TIDMCHAL
RNS Number : 7561D
Challenger Acquisitions Limited
28 April 2017
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR
INDIRECTLY, WITHIN, INTO OR IN THE UNITED STATES, AUSTRALIA, CANADA
OR JAPAN.
For immediate release 28 April 2017
Challenger Acquisitions Limited
("Challenger" or the "Company")
Final Results
Challenger Acquisitions Limited (LSE: CHAL), is pleased to
announce its final results for the period ended 31 December
2016.
CEO's Statement
2016 was a difficult year for Challenger due to delays in
funding the Jakarta project, the first project in the pipeline of
Giant Observation Wheels ("GOW"). This resulted in a structural
shift in our Company. In early 2017 we concluded a transaction
which the Board determined would be most prudent for the short and
long-term growth prospects of Challenger - to divest our ownership
interest in Starneth. This extinguishes all of our cash obligations
to Starneth whilst still maintaining our relationship with Starneth
and therefore the pipeline to ensure that we might benefit from the
development of future projects.
Despite a difficult year, there were a number of positive
elements during 2016 including the appointment, in January, of two
senior non-executive directors with broad experience in the public
market space. In addition, there were several construction updates
on the New York Wheel during the year, with approximately half of
the US$590 million project spent to 31 December 2016 and all of the
below ground work completed. The project, which is 50% larger than
the iconic London Eye, is actively progressing and the opening is
scheduled in 2018 with an estimated 3.5 million visitors expected
annually.
Continued delays in the commencement of work on the Jakarta
wheel, specifically due to the prolonged bank financing process,
and slow progress with other projects in the pipeline placed
significant strain on the Company's finances. The inability of
Starneth to close any GOW projects in 2016 had multiple impacts. An
extension agreement with the Starneth vendors had to be negotiated
and concluded in the third quarter, funding options were severely
limited in the third and fourth quarters, and on-going conversions
of convertible notes were executed at decreasing share prices.
Consequently, in order to protect shareholder value, negotiations
commenced in the fourth quarter to sell the Starneth business back
to the original majority vendor.
During the year the Directors made a critical decision to
dispose of Starneth and eliminate the monthly cash obligations and
associated vendor payments. This transaction was completed on 30
January 2017, resulting in the extinguishment of all cash
obligations on Challenger, potential consideration to Challenger of
up to US$6 million contingent on closing future GOW projects and
the signing of an on-going cooperation agreement between Challenger
and Starneth. In line with this readjustment of the Company, three
directors retired from the Board and one new director was added.
Additionally, cost control measures were implemented in order to
preserve cash resources and one of the convertible notes was
extended to March 2018 with management continuing to make progress
with the remaining note holders.
We still believe in the strategy of generating long term returns
from equity stakes in attractions globally, especially with our
equity interest in the New York Wheel. Challenger is the only
publicly listed company with an equity stake (US$3million) in this
project. However, we are now considering other opportunities in the
attractions and related sectors to create shareholder value. With
this in mind we are working to identify additional acquisition
opportunities and we look forward to updating the market on these
matters in due course.
In the meantime, on behalf of the Challenger Board we would like
to take this opportunity to thank our shareholders, note holders
and all stakeholders for their patience and support during what has
been a challenging year and we look forward to providing more news
during this transitional year for your company.
Mark Gustafson
Chief Executive Officer
28 April 2017
For more information visit www.challengeracquisitions.com or
enquire to:
Challenger Acquisitions Limited
Mark Gustafson +1 604 454 8677
St Brides Partners Ltd (PR)
Lottie Brocklehurst, Charlotte +44 (0) 20 7236
Page 1177
Notes to Editors:
Challenger (LSE: CHAL) has a US$3 million equity interest in the
US$590 million New York Wheel Project and is currently focusing on
appraising additional opportunities in the attractions sector.
Strategic and Operational Review
Challenger was formed in November 2014 to undertake one or more
acquisitions in the entertainment and leisure sectors with a
particular focus on the attractions sector.
The Company was admitted to the Official List by way of a
Standard Listing and commenced trading on the London Stock
Exchange's main market for listed securities on 19 February 2015.
The US$3 million investment in the New York Wheel was announced on
26 May 2015 along with an agreement to purchase a select group of
Starneth companies, which resulted in the suspension of trading in
the Company's shares. The acquisition of the Starneth companies was
closed on 15 July 2015. The Company's shares were readmitted for
trading on 8 December 2015. There were no Giant Observation Wheel
contracts closed by Starneth in 2016. The sale of the Starneth
group of companies was announced on 30 January 2017.
The Company has been financed by equity raised from the IPO and
the issue of multiple convertible notes in 2015 (GBP3 million) and
in 2016 (GBP2.8 million). The convertible notes have provided
timely access to funding and we expect them to remain a feature of
the Company's funding structure going forward.
New York Wheel Project Investment
On 26 May 2015 Challenger announced its participation as an
equity investor in the US$590 million New York Wheel Project which
is currently under construction and is targeted to open in 2018.
Challenger has invested US$3 million in New York Wheel Investor
LLC, the company set up to fund the equity component for the New
York Wheel Project.
The New York Wheel Project ("NYW Project") is a large
entertainment complex currently being built on the New York
Harbour, which will feature a 630-foot Giant Observation Wheel, a
68,000 square foot terminal and retail building, a 950 space
parking garage and a 5,000-person capacity green roof for
events.
Approximately US$300 million has been spent on the NYW Project
to 31 December 2016, with major developments so far including:
-- The foundation for the GOW pad is now complete (8,000 cubic
yards of concrete and 1,800 tons of structural steel). The four leg
pedestals (totalling 90 tonnes apiece) have been fabricated.
-- The majority of the parking garage is now operational (825 of
the 950 spaces). It is operating under a Temporary Certificate of
Occupancy whilst the Mechanical Electrical Plumbing work is being
completed.
-- A 465ft crane has arrived at the Brooklyn prep site to start
the erection process for some of the main components for the
GOW.
-- The terminal building is structurally complete with most MEP
including escalators installed. The curtain wall is scheduled to
begin installation in May.
-- The legs for the wheel have arrived in the South Brooklyn
Marine Terminal. Each of the four legs weighs 550 tonnes, measuring
18 feet wide and 275 feet tall.
-- Manufacturing continues on the other major components such as
the rim, cables, spindle, drive towers, capsules, electrical and
control cabinets, etc. All elements are 75% or more completed.
Construction commenced in May 2015 with the grand opening
scheduled in 2018 with an estimated 3.5 million annual visitors
expected. The GOW, which will be 50% larger than the London Eye,
will provide passengers with a panoramic view of major landmark
sites, including the New York Harbour, the Statue of Liberty, the
Verrazano Bridge, Staten Island and the Lower Manhattan
skyline.
For more information see www.newyorkwheel.com, which includes a
live webcam of the construction site.
Disposal of Starneth
The sale of Starneth, announced on 30 January 2017, provides for
three key elements: contingent consideration for Challenger, an
on-going cooperation agreement for Challenger to provide potential
funding options for the developers of select Giant Observation
Wheel projects, and the extinguishing of all cash obligations owing
by Challenger relating to Starneth. The new owner is a company
controlled by the former CEO of Starneth.
Upon closing of at least two major development projects by
Starneth over the next two years, including the Giant Observation
Wheel project in Jakarta, Challenger will receive up to US$6
million in fees less a payment of EUR1.25 million related to the
cash payment that Challenger was due to pay to the former Starneth
vendors from the original acquisition. One common equity unit of
New York Wheel LLC will continue to be pledged to the former
Starneth vendors until this payment of EUR1.25 million has been
completed. Following the sale of Starneth, Challenger will retain
its equity stake in the New York Wheel LLC, with a minimum of two
equity units and up to three equity units depending on the closure
of at least one project by Starneth in the next two years.
The cash fees of up to US$6 million that Challenger would
receive are based on two fee agreements signed with the new owners
of Starneth and are calculated based on the incoming cash receipts
from the developers for these projects. The cash payment of EUR1.25
million from Challenger is completely contingent on these projects
commencing and paid only once Challenger starts receiving these
cash fees.
Challenger and the new Starneth owners have signed a five-year
cooperation agreement whereby Starneth can provide the design and
engineering for select Giant Observation Wheel projects and
Challenger can provide potential funding options for the developers
of these select projects. There may be an opportunity for
Challenger to receive or invest in equity stakes in certain of
these projects.
Corporate and Post Year End
With the disposal of Starneth in January 2017, the Company now
has a limited corporate presence and has divested of the Starneth
offices in The Netherlands, Dubai and Florida.
Two new directors were appointed to the Board at the start of
2016 - Mr. John Le Poidevin as non-executive Chairman and Mr.
Richard Marin as a non-executive. In early 2017, Mr. Le Poidevin
retired from the Board and Mr. Markus Kameisis also stepped down,
but remains as Chief Financial Officer. Subsequently Mr. Gert
Rieder also retired in order to focus on his roles elsewhere and
was replaced by Mr. Gene Stice.
The Company currently has three directors, one of whom is an
executive officer. The Chief Financial Officer is not a member of
the Board.
2017 is a transition year for Challenger. Our vendors and note
holders have been, and remain, very patient and supportive as we
move forward. The potential receipt of fees from one or two
Starneth projects and the closing of a potential new acquisition or
corporate transaction should strengthen our Company this year.
Mark Gustafson
Chief Executive Officer
28 April 2017
Financial Review
Overview
At the balance sheet date the Group is again in a transition
phase. In 2015 the acquisitions of the Starneth Group and the
investment in the New York Wheel were transformational for the
Company. Now the disposal of the Starneth entities post year end
was necessary to end the ongoing cash burn related with the
Starneth Group. Even though a signed contract for the wheel in
Jakarta existed when the Company acquired Starneth, the developer
has not been able to close the funding required to start the
project. As a result no revenue could be earned on this
contract.
