reach4entertainment enterprises plc Report and · PDF filereach4entertainment enterprises plc Report and ... • Barclays ATP World ... JENIFER FOOTE BAHIYAH HIBAH DREW KING ANALISA

Wellington House, 125 Strand, London WC2R 0AP

reach4entertainment enterprises plcReport and Financial Statements

for the year ended 31 December 2015

company registration no: 2725009

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CONTENTS

Our Business 1

London Operations 2 New York Operations 3 Results of Trading Businesses 4

Directors and Advisers 6 Executive Chairman’s Statement 7 Strategic Report 9 Corporate Governance Statement 15 Annual Report of Remuneration 18 Directors’ Report 20 Statement of Directors’ Responsibilities 22 Independent Auditor’s Report 23 Consolidated Income Statement 25 Consolidated Statement of Total Comprehensive Income 26 Consolidated Statement of Financial Position 27 Consolidated Statement of Changes in Equity 28 Consolidated Statement of Cash Flows 29 Accounting Policies 30 Notes to the Consolidated Financial Statements 38 Company Statement of Financial Position 64 Company Statement of Changes in Equity 65

Company Accounting Policies 66 Notes to the Company Financial Statements 69

RESULTS •Revenue

£85.9 million (year ended 31 December 2014: £83.3 million)

•Adjusted EBITDA* £1.84 million (year ended 31 December 2014: £2.6 million)

• Operatingprofit/(loss) £5.19 million (year ended 31 December 2014: £(4.3) million loss)

• Profit/(loss)aftertax £4.27 million (year ended 31 December 2014: £(6.0) million loss)

• Earnings/(loss)pershare 4.01 pence (year ended 31 December 2014: (8.03) pence loss)

PROGRESS• Strongrevenueperformancewithgrowthof£2.6milliononprioryear(3.1%).

• Aspreviouslyannouncedtothemarket,2015wasnotexpectedtobeinlinewiththeexceptionalperformanceof2014,butthegroupstilldeliveredasolid£1.84millionadjustedEBITDA.

• TheGroupcompletedtherefinancingwithAlliedIrishBank(AIBGroup(UK)plcor‘AIB’),reducingthe£14.8milliondebtoutstandingwithAIBat31December2014to£6.74millionunderanewfacilitywithPNCBusinessCredit(‘PNC’),atradingnameofPNCFinancialServicesUKLtd.Inadditiontothereductioninthelevelofdebt,theGroupexpectsrelatedborrowingcoststoreducebyapproximately50%.FulldetailsofthedebtrestructuringcanbefoundintheStrategicReportonpage9.

• Deferredconsiderationpaymentsscheduledfor2015weremadetothevendorofSpotColeavingaliabilityattheendofOctober2015ofUSD$1.0million(£0.65million)whichtheCompanyhadtheoptiontopaybytheissueofnewordinarysharesintheCompany.InNovember2015itwasagreedwiththevendorthatthe$1millionUSDwouldbewaived.Thisresultedinexceptionalincomeof£0.72million(2014:Nil)includinginterest.ThevendorcontinuesinhisroleatSpotCo.TheGroupnowhasnofurtherliabilityinrelationtodeferredconsideration.

• Therefinancinganddeferredconsiderationchangesmeantotalborrowingshavereducedby£9.3millionto £6.7 million (31 December 2014: £16.1 million).

*AdjustedEBITDA(EarningsbeforeInterest,Tax,DepreciationandAmortisation)isbeforeexceptionalitems

OUR BUSINESSreach4entertainment enterprises plc. (“r4e”) is a collection of market leading branding, design and advertising agencies that operates exclusively in the theatrical, film and live entertainment sectors.

Our decades of experience, combined with our innovative approach to addressing the challenges of promoting our clients’ events, ensures that our campaigns deliver maximum consumer impact.

With leading positions in London and New York, we have built a strong platform in the world’s foremost theatrical markets and continue to leverage our existing relationships in order to further develop our presence, influence and success.

WE REACH OUT. We are r4e.

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OUR YEAR

• StrongperformancefromtheWestEnd• Services provided to over 100 productions and events• 110 employees• Growthanddevelopmentofinternationaltouringwork,aswellasfurtherexpansionofdigitalwiththe

creationofsocialbrandGoLittleBirdee• Furtherinvestmentinproductionfacilities

OURWORK

LONDON OPERATIONS

Forover25years,NewmanDisplaysLimited(‘Newmans’)haspushedcreativeboundariestodelivertailoredoutdoorsignage,displaysandinstallationsthatdelivereye-catching,inspiringresults.ThisincludesTheatreandCinemaFronts,OpeningNightEventsandPressEventsthroughtoBuildingIdentificationSignage,FrontofHouseDigitalDisplayScreensandLargeFormatLEDScreens.

DewyntersLimited(‘Dewynters’)isaworld-leadingspecialistliveentertainmentbranding,designandmarketingagency.Withover30yearsofexperience,Dewyntershasanunrivalledtrackrecordofdeliveringground-breaking,creativeandinnovativecampaignsfortheatre,thearts,sport and live entertainment events.

• BarclaysATPWorldTourFinals• BFILondonFilmFestival• TheBookofMormon• BritishMuseum• Cats• CharlieandtheChocolateFactory• AChristmasCarol• Elf• Guys and Dolls• Gypsy• TheHobbit• IntheHeights

• TheatrefrontsforKinkyBoots,BenditlikeBeckham,LordoftheDance,LesMisérables,RockyHorrorShowinLondonandaroundtheCountry,DerrenBrown,Matilda,1984andBeautiful

• Filmworkincluded;Spectre,StarWars,JurassicWorld,Fast&Furious7,TheMartian,AvengersAgeofUltron,Minions,MissionImpossibleRogueNation, LondonFilmFestival.

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• KinkyBoots• LesMisérables• TheLionKing• MammaMia!• Memphis• MissSaigon• NaturalHistoryMuseumIceRink• NimaxTheatres• TheOldVic• Photograph51• RoyalShakespeareCompany

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P U T T I N G B R O A D WAY I N T H E S P O T L I G H T F O R 70 Y E A R SLIVE! SUNDAY, JUNE 12, 2016 • 8/ 7c ONLY

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CHOREOGRAPHED BY CARLYLEWARRENDIRECTED BY ELLISSCOTT

Based on plays by Ben Hecht, Charles MacArthur and Bruce Millholland.

Original Broadway production directed by Harold Prince.

MUSICDIRECTOR STITESKEVIN

MUSICBY COLEMANCY

BOOK AND LYRICS BY

BETTY COMDEN GREENADOLPH&

Major support for On the Twentieth Century provided by Edward M. Kaufmann and The Blanche and Irving Laurie Foundation.On the Twentieth Century benefi ts from Roundabout’s Musical Theatre Fund with lead gifts from The Howard Gilman Foundation and Perry and Marty Granoff.

Musicals at Roundabout are supported with generous gifts from: The Bok Family Foundation and Cynthia Wainwright and Stephen Berger.

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ROUNDABOUT THEATRE COMPANY presents KRISTIN CHENOWETH PETER GALLAGHER ANDY KARL MARK LINN-BAKER MICHAEL McGRATH in ON THE TWENTIETH CENTURY Book and Lyrics by BETTY COMDEN & ADOLPH GREEN Music by CY COLEMAN Based on the Plays by BEN HECHT, CHARLES MacARTHUR & BRUCE MILLHOLLAND Original Broadway Production Directed by HAROLD PRINCE with PHILLIP ATTMORE JUSTIN BOWEN PRESTON TRUMAN BOYD PAUL LEGGETT CHASE BEN CRAWFORD RICK FAUGNO JENIFER FOOTE BAHIYAH HIBAH DREW KING ANALISA LEAMING KEVIN LIGON ERICA MANSFIELD JAMES MOYE LINDA MUGLESTON MAMIE PARRIS ANDY TAYLOR JIM WALTON RICHARD RIAZ YODER and MARY LOUISE WILSON Set Design DAVID ROCKWELL Costume Design WILLIAM IVEY LONG Lighting Design DONALD HOLDER Sound Design JON WESTON Orchestrations LARRY HOCHMAN Dance Arrangements and Incidental Music DAVID KRANE Music Coordinator JOHN MILLER Hair & Wig Design PAUL HUNTLEY Additional Material MARCO PENNETTE Additional Lyrics AMANDA GREEN Associate Director KASEY RT GRAHAM Associate Choreographer ANGIE CANUEL Production Stage Manager SCOTT TAYLOR ROLLISON Production Management AURORA PRODUCTIONS Casting by JIM CARNAHAN, C.S.A., STEPHEN KOPEL, C.S.A. Press Representative POLK & CO. General Manager DENISE COOPER Executive Producer SYDNEY BEERS Music Direction by KEVIN STITES Choreography by WARREN CARLYLE Directed by SCOTT ELLIS

NEWYORKOPERATIONS

Establishedin1996,SpotandCompanyofManhattanInc.(‘SpotCo’)is NewYork’sleadingliveeventsbranding,designandmarketingagency. Itiscommittedtoaprocessofcontinualevolutionandinnovationto ensureitscampaignsaredeliveredthroughtraditionalandemerging mediaplatforms,toguaranteemaximumimpact.

OUR YEAR

• StrongperformancefromBroadway• Services provided to over 50 productions • 106 employees• WithFunHomewinningthe2015TonyAwardforBestMusical,SpotCohasnowlaunchedtheTonyAward

winningbestmusicalforeightyearsinarow

OURWORK

• Hamilton• Chicago• KingCharlesIII• KinkyBoots• ManhattanTheatreClub• SomethingRotten• FunHome• SchoolofRock• FindingNeverland• Skylight

• LincolnCenterTheatre• AViewFromTheBridge• TheColorPurple• AGentlemen’sGuideToLoveandMurder• RoundaboutTheatreCompany• TheCuriousIncidentoftheDogintheNight-time• NewYorkSpringSpectacular• TheFlick• Gigi• OnTheTown

DEWYNTERS ADVERTISING INC

DewyntersAdvertisingInc.(DAI)wastheofficialin-theatremerchandisingoperationforBroadwaytheatricalproductions.In2015themerchandisearmofDewynterswastransferredtoPlaybillUKLtd,includingthoseroyaltiespreviouslycollectedbyDAIformerchandisesalesintheUS,thereforeroyalty commission income ceased in October 2015.

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London37%

NewYork63%

Location Company Revenue (£’000)London Dewynters 27,600London NewmanDisplays 3,570NewYork SpotCo 51,827NewYork DAI 285

Year ended 2014

RESULTSOFTRADINGBUSINESSES

*AdjustedEBITDAisbeforeexceptionalitems.

Revenue

Adjusted EBITDA*

London36%

NewYork64%

Location Company Revenue (£’000)London Dewynters 27,496London NewmanDisplays 3,512NewYork SpotCo 54,610NewYork DAI 231

Year ended 2015

Location Company EBITDA (£’000)London Dewynters 846London NewmanDisplays 161NewYork SpotCo 1,218NewYork DAI 10

NewYork55%

London45%

Year ended 2015

London23%

Location Company EBITDA (£’000)London Dewynters 458London NewmanDisplays 223NewYork SpotCo 2,286NewYork DAI 16

NewYork77%

Year ended 2014

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David Stoller (Executive Chairman/Acting CEO), was appointed to the reach4entertainment enterprises plc. boardon 16 December 2010. Mr. Stoller began his professional career as an attorney. Among his most significantaccomplishments, Mr. Stoller was a partner and co-head of global project finance for Milbank, Tweed,Hadley & McCloy LLP where he helped build one of the world’s largest and most successful project financepractices, participating personally in financings totalling more than $4 billion. Mr. Stoller joined CharterhouseGroup International, a large New York City-based private equity firm, as Chairman of its Environmental CapitalGroup. Through the Charterhouse Environmental Capital Group, Mr. Stoller launched American Disposal Services,an integrated waste management company that ultimately acquired and consolidated, with $34 million in equitycapital, more than 80 waste management companies. American Disposal had a successful IPO and was sold toAllied Waste at a price exceeding $1.1 billion. Mr. Stoller left Charterhouse to launch Americana Financial Services,raising over $40 million in private equity capital. Americana (now the American Wholesale Insurance Group) iscurrently among the largest private wholesale insurance brokerage in the United States. Mr. Stoller holds a BA fromthe University of Pennsylvania, an MA from the Graduate Faculty of the New School for Social Research and aJ.D. from Fordham University School of Law. He is also a graduate of the Harvard Business School AdvancedManagement Program.

Marcus Yeoman (Non-Executive Director), is currently non-executive director of two other AIM listed companiesand various private companies. His early career started with the formation of three companies in IT infrastructureand distribution, after which he moved into small company broking and corporate work with Rathbone StockbrokersLimited and Cheviot Capital (Nominees) Limited. In 2003, Marcus established Springtime Consultants Ltd andhas been acting as a consultant or non-executive director to a number of listed companies & SME ventures, whichrequire help with their growth strategies, including M&A activity.

Nicholas Richard Charles Geary Lycett (Non-Executive Director), began his career at the Outside Organisationin 2000. In 2003 he set up The Lucid Group which became the largest online and broadcast music agency in theUK representing the likes of David Bowie, Beyonce, The Rolling Stones and The Who. In 2006, he became anadvisor and shareholder in bebo, helping it become the largest social network in the UK until their sale to AOL in2010 for $850m. In 2010 he became the Managing Director of RCA Records selling a stake in The Lucid Groupto Sony Music Entertainment in the process. In 2009, he co-founded MusicQubed, a mass-market mobile musicservice that launched internationally in 2013. In addition to MusicQubed, Charlie’s interests include OperatorRecords, Black Butter and Online Broadcaster SB.TV. He is a supporter of the Prince’s Trust and has also servedas a judge for the Radio Academy.

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reach4entertainment enterprises plcDIRECTORS

DIRECTORSDavid StollerMarcus YeomanNicholas Richard Charles Geary Lycett

COMPANY SECRETARYCargil Management Services Limited

REGISTERED OFFICEWellington House125 StrandLondonWC2R 0AP

NOMINATED ADVISER AND BROKERAllenby Capital Limited3 St Helen’s PlaceLondonEC3A 6AB

AUDITORRSM UK Audit LLP (formerly Baker Tilly UK Audit LLP)Chartered Accountants25 Farringdon StreetLondonEC4A 4AB

BANKERSBarclays Bank1 Churchill PlaceLondonE14 5HP

Allied Irish Bank (GB)26 Finsbury SquareLondonEC2A 1DS

SOLICITORClintons55 Drury LaneCovent GardenLondonWC2B 5RZ

REGISTRARCapita Asset ServicesThe Registry34 Beckenham RoadBeckenhamKentBR3 4TU

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reach4entertainment enterprises plcDIRECTORS AND ADVISERS

2015 sees a return to normal market conditions

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

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

Trading in-line with market expectations

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

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

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

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

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

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

Market leader in London and New York

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

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

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reach4entertainment enterprises plcEXECUTIVE CHAIRMAN’S STATEMENT

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

London

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

The business is a world-leading specialist live entertainment branding, design and marketing agency with over30 years of experience. The management team expects this status to continue into 2016.

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

New York

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

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

As mentioned above, during the twelve months the merchandise division of Dewynters was transferred to PlaybillUK Ltd, meaning that DAI would cease to collect royalties from merchandise sales in the USA. As at the end of2015 DAI was no longer trading.

The platform for 2016 has been established

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

David StollerExecutive Chairman

24 May 2016

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reach4entertainment enterprises plcEXECUTIVE CHAIRMAN’S STATEMENT (continued)

PRINCIPAL ACTIVITIES

The principal activities of the Group during the year were to provide creative, advertising, marketing and otherservices to the theatrical, film and live entertainment industries including media strategy and buying, marketingand sales promotions, signage and publishing and merchandise.

