ANNUAL REPORT 06 - Lion Hudson HUDSON...important in our portfolio. Antonia Woodward’s charming...

2 016R REP TOANN LUA

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Notice of meeting

Notice is hereby given that the Annual General Meeting of Lion Hudson plc will be held at The OUP Pavilion, Jordan Hill, Oxford, OX2 8DR on 22 September 2016 at 10:30 a.m. for the following purposes:

1. To receive and adopt the financial statements for the year ended 31 March 2016 together with the reports of the directors and auditors

2. To re-elect the following director: Alice Lawhead

3. To confirm the appointment of Taylor Cocks Financial Services LLP as auditors of Lion Hudson plc

4. To authorise the audit committee to set the remuneration of the auditors

By Order of the Board

C. Gregory, Secretary

Registered office

Wilkinson House, Jordan Hill, Oxford OX2 8DR

31st August 2016

Proxies

A member of the company entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his or her stead. A proxy need not also be a member.

Documents available for inspection

The following documents are available for inspection at the offices of Lion Hudson plc, Oxford, during normal business hours from the date of this notice until the date of the meeting:

1. A statement of the interests of directors and their families in the share capital of the company

2. Copies of service contracts of the directors of the company

The 2016 Annual Report can be found on the company website: www.lionhudson.com

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Nicholas Jones (Managing Director) is responsible for international sales, including co-editions and rights. He was previously Managing Director of Angus Hudson Ltd. Having held senior management positions at Lonrho and divisional board positions at Maxwell Communications Corporation, he led the successful management buyout of Angus Hudson Ltd from MCC in 1989. (Nick stepped down as Managing Director of Lion Hudson on 31 March, then retired from the company on 6 June. Sadly, he passed away on 4th August 2016.)

Alice Lawhead (Non-Executive Director) has had a varied career in marketing, fundraising, and training at Director level in a range of commercial and not-for-profit organizations. For many years she has acted as editor and manager for her husband, the historical fantasy writer Stephen Lawhead. She is the author or joint author of six books.

Roy K. McCloughry (Chairman and Non-Executive Director). Originally an economist, he has been involved in writing, research, and lecturing on Christian approaches to social issues for more than thirty years. He has published fourteen books and is Vice-President of the charity Livability. He resigned from the Board on the 30th September 2015.

Suzanne Wilson-Higgins (Deputy Managing Director, EU Sales and Marketing Director) has over twenty years’ experience in the UK publishing industry. She has focused on business

development, sales, and marketing, with experience in bookselling, print-on-demand, and ebooks. As a director of Ingram’s Lightning Source UK Ltd, she launched print-on-demand and ebook services to the UK market and built them up over a decade. Previously she held senior management positions at B.H. Blackwell Ltd and at subsidiaries of Reed–Elsevier plc.

Andrew Hodder-Williams (Publishing Director) began his career at Lion Publishing, then worked at Hodder & Stoughton and Hodder Headline. Since gaining an MBA, he has worked as a consultant to the publishing and telecoms sectors, including KPMG Consulting and Atos.

Caroline Gregory (Finance Director/Company Secretary) has over thirty years’ experience within accounting and finance, having worked within the retail and charitable sectors, and held senior roles within the timber trade sector.

Nicholas Gray (Non-Executive Director and became Chairman in September 2015) has over forty years’ experience as a Christian publisher and bookseller in the UK with Wm Collins, Zondervan, and Marshall Pickering, and most recently as chairman of R L Allan, which publishes fine Bibles. He is a former Christian Bookseller of the Year. He currently serves on the board of the Oswald Chambers Publications Association, is a trustee of Media Associates International, and was formerly on the council of The Booksellers Association.

Company number 01051118

Registered office Wilkinson House Jordan Hill Oxford OX2 8DR Auditors tgs taylorcocks 3 Acorn Business Centre Northarbour Road Cosham Portsmouth Hampshire United Kingdom

Bankers HSBC Plc – Oxford Thames Valley Commercial Centre Midland House, Seacourt West Way Botley Oxford OX2 0PL

Secretary Caroline Gregory

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Chairman’s Message

thirty-five years’ service in the Christian publishing industry and had been MD of the company for the last four years. We are extremely grateful for Nick Jones’ committed and able leadership and extend to his wife Carol our heartfelt sympathy.

Appointments to new senior roles were aligned for the 2016–17 financial year including Suzanne Wilson-Higgins as Managing Director, Caroline Gregory as Finance & Shared Services Director, Becki Bradshaw as Head of Adult Commissioning, Lynne Humphreys as Head of Children’s Editorial, and Stephen Wall as Head of IT & Facilities.

The Board believes we have a strong team in place to publish books for young people and adults that glorify God and will be read in English and many other languages around the world.

I am very grateful for the refreshed leadership teams at Board and Management levels and the mission-focused commitment of our staff members. The world of Christian publishing is a continually challenging place to do business but I am confident that we have the human and God-given resources to succeed in our endeavours to make Lion Hudson stronger in the days and years ahead.

Thank you for your continuing engagement as our valued Shareholders. We much appreciate your support during these commercially difficult times as well as when trading environments around the world are less testing.

Nicholas Gray Chairman

Welcome to the Annual Report covering the financial year ending in March 2016. Following the 2015 Annual General Meeting in September 2015 I moved into the Chairmanship at a time when Lion Hudson plc was already half way through this challenging financial year. I must therefore begin by thanking Roy McCloughry for his many years of service and leadership as a Director since 1998 and as Chairman for the past five years.

The 2015–16 publishing programme enjoyed particular success with new biographies and new Bible retellings for young people, but sales were hard won across most markets this year. In the face of lower than planned sales revenues from key international markets, the Board and Management team took measures to reduce losses year-on-year by controlling overheads and increasing sales commission through adding new client publisher representation.

