Final results for the year ended 31 December 2016

28 June 2017

Work Group plc

("Work Group", the "Group" or the "Company")

Final results for the year ended 31 December 2016

Work Group announces its final results for the year ended 31 December 2016, a summary of which is set out below.

Headlines

Since completing the sale of the Group's UK trading activities and overseas subsidiaries on 31 December 2015 the Directors have been managing the legacy assets and liabilities to maximise cash resources with a view to using them to acquire a new trading business via a Reverse Takeover ("RTO") transaction, as defined in the AIM Rules for Companies.

Preparing the Company for an RTO required the disposal or termination of property leases, the negotiation of residual supply contracts and the termination of infrastructure supply contracts together with the collection of residual debtors and payment of liabilities arising from previous trading activities.

Initial cash proceeds of £1.7m were substantially reduced in dealing with these matters and the Group has experienced a net outflow in excess of £1.2m over the year.

The Company remained AIM quoted with a defined investing strategy as approved by shareholders at its last AGM.

A number of RTO candidate companies were examined and finally, in August 2016, the Company entered into exclusivity arrangements, which included a cost indemnity to cover advisory fees in the event a transaction does not proceed.

Negotiations and due diligence have been in progress since then and it is anticipated that a definitive contract can be signed shortly.

Financial headlines - continuing and discontinued operations

^ References in the report to "net fee income" represent gross profit.

Copies of the annual report will shortly be posted to shareholders, and can also be viewed on the Group's website, www.workgroupplc.com

Enquiries:

Chairman's review

Overview

The sale of the Company's UK business and overseas subsidiaries to Capita plc completed on 31 December 2015. The first half of 2016 was spent managing the legacy assets and liabilities of our UK subsidiary, and ensuring the businesses passed to Capita plc as contracted.

This process was conducted with the view of preserving cash balances while ensuring that all outstanding liabilities were settled, debtors collected, premises vacated, furniture disposed of and numerous supplier accounts closed. In order to ensure that the Company would be an attractive cash shell for a reverse takeover transaction we had negotiated limited timescales to any warranties and indemnities given as part of the sale transaction; no claims were received within the warranty period.

The Loss before tax on continuing operations was £0.495m (2015 Loss £0.9m) and cash at 31 December 2016 was £0.54m (2015 £1.7m). The one remaining significant legacy issue at the year-end was the lease on the Manchester premises vacated as part of the sale. Despite numerous attempts to assign, sub-let or surrender, the lease ran its full term to April 2017. Dilapidations were agreed and the full anticipated costs were provided for in the 2015 accounts.

As stated previously we believed that it was in the interests of shareholders to find a future for the Group which would deliver the greater value to shareholders as opposed to liquidation. Having reviewed a number of reverse takeover opportunities we entered into exclusive negotiations regarding a suitable acquisition in the Autumn of 2016, and despite some unforeseen delays, we are optimistic that the transaction will be announced shortly after publication of this Annual Report.

As this is likely to be my final report to shareholders I would like to thank them for their support and patience.

Simon Howard

Chairman

27 June 2017

Strategic report

The business model

Work Group plc was a human capital consulting group which provided a range of services built principally on employee engagement and recruitment outsourcing activities.

The employee engagement activities were conducted through operating subsidiaries in the UK, Hong Kong and USA. The client base for these services was principally made up of large corporate entities and government bodies where we would typically work with internal HR or Resourcing functions. In the case of recruitment outsourcing, this was a service delivered only in the UK and focused on the provision of specialist programme-based support.

On 31 December 2015, the Company completed the sale of the Hong Kong and New York subsidiaries and the UK business conducted through its wholly owned subsidiary Work Group Resources Limited to Capita Resourcing Limited and Capita International Limited (both wholly owned subsidiaries of Capita plc).

On the same day, the Company was re-admitted to trading on the AIM Market of the London Stock Exchange as a Rule 15 Investing Company (cash shell). Under the terms of the re-admission the Company had until 31 December 2016 to conclude a reverse takeover acquisition under the AIM Rules to enable it to maintain its quotation on AIM.

