TIDMBIP
RNS Number : 2229H
Biofutures International plc
25 May 2011
25 May 2011
Biofutures International plc
("Biofutures" or the "Company")
Final Results for the year to 31 December 2010
Biofutures International plc, is pleased to announce its final
results for the year ended 31 December 2010.
Highlights
-- Completion and Commissioning of the Zurex refinery by 31
December 2010
-- Operational licences obtained
-- Commercial tie-ups with plantation owners, palm oil
suppliers/traders and off-takers and tolling contracts for its
services and products have been executed
-- Maiden revenues generated in 2011
Enquiries:
Biofutures International plc Tel: + 603 6203 5136
Joe Wong, Chief Executive Officer
www.biofuturesplc.com
Daniel Stewart & Company plc Tel: + 44 (0) 20 7776 6550
Antony Legge / Oliver Rigby (Nomad)
Colin Rowbury (Broker)
www.danielstewart.co.uk
Copies of this final results announcement are available from the
Company's website (www.biofuturesplc.com). Copies of the Annual
Report and Accounts are being sent to shareholders on Friday 27 May
for approval at the Annual General Meeting to be held on 29 June
2011.
Chairman's statement
The year 2010 for the Company ended significantly with the
commissioning by Zurex of its palm oil refining plant ("Refinery")
at Lahad Datu, Sabah, Malaysia. This constituted a major milestone
in the history of the Company from its original objective of
building a biodiesel plant to that of becoming an investing company
of which the embarkation to invest into the building of the
Refinery became its maiden investment. This achievement could not
have been made without the support of shareholders and the tireless
efforts of the management team to secure the various approvals and
licenses from the Malaysian Government as well as a loan facility
of RM47 million (GBP9.9 million) from Bank Kerjasama Rakyat
Malaysia Berhad for capital expenditure and working capital for the
Refinery.
In preparation for the business ahead, I am happy to report that
all licenses to import, purchase and store crude palm oil ("CPO")
and to sell refined bleached deodorized palm oil ("RBD Palm Oil')
and for its exports have been obtained.
Since the commissioning of the Refinery, the palm oil market has
seen a surge in price purely due to speculative elements and
artificial demands created by various players in the market. Palm
oil being a commodity is also not spared its cyclical challenges
link to weather changes and seasonal pricing based on global demand
and supply. The management of the Company has adopted a cautious
approach in managing these issues that is prevalent in this
industry. Whilst the objective of the Company is to make money from
the refining of CPO, such expectations must be tempered with a
prudent and conservative approach to avoid buying CPO at a high
price and selling the finished product RBD Palm Oil at a lower
margin.
Being a new player in the market, the Company is looking at
various ways of bringing down and controlling the production costs
of refining CPO into RPD Palm Oil to maximize profitability of each
metric tonne of RBD Palm Oil produced at the Refinery. Apart from
entering into supply and off-take agreements of which the pricing
is based on spot market price in view of inherent market risks and
exposure, the Company is also looking at the option of 'hedging' on
the price of CPO to better manage the fluctuation in palm oil
prices. The Company has entered into a commercial arrangement for
tolling to optimize use of the Refinery along with refining its own
oil. The Company sees opportunity in the backdrop of the industry's
tough business environment and will work to profit from these
challenges going forward.
In June 2009, the Company announced that Zurex had issued a
Notice of Arbitration to JJ-Lurgi Engineering Sdn Bhd ("JJ-Lurgi")
in respect of the contract for the supply of equipment for the
production of biodiesel ("Contract") entered into in January 2007.
The matter was heard in August 2010 and the Arbitrator is expected
to give his decision on the matter sometime in the third quarter of
this year. For the uninitiated, Zurex is claiming RM9.89 million
(GBP2.1 million) against JJ-Lurgi and JJ-Lurgi has a counter claim
of RM2.87 (GBP0.6 million) against Zurex under the arbitration
proceedings. A market announcement will be made as soon as the
Arbitrator gives his decision on the matter. Now that the Refinery
has been commissioned, the Company will apart from seeking
strategic alliances and commercial tie-ups with plantation owners,
palm oil suppliers/traders and off-takers for its product to
maximize returns and minimize risks, look at other areas of
investment in line with its investment objectives. The Company
believes that the completion of the Refinery as targeted is but a
small step towards bigger and more exciting things to come.
Last but not least, the Company welcomes the appointment of
Clive Purdy as an executive director to the Board of Directors. Mr.
Purdy has been tasked with the portfolio of Finance Director in
place of Julie Pomeroy, the previous Finance Director.
David Yeoh
Executive Chairman
24 May 2011
Note: An exchange rate of GBP1 = RM4.74 is used for all
conversions in this statement
Business review
Refinery licenses
Zurex Corporation Sdn Bhd ("Zurex"), the Company's wholly-owned
subsidiary, has obtained all the necessary licenses from the
Malaysia Industrial Development Authority and Malaysian Palm Oil
Board to operate its palm oil refinery. It has also recently
received a license to import crude palm oil.
Refinery operations
Zurex's 200,000 metric tonnes per year physical refinery
("Refinery") was commissioned at the end of 2010. In total, an
investment of close to RM37.48 million (GBP7.9 million), comprising
of RM7.28 million (GBP1.5 million) for the refining system and
RM30.2 million (GBP6.4 million) for infrastructure, was made. The
Company believes that the completion of the Refinery is its first
Key Performance Indicator ("KPI"). Further KPIs are to maximize
returns and minimize risks; and be in profit by 31 December 2011.
Now that the refinery has been commissioned, the Company is
actively seeking strategic alliances. Commercial tie-ups with
plantation owners, palm oil suppliers/traders and off-takers and
tolling contracts for its services and products have been
executed.
Operating the Refinery at its most optimum level remains the
focus of Zurex and to-date, a number of supply, off-take and
tolling contracts have been executed.
