Final Results

RNS Number : 4286U

Aeorema Communications Plc

16 October 2014

 



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

16 October 2014

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

Final Results

Aeorema Communications plc, the AIM-traded live events agency, announces its results for the year ended 30 June 2014.

Overview

·    Positive progress made towards building the Group as a leading provider of live events

·    Increased profits before tax from continuing operations to £504,841 (2013: £358,864)

·    Increased revenues to £4,764,584 (2013: 3,992,751)

·    Cash at bank and in hand of £1,620,895 (2013: £1,581,790)

·    Recommend dividend payment of 2p - plus special 3p dividend to return cash to shareholders (2013: dividend payment: 1.5p and special dividend: nil)

·    Secured preferred supplier status positions with leading financial clients

·    A new single brand, Cheerful 21st, and an associated website is being developed to reflect future strategy to become the live event agency of choice

Chairman's Statement

Aeorema continues to build its position as a leading provider of live events by exploiting the strengths of its team and bringing new innovative ideas and products effectively to life.

During the year under review, we signed a number of deals, increasing both market share and profitability. We were particularly pleased to win a three year contract worth over £2 million with an existing technology client to run a live event at the annual Cannes Lions advertising festival.  We ran the first of these events this year, which was a great success.  Furthermore, Aeorema extended and won new roster positions with key organisations in the financial services industry.  Notably, we also created several 'bid' films for clients, which resulted in them winning major projects.

I believe that organisations choose to work with Aeorema for various reasons.  Firstly, we provide both new and existing customers with award-winning solutions using the latest technologies and interactive platforms; during the year we won several awards at the event industry's two major ceremonies - Eventia and Livecom.  Secondly, our clients choose us because they know we are committed to their success, have the reputation for encouraging them to push boundaries, provide seamless, progressive, solutions and help them to stand out in a crowded market now, and into the future.

It is inspiring to see the way our team works together and strives for ways to improve our collective performance.  Throughout the year, their commitment, talent and integrity have led to the delivery of remarkable results.  Post period end, we strengthened this team with the appointment of Steve Garvey as our new CEO.  Steve's 25 years' experience in corporate communications, which saw him work for a number of cutting edge businesses in the sector, will be invaluable as we take Aeorema into a new phase of growth.

Our emphasis now is on enabling Aeorema to achieve its full potential by continuing to excite our clients with superb concepts and exceptional end results.  Our five year plan is to become 'the' live events agency of choice, with a strong focus on innovation.  To this end, we are launching a new single brand, Cheerful 21st, as well as a website, with a focus on live events.  We intend to continue to grow our business organically, expanding both revenues and profits.  Importantly, we signed a new five-year lease on our office in the West End, which is large enough to support this growth.

The results for the year show a profit before taxation from continuing operations of £504,841 (2013: £358,864) on revenue of £4,764,584 (2013: £3,992,751).  We remain cash positive with cash at bank and in hand of £1,620,895 (2013: £1,581,790).

The Board is proposing a dividend of 2 pence per share to be paid on 21 November 2014 to shareholders on the register on 24 October 2014.  This has increased substantially from last year's dividend of 1.5p and additionally, in light of our strong cash position at the year end, the Board is delighted to propose a special dividend of 3 pence per share to be paid on 21 November 2014 to shareholders on the register on 24 October 2014.  The ex-dividend date for both the final dividend and the special dividend will be 23 October 2014.

On behalf of the board, I would like to thank our team for their hard work during the past year.  Our thanks also go to our shareholders, whose continued support of Aeorema has helped us achieve record levels of performance in the year to June 2014.

M Hale

Chairman

14 October 2014

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

Gary Fitzpatrick	Aeorema Communications plc	Tel: [phone]
Mark Percy/Catherine Leftley/David Banks	Cantor Fitzgerald Europe	Tel: [phone]
Elisabeth Cowell/ Charlotte Heap	St Brides Media & Finance Ltd	Tel: [phone]

