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INFA Infrastrata Plc

18.125
0.00 (0.00%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Infrastrata Plc LSE:INFA London Ordinary Share GB00BLPJ1272 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 18.125 17.75 18.50 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

Infrastrata PLC Final Results (1772Z)

08/01/2020 12:15pm

UK Regulatory


Infrastrata (LSE:INFA)
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TIDMINFA

RNS Number : 1772Z

Infrastrata PLC

08 January 2020

InfraStrata plc

("InfraStrata" or the "Company")

Final Results and AGM Notice

InfraStrata plc (AIM: INFA), the UK quoted company focused on strategic infrastructure projects, is pleased to announce its final results for the year ended 31 July 2019.

FY Company Highlights

-- The Islandmagee gas storage project was advanced substantially and a binding term sheet for a gas storage capacity offtake deal signed with leading energy trading company, Vitol S.A.

-- Significant progress made in relation to transforming InfraStrata from a one-asset entity into an organisation that has multiple assets in its portfolio

o Potential Floating Storage and Regasification Unit Project in Barrow-in-Furness

Post-Period End Company Highlights

-- Transformational acquisition of the assets of the iconic Harland and Wolff shipyard in Belfast

   --     Successfully raised over GBP6 million to fund the acquisition 

-- Initial contracts secured for Harland & Wolff, fulfilling the Company's objective to become revenue generative in 2019, and appointment of new Harland & Wolff management team

   --     Appointment of new Chairman, Clive Richardson, effective 1 February 2020 

-- Progress made in relation to securing the marine licence and delivering the Final Investment Decision ("FID") for the Islandmagee Gas Storage Project

o Decision made to delay FID beyond Q4 2019 due to General Election outcome, which has potentially opened up beneficial new funding opportunities

o Confirmation from the Department of Agriculture, Environment and Rural Affairs that the public consultation in relation to the marine licence will run from 20 December 2019 until 7 February 2020

John Wood, interim Chairman and CEO of InfraStrata, said:

"2019 was a monumental year for InfraStrata. When we reached the end of the period under review, we had a binding term sheet for a gas storage capacity offtake agreement with one of the world's largest energy trading firms and exclusivity over an exciting new FRSU project.

"This set the scene for a transformational 2019/2020 fiscal year, which so far has seen us complete the landmark acquisition of the assets of the iconic Harland & Wolff shipyard in Belfast, deliver maiden revenue, welcome new employees and institutional investors to the Group, and make substantial progress at our Islandmagee gas storage project.

"As we enter 2020, we are extremely excited about the opportunities which lie ahead of us. Not only will we be delivering the FID for Islandmagee, but we will be securing new contracts at Harland & Wolff, to build our revenue and to return this globally renowned brand to its former glory."

AGM Notice

The Company is also pleased to announce that its Annual General Meeting ("AGM") will be held on Friday 31 January 2020 at 12:00 p.m. at the offices of Fieldfisher LLP, 9th Floor, Riverbank House, 2 Swan Lane, London EC4R 3T.

The Company's Annual Report and Accounts for 2019 together with the formal notice of the AGM will be posted today to those shareholders who have elected to receive paper copies and those documents will be available on the Company's website later today.

For further information, please visit www.infrastrataplc.com or contact:

 
 InfraStrata plc                                  c/o Newgate Communications 
  John Wood, Chief Executive                       +44 (0)20 3735 8825 
 Allenby Capital Limited (AIM Nominated 
  Adviser & Joint Broker) 
  Jeremy Porter / Liz Kirchner                    +44 (0)20 3328 5656 
 Arden Partners plc (Joint Broker) 
  Paul Shackleton / Dan Gee-Summons (Corporate 
  Finance) 
  Simon Johnson (Corporate Broking)               +44 (0)20 7614 5900 
 Newgate Communications (PR) 
  Elisabeth Cowell/ Ian Silvera/Jamie Williams    +44 (0)20 3757 6880 
 

Chairman's Report

It has been a privilege to serve as interim Chairman of InfraStrata plc (the "Company") since March 2019; we have had a transformational year. I am delighted to be writing what will be my first and last yearly statement as interim Chairman, looking back at what we have achieved and looking forward, as we move into the next phase.

2019 has been a very active year on various fronts. As reported last year, we successfully completed the Front-End Engineering and Design Study ("FEED Study") for the Islandmagee gas storage project. The FEED Study and its results underpinned further negotiations with both offtake partners and project financiers. We are very pleased to have entered into a binding term sheet for a gas storage capacity offtake deal with Vitol S.A. ("Vitol") in June 2019. Once we have entered into the final Gas Storage Agreement with Vitol based on this term sheet, the deal will run for a minimum of 12 years. The commercial structure agreed with Vitol allows us to not only capture the baseload winter-summer price spread annually but also provides us with significant upside through participation in spot and short-term price arbitrage opportunities. Our salt caverns are designed to respond rapidly to changes in the physical conditions of the UK gas market (under or over supply) which in turn creates opportunities to absorb price volatilities in the spot gas markets. Therefore, whilst the salt caverns facilitate the balancing of the UK gas network in periods of stress, this deal also allows us to capture incremental margins associated with spot price volatilities.