While the Company was in advanced negotiations to conclude a significant reverse takeover acquisition at 31 December 2016 the failure to conclude a deal lead to a suspension of its quotation on 16 December 2016. 

After consultation with their professional advisers the Company believes it is still possible to conclude a satisfactory reverse transaction even though the shares may be cancelled from trading on AIM. In the meantime, the Company's shares remain suspended from trading on AIM and further updates in this regard will be announced as necessary.

Strategy and Objectives

The core elements of the Group's strategy, following the disposal of its trading subsidiaries and operations are:

- To preserve and enhance shareholder value through a successful reverse takeover transaction;

- To ensure that the enlarged group is capable of trading profitably in the future; and

- To ensure that the enlarged group operates in a market offering attractive growth prospects.

Results for the financial year

Group revenue for the year was £0.008m (2015: £7.1m). This reflects the status of the business as a non-trading entity following the sale of its business and subsidiaries to Capita plc on 31 December 2015.

The costs associated with winding-down the legacy elements of the UK business, costs associated with the negotiation of a suitable reverse takeover and the costs associated with remaining an AIM quoted company lead to an operating loss of £0.5m (2015: loss £0.9m).

Pre-tax Losses were £0.5m (2015 Loss £0.9m)

Cash flow and balance sheet

Net cash outflow was £1.2m (2015 inflow £1.6m) reflecting the payment of substantial net legacy liabilities relating to the disposal of the businesses and the operating costs for the year.

Year-end net cash balances were £0.5m (2015 £1.7m).

Earnings per Share and Dividends

The earnings per share in 2016 was a Loss per share of 1.53p (2015 earnings per share of 2.00p)

No dividend is recommended due to the deficit on distributable reserves (2015: nil).

Going Concern

Following the completion of the sale of the Company's trading operations and subsidiaries on 31 December 2015, the directors have sought to manage the assets and liabilities to preserve value pending the completion of a suitable reverse takeover transaction.

Once a suitable opportunity was identified in early Autumn 2016 an Exclusivity Agreement was entered into which contained an indemnity relating to all advisory costs contracted and expended on the transaction. Under the terms of this indemnity which still persists, in the event that a reverse takeover transaction cannot be concluded, other than for reasons of the Company's withdrawal without good reason, then all transaction costs will be covered, including some advisory fees already paid.

While the transaction has taken significantly longer than expected, due to reasons beyond the Company's control, and thereby cash balances have reduced more than the Directors would have wished, the Directors still believe that a transaction is very likely to proceed and thereby it is appropriate to prepare the accounts on a Going Concern assumption.

Monitoring, risk and KPIs

At present, following the disposal of the Company's trading operations on 31 December 2015, the focus of monitoring risk and KPI's relate solely to the preservation of cash and the search for a suitable reverse acquisition opportunity. In the event that the proposed transaction were to fail and the Company had to rely upon the cost indemnity to cover and repay advisory fees expended the Directors believe that there are still sufficient cash resources available to look for an alternative reverse transaction. In these circumstances, the directors will take no further remuneration.

Save for the fees and costs relating to the reverse takeover transaction the other costs associated with operating the business are minimal and in anticipation of the agreed acquisition the company's short-term property lease has been terminated from 30 June 2017 In these circumstances, the Directors would still anticipate that the Going Concern basis is an appropriate basis of preparing these accounts.

To preserve cash the Group has sought to eliminate all unnecessary overheads, reduced property rental obligations and concentrated on the collection of all sums owed to the Group following the sale of the business.

Business environment

The principal risk faced by the Group would be the failure to execute its chosen strategy of finding a suitable candidate for a reverse takeover.

The principal uncertainty relates to stock market and general economic conditions which are likely to affect the ability to complete a transaction.

The delays in concluding the chosen acquisition have been for reasons beyond the control of the Company and are unrelated to the general business environment.

Future focus 

The Directors have identified a suitable transaction which they are hopeful can be completed in the near future. In the event this transaction could not proceed the directors have decided that there are still sufficient cash resources to seek an alternative reverse transaction. 

