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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Reach4entertainment Enterprises Plc | LSE:R4E | London | Ordinary Share | GB00B1HLCW86 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.225 | 0.20 | 0.25 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMR4E
RNS Number : 4795J
Reach4Entertainment Enterprises PLC
12 September 2016
12 September 2016
reach4entertainment enterprises plc ('r4e', 'the Company' or 'the Group')
Unaudited interim results for the six months ended 30 June 2016
r4e, the transatlantic media and entertainment company, today announces its unaudited interim results for the six months ended 30 June 2016.
Highlights
Hot Features
Premium
Unaudited
six Unaudited
months six months
to to
30 June 30 June
2016 2015 Change
Revenue GBP49.0m GBP42.5m +15%
Gross Profit GBP11.5m GBP9.7m +19%
Adjusted EBITDA(1) GBP1.4m GBP0.9m +55%
Profit before tax Improved
GBP0.8m GBP0.05m by GBP0.75m
Improved
Earnings/(loss) per share 0.07p (0.36)p by 0.43p
(1) Adjusted EBITDA is stated before exceptional items
-- Transformative refinancing completed in December 2015 allowing the Group to focus on a strategy of growth and development;
-- borrowing reduced by GBP11.0 million since 30 June 2015;
-- strong performance from SpotCo on the back of US shows investing in advance of the Tony Awards in June 2016;
-- return to form for Newman Displays which has benefited from bringing key services in-house; -- consistent performance from Dewynters in a challenging market place; and
-- second half expected to be more challenging with investment in marketing in new shows having been H1 weighted
David Stoller, Executive Chairman, commented:
"With significant investment going into shows in the first half of this year, particularly in the US, we are pleased to report a strong first six months of the business. We also benefited from an improved performance from Newmans, which was most recently involved in the Harry Potter launch.
The second half is expected to be more challenging, with fewer shows being launched, but the business is well positioned following 2015's transformative changes and we remain on track to meet our targets for the year ahead. The outlook for 2017 is strong, including promising investment opportunities to support our strategic growth objectives."
Enquiries:
reach4entertainment enterprises
plc
+44 (0) 20 7968
David Stoller, Executive Chairman 1655
Allenby Capital (Nominated Adviser +44 (0) 20 3328
and Broker) 5656
Jeremy Porter/James Reeve (Corporate
Finance)
Katrina Perez/Kelly Gardiner
Novella Communications (Financial +44 (0) 20 3151
PR) 7008
Tim Robertson
Toby Andrews
EXECUTIVE CHAIRMAN'S STATEMENT
Introduction
I am pleased to be reporting on a successful first half for the Company. This follows a year when the Company was fundamentally transformed with the reduction of Group borrowings by GBP11 million (or 71%) and the support of shareholders who invested GBP4 million into the business in December 2015.
In 2016, our trading performance was boosted by the significant success of our US based clients, who were competing for Tony Awards. Spot & Company of Manhattan, Inc. ('SpotCo') clients, in unprecedented fashion, won all 110 Tony Awards. This resulted in a highly profitable first six months, recording a 55% increase in Group EBITDA. That said, we are expecting a weaker second half contrary to the normal pattern, principally due to the unusually front loaded show schedule, but this should not offset the progress made in the first 6 months.
The level of indebtedness prior to the restructuring had, for a number of years restricted the Company's ability to invest in the future and support the development of the business. The Company now has a manageable level of debt and stronger cash flows, permitting the Board to actively look at investment opportunities, both internal and external, which we believe will enhance our performance in 2017 and thereafter, and create significant long-term value.
Trading performance
The results for the 6 months ended 30 June 2016 show the following:
Summary of results
Unaudited Unaudited
6 months 6 months
ended ended
30 June 30 June
2016 2015
GBP'000 GBP'000
Total Revenue from continuing
operations 48,963 42,496
---------- ----------
Adjusted EBITDA(1) from
continuing operations 1,369 867
Net exceptional costs
(note 5) - (264)
Impairment in investment
(note 6) (55) -
---------- ----------
Group EBITDA 1,314 603
Operating profit 1,015 327
Profit before tax 834 52
Profit after tax 311 (268)
(1) Adjusted EBITDA is EBITDA before exceptional items.
The Group recorded a significant uplift in revenues and profits against the comparable period in 2015. The improvement came primarily from increased marketing budgets amongst our US customers and a much-improved performance from Newman Displays Ltd ('Newmans').
SpotCo increased revenues by 22% to GBP33.5 million (H1 2015: GBP27.5 million), which strongly contributed to adjusted Group EBITDA rising 55% to GBP1.4 million (H1 2015: GBP0.9 million).
Profit before tax was GBP0.8 million (H1 2015: GBP0.05 million). The Group benefited from a reduction in finance costs to GBP0.2 million (H1 2015: GBP0.3 million) reflecting the lower level of borrowings. This led to the Company recording earnings per share of 0.07p, reversing the loss per share of 0.36p from the prior period last year.