The technical and commercial capabilities of the gas storage project have now been proven and independently assessed by numerous potential partners. The final piece of the licensing regime that needs to be put in place is the full marine licence. Between August 2018 and April 2019, the Department of Agriculture, Environment and Rural Affairs ("DAERA") had a change in stance in relation to the issuance of the full marine licence, from having accepted the data submitted till until April 2019 to requiring us to update the various marine related reports. Upon reflection, this changed position provided DAERA and, consequently, the Company adequate protection respectively against any potential legal challenges at subsequent stages of the project life cycle. Whilst the Company has always worked towards maintaining its "draft" marine license status, any pre-enabling marine works would inevitably require a marine environmental baseline study as a starting point. Taking this into consideration, we decided to proceed as DAERA determined in order to achieve the best outcome for all parties involved. I am very pleased to report that DAERA has studied our latest reports in great depth and has instructed the Company to issue notices to commence the formal 42-day public consultation period. Upon completion of this period and satisfaction of any questions received, we are confident that DAERA will be able to grant the full marine licence. Once that is achieved, we will formally have all the licences in place, and it would enable us to take the next steps towards project construction. All the above provides the foundations to raise equity and debt at the project level as well as capitalise on any potential government assistance that may become available. Further, discussions are currently on-going with various financing partners, with the intention to complete project financing and commence construction. As a Board, we are trying to ensure that we extract the best value that is available in the financing markets in order to protect shareholder value. We will be making announcements in due course as soon as all the various financing avenues have been thoroughly analysed and a robust financing deal has been agreed. The report of our Chief Financial Officer in subsequent sections of this report provides more details on the various financing activities at the corporate and project levels.

As early as December 2018, we, as a Board, took a decision that we would embark on a mission of transforming the Company from a one-asset entity into an organisation that has multiple assets in its portfolio, each asset being at different phases of its respective life-cycle. In keeping with that strategy, we entered into an exclusivity agreement in July 2019 for a Floating Storage and Regasification Unit Project ("FSRU Project") located in Barrow-in-Furness. I am pleased to report that since then, we have conducted a substantial amount of technical and commercial due diligence in order to ascertain the viability of this project. Our findings have been very encouraging thus far, yet more work needs to be done before we are able to secure this project on commercially attractive terms. Further, since we announced our intention to acquire the FSRU Project, we have seen a very healthy interest from globally recognised Liquified Natural Gas ("LNG") companies that operate across the spectrum of the LNG chain, from construction to monetisation. Expressions of Interest ("EoI") have been received from the largest LNG companies in Japan, South Korea and North West Europe who desire to partner with us on the construction of the FSRU Project. In addition, very healthy interest has now been established with some of the largest LNG trading houses in the world to book storage and regasification capacity on a long-term basis. With the ongoing debate surrounding climate change, we believe that natural gas will become the predominant feedstock for power generation and will overtake coal and fuel oil consumption in the years to come. This bodes well for our vision and strategy of deploying capital and other resources into such energy related infrastructure projects.

As a Company, we welcome the introduction and commercialisation of new technologies and projects to mitigate the adverse effects of climate change. It is a pressing concern that needs to be addressed both at the policy and project levels. However, clean energy technologies that exist today, while very exciting, still suffer from intermittency in power generation. Until such time as clean energy technologies are capable of delivering steady baseload energy, natural gas will continue to support global energy networks making sure that our offices and homes are lit and heated. Additionally, we have now confirmed that our gas storage caverns can be suitable for storing hydrogen. Should the use of hydrogen across the UK gas network grid become mainstream, the Islandmagee gas storage project will be ideally placed to play a crucial role in the hydrogen storage market.

In line with our vision of expanding our portfolio of assets, the single biggest achievement for the Company this year, post the balance sheet date, was the acquisition of the assets of Harland and Wolff. On 5 December 2019, we formally completed the acquisition and acquired the keys to this iconic and historic facility in Belfast and are rapidly on the way to generating our first ever operating revenues in the Company's history. The acquisition of Harland and Wolff was hard fought. We are proud of the fact that our executive management team secured the assets in the face of significant global competition. It was the single-minded focus, determination and nimbleness of the team that achieved this historic and commercially significant outcome. The acquisition of Harland and Wolff enables us to not only bring in-house a large part of the engineering and fabrication requirements for the Islandmagee gas storage project and FSRU project, with resultant time and cost savings, but also opens a plethora of commercial revenue generating opportunities for the Company across multiple business segments. Our CEO's report in subsequent sections of this report provides a detailed vision and strategy for the Company in the months and years to come. As a Board, we remain firmly committed to this strategy.

The Board made a commitment to our shareholders that we would be revenue generating by the end of calendar year 2019 and with our contract win announced on 6 December 2019, we have fulfilled that commitment. We will now focus our attention towards growing those revenue numbers and achieving a position of being self-sustaining and cashflow positive.