Details on the disposal of the Starneth entities can be found on
pages 6 and 7 of this annual report. The disposal of the Starneth
entities has led to a change in the financial statements. The sale
decision in 2016 and the actual disposal in January 2017 have led
to the classification of the Starneth Group as assets held for
sale. Accordingly, the results of the Starneth group are presented
as discontinued operations and shown as a single line item the
income statement for 2016 and the comparative year. The assets and
liabilities of the disposal group are also shown separately on the
statement of financial position for the 2016 year end.
Loss for the year
In the period under review the disposal group (the Starneth
Group) recorded total revenue of GBP 3,579k (2015: GBP 926k). Cost
of sales amounted to GBP 3,013k (2015:GBP 458k), giving a gross
profit of GBP 566k (2015: GBP 468k). Total costs of the Starneth
Group amounted to GBP 2,410k (2015: GBP 893k), leading to a loss of
GBP 1,844k (2015: GBP 425k). In addition to this loss of the
disposal group, Challenger has impaired the goodwill of its
participation in the Starneth Group. This led to an additional loss
of GBP 3,128 (2015: nil) in the disposal group.
Challenger Acquisitions Limited had no revenue in the period
under review and total cost of GBP846k (2015: GBP 2,176k). Together
with GBP462k (2015: nil) as other comprehensive income out of the
fair value movement of available for sale financial assets and
GBP143k of other comprehensive expense (2015: nil), which is the
change of the translation reserve in the balance sheet, the total
comprehensive loss attributable to shareholders amounts to GBP
6,581k (2015: GBP 2,601k).
Balance Sheet
The total amount of assets on the balance sheet as per the
balance sheet date is GBP4,797k (2015: GBP 7,460k). The assets
consist mainly of the investment in the New York Wheel of GBP2,438k
(2015: GBP 1,976k) and the remaining goodwill (included in the
assets of the disposal group below) of the disposal group of GBP
1,635k (2015: GBP 4,817). The investments in the New York Wheel is
strategic to the company and is intended to be held long term. In
addition there are the assets of the disposal group of GBP 2,271k,
GBP71k (2015: GBP 325k) in cash and cash equivalents and GBP 17k
(2015: GBP 202k) of trade and other receivables.
These assets have been financed by a mix of equity and
convertible notes. The equity at the balance sheet date amounted to
GBP (2,750k) (2015: GBP 1,268k) and the liabilities to GBP7,547k
(2015: GBP6,192k). The liabilities consists of GBP 3,615k short
term borrowing, GBP 2,171k long term borrowing, trade and other
payables of GBP 533k and the liabilities of the disposal group of
GBP 1,228k.
Cash flow
During the year there were a number of funding transactions
which generated cash inflows of GBP2.85m, there were also a
significant number of non-cash transactions namely:
-- On 7 January 2016 230,034 Ordinary Shares were allotted (at
40p) to the holders of Convertible Notes in payment of interest to
31 December 2015.
-- On 29 January 2016 the Company issued GBP1.0 million in
secured convertible notes, convertible at 80p, maturing on 30 June
2019 and bearing interest of 8%.
-- On 3 March 2016 the Company issued GBP0.5 million in secured
convertible notes, convertible at 25p, maturing on 2 March 2017 and
bearing interest of 5%.
-- On 21 March 2016 711,646 Ordinary Shares were allotted
(676,274 at 25p and 35,372 at 20.8p) pursuant to the conversion of
GBP172,200 in convertible notes.
-- On 13 April 2016 277,615 Ordinary Shares were allotted
(268,862 at 32.2p, 5,939 at 33.4p and 2,260 at 80p) to the holders
of Convertible Notes in payment of interest to 31 March 2016 and
332,792 Ordinary Shares were allotted at 25p pursuant to the
conversion of GBP83,198 in convertible notes.
-- On 26 April 2016 the Company issued GBP0.5 million in
unsecured convertible notes, convertible at a variable pricing
formula, maturing on 22 April 2018 and bearing interest of 8%.
-- On 14 June 2016 the Company issued GBP0.5 million in
unsecured convertible notes, convertible at a variable pricing
formula, maturing on 10 June 2018 and bearing interest of 8%.
-- On 13 July 2016 463,597 Ordinary Shares were allotted
(370,088 at 22.2p, 26,369 at 23.6p, 44,313 at 22.0p and 13,827 at
23.6p) to the holders of Convertible Notes in payment of interest
to 30 June 2016 and 460,824 Ordinary Shares were allotted (at
19.8p) pursuant to the conversion of GBP91,243 in convertible
notes.
-- On 13 July 2016, the Company issued 1,100,000 Ordinary Shares
(at 75p) comprising the second tranche of the consideration shares
for the Starneth acquisition.
-- On 12 September 2016 4,276,262 Ordinary Shares were allotted
(at 17.8p) pursuant to the conversion of GBP750,128 in convertible
notes.
-- On 12 October 2016 529,952 Ordinary Shares were allotted
(361,314 at 18p, 35,654 at 17.6p, 118,290 at 17.0p and 14,694 at
17.6p) to the holders of Convertible Notes in payment of interest
to 30 September 2016.
-- On 18 October 2016 the Company issued GBP0.35 million in
unsecured convertible notes, convertible at a variable pricing
formula, maturing on 13 April 2018 and bearing interest built into
the note of 15%.
-- On 16 December 2016 124,673 Ordinary Shares were allotted (at
12.7p) pursuant to the conversion of GBP15,918 in convertible notes
and 66,000 Ordinary Shares were issued (at 75p) as partial payment
of the third tranche of consideration shares for the Starneth
acquisition.
Cash of GBP2,618k was generated from financing activities.
Cash used in operations totalled GBP2,670k.
Closing cash
As at 31 December 2016, the Group (including the disposal group)
held GBP 273k (2015: GBP 325k) in the bank account.
Markus Kameisis
Chief Financial Officer
28 April 2017
Consolidated Statement of Comprehensive Income
The statement of comprehensive income of the group from 1
January 2016 to 31 December 2016 is set out below.
Year ended Period ended
31 December 31 December
2016 2015
Note GBP'000 GBP'000
Personnel expenses 15 (80) (99)
Administrative
expenses (846) (1,218)
Operating loss (926) (1,317)
Finance costs 13 (1,002) (859)
Loss before income
taxes (1,928) (2,176)
Income tax expense 18 - -
Loss after taxation (1,928) (2,176)
Loss for the year/period
from continuing
operations (1,928) (2,176)
Loss for the year/period
from discontinued
operations 28 (4,972) (425)
Loss for year (6,900) (2,601)
Other comprehensive
expense
Translation of (143)
foreign subsidiaries -
Fair value movement 462
on available for
sale financial
asset -
Total other comprehensive 319
income -
Total comprehensive
loss attributable
to owners of the
parent (6,581) (2,601)
Loss per share:
Basic from continued
operations 19 (0.11) (0.21)
Diluted from continued
operations 19 (0.11) (0.21)
Basic from discontinued
operations 19 (0.30) (0.04)
Diluted from discontinued
operations 19 (0.30) (0.04)
Consolidated Statement of Financial Position
The consolidated statement of financial position of the group as
at 31 December 2016 is set out below:
As at 31 As at 31
December December
2016 2015
Note GBP'000 GBP'000
Assets
Current assets
Cash and cash equivalents 7 71 325
Trade and other receivables 8 17 202
Total current assets 88 527
Assets of disposal group
classified as held for sale 28 2,271 -
Non-current assets
Property, plant and equipment 9 - 140
Intangible assets 10 - 4,817
Available-for-sale financial
assets 11 2,438 1,976
Total non-current assets 2,438 6,933
Total assets 4,797 7,460
Equity and liabilities
Capital and reserves
Share capital 6 219 133
Share premium 6 4,364 2,080
Shares to be issued 6 775 1,650
Translation reserve (146) (3)
Equity component of convertible
instruments 1,064 -
Available for sale reserve 462 -
Retained earnings (9,488) (2,592)
Total equity attributable
to equity holders (2,750) 1,268
Current liabilities
Borrowings 12 3,615 4,374
Trade and other payables 14 533 1,046
Total current liabilities 4,148 5,420
Liabilities of disposal
group classified as held
for sale 28 1,228 -
Non-current liabilities
Borrowings 12 2,171 772
Total non-current liabilities 2,171 772
Total equity and liabilities 4,797 7,460
Consolidated Statement of Changes in Equity
Shares Equity component
Share Share to be Translation of convertible Retained
capital Premium issued reserve instruments earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
On incorporation
on 24 November - -
2014 - - - - -
Loss for the
period - - - - - (2,601) (2,601)
Total comprehensive
loss for the
period - - - - - (2,601) (2,601)
-------- -------- ------- ------------- ---------------- --------- -------
Unissued share
capital - - 1,650 - - - 1,650
Issue of options - - - - - 9 9
Translation
Reserve - - - (3) - - (3)
Transaction
with owners
Issue of shares 133 2,080 - - - - 2,213
-------- -------- ------- ------------- ---------------- --------- -------
Total 133 2,080 1,650 (3) - 9 3,869
As at 31 December
2015 133 2,080 1,650 (3) - (2,592) 1,268
-------- -------- ------- ------------- ---------------- --------- -------
Equity component
of convertible
Shares instruments Available
Share Share to be Translation for Retained
capital premium issued reserve sale reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 31 December
2015 133 2,080 1,650 (3) - - (2,592) 1,268
Loss for the
year - - - - - - (6,900) (6,900)
Other comprehensive
loss - - - (143) - 462 - 319
Total comprehensive
loss for the
year - - - (143) - 462 (6,900) (6,581)
Transaction
with owners
Issue of shares 86 2,284 (875) - - - - 1,495
Issue of options - - - - - - 4 4
Equity component
convertible
notes - - - - 1,044 - - 1,044
Release of
transaction
fees - - - - 20 - - 20
Total 86 2,284 (875) - 1,064 - 4 2,563
As at 31 December
2016 219 4,364 775 (146) 1,064 462 (9,488) (2,750)
Consolidated Statement of Cash Flows
Year ended Period ended
31 December 31 December
2016 2015
GBP'000 GBP,000
Cash flow from operating activities
Loss for the period before taxation (6,900) (2,601)
Depreciation, amortisation and
impairment charge 3,153 37
Share option charge 5 9
Interest 760 847
Operating cash flows before movements
in working capital (2,982) (1,708)
-------------- ---------------
Increase in receivables (81) (55)
Increase in accounts payable
and accrued liabilities 393 1,009
-------------- ---------------
Net cash used in operating activities (2,670) (754)
Acquisition of tangible fixed
assets - (8)
Investment in subsidiaries net
of cash acquired - (613)
Investment in available for sale
financial asset - (1,976)
-------------- ---------------
Net cash outflow from investing
activities - (2,597)
Interest expense (56) (570)
Issue of ordinary shares net
of issue costs - 1,339
Issue of convertible instruments 2,850 2,907
Loans repaid (176) -
Net cash inflow from financing
activities 2,618 3,676
Net (decrease)/increase in cash
and cash equivalents (52) 325
Cash and cash equivalent at beginning 325 -
of period
Cash and cash equivalent at end
of period 273 325
Of the cash and cash equivalents at 31 December 2016 GBP202k is
held in the disposal group.
