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2023 ReportAnnual Report and Accounts for the year ended 31 December 2014 www.progressivedigitalmedia.com Company No. 03925319 contents Strategic report inDepenDent auDitor’S report 21 2014 Highlights our Business Principal Activity Our Business Model chairman’s Statement chief executive’s report Operational Review Future Developments Financial Performance Key Performance Indicators Principal Risks and Uncertainties DirectorS’ report The Directors Corporate Governance Report Directors’ Interests Audit Committee Report Directors’ Remuneration Report Statement of Directors’ Responsibilities 4 5 5 6 7 7 8 9 10 12 13 16 17 18 20 Financial StatementS group Consolidated Income Statement Consolidated Statement of Comprehensive Income 24 25 Consolidated Statement of Financial Position 26 Consolidated Statement of Changes in Equity 27 Consolidated Statement of Cash Flows 28 Notes to the Consolidated Financial Statements 29 company Independent Auditor’s Report (Company) Company Statement of Financial Position Company Statement of Changes in Equity Company Statement of Cash Flows 54 55 56 57 Notes to the Company Financial Statements 58 advisers 66 Reliance on this document Our Business Review on pages 4 to 11 has been prepared in accordance with the Strategic Report requirements of section 414C of the Companies Act 2006. The intention of this document is to provide information to shareholders and is not designed to be relied upon by any other party or for any other purpose. Forward-looking statements This document contains forward-looking statements which are made by the directors in good faith based on information available to them at the time of approval of this report. In particular, all statements that express forecasts, expectations and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability of financing, anticipated costs savings and synergies and the execution of Progressive Digital Media Group’s strategy, are forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will occur in future. There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including a number of factors outside of Progressive Digital Media Group’s control. Any forward-looking statements speak only as of the date they are made, and Progressive Digital Media Group gives no undertaking to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes to events, conditions or circumstances on which any such statement is based. 3 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Strategic report 2014 Highlights Recent acquisitions performing well, whilst adverse exchange rate movements impacted organic growth. Key achievements in 2014 Revenue and earnings growth Acquisition of Pyramid Research completed 1 January 2014 Acquisition of Current Analysis completed 30 July 2014 Cash and bank facilities to fund future growth Financial performances Group revenue increased by 16.2% to £63.2m (2013: £54.3m) Business Intelligence revenue increased by 17.6% to £38.5m (2013: £32.7m) Adjusted EBITDA1 increased by 1.8% to £12.0m (2013: £11.8m) Adjusted EBITDA margin1 decreased to 19.0% (2013: 21.7%) Reported EBITDA2 reduced by 62.0% to £3.8m (2013: £9.9m) Reported profit before tax from continuing operations of £0.3m (2013: £7.3m) inclusive of £2.6m restructuring costs and £4.4m share based payments charge Group loss for the year of £2.2m, which includes tax and loss from discontinued operations Deferred Revenue increased by 50.3% to £21.5m (2013: £14.3m) Net (debt)/ cash3 of (£8.7m) (2013: net cash of £8.3m) note 1: adjusted eBitDa: Earnings before interest, tax, depreciation and amortisation, exchange rate losses, impairment, share based payments, adjusted for costs associated with derivatives, acquisitions, integration and restructure of the Group. Adjusted EBITDA margin is defined as: Adjusted EBITDA as a percentage of revenue. note 2: eBitDa: Earnings before interest, tax, depreciation, amortisation and impairment. Includes a non-cash charge of £4.4 million for share based payments (2013: £1.1 million). note 3: net (debt)/ cash: Cash and cash equivalents less short and long-term borrowings. 4 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Strategic report our Business principal activity The principal activity of Progressive Digital Media Group Plc (PDMG) and its subsidiaries (‘the Group’) is the provision of premium business information through multiple channels. The Group supplies its customers with research, analysis and tactical intelligence enabling them to gain a competitive advantage in their markets. our Business model We produce premium business information for the Global Consumer and ICT markets. We supply our customers with research, analysis and tactical intelligence across a multiple of platforms, which enables our customers to gain a competitive advantage in their markets. We have a simple business model, which is designed to generate revenues off a relatively fixed operating cost base allowing for operational gearing to drive profit growth and margin. Its key features are: 1. Strong asset base with scalable business model - premium intelligence and customer datasets 2. Global coverage of consumer and technology information markets 3. Focus on subscription and contracted revenues - high quality recurring income, with high barriers to entry and pricing power 5 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Strategic report chairman’s Statement I am pleased to report results that show good revenue and earnings growth, with revenues tempered by adverse exchange rates. We have, during 2014, made progress towards achieving our key strategic objective of becoming a leading provider of premium business information to the Global Consumer and ICT markets. In 2014 we completed three acquisitions; one small “bolt-on” for our Consumer proposition and two more substantial acquisitions which address the ICT market. Additionally, we continued to re-engineer the business and its processes, investing heavily in content sets and delivery platforms which better serve the needs of our growing blue chip customer base. our employees We work in a dynamic global market, with customer needs ever changing and where success both today and in the future is entirely dependent upon the professionalism, commitment and hard work of our employees. On behalf of the Board I would like to thank our employees for their contribution and to welcome those new employees who have joined the Group from our recent acquisitions. corporate governance Good corporate governance is a key contributor to the long-term success of the Group and the Board has adopted those aspects of the UK Corporate Governance Code that it considers relevant. We have reported on our Corporate Governance arrangements on page 13. The Board sets and monitors the Group’s strategy, reviewing trading performance, ensuring adequate funding, examining development possibilities and formulating policy on key issues. The Board is also responsible for monitoring the risk and control environment. I believe the Board, with its diverse skill set and wealth of experience in the media and business information industries, provides the leadership required to enable the Group to meet its objectives. current trading and outlook We expect 2015 to be another year of progress, as we seek to leverage our recent acquisitions and continue to invest in our content and delivery platforms. mike Danson Chairman 2 March 2015 6 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Strategic report chief executive’s report We have during 2014 made good progress towards achieving our objective of building an authoritative presence in the Global Consumer and ICT business information markets. Additionally, we have over the past year continued to invest in our content sets and delivery platforms and as we start the new financial year we are better placed than ever to serve our growing blue chip customer base on a local, regional and global basis. operational review group performance Group revenues grew by 16.2% to £63.2m. Business Intelligence revenues grew by 17.6% and now account for 61.0% of total revenues (2013: 60.3%). Over the medium term our goal is to increase Business Intelligence revenues to 75.0% of total Group revenues. Eliminating the benefit of our recent acquisitions underlying revenues grew by 4.8% which reflects the higher mix of non-Sterling denominated revenues. Events and Marketing revenues grew by 14.1% to £24.6m and now account for 39.0% of total revenues (2013: 39.7%). The majority of revenues in this area are denominated in Sterling and thus not subject to exchange rate movements. Adjusted EBITDA grew by just under 2% to £12.0m (2013: £11.8m) whilst Adjusted EBITDA margin decreased by 2.7% to 19.0% (2013: 21.7%). Margins were adversely impacted by both the part-year effect of our recent acquisitions and the effect of exchange rates and in particular the strength of Sterling against both the US dollar and Euro from which the majority of Group revenues derive. Profit before tax from continuing operations decreased by £7.0m to £0.3m (2013: £7.3m), which is after a £4.4m (2013: £1.1m) non-cash charge for share based payments reflecting the award of additional share options under the long term inventive plan for senior management and the significant increase in share price since the scheme was first introduced in January 2011. Profit before tax also includes £2.6m of largely acquisition related restructuring costs. Loss for the year of £2.2m (2013: profit of £4.5m) is net of tax and losses associated with discontinued operations. acquisitions We completed three acquisitions during 2014, one “bolt-on” acquisition addressing the Consumer market and two complementary acquisitions which address the ICT market. Pyramid Research and Current Analysis are two well-regarded and complementary businesses which provide practical market intelligence to leading professionals in the ICT sector. Pyramid Research focuses on market and service opportunities, whilst Current Analysis is focused on innovation and on how companies in the ICT space can better compete. Both companies satisfy all of our acquisition criteria, providing subscription based business information services to blue chip companies operating in a global sector. common systems The Group has a number of common systems and processes from sales management, to content production and client delivery. We seek to constantly improve these systems and processes in order to drive improved efficiencies and operating margins. Moreover, these common systems and processes ease expansion into new geographies and reduce integration risk. Future Developments We are a focused business with one clear goal: to become a leading provider of premium business information to the Global Consumer and ICT markets. Last year was a step in the right direction; this year should prove to be another as we build on the solid foundation we have established. the key objectives for the forthcoming year are: Focus on high-quality, subscription based Business Information services and products Expand our sales footprint in high-growth Consumer and ICT markets Integration, investment and growth from our recent acquisitions We are an ambitious and growing company; that we have achieved so much in such a relatively short period of time is testament to the passion, commitment and contribution of our employees. 7 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Strategic report chief executive’s report Financial performance Financially the Group has performed well with improved revenues and earnings at an Adjusted level. Financial highlights Increased the Group’s revenue by 16.2% year on year Increased profitability at the Adjusted EBITDA level by 1.8% Deferred revenue increased by £7.2m to £21.5m (2013: £14.3m) as a result of acquisitions in the year combined with strong sales towards the end of 2014 The increased share based payments charge of £4.4m (2013: £1.1m) is largely related to additional options granted to existing scheme members, new hires and employees joining the Group via acquisitions. Continuing operations revenue Profit before tax Depreciation Amortisation Finance costs eBitDa1 Restructuring costs Property related provisions Revaluation of short and long-term derivatives Share based payments charge Exceptional property costs Unrealised foreign exchange loss M&A costs Deal costs Exceptional legal costs Exchange rate losses adjusted eBitDa2 Adjusted EBITDA margin2 2014 £’000s 2013 £’000s movement 63,161 54,342 16.2% (62.0%) 294 547 2,425 484 3,750 2,237 (221) 15 4,371 13 787 431 146 - 498 7,283 562 1,725 311 9,881 392 (222) (24) 1,127 93 - 45 154 141 231 12,027 19.0% 11,818 21.7% 1.8% note 1: eBitDa: Earnings before interest, tax, depreciation, amortisation and impairment. Includes a non-cash charge of £4.4 million for share based payments (2013: £1.1 million). note 2: adjusted eBitDa: Earnings before interest, tax, depreciation and amortisation, exchange rate losses, impairment, share based payments, adjusted costs associated with derivatives, acquisitions, integration and restructure of the Group. Adjusted EBITDA margin is defined as: Adjusted EBITDA as a percentage of revenue. 8 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Strategic report chief executive’s report Key performance indicators The key performance indicators selected are used by the executive directors to monitor the Group’s performance and progress from continuing operations. During the year we have made good progress across our revenue and deferred revenue metrics. Eliminating the benefit of our recent acquisitions underlying revenues grew by 4.8%. Deferred revenues grew as a result of our recent acquisitions and strong sales in the last quarter of the year, with underlying organic year on year growth of 14.9%. Our profitability has increased at an Adjusted level, although our margins have suffered as a result of the strength of Sterling. During the year the Group obtained further financing facilities to partially fund the acquisition of Current Analysis Inc, which is reflected in the net debt position at year end. revenue adjusted eBitDa adjusted eBitDa margin Deferred revenue net (Debt)/cash1 2014 2013 % growth £63.2m £54.3m 16.2% £12.0m £11.8m 1.8% 19.0% 21.7% (2.7%) £21.5m £14.3m 50.3% (£8.7m) £8.3m (204.2%) note 1: net (debt)/ cash: Cash less short and long-term borrowings. earnings per share Basic loss per share from continuing operations was (0.78) pence per share (2013: earnings of 6.90 pence per share). Fully diluted loss per share from continuing operations was (0.70) pence per share (2013: earnings of 6.48 pence per share). cash flow The Group generated £12.0 million of Adjusted EBITDA in 2014, which excludes £0.3 million paid in relation to onerous leases. Working capital movements reduced the cash generated from continuing operations to an inflow of £3.1 million. Trade and other receivables were significantly higher than the previous year at £33.0 million (2013: £24.9 million), reflecting the balance sheet impact of the acquisitions made during the year combined with strong sales towards the end of 2014 in line with expectations. Banking facilities were renegotiated with The Royal Bank of Scotland in the year, resulting in a cash inflow of £10.0 million which was used to partially fund the acquisition of Current Analysis Inc. Capital expenditure (excluding balances in relation to acquisitions) was £2.3 million in 2014 (£0.4 million in 2013). This included £1.1 million on software (£0.1 million in 2013). currency rate risk The Group’s primary objective in managing foreign currency risk is to protect against the risk that the eventual Sterling net cash flows will be affected by changes in foreign currency exchange rates. To do this, the Group enters into foreign exchange contracts that limit the risk from movements in US dollar, Euro and Indian Rupee exchange rates with Sterling. Whilst commercially this hedges the Group’s currency exposures, it does not meet the requirements for hedge accounting and accordingly any movements in the fair value of the foreign exchange contracts are recognised in the income statement. liquidity risk and going concern The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it has sufficient liquidity to meet its liabilities as they fall due with surplus facilities to cope with any unexpected variances in timing of cash flows. The Group meets its day-to-day working capital requirements through free cash flow. The Group has an overdraft facility of £2 million, which was not utilised as at 31 December 2014 and management do not forecast utilisation of this facility in the next 18 months. Based on cash flow projections, the Group considers the existing financing facilities to be adequate to meet short-term commitments. The Directors have a reasonable expectation that there are no material uncertainties that cast significant doubt about the Group’s ability to continue as a going concern. Accordingly, the Group has prepared the Annual Report and Accounts on a going concern basis. 9 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Strategic report chief executive’s report principal risks and uncertainties The directors consider that the principal risks and uncertainties facing the Group are: risk area Failure to respond to changes in the competitive landscape or failure to establish marketing and product initiatives which maintain the competitiveness of our products. mitigating actions The Group continues to invest in its products and marketing function. opportunity Our focus on the quality of our products and services means we are able to respond to changes in the competitive landscape and the needs of our clients. This allows us to continue to deliver value and premium content to our clients. risk area When acquiring strategic fit businesses or assets, the Group is exposed to the usual risks associated with acquisitive growth, for example finding suitable targets and then successfully integrating them into the Group post acquisition. mitigating actions We mitigate the risks by a) using strict financial and commercial criteria when assessing acquisition targets, b) following thorough due diligence procedures during the acquisition process and c) adopting rigorous step by step integration plans. All acquisitions are assessed and monitored closely by the Board. opportunity Strategic fit acquisitions are a key component of our corporate growth strategy and will allow us to increase our global footprint and access high growth markets. risk area The Group remains exposed to uncertain economic conditions. mitigating actions A key part of the Group’s strategy is global expansion, particularly in Asia, Australia, North America and Latin America. Our ongoing expansion therefore mitigates our risk and reduces our exposure to localised economic turbulence such as in the Eurozone. opportunity The Group has shown good progress throughout the tough economic conditions and has put in place the building blocks for future growth during this period. We remain confident that we are well positioned for future growth and are in a position to exploit more favourable trading conditions if and when they present themselves. risk area The Group is reliant on its sales force and critical to its success is the recruitment and retention of skilled sales personnel. mitigating actions An in-house recruiting team is used to actively recruit key staff and a high-performance culture rewards success to retain skilled sales personnel. The Group also has in place a long term incentive scheme titled the Capital Appreciation Plan (“CAP”) which is used to attract and engage key personnel. opportunity Creating a high performance culture and an actively engaged team will consequently lead to the delivery of the Group’s strategic objectives. 