MARKET TECH HOLDINGS LIMITED
Third Floor
La Plaiderie Chambers
La Plaiderie
St Peter Port
Guernsey
GY1 1WG
MARKET TECH HOLDINGS LIMITED
PROSPECTUS JANUARY 2016
166619 Project Grand Canal - Cover.indd All Pages
20/01/2016 19:03
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt
as to the action you should take you are recommended to seek your own financial advice immediately from an
independent financial adviser, who is authorised under the Financial Services and Markets Act 2000 (“FSMA”) if you
are in the United Kingdom, or from another appropriately authorised independent financial adviser if you are in a
territory outside the United Kingdom.
This document comprises a prospectus relating to Market Tech Holdings Limited (“Market Tech” or the “Company”) and
has been prepared in accordance with the Prospectus Rules of the Financial Conduct Authority (“FCA”) pursuant to section
73A of FSMA. This document has been approved by the FCA in accordance with section 87A of FSMA and made available
to the public in accordance with Rule 3.2 of the Prospectus Rules.
The Company’s issued ordinary shares (“Ordinary Shares”) are currently admitted to trading on the AIM market (“AIM”)
of the London Stock Exchange plc (“London Stock Exchange”). Applications have been made to (i) the London Stock
Exchange to cancel the admission of the Ordinary Shares to trading on AIM; (ii) to the FCA for the Ordinary Shares to be
admitted to the standard segment of the Official List of the FCA (“Official List”); and (iii) to the London Stock Exchange for
the Ordinary Shares to be admitted to trading on its Main Market for listed securities (together, “Main Market Admission”).
It is expected that Main Market Admission will become effective and that dealings in the Ordinary Shares on the Main Market
of the London Stock Exchange will commence at 8.00 a.m. on 27 January 2016. Trading of the Ordinary Shares on AIM will
be cancelled by no later than Main Market Admission. No application has been made or is currently intended to be made for
the Ordinary Shares to be admitted to listing or trading on any other exchange.
The Company, the Directors and the Proposed Directors, whose names appear on page 47, accept responsibility for the
information contained in this document. To the best of the knowledge and belief of the Company, the Directors and the
Proposed Directors (each of whom has taken all reasonable care to ensure that such is the case), the information contained in
this document is in accordance with the facts and contains no omission likely to affect the import of such information.
The whole text of this document should be read, in particular the section headed “Risk Factors” on pages 17 to 40 of this
document when considering an investment in the Ordinary Shares. All statements regarding the Group’s business, financial
position and prospects should be viewed in light of such Risk Factors.
Shareholders are not required to take any action upon receipt of this document. The Company is not issuing any new Ordinary
Shares nor is it seeking to raise any new money in connection with Main Market Admission. This document has been published
solely to enable the Company to obtain admission of the Ordinary Shares to the standard segment of the Official List and to
trading on the London Stock Exchange’s Main Market for listed securities.
Market Tech Holdings Limited
(incorporated under The Companies (Guernsey) Law, 2008 and registered in Guernsey
with registered number 59208)
Admission to the standard segment of the Official List and to trading on the
London Stock Exchange’s Main Market for listed securities
Canaccord Genuity Limited
Joint Financial Adviser
Shore Capital and Corporate Limited
Joint Financial Adviser
Expected share capital of the Company immediately following Main Market Admission
Issued and fully paid
Ordinary shares of £0.10 each
Amount
Number
£46,846,819.60
468,468,196
Investors should rely only on the information in this document. No person has been authorised to give any information or make
any representations other than those contained in this document and any such information or representations must not be relied
upon as having been so authorised by the Company, the Directors, the Proposed Directors, Canaccord Genuity Limited
(“Canaccord”), Shore Capital and Corporate Limited or any other person. Market Tech will comply with any obligation to
publish a supplementary prospectus containing further updated information as required by law or by any regulatory authority
but assumes no further obligation to publish additional information. Subject to FSMA, the Listing Rules, the Disclosure and
Transparency Rules, the Prospectus Rules, the rules of the London Stock Exchange and any other applicable laws or
regulations, the delivery of this document shall not, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date of this document or that the information in this document is correct as at
any time after this date.
Each of Canaccord, which is authorised and regulated in the United Kingdom by the FCA and Shore Capital, which is
authorised and regulated in the United Kingdom by the FCA, are acting exclusively for the Company and no-one else in
connection with the contents of this document and Main Market Admission and will not regard any other person (whether or
not a recipient of this document) as a client in relation to Main Market Admission and will not be responsible to anyone other
than the Company for providing the protections afforded to their respective clients or for advising any other person on the
contents of this document or on any other transaction or arrangement referred to in this document.
Apart from the responsibilities and liabilities, if any, which may be imposed on Canaccord or Shore Capital, respectively, under
FSMA or the regulatory regime established thereunder, neither Canaccord nor Shore Capital accept any responsibility
whatsoever nor makes any representation or warranty, express or implied, concerning the contents of this document including
its accuracy, completeness or verification or concerning any other statement made or purported to be made by Market Tech, or
on Market Tech’s behalf, or by Canaccord, or on Canaccord’s behalf, or by Shore Capital, or on Shore Capital’s behalf in
connection with the Company or Main Market Admission and nothing in this document is or shall be relied upon as a promise
or representation in this respect, whether as to the past or future. Subject to applicable law, each of Canaccord and Shore
Capital disclaims, to the fullest extent permitted by applicable law, all and any duty, liability or responsibility whatsoever
(whether direct or indirect, whether in contract, in tort, under statute or otherwise) which it might otherwise have in respect of
this document and the matters referred to in this document.
This document does not constitute an offer to sell or an invitation to subscribe for, or the solicitation of an offer to buy or
subscribe for, Ordinary Shares. The Ordinary Shares have not been, and will not be, registered under the US Securities Act or
qualified for sale under the laws of any state of the United States or under the applicable laws of any other prohibited territory
and, subject to certain exceptions, may not be offered for sale or subscription or sold or subscribed directly or indirectly within
any Restricted Jurisdiction for the account or benefit of any national, resident or citizen of any Restricted Jurisdiction. The
distribution of this document and/or the transfer of the Ordinary Shares into jurisdictions other than the United Kingdom may
be restricted by law. Any failure to comply with any such restrictions may constitute a violation of the securities laws of such
jurisdictions.
The contents of this document should not be construed as legal, business or tax advice. Each prospective investor should
consult his, her or its legal adviser, financial adviser or tax adviser for advice and in making an investment decision and each
prospective investor must rely on their own examination, analysis and enquiry of the Company, including the merits of the risks
involved. In making an investment decision, prospective investors acknowledge that: (i) they have not relied on Canaccord or
Shore Capital or any person affiliated with Canaccord or Shore Capital in connection with any investigation of the accuracy of
any information contained in this document or their investment decision; and (ii) they have relied only on the information
contained in this document. Neither the Company nor any of its Directors or the Proposed Directors nor any of its employees,
agents or representatives makes any representation to any offeree or purchaser or acquirer of Ordinary Shares regarding the
legality of an investment in Ordinary Shares by such offeree or purchaser or acquirer under the laws applicable to such offeree
or purchaser or acquirer.
21 January 2016
2
CONTENTS
Page
4
17
41
43
46
PART I
PART II
PART III
PART IV
PART V
PART VI
SUMMARY
RISK FACTORS
CONSEQUENCES OF A STANDARD LISTING
IMPORTANT INFORMATION
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
DIRECTORS, PROPOSED DIRECTORS, SECRETARY, REGISTERED OFFICE
AND ADVISERS
47
PART VII INFORMATION ON THE GROUP
48
PART VIII OPERATING AND FINANCIAL REVIEW OF THE GROUP
63
PART IX
HISTORICAL FINANCIAL INFORMATION
80
SECTION A:
THE GROUP
80
SUB-SECTION 1: ACCOUNTANT’S REPORT ON THE HISTORICAL
FINANCIAL INFORMATION OF THE GROUP
FOR THE THREE YEARS ENDED 31 MARCH 2015
80
SUB-SECTION 2: HISTORICAL FINANCIAL INFORMATION OF THE GROUP
FOR THE THREE YEARS ENDED 31 MARCH 2015
82
SUB-SECTION 3: UNAUDITED INTERIM FINANCIAL INFORMATION OF THE
GROUP FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015 138
SECTION B
THE PASTRA GROUP
167
SUB-SECTION 1: ACCOUNTANT’S REPORT ON THE HISTORICAL
FINANCIAL INFORMATION OF THE PASTRA GROUP FOR
THE TWO YEARS ENDED 31 MARCH 2015 AND THE
15 MONTHS ENDED 31 MARCH 2015
167
SUB-SECTION 2: HISTORICAL FINANCIAL INFORMATION OF THE
PASTRA GROUP FOR THE TWO YEARS ENDED 31 MARCH
2015 AND THE 15 MONTHS ENDED 31 MARCH 2015
169
SECTION C:
FIVER
194
SUB-SECTION 1: ACCOUNTANT’S REPORT ON THE HISTORICAL
FINANCIAL INFORMATION OF FIVER FOR THE
THREE YEARS ENDED 30 SEPTEMBER 2014 AND THE
SIX MONTHS ENDED 31 MARCH 2015
194
SUB-SECTION 2: HISTORICAL FINANCIAL INFORMATION OF FIVER
196
SECTION D:
GLISPA
221
SUB-SECTION 1: ACCOUNTANT’S REPORT ON THE HISTORICAL
FINANCIAL INFORMATION OF GLISPA FOR THE
THREE YEAR PERIOD ENDED 31 DECEMBER 2014 AND
THE THREE MONTH PERIOD ENDED 31 MARCH 2015
221
SUB-SECTION 2: HISTORICAL FINANCIAL INFORMATION OF GLISPA FOR
THE THREE YEAR PERIOD ENDED 31 DECEMBER 2014
AND THE THREE MONTHS ENDED 31 MARCH 2015
223
PART X
UNAUDITED PRO FORMA FINANCIAL INFORMATION
245
SECTION A:
UNAUDITED PRO-FORMA FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 MARCH 2015
246
SECTION B:
ACCOUNTANT’S OPINION ON THE PRO FORMA
FINANCIAL INFORMATION
251
PART XI
CAPITALISATION AND INDEBTEDNESS
253
PART XII DIRECTORS, PROPOSED DIRECTORS, SENIOR MANAGERS AND
CORPORATE GOVERNANCE
255
PART XIII VALUATION REPORT
265
PART XIV TAXATION
273
PART XV ADDITIONAL INFORMATION
277
PART XVI DEFINITIONS
337
3
PART I
SUMMARY
Prospectus summaries are made up of disclosure requirements known as “Elements”. The Elements are numbered
in Sections A to E (A.1 to E.7).
This summary contains all the Elements required to be included in a summary for these types of securities and
issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of
the Elements.
Even though an Element may be required to be inserted in the summary because of these types of securities and
issuer, it is possible that no relevant information can be given regarding the Element. In this case, a short
description of the Element is included in the summary with the mention of “not applicable”.
Section A – Introduction and warnings
A.1
A.2
Introduction
and warnings
This summary should be read as an introduction to this document only.
Subsequent resale of
securities or final
placement of
securities through
financial
intermediaries
Not applicable. No consent has been given by the Company or any person
responsible for drawing up this document to the use of this document for
subsequent resale or final placement of securities by financial intermediaries.
Any decision to invest in the Ordinary Shares should be based on
consideration of this document as a whole. Where a claim relating to the
information contained in this document is brought before a court, the
plaintiff investor might, under the national legislation of the member state of
the EU, have to bear the costs of translating this document before the legal
proceedings are initiated. Civil liability attaches only to those persons who
have tabled the summary including any translation thereof, but only if the
summary is misleading, inaccurate or inconsistent when read together with
the other parts of this document or it does not provide, when read together
with the other parts of this document, key information in order to aid
investors when considering whether to invest in the Ordinary Shares.
Section B – Issuer and guarantor
B.1
Legal and
commercial name
The Company’s legal and commercial name is Market Tech Holdings
Limited.
B.2
Domicile and legal
form, applicable
legislation and
country of
incorporation
The Company is a limited company, incorporated on 23 October 2014
in Guernsey under The Companies (Guernsey) Law, 2008 with its registered
office situated in Guernsey. The Company is subject to the Takeover Code.
B.3
Current operations,
principal activities
and markets
Market Tech is a holding company which combines iconic central London
real estate assets based in Camden Town in the London Borough of Camden
with a technology and e-commerce services business branded Market Tech
Digital.
The Group owns approximately 15 acres of real estate assets in and around
Camden including all of the major markets located in the London Borough
of Camden being, Stables Market, Camden Lock Market and Union Street
Market (together “Camden Market”). In addition, the Group also owns
separate real estate assets on Jamestown Road and at 251-259 Camden High
Street, 31 Kentish Town Road, Utopia Village at Chalcot Road, the Hawley
4
Wharf Development site (including 39-45 Kentish Town Road), the
Interchange Building and Camden Wharf as well as, 1-11 Hawley Crescent,
which was acquired on 10 August 2015, and 49 Chalk Farm Road, which was
acquired on 23 October 2015 (together with Camden Market, the “Real
Estate Assets”). The Real Estate Assets are considered to be the material real
estate assets of the Group. The Group operates the Real Estate Assets with a
predominant focus on retail, leisure and entertainment as well as office use
and intends to further develop these assets through active asset management
to increase the rental income and expand the net lettable area. This active
asset management will include using technology and e-commerce combined
with greater customer intelligence and data collection to enhance the offering
to Camden Market retailers with the aim of helping them to grow their
revenues and, in turn, rent for Market Tech. Supplementing these Real Estate
Assets, the Group has, and is continuing to develop, a complementary online
consumer-facing e-commerce platform camdenmarket.com, an information
and e-commerce portal available to physical retailers located at the Group’s
Real Estate Assets.
In addition to the management and development of Camden Market and its
Real Estate Assets, the Group is continuing to develop a complementary
technology and e-commerce business, Market Tech Digital, with capabilities
in mobile marketing, online search and e-commerce, following its
acquisition of Fiver, a specialty value online retailer, Glispa, a Berlin based
mobile marketing business, and Stucco Media, an e-commerce and search
platform, in December 2014, March 2015 and May 2015 respectively.
B.4a
Significant recent
trends affecting the
Company and the
industry in which it
operates
The Directors and the Proposed Directors believe that the nature of the
Group’s business and the combination of activities which it undertakes is
unique and, accordingly, difficult to categorise into any one particular
industry sector or compare against a defined list of competitors.
Camden Market competes with other retail venues both physical and online
to attract paying customers. Competition from other locations may influence
the levels of footfall and customer spend in Camden Market, and
consequently may affect the rents and values generated by the Real Estate
Assets. The Directors and the Proposed Directors believe that Camden
Market offers visitors a distinctive retail experience, with independent
retailers offering a wide range of products and services, many of which have
been created on-site, operating from a variety of Victorian listed buildings,
newer market halls and open courtyards. The Directors believe that Camden
Market has a distinct identity and they continue to seek out new concepts,
brands and ideas to keep each of the markets interesting to visitors. The
Group intends to continue to pursue a programme of hosting music, media,
fashion and art events, as well as investing in marketing and public relations
in order to cement Camden Market’s reputation and attractiveness to visitors.
Part of the Group’s strategy for its Real Estate Assets is dependent upon
increasing the attractiveness of Camden Market as a location for tenants,
retailers and visitors. As a landlord the Group has recognised the opportunity
to enhance Camden Market’s unique identity through the creation of a
digitally enhanced multichannel retail and entertainment offering. This is not
unlike other operators in the retail/real estate asset management sector such
as Intu Properties plc and Hammerson plc, both of whom have sought to
enhance the attractiveness and performance of their real estate offering by
establishing complementary online and digital platforms. Across the sector,
there has been an increased focus on improving the customer experience
utilising technology.
5
B.5
Description of the
Company’s group
and the Company’s
position therein
The Company is the parent company of the Group. The table below
contains a list of the principal subsidiaries, joint ventures and associates of
the Company:
Percentage
ownership
(direct and
indirect)
Company
name
Principal
activity
Country of
incorporation
Crowndeal Services Limited
Market Tech UK Limited
Tecrange Services Limited
Delinik Trading Limited
Fiver London Limited
BrightLogic Limited
StuccoMedia Limited
Glispa Global Group Limited
Glispa Holdings GmbH
Glispa GmbH
Glispa Israel Ltd
Holding company
IP owner
IP owner
Holding company
Online website services
Holding company
Online website services
Holding company
Holding company
Online marketing service
Operational company
providing services to
Glispa GmbH
AIG refinance vehicle
Holding company
Holding company
Landlord & property owner
Residential leasing
Landlord & property owner
Landlord & property owner
Management company
British Virgin Islands
England & Wales
Cyprus
Cyprus
England & Wales
Israel
Israel
England & Wales
Germany
Germany
Israel
100
100
100
100
100
100
100
75
75
75
75
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
England & Wales
100
100
100
100
100
100
100
100
Trading company – events
Service charge company
England & Wales
England & Wales
100
100
England & Wales
100
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
England & Wales
100
100
100
100
100
100
100
100
England & Wales
England & Wales
100
100
Guernsey
Guernsey
England & Wales
100
100
100
England & Wales
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
England & Wales
British Virgin Islands
England & Wales
100
100
100
100
100
100
100
100
100
100
British Virgin Islands
100
England & Wales
100
England & Wales
100
British Virgin Islands
100
England & Wales
100
England & Wales
England & Wales
100
100
MTH Investments Limited
Divanyx Investments Limited
Korey Investments Limited
Anise Development Limited
Anise Residential Limited
Thistle Properties Limited
Majorelle Properties Limited
The Camden Market Management
Company Limited
The Market Events Company Limited
The Market Service Charge Company
Limited
Castlehaven Row Limited
Property management
company
Pastra Investments Limited
Holding company
Perola Investments Limited
Landlord & property owner
Loremar Investments Limited
Landlord & property owner
Red Harmony Investments Limited
Landlord & property owner
Tazzetta Limited
Landlord & property owner
Pushkin Properties Limited
Landlord & property owner
Simplepath Investments Limited
Holding company
Atlantic Estates Limited
Holding company &
property owner
Camden Lock (London) Limited
Landlord & property owner
Electric Enterprises Limited
Property management
company
Camden Market Holdco Limited
Holding company
Camden Lock Market Limited
Landlord & property owner
Trading company –
London Waterbus Company Limited
operation of four canal
boats
Camden Lock Limited
Onshore service company
Camden Market Holdings Corp.
Holding company
MB Market Holdings Limited
Nomura refinance vehicle
MB Market Corp.
Nomura refinance vehicle
MB Select Holdings Limited
Nomura refinance vehicle
MB Select Corp.
Nomura refinance vehicle
Camden Market Estate Holdings Limited Landlord & property owner
Stables Market (Camden) Limited
Market operator
Triangle Upper Limited
Landlord & property owner
Camden Market Property Management
Property management
Limited
company
Partner to Upper Piazza
Camden Market Upper Piazza Limited
Camden Limited
Partnership
Partner to Upper Piazza
Upper Piazza (Camden) Ltd
Camden Limited
Partnership
Upper Piazza Camden Limited
Landlord and property
Partnership
manager
Camden Market Piazza Limited
Partner to Piazza Camden
Limited Partnership
Partner to Piazza Camden
Piazza (Camden) Ltd
Limited Partnership
Piazza Camden Limited Partnership
Property investment
Construction project
Stanley Sidings Limited
manager
6
Company
name
Triangle Extension’s Limited
Tunnel Market Ltd
Camden Market Estates Arches Limited
Ground Gilbey Limited
Elcross Estates Limited
Canal Side Properties Limited
Dave Autos (UK) Limited
Interchange Camden Limited
Interchange Management Limited
Oberon Property Company Limited
Numa Property Corporation
B.6
Notifiable interests,
different voting
rights and
controlling interests
Principal
activity
Landlord & property owner
Retail & market trading
operator
Property owner
Landlord & property owner
Property owner
Commercial property
investment
Property and market trading
operation services
Co-working
Operational manager for coworking
Holding company
& property owner
Holding company
& property owner
Percentage
ownership
Country of
(direct and
incorporation
indirect)
British Virgin Islands
100
England & Wales
100
England & Wales
British Virgin Islands
England & Wales
British Virgin Islands
100
100
100
100
England & Wales
100
England & Wales
England & Wales
100
100
British Virgin Islands
100
British Virgin Islands
100
As at 20 January 2016 (being the latest practicable date prior to publication
of this document), the interests of the Directors, the Proposed Directors and
the Senior Managers (and, so far as is known to the Directors, the Proposed
Director and the Senior Managers having made appropriate enquiries, of all
such persons connected with the Directors, the Proposed Directors and the
Senior Managers) in the issued ordinary share capital of the Company are as
follows:
Name
Directors
Nilesh (Neil) Sachdev
Charles Butler
Andrew Bull
John Le Poidevin
Thomas Teichman
Proposed Directors
David Brown
Sharon Baylay
Georg Bucher
Senior Managers
Mark Alper
Caroline Grange
Number of
Ordinary
Shares
Percentage of
Ordinary
Shares
47,471
192,415
73,988
47,471
30,393
0.0101
0.0411
0.0158
0.0101
0.0065
Nil
Nil
Nil
Nil
Nil
Nil
147,4211
9,000
0.0315
0.0019
Notes:
1
22,421 Ordinary Shares registered in the name of Alt Equities Limited.
As at the date of this document, the Company is controlled by the
Major Shareholder (a company wholly owned by GHT) which owns 71.34
per cent. of the Ordinary Shares. Immediately following Main Market
Admission, insofar as is known to the Directors, the Proposed Directors and
the Company, the following persons will be directly or indirectly interested
in three per cent. or more of the Company’s issued ordinary share capital or
voting rights.
Number of
Ordinary
Shares
334,187,500
Name
Major Shareholder
Percentage of
Ordinary
Shares
71.34
Save in respect of certain rights afforded to the Major Shareholder pursuant
to the terms of the 2016 Relationship Agreement, the Ordinary Shares owned
by the Company’s major shareholders rank pari passu with the other
Ordinary Shares in all respects.
7
On 21 January 2016, the Company entered into the 2016 Relationship
Agreement with the Major Shareholder and GHT which will come into force
on Main Market Admission and will replace the 2014 Relationship
Agreement which was entered into between the Company and the Major
Shareholder at the time of AIM Admission. The 2016 Relationship
Agreement has been put in place to regulate the on-going relationship
between the Company and the Major Shareholder. The Board believes that
the terms of the 2016 Relationship Agreement will permit the Company to
carry on its business independently from the Major Shareholder and ensure
that transactions and relationships between the Major Shareholder and GHT
(on the one hand) and the Group (on the other hand) are at arm’s length and
on normal commercial terms. At Main Market Admission, all of the Ordinary
Shares will have the same voting rights.
B.7
Selected historical
key financial
information
The selected historical financial information relating to the Group set out
below has been extracted without material adjustment from the audited
financial information of the Group for the financial periods ended 31 March
2013, 31 March 2014, 31 March 2015 and the unaudited financial
information of the Group for the six month financial period ended 30
September 2015. Separate selected historical financial information relating
to the Pastra Group (owner of Camden Lock), Fiver and Glispa has not been
included below, rather this Group selected historical financial information
consolidates the financial information for the Pastra Group, Fiver and Glispa
from the date of their acquisition:
Consolidated income statements
Revenue
Adjusted EBITDA*
Operating profit
Profit before taxation
Profit for the year
*
Year ended
31 March
2013
£’000
Year ended
31 March
2014
£’000
17,914
12,757
36,268
29,409
29,280
18,442
12,622
33,954
16,916
16,961
6 months
Year ended
ended
31 March 30 September
2015
2015
£’000
£’000
30,081
12,018
61,907
44,071
43,878
62,215
10,586
17,229
10,127
7,976
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortisation
and adjusted for fair value investment property movements, share based payment charges,
exceptional items and foreign currency exchange gain/(loss).
Consolidated statements of financial position
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
As at
31 March
2013
£’000
As at
31 March
2014
£’000
401,828
8,299
–––––––––
410,127
–––––––––
(194,047)
(3,697)
–––––––––
(197,744)
–––––––––
212,383
435,201
12,869
–––––––––
448,070
–––––––––
(236,812)
(3,573)
–––––––––
(240,385)
–––––––––
207,685
–––––––––
–––––––––
Net assets
Total equity
212,383
8
–––––––––
–––––––––
207,685
6 months
As at
ended
31 March 30 September
2015
2015
£’000
£’000
795,749
102,638
–––––––––
898,387
–––––––––
(31,711)
(311,186)
–––––––––
(342,897)
–––––––––
555,490
929,281
204,949
–––––––––
1,134,230
–––––––––
(44,308)
(319,868)
–––––––––
(364,176)
–––––––––
770,054
––––––––– –––––––––
––––––––– –––––––––
555,490
770,054
Consolidated cash flow statements
Year ended
31 March
2013
£’000
Net cash (outflow)/inflow
from operating activities
Net cash used in investing
activities
Net cash generated from
financing activities
Net increase in cash and cash
equivalents
Cash and cash equivalents at
beginning of year
Cash and cash equivalents at end
of year
Year ended
31 March
2014
£’000
6 months
Year ended
ended
31 March 30 September
2015
2015
£’000
£’000
(2,488)
1,560
(10,844)
(4,138)
(3,671)
(26,049)
(118,575)
(99,941)
4,887
–––––––––
34,794
–––––––––
203,839
–––––––––
193,561
–––––––––
10,305
74,420
89,482
2,398
–––––––––
1,126
–––––––––
11,431
–––––––––
85,851
–––––––––
1,126
–––––––––
85,851
175,333
(1,272)
–––––––––
11,431
––––––––– –––––––––
Certain significant changes to the Group’s financial condition and results of
operations occurred during the periods presented above. These changes are
set out below:
•
the Group’s bank facilities were refinanced in January 2014;
•
a restructuring took place in conjunction with AIM Admission in
December 2014 pursuant to which the following real estate assets
were acquired by the Group:
–
–
–
–
–
–
Camden Lock Market;
Union Street Market;
10 Jamestown Road;
31 Kentish Town Road;
251-259 Camden High Street; and
39-45 Kentish Town Road.
The restructuring also introduced Fiver London Limited into the
Group as part of the Market Tech Digital business;
•
funds of £100 million were raised on admission to AIM in December
2014;
•
a convertible bond of £112.5 million was issued in March 2015;
•
subsequent to AIM Admission, the following properties were
acquired:
–
–
–
–
Camden Wharf in March 2015;
Interchange Building in March 2015; and
Utopia Village in April 2015; and
Hawley Crescent in August 2015,
and the following Market Tech Digital acquisitions took place:
–
–
•
Glispa in March 2015; and
Stucco Media in May 2015; and
the 2015 AIM Placing was completed in June 2015.
Save in respect of the Chalk Farm Road Acquisition and the entry into of the
AIG Senior Facilities Agreement, there has been no significant change in the
financial condition and operating results of the Group since 30 September
2015, being the last interim end date of the Group.
9
B.8
Selected key pro
forma financial
information
The following unaudited pro forma financial information for the year
ended 31 March 2015 has been prepared to illustrate the effect of the
acquisitions of the Pastra Group, Fiver and Glispa on key line items from the
income statement of the Group as if they had taken place on 1 April 2014.
The pro forma financial information has been prepared for illustrative
purposes only and, because of its nature, addresses a hypothetical situation
and does not, therefore, represent the Group’s actual financial position or
results. No pro forma net assets statement has been prepared as the
acquisitions of the Pastra Group, Fiver and Glispa had all occurred prior to
31 March 2015 and are therefore already reflected in the statement of
financial position of the Group as at 31 March 2015.
Adjustments
————————————————
Pastra
Group for
Fiver for Glispa for
the period the period the period
from 1 April from 1 April from 1 April
Group
2014 to
2014 to
2014 to
Pro forma
for the the date of the date of the date of
Other income
year ended acquisition acquisition acquisition acquisition statement
31 March
by the
by the
by the
related
of the
2015
Group
Group
Group adjustments
Group
£’000
£’000
£’000
£’000
£’000
£’000
30,081
12,018
61,907
44,071
43,878
Revenue
Adjusted EBITDA*
Operating profit
Profit before taxation
Profit for the year
*
3,156
1,076
32,570
31,965
31,785
15,430
1,244
1,189
1,191
1,099
39,476
3,717
1,400
1,405
498
–
–
(2,634)
(2,634)
(2,634)
88,143
18,056
94,432
75,999
74,626
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortisation
and adjusted for fair value investment property movements, share based payment charges,
exceptional items and foreign currency exchange gain/(loss).
Notes:
The adjustments for the Pastra Group, Fiver and Glispa reflect their results
from 1 April 2014 to the date of their acquisitions by the Group, calculated
from their respective historical financial information and from the Group
consolidation workings.
Other adjustments comprise an adjustment to reflect a full year’s
amortisation charge for intangible assets which arose on the acquisitions of
the Pastra Group, Fiver and Glispa, and an adjustment to reflect the 25 per
cent. non-controlling interest in Glispa.
The adjustments are all expected to have a continuing impact of the Group,
save for a share-based payment expense of £3,961,000 relating to Glispa.
B.9
Profit forecast or
profit estimate
Not applicable. The Company has not made a profit forecast or estimate.
B.10
Audit report on the
historical financial
information –
qualifications
Not applicable. The reports from BDO LLP on the historical financial
information included in this document do not contain any qualifications.
B.11
Insufficient working
capital
Not applicable. The Company is of the opinion that taking into account the
bank and other facilities available to the Group, the working capital available
to the Group is sufficient for the present requirements of the Group, that is
for at least 12 months from the date of this document.
10
Section C – Securities
C.1
Type and class of the
securities being
offered and admitted
to trading, including
the security
identification number
The Company will apply for the admission of up to 468,468,196 Ordinary
Shares to: (i) the standard listing segment of the Official List; and (ii) trading
on the Main Market. The Ordinary Shares will continue with their existing
ISIN number GG00BSSWD593 and SEDOL number BSSWD59. It is
expected that the Ordinary Shares will be traded under ticker LSE:MKT. No
new Ordinary Shares are being issued by the Company in connection with
Main Market Admission.
C.2
Currency of the
securities issue
United Kingdom pounds sterling. The Ordinary Shares will be quoted
and traded in pence.
C.3
Number of shares
issued and fully paid
securities and par
value
As at 20 January 2016 (being the latest practicable date prior to publication
of this document), the Company had in issue 468,468,196 Ordinary Shares
of £0.10 each all of which are fully paid. Shareholders should note that as at
the date of this document, the Company has in place the Convertible Bonds.
The issuance of additional Ordinary Shares in connection with the exercise
of rights under the Convertible Bonds may dilute all other shareholdings and
their voting interests.
C.4
Rights attached to
the securities
The rights attaching to the Ordinary Shares are uniform in all respects
and they will form a single class for all purposes, including with respect to
voting and for all dividends and other distributions declared, made or paid on
the Ordinary Shares. On a show of hands each Shareholder has one vote, and
on a poll each Shareholder has one vote per Ordinary Share held. Each
Ordinary Share ranks equally for any dividend declared. Each Ordinary
Share ranks equally for any distribution made on a winding up of the
Company.
C.5
Restrictions on
transfer
The Board may, in its absolute discretion and without giving a reason, decide
to decline to register any transfer of an Ordinary Share which is not fully paid
or on which the Company has a lien or if:
•
it is in respect of more than one class of share;
•
it is in favour of more than four joint transferees;
•
in relation to an Ordinary Share held in certificated form, having been
delivered for registration, it is not accompanied by the certificate for
the Ordinary Shares to which such transfer relates and such other
evidence as the Board may reasonably require to prove title of the
transferor and due execution by him of the transfer; or
•
the transfer is in favour of any “Non-Qualified Holder” (as such term
is defined in the Articles),
provided that any such refusal would not prevent dealings in the Ordinary
Shares from taking place on an open and proper basis on the London Stock
Exchange. For these purposes a “Non-Qualified Holder” includes, amongst
other things, any person whose ownership of Ordinary Shares may: (i) cause
the Company’s assets to be deemed “plan assets” for the purposes of the US
Plan Asset Regulations; (ii) cause the Company to be required to register as
an “investment company” under the US Investment Company Act or to lose
an exemption or status pursuant to such act to which it might otherwise be
entitled; (iii) cause the Company to register under the US Exchange Act or
the US Securities Act or any similar legislation; or (iv) cause the Company
not to be considered to be a “Foreign Private Issuer” (as such term is defined
in rule 36.4(c) under the US Exchange Act).
There are no other restrictions on the free transferability of the Ordinary
Shares, save that: (i) the Ordinary Shares have not been and will not be
registered under the US Securities Act or any US State securities laws and may
not be otherwise offered or sold in breach of securities laws of other
11
jurisdictions. The Ordinary Shares may not be offered, sold, pledged or
otherwise transferred, directly or indirectly, within the US (as defined in
Regulation S under the US Securities Act) unless the offer and sale of the
Ordinary Shares has been registered under the US Securities Act or pursuant
to an exemption from, or a transaction not subject to, the registration
requirements of the US Securities Act and (ii) other laws may limit or restrict
the free transferability of the Ordinary Shares in certain circumstances (i.e. the
Ordinary Shares have not been, and will not be, registered under the applicable
securities laws of Canada, Australia, the Republic of South Africa or Japan
and, subject to certain exceptions, the Ordinary Shares may not be offered or
sold directly or indirectly within these jurisdictions or to, or for the account or
benefit of, any persons within these jurisdictions).
This document does not constitute an offer of, or the solicitation of an offer
to buy or to subscribe for, Ordinary Shares to any person in any jurisdiction
to whom, or in which jurisdiction, such offer or solicitation is unlawful.
C.6
Application for
admission to
trading on
regulated market
Applications will be made respectively to the FCA and to the London Stock
Exchange for the Ordinary Shares to be admitted to the standard segment of
the Official List and to trading on the Main Market. Admission to trading on
the Main Market constitutes admission to trading on a regulated market. It is
expected that Main Market Admission will become effective and that dealings
will commence in the Ordinary Shares on the Main Market at 8.00 a.m. on
27 January 2016. In relation to the applications detailed above, the Company
has separately notified the London Stock Exchange of its wish to cancel the
admission of its Ordinary Shares to trading on AIM and it is anticipated that
such cancellation will occur by no later than Main Market Admission. The
Company announced its intention to de-list from AIM on 23 December 2015.
No application has been made or is currently intended to be made for the
Ordinary Shares to be admitted to listing or trading on any other exchange.
C.7
Dividend policy
The declaration and payment by the Company of any future dividends on the
Ordinary Shares will depend on the results of the Group’s operations, its
financial condition, cash requirements, future prospects, profits available for
distribution and other factors deemed to be relevant at any given time. The
Board recognises the importance of dividend income to Shareholders and
intends to adopt, at the appropriate time, a progressive dividend policy.
However, it is not the current intention of the Board to declare dividends in
the near term. The Directors and the Proposed Directors believe that
Shareholders are best served by reinvesting cash to generate growth
opportunities rather than declaring a dividend. The Group intends to continue
to pursue both organic and inorganic growth opportunities. The Company’s
dividend policy remains under regular review.
Section D – Risks
D.1
Key information
on key risks
relating to the
Company or its
industry
•
The Group derives the bulk of its rental income from retail tenants.
The Group’s ability to generate revenues from its portfolio is linked
to occupancy levels and the scope for rental increases. These factors
are themselves determined by the underlying performance of the
tenants that rent space in those properties, which is influenced by a
number of general economic factors outside of the Group’s control.
The Group’s net rental income may be adversely affected in the event
of: (i) late payments and/or non-payments by tenants of amounts due
under agreements; (ii) tenants seeking to renegotiate terms including,
but not limited to, those relating to the amount of rental obligations;
(iii) tenants’ businesses going into administration, which may affect
the Group’s ability to collect amounts receivable or otherwise manage
its tenants; and (iv) increased vacancy levels due to tenants
terminating lease and licence arrangements.
12
•
The Group is subject to the risks of ownership, redevelopment and
management of property in the UK. The financial performance of the
Group’s businesses could be adversely affected by a worsening of
general economic conditions in the UK. Such economic conditions
could have one or more of the following consequences: (a) a decline
in the value of the Real Estate Assets; and/or (b) a reduction in rents
achievable or received from tenants.
•
The valuation of the Real Estate Assets is inherently subjective due to,
among other factors, the individual nature of each property, its
location, expected future rental revenues and the assumptions upon
which a valuation is based. This is particularly so given the nature of
the Real Estate Assets and the fact that all of the markets comprising
Camden Market are in common ownership with the added value that
may be attributed to such a consolidation of ownership. There are
complexities associated with the valuation of redevelopment
properties, particularly where they comprise interests in complex
urban schemes. As a result, valuations are subject to a degree of
uncertainty and there can be no guarantee that if a property is sold,
that it will be sold at the most recent opinion of Market Value.
•
Substantially all of the Real Estate Assets are located in Camden. As
a result of this concentration, the Group is more exposed to events that
threaten visitor security or health and safety or lead to public transport
disruption or public protest or disorder, including protests against the
development of Camden and any other events that might otherwise
adversely affect the desirability or popularity of Camden as a location
or destination than a group whose assets are spread over a broader
geographical area. Any significant decrease in the popularity or status
of Camden could have an adverse impact on the value of the Real
Estate Assets.
•
Public disorder, terrorist attacks or war could damage infrastructure or
otherwise inhibit or prevent access to Camden or harm the demand for
and the value of the Real Estate Assets. The prosperity of Camden’s
local economy and, in turn, the Group’s retail and restaurant tenants
who account for the majority of the current gross income from the
Real Estate Assets is dependent on large numbers of domestic and
overseas visitors and tourists to Camden. Such actual or threatened
public disorder or terrorist attacks could pose threats to security,
public safety or public health which may result in a sustained and
significant reduction in visitor numbers, particularly international
tourists and discourage businesses from choosing central Camden
offices or retail space. To the extent that the Group’s tenants are
affected by such attacks, their ability to continue to honour
obligations under their existing leases could also be adversely
affected.
•
There could be a downturn in consumer spending at Camden Market
or on the Group’s online retail platform for a variety of reasons
including prevailing economic conditions which are beyond the
Group’s control. Reduced consumer spending could have an adverse
impact on the Group’s business, financial condition and prospects
and/or operating results.
•
The Group’s business strategy involves driving increases to the yields
of its Real Estate Assets. The first phase of the Group’s Interchange
co-working concept, currently under development at Utopia Village
and the Atrium and Triangle buildings in Stables Market, has been
successfully launched. However, the Group is at an early stage of
13
developing this concept and there are a number of challenges that it
faces including, but not limited to:
–
additional financial investment being required to market and
increase the profile of the Group’s Interchange co-working
concept; and
–
competition from other similar concepts and providers.
Due to the infancy of the Group’s Interchange co-working concept,
there is no guarantee that the Group will be successful in achieving its
intended strategy.
•
The nature of the Group’s e-commerce business involves the receipt
and storage of personal information about its tenants, customers and
employees. If the Group experiences a significant data security breach
or fails to detect and appropriately respond to a significant data
security breach, it could be exposed to government enforcement
actions and private litigation. In addition, the Group’s customers
could lose confidence in its ability to protect their personal
information, which could cause them to discontinue usage of the
Group’s online platform or stop shopping with the Group altogether.
The loss of confidence from a significant data security breach could
damage the Group’s reputation.
•
The Group’s e-commerce and Market Tech Digital businesses carry
the risk of alleged intellectual property right infringement in relation
to third parties copying websites owned by the Group such as
camdenmarket.com. The Group could be faced with pursuing a
variety of claims against third parties in order to protect its ecommerce and Market Tech Digital operations.
•
The Group’s business strategy involves an increasing percentage of
customers purchasing goods from the Group’s tenants and directly
from the Group via the Group’s online platforms including
camdenmarket.com and everything5pounds.com, thereby increasing
sales and profits. The Group’s ability to monetise its current customer
base who visit and shop at the physical markets is critical to one
aspect of the Group’s anticipated business and growth. The Group is
at an early stage of pursuing this strategy and as such there is no
guarantee that the Group will be successful in achieving this strategy
or that it will successfully increase revenues from its e-commerce
operations. If the Group is unable to monetise its existing customer
base, the Group’s online business may not grow as planned and the
Group’s investment in the online business may be unsuccessful.
•
Property redevelopment involves certain inherent risks including, but
not limited to:
–
the Group may be unable to proceed with a future
redevelopment project (i.e. one not currently in contemplation)
because it cannot obtain financing or the required capital
expenditure on favourable terms;
–
the Group may incur construction costs for a redevelopment
project that exceed original estimates;
–
the Group may be unable to obtain, or face delays in obtaining
required planning or statutory consents or building, occupancy,
environmental and other governmental permits and
authorisations;
–
environmental issues such as soil contamination could arise,
which could result in increased costs deriving from delays in
construction and operation and which could result in the
14
Group abandoning its activities with respect to a
redevelopment;
D.3
Key information on
the key risks specific
to the securities
–
the Group may be unable to complete the construction, leasing
or sale of a redevelopment on schedule, which could result in
increased debt servicing, construction or renovation costs;
–
inaccurate assessment of a redevelopment opportunity or a
decrease in occupier demand due to competition from other
residential or commercial properties or adverse market or
economic conditions, could result in a substantial proportion
of a redevelopment remaining vacant after completion;
–
the Group faces risks associated with any construction activity
at its Real Estate Assets, including the imposition of liens and
defects in materials or the workmanship of its internal team or
third party contractors;
–
the Group’s contractors, subcontractors and other
counterparties may become bankrupt or insolvent which in
turn can expose the Group to increased costs or delays to
completion where a new third party is required to be engaged
to complete a redevelopment project or increased liability
exposure following completion of a redevelopment where the
Group cannot look to a third party to rectify or compensate it
for construction defects; and
–
arbitrary changes in enabling legislation, such as planning and
environmental law after site acquisition may cause serious
delays or frustrate a redevelopment project.
•
At the time of Main Market Admission, the Major Shareholder will in
aggregate hold 334,187,500 Ordinary Shares representing
approximately 71.34 per cent. of the issued share capital of the
Company. Sales of substantial numbers of Ordinary Shares by the
Major Shareholder could adversely affect the prevailing market price
of the Ordinary Shares. Furthermore, due to the percentage interest
held by the Major Shareholder, the Major Shareholder will be able to
pass or defeat any ordinary resolution of the Company requiring a
simple majority of those attending and voting in present or by proxy
at the meeting, including amongst other things: (i) the election of
directors and (ii) authorising the directors to issue equity securities. In
addition, the Major Shareholder will be able to substantially influence
the passing of any special resolution of the Company or defeat such
resolution. The interests of the Major Shareholder may not always be
aligned with those of other Shareholders.
•
Publicly traded securities from time to time experience significant price
and volume fluctuations that may be unrelated to the operating
performance of the companies that have issued them. In addition, the
market price of the Ordinary Shares may prove to be highly volatile.
The market price of the Ordinary Shares may fluctuate significantly in
response to a number of factors, some of which are beyond the
Company’s control, including: variations in operating results in the
Company’s reporting periods; changes in financial estimates by
securities analysts; poor stock market conditions affecting companies
engaged in real estate or engaged in e-commerce; strategic alliances,
joint ventures or other capital commitments; additions or departures of
key personnel; any shortfall in turnover or net profit or any increase in
losses from levels expected by securities analysts; research and reports
that industry or securities analysts publish about the Group or its
businesses or if analysts cease coverage of the Group or fail to regularly
publish reports on it; and future issues or sales of Ordinary Shares.
15
•
The Company is applying for a standard listing on the Official List
under Chapter 14 of the Listing Rules. The proposed standard listing
will afford investors a lower level of regulatory protection than would
be applicable if the Company was to apply for a premium listing on
the Official List. Upon Main Market Admission, the AIM Rules for
Companies will cease to be applicable to the Company.
Section E – Offer
E.1
Total net proceeds
and estimated total
expenses
Not applicable. This document relates to the application for listing of the
Ordinary Shares on the Official List and admission to trading on the Main
Market only. No new Ordinary Shares are being issued by the Company in
connection with Main Market Admission.
E.2a
Reasons for the offer,
use of, estimated net
amount of the
proceeds
Not applicable. This document relates to the application for listing of
the Ordinary Shares on the Official List and admission to trading on the Main
Market only. No new Ordinary Shares are being issued by the Company in
connection with Main Market Admission.
E.3
Terms and conditions
of the offer
Not applicable. This document relates to the application for listing of
the Ordinary Shares on the Official List and admission to trading on the Main
Market only. No new Ordinary Shares are being issued by the Company in
connection with Main Market Admission.
E.4
Material interests
Not applicable. This document relates to the application for listing of
the Ordinary Shares on the Official List and admission to trading on the Main
Market only. No new Ordinary Shares are being issued by the Company in
connection with Main Market Admission.
E.5
Selling shareholders
Not applicable. This document relates to the application for listing of
the Ordinary Shares on the Official List and admission to trading on the Main
Market only. No new Ordinary Shares are being issued by the Company in
connection with Main Market Admission.
E.6
Dilution
Not applicable. This document relates to the application for listing of
the Ordinary Shares on the Official List and admission to trading on the Main
Market only. No new Ordinary Shares are being issued by the Company in
connection with Main Market Admission.
E.7
Estimated expenses
charged to investors
Not applicable. No expenses are being directly charged to Shareholders by
the Company in connection with Main Market Admission.
16
PART II
RISK FACTORS
AN INVESTMENT IN THE COMPANY INVOLVES A VARIETY OF RISKS. ACCORDINGLY,
INVESTORS SHOULD CONSIDER CAREFULLY THE SPECIFIC RISK FACTORS SET OUT
BELOW IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS DOCUMENT
BEFORE INVESTING IN THE COMPANY. IN PARTICULAR, THE COMPANY’S
PERFORMANCE MAY BE MATERIALLY AND ADVERSELY AFFECTED BY CHANGES IN
THE MARKET AND/OR ECONOMIC CONDITIONS AND BY CHANGES IN THE LAWS AND
REGULATIONS (INCLUDING ANY TAX LAWS AND REGULATIONS) RELATING TO, OR
AFFECTING, THE GROUP OR THE INTERPRETATION OF SUCH LAWS AND REGULATIONS.
IF ANY OF THE FOLLOWING RISKS MATERIALISE, THE BUSINESS, FINANCIAL
CONDITION, RESULTS OR FUTURE OPERATIONS OF THE GROUP COULD BE
MATERIALLY AND ADVERSELY AFFECTED. IN SUCH CIRCUMSTANCES, THE TRADING
PRICE OF THE ORDINARY SHARES COULD DECLINE AND INVESTORS COULD LOSE
PART OR ALL OF THEIR INVESTMENT IN THE ORDINARY SHARES. IN ADDITION, THE
RISKS BELOW ARE NOT THE ONLY RISKS TO WHICH THE COMPANY MAY BE SUBJECT.
THE COMPANY MAY BE UNAWARE OF CERTAIN RISKS OR BELIEVE CERTAIN RISKS TO
BE IMMATERIAL WHICH LATER PROVE TO BE MATERIAL. THE ORDER IN WHICH RISKS
ARE PRESENTED IS NOT NECESSARILY AN INDICATION OF THE LIKELIHOOD OF THE
RISKS ACTUALLY MATERIALISING, OF THE POTENTIAL SIGNIFICANCE OF THE RISKS
OR OF THE SCOPE OF ANY POTENTIAL HARM TO THE GROUP’S BUSINESS, RESULTS OF
OPERATIONS AND FINANCIAL CONDITION. INVESTORS SHOULD CAREFULLY
CONSIDER WHETHER AN INVESTMENT IN THE ORDINARY SHARES IS SUITABLE FOR
THEM IN THE LIGHT OF THE INFORMATION IN THIS DOCUMENT AND THEIR PERSONAL
CIRCUMSTANCES.
INVESTORS SHOULD NOTE THAT THE RISKS RELATING TO THE GROUP, ITS INDUSTRY
AND THE ORDINARY SHARES SUMMARISED IN THE SECTION OF THIS DOCUMENT
ENTITLED “SUMMARY” ARE THE RISKS THAT THE DIRECTORS AND THE PROPOSED
DIRECTORS BELIEVE TO BE THE MOST ESSENTIAL TO AN ASSESSMENT BY A
PROSPECTIVE INVESTOR OF WHETHER TO CONSIDER AN INVESTMENT IN THE
COMPANY. HOWEVER, AS THE RISKS WHICH THE GROUP FACES RELATE TO EVENTS
AND DEPEND ON CIRCUMSTANCES THAT MAY OR MAY NOT OCCUR IN THE FUTURE,
INVESTORS SHOULD CONSIDER NOT ONLY THE INFORMATION ON THE KEY RISKS
SUMMARISED IN THE SECTION OF THIS DOCUMENT HEADED “SUMMARY” BUT ALSO,
AMONG OTHER THINGS, THE ADDITIONAL RISKS AND UNCERTAINTIES DESCRIBED
BELOW.
PART A: RISKS RELATING TO THE GROUP AND ITS BUSINESS
RISKS RELATING TO THE GROUP’S REAL ESTATE OPERATIONS
Deterioration in the real estate market and general economic conditions could potentially have a negative
impact on the Group’s rental income
Returns from the Group’s investments in property depend upon the amount of rental income generated from
the property versus the expenses incurred in the construction or redevelopment and management of the
property.
The Group derives the bulk of its rental income from retail tenants. The Group’s ability to generate revenues
from its portfolio is linked to occupancy levels and the scope for rental increases. These factors are
themselves determined by the underlying performance of the tenants that rent space in those properties,
which is influenced by a number of general economic factors outside of the Group’s control, including, but
not limited to: the solvency of businesses, the availability of consumer credit, the level of consumer
indebtedness, levels of employment, seasonal earnings and increasing competition from discount and
17
internet retailers, business and consumer confidence, gross domestic product growth, infrastructure quality,
financial performance and productivity of industry, availability of lending, interest rates, trends in house
prices, fluctuations in weather, taxation, regulatory changes and oil prices. Restricted availability of credit
for consumers and businesses may lead to lower levels of consumer spending, a higher level of business
failures and difficulties for new tenants in raising capital which in turn may affect the Group’s ability to
secure new tenants and retain existing tenants for its properties, many of whom are start-up or small
companies.
Tenants may have difficulty in meeting the obligations of the terms under which they rent space from the
Group. The Group’s net rental income may be adversely affected in the event of: (i) late payments and/or
non-payments by tenants of amounts due under agreements; (ii) tenants seeking to renegotiate or dispute
terms including, but not limited to, those relating to the amount of rental obligations; and (iii) tenants’
businesses going into administration, which may affect the Group’s ability to collect amounts receivable or
otherwise manage its tenants.
If general economic conditions deteriorate: (i) the Group’s vacancy rates could increase as demand from
prospective tenants weakens; (ii) rent reviews may be settled at levels less favourable than the Group
currently expects; and (iii) existing tenants may look to renegotiate their arrangements with the Group, in
particular seeking lower rents or rent-free periods. If vacancies increase, the Group will be responsible for
business rates and be required to service and upkeep a greater number of vacant spaces, which would lead
to an increase in property outgoings. In order to encourage occupancy, the Group has had to and may have
to continue to offer rent-free periods in order to secure new tenants and in addition to rent free periods, the
Group has had to and may have to continue to offer additional incentives to new tenants. Any failure to
maintain or increase the rental rates for the Real Estate Assets generally may have a material adverse effect
on the Company’s profitability, the price of the Ordinary Shares and the Group’s ability to meet interest and
capital repayments on any debt facilities.
There may be other factors that depress rents or occupancy levels or restrict the Group’s ability to increase
rental income, rental rates or occupancy levels, including local factors relating to Camden and London.
A negative change in the financial condition of a significant number of the Group’s tenants could result in a
substantial decrease in the Group’s rental income, which would have an adverse impact on the Group’s
business, financial condition and prospects and/or operating results.
The Group’s business is dependent on general property market conditions in the UK
The Group is subject to the risks of ownership, redevelopment and management of property in the UK.
Property markets tend to be cyclical and related to the condition of the economy as a whole. The financial
performance of the Group’s businesses could be adversely affected by a worsening of general economic
conditions in the UK. Factors including but not limited to: interest rates, inflation, investor sentiment, the
availability and cost of credit, the liquidity of the global financial markets and the level and volatility of
equity prices could significantly affect the Group. Such economic conditions may have one or more of the
following consequences:
•
a decline in the value of the Real Estate Assets; and/or
•
a reduction in rents achievable or received from potential tenants and/or existing tenants of the Real
Estate Assets.
The quality of tenants and occupancy levels may decline over time
There can be no assurance that existing tenants will continue to rent space from the Group or, if they do not,
that new tenants of better or equivalent standing will be found. Furthermore, even if such renewals are
effected or replacements are granted, there can be no assurance that such renewals or replacements will be
on terms (including rental levels) as favourable as those which exist now or before such termination, nor that
the financial strength of tenants who renew or new tenants who replace them will be better, the same as, or
equivalent to, those now existing or existing before such termination. Any prolonged period of reduced
occupancy could have an adverse effect on the Group’s business, financial condition and prospects and/or
operating results.
18
The Group may face restrictions or liabilities under property laws and regulations in the UK
The Group is required to comply with a variety of laws and regulations of local, regional, national and
European Union authorities, including planning, zoning, environmental, fire, health and safety, tax, landlord
and tenant and other laws and regulations. If the Group fails to comply with these laws and regulations, the
Group may have to pay penalties or private damages awards. Changes in existing laws or regulations could
also negatively impact on the Group, for example, there could be changes in retail tenancy laws that limit the
Group’s recovery of certain property operating expenses, changes or increases in real estate taxes that cannot
be recovered from the Group’s tenants or changes in environmental laws that require significant capital
expenditure. A number of leases entered into by the Group exclude the Landlord and Tenant Act 1954 (as
amended from time to time) which gives tenants the right to renew leases through a court system. If there
were a change in law affecting the ability to exclude these rights, there is a risk that the Group would not be
able to enter into leases which, on expiry, could be re-let on more favourable terms to more attractive tenants,
which could affect the rental income of the Group and the overall profitability of the Group in the future.
Changes in existing laws or regulations, or in their interpretation or enforcement, could require the Group to
incur additional costs in complying with those laws, or require changes to its investment strategy, operations
or accounting and reporting systems, leading to additional costs and tax liabilities or loss of revenue, which
could materially adversely affect the Group’s business, financial condition and prospects and/or operating
results.
The valuation of the Real Estate Assets is inherently subjective and uncertain and is based on assumptions
which may prove to be inaccurate
The valuation of the Real Estate Assets is inherently subjective due to, among other factors, the individual
nature of each property, its location and the expected future rental revenues from that particular property.
This is particularly so given the nature of the Real Estate Assets and the fact that all of the markets
comprising Camden Market are in common ownership with the added value that may be attributed to such
a consolidation of ownership. In addition, there are particular complexities associated with the valuation of
redevelopment properties, particularly where they comprise interests in complex urban schemes.
The Real Estate Assets have been valued by independent third party professional valuers, JLL, on the basis
of Market Value in accordance with the RICS Valuation–Professional Standards, January 2014, defined as
the estimated amount for which an asset or liability should exchange on the valuation date between a willing
buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had
each acted knowledgeably, prudently and without compulsion. In determining Market Value, valuers are
required to make certain assumptions. An assumption is defined in the RICS Valuation – Professional
Standards as a supposition taken to be true. The Valuation Report contains a number of assumptions upon
which JLL based their valuations of the Real Estate Assets. These assumptions include, but are not limited
to, matters such as title, condition of structure and services, deleterious materials, plant and machinery and
environmental matters. Should an assumption differ from reality this could negatively affect the Market
Value of the property. There can be no guarantee that if a property is sold that it will be sold at the most
recent opinion of Market Value, even where any such transactions occur shortly after the relevant valuation
date. Similarly there can be no guarantee that opinions of rental value will be achieved. Investment property
valuations are dependent on, amongst other matters, the level of rental income received and anticipated to be
received from that property in the future and, as such, declines in rental income could have an adverse impact
on revenue and the value of the Real Estate Assets. Incorrect assumptions or flawed assessments underlying
a valuation report could negatively affect the Group’s financial condition and potentially inhibit the Group’s
ability to realise a sale price or achieve rental income that reflects the stated valuation.
Investors are reminded that the Valuation Report speaks only as of the valuation dates referred to in it, and
any market volatility after those dates may cause significant movements in the value of the Real Estate Assets
since such dates. There can be no assurance that any valuations will be reflected in actual transaction prices,
even where any such transactions occur shortly after the relevant valuation date, or that any estimated yield
and annual rental income will prove to be attainable. In addition, investment property valuations are
dependent on, amongst other matters, the level of rental income received and anticipated to be received on
19
that property in the future and, as such, declines in rental income could have an adverse impact on revenue
and the value of the Real Estate Assets.
Any decrease in value of the Real Estate Assets or failure by the Group to achieve assumed values could have
an adverse impact on the Group’s business, financial condition and prospects and/or operating results.
The Group’s consolidated balance sheet and income statement may be significantly affected by
fluctuations in the valuation of the Group’s properties as a result of property revaluations
As indicated above, the Group’s properties are independently revalued on a regular basis, and any increase
or decrease in the value of its properties is recorded as a revaluation gain or loss in the Group’s consolidated
income statement in the period during which the revaluation occurs. As a result, the Group can have
significant non-cash gains and losses from period to period depending on the change in valuation of its
properties, whether or not such properties are sold.
The Group faces inherent general risks relating to property investment activities
Revenue earned from the Real Estate Assets, the value of the Real Estate Assets and the operating expenses
of the Group are subject to a number of inherent general risks, which include, but are not limited to:
•
increases in business rates, payroll expenses and energy and utility costs;
•
a competitive rental market, which may affect rental levels or occupancy levels at the Real Estate
Assets;
•
the periodic need to renovate, repair and re-lease space, and the cost thereof;
•
the Group’s ability to manage increases in the cost of services provided by third party providers and/or
increases in the cost of maintaining properties including, but not limited to, unforeseen capital
expenditure;
•
tenants seeking the protection of bankruptcy laws which could result in delays in receipt of rental and
other contractual payments, inability to collect such payments, the termination of a tenant’s lease or
the failure of a tenant to vacate a property, all of which could hinder or delay the sale or re-letting of
a property;
•
whether the Real Estate Assets are perceived as attractive, convenient and safe in order to attract high
quality tenants and to maintain footfall levels; and
•
the Group’s ability to obtain adequate maintenance services or insurance on commercial terms and at
acceptable premiums or at all.
To the extent that these factors generate an increase in operating and other expenses that is not matched by
an increase in revenues or are not recoverable from tenants, they could have an adverse impact on the
Group’s business, financial condition and prospects and/or operating results.
Events which damage or diminish London’s status could affect the Group’s ability to let vacant space and
reduce the value of the Real Estate Assets
The value of the Group’s current and future properties in central London may be adversely affected by events
which damage or diminish London’s status as a global financial and business centre, such as a reduction in
London’s attractiveness to skilled persons as a result of regulation, taxation or otherwise, an increase in costs
or other adverse changes in the regulatory environment for financial services, actual or threatened acts of
terrorism, economic recession or otherwise or the UK exiting from the European Union or substantially
changing the terms on which it remains a European member state. If London’s status as a global financial
and business centre were damaged or diminished, tenant demand for commercial office space in central
London could decrease. The resulting increase in vacancies in the market could reduce the ability of the
Group to let vacant space and cause property values in central London to decrease, both of which could have
an adverse impact on the Group’s business, financial condition and prospects and/or operating results.
20
The concentration of the Real Estate Assets in Camden means risk is not diversified across a number of
geographical areas
The majority of the Group’s properties are located in Camden. As a result of this concentration, the Group
is more exposed to events that threaten visitor security or health and safety or lead to public transport
disruption or public protest or disorder, including protests against the development of Camden and any other
events that might otherwise adversely affect the desirability or popularity of Camden as a location or
destination than a group whose assets are spread over a broader geographical area. Any significant decrease
in the popularity or status of Camden could have an adverse impact on the value of the Real Estate Assets.
Such concentration may also lead to greater volatility in terms of operations, financial results and funding
requirements.
External events beyond the control of the Group may have a negative impact on the Real Estate Assets
and trading position through a reduction in the number of visitors and/or tourists to Camden
The occurrence of events such as an earthquake, an outbreak of an infectious disease or any other serious
public health concern, could result in a reduction of demand for the Group’s retail premises, offices and
leisure space. Furthermore, public disorder, terrorist attacks or war could damage infrastructure or otherwise
inhibit or prevent access to Camden or harm the demand for and the value of the Real Estate Assets. Terrorist
attacks in central London (such as those in July 2005 or as more recently seen in Paris in November 2015)
and the fact that Camden may in the future be a target of further actual or threatened public disorder action
or terrorist attacks could discourage consumers from shopping in public places like Camden.
The prosperity of Camden’s local economy and, in turn, the Group’s retail and restaurant tenants who
account for the majority of the current gross income from the Group’s portfolio is dependent on large
numbers of domestic and overseas visitors and tourists to Camden. Such actual or threatened public disorder
or terrorist attacks could pose threats to security, public safety or public health which may result in a
sustained and significant reduction in visitor numbers, particularly international tourists and discourage
businesses from choosing central Camden offices or retail space. To the extent that the Group’s tenants are
impacted by such attacks, their ability to continue to honour obligations under their existing leases could also
be adversely affected.
Overseas visitors are an important element of the local economy in Camden. Unfavourable exchange rate
changes could result in the cost of visiting London for overseas tourists increasing, likely leading to a
decrease in visitor numbers and spending. If sterling strengthens against other currencies, it could become
less expensive for UK-based visitors to visit overseas cities, which could lead to a decline in domestic visitor
numbers and spending in Camden which in turn may have an adverse impact on the Group’s business,
financial condition and prospects and/or operating results.
Significant and sustained public transport disruption or failure in London or Camden could reduce the
volume of visitors and/or tourists to Camden and could result in a decline in occupancy levels and tenancy
demand for the Real Estate Assets
Public transport services are essential in bringing into Camden the large numbers of visitors and tourists on
which the Group’s tenants depend. The failure of any one of London’s transport services, significant and
sustained disruption (in excess of normal course delays) to these services (including to Chalk Farm or
Camden Town underground stations, Camden Town as at the date of this document being subject to
redevelopment with the potential to cause some disruption to normal course services) and/or any detrimental
change to local or national policy in respect of transport may lead to a significant and potentially sustained
drop in the volume of visitors and/or tourists to Camden which could adversely affect trading conditions for
the Group’s tenants. Any such deterioration in trading conditions could have an adverse impact on the
Group’s business, financial condition and prospects and/or operating results.
21
Competition from Camden High Street and other retail sales channels including other online market
based retailers, could have an adverse effect on the Group’s business, financial condition and/or
operating results
The Group faces competition from other retail offerings located within the Camden area such as Camden
High Street. The amount of lettable space in the relevant area, the quality of facilities and the nature of stores
at such competing retail offerings could each have an adverse effect on the Group’s ability to retain tenants,
lease space and on the level of rent it can obtain. In addition, the existence of such competition may also
have an adverse impact on the Group’s ability to acquire properties or develop land at a satisfactory cost.
Further, the Group’s e-commerce offering faces competition from other established online market based
retailers which may impact on the demand for the Group’s retail space, as well as the other alternative uses
for customers’ discretionary income. Any of the foregoing factors could have an adverse effect on the
Group’s business, financial condition and prospects and/or operating results.
Issues giving rise to potential disputes in Stables Market could have an adverse effect on the Group’s
business and operations
A third party owns a private road and walkway which is located behind the emergency exit gate located at
the north-west corner of Stables Market. This gate is the western entry point to Stables Market and the Group
currently uses the gate as one of the emergency exits for Stables Market. The Group has used this gate
leading onto the private road and walkway without authorisation or dispute from the third party and believes
it has prescriptive rights over this area. However, the third party may decide at any point in time that the
emergency exit gate is closed. This will result in a change to the layout of Stables Market. If the Group was
required to change the layout of Stables Market, in addition to the costs the Group would incur in changing
the layout, any change may result in a significant reduction in the rental income derived from Stables Market
both in the short term (due to the operational disruption that changing the layout would cause) and
potentially the long term if any change resulted in a decrease in the number of tenants which Stables Market
could accommodate.
The Group may require certain consents to proceed with the Stables Market refurbishments. In relation to
one of the Stables Market leases, while the construction of Buildings A & B was authorised by the superior
landlord, the extent of the demise is ambiguous. In the event of any dispute or challenge by the superior
landlord to the Group’s demise, the Group may have to close a proportion of Buildings A & B and leave it
vacant. If such action was required, this could result in a substantial lessening of the revenue which the
Group does or could derive from Buildings A & B. Stables Market is one of the Group’s material real estate
assets. Should any such dispute or challenge materialise which results in Buildings A & B having to be left
vacant, this could potentially equate to a reduction in the rental income derived from the Stables Market
property of approximately £65,293 per annum (representing approximately 12 per cent. of the Group’s total
annual rental income as at 30 September 2015). Accordingly, any such challenge could also impact the value
of the property. In addition, the relevant lease contains alienation and alteration provisions which are more
restrictive than usual for a long leasehold interest. The landlord may forfeit for breach of covenant (with no
threshold for materiality) and, although the Group is responsible for insuring, were the premises to be
destroyed the landlord would be entitled to terminate the lease and retain the insurance proceeds. In addition,
the landlord may terminate the lease at any time on six months’ prior written notice, if the premises are
required in connection with the landlord’s railway undertaking in order for the landlord to operate their
railway business. However, if the lease is terminated by way of the operation of the railway undertaking, the
landlord is required to offer to the Group a new lease of the part or parts of the relevant premises which are
not required for the operation of the railway undertaking and additional land (located near certain arches
beneath the railway known as Arches Nos 1-40 Stanley Sidings, Primrose Hill) for a term equal to the residue
of the term left unexpired and on equal terms (save that no premium is payable) on the lease. In relation to
the other of the Stables Market leases, underlettings require consent, which is unusual given the nature of the
Company’s business. As with the other lease, the alienation and alteration provisions are generally more
restrictive than usual for a long leasehold interest.
22
Changing fashion and trends could impact on the Group’s revenues and profits as well as the goodwill of
the Group’s business
Whilst the Directors and the Proposed Directors believe that the Group’s tenants have longevity and therefore
the potential to deliver substantial growth in product sales, there is no guarantee that they will fulfil this
potential. Many of the products that the Group’s tenants sell are subject to changing consumer preferences
and fashion trends and the Group’s revenues and profits may therefore be sensitive to these changing
preferences and trends. Albeit the Group does not drive income directly from product sales made by its
tenants, the Group does have a vested interest in ensuring that: (i) the mix of products sold by its tenants are
such that they continue to attract visitors to the Camden Market; and (ii) the business operated by each tenant
is sufficiently income generating/economically viable to enable that tenant to fulfil its rent payment
obligations. Accordingly, the Group and its tenants must continue to identify and interpret trends and respond
in a timely manner. If the Group or its tenants fail to anticipate, identify or react swiftly to changes in
consumer preferences, then this could result in lower visitor numbers to the Real Estate Assets, lower sales,
higher mark downs and lower profits, each of which could impact on the ability of tenants to fulfil their rent
payment obligations or the economic viability of their individual businesses, which in turn could have an
adverse impact on the Group’s business, financial condition and prospectus and/or operating results.
Reduced consumer spending would impact on Camden Market and the Group’s online platforms
There could be a downturn in consumer spending at Camden Market or on the Group’s online retail
platforms for a variety of reasons including prevailing economic conditions which are beyond the Group’s
control. A decline in consumer spending could be caused by a reduction in visitor numbers to the Group’s
sites, change in consumer preferences, a decline in consumer confidence, various other economic factors, a
reduction in the levels of employment and a change in interest/exchange rates. Reduced consumer spending
could have an adverse impact on the Group’s business, financial condition and prospects and/or operating
results.
The Group may be liable for environmental issues relating to its operations and properties
The Group may be liable for the costs of removal, investigation or remediation of hazardous or toxic
substances located on or in a property owned by or leased to it. The costs of any required removal,
investigation or remediation of such substances may be substantial. The presence of such substances, or the
failure to remediate such substances properly, may also adversely affect the Group’s ability to sell or lease
the real estate or to borrow using the real estate as security. Laws and regulations, as these may be amended
over time, may also impose liability for the release of certain materials into the air or water from a current
or former real estate investment, including asbestos, and such release can form the basis of liability to third
persons for personal injury or other damages. Other laws and regulations can limit the development of, and
impose liability for the disturbance of the habitats of threatened or endangered species. No environmental
surveys or due diligence investigations have been carried out on behalf of the Group in respect of the Real
Estate Assets other than Stables Market (the survey for which recommended further action due to historic
uses of the site and the nearby petrol filling station). Since the Real Estate Assets comprise large areas of
former industrial land, there is a risk that substantial contamination will be found during redevelopment of
these sites. As a result, the Group could incur significant remediation costs and completion of the
developments could take significantly longer than the Directors and the Proposed Directors currently expect.
Non-compliance with, or liabilities under, existing or future environmental laws and regulations, including
failure to hold the requisite permits or licences, could result in fines, penalties, third-party claims and other
costs that could have an adverse impact on the Group’s business, financial condition and prospects and/or
operating results.
Changes in the policies of local authorities could have a significant impact upon the Group’s ability to
maximise the long-term potential of the Real Estate Assets
Substantially all of the Real Estate Assets are located within the London Borough of Camden. Although the
Group works closely with this local authority, changes in local council policies, particularly policies relating
to planning and licensing, could have a significant adverse effect on the Group’s ability to maximise the
long-term potential of its properties.
23
The ability of local authorities to contribute funds to projects with the Group to improve the street
environments in the areas of the Group’s real estate portfolio may become more limited or cease altogether.
This could result in projects not being implemented or the Group being required to contribute a greater share
of the costs of such projects.
Any property of the Group may at any time be compulsorily purchased by the Government
Any property or part of any property of the Group in the UK may, at any time, be compulsorily acquired by
a government department or local authority in connection with proposed redevelopment or infrastructure
projects. If a compulsory purchase order were made in respect of a property or part of a property,
compensation would be payable on the basis of the value of all owners’ and tenants’ proprietary interests in
that property at the time of the related purchase as determined by reference to a statutory compensation code.
This compensation could be less than the Group’s assessment of the property’s current market value (or the
relevant apportionment of such market value where only part of a property is subject to a compulsory
purchase order). If the amount received from the proceeds of sale of the relevant freehold, heritable or long
leasehold estate were inadequate, the Group’s business, financial condition and prospects and/or operating
results would be adversely affected.
There may be a delay between the compulsory purchase of a property or part of any property and the
payment of compensation, the length of which will largely depend upon the ability of the property owner
and the entity acquiring the property to agree on its open market value. In certain circumstances, the Group
may also challenge a compulsory purchase order which could result in substantial costs being incurred by
the Group. Should such a delay occur in the case of a property or part of any property owned by the Group,
the Group’s business, financial condition and prospects and/or operating results may be adversely affected.
If only part of a property is compulsorily purchased, the Group’s business, financial condition and prospects
and/or operating results could be materially adversely affected if such part was of strategic importance to the
Group.
The Group’s co-working concept (known as the “Interchange” concept) is at an early stage of
implementation
The Group’s business strategy involves driving increases to the yields of its Real Estate Assets. The
Interchange co-working concept is one of these initiatives. The concept involves offering shared office space
and/or ‘hot desks’ to start-ups and entrepreneurs who are looking for more flexibility than a more traditional
office let can provide. The first phase of the Group’s Interchange co-working concept, currently under
development at Utopia Village and the Atrium and Triangle buildings in Stables Market, has been
successfully launched. However, the Group is at an early stage of developing this concept and there are a
number of challenges that it faces including, but not limited to:
•
additional financial investment being required to market and increase the profile of the Group’s
Interchange co-working concept; and
•
competition from other similar concepts and providers.
Due to the infancy of the Group’s Interchange co-working concept, there is no guarantee that the Group will
be successful in achieving its intended strategy. If the Group is unable to expand into the co-working market
successfully and generate demand for this type of workspace, the Group’s rental income from its co-working
facilities may fail to grow and any prolonged period of low occupancy could have an adverse effect on the
Group’s business, financial condition and prospects and/or operating results.
The Group is exposed to risks relating to the receipt and processing of credit and debit card, direct debit
and online payments
The Group’s online customers may choose from a range of payment methods, including by means of credit
card or debit cards and via PayPal. In addition, the Group’s tenants typically pay by means of credit or debit
card or direct debit arrangements. If the Group offers new payment options to its customers or tenants, it may
be subject to additional regulations and compliance requirements. The Group pays fees for the processing of
credit and debit card payments, which may increase over time and raise operating costs and lower margins.
24
The Group is subject to payment card association rules, certification requirements, Payment Card Industry
Data Security Standards and rules governing electronic funds transfer, which could change or be
reinterpreted to make them difficult or impossible to comply with. If the Group fails to comply with these
rules or requirements, it may be subject to fines or higher transaction fees and in extreme cases may lose its
ability to accept credit or debit card payments from customers, process electronic fund transfers or facilitate
other types of online payments.
In addition the Group is vulnerable to online fraud, for example, a user of the Group’s websites may use a
stolen credit or debit card number to complete a transaction. The Group has a fraud detection system in place,
however there is no assurance that this system will detect all fraudulent activity undertaken on the Group’s
websites. The Group will be liable to pay the relevant credit or debit card company in cases where there have
been fraudulent transactions on its websites and it may be unable to seek redress against the perpetrator of
such transactions.
Any significant failure of the Group’s payment processing or fraud detection systems, whether caused by a
systems failure or otherwise, will adversely affect the Group’s revenue in the short term and it may result in
the loss of both online and offline customers. The Group may also suffer reputational damage. This may
consequently have a material adverse effect on the Group’s financial condition and prospects and/or
operating results.
RISKS RELATING TO THE GROUP’S E-COMMERCE OPERATIONS AND MARKET TECH
DIGITAL
The Group may not be able to successfully monetise its Real Estate Assets with its e-commerce platform
The Group’s business strategy involves an increasing percentage of customers purchasing goods from the
Group’s tenants and directly from the Group via the Group’s online platforms including camdenmarket.com
and everything5pounds.com, thereby increasing sales and profits. The Group’s ability to monetise its current
customer base who visit and shop at the physical markets is critical to one aspect of the Group’s anticipated
business and growth. The Group is at an early stage of pursuing this strategy and as such there is no guarantee
that the Group will be successful in achieving this strategy or that it will successfully increase revenues from
its e-commerce operations. The Group faces a number of challenges to monetise its existing customer base,
including:
•
providing alternative sources of revenue generated from the online platform and mobile access to the
markets;
•
offering a comprehensive user experience online and through mobile apps; and
•
ensuring that the online and mobile services which the Group provides are secure and trusted.
If the Group is unable to monetise its existing customer base, the Group’s online business may not grow as
planned and the Group’s investment in the online business may be unsuccessful, which may have an adverse
impact on the Group’s business, financial condition and prospects and/or operating results.
The Group’s is reliant on the availability of wi-fi and the reliability of IT and internet infrastructure in
implementing its online retail offering
The Group’s e-commerce strategy for Camden Market is dependent on the internet and on the continued
growth and maintenance of the internet infrastructure. There can be no assurance that the internet
infrastructure will continue to be able to support the demands placed on it by continued growth in the number
of users of and amount of traffic on the internet. To the extent that the internet’s infrastructure is unable to
support the demands placed on it, the business of the Group’s direct and indirect e-commerce customers and
clients, and consequently, the e-commerce business of the Group, may be affected.
If the websites owned by the Group were to fail or be damaged this could seriously impact on the ability of
retailers to trade and the overall reputation of the Camden Market brand with both retailers and customers.
The Company intends to mitigate this risk by investing in IT infrastructure and its hosting services. Third
party providers host much of the Group’s technology infrastructure including payment processing systems.
25
Any disruption in their services or any failure of the Group’s providers to handle the demands of the online
platform could significantly harm the e-commerce business.
The reliability of the Group’s online platform is important to the reputation of the e-commerce business and
the ability to attract and retain customers to the sites. As the number of visitors to camdenmarket.com
increases, the number of transactions will increase, the amount of information shared will grow and the
requirement for additional network capacity and computing power will consequently increase. The operation
of the technology underlying the platform is expensive and complex, and operational failures could occur. If
the Group fails to accurately predict the rate or timing of the growth of its online platforms, the Group may
be required to incur significant additional costs to maintain reliability and increase capacity.
The terms on which the Group has contracted with certain suppliers in respect of: (i) the wi-fi access the
Group provides throughout Camden Market for its customers and (ii) the Group’s IT network support, are
relatively informal and unclear. The Group has not entered into any formal written contract in respect of the
wi-fi access in Camden Market and so the Group is receiving such wi-fi access on the supplier’s standard
terms and conditions (which are supplier friendly) and at a less preferential rate than the Group might obtain
should the arrangement be negotiated. In respect of the IT network support, the basis upon which the
relationship with its support providers is on-going is uncertain as it is not clear which contract terms apply.
Some of these terms are particularly restrictive especially with respect to liability. To the extent that the terms
of such arrangements are unclear they may not be enforceable in all respects in accordance with the Group’s
understanding of such terms. To help mitigate any risk of dispute with counterparties, the Group intends to
seek to agree more detailed and precise contractual terms, but there can be no assurance that such
negotiations will be successful.
The Group may also suffer from the adverse effect of the delay or cancellation of government programmes
designed to expand broadband access and its download speed. The reduction in the growth of, or a decline
in, broadband and internet access poses a risk to the Group’s direct and indirect e-commerce customers and
clients and, accordingly, to the Group.
The Group expects to become increasingly reliant on the internet as its online business expands. To the extent
that the internet infrastructure is unable to support the demands placed upon it, is disrupted or proves
unreliable or increasingly expensive, this could have an adverse effect on the Group’s business, financial
condition and prospects and/or operating results.
Risks associated with cyber fraud and theft of data
The nature of the Group’s e-commerce business involves the receipt and storage of personal information
about its tenants, customers and employees. If the Group experiences a significant data security breach or
fails to detect and appropriately respond to a significant data security breach, it could be exposed to
government enforcement actions (including substantial fines) and private litigation. In addition, the Group’s
customers could lose confidence in its ability to protect their personal information, which could cause them
to discontinue usage of the Group’s online platform or stop shopping with the Group altogether. The loss of
confidence from a significant data security breach involving employees could damage the Group’s
reputation, cause recruiting and retention challenges, increase labour costs and affect how the Group operates
its business. Any of these factors could have an adverse effect on the Group’s business financial condition
and prospects and/or operating results.
Risks associated with intellectual property right infringement and enforcement of rights
The Group’s e-commerce and Market Tech Digital businesses carry with them the risk of alleged intellectual
property right infringement in relation to third parties copying websites owned by the Group such as
camdenmarket.com. The Group could be faced with pursuing a variety of claims against third parties in order
to protect its e-commerce and Market Tech Digital operations. These claims could relate to alleged copyright
infringement, design right infringement, trademark infringement and passing off.
The Group seeks to protect its intellectual property rights by relying on trademark and copyright protection
in addition to contractual protections. There may be instances in the future when the Group is not able to
acquire appropriate intellectual property in certain countries or not able to protect (through obtaining
26
appropriate registrations or otherwise) or enforce its intellectual property assets and/or rights, however, the
Directors and the Proposed Directors believe that the Group’s current intellectual property portfolio will
enable the execution of its e-commerce and Market Tech Digital business strategy.
The impact of changing data and internet laws and regulations in the UK, Guernsey or overseas
(including Germany and Israel)
The Group must comply with data protection and privacy laws. In the event that confidential information or
personal data is wrongfully used or misappropriated by the Group, the Group could face legal sanctions. The
Group relies upon database administrators to maintain its databases, and there is a risk that any of these
people could wrongfully use, misappropriate or otherwise unlawfully or improperly exploit customer data.
It is possible that laws in various jurisdictions that the Group may choose to operate through may be
introduced or interpreted in a manner which is inconsistent with the Group’s existing data practices, and
which could, therefore, have a material adverse effect on the Group. There is a further reputational risk
associated with handling large quantities of personal information and data. If the data were to be obtained
by third parties without the consent of the customer, this would have serious risks and ramifications for the
Group from both a regulatory and reputational perspective.
Due to the global nature of the internet, it is possible that, although the servers and infrastructure used to
provide the Group’s services may be based in the UK and transmission by the Group of the content over the
internet originates primarily in the UK, the governments of other countries might attempt to regulate the
content of the Group’s website or transmissions using its services or might prosecute the Group for violations
of their laws. In addition, laws may vary to a substantial extent from country to country. The Group may
therefore be obliged to comply with different legislative requirements which could restrict its ability to
capture and use data that is of commercial value to it.
The application or modification of existing laws or regulations, or adoption of new laws and regulations
relating to e-commerce, online operations and protection of consumers online could adversely affect the
manner in which the Group currently conducts its business. As the Group implements its digital retail
offering it may become subject to laws and regulation in jurisdictions through which it may choose to
operate. Continued compliance with the laws in such jurisdictions will result in increased costs as the Group
monitors its ability to comply with laws and regulations. There is also an increased risk of non-compliance
by the Group due to complexities in compliance with multiple laws in overseas jurisdictions.
Distribution, logistics and the development of the online retail offering
As part of the development of camdenmarket.com and the Group’s other e-commerce platforms, the Group
needs to be able to provide storage, distribution and logistics support services for retailers. As with the
Group’s existing business, Fiver, the supply of products to customers in a timely manner will be a significant
factor in driving the success of camdenmarket.com and the Group’s other e-commerce operations. Failure to
have access to adequate storage facilities, stock supply issues (resulting in items being unavailable for
immediate distribution) or unforeseen distribution delays could have an adverse effect on the Group’s
business, financial condition and prospects and/or operating results.
Foreign currency risk
Due to the international nature of the Group’s e-commerce and Market Tech Digital business, the Group
generates revenues and incurs costs in foreign currencies. In particular the operating and reporting currency
of Glispa is Euros and the operating and reporting currently of Stucco Media is US dollars. As a result, the
Group is exposed to the risk that adverse exchange rate movements cause the value (relative to its reporting
currency) of its revenues to decrease, or costs to increase, resulting in reduced profitability. Although the
Group seeks to manage its foreign currency risks in order to minimise any negative effects caused by
exchange rate fluctuations there can be no assurance it will be able to do so successfully, and its business,
results of operations and financial condition could be adversely affected by fluctuations in exchange rates.
27
Market Tech Digital may be unable to keep up with the pace of technology development and adapt to
changing customer demands and preferences
Market Tech Digital operates in an industry which is subject to continuous and fast-paced technological
change which requires the Group to adapt quickly to increasingly complex IT infrastructures. New products
and services are introduced to the market frequently and existing products and services become outdated or
obsolete at an increasing rate. Market Tech Digital’s success depends, in part, on its ability to respond to the
rapidly changing needs of customers by developing or introducing new products and services and by
continually upgrading its products and services on a timely basis. Failure to adapt in response to changes in
customer demand and preferences may limit Market Tech Digital’s ability to serve its customers effectively
and restrict its ability to execute its growth strategy, which may have a material adverse effect on the Group’s
reputation, business, results of operations and financial condition.
Market Tech Digital relies on the sustainability of a small number of key contractual partnerships in the
delivery of its services
Market Tech Digital is highly dependent on a small number of key contracts with online merchants, search
engine providers and advisers. Market Tech Digital’s reliance on these third-parties reduces its control over
the provision of its services, exposing it to risks. If Market Tech Digital is unable to manage these third-party
relationships effectively, the terms on which these third-parties are willing to trade with or supply services
to Market Tech Digital may deteriorate or terminate. As a result, Market Tech Digital’s ability to supply its
services could be impaired, and the Group’s reputation, financial condition, operating results and prospects
could be materially adversely affected.
Management of Fiver’s products is complex. Insufficient or disorganised inventory may result in lost sales
opportunities or delayed revenue, whilst excess inventory may reduce Fiver’s profit margins
Fiver is heavily dependent on its inventory management systems and related supply chain visibility tools in
order to carry out its business. Fiver must maintain sufficient inventory levels to operate its business
successfully. However, Fiver must also avoid accumulation of excess inventory in order to minimise out-ofstock levels and maintain in-stock levels across all product categories. The inventory management systems
in place may be inadequate to allow Fiver to forecast accurately and effectively manage the supply of its
products. If Fiver determines that there is excess inventory, it may have to reduce prices and write down
inventory, which in turn could result in lower gross margins. Alternatively, if Fiver does not accurately
anticipate the future demand for a particular product or the time it will take to obtain new inventory, its
inventory levels will not be appropriate which may result in delayed revenue or loss of sales opportunities
altogether as potential customers turn to competitors’ products that could be more readily available.
Fiver’s retail business faces the risk of increased competition and may be unable to win or maintain
market share
The UK online retail market is highly fragmented and continually changing. A substantial number of other
service providers offer products and services in the UK that overlap and compete with the offering of Fiver.
Such competitors include a large number and wide variety of UK and international retailers, some of which
are larger and may have significantly more resources than the Group. Further, new competitors, some of
which may be more nimble than Fiver, may disrupt the online retail market and/or gain market share at
Fiver’s expense.
The Group’s inability to successfully recover from a disaster or other business continuity event could
impair its ability to deliver its products and services and may negatively affect its business
The Group’s Market Tech Digital business is heavily reliant on the Group’s IT technology and infrastructure
to provide products and services to end users.
Any IT infrastructure failure or disruption, natural disasters or accidents, such as serious flood or fire, or
other interruption, malfunction or adverse occurrence with respect to the Group’s network operating centres,
data centres or managed service platform may negatively affect the Group’s ability to provide prompt and
efficient service to its customers. These facilities are also subject to break-ins, computer viruses, acts of
terrorism, sabotage, intentional acts of vandalism and other misconduct.
28
The Group’s technology operations are dependent upon its ability to protect its technology infrastructure
against damage from business continuity events that could have a significant disruptive effect on the Group’s
operations. If such an event was to occur, it may have a material adverse effect on the Group’s reputation,
business, results of operations and financial condition.
RISKS RELATING TO THE GROUP’S REAL ESTATE REDEVELOPMENT BUSINESS
The Group is exposed to the risks associated with redevelopment projects
An important component of the Group’s strategy is to redevelop its property portfolio including properties
such as Hawley Wharf. Property redevelopment involves certain inherent risks including, but not limited to:
•
the Group may be unable to proceed with future redevelopment projects (i.e. one not currently in
contemplation) because it cannot obtain financing or the required capital expenditure on favourable
or acceptable terms;
•
the Group may incur construction costs for a redevelopment project that exceed original estimates.
Cost overruns can occur due to a number of factors including increased material, labour or other costs
(e.g. the cost of raw materials), which could make completion of a redevelopment uneconomic
because the Group may not be able to increase rents or the sale price of completed units to offset the
increase in such costs;
•
the Group may be unable to obtain, or face delays in obtaining, required superior landlord, planning
or statutory consents or building, occupancy, environmental and other governmental permits and
authorisations which can delay completion of a project and impact on a project’s cost;
•
environmental issues such as soil contamination could arise, which could result in increased costs
deriving from delays in construction and operation and which could result in the Group abandoning
its activities entirely with respect to a redevelopment particularly if the cost of remediation is deemed
too high;
•
the Group may be unable to complete the construction, leasing or sale of a redevelopment on
schedule, which could result in increased debt servicing, construction or renovation costs and which
could allow competitors to enter into lease agreements with tenants or sale agreements with
purchasers that the Group was targeting or open another development ahead of the Group. This may
have a negative effect on the ability of the Group to lease out or sell a completed development;
•
inaccurate assessment of a redevelopment opportunity or a decrease in occupier demand due to
competition from other residential or commercial properties or adverse market or economic
conditions could result in a substantial proportion of a redevelopment remaining vacant after
completion and exert pressure on the Group to provide incentives to tenants or purchasers (e.g.
extended warranty or rent free periods);
•
the Group faces risks associated with any construction activity at its Real Estate Assets, including the
imposition of liens and defects in materials or the workmanship of its internal team or third-party
contractors. This liability may apply to defects in properties that were unknown to the Group but could
have, or should have, been discovered;
•
the Group’s contractors, subcontractors and other counterparties may become bankrupt or insolvent
which, in turn could expose the Group to increased costs or delays to completion where a new third
party is required to be engaged to complete a redevelopment project or increased liability exposure
following completion of a redevelopment where the Group cannot look to a third party to rectify or
compensate it for construction defects;
•
arbitrary changes in enabling legislation, such as planning and environmental law, after site
acquisition may cause serious delays or frustrate a redevelopment project entirely; and
29
•
changes to the prevailing economic environment could mean a redevelopment project no longer meets
the Group’s criteria for redevelopment or causes the Group to reconsider its plans for a
redevelopment.
Any of the above factors may have an adverse impact on the Group’s redevelopment strategy and the
viability of a scheme, which may in turn have an adverse impact on the Group’s business, financial condition
and prospects and/or operating results. Nothing in this paragraph is intended to qualify the opinion of the
Company that, taking into account the bank and other facilities available to the Group, the working capital
available to the Group is sufficient for the present requirements of the Group, that is, for at least the
12 months following the date of publication of this document (as set out in paragraph 14 of Part XV).
The Hawley Wharf Development is at an early stage of implementation
The planning permission process for the Hawley Wharf Development was successfully concluded in January
2013 and completion of the site assembly process concluded in December 2014. While demolition began in
early 2015, detailed planning of the site and construction itself is still underway, meaning that the Hawley
Wharf Development remains exposed to certain risks with no guarantee that the redevelopment can be
completed within budget, on schedule or in line with the Group’s current plans. The current plans are on the
basis of the planning permission obtained using GEA measurements, whereas future rental income will be
driven by net lettable area measurements. Net lettable area will only be finally determined after construction,
which itself will be driven by the detailed design work currently underway. Consequently, there is a risk that
the Group may not obtain the extent of net lettable area that it expects when construction is completed.
A number of third party consents (which are not within the Group’s control) are required for the Hawley
Wharf Development. Any delays in obtaining any of these may delay the redevelopment works, which in turn
may result in increased costs deriving from delays in construction and operation. Should the Group be unable
to obtain all necessary third party consents, it will not be able to proceed with the Hawley Wharf
Development in line with the Group’s current development plans.
Certain specific consents may be required for the intended Union Street Market Development
In Union Street Market, the subsoil under various parts of the property is excluded from the title and part of
the property is held only with possessory title (and so this part is subject to any title matters that existed prior
to its registration). The exclusion of the subsoil from the title may affect future development (due to its
impact on proposed foundations) and therefore limit some construction. Future redevelopment of Union
Street Market will need to work within these restrictions/limitations which in turn could increase the cost of
redevelopment or potentially stop redevelopment if a commercially viable or practicable solution cannot be
found.
In the event that the Group’s ownership rights are challenged, the local council may need to invoke
compulsory purchase powers to ensure that a redevelopment scheme proceeds as planned
The Group considers that it has all the necessary ownership rights or rights to acquire ownership of all land
required for its redevelopment plans. This includes the required stopping up orders for all highways and
adopted roads. The Directors and the Proposed Directors believe that a challenge to such ownership is highly
unlikely, however the risk of a challenge from a third party in relation to these rights does remain. In the past,
the local council has demonstrated its willingness to work with the Group to invoke compulsory purchase
powers (where necessary) to ensure that redevelopment schemes have proceeded as planned. However where
this process is required, there will be costs and delays associated with it and its outcome cannot be
guaranteed.
Carrying out works to listed buildings such as Stables Markets requires consents and can involve added
complexities and costs
Several of the buildings within Stables Market are listed buildings. To the extent that the refurbishment
works involve altering these buildings, the works will be subject to obtaining (and subsequently complying
with) listed building consents. There is no guarantee that the required consents can or will be obtained
which will impact on the Group’s ability to redevelop the site. The Group is aware of this risk, is in
30
discussions with the Local Authority, and is working with its specialist professional advisers to eliminate this
risk and achieve the required permissions. The redevelopment of listed buildings can involve added
complexities and costs associated with a redevelopment project (e.g. the need to source and use a particular
type of material or keep a redevelopment within a specified design/planning parameter in keeping with its
original design/construction). Future redevelopment or maintenance of any listed building will need to
comply with the terms of any granted consent which in turn could increase the cost of redevelopment or
potentially stop redevelopment if a commercially viable or practicable solution cannot be found.
Planning rectification in Stables Market
Stables Market has evolved and changed over the years without always obtaining the appropriate consents
for its planning state and use. There are various and substantial planning breaches across the site (including
breaches relating to listed buildings), most of which have been discussed and rectified with the Local
Authority through planning and listed building consents and in respect of which the Group intends to apply
for retrospective permission. The Company continues to work on the remaining consents and construction is
on-going.
In certain circumstances, the Group requires consent from the lenders under the AIG Senior Facilities
Agreement to proceed with its redevelopment plans
The Group’s borrowing arranged by the lenders under the AIG Senior Facilities Agreement is based on
standard Loan Market Association facility documentation with a full security package cross-collateralising
the obligations of the relevant Group companies. As is relatively standard for facilities of this nature, the
Group is subject to certain restrictions and obligations with respect to the day-to-day operation of its business
including its property redevelopment activities. The relevant Group companies borrowing from the lenders
under the AIG Senior Facilities Agreement has achieved limited carve outs against the restrictions imposed
on them and against the representations and undertakings which the Group has been required to give to the
lenders. In certain circumstances (e.g. where the liability or potential liability of such development works are
in excess of £3 million), the Group will be required to seek the consent of, or a waiver from, the majority
lenders in order to undertake an activity and will be required to comply with the development undertakings
relating to such works and as set out in the AIG Senior Facilities Agreement. This could be an onerous
obligation on the Group depending on the nature of the consent required to be sought and the willingness of
the lenders to give their consent. Failure to obtain the consent of the lenders to any action may have a
material adverse effect on the Group’s business, financial condition, prospects and/or operating results.
RISKS RELATING TO THE GROUP’S FINANCIAL ARRANGEMENTS
If the net rental income of the Group declines significantly, or the Real Estate Assets suffer significant
falls in value the Group may not be able, in the longer term, to maintain compliance with the covenants
in its banking facilities and Convertible Bonds
The Group funds its strategy of long-term investment in properties in part by way of committed banking
facilities. These facilities contain certain financial covenants that are adversely affected by loss of net rental
income and decreases in the value of properties.
The Group’s properties are independently re-valued on a semi-annual basis and the results are incorporated
in the Group’s financial statements as at the valuation dates. The valuation of all property assets includes
assumptions regarding rental revenue expectations and yields that investors would expect to achieve on those
assets over time. Many external economic and market factors, such as interest rate expectations, bond yields,
the availability and cost of finance and the relative attraction of property against other asset classes, have
affected and could further affect the assumptions used to arrive at current valuations.
In the longer term, a significant reduction in the value of the Group’s investment properties would adversely
affect its gearing and loan to value ratios, which could result in a breach of the related financial covenants
in the Group’s banking and other debt facilities. The Group’s current financing/banking arrangements,
provided through the AIG Senior Facilities Agreement, includes a fixed interest rate. However, that may not
be the case following any future re-financing of the AIG Senior Facilities Agreement. In the event that any
floating interest rate was agreed, the Group’s interest cover ratio could be adversely affected by a decline in
31
net rental income or rises in non-hedged interest costs. In addition, circumstances that affect the Company’s
gearing could also result in a breach of the financial covenant in the terms and conditions of the Convertible
Bonds.
If the Group were to breach any of the financial covenants in its banking facilities for any of the reasons
above or for any other reason, or if the Group’s lenders determine that there has been a material adverse
change in the financial position or business of the Group under the default provisions of the Group’s banking
facilities, an event of default may arise. If an event of default arises and is continuing, the Group’s lenders
could enforce their security over the Group’s assets. In addition, any event of default could result in the
acceleration of the Group’s obligations to repay those borrowings and any amounts owing to the bank or
other holders of debt or cancellation of the banking facilities. In addition, the Group cannot give any
assurance that it would be able to refinance any such borrowings on commercially reasonable terms, or at
all, in the longer term. A breach of the financial covenants under the Convertible Bonds for any reason, or
an acceleration of the Company’s or its principal subsidiaries’ obligations to repay amounts borrowed (under,
for example, the Group’s banking or other debt facilities) may also give rise to an event of default under the
Convertible Bonds. Any event of default under the Convertible Bonds could result in the acceleration of the
Company’s obligation to repay the Convertible Bonds at their accreted principal amount and to repay other
amounts owing to other holders of debt. A breach of the financial covenants contained in the Group’s
banking or other debt facilities or Convertible Bonds may have a material adverse effect on its business,
financial condition, prospects and/or operating results.
The Group’s ability to make scheduled debt payments in the longer term will be affected by a range of
factors, many of which are outside its control and the level of the Group’s indebtedness will act as a limit
on the Group’s business activities
The Group’s ability to generate sufficient cash flows to make scheduled payments on its indebtedness in the
longer term and the Group’s ability to refinance its indebtedness when due will depend on its future financial
performance, which will be affected by a range of economic, competitive and business factors, many of
which are outside the Group’s control. The level of the Group’s indebtedness imposes limitations on the
Group’s business including, but not limited to:
•
requiring the Group to use a portion of cash flow to service its debt obligations, thereby reducing
financial flexibility and cash available to pay dividends to Shareholders;
•
potentially limiting the Group’s ability to borrow additional amounts for working capital in the longer
term, capital expenditure, acquisitions and developments or debt service requirements, or the Group’s
ability to refinance existing indebtedness in the longer term;
•
limiting the Group’s ability to take advantage of acquisition or redevelopment opportunities that may
arise; and
•
increasing the Group’s exposure to general adverse economic and industry conditions, including
increases in interest rates and credit spreads, over the longer term.
Failure to make scheduled payments, and the foregoing consequences of the Group’s level of indebtedness
could have an adverse impact on the Group’s business, financial condition and prospects and/or operating
results.
Borrowings by the Group are secured on Group assets and any failure to meet the requirements of the
debts incurred may have an adverse impact on the Group’s business, financial condition and results of
operations
The investment and redevelopment activities of the Group are performed by one or more subsidiaries of the
Group. Certain subsidiaries act as borrowers for the purposes of the financing requirements of the relevant
investment and redevelopment activities of the Group. Such borrowings are often made on a secured basis,
with the security being granted over the relevant property investments or assets subject to redevelopment.
The secured borrowing from the lenders under the AIG Senior Facilities Agreement by certain of the
subsidiaries in the Group is structured so that recourse is only to the assets of those subsidiaries and to the
32
shares in those subsidiaries. Secured borrowings rank ahead of any unsecured borrowings of the Group. If
the lenders force a sale of any of the secured assets of the Group, there is a risk that the value received may
be lower than the value at which the investment was previously recorded by the Group. If the value received
is less than the amount of indebtedness, the borrower’s other assets, which in some cases include monies
owed to the borrower from the rest of the Group, would be available to the lenders. In addition, if the Group’s
lenders seize secured properties, the Group is likely to suffer reputational damage which could result in the
lender’s unwillingness to extend additional finance and significantly raise the Group’s future borrowing costs
or limit the Group’s ability to borrow in the future. Any of the foregoing factors could have an adverse impact
on the Group’s business, financial condition and prospects and/or operating results.
The Group may need additional capital in the longer term to grow and develop its business, however this
additional capital may not be available to the Group
The Group may need to seek additional capital over and above that raised in the 2014 AIM Placing, the 2015
AIM Placing, the issue of the Convertible Bonds and the finances made available through the Group’s
existing banking and other debt facilities, whether from further equity issues, the issue of further debt
instruments or additional bank borrowings to finance its investments or for other business purposes in the
longer term. No assurance can be given as to the availability of such additional capital at any future time or,
if available, whether it would be available on acceptable terms.
Although the Directors and the Proposed Directors believe that the Group’s financings are on reasonable
terms, there can be no guarantee that future financing will be available on terms that the Group considers
acceptable. The Group may have difficulty in repaying, renewing, extending or refinancing its existing
financing facilities or the terms of any new facilities entered into by the Group in the future could be more
onerous than the terms of the Group’s existing financing facilities. In addition, a higher level of indebtedness
increases the risk that the Group may default on its obligations, be unable to fund it operations or be unable
to pay dividends to Shareholders. If the Group seeks to raise additional capital or refinance its existing debt
facilities and is not successful in doing so, it may have a material adverse effect on the Group’s business,
financial condition and prospects and/or operating results. The statements in this risk factor do not qualify
the opinion of the Company that, taking into account the bank and other facilities available to the Group, the
working capital available to the Group is sufficient for the present requirements of the Group, that is, for at
least the 12 months following the date of publication of this document (as set out in paragraph 14 of
Part XV).
The Group is exposed to financial market risks
The valuation of the Real Estate Assets includes assumptions regarding rental revenue expectations and
yields that investors would expect to achieve on those assets over time. Many external economic and market
factors, such as interest rate expectations, bond yields, the availability and cost of finance and the relative
attraction of property against other asset classes, have affected and could further affect the assumptions used
to arrive at current valuations. Accordingly, a rise in long-term bond yields or swap rates could lead to a
reduction in property values and, as a consequence, a fall in the net asset value shown in the Group’s
accounts.
The Group may also be exposed to market interest rate risk when the Group requires financing and, if
hedging is considered appropriate, cannot hedge its interest rate exposure on commercially reasonable terms,
or at all; or if hedge counterparties default on their obligations. The Group’s current financing/banking
arrangements, provided through the AIG Senior Facilities Agreement, includes a fixed interest rate and
accordingly at this time, the Group is not exposed to interest fluctuations on it financial facilities. However,
that may not be the case following any future refinancing of the AIG Senior Facilities Agreement. In the
event that any floating interest rate was agreed, the Group could be exposed to interest rate fluctuations. To
the extent that the Group did not then hedge its exposure to interest rate fluctuations, the Group may incur
higher than expected interest rate expenses, which could have a material adverse effect on the Group’s
business, financial condition and prospects and/or operating results.
33
OTHER RISKS RELATING TO THE OPERATION OF THE GROUP’S BUSINESS
The Group may fail to integrate acquisitions successfully and may incur liabilities on such acquisitions
Part of the Group’s strategy is to make selective acquisitions of additional businesses, properties and property
portfolios. The Group has recently made several such acquisitions, including those of Glispa, Stucco Media,
The Interchange Building, Camden Wharf and Utopia Village. Successful integration of new acquisitions
into the Group’s business is affected by a range of factors including alignment of the incumbent management
team, successful refurbishment being undertaken to bring properties up to market standard, differences in
lease structures and tenant composition and the ability of the Group to achieve anticipated synergies. Any
delay or inability to integrate new acquisitions, properties and property portfolios efficiently could adversely
affect the Group’s operations and future financial performance.
The Group may also be exposed to substantial undisclosed or unascertained liabilities embedded in
properties or companies acquired that were incurred or that arose prior to completion of the Group’s
acquisition of such properties or companies. These liabilities include tax liabilities, inherited disputes,
liabilities to existing tenants, liabilities to employees, liabilities to creditors and liabilities to other third
parties involved with the properties or businesses prior to their acquisition. In particular, certain of the
trading businesses acquired by the Group are relatively new ‘start-up’ businesses operated by
owner/managers. During due diligence, examples of non-compliance with legal and/or regulatory
requirements were identified. Where the Group has considered it appropriate, protections have been obtained
in the sale and purchase documentation, but in some cases, both pre-acquisition due diligence and
protections in sale and purchase documentation are very limited.
Where considered appropriate, provision will be made in the Group’s accounts to the extent (or a proportion)
of certain identified liabilities. Although the Group may have obtained contractual protection against such
claims and liabilities from the relevant sellers, or made provision in its accounts, there can be no assurance
that such contractual protection or provision has always been or will always be successfully obtained, or that
it would be enforceable or effective if obtained under contract or that such contractual protection is sufficient
to cover the full amount of the liability incurred. There is also a risk that the Group’s assessment of these
risks may prove to be incorrect. Any liability which the Group incurs as a result of the factors listed above
could have a material adverse effect on the Group’s business, financial condition and prospects and/or
operating results.
Changes to the tax laws in the UK, Guernsey, the British Virgin Islands and/or the other jurisdictions of
incorporation of the Group’s subsidiary companies
The levels of and reliefs from taxation may change, which could adversely affect the financial prospects of
the Group and/or the returns available to Shareholders. The tax reliefs referred to in this document are those
currently available and their value depends on the individual circumstances of any particular investor. Tax
risks include, but are not limited to, the following:
•
transfer pricing risk in relation to any transactions between related parties that are not conducted on
an arm’s length basis. This could involve an adjustment to the tax calculation for the parties concerned
to take account of arm’s length pricing;
•
the risk that the tax laws in jurisdictions in which the Company or its subsidiaries have, or will have,
a taxable presence could change to impose or increase a tax liability;
•
the Real Estate Assets are held through property holding companies established in the UK, British
Virgin Islands and Cyprus in addition to other overseas jurisdictions. In the event of any asset sale, it
is the intention of the Group, wherever possible, to dispose of the property holding companies rather
than the real estate itself. There may be circumstances however where, in order to dispose of a
property, it is necessary to dispose of the direct real estate interests held by the relevant property
holding companies instead which may trigger higher transfer taxes than are expected; and
•
the risk that there may be an increase in the rates of Stamp Duty Land Tax imposed upon future
transfers of property into the Group.
34
If under the laws of the relevant jurisdictions of incorporation of the Group’s property holding companies
there were to be a change to the basis on which dividends could be paid by such companies, this could have
a negative effect on the subsidiaries’ ability to pay dividends to the Company, which in turn could impact on
the Company’s ability to pay dividends to Shareholders.