Simon Howard Neil McClure

Executive Chairman Company Secretary

27 June 2017

Consolidated income statement

Work Group plc

For the year ended 31 December 2016

Consolidated statement of comprehensive income

Work Group plc

For the year ended 31 December 2016

Consolidated and parent company statements of financial position

Work Group plc

For the year ended 31 December 2016

The Company recorded a pre-tax loss of £607,000 for the year (2015: profit £206,000)

The financial statements were approved by the board of directors on the xx June 2017 and signed on its behalf by:

Simon Howard

Executive Chairman

Company

.

Consolidated and parent company statements of cash flow

Work Group plc

For the year ended 31 December 2016

.

Notes to the financial statements

Work Group plc

For the year ended 31 December 2016

1 Summary of significant accounting policies

Work Group plc is a public limited company incorporated in England and Wales, domiciled in the United Kingdom and listed on the AIM market of the London Stock Exchange (AIM). The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, International Financial Reporting Interpretation Committee (IFRIC) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Going concern

These accounts have been prepared on the going concern basis of preparation. Following the completion of the sale of the Company's trading operations and subsidiaries on 31 December 2015, the directors have sought to manage the assets and liabilities to preserve value pending the completion of a suitable reverse takeover transaction.

Once a suitable opportunity was identified in early Autumn 2016 an Exclusivity Agreement was entered into which contained an indemnity relating to all advisory costs contracted and expended on the transaction. Under the terms of this indemnity which still persists, in the event that a reverse takeover transaction cannot be concluded, other than for reasons of the Company's withdrawal without good reason, then all transaction costs will be covered, including some advisory fees already paid.

While the transaction has taken significantly longer than expected, due to reasons beyond the Company's control, and thereby cash balances have reduced more than the Directors would have wished, the Directors still believe that a transaction is very likely to proceed and thereby it is appropriate to prepare the accounts on a Going Concern basis.

In the event that the proposed transaction were to fail and the Company had to rely upon the cost indemnity to cover and repay advisory fees expended the Directors believe that there are still sufficient cash resources available to look for an alternative reverse transaction. In these circumstances the directors will take no further remuneration.

Save for the fees and costs relating to the reverse takeover transaction the other costs associated with operating the business are minimal and in anticipation of the agreed acquisition the Company's short term property lease has been terminated from 30 June 2017. In these circumstances, the Directors would still anticipate that the Going Concern basis is an appropriate basis of preparing these accounts.

Adoption of new and revised International Financial Reporting Standards

In the current year, the Group has assessed the possible impact that the new IFRS standards and interpretations that have been issued, but are not yet effective will have on the Group's financial statements.

The three principal IFRS standards issued but not effective are

- IFRS 15 Revenue from Contracts with Customers;

- IFRS 9 Financial Instruments; and

- IFRS 16 Leases

Given the transitional nature of the group no attempt has been made to assess the possible impact of these standards, but subject to a reverse takeover transaction being concluded a review will commence.

Critical accounting estimates and judgements

To be able to prepare financial statements according to IFRS, management and the Board of Directors must make estimates and assumptions that affect the asset and liability items and revenue and expense items recorded in the financial statements as well as other information. These estimates are based on historical experience and various other assumptions that management and the Board believe are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources.

In preparing these financial statements, the directors have made the following significant estimates and judgements:

• In preparing the accounts on a going concern basis the directors have had to consider the possibility that the Company will not fulfil its investing strategy but the Company instead should use the remaining cash assets to seek an alternative reverse transaction. The potential impact of not adopting a going concern basis is that the Company should, in addition to the impairments it has already undertaken, consider additional impairments and provide for the costs associated with the liquidation of the Company.

• Determine whether there are indicators of impairment of the group's or company's tangible assets. Tangible fixed assets have been fully depreciated and impaired. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors taken into consideration in reaching such a decision are future market conditions, use of the asset, the remaining life of the asset and projected disposal values. For the year ended 31 December 2015 following the disposal of the overseas trading subsidiaries and the trade and assets of Work Group Resources Limited as at 31 December 2015, any remaining fixed assets were fully impaired. For the year ended 31 December 2016 the Company fully impaired any fixed assets acquired during the year.

