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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Hydrodec Group Plc | LSE:HYR | London | Ordinary Share | GB00BFD2QZ40 | ORD 50P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 3.25 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMHYR
RNS Number : 8816N
HydroDec Group plc
27 September 2019
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
27 September 2019
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 2019.
Ongoing turnaround programme
In light of the Group's current trading, the Board will undertake an accelerated strategic review in the final six months of its turnaround programme
Appointment of CEO
Chris Ellis, the former CEO of the Company and currently a non-executive Director, is to replace David Dinwoodie as CEO
Strategic highlights
- Despite the anticipated out turn for this financial year, the Board believes good progress has been made in the period on all previously reported strategic aims for the two year turnaround programme:
o Feedstock - key focus remains on increasing feedstock supplies and developing relationships with utilities
-- feedstock from non G&S sources materially increased
-- utility discussions progressing ahead of internal expectations
-- trial loads of paraffinic oil received for feedstock blending, which could increase volumes by up to 25%
o Management - US management team restructured following the taking back of full operational control of Hydrodec of North America ("HoNA")
o Carbon credits
-- American Carbon Registry issued a further 100,000 carbon credits in respect of Hydrodec's 2016-18 transformer oil production - credits provide a key differentiator of Hydrodec's offering and are expected to provide a unique selling point in trading for feedstock and generating higher value sales of SUPERFINE products
-- Application submitted for carbon credit approval for Hydrodec's base oil production
o Completed sale of Australian plant post period end
- Additional strategic developments:
o Project terms agreed to blend SUPERFINE with a higher viscosity oil to increase overall margins
o Progressing a proposed re-financing of the HoNA assets to replace the existing equipment lease, which is over-collateralised, with an extended facility to provide additional funds for feedstock, approved capital expenditure and growth opportunities
Trading update
- Sales volumes in H1 of 11.0 million litres were up on prior year (H1 2018: 10.3 million litres) as the business continues to sell successfully all the SUPERFINE products that it produces. Average selling prices were marginally ahead of H1 2018, which is encouraging against a backdrop of a softer crude market
- Feedstock volumes of 10.8 million litres collected at an average landed price of US$1.17 per gallon - approximately 50% higher cost than in the prior year period. Cost increases have been driven by macro events with IMO 2020 low sulphur regulations driving up fuel prices and strategic decisions taken to build relationships with new and a wider geographic network of feedstock partners. Feedstock volumes from non G&S sources materially increased but overall volumes impacted by lack of support from G&S since the HoNA restructure. Whilst relations with G&S are strained it is believed issues will be resolved
- Management expect feedstock prices to reduce next year as the benefits of wider sourcing are felt and it is working on further reducing feedstock costs by exchanging carbon credits for used oil and developing the ability to accept a broad range of off spec feedstock
- Margins have fallen in line with cost increases as sales prices are in a similar range to the prior year. This has had a meaningful impact on earnings and cash and, as a result, the Board expects FY 2019 earnings to be substantially below current market expectations
- Plant utilisation in Canton 0.1% ahead of the prior year (H1 2018: 51%) having caught up from impacts of the polar vortex and Venezuelan crisis in Q1
- Challenging trading conditions in Q3 due to plant production issues and constrained working capital position
Financial update
- Income increased to US$7.2 million (H1 2018: US$6.6 million) as demand for SUPERFINE products remained strong
- Operational adjusted EBITDA loss at Canton of US$0.25 million (H1 2018: US$0.8 million profit), reflecting significantly higher landed feedstock prices. As a result, Group adjusted EBITDA loss from continuing operations increased to US$1.4 million (H1 2018: US$0.2 million loss)
- Overall loss for the period broadly flat at US$3.2 million (H1 2018: US$3.3 million) with a reduced loss from the discontinued Australian operations offsetting the weaker US performance
- Andrew Black to extend his support to the business by an additional US$3 million demonstrating his belief in the turnaround strategy. This funding will provide a cash runway for operational needs mitigating G&S's reduced support of the existing partnership since the renegotiation of its terms late last year
David Dinwoodie, Chief Executive Officer of Hydrodec, commented:
"This has been a mixed period for Hydrodec but the direction of travel for the business both strategically and operationally is exciting and the Board believes highly beneficial to shareholders in the medium to long term.
The adverse impact of G&S's reduced feedstock supply over the summer period, together with protracted refinancing negotiations, means the Company's revenue and earnings will be substantially behind expectations for this financial year. However, the Board remains confident that this financial performance is due to short term issues which it is working hard to mitigate, with the results of that work already starting to be seen. HoNA's utility market strategy is tracking ahead of schedule and I expect the business will meet current market projections in 2020 and outperform in 2021.
As the Group enters the final 6 months of the two year turnaround programme, the Board will undertake an accelerated strategic review and it remains confident about the Company's future prospects."
Lord Moynihan, Executive Chairman of Hydrodec, commented:
"We continue to refine our governance to best cater for our evolving needs and address our growing industry network. In that regard, I am pleased to announce that Chris Ellis has agreed to return to the role of Chief Executive Officer. Chris previously held this position from 2015 to 2018, having been Chief Financial Officer from 2012 to 2015, until he stepped down in April 2018 following the illness of a close family member. Chris has a highly detailed knowledge of the Company and the turnaround strategy being pursued and recently led the sale of the Australian business. He is a qualified chartered accountant with more than 20 years' board level finance and management experience of running large international businesses, including a significant period within GE Capital. We welcomed Chris back to the Board in March 2019 as a non-executive Director and Chair of the Audit Committee.