Refinery site
Zurex's site is situated within Phase 1 of the Palm Oil
Industrial Cluster ("POIC") in Lahad Datu, Sabah, Malaysia. POIC's
management is developing the Lahad Datu area as part of a federal
and local government long-term initiative to further promote
downstream economic activities derived from the regionally
ubiquitous oil palm. Phase 1 was the development of a 500 acre
site, of which Zurex owns 14 acres.
Lahad Datu has been designated by the Malaysian government as
the country's third port of delivery for palm oil futures. The
Refinery is within a one kilometer radius of the POIC port, a
designated oleo-chemicals handling deep water port. It is also
close to more than 100 palm oil mills, and is home to companies
with a combined annual production of more than 5 million tonnes or
30 percent of Malaysia's palm and palm kernel oil output.
Industry trend
In the year under review, global palm oil production grew
marginally to about 46 million metric tonnes. Production was mainly
affected by dryer than normal weather conditions during the
previous year. This was compounded by wetter than normal harvesting
conditions in 2010.
Demand for palm oil grew at approximately 3 percent to 46
million metric tonnes, with India, China and Europe being the
largest consuming markets.
During the first half of 2010, concerns about a global recession
kept palm oil prices steady. However, the second half of 2010 and
for the most of the first quarter of 2011 saw a combination of
tight supply levels, higher crude oil prices and a weaker US dollar
that resulted in high and volatile palm oil prices.
Outlook and strategy
We are positive about the longer term prospects of the palm oil
industry due to the growing demand from both food and non-food
sectors. Regional production is expected to grow by more than 3
million metric tonnes to approximately 42 million metric tonnes in
2011. This is mainly due to the increase in production from
previously planted areas in Indonesia. The Group's long term
strategy is to explore the possibilities of owning its own
plantation and to invest in downstream activities such as
fractionation and manufacturing of higher value-added products, to
enable it to optimize its investments into this ever growing
sector.
Arbitration
Zurex's dispute with JJ-Lurgi Engineering Sdn Bhd in relation to
the contract to supply components for Zurex's proposed biodiesel
plant in Lahad Datu, Sabah was heard on August 23 to 26 August 2010
at the Regional Centre for Arbitration, Kuala Lumpur, Malaysia. The
Arbitrator's decision is expected to be announced in the third
quarter of 2011.
Note: An exchange rate of GBP1 = RM4.74 is used for all
conversions in this Business Review
Financial Review
Overview
The Group has commissioned the Refinery at the end of 2010 as
discussed in the Chairman's Statement. The Group has continued to
control its costs and has not yet earned revenue. The loss for the
year was GBP0.9 million (2009: GBP0.65 million loss).
Administrative expenses and interest income
Administrative expenses increased over the previous year to
GBP1.01 million (2009: GBP0.73 million) due to the increase in
employee and administrative costs for the Refinery. Interest income
increased from GBP0.08 million in 2009 to GBP0.11 million in the
current year due to the rise in cash on deposit as well as slightly
higher interest rates being obtained.
Cash resources
Available cash and cash equivalents at the year end were GBP1.75
million (2009: GBP1.1 million) and restricted cash balances which
are secured against the Group's bank loans were GBP4.2 million
(2009: GBP3.6 million).
The key features in the cash flows were property, plant and
capitalised project costs paid in the year totalling GBP4.11
million (2009: GBP3.08 million). In addition, interest of GBP0.11
million (2009: GBP0.08 million) was received and bank loans were
obtained which totalled GBP4.39 million (2009: GBP0.32) at the year
end. A further GBP0.95 million was received from the share issue in
December 2010.
Bank financing
In December 2009 the Group entered into a bank facility
arrangement with Bank Kerjasama Rakyat Malaysia Bhd., a licensed
bank in Malaysia, for the aggregate sum of up to RM47 million
(GBP9.9 million at GBP1=RM4.74) consisting of two tranches, of
which RM28.8 million is for capital expenditure and RM18.2 million
for working capital. The borrowings have been made under Islamic
banking principles and include an asset sale agreement and an asset
purchase agreement. Zurex has placed RM20 million on deposit with
Bank Kerjasama Rakyat Malaysia Bhd. as security for the lending of
monies. A legal charge and debenture have been given to the Bank
together with a corporate guarantee from Biofutures. The effective
rate of interest is set at 1.5% over the Bank's funding rate
subject to a cap at 9.95%. At the year end, RM22.3 million (GBP4.70
million at the year end rate of GBP1=RM 4.74) had been drawn down
on this facility.
Goodwill and intangible assets
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group's share of the net identifiable
assets of the acquired subsidiary at the date of acquisition.
Goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses.
The intangible assets are included at their fair value and have
been grouped together. They relate to the purchase of the Lahad
Datu land, the licence to manufacture palm oil biodiesel and the
linked refinery licence subsequently obtained. This group of assets
could not be separated as they were considered to be all
intrinsically linked. On the basis that the building of the
Refinery has commenced, no write-down is currently required.
Contingencies
In June 2009, the Company issued a Notice of Arbitration to
JJ-Lurgi. This relates to the dispute between the Company and
JJ-Lurgi in connection with the contract between them dated 26
January 2007 for the supply of components for the construction of a
200,000 tonnes per annum palm oil biodiesel plant. The original
contract was for RM38.4 million of which RM11.5 million had been
paid (GBP8.10 million and GBP2.42 million respectively at an
exchange rate of GBP1 = RM4.74). The Company, supported by legal
advice, has taken the view that the contract had been terminated.
Zurex is claiming RM9.89 million (GBP2.08 million GBP1=RM4.74)
against JJ-Lurgi and JJ-Lurgi has a counter claim of RM2.87 million
(GBP0.60 million GBP1=RM4.74) against Zurex under the arbitration
proceedings.
The ultimate outcome of the arbitration between the Company and
JJ Lurgi cannot be determined until the decision of the Arbitrator
is received which is expected in the third quarter of 2011. The
Directors, having obtained legal advice, are of the opinion that
the Company will be successful and accordingly, no liability has
been recognised in the accounts (2009 - nil).
