Final Results

Aeorema Communications Plc
14 November 2023
 

The information contained within this announcement is deemed by the Company to constitute inside information for the purposes of Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310.

 

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

 

14 November 2023

 

Aeorema Communications plc

("Aeorema", the "Company" or the "Group")

 

Final Results

 

Proposed 50% increase in final dividend   

Record revenue and profit

 

Aeorema Communications plc (AIM: AEO), a leading strategic communications group, is pleased to announce its audited results for the year ended 30 June 2023.

 

Highlights

·    Record operational and financial performance:

o Revenue up 66% to £20.2 million (2022: £12.2 million)

o Profit before tax up 25% to £1.0 million (2022: £0.8 million)  

·    Strong balance sheet maintained - current cash balance of £1.9 million

·    Proposed 50% increase in final dividend to 3 pence per share (2022: 2 pence per share)

·    Winner of multiple industry awards

·    Investment in business instrumental in growth, retention of clients and increased scope of work

o Cheerful Twentyfirst  - creative brand experience agency

§ 100% client retention and average year-on-year increase in revenue of 47% across flagship clients

o Cheerful Twentyfirst Inc. - North American creative brand experience agency

§ Key talent hires, including appointment of US President, André Shahrdar

§ Most successful year to date and significant ground broken with new logo brands

o Eventful - events and incentives agency

§ Year-on-year revenue growth of 140%

§ Returned to profitability

 

For further information contact:

 

Andrew Harvey

Aeorema Communications plc

Tel: +44 (0) 20 7291 0444




John Depasquale / Liz Kirchner / Lauren Wright

(Corporate Finance)

Kelly Gardiner / Jos Pinnington

(Sales & Corporate Broking)

Allenby Capital Limited

(Nominated Adviser & Broker)

Tel: +44 (0)20 3328 5656

 

Paul Dulieu / Isabel de Salis

 

St Brides Partners Ltd

(Financial PR)

 

aeorema@stbridespartners.co.uk

 

 

Chairman's Statement

 

I am incredibly proud to report record-breaking revenue of £20.2m and our first ever seven figure profit before tax ("PBT") of £1.045m for the year ended 30 June 2023. Since the new management team took over in late 2017, our business has grown dramatically with revenue increasing more than fivefold and profit quadrupling. This has been achieved while navigating a pandemic, which brought much of the global events industry to its knees and tough economic conditions. This achievement is testament to the dedication and hard work of our talented employees, the loyalty of our clients, and the strategic vision of our leadership team. I would therefore like to thank them all for their belief in Aeorema.

 

We have invested heavily in the business to ensure we continue our momentum both in EMEA and North America. As we celebrate our remarkable revenue growth, our underlying profitability this year has underpinned a deliberate strategy to reinvest a substantial portion of our earnings back into the structure and foundations of our business. Much of this expenditure is one-off in nature and leaves us well positioned to take advantage of the many opportunities we see in our high value and global sector. Hence, the net profit margin for FY 2023 belies the underlying strong fundamentals of our business and depth of client relationships and work.

 

We have invested in our team in a tight labour market whilst enduring a spike in recruitment costs, and we have strengthened our HR team to support our increasingly global team going forwards. We have also upscaled our IT infrastructure including better project management and accountancy tools, designed to enhance the reporting processes across our growing business. We have also continued to invest in our US office, including the recruitment of key team members, and continue to build brand recognition in North America while developing key client relationships for future US-focused work.

 

All of these areas of investments have already begun to yield positive results. They are enhancing our efficiencies and ability to respond to changing market dynamics, to provide more strategic and creative solutions, expand our client base, strengthen client relationships and maintain the high-quality standards our clients have come to know and appreciate from Aeorema.

 

The business continues to move at pace, and we have achieved these record financial results two years ahead of our internal targets and our internal five year plan that was set out at the height of the pandemic in 2020. Looking ahead, we see significant opportunities in EMEA and North America and the opportunity to increase the work we undertake for existing clients as well as new ones and to establish a presence at additional major "tent pole" events. 

 

At an operating company level, our core Cheerful Twentyfirst business remains strong and our strategy to invest in our team which commenced last year is proving successful as we continue to both retain global brands and expand the scope of work we are doing for them. Alongside this, our Sales and Marketing team is achieving great success bringing in fantastic brands within many sectors including professional services, technology, media and marketing.

 

Meanwhile, we are delighted that Eventful has returned to profit and, under the new leadership of Claire Gardner, who has been with the business for 12 years, there is great excitement about what Eventful can achieve over the coming years.

 

Looking forward, we are now consolidating the results of our recent investments and creating a strong platform for further growth across the Group. We believe that this provides the potential for our 2024 financial year to be another record year for the Group, albeit one which we expect will be heavily weighted towards our second half as many brands are delaying projects and pushing them into the first half of calendar year 2024; the second half of our financial year. Nonetheless, we expect a strong year overall and, as contracts are signed and projects scheduled, the greater clarity will allow us to update the market.