Total borrowings reduced by GBP11 million to GBP4.6 million (30 June 2015: GBP15.6 million), as the Company achieved a significant restructuring of the business which included a GBP4 million equity raising completed in December 2015.
The Company has entered into the new loan facility with PNC Business Credit, a trading style of PNC Financial Services UK Ltd. The new Facility is a three year GBP9.5 million secured asset-based debt facility comprised of a GBP1 million term loan and a revolving credit facility of up to GBP8.5 million based on qualifying accounts receivable. The loan covenants are tested on a quarterly basis and the Directors are confident that although covenant breaches are possible in the second half of 2016 (as noted in our recent year end accounts), these are as a result of seasonal fluctuations and not a continuing issue with performance of the Group as a whole. They therefore believe it is highly unlikely that PNC (who have been notified of this possibility) would decide to take any action under the facility. Further details on this matter are set out in the Going Concern section further below.
Market leading positions in London and New York maintained
r4e operations consist of the market-leading London and New York based theatre and live entertainment marketing businesses of Dewynters Ltd ('Dewynters') and SpotCo respectively, together with the London based signage and fascia business, Newmans. Operations of the New York based merchandising business, Dewynters Advertising Inc ('DAI') were transferred at the end of 2015.
Continuing Operations
Unaudited 6 months ended 30 June 2016 Unaudited 6 months ended 30 June 2015
--------------------------------------------------- ----------------------------------------------------
Company Revenue Adjusted Operating Profit Profit Revenue Adjusted Operating Profit Profit
EBITDA* profit before after tax EBITDA* profit before after tax
tax tax
------- --------- --------- --------- --------- ------- --------- --------- --------- ----------
GBP'000 GBP'000
--------------------------------------------------- ----------------------------------------------------
Dewynters 13,467 201 107 71 (185) 13,303 224 113 191 (49)
------- --------- --------- --------- --------- ------- --------- --------- --------- ----------
Newmans 1,939 216 193 185 185 1,556 (2) (21) (34) (34)
------- --------- --------- --------- --------- ------- --------- --------- --------- ----------
SpotCo 33,557 1,282 1,099 967 490 27,480 779 603 610 330
------- --------- --------- --------- --------- ------- --------- --------- --------- ----------
DAI - (5) (1) (1) (1) 157 12 12 10 10
------- --------- --------- --------- --------- ------- --------- --------- --------- ----------
Head Office - (325) (383) (388) (178) - (146) (381) (725) (525)
------- --------- --------- --------- --------- ------- --------- --------- --------- ----------
TOTAL 48,963 1,369 1,015 834 311 42,496 867 327 52 (268)
======= ========= ========= ========= ========= ======= ========= ========= ========= ==========
*Adjusted EBITDA is EBITDA before exceptional administrative items.
The first half of this year has been dominated by the performance of SpotCo which recorded an increase in revenue and EBITDA of 22% and 65% respectively; together with the contribution from Newmans, which changed from breakeven to contributing GBP0.2 million of EBITDA, the overall result for the Group was positive.
Spotco's reputation was enhanced by the extraordinary success achieved by its clients and its originality and innovation in marketing theatre shows is growing. The Company experienced an intensive first six months supporting the needs of all its clients ahead of the prestigious Tony Awards in June 2016. This hard work showed in June when every award on offer was won by a Spotco client. This exceptional success by Spotco clients reflects their combined calibre and the strong market position Spotco occupies amongst the leading and up and coming theatre shows in the US.
Dewynters revenues and EBITDA were broadly level with the prior year, which was less than expected. The company has seen substantial organisational changes, particularly with the appointment of a new CEO. The company is implementing plans for expansion, both geographically and strategically, which we believe will result in considerable future returns. Linking to these plans the Company continues to grow its non-West End business, and its touring business, in the UK and internationally. Therefore, while the second half still looks challenging, the Directors consider that the longer-term growth prospects for the company are very positive.
Newmans has had a very good first half, after making important changes to the business, including a substantial reduction in the level of outsourcing, instead investing in in-house printing and cutting machinery, which has showed immediate positive returns. The company has also benefited from an uplift in theatre signage sales, most prominently for the new Harry Potter play, but showing a general increase in film premier work compared to 2015. The company is looking forward to completing a good year with the all-important Christmas period still to come.
Head Office costs have increased on the prior period by GBP0.2 million (123%), due to the initial recognition of the r4e long term incentive plan plus consultancy costs in relation to the post re-financing growth strategy for the business.
Summary and Outlook
There is no doubt the Company is in a significantly better position than this time last year. The agreement struck with our former lenders last year radically changed the Company's financial structure, flexibility and capacity for growth. Since then, we have recruited senior industry professionals in London and New York to provide solid leadership, we are redesigning certain aspects of our organisations and our businesses to achieve sustainable growth over the long-term, and we are evaluating some specific key opportunities for growth-based investment. Our strategy is simple: we intend to leverage our market leading brands, experience, capabilities and intelligence to substantially grow our revenue base, by expanding geographically, and developing new tools and capabilities, including analytics and data-driven marketing methodologies, to sustain and build the market leadership we already enjoy. Finally, it is noteworthy that the markets for theatre and live entertainment, in both London and New York, continue to grow in terms of gross revenues and audience size, enhancing the value of our brands and the opportunities for our business in those markets.
