TIDMR4E
RNS Number : 8031O
Reach4Entertainment Enterprises PLC
22 May 2018
Prior to publication, the information contained within this
announcement was deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulations (EU)
No. 596/2014 ("MAR"). With the publication of this announcement,
this information is now considered to be in the public domain.
22 May 2018
reach4entertainment enterprises plc
("r4e", the "Company"' or the "Group")
Final results for the year ended 31 December 2017
r4e, the transatlantic media and entertainment company, today
announces its results for the year ended 31 December 2017.
Highlights
-- Marketed over 100 events worldwide, including many of the
best-known theatre shows including Kinky Boots, Lion King, Les
Misérables, Book of Mormon and School of Rock
-- 2017 trading performance in line with management expectations
reflecting weaker performance from the US division, SpotCo, and
tougher trading conditions in the UK
-- Revenues of GBP80.2 million (2016: GBP96.6 million)
-- Gross profit margin of 25.1% (2016: 23.6%)
-- Adjusted EBITDA* of GBP1.0 million (2016: GBP1.9 million)
-- GBP1.5 million (non-cash) impairment of carrying value of SpotCo's goodwill
-- Adjusted profit after tax** of GBP0.6m (2016: GBP0.1m)
-- Reported loss after tax of GBP1.9 million (2016: profit of GBP0.1 million)
-- Loss per share of 0.30p (2016: earnings per share of 0.02p)
-- Net cash of GBP4.3 million (2016: net debt of GBP2.9 million)
* Adjusted EBITDA is before exceptional items, and share based
payment charges
** Adjusted profit after tax is before exceptional restructuring
costs of GBP1.0 million and non-cash goodwill impairment charge of
GBP1.5 million
New Management Team
-- New management team established under new CEO Marc Boyan in Q4 2017
-- Successfully raised GBP5.5 million from an equity placing in
December 2017, to support new strategy focused on:
o expanding Group activities beyond theatrical production;
o growing the business both organically and via acquisition;
o entering new geographic markets; and
o cost saving initiatives.
2018 and Beyond
-- Strategic review of existing operations complete
-- Investment in newly established entities:
o established Dewynters Amsterdam (in April 2018) following on
from the successful launch of Dewynters Germany - r4e now has
marketing teams in four major entertainment markets; and
o incubating a new company to focus on marketing-communications
for emerging and challenger brands whilst drawing on capabilities
of existing operations globally.
-- Re-organisation and restructuring of SpotCo resulting in:
o appointment of new Managing Directors Shelby Ladd and Stephen
Santore to lead the division;
o centralisation of financial control function under Dewynters'
Finance Director, Simon Shimell;
o new management team resetting expectations for 2018; and
o commencement of turnaround plan for SpotCo with a greater
focus on data and analytics.
-- Implemented Group cost reduction programme that has achieved
GBP2.0 million of gross annualised savings at the operational
level, which has enabled the Group to invest in new operations and
in strengthening the team
-- Senior level appointment of Mark Cox as Head of Corporate
Development to spearhead M&A strategy for the Group
-- Appointment of Sir David Michels as Deputy Chairman, Non-Executive Director
-- Major new shows launched and won in 2018 include Chicago and
Bat Out of Hell with the recent win of Warner Bros' Beetlejuice
slated for 2019
Chairman of r4e Lord Michael Grade, said:
"The new team has made significant progress in the seven months
it has been in place, raising GBP5.5 million, setting out a clear
plan to build from r4e's traditional theatre strongholds in London
and New York, achieving GBP2.0 million of gross annualised cost
savings to date, and opening a new office in Amsterdam. It has also
put in place new management to lead the turnaround of SpotCo having
completed a strategic review.
"r4e represents a natural platform upon which to build an
international live entertainment marketing business and we believe
we have the necessary experience to make this happen. To that end,
2018 is likely to be a year of transition as we focus on bringing
all parts of the business together to act as one team, providing
our innovative, data led marketing services to events and theatre
show where ever they are taking place. We look forward to
finalising the restructuring of the business and pushing forward
with expanding in the areas we have identified."
Enquiries:
reach4entertainment enterprises plc +44 (0) 20 7968 1655
Marc Boyan, Chief Executive Officer
Allenby Capital (Nominated Adviser and
Joint Broker) +44 (0) 20 3328 5656
Jeremy Porter/James Reeve
Dowgate Capital (Joint Broker)
James Serjeant +44 (0) 20 3903 7715
Novella Communications (Financial PR) +44 (0) 20 3151 7008
Tim Robertson/Toby Andrews
Chairman's Statement
Overview
This is my first statement as Chairman of r4e and I am pleased
to be able to present these results for the 12 months ended 31
December 2017. It has been a year of significant change for the
Company particularly through the appointment of a new management
team in Q4 of 2017 under CEO Marc Boyan.
r4e has for a long time operated two independent divisions
successfully in London and New York, primarily supporting theatre
productions and major events under the Dewynters and SpotCo brands.
In 2017, the Company collectively represented more than 100 shows
and events including Kinky Boots, Lion King, Les Misérables, Book
of Mormon and School of Rock, reflecting the established long-term
relationships the Company has with the leading theatre and event
production companies around the world.
The appointment of Marc Boyan in October 2017 marked an
important change in the direction and ambition of the business and
has led to the articulation of a new strategy to support the future
growth of the business.
Financial Results
The Group generated revenue of GBP80.2 million (2016: GBP96.6
million) reflecting a stable performance in London, despite the
terrorism incidents and a weaker trading outcome in New York
against a strong prior year. This resulted in underlying Adjusted
EBITDA of GBP1.0 million (2016: GBP1.9 million). The gross profit
margin increased notably to 25.1% (2016: 23.6%). Loss per share
from total operations for the year was 0.30p (2016: earnings per
share 0.02p). The Board are not recommending a dividend for the
year to 31 December 2017.
Strategy
Under Marc Boyan, the new management team have set out their
strategy to build upon r4e's unique position within the live
entertainment marketing sector for the future long-term growth of
the business. As a result, the Company is now focused on growing
through the expansion of its existing activities and beyond into
non-theatre production clients, both organically and through
strategic acquisitions, as well as focusing on opening up new
geographic markets all serviced and supported by our strong
capabilities in our existing operations.
To support the Company's strategic objectives, an equity placing
was completed in December 2017, raising GBP5.5 million gross
proceeds (GBP5.3 million net). Historically, the Company has been
constrained by the costs associated with the high level of debt the
Company had compared to its market capitalisation which has now
been addressed with Group net cash of GBP4.3 million (2016: net
debt of GBP2.9 million).
Alongside the reduction in borrowings, the restructuring actions
taken to date have achieved annualised cost savings of GBP2.0
million, the majority of which have come from streamlining
operations in SpotCo to create a more competency-based structure,
which has enabled the Group to invest in new operations and in
strengthening the team. On the back of a slowdown of activity in
2017, the new management team has taken the lead on the turnaround
of this business and reset expectations for SpotCo's performance in
2018. A key focus going forward is to bring SpotCo closer together
with the rest of the Group, allowing the business to offer clients
a unified international service from its global talent pool,
supporting events and shows wherever they are performed.
Since the year end, the Company established Dewynters Amsterdam
(in April 2018) following on from the successful launch of
Dewynters Germany. As a result, r4e now has marketing teams located
in four key markets for theatre and events marketing.
Board Changes
The Board welcomed Marc Boyan as its CEO and Ralph Wilson as
Interim CFO. Alongside the appointment of Marc, I moved from Non
Executive Director to Non Executive Chairman, and Claire Hungate
stepped down from the Board as a Non Executive Director to focus on
a CEO role. Since the year end, r4e announced the appointment of
Sir David Michels as Deputy Chairman, Non-Executive Director. Sir
David was formerly CEO of Hilton Group and brings a wealth of
public company experience to the Board.
On behalf of the Board I would like to thank David Stoller,
former CEO of r4e, for his contribution to r4e.
Lord Michael Grade
Non-Executive Chairman
CEO Statement
Overview
I joined in October 2017 to help r4e expand within and develop
outside its established market positions. Today, r4e employs over
200 marketing professionals across four countries and collectively
this team has unparalleled experience of promoting and marketing
shows and events. However, it has historically had a
siloed-approach to operations with best practices in one market not
necessarily shared across the business or beyond our core industry
focus of theatrical production. r4e boasts a talented pool of
operators within its ranks who understand how to drive consumers to
ticketing and e-commerce environments. I believe this expertise can
be successfully employed to service a broader set of customers
beyond our existing base which if complemented by placing
innovation and data driven decision making at the heart of all
solutions, will represent a compelling offer for our clients.