Chris replaces David Dinwoodie who joined the Board initially as interim Chief Financial Officer in April 2018 when Chris stepped down, and was appointed Chief Executive in October 2018. David is stepping down from the Board to prevent future potential conflicts of interest arising as a result of his roles at both Greenbottle Re-refining (UK) Limited ("Greenbottle"), a company of which David is a minority shareholder (alongside Andrew Black) and a director, and Andrew Black's family office. Whilst the Board took all appropriate measures to address any possible conflicts during the sale process itself (led by Chris Ellis on behalf of the Board), the acquisition and relocation to the UK of the Group's Australian plant by Greenbottle and the ongoing royalty arrangements between Greenbottle and the Company both increase the potential for conflicts to arise going forward. Furthermore, as Andrew Black has increased his financial support for the Group, David's continued advisory relationship with Andrew's family office may well further limit his ability to act without conflict.
I would like to take this opportunity to thank David for all of his efforts over the past 18 months. I have no doubt we will continue to work closely with David, in his capacity with Andrew's family office, going forward."
For further information, please contact:
Hydrodec Group plc hydrodec@vigocomms.com Colin Moynihan, Executive Chairman Arden Partners plc (Nominated Adviser and Broker) 0207 614 5900 Ciaran Walsh Vigo Communications (PR adviser to Hydrodec) 020 7390 0230 Patrick d'Ancona Chris McMahon Charlie Neish
Notes to Editors:
Hydrodec's technology is a proven, highly efficient, oil re-refining and chemical process principally targeted at the multi-billion US$ market for transformer oil used by the world's electricity industry. MarketsandMarkets forecasts that the global transformer oil market is expected to grow from US$1.98 billion in 2015 to US$2.79 billion by 2020 at a CAGR of 7.14% from 2015 to 2020. Used transformer oil is processed with distinct competitive advantage delivered through very high recoveries (near 100%), producing 'as new' high quality oils at competitive cost and without environmentally harmful emissions. The process also completely eliminates PCBs, a toxic additive banned under international regulations.
In 2016 Hydrodec received carbon credit approval from the American Carbon Registry ("ACR"), enabling its product to be sold with a carbon offset and creating an incremental revenue stream. The Group is now generating carbon offsets through the re-refining of used transformer oil, which would otherwise ordinarily be incinerated or disposed of in an unsustainable manner. This is a highly distinctive feature for the Group, confirming (as far as the Board is aware) Hydrodec as the only oil re-refining business in the world to receive carbon credits for its output. This is a significant endorsement of the Group's proprietary technology and standing as a leader in its field.
Hydrodec's operating plant is located at Canton, Ohio, US.
Hydrodec's shares are listed on the AIM Market of the London Stock Exchange. For further information, please visit www.hydrodec.com.
Chief Executive Officer's Report
Last year the Board determined that a turnaround strategy was required to position Hydrodec to maximise its ability to address the full potential of its principal US market through its world leading re-refining technology and established that this was likely to require a two year turnaround strategy.
The two year turnaround programme remains on target. Having taken back full operational control of HoNA in H2 2018, the first half of 2019 saw management focus on completing the sale of the Australian plant and further developing its feedstock strategy. The Board believes that by the completion of the second year of the turnaround strategy in March 2020, it will be in a position to report that the business will have achieved the objectives necessary to establish long-term relationships with US utilities, both as the re-refiner of choice for their used transformer oil and as buyers of our SUPERFINE product; thus delivering a market leading 'closed loop' strategy. At that point the Group will have built a sustained and sustainable platform for further expansion in the US.
This year is focussed on building a wider and more diversified supply of feedstock, stronger networks and relationships in the industry as well as laying the groundwork for the 'closed loop' utility strategy. Progress on this front has been encouraging and the team is ahead of its initial plan.
Financial performance has been disappointing, despite our strategic progress. Whilst the average selling price was slightly ahead of 2018, which is positive especially against a backdrop of increased sales on short payment terms and a softer crude market than the prior year period, it was still less than budget. Sales to fast paying customers can be 30c per gallon less than those on longer payment terms, which presents a material opportunity for improving the Group's working capital.
I am encouraged by progress being made with utilities and confident that as the Group moves into 2020 and beyond the business will sell into the higher specification - and therefore significantly higher priced - utility market.
The biggest impact on earnings has been a margin reduction caused by materially higher feedstock prices. Average landed feedstock costs are over 50% up on prior year owing to factors including geopolitical issues in Venezuela, cross border competition from Mexico for non-detect PCB oil and the impending IMO 2020 low sulphur regulations, causing uncertainty which is pushing up fuel oil prices.
Additionally, feedstock volumes from G&S are down approximately 60% compared to the prior year with 1 million gallons less than 2018 across July and August alone. New relationships have significantly offset this reduction, however, the extent of the G&S decline means the Company will not meet its feedstock targets for 2019. The Board is excited about the potential to blend paraffinic feedstock to extend throughput by up to 25%. The Group has also agreed project terms with a counterparty to blend SUPERFINE with a higher viscosity oil to increase overall margins.
As the turnaround strategy continues there should be significant increases in feedstock volumes and reductions in feedstock pricing as the business leverages relationships that are currently being invested in, becomes able to accept a wider range of feedstock and, importantly, HoNA begins to exchange carbon credits for used oil.
Operational review
The US business sold 11.0 million litres of premium quality SUPERFINE transformer oil and base oil during the period, an increase of 6% on the corresponding period in 2018 (10.3 million litres), as the business continues to sell successfully all the oil that it produces.
Plant utilisation in Canton is 0.1% ahead of the prior year (H1 2018: 51%) having caught up from the impacts of the polar vortex and Venezuelan crisis in Q1.
Production post period end has been impacted by a hydrogen compressor failure resulting in a challenging Q3 however this will not have an ongoing impact on HoNA. Reduced capability and downtime, when combined with G&S's lack of support, had a disproportionate impact on the business owing to high operating leverage and corresponding absorption of working capital when seasonally the business should have been building inventory.
Strategic initiatives in respect of sourcing additional feedstock for periods in which there is spare capacity are underway and the HoNA plant will begin processing batches of alternative feedstock imminently.
