Aeorema Communications plc / Index: AIM / Epic: AEO / Sector: Media

22 October 2015

Aeorema Communications plc ('Aeorema' or 'the Company')

Final Results

 

Aeorema Communications plc, the AIM-traded live events agency, announces its results for the year ended 30 June 2015.

 

Overview

·    Profits before tax from continuing operations to £383,216 (2014: £504,841)

·    Revenues of £4,934,560 (2014: £4,764,584)

·    Cash at bank and in hand of £1,558,453 (2014: £1,620,895)

·    Recommend dividend payment of 3p (2014: 2p)

 

Chairman's Statement

 

During the year, Aeorema reinforced its position as a leading provider of live events under the single brand, Cheerful Twentyfirst, and navigated through a competitive market to return a profit in excess of the trading update on profits issued to the market in May 2015.  The year also saw us investing in a new website, developing a stronger single brand, creating a highly visible social media presence, and completing the refurbishment of our new offices to allow for future growth. 

 

Our ability to respond and adapt our offering in a competitive, rapidly evolving market has enabled us to attract new clients and further develop our relationships with existing clients.  We work with senior leaders of forward-thinking brands who value innovation and want to take live communication to the next level, which is where we excel.  Year-on-year, our talented team produces original, outstanding work for these clients, resulting in several nominations at prestigious award events.  These include nominations for work completed on behalf of two internationally renowned companies, further highlighting the excellent reputation that we have built in the space.

 

Our focus on delivering creative live events, incorporating superb screen content and award-winning video, naturally attracts leading people to our team.  During the year and as part of our growth strategy, we recruited several new team members to focus on new business development and strengthen our capabilities in design and content.  These appointments will each be pivotal in supporting our growth in the year ahead.

 

The results for the year show a profit before taxation from continuing operations of £383,216 (2014: £504,841) on revenue of £4,934,560 (2014: £4,764,584).  We remain cash positive with cash at bank and in hand of £1,558,453 (2014: £1,620,895).

 

The Board is proposing a dividend of 3 pence per share (2014: 2 pence per share) to be paid to shareholders on the register on 6 November 2015.  The ex-dividend date will be on 5 November 2015.  Subject to the proposed dividend being approved by the shareholders, it will be paid on 27 November 2015. 

 

Looking ahead, the market is extremely competitive and, as has been the custom over the last few years, we anticipate the second half of the year to contribute the greater part of both turnover and profitability. Investors should be assured that our brand is gaining recognition and we are carving out a niche position in the sector, which we believe will yield positive longer term results.

 

On behalf of the board, I would like to thank our team for their work during the past year as well as our shareholders for their continued support. 

 

M Hale

Chairman

 

22 October 2015

 

For further information visit www.aeorema.com or contact:

 

Gary Fitzpatrick                                   Aeorema Communications plc            Tel: 020 7291 0444

Marc Milmo/Catherine Leftley           Cantor Fitzgerald Europe                    Tel: 020 7894 7000

Charlotte Heap/Elisabeth Cowell       St Brides Partners                               Tel: 020 7236 1177

 

 

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2015

 

	Notes	2015	2014
		£	£
Continuing operations
Revenue	2	4,934,560	4,764,584
Cost of sales		(3,017,634)	(2,794,629)
Gross profit		1,916,926	1,969,955
Administrative expenses		(1,534,471)	(1,465,520)
Operating Profit	3	382,455	504,435
Finance income	4	761	406
Profit before taxation		383,216	504,841
Taxation	5	(67,979)	(89,145)
Profit and total comprehensive income for the year attributable to owners of the parent		315,237	415,696
Profit per ordinary share:
Total basic earnings per share	8	3.51904p	5.02290p
Total diluted earnings per share	8	3.37134p	4.55487p

 

There were no other comprehensive income items.
 

Statement of Financial Position

As at 30 June 2015

 

	Notes	Group		Company
		2015	2014	2015	2014
		£	£	£	£
Non-current assets
Intangible assets	9	365,154	365,154	-	-
Property, plant and equipment	10	65,135	67,449	-	-
Deferred taxation	6	6,404	24,145	-	-
Investments in subsidiaries	11	-	-	568,080	553,196
Total non-current assets		436,693	456,748	568,080	553,196
Current assets
Inventories		-	2,674	-	-
Trade and other receivables	12	1,352,398	1,475,921	328,135	357,873
Cash and cash equivalents	13	1,558,453	1,620,895	657,873	734,628
Total current assets		2,910,851	3,099,490	986,008	1,092,501
Total assets		3,347,544	3,556,238	1,554,088	1,645,697
Current liabilities
Trade and other payables	14	(1,463,504)	(1,589,007)	(86,105)	(89,730)
Net assets		1,884,040	1,967,231	1,467,983	1,555,967
Equity
Share capital	15	1,131,313	1,079,688	1,131,313	1,079,688
Share premium	16	7,063	-	7,063	-
Merger reserve	17	16,650	16,650	16,650	16,650
Other reserve	18	-	19,500	-	19,500
Share-based payment reserve		-	110,972	-	110,972
Capital redemption reserve		257,812	257,812	257,812	257,812
Retained earnings		471,202	482,609	55,145	71,345
Equity attributable to owners of the parent		1,884,040	1,967,231	1,467,983	1,555,967

