TIDMHYR
RNS Number : 9380E
HydroDec Group plc
12 May 2017
12 May 2017
Hydrodec Group plc
("Hydrodec", the "Company" or the "Group")
Audited final results for the year ended 31 December 2016
Hydrodec Group plc (AIM: HYR), the clean-tech industrial oil
re-refining group, today announces audited results for the 12
months ended 31 December 2016.
Strategic highlights
-- Strategic focus during 2016 on core transformer oil
re-refining business and associated technology
-- Rigorous focus on execution, making effective cost savings
and delivering the ramp-up of production and sales in the US
-- Disposal of loss-making UK recycling operations in March 2016
Financial highlights
-- Revenues for the year arising from the continuing core
re-refining business increased by over 100% to US$16.8 million
(2015: US$8.2 million), reflecting the full recommissioning of the
Canton plant and ongoing refinements to operating procedures and
technological efficiency
-- Gross unit margins higher than 2015, despite lower product
sales prices and challenging market conditions, with operational
performance driving improved commercial performance
-- Improvement in overall sales mix between higher margin
transformer oil and lower margin base oil, with transformer oil
sales representing 40% of total Group oil sales in 2016, up from 7%
in 2015
-- Administrative expenses fell significantly by 44% to US$6.6
million (2015: US$11.8 million) representing 38% of total income
(2015: 121%)
-- Group EBITDA loss from continuing operations significantly
reduced in the year at US$1.3 million, with just US$0.2 million
incurred in the second half of the year
-- Group EBITDA positive for Q4 2016, despite the usual seasonal
trends, providing the Company with confidence that the trend
towards positive EBITDA at Group level will continue throughout
2017
-- Net financial expense was US$1.1 million (2015: US$0.5
million) and relates to the interest payable under the lease in the
US and interest payable on the shareholder loans in the UK
-- The overall loss for the year, including losses associated
with the discontinued business, reduced to US$7.8 million (2015:
US$31.1 million)
Operational highlights
-- Group sales volumes of premium quality SUPERFINE transformer
oil and base oil for the year of 33.3 million litres (2015: 14.4
million litres), up 131% on the prior year
-- Average utilisation rate of 73% achieved for the year at
Canton, further validated by a significantly lower number of
production hours lost through unscheduled stoppages
-- Reported record sales of over 2.8 million litres in October
from Canton and record production days on two separate dates in the
same month
-- SUPERFINE transformer oil in US achieved "500 hour" status, certifying its quality
-- Hydrodec of North America ("HoNA") received accreditation for
generating carbon offsets through the re-refining of used
transformer oil
-- Relocated plant at Southern Oil's location in Bomen, New
South Wales performed well in first full year of operation under
the tolling arrangements - quality of the oil produced there is
extremely high
-- In Australia, award of a 5-year contract, for the supply of
inhibited transformer and switchgear oil, by Essential Energy,
expected to generate over 1 million litres of new transformer oil
sales over the life of the contract
Post period-end highlights and current trading:
-- Continued to pursue further market penetration in the
transformer oil business with an improvement in this key indicator
of 47% of all oil sales in Q1 2017 (2016: 24%)
-- Company achieved positive EBITDA for Q1 2017 in traditionally
the most difficult period of the year, particularly in respect of
feedstock collection and availability
-- Initial carbon credit sales achieved
-- Additional working capital facility for GBP0.5 million from
Andrew Black, the Company's largest shareholder and a non-executive
director
Chris Ellis, Chief Executive Officer of Hydrodec, commented: "I
am pleased to report that 2016 saw significant progress for the
Company as it moved towards profitability, reflecting the positive
impact of the operational improvements and cost reduction measures
put in place over the last eighteen months.
It was an important year for Hydrodec as we continued to deliver
on our strategy and made key portfolio changes in order to focus
the business on our transformer oil operations and, in particular,
on driving both our margins and overall market share penetration of
the US transformer oil market as we relaunched our business
there.
In 2017, we remain focused on continuing to deliver on the
positive Q4 2016 performance, seeking to sustainably improve
margins and market share whilst achieving further cost reductions
and efficiencies where appropriate. This should enable Hydrodec to
deliver positive Group EBITDA for 2017."
For further information please contact:
Hydrodec Group plc 01372 824750
Chris Ellis, Chief Executive
Canaccord Genuity (Nominated Adviser and Broker) 020 7523 8000
Henry Fitzgerald-O'Connor
Richard Andrews
Vigo Communications (PR adviser to Hydrodec) 020 7830 9700
Patrick d'Ancona
Chris McMahon
Notes to Editors:
Hydrodec's technology is a proven, highly efficient, oil
re-refining and chemical process initially targeted at the
multi-billion US$ market for transformer oil used by the world's
electricity industry. MarketsandMarkets forecasts that the global
transformer oil market is expected to grow from US$1.98 billion in
2015 to US$2.79 billion by 2020 at a CAGR of 7.14% from 2015 to
2020. Spent oil is currently processed at two commercial plants
with distinct competitive advantage delivered through very high
recoveries (near 100%), producing 'as new' high quality oils at
competitive cost and without environmentally harmful emissions. The
process also completely eliminates PCBs, a toxic additive banned
under international regulations.
In 2016 Hydrodec received carbon credit approval from the
American Carbon Registry ("ACR"), enabling its product to be sold
with a carbon offset and creating an incremental revenue stream.
The Group is now generating carbon offsets through the re-refining
of used transformer oil, which would otherwise ordinarily be
incinerated or disposed of in an unsustainable manner. This is a
highly distinctive feature for the Group, confirming (as far as the
Board is aware) Hydrodec as the only oil re-refining business in
the world to receive carbon credits for its output. This is a
significant endorsement of the Company's proprietary technology and
standing as a leader in its field.
Hydrodec's plants are located at Canton, Ohio, US and Bomen, New
South Wales, Australia.
Hydrodec's shares are listed on the AIM Market of the London
Stock Exchange. For further information, please visit
www.hydrodec.com.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
Chairman's Statement
2016 was an important year for Hydrodec, which saw material
progress both operationally and commercially, reflecting the
strategic imperatives the Board had previously determined as we
considered the best way ahead for the Company. I believe Hydrodec
is now well-positioned to further develop its core business and
move into profitability in 2017.
Following an internal strategic review which was initiated in
December 2015, we decided as a Board to focus on our market leading
transformer oil re-refining technology. As a consequence the Group
divested its UK collections and recycling business in March 2016.
This facilitated an enhanced focus on operational improvements at
our core US and Australian businesses.
The Group's intensive turnaround programme has been driven by
the Company's Chief Executive, Chris Ellis, with the refocused and
rationalised business moving towards profitability. Having been
Acting Chief Executive from December 2015, Chris was confirmed in
his role in March 2016 and has continued to drive the turnaround
strategy across the business in 2017.