International Financial Reporting Standards
The results for the Group for the year ended 31 December 2010
have been prepared under International Financial Reporting
Standards ("IFRS"). The results for the Company are prepared under
UK GAAP with no significant changes in accounting policies from the
prior years.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2010 2009
Notes GBP000 GBP000
Continuing operations
Gross profit - -
Administrative expenses 5 (1,014) (729)
-------- --------
Operating loss (1,014) (729)
Finance income 112 76
Loss before tax (902) (653)
Income tax expense 7 (4) -
-------- --------
Loss for the period attributable
to equity interests (906) (653)
Other comprehensive income
Net exchange differences on translating
foreign operations 4,746 (2,261)
Other comprehensive income/(loss)
net of tax 4,746 (2,261)
-------- --------
Total comprehensive income/(loss) 3,840 (2,914)
========
Loss per share
- Basic and diluted 8 (0.60)p (0.43)p
======== ========
The above items relate entirely to continuing operations.
The accompanying notes and accounting policies form an integral
part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December 2009
2010 2009
Assets Notes GBP000 GBP000
Non-current assets
Property, plant and equipment 9 9,246 5,486
Goodwill 10 7,793 6,722
Intangible assets 10 22,778 19,647
-------- --------
39,817 31,855
-------- --------
Current assets
Inventories 28 -
Trade and other receivables 12 308 57
Fixed deposits 13 4,216 3,637
Cash and cash equivalents 13 1,750 1,118
-------- --------
6,302 4,812
-------- --------
Total assets 46,119 36,667
-------- --------
Liabilities
Current liabilities
Trade and other payables 16 363 956
Current income tax liabilities 4 -
Borrowings 17 686 -
-------- --------
1,053 956
-------- --------
Non-current liabilities
Borrowings 17 4,026 318
Deferred tax 11 5,695 4,912
-------- --------
9,721 5,230
-------- --------
Total liabilities 10,774 6,186
-------- --------
Net assets 35,345 30,481
-------- --------
Equity
Share capital 14 1,664 1,510
Share premium account 15 12,089 11,293
Merger reserve 15 16,001 16,001
Translation reserve 15 9,625 4,879
Share-based payment reserve 15 225 1,042
Retained losses (4,259) (4,244)
-------- --------
Total equity 35,345 30,481
-------- --------
The accompanying accounting policies and notes form an integral
part of these financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Exchange
differences
on Share
Share translation based
Share premium Merger of foreign payments Retained Total
capital account reserve operations reserve losses equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 January
2009 1,510 11,293 16,001 7,140 1,059 (3,591) 33,412
-------- -------- -------- ------------ --------- --------- --------
Loss for the
year - - - - - (653) (653)
Translation
reserve - - - (2,261) - - (2,261)
Total comprehensive
income - - - (2,261) - (653) (2,914)
-------- -------- -------- ------------ --------- --------- --------
Transactions
with owners:
Lapse of options - - - - (17) - (17)
At 31 December 2009
1,510 11,293 16,001 4,879 1,042 (4,244) 30,481
-------- -------- -------- ------------ --------- --------- --------
Loss for the
year - - - - - (906) (906)
Translation
reserve - - - 4,746 - - 4,746
-------- -------- -------- ------------ --------- --------- --------
Total comprehensive
income - - - 4,746 - (906) 3,840
-------- -------- -------- ------------ --------- --------- --------
Transactions
with owners:
Issue of shares 154 846 - - - - 1,000
Share issue costs - (50) - - - - (50)
Share options
and warrant expense - - - - 74 - 74
Lapse of
options - - - - (891) 891 -
-------- -------- -------- ------------ --------- --------- --------
154 796 - - (817) 891 1,024
-------- -------- -------- ------------ --------- --------- --------
At 31 December 2010
1,664 12,089 16,001 9,625 225 (4,259) 35,345
-------- -------- -------- ------------ --------- --------- --------
All reserves are attributable to the equity holders of the
parent company.
CONSOLIDATED STATEMENT OF CASH FLOWS
2010 2009
Notes GBP000 GBP000
Cash flows from operating activities
Cash used in operations 18 (591) (362)
-------- --------
Net cash used in operating activities (591) (362)
-------- --------
Cash flows from investing activities
Purchases of property, plant and
equipment (4,107) (3,081)
Interest received 112 76
-------- --------
Net cash used in investing activities (3,995) (3,005)
-------- --------
Cash flows from financing activities
Proceeds from issue of ordinary
shares 1,000 -
Share issue costs (50) -
Placement of fixed deposits for
loan security - (3,637)
Proceeds from borrowings 4,394 318
-------- --------
Net cash from/(used in) financing
activities 5,344 (3,319)
-------- --------
Net increase/(decrease) in cash
and cash equivalents 758 (6,686)
Cash and cash equivalents at beginning
of year 1,118 7,812
Effect of exchange rate changes (126) (8)
Cash and cash equivalents at end
of year 13 1,750 1,118
-------- --------
The accompanying accounting policies and notes form an integral
part of this financial information.
1 General information
The Company was incorporated on 17 February 2006.
Biofutures International plc ("the Company") and its
subsidiaries (together "the Group") are involved in the refining of
palm oil.
The Company is a public limited company incorporated and
domiciled in England.
The financial information contained in this announcement is
extracted from the audited consolidated financial statements which
were approved for issue by the Board of Directors on 24 May
2011.
2 Summary of significant accounting policies
2.1 Basis of preparation
The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined in
section 434 of the Companies Act 2006 but it is derived from those
accounts. The financial information for the year ended 31 December
2009 is derived from the statutory accounts for that year which
have been delivered to the Registrar of Companies. The auditors
reported on those accounts; their report was unqualified and did
not contain a statement under s498(2) or s498(3) of the Companies
Act 2006. The consolidated statement of financial position at 31st
December 2010 ,the consolidated statement of comprehensive income,
the consolidated statement of changes in equity, the consolidated
statement of cash flows and the related notes for the year then
ended have been extracted from the Group's 2010 statutory financial
statements upon which the auditor's opinion is unqualified and does
not include any statement under s498(2) or s498(3) of the Companies
Act 2006.