Maintenance of tax residence in Guernsey
In order to ensure the Company does not become tax resident in any jurisdiction other than Guernsey, the
Company is required to be controlled and managed in Guernsey. The composition of the Board, the place of
residence of the individual members of the Board, and the location(s) in which the Board makes decisions
will be important in ensuring that the Company does not become tax resident in any jurisdiction other than
Guernsey. Whilst the Company is incorporated in Guernsey, the Company must also ensure that management
and control decisions are made in Guernsey (and not made in, for example, the UK), or the Company may
become tax resident in a jurisdiction other than Guernsey. As such, management errors could potentially lead
to the Company being considered tax resident in a jurisdiction other than Guernsey (e.g. UK tax resident)
which could have a material adverse effect on the Company’s business, financial condition and prospects
and/or operating results.
The Group may be involved in disputes with tenants and other commercial parties
The Group may be involved in disputes with tenants, commercial parties with whom it maintains
relationships or other commercial parties with whom it deals in the operation of its business. Any such
disputes could result in litigation between the Group and such third parties. Whether or not any dispute
actually proceeds to litigation, the Group may be required to devote significant management time and
attention to its successful resolution (through litigation, settlement or otherwise), which would detract from
management’s ability to focus on the Group’s business. Any such resolution could involve the payment of
damages or expenses by the Group which may be significant. In addition, any such resolution could involve
the Group agreeing to terms that restrict the operation of its business. Any of the foregoing factors could have
a material adverse effect on the Group’s business, financial condition and prospects and/or operating results.
The Group may be insufficiently insured against any or all losses, damage and limitations incurred in
connection with the operation of its business
The Group’s insurance policies are subject to exclusions of liability and limitations of liability both in
amount and with respect to certain un-insured loss events. There are certain types of losses, generally of a
catastrophic nature, such as those caused by earthquakes, floods, hurricanes, terrorism or acts of war that
may be uninsurable or, for example, in the case of terrorism, are not economically insurable. The Real Estate
Assets could suffer physical damage caused by fire or other causes, resulting in losses (including loss of rent)
which may not be fully compensated by insurance. Inflation, changes in building codes and ordinances,
environmental considerations and other factors may also result in insurance proceeds, if any, being
insufficient to repair or replace a property if it is damaged or destroyed. Under such circumstances, the
insurance proceeds, if any, may be inadequate to fully restore the Group’s economic position with respect to
the affected real estate. Should an uninsured loss or a loss in excess of insured limits occur, the Group could
lose capital invested in the affected business or property as well as anticipated future revenue from that
business or property. In addition, the Group could be liable to repair damage caused by uninsured risks. The
Group would also remain liable for any debt or other financial obligation related to that business or property.
There can be no guarantee that the level of insurance cover for the Group now or in the future will be
sufficient. No assurance can be given that material losses in excess of insurance proceeds will not occur in
the future or that any insurance proceeds will be received at all. If such losses occur and are not covered by
insurance and the Group has to make a payment, there could be a material adverse effect on the Group’s
business, financial condition and prospects and/or operating results.
The Group is potentially liable for any loss or injuries to visitors at the Real Estate Assets and the Group’s
other business premises
There is a risk of accidents involving the public at retail, leisure and office premises owned by the Group.
Accidents may arise, for example, due to overcrowding within Camden Market due to the number of visitors
35
visiting Camden Market at any one time, particularly on days when Camden Market is putting on events.
The Group places great importance on its health and safety policies. In addition, the Group has public
liability insurance in place which the Directors and the Proposed Directors consider provides an adequate
level of protection against any third party claims. However, should an accident attract publicity or be of a
size and/or nature that is not adequately covered by insurance, it may result in the Group being subject to
adverse publicity and/or having to bear extra costs. In such instances, the Group’s ability to put in place
public liability insurance cover in the future may also be adversely affected. Any of the foregoing factors
may have a material adverse effect on the Group’s business, financial condition and prospects and/or
operating results.
The Group’s success depends on the continuing efforts of its senior management team and other key
personnel and its business may be harmed if their services are lost
The Group’s success depends, to a significant extent, on the continued services of its senior management
team who have extensive experience and knowledge of the Group and its business and business strategy. If
one or more senior executives or other personnel are unable or unwilling either temporarily or permanently
to continue in their present positions or carry out their current roles, the Group may not be able to easily
replace or substitute them temporarily or at all. Such an occurence could have, but has not to date had, a
material adverse effect on the Group’s business, financial condition and prospects and/or operating results.
There is no guarantee that any of the senior management team will remain employed or engaged by the
Group. Competition for key personnel is high, the pool of qualified candidates is limited and the Group may
not be able to retain the services of its key personnel, or attract and retain high-quality key personnel in the
future. If any key personnel leave and carry on any activities competing with the Group, it may lose tenants
and staff members, and legal remedies against such individuals may be limited. The loss of the services of
one or more members of the senior management team could have a material adverse effect on the Group’s
business, financial condition and prospects and/or operating results.
The Group relies on certain third party service providers
The Group is reliant upon third party service providers to perform services which are part of the operation
of the Group’s business, including facility management, security, service charge management and car park
management. A deterioration in the Group’s relationship with any key third party service provider or failure
by any such service provider to fulfil its obligations, or underperformance of its obligations, to the Group in
accordance with the terms of its appointment could result in damage to the Group’s relationship with
stakeholders, and could cause disruptions in the Group’s business. If it becomes necessary for the Group to
replace any third party service provider, the search for a suitable replacement and the transition to such
replacement service provider may take time, which could increase costs.
The Group may be adversely affected by changes to laws and regulations
The Group’s business operations are affected by various statutes, regulations and laws. This being the case,
the Group must comply with laws applicable to businesses generally, including, but not limited to, laws
affecting health and safety, environmental, fire, tax, protection of customer and employee data, landlord and
tenant, consumer safety, quality and liability, transportation, labour, employment practices (including
pensions), minimum wage, working hours and other employment legislation and regulation and competition.
For example, changes to statutory minimum pension requirements, known as auto-enrolment, for employers
in the UK were introduced which means employers are required to provide for certain employees a
“qualifying pension scheme” into which the employer makes contributions on the employees behalf. All
companies in the Group which employ employees in the UK who earn above the relevant threshold have
“staging dates” by which they are required to comply with the automatic enrolment regime and automatically
enrol all applicable workers. Certain Group companies have staging dates in 2017 at which time they will
need to be compliant with applicable legislation. The minimum statutory employer contribution rate will
increase to 2 per cent. of qualifying earnings from 1 October 2017, and to 3 per cent. of qualifying earnings
from 1 October 2018. Therefore, the Group companies will have increased pension costs, which may result
in a significant cost increase to the Group.
36
Another example is around the calculation of holiday pay for employees. The legal basis for the calculation
of holiday pay is currently a significant issue for many employers in the UK, particularly for employees that
are remunerated using basic pay plus other variable pay elements (for example, shift premiums, commission
and overtime). Most holiday pay received by employees in the UK, who have normal working hours, is paid
at the rate of basic salary only, i.e. it excludes other variable elements of remuneration such as
commission/overtime. Whilst this is in line with the provisions of the Working Time Regulations 1998 and
associated legislation, a number of decisions in the European Court, and in the UK Employment Tribunals,
have confirmed that this is incompatible with European law. These decisions have confirmed that holiday
pay should reflect all elements of remuneration received by employees which relate to the carrying out of
their duties for the employer, including elements of variable pay such as commission and overtime pay. The
way in which holiday pay is paid to employees of the Group is based upon basic salary only and some
employees receive overtime payments. In April 2015, the Group introduced a new payroll system to
automate the payroll process and reduce the risk of errors or non-compliance with laws. However,
historically the Group may not have always been compliant with European law in the manner in which it has
calculated holiday pay entitlement. Although there is no guarantee that an employee will not try and bring a
claim, the Group thinks the likelihood is low, particularly as the Group’s employees do not generally receive
any variable elements of pay which they could attempt to assert should be included in this holiday pay.
Certain of the Group’s personnel are engaged as consultants which may result in adverse tax
consequences for the Group
Certain of the Group’s personnel are engaged under consultancy agreements with the Group. If these
consultancy agreements were to be challenged by HMRC, it is possible that the personnel in question would
be deemed to be employees of the Group. From a tax perspective, if HMRC considers that, had the relevant
personnel been engaged directly by a Group company (rather than providing services through a personal
consultancy company), that engagement would have been one of employment, then HMRC can assess the
consultancy company for income tax and NICs under the “intermediaries legislation”. This legislation only
allows HMRC to assess the consultancy company and not the Group company to whom the consultant is
providing services. There is, however, a risk of the relevant Group company being assessed if the particular
working arrangements were to show that the consultant was effectively engaged directly by the Group
company as an employee.
PART B: RISKS RELATING TO THE ORDINARY SHARES AND MAIN MARKET ADMISSION
Admission of the Ordinary Shares may not occur when expected
Although the Company has applied for admission of the Ordinary Shares to the standard segment of the
Official List and to trading on the Main Market, and it is expected that these applications will be approved,
the Group can give no assurance that such applications for admission to the Official List or admission to
trading on the Main Market will be approved by the FCA or the London Stock Exchange or that such
applications will be obtained in accordance with the Group’s current expectations. See the “Expected
Timetable of Principal Events” on page 46 of this document for further information on the expected dates
of these events.
The rights of Shareholders and the fiduciary duties owed by the Board will be governed by Guernsey law
and the Articles
The Company has been incorporated under the Companies Law. The rights of its Shareholders and the
fiduciary duties that its Board owes to the Company and Shareholders are governed by Guernsey law and the
Articles. As a result, the rights of Shareholders and the fiduciary duties owed to them and the Company may
differ in material respects from the rights and duties that would be applicable if the Company were organised
under the laws of a different jurisdiction or if the Company was not permitted to vary such rights and duties
in its Articles.
The market price of the Ordinary Shares and the volume at which they trade may fluctuate significantly
in response to a number of factors, some of which may be out of the Company’s control
Publicly traded securities from time to time experience significant price and volume fluctuations that may
be unrelated to the operating performance of the companies that have issued them. In addition, the market
37
price of the Ordinary Shares may prove to be highly volatile. The market price of the Ordinary Shares may
fluctuate significantly in response to a number of factors, some of which are beyond the Company’s control,
including: variations in operating results in the Company’s reporting periods; changes in financial estimates
by securities analysts; poor stock market conditions affecting companies engaged in real estate or engaged
in e-commerce; strategic alliances, joint ventures or other capital commitments; additions or departures of
key personnel; any shortfall in turnover or net profit or any increase in losses from levels expected by
securities analysts; research and reports that industry or securities analysts publish about the Group or its
businesses or if analysts cease coverage of the Group or fail to regularly publish reports on it; and future
issues or sales of Ordinary Shares. Any or all of these events could result in a material decline in the price
of the Ordinary Shares and/or the volume at which they trade.
Substantial future sales of Ordinary Shares or the exercise of rights under the Convertible Bonds could
impact the market price of Ordinary Shares
Upon Main Market Admission, the Major Shareholder will, in aggregate, hold 334,187,500 Ordinary Shares,
representing approximately 71.34 per cent. of the issued share capital of the Company. Sales of substantial
numbers of Ordinary Shares by the Major Shareholder could adversely affect the prevailing market price of
the Ordinary Shares. In addition, the issue by the Company of substantial numbers of Ordinary Shares upon
the conversion of the Convertible Bonds could also adversely affect the prevailing market price of the
Ordinary Shares.
The Company’s ability to pay dividends to Shareholders is not certain
Although the Company does not intend to declare dividends in the near term, the payment of dividends by
the Company to Shareholders in the future will be highly dependent upon any dividends and profits that it
receives from its subsidiary companies. The Company’s subsidiaries may be precluded from paying
dividends by various factors, such as their own financial condition, restrictions in existing or future financing
documents to which they are party, tax considerations or applicable law. The Company cannot guarantee that
it will have sufficient cash resources to pay dividends to Shareholders.
Changes in tax legislation or the interpretation of tax legislation could affect the Company’s ability to
provide returns to Shareholders
Any change in tax legislation or the interpretation of tax legislation could affect the Company’s ability to
provide returns to Shareholders. Statements in this document concerning the tax position of Shareholders are
based on current tax law and practice in the UK, which are subject to change. The taxation of an investment
in the Company depends on the individual circumstances of the relevant investor.
Issues of Ordinary Shares may result in immediate dilution of existing Shareholders
The Company may decide to issue additional Ordinary Shares in subsequent public offerings or private
placements to fund on-going redevelopment and business activities and future plans. If existing Shareholders
are not eligible to, or do not, subscribe for additional Ordinary Shares on a pro rata basis in accordance with
their existing shareholdings, this will dilute their existing interests in the Company. The Company may also
decide to issue additional Ordinary Shares upon the conversion of the Convertible Bonds which will dilute
the interests in the Company of existing Shareholders. Furthermore, the issue of additional Ordinary Shares
may be on more favourable terms than the 2014 AIM Placing Shares, the 2015 AIM Placing Shares or the
prevailing market price of the Ordinary Shares at any given time. The issue of Ordinary Shares by the
Company, or the possibility of such issue, may cause the market price of the Ordinary Shares to decline and
may make it more difficult for Shareholders to sell Ordinary Shares at a desirable time or price.
Shareholders outside the UK may not be able to participate in future issues
Under the Articles, Shareholders enjoy pre-emption rights on any issue by the Company of equity securities
for cash, unless such rights are disapplied in accordance with the Articles. However, securities laws of certain
jurisdictions may restrict the Company’s ability to allow participation by Shareholders in future equity
issues.
38
Overseas shareholders may be subject to exchange rate risk
The Ordinary Shares are, and any dividends to be paid in respect of them will be, denominated in pounds
sterling. An investment in Ordinary Shares by an investor whose principal currency is not pounds sterling
exposes the investor to foreign currency exchange rate risk. Any depreciation of pounds sterling in relation
to such foreign currency will reduce the value of the investment in the Ordinary Shares or any dividends in
foreign currency terms.
The Major Shareholder will have the ability to cast sufficient votes to pass or defeat any ordinary
resolution and has significant influence over matters requiring approval by way of a special or
extraordinary resolution
Following Main Market Admission, the Major Shareholder will legally and beneficially own approximately
71.34 per cent. of the issued share capital of the Company. The Major Shareholder is wholly owned by GHT,
a trust of which the ultimate and sole beneficiary is Teddy Sagi. As a result, the Major Shareholder, will be
able to pass or defeat any ordinary resolution of the Company requiring a simple majority of those attending
and voting in present or by proxy at the meeting, including, amongst other things the election of directors
and authorising the directors to issue equity securities.
The Major Shareholder will also be able to exercise significant influence over matters requiring shareholder
approval by special or extraordinary resolution requiring 75 per cent. of those attending and voting in person
or by proxy at the meeting.
The Company has entered into the 2016 Relationship Agreement with the Major Shareholder and GHT
which is intended to regulate the relationship between the Company, the Major Shareholder and GHT. The
2016 Relationship Agreement includes undertakings that the Major Shareholder will not take any action
which would have the effect of preventing the Company or any other member of the Group from complying
with the Group’s obligations under the Listing Rules or engage in any conduct which is intended to prejudice
any member of the Group from carrying on its business independently of the Major Shareholder and GHT
or enter into any transaction or relationship with the Group otherwise than on arm’s length normal
commercial terms. Nonetheless, the Major Shareholder will remain in a position to significantly influence
the Group’s operations and business strategy and there is a risk that the Major Shareholder may seek to
impose other duties and obligations on the Company. The interests of the Major Shareholder may also not
necessarily be aligned with those of other Shareholders. In particular, the Major Shareholder may hold
interests in, or may make acquisitions of or investments in, other businesses that may be, or may become,
competitors of the Group.
The proposed standard listing of the Ordinary Shares will afford investors a lower level of regulatory
protection than a premium listing
Application will be made for the Ordinary Shares to be admitted to the standard segment of the Official List.
Although the Company will be required to comply with Listing Principles 1 and 2 as set out in Chapter 7 of
the Listing Rules, and whilst the Directors and the Proposed Directors intend to adhere to the standards of
corporate governance set out in the UK Corporate Governance Code, a standard listing will afford investors
in the Company a lower level of regulatory protection than that afforded to investors in a company with a
premium listing (which is subject to additional obligations under the Listing Rules). In particular, the
additional provisions set out in Chapters 6 to 13 of the Listing Rules relevant for companies with a premium
listing of equity securities will not apply to the Company. For example, for as long as the Company has a
standard listing, it is not required to comply with the provisions of, amongst other things:
•
Chapter 7 of the Listing Rules, to the extent that they refer to the premium listing principles;
•
Chapter 8 of the Listing Rules regarding the appointment of a listing sponsor to guide the Company
in understanding and meeting its responsibilities under the Listing Rules in connection with certain
matters. The Company has not appointed and does not intend to appoint a sponsor in connection with
this document or Main Market Admission;
39
•
Chapter 9 of the Listing Rules containing provisions relating to continuing obligations including,
amongst other things, requirements relating to the further issues of shares and the ability to issue
shares at a discount in excess of 10 per cent.;
•
Chapter 10 of the Listing Rules regarding significant transactions;
•
Chapter 11 of the Listing Rules regarding related party transactions; and
•
Chapter 12 of the Listing Rules regarding purchases by the Company of its Ordinary Shares.
Upon Main Market Admission, the AIM Rules for Companies will cease to be applicable to the Company.
40
PART III
CONSEQUENCES OF A STANDARD LISTING
APPLICATION HAS BEEN MADE FOR THE ORDINARY SHARES TO BE ADMITTED TO THE
STANDARD LISTING SEGMENT OF THE OFFICIAL LIST. A STANDARD LISTING PROVIDES
HOLDERS OF ORDINARY SHARES WITH A LOWER LEVEL OF REGULATORY
PROTECTION THAN THAT PROVIDED TO INVESTORS IN COMPANIES WHOSE
SECURITIES ARE ADMITTED TO THE PREMIUM LISTING SEGMENT OF THE OFFICIAL
LIST, WHICH ARE SUBJECT TO ADDITIONAL OBLIGATIONS UNDER THE LISTING RULES.
IT SHOULD BE NOTED THAT NEITHER THE UKLA NOR THE LONDON STOCK EXCHANGE
WILL HAVE THE AUTHORITY TO (AND WILL NOT) MONITOR THE COMPANY’S
COMPLIANCE WITH ANY OF THE LISTING RULES AND/OR PROVISIONS OF THE MODEL
CODE OR THOSE ASPECTS OF THE DISCLOSURE AND TRANSPARENCY RULES WHICH
THE COMPANY HAS INDICATED HEREIN THAT IT INTENDS TO COMPLY WITH ON A
VOLUNTARY BASIS, NOR TO IMPOSE SANCTIONS IN RESPECT OF ANY FAILURE BY THE
COMPANY TO SO COMPLY.
The Ordinary Shares will be admitted to listing on the Official List pursuant to Chapter 14 of the Listing
Rules, which sets out the requirements for standard listings. The Company will comply with Listing
Principles 1 and 2 as set out in Chapter 7 of the Listing Rules, as required by the UKLA.
An applicant that is applying for a standard listing of equity securities must comply with all the requirements
listed in Chapter 2 of the Listing Rules, which specifies the requirements for listing for all securities. Listing
Rule 14.3 sets out the continuing obligations applicable to the issuer and requires that the issuer’s listed
securities must be admitted to trading on a regulated market at all times. There are a number of other
continuing obligations set out in Chapter 14 of the Listing Rules that will be applicable to the Company.
These include requirements as to:
•
forwarding of circulars and other documentation to the FCA for publication through the national
storage mechanism, and related notification to a regulatory information service;
•
the provision of contact details of appropriate persons nominated to act as a first point of contact with
the FCA in relation to compliance with the Listing Rules and the Disclosure and Transparency Rules;
•
the form and content of temporary and definitive documents of title;
•
the appointment of a registrar;
•
regulatory information service notification obligations in relation to a range of debt and equity capital
issues; and
•
compliance with, in particular, Chapters 4, 5 and 6 of the Disclosure and Transparency Rules.
As a consequence of the Company seeking a standard listing, Shareholders will not receive the full
protections of the Listing Rules associated with a premium listing. For as long as the Company has a
standard listing, it is not required to comply with the provisions of, amongst other things:
•
Chapter 6 of the Listing Rules containing additional requirements for the listing of equity securities;
•
Chapter 7 of the Listing Rules, to the extent that they refer to the premium listing principles;
•
Chapter 8 of the Listing Rules regarding the appointment of a listing sponsor to guide the Company
in understanding and meeting its responsibilities under the Listing Rules in connection with certain
matters. The Company has not appointed and does not intend to appoint a sponsor in connection with
this document or Main Market Admission;
41
•
Chapter 9 of the Listing Rules containing provisions relating to continuing obligations including,
amongst other things, requirements relating to the further issues of shares and the ability to issue
shares at a discount in excess of 10 per cent.;
•
Chapter 10 of the Listing Rules regarding significant transactions;
•
Chapter 11 of the Listing Rules regarding related party transactions;
•
Chapter 12 of the Listing Rules regarding purchases by the Company of its Ordinary Shares;
•
Chapter 13 of the Listing Rules relating to the form and content requirements for circulars to be sent
to Shareholders; and
•
the UK Corporate Governance Code (which the Company intends to voluntarily adhere to,
notwithstanding it not being obliged to do so).
Upon Main Market Admission, the AIM Rules for Companies will cease to be applicable to the Company.
Shareholders should note that on being admitted to listing on the standard segment of the Official List, AIM
Rule 41 shall cease to be applicable to the Company. AIM Rule 41 requires that a company seeking to cancel
admission of it shares to trading on AIM must obtain the consent of not less than 75 per cent. of votes cast
by its shareholders in a general meeting. Shareholders should further note that the equivalent provisions set
out in Listing Rule 5.2.5 which require independent shareholder consent for any intended delisting do not
apply to companies with a standard listing on the Official List. Whilst the Company maintains a standard
listing, prior to any intended cancellation of such listing, the Company would seek approval of its
shareholders in accordance with the requirements set out in the AIM Rules for Companies.
A COMPANY WITH A STANDARD LISTING IS NOT CURRENTLY ELIGIBLE FOR
INCLUSION IN ANY OF THE FTSE INDICES (FTSE100, FTSE250, ETC.). THIS MAY MEAN
THAT CERTAIN INSTITUTIONAL INVESTORS ARE UNABLE TO INVEST IN THE ORDINARY
SHARES.
42
PART IV
IMPORTANT INFORMATION
No person has been authorised to give any information or make any representations other than those
contained in this document and, if given or made, such information or representations must not be relied
upon as having been authorised by the Company, Canaccord or Shore Capital. Without prejudice to any legal
or regulatory obligation on the Company to publish a supplementary prospectus pursuant to section 87G
FSMA and Rule 3.4 of the Prospectus Rules, the publication or delivery of this document shall not, under
any circumstances, create any implication that there has been no change in the affairs of the Company and/or
the Group since the date of this document or that the information in this document is correct as at any time
subsequent to its date.
This document is being furnished by the Company solely for the purpose of admission of the Ordinary
Shares to the Official List and to trading on the Main Market of the London Stock Exchange. Any
reproduction or distribution of this document, in whole or in part, or any disclosure of its contents or use of
any information herein for any purpose other than this purpose is prohibited. This document is not intended
to provide the basis of any credit or other evaluation and should not be considered as a recommendation by
the Company that any recipient of this document should purchase or subscribe for Ordinary Shares.
Forward looking statements
Certain statements contained herein are forward looking statements and are based on current expectations,
estimates and projections (in addition to certain assumptions) about the potential returns of the Group and
industry and markets in which the Group operates, the Directors’ and the Proposed Directors’ beliefs, and
assumptions made by the Directors and the Proposed Directors. Such forward-looking statements are
identified by their use of terms and phrases such as “believe”, “targets”, “expects”, “aim”, “anticipate”,
“projects”, “would”, “could”, “envisage”, “estimate”, “intend”, “may”, “plan”, “will” or the negative of
those, variations or comparable expressions, including references to assumptions. The forward-looking
statements in this document are based on current expectations and are subject to known and unknown risks
and uncertainties that could cause actual results, performance, valuations and achievements to differ
materially from any results, performance, valuations or achievements expressed or implied by such forwardlooking statements. Factors that may cause actual results to differ materially from those expressed or implied
by such forward-looking statements include, but are not limited to, those described in the risk factors. These
forward-looking statements are based on numerous assumptions regarding the present and future business
strategies of such entity and the environment in which each will operate in the future. All subsequent oral or
written forward-looking statements attributed to the Company or any persons acting on its behalf are
expressly qualified in their entirety by the cautionary statement above. The Company and/or its Directors and
the Proposed Directors expressly disclaim any obligation or undertaking to release publicly any updates or
revisions to any forward looking statements contained herein as a result of new information, future events or
other information except to the extent required by the Listing Rules, the Disclosure and Transparency Rules,
the Prospectus Rules, the rules of the London Stock Exchange or by applicable law. Nothing in this
paragraph is intended to qualify the opinion of the Company that, taking into account the bank and other
facilities available to the Group, the working capital available to the Group is sufficient for the present
requirements of the Group, that is, for at least the 12 months following the date of publication of this
document (as set out in paragraph 14 of Part XV).
Presentation of financial information
The Company publishes its financial statements in pounds sterling. The abbreviation “£’000” represents
thousands of pounds sterling, “£m” represents millions of pounds sterling and “£bn” represents billions of
pounds sterling and references to “pence” and “p” represent pence in the United Kingdom. Reference to
“dollars”, “USD”, “US$” or “$” are to the lawful currency of the United States. Reference to “EUR”, “euros”
or “€” are to the lawful currency of the European Union.
43
The financial information presented in a number of tables in this document has been rounded to the nearest
whole number or the nearest decimal place. Therefore, the sum of the numbers in a table may not conform
exactly to the total figure given for that table. In addition, certain percentages presented in the tables in this
document reflect calculations based upon the underlying information prior to rounding, and, accordingly,
may not conform exactly to the percentages that would be derived if the relevant calculations were based
upon the rounded numbers.
Certain non-IFRS measures, such as earnings before interest, tax, depreciation, amortisation, net gain from
fair value adjustment of investment property, exceptional items, foreign exchange gain/(loss) and sharebased payment charges (“Adjusted EBITDA”) have been included in the financial information, as the
Directors and the Proposed Directors believe that these provide important alternative measures with which
to assess the Group’s performance. You should not consider Adjusted EBITDA as an alternative for revenue
or operating profits which are IFRS measures. Additionally, the Company’s calculation of Adjusted EBITDA
may be different from the calculation used by other companies and, therefore, comparability may be limited.
International Financial Reporting Standards
The historical financial information included in Part IX has been prepared in accordance with International
Financial Reporting Standards as adopted for use in the European Union.
Use of property valuation figures
This document includes valuations by JLL of the Real Estate Assets (excluding 49 Chalk Farm Road) as at
30 September 2015 and of 49 Chalk Farm Road as at 21 October 2015, all as set out in Part XIII. The Real
Estate Assets have been valued by independent third party professional valuers, JLL, on the basis of Market
Value in accordance with the RICS Valuation–Professional Standards, January 2014, defined as the estimated
amount for which an asset or liability should exchange on the valuation date between a willing buyer and a
willing seller in an arm’s length transaction after proper marketing and where the parties had each acted
knowledgeably, prudently and without compulsion. In determining Market Value, valuers are required to
make certain assumptions. An assumption is defined in the RICS Valuation – Professional Standards as a
supposition taken to be true. The Valuation Report contains a number of assumptions upon which JLL based
their valuations of the Real Estate Assets. These assumptions include, but are not limited to, matters such as
title, condition of structure and services, deleterious materials, plant and machinery and environmental
matters. Should an assumption differ from reality this could negatively affect the Market Value of the
property. There can be no guarantee that if a property is sold that it will be sold at the most recent opinion
of Market Value, even where any such transactions occur shortly after the relevant valuation date. Similarly
there can be no guarantee that opinions of rental value will be achieved. Investment property valuations are
dependent on, amongst other matters, the level of rental income received and anticipated to be received from
that property in the future and, as such, declines in rental income could have an adverse impact on revenue
and the value of the Real Estate Assets. Incorrect assumptions or flawed assessments underlying a valuation
report could negatively affect the Group’s financial condition and potentially inhibit the Group’s ability to
realise a sale price or achieve rental income that reflects the stated valuation.
Distribution of this document
This document does not constitute an offer to sell or issue, or an invitation to subscribe for, or the solicitation
of an offer to buy or to subscribe for, Ordinary Shares in the United States, Australia, Canada, Japan, the
Republic of South Africa or any other Restricted Jurisdiction. This document is not for distribution in or into
any Restricted Jurisdiction. The Ordinary Shares have not nor will they be registered under the US Securities
Act or with any securities regulatory authority of any state or other jurisdiction of the United States or under
the applicable securities laws of the United States or any other Restricted Jurisdiction and, unless an
exemption under the US Securities Act or other relevant laws is available, may not be offered for sale or
subscription or sold or subscribed directly or indirectly in, into or from a Restricted Jurisdiction or for the
account or benefit of any national, resident or citizen of any Restricted Jurisdiction. The distribution of this
document in jurisdictions other than the United Kingdom may be restricted by law and therefore persons into
whose possession this document comes should inform themselves about and observe any such restrictions.
44
Any failure to comply with these restrictions may constitute a violation of the securities laws of such
jurisdictions.
Restrictions on sales in the United States
NEITHER THIS DOCUMENT NOR THE ORDINARY SHARES HAVE BEEN APPROVED OR
DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, ANY
STATE SECURITIES COMMISSION IN THE UNITED STATES OR ANY OTHER REGULATORY
AUTHORITY IN THE UNITED STATES, NOR HAVE ANY OF THE FOREGOING AUTHORITIES
PASSED UPON OR ENDORSED THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENCE IN THE UNITED STATES.
Third party information
Where third party information has been used in this document, the source of such information has been
identified. The Company confirms that such information has been accurately reproduced and, so far as it is
aware and has been able to ascertain from information published by such third parties, no facts have been
omitted which would render the reproduced information inaccurate or misleading.
No action to be taken by Shareholders
Shareholders are not required to take any action upon receipt of this document. The Company is not issuing
any new Ordinary Shares nor is it seeking to raise any new money in connection with Main Market
Admission. This document has been published solely to enable the Company to obtain admission of the
Ordinary Shares to the Official List and to trading on the Main Market of the London Stock Exchange.
No incorporation of website information
The contents of the Group’s website, or any website directly or indirectly linked to this website, have not
been verified and do not form any part of this document and prospective investors should not rely on such
information.
References to defined terms
Capitalised terms used in this document are defined in Part XVI.
45
PART V
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Each of the times and dates in the table below is indicative only and may be subject to change. Please read
the notes to this timetable set out below.
20 Business Day notice of intention to de-list from AIM submitted to the
London Stock Exchange
23 December 2015
Publication of Prospectus
21 January 2016
Last day of trading of Ordinary Shares on AIM
26 January 2016
Expected delisting of Ordinary Shares from AIM
8.00 a.m. on 27 January 2016
Expected admission of the Ordinary Shares to the Official List
8.00 a.m. on 27 January 2016
Expected commencement of dealings of Ordinary Shares
on the Main Market
8.00 a.m. on 27 January 2016
Notes:
(1) The times and dates set out in the expected timetable of principal events above and mentioned in this document, and in any other
document issued in connection with Main Market Admission are subject to change by the Company, in which event details of the
new times and dates will be notified to the UKLA, the London Stock Exchange and, where appropriate, to Shareholders.
(2) Any reference to a time in this document is to the time in London, England, unless otherwise specified.
46
PART VI
DIRECTORS, PROPOSED DIRECTORS, SECRETARY, REGISTERED
OFFICE AND ADVISERS
Directors
Nilesh (Neil) Sachdev (Independent Non-Executive Chairman)
Charles Butler (Chief Executive Officer)
Andrew Bull (Chief Financial Officer)
John Le Poidevin (Senior Independent Non-Executive Director)
Thomas Teichman (Independent Non-Executive Director)
Proposed Directors
David Brown (Chief Financial Officer designate)
Sharon Baylay (Non-Executive Director)
Georg Bucher (Head of Corporate Development)
Company secretary
Sanne Group (Guernsey) Limited
Registered office and Directors’
and Proposed Directors’ Business
Address
Third Floor
La Plaiderie Chambers
La Plaiderie
St Peter Port
Guernsey, GY1 1WG
Joint Financial Adviser
Canaccord Genuity Limited
88 Wood Street
London, EC2V 7QR
Joint Financial Adviser
Shore Capital and Corporate Limited
Bond Street House
14 Clifford Street
London, W1S 4JU
Legal advisers to the Company as
to English law
DLA Piper UK LLP
3 Noble Street
London, EC2V 7EE
Legal advisers to the Company as
to Guernsey law
Carey Olsen
PO Box 98
Carey House
Les Banques
St Peter Port
Guernsey, GY1 4BZ
Legal advisers to the Joint
Travers Smith LLP
Financial Advisers as to English law 10 Snow Hill
London, EC1A 2AL
Reporting accountants and auditor
BDO LLP
55 Baker Street
London, W1U 7EU
Registrar
Capita Registrars (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey, GY2 4LH
Independent property valuer
Jones Lang LaSalle Limited
30 Warwick Street
London, W1B 5NH
47
PART VII
INFORMATION ON THE GROUP
1.
INTRODUCTION
1.1
Group Overview
Market Tech is a holding company which combines iconic central London real estate assets based in
Camden Town in the London Borough of Camden with a technology and e-commerce services
business branded Market Tech Digital.
The Group owns approximately 15 acres of real estate assets in and around Camden including all of
the major markets located in the London Borough of Camden, being Stables Market, Camden Lock
Market and Union Street Market (together “Camden Market”). In addition, the Group also owns
separate real estate assets on Jamestown Road and at 251-259 Camden High Street, 31 Kentish Town
Road, Utopia Village at Chalcot Road, the Hawley Wharf Development site (including 39-45 Kentish
Town Road), the Interchange Building and Camden Wharf as well as, 1-11 Hawley Crescent, which
was acquired on 10 August 2015 and 49 Chalk Farm Road which was acquired on 23 October 2015
(together with Camden Market, the “Real Estate Assets”). The Real Estate Assets are considered to
be the material real estate assets of the Group. The Group operates the Real Estate Assets with a
predominant focus on retail, leisure and entertainment as well as office use and intends to further
develop these assets through active asset management to increase the rental income and expand the
net lettable area. This active asset management will include using technology and e-commerce
combined with greater customer intelligence and data collection to enhance the offering to Camden
Market retailers with the aim of helping them to grow their revenues and, in turn, rent for Market
Tech. Supplementing these Real Estate Assets, the Group has, and is continuing to develop, a
complementary online consumer-facing e-commerce platform camdenmarket.com, an information
and e-commerce portal available to physical retailers located at the Group’s Real Estate Assets.
In addition to the management and development of Camden Market and its Real Estate Assets, the
Group is continuing to develop a complementary technology and e-commerce business, Market Tech
Digital, with capabilities in mobile marketing, online search and e-commerce, following its
acquisition of Fiver, a specialty value online retailer, Glispa, a Berlin based mobile marketing
business, and Stucco Media, an e-commerce and search platform, in December 2014, March 2015 and
May 2015 respectively. The Directors and the Proposed Directors believe that the Group’s
management team has the right mix of skills and experience to deliver this strategy.
1.2
Reason for the move to the Main Market
The Ordinary Shares have been admitted to trading on AIM since 22 December 2014. In the
admission document published by the Company at the time of AIM Admission, the Directors stated
that it was their intention for the Company to apply as soon as practicable (at the latest within
12 months from the date of AIM Admission) for its Ordinary Shares to be admitted to the Official List
and to trading on the Main Market of the London Stock Exchange. On 23 December 2015, the
Company announced its intention to de-list from AIM and move to the Main Market of the London
Stock Exchange. Admission to the standard segment of the Official List and to trading on the Main
Market of the London Stock Exchange is expected to occur on 27 January 2016.
Further information relating to reasons for the move to the Main Market is set out in paragraph 7 of
this Part VII.
48
2.
GROUP HISTORY
The Group was formed following the combination of various real estate assets in and around the London
Borough of Camden, including Camden Market and the e-commerce business of Fiver during the course of
2014. Prior to AIM Admission, the Group’s parent company, Market Tech Holdings Limited, a company
incorporated and registered in Guernsey, acquired the real estate assets comprising Camden Market,
31 Kentish Town Road and 251-259 Camden High Street from the Major Shareholder.
In December 2014, the Company was successfully admitted to the AIM market of the London Stock
Exchange raising approximately £100 million through an initial public offer and enabling the Group to bring
new investment to the Camden area and to the assets it had acquired.
Following AIM Admission, the Group has acquired the following principal real estate assets:
•
in March 2015, the Group completed the acquisitions of the 65,000 sq. ft. Interchange Building for a
total cash consideration of £49.0 million (including stamp duty) and the 50,000 sq. ft. Camden Wharf
property for a total cash consideration of £50.0 million (including stamp duty). The Interchange
Building is let as office space and Camden Wharf is let as offices, retail and leisure units. Both
properties have extensive frontages and are physically linked to the Group’s Camden Market real
estate assets. These properties strategically strengthen the Group’s real estate position within Camden
town centre through the control of mix and yields. In addition, the Group also secured the purchase
of the freehold of Camden Lock;
•
in April 2015, the Group acquired the 47,000 sq. ft. property hosting small businesses known as
Utopia Village in Chalcot Road, London, NW1, for a total consideration of £44.0 million (including
stamp duty). Utopia Village has been refurbished for the purposes of a co-working office environment
and is currently being let;
•
in August 2015, the Group acquired the freehold property comprising 1-11 Hawley Crescent NW1 for
a total consideration of £31.1 million (including stamp duty). Hawley Crescent, which is primarily let
to the Open University, includes commercial as well as residential units and is located near to the
Group’s main Camden Market sites; and
•
in October 2015, the Group acquired the freehold property known as 49 Chalk Farm Road, NW1 for
a total consideration of £5.2 million (including stamp duty). The property is currently leased to the
operators of Barfly, a live music venue with a total approximate floor area of 6,161 sq. ft. and is
situated directly opposite Stables Market.
In December 2015, the Group secured an up to £900 million debt facility from, amongst others, AIG Asset
Management (Europe) Limited with an initial term of 10 years. £300 million of this facility was drawn down
in December 2015 with a further £100 million committed to be drawn in May 2016, making a £400 million
initial committed facility. The Group's existing debt obligations, totalling c. £202 million were repaid from
this facility. The AIG Senior Facilities Agreement reinforces the Group's long term strategy to invest and
acquire further real estate assets to complement and significantly enhance the size of its real estate portfolio.
Since AIM Admission, the Group has also acquired the following two strategic assets which, together with
Fiver, comprise the Group’s technology and e-commerce business, Market Tech Digital:
•
in March 2015, in order to expand its e-commerce capabilities, the Group acquired a controlling
interest in Glispa, a Berlin-based international mobile marketing business, for an initial consideration
of €27.5 million in cash with a further €3.0 million deferred working capital payment and a further
commitment to invest up to €20.0 million to accelerate Glispa’s future development; and
•
in May 2015, the Group acquired Stucco Media a leading e-commerce marketing platform with global
reach, for a total consideration of up to US$34.5 million with a further US$8.5 million payable on the
successful delivery of an e-commerce and market based platform.
49
3.
REAL ESTATE OPERATIONS
3.1
Introduction
The Directors and the Proposed Directors believe that there is a significant opportunity to improve
revenue and create additional value from the Real Estate Assets. The Group intends to achieve this
through:
adopting an active approach to the asset management of the Real Estate Assets;
•
enhancing the yield of income-producing assets by expanding net lettable area and gradually
increasing rental income;
•
completing the Hawley Wharf Development; and
•
redeveloping Camden Lock Market and Union Street Market.
Overview of Real Estate Assets
The Real Estate Assets are predominantly focused on retail, leisure and entertainment in Camden
Town in the London Borough of Camden. The Group owns and operates all of the major markets
located in Camden Town, being Stables Market, Camden Lock Market and Union Street Market. The
Group also owns the Hawley Wharf site (formerly known as Camden Lock Village) which is currently
being developed. In addition, the Group also owns separate real estate assets on Jamestown Road, and
at 251-259 Camden High Street, 31 Kentish Town Road, Utopia Village at Chalcot Road, 1-11 Hawley
Crescent, The Interchange Building, Camden Wharf and 49 Chalk Farm Road, which the Directors
and the Proposed Directors estimate will total approximately 975,000 sq. ft. of net lettable area
following completion of the Hawley Wharf Development, the Camden Lock Market Development and
the Stables Market Development (together, the “Developments”). The Camden Lock and Stables
Market developments are subject to planning permission.
Real Estate Assets
CHALK FARM
STUDENT
RESIDENCE
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3.2
•
Real Estate Asset
1.
2.
Stables Market
Camden Lock Market
3.
Union Street Market
4.
5.
6.
7.
8.
9.
10.
11.
Jamestown Road
Camden Wharf
31 Kentish Town Road
251-259 Camden High Street
The Interchange Building
Utopia Village
1-11 Hawley Crescent
Hawley Wharf
(including 39-45
Kentish Town Road)
12. 49 Chalk Farm Road
Real Estate
Strategy
Yield growth
Redevelopment
potential and yield
growth
Redevelopment
potential and yield
growth
Yield growth
Yield growth
Yield growth
Yield growth
Yield growth
Yield growth
Yield growth
Development
potential
Yield growth
Approximate
available net
lettable area
Use
195,000 sq.ft.
48,000 sq.ft.
Commercial
Commercial
6,800 sq.ft.
Commercial
28,000 sq.ft.
50,000 sq.ft.
10,000 sq.ft.
4,400 sq.ft.
65,000 sq.ft.
47,000 sq.ft.
25,000 sq.ft.
413,346 sq.ft.1
Commercial/residential
Commercial
Commercial/residential
Commercial
Commercial
Commercial
Commercial/residential
Commercial/residential
6,161 sq.ft.
Commercial
Notes:
1
3.3
This figure reflects the post development net lettable area not the current net lettable area.
London and Camden
London is one of the world’s major capital cities, attractive to both businesses and tourists alike due
to a number of factors including its history, scale, infrastructure, language, legal system and
geographic location. London attracted approximately 18 million overseas visitors in 2014, making it
one of the most popular destination cities for overseas visitors in the world. This, coupled with the
easy access of Camden Market for people from across London and beyond and also for the local
population, contributes to the high levels of footfall in the Camden area.
London continues to be one of the most active and liquid real estate investment markets in Europe,
with a large number of occupiers and investors focused on the positioning of London as an economic
hub. The weight of money targeting London real estate in recent years has seen investment capital
spread outside of prime West End locations, leading to further investment in areas such as Camden,
Hackney and Shoreditch.
Camden Town’s distinctive character is attributed to a combination of components such as its historic
architecture, diverse retail offering, creative industries and businesses and the other varied
entertainment and leisure sites in the immediate vicinity. Each of these individual components
contributes to creating an eclectic mix of tourists and inhabitants in the area. This mix has supported
the evolution of Camden Town over the years and the Directors and the Proposed Directors believe it
differentiates Camden Town against competing town centres.
Camden has continued to attract established, international media players and renowned innovative
companies such as MTV Networks Europe (MTV), The Associated Press, Ted Baker, ASOS, and
Facebook. In September 2013, Google received approval for the development of its London
headquarters at Kings Cross in the London Borough of Camden. The Directors and the Proposed
Directors believe this will attract other technology companies to Camden, which the Directors and the
Proposed Directors consider is likely to have a positive impact on rents and local business in the
surrounding areas.
51
3.4
Strategic single ownership
Having assembled a focused and concentrated portfolio of real estate assets, the Group expects to be
able to implement a coordinated asset management strategy where single ownership creates more
value than the sum of the individual assets. For example, by owning Camden Lock Market and Stables
Market, the Group believes it will be able to make better use of the space separating the two markets.
It will also enable the Group to better arrange tenants by retail offering (i.e. food, clothing, etc). The
Group aims to promote and represent Camden Market more effectively as a result of this single
ownership strategy and by being able to project a single unified image for the area. Ultimately, the
Group’s ability to control and reposition the tenant mix in all of the major markets in Camden Town
is expected to allow the Group to enhance the overall retail, leisure and entertainment experience of
visitors. This single strategic estate ownership will be key to supporting the implementation of the
Group’s strategy to create a diverse and innovative multi-channel retail space for both visitors and
tenants as both a physical and online market place.
With a strong balance sheet and new debt financing in place, the Group is in a position to further
enhance its strategic single ownership with further real estate acquisitions in and around Camden
Town.
For further information on the Real Estate Assets, including Camden Market, please see paragraph 4
of this Part VII.
3.5
Active asset management
As at the date of publication of this document, approximately 11 acres of the Real Estate Assets
consist of yielding assets, including Stables Market, Camden Lock Market, Union Street Market,
Camden Wharf, The Interchange Building, 1-11 Hawley Crescent, 251-259 Camden High Street,
31 Kentish Town Road, Utopia Village and 49 Chalk Farm Road, the combination of which generates
substantial annual rents. The Group is committed to realising the strong upside potential from its
income-producing assets by gradually increasing rental income and by expanding the net lettable area.
As an example, owing to its popularity, Stables Market has a waiting list of in excess of 300 aspiring
tenants that have already been vetted by the Group’s management. The Directors and the Proposed
Directors believe there is a significant opportunity within Stables Market to create value through the
fit-out and letting of certain of its buildings and available land which are currently vacant or underutilised.
The Group has launched its new co-working concept, under the brand name ‘Interchange’, which
seeks to provide flexible work spaces with up to 1,000 desks within Utopia Village along with Atrium
and Triangle Buildings in Stables Market. The concept involves offering shared office space and/or
‘hot desks’ to start-ups and entrepreneurs who are looking for more flexibility than a more traditional
office let can provide. The new spaces, designed by the award-winning workplace architechs Barr
Gazetas, offer high quality fit-out and technology services, with interior design advice having been
provided by Tom Dixon. The first phase of this initiative has received significant interest. Interchange
is one of a number of initiatives which the Group has adopted to drive increases to real estate asset
yields.
By capitalising on the diverse mix of Camden Market, the Group intends to focus on enhancing the
quality and variety of tenants to establish Camden Market as a destination of choice for shoppers and
tourists seeking a distinctive retail, leisure and entertainment experience. The Group also intends to
adopt a number of initiatives to seek to create additional value from the Real Estate Assets, including:
ongoing refurbishment and fit-outs, enhancing the overall retail experience of Camden Market,
promotion of the Camden Market site and tenants’ businesses, monitoring and optimisation of the
tenant mix, using business intelligence to enhance customer experience and spend, revenue share
arrangements in exchange for providing specialised and unified retail infrastructure and using
e-commerce and m-commerce (mobile commerce) to increase online advertising and customer
interaction.
52
3.6
camdenmarket.com
The Group has launched its own proprietary website, camdenmarket.com, an information and
e-commerce portal available for use by physical retailers located at the Group’s Real Estate Assets.
camdenmarket.com is part of the Group’s strategy to develop a complementary online market
platform to enhance the performance of the Real Estate Assets and drive incremental income for
retailers. The Group intends to capitalise on the physical flow of visitors to, and the brand strength of,
Camden Market through camdenmarket.com. The Group intends to further develop
camdenmarket.com as a unified online storefront for Camden Market retailers. It is believed that this
complementary online offering will increase the attractiveness of Camden Market to physical
retailers, especially those with a multi-channel strategy and, therefore, increase occupancy levels. It
is the Directors’ and the Proposed Directors’ belief that an online retail offering combined with the
iconic Camden Market market place, will drive a distinct customer experience, increased retailer sales
and online-offline interaction.
Through the launch and further development of camdenmarket.com, the Group intends to combine the
advantages of its significant physical market hub in central London with an advanced customer
relationship management (“CRM”) programme and online retail business. The Group intends to
leverage the services supplied by Market Tech Digital.
The Group’s strategy is to capitalise on the iconic physical Camden Markets to develop a business to
customer (“B2C”) online market place underpinned by behaviour analytics and business to business
(“B2B”) services utilising customer intelligence data and analytical tools, such as demographic
mapping, to enhance both the online and physical customer retail experience and enhance the product
offering and customer loyalty. The Group intends to utilise the collective expertise and resources of
Market Tech Digital to help drive this strategy. Turnkey services are being, and have been, introduced
for the existing retail tenants, including marketing CRM and data analytics, technology, payment
processing and e-commerce distribution via Market Tech Digital. Through the use of integrated
customer analytics, the Group expects to accumulate valuable market data and intelligence for online
and offline retailers which it intends to use to generate results in the form of increased sales for
retailers.
In addition, the Group has developed interactive mobile applications to enhance visitor experience and
to provide exclusive promotions and offers, maps and market information, live event information and
more efficient shopping options (for example, organisation by product). The mobile application,
which goes through a continuous process of enhancement, is planned to allow continued engagement
before customers arrive at, and once customers have left, the physical Camden Market, by providing
customers with access to promotions and deals and ease of browsing.
The Group has embarked on creating a new customer experience for visitors to Camden Market
through the provision of services such as free wi-fi access and geographic mapping tools and targeted
promotions. The Group expects to be able to increase and target the customer footfall within the
physical retail space in Camden Market and enhance customer experience, loyalty and spend.
Market Tech Digital will support and provide services to the Group’s camdenmarket.com platform
and in furtherance of the initiatives described above in much the same way it does other third party
customers and clients.
3.7
The Group’s development and redevelopment activities
3.7.1 Landmark development of Hawley Wharf
The Hawley Wharf site is a canal-side development with full planning permission to transform
the area into an approximately 580,000 sq. ft. gross external area (“GEA”) mixed use scheme
(“Hawley Wharf Development”). The Hawley Wharf site, owing to its size and location, is
strategically important for both the London Borough of Camden and the Greater London
Authority.
The Hawley Wharf Development has full planning permission for a mixed use scheme to
include a new market alongside Regent’s Canal, residential units, offices, new public squares,
53
an art-house cinema, cafes, restaurants, a new food market and a new local primary school.
A further site was acquired adjacent to the main Hawley Wharf site (39-45 Kentish Town Road,
being “Site E”), which was granted planning permission for 24 additional residential units and
further commercial use space in September 2015 giving a total of 195 residential units on site.
Development of the Hawley Wharf Development commenced on-site in early 2015 with
demolition now having been substantially completed. Piling works are now in progress. The
Hawley Wharf Development is on track with the school scheduled for completion by
September 2016 and the remainder of the site due to be completed by the end of the 2018
financial year.
3.7.2 Redevelopment potential of the other Real Estate Assets
In addition to the Hawley Wharf Development, the Directors and the Proposed Directors
believe that each of Union Street Market and Camden Lock Market, which are income
producing Real Estate Assets, are assets with strong development (subject to obtaining
planning permission and other necessary consents) and rental uplift potential, which in turn
should increase the Group’s revenue. Further details of these developments are set out in
summary both below and in more detail in paragraph 4 below.
Camden Lock Market redevelopment
Since its acquisition of Camden Lock Market in December 2014, the Group has reorganised
some of the stalls’ lay-out in order to encourage greater customer flow between Camden Lock
Market and the adjacent Stables Market, Hawley Wharf and Regent’s Canal. The Group intends
to initiate a series of public exhibitions in early 2016 as part of its consultation strategy with
the aim of submitting a planning application in spring 2016 and obtaining planning approval
mid-year 2016.
Union Street Market redevelopment
In the long-term, the Directors and the Proposed Directors believe that Union Street Market
represents an opportunity for a more substantial redevelopment which would see a new market
combined with a boutique hotel. Following a consultation with planners, the Group has
continued to review the development potential for the Union Street Market site and has
engaged Allford Hall Monaghan Morris to assist the Group in developing a design for a scheme
for positioning a boutique hotel within a new market square and to redevelop the existing
market into a high quality destination. The total net lettable area of Union Street Market is
approximately 6,800 sq. ft. Under the current plans the net lettable area of Union Street Market
would be significantly increased.
4.
DESCRIPTION OF REAL ESTATE ASSETS
The descriptions of real estate assets in this paragraph 4 include forward-looking statements that assume
timely completion of intended development, and are subject to planning and other consents.
4.1
Stables Market
Stables Market is the largest of the markets in Camden Town and is spread over four acres located to
the west of Camden High Street. Stables Market has approximately 600 retail and food units currently
occupied by a diverse mix of traders, shops, restaurants and bars offering a wide range of goods, food,
entertainment and leisure. The majority of units are occupied under flexible arrangements allowing
the Group tight control of the rental and product mix, as well as enabling the Group to support tenants’
business growth by being able to respond to space requirements. Demand for these units is strong such
that stall vacancies, even through the recent economic downturn, have remained consistently low.
The historic portion of Stables Market dates back to the 19th century, when the site was used to
distribute and store goods using horses to transport them to and from the canals and railways. Stables
Market is currently undergoing an investment plan to refurbish its listed buildings and public space.
54
Stables Market was developed over a period of time, through the construction of three separate,
additional developments on the site, starting from 2001: namely, “Buildings A & B”, “Building C”
and “Building D”. The Group separates Stables Market currently into four distinct areas, the historic
Stables Market; Buildings A & B; Building C and Building D (as illustrated below):
The historic Stables Market comprises boutique artisan retail stores (clothing, jewellery, fashion,
artisan goods and arts and crafts), live music venues, bars, restaurants and a fitness centre.
In Buildings A & B, the upper ground to the third floor of the building is constructed as a shell, with
the building work being carried out over three phases. Buildings A & B (consisting of four levels)
provide the largest area within Stables Market. The ground-floor market units house a wide range of
retailers and artisans. The south-west block of this area contains a food quarter, with the first, second
and third floors allocated to provide space for the Group’s Interchange co-working concept.
Building C (also known as “Triangle”) consisting of four levels forms the northwest boundary of
Stables Market and fronts Camden Lock Market. Building C includes market units with some of the
highest-grossing rent in Stables Market, together with the Gilgamesh restaurant, which is located on
the first floor of this prominent building and is the gateway to Stables Market. The second and third
floors host part of the Group’s Interchange co-working concept.
Building D (consisting of one level) forms the north-east quadrant of the Stables Market with various
independent retailers housed in stable-like units.
Stables Market tenants
Stables Market is let on a combination of flexible arrangements and leases. The Directors and the
Proposed Directors estimate that over 75 per cent. of rental income from Stables Market is derived
from flexible arrangements, with the remaining income derived from a small number of tenants on
leases. The Directors and the Proposed Directors expect that the percentage of rents from flexible
arrangements will increase as the work described above is completed.
The majority of tenants or occupiers operate daily, albeit Thursdays to Sundays are peak time. The
Group has an in-house team which fits out the units for tenants or occupiers, which allows minimal
investment for new businesses. This also means that business continuity is maintained if a tenant
needs to be replaced.
Demand for units in Stables Market has been consistently high with a large waiting list of vetted
tenants and dozens of new enquiries each month.
55
Tenants are generally required to pay a deposit, with unit rents collected weekly in advance thereafter.
In the Group’s experience, vacated units can generally be reoccupied in a short period of time.
4.2
Hawley Wharf
Hawley Wharf (formerly known as Camden Lock Village) was acquired by the Group in March 2014
at the same time and as part of the same transaction as the acquisition of Stables Market. The site is
located to the east side of Chalk Farm Road, adjacent to the Regent’s Canal, and is the focus of a
development plan, which has been granted planning permission and where demolition works
commenced in January 2015.
Hawley Wharf Development
The Group obtained full planning permission from the London Borough of Camden in January 2013
for a major redevelopment covering approximately 580,000 sq. ft. GEA (including Site E). Work on
the Hawley Wharf Development has commenced, demolition has now been substantially completed
and piling works are in progress. These are due to finish before the end of the first quarter of 2016.
Mace were chosen as main contractor of the Hawley Wharf development in April 2015. The scheme
has been designed by award winning (RIBA Stirling Prize 2015) architects Allford Hall Monaghan
Morris, with a strong top-tier team of professional consultants, including Gerald Eve as planning
consultants, Arup transport consultants and Walsh Associates. The scheme was subject to a statutory
consultation with English Heritage, Metropolitan Police, the Greater London Authority, Transport for
London, London Underground, numerous local and wider businesses, residents and stakeholders. The
scheme now also includes Site E (also known as 39-45 Kentish Town Road), which was granted
planning consent in August 2015 for 24 additional residential units and further commercial space. Site
E will be developed at the same time as the main Hawley Wharf Development site.
The mixed-use canal-side scheme covers approximately 580,000 sq. ft. gross area, comprising eight
new buildings (including the school referred to in the following paragraph) varying between three and
nine storeys in height, as well as three new large public piazzas. The Hawley Wharf Development is
shown in the artist’s impression below:
56
The Hawley Wharf Development will comprise five main sites:
Development site A
Development site A will consist of two linked buildings of flexible retail units on six levels, with
additional retail units located within railway arches. An enclosed restaurant will be located on the top
of each of the blocks. Site A will comprise a canal-side building, a public piazza and a terraced
building on Camden High Street. The building is designed with a natural change of levels through
interconnecting bridges which assist with the vertical circulation and increase the viability on all
floors.
Development site B
Development site B will comprise two residential blocks consisting of social housing, and a single
main entrance for a primary school, nursery and arches consisting of general industrial units. It is also
the intention for the school to use No.1 Hawley Road which is a Grade II listed building over three
floors. Social and intermediate housing will also be provided at Site B, in a separate block.
Development site C
Development site C will consist of three private residential buildings. Block C1 comprises local retail
space, retail, light industrial space, predominantly for food manufacturing and retailing, and an art
house cinema in the basement. Block C2 comprises two levels of commercial floor space within the
central building and part five and part seven storey levels of private residential units above the
commercial space. Together, the buildings in blocks C1 and C2 are five, seven and nine-storey
buildings. All residential units are designed to the Code for Sustainable Homes standards, comply
with the London Housing Guide, and all of units have external amenity space. The basement also
includes plant, storage and parking. Other uses on the site includes cafes, galleries and incubation
space for start-ups and SMEs.
Development site D
Development site D will comprise a ground floor cafe, light industrial space and private residential
apartments above.
57
Development site E (also known as 39-45 Kentish Town Road)
Development site E represents an extension of site D to include residential units and additional
commercial space. Site E was granted planning consent in September 2015 for 25 additional private
residential units and further commercial space. Site E will be developed at the same time as the main
Hawley Wharf site.
4.3
Union Street Market
Union Street Market (also known as Buck Street Market) was acquired by the Group in December
2014. Union Street Market is a long-standing open-air market, located on a prominent Camden High
Street site, close to Camden Town Underground station. Under previous ownership, Union Street
Market developed into a high density/low value model, with approximately 200 stores on the compact
site. The market is a close-knit cluster of semi-permanent stalls, with a focus on clothing and
accessories. In the short term, the flexible nature of the stalls allows for potential to revamp the
market, adjusting spacing and layout to accommodate higher-value tenants.
In the long-term, the Directors and the Proposed Directors believe that Union Street Market represents
an opportunity for a more substantial development which would see a new market combined with a
boutique hotel. Following a consultation with planners, the Group has continued to review the
development potential for the Union Street Market site and has engaged Allford Hall Monaghan
Morris to assist the Group in developing a design for a scheme for positioning a boutique hotel within
a new market square and to redevelop the existing market into a high quality destination. The
Directors and the Proposed Directors believe that the provision of an urban hotel is a key step in
regenerating the High Street, both in terms of attracting new, higher quality tenants to the area,
attracting new footfall, laying the foundation for a high-quality night time economy and increasing
the portfolio diversity of the Group. The total net lettable area of Union Street Market is
approximately 6,800 sq. ft.. Under the current plans the net lettable area of Union Street Market would
be significantly increased.
4.4
Camden Lock Market
Camden Lock Market was acquired by the Group in December 2014. Camden Lock Market is
adjacent to Stables Market, Hawley Wharf and the Regent’s Canal. Camden Lock Market’s arts and
crafts market opened in 1972 and expanded to accommodate an eclectic mix of entrepreneurs and
artists. It comprises a vibrant mix of shops, market stalls, and food and drink offerings. The site is in
excess of one acre and currently houses approximately 267 stalls, more than 50 retail units,
20 workshops and studios and five food and beverage outlets.
Since its acquisition, the Group has reorganised some of the stalls’ lay-out in order to encourage
greater customer flow between Camden Lock Market and the adjacent Stables Market, Hawley Wharf
and Regent’s Canal. The Group intends to initiate a series of public exhibitions in early 2016 as part
of its consultation strategy with the aim of submitting a planning application in spring 2016 and
obtaining planning approval mid-year 2016.
4.5
Other Real Estate Assets
Jamestown Road was acquired by the Group in 2014 and has approximately 28,000 sq. ft. of net
lettable area, comprised of mixed retail, commercial and office space. It is a mixed-use development
that was completed in 2012 and is close to Camden Town underground station. Following
redevelopment, this site (which was formerly office accommodation) now provides four ground floor
restaurant/retail units, office accommodation on the first and second floors and nine residential
apartments on the third and fourth floors.
31 Kentish Town Road was acquired in December 2014 and has approximately 10,000 sq. ft. of net
lettable area, comprised of mixed commercial and residential space. It is a development that was
constructed in 2010 comprising residential accommodation of 14 self-contained flats on the upper
floors and commercial leaseholds owned by third parties on the ground and basement floors.
58
251-259 Camden High Street was acquired in November 2014. This is a long-standing site, with a
prominent position between Camden Town Underground station and Camden Market. It comprises
five commercial units, fronting the high street and close to Union Street Market, and five residential
leaseholds held by third parties. The Group would like to seek planning permission to increase and
improve the current net lettable area.
The Interchange Building was acquired in March 2015 and has approximately 65,000 sq. ft. of net
lettable area. The warehouse building was built between 1901 – 1905 and includes the 1850s dock
basin, the vaults and horse tunnel. It is a Grade II listed property. The warehouse was converted into
offices in 1989 and is currently let to global media group, Associated Press, with the use of B1 offices.
The Camden Wharf site was acquired in March 2015 and has approximately 50,000 sq. ft. of net
lettable area. The property comprises a four storey mixed-use development situated adjacent to
Camden Lock and the Grand Union Canal. The property comprises approximately 18,834 sq. ft. of
ground floor retail/restaurant units and approximately 30,650 sq. ft. of office accommodation. The
shell and core of the property was originally constructed in 2001 and has been subsequently fitted out
to suit the current uses. External hard standings adjacent to the Grand Union Canal and a service road
also form part of the property title. The site backs onto the Jamestown Road properties and includes
a prominent corner retail unit adjacent to the High Street. Current tenants include All Saints, Hobs
Hairdressing Salon, Sushi Salsa, J.D. Weatherspoon and Exterion Media (CBS Outdoor). The Group
would like to seek planning permission to increase and improve the current net lettable area.
Utopia Village was acquired in April 2015. The site is located on Chalcot Road, London, NW1 close
to the Group’s principal Camden Market sites. Utopia Village currently comprises 28 individual
commercial units and has approximately 47,000 sq. ft. of net lettable area.
Hawley Crescent was acquired in July 2015 and is also located close to the Group’s principal Camden
Market sites. The site is primarily let to the Open University and includes commercial and residential
units. Its commercial floor area has approximately 20,000 sq.ft. of net lettable area in addition to a
further 5,260 sq. ft. of residential space. The Group would like to seek planning permission to increase
and improve the current net lettable area.
49 Chalk Farm Road was acquired in October 2015. The property is a freehold property and currently
leased to the operators of Barfly, a live music venue with a total approximate floor area of 6,161 sq. ft.
The property is situated directly opposite Stables Market.
5.
MARKET TECH DIGITAL
5.1
Introduction
In addition to the management and development of Camden Market and its Real Estate Assets, the
Group is continuing to develop a complementary technology and e-commerce business, Market Tech
Digital, with strong capabilities in mobile marketing, online search and e-commerce following its
acquisition of Fiver, a specialty value online retailer, Glispa, a Berlin based mobile marketing
business, and Stucco Media, an e-commerce and market search platform, in December 2014,
March 2015 and May 2015 respectively.
5.2
Market Tech Digital
The Group has developed a broad initiative to build its own technology and e-commerce business both
organically and by acquiring and developing other e-commerce assets. The Group’s technology and
e-commerce division is branded Market Tech Digital, has its own management team and has been
formed following the acquisitions of Fiver in December 2014, Glispa in March 2015 and Stucco
Media in May 2015. Each of these companies has a strong management team which will remain in
place with the intention of growing Market Tech Digital via existing third party relationships and
through strong organic growth from new third party relationships creating standalone value, Market
Tech Digital will continue to provide its services to the wider Group, in particular to the
camdenmarket.com initiative with the overall aim of enhancing long term shareholder value.
59
The acquisition of Fiver, Glispa and Stucco Media by the Group has provided the Group with a
number of assets, such as significant technological capabilities, an active customer base, logistics
facilities, management expertise, trained staff and supplier relationships. The Directors and the
Proposed Directors believe these acquisitions represent a significant strategic addition to the Group’s
online capabilities which, when combined with the Group’s online assets in mobile marketing and
CRM, technology and distribution, will enable a more rapid and aggressive execution of the Group’s
strategy. The acquisition of these digital businesses provides Market Tech with a strong technology
and e-commerce platform which enables it to develop a complementary digital revenue stream whilst
offering a multi-channel e-commerce and marketing proposition to retailers.
5.2.1 Fiver – everything5pounds.com
Fiver was acquired by the Group in December 2014. Fiver was originally founded in 2011 with
the aim of starting a business model to create simplicity and value in today’s fashion world.
Fiver works with a large number of fashion suppliers, from local London manufacturers to
wholesalers throughout the UK and Europe’s major fashion centres.
Fiver offers its products to its customers via its online portal ‘www.everything5pounds.com’.
A variety of products are offered, including fashion wear, bags, accessories and footwear for
women, together with menswear and childrenswear, all of which are priced at £5. The website
is available in English and ships to destinations in the UK, the EU and the US. The web
platform offers different payment methods (including PayPal, MasterCard, Visa and others)
and includes an option to pay using different currencies (pounds sterling, euros, dollars). Since
inception, the business has generated over 1.5 million registered customers and over
one million followers on its Facebook page.
Fiver uses the warehouses at its approximately 160,000 sq. ft. distribution centre in Basildon
for the storage and delivery of products purchased by customers. The acquisition of Fiver
allows the Group to provide storage, logistics and distribution services for retailers which are
key to the Group’s strategy of integrating physical stores into the Group’s online marketing
hub.
It is anticipated that Fiver will continue to develop its existing online retail business and expand
by increasing its product range and targeting new countries through increased marketing
campaigns. Fiver will also benefit from other services provided by Market Tech Digital (for
example, Glispa helping drive additional mobile traffic and Stucco Media, helping to drive web
based traffic) which will help accelerate growth. Fiver is also able to provide services within
the Group, an example of which is access to its distribution centre and logistics network, which
has the necessary capacity to sell Camden Market retailers’ products online.
5.2.2 Glispa
On 13 March 2015, the Company acquired a controlling interest of 75 per cent. of Glispa for
an initial consideration of €27.5 million in cash with a further €3.0 million working capital
payment and a further commitment to invest up to €20.0 million to accelerate Glispa’s future
development. In addition, Gary Lin, (one of the vendors) has a put option over his 25 per cent.
shareholding of Glispa Global Group Limited that can be exercised by him between years two
and four for a further consideration of €15.0 million (unless the put option has been triggered
by the change of control of Fiver, then the consideration payable is the higher of €20 million
or fair market value). Market Tech has a call option over the same shares which can be
exercised after two years if Gary Lin ceases to be a managing director of either Glispa or Glispa
Holdings and/or his managing director service agreement has been terminated, for a further
consideration calculated as the higher of fair market value and €15.0 million.
Glispa was established in 2008 and is a Berlin-based advertiser focused on mobile marketing
allowing its clients to reach and activate global audiences. Glispa manages marketing
campaigns, the media that carries them and services the resulting consumer transactions from
60
its activities. The advertising monetisation solutions are developed on Glispa’s own private
exchange and focus on advertising placements within application walls, market places and
browsers. With the recent growth in mobile application downloads and m-commerce, Glispa
will continue to drive organic expansion accessing new users, advertisers and geographical
territories.
In addition to growing its core international business, Glispa will provides similar services to
the Group such as driving mobile traffic and downloads to camdenmarket.com and
everything5pounds.com. Glispa’s mobile commerce clients include many international, leading
online businesses.
5.2.3 Stucco Media
The Group acquired Stucco Media in May 2015 for a total consideration of up to
US$34.5 million, subject to a post-closing working capital adjustment. Stucco Media operates
an innovative and cost-effective algorithmic e-commerce marketplace technology for online
retailers in international marketplaces. The Stucco Media business model enables it to expand
into different territories with minimal capital expenditure and is focused on delivering a global
marketplace technology offering. Through proprietary algorithms, Stucco Media is able to fully
automate its clients’ advertising, selecting products that are more likely to appeal to their
customers, based on prior online behaviour.
While continuing to grow its core business, Stucco Media will assist the Group through the
provision of its algorithmic programmatic media buying marketing services. These services
can potentially be used by Fiver and the physical retailers who are tenants of Camden Markets
via camdenmarket.com.
6.
COMPETITIVE ENVIRONMENT
The Board believes that the nature of the Group’s business and the combination of activities which it
undertakes is unique and, accordingly, difficult to categorise into any one particular industry sector or
compare against a defined list of competitors.
Camden Market competes with other retail venues both physical and online to attract paying
customers. Competition from other locations may influence the levels of footfall and customer spend
in Camden Market, and consequently may affect the rents and values generated by the Real Estate
Assets. The Directors and the Proposed Directors believe that Camden Market offers visitors a
distinctive retail experience, with independent retailers offering a wide range of products and services,
many of which have been created on-site, operating from a variety of Victorian listed buildings, newer
market halls and open courtyards. The Directors and the Proposed Directors believe that Camden
Market has a distinct identity and they continue to seek out new concepts, brands and ideas to keep
each of the markets interesting to visitors. The Group intends to continue to pursue a programme of
hosting music, media, fashion and art events, as well as investing in marketing and public relations in
order to cement Camden Market’s reputation and attractiveness to visitors.
Part of the Group’s strategy for its Real Estate Assets is dependent upon increasing the attractiveness
of Camden Market as a location for tenants, retailers and visitors. As a landlord the Group has
recognised the opportunity to enhance Camden Market’s unique identity through the creation of a
digitally enhanced multichannel retail and entertainment offering. This is not unlike other operators
in the retail/real estate asset management sector such as Intu Properties plc and Hammerson plc, both
of whom have sought to enhance the attractiveness and performance of their real estate offering by
establishing complementary online and digital platforms. Across the sector, there has been an
increased focus on improving the customer experience utilising technology.
7.
REASON FOR THE MOVE TO THE MAIN MARKET
In the admission document published by the Company at the time of AIM Admission, the Directors
stated that it was their intention for the Company to apply as soon as practicable (at the latest within
61
12 months from the date of AIM Admission) for its Ordinary Shares to be admitted to the Official List
and to trading on the Main Market of the London Stock Exchange. The Company intends to apply for
admission to the Main Market of the London Stock Exchange as the Directors and the Proposed
Directors believe it will:
•
further diversify the Group’s funding sources so as to support the Group’s long-term growth;
•
provide a more appropriate platform for the continued growth of the Group and further raise its
profile and status as a growth focused business;
•
place the Company in a better position to achieve improved liquidity in its Ordinary Shares due
to the enhanced corporate exposure to an enlarged investor base; and
•
benefit Shareholders due to the further development of the Company’s corporate governance,
regulatory and reporting disciplines (through voluntary compliance with the UK Corporate
Governance Code).
Notwithstanding that the Company will be admitted to a standard listing, the Company intends to
adhere to the standards of corporate governance set out in the UK Corporate Governance Code.
8.
CURRENT TRADING AND PROSPECTS
Following on from the successful AIM Admission, the Group’s recent acquisitions, the issue of
£112.5 million of senior, unsecured convertible bonds due 2020, the 2015 AIM Placing (which raised
£200.7 million) and the entry into of the AIG Senior Facilities Agreement (a £900 million secured
debt facility), the Company is well-positioned to continue delivering value to its Shareholders.
The Company has a unique portfolio of real estate assets, located in an iconic part of London and
which offer strong upside potential through a combination of upward rent revision, yield compression
and development opportunities. In addition, the Group’s portfolio of digital service providers will
allow both online and physical retailers to access a global audience by utilising market-leading
technology, thereby enhancing customer engagement and increasing revenues.
The Group is continuing to purchase further complementary real estate assets and the Directors and
the Proposed Directors believe the Group is well-placed with its real estate property portfolio to take
advantage of rent increases and valuation uplift whilst, through active asset management, creating
further value via initiatives such as its Interchange co-working concept.
The Group continues to develop the technology and e-commerce side of its business, Market Tech
Digital which in the six month period ended 30 September 2015 saw an increase in revenues to
£48.4 million and Adjusted EBITDA of £3.9 million for the period.
9.
DIVIDEND POLICY
The declaration and payment by the Company of any future dividends on the Ordinary Shares will
depend on the results of the Group’s operations, its financial condition, cash requirements, future
prospects, profits available for distribution and other factors deemed to be relevant at any given time.
The Board recognises the importance of dividend income to Shareholders and intends to adopt, at the
appropriate time, a progressive dividend policy. However, it is not the current intention of the Board
to declare dividends in the near term. The Directors and the Proposed Directors believe that
Shareholders are best served by reinvesting cash to generate growth opportunities rather than
declaring a dividend. The Group intends to continue to pursue both organic and inorganic growth
opportunities. The Company’s dividend policy remains under regular review.
62
PART VIII
OPERATING AND FINANCIAL REVIEW OF THE GROUP
Investors should read the following discussion and analysis of the Group’s financial condition and results
of operations as at and for the years ended 31 March 2015, 2014 and 2013 in conjunction with Part IX
“Historical Financial Information” of this document. The consolidated financial statements and the
related notes for the Group for the six months ended and as at 30 September 2015 and for the years ended
and as at 31 March 2015, 2014 and 2013 have been prepared in accordance with IFRS as adopted by the
European Union. Investors should read Part IX “Historical Financial Information” of this document in
its entirety and not merely rely on the information contained in this section.
For a discussion of the Group’s significant accounting policies, see the section headed “Critical
Accounting Estimates and Judgements” below and Note 4 to the Group’s financial information as of and
for the year ended 31 March 2015. Some of the information in the following discussion and analysis
includes forward-looking statements that involve risks and uncertainties. See “Forward-looking
statements” in the section entitled “Important Information” and see Part II “Risk Factors” for a
discussion of important factors that could cause actual results to materially differ from the figures
described in the forward-looking statements contained in this document.
1.
OVERVIEW
Market Tech is a holding company which combines iconic central London real estate assets based in Camden
Town in the London Borough of Camden with a technology and e-commerce services business branded
Market Tech Digital.
The Group owns approximately 15 acres of real estate assets in and around Camden including Camden
Market. In addition, the Group also owns separate real estate assets on Jamestown Road and at
251-259 Camden High Street, 31 Kentish Town Road, Utopia Village at Chalcot Road, the Hawley Wharf
Development site (including 39-45 Kentish Town Road), the Interchange Building and Camden Wharf as
well as, 1-11 Hawley Crescent, which was acquired on 10 August 2015 and 49 Chalk Farm Road which was
acquired on 23 October 2015. The Real Estate Assets are considered to be the material real estate assets of
the Group. The Group operates the Real Estate Assets with a predominant focus on retail, leisure and
entertainment as well as office use and intends to further develop these assets through active asset
management to increase the rental income and expand the net lettable area. This active asset management
will include using technology and e-commerce combined with greater customer intelligence and data
collection to enhance the offering to Camden Market retailers with the aim of helping them to grow their
revenues and, in turn, rent for Market Tech. Supplementing these Real Estate Assets, the Group has, and is
continuing to develop, a complementary online consumer-facing e-commerce platform camdenmarket.com,
an information and e-commerce portal available to physical retailers located at the Group’s Real Estate
Assets.
In addition to the management and development of Camden Market and its Real Estate Assets, the Group is
continuing to develop a complementary technology and e-commerce business, Market Tech Digital, with
capabilities in mobile marketing, online search and e-commerce, following its acquisition of Fiver, a
specialty value online retailer, Glispa, a Berlin based mobile marketing business, and Stucco Media, an
e-commerce and search platform, in December 2014, March 2015 and May 2015 respectively.
The Group’s financial results are presented in two reporting segments: property and other, and digital. In the
six months ended 30 September 2015, the Group derived approximately 22.2 per cent. of its revenue and
63.0 per cent. of its Adjusted EBITDA from the property and other segment, and 77.8 per cent. of its revenue
and 37.0 per cent. of its Adjusted EBITDA from the digital segment. In the year ended 31 March 2015, the
Group derived approximately 66.7 per cent. of its revenue and 96.0 per cent. of its Adjusted EBITDA from
the property and other segment, and 33.3 per cent. of its revenue and 4.0 per cent. of its Adjusted EBITDA
from the digital segment. Until February 2015 the Group also derived revenue from a restaurant business
63
through its Gilgamesh brand. These operations were discontinued in February 2015 with the Group granting
a management and lease agreement for Gilgamesh restaurant to a third party operator.
2.
KEY FACTORS AFFECTING COMPARABILITY OF THE GROUP’S RESULTS INCLUDE:
2.1
Reorganisations and Acquisitions
In the year ended 31 March 2015 and in the six months ended 30 September 2015, the Group made a
number of acquisitions which had an impact on the Group’s results of operations. As a result, the
Group’s results of operations for periods under review are not directly comparable.
Reorganisation and acquisitions from entities under common control in December 2014
The Company was incorporated on 23 October 2014 with the intention of listing a series of businesses
and assets that were ultimately controlled by GHT and the Major Shareholder. As part of a
reorganisation of these businesses and assets, on 5 December 2014 the Company entered into an
agreement to acquire the entire issued share capital of Divanyx Investments Limited, whose principal
subsidiary was Camden Market Holdings Corp. and its subsidiaries (“CMHC”). Hawley Wharf
(formerly known as Camden Lock Village) and Camden Stables Market were acquired as a part of the
acquisition of CMHC. The transaction was effected by the issue of 1,000 Ordinary Shares in the
Company.
Due to the relative size of these companies, the Directors considered CMHC to be the acquirer in this
group reorganisation with the Company emerging as the holding company of the enlarged group and
therefore CMHC’s results formed the Company’s financial statements from 1 April 2014. The
comparative financial information presented for the year ended 31 March 2014 reflects the
consolidated results for CMHC. The Company is shown as the acquirer for subsequent business
combinations and asset acquisitions.
In addition to CMHC, in December 2014, the Company acquired (directly or indirectly) the following
businesses from entities under common control (the “December 2014 Acquisitions”):
•
Fiver. The Group acquired a 100 per cent. interest in Fiver and the market.com domain name
through the acquisition of 100 per cent. of the issued share capital of Fiver’s parent, Crowndeal
Services Ltd for the assumption of debt of £8.5 million and the issue of shares in Market Tech
Holdings Limited to the value of £2.125 million.
•
Union Street Market. The Group indirectly acquired a 100 per cent. interest in Atlantic Estates
Limited (a company which owns Union Street Market) for cash consideration of US$10,000
and the assumption of debt of £21.7 million.
•
Jamestown Road property. The Group acquired a 100 per cent. interest in the Jamestown Road
property through the acquisition of 100 per cent. of Anise Development Ltd for the assumption
of debt of £6.9 million.
•
31 Kentish Town Road. The Group acquired a 100 per cent. interest in 31 Kentish Town Road
through the acquisition of 100 per cent. of Perola Investments Limited for cash consideration
of US$10,000 and the assumption of debt of £11.0 million.
•
251-259 Camden High Street. The Group acquired a 100 per cent. interest in 251-259 Camden
High Street through the acquisition of 100 per cent. of Loremar Investments Limited for cash
consideration of US$10,000 and the assumption of debt of £12.0 million.
•
Camden Lock Market. The Group acquired 100 per cent. of the share capital of Camden Lock
Market Limited through the acquisition of 100 per cent. of the share capital of Pastra
Investments Limited, for cash consideration of US$10,000 and the assumption of debt of £68.2
million.
The financial results of the entities subject to the December 2014 Acquisitions were consolidated in
the Group’s financial statements from the date of their acquisition.
64
Further Acquisitions in the year ended 31 March 2015 (the “Further 2015 Acquisitions”)
•
Camden Wharf. In March 2015, the Group acquired the property Camden Wharf through the
acquisition of a 100 per cent. interest in Red Harmony Limited for cash consideration of
£50.3 million.
•
The Interchange. In March 2015, the Group acquired the property The Interchange Building
through the acquisition of a 100 per cent. interest in Tazetta Limited for cash consideration of
£49.0 million (including stamp duty).
•
Glispa. In March 2015, the Group acquired a 75 per cent. interest in Glispa for cash
consideration of EUR27.5 million (including EUR3.0 million in deferred working capital
payment of which EUR1.5 million was paid in December 2015).
The financial results of the entities subject to the Further 2015 Acquisitions were consolidated in the
Group’s financial statements from the date of their respective acquisitions.
Acquisitions in the six months ended 30 September 2015
•
Utopia Village. In April 2015, the Group acquired a 100 per cent. interest in Utopia Village for
cash consideration of £44.0 million.
•
Stucco Media Limited. In May 2015, the Group acquired Stucco Media, a leading e-commerce
marketing platform with global reach, for a total consideration of up to US$34.5 million with
a further US$8.5 million payable on the successful delivery of an e-commerce and market
based platform.
•
Hawley Crescent. In August 2015 the Group acquired the freehold property comprising
1-11 Hawley Crescent NW1, for a total consideration of £31.1 million in cash, including stamp
duty of £1.2 million. Hawley Crescent’s commercial floor area has approximately 20,000 sq.ft.
of net lettable area in addition to a further 5,260 sq.ft. of residential space.
2.2
The financial results of the entities acquired in the six months ended 30 September 2015 were
consolidated in the Group’s financial statements from the date of their respective acquisitions.
3.
KEY FACTORS AFFECTING THE GROUP’S RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
3.1
Real estate market and general economic conditions in London and in the UK
General economic and property market conditions may have a negative impact on the Group’s
business. Property markets tend to be cyclical and related to the condition of the economy as a whole.
The financial performance of the Group’s business could be adversely affected by a worsening of
general economic conditions in London and in the UK. Factors such as interest rates, inflation,
investor sentiment, the availability and cost of credit, the liquidity in global financial markets and the
level and volatility of equity prices could significantly affect the Group. See also
Part VII “Information on the Group—Competitive Environment”.
3.2
Rents receivable
The Group’s primary source of revenue from properties is its rents receivable. Rents receivable
comprise contracted gross rents paid by tenants under operating leases and licenses, recognised on an
straight line basis. Tenants of the Group rent the Group’s properties for retail, restaurant and leisure,
office, and residential uses. Principal factors that have influenced and may in future influence the
Group’s revenue from properties include the following:
•
The UK property planning system. As a general rule, use of the Group’s properties must be in
accordance with planning permission except in the case of certain limited changes of use,
which do not require planning permission. Whether or not planning permission will be granted
65
for a change of use depends upon whether the application accords with the relevant planning
authority’s planning policies for the area.
•
Licenses for restaurant and leisure use. In the London Borough of Camden, the licenses for
restaurant and leisure uses are harder to obtain than permission for other uses, due to their
impact on local amenity, for example, in terms of noise. As a result, properties with existing
licenses for restaurant and leisure use generate significantly higher gross rents than, for
example, those with planning permission for retail use. The Group’s properties with the benefit
of restaurant and leisure permissions benefit from such higher gross rents. The area’s current
policies do, however, limit the scope for obtaining further restaurant and leisure uses.
•
Property location and mix of planning uses. The Group’s gross rents are affected by both the
location of its properties and the mix of the planning uses and licences applicable to those
properties. The numerous and diverse retail and leisure attractions available in Camden help to
maintain footfall in the Group’s property locations during economic downturns and support the
gross rents of the Group’s portfolio.
In addition, as the use of the Group’s properties must accord with planning permissions, the Group’s
results of operations are significantly affected over the long term by the permissions which can be
obtained. These uses and their principal characteristics are summarised as follows:
•
Retail use. Properties include market stalls, which are typically leased under short term
tenancies cancellable within one week. Properties also include typical high street retail and
similar units;
•
Office use. Properties include offices rented to small to medium sized enterprises as well as
major investment grade companies;
•
Leisure use. Properties include restaurants, bars and clubs; and
•
Residential use. The Group leases the whole residential property at Kentish Town Road to a
third party which further sublets individual units to their occupants. The Group also receives
service charge revenue from this property.
Initial rents and rent reviews
The table below sets out the Group’s future minimum rents receivable under its non-cancellable
operating leases for the periods indicated (calculated on the assumption that any tenant with a break
option does not exercise that option):
For the
six months
ended
30 September
2015
£’000
Minimum rents receivable:
Within one year
In one to two years
Between two to five years
In more than five years
Total:
10,849
9,023
24,279
35,293
––––––––
79,444
––––––––
For the year ended 31 March
2015
2014
2013
£’000
£’000
£’000
8,938
–
28,081
32,494
––––––––
69,513
––––––––
2,618
–
6,227
6,222
––––––––
15,067
––––––––
2,415
–
4,681
7,062
––––––––
14,158
––––––––
Occupancy levels and changes to occupancy
The Group’s gross rents are positively affected by the volume of new lettings and lease renewals. The
positive impact of new lettings and lease renewals is offset by lease expirations, exercise of break
options and surrenders, and by tenant defaults. Particularly during periods of economic slowdown or
66
recession in which property values and gross rents are declining, the Group’s existing tenants may
increasingly exercise break options in order to renegotiate lease terms to reduce their rental payments,
or to negotiate lease incentives. However, break options, surrenders and tenant defaults can also
support the Group’s management strategy by enabling the Group to offer newly vacant units to tenants
who might be better suited to the Group’s overall strategy for the Camden area.
Break options in favour of tenants can reduce rents as their exercise can create void periods for the
relevant properties sooner than the contractual expiry dates. Void costs occur when the Group is
required to bear service costs for a portion of a building that is unoccupied. Void costs also occur when
the Group is required to pay “empty rates”, which are business taxes on unoccupied property, although
several listed stand-alone buildings owned by the Group are not subject to empty rates.
Occupancy levels of the Group’s properties have been relatively stable over the period under review.
Where delays in achieving occupancy have occurred, these often have been due to problems beyond the
Group’s control, such as delays in obtaining planning consent or the failure of utility companies to meet
their service obligations. Although occupancy levels and tenancy demand in Camden have been strong
throughout the period under review, any future economic downturn is likely to lead to more vacancies
and longer void periods, particularly in the non-market element of the Group’s portfolio.
3.3
Change in the valuation of property assets
The Group’s property portfolio is valued at semi-annual intervals by professionally qualified, external
valuers. The resulting valuations reflect the valuers’ opinions of the aggregate fair values of the
Group’s property portfolio, calculated in accordance with RICS Valuation Standards. In addition to
affecting the Group’s balance sheet, under IFRS, changes in property valuations also appear in the
Group’s consolidated income statements under the heading “Net gain/(loss) from fair value
adjustment on investment property”, which significantly impacts the Group’s operating profit/(loss).
These valuation surpluses or deficits reflect the difference between the fair value of the Group’s
portfolio at the reporting date and its carrying value prior to re-measurement, as well as capital
expenditures incurred during the period. Such valuation changes do not have an impact on the Group’s
cash flow.
Property valuations also affect the Group’s net asset value, adjusted net asset value and other net
asset-based statistics. However as discussed more fully below under the heading “—Adjusted
EBITDA”, net gains/(losses) from fair value adjustments on the Group’s investment properties have
been excluded from the calculation of adjusted EBITDA, in order to provide a better indicator of the
Group’s underlying revenue performance.
3.4
Interest and interest rate hedging
3.5
The Group’s activities are financed to a significant extent by external debt, and as a result a significant
charge for interest payable arises in the Group’s results of operations. Such interest charges are
influenced by the levels of floating rate debt incurred by the Group and by movements in interest
rates. To protect against adverse interest rate movements, the Group uses long-term interest rate
hedging on a substantial portion of its floating rate debt, as discussed below, such that approximately
96.5 per cent. of its long-term financing was subject to interest rate caps as at 30 September 2015. See
also Part XV “Additional Information—Material Contracts—AIG Senior Facilities Agreement”.
Pursuant to IFRS, the Group’s long-term hedging contracts are subject to semi-annual valuation, by
comparing the fixed interest rates for which the Group has contracted against the interest rates that
could have been obtained in the market at the date of valuation. This results in a fair value deficit if
current rates are lower than contracted rates and a surplus if current rates are higher than contracted
rates. The long-term nature of the Group’s current arrangements increases the volatility of these fair
value adjustments.
The fair value surpluses or deficits are recorded as non-cash fair value adjustments in the Group’s
financial statements.
67
3.6
Site visits, mobile usage and retention of customers
The number of visits to the online retail sites operated by the Group (including via mobile usage) is an
important variable that affects the Group’s revenue from online sales, since the number of site visits is an
indicator of the Group’s potential customer base. The number of site visits depends on numerous factors,
including the Group’s overall marketing spend, market penetration rates, ability to expand services to
new markets and ability to attract customers through marketing channels. Management believes that
mobile usage contributes significantly to building and maintaining the Group’s active customer base and
increasing the Group’s share in an individual customer’s online spending by providing mobile device
users with convenient and efficient interaction with the Group’s online offering.
The Group has implemented and continues to implement the strategy for attracting repeat customers
by aiming to provide a good customer experience, which the Group believes improves customer
loyalty. During the period under review, the Group experienced increased customer loyalty as
demonstrated by the propensity of customers to purchase additional products after the first purchase.
The percentage of total customers that are repeat customers has increased notwithstanding growth in
new customers during these periods.
3.7
Trend towards e-commence
The Group’s performance in online sales in periods under review had been positively influenced by the
on-going trend away from traditional brick-and-mortar stores and towards an e-commerce model. The
Group’s online sales benefit from a continuing shift of spending going from offline to online as well as
the ability for the Group to offer an integrated online and offline solution to its physical retailers.
Management believes that the reasons for this trend include the relative convenience that online
shopping offers compared to offline retailing as customers are able to order merchandise at any time at
any location, with a wide selection of the most current assortment and high levels of availability. Fast
delivery services and free returns provide further convenience. The e-commerce market depends on the
continued inclination of customers to buy online, as well the rates at which shoppers in general — and
fashion shoppers specifically — move from shopping in brick-and-mortar stores to shopping online. In
the periods under review, the Group’s performance has benefited from favourable trends in this area.
The Group is also continuing to develop a complementary technology and e-commerce business,
Market Tech Digital, with capabilities in mobile marketing, online search and e-commerce, following
its acquisition of Fiver, a specialty value online retailer, Glispa, a Berlin based mobile marketing
business, and Stucco Media, an e-commerce and search platform.
3.8
Recent Developments
On 9 October 2015, Majorelle Properties Limited exchanged contracts to acquire 49 Chalk Farm
Road, London, NW1 from Tendaline Limited for a total consideration of £5.2 million. Completion
took place on 23 October 2015. The property comprises a public house/live music venue let to Barfly
Club Limited.
On 8 December 2015, Divanyx Investments Limited (a wholly owned subsidiary of the Company) and
certain other members of the Group entered into a senior term facilities agreement with, amongst
others, AIG Asset Management (Europe) Limited as arranger. See also Part XV “Additional
Information—Material Contracts—AIG Senior Facilities Agreement”.
4.
KEY PERFORMANCE INDICATORS
In evaluating the Group’s results of operations, the Group’s management refers to a number of key financial
measures, including those from the Group’s results of operations discussed in paragraph 5 of this Part VIII,
as well as Adjusted EBITDA, a non-IFRS measure used to evaluate the Group’s performance.
68
4.1
Adjusted EBITDA
Adjusted EBITDA is a non-IFRS measure and may not be compatible to similarly titled measures
presented by other companies in the Group’s industry or otherwise. Nevertheless, the Group’s
management believe that this measure is important to understand the Group’s performance and
liquidity from period to period and to assist with the Group’s evaluation of growth trends and
preparation of budgets. Adjusted EBITDA should not be considered in isolation or as an alternative
to gross profit, cash flow or other financial measures that are derived in accordance with IFRS.
The Group defines Adjusted EBITDA as earnings before interest, taxes, depreciation, amortisation
and adjusted for fair value investment property movements, share based payment charges, exceptional
items and foreign exchange gain/(loss). The table below shows a reconciliation of the Group’s
Adjusted EBITDA to its operating profit for the periods indicated:
Adjusted EBITDA
Net gains from fair value adjustment
of investment property
Exceptional items
Depreciation and amortisation
Foreign exchange loss
Share based payment expense
Operating profit
5.
Six months ended
30 September
2015
2014
(£’000)
(£’000)
Year ended 31 March
2015
2014
2013
(£’000)
(£’000)
(£’000)
10,586
12,018
16,410
(6,690)
(2,565)
(445)
(67)
————
17,229
5,498
8,413
(313)
(252)
–
–
————
13,346
60,539
(9,487)
(624)
(500)
(39)
————
61,907
12,622
22,819
(1,073)
(414)
–
–
————
33,954
12,757
24,202
(296)
(395)
–
–
————
36,268
———— ———— ———— ———— ————
RESULTS OF OPERATIONS
The following table shows the Group’s consolidated income statement for six months ended 30 September
2015 and 2014 and for the years ended 31 March 2015, 2014 and 2013.
Six months ended
30 September
% change
2015 vs
2015
2014
2014
(£’000)
Unaudited
%
Revenue
Cost of sales
Gross profit
Administrative expenses
Net gain from fair value
adjustment of investment
property
Operating profit
Finance income
Finance cost
Profit before taxation
Income tax credit/(charge)
62,215
9,290
(34,437)
–
———— ————
27,778
9,290
———— ————
(26,959)
(4,357)
16,410
————
17,229
————
33
(7,135)
————
10,127
————
(2,151)
————
8,413
————
13,346
————
150
(9,923)
————
3,573
————
(122)
————
Year ended 31 March
% change
% change
2015 vs
2014 vs
2015
2014
2014
2013
2013
(£’000)
(£’000)
Audited
%
Audited
569.7
–
30,081
18,442
(5,981)
–
———— ————
199.0
24,100
18,442
———— ————
518.8
(22,732)
(7,307)
95.1
29.1
(78.0)
(28.1)
183.4
1,663.1
69
60,539
————
61,907
————
3
(17,839)
————
44,071
————
183
————
22,819
————
33,954
————
240
(17,278)
————
16,916
————
(333)
————
63.1
–
17,914
–
————
30.7
17,914
————
211.1
(5,848)
24.9
165.3
(5.7)
82.3
(98.8)
3.2%
160.5
154.9
24,202
————
36,268
————
187
(7,046)
————
29,409
————
(421)
————
2.9
–
2.9
(6.4)
28.3
145.2
(42.5)
(21.9)
Six months ended
30 September
% change
2015 vs
2015
2014
2014
(£’000)
Unaudited
%
Profit for the year from
continuing operations
(Loss)/profit for the year from
discontinued operations
Profit for the period
5.1
7,976
3,451
–––––––– ––––––––
131.1
Year ended 31 March
% change
% change
2015 vs
2014 vs
2015
2014
2014
2013
2013
(£’000)
(£’000)
(Audited)
%
Audited
44,254
16,583
–––––––– ––––––––
166.9
28,988
––––––––
(42.8)
–
(245)
–
(376)
378
(199.5)
292
29.5
–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
7,976
3,206
148.8
43,878
16,961
158.7
29,280
(42.1)
–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Six months ended 30 September 2015 compared to six months ended 30 September 2014
In the six months ended 30 September 2015 the Group reported its business in two segments:
•
Property and Other Segment, comprising the rent receivable from letting of properties for
retail, restaurant and leisure, office, light industrial and residential uses. In the six months
ended 30 September 2015, the Group’s external revenue generated by the property and other
segment was £13.8 million, representing 22.2 per cent. of the Group’s consolidated revenue for
that period, while Adjusted EBITDA generated by this segment was £6.7 million or 63.0 per
cent. of the Group’s consolidated Adjusted EBITDA for that period.
•
Digital Segment. In the six months ended 30 September 2015 the Group’s external revenue
generated by the digital segment was £48.4 million, representing 77.8 per cent. of the Group’s
consolidated revenue for that period, while Adjusted EBITDA generated by this segment was
£3.9 million or 37.0 per cent. of the Group’s consolidated Adjusted EBITDA for that period.
Cost of sales
The Group’s cost of sales was £34.4 million in the six months ended 30 September 2015, nearly all
of which were attributable to its digital segment. In the six months ended 30 September 2014 the
Group did not incur any cost of sales.
Gross profit
The Group’s gross profit increased by £18.5 million or 199.0 per cent. to £27.8 million for the six
months ended 30 September 2015 from £9.3 million for the six months ended 30 September 2014.
The increase was primarily due to the contributions from the real estate assets acquired between
March and September 2015 and the Group’s digital segment.
Administrative expenses
The Group’s administrative expenses primarily comprise of operating costs across both segments,
including employment costs, advertising expenses, depreciation and amortisation, auditors
remuneration, legal and professional fees as well as exceptional items (one-off, non-recurring costs).
The Group’s administrative expenses increased by £22.6 million or 518.8 per cent. to £27.0 million
for the six months ended 30 September 2015 from £4.4 million for the six months ended
30 September 2014. The increase was partly due to the increase in the Group’s exceptional items by
£6.4 million to £6.7 million in the six months ended 30 September 2015 from £0.3 million in the six
months ended 30 September 2014. This increase was primarily due to reorganisation costs of £3.2
million related to Fiver, the increase in exceptional legal and professional fees of £1.2 million, which
were incurred primarily in connection with the acquisitions completed by the Group, ongoing IBRC
Proceedings and proceedings for damages caused after a fire, as well as AIM listing costs. The entities
acquired by the Group in its digital segment in the six months ended 30 September 2015 also
contributed to the increase in the Group’s administrative expenses.
70
Net gain from the fair value adjustment of investment property
The Group’s net gain from the fair value adjustment of investment property (revaluation movements)
was £16.4 million for the six months ended 30 September 2015 as compared to the fair value of
£8.4 million for the six months ended 30 September 2014. The value of the Group’s investment
property in the balance sheet was £859.8 million as at 30 September 2015 (excluding £6.9 million of
the Group’s occupied space categorised as property, plant and equipment) as compared to £423.1
million as at 30 September 2014. The increase was primarily due to the contribution from both the
existing real estate assets and those acquired since 30 September 2014.
Operating profit
The Group’s operating profit increased by £3.9 million or 29.1 per cent. to £17.2 million for the six
months ended 30 September 2015 from £13.3 million for the six months ended 30 September 2014.
The increase was primarily due to the reasons described above, in particular net gain from the fair
value adjustment of investment property.
Finance income
The Group’s finance income decreased by £117,000 or 78.0 per cent. to £33,000 for the six months
ended 30 September 2015 from £150,000 for the six months ended 30 September 2014.
Finance cost
The Group’s finance cost decreased by £2.8 million or 28.1 per cent. to £7.1 million for the six months
ended 30 September 2015 from £9.9 million for the six months ended 30 September 2014. The
decrease was primarily due to the decrease in the interest expense primarily in relation to repayment
of £50 million under the Nomura Senior Facility and switching to debt financing with lower interest
rates.
Profit before taxation
The Group’s profit before income tax increased by £6.6 million or 183.4 per cent. to £10.1 million for
the six months ended 30 September 2015 from £3.6 million for the six months ended 30 September
2014. The increase was primarily due to the contributions from the entities acquired by the Group
since 30 September 2014.
Income tax credit/(charge)
The Group’s income tax expense increased by £2.0 million or 1,663.1 per cent. to £2.2 million for the
six months ended 30 September 2015 from £122,000 in income tax credit for the six months ended
30 September 2014. The increase was due to an adjustment of £1.2 million reflecting a release of a
provision made in prior years which resulted in income tax credit in the six months ended
30 September 2014, but was not available in the six months ended 30 September 2015. The
acquisition of Glispa also contributed to the increase.
Loss for the period from discontinued operations
The Group had a loss of £245,000 from discontinued operations in the six months ended
30 September 2014.
Profit for the period
The Group’s profit for the period increased by £4.8 million or 148.8 per cent. to £8.0 million for the
six months ended 30 September 2015 from £3.2 million for the six months ended 30 September 2014.
The increase was primarily due to the factors described above.
71
5.2
Year ended 31 March 2015 compared to the year ended 31 March 2014
Overview
In the year ended 31 March 2015 the Group began reporting its business in two segments:
•
Property and Other Segment, comprising the rent receivable from letting of properties, for
retail, restaurant and leisure, office, light industrial and residential uses. In the year ended
31 March 2015, the Group’s external revenue generated by the property and other segment was
£20.1 million, representing 66.7 per cent. of the Group’s consolidated revenue for that period,
while Adjusted EBITDA generated by this segment was £11.5 million or 96.0 per cent. of the
Group’s consolidated Adjusted EBITDA for that period.
•
Digital Segment. This segment was formed with the acquisition of Fiver in 5 December 2014
and was further strengthened with the acquisition of Glispa in March 2015. In the year ended
31 March 2015 the Group’s external revenue generated by the digital segment was
£10.0 million, representing 33.3 per cent. of the Group’s consolidated revenue for that period,
while Adjusted EBITDA generated by this segment was £0.5 million or 4.0 per cent. of the
Group’s consolidated Adjusted EBITDA for that period.
Until February 2015 the Group also operated a restaurant business through its Gilgamesh brand.
These operations were discontinued in February 2015 with the Group granting a management and
lease agreement for Gilgamesh restaurant to a third party operator. The restaurant operations have
therefore been excluded from the Group’s 2014 and 2015 financial results. See also “—Key Factors
Affecting the Comparability of the Group’s Results—Reorganisation and Acquisitions” above.
Revenue
Property and other segment
The Group’s revenue from its property and other segment increased by £1.6 million or 8.8 per cent.
to £20.1 million for the year ended 31 March 2015 from £18.4 million for the year ended 31 March
2014. The increase was primarily due to the contribution from the real estate assets acquired between
December 2014 and March 2015. See also “—Key Factors Affecting the Comparability of the Group’s
Results—Reorganisation and Acquisitions” above. This increase was partially offset by a decrease in
revenue primarily due to the closing of the markets, residential and commercial units for
commencement of the Hawley Wharf development during December 2015 and January 2015.
Revenue from the Camden Stables Market remained in line with the revenue it generated in the year
ended 31 March 2014.
Digital segment
The Group’s digital segment was formed with the acquisition of Fiver on 5 December 2014 and was
further strengthened with the acquisition of Glispa on 13 March 2015. The segment generated external
revenue of £10.0 million in the period between the respective acquisitions of these entities and
31 March 2015.
The Group did not operate in the digital segment in the year ended 31 March 2014.
Cost of sales
The Group’s cost of sales was £6.0 million in the year ended 31 March 2015, nearly all of which was
attributable to the Group’s digital segment. In the year ended 31 March 2014 the Group did not incur
any cost of sales.
Gross profit
The Group’s gross profit increased by £5.7 million or 30.7 per cent. to £24.1 million for the year
ended 31 March 2015 from £18.4 million in the year ended 31 March 2014 primarily due to the
contributions from the real estate assets acquired between December 2014 and March 2015 and the
72
Group’s digital segment. The property and other segment contributed £20.0 million while the digital
segment contributed £4.1 million to the Group’s gross profit for the year ended 31 March 2015.
Administrative expenses
The Group’s administrative expenses primarily comprise of operating costs across both segments,
including employment costs, property maintenance expenses, advertising expenses, depreciation and
amortisation, auditors remuneration, legal and professional fees as well as exceptional items (one-off,
non-recurring costs).
The Group’s administrative expenses increased by £15.4 million or 211.1 per cent. to £22.7 million
for the year ended 31 March 2015 from £7.3 million for the year ended 31 March 2014. The increase
was primarily due to the increase in the Group’s exceptional items (one-off, non-recurring costs)
which increased by £8.4 million to £9.5 million for the year ended 31 March 2015 from £1.1 million
for the year ended 31 March 2014. This increase was primarily due to AIM listing costs, the increase
in exceptional legal and professional fees of £1.2 million, which were incurred primarily in
connection with the reorganisation of the Group, preparation for the AIM listing and various
acquisitions completed by the Group in the year ended 31 March 2015, including December 2014
Acquisitions and Further 2015 Acquisitions. See also “—Adjusted EBITDA” below. The acquisitions
in the Group’s digital segment, litigation costs and IT expenses also contributed to the increase in the
Group’s administrative expenses.
The increase in employment costs and advertising expenses of £3.7 million and £1.2 million,
respectively, also contributed in the year ended 31 March 2015. The increase in employment costs was
primarily due to the increase in headcount following the December 2014 Acquisitions and the Further
2015 Acquisitions. Advertising costs were primarily incurred in the digital segment.
Net gain from the fair value adjustment of investment property
The Group’s net gain from the fair value adjustment of investment property (revaluation movements)
was £60.5 million for the year ended 31 March 2015 as compared to the fair value of £22.8 million
for the year ended 31 March 2014. The value of the Group’s investment property in the balance sheet
was £753.7 million as at 31 March 2015 as compared to £413.1 million as at 31 March 2014. The
increase was primarily due to the contribution from both the existing real estate assets and those
acquired in December 2014 Acquisitions and in Further 2015 Acquisitions.
Operating profit
The Group’s operating profit increased by £27.9 million or 82.3 per cent. to £61.9 million for the year
ended 31 March 2015 from £33.9 million for the year ended 31 March 2014. The increase was
primarily due to the increase in net gain from the fair value adjustment of investment property as
described above, with a significant contribution from the real estate assets acquired between
December 2014 and March 2015.
Adjusted EBITDA
Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation and
adjusted for fair value investment property movements, share-based payment charges, exceptional
items and foreign currency exchange gain/(loss). The table below shows a reconciliation of the
Group’s operating profit to Adjusted EBITDA.