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2014

	Notes	2014	2013
			As restated
		£	£
Continuing operations
Revenue	2	4,764,584	3,992,751
Cost of sales		(2,794,629)	(2,253,321)
Gross profit		1,969,955	1,739,430
Administrative expenses		(1,465,520)	(1,434,769)
Operating Profit	3	504,435	304,661
Gain recognised on disposal of former subsidiary	24	-	54,021
Finance income	4	406	195
Finance expense	4	-	(13)
Profit before taxation		504,841	358,864
Taxation	5	(89,145)	(79,087)
Profit for the year from continuing operations		415,696	279,777
Discontinued operations Loss for the period from discontinued operations	7	-	(16,276)
Total comprehensive income for the year attributable to owners of the parent		415,696	263,501
Profit per ordinary share:
Basic    From continuing operations    From discontinued operations Total basic earnings per share	9	5.02290p - 5.02290p	3.4809p (0.2025p) 3.2784p
Diluted    From continuing operations    From discontinued operations Total diluted earnings per share	9	4.55487p - 4.55487p	3.25117p (0.18914p) 3.06203p

There were no other comprehensive income items.

Statement of Financial Position

As at 30 June 2014

	Notes	Group		Company
		2014	2013	2014	2013
		£	£	£	£
Non-current assets
Intangible assets	10	365,154	365,154	-	-
Property, plant and equipment	11	67,449	77,040	-	-
Deferred taxation	6	24,145	8,277	-	-
Investments in subsidiaries	12	-	-	553,196	538,307
Total non-current assets		456,748	450,471	553,196	538,307
Current assets
Inventories		2,674	2,675	-	-
Trade and other receivables	13	1,475,921	606,557	357,873	468,462
Cash and cash equivalents	14	1,620,895	1,581,790	734,628	782,780
Total current assets		3,099,490	2,191,022	1,092,501	1,251,242
Total assets		3,556,238	2,641,493	1,645,697	1,789,549
Current liabilities
Trade and other payables	15	(1,589,007)	(1,140,377)	(89,730)	(282,081)
Net assets		1,967,231	1,501,116	1,555,967	1,507,468
Equity
Share capital	16	1,079,688	1,004,688	1,079,688	1,004,688
Merger reserve	17	16,650	16,650	16,650	16,650
Other reserve	18	19,500	-	19,500	-
Share-based payment reserve		110,972	96,083	110,972	96,083
Capital redemption reserve		257,812	257,812	257,812	257,812
Retained earnings		482,609	125,883	71,345	132,235
Equity attributable to owners of the parent		1,967,231	1,501,116	1,555,967	1,507,468

Statement of Changes in Equity

For the year ended 30 June 2014

Group	Share capital	Merger reserve	Other reserve	Share-based payment reserve	Capital redemption reserve	Retained earnings	Total equity
	£	£	£	£	£	£	£
At 1 July 2012	1,004,688	16,650	-	76,268	257,812	(137,618)	1,217,800
Comprehensive income for the year, net of tax	-	-	-	-	-	263,501	263,501
Share-based payments	-	-	-	19,815	-	-	19,815
At 30 June 2013	1,004,688	16,650	-	96,083	257,812	125,883	1,501,116
At 1 July 2013	1,004,688	16,650	-	96,083	257,812	125,883	1,501,116
Comprehensive income for the year, net of tax	-	-	-	-	-	415,696	415,696
Tax credit relating to share option scheme	-	-	-	-	-	61,594	61,594
Dividends paid	-	-	-	-	-	(120,564)	(120,564)
Shares issued in the period	75,000	-	19,500	-	-	-	94,500
Share-based payments	-	-	-	14,889	-	-	14,889
At 30 June 2014	1,079,688	16,650	19,500	110,972	257,812	482,609	1,967,231

Company	Share capital	Merger reserve	Other reserve	Share- based payment reserve	Capital redemption reserve	Retained earnings	Total equity
	£	£	£	£	£	£	£
At 1 July 2012	1,004,688	16,650	-	76,268	257,812	(548,586)	806,832
Comprehensive income for the year, net of tax	-	-	-	-	-	680,821	680,821
Share-based payments	-	-	-	19,815	-	-	19,815
At 30 June 2013	1,004,688	16,650	-	96,083	257,812	132,235	1,507,468
At 1 July 2013	1,004,688	16,650	-	96,083	257,812	132,235	1,507,468
Comprehensive income for the year, net of tax	-	-	-	-	-	59,674	59,674
Dividends paid	-	-	-	-	-	(120,564)	(120,564)
Shares issued in the period	75,000	-	19,500	-	-	-	94,500
Share-based payments	-	-	-	14,889	-	-	14,889
At 30 June 2014	1,079,688	16,650	19,500	110,972	257,812	71,345	1,555,967