Our clear focus on growing our market leading transformer oil
technology and business remains underpinned by the potential scale
of the US$2 billion+ global transformer oil market. With ongoing
operating refinements and technological enhancements, our Canton
plant has achieved record production levels and we continue to see
further improvements throughout 2017.
Another key goal of the Group is to build our sales of
transformer oil and to continue to increase the margin for our
product in what remains a highly competitive market. We continue to
rebuild our market share in the US, whilst increasing the
production ratio of transformer oil against base oil - both
fundamental aims for our North American business. The additional
investment by G&S into the US business reflects the strength of
this key partnership, thereby ensuring secure supplies of
feedstock. We also continue to review opportunities to develop
further re-refining capability in the US and other
jurisdictions.
It was transformational to the Company to receive carbon credit
approval in September, making the Company the first re-refiner to
earn a carbon credit for its transformer oil. This further endorses
the quality of our technology, our product and market leading green
credentials; whilst creating an annuity-styled revenue stream for
the Group. Our first sale of carbon credits was reported in May
2017.
I would like to record, on behalf of the Board and the Company,
our thanks to Andrew Black, our largest shareholder, whose
continuing support of the business in recent years, over a
challenging period in the Company's history, has been hugely
appreciated. This is further demonstrated by the provision of
additional working capital facilities announced today. We are
confident we will be in a position to repay Andrew's good faith and
support as the Company continues to strengthen.
I look forward to updating you further as we continue to make
progress during 2017.
Lord Moynihan
Chairman
Chief Executive's Report
I am pleased to report that 2016 saw significant progress for
your Company as we moved towards profitability, reflecting the
positive impact of the operational improvements and cost reduction
measures put in place over the last eighteen months.
This work has also created strong foundations for the business
on which we continue to look to build in the short term. This is
particularly relevant in respect of feedstock supply and collection
which are crucial elements of the supply chain and our business
model.
Strategy
In March 2016, the Board restated its strategy to focus on the
Group's core market leading transformer oil re-refining technology
and to grow that business in order to access a larger proportion of
the US$2 billion global transformer oil market.
Specifically, the Board stated its intention to look to
strengthen Hydrodec's footprint in the US and in the international
transformer oil market, where the Board believes Hydrodec has a
competitive advantage through its proven and market-leading
technology.
Our focus has therefore been to grow the transformer oil
business in order to drive margin expansion and profitability, with
a rigorous focus on execution, making effective cost savings and
delivering the ramp-up of production and sales in the US.
It was, therefore, an important year for Hydrodec as we
continued to deliver on this strategy by further improving our
rebuilt, expanded facility at Canton in Ohio, as we relaunched our
US transformer oil business. As the business there continues to
grow we will further seek to leverage this opportunity with our
partner and deploy a further two trains at the appropriate
time.
In addition, we made important portfolio changes in order to
focus our business on our transformer oil operations, with the
disposal of our loss-making UK recycling operations in March
2016.
Regional business review
USA
Following the well-publicised reliability issues upon its
recommissioning in 2015, the Canton plant performed satisfactorily
in its first full year of production. Further improvements
identified by operating the plant were made during 2016 and will
continue to be made in the coming financial year to both enhance
reliability and product quality. We were able to report record
sales of over 2.8 million litres in October and record production
days on two separate dates in the same month. It was also pleasing
to report that our SUPERFINE transformer oil in the US achieved
"500 hour" quality status, a requirement from a dielectric
perspective enabling us to service the larger transformer market
going forward. Importantly we were able to win back several of our
largest customer relationships at the end of the year which will
have a positive impact on the performance of Canton in 2017. As we
continue to re-establish our market position, I am confident that
we will see a further improvement in the proportion of transformer
oil sales increasing significantly from the 40% they represented in
2016, with actual performance in 2017 to date at levels above that.
Feedstock availability and collection are key to our business and I
am pleased that, under the terms of our earlier agreement, we
concluded in October additional investment by our partner G&S
Technologies Group in Hydrodec of North America ("HoNA"),
increasing their ownership of the business to 37.45% and their
non-controlling interest to US$7.9 million (2016: US$5.6
million).
Australia
The relocated plant at Southern Oil's location in Bomen, New
South Wales has worked well in its first full year of operation
under the tolling arrangements and the quality of the oil produced
there is extremely high. The key to unlocking all of the
operational benefits available to us through this relocation is
driven by the availability of feedstock. The more feedstock we are
able to put through our production process over the fixed monthly
fee, the more profitable the operation will become. A key focus has
therefore been on this aspect of our commercial activities with
some notable successes from a low starting point at the beginning
of the year. The award of a five-year contract, for the supply of
inhibited transformer and switchgear oil, by Essential Energy,
including the collection and re-refining of all generated PCB and
non-PCB waste oils, is expected to generate over one million litres
of new transformer oil sales over the life of the contract. This is
a significant step and validation of our product and service
offering. The fact that our re-refined transformer oil was
successful in a competitive tender and exceeded the technical
product acceptance criteria provides the basis to develop similar
relationships with other utilities in Australia in 2017.
Carbon credits
We were pleased to receive in September carbon credit approval
from the American Carbon Registry ("ACR"), enabling Hydrodec's
product to be sold with a carbon offset and creating a future
incremental revenue stream. This is a highly distinctive feature
for the Company, confirming (as far as the Board is aware) Hydrodec
as the only oil re-refining business in the world to receive carbon
credits for its output. This is a significant endorsement of the
Company's proprietary technology and standing as a leader in its
field.
HoNA is now generating carbon offsets through the re-refining of
used transformer oil, which would otherwise ordinarily be
incinerated or disposed of in an unsustainable manner. The ACR has
recognised 165,000 credits for HoNA's previous production between
2009 and 2014 and the Board was pleased to announce post the
financial year end, the first sales of a proportion of these
historic credits. Whilst the historic credits may only generate
nominal sums, the Company anticipates that it will generate between
50,000 to 60,000 tons of carbon offset annually going forward and
the ongoing generation of such credits could realise a value of up
to US$5 per ton based on current industry reports.
Operating and commercial performance
Revenues for the year arising from the continuing core
re-refining business increased by over 100% to US$16.8 million
(2015: US$8.2 million), reflecting the full recommissioning of the
Canton plant at the end of 2015 and the ongoing refinements made to
our operating procedures and technological efficiency.
This result reflected increased Group sales volumes of premium
quality SUPERFINE transformer oil and base oil for the year of 33.3
million litres (2015: 14.4 million litres), up 131% on the prior
year.
Underpinning this volume increase was the process of continued
improvement of plant operability, with an average utilisation rate
of 73% achieved for the year in Canton. This was further validated
by a significantly lower number of production hours lost through
unscheduled stoppages. We continue to focus on maintaining high
levels of mechanical asset reliability.
Gross unit margins were higher than 2015, despite lower product
sales prices and challenging market conditions, with operational
performance driving improved commercial performance.
