Final Results

19 August 2016

Work Group plc

(the "Company" or the "Group")

Final results for the year ended 31 December 2015

Work Group plc (LSE - AIM: "WORK") announces its final results for the year ended 31 December 2015.

Continuing and discontinued operations:

· Sale of overseas subsidiaries and UK business to Capita plc on 31 December 2015

· Re-admitted to trading on the AIM market as ''Investing Company'' under AIM Rule 15

· Managed preservation of shareholder value in business despite heavy trading losses in UK

· Focus in 2016 on achieving successful reverse takeover of profitable and sizeable business to enhance cash value of business.

Financial headlines - continuing and discontinued operations

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

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

Following posting of the Company's annual report and account to shareholders, the Company's shares will be restored to trading on AIM, which is expected to occur later today. A further announcement will be made confirming this.

Simon Howard, Executive Chairman, said: "Following the sale of the Groups' businesses to Capita in December 2015, management has been working to manage the remaining assets and liabilities to maximise cash. At 30 June 2016 the Group's cash balances were approximately £850,000 but there were significant debtor sums outstanding which are being successfully collected. The tail of remaining liabilities, including the lease on premises in Hale Cheshire, are being managed to reduce their cash impact."

Enquiries:

Chairman's review

Overview

The sale of the Company's trading operations to Capita plc in December 2015 was the culmination of an extremely difficult year. The trends witnessed during 2014 continued through 2015 - thus we experienced increasingly challenging trading in the UK which was in part offset by progress overseas, especially in the United States. We were fortunate to be able to support the overseas growth by utilising our deep well of experience in London.

What became clear on a strategic level was that significant changes were occurring for most suppliers of purely people-based advisory services in the UK. This meant that we were working in marketplaces where clients were doing more for themselves and pulling activities in-house; and consequently, the external business that was available was increasingly on a project basis. At the same time, external budgets were being cut and the effect of prolonged and ever more complex procurement procedures meant that working capital was under pressure as never before.

These changes particularly affected us as an SME without its own IP and with fewer continuing contracts delivering 'annuity income' than had previously been the case. Hence in both the employee engagement and the recruitment process outsourcing markets, we witnessed an accelerating trend of employers either taking more recruitment activities in-house or outsourcing their resourcing on a global basis to major global suppliers.

Therefore, it became clear to the Board that the trading activities of the Group could only survive as part of a much larger organisation.

Financial results

Operating loss on continuing operations, before exceptional items of (£0.2) million (2014: £2.3 million), was (£0.7 million) (2014: loss £1.2 million).

Loss before tax from continuing operations was £1.1 million (2014: loss £3.4 million). Cash at year end was £1.7 million (2014: £0.1 million)

The struggle for SME survival

Throughout the course of 2015, we were without doubt struggling to survive and I must thank our people for their commitment and endeavours in achieving the outcome that we did. However, our difficult trading conditions were exacerbated by some truly appalling corporate behaviour in the UK.

During 2014, we had concluded that our former bankers would not be the source of any short-term working capital on acceptable terms. We therefore entered into a confidential invoice discounting arrangement with another provider. However, in practice, the numerous conditions attached to these facilities, despite our client base containing many of the largest companies in the UK, meant that the facility was restricted to 18 per cent of our overall debtor book. This pressure on cash flow prevented us from shrinking our cost base to match our revenues.

This situation was aggravated by more of our working capital being tied up with UK clients which either required us to negotiate labyrinthine procurement and authorisation procedures or to accept ever longer payment terms. This culminated in a situation at the end of October when the amounts overdue (i.e. more than 60 days) from two UK clients amounted to three times our UK payroll. As an SME with large UK corporate clients, we were quite simply exploited - a situation which we did not experience in the United States or Hong Kong. The positive cash flow from these overseas offices in reality prevented the Group from having to declare insolvency.

I am afraid that I also have to reflect that our former bankers did little to support us despite a relationship going back many years. Their constant change in personnel, interpretation of facility limits to the narrowest extent possible and, on two occasions, failure to respond to requests to the point where we were forced to elevate our request to senior management within the bank is a sad reflection on the state of a once reliable business partner. The reality is that they did nothing to help us and in practice nearly caused our demise.

Sadly, the outcome for a number of our smaller suppliers was that we ourselves became late payers and for that I can only apologise. But I fear that this is a situation which will only continue to deteriorate in the UK.

