TIDMQFI
RNS Number : 7655I
Quadrise Fuels International PLC
30 March 2015
30 March 2015
Quadrise Fuels International plc
("QFI", "Quadrise", "Group" or the "Company")
Interim results for the six months ended 31 December 2014
Quadrise, the emerging supplier of MSAR(R) , a low-cost
alternative to fuel oil in the shipping, refining and power
generation markets, is pleased to announce its interim results for
the six months ended 31 December 2014.
HIGHLIGHTS
Financial
-- Cash reserves of GBP9.80 million as at 31 December 2014
(GBP2.13 million as at 31 December 2013), boosted by a successful
equity fund raising in March 2014, leaving the Group fully funded
for all current major projects.
-- Operating loss for the 6 months to 31 December 2014 of
GBP2.22 million (GBP1.80 million for 6 months to 31 December 2013),
of which GBP1.1 million relates to a non-cash charge of GBP1.08
million for share options, keeping in line with the management's
firm commitment to maintain a low cost base in the pre-revenue
phase of the Group.
Operational
-- Current expectations are that contract terms for the first
commercial production of Marine MSAR(R) fuel will be settled and
production to start the LONO programme should be available Q4 2015.
On success, consideration of the commercial roll-out should take
place in mid-2016. Arrangements have taken longer than expected
due, in part, to the oil price collapse and related
uncertainty.
-- In Saudi Arabia the Company has been advised that emulsion
fuel will be an integral part of the future national power
generation fuels mix and that the client requires an accelerated
'production to combustion' pilot programme to be implemented to
enable an extended combustion trial in a major power plant during
the coming winter. Plans and preparations to achieve this
objective, and the terms on which Quadrise will provide technology
and services, are currently under discussion.
-- The use of MSAR(R) fuel for power generation in refineries
(own use and export) is emerging as a potential additional business
sector. Related project evaluations are in advanced discussions
with a number of refining companies.
-- The prospective Joint Venture with Ecopetrol in Colombia has
been affected by the oil price collapse and related reassessment of
funding priorities. Discussions have resumed and early indications
are that there could still be a basis on which to proceed albeit on
revised terms. Should this be confirmed Quadrise may look to
include a partner and has sufficient funds reserved to participate
in an equitable joint venture structure.
-- Two senior executive appointments were confirmed late in 2014
to the newly created General Management roles responsible for
business development in the Marine and Power Generation sectors.
Their skills and experience enhance the management team and provide
effective capacity to meet the demands of imminent transition to
commercial phase operations involving multiple clients and projects
across diverse geographic locations.
-- Research and Development and associated technical services
support capacity has been step-changed since mid 2014. The UK based
Quadrise Research Facility (QRF) will also serve as the future
technical services base to support project operations. The call for
direct business support services has grown substantially and
facilities are now available to ensure effective response. The
Group R&D programme is planned and coordinated in association
with AkzoNobel, with the workload distributed across both QRF and
the AkzoNobel facilities in Sweden.
Commenting, Ian Williams, Executive Chairman, said:
"Unexpected challenges over the past six months, associated
principally with the sudden fall in oil prices, impacted the
progress of our key programmes. Fortunately this effect has passed
and we are very much on track in all respects.
In the same period the resources, skills and service capacity of
the company have been greatly enhanced and the Group is now well
prepared to meet the growing demands of our emerging multi client,
multi project, geographically diverse business portfolio.
Management is fully focussed on delivering the transition to
contracts and operations during the course of 2015."
-ENDS-
For further information, please refer to the Company's website
at www.quadrisefuels.com or contact:
Quadrise Fuels International Plc
Ian Williams, Executive Chairman +44 (0)20 7031 7321
Hemant Thanawala, Finance Director
Nominated Adviser
Smith & Williamson Corporate Finance Limited
Dr Azhic Basirov +44 (0)20 7131 4000
Ben Jeynes
Broker
Peel Hunt LLP
Richard Crichton +44 (0)20 7418 8900
Matthew Armitt
Ross Allister
Public & Investor Relations
Pelham Bell Pottinger
Philip Dennis +44 (0)20 7861 3232
Rollo Crichton-Stuart
Chairman's Statement
Quadrise Fuels International plc ("Quadrise", "QFI", the
"Company" and together with its subsidiaries the "Group") presents
its interim results for the six months ended 31 December 2014
Business Overview
This review updates shareholders on material developments during
the six months ending 31 December 2014 together with events taking
place after the balance sheet date.
Progress made across various elements of the business
development programme has, in combination, served to better prepare
the Group for the anticipated transition to commercial operations.
This includes strengthening the Quadrise board and management,
expanding in-house R&D capacity, technical resources and
services, and achieving strategic exclusivity with a leading
process plant manufacturer. In the same period key project activity
sequences have firmed up, providing clear pathways to their
respective early revenue phase.
Although the Group has moved forwards on several fronts,
progress has been somewhat overshadowed by the oil price collapse
and related negative market perception of the implications for the
value of oil and energy related businesses. The sector has
generally been marked down severely due to the short and implied
longer term uncertainty. The Quadrise value-add is centred
principally on the 'price spread' (the difference in price and
value) between Heavy Fuel Oil ("HFO") and distillate fuels
(essentially Diesel), and not by movements in the oil price itself.
Analysis has demonstrated that the economics of the Quadrise
proposition remains sound at an oil price as low as US$40 per
barrel, though the value-add will, of course, be more attractive at
$80 per barrel. The principal impact of the current oil price
volatility and price collapse are the delays to project programmes
and timing of decisions whilst the oil companies involved
re-calibrate their own planning parameters to factor in the
impact.
Quadrise is in the bulk fuels business and our target clients in
the marine and power generation fuels markets are the large
companies which account for the major share of production and
combustion of HFO. As the "integrator", Quadrise seeks to enlist
large fuel oil consumers, whether power plant owners or ship
owners, and to enable refiners to produce Quadrise MSAR(R) fuel by
licensing our technology and contracting for our specialist
services. Quadrise therefore "creates" the MSAR(R) market and the
refiner then supplies our fuel to the consumer as a lower cost
substitute for conventional HFO. MSAR(R) may also, in some cases,
substitute directly for higher value distillate fuels when these
are used for the same purpose. The markets are very large at a
global level, currently exceeding 500 million tons per annum, of
which the marine market represents some 40%. The annual value of
global fuel oil sales is still very high notwithstanding the lower
oil prices, and estimated to be over US$150 billion based on a
US$60 crude oil price. Large industrial consumers of HFO, and the
oil refining industry itself, still face unrelenting pressure to
improve efficiency and reduce cost. The Quadrise technology thus
creates added value in the refining process and offers the consumer
a lower cost fuel. The Quadrise "win - win" proposition, in which
significant environmental benefits and performance efficiencies can
also accrue through improved quality of combustion and emissions,
is potentially a 'game changer' in our target markets.
QFI is not dependent on fuel oil demand growth to create market
opportunities. The proposition is selective but typically large
scale, and is as attractive in a recession as in a positive
economic climate. The Quadrise MSAR(R) technology offers a unique
opportunity for semi-complex oil refineries to step-change margins
at very low investment, whilst also affording the marine or land
based consumer a material cost saving on conversion to MSAR(R)
fuel.