 

 

Statement of Changes in Equity

For the year ended 30 June 2015

 

Group	Share capital	Share premium	Merger reserve	Other reserve	Share-based payment reserve	Capital redemption reserve	Retained earnings	Total equity
	£	£	£	£	£	£	£	£
At 1 July 2013	1,004,688	-	16,650	-	96,083	257,812	125,883	1,501,116
Profit and total comprehensive income for the year, net of tax	-	-	-	-	-	-	415,696	415,696
Tax credit relating to share option scheme	-	-	-	-	-	-	61,594	61,594
Dividends paid	-	-	-	-	-	-	(120,564)	(120,564)
Shares issued in the period/to be issued	75,000	-	-	19,500	-	-	-	94,500
Share-based payments	-	-	-	-	14,889	-	-	14,889
At 30 June 2014	1,079,688	-	16,650	19,500	110,972	257,812	482,609	1,967,231
At 1 July 2014	1,079,688	-	16,650	19,500	110,972	257,812	482,609	1,967,231
Profit and total comprehensive income for the year, net of tax	-	-	-	-	-	-	315,237	315,237
Dividends paid	-	-	-	-	-	-	(452,500)	(452,500)
Shares issued in the period	51,625	7,063	-	(19,500)	-	-	-	39,188
Share-based payments	-	-	-	-	14,884	-	-	14,884
Transfer	-	-	-	-	(125,856)	-	125,856	-
At 30 June 2015	1,131,313	7,063	16,650	-	-	257,812	471,202	1,884,040

 

 

Company	Share capital	Share premium	Merger reserve	Other reserve	Share- based payment reserve	Capital redemption reserve	Retained earnings	Total equity
	£	£	£	£	£	£	£	£
At 1 July 2013	1,004,688	-	16,650	-	96,083	257,812	132,235	1,507,468
Comprehensive income for the year, net of tax	-	-	-	-	-		59,674	59,674
Dividends paid	-	-	-	-	-		(120,564)	(120,564)
Shares issued in the period/to be issued	75,000	-	-	19,500	-		-	94,500
Share-based payments	-	-	-	-	14,889		-	14,889
At 30 June 2014	1,079,688	-	16,650	19,500	110,972	257,812	71,345	1,555,967
At 1 July 2014	1,079,688	-	16,650	19,500	110,972	257,812	71,345	1,555,967
Comprehensive income for the year, net of tax	-	-	-	-	-	-	310,444	310,444
Dividends paid	-	-	-	-	-	-	(452,500)	(452,500)
Shares issued in the period	51,625	7,063	-	(19,500)	-	-	-	39,188
Share-based payments	-	-	-	-	14,884	-	-	14,884
Transfer	-	-	-	-	(125,856)	-	125,856	-
At 30 June 2015	1,131,313	7,063	16,650	-	-	257,812	55,145	1,467,983

 

 

Statement of Cash Flows

For the year ended 30 June 2015

 

	Notes	Group		Company
		2015	2014	2015	2014
		£	£	£	£
Net cash flow from operating activities	24	383,894	109,225	(63,711)	(152,338)
Cash flows from investing activities
Finance income		761	406	268	250
Purchase of property, plant and equipment	10	(43,785)	(44,462)	-	-
Proceeds from sale of property, plant and equipment		10,000	-	-	-
Dividends received by the Company		-	-	400,000	130,000
Cash (used) / generated in investing activities		(33,024)	(44,056)	400,268	130,250
Cash flows from financing activities
Proceeds of share issue		39,188	94,500	39,188	94,500
Dividends paid to owners of the Company		(452,500)	(120,564)	(452,500)	(120,564)
Cash used in financing activities		(413,312)	(26,064)	(413,312)	(26,064)
Net (decrease)/increase in cash and cash equivalents		(62,442)	39,105	(76,755)	(48,152)
Cash and cash equivalents at beginning of year		1,620,895	1,581,790	734,628	782,780
Cash and cash equivalents at end of year	13	1,558,453	1,620,895	657,873	734,628

 

 

Notes to the consolidated financial statements

 

For the year ended 30 June 2015

 

1 Accounting policies

 

Aeorema Communications plc is a public limited company incorporated in the United Kingdom. The Company is domiciled in the United Kingdom and its principal place of business is Moray House, 23/31 Great Titchfield Street, London W1W 7PA. The Company's Ordinary Shares are traded on the AIM Market.