The Lion Hudson family saw many changes in the 2015–16 year with key retirements and important new appointments taking place during the period. Lois Rock retired as Publisher of the Lion Children’s Books imprint, Tony Collins retired from the role of Publisher for Monarch Books and Lion Fiction, Charles Wallis retired as Production Manager, and Carol Jones retired as Publisher of Children’s Books. Nick Jones stepped down from the role of Managing Director/International Director at the end of March. The whole family of Lion Hudson was deeply saddened when Nick passed away suddenly, only shortly after he had retired from the company. He had just completed

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Publishing Highlights Our publishing for children

Lion Children’s Books continued to have a well-deserved reputation for publishing a variety of high quality Christian books amongst our publishing partners, booksellers, and consumers around the world. Candle sustained its reputation for publishing a variety of fun, innovative, novelty titles in Bibles, prayers, and Bible stories. Attractively priced formats ranged from pull-out tab books to jigsaws, pop-out and lift-the-flap books. Staff changes included the retirements of Lois Rock in the first quarter and Carol Jones at the end of the financial year. Lynne Humphreys joined the team in 2015 and was promoted to Head of Children’s Editorial at the end of the financial year. Here are some highlights:

Children’s Bibles and Bible stories: The Bible story retelling category continued to be a bedrock of Lion Hudson’s publishing programme. This year saw the release of a stunning and varied range of new Bible retellings. Star of the year was the highly visual, popular

Unofficial Bible for Minecrafters which reached a broad audience but especially those youngsters who are fans of Minecraft. There are over 250 pages of Old and New Testament stories with dynamic scenes and images, all painstakingly created by the authors within the Minecraft computer game, block by block.

Bibles for very young children included the bright and bouncy My Toddler Bible and My Little Blessings Bible from Candle and I Spy Bible from Lion Children’s Books. Candle continued its success in books for learning and play by following the winning format of The

Christmas Journey Storybook with The Bible Journey Storybook. It also launched a new series of Bible Mini Pops, the “every-page pops up” board books: Noah and other Stories and Lost Sheep and other stories. A new Bible stories range of board tab books illustrated by Lucy Barnard was created, with the first two titles as The Lost Sheep and The Helpful Donkey.

Bibles for older children included The Lion Story Bible for emerging readers to discover the whole narrative of the Bible for themselves, and Bible Stories Gone Crazy! offered older children a fun, quirky, and

visually enticing exploration of well-loved Bible stories. Joining the list and appealing to children’s sense of fun and humour were My Best Ever Bible! and The Lion Picture Puzzle Bible.

Prayers: New children’s prayer books to accompany Bibles publishing this year included The Lion Book of Nursery Prayers, increasing the “Lion Nursery” range, and Tiny Tots Prayers, inspired by the promises within the Bible. We continued to add to our ever popular Candle “99” range illustrated by Elina Ellis with 99 Prayers for Children

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Children’s Bible reference: Our information and reference titles list was enriched by Who is Jesus? beautifully illustrated by Maria Royse.

Seasonal books: Our Christmas titles included Jesus is Born, The Christmas Story for Little Angels, and Alison Jay’s On that Christmas Night from Lion Children’s Books, and from Candle a picture story book, The Midnight Visitors and the fold-out advent calendar with storybook, Countdown to Christmas. Easter saw a variety of books suitable for presentation gifts from Candle: Would

You Like to Know the Story of Easter?, The First Easter and My Very First Easter, plus The Easter Story from Lion Children’s Books.

Christening and Bible Promises for Baby’s Dedication offer families the perfect opportunity to celebrate and welcome a brand-new person into God’s wonderful world.

Occasion books for children: Gift-giving moments in a child’s life, such as dedication, baptism, or First Communion, continue to be important in our portfolio. Antonia Woodward’s charming illustrations in Bible Promises for Baby’s Baptism, Bible Promises for Baby’s

Picture story books with a purpose reach into family homes, schools, and churches to delight, inspire, and touch all who encounter them. One highlight was Rebecca Elliot’s My Stinky New School, of which one parent review said “My daughter found it helped her with some of her worries… The illustrations are beautiful and quite unlike any ‘starting school’ story I’ve seen.”

Our publishing for adult readersWe affectionately refer to our adult publishing meeting as the “BFM” or the Big Friendly Meeting, which covers Lion Books, Lion Fiction and Monarch. Staff changes included promoting Becki Bradshaw to Head of Adult Commissioning, and adding two new commissioning editors in 2016: Jessica Tinker for Lion Fiction and Simon Cox for Monarch. Alison Hull and Tony Collins continued to provide new titles for the lists albeit on a part-time basis, and Jenny Muscat assumed the role of Managing Editor across all the BFM imprints. Lion Books published 17 titles, Lion Fiction published 19 titles, and Monarch published 46 titles, a grand total of 82 titles for the BFM. Here are our highlights of 2015–16:

The publishing industry phenomenon of 2015 was adult colouring books and we successfully joined the fray with Colour Your Day, Colour Your Life, Be Still and Know that I am God, and Shine: Colour Your Life Beautiful (Monarch). Over the year these titles sold over 60,000 copies in the English language.

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2015 also saw the popular “superhero” genre thrive in film and in books. The Lion Comic Book Hero Bible published into this popular space. This illustrated Bible retelling by Marvel comic artists Siku and Jeff Anderson provided a new and exciting way of telling Bible stories in richly depicted comic book form, for a visually literate new generation. It should prove to be a staple Bible retelling in our list and has already translated into eight languages in its first year.

Biographical books from both Lion Books and Monarch published exceptionally well in the year, including autobiography, memoir, and biography. Bestselling autobiographic memoir My Journey So Far by Canon Andrew White (Lion Books) caught the media’s attention and was supported by an author tour in the autumn of 2015.

Another strong seller has been the life of the Reverend W. Awdry, The Thomas the Tank Engine Man (Lion Books), marking the 70th anniversary of the first appearance of the character in book form.

