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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Proton Motor Power Systems Plc | LSE:PPS | London | Ordinary Share | GB00BP83GZ24 | ORD 0.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2.45 | 2.30 | 2.60 | 2.45 | 2.45 | 2.45 | 0.00 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Elec Indl Apparatus, Nec | 2.09M | -18.9M | -0.0122 | -2.01 | 38.01M |
From Apr 2019 to Apr 2024
TIDMPPS
RNS Number : 6706G
Proton Power Systems PLC
31 May 2017
Proton Power Systems plc
("Proton", "Proton Power" or the "Company")
Final Results
Proton Power Systems plc (AIM: PPS), the designer, developer and producer of fuel cells and fuel cell electric hybrid systems, today announces its results for the year ended 31 December 2016
Highlights:
-- + 191% increase in sales in 2016 to GBP1,989k compared to 2015 sales of GBP684k. There is clear
momentum in our business with a resulting increase in enquiries and the sales pipeline. The
Group has delivered the orders in the year and also the opening order book of GBP0.5m to be
delivered in Q1 2017.
-- Strategic Partnership with Deutsche Bahnbau for stationary power solutions to deliver
22 systems to the market in year 1.
-- Won GBP0.5m order for Orkney Island "Surf and Turf" stationary power project.
-- Delivered the FCREEV to Magna Steyr for demonstration at the Geneva Road Show.
-- Operating loss increases by 42% to GBP7,582k following further investment in manufacturing
and development capabilities.
-- Following the year end, existing loan agreements have been extended to 2019. A further
EUR8m facility has also been agreed. This together with our secured and planned commercial
contracts provide the financial strength for our growth plans. The target is for cash flow
positivity by 2019.
-- Cash burn from operating activities increased by 53% from GBP4.5m in 2015 to GBP6.9m in 2016.
Cash flow is our key financial performance target and our objective is to achieve a positive
cash flow in the shortest time possible. Current contracts are quoted with up-front payments
reducing reliance on working capital as we continue to invest in our manufacturing
capability. The cash burn is expected to reduce in 2017 as we deliver on our order backlog.
-- Won the funding project to introduce an automated assembly machine to produce 8,000
systems in one shift. This will further reduce our product cost and will allow us to meet the
demand and bring our technology quicker to the market.
-- Delivery of fuel cell eco-system for Swiss housing complex.
-- Delivery of fuel cell systems to repower LOHC Hydrogen.
-- Installation of Proton Motor fuel cell powered electric charging station.
-- Standardisation of our product for bespoke CleanTech Power Solutions. This strategy shift
has accelerated deployment in our target markets with simplification and cost reduction.
-- Developed very strong relationships with many large multinational companies across Europe
and Asia.
- Ends -
For further information:
Proton Power Systems plc
Dr Faiz Nahab, CEO
Achim Loecher, FD Tel: +49 (0) 89 127 626 550 Ian Peden, Chairman Tel: +49 (0) 162 101 6470
www.protonpowersystems.com
Stockdale Securities Limited
Nominated adviser and broker Tel.: +44 (0) 20 7601 6100 Antonio Bossi / David Coaten www.stockdalesecurities.com
A copy of the annual report for the year ended 31 December 2016 is available from
the company's website (www.protonpowersystems.com) and will be posted to
shareholders shortly, together with a notice of annual general meeting to be
held at 11th Floor, Beaufort House, 15 St Botolph Street, London EC3A 7BB
at 11:00 a.m. on 27 June 2017.
Chairman and Deputy CEO's statement
We are pleased to report our results for the year ended 31 December 2016.
Proton Power has made significant progress this year in proven technology, strategic co-operations and building our sales pipeline for a rapid increase in our order book. Further investment in our manufacturing capability has put us in a very strong strategic position to capitalise in the marketplace to deliver financial performance. We have strengthened our organisation to be able to deliver complete power supply solutions. We add value with our fuel cell expertise and with our system and solution know-how.
Highlights:
-- + 191% increase in sales in 2016 to GBP1,989k compared to 2015 sales of GBP684k. There is clear momentum in our business with a resulting increase in enquiries and the sales pipeline. The Group has delivered the orders in the year and also the opening order book of GBP0.5m to be delivered in Q1 2017.
-- Strategic Partnership with Deutsche Bahnbau for stationary power solutions to deliver 22 systems to the market in year 1.
-- Won GBP0.5m order for Orkney Island "Surf and Turf" stationary power project. -- Delivered the FCREEV to Magna Steyr for demonstration at the Geneva Road Show.
-- Operating loss increases by 42% to GBP7,582k following further investment in manufacturing and development capabilities.
-- Following the year end, existing loan agreements have been extended to 2019. A further EUR8m facility has also been agreed. This together with our secured and planned commercial contracts provides the financial strength for our growth plans. The target is for cash flow positivity by 2019.
-- Cash burn from operating activities increased by 53% from GBP4.5m in 2015 to GBP6.9m in 2016. Cashflow is our key financial performance target and our objective is to achieve a positive cash flow in the shortest time possible. Current contracts are quoted with up-front payments reducing reliance on working capital as we continue to invest in our manufacturing capability. The cash burn is expected to reduce in 2017 as we deliver on our order backlog.
-- Won the funding project to introduce an automated assembly machine to produce 8,000 systems in one shift. This will further reduce our product cost and will allow us to meet the demand and bring our technology quicker to the market.
-- Delivery of fuel cell eco-system for Swiss housing complex. -- Delivery of fuel cell systems to repower LOHC Hydrogen. -- Installation of Proton Motor fuel cell powered electric charging station.
-- Standardisation of our product for bespoke CleanTech Power Solutions. This strategy shift has accelerated deployment in our target markets with simplification and cost reduction.
-- Developed very strong relationships with many large multinational companies across Europe and Asia.
Proton Power is playing a crucial part in shaping the Hydrogen World of the future. Its evolution from Magnet Motor Fuel Cell manufacturer to premium CleanTech Power Solutions service provider is unique.
Proton Power's pioneering spirit results in consistent focus on the future and forms the basis for the powerful forces that will drive the next 100 years of progress and the Hydrogen World of tomorrow and beyond.
View to the future
The world is committed to protecting the environment. Cities and governments, pushed by the European Commission, must reduce inner-city pollution drastically. China fights against smog in the big cities. After Diesel Gate in the US and Europe, electric vehicles with batteries are on the move. All this is generating a market for clean transport and energy. Based on that development, the world market for fuel cell products and solutions is more active than ever.
Beside pure battery solutions, also hydrogen fuel cells are the focus. Companies like Toyota, Hyundai, Daimler are pushing the technology. Fuel cells provide benefits like fast refueling and long range of operation. Hydrogen is reproducible and can make use of surplus energy from wind and solar power. Europe has put mayor funding programmes in place to set up a hydrogen infrastructure. The same is now happening now in Japan, Korea and China. The Chinese government is fully committed to fuel cell technology with major regulatory and funding support.
