TIDMQFI
RNS Number : 5205A
Quadrise Fuels International PLC
27 March 2017
27 March 2017
Quadrise Fuels International plc
("Quadrise", "QFI", the "Company" and together with its
subsidiaries the "Group")
Interim Results for the 6 month period ended 31 December
2016
Quadrise Fuels International plc (AIM: QFI), the emerging
supplier of MSAR(R) emulsion technology and fuel, enabling a low
cost alternative to heavy fuel oil (one of the world's largest fuel
markets, comprising over 450 million tons per annum) in the global
shipping, refining, and power generation markets, announces its
interim results for the 6 month ended 31 December 2016.
Operational Highlights
Marine Operational and LONO Trial
Ø Marine Operational and LONO trial commenced in July 2016:
-- Progressed well with positive feedback from Cepsa and Maersk for the duration.
-- MSAR(R) unit operations at Cepsa refinery successfully moved
to 24-hour per day production in January 2017.
-- Current trial suspended as the vessel had been involved in an
incident, totally unrelated to MSAR(R) fuel, requiring it to
undergo an unscheduled dry-dock inspection.
Ø Detailed interim inspection of the engine has been carried out
by Wärtsilä:
-- Interim inspection carried out earlier than scheduled.
-- Initial feedback from engine manufacturer has been positive.
-- Full interim report expected to be delivered within next 6 weeks.
-- Interim LONO from Wärtsilä to be progressed following receipt
of the interim inspection report.
Ø Commercialisation:
-- Maersk confirmed that the interim LONO will provide
sufficient comfort to progress approvals and commercialisation
discussions.
-- The interim inspection and LONO respectively enables
discussions with other potential customers.
Ø Maersk is reviewing options for recommencing and completing
the full LONO trial on a new vessel from Q4 2017 onwards.
Power Operational Trial
Ø Operational trial MoU signed with the Kingdom of Saudi Arabia
client in August 2016:
-- Commencement of the 'Production to Combustion' trial at
designated refinery and power plant facilities within the KSA
currently anticipated to commence in Q4 2017.
-- A KSA delegation undertook a site visit to the MSAR(R) facility at the Cepsa refinery.
-- Opportunities to accelerate the 'Production to Combustion'
trial timetable are being considered.
Other Developments
Ø The MoU with YTL PowerSeraya was extended for another year to
October 2017.
Ø AkzoNobel contracts for the exclusive purchase and supply of
goods and services and for the exclusive joint development of
emulsion fuels were extended to November 2018.
Financial highlights
Ø In November, the Company raised GBP5.25 million through a
Placing and Open Offer of new ordinary shares. The Open Offer was
oversubscribed 2.5 times.
Ø No debt and GBP7.0 million in cash reserves at 31 December
2016 (31 December 2015: GBP6.5 million).
Ø Loss after tax of GBP2.4 million (2015: GBP2.4 million) of
which GBP0.2 million relates to non-cash charges for share
options.
Ø Total assets of GBP11.5 million at 31 December 2016 (2015:
GBP10.8 million).
Ø Accumulated tax losses of approx. GBP43 million, available to
be carried forward against future profits.
Commenting, Mike Kirk, Executive Chairman of QFI, said:
"The performance of MSAR(R) on the marine trial vessel has been
positive and we expect the recent interim inspection to confirm
this. We are now closely engaged with our partners to expedite the
interim LONO. This should put us in a good position to progress
discussions on commercialisation of MSAR(R) within the shipping
industry. At the same time, we are defining the scope and plans for
the resumption of the trial to achieve a full LONO and exploring
options to accelerate the timetable for commencement of the
combustion trial in Saudi Arabia.
Whilst there remain challenges ahead, we strongly believe that
MSAR(R) continues to provide a compelling economic and
environmental case for adoption by both producers and consumers and
continue our efforts with existing clients and the wider target
markets in order to migrate to commercial operations at the
earliest opportunity."
This announcement is inside information for the purposes of
article 7 of Regulation 596/2014.
For further information, please refer to the Company's website
at www.quadrisefuels.com or contact:
Quadrise Fuels International Plc
+44 (0)20 7031
Mike Kirk, Executive Chairman 7321
Hemant Thanawala, Finance Director
Nominated Adviser
Smith & Williamson Corporate Finance
Limited
+44 (0)20 7131
Dr Azhic Basirov 4000
Ben Jeynes
Katy Birkin
Broker
Peel Hunt LLP
+44 (0)20 7418
Richard Crichton 8900
Ross Allister
Chris Burrows
Public & Investor Relations
FTI Consulting
+44 (0)20 3727
Ben Brewerton 1000
Sara Powell
Chairman's Statement
Quadrise Fuels International plc ("Quadrise", "QFI", the
"Company" and together with its subsidiaries the "Group") presents
its unaudited interim results for the six months ended 31 December
2016
Business Overview
This interim report updates shareholders on developments during
the six months ended 31 December 2016, together with material
events and activities taking place after the balance sheet
date.