• Determine whether there are indicators of impairment or write off of the group's or company's current assets. For the year ended 31 December 2015 following the disposal of the overseas trading subsidiaries and the trade and assets of Work Group Resources Limited as at 31 December 2015, any remaining current assets were reviewed for indicators of impairment and appropriate actions taken as needed.

• Determine whether, at Work Group plc and company level, there are indicators of impairment of investments. For the year ended 31 December 2015 following the disposal of the overseas trading subsidiaries and the trade and assets of Work Group Resources Limited as at 31 December 2015, all investments were fully impaired.

Following the sale of the Company's businesses and operations, the critical accounting estimates and judgements will be reviewed once the nature of any possible reverse acquisition transaction is clear or failing that a decision is taken to undertake an orderly liquidation.

Basis of consolidation

The Group financial statements comprise a consolidation of the financial statements of the holding Company and all of its subsidiary undertakings. The results of subsidiary undertakings acquired are included in the consolidated income statement and consolidated balance sheet using the acquisition method of accounting from the effective date that control is obtained.

As a result, the consolidation includes the profit and loss for the foreign subsidiaries Work Group Inc. and Work Group Ltd until the disposal date 31 December 2015. Thereafter the consolidation solely includes the Company and its wholly owned non-trading subsidiary Work Group Resources Limited.

Work Group plc controls and consequently consolidates all its subsidiaries as it is composed, and has the rights, to variable returns from its involvement with the entities and has the ability to affect those returns through its power over the entity. The group is considered to have power over its subsidiaries as it owns 100% of their voting shares and its Board has ability to direct the relevant activities.

Revenue and cost of sales

Revenue is stated net of value added tax.

Revenue in respect of the Work Business Unit segment is recognised when the right to the consideration is earned based on the terms of each client contract agreement. Revenue from advertising is recognised after the cover date of an advertisement is established or the right to cancellation of an advertisement has expired.

Unbilled revenue on client assignments is included as accrued income within trade and other receivables. Where individual on account billings exceed revenue recognised on client assignments, the excess is classified as deferred income within trade and other payables.

Invoices issued as agreed with the client are shown in advance billing in the event that related work has not been performed.

Certain client contracts allow for volume discounts and is dependent on the value of media purchased through the Company. The discounts are provided for during the year based on anticipated media spend.

Cost of sales represents costs from third party suppliers.

Exceptional items

Exceptional items are those income or costs recognised as one-off or non-recurring in nature, and substantial in size. The separate reporting of exceptional items helps provide a better indication of the Group's underlying business performance.

Finance costs

Finance costs are calculated on amounts outstanding or owing to the Group, and at the effective interest rate applicable.

Property, plant and equipment 

Property, plant and equipment are stated at historic purchase cost less accumulated depreciation. Depreciation is calculated so as to write off the cost of property, plant and equipment, less their estimated residual values, on a straight-line basis over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are:

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within net operating expenses in the income statement.

In 2016, all remaining assets after the disposal of the business were impaired. (See note 10).

Intangible assets

Goodwill is stated at cost less any accumulated impairment losses. Cost represents the difference between the fair value of the consideration paid on acquisition of a business and the fair value of the Group's share of the net identifiable assets acquired. As permitted by IFRS 1, goodwill arising on acquisitions prior to 1 January 2006 (the IFRS transition date) has been frozen at its UK GAAP carrying value at that date.

Within other intangible assets, software licences are stated at historic cost less accumulated amortisation. Amortisation is calculated so as to write off the cost of the licences, less their estimated residual values, on a straight-line basis over the expected useful economic lives of the licence concerned. The principal annual rate used for this purpose is 20%. No amortisation is charged until the software licences are available and brought into use.

Impairment of non-financial assets

Goodwill is tested annually for impairment, or earlier if circumstances indicate that impairment may have occurred. The impairment reviews are performed at the cash-generating unit (CGU) level and goodwill is assigned to CGUs for the purpose of such reviews.

At each reporting date, a review for impairment of other non-current assets is carried out to determine if any events or changes in circumstances indicate that the carrying amount of the non-current assets may not be recoverable. See paragraph on 'Critical accounting estimates and judgements' for detail.

