Consolidated Statement of Cash Flows

The cash flow statement of the group is set out below:

 

	Year ended 31 December 2017	Year ended 31 December 2016
	£'000	£'000
Cash flow from operating activities
Loss for the period before taxation	(999)	(6,900)
Depreciation, amortisation, impairment	112	3,153
Share option charge	-	5
Net unrealised FX effect	41	-
Interests	498	760
Operating cash flows before movements in working capital	(351)	(2,982)
Increase in receivables	(109)	(81)
De-/Increase in accounts payable and accrued liabilities	(132)	393
Net cash used in operating activities	(592)	(2,670)
Cash held in disposal unit	(202)	-
Net cash outflow from investing activities	(202)	-
Interest expense	-	(56)
Issue of convertible instruments net of issue costs	600	2,850
Loans repaid	-	(176)
Net cash inflow from financing activities	600	2,618
Net decrease in cash and cash equivalents	(194)	(52)
Cash and cash equivalent at beginning of period	273	325
Cash and cash equivalent at end of period	79	273

 

Of the cash and cash equivalents at 31 December 2016 £202k was held in the disposal unit.

There were significant non-cash transactions being the issue of share capital to settle convertible debt and interest. These are detailed on pages 10 and 11.

 

 

 

 

 

 

 

 

Notes to the consolidated financial statements

 

1.            General information

The Company was incorporated under section II of the Companies (Guernsey) Law 2008 on 24 November 2014, it is limited by shares and has registration number 59383.

The Company has an investment of US$3m in New York Wheel Investor LLC, a company that was set up to fund the equity component for the project to build a New York Wheel which includes an approximate 630 foot high observation wheel with 36 capsules, a 68,000 square foot terminal and retail building, and a 950 space parking garage.

The Company's registered office is located at PO Box 186, Royal Chambers, St Julian's Avenue, St. Peter Port, Guernsey GY1 4HP, Channel Islands.

The company has not prepared individual financial statements in accordance with section 244 of the Companies (Guernsey) Law 2008.

2.            Significant Accounting Policies

Basis of preparation

The consolidated financial statements of Challenger Acquisitions Limited for the year ended 31 December 2017 have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (IFRS's as adopted by the EU), issued by the International Accounting Standards Board (IASB), including interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) applicable to the companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of land and buildings and available-for-sale financial assets.

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 financial information has been presented in United Kingdom Pounds (£), being the functional currency of the Company.

 

 

Going concern

At 31 December 2017 the group had net current liabilities of £876k. The financial statements have been prepared on the assumption that the Company will continue as a going concern. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws or regulations. In assessing whether the going concern assumption is appropriate, the Directors take into account all available information for the foreseeable future, in particular for the twelve months from the date of approval of the financial information.

Following the discussions held with the convertible note holders, the cost control measures implemented, the significant progress in reducing the amounts owed to external creditors and the recent completed financing where the company received the remaining £400,000 from the £1,000,000 convertible note facility due 8 June 2019, of this $300,000 was invested in the Dallas GOW project, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The note holders are supportive of the company and there are no material external creditor balances. In order to support a new acquisition, the fund raising options may include a substantial equity offering or a new financing facility with one of the key note holders. The fund raising options are early stage and therefore there is a material uncertainty as to whether additional funding will be received and therefore regarding the going concern basis of preparation.  The financial statements do not include any adjustments that would be required if the going concern basis was not appropriate.

The Directors' objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders. At the date of this financial information, the Company had been financed from equity and convertible notes. In the future, the capital structure of the Company is expected to consist of convertible notes and equity attributable to equity holders of the Company, comprising issued share capital and reserves.

Standards and interpretations issued but not yet applied

A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and in some cases have not yet been adopted by the EU.

The directors do not expect that the adoption of these standards will have a material impact on the financial statements of the company in future periods, except that IFRS 9 will impact both the measurement and disclosures of financial instruments, more specifically that any gain or loss on the available for sale investment will not be reclassified through the profit and loss and impairment charges in the profit and loss will no longer occur. IFRS 16 will have an impact on the recognition of operating leases. At this point it is not practicable for the directors to provide a reasonable estimate of the effect of these standards as their detailed review of these standards is still ongoing.

Principles of consolidation and equity accounting

Subsidiaries

Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has the right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

The group applies the acquisition method to account for business combinations.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

Segment Reporting

For the purpose of IFRS8, the Chief Operating Decision Maker "CODM" takes the form of the board of directors. The Directors are of the opinion that after the sale of the Starneth entities the business of the Company comprised a single activity, being the identification and acquisition of target companies or businesses in the entertainment sector.