Memoirs included Walter’s War (Lion Books), a previously unknown firsthand account from a First World War soldier. Confessional memoirs included Deborah Meroff’s Under Their Very Eyes: The astonishing life of Tom Hamblin, Bible courier to Arab nations and The Night the Angels Came: Miracles of protection and

provision in Burundi by Chrissie Chapman (both Monarch).Interest in C. S. Lewis continues, and we had two titles in this area – The Oxford Inklings, by popular author and speaker Colin Duriez, and Women and C.S. Lewis, a collection of essays from UK and US

experts (both Lion Books). Finally, the gripping story of Edith Cavell: Faith before the firing squad by Catherine Butcher (Monarch) was published in the year of the 100th anniversary of her death.

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On prayer and devotionals: This year we published David Wilkinson, a regular on BBC Radio 4’s Thought for the Day, who wrote When I Pray, What Does God Do? (Monarch).

Our assorted non-fiction books included: a gem published in the history category, London: A Spiritual History by Edoardo Albert; Good

Disagreement: Grace and Truth in a Divided Church, a topical book which coincided with the Archbishop of Canterbury’s use of the phrase; Tim Dowley’s Atlas of the European Reformations (all Lion

Books);

in the Christian living category Anthony Delaney’s Rough Diamonds (Monarch) was transforming men from coal to diamonds;

and over 10,000 readers are enjoying Andy Bannister’s mix of apologetics and humour in The Atheist Who Didn’t Exist (Monarch).

New editions were released of three Lion Books favourites: first Colin Chapman’s Whose Promised Land?; later in the year the fully revised and redesigned edition of Rachel Waddilove’s The Baby Book, which published to mark the

tenth anniversary of the original edition; and Simon Jenkins’ The Bible from Scratch.

Partnering projects included Lion Books releasing two DVDs with the LUMO Project: The Gospel of Luke and The Gospel of John.

These highly accessible films use full Bible text in two versions as the narrative to accompany the stunningly beautiful footage and compelling cast, all told in a documentary style.

We also published three perennially popular devotional authors: Jennifer Rees Larcombe’s God Moments and God Moments for Dark Days; Catherine Campbell’s When We Can’t, God Can and Angus Buchan’s Walking By Faith.

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Monarch continues to be an important co-publisher of ministry resources including Freed to Lead, a major new initiative from Freedom in Christ, and the Spring Harvest theme book, Game Changers.

Our fiction books are often praised for the depth of their characters, their powerful writing, for the redemption and hope found in them, and because they do not shy away from difficult themes. Cases in point are Beth Moran’s I Hope You Dance, which explores themes of grief and identity, and Thérèse Down’s The End of Law, which tells the story of two SS officers involved in Hitler’s Final Solution – yet both stories also contain themes of hope and freedom.

Monarch also published two New Wine affiliated authors this year: Malcolm McDonald’s Set Me On Fire and Ian Parkinson’s Reignite.

Lion Fiction welcomed five new authors to the list and published three debut novels as part of our commitment to giving a platform to authors starting out. Fiona Veitch Smith’s The Jazz Files has been short-listed for one of the Crime Writer’s Association Awards – the Endeavour Historical Dagger. Previous winners include Philip Kerr and C. J. Sansom.

Marketing Highlights from April 2015–March 2016

My Journey So Far by Andrew White

Andrew was interviewed on BBC Breakfast, BBC Radio 5 Live, BBC Radio Scotland, BBC Three Counties Radio, BBC World Service Heart & Soul,

Premier Christian Radio, Transworld Radio, and UCB Radio. He was also featured in The Independent, Inspire magazine, The Telegraph, and the Spectator. The Times organized an event, “In Conversation with Canon Andrew White”, which resulted in coverage within The Times newspaper.

Ashes to Ashes, Mel Starr’s latest novel, has continued the success of the Chronicles of Hugh de Singleton series, which as a whole has now sold over 100,000 copies in English. Saints and Sailors, the final instalment in Pam Rhodes’ beloved Dunbridge Chronicles has got off to a flying start.

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The Unofficial Bible for Minecrafters by Garrett Romines and Christopher Miko

A late entry to the publishing programme and a big hit, appealing to the many Minecraft fans. Publication was supported by posters and window stickers in store, trade advertising, and an impressive

promotional trailer. Over 17,000 copies sold worldwide to date.

The Lion Comic Book Hero Bible by Jeff Anderson and Siku

Another original interpretation of the Bible, with stunning artwork from world renowned comic book artists. This title was widely promoted at various Christian and comic book events. Publicity

included an author interview in Judge Dredd magazine.

Edith Cavell: Faith before the firing squad by Catherine Butcher

The arresting biography of Edith Cavell, whose execution in 1915 caused an outcry. Catherine Butcher was interviewed on BBC Radio Northern Ireland, Premier Radio “Woman to Woman”, Transworld Radio, and in Families First magazine. A story linked to the book and the Cavell centenary was also featured on the Christianity and Families First blogs. An author book signing was also organized at Victoria Baptist Church.

The Baby Book: How to enjoy year one by Rachel Waddilove

This new 10th anniversary edition of the childcare classic received plenty of media attention. A major feature in the Daily Telegraph featuring Rachel’s views on today’s parenting styles was followed the same day by the Daily Mail and the Irish Independent, with a piece in The Sun the following day. Marie Claire online picked up the story at the weekend, and The Express the following week. The story was also picked up on websites and in newspapers around the world. Rachel was interviewed on

Vanessa Feltz’s show on BBC Radio London as well as on BBC Radio Scotland (Kay Adams show), BBC Three Counties Radio, BBC Radio Tees, Premier Radio “Woman to Woman”, and Radio NZ. Rachel was also featured in various magazines including Baby London magazine, Little London magazine, Exeter Life, Pregnancy and Parenting magazine, and Woman’s Way. The London Mummy blog included The Baby Book in a list of top 10 products for new/expectant mums and it was reviewed very favourably by The Baby Website panel of mums, who also ran a competition.