The announcement has been agreed with the company's auditor for
release.
The Company is entitled to the merger relief offered by Section
612 of the Companies Act 2006 in respect of the consideration
received in excess of the nominal value of the equity shares issued
in connection with the acquisition of Zurex.
The significant accounting policies set out below have been
consistently applied, except where stated.
2.2 Going concern
The Group is not yet producing revenue, but has constructed a
refinery plant which will allow for the commencement of production
of refined palm oil. The directors have prepared a ten year
forecast based on the assumption that production of refined palm
oil will commence in mid 2011 which indicates that the Group will
be able to continue as a going concern for the foreseeable
future.
The forecast indicates that, in addition to cash and cash
equivalent balances at 31 December 2010 GBP1.75 million, the Group
will require additional drawdowns on the loan facility with Bank
Kersama Rakyat Malaysia Bhd. (see note 17). The required drawdowns
do not exceed the available facility with that bank.
The ability of the Group to realise the forecast results is
subject to uncertainties, however, the directors have a reasonable
expectation that these uncertainties can be managed to successful
outcomes, and, based on that assessment, the Group will have
adequate resources to continue in operational existence for the
foreseeable future. They have therefore prepared the financial
information contained herein on a going concern basis. The
financial statements therefore do not reflect any adjustments that
would be required to be made if they were to be prepared on a basis
other than the going concern basis.
2.3 Standards and Interpretations in issue not yet adopted
At the date of authorisation of these financial statements,
certain new standards, amendments and interpretations to existing
standards have been published but are not yet effective, and have
not been adopted early by the Group. The Directors anticipate that
all of the pronouncements will be adopted in the Group's accounting
policies for the first period beginning after the effective date of
the pronouncement.
New standards and interpretations currently in issue but not
effective for accounting periods commencing on 1 January 2010
are:
-- IFRS 9 Financial Instruments (effective 1 January 2013)
-- IAS 24 (Revised 2009) Related Party Disclosures (effective 1
January 2011)
-- Amendment to IAS 32 Classification of Rights Issues
(effective 1 February 2010)
-- IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments (effective 1 July 2010)
-- Prepayments of a Minimum Funding Requirement - Amendments to
IFRIC 14 (effective 1 January 2011)
The Group has not early adopted these amended standards and
interpretations. The Directors do not anticipate that the adoption
of these standards and interpretations will have a material impact
on the Group's financial statements in the periods of initial
application.
2.4 Consolidation
The consolidated financial statements incorporate the accounts
of the Company and its subsidiaries and have been prepared by using
the principles of acquisition accounting ("the purchase method")
which includes the results of the subsidiaries from their date of
acquisition. Intra-group sales, profits and balances are eliminated
fully on consolidation.
2.5 Foreign currency translation
(a) Functional and presentational currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the "functional
currency"). The consolidated financial statements are presented in
sterling, which is the Company's functional and presentational
currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Monetary assets and liabilities denominated in
foreign currencies at the year end date are reported at the rate of
exchange prevailing at that date. All exchange gains arising on
retranslation of assets and liabilities are dealt with in the
income statement.
(c) Consolidation of overseas subsidiary
Income and expenditure for overseas subsidiaries are included
based upon monthly average exchange rates to give a fair
approximation to the transaction rate. Balance sheet items are
included at the year-end exchange rate. All other differences are
included within the translation reserve, including related goodwill
and intangible assets, which are translated at the rate ruling at
the year end date.
2.6 Property, plant and equipment
All property, plant and equipment (PPE) is shown at cost less
subsequent depreciation and impairment. Cost includes expenditure
that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the
income statement during the financial period in which they are
incurred.
Depreciation on assets is calculated using the straight-line
method so as to allocate the cost of each asset less its residual
value over its estimated useful life. The assets' residual values
and useful lives are reviewed, and adjusted if appropriate, at each
balance sheet date.
Land is not depreciated. Assets in the course of construction
are not depreciated until they are brought into use, at which point
they are re-categorised to their relevant category. Under IAS 23
'Borrowing costs' finance costs that are directly attributable to
the construction of the plant are capitalised.
The principal annual depreciation rates used are as
follows:-
-- Computer equipment 20%
-- Motor vehicles 20%
-- Leasehold additions 10%
2.7 Goodwill and intangible assets
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group's share of the net identifiable
assets of the acquired subsidiary at the date of acquisition.
Goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses. Gains and losses on the disposal of
an entity include the carrying amount of goodwill relating to the
entity sold.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing.
Identifiable intangible assets are recognised separately from
goodwill on all acquisitions. Such assets are carried at fair value
at the date of acquisition (i.e. as deemed cost). Such intangible
assets are reviewed for impairment on an annual basis.
The intangible assets acquired were an option to acquire land, a
licence to manufacture palm oil biodiesel, and the linked refinery
licence subsequently obtained. The group of assets are all
intrinsically linked and have been valued as a "group" (see note
10). The Directors are of the opinion that these intangibles have
an indefinite useful economic life, so no annual amortisation is
charged. Intangible assets are tested annually for impairment along
with the goodwill.
2.8 Impairment testing of goodwill, other intangible assets and
property, plant and equipment
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows (cash-generating units). As a result, some assets are tested
individually for impairment and some are tested at cash-generating
unit level. Goodwill is allocated to those cash-generating units
that are expected to benefit from synergies of the related business
combination and represent the lowest level within the Group at
which management monitors the related cash flows.
Goodwill, other individual assets or cash-generating units that
include goodwill, other intangible assets with an indefinite useful
life, and those intangible assets not yet available for use are
tested for impairment at least annually. All other individual
assets or cash-generating units are tested for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable.
An impairment loss is recognised for the amount by which the
asset's or cash-generating unit's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair
value, reflecting market conditions less costs to sell, and value
in use based on an internal discounted cash flow evaluation.