David Stoller, Executive Chairman
reach4entertainment enterprises plc
Unaudited Condensed Consolidated Income Statement
For the six months ended 30 June 2016
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2016 2015 2015
(Unaudited) (Unaudited) (Audited)
GBP000's GBP000's GBP000's
Continuing Operations
Revenue 48,963 42,496 85,849
Cost of sales (37,431) (32,800) (65,684)
------------- ------------- -------------
Gross profit 11,532 9,696 20,165
Administrative expenses (10,517) (9,369) (14,973)
EBITDA before exceptional
administrative items 1,369 867 1,843
Exceptional administrative
expense 5 - (264) (1,149)
Exceptional administrative
income 5 - - 6,025
Impairment of goodwill 6 (55) - (965)
Depreciation (204) (180) (370)
Amortisation of intangibles (95) (96) (192)
----------------------------- ------------- ------------- -------------
Operating profit 1,015 327 5,192
Finance income 2 - 64 61
Finance costs 3 (181) (339) (714)
Profit before taxation 834 52 4,539
Taxation (523) (320) (273)
Profit/(Loss) for the
period 311 (268) 4,266
============= ============= =============
The profit/(loss) is attributable to the owners
of the parent
Earnings/(loss) per share
(pence)
Basic 4 0.07 (0.36) 4.01
Diluted 4 0.06 - -
Unaudited Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2016
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2016 2015 2015
(Unaudited) (Unaudited) (Audited)
GBP000's GBP000's GBP000's
Profit/(loss) for the
period 311 4,266
(268)
Other comprehensive income:
Currency translation
gain/(loss) 39 (31) 147
Other comprehensive income
(net of tax) for the
period 39 (31) 147
Total comprehensive income/(loss)
for the period attributable
to owners of the parent 350 (299) 4,413
============= ============== =============
Unaudited Condensed Consolidated Balance Sheet
As at 30 June 2016
6 months 6 months
Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
(Unaudited) (Unaudited) (Audited)
GBP000's GBP000's GBP000's
Non-current assets
Goodwill 6 6,874 7,022 6,339
Intangible assets 3,620 3,698 3,646
Property, plant and equipment 2,659 2,316 2,359
Deferred tax asset 145 88 145
13,298 13,124 12,489
------------- ------------- -------------
Current assets
Inventories 135 283 152
Trade and other receivables 12,166 7,677 12,906
Other current assets 551 470 498
Cash and cash equivalents 522 2,511 1,160
------------- ------------- -------------
13,374 10,941 14,716
------------- ------------- -------------
Total assets 26,672 24,065 27,205
============= ============= =============
Current liabilities
Trade and other payables (15,489) (11,554) (14,709)
Current taxation liabilities (77) (93) -
Borrowings 7 (3,893) (1,423) (6,002)
------------- ------------- -------------
(19,459) (13,070) (20,711)
------------- ------------- -------------
Net current liabilities (6,085) (2,129) (5,995)
------------- ------------- -------------
Non-current liabilities
Deferred taxation (1,615) (1,381) (1,470)
Borrowings 7 (702) (14,155) (739)
Other payables 8 (1,496) (1,503) (1,478)
(3,813) (17,039) (3,687)
Total liabilities (23,272) (30,109) (24,398)
------------- ------------- -------------
Net assets/(liabilities) 3,400 (6,044) 2,807
============= ============= =============
Equity
Called up share capital 2,397 1,872 2,374
Share premium 15,371 13,501 15,329
Deferred shares 1,498 - 1,498
Capital redemption reserve 15 15 15
Share option reserve 178 - -
Warrant reserve 311 - 311
Retained earnings (16,259) (21,104) (16,570)
Own shares held (259) (259) (259)
Foreign exchange reserve 148 (69) 109
Total equity attributable
to owners of the parent 3,400 (6,044) 2,807
============= ============= =============
Unaudited Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2016
Capital Share Own Foreign Total
Share Share Deferred Redemption option Warrant Retained Shares Exchange Equity
capital premium shares reserve reserve reserve earnings held reserve GBP'000
GBP'000 GBP'000 GBP'000 GBP000 GBP000 GBP'000 GBP'000 GBP'000 GBP'000
ATTRIBUTABLE TO
EQUITY
HOLDERS OF THE
PARENT
At 1 January
2015 1,872 13,501 - 15 - - (20,836) (259) (38) (5,745)
(Loss) for the
period - - - - - - (268) - - (268)
Other
comprehensive
income, net of
tax:
Currency
translation
differences - - - - - - - - (31) (31)
-------- -------- --------- ----------- -------- -------- --------- -------- --------- --------
Total
comprehensive
income for the
period - - - - - - (268) - (31) (299)
At 30 June 2015
(Unaudited) 1,872 13,501 - 15 - - (21,104) (259) (69) (6,044)
======== ======== ========= =========== ======== ======== ========= ======== ========= ========
At 1 July 2015
Profit for the
period - - - - - - 4,534 - - 4,534
Other
comprehensive
income, net of
tax:
Currency
translation
differences - - - - - - - - 178 178
