TIDMHYR
RNS Number : 8830Z
HydroDec Group plc
23 September 2015
23 September 2015
Hydrodec Group plc
("Hydrodec", the "Company" or the "Group")
Unaudited Interim Results
Hydrodec Group plc (AIM: HYR), the clean-tech industrial oil
re-refining group, today announces unaudited results for the six
months ended 30 June 2015.
Financial highlights
-- 2015 has been, and continues to be, challenging, but the
Company does not expect short term issues to impact 2016
expectations.
-- The ramp up of key projects has been slower than expected. In
the UK, the Company continues to face, and react to, oil price
volatility and difficult market conditions.
-- Total revenue and other income of US$21.3 million (H1 2014:
US$29.4 million) includes business interruption income of US$1.5
million from the Canton insurance settlement but limited revenues
from the plant as ramp-up is ongoing; it is also impacted by lost
production during re-location of operations in Australia, whilst
revenues in the UK are adversely impacted as a result of the lower
price of oil.
-- Total sales volumes increased to 33.2 million litres (H1
2014: 25.5 million litres), with the acquisition of the business
and assets of Eco Oil Limited ("Eco-Oil") in April 2015.
-- Gross profit of US$2.8 million (H1 2014: US$7.9 million);
reflects limited revenues from the Canton facility, lost production
in Australia, and the adverse impact of the lower price of oil in
the UK.
-- Operating EBITDA(1) loss of US$3.2 million (H1 2014: US$1.6
million profit); reflecting production delays in the US, the costs
associated with relocation of operations in Australia and the
effects of the decline in the price of oil and changing market
conditions on margins in the UK Recycling business.
-- Overall loss for the period of US$7.5 million (H1 2014:
US$3.0 million) included transaction costs and one-off
restructuring costs incurred in relation to the integration of the
Eco-Oil business, the re-commissioning of the rebuilt and expanded
plant in Canton and the relocation of Australian operations.
1 EBITDA adjusted for growth expenditure of US$1.2 million (H1
2014: US$1.1 million), including acquisition costs of US$0.4m and
restructuring costs of US$0.5 million (H1 2014: US$nil)
Operational and strategic highlights
-- The rebuilt and expanded facility in Canton, Ohio was fully
installed largely as expected but has experienced performance
issues with plant and contractors slowing ramp up of production.
The pace and continuing execution of the Canton ramp-up is the key
performance imperative. At the time of this announcement, four
Trains (out of six) are in production at a reduced rate producing
approximately 38,000 litres of SUPERfine(TM) base oil per day. The
previously announced issues with heat exchangers have been
resolved; repaired units are now fitted to four Trains. Plans are
in place to bring Trains 5 and 6 into production and we expect to
switch production to transformer oil shortly. The business benefits
from secure feedstock supply and ample stock. We have now revised
our production projections for Canton for the year to 10 million
litres assuming building to full production during October.
-- The acquisition of the business and assets of Eco-Oil has
consolidated feedstock collection for the proposed lubricant oil
re-refinery in the UK. A full restructure of the consolidated UK
recycling business is nearing completion, with an approximate 36%
reduction in headcount as well as site consolidation benefits
expected to generate annualised synergies of c.US$2.5 million.
-- The Company has entered into an agreement for lease with The
Manchester Ship Canal Company Limited (a member of the Peel Ports
Group) for the proposed long term lease of a nine acre site near
Eastham Locks, Port Wirral, Merseyside in North West England, for
the first phase development of a used oil re-refinery in the UK.
The Company continues to ensure that it delivers on all aspects of
the consultation and engagement process required by the NSIP
regime, to work on the design and value engineering of the project
and to develop the planning submission for the proposed re-refinery
to be submitted later this year.
-- Commenced tolling under the outsourcing arrangement with
Southern Oil in Australia; product achieving '500hr' oil status
with encouraging market response.
Market outlook
-- In the US, despite slower than expected ramp up to full
production, we remain confident that the rebuilt and expanded plant
has a unique market proposition and is well placed in 2016 to
leverage the production of the highest quality transformer oil
produced in the US, meeting all US and international standards.
-- In the UK, lower oil prices have created a significant market
dislocation in supply and demand for used oil and used oil
products. Hydrodec UK has responded, and continues to react to, and
operate in, a tough trading environment, with a second phase of
restructuring underway. The security of feedstock supply delivered
by the combined business underpins the rationale and longer term
strategy for a UK re-refinery where base oil margins are less
volatile and continue to trade at a significant premium to fuel
oil.
Commenting on the results, Ian Smale, Chief Executive of
Hydrodec, said: "We remain focused on managing the resources of the
Company and on delivering the comprehensive six point plan set out
at this year's Annual General Meeting against a backdrop of very
difficult underlying market conditions and performance issues with
plant and contractors in key projects. We remain confident that the
key elements of our comprehensive strategy are in place and believe
that the delivery of this strategy and plan will drive the Company
to profitability."
The Company also announces today that Gillian Leates,
Non-Executive Director and Chair of the Audit Committee, has
retired from the Board and as Chair of the Audit Committee with
effect from the close of yesterday's Board meeting, in order to
focus on her other business interests, including as Non-Executive
Chairman of React Group plc. Lord Moynihan, Chairman, commented:
'On behalf of the Board I would like to express our deep
appreciation to Gill for her exceptional contribution and
commitment to Hydrodec over the last six years. As a long standing
member of the Board, she has been integral to the development of
Hydrodec over the past six years. We all wish her well for the
future.'