The Quadrise value-add is driven by the price spread between HFO
and diesel fuel. As with all refined petroleum products, market
prices are set by supply and demand for each product type. The
price drivers for HFO and diesel are different. Future rate of
growth in diesel demand is projected to continue to exceed that for
HFO thereby widening the price differential - which strengthens the
Company's future business prospects. The postponement and
cancellation of refinery upgrading and capacity expansion following
the oil price collapse will further limit diesel supply in the
medium term - serving to stretch the 'price spread' even
further.
As Quadrise engages more closely with the refining industry, an
application often arising is the use of MSAR(R) to fuel power
generation within the refinery itself thereby substituting for a
higher value fuel and contributing to associated emissions
compliance. Where surplus generating capacity exists this may also
enable the refiner to export power to the national grid. While the
related projects may be smaller scale, indications suggest they
could aggregate to a material business segment. Related project
evaluations are presently underway with a number of refining
companies. An operational 'reference plant' could be expected to
promote interest in the refining industry.
Marine MSAR(R) 2 Bunker Fuel
The marine bunker fuel oil market is currently assessed at 200
million tons per annum and valued at circa US$60 billion based on
crude oil priced at US$60 per barrel. Globally the shipping
industry is comprised of a relatively small number of very large
companies which are the major fuel consumers. In order to develop
this market, QFI entered into a Joint Development Agreement ("JDA")
in March 2010 with A.P. Møller-Mærsk, ("Mærsk"), one of the world's
largest shipping companies and marine fuel buyers, and the global
leader in container transportation.
The fuel supply system for international shipping is focussed on
five 'bunker hubs', of which Singapore is currently the largest in
terms of fuel throughput. The largest hubs are also regional oil
and petrochemical refining centres with all of the associated
installed capacity to produce, store, blend and supply a full range
of oil products to the shipping industry.
The Marine MSAR(R) programme commenced in 2010 as a joint
initiative with Mærsk and AkzoNobel and has now largely met all
agreed deliverables. Following the completion of a series of land
and seaborne service trials, Quadrise advised shareholders in the
second half of 2014 that Marine MSAR(R) had satisfied the 'Proof of
Concept' ("POC") requirements.
To date, two leading marine engine manufacturers, Wärtsilä and
MAN Diesel have participated in the programme. The fuel has been
tested on their modern two stroke propulsion engines used
extensively across the fleets of leading shipping companies.
Quadrise's focus since mid-2014 has been on preparations for the
"Letters of no Objection" (LONO) programme, issued by the engine
manufacturers. These manufacturers require operating data and a
range of technical results from an extended and continuous use of
the fuel, in normal commercial operations, to provide the basis on
which to issue the LONO. The LONO qualification assessment will
involve inspecting various key components in the engine
periodically to confirm that the performance results are compatible
with those experienced in earlier MSAR(R) fuels trials and that
nothing unexpected or problematic is evident. The LONO assessment
period is typically 4,000 hours of operational service or circa 9
months, although periodic assessments may reduce or lengthen this
duration depending on results.
Looking forward, producing MSAR(R) fuel for the LONO programme
is the first requirement. All previous production batches of Marine
MSAR(R) have been small and delivery to harbour was relatively
costly per ton due to the production location and transport mode.
Logistics cost is a key aspect of bulk fuels economics and MSAR(R)
has to be cost competitive delivered into tank at the load port. To
best cater for a multi-vessel roll-out programme, it was considered
preferable and more economic in the medium term to find a refining
partner with both production and logistics economics which would
optimise the roll-out programme. This approach was agreed in late
2014, recognising the likely related delays in the near term. In
the event, the process of identifying and selecting prospective
refiners, and progressing joint evaluations was delayed as it got
underway towards the year end. Progress was further impacted by the
subsequent time required by the oil companies to re-assess their
value expectations following the oil price collapse. While the
direction and sequence is unchanged, the programme has slipped by
approximately three months from our October 2014 projections. This
recent experience prompted a review of all aspects that require
close coordination to minimise lead times. These include, for
example, permitting by the regulatory authorities for the
introduction and installation of the MSAR(R) production process on
the refinery site, and approval of the plans to tie-in to refinery
services and oil movement systems. Compliance with permanent
installation standards might apply and more time may be required to
finalise the formal contracts and approvals than was the case in
the past. It may, however, be possible to progress a number of
aspects pending final contract signoff. While every effort will be
made to install, commission and produce as soon as possible, these
aspects make the forecasting of exact timescales challenging
currently - but will provide a valuable learning experience that
should facilitate future projects.
As soon as MSAR(R) fuel is available the LONO programme will
start, in continuous cooperation with Mærsk, to build sufficiently
comprehensive seaborne engine performance data. The Company's plan
is that fuel should be available by Q4 2015 and one of the LONOs
issued mid-2016. The data gathered will provide the base for the
confirmation of compliance to regulatory authorities and other
agencies as well as satisfying the engine manufacturers for the
purpose of warranties to Mærsk and potentially third party shipping
companies.
Momentum is growing on the imposition of environmental standards
for 'Black Soot' (carbon particulate) emissions. A definition of
Black Soot is reported to have been agreed and this paves the way
for the International Maritime Organisation to set and enforce
standards for 'open ocean' operation. This development is expected
to favour Marine MSAR(R) 2 fuel as the combustion characteristics
result in more complete carbon burnout mitigating black soot
emission. The reduced SO(2) standards for 'open ocean' are
presently scheduled to apply from 2020, but industry observers
suggest this may be delayed to 2025. Either way, the focus on
sulphur emissions is growing. Practical and economic considerations
increasingly favour compliance by means of 'scrubbing' the
emissions rather than lowering the sulphur content of the fuel.
This is being promoted with some success as the only practical
solution to 'open ocean' compliance. The alternative of conversion
to low sulphur distillate fuels at a premium of over US$250 per ton
is not considered to be feasible by informed commentators, even if
suitable fuels were to be available in the quantities required.
Based on present information, it does appear that the combination
of Marine MSAR(R) 2 fuel plus a modern scrubber should offer the
lowest cost full compliance option for large modern vessel
operators in the future.
Market expectations of Liquefied Natural Gas ("LNG") becoming a
mainstream fuel for international shipping appear to have moderated
even further following the oil price collapse. Most informed
analyses conclude that it is likely to be limited to niche
operations. These may however, grow to represent a meaningful share
of the marine market in future decades serving to take the pressure
off distillate fuels in Emission Control Areas. Most studies do
show, however, that heavy fuel oil is likely to continue to
dominate the mainstream international bunker market. Also now
evident is that this market, which has appeared to be constant for
some years, has already started to grow again as international
trade expands. The adoption of "slow steaming" as standard practice
has worked its way through the industry and cannot further depress
fuel demand. Lloyds Register forecasts that the marine fuel market
will double in volume from the 2010 base line to 2030 and that HFO
will "remain the dominant fuel for deep sea shipping". The forecast
for the maximum share for LNG in this study is 11% by 2030.
The way forward to commercial participation in the 200 million
ton per annum marine fuels market is now very clear. The key
milestones are production contract execution, plant installation
and commissioning, MSAR(R) production, circa 9 months of seaborne
service followed by LONO confirmation. This will qualify Marine
MSAR(R) as an approved fuel for open ocean operations on vessels
using the specified types of main propulsion engines. These
activities will all add to the existing body of knowledge and serve
to inform future programmes to expand marine MSAR(R) availability
from other refineries and global bunker hubs from 2017 onwards.