Quadrise's Unique Offer
Quadrise has developed MSAR(R) as a less expensive, cleaner
synthetic heavy fuel oil ("HFO"). Produced using QFI's proprietary
technology and services, MSAR(R) offers both producers and
consumers of the fuel significant economic and environmental
advantages. MSAR(R) , an oil in water emulsion, is made by mixing
the residual streams from an oil refinery with water and
specialised chemicals in a proprietary production process - instead
of diluting the residuals with high value distillate products
typically used in the production of HFO.
MSAR(R) has superior characteristics compared with HFO:
-- MSAR(R) can be stored and used at lower temperatures than HFO.
-- The small particle size (5-10 microns) of the residue in
MSAR(R) results in virtually complete combustion - leading to
improvements in engine efficiency and significant reductions in
carbon particulates in the exhaust gases.
-- The presence of water in MSAR(R) reduces the combustion
temperatures - leading to significant reductions in nitrogen oxide
("NOx") emissions.
-- MSAR(R) is provided at a lower price than HFO for the equivalent energy output.
-- Producing MSAR(R) allows the refiner to sell the higher value
distillates products that would otherwise be used to dilute the
residue in order to create HFO.
Quadrise is the technology and service partner to both the
producer and the consumer and aims to create value through licence
revenues from the production of fuel and the sale of the chemicals
and MSAR(R) manufacturing systems. The core technology has been
developed jointly with AkzoNobel Surface Chemistry - one of the
world's leading suppliers of speciality chemicals.
For the refiner, the production of MSAR(R) upgrades the low
value residue that is inherent in any oil refining process by
treating it with speciality chemicals and water in a proprietary
production process, rather than diluting it with high value
distillate to create HFO. This releases material volumes of high
value distillate for sale (typically increasing from 50% to 70% of
the overall refinery output) - providing the potential to
significantly increase refining margins. For the consumer, MSAR(R)
is offered at a discount (on an energy equivalent basis) and also
offers environmental and handling benefits, compared with HFO.
The two largest markets for the use of MSAR(R) as a low-cost,
efficient synthetic HFO with environmental advantages are the
marine bunkering and power generation markets. In both cases, it is
necessary to engage with both the producers (refiners) and
consumers (shipping companies and power utilities) to develop the
significant market opportunities. Significant work has been carried
out to demonstrate the proof of concept in these two key end-user
markets and current work is focused on commercial scale trials, the
successful delivery of which will be key milestones towards QFI
developing sustainable commercial revenues.
Marine Bunker Fuel Market
The market for marine bunker fuel is approximately 200 million
tons per annum, with a current value of approximately US$60 billion
(at US$300/mt), with the majority of product delivered via five
large regional bunkering hubs, of which Singapore is the largest.
These hubs are also major regional refining and petrochemical
centres. The demand side is dominated by a relatively small number
of very large shipping companies, with the global leader in
container shipping being Maersk Line A/S ("Maersk"). Quadrise has
been working with Maersk since 2009 and this culminated in the
current operational and letter of no objection ("LONO") trial that
commenced in July 2016, with MSAR(R) being produced at the Compania
Espanola de Petroleos S.A.U. ("Cepsa") Gibraltar San Roque Refinery
in Spain.
During the period, the International Maritime Organization
("IMO") reached a decision on the implementation of new, reduced,
open ocean fuel sulphur standards. These will now be reduced to
0.5% sulphur from 1 January 2020, unless an exhaust gas scrubber is
used. The previous implementation of the 0.1% sulphur standards in
the two designated emission control areas in North America and
Europe in 2015 was generally effected by the use of low-sulphur
marine diesel or derivatives. For the new 2020 open ocean
standards, it is currently anticipated that for most operators, the
most economic compliance option will be the use of "high" sulphur
fuel and exhaust gas scrubbers. However, even relatively modest
increases in demand for low-sulphur marine diesel will lead to an
increase in the spread between diesel and HFO which is the primary
economic driver for MSAR(R) and so will, we believe, be beneficial
for Quadrise, as it will offer increased savings over the use of
HFO with equivalent sulphur content.
Power Generation Market
The use of HFO and crude oil for power generation is a market
worth around US$28 billion per annum and the largest consumers are
in the Middle East and Asia. Quadrise's development in the power
generation market has been focused on the Kingdom of Saudi Arabia
("KSA"), as the scale and nature of the oil and power generation
industries offers an enormous opportunity for both conversion from
fuel oil to MSAR(R) production in very large refineries, and for
the substitution of crude oil and HFO currently used in thermal
power and other large scale applications. Quadrise has been
actively involved with the oil industry in KSA since 2008 and this
culminated with the signing of a memorandum of understanding
("MoU") in August 2016 for a production to combustion trial
commencing in 2017, with production at a designated refinery and
combustion at a designated boiler in a major power station.