REVIEW OF PERFORMANCE AND FUTURE DEVELOPMENTS

Year ended 31 December 2015

London New York Head Group Dewynters Newmans Total SpotCo DAI Total Office Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Revenue 27,496 3,512 31,008 54,610 231 54,841 – 85,849Adjusted EBITDA* 846 161 1,007 1,218 10 1,228 (392) 1,843Exceptional admin items (138) (6) (144) – – – 5,020 4,876Operating (loss)/profit (432) 130 (302) 863 10 873 4,621 5,192

Year ended 31 December 2014

London New York Head GroupDewynters Newmans Total SpotCo DAI Total Office Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Revenue 27,600 3,570 31,170 51,827 285 52,112 – 83,282Adjusted EBITDA* 458 223 681 2,286 16 2,302 (336) 2,647Exceptional admin items (112) 132 21 – – – – 21Operating profit/(loss) (6,194) 322 (5,872) 1,897 16 1,913 (342) (4,301)

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

Group

For the year ended 31 December 2015, the Group has seen a steady trading performance:

• Increased revenues of 3.1% or £2.6 million• Gross profit margin of 23.6% (2014: 24.2%)• EBITDA of £1.8 million

A number of exceptional items in 2015 and 2014 (as detailed on page 11) including a gain on the debt write off of£5.16 million and a gain on deferred consideration write off of £0.72 million, have resulted in increased profitcompared to the prior year:

• Operating profit increase of 221% or £9.5 million• Profit before tax increase of 189% or £9.7 million

Debt re-financing

In December 2015, the Group restructured the debt which arose on previous acquisitions of the Dewynters Groupand SpotCo. At 31 December 2014, r4e had borrowings with Allied Irish Bank (AIB Group (UK) plc or ‘AIB’)amounting to £14.8 million. During 2015 £0.6 million of this debt was repaid in accordance with the debt facilityagreement. On 04 December 2015 the remaining debt of £14.2 million was restructured as follows:

• r4e raised £4 million (before expenses) through the placing of 400 million new ordinary shares (note 17)• The 3 trading companies of the r4e group: Dewynters; SpotCo and Newmans, entered into a new facility

with PNC Business Credit (‘PNC’), a trading name of PNC Financial Services UK Ltd. The new facility isa three year secured asset based debt facility of £8.5 million split across the 3 companies, plus a £1 millionterm loan shared between Dewynters and SpotCo. (note 14)

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reach4entertainment enterprises plcSTRATEGIC REPORT

• The proceeds of the equity placing plus new debt with PNC repaid £9 million of the debt facility with AIB• The remaining £5.2 million of debt with AIB was written off as an exceptional gain• r4e has granted 24,994,462 warrants to AIB (note 18). These were fair valued at the date of issue at

£0.31 million, the cost of which has been offset against the £5.2 million gain from the debt write off

The reduction of the AIB term debt will result in lower borrowings costs across the group. Cash balances are alsoexpected to remain lower as withdrawals from the asset based lending facility incur interest, therefore, rather thancash being kept on hand, it is only drawn down as required.

As part of the debt re-financing a capital reorganisation took place so that the placing of new shares could occur at1p. This involved splitting each issued Existing Ordinary Share into one New Ordinary Share of 0.5 pence nominalvalue and one Deferred Share of 2 pence nominal value. The New Ordinary Shares have the same rights (includingas to voting, dividends and return of capital) and the Deferred Shares are effectively valueless as they will not carryany rights to vote or any dividend rights.

Deferred consideration

Deferred consideration payments of £0.66 million were paid as scheduled to the vendor of SpotCo leaving a liabilityat the end of October 2015 of USD $1.0 million (£0.65 million), which the Company had the option to pay by theissue of new ordinary shares in the Company. In November 2015 it was agreed with the vendor that this $1 millionUSD would be waived. This resulted in exceptional income of £0.72 million including interest (2014: Nil). Thevendor continues in his role at SpotCo. The Group now has no further liability in relation to the SpotCo deferredconsideration.

London

The London segment comprises Dewynters and Newmans. During the year the London operations generatedadjusted EBITDA of £1 million compared to the year ended 31 December 2014 of £0.68 million.

Dewynters delivered an improved profit on what remained a challenging year. Revenues are down 0.4% on theprior year, however, the company has maintained its gross profit at 27.8%. As a result of the redundancies made in2014 along with strong expenditure control, EBITDA is up 85% on the prior year. Operating profit for London wasreduced by exceptional expenses from Dewynters and Newmans of £0.14 million including: £0.01 million relatedto the prior year redundancies; and £0.01 million related to the warehouse lease negotiations at the end of 2014. Inaddition, as part of Dewynters focus on restructuring including the prior year redundancies and continuing reviewof its administrative costs, the company reviewed its merchandise operation and completed a successful transfer ofits merchandise business to Playbill UK Ltd resulting in exceptional costs of £0.12 million (net of income).

Newmans had a more lacklustre performance in 2015 with revenue falling by 1.6% (£0.06 million) on 2014. Grossmargins were hit hard with a reduction of 9% (£0.13 million) due to the need to use subcontractors, but due tosome cost savings EBITDA reduced by a lower £0.06 million (27.9%).

New York

The New York segment consists of SpotCo and DAI. Adjusted EBITDA for New York was £1.2 million comparedto the year ended 31 December 2014 of £2.3 million.

EBITDA is down on the 2014 prior year as SpotCo had an exceptional year in 2014 due to some one-off eventswhich were not repeated in 2015. If 2013 is taken as a more comparable year when its EBITDA in that year was£1.12 million, then in 2015 SpotCo still had a strong result at £1.2 million.

DAI went through a significant change at the end of 2015. The business was structured as a royalty collectionvehicle for merchandise sales in the USA and took a commission on the proceeds it received. The transfer of themerchandise division from Dewynters in October 2015 resulted in the rights to these royalties also being sold. Asat the end of 2015 the company was no longer trading.

10

reach4entertainment enterprises plcSTRATEGIC REPORT (continued)

Other performance highlights

Exceptional Administration Income and Expenses (excluding depreciation and amortisation)

Office move cost expense and Landlord reimbursement incomeCosts of £0.01 million (2014: £0.05 million) relate to the renegotiation of Newmans premises and Dewynterswarehouse. In 2014 the Newmans premises and Dewynters warehouse, which are on the same site in London, weregiven notice by the Landlord to vacate by December 2014 in order that the land could be developed. The surrenderof the leases in 2014, resulted in compensation from the Landlord of £0.26 million as the tenancy was within thescope of the Landlords and Tenants Act 1954. Subsequent to the commencement of the search process for newpremises, the Landlord agreed to a new lease on the current premises as the planned development has been put onhold. To this end the companies remain at the original location.

Employee contract termination costsExceptional expenses of £0.01 million (2014: £0.2 million) were incurred in Dewynters on employee contracttermination costs.

Costs relating to debt restructureThe re-financing of the AIB debt incurred a number of costs including, but not limited to, consultants, advisers,legal representation, brokers, financial services etc. These costs totalled £0.53 million (2014: Nil). In addition, thefair value of the warrants issued to AIB as part of the refinancing deal were charged as an exceptional cost of£0.3 million.

Transfer of mechanise divisionAs detailed in the Dewynters review above on page 10, the merchandise division of Dewynters was transferredduring the year. Proceeds for inventory and contribution towards legal costs by the purchaser totalled £0.2 million.Legal fees and staff costs were incurred for £0.3 million (2014: Nil).

Deferred consideration write offConsideration of $1 million USD (£0.65 million GBP), which could be converted to equity, was waived by thevendor resulting in an exceptional gain of £0.72 million including interest (2014: Nil).

AIB debt write offAs part of the AIB debt re-financing which took place in the year, £5.16 million of the outstanding debt was writtenoff (2014: Nil) and taken as an exceptional gain to the income statement.

ImpairmentAn impairment of £0.97 million was recognised in the year on goodwill attributable to the Dewynters Group as aresult of DAI ceasing to trade (2014: £6.43 million on the Dewynters Group as a whole). See note 9.

Finance Income and Finance Costs

Finance income of £0.06 million (2014: £0.06 million) is dividend income from an associate undertakingTheatrenow Limited in which Dewynters has a 29.91% shareholding. This will be the last receipt from the associateas it is in the process of being wound up.

Finance costs for the year amount to £1.03 million (2014: £0.88 million). The year included: interest on AIB bankloans £0.48 million (2014: £0.56 million); amortisation of arrangement fee for AIB bank loan of £0.07 million(2014: £0.09 million); unwinding of discount on deferred consideration £0.09 million (2014: £0.15 million) andforeign exchange loss of £0.02 million (2014: £0.08 million). Additional costs in 2015 not recognised in 2014 wereinterest and fees on the new PNC debt (£0.02 million and £0.04 million respectively).

11


Tax

A tax charge of £0.27 million has been recognised in the year (year ended 31 December 2014 tax charge recognisedfor £0.87 million). The Company has taken the position that the gain for the AIB debt release is not chargeable fortax and group relief has enabled r4e to extinguish any liability due from Dewynters and Newman.

Cash Flow

Cash outflow from operating activities in the year was £0.6 million (2014: £2.5 million inflow) as a result of workingcapital movements. As part of its investing activities the Group settled £0.66 million of the remaining deferredconsideration (2014: £0.62 million), and property, plant and equipment expenditure was £0.19 million (2014:£0.19 million).

Financing activity cash flow included repayment of the AIB bank debt of £9.63 million (2014: Nil), plus interestaccrued on debt during the year of £0.6 million (2014: £0.5 million). Proceeds from the new PNC borrowings were£6.69 million (2014: Nil) and proceeds from the issue of share capital totalled £3.83 million (2014: Nil).

The cash position at the end of 2015 is £1.29 million lower than prior year. The balance will continue to remainlow as drawdowns from the PNC facility are charged a higher interest than unutilised borrowings. Therefore cashis only drawn down as required for payments and not retained on hand for any length of time.

POSITION AT 31 DECEMBER 2015

As at 31 December 2015, the Group balance sheet has moved back into a net asset position of £2.81 million (2014:net liabilities of £5.75 million). The main factors affecting this include the write off of both the AIB debt(£5.2 million) and remaining deferred consideration (£0.72 million), and the issued share capital which raised£4.0 million less share issue costs of £0.2 million.

Non-current assets are £12.5 million (2014: £13.4 million). The reduction is mostly attributable to the £0.97 millionimpairment of goodwill as a result of the cessation of trade in DAI.

Current assets have reduced from £15.56 million at 31 December 2014 to £14.72 million as a result of cash havingreduced by £1.29 million. As noted above, cash will continue to remain at a lower level to reduce interest cost fromPNC. Inventory has reduced by £0.25 million as the transfer of the merchandise division included merchandiseinventory.

Current borrowings have increased from £1.9 million to £6.0 million. This is due to the new PNC asset basedlending facility being recognised as a current liability. The nature of the facility means that as customer receiptsare recognised the debt is paid down. Then new debt arises to finance working capital. Therefore the facility hasbeen reflected as a current liability as it will be constantly revolving.

Non-current liabilities have reduced significantly by £13.27 million due to the re-financing of the AIB debt. Thenon-current debt outstanding at the end of 2014 of £14.16 million was eliminated via a repayment to AIB of£9.0 million and the write off of £5.16 million as an exceptional gain.

Equity has been impacted by two new classes of shares/reserves. 74,894,792 deferred shares have been created aspart of the capital reorganisation (required for the debt refinancing as explained above), which have a nominal valueof 2 pence. A warrant reserve was also created to account for the 24,994,462 warrants issued to AIB, these werefair valued at the date of issue at £0.31 million which has been recognised as an exceptional cost reducing the gainon the debt write down.

12


KEY PERFORMANCE INDICATORS

The Group manages its internal operational performance through the monitoring of several key performanceindicators (“KPIs”). These are monitored and evaluated with respect to the level at which they are used and theirpurpose. Currently the focus at Group level is on the following KPIs for continuing operations:

2015 2014

Adjusted EBITDA* (£’000) 1,843 2,647Gross profit % 23.49% 24.2%Employee costs to gross profit 67.0% 61.3%Net debt to adjusted EBITDA 4.29 5.14Working capital (£’000) (5,995) (1,534)Cash inflow/(outflow) in year (£’000) (1,365) 523

*Adjusted EBITDA is before exceptional administrative expenses.

At each individual company level, the KPIs are a combination of profitability measures including achievement ofannual budget, gross/net margin, productivity measures including employee costs/EBITDA, EBITDA per head andnon-financial measures such as client profitability, client retention, and new business awarded.

RISKS ASSOCIATED WITH THE GROUP

The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreign currencyrisk and credit risk, see note 21 on Financial Instruments for further details. The Group is not currently subject toany material, legal or economic restrictions on the ability of its subsidiaries to transfer funds to the Company in theform of dividends, loans or advances.

The Group is subject to a number of macroeconomic factors, in common with the rest of the economy, such asforeign exchange rate fluctuations, which are outside of the Group’s sphere of influence. The Group does not hedgeany borrowings in either Pound Sterling or US Dollars and so a risk exists in relation to foreign exchange rates.The borrowings the Group has with PNC are split in USD currency for SpotCo and GBP currency for Dewyntersand Newman, this automatically hedges SpotCo against FX fluctuations on the debt but exposes the Group to foreignexchange fluctuation risk on consolidation of the USD debt into the GBP presentational currency.

The Group has a set of financial covenants with PNC in relation to the revolving asset based lending facility whichat 31 December 2015 totalled £5.67 million. These covenants are measured monthly and were met in full duringthe year, as at 31 December 2015, and subsequently at 30th April 2016. PNC shall be entitled to immediatelyterminate the facility and term loan at any time following an Event of Default which is continuing, (but shall notbe obliged to so terminate). A breach of a financial covenant is considered to be an Event of Default which wouldpose a going concern risk to the business. Forecasts monitored by the Group evaluate the risk of a covenant breachand therefore an Event of Default. The Group is forecasting a possible breach in the fixed charge cover covenantin the latter part of 2016 due to recent forecasts showing seasonal fluctuations in EBITDA, however the Board aresatisfied that the Group will remain a Going Concern as outlined in more detail on page 31.

The Group recognises that there is a risk for the core continuing operations, in respect of the client relationships ithas with key producers of West End/Broadway shows and in some cases, venues. If these relationships, for anyreason, cease to yield further business, this could have an adverse effect on the trading results and therefore theGroup results. The Group believes this risk to be low given the historically strong position of producers in themarket and the limited dependence of the trading results on any single producer.

The Group acknowledges that there are risks that key operational management within subsidiaries may leave. Inorder to counteract this risk, the Group has established and maintained succession plans for key positions to ensurea spread of key functions across the Group, including some cross-fertilisation of roles between the two corebusinesses of Dewynters and SpotCo to reduce the onus on specific individuals.

13


DEVELOPMENTS AND FUTURE ACTIVITIES

Relieved of the substantial debt burden carried under the previous AIB facility, the business is now poised to groworganically as well as invest and expand when the opportunities present themselves. The Directors expect that theGroup will pursue such opportunities throughout the year, including analytics and data-driven marketing initiatives(including those occasioned by its acquisition of Jampot), additional digital capabilities, and new geographies, allwhile working hard to maintain and build upon its market leadership in London and New York.

By order of the board

David StollerExecutive Chairman and Acting Chief Executive Officer

24 May 2016

14


THE BOARD

The Board currently comprises:

Executive Directors and Officers

David Stoller Executive Chairman and Acting Chief Executive Officer

Non-Executive Directors

Marcus Yeoman Non-Executive DirectorNicholas Richard Charles Geary Lycett Non-Executive Director

The Board supports the principles of the Quoted Companies Alliance Corporate Governance Code as far as ispracticable given the size and nature of its business. The statements below set out how the principles are applied tothe Group.

The Board is collectively responsible for the success of the Company, and entrepreneurial leadership is balancedby the scrutiny and oversight provided by independent Non-Executive Directors.

There is a clear division of responsibilities between Board members, and all Directors have access to the adviceand services of the Company Secretary, who is responsible for ensuring compliance with Board procedures andwith applicable regulation and legislation.

All Directors are subject to re-election by shareholders at intervals of no more than three years.

The Board meet formally on a regular basis; in addition, ad hoc meetings are called to address specific issuesrequiring Board approval. At formal meetings the Board reviews the Group’s corporate responsibility issues andreceives detailed reports on:

• operational matters and performance from the Acting CEO;• financial performance from the Group Finance Director; and• legal and compliance issues from the Company Secretary when required

The Board also sets and monitors Group strategy, approves the annual budget and examines acquisition and/ordisposal possibilities. To enable the Board to discharge its duties, all Directors receive appropriate and timelyinformation. Independent professional advice is taken as required.

There is a formal schedule of matters reserved for the Board, and routine business may be delegated to a committeeof two Directors or one Director and the Company Secretary.