The financial year that has gone past has been challenging in numerous ways - Brexit uncertainties, difficult capital market conditions, geo-political tensions etc. The single biggest challenge for the Board has been to break the perception associated with the Company's legacy of being a semi-dormant AIM company regularly seeking funding via share placings in order to sustain its activities. We believe that with at least three projects in play, the Islandmagee gas storage project, the FSRU project and Harland and Wolff, we have broken that market perception and have positioned ourselves as a dynamic and ambitious organisation that seeks to build a substantial business creating significant value for its shareholders in the process. Until such time that we are consistently revenue generating, there will continue to be pressures on cash. We took a conscious decision to limit our cash-burn rate as much as possible and raise monies in the capital market only for specific purposes. I am pleased that we have achieved a significant set of project results with a highly restricted monthly cash-outflow. Going forward, we will continue to monitor and restrict our overheads in order to ensure that we extract the maximum value for every pound spent. I understand and appreciate the pain that equity dilution causes. However, I strongly believe that we have added substantially more value than the dilution that has been caused in the short term. This is primarily because the book value of the assets purchased are significantly higher than the monies that we have raised to acquire them. Looking further out, we believe that the longer-term value accretion to shareholders has increased substantially and our overall corporate financial risk is now spread across the two assets that we currently own.

As we move into the new calendar year, we will be introducing new non-executive directors and expanding the Board of Directors. As a Board, we must be aligned, share a common ethos and, most importantly, be unanimous in our strategy for the Company. The reconstituted Board of Directors will be mandated to oversee and strengthen our corporate governance protocols and adequately challenge the executive management team. As a Company, we are set to grow rapidly in the forthcoming year, and we recognise the critical need for a well-qualified, astute and motivated Board of Directors. The appointment of Clive Richardson as Chairman of the Company, with effect from 1 February 2020 and as announced on 27 December 2019, is a firm step forward towards building such a Board of Directors.

Finally, I wish to place on record my heart-felt thanks to everyone who has been associated with the Company through this year - our suppliers, contract counterparties and advisers. I would especially like to thank our shareholders for the faith that they have placed in the Company and for having supported us during the Harland and Wolff acquisition. Without their support, this would not have been possible. I also wish to thank our new institutional shareholders who subscribed to our shares during the equity fundraise that took place in November 2019. I warmly welcome them into the Company.

As we move forward, we have surrounded ourselves with some of the biggest and most credible names across all aspects of the Company's activities - institutional shareholders, world class advisers and contractors, globally renowned clients and joint venture partners and, of course, ownership of one of the most iconic heavy engineering brands in the world. To distil our thinking using a famous quotation: "We can see further than others because we are standing on the shoulders of giants."

John Wood

Interim Chairman & CEO, 08 January 2020

Chief Executive Officer's Strategic Report

Overview

As I pass my first anniversary as Chief Executive Officer of InfraStrata plc, it has been a very challenging but exciting twelve months to consolidate our position as a small but growing company. At the same time, I believe that we have made tremendous progress in the various activities that we have undertaken through the year.

After successfully completing the Front-End Engineering and Design (FEED) for our Islandmagee gas storage project at the end of 2018, we commenced a deep detailed review of all aspects of the business Additionally we had a number of work streams that had to be completed in their entirety over and above the FEED scope and we put significant resources into completing these legacy workstreams. Upon reflection, 2019 has been a year of stabilisation and building the foundations for 2020 and beyond. With the acquisition of the assets of Harland and Wolff in December 2019, we are set up for a thrilling 2020 and beyond as we start to realise the potential of the business that we are building and the substantial increase in shareholder value that will come as a part of this journey.

In last year's Annual Report, I set out some clear objectives:

   1.    Being revenue generative during 2019 after twelve years of regular dilution 

I am delighted to report that we have achieved that milestone through our subsidiary, Harland & Wolff (Belfast) Limited, by securing two ship maintenance contracts from Sea Trucks on the day we completed the acquisition transaction of the assets of Harland and Wolff.

   2.    Moving away from being a one project company 

With the completion of the purchase of the assets of Harland and Wolff in December 2019, we have completed this objective as well. We also have several exciting projects under evaluation, especially the Floating Storage and Regasification Unit Project ("FSRU project") for which we currently have exclusivity until 8 January 2020.

   3.    Delivering the Final Investment Decision ("FID") for our Islandmagee Gas Storage Project 

Whilst we are well advanced and have made excellent progress this year in our financing negotiations for the Islandmagee gas storage project, we have taken a key decision to delay FID from Q4 2019 as a result of the outcome of the General Election and the fact that we are now extremely likely to leave the European Union.

The equity deal offered that we were carefully considering and the offers that we received previously would have resulted in the Company selling down a substantial portion of equity in the project to the incoming project equity funding partner. Following on from the General Election, we believe that there will be other funding options that may enable the Company to retain more equity in the project by utilising new schemes that are likely to be put in place in 2020 as a consequence of Brexit.