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

 

Going concern

 

The Group's business activities, together with the factors likely to affect its future development and performance are set out in the review of business contained in the Chairman's Statement. The Group's financial statements show details of its financial position including, in note 25, details of its financial instruments and exposure to risk.

 

After reviewing the Group's budget for the next financial year, other medium term plans and considering the risks outlined in note 25, the Directors, at the time of approving the financial statements, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and have therefore used the going concern basis in preparing the financial statements.

 

Basis of Preparation

 

The Group's financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

 

 

The following new standards, amendments to standards and interpretations, applied for the first time from 1 July 2014.

 

·   IFRS 2 (Amended) 'Share-Based Payments', effective 1 July 2014.

·   IFRS 3 (Amended) 'Business Combinations', effective 1 July 2014.

·   IFRS 8 (Amended) 'Operating Segments', effective 1 July 2014.

·   IFRS 11 (Amended) 'Accounting for Acquisitions of Interests in Joint Operations', effective 1 July 2016.

·   IAS 16 (Amended) 'Property, Plant and Equipment', effective 1 July 2014.

·   IAS 19 (Amended) 'Employee Benefits', effective 1 July 2014

·   IAS 24 (Amended) 'Related Party Disclosures', effective 1 July 2014.

·   IAS 38 (Amended) 'Intangible Assets', effective 1 July 2014.

·  IAS 32 (Amended) 'Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities', effective 1 January 2014.

·   IAS 36 (Amended) 'Recoverable Amounts Disclosures for Non-Financial Assets', effective 1 January 2014.

·  IAS 39 (Amended) 'Novation of Derivatives and Continuation of Hedge Accounting', effective 1 January 2014.

·   IAS 40 (Amended) 'Investment Property', effective 1 January 2014.

·   IFRIC Interpretation 21 'Levies', effective 1 January 2014.

 

The adoption of these revised and amended standards has not impacted on the Annual Report and Financial Statements.

 

Adopted IFRSs not yet applied

 

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 July 2014 and have not been adopted early by the Group:

 

·    IFRS 9 'Financial Instruments', effective 1 January 2018.

·    IFRS 14 'Regulatory Deferral Accounts', effective 1 July 2016.

·    IFRS 15 'Revenue for Contracts with Customers', effective 1 January 2018.

·    IFRS 10, IFRS 12 and IAS 28 (Amended): 'Investment Entities: Applying the Consolidation Exception', effective 1 January 2016.

·    IAS 1 (Amended), 'Disclosure Initiative', effective 1 January 2016.

·    Annual improvements to IFRS's 2012-2014 Cycle, effective 1 January 2016.

·    IFRS 10 and IAS 28 (Amended): 'Sale or Contribution of Assets between an Investor and its Associate or Joint Venture', effective 1 January 2016.

·    IAS 27 (Amended), 'Equity Method in Separate Financial Statements', effective 1 January 2016.

·    IAS 16 and IAS 41 (Amended), 'Bearer Plants', effective 1 January 2016.

·    IAS 16 and IAS 38 (Amended), 'Clarification of Acceptable Methods of Depreciation and Amortisation' effective 1 January 2016.

·    IFRS 11 (Amended), 'Accounting for Acquisitions of Interests in Joint Operations, effective 1 January 2016.

 

Management does not currently anticipate that the application of these standards, where applicable, will have an impact on the financial statements, except for the requirement of additional disclosures.

 

Basis of consolidation

 

The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 30 June 2015. Subsidiaries are all entities (including structured entities) over which the group has control. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

 

Intra-group transactions, balances and unrealised gains and losses on transactions between group companies are eliminated.

 

The merger reserve is used where more than 90% of the shares in a subsidiary are acquired and the consideration includes the issue of new shares by the Company, thereby attracting merger relief under the Companies Act 2006.

 

Revenue

 

Revenue represents amounts (excluding value added tax) derived from the provision of services to third party customers in the course of the Group's ordinary activities. Revenue is measured at the fair value of consideration received taking into account any trade discounts and volume rebates. Revenue for all business segments is recognised when the Group has earned the right to receive consideration for its services.

 

Intangible assets - goodwill

 

All business combinations are accounted for by applying the acquisition method. Goodwill acquired represents the excess of the fair value of the consideration and associated costs over the fair value of the identifiable net assets acquired.

 

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. At the date of acquisition, the goodwill is allocated to cash generating units, usually at business segment level or statutory company level as the case may be, for the purpose of impairment testing and is tested at least annually for impairment. On subsequent disposal or termination of a business acquired, the profit or loss on termination is calculated after charging the carrying value of any related goodwill.