Statement of Cash Flows

For the year ended 30 June 2014

	Notes	Group		Company
		2014	2013	2014	2013
		£	£	£	£
Net cash flow from operating activities	25	106,751	847,834	(152,338)	493,244
Cash flows from investing activities
Finance income		406	195	250	138
Purchase of property, plant and equipment	11	(41,988)	(51,335)	-	-
Proceeds from sale of property, plant and equipment		-	44,875	-	-
Dividends received by the Company		-	-	130,000	-
Disposal of subsidiary (net of cash disposed)	24	-	(16,421)	-	-
Cash (used) / generated in investing activities		(41,582)	(22,686)	130,250	138
Cash flows from financing activities
Proceeds of share issue		94,500	-	94,500	-
Dividends paid to owners of the Company		(120,564)	-	(120,564)	-
Cash used in financing activities		(26,064)	-	(26,064)	-
Net increase/(decrease) in cash and cash equivalents		39,105	825,148	(48,152)	493,382
Cash and cash equivalents at beginning of year		1,581,790	756,642	782,780	289,398
Cash and cash equivalents at end of year	14	1,620,895	1,581,790	734,628	782,780

Notes to the consolidated financial statements

For the year ended 30 June 2014

1 Accounting policies

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

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

Going concern

The Group's business activities, together with the factors likely to affect its future development and performance are set out in the review of business contained in the Chairman's Statement. The Group's financial statements show details of its financial position including, in note 26, details of its financial instruments and exposure to risk.

After reviewing the Group's budget for the next financial year, other medium term plans and considering the risks outlined in note 26, the Directors, at the time of approving the financial statements, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and have therefore used the going concern basis in preparing the financial statements.

Basis of Preparation

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

The following new standards, amendments to standards and interpretations, applied for the first time from 1 July 2013.

·    IFRS 1 (Amended) 'First-time Adoption of International Financial Reporting Standards', effective 1 January 2013.

·             IFRS 7 'Financial Instruments: Disclosures', effective 1 January 2013.

·             IFRS 10 'Consolidated Financial Statements', effective 1 January 2013.

·             IFRS 11 'Joint Arrangements', effective 1 January 2013.

·             IFRS 12 'Disclosure of Interests in Other Entities', effective 1 January 2013.

·             IFRS 13 'Fair Value Measurement', effective 1 January 2013.

·             IAS 1 (Amended) 'Presentation of Other Comprehensive Income', effective 1 January 2013.

·             IAS 16 (Amended) 'Property, Plant and Equipment', effective 1 January 2013.

·             IAS 19 (Amended) 'Employee Benefits', effective 1 January 2013.

·             IAS 27 (Revised) 'Separate Financial Statements', effective 1 January 2013.

·             IAS 28 (Revised) 'Investments in Associates and Joint Ventures', effective 1 January 2013.

·             IAS 32 (Amended) 'Financial Instruments: Presentation', effective 1 January 2013.

·             IAS 34 (Amended) 'Interim Financial Reporting', effective 1 January 2013.

·             IFRIC 20 'Stripping Costs in the Production Phase of a Surface Mine', effective 1 January 2013.

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

Adopted IFRSs not yet applied

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 July 2013 and have not been adopted early by the Group:

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

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

·      IFRS 7 (Amended) 'Financial Instruments: Disclosures', effective 1 January 2015.

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

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

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

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

·      IFRS 15 'Revenue for Contracts with Customers', effective 1 July 2017.

·      'Investment Entities' (Amendments to IFRS 10, IFRS 12 and IAS 27) effective 1 January 2014.

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

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

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

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

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

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

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

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

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

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

·      'Agriculture: Bearer Plants' (Amendments to IAS 16 and IAS 41) effective 1 January 2016.