The Future

Since the year end we have been winding down the remains of the UK business, relocating in London to small short term serviced offices and ensuring the business passed to Capita plc as contracted.

After a protracted negotiation, we have managed to finalise the consideration details which resulted in Capita retaining the amount of £500,000 held, subject to an audit of closing working capital, from the £2 million purchase price. This adjustment was as expected. Very careful cash flow management prior to completion saw significant cash withdrawn from our overseas subsidiaries which thereby reduced their normalised working capital.

Cash at 31 December 2015 was £1.7 million, with nil borrowings, after having settled some substantial transaction costs, although we did have significant accumulated creditor payments to satisfy after the year end.

The liabilities relating to warranties and indemnities given under the contract for sale ended on 30 June 2016 and no claims were received.

While some liabilities stand to be settled, our attention in recent months has turned to planning a future for the Group which will deliver the greatest value to shareholders. In particular, we have been reviewing the option for acquiring a significant new business into the Company which would constitute a ''reverse takeover'' under the AIM Rules for Companies and require shareholder approval. Provided we can clearly demonstrate that such a transaction would provide significant added value over our net cash value, we believe this would be a preferred option for shareholders. Our investing policy in this regard is set out earlier in this report. The alternative of an orderly liquidation of the Group is in practice complex, would diminish cash and can take up to 12 months.

We are currently evaluating possible reverse takeover acquisition targets and will report further on this as soon as we are able. The Directors aim to conclude a transaction as early in the second half of 2016 as is feasible notwithstanding the need to conduct extensive and appropriate due diligence.

Simon Howard

Chairman

18 August 2016

Strategic report

Work Group plc

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 has until 31 December 2016 to conclude a reverse takeover acquisition under the AIM Rules to enable it to maintain its quotation on AIM.

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 £7.1 million, a 6.5% reduction from 2014 (2014: £7.6 million). This relates to discontinued operations only and is shown as part of the loss from discontinued operations.

Operating expenses (excluding exceptional items) fell from £5.5 million to £0.7 million which could not offset the decline in revenue thereby resulting in a pre-exceptional operating loss of £0.7 million (2014: loss £1.2 million).

After exceptional items (principally costs associated with the disposal of the businesses) and before taxation, the group recorded a profit of £0.6 million (2014: loss £3.6 million).

Cash flow and balance sheet

Net cash inflow was £1.6 million, of which £1.7 million was proceeds of the sale of subsidiaries and business to Capita plc. The balance from operations in 2014 was an outflow of £1.1 million.

Despite the very heavy cash outflows resulting from the poor trading in the UK and the costs associated with maintaining the Company's AIM listing, a combination of careful cash management and exceptional cash generation in the overseas subsidiaries resulted in a net inflow before proceeds of sale are taken into account.

The restrictive terms attached to the Group's limited borrowing facilities meant that the full contracted facilities were rarely available during the year which resulted in significant penalties for late payment of both PAYE and VAT.

Year-end net cash balances were £1.7 million (2014 £0.1 million).

Earnings per Share and Dividends

The earnings per share was in 2015 2.00p (2014 loss: 12.41p), as the result of the disposal of the operations of all operations of the Group.

No dividend is recommended due to the deficit on distributable reserves (2014: nil).

Going Concern

Following the completion of the sale of the Company's trading operations and subsidiaries on 31 December 2015, the directors have a reasonable expectation that the Group has adequate available resources to continue as a going concern for the foreseeable future.

For these reasons, they continue to adopt the going concern basis in preparing their annual report and financial statements.

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.

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.

The search for a suitable acquisition opportunity that meets the Company's investing policy has involved wide ranging contact with brokers and other professional advisers operating in the AIM market.

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 before 31 December 2016.

The principal uncertainty will relate to stock market and general economic conditions which would affect the ability to complete a transaction.

The Directors are aware that to maximise shareholders' value requires a combination of preserving cash and optimising a reverse takeover. This would thereby increase the value compared to the alternative of liquidating itself and returning remaining cash to shareholders.

Future focus 

The Directors are currently evaluating a limited number of opportunities to acquire a profitable and sizeable business into the Group as a reverse takeover to provide shareholders with an opportunity to participate in an attractive investment opportunity. The Directors aim to conclude a transaction as early in the second half of 2016 as is feasible notwithstanding the need to conduct extensive and appropriate due diligence.