For further information please contact:
020 3300
Hydrodec Group plc 1643
Ian Smale, Chief Executive
Chris Ellis, Chief Financial
Officer
James Hodges, General
Counsel and Company Secretary
Peel Hunt LLP (Nominated 020 7418
Adviser and Broker) 8900
Justin Jones
Mike Bell
Vigo Communications (PR 020 7016
adviser to Hydrodec) 9570
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. 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. Hydrodec's
plants are located at Canton, Ohio, US and Young, New South Wales,
Australia. In 2013, Hydrodec acquired the business and assets of
OSS Group, the UK's largest collector, consolidator and processor
of used lubricant oil and seller of processed fuel oil, with a
national network of oil storage and transfer stations. Used oil is
converted into processed fuel oil at OSS's plant at Stourport and
principally sold on to the UK quarry and power industry. In April
2015, Hydrodec further acquired the business and assets of Eco Oil,
a leading UK waste oil collector and supplier of recycled
industrial fuel oil into the power and road stone industries. It is
also one of four significant providers of waste management services
to the marine industry in the UK, specifically oily-water slops or
marine pollutant (MARPOL). In line with our stated intention to
develop a base oil re-refinery in the UK, we have an exclusive
licence agreement with California-based Chemical Engineering
Partners (CEP) to develop the CEP wiped-film evaporation and
hydrogenation technology in the UK as well as the basic engineering
for a 75 million litre per annum capacity base oil re-refinery.
Hydrodec's shares are listed on the AIM Market of the London
Stock Exchange. For further information, please visit
www.hydrodec.com.
Chief Executive's Report
Operations
At the Company's Annual General Meeting on 9 June 2015, we set
out a clear, focused and comprehensive six point plan to drive the
Company to profitability. The first half of 2015 has been
challenging, but has delivered progress in terms of the Company's
strategic plan despite a backdrop of difficult underlying market
conditions as well as performance issues with contractors and
equipment in key projects.
The interim results reflect the re-commissioning of the rebuilt
and expanded plant in Canton and the relocation of Australian
operations as well as the impact of lower oil prices
disproportionately affecting the UK collections business. In
addition, they reflect the transaction costs and one-off
restructuring costs incurred in relation to the integration of the
Eco-Oil business, without the benefit of cuts in growth and
overhead costs which arise in the second half of the year.
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In the United States, we have commissioned the rebuilt and
expanded facility in Canton, Ohio including the necessary remedial
action on plant and equipment that slowed production ramp-up over
the summer. We have achieved design specification production from
individual processing trains and remain confident that noted
efficiency improvements will be attainable with full production
from the plant in due course. At the time of this announcement,
four Trains (out of six) are in production at a reduced rate
producing approximately 38,000 litres of SUPERfine(TM) base oil per
day. Previously announced issues with heat exchangers have been
resolved with repaired units now fitted to four Trains which will
allow us to plan for Trains 5 and 6 to be in production. We expect
to switch production to transformer oil shortly. Given the delay to
the ramp up of Trains 3 to 6 and based on revised internal
forecasts, we have now revised our production projections for
Canton for the year to 10 million litres assuming building to full
production during October.
In Australia, tolling has commenced under the outsourcing
arrangements with Southern Oil, with all transition and residual
operating cost savings now delivered. Our product has achieved
'500hr' oil status, certifying the oil to be high quality
transformer oil and efforts to further develop market penetration
of our SUPERfine(TM) product are underway. We expect the Australian
operation to be cash flow positive by the year end supported by
better margin structures compensating for some lost production
during transition.
In the UK, our objective remains to deploy world leading
technology that delivers a European hub for re-refining, producing
high quality new oils from used oils for use in their original
purpose. We have consolidated feedstock collection for the proposed
lubricant re-refinery through the acquisition of the business and
assets of Eco-Oil and are realising significant efficiencies
through the transition of the OSS and Eco-Oil businesses under a
combined Hydrodec (UK) operating structure and brand; revenue,
scale and efficiency savings are estimated to deliver approximately
US$2.5 million of benefit on an annualised basis. Significantly,
the reduced oil price has changed the character of the UK waste oil
market from oil as an opportunity value proposition to a liability
cost for workshops and operators. In the short term, however, this
pricing lag both compresses margins and reduces oil available for
collection. An additional market feature is a reduction in demand
for PFO with the decline in UK coal-fired power generation, pushing
markets increasingly into Europe. A number of steps to mitigate
both pricing lag and market structure are underway as Hydrodec UK
continues to respond and operate in a tough trading
environment.
Overall, the Company's priorities remain clear, and the Board
remains confident that our focused and comprehensive six point plan
will deliver value for shareholders: delivering the rebuild and
expansion of our US market position through our Canton re-refinery;
embedding the outsourcing relationship with Southern Oil in
Australia; delivering the leading oil and associated waste
management business in the UK; securing the technology platform of
the Company through patents and partnership with key technology
providers under the guidance of the Safety and Technology Board
Committee; building out into the large lubricant oil re-refining
market to be value accretive to Hydrodec shareholders; and, growth
through technology de-risking expansion through partnership,
collaboration or integration along the value chain. The key
elements of this comprehensive strategy are in place; the Board and
management all believe that delivery of this strategy and plan will
drive the Company to profitability.