Book Awards

Lion Hudson was named Publisher of the Year at the Christian Resources Together (CRT) 2015 awards ceremony for the sixth year running! In addition, Candle picked up Best Children’s Book for the Candle Day By Day Bible and a Monarch title, Choose Life by Simon Guillebaud, won Devotional Book of the Year.

The Lion Fiction and Monarch imprints were chosen for special recognition by ForeWord Reviews, a print magazine and website devoted to independently published books in the US. The following titles were all finalists in the 2016 IndieFab Awards: The Boy Who Loved Rain by Gerard Kelly and The Broken Blade by Anna Thayer from Lion Fiction, and Against the Flow by John Lennox from Monarch.

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Launch of My Journey So Far by Andrew White

Artists and authors pose to promote The Lion Comic Book Hero Bible at the London Book Fair

The Lion Hudson team proudly receiving the CRT Publisher of the Year award

No more room on the Lion Hudson Stand, Frankfurt 2015

Company Registration No. 01051118 (England and Wales)

LION HUDSON PLC

FINANCIAL STATEMENTS

FOR THE YEAR ENDED

31 MARCH 2016

3 Acorn Business Centre Northarbour Road

Portsmouth PO6 3TH

LION HUDSON PLC

CONTENTS

Page

Company information 1

Strategic report 2 - 5

Directors' report 6 - 7

Directors' responsibilities statement 8

Independent auditor's report 9 - 10

Statement of comprehensive income 11

Balance sheet 12

Statement of changes in equity 13

Statement of cash flows 14

Notes to the financial statements 15 - 31

LION HUDSON PLC

COMPANY INFORMATION

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Directors Mrs. C Gregory Mrs. A Lawhead Mr. A Hodder-Williams Ms. S Wilson-Higgins Mr. N Gray

Secretary Mrs. C Gregory

Company number 01051118

Registered office Wilkinson House Jordan Hill Road Oxford United Kingdom OX2 8DR

Auditor tgs taylorcocks 3 Acorn Business Centre Northarbour Road Cosham Portsmouth Hampshire United Kingdom PO6 3TH

Bankers HSBC - Oxford Commerical Centre Midland House Seacourt Botley Oxford OX2 0PL

LION HUDSON PLC

STRATEGIC REPORT

FOR THE YEAR ENDED 31 MARCH 2016

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The directors present the strategic report for the year ended 31 March 2016.

Fair review of the business The principal activities during the year were those of tactical publishing in tough market conditions, which were especially challenging in some of our key international markets.

Principal risks and uncertainties Financial risk management The Company’s operations expose it to a number of financial risks including liquidity risk, interest rate risk, credit risk and capital management risk. There is limited exposure to foreign currency risk through a hedging policy. Exposures to risks are monitored by the Finance Director and where appropriate are discussed at the monthly Exec and quarterly Board meetings. These risks are:

a) Liquidity risk Undercapitalization is a risk the company faces within the volatile current markets.

b) Interest rate profile The Company has no financial assets other than sterling cash deposits which are invested at an approximate equivalent to the Bank of England base rate. At 31 March 2016 £239K (2015: £22K) of bank balances were held in accounts which were subject to floating rates of interest.

c) Maturity of financial assets and liabilities The maturity profile of the Company’s financial assets and liabilities as at 31 March 2016 is given in notes 1.10 and 1.11.

The main financial assets are cash and trade receivables. An analysis of cash is shown in (b) above. Credit terms are contract specific which span from cash to a maximum of 150 days from the invoice date. There were trade receivables overdue at 31 March 2016 with a value of £579K (2015: £460K).

The Company would normally expect that sufficient cash is generated in the operating cycle to meet cash flows through effective cash management. The Board is confident that the more than adequate cash resources combined with improving trading conditions will finance future trading.

d) Borrowing facilities The Company utilizes a sales financing (Invoice Discounting) facility in place at 31 March 2016 or 31 March 2015.

e) Credit risk exposure Credit risk arises from cash and cash equivalents, deposits with the bank, as well as credit exposures to customers, including outstanding receivables. There were trade receivables of £579K (2015: £460K) that are past due and some provisions have been made against these. External credit ratings are obtained for customers via the sales financing facility credit insurers and debts insured to a determined limit. Company policy is to assess the credit quality of each customer internally prior to any contract being signed or any work being undertaken. Internal checks are performed taking into account their financial position as well as their reputation within the industry and past experience. All potential customers’ Annual Report and Accounts are reviewed and high risk customers either rejected or mitigating measures implemented. Invoices are aged monthly and customers with any past due invoices are contacted to arrange for payment.

LION HUDSON PLC

STRATEGIC REPORT (CONTINUED)


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The Company’s maximum exposure to credit risk relating to its financial assets is equivalent to their carrying value as disclosed in note 9. All financial assets have a fair value which is equal to their carrying value.

The Company did not have any financial instruments that would mitigate the credit exposure arising from the financial assets designated at fair value through the profit and loss account in either the current or the preceding financial year.

Capital Management

The Company’s objectives when managing capital are:

a) To safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

b) To provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to increase cash balances.