 

We have a robust cash position as at the date of this announcement of £1.9million and I am delighted to confirm that we are proposing a final dividend for the year, reflecting the growth we have achieved and the confidence we have for the future. The dividend proposed is 3 pence per share (a 50% increase on the dividend paid in 2022 of 2 pence per share). Subject to the proposed dividend being approved by shareholders at the forthcoming Annual General Meeting, it will be paid on 19 January 2024 with a record date of 22 December 2023 and an ex-dividend date of 21 December 2023.

 

We remain open to acquisition opportunities that are priced sensibly, are the right fit for our organisation and that can deliver value for our shareholders.

 

I have never been so positive about the future of Aeorema. Cheerful Twentyfirst is robust and ever growing, Eventful is thriving and, under the new leadership of André Shahrdar in our US office, we believe we can achieve great things in North America.

 

In closing, I would like to extend once more a big thank you to our amazing management team, our dedicated, brilliant and talented teams at Cheerful Twentyfirst and Eventful and our wonderful and loyal investors. Your unwavering support and commitment has been instrumental in making this year a resounding success.

 

Mike Hale

Chairman

13 November 2023

 

 

Chief Executive Officer's Report

 

This has been another exceptional year, achieved through the delivery of extremely creative and consistently high-quality work for our clients, coupled with the commercial agility to develop new markets around the world. 

 

Within the last few months alone, Cheerful Twentyfirst, our creative brand experience agency, has delivered events and experiences in New York, Austin, Tokyo, Brussels, London, Paris, Berlin and of course, Cannes, France. I am hugely pleased with the new ways we are working to delight our clients and build our agency brands across the globe. Creativity and our strong CSR (Corporate Social Responsibility) ethos is at the heart of what we do, but it is our expertise and experience in enabling our clients to communicate effectively with their audiences which has seen us become not only a leading operator but also thought leaders in our industry.

 

After 12 years at Cannes Lions, June 2023 was our busiest year ever. At this marketing and advertising industry 'tent pole' event we partnered with the most ambitious global brands to deliver seven world class, award nominated, client activations. A particular highlight was the Sport Beach activation we created with Stagwell Global, a multi-billion-dollar NASDAQ listed company. Built on shifting sands, the unique 420 capacity sports stadium brought fans out of the stands and onto the court itself to break down barriers and build long-lasting partnerships for marketers, brands and athletes alike. With over 5,000 guests attending this activation, AdWeek called Sport Beach a "total game changer" for how brands can connect with audiences through events. I'm very proud of the dynamic experiential strategy we adopted, and it has become a cornerstone for ongoing success into 2024.

Our strength in brand experience and activation continues to drive new interest and offer new opportunities. We are modelling new revenue growth streams on the back of our repeated success at Cannes Lions, as we apply our expertise at more 'tentpole' events around the world. In tandem, we continue to see significant growth in our strategic consultancy offering, which has opened new revenue streams within our businesses and introduced new skill sets into our teams.

 

Achieving our internal five-year revenue goals two-years earlier than expected has, in a large part, been down to our Client Services team. It has been a pleasure to see this part of the business thrive, having moved to an account-based model in 2021. The purpose of this change was to strengthen client relationships, secure repeat work and retain client contracts. I'm delighted to say that this has proved very successful, with us achieving 100% client retention, and an average year-on-year increase in revenue of  47% across our flagship clients.

 

In addition to our people and profit successes, our dedication to creative excellence has not gone unnoticed within our industry. This year, we had the honour of being named Global Agency of the Year at the C&IT Awards, alongside Creative Team of the Year for the fifth year running at the CN Agency Awards. A real highlight was being awarded the coveted Grand Prix award for the first time as the overall winner of the night at the events and communications industry's prestigious micebook Awards 2023. These accolades are testament to the hard work and commitment of our talented teams and reinforce our position as a leader in our field.

 

Further afield, our North American arm, Cheerful Twentyfirst Inc., has reported its most successful year to date. After only three years in the North American market, we've broken significant ground with new logo brands and key talent hires. The most exciting being the appointment of our US President, André Shahrdar, who joined in May 2023 and who we believe will be instrumental in our future growth and success in the North American market.

 

Eventful, our events and incentives agency, has had an excellent 12 months too, reporting year-on-year revenue growth of 140%. The synergy between Eventful and Cheerful Twentyfirst continues to strengthen and open opportunities for cross-client introductions and joint projects. This is particularly the case following the completion of three global events that used both agencies services. The promotion of Claire Gardiner to Managing Director of Eventful in May 2023, having joined in 2011, is also hugely pleasing. I have no doubt that under her guidance we will continue to innovate and deliver extraordinary experiences for our clients, and I look forward to seeing what the next year brings for Eventful.

 

Across the Group, the investment we have made in our businesses and teams has been instrumental in our growth.  This includes  significant expansion in our HR and operations capability, which played key roles in implementing new infrastructure and systems to significantly improved processes and efficiencies. Key systems include, the implementation and global roll out of Scoro; our custom project management software, our submission to Ecovadis; an internationally recognised sustainability certification, and achieving ISO 27001; an international standard for information security, for our data security protocols. These initiatives, alongside strengthened HR support for our now 70+ full time staff, are already delivering a great return on investment. This includes stronger scoring during procurement exercises with target brands, and a greater ability to track time and productivity, which enables us to operate more cost effectively. Culturally, the Aeorema Group has also never been stronger, which is an important factor for a people centred business such as ours.

