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2023 ReportCompany Registration No. 03926192 Clear Leisure plc Annual Report and Financial Statements for the year ended 31 December 2015 Clear Leisure plc Contents Company information Chairman’s statement Director profiles Strategic report Directors’ report Report of the independent auditor Group statement of comprehensive income Group and Company statements of financial position Group and Company statements of changes in equity Group and Company statements of cash flows Notes to the financial statements 1 4 5 8 11 13 14 15 17 18 Company information Clear Leisure plc Directors Company Secretary Company number Registered office Auditor Solicitors Nominated Adviser Financial Manager Broker Registrar Reginald Eccles Francesco Gardin James Gordon 03926192 22 Great James Street London WC1N 3ES Welbeck Associates Statutory Auditor Chartered Accountants 30 Percy Street London W1T 2DB Ferrari Pedeferri Boni Studio Legale Associato Via Fatebenefratelli, 22 20121 Milan Italy ZAI Corporate Finance 11 Staple Inn Staple Court London WC1V 7QH Haines Watts Group Limited 69-73 Theobalds Road London WC1X 8TA Peterhouse Corporate Finance Limited New Liverpool House 15 Eldon Street London EC2M 7LD Share Registrars Ltd Suite E, First Floor, 9 Lion & Lamb Yard, Farnham, Surrey GU9 7LL Clear Leisure plc CHAIRMAN’S STATEMENT I am pleased to present the Company’s Final Results for the year ended 31 December 2015. Since I became Chairman we have been pursuing a strategy of realising the inherent value of Group’s assets for shareholders. In this regard I am pleased to report that we have disposed of two assets, thereby generating funds for the Company; reduced operating costs; and advanced the process of restructuring the Company balance sheet. In line with the 2014 accounts and the 2015 interim results, euro has been adopted as the reference Currency for reporting purposes, however the 2016 accounts will be expressed in GBP sterling. The results and net equity are represented in accordance with IFRS. The operating loss, for the year totalled €642,000 as compared to a loss of €1,917,000 for the 2014 financial year. Despite managing to lower the interest rate on some loans, financing charges of €1,323,000 were higher than the 2014 figure of €1,085,000 due to the necessity to borrow additional funds to fund the new board’s investigations into what exactly the company owns and what the assets are really worth. The Group's cash reserves at 31 December 2015 stood at €1,842,000 compared with €1,373,000 at 31 December 2014. In my interim report to shareholders I warned that, although we had decided to reduce significantly the carrying value of Mediapolis assets, further reductions might be required. This has proved to be the case. As the result of a detailed professional valuation, we have reduced the carrying value of development land held by Mediapolis by a further €7 million to €13 million. Pleasingly, a similar valuation for the villas held by Mediapolis has resulted in an increase in value from €4.6 million to €5.1 million. As a consequence of the foregoing, the group recorded a loss of €20.2 million as compared to a loss of €3.1 million in 2014. Your board is confident that the revised valuation of Mediapolis now accurately reflects commercial reality and we do not anticipate further reductions. Moreover, it is the board’s intention that Mediaopolis assets will be developed to become income generating, whilst on the other side of the balance sheet, the board anticipates that it will be able to achieve significant discounts on the repayment of some loans. These actions will serve to improve the net value of assets for shareholders. Company background and strategy Clear Leisure’s core business has been to invest in real estate and service companies within the leisure sector. Most of the company’s assets are based in Italy, where the real estate market and the general economy has still not recovered from the 2008 sub-prime mortgage international crisis, although mild signs of recovery have appeared in the past 12 months and the European Central Bank has forecast these emerging positive trends will continue. The main assets of the Group in the year under review were: (cid:2) Four former Valtur holiday resorts in Italy, held via Hospitality and Leisure Fund (H&L), an Italian Regulated Real Estate Fund (disposed on 22nd December 2015), (cid:2) Mediapolis srl, owning a 50 hectare commercial property development site, located adjacent to the main highway between Milan and Turin, and 10 holiday villas in the Porto Cervo area, the most exclusive holiday location in Sardinia. (cid:2) A €6.5 m investment in SIPIEM with the intention of securing a significant share in the Ondaland waterpark, also between Milan and Turin. The above assets, for varying reasons, have been involved in complex corporate situations: H&L had a bank exposure more than twice the value of the assets, Mediapolis has a very material exposure with banks, creditors and shareholders; while the funds transferred to SIPIEM have not resulted in the intended control of the waterpark at this time. 1 | P a g e Clear Leisure plc Additionally, Clear Leisure holds minority equity positions in a number of companies in the UK, Israel and Italy. A new board was appointed at the AGM held on 31 July 2015, as follows: Mr Francesco Gardin was appointed as Chief Executive Officer and Chairman, while Mr Reginald Eccles was appointed as non-Executive Director of the Company. All previous board members resigned. Most of the effort of the new Board, has been to obtain a clear picture of the actual status of all the investments and, for each of them, devise a strategy to maximise the return for shareholders. This approach has inevitably involved legal costs and court procedures, but the complex nature of the investments made by the Company between 2009 and 2015 has left the Company with no other option. Clear Leisure’s current strategy can be summarised as follows: dispose of non-strategic assets; reorganise all strategic assets in order to maximise their value for shareholders; restructure of existing short term convertible loan and long term debt, both to decrease interest costs and extend the repayment terms until such time as the value of strategic assets has been realized. In pursuing this strategy, we have received material financial support from our largest shareholder, Eufingest, a Swiss based investment management company. Portfolio companies An update on the Group’s portfolio companies held at 31 December 2015 is as follows (percentage of equity held): Mediapolis srl (83%): owns the land, in North West Italy, designated for the purpose of a theme park, with additional guest facilities, shops and offices and 10 holiday villas in the Porto Cervo area, the most exclusive holiday location in Sardinia. As reported in the interim results, in September 2015, the Company continues to pursue its legal claim against the regional government of Piedmont for failing to honour a commitment to approve the construction of the park. The Company will provide shareholders with any updates regarding the court case, when progress has been made. SIPIEM SpA (50.17%): owns a portion of a waterpark in North West Italy, known as Ondaland, as well as other real estate assets. In May 2015, Clear Leisure finally won the rights from the owner of the water park to have its 50.17% owning in SIPIEM certified, thereby entitling the Company to attend shareholder meetings. The Company remains confident that its holding in Sipiem will become a significant realisable asset. Ascend Capital PLC (9.9%): a London based broker, the Company’s holding of which was sold back to Ascend Capital in June 2016 for GBP 50,000 (EUR 60,000.) GeoSim Systems Ltd (www.geosim.co.il) (4.71%): an Israeli company seeking to establish itself as the world leader in building complete and photorealistic 3D virtual cities and in delivering them through the Internet for use in local searches, real estate and city planning, homeland security, tourism and entertainment. Whilst the geo-spatial visualisation solutions offered by Google, Microsoft and others feature satellite photographs, street photographs and more recently coarse 3D-models with limited visual quality and interactivity, GeoSim delivers highly detailed, fully interactive city models, which the user can explore from the land or the air. Birdland srl (52%): an Italian vehicle company set up to invest in the 71% of Bibop srl now in liquidation; Bibop’s core business focused on the digital and entertainment sector. ORH SpA (99.3%): owns a chain of hotels in Italy and East Africa under the ORH brand (Ora Hotels); it was put into administration in February 2014, allegedly due to gross financial misconduct by the certain individuals associated with the company, prior to the sale to Clear Leisure. The Company continues to pursue a claim against these entities and will report to shareholders as and when it can. Alnitak sarl (100%): the wholly owned company based in Luxembourg which was the vehicle to hold “H&L” fund control; originally. the stake in this company was 51%, but, prior to the disposal of “H&L” in December 2015, Clear Leisure PLC acquired the other 49% on favourable terms. 