There were significant non-cash transactions being the issue of
share capital to settle convertible debt and interest. These are
detailed on page 9.
Notes to the consolidated financial statements
1. General information
The Company was incorporated under the section II of the
Companies (Guernsey) Law 2008 on 24 November 2014, it is limited by
shares and has registration number 59383.
Following completion of the acquisition of Starneth (the
"Acquisition") Challenger became the holding company of the
Starneth Group through which it owns and operates a business
specialising in the design and engineering of giant observation
wheels and structures. In addition, the Company has an investment
of US$3m in New York Wheel Investor LLC, a company that was set up
to fund the equity component for the project to build a New York
Wheel which includes an approximate 630 foot high observation wheel
with 36 capsules, a 68,000 square foot terminal and retail
building, and a 950 space parking garage.
The prior reporting period was the first reporting period for
the Group since its incorporation. The acquired Starneth Group was
consolidated from 1 July 2015. Following the decision to dispose of
the Starneth group, that completed after the year end, management
recognised the assets and liabilities of the Starneth group as a
disposal group at 31 December 2016.
The Company's registered office is located at 55 Mount Row, St
Peter Port, Guernsey, GY1 1NU, Channel Islands.
The company has not prepared individual financial statements in
accordance with section 244 of the Companies (Guernsey) Law
2008.
2. Significant Accounting Policies
Basis of preparation
The consolidated financial statements of Challenger Acquisitions
Limited for the year ended 31 December 2016 have been prepared in
accordance with International Financial Reporting Standards as
adopted by the EU (IFRS's as adopted by the EU), issued by the
International Accounting Standards Board (IASB), including
interpretations issued by the International Financial Reporting
Interpretations Committee (IFRIC) applicable to the companies
reporting under IFRS. The consolidated financial statements have
been prepared under the historical cost convention, as modified by
the revaluation of land and buildings and available-for-sale
financial assets.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 3.
The financial information has been presented in United Kingdom
Pounds (GBP), being the functional currency of the Company.
Going concern
At 31 December 2016 the group had net current liabilities of
GBP4,060k. The financial statements have been prepared on the
assumption that the Company will continue as a going concern. Under
the going concern assumption, an entity is ordinarily viewed as
continuing in business for the foreseeable future with neither the
intention nor the necessity of liquidation, ceasing trading or
seeking protection from creditors pursuant to laws or regulations.
In assessing whether the going concern assumption is appropriate,
the Directors take into account all available information for the
foreseeable future, in particular for the twelve months from the
date of approval of the financial information.
Following the discussions held with the ordinary creditors and
the convertible note holders, the cost control measures implemented
and the financing options available, the Directors have a
reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future. The
Noteholders are supportive of the company and discussions are
ongoing regarding changing the terms so that interest can be
settled in shares at the redemption date. The ordinary creditors
accept that repayment will occur either when a substantial fund
raising has occurred or success fees are received from Starneth.
The fund raising options are early stage and therefore there is a
material uncertainty as to whether additional funding will be
received and therefore regarding the going concern basis of
preparation. The financial statements do not include any
adjustments that would be required if the going concern basis was
not appropriate.
The Directors' objectives when managing capital are to safeguard
the Company's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders. At the date of this financial information, the
Company had been financed from equity and convertible notes. In the
future, the capital structure of the Company is expected to consist
of convertible notes and equity attributable to equity holders of
the Company, comprising issued share capital and reserves.
Standards and interpretations issued but not yet applied
A number of new standards and amendments to standards and
interpretations have been issued but are not yet effective and in
some cases have not yet been adopted by the EU.
The directors do not expect that the adoption of these standards
will have a material impact on the financial statements of the
company in future periods, except that IFRS 9 will impact both the
measurement and disclosures of financial instruments, more
specifically that any gain or loss on the available for sale
investment will not be reclassified through the profit and loss and
impairment charges in the profit and loss will no longer occur.
IFRS 16 will have an impact on the recognition of operating leases.
At this point it is not practicable for the directors to provide a
reasonable estimate of the effect of these standards as their
detailed review of these standards is still ongoing.
Principles of consolidation and equity accounting
Subsidiaries
Subsidiaries are all entities over which the group has control.
The group controls an entity when the group is exposed to, or has
the right to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the group. They are deconsolidated
from the date that control ceases.
The group applies the acquisition method to account for business
combinations.
Intercompany transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the transferred asset. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the group.
Segment Reporting
For the purpose of IFRS 8, the Chief Operating Decision Maker
"CODM" takes the form of the board of directors. The Directors are
of the opinion that the business of the Company comprises three
activities:
Corporate Center
Administers and manages the group. Identifies target companies
or businesses in the entertainment and leisure sectors for possible
further acquisitions.
Engineering
Engineers and project manages global observation wheel around
the globe.
Investments
Holds and administers all participations the group has in global
observation wheels.
Foreign Currency Translation
Functional and presentation currency
Items included in the financial statements of each of the
group's entities are measured using the currency of the primary
economic environment in which the entity operates ('the functional
currency'). The consolidated financial statements are presented in
British Pounds (GBP), which is Challenger Acquisitions functional
and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation of monetary assets and
liabilities denominated in foreign currencies at year end exchange
rates are generally recognised in profit or loss. Foreign exchange
gains and losses are presented in the statement of profit or loss,
within finance income or finance costs.
Non-monetary items that are measured at fair value in a foreign
currency are translated using the exchange rates at the date when
the fair value was determined. Translation differences on assets
and liabilities carried at fair value are reported as part of the
fair value gain or loss. For example, translation differences on
non-monetary assets and liabilities such as equities held at fair
value through profit or loss are recognised in profit or loss as
part of the fair value gain or loss and translation differences on
non-monetary assets such as equities classified as
available-for-sale financial assets are recognised in other
comprehensive income.
Group companies
The results and financial position of foreign operations (none
of which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
-- assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet
-- income and expenses for each statement of profit or loss and
statement of comprehensive income are translated at average
exchange rates (unless this is not a reasonable approximation of
the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the
dates of the transactions), and
-- all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the
translation of any net investment in foreign entities, and of
borrowings and other financial instruments designated as hedges of
such investments, are recognised in other comprehensive income.
When a foreign operation is sold or any borrowings forming part of
the net investment are repaid, the associated exchange differences
are reclassified to profit or loss, as part of the gain or loss on
sale.
Goodwill and fair value adjustments arising on the acquisition
of a foreign operation are treated as assets and liabilities of the
foreign operation and translated at the closing rate.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable. Amounts disclosed as revenue are net of
returns, trade allowances, rebates and amounts collected on behalf
of third parties.
The group recognises revenue when the amount of revenue can be
reliably measured, it is probable that future economic benefits
will flow to the entity and specific criteria have been met for
each of the group's activities as described below. The group bases
its estimates on historical results, taking into consideration the
type of customer, the type of transaction and the specifics of each
arrangement.
Income Tax
The income tax expense or credit for the period is the tax
payable on the current period's taxable income based on the
applicable income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the company's subsidiaries
and associates operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities.
Current and deferred tax is recognised in profit or loss, except
to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax
is also recognised in other comprehensive income or directly in
equity, respectively.
Business Combinations
The acquisition method of accounting is used to account for all
business combinations, regardless of whether equity instruments or
other assets are acquired. The consideration transferred for the
acquisition of a subsidiary comprises the
-- fair values of the assets transferred
-- liabilities incurred to the former owners of the acquired business
-- equity interests issued by the group
-- fair value of any asset or liability resulting from a
contingent consideration arrangement, and
-- fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the
acquisition date. The group recognises any non-controlling interest
in the acquired entity on an acquisition-by-acquisition basis
either at fair value or at the non-controlling interest's
proportionate share of the acquired entity's net identifiable
assets.
Acquisition-related costs are expensed as incurred.
The excess of the
-- consideration transferred,
-- amount of any non-controlling interest in the acquired entity, and
-- acquisition-date fair value of any previous equity interest
in the acquired entity over the fair value of the net identifiable
assets acquired is recorded as goodwill. If those amounts are less
than the fair value of the net identifiable assets of the
subsidiary acquired, the difference is recognised directly in
profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the
entity's incremental borrowing rate, being the rate at which a
similar borrowing could be obtained from an independent financier
under comparable terms and conditions.
