Final Results

RNS Number : 2206G
Aeorema Communications Plc
14 November 2022
 

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

 

14 November 2022

 

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

Final Results

 

Aeorema Communications plc, a leading strategic communications group based in London, New York City and Amsterdam, is pleased to announce its audited results for the year ended 30 June 2022, a period in which record revenue and profits have been reported.

 

Highlights

• Record operational and financial performance:

Revenue up 140% to £12.2 million (2021: £5.09m)

Profit before tax of £843,564 (2021: loss of £159,698)

• Adapting and developing of the Group's service offering to become an integrated agency with a bespoke event offering spanning live, virtual, and hybrid experiences, resulting in an incredibly flexible business model

•          Demand for live events returning, with the addition of lucrative consultancy services, including a sustainability consultancy offering going forward

•        New office in Amsterdam opened to support the global growth strategy, adding to the Group's current offices in London and New York

•          Loyal, international blue-chip client base, spanning a broad range of sectors where we are seeing commitment to increasing numbers of longer-term contracts

•            A number of significant award wins during the period and post-period end including Global Agency of the Year at the C&IT Awards

• Strong cash balance of £1.7 million

• Dividend policy reinstated with proposed final dividend payment of 2p per share

 

 

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

Andrew Harvey

 

Aeorema Communications plc

+44 (0)20 7291 0444

 

John Depasquale/F reddie Wooding (Corporate Finance)

Kelly Gardiner

(Sales and Corporate Broking)

Allenby Capital Limited (Nominated Adviser and Broker)

+44 (0)20 3328 5656

Catherine Leftley/Charlotte Page

St Brides Partners Ltd (Financial PR)

info@stbridespartners.co.uk

 

 

Chairman's Statement

The year under review has proved to be a record period for Aeorema and I am delighted to report on our best ever financial performance, which includes a 140% increase in revenue and an impressive swing back to profitability.  This is an incredible achievement and is arguably all the more impressive given the global backdrop during the period.  This milestone achievement is testament to the skill set of our team, who have adapted and developed our service offering to become an integrated agency, reflecting evolving market demands and underpinning the innovative nature of our business. 

 

Whilst our Company initially grew as providers of immersive, live event experiences, global changes motivated our team to find new ways to operate and help our clients engage and communicate with their target audiences. As an integrated agency, our bespoke event offering spans live, virtual, and hybrid experiences. That said, it is encouraging to have seen a significant return to the demand for live events, a trend which we anticipate will continue. We have also leveraged the significant knowledge and experience of our team in providing high level consultancy services, which help clients maximise and deliver on their communication strategies, and we continue to identify new ways to support our clients. A critical sustainability consulting offering will be a key focus moving forward.  As a result, we now have an incredibly flexible business model, with clear value and proven resilience.

 

Importantly, the diversification of our business has helped support a loyal, international blue-chip client base, spanning a broad range of sectors, including finance, professional services, advertising, IT, gaming, fashion, fintech, and beverages, where we are seeing commitment to increasing numbers of longer-term contracts.  In support of this and our global growth strategy, post period end we were delighted to open a new office in Amsterdam, adding to our current offices in London and New York.  We are already realising the benefits of this increased global footprint and will continue to seek additional growth opportunities to continue to build our global market position and service offering.

 

During the period we were delighted to welcome Hannah Luffman to the board as a Non-Executive Director of the Company, making her one of the youngest ever females to join a listed company board of directors in the UK. With over 15 years' commercial and strategic marketing experience working with a number of large and blue-chip companies such as Google UK, InterContinental Hotels Group, Boots and Soap&Glory, Hannah brings a wealth of industry knowledge and contacts, which is already proving beneficial as we look to raise the profile for Aeorema's global network, with a particular focus on North America.

 

Whilst we are naturally delighted to have welcomed many new clients during the period, we are also honoured to continue to be working with many regularly returning customers. This, I believe, highlights the quality of our offering.

 

Looking ahead, we remain confident in our strengthened market position, with a strong pipeline of event activity that sees us solidly into 2023. Our diverse service offering, combined with an expanded geographical operating presence, means we are poised to continue a positive growth trajectory.

 

We have a robust cash position at the date of this announcement of £1.9million. I am also delighted to confirm that we will be returning to paying a dividend for the year, reflecting the growth we have experienced and the confidence we have for the future. The dividend declared is 2 pence per share (last declared dividend 2019: 1 pence per share), which will be paid to shareholders on the register on 23 December 2022. The ex-dividend date will be 22 December 2022. Subject to the proposed dividend being approved by shareholders at the forthcoming Annual General Meeting, it will be paid on 20 January 2023. 

 

Finally, I would like to extend my sincere thanks to our shareholders for their continued support and vision. We look forward to the growth opportunities ahead and are committed to delivering on these for the benefit of all.

 

Mike Hale

Chairman

11 November 2022

 

 

Chief Executive Officer's Report

We have had an exceptional year. Our exemplary creative and strategic insight, consistent high quality of work and commercial agility means I am incredibly proud to be reporting on the most successful year to date for Aeorema, both operationally and financially.

 

Excitingly, our shift to an integrated agency model and client partnership approach has opened up opportunities to work on long-term communications strategies over multiple event and film touchpoints. We continue to see significant growth in our strategic consultancy offering, which has opened new revenue streams within our business and introduced new skill sets into our teams. Evolving our revenue streams to meet the growing needs of our clients is a continued focus in our five-year strategy for global expansion.

 

We are already seeing the strength of our increasing global reach, working with leading brands on annual communications campaigns that span multiple regions and with delivery in multiple markets. We opened our office in New York in September 2020 to support our global client base and with a US foothold, our ambitions now turn to developing and growing this presence significantly. This is a key focus for the group and will require continued investment; thanks to our strong balance sheet we are in a good position to make strategic decisions when opportunities arise.

 

Looking to EMEA, we already have a strong presence thanks to our headquarters in London. After increased demand and activity in continental Europe, we were delighted to establish a new office in Amsterdam post period end in August 2022. We are naturally keen to maximise the business opportunities available to us and this Amsterdam office provides us with an increased operational presence and expanded team to better meet the growing demands of our European client base, whilst also targeting new business opportunities. The new office also underpins our commitment to minimising our environmental impact by enabling us to deliver projects through local teams and equipment, in line with our 2022 Corporate Social Responsibility programme.

 

Balancing people, planet and profit continues to be a focus across our business. We felt it was crucial to be an early adopter and to establish a formal structure and approach around emissions measurement, especially as environmental targets become an increasingly high priority both globally and for our clients. In April 2022, we launched our client carbon measurement programme which includes advance impact forecasting and actual emissions reporting, supported by sustainability consultancy to guide reduction, mitigation and offsetting of our carbon footprint. We're pleased to say training for this programme has now been fully implemented internally, with measurement complete on multiple client projects. We have also been thrilled to appoint a Sustainability Director to oversee our continued work in understanding and implementing sustainable best practice, alongside increasing momentum behind sustainable event practice in the industry. We continue to be viewed as an industry leader in this space.

 

Our experience and vocal industry presence across sustainability, leadership, innovation and creativity has strengthened our industry reputation as thought-leaders. We've quickly become an agency-to-watch and it's a momentum we plan to nurture.