We understand there will be more clarity on what these new funding schemes are during the first part of 2020. If they are found to be unsuitable, commercially, strategically or procedurally, we will not pursue them. Instead, we will seek to revert to the arrangements that we were working on in 2019. It is the Board's opinion that we need to fully explore these new options prior to making a final commitment on FID given the potentially significant impact that these new funding options might have on our project equity position. We have had discussions with our potential project equity partners, and they understand our position to delay FID given the changing political and associated financial landscape.

Although we have only been able to complete two out of our three main objectives, we believe this approach to FID is in the best long-term interests of the business, which may substantially improve shareholder value in the mid to long term.

We are delighted to welcome Clive Richardson to the business as our new Chairman (with effect from 1 February 2020). We believe that the skills and experience that he brings will position us well for the future. We are extremely lucky that he has agreed to join us, and we now have a diverse and experienced board with strength and depth.

The task of converting the draft marine licence to a full marine license became more complicated during 2019. The Department of Agriculture, Environment and Rural Affairs ("DAERA") moved the goal posts as a result of a few local protestors who do not want gas storage or, for that matter, any other project in "their back yard", as it were. This group has opposed every project in the region over the past five years. We have, however, dealt with the change in requirements with good grace and announced the commencement of the 42-day public consultation to enable the full marine licence to be issued to us as soon as such public consultation period closes, and responses have been assessed.

Clearly this is a high-profile work stream and we have undertaken substantial amounts of additional environmental surveys and baseline establishment works to ensure that our data set is complete, up-to-date and goes over and above the legal requirements. We are not aware of any reason as to why the marine licence will not be issued. We expect this to be done early in 2020 after following due process. We have not had any issues raised by DAERA, which we believe indicates that they are comfortable with the data and reports produced that satisfy full compliance with current regulations.

We are extremely pleased to have completed the acquisition of the assets of Harland and Wolff. The deal from commencement to completion was achieved in three months. Given the multiple stakeholder groups involved in this process, completion within these timelines is an achievement that we are all very pleased with. The final acquisition cost was well under the Board's valuation as well as independent valuations conducted and, therefore, represents an excellent investment. The income stream for this multi-purpose fabrication facility will come from internal group projects and external projects. Early indications show that revenue generation is likely to come from the following sectors:

   --     Internal projects 
   --     Ship Repair & Maintenance 
   --     Ship Conversion 
   --     Offshore infrastructure/assets 
   --     Fabrication 
   --     Recycling 

When operating at full capacity, the Board estimates that the facility could eventually generate significant revenues, dependent on our marketing efforts, flow of internal projects and the development of our pool of skilled labour.

This acquisition provides the Company with the opportunity to substantially reduce the overall CAPEX of our flagship Islandmagee gas storage project in addition to being cash generating and self-sufficient, potentially negating the need to return to the stock market on a regular basis in order to provide cash inflow for ongoing operations.

We remain in constant dialogue with Meridian Holdings in relation to the proposed FSRU project. We now have several potential offtake partners who are very keen on acquiring the capacity that this asset will bring to the market. Preliminary discussions thus far have indicated that they may also provide some funding as part of the offtake agreement. Whilst this is a highly exciting project we will only proceed when we are fully satisfied with our evaluation of the risks involved. We expect a decision to be taken on our involvement within H1 2020.

Within Islandmagee Energy Hub Ltd we have several additional and interesting projects that are still in the incubation stage. We will look at developing these projects given that the hydrogen and carbon capture markets are showing some interesting levels of traction as we move into 2020.

We have introduced a new approach to Safety, Health and Environment (SHE) which we will be rolling out during 2020. Safety is of upmost importance in our minds and we will do all we can to ensure that no harm comes to any of our employees or to our environment.

Board

At the beginning of 2019, our then Chairman Graham Lyon tendered his resignation from the business in order to concentrate on other projects. I would like to place on record my thanks to Graham for all his efforts in arresting the free fall of the Company and its subsidiaries, commencing the turnaround of the business, laying the foundations of a new team and providing a stable platform.

I have had the privilege of acting, in an interim capacity, as Chairman for the remainder of 2019. Whilst in an ideal world, we would have appointed an immediate replacement, the Board wished to find the right candidate, limit cash burn and ensure that it had a clear strategic direction prior to making a new appointment. Dealing with all the legacy matters and ironing out the regulatory issues in relation to Islandmagee opened up an entirely new long list of high-quality candidates who had decades of corporate and strategy experience.

We have, therefore, concluded that the board moving into 2020 will now be expanded with the addition of a new Non-Executive Director and our new chairman thus positioning us for growth in 2020 and beyond.

We have now made one board appointment, Clive Richardson, who will fulfill the role of Chairman from 1 February 2020. We are confident that Clive will add extensive value to our business in the long term. Clive has extensive experience in large contract delivery across multiple markets including defence and maritime and has been on the board of several organisations.

The added strength and depth of knowledge that Clive brings will complement the skills of the existing board and provide significant support to the executive team.