Foreign Currency Translation

Functional and presentation currency

Items included in the financial statements of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in British Pounds (GBP), which is Challenger Acquisitions functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. Foreign exchange gains and losses   are presented in the statement of profit or loss, within finance income or finance costs.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognised in other comprehensive income.

Group companies

The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

·     assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet

·     income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and

·     all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.

The group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the group's activities as described below. The group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Income Tax

The income tax expense or credit for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Business Combinations

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the

·     fair values of the assets transferred

·     liabilities incurred to the former owners of the acquired business

·     equity interests issued by the group

·     fair value of any asset or liability resulting from a contingent consideration arrangement, and

·     fair value of any pre-existing equity interest in the subsidiary.

 

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest's proportionate share of the acquired entity's net identifiable assets.

Acquisition-related costs are expensed as incurred.

The excess of the

·     consideration transferred,

·     amount of any non-controlling interest in the acquired entity, and

·     acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised directly in profit or loss as a bargain purchase.

 

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested 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 of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Investments and other financial assets

Classification

The group classifies its financial assets in the following categories:

·     financial assets at fair value through profit or loss,

·     loans and receivables,

·     held-to-maturity investments, and

·     available-for-sale financial assets.

The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at the end of each reporting period.

Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to profit or loss as gains and losses from investment securities.

Measurement

At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Loans and receivables and held-to-maturity investments are subsequently carried at amortised cost using the effective interest method.

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value are recognised as follows:

·     for 'financial assets at fair value through profit or loss' - in profit or loss within other income or other expenses

·     for available-for-sale financial assets that are monetary securities denominated in a foreign currency - translation differences related to changes in the amortised cost of the security are recognised in profit or loss and other changes in the carrying amount are recognised in other comprehensive income

·     for other monetary and non-monetary securities classified as available-for-sale - in other comprehensive income.

Dividends on financial assets at fair value through profit or loss and available-for-sale equity instruments are recognised in profit or loss as part of revenue from continuing operations when the group's right to receive payments is established.

Interest income from financial assets at fair value through profit or loss is included in the net gains/(losses). Interest on available-for-sale securities, held-to-maturity investments and loans and receivables calculated using the effective interest method is recognised in the statement of profit or loss as part of revenue from continuing operations.

Impairment

The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or 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. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired.

Assets carried at amortized cost

For loans and receivables, the amount of the loss 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 carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. 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 profit or loss.

Assets classified as available-for-sale

If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in profit or loss.

Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent period.

If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss.

Income recognition

Service income

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for services, stated net of discounts, returns and value added taxes. The Group recognises revenue when the amount of revenue can be reliably measured and when it is probable that future economic benefits will flow to the entity.

Interest income

Interest income is recognised using the effective interest method. When a receivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate.

Dividends

Dividends are recognised as revenue when the right to receive payment is established. This applies even if they are paid out of pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence.

Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

The depreciation methods and periods used by the group are:

·     Vehicles                                                                  3-5 years

·     Furniture, fittings and equipment                               3-8 years

The assets' residual values and useful 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 disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.

Intangible assets

Goodwill

Goodwill is measured as described under "Business Combinations" in this document. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, being the operating segments.

Trade and other payables

These amounts represent liabilities for goods and services provided to the group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non-convertible bond. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders' equity, net of income tax effects.

Employee benefits

Short term obligations

Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.

The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.

Share based payments

Employee options

The fair value of options granted is recognised as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted:

·     including any market performance conditions (eg the entity's share price)

·     excluding the impact of any service and non-market performance vesting conditions (eg profitability, sales growth targets and remaining an employee of the entity over a specified time period), and

·     including the impact of any non-vesting conditions (eg the requirement for employees to save or holdings shares for a specific period of time).

The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

Social security contributions payable in connection with an option grant are considered an integral part of the grant itself and the charges are treated as cash-settled transactions.

The options are administered by Challenger Acquisitions Limited. When the options are exercised, Challenger Acquisitions Limited transfers the appropriate amount of shares to the employee. The proceeds received net of any directly attributable transaction costs are credited directly to equity.

 

Contributed equity

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity under share premium as a deduction, net of tax, from the proceeds.

Earnings per share

Basic earnings per share is calculated by dividing:

·     the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares

·     by the weighted average number of ordinary shares outstanding during the financial year.

 

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:

·     the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and

·     the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

 

3.            Critical estimates, judgements and errors

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the group's accounting policies.

This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be wrong. Detailed information about each of these estimates and judgements is included together with information about the basis of calculation for each affected line item in the financial statements.   In addition, this note also explains where there have been actual adjustments this year as a result of an error and of changes to previous estimates.