10 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Strategic report chief executive’s report principal risks and uncertainties (continued) risk area The Group is reliant on its external IT network infrastructure and is exposed to related security risks such as hacking. mitigating actions The Group continually invests in security and the Board regularly monitors the risks identified as part of the risk register review. During 2013, Grant Thornton UK LLP conducted an independent review of the external network infrastructure on behalf of the Board. opportunity Enhanced control environment, minimising operational loss or fraud. risk area Future growth is dependent on the quality of the products and services that we offer to our customers. mitigating actions Across our product sets we have stringent quality guidelines and use external assurance firms to ensure that our products and services meet the high standards set by the Group. During the year, the Group engaged an external firm to review its research quality control processes. opportunity Our focus on quality allows us to continue to deliver premium content to our clients. risk area Whilst the Group has confidence in its business plan and internal control framework, it recognises that there may be an internal or external unforeseen event beyond the control of the Group which may significantly affect the operations of the Group. mitigating actions The Group has a detailed disaster recovery and continuity plan. opportunity In the event of such a scenario, the recovery and continuity plan will minimise the operational loss and reduce the impact on the Group of any such event. risk area The Group operates globally and enters into contracts and transactions denominated in currencies other than Sterling. As a result, the Group is exposed to the risk that eventual Sterling cash flows will be affected by changes in foreign currency exchange rates. mitigating actions The Group enters into foreign exchange contracts that limit the risk from movements in US dollar, Euro and Indian Rupee. opportunity The Group operates globally and therefore having the flexibility to enter into contracts in the customer’s functional currency is a key market advantage. Simon pyper Chief Executive 2 March 2015 11 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Directors’ report the Directors Mike Danson executive chairman Mike Danson is Founder and Chairman of Progressive Digital Media Group. He founded Datamonitor, an online information company, in 1990. In 2000, Datamonitor completed its flotation on the London Stock Exchange and was sold to Informa for £502 million in 2007. He founded Progressive Digital Media Group in 2009 by reversing into TMN Media. He has a number of other business and property investments. Simon Pyper chief executive Simon Pyper is Founder and Chief Executive of Progressive Digital Media Group. Previously, Simon was Group Finance Director of Datamonitor until its sale to Informa. During his tenure at Datamonitor he supported the business as it delivered significant increases in revenues, earnings and shareholder returns. Simon received an MBA from Henley in 2003 and is a qualified accountant. Bernard Cragg non-executive Director Bernard Cragg currently sits on the boards of Alternative Networks Plc, Astro Malaysian Holdings Berhad, Astro Overseas Limited and Astro All Asia Network Limited. Bernard qualified with Price Waterhouse as a chartered accountant before joining Carlton Communications Plc as Group Financial Controller. He became Chief Financial Officer and Finance Director and was a key part of the team which transitioned the company from a small entrepreneurial firm into a major television company. Bernard was the Chairman of Datamonitor and during his time there he was an integral part of the executive team which oversaw the rapid growth of the business and its eventual successful sale in 2007. Mark Freebairn non-executive Director Mark Freebairn is the head of the CFO practice and a member of the Board Practice at Odgers Berndtson, one of the UK’s leading executive search firms. Mark has over eighteen years of experience in the recruitment and executive search industry working principally in board-level recruitment. Mark has been retained by a number of quoted companies across a broad range of industry sectors to find and recruit both executive directors and non-executive directors who can help deliver on their strategic and operational objectives. Peter Harkness non-executive Director Peter Harkness has 31 years experience as a director or chairman of several successful businesses, predominantly in the media sector. Peter has played an active role in a number of private equity deals and has gained extensive experience on the boards of both public and private companies. He is currently chairman of Chrysalis Venture Capital Trust, of the publishing and e-commerce group MyTimeMedia and of Texere Publishing Ltd, a science publisher. Peter was a non-executive director of Datamonitor until its sale to Informa. In recent years he has also been Chairman of the Butler Group until its sale to Datamonitor and was Executive Chairman of media monitoring group, Precise Media, until it was sold to Phoenix Private Equity. Kelsey van Musschenbroek non-executive Director Kelsey van Musschenbroek joined the Group as a Non-Executive Director on 1 September 2010 upon the acquisition of Canadean. Prior to this, Kelsey was one of the founders of Canadean and has been a director of Canadean since its beginnings in the early 1970’s as a specialist strategic think tank for the food and drinks industry. Kelsey has a wealth of experience in market research and analysis including the food and drinks industry, and in particular European soft drinks. After graduating from St Andrew’s University, he joined the Financial Times, finishing his time there as Commercial Editor with special responsibility for the international food and drinks industries. 12 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Directors’ report corporate governance report The Group is committed to high standards of corporate governance. Companies can choose to voluntarily adopt the UK Corporate Governance Code. Whilst the Group does not voluntarily adopt the Code, we have reported on our Corporate Governance arrangements on pages 13 to 17 by drawing upon best practice available, including those aspects of the UK Corporate Governance Code we consider to be relevant to the company and best practice. the Board The Group is led by the Board, which is made up of two executive directors and four non-executive directors. The Chairman of the Board is Mike Danson who has been Chairman since the reverse acquisition in June 2009. The Board has identified Bernard Cragg as the senior independent non-executive director. The non-executive directors’ shareholdings are detailed in the directors’ interests table on page 16 of the report. The Board has determined that all the non-executive directors are independent and that their shareholding in the Company does not affect their independence. In 2014, the Board met 12 times during the year and there is a formal schedule of matters reserved for the consideration of the Board. The Board is responsible to the shareholders for the proper management of the Group. The Board sets and monitors the Group strategy, reviewing trading performance, ensuring adequate funding, examining development possibilities and formulating policy on key issues. The Board is also responsible for monitoring the risk and control environment. The Chairman is responsible for the running of the Board and together with the Board members, determining the strategy of the Group. The Chief Executive is responsible for the running of the Group’s businesses. The non-executive directors have the opportunity to meet without the executive directors in order to discuss the performance of the Board, its committees and individual directors. All directors are required to stand for re-election every year. The terms and conditions of appointment of the non-executive directors are available for inspection at our registered office. The Company Secretary ensures that the Board and its committees are supplied with papers to enable them to consider matters in good time for meetings and to enable them to discharge their duties. Procedures are in place for the directors in the furtherance of their duties to take independent professional advice, if necessary at the company’s expense. The Board has established audit and remuneration committees with mandates to deal with specific aspects of its business. The table below details the membership and attendance of individual directors at Board and committee meetings held during the year ended 31 December 2014. Board meetings during the year: Number of meetings Peter Harkness Bernard Cragg Mark Freebairn Kelsey van Musschenbroek Mike Danson Simon Pyper Board audit committee remuneration committee 12 12 12 11 12 12 11 4 4 4 4 3 n/a n/a 2 2 2 2 2 n/a n/a remuneration committee The Remuneration Committee comprises the Chairman Mark Freebairn, Peter Harkness, Bernard Cragg and Kelsey van Musschenbroek. The Remuneration Committee is responsible for determining the service contract terms, remuneration and other benefits of the executive directors, details of which are set out in the Remuneration Report on pages 18 and 19. The terms of reference of the Remuneration Committee are available for inspection on request. audit committee The Audit Committee comprises the Chairman Bernard Cragg, Peter Harkness, Mark Freebairn and Kelsey van Musschenbroek. Bernard Cragg is a Chartered Accountant with recent and relevant financial experience. The Committee met four times in the year with the external auditors in attendance. The Committee is responsible for reviewing the Interim Report and the Annual Report and Accounts and it oversees the controls necessary to ensure the integrity of the financial information reported to shareholders. The Audit Committee discusses the nature, scope and findings of the audit with the external auditors and monitors the independence of the external auditors. The Committee is also responsible for considering the appointment or re-appointment of external auditors and the audit fee. The terms of reference of the Audit Committee are available for inspection on request. 13 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Directors’ report corporate governance report (continued) audit committee (continued) The Audit Committee discharges its responsibilities through receiving reports from management and advisers, working closely with the auditors, carrying out and reviewing risk assessments and taking counsel where appropriate in areas when required to make a judgement. The Audit Committee has considered the need for a separate internal audit function but due to the size of the Group and procedures in place to monitor both trading performance and internal controls, it was concluded the costs of a separate internal audit department would outweigh the benefits. internal control and risk management The Board has overall responsibility for the Group’s system of internal controls and for monitoring its effectiveness. However, such a system is designed to manage rather than eliminate risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The directors review the effectiveness of the Group’s system of internal controls. This review extends to all controls including financial, operational, compliance and risk management. Formal risk review is a regular board agenda item. The key controls in place have been reviewed by the Board and comprise the following: The preparation of comprehensive annual budgets and business plans integrating both financial and operational performance objectives, with an assessment of the associated business and financial risks. The overall Group budget and business plan is subject to approval by the Board. Weekly revenue reports are produced and reviewed by management. Monthly management accounts are prepared and reviewed by the Board. This includes reporting against key performance indicators and exception reporting. An organisational structure with formally defined lines of responsibility. Authorisation limits have been set throughout the Group. The quarterly preparation and Board review of management accounting control checklists. going concern As highlighted in note 18 to the financial statements the Group meets its day-to-day working capital requirements through free cash flow. The Group has an overdraft facility of £2 million, none of which was utilised as at 31 December 2014. Based on cash flow projections the Group considers the existing financing facilities to be adequate to meet short-term commitments. The Directors have a reasonable expectation that there are no material uncertainties that cast significant doubt about the Group’s ability to continue as a going concern. Accordingly, the Group has prepared the Annual Report and Accounts on a going concern basis. Shareholder relationships The Company operates a corporate website at www.progressivedigitalmedia.com where information is available to potential investors and shareholders. The Board will use the Annual General Meeting to communicate with shareholders and seek their participation. The Notice of the Annual General Meeting will be circulated more than 21 working days prior to the meeting. employee policies The Group places considerable value on the involvement of its employees and keeps them informed on matters affecting them as employees and on the factors affecting the performance of the Group. This is achieved through formal and informal meetings. The Group benefits from the diversity and variety of its workforce and is fully committed to maintaining and encouraging diversity. It is the Group’s policy to give full and fair consideration to the employment of disabled persons, the continuing employment of employees becoming disabled, and to the full development of the careers of disabled employees, having regard to their particular abilities. The Group does not discriminate on the grounds of gender, race, disability, sexuality, religion, philosophical belief, political belief, trade union membership or age as guided by the Equality Act 2010. At 31 December 2014, the Group employed the following number of employees of each gender: Male Female 2014 no. 720 379 1,099 2013 no. 585 288 873 Health and safety It is the policy of the Group to conduct all business activities in a responsible manner, free from recognised hazards and to respect the environment, health and safety of our employees, customers, suppliers, partners, neighbours and the community at large. 14 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Directors’ report corporate governance report (continued) political donations The Group has not made any political donations during the year. Subsequent events There have been no material subsequent events. Financial instruments Use of financial instruments and exposure to various financial risks has been discussed within the Strategic Report (page 9). Future developments Future developments have been discussed within the Strategic Report (page 7). 15 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Directors’ report Directors’ interests Details of the company’s share capital are set out in note 22 to the financial statements. As at 2 March 2015, Mike Danson had a beneficial interest of 66.14 per cent of the issued ordinary share capital of the Company. No other person has notified any interest in the ordinary shares of the Company, in accordance with AIM Rule 17. The interests of the directors in the ordinary shares of the Company were as follows: Mike Danson Bernard Cragg Mark Freebairn Peter Harkness Kelsey van Musschenbroek Simon Pyper number of ordinary shares 50,441,580 140,000 48,944 70,000 374,780 171,048 16 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Directors’ report audit committee report The Audit Committee plays an important role in the governance of the Group and I am pleased to present our report to you for 2014. As Chairman of the Audit Committee it is my responsibility to ensure that the Committee is rigorous and effective in its role of monitoring and reviewing: The integrity of the financial statements of the Group and any formal announcements relating to financial performance The effectiveness of internal controls and risk management framework The integrity of the Group’s relationship with the external auditors and the effectiveness of the audit process During the year the Audit Committee met on four occasions and I am satisfied that we were presented with papers of good quality and in a timely fashion. The Audit Committee consists of Bernard Cragg (Chairman), Peter Harkness, Mark Freebairn and Kelsey van Musschenbroek. the integrity of financial reporting We reviewed the integrity of the financial statements and all formal announcements relating to financial performance during 2014. As part of the review, we engaged in discussion with the external auditors on whether significant areas of judgement and significant risks were adequately reported and disclosed. We have adopted the enhanced audit report for the 2014 Annual Report and Accounts. This is not a mandatory requirement, as the Group is AIM listed and has not voluntarily adopted the UK Corporate Governance Code; however the enhanced disclosure has been included as a matter of best practice. the effectiveness of internal controls and risk management framework The Committee has a clear process for identifying, evaluating and managing risk. Significant risks faced by the Group are documented in the Group’s risk register and considered regularly. The external auditors include a review of the Group’s risk register in their audit approach. Furthermore, the Board holds an ‘Away Day’ each year when the Group’s performance, strategy and significant risks are critically evaluated, including a review of the effectiveness of internal controls. The Audit Committee has carried out the following specific actions during the year: Engaged the Group’s auditors (Grant Thornton UK LLP) to perform a review of content ownership and quality control procedures Conducted a review of the Group’s corporate governance policies external auditor The Committee recommends the reappointment of Grant Thornton UK LLP for 2015. We believe their independence, the objectivity of the external audit and the effectiveness of the audit process is safeguarded and remains strong. This is displayed through their robust internal processes, their continuing challenge, their focused reporting and their discussions with both management and the Audit Committee. We judge Grant Thornton UK LLP through the quality of their audit findings, management’s response and stakeholder feedback. In order to maintain the independence of the external auditors, the Board has determined that non-audit work will not be offered to the external auditors unless there are clear efficiencies and value added benefits to the Group. The Audit Committee annually reviews the remuneration received by the auditors for audit services and non-audit work. Their audit and non- audit fees are set, monitored and reviewed throughout the year (see note 4 of the Financial Statements). The non-audit fees in the year were not material in the context of the overall fee and the Committee deemed that no conflict existed between such audit and non-audit work. tenure of auditor Grant Thornton UK LLP have been the Auditor for the Group since the reverse takeover of TMN Group Plc in 2009 and were also the Auditor of TMN Group Plc prior to that date. To maintain the objectivity of the audit process the Group actively supports audit partner rotation. Bernard cragg Chairman of the Audit Committee 2 March 2015 17 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Directors’ report Directors’ remuneration report unaudited information the remuneration committee I am pleased to present the Remuneration Committee’s report to you for 2014. The Remuneration Committee consists of the Chairman Mark Freebairn, Peter Harkness, Bernard Cragg and Kelsey van Musschenbroek. In the matters to be decided, members have no personal financial interests, other than as shareholders. Directors’ remuneration policy The Board is responsible for setting the Group’s policy on directors’ remuneration and the Remuneration Committee decides on the remuneration package of each executive director. The primary objectives of the Group’s policy on executive remuneration are that it should be structured so as to attract and retain executives of a high calibre with the skills and experience necessary to develop the Company successfully and, secondly, to reward them in a way which encourages the creation of value for the shareholders. The performance measurement of the executive directors and the determination of their annual remuneration package is undertaken by the Remuneration Committee. No director is involved in setting his own remuneration. The main elements of the executive directors’ remuneration are: Basic annual salary - The salaries of the executive directors are reviewed annually and reflect the executives’ experience, responsibility and the Group’s market value. Bonus - Based upon performance. Other benefits - Other benefits include medical cover and car allowances. Share based payments - Full details of the share option scheme operated by the Group are set out in note 23. non-executive directors’ remuneration All non-executive directors have letters of appointment and their remuneration is determined by the Board, having considered the level of fees in similar companies. Non-executive directors are not entitled to any pension contributions. Directors’ service agreements It is the Group’s policy that directors should not have service agreements with notice periods capable of exceeding twelve months. The existing service agreements have neither fixed terms nor contractual termination payments but do have fixed notice periods. Non-executive directors have letters of appointment with the Company. The details of the service agreements of the current directors are: non-executive Directors Peter Harkness Bernard Cragg Mark Freebairn Kelsey van Musschenbroek executive Directors Mike Danson Simon Pyper Directors’ emoluments non-executive Directors Peter Harkness Bernard Cragg Mark Freebairn Kelsey van Musschenbroek executive Directors Mike Danson Simon Pyper contract date 25 June 2009 20 July 2009 13 July 2009 1 September 2010 notice period 1 month 1 month 1 month 1 month 1 October 2008 25 June 2009 12 months 12 months Basic salary £’000s Share based payment £’000s other benefits £’000s 2014 total £’000s 2013 total £’000s 30 50 30 30 50 290 - - - - - 714 - - - - 36 1 30 50 30 30 86 1,005 30 50 30 30 87 344 The other benefits consist of company cars and health insurance cover. 18 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Directors’ report Directors’ remuneration report (continued) Directors’ emoluments (continued) As at 31 December 2014 Simon Pyper had 1,120,000 share options in issue (2013: 700,000). During 2014, Simon Pyper received 700,000 share options and in March 2014, 280,000 share options were exercised at an exercise price of £2.55. No other directors have share options. Share options The Group created a share option scheme during the year ended 31 December 2010 and granted the first options under the scheme on 1 January 2011 to certain senior employees. Each option granted converts to one ordinary share on exercise. A participant may exercise their options (subject to employment conditions) at any time during a prescribed period from the vesting date to the date the option lapses. The results for the year ended 31 December 2013 met the first vesting criteria of recording £10 million EBITDA. As a result, during 2014, 1,701,156 options vested. In order for the remaining options to be exercised, the Group’s earnings before interest, taxation, depreciation and amortisation, as adjusted by the Remuneration Committee for significant or one-off occurrences, must exceed targets of £18.5 million and £23.5 million respectively. The Remuneration Committee has increased these targets during the year as a result of the acquisitions made during 2014 (2013: £15 million and £20 million respectively). The total charge recognised for the scheme during the year ended 31 December 2014 was £4.4 million (2013: £1.1 million). The awards of the scheme are settled with ordinary shares of the Company. By order of the Board mark Freebairn Chairman of the Remuneration Committee 2 March 2015 19 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Directors’ report Statement of directors’ responsibilities in respect of the annual report, the Directors’ remuneration report and the financial statements The directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the Group and the parent company financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs). 