The LONO 'extended service' evaluation could identify further
opportunities for improvement and/or issues to be addressed,
however the joint development partners have progressively de-risked
the programme over the past four years to the stage where
commercial market entry is considered by Quadrise to be imminent.
We will be introducing a unique proprietary fuel proven to be fit
for purpose for the most modern large marine engines, which offers
measurable competitive advantage in terms of cost effectiveness and
provides material environmental advantages.
Saudi Arabia
Quadrise management identified the Kingdom of Saudi Arabia
("KSA") as a prime market for Quadrise MSAR(R) technology to
substitute for crude oil and fuel oil consumed in domestic power
generation and other growth industries such as de-salination. The
scale and nature of the domestic oil and power generation
industries in KSA, and the trends evident, confirmed the potential
for an enormous amount of value to be added through the conversion
of refineries to produce MSAR(R) fuels.
It has taken several years of sustained effort to gain
credibility and recognition within KSA and the client. The Company
has been ably assisted in this process by our Saudi partner, the
Rafid Group, who have long established relationships in the oil and
energy industries throughout KSA. Following a series of
collaborative studies and reports, the Company was advised that
Quadrise technology had been approved for application within client
refineries. This was a significant milestone, marking also an
appreciation at senior levels that Quadrise MSAR(R) fuel technology
would be a strategic fit with KSA national imperatives.
Considerable value could be added through step changing domestic
distillate production and reducing expensive diesel imports. Power
demand in KSA is growing very rapidly and in excess of 30 million
tons of crude oil, fuel oil and diesel is consumed annually for
thermal power generation. The scale and potential of the
opportunity are exceptional.
In 2013 a major refining complex was designated for the first
Quadrise MMU installation. In the summer of 2013, Quadrise
International Limited ("QIL") hosted a familiarisation programme in
Europe for a group of client specialists, and representatives from
the designated refining company. The subsequent report led to the
confirmation of intent to proceed with a project, and a series of
meetings followed to define process and responsibilities. At the
client's request, QIL provided the necessary technical information
to support a formal budget proposal submitted as part of the normal
planning cycle to seek approval to install and commission the first
350,000 ton per annum MMU at the designated refinery. This project
envisaged a 20 year life but the first 'module' was also intended
to demonstrate both MSAR(R) production and the combustion of the
fuel at a local thermal power plant. Terms for QIL support and
services in the pre-commercial phase were proposed in draft
form.
It has become evident that this original project, as proposed,
is likely to be amended in scope and potentially deferred -
possibly to 2016. However, discussions concerning approval and
implementation timing led to QIL being advised that emulsion fuel
is an integral part of the potential future power generation fuels
mix, and that the client wishes to accelerate a 'production to
combustion' semi-commercial pilot project. Quadrise therefore
formulated an additional project programme to meet this
requirement, involving production at the designated refinery
complex and combustion at a large power station nearby. As
proposed, the project will demonstrate and test, to the
satisfaction of all affected parties, all facets of production,
storage, handling, transportation and combustion - and all related
operations.
The exact duration of the pilot is yet to be finalised by the
parties, however is likely to take place over an extended period
and requiring a significant volume of MSAR(R) in excess of 20,000
tons. This extended pilot limits timing to the 'off peak' period,
being the only time when a large generator set may be taken
off-line for the fuel change. Practically, this requires the pilot
to be conducted during the winter period commencing late 2015 and
concluding during 1H 2016. It also sets the critical path programme
to meet deadlines and ensure effective implementation. The nature,
scale and timing of this pilot make it ideal. It involves a very
large refinery which is a major HFO producer, and directly engages
the power company in an operation which is representative of its
very large thermal oil-fuelled power stations. The extended pilot
will also allow for sufficient operating time for an assessment of
such aspects as NOx reduction and carbon particulate mitigation.
This could step-change ash disposal operations, and fuel-to-power
conversion economics related to complete carbon burnout.
Quadrise and the client understand that the pilot project
timetable requires an early commitment by both parties. The agreed
intention is to secure the necessary approvals to progress from
'understandings to contracts' as soon as possible to enable both
parties to make an early start, especially to secure long-lead
items, including the Quadrise MMU.
The selected refinery is in close proximity to large scale
installed thermal utilities serving a major petrochemical complex
and associated industries. In addition, a project to increase the
local utility generation capacity is underway and the refinery also
presently supplies HFO to two large power stations in the region.
The pilot plant results and experience should also validate the
potential for progressive conversion of most of the residue
production currently used in HFO supplied to the power plants, in
all a potential of over 5 million tons of MSAR(R) per annum.
In principle, it is technically feasible for Quadrise MSAR(R) to
replace crude oil and fuel oil used in thermal power generation in
KSA. In practice, the constraint will be the availability of heavy
residue from domestic refineries in the country. The present power
generation fuel shortfall is met by HFO imports, however the
economy would continue to benefit from conversion irrespective of
the origin of MSAR(R) which could, in time, be imported from other
sources as a finished product.
Americas
Current focus remains on Colombia and the recommendations of the
Joint Feasibility Study completed with Ecopetrol, the Colombian
National Oil Company, in 2014. Ecopetrol was identified as a high
quality potential partner for the Central American market and was
approached as a potential joint venture partner to produce Quadrise
MSAR(R) fuels in its refineries for supply into the regional
market. Following a period of information exchange, Ecopetrol
management responded positively to a jointly prepared Business
Case. A Memorandum of Understanding ("MOU") with Ecopetrol was
executed committing parties to undertake a comprehensive
feasibility study to evaluate and define the project.
Recommendations would also consider the preferred nature and form
of the joint venture. It was anticipated that the project might be
QIL's first departure from the 'Licence Model' and would require
investment by the Company in process plant, ancillary equipment and
tie-ins to refinery services and control systems. When QFI raised
new equity funds in March 2014, a part of the GBP10 million raised
was to cover this possibility.
The concept is to manufacture Quadrise MSAR(R) fuel in Colombia
and sell this into the regional power generation and marine fuels
markets, where Ecopetrol is presently a supplier of fuel oil. The
feasibility study report was substantially completed, and
recommendations were due to be considered by Ecopetrol management
in late 2014. The report revalidated the initial business case
prior to the oil price collapse. As with most integrated oil
companies, Ecopetrol is heavily reliant on its oil production
revenues. The step change in revenues resulting from the oil price
fall has required a rapid and radical response by its management.
We understand that funding for the downstream (refining and
marketing) has been substantially reduced and costs are under
severe pressure. While no formal determination is yet to hand, we
have been advised that responsibility for the project has been
reallocated and that it remains under consideration. However should
it go forward, given current circumstances, Quadrise may need to
fund (potentially with other partners) the full capital programme
and will therefore propose an equitable joint venture structure to
fit such circumstances.
We do expect to be able to engage formally once the Ecopetrol
organisation changes are complete. Quadrise is prepared for a Joint
Venture structure requiring funding participation, but also
intends, with Ecopetrol consent, to explore opportunities to add a
suitable local funding partner - preferably with existing
capability and access to HFO customers in the Central American
market. In either event, the Joint Venture will be structured such
that any funding requirement is easily covered from existing
Quadrise resources.
The Company has continued to monitor developments in Mexico, but
has not yet moved to re-open discussions with PEMEX management.