Impairment losses recognised for cash-generating units, to which
goodwill has been allocated, are credited initially to the carrying
amount of goodwill. Any remaining impairment loss is charged pro
rata to the other assets in the cash-generating unit. With the
exception of goodwill, all assets are subsequently reassessed for
indications that an impairment loss previously recognised may no
longer exist.
2.9 Trade and other receivables
Trade and other receivables are initially recognised at fair
value, which is usually the original invoiced amount plus
transaction costs, and subsequently carried at amortised cost using
the effective interest method less provisions made for impairment
of receivables.
2.10 Trade and other payables
Trade and other payables are initially recognised at fair value,
which is usually the original invoiced amount, and subsequently
carried at amortised cost using the effective interest method.
2.11 Cash and cash equivalents
Cash and cash equivalents (readily convertible into a known
amount of cash) include cash in hand and deposits held at call with
banks with an original maturity of three months or less. For the
purpose of the cash flow statement, cash and cash equivalents are
as defined above, net of outstanding bank overdrafts. Fixed
deposits secured against bank loans are shown separately on the
statement of financial position as they do not meet the definition
of cash and cash equivalents.
2.12 Deferred income tax
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the
consolidated financial statements. The deferred income tax is not
accounted for if it arises from initial recognition of an asset or
liability in a transaction, other than a business combination, that
at the time of the transaction affects neither accounting nor
taxable profit nor loss. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantially
enacted by the balance sheet date and are expected to apply when
the related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profit will be available against
which the temporary differences can be utilised.
2.13 Employee Benefits
(a) Pension obligations
Group companies do not operate defined contribution schemes but
contribute to individual personal pension plans for certain
employees by way of paying 10% of their gross salary costs in lieu
of a scheme contribution accounted for as salary when payable.
(b) Share based payments
The Company has made share-based payments in the year to certain
directors and employees by way of share options. The fair value of
these payments is calculated by the Company using the Black Scholes
option pricing model, as the Directors believe that the options are
likely to be exercised nearer their expiry dates. The expense is
recognised on a straight line basis over the period from the date
of award to the date of vesting, based on the Company's best
estimate of shares that will eventually vest.
2.14 Judgments and estimates
Estimates and judgments are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are discussed below.
(a) Impairment of goodwill and intangible assets
Determining whether goodwill and intangible assets are impaired
requires an estimation of the value in use of the cash-generating
units to which goodwill and intangible assets have been allocated.
The value in use calculation requires the Directors to estimate the
future cash flows expected to arise from the cash-generating unit
and a suitable discount rate in order to calculate present
value.
(b) Carrying value of property, plant and equipment
The Group has reviewed property, plant and equipment and
exercised judgment on which assets will have a continuing benefit
to the business (see Note 9).
3 Subsidiaries
The Group has one principal subsidiary, Zurex Corporation Sdn.
Bhd. ("Zurex") which is incorporated in Malaysia and is 100% owned
by Biofutures. Zurex has completed the construction and
commissioning of a palm oil refinery.
4 Operating segments
Management has determined the operating segments based on the
reports reviewed by The Board that are used to make strategic
decisions.
Management has determined that the Group has one operating
segment, which is the palm oil refining plant and related
activities. The financial information contained in these financial
statements therefore relates solely to this segment. The Group has
not yet earned revenue and does not have any customers representing
more than 10% of the turnover. The Group's non-current assets
consist of land, plant and equipment and intangible assets and are
located entirely in Malaysia.
5 Expenses by nature
2010 2009
GBP000 GBP000
Included within administrative expenses
are:
Depreciation (note 9) 14 12
Employee benefit expense (note 6) 557 372
Auditors' remuneration
-- fees payable to the Company's auditor 20 19
-- fees payable to the subsidiary's
auditor 2 2
-- Tax services - 2
-- Other services - 3
Share based payment charge/(credit) 74 (17)
Exchange rate loss (57) (3)
------- -------
6 Directors and employees
The employee benefit expense during the year was as follows:
2010 2009
GBP000 GBP000
Wages and salaries including termination
payments 447 364
Social security costs 10 25
Share based payments 74 (17)
Pension costs - defined contribution 26 -
------- -------
557 372
------- -------
The average number of employees during the year was as
follows:
2010 2009
Number Number
Administration 11 8
------- -------
Remuneration in respect of Directors was as follows:
Basic Pensions -
salary Share defined
and based Termination contribution Total Total
fees payments payments schemes 2010 2009
Director GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
David
Yeoh 108 23 - 6 137 103
Joe Wong 108 23 - 6 137 103
Patrick
Howes 12 6 - - 18 12
David
Long 12 6 - - 18 12
Julie
Pomeroy 66 - 9 - 75 53
------- --------- ------------ ------------- ------- --------
306 58 9 12 385 283
------- --------- ------------ ------------- ------- --------
The number of directors who accrued benefits under company
pension schemes was as follows
2010 2009
Number Number
Defined contribution schemes 2 -
------- -------
The Board considers key management to currently comprise the
Executive Directors and Henry Yong, a director of the Company's
subsidiary. Compensation for key management in aggregate for each
of the categories specified in IAS 24 'Related Party
Disclosures'was:
2010 2009
GBP000 GBP000
Short term employee benefits 331 324
Pension contributions - defined contribution 18 -
Share-based payments 45 (17)
------- -------
394 307
------- -------
7 Income tax expense
Current tax:
The tax on the Group's loss before tax differs from the loss
before taxation multiplied by the standard rate of corporation tax
in the UK due to the following:
2010 2009
GBP000 GBP000
Loss before tax (902) (653)
------- -------
Tax calculated at the standard rate
of corporation tax in the UK: (28.0%)
(2009:28%) (253) (183)
Tax losses utilised (45) (18)
Expenses not deductible for tax purposes 302 201
Tax charge - UK current tax charge 4 -
------- -------
Factors Affecting Future Tax Charges
Deferred tax relating to the acquisition during 2006 is detailed
in note 11.
