The director presents the strategic report for the year ended 31 December 2025.

Results and performance:

The board was pleased with the performance in 2025 during a challenging year for the business.

A continued focus on appropriate service fee increases, cost reduction and efficiency programs are expected to continue to drive performance through 2026.

The board is encouraged by the performance of the UK music market through 2025 as sales of streaming subscriptions and music product in the UK reached a new all-time-high of £2,453m and revenues from streaming subscriptions increased 3.2% to £2,045.4m. Physical music sales grew 11.5% to £368.1m, propelled by an 18.5% increase in vinyl revenues and a 95% increase in other physical formats (predominantly cassette) to £4.6m. CD revenues were flat (down 1%) to £125.0m. Physical formats increased their share of music revenues to 15%, their highest share since 2021.

Additionally, from a worldwide perspective, revenue in the music industry was $31.7 billion, an increase of 7.4% compared to 2024. Streaming went up by 7.7% to $22.0 billion and after a 4.0% drop in 2024, physical sales bounced back with an 8.0% rise to $5.3 billion.

Market risk

Whilst the overall recorded music market continues to grow, the shift towards digital music consumption away from physical formats continues. This risk is minimised by expanding our service offering and client base.

Treasury operations and financial instruments

The group’s parent operates a centralised treasury function which is responsible for managing the liquidity, interest and foreign currency risks associated with the group's activities.

The group's principal financial instruments include financial assets and liabilities such as trade debtors, trade creditors and finance leases arising directly from its operations.

Liquidity risk

The group’s parent manages the group’s cash and borrowing requirements centrally in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business.

Interest rate risk

The group’s exposure to interest rate risk has been minimised through replacement of a bank overdraft facility with parent funding of the group’s operating cashflow requirements.

Foreign currency risk

The group's principal foreign currency exposures arise from trading with overseas companies and branches. The group's policy permits but does not demand that these exposures may be hedged in order to fix the costs in sterling.

Credit risk

Trade debtors are monitored on an ongoing basis with credit insurance maintained and provision made for doubtful debts where necessary.

Technology risk

The group is subject to risks relating to its ability to implement and maintain effective systems to process a high volume of transactions with customers. A failure to manage technology infrastructure and systems would adversely affect company performance. The group’s disaster recovery and business continuity plans both help to mitigate technology risks.

The board monitors progress across a range of financial targets. The main key performance indicators are Turnover, EBITDA and Net Profit after tax.

2025             2024

Turnover         £33,070,981 £45,036,589

EBITDA         £(615,935) £(848,315)

Net loss after tax         £(332,440)     £(1,760,378)

During the year, there has been a writeback of £1,345,111 in relation to intercompany debts which were written-off in 2024. These items have been treated as an exceptional when considering the EBITDA of the business.

Apart from those measures identified above and in the business review, the Director is of the opinion that no further inclusion of financial and non-financial key performance indicators is necessary for an understanding of the development, performance or position of the company’s business.

Proper Music Distribution Limited, continues to have numerous opportunities for sustained expansion as the overall entertainment distribution market in the UK and Worldwide continues to consolidate. The Direct to Consumer business model remains a key part of the company’s growth plans, along with the Drop Shipping model for key customers serving consumers online.

Digital revenues continue to grow for the industry at large as well as for Proper Music Distribution Ltd, but physical products and associated services remain the core income streams for the foreseeable future. The Director continues to be optimistic about prospects for the medium to long term, especially with new ownership in place.

On behalf of the board

The director presents his annual report and financial statements for the year ended 31 December 2025.

The principal activities of the company encompassed providing a range of sales, marketing and distribution services for CD, digital, vinyl and DVD products, tailored according to individual terms and service levels agreed with record label clients and retail partners. Incorporating UK physical distribution, a worldwide digital service, a label services division and a comprehensive international network, Proper Music Distribution Limited delivers all music formats to the widest possible market.

The results for the year are set out on page 8.

No ordinary dividends were paid. The director does not recommend payment of a final dividend.

The director who held office during the year and up to the date of signature of the financial statements was as follows:

The auditor, Sumer Audit, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of financial instruments and the associated risks.

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 director individually has taken all the necessary steps that he ought to have taken as director in order to make himself aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.

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

Company law requires the director to prepare financial statements for each financial year. Under that law the director has 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 director must not approve the financial statements unless he is 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 director is required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The director is 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. He is 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.

We have audited the financial statements of Proper Music Distribution Limited (the 'company') for the year ended 31 December 2025 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

• give a true and fair view of the state of the company's affairs as at 31 December 2025 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.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to note 1.2 which explains that the company relies on, and will continue to rely on, financial support from the group to continue to operate. The director has been assured that any additional future funding needs of the company will be provided should it be required. This reliance on group support indicates that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern. Our audit opinion is not modified in respect of this matter.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, other than the issues mentioned above, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the director with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The director is responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the strategic report and the director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the director's report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the director's report.