-------- -------- --------- ----------- -------- -------- --------- -------- --------- --------
Total
comprehensive
income for the
period - - - - - - 4,534 178 4,712
Transactions
with
owners in their
capacity
as owners:
shares
issued 2,000 1,828 - - - - - - - 3,828
Share
re-organisation (1,498) - 1,498 - - - - - - -
Issue of
warrants - - - - - 311 - - - 311
At 31 December
2015
(Audited) 2,374 15,329 1,498 15 - 311 (16,570) (259) 109 2,807
======== ======== ========= =========== ======== ======== ========= ======== ========= ========
At 1 January
2016
Profit for the
period - - - - - - 311 - - 311
Other
comprehensive
income, net of
tax:
Currency
translation
differences - - - - - - - - 39 39
-------- -------- --------- ----------- -------- -------- --------- -------- --------- --------
Total
comprehensive
income for the
period - - - - - - 311 - 39 350
Transactions
with
owners in their
capacity
as owners:
Shares
issued 23 42 - - - - - - - 65
Share based
payment
charge - - - - 178 - - - - 178
At 30 June 2016
(Unaudited) 2,397 15,371 1,498 15 178 311 (16,259) (259) 148 3,400
======== ======== ========= =========== ======== ======== ========= ======== ========= ========
Unaudited Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2016
6 months
6 months ended Year ended
ended 30 June 31 December
30 June 2015 2015
2016 (Unaudited) (Unaudited) (Audited)
GBP000's GBP000's GBP000's
Cash generated from
operating activities 10 3,111 1,027 (642)
Income taxes paid (408) (166) (213)
Net cash inflow from
operating activities 2,703 861 (855)
------------------ ------------- -------------
Investing activities
Purchase of property,
plant and equipment (156) (59) (193)
Payment of deferred
consideration 7 - (332) (611)
Dividends received
from associated undertaking - 60 60
------------------ ------------- -------------
Net cash used in investing
activities (156) (331) (794)
------------------ ------------- -------------
Financing activities
Net proceeds from the
issue of share capital - - 3,828
Proceeds from asset
based lending 55,188 - 6,690
Repayment of asset
based lending (58,112) (200) (9,630)
Repayment of term loan (87) - -
Repayments of obligations
under finance leases (3) - -
Interest paid (106) (263) (604)
------------------ ------------- -------------
Net cash (used in)/generated
from financing activities (3,120) (463) 284
------------------ ------------- -------------
Net (decrease)/increase
in cash and cash equivalents (573) 67 (1,365)
Cash and cash equivalents
at the beginning of
the period 1,160 2,446 2,446
Effect of foreign exchange
rate changes (65) (2) 79
Cash and cash equivalents
at end of the period 522 2,511 1,160
================== ============= =============
Unaudited notes to the Condensed Consolidated Interim Financial Statements
For the six months ended 30 June 2016
1 Basis of Presentation
These unaudited condensed consolidated interim financial statements are for the six months ended 30 June 2016. They have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) as adopted by the European Union. This report should be read in conjunction with the annual financial statements for the year ended 31 December 2015, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and International Financial Reporting Interpretations Committee ('IFRIC') Interpretations and the Companies Act 2006, as applicable to companies reporting under IFRS.
The financial information in this interim announcement does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The unaudited interim financial statements were approved and authorised for issue by the Board on 9 September 2016.
The comparative financial information for the year ended 31 December 2015 does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The statutory accounts of reach4entertainment enterprises plc for the year ended 31 December 2015 have been reported on by the Company's auditor, RSM UK Audit LLP, and have been delivered to the Registrar of Companies. The report of the auditor was unqualified but contained an emphasis of matter statement with regard to going concern. The auditor's report did not contain statements under Section 498(2) or 498(3) of the Companies Act 2006.
The financial information for the six months ended 30 June 2016 and 30 June 2015 is unaudited.
Accounting Policies
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2015, with exception of standards, amendments and interpretations effective in 2016.
Standards, amendments and interpretations effective in 2016
The following IFRS/IAS are either new, amended or have interpretations mandatory for the first time for the financial year beginning 1 January 2016, but had no significant impact on the Group:
-- IFRS 5, IFRS 7 &, IAS 36. Amendments resulting from September 2014 Annual Improvements to IFRSs.