Simon Howard Neil McClure

Executive Chairman Company Secretary

Consolidated income statement

Work Group plc

For the year ended 31 December 2015

Consolidated statement of comprehensive income

Work Group plc

For the year ended 31 December 2015

Consolidated and parent company statements of financial position

Work Group plc

For the year ended 31 December 2015

Consolidated and parent company statements of changes in equity

Work Group plc

For the year ended 31 December 2015

Group

Company

Consolidated and parent company statements of cash flow

Work Group plc

For the year ended 31 December 2015

Notes to the financial statements

Work Group plc

For the year ended 31 December 2015

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. 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 basis on the principle of going concern.

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. At this stage given the transitional nature of the group at the year end, the impact of the new standards is assessed as not being significant. This will be reconsidered and reassessed as the circumstances of the group change and evolve over the coming months.

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 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 and instead should liquidate the remaining assets and pay off all liabilities thereby returning any net proceeds to its shareholders. 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 and intangible assets, including goodwill. Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. 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 assets have been fully impaired.

• Determine whether there are indicators of impairment or write off of the group's or company's current assets or liabilities. 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 and liabilities have been 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. In determining this amount, the Group applies the overriding concept that fair value is the amount for which an asset can be exchanged between knowledgeable willing parties in an arm's length transaction. The nature, facts and circumstance of the investment drives the valuation methodology. 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 and liabilities have been reviewed for indicators of impairment and appropriate actions taken as needed.

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 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.

The consolidation parameters have not changed with the new IFRS 10 standard implemented in 2013. 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:

When the asset under construction is ready for his intended use, it is transferred to the relevant category of assets and the depreciation commences from this point.

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 2015, all remaining assets after the disposal of the business have been impaired, except the assets that were sold after the year end and the useful computer equipment (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.

Inventories

Inventories are valued at the lower of cost and net realisable value. Work in progress represents unbilled costs incurred in respect of revenue not recognised and is stated at the lower of cost and net realisable value.

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 operates a defined contribution scheme, the costs of which are 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.

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 a share premium account and a special reserve. None of these reserves are distributable.

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 current year revenue is reflected within discontinued operations. In the prior year, this all related to continuing operations.

3 Key management and employee information

At the end of 2015, there are three employees in relation to the continuing operations.

In 2015, staff costs (including directors) were as follows:

Key management remuneration

Key management personnel are identified as the members of the 'Group operating board'. This group comprises the directors of the operating businesses.

For the year, pension contributions were made for two directors of the operating businesses (2014: two).

The Companies Act 2006 disclosure in respect of the directors' remuneration can be found in the Directors' remuneration report.

4 Exceptional items

The exceptional costs of £204,000 (2014: 2,261,000 costs) 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

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 20.25% (2014: 21.49%), having qualified for the small profits tax rate. The differences are explained below:

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 2014.

9 Intangible assets

During the year, 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 is no longer usable, a value in use was assessed and found to be nil.

The goodwill was attributed to The Resourceful Group Limited, Park Human Resources Limited and Recruitment Communications Company Limited (£966,000). Following a strategic review at the group and company level, the directors concluded in 2014 that an impairment was required of this goodwill due to the outcome of a strategic review conducted, the continuing tough market conditions and the future plans for the group.

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 has been included to write this investment down to nil carrying value.

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

The value of investments in foreign subsidiaries, amounting to £3,489,000, was fully impaired in 2014 and were disposed off to a third party as at 31 December 2015.

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

Note:

*investment disposed of as at 31 December 2015

# company has been dissolved post year end

12 Deferred tax asset

The following table represents the ageing analysis of the 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.

Deferred taxes were charged back to the Income Statement this year due to fundamental change in the nature of the business.

13 Inventories

All inventories are carried at lower of cost or net realisable value.

14 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 an impairment of £19,000 for the year ended 31 December 2015.

15 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.

The Group monitors and manages the financial risk relating to its operations on a regular basis. These risks include market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The Group engages in regular review of policies and practices to bring these risks down to a minimum.

The Group manages liquidity risk by maintaining adequate reserves as well as the use of an overdraft facility if needed. Monthly cash flow and working capital projections are derived to ensure sufficient funds are available to meet obligations and capital expenditure requirements as they fall due.

