REG-Clear Leisure Plc: Final Results <Origin Href="QuoteRef">CLPC.L</Origin> - Part 1
30/06/2016 16:35
30 June 2016
Clear Leisure Plc
("Clear Leisure" or "the Company")
FINAL RESULTS
For the Year Ended 31 December 2015
CHAIRMAN'S STATEMENT
I am pleased to present the Company's Final Results for the year ended 31
December 2015.
Since I became Chairman we have been pursuing a strategy of realising the
inherent value of Group's assets for shareholders.
In this regard I am pleased to report that we have disposed of two assets,
thereby generating funds for the Company, reduced operating costs, and advanced
the process of restructuring the Company balance sheet.
In line with the 2014 accounts and the 2015 interim results, the euro has been
adopted as the reference Currency for reporting purposes, however the 2016
accounts will be expressed in GBP sterling. The results and net equity are
represented in accordance with IFRS.
The operating loss, for the year totalled €642,000 as compared to a loss of €
1,917,000 for the 2014 financial year. Despite managing to lower the interest
rate on some loans, financing charges of €1,323,000 were higher than the 2014
figure of €1,085,000 due to the necessity to borrow additional funds to fund
the new board's investigations into what exactly the Company owns and what the
assets are really worth. The Group's cash reserves at 31 December 2015 stood at
€1,842,000 compared with €1,373,000 at 31 December 2014.
In my interim report to shareholders I warned that, although we had decided to
reduce significantly the carrying value of Mediapolis assets, further
reductions might be required. This has proved to be the case. As the result of
a detailed professional valuation, we have reduced the carrying value of
development land held by Mediapolis by a further €7 million to €13 million.
Pleasingly, a similar valuation for the villas held by Mediapolis has resulted
in an increase in value from €4.6 million to €5.1 million.
As a consequence of the foregoing, the Group recorded a loss of €20.2 million
as compared to a loss of €3.1 million in 2014.
Your board is confident that the revised valuation of Mediapolis now accurately
reflects commercial reality and we do not anticipate further reductions.
Moreover, it is the board's intention that Mediapolis assets will be developed
to become income generating, whilst on the other side of the balance sheet, the
board anticipates that it will be able to achieve significant discounts on the
repayment of some loans. These actions will serve to improve the net value of
assets for shareholders.
Company background and strategy
Clear Leisure's core business has been to invest in real estate and service
companies within the leisure sector.
Most of the Company's assets are based in Italy, where the real estate market
and the general economy has still not recovered from the 2008 sub-prime
mortgage international crisis, although mild signs of recovery have appeared in
the past 12 months and the European Central Bank has forecast these emerging
positive trends will continue.
The main assets of the Group in the year under review were:
- Four former Valtur holiday resorts in Italy, held via Hospitality and Leisure
Fund (H&L), an Italian Regulated Real Estate Fund (disposed on 22 December
2015),
- Mediapolis srl, owning a 50 hectare commercial property development site,
located adjacent to the main highway between Milan and Turin, and 10 holiday
villas in the Porto Cervo area, the most exclusive holiday location in
Sardinia, and
- A €6.5 m investment in SIPIEM with the intention of securing a significant
share in the Ondaland waterpark, also between Milan and Turin.
The above assets, for varying reasons, have been involved in complex corporate
situations: H&L had a bank exposure more than twice the value of the assets,
Mediapolis has a very material exposure with banks, creditors and shareholders;
while the funds transferred to SIPIEM have not resulted in the intended control
of the waterpark at this time.
Additionally, Clear Leisure holds minority equity positions in a number of
companies in the UK, Israel and Italy.
A new board was appointed at the AGM held on 31 July 2015, as follows: Mr
Francesco Gardin was appointed as Chief Executive Officer and Chairman, while
Mr Reginald Eccles was appointed as non-Executive Director of the Company. All
previous board members resigned.
Most of the effort of the new board, has been to obtain a clear picture of the
actual status of all the investments and, for each of them, devise a strategy
to maximise the return for shareholders. This approach has inevitably involved
legal costs and court procedures, but the complex nature of the investments
made by the Company between 2009 and 2015 has left the Company with no other
option.