Significant estimates and judgements

The areas involving significant estimates or judgements are:

·     Going concern

See accounting policies (note 2) for details of the assessment made.

·     Fair value of the available for sale financial asset

The equity units in New York Wheel Investor LLC are not quoted, in assessing the fair value of the asset the Directors have applied a DCF model based on the projections received from the New York Wheel. The calculated amount, including anticipated delays, supports the USD 3 million shown on the balance sheet. Based on this and the confidence of the Directors that the project will continue soon with a new contractor, the Directors do not believe that the fair value is materially different to the acquisition value in the underlying currency (US dollars).

 

Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

4.            FINANCIAL RISK MANAGEMENT

This note explains the group's exposure to financial risks and how these risks could affect the group's future financial performance. Current year profit and loss information has been included where relevant to add further context.

Risk	Exposure arising from	Measurement	Management
Market risk - foreign exchange	Future commercial cash flows not denominated in GBP Recognised financial assets and liabilities not denominated in GBP	Cash flow forecasting Sensitivity analysis	No hedging     No hedging
Credit risk	Cash and cash equivalents, trade receivables, other receivables	Aging analysis Credit ratings	Diversification of bank deposits. Follow-ups to loan investment
Liquidity risk	Borrowings and other liabilities	Rolling cash flow forecasts	Availability of committed credit lines and borrowing facilities

 

Foreign exchange risk

The group is especially focused on the currency pairs USD/GBP and EUR/GBP. The group's biggest investment is denominated in USD. An outstanding liability from the Starneth acquisition is in EUR.

The group's exposure to foreign currency risk at the end of the reporting period, expressed in £'000 was as follows:

Currency	Assets in CCY	Assets in GBP	10% change	Liabilities in CCY	Liabilities in GBP	10% change
USD	3,003	2,222	(222)	8	6	1
EUR	1	1	-	1,341	1,190	119
CHF	1	1	-	1	1	-

 

The displayed FX exposures are without the disposal group (assets held for sale) which is denominated in EUR.

During the year, £ 13k foreign-exchange related profits were recognised in profit or loss.

As described above the group is primarily exposed to changes in USD/GBP and EUR/GBP exchange rates. The sensitivity of profit or loss to changes in the exchange rates as summarized in the above table arises mainly from the group's EUR denominated liabilities.

Interest rate risk

The group's fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in IFRS 7, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.

Credit risk

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables. To limit the risk the group's main cash resources are held with banks with a minimum external rating of A.

5.            Business Segments

For the purpose of IFRS8, the Chief Operating Decision Maker "CODM" takes the form of the board of Directors. The Directors are of the opinion that after the sale of the Starneth entities the business of the Company comprised a single activity, being the identification and acquisition of target companies or businesses in the entertainment sector.

6.            SHARE CAPITAL

 

           

Issued and fully paid	Number of shares	Share capital	Share premium	Total
		£'000	£'000	£'000
At 31 December 2016	21,899,076	219	4,364	4,583
Issue of shares	160,204,012	1,602	1,393	2,995
At 31 December 2017	182,103,088	1,821	5,757	7,578

           

 

During the year the company issued 152,398,657 shares to settle convertible loans worth £2,783,000 and 7,805,355 shares to settle interest accruing on the convertible loans of £212,000

The unissued shares at 31 December 2016 represented the third tranche of shares to be issued as part of the acquisition of the Starneth business. These shares were forgiven as part of the share purchase agreement. On this basis the shares have been released within equity.

 

7.            CASH AND CASH EQUIVALENTS

	2017	2016
	£'000	£'000
Cash at bank and in hand	79	71
Total cash and cash equivalents	79	71

 

8.            TRADE AND OTHER RECEIVABLES

	2017	2016
	£'000	£'000
Prepayments	14	17
Other receivables	-	-
Total trade and other receivables	14	17

 

All receivables, with the exception of prepayments which are not a financial instrument are classified as loans and receivables. Under "Other receivables" the Company gave a £100k loan to a private UK company set to launch and operate film focused conventions. The loan is due on 15 May 2018. Up to year end £12k had been recognised as accrued interest income. Before finalisation of these financial statements we were informed that the event does not take place as there was too little interest and hence too little ticket sales. As therewith the probability to receive back the full amount of the loan has decreased significantly, the whole amount including accrued interest has been impaired.