Most of the automotive supply industry is now in a change mode from conventional to electric drive trains with batteries and fuel cells. Know-how can be generated in house which will require years of R&D work or can be acquired via M&A. The current time pressure does not allow long lasting R&D projects.
All this is very promising. Fuel cell know-how has a major value and will be used in mobile as well as stationary power applications. The experts for fuel cell technology are rare. Those expert companies are only a handful of players worldwide.
Proton Power has long lasting experience in applications like buses, trucks, passenger vehicles, stationary power, ships and fork lifts. With less than 100 people it is relatively small but regarding IP and experience a very powerful company. Proton is developing own fuel cell stacks. Systems are designed from first simulation, prototype up to final solution for volume manufacturing. Proton is cooperating with German, European and China based companies in the field of fuel cell technology.
The business is organized into three business units - stationary, mobile and maritime.
These stationary fuel cell units can replace diesel generators in telecoms, data centers and eco-houses. Proton Power has a seven-year deal with its biggest customer, Deutsche Bahn, to replace old diesel back-up generators used to power track signals when there's disruption to the main power supply. The benefits for the end user are that these new units require less maintenance than the old polluting generators that were prone to algae build-up in the diesel tank, which is causing high maintenance cost. It is also possible to monitor the Proton Power system remotely, which again saves time and manpower.
The mobile applications of the Proton Power technology will be seen in the public transport and logistics arena. Proton Power was the first company to develop a hybrid range extender battery/fuel cell system. This technology allows us to use both systems in an optimized way with long lifetime expectation. In the meantime, the range extender concept is adopted by the industry especially for heavy duty vehicle applications.
Constantly evolving to stay a decisive step ahead has always formed the basis for Proton Power's thinking and actions as a company. The Company is looking two or three decades into the future and considering today the CleanTech Power Solution concepts of tomorrow.
A changing brand in Stationary, Mobility and Maritime markets.
The Company began as Magnet Motor, opening its factory in 1980. The technology and application roadmap went from the world's first triple hybrid fork lift truck to a fuel cell ship. After that we developed the triple hybrid Skoda bus in 2008. Containerized power solutions completed the application portfolio. All those applications are powered via our own fuel cell stacks, with a robust design for a long lifetime. The Company established operations in the Munich area and was one of the first German designers and manufacturers of fuel cells. International growth is now planned by looking for good partners with the same vision.
The oil crisis with diesel and now following the COP21 targets presents industry as a whole but in particular the automotive industry with a huge challenge.
Proton Stationary for businesses and people
This market includes back up power for telecoms and data centre installations which has an estimated value of EUR8 billion for the European market alone. Buildings are also becoming an interesting growing market with the installation of the ecosystem in Switzerland.
Proton Mobility
Hydrogen Battery Hybrid zero emission vehicles from emission-free factories. This market includes city buses, airport vehicles, trucks, off-road vehicles to fork lift trucks. This market's size is estimated at over EUR20 billion worldwide. The mobility sector sees many future challenges with emission free to automated driving with the vehicle becoming a power source itself. The FCREEV demonstrator delivered to Magna for the Geneva road show again shows Proton Power's capability in the sector.
Proton Maritime
Building on the success with our tourist ship in Hamburg, Proton Power sells the know-how capability to partners to evolve this market. Proton Power delivered the first feasibility for an underwater vessel. Proton Power, again, clearly demonstrates capability within the technology.
Power Solutions are becoming tailor-made
CleanTech Power Solutions will become more diverse and more flexible. That is why at Proton Power we are making our offering of products and services bespoke to customer requirements based on our standard suite of CleanTech products aimed at each market sector in a scalable modular approach. As power requirements increase our approach allows users to simply add additional modules all controlled from our unique software. This shift towards modular standardisation results in accelerated deployment in our target markets with simplification and cost reduction.
Connectivity is becoming second nature
Everything will be connected in the future. The digital age continues to drive energy demands in the world. At Proton Power we have developed our technology to remotely monitor power requirements. That is why we are seizing the opportunities of digitalisation and converting data into digital intelligence to permanently improve lives in a CleanTech environment.
Market Drivers
At the November 2015 conference in Paris (COP 21) hosted by the United Nations, 196 countries vowed to take actions designed to limit global warming. Many businesses and corporations have pledged their support for the world effort. This global event engaged a lot of corporate leaders and we believe that neither countries nor companies take these kinds of public pledges lightly. Indeed, on top of polishing their public image, companies are being good citizens of the world when they pitch in with initiatives like reducing greenhouse gas emissions, increasing their use of renewable energy, and being more energy efficient.
Coming out of Paris we now have legislation with targets for countries and businesses which are held accountable to the public. When insurance companies are pricing this into business premiums, CO2 emissions are starting to have an impact on businesses' and economies' profitability.
From a purely business standpoint, considerations of where and how to build facilities (or alter existing ones) to lessen climate risk have moved up the risk management priority list. Such moves are the main market drivers for Proton Power's CleanTech power solutions and the new Hydrogen world and zero emissions. These market drivers underpin the confidence the Directors and shareholders have in Proton Power's technology to be a real game changer to society.
Therefore, CleanTech technology is being prioritised and required to provide zero emission energy solutions to a multi-billion market that is growing year on year.
Proton Power is strategically positioned, after more than 20 years in the industry, to win a significant share.
Finance
Turnover increased by 191% to GBP1,989,000 (2015: GBP684,000), mainly due to the delivery of 22 systems under the Deutsche Bahnbau 7 year frame agreement.
The operating loss for the year was GBP7,582,000 which, when added to net finance costs of GBP6,117,000 and the non-cash loss arising from the change in the fair value of the embedded derivative on the shareholder loans of GBP5,799,000 resulted in a total loss of GBP19,498,000. Excluding the fair value loss on the embedded derivative and the exchange loss, this was in line with management expectations.
The Group secured further loan funding in 2016 of EUR10,000,000 from Mr Falih Nahab, with a further EUR8,000,000 agreed in 2017.
Cash burn from operating activities increased by 55% from GBP4,452,000 in 2015 to GBP6,906,000 in 2016.
The total funds raised financed the working capital for the year. The Company continues to be interested in involving other investors alongside Roundstone Properties Limited in this exciting opportunity.
I personally thank all our customers who believe in us, our committed employees and our shareholders who have the vision to invest in our mission.