Clear Leisure's current strategy can be summarised as follows: dispose of
non-strategic assets; reorganise all strategic assets in order to maximise
their value for shareholders; restructure of existing short term convertible
loan and long term debt, both to decrease interest costs and extend the
repayment terms until such time as the value of strategic assets has been
realised.
In pursuing this strategy, we have received material financial support from our
largest shareholder, Eufingest, a Swiss based investment management company.
Portfolio Companies
An update on the Group's portfolio companies held at 31 December 2015 is as
follows (percentage of equity held):
Mediapolis srl (83%): owns the land in North West Italy designated for the
purpose of a theme park, with additional guest facilities, shops and offices
and 10 holiday villas in the Porto Cervo area, the most exclusive holiday
location in Sardinia. As reported in the interim results, in September 2015,
the Company continues to pursue its legal claim against the regional government
of Piedmont for failing to honour a commitment to approve the construction of
the park. The Company will provide shareholders with any updates regarding the
court case, when progress has been made.
SIPIEM SpA (50.17%): owns a portion of a waterpark in North West Italy, known
as Ondaland, as well as other real estate assets. In May 2015, Clear Leisure
finally won the rights from the owner of the water park to have its 50.17%
ownership in SIPIEM certified, thereby entitling the Company to attend
shareholder meetings. The Company remains confident that its holding in SIPIEM
will become a significant realisable asset.
Ascend Capital PLC (9.9%): a London based broker, the Company's holding of
which was sold back to Ascend Capital in June 2016 for GBP 50,000 (EUR 60,000.)
GeoSim Systems Ltd (www.geosim.co.il) (4.71%): an Israeli company seeking to
establish itself as the world leader in building complete and photorealistic 3D
virtual cities and in delivering them through the Internet for use in local
searches, real estate and city planning, homeland security, tourism and
entertainment.
Whilst the geo-spatial visualisation solutions offered by Google, Microsoft and
others feature satellite photographs, street photographs and more recently
coarse 3D-models with limited visual quality and interactivity, GeoSim delivers
highly detailed, fully interactive city models, which the user can explore from
the land or the air.
Birdland srl (52%): an Italian vehicle company set up to invest in the 71% of
Bibop srl now in liquidation; Bibop's core business focused on the digital and
entertainment sector.
ORH SpA (99.3%): owns a chain of hotels in Italy and East Africa under the ORH
brand (Ora Hotels); it was put into administration in February 2014, allegedly
due to gross financial misconduct by the certain individuals associated with
the company, prior to the sale to Clear Leisure. The Company continues to
pursue a claim against these entities and will report to shareholders as and
when it can.
Alnitak sarl (100%): the wholly owned company based in Luxembourg which was the
vehicle to hold "H&L" fund control; originally. the stake in this company was
51%, but, prior to the disposal of "H&L" in December 2015, Clear Leisure PLC
acquired the other 49% on favourable terms.
Tax Losses
The Group has no tax charge for the year ended 31 December 2015, due to
previous losses incurred and has a potential deferred tax asset arising from
un-utilised management expenses available for carry forward and relief against
future taxable profits. The deferred tax asset has not been recognised in the
financial statements in accordance with the Company's accounting policy for
deferred tax.
The Company's un-utilised management expenses and capital losses carried
forward at 31 December 2015 amount to approximately €24,000,000 (2014: €
23,000,000) and €35,000,000 (2014: €20,000,000) respectively. All such losses
are available for future utilisation against profits of the business. The
Directors believe that the tax losses can be offset against profitable
investments which would ultimately enable Clear Leisure to distribute dividends
to its shareholders.
Share Capital
On 11 March 2015, shareholders approved the subdivision of existing ordinary
shares of 2.5p nominal value into new ordinary shares of 0.25p nominal value,
by issuing 199,409,377 deferred shares of 2.25p for each.