 

9.    AVAILABLE-FOR-SALE FINANCIAL ASSETS

		Available for sale financial asset
		£'000
Fair  value
At 31 December 2015		1,976
Additions		805
Disposal		(805)
Foreign exchange difference		462
At 31 December 2016		2,438
Additions		-
Foreign exchange difference		(219)
At 31 December 2017		2,219

 

On 20 May 2015, the Company invested a total of £1,976,400 (US$3,000,000) for an approximate 2% interest in New York Wheel Investor LLC. This company was setup to fund the equity component for the New York Wheel project, which includes an approximate 630 foot high observation wheel with 36 capsules, a 68,000 square foot terminal and retail building and a 950 space parking garage. In order to acquire its interest, the Company became a party to the Amended and Restated Operating Agreement of New York Wheel Investor LLC, dated May 20, 2015. Under that agreement, the Company can be called upon to make further capital contributions to the project should there be a cash shortfall, or face potential dilution of its interest should it choose not to invest further cash sums.

The equity units in New York Wheel Investor LLC are not quoted, in the prior year the Directors had regard to recent transactions in equity units of the New York Wheel and therefore assessed the value as a level 2 valuation. There have been no recent transaction in equity units and therefore in assessing the fair value of the asset the Directors have applied a discounted cash flow model based on the projections received from the New York Wheel. The calculated amount, including anticipated delays, supports the USD 3 million shown on the balance sheet. Based on this and the confidence of the Directors that the project will continue soon with a new contractor, the Directors do not believe that the fair value is materially different to the acquisition value.

The movement of the fair value of the asset are recognized in other comprehensive income and in the available for sale reserve.

The Directors consider this to be a level 3 valuation under IFRS 13, the key inputs used in the DCF model are as follows:

Discount rate - 16%

Cash flows generated over a 10 year period

Annual attendance - 2.5m - 3.8m

Ticket price - $32 - $33

Minority interest discount factor - 30%

 

If the discount rate was increased by one percentage point the fair value of the investment decreases by £0.1m.

If the annual attendance or ticket prices were reduced by 5% the fair value of the investment decreases by £0.17m.

If the minority interest discount factor was increased by five percentage points then the fair value of the investment would decrease by £0.16m

If the project was delayed by a further year the fair value of the investment decreases by £0.35m

One unit of the investment is held as security over the second part of the cash consideration of € 1.25 million.

A further unit is held as security over the 29 January 2016 convertible loan and the third unit for the convertible loan note from 2 March 2016.

10.         Borrowings

	2017	2016
Current	£'000	£'000
Convertible notes	680	1,508
Deferred cash consideration	-	2,107
Borrowings	-	-
	680	3,615
Non-current
Deferred cash consideration	1,190	-
Convertible notes	1,478	2,171
	2,668	2,171

 

 

	Note 1	Note 2	Note 3	Note 4	Note 5	Note 6	Note 7	Note 8	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2016 (liability)	1,970	-	22	305	481	901	-	-	3,679
Balance at 31 December 2016 (equity)	-	495	463	-	-	106	-	-	1,064
Finance charge	121	29	38	89	44	111	22	-	447
Issued for cash	-	-	-	-	-	-	600	-	600
Issued in lieu of interest	-	-	-	-	-	57	-	30	87
Converted into shares	(1,295)	-	(500)	(350)	(500)	(8)	(100)	(30)	(2,783)
Interest paid in shares	(90)	(5)	(40)	(53)	(49)	(86)	(3)		(326)
Interest paid in cash	-	-	-	-	-	-	-	-	-
(Increase)/decrease in accrued interest	(31)	(19)	17	9	24	(1)	(10)	-	(11)
Balance at 31 December 2017 (liability)	675	-	-	-	-	974	509	-	2,158
Balance at 31 December 2017 (equity)	-	500	-	-	-	106	-	-	606

 

Note 1

The notes are unlisted, unsecured, transferable and convertible with a twelve month maturity date which was extended during the year to 6 May 2018.  Interest is accrued at 12% per annum and payable quarterly, or upon conversion, in cash or in Ordinary Shares at the Company's discretion.  The notes can be converted into Ordinary Shares at a price per Ordinary Share equal to the lower of £0.50 and 7.5% discount to the prevailing market price, defined as the average of the lowest three volume weighted average prices as quoted by Bloomberg for the period of 10 trading days prior to the conversion date.  The convertible note has been recognised as a liability in accordance with IAS 32 - Financial Instruments as the instrument provides an obligation to the company to either settle the liability via a cash payment or via the issue of a variable number of shares. The conversion feature represents an embedded derivative, however this has not been separately recognised as the conversion feature is considered to be closely related to the host contract. 