There was an improvement in the overall sales mix between higher
margin transformer oil and lower margin base oil, with transformer
oil sales representing 40% of total Group oil sales in 2016, up
from 7% in 2015. We continue to pursue further market penetration
in the transformer oil business with an improvement in this key
indicator of 47% of all oil sales in Q1 2017 (2016: 24%).
A key focus has been on managing the cost base appropriately,
and significant reductions in operating and corporate costs have
already been realised with the benefits from more recently
implemented initiatives continuing to filter through into 2017.
Those initiatives include the recent outsourcing of non-core added
activities such as finance in addition to expected reductions in
other areas such as insurance. Administrative expenses fell
significantly by 44% to US$6.6 million (2015: US$11.8 million)
representing 38% of total income (2015: 121%) and a reflection of
efforts in this area.
Group EBITDA loss from continuing operations significantly
reduced in the year and was US$1.3 million, with just US$0.2
million incurred in the second half of the year. Group EBITDA was
positive for Q4 2016, despite the usual seasonal trends, providing
the Company with confidence that the trend towards positive EBITDA
at Group level will continue throughout 2017. We have already seen
further evidence of that in Q1 of this year as the Company achieved
positive EBITDA in traditionally the most difficult period of the
year, particularly in respect of feedstock collection and
availability.
The overall loss for the year, including losses associated with
the discontinued business, reduced to US$7.8 million (2015: US$31.1
million).
Internally the business continues to be managed and performance
measured by reference to EBITDA, it being the closest indicator of
cash generated from operations. As this is not a statutory
accounting measure, the table below reconciles this figure to the
statutory operating loss:
US$'000
---------
EBITDA (1,278)
Interest costs (1,086)
Taxation 445
Depreciation (2,711)
Amortisation (1,667)
Share based payment
costs (9)
Loss from discontinued
operations (1,503)
Statutory operating
loss (7,809)
---------
Finance costs
Net financial expense was US$1.1 million (2015: US$0.5 million)
and relates to the interest payable under the lease in the US and
interest payable on the shareholder loans in the UK.
Operating cash flow and working capital
In 2016, the Group had net cash outflow from operating
activities of US$4.4 million (2015: US$13.7 million). The movement
in working capital of US$1.5 million was a combination of a
reduction in inventory levels, an increase in trade receivables and
a reduction in trade and other payables consisting principally of
the payment of feedstock suppliers. Credit management remains
robust with no bad debts written off during the year.
The amount of working capital required by the Group's operations
continues to be closely monitored and controlled, and forms a key
part of management information. While the improving operational and
financial performance has led to the recent and forecast positive
EBITDA position, the Group is not yet positive cash generative
overall given its finance costs. As a result, and in light of the
Group's current cash and working capital position, the Company
announces that it has today agreed an additional working capital
facility (the "Facility") with Andrew Black, the Company's largest
shareholder and a non-executive Director (the "Lender"). The
Facility is for up to GBP500,000, bears interest at 10% per annum
on drawndown sums and is subject to an arrangement fee of 2.5%. The
Facility is secured over the assets of the Company.
The Facility is repayable on 31 December 2017, however the
Lender has agreed to provide the Company with an option to extend
the repayment date on the Facility, and the repayment date on all
other existing working capital facilities provided by the Lender,
to 31 December 2018. Any such extension of the loans would be at
the sole discretion of the Company and on commercial terms to be
agreed between the parties at the time.
Liquidity and financing activities
The Group's principal financing facilities are a seven year
US$10 million finance lease arrangement with First Merit fully
drawn and repayment under which commenced on 1 October 2015, and
shareholder loans from Andrew Black of US$7.8 million as at 31
December 2016 (of which US$7.4 million was utilised as at 31
December 2016), repayable on 31 December 2017. As referred to
above, the Company has acquired the option, at the Company's sole
discretion, to extend the repayment date of these loans to 31
December 2018.
The Company also has in place a lease financing arrangement of
US$1.2 million with its partner in Australia, Southern Oil, in
respect of the infrastructure costs incurred for the establishment
of its facilities at the site in Bomen. Additional working capital
has been provided by overdraft facilities in the USA and Australia.
Borrowings associated with the discontinued UK business were
divested as part of the sale arrangements for the UK operations in
March 2016.
The Group's net debt at 31 December 2016 was US$19.2 million
(2015: US$19.6 million).
Capital expenditure in 2016 totalled US$0.5 million (2015:
US$14.9 million), primarily incurred in the US in relation to
operational improvements of the rebuilt plant at Canton.
Financial reporting
The financial information has been prepared under IFRS and in
accordance with the Group's accounting policies. There have been no
changes to the Group's accounting policies during the year ended 31
December 2016.
Going concern
As set out in note 1 of the Group financial statements, taking
into account the Group's current forecast and projections, the
available facilities and progress in re-establishing market share
in the US, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue operating
for at least the next 12 months. Accordingly, the Directors
continue to adopt the going concern basis in preparing the Annual
Report and financial statements.
Disposal of UK recycling operations
In late 2015 and January 2016, the Company undertook a detailed
internal strategic review of its UK waste oil collections business
and proposed UK lubricant oil re-refining project, following a
significant deterioration in its UK operations. This deterioration
was driven predominately by the rapid decline in global oil prices
and continued challenging market conditions which resulted in the
UK business generating an increasing level of significant losses.
Despite implementing extensive restructuring and cost-saving
measures during 2015, Hydrodec remained heavily exposed to the
impact of the global oil price decline. Given the significant cash
consumption and limited cash resources available to the Company (in
the absence of a significant further fundraising), the Directors
reviewed all available options and concluded that it was in the
best interests of the Company to dispose of the UK operations.
Following a strategic auction process conducted by an
independent third party financial adviser, the Company sold its UK
operations to Andrew Black, a non-executive Director and
substantial shareholder (the "Buyer"), on 4 March 2016 for a
consideration of GBP1 in cash, including the transfer to the Buyer
of c. GBP3.9 million of existing third party indebtedness in the UK
business and involving the injection by the Buyer of further
working capital into that operation. In addition, the Buyer granted
Hydrodec a contractual right to receive a proportion of the Buyer's
entitlement to any future profits of the UK re-refining project on
the following waterfall basis (a) first, the Buyer, as primary risk
taker, to recover the costs of its investment in the UK re-refining
project; (b) then, the next tranche to be applied 70:30 between
Hydrodec and the Buyer respectively until Hydrodec has recovered
its costs incurred to date in connection with the UK re-refining
project; and (c) finally, the balance of any profits to be shared
90:10 between the Buyer and Hydrodec. The Buyer will bear all risk
and responsibility for developing the UK lubricant oil re-refining
project going forward, with Hydrodec retaining only a passive
economic interest under these profit share arrangements. The UK
re-refining project also offers a potential opportunity to develop
transformer oil re-refining capacity in the UK. The loss for the
year that is attributable to the discontinued operations is US$1.5
million (2015: US$14.1m). The impact on the Company and the
financial statements of all of the above is described in note 4 to
the financial statements, "Discontinued operations".