Contingent consideration is classified either as equity or a
financial liability. Amounts classified as a financial liability
are subsequently remeasured to fair value with changes in fair
value recognised in profit or loss.
Impairment of assets
Goodwill and intangible assets that have an indefinite useful
life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired. Other assets
are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less
costs of disposal and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of
assets (cash-generating units). Non-financial assets other than
goodwill that suffered an impairment are reviewed for possible
reversal of the impairment at the end of each reporting period.
Cash and cash equivalents
For the purpose of presentation in the statement of cash flows,
cash and cash equivalents includes cash on hand, deposits held at
call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that
are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value, and bank
overdrafts. Bank overdrafts are shown within borrowings in current
liabilities in the balance sheet.
Trade receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
Investments and other financial assets
Classification
The group classifies its financial assets in the following
categories:
-- financial assets at fair value through profit or loss,
-- loans and receivables,
-- held-to-maturity investments, and
-- available-for-sale financial assets.
The classification depends on the purpose for which the
investments were acquired. Management determines the classification
of its investments at initial recognition and, in the case of
assets classified as held-to-maturity, re-evaluates this
designation at the end of each reporting period.
Recognition and derecognition
Regular way purchases and sales of financial assets are
recognised on trade-date, the date on which the group commits to
purchase or sell the asset. Financial assets are derecognised when
the rights to receive cash flows from the financial assets have
expired or have been transferred and the group has transferred
substantially all the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the
accumulated fair value adjustments recognised in other
comprehensive income are reclassified to profit or loss as gains
and losses from investment securities.
Measurement
At initial recognition, the group measures a financial asset at
its fair value plus, in the case of a financial asset not at fair
value through profit or loss, transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at fair value through profit or
loss are expensed in profit or loss.
Loans and receivables and held-to-maturity investments are
subsequently carried at amortised cost using the effective interest
method.
Available-for-sale financial assets and financial assets at fair
value through profit or loss are subsequently carried at fair
value. Gains or losses arising from changes in the fair value are
recognised as follows:
-- for 'financial assets at fair value through profit or loss' -
in profit or loss within other income or other expenses
-- for available-for-sale financial assets that are monetary
securities denominated in a foreign currency - translation
differences related to changes in the amortised cost of the
security are recognised in profit or loss and other changes in the
carrying amount are recognised in other comprehensive income
-- for other monetary and non-monetary securities classified as
available-for-sale - in other comprehensive income.
Dividends on financial assets at fair value through profit or
loss and available-for-sale equity instruments are recognised in
profit or loss as part of revenue from continuing operations when
the group's right to receive payments is established.
Interest income from financial assets at fair value through
profit or loss is included in the net gains/(losses). Interest on
available-for-sale securities, held-to-maturity investments and
loans and receivables calculated using the effective interest
method is recognised in the statement of profit or loss as part of
revenue from continuing operations.
Impairment
The group assesses at the end of each reporting period whether
there is objective evidence that a financial asset or group of
financial assets is impaired. A financial asset or a group of
financial assets is impaired and impairment losses are incurred
only if there is objective evidence of impairment as a result of
one or more events that occurred after the initial recognition of
the asset (a 'loss event') and that loss event (or events) has an
impact on the estimated future cash flows of the financial asset or
group of financial assets that can be reliably estimated. In the
case of equity investments classified as available-for-sale, a
significant or prolonged decline in the fair value of the security
below its cost is considered an indicator that the assets are
impaired.
Assets carried at amortized cost
For loans and receivables, the amount of the loss is measured as
the difference between the asset's carrying amount and the present
value of estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial
asset's original effective interest rate. The carrying amount of
the asset is reduced and the amount of the loss is recognised in
profit or loss. If a loan or held-to-maturity investment has a
variable interest rate, the discount rate for measuring any
impairment loss is the current effective interest rate determined
under the contract. As a practical expedient, the group may measure
impairment on the basis of an instrument's fair value using an
observable market price.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised (such as an
improvement in the debtor's credit rating), the reversal of the
previously recognised impairment loss is recognised in profit or
loss.
Assets classified as available-for-sale
If there is objective evidence of impairment for
available-for-sale financial assets, the cumulative loss - measured
as the difference between the acquisition cost and the current fair
value, less any impairment loss on that financial asset previously
recognised in profit or loss - is removed from equity and
recognised in profit or loss.
Impairment losses on equity instruments that were recognised in
profit or loss are not reversed through profit or loss in a
subsequent period.
If the fair value of a debt instrument classified as
available-for-sale increases in a subsequent period and the
increase can be objectively related to an event occurring after the
impairment loss was recognised in profit or loss, the impairment
loss is reversed through profit or loss.
Income recognition
Service income
Revenue is measured at the fair value of the consideration
received or receivable, and represents amounts receivable for
services, stated net of discounts, returns and value added taxes.
The Group recognises revenue when the amount of revenue can be
reliably measured and when it is probable that future economic
benefits will flow to the entity.
Interest income
Interest income is recognised using the effective interest
method. When a receivable is impaired, the group reduces the
carrying amount to its recoverable amount, being the estimated
future cash flow discounted at the original effective interest rate
of the instrument, and continues unwinding the discount as interest
income. Interest income on impaired loans is recognised using the
original effective interest rate.
Dividends
Dividends are recognised as revenue when the right to receive
payment is established. This applies even if they are paid out of
pre-acquisition profits. However, the investment may need to be
tested for impairment as a consequence.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less
depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items. Cost may also include
transfers from equity of any gains or losses on qualifying cash
flow hedges of foreign currency purchases of property, plant and
equipment.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the group and the cost of the item can be measured
reliably. The carrying amount of any component accounted for as a
separate asset is derecognised when replaced. All other repairs and
maintenance are charged to profit or loss during the reporting
period in which they are incurred.
The depreciation methods and periods used by the group are:
-- Vehicles 3-5 years
-- Furniture, fittings and equipment 3-8 years
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in profit or
loss.
Intangible assets
Goodwill
Goodwill is measured as described under "Business Combinations"
in this document. Goodwill on acquisitions of subsidiaries is
included in intangible assets. Goodwill is not amortised but it is
tested for impairment annually, or more frequently if events or
changes in circumstances indicate that it might be impaired, and is
carried at cost less accumulated impairment losses. Gains and
losses on the disposal of an entity include the carrying amount of
goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the
goodwill arose. The units or groups of units are identified at the
lowest level at which goodwill is monitored for internal management
purposes, being the operating segments.
Trade and other payables
These amounts represent liabilities for goods and services
provided to the group prior to the end of financial year which are
unpaid. The amounts are unsecured and are usually paid within 30
days of recognition. Trade and other payables are presented as
current liabilities unless payment is not due within 12 months
after the reporting period. They are recognised initially at their
fair value and subsequently measured at amortised cost using the
effective interest method.
Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in
profit or loss over the period of the borrowings using the
effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the
extent that it is probable that some or all of the facility will be
drawn down. In this case, the fee is deferred until the draw down
occurs. To the extent there is no evidence that it is probable that
some or all of the facility will be drawn down, the fee is
capitalised as a prepayment for liquidity services and amortised
over the period of the facility to which it relates.
The fair value of the liability portion of a convertible bond is
determined using a market interest rate for an equivalent
non-convertible bond. This amount is recorded as a liability on an
amortised cost basis until extinguished on conversion or maturity
of the bonds. The remainder of the proceeds is allocated to the
conversion option. This is recognised and included in shareholders'
equity, net of income tax effects.
Employee benefits
Short term obligations
Liabilities for wages and salaries, including non-monetary
benefits and accumulating sick leave that are expected to be
settled wholly within 12 months after the end of the period in
which the employees render the related service are recognised in
respect of employees' services up to the end of the reporting
period and are measured at the amounts expected to be paid when the
liabilities are settled. The liabilities are presented as current
employee benefit obligations in the balance sheet.
The obligations are presented as current liabilities in the
balance sheet if the entity does not have an unconditional right to
defer settlement for at least twelve months after the reporting
period, regardless of when the actual settlement is expected to
occur.
Share based payments
Employee options
The fair value of options granted is recognised as an employee
benefits expense with a corresponding increase in equity. The total
amount to be expensed is determined by reference to the fair value
of the options granted:
-- including any market performance conditions (eg the entity's share price)
-- excluding the impact of any service and non-market
performance vesting conditions (eg profitability, sales growth
targets and remaining an employee of the entity over a specified
time period), and
-- including the impact of any non-vesting conditions (eg the
requirement for employees to save or holdings shares for a specific
period of time).
The total expense is recognised over the vesting period, which
is the period over which all of the specified vesting conditions
are to be satisfied. At the end of each period, the entity revises
its estimates of the number of options that are expected to vest
based on the non-market vesting and service conditions. It
recognises the impact of the revision to original estimates, if
any, in profit or loss, with a corresponding adjustment to
equity.
Social security contributions payable in connection with an
option grant are considered an integral part of the grant itself
and the charges are treated as cash-settled transactions.
The options are administered by Challenger Acquisitions Limited.
When the options are exercised, Challenger Acquisitions Limited
transfers the appropriate amount of shares to the employee. The
proceeds received net of any directly attributable transaction
costs are credited directly to equity.
Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity under share premium as a
deduction, net of tax, from the proceeds.
Earnings per share
Basic earnings per share is calculated by dividing:
-- the profit attributable to owners of the company, excluding
any costs of servicing equity other than ordinary shares
-- by the weighted average number of ordinary shares outstanding during the financial year.
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account:
-- the after income tax effect of interest and other financing
costs associated with dilutive potential ordinary shares, and
-- the weighted average number of additional ordinary shares
that would have been outstanding assuming the conversion of all
dilutive potential ordinary shares.