Clive Richardson - Chairman

On 27 December 2019 we were delighted to announce that Clive Richardson has been appointed as our new Chairman, with effect from 1 February 2020. Whilst I have enjoyed my interim stint in this role, it is great to welcome Clive with his wealth of experience into the role in order to allow me to fully concentrate on my main objective of driving the business forward as CEO during 2020. Clive will take up this position from 01 February 2020. This appointment will strengthen our board substantially, provide further governance and facilitate a clear strategic path going forward.

Most recently, Clive was Group CEO of V. Group, one of the world's largest providers of commercial ship management services with over 1,000 vessels under management. Clive held P&L responsibility, reporting to the main board, and achieved significant organic growth for shareholders throughout his tenure, also making several acquisitions. Clive also introduced a core operating framework and enhanced controls and governance which led to a significant reduction in overheads, as well as leading the recapitalisation of the business as required.

Between 2007 and 2009, Clive was Chief Operating Officer, EMEA, and Chairman, QinetiQ Ventures for QinetiQ plc, formerly known as the Defence Evaluation and Research Agency which was subsequently privatised in February 2006. This signalled the start of rapid growth and the business now reports annual revenues of GBP1.4 billion. Clive held P&L responsibility for all operations outside of North America and during his tenure, undertook three acquisitions in Australia and two acquisitions in the information security sector. Clive was also Chairman of QinetiQ Ventures' partnership with Coller Capital in the GBP80m Cody Gate Ventures fund.

Between 1989 and 2007 Clive was an executive at BAE Systems Plc. He held several senior roles during his time there, including Chief Executive of Insyte, Managing Director at Royal Ordnance plc and Commercial Director at BAe Airbus. During his career Clive also held senior positions at Marconi Electronic Devices Ltd and Westland Helicopters Limited.

Between 2004 and 2009 Clive was a member of the National Defence Industries Council, (the Government and Industry defence consultation authority) and he was President of Tech UK, (the UK trade association for the IT, telecoms and electronics sector), between 2009 and 2011.

Strategic vision

The development of a long-term strategic vision for the Company was the first activity that I undertook after being appointed Chief Executive Officer. It was clear that a one project company was very high risk and unsustainable in the long term. Our vision is, therefore, to be a leading, global energy infrastructure development and asset management company, being intimately involved through the entire lifecycle of projects from conception to decommissioning. We will participate in some projects from end to end of the lifecycle, whilst in the case of others, we may only develop or acquire to operate them.

Our goal is to spread the Company's risk profile over several projects and operations. Whilst, initially, we have restricted ourselves to a single geographical location, we have global aspirations in the longer term. The key update in our strategy from last year to this year is a more concentrated approach to asset management, operations and maintenance.

The model, whilst relatively simple, will allow us to continue to enhance our balance sheet year on year. Income will be generated from four main areas of operations; each new project may be different and have specific nuances that need to be critically assessed. Therefore, individual technical and commercial models will be developed to ensure that maximum value is derived from every potential project. The four areas of expertise that we hold and that will lead to income generation and incremental shareholder value are:

   --     Front End Project Development to FID (Final Investment Decision) - Carried equity interest 
   --     Construction Management & Project Delivery - Management fee agreement 
   --     Asset Operation, Management and Optimisation - Management and operations fee agreement 
   --     Retained equity income generation - project profit sharing via dividend distribution 

Our strategic goal is to have numerous projects and facilities at various stages of their respective lifecycles. The Board will identify and assess projects that substantially fit the following criteria:

   --     Substantial infrastructure; 
   --     Facility operational management; 
   --     Key strategic requirement for the assets; 
   --     Political stability in the project location; 
   --     Long life operations of between 20 and 40 years; 
   --     Risk of development can be mitigated to an acceptable level; and/or 
   --     State backed projects where grants for feasibility and construction may be available. 

The Board is focused on being in a position to consider returning cash to shareholders in the form of dividends, whilst retaining sufficient funds to invest in new value enhancing projects, as soon as possible.

Harland and Wolff Asset Acquisition

During the FEED study it was clear that one of the challenges for the Islandmagee gas storage project was the transportation of several large items of plant and equipment onto site.

Given the restrictions relating to weight and physical size of component structures, we put a lot of detailed analysis into the transportation plan. In an effort to determine the most cost-effective transportation route, numerous locally available sites and facilities were considered. The Harland and Wolff site was visited in March 2019 and considered to be an optimum staging facility for the project.

The advantage of being able to construct larger modules and have less assembly work on-site was calculated to offer a substantial CAPEX cost reduction for the Islandmagee Gas Storage project. With the relatively short coastal passage of 23 nautical miles Harland and Wolff is a fantastic acquisition from, inter alia, a geographical perspective.

With more modules/components that can now be transported via barge, this will lead to significantly less traffic on the local roads. In addition, it will facilitate a higher level of utilisation of the Northern Irish workforce. We have made a commitment at all stages of our flagship Islandmagee gas storage project to utilise, where possible, the local workforce.

The utilisation of local labour and construction within a nearby facility like Harland and Wolff will ease the supervisory burden on the Company, increase efficiency and save on costs. From an overall Group perspective, retention of margins on fabrication work within a group company as opposed to passing it on to a third-party fabrication company added to the attractiveness of Harland and Wolff.