73
Year ended 31 March
2014
2015
(£’000)
Operating profit per statement of comprehensive income
Adjustments:
Net gain from fair value adjustment of investment property
Exceptional items
Depreciation & amortisation
Foreign exchange loss
Share-based payment scheme
Adjusted EBITDA
33,954
(22,819)
1,073
414
–
–
————
12,622
————
61,907
(60,539)
9,487
624
500
39
————
12,018
————
The Group’s Adjusted EBITDA decreased by £0.6 million or 4.8 per cent. to £12.0 million for the year
ended 31 March 2015 from £12.6 million for the year ended 31 March 2014 due to the reasons
described above.
The Group’s exceptional items (one-off, non-recurring costs) increased by £8.4 million to £9.5 million
for the year ended 31 March 2015 from £1.1 million for the year ended 31 March 2014. The increase
was primarily due to the factors described under “—Administrative expenses” above (including £6.7
million in AIM listing costs). The Group’s exceptional items also included a £0.8 million provision
related to ongoing proceedings against certain companies within the Group for damages caused after
a fire. In addition, the Group incurred £0.6 million in legal and professional fees relating to the IBRC
Proceedings.
The exceptional items of £1.1 million for the year ended 31 March 2014 related to £0.8 million
incurred in legal and professional fees, including the fees related to the IBRC Proceedings and
£0.2 million relating to onerous lease costs.
The Group’s digital segment did not contribute materially to the Group’s Adjusted EBITDA for the
year ended 31 March 2015.
Finance income
The Group’s finance income decreased by £0.24 million for the year ended 31 March 2015 or 98.8 per
cent. to £0.001 million. The Group’s finance income in 2014 related to interest on a shareholder loan
which was repaid in full in 2014.
Finance cost
The Group’s finance cost increased by £0.5 million or 3.2 per cent. to £17.8 million for the year ended
31 March 2015 from £17.3 million for the year ended 31 March 2014. Both years have exceptional
costs included. In 2015 the Nomura mezzanine facility was repaid in full, the interest and amortisation
of fees totalling £7.6 million. The Group also incurred £10.9 million of interest and amortised fees in
relation to the Nomura mezzanine facility. In the year ended 31 March 2014 the Group incurred an
expense of £9.1 million (out of the £10.0 million IBRC loan extension fee).
The fair value adjustment of financial derivatives in effective hedges in 2015 was £0.9 million
compared to £0.4 million in 2014.
Profit before taxation
The Group’s profit before taxation was £44.1 million, an increase of 160.5 per cent. compared to
£16.9 million in the year ended 31 March 2014. The increase was primarily due to the contribution
from the entities acquired in the December 2014 Acquisitions and in the Further 2015 Acquisitions
and other reasons described above.
Income tax charge
For the year ended 31 March 2015 the Group had an income tax credit of £0.2 million due to an
adjustment of £1.2 million reflecting a release of a provision made in prior years. The Group’s
74
effective tax rate was 21 per cent. and 23 per cent. in the years ended 31 March 2015 and 2014,
respectively.
(Loss)/profit for the year from discontinued operations
The Group’s profit from discontinued operations decreased by £0.75 million to a loss of £0.37 million
for the year ended 31 March 2015 from profit of £0.38 million for the year ended 31 March 2014.
Profit for the year
The Group’s profit for the year ended March 2015 was £43.7 million which represented an increase
of 158.7 per cent. compared to £17.0 million for the year ended 31 March 2014. The increase was
primarily due to the factors described above.
5.3
Year ended 31 March 2014 compared to the year ended 31 March 2013
Revenue
In the two years ended 31 March 2014, the Group derived its revenue from rental income from its
property and other business. The Group’s restaurant operations were discontinued in the year ended
31 March 2015 and have therefore been excluded from the 2013 and 2014 financial results.
Property and Other Business
The Group’s revenue from market and property business comprises the rent receivable from its letting
of properties for retail, restaurant and leisure, office, light industrial and residential uses. The Group’s
revenue from its market and property business increased by £0.5 million or 2.9 per cent. to
£18.4 million for the year ended 31 March 2014 from £17.9 million for the year ended 31 March
2013. The increase was primarily due to an increase in market rental income achieved throughout both
the Camden Stables Market and Hawley Wharf sites.
Administrative expenses
The Group’s administrative expenses increased by £1.5 million or 25 per cent. to £7.3 million for the
year ended 31 March 2014 from £5.8 million for the year ended 31 March 2013. The increase was
due to a number of factors, mainly additional legal fees of an exceptional nature as described in more
detail under “—Adjusted EBITDA” below, group restructuring costs and an increase in the property
costs.
Net gain from the fair value adjustment of investment property
The Group’s net gain from the fair value adjustment of investment property was £24.2 million for the
year ended 31 March 2013 (bringing the value of investment property in the balance sheet to
£389 million) and £22.8 million for the year ended 31 March 2014 (bringing the value of investment
property in the balance sheet to £413.0 million).
Operating profit
The Group’s operating profit decreased by £2.3 million or 6 per cent. to £33.9 million for the year
ended 31 March 2014 from £36.3 million for the year ended 31 March 2013. The movement was
primarily due to the increase in administrative expenses and the decrease in net gain from the fair
value adjustment of investment property as described above.
Adjusted EBITDA
Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation and
adjusted for fair value investment property movements, share-based payment charges, exceptional
items and foreign currency exchange gain/(loss). The table below shows a reconciliation of the
Group’s Adjusted EBITDA and adjusted operating profit before exceptional items for the years ended
31 March 2014 and 2013 to its operating profit for the same periods.
75
Year ended 31 March
2013
2014
(£’000)
Operating profit per statement of comprehensive income
Adjustments:
Net gain from fair value adjustment of investment property
Exceptional items
Depreciation & amortisation
Adjusted EBITDA
36,268
(24,202)
296
395
————
12,757
————
33,954
(22,819)
1,073
414
————
12,622
————
The Group’s Adjusted EBITDA decreased by £0.1 million or 1.0 per cent. to £12.6 million for the year
ended 31 March 2014 from £12.75 million for the year ended 31 March 2013.
The Group’s exceptional items (one-off, non-recurring costs) were £1.1 million for the year ended
31 March 2014. This comprised £0.8 million in legal and professional fees (including the fees related
to the IBRC Proceedings) and £0.2 million relating to onerous lease costs. The £0.3 million incurred
in the year ended 31 March 2013 related to one-off legal and professional fees.
Finance income
The Group’s finance income increased by £0.05 million to £0.24 million for the year ended 31 March
2014 from £0.18 million for the year ended 31 March 2013.
Finance cost
The Group’s finance cost increased by £10.2 million or 145.2 per cent. to £17.3 million for the year
ended 31 March 2014 from £7.0 million for the year ended 31 March 2013. The increase was
primarily attributable to the IBRC aggregate loan extension fee of £10 million, of which £9.1 million
related to the year ended 31 March 2014 and was therefore expensed during the year.
Profit before taxation
The Group’s profit before income tax decreased by £12.5 million or 42 per cent. to £16.9 million for
the year ended 31 March 2014 from £29.4 million for the year ended 31 March 2013. The decrease
was due to the factors described above including the increase in exceptional items and increase in
finance costs.
Income tax charge
The Group’s income tax expense decreased by £0.09 million or 22 per cent. to £0.3 million for the
year ended 31 March 2014 from £0.4 million for the year ended 31 March 2013. The decrease was
primarily due to decrease in profit before income tax partially offset by adjustments in respect of prior
years. The effective tax rate was 23 per cent. and 26 per cent. in the years ended 31 March 2014 and
2013, respectively. The Group’s income tax expense in these periods arose from UK tax liabilities of
UK subsidiaries of the Group and its overseas subsidiaries which are subject to UK taxation.
Profit for the year
The Group’s profit for the year decreased by £12.3 million or 42.1 per cent. to £16.9 million for the
year ended 31 March 2014 from £29.3 million for the year ended 31 March 2013. The decrease was
primarily due to the factors described above.
6.
LIQUIDITY AND CAPITAL RESOURCES
6.1
Overview
6.2
Historically, the Group has financed its capital and working capital requirements through a
combination of cash flows from operating activities, debt finance and equity. The Group’s liabilities
mainly consist of the Nomura Senior Loan Facility, the Convertible Bonds and the AIG Senior Facility
76
Agreement. Since 30 September 2015, other than the refinancing of the Nomura Senior Loan Facility
pursuant to the entry into the AIG Senior Facility Agreement, there has been no significant change in
the Group’s liquidity and capital resources. See also Part XV “Additional Information—Material
Contracts—AIG Senior Facilities Agreement”.
6.3
Cash Flow
The following is the summary of the Group’s cash flows for the periods indicated.
Six months ended
30 September
2015
2014
(£’000)
(£’000)
Net cash (outflow)/inflow from operating
activities
Net cash used in investment activities
Net cash generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning
of the period
Cash and cash equivalents at the end of
the period
Year ended 31 March
2015
2014
2013
(£’000)
(£’000)
(£’000)
(4,138)
521
(10,844)
1,560
(2,488)
(99,941)
(1,844) (118,575) (26,049)
(3,671)
193,561
(58) 203,839
34,794
4,887
––––––– ––––––– ––––––– ––––––– –––––––
89,482
(1,381)
74,420
10,305
(1,272)
85,851
–––––––
11,431
–––––––
11,431
–––––––
1,126
–––––––
2,398
–––––––
175,333
10,050
85,851
11,431
1,126
––––––– ––––––– ––––––– ––––––– –––––––
Net cash generated from operating activities
Cash flow from operating activities comprises cash generated from the Group’s operating activities,
less net interest paid and corporate tax payments in respect of operating activities.
The Group’s net cash outflow from operating activities for the six months ended 30 September 2015
was £4.1 million, compared with net cash inflow from operating activities of £0.5 million for the six
months ended 30 September 2014. The decrease mainly resulted from the reduction in the Group’s
operating cash flow and the increase in income tax paid.
The Group’s net cash outflow from operating activities for the year ended 31 March 2015 was
£10.8 million, compared with net cash inflow from operating activities of £1.6 million for the year
ended 31 March 2014. The Group generated profit of £43.9 million for the year ended 31 March 2015
(as compared to £17.0 million for the year ended 31 March 2014), however, this was primarily due to
the valuation gains of £60.5 million on investment property during the period. The higher net cash
outflow in the year ended 31 March 2015 resulted from application of adjustments which eliminated
the effect of the valuation gains.
The Group’s net cash inflow from operating activities for the year ended 31 March 2014 was
£1.6 million, compared with net cash outflow from operating activities of £2.5 million for the year
ended 31 March 2013. The increase mainly resulted from increase in finance expense.
Net cash flows used in investment activities
The Group’s cash flows from investing activities principally comprises the cash used for purchase of
investment properties, together with the cash used for capital expenditures on the Group’s properties
and acquisition of digital assets.
The Group’s net cash flows used in investment activities for the six months ended 30 September 2015
was £99.9 million, compared with net cash flows used in investment activities of £1.8 million for the
six months ended 30 September 2014. The increase was primarily due to the use of funds in the
acquisitions of Utopia Village, Stucco Media and Hawley Crescent and capital expenditures in
relation to development of the Group’s current portfolio, primarily its Hawley Wharf Development.
77
The Group’s net cash flows used in investment activities for the year ended 31 March 2015 was
£118.6 million, compared with net cash flows used in investment activities of £26.0 million for the
year ended 31 March 2014 The increase was primarily due to acquisitions of various Group
companies and assets in the year ended 31 March 2015.
The Group’s net cash flows used in investment activities for the year ended 31 March 2014 was
£26.0 million, compared with net cash flows used in investment activities of £3.7 million for the year
ended 31 March 2013. The increase was primarily due to the repayment in full of a shareholder loan.
Net cash from/(used in) financing activities
Net cash from financing activities principally comprises inflows of funds from drawings on the
Group’s committed bank facilities and the Company’s issuance of the Convertible Bonds and cash
outflows arising from the costs of arranging additional bank facilities.
The Group’s net cash generated from financing activities for the six months ended 30 September 2015
was £193.6 million, compared with net cash outflows from financing activities of £58,000 for the
six months ended 30 September 2014.
The Group’s net cash generated from financing activities for the year ended 31 March 2015 was
£203.8 million, compared with net cash flows from financing activities of £34.8 million for the year
ended 31 March 2014. The increase mainly resulted from the Company’s issuance of the Convertible
Bonds and the receipt of proceeds from the equity fundraising.
The Group’s net cash generated from financing activities for the year ended 31 March 2014 was
£34.8 million, compared with net cash flows from financing activities of £4.9 million for the year ended
31 March 2013. The increase mainly resulted from the drawdown on the Nomura Senior Facility.
6.4
The Group’s debt
The following table summarises the Group’s borrowings as at 30 September 2015:
As at
30 September
2015
(£’000)
Secured borrowings at amortised cost
Convertible Bonds
188,863
109,355
–––––––––
298,218(1)
Total:
–––––––––
Notes:
1 Includes £6.4 million in current liabilities and £291.8 million in non-current liabilities.
See also Part XV of this document (“Additional Information—Material Contracts”) for the
description of the Group’s loan facilities and the terms of the Convertible Bonds.
The nominal value of the Group’s bank borrowings and Convertible Bonds as at 30 September 2015
amounted to £304.1 million. At 30 September 2015, the Group’s committed bank facilities amounted
to £188.9 million, with a weighted average maturity of 2.47 years. The weighted average interest,
including margin, payable on actual amounts drawn at 30 September 2015 was 3.6 per cent. The
Group’s margin, payable on actual amounts drawn at 30 September 2015, was 4.25 per cent., of which
2 per cent. is paid in cash and 2.25 per cent. is rolled up.
As at 30 September 2015, the nominal value of the Convertible Bonds amounted to £112.5 with
interest accruing at a rate of 2 per cent. per annum calculated by reference to the principal amount
thereof and payable semi-annually.
See also Part XV of this document (“Additional Information—Material Contracts”) for the
description of the Group’s loan facilities and the terms of the Convertible Bonds.
78
6.5
Capital expenditure
The Group’s business is capital intensive as the Group has been, and continues to be, in the process of
implementation of several development and improvement projects in relation to its properties.
Management expects the Group’s principal future capital expenditure to primarily relate to the Hawley
Wharf, Union Street and Camden Lock developments.
The anticipated source of funding for the Group’s commitments is its working capital, which comprises
the Group’s loan facilities and Convertible Bonds as described above, proceeds from its initial public
offering in December 2014, and proceeds from the 2015 AIM Placing. For more information on
working capital, see “Additional Information—Working Capital” in Part XV of this document.
6.6
Contractual commitments and off balance sheet arrangements
The following table summarises the Group’s contractual obligations, commercial obligations and
principal payments scheduled as at 31 March 2015:
Carrying Contractual
amounts cash flows
Borrowings
188,310
Borrowings (Convertible
Bonds)
107,994
Finance lease liabilities
3,573
Trade payables
5,133
Other payables
3,271
Accruals and deferred
income
12,486
Deferred consideration
2,071
––––––––
322,838
3 months
Between
or less 3-12 months
(£’000)
Between
1-5 years
More than
5 years
210,376
8,989
6,615
194,772
–
137,700
38,257
5,133
3,271
–
40
4,768
2,571
2,250
124
365
700
135,450
646
–
–
–
37,447
–
–
12,486
2,071
––––––––
409,294
11,749
1,474
––––––––
29,591
737
597
––––––––
11,388
–
–
––––––––
330,868
–
–
––––––––
37,447
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
The Group has no off balance sheet arrangements.
As at 30 September 2015, the Group had given assurances aggregating £500,000 for construction
being undertaken. The Group’s only material capital commitments related to construction of a primary
school as part of the Hawley Wharf scheme and continued development of the co-working scheme
which amounted to £22.2 million as at 30 September 2015.
7.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Note 5 of the Group’s audited consolidated financial statements for the year ended 31 March 2015
included in sub-section 2 of Section A of Part IX of this document for the discussion of the Group’s
financial and capital risk management (including currency risk), interest rate risk, credit risk and
liquidity risk.
8.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of the historical financial information requires management to make significant
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities. Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations of future events that are believed to
be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting estimates will, by
definition, seldom equal the related actual results. See Note 4 of the Group’s audited consolidated
financial statements for the year ended 31 March 2015 included in sub-section 2 of Section A of Part
IX of this document for the discussion of the Group’s critical accounting policies.
79
PART IX
HISTORICAL FINANCIAL INFORMATION
SECTION A: THE GROUP
Sub-section 1: Accountant’s report on the historical financial information of the Group for the three
years ended 31 March 2015
BDO LLP
55 Baker Street
London
W1U 7EU
The Directors
Market Tech Holdings Limited
Third Floor
La Plaiderie Chambers
La Plaiderie
St Peter Port
Guernsey
GY1 1WG
21 January 2016
Dear Sirs
Market Tech Holdings Limited (the “Company”) and its subsidiary undertakings
(together, the “Group”)
Introduction
We report on the financial information on the Group set out in sub-section 2 of Section A of Part IX. This
financial information has been prepared for inclusion in the prospectus dated 21 January 2016 of the
Company (the “Prospectus”) on the basis of the accounting policies set out in Note 2 to the financial
information. This report is required by item 20.1 of Annex I of the Commission Regulation (EC) No.
809/2004 (the “PD Regulation”) and is given for the purpose of complying with that item and for no other
purpose.
Responsibilities
The directors of the Company are responsible for preparing the financial information in accordance with
International Financial Reporting Standards as adopted by the European Union.
It is our responsibility to form an opinion on the financial information and to report our opinion to you.
Save for any responsibility arising under Prospectus Rule 5.5.3R(2)(f) to any person as and to the extent there
provided, to the fullest extent permitted by the law we do not assume any responsibility and will not accept
any liability to any other person for any loss suffered by any such other person as a result of, arising out of,
or in connection with this report or our statement, required by and given solely for the purposes of complying
with item 23.1 of Annex I of the PD Regulation, consenting to its inclusion in the Prospectus.
Basis of opinion
We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the
amounts and disclosures in the financial information. It also included an assessment of significant estimates
and judgements made by those responsible for the preparation of the financial information and whether the
80
accounting policies are appropriate to the entity’s circumstances, consistently applied and adequately
disclosed.
We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
financial information is free from material misstatement whether caused by fraud or other irregularity or
error.
Our work has not been carried out in accordance with auditing or other standards and practices generally
accepted in the United States of America or other jurisdictions outside the United Kingdom and accordingly
should not be relied upon as if it had been carried out in accordance with those standards and practices.
Opinion
In our opinion, the financial information gives, for the purposes of the Prospectus, a true and fair view of the
state of affairs of the Group as at 31 March 2013, 31 March 2014 and 31 March 2015 and of its profits, cash
flows and changes in equity for the financial years then ended in accordance with International Financial
Reporting Standards as adopted by the European Union.
Declaration
For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus
and declare that we have taken all reasonable care to ensure that the information contained in this report is,
to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.
This declaration is included in the Prospectus in compliance with item 1.2 of Annex I of the PD Regulation.
Yours faithfully
BDO LLP
Chartered Accountants
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127)
81
Sub-section 2: Historical financial information of the Group for the three years ended 31 March 2015
CONSOLIDATED INCOME STATEMENTS
Notes
Revenue
Cost of sales
GROSS PROFIT
Administrative expenses
Net gain from fair value adjustment of
investment property
6
21
ADJUSTED EBITDA*
Net gain from fair value adjustment of
investment property
Exceptional Items
Depreciation & Amortisation
Foreign exchange loss
Share based payment expense
OPERATING PROFIT
Finance income
Finance costs
PROFIT BEFORE TAXATION
Income tax credit/(charge)
PROFIT FOR THE YEAR FROM
CONTINUING OPERATIONS
(Loss)/profit for the year from discontinued
operations
21
7
19,20
35
13
14
15
16
PROFIT FOR THE YEAR
Profit for the year attributable to non-controlling
interest
PROFIT FOR THE YEAR ATTRIBUTABLE
TO THE OWNERS OF THE PARENT
Year ended
31 March
2013
£’000
17,914
–
––––––––
17,914
(5,848)
Year ended
31 March
2014
£’000
18,442
–
––––––––
18,442
(7,307)
Year ended
31 March
2015
£’000
30,081
(5,981)
––––––––
24,100
(22,732)
24,202
22,819
60,539
12,757
12,622
12,018
24,202
(296)
(395)
–
–
22,819
(1,073)
(414)
–
–
60,539
(9,487)
(624)
(500)
(39)
36,268
187
(7,046)
29,409
(421)
––––––––
33,954
240
(17,278)
16,916
(333)
––––––––
61,907
3
(17,839)
44,071
183
––––––––
28,988
16,583
44,254
292
––––––––
29,280
378
––––––––
16,961
(376)
––––––––
43,878
–
––––––––
–
––––––––
(180)
––––––––
29,280
––––––––
16,961
––––––––
––––––––
43,698
EARNINGS PER SHARE FROM
CONTINUING OPERATIONS
Basic
Diluted
Adjusted EBITDA*
18
18
18
12.54p
12.54p
5.52p
7.17p
7.17p
5.46p
16.19p
16.18p
4.41p
EARNINGS PER SHARE ATTRIBUTABLE
TO THE OWNERS OF THE PARENT
Basic
Diluted
Adjusted EBITDA*
18
18
18
12.66
12.66
5.72p
7.33p
7.33p
5.68p
16.05p
16.04p
4.34p
*
Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation and adjusted for fair value
investment property movements, share based payment charges, exceptional items and foreign currency exchange gain/(loss).
82
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Notes
PROFIT FOR THE YEAR
Year ended
31 March
2013
£’000
Year ended
31 March
2014
£’000
Year ended
31 March
2015
£’000
29,280
––––––––
16,961
––––––––
43,878
––––––––
223
–
––––––––
(500)
–
––––––––
3,334
179
––––––––
223
––––––––
(500)
––––––––
3,513
––––––––
OTHER COMPREHENSIVE INCOME
ITEMS THAT MAY BE RECLASSIFIED TO
PROFIT OR LOSS (NET OF TAX)
Gains/(losses) on property revaluation
Currency translation difference
37
OTHER COMPREHENSIVE INCOME FOR
THE YEAR (NET OF TAX)
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR (NET OF TAX)
Total comprehensive income for the year
attributable to owners of the parent
Total comprehensive income for the year
attributable to non-controlling interests
––––––––
29,503
––––––––
16,461
––––––––
29,503
16,461
47,145
–
––––––––
29,503
–
––––––––
16,461
246
––––––––
47,391
––––––––
83
––––––––
47,391
––––––––
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Notes
As at
31 March
2013
£’000
As at
31 March
2014
£’000
As at
31 March
2015
£’000
NON-CURRENT ASSETS
Goodwill
Intangible assets
Property, plant and equipment
Investment property
Investments
Other receivables
Derivative financial instruments
19
19
20
21
23
25
30
–
71
12,977
388,780
–
–
–
––––––––
401,828
––––––––
–
71
12,060
413,065
–
8,998
1,007
––––––––
435,201
––––––––
20,149
18,336
1,650
753,700
1,787
127
–
––––––––
795,749
––––––––
CURRENT ASSETS
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
24
25
30
27
115
7,058
–
1,126
––––––––
8,299
––––––––
410,127
84
1,354
–
11,431
––––––––
12,869
––––––––
448,070
3,331
13,386
70
85,851
––––––––
102,638
––––––––
898,387
(3,617)
(1,459)
(123)
(188,848)
–
––––––––
(194,047)
––––––––
(185,748)
(5,609)
(1,622)
(126)
(229,455)
–
––––––––
(236,812)
––––––––
(223,943)
(22,961)
(826)
(109)
(6,839)
(976)
––––––––
(31,711)
––––––––
70,927
–
(3,697)
–
–
–
(3,697)
––––––––
(197,744)
–
(3,573)
–
–
–
(3,573)
––––––––
(240,385)
212,383
––––––––
––––––––
(9,727)
(3,464)
(181,471)
(107,994)
(8,530)
(311,186)
––––––––
(342,897)
207,685
––––––––
––––––––
555,490
–
–
9,544
–
202,839
––––––––
–
–
9,044
–
198,641
––––––––
37,500
249,214
12,378
8,400
244,329
––––––––
212,383
––––––––
––––––––
207,685
––––––––
––––––––
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Taxes payable
Obligations under finance leases
Borrowings
Provisions
––––––––
28
29
32
30
34
NET CURRENT ASSETS/(LIABILITIES)
NON-CURRENT LIABILITIES
Other payables
Obligations under finance leases
Borrowings
Convertible Bonds
Deferred tax liabilities
––––––––
28
32
30
31
33
TOTAL LIABILITIES
––––––––
––––––––
NET ASSETS
EQUITY
Called up share capital
Share premium
Revaluation reserve
Other reserves
Retained earnings
36
37
37
TOTAL EQUITY ATTRIBUTABLE TO
OWNERS OF THE PARENT
––––––––
––––––––
Equity attributable to non-controlling interests
–
––––––––
212,383
TOTAL EQUITY
84
––––––––
––––––––
–
––––––––
207,685
––––––––
––––––––
551,821
3,669
––––––––
555,490
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share
capital
£’000
BALANCE AT 1 APRIL 2012
COMPREHENSIVE INCOME
Profit for the period
OTHER COMPREHENSIVE
(EXPENSE)/INCOME
Property revaluation
TOTAL COMPREHENSIVE
INCOME
BALANCE 31 MARCH 2013
COMPREHENSIVE INCOME
Profit for the period
OTHER COMPREHENSIVE
(EXPENSE)/INCOME
Property revaluation
TOTAL COMPREHENSIVE
INCOME
TRANSACTIONS WITH
OWNERS
Distribution (Note 17)
BALANCE 31 MARCH 2014
COMPREHENSIVE INCOME
Profit for the period
OTHER COMPREHENSIVE
(EXPENSE)/INCOME
Currency translation differences
Property revaluation
TOTAL COMPREHENSIVE
INCOME
Ordinary Shares issued
Costs of share issues
Share based payment
Issue of Convertible Bonds
Capital contribution on acquisition
of entities under common control
Valuation of put option at present
value from fair value
Acquisition of subsidiary with
non-controlling interest
TRANSACTIONS WITH
OWNERS
Contribution (Note 17)
BALANCE AT 1 APRIL 2015
Attributable to the equity holders of the parent
Share Revaluation
Other
Retained
premium
reserve
reserves
earnings
£’000
£’000
£’000
£’000
Noncontrolling
Total
interests
£’000
£’000
Total
equity
£’000
–
––––––––
–
––––––––
9,321
––––––––
–
––––––––
173,559
––––––––
182,880
––––––––
–
––––––––
182,880
––––––––
–
–
–
–
29,280
29,280
–
29,280
–
––––––––
–
––––––––
223
––––––––
–
––––––––
–
––––––––
223
––––––––
–
––––––––
223
––––––––
–
–
223
–
29,280
29,503
–
29,503
–
––––––––
–
––––––––
9,544
––––––––
–
––––––––
202,839
––––––––
212,383
––––––––
–
––––––––
212,383
––––––––
–
–
–
–
16,961
16,961
–
16,961
–
––––––––
–
––––––––
(500)
–
–––––––– ––––––––
–
––––––––
–
–
–
––––––––
–
––––––––
–
––––––––
–
––––––––
–
––––––––
9,044
––––––––
–
––––––––
–
––––––––
–
–
–
–
43,698
43,698
180
43,878
–
–
––––––––
–
–
––––––––
–
3,334
––––––––
–
–
––––––––
113
–
––––––––
113
3,334
––––––––
66
–
––––––––
179
3,334
––––––––
3,334
–
–
–
–
–
–
–
39
2,562
43,811
–
–
–
–
–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
–
37,500
–
–
–
–
250,029
(815)
–
–
(500)
–
16,961
(500)
–
–––––––– ––––––––
16,461
–
(21,159)
(21,159)
–
–––––––– –––––––– ––––––––
198,641
207,685
–
–––––––– –––––––– ––––––––
47,145
287,529
(815)
39
2,562
246
–
–
–
–
(500)
––––––––
16,461
(21,159)
––––––––
207,685
––––––––
47,391
287,529
(815)
39
2,562
–
–
–
12,173
–
12,173
–
12,173
–
–
–
(6,374)
–
(6,374)
–
(6,374)
–
––––––––
37,500
–
––––––––
249,214
–
––––––––
12,378
–
––––––––
8,400
–
––––––––
242,452
–
––––––––
549,944
3,423
––––––––
3,669
3,423
––––––––
553,613
–
––––––––
37,500
–
––––––––
249,214
–
––––––––
12,378
–
––––––––
8,400
1,877
––––––––
244,329
1,877
––––––––
551,821
–
––––––––
3,669
1,877
––––––––
555,490
–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
85
CONSOLIDATED CASH FLOW STATEMENTS
Notes
Cash generated from operations
Interest paid
Interest received
Tax paid
44
NET CASH (OUTFLOW)/INFLOW FROM
OPERATING ACTIVITIES
INVESTING ACTIVITIES
Purchase of intangible assets
Purchase of property, plant and equipment
Purchase of subsidiary (net of cash acquired)
Cash inflow from business combinations and
asset acquisitions made under common control
Purchase of investment property
Loan to shareholder repaid/(advanced)
12,113
(14,561)
–
(40)
––––––––
(2,488)
––––––––
Year ended
31 March
2014
£’000
11,138
(9,402)
(176)
–
––––––––
1,560
––––––––
Year ended
31 March
2015
£’000
4,609
(15,270)
3
(186)
––––––––
(10,844)
––––––––
19
20
45
–
(94)
–
–
(137)
–
(784)
(835)
(15,033)
21
–
(3,394)
(183)
––––––––
–
(1,466)
(24,446)
––––––––
3,746
(116,544)
10,875
––––––––
NET CASH USED IN INVESTING
ACTIVITIES
FINANCING ACTIVITIES
Proceeds from issue of shares
Costs of share issues
Issue of Convertible Bonds
Repayment of borrowings
Proceeds of new bank loans
Payment of obligations under finance leases
Loan from shareholder
Loan from shareholder repaid
Year ended
31 March
2013
£’000
(3,671)
42
42
NET CASH GENERATED FROM
FINANCING ACTIVITIES
––––––––
–
–
–
(4)
5,000
(109)
–
–
––––––––
–
–
–
–
34,915
(121)
–
–
––––––––
100,005
(815)
110,556
(51,430)
–
(127)
93,650
(48,000)
––––––––
34,794
––––––––
––––––––
10,305
74,420
2,398
––––––––
1,126
––––––––
11,431
––––––––
1,126
––––––––
11,431
––––––––
––––––––
(1,272)
CASH AND CASH EQUIVALENTS
AT END OF YEAR
––––––––
86
(118,575)
––––––––
4,887
NET INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR
(26,049)
––––––––
203,839
85,851
NOTES TO THE CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
1.
CORPORATE INFORMATION
The consolidated financial information covers Market Tech Holdings Limited and its subsidiaries
(collectively the “Group”). Market Tech Holdings Limited (the “Company”) is a limited company
incorporated and domiciled in Guernsey and whose shares are publicly traded. The registered office
is located at Third Floor, La Plaiderie Chambers, La Plaiderie, St Peter Port, Guernsey, GY1 1WG.
The Group is principally engaged in the provision of property investment, including management and
market operation services, and digital services. Information on the Group’s structure is provided in
Note 22. Information on other related party relationships of the Group is provided in Note 42.
2.
ACCOUNTING POLICIES
2.1
ACCOUNTING CONVENTION
The financial information has been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted for use in the European Union. The Group has adopted all the new and
revised International Financial Reporting Standards (“IFRS”) that are relevant to its operations and
are effective for accounting periods beginning on and after 1 April 2014.
The financial information has been prepared on a going concern basis, applying the historical cost
convention except for the revaluation of land and buildings, investment properties and derivative
financial instruments. The principal accounting policies adopted are set out below.
The preparation of financial information in conformity with IFRS requires the use of certain critical
accounting estimates and requires Directors to exercise their judgement in the process of applying the
Group’s accounting policies. It also requires the use of assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
information and the reported amounts of revenues and expenses during the reporting period. Although
these estimates are based on the Directors’ best knowledge of current events and activities, actual
results may ultimately differ from those estimates.
The areas where significant judgements and estimates are made in preparing this historical financial
information are disclosed in Note 4.
This financial information is prepared in pounds sterling and rounded to the nearest thousand.
2.2
BASIS OF CONSOLIDATION
The Company was incorporated on 23 October 2014 with the intention of listing a series of businesses
and assets that were ultimately controlled by GHT and the Major Shareholder.
As part of a reorganisation of these businesses and assets, the Company entered into an agreement to
acquire the entire issued share capital of Divanyx Investments Limited on 5 December 2014, whose
principal subsidiary was Camden Market Holdings Corp. and its subsidiaries (“CMHC”). The
transaction was effected by the issue of 1,000 shares in the Company.
On the same date the Company entered into an agreement to acquire the entire issued share capital of
Crowndeal Services Limited, whose principal subsidiary was Fiver London Limited. The transaction
was settled for cash consideration totalling $10,000.
Due to the relative size of these companies, the Directors considered CMHC to be the acquirer in this
group reorganisation with the Company emerging as the holding company of the enlarged group and
therefore CMHC results are included from 1 April 2014. The comparative financial information
presented for the year ended 31 March 2014 reflects the consolidated results for the CMHC group.
The Company is portrayed as the acquirer for subsequent business combinations and asset
acquisitions.
87
The accounting policies for these transactions with entities under common control are shown in
Note 2.3.
The consolidated financial information includes the accounts of the Company and its subsidiaries as
at 31 March 2015, 31 March 2014 and 31 March 2013. Control is achieved when the Group is
exposed, or has rights, to variable returns from its involvement with the investee and has the ability to
affect those returns through its power over the investee.
Profit or loss and each component of other comprehensive income are attributed to the equity holders
of the parent of the Group and to the non-controlling interests, even if this results in the
non-controlling interests having a deficit balance. When necessary, adjustments are made to the
financial statements of subsidiaries to bring their accounting policies into line with the Group’s
accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows
relating to transactions between members of the Group are eliminated in full on consolidation.
If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill),
liabilities, non-controlling interest and other components of equity while any resultant gain or loss is
recognised in profit or loss. Any investments retained are recognised at fair value.
2.3
COMMON CONTROL TRANSACTIONS
BUSINESS COMBINATIONS
Transactions with entities under common control are outside of the scope of IFRS 3 ‘Business
Combinations’. The identifiable assets and liabilities are measured at their pre-combination carrying
values including any previously consolidated goodwill. Any differences on consolidation between the
cost of investment and the carrying values of the net assets are recognised in equity in other reserves
as a capital contribution or distribution. The Group recognises the results of the acquired entity from
the date on which the business combination between entities under common control occurred.
Directly attributable acquisition costs are expensed as incurred and included within administrative
expenses.
Inter-company transactions, balances and unrealised gains on transactions between group companies
are eliminated on consolidation. Unrealised losses are also eliminated. When necessary, amounts
reported by subsidiaries have been adjusted to conform to the Group’s accounting policies.
ASSET PURCHASES
Assets purchased through transactions with entities under common control are measured at fair value
at date of acquisition. The consideration paid is recognised with reference to the amount recorded by
the acquiree as its acquisition cost, and any differences between the consideration paid and the fair
value of the asset acquired are recognised in equity in other reserves as a capital contribution or
distribution.
Directly attributable costs are capitalised as part of the cost of acquisition.
The transactions described above and in Note 45, relating to entities under common control, involved
assuming debt totalling £185,399,203 owed to the Major Shareholder. On 16 December 2014 the debt
was extinguished through the issue of 323,886,500 Ordinary Shares by the Company. Given the
£2 share price on the Company’s initial public offer, management consider 231,186,898 of those
shares is equivalent to a bonus issue to the Major Shareholder and therefore for the purposes of the
EPS calculation are included in the comparative figures in accordance with IAS 33 ‘Earnings per
Share’.
2.4
BUSINESS COMBINATIONS AND GOODWILL
Business combinations (other than those under common control as detailed above) are accounted for
using the acquisition method. The cost of an acquisition is measured as the aggregate of the
88
consideration transferred measured at acquisition date fair value and the amount of any
non-controlling interests in the acquiree. Acquisition-related costs are expensed as incurred and
included in administrative expenses.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration
transferred and the amount recognised for non-controlling interests, and any previous interest held,
over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets
acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has
correctly identified all of the assets acquired and all of the liabilities assumed and reviews the
procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment
still results in an excess of the fair value of net assets acquired over the aggregate consideration
transferred, then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For
the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit
from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned
to those units.
Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit
is disposed of, the goodwill associated with the disposed operation is included in the carrying amount
of the operation when determining the gain or loss on disposal. Goodwill disposed in these
circumstances is measured based on the relative values of the disposed operation and the portion of
the cash-generating unit retained.
2.5
REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the
Group and the revenue can be reliably measured, regardless of when the payment is being made.
Revenue is measured at the fair value of the consideration received or receivable, taking into account
contractually defined terms of payment and excluding taxes or duty. The Group has concluded that it
is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue
arrangements, has pricing latitude and is also exposed to inventory and credit risks.
The specific recognition criteria described below must also be met before revenue is recognised.
RENTAL INCOME AND SERVICE CHARGES
Rental income arising from operating leases and licences on investment properties is accounted for on
a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss
due to its operating nature. Service charges are recognised in the accounting period in which services
are rendered.
SALE OF GOODS ONLINE
Revenue from the sale of goods and delivery notes is recognised when the significant risks and
rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Revenue
from the sale of goods is measured at the fair value of the consideration received or receivable, net of
returns and allowances and trade discounts.
RENDERING OF SERVICES
Revenue from online mobile marketing services is recognised when the amount of revenue can be
measured reliably, it is probable that the economic benefits will flow to the Group, the stage of
completion can be measured reliably and the costs incurred, or to be incurred can be measured
reliably.
89
FOOD AND BEVERAGE
Revenue is recognised when the amounts are earned and can be reliably estimated. These revenues are
recorded net of valued added tax collected from customers and are recognised as the related services
are delivered.
2.6
TAXATION
The tax expense represents the sum of the tax currently payable and deferred tax.
CURRENT TAX
Income tax on the profit or loss comprises current and deferred tax. Income tax is recognised in the
income statement, except to the extent that it relates to items recognised directly in other
comprehensive income or equity – in which case, the tax is also recognised in other comprehensive
income or equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the date of the statement of financial position in the countries where the Group operates.
Directors periodically evaluate positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation, and establish provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities. During the ordinary course of business,
there are transactions and calculations for which the ultimate tax determination is uncertain. As a
result, the Group recognises tax liabilities based on estimates of whether additional taxes and interest
will be due.
DEFERRED TAX
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial information and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial recognition of other assets and liabilities
in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part
of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the
income statement, except when it relates to items charged or credited directly to equity, in which case
the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the
Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax
assets and liabilities relate to taxes levied by the same tax authority.
2.7
FOREIGN CURRENCIES
The Group’s consolidated financial information is presented in pounds sterling, which is also the
Company’s functional currency. For each entity the Group determines the functional currency and
items included in the financial statements of each entity are measured using that functional currency.
The Group uses the direct method of consolidation and on disposal of a foreign operation, the gain or
loss that is reclassified to profit or loss reflects the amount that arises from using this method.
TRANSACTIONS AND BALANCES
Transactions in foreign currencies are initially recorded by the Group’s entities at their respective
functional currency spot rates at the date the transaction first qualifies for recognition.
90
Monetary assets and liabilities denominated in foreign currencies are translated at the functional
currency spot rates of exchange at the reporting date.
Differences arising on settlement or translation of monetary items are recognised in profit or loss.
GROUP COMPANIES
On consolidation, the assets and liabilities of foreign operations are translated into pounds sterling at
the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated
at the average exchange rates prevailing for the period. The exchange differences arising on
translation for consolidation are recognised in other comprehensive income. On disposal of a foreign
operation, the component of other comprehensive income relating to that particular foreign operation
is recognised in profit or loss.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the
carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities
of the foreign operation and translated at the rate of exchange prevailing at the reporting date.
2.8
PROPERTY, PLANT AND EQUIPMENT
The Group has opted to carry property at fair value under IAS 16. Revaluation gains are reported in
other comprehensive income and depreciation is charged annually to the income statement. Where
revalued property is disposed of, the related amounts included in the revaluation reserve are
transferred to retained earnings when revalued assets are derecognised. Valuations are performed with
sufficient frequency to ensure that the carrying amount of a revalued asset does not differ materially
from its fair value.
If property becomes investment property (its use is changed such that it is held for long-term rental
yields rather than being owner-occupied), it is reclassified to investment property, its net book value
at the date of reclassification becomes its fair value for subsequent accounting purposes. Any
revaluation reserve related to the asset transfers remains within the revaluation reserve until the asset
is disposed of, at which time it is transferred to profit and loss.
Plant and equipment are stated at historical cost less accumulated depreciation and any accumulated
impairment losses.
Depreciation is calculated on the straight-line method or reducing balance method so as to write off
the cost of each asset to its residual value over its estimated useful life. The useful economic lives used
are as follows:
Freehold land and buildings
Leasehold Improvements
Fixtures and fittings
Plant and equipment
50 years
Life of Lease
10 years
4-5 years
The gain or loss arising on the disposal of an asset is determined as the difference between the sale
proceeds and the carrying value of the asset, and is recognised in the income statement.
2.9
BORROWING COSTS
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised
as part of the cost of the asset.
Borrowing costs are charged to profit over the term of the debt instrument so that the amount charged
is at a constant rate on the carrying amount. Borrowing costs include issue costs, which are initially
recognised as a reduction in the proceeds of the associated capital instrument.
91
2.10 INVESTMENT PROPERTIES
Property that is held for long-term rental yields or for capital appreciation or both, and that is not
occupied by the companies in the Group, is classified as investment property.
Investment property also includes property that is being constructed or developed for future use as
investment property. Land and buildings held under operating leases are classified and accounted for
by the Group as investment property when the rest of the definition of investment property is met.
Investment property is measured initially at its cost, including related transaction costs and where
applicable borrowing costs.
After initial recognition, investment property is carried at fair value. Investment property under
construction is measured at fair value if the fair value is considered to be reliably determinable. Fair
value is based on active market prices, adjusted, if necessary, for differences in the nature, location or
condition of the specific asset. If this information is not available, the Group uses alternative valuation
methods, such as recent prices on less active markets or discounted cash flow projections. Valuations
are performed by professional valuers who hold recognised and relevant professional qualifications
and have recent experience in the location and category of the investment property being valued.
These valuations form the basis for the carrying amounts in the consolidated historical financial
information. Investment property that is being redeveloped for continuing use as investment property
has also been revalued by professional valuers.
The fair value of investment property reflects, among other things, rental income from current leases
and other assumptions market participants would make when pricing the property under current
market conditions.
Subsequent expenditure is capitalised to the assets carrying amount only when it is probable that
future economic benefits associated with the expenditure will flow to the Group and the cost of the
item can be measured reliably. All other repairs and maintenance costs are expensed when incurred.
When part of an investment property is replaced, the carrying amount of the replaced part is
derecognised.
Changes in fair values are recognised in the income statement. Investment properties are derecognised
when they have been disposed of. Where the Group disposes of a property at fair value in an arm’s
length transaction, the carrying value immediately prior to the sale is adjusted to the transaction price,
and the adjustment is recorded in the income statement within net gain from fair value adjustment on
investment property.
If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment.
Its fair value at the date of reclassification becomes its cost for subsequent accounting purposes.
2.11 LEASES
The determination of whether an arrangement is (or contains) a lease is based on the substance of the
arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right
to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Group as a lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers
substantially all the risks and rewards incidental to ownership to the Group is classified as a finance
lease.
Finance leases are capitalised at the commencement of the lease at the inception date fair value of the
leased property or, if lower, at the present value of the minimum lease payments. Lease payments are
apportioned between finance charges and reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are recognised in finance
costs in the statement of profit or loss.
92
Rentals payable under operating leases are charged to income on a straight line basis over the period
of the lease. Premiums payable, rent free periods and capital contributions receivable on entering an
operating lease are released to income on a straight line basis over the lease term.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an
asset are classified as operating leases. Initial direct costs incurred in negotiating and arranging an
operating lease are added to the carrying amount of the leased asset and recognised over the lease term
on the same basis as rental income. Contingent rents are recognised as revenue in the period in which
they are earned.
When the Group provides incentives to its tenants the incentives are recognised as a reduction in
income over the lease term on a straight line basis.
2.12 INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible
assets acquired in a business combination is their fair value at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated
impairment losses. The amortisation charge for the year and impairment losses are recognised through
administrative expenses.
Intangible assets currently held by the Group are as follows:
GOODWILL
Goodwill is initially measured at cost, being the excess of the acquisition cost over the Group’s
interest in the assets and liabilities recognised. Goodwill is not amortised, but is reviewed for
impairment annually or whenever there is an indication of impairment.
TRADEMARKS
Trademarks are assessed as having a finite useful life of 5 years and are amortised over this period.
BRANDS AND DOMAIN NAMES
Brands and domain names are assessed as having a finite life of 5 to 10 years and are amortised over
this period.
CUSTOMER LISTS
Customer lists are assessed as having a finite life of 5 to 7 years and are amortised over this period.
WEBSITE DEVELOPMENT COSTS
Website development costs relating to the application and infrastructure development, graphical
design and content development stages are recognised as assets if the criteria for capitalising
development costs under IAS 38 are met.
Costs associated with websites developed for advertising or promotional purposes are expensed as
they are incurred.
Website development costs capitalised related to projects in the course of construction are stated at
cost with no provision for amortisation until the asset comes into commercial use.
93
2.13 IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS
At each reporting end date, the Group reviews the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). An asset’s recoverable amount is the higher of an asset’s or
cash generating unit’s (“CGU”) fair value less costs of disposal and its value in use. The recoverable
amount is determined for an individual asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested
for impairment annually, and whenever there is an indication that the asset may be impaired.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the
carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is
recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in
which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised
immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case
the reversal of the impairment loss is treated as a revaluation increase.
Goodwill is tested for impairment annually as at 31 March and when circumstances indicate that the
carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group
of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its
carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be
reversed in future periods.
Intangible assets with indefinite useful lives are tested for impairment annually as at 31 March at the
CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired.
2.14 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash in hand, deposits held at bank and other short-term highly
liquid investments with original maturities of three months or less.
2.15 INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and,
where applicable, direct labour costs and those overheads that have been incurred in bringing the
inventories to their present location and condition.
Net realisable value is the estimated selling price less all estimated costs of completion and costs to
be incurred in marketing, selling and distribution.
2.16 FINANCIAL INSTRUMENTS
MEASUREMENT
–
INITIAL
RECOGNITION AND
SUBSEQUENT
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
94
2.17 FINANCIAL ASSETS
INITIAL RECOGNITION AND MEASUREMENT
Financial assets are classified, at initial recognition, as financial assets at fair value through profit or
loss (“FVTPL”), loans and receivables, held-to-maturity investments, available-for-sale (“AFS”)
financial assets, or as derivatives designated as hedging instruments in an effective hedge, as
appropriate. All financial assets are recognised initially at fair value plus, in the case of financial assets
not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition
of the financial asset.
For purposes of subsequent measurement financial assets are classified in four categories:
•
•
•
•
Financial assets at FVTPL
Loans and receivables
Held-to-maturity investments
AFS financial assets
Financial assets at fair value through profit or loss
Financial assets are classified as at FVTPL when the financial asset is held for trading. This is the
case if:
•
•
•
the asset has been acquired principally for the purpose of selling in the near term, or
on initial recognition it is part of a portfolio of identified financial instruments that the Group
manages together and has a recent actual pattern of short-term profit taking, or
it is a derivative that is not designated and effective as a hedging instrument.
Financial assets at FVTPL are stated at fair value with any gains or losses arising on remeasurement
recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend
or interest earned on the financial asset. Interest and dividends are included in ‘Investment income’
and gains and losses on remeasurement included in ‘other gains and losses’ in the statement of
comprehensive income.
The fair value of financial assets traded on active liquid markets are determined by reference to quoted
market prices. The fair values of other financial assets at FVTPL are determined in accordance with
generally accepted pricing models based on discounted cash flow analysis.
AFS financial assets
AFS financial assets include equity investments that are neither classified as held for trading nor
designed at FVTPL. They are measured at fair value with gains and losses arising from changes in fair
value recognised in other comprehensive income. Where an AFS financial asset is disposed of or
determined to be impaired, the cumulative gain or loss previously recognised in other comprehensive
income is reclassified to profit or loss.
Where AFS financial assets are not quoted on an active exchange market, cost is used as an estimate
of fair value. Fair value is updated where evidence is available to support a revised fair value.
Dividends and interest earned on AFS financial assets are included in the investment income line item
in the statement of comprehensive income.
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not
quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are
measured at amortised cost using the effective interest method, less any impairment.
Interest is recognised by applying the effective interest rate, except for short-term receivables when
the recognition of interest would be immaterial.
95
The effective interest method is a method of calculating the amortised cost of a debt instrument and
of allocating the interest income over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash receipts through the expected life of the debt instrument to the
net carrying amount on initial recognition.
This category generally applies to trade and other receivables, and is the most relevant to the Group.
For more information on receivables, refer to Note 5.
IMPAIRMENT OF FINANCIAL ASSETS
The Group assesses, at each reporting date, whether there is objective evidence that a financial asset
or a group of financial assets is impaired. An impairment exists if one or more events that has occurred
since the initial recognition of the asset (an incurred ‘loss event’) has an impact on the estimated
future cash flows of the financial asset or the group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing
significant financial difficulty, default or delinquency in interest or principal payments, the probability
that they will enter bankruptcy or other financial reorganisation and observable data indicating that
there is a measurable decrease in the estimated future cash flows, such as changes in arrears or
economic conditions that correlate with defaults.
DERECOGNITION OF FINANCIAL ASSETS
Financial assets are derecognised only when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership
to another entity.
2.18 FINANCIAL LIABILITIES
INITIAL RECOGNITION AND MEASUREMENT
Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL, loans and
borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings
and payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings including
bank overdrafts, and derivative financial instruments.
SUBSEQUENT MEASUREMENT
Loans and borrowings
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised cost using the Effective Interest Rate (EIR)
method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well
as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the
statement of profit or loss.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled
or expires. When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the derecognition of the original liability and the recognition
of a new liability. The difference in the respective carrying amounts is recognised in the statement of
profit or loss.
96
2.19 DERIVATIVE FINANCIAL INSTRUMENTS
The Group uses derivative financial instruments, such as interest rate caps in order to manage its
exposure to interest rate risk.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are
subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is
recognised in profit or loss immediately unless the derivative is designated and effective as a hedging
instrument, in which event the timing of the recognition in profit or loss depends on the nature of the
hedge relationship.
A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a
negative fair value is recognised as a financial liability. A derivative is presented as a non-current asset
or liability if the remaining maturity of the instrument is more than 12 months and it is not expected
to be realised or settled within 12 months. Other derivatives are classified as current.
2.20 DERIVATIVES OVER OWN EQUITY
Where an acquirer acquires less than 100 per cent. of the shares of a subsidiary in a business
combination and enters into a written put option with the seller that permits the seller to put its
remaining interest in the subsidiary to the acquirer at a specified price, the written put option is
accounted for as a derivative over own equity in the consolidated financial information. In accordance
with IAS 32, the gross obligation of the written put option is recognised at present value in the
statement of financial position. The difference between the present value of the gross obligation under
the put option and the fair value of the put option recognised in the acquirer’s financial information is
recognised in equity. At each reporting date any change to the carrying amount calculated using the
effective interest method of the gross obligation is recognised in profit or loss.
2.21 COMPOUND INSTRUMENTS
The component parts of compound instruments issued by the Group are classified separately as
financial liabilities and equity in accordance with the substance of the contractual arrangement. At the
date of issue, the fair value of the liability component is estimated using the prevailing market interest
rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised
cost basis using the effective interest method until extinguished upon conversion or at the instrument’s
maturity date. The equity component is determined by deducting the amount of the liability
component from the fair value of the compound instrument as a whole. This is recognised and
included in equity net of income tax effects and is not subsequently remeasured.
2.22 EQUITY INSTRUMENTS
An equity instrument is any contract that evidences a residual interest in the assets of an entity after
deducting all of the liabilities. Equity instruments issued by the Group are recorded at the proceeds
received net of direct issue costs.
2.23 SHARE-BASED PAYMENTS
Employees (including senior executives) of the Group receive remuneration in the form of
share-based payments, whereby employees render services as consideration for equity instruments
(equity-settled transactions).
EQUITY-SETTLED TRANSACTIONS
The cost of equity-settled transactions is determined by the fair value at the date when the grant is
made using an appropriate valuation model.
That cost is recognised, together with a corresponding increase in other capital reserves in equity, over
the period in which the performance and/or service conditions are fulfilled in employee benefits
expense. The cumulative expense recognised for equity-settled transactions at each reporting date
until the vesting date reflects the extent to which the vesting period has expired and the Group’s best
estimate of the number of equity instruments that will ultimately vest. The statement of profit or loss
97
expense or credit for a period represents the movement in cumulative expense recognised as at the
beginning and end of that period and is recognised in employee benefits expense.
2.24 PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
When the Group expects some or all of a provision to be reimbursed, for example, under an insurance
contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is
virtually certain. The expense relating to a provision is presented in the statement of profit or loss net
of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax
rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the
increase in the provision due to the passage of time is recognised as a finance cost.
2.25 FOREIGN EXCHANGE
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated
using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the exchange rates at the date when the fair value is
determined. The gain or loss arising on translation of non-monetary items measured at fair value is
treated in line with the recognition of the gain or loss on the change in fair value of the item
(i.e., translation differences on items whose fair value gain or loss is recognised in other
comprehensive income or profit or loss are also recognised in other comprehensive income or profit
or loss, respectively). Transactions in foreign currencies are initially recorded by the Group’s entities
at their respective functional currency spot rates prevailing on the date of the transaction.
The balance sheets of foreign subsidiaries are expressed in Sterling at the rate of exchange at the
balance sheet date. Profits and losses of foreign subsidiaries are expressed in Sterling at average
exchange rates for the period. Exchange differences arising on the translation of foreign subsidiaries
are recognised in other comprehensive income.
2.26 OPERATING SEGMENTS
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-makers. The chief operating decision-makers are the people or group that
allocates resources to and assess the performance of the operating segments of an entity. The Group
has determined that its chief operating decision makers are the Board of Directors of the Group.
2.27 EXCEPTIONAL ITEMS
Exceptional items are non-recurring or material items which are outside the normal scope of the
Group’s ordinary activities. These items, in the Directors’ view, are required to be separately disclosed
by virtue of their nature or incidence to enable a full understanding of the Group’s financial
performance. Details of these items are provided in the relevant notes.
98
3.
ADOPTION OF NEW AND REVISED STANDARDS AND CHANGES IN ACCOUNTING
POLICIES
3.1
STANDARDS WHICH ARE IN ISSUE BUT NOT YET EFFECTIVE
At the date of authorisation of this financial information, the following Standards and Interpretations,
which have not yet been applied in this financial information, were in issue but not yet effective (and
in some cases had not yet been adopted by the EU):
Effective Date
1 Jul 2014
1 Jul 2014
1 Jul 2014
1 Jan 2016
1 Jan 2016
1 Jan 2016
1 Jan 2016
1 Jan 2016
1 Jan 2016
1 July 2016
1 Jan 2017
1 Jan 2018
1 Jan 2018
Annual improvements to IFRSs 2010–2012 cycle
Amendments to IAS 19: Employee Benefits
Annual improvements to IFRSs 2011–2013 cycle
Amendments to IAS 16 and IAS 38 – Clarification of acceptable methods of
depreciation and amortisation
Amendments to IAS 27 Separate financial statements – Equity method in separate
financial statements
Amendments to IFRS 10: Consolidated Financial Statements and IAS 28: Sale or
contribution of assets between an investor and its associate or joint venture
Amendments to IFRS 11 – Accounting for acquisitions of interests in joint
operations
Amendments to IFRS 12: Disclosure of Interest in Other Entities
Amendments to IAS 1: Presentation of Financial Statements
Annual improvements to IFRSs 2012–2014 cycle
IFRS 15: Revenue from Contracts with Customers
Final version issued of IFRS 9: Financial Instruments
Amendments to IFRS 7: Financial Instruments Disclosure
The Directors do not anticipate that adoption of the standards, amendments and interpretations will
have a material impact on the financial information of the Group in future years.
3.2
CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
Certain accounting standards and amendments were effective for annual periods beginning on or after
1 January 2014. These amendments have had no impact on the Group.
4.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In the application of the Group’s accounting policies, the Directors are required to make judgements,
estimates and assumptions about the carrying amount of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised, if the revision affects only that
period, or in the period of the revision and future periods if the revision affects both current and future
periods.
The following is intended to provide an understanding of the significant judgements within the
accounting policies that the management consider critical because of the assumptions or estimation
involved in their application and their impact on the consolidated financial information.
4.1
OPERATING LEASE COMMITMENTS – GROUP AS LESSOR
The Group has entered into commercial property leases on its investment property portfolio. The
Group has determined, based on an evaluation of the terms and conditions of the arrangements, such
as the lease term not constituting a major part of the economic life of the commercial property and
the fair value of the asset, that it retains all the significant risks and rewards of ownership of these
properties and accounts for the contracts as operating leases.
99
4.2
FAIR VALUE MEASUREMENT
A number of assets and liabilities included in the historical financial information require measurement
at, and/or disclosure of, fair value.
The fair value measurement of the Group’s financial and non-financial assets and liabilities utilises
market observable inputs and data as far as possible. Inputs used in determining fair value
measurements are categorised into different levels based on how observable the inputs used in the
valuation technique utilised are (the “fair value hierarchy”):
Level 1: Quoted prices in active markets for identical items (unadjusted)
Level 2: Observable direct or indirect inputs other than Level 1 inputs
Level 3: Unobservable inputs (i.e. not derived from market data).
The classification of an item into the above levels is based on the lowest level of the inputs used that
has a significant effect on the fair value measurement of the item. Transfers of items between levels
are recognised in the period they occur.
The Group measures a number of items at fair value.
Interest rate caps (Note 30)
Investment property (Note 21)
Investments (Note 23)
At inception the fair value of the liability component of the compound financial instrument (Note 31)
For more detailed information in relation to the fair value measurement of the items above, please
refer to the applicable notes.
4.3
INCOME TAXES
The Group is subject to income taxes in certain jurisdictions. Directors periodically evaluate positions
taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation, and establishes provisions where appropriate on the basis of amounts expected to be
paid to the tax authorities. During the ordinary course of business, there are transactions and
calculations for which the ultimate tax determination is uncertain. As a result, the Group recognises
tax liabilities based on estimates of whether additional taxes and interest will be due.
4.4
PROPERTY VALUATIONS
The Group’s investment properties were valued as set out in Note 21 by independent professionally
qualified valuers who hold recognised relevant professional qualifications and have recent experience
in the locations and segments of the investment properties valued.
The Group’s finance department reviews the valuations performed by the independent valuers for
financial reporting purposes. This team reports directly to the chief financial officer (CFO). At every
year end the finance team:
•
•
•
4.5
verifies all major inputs to the independent valuation report (where an independent valuation
has been carried out);
assesses property valuation movements when compared to the prior year valuation report; and
holds discussions with the independent valuer.
ACQUISITIONS
At the date of acquisition the fair values of the net assets of entities acquired is estimated using the
same methods as detailed above under fair value measurement.
The Group considers several factors to differentiate between business combinations and asset
acquisitions. Principally the Group’s view is that where an integrated set of activities and assets that
are capable of being conducted and managed for the purpose of providing a return in the form of
dividends, lower costs or other economic benefits directly to the investor constitutes a business
100
combination. Where this is not the case and a single asset or group of assets is acquired, the Group’s
view is that this constitutes an asset acquisition.
The related party element is disclosed in Note 45.
4.6
COMMON CONTROL TRANSACTIONS
Transactions with entities under common control are outside of the scope of IFRS 3 ‘Business
Combinations’. Based on the concepts of FRS 6 ‘Acquisitions and Mergers’ the identifiable assets and
liabilities are measured at their pre-combination carrying value including any previously consolidated
goodwill. Any differences on consolidation between the cost of investment and the carrying values of
the net assets are recognised in equity in other reserves as a capital contribution or distribution.
Assets purchased through transactions with entities under common control are measured at fair value at
date of acquisition. The consideration paid is recognised with reference to the amount recorded by the
acquiree as its acquisition cost, and any differences between the consideration paid and the fair value of
the asset acquired are recognised in equity in other reserves as a capital contribution or distribution.
The related party element is disclosed in Note 45.
4.7
PROVISIONS AND CONTINGENT LIABILITIES
The Group exercises judgement in measuring and recognising provisions and the exposures to
contingent liabilities related to pending litigation or other outstanding claims subject to negotiated
settlement, mediation or arbitration. Judgement is necessary in assessing the likelihood that a pending
claim will succeed, or a liability will arise, and to quantify the possible range of the financial
settlement. Because of the inherent uncertainty in this evaluation process, actual losses may be
different from the originally estimated provision (Note 34).
5.
FINANCIAL RISK MANAGEMENT
PRINCIPAL FINANCIAL INSTRUMENTS BY CATEGORY
Financial assets at fair value
through profit and loss
2013
2014
2015
£’000
£’000
£’000
FINANCIAL ASSETS
Trade and other
receivables
Shareholder loans
Cash and cash
equivalents
Derivatives – interest
rate caps
Investments – available
for sale
TOTAL FINANCIAL
ASSETS
Financial assets – loans
and receivables
2013
2014
2015
£’000
£’000
£’000
Financial assets –
available for sale
2013
2014
2015
£’000 £’000 £’000
–
–
–
–
–
–
1,315
5,651
1,144
8,998
12,976
–
–
–
–
–
–
–
–
–
–
1,126
11,431
85,851
–
–
–
–
1,007
70
–
–
–
–
–
–
–
–
–
––––––– ––––––– –––––––
–
–––––––
–
–––––––
–
1,007
70
8,092
21,573
–
–
–
1,787
––––––– ––––––– ––––––– –––––––
98,827
–
–
1,787
––––––– ––––––– ––––––– ––––––– ––––––– ––––––– –––––––––––––– –––––––
Financial liabilities at amortised cost
2013
2014
2015
£’000
£’000
£’000
FINANCIAL LIABILITIES
Trade and other payables
Borrowings
2,900
188,848
––––––––
191,748
TOTAL FINANCIAL LIABILITIES
––––––––
5,609
229,455
––––––––
235,064
––––––––
32,688
296,304
––––––––
328,992
––––––––
FINANCIAL INSTRUMENTS NOT MEASURED AT FAIR VALUE
Financial instruments not measured at fair value includes cash and cash equivalents, trade and other
receivables, trade and other payables, and loans and borrowings.
101
Due to their short term nature, the carrying value of cash and cash equivalents, trade and other
receivables, trade and other payables approximates to their fair value.
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
The fair value hierarchy of financial instruments measured at fair value is provided below.
Quoted prices in active
markets (level 1)
2013
2014
2015
£’000
£’000
£’000
FINANCIAL ASSETS
Derivatives – interest
rate caps
Investments – available
for sale
TOTAL FINANCIAL
ASSETS
–
–
–––––––
–
–
1,007
–
–
–
––––––– ––––––– –––––––
–
–––––––
–
–
–
Significant other observable
inputs (level 2)
2013
2014
2015
£’000
£’000
£’000
–
–
1,007
70
Unobservable
Inputs (level 3)
2013
2014
2015
£’000 £’000 £’000
–
–
–
–
–
–
1,787
––––––– ––––––– ––––––– –––––––
70
–
–
1,787
––––––– ––––––– ––––––– ––––––– ––––––– ––––––– –––––––––––––– –––––––
The level 2 inputs were calculated using net present value calculations of the fixed and floating
components of the interest rate. The forward curve market data was supplied by Bloomberg Financial
Markets.
The level 3 inputs were calculated with reference to recent market transactions. In the absence of
evidence of any market transactions, cost is considered to equate to a fair value (Note 23).
FINANCIAL RISK FACTORS
The Group is exposed to currency risk, interest rate risk, credit risk, liquidity risk and capital risk
management arising from the financial instruments it holds. The risk management policies employed
by the Group to manage these risks are discussed in the subsequent notes.
CURRENCY RISK
The Group has operations in Germany which has regular transactional foreign currency exposures as
it has regular business involving cross border currency flows. The operations in Germany also have a
functional currency denominated in euros.
PRINCIPAL FINANCIAL INSTRUMENTS BY CURRENCY
As at 31 March 2015 the Group’s net exposure to currency risk was as follows:
2013
2014
£’000
£’000
NET FINANCIAL (LIABILITIES)/ASSETS
US Dollar
Euro
Brazilian Real
Chinese Yuan
NET FINANCIAL (LIABILITIES)/ASSETS
–
–
–
–
–
–
–
–
–
–
2015
£’000
10,269
(19,353)
86
(7)
(9,005)
INTEREST RATE RISK
The Group’s interest rate risk principally arises from its borrowings. Borrowings that are issued at
LIBOR plus a margin rate expose the Group to cash flow interest rate risk.
Based on the various scenarios, the Group manages its cash flow interest rate risk by using interest
rate caps. In 2014 the Group entered into interest rate caps whereby a payment was made upfront to
cap the interest rates applied to its floating rate bank borrowings to protect against adverse changes in
LIBOR rates.
102
Sensitivity analysis
A 2 per cent. increase in LIBOR at 31 March would have decreased/increased post-tax profits by the
amounts shown below.
Effect on profit after taxation
2 per cent. increase in LIBOR
2 per cent. increase in LIBOR in the absence of interest
rate caps
2013
£’000
2014
£’000
2015
£’000
431
2,555
1,593
431
4,730
3,843
CREDIT RISK
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other
party by failing to discharge an obligation. Credit risk is managed on a Group basis. Credit risk arises
from cash and cash equivalents held at banks, trade receivables and other receivables. Such risks are
subject to a quarterly or more frequent review. The Group has policies in place to ensure that rental
leases & licences and other service contracts are entered into only with lessees and customers with an
appropriate credit history and the Group monitors the credit quality of receivables on an ongoing
basis.
The significant cash and cash equivalent balances held by the Group, together with the Group’s
interest rate cap instrument, are spread amongst a strong group of banks, all of which currently have
long term credit ratings of A- or better.
See Note 26 for details of trade receivable credit risk.
The carrying amount of financial assets represents the maximum credit exposure. The maximum
exposure to credit risk at the reporting date was:
Maximum credit risk
Shareholder loans
Trade receivables
Other receivables
Cash and cash equivalents
2013
£’000
2014
£’000
2015
£’000
5,651
665
650
1,126
8,998
352
792
11,431
–
8,678
4,298
85,851
The company does not hold any collateral or other credit enhancements to cover this credit risk.
LIQUIDITY RISK
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An
unmatched position potentially enhances profitability, but can also increase the risk of losses. The
Group has procedures, with the objective of minimising potential losses, such as maintaining
sufficient cash and other highly liquid current assets and by having available an adequate amount of
committed credit facilities.
The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the Group can be required to pay. The table includes both interest and principal
cash flows.
103
AT 31 MARCH 2013
Borrowings (excluding
finance lease liabilities)
Finance lease liabilities
Trade payables
Other payables
Accruals and deferred
income
Carrying
amounts
£’000
Contractual
cash flows
£’000
3 months
Between
or less 3–12 months
£’000
£’000
Between
1–5 years
£’000
More than
5 years
£’000
188,848
3,820
933
759
203,446
38,581
933
759
2,428
40
933
-
201,018
122
–
759
–
644
–
–
–
37,775
–
–
1,561
––––––––
195,921
1,561
––––––––
245,280
1,561
––––––––
4,962
–
––––––––
201,899
–
––––––––
644
–
––––––––
37,775
Carrying
amounts
£’000
Contractual
cash flows
£’000
3 months
Between
or less 3–12 months
£’000
£’000
Between
1–5 years
£’000
More than
5 years
£’000
229,455
3,699
688
911
238,952
38,422
688
911
238,952
40
688
–
–
122
–
911
–
644
–
–
–
37,616
–
–
4,010
––––––––
238,763
4,010
––––––––
282,983
4,010
––––––––
243,690
–
––––––––
1,033
–
––––––––
644
–
––––––––
37,616
Carrying
amounts
£’000
Contractual
cash flows
£’000
3 months
Between
or less 3–12 months
£’000
£’000
Between
1–5 years
£’000
More than
5 years
£’000
188,310
210,376
8,989
6,615
194,772
–
107,994
3,573
5,133
3,271
137,700
38,257
5,133
3,271
–
40
4,768
2,571
2,250
124
365
700
135,450
646
–
–
–
37,447
–
–
12,486
2,071
––––––––
322,838
12,486
2,071
––––––––
409,294
11,749
1,474
––––––––
29,591
737
597
––––––––
11,388
–
–
––––––––
330,868
–
–
––––––––
37,447
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
AT 31 MARCH 2014
Borrowings (excluding
finance lease liabilities)
Finance lease liabilities
Trade payables
Other payables
Accruals and deferred
income
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
AT 31 MARCH 2015
Borrowings (excluding
finance lease liabilities)
Borrowings (Convertible
Bonds)
Finance lease liabilities
Trade payables
Other payables
Accruals and deferred
income
Deferred consideration
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Liquidity risk management
Responsibility for liquidity risk management rests with the Board, which has established an
appropriate liquidity risk management framework for the management of the Group’s funding and
liquidity management requirements. The Group manages liquidity risk by maintaining adequate
reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and
actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
CAPITAL RISK
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a
going concern in order to provide returns for shareholders and to maintain an optimal debt and equity
balance. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net
debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents.
Total capital is calculated as ‘equity’, as shown in the consolidated balance sheet plus net debt.
104
2013
£’000
2014
£’000
2015
£’000
Total borrowings
Less: cash and cash equivalents
188,848
229,455
296,304
(1,126)
(11,431)
(85,851)
–––––––
–––––––
–––––––
Net debt
187,722
218,024
210,453
–––––––
–––––––
–––––––
Total equity
212,383
207,685
555,490
Total capital
400,105
425,709
765,943
–––––––
–––––––
–––––––
Gearing ratio
47%
51%
27%
–––––––
–––––––
–––––––
The Group’s overall strategy remained unchanged during the period. The decrease in the gearing ratio
in the year ended 31 March 2015 was a result of an equity fund raising through the AIM placing.
The Group is not subject to any externally imposed capital requirements.
6.
REVENUES
Sale of goods
Rendering of services
Rental income
2013
£’000
2014
£’000
2015
£’000
–
–
17,914
–––––––
17,914
–
–
18,442
–––––––
18,442
6,802
3,208
20,071
–––––––
30,081
2013
£’000
2014
£’000
2015
£’000
–
–
–
296
–
–––––––
296
235
–
–
767
71
–––––––
1,073
–
847
6,686
1,954
–
–––––––
9,487
–––––––
7.
–––––––
–––––––
EXCEPTIONAL ITEMS
INCLUDED WITHIN ADMINISTRATIVE EXPENSES:
Onerous lease costs
Reorganisation costs
AIM listing costs
Legal and professional fees
Other
–––––––
–––––––
–––––––
AIM listing costs are the non-recurring cost of acquiring the public listing together with related transaction
costs incurred by the Group.
Legal and professional costs relate to certain professional costs in connection with business combinations
(see Note 45) and to ongoing litigation. The ongoing litigation relates to the IBRC proceedings (for the
mis-selling of interest rate swaps and a breach by IBRC of its terms) and to proceedings against certain
companies within the Group for damages caused after a fire.
Reorganisation costs relate to the exceptional costs incurred by the Group in the year to 31 March 2015, the
majority of which are in respect of the subsidiary, Fiver London Limited, within the Group’s
technology and e-commerce operating segment. They reflect one-off costs the Group incurred post
acquisition to reorganise Fiver London Limited’s operations in order to achieve stronger growth for that
company going forward.
105
8.
OPERATING SEGMENTS
The chief operating decision-maker is the person or group that allocates resources to and assesses the
performance of the operating segments of an entity. The Group has determined that its chief operating
decision-makers are the Board of Market Tech Holdings Limited. The Board evaluates performance on the
basis of segment adjusted EBITDA.
The Directors have determined the operating segments based on the reports reviewed in making strategic
decisions. These are considered to be:
Property and other
Digital
Restaurant (discontinued operation, refer to Note 16)
The segment information provided for the reportable segments for the year ended 31 March 2013 is as
follows:
Property
and other
Digital‡
Total
£’000
£’000
£’000
Total segment revenue from external customers
Adjusted EBITDA*
OTHER ITEMS INCLUDED IN OPERATING PROFIT:
Net gain from fair value adjustment on investment property
Exceptional Items
Depreciation and amortisation
NOT INCLUDED IN OPERATING PROFIT:
Interest income
Interest payable and similar charges
Fair value adjustment of interest rate derivatives
17,914
12,757
17,914
12,860
24,202
(296)
(395)
Profit before tax
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
Total assets
410,127
–––––––
(197,744)
–––––––
212,383
Total liabilities
Net assets
–––––––
–
–––––––
–
–––––––
–
–––––––
INCLUDED WITHIN TOTAL ASSETS ARE:
Non-current asset additions
187
(7,046)
(3,334)
–––––––
29,409
–––––––
28,988
292
–––––––
29,280
–––––––
410,127
–––––––
(197,744)
–––––––
212,383
–––––––
3,488
*
Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation and adjusted for fair value
investment property movements, share based payment charges, exceptional items and foreign currency exchange gain/(loss).
‡
The Digital segment was acquired by the Group as part of the restructuring that occurred on 5 December 2014 and therefore there
were no Digital results for the Group for the year end 31 March 2013.
The segment information provided for the reportable segments for the year ended 31 March 2014 is as
follows:
Property
and other
Digital‡
Total
£’000
£’000
£’000
Total segment revenue from external customers
Adjusted EBITDA*
OTHER ITEMS INCLUDED IN OPERATING PROFIT:
Net gain from fair value adjustment on investment property
Exceptional Items
Depreciation and amortisation
106
18,442
12,622
–
–
18,442
12,622
22,819
(1,073)
(414)
Property
and other
£’000
Digital‡
£’000
NOT INCLUDED IN OPERATING PROFIT:
Interest income
Interest payable and similar charges
Fair value adjustment of interest rate derivatives
Profit before tax
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
Total assets
448,070
–––––––
(240,385)
–––––––
207,685
Total liabilities
Net assets
––––––––
–
–––––––
–
–––––––
–
––––––––
INCLUDED WITHIN TOTAL ASSETS ARE:
Non-current asset additions
Total
£’000
240
(16,835)
(443)
–––––––
16,916
–––––––
16,583
378
–––––––
16,961
–––––––
448,070
–––––––
(240,385)
–––––––
207,685
––––––––
1,603
*
Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation and adjusted for fair value
investment property movements, share based payment charges, exceptional items and foreign currency exchange gain/(loss).
‡
The Digital segment was acquired by the Group as part of the restructuring that occurred on 5 December 2014 and therefore there
were no Digital results for the Group for the year end 31 March 2014.
The segment information provided for the reportable segments for the year ended 31 March 2015 is as
follows:
Total segment revenue from external customers
Adjusted EBITDA*
ITEMS INCLUDED IN OPERATING PROFIT:
Net gain from fair value adjustment of investment property
Exceptional Items
Depreciation & amortisation
Foreign exchange loss
Share based payment expense
NOT INCLUDED IN OPERATING PROFIT:
Finance income
Interest payable and similar charges
Fair value adjustment of interest rate derivatives
Property
and other
£’000
Digital‡
£’000
Total
£’000
20,071
11,529
10,010
489
30,081
12,018
60,539
(9,487)
(624)
(500)
(39)
Profit before tax
Profit for the year from continuing operations
Loss for the year from discontinued operations
Profit for the year
Total assets
837,529
–––––––
(313,880)
–––––––
523,649
Total liabilities
Net assets
––––––––
INCLUDED WITHIN TOTAL ASSETS ARE:
Non-current asset additions
60,858
–––––––
(29,017)
–––––––
31,841
––––––––
3
(16,902)
(937)
–––––––
44,071
–––––––
44,254
(376)
–––––––
43,878
–––––––
898,387
–––––––
(342,897)
–––––––
555,490
––––––––
19,649
107
*
Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation and adjusted for fair value
investment property movements, share based payment charges, exceptional items and foreign currency exchange gain/(loss).
‡
The Digital segment was acquired by the Group as part of the restructuring that occurred on 5 December 2014 and therefore there
were no Digital results for the Group for the year end 31 March 2014. The results for Digital for the year end 31 March 2015 are
for the period from the date of acquisition.
Including discontinued operations, revenue for the group was 2013: £23,217,000 in 2013, £24,050,000 in
2014 and £34,341,000 in 2015. Adjusted EBITDA was: £13,222,000 in 2013, £13,141,000 in 2014 and
£11,815,000 in 2015.
GEOGRAPHICAL ANALYSIS OF REVENUE AND NET ASSETS
Geographical analysis of revenue and net assets is as follows:
REVENUE
UK
Europe
USA
Rest of World
2013
£’000
2014
£’000
2015
£’000
17,914
–
–
–
––––––––
17,914
18,442
–
–
–
––––––––
18,442
26,325
1,546
568
1,642
––––––––
30,081
212,383
–
––––––––
212,383
207,685
–
––––––––
207,685
540,816
14,674
––––––––
555,490
––––––––
NET ASSETS
UK
Europe
––––––––
––––––––
––––––––
––––––––
––––––––
During the years ended 31 March 2013, 31 March 2014 and 31 March 2015 there were no customers who
individually accounted for more than 10 per cent. of the total revenue of the Group.
9.
OPERATING PROFIT
Operating profit is stated after charging:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Foreign exchange losses
Operating lease expense – property
Fair value adjustments of investment property
Advertising expenses
Employment costs
2013
£’000
2014
£’000
2015
£’000
395
–
–
–
24,202
15
2,900
414
–
–
–
22,819
26
3,465
454
170
500
219
60,539
1,263
7,122
2013
£’000
2014
£’000
2015
£’000
78
––––––––
15
–
36
––––––––
51
200
––––––––
3
–
25
––––––––
28
255
––––––––
69
651
78
––––––––
798
The analysis of auditors’ remuneration is as follows:
Fees payable to the Company’s auditors for the audit of the
Company’s annual accounts
Tax services
Services in relation to AIM listing
Other services
Total non-audit fees
108
10.
KEY MANAGEMENT PERSONNEL COMPENSATION
Key management personnel are those persons having authority and responsibility for planning, directing and
controlling the activities of the Group. This includes the Board, the Non-Executive Directors, the Group
Property Director and other directors of key subsidiaries who are not members of the Board.
Salaries
Social security costs
Fees
Pension contribution
Share based payment expense
2013
£’000
2014
£’000
2015
£’000
22
4
375
–
–
––––––––
401
190
25
427
–
–
––––––––
642
1,047
135
920
11
34
––––––––
2,147
2013
Number
2014
Number
2015
Number
130
188
518
2013
£’000
2014
£’000
2015
£’000
2,706
194
–
–
––––––––
3,030
3,059
224
–
–
––––––––
3,283
6,536
536
11
39
––––––––
7,122
––––––––
11.
––––––––
––––––––
EMPLOYEES
The average monthly number of employees was:
Their aggregate remuneration comprised:
EMPLOYMENT COSTS
Wages and salaries
Social security costs
Pension contribution
Share based payment expense
––––––––
12.
––––––––
––––––––
OPERATING LEASES COMMITMENTS
LESSOR
As a market operator, the Group enters into licences at will with market stall holders. These are short term
licences cancellable within one week. In addition, the Group holds some operating leases on other real estate
assets. Future minimum rents receivable under non-cancellable operating leases are set out in the table
below, calculated on the assumption that any tenant with a break option does exercise that option:
Within one year
Between two and five years
In over five years
2013
£’000
2014
£’000
2015
£’000
2,415
4,681
7,062
––––––––
14,158
2,618
6,227
6,222
––––––––
15,067
8,938
28,081
32,494
––––––––
69,513
––––––––
109
––––––––
––––––––
LESSEE
The Group is a lessee of warehouse space. Future minimum rents payable under non-cancellable operating
leases are set out in the table below:
Within one year
Between two and five years
In over five years
2013
£’000
2014
£’000
2015
£’000
–
–
–
––––––––
–
–
–
–
––––––––
–
50
1,131
3,069
––––––––
4,250
2013
£’000
2014
£’000
2015
£’000
187
––––––––
240
––––––––
––––––––
13.
––––––––
––––––––
FINANCE INCOME
Interest Income
––––––––
3
Total interest income for financial assets that are not recognised at fair value through profit or loss was
£187,000 in 2013, £240,000 in 2014 and £3,000 in 2015.
14.
FINANCE COSTS
2013
£’000
CONTINUING FACILITIES
Senior debt
Bank loans, overdrafts and fees
Amortisation of loan arrangement fees relating to Senior debt
Fair value adjustment of interest rate derivatives
LESS: AMOUNTS CAPITALISED (NOTE 21)
2014
£’000
2015
£’000
10,361
29
–
(3,344)
––––––––
7,046
––––––––
–
––––––––
7,046
15,335
30
347
443
––––––––
16,155
––––––––
–
––––––––
16,155
8,823
117
2,083
937
––––––––
11,960
––––––––
(772)
––––––––
11,188
–
–
–
––––––––
–
1,056
67
–
––––––––
1,123
3,685
1,125
1,841
––––––––
6,651
7,046
17,278
17,839
––––––––
––––––––
––––––––
EXPIRED FACILITIES
Mezzanine debt
Amortisation of arrangement fees relating to Mezzanine debt
Exceptional – early repayment
––––––––
Finance costs recognised in profit or loss
110
––––––––
––––––––
15.
INCOME TAX CREDIT/(CHARGE)
The credit for the year can be reconciled to the profit per the income statement as follows:
2013
£’000
CORPORATION TAX
Current tax
Adjustments in respect of prior periods
Current tax credit/(charge)
DEFERRED TAX
Movement due to revaluation of property during period (Note 33)
Deferred tax
Tax credit/(charge)
2014
£’000
2015
£’000
(416)
(5)
––––––––
(421)
––––––––
(263)
(70)
––––––––
(333)
––––––––
(341)
1,207
––––––––
866
––––––––
–
–
––––––––
(421)
–
–
––––––––
(333)
(683)
(683)
––––––––
183
––––––––
––––––––
––––––––
The credit/(charge) for the year can be reconciled to the profit per the income statement as follows:
Profit on ordinary activities before tax
Expected tax charge based on the standard rate of
corporation tax in the UK of 21% (2014: 23%), (2013: 26%)
Effects of:
Fixed asset differences
Expenses not deductible for tax purposes
Income not taxable for tax purposes
Net gain from fair value adjustment of investment
property not taxable
Other differences
Unrelieved tax losses and other deductions arising
in the period
Foreign tax credits
Tax charge in respect of profit for the year
Adjustments to tax charge in respect of previous periods
Origination and reversal of timing differences
Tax credit/(charge)
16.
2013
£’000
2014
£’000
2015
£’000
29,409
16,916
44,071
(7,646)
(3,891)
(9,255)
–
–
–
6,293
3,389
(2,452)
–
(421)
–
–
––––––––
(421)
––––––––
–
–
–
5,248
(1,946)
326
–
(263)
(70)
–
––––––––
(333)
––––––––
(72)
(1,501)
300
12,725
20
(2,551)
(7)
(341)
1,207
(683)
––––––––
183
––––––––
DISCONTINUED OPERATIONS
DESCRIPTION OF DISCONTINUATION
On 19 February 2015 the Group ceased to trade its restaurant operation, Gilgamesh Camden Limited, after
entering into a management and lease agreement with a third party operator.
The results of the discontinued business, which have been included in the income statement, were as follows:
2013
£’000
5,303
(5,011)
––––––––
292
––––––––
Revenue
Operating expenses
(LOSS)/PROFIT BEFORE TAXATION
NET (LOSS)/PROFIT ATTRIBUTABLE TO
DISCONTINUATION
292
––––––––
111
2014
£’000
5,608
(5,230)
––––––––
378
––––––––
378
––––––––
2015
£’000
4,260
(4,636)
––––––––
(376)
––––––––
(376)
––––––––
CASH FLOWS GENERATED BY DISCONTINUED OPERATION
Included in the Group’s statement of cash flows are the following amounts attributable to Gilgamesh
Camden Limited:
2013
£’000
Net cash (used in)/generated from operating activities
Net cash used in investing activities
NET CASH FLOWS GENERATED BY
DISCONTINUED OPERATION
17.
465
–
––––––––
2014
£’000
583
(44)
––––––––
2015
£’000
(196)
(80)
––––––––
465
––––––––
539
(276)
––––––––
––––––––
2013
£’000
2014
£’000
2015
£’000
(21,159)
1,877
CONTRIBUTION/(DISTRIBUTION)
Amounts recognised as contribution/(distribution)
to equity holders
–
––––––––
––––––––
––––––––
A contribution of £1,877,000 was made in the year ended 31 March 2015. In 2014, £21,159,000 was
distributed to Camden Trust and GHT via a shareholder loan waiver. See related party note for further details
(Note 42). No contributions were made in the year ended 31 March 2013.
18.
EARNINGS PER SHARE
NUMBER OF SHARES
Weighted average number of ordinary shares
for basic earnings per share
Effects of dilution from:
Share options
Convertible Bonds
Weighted average number of ordinary shares adjusted
for the effect of dilution
2013+
Number
2014+
Number
2015
Number
231,237,899
231,237,899
272,287,267
–
–
––––––––––
–
–
––––––––––
47,620
102,740
––––––––––
231,237,899
231,237,899
272,437,627
2013
£’000
2014
£’000
2015
£’000
28,988
16,583
44,074
28,988
16,583
44,074
292
378
(376)
292
378
(376)
–––––––––– –––––––––– ––––––––––
EARNINGS
CONTINUING OPERATIONS
Profit for the period from continuing operations attributable
to the owners of the parent
Earnings for basic and diluted earnings per share being net
profit from continuing operations attributable to the
owners of the parent
DISCONTINUED OPERATIONS
(Loss)/profit for the period from discontinued operations
Earnings for basic and diluted earnings per share being net
profit from discontinued operations
112
ATTRIBUTABLE TO THE OWNER OF THE PARENT
Profit for the period attributable to the owners of the parent
Earnings for basic and diluted earnings per share being
attributable to the owners of the parent
EARNINGS PER SHARE FROM CONTINUING
OPERATIONS
Basic earnings per share (pence)
Diluted earnings per share (pence)
EARNINGS PER SHARE FROM DISCONTINUED
OPERATIONS
Basic earnings per share (pence)
Diluted earnings per share (pence)
EARNINGS PER SHARE ATTRIBUTABLE TO
THE OWNERS OF THE PARENT
Basic earnings per share (pence)
Diluted earnings per share (pence)
+
2013
£’000
2014
£’000
2015
£’000
29,280
16,961
43,698
29,280
16,961
43,698
12.54
12.54
7.17
7.17
16.19
16.18
0.13
0.13
0.16
0.16
(0.14)
(0.14)
12.66
12.66
7.33
7.33
16.05
16.04
The earnings per share for the year to 31 March 2014 and 2013 have been restated to take account of shares issued on the listing
of the Company on the AIM Market, shares issued to the major shareholders in consideration for the assignment of debt and
shares issued in relation to the acquisition of Fiver London Limited (Note 36). Ordinary Shares that were issued at below market
value were deemed to be a bonus issue related to the number of shares which would have been issued at market value.
ADJUSTED EBITDA PER SHARE
Adjusted EBITDA used to calculate adjusted EBITDA per share is defined as Earnings Before Interest,
Taxes, Depreciation, Amortisation and adjusted for fair value investment property movements, share based
payment charges, exceptional items and foreign currency exchange gain/(loss).
Adjusted EBITDA for the period from continuing operations
Adjusted EBITDA per share from continuing
operations – basic (pence)
Adjusted EBITDA per share from continuing
operations – diluted (pence)
Adjusted EBITDA for the period attributable to the
owner of the parent
Adjusted EBITDA per share attributable to the owner
of the parent – basic (pence)
Adjusted EBITDA per share attributable to the owner
of the parent – diluted (pence)
113
2013
£’000
2014
£’000
2015
£’000
12,757
12,622
12,018
5.52
5.46
4.41
5.52
5.46
4.41
13,223
13,141
11,814
5.72
5.68
4.34
5.72
5.68
4.34
19.
INTANGIBLE ASSETS
COST
AT 1 APRIL 2012, 1 APRIL
2013 AND 1 APRIL 2014
Additions
Acquisition – common
control transactions (Note 45)
Acquisition – business
combinations (Note 45)
Foreign exchange differences
AT 31 MARCH 2015
AMORTISATION
AT 1 APRIL 2012, 1 APRIL 2013
AND 1 APRIL 2014
Amortisation
AT 31 MARCH 2015
NET BOOK VALUE
AT 1 APRIL 2012, 1 APRIL 2013
AND 1 APRIL 2014
AT 31 MARCH 2015
Domain
Website
names development
£’000
£’000
Customer
list
£’000
Total
£’000
–
749
–
–
71
784
317
1,038
229
8,846
–
–
–––––––
352
5,553
104
–––––––
7,444
3,979
74
–––––––
4,282
28,687
267
–––––––
38,655
Domain
Website
names development
£’000
£’000
Customer
list
£’000
Total
£’000
–
67
–––––––
67
–
11
–––––––
11
–
170
–––––––
170
–
–––––––
7,377
–
–––––––
4,271
71
–––––––
38,485
Goodwill
£’000
Trademarks
£’000
Brand
£’000
–
–
71
–
–
–
–
35
5,496
–
1,766
14,648
5
–––––––
20,149
–
–
–––––––
71
4,507
84
–––––––
6,357
Goodwill
£’000
Trademarks
£’000
Brand
£’000
–
–
–––––––
–
–––––––
–
–
–––––––
–
–
88
–––––––
88
–
4
–––––––
4
––––––– ––––––– ––––––– ––––––– ––––––– –––––––
–
–––––––
20,149
71
–––––––
71
–
–––––––
6,269
–
–––––––
348
–––––––
––––––– ––––––– ––––––– ––––––– ––––––– –––––––
–––––––
––––––– ––––––– ––––––– ––––––– ––––––– –––––––
INTANGIBLE ASSETS AND IMPAIRMENT
At each reporting end date, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s
(“CGU”) fair value less costs of disposal and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that are largely independent of those from
other assets or groups of assets.
The carrying amount of goodwill is as follows:
UK operations
European operations
2013
£’000
2014
£’000
2015
£’000
–
–
––––––––
–
–
–
––––––––
–
5,496
14,653
––––––––
20,149
––––––––
––––––––
––––––––
The recoverable amounts of both the above CGUs have been determined from the value in use calculations
based on cash flow projections from formally approved budgets covering a five year period to 31 March
2020. Other major assumptions are as follows:
2015
Discount rate (%)
Operating Margin (%)*
Growth rate (%)*
*
UK operations
15
7
2
European
operations
15.5
5.7
2
The growth rate and operating margin assumptions apply only to the period beyond the formal budgeted period with the value in
use calculation based on an extrapolation of the budgeted cash flows for year five.
114
Operating margins have been based on past experience and future expectations in the light of anticipated
economic and market conditions. Discount rates are based on the Group’s beta and take into account
management’s assessment of specific risks related to the CGU. Growth rates beyond the first five years are
based on economic data pertaining to the regions concerned.
The recoverable amount of CGUs that hold a significant proportion of the Group’s overall goodwill balance
include:
UK Operations: the recoverable amount of £12,292,000 exceeds its carrying amount of £5,496,000.
European Operations: the recoverable amount of £43,558,000 exceeds its carrying amount of £14,653,000.
20.
PROPERTY, PLANT AND EQUIPMENT
Leasehold
Improvements
£’000
Fixtures,
fitting and
office
equipment
£’000
Plant and
equipment
£’000
–
––––––––
–
–
––––––––
–
––––––––
–
–
––––––––
–
––––––––
257
–
986
––––––––
25
–
––––––––
1,011
––––––––
59
–
––––––––
1,070
––––––––
91
–
1,330
––––––––
69
–
––––––––
1,399
––––––––
78
–
––––––––
1,477
––––––––
487
–
209
81
54
–
(15,668)
–
––––––––
–
–
–
–
––––––––
466
95
–
2
––––––––
1,339
139
–
5
––––––––
2,162
234
(15,668)
7
––––––––
3,967
245
––––––––
Charge for the year*
269
––––––––
AT 1 APRIL 2013
514
––––––––
Charge for the year*
285
––––––––
AT 1 APRIL 2014
799
––––––––
Charge for the year*
338
Transfer to Investment Property (Note 21)
(1,137)
Exchange differences
–
––––––––
AT 31 MARCH 2015
–
–
––––––––
–
––––––––
–
––––––––
–
––––––––
–
––––––––
16
–
–
––––––––
16
639
––––––––
91
––––––––
730
––––––––
64
––––––––
794
––––––––
167
–
3
––––––––
964
815
––––––––
208
––––––––
1,023
––––––––
205
––––––––
1,228
––––––––
106
–
3
––––––––
1,337
1,699
––––––––
568
––––––––
2,267
––––––––
554
––––––––
2,821
––––––––
627
(1,137)
6
––––––––
2,317
Land
and buildings
£’000
COST
AT 1 APRIL 2012
Additions
Revaluation increase (Note 37)
AT 1 APRIL 2013
Additions
Revaluation increase (Note 37)
AT 1 APRIL 2014
Additions
Revaluation increase (Note 37)
Acquisition – common control
transactions (Note 45)
Acquisition – business combinations
(Note 45)
Transfer to Investment Property (Note 21)
Exchange differences
AT 31 MARCH 2015
12,611
––––––––
–
223
––––––––
12,834
––––––––
–
(500)
––––––––
12,334
––––––––
–
3,334
–
Total
£’000
14,927
––––––––
94
223
––––––––
15,244
––––––––
137
(500)
––––––––
14,881
––––––––
835
3,334
344
–––––––– –––––––– –––––––– –––––––– ––––––––
DEPRECIATION
AT 1 APRIL 2012
–––––––– –––––––– –––––––– –––––––– ––––––––
115
Land
and buildings
£’000
Leasehold
Improvements
£’000
Fixtures,
fitting and
office
equipment
£’000
12,366
12,320
11,535
––––––––
–
–
–
–
––––––––
450
347
281
276
––––––––
375
NET BOOK VALUE
AT 1 APRIL 2012
AT 1 APRIL 2013
AT 1 APRIL 2014
AT 31 MARCH 2015
*
Plant and
equipment
£’000
Total
£’000
515
376
249
––––––––
825
13,228
12,977
12,060
––––––––
1,650
–––––––– –––––––– –––––––– –––––––– ––––––––
Included in the charge for the year is £136,000 (2013: £173,000, 2014: £140,000) in relation to discontinued operations (Note 16).
Disclosures relating to fair value measurement of land and buildings are shown in Note 21.
The transfer of land and buildings to investment property is the result of the Group ceasing to trade its
restaurant operations (Note 16).
21.
INVESTMENT PROPERTIES
£’000
AT 1 APRIL 2012
Additions
Disposals
Revaluation Movements
AT 1 APRIL 2013
Additions
Revaluation Movements
AT 1 APRIL 2014
Additions
Acquisition – common control transactions (Note 45)
Acquisition – business combinations and asset acquisitions (Note 45)
Transfer from Property, plant and equipment (Note 20)
Revaluation Movements
AT 31 MARCH 2015
361,234
3,394
(50)
24,202
––––––––
388,780
––––––––
1,466
22,819
––––––––
413,065
––––––––
18,030
148,250
99,285
14,531
60,539
––––––––
753,700
––––––––
VALUATION PROCESS
Investment properties are stated at fair value as at 31 March 2015 based on external valuations performed by
professionally qualified valuers. The Group’s property portfolio is valued at 31 March 2015 by Jones Lang
LaSalle Limited on the basis of fair value in accordance with The RICS Valuation – Professional Standards.
The valuations are based on information provided by the Group which includes a tenancy schedule, as
reconciled (tenant, rent, lease commencement, lease expiry, applicable break options, areas, details of any
additional income, operating costs and net operating income forecast) and any supplementary
documentation, such as copy leases and details of tenure.
The valuations are prepared using industry standard valuation software, Argus Capitalisation and Argus
Developer. The valuations are based on assumptions which are typically market related, such as market rents
and yields and are based on the professional judgment of the respective valuer and market observations. Each
property has been valued in isolation based on the unique nature, characteristics and perceived risk of that
property.
116
As part of each half-yearly valuation exercise, discussion of the valuation process, methodology and results
takes place at a meeting between the external valuers and key management at which the key assumptions and
estimates are reviewed together with consideration of the valuers’ reasons for significant valuation
movements on individual properties from the previous valuations.
Interest on 45 per cent. of the Nomura Senior debt has been capitalised since construction commenced,
resulting in £772,000 (2014: £nil, 2013: £nil) interest being capitalised in the year.
VALUATION METHODOLOGY
The fair value of investment properties and land and buildings classified as property, plant and equipment is
determined using the ‘investment method’ whereby capitalisation yields derived from market transactions
involving comparable investment properties are applied to the estimated net current and future cash flows
expected to be generated by the investment property, which the valuer calculates using comparable market
information, to obtain a market rental value.
The fair value of an investment property undergoing construction is derived using the ‘residual method’
whereby the costs required to complete the development, including a notional cost of finance and an
estimated risk factor or “profit on cost”, are deducted from the net development value arrived at under the
‘investment method’.
The key unobservable inputs used in the valuation of the properties at 31 March 2015 are as follows:
Investment property type
Markets
Office and other
Under construction
Other
Total
Fair Value
£’000
Valuation
317,100
146,750
270,000
19,850
––––––––
753,700
Investment
Investment
Residual
Residual
Market Rent PSF PA
Min
Max
£
£
10
40
10
25
250
205
350
250
Equivalent yield (%)
Min
Max Blended
%
%
%
5.00
4.35
5.00
5.00
6.50
6.00
5.50
5.25
5.55
4.78
5.46
n/a
–––––––
SENSITIVITY MEASUREMENT TO VARIATIONS IN THE SIGNIFICANT UNOBSERVABLE
INPUTS
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair
value hierarchy of the Group’s property portfolio, together with the impact of significant movements in these
inputs on the fair value measurement are shown below:
Unobservable input
Impact on
fair value
measurement
of significant
increase in input
Impact on
fair value
measurement
of significant
decrease in input
Market rent per square foot per annum
Equivalent yield
Increase
Decrease
Decrease
Increase
A sensitivity analysis was performed to ascertain the impact on the fair value of a 25 basis point shift in true
equivalent yield and a 250 basis point shift in market rent per square foot per annum.
MARKET RENT PER SQUARE FOOT PER ANNUM (PSF PA)
BP SHIFT
+250 BP
-250 BP
% CHANGE
2.68%
(2.65%)
117
EQUIVALENT YIELD
BP SHIFT
+25 BP
-25 BP
% CHANGE
(4.61%)
5.08%
There are inter-relationships between these inputs as they are partially determined by market rate conditions.
An increase in the equivalent yield may accompany an increase in gross market rent per square foot per
annum and would mitigate its impact on the fair value measurement.
The historical cost of the Group’s investment properties is as follows:
2013
£’000
Brought forward historical cost
Additions
Disposals
Acquisition – common control transactions (Note 45)
Acquisition – business combinations (Note 45)
Transfer from Property, plant and equipment
Carried forward historical cost
22.
212,637
3,394
(50)
–
–
–
––––––––
215,981
––––––––
2014
£’000
2015
£’000
215,981
1,466
–
–
–
–
––––––––
217,447
217,447
18,030
–
148,250
99,285
14,531
––––––––
497,543
––––––––
––––––––
SUBSIDIARIES
Details of the material Company’s subsidiaries at 31 March 2015 are as follows:
Country of
incorporation
(or residence)
Proportion of
ownership
interest (%)
Camden Market Property Management
Limited
Camden Roof Terrace Limited
Coco Pazzo Limited
England & Wales
England & Wales
England & Wales
100 per cent.
100 per cent.
100 per cent.
Dave Autos (UK) Limited
England & Wales
100 per cent.
Davey Autos Limited
Gilgamesh Camden Limited
England & Wales
England & Wales
100 per cent.
100 per cent.
Piazza Camden Limited Partnership
Stables Market (Camden) Limited
England & Wales
England & Wales
100 per cent.
100 per cent.
Stanley Sidings Limited
England & Wales
100 per cent.
Tunnel Market Ltd
England & Wales
100 per cent.
Upper Piazza (Camden) Ltd
England & Wales
100 per cent.
Upper Piazza Camden Limited Partnership
Water Lane (Kentish Town) Management
Camden Market Holdings Corp.
MB Market Holdings Limited
MB Market Corp.
MB Select Holdings Limited
MB Select Corp.
Camden Market Estate Holdings Limited
Triangle Upper Limited
Triangle Extension’s Limited
Ground Gilbey Limited
Canal Side Properties Limited
Elcross Estates Limited
Divanyx Investments Limited*
Luxurious Property Investments Ltd*
Perola Investments Limited*
Atlantic Estates Limited*
England & Wales
England & Wales
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
England & Wales
British Virgin Islands
British Virgin Islands
British Virgin Islands
England & Wales
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
118
Nature of business
Property Management Company
Trading company – Events
Trading company – Restaurant
Operation services
Property and Market Trading
Operation services
Property Management Services
Trading company – bar and
restaurant operation services
Property Investment
Property Management and
Market Operation Services
Trading company – Project
Management
Property Management and
Market Operation Services
Partner to Upper Piazza
Camden Limited Partnership
Property Investment
Service Charge Company
Holding company
Nomura Refinance Vehicle
Nomura Refinance Vehicle
Nomura Refinance Vehicle
Nomura Refinance Vehicle
Landlord & Property Owner
Landlord & Property Owner
Landlord & Property Owner
Landlord & Property Owner
Commercial property investment
Property Owner
Holding Company
Landlord & Property Owner
Landlord & Property Owner
Holding company
Camden Lock (London) Limited*
Electric Enterprises Limited*
Anise Development Limited*
Anise Residential Limited*
Loremar Investments Limited*
Crowndeal Services Limited*
Delinik Trading Limited*
Fiver London Limited*
Tecrange Services Limited*
Market Tech UK Limited*
Camden Lock Market Limited*
London Waterbus Company Limited*
Camden Lock Limited*
The Market Events Company Limited*
The Camden Market Management
Company Limited*
Glispa Global Group Limited*
Glispa GmbH (Germany)*
Toppoint Investment Limited*
Red Harmony Investments Limited*
Tazzeta Limited*
*
Country of
incorporation
(or residence)
England & Wales
England & Wales
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
Cyprus
England & Wales
Cyprus
England & Wales
Guernsey
England & Wales
Proportion of
ownership
interest (%)
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
England & Wales
England and Wales
100 per cent.
100 per cent.
Nature of business
Landlord & Property Owner
Landlord & Property Owner
Landlord & Property Owner
Leases Residential levels
Landlord & Property Owner
Holding company
Holding company
Online Website services
IP Property Owner
IP Property Owner
Onshore Service Company
Trading Company – Operation
services of four Canal Boats
Landlord & Property Owner
Trading Company – Events
England & Wales
England & Wales
Germany
Cyprus
British Virgin Islands
British Virgin Islands
100 per cent.
75 per cent.
75 per cent.
100 per cent.
100 per cent.
100 per cent.
Management Company
Holding company
Online Marketing Services
Holding company
Property Management Company
Property Management Company
Acquired during the year ended 31 March 2015.
The table below shows selected financial data in respect of subsidiaries that have non-controlling interest that
are material to the Group.
Glispa GmbH
£’000
SUMMARY COMPREHENSIVE INCOME INFORMATION:
Revenue
Profit for the financial period
Other comprehensive expense – foreign currency translation gain
Total comprehensive income
OTHER FINANCIAL INFORMATION:
Profit for the financial year allocated to non-controlling interests
SUMMARY FINANCIAL POSITION INFORMATION
Non-current assets
Current assets
TOTAL ASSETS
Non-current liabilities
Current liabilities
TOTAL ASSETS LESS TOTAL LIABILITIES
Equity shareholders’ funds
Non-controlling interests
TOTAL EQUITY
3,208
719
264
983
180
14,542
14,006
––––––––
28,548
––––––––
(4,238)
(9,636)
––––––––
14,674
––––––––
11,005
3,669
––––––––
14,674
––––––––
Net increase in cash for the financial period in respect of subsidiaries that have non-controlling interest
totalled £160,000. Cash increase was all generated from operations.
119
23.
INVESTMENTS
2013
£’000
Available-for-sale investments
carried at fair value –
acquired through common
control transactions
(Note 45)
Current
2014
£’000
–
–
2015
£’000
2013
£’000
–
–
Non-current
2014
£’000
–
2015
£’000
1,787
The investment above is classified as an available-for-sale financial asset. The Directors consider, in the
absence of evidence of a market transaction, cost to equate to a fair value.
24.
INVENTORIES
Finished goods
Cost of inventories recognised as an expense
Write down on inventories to net realisable value
25.
2013
£’000
2014
£’000
2015
£’000
115
1,454
–
84
1,519
–
3,331
2,766
49
Non-current
2014
£’000
2015
£’000
TRADE AND OTHER RECEIVABLES
2013
£’000
Trade receivables
Other receivables
Shareholder loans
Prepayments and accrued
income
Current
2014
£’000
2015
£’000
2013
£’000
665
650
5,651
352
792
–
8,678
4,171
–
–
–
–
–
–
8,998
–
127
–
92
––––––––
7,058
210
––––––––
1,354
537
––––––––
13,386
–
––––––––
–
–
––––––––
8,998
–
––––––––
127
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Trade receivables disclosed above are classified as loans and receivables and are therefore measured at
amortised cost.
26.