Indications are that several of the planned conventional
multi-billion upgrading projects in the PEMEX refining system may
be postponed or cancelled following the oil price collapse. These
developments are being monitored as they may offer an opportunity
to re-engage. The 'value add' prospects have not changed and a low
cost route to upgrading refinery yield values may be more readily
accepted in the changed circumstances.
Asia
The MOU with YTL Power Seraya has again been renewed and remains
in force. A suitable manufacturing and supply chain has not yet
been established, but the client remains very keen to find a
solution which will provide MSAR(R) supplies to the power plant in
Singapore. It has become apparent that a prime concern of candidate
refiners is risk associated with making changes to their plant and
product range based on the requirements of a single client. In this
regard, it is felt that the anticipated future call for MSAR(R)
Marine bunker fuel in the Singapore hub could well change the
perspective of the regional refining industry and at the same time
create a local supply base for the power plant.
Global Oil Major
Following an enquiry in 2012 from an Oil Major, QIL agreed to
evaluate the scope for conversion of certain residue streams
associated with its proprietary technologies used in large-scale
process plants at a number of locations world-wide.
Quadrise is not yet permitted to disclose the name of the group
concerned, but can advise that it has been successful in converting
the residue streams arising from these processing operations into
MSAR(R) fuels. This also looks to be a higher value application for
these hydrocarbons than their present markets.
Further developments on this initiative with the Global Oil
Major are largely pending developments with the marine fuels
programme. The key milestone now awaited is the issue of the first
LONO as this should open the market to a wide range of prospective
marine MSAR(R) consumers. It will also confirm that Marine MSAR(R)
has the potential to become an approved high-volume bulk fuels
product in the global marine fuels market.
Resources and Development Capacity
The newly appointed senior executives, Robin Lloyd and Sam
Saimbi have assumed responsibility for business development in the
Marine and Power Generation sectors respectively. Both are already
actively engaged in current business programmes and will be
identifying and pursuing selective prospective opportunities in
their respective sectors to expand the portfolio of active
projects.
The addition and recent expansion of the UK based Quadrise
Research Facility ("QRF") has proved invaluable in meeting the
growing requirements for laboratory services associated with the
business and research programmes. Rapid response capability will be
essential in the future as the number of prospective and
operational processing sites expands. The facility is being
equipped as a service base from which to meet these requirements.
It will also complement the AkzoNobel R&D capacity in Sweden in
jointly delivering on-going research programmes covering product
improvement and extension of proprietary intellectual property.
The first MSAR(R) Manufacturing Unit ("MMU") to be supplied by
ENH Engineering A/S will be delivered during April 2015. The order
for a second unit will be firmed up as soon as project timetables
are clarified. The ENH association provides for exclusivity and
joint development of process plant enhancements for improved
efficiency and capacity. A plant development programme is already
progressing and the Quadrise contribution is coordinated and
managed from the QRF base.
Financial Position
The Group held cash and cash equivalents of GBP9.8 million as at
31 December 2014, having raised GBP10.7 million (before expenses)
through a share placing in March 2014. Notwithstanding the
expansion of the executive team and the development of an in-house
R&D facility, the most recent business plan review and funding
assessment has confirmed that the Group holds sufficient funds to
cover all anticipated requirements to progress the major projects
to the early commercial revenue stage. The Company also has
sufficient reserves to hold a limited inventory of MMUs should this
be necessary to avoid delays in project progress. There are also
funds to supply plant on a lease or deferred sale basis where
advantageous and to participate in the Ecopetrol joint venture with
a local partner should this project proceed. The addition of the
two business development executives has provided the capacity to
actively evaluate additional project opportunities. It is however
anticipated that, with the likely exception of Colombia, the
'licence model' will remain the norm for some time and that funds
employed will largely reflect this business mode.
The Group recorded a loss of GBP2.2 million for the six months
to 31 December 2014 (H1 2013: GBP1.8 million) of which GBP1.1
million was a share option charge. There were no exceptional costs
during the period and G&A expenditure was held below
budget.
Having previously written down the carrying values of the
Canadian investments and with no further indication of impairment,
these have been carried forward without change.
Outlook
The prime focus is on moving the key projects to the formal
contractual commitments that will underpin and direct the
respective programmes and timetables. Management planned and
anticipated that many key aspects would be more advanced at the
close of 2014. The re-phasing of key programmes to 2015 has
affected investor confidence and this is frustrating for the board,
management and shareholders alike.
Looking forward, the major programmes are at or near the point
at which parties can commit to contractual terms and timetables.
The respective projects should then follow a progression leading to
the production and introduction of Quadrise MSAR(R) in their
markets and applications. The pace of development thereafter will
be determined largely by the technical and financial evaluation of
the associated MSAR(R) fuel manufacturing process and the
combustion performance in power generation and marine service. The
board remains confident that the outcomes will verify the
feasibility and rewards of converting to Quadrise MSAR(R) fuel
production in the refineries and substitution of conventional fuels
in the ships and power plants concerned.
The recent oil price fall will impact the energy industry which
will have to factor in not only the near-term implications, but the
probability of on-going price uncertainty. Refining is a
risk-averse industry which faces the challenging prospects of
multi-billion dollar project exposure and long lead times when
using conventional means of increasing distillate product yields.
The opportunity presented by Quadrise MSAR(R) technology to
step-change distillate product yields in oil refining for very
modest investment is highly attractive. In addition there are the
considerable environmental benefits resulting from the mitigation
of carbon particulates and the reduction of NOx when converting to
MSAR(R) fuel. Given current circumstances, it is interesting to
consider that a 'green field' combination of refining and power
generation, in which MSAR(R) offtake is assured, would require far
less complexity, capital investment and construction lead time than
the 'conventional upgrading' configurations which have become the
industry norm. As mentioned in previous reports, Quadrise is
dealing with large industries with long established practices that
are not easily changed. However, these same industries are also
known to adapt rapidly when leaders apply new technologies to gain
competitive advantage.
The prime focus of management is to make the transition to
contracts and operations over the next 12 months. The Company Group
has the programmes, partners and funding to achieve this
objective.
