American Eagle Outfitters Annual Report 2014

Plain-text annual report

CONSOLIDATED DIRECTORS’ REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2014 In ancient Greek drama, an apparently insoluble crisis was often solved by the intervention of the gods who magically descended onto the stage from the skies above. The elaborate crane mechanisms that enabled this impressive effect were known as aeorema. Aeorema Communications Plc, Moray House, 23-31 Great Titchfield Street, London, W1W 7PA Aeorema_Cover_04.indd 1 20/10/2014 14:16 Contents Overview Chairman’s statement Strategic report Directors’ report Independent auditors’ report Consolidated statement of comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the consolidated financial statements Notice of Annual General Meeting Company information 2 3 4-5 6-8 9-10 11 12 13 14 15 – 39 40 – 41 42 1 Aeorema Communications plc Aeorema Communications plc, the AIM-traded live events agency, announces its results for the year ended 30 June 2014. Overview (cid:129) Positive progress made towards building the Group as a leading provider of live events (cid:129) Increased proﬁts before tax from continuing operations to £504,841 (2013: £358,864) (cid:129) Increased revenues to £4,764,584 (2013: 3,992,751) (cid:129) Cash at bank and in hand of £1,620,895 (2013: £1,581,790) (cid:129) Recommend dividend payment of 2p - plus special 3p dividend to return cash to shareholders (2013: dividend payment: 1.5p and special dividend: nil) (cid:129) Secured preferred supplier status positions with leading ﬁnancial clients (cid:129) A new single brand, Cheerful 21st, and an associated website is being developed to reﬂect future strategy to become the live event agency of choice 2 2 Chairman’s Statement Aeorema continues to build its position as a leading provider of live events by exploiting the strengths of its team and bringing new innovative ideas and products effectively to life. During the year under review, we signed a number of deals, increasing both market share and proﬁtability. We were particularly pleased to win a three year contract worth over £2 million with an existing technology client to run a live event at the annual Cannes Lions advertising festival. We ran the ﬁrst of these events this year, which was a great success. Furthermore, Aeorema extended and won new roster positions with key organisations in the ﬁnancial services industry. Notably, we also created several ‘bid’ ﬁlms for clients, which resulted in them winning major projects. I believe that organisations choose to work with Aeorema for various reasons. Firstly, we provide both new and existing customers with award-winning solutions using the latest technologies and interactive platforms; during the year we won several awards at the event industry’s two major ceremonies - Eventia and Livecom. Secondly, our clients choose us because they know we are committed to their success, have the reputation for encouraging them to push boundaries, provide seamless, progressive, solutions and help them to stand out in a crowded market now, and into the future. It is inspiring to see the way our team works together and strives for ways to improve our collective performance. Throughout the year, their commitment, talent and integrity have led to the delivery of remarkable results. Post period end, we strengthened this team with the appointment of Steve Garvey as our new CEO. Steve’s 25 years’ experience in corporate communications, which saw him work for a number of cutting edge businesses in the sector, will be invaluable as we take Aeorema into a new phase of growth. Our emphasis now is on enabling Aeorema to achieve its full potential by continuing to excite our clients with superb concepts and exceptional end results. Our ﬁve year plan is to become ‘the’ live events agency of choice, with a strong focus on innovation. To this end, we are launching a new single brand, Cheerful 21st, as well as a website, with a focus on live events. We intend to continue to grow our business organically, expanding both revenues and proﬁts. Importantly, we signed a new ﬁve-year lease on our ofﬁce in the West End, which is large enough to support this growth. The results for the year show a proﬁt before taxation from continuing operations of £504,841 (2013: £358,864) on revenue of £4,764,584 (2013: £3,992,751). We remain cash positive with cash at bank and in hand of £1,620,895 (2013: £1,581,790). The Board is proposing a dividend of 2 pence per share to be paid on 21 November 2014 to shareholders on the register on 24 October 2014. This has increased substantially from last year’s dividend of 1.5p and additionally, in light of our strong cash position at the year end, the Board is delighted to propose a special dividend of 3 pence per share to be paid on 21 November 2014 to shareholders on the register on 24 October 2014. The ex-dividend date for both the ﬁnal dividend and the special dividend will be 23 October 2014. On behalf of the board, I would like to thank our team for their hard work during the past year. Our thanks also go to our shareholders, whose continued support of Aeorema has helped us achieve record levels of performance in the year to June 2014. M Hale Chairman 14 October 2014 3 3 Strategic Report For the year ended 30 June 2014 The directors present their Strategic Report on the Group for the year ended 30 June 2014. Principal activities Aeorema is a live events agency with ﬁlm capabilities that specialises in devising and delivering corporate communication solutions. Business review The results for the year show a proﬁt before taxation from continuing operations of £504,841 (2013: £358,864). It is proposed that the retained proﬁt after taxation of £415,696 (2013: £263,501) is transferred to the Group's reserves. Revenue for the year from continuing operations was £4,764,584 (2013: £3,992,751). The gross proﬁt remained consistent at 41% (2013: 44%) and gross proﬁt from continuing operations was £1,969,955 (2013: £1,167,261). Key Financial Highlights Year Continuing operations Revenue 2014 £ 2013 £ 2012 £ 2011 £ 4,764,584 3,992,751 2,837,345 2,147,844 Proﬁt / (loss) before taxation, impairment losses and write off of development costs 504,841 358,864 41,399 (90,336) Further information can be found within the Chairman's Statement on page 3. Capital Expenditure Total capital expenditure, including expenditure on tangible assets, was £41,988 compared with £51,335 last year. Cashﬂows Net cash inﬂow from operating activities was £106,751 compared with a net cash inﬂow of £847,834 for the year ended 30 June 2013, due to an increase in trade receivables, as a result of signiﬁcant sales shortly before the year end. Total cashﬂow, representing operating cashﬂow after taxation, interest, capital expenditure and ﬁnancing activities, increased by £39,105 compared with an increase of £825,148 last year. Employees Our priority is to attract and retain talented employees and to harness their creativity to drive growth through development and delivery of services that bring value to our customers' business operations. We continue to focus on ensuring that the performance of staff is measured against clear, business focused objectives and behavioural criteria through continual appraisals. Reward The Group benchmarks employee salaries against the market and reviews salaries annually to ensure that we are paying at a level to attract and retain high-quality employees. Key employees are offered access to a share option scheme, further details of which are provided in note 22 to the ﬁnancial statements. 