Financial review
Income in the period increased to US$7.2 million (H1 2018: US$6.6 million) as demand for SUPERFINE products remained strong.
Administrative costs within HoNA continue to be tightly controlled and are broadly in line with budget.
Operational adjusted EBITDA loss at Canton of US$0.25 million (H1 2018: US$0.8 million profit) reflected the increase in landed feedstock prices. As a result, Group adjusted EBITDA loss from continuing operations increased to US$1.4 million (H1 2018: US$0.2 million loss).
Overall loss for the period was broadly flat at US$3.2 million (H1 2018: US$3.3 million) with a reduced loss from the discontinued Australian operations offsetting the weaker US performance.
Net cash outflow from operating activities decreased to US$0.4 million (H1 2018: US$0.5 million).
The amount of working capital required by the Group's operations continues to be closely monitored and controlled, and forms a key part of management information. Management is conscious that central costs do not directly generate earnings and as such Group costs will be further reduced at the earliest opportunity, with the Group's UK office closing in Q3. The Group is not yet sufficiently cash generative from its operations to meet all central costs, having taken account of the need to retain sufficient working capital in the operations.
The Group's principal financing facilities at 30 June 2019 were a US$4.5 million finance lease arrangement with Huntington Bank and a balance of US$1.0 million on an operating cash line.
Management is progressing a proposed re-financing of the HoNA assets to replace the existing equipment lease, which is over-collateralised, with an extended facility to provide additional funds for feedstock, approved capital expenditure and growth opportunities.
The Group also had a shareholder loan from Andrew Black (the Company's largest shareholder and a non-executive Director) of US$3.8 million as at 30 June 2019, currently repayable on 31 December 2019 with an option to extend to 30 June 2020. This debt will be extended in line with the terms of the additional support detailed below. The interest on the shareholder loan is accrued and rolled-up in order that ongoing interest payments are not a cash drain on the Group. In the Group's 2018 annual results released in May 2019, it was announced that Andrew Black had provided comfort to the Board that he would provide funding of up to a further US$3.0 million to support the business. After netting off the proceeds of sale of the Australian plant to Greenbottle Re-Refining (UK) Limited ("Greenbottle"), a company controlled by Andrew Black (see "Sale of Australian Plant" below), and US$0.3m of cash funding, there remains unutilised support of US$1.2 million. The Company can announce that Andrew Black has agreed to extend his support to the business by a further US$3.0 million resulting in US$4.2 million of funds to be made available, demonstrating his belief in the future of the business. The terms for this US$4.2 million funding are to be agreed imminently and, as a related party transaction, will be subject to the independent Directors of the Company confirming, having consulted with the Company's Nominated Adviser, that they are fair and reasonable in so far as shareholders are concerned. A further announcement will be made in due course.
Net financial expense in the period reduced to US$0.3 million (H1 2018: US$0.7 million) and relates to the interest payable under the lease in the US and the decreased interest accruing on the shareholder loan in the UK following its part repayment in October 2018.
Carbon credits
Having received carbon credit approval from the American Carbon Registry ("ACR") in 2016, Hydrodec's products can be sold with a carbon offset creating an incremental revenue stream. This is a highly distinctive feature for the Group, confirming (as far as the Board is aware) Hydrodec as the only oil re-refining business in the world to receive carbon credits for its output. This is a significant endorsement of the Group's proprietary technology and standing as a leader in its field.
HoNA generates carbon offsets through the re-refining of used transformer oil, which would otherwise ordinarily be incinerated or disposed of in an unsustainable manner. The ACR has recognised a further 100,000 credits for HoNA's production between 2016 and 2018 which the Company sold to BP. The generation of our carbon credits resonates well with utilities who are looking to meet higher environmental standards applicable when managing their waste streams and any liabilities arising. Management is now in contact with a wide range of US utilities, all of whom see the merit in ensuring their waste transformer oil comes to Hydrodec and is recycled against 'Certificates of Origination'; receiving carbon credits for the way they treat their own waste streams, thus strengthening their commitment to sustainability, which is demanded by their shareholders and institutional investors alike.
Furthermore, an application has now been submitted for carbon credit approval for Hydrodec's base oil production.
Sale of Australian plant
As a result of its strategic review last year, the Board decided that with the sub-scale capacity of the Australian plant, the impact of the business on management bandwidth, and the limited and fragmented domestic market providing significant feedstock challenges, shareholder equity was better invested behind the US growth plans and it therefore initiated a formal process to sell the Group's Australian assets and business.
The strategic review was initiated in the first half of 2018, following which a sale process in respect of the Australian business was conducted by an independent third-party financial adviser, through which potential purchasers were identified, approached and invited to submit indicative offers for the plant and operations owned by Hydrodec Australia. Multiple indicative offers were received by the Company and evaluated up until the end of June 2019.
One of the potential purchasers identified was Greenbottle, a company controlled by Andrew Black, a non-executive Director and a substantial shareholder of the Company. A subcommittee of the Board (excluding Andrew Black and me, both of whom are directors of the Company and of Greenbottle) chaired by Chris Ellis, the Chair of the Audit Committee, took legal and corporate governance advice as a result of the related party involvement in the disposal process; carried out a detailed review of the offers; and continued discussions and engagement with several of the interested parties.
At the conclusion of that process the subcommittee recommended pursuing the offer proposed by Greenbottle; being the highest in absolute value terms and the most efficient in respect of Hydrodec's requirements to satisfy the terms of the sale. In reaching this decision, the independent Directors of the Company considered, inter alia: the progress of the initial discussions; the respective values proposed by the different buyers; the bidders' ability to execute the transaction on an expedited basis; and the potential to offer the Company future value in relation to the further development of its technology.
The plant owned by the Group's Australian operations has been sold to Greenbottle for a consideration of A$2 million in cash. In addition, the Group has the right to receive a royalty from Greenbottle, for an initial period of 8 years, following the granting of an exclusive licence to operate Hydrodec's technology in the UK, calculated at 5% of revenues derived. The royalty fee is subject to a minimum charge in year 4 of A$30,000 rising to A$150,000 in year 8. Any further development or improvements to the technology will accrue to Hydrodec under the terms of the licence.
