TIDMR4E
RNS Number : 4646Y
Reach4Entertainment Enterprises PLC
09 September 2015
reach4entertainment enterprises plc ( 'r4e', 'the Company' or
'the Group')
Unaudited interim results for the six months ended 30 June
2015
r4e, the transatlantic media and entertainment company, today
announces its unaudited interim results for the six months ended 30
June 2015.
Highlights
Financial
-- Maintained market leadership in both London and New York's theatre markets
-- Revenues increased to GBP42.5 million (H1 2014: GBP41.5 million)
-- Pre-exceptional items recorded EBITDA of GBP0.9 million (H1 2014: GBP1.4 million)
-- Profit before tax (post exceptional items) of GBP0.05 million (H1 2014: GBP0.7 million)
Re-financing
-- Transformative refinancing proposal agreed with AIB Group (UK) p.l.c. ("AIB") in June 2015
-- After a capital repayment of GBP0.4 million due in October
2015, total debt reduction from GBP14.2 million to GBP9 million
-- GBP5.2 million of debt converting into 12.5% of equity
-- Remaining GBP9 million to be repaid through combination of new debt and equity
-- Negotiations with new lenders and investors well underway
Looking ahead
-- AIB agreement creates opportunity to relaunch the business
-- Company to pursue future investment in growth areas of the
theatre and other entertainment markets
-- Theatre attendances, gross revenues, and number of shows
expected to continue to rise in London and New York, reinforcing
r4e's core business
-- Trading performance for 2015 is expected to be in line with
market expectations with new shows expected to launch close to
Christmas
-- 2016 outlook is positive
David Stoller, Executive Chairman, commented:
"2014 was an exceptional year for the theatre market and 2015 is
proving to be a solid if more 'normal' market environment. Of our
two main markets New York has been stronger but we anticipate that
London will improve in late 2015/early 2016. Overall our trading
performance has been comfortably in line with our expectations for
this period and the outlook for the full year.
We are very enthusiastic about the future of our business,
following the successful negotiations with AIB to restructure our
borrowings as agreed in June. Once the restructuring is completed
later this year, r4e will be able to focus on re-launching its new
business strategy, building upon our market leading positions in
London and New York theatre markets."
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
Ben Heath +44 (0) 7900 927650
EXECUTIVE CHAIRMAN'S STATEMENT
Return to normal market conditions
2014 was an exceptional year for the Group due to the high
number of new shows opening and several instances of unexpectedly
high client spend in New York. 2015 has seen a return to a solid if
more normal market environment and our trading performance reflects
this.
Importantly, the theatre markets in London and New York, in
which the Group enjoys market leading positions, are both in good
health with positive underlying trends in terms of audience and
revenue numbers.
This, together with the refinancing proposal agreed with AIB
means the Group is well placed for the future.
Trading performance
The results for the 6 months ended 30 June 2015 show the
following:
Summary of results
Unaudited Unaudited
6 months 6 months
ended ended
30 June 30 June
2015 2014
GBP'000 GBP'000
Total Revenue from continuing
operations 42,496 41,500
---------- ----------
Adjusted EBITDA(1) from
continuing operations 867 1,405
Net exceptional costs
(see note 5) (264) (9)
Group EBITDA 603 1,396
========== ==========
(1) Adjusted EBITDA is EBITDA before exceptional items.
The Group delivered a small improvement in revenue growth
primarily from advertising spend generated from US related theatre
shows. Gross profit was slightly lower due to a change in the sales
mix with a higher proportion of advertising spend contributing to
revenues.
Despite a strong performance from New York operations, with Spot
& Company of Manhattan Inc. ('SpotCo') increasing revenue by
11% to GBP27.5 million (2014: GBP24.8 million), EBITDA decreased
from the prior year as a result of the change in sales mix. Group
EBITDA in the period continued to be impacted by the unexpected
closure of 6 London musicals in 2014 and was further impacted by
exceptional costs of GBP0.264 million relating to one off property
expenses, redundancy costs and costs associated with the
re-financing with AIB.
Profit before tax was GBP0.05 million (2014: GBP0.7 million).