The other potential projects that are held within Islandmagee Energy Hub Limited and the potential FRSU project, further strengthen the Harland and Wolff acquisition rationale. In addition to our internal projects, we believe that there are other lucrative asset management markets that we can penetrate over time in order to reduce the overheads burden on our internal projects as they come through into Harland and Wolff. On that premise, clearly the facility lends itself to other asset-based activities such as ship maintenance, conversion and fabrication works across multiple sectors.

The corporate structure that is currently in place consists of four subsidiaries that are 100% owned by InfraStrata UK Ltd, which in turn is 100% owned by the Company. All subsidiaries should be able to be self-sufficient whilst benefiting from trading relationships, where possible, with each other. Harland & Wolff (Belfast) Limited has a 100% owned subsidiary, Harland & Wolff Technical Services Limited which will carry out preliminary and detailed design as well as consultancy works across a wide variety of projects.

Islandmagee Energy Limited

Overview

Our flagship Islandmagee gas storage project was first established back in 2010 when a layer of salt was discovered 1500m underneath Larne Lough. This salt layer is ideal for the establishment of underground gas storage caverns. The storage caverns are formed by drilling wells from the well pad into the salt layer thereafter removing the salt (in a brine solution) and discharging it into the fast-flowing Irish Sea via the leaching plant and pumping station. The rates and levels of discharge are highly regulated activities governed by the regulations set by the Department of Agriculture, Environment and Rural Affairs ("DAERA"). Our proposed discharge rates are well within the legal environmental limits and we have further proposed a monitoring programme that is in excess of these legal requirements.

The gas injection and withdrawal facility will be constructed on the surface and this will facilitate moving gas from the network to be injected into the caverns in times of excess supply and, conversely, withdrawn from the caverns back into the gas network when there is a shortage of gas supply.

The project is at an advanced stage and technically ready to award a construction contract. Whilst the project has progressed over the years, all areas of the project had not previously been brought up to the same level of completion. This year has been about just that, following on from feedback during the tender process undertaken in Q1 2019. Clearly this has taken longer than we would have liked. After moving into the CEO's position, I undertook a full gap analysis of all the elements of the project. This gap analysis highlighted several additional work streams that needed to be completed in order to bring the project to a "shovel-ready" status. I am pleased to report that these additional work streams have now been successfully completed.

We have additionally revisited all aspects of the project to ensure that it complies with or exceeds regulatory standards. We have also established internal systems and processes that significantly exceed current regulations. This has achieved two objectives: one, it has sought to mitigate concerns of locally formed protest groups; and two, it has created an environment that is likely to avoid potential delays in the future. One area where, legally, we could have argued that the data was still compliant regardless of it being old in nature was that surrounding the marine licence. We took the decision to bring forward the pre-baselining environmental work in order to protect against the possibility of objections that might be raised at a later stage when construction is well underway. This work has now been undertaken and submitted to DAERA. As part of this work stream, a public consultation exercise will be conducted between 20(th) December 2019 and 7(th) February 2020 upon satisfaction of any questions raised. This process is routine in nature, and we see no reason why the full marine licence will not be issued in due course early in 2020. Unfortunately, with the establishment of a local protest group it has lengthened the processing time to advance through the various stages of the regulatory system, over which we have no control.

Marine Licence

During 2019 we made excellent progress to seek to convert the draft marine licence into a full marine licence. The marine licence is required to discharge salt into the Irish sea inside the 12 nautical mile limit. As part of the marine licence, an abstraction and discharge licence is also required. Discharge outside the 12 nautical mile limit was an option that was considered as plan "B" given that the discharge requirements to be put in place were less onerous. A review was undertaken during 2019 in relation to this plan "B". However, this has not been taken any further due to all planned activities currently falling well inside the existing environmental limits.

The project currently has a draft marine licence as well as a full abstraction and discharge licence. Given the age of the previously available environmental studies and the potential for objections, the Board took the decision to bring forward the pre-construction baseline activities for all environmental survey works. These works were carried out in the waters and coastal areas surrounding the point of brine discharge. Numerous activities were undertaken including measuring tidal flows, noise studies, bird studies, various marine habitat studies, seabed samples, trawl sampling and other marine related field work in order to collate and prepare a complete set of data.

The field work was undertaken by independent marine scientists. The samples were then analysed in laboratories prior to the final reports being submitted to InfraStrata. In addition, brine discharge models were constructed by a third-party expert and further independently verified and corroborated by another independent third-party expert. These workstreams were carried out during the summer and autumn of 2019 and have been now adopted by DAERA as core project documentation.

Whilst not legally necessary, the Board believed the data from these workstreams would be required in early 2020 given that this was always a condition of the draft licence. With the completion of all the work and collation of the latest data, there will now be substantial protection against any challenge that may be posed in relation to historic data. In addition, a public consultation has been agreed to share the new data that has been gathered throughout 2019. The new data shows no adverse effects and demonstrates an improvement in some areas. As a result of these efforts we believe a full marine licence incorporating an updated abstraction and discharge licence will be awarded in 2020.