Ian Smale
Chief Executive
Chief Financial Officer's Review
The following provides a review of Hydrodec's results for the 6
months ended 30 June 2015. The half year results include additional
costs related to the acquisition and consolidation of Eco-Oil's
assets in the UK as well as re-commissioning costs in both the US
and Australia. The impact of the restructuring charges incurred in
H1 2015 will further reduce direct and overhead costs in H2
2015.
Overview
In the period, the Group sold 33.2 million litres of oil, an
increase of 30% on the previous year driven by the acquisition of
the Eco-Oil business at the start of Q2. Total income declined 27%
as Business Interruption income ceased on 31(st) March and Average
Selling Price ("ASP") declined as a result of the fall in world oil
prices.
The focus for H2 is the continued ramp up to full production in
the US of the expanded six Train facility at Canton and to complete
the consolidation of the UK Recycling business to build a
sustainably profitable business despite lower oil prices.
Re-Refining
6 months 6 months % change
30-Jun-15 30-Jun-14
Volume ('000 litres) 5,281 6,058 (13%)
ASP per litre
(US$/litre) $0.84 $0.96 (13%)
Revenue (US$'000) 4,797 9,894 (52%)
EBITDA pre one-off
costs (363) 3,142 -
Whilst the US plant remained under construction for the first
half of the year, oil sales were restricted in that region to
traded oil (3.6 million litres) which was lower compared to the
prior year as the business focus moved to re-commissioning the
plant. In Australia the business traded oil to maintain supply to
key customers while the operations were transferred to the Southern
Oil Refinery, however because of extended commissioning there was
some sales disruption to the business during the transition
resulting in a decline in volumes of 20%.
Recycling
6 months 6 months % change
30-Jun-15 30-Jun-14
Volume 25,982 19,770 31%
ASP per litre $0.33 $0.53 (38%)
Revenue 16,547 19,538 (15%)
EBITDA pre one-off
costs (1,207) 537 -
Overall volumes increased due to the acquisition of Eco-Oil on 1
April 2015. On a like for like basis volumes declined by 16% due to
the focus on higher margin business and the impact of the decline
in oil prices on the collection cycle at the end of 2014 as
suppliers retained their feedstock on the expectation of a price
recovery through Q1. The UK Recycling business has suffered further
margin compression as a result of the recent decline in world oil
prices. The business has successfully mitigated some of this impact
by pushing down feedstock acquisition costs and following the
acquisition of Eco-Oil has undertaken a significant restructuring
exercise to bring down the fixed cost base for the combined
business. Whilst some of these restructuring costs were incurred in
H1 as noted below the impact of most of these changes will only
materialise in H2 and further cost reductions will continue through
Q3 and Q4.
Growth Costs and Overheads
6 months 6 months % change
30-Jun-15 30-Jun-14
Indirect Operating
Costs 7,464 7,773 (4%)
Growth Costs* 805 1,069 (25%)
Total 8,269 8,842 (6%)
*Excludes one off transaction costs of US$422,000 for the
acquisition of Eco-Oil
Despite the acquisition of Eco-Oil during the year, the Group
has reduced ongoing indirect overheads by 6% compared to the first
half of 2014, driven by a reduction in Growth and other indirect
employee costs.
Exceptional and other items
In the half year, the Group accounted for a net charge of
US$175,000 of exceptional and other costs. This consists of:
-- Transaction costs related to the acquisition of Eco-Oil of US$422,000
-- Bargain purchase on the acquisition of Eco-Oil of US$847,000
-- Restructuring costs in the Recycling business of US$105,000
as the business restructured Eco-Oil and OSS.
-- Re-commissioning costs of US$115,000 in the US
-- Re-commissioning costs of US$380,000 in Australia
-- The cash associated with exceptional items in the period was an outflow of US$1,022,000
Cash Flow
6 months 6 months Year to
to to
30 June 30 June 31 December
2015 2014 2014
EBITDA (3,193) 1,590 1,610
Gain on disposal of Fixed
Assets (521) - (1,473)
Change in Working Capital (3,000) (1,197) 8,500
Operating Cash Flow (6,714) 393 8,637
Capital Expenditure (10,912) (3,102) (19,023)
Acquisition of Intangibles - - (1,000)
Acquisition of Eco-Oil (3,575) - -
Growth, Re-commissioning
and Restructuring (1,826) (1,069) (2,278)
Non-recurring Cash Outflows (16,313) (4,171) (22,301)
Proceeds from Loans/Equity 9,630 1,160 3,017
Net Proceeds from Disposals 648 - 3,546
Partner Capital Contribution 650 - 2,468
Non-recurring Cash Inflows 10,928 1,160 9,031
Net Finance/Lease repayment
Costs (197) (620) (1,858)
Taxes Paid (14) (18) (40)
Foreign Exchange (254) (204) (274)
Movement in Cash (12,564) (3,460) (6,805)
------------------------------- --------- --------- ------------
Net Cash at start of
Period 14,946 21,902 21,902
FX Variance on opening
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balance (151)
Net cash at end of Period 2,382 18,442 14,946
=============================== ========= ========= ============
Net cash expended in the first six months of 2015 was a US$12.6
million outflow compared to a US$3.5 million outflow in the prior
year comparable period. EBITDA was US$4.8 million lower and working
capital outflows increased by US$1.8 million driven mostly by the
build-up of feedstock in the US in anticipation of the production
restart at Canton. Capital expenditure in the period was US$10.9
million, of which US$10 million related to the construction of the
expanded plant in the US with the remainder of the lease facility
being drawn against it of US$9.6 million. The remaining US$0.9
million primarily relates to the UK as the Group progresses its
planning permission process in respect of the planned UK based
re-refinery. The acquisition of Eco-Oil for US$3.6 million
completed during the period. Overall, the Group held US$2.4 million
in cash on its balance sheet at the end of the period. Under the
terms of the arrangements with G&S, a further US$1.7 million
should be received in H2 along with disposal proceeds arising from
the restructuring of the UK businesses.