The tax charge of GBP0.32 million (2013: GBP0.40 million) appears
out of proportion against profit before tax due to GBP0.28 million
of this charge (2014: GBP0.31 million) being tax incurred in the US
against the profits of SpotCo. Having fully utilised its tax losses
carried forward, SpotCo's profits are now fully chargeable for tax
and a continuing strong performance means that the tax charge is
greater than profit before tax when consolidated within the group
results.
Recorded loss per share from total operations for the six months
to 30 June 2015 was 0.36p (2014: profit of 0.42p).
Total borrowings reduced by GBP0.59 million to GBP15.58 million
(2014: 30 June GBP16.17 million), as the Company paid down GBP0.2
million against the bank loan with AIB and continues to meet its
debt repayment obligations relating to its acquisition of
SpotCo.
The second half of the financial year has started well and we
anticipate that we will see a return to the more traditional
seasonal weighting, with a greater portion of the Group's
profitability generated in the second half of the year.
Maintained market leading positions in London and New York
Our operations now comprise 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, Newman Displays Ltd
('Newmans'). Operations of the New York based merchandising
business, Dewynters Advertising Inc ('DAI') were outsourced at the
end of 2012.
Continuing Operations
Unaudited Unaudited
6 months ended 6 months ended
30 June 2015 30 June 2014
Adjusted Adjusted
Company Revenue EBITDA* Revenue EBITDA*
GBP'000 GBP'000
------------------- -------------------
Dewynters 13,303 296 14,803 469
-------- --------- -------- ---------
Newmans 1,556 49 1,714 162
SpotCo 27,480 914 24,843 1,219
-------- --------- -------- ---------
DAI 157 12 140 9
-------- --------- -------- ---------
Head Office - (404) - (454)
TOTAL 42,496 867 41,500 1,405
======== ========= ======== =========
*Adjusted EBITDA is EBITDA before exceptional administrative
items. Adjusted EBITDA figures are shown before intergroup
management fees. Note that the report and financial statements at
31 December 2014 reflect company numbers after accounting for
intergroup management fees.
Remembering that 2014 was an exceptional year, the performance
by Spotco in New York was positive reflecting a more normalised
market environment, while Dewynters in London continues to be
impacted by the long tail of unexpected show closures in 2014.
Overall the trading performance was in line with our
expectations.
SpotCo is now building on a period of sustained growth, enjoying
a market leading position and attracting the support of some of the
leading producers of new and existing shows. SpotCo's deserved
reputation for originality of design and innovation in marketing
techniques is growing and was reflected last year in the number of
shows it represents which went on to win 16 Tony awards of the
total 24 awarded.
Dewynters revenues are down by 10% and EBITDA by 36.9% against
the same period in 2014. The London market has had fewer new
musicals opening in the period which not only impacts on Dewynters
revenues, but, as new shows typically result in higher margin
revenues than the long running shows, the resulting change in sales
mix has impacted negatively on EBITDA. Dewynters remains a market
leader in London's West End and is expected to improve on its
current performance.
In addition, Dewynters continues to grow its non-West End
related work of theatrical and musical projects in Europe, whilst
its Touring Division, established three years ago to provide
marketing services to touring productions of theatre and other live
events, continues to expand in the UK and internationally.
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With UK cinema box office revenues declining in 2014 by 7% on
2013 (source The Box Office 2014, BFI Research and Statistics pg.
7), Newmans' revenues were lower than the comparable period last
year as there were less new film premieres resulting in a declining
trading performance. However, the second half of the year, in
particular, the key Christmas period is the most profitable period
in the year for Newmans. Newmans is also focused on developing its
presence in the digital signage market and over time expects that
many new films will use digital signage for promotion.
Re-financing agreement with AIB
The Company has entered into a conditional agreement with AIB
Group (UK) plc (AIB) to restructure the Company's existing
GBP14,585,000 loan facility with AIB, as announced on 10 June 2015.
Final settlement of the existing facility is subject, inter alia,
to the Company securing funding to fulfil its repayment obligations
which is now required by 31 October 2015 for completion of the
agreement no later than 20 November 2015. r4e is seeking to secure
such funding through a combination of new debt facilities and the
issue of new ordinary shares in the Company and is progressing
discussions with potential lenders and investors in this
regard.