4 Strategic Report continued For the year ended 30 June 2014 Equal Opportunities We are committed to ensuring equal opportunities for our staff. We have introduced training which covers equal opportunities legislation and best practice. Our policy in respect of employment of disabled persons is the same as that relating to all other employees in matters of training, career development and promotion. Where employees become disabled during the course of their employment, we make every effort to make reasonable adjustments to their working environment to enable their continued employment. Safety, Health and Environment The commitment and participation of all employees is vital to efﬁcient and effective occupational risk control. In order to meet our responsibility to protect the environment, staff and the business, the Group continues to focus on maintaining a risk aware culture. We believe the Group maintains a low environmental impact. We therefore continue to work on the potential environmental impacts of energy consumption, waste and travel. Directors' Policies for Managing Principal Risks There is an ongoing process for identifying, evaluating and managing the signiﬁcant risks faced by the business. Risk reviews are undertaken regularly by the respective business areas throughout the year to identify and assess the key risks associated with the achievement of our business objective. Key risks of a ﬁnancial nature The principal risks and uncertainties facing the Group are with customer dependency. Though the Group has a very diverse customer base in certain market sectors, key customers can represent a signiﬁcant amount of revenue. Key customer relationships are closely monitored but the loss of a key client could have adverse effect on the Group’s performance. Further details of risks, uncertainties and ﬁnancial instruments are contained in note 26. Key risks of non ﬁnancial nature The Group is operating in a highly competitive global market that is undergoing continual change. The Group’s ability to respond to many competitive factors including, but not limited to technological innovations, product quality, customer service and employment of qualiﬁed personnel will be key in the achievement of its objectives, but its ultimate success will depend on the purchase spends of its customers and the buoyancy in the market. On behalf of the Board S Garbutta Director 14 October 2014 5 Directors’ Report For the year ended 30 June 2014 The directors present their annual report and ﬁnancial statements for the year ended 30 June 2014. The ﬁnancial statements are for Aeorema Communications plc (“the Company”) and its subsidiaries (together, “the Group”). In accordance with section 414C of the Companies Act 2006, the company has produced a Strategic Report which is set out on pages 4 to 5. Directors The following directors have held ofﬁce since 1 July 2013: P Litten R Owen S Garbutta M Hale G Fitzpatrick S Quah In accordance with regulation 122 of the Company's Articles of Association, one third of the directors retire by rotation, or if their number is not three, or a multiple of three, the nearest to but not exceeding one third, and, being eligible, offer themselves for re-election. Dividends The Board is proposing a dividend of 2 pence per share to be paid on 21 November 2014 to shareholders on the register on 24 October 2014. This has increased substantially from last year’s dividend of 1.5p and additionally, in light of our strong cash position at the year end, the Board is delighted to propose a special dividend of 3 pence per share to be paid on 21 November 2014 to shareholders on the register on 24 October 2014. The ex-dividend date for both the ﬁnal dividend and the special dividend will be 23 October 2014. Financial instruments Details of ﬁnancial instruments are given in note 26 to the accounts. Non-current assets The signiﬁcant changes in non-current assets during the year are explained in notes 10 and 11 to the ﬁnancial statements. As pioneers in visual technologies, the Group has utilised its resources to develop unique and highly innovative communications products. Shareholdings At 30 September 2014, the directors were aware that the following were the beneﬁcial owners of 3% or more of the Company's issued share capital: Number of shares Percentages held P Litten M Hale Reverse Take-Over Investments Plc B Smith 3,362,500 1,650,000 300,000 300,000 38.5 18.9 3.7 3.4 6 Directors’ Report continued For the year ended 30 June 2014 R Owen is a director and has an interest in Reverse Take-Over Investments plc through its parent company Westside Acquisitions plc. As civil partner of P Litten, G Fitzpatrick has a beneﬁcial interest in 3,362,500 ordinary shares. Corporate governance Although not required to do so, the Company seeks within the practical conﬁnes of being a small company to comply with a number of the principles of good governance and the UK Corporate Governance Code (“The Code") appended to the Listing Rules of the Financial Services Authority. The Board The aim of the Board is to function at the head of the Company's management structures, leading and controlling its activities and setting a strategy for enhancing shareholder value. The Board currently consists of three executive directors and three non-executive directors. The Company does not have a Nomination Committee as such; the Board collectively undertakes the functions of such a committee. Future developments On 1 July 2014 Mr S Garvey was appointed Director of Aeorema Limited and became Chief Executive Ofﬁcer. Internal control The Board has overall responsibility for ensuring that the Group maintains systems and internal ﬁnancial controls that provide them with reasonable assurance regarding the ﬁnancial information both for use within the business and for external publication and that the assets are safeguarded. Audit Committee There is an Audit Committee consisting of the Chairman, and a non-executive director. The terms of reference of the Audit Committee are to assist the Board in the discharge of its responsibilities for corporate governance, ﬁnancial reporting and internal control. Its duties include maintaining an appropriate relationship with the Company's auditors, keeping under review the scope and the results of the audit and its effectiveness. Remuneration Committee The Remuneration Committee consists of two non-executive directors, Stephen Garbutta and Michael Hale, and a meeting will be held no less than once a year. The Remuneration Committee is responsible for reviewing the performance of the executives of the Company and for setting the scale and structure of their remuneration, paying due regard to the interests of shareholders as a whole and the performance of the Company. Going concern After making appropriate enquiries, the directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Group's ﬁnancial statements. Statement of disclosure to auditor So far as the directors are aware, there is no relevant audit information of which the Company's auditors are unaware. Additionally, they have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all the relevant audit information and to establish that the Company's auditors are aware of that information. 