Outlook
I believe we continue to make strong progress in the turnaround
of the Company, with the goal of generating positive EBITDA for
2017 in sight. Whilst the general operating environment for oil
related businesses has improved recently, positively impacting the
Group's pricing and margins, challenges still remain. 2017 has
begun strongly in terms of sales orders in the US and Australia.
Whilst the Australian feedstock position remains robust, the
feedstock position in the US is tighter. Higher margin transformer
oil sales currently represent c. 47% of total Group oil sales, with
scope for further improvement through the year. The first sale of
carbon credits in the US takes us a step further to realising our
goal of an additional revenue stream unique to our technology and
business.
In 2017, we remain focused on continued progress from the
positive Q4 2016 performance, which will be driven by strengthening
margins as the Group continues to grow market share and deliver
further cost reductions and efficiencies where appropriate. This
should position Hydrodec to deliver positive Group EBITDA for
2017.
Chris Ellis
CEO
Consolidated Income Statement
For the year ended 31 December 2016
2016 2015
Note USD'000 USD'000
Continuing operations
Revenue 2 16,828 8,231
Other income 2.3 445 1,521
Total income 17,273 9,752
Cost of sales (15,952) (10,421)
Gross profit/(loss) 1,321 (669)
Administrative
expenses (6,613) (11,763)
Operating loss
before impairment (5,292) (12,432)
Impairment of property,
plant and equipment
and intangibles (373) (3,433)
Operating loss
after impairment (5,665) (15,865)
Finance costs 3 (1,086) (497)
Finance income - 5
Loss on ordinary
activities before
taxation 2.2 (6,751) (16,357)
Taxation 445 (656)
Loss for the year
from continuing
operations (6,306) (17,013)
Discontinued operations
Loss from discontinued
operations, net
of tax 4 (1,503) (14,125)
Loss for the year (7,809) (31,138)
---------- -----------
Loss for the year
attributable to:
Owners of the parent
company (7,145) (30,134)
Non-controlling
interest 10 (664) (1,004)
(7,809) (31,138)
---------- -----------
Loss per Ordinary
Share
From continuing
operations
Basic and diluted,
cents 5 (0.84) (2.28)
From continuing
and discontinued
operations
Basic and diluted,
cents 5 (1.05) (4.17)
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
2016 2015
USD'000 USD'000
Total loss for the
year (7,809) (31,138)
Other comprehensive
income
Items that may be
subsequently reclassified
to profit and loss:
Foreign currency
translation differences
on foreign operations (1,101) (1,385)
Foreign currency
translation differences
on discontinued
operations (216) 24
Items that will
never be reclassified
to profit and loss:
Revaluation of property,
plant and equipment - (496)
(1,317) (1,857)
---------- ----------
Total comprehensive
income for the year (9,126) (32,995)
---------- ----------
Total comprehensive
income for the year
attributable to:
Owners of the parent
company (8,462) (31,991)
Non-controlling
interest (664) (1,004)
(9,126) (32,995)
---------- ----------
Consolidated Statement of Financial Position
As at 31 December 2016
2016 2015
Note USD'000 USD'000
Non-current assets
Property, plant
and equipment 38,318 45,645
Intangible assets 6,586 9,616
44,904 55,261
----------- -----------
Current assets
Trade and other
receivables 6 1,969 6,799
Inventories 460 1,282
Cash and cash equivalents 114 2,064
2,543 10,145
Current liabilities
Bank overdraft (688) (2,367)
Trade and other
payables 7 (3,787) (10,489)
Other interest-bearing
loans and borrowings 8 (2,981) (6,195)
(7,456) (19,051)
----------- -----------
Net current liabilities (4,913) (8,906)
Non-current liabilities
Employee obligations (63) (46)
Other interest-bearing
loans and borrowings 8 (15,612) (13,091)
Provisions (776) (1,776)
Deferred taxation (1,093) (1,827)
(17,544) (16,740)
----------- -----------
Net assets 22,447 29,615
----------- -----------
Equity
Called up share
capital 9 6,200 6,200
Share premium account 130,539 130,539
Merger reserve 48,940 48,940
Employee benefit
trust (1,150) (1,150)
Foreign exchange
reserve (10,491) (9,174)
Capital redemption
reserve 420 420
Share option reserve 665 883
Profit and loss
account (160,547) (152,662)
Equity attributable
to owners of the
parent company 14,576 23,996
----------- -----------
Non-controlling
interest 7,871 5,619
Total equity 22,447 29,615
----------- -----------
Consolidated Statement of Cash Flow
For the year ended 31 December 2016
2016 2015
USD'000 USD'000
Cash flows from operating
activities
Loss before taxation (8,254) (31,124)
Net finance costs 1,113 522
Adjustments for:
Gain on disposal of discontinued (52) -
operations
Amortisation, depreciation
and impairment 4,726 13,439
Loss/(gain) on disposal
of property, plant and
equipment 19 (760)
Impairment of goodwill - 3,433
Share-based payments 9 31
Asset revaluation - 496
Other non-cash movements - (2,389)
Foreign exchange movement (470) 884
-------- ---------
Operating cash flows before
working capital movements (2,909) (15,468)
Decrease in inventories 510 835
(Increase)/decrease in
trade and other receivables (1,312) 4,041
Decrease in trade and other
payables (611) (3,268)
(Decrease)/increase in
provisions (80) 270
Taxes paid (9) (133)
Net cash outflow from operating
activities (4,411) (13,723)
-------- ---------
Cash flows from investing
activities
Acquisition of ECO Assets - (3,575)
Purchase of property, plant
and equipment (540) (14,937)
Proceeds from disposal
of property, plant and
equipment 10 2,536
Interest received - 5
Disposal of discontinued 1,760 -
operations, net of cash
disposed of
Proceeds from sale of interest 322 -
in subsidiary
Net cash inflow/(outflow)
from investing activities 1,552 (15,971)
-------- ---------
Cash flows from financing
activities
Proceeds from loans 4,665 15,404
Capital contribution from
NCI 250 850
Interest paid (640) (527)
Repayment of lease liabilities (1,618) (573)
Net cash inflow from financing 2,657 15,154
-------- ---------
Net decrease in cash and
cash equivalents (202) (14,540)
Cash and cash equivalents
at beginning of year (303) 14,237
Effect of movements in (69) -
exchange rates on cash
held
Closing cash and cash equivalents (574) (303)
======== =========
Reported in the Consolidated
Statement of Financial
Position as:
Cash and cash equivalents 114 2,064
Bank overdraft (688) (2,367)
-------- ---------
Net cash balance (574) (303)
======== =========
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Total
attributable
Employee Foreign Capital Share Profit to Non-controlling
Share Revaluation Merger Treasury benefit exchange redemption option and owners interest
premium reserve reserve reserve trust reserve reserve reserve loss of
Share account the Total
capital parent equity
USD USD USD USD USD USD USD USD USD USD USD USD USD
'000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000
At 1
January
