TIDMGRPH
RNS Number : 7006J
Graphene NanoChem PLC
30 June 2017
30 June 2017
Graphene NanoChem plc
(the "Company" or the "Group")
Results for the twelve months ended 31 December 2016
Graphene NanoChem (AIM: GRPH), the international provider of
nanotechnology performance enhancing solutions for global
industries, announces its audited results for the 12 months ended
31 December 2016. These results relate to business conducted by the
Group, trading as Graphene NanoChem plc (the "Company" or the
"Group").
On a stronger footing
-- Debt rationalisation plan completed albeit customary conditions precedent pending
-- Successful fund raise to support working capital needs
-- Proven technology platforms across 3 divisions
-- Strategic partnerships bearing stronger sales channels
Financial Highlights
-- Financial statements prepared on a deconsolidated basis
-- Group revenue increased to GBP0.26 million (2015: GBP0.06 million)
-- Gross Profit of GBP0.04 million (2015: Gross Loss GBP0.09 million)
-- Bad debts written off of GBP16.22 million (2015: GBP0.15 million)
-- Loss for the year from continuing operations GBP16.87 million (2015: GBP9.13 million)
-- Total comprehensive loss of GBP8.34 million (2015: GBP33.28 million)
-- Loss per share of 7.16p per share (2015: 28.56p)
-- Cash and cash equivalents at the end of the period was GBP0.63m (2015: GBP0.56m)
(See note 2.2 to the financial statements in relation to going
concern - emphasis of matter)
Other Highlights
Business and Operational Highlights
-- The Group announced on 11(th) April 2016 a business
reorganization strategy based on its three divisions namely the
Nanofluids, Water, and Polymers divisions.
-- Successful completion of the Group's debt rationalisation
plan, subject to customary conditions precedent, with our key
financiers agreed and a repayment structure for remaining debt
mapped against the Group's recalibrated business plan that saw the
conversion of short term debt into a longer term debt and a
repayment tenue mapped against the business plan of the Group, as
well as the reduction of the Group's total debt to its banking
financiers from GBP24.94 million in 2015 to GBP20.30 million in
2016.
-- Exit from the capital heavy non-core businesses of the Group,
which saw the winding-up and liquidation of two wholly-owned
subsidiaries involved in the low margin fuel additive business and
consequently significant reduction in the Group's headcount and
administrative cost.
-- Post Shareholders' approval at the Annual General Meeting on
3(rd) December 2016, each Ordinary Share of the Company has been
sub-divided into one New Ordinary Share of GBP0.01 nominal value
and one Deferred Share of GBP0.19 nominal value. The Deferred Share
has no right to vote, attend or speak at general meetings of the
Company and has no right to receive any dividend or other
distribution and will has only limited rights to participate in any
return of capital on a winding up or liquidation of the Company. No
application has been made to the London Stock Exchange for
admission of the Deferred Shares to trading on AIM and no share
certificates will be issued in respect of the Deferred Shares.
-- On 23(rd) December 2016, Darwin Capital Limited entered into
an agreement with the Group to subscribe for up to GBP2.50m Senior
Unsecured Zero Coupon Convertible Loan Notes with detachable
Warrants to support working capital requirements of the Group and
as part of Tranche 1 subscribed to GBP0.75m of the Loan Notes and
1,016,949 Warrants.
-- In the final quarter of 2016, the Group received a commercial
order of 4,000 barrels of PlatDrill, valued at US$359,678, to
service 2 wells in Changning, China, located at the southwest
region where, in line with the China government policy to increase
the development of its shale gas resources, more than 300 wells are
expected to be drilled per year in the next 5 years, which is
amongst the largest in terms of number of wells in Asia.
Post Period Events
Business and Operational Highlights
-- In the 1(st) quarter of 2017, the Group received a commercial
order for PlatSurfF for trial, valued at US$118,800 that was
deployed for use in one oil well in Q2 2017. The client has oil
well rejuvenation needs for up to 110 oil wells in Turkmenistan
and, upon successful trial, the Group shall commence negotiations
for further purchase orders for the balance of their oil wells for
utilisation over the next 12 - 24 months.
-- In the 2(nd) quarter 2017, the Group's polymer solutions was
deployed in a paid pilot project in Malaysia where the enhanced
material was approved and successfully used to convert and modify a
warehouse building for a tier-1 international aerospace company
that designs and manufacture commercial jetliners and aircrafts for
the defense industry.
-- Darwin Capital Limited has in Tranche 2 subscribed to
GBP1,000,000 of the Loan Notes and 1,355,932 Warrants. The funds
raised from the issuance of the Loan Notes have been utilised for
working capital needs of the Group in line with the business
turnaround plan.
-- The Group has issued 17,472,730 new ordinary shares to Darwin
Capital Limited in connection with the conversion of all Loan Notes
under Tranche 1 and as the date of this announcement, the Group has
134,009,266 ordinary shares in issue.
-- The debt restructuring exercise the Company has undertaken is
now expected to now be unconditional by the end of the 3rd Quarter
2017, post completion of the administrative process and other
conditions precedent, including non-core asset sales.
Jespal Deol, Chief Executive Officer of Graphene NanoChem,
commented: "Amid a difficult and challenging period for the oil and
gas industry, we took the decisive action to execute a holistic
turnaround plan for Graphene NanoChem in 2016 with the firm
intention to address our challenges head on, internally and
externally.
Our primary focus was debt reduction and a significant milestone
achievement for us is the successful completion, subject to
customary conditions precedent, of the debt rationalisation plan
that has seen the conversion of our short term debt into a longer
term debt and a repayment tenue mapped against the business plan of
the Group. This effectively allows the Group to conserve cash
outflow against debt repayment and deploy its funds towards
stabilising the business. We anticipate that the debt restructuring
exercise undertaken to now be unconditional by the end of the 3rd
Quarter 2017 post completion of the administrative process and
other conditions precedent, including non-core asset sales
We continue our strategic move towards an asset light approach
business structure that enables us to refocus operations on our
core competence of value addition leveraging on strategic
partnerships, business collaborations and outsourcing models to
deliver our solutions.
We are now entering the third phase of our Turnaround Plan, and
to this end, our business platforms have been structured around
three core areas that offer a diverse range of applications for
potential and use - Nanofluids, Water Treatment and Polymers for
Building Materials.
Our main priority now is securing contract wins and accordingly
we are currently engaging in a number of activities to do just
that. We look forward with confidence and optimism. That is where
our immediate focus is."
Annual Report and Accounts and Annual General Meeting
The Company's annual report and accounts has been sent to
shareholders and shall shortly be made available on the Company's
website. The Company's annual general meeting will be held at 10.30
a.m. on 26 July 2017 at Academy House, London Road, Camberley,
Surrey GU15 3HL.
In accordance with AIM Rule 20, the Group's Annual Report and
Accounts for the year ending 31 December 2016, which incorporates
the Notice of AGM and Form of Proxy, has been posted to
shareholders and will shortly be made available on the Company's
website at: www.graphenenanochem.com.
For further information:
Graphene NanoChem Tel: +603 2282 3080
Jespal Deol, Chief Executive Officer
Panmure Gordon (NOMAD and Broker)
Adam James / Tom Salvesen Tel: +44 (0) 20 7886 2500
Yellow Jersey PR
Charles Goodwin / Harriet Jackson Tel: +44 7747 788 221 / +44 7544 275 882
The information communicated in this announcement is inside
information for the purposes of Article 7 of Market Abuse
Regulation 596/2014 ("MAR").
Chairman's Statement
TAN SRI DATO' SRI ABI MUSA ASA'ARI MOHAMED NOR
Non-Executive Chairman
Amid a difficult and challenging period for the oil and gas
industry, we took the decisive action to execute a holistic
turnaround plan for Graphene NanoChem in 2016 with the firm
intention to address our challenges head on, internally and
externally. Our objective is to create a leaner and more nimble
Group that focuses on its fundamental competence of delivering
disruptive, high margin applications of our platform
nanotechnologies.
Our focus in the last 18 months has been to execute some of the
key steps that would allow us to recalibrate our business, reduce
our cost base, realistically address our debt position and to
diversify our industry focus in businesses that have exciting
growth opportunities. We have made significant strides forward,
achieving two important milestones in our turnaround plan during
the period.
Firstly, we successfully completed subject to customary
conditions our debt rationalisation plan with our key financiers
agreed and a repayment structure for remaining debt mapped against
the Group's recalibrated business plan. Secondly, the Group's exit
from the asset-heavy low margin fuel additive business has
significantly contributed in reducing our cost base through head
count reduction and relocation of operations to more appropriate
facilities. Next on our agenda is the disposal of our non-core
assets with proceeds to be applied towards further paring down of
our financing debt. We anticipate that the debt restructuring
exercise undertaken to now be unconditional by the 3(rd) Quarter,
2017 post completion of the administrative process.
Achieving these two milestones was critical to provide the Group
with a solid platform to execute its business strategy under the
turnaround plan, more so in the current operating environment,
which has been an extremely volatile period for the oil and gas
industry worldwide with the oil price dipping below US$30 per
barrel in January 2016.
Running our business against this macro background has been
arduous for all of us at Graphene NanoChem and our performance for
the year was within the Group's expectation. The last 12 months has
been particularly demanding as we persevere with our turnaround
plan of transitioning Graphene NanoChem into an asset-light, leaner
and more diversified Group focusing on its core competency of
value-add integration.
Despite the external challenges, we can take some measure of
satisfaction that our key strategy has been kept on track and has,
in some areas advanced.
The Scomi Group remains our key partner in the Nanofluids
Division, supporting the commercial deployment of our value-add
solutions into the oil and gas market. Whilst the industry slowdown
has severely affected the division, we take great comfort on the
number of successes of the deployment of our solutions in the
field, specifically in creating the field performance track record.
In the meantime we continue to work with the Scomi Group in various
business development activities and initiatives bringing our
solutions to market, gain market share and leverage into an
anticipated industry recovery in due course.
We do not have the luxury or the financial muscle to wait the
industry out and it is quite evident that the way forward for us is
to accelerate the pace of our industry diversifications and
continue building, within our current constraints. At its core
Graphene NanoChem remains unique, offering technology platform that
can be applied across diverse applications in multiple
industries.
Our Water Division was launched in March 2016 and we are taking
a more diverse approach in applications by targeting small and
mid-size projects in multiple market segments. Our go-to-market
model remains the same - in partnership with established industry
partners - with whom we actively work with to pursue several
project opportunities and if successful, will provide the Group
with a significant market breakthrough and opportunity to
expand.
We continue to pursue our diversification efforts strategy into
2017, with our polymer solutions for enhanced building materials
("EBM") introduced early this year and was successfully deployed in
a pilot project undertaken for a global aerospace company.
Our progress to date has been due to our strong entrepreneurial
culture; necessary for a relatively small company commercialising
new technologies in well-established market place.
Our business recalibration exercise and working capital
constraint had however led us to take a conservative approach in
business development in 2016. We still have a lot more work to do
to move the Group forward but our business platform is solid with
exciting growth opportunities in new areas.
The next step is to actively secure business opportunities that
would translate to quality revenue streams for the Group in the
various application areas that we have developed, as we continue to
complete the transition of the Group.
Much has been achieved in 2016 and we will continue to further
progress our transition plan for Group with the steadfast support
of our business stakeholders - from our shareholders, members of
the board, financiers business partners and not the least, all the
people at Graphene NanoChem to whom I wish to extend my gratitude
and personal appreciation.
Tan Sri Dato' Seri Abi Musa Asa'ari bin Mohamed Nor
Non-Executive Chairman
CEO's Review
DATO JESPAL DEOL
Chief Executive Officer
The intervening years have been full of significant challenges
which the Group has had to overcome. On the back of a debt burden
and limited liquidity, we have had to endure the prolonged downturn
of the oil and gas industry, an industry which is closely tied to
our growth plan.
During 2015, we took the decision to address these challenges
head on and the year under review has seen continued progress of
our holistic turnaround plan to restructure our debt, reduce our
cost base and streamline our operations to focus on our core
competency of value adding while protecting our growth prospects
and flexibility to diversify into new markets ("Turnaround Plan").
The delivery of the Turnaround Plan was the Group's primary goal
for the year.
It certainly has been a formidable task for the Group and while
there is still more to do, much has been achieved today to allow us
to take the next step forward to our goal of creating a leaner,
more agile and simplified company that is capable of exploiting new
opportunities in our markets and delivering sustained revenue
streams.
Our primary focus was debt reduction and a significant milestone
achievement for us is the successful completion, subject to
customary conditions precedent of Phase 1 of our Turnaround Plan
which was the Group's debt rationalisation. This resulted in the
conversion of our short term debt into a longer term debt and a
repayment tenue mapped against the business plan of the Group as
well as the reduction of the Group's total debt to its banking
financiers ("Financiers") from GBP24.94 million in 2015 to GBP20.30
million in 2016. This effectively allows the Group to conserve cash
outflow against debt repayment and deploy its funds towards
stabilising the business.
Graphene NanoChem is also well underway in Phase 2 of our
Turnaround Plan. We have now restructured Graphene Nanochem's
financial objectives, more specifically in reducing our cost base
and streamlining our business operations to create realisable value
in select industry sectors. In line with our strategy to align our
cost base with the business prospects, we continue to manage the
process of our exit from the capital heavy non-core businesses of
the Group which saw the winding-up and liquidation of our two
wholly-owned subsidiaries involved in the low margin fuel additive
business and a consequently significant reduction in the Group's
headcount and administrative cost. The Group is also in active
discussion for the disposal of its non-core assets that, if
successful, would further reduce the Group total debt to its
Financiers and add working capital to the Group. We anticipate that
the restructuring exercise it has undertaken to now be
unconditional by the 3(rd) Quarter 2017 post completion of the
administrative process.
Of considerable importance is that this progress supports our
strategic move towards an asset light approach business structure
that enables us to refocus operations on our core competence of
value addition leveraging on strategic partnerships, business
collaborations and outsourcing models to deliver our solutions.
We have now entered into the third phase of our Turnaround Plan,
and to this end, our business platforms have been structured around
three core areas that offer a diverse range of applications for
potential and use - Nanofluids, Water Treatment and Polymers for
Building Materials.
OVERVIEW
The performance of the Group reflects the heavy restructuring
that was carried out during the financial year together with the
substantially prolonged downturn of the oil and gas industry,
driven by sustained low oil prices. The year began with Brent crude
prices experiencing the sharpest fall in 30 years to US$26 per
barrel in January 2016 against the high of US$105 per barrel in
June 2014. The average Brent crude oil prices trended at US$43.73
per barrel in 2016 as compared 2015 average price of US$52.39 in
2015, due to low demand and over supply. The net impact was
substantial reduction of industry activities and overall industry
slowdown compounded further by a weak world economy in 2016 with
global GDP growth at 2.3% which was significantly lower than the
average of nearly 3% over the past 20 years. The decline in
activity had led to stunted market openings for our solutions and
the consequent losses reported by the Group.
Pursuant to the winding up of its fuel additive business
subsidiaries and resulting GBP16.22m impairment charge, the Group
recorded a combined loss from impairment and discontinued
operations of GBP10.49m for the period and a total comprehensive
loss for the year of GBP8.34m.
Amid the slow rebound of the industry and market speculation
that the "bottom cycle" has been reached for GNC it was evident
that as a small company, the way forward is to align its operations
with the short and medium term outlook of the industry and most
importantly to leverage on its technology platforms to
diversify.
Whilst we are confident of the market fundamentals of the oil
and gas industry, we continue to remain cautious of the timing of
its recovery and we need to operate on that basis. Our
diversification into the Water Treatment and Building Materials
sectors allows us to mitigate single sector exposure and the
opportunity to balance changes in supply and market demand,
variable economic conditions and shifts in market environment.
Despite ongoing challenges, we have a solid business platform to
build a future for the Group. We have had some significant wins
that validates the value proposition offered by our products and we
are continuing to make good progress in building the markets for
our solutions.
Nanofluids
Our Nanofluids platform comprises an end-to-end spectrum of cost
efficient solutions that tackle the oil and gas industry pain
points, from addressing drilling challenges and time, recovery and
production rates to regulatory health and safety and environmental
concerns associated with oil and gas exploration and production
activities.
The Scomi Group remains our primary market partner for our
oilfield solutions and the Group continues to work closely with
Scomi Group which has presence in 48 locations in 22 countries
worldwide. The prolonged downturn in the oil and gas sector has to
a large extent effected margins and volumes of some of our oilfield
solutions, and to this end our strategy is to focus on products
that have maintained higher margins and withstood oversupply in the
industry whilst retaining our operational capability to benefit
from an industry upturn. Together with the Scomi Group, we continue
to actively work in bringing our solutions into new markets
focusing on the Middle East and North African (MENA) regions and
South East Asia. This includes supporting new project bids by the
Scomi Group.