3. Critical estimates, judgements and errors
The preparation of financial statements requires the use of
accounting estimates which, by definition, will seldom equal the
actual results. Management also needs to exercise judgement in
applying the group's accounting policies.
This note provides an overview of the areas that involved a
higher degree of judgement or complexity, and of items which are
more likely to be materially adjusted due to estimates and
assumptions turning out to be wrong. Detailed information about
each of these estimates and judgements is included together with
information about the basis of calculation for each affected line
item in the financial statements. In addition, this note also
explains where there have been actual adjustments this year as a
result of an error and of changes to previous estimates.
Significant estimates and judgements
The areas involving significant estimates or judgements are:
-- Going concern
See accounting policies (note 2) for details of the assessment
made.
-- Classification and valuation of disposal group
Management considered the requirements of IFRS 5 and made the
judgement that the identified disposal group was ready for
immediate sale in its present condition and that the sale was
highly probable and that they were committed to a plan to sell at
31 December 2016. On this basis management recognised the assets
and liabilities as a disposal group on the face of the statement of
financial position and the loss for the period as being generated
from discontinued operations on the face of the statement of
comprehensive income.
-- Fair value of the consideration to be issued in shares on the acquisition of Starneth
As part of the consideration for the acquisition of Starneth, a
portion was issued or was to be issued in shares. IFRS 3 requires
equity consideration to be measured at its fair value. At the time
the company was suspended from the Standard list and therefore
there was not an active market for the Company's share capital. On
this basis the shares were valued through negotiation between the
transacting parties, having regard for the current position of the
company and the synergies that could be obtained. This process
required an element of judgement and GBP0.75 was agreed as the fair
value of the shares. Immediately prior to suspension the share
price of the company was lower and if this price was used the
Goodwill and share premium would be reduced by approximately
GBP1.2m at the acquisition date. Additionally, the impairment
recognised during the year to 31 December 2016 would have been
reduced by GBP1.2m to GBP1.9m. There is no impact on the net assets
at 31 December 2016.
-- Fair value of the available for sale financial asset
The equity units in New York Wheel Investor LLC are not quoted,
in assessing the fair value of the asset the Directors had regard
for recent transactions in the equity of New York Wheel Investor
LLC. All equity components have been acquired at the same price as
Challenger during 2015 and 2016. On the basis that the project is
materially on schedule the Directors do not believe that the fair
value is materially different to the acquisition value in the
underlying currency (US dollars).
Estimates and judgements are continually evaluated. They are
based on historical experience and other factors, including
expectations of future events that may have a financial impact on
the entity and that are believed to be reasonable under the
circumstances.
4. FINANCIAL RISK MANAGEMENT
This note explains the group's exposure to financial risks and
how these risks could affect the group's future financial
performance. Current year profit and loss information has been
included where relevant to add further context.
Risk Exposure Measurement Management
arising
from
------------ -------------------- ---------------- ----------------
Market risk Future commercial Cash flow No hedging
- foreign cash flows forecasting
exchange not denominated Sensitivity
in GBP analysis No hedging
Recognised
financial
assets and
liabilities
not denominated
in GBP
Credit risk Cash and Aging analysis Diversification
cash equivalents, Credit ratings of bank
trade receivables, deposits.
Liquidity Borrowings Rolling Availability
risk and other cash flow of committed
liabilities forecasts credit lines
and borrowing
facilities
Foreign exchange risk
The group is especially focused on the currency pairs EUR/GBP
and USD/GBP. The group's main personnel costs are in EUR, its
revenue from projects is in USD and its only investment is also
denominated in USD.
The group's exposure to foreign currency risk at the end of the
reporting period, expressed in GBP'000 was as follows:
Currency Assets Assets 10% Liabilities Liabilities 10%
in CCY in GBP change in CCY in GBP change
---------- -------- -------- -------- ------------ ------------ --------
USD 3,000 1,976 (198) 24 17 2
EUR 1 1 - 2,468 2,113 211
CHF 1 1 - - - -
The displayed FX exposures are without the disposal group
(assets held for sale) which is denominated in EUR.
During the year, GBP 175k foreign-exchange related expenses were
recognised in profit or loss.
As described above the group is primarily exposed to changes in
USD/GBP and EUR/GBP exchange rates. The sensitivity of profit or
loss to changes in the exchange rates as summarized in the above
table arises mainly from the group's EUR denominated
liabilities.
Interest rate risk
The group's fixed rate borrowings are carried at amortised cost.
They are therefore not subject to interest rate risk as defined in
IFRS 7, since neither the carrying amount nor the future cash flows
will fluctuate because of a change in market interest rates.
Credit risk
Credit risk arises from cash and cash equivalents and deposits
with banks and financial institutions, as well as credit exposures
to customers, including outstanding receivables. To limit the risk
the group's main cash resources are held with banks with a minimum
external rating of A.
5. Business Segments
For the purpose of IFRS8, the Chief Operating Decision Maker
"CODM" takes the form of the board of directors. The Directors are
of the opinion that the business of the Company comprises three
activities, being the corporate center, which administers and
manages the Group and identifies target companies or businesses for
possible acquisitions in the Giant Observation Wheel industry, the
Engineering business which is compromised by the acquired Starneth
design and engineering business and the Investment segment which
compromises all investments the group holds in Giant Observation
Wheels globally.
All revenues are generated from customers that are external to
the group.
The analysis of revenue, operating loss, assets and liabilities
by the component used by the CODM to make decisions about operating
matters is as follows:
Year ended Engineering Investments Corporate Total
31 December Center
2015
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 926 - - 926
------------ ------------ ---------- --------
Operating loss (350) - (1,360) (1,710)
------------ ------------ ---------- --------
Finance cost (1) (155) (698) (854)
Depreciation (37) - - (37)
Taxation - - - -
Carrying amount
of assets 702 1,976 4,782 7,460
------------ ------------ ---------- --------
Carrying amount
of liabilities 1,021 1,976 3,195 6,192
------------ ------------ ---------- --------
Year ended Investments Corporate Total
31 December Centre
2016
GBP'000 GBP'000 GBP'000
Revenue - - -
------------ ---------- --------
Operating loss - (926) (926)
------------ ---------- --------
Finance cost (213) (789) (1,002)
Depreciation - - -
Taxation - - -
Carrying amount
of assets 2,438 88 2,526
------------ ---------- --------
Carrying amount
of liabilities 1,976 4,343 6,319
------------ ---------- --------
The engineering operating segment forms part of the disposal
group, details of the above items can be seen in note 27.
The engineering segment is located in the Netherlands and all
revenue generated was from the USA. The corporate center and
investments are located in the parent on the company which is
registered in Guernsey.
6. SHARE CAPITAL
Issued and fully Number Share Share Total
paid of shares capital premium
GBP'000 GBP'000 GBP'000
Issued on Incorporation 1 - - -
----------- --------- --------- --------
Issue of shares 9,365,581 133 2,080 2,213
Sub division of 3,960,099 - - -
shares
----------- --------- --------- --------
At 31 December
2015 13,325,681 133 2,080 2,213
----------- --------- --------- --------
Issue of shares 8,573,395 86 2,284 2,370
----------- --------- --------- --------
At 31 December
2016 21,899,076 219 4,364 4,583
----------- --------- --------- --------
On 19 February 2015, on Admission to the Main Market of the
London Stock Exchange, a further 7,000,000 Ordinary Shares were
issued for a consideration of GBP700,000.
On 3 July 2015, 109,789 shares were issued at GBP 0.37 as
consideration for interests from the Convertible Note 2016 and
240,000 shares at GBP 0.40 were issued to the introducer of the New
York Wheel investment.
On 15 July 2015, as part of the consideration paid for acquiring
the Starneth business 1,100,000 shares were issued at a price of
GBP 0.75/each.
On 28 July 2015, 630,000 shares were issued at GBP 0.40 to the
introducer of the Starneth acquisition.
On 6 October 2015, 235,792 shares were issued as consideration
for interests from the Convertible Note 2016.
On 16 October 2015, 10,000 shares were issued upon the exercise
of employee options at GBP 0.40 per share.
On 7 January 2016 230,034 shares were issued for the payment of
interest for the period to 31 December 2015.
On 21 March 2016, 711,646 shares have been issued for the
conversion of convertible notes into shares. 694,610 shares have
been issued for the conversion of GBP 172,200 and 17,036 shares
have been issued for the accrued interest until the conversion
date.
On 13 April 2016, 277,061 shares were issued as consideration
for interest to 31 March 2016 on the Convertible Notes outstanding.
On the same day 332,792 shares were issued for the conversion of
GBP 83,198 loan notes into shares. For the accrued interest of GBP
138.08 on the conversion amount 554 shares were issued.
On 18 July 2016, 2,024,421 shares were issued. Of these, 463,597
shares were issued in relation to interest on Convertible Notes up
to 30 June 2016, 460,824 shares were issued in respect of the
conversion of GBP 81,243 of the 12% Convertible Notes due 2017 and
1,100,000 shares were issued in relation to the second tranche of
Consideration shares.
On 15 September 2016, 4,276,262 shares were issued as conversion
of GBP 750,128 of the 12% Convertible Notes due 2017 and GBP
11,046.52 to settle the interest accrued interest up until the date
of conversion.
On 17 October 2016, 529,952 shares were issued as consideration
for interests on the Convertible Notes outstanding up to 30
September 2016.
On 22 December 2016, 190,673 shares were issued. Of these
124,673 shares were issued in relation to a conversion of GBP
15,918 of the 0% Convertible Notes due April 2018, 66,000 shares
were issued in relation to the third tranche of Consideration
Shares. It was anticipated that the sale of Starneth was to be
completed prior to 31 December 2016 and the 66,000 shares were
issued in full and final settlement of the third tranche of share
consideration payable to one of the vendors. The remaining balance
was forgiven as part of the sale of Starneth after the year
end.