Other principal risks to the business

The Board considers the other principal risks to the business are as follows:

a. Market conditions Close working relationships are maintained with both the Company’s suppliers and customers in order to monitor market changes. The Directors continually monitor other markets and products that are complementary to the Company’s business model and that can be added to the Company’s portfolio of products. Economic and interest rate changes are also monitored in relation to the impact they will have on the market conditions for the Company.

b. Product risk If we do not anticipate and respond to changes in customer demands we may lose market share and our competitiveness may reduce. In order to mitigate against the risk of stock obsolescence the Company continues to innovate with releases of new titles and the frequent updating of existing products. We endeavor to work closely with customers in our product development efforts, to help ensure their relevance and acceptability in our target markets.

c. Intellectual property The Company always takes prompt action where any breach of its Intellectual Property Rights is suspected and where appropriate takes immediate legal action to protect its position.

d. Destruction of sole office A detailed Disaster Recovery Plan is in force and reviewed annually during rehearsals for such an event occurring. All staff are able to work from their home base on a continuous basis. Appropriate insurance cover is maintained. A business continuity plan is in force. Business interruption insurance cover is held with a value of £7.2m for duration of two years.

e. Destruction of computer systems We have adequate business systems and processes in place to ensure business continuity for such an eventuality.

LION HUDSON PLC



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Development and performance Tough market conditions led to a 4% decrease in turnover, although EU sales saw a positive year-on-year variance being 53% of overall turnover (2015: 41.4%) This was driven by several successful new Bible retellings such as The Unofficial Bible for Minecrafters and The Lion Comic Book Hero Bible , and a strong range of books in the biographical category, including Andrew White’s My Journey So Far .

International sales, which include English language export sales outside the EU and international co-edition sales, unfortunately ended with a negative variance year-on-year being 47% of turnover (2015: 59%). This was driven by fewer and lower value orders from customers, particularly those in key territories with weak economies. These included Brazil for co-editions and South Africa for export sales. In addition export sales to the US year-on-year showed some recovery following the demise of Good Books and trading problems for Family Christian Stores, but sales were lower than budgeted and the returns rate increased.

Unfortunately across all lists our stock to sale ratio did not improve over the year at 310 days (2015: 272 days) and in the current financial year the Board has implemented a tighter stock policy for English language books more closely linked to each title’s rate of sale and optimally holding no more than six months stock.

The ongoing cost of our production, spending £3.9m (2015: £4.3m) on £7m turnover, saw a slightly higher GP achieved of 43.96% (2015: 41.38%), which is representative of the EU sales holding across the lists.

Compared to the prior year there has been a 97% reduction in the loss before taxation, achieved largely due to careful overhead controls and prudent provisions in 2014/2015 for stock and WIP which fell into the projected write off policy. This is represented by a loss of £30K (2015: (£184K)).

Key performance indicators The Company uses a variety of KPIs in order to monitor business performance. In addition to those quoted above, the level of Debtor days – 101.6 days (2015: 104.7 days) – and creditor days – 249 days (2015: 234 days) – are monitored closely.

New KPIs on productivity and performance are being introduced within this year.

In addition the Company completes a traditional management accounts package every month which includes a profit and loss statement with forecasts for the next reporting period.

Given the nature of the business the Board believes that these KPIs are sufficient to ensure that appropriate action can be taken as necessary.

LION HUDSON PLC



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Other information and explanations Environmental and social

The Company operates from a single site in premises it leases in Oxford. Every care is taken to ensure that the Company operates in an environmentally friendly way within the limitations imposed by our location and the nature of our operations. In regard to its employees and the local community, the Company allows employees time to take part in their own social responsibilities as necessary.

Future prospects

The outlook for 2016–2017 remains challenging, as key international markets continue to place modest re-orders. As a consequence, the Board has approved a profit improvement programme through tightly controlled operational costs and stock holdings to align with sales.

In the meantime, the Company still maintains a strong balance sheet enabling it to counter the inherent uncertainty in the economy. In the current turbulent economic climate this policy continues to stand us in good stead.

By order of the board

.............................. Mrs. C Gregory Secretary .........................

LION HUDSON PLC

DIRECTORS' REPORT


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The directors present their annual report and financial statements for the year ended 31 March 2016.

Principal activities The principal activity of the company continued to be the publishing of Christian books.

Directors The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Mrs. C Gregory Mr. N Jones (Resigned 1 April 2016) Mrs. A Lawhead Mr. A Hodder-Williams Ms. S Wilson-Higgins Mr. N Gray Mr. R McCloughry (Resigned 30 September 2015)

Results and dividends The results for the year are set out on page 11.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend. Directors' insurance The company maintains insurance policies on behalf of all the directors against liability arising from negligence, breach of duty and breach of trust in relation to the company.

Auditor tgs taylorcocks were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.

Statement of disclosure to auditor So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

LION HUDSON PLC

DIRECTORS' REPORT (CONTINUED)


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Strategic report In accordance with Section 414C(11) of the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013, the Directors have set out in the company's Strategic Report on page 2, such information as required by schedule 7 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.

By order of the board

.............................. Mrs. C Gregory Secretary .........................

LION HUDSON PLC

DIRECTORS' RESPONSIBILITIES STATEMENT


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The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the

company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors' are responsible for the maintenance and integrity of the company website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

LION HUDSON PLC

INDEPENDENT AUDITOR'S REPORT

TO THE MEMBERS OF LION HUDSON PLC

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We have audited the financial statements of Lion Hudson PLC for the year ended 31 March 2016 which comprise the Statement of Total Comprehensive Income, the Balance Sheet, the Statement of Changes in Equity, the Statement of Cash Flows and the related notes numbered 1 to 25. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland".

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements In our opinion the financial statements: • give a true and fair view of the state of the company's affairs as at 31 March 2016 and of its loss for the year

then ended; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice;

and • have been prepared in accordance with the requirements of the Companies Act 2006.

Emphasis of matter In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosures concerning the Company's ability to continue as a Going Concern, as shown in notes to the financial statements, section 1.2. The conditions within section 1.2, indicate the existence of a material uncertainty which may cast significant doubt about the company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern.

LION HUDSON PLC

INDEPENDENT AUDITOR'S REPORT (CONTINUED)

TO THE MEMBERS OF LION HUDSON PLC

- 10 -

Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

• the financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors' remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit.