Through my ownership of the Miroma group of companies, I am
fortunate enough to be exposed to companies that have developed
cutting edge marketing technology solutions that we are now able to
employ for the benefit of r4e's current and prospective client
base.
Supported by the GBP5.5 million of new capital raised from our
shareholders, we have invested in attracting new people, opened up
new operational subsidiaries and markets, re-organised parts of the
business to achieve cost savings, created more efficient staffing
structures to support greater collaboration and implemented
centralised capabilities to service all current and prospective
subsidiaries.
We have made excellent progress in the past seven months on
these and other initiatives and while the restructuring programme
is still ongoing, we expect the benefits of the actions taken so
far to start to flow through in 2018.
I am pleased to be joined on the Board by Ralph Wilson as
Interim CFO and Sir David Michels as Deputy Chairman. Sir David has
served as Chairman of Miroma for the last four years and has
overseen a period of rapid growth over that time. Furthermore, we
have recently made a senior level hire for the group in Mark Cox
who joins us as Head of Corporate Development to spearhead our
M&A strategy. Mark has previously served as an Associate
Director at WPP and a Director of a leading M&A advisory
boutique focused on the media, marketing and technology
sectors.
New York, London, Hamburg and Amsterdam
Alongside market-leading agencies in London and New York, r4e
successfully launched a new agency in Hamburg in 2016.
Consequently, the Company now has a strong presence in the three
largest commercial theatre markets in the world. More recently, and
subsequent to the year-end, the launch of the joint venture
Dewynters Amsterdam in April 2018 stands as a blueprint for our
desire to continue to expand operations organically. This, combined
with the adoption of new data-driven marketing and analytics
capabilities (which can and will be increasingly applied to the
broader categories of live entertainment and e-commerce), and the
highly collaborative approach taken by the new leadership teams, is
expected to drive the Company's future growth.
In addition, in London the Group has commenced incubating a new
company to focus on marketing-communications for emerging and
challenger brands whilst drawing on capabilities of existing
operations globally.
New York
2017 was a challenging market environment for SpotCo compared to
the prior year resulting in revenue for this division reducing from
GBP65.2 million to GBP48.5 million and operating profit moving from
GBP1.0 million to a loss of GBP1.5 million, largely the result of a
GBP1.5 million non-cash impairment of the carrying value of its
goodwill.
The Board has taken a number of actions to restructure the
division and has appointed a new leadership team under joint
Managing Directors Shelby Ladd and Stephen Santore who had
previously headed up SpotCo's Digital and Analytics respectively,
supporting our belief that data informed decision making needs to
be at the heart of marketing strategy. The new management team have
been closely involved in defining a more achievable route to
profitable growth. In addition, the Finance Director of Dewynters
has taken over responsibility for financial control at SpotCo to
improve processes and systems and bolster the resources of the
business. As part of a turnaround plan, the focus will be to
continue servicing our client base to the best of our ability,
build on our recent successes for new business wins, maintain a
greater discipline in relation to costs, and integrate with the
management and skills base across the wider Group, all of which
will contribute to returning this division to its previous
position.
While the current year has begun well with the agency
successfully securing several new Broadway musicals which will
launch in the second half of 2018 and during 2019 and 2020, the
impact of these new wins is not expected to support a return to
growth until 2019.
London
Under divisional CEO James Charrington, Dewynters has been
re-organised to deliver a more streamlined service and to cultivate
a wider live entertainment client base, all underpinned by a
commitment to utilise data and analytics technology to better
identify target audiences, allocate marketing spend and track the
impact of advertising against ticket sales.
As a result, 2017 has been a year of transition for Dewynters,
reflected in the financial performance of the division with
revenues broadly stable at GBP26.2 million (2016: GBP27.5 million).
Adjusted EBITDA was GBP0.8 million (2016: GBP1.0 million) and
operating profit was GBP0.4 million (2016: GBP0.7 million).
Dewynters is well placed to improve on this performance in
2018.
Hamburg
Launched in September 2016, Dewynters Germany is still in its
infancy but is already making significant strides under the
leadership of Michael Hildebrandt, who has worked in Hamburg, the
capital of the German entertainment market, for the past 18 years
and is an established industry figure. Combined with the skills and
capabilities that this division is able to draw upon from the wider
Group, particularly from Dewynters in London, the agency has been
able to grow from a zero base in 2016 to generating organic
revenues of GBP1.4 million in 2017, and was breakeven at the
operating profit level in 2017.
Newmans
Building on the back of a highly successful 2016, Newmans
enjoyed further growth in 2017, with revenues up by 5% to GBP4.1
million (2016: GBP3.9 million), and generating EBITDA of GBP0.3
million (2016: GBP0.2 million). Previous investment in in-house
printing and cutting machinery has continued to benefit the
profitability of the division. Operating profit is also up on prior
year, at GBP0.3 million (2016: GBP0.1 million). The division
remains committed to growing into new customer markets and is well
placed going into 2018.
Outlook
r4e is changing into a very different business, switching from
operating leading brands in two separate markets, to being an
international business located across a number of markets with a
focus beyond the live entertainment market. We have made a good
start to developing r4e - the business is now conservatively geared
with headroom to invest in new opportunities. We have attracted
senior personnel into the business and we have a clear plan to
streamline the business further whilst targeting a larger share of
our existing markets and opening up new opportunities.
2018 will be a period of transition as the changes we have made
take effect. As a result, we reset expectations for the Group and
we anticipate 2018 trading results will be in line with the prior
year. However, looking further ahead we are establishing a more
integrated, cost efficient, technology driven platform from which
we expect to grow the business across all four markets in 2019 and
beyond.
Marc Boyan
Chief Executive Officer
GROUP STRATEGIC REPORT EXTRACT
PRINCIPAL ACTIVITIES
The principal activities of the Group during the year were to
provide creative, advertising, marketing and other services to the
theatrical, film and live entertainment industries including media
strategy and buying, marketing and sales promotions, signage and
publishing.
REVIEW OF PERFORMANCE AND FUTURE DEVELOPMENTS
Year ended 31 December 2017
London Dewynters Head Group
Dewynters Newmans Jampot Total SpotCo GmbH Office Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 26,153 4,099 65 30,317 48,508 1,386 - 80,211
Adjusted EBITDA* 788 331 (107) 1,012 446 (52) (430) 976
Share based charges (80) (3) - (83) 40 (40) (151) (234)
---------- -------- -------- -------- -------- ---------- -------- --------
EBITDA pre-exceptional 708 328 (107) 929 486 (92) (581) 742
Exceptional items (157) - - (157) (78) - (727) (962)
Impairment of
Goodwill - - - - (1,533) - - (1,533)
Depreciation &
amortisation (189) (71) - (260) (373) (5) (3) (641)
---------- -------- -------- -------- -------- ---------- -------- --------
Operating profit/(loss) 362 257 (107) 512 (1,498) (97) (1,311) (2,394)
Year ended 31 December 2016
London Dewynters Head Group
Dewynters Newmans Jampot Total SpotCo GmbH Office Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 27,536 3,909 - 31,445 65,153 8 - 96,606
Adjusted EBITDA* 983 216 (45) 1,154 1,496 (124) (624) 1,902
Share based charges (107) - - (107) (124) - (119) (350)
---------- -------- -------- -------- -------- ------------ -------- --------
EBITDA pre-exceptional 876 216 (45) 1,047 1,372 (124) (743) 1,552
Exceptional items - - - - - - - -
Depreciation &
amortisation (182) (77) - (259) (379) - (60) (698)
---------- -------- -------- -------- -------- ------------ -------- --------
Operating profit/(loss) 694 139 (45) 788 993 (124) (803) 854
*Adjusted EBITDA is before exceptional items and share based
payment charges. This is a measure used by r4e's provider of
finance, PNC, to monitor covenant compliance, as well as by the
Board as a proxy for cash profit.