Note 2

On 2 March 2016 the Company issued convertible notes worth £0.5 million. The notes are unlisted, secured, transferable and convertible. Maturity date is 2 March 2018. The Company can redeem the notes in cash or shares at $0.25 at Maturity at the Company's discretion. The Secured Convertible Notes are secured by one common unit of New York Wheel Investor LLC, representing a total value US$1 million. Interest is accrued at 5% per annum and payable quarterly or at Maturity at the Company's discretion. The interest can be paid in cash or shares, at the average of the 10 day closing price prior to the end of each calendar quarter, at the Company's discretion. The Company can redeem the notes at a 25% premium anytime in cash. The company can repay the accrued interest and the principal in shares at their decision, on this basis the full £0.5 million net of the £0.025 million transaction fees has been recognised in equity.

Note 3

On 24 April 2016 the Company issued convertible notes with a value of £0.5 million. The notes are unlisted, unsecured, transferable and convertible. Maturity date is 22 April 2018. Interest is accrued at 8% per annum and payable quarterly. The interest can be paid in cash or shares, at the average of the 10 day closing price prior to the end of each calendar quarter, at the Company's discretion. The notes can only be converted into Ordinary Shares at £0.25. The Company can redeem the notes at a 25% premium anytime. As per the nature of this convertible instrument, £463k was recognised as an equity component, using a discount rate of 12%. The loan and associated interest was fully converted during 2017.

Note 4

On 18 October 2016 the Company issued another convertible note with a volume of up to £ 0.35 million. The notes are unlisted, unsecured, transferable and convertible. Maturity date is 13 April 2018. Interest is built into the face value of the note at £1.15 per £ 1 of note. The notes can be converted into ordinary shares of the Company for the lower of £ 0.25 or the lowest weighted average price over the 5 days prior to the conversion. For the first 6 month, the Company can redeem in cash all or any part of the outstanding convertible note at face value, thereafter with a 15% premium to face value. The convertible note must be redeemed by the Company on 13 April 2018 in cash, unless it has been fully converted by then into ordinary shares. During the year the loan note and embedded interest was fully settled in shares

Note 5

On 10 June 2016 the Company issued another convertible note with a volume of £0.5 million. The notes are unlisted, unsecured, transferable and convertible. Maturity date is 10 June 2018. Interest is accrued at 8% per annum and payable quarterly. The interest can be paid in cash or shares, at the average of the 10 day closing price prior to the end of each calendar quarter, at the Company's discretion. The notes can be converted into Ordinary Shares at the lower of £0.25 or the lowest volume weighted average price over the 10 days prior to the conversion. The Company can redeem the notes at a 25% premium anytime in cash.

Note 6

On 29 January 2016, the Company issued further £1 million of secured convertible notes. The notes are unlisted, secured, transferable and convertible. Maturity date is 30 June 2019. The Secured Convertible Notes are secured by one common unit of New York Wheel Investor LLC, representing a total value US$1 million. Interest is accrued at 8% per annum and payable quarterly. One eighth of the interest can be settled in cash or shares at the Company's discretion. Seven eighths of the interest is settled in new convertible notes with the same terms. The notes are convertible in cash or shares at the option of the holder and can be converted into Ordinary Shares at a fixed conversion price of £0.80 per Ordinary Share. The Company can redeem the notes at a 10% premium anytime. As per the nature of this convertible instrument, £106k has been recognised as an equity component in the share option reserve, using a discount rate of 12%.

Note 7

On 2 March 2016 the Company issued another convertible note for £0.5 million. The notes are unlisted, secured, transferable and convertible. Maturity date was 2 March 2017 and has been extended to 2 March 2018 in 2017. The Company can redeem the notes in cash or shares at $0.25 at Maturity at the Company's discretion. The Secured Convertible Notes are secured by one common unit of New York Wheel Investor LLC, representing a total value US$1 million. Interest is accrued at 5% per annum and payable quarterly. The interest can be paid in cash or shares, at the average of the 10 day closing price prior to the end of each calendar quarter, at the Company's discretion. The Company can redeem the notes at a 25% premium anytime in cash. Since the Company can repay the accrued interest and the principal at maturity in shares, the full £0.5 million net of the £0.025 million transaction fees has been recognised in equity.

As part of a new £1 million funding facility, on 13 June 2017 the company issued another convertible note for £100,000. The notes are unlisted, unsecured, transferable and convertible. Maturity date is 8 June 2019. No conversions can happen in the first 120 days. The maximum amount that can be converted in any 30 day period is 20% of the principle amount. The conversion price is the lowest volume weighted average price over 10 days prior to the conversion.  Interest rate is 8% per annum and payable upon conversion at the Company's option in cash or ordinary shares at the conversion price. The Company can redeem in cash all or any part of the outstanding convertible note with a 25% premium to the principal amount. From this facility £ 100,000 has been converted until 31 December 2017 and two more tranches of this convertible note were drawn. On 25 August 2017 the Company received the first from the two additional tranches of £ 250,000 and on 1 November 2017 the second tranche received was for £ 250,000. Total outstanding nominal as per the balance sheet date were therewith £ 500,000.