7 Directors’ Report continued For the year ended 30 June 2014 Auditor On 31 October 2013 our auditors changed their name to Baker Tilly Audit Limited. Subsequently Baker Tilly Audit Limited ceased trading on 31 March 2014. The directors, having been notiﬁed of the cessation of trade of Baker Tilly Audit Limited, appointed Baker Tilly UK Audit LLP as auditor on 1 April 2014 to ﬁll the casual vacancy. In accordance with the Companies Act a resolution proposing the appointment of Baker Tilly UK Audit LLP will be put to the members. Directors' responsibilities 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 IFRS as adopted by the EU. The ﬁnancial statements are required by law and IFRS adopted by the EU to present fairly the ﬁnancial position of the group and the company and the ﬁnancial performance of the group and the company. 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 and the company for that period. In preparing the group and company ﬁnancial statements, the directors are required to:- – select suitable accounting policies and then apply them consistently; – make judgements and accounting estimates that are reasonable and prudent; – state whether they have been prepared in accordance with IFRSs adopted by the EU; – 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 Aeorema Communications plc website. Legislation in the United Kingdom governing the preparation and dissemination of ﬁnancial statements may differ from legislation in other jurisdictions. On behalf of the Board S Garbutta Director 14 October 2014 8 Independent Auditors’ Report To the Members of Aeorema Communications plc We have audited the Group and Parent Company ﬁnancial statements (“the ﬁnancial statements”) on pages 11 to 39. The ﬁnancial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company ﬁnancial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the company’s members as 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 set out on page 8, the directors are responsible for the preparation of the ﬁnancial statements and for being satisﬁed that they give a true and fair view. Our responsibility is to audit and express an opinion on the ﬁnancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices 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’s website 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 the Parent’s affairs as at 30 June 2014 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 the European Union – the Parent’s ﬁnancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the Companies Act 2006; and – the ﬁnancial statements have been prepared in accordance with the requirements of the Companies Act 2006. 9 Independent Auditors’ Report continued To the shareholders of Aeorema Communications plc 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 for which the ﬁnancial statements are prepared is consistent with the ﬁnancial statements. 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 report to you if, in our opinion: – adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have 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. Ian Hughes (Senior Statutory Auditor) For and on behalf of Baker Tilly UK Audit LLP, Statutory Auditor Chartered Accountants 25 Farringdon Street London EC4A 4AB 20 October 2014 10 Consolidated Statement of Comprehensive Income For the year ended 30 June 2014 Continuing operations Revenue Cost of sales Gross proﬁt Administrative expenses Operating Proﬁt Gain recognised on disposal of former subsidiary Finance income Finance expense Proﬁt before taxation Taxation Proﬁt for the year from continuing operations Discontinued operations Loss for the period from discontinued operations Total comprehensive income for the year attributable to owners of the parent Proﬁt per ordinary share: Basic From continuing operations From discontinued operations Total basic earnings per share Diluted From continuing operations From discontinued operations Total diluted earnings per share Notes 2 3 24 4 4 5 7 9 9 2014 £ 4,764,584 (2,794,629) 1,969,955 (1,465,520) 504,435 – 406 – 504,841 (89,145) 415,696 2013 As restated £ 3,992,751 (2,253,321) 1,739,430 (1,434,769) 304,661 54,021 195 (13) 358,864 (79,087) 279,777 – (16,276) 415,696 263,501 5.02290p – 5.02290p 4.55487p – 4.55487p 3.4809p (0.2025p) 3.2784p 3.25117p (0.18914p) 3.06203p There were no other comprehensive income items. The notes on pages 15 to 39 are an integral part of these ﬁnancial statements. 11 Statement of Financial Position As at 30 June 2014 Notes Group Company 2014 £ 2013 £ 2014 £ 2013 £ Non-current assets Intangible assets Property, plant and equipment Deferred taxation Investments in subsidiaries Total non-current assets Current assets Inventories Trade and other receivables Cash and cash equivalents Total current assets Total assets Current liabilities 10 11 6 12 13 14 365,154 365,154 67,449 24,145 – 77,040 8,277 – – – – – – – 553,196 538,307 456,748 450,471 553,196 538,307 2,674 2,675 – – 1,475,921 606,557 357,873 468,462 1,620,895 1,581,790 734,628 782,780 3,099,490 2,191,022 1,092,501 1,251,242 3,556,238 2,641,493 1,645,697 1,789,549 Trade and other payables 15 (1,589,007) ( 1,140,377) (89,730) ( 282,081) Net assets Equity Share capital Merger reserve Other reserve Share-based payment reserve Capital redemption reserve Retained earnings 1,967,231 1,501,116 1,555,967 1,507,468 16 17 18 1,079,688 1,004,688 1,079,688 1,004,688 16,650 19,500 16,650 – 16,650 19,500 16,650 – 110,972 96,083 110,972 96,083 257,812 257,812 257,812 257,812 482,609 125,883 71,345 132,235 Equity attributable to owners of the parent 1,967,231 1,501,116 1,555,967 1,507,468 The notes on pages 15 to 39 are an integral part of these ﬁnancial statements. The ﬁnancial statements were approved and authorised by the board of directors on 14 October 2014 and were signed on its behalf by G Fitzpatrick, Director S Garbutta, Director Company Registration No. 04314540 12 Statement of Changes in Equity For the year ended 30 June 2014 Group Share capital £ Merger reserve £ Other reserve £ At 1 July 2012 1,004,688 16,650 Comprehensive income for the year, net of tax Share-based payments – – – – At 30 June 2013 1,004,688 16,650 At 1 July 2013 1,004,688 16,650 Comprehensive income for the year, net of tax Tax credit relating to share option scheme Dividends paid – – – Shares issued in the period 75,000 Share-based payments – – – – – – Share- based payment reserve £ Capital