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

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

Presentation

The Directors have determined that wages and salaries relating to production personnel previously disclosed in the Consolidated Statement of Comprehensive Income within Cost of Sales should now be reflected as Administrative Expenses, in order to more accurately reflect the nature of these costs. Accordingly, an amount of £739,679 (2013: £572,169) has been reclassified to present these expenses in a consistent manner.

Basis of consolidation

The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 30 June 2014. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from their activities. Subsidiaries are fully consolidated from the date on which control is transferred until the date that such control ceases.

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

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

Revenue

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

Intangible assets - goodwill

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

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

Property, plant and equipment

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

Leasehold land and buildings	straight line over the life of the lease (5 years)
Fixtures, fittings and equipment	25% straight line

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

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

Impairment

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

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

Operating leases

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

Investments

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

Inventories

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

Trade and other receivables

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

Trade and other payables

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

Cash and cash equivalents

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

Finance income

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

Taxation

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

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

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised.

Pension costs

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

Financial instruments

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

Equity

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

Foreign currency translation

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

Share-based awards

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

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

Significant judgements and estimates

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

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

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

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

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

2 Revenue and segment information

The Company uses several factors in identifying and analysing reportable segments, including the basis of organisation, such as differences in products and geographical areas. The Board of Directors, being the Chief Operating Decision Makers, have determined that for the period ending 30 June 2014 there is only a single reportable segment.

All revenue represents sales to external customers. Three customers (2013: one) are defined as major customers by revenue, contributing more than 10% of the Group revenue.

	2014	2013
	£	£
Customer one	1,214,324	1,217,332
Customer two	809,290	-
Customer three	571,188	-
Major customers	2,594,802	1,217,332

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

Geographical market	2014	2013	2014	2013	2014	2013	2014	2013
	UK	UK	Europe	Europe	Rest of the World	Rest of the World	Total	Total
	£	£	£	£	£	£	£	£
Revenue	4,493,297	3,803,651	262,306	1,752	8,981	187,348	4,764,584	3,992,751

All non-current assets are based in the UK.

3 Operating profit

Operating profit is stated after charging:	2014	2013
	£	£
Depreciation of property, plant and equipment	51,579	35,934
Profit on disposal of property, plant and equipment	-	44,875
Fees payable to the Company's auditor in respect of:
Audit of the Company's annual accounts	6,000	6,000
Audit of the Company's subsidiaries	11,500	11,500
Staff costs (see note 21)	1,029,306	1,001,550
Operating leases - land and buildings	77,596	91,438

4 Finance income and expenses

Finance income	2014	2013
	£	£
Bank interest received	406	195
Finance expenses	2014	2013
	£	£
Other interest payable	-	13

5 Taxation

	2014	2013
	£	£
The tax charge comprises:
Current tax
Prior period adjustment	234	-
Current year	104,779	67,652
	105,013	67,652
Deferred tax
Current year	(15,868)	11,435
	(15,868)	11,435
Total tax charge in the statement of comprehensive income	89,145	79,087
Factors affecting the tax charge for the year
Profit on ordinary activities before taxation from continuing operations	504,841	358,864
Profit on ordinary activities before taxation multiplied by standard rate
of UK corporation tax of 23% (2013: 20%)	116,113	82,539
Effects of:
Non-deductible expenses	(1,114)	12,494
Income that is exempt from taxation	-	(22,745)
Depreciation, impairment losses and disposals	11,863	8,130
Capital allowances	(11,617)	(8,671)
Share-based payment	3,424	7,785
Losses utilised	-	(9,505)
Share options exercised	(12,167)	-
Marginal relief	(1,723)	(2,375)
Prior period adjustment	234	-
Deferred tax asset movement	(15,868)	11,435
	(26,968)	(3,452)
Total taxation charge	89,145	79,087

The Group has estimated losses of £375,762 (2013: £375,762) available to carry forward against future trading profits. These losses are in Aeorema Communications plc which is not currently making taxable profits as all trading is undertaken by its subsidiary Aeorema Limited.

6 Deferred taxation

	2014	2013
	£	£
Property, plant and equipment temporary differences	(5,174)	(1,094)
Temporary differences	29,319	9,371
	24,145	8,277
At 1 July	8,277	19,712
Transfer to Statement of Comprehensive Income	15,868	(11,435)
At 30 June	24,145	8,277

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

7 Discontinued Operations

On 7 December 2012 the Group disposed of its 100% subsidiary ST16 Limited, which carried out Viral Film operations. ST16 Limited was sold to its directors, S Crofts and J Stinton for proceeds of £5. Details of the assets and liabilities disposed of, and the calculation of the profit or loss on disposal, are disclosed in note 24.