 

I couldn't be prouder of the remarkable accomplishments of our dedicated team, which we have expanded to include some of the best talent in the industry. We have not only met, but have exceeded our goals, and our agency brands are now recognised on a global scale.

I want to extend my heartfelt thanks to every member of the Aeorema Communications family for making this year an outstanding one. Your contributions and dedication are the driving force behind our success. I would also like to thank all of our shareholders for their continued support and belief in Aeorema, which is a very special company.

 

Thank you once again, for joining us on this journey.

 

Steve Quah

CEO

13 November 2023

 

 

Strategic Report

 

The Board presents its Strategic Report on the Group for the year ended 30 June 2023.

 

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 £20,230,231 (2022: £12,207,253), operating profit was £1,092,920 (2022: £871,176) and profit before taxation was £1,045,960 (2022: £843,564).

 

The Group had net assets of £2,814,356 at the year-end (2022: £2,253,564) and net current assets of £1,761,557 (2022: £1,466,109).

 

The year ended 30 June 2023 was a highly successful year, with the Group achieving the highest revenue and profit before tax in its history. The Group experienced high growth with its two largest existing clients (refer to note 2) and won new business with a range of clients including the Group's largest brand activation at Cannes Lions International Festival of Creativity 2023 (refer to note 2).

 

Eventful Limited experienced a record year both in terms of revenue, up 138% (2022: 1,110% increase) compared with the previous year, and profits before tax of £205,559 (2022: £37,845 loss before tax). The year ended 30 June 2023 represented the first full year since the outbreak of COVID-19 which was unaffected by the pandemic and subsequent travel and social distancing restrictions. As a consequence, there was strong demand from clients to return to in-person events leading to a higher volume of enquiries and bookings compared with the previous year.

 

Cheerful Twentyfirst, Inc. continued to grow its revenue, up 13% (2022: 630% increase) compared with the previous year. However, investment in new hires, the office and business development and marketing meant that overall profits before tax were £317,467 compared with £716,075 in the previous year. The Group hired a new President for Cheerful Twentyfirst, Inc. who is tasked with growing the subsidiary's presence in the United States of America.

 

The Group's headcount grew during the year, hiring on average eight more employees compared with the previous year. These hires included roles essential to ensuring the Group continues to successfully deliver high quality events, including a Technical Director focused on supplier procurement and improving margins. The Group also invested in a number of roles necessary to support the client facing operations and facilitate future growth, including finance, human resources and IT.  

 

The Group's gross profit margin has decreased from 25% in 2022 to 21% in 2023. In part the reduction is a consequence of the Stagwell Cannes Lions activation, a significant build project which historically has lower gross profit margins. However, this event does not account for the entire reduction and management's focus for the year ending 30 June 2024 is on improving the Group's gross profit margin.

 

Looking ahead, the Group has not currently experienced any difficulties associated with the ongoing war in Ukraine and conflict in Israel, the cost of living crisis or global economic struggles. Demand throughout the Group's trading subsidiaries remains strong, with new clients and projects in the pipeline for the coming year. However, the Board remain acutely aware of the economic difficulties faced both in the UK and globally, and continues to evaluate its investment plans, resourcing and future forecasts on a regular basis.

 

Key performance indicators

Year

2023

2022

2021

2020

 

£

 

£

 

£

 

£

 

Revenue

20,230,231

12,207,253

5,094,518

5,475,425

Operating profit / (loss)

1,092,920

871,176

(188,105)

(175,043)

Profit / (loss) before taxation

1,045,960

843,564

(159,698)

(217,924)

 

The Group experienced a 66% increase (2022: 140% increase) in revenue during the year.

 

Event revenue increased by 77% (2022: 160% increase) in comparison with the previous year. This increase was due in large part to the new client account model approach implemented in previous years and the introduction of client focused account directors which has allowed the Group to develop closer client relationships and grow the number and size of events delivered year on year. As a result of this account model initiative and a focus on marketing, the Group delivered its highest number of and largest ever events at The Cannes Lions International Festival of Creativity, including the new brand activation for Stagwell.  

 

Film revenue decreased by 6% (2022: 52% increase) in comparison with the previous year. This reduction was largely due to a number of one off film projects in the previous year.

 

Cashflows

 

Net cash inflow from operating activities was £1,456,588 compared with a net cash inflow of £921,695 for the year ended 30 June 2022. The cash position increased by £729,683 to £2,444,100 (2022: increase by £612,704 to £1,714,417).

 

Capital expenditure

 

Total capital expenditure, including expenditure on tangible assets, was £325,027 compared with £179,475 for the year ended 30 June 2022.

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 24 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 27.