As previously announced on 3 June 2015, the Company is in a
serious loss of capital position due to the impairment of goodwill
in 2014. A general meeting was held on 30 June 2015 to address this
with shareholders. Subject to being able to conclude the
refinancing of the AIB credit facilities, the Company will record
an exceptional after tax gain as a result of the debt to equity
conversion. This, together with the intention to raise new equity
as part of the refinancing, is expected to restore shareholder
funds to a positive value and put the Company on a strong footing
for future growth.
Summary and Outlook
The size of the Group's borrowings has meant that the Company
has not been able to achieve its full potential as the debt has
restricted the ability to invest in growth opportunities, of which
there are many. The agreement with AIB is the catalyst for
re-launching the Company.
We are pleased that the 2015 trading performance to date is in
line with expectations, and provides a solid platform for securing
the future growth funding of the business. Initially we will focus
on reinforcing our market positions and expanding our internal
capabilities and growth opportunities, while at the same time
exploring a number of potential accretive acquisitions that could
accelerate the pace of our growth.
David Stoller, Executive Chairman
reach4entertainment enterprises plc
Unaudited Condensed Consolidated Income Statement
For the six months ended 30 June 2015
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
GBP000's GBP000's GBP000's
Continuing Operations
Revenue 42,496 41,500 83,282
Cost of sales (32,800) (31,637) (63,170)
------------- ------------- -------------
Gross profit 9,696 9,863 20,112
Administrative expenses (9,369) (8,733) (24,413)
EBITDA before exceptional
administrative items 867 1,405 2,647
Exceptional administrative
expense 5 (264) (9) (243)
Exceptional administrative
income 5 - - 264
Impairment of goodwill 6 - - (6,430)
Depreciation (180) (170) (344)
Amortisation of intangibles (96) (96) (195)
----------------------------------- --- ------------- --- ------------- --- -------------
Operating profit/(loss) 327 1,130 (4,301)
Finance income 2 64 44 60
Finance costs 3 (339) (465) (879)
Profit/(loss) before
taxation 52 709 (5,120)
Taxation (320) (395) (873)
(Loss)/profit for the
period (268) 314 (5,993)
============= ============= =============
The (loss)/profit is attributable to the owners
of the parent
Basic and diluted (loss)/earnings
per share (pence) 4 (0.36) 0.42 (8.03)
============= ============= =============
Unaudited Condensed Consolidated Statement of Comprehensive
Income
For the six months ended 30 June 2015
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
GBP000's GBP000's GBP000's
(Loss)/profit for the
period (268) (5,993)
314
Other comprehensive income:
Currency translation
differences (31) (126) 245
Other comprehensive income
(net of tax) for the
period (31) (126) 245
Total comprehensive (loss)/income
for the period attributable
to owners of the parent (299) 188 (5,748)
============= ============== =============
Unaudited Condensed Consolidated Balance Sheet
As at 30 June 2015
6 months 6 months
Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
GBP000's GBP000's GBP000's
Non-current assets
Goodwill 6 7,022 13,072 7,060
Intangible assets 3,698 3,823 3,799
Property, plant and equipment 2,316 2,388 2,448
Deferred tax asset 88 58 88
13,124 19,341 13,395
------------- ------------- -------------
Current assets
Inventories 283 303 401
Trade and other receivables 7,677 8,971 12,240
Other current assets 470 432 473
Cash and cash equivalents 2,511 3,115 2,446
------------- ------------- -------------
10,941 12,821 15,560
------------- ------------- -------------
Total assets 24,065 32,162 28,955
============= ============= =============
Current liabilities
Trade and other payables (11,554) (13,079) (15,840)
Current taxation liabilities (93) (175) -
Borrowings 7 (1,423) (814) (1,896)
------------- ------------- -------------
(13,070) (14,068) (17,736)
------------- ------------- -------------
Net current liabilities (2,129) (1,247) (2,176)
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------------- ------------- -------------
Non-current liabilities
Deferred taxation (1,381) (1,250) (1,349)
Borrowings 7 (14,155) (15,356) (14,155)
Other payables 8 (1,503) (1,297) (1,460)
(17,039) (17,903) (16,964)
Total liabilities (30,109) (31,971) (34,700)
------------- ------------- -------------
Net (liabilities)/assets (6,044) 191 (5,745)
============= ============= =============
Equity
Called up share capital 1,872 1,872 1,872
Share premium 13,501 13,501 13,501
Capital redemption reserve 15 15 15