Ian Peden FCMA Executive Chairman & Deputy Chief Executive Officer
Consolidated income statement
for the year ended 31 December 2016
Hot Features
Premium
2015
Note 2016 (Restated)
GBP'000 GBP'000
Revenue 4 1,989 684
Cost of sales (4,094) (1,182)
Gross loss (2,105) (498)
Other operating income 113 79
Administrative expenses (5,590) (4,926)
Operating loss (7,582) (5,345)
Finance income 9 2 788
Finance costs 10 (6,119) (1,695)
Fair value loss on
embedded derivatives (5,799) (2,920)
Loss for the year
before tax 5 (19,498) (9,172)
Tax 8 - -
Loss for the year
after tax (19,498) (9,172)
Loss per share (expressed
as pence per share)
Basic 11 (3.0) (1.4)
Diluted 11 (3.0) (1.4)
Consolidated statement of comprehensive income
for the year ended 31 December 2016
2016 2015
GBP'000 GBP'000
Loss for the year (19,498) (9,172)
Other comprehensive
income / (expense)
Items that may not
be reclassified to
profit and loss
Exchange differences
on translating foreign
operations (122) 28
Total other comprehensive
income / (expense) (122) 28
Total comprehensive
expense for the year (19,620) (9,144)
Attributable to owners
of the parent (19,620) (9,144)
Group and Company Balance sheets
as at 31 December 2016
Group Company
Note 2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Intangible assets 12 125 129 - -
Property, plant and
equipment 13 941 778 - -
Investment in subsidiary
undertakings 14 - - - -
1,066 907 - -
Current assets
Inventories 15 1,043 692 - -
Trade and other receivables 16 381 296 111 75
Cash and cash equivalents 17 2,467 614 17 2
3,891 1,602 128 77
Total assets 4,957 2,509 128 77
Liabilities
Current liabilities
Trade and other payables 18 2,172 1,480 240 181
Borrowings 19 2,662 2,084 7 1,757
4,834 3,564 247 1,938
Non-current liabilities
Borrowings 19 35,813 21,104 35,813 21,104
Embedded derivatives
on convertible interest 20 15,341 9,542 15,341 9,542
51,154 30,646 51,154 30,646
Total liabilities 55,988 34,210 51,401 32,584
Net liabilities (51,031) (31,701) (51,273) (32,507)
Equity
Equity attributable
to equity holders
of the parent Company
Share capital 22 9,712 9,708 9,712 9,708
Share premium 18,346 18,334 18,346 18,334
Merger reserve 15,656 15,656 15,656 15,656
Reverse acquisition
reserve (13,862) (13,862) -
Share option reserve 1,518 1,244 1,518 1,244
Foreign translation
reserve 6,569 6,102 - -
Capital contributions
reserves 1,161 1,002 - -
Accumulated losses
At 1 January 2016 (69,885) (60,300) (77,449) (68,148)
Loss for the year
attributable to the
owners (19,498) (9,172) (19,056) (9,301)
Other changes in retained
earnings (748) (413) - -
Total equity (51,031) (31,701) (51,273) (32,507)
Group statement of changes in equity
for the year ended 31 December 2016
Reverse Share Foreign Capital
Share Share Merger Acquisition Option Translation Contribution Accumulated Total
Capital Premium Reserve Reserve Reserve Reserve Reserves Losses Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
1 January
2015 9,695 18,298 15,656 (13,862) 971 5,598 1,065 (60,300) (22,879)
Share based
payments - - - - 273 - - - 273
Proceeds from
share issues 13 36 - - - - - - 49
Currency
translation
differences - - - - - 476 (63) (413) -
Transactions
with owners 13 36 - - 273 476 (63) (413) 322
Loss for the
year - - - - - - - (9,172) (9,172)
Other
comprehensive
income:
Currency
translation
differences - - - - - 28 - - 28
Total
comprehensive
income for
the year - - - - - 28 - (9,172) (9,144)
Balance at
31 December
2015 9,708 18,334 15,656 (13,862) 1,244 6,102 1,002 (69,885) (31,701)
Balance at
1 January
2016 9,708 18,334 15,656 (13,862) 1,244 6,102 1,002 (69,885) (31,701)
Share based
payments - - - - 274 - - - 274
Proceeds from
share issues 4 12 - - - - - - 16
Currency
translation
differences - - - - - 589 159 (748) -
Transactions
with owners 4 12 - - 274 589 159 (748) 290
Loss for the
year - - - - - - - (19,498) (19,498)
Other
comprehensive
income:
Currency
translation
differences - - - - - (122) - - (122)
Total
comprehensive
income for
the year - - - - - (122) - (19,498) (19,620)
Balance at
31 December
20165 9,712 18,346 15,656 (13,862) 1,518 6,569 1,161 (90,131) (51,031)
Company statement of changes in equity
Share
Share Share Merger Option Accumulated Total
Capital Premium Reserve Reserve Losses Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January
2015 9,695 18,298 15,656 971 (68,148) (23,528)
Proceeds from share
issues 13 36 - - - 49
Share based payments - - - 273 - 273
Transactions with owners 13 36 - 273 - 322
Loss for the year - - - - (9,301) (9,301)
Total comprehensive
expense for the year - - - - (9,301) (9,301)
Balance at 31 December
2015 9,708 18,334 15,656 1,244 (77,449) (32,507)
Balance at 1 January
2016 9,708 18,334 15,656 1,244 (77,449) (32,507)
Proceeds from share
issues 4 12 - - - 16
Share based payments - - - 274 - 274
Transactions with owners 4 12 - 274 - 290
Loss for the year - - - - (19,056) (19,056)
Total comprehensive
expense for the year - - - - (19,056) (19,056)
Balance at 31 December
2016 9,712 18,346 15,656 1,518 (96,505) (51,273)
Share premium
Costs directly associated with the issue of the new shares have been set off against the premium generated on issue of new shares.
Merger reserve
The merger reserve of GBP15,656,000 arises as a result of the acquisition of Proton Motor Fuel Cell GmbH and represents the difference between the nominal value of the share capital issued by the Company and its fair value at 31 October 2006, the date of the acquisition.
Reverse acquisition reserve
The reverse acquisition reserve (Group only) arises as a result of the method of accounting for the acquisition of Proton Motor Fuel Cell GmbH by the Company. In accordance with IFRS 3 the acquisition has been accounted for as a reverse acquisition.
Share option reserve
The Group operates an equity settled share-based compensation scheme. The fair value of the employee services received for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted. At each balance sheet date the Company revises its estimate of the number of options that are expected to vest. The original expense and revisions of the original estimates are reflected in the income statement with a corresponding adjustment to equity. The share option reserve represents the balance of that equity.