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 and profit or loss of the company and the Group for that period. In preparing these 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 applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of 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 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 company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. auditors A resolution to reappoint Grant Thornton UK LLP as auditors to the Company will be proposed at the Annual General Meeting. Disclosure of information to auditors The directors confirm that: so far as each director is aware, there is no relevant audit information of which the Group’s auditors are unaware, and the directors have taken all steps that they ought to have taken in order to make themselves aware of any relevant audit information and establish that the Group’s auditors are aware of that information. annual general meeting The Annual General Meeting will be held on 21 April 2015 at John Carpenter House, John Carpenter Street, London EC4Y 0AN at 12pm. On behalf of the Board Simon pyper Chief Executive 2 March 2015 20 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 independent auditor’s report to the members of progressive Digital media group plc our opinion on the group financial statements is unmodified In our opinion the group financial statements: give a true and fair view of the state of the group’s affairs as at 31 December 2014 and of its loss for the year then ended; have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies Act 2006. other matter We have reported separately on the parent company financial statements of Progressive Digital Media Group plc for the year ended 31 December 2014. What we have audited Progressive Digital Media Group plc’s group financial statements comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union. our assessment of risk Without modifying our opinion, we highlight the following matters that are, in our judgement, likely to be most important to users’ understanding of our audit. Our audit procedures relating to these matters were designed in the context of our audit of the consolidated financial statements as a whole, and not to express an opinion on individual transactions, account balances or disclosures. revenue recognition The risk: Under International Standards on Auditing (ISAs) (UK and Ireland), there is a presumed risk of fraud in revenue recognition. Because of this, we focused on revenue recognition, particularly given the Group’s multiple revenue streams which have different recognition criteria dependent upon the service provided or product sold. We therefore identified revenue recognition as a significant risk requiring special audit consideration. Our response: Our audit work included, but was not restricted to, an assessment of the methodology and internal control environment surrounding revenue recognition. This involved assessing the design of key controls in the revenue business cycle as well as reviewing whether the implementation of these key controls were satisfactory. In addition we audited the Group’s revenue recognition policy for each revenue stream and ensured it was in line with IFRSs as adopted by the European Union. We performed substantive testing on a sample of sales transactions throughout the year across each of the revenue streams to ensure revenue is recognised in accordance with the contract terms, having considered the principles of IFRSs as adopted by the European Union and the commercial substance of the contracts. The substantive testing also addressed whether revenue had been recognised in the correct period given when the service was delivered or product was sold and to ensure appropriate cut off procedures have been applied as well as the recognition of revenue on a gross or net basis. The substantive testing addressed accrued income and deferred revenue balances. The Group’s accounting policy in respect of revenue recognition is included in note 2. acquisition of current analysis inc. The risk: On 30 July 2014 the group acquired Current Analysis Inc. and its subsidiaries (‘Current Analysis’) for a cash consideration of $19.6 million. As a result of this acquisition, the Group recorded intangible assets and goodwill of £3.9 million and £11.4m respectively. Key judgements relate to the allocation of the purchase price to the assets and liabilities acquired and adjustments made to align accounting policies. To determine the intangible assets and goodwill arising from the acquisition required the application of a valuation model to determine the fair value of the identifiable intangible assets. We therefore identified the valuation and allocation of the purchase price to the assets and liabilities acquired as a significant risk requiring special audit consideration. Our response: Our audit work included, but was not restricted to, reviewing the sales and purchase agreement to ensure management had identified all the intangible assets, engaging our internal valuations specialists to assist the audit team in assessing the underlying assumptions used in the multi-period excess earnings method model and royalty rate model performed by management, and challenging and testing management’s calculations and assumptions used. This involved challenging both the identification and valuation of intangible assets. The valuation model includes certain assumptions which are judgemental in nature including estimates of future revenue, growth rates, customer retention rates and discount rates. We audited these assumptions with reference to historic data, sensitivity analysis, re- computation and benchmarking against industry data available. 21 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 independent auditor’s report to the members of progressive Digital media group plc (continued) intangibles impairment review The risk: A significant balance on the consolidated balance sheet is intangible assets of £42.4 million, including goodwill of £31.7 million. Goodwill has an indefinite life, and under International Accounting Standard 36: Impairment of Assets (‘IAS 36’) requires an annual review for impairment. Other intangibles are subject to an impairment test when there is an indication that an asset may be impaired. The process for measuring and recognising impairment under IAS 36 is complex and highly judgemental. We therefore identified impairment reviews as a significant risk requiring special audit consideration. Our response: Our audit work included, but was not restricted to, challenging the methodology and assumptions used by management in conducting the impairment review as described in note 11. Our audit work included challenging the forecasts prepared by management where we evaluated the forecasts by comparing it to historic performance and growth rates, understanding the key performance indicators driving revenue and comparing this to market expectations. We have challenged the key assumptions in the model for goodwill and intangible assets such as cash flow projections, discount rates, long term growth rates and sensitivities used. We have also evaluated the disclosures related to impairment review. management override of financial control The risk: Under ISAs (UK and Ireland), for all of our audits we are required to consider the risk of management override of financial controls. Due to the unpredictable nature of this risk we are required to assess it as a significant risk requiring special audit consideration. Our response: Our audit work included, but was not restricted to, specific procedures relating to this risk that are required by ISA (UK and Ireland) 240 ‘The Auditors Responsibilities relating to Fraud in an Audit of Financial Statements’. This included profiling journal entries and focusing on unusual items. We audited a sample of journal entries by tracing the journal entries to source documentation and ensuring these were appropriately approved, they were posted to the correct account codes and correct periods as well as valid company expenses. We evaluated the key judgements and assumptions in management’s estimates and audited the significant transactions outside the normal course of business. This included a detailed review of related party transactions to understand the nature of transaction and movements from the prior year. our application of materiality and an overview of the scope of our audit materiality We apply the concept of materiality in planning and performing our audit, in evaluating the effect of any identified misstatements and in forming our opinion. For the purpose of determining whether the financial statements are free from material misstatement we define materiality as the magnitude of a misstatement or an omission from the financial statements or related disclosures that would make it probable that the judgement of a reasonable person relying on the information would have been changed or influenced by the misstatement or omission. For the Group audit, we established materiality for the consolidated financial statements as a whole to be £404,000, which is approximately 3.5% of Adjusted Earnings before Interest, Taxation, Depreciation and Amortisation (‘EBITDA’). We use Adjusted EBITDA because, in our view, this is the metric against which the financial performance of the Group is measured both internally and externally. We use a different level of materiality, performance materiality, to drive the extent of our testing and this was set at 75% of financial statement materiality for the audit of the group financial statements. We also determine a lower level of specific materiality for certain areas such as directors’ remuneration and related party transactions. We determined the threshold at which we will communicate misstatements to the Audit Committee to be £20,200. In addition we will communicate misstatements below that threshold that, in our view, warrant reporting on qualitative grounds. overview of the scope of our audit We conducted our audit in accordance with International Standards on Auditing (UK and Ireland). Our responsibilities under those standards are further described in the ‘Responsibilities for the financial statements and the audit’ section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We are independent of the Group in accordance with the Auditing Practices Board’s Ethical Standards for Auditors, and we have fulfilled our other ethical responsibilities in accordance with those Ethical Standards. Our audit scope included a full audit of the financial statements of the company, Progressive Digital Media Group Plc. We evaluated controls over key financial systems identified as part of our risk assessment. This included a review of the general IT controls, the accounts production process and the controls addressing critical accounting matters identified in our risk assessment. We undertook substantive testing on significant transactions, balances and disclosures, the extent of which was based on various factors such as our overall assessment of the control environment, the effectiveness of controls over individual systems and the management of specific risks. The Group is predominately based within the UK and comprises a number of subsidiary entities which are centrally managed and controlled. In establishing the overall approach to the Group audit, we determined the UK entities that require an audit, to a subsidiary level of materiality, which provides coverage of over 98% of Group revenues and 98% of Adjusted EBITDA. Whilst the majority of the Group’s operations are located in the UK, there are a number of overseas subsidiaries. We assessed the work required in respect of overseas components to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the consolidated financial statements as a whole. The audit testing for the overseas subsidiaries in respect of the group audit was performed by ourselves. 22 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 independent auditor’s report to the members of progressive Digital media group plc (continued) other reporting required by regulations our opinion on other matters prescribed by the companies act 2006 is unmodified In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the group financial statements are prepared is consistent with the group 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: 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. responsibilities for the financial statements and the audit What an audit of financial statements involves: A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. What the directors are responsible for: As explained more fully in the Statement of Directors’ Responsibilities set out on page 20, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. What are we responsible for: 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 Ethical Standards for Auditors. Who are we reporting to: 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. nicholas page Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Gatwick 2 March 2015 23 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 consolidated income Statement notes Year ended 31 December 2014 £’000s Year ended 31 December 2013 £’000s continuing operations Revenue Cost of sales gross profit Distribution costs Administrative costs Other expenses operating profit Analysed as: adjusted eBitDa1 Items associated with acquisitions and restructure of the Group Exchange rate losses Other adjusting items eBitDa2 Amortisation Depreciation operating profit Finance costs profit before tax from continuing operations Income tax expense (loss)/ profit for the year from continuing operations Loss for the year from discontinued operations (loss)/ profit for the year attributable to: Equity holders of the parent Non-controlling interest 3 5 4 5 5 8 9 25 (loss)/ earnings per share attributable to equity holders from continuing operations: 10 Basic (loss)/ earnings per share (pence) Diluted (loss)/ earnings per share (pence) loss per share attributable to equity holders from discontinued operations: Basic loss per share (pence) Diluted loss per share (pence) total basic (loss)/ earnings per share (pence) total diluted (loss)/ earnings per share (pence) The accompanying notes form an integral part of this financial report. 63,161 (39,294) 23,867 (792) (12,991) (9,306) 778 12,027 (2,606) (498) (5,173) 3,750 (2,425) (547) 778 (484) 294 (887) (593) (1,628) (2,221) (2,106) (115) (0.78) (0.70) (1.99) (1.79) (2.77) (2.50) 54,342 (31,657) 22,685 (878) (11,744) (2,469) 7,594 11,818 (603) (231) (1,103) 9,881 (1,725) (562) 7,594 (311) 7,283 (2,146) 5,137 (633) 4,504 4,487 17 6.90 6.48 (0.87) (0.82) 6.02 5.66 1 We define Adjusted EBITDA as EBITDA adjusted for costs associated with acquisitions, integration, restructure of the Group, share based payments, impairment, exchange rate losses and impact of foreign exchange contracts. See note 5 of the financial statements for details. We present Adjusted EBITDA as additional information because we understand that it is a measure used by certain investors and because it is used as the measure of segment profit or loss. However, other companies may present Adjusted EBITDA differently. EBITDA and Adjusted EBITDA are not measures of financial performance under IFRS and should not be considered as an alternative to operating profit or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measure of performance derived in accordance with IFRS 2 EBITDA is defined as earnings before interest, tax, depreciation, amortisation and impairment. 24 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 consolidated Statement of comprehensive income (Loss)/ profit for the year other comprehensive income Items that will be classified subsequently to profit or loss: Translation of foreign entities Other comprehensive (loss)/ income, net of tax total comprehensive (loss)/ income for the year attributable to: Equity holders of the parent Non-controlling interest The accompanying notes form an integral part of this financial report. Year ended 31 December 2014 £’000s (2,221) Year ended 31 December 2013 £’000s 4,504 (166) (166) (2,387) (2,272) (115) 15 15 4,519 4,502 17 25 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 consolidated Statement of Financial position notes 31 December 2014 £’000s 31 December 2013 £’000s non-current assets Property, plant and equipment Intangible assets Deferred tax assets current assets Inventories Trade and other receivables Short-term derivative assets Cash and cash equivalents total assets current liabilities Trade and other payables Short-term borrowings Current tax payable Short-term derivative liabilities Short-term provisions non-current liabilities Long-term provisions Long-term derivative liabilities Long-term borrowings total liabilities net assets equity Share capital Share premium account Other reserve Special reserve Foreign currency translation reserve Retained profit equity attributable to equity holders of the parent Non-controlling interest total equity 12 11 16 14 15 13 17 18 13 20 20 13 18 22 1,510 42,403 457 44,370 150 33,049 106 8,261 41,566 85,936 (32,567) (1,283) (1,240) (89) (368) (35,547) (84) (26) (15,651) (15,761) (51,308) 34,628 154 200 (37,128) 48,422 (126) 23,106 34,628 - 34,628 831 24,807 1,490 27,128 155 24,877 6 14,178 39,216 66,344 (26,763) - (917) - (644) (28,324) (58) - (5,851) (5,909) (34,233) 32,111 153 - (37,128) 48,422 40 20,508 31,995 116 32,111 These financial statements were approved by the board of directors on 2 March 2015 and signed on its behalf by: michael Danson Chairman Simon pyper Chief Executive The accompanying notes form an integral part of this financial report. Company Number - 03925319 26 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 consolidated Statement of changes in equity l a t i p a c e r a h S m u i m e r p e r a h S t n u o c c a e v r e s e r r e h t o e v r e s e r l a i c e p S e v r e s e r n o i t a l s n a r t y c n e r r u c n g i e r o F e l b a t u b i r t t a y t i u q e f o s r e d l o h y t i u q e o t t n e r a p e h t g n i l l o r t n o c - n o n t s e r e t n i / t fi o r p d e n i a t e r ) s s o l ( y t i u q e l a t o t £’000s £’000s £’000s £’000s £’000s £’000s £’000s £’000s £’000s Balance at 1 January 2013 153 71,368 (37,128) Profit for the year other comprehensive income: Translation of foreign entities total comprehensive income for the year Transactions with owners: Transfer between reserves Capital reduction Dividends Share based payments charge Excess deferred tax on share based payments - - - - - - - - Balance at 31 December 2013 153 Loss for the year other comprehensive income: Translation of foreign entities total comprehensive loss for the year Transactions with owners: Issue of share capital: ERC acquisition Issue of share capital: share based payments scheme Dividends Share based payments charge Excess deferred tax on share based payments - - - - 1 - - - - - - 25 (71,393) - - - - - - - 200 - - - - - - - - - 48,422 - - - - - - - - - - - (37,128) 48,422 - - - - - - - - - - - - - - - - 25 - 15 15 - - - - - (7,942) 26,476 4,487 4,487 107 17 26,583 4,504 - 15 4,487 4,502 (25) 22,971 - - - - 1,127 1,127 (110) (110) - 17 - - (8) - - 15 4,519 - - (8) 1,127 (110) 40 - 20,508 31,995 (2,106) (2,106) 116 (115) 32,111 (2,221) (166) (166) - (166) - (166) (2,106) (2,272) (115) (2,387) - - - - - - (1) - 200 - - 4,371 4,371 334 334 Balance at 31 December 2014 154 200 (37,128) 48,422 (126) 23,106 34,628 The accompanying notes form an integral part of this financial report. - - (1) - - - 200 - (1) 4,371 334 34,628 27 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 consolidated Statement of cash Flows Year to 31 December 2014 £’000s Year to 31 December 2013 £’000s continuing operations cash flows from operating activities (Loss)/ profit for the year from continuing operations Adjustments for: Depreciation Amortisation Finance costs Taxation recognised in profit or loss Profit on disposal of subsidiary Loss on disposal of property, plant and equipment Revaluation of foreign currency loan Share based payments charge Increase in trade and other receivables Decrease in inventories Increase in trade payables Revaluation of short-term derivatives Movement in provisions cash generated from continuing operations Interest paid (continuing operations) Income taxes paid (continuing operations) net cash from operating activities (continuing operations) Net decrease in cash and cash equivalents from discontinued operations total cash flows from operating activities cash flows from investing activities (continuing operations) Acquisition of Pyramid Research Acquisition of ERC Group Acquisition of Current Analysis Inc Proceeds from disposal of subsidiary Purchase of property, plant and equipment Purchase of intangible assets net cash used in investing activities (continuing operations) Net increase/ (decrease) in cash and cash equivalents from discontinued operations total cash flows from investing activities cash flows from financing activities (continuing operations) Repayment of short-term borrowings Proceeds from long-term borrowings net cash generated from/ (used in) financing activities (continuing operations) Net decrease in cash and cash equivalents from discontinued operations total cash flows from financing activities net (decrease)/ increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effects of currency translation on cash and cash equivalents cash and cash equivalents at end of year The accompanying notes form an integral part of this financial report. 