Risk management process
The Group has policies, processes and systems in place to help
identify, evaluate and manage risks at all levels throughout the
organisation. Risks are regularly reviewed and monitored by
Business Unit or functional management teams. The executive team
review the major risks across the Group on a quarterly basis to
ensure that the management of these risks has appropriate focus.
The Board review these at least twice a year.
The principal risks that could potentially have a significant
impact on our business in the future are set out on pages 20 and 21
of the 2014 Annual Report. The pace and execution of Canton ramp-up
is the key performance imperative and short term financial risk for
the Group. The Annual Report can be downloaded at
www.hydrodec.com
Chris Ellis
Chief Financial Officer
CONSOLIDATED CONDENSED STATEMENT OF INCOME
6 months 6 months Year to
to to
30 June 2015 30 June 2014 31 December
2014
(unaudited) (unaudited) (audited)
Note USD'000 USD'000 USD'000
Revenue 2 19,825 25,414 46,185
Other income 2 1,519 4,018 8,552
Total income 21,344 29,432 54,737
Cost of sales (18,576) (21,540) (40,445)
Gross profit 2,768 7,892 14,292
Operating costs:
Employee benefit
expense (4,643) (5,801) (12,201)
Other operating costs (5,226) (5,120) (9,177)
Depreciation (277) (152) (542)
Impairment of property,
plant and equipment - - (809)
Foreign exchange
gain/(loss) (7) 34 (227)
Total operating costs (10,153) (11,039) (22,956)
------------- ------------- -------------
Operating loss (7,385) (3,147) (8,664)
------------- ------------- -------------
Analysed as:
Underlying operating
loss (4,980) (1) (2,870)
Growth costs 2 (1,227) (1,069) (2,278)
Amortisation of intangible
assets (1,930) (1,796) (3,513)
Share based payments
costs (17) (281) (324)
Bargain purchase 847 - -
on acquisition
(Loss)/Profit on
disposal of assets 521 (2) 1,473
Re-commisioning/
Restructuring costs (599) - (343)
Impairment of property,
plant and equipment - - (809)
Operating loss (7,385) (3,149) (8,664)
---------------------------- ----- ------------- ------------- -------------
Finance costs 3 (201) (95) (236)
Finance income 4 14 45
Loss on ordinary
activities before
taxation (7,582) (3,230) (8,855)
Income tax 18 187 403
Loss for the period (7,564) (3,043) (8,452)
------------- ------------- -------------
Loss for the period
attributable to:
Non-controlling interests (184) 489 986
Owners of the parent (7,380) (3,532) (9,438)
Total loss for the
period (7,564) (3,043) (8,452)
------------- ------------- -------------
Loss per share - 4 (1.06) cents (0.41) cents (1.14) cents
basic/diluted
6 months 6 months Year to
to to
Non-GAAP measure 30 June 2015 30 June 2014 31 December
2014
Note USD'000 USD'000 USD'000
Operating EBITDA 2 (3,193) 1,590 1,610
------------------ ----- ------------- ------------- ------------
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months Year to
to to
30 June 2015 30 June 2014 31 December
2014
(unaudited) (unaudited) (audited)
0 0
USD'000 USD'000 USD'000
Total loss for the
period (7,564) (3,043) (8,452)
Other comprehensive
income
Items that may be
reclassified to
profit and loss:
Exchange differences
on translation of
foreign operations (417) 1,361 (2,670)
Partner capital
contribution 325 - 1,234
Revaluation of fixed
assets - - 548
Total comprehensive
loss for the period (7,656) (1,682) (9,340)
------------- ------------- ------------
Other comprehensive
income for the period
attributable to:
Non-controlling
interests (184) 489 986
Owners of the parent (7,472) (2,171) (10,326)
Total comprehensive
loss for the period (7,656) (1,682) (9,340)
------------- ------------- ------------
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
30 June 2015 30 June 2014 31 December
2014
(unaudited) (unaudited) (audited)
Note USD'000 USD'000 USD'000
Non-current assets
Property, plant
and equipment 49,914 25,467 36,790
Intangible assets 5 20,433 22,223 20,387
Investments - 117 -
70,347 47,807 57,177
----------------------------------------- ----------------------------------------- -----------------------------------------
Current assets
Trade and other
receivables 6 8,475 8,843 8,310
Insurance receivable - 6,971 -
Inventories 3,668 1,820 1,721
Cash and cash
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September 23, 2015 02:00 ET (06:00 GMT)
equivalents 2,382 18,442 14,946
14,525 36,076 24,977
Current liabilities
Trade and other
payables 7 (15,561) (11,422) (16,636)
Provisions (663) (263) (319)
(16,224) (11,685) (16,955)
----------------------------------------- ----------------------------------------- -----------------------------------------
Net current
assets/(liabilities) (1,699) 24,391 8,022
Non-current
liabilities
Employee obligations (90) (114) (143)
Provisions (1,084) (673) (507)
Borrowings 8 (10,352) (904) (367)