TRADE RECEIVABLES – CREDIT RISK
FAIR VALUE OF TRADE RECEIVABLES
The Directors consider that the fair values of trade and other receivables due within one year approximate to
their carrying amounts as presented above.
The ageing of trade receivables (shown net of bad debt provision) was as follows:
Less than 30 days
30 to 60 days
60 to 120 days
Over 120 days
2013
£’000
2014
£’000
2015
£’000
218
136
36
275
––––––––
665
120
182
5
45
––––––––
352
5,295
2,608
271
504
––––––––
8,678
––––––––
––––––––
––––––––
Trade receivables which are overdue and not provided for total £3,383,000 at the year-end 31 March 2015
(2014: £232,000, 2013: £447,000).
120
The movement in the provision of doubtful debts was as follows:
2013
£’000
At 1 April
Amounts written off
Amounts recovered
Amounts provided for
Amounts provided for on acquisition
2014
£’000
91
(204)
–
204
–
––––––––
91
At 31 March
91
(391)
–
339
–
––––––––
39
––––––––
––––––––
2015
£’000
39
(39)
1
147
553
––––––––
701
––––––––
The exposure of the Group to credit risk and impairment losses in relation to trade and other receivables is
reported in Note 5 of the financial information.
27.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents
2013
£’000
2014
£’000
2015
£’000
1,126
11,431
85,851
Included in cash and cash equivalents is an amount of £8.49m (2014: £8.28m, 2013: £nil) in relation to
restricted Capex accounts £7.25m (2014: £8.28m, 2013: £nil) and interest reserve account £1.24m (2014:
£nil, 2013: £nil).
28.
TRADE AND OTHER PAYABLES
2013
£’000
Trade payables
Accruals
Other payables
Deferred consideration
Put option
933
1,561
1,123
–
–
––––––––
3,617
Current
2014
£’000
688
4,010
911
–
–
––––––––
5,609
2015
£’000
2013
£’000
5,133
12,486
3,271
2,071
–
––––––––
22,961
–
–
–
–
–
––––––––
–
Non-current
2014
£’000
–
–
–
–
–
––––––––
–
2015
£’000
–
–
–
–
9,727
––––––––
9,727
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Trade and other payables principally comprise amounts outstanding for trade purchase and ongoing costs.
They are non-interest bearing and are normally settled within 30 to 60 day terms. The Directors consider that
the fair values of trade and other payables due within one year approximate to their carrying amounts as
presented above.
The put option was issued on 13 March 2015 upon the acquisition of Glispa (see Note 45) and grants the
seller the option to sell their 25 per cent. share in Glispa Global Group Limited to the Company for
€15 million between years 2 and 4 after the acquisition. When measuring the consideration paid on
acquisition, the put option is recognised at fair value. On consolidation, the put option is presented at the
present value of the €15 million, being management’s best estimate of the amount due on exercise of the put
option. The difference between fair value and present value is recognised in equity, and foreign exchange
differences are recognised in profit or loss.
Fair value of put option
Revaluation of put option to present value
Foreign exchange loss
Present value of put option
2013
£’000
2014
£’000
2015
£’000
–
–
–
––––––––
–
–
–
–
––––––––
–
3,173
6,374
180
––––––––
9,727
––––––––
121
––––––––
––––––––
29.
TAXES PAYABLE
Income taxes
30.
2013
£’000
2014
£’000
2015
£’000
1,459
1,622
826
2013
£’000
2014
£’000
2015
£’000
–
–
107,994
188,848
–
––––––––
188,848
229,455
–
––––––––
229,455
6,839
181,471
––––––––
188,310
BORROWINGS
UNSECURED BORROWINGS AT AMORTISED COST
Convertible Bonds
SECURED BORROWINGS AT AMORTISED COST
Bank loans
Current
Non-current
––––––––
––––––––
––––––––
ANALYSIS OF BORROWINGS
Borrowings are classified based on the amounts that are expected to be settled within the next 12 months and
after more than 12 months from the reporting date, as follows:
2013
£’000
2014
£’000
2015
£’000
Current liabilities
192,996
Non-current liabilities (including Convertible Bonds (Note 31))
–
––––––––
192,996
236,482
–
––––––––
236,482
6,839
293,284
––––––––
300,123
Unamortised finance costs and loan arrangement fees
(7,027)
––––––––
229,455
(3,819)
––––––––
296,304
––––––––
(4,148)
––––––––
188,848
––––––––
––––––––
––––––––
––––––––
––––––––
On 13 March 2014, the CMHC group was acquired by the ultimate controlling party. This change of control
resulted in the bank borrowings becoming due for immediate repayment and as such have been reflected as
current as at 31 March 2014. On 8 April 2014 the CMHC group completed the refinancing of its bank
facilities with Nomura International plc.
2013
£’000
2014
£’000
2015
£’000
THE GROUP’S PRINCIPAL BORROWING
ARRANGEMENTS ARE:
Facility amount
195,000
Amount drawn down
192,996
Committed facility not drawn down
2,004
Interest rate
2.5% + 3 million
Repayment date
Nomura Mezzanine:
28/02/14
Nomura Senior:
Bank of Cyprus:
236,482
236,482
–
see below
27/01/15
27/01/17
N/A
192,129
192,129
–
see below
–
27/01/17
On demand
The Irish Bank Resolution Corporation Limited (‘IBRC’) facilities of £192.9 million available at 31 March
2013 were repaid in full on 30 January 2014 with the proceeds from the Nomura facilities. The interest rate
on IBRC debt is 4.13 per cent. plus 3 month LIBOR, on all apart from £10 million which was interest free.
The Nomura facilities available in the year ended 31 March 2015 comprised of senior debt of
£185.29 million (2014: £185.29 million, 2013: £nil). The mezzanine debt of £56.6 million was repaid in full,
122
including capitalised interest and early repayment fee, on 23 October 2014. The interest rate on senior debt
is 4.13 per cent. plus 3 month LIBOR. The interest rate on the mezzanine debt was fixed at 12.55 per cent.
per annum. The facilities are repayable in full on the repayment date.
The Bank of Cyprus facilities available during the year ended 31 March 2015 are comprised of an acquisition
loan of £5.8 million and a renovation loan of £3.85 million less the agreed amortisation payments per the
facilities. The outstanding balances as at 31 March 2015 were £4.3 million and £2.6 million (5 December
2014 were £4.4m and £2.6m, 2013: £nil). The interest rate on the debt is 1.15 per cent. plus 3 month LIBOR.
DERIVATIVE FINANCIAL INSTRUMENTS
The following derivative financial instruments were in place at each balance sheet date:
2013
Principal
amount
£’000
Interest rate cap (2 year)
Interest rate cap (3 year)
–
–
––––––––
–
Fair
value
£’000
–
–
––––––––
–
2014
Principal
amount
£’000
95,054
90,251
––––––––
185,305
Fair
value
£’000
302
705
––––––––
1,007
2015
Principal
amount
£’000
95,054
90,251
––––––––
185,305
Fair
Value
£’000
3
67
––––––––
70
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
2013
£’000
MOVEMENTS IN THE FAIR VALUE OF DERIVATIVE
FINANCIAL INSTRUMENT WERE:
At 1 April
Interest rate cap premium paid
Fair value movement (Note 14)
At 31 March
3,344
–
(3,344)
––––––––
–
––––––––
2014
£’000
–
1,450
(443)
––––––––
1,007
––––––––
2015
£’000
1,007
–
(937)
––––––––
70
––––––––
Derivative financial instruments are categorised as follows:
Financial Assets
Within one year
In more than one year
2013
£’000
2014
£’000
2015
£’000
–
–
––––––––
–
–
1,007
––––––––
1,007
70
–
––––––––
70
––––––––
––––––––
––––––––
In January 2014, the Group entered into two interest rate caps which were valued at 31 March 2014 and
31 March 2015 based on market data.
31.
CONVERTIBLE BONDS
On 31 March 2015 the Company issued 2 per cent. senior unsecured convertible bonds denominated in
pounds sterling with a nominal value of £112.5 million. The Convertible Bonds are due for repayment five
years from the issue date at their accreted principal amount (being £112,389.07 in respect of each £100,000
principal amount of Convertible Bonds) of £112.5 million or may be converted into Ordinary Shares of the
Company at the holder’s option at the then applicable conversion price of the Convertible Bonds of 1
Ordinary Share per £3 nominal value of the bonds.
The fair value of the liability component, included in non-current borrowings, is calculated using a market
interest rate for an equivalent non-convertible bond at the date of issue. The residual amount, representing
the value of the equity conversion component, is included in shareholders’ equity in other reserves, net of
deferred income taxes.
123
The carrying amount of the liability component of the Convertible Bonds at the balance sheet date is derived
as follows:
2013
2014
2015
£’000
£’000
£’000
Face value of convertible bonds issued on 31 March 2015
Transaction costs
Equity conversion component on initial recognition
Liability component on initial recognition and at end
of financial year
–
–
–
––––––––
–
–
–
––––––––
112,500
(1,944)
(2,562)
––––––––
–
––––––––
–
––––––––
107,994
––––––––
The effective rate of interest is 5.18 per cent.
The equity component of the Convertible Bonds has been credited to other reserves.
32.
FINANCE LEASES COMMITMENTS – LESSEE
Minimum lease payments
2013
2014
2015
£’000
£’000
£’000
Amounts payable under
finance leases:
Within one year
Between two and five years
In over five years
158
661
826,140
––––––––
826,959
161
674
825,967
––––––––
826,802
164
687
825,790
––––––––
826,641
2013
£’000
112
298
3,266
––––––––
3,676
Present value
2014
£’000
126
380
3,193
––––––––
3,699
2015
£’000
109
392
3,072
––––––––
3,573
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
2013
£’000
Minimum lease payments under finance leases
Future contingent rent payable under finance leases
Future finance charges under finance leases
826,959
(788,379)
(34,761)
––––––––
3,820
––––––––
Present value of lease liability
2014
£’000
826,802
(788,317)
(34,786)
––––––––
3,699
––––––––
2015
£’000
826,641
(787,585)
(35,483)
––––––––
3,573
––––––––
ANALYSIS OF FINANCE LEASES
Finance lease obligations are classified based on the amounts that are expected to be settled within the next
12 months and after more than 12 months from the reporting date. They are as follows:
Current liabilities
Non-current liabilities
2013
£’000
2014
£’000
2015
£’000
123
3,697
––––––––
3,820
126
3,573
––––––––
3,699
109
3,464
––––––––
3,573
––––––––
124
––––––––
––––––––
33.
DEFERRED TAXATION
The following are the major deferred tax liabilities recognised by the company and movements thereon
during the current and prior reporting period.
There are no recognised deferred tax assets at the year end 31 March 2015 (2014: £nil). The following is the
analysis of the deferred tax balances for financial reporting purposes:
Deferred tax liabilities
2013
£’000
–
––––––––
–
2014
£’000
–
––––––––
–
2015
£’000
8,530
––––––––
8,530
2013
£’000
2014
£’000
2015
£’000
–
–
–
–
–
–
–
–
–
3,609
4,160
78
–
––––––––
–
–
––––––––
–
683
––––––––
8,530
––––––––
At 1 April
Acquisition – common control transactions (Note 45)
Acquisition – business combinations (Note 45)
Movement on intangibles
Movement due to revaluation of property during
the period (Note 15)
AT 31 MARCH
––––––––
––––––––
––––––––
––––––––
––––––––
The deferred tax liability at 31 March 2015 relates to the chargeable gain that would arise on the sale of the
property portfolio at each balance sheet date as well as deferred tax arising on the acquired intangibles on
the purchase of Glispa.
Deferred tax assets of £12.4 million (2014: £10.0 million, 2013: £9.8 million) have not been recognised in
respect of losses totalling £62.1 million (2014: £49.9 million, 2013: £48.9 million).
These assets have not been recognised principally because the Directors deem the timing of any benefits that
might arise in the future not to be probable. These losses are not subject to time expiry and are available for
utilisation against profits arising in future periods in territories in which they have arisen.
34.
PROVISIONS
Litigation
Social security costs
2013
£’000
2014
£’000
2015
£’000
–
–
––––––––
–
–
–
––––––––
–
766
210
––––––––
976
––––––––
––––––––
––––––––
The Group has made a provision related to ongoing proceedings against certain companies within the Group
for damages caused after a fire.
The provision for social security costs relates to a liability which could fall on the Group related to payments
made to contractors who may be deemed employees of the Group for tax purposes. The Directors believe the
above provisions represent a reliable estimate of the potential liabilities.
35.
SHARE-BASED PAYMENT TRANSACTIONS
On 16 December 2014, Market Tech Holdings Limited issued share options to certain key management
personnel and employees under the Company’s long term incentive plan (“LTIP”) which became operative
on 16 December 2014.
The total number of options issued during the year was 262,500, which are exercisable at a price of £1. The
vesting conditions of these options is as follows:
125
60 per cent. of the options are dependent on the EPS growth of the Company over the next three years. If
EPS growth is 50 per cent. or more, all will be exercisable. If EPS growth is less than 45 per cent., none will
be exercisable.
40 per cent. have a vesting period of three years with no performance conditions attached.
If options remain unexercised after a period of ten years from the date of grant, the options will expire. All
options are forfeited if the employee leaves the Company before the options vest.
Movements in the number of unissued Ordinary Shares under option and their exercise price are as follows:
At 1 April
2013
2015 LTIP Options
–
*
Granted Exercised
Granted Exercised
during
during At 1 April during
during At 31 March
year
year
2014
year
year
2015
–
–
– 262,500
–
262,500
Exercise
price
£1
Exercise
period
Until
15/12/24*
Exercise of 60 per cent. of options is dependent on performance conditions being met
None of the above options were exercisable as at 31 March 2015.
In addition, the Company granted share options to a maximum value of £1 million, which are exercisable at
price of £1. The shares are exercisable on satisfying one of the following two vesting conditions:
The Company’s share price as quoted on the AIM Market increasing by 100 per cent. above the offer price
at which shares are offered to potential investors in connection with the AIM Admission (£2 per share); or
The Company achieving an adjusted EBITDA in the consolidated accounts of £50 million.
If neither condition is achieved by 15 September 2019, the options will lapse.
The expense recognised for employee services received during the year is shown in the following table:
Expense arising from equity-settled share-based
payment transactions
2013
£’000
2014
£’000
2015
£’000
–
–
39
The following table lists the inputs to the Black-Scholes valuation model used for the options issued under
the LTIP in the year to 31 March 2015:
2015 LTIP
Options
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of share options (years)
Exercise price (£)
3.35
52.4
1.00
3.5
1
Expected volatility is determined by calculating the historical volatility of companies classified as Real
Estate (General/Diversified) in recognised exchanges in Western Europe. The volatility is measured by the
standard deviation in monthly stock prices, estimated using 5-years data.
The dividend yield is based on the consensus of brokers dividend estimates for the 12 months ahead for
companies involved in Real Estate Investment and Services.
The risk free interest is based on the return in long date government bonds.
The expected life of the share options is based on current expectations and is not necessarily indicative of
exercise patterns that may occur. The expected volatility and dividend yield are based on market data as the
Company has insufficient historic data of its own due to its short history on the AIM market.
126
36.
SHARE CAPITAL
ORDINARY SHARES ISSUED AND FULLY PAID
Number
ORDINARY SHARES OF £0.1 EACH
At 1 April 2012, 1 April 2013 and 31 March 2014
Shares eliminated on acquisition of Market Tech Holdings Limited
Issued on incorporation of Market Tech Holdings Limited
Issued on acquisition of Divanyx Investments Limited
Issued in relation to acquisition of Fiver London Limited
Issued on assignment of debt on acquisitions
Issued upon listing of Company
AT 31 MARCH 2015
£’000
400
–
(400)
–
––––––––––– –––––––––––
–
–
––––––––––– –––––––––––
50,000
1,000
1,062,500
323,886,500
50,000,000
–––––––––––
375,000,000
5
–
106
32,389
5,000
–––––––––––
37,500
––––––––––– –––––––––––
The authorised share capital of the Company is unlimited.
On incorporation the Company issued 50,000 Ordinary Shares at par. On 5 December 2014 the Company
issued 1,000 Ordinary Shares at par in consideration for the acquisition of the entire issued share capital of
Divanyx Investments Limited.
On 12 December 2014 1,062,500 Ordinary Shares were issued at £2 per share in relation to a roll up
agreement varying the terms of the acquisition of Fiver London Limited.
On 16 December 2014 323,886,500 Ordinary Shares were issued in consideration of the assignment to the
Company of loans due to the major shareholders at that time from certain members of the Group, with an
aggregate value of £185,399,203.
On 22 December 2014 50,000,000 Ordinary Shares were issued at £2 per share upon the Company’s listing
on the AIM Market of the London Stock Exchange.
37.
RESERVES
SHARE PREMIUM
At 1 April 2012, 1 April 2013 and 31 March 2014
Issuance of share capital on assignment of debt on acquisitions
Issuance of share capital in respect of Fiver London Limited
Issuance of share capital upon listing of the Company
Costs of share issue upon listing of the Company
At 31 March 2015
£’000
–
153,011
2,018
95,000
(815)
––––––––
249,214
––––––––
REVALUATION RESERVE
£’000
At 1 April 2012
Revaluation movement (Note 20)
9,321
223
––––––––
9,544
(500)
––––––––
9,044
3,334
––––––––
12,378
At 31 March 2013
Revaluation movement (Note 20)
At 31 March 2014
Revaluation movement (Note 20)
At 31 March 2015
––––––––
127
38.
NATURE AND PURPOSE OF RESERVES
CALLED UP SHARE CAPITAL
Represents the nominal value of equity shares issued.
SHARE PREMIUM
The share premium account has been established to represent the excess of proceeds over the nominal value
for all share issues, including the excess of the exercise share price over the nominal value of the shares on
the exercise of share options as and when they occur, less any directly attributable share issue costs.
REVALUATION RESERVE
The revaluation reserve represents revaluation movements on the Group’s land and buildings held as tangible
fixed assets.
OTHER RESERVES
SHARE-BASED PAYMENTS
Used to recognise the value of equity-settled share-based payments provided to employees, including key
management personnel, as part of their remuneration.
CAPITAL CONTRIBUTION
Used to recognise the excess of the fair value of the net identifiable assets acquired and liabilities assumed
over the aggregate consideration transferred on acquisitions from entities under common control.
CONVERTIBLE BONDS
Covers the equity component of the issued Convertible Bonds. The liability component is reflected in
financial liabilities.
VALUATION OF PUT OPTION AT PRESENT VALUE FROM FAIR VALUE
Used to recognise the difference between the present value of the gross obligation under the put option and
the fair value of the put option recognised in the acquirer’s financial information.
RETAINED EARNINGS
Retained earnings represents the Group’s cumulative net gains and losses less contributions/distribution.
39.
ADJUSTED NET ASSET VALUE PER SHARE
Adjusted net assets are defined as the net assets of the property and other operating segment. Adjusted net
asset value per share has been calculated with reference to the Company’s adjusted net assets, divided by the
number of shares in issue as at the financial year end.
Adjusted net asset value per share
Adjusted net asset value (Note 8)
Number of ordinary shares in issue (Note 36)
+
2013
Pence
2014
Pence
2015
Pence
91.85
89.81
139.64
2013
£’000
2014
£’000
2015
£’000
212,385
207,685
523,649
2013+
Number
2014+
Number
2015
Number
231,237,899
231,237,899
375,000,000
The earnings per share for the year to 31 March 2014 and 2013 have been restated to take account of shares issued on the listing
of the Company on the AIM Market, shares issued to the major shareholders in consideration for the assignment of debt and
128
shares issued in relation to the acquisition of Fiver London Limited (Note 36). Shares that were issued at below market value
were deemed to be a bonus issue related to the number of shares which would have been issued at market value.
40.
CONTINGENT LIABILITIES
As at 31 March 2015, the Group had given assurances aggregating to £500,000 (31 March 2014 & 31 March
2013: £500,000) for construction being undertaken. Directors are not aware of any other contingencies that
may have a significant impact on the financial position of the Group.
41.
CAPITAL COMMITMENTS
The Group’s only material capital commitments related to construction of a primary school as part of the
Hawley Wharf Development. This amounted to £7.4 million as at 31 March 2015. There were no material
capital commitments as at 31 March 2014 and 31 March 2013.
42.
RELATED PARTY TRANSACTIONS
REMUNERATION OF KEY MANAGEMENT PERSONNEL
The shareholding of the directors, who are key management personnel, is set out below.
2015
Number
INTEREST IN ORDINARY SHARES
Neil Sachdev
John Le Poidevin
Thomas Teichman
Charles Butler
Andrew Bull
25,000
25,000
25,000
125,000
65,000
––––––––
265,000
––––––––
THE FOLLOWING TRANSACTIONS AROSE WITH PARTIES UNDER COMMON CONTROL:
At 31 March 2014 an amount of £10.9 million was due from GHT. The loan was an interest free loan and at
31 March 2014 had been discounted based on the assumption of 4 per cent. interest rate, with the resulting
discount being treated as a distribution. As part of the repayment of the Group’s mezzanine bank borrowings,
the £10.9 million outstanding from the GHT was repaid. The discount recognised in the prior year has been
reversed and treated as a contribution as per Note 17. A further amount of £45.6 million was lent to the Group
by the Major Shareholder, a company related by virtue of common control.
As part of the transactions described in Note 2.2 and the business combinations relating to companies and
assets previously under common control in Note 45, the Group assumed debt totalling £185,399,203 owed
to the Major Shareholder, which included the £45.6 million loan above. On 16 December 2014 the debt was
extinguished through the issue of 323,886,500 Ordinary Shares by the Group.
The Group has entered into a number of property lease transactions with Gaming Technology Solutions
Limited, and the guarantor, Playtech Software Limited to whom they are related by virtue of a common
shareholder. The Group received rental income of £264,000 (31 March 2014: £nil, 31 March 2013: £nil). At
31 March 2015 no amount was due to the Group (31 March 2014: £nil, 31 March 2013: £nil).
The Group has entered into a number of merchant services agreements with various companies to whom they
are related by virtue of a common shareholder. The Group paid transaction fees of €100 (31 March 2014:
€nil, 31 March 2013: £nil). At 31 March 2015 an amount of €4,000 was owed to the Group (31 March 2014:
€nil, 31 March 2013: £nil).
Certain members of the Group have brought proceedings against the Irish Bank Resolution Corporation
Limited (“IBRC”) (“IBRC proceedings”) which relates to misselling of interest rate swaps and an alleged
breach by IBRC of its terms. The Group entered into funding arrangements with certain third parties in
January 2014, including Luxurious Property Investments Limited, then a related party by virtue of a common
129
shareholder, (subsequently acquired by the Group) and previous shareholders in relation to the funding,
conduct and outcome of this litigation. The amount of funding due to the Group from Luxurious Property
Investments Limited under this agreement in relation to legal costs incurred to date in respect of the IBRC
proceedings is shown in the table below.
In respect of the IBRC proceedings, the Group entered into an agreement with a senior member of
management of the Group. Under the terms of this agreement, the individual is entitled to receive 7 per cent.
of any gross proceeds payable to certain members of the Group.
A summary of the amounts outstanding at each year end are summarised below.
Name
Camden Trust
GHT
Luxurious Property Investments
Limited
Nature of transaction
Loan
Recoverable legal fees
2013
£’000
2014
£’000
2015
£’000
5,651
–
–
8,998
–
–
–
–––––––
5,651
136
–––––––
9,134
–
–––––––
–
–––––––
–––––––
–––––––
The Major Shareholder, immediately following AIM Admission, held approximately 86.4 per cent. of the
issued Ordinary Shares.
On 16 December 2014, the Group entered into the Working Capital Loan with the Major Shareholder, for an
unsecured amount of £60,000,000 to finance the general working capital requirements of the Group. The
Working Capital Loan carried an interest rate of 4 per cent. and was repayable within three years but can be
repaid early by the Group free of any interest penalty. In the period to 31 March 2015 no amount was drawn
on this loan facility.
On 27 February 2015, the Group entered into a new acquisition loan facility (“the Acquisition Facility”) with
the Major Shareholder, in connection with the acquisition of The Interchange Building and Camden Wharf.
The Acquisition Facility was for an unsecured loan of £125,000,000. The Acquisition Facility had a fixed
interest rate of 4 per cent. per annum payable quarterly in arrears and was available to draw down until 30
June 2015. The Acquisition Facility was repayable within three years however could be repaid early by the
Group free of any interest penalty. On 24 March 2015, the Acquisition Facility was amended to provide the
Group with the ability to draw down up to £15 million in respect of the past acquisitions and a further £30
million for general acquisition purposes going forwards. On 18 March 2015, £48 million was drawn down
on this facility and subsequently repaid, with interest of £74,000, from the proceeds of the Convertible Bonds
issued on 31 March 2015.
On 24 March 2015 the Major Shareholder participated in £15 million of the Convertible Bonds issued by the
Group.
On 16 December 2014, Teddy Sagi entered into an advisory services agreement with the Group pursuant to
which Teddy Sagi will, as and when requested to do so by the Group, provide advisory services to the Group
for a nominal fee of £1 per annum until either Teddy Sagi ceases to be interested (whether legally or
beneficially) in the Ordinary Shares, or either party terminates the agreement following its fifth anniversary,
whichever is the earlier.
The Group has entered into the 2014 Relationship Agreement with GHT and the Major Shareholder which
governs the relationship between each of the parties to it to ensure that the Group is able to carry on its
business independently. For a period of two years from AIM Admission, the Major Shareholder has agreed
that it shall not propose or procure the proposal of a Shareholders’ resolution which is intended to effect any
cessation of trading of the Ordinary Shares on AIM (or any other stock exchange on which the Group’s
shares may be traded during that period) or vote in favour of any such resolution unless a majority of the
independent Directors have voted in favour of such proposal (or as part of certain offers to acquire the entire
issued share capital of the Group). The Major Shareholder has agreed that all transactions and relationships
between it, its associates (which include GHT and Teddy Sagi) and the Group shall be on arm’s length terms
130
and on a normal commercial basis. For so long as the Major Shareholder is beneficially interested in at least
20 per cent. of the voting rights which are generally exercisable at general meetings of the Group, it shall
have the right to nominate one person for appointment as a director of the Group (although it has not
currently chosen to do so). Both GHT and the Major Shareholder have given certain non-compete
undertakings to the Group and have agreed not to acquire any further Ordinary Shares for a period of
18 months after AIM Admission.
On 10 September 2014, Northernstar Investments Limited and Crowndeal Services Limited entered into a
domain name transfer agreement pursuant to which Crowndeal Services Limited acquired certain domain
names, including “market.com” for a purchase price of US$486,000 inclusive of all applicable taxes.
Northernstar Investments Limited has given some warranties and representations as to title and capacity.
Northernstar Investments Limited is related by virtue of common control.
No guarantees have been given or received.
43.
CONTROLLING PARTY
The Group’s immediate parent company is the Major Shareholder, a company incorporated in the British
Virgin Islands.
The ultimate controlling party is GHT, a trust established under the laws of the Isle of Man, the sole
beneficiary of which is Teddy Sagi.
44.
CASH GENERATED FROM OPERATIONS
PROFIT FOR THE YEAR
ADJUSTMENTS FOR:
Income tax expense
Finance expense
Investment income
Net foreign exchange differences
Share based payment expense
Fair value adjustments to derivatives
Movement on provisions
Movement on deferred tax provision
Depreciation and impairment of property, plant and equipment
Amortisation intangibles
Net gain from fair value adjustment on investment property
Foreign currency translation
MOVEMENTS IN WORKING CAPITAL:
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
CASH GENERATED FROM OPERATIONS
2013
£’000
2014
£’000
2015
£’000
29,280
16,961
43,698
421
6,859
–
–
–
–
–
–
568
–
(24,202)
–
333
17,278
(240)
–
–
–
–
–
554
–
(22,819)
–
(183)
16,902
(3)
500
39
937
976
78
627
170
(60,539)
113
(11)
18
(820)
––––––––
12,113
31
53
(1,013)
––––––––
11,138
(851)
(891)
3,036
––––––––
4,609
––––––––
131
––––––––
––––––––
45.
ACQUISITIONS OF A BUSINESS
BUSINESS COMBINATIONS, ASSET ACQUISITIONS AND INVESTMENTS MADE UNDER
COMMON CONTROL:
Goodwill Intangibles
£’000
£’000
Business combinations
Fiver London Ltd
Camden Lock Market Limited
Atlantic Estates Limited
5,496
–
–
––––––––
TOTAL BUSINESS COMBINATIONS
5,496
1,995
–
–
––––––––
1,995
Property,
plant and Investment
equipment
property Investments
£’000
£’000
£’000
258
74
1
––––––––
333
–
72,600
23,250
––––––––
95,850
–
–
–
––––––––
–
–––––––– –––––––– –––––––– –––––––– ––––––––
Goodwill Intangibles
£’000
£’000
Asset acquisitions
Crowndeal Services Limited, Tecrange
Services Limited and Market Tech
UK Limited
10 Jamestown Road (Anise
Development Limited)
31 Kentish Town Road (Perola
Investment Limited)
251–259 Camden High Street
(Loremar Investment Limited)
39–45 Kentish Town Road (Luxurious
Property Investments Limited)
Property,
plant and Investment
equipment
property Investments
£’000
£’000
£’000
–
1,355
11
–
–
–
–
–
21,000
–
–
–
–
10,300
–
–
–
–
10,500
–
–
––––––––
–
–
––––––––
1,355
–
––––––––
11
10,600
––––––––
52,400
–
––––––––
–
TOTAL OTHER INVESTMENTS
–
––––––––
–
–
––––––––
–
–
––––––––
–
–
––––––––
–
1,787
––––––––
1,787
TOTAL ACQUISITIONS UNDER
COMMON CONTROL
5,496
3,350
344
148,250
1,787
TOTAL ASSET ACQUISITIONS
Investment– Shazam
–––––––– –––––––– –––––––– –––––––– ––––––––
–––––––– –––––––– –––––––– –––––––– ––––––––
–––––––– –––––––– –––––––– –––––––– ––––––––
BUSINESS COMBINATIONS UNDER COMMON CONTROL
Fiver London Limited
On 5 December 2014 the Group acquired 100 per cent. of the share capital of Fiver London Limited, a
company whose principal activity is online retail, achieved through the acquisition of 100 per cent. of the
share capital of its parent, Crowndeal Services Ltd, for the assumption of debt of £8.5 million and the issue
of shares in Market Tech Holdings Limited to the value of £2.125 million. £0.7 million of deferred
consideration is held by Crowndeal Services Limited as a retention to meet certain potential tax liabilities
identified as part of the acquisition of Fiver.
132
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill
are as follows:
£’000
Brand and intellectual property
Customer list
Property, plant and equipment
Trade and other receivables
Inventories
Cash and cash equivalents
Trade and other payables
Other taxes and social security
1,766
229
258
1,094
2,396
1,297
(1,495)
(416)
––––––––
5,129
5,496
––––––––
10,625
Total identifiable net assets acquired
Goodwill
Total consideration
Settled by:
Assumption of debt
Shares
8,500
2,125
––––––––
10,625
––––––––
The acquisition amounts recorded in the consolidated cash flow statement for the year are:
£’000
Cash consideration
Cash and cash equivalents acquired
–
1,297
––––––––
1,297
––––––––
Camden Lock Market Limited
On 5 December 2014 the Group acquired 100 per cent. of the share capital of Camden Lock Market Limited,
a company whose principal activity is property investment, achieved through the acquisition of 100 per cent.
of the share capital of Pastra Investments Limited, for cash consideration of $10,000 and the assumption of
debt of £68.2 million.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and capital
contribution are as follows:
£’000
Property, plant and equipment
Investment property
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Corporation tax
Deferred tax
74
72,600
278
1,092
(826)
178
(9)
––––––––
73,387
(5,191)
––––––––
68,196
Total identifiable net assets acquired
Capital contribution
Total consideration – assumption of debt
––––––––
133
The acquisition amounts recorded in the consolidated cash flow statement for the year are:
£’000
Cash consideration
Cash and cash equivalents acquired
–
1,092
––––––––
1,092
Purchase of businesses, net of cash acquired
––––––––
Atlantic Estates Limited
On 5 December 2014 the Group acquired 100 per cent. of the share capital of Atlantic Estates Limited, a
company whose principal activity is property investment, through the acquisition of 100 per cent. of the share
capital of Simplepath Investments Limited, for cash consideration of $10,000 and the assumption of debt of
£21.7m.
Details of fair value of identifiable assets and liabilities acquired, purchase consideration and capital
distribution are as follows:
£’000
Property, plant and equipment
Investment property
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax
1
23,250
1,046
513
(64)
(3,600)
––––––––
21,146
538
––––––––
21,684
Total identifiable net assets acquired
Capital distribution
Total consideration – assumption of debt
––––––––
The acquisition amounts recorded in the consolidated cash flow statement for the year are:
£’000
Cash consideration
Cash and cash equivalents acquired
–
513
––––––––
513
––––––––
ASSET ACQUISITIONS UNDER COMMON CONTROL
On 5 December 2014 the Group acquired the property 10 Jamestown Road for the assumption of debt of
£6.9 million. The property was acquired through the acquisition of 100 per cent. of the share capital of Anise
Development Ltd. Anise Development Ltd has two loan facilities with Bank of Cyprus up to £5.8 million
and £3.85 million (“Anise Loan Agreements”). The outstanding balances on these loans as at 5 December
2014 were £4.4 million and £2.7 million. The Anise Loan Agreements are secured by various arrangements
including a first legal mortgage over Jamestown Road and a personal guarantee from the ultimate
shareholder.
On 5 December 2014 the Group acquired the property 31 Kentish Town Road through the acquisition of
100 per cent. of the issued share capital of Perola Investments Limited for $10,000 cash and the assumption
of debt of £11.0 million.
On 5 December 2014 the Group acquired the property 251-259 Camden High Street through the acquisition
of 100 per cent. of the issued share capital of Loremar Investments Limited for $10,000 cash and the
assumption of debt of £12.0 million. The property was valued at £10.6 million on an open market basis by
JLL, Chartered Surveyors at the 5 December 2014.
On 5 December 2014, the Group acquired the property 39-45 Kentish Town Road through the acquisition of
100 per cent. of the share capital of Luxurious Property Investments Limited in exchange for $1,000 cash
and the assumption of debt of £6.7 million. The property was valued at £10.6 million on an open market basis
by JLL, Chartered Surveyors. The Directors consider this to be the fair value at 5 December 2014.
134
On 5 December 2014 the Group acquired, through the acquisition of 100 per cent. of the share capital,
Crowndeal Services Ltd, Tecrange Limited and Market Tech UK Limited.
INVESTMENT ACQUISITION UNDER COMMON CONTROL
On 5 December 2014 the Group acquired a 0.62 per cent. interest in the share capital of Shazam Entertainment
Limited.
The net capital contribution for the above asset and investment acquisitions amounts to £7.5m.
BUSINESS COMBINATIONS AND ASSET ACQUISITIONS MADE FROM THIRD PARTIES
Goodwill Intangibles
£’000
£’000
Business combinations
Glispa GmbH
TOTAL BUSINESS COMBINATIONS
Asset acquisitions
The Interchange Building (Tazzeta Limited)
Camden Wharf (Red Harmony Investments Limited)
TOTAL ASSET ACQUISITIONS
TOTAL
Property,
plant and Investment
equipment
property
£’000
£’000
14,648
––––––––
14,648
14,039
––––––––
14,039
234
––––––––
234
–
––––––––
–
–
–
––––––––
–
––––––––
14,648
–
–
––––––––
–
––––––––
14,039
–
–
––––––––
–
––––––––
234
48,980
50,305
––––––––
99,285
––––––––
99,285
–––––––– –––––––– –––––––– ––––––––
BUSINESS COMBINATIONS
Glispa
On 13 March 2015 the Group acquired 75 per cent. of the share capital of Glispa, a German incorporated
company whose principal activity is that of a mobile marketing business, achieved through the acquisition
of 75 per cent. of the share capital of Glispa for total consideration of €30.5 million. The total consideration
was comprised of €27.5 million cash with a further €3 million deferred working capital payment. The seller
has a put option over their remaining 25 per cent. of the company that can be exercised between years two
and four for a further consideration of €15 million.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill
are as follows:
£’000
Intellectual property
Other intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Corporation tax
Accruals
Deferred tax
Total identifiable net assets acquired
Non controlling interest (calculated as share of net assets)
Goodwill
Total consideration
14,029
10
234
8,300
4,678
(1,308)
(418)
(7,673)
(4,160)
––––––––
13,692
(3,423)
14,648
––––––––
24,917
––––––––
135
£’000
Settled by:
Cash
Deferred consideration
Fair value of put option
19,711
2,033
3,173
––––––––
24,917
––––––––
Net cash outflow arising on acquisition
Cash consideration
Cash and cash equivalents acquired
(19,711)
4,678
––––––––
(15,033)
––––––––
The goodwill arising on the acquisition of the business is attributable to the anticipated profitability of the
distribution of the company’s services in new markets and the future operating synergies from the
combination.
Acquisition costs of £0.5 million have been recognised as exceptional costs in the consolidated statement of
comprehensive income.
ASSET ACQUISITIONS
Tazzeta Limited
On 24 March 2015 the Group acquired the property The Interchange Building through the acquisition of
100 per cent. of the issued share capital of Tazzeta Limited for cash of £49 million.
Red Harmony Investments Limited
On 5 March 2015 the Group acquired the property Camden Wharf, Jamestown road, through the acquisition
of 100 per cent. of the issued share capital of Red Harmony Limited for cash of £50.3 million.
If all acquisitions had occurred at the start of the financial year the Group’s revenues would have been
£91,724,000 and adjusted EBITDA would have been £23,182,000 for the year ended 31 March 2015.
Since being acquired by the Group, business combinations and asset acquisitions generated £12,960,000 in
revenue and adjusted EBITDA of £4,473,000 which is included in the income statement.
46.
EVENTS AFTER THE REPORTING DATE
On 7 April 2015 the Group entered into three significant contractual appointments as progress on Camden
Market development continues. Mace were appointed to oversee the redevelopment of Camden Lock Village,
McLaughlin & Harvey were appointed to build the primary and nursery school as part of Camden Lock
Village Development and Piercy & Company were appointed as architects to take forward a planning
applications for Camden Lock Market.
UTOPIA VILLAGE ACQUISITION
On 16 April 2015 the Group acquired a 0.84 acre property (Utopia Village), hosting small businesses, for a
total consideration of £44 million payable in cash.
In relation to that acquisition on 16 April 2015, the Group entered into a new acquisition loan facility (the
“Utopia Facility”) with the Major Shareholder, in connection with the acquisition of Utopia Village. The
Utopia Facility is for an unsecured loan of £50 million to provide finance, if requested by the Group, in
relation to the acquisition. The Utopia Facility had a fixed interest rate of 4 per cent. per annum payable
quarterly in arrears. This amount has subsequently been repaid and the facility cancelled.
136
STUCCO MEDIA ACQUISITION
On 7 May 2015 the Group acquired 100 per cent. of Stucco Media, a leading digital marketing platform for
total consideration of up to US$34.5 million, subject to a post-closing working capital adjustment. Initial
consideration of US$25.8 million was satisfied on completion by a US$12.8 million cash payment and
US$13 million paid by the issue of 3,468,196 new Ordinary Shares in the Company. The working capital
adjustment will be calculated after closing of the acquisition and any payments due following the adjustment
will be made in cash. The deferred element of consideration of US$8.7 million is to be satisfied in ordinary
shares. The Directors are in the process of identifying the fair value of the acquired assets and liabilities,
which will be reported in the interim financial statements.
ACQUISITION FACILITY
On 16 June 2015, the Group has drawn down £10 million of the £30 million available facility for general
acquisition purposes from the Acquisition Facility with the Major Shareholder. All amounts drawn down on
this facility have been subsequently repaid and the facility has now been cancelled.
2015 AIM PLACING
On 30 July 2015, the Company issued 90,000,000 new ordinary shares at a price of 223 pence per ordinary
share pursuant to an institutional placing raising gross proceeds of £200.7 million.
ACQUISITION OF 1-11 HAWLEY CRESCENT
On 10 August 2015, the Group acquired the freehold property comprising 1-11 Hawley Crescent for a total
consideration of £31.1 million (including stamp duty).
ACQUISITION OF 49 CHALK FARM ROAD
On 23 October 2015, the Group acquired the freehold property known as 49 Chalk Farm Road, NW1 for a
total consideration of £5.2 million (including stamp duty).
AIG SENIOR FACILITIES AGREEMENT
On 8 December 2015, Divanyx Investments Limited (a wholly owned subsidiary of the Company) and
certain other members of the Group entered into a senior term facilities agreement with amongst others, AIG
Asset Management (Europe) Limited as arranger. The funds available under the AIG Senior Facilities
Agreement of up to £900 million are available to certain members of the Group (the “Borrowers”):
(a) under an initial term loan facility of £400 million (the “Initial Facility”): (i) to refinance previous
indebtedness owed; (ii) to fund acquisition of real estate (to the extent permitted under the AIG Senior
Facilities Agreement); (iii) to fund development works and capital expenditure (to the extent permitted under
the AIG Senior Facilities Agreement); (iv) to fund distributions to certain other members of the Group and
MTH Investments Limited (being the immediate shareholder of Divanyx Investments Limited); (v) to fund
general corporate and working capital purposes; (vi) to fund the deposit of up to £100 million into a blocked
acquisition account; (vi) to fund the deposit of up to £10 million into a blocked interest reserve account; and
(viii) to fund associated taxes, fees, costs and expenses in connection with the AIG Senior Facilities
Agreement; and (b) under an additional facility of up to £50 million (the “Additional Facility”), an
upsize facility of up to £200 million (to be reduced by any commitments under the Additional Facility) (the
“Upsize 1 Facility”) and a further upsize facility of up to £300 million (the “Upsize 2 Facility”): (i) to fund
acquisition of real estate (to the extent permitted under the AIG Senior Facilities Agreement); (ii) to fund
development works and capital expenditure (to the extent permitted under the AIG Senior Facilities
Agreement); (iii) to fund distributions to certain other members of the Group and MTH Investments Limited
(being the immediate shareholder of Divanyx Investments Limited) ; and (v) to fund associated taxes, fees,
costs and expenses in connection with the AIG Senior Facilities Agreement.
137
Sub-section 3: Unaudited interim financial information of the Group for the six months ended
30 September 2015
The following is an extract from the unaudited interim results announcement made by the Company on
3 December 2015.
“INDEPENDENT REVIEW REPORT TO MARKET TECH HOLDINGS LIMITED
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2015 which comprises consolidated income
statement, consolidated statement of comprehensive income, the consolidated statement of financial
position, the consolidated statement of changes in equity, the consolidated cash flow statement, and the
related notes.
We have read the other information contained in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with the information in the condensed set
of financial statements.
Directors’ responsibilities
The interim report, including the financial information contained therein, is the responsibility of and has
been approved by the directors. The directors are responsible for preparing the interim report in accordance
with the rules of the London Stock Exchange for companies trading securities on AIM which require that the
half-yearly report be presented and prepared in a form consistent with that which will be adopted in the
company’s annual accounts having regard to the accounting standards applicable to such annual accounts.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set
of financial statements included in this half-yearly financial report has been prepared in accordance with
International Accounting Standard 34, “Interim Financial Reporting’’, as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in
the half-yearly financial report based on our review.
Our report has been prepared in accordance with the terms of our engagement to assist the company in
meeting the requirements of the rules of the London Stock Exchange for companies trading securities on
AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been
expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we hereby expressly disclaim any and all such
liability.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and
Ireland) 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the
Entity’’, issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently
does not enable us to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
138
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of
financial statements in the half-yearly financial report for the six months ended 30 September 2015 is not
prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by
the European Union and in accordance with the rules of the London Stock Exchange for companies trading
securities on AIM.
BDO LLP
Chartered Accountants and Registered Auditors
Location
United Kingdom
3 December 2015
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
139
CONSOLIDATED INCOME STATEMENT
Notes
Revenue
Cost of sales
GROSS PROFIT
Administrative expenses
Net gain from fair value adjustment of
investment property
ADJUSTED EBITDA*
Net gain from fair value adjustment of
investment property
Exceptional items
Depreciation & amortisation
Foreign exchange loss
Share based payment expense
4
6 months
ended
30 September
2015
£’000
62,215
(34,437)
––––––––
27,778
(26,959)
6 months
ended
30 September
2014
£’000
9,290
–
––––––––
9,290
(4,357)
Year ended
31 March
2015
£’000
30,081
(5,981)
––––––––
24,100
(22,732)
10
16,410
10,586
8,413
5,498
60,539
12,018
10
3
8,9
16,410
(6,690)
(2,565)
(445)
(67)
8,413
(313)
(252)
–
–
60,539
(9,487)
(624)
(500)
(39)
17,229
33
(7,135)
––––––––
10,127
(2,151)
––––––––
13,346
150
(9,923)
––––––––
3,573
(122)
––––––––
61,907
3
(17,839)
––––––––
44,071
183
––––––––
7,976
–
––––––––
7,976
3,451
(245)
––––––––
3,206
44,254
(376)
––––––––
43,878
(379)
––––––––
–
––––––––
(180)
––––––––
OPERATING PROFIT
Finance income
Finance costs
6
PROFIT BEFORE TAXATION
Income tax (charge)/credit
PROFIT FOR THE PERIOD FROM
CONTINUING OPERATIONS
Loss for the period from discontinued operations
PROFIT FOR THE PERIOD
Profit for the period attributable to
non-controlling interest
PROFIT FOR THE PERIOD ATTRIBUTABLE
TO THE OWNERS OF THE PARENT
––––––––
7,597
––––––––
3,206
––––––––
EARNINGS PER SHARE FROM CONTINUING
OPERATIONS ATTRIBUTABLE TO THE
OWNERS OF THE PARENT
Basic
7
Diluted
7
Basic Adjusted EBITDA*
7
1.81p
1.80p
2.44p
1.49p
1.49p
2.38p
16.19p
16.18p
4.35p
EARNINGS PER SHARE ATTRIBUTABLE
TO THE OWNERS OF THE PARENT
Basic
Diluted
1.81p
1.80p
1.39p
1.39p
16.05p
16.04p
*
7
7
43,698
Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation and adjusted for fair value
investment property movements, share based payment charges, exceptional items and foreign currency exchange gain/(loss).
140
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes
PROFIT FOR THE PERIOD
OTHER COMPREHENSIVE INCOME
ITEMS THAT WILL NOT BE
RECLASSIFIED TO PROFIT OR
LOSS (NET OF TAX)
Gains on property revaluation
ITEMS THAT MAY BE RECLASSIFIED
TO PROFIT OR LOSS (NET OF TAX)
Currency translation difference
9
OTHER COMPREHENSIVE INCOME
FOR THE PERIOD (NET OF TAX)
TOTAL COMPREHENSIVE INCOME
FOR THE PERIOD (NET OF TAX)
Total comprehensive income for the period
attributable to owners of the parent
Total comprehensive income for the period
attributable to non-controlling interests
6 months
ended
30 September
2015
£’000
6 months
ended
30 September
2014
£’000
Year ended
31 March
2015
£’000
7,976
––––––––
3,206
––––––––
43,878
––––––––
853
2,194
3,334
329
––––––––
–
––––––––
179
––––––––
1,182
––––––––
2,194
––––––––
3,513
––––––––
––––––––
9,158
––––––––
5,400
––––––––
8,722
5,400
47,145
436
––––––––
9,158
–
––––––––
5,400
246
––––––––
47,391
––––––––
141
––––––––
47,391
––––––––
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Notes
NON-CURRENT ASSETS
Goodwill
Intangible assets
Property, plant and equipment
Investment property
Investments
Other receivables
Derivative financial instruments
Deferred tax asset
CURRENT ASSETS
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
8
8
9
10
11
14
15
11
14
12
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Taxes payable
Obligations under finance leases
Borrowings
Provisions
As at
30 September
2014
£’000
As at
31 March
2015
£’000
20,833
35,110
11,631
859,751
1,787
81
–
88
––––––––
929,281
––––––––
–
71
14,222
423,102
–
9,147
545
–
––––––––
447,087
––––––––
20,149
18,336
1,650
753,700
1,787
127
–
–
––––––––
795,749
––––––––
3,241
25,218
1,157
175,333
––––––––
204,949
––––––––
1,134,230
82
2,481
–
10,050
––––––––
12,613
––––––––
459,700
3,331
13,386
70
85,851
––––––––
102,638
––––––––
898,387
(35,846)
(1,768)
(104)
(6,354)
(236)
––––––––
(44,308)
––––––––
160,641
––––––––
(7,056)
(1,812)
(121)
(50,827)
–
––––––––
(59,816)
––––––––
(47,203)
––––––––
(22,961)
(826)
(109)
(6,839)
(976)
––––––––
(31,711)
––––––––
70,927
––––––––
(10,162)
(3,416)
(182,509)
(109,355)
(13,856)
(570)
––––––––
(319,868)
––––––––
(364,176)
–
(3,520)
(182,513)
–
–
(766)
––––––––
(186,799)
––––––––
(246,615)
(9,727)
(3,464)
(181,471)
(107,994)
(8,530)
–
––––––––
(311,186)
––––––––
(342,897)
––––––––
13
14
NET CURRENT ASSETS/(LIABILITIES)
NON-CURRENT LIABILITIES
Other payables
Obligations under finance leases
Borrowings
Convertible Bonds
Deferred tax liabilities
Provisions
As at
30 September
2015
£’000
13
14
14
15
TOTAL LIABILITIES
NET ASSETS
EQUITY
Called up share capital
Share premium
Revaluation reserve
Other reserves
Retained earnings
TOTAL EQUITY ATTRIBUTABLE TO
OWNERS OF THE PARENT
Equity attributable to non-controlling interests
TOTAL EQUITY
––––––––
––––––––
––––––––
770,054
––––––––
––––––––
213,085
––––––––
––––––––
46,847
445,314
13,231
8,467
252,198
––––––––
–
–
11,238
–
201,847
––––––––
37,500
249,214
12,378
8,400
244,329
––––––––
766,057
––––––––
3,997
––––––––
770,054
213,085
––––––––
–
––––––––
213,085
551,821
––––––––
3,669
––––––––
555,490
––––––––
––––––––
The financial statements were approved by the Board of Directors and authorised for issue on 3 December 2015.
Signed on its behalf
ANDREW BULL
Director
3 December 2015
Company Registration No. 59208
142
––––––––
555,490
––––––––
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
capital
£’000
BALANCE AT 31 MARCH 2015
COMPREHENSIVE INCOME
Profit for the period
OTHER COMPREHENSIVE
INCOME
Currency translation differences
Property revaluation
TOTAL COMPREHENSIVE
INCOME
Ordinary Shares issued
Costs of share issues
Share based payment
Adjustment to non-controlling
interests
BALANCE AT 30 SEPTEMBER
2015
BALANCE AT 1 APRIL 2014
COMPREHENSIVE INCOME
Profit for the period
OTHER COMPREHENSIVE
(EXPENSE)/INCOME
Property revaluation
TOTAL COMPREHENSIVE
INCOME
TRANSACTIONS WITH
OWNERS
Distribution
BALANCE 30 SEPTEMBER 2014
BALANCE AT 1 APRIL 2014
COMPREHENSIVE INCOME
Profit for the period
OTHER COMPREHENSIVE
INCOME
Currency translation differences
Property revaluation
TOTAL COMPREHENSIVE
INCOME
Ordinary Shares issued
Costs of share issues
Share based payment
Issue of Convertible Bonds
Capital contribution on acquisition
of entities under common control
Valuation of put option at present
value from fair value
Acquisition of subsidiary with
non-controlling interest
TRANSACTIONS WITH OWNERS
Contribution
BALANCE AT 31 MARCH 2015
Attributable to the equity holders of the parent
Share Revaluation
Other
Retained
premium
reserve
reserves
earnings
£’000
£’000
£’000
£’000
Noncontrolling
Total
interests
£’000
£’000
Total
equity
£’000
37,500
––––––––
249,214
––––––––
12,378
––––––––
8,400
––––––––
244,329
––––––––
551,821
––––––––
3,669
––––––––
555,490
––––––––
–
–
–
–
7,597
7,597
379
7,976
–
–
––––––––
–
–
––––––––
–
853
––––––––
–
–
––––––––
272
–
––––––––
272
853
––––––––
57
–
––––––––
329
853
––––––––
853
–
–
–
–
–
–
67
7,869
–
–
–
–
9,347
–
–
–
199,885
(3,785)
–
8,722
209,232
(3,785)
67
436
–
–
–
9,158
209,232
(3,785)
67
–
––––––––
–
––––––––
–
––––––––
–
––––––––
–
––––––––
–
––––––––
(108)
(108)
–––––––– ––––––––
46,847
––––––––
445,314
––––––––
13,231
––––––––
8,467
––––––––
252,198
––––––––
766,057
––––––––
3,997
––––––––
770,054
––––––––
–
–
9,044
–
198,641
207,685
–
207,685
–
–
–
–
3,206
3,206
–
3,206
–
–
––––––––
–
–
––––––––
–
2,194
––––––––
–
–
––––––––
–
–
––––––––
–
2,194
––––––––
–
–
––––––––
–
2,194
––––––––
–
–
2,194
–
3,206
5,400
–
5,400
–
–
–
––––––––
–
––––––––
–
–
–
––––––––
–
––––––––
–
–
11,238
––––––––
9,044
––––––––
–
–
–
––––––––
–
––––––––
–
–
201,847
––––––––
198,641
––––––––
–
–
213,085
––––––––
207,685
––––––––
–
–
–
––––––––
–
––––––––
–
–
213,085
––––––––
207,685
––––––––
–
–
–
–
43,698
43,698
180
43,878
–
–
––––––––
–
–
––––––––
–
3,334
––––––––
–
–
––––––––
113
–
––––––––
113
3,334
––––––––
66
–
––––––––
179
3,334
––––––––
3,334
–
–
–
–
–
–
–
39
2,562
43,811
–
–
–
–
–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
–
37,500
–
–
–
–
250,029
(815)
–
–
47,145
287,529
(815)
39
2,562
246
–
–
–
–
47,391
287,529
(815)
39
2,562
–
–
–
12,173
–
12,173
–
12,173
–
–
–
(6,374)
–
(6,374)
–
(6,374)
–
37,500
–
249,214
–
12,378
–
8,400
–
242,452
–
549,944
3,423
3,669
3,423
553,613
–
––––––––
37,500
–
––––––––
249,214
–
––––––––
12,378
–
––––––––
8,400
1,877
––––––––
244,329
1,877
––––––––
551,821
–
––––––––
3,669
1,877
––––––––
555,490
–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
143
CONSOLIDATED CASH FLOW STATEMENT
6 months ended 6 months ended
30 September 30 September
Notes
2015
2014
£’000
£’000
Cash generated from operations
Interest paid
Interest received
Tax paid
20
NET CASH (OUTFLOW)/INFLOW FROM
OPERATING ACTIVITIES
2,509
(5,813)
33
(867)
––––––––
(4,138)
––––––––
INVESTING ACTIVITIES
Purchase of intangible assets
Purchase of property, plant and equipment
Purchase of subsidiary (net of cash acquired)
Cash inflow from business combinations and
asset acquisitions made under common control
Purchase of investment property
Loan to shareholder repaid/(advanced)
5,588
(5,067)
–
–
––––––––
521
––––––––
Year ended
31 March
2015
£’000
4,609
(15,270)
3
(186)
––––––––
(10,844)
––––––––
8
9
21
(922)
(3,288)
(6,959)
–
(220)
–
(784)
(835)
(15,033)
10
–
(88,772)
–
––––––––
–
(1,624)
–
––––––––
3,746
(116,544)
10,875
––––––––
NET CASH USED IN INVESTING
ACTIVITIES
(99,941)
FINANCING ACTIVITIES
Proceeds from issue of shares
Costs of share issues
Issue of Convertible Bonds
Repayment of borrowings
Proceeds of new bank loans
Acquisition of derivative
Payment of obligations under finance leases
Payment of pre-acquisition dividend by a subsidiary
Loan from shareholder
19
Loan from shareholder repaid
19
NET CASH GENERATED FROM FINANCING
ACTIVITIES
NET INCREASE IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD
––––––––
200,700
(3,785)
–
(479)
–
(2,000)
(53)
(822)
–
–
––––––––
–
–
–
–
–
–
(58)
–
–
–
––––––––
100,005
(815)
110,556
(51,430)
–
–
(127)
–
93,650
(48,000)
––––––––
193,561
––––––––
(58)
––––––––
(1,381)
74,420
––––––––
203,839
85,851
––––––––
11,431
––––––––
11,431
––––––––
175,333
10,050
85,851
––––––––
144
(118,575)
––––––––
89,482
CASH AND CASH EQUIVALENTS AT
END OF PERIOD
(1,844)
––––––––
––––––––
––––––––
NOTES TO THE CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
1.
BASIS OF PREPARATION
The condensed consolidated financial statements for the six months ended 30 September 2015 and six
months ended 30 September 2014 set out in this interim financial information are unaudited and have been
prepared in accordance with International Accounting Standard 34 ‘Interim Financial Reporting’. They do
not contain all the information and disclosures presented in the Financial Statements and should be read in
conjunction with the Financial Statements for the year ended 31 March 2015.
Neither the financial information for the half year to 30 September 2015 nor the half year to 30 September
2014 was subject to an audit but has been subject to a review in accordance with the International Standard
on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent
Auditor of the Entity, issued by the Auditing Practices Board.
The financial information presented herein for the year to 31 March 2015 does not constitute full statutory
accounts, but is derived from those accounts. The Auditor’s report on those accounts was unmodified, did
not draw attention to any matters by way of an emphasis of matter and did not contain any statement under
Section 263 of the Companies (Guernsey) Law 2008.
The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable
future. Accordingly, they continue to adopt the going concern basis in preparing the interim half year
financial statements.
The Directors approved the interim financial information for the six months ended 30 September 2015 on
3 December 2015.
The principal accounting policies used in preparing the interim results are those the Group expects to apply
in its financial statements for the year ending 31 March 2016, which do not differ to those applied in the
Group’s financial statements for the year ended 31 March 2015.
The consolidated financial information covers Market Tech Holdings Limited and its subsidiaries
(collectively the “Group”). Market Tech Holdings Limited (the “Company”) is a limited company
incorporated and domiciled in Guernsey and whose shares are publicly traded. The registered office is
located at Third Floor, La Plaiderie Chambers, La Plaiderie, St Peter Port, Guernsey, GY1 1WG.
The Group is principally engaged in property investment, including management and market operation
services and Digital services.
2.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In the application of the Group’s accounting policies, the Directors are required to make judgements,
estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised, if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods.
The critical accounting estimates and judgements used in preparing the interim results are those the Group
expects will apply in its financial statements for the year ending 31 March 2016, which do not differ to those
described in detail in the Group’s financial statements for the year ended 31 March 2015.
145
3.
EXCEPTIONAL ITEMS
6 months
ended
30 September
2015
£’000
INCLUDED WITHIN ADMINISTRATIVE EXPENSES:
Onerous contract provision
Contingent consideration payable
Listing fees
Reorganisation costs
Legal and professional fees
570
3,694
849
–
1,577
––––––––
6,690
––––––––
6 months
ended
30 September
2014
£’000
Year ended
31 March
2015
£’000
–
–
–
–
313
––––––––
313
–
–
6,686
847
1,954
––––––––
9,487
––––––––
––––––––
The onerous contract provision relates to the Group’s estimated provision to exit an operational contract.
Contingent consideration payable relates to deferred cash and equity consideration of $8.5 million and
$8.7 million in connection with the Stucco Media acquisition in May 2015. The consideration is contingent
on certain employees remaining in employment for a period of up to two years following the acquisition date.
As a result a remuneration charge for the contingent consideration is being recognised over the period the
employees are required to remain employed by Stucco Media.
Listing fees are the non-recurring cost of acquiring the AIM public listing together with related transaction
costs incurred by the Group in the year to 31 March 2015. In the six months to 30 September 2015, the Group
incurred a further £849,000 costs in connection with the move from the AIM to the Full List.
Reorganisation costs relate to the exceptional costs incurred by the Group in the year to 31 March 2015, the
majority of which are in respect of the subsidiary, Fiver London Limited, within the Group’s Digital
operating segment. They reflect one-off costs the Group incurred post acquisition to reorganise Fiver London
Limited’s operations in order to achieve stronger growth in that company going forward.
Legal and professional costs relate to certain professional costs in connection with business combinations
(see Note 21) and to ongoing litigation. The ongoing litigation relates to the IBRC proceedings (for the misselling of interest rate swaps and a breach by IBRC of its terms) and to proceedings against certain
companies within the Group for damages caused after a fire.
4.
OPERATING SEGMENTS
The decision-maker is the person or group that allocates resources to and assesses the performance of the
operating segments of an entity. The Group has determined that its chief operating decision-makers are the
Board of Directors of Market Tech Holdings Limited. The Board evaluates performance on the basis of
segment adjusted EBITDA.
The Directors have determined the operating segments based on the reports reviewed in making strategic
decisions. These are considered to be:
Property and other
Digital
Restaurant (discontinued operation)
146
The segment information provided for the reportable segments for the period ended 30 September 2015 is
as follows:
Property
and other
Digital‡
Total
£’000
£’000
£’000
Total segment revenue from external customers
13,811
48,404
62,215
Adjusted EBITDA*
6,670
3,916
10,586
OTHER ITEMS INCLUDED IN OPERATING PROFIT:
Net gain from fair value adjustment of investment property
16,410
Exceptional items
(6,690)
Depreciation & amortisation
(2,565)
Foreign exchange profit/(loss)
(445)
Share-based payment expense
(67)
NOT INCLUDED IN OPERATING PROFIT:
Interest income
33
Interest payable and similar charges
(6,222)
Fair value adjustment of interest rate derivatives
(913)
–––––––––
Profit before tax
10,127
Profit for the period from continuing operations
7,976
Profit for the period from discontinued operations
–
–––––––––
Profit for the period
7,976
–––––––––
Total assets
1,045,861
88,369
1,134,230
–––––––––
–––––––––
–––––––––
Total liabilities
(321,719)
(42,457)
(364,176)
–––––––––
–––––––––
–––––––––
Net assets
724,142
45,912
770,054
––––––––– ––––––––– –––––––––
INCLUDED WITHIN TOTAL ASSETS ARE:
Non-current asset additions
24,010
The segment information provided for the reportable segments for the period ended 30 September 2014 is
as follows:
Property
and other
Digital‡
Total
£’000
£’000
£’000
Total segment revenue from external customers
9,290
–
9,290
Adjusted EBITDA*
5,498
–
5,498
OTHER ITEMS INCLUDED IN OPERATING PROFIT:
Net gain from fair value adjustment of investment property
8,413
Exceptional items
(313)
Depreciation & amortisation
(252)
NOT INCLUDED IN OPERATING PROFIT:
Interest income
150
Interest payable and similar charges
(9,461)
Fair value adjustment of interest rate derivatives
(462)
–––––––––
Profit before tax
3,573
–––––––––
Profit for the period from continuing operations
3,451
Loss for the period from discontinued operations
(245)
–––––––––
Profit for the period
3,206
––––––––
Total assets
459,700
–
459,700
––––––––
––––––––
––––––––
Total liabilities
(246,615)
–
(246,615)
––––––––
––––––––
––––––––
Net assets
213,085
–
213,085
––––––––
INCLUDED WITHIN TOTAL ASSETS ARE:
Non-current asset additions
––––––––
––––––––
1,844
147
*
Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation and adjusted for fair value
investment property movements, share based payment charges, exceptional items and foreign currency exchange gain/(loss).
‡
The Digital segment was acquired by the Group as part of the restructuring that occurred on 5 December 2014 and therefore there
were no Digital results for the Group for the period ended 30 September 2014. The results for Digital for the year ended 31 March
2015 are for the period from the date of acquisition.
The segment information provided for the reportable segments for the year ended 31 March 2015 is as
follows:
Total segment revenue from external customers
Adjusted EBITDA*
ITEMS INCLUDED IN OPERATING PROFIT:
Net gain from fair value adjustment of investment property
Exceptional items
Depreciation & amortisation
Foreign exchange loss
Share based payment expense
NOT INCLUDED IN OPERATING PROFIT:
Finance income
Interest payable and similar charges
Fair value adjustment of interest rate derivatives
Profit before tax
Property
and other
£’000
Digital‡
£’000
Total
£’000
20,071
11,529
10,010
489
30,081
12,018
60,539
(9,487)
(624)
(500)
(39)
Profit for the year from continuing operations
Loss for the year from discontinued operations
Profit for the year
Total assets
837,529
––––––––
(313,880)
––––––––
523,649
Total liabilities
Net assets
––––––––
INCLUDED WITHIN TOTAL ASSETS ARE:
Non-current asset additions
60,858
––––––––
(29,017)
––––––––
31,841
––––––––
3
(16,902)
(937)
44,071
––––––––
44,254
(376)
––––––––
43,878
––––––––
898,387
––––––––
(342,897)
––––––––
555,490
––––––––
19,649
*
Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation and adjusted for fair value
investment property movements, share based payment charges, exceptional items and foreign currency exchange gain/(loss).
‡
The Digital segment was acquired by the Group as part of the restructuring that occurred on 5 December 2014 and therefore there
were no Digital results for the Group for the period ended 30 September 2014. The results for Digital for the year end 31 March
2015 are for the period from the date of acquisition.
Including discontinued operations, revenue for the Group was £62,346,000 in the period ended 30 September
2015, £11,511,000 in the period ended 30 September 2014 and £34,341,000 in the year ended 31 March
2015. Adjusted EBITDA was £10,830,000 in the period ended 30 September 2015, £4,671,000 in the period
ended 30 September 2014 and £11,815,000 in the year ended 31 March 2015.
148
GEOGRAPHICAL ANALYSIS OF REVENUE AND NET ASSETS
Geographical analysis of revenue and net assets is as follows:
REVENUE
UK
Europe
USA
Rest of World
6 months
ended
30 September
2015
£’000
6 months
ended
30 September
2014
£’000
Year ended
31 March
2015
£’000
25,443
5,730
14,466
16,576
––––––––
62,215
9,290
–
–
–
––––––––
9,290
26,325
1,546
568
1,642
––––––––
30,081
As at
30 September
2015
£’000
As at
30 September
2014
£’000
As at
31 March
2015
£’000
740,448
15,881
13,725
––––––––
770,054
213,085
–
–
––––––––
213,085
540,816
14,674
–
––––––––
555,490
––––––––
––––––––
––––––––
NET ASSETS
UK
Europe
Israel
––––––––
––––––––
––––––––
During the periods ended 30 September 2014, 31 March 2015 and 30 September 2015 there were no
customers who individually accounted for more than 10 per cent. of the total revenue of the Group.
5.
OPERATING LEASE COMMITMENTS
LESSOR
As a market operator, the Group enters into licences at will with market stall holders. These are short term
licences cancellable within one week. In addition, the Group holds some operating leases on other real estate
assets. Future minimum rents receivable under non-cancellable operating leases are set out in the table
below, calculated on the assumption that any tenant with a break option does exercise that option:
Within one year
In one to two years
Between two and five years
In over five years
As at
30 September
2015
£’000
As at
30 September
2014
£’000
As at
31 March
2015
£’000
10,849
9,023
24,279
35,293
––––––––
79,444
2,108
1,754
3,815
5,801
––––––––
13,478
8,938
–
28,081
32,494
––––––––
69,513
––––––––
149
––––––––
––––––––
LESSEE
The Group is a lessee of warehouse and office space. Future minimum rents payable under non-cancellable
operating leases are set out in the table below:
As at
30 September
2015
£’000
As at
30 September
2014
£’000
As at
31 March
2015
£’000
971
826
1,443
2,908
––––––––
6,148
–
–
–
–
––––––––
–
50
–
1,131
3,069
––––––––
4,250
6 months
ended
30 September
2015
£’000
6 months
ended
30 September
2014
£’000
Year ended
31 March
2015
£’000
4,436
59
4,312
111
8,823
117
1,041
2,736
145
1,041
–
–
2,083
–
–
Within one year
Between one and two years
Between two and five years
In over five years
––––––––
6.
––––––––
––––––––
FINANCE COSTS
CONTINUING FACILITIES
Senior debt interest
Bank loans, overdrafts and fees
Amortisation of loan arrangement fees relating to
Senior debt
Convertible Bonds interest
Unwinding of discount on present value of put option
Unwinding of discount to present value on
deferred consideration
Fair value adjustment of interest rate derivatives
LESS: AMOUNTS CAPITALISED (NOTE 10)
EXPIRED FACILITIES
Mezzanine debt
Amortisation of arrangement fees relating to Mezzanine debt
Exceptional – early repayment charge
Finance costs recognised in profit or loss
229
913
9,559
(2,424)
––––––––
7,135
–
462
5,926
–
––––––––
5,926
–
937
11,960
(772)
––––––––
11,188
–
–
–
––––––––
–
––––––––
7,135
3,141
856
–
––––––––
3,997
––––––––
9,923
3,685
1,125
1,841
––––––––
6,651
––––––––
17,839
––––––––
––––––––
150
––––––––
––––––––
––––––––
––––––––
7.
EARNINGS PER SHARE
NUMBER OF SHARES
Weighted average number of ordinary shares for
basic earnings per share
Effects of dilution from:
Share options
Convertible Bonds
Bonus issue
Weighted average number of ordinary shares
adjusted for the effect of dilution
6 months
ended
30 September
2015
Number
6 months
ended
30 September
2014+
Number
Year ended
31 March
2015
Number
419,078,451
231,237,899
272,287,267
98,921
–
1,905,252
–––––––––––
–
–
–
–––––––––––
47,620
102,740
–
–––––––––––
421,082,624
231,237,899
272,437,627
6 months
ended
30 September
2015
£’000
6 months
ended
30 September
2014
£’000
Year ended
31 March
2015
£’000
7,597
3,451
44,074
––––––––––– ––––––––––– –––––––––––
EARNINGS
CONTINUING OPERATIONS ATTRIBUTABLE TO
OWNERS OF THE PARENT
Earnings for basic and diluted earnings per share being
net profit from continuing operations attributable to the
owners of the parent
DISCONTINUED OPERATIONS
Loss for the period from discontinued operations
Earnings for basic and diluted earnings per share being net
profit from discontinued operations
ATTRIBUTABLE TO THE OWNER OF THE PARENT
Profit for the period attributable to the owners of the parent
Earnings for basic and diluted earnings per share being
attributable to the owners of the parent
EARNINGS PER SHARE FROM CONTINUING
OPERATIONS ATTRIBUTABLE TO THE OWNERS
OF THE PARENT
Basic earnings per share (pence)
Diluted earnings per share (pence)
EARNINGS PER SHARE FROM DISCONTINUED
OPERATIONS
Basic earnings per share (pence)
Diluted earnings per share (pence)
EARNINGS PER SHARE ATTRIBUTABLE TO THE
OWNERS OF THE PARENT
Basic earnings per share (pence)
Diluted earnings per share (pence)
151
–
(245)
(376)
–
(245)
(376)
7,597
3,206
43,698
7,597
3,206
43,698
1.81
1.80
1.49
1.49
16.19
16.18
(0.10)
(0.10)
(0.14)
(0.14)
1.39
1.39
16.05
16.04
–
–
1.81
1.80
+
The earnings per share for the period to 30 September 2014 have been restated to take account of shares issued on the listing of
the Company on the AIM Market, shares issued to the major shareholders in consideration for the assignment of debt and shares
issued in relation to the acquisition of Fiver London Limited. Shares that were issued at below market value were deemed to be
a bonus issue related to the number of shares which would have been issued at market value.
ADJUSTED EBITDA PER SHARE
Adjusted EBITDA used to calculate adjusted EBITDA per share is defined as Earnings Before Interest,
Taxes, Depreciation, Amortisation and adjusted for fair value investment property movements, share based
payment charges, exceptional items and foreign currency exchange gain/(loss).
6 months
ended
30 September
2015
£’000
6 months
ended
30 September
2014
£’000
Year ended
31 March
2015
£’000
10,586
5,498
12,018
2.53
2.38
4.41
2.51
2.38
4.41
10,207
5,498
11,838
2.44
2.38
4.35
2.42
2.38
4.35
Adjusted EBITDA for the period from continuing
operations
Adjusted EBITDA per share from continuing
operations – basic (pence)
Adjusted EBITDA per share from continuing
operations – diluted (pence)
Adjusted EBITDA for the period from continuing
operations attributable to the owner of the parent
Adjusted EBITDA per share from continuing
operations attributable to the owner of the
parent – basic (pence)
Adjusted EBITDA per share from continuing
operations attributable to the owner of the
parent – diluted (pence)
8.
INTANGIBLE ASSETS
COST
AT 1 APRIL 2014 AND
30 SEPTEMBER 2014
Additions
Acquisition – common control
transactions
Acquisition – business
combinations
Foreign exchange differences
AT 31 MARCH 2015
Additions
Disposals
Acquisition – business
combinations
Measurement period adjustment
to goodwill
Foreign exchange differences
AT 30 SEPTEMBER 2015
Goodwill Trademarks
£’000
£’000
Brand
£’000
Domain
Website
names Development
£’000
£’000
Customer
list
£’000
Total
£’000
–
–––––––
–
71
–––––––
–
–
–––––––
–
–
–––––––
35
–
––––––––
749
–
–––––––
–
71
–––––––
784
5,496
–
1,766
317
1,038
229
8,846
14,648
5
–––––––
20,149
–––––––
–
–
–
–
–––––––
71
–––––––
–
–
4,507
84
–––––––
6,357
–––––––
–
–
–
–
–––––––
352
–––––––
299
–
3,601
–
–
–
3,278
14,708
–
–
–––––––
71
–––––––
–
63
–––––––
6,420
–––––––
–
–
–––––––
651
–––––––
–
110
––––––––
11,354
––––––––
–
98
–––––––
19,088
–––––––
(2,917)
–
–––––––
20,833
–––––––
152
5,553
104
––––––––
7,444
––––––––
623
(101)
3,979
74
–––––––
4,282
–––––––
–
–
28,687
267
–––––––
38,655
–––––––
922
(101)
21,587
(2,917)
271
–––––––
8,417
–––––––
Goodwill Trademarks
£’000
£’000
AMORTISATION
AT 31 MARCH 2014 AND
30 SEPTEMBER 2014
Amortisation
AT 31 MARCH 2015
Amortisation
Foreign exchange differences
AT 30 SEPTEMBER 2015
NET BOOK VALUE
AT 1 APRIL 2014 AND
30 SEPTEMBER 2014
AT 31 MARCH 2015
AT 30 SEPTEMBER 2015
9.
–
–
–
–
–
–
–––––––
–
–––––––
–
–––––––
20,149
–––––––
20,833
Brand
£’000
Domain
Website
names Development
£’000
£’000
Customer
list
£’000
Total
£’000
–––––––
–
–––––––
–
88
88
403
7
–––––––
498
–––––––
–
4
4
50
–
–––––––
54
–––––––
–
67
67
1,005
11
––––––––
1,083
––––––––
–
11
11
808
20
–––––––
839
–––––––
–
170
170
2,266
38
–––––––
2,474
–––––––
71
–––––––
71
–––––––
71
–
–––––––
6,269
–––––––
5,922
–
–––––––
348
–––––––
597
–
––––––––
7,377
––––––––
10,271
–
–––––––
4,271
–––––––
18,249
71
–––––––
38,485
–––––––
55,943
––––––– ––––––– ––––––– ––––––– –––––––– ––––––– –––––––
PROPERTY, PLANT AND EQUIPMENT
COST
AT 1 APRIL 2014
Additions
Revaluation movement
AT 30 SEPTEMBER 2014
Additions
Revaluation movement
Acquisition – common control
transactions
Acquisition – business combinations
Transfer to Investment Property
(Note 10)
Exchange differences
AT 31 MARCH 2015
Additions
Disposals
Revaluation movement
Acquisition – business combinations
Exchange differences
Transfer from Investment Property
(Note 10)
AT 30 SEPTEMBER 2015
Land and
buildings
£’000
Leasehold
Improvements
£’000
Fixtures,
fitting and
office
equipment
£’000
Plant and
equipment
£’000
Total
£’000
12,334
––––––––
–
2,194
––––––––
14,528
––––––––
–
1,140
–
––––––––
–
–
––––––––
–
––––––––
257
–
1,070
––––––––
83
–
––––––––
1,153
––––––––
8
–
1,477
––––––––
107
–
––––––––
1,584
––––––––
380
–
14,881
––––––––
190
2,194
––––––––
17,265
––––––––
645
1,140
–
–
209
–
81
95
54
139
344
234
(15,668)
–
––––––––
–
––––––––
–
–
853
–
–
–
–
––––––––
466
––––––––
147
–
–
–
–
–
2
––––––––
1,339
––––––––
2,313
–
–
1
5
–
5
––––––––
2,162
––––––––
829
(4)
–
14
7
(15,668)
7
––––––––
3,967
––––––––
3,289
(4)
853
15
12
6,116
––––––––
6,969
––––––––
–
––––––––
613
––––––––
–
––––––––
3,658
––––––––
–
––––––––
3,008
––––––––
6,116
––––––––
14,248
––––––––
153
Land and
buildings
£’000
DEPRECIATION
AT 1 APRIL 2014
799
––––––––
Charge for the period*
131
––––––––
AT 30 SEPTEMBER 2014
930
––––––––
Charge for the period
207
Transfer to Investment Property (Note 10)
(1,137)
Exchange differences
–
––––––––
AT 31 MARCH 2015
–
––––––––
Charge for the period
69
Exchange differences
–
––––––––
AT 30 SEPTEMBER 2015
69
––––––––
NET BOOK VALUE
AT 31 MARCH 2014
11,535
AT 30 SEPTEMBER 2014
AT 31 MARCH 2015
AT 30 SEPTEMBER 2015
*
––––––––
––––––––
––––––––
––––––––
13,598
–
6,900
Leasehold
Improvements
£’000
Fixtures,
fitting and
office
equipment
£’000
Plant and
equipment
£’000
–
––––––––
–
––––––––
–
––––––––
16
–
–
––––––––
16
––––––––
20
–
––––––––
36
––––––––
794
––––––––
25
––––––––
819
––––––––
142
–
3
––––––––
964
––––––––
94
–
––––––––
1,058
––––––––
1,228
––––––––
66
––––––––
1,294
––––––––
40
–
3
––––––––
1,337
––––––––
116
1
––––––––
1,454
––––––––
–
276
249
––––––––
––––––––
––––––––
––––––––
–
450
577
––––––––
––––––––
––––––––
––––––––
334
375
2,600
––––––––
––––––––
––––––––
––––––––
290
825
1,554
Total
£’000
2,821
––––––––
222
––––––––
3,043
––––––––
405
(1,137)
6
––––––––
2,317
––––––––
299
1
––––––––
2,617
––––––––
12,060
––––––––
––––––––
––––––––
––––––––
14,222
1,650
11,631
Included in the charge for the year is £nil in relation to discontinued operations (period ended 30 September 2014: £nil, year
ended 31 March 2015: £173,000).
Disclosures relating to fair value measurement of land and buildings are shown in Note 10.
The transfer from investment property to land and buildings in the period relates to office space previously
held as investment property and is now occupied for the Group’s own use.
The transfer of land and buildings to investment property in the year ended 31 March 2015 was the result of
the Group ceasing to trade its restaurant operations.
10.
INVESTMENT PROPERTIES
£’000
AT 1 APRIL 2014
Additions
Revaluation Movements
AT 30 SEPTEMBER 2014
Additions
Acquisition – common control transactions
Acquisition –asset acquisitions
Transfer from property, plant and equipment (Note 9)
Revaluation movements
AT 31 MARCH 2015
154
413,065
1,624
8,413
––––––––
423,102
––––––––
16,406
148,250
99,285
14,531
52,126
––––––––
753,700
––––––––
£’000
19,799
75,958
(6,116)
16,410
––––––––
859,751
Additions
Acquisition – business combinations and asset acquisitions
Transfer to property, plant and equipment (Note 9)
Revaluation movements
AT 30 SEPTEMBER 2015
––––––––
VALUATION PROCESS
Investment properties are stated at fair value as at the financial period end based on external valuations
performed by professionally qualified valuers. The Group’s property portfolio is valued by Jones Lang
LaSalle Limited on the basis of fair value in accordance with The RICS Valuation – Professional Standards.
The valuations are based on information provided by the Group which includes a tenancy schedule, as
reconciled (tenant, rent, lease commencement, lease expiry, applicable break options, areas, details of any
additional income, operating costs and net operating income forecast) and any supplementary
documentation, such as copy leases and details of tenure.
The valuations are prepared using industry standard valuation software, Argus Capitalisation and Argus
Developer. The valuations are based on assumptions which are typically market related, such as market rents
and yields and are based on the professional judgment of the respective valuer and market observations. Each
property has been valued in isolation based on the unique nature, characteristics and perceived risk of that
property.
As part of each valuation exercise, discussion of the valuation process, methodology and results takes place
at a meeting between the external valuers and key management at which the key assumptions and estimates
are reviewed together with consideration of the valuers’ reasons for significant valuation movements on
individual properties from the previous valuations.
Interest on debt has been capitalised since construction commenced, resulting in £2,424,000 (period ended
30 September 2014: £nil, year ended 31 March 2015: £772,000) interest being capitalised in the period.
VALUATION METHODOLOGY
The fair value of investment properties and land and buildings classified as property, plant and equipment is
determined using the ‘investment method’ whereby capitalisation yields derived from market transactions
involving comparable investment properties are applied to the estimated net current and future cash flows
expected to be generated by the investment property, which the valuer calculates using comparable market
information, to obtain a market rental value.
The fair value of an investment property undergoing construction is derived using the ‘residual method’
whereby the costs required to complete the development, including a notional cost of finance and an
estimated risk factor or “profit on cost”, are deducted from the net development value arrived at under the
‘investment method’.
The key unobservable inputs used in the valuation of the properties at 30 September 2015 are as follows:
Investment property type
Markets
Non markets
Under construction
Other
Total
Fair Value
£’000
338,800
215,401
272,500
33,050
––––––––
859,751
Valuation
Investment
Investment
Residual
Residual
–––––––
155
Market Rent PSF PA
Min
Max
£
£
10
25
10
25
250
205
350
250
Equivalent yield (%)
Min
Max Blended
%
%
%
5
4
4.5
4.75
6.35
5.5
5.5
5.25
5.38
4.79
5.35
n/a
SENSITIVITY MEASUREMENT TO VARIATIONS IN THE SIGNIFICANT UNOBSERVABLE
INPUTS
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair
value hierarchy of the Group’s property portfolio, together with the impact of significant movements in these
inputs on the fair value measurement are shown below:
Unobservable input
Impact on
fair value
measurement
of significant
increase in input
Impact on
fair value
measurement
of significant
decrease in input
Market rent per square foot per annum
Equivalent yield
Increase
Decrease
Decrease
Increase
A sensitivity analysis was performed to ascertain the impact on the fair value of a 25 basis point shift in true
equivalent yield and a 250 basis point shift in market rent per square foot per annum.
MARKET RENT PER SQUARE FOOT PER ANNUM (PSF PA)
BP Shift
+250 bp
-250 bp
% Change
2.67%
(2.65%)
EQUIVALENT YIELD
BP Shift
+25 bp
-25 bp
% Change
(4.71%)
5.20%
There are inter-relationships between these inputs as they are partially determined by market rate conditions.
An increase in the equivalent yield may accompany an increase in gross market rent per square foot per
annum and would mitigate its impact on the fair value measurement.
The historical cost of the Group’s investment properties is as follows:
6 months
ended
30 September
2015
£’000
Brought forward historical cost
Additions
Disposals
Acquisition – common control transactions
Acquisition – Asset acquisition
Transfer (to)/from property, plant and equipment
497,543
19,799
–
–
75,958
(6,116)
––––––––
587,184
Carried forward historical cost
––––––––
156
6 months
ended
30 September
2014
£’000
Year ended
31 March
2015
£’000
217,447
1,624
–
–
–
–
––––––––
219,071
217,447
18,030
–
148,250
99,285
14,531
––––––––
497,543
––––––––
––––––––
11.
TRADE AND OTHER RECEIVABLES
Current
As at
As at
30 September 30 September
2015
2014
£’000
£’000
Trade receivables
Other receivables
Shareholder loans
Prepayments and accrued income
17,938
5,877
–
1,403
––––––––
25,218
311
1,457
–
713
––––––––
2,481
Non-current
As at
As at
As at
31 March 30 September 30 September
2015
2015
2014
£’000
£’000
£’000
As at
31 March
2015
£’000
8,678
4,171
–
537
––––––––
13,386
–
127
–
–
––––––––
127
–
81
–
–
––––––––
81
–
–
9,147
–
––––––––
9,147
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
12.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents
As at
30 September
2015
£’000
As at
30 September
2014
£’000
As at
31 March
2015
£’000
175,333
10,050
85,851
––––––––
––––––––
––––––––
Included in cash and cash equivalents is an amount of £6.88 million (period ended 30 September 2014:
£8.10 million, year ended 31 March 2015: £8.49 million) in relation to restricted Capex accounts
£6.30 million (period ended 30 September 2014: £8.10 million, year ended 31 March 2015: £7.25 million)
and interest reserve account £0.58 million (period ended 30 September 2014: £nil, year ended 31 March
2015: £1.24 million).
13.
TRADE AND OTHER PAYABLES
Current
As at
As at
30 September 30 September
2015
2014
£’000
£’000
Trade payables
Accruals
Other payables
Deferred consideration
Put option
6,972
19,390
6,930
2,554
–
––––––––
35,846
1,486
3,190
2,380
–
–
––––––––
7,056
Non-current
As at
As at
As at
31 March 30 September 30 September
2015
2015
2014
£’000
£’000
£’000
As at
31 March
2015
£’000
5,133
12,486
3,271
2,071
–
––––––––
22,961
–
–
–
–
9,727
––––––––
9,727
–
–
154
–
10,008
––––––––
10,162
–
–
–
–
–
––––––––
–
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
The put option was issued on 13 March 2015 upon acquisition of Glispa (see Note 21) and grants the seller
the option to sell their 25 per cent. share to the Company for €15 million between years 2 and 4 after the
acquisition. When measuring the consideration paid on acquisition, the put option is recognised at fair value.
On consolidation, the put option is presented at the present value of the €15 million, being management’s
best estimate of the amount due on exercise of the put option.
157
14.
BORROWINGS
As at
30 September
2015
£’000
UNSECURED BORROWINGS AT AMORTISED COST
Convertible Bonds
SECURED BORROWINGS AT AMORTISED COST
Bank loans
Current
Non-current
As at
30 September
2014
£’000
As at
31 March
2015
£’000
107,994
109,355
––––––––
–
––––––––
––––––––
–
6,354
182,509
––––––––
188,863
–
50,827
182,513
––––––––
233,340
–
6,839
181,471
––––––––
188,310
––––––––
––––––––
––––––––
ANALYSIS OF BORROWINGS
Borrowings are classified based on the amounts that are expected to be settled within the next 12 months and
after more than 12 months from the reporting date, as follows:
As at
30 September
2015
£’000
Current liabilities
Non-current liabilities (including Convertible Bonds)
Unamortised finance costs and loan arrangement fees
6,354
294,645
300,999
––––––––
(2,781)
––––––––
298,218
––––––––
THE GROUP’S PRINCIPAL BORROWING
ARRANGEMENTS ARE:
Facility amount
Amount drawn down
Committed facility not drawn down
Interest rate
Repayment date
Nomura Mezzanine:
Nomura Senior:
Bank of Cyprus:
As at
30 September
2014
£’000
53,307
185,290
238,597
––––––––
(5,257)
––––––––
233,340
––––––––
As at
31 March
2015
£’000
6,839
293,284
300,123
––––––––
(3,819)
––––––––
296,304
––––––––
As at
30 September
2015
£’000
As at
30 September
2014
£’000
As at
31 March
2015
£’000
191,644
191,644
–
see below
–
27/01/2017
On demand
238,597
238,597
–
see below
27/01/15
27/01/17
–
192,129
192,129
–
see below
–
27/01/17
On demand
The Nomura facilities available in the period ended 30 September 2015 comprised of senior debt of
£185.29 million (31 March 2015: £185.29 million, 30 September 2014: £185.29 million). The mezzanine
debt of £56.6 million was repaid in full, including capitalised interest and early repayment fee, on 23 October
2014. The interest rate on senior debt is 4.13 per cent. plus 3 month LIBOR. The interest rate on the
mezzanine debt was fixed at 12.55 per cent. per annum. The facilities are repayable in full on the repayment
date.
The Bank of Cyprus facilities available during the period ended 30 September 2015 are comprised of an
acquisition loan of £5.8 million and a renovation loan of £3.85 million less the agreed amortisation payments
per the facilities. The outstanding balances as at 30 September 2015 were £3.9 million and £2.4 million
(31 March 2015 were £4.3 million and £2.6 million and at 5 December 2014 were £4.4 million and
£2.6 million). The interest rate on the debt is 1.15 per cent. plus 3 month LIBOR.
158
NET DEBT
As at
30 September
2015
£’000
Total borrowings
Less: cash and cash equivalents
Net debt
As at
30 September
2014
£’000
298,218
(175,333)
––––––––
122,885
233,340
(10,050)
––––––––
223,290
296,304
(85,851)
––––––––
210,453
770,054
892,939
14%
213,085
436,375
51%
555,490
765,943
27%
––––––––
Total equity
Total capital
Gearing ratio
As at
31 March
2015
£’000
––––––––
––––––––
DERIVATIVE FINANCIAL INSTRUMENTS
The following derivative financial instruments were in place at each balance sheet date:
Interest rate cap (2 year)
Interest rate cap (3 year)
Swap option
As at 30 September 2015
Principal
amount
Fair value
£’000
£’000
As at 30 September 2014
Principal
amount
Fair value
£’000
£’000
As at 31 March 2015
Principal
amount
Fair Value
£’000
£’000
95,054
90,251
200,000
––––––––
385,305
95,054
90,251
–
––––––––
185,305
95,054
90,251
–
––––––––
185,305
–
6
1,151
––––––––
1,157
154
391
–
––––––––
545
3
67
–
––––––––
70
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
6 months
ended
30 September
2015
£’000
MOVEMENTS IN THE FAIR VALUE OF
DERIVATIVE FINANCIAL INSTRUMENT WERE:
At 1 April
Swap option premium paid
Fair value movement (Note 6)
At 30 September/31 March
70
2,000
(913)
––––––––
1,157
––––––––
Derivative financial instruments are categorised as follows:
Financial Assets
Within one year
In more than one year
6 months
ended
30 September
2014
£’000
1,007
–
(462)
––––––––
545
––––––––
Year ended
31 March
2015
£’000
1,007
–
(937)
––––––––
70
––––––––
As at
30 September
2015
£’000
As at
30 September
2014
£’000
As at
31 March
2015
£’000
1,157
–
––––––––
1,157
–
545
––––––––
545
70
–
––––––––
70
––––––––
––––––––
––––––––
In September 2015, the Group entered into an interest rate swap option which was valued at September 2015
based on market rate.
159
15.
DEFERRED TAXATION
The following are the major deferred tax assets and liabilities recognised by the Group and movements
thereon during the current and prior reporting period.
As at
30 September
2015
£’000
Deferred tax liabilities
Deferred tax assets
(13,856)
88
––––––––
(13,768)
––––––––
6 months
ended
30 September
2015
£’000
At 1 April
Acquisition – common control transactions
Acquisition – business combinations
Movement on intangibles
Movement due to revaluation of property during
the period (Note 10)
8,530
–
4,733
(20)
525
––––––––
13,768
AT 30 SEPTEMBER/31 MARCH
––––––––
As at
30 September
2014
£’000
–
–
––––––––
–
––––––––
As at
31 March
2015
£’000
(8,530)
–
––––––––
(8,530)
––––––––
6 months
ended
30 September
2014
£’000
Year ended
31 March
2015
£’000
–
–
–
–
–
3,609
4,160
78
–
––––––––
–
683
––––––––
8,530
––––––––
––––––––
The deferred tax liability at 31 March 2015 and 30 September 2015 relates to the chargeable gain that would
arise on the sale of the property portfolio at each balance sheet date as well as deferred tax arising on the
acquired intangibles on the purchase of Glispa and Stucco Media.
Deferred tax assets of £13.7 million as at 30 September 2015 (30 September 2014: £11.2 million, 31 March
2015: £12.4 million) have not been recognised in respect of losses totalling £64.1 million (30 September
2014: £56.0 million, 31 March 2015: £62.1 million).
These assets have not been recognised principally because the Directors deem the timing of any benefits that
might arise in the future not to be probable. These losses are not subject to time expiry and are available for
utilisation against profits arising in future periods in territories in which they have arisen.
16.
ADJUSTED NET ASSET VALUE PER SHARE
Adjusted net assets are defined as the net assets of the property and other operating segment. Adjusted net
asset value per share has been calculated with reference to the Group’s adjusted net assets, divided by the
number of shares in issue as at the financial year end.
Adjusted net asset value per share
As at
30 September
2015
Pence
As at
30 September
2014
Pence
As at
31 March
2015
Pence
154.58
––––––––
92.15
––––––––
––––––––
160
139.64
Adjusted net asset value (Note 4)
Number of ordinary shares in issue
+
17.
As at
30 September
2015
£’000
As at
30 September
2014
£’000
As at
31 March
2015
£’000
––––––––
724,142
––––––––
213,085
––––––––
As at
30 September
2015
Number
As at
30 September
2014+
Number
As at
31 March
2015
Number
468,468,196
231,237,899
375,000,000
523,649
–––––––––– –––––––––– ––––––––––
The net asset value per share as at 30 September 2014 has been restated to take account of shares issued on the listing of the
Company on the AIM Market, shares issued to the major shareholders in consideration for the assignment of debt and shares
issued in relation to the acquisition of Fiver London Limited. Shares that were issued at below market value were deemed to be
a bonus issue related to the number of shares which would have been issued at market value.
CONTINGENT LIABILITIES
As at 30 September 2015, the Group had given assurances aggregating to £500,000 (30 September 2014 and
31 March 2015: £500,000) for construction being undertaken. The Directors are not aware of any other
contingencies that may have a significant impact on the financial position of the Group.
18.
CAPITAL COMMITMENTS
The Group’s material capital commitments relate principally to the Hawley Wharf development and the
continued development of the co-working space. This amounted to £22.2 million as at 30 September 2015,
£7.4 million as at 31 March 2015 all relating to the Hawley Wharf development and £nil at 30 September
2014.
19.
RELATED PARTY TRANSACTIONS
THE FOLLOWING TRANSACTIONS AROSE WITH PARTIES UNDER COMMON CONTROL:
The Group has entered into a number of property lease transactions with Gaming Technology Solutions
Limited, and the guarantor, Playtech Software Limited. The Group received rental income of £407,504 (net
of VAT) (period ended 30 September 2014: £nil, year ended 31 March 2015: £264,000). At 30 September
2015 no amount was due to the Group (30 September 2014: £nil, 31 March 2015: £nil).
The Group has entered into a number of merchant services agreements with Safecharge Limited. The Group
paid transaction fees of £77,000 in the period ended 30 September 2015 (30 September 2014: £nil, 31 March
2015: £100). At 30 September 2015 an amount of £160,000 was owed to the Group (30 September 2014:
£nil, 31 March 2015: £2,900).
The Group and Viaden Enterprises (Cyprus) Limited entered into a software development services
agreement whereby the Group will receive software development services from Viaden Enterprises (Cyprus)
Limited. The Group capitalised fees of £198,900 in the period ended 30 September 2015 (30 September
2014: £nil, 31 March 2015: £nil). At 30 September 2015, an amount of £14,500 was owed by the Group
(30 September 2014: £nil, 31 March 2015: £nil).
The Group and Skywind Holdings Limited entered into a software development services agreement whereby
the Group will receive software development services from Skywind Holdings Limited. The Group
capitalised fees of £63,300 in the period ended 30 September 2015 (30 September 2014: £nil, 31 March
2015: £nil). At 30 September 2015, an amount of £35,600 was owed by the Group (30 September 2014: £nil,
31 March 2015: £nil).
161
The Group entered into agreements to provide user acquisition services to the following companies in
relation to specified advertising campaigns:
•
Viaden Enterprises Limited. The Group recognised sales of US$3,000 in the period ended
30 September 2015, all of which was owed to the Group at the period end (30 September 2014: £nil,
31 March 2015: £nil);
•
Plamee Ltd. The Group recognised sales of US$51,000 in the period ended 30 September 2015, all of
which was owed to the Group at the period end (30 September 2014: £nil, 31 March 2015: £nil);
•
Skywind Holdings Limited. The Group recognised sales of US$29,000 in the period ended
30 September 2015, all of which was owed to the Group at the period end (30 September 2014: £nil,
31 March 2015: £nil);
•
PT Marketing Services Limited. The Group recognised sales of US$2,000 in the period ended
30 September 2015, all of which was owed to the Group at the period end (30 September 2014: £nil,
31 March 2015: £nil); and
•
Easydock Investments Limited. The Group recognised sales of US$5,000 in the period ended
30 September 2015, all of which was owed to the Group at the period end (30 September 2014: £nil,
31 March 2015: £nil).
At 31 March 2014 an amount of £10.9 million was due from The Goodheart Trust (“GHT”), the sole
beneficiary of which is Teddy Sagi. The loan was an interest free loan and at 31 March 2014 had been
discounted based on the assumption of 4 per cent. interest rate, with the resulting discount being treated as
a distribution. As part of the repayment of the Group’s mezzanine bank borrowings, the £10.9 million
outstanding from GHT was repaid. The discount recognised in the prior year has been reversed and treated
as a contribution. A further amount of £45.6 million was lent to the Group by Citwax Investments Limited
(“Citwax”). As part of the transactions and the business combinations relating to companies and assets
previously under common control, the Group assumed debt totalling £185,399,203 owed to Citwax, which
included the £45.6 million loan above. On 16 December 2014 the debt was extinguished through the issue
of 323,886,500 Ordinary Shares by the Company.
On 16 December 2014, the Group entered into a working capital loan facility (“the Working Capital Facility
Agreement”) with Citwax, for an unsecured amount of £60 million to finance the general working capital
requirements of the Group. The Working Capital Facility Agreement carries an interest rate of 4 per cent. per
annum and is repayable within three years however can be repaid early by the Group free of any interest
penalty. In the periods to 30 September 2015 and to 31 March 2015 no amount was drawn on Working
Capital Facility Agreement. This Working Capital Facility Agreement is guaranteed by GHT and Teddy Sagi.
On 27 February 2015, the Group entered into an acquisition loan facility (“the Acquisition Facility”) with
Citwax, in connection with the acquisition of The Interchange Building and Camden Wharf. The Acquisition
Facility was for an unsecured loan of £125 million. The Acquisition Facility carried an interest rate of 4 per
cent. per annum payable quarterly in arrears and was available to draw down until 30 June 2015. On
24 March 2015, the Acquisition Facility was amended to provide the Group with the ability to draw down
up to £15 million in respect of past acquisitions and a further £30 million for general acquisition purposes
going forwards. On 18 March 2015, £48 million was drawn down on this facility and subsequently repaid,
with interest of £74,000, from the proceeds of the Convertible Bonds on 31 March 2015. On 15 June 2015,
£10 million was drawn down on this facility and subsequently repaid on 27 July 2015, with interest of
£47,000.
On 16 April 2015, the Group entered into an acquisition loan facility (‘the Utopia Facility’) with Citwax, in
connection with the acquisition of Utopia Village. The Utopia Facility was for an unsecured loan of
£50 million to provide finance, if requested by the Group, in relation to the acquisition. The Utopia Facility
carried an interest rate of 4 per cent. per annum payable quarterly in arrears and was available to draw down
until 31 July 2015. The Utopia Facility was not drawn down in the period to 30 September 2015.
162
On 30 June 2015, the draw down periods for the Acquisition Facility (as amended) and the Utopia Facility
were extended to 31 December 2015. These loans were terminated as a consequence of a share placing which
completed in July 2015.
On 24 March 2015, Citwax participated in £15 million of the Convertible Bonds issued by the Group.
On 31 July 2015, Citwax subscribed for a total of 10,250,000 Ordinary Shares as part of a share placing.
On 16 December 2014, Teddy Sagi entered into an advisory services agreement with the Group pursuant to
which Teddy Sagi will, as and when requested to do so by the Group, provide advisory services to the Group
for a nominal fee of £1 per annum until either Teddy Sagi ceases to be interested (whether legally or
beneficially) in the Ordinary Shares, or either party terminates the agreement following its fifth anniversary,
whichever is the earlier.
The Group has entered into the Relationship Agreement with GHT and Citwax which governs the
relationship between each of the parties to it to ensure that the Group is able to carry on its business
independently. For a period of two years from Admission, Citwax has agreed that it shall not propose or
procure the proposal of a Shareholders’ resolution which is intended to effect any cessation of trading of the
Ordinary Shares on AIM (or any other stock exchange on which the Group’s shares may be traded during
that period) or vote in favour of any such resolution unless a majority of the independent Directors have
voted in favour of such proposal (or as part of certain offers to acquire the entire issued share capital of the
Group). Citwax has agreed that all transactions and relationships between it, its associates (which include
GHT and Teddy Sagi) and the Group shall be on arm’s length terms and on a normal commercial basis. For
so long as Citwax is beneficially interested in at least 20 per cent. of the voting rights which are generally
exercisable at general meetings of the Group, it shall have the right to nominate one person for appointment
as a director of the Group (although it has not currently chosen to do so). Both GHT and Citwax have given
certain non-compete undertakings to the Group and have agreed not to acquire any further Ordinary Shares
for a period of 18 months after Admission.
Certain members of the Group have brought proceedings against the Irish Bank Resolution Corporation
Limited (“IBRC”) (“IBRC proceedings”) which relates to misselling of interest rate swaps and an alleged
breach by IBRC of its terms. The Group entered into funding arrangements with certain third parties in
January 2014, including Luxurious Property Investments Limited, then a related party by virtue of a common
shareholder, (subsequently acquired by the Group) and previous shareholders in relation to the funding,
conduct and outcome of this litigation. The amount of funding due to the Group from Luxurious Property
Investments Limited under this agreement in relation to legal costs was 30 September 2015: £nil
(30 September 2014: £236,000, 31 March 2014: £nil). In respect of the IBRC proceedings, the Group entered
into an agreement with a senior member of management of the Group. Under the terms of this agreement,
the individual is entitled to receive 7 per cent. of any gross proceeds payable to certain members of the
Group.
Citwax, immediately following admission to trading on AIM, held approximately 86.4% of the issued
Ordinary Shares (30 September 2015 approximately 71.3 per cent.).
On 10 September 2014, Northernstar Investments Limited and Crowndeal Services Limited entered into a
domain name transfer agreement pursuant to which Crowndeal Services Limited acquired certain domain
names, including “market.com” for a purchase price of US$486,000 inclusive of all applicable taxes
Northernstar Investments Limited has given some warranties and representations as to title and capacity.
Northernstar Investments Limited is related by virtue of common control.
Save as noted above, no guarantees have been given or received.
163
20.
CASH GENERATED FROM OPERATIONS
6 months
ended
30 September
2015
£’000
6 months
ended
30 September
2014
£’000
Year
ended
31 March
2015
£’000
7,976
3,206
43,878
2,151
6,142
(33)
445
67
1,058
4
101
(170)
–
299
2,266
(16,410)
329
122
9,311
–
–
–
462
–
–
766
–
252
–
(8,413)
–
(183)
16,902
(3)
500
39
937
–
–
976
78
627
170
(60,539)
113
90
(7,553)
5,747
––––––––
2,509
2
(1,127)
1,007
––––––––
5,588
(851)
(891)
2,856
––––––––
4,609
PROFIT FOR THE YEAR
ADJUSTMENTS FOR:
Income tax expense
Finance expense
Investment income
Net foreign exchange differences
Share based payment expense
Fair value adjustments to derivatives
Loss on disposal of property, plant and equipment
Loss on disposal intangible
Movement on provisions
Movement on deferred tax provision
Depreciation and impairment of property, plant and equipment
Amortisation intangibles
Net gain from fair value adjustment of investment property
Foreign currency translation
MOVEMENTS IN WORKING CAPITAL:
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
CASH GENERATED FROM OPERATIONS
21.
––––––––
––––––––
––––––––
ACQUISITIONS OF A BUSINESS
BUSINESS COMBINATIONS AND ASSET ACQUISITIONS MADE FROM THIRD PARTIES IN
THE PERIOD TO 30 SEPTEMBER 2015
Business combinations
Stucco Media Limited
TOTAL BUSINESS COMBINATIONS
Asset acquisitions
Thistle Properties Limited
Pushkin Properties Limited
TOTAL ASSET ACQUISITIONS
TOTAL
Goodwill
£’000
Intangibles
£’000
Property,
plant and
equipment
£’000
3,601
––––––––
3,601
17,986
––––––––
17,986
15
––––––––
15
–
––––––––
–
–
–
––––––––
–
–
–
––––––––
–
–
–
––––––––
–
44,814
31,144
––––––––
75,958
3,601
17,986
15
75,958
––––––––
––––––––
––––––––
164
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
Investment
property
£’000
––––––––
––––––––
––––––––
BUSINESS COMBINATIONS
Stucco Media Limited
On 7 May 2015 the Group acquired 100 per cent. of Stucco Media Limited, a leading digital marketing
platform for total consideration of up to US$25.8 million, subject to a post-closing working capital
adjustment, which was satisfied on completion by a US$12.8 million cash payment and US$13 million paid
by the issue of 3,468,196 new Ordinary Shares in the Company. The working capital adjustment will be
calculated after closing of the acquisition and any payments due following the adjustment will be made in
cash.
In addition to the total consideration of up to US$25.8 million, certain Vendors are entitled to US$8.7 million
of bonus Ordinary Shares in the Company and a further aggregate payment of US$8.5 million in cash. The
US$8.5 million payment is subject to successful delivery of an e-commerce platform for the Group,
measured against key deliverables and within the specified timeframe. Such payment, if it becomes due, is
subject to the continued involvement of the relevant Vendors in the business and will be made 12 months
after the closing of the acquisition. The bonus Ordinary Shares are also subject to the Vendors continued
involvement in the business and will be made between 12 and 24 months after the closing of the acquisition.