We have nothing to report in respect of the following matters in relation to which 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 director's remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

As explained more fully in the director's responsibilities statement, the director is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the director determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the director is responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, our procedures included the following:

• Obtaining an understanding of the legal and regulatory framework that the company operates in, focusing on those laws and regulations that had a direct effect on the financial statements and operations;

• Obtaining an understanding of the company’s policies and procedures on fraud risks, including knowledge of any actual, suspected or alleged fraud; and

• Discussing among the engagement team how and where fraud might occur in the financial statements and any potential indicators of fraud through our knowledge and understanding of the company and our sector-specific experience.

As a result of these procedures, we considered the opportunities and incentives that may exist within the company for fraud. We are also required to perform specific procedures to respond to the risk of management override. As a result of performing the above, we identified the following areas as those most likely to have an impact on the financial statements: compliance with the UK Companies Act.

In addition to the above, our procedures to respond to risks identified included the following:

• Making enquiries of management about any known or suspected instances of non-compliance with laws and regulations and fraud;

• Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to stock valuations and digital downloads; and

• Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness.

Due to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognise the non-compliance.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

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.

The income statement has been prepared on the basis that all operations are continuing operations.

These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.

Proper Music Distribution Limited is a private company limited by shares incorporated in England and Wales. The registered office is 1-5 Applegarth Drive, Questor, Dartford, Kent, DA1 1JD.

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 amounts in these financial statements are rounded to the nearest £1.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

The company has taken advantage of the exemption under section 401 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.

The financial statements have been prepared on a going concern basis. The director has considered relevant information, including cash flows and forecasts, the available resources available, and the impact of any subsequent events in making his assessment.

The company continues to rely on financial support from its ultimate parent company. The director has been assured that any additional funding needs of the company will be provided by its ultimate parent company should it be required to ensure the business remains a going concern for a period of at least 12 months from the date of approval of the financial statements. Based on these assessments and having regard to the resources available to the company, the director has concluded it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

Revenue is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes.

Sale of goods

Revenue 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.

Digital downloads

Revenue from digital downloads is recognised when a download has been made. Digital sales data is reported to the company by its digital aggregator several months in arrears. The company's policy is to accrue for the amounts notified to it in the two months following the year end as substantially all of this income relates to the preceding financial year.

Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Amortisation 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:

Property, plant and equipment 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:

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.

Interests in subsidiaries 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.

A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

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).

Inventories are stated at the lower of cost and estimated selling price less costs to complete and sell.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of inventories over its estimated selling price less costs to sell is recognised as an impairment loss in profit or loss.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Basic financial assets, which include trade and other receivables and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost.

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.

Basic financial liabilities, including trade and other payables and loans from fellow group companies, 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 payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

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

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

The tax currently payable is based on taxable profit for the year.

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 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 non-current 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.

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

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 statement of financial position as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss 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 profit or loss 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 leases asset are consumed.

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 in the period are included in profit or loss.

Royalties payable / recoupable expenditure

Royalty income is included on a receivable and/or due basis calculated on sales of records arising during each accounting period as reported by licensees. Royalties payable are expensed on an accruals basis. Royalty advances payable and recoupable payments are expensed on a paid basis except that they are carried forward and recognised as an asset where such expenditure relates to current unreleased products and where it is estimated that sufficient future royalties / earnings will be recouped against these products.

Advances received in respect of the licence royalties are carried forward and recognised as income as sales are earned over the life of the licence.

In the application of the company’s accounting policies, the director is 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.

Inventories are valued at the lower of cost and estimated selling price less costs to complete and sell. Lower of cost and estimated selling price less costs to complete and sell includes, where necessary, provisions for slow moving and obsolete stock. Calculation of these provisions requires judgements to be made, which include forecast consumer demand, and economic environment.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows:

As detailed more in Note 1.3 to the accounts, the company's policy is to accrue for the amounts notified to it in the two months following the year end as substantially all of this income relates to the preceding financial year.

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

Their aggregate remuneration comprised:

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2024 - 1).

The actual credit for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

As at 31 December 2025 the company had £4,751,472 (2024: £3,591,185) of unutilised tax losses. A deferred tax asset has not been recognised for these losses.

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

Details of the company's subsidiaries at 31 December 2025 are as follows:

Registered office addresses (all UK unless otherwise indicated):

The loans from the parent company bear interest at a rate of 3% above the Bank of England base rate.

Repayments are to be paid in five equal instalments on each anniversary of the date of the loans, together with any accrued interest.

The balance in the prior year related to the net amount due to the previous owner, the loan had no fixed repayment terms and was interest free.

Finance lease payments represent rentals payable by the company for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 4 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. The finance leases are secured against the assets which they relate.

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

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.

Each share is entitled to one vote in any circumstances and each share is also entitled pari passu to dividend payments or any other distribution, including a distribution arising from a winding up of the company.

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:

During the year the company entered into the following transactions with related parties:

During the financial year, the ultimate parent company changed from Utopia Music AG (Switzerland) to Artone Holding B.V. by virtue of their 100% shareholding in Artone Holdings II Ltd. The registered office address is 59 Akeleibaan, Capelle Aan Den Ijssel, Netherlands, 2908 KA.

The financial statements of Proper Music Distribution Limited are consolidated in the financial statements of Artone Holdings II Ltd. Copies of the consolidated financial statements are available from Companies House.