Group and company statements of cash flows
for the year ended 31 December 2016
Group Company
Year ended 31 December Year ended 31 December
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Loss for the year (19,498) (9,172) (19,056) (9,301)
Adjustments for:
Depreciation and amortisation 282 238 - -
Impairment of investment - - 6,435 5,165
Interest income (2) (8) (28) (22)
Interest expense 2,450 1,695 2,445 1,692
Share based payments 290 273 195 273
Movement in inventories (351) (380) - -
Movement in trade
and other receivables (85) 45 (36) 28
Movement in trade
and other payables 692 776 59 10
Movement in fair value
of embedded derivatives 5,799 2,920 5,799 2,920
Effect of foreign
exchange rates 3,517 (839) 4,043 (873)
Net cash (used in)
/ generated from operations (6,906) (4,452) (144) (108)
Interest paid - - - -
Net cash (used in)
/ generated from operating
activities (6,906) (4,452) (144) (108)
Cash flows from investing
activities
Capital contribution
to subsidiaries - - (6,435) (5,165)
Purchase of intangible
assets (62) (91) - -
Purchase of property,
plant and equipment (236) (360) - -
Interest received 2 8 - 22
Net cash used in investing
activities (296) (443) (6,435) (5,143)
Cash flows from financing
activities
Proceeds from issue
of loan instruments 8,947 5,245 6,578 5,245
Proceeds from issue
of new shares 16 8 16 8
Net cash generated
from financing activities 8,963 5,253 6,594 5,253
Net increase/(decrease)
in cash and cash equivalents 1,761 358 15 2
Effect of foreign
exchange rates 172 (4) - -
Opening cash and cash equivalents 534 180 2 - Closing cash and cash equivalents 2,467 534 17 2
Notes to the financial statements
1. General information
Proton Power Systems plc ("the Company") and its subsidiaries (together "the Group") design, develop, manufacture and test fuel cells and fuel cell hybrid systems as well as the related technical components. The Group's design, research and development and production facilities are located in Germany.
The Company is a public limited liability company incorporated and domiciled in the UK. The address of its registered office is: St Ann's Wharf, 112 Quayside, Newcastle upon Tyne, NE1 3DX. The Company's initial public offering took place at the Alternative Investment Market of the London Stock Exchange on 31 October 2006 and its shares are listed on this exchange.
Directors
The Directors who held office during the year and up to the date of approval of this report were
as follows:
Ian Peden FCMA Chairman 2,3,4 (has relinquished the role of Deputy CEO from 1 June 2017 but will continue to act as chairman of the Company)
Faiz Nahab Chief Executive 1,6
Thomas Melczer Business Development Director6 (resigned 2 August 2016)
Achim Loecher Non-Executive Director (resigned as Group Finance Director and became
Non-Executive Director on 2 August 2016) 5
Helmut Gierse Non-Executive Director 5
1 Chairman of the Remuneration Committee.
2 Chairman of the Audit Committee.
3 Chairman of the Nominations Committee.
4 Member of the Remuneration Committee.
5 Member of the Audit Committee.
6 Member of the Nominations Committee
2. Summary of significant accounting policies
The Board approved this preliminary announcement on 30 May 2017.
The financial information included in this preliminary announcement does not constitute the Group's statutory accounts for the years ended 31 December 2016 or 31 December 2015. Statutory accounts for the year ended 31 December 2015 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2016 will be delivered to the Registrar of Companies following the Company's annual general meeting.
The auditors have reported on the 2016 and 2015 accounts; their report was unqualified and included an emphasis of matter in respect of going concern.
These financial statements for the year ended 31 December 2016 have been prepared under the historical cost
convention except for embedded derivative financial instruments, which are stated at their fair value.
The accounting policies used are consistent with those contained in the Group's last annual report and accounts for
the year ended 31 December 2015.
The financial information included in this preliminary announcement has been prepared in accordance with EU
endorsed International Financial Standards ('IFRS'), IFRS IC interpretations and those parts of the Companies Act
2006 applicable to companies reporting under IFRS.
Until such time as the Group achieves operational cash inflows through becoming a volume producer of its products to a receptive market it will remain dependent on its ability to raise cash to fund its operations from existing and potential shareholders and the debt market. The Group has historically been dependent on the continuing financial support of its main investor,
Roundstone Properties Limited to meet its day-to-day working capital requirements. The Group has a loan with Roundstone Properties of EUR16,500,000. The redemption dates of this loan were extended by Roundstone Properties Limited in March 2016 as follows:
-- EUR2.4m to 23 June 2018
-- EUR16.5m; EUR5.6m to 30 September 2018 and EUR10.9m to 6 May 2018
On 20 April 2017 it was agreed with Roundstone Properties Limited that repayment of these loans be extended to 31 December 2019.
On 7 April 2016 the Group replaced its EUR10m loan facility with Mr Falih Nahab with a new loan facility of EUR20m with Mr Falih Nahab. As at 31 December 2016, EUR15,760,000 had been drawn on this facility. The redemption date of this loan was December 2018, however, subsequent to the year end it was also agreed that this loan facility would be increased by a further EUR8m to EUR28m.
On 20 April 2017 it was agreed with Mr Falih Nahab that repayment of these loans be extended to 31 December 2019.
Cash flow forecasts demonstrate that the committed facilities from Mr Falih Nahab enable the Company and the Group to meet its cash requirements for the period up to July 2018. The Company and Group are also able to defer discretionary spend during this period to provide further cash flow headroom, should this be required
At this point in time there has been no indication of circumstances which would lead to Mr Falih Nahab withdrawing this support. Mr Falih Nahab, is a private individual based in Jordan and as such is unable to produce financial information to support his ability to fund the debt facility. Mr Falih Nahab is a related party.
Due to the lack of available financial information, the Directors are unable to confirm that Falih Nahab has the ability to provide such support. This condition indicates the existence of a material uncertainty which may cast significant doubt upon the Group and the Company's ability to continue as a going concern. However, the Directors firmly believe that the Group and Company
remain a going concern on the grounds that Falih Nahab has supported the Group and the Company in recent years and that funding has been agreed by Falih Nahab for at least the next 12 months.
The financial statements do not include the adjustments that would result if the Group or Company was unable to continue as a going concern.
3. Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below.
Recognition of development costs
Self developed intangible assets are recognised where the Group can estimate that it is probable that future economic benefits will flow to the entity. See Note 12.
Impairment of goodwill
The carrying value of goodwill must be assessed for impairment annually, or more frequently if there are indications that goodwill might be impaired. This requires an estimation of the value in use of the cash generating units to which goodwill is allocated. Value in use is dependent on estimations of future cash flows from the cash generating unit and the use of an appropriate discount rate to discount those cash flows to their present value.
Classification and fair value of financial instruments
The Group uses judgement to determine the classification of certain financial instruments, in particular convertible loans advanced during the year. Judgement is applied to determine whether the instrument is a debt, equity or compound instrument and whether any embedded derivatives exist within the contracts.