 

I am pleased to report a number of significant award wins during the period and post-period end. Most recently, this included winning Global Agency of the Year at the C&IT Awards, as well as Creative Team of the Year for four consecutive years at the Conference News Awards, the biggest annual gathering and celebration of event management agencies in the UK. These exemplary accolades come alongside a handful of wins across our delivery disciplines, including winning 'Best Corporate Film' at the Campaign and PR Week Brand Film Awards, which is dubbed the most prestigious awards ceremony for the UK PR industry.

 

These award wins give rightful credit to the incredible skill set of our team, which we continue to invest in as we continue to build our business. These investments, among others in global operations, process, and office spaces, come at a pivotal time to set up the agency for further growth and success in the future, and have been a fruitful exercise in retaining (and recruiting) the industry's best talent.

 

Eventful Limited ('Eventful'), our venue sourcing and incentive travel agency, is showing promising results and optimism for growth in the next twelve months. Following the inevitable impact of restrictions during 2020/21, I am pleased to share that bookings have more than matched historic numbers, with a record pipeline in place for 22/23, and I am cautiously confident that Eventful will see a return to profitability.

 

Despite the continued global economic and political uncertainty, we remain confident in the opportunities ahead. We have proven the strength and value of our business and have a clear strategy in place to continue our upward growth trajectory as we take advantage of our enhanced global presence and strengthened team. Alongside this organic growth, we will continue to assess additional strategic growth opportunities that could materially enhance our business offering and build our market reach. With this incredibly strong financial performance and a growing blue-chip client base we are ideally positioned to further build our business.

 

My deepest thank you to our team, our clients and our shareholders for your continued support and I look forward to continuing Aeorema's journey with you as we build on this exciting phase of growth.

 

Steve Quah

CEO

11 November 2022

 

Strategic Report

 

The Board presents its Strategic Report on the Group for the year ended 30 June 2022.

 

Principal activities

Aeorema Communications plc does not trade but incurs professional fees associated with its listing on the London Stock Exchange. Aeorema Limited (trading as Cheerful Twentyfirst) and Cheerful Twentyfirst, Inc. are live events agencies with film capabilities that specialise in devising and delivering corporate communication solutions. Eventful Limited is a consultative, high-touch service, assisting clients with venue sourcing, event management and incentive travel. 

 

Business review

The results for the year show revenue was £12,207,253 (2021: £5,094,518), operating profit pre-exceptional items was £871,176 (2021: £188,105 loss) and profit before taxation was £843,564 (2021: £159,698 loss).

 

The Group had net assets of £2,253,564 at the year-end (2021: £1,514,980) and net current assets of £1,466,109 (2021: £1,019,047).

 

The year ended 30 June 2022 was a very successful year, with the Group achieving its highest revenue and profits before taxation in its history. The year, although still partially affected by the COVID-19 pandemic, witnessed the return of in-person events, especially in the second half of the financial year with the return of The Cannes Lions International Festival of Creativity. The Group experienced high growth with its two largest existing clients (refer to note 2) and won new business with a range of clients operating in sectors such as fintech, media and technology.

 

The significant growth during the year from both new and existing clients meant the Group employed on average 18 more employees compared with the previous year. These hires included roles essential to ensure the Group continued to successfully deliver high quality events. The Group also hired a new strategic director and additional account directors to support existing and new client accounts. These hires form part of the Group's strategic focus on growing both existing and new client accounts through the provision of more strategic and creative content services, rather than focusing solely on event production services. This shift in focus has not only allowed the Group to bill more time, and as a consequence improve gross profit margins, up from 23% in 2021 to 25% in 2022, but also grow client accounts as the Group becomes more involved in the clients' decision making processes. This has allowed the Group to deliver more and larger events and moving image projects.

 

Eventful Limited was significantly affected by the impact of the COVID-19 pandemic and continued to encounter difficulties caused by the pandemic in the first half of the year. However, the Company experienced an uplift in demand during the second half of the financial year as in-person events made a return and the Company delivered its first incentive travel events for new clients.

 

Cheerful Twentyfirst, Inc. experienced a very strong year. The Company built upon its successful first year of trading, growing existing client accounts and winning several new clients operating in sectors such as technology and media.

 

Looking ahead, the Group has not experienced any difficulties associated with the war in Ukraine, cost of living crisis or political uncertainties in the UK. However, the Board remain acutely aware of the economic difficulties faced both in the UK and globally, and continue to evaluate the investment plans, resourcing and future forecasts on a daily basis.

 

Key performance indicators

Year

2022

2021

2020

2019

 

£

 

£

 

£

 

£

 

Revenue

12,207,253

5,094,518

5,475,425

6,765,280

Operating profit / (loss) pre-exceptional items

871,176

(188,105)

(175,043)

384,483

Profit / (loss) before taxation

843,564

(159,698)

(217,924)

382,244

 

The Group experienced a 140% increase in revenue during the year.

 

Event revenue increased by 160% in comparison with the previous year. This increase was due in large part to two factors. Firstly, as previously explained, the Group has shifted towards a client account model with greater emphasis on building existing and new client accounts, compared with a project by project model used in previous years. This has allowed the Group to develop client relationships and grow the number and size of events delivered. Secondly, the return of in-person events during the year, especially in the Group's historically busiest month of June. The Group delivered its most ever events at The Cannes Lions International Festival of Creativity. In the previous couple of years, Cannes Lions has been cancelled as a consequence of the COVID-19 pandemic. 

 

Film revenue grew by 52% in comparison with the previous year. This growth was partly a consequence of the significant growth in events delivered during the year and the demand for films and motion graphics on these events. The moving image department also experienced high growth on solely moving image projects. The Group delivered several large moving image projects for new clients during the year, including clients introduced by Eventful Limited.

 

Eventful Limited experienced a 1110% increase in revenue during the year, compared with the previous year. The company was hugely affected by the COVID-19 pandemic, but, as demand for in-person events and incentive travel returned the company experienced significant growth in client enquiries.

 

Cashflows

Net cash inflow from operating activities was £921,695 compared with a net cash outflow of £708,814 for the year ended 30 June 2021. The cash position increased by £612,704 to £1,714,417 (2021: £1,101,713).

 

Capital expenditure

Total capital expenditure, including expenditure on tangible assets, was £179,475 compared with £59,179 for the year ended 30 June 2021.

 

Employees

Our priority is to attract and retain talented employees and to harness their creativity to drive growth through development and delivery of services that bring value to our customers' business operations.

 

We continue to focus on ensuring that the performance of staff is measured against clear, business focused objectives and behavioural criteria through continual appraisals.

 

Reward

The Group benchmarks employee salaries against the market and reviews salaries annually to ensure that we are paying at a level to attract and retain high-quality employees.

 

Key employees are offered access to a share option scheme, further details of which are provided in note 25 to the financial statements.

 

Equal opportunities

We are committed to ensuring equal opportunities for our staff. We have introduced training which covers equal opportunities legislation and best practice. Our policy in respect of employment of disabled persons is the same as that relating to all other employees in matters of training, career development and promotion. Should employees become disabled during the course of their employment, we will make every effort to make reasonable adjustments to their working environment to enable their continued employment.