Interest rate risk is managed by minimising external debt and periodically reviewing the competitiveness of debt facilities.

The Group continually reviews its exposure to exchange rate movements and has put in place methods to reduce the exchange rate risk wherever it sees such methods as beneficial.

The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the credit risk.

Trade receivables consist of a large number of customers spread across diverse industries. On-going credit evaluation is performed on the financial condition of trade receivables.

These equate to the fair value for the financial assets.

The Group's financial assets comprise trade and other receivables and cash and cash equivalents.

The net amount of trade and other receivables at Group level includes this year an impairment provision of £19,000 that was established when there is some doubt that the Group will not be able to collect all amounts due.

As of 31 December 2015, Group trade receivables of £433,000 (2014: £635,000) were not yet due.

The remaining Group trade receivables of £68,000 (2014: £643,000) were past due and an amount of £19,000 was provided for in respect of the year ended 31 December 2015, based on a case by case review. The ageing analysis of these trade receivables is as follows:

At 31 December 2015, trade receivables denominated in foreign currencies were negligible after the disposal of the foreign subsidiaries (2014: 13% of Group trade receivables). 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:

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. This above represents the security held by the factoring facility.

There is a debenture in place with Barclays Bank Plc in respect of the banking arrangements. This was discharged post year end.

16 Trade and other payables

The amounts owed to Group undertakings relate mainly to:

- The hive up of the Recruitment Communication Company Limited (£1,178,000) in 2007. No interest is applied on these balances which are repayable on demand.

- Cash transfers from the subsidiaries Work Group Resources and Work Group plc.

17 Ordinary share capital

18 Reserves

The foreign exchange reserve represents the revaluation of the intercompany net assets in the foreign subsidiaries.

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.

19 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. 

Details of directors' share options are included in the Directors' remuneration report. 

At 31 December 2015, no employees held share options (2014: 11), under the terms of the purchase and sale agreement with Capita all share options were deemed lapsed at completion on 31 December 2015. Options were previously valued using the Black-Scholes option-pricing model.

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

21 Cash and cash equivalents

22 Leases

Operating leases

The Group and Company lease all of its properties. The Group and Company also lease plant and machinery under non-cancellable operating lease agreements.

The total future minimum lease payments are due as follows:

23 Employee benefit trust

The Resourceful Group Limited Employee Benefit Trust 1995 holds £1,431 (2014: £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 2015 the total EBT interest free loan was £323,967 (2014: £323,967) and the EBT held 3,594,808 (2014: 3,594,808) shares in Work Group plc.

An impairment charge of £99,000 has been included to reduce the carrying value to its considered recoverable amount as at 31 December 2015 (2014: impairment of £126,252). The carrying value of this loan as at 31 December 2015 is £99,000.

24 Related party transactions

The Company conducts numerous transactions each year with its subsidiaries: Work Group Inc., Work Group Limited and Work Group Resources Limited.

For the year ended 31 December 2015, Work Group Plc charged £39,319 commission on sales (2014: £17,909) to Work Group Resources Limited to recognise the client contracts held by the parent company before the business hive down which were not subsequently assigned.

Total other sales of £nil (2014: £nil) were made to Work Group Inc. and Work Group Limited. Recharges relating to operating activities and support team's costs of £38,093 were made by Work Group Resources Limited to Work Group Ltd (2014: £8,815) and of £589,797 to Work Group Inc. (2014: £8,455) in 2015.

In 2015, as in 2014, Work Group Resources relied upon central services supplied by the parent company Work Group Plc, these charges amounted to £145,812 (2014: £138,989) for this period.

Under the terms of the Sale and Purchase agreement with Capita International Limited balances owing to Work Group plc and Work Group Resources Ltd, by the overseas subsidiaries Work Group Ltd and Work Group Inc. were repaid in full as part of the purchase consideration.

In total, £1,456,156 was owed by Work Group Resources Ltd to the parent company at the end of the year (2014: £3,153,225). 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.

25 Post balance sheet events

Since the year end the remaining assets and liabilities, following the sale of business to Capita plc, have been managed to optimise the Group's cash position. Excess leases have been terminated where possible. Acquisition opportunities which would allow the Company to fulfil its objectives as an Investing Company under Aim rules have and continue to be reviewed.

26 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 profit of £260,000 (2014: loss of £5,121,000) before dividends has been reported for the current year.