Following the meeting, the Company issued 11,000,000 new ordinary shares
increasing the total number of Ordinary shares in issue to 210,409,377.
Outlook
The board believes it continues to make progress with its strategy to find
value in each and every asset the Company owns. Even in the most difficult of
situations, such as ORH and Mediapolis, the Company's legal teams and in-house
experts are finding new documentation and avenues of attack, which provide a
strong case for the Company to challenge prior owners, insurance companies and
the regional courts of Italy where necessary. As before, the Company will
provide updates to the market when new progress has been made and wishes to
thank its loyal shareholders once more for the patience they have shown during
this time.
Francesco Gardin
Chief Executive and Chairman
30 June 2016
-ends-
For further information please contact:
Clear Leisure plc +39 335 296573
Francesco Gardin, CEO and Executive Chairman
ZAI Corporate Finance (Nominated Adviser)
Tim Cofman/Jamie Spotswood +44 (0)20 7060 2220
Peterhouse Corporate Finance (Joint Broker) +44 (0) 20 7469 0935
Lucy Williams / Heena Karani
Cadogan Leander (Financial PR) +44 (0) 7795 168 157
Christian Taylor-Wilkinson
About Clear Leisure Plc
Clear Leisure plc (AIM: CLP) is an AIM listed investment company with a
portfolio of companies primarily encompassing the leisure and real estate
sectors mainly in Italy. The Company may be either a passive or active investor
and Clear Leisure's investment rationale ranges from acquiring minority
positions with strategic influence through to larger controlling positions. For
further information, please visit, www.clearleisure.com
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2015
Note 2015 2014
Continuing operations €'000 €'000
Revenue - 70
Cost of sales - (1)
- 69
Other operating income - 856
Administration expenses (654) (1,986)
Operating (loss) / profit (654) (1,917)
Other gains and losses 8 (18,569) (140)
Finance income - 1
Finance charges 9 (1,023) (1,085)
Loss before tax (20,246) (3,141)
Tax 12 - -
Loss for the year from continuing operations (20,246) (3,141)
Profit/(loss) from discontinued operations 13 - 67
Loss for the year (20,246) (3,074)
Other comprehensive income
Gain on acquisition of non-controlling - 3,750
interest
Exchange translation differences - 5
Total other comprehensive income - 3,755
TOTAL COMPREHENSIVE INCOME FOR THE YEAR (20,246) 681
Loss for the year attributable to:
Owners of the parent (17,016) (2,836)
Non-controlling interests (3,230) (238)
Total comprehensive income attributable to:
Owners of the parent (17,016) 919
Non-controlling interests (3,230) (238)
Earnings per share:
Basic and fully diluted loss from continuing 14 (€0.08) (€0.01)
operations
Basic and fully diluted earnings/(loss) from - €0.00
discontinued operations
Basic and fully diluted loss per share (€0.08) (€0.01)
STATEMENTS OF FINANCIAL POSITION AT 31 DECEMBER 2015
Notes Group Group Company Company
2015 2014 2015 2014
€'000 €'000 €'000 €'000
Non-current assets
Goodwill 15 - 9 - -
Other intangible assets 16 50 151 - -
Property, plant and equipment 17 18,114 38,697 - -
Available for sale investments 19 60 6,560 - -
Other receivables 18 - - 8,537 23,538
Total non-current assets 18,224 45,417 8,537 23,538
Current assets
Investments held for trading 20 614 450 - 450
Trade and other receivables 21 6,847 148 35 -
Cash and cash equivalents 22 1,842 1,373 475 5
Total current assets 9,303 1,971 510 455
Current liabilities
Trade and other payables 23 (4,948) (4,329) (1,058) (1,625)
Borrowings 24 (20,832) (20,276) (6,680) (5,628)
Total current liabilities (25,780) (24,605) (7,738) (7,253)
Net current (liabilities)/assets (16,477) (22,634) (7,228) (6,798)
Total assets less current 1,747 22,783 1,309 16,740
liabilities
Non-current liabilities
Borrowings 24 - - - -
Deferred liabilities and 25 (407) (1,355) - -
provisions
Total non-current liabilities (407) (1,355) - -
Net assets 1,340 21,428 1,309 16,740
Equity
Share capital 27 6,112 6,074 6,112 6,074
Share premium account 27 42,954 42,856 42,954 42,856
Other reserves 28 11,412 11,390 556 534
Retained losses (59,393) (42,377) (48,313) (32,724)
Equity attributable to owners of 1,085 17,943 1,309 16,740
the Company
Non-controlling interests 31 255 3,485 - -
Total equity 1,340 21,428 1,309 16,740
The financial statements were approved by the board of directors and authorised
for issue on 30 June 2016. They were signed on its behalf by:
Francesco Gardin
Director
The accounting policies and notes form part of these financial statements.