Judgements have been made regarding whether the conversion feature meets the "fixed for fixed" test in each instrument. In the case of each instrument it is deemed it is not met on the basis that the loan is in Euros and shares are in Sterling.
The Group uses valuation techniques to measure the fair value of these financial instruments. In applying these valuation techniques, management use estimates and assumptions that are, as far as possible, consistent with observable market data. Where applicable market data is not observable, management uses its best estimate about the assumptions that market participants would make. These
estimates may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.
4. Segmental information
The Group has adopted the requirements of IFRS8 'Operating segments'. The standard requires operating segments to be identified on the basis of internal financial information about components of the Group that are regularly reviewed by the Chief Operating Decision Maker ('CODM') to allocate resources to the segments and to assess their performance. The CODM has been identified as the Board of Directors. The Board considers the business from a product/services perspective.
Based on an analysis of risks and returns, the Directors consider that the Group has only one identifiable operating segment, green energy. All property, plant and equipment is located in Germany.
Revenue from external customers
2016 2015
GBP'000 GBP'000
Germany 1,769 472
Rest of Europe 120 121
Rest of the world 100 91
1,989 684
Sales to Deutsche Bahn represented 73.6% of the Group's revenue in 2016 (2015: Siemens AG 49.5%).
The results as reviewed by the CODM for the only identified segment are as presented in the financial statements with the exception of the revaluation loss (2015: loss) on the fair value of the embedded derivative of GBP5,799,000 (2015: GBP2,920,000) and the associated impact on the balance sheet.
5. Loss for the year before tax
2016 2015
GBP'000 GBP'000
Loss on ordinary activities before
taxation is stated
after charging
Depreciation and amortisation 282 238
Hire of other assets - operating leases 281 223
Pension contributions 73 68
Change in fair value of embedded derivatives 5,799 2,920
Foreign exchange losses 3,778 -
after crediting
Foreign exchange gains - (752)
Amortisation of grants from public
bodies (22) (98)
6. Auditors' remuneration
2016 2015
GBP'000 GBP'000
Audit services
Fees payable to the Company's auditor
for the audit of the parent Company
and consolidated financial statements 41 40
Fees payable to the Company's auditor
and its associates for other services:
Other services - -
41 40
7. Staff numbers and costs
The monthly average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:
2016 2015
Development and construction 56 48
Administration and sales 23 28
79 76
The aggregate payroll costs of these persons were as follows:
Group
2016 2015
GBP'000 GBP'000
Wages and salaries 3,716 2,802
Share based payments 274 273
Social security costs 643 515
Other pension costs 73 68
4,706 3,658
There are no staff, or direct wages specific to the Company. Share based payments charge to the non-executive Directors of the Company is GBP230,000 (2015: GBP135,000)
Share based payments
The Group has incurred an expense in respect of shares and share options during the year issued to employees as follows:
Group Company
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Share options 274 273 194 139
Shares 16 41 16 41
290 314 210 180
The cost of these options to the Group is being charged over a two year period from the date of grant at which point they become exercisable.
At 31 December 2016 the Group operated a single share option scheme ("SOS"). The SOS allows the Company to grant options to acquire shares to eligible employees. Options granted under the SOS are unapproved by HM Revenue & Customs. The maximum number of shares over which options may be granted under the SOS may not be greater than 15 per cent of the Company's issued share capital at the date of grant when added to options or awards granted in the previous 10 years. The exercise of options can take place at any time after the second anniversary of the date of grant. Options cannot, in any event, be exercised after the tenth anniversary of the date of grant.
All share-based employee remuneration will be settled in equity. The Group has no legal or constructive obligation to repurchase or settle options. Share options and weighted average exercise price are as follows for the reporting periods presented:
2016 2015
Weighted Weighted
average exercise average exercise
Number price Number price
GBP GBP
Opening balance 81,245,000 0.049 63,285,000 0.043
Granted - - 19,800,000 0.068
Exercised - - (300,000) (0.030)
Forfeited (3,555,000) (0.081) (1,540,000) (0.038)
Closing balance 77,690,000 0.048 81,245,000 0.049
The fair values of options granted were determined using the Black-Scholes valuation model. Significant inputs into the calculation include a weighted average share price and exercise prices. Furthermore, the calculation takes into account future dividends of nil and volatility rates of between 50% and 94%, based on expected share price. Risk-free interest rate was determined between 2.130% and 5.125% for the various grants of options. It is assumed that options granted under the SOS have an average remaining life of 5 months (2015: 9 months).
The underlying expected volatility was determined by reference to the historical data, of the Company. No special features inherent to the options granted were incorporated into measurement of fair value.
8. Tax
The tax on the Group's loss before tax differs from the theoretical amounts that would arise using the weighted average tax rate applicable to losses of the Companies as follows:
2016 2015
GBP'000 GBP'000
Tax reconciliation
Loss before tax (19,498) (9,172)
Expected tax credit at 20% (2015: 20.25%) (3,900) (1,857)
Effects of different tax rates on foreign
subsidiaries (589) (399)
Expenses not deductible for tax purposes 1,650 900
Tax losses carried forward 2,839 1,356
Tax charge - -
9. Finance income
Group
2016 2015
GBP'000 GBP'000
Interest 2 8
Exchange gain on shareholder
loans - 780
2 788
10. Finance costs
Group
2016 2015
GBP'000 GBP'000
Interest 2,450 1,695
Exchange loss on shareholder
loans 3,669 -
6,119 1,695
11. Loss per share
Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of Ordinary shares in issue during the year.
Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary shares, share options and convertible debt; however, these have not been included in the calculation of loss per share because they are anti dilutive for these periods.
2016 2015
Basic Diluted Basic Diluted
GBP'000 GBP'000 GBP'000 GBP'000
Loss attributable to equity
holders of the Company (19,498) (19,498) (9,172) (9,172)
Weighted average number
of Ordinary shares in issue
(thousands) 643,250 643,250 642,377 642,377
Effect of dilutive potential
Ordinary shares from share
options and convertible
debt (thousands) - - - -
Adjusted weighted average
number of Ordinary shares 643,250 643,250 642,377 642,377
Pence per Pence per Pence per Pence per
share share share share
Loss per share (pence per
share) (3.0) (3.0) (1.4) (1.4)
12. Intangible assets - Group
Copyrights,
trademarks
and other
intellectual
property Development
Goodwill rights costs Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2015 2,126 265 1,275 3,666
Exchange differences - (16) (68) (84)
Additions - 91 - 91
Transfers - 42 - 42
Disposals - (130) (108) (238)
At 31 December 2015 2,126 252 1,099 3,477
At 1 January 2016 2,126 252 1,099 3,477
Exchange differences - 43 174 217
Additions - 62 - 62
Transfers - - - -
Disposals - - - -
-
-------- ------------- ----------- -------
At 31 December 2016 2,126 357 1,273 3,756
Accumulated Amortisation
At 1 January 2015 2,126 205 1,271 3,602
Exchange differences - (18) (68) (86)
Charged in year - 65 - 65
Disposals - (125) (108) (233)
At 31 December 2015 2,126 127 1,095 3,348
At 1 January 2016 2,126 127 1,095 3,348
Exchange differences - 24 174 198
Charged in year - 81 4 85
Disposals - - - -
At 31 December 2016 2,126 232 1,273 3,631
Net book value
At 31 December 2016 - 125 - 125
At 31 December 2015 - 125 4 129
At 1 January 2015 - 60 4 64
Self-developed intangible assets in the amount of GBP62,000 (2015: GBP133,000) are recognized in the reporting year, because the prerequisites of IAS 38 have been fulfilled.