28 (593) 547 2,425 484 887 (106) 8 902 4,371 (5,927) 5 396 15 (299) 3,115 (220) (1,364) 1,531 (1,281) 250 (2,006) (543) (11,168) 58 (1,212) (1,128) (15,999) 4 (15,995) - 10,000 10,000 (6) 9,994 (5,751) 14,178 (166) 8,261 5,137 562 1,725 311 2,146 - 8 - 1,127 (7,544) 25 680 (24) (642) 3,511 (214) (623) 2,674 (114) 2,560 - - - - (213) (149) (362) (24) (386) (500) - (500) (8) (508) 1,666 12,497 15 14,178 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 notes to the consolidated Financial Statements 1. General information nature of operations The principal activity of Progressive Digital Media Group Plc and its subsidiaries (‘the Group’) is to provide its customers with high quality information and services through multiple channels in a rapidly changing economic environment. The unique and up to date knowledge and information we provide enables organisations to gain competitive advantage and market share within the sectors we cover. Progressive Digital Media Group Plc (‘the Company’) is a company incorporated in the United Kingdom and listed on the Alternative Investment Market. The registered office of the Company is John Carpenter House, John Carpenter Street, London, EC4Y 0AN. The registered number of the Company is 03925319. Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention as modified by the revaluation of derivative financial instruments. These financial statements have been prepared in accordance with the accounting policies detailed below. The accounting policies have been applied consistently throughout the Group. These financial statements are presented in Pounds Sterling (£), which is also the functional currency of the Company. These financial statements have been approved for issue by the board of directors. critical accounting estimates and judgements The Group makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may deviate from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year relate to valuation of acquired intangible assets, provisions for share based payments, provision for bad debts and carrying value of goodwill and other intangibles. Valuation of acquired intangibles Management identified and valued acquired intangibles on acquisitions that were made during the periods disclosed in the financial statements. Management has applied judgements in identifying and valuing intangible assets separate from goodwill that consist of assessing the value of software, brands, intellectual property rights and customer relationships. The intangibles were valued based on either the net present value of the future cash flows associated with the intangible, or on the cost to recreate an intangible. Assumptions are made on the useful life of an intangible and if shortened, would increase the amortisation charge recognised in the income statement. The identified intangibles are set out in note 11. There are a number of assumptions in estimating the present value of future cash flows including management’s expectation of future revenue, renewal rates for subscription customers, costs, timing and quantum of future capital expenditure, long-term growth rates and discount rates. Share based payments The Group operates a share based compensation plan under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options and awards is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted, excluding the impact of any non-market service and performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period). Non-market vesting conditions are included in assumptions about the number of options and awards that are expected to vest. The total amount expensed is recognised over the vesting period, which is the period over which all of the specified existing conditions are to be satisfied. At each reporting date, the entity revises its estimates of the number of options and awards that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to the share based payments reserve within equity. Additional disclosures on the calculation of share based payments are provided in note 23. Provision for bad debt The Group is required to judge when there is sufficient objective evidence to require the impairment of individual trade receivables. It does this on the basis of the age of the relevant receivables, external evidence of the credit status of the customer entity and the status of any disputed amounts. The provision for bad debts and the ageing of overdue trade receivables are included in note 15 to the financial statements. Additional disclosures on the assumptions behind the provision are provided in note 19 within the section on credit risk. Carrying value of goodwill and other intangibles The carrying value of goodwill and other intangibles is assessed at least annually to ensure that there is no need for impairment. Performing this assessment requires management to estimate future cash flows to be generated by the related cash generating unit, which entails making judgements including the expected rate of growth of sales, margins expected to be achieved, the level of future capital expenditure required to support these outcomes and the appropriate discount rate to apply when valuing future cash flows. See note 11 for further details on intangibles and goodwill. 29 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 going concern The Group meets its day-to-day working capital requirements through free cash flow. As highlighted in note 18 to the financial statements the Group has an overdraft facility of £2 million, none of which was utilised as at 31 December 2014. Based on cash flow projections the Group considers the existing financing facilities to be adequate to meet short-term commitments. In July 2014, the Group refinanced its debt position. A US$17 million term loan was issued by The Royal Bank of Scotland to partially fund the acquisition of Current Analysis Inc (refer to acquisitions detailed in note 26). This is repayable in quarterly instalments over 4 years. The first instalment is due for repayment in July 2015, with total repayments due in 2015 being US$2 million. Additionally, The Royal Bank of Scotland issued a £20 million revolving capital facility (RCF). As at 31 December 2014, the Group had drawn down £6.4 million of this facility. The £2 million overdraft discussed above and £1 million for potential interest rate hedging also offset against the RCF leaving a remaining undrawn balance of £10.6 million as at 31 December 2014. Interest is charged on the term loan and drawn down RCF at a rate of 2.25% over the London Interbank Offered Rate. Interest is charged on the undrawn RCF at 0.9%. These new arrangements replaced the existing £6 million RCF which was arranged in October 2011 and was due for repayment in 2015. The finance facilities were issued with debt covenants which are measured on a quarterly basis. There were no breaches of these covenants during the year and as at 31 December 2014. Management have reviewed forecasted cash flows and there is no indication that there will be any breach in the next 12 months. The Directors have a reasonable expectation that there are no material uncertainties that cast significant doubt about the Group’s ability to continue as a going concern. Accordingly, the Group has prepared the annual report and financial statements on a going concern basis. 2. Accounting policies a) Basis of consolidation The consolidated financial statements include the accounts of the Company and all of its subsidiary undertakings. Subsidiaries are those entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an enterprise taking into account any potential voting rights. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated; unrealised losses are also eliminated unless costs cannot be recovered. Where necessary, accounting policies of subsidiaries have been changed to ensure consistency with the Group’s accounting policies. The results and cash flows relating to a business are included in the consolidated income statement and the consolidated statement of cash flows from the date of acquisition or are excluded from the date of disposal as appropriate. b) change to accounting policies This report has been prepared based on the accounting policies detailed in the Group’s financial statements for the year ended 31 December 2014 and is consistent with the policies applied in the previous year. c) international Financial reporting Standards (“Standards”) in issue but not yet effective The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective: IFRS 9 Financial Instruments (IASB effective date 1 January 2018) IFRS 14 Regulatory Deferral Accounts (effective 1 January 2016) IFRS 15 Revenue from Contracts with Customers (effective 1 January 2017) Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations (IASB effective date 1 January 2016) Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38 (IASB effective date 1 January 2016) Annual Improvements to IFRSs 2012-2014 Cycle (effective 1 January 2016) Amendments to IAS 16 and IAS 41: Bearer Plants (effective 1 January 2016) Amendments to IAS 27: Equity Method in Separate Financial Statements (effective 1 January 2016) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (effective 1 January 2016) It is anticipated that there will be minimal impact on the financial statements from the adoption of these new and revised standards. d) revenue recognition Revenue is measured at the fair value of consideration received or receivable and comprises amounts derived from services performed by the Group during the year. Subscription revenue is recognised on a straight-line basis over the period of the contractual term Print media revenue is recognised on publication Event revenue is recognised when the event is held Internet revenue is recognised on a straight-line basis over the contractual term (typically twelve months) Revenue from email advertising, lead generation sources and website publishing is recognised on completion of the relevant campaign or transaction after all performance criteria have been fulfilled. Commission from pay for performance actions such as clicks, leads or sales generated resulting from advertising of a merchant’s products or services on customers’ websites is recognised on completion of performance criteria and any defined cancellation period 30 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 d) revenue recognition (continued) Revenue from the provision of online research and fieldwork services is recognised by reference to stage of completion. Stage of completion is measured by reference to the extent of services completed on a project by project basis Where amounts have been invoiced in advance of services performed, this is included within deferred revenue. e) property, plant and equipment Property, plant and equipment is stated at historic cost, including expenditure that is directly attributable to the acquired item, less accumulated depreciation and impairment losses. Depreciation is calculated on a straight line basis over the estimated useful life of an asset and is applied to the cost less any residual value. The asset classes are depreciated over the following periods: Fixtures, fittings and equipment – over 3 to 5 years Motor vehicles – over 5 years Leasehold improvements – over 3 to 10 years The useful life, the residual value and the depreciation method are reassessed when there is an indication of impairment. Where there is an indication of impairment, the carrying value of the property, plant and equipment is compared to the higher of value in use and the fair value less costs to sell. If the carrying value exceeds the higher of the value in use and fair value less the costs to sell the asset then the asset is impaired and its value reduced. intangible assets f) goodwill Goodwill is recognised to the extent that it arises through a business combination and represents the difference between the consideration transferred and the fair value of net identifiable assets acquired. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to appropriate cash generating units (those expected to benefit from the business combination) and is tested annually for impairment. In testing for impairment, the recoverable amount of a CGU based on value-in-use calculations is compared to the carrying value of goodwill. These calculations use pre-tax cash flow projections based on five-year financial budgets approved by management. Cash flows beyond the five year period are extrapolated using estimated long term growth rates. Any impairment losses in respect of goodwill are not reversed. acquired intangible assets Acquired intangible assets include software, customer relationships, brands and intellectual property rights. These assets are capitalised on acquisition at cost and included in intangible assets. Intangible assets acquired in material business combinations are capitalised at their fair value as determined by reference to the expected present value of their future cash flows. Intangible assets are amortised on a straight-line basis over their estimated useful lives of three to ten years for brands and customer relationships and twenty years for IP rights. Amortisation charges are accounted for within the administrative costs category within the income statement. Impairment charges are accounted for within the other expenses category within the income statement. computer software and websites Non-integral computer software purchases are capitalised at cost as intangible assets. The Group also capitalises development costs associated with new products in accordance with the development criteria prescribed within IAS 38 “Intangible Assets”. These costs are amortised over their estimated useful lives of 3 years. Costs associated with implementing or maintaining computer software programmes are recognised as an expense. Amortisation and impairment charges are accounted for within the administrative costs category within the income statement. impairment of intangible assets Assets that have an indefinite useful life are not subject to amortisation but are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). g) taxation Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year, using rates substantively enacted at the reporting date, and any adjustments to the tax payable in respect of previous years. Deferred taxation is provided in full on temporary differences between the carrying amount of the assets and liabilities in the financial statements and the tax base. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax is determined using the tax rates that have been enacted or substantially enacted by the reporting date, and are expected to apply when the deferred tax liability is settled or the deferred tax asset is realised. Deferred tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is not provided on temporary differences arising on the initial recognition of goodwill or on assets and liabilities other than in a business combination. 31 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Tax is recognised in the income statement, except where it relates to items recognised as other comprehensive income, in which case it is recognised in the statement of other comprehensive income, and tax which related to items recognised in equity is recognised in equity. h) Foreign currencies The results are presented in British Pounds which is the presentation currency of the Group. Foreign currency transactions are translated into Sterling at the rates of exchange ruling at the date of the transaction, and if still in existence at the year end the balance is retranslated at the rates of exchange ruling at the reporting date. Differences arising from changes in exchange rates during the year are taken to the income statement. The assets and liabilities of entities with a functional currency other than Sterling are expressed in Sterling using exchange rates prevailing on the reporting date. Income and expense items and cash flows are translated at the average exchange rates for the period and exchange differences arising are recognised in other comprehensive income. Such translation differences are recognised in the income statement in the period in which a foreign operation is disposed of. i) pensions The Group’s contributions to pension schemes for its employees, all of which are defined contribution schemes, are charged to the income statement as incurred. j) provisions A provision is recognised in the statement of financial position when the Group has a legal obligation or constructive obligation as a result of a past event, it is more likely than not that an outflow of resources will be required to settle that obligation, and a reliable estimate of the amount can be made. Provisions are discounted if the time value of money is material. k) cash and cash equivalents Cash and cash equivalents include cash in hand and deposits held on call, together with other short term highly liquid investments that are readily convertible to known amounts of cash which are subject to an insignificant risk of changes in value. l) operating leases Rentals applicable to operating leases where substantially all of the benefits and risks of ownership do not transfer to the lessee are charged to the income statement on a straight line basis over the period of the lease. Rental income from sub-leasing property space is recognised on a straight line basis over the period of the relevant lease. m) Financial instruments The Group has derivative and non-derivative financial instruments which comprise foreign currency contracts, receivables, cash, loans and borrowings, and trade payables. Financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit and loss, any directly attributable transaction costs. A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are de-recognised if the contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control of substantially all risks and rewards of the asset. Financial liabilities are de-recognised if the Group’s obligations specified in the contract expire or are discharged or cancelled. Cash comprises cash balances and highly liquid call deposits. Bank overdrafts that form an integral part of the Group’s cash management are included as a component of cash for the purpose of the statement of cash flows. Derivative financial instruments The Group uses derivative financial instruments to reduce its exposure to fluctuations in foreign currency exchange rates. Derivatives are measured at fair values and any movement in fair value is recognised in the income statement. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These assets are carried at amortised cost using the effective interest method, less any impairment losses. Accounts receivable are recorded initially at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment due to bad and doubtful accounts. The provision for doubtful debts is based on management’s assessment of amounts considered uncollectible for specific customers or groups of customers based on age of debt, history of payments, account activity, economic factors and other relevant information. The amount of the provision is the difference between the asset’s unamortised cost and the present value of estimated future cash flows, discounted at an effective interest rate. The provision expense is recognised in the income statement. Bad debts are written off against the provision for doubtful debts in the period in which it is determined that the debts are uncollectible. If those debts are subsequently collected then a gain is recognised in the income statement. Trade and other payables Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. inventories n) Inventories are stated at the lower of cost and net realisable value. Cost is determined using a weighted average method. 32 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 o) Borrowings and borrowing costs Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months from the reporting date. Borrowing costs, being interest and other costs incurred in connection with the servicing of borrowings, are recognised as an expense when incurred. p) Share based payments The Group operates a share based compensation plan under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options and awards is recognised as an expense in the income statement. The total amount to be expensed is determined by reference to the fair value of the options granted (determined using the market value at the date of grant), excluding the impact of any non-market service and performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period). Non-market vesting conditions are included in assumptions about the number of options and awards that are expected to vest. The total amount expensed is recognised over the vesting period, which is the period over which all of the specified existing conditions are to be satisfied. At each reporting date, the entity revises its estimates of the number of options and awards that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to the share based payments reserve within equity. 