Note 8

The unsecured convertible note due 17 May 2018 for £30,000 was issued to the Chief Executive Officer of the Company. This note was convertible at 3p and carried a 5% interest rate after a 90 day grace period. It was converted into 1,000,000 shares at £0.03 on 6 July 2017.

On 15 July 2015 the company acquired the Starneth Group. Part of the purchase price included two deferred cash payments. The payments are in equal amounts of EUR 1,250,000 and payable at the first and second anniversary of the transaction. Accordingly these were recorded under current and non-current liabilities respectively. Based on the convertible notes issued in 2015, an interest rate of 12% was used to discount the tranches for the initial recognition. The carrying value of the amounts at 31 December 2016 in the transaction were £1,064k for the first tranche and £1,043k for the second tranche. Interest expenses recorded on both tranches in 2016 was £163k (2015:£ 86k). As part of the disposal of the Starneth participation, the terms of these payments were changed as follows, the second tranche was waived by the as part of the sale agreement and the first tranche is only payable on the payment of success fees by Starneth to Challenger, if success fees become payable then the first tranche of fees will be deducted from success fees due. The company has not recognised an asset in this regard due to the uncertainty over whether the success fees will become due. The amount of the liability amounts to £1,190k and becomes due in January 2019

 

11.         FINANCE INCOME AND COSTS

	2017	2016
	£'000	£'000
Interest Income	(12)	-
Bank charges	9	10
Interest on notes and convertibles and deferred consideration	498	759
Net foreign exchange costs	32	175
Finance costs	527	944

 

12.         TRADE AND OTHER PAYABLES

	2017	2016
	£'000	£'000
Trade payables	220	331
Accrued expenses	181	202
Total trade and other payables	401	533

 

As at 31 December 2017, trade and other payables were classified at amortised cost. A maturity analysis of the Company's trade payables due in less than one year is as follows:

		As at 31 December 2017 £	As at 31 December 2016 £
0 to 3 months		220	87
3 to 6 months		-	132
6 months +		181	112
Total		401	331

 

 

13.         EMPLOYEE BENEFIT EXPENSE

            

	2017	2016
	£'000	£'000
Wages and salaries	69	75
Share options granted to directors, employees and key advisers	(3)	5
	66	80

 

 

14.         DIRECTORS' EMOLUMENTS

 

The Directors were paid emoluments of £69k as directors' fees during the period under review (£75k in 2016). There was a release of an existing bonus accrual that has been included in administrative expenses. Of the £69k, £17k were the director's fees for Mark Gustafson. Mr. Gustafson billed an additional £19k (2016: £23k) as management fees, booked under administrative expenses. At 31 December 2017 a total amount of £87k was unpaid and due to Mr. Gustafson for management services. The total compensation for Mr. Gustafson in the year under review was £38k, whereof the director's fees have been paid, with the exception of the fourth quarter, and the management fees of £ 9k were accrued.

These details and the details for the other directors can be found within the Director's remuneration report on page 27.

The Directors were the key management personnel of the Group.

 

15.         TAXATION

 

Challenger Acquisitions Limited is a Guernsey Corporation subject to a corporate tax rate of nil, as at 31 December 2017.

 

Income tax

	2017	2016
	£'000	£'000
Current tax expense:
- Current tax on profits for the year	-	-
- Adjustments in respect to prior years	-	-
- Foreign current tax on profits for the year	-	-
Total current tax	-	-
Deferred tax:
- Origination and reversal of temporary differences	-	-
- Adjustments in respect to prior years	-	-
Total deferred tax	-	-
Income tax expense	-	-

 

A reconciliation of income tax expense, from continuing operations, applicable to the loss before taxation at the statutory tax rate to the income tax expense at the effective tax rate of the Group is as follows:

 

 

		31 Dec	31 Dec
		2017	2016
		£'000	£'000
Loss before taxation from continuing operations		(999)	(1,928)
Tax calculated at domestic tax rates applicable to losses in respective countries:		-	-
Tax effects of:
Tax losses carried forward		-	-
		-	-

 

The corporation tax rate in Guernsey is 0%, there are no unrecognised tax losses.