Water
Working in collaboration with specialist equipment
manufacturers, we apply our platform technology to tailor, enhance
and integrate systems and solutions to meet the varied water
treatment, recycling and reuse need of various industry sectors.
Within the Water Division, we remain focused in bidding for and
developing small to mid-sized projects within US$50 - US$150
million, where there is a niche unaddressed space in which larger
companies are not active. Our target areas are treatment of
produced and industrial water, sewage water, clean drinking water
and desalination process where our technology platform has a
competitive advantage.
Working with industry partners, we are making progress in
identifying market opportunities and participating in project bids.
We collaborate with the Drilling Waste Management Division of the
Scomi Group to market our offshore solutions within the energy
sector, focusing on recurring revenue-base model structure. Our
strategic partnership with Millennium Engineering Corporation Sdn.
Bhd. an experienced water and wastewater treatment company with
over 60 credited projects further enhances our market reach and
provides us with the execution capability in the deployment of our
solutions into the lucrative global water market. Key regions that
we are targeting are Asia, MENA and Africa, with off balance sheet
financing structures identified for larger scale projects.
Polymer - Building Materials
A new core application area that we have been working on to
create future value is in polymers, specifically in developing
enhanced materials for Industrialised Building Systems ("IBS") that
offers the advantages of quality, fit-for-purpose and cost
effective materials with enhanced strength and durability that will
support an IBS value proposition of increasing efficiency,
productivity and speed, reducing time frames, costs and
construction wastes and delivering affordable solutions. Population
growth, urbanization and industrialization and expected growth in
residential property constructions have led to huge requirement for
innovative solutions for IBS. Low market penetration of IBS
products is providing growth opportunities for existing
participants and new entrants.
Our polymer solutions offering was deployed this year in a paid
pilot project in Malaysia where our enhanced material was approved
and successfully used to convert and modify a warehouse building
for a tier-1 international aerospace company that designs and
manufacture commercial jetliners and aircrafts for the defense
industry, a testament to the strong value proposition of our
solutions.
We are excited with the prospect of this sector and have been in
detailed discussions with several potential partners for us to
collaborate in exploring the opportunities in the IBS sector,
focusing on affordable homes, student and worker accommodations
projects where several recurring business models potential
exist.
OUTLOOK
We are pleased to have achieved the targeted milestones of our
Turnaround Plan in 2016 and we will continue to progress our plan
forward.
To aid financial flexibility and strengthen the balance sheet,
we are pleased that in December 2016, Darwin Capital Limited
entered into an agreement with the Group to subscribe for up to
GBP2.50m Senior Unsecured Zero Coupon Convertible Loan Notes with
detachable Warrants ("Loan Notes and Warrants") to support working
capital requirements of the Group. To date, Darwin has subscribed
to GBP1.75m of the Loan Notes and Warrants.
We are in no doubt that there is still more work to be done
before the Turnaround Plan is complete. We anticipate that the debt
restructuring exercise has undertaken now to be concluded by 3(rd)
quarter 2017. We certainly expect to spend the balance of the year
2017 and much of 2018, executing measures that would reassure our
stakeholders that we are capable of successfully transforming
Graphene NanoChem into a leaner, more agile and simplified company
that is capable of exploiting new opportunities in our markets and
deliver sustained revenue streams.
The volatility of the oil and gas market has resulted in working
capital constraint for the Group and that is something that the
Group will continue to address. We remain cautious about the
recovery of the oil and gas sector but once there is improvement,
we are well placed to benefit from opportunities that arise. We are
confident that having strategically diversified the business, we
are now well positioned to take advantage of new opportunities.
Our main priority now is securing contract wins and accordingly
we are currently engaging in a number of activities to do just
that. We look forward with confidence and optimism. That is where
our immediate focus is.
Dato' Jespal Deol
Chief Executive
Financial Review
SUSHIL SINGH SIDHU
Chief Financial Officer
In the year under review, the Group's primary area of focus was
to continue progressing the Group's business reorganization which
started during the previous financial year. The focus of this
process is Group debt rationalization and exit from the non-core
businesses with focus on the nanofluids, water, and polymers
divisions.
During the period and in line with the reorganization of the
Group, the Group's non-core wholly owned subsidiary, namely
Platinum Nanochem Sdn Bhd and its wholly owned subsidiary Platinum
Green Chemicals Sdn Bhd, were wound up and are not expected to have
a material impact on the Group's core business portfolio. The
winding up of these two companies has resulted in a consequential
loss of control of Platinum Nano G Sdn Bhd. These events have
resulted in an impairment expense of GBP16.22m and gain from
discontinued operations of GBP5.73m for the period.
In line with the events above, the Group's consolidated
financial statement has been prepared on a deconsolidated basis
that includes restating of the 2015 comparable figures in
accordance with International Standards of Financial Reporting
(IFRS).
The Group has made good progress on its debt rationalization
plan with its Financial Institutions (FI") and has subject to
customary conditions precedent reduced its debt balance by 19% from
GBP24.94m (pre-deconsolidation) in 2015 to GBP20.30m in 2016. The
lower and deferred debt repayment schedules enable utilization of
operating cashflows in the near term for advancement of the
recalibrated business plan rather than repayment of debt.
Having exited from the crude palm oil refining business, the
Group is in the process of selling the assets of the business with
proceeds from the proposed sale to be utilized for further
reduction of FI debt and general working capital needs of the
Group. We anticipate the sales to be completed by 3(rd) quarter
2017.
Against a backdrop of a weak world economy in 2016 and lower
average Brent crude oil prices of $43.73 per barrel as opposed to
2015 average prices of $52.39, demand for oilfield chemicals within
the oilfield drilling sector remained low which affected sales.
This was also compounded by an oversupply of chemicals driving
lower prices thus effecting margins. After elimination made for
discontinued operations, Revenues for the period increased by 3.7x
to GBP0.26m in 2016, and the Group showed a Gross Profit of
GBP0.04m for the period as opposed to a Gross Loss of GBP0.10m from
the preceding period. Albeit small, this profit validates the
Group's move away to an asset light model which does not incur a
fixed element of cost associated with major plant operations.
With the downturn affecting margins of some of our oilfield
chemical products, the Group is developing a marketing strategy
with the its oil and gas sector partner the Scomi Group, focused on
products that have maintained higher margins and withstood
oversupply in the industry. These products are primarily in the
recovery sector of the oil field business, and the Group remains
confident in margin maintenance due to the superior performance of
the products over its competitors.
In diversifying its revenue base, the Group continues business
development within the water and polymers divisions, both focused
on realizing future sales based on current and future
partnerships.
Depreciation and amortization charges have decreased
significantly by 58% to GBP0.37m in 2016 compared to GBP0.88m in
2015 primarily due lower carrying value for assets post impairment
in the previous financial year.
Total comprehensive loss for the year was GBP8.34m (2015:
GBP33.28m) inclusive of impairment expenses and gains from
discontinued operations.
Loss per share has decreased by 75% to 7.16p from 28.56p in the
previous period.
Statement of Financial Position and Cashflows
Post deconsolidation total assets for the period have decreased
by 71% to GBP6.49m (2015: GBP22.42m) and total liabilities have
decreased by 21% to GBP22.44m (2015: GBP28.31m) resulting in a net
liability position of GBP15.95m (2015: GBP5.89m).
Net cash outflow from operating activities for the year was
GBP0.28m (2015: net cash inflow of GBP2.39m). The Group's year end
cash balance stood at GBP0.63m (2015: GBP0.56m) as at 31 May 2017,
the Group's cash and cash equivalent totaled GBP0.61m.
Notwithstanding the Group's current cash position and the going
concern - emphasis of matter statement, the Directors believe that,
the future prospects of the Group are robust as the Group moves
from its business reorganization phase to new business
implementation phase in the three divisions anchored on strong
technology solutions and strategic partnerships.
Capital Structure and Funding
To improve financial flexibility and strengthen the balance
sheet during the period, Darwin Capital Limited entered into an
agreement with the Group to subscribe for up to GBP2.50m Senior
Unsecured Zero Coupon Convertible Loan Notes (Loan Notes) with
detachable Warrants with an exercise price of 18.4375p per Warrant
(Warrants). To date, Darwin has subscribed to GBP750,000 of the
Loan Notes and 1,016,949 Warrants in Tranche 1. In Tranche 2,
Darwin has subscribed to GBP1,000,000 of the Loan Notes and
1,355,932 Warrants. The funds raised from the issuance of the Loan
Notes have been utilised for working capital needs of the Group in
line with the business turnaround.
As at 31st December 2016 the Group had 116,536,536 ordinary
shares in issue (2015: 116,526,536). Since the year end, the group
issued 17,472,730 new ordinary shares to Darwin in connection with
the conversion of all Loan Notes under Tranche 1 and as the date of
this report, the Group has 134,009,266 ordinary shares in
issue.
The Group continues to manage and safeguard capital prudently
for the benefit of its stakeholders. The Group will strive to
achieve its business plans by managing its cash resources and
maintaining an optimal capital structure with the ultimate aim of
increasing shareholder value.
Sushil Singh Sidhu
Chief Financial Officer
Our Strategy
BUSINESS STRATEGY
Graphene NanoChem's strategy is to create and distribute value
by bringing innovative, high value high margin solutions in
attractive growth sectors that will deliver future earnings for our
shareholders. The Group seeks to deliver this by progressing the
following objectives:
STRATEGIC Innovative, Solutions Diversification Partnership Model Innovative Delivery
PRIORITY Driven Applications of Sectors Focus To Accelerate Growth Models To Create
Value
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MEGATRS Customised solutions Flexibility and Smart partnerships Operational flexibility
DRIVING that meet market adaptability to and collaborations to enhance scalability
GROWTH needs and demand pursue opportunities as growth tool to and to reduce volatility
at the right across different realize market opportunities through asset light
cost. market sectors strategy
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OUR
APPROACH * Market-led innovation * Opportunity driven * Go to market strategy via industry partnerships * Outsourcing model
* Drive growth through value-add applications * Enhancing solutions portfolio * Focus on synergistic technology offerings, mark * Focus on core competency of providing value-add and
et extracting maximum value
access and execution capabilities
* Focus on performance and cost efficiency * Strong core applications development pipeline
* Focus on growth prospect in high margin applications
----------- -------------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------ -----------------------------------------------------------------
GROWTH STRATEGY
Graphene Nanochem's strategy is to create and distribute value
by bringing innovative, high value high margin solutions in
attractive growth sectors that will deliver future earnings for our
shareholders. The Group seeks to deliver this by progressing the
following objectives:
-- deliver quality earnings by focusing on higher margin business segments
-- develop sustained market position in high growth sectors by
leveraging on our technology platform and through continuous
innovation
-- move to an asset-light model through structured independent
manufacturing, focusing on value adding;
-- accelerate market penetration and expand geographical reach
through quality value-add industry partnerships
The Group will continue to focus on its core strategy of
advancing disruptive high margin applications of its platform
nanotechnologies in markets that allows it to grow predictable and
recurring revenue streams. Strategic partnerships with select
industry partners remain a key strategy to accelerate new markets
penetration and to enhance the scalability of our execution
capability as we focus on securing contract wins for the Group.
Our Strategy
KEY PERFORMANCE INDICATORS
The Group has a range of performance indicators, both financial
and non-financial, to monitor and manage the business. These are
set at the individual customer level and for business units as well
as for the Group as a whole. The Group's key performance indicators
("KPIs") are: headline operating margin, headline operating profit,
net cash and net debt. These measures are used continually to
manage the business, improve performance and compare results
against targets.
PRINCIPAL RISKS & UNCERTAINTIES
Risk management forms an integral part of the business planning
and review cycle. The Directors believe in the following risks to
be the most significant for potential investors. However, the risks
listed do not necessarily comprise all of those associated
priority. Additional risks and uncertainties not currently known to
the Directors, or which the Directors currently deem not to be
significant, may also have an adverse effect on the Group and the
information set out below does not purport to be an exhaustive
summary of the risks affecting the Group. In particular, the
Group's performance may be affected by the changes in market or
economic conditions and in legal, regulatory and tax requirements.
The Group has put in place controls and strategies to minimise
these risks where possible.
Continued Market Volatility
Risk
The general economic climate remains volatile and is affected by
numerous factors beyond the Group's control, many of which could
impact its operations, business and profitability. These factors
include supply and demand of capital, growth in gross domestic
products, employment trends, international economic trends,
currency exchange rate fluctuations, interest rates' volatility,
inflation rate, global and regional political events and
international events, as well as a range of other market forces,
all of which have an impact on product demand and business costs.
The price of oil and gas and how it determines the exploration and
production activities in the oil and gas industry will continue to
be the key driver in the rollout of the Group's nanofluids
solutions
Controls:
Exposure to this risk remains high, and may continue to have an
adverse impact on the Group's business. The Group mitigates the
risk by maintaining tight inventory controls and proactive regular
contact with customers through its partners, and thereby equipping
itself with the ability to assess market demand and for the
management to respond accordingly. The Board has also initiated
several cost reduction programmes in the effort to significantly
lower the Group's cost base, resulting in a more nimble
organisation.
Reliance On Partners
Risk:
The Group is reliant on its relationship with the Scomi Group
for the commercial rollout of its nanofluids solutions. Although
progress is being made on gaining new accounts, applications as
well as geographical reach, the substantial decrease in volumes
across the oil and gas industry as a consequence of low prices, has
resulted in a decline in activity during the year. Whilst Scomi
Group remains as one of the world's leading oilfield service
companies and its access to emerging markets provides the Group
with a strong go-to-market platform, the exposure of the Group to
one primary partner to the market remains high.
Controls:
With the aim of minimising the effect of this risk, the Group
has progressed the commercial rollout of its water and polymer
solutions into diversified markets and geographies, some of which
are independent of Scomi Group. The Board will continue to rollout
its products and develop partnerships / alliances in its effort to
be more autonomous and reduce its dependency on Scomi Group.
New Products, Projects and Technology Innovation
Risk:
All new technologies and products involve business risk both in
terms of possible abortive expenditure, reputational risk, and
potential customer claims or onerous contracts. The same is true in
transferring technology and project executions The nature of the
competitive market the Group operates in makes innovation a key to
success, absence of which could erode margins and/or result in loss
of market share even though such risks may have a material impact
on the Group.
Controls:
The Group counters this risk by continuously investing in
research and development resources and continuously focusing on
application development path. The Board remains focused on ensuring
quality assurance standards are constantly monitored, measured and
regulated
Early Stage of Commercialisation and New Markets
Risk:
Whilst the Group has made initial sales of its nanofluids, the
Group is still at early stage of commercial development. There are
a number of operational, strategic and financial risks associated
with early stage commercialisation efforts. The Group will continue
to face risks frequently encountered by early stage companies
looking to bring new applications to market. In particular, its
future growth and prospects will depend on its ability to develop
applications which have broad commercial appeal, to secure
commercialisation partners on appropriate terms and to continue to
improve its commercialisation functions and to secure sales on a
timely basis, whilst at the same time maintaining effective cost
controls.
Controls:
There are no guarantees that the Group will be able to implement
the strategy detailed in its growth strategy successfully or at
all. The Group will however approach this challenge and strive to
implement its growth strategy in a competitive market through
effective management planning and operational controls. The Group
will mitigate such risks by using specialists in those areas where
it currently believes it is still exposed.
Intellectual Property
Risk:
The Group is fundamentally based on a platform of intellectual
properties ("IP"), which includes a combination of proprietary
technologies owned by it (wholly or partly) or licensed to it. The
Group's success depends on its ability, and the ability of any
third party with which it may partner, in creating a defensible IP
portfolios with adequate protection covering its intellectual
property rights so as to preserve its exclusive rights in respect
of its technology, to preserve the confidentiality of its own and
its third party partners' know-how and to be able to operate
without having third parties circumvent the rights that it owns,
has licensed or has been licensed. The Group's products and
technologies may in the process be alleged to infringe third
parties' intellectual property or rights that may be granted in the
future. The consequent risk will be that the Group is sued for
infringement, and would need to demonstrate that its product or
methods either do not infringe the relevant third party rights or
that the rights of the third party are invalid.
Controls:
The Group will continue to closely monitor its IP in the areas
in which it operates and additionally undertake its IP development
efforts with due diligence so as to avert the emergence of such
allegations or, at least put up the best credible defence to be
successful in defending any such proceedings.
Dependence on Recruitment and Retention of Key Personnel
Risk:
The Group's business, future success and planned expansion of
its operations will depend upon its ability to attract, train and
retain qualified and appropriately skilled personnel and on the
efforts and abilities of its executive officers and certain other
key employees, particularly those with sales and sales management
responsibilities, who are key to the Group's growth. The lack of an
appropriately skilled workforce or comprehensive succession plans
would adversely impact the Group's ability to perform. The Group's
operations could be adversely affected if for any reason we were
unable to attract or retain such officers or key employees.