Mr James Blake ACA (Senior Statutory Auditor) for and on behalf of

Chartered Accountants Statutory Auditor

.........................

3 Acorn Business Centre Northarbour Road Cosham Portsmouth Hampshire United Kingdom PO6 3TH

LION HUDSON PLC

STATEMENT OF TOTAL COMPREHENSIVE INCOME


- 11 -

2016 2015 Notes £ £

Turnover 3 6,995,627 7,293,654 Cost of sales (3,968,477) (4,275,816)

Gross profit 3,027,150 3,017,838

Distribution costs (343,098) (430,148) Administrative expenses (2,660,137) (2,720,381)

Operating profit/(loss) 4 23,915 (132,691)

Interest payable and similar charges 8 (53,530) (51,065)

Loss before taxation (29,615) (183,756)

Taxation 9 - -

Loss for the financial year (29,615) (183,756)

Other comprehensive income - -

Total comprehensive income for the year (29,615) (183,756)

The profit and loss account has been prepared on the basis that all operations are continuing operations.

LION HUDSON PLC

BALANCE SHEET

AS AT 31 MARCH 2016

- 12 -

2016 2015 Notes £ £ £ £

Fixed assets Goodwill 10 129,405 145,580 Tangible assets 11 1,120,869 1,137,252 Investments 12 1,000 1,000

1,251,274 1,283,832 Current assets Stocks 15 3,121,436 3,182,835 Debtors 16 2,137,946 2,092,892 Cash at bank and in hand 238,806 22,048

5,498,188 5,297,775 Creditors: amounts falling due within one year

17 (3,351,662) (3,735,207)

Net current assets 2,146,526 1,562,568

Total assets less current liabilities 3,397,800 2,846,400

Creditors: amounts falling due after more than one year

18 (1,081,217) (500,202)

Net assets 2,316,583 2,346,198

Capital and reserves Called up share capital 23 857,993 857,993 Share premium account 782,016 782,016 Profit and loss reserves 676,574 706,189

Total equity 2,316,583 2,346,198

The financial statements were approved by the board of directors and authorised for issue on ......................... and are signed on its behalf by:

.............................. Mr. N Gray Director

Company Registration No. 01051118

LION HUDSON PLC

STATEMENT OF CHANGES IN EQUITY


- 13 -

Share capital Share premium

account

Profit and loss reserves

Total

Notes £ £ £ £

Balance at 1 April 2014 857,993 782,016 889,945 2,529,954

Year ended 31 March 2015: Loss and total comprehensive income for the year - - (183,756) (183,756)

Balance at 31 March 2015 857,993 782,016 706,189 2,346,198

Year ended 31 March 2016: Loss and total comprehensive income for the year - - (29,615) (29,615)

Balance at 31 March 2016 857,993 782,016 676,574 2,316,583

LION HUDSON PLC

STATEMENT OF CASH FLOWS


- 14 -

2016 2015 Notes £ £ £ £

Cash flows from operating activities Cash absorbed by operations 24 (100,573) (57,181) Interest paid (53,530) (51,065) Income taxes paid (38,806) -

Net cash outflow from operating activities (192,909) (108,246)

Investing activities Purchase of tangible fixed assets (42,600) (505,478)

Net cash used in investing activities (42,600) (505,478)

Financing activities New borrowings 650,000 - Repayment of bank loans - (344,124) (Payment of)/new finance leases obligations (206,636) 790,483

Net cash generated from financing activities 443,364 446,359

Net increase/(decrease) in cash and cash equivalents 207,855 (167,365)

Cash and cash equivalents at beginning of year (267,172) (99,807)

Cash and cash equivalents at end of year (59,317) (267,172)

Relating to: Cash at bank and in hand 238,806 22,048 Bank overdrafts included in creditors payable within one year (298,123) (289,220)

LION HUDSON PLC

NOTES TO THE FINANCIAL STATEMENTS


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1 Accounting policies

Company information Lion Hudson PLC is a company limited by shares incorporated in England and Wales. The registered office is Wilkinson House, Jordan Hill Road, Oxford, United Kingdom, OX2 8DR.

1.1 Accounting convention These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling , which is the functional currency of the company. Monetary a mounts in these financial statements are rounded to the nearest £1 .

The financial statements have been prepared on the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.

These financial statements for the year ended 31 March 2016 are the first financial statements of Lion Hudson PLC prepared in accordance with FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland. The date of transition to FRS 102 was 1 April 2014. An explanation of how transition to FRS 102 has affected the reported financial position and financial performance is given in note 25.

The company has taken advantage of the exemption under section 40 2 of the Companies Act 2006 not to prepare consolidated accounts , as both subsidiary entities are dormant . The financial statements present information about the company as an individual entity and not about its group .

LION HUDSON PLC

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)


1 Accounting policies (Continued)

- 16 -

1.2 Going concern

At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future and will be able to meet its liabilities as they fall due, for a period of at least twelve months from the date that the financial statements are signed.

In concluding that it is appropriate to adopt the going concern basis in preparing the financial statements, the directors have considered the current and future trading, the cash flow forecasts for the foreseeable future, the facilities provided by the bank over the invoice financing and bank overdraft, the support provided by ZipAddress Limited and the continued support from IBM invoice financing, and have considered the ability for repayment of the loans as they fall due.

The bank invoice financing facilities are in the process of being transferred, the directors anticipate that this will be obtained shortly and agreements in principle have been reached. The facility will then be in place for a period of at least twelve months, securing the facilities over a fixed charge on the assets of the company.

Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements. Should the assumptions referred to above prove to be invalid, the going concern basis may also be invalid and, accordingly, adjustments may have to be made to reduce the value of the assets to their realisable amounts, to provide any further liabilities which might arise and to reclassify all fixed assets and long term liabilities as current assets and liabilities respectively.