8 Loss per share
Basic
Basic loss per share is calculated by dividing the loss
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year.
2010 2009
Loss attributable to equity holders
of the Company GBP906,000 GBP653,000
Weighted average number of ordinary
shares in issue 151,734,411 151,060,000
Basic loss per share in pence (0.60)p (0.43)p
Diluted
Diluted loss per share is calculated by adjusting the weighted
average number of ordinary shares outstanding to assume conversion
of all contracted dilutive potential ordinary shares. The Company
has only one category of dilutive potential ordinary shares.
The options and warrants in issue are currently anti-dilutive
and accordingly the diluted loss per share is the same as the basic
loss per share.
9 Property, plant and equipment
Assets in
Office and the course
Leasehold Motor Computer of
Land additions Vehicles equipment Construction Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cost
As at 1 January
2009 1,566 40 19 18 4,423 6,066
Foreign exchange
adjustment (137) (3) (2) (2) (388) (532)
Additions 16 - - 2 3,229 3,247
Rebates (166) - - - - (166)
Closing cost
at 31 December
2009 1,279 37 17 18 7,264 8,615
Foreign exchange
adjustment 93 6 3 3 1,268 1,373
Additions - - 15 2 3,934 3,951
Reclassification - - - - (2,899) (2,899)
Closing cost
at 31 December
2010 1,372 43 35 23 9,567 11,040
-------- ----------- ---------- ------------ ------------- --------
Depreciation
As at 1 January
2009 104 8 7 5 3,293 3,417
Foreign exchange
adjustment (9) (1) (1) - (289) (300)
Charge for year - 4 4 4 - 12
Closing
depreciation at
31 December
2009 95 11 10 9 3,004 3,129
Foreign exchange
adjustment 15 2 2 1 479 499
Reclassification - - - - (1,848) (1,848)
Charge for year - 4 6 4 - 14
Closing
depreciation at
31 December
2010 110 17 18 14 1,635 1,794
-------- ----------- ---------- ------------ ------------- --------
Net book value as
at 31 December
2010 1,262 26 17 9 7,932 9,246
======== =========== ========== ============ ============= ========
Net book value as
at 31 December
2009 1,184 26 7 9 4,260 5,486
======== =========== ========== ============ ============= ========
The land shown above is in Lahad Datu, Sabah, Malaysia and has
been pledged to a bank for banking facilities granted to the
Group.
Assets in the course of construction represent the palm oil
refining plant in Sabah, Malaysia. The plant was completed at the
end of 2010 and is expected to be brought into use in 2011 at which
time it will be re-categorised and depreciated over its useful
economic life.
Included within assets in the course of construction are
GBP189,000 of borrowing costs which have been capitalised in
accordance with IAS 23 'Borrowing costs' as they were incurred on
financing the construction costs.
10 Goodwill and intangible assets
Goodwill Intangibles Total
GBP000 GBP000 GBP000
As at 1 January 2009 7,584 21,539 29,123
Effect of change in deferred
tax at Malaysian tax rate
of 25% (215) - (215)
Foreign exchange adjustment (647) (1,892) (2,539)
--------- ------------ --------
As at 31 December 2009 6,722 19,647 26,369
Foreign exchange adjustment 1,071 3,131 4,202
--------- ------------ --------
As at 31 December 2010 7,793 22,778 30,571
--------- ------------ --------
The carrying amount of goodwill is all allocated to the
operational cash generating unit.
The intangible assets are included at their fair value at
acquisition less any subsequent impairment. They relate to the
licence to manufacture palm oil biodiesel and the linked refinery
licence subsequently obtained. An indefinite life has been assumed
as the licences have no termination date and the Group has full
rights to the land. The production of palm oil is also such an
important commodity in Malaysia that its production and demand is
expected to continue indefinitely.
The intangibles and goodwill is tested for impairment annually
based on value-in-use calculations. These calculations use pre-tax
cash flow projections based on financial budgets covering a ten
year period to more fairly reflect the long term nature of the
plant. Cash flows beyond the ten year period have been calculated
using a terminal value.
Management have estimated the key assumptions based on their
knowledge of the industry and external sources of information.
The forecasts assume that the refinery plant will commence
production in mid 2011.
The key assumptions used for value in use calculations in 2010
are as follows:
2010 2009
Margin of refined palm oil over crude
palm oil (per metric tonnes) RM200 RM180
Growth rate 1% 3%
Discount rate 12% 12%
Annual production of palm oil (in metric
tonnes) 194,000 200,000
-------- --------
Based on the above assumptions and the results of the impairment
testing in accordance with IAS 36, no impairment is required.
11 Deferred income tax
The movement on the deferred income tax liability was as
follows:
GBP000
-------
As at 1 January 2009 5,600
Effect of change of Malaysian tax rate of 25% (215)
Foreign exchange adjustment (473)
-------
As at 31 December 2009 4,912
Foreign exchange adjustment 783
-------
As at 31 December 2010 - liability 5,695
-------
The deferred tax liability arose on the acquisition of Zurex in
2006.
The movement in un-provided deferred tax asset is as
follows:
2010 2009
GBP000 GBP000
As at 1 January 45 60
Adjustment in respect
of prior years - 3
Losses in prior year utilised (45) (18)
-------- --------
As at 31 December - 45
-------- --------
The deferred income tax asset is recoverable as follows:
2010 2009
GBP000 GBP000
Deferred tax asset to be recovered
after more than 12 months - 45
Un-provided tax asset - 45
--------- --------
The Group has unutilised tax losses of GBPnil (2009: GBP160,000)
for which no tax asset has been provided. The deferred tax asset is
not provided in view of the uncertainty as to the timing of its
recoverability.
12 Trade and other receivables
2010 2009
GBP000 GBP000
Other receivables 569 57
Less: provision for impairment (261) -
-------- --------
308 57
-------- --------
Credit risk
As the Company is currently not trading it has limited exposure
to credit risk in respect of receivables. The above amounts are
past due for more than 90 days.
Other receivables mainly relate to prepayments and deposits.