-- IFRS 10 - Amendments regarding the application of the consolidation exception. -- IFRS 11 - Joint Arrangements. -- IFRS 12 - Disclosure of Interests in Other Entities. -- IAS 1 - Presentation of Financial Statements. -- IAS 16 and IAS 38 - Property, Plant and Equipment and Intangible Assets. -- Amendments resulting from September 2014 Annual Improvements to IFRSs. -- IAS 19 - Employee Benefits. -- IAS 27 - Separate Financial Statements. -- IAS 28 - Interests in Associates and Joint Ventures. -- IAS 34 - Improvements to IFRSs. -- IAS 38 - Intangible Assets. 1 Basis of Presentation (continued)
The following IFRS/IAS are either new, amended or interpretations have been issued, but are not effective for the financial year beginning 1 January 2016 and have not been early adopted:
-- IFRS 2 - Share based payment. -- IFRS 9 - Financial Instruments. -- IFRS 15 - Revenue from Contracts with Customers. -- IFRS 16 - Leases. -- IAS 7 - Statement of Cash Flows. -- IAS 12 - Income Taxes.
Going Concern
These interim condensed consolidated financial statements have been prepared on a going concern basis.
During the year ending 2015 the Group made a considerable change to its debt levels and overall financial position:
-- Deferred consideration owing in relation to the SpotCo acquisition at 30 June 2015 was USD $1.5 million (GBP1.0 million GBP). USD $0.5 million of this was repaid as scheduled (GBP0.33 million GBP) leaving USD $1.0 million (GBP0.65 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 (GBP0.72 million including interest). As at 30 June 2016 there is no deferred consideration debt outstanding.
-- Bank debt with AIB as at 30 June 2015 was GBP14.59 million. The Group agreed a re-financing with AIB which took place in December 2015 leaving no debt outstanding with AIB as at 30 June 2016.
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 GBP4,000,000 (before share issue costs)
ii. The Group obtained a new three year secured asset based debt facility of GBP9.5 million with PNC Business Credit Services Ltd being made up of a GBP1 million term loan and a revolving credit facility of up to GBP8.5 million based on qualifying accounts receivable. As at 30 June 2016 the debt owed to PNC totalled GBP4.36 million, a reduction of GBP10.23 million from the AIB debt outstanding at 30 June 2016.
The term loan held with PNC is a 3 year facility against which monthly capital repayments commenced in March 2016. The term loan 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 GBP8.5 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 there have been no breaches in the period through to 31 July 2016. As disclosed in the 2015 year end accounts, the Group is forecasting possible breaches in the second half of the year due to 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. As commented on in the Chairman's Statement above, the year has had a stronger first half of the year than is normally the case, and performance is likely to be weaker than usual in the second half resulting in potential covenant breaches on a 3 month rolling measurement basis. PNC have been informed in advance of this issue and although they cannot provide a waiver of a potential future breach as of the date of these statements, they continue to be supportive of the company.
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 the second half of 2016, these are as a result of seasonal fluctuations and not a continuing issue with performance of the Group as a whole and therefore believe it highly unlikely that PNC would decide to withdraw the facility.
2 Finance Income
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
(Unaudited) (Unaudited) (Audited)
GBP000's GBP000's GBP000's
Bank interest - - 1
Dividends received
from associated undertaking - 60 60
Foreign exchange gains
on deferred
consideration - 4 -
- 64 61
============ ============ ============
3 Finance Costs
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
(Unaudited) (Unaudited) (Audited)
GBP000's GBP000's GBP000's
Finance lease interest 3 - 1
Interest on term loans 27 260 482
Interest on asset based
finance 78 - 15
Fees on asset based
finance 71 - 37
Amortisation of issue
costs of AIB bank loan - 17 66
Unwinding of discounting
on deferred consideration - 62 91
Net foreign exchange
losses on trade 2 - 3
Foreign exchange losses
on deferred consideration - - 19
181 339 714
============ ============ ============
4 Earnings/(loss) Per Share
The calculations of earnings per share are based on the following results and numbers of shares.
6 months 6 months
ended ended Year
30 June 30 June ended
31 December
2016 2015 2015
(Unaudited) (Unaudited) (Audited)
Number Number Number
Weighted average number
of 0.5 pence ordinary
shares in issue during
the period
For basic earnings/(loss)
per share 477,273,154 74,635,792 106,416,614
Dilutive effect of
share options 22,024,476 - -
For diluted earnings/(loss)
per share 499,458,802 74,635,792 106,416,614
GBP000's GBP000's GBP000's
Profit/(loss) for the
period 311 (268) 4,266
============ ============ ============
5 Exceptional Items
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
(Unaudited) (Unaudited) (Audited)
GBP000's GBP000's GBP000's
Office relocation costs - (13) (14)
Employee contract termination
costs - (20) (13)
Restructuring of bank
debt - (231) (539)
Cost of merchandise
division transfer - - (272)
Issue of warrants to
AIB - - (311)
------------ ------------ ------------
Exceptional expenses - (264) (1,149)
Income from transfer
of merchandise division - - 155
Gain on deferred consideration
write off - - 715
Gain on debt write
off - - 5,155
------------ ------------ ------------
Net exceptional administrative
(Expenses)/income - (264) 4,876
============ ============ ============
Exceptional costs in the prior 6 month period to 30 June 2015 relate to the new lease agreement of Newman's offices and Dewynters warehouse in London in 2014; further costs incurred in relation to contract termination costs as part of redundancies made in 2014; and, costs incurred in the period on the conditional agreement made with AIB on 9 June to restructure the debt facility (see note 7). For the year ended 31 December 2015, the full cost of the debt restructure of GBP0.54 million was recognised and included service from legal professionals, consultants, brokers, advisors etc.