2 | P a g e Clear Leisure plc Tax losses The Group has no tax charge for the year ended 31 December 2015, due to previous losses incurred and has a potential deferred tax asset arising from un-utilised management expenses available for carry forward and relief against future taxable profits. The deferred tax asset has not been recognised in the financial statements in accordance with the Company’s accounting policy for deferred tax. The Company’s un-utilised management expenses and capital losses carried forward at 31 December 2015 amount to approximately €24,000,000 (2014: €23,000,000) and €35,000,000 (2014: €20,000,000) respectively. All such losses are available for future utilisation against profits of the business. The Directors believe that the tax losses can be offset against profitable investments which would ultimately enable Clear Leisure to distribute dividends to its shareholders. Share capital On 11th March 2015, shareholders approved the subdivision of existing ordinary shares of 2.5p nominal value into new ordinary shares of 0.25p nominal value, by issuing 199,409,377 deferred shares of 2.25p for each. Following the meeting, the Company issued 11,000,000 new ordinary shares increasing the total number of Ordinary shares in issue to 210,409,377. Outlook The board believes it continues to make progress with its strategy to find value in each and every asset the Company owns. Even in the most difficult of situations, such as ORH and Mediapolis, the Company’s legal teams and in-house experts are finding new documentation and avenues of attack, which provide a strong case for the Company to challenge prior owners, insurance companies and the regional courts of Italy where necessary. As before, the Company will provide updates to the market when new progress has been made and wishes to thank its loyal shareholders once more for the patience they have shown during this time. Prof. Francesco Gardin Chairman 30 June 2016 3 | P a g e Clear Leisure plc DIRECTOR PROFILES Francesco Gardin Chief Executive Officer & Chairman (from 31 July 2015) Francesco Gardin, 61, born in Rovigo, Italy, graduated in Theoretical Physics at Padova University in 1979, before undertaking a UK Government research project at Exeter University (UK) from 1980 to 1982. In 1983, Francesco founded AISoftw@re SpA to develop and distribute Artificial Intelligence systems within Italy, which he took public on NASDAQ Europe in 1999 and the Milan Stock Exchange in 2000. He sold the company in 2005 but agreed to remain as non executive Chairman until March 2008. When he left the company employed more than 1,400 people with revenues in excess of £70m. In December 2008 he was appointed executive Director of London Asia Capital plc, a UK company investing in Asia, He resigned in July 2013. In October 2013 he was appointed on the board of Pan European Terminals PLC, listed on AIM of the London Stock Exchange. He resigned in July 2014 following the sale of the company. In December 2014 he co-founded First IPO Capital Ltd, a UK company aiming at financing IPO costs to companies listing on the London AIM market. During the last twenty years, he has been Director of almost fifty companies in Italy, UK, USA, Israel, Hong Kong, China, Singapore, Mauritius and Jersey. From 1984 to 2014, he was Research Associate Professor at Udine, Milano and Siena University lecturing Artificial Intelligence, Theory and Application of Computation, and Virtual Reality. His academic papers include more than 50 individual and joint publications and three books on the subject of Artificial Intelligence as editor. Reginald Eccles Non-executive Director (from 31 July 2015) Reginald George Eccles, 70, has sat on the boards of a number of public and private companies over the past four decades, including, most recently, Toledo Mining Corporation plc where he acted as Chairman and Pan European Terminals plc as Senior Independent Director. He began his career as a business and financial analyst, working in both the UK and South Africa. In 1979, he co-founded a consultancy and publishing company, with offices in the UK and Australia. Which he sold in 1988. Subsequently he held senior positions at a number of investment banks. Alfredo Villa Chief Executive Officer (until 31 July 2015) Alfredo Villa was appointed on 1 October 2009. He started his career started at Banca della Svizzera ltaliana as currency option dealer, and then joined Soginvest Banca (CIAL Group). In 1991 he co-founded in Lugano, Switzerland, Givigest Fiduciaria SA, a firm actively involved in investment banking. In 1994 he co-founded SCF SA, a financial consulting firm offering asset management services. These two companies were sold in 2001. Currently Alfredo is an independent consultant and private investor in several venture capital companies. Nilesh Jagatia Chief Finance Officer (until 19 August 2015) Nilesh Jagatia was appointed on 18 October 2012. He currently holds Finance Director positions with AIM quoted Inspirit Energy Holdings plc (INSP) Teathers Financial plc (TEA) and Limitless Earth plc (LME). Nilesh has been involved with several IPO's and was previously Group Finance Director of an AIM quoted online media and publishing company for a period of 5 years until July 2012. He has over 20 years' experience, including senior financial roles in divisions of both Universal Music Group and Sanctuary Group plc. He served as a Finance Director for an independent record label that expanded into the US. Nilesh is a qualified accountant and has a degree in finance. 4 | P a g e Clear Leisure plc STRATEGIC REPORT The Directors present their Strategic Report on Clear Leisure pic and its subsidiary undertakings (“the Group") for the year ended 31 December 2015. The Strategic Report is a new statutory requirement under section 414A of the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 and is intended to provide fair, balanced and understandable information that enables the Directors to be satisfied that they have complied with section 172 of the Companies Act 2006, which sets out the Directors' duty to promote the success of the Group and Company. Review of the business and development during the year A summary of the groups results and strategy is set out above. During 2015 the Company also entered into a number of debt facilities in order to finance the ongoing legal actions and costs of the team of experts being used to investigate each of the assets purchased by the Company under the previous management team. The debt facilities were as follows: (cid:2) Eufingest, 30 October 2015 a loan for £200,000 repayable on 29 October 2017, at an interest rate of 3% per annum. This loan was fully repaid at the end of December 2015. (cid:2) A £250,000 short term loan in March 2015 from a private UK lender, with an interest charge of £80,000 due in September 2015, which was rescheduled, with principal repaid in February and March 2016 and the interest to be paid by end of December 2016. The Company also restructured: (cid:2) (cid:2) existing convertible Loan Notes amounting in total to €400,000 plus interest, expiring at the end of 2015, by renegotiating the maturity date to 1st December 2016, the interest rate to 2.5% and the conversion price to 0.75p per share. The new Loan Note included a £200,000 facility available to the Company on demand, the €9.9 m Zero Coupon Bond (the "Bond"), due 15 December 2015 which was issued for €5,850,000. Following a Bond Holder meeting on 15 December 2015 the final maturity date of the Bond was amended to 16 December 2017, with redemption at 114.49 per cent of nominal value at maturity, giving an effective 7% annual interest rate, compared to the previous of 9.5%. Following a detailed professional valuation of the land holdings of Mediapolis, we have reduced the value of the holdings from the €20 m reported at the interim stage, to €13m. Simultaneously, a professional surveyor’s valuation has increased the value of the villas to €5.1 m from €4.6 m now that they are starting to generate rental income. Sale of investments On 31 December 2015, the entire holding in the H&L Fund, held by Alnitak sarl subsidiary, was sold for €1.2 m. After payment to a joint shareholder and commissions, the net proceeds to Clear Leisure were €850,000. Board changes On 31st July 2015 Mr Francesco Gardin was appointed as Chief Executive Officer and Chairman, and Mr Reginald Eccles was appointed as non-Executive Director. All previous board members have resigned during the year. Futures developments On 14 March Clear Leisure took operational control of SIPIEM SpA, following a favourable Court order. On 15 March 2016 a £200,000 facility was made available by Eufingest, in the form of a convertible Loan, this is to be reimbursed on 15 September 2016. 