2015 6,620 130,539 548 48,940 (44,186) (1,239) (2,915) - 7,556 (90,234) 55,629 6,100 61,729
Transactions
with
owners
in their
capacity
as owners:
Issue
of equity
shares - - - - - 31 - - - - 31 - 31
Cancelled
Shares (420) - - - 44,186 - - 420 - (44,186) - - -
Capital
contribution
from
NCI - - - - - - - - - 325 325 525 850
Transfer
to retained
earnings
in respect
of lapsed
options - - - - - - - - (6,344) 6,344 - - -
Effect
of foreign
exchange
rates - - - - - 58 (56) - - - 2 (2) -
Total
transactions
with
owners
in their
capacity
as owners (420) - - - 44,186 89 (56) 420 (6,344) (37,517) 358 523 881
-------- ---------- ------------- --------- ---------- ---------- ---------- ------------ ---------- ------------ -------------- ----------------- -----------
Loss
for the
year - - - - - - - - - (30,134) (30,134) (1,004) (31,138)
Other
comprehensive
income:
Currency
translation
differences - - (52) - - - (6,227) - (329) 5,223 (1,385) - (1,385)
Currency
translation
differences
on
discontinued
operations - - - - - - 24 - - - 24 - 24
PPE
revaluation - - (496) - - - - - - (496) - (496)
Total
other
comprehensive
income
for the
year - - (548) - - - (6,203) - (329) 5,223 (1,857) - (1,857)
-------- ---------- ------------- --------- ---------- ---------- ---------- ------------ ---------- ------------ -------------- ----------------- -----------
Total
comprehensive
income
for the
year - - (548) - - - (6,203) - (329) (24,911) (31,991) (1,004) (32,995)
-------- ---------- ------------- --------- ---------- ---------- ---------- ------------ ---------- ------------ -------------- ----------------- -----------
At 31
December
2015 6,200 130,539 - 48,940 - (1,150) (9,174) 420 883 (152,662) 23,996 5,619 29,615
-------- ---------- ------------- --------- ---------- ---------- ---------- ------------ ---------- ------------ -------------- ----------------- -----------
Total
Employee Foreign Capital Share Profit attributable Non-controlling
Share Revaluation Merger Treasury benefit exchange redemption option and to interest
premium reserve reserve reserve trust reserve reserve reserve loss owners
account of
Share the Total
capital parent equity
USD USD USD USD USD USD USD USD USD USD USD USD USD
'000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000
At 1
January
2016 6,200 130,539 - 48,940 - (1,150) (9,174) 420 883 (152,662) 23,996 5,619 29,615
Transactions
with
owners
in their
capacity
as owners:
Capital
contribution
from
NCI - - - - - - - - - - - 250 250
Sale
of interest
in HoNA - - - - - - - - - (966) (966) 2,666 1,700
Share-based
payments - - - - - - - - 9 - 9 - 9
Transfer
to retained
earnings
in respect
of
forfeit/waived
options - - - - - - - - (226) 226 - - -
Effect
of foreign
exchange
rates - - - - - - - - (1) - (1) - (1)
Total
transactions
with
owners
in their
capacity
as owners - - - - - - - - (218) (740) (958) 2,916 1,958
--------- ---------- ------------- --------- ---------- ---------- ----------- ------------ --------- ------------ -------------- ----------------- ----------
Loss
for the
year - - - - - - - - - (7,145) (7,145) (664) (7,809)
Other
comprehensive
income:
Currency
translation
differences - - - - - - (1,101) - - - (1,101) - (1,101)
Currency
translation
differences
on
discontinued
operations - - - - - - (216) - - - (216) - (216)
Total
other
comprehensive
income
for the
year - - - - - - (1,317) - - - (1,317) - (1,317)
--------- ---------- ------------- --------- ---------- ---------- ----------- ------------ --------- ------------ -------------- ----------------- ----------
Total
comprehensive
income
for the
year - - - - - - (1,317) - - (7,145) (8,462) (664) (9,126)
--------- ---------- ------------- --------- ---------- ---------- ----------- ------------ --------- ------------ -------------- ----------------- ----------
At 31
December
2016 6,200 130,539 - 48,940 - (1,150) (10,491) 420 665 (160,547) 14,576 7,871 22,447
--------- ---------- ------------- --------- ---------- ---------- ----------- ------------ --------- ------------ -------------- ----------------- ----------
Notes to the Financial Statements
For the year ended 31 December 2016
1. Corporate information and accounting policies
Hydrodec Group plc (the 'Company') is a public company
incorporated, domiciled and registered in England in the UK. The
registered number is 5188355 and the registered address is Dorset
House, Regent Park, Kingston Road, Leatherhead, KT22 7PL.
The Group's principal activity is the re-refining of used
transformer oil into, and the sale of, new SUPERFINE(TM) oil.
Basis of preparation
The Group's consolidated financial statements have been prepared
in accordance with the principal accounting policies adopted by the
Group, with International Financial Reporting Standards ('IFRS') as
issued by the International Accounting Standards Board ('IASB') and
as adopted by the European Union ('EU'), and with those parts of
the Companies Act 2006 applicable to companies reporting under
IFRS.
The financial statements were approved by the Board on 11 May
2017. They are presented in US Dollars, which is the presentational
currency of the Group. In accordance with IFRS 5 'Non-current
Assets Held for Sale and Discontinued Operations', the comparative
income statement has been re-presented so that the disclosures in
relation to discontinued operations relate to all operations that
have been discontinued by the balance sheet date.
The preparation of financial statements in accordance with IFRS
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Although these estimates are based on
management's best knowledge of current events and actions, actual
results may ultimately differ from those estimates.
These results are audited, however, the financial information
set out in this announcement does not constitute the Group's
statutory accounts, as defined in Section 435 of the Companies Act
2006, for the year ended 31 December 2016, but is derived from the
2016 Annual Report. Statutory accounts for 2015 have been delivered
to the Registrar of Companies and those for 2016 will be delivered
in due course. The auditors have reported on those accounts; their
reports were unqualified.
The accounting policies used in completing this financial
information have been consistently applied in all periods shown.
These accounting policies are detailed in the Group's financial
statements for the year ended 31 December 2015 which can be found
on the Group's website.
Going concern
As described in the Chief Executive's Report, the Group has
reported much improved operational and financial results from the
continuing business for the year, and positive Group EBITDA for the
final quarter of the year. The impact of continued improvements in
operational performance and efficiencies, coupled with current and
forecast improvements in pricing and margins, results in base case
projections for the combined USA and Australian operations for the
period to June 2018, showing a steadily improving position.