Controls:
The Group aims to mitigate this risk by in-house staff
development, that is by giving its staff clear objectives and
career paths. Remuneration packages are also regularly reviewed to
ensure that key executives receive remuneration and benefits that
closely commensurate best practices in market.
Industry Operating Environment
Risk:
In the past, cessation or delay of customers' test programmes
has inhibited the Group's growth. The Group has little or no
influence over the duration of testing, which nearly always takes
longer than originally projected by its partner or the end
customers. It is common for test programmes, particularly in
safety-critical applications such as oilfield chemicals, to take
several years to complete. It is also a risk that significant
application development time is spent on test programmes that do
not result in sales.
Controls:
The Group mitigates the risk by establishing as early as
possible the likelihood of a customer's test programme coming to
fruition and that the potential commercial opportunities for the
Group justifies embarking on the programme in the first place.
Bid Success and Contract Performance
Risk:
The Group is dependent on the success of its bid activities
across its targeted sectors and applications. Bidding, by its
nature, can be long and expensive and investment in such activity
needs to be closely monitored to ensure adequate returns. The
success and performance of the Group also depends on our
businesses' ability to successfully execute their contractual
obligations on terms that provide the expected returns. There is a
risk that a particular project (including but not limited to,
capital expenditure in relation to production expansion, meeting
agreed standards or timescale and/or product development and
commercialisation) could experience unforeseen delays and incur
unexpected expenses, adversely impacting the implementation of the
Group's strategy and the Group's reputation, business, financial
condition and results of operations.
Controls:
The Group has developed and laid down its 'gatekeeping' process
to assess on a business by business and project to project basis,
or if necessary at a Group level, the risk and reward balance in
deciding to bid for or execute contracts whether on our own account
or in partnership with others. Further, the Group maintains
rigorous quality standards in all of its operations and carefully
assesses the terms on which it agrees to enter into contractual
relationships at appropriate levels of responsibility.
Dependence of third party suppliers
Risk:
As part of the asset light model implemented by the Group in the
past year, manufacturing is outsourced to third party suppliers
enabling the Group to operate without the complexities of
maintaining a plant. A third party supplier's failure to supply
materials or components in a timely manner, or failure to supply
materials and components that meet the Group's quality, quantity or
cost requirements, or the Group's inability to obtain substitute
sources for these materials and components in a timely manner or on
terms acceptable to it, could harm its ability to meet its
contractual obligations to its customers.
Controls:
Whilst the Group's contract manufacturers will manage their own
supply chains, the Group will continue to hold good working
relationships with (i) key component suppliers (which are likely to
be used by contract manufacturers) and (ii) a more extensive supply
chain to support its on-going development activities. The Group
will establish good working relationships that ensure technical
information about the Group's products are shared and enhanced
collaboratively. The Group is also actively reviewing its
contracting structure passing on delivery commitments to the
suppliers in exchange for better prices incentivising them to
commit to flawless delivery to its customers thus allowing the
Group to meet its contractual obligations.
Litigation and Claims
Risk:
In addition to such litigation from time to time in the ordinary
course of business which it managers with appropriate professional
advice, the Group faces prospective risk of litigations arising
from its winding up of / closing down its non-core fuel additive
subsidiaries.
Controls:
The Group will continue to exercise due diligence in its day to
day business operations in addition to be carefully guided, by
specialists if necessary, to undertake and achieve its corporate
re-structuring objective.
Environmental and Regulatory Considerations
Risk:
In addition to general UK and international laws, the Group's
activities are subject to significant additional obligations,
particularly in the jurisdictions that it operates in. In the
context of changes in the regulatory environment, there is a risk
that the Group can fail to adopt policies/processes to ensure
compliance with emerging requirements. It is also difficult to
predict the impact of future changes to laws or regulations or the
introduction of new law or regulations that affect the Group and,
from time to time, interpretation of existing laws or regulations
may also change or the approach to enforcement may become more
rigorous. It could also lead to high levels of scrutiny by
regulators, enforcement agencies or authorities with associated
increase in operational costs.
Control:
The Board recognises its roles and responsibilities as good
corporate citizens in, not only the territories in which it is
resident but also the territories in which it engages in business.
The Group will consequently therefore ensure that it is adequately
resourced, either in-house or out-sourced, with specialists who are
knowledgeable with the laws of the territories in which it
undertakes businesses so that the Group is properly advised on its
roles and responsibilities as good citizens in all the territories
where it has physical presence.
Financial Risk
Risk:
There are a number of financial risks, which will be outside the
control of the Group, and which can affect revenues and/or costs,
and neither the Company nor its subsidiaries currently hedges
against such risks. These includes going concern risks (please
refer to Note 2.2), varying international exchange rates, interest
rates, world commodity prices, energy prices and supplies, raw
materials prices and supplies, inflation and international trends
in trade, tariffs and protectionism and changes in legal and
regulatory framework.
Controls:
There can be no assurance that such variables will not have a
material adverse impact on the Group's financial position or
results of operations. The Board however will endeavour to continue
to mitigate this risk by boosting the Group's financial capability
through constantly accessing sources of finance / capital such as
its successful fund raise of up to GBP2.5 million in Unsecured
Convertible Loan Notes from Darwin Strategic Capital during the
financial year 2016, of which GBP1.75 million has been subscribed
for to date.
Approval of Strategic Report
Part I of this Annual Report comprises the Strategic Report for
the Group which has been drawn up and presented in accordance with,
and in reliance upon, applicable English company law, in particular
Chapter 4A of the Companies Act 2006, and the liabilities of the
Directors in connection with this Annual Report shall be subject to
the limitations and restrictions provided by such law.
It should be noted that the Strategic Report has been prepared
for the Group as a whole and are deemed to form part of this
report, and therefore gives greater emphasis to those matters,
which are significant to Graphene NanoChem and its subsidiary
undertakings when viewed as a whole.
Approved by the Board and signed on behalf of the Board.
Dato' Jespal Sushil Sidhu
Chief Executive Officer Finance Director
Independent Auditor's Report
TO THE MEMBERS OF GRAPHENE NANOCHEM PLC
We have audited the financial statements of Graphene Nanochem
Plc for the year ended 31 December 2016 which comprise the
Consolidated Statement of Comprehensive Income, Consolidated
Statement of Financial Position, Consolidated Statement of Changes
in Equity, Consolidated Statement of Cash flows and the related
notes. The financial reporting framework that has been applied in
their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European.
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone, other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of Directors and Auditor
As explained more fully in the Directors' Responsibilities
Statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by Directors; and the
overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the Annual
Report to identify material inconsistencies with the audited
financial statements and to identify any information that is
apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Opinion on financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the Group's affairs
as at 31 December 2016 and of the Group's profit or loss for the
year then ended;
-- have been properly prepared in accordance with IFRSs as
adopted by the European Union; and
-- have been prepared in accordance with the requirements of the
Companies Act 2006.
Emphasis of matter - Going concern
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of the disclosure made in
note 2.2 to the financial statements concerning the Group ability
to continue as a going concern. The Group incurred a net loss of
GBP11,142,000 during the year ended 31 December 2016 and, at that
date, the Group's had net current liabilities of GBP4,358,000.
These conditions, along with the other matters explained in note
2.2 to the financial statements, indicate the existence of a
material uncertainty which may cast significant doubt on the
Group's ability to continue as a going concern. The financial
statements do not include the adjustments that would result if the
Group was unable to continue as a going concern.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the Strategic Report and the
Directors' Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the Strategic Report and the Directors' Report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and its
environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report and the
Directors' Report.
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the financial statements are not in agreement with the accounting records and returns; or
-- certain disclosures of Directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Mark Ling (Senior statutory auditor) 1 Westferry Circus
For and on behalf of PKF Littlejohn LLP Canary Wharf
Statutory auditor London E14 4HD
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
2016 2015
Notes GBP'000 GBP'000
Continuing operations
Revenue 6 258 55
Cost of sales (214) (150)
--------- --------------------------
Gross (loss)/profit 44 (95)
Other Income 8 20 10
Selling and distribution expenses - -
Administrative expenses 9 1,398 (755)
Bad debts written off 9 (16,222) (146)
Impairment of fixed assets 14 - (2,538)
Impairment of goodwill 15 - (1,392)
Impairment of intangible assets 15 - (4,401)
Finance income 11 - 2
Finance costs 11 (1,739) (141)
Depreciation and amortization (370) (880)
--------- --------------------------
Operating loss from continuing
operations (16,869) (10,336)
Share of loss in a joint venture 4 (5) -
--------- --------------------------
Loss before tax from continuing
operations (16,874) (10,336)
Income tax credit 12 - 1,202
--------- --------------------------
Loss for the year from continuing
operations (16,874) (9,134)
Discontinued operations
Profit/(loss) for the year from
discontinued operations 7 5,732 (23,789)
---------
Loss for the year attributable
to the owners of the parent (11,142) (32,923)
--------- --------------------------
Other comprehensive loss: items
that may be subsequently reclassified
to profit or loss
Net exchange differences on
translating foreign operations 2,802 (360)
--------- --------------------------
Total other comprehensive loss,
net of tax 2,802 (360)
--------- --------------------------
Total comprehensive loss (8,340) (33,283)
========= ==========================
Earnings per share from continuing
and discontinued operations
attributable to owners of the
parent
Basic earnings per share
- From continuing operations (12.08)p (8.15)p
- From discontinued operations 7 4.92p (20.41)p
--------- --------------------------
- From total comprehensive
loss 13 (7.16)p (28.56)p
--------- --------------------------
Diluted earnings per share
- From continuing operations (11.57)p (8.15)p
- From discontinued operations 13 4.71p (20.41)p
--------- --------------------------
- From total comprehensive
loss 13 (6.86)p (28.56)p
--------- --------------------------
The accompanying accounting policies and notes form an integral
part of these financial statements
Consolidated Statement of Financial Position
As at 31 December 2016
2016 2015
Notes GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 14 5,640 5,095
Intangible assets 15 41 41
Investment in a joint venture 4 60 19
5,741 5,155
Non-current assets directly
associated with discontinued
operations - 15,536
-------------------- --------------------
5,741 20,691
-------------------- --------------------
Current assets
Inventories 16 16 56
Trade and other receivables 17 105 115
Cash and cash equivalents 18 630 21
751 192
Current assets directly associated
with discontinued operations - 1,537
-------------------- --------------------
751 1,729
-------------------- --------------------
Total assets 6,492 22,420
-------------------- --------------------
Liabilities
Current liabilities
Trade and other payables 19 2,143 134
Borrowings 20 2,966 1,560
--------------------
5,109 1,694
Current liabilities directly
associated with discontinued
operations - 26,607
-------------------- --------------------
5,109 28,301
-------------------- --------------------
Non-current liabilities
Borrowings 20 17,334 -
17,334 -
Non-current liabilities directly
associated with discontinued
operations - 12
-------------------- --------------------
17,334 12
-------------------- --------------------
Total liabilities 22,443 28,313
-------------------- --------------------
Net (liabilities) (15,951) (5,893)
==================== ====================
Equity
Share capital 22 23,307 23,307
Share premium account 22 139,639 139,639
Shares to be issued 206 -
Reverse acquisition reserve 22 - (99,305)
Translation reserve 22 (1,349) (4,151)
Irredeemable convertible preference
shares 23 - 1,924
Accumulated losses (177,754) (67,307)
Shareholders' (deficiency)
/equity (15,951) (5,893)
==================== ====================
The accompanying accounting policies and notes form an integral
part of these financial statements.
Company Registration No: 05712979
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Equity
Share Shares Reverse Component
Share Premium to be Acquisition Translation Accumulated of Preference Total
Capital Account issued Reserve Reserve Losses Shares Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1
January
2015 23,307 139,639 - (99,305) (3,791) (34,384) 2,249 27,715
Total
comprehensive
income:
----------------- ----------------- ----------------- ------------------- ----------------- ------------------------- ---------------------- ------------------
Loss for the
financial year - - - - - (32,923) - (32,923)
Foreign currency
translation
differences - - - - (360) - (325) (685)
----------------- ----------------- ----------------- ------------------- ----------------- ------------------------- ---------------------- ------------------
- - - - (360) (32,923) (325) (33,608)
At 31 December
2015 23,307 139,639 - (99,305) (4,151) (67,307) 1,924 (5,893)
Total
comprehensive
income:
----------------- ----------------- ----------------- ------------------- ----------------- ------------------------- ---------------------- ------------------
Loss for the
financial year - - - - - (11,142) - (11,142)
Reversal of
reverse
acquisition
reserve - - - 99,305 - (99,305) - -
Reversal to
Profit & Loss - - - - - - (2,210) (2,210)
New Shares to
be issued - - 206 - - - - 206
Foreign currency
translation
differences - - - - 2,802 - 286 3,088
----------------- ----------------- ----------------- ------------------- ----------------- ------------------------- ---------------------- ------------------
- - 206 99,305 2,802 (110,447) (1,924) (10,058)
At 31
December
2016 23,307 139,639 206 - (1,349) (177,754) - (15,951)
================= ================= ================= =================== ================= ========================= ====================== ==================
All reserves are attributable to the equity holders of the
parent Company.
Consolidated Statement of Cash Flows
For the year ended 31 December 2016
2016 2015
GBP'000 GBP'000
Cash Flows From Operating Activities
Loss before taxation (16,875) (34,125)
Adjustments for:
Depreciation of property, plant
and equipment 370 1,811
Amortisation of intangible assets 1 855
Impairment loss on disposal of
former group undertaking 13,277 -
Loss/(gain) on disposal of property,
plant and equipment - 5
Inventory written off 45 693
Bad debts written off - 146
Interest income - (2)
Property, plant and equipment
written off - 2,350
Impairment of goodwill - 2,039
Impairment of intangible assets - 9,815
Impairment of tangible fixed
assets - 13,840
Share of loss in a joint venture 5 20
Impairment loss in joint venture 56 -
Finance costs 1,739 1,840
Unrealised foreign exchange loss 17 -
Warrant issue 81 -
(Increase)/decrease in :
Trade and other receivables 15 4,769
Inventories - 592
Increase /(decrease) in :
Trade and other payables 989 (492)
--------- ---------
Cash Generated From Operations (280) 4,156
Net interest paid - (1,840)
Income tax refund - 72
Net Cash From/(Used In) Operating
Activities (280) 2,388
--------- ---------
Cash Flows From Investing Activities
Purchase of property, plant and
equipment, net - (2,577)
Subscription of shares in a joint
venture (119) -
Net cash used by discontinued
operations (2,711) -
Net Cash Used In Investing Activities (2,830) (2,577)
--------- ---------
Cash Flows From Financing Activities
Issuance of Loan Notes 675 -
Advances by related companies 209 -
Net proceeds from/(repayment
of) borrowings (360) (1,336)
Net Cash Generated From/(Used
In) Financing Activities 524 (1,336)
--------- ---------
Net (Decrease) In Cash and Cash
Equivalents (2,586) (1,525)
Cash and Cash Equivalents at
beginning of year 558 2,227
Effect of exchange rate differences
on cash and cash equivalents 2,658 (144)
Cash and Cash Equivalents at
end of year (note 18) 630 558
========= =========
The accompanying accounting policies and notes form an integral
part of these financial statements.
Notes to the Financial Statements
For the year ended 31 December 2016
1 General information
Graphene Nanochem Plc is a public limited Company incorporated
and domiciled in England.
In 2013, the Company was formed through the reverse takeover of
Platinum Nanochem Sdn. Bhd. ("PNC") by Biofutures International plc
("Biofutures") where GBP32.5 million was raised through a placing
of 23.2 million ordinary shares with new investors. The enlarged
Group's shares were readmitted to the AIM market on 26 March 2013
under the name of Graphene Nanochem plc.
The consolidated financial statements are presented as a
continuation of the financial statements of Platinum Nanochem Sdn.
Bhd. The consideration transferred was calculated after determining
the fair value of the assets and liabilities of Biofutures at the
transfer date. The consideration comprises the value of the
additional shares that would need to have been purchased in
Biofutures to acquire the entire share capital.
The Company and its subsidiaries were involved in the design,
formulation and manufacturing of intermediate and performance
chemicals and advanced nano-materials. During the year ended 31
December 2016 and subsequent to the balance sheet date, the Group
commenced a restructuring of its business.
2 Summary of significant accounting policies
2.1 Basis of preparation
These consolidated financial statements of the Group are for the
year ended 31 December 2016. They have been prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted
by the European Union. The consolidated financial statements have
been prepared under the historical cost convention except where
accounting standards require the use of fair values.
The financial statements of the Company have been prepared using
FRS 102 - The Financial Reporting Standard applicable in the UK and
Republic of Ireland ("UK GAAP").