3. Segmental analysis The principal activity of Progressive Digital Media Group Plc (PDMG) and its subsidiaries (‘the Group’) is the provision of premium business information through multiple channels. The Group supplies its customers with research, analysis and tactical intelligence enabling them to gain a competitive advantage in their markets. IFRS 8 “Operating Segments” requires the segment information presented in the financial statements to be that which is used internally by the chief operating decision maker to evaluate the performance of the business and to decide how to allocate resources. The Group has identified the executive directors as its chief operating decision maker. Business information is provided to customers through multiple channels by a dedicated content team that is centrally managed by research directors who report directly to the executive directors. Business information is therefore considered to be the operating segment of the Group. The Group profit or loss is reported to the executive directors on a monthly basis and consists of earnings before interest, tax, depreciation, amortisation, central overheads and other adjusting items. The executive directors also monitor revenue within the operating segment and have decided to include an additional voluntary disclosure analysing revenue by sub-category, being Business Intelligence and Events and Marketing. A reconciliation of Adjusted EBITDA to profit before tax from continuing operations is set out below: Year ended 31 December 2014 £’000s Year ended 31 December 2013 £’000s Business Intelligence Events and Marketing total revenue adjusted eBitDa Exchange rate losses Other expenses (see note 5) Depreciation Amortisation (excluding amortisation of acquired intangible assets) Finance costs profit before tax from continuing operations 38,513 24,648 63,161 12,027 (498) (9,306) (547) (898) (484) 294 geographical analysis From continuing operations Year ended 31 December 2014 Revenue from external customers Year ended 31 December 2013 Revenue from external customers uK £’000s 17,906 uK £’000s 16,543 europe £’000s 22,447 europe £’000s 20,157 north america £’000s rest of World £’000s 15,640 7,168 north america £’000s rest of World £’000s 11,961 5,681 32,742 21,600 54,342 11,818 (231) (2,469) (562) (962) (311) 7,283 total £’000s 63,161 total £’000s 54,342 33 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 4. Operating profit Operating profit is stated after the following expenses relating to continuing operations: Depreciation of property, plant and equipment Amortisation of intangible assets Loss on foreign exchange Operating lease expense – land and buildings Operating lease expense – other Auditor’s remuneration auditor’s remuneration Audit of the Company's and the consolidated financial statements Audit of subsidiary companies' financial statements Services relating to refinancing All other services 5. Other expenses Restructuring costs Property related provisions Exceptional property costs Exceptional legal costs Deal costs M&A costs items associated with acquisitions and restructure of the group Share based payments charge Revaluation of short and long-term derivatives Unrealised foreign exchange loss Amortisation of acquired intangibles total other expenses Year ended 31 December 2014 £’000s Year ended 31 December 2013 £’000s 547 2,425 498 1,970 41 210 562 1,725 231 1,638 35 144 Year ended 31 December 2014 £’000s Year ended 31 December 2013 £’000s 60 85 40 25 210 33 75 - 36 144 Year ended 31 December 2014 £’000s Year ended 31 December 2013 £’000s 2,237 (221) 13 - 146 431 2,606 4,371 15 787 1,527 9,306 392 (222) 93 141 154 45 603 1,127 (24) - 763 2,469 Restructuring costs relates to redundancies and other restructuring, largely in relation to the integration of acquisitions made during the year. Redundancies were announced prior to 31 December 2014. Property related provisions relate to the consolidated income statement impact of the provision made for onerous property leases and dilapidations (see note 20). Exceptional property costs relate to additional costs incurred on properties that are not occupied and are provided for within the onerous property lease provision. Deal costs represent costs incurred in respect of the refinancing of loans issued by the Royal Bank of Scotland in 2014 (see note 18). The M&A costs relate to due diligence and corporate finance activity during the year. The share based payments charge relates to the share option scheme (see note 23). The revaluation of short and long-term derivatives relates to movement in the fair value of the short and long-term derivatives detailed in note 13. Unrealised foreign exchange loss relates to the retranslation of short and long-term loan and trade receivable amounts denominated in foreign currency which were held at 31 December 2014. 34 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 6. Particulars of employees employee benefit expense From continuing operations Wages and salaries Social security costs Pension costs Year ended 31 December 2014 £’000s Year ended 31 December 2013 £’000s 34,046 2,506 499 37,051 26,295 2,102 341 28,738 number of employees The average monthly number of persons, including executive directors, employed by the Group during the year was as follows: Sales and administrative staff 7. Key management compensation Short-term employee benefits Long-term employee benefits Share based payments Year ended 31 December 2014 no. Year ended 31 December 2013 no. 1,023 863 Year ended 31 December 2014 £’000s Year ended 31 December 2013 £’000s 1,526 9 1,737 3,272 1,224 - 359 1,583 Information regarding directors’ remuneration, share options, bonuses and pension contributions are set out in the Directors’ Remuneration Report on pages 18 to 19. 8. Finance income and costs Bank interest (credit)/ charge Loan interest Other interest 9. Income tax income statement current income tax: Current income tax Adjustments in respect of prior years Deferred income tax: Excess of depreciation over capital allowances on property, plant and equipment and intangible assets Deferred tax on acquired intangibles Utilisation of losses Change in corporate tax rate Deferred tax on share based payments Adjustments in respect of prior years total income tax charge in income statement Year ended 31 December 2014 £’000s Year ended 31 December 2013 £’000s (49) 523 10 484 9 298 4 311 Year ended 31 December 2014 £’000s Year ended 31 December 2013 £’000s (1,971) 1 (1,970) 58 336 (52) (68) 842 (33) 1,083 (887) (1,278) (141) (1,419) (15) 156 (1,075) (178) 302 83 (727) (2,146) 35 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 The tax charge is reconciled to the standard corporation tax rate applicable in the UK as follows: Profit on ordinary activities before tax Tax at the UK corporation tax rate of 21.5% (2013: 23.25%) Effects of: Adjustments in respect of prior years Utilisation of losses not previously recognised for deferred tax Deferred tax on share based payments Income not taxable Expenses not deductible for tax Overseas tax not at a standard rate Change in corporation tax rate Unprovided deferred tax 10. Earnings per share Year ended 31 December 2014 £’000s Year ended 31 December 2013 £’000s 294 (63) (32) 21 - - (501) (204) 10 (118) (887) 7,283 (1,693) (58) 6 40 13 (101) (28) (178) (147) (2,146) The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders of the parent company divided by the weighted average number of shares in issue during the year. The Group also has a share options scheme in place and therefore the Group has calculated the dilutive effect of these options. The below table shows earnings per share for both continuing and discontinued operations: continuing operations Basic (Loss)/ profit for the year attributable to ordinary shareholders of the parent company (£000s) Weighted average number of shares (000s) Basic (loss)/ earnings per share (pence) Diluted (Loss)/ profit for the year attributable to ordinary shareholders of the parent company (£000s) Weighted average number of shares* (000s) Diluted (loss)/ earnings per share (pence) Discontinued operations Basic Loss for the year attributable to ordinary shareholders from discontinued operations (£000s) Less minority interest (£000s) Loss for the year attributable to ordinary shareholders of the parent company (£000s) Weighted average number of shares (000s) Basic loss per share (pence) Diluted Loss for the year attributable to ordinary shareholders of the parent company (£000s) Weighted average number of shares* (000s) Diluted loss per share (pence) total Basic (Loss)/ profit for the year attributable to ordinary shareholders of the parent company (£000s) Weighted average number of shares (000s) Basic (loss)/ earnings per share (pence) Diluted (Loss)/ profit for the year attributable to ordinary shareholders of the parent company (£000s) Weighted average number of shares* (000s) Diluted (loss)/ earnings per share (pence) 36 Year ended 31 December 2014 Year ended 31 December 2013 (593) 75,941 (0.78) (593) 84,300 (0.70) (1,628) (115) (1,513) 75,941 (1.99) (1,513) 84,300 (1.79) (2,106) 75,941 (2.77) (2,106) 84,300 (2.50) 5,137 74,487 6.90 5,137 79,262 6.48 (633) 17 (650) 74,487 (0.87) (650) 79,262 (0.82) 4,487 74,487 6.02 4,487 79,262 5.66 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Reconciliation of basic weighted average number of shares to the diluted weighted average number of shares: Basic weighted average number of shares Share options in issue at end of year Diluted weighted average number of shares 31 December 2014 no’000s 31 December 2013 no’000s 75,941 8,359 84,300 74,487 4,775 79,262 * The share options in issue are anti-dilutive in respect of the diluted loss per share calculation in 2014. 11. Intangible assets cost As at 1 January 2013 Additions Disposals As at 31 December 2013 Additions: Business Combinations Additions: Separately Acquired Reclassification from PPE Disposals as at 31 December 2014 amortisation As at 1 January 2013 Charge for the year Disposals As at 31 December 2013 Charge for the year Foreign currency retranslation Reclassification from PPE Disposals Software £’000s customer relationships £’000s Brands £’000s ip rights £’000s goodwill £’000s total £’000s 11,902 27,999 5,563 149 (1,718) 3,994 316 1,128 114 (193) 5,359 (3,395) (893) 1,718 (2,570) (891) (2) (83) 186 11,039 - - 11,039 3,154 - - - - - - - 1,893 - - - 14,193 1,893 (8,590) (307) - (8,897) (736) - - - - - - - (200) - - - - - 11,902 485 - - (120) 12,267 (8,775) (525) - (9,300) (598) - - 120 (9,778) - - 27,999 13,023 - - - 56,503 149 (1,718) 54,934 18,871 1,128 114 (313) 41,022 74,734 (9,360) (30,120) - - (9,360) - - - - (1,725) 1,718 (30,127) (2,425) (2) (83) 306 (9,360) (32,331) as at 31 December 2014 (3,360) (9,633) (200) net book value as at 31 December 2014 As at 31 December 2013 1,999 1,424 4,560 2,142 1,693 - 2,489 2,602 31,662 18,639 42,403 24,807 Included in the above table, is an impairment of £nil (2013: £nil) and amortisation of £nil (2013: £nil), which relate to discontinued operations. Full disclosure on discontinued operations can be found in note 25. impairment tests for goodwill Goodwill is allocated to the Group’s cash generating units (CGUs) identified according to Brands within the Business Information segment as follows: Other Business Information Canadean Kable Pyramid ERC Current Analysis 31 December 2014 £’000s 31 December 2013 £’000s 8,889 7,573 2,222 1,233 335 11,410 31,662 8,844 7,573 2,222 - - - 18,639 The Group tests goodwill annually for impairment. The recoverable amount of a CGU is determined based on value in use calculations. These calculations use pre-tax cash flow projections based on five year financial budgets approved by management. Cash flows beyond the five year period are extrapolated using estimated long term growth rates. 37 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 group Overall, the Group has significant headroom on its net assets and does not believe the assumptions used in the assessment to be critical judgements because of the insensitive nature of the assumptions used. The discount rate used for the Group is 7.67% (2013: 7.73%). assumptions Based upon management’s historical experience and future plans, the Group set assumptions for the Group as a whole. For each of the CGU’s identified above, management then considered whether there would be any specific reason to use different assumptions from those identified for the Group. The key assumptions are: Canadean Kable Pyramid ERC Current Analysis Other BI increase in sales (for years 1 to 5) increase in costs (for years 1 to 5) Discount rate terminal growth rate 2014 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 2013 4.00% 4.00% N/a N/a N/a 3.00% 2014 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 2013 3.00% 3.00% N/a N/a N/a 3.00% 2014 8.94% 7.67% 8.94% 7.67% 8.94% 7.67% 2013 7.00% 7.50% N/a N/a N/a 7.73% 2014 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2013 2.25% 2.25% N/a N/a N/a 2.25% Canadean The intangible assets were purchased as part of the acquisition of Canadean Limited in 2010. The Canadean brand operates within the Business Information operating segment. Canadean is an established brand with strong renewal rates and has good customer relationships with global blue chip organisations. In consideration of the global markets that Canadean addresses, management have deemed it appropriate to add a premium to the Group discount rate to reflect the additional risks associated with overseas markets and foreign exchange. Management have assumed the Canadean revenue growth rate to be 3% in the short term based upon historical growth rates, which will then fall in line with the Group’s terminal growth rate. To trigger an indication of impairment, revenue would need to grow by just 1.4% each year whilst costs increased by 3%. The discount rate would need to rise to 13.10% before an impairment indication was noted. The value in use of the asset group identified within the Canadean CGU has been assessed as at 31 December 2014. Based upon the current forecasts for Canadean, no impairment has been highlighted. The recoverable amount exceeds the CGU’s net assets by £5.7 million. Kable The intangible assets were purchased as part of the acquisition of Kable in 2012. The Kable brand operates within the Business Information operating segment. Kable is an established brand with strong renewal rates and has good customer relationships. The brand is subject to UK public sector market changes, but is not exposed to significant foreign exchange fluctuations and therefore management believe the Group discount rate to be appropriate. Management have assumed the Kable revenue growth rate to be 3% in the short term based upon historical growth rates, which will then fall in line with the Group’s terminal growth rate. To trigger an indication of impairment, revenue would need to decline by 8% each year whilst costs increased by 3%. The discount rate would need to rise to 43% before an impairment indication was noted. The value in use of the asset group identified within the Kable CGU has been assessed as at 31 December 2014. Based upon the current forecasts for Kable, no impairment has been highlighted. The recoverable amount exceeds the CGU’s net assets by £15.9 million. Pyramid The intangible assets were purchased as part of the acquisition of Pyramid on 1 January 2014. The Pyramid brand operates within the Business Information operating segment. Pyramid is an established brand with strong renewal rates and has good customer relationships with global blue chip ICT organisations. In consideration of the global markets that Pyramid addresses, management have deemed it appropriate to add a premium to the Group discount rate to reflect the additional risks associated with overseas markets and foreign exchange. Management have assumed the Pyramid revenue growth rate to be 3% in the short term based upon historical growth rates, which will then fall in line with the Group’s terminal growth rate. To trigger an indication of impairment, revenue would need to grow by just 2% each year whilst costs increased by 3%. The discount rate would need to rise to 12.67% before an impairment indication was noted. The value in use of the asset group identified within the Pyramid CGU has been assessed as at 31 December 2014. Based upon the current forecasts for Pyramid, no impairment has been highlighted. The recoverable amount exceeds the CGU’s net assets by £1.3 million. Although, the assumptions are sensitive, management believe that the Pyramid business is a strong business and are confident that Pyramid will exceed the forecast used in the impairment model. 38 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 ERC The intangible assets were purchased as part of the acquisition of ERC on 28 March 2014. The ERC brand operates within the Business Information operating segment. ERC is an established, stable brand with strong renewal rates and has good customer relationships. Therefore, management have deemed the Group discount rate to be appropriate. Management have assumed the ERC revenue growth rate to be 3% in the short term based upon historical growth rates, which will then fall in line with the Group’s terminal growth rate. To trigger an indication of impairment, revenue would need to grow by just 1.3% each year whilst costs increased by 3%. The discount rate would need to rise to 10.30% before an impairment indication was noted. The value in use of the asset group identified within the ERC CGU has been assessed as at 31 December 2014. Based upon the current forecasts for ERC, no impairment has been highlighted. The recoverable amount exceeds the CGU’s net assets by £0.3 million. Although, the assumptions are sensitive, management believe that the ERC business is a strong business and are confident that ERC will exceed the forecast used in the impairment model. Current Analysis The intangible assets were purchased as part of the acquisition of Current Analysis Inc on 30 July 2014. The Current Analysis brand operates within the Business Information operating segment. Current Analysis is an established brand with strong renewal rates and has good customer relationships with global blue chip ICT organisations. In consideration of the global markets that Current Analysis addresses, management have deemed it appropriate to add a premium to the Group discount rate to reflect the additional risks associated with overseas markets and foreign exchange. Management have assumed the Current Analysis revenue growth rate to be 3% in the short term based upon historical growth rates, which will then fall in line with the Group’s terminal growth rate. To trigger an indication of impairment, revenue would need to decline by 2.8% each year whilst costs increased by 3%. The discount rate would need to rise to 19.30% before an impairment indication was noted. The value in use of the asset group identified within the Current Analysis CGU has been assessed as at 31 December 2014. Based upon the current forecasts for Current Analysis, no impairment has been highlighted. The recoverable amount exceeds the CGU’s net assets by £21.8 million. Other Business Information The Group has other Business Information brands operating in the Business Information segment. It has not been possible to allocate the remaining intangible asset group down to the brand level. The intangible assets classified within ‘Other Business Information’ were identified and recognised as part of the reverse acquisition of TMN Group Plc and the Group has looked at those groups of assets as a whole to assess for impairment. Management believe the Group assumptions to be fair and reflect the operating environment where the Other Business Information brands are situated. Management believe the 3% revenue growth assumption is a fair assessment of the Group’s future growth prospects. Organic growth, in each of the last two years, has exceeded this level. The value in use of the asset group identified within the Other Business Information CGU has been assessed as at 31 December 2014. Based upon the current forecasts for Other Business Information, no impairment has been highlighted. To trigger an indication of impairment, revenue would need to decline by 4.5% each year whilst costs increased by 3%. The discount rate would need to rise to 71% before an impairment indication was noted. The recoverable amount exceeds the CGU’s net assets by £142.2 million. amortisation Amortisation for purchased intangible assets is accounted for within the administrative costs category within the income statement. Amortisation for acquired intangible assets is accounted for within other expenses within the income statement. 39 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 12. Property, plant and equipment cost As at 1 January 2013 Additions Disposals As at 31 December 2013 Additions: Business Combinations Additions: Separately Acquired Reclassification to intangible assets Foreign currency retranslation Disposals as at 31 December 2014 Depreciation As at 1 January 2013 Charge for the year (continuing operations) Disposals As at 31 December 2013 Charge for the year (continuing operations) Charge for the year (discontinued operations) Reclassification to intangible assets Foreign currency retranslation Disposals as at 31 December 2014 net book value as at 31 December 2014 As at 31 December 2013 13. Derivative assets and liabilities Short-term derivative assets Short-term derivative liabilities Long-term derivative liabilities net derivative (liability) / asset Fixtures, fittings & equipment £’000s motor vehicles £’000s leasehold improvements £’000s 3,492 237 (539) 3,190 64 986 (114) (12) (1,132) 2,982 (2,328) (562) 531 (2,359) (545) (6) 83 9 1,116 (1,702) 1,280 831 15 - - 15 - - - - - 15 (15) - - (15) - - - - - (15) - - - - - - 6 226 - - - 232 - - - - (2) - - - - (2) 230 - total £’000s 3,507 237 (539) 3,205 70 1,212 (114) (12) (1,132) 3,229 (2,343) (562) 531 (2,374) (547) (6) 83 9 1,116 (1,719) 1,510 831 31 December 2014 £’000s 31 December 2013 £’000s 106 (89) (26) (9) 6 - - 6 Classification is based on when the derivatives mature. The fair values of derivatives are expected to impact the income statement over the next year, dependant on movements in the fair value of the foreign exchange contracts. The movement in the year was £15,000 (2013: £24,000). The Group uses derivative financial instruments to reduce its exposure to fluctuations in foreign currency exchange rates. The notional values of contract amounts outstanding are: Expiring in the year ending: 31 December 2015 31 December 2016 euro €’000s 2,300 - uS Dollar $’000s indian rupee inr’000s 2,425 750 123,490 - 40 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 14. Inventories Raw materials Work in progress 15. Trade and other receivables Trade receivables Prepayments and accrued income Other receivables Related party receivables (note 27) 31 December 2014 £’000s 31 December 2013 £’000s 55 95 150 77 78 155 31 December 2014 £’000s 31 December 2013 £’000s 26,368 3,115 3,154 412 33,049 19,845 1,960 1,674 1,398 24,877 The contractual value of trade receivables is £28.4 million (2013: £20.7 million). Their carrying value is assessed to be £26.4 million (2013: £19.8 million) after assessing recoverability. The contractual value and the carrying value of other receivables are considered to be the same. Amounts owed by related parties are repayable on demand and are non-interest bearing. The ageing analysis of these trade receivables showing fully performing and past due but not impaired is as follows: Not overdue Not more than 3 months overdue More than 3 months but not more than 1 year 31 December 2014 £’000s 31 December 2013 £’000s 21,047 2,005 3,316 26,368 15,682 1,797 2,366 19,845 The contractual amounts of the Group’s trade receivables are denominated in the following currencies: Pounds Sterling US Dollar Euro Australian Dollar Movement on the Group provision for impairment of trade receivables is as follows: Balance brought forward Provision for receivables impairment Receivables written off during the year as uncollectable Balance carried forward 31 December 2014 £’000s 31 December 2013 £’000s 13,771 10,316 4,064 275 28,426 12,530 4,478 3,404 255 20,667 31 December 2014 £’000s 31 December 2013 £’000s 822 2,280 (1,044) 2,058 2,114 824 (2,116) 822 The creation and release of provision for impaired receivables have been included within revenue in the income statement. Provisions are created and released on a specific customer level on a monthly basis when management assesses for possible impairment. The overall provision is higher than the previous year, which reflects the overall increase in gross trade receivables year on year rather than a deterioration of collectability. The other classes within trade and other receivables do not contain impaired assets. The maximum exposure to credit risk at 31 December 2014 is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security. Before accepting any new customer, the Group uses a credit scoring system to assess the potential customer’s credit quality. The trade receivables outstanding at year end have acceptable credit scores but the Group does not monitor the individual scores of customers to rank trade receivables by such a score. There are no customers who represent more than 5% of the total balance of trade receivables. 