 

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

13 November 2023

 

 

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2023

 

Notes

2023

2022


 

£ 

£ 

 

 

 

 

Continuing operations

 

 

 

 

Revenue

2

20,230,231

12,207,253

Cost of sales

 

(15,896,463)

(9,169,691)

Gross profit

 

4,333,768

3,037,562

Other income

3

-

3,743

Administrative expenses

 

(3,240,848)

(2,170,129)

 

Operating profit

4

1,092,920

871,176

Finance income

5

215

241

Finance costs

6

(47,175)

(27,853)

Profit before taxation

 

1,045,960

843,564

Taxation

7

(288,780)

(204,222)

Profit for the year

 

757,180

639,342

 

Other comprehensive income

Items that may be reclassified to profit or loss

 

Exchange differences on translation of foreign entities

 

(119,547)

42,347

Other comprehensive income for the year

 

(119,547)

42,347

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

 

637,633

681,689

 

Profit per ordinary share:

 

 

 

 

Total basic earnings per share

 

10

8.04398p

6.92078p

Total diluted earnings per share

10

6.83499p

5.80797p

 

The notes below are an integral part of these financial statements.

 

Consolidated Statement of Financial Position

As at 30 June 2023

 

Notes

Group

Company

 

 

2023

2022

2023

2022

 

 

£

£

£

£

Non-current assets

 

 

 

 

 

Intangible assets

11

566,431

568,931

-

-

Property, plant and equipment

12

428,509

222,479

-

-

Right-of-use assets

13

696,986

823,772

-

-

Investments in subsidiaries

14

-

-

1,293,568

1,229,148

Deferred taxation

8

14,844

25,925

-

-

Total non-current assets

 

1,706,770

1,641,107

1,293,568

1,229,148

Current assets

 

 

 

 

 

Trade and other receivables

15

3,502,522

3,130,035

713,588

689,332

Cash and cash equivalents

16

2,444,100

1,714,417

135,548

1,532

Total current assets

 

5,946,622

4,844,452

849,136

690,864

Total assets

 

7,653,392

6,485,559

2,142,704

1,920,012

Current liabilities

 





Trade and other payables

17

(3,882,938)

(2,960,221)

(104,459)

(143,721)

Bank loans

18

(83,333)

(83,333)

-

-

Lease liabilities

19

(109,058)

(121,999)

-

-

Current tax payable

 

(74,736)

(177,790)

-

-

Provisions

20

(35,000)

(35,000)

-

-

Total current liabilities

 

(4,185,065)

(3,378,343)

(104,459)

(143,721)

Non-current liabilities

 

 

 

 

 

Bank loans

18

(27,778)

(111,111)

-

-

Lease liabilities

19

(612,693)

(738,041)

-

-

Provisions

20

(13,500)

(4,500)

-

-

Total non-current liabilities

 

(653,971)

(853,652)

-

-

Total liabilities

 

(4,839,036)

(4,231,995)

(104,459)

(143,721)

Net assets

 

2,814,356

2,253,564

2,038,245

1,776,291

Equity

 





Share capital

21

1,192,250

1,154,750

1,192,250

1,154,750

Share premium

 

21,876

9,876

21,876

9,876

Merger reserve

 

16,650

16,650

16,650

16,650

Other reserve

 

233,375

168,956

233,375

168,956

Capital redemption reserve

 

257,812

257,812

257,812

257,812

Foreign translation reserve

 

(88,244)

31,303

-

-

Retained earnings

 

1,180,637

614,217

316,282

168,247

Equity attributable to owners of the parent

 

2,814,356

2,253,564

2,038,245

1,776,291

The notes below are an integral part of these financial statements.

The profit for the financial year of the holding company was £338,795 (2022: £148,184).

 

The financial statements were approved and authorised by the board of directors on 13 November 2023 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 2023

Group

Share capital

Share premium

Merger reserve

Other reserve

Capital redemption reserve

Foreign translation reserve

Retained earnings

Total equity

 

£

£

£

£

£

£

£

£

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

 

Comprehensive income for the year, net of tax

-

-

-

-

-

-

757,180

757,180

Dividend paid

-

-

-

-

-

-

(190,760)

(190,760)

Foreign currency

translation

-

-

-

-

-

(119,547)

-

(119,547)

Share-based payment

-

-

-

64,419

-

-

-

64,419

Share issue

37,500

12,000

-

-

-

-

-

49,500

At 30 June 2023

1,192,250

21,876

16,650

233,375

257,812

(88,244)

1,180,637

2,814,356

 

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 24.

 

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

 

Foreign translation reserve represents the accumulated gain or loss resulting from the translation of financial statements denominated in a foreign currency into the Group's reporting currency.

 

The notes below are an integral part of these financial statements.

 

 

Company Statement of Changes in Equity

For the year ended 30 June 2023

Company

Share capital

Share premium

Merger reserve

 

Other reserve

Capital redemption reserve

Retained earnings

Total equity

 

£

£

£

£

£

£

£

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

 

Comprehensive income for the year, net of tax

-

-

-

 

 

-

-

338,795

338,795

Dividend paid

-

-

-

-

-

(190,760)

(190,760)

Share-based payment

-

-

-

64,419

-

-

64,419

Share issue

37,500

12,000

-

-

-

-

49,500

At 30 June 2023

1,192,250

21,876

16,650

233,375

257,812

316,282

2,038,245

 

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 24.