The loss from the discontinued operation included in the profit for the previous year is set out below.

	2014	2013
	£	£
Loss for the year from discontinued operations Revenue	-	69,002
Expenses	-	(85,278)
Loss for the year from discontinued operations attributable to owners of the company	-	(16,276)
Cash flows from discontinued operations
Net cash outflows from operating activities	-	(90,006)
Net cash inflows from investing activities	-	51,319
Net cash outflows	-	(38,687)

8 Profit attributable to members of the parent company

As permitted by section 408 of the Companies Act 2006, the parent Company's Statement of Comprehensive Income has not been included in these financial statements. The retained profit for the financial year of the holding company was £59,674 (2013: £680,821).

9 Earnings per ordinary share

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

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

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

	2014	2013
	£	£
Basic earnings per share
Profit for the year attributable to owners of the Company	415,696	263,501
Loss for the period from discontinued operations used in the calculation of basic earnings per share from discontinued operations	-	16,276
Earnings used in the calculation of basic earnings per share from continuing operations	415,696	279,777
Basic weighted average number of shares	8,276,021	8,037,500
Dilutive potential ordinary shares: Employee share options	850,380	567,915
Diluted weighted average number of shares	9,126,401	8,605,415

10 Intangible fixed assets

Group	Goodwill
	£
Cost
At 1 July 2012	2,805,963
Disposal of subsidiary	(77,671)
At 30 June 2013	2,728,292
At 30 June 2014	2,728,292
Impairment and amortisation
At 1 July 2012	2,440,809
Eliminated on disposal	(77,671)
At 30 June 2013	2,363,138
At 30 June 2014	2,363,138
Net book value
At 1 July 2012	365,154
At 30 June 2013	365,154
At 30 June 2014	365,154

Goodwill arose for the Group on consolidation of its subsidiary company, Aeorema Limited (formerly Cheerful Scout Productions Limited).

Impairment - Aeorema Limited (formerly Cheerful Scout Productions Limited)

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

Management has assessed the sensitivity of the recoverable amounts in the key assumptions to be as follows: a five percentage increase in the discount rate would reduce the recoverable amount by £326,000 and a one percentage fall in future growth would reduce the recoverable amount by £342,000. However, in both cases there would still be no indication of impairment of goodwill.      

11 Property, plant and equipment

Group	Leasehold land	Fixtures, fittings	Total
	and buildings	and equipment
	£	£	£
Cost
At 1 July 2012	157,063	889,890	1,046,953
Additions	24,034	27,301	51,335
Disposals	(157,063)	(90,870)	(247,933)
Derecognised on disposal of a subsidiary	-	(5,254)	(5,254)
At 30 June 2013	24,034	821,067	845,101
Additions	-	41,988	41,988
At 30 June 2014	24,034	863,055	887,089
Depreciation
At 1 July 2012	153,838	827,187	981,025
Eliminated on disposal of assets	(157,063)	(90,870)	(247,933)
Eliminated on disposal of a subsidiary	-	(965)	(965)
Charge for the year	8,426	27,508	35,934
At 30 June 2013	5,201	762,860	768,061
Charge for the year	16,104	35,475	51,579
At 30 June 2014	21,305	798,335	819,640
Net book value
At 1 July 2012	3,225	62,703	65,928
At 30 June 2013	18,833	58,207	77,040
At 30 June 2014	2,729	64,720	67,449

The gross carrying amount of fully depreciated property, plant and equipment still in use is £nil (2013: £nil) in relation to leasehold land and buildings and £735,908 (2013: £696,292) in relation to fixtures, fittings and equipment.