However, while the Group has continued the positive EBITDA
performance into 2017 and the projections show sufficient cash in
totality to fund the Group's corporate costs, in order to
facilitate UK payments and also to provide additional working
capital support for the business, an additional facility has been
secured with Andrew Black.
At 30 April 2017, the Group's indebtedness, excluding finance
lease liabilities, was funded by a combination of overdraft
facilities in the USA and Australia of USD 1.9 million, and
committed loan facilities, including accrued interest, of GBP6.9
million (USD 9.0 million). In order to fund additional working
capital requirements and provide headroom for additional downside
risk in the period covered by the projections, the Company has
today announced a further committed facility for GBP500,000 (USD
0.6 million), further details of which are set out in note 11. The
key risks considered by the Directors in making their assessment as
to the adequacy of headroom include a reduction in volume of
production/sales and a decline in projected pricing.
The committed loan facilities currently have a repayment date of
31 December 2017, however the Company has the option to extend the
repayment period to 31 December 2018 on terms to be agreed. The
Board will keep the position under review and may elect to extend
the repayment period or source alternative funding or
re-financing.
After making enquiries, taking into account the Group's current
projections and financial position, the available facilities and
progress in re-establishing market share in the US, the Directors
have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for at
least the next 12 months from the date of approval of these
financial statements. In preparing these financial statements the
Directors have given consideration to the above matters and on that
basis, they believe that it remains appropriate to prepare the
financial statement on a going concern basis. The financial
statements do not include any adjustment that would result from the
basis of preparation being inappropriate.
2. Revenue and operating loss
2.1. Segment analysis
Prior to the disposal of Hydrodec (UK) Limited and Hydrodec
Re-refining (UK) Limited, (the 'discontinued operations'), the
Group was organised into two main operating segments, Re-refining
and Recycling. Subsequent to the disposal the Group now has one
main operating segment, Re-refining, which is classified as the
treatment of used transformer oil and the sale of SUPERFINE(TM)
oil. The operating segment arises from two geographic locations,
USA and Australia.
The financial information detailed below is frequently reviewed
by the Board (the Chief Operating Decision Maker) and decisions
made on the basis of adjusted segment operating results.
Year ended 31
December 2016 USA Australia Unallocated Total
Income Statement USD'000 USD'000 USD'000 USD'000
Revenue 13,158 3,670 - 16,828
Other income 400 2 43 445
-------------- --------------- -------------- ----------
Operating EBITDA 670 90 (2,038) (1,278)
Depreciation,
loss on disposal
of property,
plant and equipment,
and impairment (1,924) (408) (398) (2,730)
Amortisation - (273) (1,394) (1,667)
Loss for the
year on continuing
operations (1,682) (787) (3,837) (6,306)
-------------- --------------- -------------- ----------
At 31 December
2016 USA Australia Unallocated Total
Balance Sheet USD'000 USD'000 USD'000 USD'000
Total assets 34,642 6,759 6,046 47,447
Total liabilities (11,951) (3,547) (9,502) (25,000)
-------------- --------------- -------------- ----------
Net assets 22,691 3,212 (3,456) 22,447
-------------- --------------- -------------- ----------
Year ended 31 Re-refining Discontinued Unallocated Total
December 2015 operations
Income Statement USD'000 USD'000 USD'000 USD'000
Revenue 8,231 34,083 - 42,314
Other income 1,521 2 - 1,523
-------------- --------------- -------------- ----------
Operating EBITDA (3,254) (2,855) (5,114) (11,223)
Growth Costs (1,246) (422) (92) (1,760)
Recommissioning
Costs (302) - - (302)
Restructuring
Costs (231) (1,028) - (1,259)
Depreciation (1,310) (1,414) (11) (2,735)
Amortisation (1,683) (1,381) - (3,064)
Share-based
payment costs - - (31) (31)
Foreign exchange
profit 784 3 58 845
Operating loss
before impairment (7,242) (7,097) (5,190) (19,529)
-------------- --------------- -------------- ----------
At 31 December Discontinued
2015 Re-refining operations Unallocated Total
Balance Sheet USD'000 USD'000 USD'000 USD'000
Total assets 49,987 10,445 4,974 65,406
Total liabilities (18,023) (10,445) (7,323) (35,791)
-------------- ------------- -------------- ---------
Net assets 31,964 - (2,349) 29,615
-------------- ------------- -------------- ---------
2.2. Loss on ordinary activities
The loss before taxation is stated after charging/(crediting)
the following amounts:
Continuing Discontinued Continuing Discontinued
2016 2016 2015 2015
USD'000 USD'000 USD'000 USD'000
Government income (1,031) - (941) -
Loss/(profit) on
disposal of property,
plant and equipment 19 - - (760)
Cost of sales
- inventory expenses 6,783 133 4,955 6,145
- other direct
costs 5,379 2,925 3,581 18,504
- employee benefit
expense 1,583 814 656 6,317
- depreciation 2,207 301 1,229 1,307
Amortisation 1,667 - 1,683 1,381
Share-based payments 9 - 31 -
Depreciation and
impairment of property,
plant and equipment 504 47 92 4,167
Impairment of intangible
assets - - 3,433 3,580
Operating lease
rentals - land and
buildings 206 157 315 537
Exchange (gain)/loss (1,137) (4) 847 (2)
Fees payable to
the Company's auditor
for the audit of
the annual accounts 60 - 67 -
Fees payable to
the Company's auditor
and its associates
for other services:
- audit of the
Company's subsidiaries 35 - 113 -
Profit on disposal of assets in 2015 relate to the surplus
generated from a sale and leaseback arrangement with TIP
Europe.
2.3. Other income
Continuing Discontinued Continuing Discontinued
2016 2016 2015 2015
USD'000 USD'000 USD'000 USD'000
Settlement proceeds 400 - - -
Other income 45 - 25 2
Insurance proceeds - - 1,496 -
445 - 1,521 2
----------- ------------- ----------- -------------
Settlement proceeds
Subsequent to the incident at Canton in December 2013, Zeton
Inc., the main contractor for the rebuild, installed faulty heat
exchangers which leaked and caused a safety hazard. Hydrodec filed
a claim against Zeton Inc. in 2015 and a total settlement of USD
0.4 million was received during the year ended 31 December
2016.
Insurance proceeds
On 11 November 2014, the Group and its insurers settled the
Group's insurance claim arising from the incident at Canton in
December 2013. The sum of USD 17.25 million had been received by
the Group at 31 December 2014, and the final proceeds of USD 1.5
million were recognised in 2015.