Retained earnings (21,104) (14,529) (20,836)
Own shares held (259) (259) (259)
Foreign exchange reserve (69) (409) (38)
Total equity attributable
to owners of the parent (6,044) 191 (5,745)
============= ============= =============
Unaudited Condensed Consolidated Statement of Changes in
Equity
For the six months ended 30 June 2015
Capital Own Foreign
Share Share redemption Retained shares exchange Total
ATTRIBUTABLE TO OWNERS capital premium reserve earnings held reserve Equity
OF THE PARENT GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 January 2014 1,872 13,501 15 (14,843) (259) (283) 3
Profit for the period - - - 314 - - 314
Other comprehensive income:
Currency translation
differences - - - - - (126) (126)
---------- ---------- ------------ ----------- -------- ---------- ---------
Total comprehensive income
for the period - - - 314 - (126) 174
At 30 June 2014 (Unaudited) 1,872 13,501 15 (14,529) (259) (409) 191
At 1 July 2014
Loss for the period - - - (6,307) - - (6,307)
Other comprehensive income:
Currency translation
differences - - - - - 371 371
---------- ---------- ------------ ----------- -------- ---------- ---------
Total comprehensive income
for the period - - - (6,307) - 371 (5,936)
At 31 December 2014 (Audited) 1,872 13,501 15 (20,836) (259) (38) (5,745)
At 1 January 2015
Loss for the period - - - (268) - - (268)
Other comprehensive income:
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)
Unaudited Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2015
6 months
6 months ended Year ended
ended 30 June 31 December
30 June 2014 2014
2015 (Unaudited) (Unaudited) (Audited)
GBP000's GBP000's GBP000's
Cash generated from
operating activities 9 1,027 1,890 2,494
Income taxes paid (166) (67) (723)
Net cash inflow from
operating activities 861 1,823 1,771
------------------ ------------- -------------
Investing activities
Purchase of property,
plant and equipment (59) (122) (194)
Proceeds from disposal
of property, plant
and equipment - - 3
Payment of deferred
consideration 7 (332) (307) (615)
Dividends received
from associated undertaking 60 - 60
------------------ ------------- -------------
Net cash used in investing
activities (331) (429) (746)
------------------ ------------- -------------
Financing activities
Repayment of borrowings (200) - -
Interest paid (263) (235) (502)
------------------ ------------- -------------
Net cash used in financing
activities (463) (235) (502)
------------------ ------------- -------------
Net increase/(decrease)
in cash and cash equivalents 67 1,159 523
Cash and cash equivalents
at the beginning of
the period 2,446 1,876 1,876
Effect of foreign exchange
rate changes (2) 80 47
Cash and cash equivalents
at end of the period 2,511 3,115 2,446
================== ============= =============
Unaudited notes to the Condensed Consolidated Interim Financial
Statements
For the six months ended 30 June 2015
1 Basis of Presentation
These unaudited condensed consolidated interim financial
statements are for the six months ended 30 June 2015. 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 2014, 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 434 of
the Companies Act 2006. The unaudited interim financial statements
were approved by the Board on 8 September 2015.
The comparative financial information for the year ended 31
December 2014 does not constitute statutory accounts within the
meaning of Section 434 of the Companies Act 2006. The statutory
accounts of reach4entertainment enterprises plc for the year ended
31 December 2014 have been reported on by the Company's auditor,
Baker Tilly 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 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 2014, with
exception of standards, amendments and interpretations effective in
2015.
Standards, amendments and interpretations effective in 2015
The following new standards, amendments to standards and
interpretations are mandatory for the first
time for the financial year beginning 1 January 2015, but had no
significant impact on the Group:
-- IFRS 2 - Share-based Payment. Definitions of vesting conditions
-- IFRS 3 - Business Combinations. Accounting for contingent
consideration in a business combination
-- IFRS 9 - Deferral of mandatory effective date of IFRS 9 and
amendments to transition disclosures
-- IFRS 13 - Fair Value Measurement. Scope of paragraph 52 (portfolio exception)
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-- IAS 16 - Property, Plant and Equipment and IAS 38 -
Intangible Assets - Revaluation method - proportionate restatement
of accumulated depreciation/amortisation
-- IAS 19 - Defined Benefit Plans: Employee Contributions.