The amortisation charge above is recognized in the administrative expenses in the income statement.
As self-developed intangible assets are not material to the Group financial statements no impairment test has been performed.
There are no individually significant intangible assets.
Amortisation and impairment charges are recognised within administrative expenses.
13. Property, plant and equipment - Group
Leasehold Technical
property equipment Office & Self-constructed
improvements & machinery other equipment plant & machinery Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2015 510 1,187 690 185 2,572
Exchange differences (30) (64) (47) (12) (153)
Additions 34 133 70 123 360
Transfers (4) 115 22 (175) (42)
Disposals (12) (813) (543) - (1,368)
At 31 December 2015 498 558 192 121 1,369
At 1 January 2016 498 558 192 121 1,369
Exchange differences 80 104 35 14 233
Additions 20 117 89 10 236
Transfers - 94 5 (99) -
Disposals - - - - -
At 31 December 2016 598 873 321 46 1,838
Accumulated Depreciation
At 1 January 2015 230 1,051 619 - 1,900
Exchange differences (13) (58) (44) - (115)
Charge for year 37 92 44 - 173
Disposals (12) (813) (542) - (1,367)
At 31 December 2015 242 272 77 - 591
At 1 January 2016 242 272 77 - 591
Exchange differences 40 55 14 - 109
Charge for year 43 112 42 - 197
Disposals - - - - -
At 31 December 2016 325 439 133 - 897
Net book value
At 31 December 2016 273 434 188 46 941
At 31 December 2015 256 286 115 121 778
At 1 January 2015 280 136 71 185 672
14. Investment in subsidiary undertaking
2016 2015
Company GBP'000 GBP'000
Shares in Group undertaking
Cost
At beginning of year 56,922 51,757
Additions 6,435 5,165
At end of year 63,357 56,922
Impairment
At beginning of year 56,922 51,757
Charge for the year 6,435 5,165
At end of year 63,357 56,922
Net book value
At end of year - -
On 31 October 2006 the Company acquired the entire share capital of Proton Motor Fuel Cell GmbH, a company incorporated in Germany. The cost of investment comprises shares issued to acquire the Company valued at the listing price of 80p per share, together with costs relating to the acquisition and subsequent capital contributions made to the subsidiary.
Following a review of the Company's assets the Board has concluded that there are sufficient grounds for its investment in the subsidiary undertakings to be subject to an impairment review under IAS 36. In arriving at the charge (2015: charge) in the year of GBP6,435,000 (2015: GBP5,165,000) the Board has determined the recoverable amount on a value in use basis using a discounted cash flow model.
15. Inventories
Group Company
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Finished goods 142 112 - -
Work in progress 195 - - -
Consumable stores - - - -
Raw materials 706 580 - -
1,043 692 - -
The cost of inventories sold during 2016 is GBP2,568,254 (2015: GBP641,014). It includes GBP321,897 impairment loss slow moving finished goods and goods anticipated to be sold at a loss (2015: nil).
16. Trade and other receivables
Group Company
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 241 261 - -
Other receivables 120 20 11 9
Amounts due from Group companies - - 93 55
Prepayments and accrued
income 20 15 7 11
381 296 111 75
The Directors consider that the carrying amount of trade and other receivables approximates to their fair values.
In addition some of the unimpaired trade receivables are past due as at the reporting date. The age of financial assets past due but not impaired is as follows:
Group
2016 2015
GBP'000 GBP'000
Not more than three months
(all denominated in Euros) 228 116
The Directors consider that trade and other receivables which are not past due or impaired show no risk of requiring impairment.
17. Cash and cash equivalents
Group Company
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and in hand 2,467 614 17 2
Bank overdraft (19) - (80) - -
2,467 534 17 2
The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair values.
18. Trade and other payables
Group Company
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 822 526 - 1
Other payables 583 489 - -
Accruals and deferred income 767 465 240 180
2,172 1,480 240 181
The Directors consider that the carrying amount of trade and other payables approximates to their fair values.
19. Borrowings
Group Company
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Bank overdraft - 80 - -
Loans
Current 2,662 2,004 7 1,757
Non-current 35,813 21,104 35,813 21,104
Current and total borrowings 38,475 23,188 35,820 22,861
During 2014 the Group and Company entered into a new loan agreement with Roundstone Properties Limited which combined all existing Roundstone Properties Limited's loans and provided total facilities of EUR16,500,000. The loans under this facility were repayable on 6 May 2017 and carry interest at 10% per annum. Roundstone Properties Limited has the option to convert accrued interest and outstanding interest at any time into Ordinary shares in the Company at 2p per share. This facility was fully utilised during 2014.
On 14 December 2014 the Group and Company entered into a loan agreement with Mr Falih Nahab which provided facilities of EUR10,000,000. The loan was originally repayable on 13 December 2017 and carries interest at 10% per annum. Mr Falih Nahab has the option to convert accrued interest and outstanding interest at any time into Ordinary shares in the Company at 2p per share. On 7 April 2016 the Group replaced its EUR10m loan facility with Mr Falih Nahab with a new loan facility of EUR20m with Mr Falih Nahab on the same terms. At 31 December 2016 total advances under this facility were EUR15,760,000. Subsequent to the year end it was also agreed that this loan facility would be increased by a further EUR8m to EUR28m. Mr Falih Nahab is the brother of Mr Faiz Nahab, a Director of the Company and both are treated as related parties..
These instruments were classified as a debt host instrument with an embedded derivative being the conversion feature. The embedded derivative has been fair valued and the residual value of the instrument had been recognised as debt. The debt has subsequently been measured at amortised cost.
On 24 July 2013 the Group and Company entered into a new loan agreement with Roundstone Properties Limited providing EUR2,383,841. The loan is unsecured and carries interest at LIBOR plus 2% per annum. Interest is to be rolled up and repaid at the termination of the agreement. The Company has the option to repay interest annually.