Ian Williams
Chairman
27 March 2015
Condensed Consolidated Statement of Comprehensive Income
For the 6 months ended 31 December 2014
Note 6 months 6 months Year ended
ended 31 ended 31 30 June
December December 2014
2014 2013 Audited
Unaudited Unaudited GBP'000
GBP'000 GBP'000
Continuing operations
Revenue 58 - -
Other income 26 25 51
Production and development
costs (552) (342) (720)
Amortisation of intangible
assets 6 - (685) (685)
Impairment of available
for sale investments 7 - - (1,006)
Other administration expenses (700) (798) (1,690)
Share option charge (1,082) - (1,924)
Foreign exchange gain/(loss) 3 (2) (3)
---------------------------------- ----- ----------- ----------- -----------
Operating loss (2,247) (1,802) (5,977)
Finance costs (3) (3) (6)
Finance income 29 2 7
---------------------------------- ----- ----------- ----------- -----------
Loss before tax (2,221) (1,803) (5,976)
Taxation - - 64
---------------------------------- ----- ----------- ----------- -----------
Loss for the period from continuing
operations (2,221) (1,803) (5,912)
----------------------------------------- ----------- ----------- -----------
Other Comprehensive Income
Changes in fair value of
available for sale investments 7 - - (186)
---------------------------------- ----- ----------- ----------- -----------
Other comprehensive loss
for the period net of tax - - (186)
---------------------------------- ----- ----------- ----------- -----------
Total comprehensive loss for
the period (2,221) (1,803) (6,098)
----------------------------------------- ----------- ----------- -----------
Loss for the period attributable
to:
Owners of the Company (2,216) (1,756) (5,835)
Non-controlling interest (5) (47) (77)
Total comprehensive loss
attributable to:
Owners of the Company (2,216) (1,756) (6,021)
Non-controlling interest (5) (47) (77)
Loss per share - pence
Basic 4 (0.27)p (0.23)p (0.74) p
Diluted 4 (0.27)p (0.23)p (0.74) p
---------------------------------- ----- ----------- ----------- -----------
Condensed Consolidated Statement of Financial Position
As at 31 December 2014
Note As at As at As at
31 December 31 December 30 June
2014 2013 2014
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 5 627 546 612
Intangible assets 6 2,924 2,924 2,924
Available for sale investments 7 1,439 2,631 1,439
------------- ---------
Non-current assets 4,990 6,101 4,975
-------------------------------- ----- ------------- ------------- ---------
Current assets
Cash and cash equivalents 9,805 2,130 11,081
Trade and other receivables 177 230 170
Prepayments 270 68 76
-------------------------------- ----- ------------- ------------- ---------
Current assets 10,252 2,428 11,327
-------------------------------- ----- ------------- ------------- ---------
TOTAL ASSETS 15,242 8,529 16,302
-------------------------------- ----- ------------- ------------- ---------
Equity and liabilities
Current liabilities
Trade and other payables 320 268 241
-------------------------------- --------- --------- ---------
Current liabilities 320 268 241
-------------------------------- --------- --------- ---------
Equity attributable to
equity holders of the parent
Issued share capital 8,088 7,725 8,072
Share premium 69,117 58,489 68,633
Revaluation reserve 1,035 1,221 1,035
Share option reserve 4,127 1,149 3,045
Reverse acquisition reserve 522 522 522
Accumulated losses (67,967) (60,549) (65,126)
-------------------------------- --------- --------- ---------
Total shareholders' equity 14,922 8,557 16,181
-------------------------------- --------- --------- ---------
Non-controlling interests - (296) (120)
-------------------------------- --------- --------- ---------
TOTAL EQUITY AND LIABILITIES 15,242 8,529 16,302
-------------------------------- --------- --------- ---------
The interim accounts, accompanying policies and notes 1 to 13
(forming an integral part of these interim accounts), were approved
and authorised for issue by the Board on 27 March 2015 and were
signed on its behalf by:
I. Williams Chairman
H. Thanawala Finance Director
Condensed Consolidated Statement of Changes in Equity
For the 6 months ended 31 December 2014
Issued Reverse Non-controlling
share Share Revaluation Share acquisition Accumulated interests
capital premium reserve option reserve losses Total GBP'000s Total
GBP'000s GBP'000s GBP'000s reserve GBP'000s GBP'000s GBP'000s GBP'000s
GBP'000s
As at 1 July
2014 8,072 68,633 1,035 3,045 522 (65,126) 16,181 (120) 16,061
Loss for the
period - - - - - (2,216) (2,216) (5) (2,221)
Total
comprehensive
income for
the period - - - - - (2,216) (2,216) (5) (2,221)
--------------- --------- ---------- ------------- ---------- ------------ ------------- ---------- ---------------- ----------
Share option
charge - - - 1,082 - - 1,082 - 1,082
--------------- --------- ---------- ------------- ---------- ------------ ------------- ---------- ---------------- ----------
Acquisition
of Minority
Interest 16 484 - - - (625) (125) 125 -
--------------- --------- ---------- ------------- ---------- ------------ ------------- ---------- ---------------- ----------
Shareholders'
equity at
31 December
2014 8,088 69,117 1,035 4,127 522 (67,967) 14,922 - 14,922
--------------- --------- ---------- ------------- ---------- ------------ ------------- ---------- ---------------- ----------
Issued Reverse Non-controlling
share Share Revaluation Share acquisition Accumulated interests
capital premium reserve option reserve losses Total GBP'000s Total
GBP'000s GBP'000s GBP'000s reserve GBP'000s GBP'000s GBP'000s GBP'000s
GBP'000s
As at 1 July
2013 7,725 58,489 1,221 1,134 522 (58,793) 10,298 (249) 10,049
Loss for the
period - - - - - (1,756) (1,756) (47) (1,803)
Total
comprehensive
income for
the period - - - - - (1,756) (1,756) (47) (1,803)
--------------- --------- ---------- ------------- ---------- ------------ ------------- ---------- ---------------- ----------
Share option
charge - - - 15 - - 15 - 15
--------------- --------- ---------- ------------- ---------- ------------ ------------- ---------- ---------------- ----------
Shareholders'
equity at 31
December 2013 7,725 58,489 1,221 1,149 522 (60,549) 8,557 (296) 8,261
--------------- --------- ---------- ------------- ---------- ------------ ------------- ---------- ---------------- ----------
Issued Reverse Non-controlling
share Share Revaluation Share acquisition Accumulated interests
capital premium reserve option reserve losses Total GBP'000s Total
GBP'000s GBP'000s GBP'000s reserve GBP'000s GBP'000s GBP'000s GBP'000s
GBP'000s
As at 1
January
2014 7,725 58,489 1,221 1,149 522 (60,549) 8,557 (296) 8,261
Loss for the
period - - - - - (4,079) (4,079) (30) (4,109)
Fair value
adjustments - - (186) - - - (186) - (186)
Total
comprehensive
income for
the period - - (186) - - (4,079) (4,265) (30) (4,295)
--------------- --------- ---------- ------------- ---------- ------------ ---------------- ---------- ---------------- ----------
New shares
issued (net
of issue
costs) 334 9,772 - - - - 10,106 - 10,106
--------------- --------- ---------- ------------- ---------- ------------ ---------------- ---------- ---------------- ----------
Share option
charge - - - 1,909 - - 1,909 - 1,909
--------------- --------- ---------- ------------- ---------- ------------ ---------------- ---------- ---------------- ----------
Exercise of
share options 4 89 - (13) - - 80 - 80
--------------- --------- ---------- ------------- ---------- ------------ ---------------- ---------- ---------------- ----------
Acquisition
of minority
interest 9 283 - - - (498) (206) 206 -
--------------- --------- ---------- ------------- ---------- ------------ ---------------- ---------- ---------------- ----------
Shareholders'
equity at 30
June 2014 8,072 68,633 1,035 3,045 522 (65,126) 16,181 (120) 16,061
--------------- --------- ---------- ------------- ---------- ---------------- ------------ ---------- ---------------- ------------
Condensed Consolidated Statement of Cash Flows
For the 6 months ended 31 December 2014
Note 6 months 6 months Year ended
ended 31 ended 31 30 June
December December 2014
2014 2013 Audited
Unaudited Unaudited GBP'000
GBP'000 GBP'000
Operating activities
Loss before tax from continuing
operations (2,221) (1,803) (5,976)
Finance costs 3 3 6
Finance income (29) (2) (7)
Amortisation of intangible
assets 6 - 685 685
Depreciation 5 49 30 77
Impairment of available
for sale investments 7 - - 1,006
Share option charge 1,082 15 1,924
Working capital adjustments
Increase in trade and other
receivables (7) (69) (9)
(Increase)/decrease in prepayments (194) 11 3
Increase in trade and other
payables 79 34 7
--------------------------------------- ----- ----------- ----------- -----------
Cash utilised in operations (1,238) (1,096) (2,284)
--------------------------------------- ----- ----------- ----------- -----------
Finance costs (3) (3) (6)
Taxation received - - 64
----------- -----------
Net cash outflow from operating
activities (1,241) (1,099) (2,226)
--------------------------------------- ----- ----------- ----------- -----------
Investing activities
Finance income 29 2 7
Purchase of fixed assets 5 (64) (16) (129)
Net cash outflow from investing
activities (35) (14) (122)
--------------------------------------- ----- ----------- ----------- -----------
Financing activities
Issue of ordinary share
capital (net of issue costs) - - 10,106
Exercise of share options - - 80
Net cash inflow from financing
activities - - 10,186
Net (decrease)/increase
in cash and cash equivalents (1,276) (1,113) 7,838
Cash and cash equivalents
at the beginning of the
period 11,081 3,243 3,243
--------------------------------------- ----- ----------- ----------- -----------
Cash and cash equivalents
at the end of the period 9,805 2,130 11,081
--------------------------------------- ----- ----------- ----------- -----------
Notes to the Group Condensed Financial Statements
1. General Information
Quadrise Fuels International plc ("QFI", "Quadrise", the
"Company") and its subsidiaries (together the "Group") are engaged
principally in the manufacture and marketing of emulsified fuel for
use in power generation, industrial and marine diesel engines and
steam generation applications. The Company's ordinary shares are
quoted on the AIM market of the London Stock Exchange.