The documents, inter alia, supplied, reviewed and approved by DAERA are as follows:

   --      Environmental Conditions Update Report 

Appendix A - General Arrangement Drawings

Appendix B - Brine Dispersion Modelling Report - FEED Update

Appendix C - Underwater Noise Modelling Plots

Appendix D - Benthic Survey Reports (Aquatic Services Unit)

        Appendix E - Ecological Survey for Birds     (RPS) 

Appendix F - Cumulative Effects Assessment Stage 1 & 2

Appendix G - Biodiversity Data received from CEDaR

   --      The Updated Shadow Habitats Regulation Assessment 

As part of the marine licence, we will be installing a monitoring system. This system is designed to ensure that we only discharge into the Irish Sea what has been licensed to be discharged. There will be a system of buoys installed at sea at agreed distances from the discharge point. These buoys will come with a suite of sophisticated and fully calibrated scientific equipment that will measure the discharge of brine at specific points.

The equipment will relay data back to shore in real time where it will be monitored by the Company and DAERA. Should at any point the level of brine discharge increase over the licensed limits, an alarm message will be sent to DAERA and the brine discharge operation will be ceased until such time as the level of brine reverts to the licensed levels.

We are aware of no reason why the marine licence will not be issued. The public consultation commenced on 20 December 2019 and will end on 07 February 2020. Whilst only 42 days are legally required for a public consultation process, we have allowed a few extra days due to the intervening holiday season. During this period the Company will hold several consultation sessions that will build on the sessions that were conducted between March and October 2019.

Project Funding

We have always assumed in our economic modellings that the Islandmagee gas storage project would be funded via commercial equity and debt. Whilst there remains the possibility of acquiring some government or quasi-government funding especially after the outcome of the December 2019 General Election, we have been cautious in our approach towards making funding assumptions for our flagship project. Additionally, we have had various offers that we have been negotiating to term sheet stage. Each term sheet would require the Company to sell down a portion of the equity to the incoming equity provider resulting in our remaining equity stake to be in the region of circa 20-30% along with the return of our back costs which currently sit at circa GBP15m.

We have been working hard towards signing heads of terms on an equity deal in 2019. The Board has, however, decided to pause this process for a limited period. With the recent General Election result clearly indicating that we will be leaving the European Union, we believe that this change in circumstance will open up access to several funding initiatives in the UK which may facilitate the Company retaining the majority of the equity in Islandmagee Energy Limited. This is significant given the significant revenue streams that are expected to flow from this project through its lifetime.

Whilst some shareholders will view this decision and delay as disappointing, I have always stated that we are continually seeking to improve long term shareholder value. We have been monitoring the situation for several months and have held back from making a decision. With the marine licence consultation running through until February and the assessment period that will follow, we believe there is a window of opportunity to explore this option. We will seek to revert to the offers that we recently had on the table should this current initiative not yield the results that we desire. We believe that we will need a window of between three and six months during 2020 to fully assess the options, timescales and criteria involved in any new proposed funding routes.

Reversal of the Scotland Northern Ireland Pipeline (SNIP)

Earlier in 2019, the Company, in conjunction with Mutual Energy, submitted a speculative application to the European Union to fund a FEED study for reversal, twinning and various upgrade works in relation to the SNIP. When it became clear that the UK was leaving the EU, we were advised that no further grants would be made available.

The Board believed this would be the most probable outcome but decided to make an application nevertheless to determine if any real appetite existed to award us a grant for studies as opposed to a grant for works. Our previous cost estimates already have an allowance for the FEED costs to progress this project. Ultimately, if we are to fund the CAPEX of this project it will generate an income stream over an extended period that will cover the cost of development. Equally, Mutual Energy, as the operator, may choose to fund this directly and enter into a utilisation agreement with Islandmagee Energy Limited.

Given the perilous state of gas storage in the UK, especially with the United Kingdom now set to leave the European Union, it is essential for the United Kingdom and the Island of Ireland to have immediately available gas storage. The risk of blackouts will increase significantly given that interconnectors from the EU will be closed in an emergency situation, at which point gas supplies will be restricted. When fully operational, the Islandmagee gas storage project is expected to contribute 25% of the UK's available gas storage capacity and is set to become a key strategic asset to ensure security of gas supply to the island of Ireland and the UK mainland as well.

The binding Heads of Terms that have been signed with Vitol, prior to the Gas Storage Agreement, facilitate bringing the caverns online sequentially up to a total of 500 million cubic metres of gas storage. The cavern formation and operational schedule would not have the requirement for the reversal of the SNIP until five years after the commencement of construction of the initial three caverns. We remain confident of agreeing a commercially viable solution with Mutual Energy in this intervening period so that we do not have any capacity related restrictions when all 7 caverns are in full commercial operation.