Operational Highlights
During the period under review, continued positive progress has
been made on the marine operational trial with the nominated Maersk
vessel successfully burning MSAR(R) on its regular scheduled route,
whilst outside the European Emission Control Area. Around the
beginning of 2017, the vessel was placed on a new route that
initially saw a more rapid accumulation of run hours compared with
2016. Whilst the feedback from Maersk continues to remain positive,
recent operational issues with the trial vessel, totally unrelated
to MSAR(R) , resulted in Quadrise making two announcements, on 2
March 2017 and 13 March 2017 respectively. The first of these
announcements confirmed that there had been an incident that would
require the trial vessel to undergo an unscheduled dry dock visit.
The second announcement, on 13 March 2017, provided a further
update after Quadrise was advised by Maersk that it would not be
possible for the trial to continue on the vessel following the dry
dock visit as it would then be redeployed on a different service
that would not permit further bunkering at Algeciras. As a result,
it was confirmed that the current trial on this vessel would be
suspended once the remaining MSAR(R) fuel on board had been
consumed.
The 13 March 2017 announcement went on to state that Maersk had
confirmed that the trial has been successful to date and that
Wärtsilä would carry out a detailed interim inspection of the trial
vessel's engine to document the performance of MSAR(R) fuel to
date.
Maersk has confirmed that the trial has progressed well and,
subsequent to the last announcement, Wärtsilä has recently
completed the interim inspection of the engine and is now preparing
a report which is currently expected to be issued next month. A
positive conclusion to the Report will enable QFI and Maersk to
progress the issuance of the interim LONO by Wärtsilä to confirm
that the fuel is safe for use in Wärtsilä 2-stroke engines. Maersk
is also reviewing options for continuing the trial aboard another
vessel, although this is unlikely to commence before Q4 2017. So,
whilst the interim inspection was completed in line with the
timetable and an interim LONO should be issued shortly, the
completion of the full LONO trial will now be delayed. It is
important to emphasise that this is due to Maersk's operational
constraints rather than issues with MSAR(R) use - an unavoidable
consequence of operational testing on a commercial vessel in live
service.
Given the current situation, based on all the positive progress
made to date, Quadrise has been working closely with Maersk and
Wärtsilä since 13 March 2017 to obtain clarity around the timing
and scope of the interim LONO from Wärtsilä and the plans and scope
for the resumption of the trial. Maersk has confirmed that an
interim LONO will provide them with sufficient comfort to progress
discussions regarding commercialisation of MSAR(R) , taking into
account a variety of operational and economic factors in addition
to the technical performance of MSAR(R) .
The production of MSAR(R) at the Cepsa refinery has progressed
well during the period - with incremental enhancements to the
MSAR(R) Manufacturing Unit ("MMU") being made which are proving to
be helpful as we build up our operational experience within a
refinery that processes a variety of different crude oils. In
January 2017, we were successfully able to move to a 2-shift
production - operating the MMU on a 24-hour basis to produce the
largest single batch of MSAR(R) to date.
Since the beginning of 2017, we have also been working with
Cepsa to review new opportunities for maximising the MSAR(R)
production capacity at the facility for new customers in the marine
and power sectors and these discussions are progressing well.
In power generation, since the signing of the MoU in the KSA in
August 2016, we have significantly increased our activities in
support of this large-scale production to combustion trial. This
has included regular meetings with all parties and significant
technical and engineering input to our clients and their advisors,
to ensure that they have appropriate and up to date information on
which to base their decisions. An important element of this
engagement has been the ability to host a visit to the MSAR(R)
facility at Cepsa's refinery - demonstrating the ability of
Quadrise to successfully design, procure, commission and operate a
commercial scale MMU in an operating refinery environment. Our
input accelerated sharply from December 2016 onwards and we believe
that this is having a positive impact on project progress, with the
timetable still being based on the KSA trial commencing during the
final quarter of 2017.
Migration to Commercial Operations
It remains our plan to migrate the business to commercial
operations during 2017, pending positive decisions by our clients.
Our base-case planning has always been focused on working with
Maersk to commence early commercial MSAR(R) delivery from the Cepsa
refinery to an expanding number of ships following the issuance of
the LONO by Wärtsilä. Whilst this still remains our key objective,
the recent events highlighted above will have an impact on this
timetable.