 

Safety, health and environment

The commitment and participation of all employees is vital to efficient and effective occupational risk control. In order to meet our responsibility to protect the environment, staff and the business, the Group continues to focus on maintaining a risk aware culture.

 

We believe the Group maintains a low environmental impact. We therefore continue to work on the potential environmental impacts of energy consumption, waste and travel.

 

Directors' policies for managing principal risks

There is an ongoing process for identifying, evaluating and managing the significant risks faced by the business. Risk reviews are undertaken regularly by the respective business areas throughout the year to identify and assess the key risks associated with the achievement of our business objective.

 

Key risks of a financial nature

The principal risks and uncertainties facing the Group are linked to customer dependency. Though the Group has a very diverse customer base in certain market sectors, key customers can represent a significant amount of revenue (see note 2). Key customer relationships are closely monitored but the loss of a key client could have an adverse effect on the Group's performance. Further details of risks, uncertainties and financial instruments are contained in note 28.

 

Key risks of a non‑financial nature

The Group is operating in a highly competitive global market that is undergoing continual change. The Group's ability to respond to many competitive factors including, but not limited to technological innovations, product quality, customer service and employment of qualified personnel will be key in the achievement of its objectives, but its ultimate success will depend on the purchase spends of its customers and the buoyancy of the market.

 

On behalf of the Board

S Haffner
Director

11 November 2022

 

 

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2022

 

Notes

2022

2021


 

£

£

 

 

 

 

Continuing operations

 

 

 

 

Revenue

2

12,207,253

5,094,518

Cost of sales

 

(9,169,691)

(3,912,376)

Gross profit

 

3,037,562

1,182,142

Other income

3

3,743

61,651

Administrative expenses

 

(2,170,129)

(1,431,898)

 

Operating profit / (loss) pre-exceptional items

4

871,176

(188,105)

Exceptional income

5

 

 

-

 

 

 

 

50,000

 

 

Operating profit / (loss) post exceptional items

 

871,176

(138,105)

Finance income

6

241

489

Finance costs

7

(27,853)

(22,082)

Profit / (loss) before taxation

 

843,564

(159,698)

Taxation

8

(204,222)

(5,228)

Profit / (loss) for the year

 

639,342

(164,926)

 

Other comprehensive income

Items that may be reclassified to profit of loss

 

Exchange differences on translation of foreign entities

 

42,347

(11,044)

Other comprehensive income for the year

 

42,347

(11,044)

Total comprehensive income for the year attributable to owners of the parent

 

681,689

(175,970)

 

Profit / (loss) per ordinary share:

 

 

 

 

Total basic earnings per share

 

11

6.92078p

(1.78529)p

Total diluted earnings per share

11

5.80797p

(1.78529)p


The notes are an integral part of these financial statements.

 

Consolidated Statement of Financial Position

As at 30 June 2022

 

Notes

Group

Company

 

 

2022

2021

2022

2021

 

 

£

£

£

£

Non-current assets

 

 

 

 

 

Intangible assets

12

568,931

571,431

-

-

Property, plant and equipment

13

222,479

103,477

-

-

Right-of-use assets

14

823,772

18,995

-

-

Investments in subsidiaries

15

-

-

1,229,148

1,172,253

Deferred taxation

9

25,925

-

-

30,253

Total non-current assets

 

1,641,107

693,903

1,229,148

1,202,506

Current assets

 

 

 

 

 

Trade and other receivables

16

3,130,035

1,429,064

689,332

532,875

Cash and cash equivalents

17

1,714,417

1,101,713

1,532

5,844

Current tax receivable

 

-

10,758

-

-

Total current assets

 

4,844,452

2,541,535

690,864

538,719

Total assets

 

6,485,559

3,235,438

1,920,012

1,741,225

Current liabilities

 





Trade and other payables

18

(2,960,221)

(1,417,467)

(143,721)

(139,760)

Bank loans

19

(83,333)

(54,089)

-

-

Lease liabilities

20

(121,999)

(25,912)

-

-

Current tax payable

 

(177,790)

-

-

-

Provisions

21

(35,000)

(25,020)

-

-

Total current liabilities

 

(3,378,343)

(1,522,488)

(143,721)

(139,760)

Non-current liabilities

 

 

 

 

 

Bank loans

19

(111,111)

(195,911)

-

-

Lease liabilities

20

(738,041)

-

-

-

Deferred taxation

9

-

(2,059)

-

-

Provisions

21

(4,500)

-

-

-

Total non-current liabilities

 

(853,652)

(197,970)

-

-

Total liabilities

 

(4,231,995)

(1,720,458)

(143,721)

(139,760)

Net assets

 

2,253,564

1,514,980

1,776,291

1,601,465

Equity

 





Share capital

22

1,154,750

1,154,750

1,154,750

1,154,750

Share premium

 

9,876

9,876

9,876

9,876

Merger reserve

 

16,650

16,650

16,650

16,650

Other reserve

 

168,956

112,061

168,956

112,061

Capital redemption reserve

 

257,812

257,812

257,812

257,812

Foreign translation reserve

 

31,303

(11,044)

-

-

Retained earnings

 

614,217

(25,125)

168,247

50,316

Equity attributable to owners of the parent

 

2,253,564

1,514,980

1,776,291

1,601,465

 

The notes are an integral part of these financial statements.

 

The profit for the financial year of the holding company was £148,184 (2021: £79,179 loss).

 

The financial statements were approved and authorised by the board of directors on 11 November 2022 and were signed on its behalf by

 

A Harvey  S Haffner

Director   Director

 

Company Registration No. 04314540

 

 

Consolidated Statement of Changes in Equity

For the year ended 30 June 2022

Group

Share capital

Share premium

Merger reserve

Other reserve

Capital redemption reserve

Foreign translation reserve

Retained earnings

Total equity

 

£

£

£

£

£

£

£

£

At 30 June 2020

1,154,750

9,876

16,650

81,358

257,812

-

139,801

1,660,247

 

Comprehensive income for the year, net of tax

-

-

-

-

-

-

(164,926)

(164,926)

Foreign currency translation

-

-

-

-

-

(11,044)

-

(11,044)

Share-based payment

-

-

-

30,703

-

-

-

30,703

At 30 June 2021

1,154,750

9,876

16,650

112,061

257,812

(11,044)

(25,125)

1,514,980

 

Comprehensive income for the year, net of tax

-

-

-

-

-

-

639,342

639,342

Foreign currency translation

-

-

-

-

-

42,347

-

42,347

Share-based payment

-

-

-

56,895

-

-

-

56,895

At 30 June 2022

1,154,750

9,876

16,650

168,956

257,812

31,303

614,217

2,253,564

 

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

 

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.

 

Other reserve represents equity settled share-based employee remuneration, as detailed in note 25.

 

Capital redemption reserve represents a statutory non-distributable reserve into which amounts are transferred following redemption or purchase of a company's own shares.

 

The notes are an integral part of these financial statements.