These payments will therefore be charged to the income statement rather than forming part of the
consideration.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill
are as follows:
£’000
Customer list
Website development
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Dividend payable
Deferred tax
14,708
3,278
15
2,063
1,460
(2,594)
(822)
(4,733)
––––––––
13,375
3,601
––––––––
16,976
Total identifiable net assets acquired
Goodwill
Total consideration
––––––––
Settled by:
Cash
Shares
8,419
8,557
––––––––
16,976
––––––––
£’000
Net cash outflow arising on acquisition
Cash consideration
Cash and cash equivalents acquired
(8,419)
1,460
––––––––
(6,959)
––––––––
The goodwill arising on the acquisition of the business is attributable to the anticipated profitability of the
distribution of the company’s services in new markets and the future operating synergies from the
combination.
Acquisition costs of £148,000 have been recognised as exceptional costs in the consolidated statement of
comprehensive income.
165
ASSET ACQUISITIONS
Pushkin Properties Limited
On 16 April 2015 the Group acquired 100 per cent. of the issued share capital of Pushkin Properties Limited,
a newly incorporated company, and then acquired Utopia Village for a total consideration of £44.0 million,
excluding acquisition costs, payable in cash.
Thistle Properties Limited
On 17 June 2015 the Group acquired 100 per cent. of the issued share capital of Thistle Properties Limited,
a newly incorporated company, and then acquired 1-11 Hawley Crescent for consideration of £31.1 million,
excluding acquisition costs, payable in cash.
BUSINESS COMBINATIONS AND ASSET ACQUISITIONS MADE FROM THIRD PARTIES IN
THE YEAR TO 31 MARCH 2015
BUSINESS COMBINATIONS
Glispa
On 13 March 2015 the Group acquired 75 per cent. of the share capital of Glispa, a German incorporated
company whose principal activity is that of a mobile marketing business, achieved through the acquisition
of 75 per cent. of the share capital of Glispa. At 31 March 2015, the directors had made a provisional
assessment of the fair value of identifiable assets and liabilities acquired, purchase consideration and
goodwill. During the 6 months ended 30 September 2015, following a detailed financial review, the directors
have made certain revisions to the fair value of identifiable assets and liabilities acquired, and goodwill. The
impact of these revisions are as follows:
Fair value as
previously
assessed
£’000
Intellectual property
Other intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Corporation tax
Accruals
Deferred tax
Total identifiable net assets acquired
Total consideration
Fair value –
revised
£’000
14,029
10
234
8,300
4,678
(1,308)
(418)
(7,673)
(4,160)
––––––––
13,692
–
–
–
319
–
(330)
(314)
(108)
–
––––––––
(433)
14,029
10
234
8,619
4,678
(1,638)
(732)
(7,781)
(4,160)
––––––––
13,259
(3,423)
14,648
––––––––
24,917
108
(2,917)
––––––––
(3,242)
(3,315)
11,731
––––––––
21,675
––––––––
Non controlling interest (calculated as share of net assets)
Goodwill
Measurement
period
adjustments
£’000
––––––––
––––––––
––––––––
––––––––
––––––––
The goodwill arising on the acquisition of the business is attributable to the anticipated profitability of the
distribution of the company’s services in new markets and the future operating synergies from the
combination.”
166
SECTION B: THE PASTRA GROUP
Sub-section 1: Accountant’s report on the historical financial information of the Pastra Group for the
two years ended 31 March 2015 and the 15 months ended 31 March 2015
BDO LLP
55 Baker Street
London
W1U 7EU
The Directors
Market Tech Holdings Limited
Third Floor
La Plaiderie Chambers
La Plaiderie
St Peter Port
Guernsey
GY1 1WG
21 January 2016
Dear Sirs
The Pastra Group
Introduction
We report on the financial information on the Pastra Group set out in sub-section 2 of Section B of Part IX.
This financial information has been prepared for inclusion in the prospectus dated 21 January 2016 (the
“Prospectus”) of Market Tech Holdings Limited (the “Company”) on the basis of the accounting policies set
out in note 2 to the financial information. This report is required by item 20.1 of Annex I of the Commission
Regulation (EC) No. 809/2004 (the “PD Regulation”) and is given for the purpose of complying with that
item and for no other purpose.
Responsibilities
The directors of the Company are responsible for preparing the financial information on the basis of
preparation set out in Note 2.1 to the financial information.
It is our responsibility to form an opinion on the financial information and to report our opinion to you.
Save for any responsibility arising under Prospectus Rule 5.5.3R(2)(f) to any person as and to the extent there
provided, to the fullest extent permitted by the law we do not assume any responsibility and will not accept
any liability to any other person for any loss suffered by any such other person as a result of, arising out of,
or in connection with this report or our statement, required by and given solely for the purposes of complying
with item 23.1 of Annex I of the PD Regulation, consenting to its inclusion in the Prospectus.
Basis of opinion
We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the
amounts and disclosures in the financial information. It also included an assessment of significant estimates
and judgements made by those responsible for the preparation of the financial information and whether the
accounting policies are appropriate to the entity’s circumstances, consistently applied and adequately
disclosed.
We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
financial information is free from material misstatement whether caused by fraud or other irregularity or
error.
167
Our work has not been carried out in accordance with auditing or other standards and practices generally
accepted in the United States of America or other jurisdictions outside the United Kingdom and accordingly
should not be relied upon as if it had been carried out in accordance with those standards and practices.
Opinion
In our opinion, the financial information gives, for the purposes of the Prospectus, a true and fair view of the
state of affairs of the Pastra Group as at 31 December 2012, 31 December 2013 and 31 March 2015 and of
its profits, cash flows and changes in equity for the periods then ended in accordance with the basis of
preparation set out in Note 2.1 to the financial information.
Declaration
For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus
and declare that we have taken all reasonable care to ensure that the information contained in this report is,
to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.
This declaration is included in the Prospectus in compliance with item 1.2 of Annex I of the PD Regulation.
Yours faithfully
BDO LLP
Chartered Accountants
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)
168
Sub-section 2: Historical financial information of the Pastra Group for the two years ended
31 March 2015 and the 15 months ended 31 March 2015
COMBINED STATEMENTS OF COMPREHENSIVE INCOME FOR CAMDEN CANAL MARKET
LIMITED AND CAMDEN MARKET HOLDCO LIMITED AND ITS SUBSIDIARIES
Notes
Revenue
Cost of sales
6
GROSS PROFIT
Administrative expenses
Net gain from fair value adjustment of
investment property
ADJUSTED EBITDA*
Net gain from fair value adjustment of
investment property
Depreciation & Amortisation
14
13
OPERATING PROFIT
Finance income
Finance costs
11
PROFIT BEFORE TAXATION
Income tax charge
12
PROFIT FOR THE YEAR AND
COMPREHENSIVE INCOME
*
Year ended
31 December
2012
£’000
4,041
(280)
––––––––
3,761
(2,512)
Year ended
31 December
2013
£’000
4,286
(299)
––––––––
3,987
(2,586)
15 Months
ended
31 March
2015
£’000
5,590
(348)
––––––––
5,242
(3,304)
2,572
273
49,911
1,266
1,421
1,987
2,572
(17)
273
(20)
49,911
(49)
3,821
–
(961)
––––––––
2,860
(36)
––––––––
1,674
–
(992)
––––––––
682
(77)
––––––––
51,849
–
(834)
––––––––
51,015
(246)
––––––––
2,824
––––––––
605
––––––––
50,769
––––––––
Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation and adjusted for fair value
investment property movements.
169
COMBINED STATEMENTS OF FINANCIAL POSITION
Notes
NON-CURRENT ASSETS
Property, plant and equipment
Investment property
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
13
14
16,17
18
19
20
20
NET (LIABILITIES)/ASSETS
TOTAL EQUITY
31 March
2015
£’000
61
34,960
––––––––
35,021
45
38,181
––––––––
38,226
54
39,395
––––––––
39,449
82
91,150
––––––––
91,232
437
761
––––––––
1,198
––––––––
36,219
535
1,373
––––––––
1,908
––––––––
40,134
854
1,236
––––––––
2,090
––––––––
41,539
140
1,583
––––––––
1,723
––––––––
92,955
(1,333)
(61)
(170)
–
(19,588)
––––––––
(21,152)
––––––––
(19,954)
(986)
(55)
(164)
(150)
(20,501)
––––––––
(21,856)
––––––––
(19,948)
(827)
(32)
(158)
(200)
(21,312)
––––––––
(22,529)
––––––––
(20,439)
(766)
(177)
(152)
–
(36,319)
––––––––
(37,414)
––––––––
(35,691)
(3,825)
(14,569)
–
(18,394)
––––––––
(39,546)
––––––––
(3,327)
(4,109)
(14,666)
(6)
(18,781)
––––––––
(40,637)
––––––––
(503)
(4,386)
(14,513)
(9)
(18,908)
––––––––
(41,437)
––––––––
102
(4,661)
–
(9)
(4,669)
––––––––
(42,084)
––––––––
50,871
(3,327)
––––––––
(3,327)
(503)
––––––––
(503)
102
––––––––
102
50,871
––––––––
50,871
––––––––
TOTAL LIABILITIES
EQUITY
Invested capital
31 December
2013
£’000
––––––––
NET CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Obligations under finance leases
Borrowings
Deferred tax liabilities
31 December
2012
£’000
––––––––
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Income taxes payable
Obligations under finance leases
Borrowings
Shareholder loans
31 December
2011
£’000
––––––––
22
––––––––
170
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
COMBINED STATEMENTS OF CHANGES IN EQUITY
Invested
Capital
£’000
BALANCE AT 1 JANUARY 2012
COMPREHENSIVE INCOME
Profit for the period
BALANCE 31 DECEMBER 2012
COMPREHENSIVE INCOME
Profit for the period
BALANCE 31 DECEMBER 2013
COMPREHENSIVE INCOME
Profit for the period
BALANCE AT 31 MARCH 2015
(3,327)
––––––––
(3,327)
––––––––
2,824
––––––––
(503)
––––––––
2,824
––––––––
(503)
––––––––
605
––––––––
102
––––––––
605
––––––––
102
––––––––
50,769
––––––––
50,871
50,769
––––––––
50,871
––––––––
171
Total
£’000
––––––––
COMBINED CASH FLOW STATEMENTS
Notes
Cash generated from operations
Interest paid
Tax paid
27
NET CASH (OUTFLOW)/INFLOW FROM
OPERATING ACTIVITIES
INVESTING ACTIVITIES
Purchase of property, plant and equipment
Purchase of investment property
Year ended
31 December
2012
£’000
829
(436)
(42)
––––––––
351
13
14
NET CASH USED IN INVESTING
ACTIVITIES
NET CASH GENERATED FROM
FINANCING ACTIVITIES
–
(650)
––––––––
(29)
(941)
––––––––
(80)
(1,843)
––––––––
(970)
(1,923)
––––––––
––––––––
––––––––
–
–
31
881
–
––––––––
(150)
–
780
31
–
––––––––
(14,828)
(21,312)
–
–
36,319
––––––––
612
661
––––––––
(137)
179
––––––––
347
761
––––––––
1,373
––––––––
1,236
––––––––
1,373
––––––––
1,236
––––––––
––––––––
172
2,091
––––––––
––––––––
CASH AND CASH EQUIVALENTS AT
END OF YEAR
172
2,643
(451)
(101)
––––––––
––––––––
912
NET INCREASE IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR
946
(674)
(100)
––––––––
––––––––
(650)
FINANCING ACTIVITIES
Repayment of borrowings
Repayment of shareholder loan
Payment of loans from group undertakings
Payment of loans from parent
Loan from shareholder
Year ended
31 December
2013
£’000
15 month
ended
31 March
2015
£’000
1,583
NOTES TO THE COMBINED HISTORICAL FINANCIAL INFORMATION
1.
CORPORATE INFORMATION
The business is principally engaged in the provision of property investment, including management and
market operation services. Information on the business’s structure is provided in Note 2.1. Information on
other related party relationships of the business is provided in Note 25.
2.
ACCOUNTING POLICIES
2.1
ACCOUNTING CONVENTION
The financial information has been prepared using the historical cost convention, as modified by the
revaluation of investment property, as stated in the accounting policies. These policies have been
consistently applied to all periods presented, unless otherwise stated.
The combined financial information has been prepared in accordance with International Financial
Reporting Standards (“IFRS”) and IFRC Interpretations issued by the International Accounting
Standards Board as adopted by the European Union except as described below.
The areas where significant judgements and estimates are made in preparing this historical financial
information are disclosed in Note 4.
The financial information is prepared in pounds sterling and rounded to the nearest thousand.
Basis of preparation
On 3 October 2014 Pastra Investments Limited (“Pastra”) acquired the entire issued share capital of
Camden Canal Market Limited (formerly The Urban Market Company Limited) and Camden Market
HoldCo Limited and indirectly the entire issued share capital of its subsidiaries, Camden Lock Market
Limited, London Waterbus Company Limited and Camden Lock Limited. These entities were under
common management and control throughout the period presented in the financial information, but
they did not form part of the same legal group until their acquisition by Pastra.
The financial information has therefore been prepared by combining the financial information of
Camden Canal Market Limited together with Camden Market HoldCo Limited and its wholly owned
subsidiaries Camden Lock Market Limited, London Waterbus Company Limited and Camden Lock
Limited (together the “Combined entities”) for the three periods ended 31 December 2012,
31 December 2013 and 31 March 2015.
The combined historical financial information has been prepared by applying the principles
underlying the consolidation procedures of IFRS 10 ‘Combined Financial Statements’ (“IFRS 10”)
for each of the three periods to 31 December 2012, 31 December 2013 and 31 March 2015 and as at
these dates. The results, assets, and liabilities of all entities within the Combined entities are
aggregated, and all intra-group transactions, balances, income and expenses are eliminated on
combination. On such basis, the combined historical financial information sets out the Combined
entities’ financial position as at 31 December 2012, 31 December 2013 and 31 March 2015 and the
results of operations and cash flows for the three periods then ended.
The Combined entities’ financial period was extended during the year to align with that of the parent
company Pastra, ended 31 March. Therefore the amounts presented to 31 March 2015 are not entirely
comparable to the periods ended 31 December 2013 and 31 December 2012.
The combined financial information has been prepared in accordance with the requirements of the
Prospectus Directive Regulation and the UK Listing Rules and in accordance with this basis of
preparation. This basis of preparation describes how the financial information has been prepared in
accordance with IFRSs except as described below.
IFRSs do not provide for the preparation of combined historical financial information or for the
specific accounting treatments set out below. Accordingly in preparing the combined financial
173
information of the Combined entities certain accounting conventions commonly applied for the
purposes of preparing historical information for inclusion in investment circulars as described in the
Annexure to SIR 2000 (Investment Reporting Standards applicable to public reporting engagements
on historical information) issued by the UK Auditing Practices Board have been applied. The
application of these conventions results in the material departures from IFRSs set out below. In all
other respects, IFRSs have been applied.
•
As explained above, the combined financial information is prepared on a combined basis and
therefore does not comply with the requirements of IFRS 10. However, the financial
information has been prepared on a combined basis applying the principles underlying the
consolidation procedures of IFRS 10.
•
The combined financial information does not constitute a set of general purpose financial
statements under paragraph 2 of IAS 1 ‘Presentation of Financial Statements’ and consequently
the Combined entities do not make an explicit and unreserved statement of compliance with
IFRSs as contemplated by paragraph 16 of IAS 1. A company is only permitted to apply the
first time adoption rules of IFRS 1 ‘First time Adoption of International Financial Reporting
Standards’ in its first set of financial statements where such an unreserved statement of
compliance would be made. Although such a statement has not been made, the combined
historical financial information has been prepared as if the date of transition to IFRS is
1 January 2012, the beginning of the first comparative period presented.
•
As the financial information has been prepared on a combined basis, it is not possible to
measure earnings per share. Accordingly, the requirement of IAS 33 ‘Earnings per Share’ to
disclose earnings per share has not been applied.
•
The Combined entities are not a separate legal group and therefore it is not meaningful to
present share capital or an analysis of reserves. The excess of assets over liabilities of all
Combined entities as of 31 March 2015, 31 December 2013 and 31 December 2012 are
representative of the cumulative investment of Pastra, shown as “Invested Capital”.
The Combined entities deemed transition date to IFRSs is 1 January 2012. The principles and
requirements for first time adoption of IFRSs are set out in IFRS 1.
The Combined entities have not previously prepared or reported any combined historical financial
information in accordance with any other generally accepted accounting principles (“GAAP”).
Consequently a reconciliation between financial information prepared under a previous GAAP and
the financial information prepared in accordance with IFRSs (which is required by IFRS 1 on
transition to IFRSs) has been prepared. The Combined entities’ opening statement of financial
position is provided in note 28.
The preparation of the combined historical financial information under IFRSs requires management
to make judgments, estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are
based on historical experience and other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements about carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from
these estimates (note 4).
The combined financial information has been prepared using consistent accounting policies. All
amounts in the combined historical financial information are shown in thousands of pounds sterling
unless otherwise stated.
The following summarises the accounting and other principles applied in preparing the combined
financial information:
•
Transactions and balances between entities have been eliminated. All intra-group balances,
transactions, income and expenses and profits and losses have been eliminated on combination.
•
The combined historic financial information has been prepared on a going concern basis.
174
Description of business
Camden Market HoldCo Limited is a limited company domiciled in Guernsey, with registered office
at PO Box 142, The Beehive, Rohais, St Peter Port, Guernsey, GY1 3H. Camden Canal Market
Limited is a limited company domiciled in the United Kingdom, with registered office at
54-56 Camden Lock Place, London, NW1 8AF. The principal activity of the Combined entities is that
of property investment.
Financial periods
The financial information covers the financial periods from 1 January 2012 to 31 December 2012,
1 January 2013 to 31 December 2013 and 1 January 2014 to 31 March 2015.
Composition of the financial information
The combined financial information is drawn up in sterling, the functional currency of the Combined
entities and in accordance with IFRS accounting presentation, other than as noted under basis of
preparation above.
The financial information comprises of:
•
Combined statement of total comprehensive income
•
Combined statement of financial position
•
Combined statement of changes in equity
•
Combined statement of cash flows
•
Notes to the financial information
First time adoption of IFRS
The combined financial information includes the results for the periods ended 31 March 2015,
31 December 2013 and 31 December 2012 and statement of financial position as at each date.
The individual entities within the Combined entities have previously prepared, and continued to
prepare, their financial statements under their respective local generally accepted accounting
principles (GAAP).
In preparing this financial information, the Combined entities’ opening statement of financial position
was prepared as at 1 January 2012, the Combined entities’ date of transition to IFRS, and is detailed
in note 28.
2.2
REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the
Combined entities and the revenue can be reliably measured, regardless of when the payment is being
made. Revenue is measured at the fair value of the consideration received or receivable, taking into
account contractually defined terms of payment and excluding taxes or duty. The Combined entities
have concluded that they are the principal in all of their revenue arrangements since they are the
primary obligor in all the revenue arrangements, have pricing latitude and are also exposed to credit
risks.
The specific recognition criteria described below must also be met before revenue is recognised.
RENTAL INCOME AND SERVICE CHARGES
Rental income arising from operating leases and licences on investment properties is accounted for on
a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss
due to its operating nature. Service charges are recognised in the accounting period in which services
are rendered.
175
2.3
TAXATION
The tax expense represents the sum of the tax currently payable and deferred tax.
CURRENT TAX
Income tax on the profit or loss comprises current and deferred tax. Income tax is recognised in the
income statement, except to the extent that it relates to items recognised directly in other
comprehensive income or equity – in which case, the tax is also recognised in other comprehensive
income or equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the date of the statement of financial position in the countries where the Combined entities
operate. Directors periodically evaluate positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation, and establish provisions where appropriate
on the basis of amounts expected to be paid to the tax authorities. During the ordinary course of
business, there are transactions and calculations for which the ultimate tax determination is uncertain.
As a result, the Combined entities recognise tax liabilities based on estimates of whether additional
taxes and interest will be due.
DEFERRED TAX
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial information and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial recognition of other assets and liabilities
in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part
of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the
income statement, except when it relates to items charged or credited directly to equity, in which case
the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the
Combined entities have a legally enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax authority.
2.4
PROPERTY, PLANT AND EQUIPMENT
Plant and equipment are stated at historical cost less accumulated depreciation and any accumulated
impairment losses.
Depreciation is calculated on the straight-line method so as to write off the cost of each asset over its
estimated useful life. The useful economic lives used are as follows:
Fixtures and fittings
Plant and equipment
10 years
4-10 years
The gain or loss arising on the disposal of an asset is determined as the difference between the sale
proceeds and the carrying value of the asset, and is recognised in the income statement.
2.5
BORROWING COSTS
Borrowing costs are charged to profit over the term of the debt instrument so that the amount charged
is at a constant rate on the carrying amount. Borrowing costs include issue costs, which are initially
recognised as a reduction in the proceeds of the associated capital instrument.
176
2.6
INVESTMENT PROPERTIES
Property that is held for long-term rental yields or for capital appreciation or both, and that is not
occupied by the companies in the Combined entities, is classified as investment property.
Investment property also includes property that is being constructed or developed for future use as
investment property. Land and buildings held under operating leases are classified and accounted for
by the Combined entities as investment property when the rest of the definition of investment property
is met.
Investment property is measured initially at its cost, including related transaction costs and where
applicable borrowing costs.
After initial recognition, investment property is carried at fair value. Fair value is based on active
market prices, adjusted, if necessary, for differences in the nature, location or condition of the specific
asset. If this information is not available, the Combined entities use alternative valuation methods,
such as recent prices on less active markets or discounted cash flow projections. Valuations are
performed by professional valuers who hold recognised and relevant professional qualifications and
have recent experience in the location and category of the investment property being valued. These
valuations form the basis for the carrying amounts in the combined historical financial information.
Investment property that is being redeveloped for continuing use as investment property has also been
revalued by professional valuers.
The fair value of investment property reflects, among other things, rental income from current leases
and other assumptions market participants would make when pricing the property under current
market conditions.
Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that
future economic benefits associated with the expenditure will flow to the Combined entities and the
cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when
incurred. When part of an investment property is replaced, the carrying amount of the replaced part is
derecognised.
Changes in fair values are recognised in the income statement. Investment properties are derecognised
when they have been disposed of. Where the Combined entities dispose of a property at fair value in
an arm’s length transaction, the carrying value immediately prior to the sale is adjusted to the
transaction price, and the adjustment is recorded in the income statement within net gain from fair
value adjustment on investment property.
2.7
LEASES
The determination of whether an arrangement is (or contains) a lease is based on the substance of the
arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right
to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Lessee
A lease is classified at the inception date as a finance lease or operating lease. A lease that transfers
substantially all the risks and rewards incidental to ownership to the Combined entities is classified as
a finance lease.
Finance leases are capitalised at the commencement of the lease at the inception date fair value of the
leased property or, if lower, at the present value of the minimum lease payments. Lease payments are
apportioned between finance charges and reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are recognised in finance
costs in the statement of comprehensive income.
177
Rentals payable under operating leases are charged to income on a straight line basis over the period
of the lease. Premiums payable, rent free periods and capital contributions receivable on entering an
operating lease are released to income on a straight line basis over the lease term.
Lessor
Leases in which the Combined entities do not transfer substantially all the risks and rewards of
ownership of an asset are classified as operating leases. Initial direct costs incurred in negotiating and
arranging an operating lease are added to the carrying amount of the leased asset and recognised over
the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the
period in which they are earned.
When the Combined entities provide incentives to their tenants the incentives are recognised as a
reduction in income over the lease term on a straight line basis.
2.8
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash in hand, deposits held at bank and other short-term highly
liquid investments with original maturities of three months or less.
2.9
FINANCIAL INSTRUMENTS
MEASUREMENT
–
INITIAL
RECOGNITION AND
SUBSEQUENT
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
2.10 FINANCIAL ASSETS
INITIAL RECOGNITION AND MEASUREMENT
The Combined entities’ financial assets include loans and receivables only. Loans and receivables are
recognised initially at fair value plus transaction costs that are attributable to the acquisition of the
financial asset.
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not
quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are
measured at amortised cost using the effective interest method, less any impairment.
Interest is recognised by applying the effective interest rate, except for short-term receivables when
the recognition of interest would be immaterial.
This category generally applies to trade and other receivables, and is the most relevant to the
Combined entities. For more information on receivables, refer to Note 5.
IMPAIRMENT OF FINANCIAL ASSETS
The Combined entities assess, at each reporting date, whether there is objective evidence that a
financial asset or a group of financial assets is impaired. An impairment exists if one or more events
that has occurred since the initial recognition of the asset (an incurred ‘loss event’) has an impact on
the estimated future cash flows of the financial asset or the group of financial assets that can be
reliably estimated. Evidence of impairment may include indications that the debtors or a group of
debtors is experiencing significant financial difficulty, default or delinquency in interest or principal
payments, the probability that they will enter bankruptcy or other financial reorganisation and
observable data indicating that there is a measurable decrease in the estimated future cash flows, such
as changes in arrears or economic conditions that correlate with defaults.
178
DERECOGNITION OF FINANCIAL ASSETS
Financial assets are derecognised only when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership
to another entity.
2.11 FINANCIAL LIABILITIES
INITIAL RECOGNITION AND MEASUREMENT
The Combined entities’ financial liabilities include trade and other payables and loans and borrowings
including bank overdrafts and shareholder loans.
Financial liabilities classified as loans and borrowings and shareholder loans are recognised initially
at fair value and net of directly attributable transaction costs.
SUBSEQUENT MEASUREMENT
Loans and borrowings
This is the category most relevant to the Combined entities. After initial recognition, interest-bearing
loans and borrowings are subsequently measured at amortised cost using the Effective Interest Rate
(EIR) method. Gains and losses are recognised in profit or loss when the liabilities are derecognised
as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the
statement of profit or loss.
Shareholder loans are continued to be recognised at fair value, net of any directly attributable
transaction costs.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled
or expires. When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the derecognition of the original liability and the recognition
of a new liability. The difference in the respective carrying amounts is recognised in the statement of
profit or loss.
2.12 EQUITY INSTRUMENTS
An equity instrument is any contract that evidences a residual interest in the assets of an entity after
deducting all of the liabilities. Equity instruments issued by the Combined entities are recorded at the
proceeds received net of direct issue costs.
3.
ADOPTION OF NEW AND REVISED STANDARDS AND CHANGES IN ACCOUNTING
POLICIES
3.1
STANDARDS WHICH ARE IN ISSUE BUT NOT YET EFFECTIVE
At the date of authorisation of this financial information, the following Standards and Interpretations,
which have not yet been applied in this financial information, were in issue but not yet effective (and
in some cases had not yet been adopted by the EU):
Effective Date
1 Jul 2014
1 Jul 2014
1 Jul 2014
1 Jan 2016
Annual improvements to IFRSs 2010–2012 cycle
Amendments to IAS 19: Employee Benefits
Annual improvements to IFRSs 2011–2013 cycle
Amendments to IAS 16 and IAS 38 – Clarification of acceptable methods of
depreciation and amortisation
179
Effective Date
1 Jan 2016
1 Jan 2016
1 Jan 2016
1 Jan 2016
1 Jan 2016
1 July 2016
1 Jan 2018
1 Jan 2018
1 Jan 2018
Amendments to IAS 27 Separate financial statements – Equity method in
separate financial statements
Amendments to IFRS 10: Combined Financial Statements and IAS 28: Sale
or contribution of assets between an investor and its associate or joint venture
Amendments to IFRS 11 – Accounting for acquisitions of interests in joint
operations
Amendments to IFRS 12: Disclosure of Interest in Other Entities
Amendments to IAS 1: Presentation of Financial Statements
Annual improvements to IFRSs 2012–2014 cycle
IFRS 15: Revenue from Contracts with Customers
Final version issued of IFRS 9: Financial Instruments
Amendments to IFRS 7: Financial Instruments Disclosure
The Directors do not anticipate that adoption of the standards, amendments and interpretations will
have a material impact on the financial information of the Combined entities in future years.
3.2
CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
Certain accounting standards and amendments were effective for annual periods beginning on or after
1 January 2014. These amendments have had no impact on the Combined entities.
4.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In the application of the Combined entities’ accounting policies, the Directors are required to make
judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based on historical experience
and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised, if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods.
The following is intended to provide an understanding of the significant judgements within the accounting
policies that the management consider critical because of the assumptions or estimation involved in their
application and their impact on the combined financial information.
4.1
OPERATING LEASE COMMITMENTS – COMBINED ENTITIES AS LESSOR
The Combined entities have entered into commercial property leases on their investment property
portfolio. The Combined entities have determined, based on an evaluation of the terms and conditions
of the arrangements, such as the lease term not constituting a major part of the economic life of the
commercial property and the fair value of the asset, that they retain all the significant risks and
rewards of ownership of these properties and account for the contracts as operating leases.
4.2
PROPERTY VALUATIONS
The Combined entities’ investment properties were valued as set out in Note 14 by independent
professionally qualified valuers who hold recognised relevant professional qualifications and have
recent experience in the locations and segments of the investment properties valued.
The Combined entities’ finance department reviews the valuations performed by the independent
valuers for financial reporting purposes. This team reports directly to the chief financial officer (CFO).
At every year end the finance team:
•
verifies all major inputs to the independent valuation report (where an independent valuation
has been carried out);
180
5.
•
assesses property valuation movements when compared to the prior year valuation report; and
•
holds discussions with the independent valuers.
FINANCIAL RISK MANAGEMENT
PRINCIPAL FINANCIAL INSTRUMENTS BY CATEGORY
Financial assets – loans
and receivables
2012
2013
£’000
£’000
FINANCIAL ASSETS
Trade and other receivables
Cash and cash equivalents
326
1,373
––––––––
1,699
TOTAL FINANCIAL ASSETS
––––––––
719
1,236
––––––––
1,955
––––––––
Financial liabilities at
amortised cost
2012
2013
£’000
£’000
FINANCIAL LIABILITIES
Trade and other payables
Obligations under finance leases
Borrowings
Shareholder loans
986
4,273
14,816
20,501
––––––––
40,576
TOTAL FINANCIAL LIABILITIES
––––––––
827
4,544
14,713
21,312
––––––––
41,396
––––––––
2015
£’000
50
1,583
––––––––
1,633
––––––––
2015
£’000
766
4,813
–
36,319
––––––––
41,898
––––––––
FINANCIAL INSTRUMENTS NOT MEASURED AT FAIR VALUE
Financial instruments not measured at fair value includes cash and cash equivalents, trade and other
receivables, trade and other payables, and loans and borrowings.
Due to their short term nature, the carrying value of cash and cash equivalents, trade and other receivables,
trade and other payables approximates to their fair value.
FINANCIAL RISK FACTORS
The Combined entities are exposed to, interest rate risk, credit risk, liquidity risk and capital risk
management arising from the financial instruments they hold. The risk management policies employed by
the Combined entities to manage these risks are discussed in the subsequent notes.
INTEREST RATE RISK
The Combined entities’ interest rate risk principally arises from its borrowings. Borrowings that are issued
at LIBOR plus a margin rate expose the Combined entities to cash flow interest rate risk.
Sensitivity analysis
A 2 per cent. increase/decrease in LIBOR at 31 March would have decreased/increased post tax profits by
the amounts shown below.
Effect on profit after taxation
2 per cent. increase in LIBOR
2012
£’000
2013
£’000
2015
£’000
296
––––––––
294
––––––––
––––––––
181
–
CREDIT RISK
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by
failing to discharge an obligation. Credit risk is managed on a Combined entities basis. Credit risk arises from
cash and cash equivalents held at banks, trade receivables and other receivables. Such risks are subject to a
quarterly or more frequent review. The Combined entities have policies in place to ensure that rental leases &
licences and other service contracts are entered into only with lessees and customers with an appropriate credit
history and the Combined entities monitor the credit quality of receivables on an ongoing basis.
See Note 17 for details of trade receivable credit risk.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure
to credit risk at the reporting date was:
Maximum credit risk
Trade receivables
Other receivables
Cash and cash equivalents
2012
£’000
2013
£’000
2015
£’000
58
268
1,373
300
419
1,236
50
–
1,583
The Combined entities do not hold any collateral or other credit enhancements to cover this credit risk.
LIQUIDITY RISK
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched
position potentially enhances profitability, but can also increase the risk of losses. The Combined entities
have procedures, with the objective of minimising potential losses, such as maintaining sufficient cash and
other highly liquid current assets and by having available an adequate amount of committed credit facilities.
The following tables detail the Combined entities’ remaining contractual maturity for its financial liabilities.
The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the Combined entities can be required to pay. The table includes both interest and
principal cash flows.
AT 31 DECEMBER 2012
Carrying Contractual
amounts cash flows
£’000
£’000
Borrowings
Trade payables
Other payables
Accruals and deferred
income
Shareholder loan
Finance lease liability
3 months Between 3–
or less 12 months
£’000
£’000
Between
1–5 years
£’000
More than
5 years
£’000
14,816
291
480
16,550
291
480
149
291
480
446
–
–
15,955
–
–
–
–
–
216
20,501
4,273
––––––––
43,200
216
20,501
21,904
––––––––
59,942
216
20,501
42
––––––––
21,679
–
–
128
––––––––
574
–
–
690
––––––––
16,645
–
–
21,043
––––––––
21,043
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
182
AT 31 DECEMBER 2013
Carrying Contractual
amounts cash flows
£’000
£’000
Borrowings
Trade payables
Other payables
Accruals and deferred
income
Shareholder loan
Finance lease liability
3 months Between 3–
or less 12 months
£’000
£’000
Between
1–5 years
£’000
More than
5 years
£’000
14,713
615
173
15,955
615
173
148
615
173
442
–
–
15,365
–
–
–
–
–
39
21,312
4,544
––––––––
41,396
39
21,312
21,734
––––––––
59,828
39
21,312
42
––––––––
22,329
–
–
128
––––––––
570
–
–
695
––––––––
16,060
–
–
20,869
––––––––
20,869
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
AT 31 MARCH 2015
Carrying Contractual
amounts cash flows
£’000
£’000
Trade payables
Other payables
Accruals and deferred
income
Shareholder loans
Finance lease liability
3 months Between 3–
or less 12 months
£’000
£’000
Between More than
1–5 years
5 years
£’000
£’000
203
460
203
460
203
460
–
–
–
–
–
–
103
36,319
4,813
––––––––
41,898
103
36,319
21,564
––––––––
58,649
103
36,319
42
––––––––
37,085
–
–
128
––––––––
128
–
–
700
––––––––
700
–
–
20,694
––––––––
20,694
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Liquidity risk management
Responsibility for liquidity risk management rests with the Board, which has established an appropriate
liquidity risk management framework for the management of the Combined entities’ funding and liquidity
management requirements. The Combined entities manages liquidity risk by maintaining adequate reserves,
banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash
flows, and by matching the maturity profiles of financial assets and liabilities.
CAPITAL RISK
Capital risk management
The Combined entities’ objectives when managing capital are to safeguard the Combined entities’ ability to
continue as a going concern in order to provide returns for shareholders and to maintain an optimal debt and
equity balance. The Combined entities monitor capital on the basis of the gearing ratio. This ratio is
calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash
equivalents. Total capital is calculated as ‘equity’, as shown in the combined balance sheet plus net debt.
2012
£’000
Total borrowings
Less: cash and cash equivalents
14,816
(1,373)
––––––––
Net debt
13,443
––––––––
Total equity
(503)
Total capital
12,940
––––––––
Gearing ratio
1.04
––––––––
The Combined entities’ overall strategy remained unchanged during the period.
183
2013
£’000
14,713
(1,236)
––––––––
13,477
––––––––
102
13,579
––––––––
0.99
––––––––
2015
£’000
–
(1,583)
––––––––
(1,583)
––––––––
50,871
49,288
––––––––
1
––––––––
The Combined entities are not subject to any externally imposed capital requirements.
6.
REVENUES
Rental Income
London Waterbus Company income
Other income
2012
£’000
2013
£’000
2015
£’000
3,482
516
43
––––––––
4,041
3,266
719
301
––––––––
4,286
4,689
806
95
––––––––
5,590
––––––––
––––––––
––––––––
During the periods ended 31 March 2015, 31 December 2013 and 31 December 2012 there were
no customers who individually accounted for more than 10 per cent. of the total revenue of the Combined
entities.
7.
OPERATING PROFIT
Operating profit is stated after charging:
Depreciation of property, plant and equipment
Operating lease expense
Fair value adjustments of investment property
Employment costs
8.
2012
£’000
2013
£’000
2015
£’000
17
198
2,572
765
20
176
273
1,241
49
237
49,911
1,032
KEY MANAGEMENT PERSONNEL COMPENSATION
Key management personnel are those persons having authority and responsibility for planning, directing and
controlling the activities of the Combined entities.
Fees
9.
2012
£’000
2013
£’000
2015
£’000
––––––––
21
––––––––
–
––––––––
2012
Number
2013
Number
2015
Number
17
––––––––
17
––––––––
25
––––––––
2012
£’000
2013
£’000
2015
£’000
762
3
––––––––
765
1,236
5
––––––––
1,241
1,110
6
––––––––
1,116
26
EMPLOYEES
The average monthly number of employees was:
Their aggregate remuneration comprised:
EMPLOYMENT COSTS
Wages and salaries
Pension contribution
––––––––
184
––––––––
––––––––
10.
OPERATING LEASES COMMITMENTS
LESSOR
As a market operator, the Combined entities enter into licences at will with market stall holders. These are
short term licences cancellable within one week. Future minimum rents receivable under non-cancellable
operating leases are set out in the table below, calculated on the assumption that any tenant with a break
option does exercise that option:
Within one year
Between one and two years
Between two and five years
In over five years
2012
£’000
2013
£’000
2015
£’000
969
533
523
1,191
––––––––
3,216
888
283
360
1,071
––––––––
2,602
435
120
360
922
––––––––
1,837
2012
£’000
2013
£’000
2015
£’000
467
47
447
––––––––
961
504
46
442
––––––––
992
281
116
437
––––––––
834
––––––––
11.
––––––––
FINANCE COSTS
CONTINUING FACILITIES
Bank loans, overdrafts and fees
Amortisation of loan arrangement fees
Finance lease interest
Finance costs recognised in profit or loss
12.
––––––––
––––––––
––––––––
––––––––
INCOME TAX CREDIT/(CHARGE)
The credit for the year can be reconciled to the profit per the income statement as follows:
2012
£’000
CORPORATION TAX
Current tax charge
Deferred tax: origination and reversal of timing differences
Income tax charge
(30)
(6)
––––––––
(36)
––––––––
2013
£’000
(74)
(3)
––––––––
(77)
––––––––
2015
£’000
(246)
–
––––––––
(246)
––––––––
The credit/(charge) for the year can be reconciled to the profit per the income statement as follows:
Profit on ordinary activities before tax
Expected tax charge based on the standard rate of corporation
tax in the UK of 21% (2013 & 2012: 20%)
Effects of:
Fixed asset differences
Expenses not deductible for tax purposes
Income not taxable for tax purposes
Net gain from fair value adjustment of investment property
not taxable
Other differences
Unrelieved tax losses and other deductions arising in the period
Adjustments to tax charge in respect of previous periods
Current tax charge
2012
£’000
2013
£’000
2015
£’000
2,860
682
51,015
572
136
10,713
(35)
45
(85)
(11)
18
–
(514)
(23)
70
–
––––––––
30
(55)
14
–
(28)
––––––––
74
––––––––
185
––––––––
–
10
–
(10,481)
(12)
16
–
––––––––
246
––––––––
13.
PROPERTY, PLANT AND EQUIPMENT
Fixtures,
fitting &
office
equipment
£’000
COST
AT 1 JANUARY 2012 AND 1 JANUARY 2013
Additions
Disposals
AT 1 JANUARY 2014
Additions
Disposals
AT 31 MARCH 2015
AT 1 JANUARY 2013
Charge for the year
Depreciation on disposals
AT 1 JANUARY 2014
Charge for the year
AT 31 MARCH 2015
AT 31 MARCH 2015
14.
130
––––––––
12
–
––––––––
142
––––––––
39
(3)
––––––––
178
298
––––––––
29
(76)
––––––––
251
––––––––
80
(4)
––––––––
327
135
10
––––––––
145
––––––––
11
(76)
––––––––
80
––––––––
22
––––––––
102
101
7
––––––––
108
––––––––
9
–
––––––––
117
––––––––
26
––––––––
143
236
17
––––––––
253
––––––––
20
(76)
––––––––
197
––––––––
48
––––––––
245
33
23
29
––––––––
47
29
22
25
––––––––
35
61
45
54
––––––––
82
––––––––
NET BOOK VALUE
AT 1 JANUARY 2012
AT 1 JANUARY 2013
AT 1 JANUARY 2014
Total
£’000
168
––––––––
17
(76)
––––––––
109
––––––––
41
(1)
––––––––
149
––––––––
DEPRECIATION
AT 1 JANUARY 2012
Charge for the year
Plant &
equipment
£’000
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
INVESTMENT PROPERTIES
£’000
34,960
––––––––
650
2,572
––––––––
38,181
––––––––
941
273
––––––––
39,395
––––––––
1,843
49,911
––––––––
91,150
AT 1 JANUARY 2012
Additions
Revaluation Movements
AT 1 JANUARY 2013
Additions
Revaluation Movements
AT 1 JANUARY 2014
Additions
Revaluation Movements
AT 31 MARCH 2015
––––––––
186
VALUATION PROCESS
Investment properties are stated at fair value as at the financial year ends based on external valuations
performed by professionally qualified valuers. The Combined entities’ property portfolio is valued by Jones
Lang LaSalle Limited on the basis of fair value in accordance with The RICS Valuation – Professional
Standards. The valuations are based on information provided by the Combined entities which includes a
tenancy schedule, as reconciled (tenant, rent, lease commencement, lease expiry, applicable break options,
areas, details of any additional income, operating costs and net operating income forecast), and any
supplementary documentation, such as copy leases and details of tenure.
The valuations are prepared using industry standard valuation software, Argus Capitalisation and Argus
Developer. The valuations are based on assumptions which are typically market related, such as market rents
and yields and are based on the professional judgment of the respective valuer and market observations. Each
property has been valued in isolation based on the unique nature, characteristics and perceived risk of that
property.
As part of the annual valuation exercise, discussion of the valuation process, methodology and results takes
place at a meeting between the external valuers and key management at which the key assumptions and
estimates are reviewed together with consideration of the valuers’ reasons for significant valuation
movements on individual properties from the previous valuations.
VALUATION METHODOLOGY
The fair value of investment properties and land and buildings classified as property, plant and equipment is
determined using the ‘investment method’ whereby capitalisation yields derived from market transactions
involving comparable investment properties are applied to the estimated net current and future cash flows
expected to be generated by the investment property, which the valuer calculates using comparable market
information, to obtain a market rental value.
The fair value of an investment property undergoing construction is derived using the ‘residual method’
whereby the costs required to complete the development, including a notional cost of finance and an
estimated risk factor or “profit on cost”, are deducted from the net development value arrived at under the
‘investment method’.
The key unobservable inputs used in the valuation of the properties at 31 March 2015 are as follows:
Investment property type
Markets
Other
Fair
Value
£’000
72,300
18,850
––––––––
91,150
Market Rent PSF PA
Min
Max
£
£
Valuation
Investment
Residual
10
25
250
250
Min
%
5.25
5.00
Equivalent yield (%)
Max
Blended
%
%
5.50
5.25
5.33
5.23
––––––––
SENSITIVITY MEASUREMENT TO VARIATIONS IN THE SIGNIFICANT UNOBSERVABLE
INPUTS
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair
value hierarchy of the Combined entities’ property portfolio, together with the impact of significant
movements in these inputs on the fair value measurement are shown below:
Unobservable input
Impact on fair value
measurement of
significant increase
in input
Impact on fair value
measurement of
significant decrease
in input
Market rent per square foot per annum
Equivalent yield
Increase
Decrease
Decrease
Increase
A sensitivity analysis was performed to ascertain the impact on the fair value of a 25 basis point shift in true
equivalent yield and a 250 basis point shift in market rent per square foot per annum.
187
MARKET RENT PER SQUARE FOOT PER ANNUM (PSF PA)
BP SHIFT
% CHANGE
+250 BP
–250 BP
3.44%
(3.42%)
EQUIVALENT YIELD
BP SHIFT
% CHANGE
+25 BP
–25 BP
(4.59%)
5.04%
There are inter-relationships between these inputs as they are partially determined by market rate conditions.
An increase in the equivalent yield may accompany an increase in gross market rent per square foot per
annum and would mitigate its impact on the fair value measurement.
The historical cost of the Combined entities’ investment properties is as follows:
Brought forward historical cost
Additions
Carried forward historical cost
15.
2012
£’000
2013
£’000
2015
£’000
34,960
650
––––––––
35,610
35,610
941
––––––––
36,551
36,551
1,843
––––––––
38,394
––––––––
––––––––
––––––––
SUBSIDIARIES
Details of the Combined entities at 31 March 2015, 31 December 2013 and 31 December 2012 are as
follows:
Camden Market Holdings Corp.
Camden Canal Market Limited
Camden Lock Market Limited
London Waterbus Company
Limited
Camden Lock Limited
16.
Country of
incorporation
(or residence)
Proportion of
ownership
interest (%) Nature of business
British Virgin Islands
England & Wales
Guernsey
England & Wales
100 per cent.
100 per cent.
100 per cent.
100 per cent.
England & Wales
Holding company
Property Management Services
Landlord & Property Owner
Trading Company – Operation
services of four Canal Boats
100 per cent. Onshore Service Company
TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments and accrued income
2012
£’000
Current
2013
£’000
2015
£’000
58
268
209
––––––––
535
300
419
135
––––––––
854
50
–
90
––––––––
140
––––––––
––––––––
––––––––
Trade receivables disclosed above are classified as loans and receivables and are therefore measured at
amortised cost.
188
17.
TRADE RECEIVABLES – CREDIT RISK
FAIR VALUE OF TRADE RECEIVABLES
The Directors consider that the fair values of trade and other receivables due within one year approximate to
their carrying amounts as presented above.
The ageing of trade receivables (shown net of bad debt provision) was as follows:
2012
£’000
26
10
12
10
––––––––
58
Less than 30 days
30 to 60 days
60 to 120 days
Over 120 days
––––––––
2013
£’000
268
10
7
15
––––––––
300
––––––––
2015
£’000
31
6
11
2
––––––––
50
––––––––
There were no trade receivables which were overdue and not provided for in any of the periods.
The movement in the provision of doubtful debts was as follows:
At start of period
Amounts recovered
Amounts provided for
At end of period
2012
£’000
2013
£’000
–
–
–
––––––––
–
–
–
13
––––––––
13
––––––––
––––––––
2015
£’000
13
(2)
11
––––––––
11
––––––––
The exposure of the Combined entities to credit risk and impairment losses in relation to trade and other
receivables is reported in Note 5 of the financial information.
18.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents
19.
2012
£’000
2013
£’000
2015
£’000
––––––––
1,373
––––––––
1,236
––––––––
2012
£’000
Current
2013
£’000
2015
£’000
291
216
480
––––––––
986
615
39
173
––––––––
827
203
103
460
––––––––
766
1,583
TRADE AND OTHER PAYABLES
Trade payables
Accruals
Other payables
––––––––
––––––––
––––––––
Trade and other payables principally comprise amounts outstanding for trade purchase and ongoing costs.
They are non-interest bearing and are normally settled within 30 to 60 day terms. The Directors consider that
the fair values of trade and other payables due within one year approximate to their carrying amounts as
presented above.
189
20.
BORROWINGS
SECURED BORROWINGS AT AMORTISED COST
Bank loans:
Current
Non-current
2012
£’000
2013
£’000
2015
£’000
150
14,666
––––––––
14,816
200
14,513
––––––––
14,713
–
–
––––––––
–
––––––––
––––––––
––––––––
ANALYSIS OF BORROWINGS
Borrowings are classified based on the amounts that are expected to be settled within the next 12 months and
after more than 12 months from the reporting date, as follows:
2012
£’000
Current liabilities
Non-current liabilities
Unamortised finance costs and loan arrangement fees
150
14,850
(184)
––––––––
14,816
––––––––
2013
£’000
200
14,650
(137)
––––––––
14,713
––––––––
2015
£’000
–
–
–
––––––––
–
––––––––
THE COMBINED ENTITIES’ PRINCIPAL BORROWING
ARRANGEMENTS ARE:
2012
£’000
Facility amount
Amount drawn down
Interest rate
Repayment date
21.
2013
£’000
2015
£’000
15,000
15,000
15,000
15,000
LIBOR + 2.5% LIBOR + 2.5%
26/02/2017
26/02/2017
–
–
–
–
FINANCE LEASES COMMITMENTS – LESSEE
Minimum lease payments
2012
2013
2015
£’000
£’000
£’000
Amounts payable under finance leases:
Within one year
Between two and five years
In over five years
Present value
2012
2013
£’000
£’000
2015
£’000
170
170
170
164
158
153
690
695
700
605
589
573
21,043
20,868
20,693
3,503
3,798
4,087
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
21,904
21,734
21,564
4,272
4,545
4,813
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
2012
£’000
Minimum lease payments under finance leases
Future contingent rent payable under finance leases
Future finance charges under finance leases
21,904
(5,584)
(12,048)
––––––––
4,272
Present value of lease liability
––––––––
190
2013
£’000
21,734
(5,584)
(11,605)
––––––––
4,545
––––––––
2015
£’000
21,564
(5,584)
(11,167)
––––––––
4,813
––––––––
ANALYSIS OF FINANCE LEASES
Finance lease obligations are classified based on the amounts that are expected to be settled within the next
12 months and after more than 12 months from the reporting date. They are as follows:
Current liabilities
Non-current liabilities
2013
£’000
2014
£’000
2015
£’000
164
4,108
––––––––
4,272
158
4,387
––––––––
4,545
153
4,660
––––––––
4,813
––––––––
22.
––––––––
––––––––
NATURE AND PURPOSE OF RESERVES
INVESTED CAPITAL
Invested capital represents the excess of assets over liabilities of all Combined entities as of 31 March 2015,
31 December 2013 and 31 December 2012.
23.
CONTINGENT LIABILITIES
The Directors are not aware of any contingencies, in any of the periods, which may have a significant impact
on the financial position of the group.
24.
CAPITAL COMMITMENTS
There were no capital commitments in any of the periods.
25.
RELATED PARTY TRANSACTIONS
THE FOLLOWING TRANSACTIONS AROSE WITH PARTIES UNDER COMMON CONTROL
As at 31 March 2015 there was a shareholder loan of £36,319,000 payable by the Combined entities to
the parent company Pastra Investments Limited. As at 31 December 2013 the shareholder loan £21,312,000
was payable to the controlling parties Brockton Capital Fund II GP and Brockton Capital
Fund II LP (£20,501,000: 2012).
During the year Camden Lock Market Limited was charged by Camden Lock Limited, companies with
common directorship, management fees £1,014,712 (£1,148,953: 2013) (£1,700,377: 2012).
During the year Camden Lock Market Limited was charged by Camden Lock Limited, companies with
common directorship, service charges £206,347 (£145,815: 2013) (£122,644: 2012).
During the year London Waterbus Company Limited was charged by Camden Lock Market Limited and
Camden Lock Limited, companies with common directorship, £1,000 and £1,205 for rent and service
charges respectively (£800, £958: 2013) (£800, £924: 2012).
26.
CONTROLLING PARTY
The Combined entities’ immediate parent company is Pastra Investments Limited, a company incorporated
in the British Virgin Islands.
The ultimate controlling party is The Goodheart Trust, a trust established under the laws of the Isle of Man,
the sole beneficiary of which is Teddy Sagi.
191
27.
CASH GENERATED FROM OPERATIONS
PROFIT FOR THE YEAR
ADJUSTMENTS FOR:
Income tax expense
Finance expense
Movement on deferred tax provision
Depreciation and impairment of property, plant and equipment
Net gain from fair value adjustment on investment property
MOVEMENTS IN WORKING CAPITAL:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
CASH GENERATED FROM OPERATIONS
28.
2012
£’000
2013
£’000
2015
£’000
2,824
––––––––
605
––––––––
50,769
––––––––
36
961
6
17
(2,572)
77
992
3
20
(273)
246
834
–
49
(49,911)
(97)
(346)
––––––––
829
(320)
(158)
––––––––
946
716
(60)
––––––––
2,643
––––––––
––––––––
––––––––
RECONCILIATION OF UK GAAP TO IFRS BALANCE SHEET AT 31 DECEMBER 2011
(TRANSITION DATE)
UK GAAP
(IFRS format)
£’000
NON-CURRENT ASSETS
Property, plant and equipment
Investment property
61
34,960
––––––––
35,021
––––––––
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
437
761
1,198
––––––––
36,219
TOTAL ASSETS
––––––––
CURRENT LIABILITIES
Trade and other payables
Income taxes payable
Obligations under finance leases
Shareholder loans
(1,333)
(61)
(170)
(19,588)
––––––––
(21,152)
––––––––
(19,954)
NET CURRENT LIABILITIES
––––––––
192
IFRS balance
IAS 40
sheet
£’000
£’000
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
61
34,960
––––––––
35,021
––––––––
437
761
1,198
––––––––
36,219
––––––––
(1,333)
(61)
(170)
(19,588)
––––––––
(21,152)
––––––––
(19,954)
––––––––
UK GAAP
(IFRS format)
£’000
NON-CURRENT LIABILITIES
Obligations under finance leases
Borrowings
(3,825)
(14,569)
(18,394)
––––––––
(39,546)
TOTAL LIABILITIES
EQUITY
Invested capital
Revaluation reserve
TOTAL EQUITY
––––––––
––––––––
––––––––
––––––––
(904)
(2,423)
––––––––
(3,327)
(2,423)
2,423
––––––––
(3,327)
–
––––––––
(3,327)
––––––––
193
––––––––
(3,825)
(14,569)
(18,394)
––––––––
(39,546)
––––––––
––––––––
(3,327)
NET (LIABILITIES)/ASSETS
IFRS balance
IAS 40
sheet
£’000
£’000
––––––––
(3,327)
––––––––
SECTION C: FIVER
Sub-section 1: Accountant’s report on the historical financial information of Fiver for the three years
ended 30 September 2014 and the six months ended 31 March 2015
UHY Hacker Young LLP
Quadrant House
Floor 64
Thomas Moore Square
London E1W 1YW
The Directors
Market Tech Holdings Limited
Third Floor
La Plaiderie Chambers
La Plaiderie
St Peter Port
Guernsey
GY1 1WG
21 January 2016
Dear Sirs
Fiver London Limited (“Fiver”)
Introduction
We report on the financial information on Fiver set out in sub-section 2 of Section C of Part IX. This financial
information has been prepared for inclusion in the prospectus dated 21 January 2016 (the “Prospectus”) of
Market Tech Holdings Limited (the “Company”) on the basis of the accounting policies set out in Note 2 to
the financial information. This report is required by item 20.1 of Annex I of the Commission Regulation (EC)
No. 809/2004 (the “PD Regulation”) and is given for the purpose of complying with that item and for no
other purpose.
Responsibilities
The directors of the Company are responsible for preparing the financial information in accordance with
International Financial Reporting Standards as adopted by the European Union.
It is our responsibility to form an opinion on the financial information and to report our opinion to you.
Save for any responsibility arising under Prospectus Rule 5.5.3R(2)(f) to any person as and to the extent there
provided, to the fullest extent permitted by the law we do not assume any responsibility and will not accept
any liability to any other person for any loss suffered by any such other person as a result of, arising out of,
or in connection with this report or our statement, required by and given solely for the purposes of complying
with item 23.1 of Annex I of the PD Regulation, consenting to its inclusion in the Prospectus.
Basis of opinion
We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the
amounts and disclosures in the financial information. It also included an assessment of significant estimates
and judgements made by those responsible for the preparation of the financial information and whether the
accounting policies are appropriate to the entity’s circumstances, consistently applied and adequately
disclosed.
We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
194
financial information is free from material misstatement whether caused by fraud or other irregularity or
error.
Our work has not been carried out in accordance with auditing or other standards and practices generally
accepted in the United States of America or other jurisdictions outside the United Kingdom and accordingly
should not be relied upon as if it had been carried out in accordance with those standards and practices.
Opinion
In our opinion, the financial information gives, for the purposes of the Prospectus, a true and fair view of the
state of affairs of Fiver as at 30 September 2012, 30 September 2013, 30 September 2014 and 31 March 2015
and of its profits, cash flows and changes in equity for the periods then ended in accordance with
International Financial Reporting Standards as adopted by the European Union.
Declaration
For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus
and declare that we have taken all reasonable care to ensure that the information contained in this report is,
to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.
This declaration is included in the Prospectus in compliance with item 1.2 of Annex I of the PD Regulation.
Yours faithfully
UHY Hacker Young LLP
Chartered Accountants
195
Sub-section 2: Historical financial information of Fiver
The financial information set out below of Fiver for the three years ended 30 September 2014 and the six
months ended 31 March 2015 has been prepared by the Directors on the basis set out in note 2.
The accompanying notes represent an integral part of the financial information. The financial information
contained within this section does not constitute statutory financial statements within the meaning of
section 434 of Companies Act 2006.
STATEMENT OF COMPREHENSIVE INCOME
Notes
Continuing operations
Revenue
Cost of sales
5
Gross profit
Depreciation & Amortisation
Foreign Exchange loss
Expenses for employer financed
retirement benefit scheme
Other administrative expenses
9
Total administrative expenses
Other operating income
Operating profit/(loss)
Finance income/(costs) (net)
6
7
Profit/(loss) before income tax
Income tax
8
Profit/(loss) for the period/year
8,719,621
(6,060,691)
––––––––––
2,658,930
Year ended
30 September
2013
£
17,771,188
(12,214,326)
––––––––––
5,556,862
Year ended
30 September
2014
£
21,228,195
(14,006,516)
––––––––––
7,221,679
Period ended
31 March
2015
£
11,617,272
(7,438,185)
––––––––––
4,179,087
16,070
2,043
21,595
18,782
65,075
13,098
42,178
220,016
–
1,295,812
697,286
3,462,807
–
5,730,108
–
5,069,339
(1,313,925)
–
––––––––––
1,345,005
–
––––––––––
1,345,005
(335,393)
––––––––––
1,009,612
(4,200,470)
8,193
––––––––––
1,364,585
(23)
––––––––––
1,364,562
(299,511)
––––––––––
1,065,051
(5,808,281)
30,807
––––––––––
1,444,205
(1,083)
––––––––––
1,443,122
(36,384)
––––––––––
1,406,738
(5,331,533)
30,356
––––––––––
(1,122,090)
2,182
––––––––––
(1,119,908)
(74,152)
––––––––––
(1,194,060)
–
––––––––––
1,009,612
–
––––––––––
1,065,051
–
––––––––––
1,406,738
–
––––––––––
(1,194,060)
100.96
106.51
140.67
(119.40)
–––––––––– –––––––––– –––––––––– ––––––––––
Other comprehensive income
Total comprehensive profit/(loss)
Earnings per share
Basic and diluted earnings per
share attributable to ordinary
equity shareholders (£)
Year ended
30 September
2012
£
–––––––––– –––––––––– –––––––––– ––––––––––
27
–––––––––– –––––––––– –––––––––– ––––––––––
196
STATEMENT OF FINANCIAL POSITION
Notes
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investment in subsidiary
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
11
12
13
Non-current liabilities
Other payables
Deferred tax liabilities
14
15
16
17
Total Equity and Reserves
As at
31 March
2015
£
60,200
–
–
––––––––––
60,200
78,386
79,047
–
––––––––––
157,433
69,667
181,918
–
––––––––––
251,585
692,414
159,178
25,098,885
––––––––––
25,950,477
925,849
301,798
810,982
––––––––––
2,038,629
––––––––––
2,098,829
1,764,459
1,286,904
1,116,367
––––––––––
4,167,730
––––––––––
4,325,163
2,709,523
699,643
1,421,246
––––––––––
4,830,412
––––––––––
5,081,997
3,248,167
751,561
196,885
––––––––––
4,196,613
––––––––––
30,147,090
972,704
–
––––––––––
972,704
2,238,311
–
––––––––––
2,238,311
1,552,023
–
––––––––––
1,552,023
24,550,494
–
––––––––––
24,550,494
–
4,338
––––––––––
4,338
––––––––––
977,042
––––––––––
1,121,787
–
10,016
––––––––––
10,016
––––––––––
2,248,327
––––––––––
2,076,836
–
46,400
––––––––––
46,400
––––––––––
1,598,423
––––––––––
3,483,574
3,232,356
74,726
––––––––––
3,307,082
––––––––––
27,857,576
––––––––––
2,289,514
2
–
–
1,121,785
––––––––––
1,121,787
––––––––––
–
––––––––––
1,121,787
10,000
–
–
2,066,836
––––––––––
2,076,836
––––––––––
–
––––––––––
2,076,836
10,000
–
–
3,473,574
––––––––––
3.483,574
––––––––––
–
––––––––––
3,483,574
10,000
–
–
2,279,514
––––––––––
2,289,514
––––––––––
–
––––––––––
2,289,514
–––––––––– –––––––––– –––––––––– ––––––––––
18
19
Net assets
Non-controlling interests
As at
30 September
2014
£
–––––––––– –––––––––– –––––––––– ––––––––––
Total Liabilities
EQUITY
Capital and reserves attributable
to the company’s equity holders
Share capital
Share premium
Share-based payment reserve
Retained profits
As at
30 September
2013
£
–––––––––– –––––––––– –––––––––– ––––––––––
Total Assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
As at
30 September
2012
£
–––––––––– –––––––––– –––––––––– ––––––––––
21
–––––––––– –––––––––– –––––––––– ––––––––––
197
STATEMENTS OF CHANGES IN EQUITY
Year ended 30 September 2012
At 1 October 2011
Issue of shares
Non-controlling interests arising
on business combination
Dividends
Total comprehensive profit
for period
At 30 September 2012
Year ended 30 September 2013
At 1 October 2012
Issue of shares
Share issue costs
Dividends
Total comprehensive profit
for year
At 30 September 2013
Year ended 30 September 2014
At 1 October 2013
Issue of shares
Share issue costs
Dividends
Total comprehensive profit
for year
At 30 September 2014
Period ended 31 March 2015
At 1 October 2014
Issue of shares
Share issue costs
Dividends
Total comprehensive loss
for period
At 31 March 2015
Share
capital
£
Share
premium
£
Sharebased
payments
reserve
£
2
–
–
–
–
–
172,173
–
172,175
–
–
–
172,175
–
–
–
–
–
–
–
–
(60,000)
–
(60,000)
–
–
–
(60,000)
Retained
profit
£
Noncontrolling
Total
interest
£
£
Total
equity
£
–
–
– 1,009,612 1,009,612
– 1,009,612
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
2
–
– 1,121,785 1,121,787
– 1,121,787
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
2
9,998
–
–
–
–
–
–
–
–
–
–
1,121,785
–
–
(120,000)
1,121,787
9,998
–
(120,000)
–
–
–
–
1,121,787
9,998
–
(120,000)
–
–
– 1,065,051 1,065,051
– 1,065,051
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
10,000
–
– 2,066,836 2,076,836
– 2,076,836
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
10,000
–
–
–
–
–
–
–
–
–
–
–
2,066,836
–
–
–
2,076,836
–
–
–
–
–
–
–
2,076,836
–
–
–
1,406,738 1,406,738
– 1,406,738
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
10,000
–
– 3,473,574 3,483,574
– 3,483,574
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
10,000
–
–
–
–
–
–
–
–
–
–
–
3,473,574
–
–
–
3,483,574
–
–
–
–
–
–
–
3,483,574
–
–
–
–
–
– (1,194,060) (1,194,060)
– (1,194,060)
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
10,000
–
– 2,279,514 2,289,514
– 2,289,514
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
198
CASH FLOW STATEMENT
Operating activities
Profit before income tax
Adjustments for:
Depreciation charges
Amortisation charge
Loss on disposal of property, plant
and equipment
Finance costs/(income) (net)
Operating profit/(loss) before working
capital changes
Increase in inventory
(Increase)/Decrease in receivables
Decrease in payables
Cash generated from operations
Interest paid
Income tax paid
Net cash used in operating activities
Investing activities
Acquisition of subsidiary, net of cash
acquired
Purchases of property, plant and
equipment
Payment to acquire intangibles
Interest received
Net cash used in investing activities
Financing activities
Proceeds from issuance of ordinary
shares, net of issue costs
Proceeds from other borrowings
Repayments of other borrowings
Dividends paid to equity holders
Repayment of shares in subsidiary
Repayment of preference shares
Net from financing activities
Increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at 1 October
Cash and cash equivalents at
30 September/31 March
Year ended
30 September
2012
£
Year ended
30 September
2013
£
Year ended
30 September
2014
£
Period ended
31 March
2015
£
1,345,005
1,364,562
1,443,122
16,070
–
21,595
–
19,596
45,479
–
–
––––––––––
–
23
––––––––––
–
1,083
––––––––––
18,449
(2,182)
––––––––––
1,361,075
(781,389)
(44,249)
272,348
––––––––––
807,785
–
(49,227)
––––––––––
758,558
1,386,180
(838,610)
(985,106)
1,305,774
––––––––––
868,238
(23)
(334,000)
––––––––––
534,215
1,509,280
(945,064)
587,261
(395,400)
––––––––––
756,077
(1,662)
(290,888)
––––––––––
463,527
(1,048,285)
(538,644)
(51,919)
20,762,332
––––––––––
19,123,484
–
–
––––––––––
19,123,484
(1,119,908)
32,616
22,740
–––––––––– –––––––––– –––––––––– ––––––––––
–
–
–
(10,877)
(148,350)
579
––––––––––
(158,648)
(19,676,216)
(45,007)
–
–
––––––––––
(45,007)
(39,781)
(79,047)
–
––––––––––
(118,828)
(673,811)
–
2,182
––––––––––
(20,347,845)
–
65,000
(2,000)
(60,000)
9,998
–
–
(120,000)
–
–
–
–
–
–
–
–
––––––––––
3,000
––––––––––
(110,002)
––––––––––
–
––––––––––
–
716,551
94,431
––––––––––
305,385
810,982
––––––––––
304,879
1,116,367
––––––––––
(1,224,361)
1421,246
––––––––––
810,982
1,116,367
1,421,246
–––––––––– –––––––––– –––––––––– ––––––––––
–––––––––– –––––––––– –––––––––– ––––––––––
196,885
–––––––––– –––––––––– –––––––––– ––––––––––
199
NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1.
Reporting entity
Fiver London Limited (the “Company”) is a company incorporated and domiciled in England & Wales with
a company registration number of 07384676. The address of the Company’s registered office is
54-56 Camden Lock Place, London, NW1 8AF.
The Company’s principal activity is that of selling in-trend budget clothing, footwear and accessories
through the internet.
2.
Basis of preparation
The historical financial information of the Company has been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board
(“IASB”) and as adopted by the EU, and IFRIC interpretations.
The Company has adopted IFRS for the first time in the historical financial information. The Company’s
transition date to IFRS is 1 October 2011.
The historical financial information has been prepared under the historical cost convention with the
exception of certain items which are measured at fair value as disclosed in the accounting policies below.
The principal accounting policies set out below have been consistently applied to all periods presented.
The historical financial information has been prepared solely for the purposes of the admission document.
IFRS transition
IFRS 1 permits companies adopting IFRS for the first time to take certain optional exemptions from the full
retrospective application of IFRS.
The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are given in note 28.
Functional and presentation currency
The financial information is presented in pounds sterling (£), which is the both the functional and
presentational currency of the Company. All amounts are rounded to the nearest pound (£), except where
otherwise indicated.
New IFRS Standards and Interpretations not yet adopted
At the date of approval of the financial information, a number of new IFRS standards, amendments and
interpretations have been issued but are not yet effective and have not been applied in preparing the financial
information. The Directors do not anticipate that adoption of the standards, amendments and interpretations
will have a material impact on the financial information of the Company in future years.
Applicable for financial
periods beginning on or after
Standard/ interpretation
Content
IAS 19
IFRS 9
IFRS 7
IFRS 15
Employee Benefits
Financial Instruments
Financial instruments Disclosure
Revenue from Contracts with Customers
1 July 2014
1 January 2018
1 January 2018
1 January 2017
Significant accounting judgements and estimates
The preparation of financial information in conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets and liabilities, income and expenses. Judgements and estimates are continually evaluated and are
based on historical experience and other factors, including expectations of future events that are believed to
be reasonable under the circumstances. The resulting accounting estimates may differ from the related actual
200
results. The estimates and assumptions that have a risk of causing material adjustment to the carrying
amounts of assets and liabilities within the future financial years are as follows:
Estimates
Depreciation, useful lives and residual values of property, plant & equipment
The Directors estimate the useful lives and residual values of property, plant & equipment in order to
calculate the depreciation charges. Changes in these estimates could result in changes being required to the
annual depreciation charges in the statement of comprehensive incomes and the carrying values of the
property, plant & equipment in the statements of financial position.
Fair value of intangible assets acquired
Intangible assets acquired separately are measured on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated
impairment losses. The amortisation charge for the year and impairment losses are recognised through the
administrative expenses.
Intangible assets currently held by the company are the website development costs. Website development
costs relating to the application and infrastructure development, graphical design and content development
stages are recognised as assets if the criteria for capitalising development costs under IAS 38 are met.
Costs associated with website advertising or promotional purposes are expensed as they are incurred.
Website development costs capitalised that are in the course of construction are stated at cost with no
provision for amortisation until the asset comes into commercial use.
Such intangible assets are reviewed for impairment on an annual basis.
Useful economic life of intangible assets
The directors are of the opinion that the intangible asset has a useful economic life of 5 years and therefore
annual amortisation is being charged. The length of the project is dependent upon appeal to customers and
technological development and is therefore being estimated by the Directors. The Directors consider 5 years
to be appropriate based on their expectation of the lasting appeal to customers and therefore business being
generated over that period, taking into account changes in fashion and technological progress.
The basis of the economic life of the intangible asset is reconsidered annually and where objective evidence
exists that the economic life should be amended, the Directors adjust the rate of amortisation accordingly.
Judgments
In the process of applying the Company’s accounting policies, management has made the following
significant judgment, apart from those involving estimations, which may have a significant effect on amounts
recognised in the financial statements.
Deferred tax liability
The Company estimates future profitability in arriving at the fair value of the deferred tax assets and
liabilities. If the final tax outcome is different to the estimated deferred tax amount the resulting changes will
be reflected in the statement of comprehensive income, unless the tax relates to an item charged to equity in
which case the changes in tax estimates will also be reflected in equity.
3.
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in the historical
financial information, unless otherwise indicated.
201
Foreign currency translation
Functional and presentational currency
Items included in the financial results of each of the Company are measured using the currency of the
primary economic environment in which the Company operates (the functional currency). The historical
financial information is presented in pounds sterling (‘£’).
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the profit or loss.
Financial instruments
Financial assets and financial liabilities are measured initially at fair value plus transactions costs. Financial
assets and financial liabilities are measured subsequently as described below.
Financial assets
The Company classifies its financial assets as ‘loans and receivables’. The Company assesses at each
statement of financial position date whether there is objective evidence that a financial asset or a group of
financial assets is impaired.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They are included in current assets, except for maturities greater than 12 months
after the statement of financial position date, which are classified as non-current assets. Loans and
receivables are classified as ‘trade and other receivables’ in the Statement of Financial Position.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment.
A provision for impairment of trade receivables is established when there is objective evidence that the
Company will not be able to collect all amounts due according to the original terms of the receivables.
Significant financial difficulty, high probability of bankruptcy or a financial reorganisation and default are
considered indicators that the trade receivable is impaired. The amount of the provision is the difference
between the asset’s carrying amount and the present value of the estimated future cash flows discounted at
the original effective interest rate. The loss is recognised in the profit or loss. When a trade receivable is
uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of
amounts previously written off are credited to the profit or loss.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset
expire, or when the financial asset and all substantial risks and rewards are transferred.
Financial liabilities
The Company’s financial liabilities include trade and other payables.
Trade payables are recognised initially at fair value less transaction costs and subsequently measured at
amortised cost using the effective interest method (“EIR” method).
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortisation is included in finance costs in the Income
Statement.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Where financial liabilities are extinguished via the issue of equity instruments, the Company measures this
at the fair value of the equity instruments being issued, unless this cannot be reliably measured, in which
case the fair value is based upon the fair value of the financial liability being extinguished. Any difference
202
between the carrying value of the financial liability extinguished and the consideration paid is recognised in
profit or loss.
Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial
instruments are offset when the Company has a legally enforceable right to offset and intends either to settle
on a net basis or to realise the asset and settle the liability simultaneously.
Equity
Equity comprises the following:
•
Share capital represents amounts subscribed for shares at nominal value.
•
Retained earnings represents the accumulated profits and losses attributable to equity shareholders.
Property, plant and equipment
Plant and equipment are stated at historical cost less accumulated depreciation and impairment losses.
Depreciation is provided to write off the cost less the estimated residual value of each asset over their
expected useful economic lives, as follows:
Plant and Machinery
–
Lift Trucks
–
Storage systems
–
Other plant and machinery
Office equipment
Computer equipment
Motor vehicles
Leasehold land and building
20% reducing balance
20% reducing balance
20% reducing balance
20% reducing balance
25% reducing balance
25% reducing balance
Over the length of the lease
The carrying values of plant and equipment are reviewed at each statement of financial position date to
determine whether there are any indications of impairment. If any such indication exists, the assets are tested
for impairment to estimate the assets’ recoverable amounts. Any impairment losses are recognized in the
statement of comprehensive income.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of
financial position date. Gains and losses on disposals are determined by comparing the proceeds with the
carrying amount and are recognised within the statement of comprehensive income.
Intangible assets other than goodwill
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets
acquired in a business combination is their fair value as at the date of acquisition.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and
accumulated impairment losses, if any.
The useful lives of intangible assets are assessed as finite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The amortisation period and the
amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each
reporting period. Changes in the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as
appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible
assets with finite lives is recognised in profit or loss in the expense category consistent with the function of
the intangible assets.
203
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the
net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset
is derecognised.
Amortisation is calculated on a straight-line basis over the estimate useful life of the asset as follows:
Website development costs
Straight-line over 5 years
Impairment of assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired.
If any such indication exists, or when annual impairment testing for an asset is required, the Company makes
an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or
cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual
asset, unless the asset does not generate cash inflows that are largely independent of those from other assets
or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated
future cash flows are discounted to their present value of money and the risks specific to the asset.
Impairment losses of continuing operations are recognized in the profit or loss in those expense categories
consistent with the function of the impaired asset.
Cash and cash equivalents
Cash and cash equivalents are carried in the statement of financial position at cost and comprise cash in hand,
cash at bank, deposits held at call with banks, other short-term highly liquid investments with original
maturities of three months or less.
Inventories
Inventories are stated at the lower of costs and net realisable value. Cost comprises direct materials, and those
overheads that have been incurred in bringing the inventories to their present location and condition.
Net realisable value is the estimated selling price less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution.
Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments under operating leases (net of any incentives received from the
lessor) are charged to the statement of comprehensive income on a straight line basis over the period of the
lease.
Dividend distribution
The Company recognises a liability to make cash or non-cash distributions to owners of equity when the
distribution is authorised and is no longer the discretion of the Company. A corresponding amount is
recognised directly in equity.
Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company
and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is
measured at the fair value of the consideration received or receivable, taking into account contractually
defined terms of payment and excluding taxes or duty.
Revenue from the sale of goods online is recognised when the significant risks and rewards of ownership of
the goods have passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is
measured at the fair value of the consideration received or receivable, net of returns and allowances for trade
discounts.
204
Employee benefits
Short term employee benefits
Wages, salaries, paid annual leave, paid sick leave and bonuses are recognised as an expense in the period
in which the associated services are rendered by employees.
Pensions and other post-employment benefits
The company operates a defined benefit pension plan that requires contributions to be made to a separately
administered fund.
Details of ‘The Fiver London Limited 2013 EFRBS’ scheme were not made available in order to ensure
compliance with the requirements of IAS 19.
Current and deferred income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be
recovered or paid to the taxation authorities. A provision is made for corporation tax for the reporting period
using the tax rates that have been substantially enacted for the company at the reporting date.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the
statement of comprehensive income.
Deferred income tax is provided in full on an undiscounted basis, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial
statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or
substantially enacted by the statement of financial position date and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.
Operating segments
An operating segment is a component of an entity that engages in business activities from which it may earn
revenues and incur expenses (including revenues and expenses related to transactions with other components
of the same entity), whose operating results are regularly reviewed by the entity’s Chief Operating Decision
Maker to make decisions about resources to be allocated to the segment and assess its performance, and for
which discrete financial information is available. The Chief Operating Decision Maker has been identified
as the Board of Executive Directors, at which level strategic decisions are made.
4.
Operating segments
The Company has only one operating segment: the sale of in-trend budget clothing, footwear and accessories
through the internet. The Company operates within the UK only and therefore there is no geographical
information to disclose.
None of the Company’s customers individually contribute over 10 per cent. of the total revenue.
5.
Revenue
Revenue is derived from the Company’s principal activity of sale of goods online.
205
6.
Operating profit
Operating loss is stated after charging:
Staff costs (note 9)
Depreciation (note 10)
Amortisation of intangibles
Loss on foreign exchange transactions
Fees payable to the company’s auditor
7.
Year ended
30 Sept
2013
£
Year ended
30 Sept
2014
£
Period ended
31 March
2015
£
489,826
16,070
–
2,043
––––––––
16,054
2,105,822
21,595
–
18,782
––––––––
19,252
2,924,200
19,596
45,479
13,098
––––––––
–
1,947,552
32,616
22,740
220,016
––––––––
25,054
Year ended
30 Sept
2012
£
Year ended
30 Sept
2013
£
Year ended
30 Sept
2014
£
Period ended
31 March
2015
£
–
––––––––
23
––––––––
1,662
––––––––
–
––––––––
–
––––––––
–
–
––––––––
23
579
––––––––
1,083
2,182
––––––––
2,182
Year ended
30 Sept
2012
£
Year ended
30 Sept
2013
£
Year ended
30 Sept
2014
£
Period ended
31 March
2015
£
331,055
––––––––
–
––––––––
293,833
––––––––
–
––––––––
–
––––––––
–
––––––––
45,826
––––––––
–
––––––––
4,338
––––––––
335,393
5,678
––––––––
299,511
36,384
––––––––
36,384
28,326
––––––––
74,152
––––––––
––––––––
––––––––
––––––––
Finance income/(costs) (net)
Recognised in profit for the year
Finance costs
Interest payable
Finance income
Less: Interest received
Finance income/(costs) (net)
8.
Year ended
30 Sept
2012
£
––––––––
––––––––
––––––––
––––––––
Income tax
Income tax expense
Current tax expense
Current year
Deferred tax income
Current year
Total income tax credit
––––––––
206
––––––––
––––––––
––––––––
A reconciliation between the tax expense and the accounting loss multiplied by the tax rate for each period
is as follows:
Profit before taxation
Current taxation at standard tax rate (2015:
21%, 2013: 23.5%, 2012: 25%)
Reconciliation to actual income tax charge
Tax losses carried forward
Non-deductible expenses
Depreciation over capital allowances
Other tax adjustments
Movement in deferred tax
Total tax credit
Year ended
30 Sept
2012
£
Year ended
30 Sept
2013
£
Year ended
30 Sept
2014
£
Period ended
31 March
2015
£
1,345,005
––––––––
1,364,562
––––––––
–
––––––––
345,954
––––––––
336,251
320,672
–
72,650
–
–
(5,196)
–
4,338
––––––––
335,393
–
24
(6,165)
(20,698)
5,678
––––––––
299,511
––––––––
––––––––
–
–
–
–
36,384
––––––––
36,384
––––––––
–
30,078
(27,331)
(29,571)
28,326
––––––––
74,152
––––––––
Deferred taxes
Details of the deferred tax liabilities are given on note 19.
9.
Employee information
Salaries, wages, bonuses and allowances
Defined contribution pension costs
Social security costs
Other benefits
Share-based payments
Year ended
30 Sept
2012
£
Year ended
30 Sept
2013
£
Year ended
30 Sept
2014
£
Period ended
31 March
2015
£
475,039
–
14,787
1,424,835
600,100
80,887
2,716,461
–
207,739
1,805,162
–
142,390
–
––––––––
489,826
–
––––––––
2,105,822
–
––––––––
2,924,200
–
––––––––
1,947,552
––––––––
––––––––
––––––––
––––––––
The average monthly number of persons employed (including Directors) by the group, analysed by category,
was as follows:
Technical and operations
Sales and marketing
Administration
Management
Number
Number
Number
Number
50
245
141
152
6
2
––––––––
58
16
2
––––––––
263
16
2
––––––––
159
17
2
––––––––
171
––––––––
207
––––––––
––––––––
––––––––
Included in staff costs above is Directors’ remuneration as follows:
Salaries, wages, bonuses and allowances
Share-based payments
Year ended
30 Sept
2012
£
Year ended
30 Sept
2013
£
Year ended
30 Sept
2014
£
Period ended
31 March
2015
£
27,928
–
––––––––
27,928
51,389
–
––––––––
51,389
29,355
–
––––––––
29,355
28,268
–
––––––––
28,268
––––––––
––––––––
––––––––
––––––––
Key management is considered to be the Directors only and so key management remuneration is as disclosed
above.
During the year ended 30 September 2013, the Company resolved to establish an employer financed
retirement benefit scheme for the benefit of its officers, employees and their wider families, the Fiver London
Limited 2013 EFRBS (“the Scheme”).
As the details and actuarial valuations have not been provided to us, it is not possible to disclose the tables
required under IAS 19 summarising the components of the net benefit expense recognised in the income
statement and the funded status and amounts recognised in the statement of financial position for the
Scheme.
During the year ended 30 September 2013, the company has paid contributions amounting to £600,000 to
the Scheme and has incurred legal expenses of £97,286 in respect of the Scheme. The total of £697,286 is
included within administrative expenses.
10.
Operating leases commitments
Lessee
The Company is a lessee of warehouse space. Future minimum rents payable under non-cancellable
operating leases are set out in the table below:
Within one year
Between two and five years
In over five years
Year ended
30 Sept
2012
£
Year ended
30 Sept
2013
£
Year ended
30 Sept
2014
£
Period ended
31 March
2015
£
–
270,000
–
––––––––
270,000
270,000
–
–
––––––––
270,000
270,000
–
–
––––––––
270,000
–
–
240,165
––––––––
240,165
––––––––
208
––––––––
––––––––
––––––––
11.
Property, plant and equipment
Cost
At 1 October 2011
Additions
At 30 September 2012
Additions
At 30 September 2013
Additions
At 30 September 2014
Additions
Disposals
At 31 March 2015
Depreciation
At 1 October 2011
Depreciation charge
At 30 September 2012
Depreciation charge
At 30 September 2013
Depreciation charge
At 30 September 2014
Depreciation charge
Disposals
At 31 March 2015
Net book values
At 30 September 2012
At 30 September 2013
At 30 September 2014
At 31 March 2015
Leasehold
land &
buildings
£
Fixtures,
Computer fittings and
equipment equipment
£
£
Plant and
machinery
£
–
–
––––––––
–
–
––––––––
–
–
––––––––
–
466,144
–
––––––––
466,144
–
5,070
––––––––
5,070
–
––––––––
5,070
–
––––––––
5,070
140,919
–
––––––––
145,989
–
6,311
––––––––
6,311
10,651
––––––––
16,962
4,877
––––––––
21,839
66,748
–
––––––––
88,587
37,291
23,626
––––––––
60,917
20,030
––––––––
80,947
–
––––––––
80,947
–
(31,626)
––––––––
49,321
–
10,000
––––––––
10,000
9,100
––––––––
19,100
6,000
––––––––
25,100
–
–
––––––––
25,100
37,290
45,007
––––––––
82,298
39,781
––––––––
122,079
10,877
––––––––
132,956
673,811
(31,626)
––––––––
775,141
–
–
––––––––
–
–
––––––––
–
––––––––
–
15,538
–
––––––––
15,538
–
1,014
––––––––
1,014
811
––––––––
1,825
649
––––––––
2,474
7,601
–
––––––––
10,075
–
1,578
––––––––
1,578
3,846
––––––––
5,424
4,104
––––––––
9,528
5,502
–
––––––––
15,030
6,028
10,978
––––––––
17,006
12,788
––––––––
29,794
10,230
––––––––
40,024
2,245
(13,177)
––––––––
29,092
–
2,500
––––––––
2,500
4,150
––––––––
6,650
4,613
––––––––
11,263
1,729
–
––––––––
12,992
6,028
16,070
––––––––
22,098
21,595
––––––––
43,693
19,596
––––––––
63,289
32,615
(13,177)
––––––––
82,727
–
–
–
––––––––
450,606
4,056
3,245
2,596
––––––––
135,914
4,733
11,538
7,434
––––––––
73,557
43,911
51,153
40,923
––––––––
20,229
7,500
12,450
7,837
––––––––
12,108
60,200
78,386
69.667
––––––––
692,414
Motor
vehicles
£
Total
£
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Depreciation is included within administrative expenses.
209
12.
Intangible assets
Website development
30 Sept
30 Sept
2013
2014
£
£
30 Sept
2012
£
Cost
As at 1 October
Additions
–
31 March
2015
£
––––––––
–
–
79,047
––––––––
79,047
79,047
148,350
––––––––
227,397
––––––––
227,397
At 30 September/31 March
–
–
––––––––
–
–
–
––––––––
–
–
45,479
––––––––
45,479
45,479
22,740
––––––––
68,219
Net book value
At 30 September/31 March
–
79,047
181,918
159,178
At 30 September/31 March
––––––––
Amortisation
As at 1 October
Amortisation charge
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
227,397
––––––––
––––––––
––––––––
Amortisation is included within administrative expenses.
13.
Investments
Details of the Company’s subsidiary companies are as follows:
Subsidiary companies
2012
%
Glispa Global Group Limited
Glispa GmbH*
–
–
Equity interests
2013
2014
%
–
–
2015
%
75
100
Principal activities
Investment Holding
Digital and mobile marketing
Glispa Global Group Limited is incorporated and operates in England and has not yet produced any financial
results. Glispa GmbH is incorporated in Germany and was acquired on 13 March 2015.
*
14.
Glispa GmbH is a 100% subsidiary of Glispa Global Group Limited and is therefore, indirectly owned.
Inventories
Finished goods
Cost of inventories recognised as an expense
Write-down of inventories to net
realisable value
30 Sept
2012
£
30 Sept
2013
£
30 Sept
2014
£
31 March
2015
£
925,849
238,061
1,764,459
576,956
2,709,523
–
3,248,167
1,056,538
–
–
–
–
210
15.
Trade and other receivables
Trade receivables
Prepayments
Other receivables
30 Sept
2012
£
30 Sept
2013
£
30 Sept
2014
£
31 March
2015
£
–
25,100
276,698
––––––––
301,798
–
3,217
1,283,687
––––––––
1,286,904
–
37,104
662,539
––––––––
699,643
60,000
255,185
436,376
––––––––
751,561
––––––––
––––––––
––––––––
––––––––
The Company normally invoices for goods and services in advance and payment is received prior to delivery.
Some customers are being given a 15 day credit term as they are invoiced mid-month. Other credit terms are
assessed and approved on a case-by-case basis. The Company has no significant concentration of credit risk
that may arise from exposure to a single debtor or the groups of debtors. Exposure to credit and currency
risks related to trade and other receivables is disclosed in note 23.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair
values as they are comprised of short term receivables.
All of the group’s trade receivables have been reviewed for indicators of impairment. None of the trade
receivables were found to be impaired and no provision has been made.
Trade receivables above include amounts that are past due at the year-end but against which no allowance
for doubtful receivables has been made because there has not been any significant change in credit quality
and the amounts are still considered recoverable. The ageing of trade and other receivables not impaired
were:
Current
Overdue by less than 30 days
30 to 60 days overdue
60 to 90 days overdue
More than 90 days overdue
Balance at end of year
16.
30 Sept
2012
£
30 Sept
2013
£
30 Sept
2014
£
31 March
2015
£
301,798
–
–
–
–
––––––––
301,798
1,286,904
–
–
–
–
––––––––
1,286,904
1,552,023
–
–
–
–
––––––––
1,552,023
751,561
–
–
–
–
––––––––
751,561
––––––––
––––––––
––––––––
––––––––
Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise the following:
Cash at bank
30 Sept
2012
£
30 Sept
2013
£
30 Sept
2014
£
31 March
2015
£
810,982
1,116,367
1,421,246
––––––––
––––––––
––––––––
––––––––
The Group’s exposure to interest rate risk for financial assets and liabilities is disclosed in note 23.
211
196,885
17.
Trade and other payables
Trade payables
Other taxes and social security
Other payables
Amounts owed to parent entity
Accruals and deferred income
30 Sept
2012
£
30 Sept
2013
£
30 Sept
2014
£
31 March
2015
£
151,020
660,473
95,950
–
65,261
–––––––––
972,704
200,878
1,082,961
760,555
–
193,917
–––––––––
2,238,311
319,190
618,689
209,163
404,981
–
–––––––––
1,552,023
1,276,700
466,988
2,306,023
20,184,609
316,174
–––––––––
24,550,494
––––––––– ––––––––– ––––––––– –––––––––
The normal trade credit terms granted to the Company are 30 days. Exposure to liquidity and currency risks
related to trade and other payables is disclosed in Note 23.
Included within other payables as at 31 March 2015 is the amount of £2,033,000 owed as deferred
consideration following the acquisition of the subsidiary (Note 20).
The Directors consider that the carrying amount of trade and other payables approximates to their fair values.
Amount owed to parent
As at 31 March 2015 the Company owed £20,184,609 to the immediate holding entity after receiving funds
for the acquisition of the subsidiaries.
18.
Other financial liabilities
Deferred consideration/put option
30 Sept
2012
£
30 Sept
2013
£
30 Sept
2014
£
31 March
2015
£
–
––––––––
–
––––––––
–
3,232,356
––––––––
––––––––
The put option was issued on 13 March 2015 upon acquisition of Glispa GmbH (see Note 20) and grants the
seller the option to sell their 25 per cent. share to the Company for €15 million between years 2 and 4 after
the acquisition. When measuring the consideration paid on acquisition, the put option is recognised at fair
value.
19.
Deferred tax liability
As at 1 October
Credit to the statement of comprehensive
income
Balance as at 30 September
30 Sept
2012
£
30 Sept
2013
£
30 Sept
2014
£
31 March
2015
£
–
4,338
10,016
46,400
4,338
––––––––
4,338
5,678
––––––––
10,016
36,384
––––––––
46,400
28,326
––––––––
74,726
––––––––
––––––––
––––––––
––––––––
The deferred tax balance arose on timing differences.
20.
Business combinations
On the 13 March 2015, the Company indirectly acquired 75 per cent. of the share capital of Glispa, a German
incorporated company whose principal activity is that of a mobile marketing business, achieved through the
acquisition of 75 per cent. of the share capital of Glispa for total consideration of €30.5 million. The total
consideration was comprised of €27.5 million cash with a further €3 million deferred working capital
payment. The seller has a put option over their remaining 25 per cent. of the company that can be exercised
between years two and four for a further consideration of €15 million.
212
The following table summarises the consideration paid for Glispa the fair value of assets acquired, liabilities
assumed and the non-controlling interests at the acquisition date.
£’000
Fair value of cash consideration at 13 March 2015
Cash
Deferred consideration
Put option at fair value
Fair value of assets and liabilities at the date of acquisition:
Intellectual property
Other intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
19,711
2,033
3,173
14,029
10
234
8,300
4,678
(1,308)
––––––––
(418)
(7,673)
(4,160)
––––––––
13,692
(3,423)
14,648
––––––––
24,917
Corporation tax
Accruals
Deferred tax
Total identifiable net assets
Non-controlling interest
Goodwill
Total consideration
21.
£’000
––––––––
––––––––
24,917
––––––––
Share capital
30 Sept
2012
£
Authorised, issued and fully paid
2012: 2 ordinary shares of £1 each £1
2013: 10,000 ordinary shares of £1 each
2015: 10,000 ordinary shares of £1 each
30 Sept
2013
£
30 Sept
2014
£
31 March
2015
£
10,000
10,000
2
10,000
––––––––
––––––––
––––––––
––––––––
During the period ended 30 September 2012, 2 ordinary shares of £1 were issued for cash of £2.
During the year ended 30 September 2013, a further issue of £9,998 shares of £1 were issued for a total
consideration of £9,998
22.
Commitments and contingencies
(a)
Capital commitments
The group had no capital commitments at 30 September 2012, 2013, 2014 or the period ended
31 March 2015.
(b)
Operating lease commitments
The Company does not lease assets under non-cancellable operating lease agreements.
(c)
Contingent liabilities
The Company had no contingent liabilities at 30 September 2012, 2013, 2014 or period ended
31 March 2015.
213
23.
Financial instruments
Financial risk management objectives and policies
The Company’s financial risk management policy seeks to ensure that adequate financial resources are
available for the development of the Company’s business whilst managing its risks. The Company does not
engage in speculative transactions or hedging transactions.
The Company’s principal financial instruments consist of cash and cash equivalents and loans. The main
purpose of these financial instruments is to finance the group’s operations. The group has other financial
instruments such as trade receivables and trade payables that arise directly from its operations.
The Directors have overall responsibility for the establishment and oversight of the Company’s risk
management and they recognise that financial risk management is an area in which they may need to develop
specific policies should the Company become exposed to further financial risks as the business develops. The
Directors currently ensure that the Company has sufficient cash and cash equivalents to ensure there are
sufficient reserves to support the business operations. The exposure to other financial instruments is limited
to those generated though the operations and borrowings.
The main risks arising from the Company’s financial instruments are credit risk, interest rate risk, currency
risk, liquidity risk, and market price risk. This note presents information about the Company’s exposure to
each of these risks. The Board reviews and agrees policies for managing each of these risks as and when they
arise. Further quantitative disclosures are included throughout the financial information.
There have not been any material changes in respect of the exposure to financial risks during the periods
presented.
Credit risk
Credit risk is the risk of financial loss to the Company if a customer fails to meet its contractual obligations.
The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each
customer. The Company provides credit to only a limited number of customers in the normal course of
business. The company’s main customer base pay for goods ordered online upfront and therefore the
Company believes it has no material concentration of credit risk. Management has a credit policy in place
and the exposure to the credit risk is monitored on an ongoing basis. Appropriate credit limits are set and
credit evaluations are performed on all customers requiring credit facilities. Sales exceeding credit limit or
outstanding remains beyond the stipulated terms will be subject to credit hold.
Market price risk
Market price risk is the risk that changes in market prices such as foreign exchange and interest rates will
affect the Company’s income. The Directors do not consider market price risk to be a material risk to the
Company.
Interest rate risk
The Company has no interest bearing financial liabilities. The Company is only exposed to interest rate risk
on short term facilities and cash balances. The Directors monitor the interest rate of credit facilities offered
by the financial institutions on a monthly basis. The Directors do not consider this to be an exposure to
interest rate risk.
Currency risk
The Company’s operations are entirely in the United Kingdom resulting in minimal exposure to currency
risk. No sensitivity analysis of currency risk has therefore been shown.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.
As part of its overall prudent liquidity risk management, the Company actively manages its operating cash
214
flows and the availability of funding through an adequate amount of committed credit facilities and ability
to close out market positions. The contractual maturity of the financial liabilities, including both principal
and interest, are as follows:
2012
Trade and other payables
Borrowings
Amounts owed to related parties
Other financial liabilities
Other liabilities
Less than
one year
£
More than
one year
£
Total
£
151,020
–
80,076
–
741,608
––––––––
972,704
–
–
–
–
–
––––––––
–
151,020
–
80,076
–
741,608
––––––––
972,704
Less than
one year
£
More than
one year
£
Total
£
200,878
–
150,000
–
1,887,433
––––––––
2,238,311
–
–
–
–
–
––––––––
–
200,878
–
150,000
–
1,887,433
––––––––
2,238,311
Less than
one year
£
More than
one year
£
Total
£
319,190
–
404,981
–
–
––––––––
1,552,023
–
–
–
–
–
––––––––
–
319,190
–
404,981
–
–
––––––––
1,552,023
£
£
£
1,276,700
–
20,184,609
–
3,089,185
–––––––––
24,550,494
–
–
–
–
3,232,356
–––––––––
3,232,356
1,276,700
–
20,184,609
–
6,321,541
–––––––––
27,782,850
––––––––
––––––––
––––––––
2013
Trade and other payables
Borrowings
Amounts owed to related parties
Other financial liabilities
Other liabilities
––––––––
––––––––
––––––––
2014
Trade and other payables
Borrowings
Amounts owed to related parties
Other financial liabilities
Other liabilities
––––––––
––––––––
––––––––
2015
Trade and other payables
Borrowings
Amounts owed to related parties
Other financial liabilities
Other liabilities
––––––––– ––––––––– –––––––––
Fair values
The carrying amounts of all financial assets and liabilities of the Company as disclosed in the notes to the
financial information are approximately their fair values.
215
The carrying amounts and corresponding fair values of financial assets and financial liabilities in the
financial information are designated into the following categories:
Financial assets
2012
Measured at amortised cost:
Trade receivables
Other receivables
Carrying value
£
Fair value
£
–
301,798
––––––––
301,798
–
301,798
––––––––
301,798
Carrying value
£
Fair value
£
–
1,286,904
––––––––
1,286,904
–
1,286,904
––––––––
1,286,904
––––––––
2013
Measured at amortised cost:
Trade receivables
Other receivables
––––––––
2014
Measured at amortised cost:
Trade receivables
Other receivables
Financial assets
2015
Measured at amortised cost:
Trade receivables
Other receivables
Called up share capital not paid
2012
Measured at amortised cost
Trade payables
Other taxes and social securities
Directors’ loans
Other loans
Other financial liabilities
Fair value
£
–
699,643
––––––––
699,643
–
699,643
––––––––
699,643
––––––––
––––––––
Carrying value
£
Fair value
£
60,000
691,561
–
––––––––
751,561
60,000
691,561
–
––––––––
751,561
Carrying value
£
Fair value
£
151,020
660,473
80,076
–
81,135
––––––––
972,704
151,020
660,473
80,076
–
81,135
––––––––
972,704
––––––––
216
––––––––
Carrying value
£
––––––––
Financial liabilities
––––––––
––––––––
––––––––
2013
Measured at amortised cost:
Trade payables
Other taxes and social securities
Other payables
Other loans
Other financial liabilities
£
£
200,878
1,082,961
760,555
–
193,917
––––––––
2,238,311
200,878
1,082,961
760,555
–
193,917
––––––––
2,238,311
£
£
––––––––
2014
Measured at amortised cost:
Trade payables
Other taxes and social securities
Other payables
Other loans
Other financial liabilities
319,190
618,689
209,163
–
404,981
––––––––
1,552,023
319,190
618,689
209,163
–
404,981
––––––––
1,552,023
£
£
––––––––
2015
Measured at amortised cost:
Trade payables
Other taxes and social securities
Other payables
Amount owed to holding entity
Other financial liabilities
––––––––
1,276,700
466,988
316,174
20,184,609
2,306,023
–––––––––
24,550,494
––––––––
1,276,700
466,988
316,174
20,184,609
2,306,023
–––––––––
24,550,493
––––––––– –––––––––
Capital risk management
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a
going concern in order to provide returns for shareholders, benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital with an appropriate level of leverage for the size of the
business so as to maintain investor, creditor and market confidence and to sustain future development of the
business. In order to maintain or adjust the capital structure, the Company may return capital to shareholders,
issue new shares or sell assets to reduce debt. There have been no changes to the Company’s approach to
capital management during the three year period ended 31 March 2015.
The Company’s capital structure comprises all components of equity (i.e. share capital and retained earnings
and as at 31 March 2015 this amounted to £2,344,090 (2013: £2,076,836, 2012: £1,121,787).
24.
Subsequent events
No significant events have taken place since the statement of financial position date.
25.
Control
The Group’s immediate parent company is the major shareholder, a company incorporated in the British
Virgin Islands. The ultimate controlling party is GHT, a trust established under the laws of the Isle of Man,
the sole beneficiary of which is Teddy Sagi.
217
26.
Related party transactions
Transactions with key management personnel
Key management personnel of the Group are defined as those persons having authority and responsibility for
the planning, directing and controlling the activities of the Company, directly or indirectly. Key management
of the Company are considered to be the Directors of Fiver London Limited, details of their remuneration
are scheduled in Note 9.
During the year ended 30 September 2012, the directors of the Company, C. Dumlupinar and S Daysak
advanced £32,076 and £48,000 to the Company. The loans are unsecured and interest free. The total balances
due to the directors as at 30 September 2012 are included within borrowings amounted to £80,076.
During the year ended 30 September 2013 the directors provided the Company with a further loan of £39,924
on the same terms as the loan advanced in 2012. During the year the directors were also paid a dividend
amounting to £120,000 and the total balance of £120,000 is included within borrowings.
During the period to 31 March 2015, the Company received borrowings of £132,224 from its ultimate parent
undertaking, Market Tech Holdings Limited and a further £20,052,385 from Market Tech UK Limited, a
company within the group of Market Tech Holdings Limited in order to fund the acquisition of its
subsidiaries. The loan was unsecured, interest free and repayable on demand.
27.
Earnings per share
Basic earnings per share are calculated by dividing the net profit for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year.
The following reflects the income and share data used in the basic earnings per share computations:
Year Ended
30 September
2012
£
Year Ended
30 September
2013
£
Year Ended
30 September
2014
£
1,009,612
–––––––––
1,065,051
–––––––––
1,406,738
–––––––––
(1,194,060)
–––––––––
10,000
–––––––––
100.96
–––––––––
10,000
–––––––––
106.51
–––––––––
10,000
–––––––––
140.67
–––––––––
10,000
–––––––––
(119.40)
–––––––––
Net profit attributable to ordinary
equity holders for basic earnings
Weighted average number of ordinary shares
for basic earnings per share
Loss per share (basic and diluted)
28.
Period Ended
31 March
2015
£
Transition to IFRS
This is the first time that the Company has presented its financial information under IFRS. The accounting
policies above have been applied in preparing the financial information for the year ended 30 September
2012, 30 September 2013 and the period ended 31 March 2015.
An explanation of how the transition from UK GAAP to IFRS has affected the Company’s financial position,
financial performance at 31 March 2015 being the Company’s most recent annual financial statements
prepared in accordance with UK GAAP is set out in the following table and notes. The transition to IFRS
had no impact on the Company’s cash flows at 31 March 2015.
218
Reconciliation of total comprehensive income for the period ended 31 March 2015
Year ended Adjustment 1 Adjustment 2 Adjustment 3
31 March
2015
£
£
£
£
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Operating profit
Finance Profit (net)
Profit before income tax
Income tax
Profit for the year
Other comprehensive income
Total comprehensive profit
Profit attributable to:
Equity owners
Adjustments:
32,845,467
(21,444,701)
––––––––––
11,400,766
(11,158,783)
–
––––––––––
241,983
1,100
––––––––––
243,083
(78,700)
––––––––––
164,383
–
––––––––––
164,383
––––––––––
164,383
–
–
––––––––––
–
148,350
–
––––––––––
148,350
–
––––––––––
148,350
–
––––––––––
148,350
–
––––––––––
148,350
––––––––––
–
–
––––––––––
–
(68,219)
–
––––––––––
(68,219)
–
––––––––––
(68,219)
(31,836)
––––––––––
(100,055)
–
––––––––––
(100,055)
––––––––––
148,350
(100,055)
–
–
––––––––––
–
(61,162)
61,162
––––––––––
–
–
––––––––––
–
–
––––––––––
–
–
––––––––––
–
––––––––––
–
Year ended
31 March
2015
£
32,845,467
(21,444,701)
––––––––––
11,400,766
(11,139,814)
61,162
––––––––––
322,114
1,100
––––––––––
323,214
(110,536)
––––––––––
212,678
–
––––––––––
212,678
––––––––––
212,678
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
1.
Recognition of website development costs as intangible under IFRS that was previously charged as an administrative expense
under UK GAAP and recognition of an intangible asset leading to amortisation being charged under IFRS.
2.
Amortisation charge for website development. The recognition of the intangible asset led to a deferred tax liability being
recognised under IFRS. The income tax credit represents the movement in the deferred tax liability during the year as a result of
the amortisation of the intangible asset and changes in the rate of corporation tax that the company is subject to.
3.
Split between profit and loss on foreign exchange that was previously netted off under UK GAAP.
219
Reconciliation of equity at 31 March 2015
As at Adjustment 1 Adjustment 2 Adjustment 3
31 March
2015
£
£
£
£
ASSETS
Non-current assets
Property, plant and equipment
Intangibles
Investment
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total Assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Non-current liabilities
Other payables
Deferred tax liabilities
Total Liabilities
Net assets/(liabilities)
EQUITY
Capital and reserves attributable
to equity holders
Share capital
Share premium
Retained Profits
Total Equity and Reserves
Adjustments:
As at
31 March
2015
£
692,414
–
–
–
692,414
227,397
(68,219)
–
159,178
25,098,885
–
–
– 25,098,885
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
25,791,299
227,397
(68,219)
– 25,950,477
3,248,167
–
–
–
3,248,167
751,561
–
–
–
751,561
196,885
–
–
–
196,885
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
4,196,613
–
–
–
4,196,613
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
29,987,912
227,397
(68,219)
– 30,147,090
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
24,550,494
–
–
– 24,550,494
–
–
–
–
–
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
24,550,494
–
–
– 24,550,494
3,232,356
–
–
–
3,232,356
42,890
–
–
31,836
74,726
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
3,275,246
–
–
31,836
3,307,082
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
27,825,740
–
–
31,836 27,857,576
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
2,162,172
227,397
(68,219)
(31,836)
2,289,514
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
10,000
–
–
–
10,000
–
–
–
–
–
2,152,172
227,397
(68,219)
(31,836)
2,279,514
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
2,162,172
227,397
(68,219)
(31,836)
2,289,514
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
1.