Property, plant and equipment

Property, plant and equipment is stated in the financial statements at cost less accumulated depreciation and any impairment value. Depreciation is provided to write off the cost less estimated residual value of property, plant and equipment over its expected useful life (which is reviewed at least at each financial year end), as follows:

 

Leasehold land and buildings	straight line over the life of the lease (3 years)
Fixtures, fittings and equipment	25% straight line

 

Any gain or loss arising on the derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Statement of Comprehensive Income in the year that the asset is derecognised.

 

Fully depreciated assets still in use are retained in the financial statements.

 

Impairment

 

The carrying amounts of the Group's assets are reviewed at each period end to determine whether there is any indication of impairment. If any such indication exists, the assets' recoverable amount is estimated. For goodwill and intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each annual period end date and whenever there is an indication of impairment.

 

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the Statement of Comprehensive Income in those expense categories consistent with the function of the impaired asset.

 

Operating leases

 

Rentals under operating leases are charged to the Statement of Comprehensive Income on a straight line basis over the period of the lease.

 

Investments

 

Fixed asset investments are stated at cost less provision for diminution in value.

 

Inventories

 

Inventories are stated at the lower of cost and net realisable value.

 

Trade and other receivables

 

Trade and other receivables are stated initially at fair value and subsequently measured at amortised cost less any provision for impairment.

 

Trade and other payables

 

Trade payables are recognised initially at fair value and subsequently measured at amortised cost.

 

Cash and cash equivalents

 

Cash comprises, for the purpose of the Statement of Cash Flows, of cash in hand and deposits payable on demand. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. Cash equivalents normally have a date of maturity of 3 months or less from the acquisition date.

 

Finance income

 

Financial income consists of interest receivable on funds invested. It is recognised in the Statement of Comprehensive Income as it accrues.

 

Taxation

 

Income tax on the profit or loss for the periods presented comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year, using rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

 

Deferred tax is provided on temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; the differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period.

 

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. Deferred tax assets and liabilities are not discounted.

 

Pension costs

 

The Group does not operate a pension scheme for its employees. It does however, make contributions to the private pension arrangements of certain employees. These arrangements are of the money purchase type and the amount charged to the Statement of Comprehensive Income represents the contributions payable by the Group for the period.

 

Financial instruments

 

The Group does not enter into derivative transactions and does not trade in financial instruments. Financial assets and liabilities are recognised on the Statement of Financial Position when the Group becomes a party to the contractual provision of the instrument.

 

Equity

 

An equity instrument is a contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. The Group's equity instruments comprise 'share capital' in the Statement of Financial Position.

 

Foreign currency translation

 

Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the end of the reporting period. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to the Statement of Comprehensive Income.

 

Share-based awards

 

The Group issues equity settled payments to certain employees. Equity settled share based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant.

The fair value is estimated using option pricing models and is dependent on factors such as the exercise price, expected volatility, option price and risk free interest rate. The fair value is then amortised through the Statement of Comprehensive Income on a straight-line basis over the vesting period. Expected volatility is determined based on the historical share price volatility for the Company. Further information is given in note 22 to the financial statements.

 

Significant judgements and estimates

 

The preparation of the Group's financial statements in conforming with IFRS required management to make judgements, estimates and assumptions that effect the application of policies and reported amounts in the financial statements. These judgements and estimates are based on management's best knowledge of the relevant facts and circumstances. Information about such judgements and estimation is contained in the accounting policies and / or notes to the financial statements and the key areas are summarised below:

 

a)   Depreciation rates are based on the estimated useful lives and residual value of the assets involved.

b)   The impairment review of goodwill is based on the estimation of future cash flows and discount rates in order to calculate the present value of the cash flows.

c)   The Group operates share incentive schemes as detailed in note 22. In order to calculate the annual charge in accordance with IFRS 2, management are required to make a number of assumptions and include, amongst others, volatility and expected life of options.

d)   An allowance for uncollectable trade receivables is estimated based on a combination of aging analysis and any specific, known troubled customer accounts.

e)   An allowance for dilapidations is estimated based on a total value of works to restore the property to its original condition at the end of the lease.

 

2 Revenue and segment information

 

The Company uses several factors in identifying and analysing reportable segments, including the basis of organisation, such as differences in products and geographical areas. The Board of Directors, being the Chief Operating Decision Makers, have determined that for the period ending 30 June 2015 there is only a single reportable segment.

 

All revenue represents sales to external customers. Three customers (2014: three) are defined as major customers by revenue, contributing more than 10% of the Group revenue.

 

	2015	2014
	£	£
Customer one	1,320,762	1,214,324
Customer two	632,892	571,188
Customer three	581,546	809,290
Major customers	2,535,200	2,594,802

 

The geographical analysis of revenue from continuing operations by geographical location of customer is as follows:

 

Geographical market	2015	2014	2015	2014	2015	2014	2015	2014
	UK	UK	Europe	Europe	Rest of the World	Rest of the World	Total	Total
	£	£	£	£	£	£	£	£
Revenue	4,479,022	4,493,297	391,519	262,306	64,019	8,981	4,934,560	4,764,584

All non-current assets are based in the UK.