On 31 December 2016, the number of Ordinary Shares authorised
for issue was unlimited. All Ordinary Shares have equal voting
rights and rank equally on a winding up.
At the balance sheet date 1,034,000 shares were not issued under
the SPA with a price of GBP 0.75 per share. GBP775,000 has been
recognised on the balance sheet as unissued shares.
7. CASH AND CASH EQUIVALENTS
2016 2015
GBP'000 GBP'000
--------------------- -------- --------
Cash at bank and in
hand 71 325
--------------------- -------- --------
Total cash and cash
equivalents 71 325
8. TRADE AND OTHER RECEIVABLES
2016 2015
GBP'000 GBP'000
----------------------- -------- --------
Prepayments 17 90
Other receivables - 112
----------------------- -------- --------
Total trade and other
receivables 17 202
All receivables, with the exception of prepayments which are not
a financial instrument are classified as loans and receivables.
9. PROPERTY, PLANT AND EQUIPMENT
Fixtures
and
fittings Total
GBP'000 GBP'000
Cost
On incorporation - -
Additions on
acquisitions 157 157
Additions 8 8
Foreign exchange
differences 2 2
At 31 December
2015 167 167
---------- --------
Additions 19 19
Foreign exchange
differences (4) (4)
Transfer to
disposal group (182) (182)
As at 31 December
2016 - -
Accumulated
Depreciation
On incorporation - -
Charge for the
period (27) (27)
---------- --------
At 31 December
2015 (27) (27)
---------- --------
Charge for the
period (41) (41)
Transfer to
disposal group 68 68
---------- --------
At 31 December - -
2016
Net book value
At 31 December
2015 140 140
========== ========
Net book value
At 31 December
2016 - -
========== ========
10. INTANGIBLE ASSETS
Goodwill Software Total
GBP'000 GBP'000 GBP'000
Cost
On incorporation - - -
Additions on
acquisition 4,766 59 4,825
Foreign exchange
difference - 2 2
----------- ----------- --------
At 31 December
2015 4,766 61 4,827
Addition - 14 14
Foreign exchange
difference (3) 11 8
Transfer to
disposal group (4,763) (86) (4,849)
=========== =========== ========
At 31 December - - -
2016
Accumulated
amortisation
On incorporation - - -
Charge for the
period - (10) (10)
----------- ----------- --------
At 31 December
2015 - (10) (10)
Charge for the
period (3,128) (23) (3,151)
Transfer to
disposal group 3,128 33 3,161
At 31 December - - -
2016
Carrying amount
At 31 December
2015 4,766 51 4,817
=========== =========== ========
At 31 December - - -
2016
=========== =========== ========
Goodwill
On 15 July 2015, the Company entered into a Share Purchase
Agreement with Smits International B.V., Yamapro Trading - F.Z.E.
and Systems Engineering International, Inc. (the "Sellers"), for
the acquisition of all shares in Starneth Holding B.V. and in
Starneth Europe B.V. with immediate effect. Starneth Holding B.V.
and Starneth Europe B.V. own all the shares in Banka B.V., SME
Engineering Services JLT, Starneth Ltd, Starneth Pte Ltd, and
Starneth America LLC.
The acquisition has led to goodwill of GBP 4,766k in the group's
balance sheet.
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired. At 31 December 2016 management was aware that the
Starneth participation was not performing according to
expectations. As a result of the constant cash burn within this
participation and having regard to the subsequent disposal of the
Starneth participation after the year end, management agreed that
the goodwill should be allocated to the disposal group and written
down to is fair value less costs to sell. Management consider the
fair value less costs to sell of the disposal group to be GBP1,043k
being liabilities (the 2nd tranche of the deferred cash
consideration, see borrowings note) due to the purchaser of the
disposal group which the purchaser is waiving as part of the
transfer. At the year end the fair value of the potential
contingent consideration that the company may also receive in
respect of the transfer was not considered material due to the high
level of uncertainty associated with the performance conditions.
Therefore, an impairment of GBP3,128k has been recognised against
goodwill to write down the carrying value of the disposal group
down to fair value less costs to sell.
11. AVAILABLE-FOR-SALE FINANCIAL ASSETS
Available
for
sale
financial
asset
GBP'000
Cost
On incorporation -
Additions -
on acquisition
Additions 1,976
Foreign exchange -
difference
-----------
At 31 December
2015 1,976
-----------
Additions -
Foreign exchange
difference 462
-----------
At 31 December
2016 2,438
-----------
On 20 May 2015, the Company invested a total of GBP1,976,400
(US$3,000,000) for an approximate 2% interest in New York Wheel
Investor LLC. This company was setup to fund the equity component
for the New York Wheel project, which includes an approximate 630
foot high observation wheel with 36 capsules, a 68,000 square foot
terminal and retail building and a 950 space parking garage. In
order to acquire its interest, the Company became a party to the
Amended and Restated Operating Agreement of New York Wheel Investor
LLC, dated May 20, 2015. Under that agreement, the Company can be
called upon to make further capital contributions to the project
should there be a cash shortfall, or face potential dilution of its
interest should it choose not to invest further cash sums.
The equity units in New York Wheel Investor LLC are not quoted,
in assessing the fair value of the asset the Directors have regard
for recent transactions in the equity of New York Wheel Investor
LLC. All equity components have been acquired at the same price as
Challenger. On the basis that the project is materially on schedule
and therefore the Directors don't believe the fair value is
materially different to the acquisition value.
The Directors consider this to be a level 2 valuation under IFRS
13.
One unit of the investment is held as security over the second
part of the cash consideration of EUR 1.25 million (detailed in
note 12).
A further unit is held as security over the 29 January 2016
convertible loan (detailed in note 12).
12. Borrowings
2016 2015
Current GBP'000 GBP'000
----------------------------- -------- --------
Convertible notes 1,508 3,012
Deferred cash consideration 2,107 865
Borrowings - 497
3,615 4,374
Non-current
----------------------------- -------- --------
Deferred cash consideration - 772
Convertible notes 2,171 -
----------------------------- -------- --------
2,171 772
Between 6 May 2015 and 30 July 2015, the Company issued
GBP3,067,200 of convertible notes. The notes are unlisted,
unsecured, transferable and convertible with a twelve month
maturity date. Interest is accrued at 12% per annum and payable
quarterly, or upon conversion, in cash or in Ordinary Shares at the
Company's discretion. The notes can be converted into Ordinary
Shares at a price per Ordinary Share equal to the lower of GBP0.50
and 7.5% discount to the prevailing market price, defined as the
average of the lowest three volume weighted average prices as
quoted by Bloomberg for the period of 10 trading days prior to the
conversion date. Provided that if the volume weighted average price
is at any time less than GBP0.25 for three consecutive trading
days, then the noteholder is unable to convert for a period of 30
calendar days, without the consent of the Company. The requirement
of consent applies only on the first such occasion. The maximum
amount of notes that may be converted in any 30-day period by a
noteholder is 10% of the total amount of any notes subscribed by
that noteholder. The Company can redeem the notes at a 10% premium
anytime the market price is lower than GBP0.50.
The convertible note has been recognised as a liability in
accordance with IAS 32 - Financial Instruments as the instrument
provides an obligation to the company to either settle the
liability via a cash payment or via the issue of a variable number
of shares. The conversion feature represents an embedded
derivative, however this has not been separately recognised as the
conversion feature is considered to be closely related to the host
contract.
On 15 July 2015 the company acquired the Starneth Group. Part of
the purchase price included two deferred cash payments. The
payments are in equal amounts of EUR 1,250,000 and payable at the
first and second anniversary of the transaction. Accordingly these
were recorded under current and non-current liabilities
respectively. Based on the convertible notes issued in 2015, an
interest rate of 12% was used to discount the tranches for the
initial recognition. The carrying value of the amounts at 31
December 2016 in the transaction were GBP1,064k for the first
tranche and GBP1,043k for the second tranche. Interest expenses
recorded on both tranches in 2016 was GBP163k (2015:GBP 86k). As
part of the disposal of the Starneth participation after the year
end, the terms of these payments were changed as follows, the
second tranche was waived by the as part of the sale agreement and
the first tranche is only payable on the payment of success fees by
Starneth to Challenger, if success fees become payable then the
first tranche of fees will be deducted from success fees due. The
company has not recognised an asset in this regard due to the
uncertainty over whether the success fees will become due.
On 29 January 2016, the Company issued further GBP1 million of
secured convertible notes. The notes are unlisted, secured,
transferable and convertible. Maturity date is 30 June 2019. The
Secured Convertible Notes are secured by one common unit of New
York Wheel Investor LLC, representing a total value US$1 million.
Interest is accrued at 8% per annum and payable quarterly. One
eighth of the interest can be settled in cash or shares at the
Company's discretion. Seven eighths of the interest is settled in
new convertible notes with the same terms. The notes are
convertible in cash or shares at the option of the holder and can
be converted into Ordinary Shares at a fixed conversion price of
GBP0.80 per Ordinary Share. The Company can redeem the notes at a
10% premium anytime. As per the nature of this convertible
instrument, GBP106k has been recognised as an equity component in
the share option reserve, using a discount rate of 12%.
On 2 March 2016 the Company issued another convertible note for
GBP0.5 million. The notes are unlisted, secured, transferable and
convertible. Maturity date is 2 March 2017. The Company can redeem
the notes in cash or shares at $0.25 at Maturity at the Company's
discretion. The Secured Convertible Notes are secured by one common
unit of New York Wheel Investor LLC, representing a total value
US$1 million. Interest is accrued at 5% per annum and payable
quarterly. The interest can be paid in cash or shares, at the
average of the 10 day closing price prior to the end of each
calendar quarter, at the Company's discretion. The Company can
redeem the notes at a 25% premium anytime in cash. Since the
Company can repay the accrued interest and the principal at
maturity in shares, the full GBP0.5 million net of the GBP0.025
million transaction fees has been recognised in equity.