BOARD COMMITTEES

During the year under review the Company maintained three Board Committees, as follows:

Audit Committee

The Audit Committee is required to comprise of a minimum of two members, all of whom shall be independentnon-executive directors, at least one of whom has recent and relevant financial experience. During the year underreview the Committee comprised Marcus Yeoman and Richard Ingham (Chairman). The Committee meets at leasttwice a year at appropriate times in the reporting and audit cycle, and otherwise as required by the Chairman. TheCommittee has an independent role, operating as an overseer and a maker of recommendations to the Board for itsconsideration and final approval. The Committee does not assume the functions of management. Its remit includesmonitoring the integrity of the financial statements, and reviewing internal controls and risk management systems.In addition, the Committee considers matters relating to the appointment, independence and objectivity of theAuditor and reviews the results and effectiveness of the audit. Only members of the Committee have the right to

15

reach4entertainment enterprises plcCORPORATE GOVERNANCE STATEMENT

attend its meetings. However, other Directors and executives may be invited to attend all or part of any meeting,and the external auditor is invited to attend meetings on a regular basis.

The Audit Committee terms of reference are available on the Company’s website.

Remuneration Committee

Members of the Committee shall be appointed by the Board. The Committee shall comprise at least two members,all of whom shall be independent non-executive directors. During the year under review the Committee comprisedMarcus Yeoman and Richard Ingham (Chairman).

The Committee will meet at least once a year and at such other times as the Chairman of the Committee shallrequire. The Committee has an independent role, operating as an overseer and a maker of recommendations to theBoard for its consideration and final approval. The role of the Committee is to assist the Board to ensure that thedirectors, executives and prescribed officers are remunerated fairly and responsibly in line with the long-terminterests of the company and that the remuneration report and disclosure of director and other executiveremuneration is simple to read and understand and is accurate and complete. In addition the committee is to ensurethat an effective remuneration policy is in place, aligned with the company’s strategy, and is applied consistentlythroughout the Company and Group at all employee levels.

The Remuneration Committee terms of reference are available on the Company’s website.

Nomination Committee

The Committee shall comprise a minimum of three: the Company Chairman and at least two independentnon-executive directors. The Committee is to be made up of a majority of independent non-executive directors.During the year under review the Committee comprised David Stoller (Chairman of the Committee), MarcusYeoman and Richard Ingham.

The Committee will meet at least annually and at such other times as the Chairman of the Committee shall require.The Committee’s responsibilities include reviewing the size, structure and composition of the Board; identifyingand nominating suitable candidates for appointment to the Board; board succession planning; and makingrecommendations for appointments to board committees.

The Nomination Committee terms of reference are available on the Company’s website.

RELATIONS WITH SHAREHOLDERS

The Board recognises the importance of communications with shareholders. There is regular dialogue withinstitutional shareholders including presentations following the announcement of the Company’s interim and fullyear results.

The Board uses the Annual General Meeting to communicate with private and institutional investors and welcomestheir participation.

INTERNAL CONTROL AND RISK MANAGEMENT

The Board is responsible for the Group’s systems of internal control and risk management and for reviewing theeffectiveness of those systems. Such systems are designed to manage, rather than eliminate, the risk of failure toachieve business objectives; any system can provide only reasonable and not absolute assurance against materialmisstatement or loss.

16

reach4entertainment enterprises plcCORPORATE GOVERNANCE STATEMENT (continued)

The following controls have continued in place throughout the year:

• defined organisational structure with appropriate delegation of authority• regular Board meetings• clear responsibilities on the part of financial management for the maintenance of good financial controls

and the production and review of detailed, accurate and timely financial management information• authorisation levels and proper segregation of accounting duties• a comprehensive financial review cycle, which includes an annual budget approved by the main board,

detailed monthly variances against budget at subsidiary level with, where necessary, remedial action;• annual performance is reforecast quarterly; and• provision to the Board of reevant, accurate and timely management information.

The Group Manual of Policies and Procedures provides a framework of rules, controls and processes to enable theGroup to operate efficiently, legally and effectively within its marketplaces.

The internal control environment will continue to be monitored and reviewed by the Board and, where necessary,it will ensure that improvements are implemented.

On behalf of the Board


24 May 2016

17

reach4entertainment enterprises plcCORPORATE GOVERNANCE STATEMENT (continued)

DIRECTORS’ REMUNERATION 2015

The remuneration of the Directors who served during the year ended 31 December 2015 is shown below:

Taxable Salary Benefits Total£’000 £’000 £’000

David Stoller 250 16 266Marcus Yeoman* 25 – 25Richard Ingham (resigned 11/05/16)* 25 – 25

–––––––– –––––––– ––––––––300 16 316

–––––––– –––––––– –––––––––––––––– –––––––– ––––––––* Denotes Non-Executive Director

DIRECTORS’ REMUNERATION 2014

The remuneration of the Directors who served during the year ended 31 December 2014 is shown below:

TaxableSalary Benefits Total£’000 £’000 £’000

David Stoller 250 12 262Marcus Yeoman* 25 – 25Richard Ingham* 25 – 25

–––––––– –––––––– ––––––––300 12 312

–––––––– –––––––– –––––––––––––––– –––––––– ––––––––* Denotes Non-Executive Director

18

reach4entertainment enterprises plcANNUAL REPORT ON REMUNERATION

POLICY ON DIRECTORS’ REMUNERATION

The Remuneration Committee is responsible for determining and agreeing with the Board the remuneration policyfor the Executive Directors and Officers and for approving their remuneration packages and contract terms. TheCommittee’s remit also includes approving the design of performance related pay schemes and share incentiveplans, and the remuneration packages of the directors of the subsidiary companies.

Through monitoring the marketplace the Committee seeks to offer remuneration packages which not only reflectcurrent market conditions but are also commensurate with attracting, retaining and motivating executives of qualityto ensure the continued growth and success of the Group.

The Executive Director determines the remuneration of the Non-Executive Directors based on the requirements ofeach individual role, whilst referring to publically available Executive remuneration reports by 3rd party consultants.

DIRECTORS’ SERVICE CONTRACTS

For all directors, the terms of their service agreements include, inter alia, that the agreements can be terminated bywritten notice given by either party at any time.

Further details concerning Directors’ emoluments are disclosed in note 6 to the Consolidated Financial Statements.

On behalf of the Remuneration Committee

Marcus YeomanNon-Executive Director

24 May 2016

19

reach4entertainment enterprises plcREMUNERATION POLICY REPORT

The Directors submit their report and the Group financial statements of reach4entertainment enterprises plc. forthe year ended 31 December 2015.

GOING CONCERN

The financial statements have been prepared on a going concern basis. A detailed review of this going concernassumption is set out on page 31 within the Accounting Policies section.

RESULTS AND DIVIDENDS

The profit after tax for the year was £4.27 million (year ended 31 December 2014: £5.99 million loss).

The Directors did not pay an interim dividend (year ended 31 December 2014: £Nil) and do not recommend thepayment of a final dividend (year ended 31 December 2014: £Nil).

The Group manages its internal operational performance through the monitoring of several key performanceindicators (see Strategic Report on page 13).

RISKS ASSOCIATED WITH THE GROUP

These are described in the Strategic Report page 13 and as part of the Financial Instruments note on page 59.

DIRECTORS

The following Directors held office during the year:

David StollerMarcus YeomanRichard Ingham (resigned 11 May 2016)Nicholas Richard Charles Geary Lycett (appointed 1 May 2016)

DIRECTORS INTERESTS

The Directors in office at 31 December 2015 held the following number of shares during the year:

1 January 2015 31 December 2015

David Stoller 18,927,358 23,927,358Marcus Yeoman 200,943 1,200,943Richard Ingham (resigned 11 May 2016) 226,415 226,415

SUBSTANTIAL SHAREHOLDINGS

Interests, of 3% or greater, in the share capital of the Company as at 20 May 2016 were as follows:

Number ofshares in which Percentage

beneficially of issuedinterested share capital

Mr Nigel Wray 124,900,000 26.04%Gate Ventures plc. 86,350,000 18.01%Herald Investment Management 67,325,000 14.04%Stoller Family Partners LP* 23,927,358 4.99%Stephen Hemsley 17,500,000 3.65%

* Controlled by David Stoller.

20

reach4entertainment enterprises plcDIRECTORS’ REPORT

CORPORATE GOVERNANCE

The Company is supportive of the principles embodied in the Quoted Companies Alliance Corporate GovernanceCode. Details concerning the Group arrangements relating to corporate governance and internal controls are givenin the Corporate Governance Report on pages 15 to 17.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITOR

The Directors who were in office on the date of approval of these financial statements have confirmed that, as faras they are aware, there is no relevant audit information of which the auditor is unaware. Each of the directors haveconfirmed that they have taken all the steps that they ought to have taken as directors in order to make themselvesaware of any relevant audit information and to establish that it has been communicated to the auditor.

DIRECTORS’ INDEMNITY

Qualifying third party indemnity provisions (as defined in Section 234 (2) of the Companies Act 2006) are in forcefor the benefit of the directors.

INFORMATION CONTAINED IN THE STRATEGIC REPORT

The following information has been included in the Strategic Report page 9 in accordance with s414C (11) of theCompanies Act:

• particulars of any important events affecting the company which have occurred since the end of the financialyear;

• an indication of likely future developments in the business of the company.

AUDITOR

RSM UK Audit LLP has indicated its willingness to continue in office.

By order of the board


24 May 2016

21

reach4entertainment enterprises plcDIRECTORS’ REPORT (continued)

The directors are responsible for preparing the Strategic Report and the Directors’ Report and the financial

statements in accordance with applicable law and regulations.

Company law requires the directors to prepare group and company financial statements for each financial year. The

directors are required by the AIM Rules of the London Stock Exchange to prepare group financial statements in

accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”)

and have elected under company law to prepare the company financial statements in accordance with Financial

Reporting Standard 102 (United Kingdom Accounting Standards and applicable law).

The group financial statements are required by law and IFRS adopted by the EU to present fairly the financial

position and performance of the group; the Companies Act 2006 provides in relation to such financial statements

that references in the relevant part of that Act to financial statements giving a true and fair view are references to

their achieving a fair presentation.

Under company law the directors must not approve the financial statements unless they are satisfied that they give

a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for

that period.

In preparing each of the group and company financial statements, the directors are required to:

a. select suitable accounting policies and then apply them consistently;

b. make judgements and accounting estimates that are reasonable and prudent;

c. for the group financial statements, state whether they have been prepared in accordance with IFRSs adopted

by the EU and for the company financial statements state whether applicable UK accounting standards have

been followed, subject to any material departures disclosed and explained in the company financial

statements;

d. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the

group and the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the

group’s and the company’s transactions and disclose with reasonable accuracy at any time the financial position of

the group and the company and enable them to ensure that the financial statements comply with the Companies

Act 2006. They are also responsible for safeguarding the assets of the group and the company and hence for taking

reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included

on the reach4entertinment enterprises plc. website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ

from legislation in other jurisdictions.

22

reach4entertainment enterprises plcSTATEMENT OF DIRECTORS’ RESPONSIBILITIES IN THE

PREPARATION OF FINANCIAL STATEMENTS

We have audited the group and parent company financial statements (“the financial statements”) on pages 25 to 73.The financial reporting framework that has been applied in the preparation of the group financial statements isapplicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. Thefinancial reporting framework that has been applied in the preparation of the parent company financial statementsis applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted AccountingPractice) FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of theCompanies Act 2006. Our audit work has been undertaken so that we might state to the company’s members thosematters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permittedby law, we do not accept or assume responsibility to anyone other than the company and the company’s membersas a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As more fully explained in the Directors’ Responsibilities Statement on page 22, the directors are responsible forthe preparation of the financial statements and for being satisfied that they give a true and fair view. Ourresponsibility is to audit and express an opinion on the financial statements in accordance with applicable law andInternational Standards on Auditing (UK and Ireland). Those standards require us to comply with the AuditingPractices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’swebsite at http://www.frc.org.uk/auditscopeukprivate

Opinion on financial statements

In our opinion

• the financial statements give a true and fair view of the state of the group’s and of the parent company’saffairs as at 31 December 2015 and of the group’s profit for the year then ended;

• the group financial statements have been properly prepared in accordance with IFRSs as adopted by theEuropean Union;

• the parent company financial statements have been properly prepared in accordance with United KingdomGenerally Accepted Accounting Practice; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Emphasis of matter – Going Concern

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of thedisclosure set out on page 31 of the financial statements concerning the group’s ability to continue as a goingconcern. There are monthly financial covenants attached to the group’s term and asset backed borrowings withPNC and the group’s forecasts show an expected breach of these covenants in the latter half of 2016. The Directorsbelieve that the breach is temporary and as a result of seasonality in the business and subsequent months are expectedto meet covenants with headroom.

These conditions, along with the other matters explained on pages 31 – 32 of the financial statements, indicate theexistence of a material uncertainty which may cast significant doubt about the group’s ability to continue as a goingconcern. The financial statements do not include the adjustments that would result if the group was unable tocontinue as a going concern.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year forwhich the financial statements are prepared is consistent with the financial statements.

23

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OFreach4entertainment enterprises plc

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to reportto you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audithave not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or• certain disclosures of directors’ remuneration specified by law are not made; or• we have not received all the information and explanations we require for our audit.

MARK HARWOOD (Senior Statutory Auditor)For and on behalf of RSM UK AUDIT LLP, Statutory AuditorChartered Accountants25 Farringdon StreetLondon EC4A 4AB

24 May 2016

24

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OFreach4entertainment enterprises plc (continued)

2015 2014Note £’000 £’000

Continuing operationsRevenue 1 85,849 83,282Cost of sales 5 (65,684) (63,170)

–––––––––– ––––––––––GROSS PROFIT 20,165 20,112Administrative expenses 5 (14,973) (24,413)EBITDA before exceptional items 1,843 2,647Exceptional administrative expenses 2 (1,149) (243)Exceptional administrative income 2 6,025 264Impairment of goodwill 9 (965) (6,430)Depreciation 10 (370) (344)Amortisation of intangible assets 9 (192) (195)

OPERATING PROFIT/(LOSS) 5,192 (4,301)Finance income 3 61 60Finance costs 4 (714) (879)

–––––––––– ––––––––––PROFIT/(LOSS) BEFORE TAXATION 4,539 (5,120)Taxation 7 (273) (873)

–––––––––– ––––––––––PROFIT/(LOSS) FOR THE YEAR 4,266 (5,993)

–––––––––– –––––––––––––––––––– ––––––––––The profit/(loss) is attributable to the equity holders of the parent

Basic and diluted earnings/(loss) per share 8 4.01 (8.03)–––––––––– –––––––––––––––––––– ––––––––––

25

reach4entertainment enterprises plcCONSOLIDATED INCOME STATEMENTfor the year ended 31 December 2015

2015 2014£’000 £’000

PROFIT/(LOSS) FOR THE YEAR 4,266 (5,993)–––––––––– ––––––––––

Other comprehensive income:Items that will not be reclassified to profit and loss:Currency translation differences 147 245

–––––––––– ––––––––––Other comprehensive income for the year, net of tax 147 245

–––––––––– ––––––––––TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEARATTRIBUTABLE TO THE OWNERS OF THE PARENT 4,413 (5,748)

–––––––––– –––––––––––––––––––– ––––––––––Items in the statement above are disclosed net of tax. The income tax relating to each component of othercomprehensive income is disclosed in note 7.