Impairment reviews comprise a comparison of the carrying amount of the non-current asset with its recoverable amount (the higher of the fair value less cost to sell and value in use). To the extent that the carrying amount exceeds the recoverable amount, the non-current asset is impaired and an impairment loss is recognised in the income statement. See paragraph on 'Critical accounting estimates and judgements' for detail.

Trade receivables

Trade receivables are non-derivative assets of fixed and determinable amounts that are not quoted in an active market and arise through the provision of goods and services to customers. They are recognised initially at fair value, subsequent measurement assesses the carrying value less impairment losses. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect any or a proportion of amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the estimated discounted future cash flows. The amount of the provision is recognised in the income statement.

Taxation

Income tax on the profit for the year 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 equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted, or substantively enacted, at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred taxation is provided using the balance sheet liability method in respect of all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their respective carrying values. Deferred taxation is determined using the tax rates and laws that have been enacted, or substantively enacted, by the balance sheet date and are expected to apply when the related deferred tax asset or liability is realised or settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits and future capital gains will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are not discounted.

Cash and cash equivalents

Cash and cash equivalents as presented in the balance sheet, consist solely of cash balances. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purposes of the cash flow statement.

Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are measured at fair value.

Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Rents payable under operating leases are charged in the income statement on a straight-line basis over the term of the lease.

Pensions

The Group operated a defined contribution scheme, the costs of which were recognised in the income statement in the period in which they relate. The assets of the scheme are held separately from those of the Group in an independently administered scheme.

Foreign currencies

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in Sterling, which is the Company's functional and the Group's presentation currency.

Monetary assets and liabilities in foreign currencies are translated into functional currency at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into functional currency at the rate of exchange ruling at the date of the transaction. Exchange differences are recognised in the income statement as they arise.

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

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

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

· All resulting exchange differences are recognised in Other Comprehensive Income.

Share based payment

The Group issued equity-settled, share-based payments, in the form of share options, to certain employees. In accordance with IFRS 2, such options are measured at fair value at the date of grant. Fair value is measured using the Black-Scholes pricing model and is expensed on a straight-line basis in the income statement over the vesting period, based on the Group's value of these options at the grant date and estimate of the number of shares that will eventually vest.

These plans expired as part of the sale agreement to Capita group and no new options have been granted subsequently.

Dividends

Dividend distributions to the Company's shareholders are recognised in the financial statements in the year in which the distribution is authorised. Interim dividends are recognised when paid.

Reserves

The reserves comprise share capital; share premium account; a special reserve; a reserve for shares held by the Employee Benefit Trust and a retained earnings reserve.

- Share capital This represents the nominal value of shares that have been issued by the Company.

- Share premium This reserve records the amount above the nominal value received for shares issued by the Company. Share premium may only be utilised to write-off any expenses incurred or commissions paid on the issue of those shares, or to pay up new shares to be allotted to members as fully paid bonus shares.

- Special reserve - This reserve arose from a Court approved share reorganisation approved in 2005 and is only distributable with the specific approval of the High Court

- EBT Trust reserve - This reserve represents the cost of shares held by the Company's Employee Benefit Trust and is a non-distributable reserve

- Retained earnings This reserve comprises all current and prior period retained profits and losses after deducting any distributions made to the Company's shareholders.

Ordinary share capital

Ordinary shares are classified as equity when the Company has no obligation to pay the holders cash or other financial assets. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. The shares held by the EBT are treated as shares held in treasury.

2 Geographical segmental reporting

The sales analysis in the table below is based on the location of the customer. All significant assets and capital expenditure are located in the UK.

The 2015 revenue cover the Group's trading activities that were disposed of on 31 December 2015 and is reflected within discontinued operations. The Revenue earned in 2016 reflects the proceeds from the sale of surplus assets.

3 Key management and employee information

In the financial year 2016 the Company and Group had 3 employees including the two directors.

In 2016, staff costs which comprised only key management (including directors) were as follows:

Key management remuneration

Key management personnel are identified as in 2015 members of the 'Group operating board' and in 2016 the remaining employees. This group in 2015 comprises the directors of the operating businesses which were disposed of on 31 December 2015.

For the year 2016 no pension contributions were made for any directors (2015: two).