QFI was incorporated on 22 October 2004 as a limited company
under the Companies Act 1985 with registered number 05267512. It is
domiciled and registered at Gillingham House, 38-44 Gillingham
Street, London, SW1V 1HU.
2. Summary of Significant Accounting Policies
(2.1) Basis of Preparation
The interim accounts have been prepared in accordance with IAS
34 'Interim financial reporting' and on the basis of the accounting
policies set out in the annual report and accounts for the year
ended 30 June 2014, which have been prepared in accordance with
International Financial Reporting Standards as adopted for use by
the European Union. The interim accounts are unaudited and do not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006.
The same accounting policies, presentation and methods of
computation have been followed in these unaudited interim financial
statements as those which were applied in the preparation of the
Group's annual statements for the year ended 30 June 2014, upon
which the auditors issued an unqualified opinion, and which have
been delivered to the registrar of companies.
The interim accounts have been drawn up using accounting
policies and presentation expected to be adopted in the Group's
full financial statements for the year ended 30 June 2015. The
following standards will be adopted in full for the first time in
the year-end financial statements but did not have a material
impact on these interim statements:
IAS 27 (revised) 'Separate Financial Statements'
IAS 28 (revised) 'Investments in Associates and Joint
Ventures'
IFRS 10 'Consolidated Financial Statements'
IFRS 11 'Joint Arrangements'
IFRS 12 'Disclosures in Other Entities'
IFRS 13 'Fair Value Measurements'
The interim accounts for the six months ended 31 December 2014
were approved by the Board on 27 March 2015.
The directors do not propose an interim dividend.
3. Segmental Information
For the purpose of segmental information the reportable
operating segment is determined to be the business segment. The
Group principally has two business segments, the results of which
are regularly reviewed by the Board:
-- a business to produce emulsion fuel (or supply the associated
technology to third parties) as a low cost substitute for
conventional heavy fuel oil ("HFO") for use in power generation
plants and industrial and marine diesel engines; and
-- the holding of a portfolio of non-managed interests and general corporate administration.
Information regarding the results of each reportable segment is
as follows:
Business Segments
Period ended 31 December Non-managed
2014 Emulsion interests Total
fuel Unaudited Unaudited
Unaudited
GBP'000s GBP'000s GBP'000s
Revenue - sale to external
customers 58 - 58
---------------------------- ------------ ------------ ------------
Segment result (759) (42) (801)
---------------------------- ------------ ------------ ------------
Unallocated net corporate
expenses (1,446)
------------
Operating loss (2,247)
Finance costs (3)
Finance income 29
------------
Loss before tax (2,221)
Taxation -
---------------------------- ------------ ------------ ------------
Loss for the period from
continuing operations (2,221)
---------------------------- ------------ ------------ ------------
As at 31 December 2014 Non-managed
Emulsion interests Total
fuel Unaudited Unaudited
Unaudited
GBP'000s GBP'000s GBP'000s
Assets and Liabilities
Segment assets 3,957 1,439 5,396
Unallocated corporate assets 9,846
----------------------------------- ------------ ------------ ------------
Total assets 15,242
----------------------------------- ------------ ------------ ------------
Segment liabilities 123 - 123
Unallocated corporate liabilities 197
----------------------------------- ------------ ------------ ------------
Total liabilities 320
----------------------------------- ------------ ------------ ------------
Other segment information
Amortisation of intangible -
assets
Period ended 31 December Non-managed
2013 Emulsion interests Total
fuel Unaudited Unaudited
Unaudited
GBP'000s GBP'000s GBP'000s
Revenue - sale to external - - -
customers
---------------------------- ------------ ------------ ------------
Segment result (1,328) (196) (1,524)
---------------------------- ------------ ------------ ------------
Unallocated net corporate
expenses (278)
------------
Operating loss (1,802)
Finance costs (3)
Finance income 2
------------
Loss before tax (1,803)
Taxation -
---------------------------- ------------ ------------ ------------
Loss for the period from
continuing operations (1,803)
---------------------------- ------------ ------------ ------------
As at 31 December 2013 Non-managed
Emulsion interests Total
fuel Unaudited Unaudited
Unaudited
GBP'000s GBP'000s GBP'000s
Assets and Liabilities
Segment assets 4,706 2,631 7,337
Unallocated corporate assets 1,192
----------------------------------- ------------ ------------ ------------
Total assets 8,529
----------------------------------- ------------ ------------ ------------
Segment liabilities 143 - 143
Unallocated corporate liabilities 125
----------------------------------- ------------ ------------ ------------
Total liabilities 268
----------------------------------- ------------ ------------ ------------
Other segment information
Amortisation of intangible
assets 685 - 685
Year ended 30 June 2014 Non-managed
Emulsion interests Total
fuel Audited Audited
Audited
GBP'000s GBP'000s GBP'000s
Revenue - sale to external - - -
customers
----------------------------------- ----------- ------------ ----------
Segment result (2,036) (1,274) (3,310)
----------------------------------- ----------- ------------ ----------
Unallocated net corporate
expenses (2,667)
----------
Operating loss (5,977)
Finance costs (6)
Finance income 7
----------
Loss before tax (5,976)
Taxation 64
----------------------------------- ----------- ------------ ----------
Loss for the year from continuing
operations 5,912
----------------------------------- ----------- ------------ ----------
As at 30 June 2014 Non-managed
Emulsion interests Total
fuel Audited Audited
Audited
GBP'000s GBP'000s GBP'000s
Assets and Liabilities
Segment assets 4,018 1,439 5,457
Unallocated corporate assets 10,845
----------------------------------- ----------- ------------ ----------
Total assets 16,302
----------------------------------- ----------- ------------ ----------
Segment liabilities 122 - 122
Unallocated corporate liabilities 119
----------------------------------- ----------- ------------ ----------
Total liabilities 241
----------------------------------- ----------- ------------ ----------
Other segment information
Amortisation of intangible
assets 685 - 685
Geographical Segments
The Group's main geographical segments during the period were
Europe and Canada. The following table presents certain asset
information regarding the Group's geographical segments.