 

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 below are an integral part of these financial statements.



Consolidated Statement of Cash Flows

For the year ended 30 June 2023

 

Notes

Group

 

 

 

2023

2022

 

 

£

 

£

 

Net cash flow from operating activities

26

1,456,588

921,695


 



Cash flows from investing activities

 

 

 

Finance income

5

215

241

Purchase of property, plant and equipment

12

(325,027)

(179,475)

Repayment of leasing liabilities

 

(177,500)

(74,201)

Cash used in investing activities

 

(502,312)

(253,435)

 

 

 

 

Cash flows from financing activities

 

 

 

Repayment of borrowings

 

(83,333)

(55,556)

Dividends paid to owners of the company

 

(190,760)

-

Shares issued

 

49,500

-

Cash used in financing activities

 

(224,593)

(55,556)

 

 

 

 

Net increase in cash and cash equivalents

 

729,683

612,704

Cash and cash equivalents at beginning of year

 

1,714,417

1,101,713

Cash and cash equivalents at end of year

 

2,444,100

1,714,417

 

The notes below are an integral part of these financial statements.

 

Notes to the consolidated financial statements

For the year ended 30 June 2023

 

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 27. 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 are the new accounting standards or amendments applicable for 30 June 2023 yearend, which are effective for accounting periods beginning on or after 1 January 2022.

 

·      Amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards-Subsidiary

·      Amendment to IFRS 9 Financial Instruments-Fees in the '10 per cent' Test for Derecognition of Financial Liabilities

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

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

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

 

The Group does not believe that there is a material impact on the financial statements from the adoption of these standards.

 

Future standards in place but not yet effective

 

The following new standards, amendments or interpretations to existing standards adopted in the United Kingdom, and are mandatory for the Group's accounting periods beginning on or after 1 January 2023 are as follows:

·      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);  and

·      Definition of Accounting Estimates (Amendments to IAS 8).

 

The Group did not early adopt the above new standards, amendments, or interpretations for 30 June 2023 yearend.

 

Basis of consolidation

 

The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 30 June 2023. 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 24 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 11 on goodwill impairment and note 13 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 2023 there is only a single reportable segment.

 

All revenue represents sales to external customers. Three customers (2022: two) are defined as major customers by revenue, contributing more than 10% of the Group revenue.

 

2023

2022

 

£

£

Customer One

3,015,981

1,916,827

Customer Two

2,474,089

-

Customer Three

2,258,852

1,816,883

Major customers in the current year

7,748,922

3,733,710

 

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

Geographical market

2023

2022

 

£

£

United Kingdom

11,491,547

7,586,982

United States

6,821,433

4,150,179

Rest of the World

1,917,251

470,092

 

20,230,231

12,207,253

 

 

 

2023

2022

 

£

£

Revenue from contracts with customers - Events

17,915,369

10,135,172

Revenue from contracts with customers - Film

1,675,186

1,785,367

Other revenue

639,676

286,714

Total revenue

20,230,231

12,207,253

 

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

 

 

2023

2022

 

£

Deferred income

809,774

839,326

Accrued income

1,350,233

 

Deferred income at the beginning of the period has been recognised as revenue during the period. Deferred income carried forward at the year end will be recognised within the next year.

 

3 Other income

 

Other income

2023

2022

 

£

£

Coronavirus job retention scheme government grant

-

1,168

Business interruption payment grant

-

2,575


-

3,743

 

During the prior 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:

2023

2022

 

£

 

£

 

Cost of sales



Depreciation of fixtures, fittings and equipment

75,521

54,101

Amortisation of intangible assets

2,500

2,500

Staff costs (see note 23)

3,060,948

2,135,136

Administrative expenses



Depreciation of right-of-use assets

126,786

82,361

Depreciation of leasehold land and buildings

34,243

1,935

(Profit) / loss on foreign exchange differences

31,888

14,465

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



   Audit of the Company's annual accounts

12,600

7,842

   Audit of the Company's subsidiaries

23,366

26,694

Interest on lease liabilities

39,212

21,191

Staff costs (see note 23)

1,321,451

1,107,745

 

5 Finance income

Finance income

2023

2022

 

£

£

Bank interest received

215

241

 

6 Finance costs

 

Finance costs

2023

2022

 

£

£

Coronavirus business interruption loan interest

7,963

6,662

Lease interest

39,212

21,191


47,175

27,853

 

7 Taxation

 

 

2023

2022

 

£

 

£

 

The tax charge comprises:

 

 

 

 

 

Current tax

 

 

 

Current year

277,699

232,206




 

277,699

232,206

Deferred tax (see note 8)

 

 

Current year

11,081

(27,984)

 

11,081

(27,984)




Total tax charge in the statement of comprehensive income

288,780

204,222

Factors affecting the tax charge for the year

 

 

Profit on ordinary activities before taxation from continuing operations

1,045,960

843,564

Profit on ordinary activities before taxation multiplied by standard rate



of UK corporation tax of 20.5% (2022: 19%)

214,422

160,277

Effects of:



Non-deductible expenses

74,358

43,945




 

74,358

43,945

Total tax charge

288,780

204,222

 

The Group has estimated losses of £375,762 (2022: £685,568) available to carry forward against future trading profits. Losses totalling £375,762 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.