Capitalisation of intangible assets previously charged as an administrative expense under UK GAAP.
2.
Amortisation charge for the intangible asset under IFRS as at 31 March 2015.
3.
Deferred tax charge provided for in respect of the intangibles asset in accordance with IFRS requirements.
220
SECTION D: GLISPA
Sub-section 1: Accountant’s report on the historical financial information of Glispa for the three year
period ended 31 December 2014 and the three month period ended 31 March 2015
BDO LLP
55 Baker Street
London
W1U 7EU
The Directors
Market Tech Holdings Limited
Third Floor
La Plaiderie Chambers
La Plaiderie
St Peter Port
Guernsey
GY1 1WG
21 January 2016
Dear Sirs
Glispa GmbH (“Glispa”)
Introduction
We report on the financial information on Glispa set out in sub-section 2 of Section D of Part IX. This
financial information has been prepared for inclusion in the prospectus dated 21 January 2016 (the
“Prospectus”) of Market Tech Holdings Limited (the “Company”) on the basis of the accounting policies set
out in Note 2 to the financial information. This report is required by item 20.1 of Annex I of the Commission
Regulation (EC) No. 809/2004 (the “PD Regulation”) and is given for the purpose of complying with that
item and for no other purpose.
Responsibilities
The directors of the Company are responsible for preparing the financial information in accordance with
International Financial Reporting Standards as adopted by the European Union.
It is our responsibility to form an opinion on the financial information and to report our opinion to you.
Save for any responsibility arising under Prospectus Rule 5.5.3R(2)(f) to any person as and to the extent there
provided, to the fullest extent permitted by the law we do not assume any responsibility and will not accept
any liability to any other person for any loss suffered by any such other person as a result of, arising out of,
or in connection with this report or our statement, required by and given solely for the purposes of complying
with item 23.1 of Annex I of the PD Regulation, consenting to its inclusion in the Prospectus.
Basis of opinion
We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the
amounts and disclosures in the financial information. It also included an assessment of significant estimates
and judgements made by those responsible for the preparation of the financial information and whether the
accounting policies are appropriate to the entity’s circumstances, consistently applied and adequately
disclosed.
We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
221
financial information is free from material misstatement whether caused by fraud or other irregularity or
error.
Our work has not been carried out in accordance with auditing or other standards and practices generally
accepted in the United States of America or other jurisdictions outside the United Kingdom and accordingly
should not be relied upon as if it had been carried out in accordance with those standards and practices.
Opinion
In our opinion, the financial information gives, for the purposes of the Prospectus, a true and fair view of the
state of affairs of Glispa as at 31 December 2012, 2013 and 2014 and 31 March 2015 and of its profits, cash
flows and changes in equity for the periods then ended in accordance with International Financial Reporting
Standards as adopted by the European Union.
Declaration
For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus
and declare that we have taken all reasonable care to ensure that the information contained in this report is,
to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.
This declaration is included in the Prospectus in compliance with item 1.2 of Annex I of the PD Regulation.
Yours faithfully
BDO LLP
Chartered Accountants
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)
222
Sub-section 2: Historical financial information of Glispa for the three year period ended 31 December
2014 and the three month period ended 31 March 2015
STATEMENTS OF COMPREHENSIVE INCOME
Notes
Revenue
Cost of sales
GROSS PROFIT
6
3 months
ended
31 March
2015
€’000
52,667
(45,216)
7,451
––––––––
(6,534)
1,408
14,414
(12,293)
2,121
––––––––
(1,804)
2,060
20
2,569
(42)
(2)
–
6,392
(85)
(218)
–
6,687
(129)
789
(5,022)
1,135
(34)
1,276
–
11
2,525
––––––––
25
2,550
––––––––
(833)
6,089
––––––––
4
6,093
––––––––
(1,859)
2,325
––––––––
9
2,334
––––––––
(703)
2,377
––––––––
–
2,377
––––––––
(721)
13
Finance income
PROFIT BEFORE TAXATION
*
Year ended
31 December
2014
€’000
45,459
(37,505)
7,954
––––––––
(2,418)
553
OPERATING PROFIT
Income tax credit/(charge)
PROFIT FOR THE PERIOD
AND TOTAL
COMPREHENSIVE
INCOME ATTRIBUTABLE
TO THE OWNERS OF
GLISPA
Year ended
31 December
2013
€’000
17,493
(14,179)
3,314
––––––––
(1,264)
475
Administrative expenses
Other operating income
ADJUSTED EBITDA*
Depreciation & Amortisation
Foreign exchange gain/(loss)
Share based payment expense
Year ended
31 December
2012
€’000
1,717
––––––––
4,234
––––––––
1,631
––––––––
1,656
––––––––
Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation and adjusted for share based
payment charges and foreign currency exchange gain/(loss).
223
STATEMENTS OF FINANCIAL POSITION
Notes
NON-CURRENT ASSETS
Intangible assets
Property, plant and equipment
CURRENT ASSETS
Inventories
Trade and other receivables
Cash and cash equivalents
13
14
15
16
16
18
16
19
24
376
––––––––
400
17
343
––––––––
360
13
329
––––––––
342
11
2,751
2,016
––––––––
4,778
––––––––
4,861
–
2,999
971
––––––––
3,970
––––––––
4,105
–
9,360
2,104
––––––––
11,464
––––––––
11,864
–
11,294
4,624
––––––––
15,918
––––––––
16,278
–
12,978
6,616
––––––––
19,594
––––––––
19,936
(2,534)
–
(172)
––––––––
(2,706)
––––––––
2,072
(3,319)
–
(494)
––––––––
(3,813)
––––––––
157
(7,963)
–
(1,378)
––––––––
(9,341)
––––––––
2,123
(11,230)
–
(921)
––––––––
(12,151)
––––––––
3,767
(12,645)
(68)
(1,118)
––––––––
(13,831)
––––––––
5,763
–
–
––––––––
–
––––––––
(2,706)
–
–
––––––––
–
––––––––
(3,813)
–
(97)
––––––––
(97)
––––––––
(9,438)
–
(70)
––––––––
(70)
––––––––
(12,221)
(242)
(150)
––––––––
(392)
––––––––
(14,223)
–––––––– –––––––– –––––––– –––––––– ––––––––
–––––––– –––––––– –––––––– –––––––– ––––––––
NET ASSETS
TOTAL EQUITY ATTRIBUTABLE TO
OWNERS OF GLISPA
24
111
––––––––
135
–––––––– –––––––– –––––––– –––––––– ––––––––
TOTAL LIABILITIES
EQUITY
Share capital
Retained earnings
2
81
––––––––
83
–––––––– –––––––– –––––––– –––––––– ––––––––
NET CURRENT ASSETS
NON-CURRENT LIABILITIES
Deferred income
Deferred tax liabilities
31 March
2015
€’000
–––––––– –––––––– –––––––– –––––––– ––––––––
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Deferred income
Taxes payable
1 January 31 December 31 December 31 December
2012
2012
2013
2014
€’000
€’000
€’000
€’000
21
21
2,155
292
2,426
4,057
5,713
25
2,130
––––––––
25
267
––––––––
25
2,401
––––––––
25
4,032
––––––––
25
5,688
––––––––
2,155
292
2,426
4,057
5,713
–––––––– –––––––– –––––––– –––––––– ––––––––
224
STATEMENTS OF CHANGES IN EQUITY
BALANCE AT 1 JANUARY 2012
COMPREHENSIVE INCOME
Profit for the period
OTHER COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME
TRANSACTIONS WITH OWNERS
Distribution
BALANCE AT 31 DECEMBER 2012
COMPREHENSIVE INCOME
Profit for the period
OTHER COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME
TRANSACTIONS WITH OWNERS
Distribution
BALANCE AT 31 DECEMBER 2013
COMPREHENSIVE INCOME
Profit for the period
OTHER COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME
TRANSACTIONS WITH OWNERS
Distribution
BALANCE AT 31 DECEMBER 2014
COMPREHENSIVE INCOME
Profit for the period
OTHER COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME
TRANSACTIONS WITH OWNERS
Distribution
BALANCE AT 31 MARCH 2015
Share
capital
€’000
Retained
earnings
€’000
Total
equity
€’000
25
––––––––
2,130
––––––––
2,155
––––––––
–
–
––––––––
–
1,717
–
––––––––
1,717
1,717
–
––––––––
1,717
–
––––––––
25
––––––––
(3,580)
––––––––
267
––––––––
(3,580)
––––––––
292
––––––––
–
–
––––––––
–
4,234
–
––––––––
4,234
4,234
–
––––––––
4,234
–
––––––––
25
––––––––
(2,100)
––––––––
2,401
––––––––
(2,100)
––––––––
2,426
––––––––
–
–
––––––––
–
1,631
–
––––––––
1,631
1,631
–
––––––––
1,631
–
––––––––
25
––––––––
–
––––––––
4,032
––––––––
–
––––––––
4,057
––––––––
–
–
––––––––
–
1,656
–
––––––––
1,656
1,656
–
––––––––
1,656
–
––––––––
25
–
––––––––
5,688
–
––––––––
5,713
––––––––
225
––––––––
––––––––
CASH FLOW STATEMENTS
Notes
CASH GENERATED FROM
OPERATIONS
24
Interest paid
Interest received
Tax paid
NET CASH INFLOW FROM
OPERATING ACTIVITIES
INVESTING ACTIVITIES
Purchase of intangible assets
Purchase of property, plant and
equipment
NET CASH USED IN
FINANCING ACTIVITIES
Adjustments to cash caused by
exchange rate fluctuations
NET INCREASE IN CASH
AND CASH EQUIVALENTS
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF PERIOD
CASH AND CASH
EQUIVALENTS AT END
OF PERIOD
2,831
––––––––
–
25
(233)
––––––––
2,623
––––––––
13
NET CASH USED IN
INVESTING ACTIVITIES
FINANCING ACTIVITIES
Distribution to Shareholders
Loan to Shareholder
Loan to Shareholder
Year ended
31 December
2012
€’000
4,263
––––––––
–
4
(556)
––––––––
3,711
––––––––
Year ended
31 December
2014
€’000
4,925
––––––––
(12)
9
(2,740)
––––––––
2,182
––––––––
1,832
––––––––
(1)
–
(443)
––––––––
1,388
––––––––
(40)
(11)
(9)
(1)
(65)
––––––––
(340)
––––––––
(80)
––––––––
(20)
––––––––
(105)
12
Year ended
31 December
2013
€’000
3 months
ended
31 March
2015
€’000
––––––––
––––––––
(351)
––––––––
––––––––
(3,580)
–
–
––––––––
(2,100)
(1,546)
1,546
––––––––
–
–
–
––––––––
–
–
–
––––––––
(3,580)
(89)
(21)
––––––––
––––––––
(2,100)
––––––––
–
––––––––
17
––––––––
(127)
––––––––
427
––––––––
625
––––––––
(1,045)
–
––––––––
––––––––
1,133
––––––––
2,520
––––––––
2,016
––––––––
971
––––––––
2,104
––––––––
4,624
––––––––
971
––––––––
2,104
––––––––
4,624
––––––––
––––––––
226
1,992
6,616
NOTES TO THE FINANCIAL STATEMENTS
1.
CORPORATE INFORMATION
glispa GmbH (“Glispa”) is a limited company incorporated and domiciled in Germany. The registered office
is located at Sophienstraße 21, 10178 Berlin.
Glispa is principally engaged in the provision of services relating to mobile marketing, social media
marketing, search engine marketing, media planning and buying.
2.
ACCOUNTING POLICIES
2.1
ACCOUNTING CONVENTION
The financial information has been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted for use in the European Union. This financial information represents
Glispa’s first financial statements drawn up in accordance with IFRS. Accordingly, IFRS 1,
“First-time adoption of the International Financial Reporting Standards,” applied. The transition date
was 1 January 2012.
The transition from German GAAP to IFRS at 1 January 2012 affected the reported financial position
and the financial performance as follows:
German GAAP
(IFRS format)
€’000
NON-CURRENT ASSETS
Intangible assets
Property, plant and equipment
2
81
––––––––
83
CURRENT ASSETS
Inventories
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Deferred income
Taxes payable
NET CURRENT ASSETS/(LIABILITIES)
227
IAS 8
€’000
IFRS
balance sheet
€’000
–
–
––––––––
–
2
81
––––––––
83
––––––––
––––––––
––––––––
11
2,751
2,016
––––––––
4,778
––––––––
4,861
–
–
–
––––––––
–
––––––––
–
11
2,751
2,016
––––––––
4,778
––––––––
4,861
––––––––
––––––––
––––––––
(2,568)
–
(172)
––––––––
(2,740)
––––––––
2,121
34
–
–
––––––––
34
––––––––
34
(2,534)
–
(172)
––––––––
(2,706)
––––––––
2,155
––––––––
––––––––
––––––––
NON-CURRENT LIABILITIES
Deferred income
Deferred tax liabilities
TOTAL LIABILITIES
NET ASSETS
German GAAP
(IFRS format)
€’000
IAS 8
€’000
–
–
–
(2,740)
––––––––
2,121
–
–
–
34
––––––––
34
–
–
–
(2,706)
––––––––
2,155
25
2,096
––––––––
–
34
––––––––
25
2,130
––––––––
2,121
34
2,155
––––––––
EQUITY
Share capital
Retained earnings
TOTAL EQUITY ATTRIBUTABLE TO
OWNERS OF GLISPA
––––––––
––––––––
––––––––
IFRS
balance sheet
€’000
––––––––
––––––––
Glispa does not make use of any exceptions of IFRS 1.18.
The financial information for the first three months of 2015 is not comparable to the financial
information for 2012, 2013 and 2014 as those represent the financial years.
The financial information has been prepared on a going concern basis, applying the historical cost
convention. The principal accounting policies adopted are set out below.
The preparation of financial information in conformity with IFRS requires the use of certain critical
accounting estimates and requires Directors to exercise their judgement in the process of applying
Glispa’s accounting policies. It also requires the use of assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
information and the reported amounts of revenues and expenses during the reporting period. Although
these estimates are based on the Directors’ best knowledge of current events and activities, actual
results may ultimately differ from those estimates.
The areas where significant judgements and estimates are made in preparing this historical financial
information are disclosed in Note 4.
This financial information is prepared in Euro and rounded to the nearest thousand.
2.2
REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable that the economic benefits will flow to Glispa
and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is
measured at the fair value of the consideration received or receivable, taking into account
contractually defined terms of payment and excluding taxes or duty. Glispa has concluded that it is
the principal in all of its revenue arrangements since it is the primary obligor in all the revenue
arrangements, has pricing latitude and is also exposed to credit risks.
The specific recognition criteria described below must also be met before revenue is recognised.
RENDERING OF SERVICES
Revenue from online mobile marketing services is recognised when the amount of revenue can be
measured reliably, it is probable that the economic benefits will flow to Glispa, the stage of
completion can be measured reliably and the costs incurred, or to be incurred can be measured
reliably.
228
2.3
TAXATION
The tax expense represents the sum of the tax currently payable and deferred tax.
CURRENT TAX
Income tax on the profit or loss comprises current and deferred tax. Income tax is recognised in the
income statement, except to the extent that it relates to items recognised directly in other
comprehensive income or equity – in which case, the tax is also recognised in other comprehensive
income or equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the date of the statement of financial position in the countries where Glispa operates.
Directors periodically evaluate positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation, and establish provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities. During the ordinary course of business,
there are transactions and calculations for which the ultimate tax determination is uncertain. As a
result, Glispa recognises tax liabilities based on estimates of whether additional taxes and interest will
be due.
DEFERRED TAX
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial information and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial recognition of other assets and liabilities
in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part
of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the
income statement, except when it relates to items charged or credited directly to equity, in which case
the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when Glispa
has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and
liabilities relate to taxes levied by the same tax authority.
2.4
PROPERTY, PLANT AND EQUIPMENT
Plant and equipment are stated at historical cost less accumulated depreciation and any accumulated
impairment losses.
Depreciation is calculated on the straight-line method so as to write off the cost of each asset to its
residual value over its estimated useful life. The useful economic lives used are as follows:
Fixtures, fittings and office equipment
3-23 years
The gain or loss arising on the disposal of an asset is determined as the difference between the sale
proceeds and the carrying value of the asset, and is recognised in the income statement.
2.5
LEASES
The determination of whether an arrangement is (or contains) a lease is based on the substance of the
arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right
to use the asset or assets, even if that right is not explicitly specified in an arrangement.
229
Company as a lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers
substantially all the risks and rewards incidental to ownership to Glispa is classified as a finance lease.
Finance leases are capitalised at the commencement of the lease at the inception date fair value of the
leased property or, if lower, at the present value of the minimum lease payments. Lease payments are
apportioned between finance charges and reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are recognised in finance
costs in the statement of profit or loss.
Rentals payable under operating leases are charged to income on a straight line basis over the period
of the lease. Premiums payable, rent free periods and capital contributions receivable on entering an
operating lease are released to income on a straight line basis over the lease term.
2.6
INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated
impairment losses. The amortisation charge for the year and impairment losses are recognised through
administrative expenses.
Internally generated intangible assets are capitalised if the recognition criteria of IAS 38.57 et seqq.
are met. Glispa does not capitalise development costs for internally generated intangible assets as not
all the recognition criteria are fulfilled.
Intangible assets currently held by Glispa are as follows:
LICENCES
Licences are assessed as having a finite useful life of 1-3 years and are amortised over this period.
2.7
IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS
At each reporting end date, Glispa reviews the carrying amounts of its tangible and intangible assets
to determine whether there is any indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). An asset’s recoverable amount is the higher of an asset’s or cash
generating unit’s (“CGU”) fair value less costs of disposal and its value in use. The recoverable
amount is determined for an individual asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the
carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is
recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised
immediately in profit or loss.
2.8
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash in hand, deposits held at bank and other short-term highly
liquid investments with original maturities of three months or less.
230
2.9
FINANCIAL INSTRUMENTS
MEASUREMENT
–
INITIAL
RECOGNITION AND
SUBSEQUENT
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
2.10 FINANCIAL ASSETS
INITIAL RECOGNITION AND MEASUREMENT
Financial assets are classified, at initial recognition, as financial assets at fair value through profit or
loss (“FVTPL”), loans and receivables, held-to-maturity investments, available-for-sale (“AFS”)
financial assets, or as derivatives designated as hedging instruments in an effective hedge, as
appropriate. All financial assets are recognised initially at fair value plus, in the case of financial assets
not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition
of the financial asset.
For purposes of subsequent measurement financial assets are classified in the category “loans and
receivables”.
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not
quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are
measured at amortised cost using the effective interest method, less any impairment.
Interest is recognised by applying the effective interest rate, except for short-term receivables when
the recognition of interest would be immaterial.
The effective interest method is a method of calculating the amortised cost of a debt instrument and
of allocating the interest income over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash receipts through the expected life of the debt instrument to the
net carrying amount on initial recognition.
This category generally applies to trade and other receivables, and is the most relevant to Glispa. For
more information on receivables, refer to Note 5.
IMPAIRMENT OF FINANCIAL ASSETS
Glispa assesses, at each reporting date, whether there is objective evidence that a financial asset or a
group of financial assets is impaired. An impairment exists if one or more events that has occurred
since the initial recognition of the asset (an incurred ‘loss event’) has an impact on the estimated
future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing
significant financial difficulty, default or delinquency in interest or principal payments, the probability
that they will enter bankruptcy or other financial reorganisation and observable data indicating that
there is a measurable decrease in the estimated future cash flows, such as changes in arrears or
economic conditions that correlate with defaults.
DERECOGNITION OF FINANCIAL ASSETS
Financial assets are derecognised only when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership
to another entity.
231
2.11 FINANCIAL LIABILITIES
INITIAL RECOGNITION AND MEASUREMENT
Financial liabilities are classified, at initial recognition, as loans and borrowings.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings
and payables, net of directly attributable transaction costs.
Glispa’s financial liabilities include trade and other payables.
SUBSEQUENT MEASUREMENT
Trade and other payables
This is the category most relevant to Glispa. After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised cost using the Effective Interest Rate (EIR)
method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well
as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the
statement of profit or loss.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled
or expires.
2.12 GOVERNMENT GRANTS
Government grants, which are intended to compensate the company for incurred expenses, are
recognised in profit or loss as other operating income in the period in which the respective expenses
were incurred.
2.13 SHARE-BASED PAYMENTS
The fair value of the amount payable to employees in respect of any participation in sales proceeds
from the future sale of the business, which are settled in cash, is recognised as an expense with an
corresponding increase in liabilities, over the period during which the employee become entitled to
payment. The liability is re-measured at each reporting date and at settlement date based on the fair
value of the participation rights. Any changes in the liability are recognised in profit or loss.
2.14 FOREIGN EXCHANGE
Transactions denominated in foreign currency are translated to the functional currency at the spot rate
of exchange on the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies as of the closing date are converted
to Euro at the exchange rate in effect on the balance sheet date. Non-monetary assets and liabilities
measured at fair value in a foreign currency are translated using the exchange rates in effect on the
date on which the fair value was determined. Currency-translation differences are always recognised
in profit or loss for the corresponding period in which they occur. Non-monetary items measured in
terms of historical acquisition or production cost in a foreign currency are not retranslated.
232
3.
ADOPTION OF NEW AND REVISED STANDARDS AND CHANGES IN ACCOUNTING
POLICIES
3.1
STANDARDS WHICH ARE IN ISSUE BUT NOT YET EFFECTIVE
The following Standards and Interpretations, which have not yet been applied in this financial
information, were in issue but not yet effective (and in some cases had not yet been adopted by the
EU):
Effective Date
1 Jan 2016
1 Jan 2016
1 Jan 2016
1 Jan 2016
1 Jan 2016
1 Jan 2016
1 July 2016
1 Jan 2018
1 Jan 2018
1 Jan 2018
Amendments to IAS 16 and IAS 38 – Clarification of acceptable methods of
depreciation and amortisation
Amendments to IAS 27 Separate financial statements – Equity method in
separate financial statements
Amendments to IFRS 10: Consolidated Financial Statements and IAS 28: Sale
or contribution of assets between an investor and its associate or joint venture
Amendments to IFRS 11 – Accounting for acquisitions of interests in joint
operations
Amendments to IFRS 12: Disclosure of Interest in Other Entities
Amendments to IAS 1: Presentation of Financial Statements
Annual improvements to IFRSs 2012–2014 cycle
IFRS 15: Revenue from Contracts with Customers
Final version issued of IFRS 9: Financial Instruments
Amendments to IFRS 7: Financial Instruments Disclosure
The Directors do not anticipate that adoption of the standards, amendments and interpretations will
have a material impact on the financial information of Glispa in future years.
3.2
CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
Certain accounting standards and amendments were effective for annual periods beginning on or after
1 January 2015. These amendments have had no impact on Glispa.
The Directors do not anticipate that adoption of the standards, amendments and interpretations will
have a material impact on the financial information of Glispa in future years.
4.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In the application of Glispa’s accounting policies, the directors are required to make judgements, estimates
and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical experience and other factors that
are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised, if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods.
The following is intended to provide an understanding of the significant judgements within the accounting
policies that the management consider critical because of the assumptions or estimation involved in their
application and their impact on the consolidated financial information.
4.1
FAIR VALUE MEASUREMENT
A number of assets and liabilities included in the historical financial information require measurement
at, and/or disclosure of, fair value.
The fair value measurement of the Group’s financial and non-financial assets and liabilities utilises
market observable inputs and data as far as possible. Inputs used in determining fair value
measurements are categorised into different levels based on how observable the inputs used in the
valuation technique utilised are (the “fair value hierarchy”):
Level 1: Quoted prices in active markets for identical items (unadjusted)
233
Level 2: Observable direct or indirect inputs other than Level 1 inputs
Level 3: Unobservable inputs (i.e. not derived from market data).
The classification of an item into the above levels is based on the lowest level of the inputs used that
has a significant effect on the fair value measurement of the item. Transfers of items between levels
are recognised in the period they occur.
Glispa primarily measures liabilities from cash-settled share-based payments at fair value.
For more detailed information in relation to the fair value measurement of the items above, please
refer to the applicable notes.
5.
FINANCIAL RISK MANAGEMENT
PRINCIPAL FINANCIAL INSTRUMENTS BY CATEGORY
Financial assets – loans and receivables
2012
2013
2014
€’000
€’000
€’000
Financial Assets
Trade and other receivables
Receivables from Shareholders
Cash and cash equivalents
Total Financial Assets
2,977
10
971
––––––––
3,958
––––––––
9,349
10
2,104
––––––––
11,463
––––––––
11,284
10
4,624
––––––––
15,918
––––––––
Financial liabilities at amortised cost
2012
2013
2014
€’000
€’000
€’000
Financial Liabilities
Trade and other payables
Total Financial Liabilities
3,319
––––––––
3,319
––––––––
7,963
––––––––
7,963
––––––––
6,208
––––––––
6,208
––––––––
2015
€’000
12,796
–
6,616
––––––––
19,412
––––––––
2015
€’000
7,622
––––––––
7,622
––––––––
FINANCIAL INSTRUMENTS NOT MEASURED AT FAIR VALUE
Financial instruments not measured at fair value include cash and cash equivalents, trade and other
receivables, and trade and other payables.
Due to their short term nature, the carrying value of cash and cash equivalents, trade and other receivables,
trade and other payables approximates to their fair value.
FINANCIAL RISK FACTORS
Glispa is exposed to currency risk, credit risk, liquidity risk and capital risk. The risk management policies
employed by Glispa to manage these risks are discussed in the subsequent notes.
CURRENCY RISK
Glispa has operations which has regular transactional foreign currency exposures as it has regular business
involving cross border currency flows.
234
PRINCIPAL FINANCIAL INSTRUMENTS BY CURRENCY
As at the following dates Glispa’s net exposure to currency risk was as follows:
Net Financial (Liabilities)/Assets
US Dollar
Brazilian Real
Net Financial (Liabilities)/Assets
2012
€’000
2013
€’000
2014
€’000
2015
€’000
–
–
––––––––
–
3,065
27
––––––––
3,092
3,412
444
––––––––
3,856
5,462
124
––––––––
5,586
––––––––
––––––––
––––––––
––––––––
CREDIT RISK
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party
by failing to discharge an obligation. Credit risk arises from cash and cash equivalents held at banks, trade
receivables and other receivables. Such risks are subject to a quarterly or more frequent review. Glispa has
policies in place to ensure that service contracts are entered into only with customers with an appropriate
credit history and Glispa monitors the credit quality of receivables on an ongoing basis.
See Note 14 for details of trade receivable credit risk.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure
to credit risk at the reporting dates was:
Maximum credit risk
Receivables against Shareholders
Trade receivables
Other receivables
Cash and cash equivalents
Total
2012
€’000
2013
€’000
2014
€’000
2015
€’000
10
2,924
53
971
––––––––
3,958
10
9,205
144
2,104
––––––––
11,463
10
9,386
1,898
4,624
––––––––
15,918
–
11,034
1,762
6,616
––––––––
19,412
––––––––
––––––––
––––––––
––––––––
The company does not hold any collateral or other credit enhancements to cover this credit risk.
LIQUIDITY RISK
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched
position potentially enhances profitability, but can also increase the risk of losses. Glispa has procedures,
with the objective of minimising potential losses, such as maintaining sufficient cash and other highly liquid
current assets and by having available an adequate amount of committed credit facilities.
The following tables detail Glispa’s remaining contractual maturity for its financial liabilities. The tables
have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date
on which Glispa can be required to pay. The table includes both interest and principal cash flows.
235
At 31 March 2015
Trade payables
Other payables
Accruals
Carrying Contractual
amounts cash flows
€’000
€’000
3 months Between 3–
or less 12 months
€’000
€’000
Between
1–5 years
€’000
More than
5 years
€’000
200
435
12,010
––––––––
12,645
200
435
12,010
––––––––
12,645
–
–
–
––––––––
–
–
–
–
––––––––
–
–
–
–
––––––––
–
Carrying Contractual
amounts cash flows
€’000
€’000
3 months Between 3–
or less 12 months
€’000
€’000
Between
1–5 years
€’000
More than
5 years
€’000
1,994
491
8,745
––––––––
11,230
1,994
491
3,723
––––––––
6,208
–
–
5,022
––––––––
5,022
–
–
–
––––––––
–
–
–
–
––––––––
–
Carrying Contractual
amounts cash flows
€’000
€’000
3 months Between 3–
or less 12 months
€’000
€’000
Between
1–5 years
€’000
More than
5 years
€’000
5,034
401
2,528
––––––––
7,963
5,034
401
2,528
––––––––
7,963
–
–
–
––––––––
–
–
–
–
––––––––
–
–
–
–
––––––––
–
Carrying Contractual
amounts cash flows
€’000
€’000
3 months Between 3–
or less 12 months
€’000
€’000
Between
1–5 years
€’000
More than
5 years
€’000
2,032
608
679
––––––––
3,319
2,032
608
679
––––––––
3,319
–
–
–
––––––––
–
–
–
–
––––––––
–
200
435
12,010
––––––––
12,645
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
At 31 December 2014
Trade payables
Other payables
Accruals
1,994
491
8,745
––––––––
11,230
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
At 31 December 2013
Trade payables
Other payables
Accruals
5,034
401
2,528
––––––––
7,963
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
At 31 December 2012
Trade payables
Other payables
Accruals
2,032
608
679
––––––––
3,319
–
–
–
––––––––
–
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Liquidity risk management
Responsibility for liquidity risk management rests with the management, which has established an
appropriate liquidity risk management framework of Glispa’s funding and liquidity management
requirements. Glispa manages liquidity risk by maintaining adequate reserves, banking facilities and reserve
borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the
maturity profiles of financial assets and liabilities.
CAPITAL RISK
Capital risk management
Glispa’s objectives when managing capital are to safeguard Glispa’s ability to continue as a going concern
in order to provide returns for shareholders. Currently Glispa does not have any debt obligations to fulfil, but
236
this might be a requirement in the future. Glispa is ready to utilise proper monitoring through instruments
like the gearing ratio in order to ensure an optimal debt and equity balance.
Glispa’s overall strategy remained unchanged during the period.
Glispa is not subject to any externally imposed capital requirements.
6.
REVENUES
Glispa is involved in online affiliate marketing as a form of the rendering of services. The services provided
are solely single arrangements.
The geographical split of revenues is as follows:
European Union
UK
USA
Other
Total
7.
2012
€’000
2013
€’000
2014
€’000
2015
€’000
7,949
802
1,915
6,827
––––––––
17,493
16,529
2,006
7,411
19,513
––––––––
45,459
12,410
2,744
8,071
29,442
––––––––
52,667
3,464
1,012
3,376
6,562
––––––––
14,414
2012
€’000
2013
€’000
2014
€’000
2015
€’000
1,243
119
212
844
(553)
5,040
219
346
929
(1,408)
417
109
61
1,217
(2,060)
––––––––
––––––––
––––––––
––––––––
OPERATING PROFIT
Operating profit is stated after charging:
Employment costs
Advertising expenses
Legal and Consulting Fees
Other expenses
Other operating income
8.
554
114
117
479
(475)
KEY MANAGEMENT PERSONNEL COMPENSATION
Key Management personnel is constituted by the members of the board, Gary Chah-Arn Lin, Tim Roine
Alexander Nilsson, and Alon Shamir (since 14 March 2015).
The members of the Management Board received the following remuneration:
Salaries
Bonus payments
Social security costs
Pension contribution
Share based payment expense
2012
€’000
2013
€’000
2014
€’000
2015
€’000
405
96
15
–
–
––––––––
516
415
150
16
–
–
––––––––
581
416
321
16
–
2,363
––––––––
3,116
104
–
4
–
–
––––––––
108
––––––––
237
––––––––
––––––––
––––––––
9.
EMPLOYEES
The average monthly number of employees was:
2012
Number
2013
Number
2014
Number
2015
Number
––––––––
41
––––––––
71
––––––––
89
––––––––
2012
€’000
2013
€’000
2014
€’000
2015
€’000
2,437
320
–
––––––––
2,757
4,027
535
–
––––––––
4,562
4,826
772
5,022
––––––––
10,620
1,472
214
–
––––––––
1,686
100
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Share based payment expense
––––––––
10.
––––––––
––––––––
––––––––
OPERATING LEASES COMMITMENTS
LESSEE
Glispa is primarily a lessee of office space. Future minimum rents payable under non-cancellable operating
leases are set out in the table below:
Within one year
Between two and five years
In over five years
2012
€’000
2013
€’000
2014
€’000
2015
€’000
–
160
–
––––––––
160
101
48
–
––––––––
149
92
286
–
––––––––
378
306
5
–
––––––––
311
––––––––
11.
––––––––
––––––––
––––––––
INCOME TAX CREDIT/(CHARGE)
The credit for the year can be reconciled to the profit per the income statement as follows:
2012
€’000
CORPORATION TAX
Current tax charge
DEFERRED TAX
Deferred tax
Total tax charge
2013
€’000
2014
€’000
2015
€’000
(833)
(1,762)
(730)
(641)
–
––––––––
(833)
(97)
––––––––
(1,859)
27
––––––––
(703)
(80)
––––––––
(721)
––––––––
238
––––––––
––––––––
––––––––
The charge for the year can be reconciled to the profit per the income statement as follows:
Profit on ordinary activities before tax
Expected tax charge based on the standard rate
of corporation tax in Berlin of 30.175%
(2012-2013) and of 30.21% (from 2014
onwards)
Effects of:
Expenses not deductible for tax purposes
Other differences
Adjustments to tax charge in respect of
previous periods
Current tax charge
12.
2012
€’000
2013
€’000
2014
€’000
2015
€’000
2,550
6,093
2,334
2,377
(769)
(1,839)
(705)
(718)
(2)
(62)
(2)
(18)
(5)
(3)
(3)
–
–
––––––––
(833)
–
––––––––
(1,859)
10
––––––––
(703)
–
––––––––
(721)
––––––––
––––––––
––––––––
CONTRIBUTION/(DISTRIBUTION)
2012
€’000
Amounts recognised as distribution to equity
holders
13.
––––––––
(3,580)
––––––––
2013
€’000
(2,100)
––––––––
2014
€’000
2015
€’000
–
––––––––
––––––––
–
PROPERTY, PLANT AND EQUIPMENT
Office equipment,
fixtures and fittings
€’000
Cost
At 1 January 2012
157
––––––––
65
4
––––––––
226
––––––––
340
(2)
––––––––
564
––––––––
80
–
––––––––
644
––––––––
20
(5)
––––––––
659
Additions
Reclassifications
At 1 January 2013
Additions
Disposals
At 1 January 2014
Additions
Disposals
At 1 January 2015
Additions
Disposals
At 31 March 2015
––––––––
239
Office equipment,
fixtures and fittings
€’000
Depreciation
At 1 January 2012
76
––––––––
39
––––––––
115
––––––––
73
––––––––
188
––––––––
113
––––––––
301
––––––––
29
––––––––
330
Charge for the year
At 1 January 2013
Charge for the year
At 1 January 2014
Charge for the year
At 1 January 2015
Charge for the year
At 31 March 2015
––––––––
Net Book Values
At 31 December 2011
At 31 December 2012
At 31 December 2013
At 31 December 2014
81
111
376
343
––––––––
329
At 31 March 2015
14.
––––––––
TRADE AND OTHER RECEIVABLES
Current
2013
€’000
2012
€’000
Trade receivables
Other receivables
Receivables from Shareholders
Prepayments and accrued income
2,924
53
10
12
––––––––
2,999
––––––––
9,205
144
10
1
––––––––
9,360
––––––––
2014
€’000
2015
€’000
9,386
1,898
10
–
––––––––
11,294
11,034
1,762
–
182
––––––––
12,978
––––––––
––––––––
Trade receivables disclosed above are classified as loans and receivables and are therefore measured at
amortised cost.
Trade receivable – Credit Risk
Fair Value of Trade Receivables
The Directors consider that the fair values of trade and other receivables due within one year approximate to
their carrying amounts as presented above.
The ageing of trade receivables (shown net of bad debt provision) was as follows:
Less than 30 days
30 to 60 days
60 to 120 days
Over 120 days
2012
€’000
2013
€’000
2014
€’000
2015
€’000
2,514
260
32
118
––––––––
2,924
8,642
201
309
53
––––––––
9,205
7,332
1,160
524
370
––––––––
9,386
9,973
468
586
7
––––––––
11,034
––––––––
––––––––
There were no overdue receivables that had not been written down.
240
––––––––
––––––––
The movement in the provision of doubtful debts was as follows:
At 1 January
Amounts written off
Amounts recovered
Amounts provided for
At 31 December
2012
€’000
2013
€’000
–
–
–
128
––––––––
128
128
–
–
93
––––––––
221
––––––––
––––––––
2014
€’000
221
(87)
–
–
––––––––
134
––––––––
2015
€’000
134
–
–
245
––––––––
379
––––––––
The exposure of Glispa to credit risk and impairment losses in relation to trade and other receivables is
reported in Note 5 of the financial information.
15.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents
2012
€’000
2013
€’000
2014
€’000
2015
€’000
971
––––––––
2,104
––––––––
4,624
––––––––
––––––––
6,616
There are no restrictions on cash and cash equivalents.
16.
TRADE AND OTHER PAYABLES
Trade payables
Accruals and deferred income
Other payables
2012
€’000
2,032
679
608
––––––
3,319
Current
2013
2014
€’000
€’000
5,034
1,994
2,528
8,745
401
491
––––––
––––––
7,963
11,230
2015
€’000
200
12,078
435
––––––
12,713
2012
€’000
–
–
–
––––––
–
Non-current
2013
2014
€’000
€’000
–
–
–
–
–
–
––––––
––––––
–
–
2015
€’000
–
242
–
––––––
242
–––––– –––––– –––––– –––––– –––––– –––––– –––––– ––––––
Trade and other payables principally comprise amounts outstanding for trade purchase and ongoing costs.
They are non-interest bearing and are normally settled within 30 to 60 day terms. The Directors consider that
the fair values of trade and other payables due within one year approximate to their carrying amounts as
presented above.
17.
GOVERNMENT GRANTS
Glispa received a government grant in January 2015. The grant has been recognised as part of profit on a
systematic basis in the periods in which the relating personnel expenses are recognised.
The government grant amounts to EUR 345,000. The grant subsidises the creation and retention of
23 permanent employment posts at the Berlin location of Glispa. It is conditional on the retention of these
permanent employment posts over a period of 5 years, beginning with the creation of the 23rd post in
October 2014. The grant must be used for investments into assets for the Berlin location of Glispa.
Non-compliance with these conditions leads to a reduction or even the reimbursement of the grant. Further
payments will be received to the extent to which related costs are incurred. Glispa receives no other forms
of government assistance. As at 31 March 2015 EUR 69,000 of the grant was recognised in profit.
18.
TAXES PAYABLE
Income taxes
2012
€’000
2013
€’000
2014
€’000
2015
€’000
494
1,378
921
1,118
––––––––
241
––––––––
––––––––
––––––––
19.
DEFERRED TAXATION
The following are the major deferred tax assets and liabilities recognised by the company and movements
thereon during the reporting periods.
2012
€’000
Deferred tax asset/(liability)
At 1 JANUARY
Trade receivables
Accruals for outstanding invoices
Other differences
Receivables government grant
Deferred income (government grant)
Personnel-related accruals
Receivables in foreign currency
AT 31 DECEMBER (31 MARCH 2015)
20.
2013
€’000
––––––––
––––––––
––––––––
––––––––
2012
€’000
2013
€’000
2014
€’000
2015
€’000
––––––––
–
(44)
(53)
–
–
–
–
–
––––––––
(97)
––––––––
(70)
2015
€’000
–
–
–
–
–
–
–
–
–
––––––––
–
(97)
2014
€’000
(97)
(44)
–
–
104
(25)
17
(25)
––––––––
(70)
––––––––
(150)
(70)
(79)
54
11
(104)
97
24
(83)
––––––––
(150)
––––––––
SHARE-BASED PAYMENT TRANSACTIONS
Glispa set up an Employment Participation Program (“EPP”) which qualifies as “cash-settled payment
transactions”. A certain number of employees are, in case of a sale of more than 50 per cent. of the shares in
the Company, entitled to a share in the sales proceeds equal to his percentage share which is defined in the
appendix of an employment contract.
The conditions are as follows: The percentage share in the sales proceeds is defined in the individual
appendices of the employment contracts. Until the day of the sale, the percentage share increases on a
straight-line basis for every full month in which the employment contract with the employee is effective, up
to a defined maximum amount. In the event of a sale the employee will immediately receive a defined
percentage of the sales proceeds regardless of the original vesting schedule, provided that at the time of sale
the employment agreement is still effective. If the employee terminates the employment contract, all claims
by the employee in connection with the EPP shall expire. If Glispa terminates the employment contract or if
the parties terminate the contract by mutual agreement, the percentage share is reduced after the expiry of
each full month after the termination by 1/6 of the amount as of the termination of the employment contract.
As of 31 December 2011, 31 December 2012 and 31 December 2013 the probability of a sale as a nonmarket performance condition was considered to be remote, therefore no liability was recorded. During the
preparation of the financial statements for 2014 the sale in 75 per cent. of the shares occurred. A liability and
expenses of EUR 5,022,000 equalling the fair value of was recorded. The fair value of the liability was
directly derived from the sales price of the shares amounting to EUR 25,000,000 and equals the carrying
amount of the liability as of 31 December 2014.
On 12 March 2015 Glispa set up another EPP, a Special-Bonus Agreement, with certain key employees over
a period expiring at the end of the financial year 2017/2018. This agreement includes two different
components of bonus: a “Special Bonus I” which will be rewarded for the FY 2015/2016, 2016/2017 and
2017/2018 upon attainment of certain bonus targets. The second component is a “Special Bonus II” which
shall be rewarded in case of a sale of more than 50 per cent. of the shares in one or several of the Glispacompanies or the sale of substantially all of Glispa’s assets used for operating its business or an initial public
offering of one of the Glispa-companies. Glispa currently assesses the probability of a sale as remote,
therefore no liability was recognised as of 31 March 2015.
242
The expense recognised for employee services received during the year is shown in the following table:
Expense arising from cash-settled share-based
payment transactions
21.
2012
€’000
2013
€’000
2014
€’000
2015
€’000
–
–
5,022
––––––––
–
––––––––
Number
€’000
25,000
––––––––
––––––––
––––––––
SHARE CAPITAL
SHARE CAPITAL
ORDINARY SHARES OF €1.00 EACH
At 31 December 2011, 2012, 2013, 2014 and 31 March 2015
––––––––
25
RETAINED EARNINGS
Retained earnings represent Glispa’s cumulative net gains and losses less contributions/distributions.
22.
CONTROLLING PARTY
Parent and ultimate controlling party
During 2015, a majority of Glispa’s shares were acquired by Market Tech Holdings Limited. As a result the
new ultimate controlling party is Market Tech Holdings Limited. The immediate controlling party is Glispa
Holdings GmbH. Until the sale of the majority of the shares, Mr. Gary Chah-Arn Lin was the sole
shareholder of Glispa.
23.
RELATED PARTY TRANSACTIONS
Transactions with Management Directors
In November 2013 Glispa entered into a loan contract as a borrower with the shareholder Gary Lin. The
respective loan was a non-secured and non-interest-bearing loan amounting to EUR 1,546,000. It was repaid
in December 2013.
In December 2013 Glispa entered into a tenancy agreement for an apartment in Berlin with the company
owner Gary Lin. The contract continues indefinitely until either of the parties involved cancels the contract.
The contract stipulates monthly payments of EUR 3,000.
In February 2015 Glispa entered into an agreement of a sale of a used motor vehicle to its owner Gary Lin.
The vehicle was sold to Mr. Lin for EUR 6,000 resulting in no gain or loss.
In 2012 and 2013 dividends of EUR 3,580,000 and EUR 2,100,000 respectively were distributed to the sole
shareholder Mr. Lin.
Management Directors at glispa GmbH
Mr Gary Chah-Arn Lin, Berlin, Director
Mr Tim Roine Alexander Nilsson, Berlin, Director
Mr Alon Shamir, London, Director (since 14 March 2015)
Regarding the management compensation of the directors we refer to section 8.
243
24.
CASH GENERATED FROM OPERATIONS
Year ended Year ended Year ended
31 December 31 December 31 December
Notes
2012
2013
2014
€’000
€’000
€’000
1,717
––––––––
PROFIT FOR THE PERIOD
ADJUSTMENTS FOR:
Income tax expense
Finance expense
Investment income
Share based payment expense
Depreciation of property, plant and
equipment & Amortisation of
intangible assets
Profit/loss on disposal of property, plant
and equipment and intangibles
Foreign currency translation
MOVEMENTS IN WORKING CAPITAL:
(Increase) in trade and other receivables
Increase in trade and other payables
Increase in provisions
CASH GENERATED FROM OPERATIONS
11
4,234
––––––––
1,656
––––––––
20
833
–
(25)
–
13
42
85
129
34
11
4
(1)
188
–
(581)
8
(783)
(6,421)
4,323
–
––––––––
4,263
(1,997)
15
–
––––––––
4,925
(1,683)
1,878
–
––––––––
1,832
(260)
508
1
––––––––
2,831
1,859
–
(4)
–
1,631
––––––––
3 months
ended
31 March
2015
€’000
703
12
(9)
5,022
721
1
–
–
–––––––– –––––––– –––––––– ––––––––
244
PART X
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma income statement for the year ended 31 March 2015 set out in Section A of this
Part X has been prepared on the basis of the notes set out below to illustrate the effect of the acquisitions of
the Pastra Group, Fiver and Glispa on the income statements of the Group as if they had taken place on
1 April 2014.
The unaudited pro forma financial information has been prepared for illustrative purposes only and, because
of its nature, addresses a hypothetical situation and does not, therefore, represent the Group’s actual financial
position or results.
The unaudited pro forma financial information is based on the consolidated financial information of the
Company for the year ended 31 March 2015, set out in the financial information on the Group in sub-section
2 of Section A of Part IX of this document, and has been prepared in a manner consistent with the accounting
policies adopted by the Company in preparing such information and on the basis set out in the notes set out
below.
No pro forma net assets statement has been included as the acquisitions of the Pastra Group, Fiver and Glispa
had all occurred prior to 31 March 2015 and are therefore already reflected in the statement of financial
position of the Group as at 31 March 2015 set out in sub-section 2 of Section A of Part IX of this document.
Shareholders should read the whole of this document and not rely solely on the selected financial
information contained in this Part X.
245
SECTION A: UNAUDITED PRO-FORMA FINANCIAL INFORMATION FOR THE YEAR ENDED
31 MARCH 2015
Adjustments
–––––—————————————————————————––––
The Pastra
Group for
Fiver for
Glispa for
the period
the period
the period
from
from
from
The Group
1 April
1 April
1 April
for the year
2014
2014
2014
Other
Pro forma
ended
to the date
to the date
to the date
acquisition
income
31 March of acquisition of acquisition of acquisition
related
statement
2015 by the Group by the Group by the Group adjustments of the Group
(note 1)
(note 2)
(note 3)
(note 4)
(note 5)
£’000
£’000
£’000
£’000
£’000
£’000
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Net gain from fair value
adjustment of investment
property
Adjusted EBITDA
Net gain from fair value
adjustment of investment
property
Exceptional items
Depreciation and amortisation
Foreign exchange loss
Share-based payment expense
Operating profit
Finance income
Finance expense
Profit before taxation
Income tax credit/(charge)
Profit for the year from
continuing operations
Loss for the year on
discontinued operations
Profit for the year
Profit for the year attributable
to non-controlling interest
Profit for the year attributable
to owners of the parent
30,081
(5,981)
––––––––
24,100
(22,732)
–
3,156
(224)
––––––––
2,932
(1,874)
–
15,430
(10,385)
––––––––
5,045
(3,902)
46
39,476
(34,390)
––––––––
5,086
(5,693)
2,006
–
–
––––––––
–
(2,634)
–
88,143
(44,999)
––––––––
37,163
(36,834)
2,052
60,539
31,512
–
–
–
92,051
12,018
1,076
1,244
3,717
–
18,056
60,539
(9,487)
(624)
(500)
(39)
31,512
–
(18)
–
–
–
–
(45)
(10)
–
–
–
(98)
1,742
(3,961)
–
–
(2,634)
–
–
92,051
(9,487)
(3,419)
1,232
(4,000)
61,907
3
(17,839)
––––––––
44,071
183
––––––––
32,570
–
(605)
––––––––
31,965
(180)
––––––––
1,189
2
–
––––––––
1,191
(92)
––––––––
1,400
5
–
––––––––
1,405
(907)
––––––––
(2,634)
–
–
––––––––
(2,634)
–
––––––––
94,432
11
(18,444)
––––––––
75,999
(997)
––––––––
44,254
31,785
1,099
498
(2,634)
(376)
––––––––
43,878
–
––––––––
31,785
–
––––––––
1,099
–
––––––––
498
–
––––––––
(2,634)
(376)
––––––––
74,626
(180)
––––––––
–
––––––––
–
––––––––
–
––––––––
460
––––––––
280
––––––––
31,785
1,099
498
43,698
(2,174)
75,002
74,906
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Notes:
1. The income statement of the Group for the year ended 31 March 2015 has been extracted without material adjustment from the
financial information on the Group for the year ended 31 March 2015 set out in sub-section 2 of Section A of Part IX of this
document.
246
2.
The adjustment for the Pastra Group has been calculated as set out below:
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Net gain from fair value adjustment of
investment property
Adjusted EBITDA
Net gain from fair value adjustment of
investment property
Exceptional items
Depreciation and amortisation
Foreign exchange loss
Share-based payment expense
Operating profit
Finance income
Finance expense
Profit before taxation
Income tax credit/(charge)
Profit for the year from continuing operations
Loss for the year on discontinued operations
Profit for the year
Profit for the year attributable to
non-controlling interest
Profit for the year attributable to
owners of the parent
Results
for the Pastra
Group for the
15 months ended
31 March 2015
(note i)
£’000
Less: results for
the Pastra
Group for the
3 months ended
31 March 2014
(note ii)
£’000
Less:
consolidated
results
for the Pastra
Group from
the date of
acquisition
by the Group to
31 March 2015
(note iii)
£’000
5,590
(348)
––––––––
5,242
(3,304)
–
(1,145)
81
––––––––
(1,064)
680
–
(1,289)
43
––––––––
(1,246)
750
–
49,911
1,987
49,911
–
(49)
–
–
–
(391)
–
–
7
–
–
The Pastra
Group
for the period
from 1 April
2014 to the
date of
acquisition
by the Group
(note iv)
£’000
3,156
(224)
––––––––
2,932
(1,874)
–
(18,399)
31,512
(520)
1,076
(18,399)
–
24
–
–
31,512
–
(18)
–
–
51,849
–
(834)
––––––––
51,015
(246)
––––––––
50,769
–
––––––––
50,769
(384)
–
219
––––––––
(165)
66
––––––––
(99)
–
––––––––
(99)
(18,895)
–
10
––––––––
(18,885)
–
––––––––
(18,885)
–
––––––––
(18,885)
32,570
–
(605)
––––––––
31,965
(180)
––––––––
31,785
–
––––––––
31,785
–
––––––––
–
––––––––
–
––––––––
–
––––––––
50,769
––––––––
––––––––
(99)
(18,885)
––––––––
31,785
––––––––
Notes:
(i) The income statement of the Pastra Group has been extracted without material adjustment from the financial information on
the Pastra Group for the 15 month period ended 31 March 2015, set out in sub-section 2 of Section B of Part IX of this
document.
(ii) In order to determine the results for the Pastra Group for the 12 months ended 31 March 2015, this adjustment removes
3 months of the results from 1 January 2014 to the date of acquisition on a pro-rata basis. Before completing this pro rata
adjustment significant one-off items were excluded, including fair value adjustments, with only those relating to the period
from 1 January 2014 to 31 March 2014 then added back into the final adjustment.
(iii) In order to determine the results for the Pastra Group for the period from 1 April 2014 to the date of Pastra’s acquisition by
the Group on 5 December 2014 (after which time the Pastra Group is reflected within the Group’s income statement), this
adjustment eliminates the Pastra Group’s results included in the consolidated Group income statement for the year ended
31 March 2015. This adjustment is sourced from the consolidation workings underpinning the income statement of the
Group for the year ended 31 March 2015, included within sub-section 2 of Section A of Part IX of this document.
(iv) The net adjustment reflects the sum of the previous three columns.
247
3.
The adjustment for Fiver has been calculated as set out below:
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Net gain from fair value
adjustment of
investment property
Adjusted EBITDA
Net gain from fair value
adjustment of
investment property
Exceptional items
Depreciation and
amortisation
Foreign exchange loss
Share-based payment
expense
Operating profit
Finance income
Finance expense
Profit before taxation
Income tax credit/(charge)
Profit for the year from
continuing operations
Loss for the year on
discontinued operations
Profit for the year
Profit for the year
attributable to
non-controlling interest
Profit for the year
attributable to owners
of the parent
Results for
Fiver for the
12 months ended
30 September
2014
(note i)
£’000
Results for
Fiver for the
6 months ended
31 March 2015
(note ii)
£’000
21,228
(14,006)
––––––––
7,222
(5,808)
31
11,617
(7,438)
––––––––
4,179
(5,332)
30
–
1,522
(10,614)
7,003
––––––––
(3,611)
2,904
(15)
(6,802)
4,507
––––––––
(2,745)
4,334
–
15,430
(10,385)
––––––––
5,045
(3,902)
46
–
–
–
(42)
(220)
–
1,444
–
(1)
––––––––
1,443
(36)
––––––––
Fiver for the
period from
1 April 2014
to the date of
acquisition
by the Group
(note v)
£’000
(860)
–
–
(65)
(13)
Less: results for
Fiver for the
6 months ended
31 March 2014
(note iii)
£’000
Less: consolidated
results for Fiver
from the date of
acquisition by the
Group to
31 March 2015
(note iv)
£’000
–
–
–
–
1,342
1,244
–
–
–
–
–
–
33
6
30
217
–
–
(761)
(45)
(10)
–
(1,122)
2
–
––––––––
(1,120)
(74)
––––––––
(722)
–
1
––––––––
(721)
18
––––––––
1,589
–
1
––––––––
1,590
–
––––––––
1,407
(1,194)
(703)
1,590
1,099
–
––––––––
1,407
–
––––––––
(1,194)
–
––––––––
(703)
–
––––––––
1,590
–
––––––––
1,099
–
––––––––
–
––––––––
–
––––––––
–
––––––––
–
––––––––
1,407
––––––––
1,590
––––––––
––––––––
(1,194)
(703)
––––––––
––––––––
1,189
2
–
––––––––
1,191
(92)
––––––––
1,099
Notes:
(i) The income statement of Fiver for the year ended 30 September 2014 has been extracted without material adjustment from
the financial information on Fiver for the year ended 30 September 2014, set out in sub-section 2 of Section C of Part IX of
this document.
(ii) The income statement of Fiver for the 6 months ended 31 March 2015 has been extracted without material adjustment from
the financial information on Fiver for the period ended 31 March 2015, set out in sub-section 2 of Section C of Part IX of
this document.
(iii) In order to determine the results for the Fiver for the year ended 31 March 2015, this adjustment removes 6 months of the
results for the year ended 30 September 2014 on a pro-rata basis. Before calculating this pro rata adjustment, significant
one-off items were excluded, with only those relating to the period from 1 October 2013 to 31 March 2014 then added back
into the final adjustment.
(iv) In order to determine the results for Fiver for the period from 1 April 2014 to the date of Fiver’s acquisition by the Group
on 5 December 2014 (after which time Fiver is reflected within the Group’s income statement), this adjustment eliminates
Fiver’s results included in the consolidated Group income statement for the year ended 31 March 2015. This adjustment is
sourced from the consolidation workings underpinning the income statement of the Group for the year ended 31 March
2015, included within sub-section 2 of Section A of Part IX of this document.
(v) The net adjustment reflects the sum of the previous four columns.
248
4.
The adjustment for Glispa has been calculated as set out below:
Results for
Results for
Glispa for the Glispa for the
12 months
3 months
ended
ended
31 December
31 March
2014
2015
(note i)
(note ii)
€’000
€’000
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Net gain from fair value
adjustment of investment
property
Adjusted EBITDA
Net gain from fair value
adjustment of investment
property
Exceptional items
Depreciation and amortisation
Foreign exchange gain
Share-based payment expense
Operating profit
Finance income
Finance expense
Profit before taxation
Income tax credit/(charge)
Profit for the year from continuing
operations
Loss for the year on discontinued
operations
Profit for the year
Profit for the year attributable to
non-controlling interest
Profit for the year attributable to
owners of the parent
52,667
(45,216)
––––––––
7,451
(6,534)
1,408
14,414
(12,293)
––––––––
2,121
(1,804)
2,060
Less:
consolidated
results for
Less: results
Glispa
Glispa
Glispa
for Glispa
from the for the period for the period
for the
date of
from 1 April
from 1 April
3 months
acquisition
2014
2014
ended by the Group
to the date
to the date
31 March
to 31 March of acquisition of acquisition
2014
2015 by the Group by the Group
(note iii)
(note iv)
(note v)
(note vi)
€’000
€’000
€’000
£’000
(13,167)
11,304
––––––––
(1,863)
378
(352)
–
(3,862)
2,602
––––––––
(1,260)
742
(572)
–
–
6,687
1,135
–
–
(129)
789
(5,022)
–
–
(34)
1,276
–
–
–
32
(197)
–
2,325
9
–
––––––––
2,334
(703)
––––––––
2,377
–
–
––––––––
2,377
(721)
––––––––
(1,837)
(2)
–
––––––––
(1,839)
176
––––––––
(1,090)
–
–
––––––––
(1,090)
98
––––––––
(1,672)
–
(1,437)
–
–
7
340
–
50,053
(43,603)
––––––––
6,449
(7,218)
2,544
39,476
(34,390)
––––––––
5,086
(5,693)
2,006
–
–
4,713
3,717
–
–
(124)
2,208
(5,022)
–
–
(98)
1,742
(3,961)
1,775
7
–
––––––––
1,782
(1,150)
––––––––
1,400
5
–
––––––––
1,405
(907)
––––––––
1,631
1,656
(1,663)
(992)
632
498
–
––––––––
1,631
–
––––––––
1,656
–
––––––––
(1,663)
–
––––––––
(992)
–
––––––––
632
–
––––––––
498
–
––––––––
–
––––––––
–
––––––––
–
––––––––
–
––––––––
–
––––––––
1,631
––––––––
1,656
––––––––
632
––––––––
––––––––
(1,663)
(992)
––––––––
––––––––
498
Notes:
(i) The income statement of Glispa for the year ended 31 December 2014 has been extracted without material adjustment from
the financial information on Glispa for the year ended 31 December 2014, set out in sub-section 2 of Section D of Part IX
of this document.
(ii) The income statement of Glispa for the 3 months ended 31 March 2015 has been extracted without material adjustment from
the financial information on Glispa for the period ended 31 March 2015, set out in sub-section 2 of Section D of Part IX of
this document.
(iii) In order to determine the results for the Glispa for the 12 months ended 31 March 2015, this adjustment removes 3 months
of the results for the year ended 31 December 2014 on a pro-rata basis. Before calculating this pro rata adjustment,
significant one-off items were excluded, with only those relating to the period from 1 January 2014 to 31 March 2014 then
added back into the final adjustment.
(iv) In order to determine the results for Glispa for the period from 1 April 2014 to the date of Glispa’s acquisition by the Group
on 13 March 2015 (after which time Glispa is reflected within the Group’s income statement), this adjustment eliminates
Glispa’s results included in the consolidated Group income statement for the year ended 31 March 2015. This adjustment
is sourced from the consolidation workings underpinning the income statement of the Group for the year ended 31 March
2015, included within sub-section 2 of Section A of Part IX of this document.
(v) The net adjustment reflects the sum of the previous four columns.
249
(vi) The net adjustment has been converted from euros into pounds sterling using the average exchange rate of €1.2679 = £1 for
the year ended 31 March 2015.
5.
Other acquisition related adjustments comprise:
(a) an adjustment to reflect a full year’s amortisation charge for intangible assets which arose on the acquisitions of the Pastra
Group, Fiver and Glispa, calculated as follows:
Pastra Group
£’000
–
Full year amortisation charge
Less: Amortisation included in the Group accounts
for the year ended 31 March 2015
–
––––––––
–
Adjustment before non-controlling interest
––––––––
Fiver
£’000
399
(103)
––––––––
296
––––––––
Glispa
£’000
2,338
–
––––––––
2,338
––––––––
Total
£’000
2,737
(103)
––––––––
2,634
––––––––
(b) an adjustment to reflect the 25 per cent. non-controlling interest in Glispa for the period from 1 April 2014 to the date of
Glispa’s acquisition by the Group (after which time Glispa is reflected within the Group’s income statement), calculated as
follows:
Period from
1 April 2014
to the date
of acquisition
by the Group
£’000
Glispa’s profit for the period
Amortisation of intangible assets of Glispa (as per Note 5(a) above)
Net adjustment
6.
498
(2,338)
25% noncontrolling
interest thereof
£’000
(124)
584
––––––––
460
––––––––
The adjustments are all expected to have a continuing impact of the Group, save for the share-based payment expense of
£3,961,000 relating to Glispa.
250
SECTION B: ACCOUNTANT’S OPINION ON THE PRO FORMA FINANCIAL INFORMATION
BDO LLP
55 Baker Street
London
W1U 7EU
The Directors
Market Tech Holdings Limited
Third Floor
La Plaiderie Chambers
La Plaiderie
St Peter Port
Guernsey
GY1 1WG
21 January 2016
Dear Sirs
Market Tech Holdings Limited (the “Company”)
Pro forma financial information
We report on the unaudited pro forma income statement (the “Pro Forma Financial Information”) set out in
Section A of Part X of the prospectus dated 21 January 2016 (the “Prospectus”) which has been prepared on
the basis described, for illustrative purposes only, to provide information about how the acquisitions of the
Pastra Group, Fiver and Glispa might have affected the financial information presented on the basis of
accounting policies adopted by the Company in preparing the historical financial information for the year
ended 31 March 2015.
This report is required by item 20.2 of Annex I of the Commission Regulation (EC) No. 809/2004 (the “PD
Regulation”) and is given for the purpose of complying with that item and for no other purpose.
Responsibilities
It is the responsibility of the directors of the Company (the “Directors”) to prepare the Pro Forma Financial
Information in accordance with item 20.2 of Annex I of the PD Regulation.
It is our responsibility to form an opinion, as required by item 7 of Annex II of the PD Regulation, as to the
proper compilation of the Pro Forma Financial Information and to report that opinion to you.
Save for any responsibility arising under Prospectus Rule 5.5.3R(2)(f) to any person as and to the extent there
provided, to the fullest extent permitted by the law we do not assume any responsibility and will not accept
any liability to any other person for any loss suffered by any such other person as a result of, arising out of,
or in connection with this report or our statement, required by and given solely for the purposes of complying
with item 23.1 of Annex I of the PD Regulation, consenting to its inclusion in the Prospectus.
In providing this opinion we are not updating or refreshing any reports or opinions previously made by us
on any financial information used in the compilation of the Pro Forma Financial Information, nor do we
accept responsibility for such reports or opinions beyond that owed to those to whom those reports or
opinions were addressed by us at the dates of their issue.
Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. The work that we performed for the purpose of making this report,
which involved no independent examination of any of the underlying financial information, consisted
251
primarily of comparing the unadjusted financial information with the source documents, considering the
evidence supporting the adjustments and discussing the Pro Forma Financial Information with the Directors.
We planned and performed our work so as to obtain the information and explanations which we considered
necessary in order to provide us with reasonable assurance that the Pro Forma Financial Information has
been properly compiled on the basis stated and that such basis is consistent with the accounting policies of
the Company.
Our work has not been carried out in accordance with auditing or other standards and practices generally
accepted in the United States of America or other jurisdictions outside the United Kingdom and accordingly
should not be relied upon as if it had been carried out in accordance with those standards and practices.
Opinion
In our opinion:
(a)
the Pro Forma Financial Information has been properly compiled on the basis stated; and
(b)
such basis is consistent with the accounting policies of the Company.
Declaration
For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus
and declare that we have taken all reasonable care to ensure that the information contained in this report is,
to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.
This declaration is included in the Prospectus in compliance with item 1.2 of Annex I of the PD Regulation.
Yours faithfully
BDO LLP
Chartered Accountants
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)
252
PART XI
CAPITALISATION AND INDEBTEDNESS
The following table shows the consolidated gross indebtedness of the Group as at 30 November 2015 and
the consolidated Group capitalisation as at 30 September 2015. The figures for capitalisation have been
extracted without material adjustment from the interim accounts of the Group as at 30 September 2015
included in sub-section 3 of Section A of Part IX. The indebtedness figures have been extracted from the
interim accounts of the Group as at 30 September 2015 included in sub-section 3 of Section A of Part IX and
the underlying accounting records of the Group as at 30 November 2015.
As at 30 November 2015
(unaudited)
(£’000)
Total current debt:
– Guaranteed(1)
– Secured(2)
– Unguaranteed/unsecured
Total non-current debt (excluding current portion of long-term debt):
– Guaranteed(1)
– Secured(2)
– Unguaranteed/unsecured
–
6,115
110,290
–
185,290
–
––––––––
301,695
––––––––
Total indebtedness
As at 30 September 2015
(unaudited)
Capitalisation:
– Share capital
– Legal reserves(3)
– Other reserves(4)
46,847
445,314
12,173
––––––––
504,334
––––––––
Total capitalisation
Notes:
1
No guarantees have been given by the Group; the only guarantee given have been a personal guarantee from the Major
Shareholder for the benefit of the Group relating to the senior debt facility provided by Bank of Cyprus of £6.1 million.
2
Secured facilities comprise a £185.3 million committed and fully drawn senior debt facility with Nomura International plc,
secured over Stables Market and Hawley Wharf property assets, and a £6.1 million fully drawn senior debt facility provided by
Bank of Cyprus and secured against the Jamestown Road property asset.
3
Comprises the share premium reserve.
4
Comprises the capital contribution on acquisition of entities under common control.
5
In addition, to the indebtedness shown in the table above, the Group had working capital and acquisition facilities in place with
the Major Shareholder. At 30 November 2015, the total committed facilities of £60 million remained undrawn.
Capitalisation does not include retained earnings or the share based payment reserve.
There has been no material change in the Group’s capitalisation since 30 September 2015.
253
The following table shows the consolidated Group net financial indebtedness as at 30 November 2015.
As at 30 November 2015
(unaudited)
(£’000)
Cash
Cash equivalents
Trading securities(1)
161,162
–
–
––––––––
161,162
––––––––
–
––––––––
(6,115)
–
–
––––––––
(6,115)
––––––––
155,047
––––––––
(185,290)
(110,290)
–
––––––––
(295,580)
––––––––
(140,533)
––––––––
Liquidity
Current financial receivables(2)
Current bank debt
Current portion of non-current debt
Other current financial debt
Current financial indebtedness
Net current financial liquidity
Non-current bank loans
Bonds issued
Other non-current loans
Non-current financial indebtedness
Net financial indebtedness
Notes:
1
The Group has an investment of £1.8 million in the share capital of Shazam Entertainment Limited, which is held for investment
purposes rather than as a trading security.
2
Not included in the current financial receivables is an amount for the fair value of the Nomura swap in place at 30 November
2015. This was last fair valued at 30 September 2015 at £6,000. It is not considered material enough to include in the table above.
As at 30 November 2015, the Group had given assurances aggregating to £500,000 for construction being
undertaken. Directors are not aware of any other material indirect or contingent indebtedness that may have
a significant impact on the financial position of the Group as at 30 November 2015.
Subsequent to the indebtedness balances disclosed above, the Group agreed a £900 million secured debt
facility on 8 December 2015 with an initial term of 10 years (the “AIG Senior Facilities Agreement”)
arranged by AIG Asset Management (Europe) Limited. This agreement comprises a committed £300 million
term loan which will be drawn down immediately, with a further £100 million to be drawn down in May
2016. A further £50 million is available for draw down, subject to certain conditions, until December 2017.
The agreement has two future drawdown pools of £150 million and £300 million respectively, subject to
lender consent.
The Group’s existing debt obligations with Nomura International Plc and Bank of Cyprus totalling
circa. £191 million has been repaid from the AIG Senior Facilities Agreement. In addition, the undrawn
Working Capital Loan of £60 million from the Major Shareholder, is, as a result of this agreement, no longer
available to the Company.
254
PART XII
DIRECTORS, PROPOSED DIRECTORS, SENIOR MANAGERS AND
CORPORATE GOVERNANCE
1.
DIRECTORS AND PROPOSED DIRECTOR
The following table lists the names, positions and ages of the Directors and the Proposed Directors:
Name
Directors
Nilesh (Neil) Sachdev
Charles Butler
Andrew Bull
John Le Poidevin
Thomas Teichman
Proposed Directors
David Brown
Sharon Baylay
Georg Bucher
Age
Date of birth
Position
57
43
36
45
68
7 November 1958
24 June 1972
2 February 1979
24 June 1970
23 November 1947
Non-Executive Chairman
Chief Executive Officer
Chief Financial Officer
Senior Independent Non-Executive Director
Independent Non-Executive Director
43
47
41
26 February 1972
4 April 1968
9 March 1974
Chief Financial Officer designate
Independent Non-Executive Director
Head of Corporate Development
The business address of each of the Directors and the Proposed Directors is Third Floor, La Plaiderie
Chambers, La Plaiderie, St Peter Port, Guernsey, GY1 1WG.
The management expertise and experience of each of the Directors and the Proposed Director is set out below.
1.1
Executive Directors
1.1.1 Charles Butler – Chief Executive Officer
Charles was appointed as Group CEO in September 2014 to drive the overall Group strategy
and implement the online-offline concept for the Group. Charles has extensive experience in
leading public online businesses including serving as CEO for Netplay TV Plc from 2010 to
2014. Charles currently serves as Non-Executive Chairman for Netplay TV Plc. Charles has
extensive experience in building out e-commerce operations and has a successful track record
in restructuring, fund raising and EBITDA turnaround for online e-commerce businesses. Prior
to Netplay TV Plc, Charles was CEO of Bowan International and, earlier, Finance Director.
Bowan International was an online sportsbetting, casino and poker operator, which was sold to
the Bet365 Group in 2006.
1.1.2 Andrew Bull – Chief Financial Officer
Andrew has worked for the Group since 2009 and is responsible for all aspects of the
Company’s financial management. Andrew is also heavily involved with all fundamental
financial aspects of the property management, commercial and operation of the Camden
Markets. Andrew is a Chartered Accountant. He has a background in Big Four accounting,
multi-industry corporate recovery and restructuring advisory, and has previously worked for
DTZ as a member of their real estate corporate finance advisory team. As announced by the
Company on 21 January 2016, David Brown has been appointed by the Group to act as Chief
Financial Officer with David’s appointment taking effect from 1 March 2016 or earlier if a start
date in advance of this can be agreed. It is intended that Andrew will remain as Chief Financial
Officer until this date following which he will step-down from the Board and take up the
position of Group Real Estate Finance Director.
1.2
Non-Executive Directors
1.2.1 Nilesh (Neil) Sachdev – Non-Executive Chairman
Neil was appointed as Non-Executive Chairman on 5 December 2014. Neil has 35 years of
experience in retail and real estate, as well as having held various Government BIS roles in an
advisory capacity with a focus on climate change, construction and education. Neil is currently
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a Non-Executive Director at Intu Properties plc and has been for the last seven years. Neil is a
Fellow of the Royal Institute of Chartered Surveyors.
1.2.2 John Le Poidevin – Senior Independent Non-Executive Director
John was appointed as Senior Independent Non-Executive Director on 5 December 2014. John
is an experienced Non-Executive Director who sits on several boards, primarily of real estate
or online technology related companies and funds. Before becoming a full-time Non-Executive
Director, John was a partner at BDO LLP in London for many years and is well versed in audit,
risk and controls, corporate governance and financial reporting. John is a Fellow of the Institute
of Chartered Accountants in England and Wales.
1.2.3 Thomas Teichman – Independent Non-Executive Director
Thomas was appointed as an Independent Non-Executive Director on 5 December 2014.
Thomas has a long track record in backing and developing successful internet, technology
and software businesses, as well as a previous career in investment banking at firms like
Credit Suisse, Bank of Montreal and Mitsubishi Bank. Thomas led the flotation of his first
online business in the 1990s on the London Stock Exchange and NASDAQ and then became
an early backer and board member of a succession of technology and internet companies
such as Kobalt Music Group, mergermarket.com, lastminute.com, moshimonsters.com,
notonthehighstreet.com, System C, ARC Rise Cores, Advanced Visual Technologies and
Argonaut Games, many of which he subsequently exited via IPOs or trade sales. Tom has been
chairman of SPARK Venture Management since 1996, it manages third party funds for
university, government and institutional investors. He also served as a director of SPARK
Ventures plc on AIM which he chaired from 1999 to 2009 and on a variety of private, growing
companies, mainly in the online and technology sectors. He holds a B.Sc. in Economics from
University College London.
1.3
Proposed Directors
1.3.1 David Brown – Chief Financial Officer designate
David Brown is a proposed Executive Director. David is currently corporate finance director at
Greene King plc, where he has undertaken a number of senior finance roles since 1998,
including interim chief financial officer and has served as a board director of a number of
Greene King plc subsidiaries. David brings extensive listed company experience including a
successful track record in M&A and raising finance. He began his career with KPMG after
graduating from the University of Cambridge and is a member of the Institute of Chartered
Accountants in England and Wales and an associate member of the Association of Corporate
Treasurers.
1.3.2 Georg Bucher – Head of Corporate Development
Georg is a proposed Executive Director. Georg is to be appointed to the Board on 1 February
2016. Georg joined the Group in 2015 as Head of Corporate Development and Capital Markets.
Before joining the Group, he gained 15 years’ experience in investment banking working at
Berenberg, Deutsche Bank and UBS, with a strong focus on European real estate. During this
time he was engaged on equity capital raisings and merger and acquisition transactions with a
total value over £15 billion.
1.3.3 Sharon Baylay – Independent Non-Executive Director
Sharon Baylay is a proposed Non-Executive Director. Sharon is currently a Non-Executive
Director of ITE Group plc; Restore plc; and Non-Executive Chairman of Dot Net Solutions
Ltd. She was previously the Marketing Director and a main board director of BBC from 20092011 with responsibility for all aspects of Marketing, Communications and Audiences, as well
as Non-Executive Director of BBC Worldwide, Freesat UK and Digital UK. Sharon joined the
BBC from Microsoft where she was latterly General Manager of Microsoft UK’s Advertising
and Online division and sat on the Board of Microsoft UK. Sharon spent a total of 15 years of
her career with Microsoft Corporation.
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1.4
Current and previous directorships
1.3.1 The Directors (in addition to being Directors of the Company) and the Proposed Directors hold
the following directorships and are partners in the following partnerships and/or have held the
following directorships and have been partners in the following partnerships within the five
years prior to the date of this document:
Director/
Proposed
Director
Neil Sachdev
Current appointments
Previous appointments
Clevertec Limited
Exclusive Contract Services Limited
Intu Properties plc
HSS Hire Group Plc
Martin’s Design and Construction
Limited
Martin’s Estates (Clerkenwell)
Limited
Martin’s Properties (Chelsea)
Limited
Martin’s Properties (Kensington)
Limited
Martin’s Properties (Radnor Walk)
Limited
Martin’s Properties No.1 Limited
NHS Property Services Limited
Querkus Limited
Radnor Walk Investments Limited
The Exclusive Services Group
Limited
Ballyowan Limited
Barleygold Limited
BL Crawley
BL Sainsbury Superstore Limited
BL Superstores (Funding) Ltd
BL Superstores Finance Plc
BLS Non Securitised 2012
1 Limited
BLS Non Securitised 2012
2 Limited
BLSSP (Cash Management) Limited
BLSSP (Lending) Limited
BLSSP (PHC 1 2010) Limited
BLSSP (PHC 1 2012) Limited
BLSSP (PHC 1) Limited
BLSSP (PHC 10) Limited
BLSSP (PHC 11) Limited
BLSSP (PHC 12) Limited
BLSSP (PHC 13) Limited
BLSSP (PHC 14) Limited
BLSSP (PHC 15) Limited
BLSSP (PHC 16) Limited
BLSSP (PHC 17) Limited
BLSSP (PHC 18) Limited
BLSSP (PHC 19) Limited
BLSSP (PHC 2 2010) Limited
BLSSP (PHC 2) Limited
BLSSP (PHC 20) Limited
BLSSP (PHC 21) Limited
BLSSP (PHC 22) Limited
BLSSP (PHC 23) Limited
BLSSP (PHC 24) Limited
BLSSP (PHC 25) Limited
BLSSP (PHC 26) Limited
BLSSP (PHC 27) Limited
BLSSP (PHC 28) Limited
BLSSP (PHC 3) Limited
BLSSP (PHC 30) Limited
BLSSP (PHC 31) Limited
BLSSP (PHC 32) Limited
BLSSP (PHC 33) Limited
BLSSP (PHC 34) Limited
BLSSP (PHC 35) Limited
BLSSP (PHC 4) Limited
BLSSP (PHC 5) Limited
257
Director/
Proposed
Director
Current appointments
Neil Sachdev
(continued)
Previous appointments
BLSSP (PHC 6) Limited
BLSSP (PHC 7) Limited
BLSSP (PHC 9) Limited
BLSSP Property Holdings Limited
British Land Superstores
(Non-Securitised)
Clarendon Property Company
East Walls Nominees No. 1 Limited
East Walls Nominees No. 2 Limited
Exclusive Contracts Limited
Harvest 2 GP Limited
Harvest 2 Selly Oak Limited
Harvest GP Limited
Harvest Nominee No. 1 Limited
Harvest Nominee No. 2 Limited
IGD Services Limited
Institute of Grocery Distribution
(The)
JSD (London) Limited
Medico-Dental Holdings Limited
Oxford Road Land Limited
Pencilscreen Limited
Ramheath Properties Limited
Reef Investments Limited
Romford Developments Limited
S.W. Dewsbury Limited
Sainsbury Bridgeco Holdco Limited
Sainsbury Bridgeco Propco Limited
Sainsbury Holdco A Limited
Sainsbury Holdco B Limited
Sainsbury Propco A Limited
Sainsbury Propco B Limited
Sainsbury Propco C Limited
Sainsbury Propco D Limited
Sainsbury’s Supermarkets Limited
Sainsbury’s Supermarkets Ltd
Selected Land And Property
Company
Sixth Sense Partnership Limited
Stamford Properties (Dorking)
Limited
Ten Fleet Place
Tesco Stores Limited
Vauxhall Storage Limited
Vyson
258
Director/
Proposed
Director
Charles
Butler
Current appointments
Previous appointments
Netplay TV Plc
Avocet Systems Limited
HCP High Yield Commercial
Property LLP
Gana Media Limited
MCHEX Holdings Limited
MCHEX Limited
Mobileworkflow Limited
Netplay TV (UK) Limited
Netplay TV Gaming Limited
Netplay TV Leisure Limited
Netplay TV Trustees Limited
Stream Telecommunications Limited
Netplay TV Mobile Limited
Netplay TV Broadcasting Limited
Netplay TV Marketing Services
Limited
Netplay TV Services Limited
WGS (Hamilton) LLP
The Estonian Property Opportunities
Fund LLP
Andrew Bull
Pluto Limited
John Le
Poidevin
AUB Investment Funds PCC
Limited
The AUB Pan Asian Investment
Fund Limited
Jumpman Gaming Limited
Safecharge International Group
Limited
JLP Associates Limited
35/37 Upper Montagu Street
Management Company Limited
Stride Gaming Plc
International Public Partnerships
Limited
Challenger Acquisitions Limited
BDO LLP
Etonminster Property Management
Limited
224 KHS General Partner Limited
Thomas
Teichman
SPARK Venture Management
Limited
SPARK Venture Management
Holdings Limited
SPARK Ventures Limited
SPARK Black Sheep Limited
Squawka Ltd
Elevate Platform Limited
Kriticalmass Limited
Hardlyever Limited
62 Dean Street Soho London
Limited
Quester Venture GP Limited
Quester Academic GP Limited
Querist Limited
Quester Venture Participations
Limited
Soho Capital LLP
Doctify Limited
The Garage, Soho Limited
Arem Foundation
Eve Snow Limited
Gresham House Strategic plc
Kobalt Music Group Limited
Mind Candy Limited
Moshi Monsters Music Limited
Spark Advisory Partners Limited
Spark Impact Limited
259
Director/
Proposed
Director
Current appointments
Previous appointments
David Brown
Belhaven Group Properties Limited
Belhaven Pubs Limited
Capital Pub Company Trading
Limited
Cloverleaf Restaurants Limited
G.K. Holdings No.1 Limited
Greene King Debt Acquisitions
Limited
Greene King Investments Limited
LFR Group Limited
Realpubs Developments Limited
Realpubs II Limited
Realpubs Limited
Rushmere Sports Club Limited
Sapphire Food North East No.1
Limited
Sapphire Food North West No.3
Limited
Sapphire Food South East No. 4
Limited
Sapphire Food South West No. 2
Limited
Sapphire Rural Destination No.5
Limited
The Capital Pub Company Limited
Sharon Baylay Indigo Blu Investments Ltd
ITE Group plc
Restore plc
Vega Technologies Ltd
BBC Corporation
2.
SENIOR MANAGERS
2.1
The following table lists the name, position and age of the Senior Managers:
Name
Age
Position
Mark Alper
Caroline Grange
41
35
Group Property Director
General Counsel
The business address of the Senior Managers is Third Floor, La Plaiderie Chambers, La Plaiderie,
St Peter Port, Guernsey, GY1 1WG.
The management expertise and experience of each Senior Manager is set out below.
2.2
Mark Alper – Group Property Director
Mark has worked for the Group since 2001 and has been responsible for its UK operations for the last
10 years. Mark has been involved with the development of all of the buildings within Stables Market
and headed the Camden Lock Village site assembly and planning process. Mark manages all aspects
of the development, operational business, banking and community/statutory liaison. Mark is a
Chartered Architect by profession and is a registered member of RIBA and ARB with a Master’s
Degree in Urban Regeneration and Business Real Estate Development and has over 16 years’
experience in property and business development in London.
260
2.3
Caroline Grange – General Counsel
Caroline joined the Group in March 2015 as General Counsel. Caroline oversees the legal affairs of
the Group and manages governance and regulatory compliance for the Board. Prior to joining the
Group, Caroline was a corporate lawyer for seven years at international law firm DLA Piper UK LLP.
She is admitted as a solicitor in England & Wales.
3.
TRANSACTIONS WITH DIRECTORS, PROPOSED DIRECTORS AND SENIOR
MANAGERS
3.1
No Director, Proposed Director or Senior Manager has or has had any interest in any transactions
which are or were unusual in their nature or conditions or are or were significant to the business of
the Group or any of its operating companies and which were affected by the Group or any of its
operating companies during the current or immediately preceding financial year or during an earlier
financial year and which remain in any respect outstanding or unperformed.
3.2
There are no outstanding loans or guarantees granted or provided by any member of the Group to or
for the benefit of any of the Directors, Proposed Directors or Senior Managers.
4.
CONFLICTS OF INTEREST
4.1
There are no actual or potential conflicts of interest between the Directors’ or Proposed Directors’
duties to the Company and their private interests or other duties.
4.2
There are no arrangements or understandings with major shareholders, customers, suppliers or others,
pursuant to which any Director, Proposed Director or Senior Manager has been selected as a member
of the administrative, management or supervisory body or senior management of the Company.
5.
DIRECTORS’, PROPOSED DIRECTORS’ AND SENIOR MANAGERS’ DISCLOSURES
5.1
Save as disclosed in this Part XII, during the last five years, no Director, Proposed Director or Senior
Manager has:
5.1.1 been convicted in relation to a fraudulent offence;
5.1.2 been associated with any bankruptcy, receivership or liquidation while acting in the capacity of
a member of the administrative, management or supervisory body or senior management of any
company;
5.1.3 been subject to any official public incrimination and/or sanction by statutory or regulatory
authorities (including designated professional bodies);
5.1.4 been disqualified by a court from acting as a member of the administrative, management or
supervisory bodies of any issuer or from acting in the management or conduct of the affairs of
any issuer;
5.1.5 been a partner in a partnership which, while he or she was a partner or within 12 months of his
ceasing to be a partner, was put into compulsory liquidation or administration or which entered
into any partnership or voluntary arrangement, or had a receiver appointed over any partnership
asset;
5.1.6 had a receiver appointed with respect to any assets belonging to him or her; or
5.1.7 been a director of a company which has been placed in receivership, compulsory liquidation,
creditors’ voluntary liquidation or administration or which entered into any company voluntary
arrangement or any composition or arrangement with its creditors generally or any class of
creditors, at any time during which he or she was a director of that company or within
12 months after his/her ceasing to be a director.
261
5.2
In 1992, Thomas Teichman was appointed to the board of directors of Town and County Holdings
Limited by the Bank of Montreal Capital Markets Limited as a non-executive board representative.
He resigned from the board within three months after joining and Town and County Holdings Limited
subsequently went into receivership and then administration within 12 months after he resigned from
the board.
5.3
In January 2011, Charles Butler was a director of Mobile Workflow Limited, Netplay TV (UK)
Limited, Netplay TV Gaming Limited, Netplay TV Trustees Limited, and Stream
Telecommunications Limited when each of them entered into voluntary dissolution.
5.4
In February 2011, Charles Butler was a director of MCHEX Limited and MCHEX Holdings Limited
when each of them entered into voluntary dissolution.
5.5
In June 2011, Neil Sachdev was a director of Oxford Road Land Limited when it entered into
voluntary dissolution.
5.6
In July 2012, Charles Butler was a director of Netplay TV Mobile Limited when it entered into
voluntary dissolution.
5.7
In April 2013, Thomas Teichman was a director of the Arem Foundation when it entered into
voluntary dissolution.
5.8
In September 2013, Charles Butler was a director of Gana Media Limited when it entered into
voluntary dissolution.
5.9
In September 2014, Andrew Bull was a director of Pluto Limited when it entered into voluntary
dissolution.
5.10 In January 2016, Neil Sachdev was a director of Sixth Sense Partnership Limited when it entered into
voluntary dissolution.
6.
CORPORATE GOVERNANCE
6.1
UK Corporate Governance Code
6.1.1 The Board is committed to the highest standards of corporate governance. Save as set out in
this paragraph 6, as of the date of this document, and on and following Main Market
Admission, notwithstanding that it is not required to as a Company admitted to the standard
listing segment of the Official List, the Board intends to comply with the requirements of the
UK Corporate Governance Code (“UK Corporate Governance Code”). The Company will
report to its Shareholders on its compliance with the UK Corporate Governance Code.
6.1.2 The UK Corporate Governance Code recommends that, on appointment, the chairman of a
company with a premium listing on the Official List should meet the independence criteria set
out in the UK Corporate Governance Code. The independent Non-Executive Chairman is Neil
Sachdev.
6.1.3 The UK Corporate Governance Code recommends that at least half the board of directors of a
UK listed company, excluding the Chairman, should comprise Non-Executive Directors
determined by the board to be independent in character and judgement and free from
relationships or circumstances which may affect, or could appear to affect, the director’s
judgement. As at the date of this document, the Board comprises two Executive Directors
(Charles Butler and Andrew Bull) and two Non-Executive Directors (John Le Poidevin and
Thomas Teichman), excluding the Chairman. It is intended that, with effect from 1 March
2016, David Brown will replace Andrew Bull as Chief Financial Officer and will act as an
Executive Director of the Company. The Company intends to appoint Sharon Baylay on
1 February 2016 as an independent Non-Executive Director. From 1 February 2016, Georg
Bucher will be appointed as an Executive Director. From the effective date of these
appointments the Board will comprise three Executive Directors (Charles Butler, David Brown
262
and Georg Bucher) and three Non-Executive Directors (John Le Poidevin, Thomas Teichman
and Sharon Baylay), excluding the Chairman. The UK Corporate Governance Code further
recommends that the board of directors of a company should appoint one of the Non-Executive
Directors to be the Senior Independent Director to provide a sounding board for the Chairman
and to serve as an intermediary for the other directors when necessary. The Senior Independent
Director should be available to shareholders if they have concerns which contact through the
normal channels of the Chairman or the Chief Executive Officer has failed to resolve or for
which such contact is inappropriate. John Le Poidevin is the Senior Independent Director and
is available to Shareholders.
6.1.4 Following Main Market Admission, the Board will meet between eight and 12 times a year or
as and when required to review, formulate and approve the Group’s strategy, budgets and
corporate actions and to oversee the Group’s progress towards its goals. As envisaged by the
UK Corporate Governance Code, the Board has established three committees: an Audit
Committee, a Nomination Committee and a Remuneration Committee. If the need should arise,
the Board may set up additional committees as appropriate.
6.2
Audit Committee
The Audit Committee is chaired by John Le Poidevin, and its other members are Neil Sachdev and
Thomas Teichman, all three of whom are independent. The Audit Committee is expected to meet
formally at least three times a year and otherwise as required. It has the responsibility for ensuring
that the financial performance of the Group is properly reported on and reviewed, and its role includes
monitoring the integrity of the financial statements of the Group (including annual and interim
accounts and announcements), reviewing internal control and risk management systems, reviewing
any changes to accounting policies, reviewing and monitoring the extent of non-audit services
undertaken by external auditors and advising on the appointment of external auditors. The Audit
Committee gives due consideration to laws and regulations, the provisions of the UK Corporate
Governance Code and the requirements of the Listing Rules. The Audit Committee Chairman will be
available at annual general meetings of the Company to respond to questions from Shareholders. The
Audit Committee has taken appropriate steps to ensure that the Company’s auditors are independent
of the Company and obtained written confirmation from the Company’s auditors that they comply
with guidelines on independence issued by the relevant accountancy and auditing bodies.
6.3
Remuneration Committee
The Remuneration Committee is chaired by Thomas Teichman and its other members are John Le
Poidevin and Neil Sachdev, all three of whom are independent. The Remuneration Committee is
expected to meet not less than twice a year and otherwise as required. The Remuneration Committee
recommends what policy the Company should adopt on executive remuneration, determines the levels
of remuneration for each of the executive directors and of the chairman and recommends and monitors
the remuneration of members of senior management. The Remuneration Committee will also generate
an annual remuneration policy and practices report to be approved by the Shareholders at the annual
general meeting. The Remuneration Committee, within the terms of the agreed policy, will determine
the total individual remuneration package of each Executive Director, the Chairman and other
designated Senior Managers. The Remuneration Committee will make recommendations to the board
on the remuneration arrangements for the Executive Directors and the Chairman. The Remuneration
Committee will oversee the remuneration policy of the Group. No Director or Senior Manager will be
allowed to partake in any discussions as to his or her own remuneration.
6.4
Nomination Committee
The Nomination Committee is chaired by Neil Sachdev and its other members are John Le Poidevin
and Thomas Teichman, all three of whom are independent. The Nomination Committee is expected
to meet not less than twice a year and otherwise as required. The Nomination Committee is
responsible for assisting the Board in the formal selection and appointment of directors. It will
263
consider potential candidates and will recommend appointments of new directors to the Board. The
appointments will be based on merit and against objective criteria, including the gender and the time
available to devote to the position of, the potential director. It is responsible for carrying out an annual
performance evaluation of the Board, its committees and individual directors.
7.
MODEL CODE
The Company has adopted a code of securities dealings in relation to the Ordinary Shares which is
based on, and is at least as rigorous as, the Model Code as published in the Listing Rules. The code
applies to the Directors, the Proposed Directors and other relevant employees of the Company.
8.
RELATIONSHIP WITH MAJOR SHAREHOLDER
For information about the Company’s relationship with the Major Shareholder, see paragraph 13 of
Part XV of this document.
9.
TAKEOVER CODE
The Takeover Code is issued and administered by the Takeover Panel. The Company will, following
Main Market Admission, continue to be subject to the Takeover Code. For information about the
Takeover Code, see paragraph 23 of Part XV of this document.
264
PART XIII
VALUATION REPORT
Jones Lang LaSalle Limited
30 Warwick Street London W1B 5NH
+44 (0)20 7493 4933
jll.co.uk
Market Tech Holdings Limited
Third Floor, La Plaiderie
La Plaiderie Chambers
St Peter Port
Guernsey
GY1 1WG
For the attention of: The Directors
Your ref
Project Grand Canal
Our ref
CL/479500LON
Project Number 1000288180
Shore Capital & Corporate Limited (Joint Financial Adviser)
Bond Street House
14 Clifford Street
London, W1S 4JU
For the attention of: Toby Gibbs
Direct line
0207 852 4879
[email protected]
Shore Capital Stockbrokers Limited (Joint Broker)
Bond Street House
14 Clifford Street
London, W1S 4JU
For the attention of: Toby Gibbs
Canaccord Genuity Limited (Joint Financial Adviser and Joint Broker)
88 Wood Street
London, EC2V 7QR
For the attention of: Chris Connors
Private & Confidential
21 January 2016
Dear Sirs,
Valuation of the Freehold, Leasehold and Part Freehold and
Part Leasehold interests in the Properties
Introduction
In accordance with our signed engagement letter with the Market Tech Holdings Limited (the “Company”),
dated 5 October 2015, we, Jones Lang LaSalle Limited, Chartered Surveyors, have considered the properties
referred to in the attached schedule (the “Schedule”), in order to advise you of our opinion of the Market
Value (as defined below) as at 30 September 2015 (or in the case of 49 Chalk Farm Road, as at 21 October
2015), of the Freehold (“F/H”), Leasehold (“L/H”) or Part Freehold, Part Leasehold (“Part F/H, Part L/H”)
interests in each of these properties (the “Properties” and each a “Property”), as appropriate.
The effective valuation date is 30 September 2015 (or in the case of 49 Chalk Farm Road, as at 21 October
2015).
265
Purpose of Valuation
We understand that this valuation report and schedule (together, the “Summary Valuation Report”) are
required to confirm the Market Value of certain real estate assets of the Company as at 30 September 2015.
Furthermore this Summary Valuation Report will be included in the prospectus (the “Prospectus”) to be
published in connection with admission of the Company’s ordinary shares to the standard listing segment of
the Official List of the Financial Conduct Authority and to trading on the London Stock Exchange’s main
market for listed securities (the “Step Up”). We are aware that the Company, the directors of the Company
and the Joint Financial Advisers will rely upon the contents of this Summary Valuation Report in connection
with the Step-Up.
We can confirm that we have prepared our Valuation as independent External Valuers as defined in the RICS
Valuation – Professional Standards, January 2014, and are qualified for the purposes of the valuations. The
valuation accords with the RICS Valuation – Professional Standards, January 2014 and the International
Valuation Standards.
We currently value the Properties on a bi-annual basis on behalf of the Company. We confirm that there is
no conflict of interest in undertaking this instruction.
Basis of Valuation and Assumptions
We set out below the basis and assumptions we have used in preparing our valuation followed by a summary
of the aggregate values of the Freehold and Leasehold and Part Freehold and Part Leasehold interests in the
Properties described in the attached Schedule.
We confirm that the value of the Properties has been assessed on the basis of Market Value in accordance
with the appropriate sections of both the current Practice Statements (“PS”), and United Kingdom Practice
Statements (“UKPS”) contained within the RICS Valuation – Professional Standards, January 2014 (the
“Red Book”). This is an internationally accepted method of valuation in accordance with the International
Valuation Standards (“IVS”).
The definition of Market Value as defined in the IVS Framework paragraph 29 is “the estimated amount for
which as asset or liability should exchange on the valuation date between a willing buyer and a willing seller
in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably,
prudently and without compulsion.”
Our valuation has also been undertaken in accordance with the relevant provisions of the Prospectus
Directive (2003/71/EC) and related guidance and has been undertaken by us as External Valuers as defined
in the RICS Valuation Standards. The Properties are held as investments and developments and we have
therefore used the appropriate property investment and development valuation methodology to calculate the
Market Values.
Material Change
We hereby confirm that as at the date of this Summary Valuation Report:
•
we have not been informed by the Company of any material change since 30 September 2015, in any
matter relating to any specific Property covered by our Summary Valuation Report which in our
opinion would have a material effect on the value as at today’s date;
•
in relation to market conditions and movements in the property markets in which the properties
covered by our Summary Valuation Report are located, we do not consider that the movement in
respect of the Properties constitutes a material change since 30 September 2015.
Valuation approach
We have utilised three valuation approaches.
The income capitalisation method is based on capitalising the net income stream at an appropriate yield. In
establishing the net income stream, we have reflected the current rent (gross rent) payable to lease expiry, at
266
which point the valuer has assumed that each unit of occupation will be let at their opinion of Market Rent.
The valuer has made allowances for voids and rent free periods where appropriate, as well as deducting
non-recoverable costs where applicable. The comparable method is used to select the appropriate yield,
which has been adjusted for the location of the building, specification, tenant credit quality, lease terms and
lot size amongst other factors.
The residual appraisal method is adopted in respect of properties in the course of development or where
potentially a development is anticipated. In the case of the latter, a combination of the income capitalisation
method and residual method may be applied. The residual method involves the estimation of capital outlays
and construction costs, development costs, and anticipated sales income which are estimated to arrive at a
series of net cash flows that are then discounted over the projected development and marketing periods.
Allowances for developer’s profit and finance costs during construction and marketing periods are reflected,
which cover specific development risks such as planning etc.
Valuation
On the basis outlined in this Summary Valuation Report, we are of the opinion that the aggregate of the
individual Market Values, as at 30 September 2015, of the Freehold, Leasehold and Part Freehold,
Part Leasehold interests, subject to and with the benefit of various occupational leases, as summarised in the
attached Schedule, but subject to the Special Assumption stated in this report, is:
Property Address
Market Value
Stables Market, Chalk Farm Road, London NW1 8AH
£239,600,000
Camden Lock Village, Hawley Warf, London NW1
£272,500,000
Camden Lock Market, Camden High Street, London NW1
£102,800,000
Union Street Market, Camden High Street London NW1
£29,450,000
10 Jamestown Road, Camden, London NW1 7BY
£26,300,000
31 Kentish Town Road, Camden NW1
£10,300,000
Camden Wharf, 28 Jamestown Road, Camden, London, NW1 7BY £48,300,000
The Interchange, Oval Road, Camden Lock, London NW1 7DZ
£55,300,000
251-259, Camden High Street, London NW1 7BU
£11,100,000
1-11 Hawley Crescent, Camden Town, London NW1 8NP
£28,000,000
Utopia Village, 7 Chalcot Rd, London NW1 8LH
£43,000,000
49 Chalk Farm Rd, London NW1 8AN*
£5,000,000
––––––––––––
Total Aggregate Market Value
£871,650,000
*
Tenure
Part F/H Part L/H
Part F/H Part L/H
F/H
F/H
F/H
F/H
F/H
F/H
F/H
F/H
F/H
F/H
––––––––––––
49 Chalk Farm Rd, London NW1 8AN was acquired after 30 September 2015 and has therefore been valued at the date of
inspection, as at 21 October 2015.
There are no negative values to the report.
On a like for like basis, the Market Values are consistent with valuation outcomes carried out for the purposes
of the accounts for the Company for the financial year ended 31 March 2015.
Below we summarise the total aggregate values by Tenure:
Tenure
Market Value
F/H
Part F/H, Part LH
£359,550,000
£512,100,000
––––––––––––
£871,650,000
Total Aggregate Market Value
––––––––––––
267
Below we include a comparison of Market Values as at 31 March 2015 and 30 September 2015:
Property Address
Stables Market, Chalk Farm Road, London NW1 8AH
Camden Lock Village, Hawley Warf, London NW1
Camden Lock Market, Camden High Street, London NW1
Union Street Market, Camden High Street London NW1
10 Jamestown Road, Camden, London NW1 7BY
31 Kentish Town Road, Camden NW1
Camden Wharf, 28 Jamestown Road, Camden,
London, NW1 7BY
The Interchange Building, Oval Road, Camden Lock,
London NW1 7DZ
251-259, Camden High Street, London NW1 7BU
1-11 Hawley Crescent, Camden Town, London NW1 8NP
Utopia Village, 7 Chalcot Rd, London NW1 8LH
49 Chalk Farm Rd, London NW1 8AN
Change in
Market Value
Principal reason
for change in value
+£20,300,000
+£2,500,000
+£11,650,000
+£2,950,000
£2,100,000
£0
Yield compression
Development progress
Development progress
Development progress
Improved residential sales rate
No change
+£300,000
Yield compression
+£1,550,000
+£600,000
n/a
n/a
n/a
Yield compression
Yield compression
n/a
n/a
n/a
Realisation Costs
Our Valuation is exclusive of VAT and no allowances have been made for any expenses of realisation nor for
taxation which might arise in the event of a disposal of any Property.
Development Summary
We have valued the land component of Camden Lock Village via the residual appraisal method, the approach
to which is discussed above. In doing so, we have adopted a market-based approach to the various inputs we
have adopted, which results in headline summary figures of:
Camden Lock Village
Headline Summary Figures
Net Realisation
Total Costs
Land Acquisition
Core Construction Costs
Other Costs (Sec 106, Contingency, Professional Fees, Marketing and
Letting and Finance)
Developer’s Profit (£)
Developer’s Profit (%)
£606,419,664
£516,101,805
£288,076,992
£156,237,501
£71,787,313
£90,317,859
17.5% Profit on Cost
Assumptions and Sources of Information
An assumption is stated in the Glossary to the Red Book to be a “supposition taken to be true”
(“assumption”). Assumptions are facts, conditions or situations affecting the subject of, or approach to, a
valuation that, by agreement, need not be verified by a valuer as part of the valuation process. In undertaking
our valuations, we have made a number of assumptions and have relied on certain sources of information.
We believe that the assumptions we have made are reasonable, taking into account our knowledge of the
Properties, and the contents of reports made available to us. However, in the event that any of these
assumptions prove to be incorrect then our valuations should be reviewed. The assumptions we have made
for the purposes of our valuations are referred to below.
We have made the following Special Assumption as agreed with the Company:
The occupational lease to Gilgamesh Camden Limited, dated 17 January 2014, specifies a base rent of
£800,000 per annum. We draw your attention to the superior headlease between Camden Market Estate
Holdings Limited (landlord) and Triangle Upper Limited (tenant), for a term of 75 years from 14 August
268
2008, at a minimum headrent of £750,000 per annum. Regardless of the level of the underlease rent for
Building C, the headlease payaway results in a material dilution of this income.
We have valued Stables Market on the Special Assumption that a sale of the freehold interest in the property
would benefit from an assignment of the superior headlease in respect of Building C (excluding the ground
floor which is held under a separate interest) between Camden Market Estate Holdings Limited and Triangle
Upper Limited and that a prospective purchaser, as the freeholder, would effectively collect 100 per cent. of
the rent derived from an underlease (should an assignment not occur, this could have a material impact on
value).
We have assumed in our valuations that any other such intermediary leasehold interests in existence held by
related companies to the Company would be assigned to the purchaser of the property upon a sale in order
to achieve a price equivalent to our reported values.
Inspections
We inspected the Properties contained within the Schedule between 4 August 2015 and 30 September 2015.
The acquisition of 49 Chalk Farm Road, London NW1 8AN completed after the 30 September 2015 and this
property was therefore inspected on 21 October 2015.
Information
We have made an assumption that the information which the Company and its professional advisers have
supplied to us in respect of the Properties is both full and correct.
It follows that we have made an assumption that details of all matters likely to affect value within their
collective knowledge such as prospective lettings, rent reviews, outstanding requirements under legislation
and planning decisions have been made available to us and that the information is up to date.
Title
We have had sight of draft Certificates of Title, in final form, for the Properties, prepared by DLA Piper UK
LLP. Although we understand that the Certificates are in final form, should they change we reserve the right
to amend our valuations accordingly. We have considered the available information in the valuation of the
Properties.
Floor Areas
We have been provided with floor areas by the Company and have assumed that these are gross or net and
have been prepared in accordance with the RICS’ Code of Measuring Practice. As agreed, we have relied
upon these floor areas for the purposes of this valuation exercise. For the avoidance of doubt, we have not
measured any part of the property or undertaken check measurements.
Plant and Machinery
Landlords’ fixtures such as lifts, escalators, air-conditioning and other normal service installations have been
treated as an integral part of each Property and are included within our valuations. Plant and machinery,
tenant’s fixtures and specialist trade fittings have been excluded from our valuations.
No specialist tests have been carried out on any of these service systems and for the purposes of our
valuations, we have assumed that all are in good working order and in compliance with any relevant statute
bye-law or regulation.
Environmental Investigations and Ground Conditions
We were not instructed to carry out site surveys or environmental assessments nor have we investigated any
historical records, to establish whether any land or premises are or have been, contaminated. Unless we have
been provided with information to the contrary, we have assumed that the Properties are not, nor are likely
269
to be, affected by land contamination and that there are no ground conditions which would affect the present
or future use of the Properties.
We were not instructed to carry out structural surveys of the Properties, but we have reflected any apparent
wants of repair in our opinion of the value as appropriate. Properties have been valued on the basis of the
Company’s advice. Save where we have been specifically advised to the contrary, we have assumed that no
deleterious materials have been used in the construction of any of the subject buildings.
Planning
We have had sight of the Certificates of Title, in final form prepared by DLA Piper UK LLP, and have made
verbal Town Planning enquiries only. We understand that there are no adverse Town Planning, Highway or
other schemes or proposals which would materially impact our opinion of value.