5 | P a g e Clear Leisure plc STRATEGIC REPORT (continued) The previous Board negotiated settlement in principle with Digital Magics S.p.A. to close all outstanding disputes arising from past transactions involving a number of deals between Clear Leisure and Digital Magics S.p.A. This agreement involved the issue of a further €400,000, 7% debt bond and a cash payment for €17,500. In March 2016 the new Board renegotiated the original settlement and has agreed to issue two units totalling €300,000 of the existing Clear Leisure Bond bearing a 7% interest, which expires on 15 December 2017. The €17,500 cash payment obligation is unchanged. On 5 May 2016, Eufingest provided a facility of £100,000 at an interest rate of 2.5 per cent per annum. The facility is repayable on 30 September 2016 and is being used for working capital purposes. The Company may repay the facility early at any time without penalty. Eufingest may convert the outstanding balance of the Facility into Shares at the rate of 0.75 pence per Share. On 21 June 2016, Eufingest provided a facility of €50,000 at an interest rate of 2.5 per cent per annum. The facility is repayable on 30 September 2016 and was drawn upon immediately. On 21 June 2016 the Company disposed of its 9.9% holding in Ascend Capital Limited, being 5,500 shares, for a total consideration of £50,000 (£9.09 per share). The Company has not incurred any loss by this sale, as the carrying value of the holding in Ascend Capital Limited was €60,000 (£47,000). Risks and uncertainties The Group's investments as at 31 December 2015 were all in unlisted investments, as a result there is no readily available market for sale in order to arrive at a fair value. The valuation of each investment is appraised on a regular basis and requires a significant amount of judgment together with reviewing the cash flows and budgets of the investee company in order to arrive at a fair value. The Group has raised funds during the period, but the Directors consider that the amounts raised will not be sufficient to meet their operating forecasts over the next 12 months, further funds will be required to implement the Company strategy and meet the day to day operations of the Group. Key performance indicators (“kpi’s”) The key performance indicators are set out below: Net asset value (less minority interests) Net asset value – fully diluted per share (€) Closing share price Market capitalisation Assessment of business risk 31 December 2015 31 December 2014 Change % €1,085,000 €17,943,000 (94)% 0.005 0.88p 0.09 (95)% 0.98p (10)% €1,851,000 €1,954,000 (5)% The Board regularly reviews operating and strategic risks. The Group's operating procedures include a system for reporting financial and non-financial information to the Board including: (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) reports from management with a review of the business at each Board meeting, focusing on any new decisions/risks arising; reports on the performance of investments; reports on selection criteria of new investments; discussion with senior personnel; and consideration of reports prepared by third parties. 6 | P a g e Clear Leisure plc STRATEGIC REPORT (continued) Financial risk management Details of the Group's financial instruments and its policies with regard to financial risk management are contained in note 26 to the financial statements. Results for the year and dividends The loss for the year from continuing operations was €20,246,000 (2014: loss of €3,141,000). Since the Group does not have any distributable reserves, the Directors are unable to recommend the payment of a dividend. Going concern The Group's activities generated a loss from continuing operations of €20,246,000 (2014: €3,141,000) and had net current liabilities of €16,477,000 as at 31 December 2015. The Group's operational existence is still dependent 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 judgment that there is a reasonable expectation that the Group can secure adequate resources to continue its operations for the foreseeable future and that adequate arrangements will be in place to settle 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, By order of the Board. Francesco Gardin Director 30 June 2016 7 | P a g e Clear Leisure plc DIRECTORS’ REPORT The Directors present their report together with the audited financial statements for the year ended 31 December 2015. Principal Activity The principal activity of the Group is that of an investment company pursuing a strategy to create a portfolio of companies within the leisure, entertainment, interactive media and financial services sectors. Directors The present members of the Board of Directors together with brief biographies are shown on page 4. The board comprised the following directors who served throughout the year and up to the date of this report save where disclosed otherwise beside their name: Alfredo Villa (resigned 31 July 2015) Nilesh Jagatia (resigned 19 August 2015) Francesco Gardin (appointed 31 July 2015) Reginald Eccles (appointed 31 July 2015) Directors’ interests No Director had a material interest in any contract of significance to the Company or any of its subsidiaries during the period. No Directors of the Company have any beneficial interests in the shares of its subsidiary companies. The interests of the directors who served at the end of the year in the share capital of the Company at 31 December 2015 and 31 December 2014 were as follows: Directors (0.25p ordinary shares) % (0.25p ordinary shares) 31 December 2015 Holding 31 December 2014 Alfredo Villa Francesco Gardin 28,279,039 100,000 15.61 0.047 28,279,039 100,000 The closing market price of the ordinary shares at 31 December 2015 was 0.88p and the highest and lowest closing prices during the year were 1.6p and 0.55p respectively. There have been no changes in the Directors’ interests between the year end and 30 June 2016. 8 | P a g e DIRECTORS’ REPORT (continued) Remuneration Remuneration receivable by each Director during the year was as follows: Clear Leisure plc Executive Directors Alfredo Villa* Nilesh Jagatia* Reginald Eccles Francesco Gardin Total 2015 Board fees 2015 Remuneration €’000 €’000 2015 Total €’000 - - - - - 85 35 18 112** 250 85 35 18 112 250 2014 Total €’000 146 61 - - 207 None of the Directors had any pension entitlement. * Alfredo Villa and Nilesh Jagatia resigned on 31 July 2015. **Of which €90,000 was in respect of a bonus on the disposal of investments and £12,500 was paid in shares. Directors’ interests in share options and warrants At 31 December 2015 the Directors had the following interest in share options or warrants in the Company: - On 31 July 2015 Francesco Gardin was awarded 10,000,000 stock options at a strike price of 1.25p to be exercised within five years. - On 31 July 2015 Reginal Eccles was awarded 3,000,000 stock options at a strike price of 1.25p to be exercised within five years. All former share option plans had lapsed and no options were exercised in any of the last three financial years. Significant shareholders As at 30 June 2016 so far as the directors are aware, the parties who are directly or indirectly interested in 3 per cent or more of the nominal value of the Company’s share capital are as follows: Eufingest Afredo Villa Luke Johnson Roy Nominees Limited TD Direct Investing Nominees (Europe) Limited Hargreaves Lansdown Nominees Limited TMS-EKAB Barclayshare Nominees Limited Winterflood Securities Limited Regilco S.R.L Number of ordinary shares % 56,500,000 28,279,039 25,000,000 14,194,968 11,963,740 11,210,948 11,000,000 9,287,626 8,789,135 7,190,000 26.85 13.44 11.88 6.75 5.69 5.33 5.23 4.41 4.18 3.42 Corporate Governance As an AIM-listed Company, the Company is not required to follow the provisions of the Corporate Governance Code as set out in the Financial Conduct Authority’s Listing Rules. However, the Directors recognise the importance and support the principles of good governance. Directors' liability insurance and indemnity The Company is in the process of arranging insurance cover in respect of potential legal action against its Directors. To the extent permitted by UK law, the Company also intends to indemnify the Directors. 9 | P a g e Clear Leisure plc DIRECTORS’ REPORT (continued) Statement of Directors' Responsibilities The Directors are responsible for preparing the Annual Report of the Directors and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the directors have prepared the Group and Parent Company financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”). Under Company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. The Directors are also required to prepare financial statements in accordance with the AIM rules of the London Stock Exchange. In preparing these financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; (cid:2) (cid:2) make judgments and accounting estimates that are reasonable and prudent; (cid:2) state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. (cid:2) The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Group is compliant with AIM Rule 26 regarding the Group’s website. Disclosure of information to auditor In the case of each person who was a Director at the time this report was approved: (cid:2) (cid:2) so far as that director is aware there is no relevant audit information of which the Group’s auditor is unaware; and that director has taken all steps that the director ought to have taken as a director to make himself aware of any relevant audit information and to establish that the Group’s auditor is aware of that information. Events after the reporting period Details of events after the reporting period have been disclosed in Note 35. Independent auditor Welbeck Associates, having expressed their willingness to continue in office, will be deemed reappointed for the next financial year in accordance with section 487(2) of the Companies Act 2006 unless the Company