 

 

Company Statement of Changes in Equity

For the year ended 30 June 2022

 

Company

Share capital

Share premium

Merger reserve

 

Other reserve

Capital redemption reserve

Retained earnings

Total equity

 

£

£

£

£

£

£

£

At 30 June 2020

1,154,750

9,876

16,650

81,358

257,812

129,495

1,649,941

 

Comprehensive income for the year, net of tax

-

-

-

 

 

-

-

(79,179)

(79,179)

Share-based payment

-

-

-

30,703

-

-

30,703

At 30 June 2021

1,154,750

9,876

16,650

112,061

257,812

50,316

1,601,465

 

Comprehensive income for the year, net of tax

-

-

-

 

 

-

-

117,931

117,931

Share-based payment

-

-

-

56,895

-

-

56,895

At 30 June 2022

1,154,750

9,876

16,650

168,956

257,812

168,247

1,776,291

 

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

 

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.

 

Other reserve represents equity settled share-based employee remuneration, as detailed in note 25.

 

Capital redemption reserve represents a statutory non-distributable reserve into which amounts are transferred following redemption or purchase of a company's own shares.

 

The notes are an integral part of these financial statements.

 

Consolidated Statement of Cash Flows

For the year ended 30 June 2022

 

Notes

Group

 

 

 

2022

2021

 

 

£

 

£

 

Net cash flow from operating activities

27

921,695

(708,814)


 



Cash flows from investing activities

 

 

 

Finance income

6

241

489

Purchase of property, plant and equipment

13

(179,475)

(59,179)

Repayment of leasing liabilities

 

(74,201)

(102,000)

Cash used in investing activities

 

(253,435)

(160,690)

 

 

 

 

Cash flows from financing activities

 

 

 

Repayment of borrowings

 

(55,556)

-

Proceeds from borrowings

 

-

250,000

Cash used in financing activities

 

(55,556)

250,000

 

 

 

 

Net (decrease) / increase in cash and cash equivalents

 

612,704

(619,504)

Cash and cash equivalents at beginning of year

 

1,101,713

1,721,217

Cash and cash equivalents at end of year

 

1,714,417

1,101,713

 

Cash and cash equivalents

The amounts disclosed on the Statement of Cash Flows in respect of cash and cash equivalents are in respect of the Statement of Financial Position amounts:

 

Notes

Group

 

Company

 

 

 

2022

2021

2022

2021

 

 

£

£

£

£

Cash and cash equivalents

17

1,714,417

1,101,713

1,532

5,844

 

 

1,714,417

1,101,713

1,532

5,844

 

The notes are an integral part of these financial statements.

Notes to the consolidated financial statements

For the year ended 30 June 2022

 

1 Accounting policies

Aeorema Communications plc is a public limited company incorporated in the United Kingdom and registered in England and Wales. The Company is domiciled in the United Kingdom and its principal place of business is 87 New Cavendish Street, London, W1W 6XD. 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.

 

The presentation currency is £ sterling.

 

Going concern

The Board have reviewed the Group's detailed forecasts for the next financial year, other medium term plans, the impact of the war in Ukraine, the cost of living crisis and economic and political uncertainties both in the UK and globally, as well as  considering the risks outlined in note 28. After doing so, 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 and company financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards (IFRS) as adopted by the UK

 

The following new standards, amendments to standards and interpretations have been applied for the first time from 1 July 2021. Their adoption has not had a material impact on the financial statements:

 

· Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16).

· Covid-19-Related Rent Concessions beyond 30 June 2021 - (Amendment to IFRS 16)

 

Future standards in place but not yet effective

No new standards, amendments or interpretations to existing standards that have been published and that are mandatory for the Company's accounting periods beginning on or after 1 July 2022 have been adopted early.

 

The following standards and amendments are not yet endorsed in the UK at the date of authorisation of these financial statements:

 

· Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)

· Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)

· Annual Improvements 2018-2020 Cycle

· Reference to the Conceptual Framework (Amendments to IFRS 3)

· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)

· Classification of Liabilities as Current or Non-current - Deferral of Effective Date (Amendment to IAS 1)'

· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

· Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

· Definition of Accounting Estimates (Amendments to IAS 8)

 

The Group does not believe that there would have been a material impact on the financial statements from early adoption of these standards / interpretations.

 

Basis of consolidation

The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 30 June 2022. Subsidiaries are all entities (including structured entities) over which the Group has control. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are consolidated until the date that control ceases.

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

 

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

 

Revenue

Revenue represents amounts (excluding value added tax) derived from the provision of services to third party customers in the course of the Group's ordinary activities. 

 

As a result of providing these services, the Group may from time to time receive commissions from other third parties.  These commissions are included within revenue on the same basis as that arising from the contract with the underlying third party customer.

 

The revenue and profits recognised in any period are based on the satisfaction of performance obligations and an assessment of when control is transferred to the customer.

 

For most contracts with customers, there is a single distinct performance obligation and revenue is recognised when the event has taken place or control of the content or video has been transferred to the customer.

 

Where a contract contains more than one distinct performance obligation (multiple film productions, or a project involving both build construction and event production) revenue is recognised as each performance obligation is satisfied.

 

The transaction price is substantially agreed at the outset of the contract, along with a project brief and payment schedule (full payment in arrears for smaller contracts; part payment(s) in advance and final payment in arrears for significant contracts).

 

Due to the detailed nature of project briefs agreed in advance for significant contracts, management do not consider that significant estimates or judgements are required to distinguish the performance obligation(s) within a contract.

 

For contracts to prepare multiple film productions, the transaction price is allocated to constituent performance obligations using an output method in line with agreements with the customer.

 

For other contracts with multiple performance obligations, management's judgement is required to allocate the transaction price for the contract to constituent performance obligations using an input method using detailed budgets which are prepared at outset and subsequently revised for actual costs incurred and any changes to costs expected to be incurred.

 

The Group does not consider any disaggregation of revenue from contracts with customers necessary to depict how the nature, amount, timing and uncertainty of the Group's revenue and cash flows are affected by economic factors.

 

Where payments made are greater than the revenue recognised at the reporting date, the Group recognises deferred income (a contract liability) for this difference. Where payments made are less than the revenue recognised at the reporting date, the Group recognises accrued income (a contract asset) for this difference.

 

A receivable is recognised in relation to a contract for amounts invoiced, as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

 

At each reporting date, the Group assesses whether there is any indication that accrued income assets may be impaired by assessing whether it is possible that a revenue reversal will occur. Where an indicator of impairment exists, the Group makes a formal estimate of the asset's recoverable amount.  Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

 

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.

 

Intangible assets - other

Intangible assets are stated in the financial statements at cost less accumulated amortisation and any impairment value. Amortisation is provided to write off the cost less estimated residual value of intangible assets over its expected useful life (which is reviewed at least at each financial year end), as follows:

 

Intellectual property

 

25% straight line

 

 

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

 

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

 

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

 

Fixtures, fittings and equipment

Straight line over four years

 

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

 

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

 

Impairment

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

 

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

 

Investments

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

 

Leases

In applying IFRS 16, for all leases (except as noted below), the Group:

a) recognises right-of-use assets and lease liabilities in the statement of financial position, initially measured at the present value of future lease payments;

b) recognises depreciation of right-of-use assets and interest on lease liabilities in the statement of profit or loss; and

c) separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within operating activities) in the statement of cash flows.

 

Lease incentives (e.g. free rent period) are recognised as part of the measurement of the right-of-use assets and lease liabilities whereas under IAS 17 they resulted in the recognition of a lease incentive liability, amortised as a reduction of rental expense on a straight-line basis.