Deferred taxation (1,706) (1,884) (1,453)
Other non current (1,000) - (1,000)
liabilities
(14,232) (3,575) (3,470)
----------------------------------------- ----------------------------------------- -----------------------------------------
Net assets 54,416 68,623 61,729
----------------------------------------- ----------------------------------------- -----------------------------------------
Equity attributable
to equity holders
of the parent
Called up share
capital 9 5,870 6,841 6,250
Share premium account 124,518 134,891 123,243
Merger reserve 4,980 50,571 46,204
Treasury reserve - (45,659) (41,716)
Employee benefit
trust (1,219) (1,356) (1,239)
Foreign exchange
reserve 3,719 3,660 5,017
Share option reserve 7,652 8,234 7,556
Revaluation reserve 513 - 548
Profit and loss
account (97,856) (92,926) (90,234)
48,177 64,256 55,629
----------------------------------------- ----------------------------------------- -----------------------------------------
Non-controlling
interests 6,239 4,367 6,100
Total equity 54,416 68,623 61,729
----------------------------------------- ----------------------------------------- -----------------------------------------
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN
EQUITY
Employee Foreign Share Profit Total Non
attributable
to
owners
of
the
parent
Share Share Revaluation Merger Treasury benefit exchange option and controlling Total
loss equity
capital premium reserve reserve reserve trust reserve reserve account interest
At 1 January
2014 6,619 130,524 - 48,940 (44,186) (1,312) 2,850 7,330 (85,454) 65,311 3,872 69,183
-
Exchange
differences 221 4,351 - 1,631 (1,473) (44) (4,692) - - (6) 6 -
Share-based
payment - - - - - - - 659 - 659 - 659
Issue of
shares 1 15 - - - - - - - 16 - 16
Transactions
with owners 222 4,366 - 1,631 (1,473) (44) (4,692) 659 - 669 6 675
--------- --------- ------------ --------- --------- --------- ---------- --------- --------- ------------- ------------ --------
Exchange
differences - - - - - - 5,502 245 (4,386) 1,361 - 1,361
Loss for
the period - - - - - - - - (3,532) (3,532) 489 (3,043)
Total
comprehensive
income - - - - - - 5,502 245 (7,918) (2,171) 489 (1,682)
--------- --------- ------------ --------- --------- --------- ---------- --------- --------- ------------- ------------ --------
At 30 June
2014 6,841 134,890 - 50,571 (45,659) (1,356) 3,660 8,234 (93,372) 63,809 4,367 68,176
--------- --------- ------------ --------- --------- --------- ---------- --------- --------- ------------- ------------ --------
Exchange
differences (591) (11,647) - (4,367) 3,943 117 12,543 - - (2) 2 -
Share-based
payment - - - - - - - (24) - (24) - (24)
Issue of - - - - - - - - - - - -
shares
Issue costs - - - - - - - - - - - -
Investment
from partner - - - - - - - - - - 1,234 1,234
Transactions
with owners (591) (11,647) - (4,367) 3,943 117 12,543 (24) - (26) 1,236 1,210
--------- --------- ------------ --------- --------- --------- ---------- --------- --------- ------------- ------------ --------
Exchange
differences - - - - - - (11,186) (654) 7,809 (4,031) - (4,031)
PPE
revaluation - - 548 - - - - - - 548 - 548
Investment
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September 23, 2015 02:00 ET (06:00 GMT)
from partner - - - - - - - - 1,234 1,234 - 1,234
Loss for
the period - - - - - - - (5,905) (5,905) 497 (5,408)
Total
comprehensive
income - - 548 - - - (11,186) (654) 3,138 (8,154) 497 (7,657)
--------- --------- ------------ --------- --------- --------- ---------- --------- --------- ------------- ------------ --------
At 31 December
2014 6,250 123,243 548 46,204 (41,716) (1,239) 5,017 7,556 (90,234) 55,629 6,100 61,729
--------- --------- ------------ --------- --------- --------- ---------- --------- --------- ------------- ------------ --------
Change
in exchange
rates 57 1,275 (35) (339) 394 20 (1,370) - - 2 (2) -
Share-based
payment - - - - - - - 18 - 18 - 18
Investment
from partner - - - - - - - - 325 325 - 325
Cancellation
of shares (437) - - (40,885) 41,322 - - - - - - -
Transactions
with owners (380) 1,275 (35) (41,224) 41,716 20 (1,370) 18 325 345 (2) 343
--------- --------- ------------ --------- --------- --------- ---------- --------- --------- ------------- ------------ --------
Change
in exchange
rates - - - - - - 72 78 (567) (417) - (417)
Investment
from partner - - - - - - - - - - 325 325
Loss for
the period - - - - - - - - (7,380) (7,380) (184) (7,564)
Total
Comprehensive
Income - - - - - - 72 78 (7,947) (7,797) 141 (7,656)
--------- --------- ------------ --------- --------- --------- ---------- --------- --------- ------------- ------------ --------
At 30 June
2015 5,870 124,518 513 4,980 - (1,219) 3,719 7,652 (97,856) 48,177 6,239 54,416
--------- --------- ------------ --------- --------- --------- ---------- --------- --------- ------------- ------------ --------