12 Non-current assets - Investments

Company	Shares in subsidiary
	£
Cost
At 1 July 2012	3,306,981
Increase in respect of share based payments	12,039
Disposal of subsidiary	(86,500)
At 30 June 2013	3,232,520
Increase in respect of share based payments	14,889
At 30 June 2014	3,247,409
Provision
At 1 July 2012	2,780,713
Disposal of subsidiary	(86,500)
At 30 June 2013	2,694,213
At 30 June 2014	2,694,213
Net book value
At 1 July 2012	526,268
At 30 June 2013	538,307
At 30 June 2014	553,196

Holdings of more than 20%

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

Subsidiary undertakings	Country of	Shares held
	registration
	or incorporation	Class	%
Aeorema Limited (formerly Cheerful Scout Productions Limited)	England and Wales	Ordinary	100
Twentyfirst Limited	England and Wales	Ordinary	100

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

Company	Principal activity
Aeorema Limited (formerly Cheerful Scout Productions Limited)	Provision of business communication services
Twentyfirst Limited	Non-trading

13 Trade and other receivables

	Group		Company
	2014	2013	2014	2013
	£	£	£	£
Trade receivables	1,401,432	526,982	-	-
Related party receivables	-	-	353,337	457,863
Other receivables	19,084	20,516	-	6,180
Prepayments and accrued income	55,405	59,059	4,536	4,419
	1,475,921	606,557	357,873	468,462

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

At the year end, trade receivables of £344,096 (2013: £262,488) were past due but not impaired. These relate to a number of customers for whom there is no significant change in credit quality and the amounts are still considered recoverable. The ageing of these trade receivables is as follows:

	Group
	2014	2013
	£	£
Less than 90 days	317,802	239,164
More than 90 days	26,294	23,324
	344,096	262,488

14 Cash and cash equivalents

	Group		Company
	2014	2013	2014	2013
	£	£	£	£
Bank balances	1,620,895	1,581,790	734,628	782,780
Cash and cash equivalents	1,620,895	1,581,790	734,628	782,780
Cash and cash equivalents in the statement of cash flows	1,620,895	1,581,790	734,628	782,780

15 Trade and other payables

	Group		Company
	2014	2013	2014	2013
	£	£	£	£
Trade payables	902,860	686,742	1,656	11,114
Related party payables	-	-	67,355	197,355
Taxes and social security costs	301,004	186,474	1,369	250
Other payables	43,842	160	-	-
Accruals and deferred income	341,301	267,001	19,350	73,362
	1,589,007	1,140,377	89,730	282,081

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

16 Share capital

	2014	2013
	£	£
Authorised
28,000,000 Ordinary shares of 12.5p each	3,500,000	3,500,000
Allotted, called up and fully paid	Number	Ordinary shares
		£
At 1 July 2012	8,037,500	1,004,688
At 30 June 2013	8,037,500	1,004,688
Issue of shares	600,000	75,000
At 30 June 2014	8,637,500	1,079,688

£19,500 share options were exercised just before the year end with the shares being issued on 2 July 2014.

See note 22 for details of share options outstanding.

17 Merger reserve

	Merger reserve
	£
At 1 July 2012	16,650
At 30 June 2013	16,650
At 30 June 2014	16,650

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

18 Other reserve

	Subscriptions received reserve
	£
At 1 July 2012	-
At 30 June 2013	-
Exercise of options	19,500
At 30 June 2014	19,500

On 16 June 2014 104,000 share options were exercised and fully paid for at 18.75p each. The shares were allotted on 2 July 2014. For the earnings per share note these shares are treated as issued on the exercise date. This reserve holds the funds at the year end. The reserve is not distributable.

19 Financial commitments

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

Group	Land and Buildings
	2014	2013
	£	£
Not later than one year	10,417	-
Later than one year and not later than five years	-	62,500

20 Directors' emoluments

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

	Salary or fees	Salary or fees	Pensions	Pensions	Total	Total
	2014	2013	2014	2013	2014	2013
	£	£	£	£	£	£
P Litten	65,000	50,000	59,834	52,483	124,834	102,483
G Fitzpatrick	52,885	50,000	59,834	52,483	112,719	102,483
M Hale	-	-	-	-	-	-
S Garbutta	3,000	1,500	-	-	3,000	1,500
R Owen	7,500	7,500	-	-	7,500	7,500
S Quah (appointed 15 April 2013)	133,000	25,296	-	-	133,000	25,296
	261,385	134,296	119,668	104,966	381,053	239,262

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

Name	Grant date	Number awarded	Exercise price	Earliest exercise price	Expiry date
S Quah	20 July 2010	300,000	12.50p	20 July 2013	19 July 2020
S Quah	25 April 2013	300,000	16.50p	25 April 2016	24 April 2023

G Fitzpatrick exercised 64,000 shares on 16 June 2014 at 18.75p each resulting in a gain of £31,200.