We have seen a summary of the planning consents in the Certificates of Title, prepared by DLA Piper UK
LLP, and have assumed that the Properties have been erected and are being occupied and used in accordance
with all necessary consents and that there are no outstanding statutory notices that would materially impact
our opinion of value. We have assumed that all buildings comply with all statutory and Local Authority
requirements including building, fire and health and safety regulations.
Tenure and Tenancies
We have had sight of the draft Certificates of Title in final form, prepared by DLA Piper UK LLP.
We have read copies of the leases and have relied on the tenancy summaries provided by the Company for
the purposes of our valuation.
We have not conducted credit enquires into the financial status of any of the tenants. However, in undertaking
our valuations we have reflected our understanding of the market perception of the financial status of the
tenants. We have also assumed that each tenant is capable of meeting its leasehold obligations and that there
are no undisclosed breaches of covenant.
Responsibility
This Valuation and the Schedule are provided to the addressees as set out on the first page of this certificate.
This Summary Valuation Report forms part of the Prospectus and may be referred to in any supplementary
prospectus issued by the Company, and we hereby give our consent for our Summary Valuation Report to be
included in the Prospectus. The addressees of the Summary Valuation Report may rely on it, as may investors
in Ordinary Shares.
Neither the whole nor any part of this Summary Valuation Report nor any reference thereto may be included
in any other published document, circular or statement, nor published in any way without our written
approval of the form and context in which it is to appear. For the avoidance of doubt, such approval is
required whether or not Jones Lang LaSalle Limited are referred to by name and whether or not the contents
of our Summary Valuation Report are combined with other reports. Such approval shall not be unreasonably
withheld. Notwithstanding the foregoing, the contents and data contained in this Summary Valuation Report
may be cited and summarised elsewhere in this Prospectus. Notwithstanding any other provision contained
within this Summary Valuation Report, this Summary Valuation Report may also be relied upon by the
Company and may be disclosed in any litigation or regulatory enquiry or investigation or action in
connection with the Prospectus or the Step-Up.
270
For the purposes of Prospectus Rule 5.5.3R(2)(f), Jones Lang LaSalle is responsible for this Summary
Valuation Report and accepts responsibility for the information contained in this Summary Valuation Report
and confirms that, to the best of its knowledge (having taken all reasonable care to ensure that such is the
case), the information contained in this Summary Valuation Report is in accordance with the facts and
contains no omissions likely to affect its import.
Yours faithfully,
Christian Luft MRICS
Director
For and on behalf of
Jones Lang La Salle Limited
271
Schedule of Properties
Property Address
Stables Market, Chalk Farm Road, London NW1 8AH
Camden Lock Village, Hawley Warf, London NW1
Camden Lock Market, Camden High Street, London NW1
Union Street Market, Camden High Street London NW1
10 Jamestown Road, Camden, London NW1 7BY
31 Kentish Town Road, Camden NW1
Camden Wharf, 28 Jamestown Road, Camden, London, NW1 7BY
The Interchange Building, Oval Road, Camden Lock, London NW1 7DZ
251-259, Camden High Street, London NW1 7BU
1-11 Hawley Crescent, Camden Town, London NW1 8NP
Utopia Village, 7 Chalcot Rd, London NW1 8LH
49 Chalk Farm Road, Camden, London NW1
272
PART XIV
TAXATION
1.
TAXATION
This section outlines the general UK and Guernsey tax considerations for UK resident and Guernsey resident
individuals and corporate shareholders relating to the payment of dividends by the Company on Ordinary
Shares, and on future sales by the Shareholders of their Ordinary Shares in the Company.
The following information is intended as a general guide only based on current UK and Guernsey tax
legislation, including published HMRC practice, as it applies to holding or disposing of Ordinary Shares. It
is intended only for Shareholders who are resident and domiciled in the UK or Guernsey for tax purposes
and who will hold Ordinary Shares as an investment and who will be the absolute beneficial owners of them.
Non-UK resident and non-UK domiciled Shareholders should consult their own professional advisers.
The information is given by way of general summary only and does not purport to be a comprehensive
analysis of the tax consequences applicable to Shareholders and may not apply to certain classes of
Shareholders who are subject to special rules, such as dealers in securities, broker-dealers, insurance
companies and collective investment schemes. In addition, except where the position of non-UK residents is
expressly referred to, the following statements relate solely to Shareholders who are either resident, or in the
case of individuals, domiciled in the UK or Guernsey for tax purposes.
The following comments are prepared on the basis that the Company is resident in Guernsey and does not
operate from a permanent establishment in the UK; is not managed and controlled in the UK; does not
presently trade from within the UK; is not presently liable to UK Corporation Tax; and is not required to be
registered for UK Value Added Tax.
Prospective Shareholders who are in any doubt as to their tax position, or who are subject to tax in a
jurisdiction other than the UK or Guernsey, should consult their professional adviser without delay.
1.1
UK Taxation
The Company
The policy of the Group will be to continue to manage and operate each of the Group companies in a
way that is intended to ensure that it has a taxable presence only in the jurisdiction in which each
Group company is incorporated and that it has no taxable permanent establishment or other taxable
presence in any other jurisdiction, with the exception of UK real estate owned by non-UK tax resident
companies which will be subject to UK taxation. It is the intention of the Directors and the Proposed
Directors to continue to conduct the affairs of the Company such that the central management and
control of the Company is exercised in Guernsey so that the Company has no UK taxable presence.
1.1.1 Taxation of dividends
Individuals resident and domiciled in the UK
Individual Shareholders receiving a dividend also receive a notional tax credit in respect of the
dividend equal to one ninth of the amount of the dividend paid (or ten per cent. of the combined
amount of the tax credit and the dividend). The amount of the dividend received by such an
individual Shareholder and the associated tax credit form part of the Shareholder’s income for
UK tax purposes.
The rate of income tax on dividends is ten per cent. for individuals not liable to tax at a rate
above the basic rate. For such individuals, the tax credit therefore discharges their income tax
liability and no further tax is due. Individual Shareholders who are subject to the higher rate of
income tax are liable to tax on dividends at the rate of 32.5 per cent. After taking account of
the tax credit, such Shareholders will have further tax to pay equal to 22.5 per cent. of the
273
combined amount of the dividend and the tax credit, or 25 per cent. of the net dividend paid.
Individual Shareholders who are subject to the additional rate of income tax are liable for tax
on dividends at the rate of 37.5 per cent. After taking account of the tax credit, such
Shareholders will have further tax to pay equal to 27.5 per cent. of the combined amount of
dividend and the tax credit or approximately 30.56 per cent. of the net dividend paid.
Shareholders who are not liable to UK tax on dividends, including pension funds and charities,
are not entitled to claim repayment of the tax credit (or any part of it).
The Finance Act 2015 announced the abolition of the dividend tax credit from April 2016 and
the introduction of a new tax-free dividend allowance of £5,000 per annum. The rates of
income tax on dividends will be 7.5 per cent. for individuals not liable to tax at a rate above the
basic rate, 32.5 per cent. for individuals subject to the higher rate of income tax and
38.1 per cent. for individuals subject to the additional rate of income tax.
Companies only resident in the UK
Overseas dividends received by a UK resident corporate shareholder that is not a small
company will be exempt from UK corporation tax subject to certain conditions. A small
company is defined by reference to the European Commission’s Recommendation EC
2003/361/EC which states a company is ‘small’ in an accounting period if in that period its
number of employees does not exceed 50 and, either its turnover or balance sheet total does not
exceed €10 million. Companies should seek their own tax advice on the taxation of dividends
from the Company. If the distribution is received by a company which is not ‘small’, then for
the distribution to be exempt it must fall within one of five exempt classes defined in the UK
tax legislation. Given the broad nature of the exemptions, dividends received by most UK
corporate shareholders should qualify for exemption from UK taxation.
UK pension funds and charities are generally exempt from tax on dividends that they receive.
1.1.2 Capital Gains
For the purposes of UK taxation of chargeable gains, the purchase of Ordinary Shares will be
regarded as an acquisition of a new holding in the Company.
A disposal of Ordinary Shares by a Shareholder may, depending upon the Shareholder’s
circumstances, give rise to a liability to UK taxation on chargeable gains.
Individuals resident and domiciled in the UK
Where an individual Shareholder disposes of Ordinary Shares at a gain, capital gains tax will
be payable to the extent that the gain (together with any other gains arising in that year) exceeds
the annual exemption (£11,100 for 2015/16) and after taking account of any capital losses (and
other reliefs or exemptions) available to the individual.
For individuals, capital gains tax will be charged at 18 per cent. where the individual’s taxable
income and gains are less than the upper limit of the income tax basic rate band (for 2015/16:
£31,785, for 2016/17: £32,000 and for 2017/18: £32,400). To the extent that any chargeable
gains when aggregated with income arising in a tax year exceed the upper limit of the income
tax basic rates band, capital gains tax will be charged at 28 per cent.
Where a Shareholder disposes of the Ordinary Shares at a loss, the loss should be available to
offset against other current year gains or carried forward to offset against future gains.
Companies
Where a Shareholder is within the charge to corporation tax, a disposal of Ordinary Shares may
give rise to a chargeable gain (or allowable loss) for the purposes of UK corporation tax,
depending on the circumstances and subject to any available exemption or relief. Corporation
274
tax is charged on chargeable gains at the rate applicable to that company (20 per cent. for the
financial year 1 April 2015 to 31 March 2016). Indexation allowance may reduce the amount
of chargeable gain that is subject to corporation tax, but may not create or increase any
allowable loss.
Where a Shareholder disposes of the Ordinary Shares at a loss, the loss should be available to
offset against other current year gains or carried forward to offset against future gains. In
certain circumstances, the loss may be available to offset against taxable income in the current
year (depending upon, inter alia, the circumstances of the Company and the Shareholder).
Companies should seek their own tax advice.
1.1.3 Stamp Duty and Stamp Duty Reserve Tax
Stamp duty should not be chargeable in respect of a transfer of Ordinary Shares held in CREST,
provided there is no instrument of transfer of the Ordinary Shares.
Stamp duty would generally be chargeable in respect of a transfer of Ordinary Shares for which
there is an instrument of transfer, at the rate of 0.5 per cent. of the amount or value of the
consideration given for the transfer, unless the instrument is executed outside the UK and is
kept outside the UK and does not relate to any property situated, or to any matter or thing done
or to be done in the UK. Any stamp duty will normally be the liability of the purchaser or the
transferee of the Ordinary Shares.
Stamp Duty Reserve Tax (“SDRT”) should not be chargeable in respect of any agreement to
transfer Ordinary Shares as they are issued by a company incorporated outside the UK and such
shares will not qualify as “chargeable securities” for the purpose of the tax, as the Ordinary
Shares are not registered in a register kept in the UK by or on behalf of the Company nor paired
with shares issued by a body corporate incorporated in the UK.
1.1.4 Inheritance Tax
Inheritance tax may be payable where an individual dies (wherever they are domiciled) holding
Ordinary Shares or where certain lifetime gifts are made of Ordinary Shares by individuals or
certain trustees.
Under current UK law, the main occasions on which IHT is charged are on the death of the
Shareholder, on any gifts made during the seven years prior to the death of the Shareholder, and
on certain lifetime transfers, including transfers to trustees or appointments out of trusts to
beneficiaries, save in very limited circumstances. Special rules also apply to close companies
and trustees of settlements.
The inheritance tax rules are complex and Shareholders should consult an appropriate
professional adviser in any case where they think the rules may be relevant.
1.1.5 Section 13 Taxation of Chargeable Gains Act 1992 (“TCGA”)
The attention of UK individual investors resident and domiciled in the UK and UK tax resident
companies is drawn to the provisions of Section 13 TCGA under which, in certain
circumstances, a portion of capital gains made by the Company can be attributed to an investor
who holds, alone or together with persons connected with him, more than 25 per cent. of the
Ordinary Shares. The capital gains attributed to the investor may (in certain circumstances, and
subject to certain exemptions not applying) be liable to UK tax on capital gains in the hands of
the investor. Investors should seek their own tax advice if, together with persons connected with
them, they hold 25% or more of the Ordinary Shares in the Company.
275
1.2
Guernsey Taxation
The Company
The Company is resident for tax purposes in Guernsey and is subject to the company standard rate of
income tax in Guernsey, currently at zero per cent. provided the income of the Company does not
include: (i) income from banking, custody services, fiduciary services, domestic insurance business,
domestic insurance broking, insurance management and fund administration (subject to tax at
10 per cent.); or (ii) income from trading activities regulated by the Office of the Director General of
Utility Regulation, income from the ownership of land and buildings situated in Guernsey, income
from retail business carried on in Guernsey generating a profit of more than £500,000 per year and
income from the importation and supply of hydrocarbon oil and gas (subject to tax at 20 per cent.). It
is not intended that the income of the Company will derive from any of these sources.
There is an obligation on the Company, when it makes distributions to Guernsey resident “beneficial
members”, to withhold and pay over tax at a rate of up to 20 per cent. on behalf of the relevant
Shareholder to the Director of Income Tax. The liability to account for tax from the Company’s
distributions arises where the beneficial member is resident in Guernsey for Guernsey tax purposes.
Provided the beneficial member is not resident in Guernsey, then the Company’s distributions can be
paid free of withholding tax.
The Company will have a reporting requirement to file returns with the Director of Income Tax for
distributions to Guernsey residents.
Shareholders
Shareholders who are resident in Guernsey, Alderney or Herm will incur Guernsey income tax on any
dividends paid to them on Ordinary Shares. The Company will be required to treat any such dividend
to a Guernsey resident beneficial member as being declared gross but paid net, and to pay the
appropriate tax on the Shareholder’s behalf to the States of Guernsey. Shareholders resident outside
Guernsey will not be subject to any tax in Guernsey in respect of, or in connection with, the
acquisition, holding or disposal of any Ordinary Shares owned by them.
Stamp duty
No stamp duty is chargeable in Guernsey on the issue, or repurchase of shares in the Company.
Tax Information Reporting Agreements
The Company may be subject to the Foreign Account Tax Compliance Act (“FATCA”). In 2013, the
States of Guernsey signed an inter-governmental agreement with the United States (“Guernsey –
US IGA”) concerning the implication of FATCA. The IGA provides details of the mechanism by
which Guernsey-based entities will provide disclosure details in respect of certain investors in the
Company who are residents or citizens of the US. The Guernsey – US IGA is implemented through
Guernsey’s domestic legislation.
The Company reserves the right to request from any investor or potential investor such information as
is deemed necessary to comply with FATCA and any obligations arising under the related IGA.
Guernsey has announced that it will become an “Early Adopter” of the Common Reporting Standard
(CRS) and this will be implemented from 1 January 2016. As a result, further similar agreements with
other jurisdictions have been executed, and are expected to be executed in the future, and the
Company reserves the right to request from any investor or potential investor such information as is
deemed necessary to comply not only with the existing inter-governmental agreements referred to
above but any similar agreements relating to automatic exchange of information.
276
PART XV
ADDITIONAL INFORMATION
1.
PERSONS RESPONSIBLE
The Company, the Directors and the Proposed Directors, whose names appear in Part VI, accept
responsibility for the information contained in this document. To the best of the knowledge of the Directors,
the Proposed Directors and the Company (who have taken all reasonable care to ensure that such is the case)
the information contained in this document is in accordance with the facts and does not omit anything likely
to affect the import of such information. All the Directors and the Proposed Directors accept individual and
collective responsibility for compliance with the Prospectus Rules.
2.
THE COMPANY
2.1
The Company was incorporated as a company limited by shares in Guernsey under the Companies
Law on 23 October 2014 with the name Market Tech Holdings Limited and with registered number
59208.
2.2
The principal legislation under which the Company operates and under which the Ordinary Shares
were created is the Companies Law and the ordinances and regulations made thereunder. The liability
of the Company’s members is limited.
2.3
The Company is domiciled in Guernsey. The Company’s registered office and principal place of
business is at Third Floor, La Plaiderie Chambers, La Plaiderie, St Peter Port, Guernsey, GY1 1WD.
The Company’s telephone number is +44 (0) 1481 729 002.
2.4
The principal activities of the Group are the provision of property investment, including management
and market operation services and e-commerce services.
3.
SUBSIDIARIES
The Company is the holding company of the Group. The following table contains details of the Company’s
significant subsidiaries:
Company name
Principal activity
Crowndeal Services Limited
Market Tech UK Limited
Tecrange Services Limited
Delinik Trading Limited
Fiver London Limited
BrightLogic Limited
StuccoMedia Limited
Glispa Global Group Limited
Glispa Holdings GmbH
Glispa GmbH
Glispa Israel Ltd
Holding company
IP owner
IP owner
Holding company
Online website services
Holding company
Online website services
Holding company
Holding company
Online marketing service
Operational company providing
services to Glispa GmbH
AIG refinance vehicle
Holding company
Holding company
Landlord & property owner
Leases residential levels
Landlord & property owner
MTH Investments Limited
Divanyx Investments Limited
Korey Investments Limited
Anise Development Limited
Anise Residential Limited
Thistle Properties Limited
277
Country of
incorporation
Percentage
ownership
(direct and
indirect)
British Virgin Islands
England & Wales
Cyprus
Cyprus
England & Wales
Israel
Israel
England & Wales
Germany
Germany
Israel
100
100
100
100
100
100
100
75
75
75
75
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
100
100
100
100
100
100
Percentage
ownership
(direct and
indirect)
Company name
Principal activity
Country of
incorporation
Majorelle Properties Limited
The Camden Market Management
Company Limited
The Market Events Company Limited
The Market Service Charge
Company Limited
Castlehaven Row Limited
Pastra Investments Limited
Perola Investments Limited
Loremar Investments Limited
Red Harmony Investments Limited
Tazzetta Limited
Pushkin Properties Limited
Simplepath Investments Limited
Atlantic Estates Limited
Landlord & property owner
Management company
British Virgin Islands
England & Wales
100
100
Trading company – events
Service charge company
England & Wales
England & Wales
100
100
Property management company
Holding company
Landlord & property owner
Landlord & property owner
Landlord & property owner
Landlord & property owner
Landlord & property owner
Holding Company
Holding company &
property owner
Landlord & property owner
Property Manager
Holding company
Landlord & property owner
Trading company – operation
of four canal boats
Onshore service company
Holding company
Nomura refinance vehicle
Nomura refinance vehicle
Nomura refinance vehicle
Nomura refinance vehicle
Landlord & property owner
England & Wales
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
England & Wales
100
100
100
100
100
100
100
100
100
England & Wales
England & Wales
Guernsey
Guernsey
England & Wales
100
100
100
100
100
England & Wales
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
100
100
100
100
100
100
100
Market operator
England & Wales
Landlord & property owner
British Virgin Islands
Property management company England & Wales
100
100
100
Partner to Upper Piazza
British Virgin Islands
Camden Limited Partnership
Partner to Upper Piazza Camden England & Wales
Limited Partnership
Property investment
England & Wales
100
Camden Lock (London) Limited
Electric Enterprises Limited
Camden Market Holdco Limited
Camden Lock Market Limited
London Waterbus Company Limited
Camden Lock Limited
Camden Market Holdings Corp.
MB Market Holdings Limited
MB Market Corp.
MB Select Holdings Limited
MB Select Corp.
Camden Market Estate
Holdings Limited
Stables Market (Camden) Limited
Triangle Upper Limited
Camden Market Property
Management Limited
Camden Market Upper Piazza Limited
Upper Piazza (Camden) Ltd
Upper Piazza Camden
Limited Partnership
Camden Market Piazza Limited
Piazza (Camden) Ltd
Piazza Camden Limited Partnership
Stanley Sidings Limited
Triangle Extension’s Limited
Tunnel Market Ltd
Camden Market Estates
Arches Limited
Partner to Piazza Camden
Limited Partnership
Partner to Piazza Camden
Limited Partnership
Property investment
Construction project manager
Landlord & property owner
Retail & market trading operator
Property owner
278
100
100
British Virgin Islands
100
England & Wales
100
England & Wales
England & Wales
British Virgin Islands
England & Wales
England & Wales
100
100
100
100
100
Percentage
ownership
(direct and
indirect)
Country of
incorporation
Company name
Principal activity
Ground Gilbey Limited
Elcross Estates Limited
Canal Side Properties Limited
Dave Autos (UK) Limited
Landlord & property owner
British Virgin Islands
Property owner
England & Wales
Commercial property investment British Virgin Islands
Property and market trading
England & Wales
operation services
co-working
England & Wales
Operational manager
England & Wales
for co-working
Property owner
British Virgin Islands
Property owner
British Virgin Islands
Interchange Camden Limited
Interchange Management Limited
Oberon Property Company Limited
Numa Property Corporation
100
100
100
100
100
100
100
100
4.
SHARE CAPITAL
4.1
The issued and fully paid share capital of the Company as at 20 January 2016 (being the latest
practicable date prior to publication of this document):
Class of share capital
Ordinary Shares
Number of
shares issued
Nominal value
of shares
468,468,196
£46,846,819.60
4.2
As at 20 January 2016 (being the latest practicable date prior to publication of this document) none
of the Ordinary Shares were held as treasury shares.
4.3
On incorporation, the Company’s issued share capital was £5,000 divided into 50,000 ordinary shares
of £0.10 each. The initial subscriber was the Major Shareholder.
4.4
The following changes to the issued share capital of the Company will have taken place between
incorporation and 20 January 2016 (being the latest practicable date prior to publication of this
document):
4.4.1 on 5 December 2014, the Company issued a total of 1,000 Ordinary Shares in consideration for
the acquisition of the entire issued share capital of Divanyx Investments Limited;
4.4.2 on 12 December 2014, the Company resolved to issue a total of 1,062,500 Ordinary Shares
immediately prior to AIM Admission pursuant to the Roll Up Agreement further details of
which are set out in paragraph 19.12 of this Part XV;
4.4.3 on 16 December 2014, the Company issued a total of 323,886,500 Ordinary Shares to the
Major Shareholder in consideration of the assignment to the Company of loans due to the
Major Shareholder from certain members of the Group, with an aggregate value of
£185,399,203;
4.4.4 on 22 December 2014, the Company issued a total of 50,000,000 Ordinary Shares as part of
the 2014 AIM Placing;
4.4.5 on 12 May 2015, the Company issued a total of 3,468,196 Ordinary Shares as consideration in
connection with the acquisition of StuccoMedia; and
4.4.6 on 31 July 2015, the Company issued a total of 90,000,000 Ordinary Shares as part of the 2015
AIM Placing.
279
4.5
As the issues of Ordinary Shares described in paragraph 4.4.1, 4.4.3 and 4.4.5 of this Part XV were
made for non-cash consideration, more than 10 per cent. of the issued share capital of the Company
as at the date of this document has been paid for in assets other than cash.
4.6
The following is a reconciliation of the number of issued Ordinary Shares from the date of
incorporation of the Company to 20 January 2016 (being the latest practicable date prior to
publication of this document):
Issued
Ordinary Shares
Date
Description
23 October 2014
5 December 2014
50,000 Ordinary Shares issued on incorporation
1,000 Ordinary Shares issued pursuant to the Share
Exchange Agreement
12 December 2014
1,062,500 Ordinary Shares issued pursuant to the Roll Up
Agreement
1,113,500
16 December 2014
323,886,500 Ordinary Shares issued to the Major
Shareholder in consideration of the assignment to the
Company of loans, due to the Major Shareholder from
certain members of the Group, with an aggregate value of
£185,399,203
50,000,000 Ordinary Shares issued as part of the 2014
AIM Placing for cash consideration
325,000,000
12 May 2015
3,468,196 Ordinary Shares issued as part of the
consideration payable in connection with the acquisition
of StuccoMedia
378,468,196
31 July 2015
90,000,000 Ordinary Shares issued as part of the 2015
AIM Placing
468,468,196
22 December 2014
50,000
51,000
375,000,000
4.7
By a resolution of the Board passed on 16 December 2014, it was resolved conditionally upon (but
effective immediately prior to) the 2014 AIM Placing, to issue the 50,000,000 Ordinary Shares for
cash at £2.00 per Ordinary Share.
4.8
On 30 July 2015, the following shareholder resolutions were passed at an extraordinary general
meeting of the Company:
4.8.1 that the Company adopt new articles of incorporation in substitution for the existing articles of
incorporation and that all past acts of the Directors taken under the existing articles of
incorporation were to be ratified and confirmed;
4.8.2 that, subject to the Placing Agreement becoming unconditional, in addition to all existing
powers and authorities conferred upon the Directors (including those conferred upon the
Directors by way of written resolution on 16 December 2014) and to the extent required by
sections 292 and 293 of the Companies Law, the Directors be generally and unconditionally
authorised to issue the 2015 AIM Placing Shares in respect of the 2015 AIM Placing, provided
that this authority will expire (unless previously renewed, varied or revoked) by 31 December
2015; and
4.8.3 that, subject to the passing of the resolution as set out in paragraph 4.8.2 of this Part XV, in
addition to all dis-application authorities previously conferred upon the Directors (including
those conferred upon the Directors by way of written resolution on 16 December 2014), the
Directors be empowered to issue the 2015 AIM Placing Shares at £2.23 per Ordinary Share as
if Article 4.13 of the existing articles of incorporation, at the time the resolution was passed (or
by any equivalent provision in the Articles), and any pre-emption rights included therein did
not apply to any such issue, provided that this power shall be limited to the issue of the 2015
AIM Placing Shares only and shall expire (unless previously renewed, varied or revoked) by
31 December 2015.
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4.9
On 7 August 2015, the following shareholder resolutions were passed at the annual general meeting
of the Company:
4.9.1 that, pursuant to section 292 of the Companies Law, the Directors be authorised to exercise all
powers of the Company to issue Ordinary Shares in the Company or to grant rights to subscribe
for or to convert any security into Ordinary Shares in the Company:
4.9.1.1 up to a maximum number of Ordinary Shares which are equal to one third of the share
capital of the Company in issue at the date of the annual general meeting;
4.9.1.2 an additional amount of up to a maximum number of Ordinary Shares which are equal
to one third of the share capital of the Company in issue at the date of the annual
general meeting in connection with an offer by way of a rights issue:
(a)
to holders of Ordinary Shares in proportion to the respective numbers of
Ordinary Shares held by them;
(b)
to holders of other equity securities in the capital of the Company, as required
by the rights of those securities or, subject to such rights, as the Directors
otherwise consider necessary,
but subject to such exclusions or other arrangements as the Directors may deem
necessary or expedient in relation to treasury shares, fractional entitlements, record
dates or any legal or practical problems under the laws of any territory or the
requirements of any regulatory body or stock exchange,
provided that (unless previously revoked, varied or renewed) this authority shall expire at the
conclusion of the Company’s next annual general meeting after the passing of this resolution
or on 7 November 2016 (whichever is the earlier), save that the Company may make an offer
or agreement before this authority expires which would or might require shares to be issued or
rights to subscribe for or to convert any security into shares to be granted after this authority
expires and the Directors may issue shares or grant such rights pursuant to any such offer or
agreement as if this authority had not expired. This authority is given in substitution for all
existing authorities under section 292 of the Companies Law, which shall be immediately
revoked upon the passing of this resolution;
4.9.2 that, subject to the passing of the resolution at paragraph 4.9.1 of this Part XV, the Directors be
generally empowered to issue equity securities for cash pursuant to the authority granted by the
resolution at paragraph 4.9.1 of this Part XV and to sell Ordinary Shares held by the Company
as treasury shares for cash as if the pre-emption provisions contained in the Articles did not
apply to any such issue or sale, provided that this power is limited to the issue of equity
securities or sale of treasury shares:
4.9.2.1 in connection with an offer of equity securities (whether by way of a rights issue, open
offer or otherwise but, in the case of an issue pursuant to the authority granted by the
resolution at paragraph 4.9.1.2 of this Part XV, such power shall be limited to the issue
of equity securities in connection with an offer by way of a rights issue):
(a)
to holders of Ordinary Shares in proportion to the respective numbers of
Ordinary Shares held by them; and
(b)
to holders of other equity securities in the capital of the Company, as required
by the rights of those securities or, subject to such rights, as the Directors
otherwise consider necessary,
but subject to such exclusions or other arrangements as the Directors may deem
necessary or expedient in relation to treasury shares, fractional entitlements, record
dates or any legal or practical problems under the laws of any territory or the
requirements of any regulatory body or stock exchange;
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4.9.2.2 otherwise than pursuant to paragraph 4.9.1.1 of this Part XV, up to an aggregate
number of Ordinary Shares which are equal to 5 per cent. of the share capital of the
Company in issue at the date of the Company’s annual general meeting,
and (unless previously revoked, varied or renewed) this power shall expire at the conclusion of
the next annual general meeting of the Company after the passing of this resolution or on
7 November 2016 (whichever is the earlier), save that the Company may make an offer or
agreement before this power expires which would or might require equity securities to be
issued or treasury shares to be sold for cash after this power expires and the Directors may issue
equity securities or sell treasury shares for cash after this power expires and the Directors may
issue equity securities or sell treasury shares for cash pursuant to any such offer or agreement
as if this power had not expired. This authority is given in substitution for all existing
authorities under the Articles, which are to be revoked immediately upon the passing of this
resolution;
4.9.3 that, pursuant to section 315 of the Companies Law, the Company be generally and
unconditionally authorised to make market acquisitions of Ordinary Shares provided that:
4.9.3.1 the maximum aggregate number of Ordinary Shares which may be purchased shall be
a number not exceeding 10 per cent. of the share capital of the Company in issue at the
date of the annual general meeting;
4.9.3.2 the minimum price (excluding expenses connected with the acquisition) which may be
paid for an Ordinary Share is 10 pence;
4.9.3.3 the maximum price (excluding expenses connected with the acquisition) which may be
paid for an Ordinary Share is an amount equal to the higher of:
(a)
105 per cent. of the average of the middle market quotations for an Ordinary
Share as derived from the Daily Official List of the London Stock Exchange for
the five business days immediately preceding the day on which the purchase is
made; or
(b)
the higher of the price of the last independent trade and highest current
independent bid on the London Stock Exchange Daily Official List for an
Ordinary Share at the time the acquisition is carried out,
and (unless previously revoked, varied or renewed) this authority shall expire at the conclusion
of the next annual general meeting of the Company after the passing of this resolution or on
7 November 2016 (whichever is the earlier), save that the Company may enter into a contract
to purchase Ordinary Shares before this authority expires under which such purchase will or
may be completed or executed wholly or partly after this authority expires and may make a
purchase of Ordinary Shares pursuant to any such contract as if this authority had not expired,
subject always to the provisions of the Companies Law, the Company shall be able to hold as
treasury shares any Ordinary Shares acquired pursuant to the authority conferred by this
resolution at paragraph 4.9.3 of this Part XV.
4.10 The following table shows the number of Ordinary Shares under option pursuant to the LTIP as at
20 January 2016 (being the latest practicable date prior to publication of this document) in addition
to the Option granted to Charles Butler as described in paragraph 9.3 of this Part XV.
LTIP
Number of
Ordinary Shares
under option
Expiry date
Exercise
price
262,500
10 years from grant
Nominal
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4.11 The Ordinary Shares are in registered form and are capable of being held in uncertificated form. In
the case of Ordinary Shares held in uncertificated form, the Articles permit the holding and transfer
of Ordinary Shares under CREST. CREST is a paperless settlement procedure enabling securities to
be evidenced otherwise than by certificate and transferred otherwise than by written instrument. The
Ordinary Shares will continue to be admitted to CREST. The records in respect of Ordinary Shares
held in uncertificated form will be maintained by Euroclear UK & Ireland Limited and the Registrar.
4.12 On 31 March 2015, the Company completed an offering of £112.5 million of senior, unsecured
convertible bonds due 2020, with an initial conversion price of 300 pence (the “Convertible Bonds”).
The Convertible Bonds carry a coupon of 2.00 per cent. per annum payable semi-annually in arrears.
The Convertible Bonds are convertible into fully paid Ordinary Shares at the option of their holder,
subject to the Company’s right to elect to cash settle any conversion. The Ordinary Shares underlying
the Convertible Bonds represented 10 per cent. of the Company’s issued Ordinary Shares immediately
prior to the issuance of the Convertible Bonds. As a result of the 2015 AIM Placing Shares being
issued at a discount to the current market price of the Ordinary Shares, the price at which the
Convertible Bonds can be converted into new and/or existing Ordinary Shares has been adjusted from
£3.00 to £2.9396, effective from 31 July 2015. Further details relating to the terms of the Convertible
Bonds are set out in paragraph 19.9 of this Part XV.
4.13 The International Security Identification Number (“ISIN”) of the Ordinary Shares is
GG00BSSWD593 and the Stock Exchange Daily Official List (“SEDOL”) number is BSSWD59.
4.14 The legislation under which the Ordinary Shares have been created is the Companies Law and the
ordinances and regulations made thereunder.
4.15 The Ordinary Shares are denominated in United Kingdom pounds sterling.
4.16 Save as disclosed in this paragraph 4 and paragraphs 8 and 9 of this Part XV, as at 20 January 2016
(being the latest practicable date prior to publication of this document):
4.16.1 the Company does not hold any treasury shares and no Ordinary Shares were held by, or on
behalf of, any member of the Group;
4.16.2 no Ordinary Shares have been issued otherwise than as fully paid;
4.16.3 the Company had no outstanding convertible securities, exchangeable securities or securities
with warrants;
4.16.4 the Company has given no acquisition rights and/or obligations over its unissued share capital
nor has it given an undertaking to increase its share capital; and
4.16.5 no capital of any member of the Group is under option or is agreed, conditionally or
unconditionally, to be put under option.
4.17 There have been no public takeover bids by third parties in respect of the Company’s share capital
within the last financial year or in the current financial year as at 20 January 2016 (being the latest
practicable date prior to publication of this document).
5.
MEMORANDUM AND ARTICLES OF INCORPORATION
The memorandum of incorporation of the Company provides that the objects of the Company are
unlimited.
A summary of the principal provisions of the Articles, including the provisions relating to the rights
attaching to the Ordinary Shares, is set out below.
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5.1
Share capital
5.1.1 Subject to the Companies Law and other provisions of the Articles, the Directors have the
power to issue, and to grant rights to subscribe for, or to convert any securities into, up to such
number of shares as from time to time determined by the Company by ordinary resolution.
5.1.2 Subject to the above, the Directors may issue shares in such classes and on such terms
(including as to the consideration payable) as shall be determined at the discretion of the Board.
5.2
Dividends and other distributions
5.2.1 Subject to the rights of any Ordinary Shares which may be issued with special rights or
privileges, the Ordinary Shares carry the right to receive all income of the Company
attributable to the Ordinary Shares, and to participate in any distribution of such income made
by the Company, such income shall be divided pari passu among the holders of Ordinary
Shares in proportion to the number of Ordinary Shares held by them.
5.2.2 The Directors may from time to time authorise dividends and distributions to be paid to
Shareholders in accordance with the requirements set out in the Companies Law and subject to
any Shareholder’s rights attaching to their shares.
5.2.3 All unclaimed dividends and distributions may be invested or otherwise made use of by the
Board for the benefit of the Company until claimed. All dividends unclaimed on the earlier of
(i) a period of seven years after the date when it first became due for payment and (ii) the date
on which the Company is wound-up, shall be forfeited and shall revert to the Company without
the necessity for any declaration or other action on the part of the Company.
5.3
Capital
As to a winding-up of the Company or other return of capital (other than by way of a repurchase or
redemption of Ordinary Shares in accordance with the provisions of the Articles and the Companies
Law), the surplus assets of the Company attributable to the Ordinary Shares remaining after payment
of all creditors shall, subject to the rights of any Ordinary Shares that may be issued with special rights
or privileges, be divided amongst the holders of Ordinary Shares pari passu among the holders of
Ordinary Shares in proportion to the number of Ordinary Shares held by them.
5.4
Voting
5.4.1 Subject to any special rights, restrictions or prohibitions as regards voting for the time being
attached to any Ordinary Shares, holders of Ordinary Shares shall have the right to receive
notice of and to attend and vote at general meetings of the Company.
5.4.2 Each Shareholder being present in person or by proxy or by a duly authorised representative (if
a corporation) at a meeting shall upon a show of hands have one vote and upon a poll each such
holder present in person or by proxy or by a duly authorised representative (if a corporation)
shall, in the case of a separate class meeting, have one vote in respect of each share held by him
and, in the case of a general meeting of all Shareholders, have one vote in respect of each
Ordinary Share held by him.
5.5
Pre-emption rights
There are no provisions of the Companies Law which confer rights of pre-emption in respect of the
issue of Ordinary Shares. However, the Articles provide that the Company is not permitted to issue
(for cash) equity securities (being Ordinary Shares or rights to subscribe for, or convert securities into,
Ordinary Shares) or sell (for cash) any Ordinary Shares held as treasury shares, unless it shall first
have offered to issue to each existing holder of Ordinary Shares on the same or more favourable terms
a proportion of those Ordinary Shares which is as nearly as practicable equal to the proportion of the
issued Ordinary Shares represented by the Ordinary Shares held by such shareholder. These
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pre-emption rights may be excluded and disapplied or modified by extraordinary resolution of the
Shareholders.
5.6
Variation of rights
5.6.1 Whenever the capital of the Company is divided into different classes of shares, the rights
attached to any class of shares may (unless otherwise provided by the terms of issue of the
shares of that class) be varied or abrogated:
5.6.1.1 with the consent in writing of the holders of more than 75 per cent. in number of the
issued shares of that class; or
5.6.1.2 with the sanction of an extraordinary resolution passed at a separate meeting of the
holders of the shares of that class.
5.6.2 The necessary quorum at any separate class meeting shall be two persons present holding or
representing by proxy at least one-third of the voting rights of the issued shares of that class
(provided that if any such meeting is adjourned for lack of a quorum, the quorum at the
reconvened meeting shall be one person present holding shares of that class or his proxy)
provided always that where the class has only one member, that member shall constitute the
necessary quorum and any holder of shares of the class in question may demand a poll.
5.6.3 The special rights conferred upon the holders of any shares or class of shares issued with
preferred, deferred or other rights shall (unless otherwise expressly provided by the conditions
of issue of such shares) be deemed not to be varied by (a) the creation or issue of further shares
ranking pari passu therewith or (b) the purchase or redemption by the Company of any of its
shares (or the holding of such shares as treasury shares).
5.7
Disclosure of interests in Ordinary Shares
5.7.1 The Directors shall have power by notice in writing (a “Disclosure Notice”) to require a
Shareholder to disclose to the Company the identity of any person other than the Shareholder
(an interested party) who has any interest (whether direct or indirect) in the Ordinary Shares
held by the Shareholder or has been so interested at any time during the three years
immediately preceding the date on which the Disclosure Notice is issued and the nature of such
interest. Any such Disclosure Notice shall require any information in response to such
Disclosure Notice to be given in writing to the Company within 28 days of the date of service
(or 14 days if the Ordinary Shares concerned represent 0.25 per cent. or more of the number of
Ordinary Shares in issue of the class of Ordinary Shares concerned).
5.7.2 If any member is in default in supplying to the Company the information required by the
Company within the prescribed period (which is 28 days after service of the notice or 14 days
if the Ordinary Shares concerned represent 0.25 per cent. or more in number of the issued
Ordinary Shares of the relevant class), or such other reasonable period as the Directors may
determine, the Directors in their absolute discretion may serve a direction notice on the
member (a “Direction Notice”). The Direction Notice may direct that in respect of the
Ordinary Shares in respect of which the default has occurred (the “Default Shares”) and any
other Ordinary Shares held by the member shall not be entitled to vote in general meetings or
class meetings. Where the Default Shares represent at least 0.25 per cent. in number of the class
of Ordinary Shares concerned, the Direction Notice may additionally direct that dividends on
such Default Shares will be retained by the Company (without interest) and that no transfer of
the Default Shares (other than a transfer authorised under the Articles) shall be registered until
the default is rectified.
5.7.3 The Directors may be required to exercise their power to require disclosure of interested parties
on a requisition of Shareholders holding not less than 1/10th of the total voting rights attaching
to the Ordinary Shares in issue at the relevant time.
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5.7.4 In addition to the rights referred to above, the Board may serve notice on any Shareholder
requiring that Shareholder to promptly provide the Company with any information,
representations, certificates or forms relating to such Shareholder (or its direct or indirect
owners or account holders) that the Board determines from time to time are necessary or
appropriate for the Company to:
5.7.4.1 satisfy any account or payee identification, documentation or other diligence
requirements and any reporting requirements imposed under: (A) sections 1471 to
1474 of the United States Internal Revenue Code of 1986 Treasury Regulations
(“FATCA”) and any agreement relating thereto (including, any amendments,
modification, consolidation, re-enactment or replacement thereof made from time to
time); (B) the UK-Guernsey IGA (as defined in the Articles); (C) the multilateral
competent authority agreement signed on 29 October 2014 by fifty-one jurisdictions
(including Guernsey) which provides for the automatic exchange of FATCA-like
information in line the Common Reporting Standard issued by the Organization for
Economic Co-operation and Development; and/or (D) the requirements of any similar
laws or regulations to which the Company may be subject enacted from time to time
by any other jurisdiction (“Similar Laws”); or
5.7.4.2 avoid or reduce any tax otherwise imposed by FATCA or Similar Laws (including any
withholding upon any payments to such Shareholder by the Company);
5.7.4.3 prevent a non-exempt prohibited transaction under the United Sates Employee
Retirement Income Security Act of 1974 (“ERISA”) or Section 4975 of the Internal
Revenue Code or prevent the Company from becoming subject to laws or regulations
that are substantially similar to the prohibited transaction provisions of Section 406 of
ERISA or Section 4975 of the Internal Revenue Code; or
5.7.4.4 permit the Company to enter into, comply with, or prevent a default under or
termination of, an agreement of the type described in section 1471(b) of the US
Internal Revenue Code of 1986 or under Similar Laws.
If any Shareholder (a “Defaulting Shareholder”) is in default of supplying to the Company the
information referred to above within the prescribed period (which shall not be less than 28 days after
the service of the notice), the Defaulting Shareholder shall be deemed to be a Non-Qualified Holder.
5.8
Prohibition on the Acquisition of Shares
Under the Articles, a person may not acquire shares in the Company, either as part of an initial issue
of shares in the Company or subsequently, if such person is a Non-Qualified Holder (as defined in the
Articles). Each purchaser and transferee of shares in the Company will be required to represent,
warrant and covenant, or will be deemed to have represented, warranted and covenanted, for the
benefit of the Company, its affiliates and advisers that:
5.8.1 it is not a Non-Qualified Holder (as defined in the Articles);
5.8.2 no portion of the assets it uses to purchase, and no portion of the assets it uses to hold, the
shares in the Company or any beneficial interest therein constitutes or will constitute the assets
of a Benefit Plan Investor other than Shareholders that acquired the shares in the Company on
or prior to AIM Admission with the written consent of the Company;
5.8.3 if it is, or is acting on behalf of, a Benefit Plan Investor, its acquisition, holding and disposition
of such share in the Company does not and will not constitute or result in a non-exempt
prohibited transaction under ERISA or Section 4975 of the Internal Revenue Code; and
5.8.4 if a holder is a governmental, church, non-US or other plan, (i) it is not, and for so long as it
holds such shares in the Company or interest therein will not be, subject to any federal, state,
local, non-US or other laws or regulations that could cause the underlying assets of the
286
Company to be treated as assets of the holder by virtue of its interest in the shares in the
Company and thereby subject the Company (or any persons responsible for the investment and
operation of the Company’s assets) to laws or regulations that are substantially similar to the
prohibited transaction provisions of Section 406 of ERISA or Section 4975 of the Internal
Revenue Code and (ii) its acquisition, holding and disposition of such shares in the Company
will not constitute or result in a non-exempt violation of any federal, state, local or non-US law
that is similar to the prohibited transaction provisions of section 406 of ERISA and/or section
4975 of the Internal Revenue Code.
5.9
Transfer of Ordinary Shares
5.9.1 Subject to the Articles (and the restrictions on transfer contained therein), a Shareholder may
transfer all or any of his Ordinary Shares in any manner which is permitted by the Companies
Law or in any other manner which is from time to time approved by the Board.
5.9.2 A transfer of a certificated Ordinary Share shall be in the usual common form or in any other
form approved by the Board. An instrument of transfer of a certificated Ordinary Share shall
be signed by or on behalf of the transferor and, unless the Ordinary Share is fully paid, by or
on behalf of the transferee.
5.9.3 The Articles provide that the Board has the power to implement such arrangements as it may,
in its absolute discretion, think fit in order for any class of Ordinary Shares to be admitted to
settlement by means of the CREST UK system. If the Board implements any such
arrangements, any provision of the Articles will not apply or have effect to the extent that it is
in any respect inconsistent with:
5.9.3.1 the holding of shares of the relevant class in uncertificated form;
5.9.3.2 the transfer of title to shares of the relevant class by means of the CREST UK system;
or
5.9.3.3 the Regulations or the CREST Rules.
5.9.4 Where any class of Ordinary Shares is, for the time being, admitted to settlement by means of
the CREST UK system such securities may be issued in uncertificated form in accordance with
and subject to the Regulations. Unless the Board otherwise determines, shares held by the same
holder or joint holders in certificated form and uncertificated form will be treated as separate
holdings. Shares may be changed from uncertificated to certificated form, and from certificated
to uncertificated form, in accordance with and subject to the Regulations (as defined in the
Articles). Title to such of the shares as are recorded on the register as being held in
uncertificated form may be transferred only by means of the CREST UK system.
5.9.5 The Board may, in its absolute discretion and without giving a reason, refuse to register a
transfer of any share in certificated form or uncertificated form subject to the Articles which is
not fully paid or on which the Company has a lien provided that this would not prevent dealings
in the shares from taking place on an open and proper basis on the London Stock Exchange.
5.9.6 In addition, the Board may decline to transfer, convert or register a transfer of any share in
certificated form or (to the extent permitted by the Regulations or the CREST Rules)
uncertificated form: (a) if it is in respect of more than one class of shares, (b) if it is in favour
of more than four joint transferees, (c) if applicable, if it is delivered for registration to the
registered office of the Company or such other place as the Board may decide, not
accompanied by the certificate for the shares to which it relates and such other evidence of title
as the Board may reasonably require, or (d) the transfer is in favour of any Non-Qualified
Holder, defined in the Articles as any person whose ownership of Ordinary Shares may:
(i) cause the Company’s assets to be deemed “plan assets” for the purposes of the Plan Asset
Regulations; (ii) cause the Company to be required to register as an “investment company”
under the US Investment Company Act (including because the holder of the shares is not a
287
“qualified purchaser” as defined in the US Investment Company Act) or to lose an exemption
or status thereunder to which it might otherwise be entitled; (iii) cause the Company to register
under the US Exchange Act, the US Securities Act or any similar legislation; (iv) cause the
Company not to be considered a “Foreign Private Issuer” as such term is defined in rule 3b-4(c)
under the US Exchange Act; (v) result in a person holding Ordinary Shares in violation of the
transfer restrictions put forth in any prospectus published by the Company, from time to time;
(vi) cause the Company to be a “controlled foreign corporation” for the purposes of the Internal
Revenue Code; (vii) result in any Ordinary Shares being owned, directly or indirectly, by
Benefit Plan Investors, other than holders that acquired Ordinary Shares on or prior to AIM
Admission with the written consent of the Company; (viii) cause the Company to otherwise be
in violation of the Investment Company Act, the US Exchange Act, ERISA, the Internal
Revenue Code or any applicable federal, state, local, non-US or other laws or regulations that
are substantially similar to Section 406 of ERISA or Section 4975 of the US Internal Revenue
Code; (ix) otherwise cause the Company to suffer any pecuniary, fiscal, administrative,
regulatory or tax disadvantage (which will include any excise tax, penalties or liabilities under
ERISA or the Internal Revenue Code, including as a result of the Company’s failure to comply
with FATCA as a result of the Non-Qualified Holder failing to provide information concerning
itself as requested by the Company in accordance with the Articles); or (x) result in any
Ordinary Shares being owned, directly or indirectly, by any person who is deemed to be a NonQualified Holder as a result of failing to provide information requested by the Company in
reference to the above matters.
5.9.7 If any shares are owned directly, indirectly or beneficially by a person believed by the Board
to be a Non-Qualified Holder, the Board may give notice to such person requiring him either:
(i) to provide the Board within 30 days of receipt of such notice with sufficient satisfactory
documentary evidence to satisfy the Board that such person is not a Non-Qualified Holder, or
(ii) to sell or transfer his Ordinary Shares to a person who is not a Non-Qualified Holder within
30 days and within such 30 days to provide the Board with satisfactory evidence of such sale
or transfer and pending such sale or transfer, the Board may suspend the exercise of any voting
or consent rights and rights to receive notice of or attend any meeting of the Company and any
rights to receive dividends or other distributions with respect to such shares. Where condition
(i) or (ii) is not satisfied within 30 days after the serving of the notice, the person will be
deemed, upon the expiration of such 30 days, to have forfeited his shares. If the Board in its
absolute discretion so determines, the Company may dispose of the shares at the best price
reasonably obtainable and pay the net proceeds of such disposal to the former holder.
5.9.8 The Board of Directors may decline to register a transfer of an uncertificated share which is
traded through the CREST UK system in accordance with the CREST Rules (as defined in the
Articles) where, in the case of a transfer to joint holders, the number of joint holders to whom
uncertificated shares is to be transferred exceeds four.
5.10 General meetings
5.10.1 General meetings (which are annual general meetings) shall be held at least once in each
calendar year and in any event, no more than 15 months since the last annual general meeting.
All general meetings (other than annual general meetings) shall be called extraordinary general
meetings. Extraordinary general meetings and annual general meetings shall be held in
Guernsey or such other place as may be determined by the Board from time to time.
5.10.2 The notice must specify the date, time and place of any general meeting and the text of any
proposed special and ordinary resolution. Any general meeting shall be called by at least
14 clear days’ notice. A general meeting may be deemed to have been duly called by shorter
notice if it is so agreed by all the members entitled to attend and vote thereat. The accidental
omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any person
entitled to receive such notice shall not invalidate the proceedings at the meeting.
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5.10.3 The Shareholders may require the Board to call an extraordinary general meeting in accordance
with the Companies Law.
5.11 Restrictions on voting
Unless the Board otherwise decides, no member shall be entitled to vote at any general meeting or at
any separate meeting of the holders of any class of shares in the Company, either in person or by
proxy, in respect of any share held by him unless all calls and other sums presently payable by him in
respect of that share have been paid. No member of the Company shall, if the Directors so determine,
be entitled in respect of any share held by him to attend or vote (either personally or by representative
or by proxy) at any general meeting or separate class meeting of the Company or to exercise any other
right conferred by membership in relation to any such meeting if he or any other person appearing to
be interested in such shares has failed to comply with a Disclosure Notice (see paragraph 5.7.1 of this
Part XV) within 14 days, in a case where the shares in question represent at least 0.25 per cent. of
their class, or within 28 days, in any other case, from the date of such Disclosure Notice. These
restrictions will continue until the information required by the notice is supplied to the Company or
until the shares in question are transferred or sold in circumstances specified for this purpose in the
Articles.
5.12 Appointment, retirement and disqualification of Directors
5.12.1 Unless otherwise determined by the Shareholders by ordinary resolution, the number of
Directors shall not be less than two and there shall be no maximum number.
5.12.2 A Director need not be a Shareholder. A Director who is not a Shareholder shall nevertheless
be entitled to attend and speak at Shareholders’ meetings.
5.12.3 Subject to the Articles, Directors may be appointed by the Board (either to fill a vacancy or
as an additional Director). No person other than a Director retiring at a general meeting shall,
unless recommended by the Directors, be eligible for election by the Company to the office
of Director unless not less than seven and not more than 42 clear days before the date
appointed for the meeting there shall have been left at the Company’s registered office (or, if
an electronic address has been specified by the Company for such purposes, sent to the
Company’s electronic address) notice in writing signed by a Shareholder who is duly
qualified to attend and vote at the meeting for which such notice is given of his intention to
propose such person for election together with notice in writing signed by that person of his
willingness to be elected, specifying his tax residency status and containing a declaration that
he is not ineligible to be a Director in accordance with the Companies Law.
5.12.4 No person shall be or become incapable of being appointed a Director, and no Director shall
be required to vacate that office, by reason only of the fact that he has attained the age of 70
years or any other age.
5.12.5 Subject to the Articles, at each annual general meeting of the Company, any Director (i) who
has been appointed by the Board since the last annual general meeting, (ii) who held office at
the time of the two preceding annual general meetings and who did not retire at either of them,
or (iii) who has held office with the Company, other than employment or executive office, for
a continuous period of nine years or more at the date of the meeting, shall retire from office
and may offer himself for election or re-election by the Shareholders.
5.12.6 A Director who retires at an annual general meeting may, if willing to continue to act, be
elected or re-elected at that meeting. If he is elected or re-elected he is treated as continuing
in office throughout. If he is not elected or re-elected, he shall remain in office until the end
of the meeting or (if earlier) when a resolution is passed to appoint someone in his place or
when a resolution to elect or re-elect the Director is put to the meeting and lost.
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5.12.7 A Director may resign from office as a Director by giving notice in writing to that effect to
the Company at its registered office, which notice shall be effective upon delivery to the
registered office.
5.12.8 The office of a Director shall be vacated: (i) if he (not being a person holding for a fixed term
an executive office subject to termination if he ceases from any cause to be a Director) resigns
his office by one month’s written notice signed by him sent to or deposited at the Company’s
registered office; (ii) if he dies; (iii) if he shall have absented himself (such absence not being
absence with leave or by arrangement with the Board on the affairs of the Company) from
meetings of the Board for a consecutive period of 12 months and the Board resolves that his
office shall be vacated; (iv) if he becomes bankrupt or makes any arrangements or
composition with his creditors generally; (v) if he ceases to be a Director by virtue of, or
becomes prohibited from being a Director by reason of, an order made under the provisions
of any law or enactment; (vi) if he is requested to resign by written notice signed by a majority
of his co-Directors (being not less than two in number); (vii) if the Company by ordinary
resolution shall declare that he shall cease to be a Director; or (viii) if he becomes ineligible
to be a Director in accordance with the Companies Law.
5.12.9 Any Director may, by notice in writing, appoint any other person (subject to the provisions in
paragraph 5.12.10 of this Part XV), who is willing to act as his alternate and may remove his
alternate from that office.
5.12.10 Each alternate Director shall be eligible to be a Director under the Companies Law and shall
sign a written consent to act. Every appointment or removal of an alternate Director shall be
by notice in writing signed by the appointor and served upon the Company.
5.13 Proceedings of the Board
5.13.1 The Board may meet for the despatch of business, adjourn and otherwise regulate its meetings
as it thinks fit save that all meetings of the Board shall take place outside of the United
Kingdom. The quorum necessary for the transaction of the business of the Board may be fixed
by the Board and unless so fixed shall be two. Subject to the Articles, a meeting of the Board
at which a quorum is present shall be competent to exercise all the powers and discretion
exercisable by the Board.
5.13.2 The Board may elect one of their number as chairman. If no chairman is elected or if at any
meeting the chairman is not present within five minutes after the time appointed for holding the
meeting, the Directors present may choose one of their number to be chairman of the meeting.
5.13.3 Questions arising at any meeting shall be determined by a majority of votes.
5.13.4 The Board may delegate any of its powers to committees consisting of one or more Directors
as they think fit. Any committee so formed shall be governed by any regulations that may be
imposed on it by the Board and (subject to such regulations) by the provisions of the Articles
that apply to meetings of the Board. All meetings of any such committee shall take place
outside of the United Kingdom.
5.14 Remuneration of Directors
The Directors shall be entitled to receive fees for their services, such sums not to exceed in aggregate
£500,000 in any financial year in aggregate (or such sum as the Company in general meeting shall
from time to time determine). The Directors may be paid all reasonable travelling, hotel and other out
of pocket expenses properly incurred by them in attending board or committee meetings or general
meetings, and all reasonable expenses properly incurred by them seeking independent professional
advice on any matter that concerns them in the furtherance of their duties as a Director.
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5.15 Interests of Directors
5.15.1 Subject to and in accordance with the Companies Law, a Director must, immediately after
becoming aware of the fact that he is interested in a transaction or proposed transaction with
the Company, disclose that fact to the Directors.
5.15.2 Subject to the provisions of the Companies Law, and provided that he has disclosed to the
Directors the nature and extent of any interests of his, a Director notwithstanding his office:
5.15.2.1 may hold any other office or place of profit under the Company (other than the office
of auditor) in conjunction with his office of Director on such terms as to the tenure of
office and otherwise as the Directors may determine;
5.15.2.2 may be a party to, or otherwise interested in, any transaction or arrangement with the
Company or in which the Company is otherwise interested;
5.15.2.3 may be a director or other officer of, or employed by, or a party to any transaction or
arrangement with, a shareholder of or otherwise interested in, anybody corporate
promoted by the Company or in which the Company is otherwise interested;
5.15.2.4 shall not, by reason of his office, be accountable to the Company for any remuneration
or benefit which he derives from any such office or employment or from any such
transaction or arrangement or from any interest in any such body corporate and no
such transaction or arrangement shall be liable to be avoided on the ground of any
such interest or benefit;
5.15.2.5 may act by himself or his firm in a professional capacity for the Company, other than
as auditor, and he or his firm shall be entitled to remuneration for professional services
as though he were not a Director of the Company; and
5.15.2.6 may be counted in the quorum present at any meeting in relation to any resolution in
respect of which he has declared an interest (but he may not vote thereon).
5.16 Winding-up
5.16.1 If the Company shall be wound up, the liquidator may, with the sanction of an extraordinary
resolution and any other sanction required by the Companies Law, divide the whole or any part
of the assets of the Company among the members entitled to the same in specie and the
liquidator or, where there is no liquidator, the Directors may for that purpose value any assets
as he or they deem fair and determine how the division shall be carried out as between the
members or different classes of members and, with the like sanction, may vest the whole or any
part of the assets in trustees upon such trusts for the benefit of the members as he or they may
determine, but no member shall be compelled to accept any assets upon which there is a
liability.
5.16.2 Where the Company is proposed to be or is in the course of being wound up and the whole or
part of its business or property is proposed to be transferred or sold to another company, the
liquidator may, with the sanction of an ordinary resolution, receive in compensation shares,
policies or other like interests for distribution or may enter into any other arrangements
whereby the members may, in lieu of receiving cash, shares, policies or other like interests,
participate in the profits of or receive any other benefit from the transferee.
5.17 Borrowing powers
The Directors may exercise all the powers of the Company to borrow money and to give guarantees,
mortgage, hypothecate, pledge or charge all or part of its undertaking, property (present or future) or
assets or uncalled capital and to issue debentures and other securities whether outright, or as collateral
security for any debt, liability or obligation of the Company or of any third party.
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6.
SHAREHOLDER RIGHTS UNDER GUERNSEY LAW
The following is a summary of the rights of the Shareholders under the Companies Law and other applicable
laws in Guernsey. Prospective shareholders are advised that this is not a complete statement of the rights of
the Shareholders under applicable law in Guernsey or under the Articles.
6.1
Board of Directors
Composition and election
Under the Companies Law, the board of directors of a company must be composed of at least one
director. Subject to the Company’s Articles, directors are appointed by way of ordinary resolution of
the shareholders passed by simple majority.
Limitation on personal liability of directors
A director may not be exempted from or indemnified directly or indirectly by his company in respect
of any liability incurred for negligence, default, breach of duty or breach of trust. A company can,
however, obtain directors’ and officers’ insurance cover. Directors are jointly and severally liable for
violations of the law or for exceeding powers granted by the articles of incorporation of a Guernsey
company.
Indemnification of directors
A director may not be exempted from or indemnified directly or indirectly by his company in respect
of any liability incurred for negligence, default, breach of duty or breach of trust. Any director who
has acted honestly and reasonably and who, having regard to the circumstances of each case, ought
fairly be excused, may be relieved of liability by the court.
Removal of directors
A person will cease to be a director if he/she is subject to disqualification under section 137 of the
Companies Law as being unfit to be concerned in the management of a company based on factors
including, for example, such person’s probity, competence, experience and soundness of judgement,
qualifications and previous conduct.
Filling vacancies on the board of directors
Directors may only be appointed by way of ordinary resolution of the shareholders passed by a simple
majority, unless a company’s articles of incorporation allow otherwise. The Articles provide that the
directors may appoint directors to the Board to fill a vacancy or as an additional director to hold office
until the next annual general meeting of the Company.
6.2
Company alterations
6.2.1 Under the Companies Law, an amalgamation of two companies requires a special resolution of
the shareholders from each amalgamating company. It is possible for a Guernsey company to
merge with another Guernsey company or an overseas company. There is a short form
amalgamation process for amalgamations between a company and its wholly owned subsidiary
or between two or more wholly owned subsidiaries of the same company which does not
require a special resolution of the members of each company. Creditors and members of an
amalgamating company can apply to court, if they object to the amalgamation, on the grounds
that the amalgamation would unfairly prejudice their interests and, if satisfied that such unfair
prejudice may result, the court may order the amalgamation not take effect or be modified.
6.2.2 Under the Companies Law, a compromise or arrangement is permitted between the company
and its creditors or shareholders, or any class thereof, whether for the purpose of facilitating
the company’s reconstruction or its merger with another company, or otherwise. An application
must be made to court which will order a meeting of the company’s creditors or shareholders.
It is necessary for 75 per cent. in value of the creditors or 75 per cent. of the voting rights of
the shareholders, or class thereof, as the case may be, to agree to the compromise or
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arrangement and if such compromise or arrangement is sanctioned by the court, it will be
binding on the creditors or shareholders, or class thereof, as appropriate.
6.2.3 The Companies Law also requires the approval of the shareholders by special resolution for the
continuation into another jurisdiction. Continuance of an overseas company in Guernsey under
the Companies Law also requires the corporation to establish to the satisfaction of the Registrar
of Companies in Guernsey that the company’s removal from the register of companies has been
authorised by the law of the jurisdiction of that company, the company is not insolvent or has
not had an administrator or receiver appointed and the company has not entered into a
compromise or arrangement with a creditor.
6.2.4 Under the Companies Law, the memorandum of incorporation may be altered by a unanimous
resolution and articles of incorporation may be altered by special resolution unless provisions
are embedded in the articles of incorporation and are stated as requiring a resolution with a
higher or lower threshold. Certain provisions within a company’s articles of incorporation can
be embedded with a higher voting threshold required for change and certain parts of a
company’s articles of incorporation may also require a higher voting threshold.
6.2.5 Variation of the rights of a class of shareholders may only be effected (a) in accordance with
any provision in the company’s articles of incorporation for the variation of those rights, or
(b) where the company’s articles of incorporation contain no such provision, if the variation is
consented in writing by the holders of at least 75 per cent. in value of the issued shares of that
class (excluding any shares held as treasury shares), or a special resolution passed at a separate
general meeting of the shareholders of that class sanctioning the variation.
6.2.6 Any amendment of a provision contained in a company’s articles of incorporation for the
variation of the rights of a class of shareholders, and any insertion of any such provision into
the articles of incorporation, is itself to be treated as a variation of those rights. Under the
Companies Law, in certain circumstances dissent rights in respect of such alterations are
available (unless the articles of incorporation provide otherwise in certain cases).
6.2.7 Under the Companies Law, amendments to a company’s articles of incorporation may be
sanctioned by way of a special resolution approved by the company’s shareholders.
6.3
Rights of dissent and appraisal
The Companies Law contains rights of dissent (which is discretionary on the part of the court), which
is applicable where the company resolves to:
6.3.1 amalgamate with another corporation (other than vertical or horizontal short form
amalgamations);
6.3.2 transfer of registration of a corporation into a jurisdiction; or
6.3.3 exercise squeeze-out rights in relation to a takeover transaction.
6.4
Oppression remedy
Under the Companies Law, a shareholder can apply to the court for an order providing relief on the
ground that the company’s affairs are being or have been conducted in a manner which is unfairly
prejudicial to any of its members.
6.5
Shareholder derivative actions
The laws of Guernsey permits derivative actions to be brought by a shareholder, or such person as the
court directs who, in the discretion of the court, is a proper person to make an application to court to
bring a derivative action. Under the laws of Guernsey, the complainant must obtain permission of the
court to commence a derivative action.
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6.6
Meetings
Requisitioned by shareholders
The Companies Law provides the right to call meetings to shareholders of a company where they hold
at least 10 per cent. of such of the capital of the company as carries the right of voting at general
meetings of the company (excluding any capital held as treasury shares).
Shareholder proposals
The Companies Law does not specifically provide a process for shareholders requesting matters to be
put to a vote at shareholder meetings.
The shareholders may raise any matter relating to the formation of the company or arising out of the
directors’ report, regardless of whether notice has been given, but no resolution for which notice has
not been properly given may be passed at a meeting. As such, a resolution to be proposed by a
shareholder would have to be included in the notice of a meeting called by the directors in order to be
considered at that meeting. Notwithstanding anything to the contrary in the company’s memorandum
or articles of incorporation, shareholders who hold more than 10 per cent. of such of the capital of the
company as carries the right of voting at general meetings of the company (excluding any capital held
as treasury shares) may require the directors to call a general meeting and the request may include the
text of a resolution that is intended to be moved at the meeting. The notice of the meeting must include
notice of the resolution. Also, shareholders representing not less than 5 per cent. of the total voting
rights of all members entitled to vote on the resolution (or such lower percentage as is specified for
this purpose in the company’s articles of incorporation) of a company may require the company to
circulate a resolution (and an accompanying written statement of not more than a 1000 words) that
may properly be moved as a written resolution.
Form of proxy and information circular
The Companies Law contains provisions which require every notice calling a meeting to contain a
statement that a member is entitled to appoint a proxy (or proxies, if appointed in respect of different
shares) to attend, speak and vote at that meeting and that the proxy need not be a member of the
company.
Place of meetings
The Companies Law provides that subject to the provisions of a company’s articles of incorporation,
a general meeting may be held at any place in Guernsey or elsewhere. The Companies Law states that
subject to any provision to the contrary in a company’s articles of incorporation, if a shareholder is,
by any means, in communication with one or more other shareholders so that each shareholder
participating in the communication can hear or read what is said or communicated by each of the
others, each shareholder so participating is deemed to be present at a meeting with the other
shareholders so participating and a meeting of shareholders so conducted will be deemed to be held
in the place in which the chairman of the meeting is present.
6.7
Sale of undertaking
The Companies Law does not contain provisions in relation to shareholder authority for the sale of a
company’s undertaking and the sale, lease or exchange of all or substantially all the property of the
company will be governed by the articles of incorporation of a company.
6.8
Distributions and dividends; repurchases and redemptions
6.8.1 Subject to the directors’ satisfaction that the company meets a statutory solvency test,
dividends need not be paid out of any particular account or source and, specifically, need not
be paid from profits or reserves. The same test applies for other distributions such as
redemptions, share buybacks, capital reductions, bonus issues and distributions on winding up.
The solvency test requires the directors’ certification that, in their opinion, the company is able
to meet its debts and liabilities as they fall due and has assets greater than its liabilities. If there
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are no reasonable grounds for certifying that the solvency test is met, or if the correct procedure
is not followed, then the directors may be personally liable to reimburse the relevant dividend
or distribution if it cannot be recovered from shareholders.
6.8.2 If authorised by its memorandum or articles of incorporation, a company may issue redeemable
shares or acquire its own shares (including redeemable shares). A company may not redeem a
share unless it is fully paid, nor if as a result the company would have no shareholders.
A company may acquire its own shares pursuant to a market purchase or a contract authorised
by the company’s shareholders, and must obtain the consent of the shareholders whose shares
are being acquired. Shares need not be redeemed or acquired from a particular account or source.
6.9
Transactions with directors and officers
The Companies Law includes a statutory regime for disclosure of directors’ interests. Where a
directors’ interest is not disclosed to the board of directors of a company at the time of a transaction,
the transaction may be avoided within three months after the date of the company becoming aware of
the interest, unless it is ratified by shareholders or the company received fair value for the transaction.
Legal protections are available to third parties who transact with the company in good faith, for
valuable consideration and without knowledge of the directors’ failure to disclose his interests.
6.10 Interested shareholders
The Companies Law does not contain restrictions on the transactions that a shareholder may conclude
with a company.
6.11 Schemes of arrangement or compromise
6.11.1 An arrangement may be proposed between a company and its members, or any class of them
or creditors or class of creditors (as the case may be).
6.11.2 In addition to a share purchase arrangement, an arrangement includes a reorganisation of the
company’s share capital by the consolidation of shares of different classes, or by the division
of shares into shares of different classes, a conversion into another type of company, an
amalgamation, or a migration into another jurisdiction.
6.11.3 An application may be made to the court to summon a meeting of the shareholders or class of
shareholder, or creditors or class of creditors (as the case may be). Notice (containing certain
prescribed information) must be given to all of the members or relevant class of members, or
creditors or class of creditors (as the case may be), who will be affected by the arrangement.
6.11.4 If a majority in number representing 75 per cent. in value of the members or class of members
(excluding any shares held as treasury shares), or creditors or class of creditors (as the case may
be), present and voting either in person or by proxy at the meeting summoned by the court,
agree a compromise or arrangement, the court may, on an application under this section,
sanction the compromise or arrangement.
6.11.5 In exercising its discretion whether to sanction an arrangement, the Court may consider
whether:
6.11.5.1 the majority is acting in good faith in the interests of the creditors or class of creditors,
or members or class of members (as the case may be) it professes to represent; and
6.11.5.2 the different interests of creditors or members are such that they should be treated as
belonging to a different class of creditors or members.
6.11.6 Consequently, if a court deems that a shareholder with a majority shareholding by value has
different interests to that of a minority shareholder, they may be treated by the court as
belonging to a different class. As such, a majority shareholder might not be able to be counted
in the requisite 75 per cent. required to approve an arrangement. The 75 per cent. would then
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be considered to be 75 per cent. of the minority shareholders by value who are present and
voting.
6.11.7 A compromise or agreement sanctioned by the court is then binding upon all creditors or class
of creditors, or on the members or class of members (as the case may be), the company, an
administrator or liquidator and contributories of the company (if relevant) and any receiver of
a cell of a protected cell company (if relevant).
6.12 Unfair prejudice
6.12.1 A member of a company may apply to the court on the ground that the affairs of the company
are conducted in a manner that is unfairly prejudicial to the interests of members generally or
of some part of its members (including at least himself), or an actual or proposed act or
omission of the company is or would be so prejudicial.
6.12.2 A person who is not a member of a company but to whom shares in the company have been
transferred or transmitted by operation of law may apply as if he was a member.
6.12.3 If the court is satisfied that an application is well founded, it may make such orders (a) to
regulate the conduct of the company’s affairs in the future, (b) require the company to refrain
from doing or continuing to do an act, or require it to do any act which the applicant has
complained it has omitted to do, (c) to authorise civil proceedings to be brought in the name
and on behalf of the company by such persons and on such terms as the court may direct,
(d) provide for the purchase of shares of any member of the company by other members of the
company or by the company itself (and reduction of the company’s capital accordingly), and
(e) require the company not to make any, or any specified, alterations in its articles of
incorporation without the leave of the court, and the court may make such alterations to the
company’s articles of incorporation and any of its resolutions as the court thinks fit.
6.13 Dealing in securities
Under the Company Securities (Insider Dealing) (Bailiwick of Guernsey) Law, 1996, an individual
who has information, which specifically relates to particular securities or to a particular issuer(s) (and
not to securities or to issuers of securities generally) which has not been made public (but would be
likely to have a significant effect on the price of any securities if it were made public), will be guilty of
insider dealing if he deals in securities which are price affected securities in relation to the information.
That person will also be guilty of insider dealing if he encourages another person to deal in securities
which are (whether or not that other knows it) price affected securities in relation to the information,
knowing or having reasonable cause to believe that the dealing would take place on a regulated market,
or through a professional intermediary or he discloses the information, otherwise than in the proper
performance of the functions of his employment, office or profession, to another person.
7.
EMPLOYEES
The table below sets out the average number of persons employed by the Group during the financial
years referred to below.
Financial year (each
ended on 31 March
for the Group,
30 September
for Fiver and
31 December for
Pastra and Glispa)
2015
2014
2013
Number of
persons,
including
executive
directors,
employed by
the Group
Number of
persons,
including
executive
directors,
employed by
Pastra
Number of
persons,
including
executive
directors,
employed by
Glispa
Number of
persons,
including
executive
directors,
employed by
Fiver
518
188
130
25
17
17
100
89
71
171
159
263
296
As at the date of acquisition of Stucco Media (being 7 May 2015), the total number of employees of
Stucco Media was 34. As at 20 January 2016 (being the latest practicable date prior to publication of
this document), there were 501 employees employed by the Group as a whole, (of which there are 27
contractors in the Group) which includes the employees of Fiver, Glispa and Stucco Media.
8.
LONG TERM INCENTIVE PLAN
8.1
Overview
8.1.1 On 16 December 2014, the Company adopted the Long Term Incentive Plan (“LTIP”). Under
the LTIP, awards in the form of options (“Options”) over Ordinary Shares or conditional rights
to acquire Ordinary Shares (“Conditional Share Awards” and, together with Options,
“Awards”) may be made to employees and directors of the Group or to other key service
providers to the Group.
8.1.2 The Remuneration Committee supervises the operation of the LTIP.
8.1.3 Options may be granted either with a nil/nominal exercise price (“Nil Cost Options”), or an
exercise price equal to the market value of an Ordinary Share on the grant date (“Market Value
Options”). Conditional Share Awards will entitle the holder to receive Ordinary Shares at no
cost. Nil/nominal cost Options and Conditional Share Awards normally will be granted only to
directors and other senior managers or key service providers and will be subject to
appropriately challenging performance criteria reflecting the nil/nominal exercise price/cost.
8.1.4 The principal features of the LTIP are set out in paragraphs 8.2 to 8.17 below.
8.1.5 The LTIP includes a schedule (“CSOP Schedule”) pursuant to which Options may be granted
which satisfy the conditions of Schedule 4 of the Income Tax (Earnings & Pensions) Act 2003
(“Schedule 4”) and therefore benefit from certain tax advantages. Further details of the CSOP
Schedule are set out in paragraph 8.16 of this Part XV.
8.2
Participation
8.2.1 Participation in the LTIP is open to directors and employees of the Group and to other service
providers deemed by the Remuneration Committee to be key service providers.
8.2.2 Nil Cost Options have been granted under the LTIP and are outstanding in respect of a total of
262,500 Ordinary Shares. Of these, Nil Cost Options over a total of 75,000 Ordinary Shares
have been granted to Andrew Bull as set out in paragraph 9.2 of this Part XV and over a total
of 150,000 Ordinary Shares to Alt Equities Limited (the company which provides Mark Alper’s
services to the Group) as described in paragraph 19.13 of this Part XV. Details of the
performance and other conditions which apply to these Nil Cost Options are set out in
paragraph 8.5 of this Part XV. An Option was also granted to Charles Butler at the time of AIM
Admission, details of which are set out in paragraph 9.3 (and paragraph 8.5 in relation to the
applicable performance targets) of this Part XV.
8.3
Timing of grant of awards
Generally, Awards can only be made in the six week period following the announcement by the
Company of its results for any period. However, in circumstances which the Remuneration Committee
considers exceptional, Awards may be made outside these six week periods.
8.4
Individual participation limit
The maximum value of Ordinary Shares over which Awards under the LTIP may be granted to a
participant (“Participant”) in any financial year of the Company may not exceed 150 per cent. of his
basic salary for that financial year, or, in the case of a service provider, 150 per cent. of the base
engagement fee, (or for the preceding financial year, if greater) unless circumstances arise which the
Remuneration Committee determines justify granting Awards outside this limit. This limit does not
apply to the Option granted at AIM Admission to Charles Butler. It is intended to seek shareholder
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approval at the next annual general meeting of the Company to increase the normal individual
participation limit from 150 per cent. to 200 per cent. of basic salary.
8.5
Performance targets and vesting
8.5.1 Awards will normally only vest after a minimum period of three years from the date of grant.
Vesting of all Awards will normally be subject to the achievement of appropriate performance
and/or other conditions and will be subject to the Participant continuing to be an employee or
director of the Group at the time of vesting or in the case of an Award made to a service
provider, that person continuing to provide key services to the Group at the time of vesting.
8.5.2 Awards for executive directors and other employees may be subject to a further holding period
(which will normally be two years from vesting) following vesting at the discretion of the
Remuneration Committee.
8.5.3 In respect of the outstanding Nil Cost Options granted at the time of AIM Admission in
December 2014 (other than those granted to Charles Butler) 60 per cent. of the Awards will vest
in full upon achievement of 50 per cent. growth in earnings per share (“EPS”) measured over
the three financial years to 31 March 2017, with 90 per cent. of that tranche of the Awards
vesting at 45 per cent. growth in EPS over that period, and straight line vesting between
90 per cent. and 100 per cent. for EPS growth between 45 per cent. and 50 per cent. The
remaining 40 per cent. of the Awards will generally vest on the third anniversary of the AIM
Admission (subject to continued employment or engagement with the Group).
8.5.4 Where performance conditions have been set, if events subsequently happen which cause the
Remuneration Committee to consider that any performance condition no longer represents a
fair measure of performance, the Remuneration Committee may amend the performance
condition so as to be more appropriate.
8.5.5 The Option granted to Charles Butler at AIM Admission will vest if one of the following
performance conditions is achieved by 15 September 2019:
8.5.5.1 the Company’s share price as quoted on AIM or the Main Market as applicable,
increasing by 100 per cent. above the 2014 AIM Placing Price and remaining above
this level on average for a period of 20 consecutive dealing days;
8.5.5.2 the Company achieving adjusted EBITDA of £50 million in any one financial year as
determined by reference to the audited accounts of the Company for that financial year.
8.5.6 To the extent that any Award does not vest, it will forthwith lapse.
8.5.7 Awards in the form of Options which vest will normally be capable of exercise until the date
which is ten years less one day from the date of grant.
8.6
Ceasing to be an employee
8.6.1 Participants who cease to be employees or directors or service providers within the Group will
normally forfeit any unvested Awards.
8.6.2 However, if a Participant so ceases as a result of death, ill health, injury or disability,
redundancy or the sale of the company or business by which the Participant is engaged being
sold out of the Group, or for any other reason determined by the Remuneration Committee
(“good leaver”), that Participant will be allowed to retain any unvested Award which will vest,
subject to the achievement of any performance conditions applicable to that Award, on the
normal date as if that Participant had continued in employment within, (or had continued to
provide such services to), the Group. However, the number of Ordinary Shares in respect of
which the Award vests will then be reduced on a pro rata basis to take account of the period of
time since the date of grant during which the Participant was not an employee (unless the
Remuneration Committee determines not to apply such pro-rating).
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8.6.3 Where a Participant who is subject to the further two year holding period in relation to his
Award ceases to be employed by the Group, the award will normally be delivered at the earlier
of (i) the end of the original two year holding period and (ii) the expiry of such shorter period
as the Remuneration Committee may determine.
8.6.4 Notwithstanding this, the Remuneration Committee may instead determine that an Award
granted to a good leaver may vest early when the Participant leaves, to the extent to which, at
the date of cessation of employment or ceasing to provide services, the performance conditions
applicable to that Award have been satisfied (as determined by the Remuneration Committee
acting reasonably), and on a pro-rata basis taking into account the period of time which has
elapsed since the Option was granted (unless the Remuneration Committee determines not to
apply such pro-rating).
8.6.5 To the extent that Options held by a good leaver have vested or vest, they may be exercised for
a period of six months following the date of cessation of employment (or ceasing to provide
services), or following vesting if later, (or such longer period as the Remuneration Committee
determines) and will otherwise lapse at the end of that period. If a Participant has died, any
Awards held by such Participant which have vested or vest following his death may be
exercised for a period of 12 months following his death, or following the date of vesting, if
later, and will otherwise lapse at the end of that period. A Participant who leaves and is not a
good leaver will forfeit any unvested Awards.
8.6.6 A Participant who is dismissed for reasons entitling the company engaging such Participant to
terminate his contract without notice or pay in lieu of notice will also forfeit any vested Awards.
8.6.7 Special provisions apply to the Option granted to Charles Butler at AIM Admission if he ceases
to be an employee of the Group in certain circumstances:
8.6.7.1 if the Company terminates his employment (other than for acts of default on his part
as described in paragraph 10.3.2 of this Part XV) and he receives a payment in lieu of
notice and either (1) the Company share price performance condition referred to in
paragraph 8.5.5.1 above is satisfied within three months following his termination of
employment, or (2) such termination occurs in the final three months of a financial year
of the Company and the performance condition set out at paragraph 8.5.5.2 above is
achieved in respect of that financial year, then Charles Butler’s Option shall vest
notwithstanding his termination of employment; and
8.6.7.2 if the Company terminates his employment (other than for cause) after the end of a
financial year of the Company in respect of which the performance condition set out at
paragraph 8.5.5.2 is satisfied but prior to the date when the Company’s accounts for
that year have been audited, provided that the Company’s audited accounts confirm
that such performance condition has been satisfied, his Option shall vest
notwithstanding his termination of employment.
8.7
Change of control and other corporate events
8.7.1 If there is a change of control of the Company, or a compromise or arrangement leading to a
change of control of the Company or of substantially all of its undertaking and property, or a
voluntary winding up, the number of Ordinary Shares in respect of which Awards will vest will
be calculated on the basis of the extent to which the performance conditions applicable to those
Awards have been satisfied as at the date of the change of control (or other event), although the
Remuneration Committee may, if it considers the circumstances justify it, resolve that such
vesting shall be to a greater extent. The resulting number of Ordinary Shares will then be
reduced on a pro rata basis to reflect the reduced period between the date the Award was
granted and the date of the change of control (or other event), unless the Remuneration
Committee decides not to apply such pro-rating.
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8.7.2 Where appropriate, for example in the case of an amalgamation or reconstruction of the
Company, with the consent of the acquiring company, Participants may be required or allowed
to exchange Awards so as to operate over shares in the acquiring company.
8.7.3 On the occurrence of any demerger, reorganisation, reconstruction or amalgamation, demerger,
distribution or other transaction of the Company which in the reasonable opinion of the
Remuneration Committee may affect the current or future value of any Award, the
Remuneration Committee may vary or alter in any manner whatsoever the terms of any Award
so as to preserve the overall value of the Award. Such alteration may include amending any
performance condition and/or the terms on which an Award vests, and may provide for
immediate vesting on such event.
8.8
Dividend equivalent
On vesting of Awards, Participants may be awarded additional Ordinary Shares or cash equal in
value/amount to dividends paid during the performance period and any subsequent holding period in
respect of a number of Ordinary Shares equal to the number in respect of which the Award has vested.
8.9
Malus and clawback
8.9.1 Awards may be granted on terms that the Remuneration Committee may decide at the time of
vesting of an Award, or in the case of an Option, the time of exercise of the Option or at any
time before, that the number of Ordinary Shares subject to the Award shall be reduced on such
basis as it determines to be fair and reasonable, if it determines that there has been a material
misstatement in the audited accounts of any Group Company or in the consolidated accounts
of the Company, or that the assessment of any performance condition applicable to that Award
was based on a material error, or materially inaccurate or misleading information, or in the case
of action or conduct of the Participant which amounts to fraud or gross misconduct or has a
material detrimental effect on the reputation of the Group.
8.9.2 In addition, awards may be granted on terms that the Remuneration Committee may apply
clawback to all or a part of a Participant’s Award in the circumstances set out above during the
period of three years (or such other period not exceeding three years as the Remuneration
Committee may determine) following vesting of the Award. Clawback may be effected by
requiring the transfer of Ordinary Shares or payment of proceeds of sale of the Ordinary Shares
acquired on vesting/exercise.
8.10 Dilution limits
8.10.1 The number of new Ordinary Shares over which Awards may be granted under the LTIP in any
10 year period, when aggregated with the number of Ordinary Shares issuable pursuant to
awards made in such 10 year period under all other share plans operated by the Company, may
not exceed 5 per cent. of the number of Ordinary Shares in issue from time to time.
8.10.2 For so long as institutional guidelines recommend, Ordinary Shares transferred from treasury
to satisfy Awards will count as newly issued shares for these purposes.
8.10.3 Awards which have lapsed or been surrendered will not count towards this dilution limit.
8.11 Taxation
Under the terms of the LTIP, the Participant agrees to pay to the relevant Group Company the amount
of any income tax and social security contributions which such Group Company is required to
withhold and/or account for to any fiscal authority in respect of any Award granted under the LTIP. To
the extent permitted by law, such tax and social security liabilities may be deducted from other
payments due to the Participant and the relevant Group Company may withhold and sell Ordinary
Shares to which the Participant would otherwise be entitled under the Plan to raise funds in order to
meet such liabilities. To the extent permitted by law, such social security contributions may include
employer contributions.
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8.12 Variation of share capital
In the event of any increase or variation of share capital by way of capitalisation, rights issue,
sub-division, consolidation or reduction of share capital or otherwise, the number of Ordinary Shares
over which an Award has been made, and any purchase price in respect of such Awards may be adjusted
by the Remuneration Committee as it determines to be appropriate (but subject to applicable laws).
8.13 Amendment of the LTIP
8.13.1 The terms of the LTIP may be amended by the Remuneration Committee.
8.13.2 However, certain amendments which would benefit Participants may not be made without prior
shareholder approval unless the amendments are minor amendments which are to benefit the
administration of the LTIP or are necessary or desirable to comply with or take account of
applicable legislation or any change therein or to obtain or maintain favourable taxation,
exchange control or regulatory treatment for the Company (or any Group company) or for
Participants.
8.13.3 The provisions which may not generally be amended without shareholder approval are the basis
for determining an eligible person’s entitlement (or otherwise) to be granted an Award and/or to
acquire Ordinary Shares on the exercise of an Option and/or to become absolutely entitled to
Ordinary Shares subject to a Conditional Share Award (as the case may be) under the LTIP, the
persons to whom an Award may be granted, the individual and overall limits on the number of
Ordinary Shares over which Awards may be granted, the price at which Ordinary Shares may be
acquired under an Award, and the adjustment of Awards on a variation of share capital.
8.13.4 An amendment may not normally adversely affect the rights of a Participant except with such
Participant’s consent.
8.14 Term of the LTIP
The life of the LTIP will be ten years and no Awards may therefore be granted more than ten years
after the date on which it was approved by the Shareholders.
8.15 Pension benefits
None of the benefits which may be received under the LTIP will be pensionable.
8.16 Tax-Advantaged options
The LTIP permits the Company to grant Options which have tax advantages pursuant to the provisions
of Schedule 4. Where such Options (“Tax-Advantaged Options”) are granted, the terms of the LTIP
will be modified to comply with Schedule 4. In particular:
8.16.1 the aggregate subscription price (at the date of grant) of all outstanding Tax-Advantaged
Options granted to any one participant under the LTIP and under any other Schedule 4 share
option scheme adopted or operated by the Company (but excluding options granted under any
savings related share option scheme) may not exceed £30,000;
8.16.2 Tax-Advantaged Options may not have an exercise price less than the market value of an
Ordinary Share at the date of grant of the Option;
8.16.3 only employees and full-time directors will be eligible to be granted Tax-Advantaged Options;
8.16.4 there is no provision for payment of dividend equivalents;
8.16.5 in the case of leavers, Options may be exercised by leavers (in the case of leavers who are not
good leavers, at the discretion of the Committee) within the period of six months following
cessation of employment, or 12 months in the case of death. The categories of “good leaver”
also include retirees; and
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8.16.6 the provisions which allow the Remuneration Committee to alter or vary an Option on the
occurrence of a demerger, reorganisation, reconstruction or amalgamation, demerger,
distribution or other transaction of the Company shall not apply to Tax-Advantaged Options.
8.17 Employee benefit trust
8.17.1 The administration and operation of the LTIP is generally facilitated by the trustee (“Trustee”)
of a non-UK resident employee benefit trust (“EBT”). The Trustee of the LTIP is Leumi
Overseas Trust Corporation Limited, an independent professional trustee. In exercising its
discretion, the Trustee will have regard to the recommendations of the Remuneration
Committee.
8.17.2 The EBT may subscribe for Ordinary Shares or may purchase Ordinary Shares in the market
in order to satisfy awards made under the LTIP. In respect of Ordinary Shares acquired by
subscription, the subscription price to be paid by the EBT is expected to be the market value
of the Ordinary Shares.
8.17.3 The duration of the EBT is 125 years.
8.17.4 The EBT will not hold more than 5 per cent. of the issued ordinary share capital of the
Company without shareholder approval and the trustees of the EBT will not exercise any voting
rights in respect of Ordinary Shares held in the EBT from time to time except for voting rights
in respect of Ordinary Shares which are beneficially owned by any beneficiary of the EBT and
in relation to which the EBT has received voting instructions from that beneficiary.
The Company (or other Group Companies) will fund the EBT to enable it to acquire Ordinary
Shares.
9.
DIRECTORS, PROPOSED DIRECTORS AND SENIOR MANAGERS AND OTHER
INTERESTS
9.1
As at 20 January 2016 (being the latest practicable date prior to publication of this document), the
interests (all of which are beneficial unless otherwise stated), whether direct or indirect, of the
Directors, the Proposed Directors and the Senior Managers and their families in the issued share
capital of the Company and the existence of which is known to or could, with reasonable diligence,
be ascertained by that Director, Proposed Directors or Senior Manager, are as follows:
As at the date of this document
Number
Percentage of
of Ordinary
Ordinary
Shares
Shares
Directors
Neil Sachdev
Charles Butler
Andrew Bull
John Le Poidevin
Thomas Teichman
Proposed Directors
David Brown
Sharon Baylay
Georg Bucher
Senior Managers
Mark Alper
Caroline Grange
47,471
192,415
73,988
47,471
30,393
0.0101
0.0411
0.0158
0.0101
0.0065
Nil
Nil
Nil
Nil
Nil
Nil
147,4211
9,000
Notes:
1
22,421 Ordinary Shares registered in the name of Alt Equities Limited.
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0.0315
0.0019
9.2
As at the date of Main Market Admission, the following options over Ordinary Shares have been
granted pursuant to the LTIP, to the following Directors, Proposed Directors and Senior Managers for
nil consideration:
Value or
number of
Ordinary Shares
under option
Directors
Charles Butler
Andrew Bull
Senior Manager
Mark Alper(1)
£1,000,000 (value)
75,000 (shares)
150,000
Date of
grant
Exercise
price
Last date for
exercise
AIM Admission
AIM Admission
Nominal
Nominal
Ten years from grant
Ten years from grant
AIM Admission
Nominal
Ten years from grant
Notes:
1
Options granted in the name of Alt Equities Limited.
9.3
As at the date of AIM Admission, an Option was granted to Charles Butler pursuant to the LTIP which
is outstanding. On exercising the Option, Charles Butler will be entitled to receive such number of
Ordinary Shares which, on the vesting date, have a value of £1.0 million. Vesting of this Option is
subject to achievement of one of two performance conditions, details of which are set out in paragraph
8.5 of this Part XV. Details of the performance conditions applicable to the other Options listed in the
table in paragraph 9.2 above are also set out in paragraph 8.5 of this Part XV.
9.4
Save as disclosed in paragraphs 9.1, 9.2 and 9.3 of this Part XV, none of the Directors, the Proposed
Directors and the Senior Managers have any interest in the share capital of the Company or of any of
its subsidiaries nor does any member of his or her family have any such interest, whether beneficial
or non-beneficial.
10.
DIRECTORS’, PROPOSED DIRECTORS’ SERVICE AGREEMENTS AND LETTERS OF
APPOINTMENT
10.1 Details of the Directors, the Proposed Directors and the Senior Managers, their business addresses and
functions in the Company and details of their other directorships, partnerships and positions held are
set out in paragraphs 1 and 2 of Part XII (Directors, Proposed Directors, Senior Managers and
Corporate Governance) of this document.
Executive Directors
10.2 Each of the Executive Directors has a service agreement with the Company. Details of these service
agreements are set out below:
Executive Director
Date of agreement
Current salary (per annum)
Charles Butler
Andrew Bull
16 December 2014
12 December 2014
£350,000
£150,000
10.3 Charles Butler
10.3.1 General terms
10.3.1.1 On 16 December 2014, the Company entered into a service agreement with Charles
Butler to be employed in the capacity of Chief Executive Officer (the “Service
Agreement”). His current annual gross base salary payable by the Company is
£350,000 (increased from £250,000 with effect from 8 December 2015) which shall
be reviewed annually by the Remuneration Committee but is not necessarily
increased.
10.3.1.2 Under the terms of the Service Agreement, Mr Butler will be eligible to participate
in an annual bonus scheme on such terms and subject to such conditions as may be
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decided from time to time by the Remuneration Committee. It is intended that the
annual bonus opportunity will be a maximum of 100 per cent. of Mr Butler’s basic
salary, subject to performance conditions aligned to the objectives of the Company.
A portion of the award may be deferred into Ordinary Shares. No payment will be
made under the bonus scheme if, on the payment date, Mr Butler has given notice of
termination of his employment or he is no longer employed by any member of the
Group.
10.3.1.3 Mr Butler will be eligible to receive an annual award under the LTIP of up to
200 per cent. of his basic salary, subject to performance conditions aligned to the
Company’s long-term strategic objectives. The current intention is that awards in
2016 will be based on: net asset value growth per share; relative total shareholder
return against a comparator index, as determined by the Remuneration Committee;
and strategic objectives aligned with the Company’s long-term strategic objectives.
The Remuneration Committee reserves the right to vary the performance conditions
and the weightings applied to them.
10.3.1.4 Any incentive, benefit or compensation arrangements under which Mr Butler may
receive payment are subject to limitation or modification to the extent the Company
reasonably deems necessary in order to remain consistent with any applicable
remuneration policy, or to comply with applicable laws, regulation and guidance,
including any regulations or guidance published by the FCA. Mr Butler shall only be
eligible to and shall only be entitled to be paid a bonus subject to any conditions as
the Remuneration Committee sees fit in its absolute discretion.
10.3.1.5 Mr Butler is entitled to 26 days’ paid holiday (in addition to public holidays); private
medical expenses insurance cover and a company pension contribution of an amount
equivalent to 8 per cent. of his salary per annum into a nominated pension plan.
10.3.2 Termination provisions
10.3.2.1 The Service Agreement will continue unless terminated by either the Company or
Mr Butler by providing the other with at least six months’ written notice. The
Company may terminate the Service Agreement with immediate effect and without
compensation in the event of certain specified acts of default of Mr Butler, which
include but are not limited to: (i) a failure to comply with a lawful order or direction
of the board of directors of the Company; (ii) a serious or repeated breach of the
Service Agreement; (iii) gross or serious misconduct; (iv) bankruptcy; (v) being
prohibited from acting as a director; (vi) being guilty of a breach of the rules or
regulations of the UK Listing Authority or any other regulatory authority or
legislation that relates to the business of the Company.
10.3.2.2 The Company, at its discretion, may terminate his employment at any time with
immediate effect by making a payment in lieu of notice equal to his salary for any
unexpired period of notice. The Company may pay the payment in lieu of notice in
instalments and require Mr Butler to mitigate his loss.
10.3.2.3 If the Company makes a payment in lieu of notice, if either of the two performance
criteria are achieved within the following three months, Mr Butler will remain
entitled to the Option described in paragraph 9.3 of this Part XV.
10.3.2.4 Mr Butler is subject to obligations regarding confidentiality and intellectual property
and restrictive covenants following the termination of his employment that vary in
length between six and 12 months and include: non-competition; non-solicitation
and non-dealing with clients and potential clients and business partners;
non-solicitation of employees and non-interference with suppliers.
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10.4 Andrew Bull
10.4.1 General terms
10.4.1.1 On 12 December 2014, the Company entered into a service agreement with Andrew
Bull to be employed in the capacity of Chief Finance Officer (the “Service
Agreement”). His current annual gross base salary payable by the Company is
£150,000 which shall be reviewed annually by the Remuneration Committee, but is
not necessarily increased.
10.4.1.2 Under the terms of the Service Agreement, Mr Bull will be eligible to participate in
an annual bonus scheme on such terms and subject to such conditions as may be
decided from time to time by the Remuneration Committee. It is intended that the
annual bonus opportunity will be a maximum of 100 per cent. of his basic salary,
subject to performance conditions aligned to the objectives of the Company.
A portion of the award may be deferred into Ordinary Shares. No payment will be
made under the bonus scheme if, on the payment date, Mr Bull has given notice of
termination of his employment or he is no longer employed by any member of the
Group. As at the date of this prospectus, it has been agreed between the Company
and Mr Bull that he will be awarded a one-off cash bonus of £75,000 on completion
of Main Market Admission.
10.4.1.3 Mr Bull will be eligible to receive an annual award under the LTIP of up to 200 per
cent. of his basic salary, subject to performance conditions aligned to the Company’s
long-term strategic objectives. The performance conditions for these awards will be
in line with the performance conditions attached to the Chief Executive Officer’s
LTIP awards, as set out above.
10.4.1.4 Any incentive, benefit or compensation arrangements under which Mr Bull may
receive payment are subject to limitation or modification to the extent the Company
reasonably deems necessary in order to remain consistent with any applicable
remuneration policy, or to comply with applicable laws, regulation and guidance,
including any regulations or guidance published by the FCA. Mr Bull shall only be
eligible to and shall only be entitled to be paid a bonus subject to any conditions as
the Remuneration Committee sees fit in its absolute discretion.
10.4.1.5 Mr Bull is entitled to 24 days’ paid holiday (in addition to public holidays) and shall
be eligible to participate in such pension and benefits arrangements as the
Remuneration Committee may determine.
10.4.2 Termination provisions
10.4.2.1 The Service Agreement will continue unless terminated by either the Company or
Mr Bull by providing the other with at least six months’ written notice. The
Company may terminate the Service Agreement with immediate effect and without
compensation in the event of certain specified acts of default of Mr Bull, which
include but are not limited to: (i) a failure to comply with a lawful order or direction
of the Board; (ii) a serious or repeated breach of the Service Agreement; (iii) gross
or serious misconduct; (iv) bankruptcy; (v) being prohibited from acting as a
director; (vi) being guilty of a breach of the rules or regulations of the UK Listing
Authority or any other regulatory authority or legislation that relates to the business
of the Company.
10.4.2.2 The Company, at its discretion, may terminate his employment at any time with
immediate effect by making a payment in lieu of notice equal to his salary for any
unexpired period of notice. The Company may pay the payment in lieu of notice in
instalments and require Mr Bull to mitigate his loss.
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10.4.2.3 Mr Bull is subject to obligations regarding confidentiality and intellectual property
and restrictive covenants following the termination of his employment that vary in
length between six and 12 months and include: non-competition; non-solicitation
and non-dealing with clients and potential clients and business partners;
non-solicitation of employees and non-interference with suppliers.
Non-Executive Directors
10.5 Each of the Non-Executive Directors has a letter of appointment with the Company. Details of these
letters of appointment are set out below:
Non-Executive Director Date of letter
Neil Sachdev
John Le Poidevin
Thomas Teichman
Committee Chairmanships/
Other Boar Positions
16 December 2014 Chairman of the Nomination
Committee
Audit Committee
Remuneration Committee
16 December 2014 Chairman of the Audit Committee
Remuneration Committee
Nomination Committee
Senior Independent Director
5 December 2014
Chairman of the Remuneration
Committee
Audit Committee
Nomination Committee
Current fee
(per annum)
£230,000
£77,500
£66,000
10.6 Neil Sachdev
Neil Sachdev was appointed as Non-Executive Chairman of the Company on 5 December 2014. His
current annual fee payable by the Company is £230,000 (increased from £95,000 with effect from
1 September 2015) The Company shall reimburse Mr Sachdev for all reasonable and properly
documented expenses incurred in performing his duties. Mr Sachdev is subject to intellectual property
obligations and confidentiality undertakings without limitation in time until the confidential
information becomes available to the public generally (other than by reason of their breach). The
appointment of Mr Sachdev is for an initial term of three years unless terminated earlier by either
party giving to the other not less than three months’ prior written notice during the first nine months
of service and thereafter not less than six months’ prior written notice. If Mr Sachdev is not re-elected
to his position as a director of the Company by the shareholders or if at any time he resigns from
office, his appointment shall terminate automatically and with immediate effect.
10.7 John Le Poidevin
John Le Poidevin was appointed as the Senior Independent Non-Executive Director of the Company
on 5 December 2014. His current annual fee payable by the Company is £77,500 (increased from
£60,000 with effect from 8 December 2015). The Company shall reimburse Mr Le Poidevin for all
reasonable and properly documented expenses incurred in performing his duties. Mr Le Poidevin is
subject to intellectual property obligations and confidentiality undertakings without limitation in time
until the confidential information becomes available to the public generally (other than by reason of
their breach). The appointment of Mr Le Poidevin is for an initial term of three years unless
terminated earlier by either party giving to the other not less than three months’ prior written notice.
If Mr Le Poidevin is not re-elected to his position as a director of the Company by the shareholders
or if at any time he resigns from office, his appointment shall terminate automatically and with
immediate effect.
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10.8 Thomas Teichman
Thomas Teichman was appointed as a Non-Executive Director of the Company on 5 December 2014.
His current annual fee payable by the Company is £66,000 (increased from £50,000 with effect from
8 December 2015). The Company shall reimburse Mr Teichman for all reasonable and properly
documented expenses incurred in performing his duties. Mr Teichman is subject to intellectual
property obligations and confidentiality undertakings without limitation in time until the confidential
information becomes available to the public generally (other than by reason of their breach). The
appointment of Mr Teichman is for an initial term of three years unless terminated earlier by either
party giving to the other not less than three months’ prior written notice. If Mr Teichman is not reelected to his position as a director of the Company by the shareholders or if at any time he resigns
from office, his appointment shall terminate automatically and with immediate effect.
10.9 Non-Executive Director fees
Each Non-Executive Director is entitled to an annual basic fee of £55,000. The Senior Independent
Director receives an additional fee of £10,000. The Chairman of the Audit Committee and the
Chairman of the Remuneration Committee also receive an additional fee of £12,500 and £11,000
respectively. Given the significant additional work that has been required in relation to the Main Market
Admission and will be required in relation to establishing the appropriate governance processes and
committee activities following Main Market Admission, John Le Poidevin and Thomas Teichman will
also each receive an additional fee of £10,000.
Proposed Directors
10.10 David Brown
10.10.1General terms
10.10.1.1 On 21 January 2016, the Company entered into a service agreement with David
Brown to be employed in the capacity of Chief Financial Officer (the “Service
Agreement”). David’s appointment will be effective from 1 March 2016 or earlier if
a start date in advance of this date can be agreed. His annual gross base salary
payable by the Company is £235,000 which shall be reviewed annually by the
Remuneration Committee but is not necessarily increased.
10.10.1.2 Under the terms of the Service Agreement, Mr Brown will be eligible to participate
in an annual bonus scheme on such terms and subject to such conditions as may be
decided from time to time by the Remuneration Committee. It is intended that the
annual bonus opportunity will be a maximum of 100 per cent. of Mr Brown’s basic
salary, subject to performance conditions aligned to the objectives of the Company.
No payment will be made under the bonus scheme if, on the payment date,
Mr Brown has given notice of termination of his employment or he is no longer
employed by any member of the Group.
10.10.1.3 Mr Brown will be eligible to receive an annual award under the LTIP of up to 150
per cent. of his basic salary (or up to 200 per cent. if the Shareholders approve the
increase in the participation limit as referred to in paragraph 8.4 of this Part XV),
subject to performance conditions aligned to the Company’s long-term strategic
objectives. The current intention is that awards in 2016 will be based on: net asset
value growth per share; relative total shareholder return against a comparator index,
as determined by the Remuneration Committee; and strategic objectives aligned with
the Company’s long-term strategic objectives. The Remuneration Committee
reserves the right to vary the performance conditions and the weightings applied to
them.
10.10.1.4 Any incentive, benefit or compensation arrangements under which Mr Brown may
receive payment are subject to limitation or modification to the extent the Company
reasonably deems necessary in order to remain consistent with any applicable
307
remuneration policy, or to comply with applicable laws, regulation and guidance,
including any regulations or guidance published by the FCA. Mr Brown shall only
be eligible to and shall only be entitled to be paid a bonus subject to any conditions
as the Remuneration Committee sees fit in its absolute discretion.
10.10.1.5 Mr Brown is entitled to 25 days’ paid holiday (in addition to public holidays); private
medical expenses insurance cover and a company pension contribution of an amount
equivalent to 6 per cent. of his salary per annum into a nominated pension plan.
10.10.2 Termination provisions
10.10.2.1 The Service Agreement will continue unless terminated by either the Company or
Mr Brown by providing the other with at least six months’ written notice. The
Company may terminate the Service Agreement with immediate effect and without
compensation in the event of certain specified acts of default of Mr Brown, which
include but are not limited to: (i) a failure to comply with a lawful order or direction
of the board of directors of the Company; (ii) a serious or repeated breach of the
Service Agreement; (iii) gross or serious misconduct; (iv) bankruptcy; (v) being
prohibited from acting as a director; (vi) being guilty of a breach of the rules or
regulations of the UK Listing Authority or any other regulatory authority or
legislation that relates to the business of the Company.
10.10.2.2 The Company, at its discretion, may terminate his employment at any time with
immediate effect by making a payment in lieu of notice equal to his salary for any
unexpired period of notice. The Company may pay the payment in lieu of notice in
instalments and require Mr Brown to mitigate his loss.
10.10.2.3 Mr Brown is subject to obligations regarding confidentiality and intellectual property
and restrictive covenants following the termination of his employment that vary in
length between six and 12 months and include: non competition; non solicitation and
non dealing with clients and potential clients and business partners; non solicitation
of employees and non interference with suppliers.
10.11 Georg Bucher
10.11.1 General Terms
10.11.1.1 On 23 June, 2015, the Company entered into a service agreement with Georg Bucher
to be employed in the capacity of Head of Corporate Development and Capital
Markets (the “Service Agreement”). His current annual gross salary payable by the
Company is £200,000, which shall be reviewed annually by the Remuneration
Committee but is not necessarily increased.