 

Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36 Impairment of Assets. This replaces the previous requirement to recognise a provision for onerous lease contracts.

 

For short‑term leases (lease term of 12 months or less) and leases of low-value assets (such as photocopiers), the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16. This expense is presented within administrative expenses in the consolidated statement of comprehensive income.

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, 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.

 

Bank loans and overdrafts comprise amounts due on demand.

 

Finance income

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

 

Taxation

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

 

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

 

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

 

Pension costs

The Group operates a pension scheme for its employees. It also makes 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.

 

Government grants

Government grants are recognised based on the accrual model and are measured at the fair value of the asset received or receivable. Grants are classified as relating either to revenue or to assets. Grants relating to revenue are recognised in income over the period in which the related costs are recognised. Grants relating to assets are recognised over the expected useful life of the asset. Where part of a grant relating to an asset is deferred, it is recognised as deferred 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 25 to the financial statements.

 

Exceptional items

Exceptional items are one off, material items outside the normal course of business which are not related to the Group's trading activities.

 

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 affect 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. For critical judgements that the directors have made in the process of applying the Group's accounting policies, see note 12 on goodwill impairment and note 14 on discount rate used to calculate right of use assets and lease liability.

 

2 Revenue and segment information

The Group 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 year ending 30 June 2022 there is only a single reportable segment.

 

All revenue represents sales to external customers. Two customers (2021: three) are defined as major customers by revenue, contributing more than 10% of the Group revenue.

 

 

2022

2021

 

£

£

Customer One

1,916,827

1,211,409

Customer Two

1,816,883

338,377

Major customers in the current year

3,733,710

1,549,786

Major customers in prior year

 

1,206,346

 

 

2,756,132

 

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

Geographical market

2022

2021

 

£

£

United Kingdom

7,586,982

3,907,873

United States

4,150,179

1,055,096

Rest of the World

470,092

131,549




 

12,207,253

5,094,518

 

 

2022

2021

 

£

£

Revenue from contracts with customers - Events

10,135,172

3,917,481

Revenue from contracts with customers - Film

1,785,367

1,177,037

Other revenue

286,714

-




Total revenue

12,207,253

5,094,518

 

Contract assets and liabilities from contracts with customers have been recognised as follows:

 

2022

2021

 

£

£

Deferred income

839,326

384,598

Accrued income

169,955

 

Deferred income at the beginning of the period has been recognised as revenue during the period.

 

3 Other income

Other income

2022

2021

 

£

£

Coronavirus job retention scheme government grant

1,168

56,501

Business interruption payment grant

2,575

5,150





3,743

61,651

 

During the year the Group received government grants under the UK government's coronavirus job retention scheme and the coronavirus business interruption loan scheme.

 

4 Operating profit

Operating profit is stated after charging or crediting:

2022

2021

 

£

 

£

 

Cost of sales



Depreciation of fixtures, fittings and equipment

54,101

40,885

Amortisation of intangible assets

2,500

2,500

Staff costs (see note 24)

2,135,136

1,287,342

Administrative expenses



Depreciation of right-of-use assets

82,361

91,092

Depreciation of leasehold land and buildings

1,935

-

(Profit) / loss on foreign exchange differences

14,465

13,401

Fees payable to the Company's auditor in respect of:



  Audit of the Company's annual accounts

7,842

6,000

  Audit of the Company's subsidiaries

26,694

20,622

Interest on lease liabilities

21,191

16,932

Staff costs (see note 24)

1,107,745

837,847

 

5 Exceptional items

Items that are material either because of their size or their nature, or that are non-recurring, are considered as exceptional. The exceptional income in the year ended 30 June 2021 totalling £50,000 included in the consolidated Statement of Comprehensive Income relates to the contingent consideration totalling £100,000 which forms part of the overall consideration for Eventful Limited in the year ended 30 June 2020. Eventful Limited failed to meet the target set in the purchase agreement for the year ending 30 June 2021 and therefore the contingent consideration related to the year ended 30 June 2021 has been moved to the consolidated Statement of Comprehensive Income as exceptional income. The remaining contingent consideration totalling £50,000 is included in the Statement of Financial Position. 

 

6 Finance income

Finance income

2022

2021

 

£

£

Bank interest received

241

489

 

 

7 Finance costs

 

Finance costs

2022

2021

 

£

£

Coronavirus business interruption loan interest

6,662

5,150

Lease interest

21,191

16,932





27,853

22,082

 

8 Taxation

 

2022

2021

 

£

 

£

 

The tax charge comprises:

 

 

 

 

 

Current tax

 

 

 

Current year

232,206

(4,442)




 

232,206

(4,442)

Deferred tax (see note 9)

 

 

Current year

(27,984)

9,670

 

(27,984)

9,670




Total tax charge in the statement of comprehensive income

204,222

5,228

Factors affecting the tax charge for the year

 

 

Profit / (loss) on ordinary activities before taxation from continuing operations

843,564

(159,698)

Profit / (loss) on ordinary activities before taxation multiplied by standard rate



of UK corporation tax of 19% (2021: 19%)

160,277

(30,343)

Effects of:



Non-deductible expenses

43,945

15,021

Tax on foreign subsidiaries

-

20,550




 

43,945

35,571

Total tax charge

204,222

5,228

 

The Group has estimated losses of £685,568 (2021: £685,568) available to carry forward against future trading profits. Losses totalling £635,371 are in Aeorema Communications plc which is not currently making taxable profits, as all trading is undertaken by its subsidiaries Aeorema Limited, Eventful Limited and Cheerful Twentyfirst, Inc., therefore no deferred tax asset has been recognised in respect of this amount.

 

9 Deferred taxation

 

2022

2021

 

£

£

Property, plant and equipment temporary differences

(39,435)

(16,826)

Temporary differences

55,823

(25,023)

Tax losses

9,537

39,790

 

25,925

(2,059)

At 1 July

(2,059)

7,611

Transfer to Statement of Comprehensive Income

27,984

(9,670)

At 30 June

25,925

(2,059)

10 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 profit for the financial year of the holding company was £148,184 (2021: £79,179 loss).

 

11 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.

 

1.  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. In view of the group loss for the year, options to subscribe for ordinary shares in the company are anti-dilutive and therefore diluted earnings per share information is presented in line with basic earnings per share.

 

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

 

 

2022

2021

 

£

£

 

Basic earnings per share

 

 

(Loss) / profit for the year attributable to owners of the Company

639,342

(164,926)




Basic weighted average number of shares

9,238,000

9,238,000

 

Dilutive potential ordinary shares:
Employee share options

1,770,000

1,920,000

Diluted weighted average number of shares

11,008,000

11,158,000

 

12 Intangible fixed assets

Group

Goodwill

Intellectual

Property

Total

 

£

£

£

Cost




At 30 June 2020

2,927,486

10,000

2,937,486

At 30 June 2021

2,927,486

10,000

2,937,486

At 30 June 2022

2,927,486

10,000

2,937,486

 

 

Impairments and amortisation




 

At 30 June 2020

2,363,138

417

2,363,555

Charge for the year

-

2,500

2,500

 

At 30 June 2021

2,363,138

2,917

2,363,555

Charge for the year

-

2,500

2,500

 

At 30 June 2022

2,363,138

5,417

2,366,055

Net book value




At 30 June 2020

564,348

9,583

573,931

At 30 June 2021

564,348

7,083

571,431

At 30 June 2022

564,348

4,583

568,931

 

Goodwill arose for the Group on consolidation of its subsidiaries, Aeorema Limited and Eventful Limited.