 

8 Deferred taxation

 

 Group

2023

2022

 

£

£

Property, plant and equipment temporary differences

(83,481)

(39,435)

Temporary differences

98,325

55,823

Tax losses

-

9,537

 

14,844

25,925

At 1 July

25,925

(2,059)

Transfer to Statement of Comprehensive Income

(11,081)

27,984

At 30 June

14,844

25,925

 

9 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 £338,795 (2022: £148,184).

 

10 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:

 

 

2023

2022

 

£

£

 

Basic earnings per share

 

 

Profit for the year attributable to owners of the Company

757,180

639,342




Basic weighted average number of shares

9,413,000

9,238,000

 

Dilutive potential ordinary shares:

Employee share options

1,665,000

1,770,000

Diluted weighted average number of shares

11,078,000

11,008,000

 

11 Intangible fixed assets

 

Group

Goodwill

Intellectual

Property

Total

 

£

£

£

Cost




At 30 June 2021

2,927,486

10,000

2,937,486

At 30 June 2022

2,927,486

10,000

2,937,486

At 30 June 2023

2,927,486

10,000

2,937,486

 

 

Impairments and amortisation




 

At 30 June 2021

2,363,138

2,917

2,366,055

Charge for the year

-

2,500

2,500

 

At 30 June 2022

2,363,138

5,417

2,368,555

Charge for the year

-

2,500

2,500

 

At 30 June 2023

2,363,138

7,917

2,371,055

Net book value




At 30 June 2021

564,348

7,083

571,431

At 30 June 2022

564,348

4,583

568,931

At 30 June 2023

564,348

2,083

566,431

 

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 2023-24 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 3% 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

15,646,053

(712,679)

27,618,896

11,118,210

Carrying amount in financial statements

365,154

365,154

365,154

365,154






Difference

15,280,899

(1,077,833)

27,253,742

10,753,056

 

Eventful Limited

3% Growth

0% Growth

Discount Rate of 5%

Discount Rate of 15%

 

£

£

£

£

Value in use calculations

563,932

(798.256)

796,692

460,377

Carrying amount in financial statements

199,194

199,194

199,194

199,194






Difference

364,738

(997,450)

597,498

261,183

 

Combined

4% Growth

0% Growth

Discount Rate of 5%

Discount Rate of 15%

 

£

£

£

£

Value in use calculations

16,209,985

(1,510,935)

28,415,588

11,578,587

Carrying amount in financial statements

564,348

564,348

564,348

564,348






Difference

15,645,637

(2,075,283)

27,851,240

11,014,239

 

12 Property, plant and equipment

 

Group

Leasehold land

Fixtures, fittings

Total

 

and buildings

and equipment

 

 

£

£

£

Cost




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

Additions

154,068

170,959

325,027

Disposals

-

(72,449)

(72,449)

Foreign exchange movement

-

(143)

(143)

At 30 June 2023

252,889

403,262

656,151

 

 

Depreciation




 

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

Charge for the year

34,243

75,521

109,764

Eliminated on disposal

-

(63,308)

(63,308)

Foreign exchange movement

-

(51)

(51)

 

At 30 June 2023

36,178

191,464

227,642

Net book value




At 30 June 2021

-

103,477

103,477

At 30 June 2022

96,886

125,593

222,479

At 30 June 2023

216,711

211,798

428,509

 

13 Right-of-use assets

 

Group

Leasehold Property

 

£

Cost


At 30 June 2021

18,995

Additions

887,138

Disposals

(18,995)

At 30 June 2022

887,138

At 30 June 2023

887,138

Depreciation

 

At 30 June 2021

-

Charge for the year

82,361

Disposals

(18,995)

At 30 June 2022

63,366

Charge for the year

126,786

At 30 June 2023

190,152

Net book value

 

At 30 June 2021

18,995

At 30 June 2022

823,772

At 30 June 2023

696,986

 

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 previous 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.

 

14 Non-current assets - Investments

 

Company

Shares in subsidiary

 

£

Cost


At 30 June 2021

3,866,466

 

Increase in respect of share-based payments

56,895

At 30 June 2022

3,923,361

 

Increase in respect of share-based payments

64,419

Incorporation of subsidiary

1

At 30 June 2023

3,987,781

Provision

 

At 30 June 2021

2,694,213

At 30 June 2022

2,694,213

At 30 June 2023

2,694,213

Net book value

 

At 30 June 2021

1,172,253

At 30 June 2022

1,229,148

At 30 June 2023

1,293,568

 

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

 

Profit / (loss) before tax for the year ended 30 June 2023

Net assets at year ended 30 June 2023

 

Registration

 

or incorporation

Class

%

 

£

 

£

Aeorema Limited

England and Wales

Ordinary

100

781,754

1,097,075

Eventful Limited

England and Wales

Ordinary

100

205,559

140,109

Twentyfirst Limited

(Dormant)

England and Wales

Ordinary

100

-

1,362

Cheerful Twentyfirst, Inc.