These consolidated financial statements are presented in Pounds
Sterling ("GBP") which is the functional and presentation currency
of the parent, and rounded to the nearest thousand ("GBP'000"). The
functional currency of the subsidiaries is the Malaysian Ringgit as
that is the currency of their primary economic environment. The
directors have chosen to present these financial statements in
Pounds Sterling due to the international exposure and shareholders
of the entity.
The significant accounting policies set out below have been
consistently applied, except where stated.
On publishing the parent Company financial statements here
together with the Group financial statements, the Company is taking
advantage of the exemption in s408 of the Companies Act 2006 not to
present its individual Statement of Comprehensive Income statement
and related notes that form a part of these approved financial
statements.
Notes to the Financial Statements
For the year ended 31 December 2016
2 Summary of significant accounting policies (Continued)
2.2 Going concern
Although the Group recorded a net loss of GBP11,142,000 for the
financial year ended 31 December 2016, the significant progress in
the holistic business restructuring that includes the successful
launching of two new divisions in the Water & Polymers markets,
coupled with the similarly positive debt restructuring, gives the
Directors optimism that the Group will continue to be operational
in the foreseeable future.
The Group is in advanced discussions to dispose of identified
non-core assets to a third party although no binding agreement has
been entered into at the date of this report. In conjunction with
the proposed disposal, the Group will utilize the proceeds from the
sale to make full settlement of its debt owing to its primary short
term financier and pay down the restructured debt of its primary
long term financier. The successful conclusion of the above
disposal and utilization of proceeds mentioned will positively
impact the Group's indebtedness.
In addition to the above proposed disposal, the Group has
successfully raised funds via an agreement with Darwin Capital
Limited to subscribe for up to GBP2.50m Senior Unsecured Zero
Coupon Convertible Loan Notes with detachable Warrants in three
separate tranches to support working capital requirements of the
Group. Tranche 1 of GBP0.75m and Tranche 2 of GBP1.00m has been
subscribed to in December 2016 and May 2017 respectively.
The Directors have prepared financial forecasts which suggests
that based on conversion of the anticipated sales pipelines,
successful conclusion on the matters discussed above that the Group
is able to continue to meet its obligations as and when they fall
due.
The Directors have at the time of approving the financial
statements, have considered the going concern assumption, and have
concluded with reasonable expectation that the Group would continue
as a going concern and have adequate resources to continue in
operational existence for the foreseeable future. As the Directors
consider that it is appropriate to prepare the financial statements
of the Group and the Company on a going concern basis, the
financial statements do not include any adjustments relating to the
recoverability and classification of the assets and liabilities
that may be necessary, if the going concern basis of preparing the
financial statements of the Group and Company is not
appropriate.
2.3 Standards and Interpretations effective in the current
period
(a) Accounting developments during 2016
The International Accounting Standards Board (IASB) issued
various amendments and revisions to International Financial
Reporting Standards and IFRIC interpretations. The amendments and
revisions were applicable for the period ended 31 December 2016 but
did not results in any material changes to the financial statements
of the Group or Company.
The following standards were adopted by the Group during the
year:
-- IAS 1 (Amendment) - Disclosure initiatives (effective 1 January 2016)*
-- IAS 16 and IAS 38 (Amendments) - Clarification of acceptable
methods of depreciation and amortisation (effective 1 January
2016)*
-- IAS 19 - Employee benefits (Amendments) (effective 1 January 2016)*
-- IAS 27 (Amendment) - Equity method in separate financial
statements (effective 1 January 2016)*
-- IAS 28 - Investment in associates (Amendments) (effective 1 January 2016)*
-- IFRS 10 - Consolidated financial statements (effective 1 January 2016)*
-- IFRS 11 (Amendment) - Accounting for acquisitions of interest
in joint operations (effective 1 January 2016)*
-- IFRS 12 - Disclosure of interest in other entities (effective 1 January 2016)*
-- Annual improvement Cycle 2012-2014
*EU effective date
Notes to the Financial Statements
For the year ended 31 December 2016
2 Summary of significant accounting policies (Continued)
2.3 Standards and Interpretations effective in the current
period (continued)
(b) Accounting developments not yet adopted
Various new standards and amendments have been issued by the
IASB up to the date of this report which are not applicable until
future periods and have not yet been endorsed by the European
Union.
At the date of authorisation of these financial statements, the
following standards and interpretations, were in issue but not yet
effective, and have not been early adopted by the Group:
-- IAS 7 - Statement of Cash Flow amendments (effective 1 January 2017)
-- IAS 12 (Amendment) - Recognitions of Deferred Tax Assets for
Unrealised Losses (effective 1 January 2017)
-- IFRS 9 - Financial Instruments (2015) (effective 1 January 2018)*
-- IFRS 15 - Revenue from contracts with customers (effective 1 January 2018)*
-- IFRS 16 - Leases (effective 1 January 2019)
-- IFRS 2 - Classification and Measurement of Share-based Payment Transactions
-- IFRIC 22 - Foreign Currency Transactions and Advance
Consideration (effective 1 January 2018)
-- IAS 40 - Transfers of Investment Property (effective 1 January 2018)
-- Annual improvement Cycle 2014-2016 (effective 1 January 2017/2018)
The Directors are actively considering the effects upon the
financial statements and at the time of approval do not consider
that the financial statements will be subject to material
changes.
None of these is expected to have a significant effect on the
consolidated financial statements of the Group, except the
following set out below:
IFRS 9, 'Financial instruments', addresses the classification,
measurement and recognition of financial assets and financial
liabilities. The complete version of IFRS 9 was issued in July
2014. It replaces the guidance in IAS 39 that relates to the
classification and measurement of financial instruments. IFRS 9
retains but simplifies the mixed measurement model and establishes
three primary measurement categories for financial assets:
amortised cost, fair value through OCI and fair value through
P&L. The basis of classification depends on the entity's
business model and the contractual cash flow characteristics of the
financial asset. Investments in equity instruments are required to
be measured at fair value through profit or loss with the
irrevocable option at inception to present changes in fair value in
OCI not recycling. There is now a new expected credit losses model
that replaces the incurred loss impairment model used in IAS 39.
For financial liabilities there were no changes to classification
and measurement except for the recognition of changes in own credit
risk in other comprehensive income, for liabilities designated at
fair value through profit or loss. IFRS 9 relaxes the requirements
for hedge effectiveness by replacing the bright line hedge
effectiveness tests. It requires an economic relationship between
the hedged item and hedging instrument and for the 'hedged ratio'
to be the same as the one management actually use for risk
management purposes. Contemporaneous documentation is still
required but is different to that currently prepared under IAS 39.
The standard is effective for accounting periods beginning on or
after 1 January 2018. Early adoption is permitted subject to EU
endorsement. The Group is yet to assess IFRS 9's full impact.
IFRS 15, 'Revenue from contracts with customers' deals with
revenue recognition and establishes principles for reporting useful
information to users of financial statements about the nature,
amount, timing and uncertainty of revenue and cash flows arising
from an entity's contracts with customers. Revenue is recognised
when a customer obtains control of a good or service and thus has
the ability to direct the use and obtain the benefits from the good
or service. The standard replaces IAS 18 'Revenue' and IAS 11
'Construction contracts' and related interpretations. The standard
is effective for annual periods beginning on or after 1 January
2018 and earlier application is permitted subject to EU
endorsement. The Group is assessing the impact of IFRS 15.
Notes to the Financial Statements
For the year ended 31 December 2016
2 Summary of significant accounting policies (Continued)
2.3 Standards and Interpretations effective in the current
period (continued)
(b) Accounting developments not yet adopted (continued)
IFRS 16 'Leases' specifies how an IFRS reporter will recognise,
measure, prepare and disclose leases. The standard provides a
single lessee accounting model, requiring lessees to recognise
assets and liabilities for all leases unless the lease term is 12
months or less or the underlying asset has a low value. Lessors
continue to classify leases as operating or finance, with IFRS 16's
approach to lessor accounting substantially unchanged from its
predecessor IAS 17. The standard replaces IAS 17 'Leases' and
related interpretations. The standard is effective for annual
periods beginning on or after 1 January 2019, with earlier adoption
permitted if IFRS 15 'Revenue from contracts with customers' has
also been applied (subject to EU endorsement).
There are no other IFRSs or IFRIC interpretations that are not
yet effective that would be expected to have a material impact on
the Group
2.4 Basis of Consolidation
The consolidated financial statements incorporate the financial
statements of the Company and all its subsidiaries made up to 31
December 2016.
Subsidiaries are entities (including structured entities)
controlled by the Group. The Group controls an entity when the
Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those
returns through its power over the investee.
Subsidiaries are consolidated from the date on which control is
transferred to the Group up to the effective date on which control
ceases, as appropriate.
Intragroup transactions, balances, income and expenses are
eliminated on consolidation. Where necessary, adjustments are made
to the financial statements of subsidiaries to ensure consistency
of accounting policies with those of the Group.
Notes to the Financial Statements
For the year ended 31 December 2016
2 Summary of significant accounting policies (Continued)
2.4 Basis of Consolidation
(a) Business Combinations
Acquisitions of businesses are accounted for using the
acquisition method. Under the acquisition method, the consideration
transferred for acquisition of a subsidiary is the fair value of
the assets transferred, liabilities incurred and the equity
interests issued by the Group at the acquisition date. The
consideration transferred includes the fair value of any asset or
liability resulting from a contingent consideration arrangement.
Acquisition-related costs, other than the costs to issue debt or
equity securities, are recognised in profit or loss when
incurred.
In a business combination achieved in stages, previously held
equity interests in the acquiree are remeasured to fair value at
the acquisition date and any corresponding gain or loss is
recognised in profit or loss.
Non-controlling interests in the acquiree may be initially
measured either at fair value or at the non-controlling interests'
proportionate share of the fair value of the acquiree's
identifiable net assets at the date of acquisition. The choice of
measurement basis is made on a transaction-by-transaction
basis.
The consolidated financial statements have been issued in the
name of the legal parent (i.e. the accounting acquiree), but
presented as a continuation of the financial statements of the
legal subsidiary (i.e. the accounting acquirer).
The following principles have been applied:
(i) The assets and liabilities of the legal subsidiary shall be
recognised and measured in the consolidated financial statements at
their pre-combination carrying amounts;
(ii) The assets and liabilities of the legal parent shall be
recognised and measured in the consolidated financial statements at
their fair values at the acquisition date;
(iii) The retained profits and other equity balances (such as
revaluation reserves and foreign exchange reserves) recognised in
the consolidated financial statements shall be the retained profits
and other equity balances of the legal subsidiary immediately
before the business combination;
(iv) The amount recognised as issued equity instruments (i.e.
share capital and share premium) in the consolidated financial
statements shall be determined by adding to the issued equity of
the legal subsidiary immediately before the business combination
the fair value of the legal parent (i.e. the deemed cost of the
business combination); and
(v) The equity structure appearing in the consolidated financial
statements shall reflect the equity structure of the legal parent,
including the equity instruments issued by the legal parent to
effect the combination.
(b) Joint Arrangements
Joint arrangements are arrangements of which the Group has joint
control, established by contracts requiring unanimous consent for
decisions about the activities that significantly affect the
arrangements' returns.
Joint arrangements are reclassified and accounted for as
follows:
-- A joint arrangement is classified as "joint operation" when
the Group or the Company has rights to the assets and obligations
for the liabilities relating to an arrangement. The Group account
for each of its share of the assets, liabilities and transactions,
including its share of those held or incurred jointly with the
other investors, in relation to the joint operation.
-- A joint arrangement is classified as "joint venture" when the
Group has rights only to the net assets of the arrangements. The
Group accounts for its interest in the joint venture using the
equity method.
Notes to the Financial Statements
For the year ended 31 December 2016
2 Summary of significant accounting policies (Continued)
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 of each individual entity 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 profit or loss.
(c) Consolidation of overseas subsidiaries
Income and expenditure for overseas subsidiaries are included
based upon monthly average exchange rates to give a fair
approximation to the transaction rate. Items of statement of
financial position 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
profit and loss 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
statement of financial position date.
The principal annual depreciation rates used to depreciate other
assets are as follows:
Leasehold land Over the lease period
of 65 and 99 years
Buildings 2%
Motor vehicles 20%
Computer Equipment 10-40%
Furniture, fittings and
equipment 20%
Plant and machinery 5 - 20%
Renovations 10-20%
Capital work-in-progress represents assets under construction,
and which are not ready for commercial use at the end of the
reporting period. Capital work-in-progress is stated at cost, and
will be transferred to the relevant category of assets and
depreciated accordingly when the assets are completed and ready for
commercial use.
Cost of capital work-in-progress includes direct cost, related
expenditure and interest cost on borrowings taken to finance the
acquisition of the assets to the date that the assets are completed
and put in use.
Notes to the Financial Statements
For the year ended 31 December 2016
2 Summary of significant accounting policies (Continued)
2.6 Property, plant and equipment (Continued)
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when the cost
is incurred and it is probable that the future economic benefits
associated with the asset will flow to the Company and the cost of
the asset can be measured reliably. The carrying amount of parts
that are replaced is derecognised. The costs of the day-to-day
servicing of equipment are recognised in profit or loss as
incurred. Cost also comprises the initial estimate of dismantling
and removing the asset and restoring the site on which it is
located for which the Company is obligated to incur when the asset
is acquired, if applicable.
An item of property and equipment is derecognised upon disposal
or when no future economic benefits are expected from its use. Any
gain or loss arising from derecognition of the asset is recognised
in profit or loss. The revaluation reserve included in equity is
transferred directly to retained profits on retirement or disposal
of the asset.
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 purposes
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. Intangible
assets are tested annually for impairment along with the
goodwill.
Intangible assets comprise of the followings:
(a) Research and development expenditure
Research expenditure is recognised as an expense when it is
incurred.
Development expenditure is recognised as an expense except that
costs incurred on development projects are capitalised as
non-current assets to the extent that such expenditure is expected
to generate future economic benefits.
Development expenditure is capitalised if, and only if an entity
can demonstrate all of the following:
(i) its ability to measure reliably the expenditure attributable
to the asset under development;
(ii) the product or process is technically and commercially feasible;
(iii) its future economic benefits are probable;
(iv) its intention to complete and the ability to use or sell the developed asset; and
(v) the availability of adequate technical, financial and other
resources to complete the asset under development.
Capitalised development expenditure is measured at cost less
accumulated amortisation and impairment losses, if any. Development
expenditure initially recognised as an expense is not recognised as
assets in the subsequent period.
The development expenditure is amortised on a straight-line
method over a period of 8 to 15 years when the products are ready
for sale or use. In the event that the expected future economic
benefits are no longer probable of being recovered, the development
expenditure is written down to its recoverable amount.
(b) Licences
Separately acquired licence is shown at historical cost. Licence
has a finite useful life and is carried at cost less accumulated
amortisation. Impairment reviews are undertaken annually or more
frequently if events or changes in circumstances indicate a
potential impairment. Any impairment is recognised immediately as
an expense.
Notes to the Financial Statements
For the year ended 31 December 2016
2 Summary of significant accounting policies (Continued)
(c) Patents
Separately acquired patents are shown at historical cost.
Patents have a finite useful life and are carried at cost less
accumulated impairment. Impairment reviews are undertaken annually
or more frequently if events or changes in circumstances indicate a
potential impairment. The carrying value of the asset is compared
to the recoverable amount, which is the higher of value in use and
the fair value less costs of disposal. Any impairment is recognised
immediately as an expense.
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 Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is determined on the first-in-first-out basis and
comprises the purchase price and incidentals incurred in bringing
the inventories to their present location and condition.
Net realisable value represents the estimated selling price less
the estimated costs of completion and the estimated costs necessary
to make the sale.
Reviews are made periodically by management on damaged, obsolete
and slow-moving inventories. These reviews require judgement and
estimates. Possible changes in these estimates could result in
revisions to the valuation of inventories.
2.10 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.
An impairment loss is recognised when there is objective
evidence that a financial asset is impaired. Management
specifically reviews its loans and receivables financial assets and
analyses historical bad debts, customer concentrations, customer
creditworthiness, current economic trends and changes in the
customer payment terms when making a judgment to evaluate the
adequacy of the allowance for impairment losses. Where there is
objective evidence of impairment, the amount and timing of future
cash flows are estimated based on historical loss experience for
assets with similar credit risk characteristics. If the expectation
is different from the estimation, such difference will impact the
carrying value of receivables.
2.11 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.
Notes to the Financial Statements
For the year ended 31 December 2016
2 Summary of significant accounting policies (Continued)
2.12 Borrowing costs
Borrowing costs, directly attributable to the acquisition,
construction or production of a qualifying asset, are capitalised
as part of the cost of those assets, until such time as the assets
are ready for their intended use or sale. Capitalisation of
borrowing costs is suspended during extended periods in which
active development is interrupted.
All other borrowing costs are recognised in profit or loss as
expenses in the period in which they incurred.
2.13 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.