 

Impairment - Aeorema Limited and Eventful Limited

 

Goodwill arises on acquisition of a business combination and represents the difference between the fair value of the consideration paid and the aggregate fair value of identifiable assets and liabilities acquired. Goodwill is tested annually for impairment, goodwill is impaired when the value in use exceeds the net asset value of the group's cash generating units (CGUs).The CGUs represent Aeorema Limited and Eventful Limited, being the lowest level within the group at which goodwill is monitored for internal management purposes.

 

The value in use has been calculated on a discounted cash flow basis using the 2022-23 budgeted figures as approved by the Board of directors, extended in perpetuity to calculate the terminal value and discounted at a rate of 10%. It is assumed that future growth will be 2% for venue sourcing activities and 4% for event and moving image production activities. Using these assumptions, which are based on past experience and future expectations, the recoverable amount of goodwill of £2,673,773 was determined to be higher than its carrying value, hence no impairment in the year.

 

Sensitivity Analysis

 

If the assumptions used in the impairment review were changed to greater extent than as presented in the following table, the changes would, in isolation, lead to impairment loss being recognised for 0% growth rate.

 

Aeorema Limited

4% Growth

0% Growth

Discount Rate of 5%

Discount Rate of 15%

 

£

£

£

£

Value in use calculations

1,796,220

(25,553,571)

2,979,797

1,411,761

Carrying amount in financial statements

365,154

365,154

365,154

365,154






Difference

1,431,066

(25,918,725)

2,614,643

1,046,607

 

Eventful Limited

2% Growth

0% Growth

Discount Rate of 5%

Discount Rate of 15%

 

£

£

£

£

Value in use calculations

841,553

(134,627)

1,379,307

629,102

Carrying amount in financial statements

199,194

199,194

199,194

199,194






Difference

642,359

(333,821)

1,180,113

429,908

 

Combined

2% Growth

0% Growth

Discount Rate of 5%

Discount Rate of 15%

 

£

£

£

£

Value in use calculations

2,637,773

(25,688,198)

4,349,104

2,040,863

Carrying amount in financial statements

564,348

564,348

564,348

564,348






Difference

2,109,425

(26,252,546)

3,794,756

1,476,515

 

13 Property, plant and equipment

Group

Leasehold land

Fixtures, fittings

Total

 

and buildings

and equipment

 

 

£

£

£

Cost




At 30 June 2020

58,536

173,182

231,718

Additions

-

59,179

59,179

Disposals

-

(3,354)

(3,354)

At 30 June 2021

58,536

229,007

287,543

Additions

98,821

80,654

179,475

Disposals

(58,536)

(5,095)

(63,631)

Foreign exchange movement

-

329

329

At 30 June 2022

98,821

304,895

403,716

 

 

Depreciation




 

At 30 June 2020

58,536

87,230

145,766

Charge for the year

-

40,885

40,885

Eliminated on disposal

-

(2,585)

(2,585)

 

At 30 June 2021

58,536

125,530

184,066

Charge for the year

1,935

54,101

56,036

Eliminated on disposal

(58,536)

(449)

(58,985)

Foreign exchange movement

-

120

120

 

At 30 June 2022

1,935

179,302

181,237

Net book value




At 30 June 2020

-

85,952

85,952

At 30 June 2021

-

103,477

103,477

At 30 June 2022

96,886

125,593

222,479

 

14 Right-of-use assets

Group

Leasehold Property

 

£

Cost


At 30 June 2020

455,436

Lease modification adjustment

(436,441)

At 30 June 2021

18,995

Additions

887,138

Disposals

(18,995)

At 30 June 2022

887,138

Depreciation

 

At 30 June 2020

75,906

Charge for the year

91,092

Lease modification adjustment

(166,998)

At 30 June 2021

-

Charge for the year

82,361

Disposals

(18,995)

At 30 June 2022

63,366

Net book value

 

At 30 June 2020

379,530

At 30 June 2021

18,995

At 30 June 2022

823,772

 

The right-of-use asset addition during the year relates to the Group's leasehold property at 87 New Cavendish Street, London, W1W 6XD. The Group entered the new leasehold in January 2022.

The right-of-use asset is calculated on the assumption that the Group will remain in the premises for the duration of the 7 year lease agreement. A discount rate of 5% was used to calculate the right-of use asset. 5% was considered an appropriate rate based on the Group's weighted average cost of capital.

The disposal during the year relates to the Group's leasehold property at Moray House, 23-31 Great Titchfield Street, London, W1W 7PA. The Group left the premises in September 2021.

 

15 Non-current assets - Investments

Company

Shares in subsidiary

 

£

Cost


At 30 June 2020

3,835,753

 

Increase in respect of share-based payments

30,703

Acquisition of subsidiary

10

At 30 June 2021

3,866,466

 

Increase in respect of share-based payments

56,895

At 30 June 2022

3,923,361

Provision

 

At 30 June 2020

2,694,213

At 30 June 2021

2,694,213

At 30 June 2022

2,694,213

Net book value

 

At 30 June 2020

1,141,540

At 30 June 2021

1,172,253

At 30 June 2022

1,229,148

 

Holdings of more than 20%

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

Subsidiary undertakings

Country of

Shares held

 

 

Registration

 

 

 

or incorporation

Class

%

Aeorema Limited

England and Wales

Ordinary

100

Eventful Limited

England and Wales

Ordinary

100

Twentyfirst Limited (Dormant)

England and Wales

Ordinary

100

Cheerful Twentyfirst, Inc.

United States of America

Ordinary

100

Cheerful Twentyfirst B.V.

The Netherlands

Ordinary

100

 

Post year end the Group formed Cheerful Twentyfirst B.V., a Dutch company based in Amsterdam. Aeorema Communications plc holds 100% of the share capital in Cheerful Twentyfirst B.V.

 

The registered address of Aeorema Limited, Eventful Limited and Twentyfirst Limited is 64 New Cavendish Street, London, W1G 8TB. The registered address of Cheerful Twentyfirst, Inc. is 85 Broad Street, Floor 16, New York, NY, 10004. The registered address of Cheerful Twentyfirst B.V. is Herengracht 500, 1017 CB, Amsterdam. 

 

16 Trade and other receivables

 

Group

Company

 

2022

2021

2022

2021

 

£

£

£

£

Trade receivables

1,980,121

964,490

-

-

Related party receivables

-

-

666,017

517,003

Other receivables

78,536

93,015

14,982

3,872

Prepayments and accrued income

1,071,378

371,559

8,333

12,000


3,130,035

1,429,064

689,332

532,875


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.

Trade and other receivables are assessed for impairment based upon the expected credit losses model. The credit losses historically incurred have been immaterial and as such the risk profile of the trade receivables has not been presented.