 

3 Operating profit

 

Operating profit is stated after charging:	2015	2014
	£	£
Depreciation of property, plant and equipment	30,708	48,185
Loss on disposal of property, plant and equipment	5,389	-
Fees payable to the Company's auditor in respect of:
Audit of the Company's annual accounts	8,500	6,000
Audit of the Company's subsidiaries	14,000	11,500
Staff costs (see note 21)	1,063,817	1,029,306
Operating leases - land and buildings	80,813	77,596

 

4 Finance income and expenses

 

Finance income	2015	2014
	£	£
Bank interest received	761	406

5 Taxation

 

	2015	2014
	£	£
The tax charge comprises:
Current tax
Prior period adjustment	(923)	234
Current year	51,161	104,779
	50,238	105,013
Deferred tax (see note 6)
Current year	17,741	(15,868)
	17,741	(15,868)
Total tax charge in the statement of comprehensive income	67,979	89,145
Factors affecting the tax charge for the year
Profit on ordinary activities before taxation from continuing operations	383,216	504,841
Profit on ordinary activities before taxation multiplied by standard rate
of UK corporation tax of 20.75% (2014: 23%)	79,517	116,113
Effects of:
Non-deductible expenses	1,204	(1,114)
Depreciation, impairment losses and disposals	7,490	11,863
Capital allowances	(7,938)	(11,617)
Share-based payment	-	3,424
Share options exercised	(28,645)	(12,167)
Marginal relief	(467)	(1,723)
Prior period adjustment	(923)	234
	(29,279)	(11,100)
Current tax charge	50,238	105,013

 

The Group has estimated losses of £375,762 (2014: £375,762) available to carry forward against future trading profits. These losses are in Aeorema Communications plc which is not currently making taxable profits as all trading is undertaken by its subsidiary Aeorema Limited.

 

6 Deferred taxation

	2015	2014
	£	£
Property, plant and equipment temporary differences	(8,296)	(5,174)
Temporary differences	14,700	29,319
	6,404	24,145
At 1 July	24,145	8,277
Transfer to Statement of Comprehensive Income	(17,741)	15,868
At 30 June	6,404	24,145

 

The deferred tax asset is expected to be utilised given the return to profitability and future trading prospects.

 

7 Profit attributable to members of the parent company

 

As permitted by section 408 of the Companies Act 2006, the parent Company's Statement of Comprehensive Income has not been included in these financial statements. The retained profit for the financial year of the holding company was £310,444 (2014: £59,674).

 

8 Earnings per ordinary share

 

Basic earnings per share are calculated by dividing the profit or loss attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the year.

 

Diluted earnings per share are calculated by dividing the profit or loss attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would have been issued on the conversion of all dilutive potential ordinary shares into ordinary shares.

 

The following reflects the income and share data used and dilutive earnings per share computations:

 

	2015	2014
	£	£
Basic earnings per share
Profit for the year attributable to owners of the Company	315,237	415,696
Basic weighted average number of shares	8,958,044	8,276,021
Dilutive potential ordinary shares: Employee share options	392,456	850,380
Diluted weighted average number of shares	9,350,500	9,126,401

 

9 Intangible fixed assets

 

Group	Goodwill
	£
Cost
At 1 July 2013	2,728,292
At 30 June 2014	2,728,292
At 30 June 2015	2,728,292
Impairment and amortisation
At 1 July 2013	2,363,138
At 30 June 2014	2,363,138
At 30 June 2015	2,363,138
Net book value
At 1 July 2013	365,154
At 30 June 2014	365,154
At 30 June 2015	365,154

 

Goodwill arose for the Group on consolidation of its subsidiary company, Aeorema Limited.

 

Impairment - Aeorema Limited

 

Goodwill has been tested for impairment based on its future value in use. Future value has been calculated on a discounted cash flow basis using the 2015 budgeted figures as approved by the Board of Directors extended for a period to 5 years and discounted at a rate of 10%. It has been assumed that future growth will be at 1.5%. Using these assumptions, which are based upon past experience, there was no impairment in the year.

Management has assessed the sensitivity of the recoverable amounts in the key assumptions to be as follows: a five percentage increase in the discount rate would reduce the recoverable amount by £292,306 and a one percentage fall in future growth would reduce the recoverable amount by £352,473. However, in both cases there would still be no indication of impairment of goodwill.      