26

reach4entertainment enterprises plcCONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOMEfor the year ended 31 December 2015

2015 2014Note £’000 £’000

NON-CURRENT ASSETSGoodwill and intangible assets 9 9,985 10,859Property, plant and equipment 10 2,359 2,448Deferred tax asset 12/15 145 88

–––––––––– ––––––––––12,489 13,395

–––––––––– ––––––––––CURRENT ASSETSInventories 11 152 401Trade and other receivables 12 12,906 12,240Other current assets 12 498 473Cash and cash equivalents 1,160 2,446

–––––––––– ––––––––––14,716 15,560

–––––––––– ––––––––––TOTAL ASSETS 27,205 28,955

–––––––––– –––––––––––––––––––– ––––––––––CURRENT LIABILITIESTrade and other payables 13 (14,709) (15,840)Borrowings 14 (6,002) (1,896)

–––––––––– ––––––––––(20,711) (17,736)

–––––––––– ––––––––––NET CURRENT LIABILITIES (5,995) (2,176)

–––––––––– ––––––––––NON-CURRENT LIABILITIESDeferred taxation 15 (1,470) (1,349)Other payables 16 (1,478) (1,460)Borrowings 14 (739) (14,155)

–––––––––– ––––––––––(3,687) (16,964)

–––––––––– ––––––––––TOTAL LIABILITIES (24,398) (34,700)

–––––––––– ––––––––––NET ASSETS/(LIABILITIES) 2,807 (5,745)

–––––––––– –––––––––––––––––––– ––––––––––EQUITYCalled up share capital 17 2,374 1,872Share premium 15,329 13,501Deferred shares 1,498 –Capital redemption reserve 15 15Warrant reserve 311 –Retained earnings (16,570) (20,836)Own shares held 17 (259) (259)Foreign exchange reserve 109 (38)

–––––––––– ––––––––––TOTAL EQUITY/(DEFICIT) ATTRIBUTABLE TO EQUITYHOLDERS OF THE PARENT 2,807 (5,745)

–––––––––– –––––––––––––––––––– ––––––––––The financial statements on pages 25 to 63 were approved by the board of Directors and authorised for issue on24 May 2016 and are signed on its behalf by:

David StollerDirector

27

reach4entertainment enterprises plcCONSOLIDATED STATEMENT OF FINANCIAL POSITIONas at 31 December 2015 Company number: 2725009

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28

reach4entertainment enterprises plcCONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2015

2015 2014Note £’000 £’000

Cash generated from operating activities 19 (642) 2,494Income taxes paid (213) (723)

–––––––––– ––––––––––Net cash (used in)/generated from operating activities (855) 1,771

–––––––––– ––––––––––

Investing activitiesPurchases of property, plant and equipment 10 (193) (194)Proceeds from disposal of property, plant and equipment – 3Payment of deferred consideration 14 (661) (615)Dividends received from associated undertaking 3 60 60

–––––––––– ––––––––––Net cash used in investing activities (794) (746)

–––––––––– ––––––––––Financing activitiesNet proceeds from the issue of share capital 3,828 –Proceeds from new borrowings 6,690 –Repayments of borrowings (9,630) –Interest paid (604) (502)

–––––––––– ––––––––––Net cash generated from/(used in) financing activities 284 (502)

–––––––––– ––––––––––Net (decrease)/increase in cash and cash equivalents (1,365) 523Cash and cash equivalents at the beginning of the year 2,446 1,876Effect of foreign exchange rate changes 79 47

–––––––––– ––––––––––Cash and cash equivalents at the end of the year 1,160 2,446

–––––––––– –––––––––––––––––––– ––––––––––

29

reach4entertainment enterprises plcCONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2015

GENERAL INFORMATION

r4e is a public limited company incorporated and domiciled in England and Wales. The Company’s ordinary sharesare traded on AIM of the London Stock Exchange.

BASIS OF PRESENTATION

The Group financial statements have been prepared under the historic cost convention on a going concern basisand in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union,IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.

(a) New and amended standards effective and adopted by the Group during the year beginning 01 January 2015.

The group has adopted the following new and amended IFRSs from their effective date:

• IFRS 2, 3, 8, 13 & IAS 16, 24, 38 – Amendments resulting from Annual Improvements 2010-2012 Cycle.Annual periods on or after 01 July 2014

• IFRS 3 & 13 – Amendments resulting from Annual Improvements 2011-2013 Cycle. Annual periods on orafter 01 July 2014

• IAS 19 – Employee Benefits. Amended to clarify the requirements that relate to how contributions fromemployees or third parties that are linked to service should be attributed to periods of service. Annual periodsbeginning on or after 01 July 2014.

(b) Standards, amendments and interpretations to existing standards that are not yet effective and have not beenadopted early by the group.

• IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations. Amendments resulting fromSeptember 2014 Annual Improvements to IFRSs

• IFRS 7 – Financial Instruments – Disclosures. Amendments resulting from September 2014 AnnualImprovements to IFRSs

• IFRS 5 &, IAS 36. Amendments resulting from September 2014 Annual Improvements to IFRSs. Annualperiods beginning on or after 01 January 2016

• IFRS 9 – Financial Instruments. Incorporating requirements for classification and measurement, impairment,general hedge accounting and de-recognition. Available for application if the relevant date of initialapplication is before 01 February 2015

• IFRS 10 – Amendments regarding the sale or contribution of assets between an investor and its associate orjoint venture. Effective date of September 2014 deferred indefinitely

• IFRS 10 – Amendments regarding the application of the consolidation exception. Annual periods beginningon or after 01 January 2016

• IFRS 11 – Joint Arrangements. Amendments to accounting for acquisitions of interest in joint operations.Annual periods beginning on or after 01 January 2016

• IFRS 12 – Disclosure of Interests in Other Entities. Amendments regarding the application of theconsolidation exception. Annual periods beginning on or after 01 January 2016

• IFRS 15 – Revenue from Contracts with Customers. Applicable for periods beginning on or after 01 January2018

• IFRS 16 – Leases. Annual periods beginning on or after 01 January 2019.• IAS 1 – Presentation of Financial Statements. Amendments resulting from the disclosure initiative. Annual

periods beginning on or after 01 January 2016• IAS 7 – Statement of Cash Flows. Amendments as result of the Disclosure initiative. Annual periods

beginning on or after 01 January 2017• IAs 12 – Income Taxes. Amendments regarding the recognition of deferred tax assets for unrealised losses.

Annual periods beginning on or after 01 January 2017• IAS 16 and IAS 38 – Property, Plant and Equipment and Intangible Assets. Amendments resulting from

Annual Improvements 2010-2012 Cycle (proportionate restatement of accumulated depreciation onrevaluation). Applicable for periods beginning on or after 01 January 2016.Amendments resulting from September 2014 Annual Improvements to IFRSs. Annual periods beginningon or after 01 January 2016

30

reach4entertainment enterprises plcACCOUNTING POLICIES

BASIS OF PRESENTATION (continued)

• IAS 19 – Employee Benefits. Amendments resulting from September 2014 Annual Improvements to IFRSs.Annual periods beginning on or after 01 January 2016

• IAS 27 – Separate Financial Statements. Amendments reinstating the equity method as an accounting optionfor investments in subsidiaries, joint ventures and associates in an entity's separate financial statements.Applicable for periods beginning on or after 01 January 2016

• IAS 28 – Interests in Associates and Joint Ventures. Amendments regarding the sale or contribution of assetsbetween an investor and its associate or joint venture plus amendments regarding the application of theconsolidation exception. Applicable for periods beginning on or after 01 January 2016.

• IAS 34 – Interim Financial Reporting. Amendments resulting from September 2014 Annual Improvementsto IFRSs. Applicable for periods beginning on or after 01 January 2016

• IAS 38 – Intangible Assets. Amendments regarding the clarification of acceptable methods of depreciationand amortisation. Annual periods beginning on or after 01 January 2016

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have nomaterial impact on the financial statements of the Group when the relevant standards and interpretations come intoeffect.

BASIS OF CONSOLIDATION

The Group consolidated financial statements incorporate the financial statements of r4e and its subsidiaries. Thefinancial statements of the subsidiaries are prepared for the same reporting periods as the parent company, usingconsistent accounting policies.

The excess of cost of acquisition over the fair values of the Group’s share of identifiable net assets acquired isrecognised as goodwill. Any deficiency of the cost of acquisition below the fair value of identifiable net assetsacquired (i.e. discount on acquisition) is recognised directly in the income statement.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The costsof an acquisition are measured as the total of the fair values of the assets given, equity instruments issued andliabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingentliabilities assumed in a business combination are initially measured at fair value at acquisition date, irrespective ofthe extent of any minority interest.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statementfrom the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policiesused into line with those used by other members of the Group.

All intra-group transactions, balances, and unrealised gains on transactions between Group companies are eliminatedon consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairmentof the asset transferred.

GOING CONCERN

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

31

reach4entertainment enterprises plcACCOUNTING POLICIES (continued)

GOING CONCERN (continued)

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

• Deferred consideration owing in relation to the SpotCo acquisition at 31 December 2014 was USD $2 million(£1.26 million GBP). During 2015, USD $1 million of this was repaid as scheduled (£0.65 million GBP)leaving USD $1.0 million (£0.65 million) outstanding which the Company had the option to pay by theissue of new ordinary shares in the Company. In November 2015 it was agreed with the vendor that the$1 million USD would be waived (£0.72 million including interest). As at 31 December 2015 there is nodeferred consideration debt outstanding.

• Bank debt with AIB as at 31 December 2014 was £14.785 million. The Group agreed a re-financing withAIB which took place in December 2015 leaving no debt outstanding with AIB as at 31 December 2015.As part of the re-financing of AIB, two sources of funds were obtained:i. The Company issued 400,000,000 ordinary shares of 1p each raising £4,000,000 (before share issue

costs)ii. The Group obtained a new three year secured asset based debt facility of £9.5 million with PNC

Business Credit Services Ltd being made up of a £1 million term loan and a revolving credit facilityof up to £8.5 million based on qualifying accounts receivable. As at 31 December 2015 the debt owedto PNC totalled £6.68 million, a reduction of £8.11 million from the AIB debt outstanding at31 December 2014.

The term loan held with PNC is a 3 year facility against which monthly capital repayments commenced from March2016. The debt will be fully paid down by October 2018. The asset based lending facility is a revolving credit linebased upon qualifying accounts receivable. This means current debt is constantly being paid down and new debtbeing drawn. The facility will therefore fluctuate but will be no more than £8.5 million at any point. A new set offinancial covenants were agreed with PNC in relation to this debt. The financial covenants are measured monthlyand all were met at 31 December 2015 and also at each subsequent month end until the latest measurement dateprior to these accounts being 30 April 2016. Later in 2016 the Group is forecasting a possible breach in the fixedcharge cover covenant due to updated forecasts showing seasonal fluctuations in EBITDA. The previous covenantswith AIB were determined on a 12 month rolling basis in which seasonality was not a risk. The fixed charge covenantwith PNC is determined on a 3 month rolling basis and is therefore sensitive to seasonality shifts. Given that thecurrent forecast for the full year 2016 EBITDA is in line with expectations, PNC has informed the Company thatthey recognise the seasonality factor and the likelihood that the company will still meet its debt obligations even ifa monthly covenant is breached. That said, they cannot provide a waiver of a potential future breach as of the dateof these accounts.

Given the significant reduction in the debt levels of the group, plus the improvement to the balance sheet position,the Directors believe that the going concern basis is appropriate and the Group has adequate resources to continuingtrading for the foreseeable future. Regarding the aforementioned PNC covenants, the Directors are confident thatalthough breaches are possible in later 2016, these would only be temporary as a result of seasonal fluctuations andnot due to performance of the Group as a whole – subsequent months are forecast to meet covenants with headroom– and therefore believe it highly unlikely that PNC would decide to terminate the facility.

GOODWILL

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

32


OTHER INTANGIBLE ASSETS

Customer relationships and customer contracts acquired through business combinations are included at fair valueless accumulated amortisation and impairment losses. Amortisation is charged to the income statement in proportionto the benefits derived from the relevant asset over a period of between 5 and 20 years using a reducing balancecalculation.

Brand intangibles have been recognised at fair value. The Dewynters brand is deemed to have an indefinite life,due to its dominance in the marketplace in which it operates and that there is no foreseeable limit on the periodover which the asset is expected to generate cash inflows. It is not amortised, but is subject to annual impairmentreviews. The brand value applied to SpotCo is being amortised over 15 years using a straight line method.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at historical cost less accumulated depreciation.

Depreciation is provided on all property, plant and equipment at rates calculated to write each asset down to itsestimated residual value over its expected useful life, as follows:-

Short leasehold improvements over period of the leasePlant and machinery 25% straight lineFixtures and fittings 20% straight line

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amountis greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and arerecognised within ‘Administrative expenses’ in the income statement.

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 maybe impaired. For the purpose of impairment testing, assets are grouped at the lowest levels for which they haveseparately identifiable cash flows, known as cash generating units. If the recoverable amount of the cash-generatingunit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amountof any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carryingamount 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, theestimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to the asset for which the estimates of futurecash flows have not been adjusted.

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

33


INVENTORIES

Inventories are valued at the lower of cost and net realisable value, with cost determined on a first in first out basis.Provision is made where necessary for obsolete, slow-moving and damaged inventories.

DEFERRED CONSIDERATION

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

FINANCIAL INSTRUMENTS

Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes aparty to the contractual provisions of the instrument.

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire orwhen the contractual rights to those assets are transferred. Financial liabilities are derecognised when the obligationspecified in the contract is discharged, cancelled or expires.

The classification of financial assets and financial liabilities depends upon the nature and purpose of the instrumentsand is determined at the time of initial recognition.

Interest bearing loans and borrowingsAll interest bearing loans and borrowings are initially recognised at the fair value of the consideration received lessdirectly attributable transaction costs.

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost usingthe effective interest method.

Gains and losses are recognised in the income statement when the liabilities are derecognised as well as throughthe amortisation process.

Trade and other receivablesTrade receivables are classified as loans and receivables and are initially recognised at fair value. They aresubsequently measured at their amortised cost using the effective rate of interest method less any provision forimpairment. A provision for impairment is made where there is objective evidence (including customers withfinancial difficulties or in default on payments), that amounts will not be recovered in accordance with originalterms of the agreement. A provision for impairment is established when the carrying value of the receivable exceedsthe present value of the future cash flow, discounted using the original effective interest rate. The carrying value ofthe receivable is reduced through the use of an allowance account and any impairment loss is recognised in theincome statement.

Trade and other payablesTrade payables are initially recognised at fair value and subsequently at amortised cost using the effective interestmethod. Trade and other payables are classified as ‘financial liabilities’.

Cash and cash equivalentsCash and cash equivalents include cash in hand and deposits held at call with banks. Bank overdrafts are shownwithin borrowings in current liabilities on the balance sheet.

Deferred financing costsBank arrangement fees and associated legal costs are amortised over the term of the debt facility.

34


LEASES

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewardsof ownership of the asset to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of thelease or, if lower, at the present value of the minimum lease payments as determined at the inception of the lease.The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve aconstant rate of interest on the remaining balance of the liability. Finance charges are recognised in the incomestatement.

Rentals payable under operating leases are charged to the income statement on a straight line basis over the termof the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spreadon a straight line basis over the lease term.

SEGMENTAL REPORTING

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operatingdecision-maker. The chief operating decision maker has been identified as the management team including theActing Chief Executive Officer.

The chief operating decision maker considers the business from both a geographic and operational perspective.Geographically, management considers the performance in the UK and US. They are managed separately becauseeach segment operates within a particular economic environment and is subject to risks and returns that are differentfrom those of components operating in other economic environments. From an operational perspective, managementseparately considers external service activities versus internal supporting administration.

The Group has 3 reportable segments New York operations, London operations and Head Office.

RETIREMENT BENEFITS

The amount charged to the income statement in respect of pension costs is equal to the contributions payable tomoney purchase schemes in the year. Differences between contributions payable in the year and contributionsactually paid are shown as either accruals or prepayments in the balance sheet.

REVENUE RECOGNITION

Revenue for media comprises commission and fees earned during the year in respect of amounts billed, whetherfor marketing or advertising services or for the sale of physical merchandise. Direct costs include fees paid toexternal suppliers where they are retained to perform part or all of a specific project for a client and the resultingexpenditure is directly attributable to the revenue earned.

Revenue and profit for events is recognised when the event takes place. Where revenue is conditional on theoccurrence of future events, that revenue is not recognised until that event occurs.

Revenue is net of VAT and other sales related taxes.

35


FOREIGN CURRENCY TRANSLATION

a) Functional and presentation currencyItems included in the financial statements of each of the Group’s entities are measured using the currency of theprimary economic environment in which the entity operates (‘the functional currency’). The consolidated financialstatements are presented in ‘sterling’ (‘£’), which is the company’s functional and presentation currency.

b) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing at thedates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions andfrom the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currenciesare recognised in finance income/costs in the income statement.

c) Group companiesThe results and financial position of all the Group entities that have a functional currency different from thepresentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of thatbalance sheet;

• income and expenses for each income statement are translated at average exchange rates (unless this averageis not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates,in which case income and expenses are translated at the rate on the dates of the transactions); and

• all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations aretaken to shareholders’ equity.

TAXATION

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported inthe income statement because it excludes items of income or expense that are taxable or deductible in other periodsand it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculatedusing tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between thetax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, thedeferred income tax is not accounted for, if it arises from initial recognition of an asset or liability in a transactionother than a business combination that at the time of the transaction affects neither accounting nor taxable profit orloss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enactedby the balance sheet date and are expected to apply when the related deferred income tax asset is realised or thedeferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be availableagainst which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates,except where the timing of the reversal of the temporary difference is controlled by the Group and it is probablethat the temporary difference will not reverse in the foreseeable future.

