I've just read the AIM prospectus (P.29) and the £8.42m is quite clearly shown as being part of the £10.2m. This has all been properly accounted for. If there was any additional "hit" to be booked in 2002 based on what was known in 2001, then AIM prospectus would have been clearly misleading to investors, bordering on fraudulent - I do not believe this to be the case.
The question I have is whether the agreement has actually become effective. I am not sure after reading this from the AIM prospectus :-
"If this agreement does not come into force, Old Chorion will remain the head lessee under a lease of premises at the Trocadero Centre and, under the existing terms of the lease, will be obliged to pay rent of £3.3 million
annually. Under these arrangements there would be an upwards-only rent review in September 2002. The lease would expire in September 2022, subject to a break option, exercisable by Old Chorion in March 2008.
Old Chorion sub-let this space at a rate of £3,190,000 per annum but there were concerns that the sub-tenant may have been unable to fulfil its obligations for the duration of the sub-lease. In addition, Old Chorion had
agreed with its landlord that if Old Chorion’s pre-tax profits in any year were less than £6 million, Old Chorion would deposit with the landlord an amount equal to one year’s rent or provide a bank guarantee for
this amount."
If the agreement does not come into force, Urbium will be exposed to potential losses that may not be easily quantified. However with no £9m payment to make, this would probably involve a write-back of the provision to the accounts in 2002, with the long term future direction of this business hamstrung by the Trocodero lease until 2008.
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