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
6 months 6 months Year to
to to
30 June 30 June 31 December
2015 2014 2014
(unaudited) (unaudited) (audited)
USD'000 USD'000 USD'000
Cash flows from operating
activities
Loss before tax (7,582) (3,230) (8,855)
Net finance costs 197 81 191
Amortisation, depreciation
and impairment 3,189 3,421 7,445
Bargain purchase recognised (847) - -
in statement of comprehensive
income
Loss/(gain) on disposal of
fixed assets (521) 2 (1,473)
Share based payment expense 17 281 324
Foreign exchange movement (247) (238) (47)
Operating cash flows before
working capital movements (5,794) 317 (2,415)
------------ ---------------------------- ---------------------------
Increase in inventories (1,551) (248) (149)
Decrease in receivables 2,365 383 6,986
(Decrease)/increase in trade
and other payables (3,480) (1,304) 2,143
Increase in provisions (334) (28) (480)
Taxes paid (14) (18) (40)
Net cash (outflow)/inflow
from operating activities (8,808) (898) 6,045
------------ ---------------------------- ---------------------------
Cash flows from investing
activities
Acquisition of ECO Assets (3,575) - -
Purchase of property, plant
and equipment (10,912) (3,102) (19,023)
Purchase of other intangible
assets - - (1,000)
Proceeds from disposal of
property, plant and equipment 648 - 1,851
Proceeds from sale of investment - - 1,695
Interest received 4 14 45
Net cash outflow from investing
activities (13,835) (3,088) (16,432)
------------ ---------------------------- ---------------------------
Cash flows from financing
activities
Issue of new shares - 17 17
Proceeds from loans 9,630 1,143 3,000
Expansion capital partner
contribution 650 - 2,468
Interest paid (201) (94) (236)
Repayment of lease liabilities - (540) (1,667)
Net cash inflow/(outflow)
from financing 10,079 526 3,582
------------ ---------------------------- ---------------------------
(Decrease)/(decrease) in
cash and cash equivalents (12,564) (3,460) (6,805)
------------ ---------------------------- ---------------------------
Movement in net cash
Cash 14,946 21,902 21,902
Exchange differences on cash
and cash equivalents - - (151)
Opening cash and cash equivalents 14,946 21,902 21,751
Decrease in cash and cash
equivalents (12,564) (3,460) (6,805)
Closing cash and cash equivalents 2,382 18,442 14,946
------------ ---------------------------- ---------------------------
Reported in the Consolidated
Statement of Financial Position
as:
Cash and cash equivalents 2,382 18,442 14,946
------------ ---------------------------- ---------------------------
NOTES TO THE UNAUDITED INTERIM REPORT
1. Basis of Preparation
Hydrodec Group plc is the Group's ultimate parent company. It is
incorporated and domiciled in England and Wales. The address of
Hydrodec Group plc's registered office is 6 Hay's Lane, London,
United Kingdom. Hydrodec Group plc's shares are listed on the
Alternative Investment Market of the London Stock Exchange.
The Group presents its financial statements in US dollars, as
the Group's business is influenced by pricing in international
commodity markets which are primarily dollar based.
These consolidated condensed interim financial statements have
been approved by the Board of Directors on 22 September 2015.
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The interim consolidated financial statements for the six months
ended 30 June 2015, which are unaudited, do not constitute
statutory accounts within the meaning of Section 435 of the
Companies Act 2006. Accordingly, this condensed report is to be
read in conjunction with the Annual Report for the year ended 31
December 2014, which has been prepared in accordance with IFRS as
adopted by the European Union, and any public announcements made by
the Group during the interim reporting period.
The statutory accounts for the year ended 31 December 2014 have
been reported on by the Group's auditors, received an unqualified
audit report and have been filed with the registrar of companies at
Companies House. The unaudited condensed interim financial
statements for the six months ended 30 June 2015 have been drawn up
using accounting policies and presentation expected to be adopted
in the Group's full financial statements for the year ending 31
December 2015, which are not expected to be significantly different
to those set out in note 1 to the Group's audited financial
statements for the year ended 31 December 2014.
The financial statements have been prepared on the going concern
basis, which assumes that the Group will have sufficient funds to
continue in operational existence for the foreseeable future. As
highlighted in the risk management section of the CFO's Report, a
key underlying risk to this basis is the pace and execution of the
ramp up of production at Canton.