EXCEPTIONAL ITEMS

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

36


EMPLOYEE BENEFIT TRUST

The assets and liabilities of the Employee Benefit Trust (EBT) have been included in the Group accounts. Anyassets held by the EBT cease to be recognised on the balance sheet when the assets vest unconditionally to identifiedbeneficiaries. The costs of purchasing own shares held by the EBT are shown as a deduction against equity. Theproceeds from the sale of own shares held increase equity. Neither the purchase nor sale of own shares leads to again or loss being recognised in the income statement.

ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of financial statements in conformity with IFRS requires management to make judgements,estimates and assumptions that affect the application of the Group’s accounting policies, described above, withrespect to the carrying amounts of assets and liabilities at the date of the financial statements, the disclosure ofcontingent assets and liabilities at the date of the financial statements and the reported amounts of income andexpenses during the reporting year. These judgements, estimates and associated assumptions are based on historicalexperience and various other factors that are believed to be reasonable under the circumstances, including currentand expected economic conditions. Although these judgements, estimates and associated assumptions are basedon management’s best knowledge of current events and circumstances, the actual results may differ. Estimates andunderlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised inthe year in which the estimate is revised and in any future years affected.

The judgements, estimates and assumptions which are of most significance to the Group are as follows:

Going concernAs noted in the going concern section above, judgements, estimates and assumptions used in cash flow forecastsare of key significance to determining the going concern status of the Group. Management regularly reviews themfor significant changes in circumstances.

Estimated impairment of goodwillThe Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policystated above. The recoverable amounts of cash-generating units have been determined based on value-in-usecalculations. These calculations required the use of estimates (note 9).

Valuation of intangible assetsOther intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and lessaccumulated impairment losses. For impairment purposes to determine the fair value of acquisition-relatedintangible assets, in the absence of market prices for similar assets, valuation techniques are applied. Thesetechniques use a variety of estimates including projected future results and expected future cash flows discountedusing the weighted average cost of capital (note 9).

CAPITAL RISK MANAGEMENT

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concernin order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capitalstructure to reduce the cost of capital. In order to adjust the capital structure, the Group may issue new shares orsell 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 StrategicReport on page 10 and in borrowings note 14. The covenants were met in full as at 31 December 2015 and also ateach subsequent month end until the latest measurement date prior to these accounts being 30 April 2016.

37


1 BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

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

Principal continuing activities are as follows:

New York (NY) – marketing, design, advertising, promotions, digital media services, publishing andmerchandising.

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

Head Office – finance and administration services for the Group.

Segment information for continuing operations of the Group for the year ended 31 December 2015 ispresented below.

NY London Headoperations operations Office Group

£’000 £’000 £’000 £’000

Sale of goods 231 1,749 – 1,980Provision of services 54,610 29,259 – 83,869

––––––––– ––––––––– ––––––––– –––––––––Revenue (all external customers) 54,841 31,008 – 85,849

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––Adjusted EBITDA* 1,228 1,007 (392) 1,843Exceptional administrative expense – (299) (850) (1,149)Exceptional administrative income – 155 5,870 6,025Impairment of Goodwill – (965) – (965)Depreciation (224) (139) (7) (370)Amortisation (131) (61) – (192)

––––––––– ––––––––– ––––––––– –––––––––Operating profit/(loss) 873 (302) 4,621 5,192

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––Finance income 1 60 – 61Finance costs (32) (28) (654) (714)

––––––––– ––––––––– ––––––––– –––––––––Profit/(loss) before tax 842 (270) 3,967 4,539

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––Tax (charge)/credit (250) (393) 370 (273)

––––––––– ––––––––– ––––––––– –––––––––Profit/(loss) after tax 592 (663) 4,337 4,226

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––

* Adjusted EBITDA is before exceptional items.

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

38

reach4entertainment enterprises plcNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 31 December 2015

1 BUSINESS AND GEOGRAPHICAL SEGMENTS (continued)

HeadNY London Office

operations operations operations Group£’000 £’000 £’000 £’000

Capital additions:Property, plant and equipment 104 88 1 193

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––Balance sheet:Segment assetsNon-current assets 7,408 5,056 25 12,489Current assets 8,842 5,450 424 14,716

––––––––– ––––––––– ––––––––– –––––––––Total segment assets 16,250 10,506 449 27,205

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––Liabilities:Total segment liabilities (15,177) (7,376) (1,845) (24,398)

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––

Segment information for continuing operations of the Group for the year ended 31 December 2014 ispresented below

NY London Headoperations operations Office Group

£’000 £’000 £’000 £’000

Sale of goods 285 2,196 – 2,481Provision of services 51,827 28,974 – 80,801

––––––––– ––––––––– ––––––––– –––––––––Revenue (all external customers) 52,112 31,170 – 83,282

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––Adjusted EBITDA* 2,302 681 (336) 2,647Exceptional administrative expense – (243) – (243)Exceptional administrative income – 264 – 264Impairment of Goodwill – (6,430) – (6,430)Depreciation (194) (144) (6) (344)Amortisation (195) – – (195)

––––––––– ––––––––– ––––––––– –––––––––Operating profit/(loss) 1,913 (5,872) (342) (4,301)

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––Finance income – 60 – 60Finance costs – (1) (878) (879)

––––––––– ––––––––– ––––––––– –––––––––Profit/(loss) before tax 1,913 (5,813) (1,220) (5,120)

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––Tax credit/(charge) (716) (753) 596 (873)

––––––––– ––––––––– ––––––––– –––––––––Profit/(loss) after tax 1,197 (6,566) (624) (5,993)

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––

* Adjusted EBITDA is before exceptional items.

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

39

reach4entertainment enterprises plcNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)For the year ended 31 December 2015

1 BUSINESS AND GEOGRAPHICAL SEGMENTS (continued)

HeadNY London Office

operations operations operations Group£’000 £’000 £’000 £’000

Capital additions:Property, plant and equipment 146 36 12 194

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––Balance sheet:Segment assetsNon-current assets 7,285 6,076 34 13,395Current assets 9,229 6,295 36 15,560

––––––––– ––––––––– ––––––––– –––––––––Total segment assets 16,514 12,371 70 28,955

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––LiabilitiesTotal segment liabilities (11,658) (5,617) (17,425) (34,700)

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––

2 EXCEPTIONAL ADMINISTRATIVE ITEMS

2015 2014£’000 £’000

Office move costs (14) (46)Employee contract termination related costs (13) (197)Costs relating to debt restructure (539) –Costs of merchandise division sale (272) –Issue of warrants to AIB (311) –

––––––––– –––––––––Exceptional administrative expenses (1,149) (243)

Landlord and Tenants Act reimbursement – 264Income from transfer of merchandise division 155 –Gain on deferred consideration write off (note 14) 715 –Gain on debt write off (note 14) 5,155 –

––––––––– –––––––––Exceptional administrative income 6,025 264

––––––––– –––––––––––––––––– –––––––––

Office move and Landlord reimbursement

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

Employee contract termination costs

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

40


2 EXCEPTIONAL ADMINISTRATIVE ITEMS (continued)

Deferred consideration on the acquisition of SpotCo

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

Gain on debt write off

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

Issue of warrants to AIB

As part of the refinancing deal with AIB, the Company granted 24,994,462 Warrants to AIB Joint Ventures,a subsidiary of AIB. These have been valued at the date of issue, see note 18.

3 FINANCE INCOME

2015 2014£’000 £’000

Bank interest received 1 –Dividend income from associated undertaking 60 60

––––––––– –––––––––61 60

––––––––– –––––––––––––––––– –––––––––

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

4 FINANCE COSTS

2015 2014£’000 £’000

Finance lease interest 1 –Interest on AIB bank loans 482 563Interest on new debt 15 –Fees on new debt 37 –Amortisation of arrangement fees for bank loan 66 87Unwinding of discounting on deferred consideration (note 14) 91 154Foreign exchange loss on trade 3 –Foreign exchange loss on deferred consideration (note 14) 19 75

––––––––– –––––––––714 879

––––––––– –––––––––––––––––– –––––––––

41


5 EXPENSES BY NATURE AND AUDITOR’S REMUNERATION

2015 2014£’000 £’000

Media, marketing and promotional services 65,029 62,503Staff costs (note 6) 12,854 12,325Depreciation, amortisation and impairment 1,526 6,969Exceptional administrative income (note 2) (4,876) (21)General office expenses 2,996 2,612Operating lease payments:

Land and buildings 1,378 1,324Plant and machinery 142 247

Professional costs 1,004 1,042Travelling 534 423Other 70 159

––––––––– –––––––––Total cost of sales and administrative expenses 80,657 87,583

––––––––– –––––––––––––––––– –––––––––

During the year the Group obtained the following services from the Company’s auditor and its associates:

2015 2014£’000 £’000

Audit fees– fees payable to the company’s auditor for the audit of the company’s

annual accounts 45 45Fees payable to the company’s auditor and its associates for other services:– the audit of the company’s subsidiaries, pursuant to legislation 55 55– audit related assurance services 12 12– tax compliance services 15 16– tax advisory services 15 –

––––––––– –––––––––142 128

––––––––– –––––––––––––––––– –––––––––6 EMPLOYEES AND DIRECTORS

The average monthly number of employees (including executive directors) was:

2015 2014Number Number

Services and promotion 173 178Professional and administrative 46 45

––––––––– –––––––––219 223

––––––––– –––––––––––––––––– –––––––––Staff costs for above persons, included in administrative expenses:

£’000 £’000

Wages and salaries 10,740 10,283Social security costs and other benefits 953 945Other pension costs (defined contribution) 506 430

––––––––– –––––––––12,199 11,658

––––––––– –––––––––––––––––– –––––––––

42


6 EMPLOYEES AND DIRECTORS (continued)

Staff costs for above persons, included in cost of sales:

£’000 £’000

Wages and salaries 572 581Social security costs 60 63Other pension costs (defined contribution) 23 23

––––––––– –––––––––655 667

––––––––– –––––––––––––––––– –––––––––DIRECTORS’ REMUNERATIONThe remuneration of Directors is set out below.

Recognised in the income statement

2015 2014£’000 £’000

Emoluments 300 312Social security costs 9 8

––––––––– –––––––––Total remuneration 309 320

––––––––– –––––––––––––––––– –––––––––Highest paid director:Emoluments 267 262

––––––––– –––––––––––––––––– –––––––––

The number of directors for whom benefits were accruing under defined contribution pension schemes wasNil (2014: Nil).

The key management within the Group are the directors as noted above and in the directors’ report.

Number of key management personnel Number Number

Executive Directors 1 1Non-Executive Directors 2 2

––––––––– –––––––––3 3

––––––––– –––––––––––––––––– –––––––––

See the data tables in the Annual Report of Remuneration for details of total remuneration per individualDirector.

7 TAXATION

2015 2014£’000 £’000

Current tax:Overseas tax on profits/(losses) of the year 251 716

––––––––– –––––––––Total current tax charge 251 716Deferred tax:Origination and reversal of timing differences 82 147Deferred tax rate change 17 –Deferred tax – adjustment in respect of previous periods (77) 10

––––––––– –––––––––Total deferred tax (note 15) 22 157

––––––––– –––––––––Tax charge on loss of ordinary activities 273 873

––––––––– –––––––––––––––––– –––––––––

43


7 TAXATION (continued)

Factors affecting the tax charge for the year:

2015 2014£’000 £’000

The tax assessed for the year differs from the effective averagerate of corporation tax in the UK of 20.25% (2014: 21.5%).The differences are explained below:Profit/(loss) on ordinary activities before tax 4,539 (5,120)

––––––––– –––––––––Profit/(loss) on ordinary activities multiplied by effective averagerate of corporation tax in the UK of 20.25% (2014: 21.5%) 919 (1,101)Effects of:Fixed asset differences 13 –Expenses not deductible for tax purposes 342 1,413Income not subject to tax (1,182) (14)Other tax adjustments, reliefs and transfers (144) –Depreciation on non-qualifying assets – 5Difference in tax rates on overseas earnings 185 364UK losses not utilised – 192Timing differences not recognised in the computation 131 –Change in corporation tax rates 123 2Adjustments to brought forward values (13) –Adjustment in respect of previous periods (59) 12Deferred tax not recognised (42) –

––––––––– –––––––––Total tax charge for the year 273 873

––––––––– –––––––––––––––––– –––––––––

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

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

8 EARNINGS/(LOSS) PER SHARE

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

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

2015 2014£’000 £’000

For basic and diluted profit per shareProfit/(Loss) for financial year 4,266 (5,993)

––––––––– –––––––––––––––––– –––––––––

Number of shares Number Number

Weighted average number of ordinary shares for the purposesof basic and diluted earnings per share 106,416,614 74,635,792

–––––––––– –––––––––––––––––––– ––––––––––

Earnings/(Loss) per share (pence) after taxTotal operations after tax 4.01 (8.03)

–––––––––– –––––––––––––––––––– ––––––––––

44


9 GOODWILL AND INTANGIBLE ASSETS

Customer PurchasedBrands relationships goodwill Total£’000 £’000 £’000 £’000

Cost1 January 2014 4,052 4,115 13,393 21,560Foreign exchange differences 111 – 278 389Write down – (1,508) – (1,508)

–––––––– –––––––– –––––––– ––––––––31 December 2014 4,163 2,607 13,671 20,441Foreign exchange differences 98 – 244 342

–––––––– –––––––– –––––––– ––––––––31 December 2015 4,261 2,607 13,915 20,783

–––––––– –––––––– –––––––– ––––––––Amortisation1 January 2014 904 3,317 181 4,402Charged in the year 131 61 – 192Write down – (1,508) – (1,508)Impairment charge – – 6,430 6,430Foreign exchange differences 63 – – 63

–––––––– –––––––– –––––––– ––––––––31 December 2014 1,098 1,870 6,611 9,579Charged in the year 131 61 – 192Impairment charge – – 965 965Foreign exchange differences 62 – – 62

–––––––– –––––––– –––––––– ––––––––31 December 2015 1,291 1,931 7,576 10,798

–––––––– –––––––– –––––––– ––––––––Net book value31 December 2015 2,970 676 6,339 9,985

–––––––– –––––––– –––––––– –––––––––––––––– –––––––– –––––––– ––––––––31 December 2014 3,062 737 7,060 10,859

–––––––– –––––––– –––––––– –––––––––––––––– –––––––– –––––––– ––––––––31 December 2013 3,148 798 13,212 17,158

–––––––– –––––––– –––––––– –––––––––––––––– –––––––– –––––––– ––––––––

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

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

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

Impairment tests for goodwill

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

2015 2014£’000 £’000

Dewynters Group (Dewynters, Newmans, DAI) 1,351 2,316SpotCo 4,988 4,744

––––––––– –––––––––Total Goodwill 6,339 7,060

––––––––– –––––––––––––––––– –––––––––

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

45


9 GOODWILL AND INTANGIBLE ASSETS (continued)

The merchandise division of Dewynters was transferred during the year and as a result the royalties frommerchandise sales in the USA will no longer be collected by DAI. This means DAI is no longer trading andremains dormant with the exception of minor costs of corporation and tax accounts in the USA. TheCompany has allocated to DAI a portion of the goodwill in the Dewynters Group, which arose on itsacquisition in 2006, based on its proportion of the EBITDA of the Dewynters Group at the time of theacquisition. This resulted in an impairment of £0.97 million recognised in the 2015 accounts. As at31 December 2015 the recoverable amount of the Dewynters Group is £5.66 million. No class of asset otherthan goodwill was deemed impaired.

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

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

DewyntersGroup SpotCo

Revenue (fall)/growth – 1 year (3.4)% 3.6%Revenue growth per annum – years 2-5 1.5% 1.5%Cost growth – employee costs from year 1 0.8% 10.2%Cost growth per annum – employee costs from years 2-3 2% 2.0%Cost growth per annum – employee costs years 4-5 1% 1.5%Cost growth – overhead costs from year 1 1% 1.5%Cost growth – overhead costs from years 2-5 1% 1.5%Discount rate 12% 12%Capitalisation rate 17.5% 17.5%

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

Initial growth rates in year 1 are taken from the CGU’s 2016 operational budgets, and so in some cases canshow a difference to the straight line growth rates applied to subsequent years. Growth after year 1 has beendetermined on the basis of general industry market growth and so the rate reduces and remains consistent.The growth rates used are considered by management to be in line with general trends in which each CGUoperates and deemed by management to be a reasonable expectation for the media CGU.