At 30 June 2019 the Australian operation is presented as a discontinued business, and the plant as assets held for sale (see notes 4, 6 and 10 of the financial statements).
Board and management changes
Further to the renegotiation of the ownership and governance structure of HoNA at the end of 2018, Ron Kubala was promoted to the HoNA board and simultaneously appointed Director of Production and Operations. Ed Superior returned to HoNA as Director of Procurement, Sales and Marketing, and Dia Ray was appointed Finance Director later in the period.
I am pleased to be handing the CEO role back to Chris Ellis, who I know is energised and ready to continue where he left off. I have enjoyed my time as CEO but the potential conflicts of interest have been increasingly challenging to manage and it is a relief to step back. I look forward to continue working with the Company in my capacity as adviser to Andrew Black's family office.
Going concern
Taking into account the Group's current forecast and projections and on-going support from Andrew Black (a non-executive Director of the Company and its largest shareholder), the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue operating for at least the next 12 months. As with any company placing reliance on a shareholder for support, the Directors acknowledge that there can be no certainty that this support will continue although, at the date of these interim financial statements, they have no reason to believe that it will not do so. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements.
Dividend policy
In its announcement on 8 October 2018 of the proposed placing and open offer, and in the associated circular to shareholders, the Company stated that "Subject to distributable reserves, the Company intends to introduce a dividend payment for the full year ending 31 December 2019". As the Company currently has negative distributable reserves, which would prevent a dividend being paid, the Board intends to take action to create distributable reserves to allow for future dividend payments where the performance of the business generates sufficient cash to allow for it. This is likely to involve a court-approved reduction of capital under the Companies Act 2006. In light of current year trading, the Board anticipates this process will be delayed until mid-2020 with a view to introducing a dividend payment for the year ended 31 December 2020.
Brexit
The Directors have considered the potential impact of Brexit on the operations of the Group. The earnings of the Group's business are based within the US and, as such, the Directors believe any impact will be limited; potentially creating a hedge against Brexit.
Outlook
Recent trading in the US has been disappointing owing to a severe drop off in feedstock from G&S during the business's peak seasonal months. This had a negative impact on working capital, which meant the business needed to pursue lower margin sales.
However, the Board is pleased that Andrew Black has increased his support for the business. Management is progressing options to refinance the business to better utilise the strong asset base and this growth capital will enable HoNA to get back on track to deliver improved EBITDA in 2020 through delivery of the closed loop strategy.
Significantly, the Board remains confident that year to date financial performance is due to short term issues and, with HoNA's utility market strategy ahead of schedule, I expect market projections to 2021 to be exceeded.
Although this financial year will not meet market expectations, the strategic focus on sourcing new, sustainable sources of feedstock is beginning to deliver and the Board expects material improvement into 2020 and beyond. As the Group enters the final 6 months of the two year turnaround programme, the Board will undertake an accelerated strategic review and it remains confident about the Group's future prospects.
David Dinwoodie
Chief Executive Officer
27 September 2019
HYDRODEC GROUP PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2019
Hot Features
Premium
Unaudited Unaudited
six months six months Audited
ended ended year ended
30 June 30 June 31 December
2019 2018 2018
Note USD'000 USD'000 USD'000
------------ ------------ -------------
Continuing operations
Revenue 2 7,051 6,437 14,851
Other income 124 171 165
Total income 7,175 6,608 15,016
Cost of sales (7,151) (5,432) (12,906)
Gross profit 24 1,176 2,110
Administrative expenses
- other (2,621) (2,661) (5,830)
Administrative expenses
- strategic review expenses - - (1,133)
(2,621) (2,661) (6,963)
------------ ------------ -------------
Operating loss (2,597) (1,485) (4,853)
Impairment related to
disposal of Australian
land and buildings - - (647)
Finance income 2 1 2
Finance costs (267) (653) (1,150)
Loss on ordinary activities
before taxation (2,862) (2,137) (6,648)
Taxation 33 35 68
------------ ------------ -------------
Loss for the period from
continuing operations 2 (2,829) (2,102) (6,580)
Discontinued operations
Loss from discontinued
operations, net of tax 4 (415) (1,171) (7,101)
Loss for the period (3,244) (3,273) (13,681)
------------ ------------ -------------
Loss for the period attributable
to:
Owners of the parent
company (3,010) (3,135) (13,389)
Non-controlling interest (234) (138) (292)
(3,244) (3,273) (13,681)
------------ ------------ -------------
Loss per Ordinary Share
From continuing operations
Basic and diluted, cents
per share 5 (10) (28) (59)
------------ ------------ -------------
From continuing and discontinued
operations
Basic and diluted, cents
per share 5 (11) (44) (122)
------- ------- --------
HYDRODEC GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2019
Unaudited Unaudited
six months six months Audited
ended ended year ended
30 June 30 June 31 December
2019 2018 2018
USD'000 USD'000 USD'000
------------ ------------ -------------
Total loss for the period (3,244) (3,273) (13,681)
Other comprehensive income
Items that may be subsequently
reclassified to profit
and loss:
Foreign currency translation
differences on foreign
operations 52 21 177
Foreign currency translation
differences on discontinued
operations 3 166 402
------------ ------------ -------------
55 187 579
------------ ------------ -------------
Total comprehensive income
for the period (3,189) (3,086) (13,102)
------------ ------------ -------------