1.3 Turnover Turnover represents amounts invoices to customers, excluding Value Added Tax.

Turnover from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods) , the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

1.4 Intangible fixed assets - goodwill Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 20 years.

For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

LION HUDSON PLC




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1.5 Tangible fixed assets Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Fixtures, fittings & equipment 10% - 50% Software 20% - 50% Software 15 years straight line

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss .

1.6 Fixed asset investments Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

1.7 Impairment of fixed assets At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

1.8 Stocks Stock and work in progress are valued at the lower of cost and net realisable value. Cost, using the first-in, first-out basis, consists of direct production costs.

Estimated net realisable value is calculated after providing for obsolescence based on the age and saleability of the stocks.

1.9 Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

LION HUDSON PLC




- 18 -

1.10 Financial instruments Financial instruments are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset , with the net amounts presented in the financial statements , when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publically traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Impairment of financial assets Financial assets, other than those held at fair value through profit and loss , are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Classification of financial liabilities Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

LION HUDSON PLC




- 19 -

Basic financial liabilities Basic financial liabilities, including creditors and bank loans that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. A m ounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Other financial liabilities Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are s ubsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value though profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

1.11 Equity instruments Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

1.12 Employee benefits The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

1.13 Retirement benefits Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

LION HUDSON PLC




- 20 -

1.14 Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to the profit and loss account so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Rentals payable under operating leases, including any lease incentives received, are charged to income on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.

1.15 Foreign exchange Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the profit and loss account for the period.

1.16 Taxation The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

LION HUDSON PLC



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2 Judgements and key sources of estimation uncertainty

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

Critical judgements The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Goodwill Goodwill has arisen on the acquisition of Angus Hudson Limited and the rights to their imprints. These imprints continue to be published under Lion Hudson PLC. As such, the Directors consider the useful economic life of goodwill to be 20 years.

Calculation of stock provisions The company maintains a stock provision in order to maintain stock at the lower of cost and net realisable value. The Directors review sales reports to determine slow moving titles and forecast sales for the following 12 months. From this analysis, the titles that are not expected to sell are provided for within the accounts.

Credit note provision At the end of each accounting period, the Directors review the level of credit notes raised over the previous 12 months and use this to estimate the value of credit notes that are expected to be issued in the first two months of the following year.

3 Turnover and other revenue

An analysis of the company's turnover is as follows: 2016 2015

£ £ Turnover UK 3,707,682 3,018,871 USA 1,608,994 826,760 Other 1,678,951 3,448,023

6,995,627 7,293,654

LION HUDSON PLC



- 22 -

4 Operating profit/(loss) 2016 2015

Operating profit/(loss) for the year is stated after charging/(crediting): £ £

Exchange gains (43,046) (29,478) Fees payable to the company's auditor for the audit of the company's financial statements 14,800 16,008 Depreciation of owned tangible fixed assets 27,792 24,358 Depreciation of tangible fixed assets held under finance leases 31,190 - Amortisation of intangible assets 16,175 16,175 Operating lease charges 125,104 139,500

5 Directors' remuneration 2016 2015

£ £

Remuneration for qualifying services 332,394 295,392

The number of directors for whom retirement benefits are accruing under money purchase schemes amounted to 4 (2015 - 4).

Remuneration disclosed above include the following amounts paid to the highest paid director:

Remuneration for qualifying services 89,841 90,034

The directors are also considered to be key management personnel.

6 Employees

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

2016 2015 Number Number

Editorial, design and production 25 22 Sales and marketing 29 29 Accounts and computer staff 5 5

59 56

LION HUDSON PLC



6 Employees (Continued)

- 23 -

Their aggregate remuneration comprised: 2016 2015

£ £

Wages and salaries 1,666,812 1,978,027 Social security costs 156,009 176,766 Pension costs 201,927 195,736

2,024,748 2,350,529

7 Retirement benefit schemes

Defined contribution schemes The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

The charge to profit and loss in respect of defined contribution schemes was £201,927 (2015 - £195,736).

8 Interest payable and similar charges 2016 2015

£ £ Interest on financial liabilities measured at amortised cost: Interest on bank overdrafts and loans 16,250 - Interest on finance leases and hire purchase contracts 13,328 -

29,578 - Other finance costs: Other interest 23,952 51,065

53,530 51,065

LION HUDSON PLC



- 24 -

9 Taxation The charge for the year can be reconciled to the loss per the profit and loss account as follows:

2016 2015 £ £

Loss before taxation (29,615) (183,756)

Expected tax charge based on the standard rate of corporation tax in the UK of 20.00% (2015: 20.00%) (5,923) (36,751) Tax effect of expenses that are not deductible in determining taxable profit 13,315 1,464 (Decrease)/Increase in deferred tax asset not recognised (7,392) 35,287

Tax expense for the year - -

A deferred tax liability on fixed asset timing differences of £179,093 has been netted off an against an unrecognised deferred tax asset of £253,457 regarding losses.

At 31st March 2016 the company has £1,300,000 (2015 - £1,500,000) of tax losses available for future use.

10 Intangible fixed assets Publishing Rights

£ Cost At 1 April 2015 and 31 March 2016 323,505

Amortisation and impairment At 1 April 2015 177,925 Amortisation charged for the year 16,175

At 31 March 2016 194,100

Carrying amount At 31 March 2016 129,405

At 31 March 2015 145,580

LION HUDSON PLC



- 25 -

11 Tangible fixed assets Fixtures, fittings

& equipment Software Software Total

£ £ £ £ Cost At 1 April 2015 261,184 312,487 1,125,985 1,699,656 Additions - 13,270 29,330 42,600

At 31 March 2016 261,184 325,757 1,155,315 1,742,256

Depreciation and impairment At 1 April 2015 257,303 305,102 - 562,405 Depreciation charged in the year 3,881 1,765 53,336 58,982

At 31 March 2016 261,184 306,867 53,336 621,387

Carrying amount At 31 March 2016 - 18,890 1,101,979 1,120,869

At 31 March 2015 3,881 7,386 1,125,985 1,137,252

The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.