46


9 GOODWILL AND INTANGIBLE ASSETS (continued)

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

DewyntersGroup SpotCo

Revenue (fall) – 1 year (10.1)% (27.0)%Revenue (fall) – remainder (0.5)% (1.3)%Cost growth – employee costs from year 1 1.5% 5.0%Cost growth per annum – employee costs from years 2-3 0.8% 1.5%Cost growth – overhead costs from year 1 5.0% 21.0%Cost growth – overhead costs from year 2-5 0.9% 3.0%Discount rate increase 4.0% 9.0%Capitalisation rate increase 6.5% 23.5%

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

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

47


10 PROPERTY, PLANT AND EQUIPMENT

Short Fixturesleasehold Plant and and

improvements machinery fittings Total£’000 £’000 £’000 £’000

Cost1 January 2014 1,985 608 259 2,852Additions 44 118 32 194Foreign exchange differences 92 24 34 150Disposals – – (1) (1)

––––––––– ––––––––– ––––––––– –––––––––31 December 2014 2,121 750 324 3,195Additions 24 145 24 193Foreign exchange differences 115 33 20 168Disposal (375) (31) – (406)

––––––––– ––––––––– ––––––––– –––––––––31 December 2015 1,885 897 368 3,150

––––––––– ––––––––– ––––––––– –––––––––Depreciation1 January 2014 1 354 1 356Charge for the year 172 103 69 344Foreign exchange differences 8 19 20 47

––––––––– ––––––––– ––––––––– –––––––––31 December 2014 181 476 90 747Charge for the year 181 119 70 370Foreign exchange differences 43 26 11 80Disposal (375) (31) – (406)

––––––––– ––––––––– ––––––––– –––––––––31 December 2015 30 590 171 791

––––––––– ––––––––– ––––––––– –––––––––Net book value31 December 2015 1,855 307 197 2,359

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––31 December 2014 1,940 274 234 2,448

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––31 December 2013 1,984 254 258 2,496

––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– –––––––––

The net carrying amount of property, plant and equipment includes £0.07 million of computer equipmentheld under finance lease.

All depreciation charges, included in the note above, have been recognised in administrative expenses inthe Consolidated Income Statement.

At year end the net carrying amount of leased plant and machinery was £64,501 (2014: Nil). The leasedequipment secures lease obligations.

Under the terms of the Group’s borrowing arrangements, the loan disclosed in note 14 is secured on theassets of the Group including all property, plant and equipment.

11 INVENTORIES

2015 2014£’000 £’000

Finished goods 152 401––––––––– –––––––––––––––––– –––––––––

The cost of inventories recognised as an expense and the amount included in cost of sales was £0.53 million(2014: £0.78 million).

48


12 TRADE AND OTHER RECEIVABLES

2015 2014£’000 £’000

Current trade and other receivables:Trade receivables 11,905 11,339Impairment losses (34) (115)

––––––––– –––––––––Net trade receivables 11,871 11,224Other receivables 331 418Prepayments 537 414Accrued income 167 184

––––––––– –––––––––12,906 12,240

––––––––– –––––––––––––––––– –––––––––

Trade receivables are generally non-interest bearing. The average credit period taken on sales is 51 days(2014: 50 days). Trade receivables are provided against based on estimated irrecoverable amounts,determined by reference to past default experience.

The asset based lending facility with PNC is secured over the trade receivables of the company (see note 14for details).

Other current assets:Bank deposit 498 473

––––––––– –––––––––––––––––– –––––––––

The bank deposit of £0.50 million (2014: £0.75 million) is used as security for a letter of credit guaranteeinglease payments in relation to the SpotCo office lease in New York. This letter of credit has a 12 month termbut is expected to be renewed on expiry. The balance will reduce from $0.74 million to $0.49 million on the5th anniversary of the lease commencement date (2018), and then to $0.33 million on the 9th anniversary.

Non-current:Deferred tax asset (note 15) 145 88

––––––––– –––––––––––––––––– –––––––––

Included in the Group’s trade receivable balance are debtors with a carrying amount of £5.08 million (2014:£4.41 million) which are past due at the reporting date but not provided against as management are confidentof payment. The Group has a provision against other smaller debts to a total of £0.03 million (2014: £0.01million).

Ageing of past due but not impaired receivables:

2015 2014£’000 £’000

Less than 60 days 3,536 2,606Between 60-90 days 810 630More than 90 days 730 1,169

––––––––– –––––––––5,076 4,405

––––––––– –––––––––––––––––– –––––––––

49


12 TRADE AND OTHER RECEIVABLES (continued)

Movement in the allowance account for credit losses:

2015 2014£’000 £’000

Opening balance 115 25Amounts provided for as impaired through the income statement 40 114Amounts recovered in the year (25) (3)Prior impairment written off in the year (95) (21)

––––––––– –––––––––35 115

––––––––– –––––––––––––––––– –––––––––

In determining the recoverability of a trade receivable the Group considers any change to the credit qualityof the trade receivable from the date credit was initially granted up to the reporting date.

Trade and other receivables are held in Pound Sterling, and US Dollars as at 31 December 2015 and31 December 2014.

The directors consider that the carrying amount of trade and other receivables approximates to their fairvalue.

13 TRADE AND OTHER PAYABLES

2015 2014£’000 £’000

Current:Trade payables 8,148 9,231Other taxation and social security 833 723Other payables 925 475Accruals and deferred income 4,803 5,411

––––––––– –––––––––14,709 15,840

––––––––– –––––––––––––––––– –––––––––

Trade and other payables principally comprise amounts outstanding for trade purchases and on-going costs.The average credit period taken for trade purchases is 45 days (2014: 54 days). For most suppliers no interestis charged but for overdue balances interest may be charged at various interest rates.

Trade and other payables are held in Pound Sterling, and US Dollars as at 31 December 2015 and31 December 2014.

The directors consider that the carrying amount of trade and other payables approximates to their fair value.

The Group has financial risk management policies in place to ensure that all payables are paid within thecorrect time frame and no interest has been charged by any suppliers as a result of late payment of invoicesduring the period.

50


14 BORROWINGS

2015 2014£’000 £’000

Current:Deferred consideration – 1,266Term debt 314 630Asset based lending facility 5,665 –Finance leases 23 –

––––––––– –––––––––6,002 1,896

––––––––– –––––––––––––––––– –––––––––Non-current:Term debt 697 14,155Finance leases 42 –

––––––––– –––––––––739 14,155

––––––––– –––––––––––––––––– –––––––––Analysis of borrowings:On demand or within one yearDeferred consideration – 1,266Term debt 314 630Asset based lending facility 5,665 –Finance leases 23 –

––––––––– –––––––––6,002 1,896

In the second to fifth years inclusiveTerm debt 697 14,155Finance leases 42 –

––––––––– –––––––––739 14,155

––––––––– –––––––––Amounts due for settlement 6,741 16,051Less amounts due within one year (6,002) (1,896)

––––––––– –––––––––Amounts due for settlement after one year 739 14,155

––––––––– –––––––––––––––––– –––––––––

Analysis of borrowings by currency:

Sterling USD Total£’000 £’000 £’000

31 December 2015Asset based lending facility 731 4,934 5,665Term debt 350 661 1,011Finance leases 65 – 65

––––––––– ––––––––– –––––––––1,146 5,595 6,741

––––––––– ––––––––– –––––––––––––––––– ––––––––– –––––––––31 December 2014Bank loans 14,785 – 14,785Deferred consideration – 1,266 1,266

––––––––– ––––––––– –––––––––14,785 1,266 16,051

––––––––– ––––––––– –––––––––––––––––– ––––––––– –––––––––

51


14 BORROWINGS (continued)

Debt restructure

In December 2015, the Company successfully concluded discussion on restructuring the debt which aroseon the previous acquisitions of SpotCo and the Dewynters Group of companies. At the end of prior year31 December 2014, the Company had borrowings with AIB Group (UK) plc amounting to £14.8 million.During 2015 £0.63 million of this debt was repaid in accordance with the debt facility agreement. On04 December 2015 the remaining debt was restructured as follows:

• The Company raised £4 million (before expenses) through the placing of 400 million new ordinaryshares

• The 3 trading companies of the r4e group, SpotCo, Dewynters and Newmans, entered into a newfacility with PNC. The new facility is a three year secured asset based debt facility of £8.5 millionplus a £1 million term loan. Both the facility and the term loan are shared across the 3 companies

• The proceeds of the equity placing plus new debt with PNC repaid £9 million of the debt facilitywith AIB

• The remaining £5.16 million of debt with AIB was written off. See note 2• The Company has granted 24,994,462 warrants to AIB. See note 18

Term debt

The new term debt with PNC totalled £1 million when drawn down on 04 December 2015 (£1.02 million at31 December 2015 due to foreign exchange) and was split between SpotCo and Dewynters based on expectedfuture cash flows of the Companies. The debt has interest payable at 4% over Barclays Bank plc. base rate(Dewynters) and the rate published by the central bank or monetary authority of the relevant territory(SpotCo). Repayments are in equal monthly instalments and begin in March 2016. The debt will be fullyrepaid by October 2018.

Asset based lending

All 3 trading companies, SpotCo, Dewynters and Newmans, hold asset based lending facilities with PNC.Borrowing is determined by qualifying accounts receivable. The nature of the facility means that the balancewill fluctuate from month to month and as the debt is paid down, new debt will arise to finance workingcapital, therefore the facility has been reflected as a current liability as it will be constantly revolving. Anothereffect of the facility is that cash balances across the group will be lower as cash drawdown incurs a higherrate of interest therefore cash will only be drawn down as required rather than being held on hand.

The facility with PNC has interest payable at 2.25% over Barclays Bank plc. base rate for amounts borrowed.Borrowings not utilised have interest payable at 0.5%. On top of a fixed and floating charge over its assets,the Group has given PNC an unlimited guarantee in respect of these borrowings. The Group has a set offinancial covenants with PNC in relation to the loan which are measured monthly and were met in full as at31 December 2015 and also at each subsequent month end until the latest measurement date prior to theseaccounts being 30 April 2016. Forecasts for 2016 currently reflect a possible breach in the fixed charge coverfinancial covenant due to updated forecasts showing seasonal fluctuations in EBITDA, however, given thatthe current forecast for the full year 2016 EBITDA is in line with expectations and subsequent months areforecast to meet covenants with headroom, the Directors are confident the Group remains a going concern– see page 31 for further details.

Deferred Consideration

The remaining payments scheduled to the vendor for 2015 were made leaving a balance of $1 million USDat October 2015 which could be converted to equity. An agreement was signed with the vendor agreeing towaive the $1 million conversion. He retains his role at Spotco.

52


14 BORROWINGS (continued)

Movements on deferred consideration during the year are as follows:

2015 2014£’000 £’000

Opening balance 1,266 1,652Unwinding of discounting on deferred consideration (note 4) 91 154Payments of deferred consideration – cash (661) (615)Foreign exchange differences (note 4) 19 75Write off of remaining $1 million (649) –Release of interest previously discounted (66) –

––––––––– –––––––––Closing balance – 1,266

––––––––– –––––––––––––––––– –––––––––

15 DEFERRED TAXATION

The movement in the year of the Group’s deferred tax liability was as follows:

2015 2014£’000 £’000

At start of year (1,261) (1,061)Foreign exchange differences (42) (43)Transfer to income statement (22) (157)

––––––––– –––––––––At year end (1,325) (1,261)

––––––––– –––––––––––––––––– –––––––––

The deferred taxation liability disclosed above relates primarily to intangible assets as follows:

2015 2014£’000 £’000

Deferred tax assets:Accumulated depreciation in excess of capital allowances 137 79Other temporary differences 8 9

––––––––– –––––––––145 88

––––––––– –––––––––––––––––– –––––––––Deferred tax liabilities:Intangible assets (1,470) (1,349)

––––––––– –––––––––(1,470) (1,349)

––––––––– –––––––––––––––––– –––––––––Deferred taxation provision (1,325) (1,261)

––––––––– –––––––––––––––––– –––––––––

The government has indicated that it intends to reduce the main rate of Corporation tax to 18% from 20%from 1 April 2020. This change in rate has been substantively enacted at the balance sheet date hence thedeferred tax liability is recognised at 18%.

53


16 OTHER NON CURRENT PAYABLES

Landlord reimbursement accrual

Amounts in non-current other payables of £0.63 million (2014: £0.66 million) relate to the re-imbursementof leasehold improvement costs from SpotCo’s landlord at the new New York office. As with many US leasesSpotCo, as tenant, had to undertake a programme of complete refurbishment of the property. Some of theexpenses, related to the provision of basic utilities and services, were then refunded by the landlord.£0.84 million ($1.25 million USD) was received in cash from the Landlord in 2013. In line with SICInterpretation 15 this reimbursement has been recognised as a liability and is being unwound to the incomestatement over the period of the lease, reducing rental costs. £0.06 million was unwound during the year(2014: £0.06 million). Amounts in current liabilities relating to the reimbursement total £0.06 million (2014:£0.06 million).

2015 2014£’000 £’000

Within one year 61 55––––––––– –––––––––

Between two and five years 244 220More than five years 384 435

––––––––– –––––––––628 655

––––––––– –––––––––––––––––– –––––––––

Rent holiday accrual

Other amounts in non-current other payables of £0.85 million (31 December 2014: £0.81 million) relate toan accrual for rental payments built up during a period of ‘rent holiday’ as provided for in the new leasesfor Dewynters and SpotCo’s Offices. In line with SIC Interpretation 15 the accrual will be released to theincome statement over the term of the lease thus reducing rent costs.

2015 2014£’000 £’000

Within one year 144 38––––––––– –––––––––

Between two and five years 577 523More than five years 273 282

––––––––– –––––––––850 805

––––––––– –––––––––Total non-current payables 1,478 1,460

––––––––– –––––––––––––––––– –––––––––

17 SHARE CAPITAL

2015 2014£’000 £’000

Authorised, allotted, issued and fully paid:474,894,792 ordinary shares at 0.5 pence each(2014: 74,894,792 ordinary shares of 2.5 pence each) 2,374 1,872

––––––––– –––––––––––––––––– –––––––––

54


17 SHARE CAPITAL (continued)

Authorised, allotted, issued and fully paid: Nominal Number ofValue shares£’000 No.

Date Detail1 January 2015 Balance brought forward 1,872 74,894,7922 December 2015 Share split, transfer to deferred shares (1,498) –3 December 2015 Shares issued 2,000 400,000,000

–––––––– –––––––––––31 December 2015 Balance carried forward 2,374 474,894,792

–––––––– ––––––––––––––––––– –––––––––––

On 2 December 2015 the Company underwent a capital reorganisation to split 74,894,792 shares into74,894,792 ordinary shares of £0.005 nominal value and 74,894,792 deferred shares of £0.02 nominal value.

On 3 December 2015 400,000,000 shares were issued at £0.01 per share resulting in a share premium of£2 million and share issues costs of £0.172 million. The price of the shares was below market value as theywere issued as part of a private placement not as an issue to the open market.

Employee benefit trust

2015 2015 2014 2014Shares £’000 Shares £’000

CostAt the beginning and end of the period 259,000 259 259,000 259

–––––––– –––––––– –––––––– –––––––––––––––– –––––––– –––––––– ––––––––

During 2007 and 2008 the company funded an employee benefit trust to purchase its own shares to meet theGroup’s expected obligations under an employee share scheme. There are no share options remaining at31 December 2015 (2014: Nil). As at 31 December 2015 the market value of own shares held in trust was£4,144 (2014: £7,770).

During the year the mid-price of the Company’s shares traded between 0.85pence and 4.25 pence (2014:2.875 pence and 7.875 pence). At 31 December 2015 the share price was 1.6 pence (2014: 3.0 pence).

18 RESERVES

Capital redemption reserveThis reserve arose from the redemption of redeemable preference shares.

Share premiumThe share premium account is the additional amount over and above the nominal share capital that is receivedfor shares issued less any share issue costs.

Deferred sharesDeferred Shares are valueless and do not carry any rights to vote or any dividend rights. The Deferred Sharesare not quoted on AIM or any other stock market and will not be transferable unless with the prior writtenconsent of the Company.

Interest in own sharesThis reserve arose from the purchase of shares in the Company by the Employee Benefit Trust, fundedthrough loans from the Company.