 

At the year end, trade receivables of £694,325 (2021: £76,504) were past due but not impaired. These amounts are still considered recoverable. The ageing of these trade receivables is as follows:

 

Group

 

2022

2021

 

£

£

Less than 90 days overdue

566,605

39,419

More than 90 days overdue

127,720

37,085

 

694,325

76,504

 

17 Cash at bank and in hand

 

Group

Company

 

2022

2021

2022

2021

 

£

£

£

£

Bank balances

1,714,417

1,101,713

1,532

5,844

 

1,714,417

1,101,713

1,532

5,844

 

18 Trade and other payables


Group

Company


2022

2021

2022

2021


£

£

£

£

Trade payables

796,671

492,163

5,411

5,395

Related party payables

-

-

67,355

67,365

Taxes and social security costs

466,847

310,148

-

-

Other payables

124,737

91,002

50,000

50,000

Accruals and deferred income

1,571,966

524,154

20,955

17,000


2,960,221

1,417,467

143,721

139,760

 

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.

 

19 Bank Loans

 

 

2022

 

2021

 

£

£

 

Bank Loan



Current

83,333

54,089

Non-current

111,111

195,911




 

250,000

 

On 15 October 2020 the company received a Floating Rate Basis Coronavirus Business Interruption Loan (CBIL) of £250,000 from Barclays Bank UK PLC to cover the company's working capital commitments during the COVID-19 pandemic. For the first twelve months interest on the loan is paid by the UK government, after this point interest will be paid at a margin of 2.28%, in addition to monthly capital repayments of £6,944 to the final repayment date of 15 October 2024.

 

Under IFRS 9, the loan should be initially recognised at fair value and subsequently accounted for at amortised cost. However, the difference between the nominal value and fair value is not material, therefore the full nominal value of the loan is recognised with the interest charge for the period of £6,662 being charged to profit and loss. This is offset by the equal amount of government grant income being recognised.

 

The bank loan is secured by a fixed and floating charge over the company's present and future assets.

 

20 Leases

The balance sheet shows the following amounts relating to leases:

Group

 

2022

 

2021

 

£

£

 

Right-of-use assets



Buildings

 

823,772

 

18,995





18,995

 

Group

 

2022

 

2021

 

£

£

 

Lease liabilities



Current

121,999

25,912

Non-current

738,041

-




 

25,912

 

 

Group

 

 

2021

 

£

 

Maturity analysis - contractual undiscounted cash flows



Less than one year


213,000

One to five years


710,000

More than five years


71,000




 

994,000

 

Group

 

2022

 

2021

 

£

£

 

Interest on lease liabilities

21,191

16,932




 

16,932

 

21 Provisions

Group

 

Leasehold dilapidations

 

Total

 

£

£

At 1 July 2021

25,020

25,020




Charged to statement of comprehensive income

14,480

14,480




At 30 June 2022

39,500

39,500

 

Group

 

Leasehold dilapidations

 

Total

 

£

£

Current

35,000

25,020

Non-current

4,500

-




 

25,020

 

Leasehold dilapidations relate to the estimated cost of returning a leasehold property to its original state at the end of the lease in accordance with the lease terms. The main uncertainty relates to estimating the cost that will be incurred at the end of the lease.

 

 

22 Share capital

 

2022

2021

 

£

£

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 30 June 2020

9,238,000

1,154,750

At 30 June 2021

9,238,000

1,154,750

At 30 June 2022

9,238,000

1,154,750

 

Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the company.

 

See note 25 for details of share options outstanding.

 

23 Directors' emoluments


Salary, fees, bonuses and benefits in kind

Salary, fees, bonuses and benefits in kind

Pensions

Pensions

Total

Total

 

2022

2021

2021

2022

2021

 

£

£

£

£

£

£

M Hale

-

-

-

-

-

-

S Haffner

15,000

15,000

-

-

15,000

15,000

R Owen

20,000

20,000

-

-

20,000

20,000

S Quah

151,057

139,268

7,500

5,000

158,557

144,268

A Harvey

112,377

103,653

6,172

4,000

118,549

107,653

H Luffman

4,558

-

-

-

4,558

-

 

302,992

277,921

13,672

9,000

316,664

286,921

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

 

During the year M Hale waived his right to fees of £15,000 (2021: £15,000)

 

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

Name

Grant date

Number awarded

Exercise price

Earliest exercise date

Expiry date







S Quah

25 April 2013

300,000

16.50p

25 April 2016

24 April 2023

S Quah

22 August 2018

300,000

29.00p

17 November 2020

22 August 2028

A Harvey

22 August 2018

300,000

29.00p

17 November 2020

22 August 2028

S Quah

29 April 2021

100,000

31.00p

5 November 2023

29 April 2031

A Harvey

29 April 2021

100,000

31.00p

5 November 2023

29 April 2031

S Quah

29 April 2021

100,000

50.00p

5 November 2023

29 April 2031

A Harvey

29 April 2021

100,000

50.00p

5 November 2023

29 April 2031

S Quah

29 April 2021

100,000

70.00p

5 November 2023

29 April 2031

A Harvey

29 April 2021

100,000

70.00p

5 November 2023

29 April 2031

 

Fees for S Haffner are charged by Harris & Trotter LLP, a firm in which he is a member (see note 26).

 

24 Employee information

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

 Number of employees

Group

Company

 

2022 Number

2021 Number

2022 Number

2021 Number

 

 

 

 

 

Administration and production

55

37

5

5

 

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

Employment costs

Group

Company

 

2022

2021

2022

2021

 

£

£

£

£

Wages and salaries

2,827,204

1,846,938

39,558

35,000

Social security costs

294,872

205,253

-

-

Pension costs

63,910

42,295

-

-

Share-based payments

56,895

30,703

-

-

 

2,125,189

39,558

35,000

 

25 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 2022

Number of options 2021

 

 

From

To

 

 

25 April 2013

16.5p

25 April 2016

24 April 2023

300,000

300,000

22 August 2018

29.0p

17 November 2020

22 August 2028

600,000

600,000

14 June 2019

26.0p

14 June 2022

14 June 2029

120,000

120,000

29 April 2021

31.0p

5 November 2023

29 April 2031

200,000

300,000

29 April 2021

50.0p

5 November 2023

29 April 2031

200,000

300,000

29 April 2021

70.0p

5 November 2023

29 April 2031

200,000

300,000

23 May 2022

60.0p

23 May 2025

23 May 2032

150,000

-

 

 

 

 

1,770,000

1,920,000

 

During the year H Luffman ended her employment with Aeorema Limited. As a result, the share options that she received during the previous year were cancelled.