Amended to clarify the requirements that relate to how
contributions from employees or third parties that are linked to
service should be attributed to periods of service
-- IAS 36 - Impairment of Assets. Recoverable Amount Disclosures
for Non-Financial Assets. Amendments to IAS 36
-- IAS 39 - Financial Instruments. Recognition and Measurement
Novation of Derivatives and Continuation of Hedge Accounting.
1 Basis of Presentation (continued)
-- IAS 40 - Investment Property. Interrelationship between IFRS
3 and IAS 40 (ancillary services)
-- IFRIC 21 - Levies.
The following new standards, amendments to standards and
interpretations have been issued, but are not effective for the
financial year beginning 1 January 2015 and have not been early
adopted:
-- IFRS 5 - Non-current Assets Held for Sale and Discontinued
Operations, IFRS 7 - Financial Instruments: Disclosures. Amendments
resulting from September 2014 Annual Improvements to IFRSs
-- IFRS 10 - Consolidated Financial Statements. Amendments
regarding the sale or contribution of assets between an investor
and its associate or joint venture. Amendments regarding the
application of the consolidation exception.
-- IFRS 11 - Joint Arrangements - Amendments regarding the
accounting for acquisitions of an interest in a joint operation
-- IFRS 12 - Disclosure of Interests in Other Entities.
Amendments regarding the application of the consolidation
exception.
-- IFRS 15 - Revenue from Contracts with Customers
-- IAS 1 - Presentation of Financial Statements. Amendments
resulting from the disclosure initiative
-- IAS 16 - Property, Plant and Equipment - Amendments regarding
the clarification of acceptable methods of depreciation and
amortisation.
-- IAS 19 - Employee Benefits. Amendments resulting from
September 2014 Annual Improvements to IFRSs.
-- IAS 27 - Separate Financial Statements. Amendments
reinstating the equity method as an accounting option for
investments in in subsidiaries, joint ventures and associates in an
entity's separate financial statements
-- IAS 28 - Investments in Associates and Joint Ventures.
Amendments regarding the sale or contribution of assets between an
investor and its associate or joint venture. Amendments regarding
the application of the consolidation exception.
-- IAS 34 - Interim Financial Reporting. Amendments resulting
from September 2014 Annual Improvements to IFRSs.
-- IAS 38 - Intangible Assets - Amendments regarding the
clarification of acceptable methods of depreciation and
amortisation
Going Concern
These interim condensed consolidated financial statements have
been prepared on a going concern basis.
During the year ended 31 December 2012 the Group agreed a debt
repayment schedule for the remaining $4.2 million of deferred
consideration in relation to the SpotCo acquisition in 2008. The
repayment period is over 2013 - 2015. During the six months ending
30 June 2015, $0.33 million has been repaid in-line with the
schedule, leaving an outstanding balance of $1.6 million (GBP1
million after discounting and translation to GBP), see note 7. The
final scheduled repayments will be made over July - October 2015
leaving a liability of $1 million (GBP0.64 million), over which
there is an option to convert to equity. Both r4e and the vendor
have the right to require the remaining US$1 million deferred
consideration due to be satisfied by the subscription of Ordinary
Shares at the prevailing mid-market price. If the number of
Ordinary Shares so issued would cause an obligation to make a
mandatory offer for the entire issued share capital of r4e under
Rule 9 of the City Code on Takeovers and Mergers, the vendor shall
be obliged to subscribe only for such number of Ordinary Shares as
would not trigger such obligation, and the balance of the debt due
will be written off.
On 9 June 2015 the Company entered into a conditional agreement
(the "Agreement") with AIB Group (UK) plc ("AIB") to restructure
the Company's existing GBP14,585,000 loan facility with AIB (the
"Existing Facility"). Final settlement of the Existing Facility is
subject, inter alia, to the Company securing funding to fulfil its
repayment obligations on or prior to 31 October 2015 and the
completion of the Agreement no later than 20 November 2015. r4e is
seeking to secure such funding through a combination of new debt
facilities and the issue of new ordinary shares in the Company, and
is progressing discussions with potential lenders and investors in
this regard. More details are in note 7.