55


18 RESERVES (continued)

Foreign exchange reserveThe foreign exchange reserve comprises all foreign exchange differences arising from the translation of thefinancial statements of operations that do not have sterling as a functional currency. Exchange differencesare classified as equity and transferred to the Group’s translation reserve. Such translation differences arerecognised in the income statement in the period in which an operation is disposed of. Movement in foreignexchange reserves in the year is shown on the Consolidated Statement of Changes in Equity.

Retained earningsRetained earnings records the cumulative profits and losses recognised in the Consolidated IncomeStatement, net of any distributions and share-based payments made.

Warrant reserveThe warrant reserve comprises the equity component of warrants issued by the Company. On 04 December2015 the Company granted 24,994,462 Warrants to AIB Joint Ventures, a subsidiary of AIB. The Warrantsare exercisable for five years at an exercise price of 1 penny per Warrant, only when the closing mid-marketprice of a New Ordinary Share reaches 5 pence or more on any Trading Day during that five year period,subject to the right to exercise earlier upon the occurrence of certain specified Acceleration Events (as definedin the Warrant Agreement). The warrants have been accounted for at fair value through the profit and lossaccount. The fair value has been calculated using a binomial model. The model assumes there are nodividends in the option period and other inputs are as follows:

Year ended Year ended2015 2014

Share price at 31 December 2015Risk free rate 1.346% –Barrier price £0.05 –Strike price £0.01 –Volatility 100% –Spot price £0.016 –Days to Expiry 1,798 –

Over the past three years, the share price volatility has been 98%, rising to 133% over the 12 months to the31 December 2015 balance sheet date. Subsequent to the refinancing, the Board considers that future shareprice volatility will be materially less than the historic values which were unquestionably influenced by thefinancial restructuring. Notwithstanding, it was considered prudent to assume a 100% volatility for purposesof valuing the warrants. Using an 80% or a 120% volatility results in a ± 15% change in the warrant price.

The fair value of the warrants at the date of grant totalled £311k (2014: £Nil). This amount has been chargedin full to the profit and loss account during the year.

56


19 CASH GENERATED FROM OPERATIONS

2015 2014£’000 £’000

Reconciliation of net cash flows from operating activitiesProfit/(Loss) before taxation 4,539 (5,120)Adjustments:Finance costs 714 879Finance income (61) (60)Depreciation 369 344Amortisation of intangibles 192 195Impairment of goodwill 965 6,430Exceptional debt write offs (6,018) –

––––––––– –––––––––Operating cash flows before movements in working capital 700 2,668Decrease/(increase) in inventories 249 (120)(Increase) in trade and other receivables (666) (1,897)(Decrease)/Increase in trade and other payables (925) 1,843

––––––––– –––––––––Cash (used in)/generated from operating activities (642) 2,494

––––––––– –––––––––––––––––– –––––––––

20 COMMITMENTS UNDER LEASES

Finance Leases

The Group leases some of its computer equipment (net carrying value £0.07 million – 2013: Nil). Theseassets are classified as finance leases as the rental period amounts to the estimated useful economic life ofthe assets concerned and the Group will be absolute owner of the assets outright at the end of the minimumlease term.

Future lease payments are due as follows:

Minimumlease Present

payments Interest value£’000 £’000 £’000

2015Not later than one year 20 3 23Between one year and five years 34 8 42

–––––––– –––––––– ––––––––54 11 65

–––––––– –––––––– –––––––––––––––– –––––––– ––––––––

2015 2014£’000 £’000

Current liabilities 23 –Non-current liabilities 42 –

––––––––– –––––––––––––––––– –––––––––

No finance leases were in place in 2014.

57


20 COMMITMENTS UNDER LEASES (continued)

Operating Leases

The Group had aggregate minimum lease payments under non-cancellable operating leases as follows:

2015 2014£’000 £’000

Land and buildingswithin one year 1,626 1,310within second to fifth years 6,543 5,846more than five years 8,630 8,620

––––––––– –––––––––16,799 15,776

Plant and machinerywithin one year 156 158within second to fifth years 182 194

––––––––– –––––––––338 352

––––––––– –––––––––Total commitments 17,137 16,128

––––––––– –––––––––––––––––– –––––––––

SpotCo’s lease term is 14 years and commenced on 18 December 2012. The lease has inbuilt cost increaseswhich will allow the business to forecast reliably and removes the need for rent reviews. Dewynters leaseterm is 10 years and commenced on 5 April 2013. A rent review, for any uplift in rent only, will take place5 years from commencement date.

The operating lease costs in the period were as follows:

2015 2014£’000 £’000

Land and buildings 1,378 1,324Plant and machinery 143 247

––––––––– –––––––––1,521 1,571

––––––––– –––––––––––––––––– –––––––––

Operating lease payments for land and buildings represent rent payable by the Group for warehouse spacein London plus office properties in New York and London.

21 FINANCIAL INSTRUMENTS

The Group's financial instruments comprise cash, bank loans, deferred consideration and various otherreceivable and payable balances that arise from its operations. The main purpose of these financialinstruments was to finance the Group’s operations.

It is, and has been throughout the period under review, the Group’s policy that no trading in financialinstruments shall be undertaken.

The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreigncurrency risk and credit risk. The Board reviews and agrees policies for the management of these risks andthese are summarised below. These policies have remained unchanged throughout the period.

58


21 FINANCIAL INSTRUMENTS (continued)

Interest Rate Risk

The Group’s cash balances, deposits and debt through term and asset backed borrowings will be subject tofluctuations in current and future interest rates. All other significant financial assets and liabilities do notbear interest. The Group monitors the rates of interest receivable and payable on its cash and debt balances,but given the nature of these assets and liabilities, interest liabilities are not capped.

Liquidity risk

It is the Group’s policy to manage its financing of its business through internally generated funds with surplusfunds invested in short and medium fixed term money market deposits. Requirements are kept under regularreview by the Board and Group companies have negotiated overdraft facilities with their bankers in orderto minimise any exposure to short term liquidity risks.

Foreign currency risk

The subsidiaries, DAI and SpotCo, based in the US have their functional currency in US dollars.

The Company and its subsidiaries enter into transactions denominated in Sterling, and US Dollars. TheGroup’s revenue and expenditure can therefore be affected by foreign currency exchange movements.

The Board monitors all foreign currency exposure but the Group does not currently hedge against movementsin the exchange rates of Sterling and foreign currencies in respect of any financial assets and liabilities.

Credit risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.

Senior management receives monthly reports summarising trade receivable balances and their ageing profileand appropriate action is taken to manage any significant items. A provision for impairment is made ifconsidered necessary. An ageing analysis can be found in note 12.

Cash and cash equivalents are also part of the Groups credit risk and further information is provided below.

2015 2014Funds Total Funds Total

held in Funds held funds held in Funds held fundsGBP in USD held GBP in USD held

£’000 £’000 £’000 £’000 £’000 £’000

AIB (GB) 242 – 242 1,368 – 1,368Barclays Bank 440 – 440 – – –HSBC – – – – 13 13TD Bank – 460 460 – 1,043 1,043UBS – 16 16 – 15 15Other 2 – 2 7 – 7

–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––684 476 1,160 1,375 1,071 2,446

–––––––– –––––––– –––––––– –––––––– –––––––– –––––––––––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

59



Financial instruments by category

2015 2014Financial Financial

liabilities at liabilities at Loans and amortised Loans and amortised

Total receivables cost Total receivables costAsset/(liability) £’000 £’000 £’000 £’000 £’000 £’000

Trade and other receivables 12,866 12,866 – 12,115 12,115 –Cash and cash equivalents 1,160 1,160 – 2,446 2,446 –Trade and otherpayables (13,443) – (13,443) (14,825) – (14,825)Borrowing (6,741) – (6,741) (14,785) – (14,785)Deferred consideration – – – (1,266) – (1,266)

–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––(6,158) 14,026 (20,184) (16,315) 14,561 (30,876)

–––––––– –––––––– –––––––– –––––––– –––––––– –––––––––––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

Financial instruments have been categorised as trade and other receivables, cash and cash equivalents, tradeand other payables, borrowings or deferred consideration.

Trade and other receivables include any impairment losses and exclude prepayments and accrued income.Trade and other payables exclude statutory liabilities, and deferred income.

The directors consider that the carrying amount of all financial instruments approximates to their fair value.

Interest rate profile of financial assets and liabilities.

The interest rate profile of the Group’s financial assets and liabilities was:

2015 2014Non- Non-

interest Floating interest Floating FixedTotal bearing rate Total bearing rate rate

Asset/(liability) £’000 £’000 £’000 £’000 £’000 £’000 £’000

Trade and other receivables 12,866 12,866 – 12,115 12,115 – –Cash and cash equivalents 1,160 – 1,160 2,446 – 2,446 –Trade and other payables (13,443) (13,443) (14,825) (14,825) – –Borrowing (6,741) (6,741) (14,785) – (14,785) –Deferred consideration – – – (1,266) – – (1,266)

––––––– ––––––– ––––––– ––––––– ––––––– ––––––– –––––––(6,158) (577) (5,581) (16,315) (2,710) (12,339) (1,266)

––––––– ––––––– ––––––– ––––––– ––––––– ––––––– –––––––––––––– ––––––– ––––––– ––––––– ––––––– ––––––– –––––––

In both 2015 and 2014 the interest rate received for the floating rate financial assets was at prevailing bankrates.

60



Floating rate liabilities bear interest over prevailing Barclays Bank Plc rates (2014 AIB term debt overprevailing LIBOR) as follows:

2015 2014% %

Cash flow term debt 4 –Asset based lending facility 2.25 –AIB term debt – 3

––––––– –––––––The weighted average period to maturity for non-interest bearing financial liabilities is less than 1 year(2014: 1 year).

Interest rate sensitivity

The Group has derived a sensitivity analysis based on 2% variances in floating interest rates. The sensitivityanalysis below has been determined based on the exposure to interest rates for all floating rate financialassets and liabilities at the balance sheet date. 2% is the rate used internally when reporting to keymanagement personnel.

2015 2014Impact on equity and profit after tax £’000 £’000

2% increase in rate of interest (170) (296)––––––– –––––––

2% decrease in rate of interest 170 296––––––– –––––––––––––– –––––––

Foreign currency exposures

The foreign exchange rate profile of the Group’s financial assets and liabilities was:

2015 2014Total Sterling US Dollar Total Sterling US Dollar

Asset/(liability) £’000 £’000 £’000 £’000 £’000 £’000

Trade and other receivables 12,866 5,096 7,770 12,115 4,410 7,705Cash and cash equivalents 1,160 683 477 2,446 1,375 1,071Trade and other payables (13,443) (4,888) (8,555) (14,825) (4,338) (10,487)Borrowing (6,741) (6,741) – (14,785) (14,785) –Deferred consideration – – – (1,266) – (1,266)

––––––– ––––––– ––––––– ––––––– ––––––– –––––––(6,158) (5,850) (308) (16,315) (13,338) (2,977)

––––––– ––––––– ––––––– ––––––– ––––––– –––––––––––––– ––––––– ––––––– ––––––– ––––––– –––––––

Foreign exchange rate sensitivity

The Group has derived a sensitivity analysis based on 20% variances in the foreign exchange rates used forUS Dollar. The sensitivity analysis below has been determined based on the exposure to foreign exchangerates for all financial assets and liabilities held in a foreign currency at the balance sheet date. 20% is thesensitivity variable used internally when reporting to key management personnel:

2015 2014Impact on equity and profit after tax £’000 £’000

20% increase in foreign exchange rate 51 496––––––– –––––––––––––– –––––––

20% decrease in foreign exchange rate (77) (744)––––––– –––––––––––––– –––––––

61



Maturity of financial instruments

Financial liabilities

The maturity profile of the Group’s financial liabilities, including interest payable on borrowings, was:

2015 2014£’000 £’000

In one year or less, or on demand 19,497 16,689In more than one year, but not more than two years 375 4,334In more than two years, but not more than five years 313 4,103

––––––– –––––––20,185 25,126

––––––– –––––––––––––– –––––––

Financial assets

The maturity profile of the Group’s financial assets was:2015 2014

£’000 £’000

In one year or less, or on demand 13,861 14,561––––––– –––––––

13,861 14,561––––––– –––––––––––––– –––––––

Fair Value of Assets and Liabilities

The fair value amounts of the Group’s financial assets and liabilities as at 31 December 2015 and31 December 2014 did not vary materially from the carrying value amounts due to the short term nature ofcurrent assets and liabilities and the interest rates applicable to the non-current liabilities.

Maximum Credit Risk

The Group’s exposure to credit risk arises mainly as follows:

2015 2014£’000 £’000

Cash and cash equivalents 1,659 2,446Trade and other receivables 12,368 12,115

––––––– –––––––14,027 14,561

––––––– –––––––––––––– –––––––

The majority of the Group’s trade receivables are due for collection within 30 days. Details of trade andother receivables past due at the reporting date are given in note 12. As at 31 December 2015 the provisionfor impaired trade receivables is £0.12 million (2014: £0.12 million) see note 12. No other financial assetsare impaired as at 31 December 2015 (2014: Nil).

Credit quality of financial assets

Cash and cash equivalents are not held with any institutions with a rating of lower than A–.

62


22 RELATED PARTY DISCLOSURES

During the year ended 31 December 2015, transactions with Key Management Personnel are in relation toDirectors of the Group and are presented in Directors Remuneration tables on page 18 and note 6 to theaccounts.

Dividend income received in the year ended 31 December 2015 of £0.06 million (2014: £0.06 million) isfrom the associate undertaking Theatrenow Limited, in which Dewynters has a 29.91% shareholding.

22 TRANSACTIONS WITH DIRECTORS

At 31 December 2015, David Stoller owed the Group £35,982 (2014: the Group owed Mr. Stoller £1,026repaid in 2015). This relates to PAYE payments, whereby following a PAYE assessment it was determinedthat Mr Stoller’s compensation for work in the UK for the Company should be subject to PAYE (as opposedto being taxed only in the US) and therefore the Company was required to immediately pay outstandingPAYE. The Company will seek to recover this amount from Mr Stoller as soon as possible and once therelated overpayment of employment tax in the US becomes available. Subsequent to 31 December 2015,Mr Stoller has made repayments of £8,000. The loan is non-interest bearing and no terms and conditionsare attached. Full repayment is due by 31 December 2016.

During the year ended December 2015, the Group procured consultancy services totalling £0.188 million(2014: Nil) from Glen House Capital Strategies Ltd., a company owned by Richard Ingham, a non-executivedirector of the Board during the period, in recognition of consultancy services provided since 2013.£0.12 million was outstanding at 31 December 2015 (2014: Nil).

During the year ended December 2015, the Group procured consultancy services totalling £0.03 million(2014: Nil) from Springtime Consultants Ltd., a company owned by Marcus Yeoman, a non-executivedirector of the Board during the period. £0.02 million was outstanding at 31 December 2015 (2014: Nil).

23 SUBSEQUENT EVENTS

On 11 February 2016 Richard Ingham resigned his position as non-executive member of the Board ofDirectors to take effect after three months. As a result Mr. Ingham stepped down as a director on 11th May2016.

On 12 February 2016, 1 million shares were issued in payment of services relating to advice received onthe December 2015 fund raise. The shares were issued at 0.01 pence each.

On 4 March 2016 the Company announced that it had adopted a new employee share incentive scheme, thereach4entertainment enterprises plc 2016 Long Term Incentive Plan. The plan can grant up to 20 per cent.of the issued share capital at an exercise price of 1p per share. On 4 March 2016, 84,475,000 options in newordinary shares in the Company, representing approximately 17.75 per cent. of the issued ordinary sharecapital of the Company on that date, were granted to employees and senior management, including to theExecutive Chairman and Acting CEO. Of the total Options granted, 23,750,000 were granted to DavidStoller, the Executive Chairman and Acting CEO of the Company, which represent approximately 4.99 percent. of the issued ordinary share capital of the Company at that date.

On 4 March 2016 it was announced that James Charrington had been appointed as CEO of Dewynters. In2014, Mr Charrington had set up Jampot Consulting Limited (“Jampot”) an Arts Marketing Consultancy,working with, amongst others, the National Theatre and Sonia Friedman on ticketing and marketingstrategies. On 21 March 2016, the Company acquired 100% of Jampot for consideration totalling £55,000by the issue of 3,666,666 ordinary shares in r4e at 1.5p per share. The Board of r4e believes the IP in digitalmarketing that Jampot can bring will be beneficial to the Group and add to its service offering. Jampot hasa year end of 31 October, therefore for the period from 1 November 2015 to the date of acquisition being21 March 2016, Jampot had revenue of £16,214, profit before tax of £5,563 and net assets of £87.

