R4E.L Regulatory News (R4E)

10 April 2014

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

Preliminary results for the year ended 31 December 2013

r4e, the transatlantic media and entertainment company, today announces its preliminary results for the year ended 31 December 2013.

Financial Highlights

1 Adjusted EBITDA is EBITDA before exceptional items

2 Reduction in earnings per share reflects decrease in tax credit, which reduced from £547,000 in 2012 to £93,000 in 2013

Highlights 

· Continued improvement in trading performance, in line with market expectations, with Adjusted EBITDA1 and profit before tax increased by 46 per cent and 90 per cent respectively;

· Stable performance from London operations with Adjusted EBITDA3 of £1.3 million (2012: £1.4 million);

· Strong improvement in trading from New York operations, which delivered Adjusted EBITDA3 of £1.1 million (2012: £0.4 million).

3Adjusted EBITDA is EBITDA before exceptional items and Head Office cost allocations

Post Period End Highlights

· r4e granted 17 per cent shareholding in Stage 17 Incorporated ('Stage17'), a digital platform that will deliver a range of Broadway and arts related entertainment content, in lieu of staff support provided by r4e to Stage17 during its development;

· Successful bank refinancing, with a new, six-year agreement signed with Allied Irish Bank ('AIB') on 7 April 2014 that provides a meaningful reduction in the interest rate against the Group's previous facility with AIB.

David Stoller, Executive Chairman, r4e, commented:

"This set of results provides further evidence that the extensive efforts that have been made restructuring and improving our Group operations in recent years is working.

"We have established a very stable and profitable trading platform, addressed our cost base - an area which we continue to monitor very carefully and in which we still believe we can make further savings - and integrated our operations in order to create a more collaborative and effective working culture.

"Following the recent refinancing with AIB, the Group has a solid financial platform, which enables us to now focus on growth, both through further developing our market-leading operations on both sides of the Atlantic and continuing to look for associated strategic opportunities by leveraging the strength of our existing client and industry relationships.

"I am more confident about the Group's future now than at any time since I became involved with r4e and believe that we will continue to make progress throughout this year and beyond."

31 December 2013 Full Report and Accounts

The Company will shortly post its report and accounts for the year ended 31 December 2013 to shareholders and will be available on its website www.r4e.com.

Enquiries:

reach4entertainment

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

Sarah Hall, Chief Operating Officer +44 (0) 20 7321 0488

Blytheweigh

Paul Weigh +44 (0) 7989 129658

Eleanor Parry +44 (0) 7551 293620

Cantor Fitzgerald Europe

Mark Percy (Corporate Finance) +44 (0) 20 7894 7000

David Banks / Paul Jewell (Corporate Broking)

Allenby Capital

Katrina Perez/Kelly Gardiner +44 (0) 20 3328 5656

EXECUTIVE CHAIRMAN'S STATEMENT

Stable trading platform established in a year of progression

2013 was a year of further progress for r4e. The Group has undergone substantial change in the recent past, which is clearly delivering results, with meaningful increases achieved in Group revenue and profit before tax.

r4e is now a streamlined, focused business with a clear strategic direction. Our two live events marketing businesses, Dewynters Ltd ('Dewynters') in London and Spot & Company of Manhattan Inc ('SpotCo') in New York further cemented their market-leading positions in 2013, while also proving successful in expanding their offering to associated market sectors. The two businesses are also working on an increasingly collaborative basis, with an effective knowledge exchange programme in place that ensures transatlantic support when required.

Across the Group, we continue to manage our cost base very carefully, ensuring that operations are appropriately sized for their operating environments. Further cost reductions at head office level were achieved in 2013.

Improved financial performance, in-line with market expectations

The Group delivered an improved financial performance in 2013, in-line with market expectations, with growth in revenue, adjusted EBITDA and profit before tax. Group revenue increased by £6.5 million, to £75.8 million (2012: £69.3 million), with stronger revenue generation in the second half of the financial year, as anticipated. The gross margin of 25.6 per cent achieved was broadly consistent when compared to last year (2012: 25.9 per cent).

In-line with the improved revenue performance, there were meaningful increases in both adjusted EBITDA and profit before tax. Adjusted EBITDA increased by 46.0 per cent to £1.9 million (2012: £1.3 million), while profit before tax nearly doubled to £0.31 million (2012: £0.16 million).

Earnings per share from total operations for the year is 0.54p (2012: 1.02p), with the decrease largely attributable to a large tax credit in the prior financial year.

Robust performance from London operations supported by strong improvement from New York operations

The Group's London operations, Dewynters and Newman Displays Limited ('Newmans'), delivered a robust performance in 2013, generating increased revenue of £36.0 million (2012: £33.2 million) and adjusted EBITDA of £1.3 million (2012: £1.4 million), broadly in-line with that achieved in 2012.

Dewynters' revenue increased by £3.3 million to £32.3 million (2012: £29.0 million). Adjusted EBITDA also increased from £0.75 million to £0.79 million, with a change in the sales mix meaning that the revenue increase delivered was not proportionally reflected in profit terms.