For Maersk, it remains the case that a positive interim
inspection and LONO respectively by Wärtsilä is the trigger point
for commencing commercial discussions - with the balance of the
hours to the issue of the full LONO being essentially confirmatory.
A commercial framework has been drafted, and is being used for
outline planning purposes to form the likely basis for any future
discussions and agreements between Quadrise, Cepsa and Maersk.
Maersk's decision will ultimately be taken on several factors,
primarily economic and operational, that will include the economic
and environmental advantages of MSAR(R) in addition to their chosen
approach to compliance with the new IMO open ocean sulphur
standards that come into force in 2020.
In addition to the continuing discussions with Maersk, we have
been increasing our activities with other shipping operators and we
believe that, subject to its scope, an interim LONO from Wärtsilä,
will be a very positive attribute in progressing those activities.
Alongside this, we will be continuing our discussions with a number
of other producers in the major European and Asian bunker hubs and
regional refining centres to provide additional sourcing
opportunities.
Our knowledge of operating on a commercial scale at the Cepsa
refinery is also enabling us to further refine our operating,
quality and development activities to support migration to
commercial operations during 2017. During the period, we continued
to make targeted investments in engineering, operational,
laboratory and business development staff to ensure a smooth
migration to early-stage commercial operations alongside our
various trial activities.
We extended our agreement with the University of Surrey in
November 2016 and this will, in collaboration with our in-house
activities at the Quadrise Research Facility ("QRF"), ensure that
we are able to continue to further improve our understanding of the
complexities of emulsion chemistry so that we can optimise MSAR(R)
formulations to deliver the best balance of cost, shelf-life and
operating performance. The extension of our commercial, supply,
intellectual property and development arrangements with our
technology partner, AkzoNobel Surface Chemistry, to November 2018
are also important in underpinning our early-stage commercial
activities.
Targeted Business Development Programme
Whilst the key trial programmes are an important element of our
business development activities - as they demonstrate our
technology in use on commercial-scale applications - we have an
active business development programme to raise the profile of
Quadrise with refiners, power utilities and shippers in our
targeted markets in Europe, the Middle East and Asia. This includes
a co-ordinated programme of attendance/speaking at relevant
industry conferences and seminars - alongside a series of meetings
with specific companies - co-ordinated by our General Managers in
the refining, marine and power segments. In addition to working
directly with potential producers and consumers, we are also
raising the profile of Quadrise through engagement with key
financial and trade media. To maximise impact and reduce costs,
these meetings/interviews are co-ordinated with attendance at
conferences and prospective client meetings.
As outlined previously, in Asia we continue our relationship
with YTL PowerSeraya and extended the MoU for a further year in
October 2016. Whilst the prospective benefits remain material,
unlocking value is dependent on MSAR(R) production by a major
regional refiner and this is only likely to start when there is a
market for Marine MSAR(R) through the Singapore bunker hub. This
opportunity is being investigated as an integral part of the
commercial roll-out in the marine market.
Our discussions with a number of oil majors and refiners in
Europe, the Middle East and Asia are continuing and plans for
evaluation of sample residues at the QRF from a number of
refineries are an integral part of this process and these are
expected to be progressed during the remainder of 2017. These cover
a range of applications including marine, power and refinery
refuelling.
We have also progressed discussions with several parties looking
to use our technology in novel upstream applications that have
significant long-term potential. We are careful to limit the
resources that we commit to these longer-term applications.
Financial Position
The Group recorded a loss of GBP2.4 million for the six months
to 31 December 2016, including a non-cash share option charge of
GBP0.2 million and consultancy revenue of GBP0.1 million (H1 2015:
GBP2.4 million loss). The production and development costs for the
period under review amounted to GBP1.3 million, most of which
related to the ongoing Marine LONO trial with Maersk.
The Group held cash and cash equivalents of GBP7.0 million as at
31 December 2016. This includes GBP5.0 million (net of costs)
raised through a placing and open offer during the six months'
period then ended. The Group continues to operate on a debt free
basis and continues to maintain a stringent control of costs.
The Group's total assets amounted to GBP11.5 million as at 31
December 2016 (GBP10.8 million as at 31 December 2015). Apart from
the cash and cash equivalents, this included fixed tangible assets
(mainly plant and equipment) of GBP1.1 million and MSAR(R) trade
name of GBP2.9 million.
Outlook
As endorsed by Maersk in the announcement on 13 March 2017, the
performance of MSAR(R) fuel on the trial vessel in normal
commercial service has been positive and we expect the interim
inspection by Wärtsilä to confirm this in the near future. We are
now closely engaged with Maersk and Wärtsilä to expedite the issue
of the report and interim LONO, given the completion of the interim
inspection, as well as defining the scope and plans for the
resumption of the trial on another vessel to achieve a full LONO.
