R4E.L Regulatory News (R4E)

25 May 2016

reach4entertainment enterprises plc ("r4e", the "Company"' or the "Group")

Final results for the year ended 31 December 2015

r4e, the transatlantic media and entertainment company, today announces its results for the year ended 31 December 2015.

Highlights

· Sound trading performance combined with the successful re-structuring of the business.

· Adjusted EBITDA of £1.84 million, in-line with market expectations but, as expected, below the exceptional performance of 2014.

· The Company successfully completed an equity placing to raise £4.0 million to support restructuring

· Secured a three-year asset based debt facility of £9.5 million ('New Facility') with PNC Business Credit ('PNC') being made up of a £1 million term loan and a revolving credit facility of up to £8.5 million based on qualifying accounts receivable.

· £9.6 million repayment of its existing £14.8 million loan facility with Allied Irish Bank ('AIB') plus grant of 25 million warrants to AIB. Balance of loan written off.

· Significant reduction in the level of debt means borrowing costs will reduce by approximately 50%.

· Strengthened balance sheet now puts the Company in a stable position from which to maintain its status as a market leader in both London and New York.

· Looking ahead, the Company remains focused on supporting its first class teams across the business in continuing to deliver modern, market leading promotional strategies for theatre, live acts and film.

Commenting on the results, David Stoller, Executive Chairman, said, "Firstly, I would like to thank all of the r4e staff, the shareholders and our lenders for their continued support during this transformational period for the business. Now that the restructuring of our debt is complete, I am confident that the Company has a solid platform from which to progress in the coming years. The focus is now very much on creating long term value for our existing and new shareholders by continuing to maintain our status as a market leader in both London and New York, as well as identifying and executing strategic opportunities to enhance the business."

31 December 2015 Full Report and Accounts

The Company will shortly post its report and accounts for the year ended 31 December 2015 to shareholders, along with notice of the annual general meeting to be held at 10.30am on 29 June 2016, and both documents will soon be available on its website, www.r4e.com. The annual general meeting will be held at the offices of the Company at Wellington House, 125 Strand, London, WC2R 0AP.

Enquiries:

reach4entertainment

David Stoller, Executive Chairman +44 (0) 20 7968 1655

Novella Communications - Financial PR

Tim Robertson +44 (0) 207 6303843

Ben Heath +44 (0) 207 6303848

Allenby Capital Ltd - AIM Nominated Adviser and Broker

Jeremy Porter/ James Reeve +44 (0) 20 3328 5656

EXECUTIVE CHAIRMAN'S STATEMENT

2015 sees a return to normal market conditions

The Group is delighted to announce that, although results did not replicate the exceptional performance of 2014, the twelve month period saw an improvement on key performance indicators such as revenue and profit before tax. The strength of performance in the twelve month period was the result of a combination of delivery from its client base, both new and existing clients, together with the on-going restructuring of the agency and its cost base.

The theatre and live entertainment market continued to be stable throughout 2015. In the twelve month period, the Group promoted over 100 shows in both London and internationally, further demonstrating our position as the leader in theatre and film promotion. The Group continues to develop its services, with further expansion in digital and the creation of a boutique social media brand, as well as being consistent with growth in its touring offering.

Trading in-line with market expectations

The Group delivered further improvement in revenue growth in the twelve months to 31 December 2015.

Group revenue increased by 3.1 per cent to £85.9 million (2014: £83.3 million), with trading more weighted towards the second half of the period.

Underlying profitability for r4e (Adjusted EBITDA*) reduced by 31 per cent to £1.8 million (2014: £2.6 million), due to exceptional income from SpotCo in 2014 not reoccurring in 2015 plus additional staff costs required to service the higher volume of turnover. The gross profit margin remained unchanged from 2014 at 24%.

Profit before tax increased to £4.5 million (2014: loss of £5.1 million) as a result of the exceptional gain made from the AIB debt write-off and deferred consideration waiver.

Earnings per share from total operations for the year is 4.01p (2014: loss of 8.03p). The significant increase in EPS was in part due to the impact of goodwill impairment in 2014, and the initial benefits from debt restructuring which will continue into 2016.

