Annual 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
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5
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6
7
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9
10
12
13
16
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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.
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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.
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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
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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
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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
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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