Total comprehensive income
for the period attributable
to:
Owners of the parent
company (2,955) (2,948) (12,810)
Non-controlling interest (234) (138) (292)
(3,189) (3,086) (13,102)
------------ ------------ -------------
HYDRODEC GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2019
Unaudited Unaudited
six months six months Audited
ended ended year ended
30 June 30 June 31 December
2019 2018 2018
Note USD'000 USD'000 USD'000
------------ ------------ -------------
Non-current assets
Property, plant and equipment 29,412 30,665 30,063
Intangible assets 5,440 6,181 5,684
34,852 36,846 35,747
------------ ------------ -------------
Current assets
Trade and other receivables 1,281 1,678 1,869
Inventories 494 651 541
Cash and cash equivalents 179 302 2,150
Non-current assets held
for sale 6 1,192 2,565 1,059
3,146 5,196 5,619
Current liabilities
Bank overdraft (446) - (664)
Trade and other payables (4,126) (4,906) (2,418)
Other interest-bearing
loans and borrowings 7 (7,093) (15,631) (7,067)
Provisions (956) - (1,851)
(12,621) (20,537) (12,000)
------------ ------------ -------------
Net current liabilities (9,475) (15,341) (6,381)
Non-current liabilities
Employee obligations (37) - (35)
Other interest-bearing
loans and borrowings 7 (2,965) (4,551) (3,766)
Provisions (88) (792) (55)
Deferred taxation (903) (1,002) (937)
(3,993) (6,345) (4,793)
------------ ------------ -------------
Net assets 21,384 15,160 24,573
------------ ------------ -------------
Equity
Called up share capital 9 19,615 6,200 19,615
Share premium account 136,594 130,539 136,594
Merger reserve 48,940 48,940 48,940
Capital redemption reserve 420 420 420
Profit and loss account (187,464) (178,353) (184,509)
Equity attributable to
owners of the parent
company 18,105 7,746 21,060
------------ ------------ -------------
Non-controlling interest 3,279 7,414 3,513
Total equity 21,384 15,160 24,573
------------ ------------ -------------
HYDRODEC GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2019 (Unaudited)
Total Total
Profit profit attributable
Capital Employee Foreign Share and and to owners
Share Share Merger redemption benefit exchange option loss loss of the Non-controlling Total
capital premium reserve reserve trust reserve reserve account account parent interest equity
USD USD USD USD USD USD USD USD USD USD USD USD
'000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000
At 1 January
2019 19,615 136,594 48,940 420 (1,150) (9,840) 94 (173,613) (184,509) 21,060 3,513 24,573
Loss for
the year - - - - - - - (3,010) (3,010) (3,010) (234) (3,244)
Other
comprehensive
income:
Currency
translation
differences
on foreign
operations - - - - - 52 - - 52 52 - 52
Currency
translation
differences
on
discontinued
operations - - - - - 3 - - 3 3 - 3
Total other
Comprehensive
Income for
the period - - - - - 55 - - 55 55 - 55
-------- -------- -------- ----------- --------- --------- -------- ---------- ---------- ------------- ---------------- ----------
Total
Comprehensive
Income for
the period - - - - - 55 - (3,010) (2,955) (2,955) (234) (3,189)
-------- -------- -------- ----------- --------- --------- -------- ---------- ---------- ------------- ---------------- ----------
At 30 June
2019 19,615 136,594 48,940 420 (1,150) (9,785) 94 (176,623) (187,464) 18,105 3,279 21,384
-------- -------- -------- ----------- --------- --------- -------- ---------- ---------- ------------- ---------------- ----------
HYDRODEC GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Audited)
For the year ended 31 December 2018 (Audited)
Total Total
Profit profit attributable
Capital Employee Foreign Share and and to owners
Share Share Merger redemption benefit exchange option loss loss of the Non-controlling Total
capital premium reserve reserve trust reserve reserve account account parent interest equity
USD USD USD USD USD USD USD USD USD USD USD USD
'000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000
At 1 January
2018 6,200 130,539 48,940 420 (1,150) (10,419) 647 (164,483) (174,985) 10,694 7,552 18,246
Transactions
with owners
in their
capacity
as owners:
Issue of
equity shares 13,415 6,707 - - - - - - - 20,122 - 20,122
Expenses
of issue
of equity
shares - (652) - - - - - - - (652) - (652)
Equity movement
from NCI
to parent - - - - - - - 3,706 3,706 3,706 (3,747) (41)
Transfer
to profit
and loss
in respect
of
forfeited/lapsed
options - - - - - - (553) 553 - - - -
Total
transactions
with owners
in their
capacity
as owners 13,415 6,055 - - - - (553) 4,259 3,706 23,176 (3,747) 19,429
--------- -------- -------- ----------- --------- --------- -------- ----------- ----------- ------------- ---------------- -----------
Loss for
the year - - - - - - - (13,389) (13,389) (13,389) (292) (13,681)
Other
comprehensive
income:
Currency
translation
differences
on foreign
operations - - - - - 177 - - 177 177 - 177
Currency
translation
differences
on discontinued
operations - - - - - 402 - - 402 402 - 402
Total other
Comprehensive
Income for
the period - - - - - 579 - - 579 579 - 579
--------- -------- -------- ----------- --------- --------- -------- ----------- ----------- ------------- ---------------- -----------
Total
Comprehensive
Income for
the period - - - - - 579 - (13,389) (12,810) (12,810) (292) (13,102)
--------- -------- -------- ----------- --------- --------- -------- ----------- ----------- ------------- ---------------- -----------
At 31 December
2018 19,615 136,594 48,940 420 (1,150) (9,840) 94 (173,613) (184,509) 21,060 3,513 24,573
--------- -------- -------- ----------- --------- --------- -------- ----------- ----------- ------------- ---------------- -----------
HYDRODEC GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2018 (Unaudited)
Total Total
Profit profit attributable
Capital Employee Foreign Share and and to owners
Share Share Merger redemption benefit exchange option loss loss of the Non-controlling Total
capital premium reserve reserve trust reserve reserve account account parent interest equity
USD USD USD USD USD USD USD USD USD USD USD USD
'000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000
At 1 January
2018 6,200 130,539 48,940 420 (1,150) (10,419) 647 (164,483) (175,405) 10,694 7,552 18,246
Transactions
with owners
in their
capacity
as owners:
Share-based - - - - - - - - - - - -
payments
Effect of
foreign - - - - - - - - - - - -
exchange
rates
Total