41 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 16. Deferred income tax Balance brought forward Created upon acquisition of subsidiary Credited/ (charged) to profit and loss account (continuing operations) Charged to profit and loss account (discontinued operations) Deferred tax recognised directly in reserves in relation to share based payments Change in rate Balance carried forward The provision for deferred taxation consists of the tax effect of temporary differences in respect of: Intangible assets purchased Excess of tax allowances over depreciation on fixed assets Deferred tax on share based payments Trading losses Balance carried forward 31 December 2014 £’000s 31 December 2013 £’000s 1,490 (1,690) 1,151 (760) 334 (68) 457 (1,769) 289 1,934 3 457 2,327 - (549) - (110) (178) 1,490 355 200 860 75 1,490 As at 31 December 2014, the utilisation of the deferred tax asset relating to tax losses is dependent on future taxable profits of approximately £0.0 million and is subject to compliance with taxation authority requirements. The Group has continued to recognise these deferred tax assets as it is probable that there will be available taxable profits to offset these losses based on current forecasts and recent taxable profits in certain subsidiaries. As at 31 December 2014 the Group has unrecognised potential deferred tax assets of £0.2 million. This consisted of gross values of £0.1 million of temporary differences and £0.8 million of unrecognised losses, which would give a future tax benefit of £0.2 million. These tax losses and temporary differences may be available to be carried forward to offset against future taxable income. However their utilisation is contingent on the relevant subsidiaries producing taxable profits over a significant period of time and is subject to compliance with the relevant taxation authority requirements. As at 31 December 2014 these subsidiaries have not made a taxable profit and there is not convincing other evidence that sufficient taxable profit will be available in the future. 17. Trade and other payables Trade payables Other taxation and social security Accruals and deferred revenue 18. Borrowings current Loans due within one year non-current Long-term loans 31 December 2014 £’000s 31 December 2013 £’000s 5,433 1,983 25,151 32,567 6,593 2,489 17,681 26,763 31 December 2014 £’000s 31 December 2013 £’000s 1,283 - 15,651 5,851 overdraft The Group currently has a £2 million overdraft facility, which was not drawn down upon at 31 December 2014. Interest is charged on the overdraft at 2.25% over the Bank of England Base Rate. term loan and rcF US$17m term loan and £20m RCF provided by The Royal Bank of Scotland In July 2014, the Group refinanced its debt position. A US$17 million term loan was issued by The Royal Bank of Scotland to partially fund the acquisition of Current Analysis Inc (refer to acquisitions detailed in note 26). This is repayable in quarterly instalments over 4 years. The first instalment is due for repayment in July 2015, with total repayments due in 2015 being US$2 million. Additionally, The Royal Bank of Scotland issued a £20 million revolving capital facility (RCF). As at 31 December 2014, the Group had drawn down £6.4 million of this facility. The £2 million overdraft discussed above and £1 million for potential interest rate hedging also offset against the RCF leaving a remaining undrawn balance of £10.6 million as at 31 December 2014. 42 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Interest is charged on the term loan and drawn down RCF at a rate of 2.25% over the London Interbank Offered Rate. Interest is charged on the undrawn RCF at 0.9%. These new arrangements replaced the existing £6 million RCF which was arranged in October 2011 and was due for repayment in 2015. Non-current borrowings can be reconciled as follows: Term loan issued by The Royal Bank of Scotland RCF issued by The Royal Bank of Scotland Capitalised fees, net of amortised amount 19. Financial assets and liabilities 31 December 2014 £’000s 31 December 2013 £’000s 9,619 6,375 (343) 15,651 - 6,000 (149) 5,851 The Group is exposed to foreign currency, interest rate, liquidity, credit and equity risks. Each of these risks, the associated financial instruments and the management of those risks are detailed below. The Group’s financial instruments are classified under IFRS as follows: Fair value (through profit or loss) £’000s loans and receivables £’000s amortised cost £’000s 31 December 2014 Current assets Cash Short-term derivative assets Trade receivables Other receivables Related party receivables Current liabilities Short-term debt Short-term derivative liabilities Trade accounts payable Accruals Non-current liabilities Long-term debt Long-term derivative liabilities 31 December 2013 Current assets Cash Short-term derivative assets Trade receivables Other receivables Related party receivables Current Liabilities Trade accounts payable Accruals Non-current liabilities Long-term debt - 106 - - - 106 - (89) - - (89) - (26) (26) 8,261 - 26,368 3,154 412 38,195 - - - - - - - - total £’000s 8,261 106 26,368 3,154 412 38,301 (1,283) (89) (5,433) (3,672) - - - - - - (1,283) - (5,433) (3,672) (10,388) (10,477) (15,651) - (15,651) (15,651) (26) (15,677) Fair value (through profit or loss) £’000s loans and receivables £’000s amortised cost £’000s - 6 - - - 6 - - - - - 14,178 - 19,845 1,674 1,398 37,095 - - - - - - - - - - - (6,593) (3,391) (9,984) (5,851) (5,851) total £’000s 14,178 6 19,845 1,674 1,398 37,101 (6,593) (3,391) (9,984) (5,851) (5,851) 43 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Maturity analysis The long term debt’s contractual features are detailed in note 18 and it is not expected that those loans will be repaid within a year or until replaced with equivalent debt or equity financing. The debt shown in the table below is inclusive of the projected interest payments in accordance with IFRS 7 (interest on long-term debt £2,228,343). Current liabilities Short-term debt Short-term derivative liabilities Trade accounts payable Accruals Non-current liabilities Long-term debt Long-term derivative liabilities less than 1 month £’000s 1 to 3 months £’000s - (15) (2,203) - - - (122) (27) (3,230) (3,672) - - 3 months to 1 year £’000s (1,647) (47) - - - - (2,218) (7,051) (1,694) 1 to 5 years £’000s - - - - (17,393) (26) (17,419) total £’000s (1,769) (89) (5,433) (3,672) (17,393) (26) (28,382) Reclassifications There have been no reclassifications between financial instrument categories during the years ended 31 December 2014 and 31 December 2013. Fair value of financial instruments Financial instruments are either carried at amortised cost, less any provision for impairment, or fair value. The fair value of long-term debt is the same as the carrying value of long-term debt as at 31 December 2014. The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. As at 31 December 2014, the only financial instruments measured at fair value were derivative financial assets and these are classified as Level 2. Cash, trade receivables and trade accounts payable The carrying amounts of these balances are approximately equivalent to their fair value because of the short term to maturity. market risk The Group is exposed to market risk primarily from changes in foreign currency exchange rates and interest rates. currency risk The Group’s primary objective in managing foreign currency risk is to protect against the risk that the eventual Sterling net cash flows will be adversely affected by changes in foreign currency exchange rates. Due to the Group’s operation in India, the Group has entered into foreign exchange contracts that limit the risk from movements in the Indian Rupee exchange rate with Sterling. The Group’s exposure to foreign currencies arising from financial instruments is: 31 December 2014 Exposures Cash Short and long-term derivative assets/ (liabilities) Short and long-term debt Trade receivables Trade accounts payable net balance sheet exposure uSD £’000s 1,302 (114) (10,902) 10,316 (855) (253) eur £’000s 1,655 54 - 4,064 (101) 5,672 other £’000s total £’000s 169 51 - 275 - 495 3,126 (9) (10,902) 14,655 (956) 5,914 44 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 31 December 2013 Exposures Cash Short-term derivative assets Trade receivables Trade accounts payable net balance sheet exposure uSD £’000s 3,104 - 4,478 (616) 6,966 eur £’000s 741 - 3,404 - 4,145 other £’000s 178 6 255 - 439 total £’000s 4,023 6 8,137 (616) 11,550 Forecast sales and purchases in foreign currencies have not been included in the table above and opposite as they are not financial instruments. As at 31 December 2014 a movement of 10% in Sterling would impact the income statement as detailed in the table below: Impact on Net earnings before income tax: USD EUR 10% decrease 10% increase 2014 £’000s 36 (516) (480) 2013 £’000s (854) (388) (1,242) 2014 £’000s (13) 630 617 2013 £’000s 505 447 952 This analysis assumes a movement in Sterling across all currencies and only includes the effect of foreign exchange movements on financial instruments. All other variables remain constant. Interest rate risk The Group is exposed to interest rate risk on its overdraft and the outstanding loans to The Royal Bank of Scotland. The Group does not manage this risk with the use of derivatives. No other liabilities accrue interest. The table below shows how a movement in interest rates of 100 basis points would affect profit before tax based on the additional interest expense for the year then ended: Impact on: Net earnings before income tax This analysis assumes all other variables remain constant. 100 basis point decrease 100 basis point increase 2014 £’000s 173 2013 £’000s 60 2014 £’000s (173) 2013 £’000s (60) Liquidity risk Liquidity risk represents the Group’s ability to meet its contractual obligations. The Group evaluates its liquidity requirements on an ongoing basis. In general, the Group generates sufficient cash flows from its operating activities to meet its financial liabilities. The Group’s main source of financing for its working capital requirements is free cash flow. The Group has a £2 million overdraft facility; none of which was utilised at 31 December 2014 (2013: £nil). The Group’s exposure to liquidity risk arises from trade accounts payable and loans due to the Royal Bank of Scotland. All contractual cash flows from trade accounts payable are the same as the carrying value of the liability due to their short-term nature. At 31 December 2014, the Group has a revolving credit facility of £6.4 million and a US$17 million term loan outstanding with the Royal Bank of Scotland. See note 18 for further details. Credit risk In the normal course of its business, the Group incurs credit risk from cash and trade receivables. The Group has a credit policy that is used to manage this exposure to credit risk, including credit checking prior to contracts being signed. The Group’s financial instruments do not have significant concentration of risk with any related parties. £38.3 million of the Group’s assets are subject to credit risk (31 December 2013: £37.1 million). The Group does not hold any collateral over these amounts. See note 15 for further details of the Group’s receivables. The Group maintains a provision for estimated losses expected to arise from customers being unable to make required payments. This provision takes into account known commercial factors impacting specific customer accounts, as well as the overall profile of the Group’s receivables portfolio. In assessing the provision, factors such as past collection history, the age of receivable balances, the level of activity in customer accounts, as well as general macro-economic trends, are taken into account. Significant changes in these factors would likely necessitate changes in the doubtful debts provision. At present, however, the Group considers the current level of its allowance for doubtful accounts to be adequate to cover expected credit losses on trade receivables. Bad debt expenses are reported in the income statement. 45 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Equity risk It is the Group’s policy to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the development of the business. See note 22 for further details of the Group’s equity. 20. Provisions The movement in the provisions is as follows: At 1 January 2013 Increase in provision Utilised Release of unutilised provision At 31 December 2013 Increase in provision Utilised Release of unutilised provision at 31 December 2014 Current: Non-current: onerous leases £’000s Dilapidations £’000s 656 29 (300) (208) 177 345 (101) (204) 217 192 25 454 48 (43) (90) 369 15 (78) (172) 134 75 59 other £’000s 234 100 (121) (57) 156 131 (141) (45) 101 101 - total £’000s 1,344 177 (464) (355) 702 491 (320) (421) 452 368 84 Onerous lease Provision has been made for the net present value of future residual leasehold commitments. This provision has been calculated making assumptions on future rental income, market rents, insurance and rates and this has then been discounted using a discount rate of 2% per annum. This provision is expected to be utilised over the period of each specific lease. Dilapidations Provision has been made for the net present value of future dilapidations that are owed due to legal or constructive obligations under the Group’s operating leases of office premises. The provision is expected to be utilised over the period to the end of each specific lease. Other Provision has been made for the Group’s obligations to pay commission to registered users of the Group’s websites. 21. Operating lease commitments As at 31 December 2014 the Group had outstanding commitments for future minimum lease payments under non-cancellable leases, which fell due as follows: land and buildings Within 1 year Within 2 to 5 years Over 5 years other Within 1 year Within 2 to 5 years 31 December 2014 £’000s 31 December 2013 £’000s 2,341 7,688 21,960 31,989 64 77 141 2,409 7,019 23,649 33,077 43 44 87 The Group sub-lets certain areas of its property portfolio. As at 31 December 2014, the Group had contracts with sub-tenants for the following future minimum lease rentals: land and buildings Within 1 year Within 2 to 5 years Over 5 years 46 31 December 2014 £’000s 31 December 2013 £’000s 331 641 187 1,159 616 641 347 1,604 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 22. Equity Share capital erc acquisition The Group issued 76,191 ordinary shares as part of the consideration for ERC Group Limited and its subsidiaries (as discussed in note 26). These shares rank pari passu with the existing PDMG ordinary shares in issue. Share option Scheme The Group issued 1,400,000 ordinary shares on 7 March 2014 and 305,080 ordinary shares on 14 March 2014 following the exercise of options by employees pursuant to the vesting of the Company’s Capital Appreciation Plan (as discussed in note 23). These shares rank pari passu with the existing PDMG ordinary shares in issue. allotted, called up and fully paid: Ordinary shares at 1 January (1/14th pence) Sub-division of ordinary share capital Issue of shares: partial consideration ERC Issue of shares: other Issue of shares: share based payments scheme Ordinary shares c/f 31 December (1/14th pence) Deferred shares of £1.00 each 31 December 2014 31 December 2013 no ’000s £’000s no ’000s £’000s 74,487 - 76 4 1,701 76,268 100 76,368 53 - - - 1 - 74,487 - - - 54 74,487 100 154 100 74,587 - 53 - - - 53 100 153 Capital management The Group’s capital management objectives are: To ensure the Group’s ability to continue as a going concern To fund future growth and provide an adequate return to shareholders and, when appropriate, distribute dividends The capital structure of the Group consists of net debt, which includes borrowings (note 18) and cash and cash equivalents, and equity. In order to enable the directors to pay dividends in the future when considered appropriate, at the Annual General Meeting on 24 April 2013 shareholders approved the cancellation of the parent company’s share premium account (the “Capital Reduction”). The Capital Reduction took effect on 23 May 2013 following confirmation by the Court. By way of undertaking to the Court, the Company has constituted a special reserve for the protection of its creditors as at the effective date of the Capital Reduction. In respect of equity, the Board has decided, in order to maximise flexibility in the near term with regards to growth opportunities, not to return any cash by way of a dividend at this time. The Board is committed to keeping this policy under constant review and will evaluate alternative methods of returning cash to shareholders when appropriate. The Company has two classes of shares. The ordinary shares carry no right to fixed income and each share carries the right to one vote at general meetings of the Company. The deferred shares do not confer upon the holders the right to receive any dividend, distribution or other participation in the profits of the Company. The deferred shares do not entitle the holders to receive notice of or to attend and speak or vote at any general meeting of the Company. On distribution of assets on liquidation or otherwise, the surplus assets of the Company remaining after payments of its liabilities shall be applied first in repaying to holders of the deferred shares the nominal amounts and any premiums paid up or credited as paid up on such shares, and second the balance of such assets shall belong to and be distributed among the holders of the ordinary shares in proportion to the nominal amounts paid up on the ordinary shares held by them respectively. There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights. No person has any special rights of control over the Company’s share capital and all its issued shares are fully paid. With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association, the principles of the UK Corporate Governance Code, the Companies Act and related legislation. The Articles themselves may be amended by special resolution of the shareholders. The powers of Directors are described in the Board Terms of Reference, copies of which are available on request. The disclosures above are for both the Group and the Company. Other reserves Other reserves consist of a reserve created upon the reverse acquisition of the TMN Group Plc. The foreign currency translation reserve contains the translation differences that arise upon translating the results of subsidiaries with a functional currency other than Sterling. Such exchange differences are recognised in the income statement in the period in which a foreign operation is disposed of. Special reserve The special reserve was created upon the capital reduction outlined above. 47 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 23. Share based payments The Group created a share option scheme during the year ended 31 December 2010 and granted the first options under the scheme on 1 January 2011 to certain senior employees. Each option granted converts to one ordinary share on exercise. A participant may exercise their options (subject to employment conditions) at any time during a prescribed period from the vesting date to the date the option lapses. For these options to be exercised the Group’s earnings before interest, taxation, depreciation and amortisation, as adjusted by the Remuneration Committee for significant or one-off occurrences, must exceed certain targets. The fair values of options granted were determined using the market value at the date of grant. The market values were compared to the Black-Scholes model and there were no significant differences. The following assumptions were used in the valuation: award tranche Award 1 Award 2 Award 3 Award 4 Award 5 Award 6 Award 7 Award 8 grant Date 1 January 2011 1 August 2011 1 May 2012 7 March 2014 8 September 2014 22 September 2014 9 December 2014 31 December 2014 Fair Value of Share price at grant Date exercise price (pence) estimated Forfeiture rate p.a. Weighted average of remaining contractual life £1.09 £1.32 £1.87 £2.55 £2.575 £2.525 £2.075 £2.025 0.0714p 0.0714p 0.0714p 0.0714p 0.0714p 0.0714p 0.0714p 0.0714p 15% 0% 15% 15% 15% 15% 15% 15% 2.5 2.5 2.5 2.5 2.7 2.5 2.6 2.5 The estimated forfeiture rate assumption is based upon management’s expectation over the number of options that will lapse over the vesting period. The assumptions were determined when the scheme was set up in 2011 and are reviewed annually. Management believe the current assumptions to be reasonable based upon the rate of lapsed options. Each of the above awards are subject to the following vesting criteria: Award 1-4 Award 5 Award 6 Award 7 Award 8 group achieves £10m eBitDa group achieves £18.5m eBitDa group achieves £23.5m eBitDa Vesting criteria 20% Vest N/a N/a N/a N/a 40% Vest 30% Vest 50% Vest 40% Vest 50% Vest 40% Vest 70% Vest 50% Vest 60% Vest 50% Vest During 2013 the first vesting criteria of the Group achieving £10m Adjusted EBITDA was met. As a result 1,701,156 options were exercised during 2014 at a weighted exercise price of 0.0714 pence. The weighted average price of shares exercised was £2.55. The Remuneration Committee has increased the second and third vesting criteria to £18.5 million and £23.5 million respectively as a result of the acquisitions made during 2014 (2013: £15 million and £20 million respectively). The total charge recognised for the scheme during the twelve months to 31 December 2014 was £4,371,000 (2013: £1,127,000). The awards of the scheme are settled with ordinary shares of the Company. Reconciliation of movement in the number of options is provided below. 