This should put us in a good position to progress discussions with
Maersk on commercialisation of MSAR(R) within the shipping
industry.
We continue to plan to migrate the business to commercial
operations during 2017, pending positive decisions by our clients
and the ability to reach appropriate commercial terms with all
parties for continued production and supply from the Cepsa San
Roque refinery in Spain. The recent events concerning the Maersk
trial vessel may have an impact on the timetable; however, we are
also increasing our activities with other shipping operators as a
result of the positive trial progress to date, and the potential
issuance of an interim LONO.
Alongside this we are also planning for the commencement of the
production to combustion trial in KSA in late 2017 - which will
require significant engineering and operational support during the
design, procurement and commissioning stages - in addition to the
continued support during the extended production campaign to
produce the significant quantities of MSAR(R) fuel required for the
combustion trial.
The generally more stable oil price environment and a predicted
future widening of the marine gas oil/HFO spread is further
underpinning the value that our technology can deliver. Alongside
the general improvement in the oil and product price macro
environment, the IMO decision on the implementation of the lower
open-ocean sulphur standards has resulted in an emerging consensus
that non-compliant fuel and exhaust gas scrubbers are the lowest
cost compliance option for the industry as a whole. This, we
expect, will provide further support to the developing market for
marine MSAR(R) in the medium term. In KSA, the use of MSAR(R) is
closely aligned with the objectives of the Vision 2030 programme -
to increase value delivered within the Kingdom and reduce the
reliance on domestic crude oil consumption.
Whilst the recent challenges in the marine operational and LONO
trial are unfortunate, pending the issuance of the interim LONO,
the ability to fuel and operate a commercial vessel on MSAR(R) has
been established. We have an experienced and committed board and
senior management team that are responding positively to the
challenges and we remain well positioned to deliver value from our
unique technology. We expect our activities during the remainder of
the financial year to provide the firm foundations for this value
to begin to be realised during the second half of 2017.
Mike Kirk
Executive Chairman
24 March 2017
Condensed Consolidated Statement of Comprehensive Income
For the 6 months ended 31 December 2016
Note 6 months 6 months Year ended
ended ended 30 June
31 December 31 December 2016
2016 2015 Audited
Unaudited Unaudited GBP'000
GBP'000 GBP'000
Continuing operations
Revenue 68 2 2
Production and development
costs (1,297) (834) (2,156)
Other administration
expenses (1,029) (1,083) (1,965)
Share option charge (162) (460) (802)
Foreign exchange
gain/(loss) (6) 7 (18)
---------------------------- ----- ------------- ------------- -----------
Operating loss (2,426) (2,368) (4,939)
Finance costs (5) (4) (8)
Finance income 6 19 41
---------------------------- ----- ------------- ------------- -----------
Loss before tax (2,425) (2,353) (4,906)
Taxation - - 149
---------------------------- ----- ------------- ------------- -----------
Total comprehensive
loss for the period
from continuing operations (2,425) (2,353) (4,757)
----------------------------------- ------------- ------------- -----------
Loss per share -
pence
(0.59)
Basic 4 (0.29)p (0.29)p p
(0.59)
Diluted 4 (0.29)p (0.29)p p
---------------------------- ----- ------------- ------------- -----------
Condensed Consolidated Statement of Financial Position
As at 31 December 2016
Note As at As at As at
31 December 31 December 30 June
2016 2015 2016
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Property, plant and
equipment 5 1,086 1,043 1,156
Intangible assets 6 2,924 2,924 2,924
Non-current assets 4,010 3,967 4,080
----------------------------- ----- ------------- ------------- ---------
Current assets
Cash and cash equivalents 7,048 6,495 4,268
Trade and other receivables 263 230 297
Prepayments 130 81 120
Stock 69 - -
----------------------------- ----- ------------- ------------- ---------
Current assets 7,510 6,806 4,685
----------------------------- ----- ------------- ------------- ---------
TOTAL ASSETS 11,520 10,773 8,765
----------------------------- ----- ------------- ------------- ---------
Equity and liabilities
Current liabilities
Trade and other payables 638 522 576
--------------------------- --------- --------- ---------
Current liabilities 638 522 576
--------------------------- --------- --------- ---------
Equity attributable
to equity holders
of the parent
Issued share capital 8,622 8,096 8,096
Share premium 73,646 69,216 69,216
Share option reserve 4,398 4,605 4,704
Reverse acquisition
reserve 522 522 522
Accumulated losses (76,306) (72,188) (74,349)
--------------------------- --------- --------- ---------
Total shareholders'