31 December 31 December 30 June
2014 2013 2014
Unaudited Unaudited Audited
GBP'000s GBP'000s GBP'000s
Non-current assets
Europe 3,551 3,470 3,536
Canada 1,439 2,631 1,439
-------------------- ------------ ------------ ---------
Total 4,990 6,101 4,975
-------------------- ------------ ------------ ---------
4. Loss Per Share
The calculation of loss per share is based on the following loss
and number of shares:
6 months 6 months Year ended
ended 31 ended 30 June
December 31 December 2014
2014 2013 Audited
Unaudited Unaudited
Loss for the period from
continuing operations (GBP'000s) (2,216) (1,756) (5,835)
Weighted average number
of shares:
Basic 807,859,828 772,543,391 783,491,125
Diluted 807,859,828 772,543,391 783,491,125
Loss per share:
----------------------------------- ------------ ------------- ------------
Basic (0.27)p (0.23) p (0.74)p
----------------------------------- ------------ ------------- ------------
Diluted (0.27)p (0.23) p (0.74)p
----------------------------------- ------------ ------------- ------------
Basic loss per share is calculated by dividing the loss for the
period from continuing operations of the Group by the weighted
average number of ordinary shares in issue during the period.
For diluted loss per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
potential dilutive options and warrants over ordinary shares.
Potential ordinary shares resulting from the exercise of share
options and warrants have an anti-dilutive effect due to the Group
being in a loss position. As a result, diluted loss per share is
disclosed as the same value as basic loss per share. The 8.5
million dilutive share options issued by the Company and which are
outstanding at the period-end could potentially dilute earnings per
share in the future if exercised when the Group is in a profit
making position.
5. Property, plant and equipment
Leasehold Computer Software Office Plant Total
improvements equipment equipment and machinery
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Cost
Opening balance
- 1 July 2014 94 21 17 16 559 707
Additions - 30 26 - 8 64
--------------------- -------------- ----------- --------- ----------- --------------- ---------
Closing balance
- 31 December
2014 94 51 43 16 567 771
--------------------- -------------- ----------- --------- ----------- --------------- ---------
Depreciation
Opening balance
- 1 July 2014 (6) (7) (9) (6) (67) (95)
Depreciation charge
for the year (9) (2) (2) (2) (34) (49)
--------------------- -------------- ----------- --------- ----------- --------------- ---------
Closing balance
- 31 December
2014 (15) (9) (11) (8) (101) (144)
--------------------- -------------- ----------- --------- ----------- --------------- ---------
Net book value
at 31 December
2014 79 42 32 8 466 627
--------------------- -------------- ----------- --------- ----------- --------------- ---------
Leasehold Computer Software Office Plant Total
improvements equipment equipment and machinery
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Cost
Opening balance
- 1 July 2013 17 14 17 16 531 595
Additions - - - - 16 16
--------------------- -------------- ----------- --------- ----------- --------------- ---------
Closing balance
- 31 December
2013 17 14 17 16 547 611
--------------------- -------------- ----------- --------- ----------- --------------- ---------
Depreciation
Opening balance
- 1 July 2013 (12) (4) (5) (3) (11) (35)
Depreciation charge
for the year (3) (2) (2) (1) (22) (30)
--------------------- -------------- ----------- --------- ----------- --------------- ---------
Closing balance
- 31 December
2013 (15) (6) (7) (4) (33) (65)
--------------------- -------------- ----------- --------- ----------- --------------- ---------
Net book value
at 31 December
2013 2 8 10 12 514 546
--------------------- -------------- ----------- --------- ----------- --------------- ---------
Leasehold Computer Software Office Plant Total
improvements equipment equipment and machinery
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Cost
Opening balance
- 1 July 2013 17 14 17 16 531 595
Additions 94 7 - - 28 129
Disposals (17) - - - - (17)
--------------------- -------------- ----------- --------- ----------- --------------- ---------
Closing balance
- 30 June 2014 94 21 17 16 559 707
--------------------- -------------- ----------- --------- ----------- --------------- ---------
Depreciation
Opening balance
- 1 July 2013 (12) (4) (5) (3) (11) (35)
Depreciation charge
for the year (11) (3) (4) (3) (56) (77)
Disposals 17 - - - - 17
--------------------- -------------- ----------- --------- ----------- --------------- ---------
Closing balance
- 30 June 2014 (6) (7) (9) (6) (67) (95)
--------------------- -------------- ----------- --------- ----------- --------------- ---------
Net book value
at 30 June 2014 88 14 8 10 492 612
--------------------- -------------- ----------- --------- ----------- --------------- ---------
6. Intangible Assets
QCC royalty MSAR(R) Technology
payments trade name and know-how Total
Unaudited Unaudited Unaudited Unaudited
GBP'000s GBP'000s GBP'000s GBP'000s
Cost
Opening balance -
1 July 2014 7,686 3,100 25,901 36,687
Additions - - - -
------------------- ------------ ------------ -------------- ----------
Closing balance -
31 December 2014 7,686 3,100 25,901 36,687
------------------- ------------ ------------ -------------- ----------
Amortisation and
Impairment
Opening balance -
1 July 2014 (7,686) (176) (25,901) (33,763)
Amortisation - - - -
Closing balance -
31 December 2014 (7,686) (176) (25,901) (33,763)
------------------- ------------ ------------ -------------- ----------
Net book value at
31 December 2014 - 2,924 - 2,924
------------------- ------------ ------------ -------------- ----------
QCC royalty MSAR(R) Technology
payments trade and know-how Total
name
Unaudited Unaudited Unaudited Unaudited
GBP'000s GBP'000s GBP'000s GBP'000s
Cost
Opening balance -
1 July 2013 7,686 3,100 25,901 36,687
Additions - - - -
------------------- ------------ ---------- -------------- ----------
Closing balance -
31 December 2013 7,686 3,100 25,901 36,687
------------------- ------------ ---------- -------------- ----------
Amortisation and
Impairment
Opening balance -
1 July 2013 (7,686) (176) (25,216) (33,078)
Amortisation - - (685) (685)
Closing balance -
31 December 2013 (7,686) (176) (25,901) (33,763)
------------------- ------------ ---------- -------------- ----------
Net book value at
31 December 2013 - 2,924 - 2,924
------------------- ------------ ---------- -------------- ----------
QCC royalty MSAR(R) Technology
payments trade name and know-how Total
Audited Audited Audited Audited
GBP'000s GBP'000s GBP'000s GBP'000s
Cost
Opening balance -
1 July 2013 7,686 3,100 25,901 36,687
Additions - - - -
------------------- ------------ ------------ -------------- ----------
Closing balance -
30 June 2014 7,686 3,100 25,901 36,687
------------------- ------------ ------------ -------------- ----------
Amortisation and
Impairment
Opening balance -
1 July 2013 (7,686) (176) (25,216) (33,078)
Amortisation - - (685) (685)
Closing balance -
30 June 2014 (7,686) (176) (25,901) (33,763)
------------------- ------------ ------------ -------------- ----------
Net book value at
30 June 2014 - 2,924 - 2,924
------------------- ------------ ------------ -------------- ----------
Intangibles comprise intellectual property with a cost of
GBP36.69m, including assets of finite and indefinite life. QCC's
royalty payments of GBP7.69m and the MSAR(R) trade name of GBP3.10m
are termed as assets having indefinite life as it is assessed that
there is no foreseeable limit to the period over which the assets
are expected to generate net cash inflows for the Group. The assets
with indefinite life are not amortised. The remaining intangibles
amounting to GBP25.90m, primarily made up of technology and
know-how, are considered as finite assets and are now fully
amortised. The Group does not have any internally generated
intangibles.