31 December 2013 Granted Vested Forfeited 31 December 2014 The following table summarises the Group’s share options outstanding at 31 December 2014: option price (pence) 1/14th 1/14th 1/14th 1/14th 1/14th number of options 4,775,050 5,553,436 (1,701,156) (268,450) 8,358,880 reporting date 31 December 2011 31 December 2012 31 December 2013 31 December 2014 48 options outstanding option price (pence) remaining life (years) 5,004,300 4,931,150 4,775,050 8,358,880 1/14th 1/14th 1/14th 1/14th 3.7 4.3 3.3 2.5 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 24. Capital commitments There were no capital commitments at 31 December 2014 (2013: £nil). 25. Discontinued operations As the business becomes more focussed on its Business Information offering, a number of legacy non-core business units have been discontinued in recent years. During 2012, the Group made the decision to close the TMN email marketing business unit, including the TMN, EDR and TAPPS businesses. During 2013, the Group discontinued the US and European arms of its affiliate marketing business. The email marketing and US / European affiliate marketing businesses formed part of the Group’s B2C Digital Marketing division. Following a review of the performance of the Group’s German subsidiary, it was decided that it was no longer viable and its activities ceased in June 2014. Additionally, on 1 July 2014, the Group disposed of its 75% shareholding in Office Solutions Media Limited (‘OSM’). The subsidiary company was no longer deemed to be a strategic fit with the remainder of the Group; therefore the shares were sold to OSM’s minority shareholder. Additionally, towards the end of 2014, the Group decided to discontinue the PDM (which was engaged in business to business lead generation) and Market Research business units. The key factors affecting this decision were a combination of continued under-performance of these business units and lack of strategic fit with the remainder of the Group. Pursuant to the provisions of IFRS 5 the above operations have been classified as discontinued. a) the results of the discontinued operation are as follows: Discontinued operations Revenue Cost of sales gross (loss)/profit Distribution costs Administrative costs Other income operating loss from discontinued operations Finance costs loss before tax from discontinued operations Income tax expense loss for the year from discontinued operations b) loss before tax This is arrived after charging: Depreciation c) cash flows from discontinued operations Year ended 31 December 2014 £’000s Year ended 31 December 2013 £’000s 1,338 (1,958) (620) (19) (453) 86 (1,006) - (1,006) (622) (1,628) 2,670 (2,580) 90 (32) (768) 77 (633) - (633) - (633) Year ended 31 December 2014 £’000s 6 Year ended 31 December 2013 £’000s - Year ended 31 December 2014 £’000s Year ended 31 December 2013 £’000s Cash outflows from operating activities Cash inflows/ (outflows) from investing activities Cash outflows from financing activities total cash outflows from discontinued operations (1,281) 4 (6) (1,283) (114) (24) (8) (146) 49 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 26. Acquisitions pyramid research On 1 January 2014 the Group acquired the business and assets of Pyramid Research for cash consideration of US$3,250,000 (£2,006,173). Pyramid is a leading provider of business information and market analysis for the ICT industry. Pyramid has a well regarded brand name and an expanding presence in some of the world’s fastest growing markets. The amounts recognised for each class of assets and liabilities at the acquisition date were as follows: carrying Value £’000s Fair Value adjustments £’000s Fair Value £’000s Intangible assets consisting of: Software Brand Customer relationships Net assets acquired consisting of: Tangible fixed assets Accounts receivable Trade and other payables Deferred revenue Fair value of net assets acquired Cash consideration Less net assets acquired goodwill - - - 24 643 (163) (457) 47 51 503 420 - (184) (64) - 726 51 503 420 24 459 (227) (457) 773 2,006 (773) 1,233 Pyramid Research has generated revenues of £2.4m and a contribution loss of £0.4m in the year ended 31 December 2014. The goodwill that arose on the combination can be attributed to revenue and cost synergies expected to arise upon the integration of Pyramid Research into Progressive Digital Media Group. The Group incurred legal and professional costs of £105,000 in relation to the acquisition, which were recognised in other expenses (note 5). erc On 28 March 2014, the Group acquired ERC Group Limited and its subsidiaries (‘ERC’) for total consideration of £804,000. The consideration comprised of £604,000 in cash consideration and £200,000 in equity. The equity issued was 76,191 ordinary shares in PDMG at a price of £2.625 (which rank pari passu with the existing PDMG ordinary shares in issue). ERC is a provider of business information and market analysis for the Consumer market. ERC has a well regarded brand name and a dedicated client base which will be used as a solid base for growth. The amounts recognised for each class of assets and liabilities at the acquisition date were as follows: carrying Value £’000s Fair Value adjustments £’000s Fair Value £’000s Intangible assets consisting of: Intellectual property Customer relationships Deferred tax liability upon creation of intangible assets Net assets acquired Fair value of net assets acquired Total consideration Less net assets acquired goodwill - - - - - 485 101 (117) - 469 485 101 (117) - 469 804 (469) 335 In line with the provisions of IFRS 3, further fair value adjustments may be required within the 12 month period from the date of acquisition. Any fair value adjustments will result in an adjustment to the goodwill balance reported above. In 2013 ERC had revenues of £0.4m and profits before tax of £nil. ERC has generated revenues of £0.3m and a contribution of £0.1m in the period from acquisition to 31 December 2014. If the acquisition had occurred on 1 January 2014, the Group year to date revenue for 2014 would have been £63.2m and the Group profit before tax from continuing operations would have been £0.3m. 50 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 The Group incurred legal and professional costs of £16,000 in relation to the acquisition, which were recognised in other expenses (note 5). The goodwill that arose on the combination can be attributed to revenue and cost synergies expected to arise upon the integration of ERC into Progressive Digital Media Group. The total cash cost of the acquisition is reconciled as follows: Cash consideration Cash acquired as part of opening balance sheet Cash returned to seller representing net assets as at completion date total cash cost £’000s 604 (165) 104 543 current analysis On 30 July 2014, the Group acquired Current Analysis Inc and its subsidiaries (‘Current Analysis’) for cash consideration of US$19,600,000 (£11,529,412). Current Analysis is an established and well regarded business which provides subscription based business intelligence services to the ICT industry. The acquisition supports the Group’s strategy of expanding its premium subscription based services into global markets. The amounts recognised for each class of assets and liabilities at the acquisition date were as follows: carrying Value £’000s Fair Value adjustments £’000s Fair Value £’000s Intangible assets consisting of: Customer relationships Brand Deferred tax liability upon creation of intangible assets Net liabilities acquired consisting of: Tangible fixed assets Intangible assets Cash and cash equivalents Trade receivables Prepayments and other receivables Trade and other payables Deferred revenue Short and long-term provisions Fair value of net assets acquired Total consideration Less net assets acquired goodwill - - - 41 257 361 1,340 383 (1,116) (3,701) (49) (2,484) 2,543 1,390 (1,573) - - - - - 461 - (218) 2,603 2,543 1,390 (1,573) 41 257 361 1,340 383 (655) (3,701) (267) 119 11,529 (119) 11,410 In line with the provisions of IFRS 3, further fair value adjustments may be required within the 12 month period from the date of acquisition. Any fair value adjustments will result in an adjustment to the goodwill balance reported above. In 2013 Current Analysis had revenues of US$13.3m and profits before tax of US$0.2m. Current Analysis has generated revenues of £3.6m and a contribution of £1.2m in the period from acquisition to 31 December 2014. If the acquisition had occurred on 1 January 2014, the Group year to date revenue for 2014 would have been £67.6m and the Group loss before tax from continuing operations would have been £0.6m. The Group incurred legal and professional costs of £286,000 in relation to the acquisition, which were recognised in other expenses (note 5). The goodwill that arose on the combination can be attributed to revenue and cost synergies expected to arise upon the integration of Current Analysis into Progressive Digital Media Group, the highly skilled assembled workforce and penetration into the valuable US ICT business information sector. As part of the acquisition of Current Analysis, US$2million of the purchase consideration was transferred to an Escrow account to cover unpaid historic US sales tax. A claim will be made against the Escrow monies to extinguish the liability once the exact value is agreed with the relevant tax authorities. The liability is estimated to be no more than US$1.85m. The total cash cost of the acquisition is reconciled as follows: Cash consideration Cash acquired as part of opening balance sheet total cash cost £’000s 11,529 (361) 11,168 51 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 27. Related party transactions Mike Danson, Progressive Digital Media Group’s Chairman, owns 66.14% of the Company’s ordinary shares as at 2 March 2015. Mike Danson owns a number of businesses that interact with Progressive Digital Media Group. The principal transactions, which are all conducted on an arm’s length basis, are as follows: accommodation Following the sale of the freehold property, Progressive Digital Media Group entered into a property lease with Estel Property Investments for a period of 25 years. In September 2009, Progressive Digital Media Group entered into a second lease with Estel Property Investments for another property for a period of 25 years. The buildings are also occupied by a number of other businesses that are owned by Mike Danson (see below). The total rental expense in relation to the buildings owned by Estel Property Investments for the year ended 31 December 2014 was £1,949,500 (2013: £1,696,300). corporate support services Corporate support services are provided to and from other companies owned by Mike Danson, principally finance, human resources, IT and facilities management. These are recharged to companies that consume these services based on specific drivers of costs, such as proportional occupancy of buildings for facilities management, headcount for human resources services, revenue or gross profit for finance services and headcount for IT services. The recharge made from Progressive Digital Media Group to these companies for the year ended 31 December 2014 was £404,900 (2013: £785,900). revenue license agreement During the year, Progressive Digital Media Group continued a licensing agreement with World Marketing Intelligence Ltd (“WMI”), a company wholly owned by Mike Danson, to sell WMI’s Construction Intelligence Center (“CIC”) content through the Group’s own websites. Under the terms of the agreement, 20% of revenue generated from the sale of CIC content is payable to WMI. The total revenue recognised in Progressive Digital Media Group for 2014 is £0.3 million (2013: £0.2 million). Directors and Key management personnel The remuneration of Directors is discussed within the Directors’ Remuneration Report on pages 18 and 19. Remuneration of key management personnel is detailed in note 7. amounts outstanding The Group has taken advantage of the exemptions contained within IAS 24 - Related Party Disclosures from the requirement to disclose transactions between Group companies as these have been eliminated on consolidation. The amounts outstanding for other related parties were: 31 December 2014 £’000s 31 December 2013 £’000s Global Data Ltd Global Data Publications Inc World Marketing Intelligence Ltd New Statesman Ltd Progressive Media International Ltd Estel Property Investments Ltd Estel Property Investments No.2 Ltd Estel Property Investments No.3 Ltd Elite Luxury Publishing Inc Spears Ltd Progressive Media Publishing Ltd Progressive Innovations Ltd Progressive Global Media Ltd Progressive Customer Publishing Ltd Progressive Media International Middle East FZ LLC Financial News Publishing Ltd World Market Intelligence Pty Ltd Progressive Global Markets Korea Ltd Progressive Media Group UK Ltd Progressive Luxury Publications Ltd Sportcal.com Ltd Digital Insights & Research Pvt Ltd Knowledge Pool Ltd The Samling Ltd The company has right of set off over these amounts. 52 79 3 (242) 2,689 735 (4,602) 291 (832) 967 343 2 (3) 73 900 (70) (154) 203 32 (21) 3 9 3 3 1 (78) 67 1,139 2,541 674 (4,462) 291 (832) 975 285 2 (3) 13 709 66 (5) - 13 - - - - 3 - 412 1,398 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Subsidiary undertakings Subsidiary undertaking country of registration Holding TMN Media Limited MutualPoints Limited England & Wales England & Wales Electronic Direct Response Limited England & Wales Kable Business Intelligence Limited England & Wales ICD Research Limited England & Wales Internet Business Group Limited England & Wales Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares AffiliateFuture Incorporated* United States of America Ordinary shares Viajes Xiana SL* Spain Progressive Media Group Limited* England & Wales Dewberry Redpoint Limited* Conlumino Limited* England & Wales England & Wales Progressive Digital Media Limited England & Wales Progressive Capital Limited* SPG Media Group Limited* SPG Media Limited* England & Wales England & Wales England & Wales Progressive Digital Media Pty Ltd Australia Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Progressive Digital Media Inc United States of America Ordinary shares Progressive Digital Media Pvt Ltd India ERC Group Limited ERC Holdings Limited* England & Wales England & Wales ERC Statistics International Limited* England & Wales Ordinary shares Ordinary shares Ordinary shares Ordinary shares Progressive Digital Media Holdings, Inc United States of America Ordinary shares Current Analysis, Inc* United States of America Ordinary shares Current Intelligence and Analysis Ltd* England & Wales Current Analysis SAS* France Current Analysis Asia Pacific Pty. Ltd* Singapore Cornhill Publications Limited* Canadean Limited England & Wales England & Wales Progressive Digital Media EBT Ltd* England & Wales Progressive Intelligence Limited* England & Wales Apex Subscription Agency Limited* England & Wales Kable Intelligence Limited* England & Wales Canadean Central Europe GmbH* Canadean Mexico Y Centro America, F. De R.L. De C.V* Germany Mexico *indirectly held Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% principal activity Non-trading Online direct marketing Non-trading Business Information Non-trading Performance advertising Non-trading Non-trading Business Information Business Information Dormant Holding company Holding company Holding company Non-trading Business Information Business Information Business Information Business Information Holding company Non-trading Holding company Business Information Business Information Business Information Business Information Non-trading Business Information Dormant Dormant Dormant Business Information Business Information Business Information 53 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 independent auditor’s report to the members of progressive Digital media group plc We have audited the parent company financial statements of Progressive Digital Media Group Plc for the year ended 31 December 2014 which comprise the company statement of financial position, the company statement of changes in equity, the company statement of cash flows and the related notes. 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. 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 auditors As explained more fully in the Statement of directors’ responsibilities, set out on page 20, the directors are responsible for the preparation of the parent company 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 parent company 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 www.frc.org.uk/auditscopeukprivate. opinion on financial statements In our opinion the parent company financial statements: give a true and fair view of the state of the company’s affairs as at 31 December 2014; have been properly prepared in accordance with IFRS as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies Act 2006. opinion on other matter prescribed by the companies act 2006 In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the financial statements are prepared is consistent with the parent company 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. other matters We have reported separately on the group financial statements of Progressive Digital Media Group Plc for the year ended 31 December 2014. nicholas page Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Gatwick 2 March 2015 54 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 company Statement of Financial position notes 31 December 2014 £’000s 31 December 2013 £’000s non-current assets Property, plant and equipment Intangible assets Investments current assets Trade and other receivables Short-term derivatives Cash and cash equivalents total assets current liabilities Trade and other payables Short-term derivatives Short-term borrowings non-current liabilities Long-term provisions Long-term derivatives Long-term borrowings total liabilities net assets equity Share capital Share premium account Other reserve Special reserve Retained earnings equity attributable to equity holders 5 4 6 7 8 9 8 11 10 8 11 1,220 1,009 67,388 69,617 14,763 106 8,576 23,445 93,062 (14,761) (89) (1,283) (16,133) (59) (26) (15,651) (15,736) (31,869) 351 284 50,580 51,215 18,382 6 9,516 27,904 79,119 (14,982) - - (14,982) (58) - (5,851) (5,909) (20,891) 61,193 58,228 154 200 7,174 48,422 5,243 61,193 153 - 7,174 48,422 2,479 58,228 These financial statements were approved by the board of directors on 2 March 2015 and signed on its behalf by: michael Danson Chairman Simon pyper Chief Executive The accompanying notes form an integral part of this financial report. Company number: 03925319 55 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 company Statement of changes in equity l a t i p a c e r a h S m u i m e r p e r a h S t n u o c c a e v r e s e r r e h t o e v r e s e r l a i c e p S / ) s s o l ( d e n i a t e r s g n i n r a e y t i u q e l a t o t £’000s £’000s £’000s £’000s £’000s £’000s Balance at 1 January 2013 Loss for the year transactions with owners: Capital reduction Share based payments charge Balance at 31 December 2013 Loss for the year transactions with owners: Issue of share capital: ERC Issue of share capital: share based payments scheme Share based payments charge Balance at 31 December 2014 153 71,393 7,174 - - (20,985) 57,735 (634) (634) - - - 153 - - 1 - - (71,393) - - - 200 - - - - - 48,422 - 7,174 48,422 - - - - - - - - 154 200 7,174 48,422 22,971 1,127 2,479 (1,606) - (1) 4,371 5,243 - 1,127 58,228 (1,606) 200 - 4,371 61,193 The accompanying notes form an integral part of this financial report. 