equity 10,882 10,251 8,189
--------------------------- --------- --------- ---------
TOTAL EQUITY AND
LIABILITIES 11,520 10,773 8,765
--------------------------- --------- --------- ---------
Condensed Consolidated Statement of Changes in Equity
For the 6 months ended 31 December 2016
Issued Reverse
share Share Share acquisition Accumulated
capital premium option reserve losses Total
GBP'000 GBP'000 reserve GBP'000 GBP'000 GBP'000
GBP'000
As at 1
July 2016 8,096 69,216 4,704 522 (74,349) 8,189
Loss and
total comprehensive
loss for
the period - - - - (2,425) (2,425)
Share option
charge - - 162 - - 162
---------------------- --------- ---------- ---------- ------------- -------------- ----------
New shares
issued net
of issue
costs 526 4,430 - - - 4,956
---------------------- --------- ---------- ---------- ------------- -------------- ----------
Transfer
of balances
relating
to expired
share options - - (468) - 468 -
---------------------- --------- ---------- ---------- ------------- -------------- ----------
Shareholders'
equity at
31 December
2016 8,622 73,646 4,398 522 (76,306) 10,882
---------------------- --------- ---------- ---------- ------------- -------------- ----------
Issued Reverse
share Share Share acquisition Accumulated
capital premium option reserve losses Total
GBP'000 GBP'000 reserve GBP'000 GBP'000 GBP'000
GBP'000
As at 1
July 2015 8,096 69,216 4,210 522 (69,900) 12,144
Loss and
total comprehensive
loss for
the period - - - - (2,353) (2,353)
---------------------- --------- ---------- ---------- ------------- -------------- ------------
Share option
charge - - 460 - - 460
---------------------- --------- ---------- ---------- ------------- -------------- ------------
Transfer
of balances
relating
to expired
share options - - (65) - 65 -
---------------------- --------- ---------- ---------- ------------- -------------- ------------
Shareholders'
equity
at 31 December
2015 8,096 69,216 4,605 522 (72,188) 10,251
---------------------- --------- ---------- ---------- ------------- -------------- ------------
Issued Reverse
share Share Share acquisition Accumulated
capital premium option reserve losses Total
GBP'000 GBP'000 reserve GBP'000 GBP'000 GBP'000
GBP'000
As at 1
January
2016 8,096 69,216 4,605 522 (72,188) 10,251
Loss and
total comprehensive
loss for
the period - - - - (2,404) (2,404)
Share option
charge - - 342 - - 342
---------------------- --------- ---------- ---------- ------------- -------------- ----------
Transfer
of balances
relating
to expired
share options - - (243) - 243 -
---------------------- --------- ---------- ---------- ------------- -------------- ----------
Shareholders'
equity at
30 June
2016 8,096 69,216 4,704 522 (74,349) 8,189
---------------------- --------- ---------- ---------- ------------- -------------- ----------
Condensed Consolidated Statement of Cash Flows
For the 6 months ended 31 December 2016
Note 6 months 6 months Year ended
ended ended 30 June
31 December 31 December 2016
2016 2015 Audited
Unaudited Unaudited GBP'000
GBP'000 GBP'000
Operating activities
Loss before tax from
continuing operations (2,425) (2,353) (4,906)
Finance costs 5 4 8
Finance income (6) (19) (41)
Depreciation 5 106 64 148
Loss on disposal
of fixed assets - 2 2
Share option charge 162 460 802
Working capital adjustments
Decrease in trade
and other receivables 34 103 36
(Increase)/decrease
in prepayments (10) 157 118
Increase in trade
and other payables 62 100 154
Increase in stock (69) - -
----------------------------- ----- ------------- ------------- -----------
Cash utilised in
operations (2,141) (1,482) (3,679)
----------------------------- ----- ------------- ------------- -----------
Finance costs (5) (4) (8)
Taxation received - - 149
------------- -------------
Net cash outflow
from operating activities (2,146) (1,486) (3,538)
----------------------------- ----- ------------- ------------- -----------
Investing activities
Finance income 6 19 41
Purchase of fixed
assets 5 (36) (399) (596)
Net cash outflow
from investing activities (30) (380) (555)
----------------------------- ----- ------------- ------------- -----------
Financing activities
Issue of ordinary 4,956 - -
share capital
Net cash inflow from 4,956 - -
financing activities
Net increase/(decrease)
in cash and cash
equivalents 2,780 (1,866) (4,093)
Cash and cash equivalents
at the beginning
of the period 4,268 8,361 8,361
----------------------------- ----- ------------- ------------- -----------
Cash and cash equivalents
at the end of the
period 7,048 6,495 4,268
----------------------------- ----- ------------- ------------- -----------
Notes to the Group Condensed Financial Statements
1. General Information
Quadrise Fuels International plc ("QFI", "Quadrise", or the
"Company") and its subsidiaries (together with the Company, 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 UK Company Law 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 2016, 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 2016, 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 2017.