2. Revenue and operating loss
2.1. segment analysis
Following the acquisition of the principal assets and business
of OSS Group Limited in September 2013 and now of Eco Oil Limited
in April 2015, the Group now operates two main operating
segments:
-- Re-refining: principally the treatment of used transformer
oil and the sale of SUPERFINE(TM) oil
-- Recycling: principally the collection and treatment of waste
lubricant oil and the sale of recycled oil products
The financial information detailed below is frequently reviewed
by the Board (the Chief Operating Decision Maker).
Re-refining Recycling Unallocated Total
6 months to 30 June USD'000 USD'000 USD'000 USD'000
2015
Revenue and other
income 4,797 16,547 - 21,344
------------ ---------- ------------ --------
Operating EBITDA (363) (1,207) (1,623) (3,193)
Growth Costs (715) (422) (90) (1,227)
Bargain Purchase - 847 - 847
Re-commisioning Costs (494) - - (494)
Restructuring Costs - (105) - (105)
Amortisation and
depreciation (1,486) (1,699) (4) (3,189)
Share-based payment
costs - - (17) (17)
Foreign exchange
profit / (loss) (25) 48 (30) (7)
Operating (loss)/profit (3,083) (2,538) (1,764) (7,385)
------------ ---------- ------------ --------
Re-refining Recycling Unallocated Total
6 months to 30 June USD'000 USD'000 USD'000 USD'000
2014
Revenue and other
income 9,894 19,538 - 29,432
------------ ---------- ------------ --------
Operating EBITDA 3,142 537 (2,089) 1,590
Growth Costs - - (1,069) (1,069)
Amortisation and
depreciation (1,585) (1,820) (16) (3,421)
Share-based payment
costs - - (281) (281)
Foreign exchange
profit / (loss) 74 (40) - 34
Operating (loss)/profit 1,631 (1,323) (3,455) (3,147)
------------ ---------- ------------ --------
Re-refining Recycling Unallocated Total
Year ended 31 December USD'000 USD'000 USD'000 USD'000
2014
Revenue and other
income 20,057 34,680 - 54,737
------------ ---------- ------------ --------
Operating EBITDA 4,944 764 (4,098) 1,610
Growth Costs (1,772) - (506) (2,278)
Amortisation, depreciation
and impairment (3,277) (3,360) - (6,637)
Share-based payment
costs - - (324) (324)
Foreign exchange
loss (67) (88) (72) (227)
Operating (loss)/profit (172) (2,684) (5,000) (7,856)
------------ ---------- ------------ --------
2.2. geographic analysis
The Group's revenues from external customers and its non-current
assets are divided into the following geographical areas:
6 months to 6 months to Year to 31
30 June 2015 30 June 2014 December 2014
---------------------- ---------------------- ----------------------
Revenue Non-current Revenue Non-current Revenue Non-current
and assets and assets and assets
other other other
income income income
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
UK 16,547 17,380 19,538 12,474 34,680 11,580
USA* 2,706 33,235 6,416 8,906 13,910 23,733
Australia 2,091 11,994 3,478 15,437 6,147 13,078
Unallocated - 7,738 - 10,990 - 8,786
21,344 70,347 29,432 47,807 54,737 57,177
-------- ------------ -------- ------------ -------- ------------
*2015 income includes USD1,510,000 for business
interruption.
2.3. loss ON ORDINARY ACTIVITIES
The loss on ordinary activities before taxation is stated after
charging/(crediting) the following amounts:
6 months 6 months Year to
to to
30 June 30 June 31 December
2015 2014 2014
USD'000 USD'000 USD'000
Grant Income - (797) (1,641)
Cost of goods sold
- inventory expensed 4,437 6,115 11,058
- other direct costs 10,398 11,117 20,313
- employee benefit expense 2,759 2,835 6,493
- depreciation 982 1,473 2,581
Depreciation 277 152 542
Impairment of assets - - 809
2.4. growth costs
The business continues to invest in long term strategic growth
initiatives focused on geographic expansion and research and
development. These costs are analysed as follows:
6 months 6 months Year to
to to
30 June 30 June 31 December
2015 2014 2014
USD'000 USD'000 USD'000
--------- --------- ------------
Market expansion development
costs 448 454 1,270
New product development 357 615 1,008
Transaction fees and onetime
costs 422 - -
Growth costs 1,227 1,069 2,278
--------- --------- ------------
6 months 6 months Year to
to to
30 June 30 June 31 December
2015 2014 2014
USD'000 USD'000 USD'000
--------- --------- ------------
Employee benefit expense 460 635 1,342
Other costs 767 434 936
Growth costs 1,227 1,069 2,278
--------- --------- ------------
3. Finance costs
6 months 6 months Year to
to to
30 June 30 June 31 December
2015 2014 2014
USD'000 USD'000 USD'000
--------- --------- ------------
Bank overdrafts and leases 201 95 236
201 95 236
--------- --------- ------------
4. LOSS PER SHARE
The calculation of the basic loss per share is based on the loss
attributable to ordinary shareholders divided by the weighted
average number of shares in issue during the year.