 

16.         LOSS PER SHARE

 

The calculation for loss per share (basic and diluted) for the relevant period is based on the loss after income tax attributable to equity holder for the period ending 31 December 2017 and is as follows:

 

31 December 2017

 

Loss from continued operations attributable to equity holders (£)	(1,218,000)
Weighted average number of shares	93,005,288
Loss per share basic (£)	(0.01)
Weighted average number of shares for dilutive calculation	93,005,288
Loss per share diluted (£)	(0.01)

 

Loss from discontinued operations attributable to equity holders (£)	(146,000)
Weighted average number of shares	93,005,288
Loss per share basic and diluted (£)	(0.01)

 

Total loss per share basic and diluted

(0.01)

 

31 December 2016

 

Loss from continued operations attributable to equity holders (£)	(1,928,000)
Weighted average number of shares	16,824,053
Loss per share basic (£)	(0.11)
Weighted average number of shares for dilutive calculation	16,824,053
Loss per share diluted (£)	(0.11)

 

 

Loss from discontinued operations attributable to equity holders (£)	(4,972,000)
Weighted average number of shares	16,824,053
Loss per share basic (£)	(0.30)
Weighted average number of shares for dilutive calculation	16,824,053
Loss per share diluted (£)	(0.30)

 

Total loss per share basic and diluted

(0.41)

 

 

Basic loss per share is calculated by dividing the loss after tax attributable to the equity holders of the group by the weighted average number of shares in issue during the year.

 

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares namely the conversion of the convertible loan note in issue. The effect of these potential dilutive shares would be anti-dilutive and therefore are not included in the above calculation of diluted earnings per share.

 

17.         RELATED PARTY TRANSACTIONS

 

The unsecured convertible note due 17 May 2018 for £30,000 was issued to the Chief Executive Officer of the Company. This note was convertible at 3p and carried a 5% interest rate after a 90 day grace period. It was converted into 1,000,000 shares at £0.03 on 6 July 2017.

 

18.         COMMITMENTS

 

             The Company had not entered into any material capital commitments as at 31 December 2017.

 

19.         SHARE BASED PAYMENTS

 

             On 29 July 2015, options to acquire 615,000 Ordinary Shares ("Options 2015") were granted to employees and consultants of the Group. On 8 September 2015, options to acquire 730,000 Ordinary Shares ("Options 2015") were granted to the directors of the company. These Options 2015 have a fixed exercise price of 40 pence, and are exercisable in the following tranches; 25% as from the date of grant and 25% every twelve months thereafter (and are therefore fully vested after three years).  They cannot be exercised after the 5th anniversary of the grant. The group has no legal or constructive obligation to repurchase or settle the options in cash.

             On 7 January 2016, options to acquire 180,000 Ordinary Shares ("Options 2016") were granted to consultants of the Group. These options have a fixed exercise price of 45 pence, and are exercisable in the following tranches:

             Movements in the number of share options outstanding and their related weighted average exercise prices are as follows: 25% as from the date of grant and 25% every twelve months thereafter (and are therefore fully vested after three years).  They cannot be exercised after the 5th anniversary of the grant. The group has no legal or constructive obligation to repurchase or settle the options in cash.

 

	2017		2016
	Average exercise price in £ per share option	Options (thousands)	Average exercise price in £ per share option	Options (thousands)
Beginning of period	0.41	1,516	0.40	1,335
Granted	0.00	-	0.45	181
Forfeited	0.41	(423)	0.00	-
Exercised	0.00	-	0.00	-
Expired	0.00	-	0.00	-
End of period	0.41	1,093	0.41	1,516

 

             Out of the outstanding 1,092,500 share options 855,000 were exercisable. No options were exercised in 2016 and 2017.

             Share options outstanding at the end of the year have the following expiry date and exercise prices:

Grant-vest	Expiry date	Exercise price in £	Share options (thousands)
			2017
2015-01	2020-07	0.40	303
2015-02	2020-09	0.40	630
2016-01	2021-01	0.45	160
			1,093

 

             The weighted average fair value of the Options 2015 determined using the Black-Scholes valuation model was 1.4 pence per option. The significant inputs to the model were share price of 38 pence at the grant date, exercise price of £0.40, volatility of 14%, dividend yield of 0% an expected option life (to expiry) of 5 years with 25% vesting each year and an annual risk free interest rate of 0.5%. The volatility measured at the standard deviation of continuously compounded share returns is based on the statistical analysis of daily share prices from listing of the company until the grant date.

             The weighted average fair value of the Options 2016 determined using the Black-Scholes valuation model was 2.49 pence per option. The significant inputs to the model were share price of 37.5 pence at the grant date, exercise price of £0.45, volatility of 14%, dividend yield of 0% an expected option life (to expiry) of 5 years with 25% vesting each year and an annual risk free interest rate of 0.5%. The volatility measured at the standard deviation of continuously compounded share returns is based on the statistical analysis of daily share prices from listing of the company until the grant date.

As a result of the 422,500 options that forfeited during the period, the profit and loss has been credited with £3k and the share option reserve has been decreased accordingly.