United States of America

Ordinary

100

317,467

424,412

Cheerful Twentyfirst B.V.

The Netherlands

Ordinary

100

(9,427)

(7,635)

During the year 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 Strawinskylaan 569, 1077 XX, Amsterdam. 

 

15 Trade and other receivables

 

 

Group

Company

 

2023

2022

2023

2022

 

£

£

£

£

Trade receivables

1,649,905

1,980,121

-

-

Related party receivables

-

-

689,087

666,017

Other receivables

170,188

78,536

8,819

14,982

Prepayments and accrued income

1,682,429

1,071,378

15,682

8,333


3,502,522

3,130,035

713,588

689,332


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 £308,531 (2022: £694,325) were past due but not impaired. These amounts are still considered recoverable. The ageing of these trade receivables is as follows:

 

 

Group

 

2023

2022

 

£

£

Less than 90 days overdue

160,286

566,605

More than 90 days overdue

148,245

127,720

 

308,531

694,325

 

16 Cash at bank and in hand

 

 

Group

Company

 

2023

2022

2023

2022

 

£

£

£

£

Bank balances

2,444,100

1,714,417

135,548

1,532

 

2,444,100

1,714,417

135,548

1,532

 

17 Trade and other payables

 


Group

Company


2023

2022

2023

2022


£

£

£

£

Trade payables

1,587,052

796,671

21,604

5,411

Related party payables

-

-

67,355

67,355

Taxes and social security costs

36,528

466,847

-

-

Other payables

121,581

124,737

-

50,000

Accruals and deferred income

2,137,777

1,571,966

15,500

20,955


3,882,938

2,960,221

104,459

143,721

 

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.

 

18 Bank Loans

 

 

 

2023

 

2022

 

£

£

 

Bank Loan



Current

83,333

83,333

Non-current

27,778

111,111




 

111,111

194,444

 

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 £7,963 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.

 

19 Leases

 

The balance sheet shows the following amounts relating to leases:

 

Group

 

2023

 

2022

 

£

£

 

Right-of-use assets



Buildings

 

696,986

 

823,772





696,986

 

Group

 

2023

 

2022

 

£

£

 

Lease liabilities



Current

109,058

121,999

Non-current

612,693

738,041




 

721,751

 

Group

 

2023

 

2022

 

£

£

 

Maturity analysis - contractual undiscounted cash flows



Less than one year

142,000

213,000

One to five years

639,000

710,000

More than five years

-

71,000




 

781,000

 

Group

 

2023

 

2022

 

£

£

 

Interest on lease liabilities

39,212

21,191




 

39,212

 

20 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

 

 

 

Charged to statement of comprehensive income

9,000

9,000

 

 

 

At 30 June 2023

48,500

48,500

 

Group

 

Leasehold dilapidations

 

Total

 

£

£

Current

35,000

35,000

Non-current

13,500

13,500




 

48,500

 

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.

 

21 Share capital

 

 

2023

2022

 

£

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 2021

9,238,000

1,154,750

At 30 June 2022

9,238,000

1,154,750

Shares issued during the year

300,000

37,500

At 30 June 2023

9,538,000

1,192,250

 

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 24 for details of share options outstanding.

 

22 Directors' emoluments

 


Salary, fees, bonuses and benefits in kind

Salary, fees, bonuses and benefits in kind

Pensions

Pensions

Total

Total

 

2023

2022

2023

2022

2023

2022

 

£

£

£

£

£

£

M Hale

-

-

-

-

-

-

S Haffner

16,250

15,000

-

-

16,250

15,000

R Owen

20,000

20,000

-

-

20,000

20,000

S Quah

219,375

151,057

9,375

7,500

228,750

158,557

A Harvey

165,000

112,377

7,657

6,172

172,657

118,549

H Luffman

16,250

4,558

-

-

16,250

4,558

 

436,875

302,992

17,032

13,672

453,907

316,664

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

 

During the year M Hale waived his right to fees of £15,000 (2022: £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

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 25).

 

23 Employee information

 

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

 

 Number of employees

Group

Company

 

2023 Number

2022 Number

2023 Number

2022 Number

 

 

 

 

 

Administration and production

63

55

5

5

 

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

 

Employment costs

Group

Company

 

2023

2022

2023

2022

 

£

£

£

£

Wages and salaries

3,759,340

2,827,204

52,500

39,558

Social security costs

429,412

294,872

-

-

Pension costs

129,228

63,910

-

-

Share-based payments

64,419

56,895

-

-

 

4,382,399

3,242,881

52,500

39,558

 

24 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 2023

Number of options 2022

 

 

From

To

 

 

25 April 2013

16.5p

25 April 2016

24 April 2023

-

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

200,000

29 April 2021

50.0p

5 November 2023

29 April 2031

200,000

200,000

29 April 2021

70.0p

5 November 2023

29 April 2031

200,000

200,000

23 May 2022

60.0p

23 May 2025

23 May 2032

100,000

150,000

19 October 2022

71.0p

19 October 2025

19 October 2032

110,000

-

 

 

 

 

1,530,000

1,770,000

 