Company Number 03926192
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2015
Group Share Share Other Retained Total Non-controlling Total
losses interests equity
capital premium reserves €'000
€'000 €'000 €'000
€'000 account €'000
€'000
At 1 January 2015 6,074 42,856 11,390 (42,377) 17,943 3,485 21,428
Loss for the year - - - (17,016) (17,016) (3,230) (20,246)
Other comprehensive - - - - -
income
Total comprehensive - - - (17,016) (17,016) (3,230) (20,246)
income for the year
Issue of shares 38 98 - - 136 - 136
Share option charge - - 22 - 22 - 22
At 31 December 2015 6,112 42,954 11,412 (59,393) 1,085 255 1,340
Company
At 1 January 2015 6,074 42,856 534 (32,724) 16,740 - 16,740
Loss and total - - - (15,589) (15,589) - (15,589)
comprehensive
income for the year
Issue of shares 38 98 - - 136 - 136
Share option charge - - 22 - 22 - 22
At 31 December 2015 6,112 42,954 556 (48,313) 1,309 - 1,309
The accounting policies and notes form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014
Group Share Share Other Retained Total Non-controlling Total
losses interests equity
capital premium reserves €'000
€'000 €'000 €'000
€'000 account €'000
€'000
At 1 January 2014 6,074 42,856 10,869 (42,843) 16,956 7,219 24,175
Loss for the year - - - (2,836) (2,836) (238) (3,074)
Other comprehensive - - 453 3,302 3,755 - 3,755
income
Total comprehensive - - 453 466 919 (238) 681
income for the year
Acquisition of - - - - - (3,496) (3,496)
non-controlling
interests in
subsidiary
Issue of convertible - - 68 - 68 - 68
bond
At 31 December 2014 6,074 42,856 11,390 (42,377) 17,943 3,485 21,428
Company
At 1 January 2014 6,074 42,856 466 (31,990) 17,406 - 17,406
Loss and total - - - (734) (734) - (734)
comprehensive income
for the year
Issue of convertible - - 68 - 68 - 68
bond
At 31 December 2014 6,074 42,856 534 (32,724) 16,740 - 16,740
The accounting policies and notes form part of these financial statements.
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2015
Note Group Group Company Company
2015 2014 2015 2014
€'000 €'000 €'000 €'000
Net cash outflow from operating 29 (835) (387) (835) (473)
activities
Cash flows from investing
activities
(Increase)/decrease in loan to - - - 99
subsidiary undertakings
Acquisition of subsidiary - (193) - -
undertakings
Purchase of available for sale 900 (33) 900 (33)
investments
Cash balances of subsidiaries - - - -
acquiried
Cash repayments by subsidiaries - - 1 -
Interest received - 1 - -
Net cash (outflow) from investing 900 (225) 901 66
activities
Cash flows from financing
activities
Proceeds of issue of shares 136 - 136 -
Repayment of long term debt (272) - (272) -
Proceeds from borrowing 540 - 540 -
Proceeds of issue of convertible - 412 - 412
bond
Proceeds of short term loans - 90 - -
Net cash inflow from financing 404 502 404 412
activities
Net (decrease) /increase in cash 469 (110) 470 5
for the year
Cash and cash equivalents at 1,373 1,477 5 -
beginning of year
Exchange differences - 6 - -
Cash and cash equivalents at end 22 1,842 1,373 475 5
of year
The accounting policies and notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. General Information
Clear Leisure plc is a company incorporated in the United Kingdom under the
Companies Act 2006. The Company's ordinary shares are traded on AIM of the
London Stock Exchange. The address of the registered office is given on the
Company information page. The nature of the Group's operations and its
principal activities are set out in the Directors' report on page 8.