 

20.         SUBSEQUENT EVENTS

            

On 11 January 2018, the Company issued 478,098 Ordinary Shares and 19,829 new Convertible Notes to the holders of the Convertible Note due 30 June 2019 in payment of interest due for the quarter ending 31 December 2017.

On 18 January 2018, the Company announced that it has raised the remaining £400,000 from the Convertible Note facility due 8 June 2019 and invested consequently US$ 300,000 in a new Giant Observation Wheel Project in Dallas, Texas called the Eye of Texas LLC. This initial investment into the project is in form of a convertible note with a 24 month term, 9% interest, and is convertible into membership interest, which the Company estimates would convert today into an equity position of approx. 4%.

On 6 March 2018, the Company issued 38,826,686 new ordinary shares in relation to conversion of certain convertible notes as follows:

 

9,901.353 shares were allocated to the holders of the convertible note due 2 March 2018 comprising 4,166,667 shares on the conversion of the entire balance of £500,000 of notes and 5,734,686 shares for accumulated interest.

 

9,394,510 shares were allotted to holders of the convertible note due 6 May 2018, comprising 8,242,791 Shares on the conversion of £35,444 of notes and 1,151,719 shares for accumulated interest;

 

19,530,823 shares were allotted to holders of convertible note due 8 June 2019, comprising 18,750,000 Shares on the conversion of £75,000 of notes and 780,823 shares for accumulated interest.

 

21.         FINANCIAL INSTRUMENTS

 

The only financial instrument the Group held, in addition to those disclosed elsewhere in these notes, as at 31 December 2017 was Cash and cash equivalents.

 

 

22.         ULTIMATE CONTROLLING PARTY

 

As at 31 December 2017, no one entity owns greater than 50% of the issued share capital. Therefore the Company does not have an ultimate controlling party.

23.          CONTINGENCIES

 

Due to the Group's activities, matters arise that could give rise to a contingent liability. No further details are given as it could be seriously prejudicial to the position of the Group.

24.         ASSETS OF DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS

 

At 31 December 2016 the assets and liabilities relating to the Starneth Holdings BV and Starneth Europe BV were presented as held for sale following the approval of the group's management to proceed with the disposal of these companies. During the year to 31 December 2017 and on 6 January 2017 the sale completed.

 

Cash flows

		31 Dec 2016
		£'000
Operating cash flows		(1,512)
Investing cash flows		-
Financing cash flows		1,405
Total cash flows		(107)

 

Assets of disposal group classified as held for sale

 

		31 Dec 2016
		£'000
Property plant and equipment		118
Intangibles		50
Goodwill allocated to disposal group		1,635
Trade and other receivables		266
Cash and cash equivalents		202
Total		2,271

 

Liabilities of disposal group classified as held for sale

		31 Dec 2016
		£'000
Trade and other payables		1,228
Total		1,228

 

Cumulative income/(expense) recognised other comprehensive income relating to disposal group classified as held for sale

		31 Dec 2016
		£'000
Foreign exchange translation adjustments		(146)
Total		(146)

 

 

Analysis of the result of discontinued operations and the result recognised on the re-measurement of assets or disposal group is as follows:

		31 Dec 2017	31 Dec 2016
		£'000	£'000
Revenue		-	3,579
Expenses		-	(5,423)
Impairment of Goodwill associated with disposal group (note 10)		-	(3,128)
Profit before tax of discontinued operations		-	(4,972)
Tax		-	-
Profit after tax of discontinued operations		-	(4,972)
Release of translation reserve		(146)	-
Loss for the year from discontinued operations		(146)	(4,972)

 

The pre-tax loss recognised on the re-measurement of the disposal group to fair value less costs to sell was £3,128k.  The fair value less costs to sell reflect the expected proceeds on disposal, which have been determined by the directors to be the waiving of an existing liability to the purchaser for deferred cash consideration for £1,043k. Therefore the carrying value of the disposal group equals the expected proceeds at 31 December 2016.

 

Immediately subsequent to the year end the Company lost control of the disposal group after agreement was reached with the purchasers. The date of signing the sale and purchase agreement was the 30 January 2017, the date of the loss of control was 6 January 2017. As the loss of control happened immediately after to the year end, the figures as at year end have been used for the deconsolidation.

 

The fair value less costs to sell reflect the expected proceeds on disposal, which have been determined by the directors to be the waiving of an existing liability to the purchaser for deferred cash consideration for £1,043k. Therefore the carrying value of the disposal group equals the expected proceeds at 31 December 2016. The loss on the disposal of the disposal group of £146k is the release of the foreign currency translation reserve.