redemption reserve £ Retained earnings £ Total equity £ 76,268 257,812 (137,618) 1,217,800 – 19,815 – – 263,501 263,501 – 19,815 96,083 257,812 125,883 1,501,116 96,083 257,812 125,883 1,501,116 – – – – – 415,696 415,696 61,594 61,594 (120,564) ( 120,564) – – 94,500 14,889 At 30 June 2014 1,079,688 16,650 19,500 110,972 257,812 482,609 1,967,231 – 14,889 Company Share capital £ Merger reserve £ Other reserve £ At 1 July 2012 1,004,688 16,650 Comprehensive income for the year, net of tax Share-based payments – – – – At 30 June 2013 1,004,688 16,650 At 1 July 2013 1,004,688 16,650 Comprehensive income for the year, net of tax Dividends paid – – Shares issued in the period 75,000 Share-based payments - – – – – Share- based payment reserve £ Capital redemption reserve £ Retained earnings £ Total equity £ 76,268 257,812 (548,586) 806,832 – 19,815 – – 680,821 680,821 – 19,815 96,083 257,812 132,235 1,507,468 96,083 257,812 132,235 1,507,468 – – – – 59,674 59,674 (120,564) ( 120,564) – – 94,500 14,889 – 14,889 At 30 June 2014 1,079,688 16,650 19,500 110,972 257,812 71,345 1,555,967 The notes on pages 15 to 39 are an integral part of these ﬁnancial statements. 13 – – – – – – – – 19,500 – – – – – – – 19,500 – – – – – – – Statement of Cash Flows For the year ended 30 June 2014 Net cash ﬂow from operating activities 25 106,751 847,834 (152,338) 493,244 Notes Group Company 2014 £ 2013 £ 2014 £ 2013 £ Cash ﬂows from investing activities Finance income 406 195 250 138 Purchase of property, plant and equipment 11 (41,988) ( 51,335) Proceeds from sale of property, plant and equipment Dividends received by the Company Disposal of subsidiary (net of cash disposed) 24 – – – 44,875 – 130,000 (16,421) – – – – – – – Cash (used) / generated in investing activities (41,582) ( 22,686) 130,250 138 Cash ﬂows from ﬁnancing activities Proceeds of share issue Dividends paid to owners of the Company Cash used in ﬁnancing activities 94,500 (120,564) (26,064) – – – 94,500 (120,564) (26,064) – – – Net increase / (decrease) in cash and cash equivalents 39,105 825,148 (48,152) 493,382 Cash and cash equivalents at beginning of year 1,581,790 756,642 782,780 289,398 Cash and cash equivalents at end of year 14 1,620,895 1,581,790 734,628 782,780 The notes on pages 15 to 39 are an integral part of these ﬁnancial statements. 14 Notes to the Consolidated Financial Statements For the year ended 30 June 2014 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 26, 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 26, 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 2013. (cid:129) IFRS 1 (Amended) ‘First-time Adoption of International Financial Reporting Standards’, effective 1 January 2013. (cid:129) IFRS 7 ‘Financial Instruments: Disclosures’, effective 1 January 2013. (cid:129) IFRS 10 ‘Consolidated Financial Statements’, effective 1 January 2013. (cid:129) IFRS 11 ‘Joint Arrangements’, effective 1 January 2013. (cid:129) IFRS 12 ‘Disclosure of Interests in Other Entities’, effective 1 January 2013. (cid:129) IFRS 13 ‘Fair Value Measurement’, effective 1 January 2013. (cid:129) IAS 1 (Amended) ‘Presentation of Other Comprehensive Income’, effective 1 January 2013. (cid:129) IAS 16 (Amended) ‘Property, Plant and Equipment’, effective 1 January 2013. (cid:129) IAS 19 (Amended) ‘Employee Beneﬁts’, effective 1 January 2013. (cid:129) IAS 27 (Revised) ‘Separate Financial Statements’, effective 1 January 2013. (cid:129) IAS 28 (Revised) ‘Investments in Associates and Joint Ventures’, effective 1 January 2013. (cid:129) IAS 32 (Amended) ‘Financial Instruments: Presentation’, effective 1 January 2013. (cid:129) IAS 34 (Amended) ‘Interim Financial Reporting’, effective 1 January 2013. (cid:129) IFRIC 20 ‘Stripping Costs in the Production Phase of a Surface Mine’, effective 1 January 2013. The adoption of these revised and amended standards has not impacted on the Annual Report and Financial Statements. 15 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 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 2013 and have not been adopted early by the Group: (cid:129) IFRS 2 (Amended) ‘Share-Based Payments’, effective 1 July 2014. (cid:129) IFRS 3 (Amended) ‘Business Combinations’, effective 1 July 2014. (cid:129) IFRS 7 (Amended) ‘Financial Instruments: Disclosures’, effective 1 January 2015. (cid:129) IFRS 8 (Amended) ‘Operating Segments’, effective 1 July 2014. (cid:129) IFRS 9 ‘Financial Instruments’, effective 1 January 2018. (cid:129) IFRS 11 (Amended) ‘Accounting for Acquisitions of Interests in Joint Operations’, effective 1 July 2016. (cid:129) IFRS 14 ‘Regulatory Deferral Accounts’, effective 1 July 2016. (cid:129) IFRS 15 ‘Revenue for Contracts with Customers’, effective 1 July 2017. (cid:129) ‘Investment Entities’ (Amendments to IFRS 10, IFRS 12 and IAS 27) effective 1 January 2014. (cid:129) IAS 16 (Amended) ‘Property, Plant and Equipment’, effective 1 July 2014. (cid:129) IAS 19 (Amended) ‘Employee Beneﬁts’, effective 1 July 2014. (cid:129) IAS 24 (Amended) ‘Related Party Disclosures’, effective 1 July 2014. (cid:129) IAS 27 (Amended) ‘Separate Financial Statements’, effective 1 January 2016. (cid:129) IAS 32 (Amended) ‘Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities’, effective 1 January 2014. (cid:129) IAS 36 (Amended) ‘Recoverable Amounts Disclosures for Non-Financial Assets’, effective 1 January 2014. (cid:129) IAS 38 (Amended) ‘Intangible Assets’, effective 1 July 2014. (cid:129) IAS 39 (Amended) ‘Novation of Derivatives and Continuation of Hedge Accounting’, effective 1 January 2014. (cid:129) IAS 40 (Amended) ‘Investment Property’, effective 1 January 2014. (cid:129) ‘Clariﬁcation of Acceptable Methods of Depreciation and Amortisation’ (Amendments to IAS 16 and IAS 38) effective 1 January 2016. (cid:129) ‘Agriculture: Bearer Plants’ (Amendments to IAS 16 and IAS 41) effective 1 January 2016. (cid:129) IFRIC Interpretation 21 ‘Levies’, effective 1 January 2014. Management does not believe that the application of these standards, where applicable, will have an impact on the ﬁnancial statements, except for the requirement of additional disclosures. Presentation The Directors have determined that wages and salaries relating to production personnel previously disclosed in the Consolidated Statement of Comprehensive Income within Cost of Sales should now be reﬂected as Administrative Expenses, in order to more accurately reﬂect the nature of these costs. Accordingly, an amount of £739,679 (2013: £572,169) has been reclassiﬁed to present these expenses in a consistent manner. 16 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 Basis of consolidation The Group ﬁnancial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 30 June 2014. Subsidiaries are entities over which the Group has the power to control the ﬁnancial and operating policies so as to obtain beneﬁts from their activities. Subsidiaries are fully consolidated from the date on which control is transferred until the date that such 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 (5 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 income statement in the year that the asset is derecognised. Fully depreciated assets still in use are retained in the ﬁnancial statements. 