receives notice under section 488(1) of the Companies Act 2006. By order of the Board. Francesco Gardin Chairman 30 June 2016 10 | P a g e Clear Leisure plc INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CLEAR LEISURE PLC We have audited the financial statements of Clear Leisure plc for the year ended 31 December 2015 which comprise the group statement of comprehensive income, the group and parent company statements of changes in equity, the group and parent company statements of financial position, the group and parent company statements of cash flows, and the related notes. The financial reporting framework that has been applied in the preparation of the Group and Parent Company financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the statement of Directors’ responsibilities set out on page 10, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Chairman’s statement, strategic report and Directors’ report to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implication for our report. A description of the scope of an audit of financial statements is also provided on the APB's website (at www.frc.org.uk/apb/scope/private.cfm). Opinion on matters prescribed by the Companies Act 2006 In our opinion the information given in the report of the directors for the financial year for which the financial statements are prepared is consistent with the financial statements. Opinion Emphasis of matter – Going concern We draw your attention to the disclosure made in note 3 to the financial statements concerning the Group’s ability to continue as a going concern. These conditions, along with other matters explained in note 3 to the financial statements, indicate the existence of a material uncertainty which may cast doubt about the ability of the Group to continue as a going concern. The Directors have plans to manage the cash flows of the Group to enable it to continue as a going concern. These plans include the necessary additional fundraising required to provide the operational working capital requirement for the next 12 months. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern. 11 | P a g e INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CLEAR LEISURE PLC (continued) Clear Leisure plc Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: (cid:2) adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. (cid:2) (cid:2) (cid:2) Jonathan Bradley Hoare (Senior statutory auditor) for and on behalf of Welbeck Associates Chartered Accountants and Registered Auditors London, United Kingdom 30 June 2016 12 | P a g e GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2015 Clear Leisure plc Continuing operations Revenue Cost of sales Other operating income Administration expenses Operating (loss) / profit Other gains and losses Finance income Finance charges Loss before tax Tax Loss for the year from continuing operations Profit/(loss) from discontinued operations Loss for the year Other comprehensive income Gain on acquisition of non-controlling interest Exchange translation differences Total other comprehensive income Note 8 9 12 13 2015 €’000 - - - - (654) (654) (18,569) - (1,023) (20,246) - (20,246) - (20,246) - - - 2014 €’000 70 (1) 69 856 (1,986) (1,917) (140) 1 (1,085) (3,141) - (3,141) 67 (3,074) 3,750 5 3,755 TOTAL COMPREHENSIVE INCOME FOR THE YEAR (20,246) 681 Loss for the year attributable to: Owners of the parent Non-controlling interests Total comprehensive income attributable to: Owners of the parent Non-controlling interests Earnings per share: (17,016) (3,230) (2,836) (238) (17,016) (3,230) 919 (238) Basic and fully diluted loss from continuing operations 14 (€0.08) (€0.01) Basic and fully diluted earnings/(loss) from discontinued operations Basic and fully diluted loss per share - (€0.08) €0.00 (€0.01) 13 | P a g e STATEMENTS OF FINANCIAL POSITION AT 31 DECEMBER 2015 Clear Leisure plc Non-current assets Goodwill Other intangible assets Property, plant and equipment Available for sale investments Other receivables Total non-current assets Current assets Investments held for trading Trade and other receivables Cash and cash equivalents Total current assets Current liabilities Trade and other payables Borrowings Total current liabilities Notes 15 16 17 19 18 20 21 22 23 24 Group 2015 €’000 - 50 18,114 60 - 18,224 614 6,847 1,842 9,303 Group 2014 €’000 9 151 38,697 6,560 - 45,417 450 148 1,373 1,971 Company 2015 €’000 Company 2014 €’000 - - - - 8,537 8,537 - 35 475 510 - - - - 23,538 23,538 450 - 5 455 (4,948) (20,832) (25,780) (4,329) (20,276) (24,605) (1,058) (6,680) (7,738) (1,625) (5,628) (7,253) Net current (liabilities)/assets (16,477) (22,634) (7,228) (6,798) Total assets less current liabilities 1,747 22,783 1,309 16,740 Non-current liabilities Borrowings Deferred liabilities and provisions Total non-current liabilities Net assets Equity Share capital Share premium account Other reserves Retained losses Equity attributable to owners of the Company Non-controlling interests Total equity 24 25 27 27 28 31 - (407) (407) - (1,355) (1,355) - - - - - - 1,340 21,428 1,309 16,740 6,112 42,954 11,412 (59,393) 1,085 255 1,340 6,074 42,856 11,390 (42,377) 17,943 3,485 21,428 6,112 42,954 556 (48,313) 1,309 - 1,309 6,074 42,856 534 (32,724) 16,740 - 16,740 The financial statements were approved by the board of directors and authorised for issue on 30 June 2016. They were signed on its behalf by: Francesco Gardin Director The accounting policies and notes form part of these financial statements. Company Number 03926192 14 | P a g e Clear Leisure plc STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2015 Group Share capital €’000 Share premium account €’000 Other reserves Retained losses Total €’000 €’000 €’000 Non- controlling interests €’000 Total equity €’000 At 1 January 2015 6,074 42,856 11,390 (42,377) 17,943 3,485 21,428 Loss for the year Other comprehensive income Total comprehensive income for the year Issue of shares Share option charge At 31 December 2015 Company At 1 January 2015 Loss and total comprehensive income for the year Issue of shares Share option charge At 31 December 2015 - - - - (17,016) - (17,016) - (3,230) - (20,246) - - 38 - 6,112 - 98 - 42,954 - - 22 11,412 (17,016) - - (59,393) (17,016) 136 22 1,085 (3,230) - - 255 (20,246) 136 22 1,340 6,074 42,856 534 (32,724) 16,740 - 38 - 6,112 - 98 - 42,954 - - 22 556 (15,589) (15,589) - - (48,313) 136 22 1,309 - - - - - 16,740 (15,589) 136 22 1,309 The accounting policies and notes form part of these financial statements. 15 | P a g e Clear Leisure plc STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014 Group Share capital €’000 Share premium account €’000 Other reserves Retained losses Total €’000 €’000 €’000 Non- controlling interests €’000 Total equity €’000 At 1 January 2014 6,074 42,856 10,869 (42,843) 16,956 7,219 24,175 Loss for the year Other comprehensive income Total comprehensive income for the year Acquisition of non-controlling interests in subsidiary Issue of convertible bond At 31 December 2014 Company At 1 January 2014 Loss and total comprehensive income for the year Issue of convertible bond At 31 December 2014 - - - - - - - 453 453 (2,836) 3,302 (2,836) 3,755 (238) - (3,074) 3,755 466 919 (238) 681 - - 6,074 - - 42,856 - 68 11,390 - - (42,377) - 68 17,943 (3,496) - 3,485 (3,496) 68 21,428 6,074 42,856 466 (31,990) 17,406 - - 6,074 - - 42,856 - 68 534 (734) - (32,724) (734) 68 16,740 - - - - 17,406 (734) 68 16,740 The accounting policies and notes form part of these financial statements. 16 | P a g e STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2015 Clear Leisure plc Note Group 2015 €’000 Group 2014 €’000 Company 2015 €’000 Company 2014 €’000 Net cash outflow from operating activities 29 (835) (387) (835) (473) Cash flows from investing activities (Increase)/decrease in loan to subsidiary undertakings Acquisition of subsidiary undertakings Purchase of available for sale investments Cash balances of subsidiaries acquiried Cash repayments by subsidiaries Interest received - - 900 - - - - (193) (33) - - 1 - - 99 - 900 (33) - 1 - - - - Net cash (outflow) from investing activities 900 (225) 901 66 Cash flows from financing activities Proceeds of issue of shares Repayment of long term debt Proceeds from borrowing Proceeds of issue of convertible bond Proceeds of short term loans Net cash inflow from financing activities Net (decrease) /increase in cash for the year Cash and cash equivalents at beginning of year Exchange differences 136 (272) 540 - - 404 469 1,373 - - - - 412 90 502 (110) 1,477 6 136 (272) 540 - - 404 470 5 - Cash and cash equivalents at end of year 22 1,842 1,373 475 The accounting policies and notes form part of these financial statements. - - - 412 - 412 5 - - 5 17 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 1. General Information Clear Leisure plc is a company incorporated in the United Kingdom under the Companies Act 2006. The Company’s ordinary shares are traded on AIM of the London Stock Exchange. The address of the registered office is given on the Company information page. The nature of the Group’s operations and its principal activities are set out in the Directors’ report on page 8. Standards and amendments which became effective during the year have not had a material impact on the financial statements. Statement of compliance The financial statements comply with IFRS as adopted by the European Union. The following new and revised Standards and Interpretations have been adopted in the current period by the Group for the first time and do not have a material impact on the group. IFRS 12 Disclosures of interests in other entities A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and not early adopted. None of these are expected to have a significant effect on the financial statements of the Group. 