These interim accounts continue to reflect the Existing Facility
agreement which will be deferred to in the event that the
restructure should not take place. Covenants continue to be
measured quarterly in line with the current facility. All banking
covenants had been met as at 30 June 2015.
2 Finance Income
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
(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 43 -
64 44 60
============ ============ ============
3 Finance Costs
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
GBP000's GBP000's GBP000's
Interest on bank loans 260 298 563
Amortisation of issue
costs of bank loan 17 83 87
Unwinding of discounting
on deferred consideration 62 83 154
Net foreign exchange
losses on trade - 1 -
Foreign exchange losses
on deferred consideration - - 75
339 465 879
============ ============ ============
4 (Loss)/earnings 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
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
Number Number Number
Weighted average number
of 2.5 pence ordinary
shares in issue during
the period
For basic earnings
per share 74,635,792 74,635,792 74,635,792
GBP000's GBP000's GBP000's
(Loss)/profit for the
period (268) 314 (5,993)
============ ============ ============
There were no share options in issue at 30 June 2015, 31
December 2014 or 30 June 2014.
5 Exceptional Items
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
GBP000's GBP000's GBP000's
Office relocation costs (13) (9) (46)
Employee contract termination
costs (20) - (197)
Restructuring of bank
debt (231) - -
------------ ------------ ------------
Exceptional expenses (264) (9) (243)
Landlord and Tenants
reimbursement income - - 264
------------ ------------ ------------
Net exceptional administrative
(Expenses)/income (264) (9) 21
============ ============ ============
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Exceptional costs in the 6 month period to 30 June 2015 relate
to the new lease agreement of Newman's offices and Dewynters
warehouse in London in 2014 (see below); further costs incurred in
relation to contract termination costs as part of redundancies made
in 2014; and, costs incurred to date on the conditional agreement
made with AIB on 9 June to restructure the current debt facility
(see note 7).
Expenses and income in the prior year ended 31 December 2014
relate to Newmans' premises and Dewynters Warehouse, which are on
the same site in London, being given notice by the Landlord to
vacate by December 2014 in order that the land could be developed.
The surrender of the leases resulted in compensation from the
Landlord of GBP0.26m as the tenancy was within the scope of the
Landlords and Tenants Act 1954.
5 Exceptional Items (continued)
Subsequent to the commencement of the search process for new
premises, the Landlord agreed to a new lease on the current
premises as the planned development has been put on hold. To this
end the companies remain at the original location but have received
compensation due to the surrender of the old lease. The new lease
does not fall under the Landlords and Tenants Act 1954. Exceptional
expenses of GBP0.05 million in the year ended 2014 relate to the
search for new premises plus negotiation for the new lease.
Exceptional expenses of GBP0.2m incurred in 2014 were employee
contract termination costs in Dewynters.
6 Goodwill
Total
GBP000's
Cost:
1 January 2014 13,212
Foreign exchange differences (140)
30 June 2014 13,072
Impairment charge (6,430)
Foreign exchange differences 418
31 December 2014 7,060
----------
Foreign exchange differences (38)
30 June 2015 7,022
----------
Net Book Value:
30 June 2015 (unaudited) 7,022
==========
30 June 2014 (unaudited) 13,072
==========
31 December 2014 (audited) 7,060
==========
An impairment charge of GBP6.43 million was incurred during the
year ended 2014 on the Dewynters Group. As a result of the
discussions with the Company's bank and third parties on how best
to restructure the bank loan or replace it altogether, an
independent valuation was obtained, which resulted in a review of
the value of the recoverable amount of certain assets, and it was
decided that the goodwill held against the Dewynters Group of
companies should be impaired.
A review has been undertaken at 30 June 2015 and has not
identified any further need for impairment.