transactions
with owners - - - - - - - - - - - -
in their
capacity
as owners
-------- -------- -------- ----------- --------- --------- -------- ---------- ---------- ------------- ---------------- ----------
Loss for
the year - - - - - - - (3,135) (3,135) (3,135) (138) (3,273)
Other
comprehensive
income:
Currency
translation
differences
on foreign
operations - - - - - 21 - - 21 21 - 21
Currency
translation
differences
on
discontinued
operations - - - - - 166 - - 166 166 - 166
Total other
Comprehensive
Income for
the period - - - - - 187 - - 187 187 - 187
-------- -------- -------- ----------- --------- --------- -------- ---------- ---------- ------------- ---------------- ----------
Total
Comprehensive
Income for
the period - - - - - 187 - (3,135) (2,948) (2,948) (138) (3,086)
-------- -------- -------- ----------- --------- --------- -------- ---------- ---------- ------------- ---------------- ----------
At 30 June
2018 6,200 130,539 48,940 420 (1,150) (10,232) 647 (167,618) (178,353) 7,746 7,414 15,160
-------- -------- -------- ----------- --------- --------- -------- ---------- ---------- ------------- ---------------- ----------
HYDRODEC GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
For the six months ended 30 June 2019
Unaudited Unaudited Audited
six months six months Year ended
ended ended
30 June 30 June 31 December
2019 2018 2018
USD'000 USD'000 USD'000
------------ ------------ ------------
Cash flows from operating activities
Loss before taxation from continuing
operations (2,862) (2,137) (6,648)
Loss before taxation from discontinued
operations (401) (1,171) (7,101)
------------ ------------ ------------
(3,263) (3,308) (13,749)
Finance income (2) - (2)
Finance costs 322 719 1,279
Adjustments for:
Amortisation, depreciation and
impairment 1,067 1,544 6,767
Loss on disposal of property, plant
and equipment - - 3
Foreign exchange movement 45 181 390
Operating cash outflow before working
capital movements (1,831) (864) (5,312)
Decrease/(increase) in inventories 47 (248) (258)
Decrease/(increase) in receivables 555 (6) 185
Increase/(decrease) in trade and
other payables 1,684 576 (2,914)
(Decrease)/increase in provisions (890) - 1,069
Net cash outflow from operating
activities (435) (542) (7,230)
------------ ------------ ------------
Cash flows from investing activities
Purchase of property, plant and
equipment (241) (125) (269)
Purchase of intangible assets - - (11)
Interest received 2 - 2
Net cash outflow from investing
activities (239) (125) (278)
------------ ------------ ------------
Cash flows from financing activities
Proceeds from issue of shares - - 14,348
Costs of issue of shares - - (653)
Proceeds from loans and borrowings - 1,574 3,360
Interest paid (174) (235) (2,460)
Repayment of interest-bearing loans
and borrowings (909) (883) (5,419)
Net cash (outflow)/inflow from
financing activities (1,083) 456 9,176
------------ ------------ ------------
Net (decrease)/ increase in cash
and cash equivalents (1,757) (211) 1,668
Cash and cash equivalents at beginning
of period 1,486 (214) (214)
Effect of movements in exchange
rates on cash held 4 18 32
Cash and cash equivalents at end
of period (267) (407) 1,486
------------ ------------ ------------
Reported in the Consolidated Statement
of Financial Position as:
Cash and cash equivalents 179 302 2,150
Bank overdraft (446) - (664)
Included in assets held for sale - (709) -
------------ ------------ ------------
Net cash balance (267) (407) 1,486
------------ ------------ ------------
HYDRODEC GROUP PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 30 June 2019
1. ACCOUNTING POLICIES
Basis of preparation
This report was approved by the Directors on 26 September 2019.
The condensed consolidated interim financial statements have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as adopted by the EU ('Adopted IFRSs').
The condensed consolidated interim financial statements are presented in United States dollars ('USD') as the Group's business is influenced by pricing in international commodity markets which are primarily USD based.
The Company is domiciled in the United Kingdom. The Company's shares are admitted to trading on the AIM market.
Other than the adoption of IFRS 16, the current and comparative periods to June have been prepared using the accounting policies and practices consistent with those adopted in the annual financial statements for the year ended 31 December 2018, and with those expected to be adopted in the Group's financial statements for the year ended 31 December 2019. This is the first set of the Group's financial statements where IFRS 16 Leases has been applied. There is no material impact on the financial statements from the adoption of this standard.
In applying these policies to the interim financial results, the Board has exercised its judgement in respect of the fair value of the Australian assets classified as held for sale.
Comparative figures for the year ended 31 December 2018 have been extracted from the statutory financial statements for that period which carried an unqualified audit report, did not contain a statement under sections 498(2) or (3) of the Companies Act 2006 and have been delivered to the Registrar of Companies.
The financial information contained in this report does not constitute statutory financial statements as defined by section 434 of the Companies Act 2006, and should be read in conjunction with the Group's financial statements for the year ended 31 December 2018. This report has not been audited by the Group's auditors.
Taking into account the Group's current forecast and projections and on-going support from Andrew Black (a non-executive Director of the Company and its largest shareholder), the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue operating for at least the next 12 months. As with any company placing reliance on a shareholder for support, the Directors acknowledge that there can be no certainty that this support will continue although, at the date of these interim financial statements, they have no reason to believe that it will not do so. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements.
The principal risks and uncertainties of the Group have not changed since the publication of the last annual financial report where a detailed explanation of such risks and uncertainties can be found.