Standards and amendments which became effective during the year have not had a
material impact on the financial statements.
Statement of compliance
The financial statements comply with IFRS as adopted by the European
Union. The following new and revised Standards and Interpretations have
been adopted in the current period by the Group for the first time and do
not have a material impact on the group.
IFRS 12 Disclosures of interests in other entities
A number of new standards and amendments to standards and interpretations
have been issued but are not yet effective and not early adopted. None of
these are expected to have a significant effect on the financial
statements of the Group.
2. Accounting policies
The principal accounting policies are summarised below. They have all been
applied consistently throughout the period covered by these consolidated
financial statements.
Basis of preparation
The consolidated Financial Statements of Clear Leisure plc have been prepared
in accordance with International Financial Reporting Standards (IFRS) and IFRS
Interpretations Committee (IFRS IC) as adopted by the European Union and the
parts of Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared under the historical cost
convention except in respect of revalued properties (as permitted by IFRS 1),
and for certain available for sale investments that are stated at their fair
values and land and buildings that have been revalued to their fair value.
The preparation of Financial Statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the consolidated
Financial Statements are disclosed in Note 3.
The Consolidated Financial Statements are presented in Euros (€), the
presentational and functional currency, rounded to the nearest €'000.
Going Concern
Any consideration of the forseeable future involves making a judgement, at a
particular point in time, about future events which are inherently uncertain.
The ability of the Group to carry out its planned business objectives is
dependent on its continuing ability to raise adequate financing from equity
investors and/or the achievement of profitable operations.
Nevertheless, at the time of approving these financial statements and after
making due enquiries, the Directors have a reasonable expectation that the
Group has adequate resources to continue operating for the forseeable future.
For this reason they continue to adopt the going concern basis of preparing the
Group's financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Group and entities controlled by the Group (its subsidiaries) made up to 31
December each year. Control is achieved where the Group has the power to govern
the financial and operating policies of an investee entity so as to obtain
benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate. Where
necessary, adjustments are made to the financial statements of subsidiaries to
bring the accounting policies used into line with those used by the group. All
intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Non-controlling interests in subsidiaries are identified separately from the
Group's equity therein. Those interests of non-controlling shareholders that
are present ownership interests entitling their holders to a proportionate
share of net assets upon liquidation may initially be measured at fair value or
at the non-controlling interests' proportionate share of the fair value of the
acquiree's identifiable net assets. The choice of measurement is made on an
acquisition-by-acquisition basis. Other non--controlling interests are
initially measured at fair value. Subsequent to acquisition, the carrying
amount of non-controlling interests is the amount of those interests at initial
recognition plus the non-controlling interests' share of subsequent changes in
equity. Total comprehensive income is attributed to non-controlling interests
even if this results in the non-controlling interests having a deficit balance.
Changes in the Group's interests in subsidiaries that do not result in a loss
of control are accounted for as equity transactions. The carrying amount of the
Group's interests and the non-controlling interests are adjusted to reflect the
changes in their relative interests in the subsidiaries. Any difference between
the amount by which the non-controlling interests are adjusted and the fair
value of the consideration paid or received is recognised directly in equity
and attributed to the owners of the Group.
When the Group loses control of a subsidiary, the profit or loss on disposal is
calculated as the difference between (i) the aggregate of the fair value of the
consideration received and the fair value of any retained interest and (ii) the
previous carrying amount of the assets (including goodwill), less liabilities
of the subsidiary and any non-controlling interests. Amounts previously
recognised in other comprehensive income in relation to the subsidiary are
accounted for (i.e. reclassified to profit or loss or transferred directly to
retained earnings) in the same manner as would be required if the relevant
assets or liabilities are disposed of. The fair value of any investment
retained in the former subsidiary at the date when control is lost is regarded
as the fair value on initial recognition for subsequent accounting under lAS 39
Financial Instruments: Recognition and Measurement or, when applicable, the
costs on initial recognition of an investment in an associate or jointly
controlled entity.