During 2013, Dewynters delivered opening campaigns for several large West End shows and continued to work with a number of established, long running shows, while increasing its footprint into exhibitions, sport, music and other live events.

Early signs indicate Dewynters will deliver a similarly robust performance in 2014.

Newmans delivered marginally lower revenue and adjusted EBITDA of £3.7 million (2012: £4.2 million) and £0.47 million (2012: £0.61 million) respectively.

Newmans' performance was impacted by the cancellation of certain long standing events. Cancellations occurred at short notice, leaving insufficient time to seek new opportunities and hence, a lower than expected revenue performance for the year. It is anticipated that Newmans' performance in 2014 will return to prior levels and hence display an improvement on 2013.

SpotCo traded strongly in 2013, reporting revenue of £39.4 million (2012: £34.0 million), an increase of £5.4 million, and adjusted EBITDA improved by 133 per cent to £1.1 million (2012: £0.5 million).

Trading was strong due to a combination of factors. A number of Broadway shows SpotCo delivered opening campaigns for enjoyed impressive commercial success, leading to them running into multiple seasons, while SpotCo's strategic diversification away from Broadway continued to prove successful.

The division has enjoyed a strong start to 2014, continuing to deliver ongoing campaigns for a number of shows that opened in 2013, augmented by new mandates secured in 2014 for show openings that will occur throughout the year.

Further cost savings delivered; debt refinancing provides solid financial platform

Eliminating cost was a key part of the extensive restructuring that the Group has carried out in the recent past. A specific focus was placed on reducing central office costs to a more realistic level. Further progress was made in this area in 2013 and over £0.7 million of annualised head office costs have been eliminated during the past two financial years.

The cost conscious culture we have established is now firmly ingrained in the business and further savings will be made where possible, although with the restructuring now materially complete it is expected that further savings will come from driving efficiencies as opposed to directly cutting costs.

Post year end, the Company announced the successful refinancing of its £14.8 million revolving credit facility with Allied Irish Bank ('AIB'). The new agreement established a six year term from April 2014 and a new interest rate of 3 per cent over LIBOR, which provides a meaningful reduction in the interest rate against the Group's previous facility of 4 per cent over LIBOR, rising to 5 per cent over LIBOR from 26 April 2014. For this financial year, we expect the new arrangements to deliver an annual interest saving of around £220,000.

Focus on driving growth through new, strategic initiatives in associated market sectors

The focus for our core live events marketing businesses remains unchanged, namely to leverage the strength of each business in order to further develop their market-leading positions. We will continue to ensure that Dewynters and SpotCo work in a joined up manner in order to support business development, while both companies are increasingly seeking to expand their offering into associated market sectors in order to reduce reliance on their core theatre sectors and capture growth opportunities.

We are also enthusiastic about the opportunity for our businesses to leverage the strengths of the relationships our people have within the industry and develop new business streams for the Group. One such example is the recent Stage17 initiative, in which the Group was granted a 17 per cent shareholding in return for support provided by r4e to Stage17 during its development. Stage17 is a rich digital platform that will deliver a range of Broadway and arts related entertainment. Stage17 is still at an early stage of its development, with the full site expected to go live by the end of April 2014. However, over the short-medium term, I believe Stage17 offers very exciting potential and will seek to monetise its offering through a combination of digital advertising, premium membership subscriptions and e-commerce that will be integrated into the site. The Group continues to progress other initiatives that present genuine growth opportunities and I expect to be in a position to report further on this during the course of this financial year.

Confident of making further progress in 2014 and beyond

This set of results provides further evidence that the extensive efforts that have been made restructuring and improving our Group operations in recent years is working.

We have established a very stable and profitable trading platform, addressed our cost base - an area which we continue to monitor very carefully and in which we still believe we can make further savings - and integrated our operations in order to create a more collaborative and effective working culture.

Following the post year end refinancing with AIB, the Group has a solid financial platform, which enables us to now focus on growth, both through further developing our market-leading operations on both sides of the Atlantic and continuing to look for associated strategic opportunities by leveraging the strength of our existing client and industry relationships.

I am more confident about the Group's future now than at any time since I became involved with r4e and believe that we will continue to make progress throughout this year and beyond.

David Stoller

Executive Chairman

9 April 2014

REVIEW OF PERFORMANCE BY COMPANY

Year ended 31 December 2013

Year ended 31 December 2012

*Adjusted EBITDA is before exceptional administrative expenses.

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF CASH FLOWS AS AT 31 DECEMBER 2013

BASIS OF PRESENTATION

The above unaudited financial information does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The above figures for the year ended 31 December 2013 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 on page 31 of the financial statements concerning the group's ability to continue as a going concern. The group had net current liabilities of £1.54 million as at 31 December 2013 and non-current borrowings of £15.8 million. There are quarterly financial covenants attached to the group's non-current bank borrowings of £14.8 million and quarterly repayments are due in relation to deferred consideration outstanding.

These conditions, along with the other matters explained on page 31 of the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the group and the parent company'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.

SIGNIFICANT ACCOUNTING POLCIES

GOING CONCERN

As at 31 December 2013 the Group had net assets of £0.003 million (31 December 2012: £0.29 million) and made an operating profit in the year then ended of £1.07 million (year ended 31 December 2012: £0.22 million).