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

 

2022

2022

2021

2021

 

 

£

 

£

Outstanding at beginning of the year

1,920,000

0.37

1,020,000

0.25

Granted during the year

150,000

0.60

900,000

0.50

Cancelled during the year

(300,000)

(0.50)

-

-

Outstanding at end of the year

1,770,000

0.40

1,920,000

0.37

Exercisable at the end of the year

1,020,000

0.25

900,000

0.25

 

The exercise price of options outstanding at the year-end was £0.404 (2021: £0.369) and their weighted average contractual life was 6.5 years (2021: 7.6 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

22 August 2018

Model used

Black-Scholes

Share price at grant date

29.0p

Exercise price

29.0p

Contractual life

10 years

Risk free rate

0.75%

Expected volatility

40.33%

Expected dividend rate

0%

Fair value option

14.800p

 

Grant date

14 June 2019

 

 

Model used

Black-Scholes

 

 

Share price at grant date

26.0p

 

 

Exercise price

26.0p

 

 

Contractual life

10 years

 

 

Risk free rate

0.75%

 

 

Expected volatility

40.33%

 

 

Expected dividend rate

0%

 

 

Fair value option

12.894p

 





 

Grant date

29 April 2021

Model used

Black-Scholes

Share price at grant date

30.5p

Exercise price

31.0p

Contractual life

10 years

Risk free rate

0.84%

Expected volatility

153.96%

Expected dividend rate

0%

Fair value option

30.060p

 

Grant date

29 April 2021

Model used

Black-Scholes

Share price at grant date

30.5p

Exercise price

50.0p

Contractual life

10 years

Risk free rate

0.84%

Expected volatility

153.96%

Expected dividend rate

0%

Fair value option

29.943p

 

Grant date

29 April 2021

Model used

Black-Scholes

Share price at grant date

30.5p

Exercise price

70.0p

Contractual life

10 years

Risk free rate

0.84%

Expected volatility

153.96%

Expected dividend rate

0%

Fair value option

29.845p

 

Grant date

23 May 2022

Model used

Black-Scholes

Share price at grant date

60.0p

Exercise price

60.0p

Contractual life

10 years

Risk free rate

2.31%

Expected volatility

175.63%

Expected dividend rate

0%

Fair value option

59,707p

 

The expected volatility is determined by calculating the historical volatility of the parent company's share price. For the share options issued prior to the year ended 30 June 2021 the historical volatility of the parent company's share price is calculated over the last three years. For share options issued after 1 July 2021 the historical volatility is calculated over the last 10 years. The method used to determine the historical volatility of the parent company's share price changed in the prior year as a consequence of the COVID-19 pandemic. The impact of the COVID-19 pandemic on the parent company's share price was significant and not considered an appropriate measure of the parent company's share price volatility. The extension of the period to 10 years was considered appropriate. The risk free rate is based on the yield from gilt strip government bonds with a similar life to the expected life of the options.

 

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

 

 

2022

2021

 

£

£

Share-based payment charge

56,895

30,703

 

26 Related party transactions

The Group has a related party relationship with its subsidiaries and its key management personnel (including directors). Details of transactions between the Company and its subsidiaries are as follows:

 

2022

2021

 

£

£

Amounts owed by subsidiaries



Total amount owed by subsidiaries

666,017

517,003

Amounts owed to subsidiaries



Total amount owed to subsidiaries

67,355

67,365

 

Aeorema Limited

The company received dividends totalling £125,000 during the year (2021: £Nil) from its subsidiary, Aeorema Limited. The company transferred a VAT receivable of £17,424 (2021: £19,221) to Aeorema Limited due to being part of a common VAT group.

 

Aeorema Limited transferred a net amount of expenses to Aeorema Communications plc during the year of £24,558 (2021: £20,000).

 

Aeorema Limited paid expenses totalling £114,052 (2021: £113,352) on behalf of Aeorema Communications plc during the year.

 

During the year, Aeorema Limited made a net transfer of cash of £10,000 to Aeorema Communications plc (2021: £10,000).

 

Cheerful Twentyfirst, Inc.

The company received dividends totalling £125,000 during the year (2021: £Nil) from its subsidiary, Cheerful Twentyfirst, Inc.

 

Eventful Limited

The company received dividends totalling £25,000 during the year (2021: £Nil) from its subsidiary, Eventful Limited.

 

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

 

 

2022

2021

 

£

£

Short-term employee benefits

302,991

277,921

Post-employment benefits

13,672

9,000

 

316,663

286,921

 

The share options held by directors of the Company are disclosed in note 23. During the year, a charge of £49,905 (2021: £21,002) was recognised in the Consolidated Statement of Comprehensive Income in respect of these share options.

 

During the previous year S Quah received an interest-free loan of £10,000. At the year end, £10,000 (2021: £10,000) was outstanding.

 

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

 

 Harris and Trotter LLP - charged during the year

2022

2021

 

£

£

Aeorema Communications plc

15,000

15,000

Aeorema Limited

9,650

12,850

 

24,650

27,850

 

At the year end, the Group had an outstanding trade payable balance to Harris and Trotter LLP of £6,840 (2021: £5,630).

 

27 Cash flows

 

Group


2022

2021

 

£

 

£

 

Cash flows from operating activities



Profit / (loss) before taxation

843,564

(159,698)

Depreciation of property, plant and equipment

56,036

40,885

Depreciation of right-of-use assets

82,361

91,092

Amortisation of intangible fixed assets

2,500

2,500

Loss on disposal of fixed assets

4,646

769

Share-based payment expense

56,895

30,703

Finance income

(241)

(489)

Interest on lease liabilities

21,191

16,932

Exchange rate differences on translation

42,138

(11,044)

Revaluation of right-to-use asset

-

(5,311)

 

1,109,090

6,339

Increase / (decrease) in trade and other payables

1,557,234

191,244

(Increase) / decrease in trade and other receivables

(1,700,972)

(831,592)

Taxation paid

(43,657)

(74,805)

Cash generated / (used) from operating activities

921,695

(708,814)

 

28 Financial instruments

 

Financial instruments recognised in the consolidated statement of financial position

 

All financial instruments are recognised initially at their transaction cost and subsequently measured at amortised cost.

 

 

Group

Company


2022

£

2021

£

2022

£

2021

£

Financial Assets





Trade and other receivables

2,933,659

1,227,460

666,017

517,003

Cash and cash equivalents

1,714,417

1,101,713

1,532

5,844

Investments in subsidiaries

-

-

1,229,148

1,172,253

Total

4,648,076

2,329,173

1,896,697

1,695,100

Financial Liabilities





Trade and other payables

1,115,852

833,165

122,766

122,760

Accruals

732,640

139,555

20,955

17,000

Total

1,848,492

972,720

143,721

139,760

 

 

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 2022 was £1,980,121 (2021: £964,490). 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. The credit risk associated with trade receivables is minimal as invoices are based on contractual agreements with long-standing customers. Credit losses historically incurred by the Company have consequently been immaterial.

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 £2,327,501 (2021: £1,036,700).

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 net of bank overdrafts was £1,714,417 (2021: £1,101,713). 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 Consolidated Statement of Changes in Equity. At the year end, total equity was £2,253,564 (2021: £1,514,980).

 

29 Pension costs defined contribution

The Group makes pre-defined contributions to employees' personal pension plans. Contributions payable by the Group for the year were £63,910 (2021: £41,946). At the end of the reporting period £12,021 (2021: £9,237) of contributions were due in respect of the period.

 

30 Dividends

As a consequence of the COVID-19 pandemic, the Board decided that no final dividend would be paid to shareholders for the year ended 30 June 2021.

 

In respect of the current year, the directors propose that a final dividend of 2 pence per share be paid to shareholders on 20 January 2023. 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 23 December 2022. The total estimated dividend to be paid is £184,760. The payment of this dividend will not have any tax consequences for the Group.

 

31 Contingent liability

Company

The Company is a member of a group VAT registration with all other companies in the Aeorema Communications group and, under the terms of the registration, is jointly and severally liable for the VAT payable by all members of the group. At 30 June 2022 the Company had no potential liability under the terms of the registration.

 

**ENDS**

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