Business Combinations
Acquisitions of subsidiaries and businesses are accounted for using the
acquisition method. The consideration for each acquisition is measured at the
aggregate of the fair values (at the date of exchange) of assets given,
liabilities incurred or assumed, and equity instruments issued by the Group in
exchange for control of the acquiree. Acquisition-related costs are recognised
in profit or loss as incurred.
Where applicable, the consideration for the acquisition includes any asset or
liability resulting from a contingent consideration arrangement, measured at
its acquisition-date fair value. Subsequent changes in such fair values are
adjusted against the cost of acquisition where they qualify as measurement
period adjustments (see below). All other subsequent changes in the fair value
of contingent consideration classified as an asset or liability are accounted
for in accordance with relevant IFRSs. Changes in the fair value of contingent
consideration classified as equity are not recognised.
Where a business combination is achieved in stages, the Group's previously-held
interests in the acquired entity are remeasured to fair value at the
acquisition date (i.e. the date the Group attains control) and the resulting
gain or loss, if any, is recognised in profit or loss. Amounts arising from
interests in the acquiree prior to the acquisition date that have previously
been recognised in other comprehensive income are reclassified to profit or
loss, where such treatment would be appropriate if that interest were disposed
of.
The acquiree's identifiable assets, liabilities and contingent liabilities that
meet the conditions for recognition under IFRS 3(2008) are recognised at their
fair value at the acquisition date, except that:
- deferred tax assets or liabilities and liabilities or assets related to
employee benefit arrangements are recognised and measured in accordance with
lAS 12 Income Taxes and lAS 19 Employee Benefits respectively;
- liabilities or equity instruments related to the replacement by the Group of
an acquiree's share-based payment awards are measured in accordance with IFRS 2
Share-based Payment; and
- assets (or disposal groups) that are classified as held for sale in
accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations are measured in accordance with that Standard.
If the initial accounting for a business combination is incomplete by the end
of the reporting period in which the combination occurs, the Group reports
provisional amounts for the items for which the accounting is incomplete. Those
provisional amounts are adjusted during the measurement period (see below), or
additional assets or liabilities are recognised, to reflect new information
obtained about facts and circumstances that existed as of the acquisition date
that, if known, would have affected the amounts recognised as of that date.
The measurement period is the period from the date of acquisition to the date
the Group obtains complete information about facts and circumstances that
existed as of the acquisition date, and is subject to a maximum of one year.
Goodwill
Goodwill arising in a business combination is recognised as an asset at the
date that control is acquired (the acquisition date). Goodwill is measured as
the excess of the sum of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the fair value of the acquirer's
previously held equity interest (if any) in the entity over the net of the
acquisition-date amounts of the identifiable assets acquired and the
liabilities assumed.
If, after reassessment, the Group's interest in the fair value of the
acquiree's identifiable net assets exceeds the sum of the consideration
transferred, the amount of any non-controlling interest in the acquiree and the
fair value of the acquirer's previously held equity interest in the acquiree
(if any), the excess is recognised immediately in profit or loss as a bargain
purchase gain.
Goodwill is not amortised but is reviewed for impairment at least annually. For
the purpose of impairment testing, goodwill is allocated to each of the Group's
cash-generating units expected to benefit from the synergies of the
combination. Cash-generating units to which goodwill has been allocated are
tested for impairment 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. An impairment loss recognised for
goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in
the determination of the profit or loss on disposal.
Acquired intangible assets
Intangible assets acquired separately or as part of a business combination are
capitalised at cost and fair value as at the date of acquisition, respectively.