In the prior the year the Group agreed a debt repayment schedule for the remaining deferred consideration in relation to the SpotCo acquisition in 2008. During the 2013 year £0.65 million was repaid against this debt and no outstanding payments were due as at 31 December 2013. The remaining balance of £1.65 million plus interest is repayable over 2014 - 2015 (see note 10). Subsequent to the year end the Group agreed a debt repayment schedule in relation to the AIB Group bank debt of £14.8 million. The facility matures in April 2020 and numerous capital repayments will be made over the term of the facility at amounts and dates specified in the facility agreement. The first repayment of £0.2m is due in April 2015 with accelerated capital repayments thereafter. A new set of financial covenants have also been agreed with AIB Group in relation to this debt. The covenants will be measured quarterly over the remaining term of the facility. The Directors have prepared and reviewed detailed forecasts going out until 2020, which indicate that the Group will have sufficient cash flow to meet in full the deferred consideration debt obligation, required facility repayments, and to meet future covenant requirements. The Board is confident that these matters will be concluded in a manner which enables the going concern basis of accounting to be applicable.

Whilst the Directors believe that the going concern basis is appropriate, the existence of the bank debt repayments from 2015 onwards, the need to meet quarterly bank covenants, the use of estimates in the forecasts, and the continuing challenge of the trading environment represents uncertainties which may cast doubt upon the Group's ability to continue as a going concern and that, therefore, the Group may be unable to discharge its liabilities in the normal course of business.

After making enquiries and considering the uncertainties described above, the Directors have concluded that the Group has adequate resources to continuing trading for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the Group financial statements. The financial statements do not include any adjustments that would result if the Group was unable to continue as a going concern.

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 intangibles 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.

DEFERRED CONSIDERATION

Deferred consideration liability is recognised at present value. The difference between the present value and the total amount payable at a future date gives rise to a finance charge which will be charged to the income statement and credited to the liability over the period of the deferral.

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

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 2013 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 2012 is presented below

*Adjusted EBITDA is before exceptional items.

2. EXCEPTIONAL ADMINISTRATIVE ITEMS

Exceptional office move costs in the year ended 31 December 2013 relate to relocation of SpotCo offices in New York and the Dewynters offices in London. Costs include search fees, legal and removal costs, plus rent required to be paid on both new and old offices during the build-out of the moves. Operating profit for London was boosted by exceptional income from Dewynters of £0.91 million. This was compensation received as the lease was under the scope of the Landlords and Tenants Act 1954, resulting from the enforced move of Dewynters to enable redevelopment of the premises.

Employee contract termination costs in the prior year ended 31 December 2012 are considered exceptional as they result from the Group's recent period of restructure. Discounted interest on the deferred consideration balance in 2012 is being unwound and charged to the income statement over the period of the agreement being November 2012 to November 2015.

3 FINANCE INCOME

Dividend income received in the year ended 31 December 2013 of £92,727 (2012: Nil) is from the associate undertaking Theatrenow Limited, in which Dewynters Limited has a 29.91% shareholding.

Exceptional finance income of £nil (2012: £0.51 million) relates to the gain on renegotiation of deferred consideration liability (note 10).

4 FINANCE COSTS

5 EXPENSES BY NATURE

6 TAXATION

Factors affecting the tax credit for the year:

The £0.14 million deferred tax charge arises following a change in estimate of the tax deduction in relation to goodwill arising on the acquisition of SpotCo in the United States (2012: £0.5 million).

A deferred tax asset of approximately £0.69 million (2012: £0.76 million) has not been recognised due to uncertainty over future profitability. At 31 December 2013, the Group had losses carried forward of £3.5 million (2012: £3.3 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 (2012: 40%) and 23% in the United Kingdom (2012: 24%).

7 EARNINGS/(LOSS) PER SHARE

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

Profits/(Losses) 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. Adjustments to consideration of £Nil (2012: £0.13 million) relate to a reduction in the estimation of deferred consideration payable on acquisitions (note 10).

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 (CGU's) identified according to the operations as grouped upon acquisition. An operating level summary of the goodwill allocation is presented below:

An impairment charge of £0.18 million was incurred in the year on Dewynters Advertising Inc. (DAI) due to the reduced level of cash flows expected from this CGU in future years. At 31 December 2012 the group outsourced the operational fulfilment of the activities of DAI. Whilst this has reduced the losses being made by DAI in 2013, a reduced level of operations has also resulted in a smaller cash flow projection therefore resulting in an impairment charge of £0.18m. As at 31 December 2013 the recoverable amount of DAI is £0.22 million. No class of asset other than goodwill was deemed impaired.

The recoverable amount of CGU's has been determined based on value-in-use calculations which cover a period of 20 years. These calculations use pre-tax cash flow projections based on financial budgets for the year ended 31 December 2014 as approved by management and cash flows beyond the one-year period are extrapolated using straight line growth rates stated below. Management are confident that projections over the five year period are reliable given historical experience of these projections and the prudent nature of the assumptions used.

The key assumptions used for the value-in-use calculations in 2013 are as follows: