REG-Clear Leisure Plc: Final Results <Origin Href="QuoteRef">CLPC.L</Origin> - Part 2
07/07/2017 07:05
- Part 2: For the preceding part double click ID:nPRr7ADFBa
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 provision is established when there is objective evidence that
the Group will not be able to collect all amounts due. The amount of any
provision is recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other
short-term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
Impairment of financial assets
The Group assesses at the end of each reporting period whether there is
objective evidence that a financial asset, or a group of financial assets, is
impaired. A financial asset, or a group of financial assets, is impaired, and
impairment losses are incurred, only if there is objective evidence of
impairment as a result of one or more events that occurred after the initial
recognition of the asset (a “loss event”), and that loss event (or events)
has an impact on the estimated future cash flows of the financial asset, or
group of financial assets, that can be reliably estimated.
The criteria that the Group uses to determine that there is objective evidence
of an impairment loss include:
*
significant financial difficulty of the issuer or obligor;
*
a breach of contract, such as a default or delinquency in interest or
principal repayments;
*
the disappearance of an active market for that financial asset because of
financial difficulties;
*
observable data indicating that there is a measurable decrease in the
estimated future cash flows from a portfolio of financial assets since the
initial recognition of those assets, although the decrease cannot yet be
identified with the individual financial assets in the portfolio; or
*
for assets classified as available-for-sale, a significant or prolonged
decline in the fair value of the security below its cost.
Assets carried at amortised cost
The amount of impairment is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows
(excluding future credit losses that have not been incurred), discounted at
the financial asset’s original effective interest rate. The asset’s
carrying amount is reduced, and the loss is recognised in the statement of
comprehensive income. As a practical expedient, the Group may measure
impairment on the basis of an instrument’s fair value using an observable
market price.
If, in a subsequent period, the amount of the impairment loss decreases and
the decrease can be related objectively to an event occurring after the
impairment was recognised (such as an improvement in the debtor’s credit
rating), the reversal of the previously recognised impairment loss is
recognised in the statement of comprehensive income.
Financial liabilities
The Group’s financial liabilities comprise convertible bonds, borrowings and
trade payables. Financial liabilities are obligations to pay cash or other
financial liabilities and are recognised when the Group becomes a party to the
contractual provisions of the instruments.
Convertible bonds
Convertible bonds are regarded as compound instruments, consisting of a
liability component and an equity component. At the date of issue, the fair
value of the liability component is estimated using the prevailing market
interest rate for similar non-convertible debt. The difference between the
proceeds of issue of the convertible loan notes and the fair value assigned to
the liability component, representing the embedded option to convert the
liability into equity of the Group, is included in equity.
Issue costs are apportioned between the liability and equity components of the
convertible loan notes based on their relative carrying amounts at the date of
issue. The portion relating to the equity component is charged directly
against equity.
The interest expense on the liability component is calculated by applying the
prevailing market interest rate for similar non-convertible debt to the
liability component of the instrument. The difference between this amount and
the interest paid is added to the carrying amount of the convertible loan
note.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently carried at amortised cost; any
difference between the proceeds (net of transaction costs) and the redemption
value is recognised in the statement of comprehensive income over the period
of the borrowings, using the effective interest method. Borrowings are
classified as current liabilities unless the Group has an unconditional right
to defer settlement of the liability for at least 12 months after the end of
the reporting period.
Borrowings costs
Borrowing costs are recognised in profit or loss in the period in which they
are incurred.
Trade payables
Trade payables are initially measured at fair value, and are subsequently
measured at amortised cost, using the effective interest rate method.
Segmental reporting
In identifying its operating segments, management generally follows the
Group's service lines, which represent the main products and services provided
by the Group. The measurement policies the Group uses for segment reporting
under IFRS 8 are the same as those used in its financial statements. The
disclosure is based on the information that is presented to the chief
operating decision maker, which is considered to be the board of Clear Leisure
plc.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the
assets of the Group after deducting all of its liabilities. Equity instruments
issued by the Group are recorded at the proceeds received net of direct issue
costs.
Share capital account represents the nominal value of the shares issued.
The share premium account represents premiums received on the initial issuing
of the share capital. Any transaction costs associated with the issuing of
shares are deducted from share premium, net of any related income tax
benefits.
Retained losses include all current and prior period results as disclosed in
the statement of comprehensive income.
Other reserves consists of the merger reserve, revaluation reserve, exchange
translation reserve and loan equity reserve.
*
the merger reserve represents the premium on the shares issued less the
nominal value of the shares, being the difference between the fair value of
the consideration and the nominal value of the shares.
*
the revaluation reserve represents the difference between the purchase costs
of the available for sale investments less any impairment charge and the
market or fair value of those investments at the accounting date.
*
the exchange translation reserve represents the movement of items on the
statement of financial position that were denominated in foreign before
translation
*
the loan equity reserve represents the value of the equity component of the
nominal value of the loan notes issued.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that the Group will
be required to settle that obligation and a reliable estimate can be made of
the amount of the obligation
The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the year-end date, taking into
account the risks and uncertainties surrounding the obligation.
3.Critical accounting judgements and key sources of estimation uncertainty
The preparation of Financial Statements in conformity with IFRSs requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. Estimates and judgements are continually evaluated and are
based on historical experience and other factors including expectations of
future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the related
actual results. The estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below
Impairment of goodwill
Goodwill has a carrying value of €nil (2015: €nil). The Group tests
annually whether goodwill has suffered any impairment, in accordance with the
accounting policy stated in Note 2. The recoverable amounts of
cash-generating units have been determined based on value-in-use
calculations.
Fair value measurement
Management uses valuation techniques to determine the fair value of financial
instruments (where active market quotes are not available) and non-financial
assets. This involves developing estimates and assumptions consistent with how
market participants would price the instrument. Management bases its
assumptions on observable data as far as possible but this is not always
available. In that case management uses the best information available.
Estimated fair values may vary from the actual prices that would be achieved
in an arm’s length transaction at the reporting date.
In order to arrive at the fair value of investments a significant amount of
judgement and estimation has been adopted by the Directors as detailed in the
investments accounting policy. Where these investments are un-listed and there
is no readily available market for sale the carrying value is based upon
future cash flows and current earnings multiples for which similar entities
have been sold.
Going Concern
The Group’s activities generated a loss of €397,000 (2015: €20,246,000)
and had net current liabilities of €14,985,000 as at 31 December 2016. The
Group’s operational existence is still dependant on the ability to raise
further funding either through an equity placing on AIM, or through other
external sources, to support the on-going working capital requirements.
After making due enquiries, the Directors have formed a judgement that there
is a reasonable expectation that the Group can secure further adequate
resources to continue in operational existence for the foreseeable future and
that adequate arrangements will be in place to enable the settlement of their
financial commitments, as and when they fall due.
For this reason, the Directors continue to adopt the going concern basis in
preparing the financial statements. Whilst there are inherent uncertainties in
relation to future events, and therefore no certainty over the outcome of the
matters described, the Directors consider that, based upon financial
projections and dependant on the success of their efforts to complete these
activities, the Group will be a going concern for the next twelve months. If
it is not possible for the Directors to realise their plans, over which there
is significant uncertainty, the carrying value of the assets of the Group is
likely to be impaired.
Valuation of Land in Mediapolis
The range of the fair values of the land varies significantly depending on the
use.
As IFRS requires that the land be valued at the best possible use, the
directors’ valuation is based on the assumption that the land will be used
for the construction of the future Care Homes project. Should the land be used
for a different purpose, this value may not be recovered.
4.Segment information
IFRS 8 requires reporting segments to be identified on the basis of internal
reports about components of the Group that are regularly reviewed by the chief
operating decision maker.
Information reported to the Group’s chief operating decision maker for the
purposes of resource allocation and assessment of segment performance is
specifically focused on the geographical segments within the Group.
Information regarding the Group’s reportable segments is presented below:
2016 2015
UK Italy Total UK Italy Total
Continuing operations €’000 €’000 €’000 €’000 €’000 €’000
Revenue - 63 63 - - -
Cost of sales - - - - - -
Gross Profit - 63 63 - -
Other Income - 943 943 - - -
Finance charges (212) (39) (251) (684) (339) (1,023)
Other operating expenses (956) (206) (1,162) (354) (300) (654)
Other gains and losses 24 - 24 860 (19,429) (18,569)
Profit/(Loss) for the financial year (963) (1, 182 ) (383 ) ( 1 78) (2 0 ,068) (20,246)
2016 2015
Segment assets Segment liabilities Net additions to non-current Assets Net assets/ (liabilities) Segment assets Segment liabilities Net Additions to non-current assets Net assets/ (liabilities)
€’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000
UK 9,625 (8,588) - 1,037 8,284 (8,702) - (418)
Italy 17,611 (17,047) - 564 19,243 (17,485) - 1,758
2 7,236 (25,605 ) - 1,601 27,527 (26,187) - 1, 3 40
5.Employee numbers
2016 Number 2015 Number
The average number of Company’s employees during the period was as follows:
Management and administration 2 2
6.Staff costs
2016 €’000 2015 €’000
Staff costs during the period including directors comprise:
Wages and salaries 142 228
142 228
7.Directors’ Emoluments
2016 €’000 2015 €’000
Aggregate emoluments 142 228
Share based payment 30 35
172 263
There are no retirement benefits accruing to the Directors. Details of
directors’ remuneration are included in the Directors’ Report.
8.Other gains and losses
2016 €’000 2015 €’000
Impairment of property investments - (20,583)
Decrease in provisions - 650
Writeback of VAT tax credit - 300
Revaluation of investments 21 614
Profit on disposal of Ascend Capital Profit on disposal of H&L fund 1 2 - 450
24 (18,569)
9.Finance charges
2016 €’000 2015 €’000
Interest on convertible bonds 94 684
Interest on bank loans and overdrafts 157 339
251 1,023
10.Auditor’s remuneration
2016 €’000 2015 €’000
Group Auditor’s remuneration:
Fees payable to the Group’s auditor for the audit of the Company and consolidated financial statements: 33 28
Non audit services:
Other services (tax) 3 6
Subsidiary Auditor’s remuneration
Other services pursuant to legislation 6 6
11.Company income statement
An income statement for Clear Leisure plc is not presented in accordance with
the exemption allowed by Section 408 of the Companies Act 2006. The parent
company’s comprehensive loss for the financial year amounted to €1,976,000
(2015: €15,589,000).
12.Tax
2016 €’000 2015 €’000
Current taxation 14 -
Deferred taxation - -
Tax charge for the year 14 -
The Group has a potential deferred tax asset arising from unutilised
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 Group’s accounting policy for
deferred tax.
The Group’s unutilised management expenses and capital losses carried
forward at 31 December 2016 amount to approximately €25 million (2015: €24
million) and €36 million (2015: €35 million) respectively.
The standard rate of tax for the current year, based on the UK effective rate
of corporation tax is 20.25% (2015: 20.25%). The actual tax for the current
and previous year varies from the standard rate for the reasons set out in the
following reconciliation:
Continuing operations 2016 €’000 2015 €’000
Loss for the year before tax ( 397 ) (20,246)
Tax on ordinary activities at standard rate ( 14 ) (4,100)
Effects of:
Expenses not deductible for tax purposes - 280
Foreign taxes 14 -
Tax losses available for carry forward against future profits 3,820 3,820
Total tax - -
13.Earnings per share
The basic earnings per share is calculated by dividing the loss attributable
to equity shareholders by the weighted average number of ordinary shares in
issue during the period. Diluted earnings per share is computed using the
weighted average number of shares during the period adjusted for the dilutive
effect of share options and convertible loans outstanding during the period.
The loss and weighted average number of shares used in the calculation are set
out below:
2016 2015
Loss €’000 Weighted average no. of shares 000’s Per share Amount Euro Loss €’000 Weighted average no. of shares 000’s Per share Amount Euro
Basic and fully diluted earnings per share
Continuing operations (450) 238,824 (€0.00) (17,016) 208,378 (€0.08)
Total operations (450) 238,824 (€0.00) (17,016) 208,378 (€0.08)
The share options in issue are anti-dilutive in respect of the loss per share
calculation and have therefore not been included.
IAS 33 requires presentation of diluted earnings per share when a company
could be called upon to issue shares that would decrease earnings per share.
In respect of 2015 and 2016 the diluted loss per share is the same as the
basic loss per share as the loss for each year has an anti-dilutive effect.
14.Goodwill
2016 €’000 2015 €’000
Cost
At 1 January 1,312 1,312
At 31 December 1,312 1,312
Accumulated impairment losses
At 1 January 1,312 1,303
Impairment loss for the year - 9
At 31 December 1,312 1,312
Net book value - -
Goodwill is allocated to cash generating units. The recoverable amount of
each unit is determined based on value-in-use calculations. The key
assumptions for the value-in-use calculation are those regarding discount
rates and growth rates as well as expected changes to costs and selling
prices. Management have estimated the discount rate based on the weighted
average cost of capital. Changes in selling prices and direct costs are
based on past experience and expectations of future change in the markets.
These calculations use cash flow projections based on financial budgets
approved by management looking forward up to five years. Cash flows are
extrapolated using estimated growth rates beyond the budget period. The key
assumptions for the value-in-use calculations are:
*
a real growth rate of 2% which has been used to extrapolate cash flows beyond
the budget period; and
*
a WACC rate of 15% applied to the cash flow projection.
The Group tests annually for impairment, or more frequently if there are
indications that goodwill might be impaired.
15.Other intangible fixed assets
Development
costs Total
€’000 €’000
Cost
At 1 January 2015 169 169
At 31 December 2015 169 169
At 31 December 2016 169 169
Amortisation
At 1 January 2015 18 18
Amortisation charge for the year - -
Closure of operations 101 101
At 31 December 2015 119 119
Closure of operations 30 30
At 31 December 2016 149 149
Carrying value
At 31 December 2015 50 50
At 31 December 2016 20 20
16.Property, plant and equipment
Group Land & buildings Total
€’000 €’000
Cost
At 1 January 2015 38,697 38,697
Impairment of property (20,583) (20,583)
At 31 December 2015 18,114 18,114
Impairment of property (100) (100)
At 31 December 2016 18,014 18,014
Carrying value
At 31 December 2015 18,114 18,114
At 31 December 2016 18,014 18,014
Included in Land & Buildings above is the interest in a 497,884 sqm plot of
land located near the town of Albiano D’Ivrea. An independent appraisal of
freehold land owned by the Group was carried out by a chartered architect in
June 2016. The carrying value of the land at the date of the appraisal was
€13 million. Loans with a carrying value of €3.1million are secured by
land with a carrying amount of €13million.
17.Investment in subsidiaries
Company 2016 €’000 2015 €’000
As at 1 January:
Loans to subsidiary undertakings 8,537 23,538
Net advances/(repayments) during the year 1,011 (1)
Impairment in investment - (15,000)
As at 31 December 9, 548 8,537
The significant subsidiary undertakings held by the Group at 31 December 2016
were as follows:
Subsidiaries Country of incorporation % Owned Nature of business
Brainspark Associates Limited England 100.00 Investment holding company
*Mediapolis Investments SA Luxembourg 71.72 Investment holding company
*Mediapolis S.p.A. Italy **74.67 Lesiure/Real Estate
SoSushi Company S.r.l. Italy 100.00 Brand Management
Clear Holiday S.r.l. Italy 100.00 Dormant company
* Indirectly held.
** Brainspark Associates Limited owns 71.72% and Mediapolis Investments SA
owns 13.07% of Mediapolis Spa, bringing the total indirect holding to 84,04%.
18.Available for sale investments
Group 2016 €’000 2015 €’000
Fair value
At 1 January 60 6,560
Impairment recognised in the income statement - -
Transfer to trade and other receivables - (6,500)
Disposals ( 60 ) -
Carrying value at 31 December - 60
Non-current assets - 60
Current assets - -
- 60
Details of each of the Group’s material associates at the end of the
reporting period are as follows:
Name of associate Place of incorporation and principal place of busines Proportion of ownership held by the Group (%) Principal activity
Sipiem S.p.A** Italy 50.17 Real Estate and Holding
**Investments in associates where the proportion of ownership held by the
Group was greater than 50%, but it was determined that the Group did not have
control of the company and that the Group was not exposed to variable returns
from its involvement with the company and did not have the ability to affect
those returns through power of the company.
The available for sale investments are valued in accordance with IFRS 7 and
Level 3 of the fair value hierarchy. Their fair value and the methodology
adopted is determined on the basis of their net assets or, where a sale is
imminent, the best estimate of the eventual proceeds. Given the methodology
adopted, it is not envisaged that the adoption of alternative
assumptions/methodologies, sensitivity analysis, would have a material impact
upon the investments.
19.Investments held for trading
Group and Company 2016 €’000 2015 €’000
Fair value
At 1 January 614 450
Movement in fair value of investments 20 614
Disposals - (450)
Carrying value at 31 December 6 3 4 614
The amount of €634,000 shown above is a level 3 investment and represents
the fair value of 533,990 shares in Geosim Systems Ltd.
20.Trade and other receivables
Group 2016 €’000 Group 2015 €’000 Company 2016 €’000 Company 2015 €’000
Other receivables Trade receivables Amount falling due after one year Amounts owed by subsidiaries Other receivables 7,068 6 - 62 6,847 - - - 71 4 9,548 - 35 - 8,537 -
Current assets Non-current assets 7, 136 62 6,847 - 75 9,548 35 8,537
Other receivables include €6,500,000 due from Sipiem, the amount is
unsecured, interest free and does not have fixed terms of repayment.
The directors consider that the carrying value of trade and other receivables
approximates to their fair value.
21.Cash and cash equivalents
Group Group 2016 €’000 Group 2015 €’000 Company 2016 €’000 Company 2015 €’000
Cash at bank and in hand 1,370 1,842 2 475
1,370 1,842 2 475
The Directors consider the carrying amounts of cash and cash equivalents
approximates to their fair value.
The Unicredit bank account in Mediapolis S.p.A is currently frozen and
therefore the subsidiary has no right to the balance of €1,368,414).
22.Trade and other payables
Group 2016 €’000 Group 2015 €’000 Company 2016 €’000 Company 2015 €’000
Trade payables 870 504 530 128
Other taxes payable 75 70 - 15
Other payables 29 1,160 29 288
Amounts due to subsidiary undertakings - - - 85
Accruals 3,271 3,214 285 542
Trade and other payables 4,245 4,948 844 1,058
The directors consider that the carrying value of trade and other payables
approximates to their fair value.
23.Borrowings
Group 2016 €’000 Group 2015 €’000 Company 2016 €’000 Company 2015 €’000
Bank loans and overdrafts 8,127 8,127 - -
7% Convertible bond 2014 Mediapolis bond 88 750 88 950 88 88
Zero rate convertible bond 2015 6,453 5,340 6,453 5,853
Shareholder loans 4,362 4,379 - -
Other borrowings 1,203 1,948 1,203 739
20,983 20,832 7,744 6,680
Disclosed as: Current borrowings 19,880 20,832 6,641 6,680
Non-current borrowings 1,103 - 1,103 -
20,983 20,832 7,744 6,680
7% Convertible Bond 2014
On 31 March 2010 the company launched an issue of £10 million (€12
million), before issue costs, 7% convertible bonds due 2014.The Bonds are
denominated in sterling and are convertible into new ordinary shares of 2.5
pence each in the company at a conversion rate of 400 New Ordinary Shares per
Bond up until 15 March 2014. The nominal value of each Bond is £1,000
(€1,200).The redemption date of the bonds is 31 March 2014 the coupon of 7%
is payable at the end of each year. The Company, between 1 and 7 April 2012,
was able to repurchase and serve notice on any or all of the bondholders to
sell their Bond in whole or in part at 110% of the nominal value. The
bondholders, at any time prior to redemption, may serve a conversion notice to
the company in respect of all or any integral multiple of £1,000 (€1,200)
nominal value of bonds held by them.
During 2011, a bond holder converted £2.64 million (€3.17 million) into
equity shares for which 8,035,856 ordinary shares of 2.5p each were issued in
exchange for the bond and cumulative interest due thereon.
During 2012, bonds were converted for a total amount of €8.2 million. The
conversion was settled as follows:
€4.9 million (£3.9 million) including cumulative interest was converted
into equity shares (11,000,000 Ordinary 2.5p shares at 36p each.) €3.3
million (£2.7 million) including cumulative interest was settled in cash for
€1.9 million, with approximately 40% discount realising €1.3 million
(£1.1 million) profit for the Group.
In March 2014 €1,885,400 zero rate convertible bonds 2015 were issued in
settlement of £1,563,000 7% bonds including all un paid and accrued interest
up to the date of settlement. This settlement has resulted in a credit to
the income statement of €439,000 for the year ended 31 December 2014.
Zero Rate Convertible Bond 2015
On 25 March 2013 the Company issued €3,000,000 nominal value of zero rate
convertible bonds at a discount of 22%.The bonds are convertible at 15p per
share and have a redemption date of 15 December 2015.
During 2014 the Company issued €1,885,400 zero bonds in settlement of
£1,563,000 7% bonds (see above).Also €600,000 zero bonds were issued in
settlement of a debt of €518,000 and €450,000 bonds were issued for cash
realising €412,000 before expenses.
On 15 December 2015 the bondholders meeting approved the amendments on the
Zero Rate Convertible Bond 2015, originally due on 15 December 2015; Under new
terms the final maturity date of the Bond is 15 December 2017 and the interest
has been reduced from 9.5% to 7%.
On 15 December 2016 the bondholders meeting approved the amendments on the
Zero Rate Convertible Bond 2015, originally due on 15 December 2017; Under new
terms the final maturity date of the Bond is 15 December 2018 and the interest
has been reduced from 7% to 1%.
23. Borrowings (continued)
2016 €’000 2015 €’000
Liability component at 1 January 5,853 5,428
Adjustment from renegotiation of convertible bonds 522
Interest charge for the year 78 425
Liability component at 31 December 6,453 5,853
Disclosed as:
Non-Current Liabilities - -
Current Liabilities 6,453 5,853
Interest on the bonds is payable annually on 31 March each year. No interest
payment was made on 31 March 2014 or on 31 March 2015. The liability component
of the bonds at 31 December 2016 includes all interest accrued to that date.
The unpaid interest together with accrued interest to 31 December 2016 is
included within current liabilities.
Shareholder Loans
Included in the shareholder loans is an amount owing to Olivetti Multiservices
S.p.A. (“OMS”) from Mediapolis S.p.A. for €4,362,032 including
cumulative interest. This loan carries interest at Euribor +1% and is secured
with a second charge over the Land within Mediapolis S.p.A.
Under IAS 32 the bonds contain two components, liability and equity elements.
The equity element is presented in equity under the heading of “equity
component of convertible instrument”. The effective interest rate of the
liability element on initial recognition is 12.5% per annum.
24.Provisions
2016 2015
Group €'000 €'000
Provisions for costs within Mediapolis Spa 407 407
407 407
Provision for costs within Mediapolis Spa are for litigation costs and loan
repayments.
25.Financial instruments
The Group’s financial instruments comprise cash, available for sale
investments, trade receivables, trade payables that arise from its operations
and borrowings. The main purpose of these financial instruments is to provide
finance for the Group’s future investments and day to day operational needs.
The Group does not enter into any derivative transactions such as interest
rate swaps or forward foreign exchange contracts, as the Group’s exposure to
movements in foreign exchange rates is not considered significant (see Foreign
currency risk management) . The main risks faced by the Group are limited to
interest rate risk on surplus cash deposits and liquidity risk associated with
raising sufficient funding to meet the operational needs of the business. The
Board reviews and agrees policies for managing these risks and they are
summarised below.
FINANCIAL ASSETS BY CATEGORY The IAS 39 categories of financial assets included in the balance sheet and the headings in which they are included are as follows:
2016 2015
€'000 €'000
Financial assets:
Available for sale investments 60 60
Investments held for trading 634 614
Loans and receivables 7,136 6,847
Cash and cash equivalents 1,370 1,842
9,140 9,363
FINANCIAL LIABILITIES BY CATEGORY The IAS 39 categories of financial liability included in the balance sheet and the headings in which they are included are as follows:
2016 2015
€'000 €'000
Financial liabilities at amortised cost:
Trade and other payables 974 2,535
Borrowings 19,880 20,832
20,854 23,367
Financial instruments measured at fair value:
Level 1 Level 2 Level 3
€’000 €’000 €’000
As at 31 December 2016
Available for sale investments - - -
Investments held for trading - - 634
- - 634
As at 31 December 2015
Available for sale investments - - 60
Investments held for trading - - 614
- - 674
The Company has adopted fair value measurements using the IFRS 7 fair value
hierarchy.
Categorisation within the hierarchy has been determined on the basis of the
lowest level of input that is significant to the fair value measurement of the
relevant asset as follows:
Level 1 - valued using quoted prices in active markets for identical assets;
Level 2 - valued by reference to valuation techniques using observable inputs
other than quoted prices included in Level 1;
Level 3 - valued by reference to valuation techniques using inputs that are
not based on observable markets criteria.
The Level 3 investment refers to an investment in GeoSim Systems Ltd.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be
able to continue as going concerns while maximising the return to stakeholders
through optimisation of the debt and equity balance. The capital structure of
the Group consists of debt attributable to convertible bondholders,
borrowings, cash and cash equivalents, and equity attributable to equity
holders of the Group, comprising issued capital, reserves and retained
earnings, all as disclosed in the Statement of Financial Position.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including
the criteria for recognition, the basis of measurement and the basis on which
income and expenses are recognised, in respect of each class of financial
asset, financial liability and equity instrument disclosed in Note 2 to the
financial statements.
Financial risk management objectives
The company is exposed to a variety of financial risks which result from both
its operating and investing activities. The Group’s risk management is
coordinated by the board of directors, and focuses on actively securing the
Company’s short and medium term cash flows by raising liquid capital to meet
current liability obligations.
Market price risk
The Company’s exposure to market price risk mainly arises from movements in
the fair value of its land and buildings as well as investments. The values of
the Land & Buildings are the key drivers in the Net asset value of the Group,
and so the political stability and macro economic factors of Italy all have a
large effect on the market price risk. Therefore other than ensuring
acquisitions are carefully profiled and selected and the Directors ensuring
are in close contact with local government and property industry analysts the
exposure is open to both positive and negative swings. The Group manages its
property price risk actively reviewing market trends in the determined
geographic locations. The Group manages the investment price risk within its
long-term investment strategy to manage a diversified exposure to the market.
The Group’s price risk is sensitive to fluctuations to property market. If
the investments were to experience a rise or fall of 15% in their fair value,
this would result in the Group’s net asset value and statement of
comprehensive income increasing or decreasing by €68,000 (2015: €66,000).
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of
Directors, which monitors the Group’s short, medium and long-term funding
and liquidity management requirements on an appropriate basis. The Group has
very little cash balance at the balance sheet date (refer to Note 2 – Basis
of preparation of financial statements and going concern). The Group continues
to secure future funding and cash resources from disposals as and when
required in order to meet its cash requirements. This is an on-going process
and the directors are confident with their cash flow models.
The following are the undiscounted contractual maturities of financial
liabilities:
Carrying Amount Less than 1 year Between 1 and 5 years Total
€’000 €’000 €’000 €’000
As at 31 December 2016
Trade and other payables 974 974 - 974
Borrowings 19,880 - 19,880 19,880
20,854 974 19,880 20,854
As at 31 December 2015
Trade and other payables 2,535 2,535 - 2,535
Borrowings 20,832 20,832 - 20,832
23,367 23,367 - 23,367
Management believes that based on the information provided in Notes 2 and 3
– in the ‘Basis of preparation’ and ‘Going concern’, that future
cash flows from operations will be adequate to support these financial
liabilities.
Interest rate risk
The Group and Company manage the interest rate risk associated with the Group
cash assets by ensuring that interest rates are as favourable as possible,
whilst managing the access the Group requires to the funds for working capital
purposes.
The Group’s cash and cash equivalents are subject to interest rate exposure
due to changes in interest rates. Short-term receivables and payables are not
exposed to interest rate risk. The borrowings are at both fixed and floating
interest rates. Floating interest rates are based on respective EURIBOR and
other bank prime interest rates.
Group Company
2016 2015 2016 2015
€’000 €’000 €’000 €’000
Fixed rate instruments
Financial assets 9,140 9,303 77 510
Financial liabilities 20,854 22,566 7,200 7,196
Change in interest rates will affect the Group’s income statement as
follows:
Group
Gain / (loss)
2016 2015
€’000 €’000
Euribor +0.5% / -0.5% (62) / 62 (69) / 69
The analysis was applied to financial liabilities based on the assumption that
the amount of liability outstanding as at the reporting date was outstanding
for the whole year.
Foreign currency risk management
The Group undertakes certain transactions denominated in currencies other than
Euro, hence exposures to exchange rate fluctuations arise. Amounts due to
fulfil contractual obligations of £69,000 (€88,000) are denominated in
sterling. An adverse movement in the exchange rate will impact the ultimate
amount payable, a 10% increase or decrease in the rate would result in a
profit or loss of €9,000. The Group’s functional and presentational
currency is the Euro as it is the currency of its main trading environment,
and most of the Group’s assets and liabilities are denominated in Euro.
The parent company is located in the sterling area.
Credit risk management
The Group’s financial instruments, which are subject to credit risk, are
considered to be trade and other receivables. There is a risk that the
amount to be received becomes impaired. The Group’s maximum exposure to
credit risk is €7,136,000 (2015: €6,847,000) comprising receivables during
the period. About 90% of total receivables are due from a single company. The
ageing profile of trade receivables was:
2016 2015
Total book value Allowance for impairment Total book value Allowance for impairment
Group €’000 €’000 €’000 €’000
Current 7,074 - 312 -
Overdue more than one year 62 - 7,135 600
7,136 - 6,847 600
2016 2015
Total book value Allowance for impairment Total book value Allowance for impairment
Company €’000 €’000 €’000 €’000
Current 75 - - -
Overdue more than one year - 35 -
75 - 35 -
26.Share capital and share premium
ISSUED AND FULLY PAID: Number of ordinary shares Number of deferred shares Ordinary share capital €’000 Deferred Share capital €’000 Share premium €’000 Total €’000
At 1 January 2015 199,409,377 - 6,074 - 42,586 48,390
Share reorganisation
Ordinary shares of 0.25p each 199,409,377 - 607 - - 607
Deferred shares of 2.25p each - 199,409,377 - 5,467 - 5,467
Issue of shares 11,000,000 - 38 - 98 136
At 31 December 2015 210,409,377 199,409,377 645 5,467 42,954 49,066
Issue of shares 1,428,571 - 15 - 10 25
Issue of shares 30,000,000 - 88 - 88 176
Conversion of loan stock to shares 21,982,947 - 64 - 129 193
Issue of shares 22,222,222 - 65 - 170 235
At 31 December 2016 286,043,117 199,409,377 877 5,467 43,351 49,695
On 26 July 2016, the Company allotted 1,428,571 ordinary shares of 0.25 pence
to Francesco Gardin in accordance with his contract at a price of 0.875 pence
per share.
On 4 August 2016, the Company raised a total of £150,000 through a placing of
30,000,000 ordinary shares of 0.25 pence at a price of 0.5 pence per share.
Convertible loans of £164,872.10 was also converted to 21,982,947 ordinary
shares of 0.25 pence at a price of 0.75 pence per share.
On 14 September 2016, the Company raised a total of £200,000 gross of
expenses through a placing of 22,222,222 ordinary shares of 0.25 pence at a
price of 0.9 pence per share.
27.Share based payments
Equity settled share option scheme
The Company operates share-based payment arrangements to remunerate directors
and key employees in the form of a share option scheme. Equity-settled
share-based payments are measured at fair value (excluding the
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