Group
For the year ended 31 December 2017, the Group has seen a mixed
trading performance, with reduced revenues, mitigated by improved
gross profit margin and - as set out in note 4 to this final
results announcement - by reduced overheads:
-- Revenue down by GBP16.4 million and 17% on prior year
-- Gross profit down by GBP2.7 million and 12% on prior year
-- Gross profit margin up by 1.5% on prior year (at 25.1%, versus 2016's 23.6%)
Operating (loss)/profit performance was also affected by:
-- Exceptional costs of GBP1.0 million relating primarily to
Board and staff restructuring, which included the ceasing of David
Stoller's roles of Executive Chairman and Chief Executive
Officer;
-- Impairment of GBP1.5 million relating to the carrying value
of SpotCo's goodwill and intangible assets;
-- Shared based payment charges associated with the Group's Long
Term Incentive Plan ('LTIP'). A total of 228.0 million share
options had been granted to employees by 31 December 2017, of which
19.4 million had been exercised, and 11.5 million had been
forfeited in the year, leaving 197.1 million in place at the
year-end. The options were valued and GBP0.2 million was charged to
the income statement in the year (2016: GBP0.3 million). This is
non-cash effecting, with the creation of a share option reserve,
but the charge is recognised as personnel cost and thus reduces the
Group's EBITDA.
Debt financing
The amount owing to debt provider PNC reduced significantly
during the year, down to GBP2.5 million (2016: GBP5.0 million),
which was a result of the accelerated repayment in July of the
then-remaining term loan balance of GBP0.6 million, coupled with a
reduced drawdown by year-end against the asset based lending
facility.
As announced in October 2017, the Company breached its quarterly
monitoring covenant in the third quarter of 2017. The breach was
due to the covenant being determined on a 3-month rolling basis
which is therefore sensitive to seasonality fluctuations in EBITDA.
As announced in March 2018, the Company received formal agreement
from PNC to waive its rights in connection with the breach of the
covenant. As announced in February 2018, the Company stayed within
its key overall full-year monitoring covenant for 2017.
The initial 3-year term of the facility runs to 3(rd) December
2018, and the facility automatically continues in place
indefinitely thereafter unless either party gives at least six
months' notice on or after 4(th) June 2018. The Group believes that
the relationship with PNC is good, that they remain supportive of
the Company, and that they appear likely to want to continue the
arrangement after the end of the initial term.
Market
The Group's market is the provision of marketing and media
services to ticketed live events. Historically, it has focused upon
the entertainment sector, and specifically theatre. The Group's
subsidiaries, Dewynters in London and SpotCo in New York, are
market leaders in their respective theatrelands. As a result, the
Group is diversifying into new territories, and beyond theatre.
London
The London segment comprises Dewynters, Newmans and - since
October 2016 - Jampot. During the year the London operations
generated EBITDA, before exceptional items, of GBP0.9 million
compared to the year ended 31 December 2016 of GBP1.0 million.
Operating profit of GBP0.5 million was down on the prior year
(2016: GBP0.8 million). Jampot contributed a loss to this result,
of GBP0.1 million (2016: a loss of GBP0.05 million), acting as a
centre of expertise for data-driven marketing techniques.
Dewynters had a challenging year in 2017 to uphold margins in
the face of a changing sales mix. Revenues were down on the prior
year by 5%, caused partly by the impact of the London terrorist
attacks. Being weighted more towards media, gross profit margin was
down slightly at 26.9% (2016: 27.8%). In addition, the non-cash
affecting LTIP employee share options resulted in a charge of
GBP0.1 million to employee costs. EBITDA before exceptional items
was down GBP0.2 million, at GBP0.7 million (2016: GBP0.9 million),
or GBP0.8 million (2016: GBP1.0 million) when adding back the LTIP
costs. Operating profit was down GBP0.3 million, at GBP0.4 million
(2016: GBP0.7 million).
Newmans made a significant contribution to the London results in
2017 with an increase in revenue of GBP0.2 million (5%) to GBP4.1
million and a 50% increase in Adjusted EBITDA to GBP0.3 million,
compared with 2016. The continued good performance is aided by the
reduction in the level of outsourcing thanks to the investment in
2015 in in-house printing and cutting machinery. The result is
particularly pleasing since it is despite the negative impact,
earlier in the year, of the London terrorist attacks. Operating
profit rose strongly against the prior year at GBP0.3 million
(2016: GBP0.1 million) continuing the benefit of lower debt costs
under the PNC facility arrangement.
Jampot had its first full year within the group, generating
GBP0.1 million of revenue (2016: GBPnil) and an Adjusted EBITDA and
operating loss of GBP0.1 million (2016: GBP0.05 million) as it
focused mainly upon driving internal awareness, knowledge and
skills.
New York
The New York segment now consists solely of SpotCo, after DAI
was dissolved in December 2016 with only negligible closure costs
that year.
After increasing by GBP10.5m in 2016, SpotCo's revenue
contribution to the group decreased in 2017 by GBP16.6 million
(26%) to GBP48.5 million (2016: GBP65.1 million). In US Dollars,
SpotCo's 2017 revenue was $62.9 million, a $25.1 million (29%)
decrease on 2016's $88.0 million. The weighted average exchange
rate between the US Dollar and British Pound in 2017 for SpotCo's
revenues was 1.30, compared with 2016's average of 1.35. The
effective strengthening of the US Dollar helped mitigate the
revenue reduction in British Pounds by GBP2.7 million. The
disappointing level of trading was caused by challenging market
conditions and intense competition: for example, two productions,
Chicago and Waitress, switched agencies during the year. Jim
Edwards, current chief executive of SpotCo, will be stepping down
in June 2018, and Shelby Ladd and Stephen Santore have been
appointed Managing Directors. In recent months, SpotCo has had
encouraging and important wins for shows commencing in 2018, 2019,
and provisionally even 2020, and the new management team are
positive about long-term return to growth after what looks to be a
challenging period of turnaround continuing into 2018.
Improved gross profit margin - primarily the result of a shift
in favour of higher-margin non-media work - combined with actions
leading to significant year-on-year savings in personnel costs and
other administrative expenses, softened the impact of the revenue
reduction upon Adjusted EBITDA which was GBP0.4 million (2016:
GBP1.5 million). A GBP1.5 million impairment of SpotCo's goodwill
was caused by inherent uncertainty during a period of continuing
restructure, and led to a GBP1.5 million operating loss (2016:
GBP1.0 million profit).
Other performance highlights
Long Term Incentive Plan (LTIP)
The Board recognises the importance of retaining and
incentivising employees, and has continued to operate the r4e plc
Long Term Incentive Plan, set up in 2016, which allows the Company
to make grants of share options of up to 20 per cent of the issued
share capital. Included within employee costs and therefore within
EBITDA before exceptional items, in 2017, is GBP0.2 million of
costs related to the valuation of the LTIP options granted to
employees in the year (2016: GBP0.3 million). There is no cash
effect of the valuation, with the costs being recognised within
personnel costs in the Statement of Comprehensive Income and the
creation of an option reserve on the Statement of Financial
Position.
Finance Costs
Finance costs for the year amount to GBP0.3 million (2016:
GBP0.4 million), and primarily comprise interest and fees on PNC
debt of GBP0.3 million (2016: GBP0.3 million). The moderate
reduction in the cost is attributable to lower levels of
borrowings.
Tax
A tax credit of GBP0.8 million has been recognised in the year
(2016: GBP0.4 million charge), arising GBP0.5 million due to a
reduction in the deferred tax liability on intangibles and goodwill
in SpotCo as a direct result of the US corporate tax rate being
reduced from 35% to 21%, and a further GBP0.3 million reduction in
that liability because of the impairment of goodwill. Deferred tax
assets remain substantially unchanged. Group relief - mainly from
r4e - has enabled the Group to extinguish any liability due from
Dewynters and Newmans, whilst no tax is due in the USA on SpotCo
profits (2016: GBP0.3 million).
Cash Flow
Cash inflow from operating activities in the year was GBP1.9
million (2016: GBP3.2 million inflow) as a result of positive
trading (GBP0.01 million inflow) and working capital movements
(GBP1.9 million inflow). As part of its investing activities,
property plant and equipment expenditure was GBP0.1 million (2016:
GBP0.3 million).
Financing activity cash flow has significant movements as a
result of the PNC asset based lending facility. As cash was drawn
down to fund working capital, proceeds from the facility totalled
GBP83.7 million, and repayments to the lender through the facility
totalled GBP84.4 million (2016: GBP108.7 million and GBP111.4
million respectively). Proceeds from the issues of share capital
totalled GBP5.5 million - including GBP0.2 million arising upon the
exercise of share options - after related expenses (2016: GBP1.9
million), to invest in the Group's new initiatives. Interest and
fees paid out on debt totalled GBP0.29 million (2016: GBP0.34
million), reduced because of lower debt levels.
As explained in the prior year accounts, the cash position is
not expected to increase over the short term as drawdowns from the
PNC facility are charged a higher interest than unutilised
borrowings. Therefore, cash for working capital purposes is only
drawn down as required for payments rather than being retained on
hand for any length of time.
POSITION AT 31 DECEMBER 2017
As at 31 December 2017, the Group balance sheet has strengthened
by GBP3.8 million with a net asset position of GBP9.2 million
(2016: GBP5.4 million), caused primarily by a successful equity
placing in December 2017 raising funds of GBP5.3 million (net of
GBP0.2 million of costs), offset by the GBP1.5 million impairment
at SpotCo (2016: GBPnil).
Non-current assets are lower by GBP2.7 million at GBP11.1
million (2016: GBP13.8 million). GBP0.7 million of the decrease is
the effect of foreign exchange rates on the value of intangibles
(goodwill and brands) in SpotCo. GBP1.5 million is the impairment
of goodwill at SpotCo. The remaining GBP0.5 million is depreciation
of property, plant and equipment, with GBP0.1 million of additions
offset by GBP0.1 million of foreign exchange impact.
Current assets have increased by GBP1.3 million, from GBP17.1
million at 31 December 2016 to GBP18.4 million. That is as a result
of cash being higher by GBP4.7 million - resulting from the fund
raise - offset by trade and other receivables being lower by GBP3.3
million (23%), primarily a reflection of the 17% decrease in
revenues in the year, boosted by improved collections.
Trade and other payables have also reduced year-on-year, by 10%,
or GBP1.8 million, at GBP15.8 million. This reflects reduced levels
of work in 2017 but is proportionally less than the reduction in
turnover because of an increase in trade payables creditor days at
the respective year-ends. Current borrowings have come down from
GBP4.5 million to GBP2.4 million, as the asset based lending
liability has reduced, caused by lower maximum availability because
of lower trading levels, coupled with lower utilisation. This can
be due to timing as cash is drawn down and repaid on a constant
rolling basis.
Net current assets/(liabilities) have improved by GBP5.2
million, from a liability position of GBP5.0 million to an asset
position of GBP0.2 million, thanks primarily to the increase in
cash.
Non-current liabilities have been reduced by GBP1.5 million,
from GBP3.5 million to GBP2.0 million. Of this, GBP0.6 million was
caused by impact of the reduction of the US corporate tax rate upon
the deferred tax creditor arising on SpotCo's goodwill and
intangible assets, and GBP0.3 million by a further reduction in
that creditor because of the impairment of those assets. A further
GBP0.4 million decrease is attributable to repayments against PNC's
term loan.
The GBP5.1 million increase in equity was caused by new shares
issues in the year totalling 386,086,744 shares. These are set out
in note 10 to this final results announcement, and primarily relate
to the equity placing in December 2017. A further GBP0.2 million
was charged to the share option reserve in connection with the
value of r4e plc LTIP options granted to employees. These were
offset GBP0.7 million by the loss for the year. (Share options
exercised during 2017 resulted in the release of GBP0.2 million
from share option reserve to retained earnings.)
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2017
2017 2016
Note GBP'000 GBP'000
Continuing operations
Revenue 1 80,211 96,606
Cost of sales 4 (60,066) (73,779)
GROSS PROFIT 20,145 22,827
Administrative expenses 4 (22,539) (21,973)
Adjusted EBITDA* 976 1,902
Share based payment charges (234) (350)
-------------------- --------
EBITDA before exceptional items 742 1,552
Exceptional administrative expenses 2 (962) -
Impairment of goodwill 7 (1,533) (55)
Depreciation (452) (447)
Amortisation of intangible assets 7 (189) (196)
OPERATING (LOSS)/PROFIT (2,394) 854
Finance costs 3 (295) (355)
-------------------- --------
(LOSS)/PROFIT BEFORE TAXATION (2,689) 499
Taxation 5 824 (409)
(LOSS)/PROFIT FOR THE YEAR (1,865) 90
The profit is attributable to the equity
holders of the parent
Basic and diluted (loss)/earnings per
share (p)
Basic (loss)/earnings per share 6 (0.30) 0.02
Diluted (loss)/earnings per share 6 (0.30) 0.02
*Adjusted EBITDA is before exceptional items and share based
payment charges.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2016
2017 2016
GBP'000 GBP'000
(LOSS)/PROFIT FOR THE YEAR (1,865) 90
--------- --------
Other comprehensive income:
Items that will not be reclassified to
profit and loss:
Currency translation differences (33) 89
Other comprehensive income for the year,
net of tax (33) 89
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE
YEAR ATTRIBUTABLE TO THE EQUITY HOLDERS
OF THE PARENT (1,898) 179
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2017
2017 2016
Note GBP'000 GBP'000
NON-CURRENT ASSETS
Goodwill and intangible assets 7 8,635 10,946
Property, plant and equipment 2,230 2,720
Deferred tax asset 187 167
11,052 13,833
CURRENT ASSETS
Inventories 139 139
Trade and other receivables 10,981 14,263
Other current assets 549 601
Cash and cash equivalents 6,758 2,097
18,427 17,100
TOTAL ASSETS 29,479 30,933
======== ========
CURRENT LIABILITIES
Trade and other payables (15,773) (17,582)
Borrowings 8 (2,446) (4,489)
(18,219) (22,071)
NET CURRENT ASSETS/(LIABILITIES) 208 (4,971)
NON-CURRENT LIABILITIES
Deferred taxation (785) (1,733)
Other payables 9 (1,194) (1,241)
Borrowings 8 (56) (537)
(2,035) (3,511)
-------- --------
TOTAL LIABILITIES (20,254) (25,582)
NET ASSETS 9,225 5,351
======== ========
EQUITY
Called up share capital 10 5,005 3,074
Share premium 10 20,252 16,645
Deferred shares 1,498 1,498
Capital redemption reserve 15 15
Share option reserve 392 349
Warrant reserve 311 311
Retained earnings (18,154) (16,480)
Own shares held 10 (259) (259)
Foreign exchange reserve 165 198
TOTAL EQUITYATTRIBUTABLE TO EQUITY HOLDERS
OF THE PARENT 9,225 5,351
======== ========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 31
DECEMBER 2017
Capital Share Own Foreign
Share Share Deferred Redemption option Warrant Retained Shares Exchange Total
capital premium shares reserve reserve reserve earnings held reserve Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
ATTRIBUTABLE
TO EQUITY
HOLDERS OF THE
PARENT
At 31 December
2015 2,374 15,329 1,498 15 - 311 (16,570) (259) 109 2,807
Profit for the
year - - - - - - 90 - - 90
Other
comprehensive
income, net of
tax:
Currency
translation
differences - - - - - - - - 89 89
Total
comprehensive
income for
the year - - - - - - 90 - 89 179
Transactions
with owners in
their capacity
as owners:
Shares issued 700 1,316 - - - - - - - 2,016
Share based
payment
charges - - - - 349 - - - 349
At 31 December
2016 3,074 16,645 1,498 15 349 311 (16,480) (259) 198 5,351
Loss for the
year - - - - - - (1,865) - - (1,865)
Other
comprehensive
income, net of
tax:
Currency
translation
differences - - - - - - - - (33) (33)
Total
comprehensive
income for
the year - - - - - - (1,865) - (33) (1,898)
Transactions
with owners in
their capacity
as owners:
Shares issued,
net of costs 1,931 3,607 - - - - - - - 5,538
Share based
payment
charges - - - - 234 - - - - 234
Share options
exercised - - - - (191) - 191 - - -
At 31 December
2017 5,005 20,252 1,498 15 392 311 (18,154) (259) 165 9,225
======== ======== ========= =========== ======== ======== ========= ======== ========= ========
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2017
2017 2016
Note GBP'000 GBP'000
Cash generated from operating activities 12 1,797 3,089
Income taxes paid (44) (436)
Net cash generated from operating
activities 1,753 2,653
Investing activities
Purchases of property, plant and equipment (115) (489)
Net cash used in investing activities (115) (489)
Financing activities
Net proceeds from the issue of share
capital 5,538 2,016
Proceeds from asset based lending 83,722 108,684
Repayment of asset based lending (85,114) (111,396)
Repayment of term loan (788) (287)
Repayments of obligations under finance
leases (65) (13)
Interest and fees paid on borrowings (295) (338)
Net cash generated from/(used in)
financing activities 2,998 (1,334)
Net increase in cash and cash equivalents 4,636 830
Cash and cash equivalents at the beginning
of the year 2,097 1,160
Effect of foreign exchange rate changes 25 107
Cash and cash equivalents at the end
of the year 6,758 2,097
Reconciliation of net debt
2016 Cash flows Non-cash 2017
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 2,097 4,636 25 6,758
Borrowings (5,026) 2,245 279 (2,502)
--------- ----------- --------- ---------
Net (debt)/cash (2,929) 6,881 304 4,256
--------- ----------- --------- ---------
BASIS OF PRESENTATION
The financial information in this announcement does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. The figures for the year ended 31 December 2017
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.