On 04 December 2015, the Company raised £4.0 million, before expenses, placing 400,000,000 new Ordinary Shares with new and existing shareholders at a price of 1 penny per share. The Company also entered into a new facility with PNC for a three year secured asset based debt facility of £9.5 million being made up of a £1 million term loan and a revolving credit facility of up to £8.5 million based on qualifying accounts receivable. This enabled the Company to repay its existing loan facility agreement of £14.5 million with AIB (after £0.6 million of scheduled capital repayments made during the year), through a cash settlement of £9 million, with the remaining £5.2 million written-off and taken as an exceptional gain to the income statement.

* Adjusted EBITDA is EBITDA before exceptional items and impairment of goodwill

Market leader in London and New York

The Group continues to be a market-leader in London and New York theatre and live entertainment marketing businesses through its wholly-owned subsidiaries. In London, the Group operates through Dewynters Ltd ('Dewynters'), and the London based signage and fascia business, Newman Displays Ltd ('Newmans'). Operations in New York consist of SpotCo and Dewynters Advertising Inc ('DAI'), with the latter becoming dormant after the Dewynters merchandising division was transferred during the period.

While 2014 was an exceptional year for SpotCo due to a number of one off events, 2015 represented a return to normal market conditions for the business. In London, reduction in headcount and finance costs enabled Dewynters to deliver improved profitability despite a decrease in revenues on the previous year. Overall the trading performance was in-line with our expectations.

London

Dewynters showed strong performance in 2015, following the challenging and unexpected market conditions experienced in 2014. The business remained focused on reducing its employee count and keeping expenditure under control and, as a result, saw an EBITDA increase of 85% in the period, up to £0.85 million (2014: £0.46 million). Revenues are down 0.4% on the prior year, however, the company has maintained its gross profit at 27.8%.

The business is a world-leading specialist live entertainment branding, design and marketing agency with over 30 years of experience. The management team expects this status to continue into 2016.

For over 25 years, Newmans has pushed creative boundaries to deliver tailored outdoor signage, displays and installations that deliver eye-catching, inspiring results. The business revenues were £3.5 million (2014: £3.6 million) in the period and EBITDA was £0.16 million (2014: £0.22 million). The Group anticipates that new films will increasingly adopt the digital signage technology, with Newmans clearly focussed on developing its presence in this market. In addition, Newmans has upgraded some key equipment that the management team is confident will substantially enhance the business.

New York

SpotCo still enjoys a market leading position, although EBITDA for 2015 was not comparable to the previous year due to some one-off events in 2014. Revenues for the period increased by 5% on the previous year to £54.6 million (2014: £51.8 million). The company continues to be a leader in New York's theatre and live entertainment industry and its achievements were in evidence when the shows it represents won 16 Tony awards of the total 24 awarded in the 2014/15 season.

The company's financial condition was enhanced in 2015 with the waiver of an outstanding deferred consideration balance of $1 million that resulted from the acquisition of SpotCo in 2008.

As mentioned above, during the twelve months the merchandise division of Dewynters was transferred to Playbill UK Ltd, meaning that DAI would cease to collect royalties from merchandise sales in the USA. As at the end of 2015 DAI was no longer trading.

The platform for 2016 has been established

2015 marks a significant milestone for the Group. Cleared of the prohibitive debt facility from AIB, the business now has the ability to organically grow as well as invest and expand where the opportunities present themselves, particularly in exploring new geographies and pursing data-based marketing and other digital initiatives. The management team is confident that the Group will be able to pursue these growth opportunities while maintaining and building upon its position as a theatre and entertainment market leader in the London and New York.

David Stoller

Executive Chairman

REVIEW OF PERFORMANCE BY COMPANY

Year ended 31 December 2015

Year ended 31 December 2014

*Adjusted EBITDA is before exceptional items and impairment of goodwill.

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2015

Items in the statement above are disclosed net of tax. The income tax relating to each component of other comprehensive income is disclosed in note 6.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2015

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2015

CONSOLIDATED STATEMENT OF CASH FLOWS AS AT 31 DECEMBER 2015

BASIS OF PRESENTATION

The above unaudited financial information in this announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The above figures for the year ended 31 December 2015 are an abridged version of the Company's accounts which have been reported on by the Company's auditor but have not been dispatched to the shareholders or filed with the Registrar of Companies. These accounts received an audit report which was unqualified and did not include a statement under section 498(2) or section 498(3) of the Companies Act 2006. The audit report included a reference to matters to which the auditors drew attention by way of emphasis without qualifying their report in relation to going concern, as follows:

Emphasis of matter

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure set out below concerning the group's ability to continue as a going concern. There are monthly financial covenants attached to the group's term and asset backed borrowings with PNC and the group's forecasts show an expected breach of these covenants in the latter half of 2016. The Directors believe that the breach is temporary and as a result of seasonality in the business and subsequent months are expected to meet covenants with headroom.