2.14 Financial Instruments
Financial instruments are recognised in the statements of
financial position when the Group has become a party to the
contractual provisions of the instruments.
Financial instruments are classified as liabilities or equity in
accordance with the substance of the contractual arrangement.
Interest, dividends, gains and losses relating to a financial
instrument classified as a liability, are reported as an expense or
income. Distributions to holders of financial instruments
classified as equity are charged directly to equity.
Financial instruments are offset when the Group has a legally
enforceable right to offset and intends to settle either on a net
basis or to realise the asset and settle the liability
simultaneously.
A financial instrument is recognised initially at its fair
value. Transaction costs that are directly attributable to the
acquisition or issue of the financial instrument (other than a
financial instrument at fair value through profit or loss) are
added to/deducted from the fair value on initial recognition, as
appropriate. Transaction costs on the financial instrument at fair
value through profit or loss are recognised immediately in profit
or loss.
Financial instruments recognised in the statements of financial
position are disclosed in the individual policy statement
associated with each item.
(a) Financial Assets
On initial recognition, financial assets are classified as
either financial assets at fair value through profit or loss,
held-to-maturity investments, loans and receivables financial
assets, or available-for-sale financial assets, as appropriate.
(i) Financial Assets at Fair Value Through Profit or Loss
As at the end of the reporting period, there were no financial
assets classified under this category.
(ii) Held-to-maturity Investments
As at the end of the reporting period, there were no financial
assets classified under this category.
(iii) Loans and Receivables Financial Assets
Trade receivables and other receivables that have fixed or
determinable payments that are not quoted in an active market are
classified as loans and receivables financial assets. Loans and
receivables financial assets are measured at amortised cost using
the effective interest method, less any impairment loss. Interest
income is recognised by applying the effective interest rate,
except for short-term receivables when the recognition of interest
would be immaterial.
(iv) Available-for-sale Financial Assets
As at the end of the reporting period, there were no financial
assets classified under this category except for loan and
receivables.
Notes to the Financial Statements
For the year ended 31 December 2016
2 Summary of significant accounting policies (Continued)
2.14 Financial Instruments (Continued)
(b) Financial Liabilities
All financial liabilities are initially at fair value plus
directly attributable transaction costs and subsequently measured
at amortised cost using the effective interest method other than
those categorised as fair value through profit or loss.
Fair value through profit or loss category comprises financial
liabilities that are either held for trading or are designated to
eliminate or significantly reduce a measurement or recognition
inconsistency that would otherwise arise. Derivatives are also
classified as held for trading unless they are designated as
hedges.
(c) Equity Instruments
(i) Ordinary Shares
Incremental costs directly attributable to the issue of new
ordinary shares or options are shown in equity as a deduction, net
of tax, from proceeds.
Dividends on ordinary shares are recognised as liabilities when
approved for appropriation.
(ii) Irredeemable Convertible Preference Shares ("ICPS")
Preference shares are classified as equity if they are
non-redeemable, or are redeemable but only at the Company's option,
and any dividends are discretionary. Dividends on preference shares
are recognised as distributions within equity.
Preference shares are classified as financial liabilities if
they are redeemable on a specific date or at the option of the
preference shareholders, or if dividend payments are not
discretionary. Dividends thereon are recognised as interest expense
in profit or loss as accrued.
(d) Derecognition
A financial asset or part of it is derecognised when, and only
when, the contractual rights to the cash flows from the financial
asset expire or the financial asset is transferred to another party
without retaining control or substantially all risks and rewards of
the asset. On derecognition of a financial asset, the difference
between the carrying amount and the sum of the consideration
received (including any new asset obtained less any new liability
assumed) and any cumulative gain or loss that had been recognised
in equity is recognised in profit or loss.
A financial liability or a part of it is derecognised when, and
only when, the obligation specified in the contract is discharged
or cancelled or expires. On derecognition of a financial liability,
the difference between the carrying amount of the financial
liability extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or
liabilities assumed, is recognised in profit or loss.
Notes to the Financial Statements
For the year ended 31 December 2016
2 Summary of significant accounting policies (Continued)
2.15 Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable, and represents amounts receivable for goods
supplied, stated net of discounts and returns. The Group recognises
revenue when the amount of revenue can be reliably measured and it
is probable that future economic benefits will flow to the entity,
and when specific criteria have been met for each of the Group's
activities, as described below.
(a) Sales of goods
Sales of refined palm oil, biofuels and nanofluids are
recognised when the risks of obsolescence and loss have been
transferred to the customers, and either the customers have
accepted the products in accordance with the sales contract, the
acceptance provisions have lapsed or the Group has objective
evidence that all criteria for acceptance have been satisfied.
(b) Rendering of services
Palm oil tolling services are recognised when services are
performed in accordance with the service contract.
(c) Finance income
Interest income is recognised on an accrual basis using the
effective interest method.
2.16 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 statement of financial position 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.
2.17 Employee Benefits
(a) Pension obligations
Group companies do not operate defined contribution schemes but
contribute to individual personal pension plan for certain
employees by way of paying 12% of their gross salary costs in lieu
of a scheme contribution as required by Malaysian law, which is
accounted for as salary when payable.
(b) Share-based payments
The fair value of previous share options 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 to their expiry dates. The expense is recognised in the
profit and loss 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. A credit is
recognised on the same basis in the share-based payment
reserve.
Notes to the Financial Statements
For the year ended 31 December 2016
2 Summary of significant accounting policies (Continued)
2.18 Fair value measurements
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether
that price is directly observable or estimated using a valuation
technique. The measurement assumes that the transaction takes place
either in the principal market or in the absence of a principal
market, in the most advantageous market. For non-financial asset,
the fair value measurement takes into account a market's
participant ability to generate economic benefits by using the
asset in its highest and best use or by selling it to another
market participant that would use the asset in its highest and best
use.
For financial reporting purposes, the fair value measurements
are analysed into level 1 to level 3 as follows:
Level 1: Inputs are quoted prices (unadjusted) in active markets
for identical assets or liability that the entity can access at the
measurement date;
Level 2: Inputs are inputs, other than quoted prices included
within level 1, that are observable for the asset or liability,
either directly or indirectly; and
Level 3: Inputs are unobservable inputs for the asset or liability.
The transfer of fair value between levels is determined as of
the date of the event or change in circumstances that caused the
transfer.
2.19 Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from
past events and whose existence will only be confirmed by the
occurrence or non-occurrence of one or more uncertain future events
not wholly within the control of the Group. It can also be a
present obligation arising from past events that is not recognised
because it is not probable that outflow of economic resources will
be required or the amount of obligation cannot be measured
reliably.
A contingent liability is not recognised but is disclosed in the
notes to the accounts. When a change in the probability of an
outflow occurs so that the outflow is probable, it will then be
recognised as a provision. A contingent asset is a possible asset
that arises from past events and whose existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain
events not wholly within the control of the Group. Contingent
assets are not recognised but are disclosed in the notes to the
accounts when an inflow of economic benefits is probable. When
inflow is virtually certain, an asset is recognised.
2.20 Judgements and estimates
Estimates and judgements 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 to 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.
(see note 15 for details). In view of the Group's planned exit from
the palm oil refining and biodiesel businesses, goodwill and
intangible assets have been fully impaired at the balance sheet
date.
Notes to the Financial Statements
For the year ended 31 December 2016
2 Summary of significant accounting policies (Continued)
2.20 Judgements and estimates (Continued)
(b) Impairment of property, plant and equipment
The carrying amounts of property, plant and equipment are
reviewed at the end of each reporting period to determine whether
there is any indication of impairment. If any such indication
exists, then the asset's recoverable amount is estimated, which
requires management judgement.
(c) Impairment of trade receivables
An impairment loss is recognised when there is objective
evidence that a trade receivable is impaired. Management has
specifically reviewed trade receivables having specific regard to;
historical bad debts, customer concentrations, customer
creditworthiness, current economic trends and changes in the
customer payment terms when making a judgment to evaluate the
adequacy of the allowance for impairment losses. Where there is
objective evidence of impairment, the amount and timing of future
cash flows are estimated based on historical loss experience for
assets with similar credit risk characteristics. If the expectation
is different from the estimation, such difference will impact the
carrying value of receivables. See Note 26 (b) for details
regarding the Group's trade receivables.
(d) Borrowings
As disclosed in Note 20, a novation agreement was completed to
novate the loan amounting to GBP17,695,000 from its primary long
term financier Malaysian Debt Ventures ("MDV") from Platinum
Nanochem Sdn. Bhd. to Platinum Techsolve Sdn. Bhd. on 26 August
2016. During the year the Group also entered into a Consent
Judgement with its primary short term financier Bank Kerjasama
Rakyat Berhad ("BKRB") with the terms of payment stipulated in the
aforesaid judgement. Subsequent to the financial year ended 31
December 2016 however, the Group has requested and been granted
deferments in payments by BKRB. The carrying values of outstanding
borrowings in Note 20 include accrued interest to date but exclude
any penalties that the Group may incur once settlement has been
reached with other lenders involving disposal of property, plant
and equipment held by the banks as security.
(e) Discontinued operations
Note 7 discusses the loss of control of Platinum Nanochem Sdn.
Bhd. and its wholly owned subsidiaries Platinum Green Chemicals
Sdn. Bhd. and Platinum Nano G Sdn. Bhd. in more detailed. The board
has had difficulties in accessing complete financial information of
these discontinued operations and hence has constructed financial
statements from the Statement of Affairs submitted to the
respective administrators, receivers and liquidators using best
estimates and judgement.
(f) Contingent liabilities
As disclosed in Note 25 to the financial statements, the
provided a corporate guarantee for banking facilities granted to
its subsidiary.
(g) Going concern
Management of the Group has made a number of significant
judgments about the applicability of the going concern basis of
presentation of the financial statements. These are set out in note
2.2.
Notes to the Financial Statements
For the year ended 31 December 2016
3 Subsidiaries
Graphene Nanochem plc has the following subsidiaries:
Name of subsidiaries Effective Registered address Principal activities
equity
interest
2016 2015
% %
Platinum Nanochem - 100 Suite 1008 10th Investment holding
Sdn. Bhd. Floor Wisma Lim and provision of
Foo Yong, 86 Jalan management services
Raja Chulan
50200 Kuala Lumpur,
Malaysia
Suite 1008 10th
Floor Wisma Lim
Foo Yong, 86 Jalan Trading of oilfield
Raja Chulan chemicals products,
Platinum Techsolve 50200 Kuala Lumpur, water treatment
Sdn. Bhd. 100 100 Malaysia products & polymers
Suite 1008 10th
Floor Wisma Lim
Foo Yong, 86 Jalan Refining of crude
Raja Chulan palm oil, trading
Platinum Performance 50200 Kuala Lumpur, of oilfield chemical
Chem Sdn Bhd. 100 100 Malaysia products
Platinum Nanochem Sdn. Bhd. has the following subsidiaries:
Name of subsidiaries Effective Registered address Principal activities
equity
interest
2016 2015
% %
Platinum Green - 100 Suite 1008 10th Manufacturing of
Chemicals Sdn. Floor Wisma Lim advanced chemicals
Bhd. Foo Yong, 86 Jalan and biofuels
Raja Chulan
50200 Kuala Lumpur,
Malaysia
Platinum Nano - 100 Suite 1008 10th Manufacturing of
G Sdn. Bhd. Floor Wisma Lim advanced nano materials
Foo Yong, 86 Jalan
Raja Chulan
50200 Kuala Lumpur,
Malaysia
Platinum Techsolve Sdn. Bhd. has the following subsidiaries and
joint venture:
Name of subsidiaries Effective Registered address Principal activities
equity
interest
2016 2015
% %
Suite 1008 10th
Floor Wisma Lim
Foo Yong, 86 Jalan
Raja Chulan Manufacturing and
Scomi Platinum 50200 Kuala Lumpur, trading of oilfield
Sdn. Bhd. 50 50 Malaysia chemical products
All the above subsidiaries are incorporated in Malaysia.
Please refer to Note 7 for discontinued operations during the
year.
4 Investment in a joint venture
2016 2015
GBP'000 GBP'000
Investment in a joint venture 78 78
Capital injection into joint venture 44 -
Share of loss (5) (20)
Foreign exchange adjustment (57) (39)
-------- --------
60 19
-------- --------
Scomi Platinum Sdn Bhd, a 50% owned joint venture in the Group
which is principally engaged in manufacturing of speciality
chemicals and other graphene-enhanced green chemicals. The Group
accounted for the joint venture by using the equity method.
Notes to the Financial Statements
For the year ended 31 December 2016
Summarised financial information in respect of the Group's joint
venture are set out below:
Year ended Year ended
31 December 31 December
2016 2015
GBP'000 GBP'000
Revenue - -
------------- -------------
Loss after tax (10) (40)
------------- -------------
Group's share of results for the
year (5) (20)
------------- -------------
Total assets 160 158
Total liabilities (40) (120)
Net assets 120 38
------------- -------------
Group's share of joint venture
net assets 60 19
------------- -------------
5 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 refining and manufacturing and trading of
oilfield chemicals (2015: one operating segment, refining and
manufacturing of palm oil and biofuels as well as production of
oilfield products). The financial information contained in these
financial statements therefore relates solely to this segment. The
Group's non-current assets consist of property, plant and
equipment, goodwill and intangible assets, and are located entirely
in Malaysia.
6 Revenue
2016 2015
GBP'000 GBP'000
Revenue from sales of
second generation biofuels
and refined palm oil - 46
Revenue from sales
of oil field products 258 9
258 55
======== ========
7 Discontinued Operations
During the financial year, the Group lost control of the
following entities:
i) Platinum Green Chemicals Sdn. Bhd.
Platinum Green Chemicals Sdn. Bhd. is a wholly owned subsidiary
of Platinum Nanochem Sdn. Bhd., which in turn is a wholly owned
subsidiary of Graphene Nanochem Sdn. Bhd. The Company's core
operations are in the discontinued fuel additive business.
On 11 July 2016, KPMG Deal Advisory Sdn. Bhd. was appointed as
receivers and managers of Platinum Green Chemicals Sdn. Bhd. The
appointment was made by Bank Pembangunan Malaysia Berhad vide the
Security Deed and Debenture held and pursuant to Sections 188(1),
189(1) and 189(2) of the Malaysian Company Act 1965. Upon this
appointment, the powers of the directors were suspended with
regards to all affairs and business of the Company. Subsequent to
this appointment, a winding up order for Platinum Green Chemicals
Sdn. Bhd. via Section 218 of the Malaysian Companies Act 1965 was
received on 1 August 2016.
ii) Platinum Nanochem Sdn. Bhd.
Platinum Nanochem Sdn. Bhd. a wholly owned subsidiary of
Graphene Nanochem Sdn. Bhd. and parent Company of Platinum Green
Chemicals Sdn. Bhd. and Platinum Nano G Sdn. Bhd. The Company's
core operations are in the discontinued fuel additive business.
On 15 July 2016, a winding up order was received for Platinum
Nanochem Sdn. Bhd. pursuant to Section 218 of the Malaysian
Companies Act 1965. Upon receipt of this order, the powers of the
directors were suspended with regards to all affairs and business
of the Company and its subsidiaries.
Notes to the Financial Statements
For the year ended 31 December 2016
7 Discontinued Operations (continued)
iii) Platinum Nano G Sdn. Bhd.
Platinum Nano G Sdn. Bhd. is a wholly owned subsidiary of
Platinum Nanochem Sdn. Bhd., which in turn is a wholly owned
subsidiary of Graphene Nanochem Sdn. Bhd. The Company's core
operations are in the business of providing high technology and
manufacturing of advanced materials.
On 15 July 2016, a winding up order was received for its parent
Company Platinum Nanochem Sdn. Bhd. pursuant to Section 218 of the
Malaysian Companies Act 1965. The directors deem this event as a
loss of control of Platinum Nano G Sdn. Bhd. and subsequently have
deconsolidated this entity from the Group accounts.