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. The indefinite-life nature of goodwill is
considered appropriate given the longevity of agencies in the
theatre world - for example Dewynters has been in existence for
about a century now. 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 (CGUs). If the recoverable
amount of the CGU 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.
Share based payments
The Group issues equity-settled share-based payments to certain
employees. Equity-settled share-based payments are measured at fair
value (excluding the effect of non-market based vesting conditions)
at the date of grant. The fair value determined at the grant date
of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group's
estimate of the shares that will eventually vest and adjusted for
the effect of non-market based vesting conditions.
Fair value is measured using a Black-Scholes valuation model for
vanilla options and a binomial model for more complex options. The
expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
Capital Risk Management
The Group's objectives when managing capital - the combination
of equity and debt funding - 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 Strategic Report on page 10 of the
Company's accounts, and in Borrowings note 8 to this final results
announcement. Although breached in the third quarter of 2017, since
then the covenants were met for the key full-year measure, and
until the date of the release of those accounts.
Notes to the final results announcement
for the year ended 31 December 2017
Index of Notes
1. Business and Geographical Segments
2. Exceptional Administrative Items
3. Finance Costs
4. Expenses by Nature and Auditor's Remuneration
5. Taxation
6. Earnings Per Share
7. Goodwill and Intangible Assets
8. Borrowings
9. Other Non-Current Payables
10. Share Capital
11. Shared-Based Payments
12. Cash Generated from Operations
13. Related Party Disclosures
14. Transactions with Directors
15. Subsequent Events
1. BUSINESS AND GEOGRAPHICAL SEGMENTS
Business segments
For management purposes, the Group is currently organised into
four operating segments - New York operations, London operations,
German operations and Head Office. These divisions are the basis on
which the Group reports its segment information to the chief
operating decision maker.
Principal continuing activities are as follows:
New York (NY) - data-driven marketing, design, advertising,
promotions, digital media services, and publishing.
London - data-driven marketing, design, advertising, promotions,
digital media services, publishing, signage and fascia
displays.
Germany - data-driven marketing strategy and planning, media
planning, design, event production, PR, CRM and data
consulting.
Head Office - corporate strategy, finance and administration
services for the Group.
Segment information for continuing operations of the Group for
the year ended 31 December 2017 is presented below:
NY London Hamburg
operations operations operations Head Office Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
Provision of services 48,508 30,317 1,386 - 80,211
Revenue (all external
customers) 48,508 30,317 1,386 - 80,211
Adjusted EBITDA 446 1,012 (52) (430) 976
Share based payment
charges 40 (83) (40) (151) (234)
------------ ------------ ------------ ------------ ---------
EBITDA before exceptional
items 486 929 (92) (581) 742
Exceptional administrative (78) (157) - (727) (962)
Impairment of goodwill (1,533) - - - (1,533)
Depreciation (245) (199) (5) (3) (452)
Amortisation (128) (61) - - (189)
Operating profit/(loss) (1,498) 512 (97) (1,311) (2,394)
Finance costs (212) (42) (2) (39) (295)
(Loss)/profit before
tax (1,710) 470 (99) (1,350) (2,689)
Tax credit/(charge) 912 (31) - (57) 824
Profit/(loss) after
tax (798) 439 (99) (1,407) (1,865)
============ ============ ============ ============ =========
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.
1. BUSINESS AND GEOGRAPHICAL SEGMENTS (continued)
NY London Hamburg Head
operations operations operations Office Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Capital additions:
Property, plant
and equipment - 90 25 - 115
============ ============ ============= ========= =========
Balance sheet:
Segment assets
Non-current assets 8,179 2,831 21 21 11,052
Current assets 5,106 7,028 649 5,644 18,427
------------ ------------ ------------- --------- ---------
Total segment assets 13,285 9,859 670 5,665 29,479
============ ============ ============= ========= =========
Liabilities:
Total segment liabilities (9,921) (7,822) (868) (1,643) (20,254)
Capital additions include no plant held under finance lease
(2016: GBP0.19 million). GBP0.05 million had been paid against the
finance lease additions of 2016 in the year ended 31 December 2017
(2016: GBP0.05 million).
1. BUSINESS AND GEOGRAPHICAL SEGMENTS (continued)
Segment information for continuing operations of the Group for
the year ended 31 December 2016 is presented below.
NY London Hamburg
operations operations operations Head Office Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
Sale of goods - 1,168 - - 1,168
Provision of services 65,153 30,277 8 - 95,438
Revenue (all external
customers) 65,153 31,445 8 - 96,606
Adjusted EBITDA 1,496 1,154 (124) (624) 1,902
Shared based payment
charges (124) (107) - (119) (350)
------------ ------------ ------------ ------------ ---------
EBITDA before exceptional
items 1,372 1,047 (124) (743) 1,552
Impairment of goodwill - - - (55) (55)
Depreciation (244) (198) - (5) (447)
Amortisation (135) (61) - - (196)
Operating profit/(loss) 993 788 (124) (803) 854
Finance costs (260) (95) - - (355)
Profit/(loss) before
tax 733 693 (124) (803) 499
Tax (charge)/credit (338) (971) - 900 (409)
Profit/(loss) after
tax 395 (278) (124) 97 90
============ ============ ============ ============ =========
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.
1. BUSINESS AND GEOGRAPHICAL SEGMENTS (continued)
Head
NY London Hamburg Office
operations operations operations operations Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Capital additions:
Property, plant and equipment 42 502 1 - 545
============ ============ ============= ============ =========
Balance sheet:
Segment assets
Non-current assets 8,559 5,248 1 25 13,833
Current assets 9,831 6,268 127 874 17,100
------------ ------------ ------------- ------------ ---------
Total segment assets 18,390 11,516 128 899 30,933
============ ============ ============= ============ =========
Liabilities:
Total segment liabilities (16,806) (7,060) (42) (1,674) (25,582)
2. EXCEPTIONAL ADMINISTRATIVE ITEMS
2017 2016
GBP'000 GBP'000
Employee contract termination-related 814 -
costs
Costs relating to reorganisation 104 -
of the Board
Costs expensed to Income Statement 44 -
re share issues
Exceptional administrative expenses 962 -
Employee contract termination-related costs
The employee contract termination-related costs of GBP0.81m
relate to employees of Dewynters, SpotCo, and Head Office, and are
considered exceptional due to the level of redundancy, PILON, and
compensation for loss of office required as a result of company
performance.
Costs relating to reorganisation of Board
In order to ensure governance compliance when reorganising the
Board, exceptional legal and other costs were incurred.
Costs expensed to Income Statement re share issues
Other costs of GBP0.15m directly associated with the equity
placing of December 2017, raising GBP5.5 million (gross proceeds),
were charged against the share premium account, making a total of
GBP0.2m of costs re share issues.
3 FINANCE COSTS
2017 2016
GBP'000 GBP'000
Finance lease interest 20 13
Interest on PNC debt 170 200
Fees on PNC debt 108 137
Foreign exchange (gain)/loss on finance
items (3) 5
295 355
4 EXPENSES BY NATURE AND AUDITOR'S REMUNERATION
2017 2016
GBP'000 GBP'000
Media, marketing and promotional services 60,066 73,779
Staff costs 14,646 15,439
Share based payment costs (note 11) 234 350
Depreciation, amortisation and impairment 2,174 699
Exceptional administrative items (note 962 -
2)
General office expenses 1,596 1,817
Operating lease payments:
Land and buildings 1,460 1,339
Plant and machinery 62 160
Professional costs 636 1,373
Travelling 498 547
Other 271 249
Total cost of sales and administrative
expenses 82,605 95,752
During the year the Group obtained the following services from
the Company's auditor and its associates:
2017 2016
GBP'000 GBP'000
Audit fees
* statutory audit of the parent and consolidated
accounts 45 40
Fees payable to the company's auditor
and its associates for other services:
* the audit of the company's subsidiaries, pursuant to
legislation 55 50
* audit related services 10 11
* tax compliance services - 21
* tax advisory services - 6
110 128
5 TAXATION
2017 2016
GBP'000 GBP'000
Current tax:
Current UK Corporation Tax - -
Overseas tax (credit)/charge on (losses)/profits
of the year (22) 338
Total current tax (credit)/charge (22) 332
-------- --------
Deferred tax:
Origination and reversal of timing differences (234) 69
Deferred tax rate change (568) 8
Total deferred tax (credit)/charge (802) 77
Tax (credit)/charge on (loss)/profit of
ordinary activities (824) 409
Factors affecting the tax charge for the year:
2017 2016
GBP'000 GBP'000
The tax assessed for the year differs
from the effective average rate of corporation
tax in the UK of 19.25% (2016: 20.00%).