A number of new standards and amendments to standards and
interpretations have been issued but are not yet effective and in
some cases have not yet been adopted by the European Union.
The Directors do not expect that the adoption of these standards
will have a material impact on the financial information of the
Group in future periods.
The interim accounts for the six months ended 31 December 2016
were approved by the Board on 24 March 2017.
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 one business segment, the results of which
are regularly reviewed by the Board. This business segment is a
business to produce emulsion fuel (or supply the associated
technology to third parties) as a low cost substitute for
conventional HFO for use in power generation plants and industrial
and marine diesel engines.
Geographical Segments
The Group's only geographical segment during the period was the
UK.
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 ended 30 June
31 December 31 December 2016
2016 2015 Audited
Unaudited Unaudited
Loss for the period
from continuing operations
(GBP'000s) (2,425) (2,353) (4,757)
Weighted average number
of shares:
Basic 830,088,926 809,585,162 809,585,162
Diluted 830,088,926 809,585,162 809,585,162
Loss per share:
----------------------------- ------------- ------------- ------------
Basic (0.29)p (0.29)p (0.59)p
----------------------------- ------------- ------------- ------------
Diluted (0.29)p (0.29)p (0.59)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 27.13
million 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'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
Opening balance
- 1 July 2016 99 89 43 16 1,251 1,498
Additions 8 3 - - 25 36
Disposals - - - - - -
----------------- -------------- ----------- --------- ----------- ----------- --------
Closing balance
- 31 December
2016 107 92 43 16 1,276 1,534
----------------- -------------- ----------- --------- ----------- ----------- --------
Depreciation
Opening balance
- 1 July 2016 (46) (30) (24) (12) (230) (342)
Depreciation
charge for
the period (10) (9) (4) (2) (81) (106)
Disposals - - - - - -
----------------- -------------- ----------- --------- ----------- ----------- --------
Closing balance
- 31 December
2016 (56) (39) (28) (14) (311) (448)
----------------- -------------- ----------- --------- ----------- ----------- --------
Net book value
at 31 December
2016 51 53 15 2 965 1,086
----------------- -------------- ----------- --------- ----------- ----------- --------
Leasehold Computer Software Office Plant Total
improvements equipment equipment and
machinery
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
Opening balance
- 1 July 2015 99 70 43 16 682 910
Additions - 5 - - 394 399
Disposals - - - - (6) (6)
----------------- -------------- ----------- --------- ----------- ----------- --------
Closing balance
- 31 December
2015 99 75 43 16 1,070 1,303
----------------- -------------- ----------- --------- ----------- ----------- --------
Depreciation
Opening balance
- 1 July 2015 (26) (14) (15) (9) (136) (200)
Depreciation
charge for
the period (9) (8) (4) (2) (41) (64)
Disposals - - - - 4 4
----------------- -------------- ----------- --------- ----------- ----------- --------
Closing balance
- 31 December
2015 (35) (22) (19) (11) (173) (260)
----------------- -------------- ----------- --------- ----------- ----------- --------
Net book value
at 31 December
2015 64 53 24 5 897 1,043
----------------- -------------- ----------- --------- ----------- ----------- --------
Leasehold Computer Software Office Plant Total
improvements equipment equipment and
machinery
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
Opening balance
- 1 July 2015 99 70 43 16 682 910
Additions - 19 - - 577 596
Disposals - - - - (8) (8)
----------------- -------------- ----------- --------- ----------- ----------- --------
Closing balance
- 30 June
2016 99 89 43 16 1,251 1,498
----------------- -------------- ----------- --------- ----------- ----------- --------
Depreciation
Opening balance
- 1 July 2015 (26) (14) (15) (9) (136) (200)
Depreciation
charge for
the year (20) (16) (9) (3) (100) (148)
Disposals - - - - 6 6
----------------- -------------- ----------- --------- ----------- ----------- --------
Closing balance
- 30 June
2016 (46) (30) (24) (12) (230) (342)
----------------- -------------- ----------- --------- ----------- ----------- --------
Net book value
at 30 June
2016 53 59 19 4 1,021 1,156
----------------- -------------- ----------- --------- ----------- ----------- --------
6. Intangible Assets
QCC royalty MSAR(R) Technology
payments trade and know-how Total
name
Unaudited Unaudited Unaudited Unaudited
GBP'000 GBP'000 GBP'000 GBP'000
Cost
Opening balance
- 1 July 2016 7,686 3,100 25,901 36,687
Additions - - - -
----------------- ------------ ---------- -------------- ----------
Closing balance
- 31 December
2016 7,686 3,100 25,901 36,687
----------------- ------------ ---------- -------------- ----------
Amortisation
and Impairment
Opening balance
- 1 July 2016 (7,686) (176) (25,901) (33,763)
Amortisation - - - -
Closing balance