3. Finance costs
Continuing Discontinued Continuing Discontinued
2016 2016 2015 2015
USD'000 USD'000 USD'000 USD'000
Bank overdrafts
and leases 612 27 463 30
Shareholder loan 474 - 34 -
1,086 27 497 30
----------- ------------- ----------- ---------------
4. Discontinued operations
On 4 March 2016, following a strategic auction process conducted
by an independent third-party financial adviser, Hydrodec Holdco
Limited, a wholly-owned subsidiary of the Company, disposed of
Hydrodec (UK) Limited and Hydrodec Re-Refining (UK) Limited
(together, the 'UK operations'), together with certain other rights
and assets relating to its UK operations, to Andrew Black (the
'Buyer"), a non-executive Director and a substantial shareholder of
the Company. The consideration for the sale of the UK operations
was GBP1 in cash and, in addition, the Buyer agreed to grant the
Group a contractual right to receive 10% of the Buyer's entitlement
to any future net profits of the UK lubricant oil re-refining
project on distribution or exit.
The UK operations have been treated as discontinued operations
for the year ended 31 December 2016. A single amount is shown on
the face of the consolidated income statement, comprising the
post-tax result of discontinued operation and the post-tax loss
recognised on the re-measurement to fair value less costs to sell
and on disposal of the discontinued operations. The income
statement for the prior period has been restated to conform to this
presentation. In the cash flow statement, the cash provided by the
operating activities of the UK operations has been reported as a
single line item.
The results of the discontinued operations, which have been
included in the consolidated income statement, were as follows:
4.1. Loss from discontinued operations, net of tax
2016 2015
USD'000 USD'000
Revenue and
other income 4,500 34,085
Expenses (6,028) (41,182)
-------------- -----------
Operating loss
before impairment (1,528) (7,097)
Impairment - (7,640)
Operating loss
after impairment (1,528) (14,737)
Finance costs (27) (30)
-------------- -----------
Loss before
taxation (1,555) (14,767)
Income tax credit - 642
-------------- -----------
Net loss attributable
to discontinued
operations (1,555) (14,125)
Gain on disposal
of discontinued 52 -
operations (see
4.2)
Loss from discontinued
operations,
net of tax (1,503) (14,125)
-------- -----------
Loss per Ordinary
Share
Basic and diluted,
cents (0.21) (1.89)
4.2. Gain on sale of discontinued
operations
USD'000
Property, plant and
equipment (4,538)
Inventories (312)
Trade and other receivables (6,164)
Cash and cash equivalents 2,014
Trade and other payables 4,732
Provisions 894
Other interest bearing
loans and payables 3,464
--------
Net liabilities 90
Currency translation
differences 216
Costs of disposal,
satisfied in cash (254)
Gain on disposal of
discontinued operations 52
--------
Costs of disposal,
satisfied in cash (254)
Cash and cash equivalents
disposed of 2,014
Net cash inflow 1,760
--------
During the year, the discontinued operations contributed USD
1.64 million to the Group's net cash outflow from operating
activities, USD 1.76 million to inflow from investing activities
and USD 0.5 million to net cash inflow from financing
activities.
5. Loss per Ordinary Share
Basic loss per Ordinary Share is calculated by dividing the net
loss for the year attributable to ordinary shareholders by the
weighted average number of Ordinary Shares in issue during the
year. The calculation of the basic and diluted loss per Ordinary
Share is based on the following data:
Continuing Continuing
and discontinued and discontinued
Continuing operations Continuing operations
operations operations
2016 2016 2015 2015
USD'000 USD'000 USD'000 USD'000
Losses
Losses for the
purpose of basic
loss per Ordinary
Share (6,306) (7,809) (17,013) (31,138)
------------- ------------------ ------------- ------------------
Number Number Number Number
'000 '000 '000 '000
Number of shares
Weighted average
number of shares
for the purpose
of basic loss
per share 746,683 746,683 746,683 746,683
------------- ------------------ ------------- ------------------
Loss per Ordinary
Share
Basic and diluted,
cents per share (0.84) (1.05) (2.28) (4.17)
------------- ------------------ ------------- ------------------
Due to the losses incurred in the years reported, there is no
dilutive effect from the existing share options, warrants or share
based employment compensation plan.
6. Trade and other receivables
2016 2015
USD'000 USD'000
-------- --------
Trade receivables 1,427 5,103
Prepayments and accrued
income 421 1,260
Other receivables 97 436
VAT recoverable 24 -
1,969 6,799
-------- --------
Trade receivables principally comprise amounts receivable in
respect of revenue and are short term.
No interest is generally charged on trade receivables.
Other receivables include the sum of USD 25,507 in respect of
the sale of a further 12.45% interest in Hydrodec of North America
LLC to G&S Oil Recycling Group LLC. See note 10.
Other receivables include the sum of USD 55,000 which is cash
held in a restricted use bank account in connection with EPA
environmental expenditure.
At 31 December 2016, trade receivables include amounts which are
past their due date but against which the Group has not recognised
an allowance for impairment because the amounts are considered
recoverable.
The analysis of trade receivables is as follows:
2016 2015
USD'000 USD'000
Less than one month 1,399 3,540
Past due but not impaired 28 1,563
1,427 5,103
-------- --------
Credit sales are only made after credit approval procedures are
completed, and the carrying value represents the Group's maximum
exposure to credit risk.
The Directors consider that the carrying amount of trade and
other receivables approximates their fair value.
7. Trade and other payables
2016 2015
USD'000 USD'000
-------- --------
Trade payables 2,382 6,021
Other payables 180 184
VAT payable 17 582
Other taxation and social
security 44 634
Accruals 1,164 3,068
3,787 10,489
-------- --------
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and on-going costs. No interest is
generally charged on trade payables.
The Group has financial risk management policies to ensure that
all payables are paid within the credit time frame.
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
8. Other interest-bearing loans and borrowings
2016 2015
USD'000 USD'000
-------- --------
Current liabilities
Finance lease liabilities 1,662 2,074
Unsecured bank facility 1,319 4,121
2,981 6,195
-------- --------
Non-current liabilities
Finance lease liabilities 7,774 9,125
Shareholder loan 7,838 3,962
Other loans - 4
15,612 13,091
-------- --------
Finance lease liabilities
The Group has two arrangements which have been classified as
finance leases. The first is denominated in USD and was for a
principal sum of USD 10.0 million, bearing interest at the rate of
3.96% and is repayable on a fixed repayment basis over 7 years. The
second arrangement is denominated in Australian dollars, bearing
interest at the rate of 5.55% and is repayable on a fixed repayment
basis over 7 years
Minimum Minimum
lease lease
payments Interest Principal payments Interest Principal
2016 2016 2016 2015 2015 2015
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Less than
one year 2,028 366 1,662 2,125 446 1,679
Between
one and
five years 7,989 729 7,260 8,072 1,052 7,020
More than
five years 518 4 514 2,578 78 2,500
10,535 1,099 9,436 12,775 1,576 11,199
---------- ----------- ------------ ---------- ----------- ------------
The Group's obligations under finance leases are secured by the
lessor's rights over certain assets. The amount outstanding in
respect of the lease in which there is a general title to certain
tangible assets held in the USA is USD 8.2 million (2015: USD 9.6
million).