The differences are explained below:
(Loss)/profit on ordinary activities
before tax (2,689) 499
(Loss)/profit on ordinary activities
multiplied by effective average rate
of corporation tax in the UK of 19.25%
(2016: 20.00%) (518) 100
Effects of:
Fixed asset differences 20 20
Expenses not deductible for tax purposes 393 -
Income not subject to tax - (439)
Other tax adjustments, reliefs and transfers (135) (30)
Temporary difference on overseas tax - (7)
Difference in tax rates on overseas earnings - 165
Timing differences not recognised in
the computation 128 132
Impact of changes in foreign tax rates
for deferred tax (568) 8
FX difference on opening gross timing 32 -
differences
Deferred tax not previously recognised (176) 460
Total tax (credit)/charge for the year (824) 409
========== ==========
5 TAXATION (continued)
A deferred tax asset of approximately GBP1.05 million (2016:
GBP1.25 million) has not been recognised due to uncertainty over
future profitability. At 31 December 2017, the Group had trade
losses carried forward of GBP3.0 million (2016: GBP2.9 million),
available for offset against future profits in the UK, as well as
non-trade loan relationship deficit of GBP3.2 million (2016: GBP4.3
million) and capital losses of GBP4.7 million (2016: GBP4.7
million).
Taxation is calculated at the rates prevailing in the respective
jurisdictions. The standard tax rates in each jurisdiction are 21%
in the United States (2016: 35%) and 19% in the United Kingdom
(2016: 20%).
6 EARNINGS PER SHARE
The calculations of earnings per share are based on the
following profits and number of shares:
Profit attributable to equity holders of the company
2017 2016
GBP'000 GBP'000
For basic and diluted profit per share
(Loss)/profit for financial year (1,865) 90
Number Number
Number of shares
Weighted average number of ordinary
shares for the purposes of basic earnings
per share 627,060,836 500,208,593
Potentially dilutive effect of share
options 97,573,736 483,688
------------ ------------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 724,634,572 500,692,281
(Loss)/earnings per share
pence pence
Basic (loss)/earnings per share (0.30) 0.02
Diluted (loss)/earnings per share (0.30) 0.02
The loss attributable to ordinary shareholders and weighted
average number of ordinary shares for the purposes of calculating
the diluted loss per share are the same as those used for basic
loss per ordinary share. This is because the exercise of share
options and other benefits would have the effect of reducing loss
per share and is therefore not dilutive under the terms of IAS 33,
Earnings Per Share.
7 GOODWILL AND INTANGIBLE ASSETS
Brands Customer relationships Purchased goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
1 January 2016 4,261 2,607 13,915 20,783
Additions - - 55 55
Foreign exchange differences 409 - 1,026 1,435
-------- ---------------------- ------------------ --------
31 December 2016 4,670 2,607 14,996 22,273
Additions
Foreign exchange differences (213) - (531) (744)
-------- ---------------------- ------------------ --------
31 December 2017 4,457 2,607 14,465 21,529
-------- ---------------------- ------------------ --------
Amortisation and impairment
1 January 2016 1,291 1,931 7,576 10,798
Charged in the year 135 61 - 196
Impairment charge - - 55 55
Foreign exchange differences 278 - - 278
31 December 2016 1,704 1,992 7,631 11,327
Charged in the year 128 61 - 189
Impairment charge - - 1,533 1,533
Foreign exchange differences (155) - - (155)
31 December 2017 1,677 2,053 9,164 12,894
Net book value
31 December 2017 2,780 554 5,301 8,635
31 December 2016 2,966 615 7,365 10,946
31 December 2015 2,970 676 6,339 9,985
Goodwill relates to the anticipated profitability and future
operating synergies arising on the acquisition of subsidiaries.
Brands relate to the expected future benefit associated with the
subsidiaries' well-known names in the market, as arising on
acquisition.
Customer relationships represent the probable value over time of
clients obtained by way of acquisition.
All amortisation and impairment charges have been recognised as
administrative expenses in the income statement.
7 GOODWILL AND INTANGIBLE ASSETS (continued)
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:
2017 2016
GBP'000 GBP'000
-------------------------------------- ---------- ----------
Dewynters Group (Dewynters, Newmans) 1,351 1,351
SpotCo 3,950 6,014
Total goodwill 5,301 7,365
An impairment of GBP1.53 million in the year is related to the
carrying value of SpotCo's goodwill (2016: GBP0.55 million related
to Jampot Consulting Ltd - see note below). After a disappointing
year in 2017 and with recovery looking like it may take longer than
previously anticipated, management reviewed and cautiously revised
the key assumptions for the value-in-use calculations of SpotCo, in
particular pulling back from revenue growth rate for 2019 onwards
from 1.5% to 1.0%, which - on the back of the softened outlook for
2018 - resulted in the impairment. Management will continue to
monitor the trading outlook, and may revise the key revenue growth
assumption upwards again, for future impairment review purposes, if
and when they consider that to be an appropriate reflection of an
improved forward view.
An impairment of GBP0.55 million in 2016 related to the purchase
of Jampot Consulting Ltd. In 2016 the Company acquired Jampot for
consideration totalling GBP55,000. Although Jampot's digital
marketing IP was believed beneficial, since it related to the Group
as a whole, and future revenues could not be specifically allocated
to the acquired company, the goodwill in Jampot was written off in
2016. Subsequent to the write off, management decided to operate
the Group's new data marketing analytics business through
Jampot.
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 2018 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 in the tables detailed below and on the
next page.
The table for Dewynters Group, below, also 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 as set out, would result
in a removal of the headroom in the value-in-use calculations in
2017.
The key assumptions used in 2017, for the value-in-use
calculations and the change required to remove the headroom - along
with whether the Board considers that to be a reasonable change -
are as follows:
Dewynters Group Value-in-use Headroom Reasonable
assumption removal Change?
---------------------------------- ------------ -------- ----------
Revenue growth - year 1 4.6% (16.1%) No
Revenue growth per annum -
years 2-5 1.5% (4.4%) Yes
Gross profit margin- year 1 29.9% (83.4%) No
Gross profit margin - years
2-3 28.5% (51.7%) No
Gross profit margin - years
4-5 29.0% (18.2%) No
Employee costs (fall)/growth
- year 1 (4.3%) 20.3% No
Employee costs growth per annum
- years 2-3 1.5% 12.0% No
Employee costs growth per annum
- years 4-5 1.0% 16.2% No
Overhead costs growth - year
1 8.5% 52.5% No
Overhead costs growth - years
2-5 1.0% 15.5% No
Discount rate 15.5% 188.8% No
Capitalisation rate 15.5% (430.3%) No
EBITDA growth - year 1 81.1% (57.6%) Yes
7 GOODWILL AND INTANGIBLE ASSETS (continued)
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 2018
operational forecasts, 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 a combination of general industry market growth -
occasionally flexed if necessary for specific CGU circumstances -
and so the rate generally 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 CGU.
As well and reflecting the key assumptions for the value-in-use
calculations, the table for SpotCo, below, also shows the potential
level of adverse change in revenue or costs that the Board
considers to be possible in the future, along with the impairment
that would arise were that change to occur:
SpotCo Value-in-use assumption Reasonable adverse Change Additional impairment would be
-------------------------------- ----------------------- ------------------------- ------------------------------
Revenue (fall) - year 1 (5.8%) -5.0% GBP(2.87m)
Revenue growth per annum -
years 2-5 1.0% -2.0% GBP(3.14m)
Gross profit margin - year 1 19.9% -5.0% GBP(0.38m)
Gross profit margin - years
2-3 20.5% -3.0% GBP(0.32m)
Gross profit margin - years
4-5 21.5% -2.0% GBP(0.74m)
Employee costs growth - year 1 (18.0%) 1.0% GBP(0.40m)
Employee costs growth per
annum - years 2-3 1.0% 1.0% GBP(0.64m)
Employee costs growth per
annum - years 4-5 1.0% 1.0% GBP(0.47m)
Overhead costs growth - year 1 (11.8%) 3.0% GBP(0.35m)
Overhead costs growth - years
2-5 1.5% 2.0% GBP(0.66m)
Discount rate 15.5% 25.0% GBP(0.30m)
Capitalisation rate 15.5% 33.0% GBP(0.80m)
EBITDA (fall) - year 1 -27.8% -75.0% GBP(0.85m)
Brands and customer relationships all arise on acquisition;
there are not internally-generated intangible assets. The brand
allocated to the Dewynters CGU totalling GBP2.3 million (2016:
GBP2.3 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
GBP0.5 million (2016: GBP0.7 million) is being amortised over 15
years and has 7 years remaining.