These conditions, along with the other matters explained in the disclosure below, indicate the existence of a material uncertainty which may cast significant doubt about the group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the group was unable to continue as a going concern.

GOING CONCERN

As at 31 December 2015 the Group had net assets of £2.81 million (31 December 2014: net liabilities £5.75 million) and made an operating profit in the year then ended of £5.19 million (year ended 31 December 2014: loss of £4.30 million).

During 2015 the Group has made a considerable change to its debt levels and overall financial position:

· Deferred consideration owing in relation to the SpotCo acquisition at 31 December 2014 was USD $2 million (£1.26 million GBP). During 2015, USD $1 million of this was repaid as scheduled (£0.66 million GBP) leaving USD $1.0 million (£0.65 million) outstanding which the Company had the option to pay by the issue of new ordinary shares in the Company. In November 2015 it was agreed with the vendor that the $1 million USD would be waived (£0.72 million including interest). As at 31 December 2015 there is no deferred consideration debt outstanding.

· Bank debt with AIB as at 31 December 2014 was £14.785 million. The Group agreed a re-financing with AIB which took place in December 2015 leaving no debt outstanding with AIB as at 31 December 2015.

As part of the re-financing of AIB, two sources of funds were obtained:

i. The Company issued 400,000,000 ordinary shares of 1p each raising £4,000,000 (before share issue costs)

ii. The Group obtained a new three year secured asset based debt facility of £9.5 million with PNC Business Credit Services Ltd being made up of a £1 million term loan and a revolving credit facility of up to £8.5 million based on qualifying accounts receivable. As at 31 December 2015 the debt owed to PNC totalled £6.68 million, a reduction of £8.11 million from the AIB debt outstanding at 31 December 2014.

The term loan held with PNC is a 3 year facility against which monthly capital repayments commenced from March 2016. The debt will be fully paid down by October 2018. The asset based lending facility is a revolving credit line based upon qualifying accounts receivable. This means current debt is constantly being paid down and new debt being drawn. The facility will therefore fluctuate but will be no more than £8.5 million at any point. A new set of financial covenants were agreed with PNC in relation to this debt. The financial covenants are measured monthly and all were met at 31 December 2015 and also at each subsequent month end until the latest measurement date prior to these accounts being 30 April 2016. Later in 2016, the Group is forecasting a possible breach in the fixed charge cover covenant due to updated forecasts showing seasonal fluctuations in EBITDA. The previous covenants with AIB were determined on a 12 month rolling basis in which seasonality was not a risk. The fixed charge covenant with PNC is determined on a 3 month rolling basis and is therefore sensitive to seasonality shifts. Given that the current forecast for the full year 2016 EBITDA is in line with expectations, PNC has informed the Company that they recognise the seasonality factor and the likelihood that the company will still meet its debt obligations even if a monthly covenant is breached. That said, they cannot provide a waiver of a potential future breach as of the date of these accounts.

Given the significant reduction in the debt levels of the group, plus the improvement to the balance sheet position, the Directors believe that the going concern basis is appropriate and the Group has adequate resources to continuing trading for the foreseeable future. Regarding the aforementioned PNC covenants, the Directors are confident that although breaches are possible in later 2016, these would only be temporary as a result of seasonal fluctuations and not due to performance of the Group as a whole - subsequent months are forecast to meet covenants with headroom - and therefore believe it highly unlikely that PNC would decide to terminate the facility.

SIGNIFICANT ACCOUNTING POLICIES

GOODWILL

Goodwill is reviewed for impairment at least annually and any impairment will be recognised in the income statement and is not subsequently reversed. As such it is stated at cost less provision for impairment in value. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

IMPAIRMENT OF ASSETS (INTANGIBLE AND PROPERTY, PLANT AND EQUIPMENT)

Goodwill is not subject to amortisation but is tested annually or whenever there is an indication that the asset may be impaired. For the purpose of impairment testing, assets are grouped at the lowest levels for which they have separately identifiable cash flows, known as cash generating units. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Impairment losses recognised for goodwill are not reversed in a subsequent period.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement. Where an impairment loss subsequently reverses the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognised immediately in the income statement.