17 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 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 income statement 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. 18 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 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. 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. 19 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 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. 20 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 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 2014 there is only a single reportable segment. All revenue represents sales to external customers. Three customers (2013: one) are deﬁned as major customers by revenue, contributing more than 10% of the Group revenue. Customer one Customer two Customer three Major customers 2014 £ 1,214,324 809,290 571,188 2013 £ 1,217,332 – – 2,594,802 1,217,332 The geographical analysis of revenue from continuing operations by geographical location of customer is as follows: Geographical market 2014 2013 2014 2013 UK £ UK £ Europe £ Europe £ 2014 Rest of the World £ 2013 Rest of the World £ 2014 2013 Total £ Total £ Revenue 4,493,297 3,803,651 262,306 1,752 8,981 187,348 4,764,584 3,992,751 All non-current assets are based in the UK. 21 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 3 Operating proﬁt Operating proﬁt is stated after charging Depreciation of property, plant and equipment Proﬁt on disposal of property, plant and equipment Fees payable to the Company’s auditor in respect of: Audit of the Company’s annual accounts Audit of the Company’s subsidiaries Staff costs (see note 21) Operating leases – land and buildings 4 Financial income and expenses Finance income Bank interest received Finance expenses Other interest payable 2014 £ 2013 £ 51,579 35,934 – 44,875 6,000 6,000 11,500 11,500 1,029,306 1,001,550 77,596 91,438 2014 £ 406 2014 £ – 2013 £ 195 2013 £ 13 22 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 5 Taxation The tax charge comprises: Current tax Prior period adjustment Current year Deferred tax Current year Total tax charge in the statement of comprehensive income Factors affecting the tax charge for the year 2014 £ 2013 £ 234 – 104,779 67,652 105,013 67,652 (15,868) 11,435 (15,868) 11,435 89,145 79,087 Proﬁt on ordinary activities before taxation from continuing operations 504,841 358,864 Proﬁt on ordinary activities before taxation multiplied by standard rate of UK corporation tax of 23% (2013: 20%) Effects of: Non deductible expenses Income that is exempt from taxation Depreciation, impairment losses and disposals Capital allowances Share-based payment Losses utilised Share options exercised Marginal relief Prior period adjustment Deferred tax asset movement Total taxation charge 116,113 82,539 (1,114) 12,494 – (22,745) 11,863 8,130 (11,617) ( 8,671) 3,424 7,785 – ( 9,505) (12,167) – (1,723) (2,375) 234 – (15,868) 11,435 (29,968) (3,452) 89,145 79,087 The Group has estimated losses of £375,762 (2013: £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. 23 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 6 Deferred taxation Property, plant and equipment temporary differences Temporary differences At 1 July Transfer to Statement of Comprehensive Income At 30 June 2014 £ 2013 £ (5,174) (1,094) 29,319 24,145 9,371 8,277 8,277 19,712 15,868 (11,435) 24,145 8,277 The deferred tax asset is expected to be utilised given the return to proﬁtability and future trading prospects. 7 Discontinued Operations On 7 December 2012 the Group disposed of its 100% subsidiary ST16 Limited, which carried out Viral Film operations. ST16 Limited was sold to its directors, S Crofts and J Stinton for proceeds of £5. Details of the assets and liabilities disposed of, and the calculation of the proﬁt or loss on disposal, are disclosed in note 24. The loss from the discontinued operation included in the proﬁt for the previous year is set out below. Loss for the year from discontinued operations Revenue Expenses Loss for the year from discontinued operations attributable to owners of the company Cash ﬂows from discontinued operations Net cash outﬂows from operating activities Net cash inﬂows from investing activities Net cash outﬂows 2014 £ 2013 £ – – – – – – 69,002 (85,278) (16,276) (90,006) 51,319 (38,687) 24 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 8 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 £59,674 (2013: £680,821). 9 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: 2014 £ 2013 £ Basic earnings per share Proﬁt for the year attributable to owners of the Company 415,696 263,501 Loss for the period from discontinued operations used in the calculation of basic earnings per share from discontinued operations – 16,276 Earnings used in the calculation of basic earnings per share from continuing operations 415,696 279,777 Basic weighted average number of shares Dilutive potential ordinary shares: Employee share options Diluted weighted average number of shares 8,276,021 8,037,500 850,380 567,915 9,126,401 8,605,415 25 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 10 Intangible ﬁxed assets Group Cost At 1 July 2012 Disposal of subsidiary At 30 June 2013 At 30 June 2014 Impairment and amortisation At 1 July 2012 Eliminated on disposal At 30 June 2013 At 30 June 2014 Net book value At 1 July 2012 At 30 June 2013 At 30 June 2014 Goodwill £ 2,805,963 (77,671) 2,728,292 2,728,292 2,440,809 (77,671) 2,363,138 2,363,138 365,154 365,154 365,154 Goodwill arose for the Group on consolidation of its subsidiary company, Aeorema Limited (formerly Cheerful Scout Productions Limited). Impairment – Aeorema Limited (formerly Cheerful Scout Productions 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 £326,000 and a one percentage fall in future growth would reduce the recoverable amount by £342,000. However, in both cases there would still be no indication of impairment of goodwill. 26 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 11 Property, plant and equipment Group Cost At 1 July 2012 Additions Disposals Derecognised on disposal of a subsidiary At 30 June 2013 Additions At 30 June 2014 Depreciation At 1 July 2012 Eliminated on disposal of assets Eliminated on disposal of a subsidiary Charge for the year At 30 June 2013 Charge for the year At 30 June 2014 Net book value At 1 July 2012 At 30 June 2013 At 30 June 2014 Leasehold land and buildings £ Fixtures, ﬁttings and equipment £ 157,063 24,034 (157,063) - 24,034 – 24,034 153,838 (157,063) - 8,426 5,201 16,104 21,305 3,225 18,833 2,729 889,890 27,301 (90,870) (5,254) 821,067 41,988 863,055 827,187 (90,870) (965) 27,508 762,860 35,475 798,335 62,703 58,207 64,720 Total £ 1,046,953 51,335 (247,933) (5,254) 845,101 41,988 887,089 981,025 (247,933) (965) 35,934 768,061 51,579 819,640 65,928 77,040 67,449 The gross carrying amount of fully depreciated property, plant and equipment still in use is £nil (2013: £nil) in relation to leasehold land and buildings and £735,908 (2013: £696,292) in relation to ﬁxtures, ﬁttings and equipment. 