56 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 company Statement of cash Flows cash flows from operating activities Loss after taxation Adjustments for: Depreciation Amortisation Finance expense Revaluation of foreign currency loan Movement in provision Revaluation of derivatives Increase in trade and other receivables (Decrease)/ increase in trade and other payables cash (used in)/ generated by operations Interest paid net cash from operating activities cash flows from investing activities Purchase of property, plant and equipment Purchase of intangible assets Acquisition of Current Analysis Inc Acquisition of ERC Group net cash used in investing activities cash flows from financing activities Proceeds from long-term borrowings Repayment of short-term borrowings Net inflow from inter-company loans net cash from financing activities net (decrease)/ increase in cash and cash equivalents Cash and cash equivalents at beginning of year cash and cash equivalents at end of year The accompanying notes form an integral part of this financial report. Year ended 31 December 2014 £’000s Year ended 31 December 2013 £’000s (1,606) (634) 233 254 480 902 (1) 15 (763) (412) (898) (215) (1,113) (1,102) (979) (11,529) (708) (14,318) 10,000 - 4,491 14,491 (940) 9,516 8,576 171 159 305 - (2) (24) (274) 1,277 978 (214) 764 (141) (145) - - (286) - (500) 828 328 806 8,710 9,516 57 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 notes to the company Financial Statements 1. General information Progressive Digital Media Group Plc is incorporated and domiciled in the United Kingdom. critical accounting estimates and judgements The Company makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may deviate from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year relate to carrying value of investments, provisions for share based payments and the provision for bad debts. Share based payments The Group operates a share based compensation plan under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options and awards is recognised as an expense in the Group income statement. The total amount to be expensed is determined by reference to the fair value of the options granted, excluding the impact of any non-market service and performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period). Non-market vesting conditions are included in assumptions about the number of options and awards that are expected to vest. The total amount expensed is recognised over the vesting period, which is the period over which all of the specified existing conditions are to be satisfied. At each reporting date, the entity revises its estimates of the number of options and awards that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Group income statement, with a corresponding adjustment to the share based payments reserve within equity. The Company does not directly employ those participating in the share based payments scheme as they are employed by other Group companies. The issue of share incentives by the Company to employees of its subsidiaries represents additional capital contributions. An addition to the Company’s investment in Group undertakings is reported with a corresponding increase in shareholders’ funds. Provision for bad debt The Company is required to judge when there is sufficient objective evidence to require the impairment of individual trade receivables. It does this on the basis of the age of the relevant receivables, external evidence of the credit status of the customer entity and the status of any disputed amounts. Carrying value of investments The carrying value of investments is assessed at least annually to ensure that there is no need for impairment. Performing this assessment requires management to estimate future cash flows to be generated by the related investment, which may entail making judgements including the expected rate of growth of sales, margins expected to be achieved, the level of future capital expenditure required to support these outcomes and the appropriate discount rate to apply when valuing future cash flows. 2. Accounting policies a) Basis of preparation The parent company financial statements have been prepared in accordance with applicable IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. As permitted by section 408 of the Companies Act 2006, the income statement of the Company is not presented. The Company’s loss for the year ended 31 December 2014 is £1.6 million (year ended 31 December 2013: loss £0.6 million). b) change to accounting policies This report has been prepared based on the accounting policies detailed in the Group’s financial statements for the year ended 31 December 2014 and is consistent with the policies applied in the previous year. c) property, plant and equipment Property, plant and equipment is stated at historic cost, including expenditure that is directly attributable to the acquired item, less accumulated depreciation and impairment losses. Depreciation is calculated on a straight line basis over the deemed useful life of an asset and is applied to the cost less any residual value. The asset classes are depreciated over the following periods: Computer and equipment – over 3 to 5 years Leasehold improvements – over 3 to 10 years The useful life, the residual value and the depreciation method is assessed annually. Where there is an indication of impairment, the carrying value of the property, plant and equipment is compared to the higher of value in use and the fair value less costs to sell. If the carrying value exceeds the higher of the value in use and fair value less the costs to sell then the asset is impaired and an impairment loss recognised in profit or loss. 58 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 intangible assets d) computer software Non-integral computer software purchases are capitalised at cost as intangible assets. The Company also capitalises development costs associated with new products in accordance with the development criteria prescribed within IAS 38 “Intangible Assets”. These costs are amortised over their estimated useful lives of 3 years. Costs associated with implementing or maintaining computer software programmes are recognised as an expense. investments e) Investments in subsidiaries are stated at cost less any provision for impairment. f) taxation Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year, using rates substantively enacted at the reporting date, and any adjustments to the tax payable in respect of previous years. Deferred taxation is provided in full on temporary differences between the carrying amount of the assets and liabilities in the financial statements and the tax base. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax is determined using the tax rates that have been enacted or substantially enacted by the reporting date, and are expected to apply when the deferred tax liability is settled or the deferred tax asset is realised. Deferred tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Tax is recognised in the income statement, except where it relates to items recognised as other comprehensive income, in which case it is recognised in the statement of other comprehensive income. Tax relating to items recognised in equity is recognised directly in equity. g) Foreign currencies The results are presented in British Pounds which is the functional currency of the Company. Foreign currency transactions are translated into Sterling at the rates of exchange ruling at the date of the transaction, and if still in existence at the year end the balance is retranslated at the rates of exchange ruling at the reporting date. Differences arising from changes in exchange rates during the year are taken to the income statement. h) provisions A provision is recognised in the balance sheet when the Company has a legal obligation or constructive obligation as a result of a past event, it is more likely than not that an outflow of resources will be required to settle that obligation, and a reliable estimate of the amount can be made. Provisions are discounted if the time value of money is material. i) cash and cash equivalents Cash and cash equivalents include cash in hand and deposits held on call, together with other short term highly liquid investments that are readily convertible to known amounts of cash which are subject to an insignificant risk of changes in value. j) Dividends Dividends on the Company’s ordinary shares are recognised as a liability in the Company’s financial statements, and as a deduction from equity, in the period in which the dividends are declared. Where such dividends are proposed subject to the approval of the Company’s shareholders, the dividends are only declared once shareholder approval has been obtained. k) Financial instruments The Group has derivative and non-derivative financial instruments which comprise foreign currency contracts, investments in equity, receivables, cash, loans and borrowings, and trade payables. Financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit and loss, any directly attributable transaction costs. A financial instrument is recognised if the Company becomes a party to the contractual provisions of the instrument. Financial assets are de- recognised if the contractual rights to the cash flows from the financial assets expire or if the Company transfers the financial asset to another party without retaining control of substantially all risks and rewards of the asset. Financial liabilities are de-recognised if the Company’s obligations specified in the contract expire or are discharged or cancelled. The Company uses derivative financial instruments to reduce its exposure to fluctuations in foreign currency exchange rates. Derivatives are measured at fair values and any movement in fair value is recognised in the income statement. l) trade and other payables Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. 59 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 m) Borrowings and borrowing costs Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months from the reporting date. Borrowing costs, being interest and other costs incurred in connection with the servicing of borrowings, are recognised as an expense when incurred. n) Share based payments The Group operates a share based compensation plan under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options and awards is recognised as an expense in the Group income statement. The total amount to be expensed is determined by reference to the fair value of the options granted (determined using the market value at the date of grant), excluding the impact of any non-market service and performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period). Non- market vesting conditions are included in assumptions about the number of options and awards that are expected to vest. The total amount expensed is recognised over the vesting period, which is the period over which all of the specified existing conditions are to be satisfied. At each reporting date, the entity revises its estimates of the number of options and awards that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Group income statement, with a corresponding adjustment to the share based payments reserve within equity. The Company does not directly employ those participating in the share based payments scheme as they are employed by other Group companies. The issue of share incentives by the Company to employees of its subsidiaries represents additional capital contributions. An addition to the Company’s investment in Group undertakings is reported with a corresponding increase in shareholders’ funds. 3. Dividends No dividend has been recommended for the year (December 2013: £nil). 4. Intangible assets cost As at 1 January 2013 Additions As at 31 December 2013 Additions Disposals as at 31 December 2014 amortisation As at 1 January 2013 Charge for the year As at 31 December 2013 Charge for the year Disposals as at 31 December 2014 net book value as at 31 December 2014 As at 31 December 2013 60 computer software £’000s 972 145 1,117 979 (128) 1,968 (674) (159) (833) (254) 128 (959) 1,009 284 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 5. Property, plant and equipment leasehold improvements £’000s computer equipment £’000s - - - 225 - 225 - - - - - - 225 - cost As at 1 January 2013 Additions As at 31 December 2013 Additions Disposals as at 31 December 2014 Depreciation As at 1 January 2013 Charge for the year As at 31 December 2013 Charge for the year Disposals as at 31 December 2014 net book value as at 31 December 2014 As at 31 December 2013 6. Investments cost As at 1 January 2013 Share based payments to employees of subsidiaries As at 31 December 2013 Acquisition of ERC Group Limited Acquisition of Current Analysis Inc Share based payments to employees of subsidiaries as at 31 December 2014 Depreciation as at 31 December 2013 and 2014 net book value as at 31 December 2014 As at 31 December 2013 total £’000s 1,074 141 1,215 1,102 (67) 2,250 (693) (171) (864) (233) 67 1,074 141 1,215 877 (67) 2,025 (693) (171) (864) (233) 67 (1,030) (1,030) 995 351 1,220 351 group undertakings £’000s 59,730 1,127 60,857 908 11,529 4,371 77,665 (10,277) 67,388 50,580 Share-based payments to employees of subsidiaries The issue of share incentives by the Company to employees of its subsidiaries represents additional capital contributions. An addition to the Company’s investment in Group undertakings is reported with a corresponding increase in shareholders’ funds. acquisitions The acquisition of ERC Group Limited was funded by a combination of £708,000 in cash and an issue of share capital which generated a share premium account increase of £200,000. impairment indicators Management have performed an assessment to identify whether there are any indicators of impairment to the investment balances. Sufficient evidence has been obtained to support that there is no indication of impairment. 61 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 7. Trade and other receivables Prepayments and accrued income Other receivables Amounts owed by group undertakings Amounts owed by related parties Other taxation and social security The carrying values are considered to be a reasonable approximation of fair value. 8. Derivative assets and liabilities Short-term derivative assets Short-term derivative liabilities Long-term derivative liabilities net derivative (liability) / asset 31 December 2014 £’000s 31 December 2013 £’000s 1,536 293 11,605 1,157 172 14,763 1,168 147 15,989 1,064 14 18,382 31 December 2014 £’000s 31 December 2013 £’000s 106 (89) (26) (9) 6 - - 6 Classification is based on when the derivatives mature. The fair values of derivatives are expected to impact the income statement over the next year, dependant on movements in the fair value of the foreign exchange contracts. The movement in the year was £15,000 (2013: £24,000). The Group uses derivative financial instruments to reduce its exposure to fluctuations in foreign currency exchange rates. The notional values of contract amounts outstanding are: Expiring in the year ending: 31 December 2015 31 December 2016 9. Trade and other payables Trade payables Other payables Accruals and deferred revenue Amounts owed to group undertakings Amounts owed to related parties euro €’000 2,300 - uS Dollar $’000 2,425 750 indian rupee inr’000 123,490 - 31 December 2014 £’000s 31 December 2013 £’000s 507 2 172 11,654 2,426 14,761 470 - 378 11,546 2,588 14,982 The directors consider the carrying amount of trade payables approximates to their fair value. The effect of discounting trade and other payables has been assessed and is deemed to be immaterial to the Company’s results. 10. Provisions At 1 January 2014 Increase in provision at 31 December 2014 Current: Non-current: 62 Dilapidations £’000s 58 1 59 - 59 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 11. Borrowings current Loans due within one year non current Long-term loans 31 December 2014 £’000s 31 December 2013 £’000s 1,283 - 15,651 5,851 overdraft The Group currently has a £2 million overdraft facility, which was not drawn down upon at 31 December 2014. Interest is charged on the overdraft at 2.25% over the Bank of England Base Rate. term loan and rcF US$17m term loan and £20m RCF provided by The Royal Bank of Scotland In July 2014, the Group refinanced its debt position. A US$17 million term loan was issued by The Royal Bank of Scotland to partially fund the acquisition of Current Analysis Inc (refer to acquisitions detailed in note 26 of the Group accounts). This is repayable in quarterly instalments over 4 years. The first instalment is due for repayment in July 2015, with total repayments due in 2015 being US$2 million. Additionally, The Royal Bank of Scotland issued a £20 million revolving capital facility (RCF). As at 31 December 2014, the Group had drawn down £6.4 million of this facility. The £2 million overdraft discussed above and £1 million for potential interest rate hedging also offset against the RCF leaving a remaining undrawn balance of £10.6 million as at 31 December 2014. Interest is charged on the term loan and drawn down RCF at a rate of 2.25% over the London Interbank Offered Rate. Interest is charged on the undrawn RCF at 0.9%. These new arrangements replaced the existing £6 million RCF which was arranged in October 2011 and was due for repayment in 2015. 12. Financial assets and liabilities The Company’s financial instruments are classified under IFRS as follows: Fair value (through profit or loss) £’000s loans and receivables £’000s amortised cost £’000s total £’000s 31 December 2014 Current assets Cash Short-term derivative assets Other receivables Amounts owed by group undertakings Amounts owed by related parties Current liabilities Short-term derivative liabilities Trade accounts payable Accruals Amounts owed to group undertakings Amounts owed to related parties Short-term borrowings Non-current liabilities Long-term derivative liabilities Long-term borrowings - 106 - - - 106 (89) - - - - - (89) (26) - (26) 8,576 - 293 11,605 1,157 21,631 - - - - - - - - - - - - - - - - - (507) (172) (11,654) (2,426) (1,283) (16,042) - (15,651) (15,651) 8,576 106 293 11,605 1,157 21,737 (89) (507) (172) (11,654) (2,426) (1,283) (16,131) (26) (15,651) (15,677) 63 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 31 December 2013 Current assets Cash Short-term derivatives Other receivables Amounts owed by group undertakings Amounts owed by related parties Current liabilities Trade accounts payable Accruals Amounts owed to group undertakings Amounts owed to related parties Non-current liabilities Borrowings Fair value (through profit or loss) £’000s loans and receivables £’000s amortised cost £’000s total £’000s - 6 - - - 6 - - - - - - 9,516 - 147 15,989 1,064 26,716 - - - - - - - - - - - - (470) (378) (11,546) (2,588) (14,982) 9,516 6 147 15,989 1,064 26,722 (470) (378) (11,546) (2,588) (14,982) (5,851) (5,851) Maturity analysis The long-term debt’s contractual features are detailed in note 18 of the Group accounts and it is not expected that those loans will be repaid within a year or until replaced with equivalent debt or equity financing. The debt shown in the table below is inclusive of the projected interest payments in accordance with IFRS 7 (interest on long-term debt £2,228,343). less than 1 month £’000s 1 to 3 months £’000s 3 months to 1 year £’000s 1 to 5 years £’000s Current liabilities Short-term derivative liabilities Trade accounts payable Accruals Amount owed to group undertakings Amounts owed to related parties Short-term borrowings Non-current liabilities Long-term derivative liabilities Long-term borrowings (15) - - - - - - - (27) (507) (172) - - (122) - - (47) - - - (2,426) (1,647) - - (15) (828) (4,120) total £’000s (89) (507) (172) (11,654) (2,426) (1,769) - - - (11,654) - - (26) (17,393) (29,073) (26) (17,393) (34,036) Reclassifications There have been no reclassifications between financial instrument categories during the year ended 31 December 2014 and year ended 31 December 2013. The Company is part of a cross-guarantee arrangement in relation to the Group’s £2.0 million overdraft facility. Please refer to note 19 of the Group accounts on financial assets and liabilities for the Group’s exposure to risk. 64 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 13. Related party transactions Directors The remuneration of the directors of the Group and Company is set out on page 18 in the consolidated accounts of the Group within the Directors Remuneration Report. corporate support services Corporate support services are provided to the other companies owned by Mike Danson, principally finance, human resources, IT and facilities management. These are recharged to companies that consume these services based on specific drivers of costs, such as proportional occupancy of buildings for facilities management, headcount for human resources services, revenue or gross profit for finance services and headcount for IT services. The recharge made from Progressive Digital Media Group to these companies for the year to 31 December 2014 was £404,900 (2013: £785,900). amounts outstanding to and from related parties The amounts outstanding for related parties and group undertakings were: Amounts owed by group undertakings: Kable Business Intelligence Limited Progressive Media Group Limited Progressive Digital Media Limited Current Analysis Inc Current Intelligence & Analysis Limited AffiliateFuture Inc ERC Group Limited Progressive Digital Media Inc Progressive Digital Media Pty Limited Amounts owed by related parties: New Statesman Limited Progressive Media International Limited Estel Properties Investments No.2 Limited Progressive Customer Publishing Limited Spears Publishing Limited Sportcal.com Limited Progressive Luxury Publications Limited GlobalData Limited The Samling Limited Amounts owed to group undertakings: Internet Business Group Limited Office Solutions Media Limited Dewberry Redpoint Limited TMN Media Limited Electronic Direct Response Limited MutualPoints Limited Progressive Digital Media Inc Progressive Digital Media PVT Limited Amounts owed to related parties: World Marketing Intelligence Limited Estel Property Investments Limited Estel Property Investments No.3 Limited GlobalData Limited Financial News Publishing Limited Progressive Media International Middle East FZ-LLC Elite Luxury Publishing Inc 31 December 2014 £’000s 31 December 2013 £’000s 5,374 2,290 3,030 446 353 78 20 - 14 2,577 10,328 2,988 - - 78 - 5 13 11,605 15,989 600 369 76 36 62 9 3 1 1 1,157 (2,108) - (1,572) (6,000) (672) (728) (104) (470) 592 334 75 3 60 - - - - 1,064 (2,014) (553) (1,241) (5,948) (648) (761) - (381) (11,654) (11,546) (1,625) (265) (252) - (148) (63) (73) (2,426) (2,142) (115) (252) (34) - - (45) (2,588) 65 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 advisers company Secretary Stephen Bradley Head office and registered office John Carpenter House John Carpenter Street London EC4Y 0AN Tel: + 44 (0) 20 7936 6400 nominated adviser and Broker Nplus1 Singer Advisory LLP 1 Bartholomew Lane London EC2N 2AX Solicitors Osborne Clarke 2 Temple Back East Temple Quay Bristol BS1 6EG auditor Grant Thornton UK LLP Grant Thornton House Melton Street London NW1 2EP registrars Capita Registrars Limited Northern House Woodsome Park Fenay Bridge Huddersfield West Yorkshire HD8 0GA Bankers The Royal Bank of Scotland Plc 280 Bishopsgate London EC2M 4RB registered number Company No. 03925319 66 Progressive Digital Media Group PlcAnnual Report and Accounts 2014 Head office and registered office John Carpenter House John Carpenter Street London EC4Y 0AN Tel: + 44 (0) 20 7936 6400
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