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Monday 12th of September 2016

reach4entertainment enterprises plc Unaudited interim results

By Aim Listing

r4e, the transatlantic media and entertainment company, today announces its unaudited interim results for the six months ended 30 June 2016.

Highlights

 

  • Transformative refinancing completed in December 2015 allowing the Group to focus on a strategy of growth and development;
  • borrowing reduced by £11.0 million since 30 June 2015;
  • strong performance from SpotCo on the back of US shows investing in advance of the Tony Awards in June 2016;
  • return to form for Newman Displays which has benefited from bringing key services in-house;
  • consistent performance from Dewynters in a challenging market place; and
  • second half expected to be more challenging with investment in marketing in new shows having been H1 weighted

 

David Stoller, Executive Chairman, commented:

"With significant investment going into shows in the first half of this year, particularly in the US, we are pleased to report a strong first six months of the business. We also benefited from an improved performance from Newmans, which was most recently involved in the Harry Potter launch. 

The second half is expected to be more challenging, with fewer shows being launched, but the business is well positioned following 2015's transformative changes and we remain on track to meet our targets for the year ahead.  The outlook for 2017 is strong, including promising investment opportunities to support our strategic growth objectives."

"I am pleased to be reporting on a successful first half for the Company. This follows a year when the Company was fundamentally transformed with the reduction of Group borrowings by £11 million (or 71%) and the support of shareholders who invested £4 million into the business in December 2015."

"In 2016, our trading performance was boosted by the significant success of our US based clients, who were competing for Tony Awards. Spot & Company of Manhattan, Inc. ('SpotCo') clients, in unprecedented fashion, won all 110 Tony Awards. This resulted in a highly profitable first six months, recording a 55% increase in Group EBITDA.  That said, we are expecting a weaker second half contrary to the normal pattern, principally due to the unusually front loaded show schedule, but this should not offset the progress made in the first 6 months."

"The level of indebtedness prior to the restructuring had, for a number of years restricted the Company's ability to invest in the future and support the development of the business. The Company now has a manageable level of debt and stronger cash flows, permitting the Board to actively look at investment opportunities, both internal and external, which we believe will enhance our performance in 2017 and thereafter, and create significant long-term value."

Market leading positions in London and New York maintained

r4e operations consist of the market-leading London and New York based theatre and live entertainment marketing businesses of Dewynters Ltd ('Dewynters') and SpotCo respectively, together with the London based signage and fascia business, Newmans.  Operations of the New York based merchandising business, Dewynters Advertising Inc ('DAI') were transferred at the end of 2015.

The first half of this year has been dominated by the performance of SpotCo which recorded an increase in revenue and EBITDA of 22% and 65% respectively; together with the contribution from Newmans, which changed from breakeven to contributing £0.2 million of EBITDA, the overall result for the Group was positive.

Spotco's reputation was enhanced by the extraordinary success achieved by its clients and its originality and innovation in marketing theatre shows is growing. The Company experienced an intensive first six months supporting the needs of all its clients ahead of the prestigious Tony Awards in June 2016. This hard work showed in June when every award on offer was won by a Spotco client. This exceptional success by Spotco clients reflects their combined calibre and the strong market position Spotco occupies amongst the leading and up and coming theatre shows in the US.

Dewynters revenues and EBITDA were broadly level with the prior year, which was less than expected. The company has seen substantial organisational changes, particularly with the appointment of a new CEO. The company is implementing plans for expansion, both geographically and strategically, which we believe will result in considerable future returns.  Linking to these plans the Company continues to grow its non-West End business, and its touring business, in the UK and internationally. Therefore, while the second half still looks challenging, the Directors consider that the longer-term growth prospects for the company are very positive.

Newmans has had a very good first half, after making important changes to the business, including a substantial reduction in the level of outsourcing, instead investing in in-house printing and cutting machinery, which has showed immediate positive returns.  The company has also benefited from an uplift in theatre signage sales, most prominently for the new Harry Potter play, but showing a general increase in film premier work compared to 2015. The company is looking forward to completing a good year with the all-important Christmas period still to come.

Head Office costs have increased on the prior period by £0.2 million (123%), due to the initial recognition of the r4e long term incentive plan plus consultancy costs in relation to the post re-financing growth strategy for the business.

Summary and Outlook

There is no doubt the Company is in a significantly better position than this time last year. The agreement struck with our former lenders last year radically changed the Company's financial structure, flexibility and capacity for growth. Since then, we have recruited senior industry professionals in London and New York to provide solid leadership, we are redesigning certain aspects of our organisations and our businesses to achieve sustainable growth over the long-term, and we are evaluating some specific key opportunities for growth-based investment.  Our strategy is simple: we intend to leverage our market leading brands, experience, capabilities and intelligence to substantially grow our revenue base, by expanding geographically, and developing new tools and capabilities, including analytics and data-driven marketing methodologies, to sustain and build the market leadership we already enjoy. Finally, it is noteworthy that the markets for theatre and live entertainment, in both London and New York, continue to grow in terms of gross revenues and audience size, enhancing the value of our brands and the opportunities for our business in those markets.