The results of Platinum Nanochem Sdn. Bhd. (till 15 July 2016),
Platinum Green Chemicals Sdn. Bhd. (till 11 July 2016) and Platinum
Nano G Sdn. Bhd. (till 15 July 2016) are presented below:
2016 2015
GBP'000 GBP'000
Revenue 900 7,916
Cost of sales (683) (8,468)
-------- ---------
Gross profit 217 (552)
Other Income (13) 242
Selling and distribution
expenses (126) (114)
Administrative expenses 5,980 (2,498)
Impairment of fixed
assets - (11,302)
Impairment of goodwill - (647)
Impairment of intangible
assets - (5,414)
Finance costs (325) (1,699)
Depreciation and amortisation (1) (1,785)
-------- ---------
Loss before tax for
discontinued operations 5,732 (23,769)
Tax - (20)
-------- ---------
Profit / (Loss) after
tax for discontinued
operations 5,732 (23,789)
-------- ---------
2016 2015
GBP'000 GBP'000
Assets
Property, plant and
equipment 15,054 15,536
Inventories 198 193
Trade and other receivables 240 807
Cash and cash equivalents 513 537
--------- --------
Total assets directly
associated with discontinued
operations 16,005 17,073
--------- --------
Liabilities
Trade and other payables 21,297 3,229
Borrowings 10,726 23,384
--------- --------
Total liabilities directly
associated with discontinued
operations 32,023 26,613
--------- --------
Net (liabilities) directly
associated with discontinued
operations (16,018) (9,540)
--------- --------
Notes to the Financial Statements
For the year ended 31 December 2016
7 Discontinued Operations (continued)
Basic Earnings per share from Discontinued Operations
attributable to the Equity Holders of the Group during the year
2016 2015
Profit/(loss) from discontinued
operation attributable to equity
holders of the parent GBP5,732,000 (GBP23,789,000)
Weighted average number
of ordinary shares in issue 116,536,536 116,536,536
------------- ------------------
Basic earnings/(loss) per share
in pence from discontinued operations 4.92p (20.41)p
============= ==================
8 Other Income
2016 2015
GBP'000 GBP'000
Realised gain on foreign currency
exchange - 242
Rental income 20 10
Other income from discontinued operations - (242)
20 10
======== ==================
9 Administrative expenses & bad debts written off
2016 2015
GBP'000 GBP'000
Included within administrative
expenses are:
Employee benefit expenses 186 835
Rental of premises 35 62
Rental of equipment - 28
Rental of motor vehicle - 4
Rental of office equipment - 2
Property, plant and equipment
written off - 2,340
Bad debts written off on
loss of control of subsidiaries 16,222 146
Inventory written off 45 694
Compensation for loss to
customer 86 -
Auditor's remuneration:
- Fees payable to the Group's
auditor for the audit of
the
Group's annual accounts 30 32
- Fees payable to the subsidiaries'
auditor for the audit of
the
subsidiaries' annual accounts 4 24
======== ========
Notes to the Financial Statements
For the year ended 31 December 2016
10 Directors and employees
The employee benefit expense during the year was as follows:
2016 2015
GBP'000 GBP'000
Salary and wages 174 766
Pension costs-defined
contribution 11 69
Social security cost 1 -
186 835
======== ========
The number of employees inclusive of executive directors at year
end was 14 (2015: 45).
2016 2015
Number Number
Directors & Managerial 5 9
Administrative 5 11
Operational 4 25
14 45
======= =======================
Remuneration in respect of Directors was as follows:
Basic Pension-Defined
salary contribution Total Total
Director and fees schemes 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Tan Sri Abi Musa 12 - 12 12
Dato Jespal Deol 3 - 3 12
Sushil Sidhu 2 - 2 12
AM Cleverly Esq & Mrs
JCM Cleverly - - - 12
Dato' Larry Gan 12 - 12 12
Patrick Dennis Howes 24 - 24 24
Dato' Mohamed Sallehuddin 12 - 12 12
65 - 65 96
========== ================ ======== ========
The salary and benefit payable to directors totaling GBP60,000
was accrued as at 31 December 2016
The number of Directors who accrued benefits under Company
pension schemes was as follows:
2016 2015
Number Number
Defined contribution
schemes 2 2
======= =======
11 Finance income/costs
2016 2015
GBP'000 GBP'000
Finance cost
Interest on bank borrowings 1,739 1,803
Interest paid to suppliers - 37
Finance costs from discontinued
operations - (1,699)
1,739 141
======== ========
Finance income
Interest income - 2
- 2
===================== ============
Notes to the Financial Statements
For the year ended 31 December 2016
12 Income tax
2016 2015
GBP'000 GBP'000
Current income tax - -
Deferred tax -
Origination or recognition of temporary
differences - (1,202)
- - (1,202)
=========================================================== ===================
The tax on the Group's loss before tax differs from the loss
before taxation multiplied by the standard rate of corporation tax
in Malaysia due to the following:
2016 2015
GBP'000 GBP'000
Loss before tax (16,269) (38,665)
Tax calculated at the standard rate
of corporation tax in Malaysia: 24%
(2015:25%) (3,905) (9,666)
Expenses not deductible for tax purposes 4,342 4,893
Deferred tax credit not recognised
during the year (437) 3,571
- (1,202)
========= =========
The temporary differences attributable
to the deferred tax assets and deferred
tax
liabilities which are not recognised
in the financial statements are as
follows:
Deferred tax assets:
- Unabsorbed capital allowances 8,660 20,934
- Unutilised tax losses 2,880 28,999
* Allowances for doubtful debts 516 459
12,056 50,392
Deferred tax liabilities:
- Accelerated capital allowances - (13,782)
--------- ---------
12,056 36,610
========= =========
The net deferred tax assets are not provided in view of the
uncertainty on the timing of their recoverability. The tax rate
applied is reflecting the average tax rate weighted in proportion
to accounting profit earned in each geographical territory.
13 Earnings per share
Basic
Basic earnings 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.
2016 2015
Loss attributable to equity
holders of the Company (GBP14,072,000) (GBP9,494,000)
Profit/(loss) from discontinued
operation attributable to equity
holders of the parent GBP5,732,000 (GBP23,789,000)
---------------- ----------------
Total (GBP8,340,000) (GBP33,283,000)
Weighted average number
of ordinary shares in issue 116,536,536 116,536,536
Notes to the Financial Statements
For the year ended 31 December 2016
13 Earnings per share (continued)
Basic (continued)
Earnings per share from
continuing and discontinued
operations attributable
to owners of the parent
Diluted earnings per share
- From continuing operations (12.08)p (8.15)p
- From discontinued operations 4.92p (20.41)p
--------- ---------
- From total comprehensive
loss (7.16)p (28.56)p
--------- ---------
Diluted
Diluted earnings per share is a performance metric calculated to
gauge the quality of earnings if all convertible securities were
exercised. 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 Directors have computed the diluted earnings per share by
assuming that all convertible securities on issue at year end is
converted at a price of 18.4375p.
2016 2015
Conversion of 30 Loan Notes,
par value GBP25,000 each 4,067,797 -
Conversion of 1,016,949
Warrants, exercise price
18.4375p 1,016,949 -
------------ --------------------------
Total additional shares
post conversion 5,084,746 -
Enlarged number of shares
of Group 121,621,282 116,536,536
Earnings per share from
continuing and discontinued
operations attributable
to owners of the parent
Diluted earnings per share
- From continuing operations (11.57)p (8.15)p
- From discontinued operations 4.71p (20.41)p
------------ --------------------------
- From total comprehensive
loss (6.86)p (28.56)p
------------ --------------------------
Notes to the Financial Statements
For the year ended 31 December 2016
14 Property, plant and equipment
Furniture,
fittings Computer Plant
Leasehold Leasehold and & and Motor Capital
land Buildings equipment Software machinery vehicles Renovation work-in-progress Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1
January
2015 2,733 1,217 348 - 33,780 403 340 8,599 47,420
Additions - - 29 - 2,201 345 - 2 2,577
Disposal - - - - (5) - - - (5)
Transfer - - (150) - (2,077) (449) - - (2,676)
Written
off (69) (378) (7) - (6,030) - (65) (7,291) (13,840)
Foreign
exchange
adjustment (396) (176) (42) - (2,535) (41) (44) (1,310) (4,544)
Discontinued
operations (1,554) (112) (178) - (21,504) (258) (231) - (23,837)
As at 31
December
2015 714 551 - - 3,830 - - - 5,095
Additions - - - 145 - - - - 145
Disposal - - - - - - - - -
Written
off - - - - - - - - -
Impairment - - - - - - - - -
Foreign
exchange
adjustment 106 82 - - 571 - - - 759
---------- ---------- ----------- --------- ---------- --------- ----------- ----------------- ---------
As at 31
December
2016 820 633 - 145 4,401 - - - 5,999
---------- ---------- ----------- --------- ---------- --------- ----------- ----------------- ---------
Accumulated depreciation
As at 1
January
2015 298 120 253 - 6,964 189 242 - 8,066
Additions 50 5 30 - 1,669 38 19 - 1,811
Disposal - - (121) - (89) (116) - - (326)
Foreign
exchange
adjustment (47) (17) (31) - (1,098) (21) (36) - (1,250)
Discontinued
operations (301) (108) (131) - (7,446) (90) (225) - (8,301)
As at 31
December
2015 - - - - - - - - -
Additions 18 14 - 44 294 - - - 370
Written
off - - - - - - - - -
Foreign
exchange
adjustment (1) (1) - - (9) - - - (11)
---------- ---------- ----------- --------- ---------- --------- ----------- ----------------- ---------
As at 31
December
2016 17 13 - 44 285 - - - 359
---------- ---------- ----------- --------- ---------- --------- ----------- ----------------- ---------
Net book
value as
at 31
December
2016 803 620 - 101 4,116 - - - 5,640
========== ========== =========== ========= ========== ========= =========== ================= =========
Net book
value as
at 31
December
2015 714 551 - - 3,849 - - - 5,095
========== ========== =========== ========= ========== ========= =========== ================= =========
Notes to the Financial Statements
For the year ended 31 December 2016
14 Property, plant and equipment (continued)
The leasehold land, buildings, plant and machinery owned by
Platinum Performance Chem Sdn. Bhd. have been pledged to licensed
banks as security for banking facilities granted to the Group as
disclosed in Note 20.
The title of the leasehold land owned by Platinum Performance
Chem Sdn. Bhd. at Lahad Datu, Sabah, Malaysia is yet to be
transferred to the subsidiary Company as it is held under master
title.
The Group's property, plant and equipment, including capital
work in progress, was subject to independent valuations once every
3 years which assessed both their current market value and forced
sale value. The valuations were performed in accordance with
Malaysian Valuation Standards and The Royal Institution of
Surveyors, Malaysia. In the previous financial year, fixed assets
have been impaired to their estimated forced sale values, as
determined by the valuations.
Notes to the Financial Statements
For the year ended 31 December 2016
15 Goodwill and Intangible assets
Development
Licenses Costs Patent Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 2015 7,524 6,391 3 3,171 17,089
Disposal - - (3) - (3)
Impairment (4,942) (4,873) - (2,039) (11,854)
Transfer - (24) 24 - -
Foreign exchange adjustment (62) (620) - (1,132) (1,814)
Discontinued operations (2,502) (874) - - (3,376)
--------- ------------ -------- ----------- ---------
As at 31 December
2015 18 - 24 - 42
Disposal - - - - -
Impairment - - - - -
Transfer - - - - -
Foreign exchange adjustment - - - - -
As at 31 December
2016 18 - 24 - 42
--------- ------------ -------- ----------- ---------
Accumulated amortization
As at 1 January 2015 2,087 546 1 - 2,634
Addition during the
year 421 433 - - 854
Elimination of depreciation - - (1) - (1)
Foreign exchange adjustment (5) (105) - - (110)
Discontinued operations (2,502) (874) - - (3,376)
--------- ------------ -------- ----------- ---------
As at 31 December
2015 1 - - - 1
Addition during the
year - - - - -
Elimination of depreciation - - - - -
Foreign exchange adjustment - - - - -
--------- ------------ -------- ----------- ---------
As at 31 December
2016 1 - - - 1
--------- ------------ -------- ----------- ---------
Net book value as
at 31 December 2016 17 - 24 - 41
========= ============ ======== =========== =========
Net book value as
at 31 December 2015 17 - 24 - 41
========= ============ ======== =========== =========
Goodwill
The carrying amount of goodwill has been fully impaired in the
previous financial year.
Licenses
i) License for the usage of development, exploitation and
commercialisation of graphite nano-fibres and its derivatives;
and
ii) License for the manufacture of palm oil biodiesel and the
linked refinery license subsequently obtained. A useful economic
life of 20 years has been assumed as the license has 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.
Development Costs
The carrying amount of development costs has been fully impaired
in the previous financial year.
Notes to the Financial Statements
For the year ended 31 December 2016
15 Goodwill and Intangible assets (Continued)
The goodwill and intangible assets are tested for impairment
annually at the statement of financial position date, the Group
evaluates, among other factors, the duration and extent to which
their carrying amount is less that its cost and the recoverable
amounts. This including factors such as market conditions, changes
in business, operational strategies and significant changes
expected to take place in the near future.
The directors are of the opinion that the Group will not
generate sufficient future profits and cash flows from its palm oil
and biodiesel businesses and accordingly the goodwill and
intangible assets related those businesses have been fully
impaired.
16 Inventories
2016 2015
GBP'000 GBP'000
At cost,
Raw material - 8
Finished goods - 192
Consumable goods 16 31
Inventories associated
with discontinued operations - (175)
-------- --------
16 56
At net realisable value,
Finished goods - 18
Inventories associated
with discontinued operations - (18)
-------- --------
16 56
======== ========
The amount of inventories recognised as an expense during the
year to 31 December 2016 was GBPnil (2015: GBP8,493,000). The
amount of inventories written off during the year to 31 December
2016 was GBP45,000 (2015: GBPnil)
17 Trade and other receivables
2016 2015
GBP'000 GBP'000
Trade receivables - 511
Other receivables 27 132
Deposits 28 164
Prepayments 50 115
Trade and other receivables
from discontinued operations - (807)
105 115
======== ========
The normal trade credit term is 30-60 days (2015: 30-90
days).
Included in prepayments, there are advances paid to trade
creditors for the purchase of raw materials amounting to
approximately GBPnil (2015: GBP106,000).
Notes to the Financial Statements
For the year ended 31 December 2016
18 Cash and cash equivalents
2016 2015
GBP'000 GBP'000
Fixed deposits with licensed banks - 3
Cash and bank balances 630 555
Cash and cash equivalents from discontinued
operations - (537)
630 21
======== ========
The deposits with licensed banks at the end of the reporting
period bore an effective interest rate of nil (2015: 3%) per annum.
The deposits have a maturity period of nil (2015: 30 days).
19 Trade and other payables
2016 2015
GBP'000 GBP'000
Trade payables - 1,838
Other payables 1,964 606
Accruals 179 919
Trade and other payables
from discontinued operations - (3,229)
2,143 134
======== ========
Within other payables is the amount of GBP436,000 in respect of
short term loans. These loans bear no interest, are security free
and are repayable at various dates on or before 31 December
2017.
The trade and other payables (excluding short term loans) of the
Group are due for payment within 30-60 days (2015: 30-60 days).
20 Bank borrowings
2016 2015
GBP'000 GBP'000
The details of bank borrowings are:
Term loans 20,300 10,464
Finance lease - 16
Revolving credits - 14,463
Bank Borrowings from discontinued
operations - (23,383)
-------- ---------
20,300 1,560
======== =========
The bank borrowings are repayable
as follows:
Shown as current liabilities
Term loans 2,966 10,464
Finance lease - 5
Revolving credits - 14,463
Borrowings directly related to discontinued
operations - (23,372)
2,966 1,560
======== =========
Shown as non-current liabilities
Term loans
Between one and two years 3,608 -
Between two and five years 13,726 -
More than five years - -
-------- ---------
17,334 -
Finance lease
Between one and two years - 12
Finance lease directly related to
discontinued operations - (12)
20,300 1,560
======== =========
Notes to the Financial Statements
For the year ended 31 December 2016
20 Bank borrowings (continued)
Term loans and Revolving credits
The term loans and revolving credits are secured as follows:
(a) first party first fixed charge over the leasehold land,
buildings, plant and machinery of certain subsidiaries as disclosed
In Note 14;
(b) fixed and floating charge over all present and future assets
of certain subsidiaries; both movable and immovable;
(c) assignment of all the subsidiaries' right under the relevant
contract/agreements related to the capital work-in-progress
assignable to the bank, applicable insurance, permits and
liquidated damages, performance bonds/guarantees and licenses;
(d) deed of assignment of contract proceeds over executed sales
off-take agreements between the borrower and the buyer; and
(e) irrevocable joint and several guarantees by the Company, all
directors of a subsidiary and certain directors of the Company.
Term loans bear weighted average effective interest rates ranged
from 7.25% to 8.10% (2015: 7.25% to 8.10%) per annum and revolving
credits bear weighted average effective interest rates ranged from
7.25% to 8.0% (2015: 7.25% to 8.0%) per annum.
Finance lease bears a weighted average effective Interest rate
of nil (2015: 6.96%) per annum.
On 26 August 2016, a novation agreement was completed to novate
the loan amounting to GBP17,695,000 from Malaysian Debt Ventures
("MDV") from Platinum Nanochem Sdn. Bhd. to Platinum Techsolve Sdn.
Bhd. The said facility has a tenure from 1 November 2015 to 31
December 2021 and bears an effective finance charge of 8% per annum
on daily rest payable semi-annually in advance subject to periodic
review at discretion of MDV.