27 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 Shares in subsidiary £ 3,306,981 12,039 (86,500) 3,232,520 14,889 3,247,409 2,780,713 (86,500) 2,694,213 2,694,213 526,268 538,307 553,196 12 Non-current assets – Investments Company Cost At 1 July 2012 Increase in respect of share based payments Disposal of subsidiary At 30 June 2013 Increase in respect of share based payments At 30 June 2014 Provision At 1 July 2012 Disposal of subsidiary At 30 June 2013 At 30 June 2014 Net book value At 1 July 2012 At 30 June 2013 At 30 June 2014 28 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 Holdings of more than 20% The Company holds more than 20% of the share capital of the following companies: Subsidiary undertakings Aeorema Limited (formerly Cheerful Scout Productions Limited) Twentyﬁrst Limited Country of registration or incorporation England and Wales England and Wales Shares held Class Ordinary Ordinary % 100 100 The principal activity of these undertakings for the last relevant ﬁnancial year was as follows: Company Principal activity Aeorema Limited (formerly Cheerful Scout Productions Limited) Provision of business communication services Twentyﬁrst Limited Non-trading 13 Trade and other receivables Trade receivables Related party receivables Other receivables Prepayments and accrued income Group Company 2014 £ 2013 £ 1,401,432 526,982 2014 £ - 2013 £ - - - 353,337 457,863 19,084 20,516 – 55,405 59,059 4,536 6,180 4,419 1,475,921 606,557 357,873 468,462 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. 29 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 At the year end, trade receivables of £344,096 (2013: £262,488) 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: Less than 90 days More than 90 days 14 Cash and cash equivalents Bank balances Cash and cash equivalents Group 2014 £ 2013 £ 317,802 239,164 26,294 23,324 344,096 262,488 Group Company 2014 £ 2013 £ 2014 £ 2013 £ 1,620,895 1,581,790 734,628 782,780 1,620,895 1,581,790 734,628 782,780 Cash and cash equivalents in the statement of cash ﬂows 1,620,895 1,581,790 734,628 782,780 15 Trade and other payables Trade payables Related party payables Taxes and social security costs Other payables Group Company 2014 £ 2013 £ 2014 £ 2013 £ 902,860 686,742 1,656 11,114 - - 67,355 197,355 301,004 186,474 1,369 43,842 160 - 250 - Accruals and deferred income 341,301 267,001 19,350 73,362 1,589,007 1,140,377 89,730 282,081 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. 30 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 16 Share capital Authorised 2014 £ 2013 £ 28,000,000 Ordinary shares of 12.5p each 3,500,000 3,500,000 Allotted, called up and fully paid At 1 July 2012 At 30 June 2013 Issue of shares At 30 June 2014 Ordinary shares £ Number 8,037,500 1,004,688 8,037,500 1,004,688 600,000 75,000 8,637,500 1,079,688 £19,500 share options were exercised just before the year end with the shares being issued on 2 July 2014. See note 22 for details of share options outstanding 17 Merger reserve At 1 July 2012 At 30 June 2013 At 30 June 2014 Merger reserve £ 16,650 16,650 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. 31 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 18 Other reserve At 1 July 2012 At 30 June 2013 Exercise of options At 30 June 2014 Subscriptions received reserve £ – – 19,500 19,500 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. This reserve holds the funds at the year end. The reserve is not distributable. 19 Financial commitments Total future minimum lease payments under non-cancellable operating lease rentals are payable as follows: Group Not later than one year Later than one year and not later than ﬁve years 20 Directors’ emoluments The remuneration of Directors of the Company is set out below. Land and Buildings 2014 £ 10,417 2013 £ – – 62,500 P Litten G Fitzpatrick M Hale S Garbutta R Owen Salary or Fees 2014 £ 65,000 Salary or Fees 2013 £ 50,000 Pensions 2014 £ 59,834 Pensions 2013 £ 52,483 Total 2014 £ 124,834 Total 2013 £ 102,483 52,885 50,000 59,834 52,483 112,719 102,483 - 3,000 7,500 - 1,500 7,500 - - - - - - - - - 3,000 7,500 - 1,500 7,500 133,000 25,296 S Quah (appointed 15 April 2013) 133,000 25,296 261,385 134,296 119,668 104,966 381,053 239,262 32 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 The share options held by directors who served during the year are summarised below: Name S Quah S Quah Grant date Number awarded 20 July 2010 300,000 25 April 2013 300,000 Exercise price 12.50p 16.50p Earliest exercise price Expiry date 20 July 2013 19 July 2020 25 April 2016 24 April 2023 G Fitzpatrick exercised 64,000 shares on 16 June 2014 at 18.75p each resulting in a gain of £31,200. Fees for S Garbutta are charged by Harris & Trotter LLP, a ﬁrm in which he is a member. See note 23. 21 Employee information The average monthly number of employees (including directors) employed by the Group during the year was: Number of employees Administration and Production 2014 Number 2013 as restated Number 19 17 The aggregate payroll costs of these employees charged in the Statement of Comprehensive Income was as follows: Employment costs Wages and salaries Social security costs Pension costs Share-based payments 2014 £ 2013 £ 821,680 782,230 72,897 94,367 119,840 105,138 14,889 19,815 1,029,306 1,001,550 33 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 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 From To Number of options 2014 Number of options 2013 28 October 2004 18.75p 28 October 2007 27 October 2014 9,000 113,000 20 July 2010 25 April 2013 12.5p 16.5p 20 July 2013 19 July 2020 300,000 1,200,000 25 April 2016 24 April 2023 300,000 300,000 609,000 1,613,000 Details of the number of share options and the weighted average exercise price outstanding during the year are as follows: Weighted average exercise price 2014 £ Number of options 2014 Number of options 2013 Outstanding at beginning of the year 1,613,000 0.11 1,943,000 Lapsed during the year Granted during the year Exercised during the year (300,000) (0.13) (630,000) – – 300,000 (704,000) (0.13) – Outstanding at end of the year 609,000 0.15 1,613,000 Exercisable at the end of the year 309,000 0.13 113,000 Weighted average exercise price 2013 £ 0.09 (0.23) 0.17 – 0.11 0.19 The exercise price of options outstanding at the year-end ranged between £0.125 and £0.1875 (2013: £0.125 and £0.2325) and their weighted average contractual life was 7.7 years (2013: 7.7 years). 