Unsecured bank facility
The unsecured bank facility at 31 December 2016 represents a
working capital facility in the USA. In addition to this facility,
at 31 December 2015, there was an amount of USD 2.8 million in
respect of a factoring facility in the UK which relates to the
discontinued operation in 2016.
Shareholder loan
The shareholder loan represents an amount due to Andrew Black, a
non-executive Director and significant shareholder in the
Company.
2016 2015
USD'000 USD'000
-------- --------
Facility 7,380 3,928
Interest 458 34
Amount outstanding 7,838 3,962
-------- --------
The loan consists of an initial facility of USD 2.6 million
(GBP2.15 million) and a second facility of USD 5.2 million (GBP4.25
million). The facilities are secured over the rights for Hydrodec
Development Corporation Pty Limited to receive a royalty based on
the quantity of SUPERFINE(TM) oil produced by Hydrodec of North
America LLC and Hydrodec Australia Pty Limited. The royalty, which
is based on average annual production, is expected to generate
approximately USD 1.0 million per annum.
The loans bear interest at the rate of 7% per annum and 8% per
annum respectively and accumulated interest to 31 December 2016 has
been added to the principal loan amount. Under the original terms
of the facilities, the loans are repayable by 31 December 2017,
however, the Company has agreed an option to extend the repayment
date to 31 December 2018 and the loans have therefore been treated
as non-current liabilities. See note 11.
9. Share capital
2016 2015
USD'000 USD'000
-------- --------
Allotted, issued and fully
paid
Ordinary Shares of 0.5 pence
each
At 1 January 6,200 6,620
Issued in settlement of
loan - (420)
At 31 December 6,200 6,200
-------- --------
2016 2015
Number of Number of
shares shares
------------ -------------
At 1 January 746,682,805 803,356,138
Cancelled - (56,673,333)
At 31 December 746,682,805 746,682,805
------------ -------------
Hydrodec Group plc held 54,500,000 of its own Ordinary Shares
(which were previously held by VIN (Australia) Pty Limited pursuant
to the acquisition of Virotec International plc in 2008) and which
were transferred to Hydrodec Group plc as part of a dividend in
specie to Hydrodec Group plc on the liquidation of VIN (Australia)
Pty Limited in 2014. These shares, together with a further
2,173,333 Ordinary Shares issued as part of the acquisition of
Virotec International plc, were cancelled in 2015 upon the
liquidation of VIN (Australia) Pty Limited and Virotec
International plc.
10. Investments
The Company had investments in the following subsidiary
undertakings as at 31 December 2016 which principally affected the
losses and net assets of the Group:
Country Proportion Principal activity
of incorporation of ownership
and principal interest
operations
Hydrodec Holdco Limited UK 100% Holding company
Hydrodec Development UK 100% Technology
Corporation (UK) Limited* company
Hydrodec Inc USA 100% Holding company
Hydrodec of North America USA 62.55% Oil treatment
LLC** services
Hydrodec Development Australia 100% Technology and holding
Corporation Pty Limited company
Hydrodec Australia Pty Australia 100% Oil treatment
Limited*** services
Hydrodec Japan Co Limited Japan 100% Holding company
Hydrotek Eco Japan Co Japan 100% Patent holding company
Limited****
* Held through Hydrodec
Holdco Limited
** Held through Hydrodec
Inc
*** Held through Hydrodec Development
Corporation Pty Limited
**** Held through Hydrodec
Japan Co Limited
On 4 March 2016, Hydrodec Holdco Limited, a wholly-owned
subsidiary of the Company, disposed of Hydrodec (UK) Limited and
Hydrodec Re-Refining (UK) Limited). See note 4.
Subsidiary with material non-controlling interests
On 16 April 2013, the Group sold a 25% interest in Hydrodec of
North America LLC ('HoNA') to G&S Oil Recycling Group LLC
('G&S') for a total consideration, based on a multiple of
earnings, which management estimated to be USD 3.31 million.
Additionally, a royalty stream of 5% of net revenue is payable to a
member of the Group under the terms of the strategic partnership
with G&S.
The terms of the agreement with G&S included the potential
for the sale of a further 24.9% interest in HoNA to G&S in two
equal tranches of 12.45%, subject to certain criteria being met.
The additional investment would be triggered by the successful
expansion of the Canton facility's existing four trains, by a
further four trains, in increments of two trains (Stage 1 and Stage
2). The expansion was to be funded equally by the Group and
G&S, and the terms of the agreement intended that the
subsequent investment, and ownership of the additional trains,
would be within newly incorporated entities, owned equally by the
partners to ensure ownership was representative of the capital
contributed by each party.
An additional two trains were funded equally by the parties as
part of the rebuild of Canton and upon subsequent commencement of
production at the end of December 2015, the key qualifying
condition for the Stage 1 closing was met. Accordingly, on 14
October 2016, a further sale of 12.45% interest in HoNA was made
for a total consideration of USD 1.7 million.
At 31 December 2016, there was an amount outstanding in respect
of the sale of USD 25,507 which is included in other receivables.
See note 6.
The additional two trains were constructed on the Canton site
and not within a separate legal entity reflecting the equal
funding, as prescribed under the terms of the agreement. It was
therefore agreed that G&S would be allocated 41.65% share of
net income from 14 October 2016 to reflect their contractual
entitlement.
Proportion
of ownership
interest and Total comprehensive
voting rights income allocated Accumulated
held by NCI to NCI NCI
2016 2015 2016 2015
2016 2015 USD'000 USD'000 USD'000 USD'000
--------- ------ ---------- ---------- -------- --------
Hydrodec of
North America
LLC 37.45% 25% (664) (1,004) (423) 241
--------- ------ ---------- ---------- -------- --------
No dividends were paid to the NCI during the years reported.
During the year ended 31 December 2016, capital contributions of
USD nil (2015: USD 1.3 million) were made by the Group and G&S
in relation to the expansion of the Canton plant. Of this
contribution, 25% was recognised as NCI capital contribution and
the balance was recognised in the Group reserves.
11. Post balance sheet events
On 11 May 2017, the Company agreed an additional working capital
facility with Andrew Black, a Non-Executive Director and
significant shareholder in the Company, for the sum of up to USD
0.6 million. The facility bears interest at 10% per annum and is
subject to an arrangement fee of 2.5%. The facility is repayable on
31 December 2017, however, the Company has agreed an option to
extend the repayment date on both this, and its existing
facilities, to 31 December 2018, on commercial terms to be agreed
by the parties at the time. The facility is secured over the assets
of the Company.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UAORRBOAVAUR
(END) Dow Jones Newswires
May 12, 2017 02:00 ET (06:00 GMT)
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