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The weighted average number of shares used in the calculations
are set out below:
6 months 6 months Year to
to to
30 June 30 June 31 December
2015 2014 2014
Number of
Number of Shares Shares
-------------------------- ------------
744,099,472 744,038,008 744,074,814
In the period, the share options and warrants were anti-dilutive
and diluted earnings per share is the same as basic. The
calculation of the weighted average number of shares excludes
shares held by the Employee Benefit Trust.
5. TANGIBLE FIXED ASSETS
Land and Plant and Assets in Course Total
Buildings Equipment of Construction
----------- ----------- ----------------- --------
Cost
At 31 December
2013 4,977 25,100 - 30,077
Exchange translation 215 1,084 - 1,299
Additions - 371 2,810 3,181
At 30 June 2014 5,192 26,555 2,810 34,557
----------- ----------- ----------------- --------
Exchange translation (361) (4,776) - (5,137)
Additions 7 547 15,288 15,842
Revaluation - 548 - 548
Disposals - (1,424) - (1,424)
At 31 December
2014 4,838 21,450 18,098 44,386
----------- ----------- ----------------- --------
Exchange translation (67) (297) - (364)
Acquisition 894 3,091 - 3,984
Additions 14 96 10,675 10,785
Disposals (6) (536) - (542)
At 30 June 2015 5,672 23,804 28,773 58,249
----------- ----------- ----------------- --------
Accumulated depreciation
At 31 December
2013 330 7,084 - 7,414
Exchange translation 14 306 - 320
Provided in the
period 74 1,464 - 1,538
At 30 June 2014 418 8,854 - 9,273
----------- ----------- ----------------- --------
Exchange translation (42) (2,604) - (2,646)
Provided in the
period 127 1,458 - 1,585
Impairment - 809 - 809
Disposals - (1,424) - (1,424)
At 31 December
2014 503 7,093 - 7,596
----------- ----------- ----------------- --------
Exchange translation (7) (98) - (105)
Provided in the
period 54 1,205 - 1,259
Disposals (3) (412) - (415)
At 30 June 2015 547 7,788 - 8,335
----------- ----------- ----------------- --------
Carrying amount
At 30 June 2015 5,125 16,016 28,773 49,914
At 30 June 2014 4,774 17,701 2,810 25,285
At 31 December
2014 4,335 14,357 18,098 36,790
6. Intangibles
Re-Refining Recycling Total
-------------------------------------------- --------------------
Royalty Hydrodec Goodwill CEP Contracts Brand
Technology License Name
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Cost
At 31 December
2013 5,010 25,859 6,725 - 2,354 2,201 42,149
Exchange translation 167 862 224 - 78 73 1,404
Additions - - - - - - -
At 30 June 2014 5,177 26,721 6,949 - 2,432 2,274 43,553
-------- ------------ --------- --------- ---------- -------- --------
Exchange translation (584) (2,307) (600) (52) (209) (195) (3,947)
Additions - - - 2,000 - - 2,000
At 31 December
2014 4,593 24,414 6,349 1,948 2,223 2,079 41,606
-------- ------------ --------- --------- ---------- -------- --------
Exchange translation (292) 252 65 20 23 21 90
Additions - - - - 818 1,287 2,105
At 30 June 2015 4,301 24,666 6,414 1,968 3,064 3,387 43,801
-------- ------------ --------- --------- ---------- -------- --------
Accumulated
amortisation
and impairment
At 31 December
2013 2,925 12,361 3,300 - 179 195 18,960
Exchange translation 18 430 110 - 7 6 571
Provided in
the period 279 858 - - 318 344 1,799
At 30 June 2014 3,222 13,649 3,410 - 504 545 21,330
-------- ------------ --------- --------- ---------- -------- --------
Exchange translation (229) (1,215) (292) - (43) (45) (1,824)
Provided in
the period 272 836 - - 289 316 1,713
At 31 December
2014 3,265 13,270 3,118 - 750 816 21,219
-------- ------------ --------- --------- ---------- -------- --------
Exchange translation (1) 163 31 - 18 8 219
Provided in
the period 255 784 - - 455 436 1,930
At 30 June 2015 3,519 14,217 3,149 - 1,223 1,260 23,368
-------- ------------ --------- --------- ---------- -------- --------
Carrying amount
At 30 June 2015 782 10,449 3,265 1,968 1,841 2,127 20,433
At 30 June 2014 1,955 13,072 3,539 - 1,928 1,729 22,223
At 31 December
2014 1,328 11,144 3,231 1,948 1,473 1,263 20,387
7. Trade and other receivables
As at As at As at
30 June 30 June 31 December
2015 2014 2014
USD'000 USD'000 USD'000
-------- -------- ------------
Trade receivables 6,632 5,243 4,270
Prepayments and accrued
income 1,546 1,812 3,790
Other receivables 292 1,788 198
Other taxation and social
security 5 - 52
8,475 8,843 8,310
-------- -------- ------------
8. Trade and other payables
As at As at As at
30 June 30 June 31 December
2015 2014 2014
USD'000 USD'000 USD'000
-------- -------- ------------
Trade payables 7,776 3,939 6,624
Accruals 4,988 6,017 5,207
Other loan obligations due
within 1 year 2,630 - 3,000
Deferred income - 571 1,496
Finance lease obligations
due within 1 year 168 895 309
15,562 11,422 16,636
-------- -------- ------------
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