34 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 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: 28 October 2004 20 July 2010 9 March 2012 25 April 2013 Grant date Model used Share price at grant date Exercise price Contractual life Risk free rate Expected volatility Expected dividend rate Binomial 16.25p 18.75p 10 years 6% 43% 0% Fair value option 5.9868p Black-Scholes Black-Scholes Black-Scholes 8.75p 8.75p 10 years 0.5% 100% 0% 7.779p 23.25p 23.25p 10 years 0.5% 105% 0% 16.5p 16.5p 10 years 0.5% 104% 0% 21.053p 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 expected dividend rate is zero as the company has not paid dividends in the past. The Group recognised the following charges in the Statement of Comprehensive Income in respect of its share-based payment plans: Share-based payment charge 2014 £ 2013 £ 14,889 19,815 35 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 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: Management fees charged by subsidiaries to Aeorema Communications plc Aeorema Limited (formerly Cheerful Scout Productions Limited) – 102,483 2014 £ 2013 £ Amounts owed by subsidiaries Total amount owed by subsidiaries Amounts owed to subsidiaries Total amount owed to subsidiaries The compensation of key management (including directors) of the Group is as follows: Short-term employee beneﬁts Post-employment beneﬁts Share based payment expense 353,337 457,863 67,355 197,355 2014 £ 2013 £ 297,687 119,176 119,668 104,966 14,889 4,353 432,244 228,495 Aeorema Communications plc is a guarantor for a lease entered into by Aeorema Limited (formerly Cheerful Scout Productions Limited), its subsidiary undertaking. 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 Aeorema Communications plc Aeorema Limited (formerly Cheerful Scout Productions Limited) Twentyﬁrst Limited ST16 Limited 2014 £ 15,000 22,325 – – 2013 £ 17,071 7,200 7,200 1,600 37,325 33,071 36 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 24 Disposal of a subsidiary On 7 December 2012 the Group disposed of its 100% subsidiary ST16 Limited, which carried out Viral Film operations. Consideration received Consideration received in cash and cash equivalents Analysis of assets and liabilities over which control was lost Current assets Cash and cash equivalents Trade and other receivables Non-current assets Property, plant and equipment Current liabilities Trade and other payables Net liabilities disposed of Gain on disposal of subsidiary Consideration received Net liabilities disposed of Net cash outﬂow on disposal of subsidiary Consideration received in cash and cash equivalents Less: Cash and cash equivalent balances disposed of 2014 £ – – 2014 £ – – – – – 2014 £ – – – 2014 £ – – – 2013 £ 5 5 2013 £ 16,426 11,700 4,289 (86,431) (54,016) 2013 £ 5 54,016 54,021 2013 £ 5 (16,426) (16,421) 37 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 25 Cash ﬂows Cash ﬂows from operating activities Proﬁt after taxation Tax expense recognised in Consolidated Statement of Comprehensive Income Depreciation Proﬁt on disposal of property, plant and equipment Proﬁt on disposal of subsidiary Share-based payment Impairment of investment in subsidiaries Dividend received by the Company Finance income Group Company 2014 £ 2013 £ 2014 £ 2013 £ 415,696 263,501 59,674 680,821 89,145 79,087 51,579 35,934 – – (44,875) (54,021) 14,889 19,815 – – – – – – – – – – – – – – 7,776 (20,000) (130,000) – (406) (195) (250) (138) 570,903 299,246 (70,576 668,459 Increase / (decrease) in trade and other payables 448,630 272,572 (192,351) 240,986 (Increase) / decrease in trade and other receivables (869,364) 201,285 110,589 (416,201) Changes in working capital due to disposal of subsidiary: Trade and other receivables Trade and other payables Taxation paid – – (11,700) 86,431 (43,418) – – – – – – – Cash generated / (used) from operating activities 106,751 847,834 (152,338) 493,244 26 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 2014 was £1,401,432 (2013: £526,982). 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. 38 Notes to the Consolidated Financial Statements continued For the year ended 30 June 2014 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 £1,589,007 (2013: £1,140,377). 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 £1,620,895 (2013: £1,581,790). 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 £1,967,231 (2013: £1,501,116). Fair value of ﬁnancial assets The Group's book value of the ﬁnancial assets equates to their fair values. 27 Pension costs deﬁned contribution The Group makes pre-deﬁned contributions to employees' personal pension plans. Contributions payable by the Group for the year were £119,840 (2013: £105,138). At the end of the reporting period £24,998 (2013: £17,948) of contributions were due in respect of the period. The amounts were paid subsequent to the end of the reporting period. 28 Dividends On the 29 November 2013 an enhanced maiden dividend of 1.5 pence per share (total dividend £120,564) was paid to holders of fully paid ordinary shares. In respect of the current year, the directors propose that a ﬁnal dividend of 2 pence per share and a special dividend of 3 pence per share be paid to shareholders on 21 November 2014. 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 24 October 2014. The total estimated dividend to be paid is £437,525. The payment of this dividend will not have any tax consequences for the Group. 29 Control There is no overall controlling party. 39 Notice of Annual General Meeting Aeorema Communications plc (Incorporated and registered in England and Wales with company number 4314540) NOTICE IS HEREBY GIVEN that the Annual General Meeting of Aeorema Communications plc will be held at Moray House, 23-31 Great Titchﬁeld Street, London W1W 7PA on 19th November 2014 at 10.30 a.m. for the transaction of the following business: As Ordinary Business to consider and, if thought ﬁt, pass the following resolutions which will be proposed as Ordinary Resolutions: 1. To receive and adopt the report of the directors of the Company and the audited accounts for the Company for the year ended 30 June 2014. 2. To re-appoint Richard Owen as a Director of the Company, who retires in accordance with article 122 of the Company’s Articles of Association. 3. To re-appoint Peter Litten as a Director of the Company, who retires in accordance with article 122 of the Company’s Articles of Association. 4. To appoint Baker Tilly UK Audit LLP as auditors of the Company and to authorise the Directors to ﬁx their remuneration. 5. To declare a ﬁnal dividend on the ordinary shares of 12.5 pence each in the capital of the Company for the year ended 30 June 2014 of 2 pence per ordinary share. As Special Business to consider and, if thought ﬁt, pass the following resolutions of which Resolutions 6 and 7 will be proposed as Ordinary Resolutions and Resolution 8 will be proposed as a Special Resolution: 6. That the Company be and is hereby generally and unconditionally authorised in accordance with Section 701 of the Companies Act 2006 (the “Act”) to make market purchases (within the meaning of Section 693(3) of the Act) on the AIM Market of the London Stock Exchange plc of ordinary shares of 12.5 pence each in the capital of the Company (“Ordinary Shares”) provided that: (i) the maximum number of Ordinary Shares hereby authorised to be purchased is 1,190,625 Ordinary Shares; (ii) the minimum price which may be paid for an Ordinary Share is 1 pence; (iii) the maximum price which shall be paid for an Ordinary Share shall be an amount equal to 105 per cent. of the average middle market quotations taken from the AIM Appendix to the Daily Ofﬁcial List of the UKLA for the ﬁve business days immediately preceding the day on which the Ordinary Share is contracted to be purchased; (iv) unless renewed the authority hereby conferred shall expire on the earlier of the Company’s Annual General Meeting in 2015 or eighteen months from the passing of this Resolution unless such authority is renewed, varied or revoked prior to such time; and (v) the Company may make a contract or contracts to purchase Ordinary Shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiry of such authority and may make a purchase of Ordinary Shares in pursuance of any such contract or contracts. 