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

21 Employee information

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

Number of employees	2014	2013
		As restated
	Number	Number
Administration and production	19	17

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

Employment costs	2014	2013
	£	£
Wages and salaries	821,680	782,230
Social security costs	72,897	94,367
Pension costs	119,840	105,138
Share-based payments	14,889	19,815
	1,029,306	1,001,550

22 Share-based payments

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

Date of grant	Exercise price	Exercise period		Number of options 2014	Number of options 2013
		From	To
28 October 2004	18.75p	28 October 2007	27 October 2014	9,000	113,000
20 July 2010	12.5p	20 July 2013	19 July 2020	300,000	1,200,000
25 April 2013	16.5p	25 April 2016	24 April 2023	300,000	300,000
				609,000	1,613,000

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

	Number of options	Weighted average exercise price	Number of options	Weighted average exercise price
	2014	2014	2013	2013
		£		£
Outstanding at beginning of the year	1,613,000	0.11	1,943,000	0.09
Lapsed during the year	(300,000)	(0.13)	(630,000)	(0.23)
Granted during the year	-	-	300,000	0.17
Exercised during the year	(704,000)	(0.13)
Outstanding at end of the year	609,000	0.15	1,613,000	0.11
Exercisable at the end of the year	309,000	0.13	113,000	0.19

The exercise price of options outstanding at the year-end ranged between £0.125 and £0.1875 (2013: £0.125 and £0.2325) and their weighted average contractual life was 7.7 years (2013: 7.7 years).

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

Grant date	28 October 2004	20 July 2010	9 March 2012	25 April 2013
Model used	Binomial	Black-Scholes	Black-Scholes	Black-Scholes
Share price at grant date	16.25p	8.75p	23.25p	16.5p
Exercise price	18.75p	8.75p	23.25p	16.5p
Contractual life	10 years	10 years	10 years	10 years
Risk free rate	6%	0.5%	0.5%	0.5%
Expected volatility	43%	100%	105%	104%
Expected dividend rate	0%	0%	0%	0%
Fair value option	5.9868p	7.779p	21.053p	14.889p

The expected volatility is determined by calculating the historical volatility of the company's share price over the last three years. The risk free rate is the office Bank of England base rate. The expected dividend rate is zero as the company has not paid dividends in the past.

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

	2014	2013
	£	£
Share-based payment charge	14,889	19,815

23 Related party transactions

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

	2014	2013
	£	£
Management fees charged by subsidiaries to Aeorema Communications plc
Aeorema Limited (formerly Cheerful Scout Productions Limited)	-	102,483
Amounts owed by subsidiaries
Total amount owed by subsidiaries	353,337	457,863
Amounts owed to subsidiaries
Total amount owed to subsidiaries	67,355	197,355

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

	2014	2013
	£	£
Short-term employee benefits	297,687	119,176
Post-employment benefits	119,668	104,966
Share based payment expense	14,889	4,353
	432,244	228,495

Aeorema Communications plc is a guarantor for a lease entered into by Aeorema Limited (formerly Cheerful Scout Productions Limited), its subsidiary undertaking.

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

Harris and Trotter LLP - charged during the year	2014	2013
	£	£
Aeorema Communications plc	15,000	17,071
Aeorema Limited (formerly Cheerful Scout Productions Limited)	22,325	7,200
Twentyfirst Limited	-	7,200
ST16 Limited	-	1,600
	37,325	33,071

24 Disposal of a subsidiary

On 7 December 2012 the Group disposed of its 100% subsidiary ST16 Limited, which carried out Viral Film operations.