7 Borrowings
30 June 30 June 31 December
2015 2014 2014
(Unaudited) GBP000's (Unaudited) GBP000's (Audited) GBP000's
Current:
Bank loans 430 200 630
Deferred consideration 993 614 1,266
1,423 814 1,896
====================== ====================== ====================
Non-current:
Bank loans 14,155 14,585 14,155
Deferred consideration - 771 -
---------------------- ---------------------- --------------------
14,155 15,356 14,155
====================== ====================== ====================
Analysis of borrowings
On demand or within one year:
Bank loans 430 200 630
Deferred consideration 993 614 1,266
====================== ====================== ====================
In the second to fifth years
inclusive:
Bank loan 6,760 7,190 7,190
Deferred consideration - 771 -
More than five years:
Bank loan 7,395 7,395 6,965
On 9 June 2015 the Company entered into a conditional agreement
(the "Agreement") with AIB Group (UK) plc ("AIB") to restructure
the Company's existing GBP14,585,000 loan facility with AIB (the
"Existing Facility"). Final settlement of the Existing Facility is
subject, inter alia, to the Company securing funding to fulfill its
repayment obligations on or prior to 31 October 2015 and the
completion of the Agreement no later than 20 November 2015. r4e is
seeking to secure such funding through a combination of new debt
facilities and the issue of new ordinary shares in the Company, and
is progressing discussions with potential lenders and investors in
this regard.
Under the terms of the Agreement:
1. AIB will convert an amount equal to GBP5,155,000 of the
outstanding principal debt due under the Existing Facility into new
ordinary shares of 2.5p each in the Company ("Settlement Shares"),
with the number of Settlement Shares to be equivalent to 12.5% of
the fully diluted issued share capital of the Company as at the
Completion Date.
2. r4e will grant to AIB a European five year put option over
the Settlement Shares (which can only be exercised on the date that
is five years from the date of grant) (the "Option"), which, if
exercised, will result in r4e acquiring the Settlement Shares from
AIB for a consideration of GBP2,000,000 in cash.
3. r4e will make a cash repayment of GBP9,430,000 in full and
final settlement of the principal amount outstanding under the
Existing Facility at the Completion Date (the "Principal Settlement
Amount"). The Principal Settlement Amount due to be paid by r4e to
AIB on the Completion Date includes a GBP430,000 principal
repayment due on 7 October under the Existing Facility ("Principal
Repayment"). Should the Completion Date fall after the due date of
the Principal Repayment then the GBP430,000 shall be paid as due,
reducing the final settlement figure to GBP9,000,000.
7 Borrowings (continued)
4. r4e will pay any unpaid interest accrued under the terms of
the Existing Facility up until the Completion Date.
5. r4e will pay the costs incurred by AIB and r4e in connection
with the Transaction, whether or not it proceeds.
The Agreement includes certain milestones (the "Milestones")
which r4e must use its best endeavours to ensure are achieved in
advance of the Completion Date. Included in the Milestones are
deadlines for when the Company must have made advancements in
securing the debt and equity required to satisfy the Principal
Settlement Amount.
In the event of certain events occurring, such as default under
the Existing Facility, failure to achieve the Milestones or if r4e
is unable to raise new funding, AIB can terminate the Agreement at
any time up to the Completion Date.
Notwithstanding AIB's termination rights, the Agreement provides
that both parties will each use their reasonable endeavours to
co-operate towards reaching a consensual resolution in respect of
restructuring the Existing Facility. There is uncertainty over the
Company's ability to meet a significant scheduled repayment of the
Existing Facility in April 2016 and therefore if the terms of the
Agreement are not met or another resolution to restructure the
Existing Facility is not agreed with AIB, the Company will have to
re-consider the options available to it in order to facilitate or
re-negotiate this payment and to secure the future of the
Company.
The figures shown in the borrowings table reflect the Existing
Facility agreement not the conditional Agreement made with AIB to
restructure the facility.
Deferred consideration
Movements on deferred consideration during the year are as
follows:
30 June 30 June 31 December
2015 2014 2014
(Unaudited) GBP000's (Unaudited) GBP000's (Audited) GBP000's
Opening balance 1,266 1,652 1,652
Unwinding of discounting on deferred
consideration 62 83 154
Payment of deferred consideration -
cash (332) (307) (615)
Foreign exchange differences (3) (43) 75
Closing balance 993 1,385 1,266
====================== ====================== ====================
8 Other payables
Landlord reimbursement accrual
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