2. SEGMENTAL INFORMATION
The Group has one main operating segment, Re-refining, which is classified as the treatment of used transformer oil and the sale of SUPERFINE oil. Subsequent to the cessation of operations in Australia during the year ended 31 December 2018 (the 'discontinued operations'), the Group's operating segment arises from one geographic location, being the USA.
The financial information detailed below is frequently reviewed by the Board (the Chief Operating Decision Maker) and decisions made on the basis of adjusted segment operating results.
Unaudited six months ended 30 June 2019
USA Australia Unallocated Total
USD'000 USD'000 USD'000 USD'000
---------------------------------- ---------- ------------ ---------
Income Statement
Continuing operations
Revenue from contracts
with customers 7,051 - - 7,051
Other income - 124 - 124
---------------------------------- ---------- ------------ ---------
Adjusted EBITDA (252) 19 (1,167) (1,400)
Depreciation (916) - - (916)
Amortisation - (107) (179) (286)
Loss for the period
from continuing operations (1,273) (116) (1,440) (2,829)
---------------------------------- ---------- ------------ ---------
Unaudited six months ended 30 June 2019
USA Australia Unallocated Total
USD'000 USD'000 USD'000 USD'000
---------------------------------- ---------- ------------ ---------
Balance Sheet
Total assets 30,743 1,716 5,539 37,998
Total liabilities (7,001) (3,914) (5,699) (16,614)
---------------------------------- ---------- ------------ ---------
Net assets 23,742 (2,198) (160) 21,384
---------------------------------- ---------- ------------ ---------
The total assets in respect of Australia include the net
assets held for sale disclosed in note 6.
Unaudited six months ended 30 June 2018
USA Australia Unallocated Total
USD'000 USD'000 USD'000 USD'000
---------------------------------- ---------- ------------ ---------
Income Statement
Continuing operations
Revenue from contracts
with customers 6,437 - - 6,437
Other income - 171 - 171
---------------------------------- ---------- ------------ ---------
Adjusted EBITDA 799 150 (1,110) (161)
Depreciation and loss
on disposal of property,
plant and equipment (972) - (1) (973)
Amortisation - (141) (189) (330)
Loss for the period
from continuing operations (278) (115) (1,709) (2,102)
---------------------------------- ---------- ------------ ---------
Unaudited six months ended 30 June 2018
USA Australia Unallocated Total
USD'000 USD'000 USD'000 USD'000
---------------------------------- ---------- ------------ ---------
Balance Sheet
Total assets 32,719 3,277 6,046 42,042
Total liabilities (11,484) (748) (14,650) (26,882)
---------------------------------- ---------- ------------ ---------
Net assets 21,235 2,529 (8,604) 15,160
---------------------------------- ---------- ------------ ---------
Audited year ended 31 December 2018
USA Australia Unallocated Total
USD'000 USD'000 USD'000 USD'000
---------------------------------- ---------- ------------ ---------
Income Statement
Continuing Operations
Revenue from contracts
with customers 14,851 - - 14,851
Other income - 165 - 165
---------------------------------- ---------- ------------ ---------
Adjusted EBITDA 1,514 60 (2,749) (1,175)
Depreciation and impairment (1,925) - (648) (2,573)
Amortisation - (274) (363) (637)
Loss for the year from
continuing operations (595) (390 (5,595) (6,580)
---------------------------------- ---------- ------------ ---------
Audited year ended 31 December 2018
USA Australia Unallocated Total
USD'000 USD'000 USD'000 USD'000
---------------------------------- ---------- ------------ ---------
Balance Sheet
Total assets 32,496 1,707 7,163 41,366
Total liabilities (7,582) (3,930) (5,281) (16,793)
---------------------------------- ---------- ------------ ---------
Net assets 24,914 (2,223) 1,882 24,573
---------------------------------- ---------- ------------ ---------
3. DIVIDS
The Directors do not recommend the payment of a dividend for the period (30 June 2018: nil, 31 December 2019: nil).
4. DISCONTINUED OPERATIONS
In September 2018, the Board completed a strategic review of the Group's operations and agreed a Group strategic plan for all operations within the Group. As part of this plan, the Group's Australian operations ceased to operate whilst the Board pursued an active programme to locate a buyer. Post period end the sale of the Australian assets classified as assets held for sale was completed. See notes 6 and 10.
The Australian operations were treated as discontinued operations for the year ended 31 December 2018, and continue to be treated as such for the period ended 30 June 2019. A single amount is shown on the face of the condensed consolidated income statement, comprising the post-tax result of discontinued operations.
The results of the discontinued operations, which have been included in the condensed consolidated income statement, were as follows:
Unaudited Unaudited Audited
six months six months year ended
ended ended
30 June 30 June 31 December
2019 2018 2018
USD'000 USD'000 USD'000
------------ ------------ ------------
Revenue - 1,034 1,237
Expenses (481) (2,138) (5,074)
------------ ------------ ------------
Operating loss before impairment (481) (1,104) (3,837)
Impairment of abandoned property,
plant and equipment - - (1,249)
Impairment of inventory - - (157)
Reversal of impairment/(Impairment)
of non-current assets held for
sale 135 - (1,728)
------------ ------------ ------------
Operating loss after impairment (346) (1,104) (6,971)
Finance costs (55) (67) (130)
------------ ------------ ------------
Loss before taxation (401) (1,171) (7,101)
Taxation (14) - -
------------ ------------ ------------
Loss from discontinued operations,
net of tax (415) (1,171) (7,101)
------------ ------------ ------------
Loss per Ordinary Share
Basic and diluted, cents (1) (16) (63)
------------ ------------ ------------
During the period, the discontinued operations contributed USD 0.7
million outflow (30 June 2018: USD 0.6 million outflow; 31 December
2018: USD 2.1 million outflow) to the Group's net cash outflow from
operating activities, USD nil (30 June 2018: USD 0.02 million outflow;
31 December 2018: USD nil) to outflow from investing activities and
USD 0.05 million (30 June 2018: USD 0.2 million outflow; 31 December
2018: 0.1 million outflow) to net cash outflow from financing activities.