2016 2015 £ £

Software 670,594 701,784

Depreciation charge for the year in respect of leased assets 31,190 -

12 Fixed asset investments 2016 2015

Notes £ £

Investments in subsidiaries 13 1,000 1,000

The company has taken advantage of the exemption under section 40 2 of the Companies Act 2006 not to prepare consolidated accounts. The subsidiaries are deemed immaterial for the purposes of giving a true and fair view as they are dormant. The financial statements present information about the company as an individual entity and not about its group .

LION HUDSON PLC



12 Fixed asset investments (Continued)

- 26 -

Movements in fixed asset investments Shares in

subsidiary undertakings

£ Cost or valuation At 1 April 2015 & 31 March 2016 1,000

Carrying amount At 31 March 2016 1,000

At 31 March 2015 1,000

13 Subsidiaries

Details of the company's subsidiaries at 31 March 2016 are as follows:

Name of undertaking and country of Nature of business Class of % Held incorporation or residency shareholding Direct Indirect

Angus Hudson Limited England and Wales

Dormant Ordinary 100.00

Aslan Publishing Services Limited

England and Wales

Dormant Ordinary 100.00

The aggregate capital and reserves and the result for the year of the subsidiaries noted above was as follows:

Name of undertaking Profit/(Loss) Capital and Reserves

£ £

Angus Hudson Limited - 1,000 Aslan Publishing Services Limited - 2

LION HUDSON PLC



- 27 -

14 Financial instruments 2016 2015

£ £ Carrying amount of financial assets Debt instruments measured at amortised cost 2,044,210 2,009,277

Carrying amount of financial liabilities Measured at amortised cost 4,363,546 4,198,114

15 Stocks 2016 2015

£ £

Work in progress 584,157 750,437 Finished goods and goods for resale 2,537,279 2,432,398

3,121,436 3,182,835

16 Debtors 2016 2015

Amounts falling due within one year: £ £

Trade debtors 1,907,024 1,655,010 Corporation tax recoverable 38,806 - Other debtors 137,186 354,267 Prepayments and accrued income 54,930 83,615

2,137,946 2,092,892

LION HUDSON PLC



- 28 -

17 Creditors: amounts falling due within one year 2016 2015

Notes £ £

Bank loans and overdrafts 19 298,123 289,220 Obligations under finance leases 20 152,630 290,281 Trade creditors 2,148,397 2,259,934 Other taxation and social security 69,333 37,295 Other creditors 348,927 324,175 Accruals and deferred income 334,252 534,302

3,351,662 3,735,207

Included within accruals is an amount of £32,346 (2015: £57,346) relating to the companys obligation to refurbish its former offices.

Included in other creditors is an amount of £140,555 (2015: £192,399) relating to invoice discounting. This is secured by a fixed charge on all debts purchased and a floating charge over all the assets of the company.

The bank overdraft facility is secured by a fixed and floating charge over the assets of the company.

The obligations under finance lease are secured over the assets acquired.

18 Creditors: amounts falling due after more than one year 2016 2015

Notes £ £

Obligations under finance leases all in 2-5 years 20 431,217 500,202 Other borrowings 19 650,000 -

1,081,217 500,202

The amounts included within other borrowings are owed to ZipAddress Limited and are secured by a floating charge over the assets of the company. Interest is charged at a rate of 2.5% per annum.

The obligations under finance lease are secured over the assets acquired. Interest is charged at a rate of 4.5% per annum.

LION HUDSON PLC



- 29 -

19 Loans and overdrafts 2016 2015

£ £

Bank overdrafts 298,123 289,220 Loans from related parties 650,000 -

948,123 289,220

Payable within one year 298,123 289,220 Payable after one year 650,000 -

20 Finance lease obligations 2016 2015

Future minimum lease payments due under finance leases: £ £

Within one year 180,000 220,000 In two to five years 481,396 661,360

661,396 881,360 Less: future finance charges (77,549) (90,877)

583,847 790,483

21 Operating lease commitments

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

2016 2015 £ £

Within one year 164,600 148,155 Between two and five years 552,955 533,445 In over five years - 125,104

717,555 806,704

LION HUDSON PLC



- 30 -

22 Related party transactions

During the year, the company was advanced £650,000 (2015 - £nil) by Zip Address Limited, a shareholder of the company. At the year end, the company owed Zip Address Limited £650,000 (2015 - £nil). This balance is included within 'Other borrowings' and is due after more than one year. Interest is charged on an arms length basis, during the year interest of £14,375 was paid to ZipAddress Limited.

23 Share capital 2016 2015

£ £ Ordinary share capital Issued and fully paid 1,715,986 Ordinary shares of 50p each 857,993 857,993

24 Cash generated from operations 2016 2015

£ £

Profit/(Loss) for the year after tax (29,615) (183,756)

Adjustments for: Finance costs 53,530 51,065 Amortisation and impairment of intangible assets 16,175 16,175 Depreciation and impairment of tangible fixed assets 58,982 24,358

Movements in working capital: Decrease/(increase) in stocks 61,400 (239,872) (Increase)/decrease in debtors (6,248) 136,788 (Decrease)/increase in creditors (254,797) 138,061

Cash absorbed by operations (100,573) (57,181)

LION HUDSON PLC



- 31 -

25 Reconciliations on adoption of FRS 102

The effect on the group and company’s reported equity and profits on the transition to FRS 102 is reported below. There were no items requiring adjustment on transition.

Reconciliation of equity 1 April 31 March

2014 2015 £ £

Equity as reported under previous UK GAAP and under FRS 102 2,529,954 2,346,198

Reconciliation of profit or loss 2015

£

Profit or loss as reported under previous UK GAAP and under FRS 102 (183,756)

XII

www.lionhudson.com

LION FICTION

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