During the year the Group also entered into a Consent Judgement
with its short term financier, Bank Kerjasama Rakyat Berhad
("BKRB"), with the terms of payment stipulated in the aforesaid
judgement. Subsequent to the financial year ended 31 December 2016,
the Group has requested and been granted deferments in payments by
BKRB.
21 Deferred tax liability
GBP'000
The movement on the deferred tax liability
are as follows:
As at 1 January 2015 1,202
Recognised in statement of comprehensive
income (1,202)
As at 31 December 2015 -
Recognised in statement of comprehensive
income -
--------
As at 31 December 2016 -
========
22 Share capital and options
2016 2015 2016 2015
Number of shares GBP'000 GBP'000
Issued and Fully Paid-Up:
At 1 January and 31 December
Ordinary shares of 0.20p
each - 116,536,536 - 23,307
Ordinary shares of 0.01p
each 116,536,536 - 1,165 -
Deferred shares of 0.19p
each 116,536,536 - 22,142 -
233,073,072 116,536,536 23,307 23,307
============ ============ =============== =============
Notes to the Financial Statements
For the year ended 31 December 2016
22 Share capital and options (continued)
At the Company's last Annual General Meeting held on 6 December
2016, approval was given by Shareholders, inter alia for a Capital
Reorganisation, whereby each Existing Ordinary Share of GBP0.20
nominal value was to be sub-divided into one New Ordinary Shares of
GBP0.01 nominal value and a 2016 Deferred Share of GBP0.19 nominal
value.
After the Share Capital Reorganisation there will be no change
to the number of ordinary shares in issue which means there will be
116,536,536 New Ordinary Shares in issue. The Deferred Shares will
have no value or voting rights and will not be issued with a share
certificate in respect of the Deferred Shares and they will not be
listed on AIM.
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.
Translation reserve - represents the differences arising on translation of foreign operations into the presentational currency.
Reverse acquisition reserve - represented the premium on shares
issued as consideration for the reverse acquisition of Platinum
Nanochem Sdn. Bhd. which was acquired by way of share for share
exchange.
23 Preference Shares
2016 2015
GBP'000 GBP'000
Irredeemable convertible preference
shares
-------- --------
As at 1 January 1,924 2,249
Foreign exchange adjustment 286 (325)
Preference Shares written off directly (2,210) -
related to discontinued operations
-------- --------
As at 31 December - 1,924
======== ========
Irredeemable convertible preference shares
In the year ended 31 December 2013, the subsidiary of the
Company issued 12,250,000 irredeemable convertible preference
shares of RM1 each as consideration for the acquisition of plant
and machinery.
The rights attached to the irredeemable convertible preference
shares ("ICPS") are as follows:
(a) The ICPS shall not carry any fixed rate of dividend. The
ICPS holder shall be entitled, on an As If Converted Basis, to such
dividend and at such rate as may be declared over the ordinary
shares of the subsidiary from time to time. "As If Converted Basis"
means the notional conversion of all the ICPS held by a holder on
the date falling immediately prior to the record date for the
dividends on the ordinary shares of the subsidiary.
(b) The ICPS holder does not have the right to vote at any
liquidation, dissolution, winding up or other repayment of capital
of the subsidiary. The holder of the ICPS shall participate
rateably with the holders of ordinary shares of the subsidiary in
any surplus assets.
(c) All of the outstanding ICPS shall be converted on a one to
one basis by the subsidiary into fully paid new ordinary shares in
the share capital of the subsidiary within fourteen (14) days from
the successful commissioning of a 50 tonne per annum facility for
the production of various forms of carbonaceous materials.
Notes to the Financial Statements
For the year ended 31 December 2016
23 Preference Shares (continued)
Irredeemable convertible preference shares (continued)
(d) The holder of the ICPS shall carry no right to vote at any
general meeting of the subsidiary except with regard to the
following circumstances:-
(i) upon any resolution which directly varies the rights attached to the ICPS; and
(ii) upon any resolution for the winding up of the subsidiary.
(e) The new ordinary shares will rank pari passu in all respects
with the then existing ordinary shares of the subsidiary.
The ICPS is held by Platinum Nanochem Sdn. Bhd. and has been
written off during the financial year as the Group has lost control
of this subsidiary. Please refer to Note 7 for further details.
24 Share Warrants
At financial year end, the Company had issued to Darwin Capital
Limited 1,016,949 Ordinary Shares Warrants at an exercise price of
18.4375 pence per new Ordinary Share. The Warrants can be exercised
over a five-year period from 23 December 2016.
25 Contingent liabilities
At the date of the report, the Company provided a corporate
guarantee for banking facilities granted to its subsidiary
amounting to GBP17,695,000 (2015: GBP15,905,000).
26 Financial instruments
The Group's activities expose it to a variety of financial
risks: market risks (including foreign currency risk, interest rate
risk and equity price risk), credit risk and liquidity 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 2016 are as follows:
2016 2015
GBP'000 GBP'000
Current assets
Trade and other receivables 105 922
Cash and bank balances 630 558
Current assets directly associated
with discontinued operations - (1344)
-------- ---------
Loans and receivables carried at
amortised cost 735 136
-------- ---------
Current liabilities
-------- ---------
Trade and other payables 2,143 3,370
Borrowings 2,966 24,932
Current liabilities directly associated
with discontinued operations - (26,614)
-------- ---------
5,109 1,688
Non-current liabilities
Borrowings 17,334 12
Non-current liabilities directly
associated with discontinued operations - (6)
Other financial liabilities carried
at amortised cost 22,443 1,694
-------- ---------
Risk management is carried out centrally under policies approved
by the Board.
Notes to the Financial Statements
For the year ended 31 December 2016
26 Financial instruments (continued)
(a) Market risk (continued)
The Group is exposed to foreign currency risk on transactions
and balances that are denominated in currencies other than Pound
Sterling. The currencies giving rise to this risk are primarily
United States Dollar and Malaysian Ringgit. Foreign currency risk
is monitored closely on an ongoing basis to ensure that the net
exposure is at an acceptable level. On occasion, the Group enters
into forward foreign currency contracts to hedge against its
foreign currency risk.
The carrying amounts of the Group's foreign currency denominated
monetary assets and monetary liabilities at the reporting date are
as follows:
United
2016 States Malaysian
Dollar Ringgit Total
GBP'000 GBP'000 GBP'000
Trade and other receivables - 86 86
Fixed deposits with licenced - - -
banks
Cash and bank balances - 139 139
Trade and other payables - 733 733
Borrowings - 20,300 20,300
--------- ---------- --------
Net exposure - 21,258 21,258
========= ========== ========
Foreign Currency Risk (continued)
United
States Malaysian
2015 Dollar Ringgit Total
GBP'000 GBP'000 GBP'000
Trade and other receivables 106 804 910
Fixed deposits with licenced
banks - 3 3
Cash and bank balances - 407 407
Trade and other payables (2) (2,601) (2,603)
Borrowings - (24,944) (24,944)
-------- ---------- ---------
Net exposure 104 (26,331) (26,227)
======== ========== =========
For the year ended 31 December 2016, if the Malaysian Ringgit
had strengthened or weakened by up to 5% against the Sterling with
all other variables held constant, the impact on the loss before
tax would have been increased and decreased by GBP637,000 (2015:
GBP1,315,000).
Cash flow and fair value interest rate risk
The Group's cash flow interest rate risk arises from money
market deposits and bank borrowings. Interest rate risk is the risk
that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in market interest rates. The
Group's exposure to interest rate risk arises mainly from money
market deposits and bank borrowings. The Group's policy is to
obtain the most favourable interest rates available. Any surplus
funds of the Group will be placed with licensed financial
institutions to generate interest income.
Bank borrowings bear a variable rate of interest which expose
the Group to cash flow interest rate risk. The Group does not
consider the risk to be significant in view of the nature of the
Group's current activities. A 100 basis point change represents
management's estimate of a possible change in interest rates at the
reporting date. If interest rates had been 100 basis points higher
and all other variables remained constant, the impact on the
Group's profit and loss would have been GBP203,000 (2015:
GBP249,000).
Notes to the Financial Statements
For the year ended 31 December 2016
26 Financial instruments (continued)
(b) Credit risk (continued)
The Group's exposure to credit risk, or the risk of
counterparties defaulting, arises mainly from trade and other
receivables. The Group manages its exposure to credit risk by the
application of credit approvals, credit limits and monitoring
procedures on an ongoing basis. For other financial assets
(including quoted investments, cash and bank balances and
derivatives), the Group minimises credit risk by dealing
exclusively with high credit rating counterparties.
The Group establishes an allowance for impairment that
represents its estimate of incurred losses in respect of the trade
and other receivables as appropriate. The main components of this
allowance are a specific loss component that relates to
individually significant exposures, and a collective loss component
established for Groups of similar assets in respect of losses that
have been incurred but not yet identified. Impairment is estimated
by management based on prior experience and the current economic
environment.
(i) Credit risk concentration profile
The Group's major concentration of credit risk relates to the
amounts owing by three (3) customers which constituted
approximately % (2015 - 81%) of its trade receivables at the end of
the reporting period.
The revenue generated by the three customers were as
follows:
Customer 1 - GBP258,451 [100%] (2015 - GBP727,352 Percentage of
revenue [9%])
Customer 2 - nil [-%] (2015 - GBP595,715 Percentage of revenue
[7%])
Customer 3 - nil [-%] (2015 - GBP85,162 Percentage of revenue
[1%])
Prior figures were part of discontinued operations in the
current year.
(ii) Exposure to credit risk
As the Group does not hold any collateral, the maximum exposure
to credit risk is represented by the carrying amount of the
financial assets as at the end of the reporting period.
(iii) Ageing analysis
2016
There are no trade receivables in the
statement of financial position at 31
December 2016
Gross Individual Collective Carrying
Amount Impairment Impairment Value
GBP'000 GBP'000 GBP'000 GBP'000
2015
Not past due 285 - - 285
Past due:
- 1 to 3 months 226 - - 226
- 3 to 6 months 146 (146) - -
657 (146) - 511
======== =========== =========== =========
Trade receivables that are past due but not impaired. Prior
figures were part of discontinued operations in the current
year.
The Group believes that no impairment allowance is necessary in
respect of these trade receivables. They are substantially
companies with good collection track record and no recent history
of default.
A significant portion of trade receivables that are neither past
due nor impaired are regular customers that have been transacting
with the Group. The Group uses ageing analysis to monitor the
credit quality of the trade receivables. Any receivables having
significant balances past due or more than 180 days, which are
deemed to have higher credit risk, are monitored individually.
Notes to the Financial Statements
For the year ended 31 December 2016
26 Financial instruments (continued)
(c) Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in settling its financial obligations that are settled
with cash or another financial asset. The Directors' objective is
to maintain, as much as possible, a level of its cash and bank
balances adequate enough to ensure that there will be sufficient
liquidity to meet its liabilities when they fall due. The following
set forth the remaining contractual maturities of financial
liabilities as at:
< 1 1-2 2-5
GBP'000 On demand year years years Total
31 December 2016
Trade and other
payables and accruals 2,143 - - - 2,143
Borrowings - 2,966 3,608 13,726 20,300
---------- ------ ------- ------- --------
2,143 2,966 3,608 13,726 22,443
========== ====== ======= ======= ========
31 December 2015
Trade and other
payables and accruals 3,370 - - - 3,370
Borrowings 24,927 5 11 - 24,943
---------- ------ ------- ------- --------
28,297 5 11 - 28,313
========== ====== ======= ======= ========
(d) Fair value information
As at the end of the reporting period, there were no financial
instruments carried at fair values. The fair values of the
financial assets and financial liabilities approximated their
carrying amounts due to relatively short-term maturity of the
financial instruments (maturing within the next 12 months). The
fair values are determined by discounting the relevant cash flows
at rates equal to the current market interest rate plus appropriate
credit rating, where necessary.
Set out below is a comparison by class of the carrying amounts
of fair value of the Group's financial instruments, other than
those whose carrying amounts are a reasonable approximation of fair
value:
Carrying Fair
GBP'000 Type value value
31 December 2016
Financial assets
Level
Property, plant and equipment 3 5,640 5,640
Level
Intangible assets 3 41 41
5,681 5,681
========= =======
31 December 2015
Financial assets
Level
Property, plant and equipment 3 20,631 20,631
Level
Intangible asset 3 41 41
--------- -------
20,672 20,672
========= =======
(e) Capital risk management
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.
Notes to the Financial Statements
For the year ended 31 December 2016
26 Financial instruments (continued)
(e) Capital risk management
The Group considers capital to be its equity reserves as shown
in the consolidated statement of financial position 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. Capital at 31 December 2016 and 31
December 2014 was as follows:
2016 2015 2014
GBP'000 GBP'000 GBP'000
Total borrowings (Note 20) 20,300 24,943 30,441
Less: Cash and cash equivalents
(Note18) (630) (558) (2,227)
--------- -------- --------
Net debt 19,670 24,385 28,214
Total equity (15,426) (5,893) 27,715
--------- -------- --------
4,244 18,492 55,929
========= ======== ========
27 Operating lease commitments
Leases as lessee
The Group leases two office premises and office equipment under
operating leases. The lease period of office premises is two years
with an option to renew after that date and office equipment is
five years.
2016 2015
GBP'000 GBP'000
Not more than one year 1 28
Later than one year and not later
than five years 2 3
-------- --------
3 31
-------- --------
28 Related party transactions
Identities of related parties
(a) In relation to the information detailed elsewhere in the
financial statements, the Group has a controlling related party
relationship with its subsidiary as disclosed in Note 3 to the
financial statements.
(b) Other than those disclosed elsewhere in the financial
statements, the Group and the Company also carried out the
following significant transactions with the related parties during
the financial year:-
2016 2015
GBP'000 GBP'000
Key management personnel:
- Salaries and other benefits 65 308
- Defined contribution plan - 34
======== ========
The salary and benefit payable to key management totaling
GBP60,000 was accrued as at 31 December 2016.
29 Control
The Company is under the control of its shareholders and not any
one party.
30 Significant event
During the financial year on the 23 December 2016, the Group
executed a subscription agreement with Darwin Capital Limited for
the issuance of up to GBP2.5m of Senior Unsecured Zero Coupon
Convertible Loan Notes ("Loan Notes") with detachable Warrants in 3
separate tranches. In tranche 1 a total of 30 Loan Notes of GBP
25,000 each, was issued along with 1,016,949 detachable warrants.
These warrants can be exercised over a five-year period from 23
December 2016.
Notes to the Financial Statements
For the year ended 31 December 2016
31 Subsequent events
Post financial year end Darwin Capital Limited converted the 30
Loan Notes issued from tranche 1 as follows:
Date Loan Aggregate Loan Aggregate New Ordinary Loan
Notes Value Notes Value Shares Note
Issued Converted Issued Balance
------------- -------- ----------- ----------- ------------- ------------- ---------
23 December
2016 30 GBP750,000 - - - 30
------------- -------- ----------- ----------- ------------- ------------- ---------
03 February
2017 - - (4) (GBP100,000) 1,349,674 26
------------- -------- ----------- ----------- ------------- ------------- ---------
08 March
2017 - - (6) (GBP150,000) 3,052,279 20
------------- -------- ----------- ----------- ------------- ------------- ---------
03 April
2017 - - (10) (GBP250,000) 6,130,011 10
------------- -------- ----------- ----------- ------------- ------------- ---------
12 April
2017 - - (10) (GBP250,000) 6,940,766 -
------------- -------- ----------- ----------- ------------- ------------- ---------
On 15 May 2017, the Group issued a further 40 Loan Notes in
tranche 2 with an aggregate value of GBP1,000,000 with 1,355,932
detachable warrants at an exercise price of 18.4375 pence per new
Ordinary Share. The Warrants can be exercised over a five-year
period from 15 May 2017.
At date of this report the enlarged share capital of the Group
consists of 134,009,266 ordinary shares at 1p each and total
detachable warrants outstanding are 2,372,881
Independent Auditor's Report
TO THE MEMBERS OF GRAPHENE NANOCHEM PLC
We have audited the financial statements of Graphene Nanochem
Plc for the year ended 31 December 2016 which comprise the
Statement of Financial Position, the Statement of Changes in
Equity, the Statement of Cash Flows and the related notes. The
financial reporting framework that has been applied in their
preparation is applicable law United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice) including
FRS 102 "The Financial Reporting Standard applicable in the UK and
Republic of Ireland".
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone, other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of Directors and Auditor
As explained more fully in the Directors' Responsibilities
Statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the parent company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by Directors; and the
overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the Annual
Report to identify material inconsistencies with the audited
financial statements and to identify any information that is
apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Opinion on financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's
affairs as at 31 December 2016 and of the Company's profit for the
year then ended;
-- have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Emphasis of matter - Going concern
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of the disclosure made in
note 2.2 to the Consolidated Group's financial statements
concerning the Company's ability to continue as a going concern.