Intangible assets are subsequently amortised on a straight-line basis over the
expected period that benefits will accrue to the Group:
Patents and trade marks over 10 years
Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill, are not
subject to amortisation and are tested annually for impairment. Assets that are
subject to amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset's fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units). Non-financial
assets other than goodwill that suffered an impairment are reviewed for
possible reversal of the impairment at each reporting date.
Development costs
Internally generated development expenditure is capitalised as an intangible
asset only if all the following criteria are met:
- the asset can be identified;
- it is probable that the asset will generate future economic benefits;
- the fair value of the asset can be measured reliably.
Capitalised development expenditure is amortised on a straight-line basis over
the period of expected future sales of the resulting products, which has been
assessed as between 5 and 10 years.
Property, plant and equipment
Land and buildings held for use in the production or supply of goods or
services, or for administrative purposes, are stated in the balance sheet at
their revalued amounts, being the fair value at the date of revaluation, less
any subsequent accumulated depreciation and subsequent accumulated impairment
losses. Revaluations are performed with sufficient regularity such that the
carrying amount does not differ materially from that which would be determined
using fair values at the balance sheet date.
Any revaluation increase arising on the revaluation of such land and buildings
is credited to the properties revaluation reserve, except to the extent that it
reverses a revaluation decrease for the same asset previously recognised as an
expense, in which case the increase is credited to the income statement to the
extent of the decrease previously expensed. A decrease in carrying amount
arising on the revaluation of such land and buildings is charged as an expense
to the extent that it exceeds the balance, if any, held in the properties
revaluation reserve relating to a previous revaluation of that asset.
Depreciation on revalued buildings is charged to income. On the subsequent sale
or scrap page of a revalued property, the attributable revaluation surplus
remaining in the properties revaluation reserve is transferred directly to
retained earnings.
Properties in the course of construction for production, supply or
administrative purposes, or for purposes not yet determined, are carried at
cost, less any recognised impairment loss. Cost includes professional fees and,
for qualifying assets, borrowing costs capitalised in accordance with the
group's accounting policy. Depreciation of these assets, on the same basis as
other property assets, commences when the assets are ready for their intended
use.
Freehold land is not depreciated.
Plant and equipment and fixtures and fittings are stated at cost less
accumulated depreciation and any accumulated impairment losses. Depreciation is
provided on all tangible assets to write down the cost less estimated residual
value of each asset over its expected useful economic life on a straight line
basis at the following annual rates:
Land and buildings Nil
Leasehold improvements Straight line over the remaining period of
the lease
Plant and machinery 15% straight line
Fixtures and fittings 20% straight line
Asset residual values and useful economic lives are reviewed and adjusted if
appropriate at the end of each reporting period. An asset's carrying amount is
written down immediately to its recoverable amount if the asset's carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposal are determined by comparing the proceeds with the
carrying amount and are recognised in the income statement.
Inventories
Inventories are stated at the lower of cost and net realisable value. The cost
of finished goods and work in progress comprise all direct expenditure and an
appropriate proportion of fixed and variable overheads. Net realisable value is
the estimated selling price in the ordinary course of business, less applicable
variable selling expenses.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less any provision for
impairment.
Foreign currency
The functional currency is Euro. Foreign currency transactions are translated
into the functional currency using the exchange rates prevailing at the dates
of the transactions or valuation where items are re-measured. Exchange gains
and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the Statement of
Comprehensive Income. Exchange gains and losses that relate to borrowings and
cash and cash equivalents are presented in the income statement within `finance
income or costs'. All other Exchange gains and losses are presented in the
income statement within `other (losses)/gains - net'.
Changes in the fair value of monetary securities denominated in foreign
currency classified as available for sale are analysed between translation
differences resulting from changes in the amortised cost of the security and
other changes in the carrying amount of the security. Translation differences
related to changes in amortised cost are recognised in profit or loss, and
other changes in carrying amount are recognised in other comprehensive income.
Taxation
The tax expense represents the sum of the tax currently payable and any
deferred tax.
Current taxes are based on the results of the Group companies and are
calculated according to local tax rules, using the tax rates that have been
enacted or substantially enacted by the period-end date.