Intangible customer relationships are attributable to Dewynters
only. The useful economic life for customer relationships within
Dewynters is 20 years of which 10 are remaining as at 31 December
2017. It has a carrying value of GBP0.6 million (2016: GBP0.6
million) and GBP0.06 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.
8 BORROWINGS
2017 2016
GBP'000 GBP'000
Current:
Term debt - 378
Asset based lending facility 2,372 4,037
Finance leases 74 74
2,446 4,489
========= =========
Non-current:
Term debt - 410
Finance leases 56 127
--------- ---------
56 537
========= =========
Analysis of borrowings:
On demand or within one year
Term debt - 378
Asset based lending facility 2,372 4,037
Finance leases 74 74
2,446 4,489
In the second to fifth years inclusive
Term debt - 410
Finance leases 56 127
56 537
Amounts due for settlement 2,502 5,026
Less amounts due within one year (2,446) (4,489)
Amounts due for settlement after one year 56 537
========= =========
Analysis of borrowings by currency:
Sterling US Dollar Total
GBP'000 GBP'000 GBP'000
31 December 2017
Asset based lending facility 190 2,182 2,372
Finance leases 130 - 130
320 2,182 2,502
========= ========== =========
Sterling US Dollar Total
GBP'000 GBP'000 GBP'000
31 December 2016
Asset based lending facility 960 3,077 4,037
Term debt 240 548 788
Finance leases 201 - 201
1,401 3,625 5,026
========= ========== =========
Asset based lending facility - summary: 31 December 2017 31 December 2016
GBP'000 GBP'000
Drawn down 2,372 4,037
Available for drawdown but undrawn 1,264 1,982
Not available for draw down 4,864 2,481
8,500 8,500
================= =================
8 BORROWINGS (continued)
Term debt
The term debt with PNC had 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 were in equal monthly instalments and began in
March 2016. The Group was able to pay off the remaining balance of
GBP0.55 million in full in July 2017.
Asset based lending
SpotCo, Dewynters and Newmans all 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 than they would otherwise be, since
cash drawdown incurs a higher rate of interest and 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 in Sterling, or
for amounts in Euro or US Dollars 2.25% over the rate published by
the central bank or relevant monetary authority. Borrowing facility
amounts not utilised incur interest payable at a fixed 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.
As announced in October 2017 the Company breached its quarterly
monitoring covenant in the third quarter of 2017. The breach was
due to the covenant being determined on a 3-month rolling basis
which is therefore sensitive to seasonality fluctuations in EBITDA.
As announced in March 2018, the Company received formal agreement
from PNC to waive its rights in connection with the breach. As
announced in February 2018, the Company stayed within its key
overall full-year monitoring covenant for 2017.
The initial 3-year term of the facility runs to 3(rd) December
2018, and the facility automatically continues in place
indefinitely thereafter unless either party gives at least six
months' notice on or after 4(th) June 2018. We believe that the
relationship with PNC is good, that they remain supportive of the
Company, and that they appear likely to want to continue the
arrangement after the end of the initial term. The Directors are
confident the Group remains a going concern - see page 35 for
further details.
9 OTHER NON-CURRENT PAYABLES
Landlord reimbursement accrual
Amounts in non-current other payables of GBP0.56 million (2016:
GBP0.61 million) relate to the re-imbursement of leasehold
improvement costs from SpotCo's landlord at the New York office. As
with many US leases SpotCo, as tenant, had to undertake a programme
of refurbishment of the property. Some of the expenses, related to
the provision of basic utilities and services, were then refunded
by the landlord. GBP0.84 million ($1.25 million) was received in
cash from the Landlord in 2013. In line with SIC Interpretation 15
this reimbursement has been recognised as a liability and is being
unwound to the income statement over the period of the lease,
reducing rental costs. GBP0.06 million was unwound during the year
(2016: GBP0.07 million). Amounts in current liabilities relating to
the reimbursement total GBP0.06 million (2016: GBP0.07
million).
2017 2016
GBP'000 GBP'000
Within one year 60 74
--------- ---------
Between two and five years 296 296
More than five years 260 315
556 611
========= =========
Rent holiday accrual
Other amounts in non-current other payables of GBP0.46 million
(31 December 2016: GBP0.63 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. In line with
SIC Interpretation 15 the accrual will be released to the income
statement over the term of the lease thus reducing rent costs.
2017 2016
GBP'000 GBP'000
Within one year 133 168
--------- ---------
Between two and five years 393 393
More than five years 69 237
--------- ---------
462 630
--------- ---------
Separation payments
Other amounts in non-current other payables of GBP0.18 million
(31 December 2016: GBPNil) relate to remaining payments owed to
David Stoller in relation to pay in lieu of notice and compensation
for loss of office, and related payroll tax obligations.
2017 2016
GBP'000 GBP'000
Within one year 352 -
--------- ---------
Between two and five years 176 -
Summary
Total non-current payables 1,194 1,241
========= =========
10 SHARE CAPITAL
2017 2016
GBP'000 GBP'000
Authorised, allotted, issued and fully paid:
1,001,079,415 ordinary shares at 0.5 pence each
(2016: 614,992,671 ordinary shares of 0.5 pence each) 5,005 3,074
Authorised, allotted, issued and fully paid: Number of shares Nominal Value Share Premium
Date Detail No. GBP'000 GBP'000
01 Jan 2016 Balance brought forward 474,894,792 2,374 15,329
12 Feb 2016 Shares issued 1,000,000 5 5
29 Mar 2016 Shares issued 3,666,666 18 36
01 Nov 2016 Shares issued 133,333,334 667 1,243
21 Dec 2016 Shares issued 2,097,879 10 32
31 Dec 2016 Balance carried forward 614,992,671 3,074 16,645
07 Dec 2017 Options exercised 19,420,076 98 98
20 Dec 2017 Shares issued 366,666,668 1,833 3,509
31 Dec 2017 Balance carried forward 1,001,079,415 5,005 20,252
Employee benefit trust 2017 2017 2016 2016
Shares GBP'000 Shares GBP'000
Cost
At the beginning and end
of the year 259,000 259 259,000 259
======== ========= ======== =========
Date Event Shares Price Detail
In satisfaction of fees payable
12 Feb in connection with the placing
2016 Fees Payable 1,000,000 1.0p completed in December 2015
For the acquisition of Jampot
29 Mar Jampot on 29(th) March 2016 resulting
2016 Acquisition 3,666,666 1.5p in share premium of GBP0.04m
On fund raise resulting in
01 Nov share premium of GBP1.33m.
2016 Fund Raise 133,333,334 1.5p Costs of issue totalled GBP0.20m
To the CEO of Dewynters GmbH,
in accordance with the terms
of his service agreement,
21 Dec Dewynters as part of his remuneration
2016 GmbH CEO 2,097,879 2.0p package
Share
07 Dec Options Exercise of share options
2017 Exercise 19,420,076 1.0p (see note 11) by David Stoller
On fund raise resulting in
share premium of GBP3.67m.
Costs of issue totalled GBP0.20m,
20 Dec of which GBP0.04m was expensed
2017 Fund Raise 366,666,668 1.5p in the P&L
During 2007 and 2008 the company funded an employee benefit
trust to purchase its own shares to meet the Group's expected
obligations under an employee share scheme. As at 31 December 2017
the market value of own shares held in trust was GBP5,569 (2016:
GBP4,727).
During the year the mid-price of the Company's shares traded
between 1.12 pence and 2.25 pence (2016: 1.33 pence and 2.63
pence). At 31 December 2017 the share price was 2.15 pence (2016:
1.83 pence).
11 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 1.0p - 2.0p 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
former or current 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.
In addition, Options held by Marc Boyan 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
i) a share price target of GBP0.025 per share and/or ii) an
increase in Adjusted EBITDA of GBP1,000,000 over the Company's
Adjusted EBITDA* for the 2017 financial year;
(b) A further one third of the Option shall become exercisable
on meeting i) a share price target of GBP0.035 per share and/or ii)
an increase in Adjusted EBITDA of GBP2,000,000 over the Company's
Adjusted EBITDA* for the 2017 financial year; and
(c) The remaining one third of the Option shall become
exercisable on meeting i) a share price target of GBP0.045 per
share and/or ii) an increase in Adjusted EBITDA of GBP3,000,000
over the Company's Adjusted EBITDA* for the 2017 financial
year.