18 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 2. Accounting policies The principal accounting policies are summarised below. They have all been applied consistently throughout the period covered by these consolidated financial statements. Basis of preparation The consolidated Financial Statements of Clear Leisure plc have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) as adopted by the European Union and the parts of Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention except in respect of revalued properties (as permitted by IFRS 1), and for certain available for sale investments that are stated at their fair values and land and buildings that have been revalued to their fair value. The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated Financial Statements are disclosed in Note 3. The Consolidated Financial Statements are presented in Euros (€), the presentational and functional currency, rounded to the nearest €’000. Going Concern Any consideration of the forseeable future involves making a judgement, at a particular point in time, about future events which are inherently uncertain. The ability of the Group to carry out its planned business objectives is dependent on its continuing ability to raise adequate financing from equity investors and/or the achievement of profitable operations. Nevertheless, at the time of approving these financial statements and after making due enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue operating for the forseeable future. For this reason they continue to adopt the going concern basis of preparing the Group’s financial statements. 19 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 2. Accounting policies (continued) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Group and entities controlled by the Group (its subsidiaries) made up to 31 December each year. Control is achieved where the Group has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Non-controlling interests in subsidiaries are identified separately from the Group's equity therein. Those interests of non-controlling shareholders that are present ownership interests entitling their holders to a proportionate share of net assets upon liquidation may initially be measured at fair value or at the non- controlling interests' proportionate share of the fair value of the acquiree's identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition basis. Other non-controlling interests are initially measured at fair value. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the noncontrolling interests' share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non- controlling interests having a deficit balance. Changes in the Group's interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amount of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Group. When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), less liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities are disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under lAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the costs on initial recognition of an investment in an associate or jointly controlled entity. 20 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 2. Accounting policies (continued) Business Combinations Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRSs. Changes in the fair value of contingent consideration classified as equity are not recognised. Where a business combination is achieved in stages, the Group's previously-held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3(2008) are recognised at their fair value at the acquisition date, except that: (cid:2) (cid:2) (cid:2) deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with lAS 12 Income Taxes and lAS 19 Employee Benefits respectively; liabilities or equity instruments related to the replacement by the Group of an acquiree's sharebased payment awards are measured in accordance with IFRS 2 Share-based Payment; and assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date, and is subject to a maximum of one year. 21 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 2. Accounting policies (Continued) Goodwill Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer's previously held equity interest (if any) in the entity over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the Group's interest in the fair value of the acquiree's identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer's previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Acquired intangible assets Intangible assets acquired separately or as part of a business combination are capitalised at cost and fair value as at the date of acquisition, respectively. Intangible assets are subsequently amortised on a straight-line basis over the expected period that benefits will accrue to the Group: Patents and trade marks over 10 years Impairment of non-financial assets Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Development costs Internally generated development expenditure is capitalised as an intangible asset only if all the following criteria are met: (cid:2) (cid:2) (cid:2) the asset can be identified; it is probable that the asset will generate future economic benefits; the fair value of the asset can be measured reliably. Capitalised development expenditure is amortised on a straight-line basis over the period of expected future sales of the resulting products, which has been assessed as between 5 and 10 years. Property, plant and equipment Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date. 22 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 2. Accounting policies (Continued) Property, plant and equipment (continued) Any revaluation increase arising on the revaluation of such land and buildings is credited to the properties revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is credited to the income statement to the extent of the decrease previously expensed. A decrease in carrying amount arising on the revaluation of such land and buildings is charged as an expense to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset. Depreciation on revalued buildings is charged to income. On the subsequent sale or scrap page of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings. Properties in the course of construction for production, supply or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the group's accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Freehold land is not depreciated. Plant and equipment and fixtures and fittings are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is provided on all tangible assets to write down the cost less estimated residual value of each asset over its expected useful economic life on a straight line basis at the following annual rates: Land and buildings Leasehold improvements Plant and machinery Fixtures and fittings Nil Straight line over the remaining period of the lease 15% straight line 20% straight line Asset residual values and useful economic lives are reviewed and adjusted if appropriate at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised in the income statement. Inventories Inventories are stated at the lower of cost and net realisable value. The cost of finished goods and work in progress comprise all direct expenditure and an appropriate proportion of fixed and variable overheads. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Investments in subsidiaries Investments in subsidiaries are stated at cost less any provision for impairment. 23 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 2 Accounting policies (Continued) Foreign currency The functional currency is Euro. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Exchange gains and losses resulting from the settlement of such transactions and from the translation at year- end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income. Exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within ‘finance income or costs’. All other Exchange gains and losses are presented in the income statement within ‘other (losses)/gains – net’. Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income. Taxation The tax expense represents the sum of the tax currently payable and any deferred tax. Current taxes are based on the results of the Group companies and are calculated according to local tax rules, using the tax rates that have been enacted or substantially enacted by the period-end date. Deferred tax is provided in full using the financial position liability method for all taxable temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Deferred tax is measured using currently enacted or substantially enacted tax rates. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax assets are recognised to the extent the temporary difference will reverse in the foreseeable future and that it is probable that future taxable profit will be available against which the asset can be utilised. Deferred tax is recognised for all deductible temporary differences arising from investments in subsidiaries and associates, to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. Revenue Revenue, which excludes Value Added Tax, represents the value of services rendered. Consultancy fees are recognised as earned on unconditional supply of services. Interest income Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition. Financial instruments Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes a party to the contractual provisions of the instrument. Financial assets The Group’s financial assets are classified into the following specific categories: “available for sale investments”, “trade and other receivables”, and “cash and cash equivalents”. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. 24 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 2 Accounting policies (Continued) Available for sale investments Investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at cost, including transaction costs. Investments classified as available for sale are measured at subsequent reporting dates at fair value. Fair value is defined as the price at which an orderly transaction would take place between market participants at the reporting date and is therefore an estimate and as such requires the use of judgement. Where possible fair value is based upon observable market prices, such as listed equity markets or reported merger and acquisition transactions. Alternative bases of valuation may include contracted proceeds or best estimate thereof, implied valuation from further investment and long-term cash flows discounted at a rate which is tested against market data. Gains and losses arising from changes in fair value are recognised directly in other comprehensive income, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in other comprehensive income is included in the net profit or loss for the period. Impairment losses recognised in the income statement for equity investments classified as available-for-sale are not subsequently reversed through the income statement. The Group determines the fair value of its Investments based on the following hierarchy: LEVEL 1 – Where financial instruments are traded in active financial markets, fair value is determined by reference to the appropriate quoted market price at the reporting date. Active markets are those in which transactions occur in significant frequency and volume to provide pricing information on an ongoing basis. LEVEL 2 – If there is no active market, fair value is established using valuation techniques, including discounted cash flow models. The inputs to these models are taken from observable market data including recent arm’s length market transactions, and comparisons to the current fair value of similar instruments; but where this is not feasible, inputs such as liquidity risk, credit risk and volatility are used. LEVEL 3 – Valuations in this level are those with inputs that are not based on observable market data. Investments held for trading All investments determined upon initial recognition as held at fair value through profit or loss were designated as investments held for trading. Investment transactions are accounted for on a trade date basis. Assets are de-recognised at the trade date of the disposal. Assets are sold at their fair value, which comprises the proceeds of sale less any transaction cost. The fair value of the financial instruments in the balance sheet is based on the quoted bid price at the balance sheet date, with no deduction for any estimated future selling cost. Unquoted investments are valued by the directors using primary valuation techniques such as recent transactions, last price and net asset value. Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the consolidated statement of comprehensive income as “Net gains on investments”. Investments are initially measured at fair value plus incidental acquisition costs. Subsequently, they are measured at fair value in accordance with IAS 39. This is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. Trade and other receivables Trade and other receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method. A 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. 25 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 2. Accounting policies (Continued) 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: (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) 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. 26 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 2 Accounting policies (Continued) 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. (cid:2) (cid:2) (cid:2) (cid:2) 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. 27 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 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 (2014: €9,000). 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 €20,246,000 (2014: €3,141,000) and had net current liabilities of €16,477,000 as at 31 December 2015. 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. 28 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 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: Continuing operations Revenue Cost of sales Gross Profit Finance Income Finance charges Other operating expenses UK €’000 2015 Italy €’000 Total €’000 UK €’000 - - - - - - - - - - - - - - - (684) (354) (339) (300) (1,023) (506) (654) (1,131) Other gains and losses 860 (19,429) (18,569) 856 2014 Italy €’000 70 (1) 69 1 (579) (885) (966) Total €’000 70 (1) 69 1 (1,085) (2,016) (110) Profit/(Loss) for the financial year (178) (20,068) (20,246) (781) (2,360) (3,141) 2015 2014 Segment assets €’000 Segment liabilities €’000 Net additions to non- current Assets €’000 Net assets/ (liabilities) €’000 Segment assets €’000 Segment liabilities €’000 Net Additions to non- current assets €’000 Net assets/ (liabilities) €’000 UK Italy 8,284 (8,702) 19,243 (17,485) 27,527 (26,187) - - - (418) 1,758 1,340 524 (8,302) 46,864 (17,658) 47,388 (25,960) - - - (7,778) 29,206 21,428 29 | P a g e NOTES TO THE FINANCIAL STATEMENTS 5. Employee numbers Clear Leisure plc 2015 Number 2014 Number The average number of employees during the period was as follows: Management and administration 2 5 6. Staff costs Staff costs during the period including directors comprise: Wages and salaries Social security costs Other pension costs 2015 €’000 2014 €’000 250 - - 250 279 28 - 307 2014 €’000 207 18 225 Other pension costs relate to contributions to defined contribution pension schemes and are charged as an expense as they fall due. 7. Directors’ Emoluments Aggregate emoluments Social security costs 2015 €’000 250 - 250 There are no retirement benefits accruing to the Directors. Details of directors’ remuneration are included in the Directors’ Report. 8. Other gains and losses Impairment of investments Impairment of property investments Decrease in provisions Writeback of VAT tax credit Revaluation of investments Profit on disposal of H & L fund 30 | P a g e 2015 €’000 2014 €’000 - (996) (20,583) 650 300 614 450 - - - - (18,569) (996) Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 9. Finance charges Interest on convertible bonds Interest on bank loans and overdrafts 10. Auditor’s remuneration Group Auditor’s remuneration: Fees payable to the Group’s auditor for the audit of the Company and consolidated financial statements: Non audit services: Other services Subsidiary Auditor’s remuneration Other services pursuant to legislation 11. Company income statement 2015 €’000 684 339 2014 €’000 506 579 1,023 1,085 2015 €’000 2014 €’000 28 6 - 40 6 - 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 income for the financial year amounted to a loss of €15,589,000 (2014: loss €734,000). 31 | P a g e NOTES TO THE FINANCIAL STATEMENTS 12. Tax Current taxation Deferred taxation Tax charge for the year Clear Leisure plc 2015 €’000 2014 €’000 - - - - - - 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 2015 amount to approximately €24 million (2014: €23 million) and €35 million (2014: €20 million) respectively. The standard rate of tax for the current year, based on the UK effective rate of corporation tax is 20.25% (2014 – 21.5%). 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 Loss for the year before tax Tax on ordinary activities at standard rate Effects of: Expenses not deductible for tax purposes Foreign taxes Tax losses available for carry forward against future profits Total tax 2015 €’000 2014 €’000 (20,246) (3,141) (4,100) (675) 280 - 3,820 - 152 - 523 - 32 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 13. Discontinued operations On 3 December 2013, as a result of a pending investigation into the financial irregularities of the subsidiary ORH S.p.A, the Group announced that legal action had resulted in the settlement of its investment in the subsidiary. The settlement resulted in a disposal of part of the Group’s holding in ORH S.p.A. In addition a liquidator was appointed by a tribunal in Milan on 2 February 2014. These two events have resulted in the Group no longer holding a controlling interest in ORH S.p.A. The results of the discontinued operations, which have been included in the consolidated income statement, were as follows: Revenue Expenses Loss before tax Attributable tax expense Profit/(loss) on disposal of discontinued operations (see Note 30) Net profit/(loss) attributable to discontinued operations 2015 €’000 2014 €’000 - - - - - - - - - - 67 67 In 2013 a loss of €5,570,000 arose on the disposal of ORH Spa, being the difference between the proceeds of disposal and the carrying amount of the subsidiary’s net assets and attributable goodwill. 