Disclosure in respect of the directors' remuneration can be found in the Directors' remuneration report.

4 Exceptional items

In 2015 the exceptional costs of £204,000 relates to professional costs associated with the business sale and the write off of assets and liabilities that are no longer relevant in the context of the continuing operations.

6 Profit from discontinued operations net of tax - 2016

7 Taxation

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date. The standard rate of corporation tax in the UK for the year was 20.00% (2015: 20.25%), having qualified for the small profits tax rate. The differences are explained below:

The availability of losses carried forward to offset future Corporation Tax liabilities may be affected by the contemplated reverse takeover transaction as outlined in the Strategic Report. Generally, losses may only be used to offset profits arising from the same or similar business activities.

8 Earnings/(loss) per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year excluding treasury shares and shares held by the EBT which are treated as treasury shares.

No further shares have been issued since 31 December 2015.

9 Intangible assets

During 2015, the Group has recognised an impairment loss for the remaining amount of the software licences of the ERP system for £78,000, in addition to the depreciation of the year, as the system was no longer usable, a value in use was assessed and found to be nil.

10 Property, plant and equipment

Company

As at 31 December 2015, following the disposal of the overseas subsidiaries to Capita International Ltd and the UK trading operations undertaken by Work Group Resources Limited to Capita Resourcing Limited, all assets not specifically transferred under the terms of the sale and purchase agreements were fully impaired at both Group and Company level. A full assessment of assets held by the Group and the Company after the sale of the businesses to Capita PLC lead to an impairment charge to reflect the remaining value in use.

11 Investments in subsidiaries

Company

Following the sale of the trade and assets of Work Group Resources Limited as at 31 December 2015 and a review of the carrying value of this investment, an impairment charge was included to write this investment down to nil carrying value.

Below is the list of Parent Company's investments in subsidiaries:

The registered office of the subsidiary is the same as for the public company.

The subsidiary undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary undertaking held directly by the parent company does not differ from the proportion of ordinary shares held.

12 Deferred tax asset

Deferred income tax assets are recognised for tax losses and other timing differences to the extent that the Directors believe that the realisation of related tax benefit through future taxable profits is probable.

Given the uncertainty about the Company's future trading activities no credit for available losses has been included in the accounts.

13 Trade and other receivables

The amount owing from group undertakings relates to the loan made by the Company to the EBT. No interest is applied to this balance.

A review of the remaining trade receivables has been undertaken, leading to no impairment,

(2015: £19,000).

14 Financial instruments

The Group's financial instruments comprise cash and other items such as trade and other receivables and trade and other payables that arise directly from its operations. Further detail is set out below. The main purpose of holding cash is to finance the Group's future investments and operations. It is and has been throughout the years presented the Group's policy that no trading in financial instruments shall be undertaken.

The fair value of financial assets and liabilities is not materially different to their book value.

The Group manages its capital to ensure entities in the Group will be able to continue as a going concern.

Prior to disposal of its UK business and overseas subsidiaries on 31 December 2015 the Group monitored and managed the financial risk relating to its operations on a regular basis. These risks included market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The Group engaged in regular review of policies and practices to bring these risks down to a minimum.

Following the disposal of its business activities on 31 December 2015 the Group focussed principally on the management of its available cash reserves to ensure they were sufficient to enable it to partly fund a suitable reverse takeover transaction. Monthly cash flow and working capital projections are derived to ensure sufficient funds are available to meet obligations as they fall due.

Interest rate risk is managed by minimising external debt and the Group has no exposure to foreign currency risk as all assets and liabilities are denominated in sterling. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating any credit risk.

Prior to the sale of the Company's trading operations trade receivables consisted of a large number of customers spread across diverse industries. Following the sale on 31 December 2015 the legacy trade receivables remaining with the Group were managed successfully so that all material sums due were collected during the year. At year end 2016 no balances are outstanding.

These equate to the fair value for the financial assets.

The Group's financial assets comprise cash and cash equivalents.

The net amount of trade and other receivables at Group level included at 31 December 2015 an impairment provision of £19,000 that was established when there was some doubt that the Group would be able to collect all amounts due. No provision remains at year end 2016.