63


2015 2014Notes £’000 £’000

FIXED ASSETSTangible assets 1 12 18Investments 2 14,204 15,169

–––––––––– ––––––––––14,216 15,187

–––––––––– ––––––––––CURRENT ASSETSDebtors 3 555 919Cash at bank and in hand 298 6

–––––––––– ––––––––––853 925

CURRENT LIABILITIES: Creditors amounts falling duewithin one year 4 (15,335) (9,354)

–––––––––– ––––––––––NET CURRENT LIABILITIES (14,482) (8,429)

–––––––––– ––––––––––TOTAL ASSETS LESS CURRENT LIABILITIES (266) 6,758CREDITORS: Amounts falling due after more than one year 5 (27) (14,180)

–––––––––– ––––––––––NET LIABILITIES (293) (7,422)

–––––––––– –––––––––––––––––––– ––––––––––CAPITAL AND RESERVESCalled up share capital 6 2,374 1,872Deferred shares 6 1,498 –Share premium account 6 15,329 13,501Capital redemption reserve 6 15 15Warrant reserve 311 –Own shares held 6 (259) (259)Profit and loss account 6 (19,561) (22,551)

–––––––––– ––––––––––TOTAL EQUITY 7 (293) (7,422)

–––––––––– –––––––––––––––––––– ––––––––––

The financial statements on pages 64 to 73 were approved by the board of Directors and authorised for issue on24 May 2016 and are signed on its behalf by:

David StollerDirector

64

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65

reach4entertainment enterprises plcSTATEMENT OF CHANGES IN EQUITY

BASIS OF ACCOUNTING

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standardapplicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006,including the provisions of the Large and Medium-sized Companies and Groups (Accounts and Reports)Regulations 2008, and under the historical cost convention.

The Group financial statements have been prepared in accordance with International Financial Reporting Standards(“IFRS”) as adopted by the European Union. Where these financial statements cross reference to the Group accountsthere is no difference in treatment.

No Statement of Comprehensive Income is presented for r4e, as provided by Section 408 (3) of the CompaniesAct 2006.

Auditor’s remuneration information is provided in note 5 of the Group accounts.

First time adoption of FRS 102

These financial statements are the first financial statements of r4e plc (“r4e) prepared in accordance withFinancial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’(FRS 102). The financial statements of r4e for the year ended 31 December 2014 were prepared in accordance withprevious UK GAAP.

Some of the FRS 102 recognition, measurement, presentation and disclosure requirements and accounting policychoices differ from previous UK GAAP. Consequently, the directors have amended certain accounting policies tocomply with FRS 102. The directors have also taken advantage of certain exemptions from the requirements ofFRS 102 permitted by FRS 102 Chapter 35 ‘Transition to this FRS’.

Comparative figures have been restated to reflect the adjustments made, except to the extent that the directors havetaken advantage of exemptions to retrospective application of FRS 102 permitted by FRS 102 Chapter 35 ‘Transitionto this FRS’. Adjustments are recognised directly in retained earnings at the transition date.

REDUCED DISCLOSURES

In accordance with FRS 102, the Company has taken advantage of the exemptions from the following disclosurerequirements;

• Section 4 ‘Statement of Financial Position’ – Reconciliation of the opening and closing number of shares• Section 7 ‘Statement of Cash Flows’ – Presentation of a Statement of Cash Flow and related notes and

disclosures• Section 11 ‘Basic Financial Instruments’ & Section 12 ‘Other Financial Instrument Issues’ – Carrying

amounts, interest income/expense and net gains/losses for each category of financial instrument; basis ofdetermining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair valuechanges recognised in profit or loss and in other comprehensive income

• Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel

The financial statements of the Company are consolidated in the financial statements of r4e. The consolidatedfinancial statements of r4e are available from its registered office, Wellington House, 125 Strand, London,WC2R 0AP.

GOING CONCERN

Full details of the going concern assumption are provided in the accounting policies of the Groups’ accountson page 31.

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reach4entertainment enterprises plcCOMPANY ACCOUNTING POLICIES

TANGIBLE FIXED ASSETS

Fixed assets are stated at historical cost less accumulated depreciation.

Depreciation is provided on all tangible fixed assets other than freehold land at rates calculated to write each assetdown to its estimated residual value over its expected useful life, as follows:

Plant and machinery 25% straight lineFixtures and fittings 20% straight line

INVESTMENTS

Long-term investments are classified as fixed assets and stated at cost less provision for any impairment in value.

EMPLOYEE BENEFITS

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs arerequired to be recognised as part of the cost of stock or are capitalised as an intangible fixed asset or a tangiblefixed asset.

PENSIONS

The Company operates defined contribution schemes and makes contributions to the personal schemes of certainemployees. Pension costs charged against profits represent the amounts payable to the schemes in respect of theyear. Differences between contributions payable in the year and contributions actually paid are shown as eitheraccruals or prepayments.

FOREIGN CURRENCIES

Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling atthe balance sheet date. Transactions in foreign currencies are recorded at the rates ruling at the date of thetransactions. All differences are taken to the profit and loss account.

DEFERRED FINANCING COSTS

Bank arrangement fees and associated legal costs are amortised over the term of the debt facility.

EMPLOYEE BENEFIT TRUST

The assets and liabilities of the Employee Benefit Trust (EBT) have been included in the Company’s accounts. Anyassets held by the EBT cease to be recognised on the Company balance sheet when the assets vest unconditionallyto identified beneficiaries. The costs of purchasing own shares held by the EBT are shown as a deduction againstequity. The proceeds from the sale of own shares held increase equity. Neither the purchase nor sale of own sharesleads to a gain or loss being recognised in the Company income statement.

FINANCIAL INSTRUMENTS

Financial assets and financial liabilities are recognised on the Company’s balance sheet when the Company becomesa party to the contractual provisions of the instrument. See page 34 of the group accounts for full details of theaccounting policy which is the same for the individual parent entity.

TAX

Taxation is based on the loss for the year and takes into account taxation deferred because of timing differencesbetween the treatment of certain items for taxation and accounting purposes.

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reach4entertainment enterprises plcCOMPANY ACCOUNTING POLICIES (continued)

TAX (continued)

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or theliability is settled based on tax rates that have been enacted or substantively enacted by the reporting date. Deferredtax is not discounted. Deferred tax assets are recognised only to the extent that it is probable that they will berecovered by the reversal of deferred tax liabilities or other future taxable profits.

Deferred tax is recognised on income or expenses from subsidiaries that will be assessed to or allow for tax in afuture period except where the Company is able to control the reversal of the timing difference and it is probablethat the timing difference will not reverse in the foreseeable future.

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reach4entertainment enterprises plcCOMPANY ACCOUNTING POLICIES (continued)

1 TANGIBLE FIXED ASSETS

Plant and Fixtures andmachinery fittings Total

COMPANY £’000 £’000 £’000Cost31 December 2014 55 36 91Additions 1 – 1

–––––––––– –––––––––– ––––––––––31 December 2015 56 36 92

–––––––––– –––––––––– ––––––––––Depreciation31 December 2014 40 33 73Charge for the year 6 1 7

–––––––––– –––––––––– ––––––––––31 December 2015 46 34 80

–––––––––– –––––––––– ––––––––––Net book value31 December 2015 10 2 12

–––––––––– –––––––––– –––––––––––––––––––– –––––––––– ––––––––––31 December 2014 15 3 18

–––––––––– –––––––––– –––––––––––––––––––– –––––––––– ––––––––––

2 FIXED ASSET INVESTMENTS

Subsidiaryundertakings

£’000CostAt 31 December 2015 and 31 December 2014 24,819

––––––––––Provision for impairment in value31 December 2014 (9,650)Impairment (965)

––––––––––31 December 2015 (10,615)

Net book value31 December 2015 14,204

––––––––––––––––––––31 December 2014 15,169

––––––––––––––––––––

An impairment charge of £0.97 million was incurred in the year on the Dewynters Group (inclusive ofDewynters, Newmans and DAI) (2014: £8.75 million). The impairment is due to the merchandise divisionof Dewynters being transferred during the year and as a result the royalties from merchandise sales in theUSA will no longer be collected by DAI. This means DAI is no longer trading and remains dormant withthe exception of minor costs of corporation and tax accounts in the USA.

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reach4entertainment enterprises plcNOTES TO THE COMPANY FINANCIAL STATEMENTSFor the year ended 31 December 2015

2 FIXED ASSET INVESTMENTS (continued)

As at 31 December 2015 the Group holds more than 20% of the equity and voting rights of the followingcompanies:

ProportionCountry of of shares

Name of subsidiary incorporation held Class of shares Nature of business

USA 100% Ordinary Marketing and promotion

reach4entertainment Inc. USA 100% Ordinary Holding company

r4e Limited1 Great Britain 100% Ordinary Dormant

reach4entertainment Limited1 Great Britain 100% Ordinary Dormant

Dewynters Limited Great Britain 100% Ordinary Marketing and promotion

Newman Displays Ltd* Great Britain 100% Ordinary Signage and fascia displays

Dewynters Advertising Inc.* USA 100% Ordinary Merchandising

reach4creative Limited1 Great Britain 100% Ordinary Dormant

reach4digital Limited1 Great Britain 100% Ordinary Dormant

reach4events Limited1 Great Britain 100% Ordinary Dormant

reach4sponsorship Limited1 Great Britain 100% Ordinary Dormant

reach4talent Limited1 Great Britain 100% Ordinary Dormant

Name of associateTheatrenow Limited** Great Britain 29.91% Ordinary Ticketing agent

As at 31 December 2015 the Group holds less than 20% of the equity and voting rights of the followingcompany:

Stage17 Inc. USA 17% Ordinary Digital platform

* subsidiaries wholly owned by Dewynters Limited

**associates held by Dewynters Limited

1 The Company has taken the exemption from audit under section 480 of the Companies Act 2006.

Dewynters Limited is wholly owned by r4e Limited, and Spot and Company of Manhattan Inc. is whollyowned by reach4entertainment Inc.

3 DEBTORS

2015 2014£’000 £’000

Due within one year:Owed by subsidiary undertakings 437 878Other debtors 44 10Prepayments 20 15Other tax 41Deferred tax asset 13 16

–––––––––– ––––––––––555 919

–––––––––– –––––––––––––––––––– ––––––––––Included in other debtors is £0.04 million due from David Stoller CEO. See Group accounts related partynote 22 for more detail.

Spot and Company ofManhattan Inc.

70

reach4entertainment enterprises plcNOTES TO THE COMPANY FINANCIAL STATEMENTS (continued)For the year ended 31 December 2015

4 CREDITORS: Amounts falling due within one year

2015 2014£’000 £’000

Bank loans – 630Trade creditors 120 24Amounts owed to subsidiary undertakings 14,927 7,078Other taxation and social security 5 4Other creditors – 3Accruals and deferred income 283 349Deferred consideration – 1,266

–––––––––– ––––––––––15,335 9,354

–––––––––– –––––––––––––––––––– ––––––––––

Interest is charged on amounts owed to SpotCo and Dewynters at rates of 0.25% (2014: 0.25%) and 3.56%(2014: 3.56%) per annum respectively.

The deferred consideration payments scheduled to the vendor for 2015 of $1 million USD (£0.66 million)were made in the year leaving a balance of $1 million USD at October 2015 which could be converted toequity. An agreement was signed with the vendor agreeing to waive the $1 million conversion. He retainshis role at Spotco. See borrowings note 14 of the group accounts for more details. The $1 million USDamount waived has been recognised as an exceptional income in the year.

5 CREDITORS: Amounts falling due after more than one year

2015 2014£’000 £’000

Bank loans – 14,155Rent holiday accrual 27 25

–––––––––– ––––––––––27 14,180

–––––––––– –––––––––––––––––––– ––––––––––

The bank loan held with AIB Group was repaid during the year, see borrowings note 14 of the group accountsfor details.

Accruals falling due after more than one year relate to rental payments built up during a period of ‘rentholiday’ as provided for in the lease for Dewynters London Offices (Dewynters recharges r4e for space theparent uses). The accrual will be released to the income statement over the term of the lease reducing rentcosts:

2015 2014£’000 £’000

Between two and five years 19 14Over five years 8 11

–––––––––– ––––––––––27 25

–––––––––– –––––––––––––––––––– ––––––––––

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6 SHARE CAPITAL AND RESERVES

2015 2014£’000 £’000

Allotted, issued and fully paid:474,894,792 ordinary shares of 0.5 pence each (2014: 74,894,792ordinary shares of 2.5 pence each) 2,374 1,872

–––––––––– –––––––––––––––––––– ––––––––––

Number ofNominal Value shares

Authorised, allotted, issued and fully paid: £’000 No.

Date Detail1 January 2015 Balance brought forward 1,872 74,894,7922 December 2015 Share split, transfer to deferred shares (1,498)3 December 2015 Shares issued 2,000 400,000,000

–––––––––– ––––––––––31 December 2015 Balance carried forward 2,374 474,894,792

–––––––––– –––––––––––––––––––– ––––––––––

On 2 December 2015 the Company underwent a capital reorganisation to split 74,894,792 shares into74,894,792 ordinary shares of £0.005 nominal value and 74,894,792 deferred shares of £0.02 nominal value.On 3 December 2015 400,000,000 shares were issued at £0.01 per share resulting in a share premium of£2 million and share issues costs of £0.172 million.

Capital redemption reserveThis reserve arose from the redemption of redeemable preference shares.

Share premiumThe share premium account is the additional amount over and above the nominal share capital that is receivedfor shares issued less any share issue costs.

Deferred sharesDeferred Shares are valueless and do not carry any rights to vote or any dividend rights. The Deferred Sharesare not quoted on AIM or any other stock market and will not be transferable unless with the prior writtenconsent of the Company.

Interest in own sharesThis reserve arose from the purchase of shares in the Company by the Employee Benefit Trust, fundedthrough loans from the Company.

Retained earningsRetained earnings records the cumulative profits and losses recognised in the Consolidated IncomeStatement, net of any distributions and share-based payments made.

Warrant reserveThe warrant reserve comprises the equity component of warrants issued by the Company. The Companyhas granted 24,994,462 Warrants to AIB Joint Ventures, a subsidiary of AIB. The Warrants are exercisablefor five years at an exercise price of 1 penny per Warrant, only when the closing mid-market price of a NewOrdinary Share reaches 5 pence or more on any Trading Day during that five year period, subject to theright to exercise earlier upon the occurrence of certain specified Acceleration Events (as defined in theWarrant Agreement). The warrants have been accounted for at fair value through the profit and loss account.See Group accounts note 18 for more detail.

72


7 PROFIT OF THE PARENT COMPANY

The Company’s profit after tax for the year ended 31 December 2015 amounted to £2.9 million (December2014: £9.64 million loss).

8 CONTINGENT LIABILITIES

On top of a fixed and floating charge over its assets, the company has given a cross guarantee in respect ofthe borrowings held by other r4e group subsidiaries with PNC.

9 FIRST TIME ADOPTION OF FRS 102

Reconciliations and descriptions of the effect of the transition to FRS 102 on; (i) equity at the date oftransition to FRS 102; (ii) equity at the end of the comparative period; and (iii) profit or loss for thecomparative period reported under previous UK GAAP are given below.

Reconciliations of Equity

1 January 31 December2013 2014

£’000 £’000

Equity as previously reported under previous UK GAAP 2,219 (7,420)Accrued holiday pay (2) (2)

–––––––––– ––––––––––Equity reported under FRS 102 2,217 (7,422)

–––––––––– –––––––––––––––––––– ––––––––––

Reconciliation of Profit or Loss

Year ended Year ended31 December 31 December

2013 2014

Loss as previously reported under previous UK GAAP (166) (9,639)Accrued holiday pay (2) (–)

–––––––––– ––––––––––Loss reported under FRS 102 (168) (9,639)

–––––––––– –––––––––––––––––––– ––––––––––

Accrued holiday pay

Under previous UK GAAP the Company did not account for unused employee holiday. FRS 102 S28requires any consideration given to employees as a result of their service to be recognised. The recognitionof any holiday owed at the year end as an accrual in the accounts, has increased staff costs thereby reducingprofit in the period and its comparatives and therefore caused a reduction in retained earnings in each ofthose years.

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