10.11.1.2 Under the terms of the Service Agreement, Mr Bucher shall be entitled to a one-off
cash payment of £100,000 (subject to such statutory deductions as are required by
law) on condition of, and within 30 days following Main Market Admission.
10.11.1.3 Under the terms of the Service Agreement, Mr Bucher will be eligible to participate
in an annual bonus scheme on such terms and conditions as may be decided from
time to time by the Remuneration Committee. A portion of the award may be
deferred into Ordinary Shares. No payment will be made under the bonus scheme if,
on the payment date, Mr Bucher has given notice of termination of his employment
or he is no longer employed by any member of the Group.
10.11.1.4 Mr Bucher will be eligible to receive an annual award under the LTIP of up to
100 per cent. of his basic salary (or up to 200 per cent. if the Shareholders approve
the increase in the participation limit as referred to in paragraph 8.4 of this Part XV),
subject to performance conditions aligned to the Company’s long-term strategic
objectives. The performance conditions for these awards will be in line with the
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performance conditions attached to the Chief Executive Officer’s LTIP awards, as set
out above.
10.11.1.5 Any incentive, benefit or compensation arrangements under which Mr Bucher may
receive payment or other entitlements are subject to limitation or modification to the
extent the Company or any member of the Group reasonably deems necessary in
order to remain consistent with any applicable remuneration policy, or to comply
with applicable laws, regulation and guidance, including any regulations or guidance
published by the FCA. Mr Bucher shall only be eligible for and shall only be entitled
to be paid a bonus subject to any conditions as the Remuneration Committee sees fit
in its absolute discretion.
10.11.1.6 Mr Bucher is entitled to 25 working days' paid holiday (in addition to public
holidays) and a company pension contribution of an amount equivalent to 6 per cent.
of his salary per annum into a nominated pension plan. He is also entitled to
participate in the private health care programme (when initiated by the Company).
10.11.2 Termination Provisions
10.11.2.1 The Service Agreement will continue until terminated by either the Company or Mr
Bucher by providing the other with at least six months’ written notice. The Company
may terminate the Service Agreement with immediate effect and without
compensation in the event of certain specified acts of default of Mr Bucher, which
include but are not limited to: (i) a failure to comply with a lawful order or direction
of the board of directors of the Company; (ii) a serious or repeated breach of the
Service Agreement; (iii) gross or serious misconduct; (iv) bribery, corruption, fraud,
dishonesty or conduct tendering himself, the Company or the Group into any
criminal offence; (v) bankruptcy; (vi) being prohibited from acting as a director; (vii)
membership disqualification with a regulatory body which is reasonably required by
the Company for him to carry out his duties; (viii) a failure to accept terms and
circumstances of employment if the Company is wound up for the purposes of
reconstruction or amalgamation required under the Service Agreement; (ix)
resignation by Mr Bucher other than at the request of the Company; (x) being guilty
of a breach of the rules or regulations of any regulatory authority or legislation that
relates to the business of the Company.
10.11.2.2 The Company, at its discretion may terminate his employment at any time with
immediate effect by making a payment in lieu of notice equal to his salary for any
unexpired period of notice. The Company may pay the payment in lieu of notice in
instalments and require Mr Bucher to mitigate his loss.
10.11.2.3 Mr Bucher is subject to obligations regarding confidentiality and intellectual
property and restrictive covenants following the termination of his employment that
vary in length between six and 12 months and include: non competition; non
solicitation and non dealing with clients and potential clients and business partners;
non solicitation of employees and non interference with suppliers.
10.12 Sharon Baylay
Sharon Baylay is proposed to be appointed as a Non-Executive Director of the Company on
1 February 2016. Her proposed annual fee to be payable by the Company will be £55,000. The
Company shall reimburse Ms Baylay for all reasonable and properly documented expenses incurred
in performing her duties. Ms Baylay will be subject to intellectual property obligations and
confidentiality undertakings without limitation in time until the confidential information becomes
available to the public generally (other than by reason of their breach). The appointment of Ms Baylay
is to be for an initial term of three years unless terminated earlier by either party giving the other not
less than three months’ prior written notice. If Ms Baylay is not re-elected to her position as a director
309
of the Company by the Shareholders or if at any time she resigns from office, her appointment shall
terminate automatically and with immediate effect.
10.13 Directors’ remuneration
For the year ended 31 March 2015, the aggregate total remuneration paid (including contingent or
deferred compensation) and benefits in kind granted (under any description whatsoever) to each of the
Directors and Senior Managers by the Group was approximately £1,791,150.
Under the terms of their service contracts, letters of appointment and applicable incentive plans, in the
financial year ended 31 March 2015, the Directors were remunerated as set out below:
Director
Charles Butler1
Base
salary
(£)
136,000
Benefits
(£)3
600,000
Total (excl
pension)
(£)4
736,000
Andrew Bull2
126,000
245,000
371,000
–
–
371,000
Nilesh Sachdev
–
–
–
28,000
–
28,000
John Le Poidevin
–
–
–
17,000
–
17,000
Thomas Teichman
–
–
–
16,000
–
16,000
Fees
(£)
–
Pension
(£)
11,000
Total (incl
pension)
(£)
747,000
Notes:
1.
Includes £26,000 paid by a subsidiary company before incorporation of the Company.
2.
Includes £65,000 paid by a subsidiary company before incorporation of the Company.
3.
Benefits represent annual incentive payments payable to each Executive Director.
4.
This figure represents the combined value of base salary and benefits.
10.14 There are no arrangements under which any Director or the Proposed Directors has waived or agreed
to waive future emoluments nor have there been any such waivers of emoluments during the financial
year immediately preceding the date of this document.
10.15 There are no outstanding loans granted by any member of the Group to any Director or the Proposed
Directors nor are there any guarantees provided by any member of the Group for the benefit of any
Director or the Proposed Directors.
10.16 No Director nor Proposed Director has or has had any interest in any transactions which are or were
unusual in their nature or conditions or are or were significant to the business of the Group or any of
its subsidiary undertakings and which were effected by the Group or any of its subsidiaries during the
current or immediately preceding financial year or during an earlier financial year and which remain
in any respect outstanding or unperformed.
11.
SIGNIFICANT SHAREHOLDERS
11.1 As at 20 January 2016 (being the latest practicable date prior to publication of this document), so far
as the Directors and the Proposed Directors are aware, the only persons who are or will be interested,
directly or indirectly, in 3 per cent. or more of the Company’s capital or voting rights, being the level
at which notification is required to be made to the Company pursuant to the Disclosure and
Transparency Rules and the Articles are:
Shareholder
Major Shareholder
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Number of
Ordinary Shares
Percentage of
Ordinary Shares
334,187,500
71.3 per cent.
11.2 Immediately following Main Market Admission:
11.2.1 other than the Major Shareholder, the Company is not aware of any persons who, directly or
indirectly, jointly or severally, will exercise or could exercise control over the Company; and
11.2.2 no Shareholder has or will have different voting rights.
11.3 Rule 9 disclosures
11.3.1 Overview
For the purposes of Rule 9 of the Takeover Code (which is described in paragraph 23 of this
Part XV), the Major Shareholder and its Affiliated Persons will be deemed to be acting in
concert. In addition, the Company understands that the Takeover Panel will presume the Major
Shareholder, its parent, subsidiaries and fellow subsidiaries, and their associated companies,
and companies of which such companies are associated companies, all with each other (for this
purpose ownership or control of 20 per cent. or more of the equity share capital of a company
is regarded as the test of associated company status), to be acting in concert (the “Concert
Party”).
11.3.2 Whitewash procedure
11.3.2.1 When a company redeems or purchases its own voting shares, under Rule 37 of the
Takeover Code any resulting increase in the percentage of shares carrying voting
rights in which a person or group of persons acting in concert is interested will be
treated as an acquisition for the purpose of Rule 9 of the Takeover Code. Rule 37 of
the Takeover Code provides that, subject to prior consultation, the Takeover Panel
will normally waive any resulting obligation to make a general offer if there is a vote
of independent shareholders and a procedure along the lines of that set out in
Appendix 1 to the Takeover Code is followed. Appendix 1 to the Takeover Code sets
out the procedure which should be followed in obtaining that consent of independent
shareholders. Under Note 1 on Rule 37 of the Takeover Code, a person who comes
to exceed the limits in Rule 9.1 in consequence of a company’s purchase of its own
shares will not normally incur an obligation to make a mandatory offer unless that
person is a director, or the relationship of the person with any one or more of the
directors is such that the person is, or is presumed to be, acting in concert with any
of the directors. However, there is no presumption that all the directors (or any two
or more directors) are acting in concert solely by reason of a proposed purchase by
a company of its own shares, or the decision to seek shareholders’ authority for any
such purchase.
11.3.2.2 Under Note 2 on Rule 37 of the Takeover Code, the exception in Note 1 on Rule 37
described above will not apply, and an obligation to make a mandatory offer may
therefore be imposed, if a person (or any relevant member of a group of persons
acting in concert) has acquired an interest in shares at a time when he, she or it had
reason to believe that such a purchase of its own shares by the company would take
place. However, Note 2 will not normally be relevant unless the relevant person has
knowledge that a purchase for which requisite shareholder authority exists is being,
or is likely to be, implemented (whether in whole or in part).
11.3.2.3 The Takeover Panel must be consulted in advance in any case where Rule 9 of the
Takeover Code might be relevant. This will include any case where a person or group
of persons acting in concert is interested in shares carrying 30 per cent. or more but
does not hold shares carrying more than 50 per cent. of the voting rights of a
company, or may become interested in 30 per cent. or more on full implementation
of the proposed purchase by the company of its own shares. In addition, the Takeover
Panel should always be consulted if the aggregate interests in shares of the directors
and any other persons acting in concert, or presumed to be acting in concert, with any
311
of the directors amount to 30 per cent. or more, or may be increased to 30 per cent.
or more on full implementation of the proposed purchase by the company of its own
shares.
12.
RELATED PARTY TRANSACTIONS
12.1 Deed of Conduct
12.1.1 On 13 March 2014, the Company entered into an agreement (“Deed of Conduct”) with
Westline Solutions Limited (“WSL”), GHT, Diamondcourse Limited (“Diamondcourse”),
Luxurious Property Investments Limited (“LPIL”), Richard Caring (“RC”) and Westcoast
International Limited (“WIL”) in relation to the conduct of a claim made by certain members
of the Group (“Claimants”) against Irish Bank Resolution Corporation Limited (in special
liquidation) (“IBRC”). The claim against IBRC arose from a loan made by Anglo Irish Bank
(as it was then known) to certain members of the Group, further details of which are set out in
paragraph 16 of this Part XV (“IBRC Claim”). It was (effectively) agreed that the existing
shareholders (Diamondcourse and WSL) would retain an interest in any proceeds resulting
from the IBRC Claim. The Deed of Conduct was entered into on the same date as two share
purchase agreements pursuant to which GHT purchased the entire issued share capital of
CMHC – 50 per cent. from Diamondcourse and 50 per cent. from WSL (which held the legal
title with the beneficial title split between WIL and RC) (“CMHC Acquisition”).
12.1.2 Under the terms of the Deed of Conduct, WSL, LPIL and Diamondcourse agreed:
12.1.2.1 to provide funding to the Claimants in relation to the IBRC Claim (including in the
event of an award of costs against any of the Claimants) if and when costs of the
IBRC Claim exceed £1,500,000 to be made in the following proportions – WSL
50 per cent., Diamondcourse 25 per cent. and LPIL 25 per cent.;
12.1.2.2 that WSL will be entitled to an amount equal to 50 per cent. of any sum payable to
the Claimants in respect of the IBRC Claim less (i) claim costs (including amounts
payable to IBRC), (ii) amounts payable pursuant to an agreement between Mark
Alper and CMHC dated 22 January 2014, (iii) tax and (iv) interest, (“IBRC
Proceeds”). Any such payment to WSL is to be classed as additional consideration
in relation to the shares in CMHC sold to GHT by WSL;
12.1.2.3 that Diamondcourse shall be entitled to receive 50 per cent. of the IBRC Proceeds
(of which 25 per cent. is to be paid to LPIL pursuant to the terms of an agreement
dated 7 December 2012 made between, inter alia, Diamondcourse and LPIL
(“Principal Agreement”);
12.1.2.4 to certain matters in relation to how the IBRC Claim will be conducted including,
amongst other things: (i) that no material claim decision (as defined in the Deed of
Conduct) shall be made without three out of four votes in favour of it being made
(where WSL has two votes and Diamondcourse and LPIL have one vote each);
(ii) that day to day running of the IBRC Claim shall be undertaken by Mark Alper or
someone proposed by CMHC; and (iii) that an appeal against a judgment made
against any Claimant may only be made by unanimous agreement of WSL,
Diamondcourse and LPIL; and
12.1.2.5 that in the event of a sale of shares in CMHC, the purchaser of such shares should
provide WSL with a deed of adherence to the Deed of Conduct.
12.1.3 The terms of the Deed of Conduct were varied pursuant to the terms of the Release Agreement
summarised in paragraph 19.16 of this Part XV.
12.1.4 On 16 December 2014, Divanyx Investments Limited entered into a deed of adherence to the
Deed of Conduct, pursuant to which Divanyx Investments Limited agreed to observe, perform
and be bound by all of the terms of the Deed of Conduct and assume the benefit of the Deed
312
of Conduct as if references to GHT in the Deed of Conduct were references to Divanyx
Investments Limited.
12.2 On 10 September 2014, Northernstar Investments Limited and Crowndeal Services Limited entered
into a domain name transfer agreement, pursuant to which Crowndeal Services Limited acquired
certain domain names, including ‘market.com’ for a purchase price of USD 486,000 inclusive of all
applicable taxes. Northernstar Investments Limited has given warranties and representations as to title
and capacity. Northernstar Investments Limited is a related party to the Company by virtue of
common control, via the Major Shareholder.
12.3 On 18 November 2014 and 24 November 2014, Market Tech UK Ltd and Fiver (each wholly owned
subsidiaries of the Company) each entered into separate merchant services agreements (“MSAs”) on
substantially similar terms with Safecharge Limited (an associate of the Major Shareholder), both of
which were amended on 3 December 2014. The MSAs relate to the provision of electronic payment
services and have been entered into in accordance with Safecharge’s standard terms and conditions.
The MSAs are each entered into for a minimum period of 36 months (“Minimum Period”) and a
minimum fee of €5,000 per month. The MSAs are terminable by either party for convenience on
30 days’ prior written notice. Safecharge also retains the right to suspend or terminate the provision
of the services under the MSAs as a result of any breach by Market Tech UK Ltd and Fiver London
Ltd of their respective obligations. In the event that either MSA is terminated for any reason within
the Minimum Period, Safecharge shall be entitled to a payment from the relevant party to be
calculated by the multiplication of the minimum monthly fee (as set out above) by the number of
months remaining in the Minimum Period.
12.4 On 18 November 2014 and 24 November 2014, each of Market Tech UK Ltd and Fiver (each wholly
owned subsidiaries of the Company) entered into “card not present” card processing arrangements
(“CNPC Processing Agreements”) with WorldPay (UK) Limited (“WorldPay”) and Safecharge
Limited (an associate of the Major Shareholder). WorldPay is party to the CNPC Processing
Agreements to acquire Market Tech UK Ltd’s and Fiver’s payment transactions on behalf of
Safecharge Limited. The CNPC Processing Agreements contain general conditions and are valid for
the same term as the MSAs, as described in paragraph 12.3 of this Part XV. Under the CNPC
Processing Agreements, WorldPay and Safecharge have the right to terminate or suspend the provision
of services in certain limited circumstances and Market Tech UK Ltd and Fiver have the right to
terminate without cause on one month’s notice.
12.5 On 16 December 2014, Teddy Sagi entered into an advisory services agreement with the Company
pursuant to which Teddy Sagi will, as and when requested to do so by the Company, provide advisory
services to the Group for a nominal fee of £1 per annum until either Teddy Sagi ceases to be interested
(whether legally or beneficially) in the Ordinary Shares, or either party terminates the agreement
following its fifth anniversary, whichever is the earlier. The agreement provides that Mr Sagi will
provide advice and input to the Group on such matters that it (acting by its board of directors and/or
executive management) may reasonably request from time to time (including without limitation
advice relating to current and/or proposed e-commerce activities and assisting with the appraisal of
any potential investment, acquisition or other commercial opportunity for the Group).
12.6 On 16 December 2014, the Group entered into a working capital loan facility with the Major
Shareholder, for an unsecured amount of £60 million to finance the general working capital
requirements of the Group under which the Major Shareholder is the lender and the Company is the
Borrower (“Working Capital Loan”). The Working Capital Loan had a fixed rate of interest of 4 per
cent. per annum (8 per cent. in respect of overdue amounts), with interest payable quarterly in arrears
on the last day of each quarter, although interest may instead be capitalised at the option of the
Company. The Working Capital Loan was available for drawing by way of a number advances at any
time until the second anniversary of the date of the Working Capital Loan following a written request.
This arrangement has now been terminated.
12.7 On 27 February 2015, the Group entered into an acquisition loan facility with the Major Shareholder,
in connection with the acquisition of The Interchange Building and Camden Wharf. This acquisition
313
facility was for an unsecured loan of £125 million. This acquisition facility had a fixed interest rate of
4 per cent. per annum payable quarterly in arrears and was available to draw down until 30 June 2015.
This arrangement has now been terminated.
12.8 On 16 April 2015, the Group entered into an acquisition loan facility with the Major Shareholder, in
connection with the acquisition and development of Utopia Village. This acquisition facility was for
an unsecured loan of £50 million to provide finance, if requested by the Company, in relation to the
acquisition of Utopia Village. This acquisition facility was on substantially equivalent terms to the
Company’s then other facilities with the Major Shareholder being the Working Capital Loan and the
acquisition facility agreement entered into on 27 February 2015 (terms of which are set out in
paragraph 12.6 and paragraph 12.7 of this Part XV). This acquisition facility agreement had a fixed
interest rate of 4 per cent. per annum payable quarterly in arrears and was available to be drawn down
until 31 July 2015. This arrangement has now been terminated.
12.9 The Major Shareholder has been allocated approximately 13 per cent. of the Convertible Bonds.
A description of the terms relating to the Convertible Bonds is set out in paragraph 19.9 of this
Part XV. In the event that the Major Shareholder were to exercise its conversion rights under the
Convertible Bonds, the terms of the Convertible Bonds could result in the acquisition by the Major
Shareholder of up to approximately 4,975,166 additional Ordinary Shares (based on the Major
Shareholder holding 13 per cent. of the Convertible Bonds and a conversion price of £2.9396)
assuming: (i) the Company does not issue any further Ordinary Shares between the date of this
document and the date of any such exercise by the Major Shareholder (including to other holders of
Convertible Bonds); and (ii) that the Company does not elect to settle any conversion of Convertible
Bonds by means of a cash payment as opposed to an issue of Ordinary Shares as it is entitled to do
pursuant to the terms of the Convertible Bonds.
12.10 On 15 June 2015, Glispa and Snapside Trading Limited entered into a management services
agreement whereby Glispa would provide management services in relation to certain paid mobile
applications operated by Snapside Trading Limited to Snapside Trading Limited in exchange for a
monthly fee payable in euros. Teddy Sagi (the ultimate beneficiary of GHT, which is the sole
shareholder of the Major Shareholder) has a beneficial interest in Snapside Trading Limited.
12.11 On 29 July 2015, Tecrange Services Limited (one of the Company’s wholly owned subsidiaries) and
Viaden Enterprises (Cyprus) Limited entered into a software development services agreement,
whereby Tecrange Services Limited will receive software development services from Viaden
Enterprises (Cyprus) Limited. As consideration for the provision of the services to Tecrange Services
Limited, Tecrange Services Limited will pay Viaden Enterprises (Cyprus) Limited a monthly fee
covering the costs incurred by Viaden Enterprises (Cyprus) Limited for the provision of software
development services (less any financial, exceptional or extraordinary expenses) plus ten per cent. of
such costs payable in either US dollars or Euros. Teddy Sagi (the ultimate beneficiary of GHT, which
is the sole shareholder of the Major Shareholder) has a beneficial interest in Viaden Enterprises
(Cyprus) Limited.
12.12 On 29 July 2015, Crowndeal Services Limited (one of the Company’s wholly owned subsidiaries)
entered into a services agreement with Skywind Holdings Limited (an associate of the Major
Shareholder) pursuant to which Skywind Holdings Limited is to provide software development
services to Crowndeal Services Limited, such to be provided in accordance with the instructions of
Crowndeal Services Limited. Although entered into on 29 July 2015, the agreement has an effective
date of 1 April 2015. Under the terms of the agreement, in exchange for providing the software
development services, Skywind Holdings Limited will receive a monthly fee covering its and its
subsidiaries’ costs incurred in providing such services, plus an additional amount of 10% of such
costs. All payments to be made under the agreement are to be made in Euros. The agreement may be
terminated by either party giving 30 day written notice to the other party
12.13 The leases of the properties at Jamestown Road, as described in paragraphs 12.17 to 12.19 of this
Part XV are guaranteed by Playtech Software Limited. Teddy Sagi (the ultimate beneficiary of GHT,
314
which is the sole shareholder of the Major Shareholder) has a beneficial interest in Playtech Software
Limited.
12.14 In September 2015, Glispa negotiated media insertion orders in relation to online media orders,
whereby Glispa will provide user acquisition services to the following companies (as advertisers),
each of which are “associates” of the Major Shareholder, in relation to specified advertising
campaigns and on the terms which are in line with equivalent arrangements with unconnected third
parties:
12.14.1
Viaden Enterprises Limited, with an expected monthly revenue of USD 5,000;
12.14.2
Plamee Ltd, with an expected monthly revenue of USD 10,000;
12.14.3
Skywind Holdings Limited, with an expected monthly revenue of USD 20,000;
12.14.4
PT Marketing Services Limited, with an expected monthly revenue of USD 5,000; and
12.14.5
Easydock Investments Limited, with an expected monthly revenue of USD 5,000.
12.15 In October 2015, the Group agreed leases for units at Utopia Village with: (i) Raftech Services
Limited (an associate of Alon Shamir, a director of various of the Company’s subsidiaries);
(ii) Safecharge (UK) Ltd (an associate of the Major Shareholder) and (iii) Visual DNA, part of the
Imagini Europe Limited group of companies (an associate of the Major Shareholder). Each of the
leases with Raftech Services Limited and Safecharge (UK) Limited will be for an initial one year term
and the leases with Visual DNA will each be for an initial term of three years. The leases have an
annual rent of £129,285, £121,420 and £161,220 and £99,480 respectively. In addition, the Group has
agreed to meet costs of up to £25,000 in relation to Visual DNA’s relocation costs.
12.16 Crowndeal Services Limited acquired 20,021,089 ordinary shares (being a minority interest of
approximately 0.62 per cent.) in the capital of Shazam Entertainment Limited for consideration of
USD 3 million pursuant to a sale agreement between (1) Acacia 1 L.P. and (2) Crowndeal Services
Limited dated 30 July 2014. The agreement contains only warranties in respect of title, capacity and
status. Teddy Sagi (the ultimate beneficiary of GHT, which is the sole shareholder of the Major
Shareholder) has a beneficial interest in Shazam Entertainment Limited.
12.17 On 11 June 2012, the landlord, Anise Residential Limited, entered an underlease of the third and
fourth floor of Jamestown Road with the tenant, Gaming Technology Solutions Limited, and the
guarantor, Playtech Software Limited. The underlease has been granted for a term of ten years
commencing on and including 11 June 2012. The rent is £430,000 (exclusive of VAT) per annum,
which has been payable from 11 June 2012, and which is subject to a rent review on 11 June 2017.
The underlease is excluded from the provisions of the Landlord and Tenant Act 1954. The parties
entered into a deed of variation to the underlease on 19 February 2013 pursuant to which the tenant’s
ability to assign or sub-let its demise was amended. The underlease was granted out of a lease of the
same demise dated 23 April 2012 between Anise Development Limited (as landlord) and Anise
Residential Limited (as tenant). Teddy Sagi (the ultimate beneficiary of GHT, which is the sole
shareholder of the Major Shareholder) has a beneficial interest in Playtech Software Limited.
12.18 On 11 June 2012, the landlord, Anise Development Limited, entered a lease of part first floor and
second floor of Jamestown Road with the tenant, Gaming Technology Solutions Limited, and the
guarantor, Playtech Software Limited. The lease has been granted for a term of ten years commencing
on and including 11 June 2012. The rent is £320,000 (exclusive of VAT) per annum, which has been
payable from 11 June 2012, and which is subject to review on 11 June 2017. The lease is excluded
from the provisions of the Landlord and Tenant Act 1954. Teddy Sagi (the ultimate beneficiary of
GHT, which is the sole shareholder of the Major Shareholder) has a beneficial interest in Playtech
Software Limited.
12.19 On 21 February 2014, the landlord, Anise Development Limited, entered a lease of Unit 4,
10 Jamestown Road, London NW1 with the tenant, Gaming Technology Solutions Limited, and the
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guarantor, Playtech Software Limited. The lease has been granted for a term from and including
21 February 2014 to and including 10 June 2022. The rent is £137,260.80 (exclusive of VAT) per
annum, which has been payable from 1 August 2014, and which is subject to a rent review on 11 June
2017. The lease is excluded from the provisions of the Landlord and Tenant Act 1954. Teddy Sagi (the
ultimate beneficiary of GHT, which is the sole shareholder of the Major Shareholder) has a beneficial
interest in Playtech Software Limited.
12.20 On 5 December 2014, the Company and the Major Shareholder entered into a share exchange
agreement pursuant to which the Company acquired the entire issued share capital of Divanyx
Investments Limited and Crowndeal Investments Limited in consideration for the issue of 1,000
Ordinary Shares to the Major Shareholder.
12.21 Save as disclosed in paragraphs 12.1 to 12.20 of this Part XV and the historical financial information
in Sections A, B, C and D of Part IX, there are no related party transactions that have been entered
into by the Company or any member of the Group during the financial years ended 31 March 2013,
2014 and 2015 nor during the period between 31 March 2015 and 20 January 2016, (being the latest
practicable date prior to publication of this document).
13.
RELATIONSHIP WITH MAJOR SHAREHOLDER
13.1 On 21 January 2016, the Company entered into the 2016 Relationship Agreement with the Major
Shareholder and GHT, which will be effective from the date of Main Market Admission. The principal
purpose of the 2016 Relationship Agreement is to ensure that the Company is capable at all times of
carrying on its business independently of the Major Shareholder. The Directors and the Proposed
Directors believe that the terms of the 2016 Relationship Agreement will enable the Company to carry
on its business independently from the Major Shareholder and its affiliates and ensure that all
transactions and relationships between the Company and the Major Shareholder are and will be, at
arm’s length and on a normal commercial basis. A summary of the terms of the 2016 Relationship
Agreement is contained at paragraph 19.7 of this Part XV.
14.
WORKING CAPITAL
The Company is of the opinion that, taking into account the bank and other facilities available to the
Group, the working capital available to the Group is sufficient for the present requirements of the
Group, that is for at least 12 months from the date of this document.
15.
SIGNIFICANT CHANGE
Save in respect of the Chalk Farm Road Acquisition and the entry into of the AIG Senior Facilities
Agreement, there has been no significant change in the financial or trading position of the Group since
30 September 2015, being the last interim end date of the Group.
16.
LITIGATION
16.1 Save as disclosed in paragraph 16.2 of this Part XV there are not and have not been any governmental,
legal or arbitration proceedings (including any such proceedings which are pending or threatened of
which the Company is aware), during the period covering at least the previous 12 months, which may
have, or have had in the recent past, significant effects on the Company and/or the Group’s financial
position or profitability.
16.2 Certain members of the Group (Camden Market Estates Holdings Limited, Ground Gilbey Limited,
Triangle Upper Limited, Canal Side Properties Limited, Triangle Extension’s Limited, Piazza
Camden LP and Upper Piazza (Camden) LP) have brought proceedings against IBRC (as defined in
paragraph 12.1.1 of this Part XV) (“IBRC Proceedings”) in relation to a claim that, as a result of IBRC
attempting to sell a loan made in July 2005 to certain members of the Group in alleged breach of its
terms, the Group was unable to find a buyer for its property assets in the market. The quantum of
damages claimed is approximately £19,500,000. A summary judgment was heard in May 2014 and
the Court found in favour of the Group. However, IBRC sought permission to appeal from the Court
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of Appeal which was granted on 30 July 2015. These proceedings remain ongoing. The Group has
entered into arrangements with certain third parties in relation to the funding, conduct and outcome
of this litigation which are described in paragraph 12.1 of this Part XV.
17.
ENVIRONMENTAL ISSUES
As far as the Directors and the Proposed Directors are aware, there are no material environmental
issues that may affect the Group or the Group’s utilisation of its tangible fixed assets. However,
limited or no environmental surveys or due diligence investigations have been carried out on behalf
of the Group in respect of the Real Estate Assets other than Stables Market. Since the Real Estate
Assets comprise large areas of former industrial land, there is a risk that substantial contamination
could be found during development.
18.
INTELLECTUAL PROPERTY
18.1 As at 20 January 2016 (being the latest practicable date prior to publication of this document), the
Group owns the following intellectual property which is considered material to the Group, five of
which are website domains and two of which are trademarks: www.camdenmarket.com,
www.everything5pounds.com, www.stuccomedia.co.uk, www.stuccomedia.com, www.glispa.com,
Gilgamesh and Shaka Zulu.
18.2 Save as set out in paragraph 18.1 of this Part XV, the Group is not dependent upon any other material
intellectual property. The Group regards its intellectual property rights as valuable assets and takes
appropriate action to protect and will, when necessary, enforce them.
18.3 The Group is currently not party to any material intellectual property disputes.
19.
MATERIAL CONTRACTS
The following contracts (not being contracts entered into in the ordinary course of business) have been
entered into in the two years preceding the date of this document by any member of the Group and
are, or may be, material to the Group or have been entered into by any member of the Group and
contain any provision under which any member of the Group has any obligation or entitlement which
is material to the Group at the date of this document:
19.1 Introduction Agreement
On 21 January 2016, the Company entered into an introduction agreement with the Joint Financial
Advisers pursuant to which the Company appointed the Joint Financial Advisers as joint financial
advisers for the purposes of, and in order to assist the Company with, Main Market Admission (the
“Introduction Agreement”). The Introduction Agreement contains customary warranties and
indemnities given by the Company to the Joint Financial Advisers. In consideration for the provision
of their services to the Company in connection with Main Market Admission, the Company has
agreed to pay to the Joint Financial Advisers a fee of £500,000 payable as to £250,000 to Shore
Capital and £250,000 to Canaccord as well as all costs, fees and expenses incurred by the Joint
Financial Advisers in connection with their role as Joint Financial Advisers. The Introduction
Agreement also contains provisions for early termination by the Joint Financial Advisers in certain
circumstances including, but not limited to, if at any time prior to Main Market Admission (i) there is
a material adverse change in the financial position of the Group which in the good faith opinion of the
Joint Financial Advisers would make it inadvisable to proceed with Main Market Admission or (ii)
the Company is in material breach of the warranties or any other provision under the Introduction
Agreement.
19.2 Financial adviser and broker agreement
Pursuant to an agreement dated 21 January 2016 made between the Company and Shore Capital,
Shore Capital and Corporate Limited and Shore Capital Stockbrokers Limited have agreed to act as
financial adviser and broker respectively to the Company following Main Market Admission
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(“Broker Agreement”). Pursuant to the Broker Agreement, Shore Capital shall provide the Company
with, inter alia, such independent advice and guidance to ensure compliance by the Company on a
continuing basis with the requirements of the London Stock Exchange, Listing Rules, Prospectus
Rules, Disclosure Rules and Transparency Rules and The Takeover Code and where necessary liaise
with the UK Listing Authority. Under the Broker Agreement, the Company has agreed to pay Shore
Capital a retainer fee of £100,000 per annum (plus VAT) as well as payment of any disbursements and
expenses reasonably incurred by Shore Capital in the course of carrying out its duties as a financial
adviser and broker. The Broker Agreement is terminable on three months’ written notice given by
either Shore Capital or the Company. The Broker Agreement contains provisions for early termination
in certain circumstances and also an indemnity given by the Company to Shore Capital in relation to
the provision by Shore Capital of its services.
19.3 Shore Capital Nominated Adviser and Joint Broker Agreement
On 8 June 2015, the Company entered into a nominated adviser and joint broker agreement with
Shore Capital and Corporate Limited and Shore Capital Stockbrokers Limited (“Nomad and Joint
Broker Agreement”). Pursuant to the Nomad and Joint Broker Agreement, the Company has
appointed Shore Capital and Corporate Limited as nominated adviser and Shore Capital Stockbrokers
Limited as joint broker to the Company. The Company agreed to pay Shore Capital and Corporate
Limited a retainer fee of £100,000 per annum (plus VAT) in respect of the services of Shore Capital
and Corporate Limited and Shore Capital Stockbrokers Limited. The Nomad and Joint Broker
Agreement contains certain undertakings and indemnities given by the Company in respect of,
amongst other things, compliance with all applicable laws and regulations. The appointments are
continuing unless terminated by either the Company or Shore Capital and Corporate Limited and
Shore Capital Stockbrokers Limited on giving to the other not less than three months’ notice in
writing. Upon Main Market Admission, Shore Capital and Corporate Limited shall cease to act as the
Company’s nominated adviser but Shore Capital and Corporate Limited and Shore Capital
Stockbrokers Limited shall continue to act as the Company’s joint broker on the terms of the financial
adviser and broker agreement described in paragraph 19.2 above. The Nomad and Joint Broker
Agreement also contains provisions for early termination in certain circumstances.
19.4 Canaccord Genuity Limited Joint Broker Agreement
On 8 June 2015, the Company entered into a joint broker agreement with Canaccord Genuity Limited
(“Canaccord Joint Broker Agreement”). Pursuant to the Canaccord Joint Broker Agreement, the
Company has appointed Canaccord Genuity Limited as joint broker to the Company. The Company
has agreed to pay Canaccord Genuity Limited a fee of £50,000 per annum (plus VAT) in respect of
the services of Canaccord Genuity Limited. The Canaccord Joint Broker Agreement contains certain
undertakings and indemnities which are standard in agreements of this nature. The appointment is
continuing unless terminated by either the Company or Canaccord in writing at any time. The
Canaccord Joint Broker Agreement will continue in force following Main Market Admission.
19.5 2015 AIM Placing Agreement
On 9 July 2015, the Company entered into an agreement with the Joint Bookrunners in connection
with the 2015 AIM Placing (the “2015 AIM Placing Agreement”) pursuant to which the Joint
Bookrunners each agreed, in accordance with the terms of the 2015 AIM Placing Agreement, to use
reasonable endeavours to procure subscribers for the 2015 AIM Placing Shares at the 2015 AIM
Placing Price. The 2015 AIM Placing was not underwritten, except to the extent that certain places
procured by a Joint Bookrunner (and listed in the 2015 AIM Placing Agreement) failed to subscribe
for any or all of the 2015 AIM Placing Shares which were allocated to them in the 2015 AIM Placing
and for which they had each agreed to subscribe, in which instance each Joint Bookrunner severally
agreed to acquire such shares of such placees at the 2015 AIM Placing Price. The 2015 AIM Placing
Agreement contained certain warranties given by the Company in favour of the Joint Bookrunners in
relation to, amongst other things, the Company and its business and certain matters connected with
the 2015 AIM Placing. Pursuant to the 2015 AIM Placing Agreement, the Joint Bookrunners had the
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right to terminate the 2015 AIM Placing Agreement under specified circumstances, including,
amongst other things (i) if it comes to the knowledge of any Joint Bookrunner that a warranty given
by the Company and contained in the 2015 AIM Placing Agreement was untrue, inaccurate or
misleading in any material respect when made on the date of the 2015 AIM Placing Agreement or that
any of the warranties would be untrue, inaccurate or misleading in any material respect if it were to
be repeated immediately prior to 2015 AIM Placing; or (ii) a force majeure event takes place. The
2015 AIM Placing Agreement also contains a customary indemnity from the Company in favour of
the Joint Bookrunners pursuant to which the Company agreed to indemnify the Joint Bookrunners
against all losses, costs, damages and expenses which the Joint Bookrunners may suffer or incur arises
under, out of, or in connection with, amongst other things, the 2015 AIM Placing.
19.6 2014 Lock In Deeds
19.6.1 On 17 December 2014, the Company, Jefferies International Limited and the Major
Shareholder entered into a Lock In Deed, pursuant to which the Major Shareholder has, subject
to certain exceptions, undertaken to Jefferies International Limited that it will not, and it will
procure that its related parties do not, dispose of, or agree to dispose of, any Ordinary Shares
for a period of 12 months from AIM Admission. This period has now expired. However
pursuant to the terms of the 2014 Lock In Deeds, the Major Shareholder has further undertaken
that any disposal of any Ordinary Shares by it or its related parties in the following 12 months
will be in accordance with the reasonable requirements of Jefferies International Limited (now
Shore Capital following the assignment referred to below) so as to ensure an orderly market for
the issued share capital of the Company. On 6 August 2015, Jefferies International Limited and
Shore Capital entered into a deed of assignment under which Jefferies International Limited
assigned all of its rights and obligations under the Lock in Deed described above to Shore
Capital.
19.6.2 On 17 December 2014, the Company, Mark Alper and each of the Directors entered into Lock
In Deeds, pursuant to which Mark Alper and the Directors have, subject to certain exceptions,
undertaken to Jefferies International Limited that they will not dispose of, or agree to dispose
of, any Ordinary Shares in which they have an interest for a period of 12 months from AIM
Admission. This period has now expired. However pursuant to the terms of the 2014 Lock In
Deeds, Mark Alper and the Directors have each further undertaken that any disposal of any
Ordinary Shares by them in the following 12 months will be in accordance with the reasonable
requirements of Jefferies International Limited (now Shore Capital following the assignment
referred to below) so as to ensure an orderly market for the issued share capital of the Company.
On 6 August 2015, Jefferies International Limited and Shore Capital entered into a deed of
assignment under which Jefferies International Limited assigned all of its rights and obligations
under the Lock in Deed described above to Shore Capital.
19.7 2016 Relationship Agreement
On 21 January 2016, GHT, the Major Shareholder and the Company entered into a relationship
agreement (“2016 Relationship Agreement”), which, in replacement of the 2014 Relationship
Agreement, governs the relationship between each of the parties to it to ensure that the Company is
able to carry on its business independently following Main Market Admission. Pursuant to the terms
of the 2016 Relationship Agreement, the Major Shareholder has agreed that it shall not propose or
procure the proposal of a Shareholders’ resolution which is intended to effect any cessation of trading
of the Ordinary Shares on the Main Market (or any other stock exchange on which the Company’s
shares may be traded during that period) or vote in favour of any such resolution unless a majority of
the independent Directors have voted in favour of such proposal (or as part of certain offers to acquire
the entire issued share capital of the Company). The Major Shareholder agreed that all transactions
and relationships between it or its associates (which include GHT and Teddy Sagi) shall be on arm’s
length terms and on a normal commercial basis. For so long as the Major Shareholder is beneficially
interested in at least 20 per cent. of the voting rights which are generally exercisable at general
meetings of the Company, it shall have the right to nominate one person for appointment as a director
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of the Company (although it has not currently chosen to do so). Both GHT and the Major Shareholder
have given certain non-compete undertakings to the Company in relation to the business of the Group
and have agreed not to acquire any further Ordinary Shares for 18 months from the 2014 AIM Placing.
The 2016 Relationship Agreement will terminate automatically if (i) if the Major Shareholder and its
associates cease to control directly or indirectly at least 20 per cent. of the issued share capital of the
Company or (ii) if the Ordinary Shares of the Company cease to be admitted to trading on a stock
exchange.
19.8 2014 Relationship Agreement
On 16 December 2014, GHT, the Major Shareholder and the Company entered into a relationship
agreement (“2014 Relationship Agreement”), which governs the relationship between each of the
parties to it to ensure that the Company is able to carry on its business independently following the
2014 AIM Placing. For a period of two years from the 2014 AIM Placing, the Major Shareholder has
agreed that it shall not propose or procure the proposal of a Shareholders’ resolution which is intended
to effect any cessation of trading of the Ordinary Shares on AIM (or any other stock exchange on
which the Company’s shares may be traded during that period) or vote in favour of any such resolution
unless a majority of the independent Directors have voted in favour of such proposal (or as part of
certain offers to acquire the entire issued share capital of the Company). The Major Shareholder
agreed that all transactions and relationships between it or its associates (which include the GHT and
Teddy Sagi) shall be on arms’ length terms and on a normal commercial basis. For so long as the
Major Shareholder is beneficially interested in at least 20 per cent. of the voting rights which are
generally exercisable at general meetings of the Company, it shall have the right to nominate one
person for appointment as a director of the Company (although it has not currently chosen to do so).
Both GHT and the Major Shareholder have given certain non-compete undertakings to the Company
in relation to the business of the Group and have agreed not to acquire any further Ordinary Shares
without the prior approval of the Board. The 2014 Relationship Agreement will terminate
automatically if (i) the Major Shareholder and its associates cease to control directly or indirectly at
least 20 per cent. of the issued share capital of the Company or (ii) the Ordinary Shares of the
Company cease to be admitted to trading on a stock exchange. The 2014 Relationship Agreement will
terminate pursuant to the terms of the 2016 Relationship Agreement on Main Market Admission.
19.9 Convertible Bonds
19.9.1 Background
On 31 March 2015, the Company issued £112,500,000 2 per cent. convertible bonds due 2020
(the “Convertible Bonds”) constituted by a trust deed dated 31 March 2015 (the “Trust
Deed”) and entered into between the Company and The Law Debenture Trust Company p.l.c.
(the “Trustee”). The issue of the Convertible Bonds was authorised by resolutions of the board
of directors passed on 18 March 2015 and 27 March 2015. The Ordinary Shares underlying the
Convertible Bonds represented 10 per cent. of the Company’s issued Ordinary Shares
immediately prior to the issuance of the Convertible Bonds.
The Convertible Bonds were issued pursuant to a subscription agreement dated 31 March 2015
and entered into between the Company, UBS Limited, Jefferies International Limited,
Joh. Berenberg, Gossler & Co. KG, Frankfurt Branch, Barak Capital Underwriting Limited and
Shore Capital Stockbrokers Limited (the “Subscription Agreement”).
19.9.2 Purpose
The net proceeds of the Convertible Bonds were used to fund, both directly and indirectly, the
acquisitions of The Camden Wharf, The Interchange Building and the acquisition of Glispa.
The offering generated net proceeds of £110.6 million.
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19.9.3 Currency and interest
The Convertible Bonds are payable in pounds sterling and bear interest from 31 March 2015 at
the rate of 2 per cent. per annum calculated by reference to the principal amount thereof and
payable semi-annually in arrears in equal instalments on 31 March and 30 September in each
year, commencing on 30 September 2015.
19.9.4 Form and denomination
Each Convertible Bond is in registered form and in principal amounts of £100,000 each. The
Convertible Bonds have been admitted to trading on the Open Market (Freiverkehr) of the
Frankfurt Stock Exchange.
19.9.5 Status
The Convertible Bonds are direct, unconditional, unsubordinated and (subject to the negative
pledge described below) unsecured obligations of the Company and shall at all times rank pari
passu and without preference among themselves.
19.9.6 Negative pledge
Under the terms and conditions of the Convertible Bonds, the Company has agreed that so long
as any Convertible Bond remains outstanding, the Company will not (and will ensure that none
of its principal subsidiaries will) create any security over its assets to secure certain forms of
indebtedness (broadly, indebtedness in the form of instruments which are intended to be
quoted, listed or dealt in or traded on any stock exchange or over-the-counter or other securities
market) or any guarantee or indemnity in respect of such indebtedness, without granting
equivalent security in respect of the Convertible Bonds. However, this restriction does not
apply to the creation of security in respect of such indebtedness, guarantee or indemnity where
the aggregate maximum principal amount of all such indebtedness outstanding at any time does
not exceed £300,000,000.
19.9.7 Net borrowings covenant
As a term of the Convertible Bonds, the Company shall ensure that its net borrowings will not
at any time exceed 65 per cent. of its adjusted capital and reserves (as such terms are defined
in the terms and conditions of the Convertible Bonds).
19.9.8 Conversion rights
Each Convertible Bond entitles the holder to convert such Convertible Bond into new and/or
existing Ordinary Shares, as determined by the Company, at the prevailing conversion price.
The terms and conditions of the Convertible Bonds give the Company the right to elect to settle
any conversion entirely in shares, cash or a combination of shares and cash.
The Ordinary Shares issued on conversion of the Convertible Bonds will rank for all dividends
or other distributions declared after the conversion date but not before such date and otherwise
pari passu in all respects with the Ordinary Shares in issue on the date of such conversion of
the Convertible Bonds.
19.9.9 Conversion price
The initial conversion price of the Convertible Bonds was £3.00. The conversion price is
subject to adjustment from time to time upon the occurrence of one or more of the events set
out in the terms and conditions of the Convertible Bonds, which include: a consolidation,
reclassification or subdivision affecting the Ordinary Shares in issue; the issue of Ordinary
Shares to Shareholders by way of capitalisation of profits or reserves; the declaration,
announcement or payment of any dividend by the Company to Shareholders; the issue of
Ordinary Shares (or of any options, warrants or other rights to subscribe for or otherwise
acquire such Ordinary Shares) or other shares in the capital of the Company, in either case to
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Shareholders as a class by way of rights at a price per Ordinary Share which is less than
95 per cent. of the current market price of the Ordinary Share on the first date on which the
Ordinary Shares are traded ex-rights, ex-options or ex-warrants; the issue by the Company
wholly for cash or no consideration of Ordinary Shares (or of any options, warrants or other
rights to subscribe for or otherwise acquire such Ordinary Shares) at a price per Ordinary Share
which is less than 95 per cent. of the current market price of the Ordinary Shares on the date
of the first public announcement of the terms of such issue.
As a result of the 2015 AIM Placing Shares being issued at a discount to the current market
price of the Ordinary Shares, the price at which the Convertible Bonds can be converted into
new and/or existing Ordinary Shares has been adjusted from £3.00 to £2.9396, effective from
31 July 2015.
19.9.10 Redemption
Unless previously converted or redeemed, each £100,000 principal amount of Convertible
Bonds will be redeemed on 31 March 2020 at an accreted principal amount of £112,389.07,
being 112.4 per cent. of par and reflecting a gross yield to maturity of 4.25 per cent.
per annum calculated on a semi-annual basis.
The Convertible Bonds may be redeemed prior to their scheduled maturity date at the option
of the Company or their holder in certain circumstances.
19.9.11 Undertakings
The terms and conditions of the Convertible Bonds contain certain undertakings that are
customary for convertible bonds such as an undertaking by the Company to keep available
free from pre-emptive rights sufficient authorised but unissued Ordinary Shares to enable the
exercise of conversion rights to be satisfied in full.
19.9.12 Events of default
Events of default under the Convertible Bonds include, amongst others, payment default,
failure to comply with other non-payment obligations, cross-default, insolvency, winding-up
and the commencement of enforcement proceedings.
19.9.13 Transaction documents
In connection with the issuance of the Convertible Bonds, the Company entered into the
following transaction documents, each dated 31 March 2015: (i) the Subscription Agreement;
(ii) the Trust Deed; (iii) a paying, transfer and conversion agency agreement entered into with
the Trustee and Banque International Luxembourg S.A. as principal paying, transfer and
conversion agent and registrar; and (iv) a calculation agency agreement entered into with
Conv-Ex Advisors Limited.
19.10 Share Exchange Agreement
On 5 December 2014, the Company and the Major Shareholder entered into a share exchange
agreement pursuant to which the Company acquired the entire issued share capital of Divanyx
Investments Limited and Crowndeal Investments Limited in consideration for the issue of 1,000
Ordinary Shares to the Major Shareholder (“Share Exchange Agreement”).
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19.11 AIG Senior Facilities Agreement
19.11.1
Background
On 8 December 2015, Divanyx Investments Limited (a wholly owned subsidiary of the
Company) and certain other members of the Group (the “Obligors”) entered into a senior
term facilities agreement with amongst others, AIG Asset Management (Europe) Limited as
arranger (“AIG Senior Facilities Agreement”).
19.11.2
Purpose
The funds available under the AIG Senior Facilities Agreement of up to £900 million are
available to certain members of the Group (the “Borrowers”): (a) under an initial term loan
facility of £400 million (the “Initial Facility”): (i) to refinance previous indebtedness owed;
(ii) to fund acquisition of real estate (to the extent permitted under the AIG Senior Facilities
Agreement); (iii) to fund development works and capital expenditure (to the extent
permitted under the AIG Senior Facilities Agreement); (iv) to fund distributions to certain
other members of the Group and MTH Investments Limited (being the immediate
shareholder of Divanyx Investments Limited); (v) to fund general corporate and working
capital purposes; (vi) to fund the deposit of up to £100 million into a blocked acquisition
account; (vi) to fund the deposit of up to £10 million into a blocked interest reserve account;
and (viii) to fund associated taxes, fees, costs and expenses in connection with the AIG
Senior Facilities Agreement; and (b) under an additional facility of up to £50 million (the
“Additional Facility”), an upsize facility of up to £200 million (to be reduced by any
commitments under the Additional Facility) (the “Upsize 1 Facility”) and a further upsize
facility of up to £300 million (the “Upsize 2 Facility”): (i) to fund acquisition of real estate
(to the extent permitted under the AIG Senior Facilities Agreement); (ii) to fund
development works and capital expenditure (to the extent permitted under the AIG Senior
Facilities Agreement); (iii) to fund distributions to certain other members of the Group and
MTH Investments Limited (being the immediate shareholder of Divanyx Investments
Limited) ; and (v) to fund associated taxes, fees, costs and expenses in connection with the
AIG Senior Facilities Agreement.
19.11.3
Currency and Interest
19.11.3.1 Each facility made available under the AIG Senior Facilities Agreement is made
available in Pounds Sterling.
19.11.3.2 In relation to any loan drawn under the Initial Facility, the interest is the aggregate
of the applicable margin and the applicable fixed rate. The applicable margin is:
(a)
1.00 per cent/annum in respect of any interest period ending on or prior to
the eighth interest payment date following the first utilisation date or, in
relation to the loan made on the first interest payment date, 1.01 per cent.
per annum;
(b)
1.50 per cent/annum in respect of any interest period ending after the
eighth interest payment date following the first utilisation date but on or
prior to the tenth interest payment date following the first utilisation date
or, in relation to the loan made on the first interest payment date, 1.51 per
cent. per annum;
(c)
1.75 per cent/annum in respect of any interest period ending after the tenth
interest payment date following the first utilisation date but on or prior to
the twelfth interest payment date following the first utilisation date or, in
relation to the loan made on the first interest payment date, 1.76 per cent.
per annum; and
(d)
2.20 per cent/annum in respect of any interest period ending after the
twelfth interest payment date following the first utilisation date or, in
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relation to the loan made on the first interest payment date, 2.21 per cent.
per annum.
19.11.3.3 Interest periods run quarterly and interest payment dates are 5 February, 5 May,
5 August and 5 November in each year.
19.11.3.4 In relation to any loan drawn under the Additional Facility, Upsize 1 Facility and
Upsize 2 Facility, the interest is the aggregate of 2.00 per cent. per annum and the
applicable fixed rate. The AIG Senior Facilities Borrowers however, have the
ability to replace part of the lenders’ commitment in relation to an Upsize 1 Loan
or an Upsize 2 Loan (as defined therein) and procure a new margin at that time
in relation to such commitment, provided such margin is not more than 2.25 per
cent. per annum.
19.11.3.5 The applicable margin referred to in paragraph 19.11.3.2 and 19.11.3.4 above
shall be referred to as the “Margin”.
19.11.3.6 The applicable fixed rate as referred to in paragraph 19.11.3.2 and 19.11.3.4
above is:
19.11.4
(a)
in relation to any loan drawn under the Initial Facility, 1.88 per cent. per
annum; and
(b)
in relation to any loan drawn under the Additional Facility, Upsize 1
Facility and Upsize 2 Facility, the swap rate applicable to that loan as at
10.00am (London time) on the date falling three business days prior to the
utilisation date of that loan.
Fees
The following fees are payable under the AIG Senior Facilities Agreement:
19.11.4.1 an arrangement fee:
(a)
of £4 million (which was paid on the date the loan was first drawn down
(the “Utilisation Date”));
(b)
on each utilisation date in respect of a loan under the Additional Facility in
an amount in sterling equal to 1 per cent. of the principal amount of the
relevant loan under the Additional Facility made on that utilisation date
(plus value added tax);
(c)
on each utilisation date in respect of a loan under the Upsize 1 Loan
Facility, in an amount in sterling equal to 1 per cent. of the principal
amount of the relevant loan under the Upsize 1 Loan Facility made on that
utilisation date (plus value added tax);
(d)
on each utilisation date in respect of a loan under the Upsize 2 Loan
Facility, in an amount in sterling equal to 1 per cent. of the principal
amount of the relevant loan under the Upsize 2 Loan Facility funded on
that utilisation date (plus value added tax) by:
(i)
an Original Lender (as defined therein) or an Affiliate (as defined
therein) of an Original Lender (as defined therein);
(ii)
the Arranger (as defined therein) or an Affiliate (as defined therein)
of the Arranger (as defined therein); and
(iii)
any entity that is managed or advised by the Arranger (as defined
therein) or AIG Asset Management (U.S.), LLC or an Affiliate (as
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defined therein) of either the Arranger (as defined therein)or AIG
Asset Management (U.S.), LLC.
(the “Upsize 2 Loan Arrangement Fee”)
19.11.4.2 an agency fee of 0.015 per cent. per annum of the outstanding loans as at the
beginning of the relevant interest period, payable from the Utilisation Date;
19.11.4.3 a security agent fee of £2,500 per annum payable from the Utilisation Date; and
19.11.4.4 a prepayment fee equivalent to the present value of the aggregate interest
(including Margin) that would have been due and payable to the lenders in respect
of the amount prepaid from the date of repayment until the relevant termination
date of that loan discounted using the interpolated GBP swap rate (mid-market
swap rate for sterling swap transactions on ICAP screen ICAB1 available on
Bloomberg). Prepayment fees are carved out for certain prepayments as permitted
under the AIG Senior Facilities Agreement.
19.11.5
Maturity and voluntary prepayment
19.11.5.1 The following termination dates apply in relation to loans made under the AIG
Senior Facilities Agreement and such loans will become due and payable on such
dates:
(a)
loans made under the Initial Facility and the Additional Facility mature on
the tenth anniversary of the first utilisation date;
(b)
loans made under the Upsize 1 Facility mature on the thirteenth
anniversary of the first utilisation date; and
(c)
loans made under the Upsize 2 mature on the fourteenth anniversary of the
first utilisation date.
19.11.5.2 The AIG Senior Facilities Obligors may voluntarily prepay all or any part of a
loan at any time subject to the payment of the fee as set out in paragraph 19.11.4.4
of this Part XV.
19.11.6
Mandatory prepayment
19.11.6.1 The facilities made available under the AIG Senior Facilities Agreement are
required to be repaid in full or part in certain circumstances, including: (i) with
respect to the original lenders or any other lender who becomes a party to the AIG
Senior Facilities Agreement as a lender, if it becomes unlawful for such a lender
to perform its obligations and/or fund its participation under the AIG Senior
Facilities Agreement, and such lender’s participation has not been transferred;
and (ii) if there is a change of control.
19.11.6.2 Change of control means: (i) the Company ceasing to directly or indirectly
control Divanyx Investments Limited; (ii) MTH Investments Limited ceasing to
directly control Divanyx Investments Limited; (iii) other than as permitted under
the AIG Senior Facilities Agreement, Divanyx Investments Limited ceasing to
control any AIG Senior Facilities Obligor or other subsidiary of Divanyx
Investments Limited. Control is defined by reference to: (i) the power to cast
100 per cent. of the votes; (ii) the power to appoint and remove all or the majority
of the directors; (iii) the power to give directions with respect to the operating and
financial policies of the relevant company with which the directors are compelled
to comply; or (iv) holding legally or beneficially 100 per cent. of the issued share
capital of the relevant company.
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19.11.7
Representations, warranties, undertakings and covenants
Under the AIG Senior Facilities Agreement, the Obligors have:
19.11.7.1 provided certain representations and warranties which are customary for an
agreement of this nature;
19.11.7.2 agreed to provide certain updates and information on the operations of the
business to the lenders which are customary for an agreement of this nature;
19.11.7.3 agreed to certain covenants which are customary for an agreement of this nature
including (i) a negative pledge which, subject to certain exceptions, prohibits any
AIG Senior Facilities Obligor from granting or permitting to exist security over
its assets or entering into arrangements similar to security (ii) restrictions on
disposals and acquisitions save with the consent of the lenders under the AIG
Senior Facilities Agreement and save for other carve outs which are customary in
this type of facility agreement (iii) restrictions on payment of dividends except to
another AIG Senior Facilities Obligor and to MTH Investments Limited provided
there is no default under the AIG Senior Facilities Agreement and (iv) an
undertaking, subject to certain de minimis carve-outs (including where the
liability is less than £350,000), that all material contracts must be approved by the
lenders; and
19.11.7.4 agreed to certain financial covenants including (i) an actual interest cover
covenant whereby each Obligor must ensure that the historical interest cover on
each interest payment date is at least 140 per cent. and (ii) a loan to value
covenant such that the outstanding loans under the AIG Senior Facilities
Agreement as a percentage of the aggregate market value of the properties must
not exceed 65 per cent. There are limited cure rights however under the AIG
Senior Facilities Agreement in relation to which the AIG Senior Facilities
Obligors can either: (a) prepay the loans; or (b) deposit cash, to cure a financial
covenant breach.
19.11.8
Events of default
Events of default under the AIG Senior Facilities Agreement include, amongst others,
payment default, failure to comply with financial covenants, misrepresentation,
cross-default, insolvency, attachments, property specific events of default and material
adverse effect.
19.11.9
Security
The facilities made available under the AIG Senior Facilities Agreement is cross guaranteed
by the AIG Senior Facilities Obligors and secured by the assets and undertakings of the AIG
Senior Facilities Obligors.
19.12 Roll Up Agreement
19.12.1
On 12 December 2014, the Company, Delinik Trading Limited and Cenk Dumlupinar and
Serkan Daysak entered into a roll up agreement to vary the terms of the Fiver share purchase
agreement (as described in paragraph 19.34 of this Part XV) (“Roll Up Agreement”).
19.12.2
Pursuant to the terms of the Roll Up Agreement, the Company agreed, that immediately
prior to the AIM Admission, it would issue 531,250 Ordinary Shares to Cenk Dumlupinar
(or as he may direct) and 531,250 Ordinary Shares to Serkan Daysak (or as he may direct).
19.12.3
Pursuant to the terms of the Roll Up Agreement:
19.12.3.1 Cenk Dumlupinar has agreed for a period of 12 months from AIM Admission
that, subject to certain exceptions, he will not dispose of Ordinary Shares (or any
interest therein) except with the prior written consent of the Company (which the
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Company has agreed not to give without the consent of its nominated adviser),
such consent not to be unreasonably withheld or delayed; and
19.12.3.2 Serkan Daysak has agreed for a period of six months from AIM Admission in
respect of 50 per cent. of Ordinary Shares that he owns and for a period of twelve
months from AIM Admission in respect of the other 50 per cent. of the Ordinary
Shares that he owns, that, subject to certain exceptions, he will not dispose of
Ordinary Shares (or any interest therein) except with the prior written consent
of the Company (which the Company has agreed not to give without the consent
of its nominated adviser), such consent not to be unreasonably withheld or
delayed.
19.13 Arrangements with Mark Alper
19.13.1
Share of IBRC proceedings
On 22 January 2014, Mark Alper entered into an agreement with CMHC in respect of the
IBRC proceedings (further details of which are set out in paragraphs 12.1 and 16 of this
Part XV). Under the terms of this agreement, Mark Alper is entitled to receive 7 per cent.
of the gross proceeds payable to certain members of the Group in respect of the IBRC
proceedings.
19.13.2
Consultancy Agreement
19.13.2.1 On 31 July 2014, Mark Alper (Managing Director of Stanley Sidings Limited and
the Group Property Director) entered into a consultancy agreement with Stanley
Sidings Limited and Alt Equities Limited (“Consultancy Agreement”). The
Consultancy Agreement was for an initial fixed term of 18 months, which
commenced on 1 May 2014 (“Initial Term”). Mark Alper provides general
management and strategic advice to Stanley Sidings Limited, for a minimum of
five days per week. The retainer fee is £25,000 per month during the initial term.
A signing-on fee of £200,000 was paid by Stanley Sidings Limited on the
execution of the Consultancy Agreement. In addition, a further fee of £150,000
was paid to Alt Equities Limited following expiry of the Initial Term
(i.e. 1 November 2015. The Initial Term has now ended but the Consultancy
Agreement will roll on with a three month notice period, as provided for under
the terms of the Consultancy Agreement. Under the terms of the Consultancy
Agreement (and given that the Initial Term has ended) either party can terminate
the Consultancy Agreement by providing three months’ written notice. The
Consultancy Agreement provides no right of substitution, requiring Mark Alper
to deliver the services personally. The Consultancy Agreement also provides that
neither Alt Equities Limited nor Mark Alper shall be liable to Stanley Sidings
Limited for any loss of profit, loss of business, loss of opportunity or any indirect
or consequential losses, whether arising from breach of contract, negligence or
other tort or breach of statutory duty, other than in the case of their fraud or
criminal conduct (or omission).
19.13.2.2 A Nil Cost Option was granted to Alt Equities Limited, as at the date of the AIM
Admission, pursuant to the LTIP. Details of the performance conditions
applicable to this Option, and the other applicable terms, are set out in
paragraphs 8.2 to 8.17 of this Part XV.
19.14 Deed of Conduct and Deed of Adherence
Terms of the Deed of Conduct and Divanyx Investment Limited’s Deed of Adherence to the Deed of
Conduct are set out in paragraph 12.1 of this Part XV.
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19.15 Deed of Novation
19.15.1
On 13 March 2014, CMHC, along with WSL, the GHT and Diamondcourse entered into a
deed of novation under which WSL novated its rights, liabilities, duties and obligations in
respect of two loan agreements to the GHT (“Deed of Novation”). The loan agreements
novated were:
19.15.1.1 a loan agreement dated 31 January 2014 between WSL (as lender) and
Diamondcourse (as borrower) pursuant to which WSL made available the sum of
£10,875,000 to Diamondcourse; and
19.15.1.2 a loan agreement dated 31 January 2014 between CMHC (as lender) and each of
WSL and Diamondcourse as borrowers (“Shareholder Loan Agreement”).
Under the terms of the Shareholder Loan Agreement, each of such borrowers had
made available to it various loan facilities including a loan of £10,875,000.
19.15.2
WSL and CMHC each confirmed in the Deed of Novation that the amount outstanding
under the Shareholder Loan Agreement (as novated to the GHT) as at 13 March 2014 was
£10,875,000. The amount outstanding under the Shareholder Loan Agreement was repaid
on 24 October 2014.
19.16 Release Agreement
19.16.1
On 13 March 2014, CMHC entered into an agreement with Diamondcourse, LPIL, GHT,
Leumi Overseas Trust Corporation Limited, as trustee of the Camden Trust (“Camden
Trust”) and Zari David Kobo (also known as Eliezar Covo) in relation to certain
arrangements between the parties in connection with the CMHC Acquisition (“Release
Agreement”).
19.16.2
The Release Agreement varies the Deed of Conduct as between CMHC, the GHT,
Diamondcourse and LPIL such that payments of claim costs under the Deed of Conduct
by Diamondcourse shall be for 25 per cent. of such claim costs and that no amount payable
to Diamondcourse under the Deed of Conduct shall be reduced by any claim costs incurred
prior to 13 March 2014 (save for certain interest payments). To the extent such variations
conflict with the Deed of Conduct either Diamondcourse agrees that it shall comply with
the provisions of the Deed of Conduct and Diamondcourse and LPIL will adjust the
proportions as between themselves or GHT will make payments to CMHC on behalf of
Diamondcourse.
19.16.3
The Release Agreement further provides that payments to Diamondcourse under the Deed
of Conduct shall be classed as additional consideration in relation to the shares in CMHC
sold to the GHT by Diamondcourse.
19.17 Assumption Agreement
19.17.1
On 16 December 2014, an agreement was entered into between Divanyx Investments
Limited, GHT, Luxurious Property Investments Limited and CMHC pursuant to which and
in connection with Divanyx’s acquisition of CMHC from GHT, Divanyx Investments
Limited assumed the GHT’s position in relation to certain agreements (“Assumption
Agreement”). Under the Assumption Agreement:
19.17.1.1 Divanyx Investments Limited assumes responsibility for GHT’s obligations
under the two sale agreements relating to the original acquisition by GHT of
CMHC (referred to in paragraph 12.1 of this Part XV) to pay deferred
consideration to each of WSL and Diamondcourse by reference to sums received
by CMHC (or members of its group) in relation to the IBRC Claims (the amounts
being 50 per cent. of the amount received in the case of WSL and 25 per cent. of
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the amount received in the case of Diamondcourse) (as set out in paragraph 12.1.2
of this Part XV);
19.17.1.2 Divanyx Investments Limited assumes GHT’s position under the Deed of
Conduct (as summarised in paragraph 12.1 of this Part XV) such that (i) any
payment by CMHC to WSL to satisfy the obligation in relation to deferred
consideration due to WSL is treated as a distribution or loan to Divanyx
Investments Limited (in place of GHT) as the new shareholder in CMHC and (ii)
Divanyx Investments Limited agrees to exercise powers as shareholder in CMHC
to ensure that the provisions of the Deed of Conduct in relation to the conduct of
the IBRC litigation (as described in paragraph 16 of this Part XV) are complied
with; and
19.17.1.3 Divanyx Investments Limited assumes GHT’s position under the Release
Agreement (as summarised in paragraph 19.16 of this Part XV) such that (i) any
payment by CMHC to Diamondcourse to satisfy the obligation in relation to
deferred consideration due to Diamondcourse is also treated as a loan or
distribution to Divanyx Investments Limited as the new shareholder in CMHC
and (ii) any obligation of the GHT to make a payment to CMHC (as referred to
in paragraph 12.1.2 of this Part XV) will be met by Divanyx Investments Limited.
19.18 Agreement relating to the acquisition of a minority interest in Shazam Entertainment Limited
The terms of this agreement are described in paragraph 12.16 of this Part XV.
19.19 Framework Agreements with Crosspath
On 15 December 2014, each of Market Tech UK Ltd and Fiver entered into a framework agreement
with Crosspath Trading Limited (a subsidiary of Crossrider plc) (“Crosspath”) for the provision of
advertising services (“Framework Agreements”). Under the Framework Agreements, which serve as
the general terms and conditions, Market Tech UK Ltd and Fiver are each able to place individual
insertion orders (“IO”) for specific services or products to be supplied by Crosspath. Payment terms
will be set out in the relevant IO and each of the Framework Agreements will commence on the
advertising campaign start date (which will be set out in the relevant IO) and will last for the term of
the campaign. Crosspath retains the right to terminate the Framework Agreements or any advertising
campaign at any time for any reason.
19.20 Underlease of third and fourth floor of Jamestown Road
The terms of the underlease are described in paragraph 12.17 of this Part XV.
19.21 Lease of part first floor and second floor of Jamestown Road
The terms of the lease of part of the first floor and second floor of Jamestown Road are described in
paragraph 12.18 of this Part XV.
19.22 Lease of Unit 4, 10 Jamestown Road
The terms of the lease of Unit 4, 10 Jamestown Road are described in paragraph 12.19 of this Part XV.
19.23 Purchase of 39-45 Kentish Town Road
On 13 March 2014, (1) 2 Arclec Limited and 4 Arclec Limited and (2) Luxurious Property
Investments Limited entered into a transfer pursuant to which the land at 39-45 Kentish Town Road,
Camden as is registered at the Land Registry with title absolute under title numbers 410752, 23030,
NGL304315, 410753 and NGL615029 was transferred to Luxurious Property Investments Limited.
The purchase price was £6,500,000. Luxurious Property Investments Limited purchased the property
with vacant possession.
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19.24 Purchase of Union Street Market
On 29 August 2014, (1) Lorraine Denise Gordon, Hudson Trustees Limited, Attendus Trust Company
AG, Yves Bruderlein, Lance Dorian Ranger, Henry Michael Lennard and (2) Simple Path Investments
Limited entered into a share purchase agreement pursuant to which Lorraine Denise Gordon, Hudson
Trustees Limited, Attendus Trust Company AG, Yves Bruderlein, Lance Dorian Ranger and Henry
Michael Lennard sold the entire issued share capital of Atlantic Estates Limited to Simple Path
Investments Limited (a subsidiary of Korey Investments Limited) in consideration for (i) £17,000,000
on completion and (ii) an amount equal to the amount required to repay the loan amount and all break
fees associated with a hedging agreement in respect of a £4,500,000 term loan facility provided by
National Westminster Bank Plc. The agreement contains certain customary warranties given by
Hudsun Trustees Limited, Attendus Trust Company AG, Yves Bruderlein and Lance Dorian Ranger
in favour of Simple Path Investments Limited in respect of title, capacity and status.
19.25 Purchase of 31 Kentish Town Road
On 2 October 2014, (1) Mountview Investments Limited and (2) Perola Investments Limited entered
into an asset purchase agreement pursuant to which Perola Investments Limited purchased the
freehold property at 31 Kentish Town Road, London NW1 8NL (as is registered at the Land Registry
with title absolute under title number NGL715574) for £10,600,000 (exclusive of VAT). Perola
Investments Limited purchased the property subject to a number of occupational leases. The
completion date was 14 October 2014.
19.26 Purchase of Camden Lock Market
On 3 October 2014, (1) Camden Lock Market Partnership L.P, (2) Urban Market Company Holdco
(Guernsey) Limited and (3) Pastra Investments Limited entered into a share purchase agreement
pursuant to which (i) Camden Lock Market Partnership L.P sold the entire issued share capital of
Camden Market Holdco Limited and (ii) The Urban Market Company Holdco (Guernsey) Limited
sold the entire issued share capital of The Urban Market Company Limited (now called Camden
Canal Market Limited) to Pastra Investments Limited in consideration for £68,000,000 (less an
amount equal to the then outstanding bank debt and the outstanding shareholder loans). The
agreement excludes all warranties and representations except some given by each of parties with
regards to their capacity to enter into the agreement. The agreement was conditional on the
satisfaction of certain conditions, the longstop date for the satisfaction of such conditions being ten
days after the date of the agreement. These conditions were fulfilled and the completion date was
10 October 2014.
19.27 Purchase of 251-259 Camden High Street
On 7 November 2014, (1) Gemcroft Limited and (2) Loremar Investments Limited entered into an
asset purchase agreement pursuant to which Loremar Investments Limited purchased the freehold
property at 251 – 259 Camden High Street, London NW1 7BU as is registered at the Land Registry
with title absolute under title number NGL66424 for £11,500,000 (exclusive of VAT). Loremar
Investments Limited purchased the property subject to a number of occupational leases. The
completion date was 7 November 2014.
19.28 Purchase of Camden Wharf, Jamestown Road
On 26 February 2015, Red Harmony Investments Limited entered into a sale contract with HSBC
Trust Company (UK) Limited (as nominee of Tesco Pension Trust) to purchase Units 1 to 3 Camden
Wharf, Jamestown Road and 287 Camden High Street, London, NW1 for £48 million. The sale
completed on 5 March 2015. The property is currently let to a mixture of tenants for both retail and
office use. Red Harmony Investments Limited accepted a surrender of third floor 28 Jamestown Road,
London, NW1 from the office tenant, Exterion Media (UK) Limited, on 28 May 2015.
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19.29 Purchase of The Interchange Building and Camden Lock Market
On 24 March 2015, Tazzeta Limited acquired the freehold interests in Camden Lock Market and The
Interchange Building Warehouse, Oval Road, London, NW1 for a total consideration of £47 million.
Contracts were exchanged on 26 February 2015 with Market Tech Holdings Limited guaranteeing
Tazzeta Limited’s obligations pursuant to the sale contract. The Interchange Building is an office
building let to Associated Press Television News Limited on a lease expiring on 24 December 2026.
Camden Lock Place is a market site let in its entirety on a lease expiring on 23 June 2119, which is
currently vested in Camden Lock Market Limited. Following completion of the sale, the freehold
interest in Camden Lock Market was transferred from Tazzeta Limited to Camden Lock Market
Limited, and the transfer contained a declaration of merger so that the leaseholder interest is merged
into the freehold interest.
19.30 Purchase of Utopia Village
On 16 April 2015, Pushkin Properties Limited acquired a 0.84 acre property (Utopia Village, NW1),
hosting small businesses on short term leases for the purposes of a co-working office environment,
from Utopia Property Sales Limited for a total consideration of £42 million. Contracts were
exchanged on 10 April 2015 with completion of the purchase taking place on 16 April 2015.
19.31 Purchase of 1-11 & 12 Hawley Crescent
On 17 June 2015, Thistle Properties Limited exchanged contracts to acquire 1 – 11 & 12 Hawley
Crescent, NW1 from RG Holdings LP for a total consideration of £31.1 million. Completion took
place on 10 August 2015. The property comprises office space let to The Open University, with
6 residential apartments above.
19.32 Agreement for lease for Fiver Basildon warehouse
On 19 June 2015 the lease of Unit 44 Yardley Business Park, Basildon was completed. There is a rent
deposit of £80,000 plus VAT which was lodged with the landlord pursuant to the terms of a rent
deposit deed. Fiver will have a rent free period of 14 months followed by an initial annual rent of
£200,138 pro-rated for the remaining 10 months of the second year which will then increase on a
staggered basis from years three to six (£240,165 per annum in year three and £320,220 per annum
in years four, five and six), after which it will be subject to annual upwards only increases in
accordance with the Retail Price Index with a collar and cap of 0 per cent. and 3 per cent. respectively.
Fiver can break the lease at the end of the seventh and 11th years of the term.
19.33 Purchase of 49 Chalk Farm Road
On 9 October 2015, Majorelle Properties Limited exchanged contracts to acquire 49 Chalk Farm
Road, London, NW1 from Tendaline Limited for a total consideration of £5 million. Completion took
place on 23 October 2015. The property comprises a public house/live music venue let to office space
let to Barfly Club Limited.
19.34 Purchase of Fiver
19.34.1
Share purchase agreement
On 21 August 2014, (1) Delinik Trading Limited and (2) Cenk Dumlupinar and Serkan
Daysak entered into a share purchase agreement pursuant to which Cenk Dumlupinar and
Serkan Daysak sold the entire issued share capital of Fiver to Delinik Trading Limited
(a subsidiary of Crowndeal Services Limited) in consideration for (i) £6,800,000 payable
on completion, (ii) deferred consideration in an amount not exceeding £1,700,000 and (iii)
an undertaking by Delinik Trading Limited to issue shares comprising 20 per cent. of the
total issued share capital of Delinik Trading Limited. The agreement contains a full suite of
general warranties as well as warranties in respect of title, capacity and status and contains
certain indemnities for matters arising both pre and post completion which are given by
Cenk Dumlupinar and Serkan Daysak in favour of Delinik Trading Limited. The share
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purchase agreement was amended pursuant to a variation agreement entered into on
26 November 2014 (the “Variation Agreement”). Pursuant to the terms of the Variation
Agreement, Cenk Dumlupinar and Serkan Daysak agreed that (i) the shares in Delinik
Trading Limited (due to them under the terms of the share purchase agreement) would no
longer be issued; (ii) £1,000,000 of the deferred consideration would be paid to them no
later than 28 November 2014; and (iii) the remaining £700,000 of deferred consideration
would be held by Crowndeal Services Limited as a retention to meet certain potential tax
liabilities identified as part of the acquisition of Fiver. The Variation Agreement also
provided for the termination of the shareholders agreement referred to in paragraph 19.34.2
of this Part XV. Please refer to the description of the Roll Up Agreement in
paragraph 19.12 of this Part XV which provides for the issue of Ordinary Shares to Cenk
Dumlupinar and Serkan Daysak.
19.34.2
Shareholders’ agreement
On 21 August 2014, (1) Crowndeal Services Limited (2) Delinik Trading Limited and
(3) Cenk Dumlupinar and Serkan Daysak entered into a shareholders’ agreement relating to
Delinik Trading Limited, which was entered into in anticipation of the receipt of shares in
the issued capital of Delinik Trading Limited by Cenk Dumlupinar and Serkan Daysak as
consideration for the sale of their shares in Fiver. The agreement governs the relationship
between the shareholders of Delinik Trading Limited and contained various drag along and
tag along provisions in favour of the majority shareholder, being Crowndeal Services
Limited. The agreement was terminated pursuant to the Variation Agreement (as described
in paragraph 19.34.1 of this Part XV).
19.34.3
Tax covenant
On 21 August 2014, (1) Delinik Trading Limited and (2) Cenk Dumlupinar and Serkan
Daysak entered into a tax covenant, pursuant to which Cenk Dumlupinar and Serkan
Daysak indemnify Delinik Trading Limited in respect of all tax liabilities which arose
before completion, subject only to some restrictions as set out in the covenant.
19.35 Purchase of Glispa
On 13 March 2015, (1) Fiver (2) the Company and (3) Gary Chah-Arn Lin entered into a share
purchase agreement pursuant to which Gary Lin sold 72.27 per cent. of the entire issued share capital
of Glispa for consideration of €19,978,220 (being €25,000,000 less the total of the cash bonuses
payable to certain employees of Glispa as a result of the transaction, being €5,021,780, subject to any
adjustments in respect of the final tax accounts of Glispa) plus €2.5 million working capital payment
payable in cash on completion, and a further €3.0 million deferred working capital payment. The
agreement contains a full suite of general warranties as well as warranties in respect of title, capacity
and status and contains certain indemnities for matters arising both pre and post completion which are
given by Gary Lin in favour of Fiver. Gary Lin has a put option over his 25 per cent. of Glispa Global
Group Limited that can be exercised between years 2 and 4 for a further consideration of €15 million
(unless the put option has been triggered by the change of control of Fiver, then the consideration
payable is the higher of €20 million or the fair market value). The Company has a call option over the
same shares which can be exercised after two years if Gary Lin ceases to be a managing director of
either Glispa or Glispa Holdings and/or his managing director service agreement has been terminated,
for a further consideration calculated as the higher of market value and €15 million. The Company is
also providing a guarantee for the obligations of Fiver in respect of the payments of consideration due
under the agreement.
19.36 Purchase of Stucco Media
On 7 May 2015, (1) the Shareholders (as defined in Exhibit A to the agreement), (2) BrightLogic Ltd,
(3) the Company, (4) Stucco Media and (5) Delinik Trading Limited entered into a share purchase
agreement pursuant to which the Shareholders sold the entire issued share capital to BrightLogic
Limited for total consideration of up to US$34.5 million, subject to a post-closing working capital
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adjustment. Of the US$34.5 million, US$12,806,435 was payable in cash on closing, US$13,016,139
of Ordinary Shares were issued to the shareholders at closing, and US$8,677,426 of Ordinary Shares
are to be issued as a bonus to each Major Shareholder (as defined in the agreement) on 7 May 2016
(being the first anniversary of the closing date) and on each month for 12 months following 7 May
2016 (being the first anniversary of the closing date). In addition to the total consideration, certain of
the shareholders are entitled to a further aggregate payment of US$8.5 million in cash subject to the
successful future delivery of an e-commerce platform for the Group, measured against key
deliverables and within specified timeframes. Such payment, if it were to become due, is subject to
the continued involvement of the relevant shareholders in the business and will be made 12 months
after the closing date. The issue of any Ordinary Shares to the Shareholders is subject to the continued
involvement of certain of the shareholders in the business of Stucco Media. Those shareholders who
are in receipt of Ordinary Shares are locked up until 7 May 2017 (being the second anniversary of the
date of closing). The agreement contains the general warranties as well as warranties in respect of
title, capacity and status, which are given by each of the shareholders severally on an indemnity basis,
together with certain indemnities for matters arising pre and post completion. The agreement was
varied by way of deed dated 17 November 2015, so that the initial draft of the closing statements are
now to be prepared by 30 November 2015 rather than within 30 Business Days (as defined in the
agreement) of the transaction closing.
20.
DATE OF VALUATIONS IN THE VALUATION REPORT
This document includes valuations by JLL of the Real Estate Assets (excluding 49 Chalk Farm Road)
as at 30 September 2015 and of 49 Chalk Farm Road as at 21 October 2015, all as set out in Part XIII.
As at the date of this document, no material changes have occurred since the 30 September 2015 (in
the case of the Real Estate Assets (excluding 49 Chalk Farm Road)) or 21 October 2015 (in the case
of 49 Chalk Farm Road).
21.
THE DISCLOSURE AND TRANSPARENCY RULES
21.1 Under Chapter 5 of the Disclosure and Transparency Rules and in accordance with the Articles which
provide that the Company shall be deemed an “issuer” as such term is defined in Chapter 5 of the
Disclosure and Transparency Rules (and not, for the avoidance of doubt, a “non-UK issuer”), subject
to certain limited exceptions, a person must notify the Company (and, at the same time, the FCA) of
the percentage of voting rights he holds (within four trading days) if he acquires or disposes of shares
in the Company to which voting rights are attached and if, as a result of the acquisition or disposal,
the percentage of voting rights which he holds as a shareholder (or, in certain cases, which he holds
indirectly) or through his direct or indirect holding of certain types of financial instruments (or a
combination of such holdings):
21.1.1 reaches, exceeds or falls below 3 per cent. and each one per cent. threshold thereafter up to 100
per cent.; or
21.1.2 reaches, exceeds or falls below an applicable threshold in the paragraph above as a result of
events changing the breakdown of voting rights and on the basis of the total voting rights
notified to the market by the Company.
21.2 Such notification must be made using the prescribed form TR1 available from the FCA’s website at
http://www.fca.org.uk. Under the Disclosure and Transparency Rules, the Company must announce
the notification to the public as soon as possible and in any event by not later than the end of the
trading day following receipt of a notification in relation to voting rights. The FCA may take
enforcement action against a person holding voting rights who has not complied with Chapter 5 of the
Disclosure and Transparency Rules.
333
22.
CONSENTS
22.1 BDO LLP, as the reporting accountant, has given and not withdrawn its written consent to the
inclusion of its reports in sub-section 1 of Section A of Part IX, sub-section 1 of Section B of Part IX,
sub-section 1 of Section D of Part IX and Section B of Part X in the form and context in which they
are included and has authorised the contents of those parts of this document which comprise its
reports for the purposes of Rule 5.5.3R(2)(f) of the Prospectus Rules.
22.2 UHY Hacker Young LLP, as predecessor auditor to Fiver, has given and not withdrawn its written
consent to the inclusion of its report in sub-section 1 of Section C of Part IX in the form and context
in which it is included and has authorised the contents of that part of this document which comprises
its report for the purposes of Rule 5.5.3R(2)(f) of the Prospectus Rules.
22.3 JLL has given and not withdrawn its written consent to the inclusion of its report in Part XIII in the
form and context in which it is included and has authorised the contents of those parts of this
document which comprise its reports for the purposes of Rule 5.5.3R(2)(f) of the Prospectus Rules.
22.4 Canaccord has given and not withdrawn its consent to the issue of this document with the inclusion
of its name and references to it in the form and context in which they appear.
22.5 Shore Capital has given and not withdrawn its consent to the issue of this document with the inclusion
of its name and references to it in the form and context in which they appear.
23.
MANDATORY BIDS, SQUEEZE-OUT AND SELL-OUT RULES RELATING TO THE
ORDINARY SHARES
23.1 Other than as provided by the Takeover Code and Part XVIII of the Companies Law, there are no rules
or provisions relating to mandatory bids and/or squeeze-out and sell-out rules that apply to the
Ordinary Shares.
23.2 “Interests in shares” is defined broadly in the Takeover Code. A person who has long economic
exposure, whether absolute or conditional, to changes in the price of shares will be treated as
interested in those shares. A person who only has a short position in shares will not be treated as
interested in those shares.
23.3 “Voting rights” for these purposes means all the voting rights attributable to the share capital of a
company which are currently exercisable at a general meeting.
23.4 Persons “acting in concert” (and concert parties) comprise persons who, pursuant to an agreement or
understanding (whether formal or informal), co-operate to obtain or consolidate control of a company
or to frustrate the successful outcome of an offer for a company. A person and each of its Affiliated
Persons will be deemed to be acting in concert all with each other. In addition, certain categories of
people are presumed under the Takeover Code to be acting in concert with each other unless the
contrary is established.
23.5 For details regarding the Major Shareholder and other persons presumed by the Takeover Panel to be
acting in concert with respect to the Group on Main Market Admission for the purposes of Rule 9 of
the Takeover Code, please refer to paragraph 11 of this Part XV.
23.6 Mandatory bid
23.6.1 The Takeover Code applies to the Company. Under Rule 9 of the Takeover Code, if an
acquisition of Ordinary Shares were to increase the aggregate holding of the acquirer and
its concert parties to shares carrying 30 per cent. or more of the voting rights in the
Company, the acquirer (and depending on the circumstances, its concert parties) would be
required, except with the consent of the Takeover Panel, to make a cash offer for the
outstanding shares in the Company at a price no less than the highest price paid for any
interests in the Ordinary Shares by the acquirer or its concert parties during the previous
12 months. This requirement would also be triggered by an acquisition of shares by a person
334
holding (together with its concert parties) shares carrying between 30 and 50 per cent. of
the voting rights in the Company if the effect of such acquisition were to increase that
person’s percentage of the voting rights.
23.6.2 Prospective investors should be aware that, immediately following Main Market Admission,
the Major Shareholder will continue to hold more than 50 per cent. of the Company’s voting
share capital and may, accordingly, be able to increase its aggregate shareholding in the
Company without incurring any obligation under the Takeover Code to make a general offer.
23.7 Squeeze-out
23.7.1 Under the Companies Law, if an offeror were to acquire 90 per cent. of the Ordinary Shares
within four months of making a takeover offer, it could then compulsorily acquire the
remaining 10 per cent. It would do so by sending a notice to outstanding Shareholders
telling them that it will compulsorily acquire their shares and then, one month later, it would
execute a transfer of the outstanding shares in its favour and pay the consideration to the
Company, which would hold the consideration on trust for the outstanding Shareholders.
The consideration offered to the Shareholders whose shares are compulsorily acquired
under the Companies Law must, in general, be the same as the consideration that was
available under the takeover offer.
23.7.2 The above process is subject to objection from any dissenting Shareholder. A dissenting
Shareholder (being a Shareholder who has not assented to, or who has failed or refused to
transfer his shares to the transferee in accordance with the scheme or contract) may, within
one month after the date of a notice to acquire, apply to the court to cancel that notice. The
court may then either cancel the notice or make such order as it thinks fit.
23.8 Sell-out
The Companies Law does not give Shareholders sell-out rights in respect of their Ordinary Shares
(that is, the right to have their Ordinary Shares acquired by an offeror as part of a takeover offer, where
the offeror had acquired more than 90 per cent. of the Ordinary Shares before the end of the offer
period, and the Shareholder had not previously accepted the offer).
24.
GENERAL
24.1 The current auditors of the Company and the Group are BDO LLP, a member firm of the Institute of
Chartered Accountants in England and Wales who are responsible for the audit of the statutory
financial statements of the Company and the Group for the financial years ended 31 March 2013, 2014
and 2015.
24.2 The Directors and the Proposed Directors are not aware of any patents or other intellectual property
rights, licences, particular contracts or manufacturing processes on which the Company is dependent.
24.3 Save as disclosed in this document, the Directors and the Proposed Directors are not aware of any
exceptional factors which have influenced the Company’s recent activities.
24.4 Save as disclosed in this document and so far as the Directors and the Proposed Directors are aware,
there are no known trends, uncertainties, demands, commitments or events that are reasonably likely
to have a material effect on the Company’s prospects for at least the current year.
25.
DOCUMENTS AVAILABLE FOR INSPECTION
25.1 Copies of the following documents will be available for inspection at the offices of DLA Piper UK
LLP, 3 Noble Street, London, EC2V 7EE and at the registered office of the Company during usual
business hours on any weekday (Saturdays, Sundays and public holidays excepted) for a period of 12
months from Main Market Admission:
25.1.1 the memorandum of the Company and the Articles;
335
25.1.2 the Directors’ and the Proposed Directors’ service contracts and letters of appointment
referred to in paragraph 10 of this Part XV;
25.1.3 the Valuation Report;
25.1.4 the written consent letter of JLL referred to in paragraph 22.3 of Part XV;
25.1.5 the historical financial information relating to the Group and the report thereon by BDO LLP,
as set out in Section A of Part IX;
25.1.6 the historical financial information relating to the Pastra Group and the report thereon by
BDO LLP, as set out in Section B of Part IX;
25.1.7 the historical financial information relating to Fiver and the report thereon by UHY Hacker
Young LLP, as set out in Section C of Part IX;
25.1.8 the historical financial information relating to Glispa and the report thereon by BDO LLP, as
set out in Section D of Part IX;
25.1.9 the report on the unaudited pro forma financial information from BDO LLP, as set out in
Section B of Part X;
25.1.10 the written consent letter of BDO referred to in paragraph 22.1 of Part XV;
25.1.11 the written consent letter of UHY Hacker Young LLP referred to in paragraph 22.2 of
Part XV;
25.1.12 the written consent letter of Canaccord referred to in paragraph 22.4 of Part XV;
25.1.13 the written consent letter of Shore Capital referred to in paragraph 22.5 of Part XV;
25.1.14 a copy of this document.
Dated 21 January 2016
336
PART XVI
DEFINITIONS
The following definitions apply throughout this document, unless the context otherwise requires:
“2014 AIM Placing”
the placing of the 2014 AIM Placing Shares at the 2014 AIM
Placing Price on 22 December 2014
“2014 AIM Placing Price”
200 pence per Ordinary Share
“2014 AIM Placing Shares”
the 50,000,000 Ordinary Shares issued in accordance with the 2014
AIM Placing
“2014 Relationship Agreement”
the conditional agreement dated 16 December 2014 entered into
between the Company, the Major Shareholder and the GHT, details
of which are set out in paragraph 19.8 of Part XV
“2015 AIM Placing”
the placing of the 2015 AIM Placing Shares at 223 pence per share
on 31 July 2015
“2015 AIM Placing Shares”
the 90,000,000 Ordinary Shares issued in accordance with the 2015
AIM Placing
“2016 Relationship Agreement”
the conditional agreement dated 21 January 2016 entered into
between (1) the Company (2) GHT and (3) the Major Shareholder,
details of which are set out in paragraph 19.7 of Part XV
“251-259 Camden High Street”
251-259 Camden High Street, London NW1 7BU
“31 Kentish Town Road”
31 Kentish Town Road, London NW1 8NL
“39-45 Kentish Town Road”
39-45 Kentish Town Road, London, NW1 8NP
“Acquisition Facility”
the acquisition loan facility between the Company and the Major
Shareholder dated 27 February 2015 in connection with the
acquisition of The Interchange Building and Camden Wharf, details
of which are set out in paragraph 12.7 of Part XV
“Affiliated Persons”
has the meaning set out in the Takeover Code and for the purposes
of this document means any undertaking in respect of which any
person: (a) has a majority of the shareholders’ or members’ voting
rights; (b) is a shareholder or member and at the same time has the
right to appoint or remove a majority of the members of its board of
directors; (c) is a shareholder or member and alone controls a
majority of the shareholders’ or members’ voting rights pursuant to
an agreement entered into with other shareholders or members; or
(d) has the power to exercise, or actually exercises, dominant
influence or control
“AIG Senior Facilities Agreement”
has the meaning set out in paragraph 19.11 of Part XV
“AIG Senior Facilities Borrowers”
Camden Market Estates Holdings Ltd, Triangle Upper Limited,
Triangle Extension’s Limited, Upper Piazza Camden LP, Piazza
Camden LP, Ground Gibley Limited, Elcross Estates Limited,
Canal Side Properties Limited, Anise Development Limited,
Atlantic Estates Limited, Camden Lock (London) Limited, Perola
Investments Limited, Loremar Investments Limited, Red Harmony
Investments Limited, Camden Lock Market Limited, Tazzetta
337
Limited, Pushkin Properties Limited and Divanyx Investments
Limited, each a borrower under the terms of the AIG Senior
Facilities Agreement, and each an “AIG Senior Facilities
Borrower”
“AIG Senior Facilities Obligors”
Camden Market Estates Holdings Ltd, Triangle Upper Limited,
Triangle Extension’s Limited, Upper Piazza Camden LP, Piazza
Camden LP, Ground Gibley Limited, Elcross Estates Limited,
Canal Side Properties Limited, Anise Development Limited,
Atlantic Estates Limited, Camden Lock (London) Limited, Perola
Investments Limited, Loremar Investments Limited, Red Harmony
Investments Limited, Camden Lock Market Limited, Tazzetta
Limited, Pushkin Properties Limited, Divanyx Investments Limited,
Korey Investments Limited, Castlehaven Row Limited, The
Camden Market Management Company Limited, The Market
Service Charge Company Limited, Simplepath Investments
Limited, Pastra Investments Limited, Luxurious Property
Investments Ltd, Dixie Property Investments Ltd, Interchange
Camden Limited, Interchange Management Limited, CMHC, MB
Market Holdings Limited, MB Market Corp, MB Select Holdings
Limited, MB Select Corp, Camden Market Holdco Limited,
London Waterbus Company Limited, Camden Lock Limited,
Electric Enterprises Limited, Camden Market Property
Management Limited, Camden Market Piazza Limited, Piazza
(Camden) Ltd, Stanley Sidings Ltd, Camden Market Upper Piazza
Limited, Upper Piazza (Camden) Ltd, Tunnel Market Ltd, Camden
Market Estate Arches Limited, Stables Market (Camden) Limited,
Dave Autos (UK) Limited, Anise Residential Limited, Centrepoint
Management Limited, Davey Autos Limited and Water Lane
(Kentish Town) Management Limited, each an obligor under the
terms of the AIG Senior Facilities Agreement, and each an “AIG
Senior Facilities Obligor”
“AIM”
the AIM Market, a market operated by the London Stock Exchange
“AIM Admission”
the admission of the Ordinary Shares in issue as at 22 December
2014 to trading on AIM being effective in accordance with the AIM
Rules on 22 December 2014
“AIM Rules”
the rules for companies governing admission to and the operation of
AIM, published by the London Stock Exchange
“Articles”
the current memorandum of incorporation and articles of
incorporation of the Company adopted on 30 July 2015
“Audit Committee”
the audit committee of the Board
“Awards”
has the meaning given in paragraph 8.1.1 of Part XV
“BDO”
BDO LLP a limited liability partnership incorporated and registered
in England and Wales, registered number OC305127 whose
registered office address is at 55 Baker Street, London W1U 7EU
“Board” or “Directors”
the board of directors of the Company whose names are set out in
Part VI and “Director” means any one of them
“Buildings A & B”
the two buildings within the Stables Market, labelled as “Buildings
A&B” in the diagram in paragraph 4.1 of Part VII
338
“Camden Lock Market”
Camden Lock Market, Chalk Farm Road, Camden, London, NW1
“Camden Market”
Stables Market, Camden Lock Market and Union Street Market
“Canaccord”
Canaccord Genuity Limited, a company incorporated and registered
in England and Wales, registered number 01774003 whose
registered office is at 88 Wood Street, London, EC2V 7QR, Joint
Financial Adviser to the Company
“Camden Lock Market
Development”
the development opportunity at Camden Lock Market, further
details of which are set out in paragraph 3 and 4 of Part VII
“Chalk Farm Road Acquisition”
the acquisition by the Group of 49 Chalk Farm Road, London, NW1
from Tendaline Limited for a total consideration of £5 million for
which completion took place on 23 October 2015
“CMHC”
Camden Market Holdings Corp., a company incorporated in the
British Virgin Islands
“CMHC Acquisition”
has the meaning set out in paragraph 12.1 of Part XV
“Companies Law”
the Companies (Guernsey) Law, 2008 (as amended) and any
ordinances and regulations issued thereunder
“Company” or “Market Tech”
Market Tech Holdings Limited, a company incorporated and
registered in Guernsey, registered number 59208 whose registered
office is at Third Floor, La Plaiderie Chambers, La Plaiderie,
St Peter Port, Guernsey, GY1 1WG
“Conditional Share Awards”
has the meaning set out in paragraph 8.1.1 of Part XV
“Convertible Bonds”
the £112.5 million senior, unsecured convertible bonds due 2020
issued by the Company on 31 March 2015 with an initial conversion
price of 300 pence, but now £2.9396 as a result of the 2015 AIM
Placing, further details of which are set out in paragraph 19.9 of
Part XV
“CREST”
the system for the paperless settlement of share transfers and the
holding of uncertificated shares operated by Euroclear UK &
Ireland Limited
“CSOP Schedule”
has the meaning set out in paragraph 8.1.5 of Part XV
“Developments”
the Hawley Wharf Development, the Camden Lock Market
Development and the Union Street Market Development
“Diamondcourse”
has the meaning set out in paragraph 12.1.1 of Part XV
“EBT”
has the meaning set out in paragraph 8.17.1 of Part XV
“EU”
the European Union
“Executive Directors”
the executive Directors of the Company
“FCA”
the UK Financial Conduct Authority
“Fiver”
Fiver London Limited, a company incorporated and registered in
England and Wales, registered number 07384676 and whose
registered office address is at 54-56 Camden Lock Place, London,
NW1 8AF, trading as “everything5pounds.com”
“FSMA”
the UK Financial Services and Markets Act 2000 (as amended)
339
“GEA” or “gross external area”
the total area of the building including external perimeter walls and
any service or communal areas
“GHT”
the Goodheart Trust, a trust of which the ultimate beneficiary is
Teddy Sagi
“Glispa”
Glispa GmbH, a company incorporated and registered in Germany,
registered number HRB114678 B and whose registered office is at
Sophienstr. 21, 10178 Berlin, Germany
“Group”
the Company and its subsidiary undertakings, and each company
within the Group shall be a “Group Company”
“Hawley Wharf”
Hawley Wharf, Chalk Farm Road, Camden, London, NW1,
formerly known as ‘Camden Lock Village’
“Hawley Wharf Development”
a canal-side development opportunity at the Hawley Wharf site with
planning permission to transform the area into a mixed use scheme,
further details of which are set out in paragraphs 3 and 4 of Part VII
“HMRC”
HM Revenue and Customs
“IBRC”
has the meaning given to it in paragraph 12.1 of Part XV
“IBRC Proceedings”
the IBRC claim referred to in paragraph 12.1 of Part XV
“ISIN”
International Securities Identification Number
“Jamestown Road”
4 and 6 and 10 – 26A (even) Jamestown Road, London
“JLL”
Jones Lang LaSalle Limited, a company incorporated and registered
in England and Wales, registered number 01188567 whose
registered office is at 30 Warwick Street, London W1B 5NH
“Joint Bookrunners”
in relation to the 2015 AIM Placing, together Canaccord, Shore
Capital and Joh Berenberg, Grossler & Co KG
“Joint Financial Advisers”
Shore Capital and Canaccord
“Listing Rules”
the listing rules of the FCA made under Part VI of FSMA
“London Stock Exchange”
the London Stock Exchange plc, a company incorporated and
registered in England and Wales, registered number 02075721
whose registered office is at 10 Paternoster Square, London,
EC4M 7LS
“LPIL”
has the meaning set out in paragraph 12.1.1 of Part XV
“LTIP”
the long term incentive plan, as defined in paragraph 8.1.1 of
Part XV
“Main Market”
the main market of the London Stock Exchange for listed securities
“Main Market Admission”
the admission of the Ordinary Shares to the standard listing segment
of the Official List and to trading on the Main Market
“Major Shareholder”
Citwax Investments Limited, a company incorporated and
registered in the British Virgin Islands, registered number 1826059
“Market Value”
the definition of Market Value adopted by the International
Valuation Standards Council (IVSC), and as used by JLL in the
Valuation Report in accordance with the RICS Valuation –
340
Professional Standards, January 2014, defined as “The estimated
amount for which an asset or liability should exchange on the
valuation date between a willing buyer and a willing seller in an
arm’s length transaction after proper marketing and where the
parties had each acted knowledgeably, prudently and without
compulsion”
“Market Value Options”
has the meaning set out in paragraph 8.1.3 of Part XV
“Nil Cost Options”
has the meaning set out in paragraph 8.1.3 of Part XV
“net lettable area”
the total area within a building that is able to be let to a tenant, and
the area by which a tenant’s rent is derived (excludes internal areas
used for service or communal areas)
“Nomination Committee”
the nomination committee of the Board
“Nomura Senior Facility”
the senior term loan facility entered into with Nomura European
Investment Limited which, following the entry into of the AIG
Senior Facilities Agreement, has now been terminated
“Non-Executive Directors”
the non-executive Directors of the Company
“Official List”
the Official List of the FCA
“Options”
has the meaning set out in paragraph 8.1.1 of Part XV
“Ordinary Shares”
ordinary shares of 10 pence each in the capital of the Company
“Participant”
has the meaning set out in paragraph 8.4 of Part XV
“Pastra Group”
together, Camden Market HoldCo Limited, Camden Lock Market
Limited, London Waterbus Company Limited, Camden Lock
Limited and Camden Canal Market Limited, but not Pastra
Investments Limited, and should not be considered as forming a
group
“Proposed Directors”
David Brown, Sharon Baylay and Georg Bucher
“Prospectus” or “this document”
this document dated 21 January 2016, comprising a prospectus for
the purposes of the Prospectus Rules
“Prospectus Rules”
the prospectus rules of the UK Listing Authority made pursuant to
section 73A of FSMA
“Real Estate Assets”
Camden Market and the separate real estate assets at 31 Kentish
Town Road, Jamestown Road, 251-259 Camden High Street,
Utopia Village at Chalcot Road, the Hawley Wharf Development
site, Camden Wharf, The Interchange Building, 1-11 Hawley
Crescent and 49 Chalk Farm Road, being collectively the material
real estate assets of the Group
“Red Book”
RICS Valuation – Professional Standards, January 2014
“Registrars”
Capita Registrars (Guernsey) Limited, a company incorporated and
registered in Guernsey, registered number 38018 whose registered
office is at Mont Crevelt House, Bulwer Avenue, St Sampson,
Guernsey, GY2 4LH
“Release Agreement”
has the meaning set out in paragraph 19.16.1 of Part XV
341
“Remuneration Committee”
the remuneration committee of the Board
“Restricted Jurisdiction”
the United States, Australia, Canada, Japan, the Republic of South
Africa and their respective territories and possessions, and any other
jurisdiction where the distribution of this document would or might
breach any applicable law or regulation
“Roll Up Agreement”
the roll up agreement dated 16 December 2014 entered into by the
Company, Delinik Trading Limited and Cenk Dumlupinar and
Serkan Daysak, details of which are set out in paragraph 19.12 of
Part XV
“SEDOL”
the Stock Exchange Daily Official List
“Senior Managers”
Mark Alper and Caroline Grange
“Share Exchange Agreement”
the agreement dated 5 December 2014 made between the Company
and the Major Shareholder, details of which are set out in
paragraph 19.10 of Part XV
“Shareholder Loan Agreement”
has the meaning set out in paragraph 19.15.1.2 of Part XV
“Shareholders”
the holders of Ordinary Shares in the capital of the Company and
“Shareholder” means any one of them as the context requires
“Shore Capital”
Shore Capital and Corporate Limited, a company incorporated and
registered in England and Wales, registered number 02083043 Bond
Street House, 14 Clifford Street, London, W1S 4JU, Joint Financial
Adviser to the Company
“Site E”
39-45 Kentish Town Road, London, NW1 (being part of the Hawley
Wharf Development)
“Stables Market”
Stables Market, Chalk Farm Road, Camden, London, NW1
“Stucco Media”
Stucco Media Limited a company incorporated and registered in
Israel, registered number 51-473384-9 and whose registered office
is at 29 Lilinblum St., Tel-Aviv, Israel
“subsidiary company”
a subsidiary of the Company as that term is defined in section 531
of the Companies Law (save that such term shall include overseas
companies)
“Takeover Code”
the UK City Code on Takeovers and Mergers
“Takeover Panel”
the panel charged with monitoring compliance with the Takeover
Code
“Tax-Advantaged Options”
has the meaning set out in paragraph 8.16 of Part XV
“Trustee”
has the meaning set out in paragraph 8.17 of Part XV
“UK” or “United Kingdom”
the United Kingdom of Great Britain and Northern Ireland
“UK Corporate Governance Code”
the UK Corporate Governance Code published by the Financial
Reporting Council in September 2014
“Union Street Market”
Union Street Market, Buck Street, Camden, London, NW1
“Union Street Market
Development”
the development opportunity at Union Street Market, further details
of which are set out in paragraph 3 and 4 of Part VII
342
“US” or “United States”
the United States of America, its territories and possessions, any
state of the United States of America and the District of Columbia
“US Plan Asset Regulations”
the regulations issued by the US Department of Labour for the
purposes of the United States Employee Retirement Income
Security Act 1974 (as amended)
“US Exchange Act”
the United States Securities Exchange Act of 1934 (as amended)
“US Investment Company Act”
the United States Investment Company Act of 1940 (as amended)
“US Securities Act”
the United States Securities Act of 1933 (as amended)
“Valuation Report”
the valuation report prepared by JLL set out in Part XIII
“VAT”
value added tax
“Working Capital Loan”
the agreement dated 16 December 2014 (as amended) entered into
between the Company and the Major Shareholder details of which
are set out in paragraph 12.6 of Part XV
“WSL”
has the meaning set out in paragraph 12.1.1 of Part XV
343
sterling 166619
MARKET TECH HOLDINGS LIMITED
Third Floor
La Plaiderie Chambers
La Plaiderie
St Peter Port
Guernsey
GY1 1WG
MARKET TECH HOLDINGS LIMITED
PROSPECTUS JANUARY 2016
166619 Project Grand Canal - Cover.indd All Pages
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