 

10 Property, plant and equipment

 

Group	Leasehold land	Fixtures, fittings	Total
	and buildings	and equipment
	£	£	£
Cost
At 1 July 2013	24,034	815,199	839,233
Additions	-	44,462	44,462
At 30 June 2014	24,034	859,661	883,695
Additions	17,761	26,024	43,785
Disposals	(24,034)	(583,741)	(607,775)
At 30 June 2015	17,761	301,944	319,705
Depreciation
At 1 July 2013	5,201	762,860	768,061
Charge for the year	16,104	32,081	48,185
At 30 June 2014	21,305	794,941	816,246
Charge for the year	4,108	26,600	30,708
Eliminated on disposal	(24,034)	(568,350)	(592,384)
At 30 June 2015	1,379	253,191	254,570
Net book value
At 1 July 2013	18,833	52,339	71,172
At 30 June 2014	2,729	64,720	67,449
At 30 June 2015	16,382	48,753	65,135

 

11 Non-current assets - Investments

 

Company	Shares in subsidiary
	£
Cost
At 1 July 2013	3,232,520
Increase in respect of share based payments	14,889
At 30 June 2014	3,247,409
Increase in respect of share based payments	14,884
At 30 June 2015	3,262,293
Provision
At 1 July 2013	2,694,213
At 30 June 2014	2,694,213
At 30 June 2015	2,694,213
Net book value
At 1 July 2013	538,307
At 30 June 2014	553,196
At 30 June 2015	568,080

 

Holdings of more than 20%

 

The Company holds more than 20% of the share capital of the following companies:

 

Subsidiary undertakings	Country of	Shares held
	registration
	or incorporation	Class	%
Aeorema Limited	England and Wales	Ordinary	100
Twentyfirst Limited	England and Wales	Ordinary	100

 

The principal activity of these undertakings for the last relevant financial year was as follows:

 

Company	Principal activity
Aeorema Limited	Provision of business communication services
Twentyfirst Limited	Dormant

 

12 Trade and other receivables

 

	Group		Company
	2015	2014	2015	2014
	£	£	£	£
Trade receivables	1,055,898	1,401,432	-	-
Related party receivables	-	-	323,447	353,337
Other receivables	19,230	19,084	-	-
Prepayments and accrued income	277,270	55,405	4,688	4,536
	1,352,398	1,475,921	328,135	357,873

All trade and other receivables are expected to be recovered within 12 months of the end of the reporting period. The fair value of trade and other receivables is the same as the carrying values shown above.

 

At the year end, trade receivables of £284,944 (2014: £344,096) were past due but not impaired. These relate to a number of customers for whom there is no significant change in credit quality and the amounts are still considered recoverable. The ageing of these trade receivables is as follows:

 

	Group
	2015	2014
	£	£
Less than 90 days	284,944	317,802
More than 90 days	-	26,294
	284,944	344,096

 

13 Cash and cash equivalents

 

	Group		Company
	2015	2014	2015	2014
	£	£	£	£
Bank balances	1,558,453	1,620,895	657,873	734,628
Cash and cash equivalents	1,558,453	1,620,895	657,873	734,628
Cash and cash equivalents in the statement of cash flows	1,558,453	1,620,895	657,873	734,628

 

14 Trade and other payables

 

	Group		Company
	2015	2014	2015	2014
	£	£	£	£
Trade payables	685,375	902,860	2,878	1,656
Related party payables	-	-	67,355	67,355
Taxes and social security costs	187,778	301,004	-	1,369
Other payables	33,543	43,842	-	-
Accruals and deferred income	556,808	341,301	15,872	19,350
	1,463,504	1,589,007	86,105	89,730

 

All trade and other payables are expected to be settled within 12 months of the end of the reporting period. The fair value of trade and other payables is the same as the carrying values shown above.

 

15 Share capital

 

	2015	2014
	£	£
Authorised
28,000,000 Ordinary shares of 12.5p each	3,500,000	3,500,000
Allotted, called up and fully paid	Number	Ordinary shares
		£
At 1 July 2013	8,037,500	1,004,688
Issue of shares	600,000	75,000
At 30 June 2014	8,637,500	1,079,688
Issue of shares	413,000	51,625
At 30 June 2015	9,050,500	1,131,313

 

See note 22 for details of share options outstanding.

 

16 Share Premium

 

	Share Premium
	£
At 1 July 2013	-
At 30 June 2014	-
Issue of shares	7,063
At 30 June 2015	7,063

 

Share premium represents the value of shares issued in excess of their list price.

 

17 Merger reserve

 

	Merger reserve
	£
At 1 July 2013	16,650
At 30 June 2014	16,650
At 30 June 2015	16,650

 

In accordance with section 612 of the Companies Act 2006, the premium on ordinary shares issued in relation to acquisitions is recorded as a merger reserve. The reserve is not distributable.

 

18 Other reserve

 

	Subscriptions received reserve
	£
At 1 July 2013	-
Exercise of options	19,500
At 30 June 2014	19,500
Allotment of shares	(19,500)
At 30 June 2015	-

 

On 16 June 2014 104,000 share options were exercised and fully paid for at 18.75p each. The shares were allotted on 2 July 2014. For the earnings per share note these shares are treated as issued on the exercise date. The reserve was fully transferred out by 30 June 2015. The reserve is not distributable.