13 Cash and cash equivalents
2010 2009
GBP000 GBP000
Cash at bank and in hand 686 95
Short-term bank deposits 1,064 1,023
-------- --------
1,750 1,118
Fixed deposits 4,216 3,637
-------- --------
5,966 4,755
-------- --------
Short term deposits are monies held on money market made with
recognised banks.
The fixed deposit of RM20 million (2009: RM20 million) has been
pledged to Bank Kerjasama Rakyat Malaysia Bhd. as security for the
Group's bank borrowings (see note 17) and is therefore not
available on demand to the Group. The fixed deposits have not been
included in cash and cash equivalents for the purposes of the
statement of cash flows.
Credit risk
The Group recognises the impact of credit risk and has
diversified its cash holdings over 4 banks.
Interest rate and liquidity risk
The effective interest rate on short-term bank deposits was 0.8%
(2009: 1.6%). These deposits have an average maturity of 30 days
(2009: 49 days).
14 Share capital and options
2010 2010 2009 2009
Number GBP000 Number GBP000
Authorised
Ordinary shares of 1p each
250,000,000 2,500 250,000,000 2,500
Issued and fully
paid
At 1 January 151,060,000 1,510 151,060,000 1,510
Issue of shares 15,385,000 154 - -
------------ -------- ------------ --------
At 31 December 166,445,000 1,664 151,060,000 1,510
------------ ======== ------------ --------
Options and warrants outstanding at 31st December 2010 were
exercisable as follows:
Expiry
Date of grant Type of arrangement Number granted Exercise price date
27/10/06 Warrants 1,107,975 25p 11/05/11
29/08/08 Options 1,510,600 4.875p 29/08/12
05/02/10 Options 4,129,007 4.046p 05/05/15
28/12/10 Warrants 15,385,000 10p 28/12/11
--------------------------
22,132,582
--------------------------
In total 2,286,004 of the outstanding share options granted on 5
February 2010 are conditional on the Group achieving profitability
by set target dates up to 30 March 2012. The remaining 19,496,578
options and warrants are not subject to any unsatisfied vesting
conditions and were exercisable at the year end date.
15 Description and purpose of reserves
The reserves included in the Consolidated Statement of Changes
in Equity are as follows:
Share capital - represents the nominal value of the shares issued.
Share premium - represents the premium over nominal value paid for
the shares issued, less costs of issuing shares.
Merger reserve - represents the premium on shares issued as
consideration for the acquisition of Zurex, which
was acquired by way of share for share exchange and
qualified for merger relief.
Translation reserve - represents the differences arising on translation
of foreign operations into the presentational
currency.
Share based - represents the balance of share based payments
recorded in the financial payments reserve
statements but not yet exercised.
Management of capital
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
The Group considers capital to be its equity reserves as shown
in the consolidated balance sheet plus net debt. At the current
stage of the Group's life cycle, the Group's objective in managing
its capital is to ensure that funds raised meet the cash
requirements to bring the palm oil refinery into operational
use.
Capital at 31 December 2010 and 31 December 2009 was as
follows:
2010 2009
GBP000 GBP000
Total borrowings (note 17) 4,712 318
Less: cash and cash
equivalents (note 13) (1,750) (1,118)
------------------- -------------------
Net debt 2,962 800
Total equity 35,345 30,481
Total capital 38,307 31,281
=================== ===================
16 Trade and other payables
2010 2009
GBP000 GBP000
Trade payables 363 956
363 956
--------------- ---------------
The carrying amounts of trade and other payables are at fair
value.
The trade creditor days of the Group for the year ended 31
December 2010 were 17 days (2009: 42 days)
17 Bank borrowings
2010 2009
GBP000 GBP000
Current liabilities 686 -
Non current liabilities 4,026 318
----------------- ---------------
4,712 318
----------------- ---------------
The bank borrowings arise under a facility with Bank Kerjasama
Rakyat Malaysia Bhd., a licensed bank in Malaysia, for the
aggregate sum of up to RM47 million (approximately GBP9.9 million
GBP1=RM4.74) consisting of two tranches, of which RM28.8 million is
for capital expenditure and RM18.2 million for working capital. The
borrowings have been made under Islamic banking principles and
include an asset sale agreement and an asset purchase agreement.
Zurex has placed RM20 million on deposit with Bank Kerjasama Rakyat
Malaysia Bhd. as security for the lending of monies (see note 13).
A legal charge and debenture have been given to the Bank together
with a corporate guarantee from the Company. The effective rate of
interest is set at 1.5% over the Bank's funding rate subject to a
cap at 9.95%. Interest has been provided in these accounts.
The bank borrowings are secured by the following:
(a) A pledge over a fixed deposit of RM20.0 million;
(b) A legal charge over the land owned by the Group (see note
9);
(c) Fixed and floating charges over all present and future
assets of the Company's subsidiary; and
(d) A corporate guarantee by the Company.
Maturity analysis of non current bank borrowing is as
follows:
2010 2009
GBP000 GBP000
Repayable between one and two
years 709 318
Repayable between two and five
years 3,317 -
----------------- ---------------
4,026 318
----------------- ---------------
18 Cash from operations
2010 2009
GBP000 GBP000
Operating loss (1,014) (729)
Adjustments for:
- depreciation 14 12
- Impairment of current assets 261 -
- share based payments (note 20) 74 (17)
Changes in working capital:
- inventories (28) -
- trade and other receivables 10 44
- trade and other payables 92 328
Cash used in operating activities (591) (362)
======== ========
19 Contingencies
In June 2009, Zurex issued a Notice of Arbitration to JJ-Lurgi
Engineering Sdn. Bhd. ("JJ Lurgi"). This relates to the dispute
between Zurex and JJ-Lurgi in connection with the contract between
them dated 26 January 2007 for the supply of components for the
construction of a 200,000 tonnes per annum palm oil biodiesel
plant. The original contract was for RM38.4 million (GBP8.1 million
at GBP1=RM4.74) of which RM11.5 million (GBP2.4 million at
GBP1=RM4.74) had been paid. The Company supported by legal advice,
has taken the view that the contract had been terminated. Zurex is
claiming RM9.89 million (GBP2.1 million GBP1=RM4.74) against
JJ-Lurgi and JJ-Lurgi has a counter claim of RM2.87 million (GBP0.6
million GBP1=RM4.74) against Zurex under the arbitration
proceedings.