7. That the directors of the Company be generally and unconditionally authorised pursuant to and in accordance with section 551 of the Act to exercise all the powers of the Company to allot shares in the Company and/or to grant rights to subscribe for, or to convert any security into, shares in the Company (“Rights”) up to a maximum nominal amount of £1,000,000, provided that this authority shall expire at the end of the next annual general meeting of the Company to be held after the date of the passing of this Resolution or, if earlier, ﬁfteen months from the date of the passing of this Resolution save that the Company may prior to the expiry of such period make any offer or agreement which would or might require shares to be allotted or Rights to be granted after such expiry and the directors of the Company shall be entitled to allot shares in the Company and to grant Rights pursuant to any such offer or agreement as if this authority had not expired. 40 Notice of Annual General Meeting continued Aeorema Communications plc (Incorporated and registered in England and Wales with company number 4314540) 8. That, subject to the passing of Resolution 7 set out above, the directors of the Company be empowered pursuant to section 570 of the Act to allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authority conferred on them by Resolution 7 above, as if section 561(1) of the Act did not apply to such allotment provided this power shall be limited to: (i) the allotment of equity securities in connection with a rights issue, open offer or other offer of equity securities open for acceptance for a period ﬁxed by the directors of the Company to holders of equity securities on the register on a ﬁxed record date where the equity securities respectively attributable to the interests of such holders are proportionate (as nearly as may be practicable) to their respective holdings of such equity securities or in accordance with the rights attached thereto (but subject to such exclusions or other arrangements as the directors of the Company may deem necessary or expedient in relation to treasury shares, fractional entitlements or legal or practical problems under the laws of, or the requirements of any recognised body or stock exchange in, any territory or by virtue of shares being represented by depositary receipts or any other matter); and (ii) the allotment to any person or persons (otherwise than pursuant to sub-paragraph (i) of this Resolution above) of equity securities up to an aggregate nominal amount of £1,000,000; provided that the power given by this Resolution shall expire at the end of the next annual general meeting of the Company to be held after the date of the passing of this Resolution or, if earlier, ﬁfteen months from the date of the passing of this Resolution, save that the directors of the Company shall be entitled to make offers or agreements before the expiry of such power which would or might require equity securities to be allotted after such expiry and the directors of the Company shall be entitled to allot equity securities pursuant to any such offers or agreements as if the power conferred hereby had not expired. By order of the Board Stephen Haffner Company Secretary Registered Ofﬁce: 64 New Cavendish Street London W1G 8TB Dated: 14 October 2014 Notes: (1) A member entitled to attend and vote at the above-mentioned annual general meeting (the "Meeting") is entitled to appoint a proxy or proxies to exercise any or all of his rights to attend, speak and vote at the Meeting instead of him. All members are entitled to attend and vote at the Meeting, whether or not they have returned a form of proxy. (2) A Form of Proxy is enclosed for your use, if desired. The instrument appointing a proxy must reach the Company’s registrars, PXS 1, 34 Beckenham Road, Beckenham, Kent, BR3 4ZF not less than 48 hours before the time of holding of the Meeting. (3) Pursuant to Regulation 41 of The Uncertiﬁcated Securities Regulations 2001, the Company speciﬁes that only those members of the Company on the register 48 hours before the time set for the Meeting shall be entitled to attend or vote at the Meeting in respect of the number of shares registered in their name at the time. Changes to the register of members after that time will be disregarded in determining the rights of any person to attend or vote at the Meeting. (4) A copy of the register of Directors’ interests in shares in the Company and copies of the Directors’ service contracts of more than one year’s duration will be available for inspection at the registered ofﬁce of the Company during ofﬁce hours only on any weekday (excluding Saturdays, Sundays and public holidays) from the date of this notice until the date of the Meeting and at the place of the Meeting for at least 15 minutes prior to and during the Meeting. 41 Company Information Company Information Directors Secretary Company number Registered ofﬁce Financial advisers Stockbrokers Nominated adviser Auditors Solicitors Bankers (Non-Executive Chairman) (Deputy Chairman and Creative Director) (Chief Executive) (Non-Executive) (Non-Executive) (Executive Director) M Hale P Litten G Fitzpatrick S Garbutta R Owen S Quah S Haffner 04314540 64 New Cavendish Street London, W1G 8TB Harris & Trotter LLP 64 New Cavendish Street London, W1G 8TB Cantor Fitzgerald Europe One Churchill Place Canary Wharf London, E14 5RB Cantor Fitzgerald Europe One Churchill Place Canary Wharf London, E14 5RB Baker Tilly UK Audit LLP 25 Farringdon Street London, EC4A 4AB Howard Kennedy LLP No.1 London Bridge London SE1 9BG Ross & Craig 12a Upper Berkeley Street London, W1H 7PE Barclays Bank plc P O Box 32106 London, NW1 2ZH Registrar and transfer ofﬁce Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent, BR3 4TU 42 Notes 43 Notes 44 CONSOLIDATED DIRECTORS’ REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2014 In ancient Greek drama, an apparently insoluble crisis was often solved by the intervention of the gods who magically descended onto the stage from the skies above. The elaborate crane mechanisms that enabled this impressive effect were known as aeorema. Aeorema Communications Plc, Moray House, 23-31 Great Titchfield Street, London, W1W 7PA Aeorema_Cover_04.indd 1 20/10/2014 14:16 Aeorema_Cover_04.indd 2 20/10/2014 14:16

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