Deferred tax is provided in full using the financial position liability method
for all taxable temporary differences arising between the tax bases of assets
and liabilities and their carrying values for financial reporting purposes.
Deferred tax is measured using currently enacted or substantially enacted tax
rates. Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of
taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable profit nor the
accounting profit.
Deferred tax assets are recognised to the extent the temporary difference will
reverse in the foreseeable future and that it is probable that future taxable
profit will be available against which the asset can be utilised. Deferred tax
is recognised for all deductible temporary differences arising from investments
in subsidiaries and associates, to the extent that it is probable that the
temporary difference will reverse in the foreseeable future and taxable profit
will be available against which the temporary difference can be utilised.
Revenue
Revenue, which excludes Value Added Tax, represents the value of services
rendered. Consultancy fees are recognised as earned on unconditional supply of
services.
Interest income
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount on initial
recognition.
Financial instruments
Financial assets and financial liabilities are recognised in the Group's
statement of financial position when the Group becomes a party to the
contractual provisions of the instrument.
Financial assets
The Group's financial assets are classified into the following specific
categories: "available for sale investments", "trade and other receivables",
and "cash and cash equivalents". The classification depends on the nature and
purpose of the financial assets and is determined at the time of initial
recognition.
Available for sale investments
Investments are recognised and derecognised on a trade date where a purchase or
sale of an investment is under a contract whose terms require delivery of the
investment within the timeframe established by the market concerned, and are
initially measured at cost, including transaction costs.
Investments classified as available for sale are measured at subsequent
reporting dates at fair value. Fair value is defined as the price at which an
orderly transaction would take place between market participants at the
reporting date and is therefore an estimate and as such requires the use of
judgement. Where possible fair value is based upon observable market prices,
such as listed equity markets or reported merger and acquisition transactions.
Alternative bases of valuation may include contracted proceeds or best estimate
thereof, implied valuation from further investment and long-term cash flows
discounted at a rate which is tested against market data. Gains and losses
arising from changes in fair value are recognised directly in other
comprehensive income, until the security is disposed of or is determined to be
impaired, at which time the cumulative gain or loss previously recognised in
other comprehensive income is included in the net profit or loss for the
period. Impairment losses recognised in the income statement for equity
investments classified as available-for-sale are not subsequently reversed
through the income statement.
The Group determines the fair value of its Investments based on the following
hierarchy:
LEVEL 1 - Where financial instruments are traded in active financial markets,
fair value is determined by reference to the appropriate quoted market price at
the reporting date. Active markets are those in which transactions occur in
significant frequency and volume to provide pricing information on an ongoing
basis.
LEVEL 2 - If there is no active market, fair value is established using
valuation techniques, including discounted cash flow models. The inputs to
these models are taken from observable market data including recent arm's
length market transactions, and comparisons to the current fair value of
similar instruments; but where this is not feasible, inputs such as liquidity
risk, credit risk and volatility are used.
LEVEL 3 - Valuations in this level are those with inputs that are not based on
observable market data.
Investments held for trading
All investments determined upon initial recognition as held at fair value
through profit or loss were designated as investments held for trading.
Investment transactions are accounted for on a trade date basis. Assets are
de-recognised at the trade date of the disposal. Assets are sold at their fair
value, which comprises the proceeds of sale less any transaction cost. The fair
value of the financial instruments in the balance sheet is based on the quoted
bid price at the balance sheet date, with no deduction for any estimated future
selling cost. Unquoted investments are valued by the directors using primary
valuation techniques such as recent transactions, last price and net asset
value. Changes in the fair value of investments held at fair value through
profit or loss and gains and losses on disposal are recognised in the
consolidated statement of comprehensive income as "Net gains on investments".
Investments are initially measured at fair value plus incidental acquisition
costs. Subsequently, they are measured at fair value in accordance with IAS 39.
This is either the bid price or the last traded price, depending on the
convention of the exchange on which the investment is quoted.
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value
and are subsequently measured at amortised cost using the effective interest
rate method. A
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