On 24 April 2016 the Company issued another convertible note for
GBP0.5 million. The notes are unlisted, unsecured, transferable and
convertible. Maturity date is 22 April 2018. Interest is accrued at
8% per annum and payable quarterly. The interest can be paid in
cash or shares, at the average of the 10 day closing price prior to
the end of each calendar quarter, at the Company's discretion. The
notes can only be converted into Ordinary Shares at the lower of
GBP0.25 or the lowest volume weighted average price over the 10
days prior to the conversion. The Company can redeem the notes at a
25% premium anytime. As per the nature of this convertible
instrument, GBP463k has been recognised as an equity component in
the share option reserve, using a discount rate of 12%.
On 10 June 2016 the Company issued another convertible note for
GBP0.5 million. The notes are unlisted, unsecured, transferable and
convertible. Maturity date is 10 June 2018. Interest is accrued at
8% per annum and payable quarterly. The interest can be paid in
cash or shares, at the average of the 10 day closing price prior to
the end of each calendar quarter, at the Company's discretion. The
notes can be converted into Ordinary Shares at the lower of GBP0.25
or the lowest volume weighted average price over the 10 days prior
to the conversion. The Company can redeem the notes at a 25%
premium anytime in cash.
On 18 October 2016 the Company issued another convertible note
for GBP 0.35 million. The notes are unlisted, unsecured,
transferable and convertible. Maturity date is 13 April 2018.
Interest is built into the face value of the note at GBP1.15 per
GBP 1 of note. The notes can be converted into ordinary shares of
the Company for the lower of GBP 0.25 or the lowest weighted
average price over the 5 days prior to the conversion. For the
first 6 months, the Company can redeem in cash all or any part of
the outstanding convertible note at face value, thereafter with a
15% premium to face value. The convertible note must be redeemed by
the Company on 13 April 2018 in cash, unless it has been fully
converted by then into ordinary shares.
The convertible notes, where no equity component has been
described above, have been recognised as a liability in accordance
with IAS 32 - Financial Instruments as the instrument provides an
obligation to the company to either settle the liability via a cash
payment or via the issue of a variable number of shares. The
conversion feature represents an embedded derivative, however this
has not been separately recognised as the conversion feature is
considered to be closely related to the host contract.
13. FINANCE INCOME AND COSTS
2016 2015
GBP'000 GBP'000
------------------------ -------- --------
Interest expense banks - -
Bank charges 10 5
Financing Fees - 348
Interest on notes
and convertibles 759 412
Listing costs 58 48
Net foreign exchange
costs 175 46
------------------------ -------- --------
Finance costs 1,002 859
------------------------ -------- --------
14. TRADE AND OTHER PAYABLES
2016 2015
GBP'000 GBP'000
----------------------- -------- --------
Trade payables 331 406
Social security and
other taxes - 32
Other liabilities - 327
Accrued expenses 202 281
----------------------- -------- --------
Total trade and other
payables 533 1,046
As at 31 December 2016, trade and other payables were classified
at amortised cost. A maturity analysis of the Company's trade
payables due in less than one year is as follows:
As at As at
31 December 31 December
2016 2015
GBP GBP
0 to 3 months 87 378
3 to 6 months 132 28
6 months + 112 -
------------- -------------
Total 331 292
------------- -------------
The deferred cash consideration of GBP2,107,000 represents the
two remaining cash tranches due to the vendors of the Starneth
group. Details regarding the amended payment terms of these
liabilities is included in note 12.
Details of the repayment terms of the company's convertible
financial instruments can be found in note 12.
15. EMPLOYEE BENEFIT EXPENSE
2016 2015
GBP'000 GBP'000
-------------------------- -------- --------
Wages and salaries 75 90
Share options granted
to directors, employees
and key advisers 5 9
80 99
-------------------------- -------- --------
16. DIRECTORS' EMOLUMENTS
The Directors were paid emoluments of GBP75k as director's fees
during the period under review (GBP90k in 2015). Of this amount
GBP10k were the director's fees for Mark Gustafson out of which
GBP7.5k were paid, GBP2.5k were unpaid and due. Mr. Gustafson was
paid an additional GBP23k (2015: GBP74k) as management fee, booked
under administrative expenses. At 31 December 2016 an amount of
GBP67k was unpaid and due. The total compensation for Mr. Gustafson
in the year under review was GBP100k.
Icelia AG, a company of which Mr. Markus Kameisis is a director,
has billed the Group for GBP159k for the period under review (2015:
GBP118k) for various services. Of this amount GBP70k were paid and
GBP 89k were due and unpaid at the end of the reporting period.
These details and the details for the other directors can be
found within the Director's remuneration report on page 25.
The Directors were the key management personnel of the
Group.
17. IMPAIRMENT OF GOODWILL
During the year goodwill was written down to its recoverable
amount, the expense recognised in the disposal group, the Starneth
participation was GBP3,128. On 30 January 2017 the Company disposed
of all of its Starneth entities for potential consideration of up
to $ 6 million in cash, depending on the closing of two development
projects by the Starneth Group in the next two years. The Company
further has the obligation to pay the second part of the cash
consideration of EUR 1.25 million. The payment of this amount is
also depending on projects closing and secured by one common equity
unit of the New York Wheel LLC. If no project is closing within the
two years from the sale, Challenger might lose its third common
equity unit in the New York Wheel LLC and remain with two equity
units.
As a consequence of this transaction in early 2017 the directors
recognised an impairment of GBP3,128k against goodwill to write
down the carrying value of the disposal group down to fair value
less costs to sell.
18. TAXATION
Challenger Acquisitions Limited is a Guernsey Corporation
subject to a corporate tax rate of nil, as at 31 December 2016. The
businesses of the Starneth Group classified as a disposal group are
taxable at the respective corporate tax rates in the United States
of America (8%), the Netherlands (20%), Singapore (0%) and Dubai
(0%). The average tax rate is 3.7%.
Income tax
2016 2015
GBP'000 GBP'000
Current tax expense:
- Current tax on profits - -
for the year
- Adjustments in respect - -
to prior years
- Foreign current tax - -
on profits for the year
-------- --------
Total current tax - -
-------- --------
Deferred tax:
- Origination and reversal - -
of temporary differences
- Adjustments in respect - -
to prior years
--------
Total deferred tax - -
--------
Income tax expense - -
======== ========
A reconciliation of income tax expense, from continuing
operations, applicable to the loss before taxation at the statutory
tax rate to the income tax expense at the effective tax rate of the
Group is as follows:
31 Dec 31 Dec
2016 2015
GBP'000 GBP'000
Loss before taxation
from continuing
operations (1,928) (2,176)
========== ==========
Tax calculated at domestic
tax rates applicable
to losses in respective
countries: - (91)
Tax effects of:
Tax losses carried
forward - 91
- -
========== ==========
The corporation tax rate in Guernsey is 0%, there are no
unrecognised tax losses.
19. LOSS PER SHARE
The calculation for loss per share (basic and diluted) for the
relevant period is based on the loss after income tax attributable
to equity holder for the period ending 31 December 2016 and is as
follows:
Loss from continued operations
attributable to equity holders
(GBP) (1,928,000)
------------
Weighted average number of shares 16,824,053
------------
Loss per share basic (GBP) (0.11)
------------
Weighted average number of shares
for dilutive calculation 16,824,053
Loss per share diluted (GBP) (0.11)
------------
Loss from discontinued operations
attributable to equity holders
(GBP) (4,972,000)
------------
Weighted average number of shares 16,824,053
------------
Loss per share basic (GBP) (0.30)
------------
Weighted average number of shares
for dilutive calculation 16,824,053
Loss per share diluted (GBP) (0.30)
------------
Basic loss per share is calculated by dividing the loss after
tax attributable to the equity holders of the group by the weighted
average number of shares in issue during the year.
Diluted loss per share is calculated by adjusting the weighted
average number of ordinary shares outstanding to assume conversion
of all potential dilutive ordinary shares namely the conversion of
the convertible loan note in issue. The effect of these potential
dilutive shares would be anti-dilutive and therefore are not
included in the above calculation of diluted earnings per
share.
20. RELATED PARTY TRANSACTIONS
All related party transactions were within the disposal
group.
During the period the Group invoiced Starneth LLC, a company
controlled by Chiel Smits, GBP3,586k (2015: GBP926k) for
sub-contracting services provided.
On 31 December 2015, the Group entered into a loan agreement
with Starneth LLC over an amount of $740k (GBP497k). On 31 December
2016 an amount of $357k (GBP321k) was still outstanding. The
interest rate for this loan is 5%. The duration was one year and
has been prolonged at the end of the year. Interest expense of
GBP13k was recorded in 2016 (2015: nil).
21. COMMITMENTS
The Company had not entered into any material capital
commitments as at 31 December 2016.
22. SHARE BASED PAYMENTS
On 29 July 2015, options to acquire 615,000 Ordinary Shares
("Options 2015") were granted to employees and consultants of the
Group. On 8 September 2015, options to acquire 730,000 Ordinary
Shares ("Options 2015") were granted to the directors of the
company. These Options 2015 have a fixed exercise price of 40
pence, and are exercisable in the following tranches; 25% as from
the date of grant and 25% every twelve months thereafter (and are
therefore fully vested after three years). They cannot be exercised
after the 5th anniversary of the grant. The group has no legal or
constructive obligation to repurchase or settle the options in
cash.