5 Exceptional Items (continued)
As part of the refinancing deal with AIB in December 2015, the Company granted 24,994,462 Warrants to AIB Joint Ventures, a subsidiary of AIB. These were valued at the date of issue.
Exceptional income for the year ending 31 December 2015 included GBP0.2 million received for inventory and legal costs as a result of the transfer of the merchandise arm of Dewynters to Playbill UK Ltd, plus income of GBP5.16 million was recognised as a result of the write off of outstanding debt with AIB Group (UK) plc, as part of the December 2015 debt restructure.
In addition, a waiver of the final deferred consideration liability of $1 million was made by the SpotCo vendor which resulted in exceptional income of GBP0.72 million including interest.
6 Goodwill
Total
GBP000's
Cost:
1 January 2015 7,060
Foreign exchange differences (38)
30 June 2015 7,022
Impairment charge (965)
Foreign exchange differences 281
31 December 2015 6,339
----------
Acquired goodwill 55
Impairment to goodwill (55)
Foreign exchange differences 535
30 June 2016 6,874
----------
Net Book Value:
30 June 2016 (unaudited) 6,874
==========
30 June 2015 (unaudited) 7,022
==========
31 December 2015 (audited) 6,339
==========
An impairment of GBP0.55m in the period is related to the purchase of Jampot Consulting Ltd. On 4 March 2016 it was announced that James Charrington had been appointed as CEO of Dewynters. In 2014, Mr Charrington had set up Jampot Consulting Limited ("Jampot") an Arts Marketing Consultancy, working with, amongst others, the National Theatre and Sonia Friedman on ticketing and marketing strategies. On 21 March 2016, the Company acquired 100% of Jampot for consideration totalling GBP55,000 by the issue of 3,666,666 ordinary shares in r4e at 1.5p per share.
6 Goodwill (continued)
The Board of r4e believes the IP in digital marketing that Jampot can bring will be beneficial to the Group and add to its service offering. As this benefit is related to the group as a whole and future revenues cannot be specifically allocated to the acquired company, the goodwill in Jampot has been written off.
An impairment charge of GBP6.43 million incurred during the prior period ended June 2015 was related to the Dewynters Group. The merchandise division of Dewynters was transferred during 2015 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 GBP0.97 million recognised in the 2015 accounts
A review has been undertaken at 30 June 2016 and has not identified any further need for impairment.
7 Borrowings
30 June 30 June 31 December
2016 2015 2015
(Unaudited) GBP000's (Unaudited) GBP000's (Audited) GBP000's
Current:
Term debt 336 430 314
Asset based lending facility 3,409 - 5,665
Finance leases 148 - 23
Deferred consideration - 993 -
3,893 1,423 6,002
====================== ====================== ====================
Non-current:
Term debt 611 14,155 697
Finance leases 91 - 42
---------------------- ---------------------- --------------------
702 14,155 739
====================== ====================== ====================
Analysis of borrowings
On demand or within one year:
Term debt 336 430 314
Asset based lending facility 3,409 - 5,665
Finance leases 148 - 23
Deferred consideration - 993 -
====================== ====================== ====================
In the second to fifth years inclusive:
Term debt 611 6,760 697
Finance leases 91 - 42
More than five years:
Bank loan - 7,395 -
7 Borrowings (continued)
Debt restructure
In December 2015, the Company successfully concluded discussion on restructuring the debt which arose on the previous acquisitions of SpotCo and the Dewynters Group of companies. At the end of prior period 30 June 2015, the Company had borrowings with AIB Group (UK) plc amounting to GBP14.6 million. During 2015 GBP0.63 million of this debt was repaid in accordance with the debt facility agreement. On 04 December 2015 the remaining debt was restructured as follows:
-- The Company raised GBP4 million (before expenses) through the placing of 400 million new ordinary shares
-- The 3 trading companies of the r4e group, SpotCo, Dewynters and Newmans, entered into a new facility with PNC. The new facility is a three year secured asset based debt facility of GBP8.5 million plus a GBP1 million term loan. Both the facility and the term loan are shared across the 3 companies
-- The proceeds of the equity placing plus new debt with PNC repaid GBP9 million of the debt facility with AIB
-- The remaining GBP5.16 million of debt with AIB was written off. See note 5 -- The Company has granted 24,994,462 warrants to AIB.
Term debt
The new term debt with PNC totalled GBP1 million when drawn down on 04 December 2015 (GBP1.02 million at 31 December 2015 due to foreign exchange). GBP0.87 million has been repaid as at 30 June 2016. The debt was split between SpotCo and Dewynters based on expected future cash flows of the Companies and has interest payable at 4% over Barclays Bank plc. base rate (Dewynters) and the rate published by the central bank or monetary authority of the relevant territory (SpotCo). Repayments are in equal monthly instalments. The debt will be fully repaid by October 2018.