 

19 Financial commitments

 

Total future minimum lease payments under non-cancellable operating lease rentals are payable as follows:

 

Group	Land and Buildings
	2015	2014
	£	£
Not later than one year	91,000	10,417
Later than one year and not later than five years	106,167	-

 

20 Directors' emoluments

 

The remuneration of Directors of the Company is set out below.

 

	Salary, bonus or fees	Salary, bonus or fees	Pensions	Pensions	Total	Total
	2015	2014	2015	2014	2015	2014
	£	£	£	£	£	£
P Litten	78,333	65,000	45,993	59,834	124,326	124,834
G Fitzpatrick	46,667	52,885	45,993	59,834	92,660	112,719
M Hale	-	-	-	-	-	-
S Garbutta	7,500	3,000	-	-	7,500	3,000
R Owen	7,500	7,500	-	-	7,500	7,500
S Quah	132,000	133,000	-	-	132,000	133,000
	272,000	261,385	91,986	119,668	363,986	381,053

 

 

 

 

 

 

 

 

The share options held by directors who served during the year are summarised below:

 

Name	Grant date	Number awarded	Exercise price	Earliest exercise date	Expiry date
S Quah	25 April 2013	300,000	16.50p	25 April 2016	24 April 2023

 

On 21 October 2014, S Quah exercised 300,000 share options with an exercise price of 12.5p each. The gain on these shares amounted to £132,000. The net value of shares received under the long term incentive scheme was £169,500.

 

Fees for S Garbutta are charged by Harris & Trotter LLP, a firm in which he is a member. See note 23.

Some directors were awarded a bonus in the year. S Quah was awarded a bonus of £30,000 (2014: £38,000) and P Litten was awarded a bonus of £20,000 (2014: £15,000).

 

21 Employee information

 

The average monthly number of employees (including directors) employed by the Group during the year was:

 

Number of employees	2015	2014
	Number	Number
Administration and production	19	19

 

The aggregate payroll costs of these employees charged in the Statement of Comprehensive Income was as follows:

 

Employment costs	2015	2014
	£	£
Wages and salaries	874,703	821,680
Social security costs	81,972	72,897
Pension costs	92,258	119,840
Share-based payments	14,884	14,889
	1,063,817	1,029,306

 

22 Share-based payments

 

The Group operates an EMI Share option scheme for key employees. Options are granted to key employees at an exercise price equal to the market price of the Company's shares at the date of grant. Options are exercisable from the third anniversary of the date of grant and lapse if they remain unexercised at the tenth anniversary or upon cessation of employment. The following option arrangements exist over the Company's shares:

 

Date of grant	Exercise price	Exercise period		Number of options 2015	Number of options 2014
		From	To
28 October 2004	18.75p	28 October 2007	27 October 2014	-	9,000
20 July 2010	12.5p	20 July 2013	19 July 2020	-	300,000
25 April 2013	16.5p	25 April 2016	24 April 2023	300,000	300,000
				300,000	609,000

 

Details of the number of share options and the weighted average exercise price outstanding during the year are as follows:

 

	Number of options	Weighted average exercise price	Number of options	Weighted average exercise price
	2015	2015	2014	2014
		£		£
Outstanding at beginning of the year	609,000	0.15	1,613,000	0.11
Lapsed during the year	-	-	(300,000)	(0.13)
Exercised during the year	(309,000)	0.13	(704,000)	(0.13)
Outstanding at end of the year	300,000	0.17	609,000	0.15
Exercisable at the end of the year	-	-	309,000	0.13

 

The exercise price of options outstanding at the year-end was £0.165 (2014: ranged between £0.125 and £0.1875) and their weighted average contractual life was 7.8 years (2014: 7.7 years).

 

Equity-settled share-based payments are measured at fair value at the date of grant. The fair value as determined at the grant date of equity-settled share-based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. The estimated fair value of the options is measured using an option pricing model. The inputs into the model are as follows:

 

Grant date	28 October 2004	20 July 2010	25 April 2013
Model used	Binomial	Black-Scholes	Black-Scholes
Share price at grant date	16.25p	8.75p	16.5p
Exercise price	18.75p	8.75p	16.5p
Contractual life	10 years	10 years	10 years
Risk free rate	6%	0.5%	0.5%
Expected volatility	43%	100%	104%
Expected dividend rate	0%	0%	0%
Fair value option	5.9868p	7.779p	14.889p

 

The expected volatility is determined by calculating the historical volatility of the company's share price over the last three years. The risk free rate is the office Bank of England base rate.