On 7 January 2016, options to acquire 181,000 Ordinary Shares
("Options 2016") were granted to consultants of the Group. These
options have a fixed exercise price of 45 pence, and are
exercisable in the following tranches:
Movements in the number of share options outstanding and their
related weighted average exercise prices are as follows: 25% as
from the date of grant and 25% every twelve months thereafter (and
are therefore fully vested after three years). They cannot be
exercised after the 5th anniversary of the grant. The group has no
legal or constructive obligation to repurchase or settle the
options in cash.
2016 2015
--------------- -------------------------- --------------------------
Average Options Average Options
exercise (thousands) exercise (thousands)
price price
in GBP in GBP
per share per share
option option
--------------- ----------- ------------- ----------- -------------
Beginning of
period 0.40 1,335 0.00 -
--------------- ----------- ------------- ----------- -------------
Granted 0.45 181 0.40 1,345
--------------- ----------- ------------- ----------- -------------
Forfeited 0.00 - 0.00 -
--------------- ----------- ------------- ----------- -------------
Exercised 0.00 - 0.40 10
--------------- ----------- ------------- ----------- -------------
Expired 0.00 - 0.00 -
--------------- ----------- ------------- ----------- -------------
End of period 0.41 1,516 0.40 1,335
--------------- ----------- ------------- ----------- -------------
Out of the outstanding 1,516,000 share options 712,750 were
exercisable. Options exercised in 2015 resulted in 10,000 shares
being issued at a price of 40 pence each. No options were exercised
in 2016.
Share options outstanding at the end of the year have the
following expiry date and exercise prices:
Grant-vest Expiry Exercise Share options
date price in (thousands)
GBP
------------ --------- ---------- ----------------
2015
------------ --------- ---------- --------------
2015-01 2020-07 0.40 605
2015-02 2020-09 0.40 730
2016-01 2021-01 0.45 181
1,516
--------------
The weighted average fair value of the Options 2015 determined
using the Black-Scholes valuation model was 1.4 pence per option.
The significant inputs to the model were share price of 38 pence at
the grant date, exercise price of GBP0.40, volatility of 14%,
dividend yield of 0% an expected option life (to expiry) of 5 years
with 25% vesting each year and an annual risk free interest rate of
0.5%. The volatility measured at the standard deviation of
continuously compounded share returns is based on the statistical
analysis of daily share prices from listing of the company until
the grant date.
The weighted average fair value of the Options 2016 determined
using the Black-Scholes valuation model was 2.49 pence per option.
The significant inputs to the model were share price of 37.5 pence
at the grant date, exercise price of GBP0.45, volatility of 14%,
dividend yield of 0% an expected option life (to expiry) of 5 years
with 25% vesting each year and an annual risk free interest rate of
0.5%. The volatility measured at the standard deviation of
continuously compounded share returns is based on the statistical
analysis of daily share prices from listing of the company until
the grant date.
See note 15 for the total expense recognised in the income
statement for share options granted to directors, employees and key
advisers.
23. SUBSEQUENT EVENTS
On 6 January 2017 John Le Poidevin, the Chairman until that
date, decided to retire. He was replaced by Mark Gustafson taking
the role as Chairman in addition to his role as CEO.
On 6 January 2017, the Company issued 792,156 Ordinary Shares to
the holders of its convertible loan notes in payment of GBP 89k of
interest due for the period ending 31 December 2016.
On 6 January 2017, the Company issued 188,501 Ordinary Shares on
the conversion of GBP20k of the unsecured convertible notes due 13
April 2018.
On 30 January 2017 the Company announced that it had sold its
entire participation in the Starneth Group (Starneth Europe B.V.
and Starneth Holding B.V.). The Company received a potential
consideration for the sale of up to $ 6 million in cash, depending
on the closing of two development projects by the Starneth Group in
the next two years. The Company further has the obligation to pay
the second part of the cash consideration of EUR 1.25 million. The
payment of this amount is also depending on projects closing and
secured by one common equity unit of the New York Wheel LLC. If no
project is closed within the two years from the sale, Challenger
might lose its third common equity unit in the New York Wheel LLC
and remain with two equity units.
On 6 February 2017, the Company announced that the CEO and
Chairman of the Company, Mr. Mark Gustafson has agreed to a
compensation agreement of GBP1k per month until further notice. On
the same date Mr. Markus Kameisis retired from the board of the
Company but remains in the Company as CFO.
On 9 February 2017, the Company issued 8,323,476 shares on the
conversion of GBP630k of the 12% unsecured convertible notes 2017
and GBP50k of the unsecured convertible notes due 13 April 2018. An
additional 15,536 shares were allotted to settle interest of GBP1k
due up until the conversion.
On 28 March 2017, the Company announced that Mr. Gert Rieder
retired from the Board of Directors and was replaced with Mr. Gene
Stice.
On 30 March 2017, the Company issued 8,697,927 shares. Of these
6,622,963 were issued in relation to conversions totaling GBP213k
of the 12% unsecured convertible notes 2017 and 1,206,329 shares
relating to a conversion of the unsecured convertible notes due 13
April 2018. Also included in this total are 868,635 shares issued
for the interest due up to the date of conversion.
24. GROUP STRUCTURE
The group had the following active subsidiaries as of 31
December 2016:
Proportion Portion
of ordinary of ordinary
shares shares
Country held held
of incorporation directly by the
and place Nature by parent group
Name of business of business (%) (%)
----------------- ------------------- -------------- ------------- -------------
Starneth Engineering
Europe BV Netherlands company 100 100
----------------- ------------------- -------------- ------------- -------------
Starneth Intermediate
Holdings holding
BV Netherlands company 100 100
----------------- ------------------- -------------- ------------- -------------
Starneth Engineering
America LLC US company - 100
----------------- ------------------- -------------- ------------- -------------
Starneth Engineering
Pte Ltd Singapore company - 100
----------------- ------------------- -------------- ------------- -------------
SME Engineering
Services Engineering
JLT Dubai company - 100
----------------- ------------------- -------------- ------------- -------------
Treasury
Banka BV Netherlands entity - 100
----------------- ------------------- -------------- ------------- -------------
The group had the following dormant subsidiaries as of 31
December 2016:
Proportion Portion
of ordinary of ordinary
shares shares
Country held held
of incorporation directly by the
and place Nature by parent group
Name of business of business (%) (%)
------------ ------------------- -------------- ------------- -------------
Starneth
Ltd Hong Kong Dormant - 100
------------ ------------------- -------------- ------------- -------------
Global Eye
Holdings
Limited Guernsey Dormant 100 100
------------ ------------------- -------------- ------------- -------------
The group had the following dormant associates as of 31 December
2016:
Portion
Proportion of ordinary
of ordinary shares
Country shares held held
of incorporation directly by the
and place Nature by parent group
Name of business of business (%) (%)
-------------- ------------------- -------------- -------------- -------------
Starneth
Engineering
LLC US Dormant - 30
-------------- ------------------- -------------- -------------- -------------
All subsidiary undertakings are included in the consolidation.
The proportion of the voting rights in the subsidiary undertakings
held directly by the parent company do not differ from the
proportion of ordinary shares held. There are no preference shares
existing in the group. Further there are no significant
restrictions in any of the subsidiaries' domiciles.
25. FINANCIAL INSTRUMENTS
The only financial instrument the Group held, in addition to
those disclosed elsewhere in these notes, as at 31 December 2016
was Cash and cash equivalents.
26. ULTIMATE CONTROLLING PARTY
As at 31 December 2016, no one entity owns greater than 50% of
the issued share capital. Therefore the Company does not have an
ultimate controlling party.
27. CONTINGENCIES
Due to the Group's activities, matters arise that could give
rise to a contingent liability. No further details are given as it
could be seriously prejudicial to the position of the Group.
28. ASSETS OF DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS
The assets and liabilities related to the Starneth Holdings BV
and Starneth Europe BV have been presented as held for sale
following the approval of the group's management to proceed with
the disposal of these companies. Subsequent to the year end the
sale completed.
Cash flows
31 Dec 31 Dec
2016 2015
GBP'000 GBP'000
Operating cash
flows (1,512) (466)
Investing cash
flows - (60)
Financing cash
flows 1,405 495
---------- ----------
Total cash flows (107) (31)
========== ==========
Assets of disposal group classified as held for sale
31 Dec
2016
GBP'000
Property plant
and equipment 118
Intangibles 50
Goodwill allocated to disposal
group 1,635
Trade and other
receivables 266
Cash and cash
equivalents 202
Total 2,271
==========
Liabilities of disposal group classified as held for sale
31 Dec
2016
GBP'000
Trade and other
payables 1,228
Total 1,228
==========
Cumulative income/(expense) recognised other comprehensive
income relating to disposal group classified as held for sale
31 Dec 31 Dec
2016 2015
GBP'000 GBP'000
Foreign exchange translation (143) -
adjustments
Total (151) -
========== ==========
Analysis of the result of discontinued operations and the result
recognised on the re-measurement of assets or disposal group is as
follows:
31 Dec 31 Dec
2016 2015
GBP'000 GBP'000
Revenue 3,579 926
Expenses (5,423) (1,351)
Impairment of Goodwill associated
with disposal group (note 10) (3,128)
Profit before tax of discontinued
operations (4,972) (425)
Tax - -
Profit after tax of discontinued
operations (4,972) (425)
========== ==========
The pre-tax loss recognised on the re-measurement of the
disposal group to fair value less costs to sell was GBP3,128k. The
fair value less costs to sell reflect the expected proceeds on
disposal, which have been determined by the directors to be the
waiving of an existing liability to the purchaser for deferred cash
consideration for GBP1,043k. Therefore the carrying value of the
disposal group equals the expected proceeds at 31 December
2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UWAVRBNASUAR
(END) Dow Jones Newswires
April 28, 2017 11:19 ET (15:19 GMT)
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