5. LOSS PER ORDINARY SHARE
Basic loss per Ordinary Share is calculated by dividing the net loss for the period attributable to ordinary shareholders by the weighted average number of Ordinary Shares in issue during the period. The calculation of the basic and diluted loss per Ordinary Share is based on the following data:
Unaudited six months Unaudited six months Audited year ended
ended 30 June 2019 ended 30 June 2018 31 December 2018
Continuing Continuing Continuing
and and and
Continuing discontinued Continuing discontinued Continuing discontinued
operations operations operations operations operations operations
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
----------------- ------------- ------------ ------------- ------------ ---------------
Losses
Losses for
the
purpose
of basic
loss per
Ordinary
Share (2,829) (3,244) (2,102) (3,273) (6,580) (13,681)
----------------- ------------- ------------ ------------- ------------ -------------
Number Number Number Number Number Number
'000 '000 '000 '000 '000 '000
--------- --------- ------- -------- ------- ---------
Number of shares
Weighted average
number of shares
for the purpose
of basic loss
per Ordinary
Share 28,374 28,374 7,467 7,467 11,247 11,247
--------- --------- ------- -------- ------- ---------
Loss per Ordinary
Share
Basic and diluted,
cents per share (10) (11) (28) (44) (59) (122)
--------- --------- ------- -------- ------- ---------
Due to the losses incurred in the years reported, there is no dilutive effect from the existing share options.
The information shown above for the period ended 30 June 2018 has been restated to reflect the share consolidation which took place on 26 October 2018.
6. NON-CURRENT ASSETS HELD FOR SALE
In September 2018, the Board completed a strategic review of the Group's operations and agreed a Group strategic plan for all operations within the Group. As part of this plan it was announced that the Board was committed to a plan to sell the Group's Australian operations or groups of assets and an active programme to locate a buyer and complete a sale would be undertaken. Non-current assets, consisting of plant and equipment, the sale of which is highly probably to take place within twelve months, have been classified as a disposal group held for sale and presented separately in the balance sheet. Post period end the sale of the non-current assets was completed. See note 10.
On classification as assets held for sale, the fair value of the assets was based on fair value less costs of disposal, estimated using the market approach and based on knowledge of potential acquirers of the assets. In accordance with the requirements of IFRS 5, an impairment charge of USD 1.3 million was recognised and presented within the results of discontinued operations in the year ended 31 December 2018. In the period to 30 June 2019, the fair value of the assets was remeasured based on additional information and an impairment reversal of USD 0.1 million has been recognised and presented within the results of discontinued operations.
At 30 June 2019, the disposal group was stated at fair value less costs to sell and comprised the following assets:
USD'000
----------
Carrying value
Property, plant and equipment 2,619
Inventory 59
----------
Impairment 2,678
(1,486)
----------
1,192
----------
7. OTHER INTEREST-BEARING LOANS AND BORROWINGS
Unaudited Unaudited Audited
six months six months year ended
ended ended
30 June 30 June 31 December
2019 2018 2018
USD'000 USD'000 USD'000
----------- ----------- ------------
Current liabilities
Finance lease liabilities 2,351 1,524 2,465
Unsecured bank facility 961 1,319 961
Shareholder loan 3,781 12,788 3,641
7,093 15,631 7,067
----------- ----------- ------------
Non-current liabilities
----------- ----------- ------------
Finance lease liabilities 2,965 4,551 3,766
----------- ----------- ------------
Shareholder loan
The shareholder loan represents an amount due to Andrew Black, a non-executive Director and significant shareholder in the Company, which bears interest of 8% per annum.
During the year ended 31 December 2018, the repayment date on the outstanding shareholder loan was extended by agreement from 31 December 2018 to 31 December 2019, and the Company has subsequently been granted an option to further extend the repayment date to 30 June 2020.
8. RELATED PARTY TRANSACTIONS
There is a sum of USD 1.2 million presented within trade and other payables, which is due to Andrew Black in respect of payments made to the Company's Australian subsidiary. These sums will be deducted from sale proceeds due on the disposal of the Australian plant and equipment. See note 10.
9. SHARE CAPITAL
Unaudited Unaudited Audited
six months six months year ended
ended ended
30 June 30 June 31 December
2019 2018 2018
USD'000 USD'000 USD'000
----------- ----------- ------------
Allotted, issued and fully paid
28,373,839 Ordinary Shares of
50 pence each (30 June 2018: 746,682,805
Ordinary Shares of 0.5 pence each) 19,615 6,200 19,615
----------- ----------- ------------
10. POST BALANCE SHEET EVENTS
Disposal of Australian plant and equipment
On 13 August 2019, the Group announced the disposal of its Australian plant and equipment, and an agreement to licence certain other rights in respect of those assets, to Greenbottle. The plant and equipment were sold for a gross consideration of AUD 2 million cash, and the Group expects to recognise net proceeds of AUD 1.7 million, after estimated decommissioning and transportation costs. In addition, the Group has the right to receive a royalty from Greenbottle for an initial period of 8 years, following the granting of an exclusive licence to operate Hydrodec's technology in the UK, calculated at 5% of revenues derived. The royalty fee is subject to a minimum charge in year 4 of AUD 0.03 million, rising to AUD 0.15 million in year 8. Any further development or improvement to the technology will accrue to Hydrodec under the terms of the licence.
The disposal of the Australian plant and equipment constitutes a related party transaction as Andrew Black, a non-executive Director and a significant shareholder in the Company is the 98% ultimate shareholder and a director of Greenbottle. In addition, David Dinwoodie, a 2% ultimate shareholder and a director of Greenbottle is the Chief Executive Officer of the Company.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR SEMSSWFUSEEU
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September 27, 2019 02:01 ET (06:01 GMT)
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