14. 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: 2015 Weighted average no. of shares 000’s Per share Amount Euro Loss €’000 2014 Weighted average no. of shares 000’s Loss €’000 Per share Amount Euro Basic and fully diluted earnings per share Continuing operations (17,016) 208,378 (€0.08) (3,141) 199,409 (€0.01) Discontinued operations Total operations - (17,016) - 208,378 - (€0.08) 67 (3,074) 199,409 199,409 - (€0.01) 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 2014 and 2015 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. 33 | P a g e NOTES TO THE FINANCIAL STATEMENTS Clear Leisure plc 15. Goodwill Cost At 1 January At 31 December Accumulated impairment losses At 1 January Impairment loss for the year At 31 December Net book value 2015 €’000 2014 €’000 1,312 1,312 1,312 1,312 1,303 9 1,312 - 1,303 - 1,303 9 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: (cid:2) a real growth rate of 2% which has been used to extrapolate cash flows beyond the budget period; and (cid:2) 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. 34 | P a g e NOTES TO THE FINANCIAL STATEMENTS 16. Other intangible fixed assets Cost At 1 January 2014 Closure of operations At 31 December 2014 At 31 December 2015 Amortisation At 1 January 2014 Amortisation charge for the year Closure of operations At 31 December 2014 Closure of operations At 31 December 2015 Carrying value At 31 December 2014 At 31 December 2015 Clear Leisure plc Development costs €’000 273 (104) 169 169 38 - (20) 18 101 119 151 50 Total €’000 273 (104) 169 169 38 - (20) 18 101 119 151 50 35 | P a g e NOTES TO THE FINANCIAL STATEMENTS Clear Leisure plc 17. Property, plant and equipment Group Cost At 1 January 2014 Closure of operations At 31 December 2014 Impairment of property At 31 December 2015 Depreciation At 1 January 2014 Depreciation charge for the year Disposal of subsidiary undertaking At 31 December 2014 At 31 December 2015 Carrying value At 31 December 2014 At 31 December 2015 Land & buildings €’000 Leasehold improvements €’000 Plant & machinery €’000 Fittings & equipment €’000 Total €’000 38,697 - 38,697 (20,583) 18,114 - - - - - 38,697 18,114 - - - - - - - - - - - - 223 (223) 193 (193) 39,112 (416) - - - 40 2 (42) - - - - - - - 28 2 (30) - - - - 38,697 (20,583) 18,114 68 4 (72) - - 38,697 18,114 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. 36 | P a g e NOTES TO THE FINANCIAL STATEMENTS 18. Investment in subsidiaries Company As at 1 January: Loans to subsidiary undertakings Net (repayments)/advances during the year Impairment in investment As at 31 December Clear Leisure plc 2015 €’000 23,538 (1) (15,000) 8,537 2014 €’000 23,119 419 23,538 The significant subsidiary undertakings held by the Group at 31 December 2015 were as follows: Subsidiaries Brainspark Associates Limited *Mediapolis Investments SA *Mediapolis S.p.A. *SoSushi Company S.r.l. Clear Holiday S.r.l. Country of incorporation England Luxembourg Italy Italy Italy % Owned 100.00 71.72 **74.67 100.00 100.00 Nature of business Investment holding company Investment holding company Lesiure/Real Estate Brand Management Dormant company * Indirectly held. ** Brainspark Associates Limited owns 71.72% and Mediapolis Investments SA owns 13.07% of Mediapolis Spa 19. Available for sale investments Group Fair value At 1 January Impairment recognised in the income statement Transfer to trade and other receivables Disposals Carrying value at 31 December Non-current assets Current assets 2015 €’000 6,560 - (6,500) - 60 60 - 60 2014 €’000 7,556 (996) - - 6,560 6,560 - 6,560 37 | P a g e NOTES TO THE FINANCIAL STATEMENTS 19. Available for sale investments (continued) Clear Leisure plc Details of each of the Group’s material associates at the end of the reporting period are as follows: Name of associate Sipiem S.p.A** Ascend Capital plc Place of incorporation and principal place of busines Italy UK Proportion of ownership held by the Group (%) Principal activity 50.17 9.9 Real Estate and Holding Corporate broking **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. 20. Investments held for trading Group and Company Fair value At 1 January Net acquisition costs of investments Movement in fair value of investments Disposals Carrying value at 31 December 2015 €’000 2014 €’000 450 - 614 (450) 614 - 33 417 - 450 The amount of €450,000 shown above is a level 3 investment and represents the Group’s 100% interest in a specific vehicle, which controls the entire share capital of Hospitality & Leisure Fund (H&L Fund), an Italian real estate fund regulated by the Italian financial authorities. This investment has been realised during the year. The amount of €614,000 shown above is a level 3 investment and represents the fair value of 533,990 shares in Geosim Systems Ltd. 38 | P a g e NOTES TO THE FINANCIAL STATEMENTS 21. Trade and other receivables Trade and other receivables Other receivables Amounts falling due after one year Amounts owed by subsidiaries Non-current assets Current assets Clear Leisure plc Group 2015 €’000 - 6,847 - 6,847 - 6,847 Group 2014 €’000 Company 2015 €’000 Company 2014 €’000 90 58 - 148 - 148 - 35 8,537 8,572 8,537 35 - - 23,538 23,538 23,538 - The directors consider that the carrying value of trade and other receivables approximates to their fair value. 22. Cash and cash equivalents Group Cash at bank and in hand Group 2015 €’000 1,842 1,842 Group 2014 €’000 1,373 1,373 Company 2015 €’000 Company 2014 €’000 475 475 5 5 Included in the above is an amount for cash held on escrow relating to the Mediapolis S.p.A. Land & Buildings. The Directors consider the carrying amounts of cash and cash equivalents approximates to their fair value. 23. Trade and other payables Trade payables Other taxes payable Other payables Amounts due to subsidiary undertakings Accruals Trade and other payables Group 2015 €’000 504 70 1,160 - 3,214 4,948 Group 2014 €’000 1,199 84 1,141 - 1,905 4,329 Company 2015 €’000 Company 2014 €’000 128 15 288 85 542 516 15 249 302 543 1,058 1,625 The directors consider that the carrying value of trade and other payables approximates to their fair value. Included in other payables is an amount of €830,000 (2014: €830,000) which represents the directors’ assessment of the amounts due to fulfil contractual obligations relating to the purchase of investments. 39 | P a g e NOTES TO THE FINANCIAL STATEMENTS 24. Borrowings Bank loans and overdrafts 7% Convertible bond 2014 Zero rate convertible bond 2015 Shareholder loans Other borrowings Disclosed as: Current borrowings Non-current borrowings 7% Convertible Bond 2014 Clear Leisure plc Group 2015 €’000 8,127 1,038 5,340 4,379 1,948 Group 2014 €’000 9,536 88 5,340 4,070 1,242 20,832 20,276 20,832 20,276 - - 20,832 20,276 Company 2015 €’000 Company 2014 €’000 - 88 5,853 - 739 6,680 6,680 - 6,680 - 88 5,340 - 200 5,628 5,628 - 5,628 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 bonds 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 EUR 9.9 million Zero Coupon Bond, 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% to7%. Shareholder Loans Included in the shareholder loans is an amount owing to Olivetti Multiservices S.p.A. (“OMS”) from Mediapolis S.p.A. for €4,379,068 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. 40 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 24. Borrowings (continued) 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. Liability component at 1 January Net proceeds of issue Equity component Interest charge for the year Conversion during the year including interest Gain on settlement of 7% bonds by issue of zero coupon bonds Liability component at 31 December Disclosed as: Non-Current Liabilities Current Liabilities 2015 €’000 5,428 - - 5,428 425 - - 5,853 - 5,853 2014 €’000 4,499 930 (68) 5,361 506 - (439) 5,428 - 5,428 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 2015 includes all interest accrued to that date. The unpaid interest together with accrued interest to 31 December 2015 is included within current liabilities. 25. Deferred liabilities and Provisions Group Provisions: Potential litigation costs in Mediapolis Spa Provision for costs relating to loans within Mediapolis Spa Provision for infrastructure costs relating to land held by Mediapolis Spa 2015 €'000 - 407 - 407 2014 €'000 118 537 700 1,355 41 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 26. 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: Financial assets: Available for sale investments Investments held for trading Loans and receivables Cash and cash equivalents 2015 €'000 60 614 6,847 1,842 9,363 2014 €'000 6,560 450 148 1,373 8,531 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: Financial liabilities at amortised cost: Trade and other payables Borrowings Financial instruments measured at fair value: As at 31 December 2015 Available for sale investments Investments held for trading As at 31 December 2014 Available for sale investments 2015 €'000 2,535 20,832 23,367 2014 €'000 2,424 20,276 22,700 Level 1 €’000 Level 2 €’000 Level 3 €’000 - - - - - - - - - - 60 614 674 - 7,010 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. 