While the Company made a net profit of GBP1,669,000 during the year
ended 31 December 2016, at that date, the Company had net current
assets of GBP1,657,000. These conditions, along with the other
matters explained in note 2.6 to the financial statements, indicate
the existence of a material uncertainty which may cast significant
doubt on the Company's ability to continue as a going concern. The
financial statements do not include the adjustments that would
result if the company was unable to continue as a going
concern.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the Strategic Report and the
Directors' Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the Strategic Report and the Directors' Report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the company and
its environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report and the
Directors' Report.
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the financial statements are not in agreement with the accounting records and returns; or
-- certain disclosures of Directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit
Mark Ling (Senior statutory auditor) 1 Westferry Circus
For and on behalf of PKF Littlejohn LLP Canary Wharf
Statutory auditor London E14 4HD
Statement of Financial Position
(Parent Company)
As At 31 December 2016
2016 2015
Notes GBP000 GBP000
Fixed assets
Property, plant & equipment 5 101 -
Intangible assets 7 41 41
142 41
Current assets
Other debtors 8 19 12
Amount owed by subsidiaries 8 3,632 -
Cash at bank and in hand 41 -
3,692 12
Current liabilities
Bank overdraft - (12)
Creditors: amounts falling due within one year 9 (2,035)
(117)
(2,035) (129)
Net current assets / (liabilities) 1,657 (117)
Net assets / (liabilities) 1,799 (76)
Capital and reserves
Share capital 10 23,307 23,307
Share premium account 11 37,639 37,639
Shares to be issued 206 -
Profit and loss account 11 (59,353) (61,022)
Shareholders' funds 11 1,799 (76)
On publishing the parent Company financial statements here
together with the Group financial statements, the Company is taking
advantage of the exemption in s408 of the Companies Act 2006 not to
present its individual Statement of Comprehensive Income statement
and related notes that form a part of these approved financial
statements.
The profit for the year is GBP1,669,000 (2015: Loss
GBP50,726,000)
Company Registration No: 05712979
Statement of Changes in Equity
(Parent Company)
As At 31 December 2016
Share Shares
Share Premium to be Accumulated Total
Capital Account issued Losses Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2015 23,307 37,639 - (10,296) 50,650
Total comprehensive
loss
--------- --------- -------- ---------------- ---------
Loss for the
financial year - - - (50,726) (50,726)
- - - (50,726) (50,726)
At 31 December
2015 23,307 37,639 - (61,022) (76)
Total comprehensive
loss
--------- --------- -------- ---------------- ---------
New Shares to
be issued - - 206 - 206
Profit for the
financial year - - - 1,669 1,669
--------- --------- -------- ---------------- ---------
- - 206 1,669 1,875
At 31 December
2016 23,307 37,639 206 (59,353) 1,799
========= ========= ======== ================ =========
Statement of Cash Flows
(Parent Company)
As At 31 December 2016
2016 2015
GBP'000 GBP'000
Cash Flows From Operating Activities
Loss before taxation 1,669 (50,726)
Adjustments for:
Depreciation of PPE 44 -
Amortisation of intangible assets 1 1
Impairment of investment in subsidiaries - 21,268
Provision against amount owed
by former Group undertakings (3,268) 26,759
Interest income - (168)
Warrant issue 81 -
-------- ---------
(Increase) / Decrease in :
Trade and other receivables (7) 4
Increase / (Decrease) in :
Trade and other payables 851 62
Other payable and accrued expenses 7 -
Cash Generated From / (Used In)
Operations (622) (2,800)
Net interest received - 168
Net interest paid - -
Net Cash Used In Operating Activities (622) (2,632)
-------- ---------
Cash Flows (For) / From Investing
Activities
Purchase of intangible assets - (42)
Repayment by subsidiaries - 1,841
Loan to subsidiaries (436) -
Net Cash (Used In) / Generated
From Investing Activities (436) 1,799
-------- ---------
Cash Flows (For) / From Financing
Activities
Issuance of loan notes 675 -
Loan from third party 436 -
-------- ---------
Net Cash (Used In) / Generated
From Financing Activities 1,111 -
-------- ---------
Net Decrease In Cash and Cash
Equivalents 53 (833)
Cash and Cash Equivalents at
beginning of year (12) 821
Cash and Cash Equivalents at
end of year 41 (12)
======== =========
Notes to the Financial Statements (Parent Company)
For the year ended 31 December 2016
1 General information
Graphene Nanochem Plc ("the Company") is the UK holding company
of a Group of companies which are involved in the design,
formulation and manufacturing of intermediate and performance
chemicals and advanced nano-materials. The registered address of
the Company is Academy House, London Road, Camberley, Surrey, GU15
3HL.
2 Principal accounting policies
2.1 Basis of preparation
The financial statements have been prepared under the historical
cost convention and using UK financial reporting standards and
applicable law which together comprise with FRS 102 - The Financial
Reporting Standard applicable in the UK and Republic of Ireland.
("UK GAAP"). The consolidated financial statements of the Group
have been shown separately and are prepared using IFRS as adopted
by the European Union.
Information on impact of first-time adoption of FRS 102 is given
in note 17.
On publishing the parent Company financial statements here
together with the Group financial statements, the Company is taking
advantage of the exemption in s408 of the Companies Act 2006 not to
present its individual Statement of Comprehensive Income statement
and related notes that form a part of these approved financial
statements.
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 Platinum Performance Chem Sdn
Bhd (formerly known as Zurex Corporation Sdn Bhd).
The principal accounting policies of the Company are set out
below. There were no recognised gains or losses for the year other
than the loss for the year.
The financial statements have been prepared on the going concern
basis as explained in Note 2.2 to the consolidated financial
statements.
2.2 Income from investments
Investment income comprises interest receivable from the
licensed banks and is recognised on an accrual basis using the
effective interest method.
2.3 Deferred taxation
Deferred tax is recognised in respect of all timing differences
that have originated but not reversed at the balance sheet date
where transactions or events have occurred at that date that will
result in an obligation to pay more, or a right to pay less or to
receive more, tax, with the following exceptions:
-- provision is made for tax on gains arising from the
revaluation (and similar fair value adjustments) of fixed assets,
and gains on disposal of fixed assets that have been rolled over
into replacement assets, only to the extent that, at the balance
sheet date, there is a binding agreement to dispose of the assets
concerned. However, no provision is made where, on the basis of all
available evidence at the balance sheet date, it is more likely
than not that the taxable gain will be rolled over into replacement
assets and charged to tax only where the replacement assets are
sold;
-- provision is made for deferred tax that would arise on
remittance of the retained earnings of overseas subsidiaries,
associates and joint ventures only to the extent that, at the
balance sheet date, dividends have been accrued as receivable;
and
-- deferred tax assets are recognised only to the extent that
the Directors consider that it is more likely than not that there
will be suitable taxable profits from which the future reversal of
the underlying timing differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax
rates that are expected to apply in the periods in which timing
differences reverse, based on tax rates and laws enacted or
substantively enacted at the balance sheet date.
Notes to the Financial Statements (Parent Company)
For the year ended 31 December 2016
2 Principal accounting policies (Continued)
2.4 Foreign currency
Transactions in foreign currencies are translated at the
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities in foreign currencies are translated at the
rates of exchange ruling at the balance sheet date. Any gain or
loss arising from a change in exchange rates subsequent to the date
of the transaction is included as an exchange gain or loss in the
profit and loss account.
2.5 Financial instruments
Financial assets and liabilities are recognised in the
statements of financial position when the Company has become a
party to the contractual provisions of the instruments.
The Company's financial assets and liabilities are initially
measured at fair value plus any directly attributable transaction
costs. The carrying value of the Company's financial assets,
primarily cash and bank balances, and liabilities, primarily the
Company's payables and other accrued expenses, approximate their
fair values.
(i) Financial assets
On initial recognition, financial assets are classified as
either financial assets at fair value through profit or loss,
held-to-maturity investments, loans and receivables financial
assets, or available-for-sale financial assets, as appropriate.
-- Trade and other receivables
Trade and other receivables (including deposits and prepayments)
that have fixed or determinable payments that are not quoted in an
active market are classified as other receivables, deposits, and
prepayments. Other receivables, deposits, and prepayments are
measured at amortised cost using the effective interest method,
less any impairment loss. Interest income is recognised by applying
the effective interest rate, except for short-term receivables when
the recognition of interest would be immaterial.
(ii) Financial liabilities and equity instruments
Financial liabilities are classified as liabilities or equity in
accordance with the substance of the contractual arrangement.
Interest, dividends, gains and losses relating to financial
liabilities are reported in profit or loss. Distributions to
holders of financial liabilities are classified as equity and
charged directly to equity.
-- Financial liabilities
Financial liabilities comprise long-term borrowings, short-term
borrowings, trade and other payables and accruals, measured at
amortised cost using the effective interest method.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash payments
(including all fees on points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial liability, or, where appropriate, a shorter period to the
net carrying amount on initial recognition.
-- Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all its
liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
Notes to the Financial Statements (Parent Company)
For the year ended 31 December 2016
2 Principal accounting policies (Continued)
2.6 Critical accounting judgments and key sources of estimation uncertainty
In the application of the Company's accounting policies, the
Directors are required to make judgments, estimates and assumptions
about the carrying amounts of assets and liabilities that are not
apparent from other sources. The estimates and assumptions are
based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
The following are the key assumptions concerning the future and
other key sources of estimation uncertainty at the statement of
financial position date that have a significant risk of causing a
significant adjustment to the carrying amounts of assets and
liabilities in the Financial statements:
2.7 Carrying value of investment in and loans due from subsidiaries
Management's assessment for impairment of investment and long
term loans in subsidiaries is based on the estimation of value in
use of the cash generating unit (CGU) by forecasting the expected
future cash flows for a period of up to five years, using a
suitable discount rate in order to calculate the present value of
those cash flows.
As the Company's subsidiaries have ceased operations and are in
negotiations with various banks to dispose of fixed assets to
settle overdue loans, management has fully impaired the carrying
values of investments in subsidiaries and loans due from
subsidiaries.
Notes to the Financial Statements (Parent Company)
For the year ended 31 December 2016
3 Administrative expenses
2016 2015
GBP'000 GBP'000
Included within administrative
expenses are:
Amortisation of intangible
assets - 1
Auditors remuneration
- Fees payable to the Company's
auditor for the audit of the
annual accounts 30 32
4 Directors and employees
The employee benefit expense during the year was as follows:
2016 2015
GBP'000 GBP'000
Salary and wages including
gratitude 65 96
-------- -------------------
There was no employee except for the number of directors during
the year was 6 (2015:7).
Remuneration in respect of Directors was as follows:
Basic Pension-Defined
salary contribution Total Total
Director and fees schemes 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Tan Sri Abi Musa 12 - 12
Dato Jespal Deol 3 - 12
Sushil Sidhu 2 - 12
Am Cleverly Esq &
Mrs JCM Cleverly - - 12
Dato' Larry Gan 12 - 12
Patrick Dennis Howes 24 - 24
Dato' Mohamed Sallehuddin 12 - 12
65 - 96
========== ========================== ======== =============
The salary and benefit payable to key management totaling
GBP60,000 was accrued as at 31 December 2016
5 Property, plant & equipment
2016 2015
GBP'000 GBP'000
Cost
At 1 January
Additions 145- -
-
-------- --------
At 31 December 145 -
-------- --------
Accumulated Depreciation
At 1 January - -
Additions 44 -
-------- --------
At 31 December 44 -
-------- --------
Net Book Value
At 31 December 101 -
-------- --------
Notes to the Financial Statements (Parent Company)
For the year ended 31 December 2016
6 Investments in subsidiaries
2016 2015
GBP'000 GBP'000
Cost
At 1 January 30,525 30,525
Additions - -
-------- --------
At 31 December 30,525 30,525
-------- --------
Permanent diminutions
At 1 January 30,525 9,257
Impairment for the
year - 21,268
-------- --------
At 31 December 30,525 30,525
-------- --------
Net book value - -
======== ========
Please refer to Notes 3 & 7 of the consolidated financial
statements for list of subsidiaries and discontinued
operations.
Investments in subsidiaries and a joint venture are shown at
cost less impairment loss.
As some of the Company's subsidiaries have ceased operations and
are in negotiations with various banks to dispose of fixed assets
to settle overdue loans, management has fully impaired the carrying
values of these investments in subsidiaries and loans due from
subsidiaries.
7 Intangible assets
Licenses Patents Total
GBP'000 GBP'000 GBP'000
Cost
As at 1 January 2016 18 24 42
Transfer from subsidiary
undertakings - - -
As at 31 December 2016 18 24 42
--------- -------- --------
Accumulated amortisation
As at 1 January 2016 1 - 1
Transfer from subsidiary
undertakings - - -
As at 31 December 2016 1 - 1
--------- -------- --------
Net book value as at
31 December 2016 17 24 41
========= ======== ========
8 Debtors
2016 2015
GBP'000 GBP'000
Due within more than
one year
Amounts owed by subsidiaries 3,632 26,759
Less: provision allowance - (26,759)
-------- ---------
Net amount owed by
subsidiaries 3,632 -
Due within one year
Other debtors 19 12
-------- ---------
3,651 12
======== =========
Notes to the Financial Statements (Parent Company)
For the year ended 31 December 2016
9 Creditors: amounts falling due within one year
2016 2015
GBP'000 GBP'000
Accruals and deferred
income 1,410 117
Borrowings 625
-------- --------
2,035 117
======== ========
10 Share capital and options
2016 2015 2016 2015
Number of shares GBP'000
Issued and Fully Paid-Up:
At 1 January and 31 December
Ordinary shares of 0.20p
each - 116,536,536 - 23,307
Ordinary shares of 0.01p
each 116,536,536 - 1,165 -
Deferred shares of 0.19p
each 116,536,536 - 22,142 -
233,073,072 116,536,536 23,307 23,307
============ ============ ======== =======
At the Company's last Annual General Meeting held on 6 December
2016, approval was given by Shareholders, inter alia for a Capital
Reorganisation, whereby each Existing Ordinary Share of 0.2p
nominal value was to be sub-divided into one New Ordinary Shares of
GBP0.01 nominal value and a 2016 Deferred Share of GBP0.19 nominal
value.
After the Share Capital Reorganisation there will be no change
to the number of ordinary shares in issue which means there will be
116,536,536 New Ordinary Shares in issue. The Deferred Shares will
have no value or voting rights and will not be issued with a share
certificate in respect of the Deferred Shares and they will not be
listed on AIM.
11 Statement of reserves
Share Premium Profit and
account loss account
GBP000 GBP000
At 1 January 2015 37,639 (10,296)
Loss for the year - (50,726)
-------------- --------------
At 31 December 2015 37,639 (61,022)
Profit for the year - 1,669
At 31 December 2016 37,639 (59,353)
-------------- --------------
12 Capital commitments
The Company had no contracted capital commitments at 31 December
2016 (2015: GBPnil).
13 Contingent liability
The Company has provided a guarantee in respect of bank
borrowings of its subsidiaries totaling GBP17,695,000 (2015:
GBP15,905,000).
Notes to the Financial Statements (Parent Company)
For the year ended 31 December 2016
14 Transactions with Directors and other related parties
The Company has taken advantage of the exemption in FRS102 and
has not disclosed transactions with wholly owned Group
undertakings. There are no other related party transactions with
the Company. The Company is under the control of its shareholders
and not any one party.
15 Company profit and loss account
The Company has taken advantage of the exemption available under
Section 408 of the Companies Act 2006 and has not presented its own
profit and loss account. The profit of the Company for the year was
GBP1,669,000 (2015: loss GBP50,726,000).
16 Financial instruments
The carrying amounts of the Company's financial assets and
liabilities as at 31 December 2016 are as follows:
2016 2015
GBP'000 GBP'000
Financial assets
Trade and other receivables 19 12
Cash and bank balances 41 -
-------- --------
60 12
-------- --------
Financial liabilities carried at
amortised costs
-------- --------
Trade and other payables 1,410 117
Borrowings 625 12
-------- --------
2,035 129
-------- --------
17 Operating lease commitments
Leases as lessee
The Group leases two office premises and office equipment under
operating leases. The lease period of office premises is two years
with an option to renew after that date and office equipment is
five years.
2016 2015
GBP'000 GBP'000
Not more than one year 1 28
Later than one year and not later
than five years 2 3
-------- --------
3 31
-------- --------
18 First time adoption of FRS 102
The accounting policies applied under the entity's previous
accounting framework are not materiality difference to the
accounting policies that are compliant with FRS 102 and there has
been no material impact on equity or profit or loss. Accordingly,
no reconciliation from the entity's previous accounting framework
has been presented.
19 Significant event
Refer to Note 30 of the consolidated financial statements.
20 Subsequent events
Refer to Note 31 of the consolidated financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GUGDLCUXBGRG
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June 30, 2017 02:03 ET (06:03 GMT)
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