As of 31 December 2015, Group trade receivables of £433,000 were not yet due.

The remaining Group trade receivables at 31 December 2015 of £68,000 were past due and an amount of £19,000 was provided for in respect of that year, based on a case by case review. The ageing analysis of these trade receivables was as follows:

At 31 December 2016 and 2015, trade receivables denominated in foreign currencies were negligible after the disposal of the foreign subsidiaries. No interest was accrued for trade and other receivables.

The Group's financial liabilities consist of trade and other payables. A detailed description of these financial liabilities is given below:

Cash facilities were as follows:

A debenture in place with Barclays Bank PLC in respect of the banking arrangements was fully discharged in early 2016 and no security or borrowing exists at year end.

During the year ended 31 December 2014, Work Group plc signed a factoring contract on all UK based debtors billing. The factoring company was financing 55% of UK debtors until payment for a maximum of 90 days from date of invoice. The 2015 balance represents the security held by the factoring facility which was fully discharged in early 2016.

15 Trade and other payables

The amounts owed to Group undertakings relate mainly to cash transfers from the subsidiaries Work Group Resources and Work Group plc.

16 Ordinary share capital

17 Reserves

The special reserve was created in 2005. With the sanction of an Order of the High Court effective from 28 November 2005 the ordinary shares of £1 each and the cumulative preferred ordinary shares of £1 each were both reduced to 10p per share and the share premium account was cancelled. This created a special reserve of £2,946,869.

The accumulated deficit on the Company's profit and loss account as at the effective date of 28 November 2005 was reduced to nil by a transfer from the special reserve, reducing the special reserve by (£121,063). The special reserve then amounted to £2,825,806.

18 Share based payments

Group and Company

The Employee share ownership plan (ESOP) was established in 2003 and renewed in 2010. Under the scheme the trustee, Louvre Trustees Limited, purchased the company's ordinary shares in the market using a £323,967 loan granted to Work Group plc by the trust. 

All share options were cancelled at 31 December 2015 and no new options have been granted during the year or subsequent to the year end. Options were previously valued using the Black-Scholes option-pricing model.

Share options

19 Reconciliation of profit/(loss) to cash used in operations

20 Cash and cash equivalents

21 Leases

Operating leases

The Group and Company have significantly reduced their lease commitments during the year and at year end held one short term property lease, which was terminated post year end.

The total future minimum lease payments are due as follows:

22 Employee benefit trust

The Resourceful Group Limited Employee Benefit Trust 1995 holds £1,431 (2015: £1,431) in cash offshore for the benefit of employees.

The cash has been recognised in the consolidated balance sheet on the basis that Work Group plc is deemed to be the sponsoring employer of the trust. A corresponding liability for payments to be made for the benefit of employees has been recognised in other payables.

At 31 December 2016, the total EBT interest free loan was £323,967 (2015: £323,967) and the EBT held 3,594,808 (2015: 3,594,808) shares in Work Group plc.

No further impairment has taken place on the carrying value of this loan pending the outcome of negotiations to successfully complete a reverse takeover transaction (2015 £99,000)

The carrying value of this loan as at 31 December 2016 is £99,000 (2015 £99,000).

In the event that no transaction is concluded as outlined in the Strategic Review this loan may prove to be irrecoverable.

23 Related party transactions

As part of the arrangements to manage the legacy assets and liabilities of its UK business conducted through its Work Group Resources Limited, the Company has provided management services without charge. In total, £2,167,285 was owed by Work Group Resources Ltd to the parent company at the end of the year (2015: £1,456,156). This has been fully provided for in the parent company's financial statements.

All transactions related to directors during the year can be found in the Directors' remuneration report.

24 Post balance sheet events

The Company continues to pursue the opportunity for a substantial reverse takeover. Further due diligence and legal and financial enquiries are in hand and the Company has recently renewed its exclusivity and indemnity arrangements with the candidate company.

25 Company income statement

The Company has taken advantage of the exemption in Section 408 of the Companies Act 2006 from publishing a separate income statement and statement of comprehensive income. A loss of £607,000 (2015: profit £260,000) before dividends has been reported for the current year.