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

 

2023

2023

2022

2022

 

 

£

 

£

Outstanding at beginning of the year

1,770,000

0.40

1,920,000

0.37

Granted during the year

110,000

0.71

150,000

0.60

Cancelled during the year

(50,000)

(0.60)

(300,000)

(0.50)

Exercised during the year

(300,000)

(0.17)

-

-

Outstanding at end of the year

1,530,000

0.48

1,770,000

0.40

Exercisable at the end of the year

720,000

0.28

1,020,000

0.25

 

The exercise price of options outstanding at the year-end was £0.481 (2022: £0.404) and their weighted average contractual life was 6.8 years (2022: 6.5 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

 

Grant date

19 October 2022

Model used

Black-Scholes

Share price at grant date

71.0p

Exercise price

71.0p

Contractual life

10 years

Risk free rate

3.87%

Expected volatility

177.03%

Expected dividend rate

0%

Fair value option

26.581p

 

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:

 

 

2023

2022

 

£

£

Share-based payment charge

64,419

56,895

 

25 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:

 

 

2023

2022

 

£

£

Amounts owed by subsidiaries



Total amount owed by subsidiaries

689,087

666,017

Amounts owed to subsidiaries



Total amount owed to subsidiaries

67,355

67,355

 

Aeorema Limited

The company received dividends totalling £350,000 during the year (2022: £125,000) from its subsidiary, Aeorema Limited. The company transferred a VAT receivable of £33,245 (2022: £17,424) 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 £36,250 (2022: £24,558).

 

Aeorema Limited paid expenses totalling £237,135 (2022: £114,052) on behalf of Aeorema Communications plc during the year.

 

During the year, Aeorema Limited made a net transfer of cash of £186,800 to Aeorema Communications plc (2022: £10,000).

 

Cheerful Twentyfirst, Inc.

 

The company received dividends totalling £150,000 during the year (2022: £125,000) from its subsidiary, Cheerful Twentyfirst, Inc.

 

Eventful Limited

 

The company received dividends totalling £100,000 during the year (2022: £25,000) from its subsidiary, Eventful Limited.

 

Compensation of key management

 

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

 

 

2023

2022

 

£

£

Short-term employee benefits

442,158

302,991

Post-employment benefits

17,032

13,672

 

459,190

316,663

 

The share options held by directors of the Company are disclosed in note 22. During the year, a charge of £49,905 (2022: £49,905) was recognised in the Consolidated Statement of Comprehensive Income in respect of these share options.

 

During the year S Quah received an interest-free loan of £40,000 (2022: £nil). 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

2023

2022

 

£

£

Aeorema Communications plc

16,250

15,000

Aeorema Limited

11,450

9,650

 

27,700

24,650

 

At the year end, the Group had an outstanding trade payable balance to Harris and Trotter LLP of £5,000 (2022: £5,630).

 

26 Cash flows

 

Group


2023

2022

 

£

 

£

 

Cash flows from operating activities



Profit / (loss) before taxation

1,045,960

843,564

Depreciation of property, plant and equipment

109,764

56,036

Depreciation of right-of-use assets

126,786

82,361

Amortisation of intangible fixed assets

2,500

2,500

Loss on disposal of fixed assets

9,141

4,646

Share-based payment expense

64,419

56,895

Finance income

(215)

(241)

Interest on lease liabilities

39,212

21,191

Exchange rate differences on translation

(119,455)

42,138

 

1,278,112

1,109,090

Increase in trade and other payables

931,716

1,557,234

Decrease in trade and other receivables

(372,487)

(1,700,972)

Taxation paid

(380,753)

(43,657)

Cash generated from operating activities

1,456,588

921,695

 

27 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


2023

£

2022

£

2023

£

2022

£

Financial Assets





Trade and other receivables

3,170,326

2,933,659

589,087

666,017

Cash and cash equivalents

2,444,100

1,714,417

135,548

1,532

Investments in subsidiaries

-

-

1,293,567

1,229,148

Total

5,614,426

4,648,076

2,018,202

1,896,697

Financial Liabilities





Trade and other payables

1,819,744

1,115,852

88,959

122,766

Accruals

1,328,001

732,640

17,000

20,955

Total

3,147,745

1,848,492

105,959

143,721

 

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 2023 was £1,649,905 (2022: £1,980,121). 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 Group 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 £3,147,899 (2022: £2,327,501).

 

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 £2,444,100 (2022: £1,714,417). 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 £2,814,356 (2022: £2,253,564).

 

28 Pension costs defined contribution

 

The Group makes pre-defined contributions to employees' personal pension plans. Contributions payable by the Group for the year were £129,228 (2022: £63,910). At the end of the reporting period £17,475 (2022: £12,021) of contributions were due in respect of the period.

 

29 Dividends

 

In respect of the current year, the directors propose that a final dividend of 3 pence per share (2022: 2 pence) be paid to shareholders on 19 January 2024. 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 22 December 2023. The total estimated dividend to be paid is £286,140. The payment of this dividend will not have any tax consequences for the Group.

 

30 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 2023 the Company had no potential liability under the terms of the registration.

 

 

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