*Adjusted EBITDA is before exceptional items and share based
payment charges.
However, subject to the Board's discretion, the Option holders
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.
11 SHARE-BASED PAYMENTS (continued)
The following options to subscribe for the Company's shares have
been granted to directors and eligible employees ('Eligible Ees'),
at - and had not lapsed or been exercised by - 31 December
2017:
Granted Date of Number of Exercise
to Option Shares First exercisable* Expiry date Price
David Stoller 04 Mar 2016 4,329,924 01 Oct 2017 04 Mar 2022 1.00 pence
Linzi Allen 04 Mar 2016 4,750,000 01 Oct 2017 04 Mar 2022 1.00 pence
Eligible 04 Mar 2016 20,267,637 04 Mar 2019 04 Mar 2022 1.00 pence
Ees
Eligible 21 Mar 2016 9,500,000 21 Mar 2019 21 Mar 2022 1.00 pence
Ees
Eligible 02 Jun 2016 10,800,000 02 Jun 2019 02 Jun 2022 1.00 pence
Ees
Eligible 27 Sep 2016 1,500,000 27 Sep 2019 27 Sep 2022 1.00 pence
Ees
Eligible 20 Dec 2016 9,500,000 20 Dec 2019 20 Dec 2022 2.00 pence
Ees
Eligible 01 Mar 2017 1,000,000 01 Mar 2020 01 Mar 2023 2.00 pence
Ees
Eligible 25 Apr 2017 1,000,000 25 Apr 2020 25 Jun 2023 1.50 pence
Ees
Eligible 13 Sep 2017 2,000,000 13 Sep 2020 13 Sep 2023 1.40 pence
Ees
Marc Boyan 20 Dec 2017 124,635,959 20 Dec 2020 20 Dec 2023 1.50 pence
*or on share price target where applicable
2017 2016
Movement in number of options in the year: No. Options No. Options
Outstanding brought forward at 1 January 93,100,000 -
Granted during the year 128,635,959 100,900,000
Exercised during the year (19,420,076) -
Forfeited during the year (17,782,363) (7,800,000)
------------- -------------
Outstanding carried forward at 31 December 184,533,520 93,100,000
------------- -------------
Options granted in 2017 were granted only on the dates, in the
volumes, and at the exercise prices as shown in the above table.
8,147,561 options were exercisable at 31 December 2017 (2016:
nil).
The share options outstanding as at 31 December 2017 had a
weighted average remaining contractual life of 5.48 years (2016:
5.36 years). The weighted average share price of exercised options
at the date of exercise was 1.80p (2016: not applicable).
The weighted average fair value of options granted during the
period was 1.03p (2016: 1.19p).
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 1.00-2.00 pence, as applicable
Share price at valuation date 0.02150 pence
Expected life 6 years
Volatility 100% - 40%
Risk free interest rate From 0.24% - 1.5%
Exit rate of employees 5%
During the year the Group recognised total share-based payment
expenses of GBP0.23 million (31 December 2016: GBP0.35
million).
12 CASH GENERATED FROM OPERATIONS
2017 2016
GBP'000 GBP'000
Reconciliation of net cash flows from
operating activities
(Loss)/profit before taxation (2,689) 499
Adjustments:
Finance costs 295 355
Depreciation 452 447
Amortisation of intangibles 189 196
Impairment of goodwill 1,533 55
Share based payment charges 234 349
Operating cash flows before movements
in working capital 14 1,901
Decrease in inventories - 13
Decrease/(increase) in trade and other
receivables 2,654 (1,357)
(Decrease)/increase in trade and other
payables (783) 2,532
Decrease in other non-current liabilities (88) -
Cash generated from operating activities 1,797 3,089
========= =========
Restatement of 2016 statement of cash flows
The comparative statement of cash flows and the related note
have been restated to correct certain classification errors
identified during the completion of the 2017 financial statements
which has impacted the 2016 amounts as follows:
-- Increase in trade and other payables, Cash generated from
operating activities, and Net cash generated from operating
activities have reduced by GBP107,000;
-- Purchase of property, plant and equipment has increased by
GBP133,000, and Purchase of finance lease equipment has reduced by
this same amount;
-- Net proceeds from the issue of share capital has increased by
GBP107,000 and Net cash used in financing activities has reduced by
the same amount.
These changes had no impact on the profit for the year ended 31
December 2016 or on the cash and cash equivalents balance
recognised in the consolidated statement of financial position at
that date.
13 RELATED PARTY DISCLOSURES
During the year ended 31 December 2017, transactions with Key
Management Personnel are in relation to Directors and other senior
executive staff of the Group and are presented in the Directors
Remuneration and other tables on page 20 of the Company's accounts
and in note 5 to those accounts.
Lord Grade (non-executive Director of r4e) is currently a
director of Gate Ventures plc, which was a substantial shareholder
in r4e during the year. He is also a co-founder of The GradeLinnit
Company Ltd ("GradeLinnit"). During 2017, Dewynters had an existing
agreement in place with GL 42nd Street Limited, a subsidiary
company of GradeLinnit, for the provision of marketing and media
services for the West End production of 42nd Street, which launched
at the Theatre Royal Drury Lane in the first half of 2017. The fees
payable to Dewynters under the agreement were on the Company's
normal commercial terms and amounted to GBP1,516,384 (2016:
GBP264,788). The balance owed to Dewynters at 31 December 2017 was
GBPNil (2016: GBP205,677).
14 TRANSACTIONS WITH DIRECTORS
At 31 December 2017, no directors owed the Group any amounts
(2016: David Stoller owed the Group GBP268).
During the year ended December 2016, the Group procured
consultancy services totalling GBP0.05 million from Glen House
Capital Strategies Ltd., a company owned by Richard Ingham who was
a non-executive director of the Board up until his resignation on
11 May 2016. No balance was outstanding at 31 December 2016.
During the year ended December 2017, the Group procured
consultancy services totalling GBP0.03 million (2016: GBP0.03
million) from Springtime Consultants Ltd., a company owned by
Marcus Yeoman, a non-executive director of the Board. No balance
was outstanding at 31 December 2017 (2016: GBPNil).
15 SUBSEQUENT EVENTS
Miroma buying agreements
As announced by r4e on 12 February 2018, Dewynters and SpotCo
have entered into media buying agreements with, respectively,
Miroma International Limited and Miroma Outcomes LLC (collectively
'Miroma'). Those are companies owned by Miroma Holdings Limited, a
company of which Marc Boyan, the CEO of r4e, is a director and the
controlling shareholder. The Miroma group operates a successful
media trading business which works with brands, media agencies and
media owners to enable brand owners to extract additional value
from their marketing budgets.
As part of an operational review of the business, the Board of
r4e has been reviewing the Group's media suppliers and partners,
and determined that it is in the best interests of the Group and
its clients, for Dewynters and SpotCo to enter into agency referral
and media trading services agreements with Miroma. The agreements
are expected to result in efficiencies in media buying for
Dewynters and SpotCo, through the expertise and purchasing power of
Miroma, and were entered into on an arm's-length basis. They have
an initial one-year term and will continue thereafter unless
terminated by either party providing three months' notice.
PNC Waiver
As announced by r4e on 6 March 2018, PNC formally agreed to
enter into an Amendment, Consent and Waiver agreement with the
Group. The waiver covers the Group's breach of its rolling 3-months
monitoring covenant in the third quarter of 2017. The Group stayed
within its key overall full-year monitoring covenants for 2017.
Dewynters Amsterdam
As announced by r4e on 24 April 2018, the Group has launched a
new agency and office in the Netherlands with the establishment of
Dewynters Amsterdam B.V. It is a joint venture between r4e and
Lisette Heemskerk, Ronald Luijendijk and Jacques Kuyf, all
well-known leaders in the media and marketing sectors. Dewynters
Amsterdam is 60% owned by r4e and 40% by the joint venture
partners, and will focus on providing marketing, sales and
communication services to the thriving theatrical and live
entertainment markets in the Netherlands and the Dutch-speaking
region of Belgium.
The Group will support the development of Dewynters Amsterdam,
which has already secured, a multi-billion dollar European media
and entertainment group as its first client, to provide commercial
and business strategies, marketing plans and creative concepts.
Under the joint venture agreement, r4e will invest towards
establishing the business and make available the whole range of
marketing skills used in supporting theatre shows and live
entertainment events from across its employee base.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FKBDDQBKKNPB
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