42 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 26. Financial instruments (continued) Level 3 investments include both investments in associates, per Note 20, as well as investments in Ascend Capital plc and 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 bond holders, 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 €66,000 (2014: €5,604,000). 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. 43 | P a g e NOTES TO THE FINANCIAL STATEMENTS 26. Financial instruments (continued) The following are the undiscounted contractual maturities of financial liabilities: Clear Leisure plc As at 31 December 2015 Trade and other payables Borrowings As at 31 December 2014 Trade and other payables Borrowings Carrying Amount €’000 Less than 1 year €’000 Between 1 and 5 years €’000 2,535 20,832 23,367 2,424 20,276 22,700 2,535 20,832 23,367 2,424 20,276 22,700 - - - - - - - Total €’000 2,535 20,832 23,367 2,424 20,276 22,700 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. Interest rates are based on respective EURIBOR and other bank prime interest rates. 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. 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 €7,464,000 (2014: €148,000) comprising receivables during the period. 44 | P a g e NOTES TO THE FINANCIAL STATEMENTS 27. Share capital and share premium Clear Leisure plc Number of ordinary shares Number of deferred shares ISSUED AND FULLY PAID: At 1 January 2015 199,409,377 Ordinary share capital €’000 6,074 Deferred Share capital €’000 Share premium €’000 Total €’000 42,856 48,930 Share reorganisation (see note below) Ordinary shares of 0.25p each Deferred shares of 2.25p each 199,409,377 - 607 - 199,409,377 5,467 607 5,467 Issue of shares 11,000,000 - At 31 December 2015 210,409,377 199,409,377 38 645 98 136 5,467 42,954 49,066 During the year the Company undertook a share capital reorganisation subdividing each issued exsisting ordinary share of 2.5p into one ordinary share of 0.25p and one deferred share of 2.25p. On 30 April 2015, the Company raised a total of £110,000 gross of expenses through a placing of 11,000,000 ordinary shares of 0.25 pence at a price of 1 pence per share. 28. Other reserves The Group considers its capital to comprise ordinary share capital, share premium, retained losses and its convertible bonds. In managing its capital, the Group’s primary objective is to maintain a sufficient funding base to enable the Group to meet its working capital and strategic investment needs. In making decisions to adjust its capital structure to achieve these aims, through new share issues, the Group considers not only their short-term position but also their long-term operational and strategic objectives. Merger reserve Revaluation reserve Group At 1 January 2014 Acquisition of non-controlling interest Issue of convertible notes loan At 31 December 2014 Share option charge At 31 December 2015 €’000 8,325 - - 8,325 - 8,325 €’000 2,084 447 - 2,531 - 2,531 Exchange translation reserve €’000 Loan note equity reserve €’000 Share option reserve €’000 (6) 6 - - - - 466 - 68 534 - 534 - - - - 22 22 Total other Reserves €’000 10,869 453 68 11,390 22 11,412 45 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 29. Cash used in operations Group 2015 €’000 Group 2014 €’000 Company 2015 €’000 Company 2014 €’000 Loss before tax (20,246) (3,074) (15,589) (734) Amounts written off investments Share based payment charge - 22 996 15,000 - 22 Movement in fair value of investments held for trading Impairment of property plant and equipment Discount on settlement of bonds Gain on disposal of investment Writeback of receivables Finance income Finance charges Decrease in provisions Decrease/(increase) in receivables (Decrease)/increase in payables (614) 20,583 (417) - - (439) (450) (300) - 1,023 (650) (398) 195 - 4 (1) 1,085 - 605 854 Cash (used in)/generated by operations (835) (387) - - - (450) - - 684 - (35) (467) (835) - - (417) - (439) - - - 506 - - 611 (473) 46 | P a g e Clear Leisure plc NOTES TO THE FINANCIAL STATEMENTS 30. Disposal of subsidiary As referred to in Note 13, on 3 December 2013 the Group disposed of its majority interest in ORH Spa. The net assets of ORH Spa at the date of disposal were as follows: Other intangible assets Tangible fixed assets Inventories Other receivables Trade payables Borrowings Convertible loan notes Deferred liabilities and provisions Attributable goodwill Net assets Less: non-controlling interests Net assets attributable to owners of the parent company Loss on disposal Total consideration 2013 €’000 4,311 354 93 8,455 (2,536) (6,098) (2,351) (217) 5,231 7,242 (1,672) 5,570 (5,345) 225 47 | P a g e NOTES TO THE FINANCIAL STATEMENTS 31. Non-controlling interests The following is a summary of the Group’s non-controlling interests. At 1 January 2014 Acquisition of non-controlling interests Total comprehensive income attributable to non-controlling interests At 31 December 2014 Total comprehensive income attributable to non-controlling interests At 31 December 2015 Clear Leisure plc Mediapolis Spa €’000 7,219 (3,496) (238) 3,485 (3,230) 255 Total €’000 7,219 (3,496) (238) 3,485 (3,230) 255 Summarised financial information in respect of the Group’s current subsidiaries that have material non- controlling interests is set out below. The summarised financial information below represents amounts before intragroup eliminations. Mediapolis Spa Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total assets less total liabilities Equity attributable to owners of the parent Non-controlling interests Total equity 2015 €’000 2,709 15,163 17,872 7,444 9,484 944 929 15 944 2014 €’000 1,724 38,696 40,420 16,767 1,355 18,122 18,813 3,485 22,298 Total comprehensive income attributable to the owners of the parent (18,732) (1,285) Total comprehensive interests income attributable to the non-controlling Total comprehensive income for the year (3,470) (22,202) (238) (1,523) 48 | P a g e NOTES TO THE FINANCIAL STATEMENTS Clear Leisure plc 32. Operating lease commitments There were no operating lease commitments at 31 December 2014 and 31 December 2015. 33. Ultimate controlling party The Group considers that there is no ultimate controlling party. 34. Related party transactions Transactions between the company and its subsidiaries, which are related parties have been eliminated on consolidation and are not disclosed in this note. Transactions between the company and its subsidiaries are disclosed in the company’s separate financial statements. During the year, NKJ Associates Ltd, a company in which N Jagatia is a Director, charged consultancy fees of €35,000. The amount owed to NKJ Associates Ltd at year end is €10,656. During the year, Metals Analysis Limited, a company in which R Eccles is a Director, charged consultancy fees of €15,250. The amount owed to Metals Analysis Limited at year end is €nil. The shareholder loan as disclosed in Note 24 ‘Borrowings’ is a loan provided by Olivetti Multiservices S.p.A., who also holds 5.1% of the ordinary shares of Mediapolis S.p.A. In addition Eufingest which has a 26.9% shareholding also has an outstanding loan for €400,000. Remuneration of key management personnel The remuneration of the directors, who are the key personnel of the group, is included in the Directors Report. Under “IAS 24: Related party disclosures”, all their remuneration is in relation to short-term employee benefits. 35. Events after the reporting date The following events have taken place after the end of the reporting period: In May 2016 the Company entered into an unsecured convertible loan facility agreement (the Facility") with Eufingest S.A ("Eufingest"), a Swiss investor and major shareholder in the Company. Under the Facility, Eufingest provided a facility of £100,000 at an interest rate of 2.5 per cent per annum. The Facility is repayable on 30 September 2016. The Facility was fully drawn down immediately. The Company may repay the Facility early at any time without penalty. At any time before 30 September 2016, Eufingest may convert the outstanding balance of the Facility into Shares at the rate of 0.75 pence per Share. In June 2016 the Company disposed of its 9.9% holding in Ascend Capital Limited, being 5,500 shares, for a total consideration of £50,000 (£9.09 per share). The Company did not incur any loss by this sale, as the 31 December 2015, carrying value of the holding in Ascend Capital Limited was EUR 60,000 (£47,000). In June 2016 the Company announced that it has entered into a new unsecured convertible loan facility agreement (the Facility") with Eufingest. Under the Facility, Eufingest provides a facility of EUR 50,000 at an interest rate of 2.5 per cent per annum. The Facility is repayable on 30 September 2016. The Facility has been drawn down. The Company may repay the Facility early at any time without penalty. At any time before 30 September 2016, Eufingest may convert the outstanding balance of the Facility into Shares at the rate of 0.75 pence per Share. 49 | P a g e
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