Consideration received	2014	2013
	£	£
Consideration received in cash and cash equivalents	-	5
	-	5

Analysis of assets and liabilities over which control was lost	2014	2013
	£	£
Current assets
Cash and cash equivalents	-	16,426
Trade and other receivables	-	11,700
Non-current assets
Property, plant and equipment	-	4,289
Current liabilities
Trade and other payables	-	(86,431)
Net liabilities disposed of	-	(54,016)

Gain on disposal of subsidiary	2014	2013
	£	£
Consideration received	-	5
Net liabilities disposed of	-	54,016
	-	54,021

Net cash outflow on disposal of subsidiary	2014	2013
	£	£
Consideration received in cash and cash equivalents	-	5
Less: Cash and cash equivalent balances disposed of	-	(16,426)
	-	(16,421)

25 Cash flows

	Group		Company
	2014	2013	2014	2013
	£	£	£	£
Cash flows from operating activities
Profit  after taxation	415,696	263,501	59,674	680,821
Tax expense recognised in Consolidated Statement of Comprehensive Income	89,145	79,087
Depreciation	51,579	35,934	-	-
Profit on disposal of property, plant and equipment	-	(44,875)	-	-
Profit on disposal of subsidiary	-	(54,021)
Share-based payment	14,889	19,815	-	7,776
Impairment of investment in subsidiaries	-	-	-	(20,000)
Dividends received by the Company	-	-	(130,000)	-
Finance income	(406)	(195)	(250)	(138)
	570,903	299,246	(70,576)	668,459
Increase / (decrease) in trade and other payables	448,630	272,572	(192,351)	240,986
(Increase) / decrease in trade and other receivables	(869,364)	201,285	110,589	(416,201)
Changes in working capital due to disposal of subsidiary: -     Trade and other receivables -     Trade and other payables	- -	(11,700) 86,431	-	-
Taxation paid	(43,418)	-	-	-
Cash generated / (used) from operating activities	106,751	847,834	(152,338)	493,244

26 Financial instruments

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

Credit risk

Credit risk arises principally from the Group's trade receivables. It is the risk that the counterparty fails to discharge its obligation in respect of the instrument. The maximum exposure to credit risk at 30 June 2014 was £1,401,432 (2013: £526,982). Trade receivables are managed by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding for both time and credit limits. At the year end, the credit quality of trade receivables is considered to be satisfactory.

Liquidity risk

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group's policy is to meet its liabilities when they fall due. The Group monitors cash flow on a regular basis. At the year end, the Group has sufficient liquid resources to meets its obligations of £1,589,007 (2013: £1,140,377).

Market risk

Market risk arises from the Group's use of interest bearing financial instruments. It is the risk that the fair value of future cash flows of a financial instrument will fluctuate. At the year end, the cash and cash equivalents of the Group was £1,620,895 (2013: £1,581,790). The Group ensures that its cash deposits earn interest at a reasonable rate.

Capital risk

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern while maximising the return to stakeholders. The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in the Group Statement of Changes in Equity. At the year end, total equity was £1,967,231 (2013: £1,501,116).

Fair value of financial assets

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

27 Pension costs defined contribution

The Group makes pre-defined contributions to employees' personal pension plans. Contributions payable by the Group for the year were £119,840 (2013: £105,138). At the end of the reporting period £24,998 (2013: £17,948) of contributions were due in respect of the period. The amounts were paid subsequent to the end of the reporting period.

28 Dividends

On the 29 November 2013 an enhanced maiden dividend of 1.5 pence per share (total dividend £120,564) was paid to holders of fully paid ordinary shares.

In respect of the current year, the directors propose that a final dividend of 2 pence per share and a special dividend of 3 pence per share be paid to shareholders on 21 November 2014. The dividends are subject to approval by shareholders at the Annual General Meeting and have not been included as liabilities in these consolidated financial statements. The proposed dividends are payable to all shareholders on the Register of Members on 24 October 2014. The total estimated dividend to be paid is £437,525. The payment of this dividend will not have any tax consequences for the Group.

29 Control

There is no overall controlling party.

30 Notice of AGM

The Annual General Meeting of Aeorema Communications plc will be held at Moray House, 23-31 Great Titchfield Street, London W1W 7PA on 19 November 2014 at 10.30am.  A formal notice of AGM along with the Annual Report and Accounts for the year ended 30 June 2014 will be sent to shareholders and will be available on the Company's website www.aeorema.com in due course.   

 

END

 

 

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