- 31 December
2016 (7,686) (176) (25,901) (33,763)
----------------- ------------ ---------- -------------- ----------
Net book value
at 31 December
2016 - 2,924 - 2,924
----------------- ------------ ---------- -------------- ----------
QCC royalty MSAR(R) Technology
payments trade and know-how Total
name
Unaudited Unaudited Unaudited Unaudited
GBP'000 GBP'000 GBP'000 GBP'000
Cost
Opening balance
- 1 July 2015 7,686 3,100 25,901 36,687
Additions - - - -
----------------- ------------ ---------- -------------- ----------
Closing balance
- 31 December
2015 7,686 3,100 25,901 36,687
----------------- ------------ ---------- -------------- ----------
Amortisation
and Impairment
Opening balance
- 1 July 2015 (7,686) (176) (25,901) (33,763)
Amortisation - - - -
Closing balance
- 31 December
2015 (7,686) (176) (25,901) (33,763)
----------------- ------------ ---------- -------------- ----------
Net book value
at 31 December
2015 - 2,924 - 2,924
----------------- ------------ ---------- -------------- ----------
QCC royalty MSAR(R) Technology
payments trade and know-how Total
name
Audited Audited Audited Audited
GBP'000 GBP'000 GBP'000 GBP'000
Cost
Opening balance
- 1 July 2015 7,686 3,100 25,901 36,687
Additions - - - -
------------------ ------------ --------- -------------- ---------
Closing balance
- 30 June 2016 7,686 3,100 25,901 36,687
------------------ ------------ --------- -------------- ---------
Amortisation
and Impairment
Opening balance
- 1 July 2015 (7,686) (176) (25,901) (33,763)
Amortisation - - - -
Closing balance
- 30 June 2016 (7,686) (176) (25,901) (33,763)
------------------ ------------ --------- -------------- ---------
Net book value
at 30 June 2016 - 2,924 - 2,924
------------------ ------------ --------- -------------- ---------
Intangibles comprise intellectual property with a cost of
GBP36.69m, including assets of finite and indefinite life. QCC
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. As at 30 June 2016, the QCC royalty payments asset was
fully impaired and the MSAR(R) trade name asset had a net book
value of GBP2.924m. For the six month period to 31 December 2016,
there was no indication that the MSAR(R) trade name asset may be
impaired.
As a result, the Directors concluded that no impairment is
necessary for the six month period to 31 December 2016.
7. Available for Sale Investments
31 December 31 December 30 June
2016 2015 2016
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Unquoted securities
Opening balance - - -
Changes in fair value - - -
Impairment charge - - -
---------------------- ------------ ------------ ---------
Closing balance - - -
---------------------- ------------ ------------ ---------
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 2016. 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 shares in each of these companies were valued at CAD $nil on
1 July 2016. Shareholder communications received during the period
to 31 December 2016 indicate that the business models for each of
these companies remain highly uncertain, with minimal possibility
of any material value being recovered from their asset base. On
that basis, the directors have determined that the investments
should continue to remain valued at CAD $nil at 31 December
2016.
8. 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 2016 amounted to GBP28k (for the
six month period to 31 December 2015: GBP23k). The balance payable
at 31 December 2016 was GBP7.9k (as at 30 June 2016: GBP12k).
QFI defines key management personnel as the Directors of the
Company. There are no transactions with Directors, other than their
remuneration or disclosed above.
9. Seasonality
The operations of the Group are not affected by seasonal
fluctuations.
10. 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
2016 GBP'000 2015 2016
GBP'000 GBP'000
Office premises:
One year 106 106 106
Two to five years 131 237 187
After five years - - -
The Group has no contingent liabilities as at the statement of
financial position date.
11. Events After the End of the Reporting Period
The Company put out 2 announcements on the 2(nd) and 13(th)
March 2017, respectively. The first of these confirmed that there
had been an incident that would require the Maersk trial vessel to
undergo an unscheduled dry-dock visit and the second announcement
on the 13(th) March provided a further update after Quadrise was
advised by Maersk that:
-- Maersk is continuing its efforts to move the trial vessel to a suitable dry dock;
-- Following this dry dock, the new vessel route deployed would
not permit further bunkering at Algeciras due to schedule
limitations;
-- The current trial on this vessel would be suspended once the
remaining MSAR(R) fuel had been consumed.
Subsequent to the announcements above, an interim inspection of
the engine has been carried out by Wärtsilä to document the
performance of MSAR(R) fuel to date.
12. 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.
The company news service from the London Stock Exchange
END
IR BRGDXBBDBGRS
(END) Dow Jones Newswires
March 27, 2017 02:00 ET (06:00 GMT)
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