The redemption dates of these loans were extended by Roundstone Properties Limited and Mr Falih Nahab in March 2016 as follows:
-- EUR2.4m to 23 June 2018 -- EUR16.5m; EUR5.6m to 30 September 2018 and EUR10.9m to 6 May 2018 -- EUR10m to 31 March 2019
On 20 April 2017 it was agreed with Roundstone Properties Limited and Mr Falih Nahab that repayment of these loans be further extended to 31 December 2019.
During 2013 Roundstone Properties Limited provided short-terms loans directly to SPower Holdings GmbH of EUR335,000. The loans are interest free and repayable on demand.
The Directors consider that the carrying amount of borrowings approximates to their fair value.
20. Embedded derivatives on convertible interest
Group Company
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Embedded derivatives on
convertible interest 15,341 9,542 15,341 9,542
The embedded derivatives relate to the conversion features attached to convertible interest as disclosed under note 19. The derivatives are initially recognised at fair value and fair valued at each subsequent accounting reference date.
21. Deferred income tax - Group
Deferred tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related benefit through future taxable profits is probable. The Group has not recognised deferred income tax assets of GBP14,494,000 (2015: GBP10,339,000) in respect of losses amounting to GBP6,865,000 (2015: GBP3,661,000) and EUR58,237,000 (2015: EUR49,751,000).
22. Share capital
The share capital of Proton Power Systems plc consists of fully paid Ordinary shares with a par value of GBP0.01 (2015: GBP0.01) and Deferred Ordinary shares with a par value of GBP0.01. All Ordinary shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the shareholders' meeting of Proton Power Systems plc. Deferred Ordinary shares have no rights other than the repayment of capital in the event of a winding up. None of the parent's shares are held by any company in the Group.
On 18 January 2016 448,505 Ordinary shares of 1p each were issued each at a price of 3.625p per share in settlement of a supplier's invoice.
Details of share options in issue are given in Note 7.
The number of shares in issue at the balance sheet date is 643,270,377 (2015: 642,821,872) Ordinary shares of 1p each (2015: 1p each) and 327,963,452 (2015: 327,963,452) Deferred Ordinary shares of 1p each.
Proceeds received in addition to the nominal value of the shares issued during the year have been included in share premium, less registration and other regulatory fees and net of related tax benefits.
2016 2015
Deferred Deferred
Ordinary ordinary Ordinary ordinary
shares shares shares shares
No. No. No. No.
'000 GBP'000 '000 GBP'000 '000 GBP'000 '000 GBP'000
Shares authorised, issued
and fully paid
At the beginning of the
year 642,822 6,428 327,963 3,280 641,518 6,415 327,963 3,280
Share issue 448 4 - - 1,304 13 - -
643,270 6,432 327,963 3,280 642,822 6,428 327,963 3,280
23. Commitments
Neither the Group nor the Company had any capital commitments at the end of the financial year, for which no provision has been made. Total future lease payments under non-cancellable operating leases are as follows:
2016 2015
Land and Land and
buildings Other buildings Other
Group GBP'000 GBP'000 GBP'000 GBP'000
Operating leases payable:
Within one year 333 - 223 -
In the second to fifth
years inclusive 638 - 211 -
After more than five years - - - -
971 - 434 -
24. Related party transactions
During the year ended 31 December 2016 the Group and Company entered into the following related party transactions:
Group Company
Year ended 31 December Year ended 31 December
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
(Expenses) / Income
Roundstone Properties Limited
effective loan interest (1,362) (1,317) (1,362) (1,317)
Falih Nahab effective loan
interest (1,018) (339) (1,018) (339)
Roundstone Properties Limited
other loan interest (64) (36) (64) (36)
Thomas Melzcer (70) 3 - -
Helmut Gierse (16) (20) (16) (20)
Team B Partners LLP - (4) - (4)
IJP Business & Finance Services
Limited (122) (95) (122) (95)
The amount relating to Thomas Melzcer is a director loan balance and accrued interest which was written off during the year.
At 31 December 2016 the Group and Company had the following balances with related parties:
Group Company
Year ended 31 December Year ended 31 December
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Amounts due (to) / from
Roundstone Properties Limited
borrowings and embedded
derivatives (see Notes 19
and 20) (33,072) (24,104) (30,703) (24,104)
Roundstone Properties Limited
interest accrual (172) (108) (172) (108)
Roundstone Properties Limited
bank guarantee (177) (368) - -
Roundstone Properties Limited
loans to SPower GmbH (286) (247) - -
Falih Nahab (20,451) (8,299) (20,451) (8,299)
Thomas Melzcer - 62 - -
Team B Partners LLP - - - -
IJP Business & Finance Services
Limited - - - -
Further borrowings were drawn down during the year which contained embedded derivatives. In accordance with IAS 39 these have been fair valued.
During the year the Company made capital contributions to Proton Motor Fuel Cells GmbH of GBP6,435,000 (2015: GBP5,165,000) and to SPower Holdings GmbH of GBPnil (2015: GBPnil).
25. Risk management objectives and policies
The Group's activities expose it to a variety of financial risks:
-- foreign exchange risk (note 26);
-- credit risk (note 27); and
-- liquidity risk (note 28).
The Group's overall risk management programme focuses on the unpredictability of cash flows from customers and seeks to minimise potential adverse effects on the Group's financial performance. The Board has established an overall treasury policy and has approved procedures and authority levels within which the treasury function must operate. The Directors conduct a treasury review at least monthly and the Board receives regular reports covering treasury activities. Treasury policy is to manage risks within an agreed framework whilst not taking speculative positions.
The Group's risk management is co-ordinated at Proton Motor Fuel Cell GmbH in close co-operation with the Board of Directors, and focuses on actively securing the Group's short to medium term cash flows by minimising the exposure to financial markets.
26. Foreign currency sensitivity
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Euro and Sterling.
The Group does not hedge either economic exposure or the translation exposure arising from the profits, assets and liabilities of Euro business.
Euro denominated financial assets and liabilities, translated into Sterling at the closing rate, are as follows:
Year ended 31 December Year ended 31 December
2016 2015
EUR'000 GBP'000 EUR'000 GBP'000
Financial assets 3,295 2,813 1,207 889
Financial liabilities (65,300) (55,741) (43,794) (32,272)
Short-term exposure (62,005) (52,928) (42,587) (31,383)
The following table illustrates the sensitivity of the net result for the year and equity with regard to the parent Company's financial assets and financial liabilities and the Sterling/Euro exchange rate. It assumes a +/- 23.58% change of the Sterling/Euro exchange rate for the year ended at 31 December 2016 (2015: 12.87%). This percentage has been determined based on the average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on the parent Company's foreign currency financial instruments held at each balance sheet date.