Asset based lending
All 3 trading companies, SpotCo, Dewynters and Newmans, hold asset based lending facilities with PNC. Borrowing is determined by qualifying accounts receivable. The nature of the facility means that the balance will fluctuate from month to month and as the debt is paid down, new debt will arise to finance working capital, therefore the facility has been reflected as a current liability as it will be constantly revolving. Another effect of the facility is that cash balances across the group will be lower as cash drawdown incurs a higher rate of interest therefore cash will only be drawn down as required rather than being held on hand.
The facility with PNC has interest payable at 2.25% over Barclays Bank plc. base rate for amounts borrowed. Borrowings not utilised have interest payable at 0.5%. On top of a fixed and floating charge over its assets, the Group has given PNC an unlimited guarantee in respect of these borrowings. The Group has a set of financial covenants with PNC in relation to the loan which are measured monthly and were met in full as at 30 June 2016 and also at 31 July 2016. Forecasts looking out to the end of 2016 currently reflect possible breaches in the fixed charge cover financial covenant due to seasonal fluctuations in EBITDA, however, PNC remain supportive although they cannot provide a waiver of a potential future breach as of the date of these accounts (please refer to Going Concern note above for further details).
7 Borrowings (continued)
Deferred consideration
Movements on deferred consideration during the period are as follows:
30 June 30 June 31 December
2016 2015 2015
(Unaudited) GBP000's (Unaudited) GBP000's (Audited) GBP000's
Opening balance - 1,266 1,266
Unwinding of discounting on deferred
consideration - 62 91
Payment of deferred consideration -
cash - (332) (661)
Foreign exchange differences - (3) 19
Write off of remaining $1 million - - (649)
Release of interest previously
discounted - - (66)
---------------------------- ---------------------- --------------------
Closing balance - 993 -
============================ ====================== ====================
8 Other payables
Landlord reimbursement accrual
Amounts in non-current other payables of GBP0.66 million (30 June 2015: GBP0.62 million) relate to the re-imbursement of leasehold improvement costs from SpotCo's landlord at the new New York office which was moved into during 2013. As with many US leases SpotCo, as tenant, had to undertake a programme of complete refurbishment of the property and some of these expenses, related to the provision of basic utilities and services, were then refunded by the landlord. In line with SIC 15 this reimbursement has been recognised as a liability and will be unwound to the income statement reducing rental costs over the period of the lease. During the 6 months period to 30 June 2015 GBP0.03 million was unwound and credited to the income statement (30 June 2015: GBP0.03 million). The balance has increased since prior period 30 June 2015 due to foreign exchange as the liabilities functional currency is in USD.
Amounts in current liabilities relating to the reimbursement total GBP0.06 million (30 June 2015: GBP0.06 million).
30 June 30 June 31 December
2016 2015 2015
(Unaudited) GBP000's (Unaudited) GBP000's (Audited) GBP000's
Within one year 68 58 61
---------------------- ---------------------- --------------------
Within second to fifth years 270 230 244
More than five years 391 391 384
---------------------- ---------------------- --------------------
661 621 628
====================== ====================== ====================
8 Other payables (continued)
Rent holiday accrual
Other amounts in non-current other payables of GBP0.84 million (30 June 2015: GBP0.88 million) relate to an accrual for rental payments built up during a period of 'rent holiday' as provided for in the new leases for Dewynters and SpotCo's Offices which were moved into during 2013. In line with SIC Interpretation 15 the accrual will be released to the income statement over the term of the lease reducing rent costs.
30 June 30 June 31 December
2016 2015 2015
(Unaudited) GBP000's (Unaudited) GBP000's (Audited) GBP000's
Within one year 148 112 144
----------------------- ----------------------- ---------------------
Within second to fifth years 595 506 577
More than five years 240 376 273
----------------------- ----------------------- ---------------------
835 882 850
======================= ======================= =====================
Total non-current other payables 30 June 30 June 31 December
2016 2015 2015
(Unaudited) GBP000's (Unaudited) GBP000's (Audited) GBP000's
Landlord reimbursement accrual 661 621 628
Rent holiday accrual 835 882 850
----------------------- ----------------------- ---------------------
Total non-current payables 1,496 1,503 1,478
======================= ======================= =====================
9 Share-based payments
Equity-settled share option plan
Under the Group plan, share options are granted at the average price of the Company's shares at the grant date. The employee is entitled to the exercise the options at 1p per share as to 50 per cent on the third anniversary of the date of grant and as to 50 per cent. on the fourth anniversary of the date of grant. In addition, Options held by David Stoller and certain other senior employees and management may be exercised earlier if the Board determines that any exercise condition as set out below has been met:
Should the Company's mid-market closing share price meet or exceed the following targets for five trading days (which may be non-consecutive) within a period of 30 consecutive calendar days prior to the third anniversary of the date of grant, the Option shall be exercisable as follows:
(a) one third of the Option shall become exercisable on meeting a share price target of GBP0.035 per share;
(b) a further one third of the Option shall become exercisable on meeting a share price target of GBP0.045 per share; and
(c) the remaining one third of the Option shall become exercisable on meeting a share price target of GBP0.055 per share.