The Group tests intangible assets annually for impairment, or
more frequently if there are indications that they might be
impaired. For the 6 month period to 31 December 2014, there were no
indications that the intangible assets may be impaired.
As a result, the Directors concluded that no impairment is
necessary for the six month period to 31 December 2014.
7. Available for Sale Investments
31 December 31 December 30 June
2014 2013 2014
Unaudited Unaudited Audited
GBP'000s GBP'000s GBP'000s
Unquoted securities
Opening balance 1,439 2,631 2,631
Changes in fair value - - (186)
Impairment of investment
QCC - - (1,006)
-------------------------- ------------ ------------ ----------
Closing balance 1,439 2,631 1,439
-------------------------- ------------ ------------ ----------
Unquoted securities represent the Group's investment in Quadrise
Canada Corporation ("QCC"), Paxton Corporation ("Paxton"), Optimal
Resources Inc. ("ORI") and Porient Fuels Corporation ("Porient"),
all of which are incorporated in Canada.
At the statement of financial position date, the Group held a
20.44% share in the ordinary issued capital of QCC, a 3.75% share
in the ordinary issued capital of Paxton, a 9.54% share in the
ordinary issued capital of ORI and a 16.86% share in the ordinary
issued capital of Porient.
QCC is independent of the Group and is responsible for its own
policy-making decisions. There have been no material transactions
between QCC and the Group during the period or any interchange of
managerial personnel. As a result, the Directors do not consider
that they have significant influence over QCC and as such this
investment is not accounted for as an associate.
The Group has no immediate intention to dispose of its available
for sale investments unless a beneficial opportunity to realise
these investments arises.
Given that there is no active market in the shares of any of
above companies, the Directors have determined the fair value of
the unquoted securities at 31 December 2014. In this regard, the
Directors considered other factors such as past equity placing
pricing and assessment of risked net present value of the
enterprises to arrive at their conclusion on any impairment for all
of the unquoted securities.
The Directors made a full provision against the carrying value
of the 3,682,500 QCC shares during the year ended 30 June 2014.
Shareholder communications received during the period to 31
December 2014 indicate that the business model of QCC continues to
remain uncertain, as does the possibility of any material value
being recovered from QCC's asset base. The QCC shares therefore
continue to be valued at CAD$ nil as at 31 December 2014.
The Paxton shares were valued at CAD$4.00 per share as at 1 July
2014. Shareholder communications received since 1 July 2014 show
that Paxton continues to make progress in its business activities
and there is therefore no indication of impairment in this
investment. Based on this, the Directors have concluded that the
value of CAD$4.00 per share continues to reflect the fair value of
the 652,874 shares held in Paxton as at 31 December 2014. The total
value of the Paxton investment as at 31 December 2014 is
GBP1.44m.
The Directors made a full provision against the carrying value
of the 5,682,500 ORI shares during the year ended 30 June 2014.
Although ORI continues to operate, the viability of its business
model continues to remain highly doubtful and no material amounts
are expected to be realised from its remaining assets. The ORI
shares therefore continue to be valued at CAD$ nil as at 31
December 2014.
The Directors made a full provision against the Porient shares
during the year ended 30 June 2014. Porient is yet to be defined
into a business with active projects and the current prospects of
this happening are doubtful. The Porient shares therefore continue
to be valued at CAD$ nil as at 31 December 2014.
8. Non-controlling Interest
Non-controlling interests were reduced to GBPnil on 22 October
2014 when the Company purchased ROE Projects Limited, which held a
6.25% participation in the equity of Quadrise Marine Limited,
Quadrise KSA Limited, Quadrise Americas Limited and Quadrise Asia
Limited.
9. Related Party Transactions
Non-Executive Director Laurence Mutch is also a director of
Laurie Mutch & Associates Limited, which has provided
consulting services to the Group. The total fees charged for the
six month period to 31 December 2014 amounted to GBP16k (for the
six month period to 31 December 2013: GBP24k). The balance payable
at 31 December 2014 was GBP2.5k (as at 30 June 2014: GBP4k).
Ian Williams and Hemant Thanawala are directors of International
Energy Services Limited ("IESL"). QFI provided services to IESL
during the period for which QFI received income of GBP26k (for the
six month period to 31 December 2013:GBP25k). The balance
receivable at the statement of financial position date was GBPnil
(as at 30 June 2014: GBP14k).
Jason Miles is a Director of ROE Projects Limited, which
provided consulting services to the group until 22 October 2014.
The total fees charged for the six month period to 31 December 2014
amount to GBP62k (for the six month period to 31 December 2013:
GBP132k). The balance payable at the statement of financial
position date was GBPnil (as at 30 June 2014: GBP15k).
On 22 October 2014, the Company issued 1,593,626 new ordinary
shares in the Company, equating to a value of GBP500k, to Jason and
Rachel Miles in consideration for 100% of the share capital of ROE
Projects Limited, which holds a 6.25% interest in each of Quadrise
Marine Limited, Quadrise KSA Limited, Quadrise Americas Limited and
Quadrise Asia Limited.
QFI defines key management personnel as the Directors of the
Company. There are no transactions with Directors, other than their
remuneration or disclosed above.
10. Seasonality
The operations of the Group are not affected by seasonal
fluctuations.
11. Commitments and Contingencies
The Group and the Company have entered into a commercial lease
for office rental. This lease expires on 25(th) March 2019, and
there are no restrictions placed on the Group or Company by
entering into this lease. The minimum future lease payments for the
non-cancellable lease are as follows:
31 December 31 December 30 June
2014 GBP'000s 2013 2014
GBP'000s GBP'000s
Office premises:
One year 104 - 77
Two to five years 344 - 397
After five years - - -
On 18(th) December 2014, the Group signed agreement with ENH
Engineering A/S ("ENH") to purchase up to two proprietary MSAR(R)
Manufacturing Units ("MMUs") designed for the processing of
refinery heavy residues and production of MSAR(R) fuel emulsions.
As of the date of this report, the Group has placed an order with
ENH for the first MMU totalling EUR400k, of which EUR200k has been
paid as a deposit.
The Group has no contingent liabilities as at the statement of
financial position date.
12. Events After the End of the Reporting Period
On 29 January 2015, Jason Miles, the Company's Chief Operating
Officer, exercised 750,000 share options at a price of 14.23 pence
per share. Following the exercise of share options, Jason Miles
sold 100,000 ordinary shares in the Company at a price of 18.00
pence per share on 30 January 2015 to satisfy personal tax
obligations.
13. Copies of the Interim Accounts
Copies of the interim accounts are available on the Company's
website at www.quadrisefuels.com and from the Company's registered
office, Gillingham House, 38-44 Gillingham Street, London, SW1V
1HU.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PGUGPWUPAGMM
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