EXCEPTIONAL ITEMS

Exceptional items represent income or expenses, which based on their materiality, frequency or non-operating nature, have been separately disclosed to facilitate the assessment of the Group's underlying operating profitability.

CAPITAL RISK MANAGEMENT

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to adjust the capital structure, the Group may issue new shares or sell assets to reduce debt.

As part of the Capital Risk Management process the Group acknowledges the need to monitor, and meet in full, covenants held over the revolving asset based facility with PNC. More details on the bank debt are in the borrowings note 9. The covenants were met in full as at 31 December 2015 and also at each subsequent month end until the latest measurement date prior to these accounts being 30 April 2016.

NOTES

1. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the Group is currently organised into three operating segments - New York operations, London operations and Head Office. These divisions are the basis on which the Group reports its segment information.

Principal continuing activities are as follows:

New York (NY) - marketing, design, advertising, promotions, digital media services, publishing and merchandising.

London - marketing, design, advertising, promotions, digital media services, publishing and merchandising, signage and fascia displays.

Head Office - finance and administration services for the Group.

Segment information for continuing operations of the Group for the year ended 31 December 2014 is presented below.

Management fees charged at an arm's-length basis between reportable segments are reflected in the figures above on the basis that this is a true reflection of the operating costs of each segment.

 *Adjusted EBITDA is before exceptional items.

Segment information for continuing operations of the Group for the year ended 31 December 2014 is presented below:

Management fees charged at an arm's-length basis between reportable segments are reflected in the figures above on the basis that this is a true reflection of the operating costs of each segment.

*Adjusted EBITDA is before exceptional items.

2. EXCEPTIONAL ADMINISTRATIVE ITEMS

In the prior year 2014 the Newmans premises and Dewynters warehouse, which are on the same site in London, were given notice by the Landlord to vacate by December 2014 in order that the land could be developed. The surrender of the leases resulted in compensation from the Landlord of £0.26 million as the tenancy was within the scope of the Landlords and Tenants Act 1954. Subsequent to the commencement of the search process for new premises, the current Landlord agreed to a new lease on the premises due to the planned development being put on hold. Exceptional expenses of £0.01 million relate to the search for new premises plus negotiation for the new leases with the current landlord (2014: £0.05 million).

Employee contract termination costs

Exceptional expenses of £0.01 million (2014: £0.2 million) relates to Dewynters employee contract termination costs in prior year which are considered exceptional due to the level of redundancy required as a result of company performance.

Deferred consideration on the acquisition of SpotCo

Deferred consideration payments were made as scheduled during 2015 leaving a further remaining balance at the end of October 2015 of USD $1.0 million (£0.65 million) which the Company had the option to pay by the issue of new ordinary shares in the Company. It was agreed during the year that the vendor would waive the final liability of $1 million which resulted in exceptional income of £0.72 million including interest (2014: Nil). The vendor continues in his role at SpotCo. In addition the final interest due to unwind on the discounted liability was also written off resulting in a gain of £0.07 million (2014: Nil).

Gain on debt write off

The debt restructure which took place in December 2015 paid AIB Group £9 million of the debt outstanding at that date of £14.16 million. The remaining balance of £5.16 million was written off resulting in an exceptional gain to the Income Statement. The process of negotiating the debt restructure included service from legal professionals, consultants, brokers, advisors etc. Fees in relation to the restructure totalled £0.53 million.

Issue of warrants to AIB

As part of the refinancing deal with AIB, the Company granted 24,994,462 Warrants to AIB Joint Ventures, a subsidiary of AIB. These have been valued at the date of issue, see note 11.

3. FINANCE INCOME

Dividend income received in the year ended 31 December 2015 of £60,492 (2014: £59,824) is from the associate undertaking Theatrenow Limited, in which Dewynters has a 29.91% shareholding. The payments are final distributions of capital and the associate is to be wound up in 2016.

4. FINANCE COSTS

5. EXPENSES BY NATURE AND AUDITOR'S REMUNERATION

1.