If the Euro had strengthened against Sterling by 23.58% (2015: 12.87%) then this would have had the following impact:
Year ended Year ended
31 December 31 December
2016 2015
GBP'000 GBP'000
Net result for the year (12,481) (4,039)
Equity (12,481) (4,039)
If the Euro had weakened against Sterling by 23.58% (2015: 12.87%) then this would have had the following impact:
Year ended Year ended
31 December 31 December
2016 2015
GBP'000 GBP'000
Net result for the year 12,481 4,039
Equity 12,481 4,039
Exposures to foreign exchange rates vary during the year depending on the value of Euro denominated loans. Nonetheless, the analysis above is considered to be representative of Group's exposure to currency risk.
27. Credit risk analysis
Credit risk is managed on a Group basis. Credit risk arises from cash and deposits with banks, as well as credit exposures to customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of 'A' are accepted. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board.
No credit limits were exceeded during the reporting period, and management does not expect any losses from non-performance by these counterparties. The Directors do not consider there to be any significant concentrations of credit risk.
The Group's maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date, as summarised below:
Group Company
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 2,467 534 17 2
Trade and other receivables 363 281 104 64
Short-term exposure 2,830 815 121 66
The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Group's policy is to deal only with creditworthy counterparties.
The Group's management considers that all the above financial assets that are not impaired for each of the reporting dates under review are of good credit quality, including those that are past due.
None of the Group's financial assets are secured by collateral or other credit enhancements.
In respect of trade and other receivables, the Group is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk for liquid funds and other short-term financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.
28. Liquidity risk analysis
Prudent liquidity risk management includes maintaining sufficient cash and the availability of funding from an adequate amount of committed credit facilities. The Group maintains cash to meet its liquidity requirements.
The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash-outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 180-day and a 360-day lookout period are identified monthly.
As at 31 December 2016, the Group's liabilities have contractual maturities which are summarised below:
Within 6
months 6 to 12 months 1 to 5 years
GBP'000 GBP'000 GBP'000
Trade payables 823 - -
Other short term financial
liabilities 461 - -
Borrowings and embedded
derivatives on convertible
loans 2,662 - 35,813
This compares to the maturity of the Group's financial liabilities in the previous reporting period as follows:
Within 6
months 6 to 12 months 1 to 5 years
GBP'000 GBP'000 GBP'000
Trade payables 526 - -
Other short term financial
liabilities 464 - -
Borrowings and embedded
derivatives on convertible
loans 2,004 - 21,104
The above contractual maturities reflect the gross cash flows, which may differ to the carrying values of the liabilities at the balance sheet date. Borrowings and embedded derivatives on convertible loans have been combined as they relate to the same instruments. Contractual maturities have been assumed based on the assumption that the lender does not convert the loans into equity before the repayment date.
29. Financial instruments
The assets of the Group and Company are categorised as follows:
As at 31 December 2016 Group Company
Non-financial Non-financial
assets assets
/ financial / financial
assets assets
not not
Loans in scope Loans in scope
and of IAS and of IAS
receivables 39 Total receivables 39 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Intangible assets - 125 125 - - -
Property, plant and equipment - 941 941 - - -
Investment in subsidiary - - - - - -
Inventories - 1,043 1,043 - - -
Trade and other receivables 363 18 381 104 7 111
Cash and cash equivalents 2,467 - 2,467 17 - 17
2,830 2,127 4,957 121 7 128
============ ============= ======= ============ ============= =======
As at 31 December 2015 Group Company
Non-financial Non-financial
assets assets
/ financial / financial
assets assets
not not
Loans in scope Loans in scope
and of IAS and of IAS
receivables 39 Total receivables 39 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Intangible assets - 129 129 - - -
Property, plant and equipment - 778 778 - - -
Investment in subsidiary - - - - - -
Inventories - 692 692 - - -
Trade and other receivables 281 15 296 64 11 75
Cash and cash equivalents 614 - 614 2 - 2
895 1,614 2,509 66 11 77
============ ============= ======= ============ ============= =======
The liabilities of the Group and Company are categorised as follows:
As at 31
December
2016 Group Company
Financial Financial
liabilities liabilities
valued Liabilities valued Liabilities
at fair not at fair not
value within value within
Financial through the Financial through the
liabilities the scope liabilities the scope
at amortised income of IAS at amortised income of IAS
cost statement 39 Total cost statement 39 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade and other
payables 1,653 - 519 2,172 240 - - 240
Borrowings 38,475 - - 38,475 35,820 - - 35,820
Embedded
derivatives
on convertible
loans - 15,341 - 15,341 - 15,341 - 15,341
40,128 15,341 519 55,988 36,060 15,341 - 51,401
============= ============ =========== ======= ============= ============ =========== =======
As at 31
December
2015 Group Company
Financial Financial
liabilities liabilities
valued Liabilities valued Liabilities
at fair not at fair not
value within value within
Financial through the Financial through the
liabilities the scope liabilities the scope
at amortised income of IAS at amortised income of IAS
cost statement 39 Total cost statement 39 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade and other
payables 1,375 - 105 1,480 181 - - 181
Borrowings 23,188 - - 23,188 22,861 - - 22,861
Embedded
derivatives
on convertible
loans - 9,542 - 9,542 - 9,542 - 9,542
24,563 9,542 105 34,210 23,042 9,542 - 32,584
============= ============ =========== ======= ============= ============ =========== =======
Fair values
Management believe that the fair value of trade and other payables and borrowings is approximately equal to book value.
IFRS 13 sets out a three-tier hierarchy for financial assets and liabilities valued at fair value. These are as follows:
-- Level 1 - quoted prices (unadjusted) in active markets for identical assets and liabilities;
-- Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and
-- Level 3 - unobservable inputs for the asset or liability.
The embedded derivatives fall within the fair value hierarchy level 2.
30. Capital management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, provide returns for shareholders and benefits to other stakeholders and to maintain a structure to optimise the cost of capital. The Group defines capital as debt and equity. In order to maintain or adjust the capital structure, the Group may consider: the issue or sale of shares or the sale of assets to reduce debt.
The Group routinely monitors its capital and liquidity requirements through leverage ratios consistent with industry-wide borrowing standards. There are no externally imposed capital requirements during the period covered by the financial statements.
Group Company
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Total liabilities 55,988 34,210 51,401 32,584
Less: cash and cash equivalents (2,467) (614) (17) (2)
Adjusted net debt 53,521 33,596 51,384 32,582
31. Ultimate controlling party
The Directors consider Roundstone Properties Limited to be the Ultimate Controlling Party. Dr. Faiz Nahab is connected to Roundstone Properties Limited.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SDESWFFWSEII
(END) Dow Jones Newswires
May 31, 2017 05:00 ET (09:00 GMT)
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