 

The Group recognised the following charges in the Statement of Comprehensive Income in respect of its share-based payment plans:

 

	2015	2014
	£	£
Share-based payment charge	14,884	14,889

 

23 Related party transactions

 

The Group has a related party relationship with its subsidiaries and its directors. Details of transactions between the Company and its subsidiaries are as follows:

 

	2015	2014
	£	£
Amounts owed by subsidiaries
Total amount owed by subsidiaries	323,447	353,337
Amounts owed to subsidiaries
Total amount owed to subsidiaries	67,355	67,355

 

The compensation of key management (including directors) of the Group is as follows:

 

	2015	2014
	£	£
Short-term employee benefits	302,076	297,687
Post-employment benefits	91,986	119,668
Share based payment expense	14,884	14,889
	408,946	432,244

 

Harris and Trotter LLP is a firm in which S Garbutta is a member. The amounts charged to the Group for professional services is as follows:

 

Harris and Trotter LLP - charged during the year	2015	2014
	£	£
Aeorema Communications plc	15,250	15,000
Aeorema Limited	29,390	22,325
	44,640	37,325

 

24 Cash flows

 

	Group		Company
	2015	2014	2015	2014
	£	£	£	£
Cash flows from operating activities
Profit  after taxation	315,237	415,696	310,444	59,674
Tax expense recognised in Consolidated Statement of Comprehensive Income	67,979	89,145	-	-
Depreciation	30,708	48,185	-	-
Loss on disposal of property, plant and equipment	5,389	-	-	-
Share-based payment	14,884	14,889	-	-
Dividends received by the Company	-	-	(400,000)	(130,000)
Finance income	(761)	(406)	(268)	(250)
	433,436	567,509	(89,824)	(70,576)
Increase / (decrease) in trade and other payables	(132,788)	454,498	(3,624)	(192,351)
(Increase) / decrease in trade and other receivables	123,523	(869,364)	29,737	110,589
(Increase) / decrease in inventories	2,674	-	-	-
Taxation paid	(42,951)	(43,418)	-	-
Cash generated / (used) from operating activities	383,894	109,225	(63,711)	(152,338)

 

25 Financial instruments

 

The Group is exposed to risks that arise from its use of financial instruments. There have been no significant changes in the Group's exposure to financial instrument risk, its objectives, policies and processes for managing those from previous periods. The principal financial instruments used by the Group, from which financial instrument risk arises, are trade receivables, cash and cash equivalents and trade and other payables.

 

Credit risk

 

Credit risk arises principally from the Group's trade receivables. It is the risk that the counterparty fails to discharge its obligation in respect of the instrument. The maximum exposure to credit risk at 30 June 2015 was £1,055,898 (2014: £1,401,432). Trade receivables are managed by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding for both time and credit limits. At the year end, the credit quality of trade receivables is considered to be satisfactory.

 

Liquidity risk

 

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group's policy is to meet its liabilities when they fall due. The Group monitors cash flow on a regular basis. At the year end, the Group has sufficient liquid resources to meets its obligations of £1,463,504 (2014: £1,589,007).

 

Market risk

 

Market risk arises from the Group's use of interest bearing financial instruments. It is the risk that the fair value of future cash flows of a financial instrument will fluctuate. At the year end, the cash and cash equivalents of the Group was £1,558,453 (2013: £1,620,895). The Group ensures that its cash deposits earn interest at a reasonable rate.

 

Capital risk

 

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern while maximising the return to stakeholders. The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in the Group Statement of Changes in Equity. At the year end, total equity was £1,884,040 (2014: £1,967,231).

 

Fair value of financial assets

 

The Group's book value of the financial assets equates to their fair values.

 

26 Pension costs defined contribution

 

The Group makes pre-defined contributions to employees' personal pension plans. Contributions payable by the Group for the year were £92,258 (2014: £119,840). At the end of the reporting period £30,000 (2014: £24,998) of contributions were due in respect of the period. The amounts were paid subsequent to the end of the reporting period.

 

27 Dividends

 

On the 21 November 2014 a final dividend of 2 pence per share and a special dividend of 3 pence per share (total dividend £452,500) was paid to holders of fully paid ordinary shares.

 

In respect of the current year, the directors propose that a final dividend of 3 pence per share be paid to shareholders on 27 November 2015. The dividends are subject to approval by shareholders at the Annual General Meeting and have not been included as liabilities in these consolidated financial statements. The proposed dividends are payable to all shareholders on the Register of Members on 6 November 2015. The total estimated dividend to be paid is £271,515. The payment of this dividend will not have any tax consequences for the Group.

 

28 Control

 

There is no overall controlling party.

 

29 Notice of AGM

 

The Annual General Meeting of Aeorema Communications plc will be held at Moray House, 23-31 Great Titchfield Street, London W1W 7PA on 23rd November 2015 at 10.30am.  A formal notice of AGM along with the Annual Report and Accounts for the year ended 30 June 2015 will be sent to shareholders and will be available on the Company's website www.aeorema.com in due course.