6. TAXATION

Factors affecting the tax charge for the year:

A deferred tax asset of approximately £0.96 million (2014: £0.87 million) has not been recognised due to uncertainty over future profitability. At 31 December 2015, the Group had losses carried forward of £5.3 million (2014: £4.3 million), available for offset against future profits.

Taxation is calculated at the rates prevailing in the respective jurisdictions. The standard tax rates in each jurisdiction are 40% in the United States (2014: 40%) and 20% in the United Kingdom (2014: 21%).

7. EARNINGS/(LOSS) PER SHARE

The calculations of earnings per share are based on the following profits/(loss) and number of shares:

Profits/(Loss) attributable to equity holders of the company

8. GOODWILL AND INTANGIBLE ASSETS

Goodwill relates to the anticipated profitability and future operating synergies arising on the acquisition of subsidiaries.

Write down of customer relationships in prior year relates to SpotCo intangible assets with zero net book value where the relationship with the client no longer existed.

All amortisation and impairment charges have been recognised as administrative expenses in the income statement.

Impairment tests for goodwill

Goodwill is allocated to the Group's cash generating units (CGUs) identified according to the operations as grouped upon acquisition. An operating level summary of the goodwill allocation is presented below:

An impairment charge of £0.97 million was incurred in the year on the Dewynters Group (inclusive of Dewynters, Newman and DAI) (2014: £6.43 million).

The merchandise division of Dewynters was transferred during the year and as a result the royalties from merchandise sales in the USA will no longer be collected by DAI. This means DAI is no longer trading and remains dormant with the exception of minor costs of corporation and tax accounts in the USA. The Company has allocated to DAI a portion of the goodwill in the Dewynters Group, which arose on its acquisition in 2006, based on its proportion of the EBITDA of the Dewynters Group at the time of the acquisition. This resulted in an impairment of £0.97 million recognised in the 2015 accounts. As at 31 December 2015 the recoverable amount of the Dewynters Group is £5.66 million. No class of asset other than goodwill was deemed impaired.

The recoverable amount of CGUs has been determined based on value-in-use calculations which cover a period of 5 years plus a terminal value. These calculations use pre-tax cash flow projections based on financial budgets for the year ended 31 December 2016 as approved by management and cash flows beyond the one-year period are extrapolated using straight line growth rates stated below. Prudent assumptions have been used in the value-in-use calculations as detailed below.

The key assumptions used for the value-in-use calculations in 2015 are as follows:

Management have determined budgeted gross margin, revenue growth and costs based on past performance and expectations of the market development for each CGU. The discount rates are pre-tax and reflect management's assessment of the risks relating to each CGU. In line with the conservative approach adopted in valuing the CGUs, the discount rate applied in the value-in-use calculations has been adjusted to reflect long term rates.

Initial growth rates in year 1 are taken from the CGU's 2016 operational budgets, and so in some cases

can show a difference to the straight line growth rates applied to subsequent years. Growth after year 1 has been determined on the basis of general industry market growth and so the rate reduces and remains consistent. The growth rates used are considered by management to be in line with general trends in which each CGU operates and deemed by management to be a reasonable expectation for the media CGU.

The following table reflects the level of movements required in revenue or costs which could result in a potential impairment per the value in use calculation. A further percentage (fall)/increase, of the magnitude indicated in the table below, in any one of the key assumptions set out above would result in a removal of the headroom in the value-in-use calculations in 2015:

Brands and customer relationships are all derived from acquisitions; there are no internally generated intangible assets. The brand allocated to the Dewynters CGU totalling £2.26 million (2014: £2.26 million) is determined to have an indefinite life. It is subject to an annual impairment review using the same assumptions as for goodwill. The brand value allocated to SpotCo CGU totalling £0.70 million (2014: £0.80 million) is being amortised over 15 years and has 8 years remaining.

Intangible customer relationships are attributable to Dewynters only. The useful economic life for customer relationships within Dewynters is 20 years of which 12 are remaining as at 31 December 2015. It has a carrying value of £0.67 million and £0.06 million was charged to amortisation in the year. Where there are any indications of impairment within these businesses the Group carries out impairment reviews on brands and customer relationships using the same assumptions as for goodwill.

9. BORROWINGS