The ultimate outcome of the arbitration between the Company and
JJ Lurgi cannot be determined presently for inclusion within these
accounts, but the Directors are of the opinion that the Company
will be able to support its case successfully and, accordingly, no
liability has been recognised (2009 - nil).
20 Share options and warrants
The Group recognised an expense of GBP74,000 (2009: GBP17,000
credit) in the Statement of comprehensive income in respect of its
share based payment plans. Movements in the number of share options
in issue, and the weighted average exercise price (WAEP), during
the year were as follows:
2010 2010 2009 2009
Number WAEP (pence) Number WAEP (pence)
At 1
January 2,618,575 13.39 2,738,575 12.85
Granted
during
the
year 20,657,011 8.56 - -
Lapsed (1,143,004) 4.06 (120,000) 1.00
--------------------------- --------------------- ------------------------- ---------------------
At 31
December 22,132,582 9.37 2,618,575 13.39
--------------------------- --------------------- ------------------------- ---------------------
The fair value of options granted were estimated using the
Black-Scholes option-pricing model. The estimated fair values are
based on the following weighted average assumptions:
2010
Share price at grant date 3.53p
Exercise price 4.05p
Expected volatility 157%
Expected life 5 years
Expected dividend yield Nil
Risk free interest rate 2%
-----------------------
The expected volatility is determined by using as a base the
share price movements recorded since the share placing on AIM in
May 2006.
21 Financial instruments
The Group's activities expose it to a variety of financial
risks: credit risk, liquidity risk, cash flow risk, fair value
interest-rate risk and foreign currency risk. The Group's overall
risk management programme focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects
on the Group's financial performance. The Group's treasury policy
is set by the Board and is reviewed regularly. Further detail
regarding risk exposure and risk management policies is provided
below.
The carrying amounts of the Group's financial assets and
liabilities as at 31 December 2010 are as follows:
Group Group
2010 2009
GBP000 GBP000
Current assets
Trade and other receivables 308 57
Cash and cash equivalents, fixed deposits 5,966 4,755
------- -------
Loans and receivables carried at amortised
cost 6,274 4,812
------- -------
Current liabilities
Trade and other payables 363 955
Borrowings 686 -
Non current liabilities
Borrowings 4,026 318
------- -------
Other financial liabilities carried
at amortised cost 5,075 1,273
------- -------
Risk management is carried out centrally under policies approved
by the Board.
(a) Credit risk
The Group's current main credit risks relates to monies held on
deposit with various banking institutions. Monies held on deposit
are spread over four main financial institutions to reduce the
credit risk.
(b) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient
cash balances and ensuring availability of funding.
(c) Cash flow and fair value interest rate risk
The Group's cash flow interest rate risk arises from money
market deposits and bank borrowings.
Deposits made at variable rates expose the Group to cash flow
interest rate risk. The Group's deposits are at a fixed rate for
the duration of the deposit which range from 1 week to 3
months.
Bank borrowings bear a variable rate of interest which expose
the Group to cash flow interest rate risk.
No long term interest rate hedging contracts have been entered
into. The Group does not consider the risk to be significant in
view of the nature of the Group's current activities. If interest
rates had changed by 0.5% during the year, the impact on the
Group's profit and loss would have been GBP22,000 (2009:
GBP24,000).
(d) Foreign currency risk
The Group operates internationally and is exposed to foreign
exchange risk arising primarily with respect to the Malaysian
Ringgit and the UK Pound. Foreign exchange risk arises from future
commercial transactions and recognised assets and liabilities.
The Group does not currently have an active policy to hedge its
foreign currency risks as it is primarily financing its overseas
operations in local currency hence reducing its net foreign
exchange exposure.
The carrying amounts of the Group's foreign currency denominated
monetary assets and monetary liabilities at the reporting date are
as follows:
2010 2009
The following amounts have been
translated from Malaysian
Ringgit: GBP000 GBP000
Trade and other receivables 308 22
Cash and cash equivalents 4,351 4,136
Trade and other payables (308) (813)
Borrowings (4,712) (318)
Net exposure (361) 3,027
-------- ---------------------
For the year ended 31 December 2010, if the Malaysian Ringgit
had weakened by 0.5 against Sterling with all other variables held
constant, the post tax loss for the year would have been GBP47,000
(2009: GBP33,000) lower mainly as a result of foreign exchange
gains/losses on translation of Malaysian Ringgit-denominated
transactions.
Equity would have been GBP3,249,674 (2009: GBP2,498,000) lower,
arising mainly from foreign exchange losses/gains on translation of
Malaysian Ringgit-denominated assets and liabilities.
22 Capital commitments
2010 2009
GBP000 GBP000
Contracted but not provided for:-
Property, plant and equipment for the
refinery plant 663 4,040
-------- --------
23 Related party transactions
Henry Yong is a director of both WS Bio and Zurex (although he
is not a director of the Company), and accordingly the contracts
entered into with WS Bio in February 2009 and December 2009 for the
construction of the plant represent related party transactions, as
follows:
2010 2009
GBP000 GBP000
Assets in the course of construction
by WS Bio included in property,
plant and equipment. 3,699 3,144
-------- --------
Amounts payable to WS Bio at the
year end date 306 354
---- ----
The Directors are of the opinion that the transaction above was
entered into in the normal course of business and have been
established on terms and conditions that are not materially
different from those obtainable in transactions with third
parties.
The Company has provided a guarantee to WS Bio in respect of the
contract between WS Bio and Zurex.
24 Control
The Company is under the control of its shareholders and not any
one party.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR DKQDQABKDDPB
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