However, subject to the Board's discretion, the Option holder shall be required to retain the shares received on exercise of an Option on the Share Price Targets having been met until the earlier of:
i) twelve months following the date the Option is exercised; or ii) the third anniversary from the date of grant has passed.
If options remain unexercised after a period of 6 years from the date of grant, the options expire. Furthermore, options are forfeited if the employee leaves the Group as a "bad leaver" before they become entitled to exercise the share option.
The following options to subscribe for the Company's shares have been granted to directors and eligible employees and had not lapsed at 30 June 2016:
Granted Date of Number of Shares First exercisable Expiry date Exercise
to Option Price
David Stoller 4 March 23,750,000 4 March 2019 4 March 2022 1.00
2016 or on share pence
price target
Eligible 4 March 23,950,000 4 March 2019 4 March 2022 1.00
Employees 2016 or on share pence
price target
where applicable
Eligible 21 March 9,500,000 21 March 21 March 2022 1.00
Employees 2016 2019 or on pence
share price
target
Eligible 2 June 24,900,000 2 June 2019 2 June 2022 1.00
Employees 2016 or on share pence
price target
where applicable
Eligible 29 June 6,300,000 29 June 2019 29 June 2022 1.00
Employees 2016 or on share pence
price target
9 Share-based payments (continued)
Movement in number of options in the period: 30 June
2016
No. Options
Outstanding at 1 January 2016 -
Granted during the period 89,900,000
Forfeit during the period (1,500,000)
-------------
Outstanding at 30 June 2016 84,400,000
All options granted to date have an exercise price of GBP0.01. No options were exercised or expired during the period. No options were exercisable at 30 June 2016.
The share options outstanding as at 30 June 2016 had a weighted average remaining contractual life of 5.75years.
The weighted average fair value of options granted during the period was 0.013p. The fair value of equity-settled share options granted is estimated as at the date of grant using a binomial model, taking account of the terms and conditions upon which the options were granted. The key assumptions used to determine the fair value are as follows:
Exercise price 0.01 pence Share price at valuation date 0.02 pence Expected life 6 years Volatility 100%-40% Risk free interest rate From 0.14% - 0.65% Exit rate of employees 5%
During the period ended 30 June 2016 the Group recognised total share-based payment expenses of GBP0.17 million (30 June 2015: Nil).
10 Cash flows from operating activities
6 months 6 months Year ended
ended 30 ended 31 December
June 2016 30 June 2015
2015
(Unaudited) (Unaudited) (Unaudited)
GBP000's GBP000's GBP000's
Reconciliation of net
cash flows from operating
activities
Profit before taxation 834 52 4,539
Finance costs 181 339 714
Finance income - (64) (61)
Depreciation 204 180 369
Amortisation of intangibles 95 96 192
Impairment of goodwill 55 - 965
Share based payment
expense 178 - -
Exceptional debt write
offs - - (6,018)
Operating cash flows
before movements in
working capital 1,547 603 700
Decrease in inventories 17 119 249
Decrease/(increase)
in trade and other
receivables 740 4,562 (666)
Increase/(decrease)
in trade and other
payables 807 (4,257) (925)
Cash flows from operating
activities 3,111 1,027 (642)
============ ============ ============
11 Related Party Disclosures
Richard Ingham, a non-executive director of the Board in the period up until his resignation on 11 May, is the owner of Glen House Capital Strategies Ltd., a company which provides financial consultancy services. During the 4 months leading up to Mr Ingham's resignation on 11 May 2016, the Group procured services from Glen House Capital Strategies Ltd. totalling GBP0.05 million (30 June 2015: GBP0.15 million). GBP0.13 million was outstanding to Glen House Capital Strategies at 30 June 2016 (2015: GBP0.15 million) which will be paid up in full by 31 March 2017.
During the 6 months to 30 June 2015, the Group procured consultancy services totalling GBP0.01 million (2015: GBP0.03m) from Springtime Consultants Ltd., a company owned by Marcus Yeoman, a non-executive director of the Board during the period. GBPNil was outstanding at 30 June 2016 (2015: GBP0.03 million).
12 Transactions with Directors
At 30 June 2016 David Stoller owed the Group GBP37,258 (30 June 2015: GBP1,545). This relates to PAYE payments, whereby following a PAYE assessment it was determined that Mr Stoller's compensation for work in the UK for the Company should be subject to PAYE (as opposed to being taxed only in the US) and therefore the Company was required to immediately pay outstanding PAYE. The Company will seek to recover this amount from Mr Stoller as soon as possible and once the related overpayment of employment tax in the US becomes available. Subsequent to 30 June 2016, Mr Stoller has made repayments of GBP10,000. The loan is non-interest bearing and no terms and conditions are attached. Full repayment is due by 31 December 2016
13 Interim Report
This document is available on the Group's website at www.r4e.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EKLFBQKFZBBE
(END) Dow Jones Newswires
September 12, 2016 02:00 ET (06:00 GMT)
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