Gas Storage Agreement (GSA)

As previously mentioned, a lot of detailed work was undertaken during the negotiation of the Heads of Terms stage. Implementation of these terms into the GSA is progressing well and will be brought to conclusion in 2020. Drafts have now been exchanged between the parties. Given that the commercial model that is being used is pioneering and has not been devised previously, a number of back tests and independent assessments have been conducted in order to prove the effectiveness of this new commercial gas storage model. The fact that we have managed to secure an element of the traders' profit into our agreement in addition to receiving 100% of the classic seasonal spread bodes well for the future. For the avoidance of doubt, the funding model that we adopt to construct the project will not affect the GSA.

Harland & Wolff (Belfast) Limited

Harland & Wolff (Belfast) Limited is the group's new subsidiary company that was used to acquire the assets of Harland and Wolff from the administrators. This acquisition was completed on 5 December 2019. We launched an initial bid for the assets by paying a non-refundable deposit of GBP500,000 in order to get first mover advantage.

The final deal that has been agreed with the administrators is as follows:

 
 Structured payments 
 
 1 October 2019        Deposit paid - exclusivity   GBP0.5m 
                        secured 
 4 December 2019       Interim part payment         GBP3.30m 
 30 April 2020         Final payment                GBP1.45m 
 
                       TOTAL COST                   GBP5.25M 
 
 

The Facility is made up of two sites. Site one includes the Belfast Dry Dock and site two includes the new building and fabrication dock along with 30,000m(2) of undercover fabrication space.

The facilities have deep water access and over 900m of quayside berths between the two facilities. There are various deep water pockets around both sites that will facilitate larger deep drafted vessels and structures to berth and be worked on.

Whilst our primary purpose for acquiring the assets of Harland and Wolff and establishing Harland & Wolff (Belfast) Limited is to undertake various fabrication activities for our flagship Islandmagee gas storage project and subsequent projects to be developed over time, we are conscious that we need to keep the rate of cash burn on overheads down to a minimum.

It is still early days given that we formally acquired the assets only on 05 December 2019, but we have been able to identify certain sectors where we will be able to secure some additional projects to ensure continuity of employment and further develop the skill set of the employees whilst reducing the overhead burden of owning the facility. We have been fortunate to have secured the first two vessel dockings for asset maintenance, the first of which docked on 21 December 2019. These contracts represent the first ever operating revenues for the Company.

Across all the markets from which we may look to secure projects, the addressable market size in the UK is circa GBP15.15bn before applying sensitivities, capacity constraints, competitiveness and competency. The key indicator at this stage is that we clearly have a large addressable market and of which we are confident that we can obtain a small yet significant market share. The new management team will further evaluate each market and the opportunities available as we progress through 2020.

Internal Projects

The Company will continue to work through various valuation processes and consider new projects to develop. It is likely that these projects will require a certain degree of fabrication and utilisation of the facilities available at Harland and Wolff. Typical projects in this sector will range in value from GBP100-300m with a duration of 2-4 years.

Ship Repair

Projects in this area will cover general routine maintenance and asset management of marine assets including vessels and will utilise mainly the Belfast Dry Dock and the numerous quayside berths available onsite. This sector will be split further down into cruise & ferry, defence, commercial and high-speed vessels. Contracts can vary in value from GBP150,000 - GBP5m with a duration of between 7-14 days in dock or alongside the quay. Ease of entry into this market and relatively low commercial risks are positive factors for this sector. We have already entered this activity with the award of two contracts in December 2019 by Sea Truck Ferries Limited.

Ship Conversion

This area is more complex than standard ship repairs and requires a more experienced management team. As detailed later on in this report, we have assembled a team capable of handling these types of projects. The general sectors for this type of work are across cruise, construction vessels, defence and ferry. Contract values can vary from GBP10m - GBP70m with a normal duration of 14-30+ days. The entry point for this level of projects is more complex and requires an experienced team to ensure the techno-commercial risks are understood and adequately mitigated. With an experienced team now in place, we will be well positioned to enter this market during 2020.

Offshore infrastructure / assets

The facilities and employees of Harland & Wolff already enjoy vast experience in this sector. The dock sizes lend themselves to larger projects such as Floating Production Storage and Operating vessels ("FPSO"), offshore structures and vessels as well as spooling and subsea structures. This sector has a mixed use of the facilities ranging from the utilisation of the fabrication halls through to blasting and painting rooms and finally, the use of the quayside and dry docks. Contracts can vary in value from GBP1m - GBP70m+ with project durations ranging from 14 days to in excess of 120 days for more complex projects. Given their experience over the last decade, the team are well positioned to enter this market in the near future.

Steel Fabrication

The facility has 30,000m2 of undercover fabrication space and has blast and paint coating facilities that complement fabrication. Clearly, this area will be extremely busy dealing with internal projects and it is, therefore, essential that this sector makes progress early in 2020 to upskill the workforce. There are numerous contracts that we may be able to secure to advance this area including construction industry steel for office buildings and factories, renewable and offshore infrastructure projects and completing defence vessel blocks including the construction of new vessels. The contract value in this sector is varied and can be from GBP0.1m up to GBP200m+. This forms an integral part of physical asset lifecycle management and each project will always be handled on a case by case basis in order to understand its risk profile whilst maintaining economic efficiency.

Recycling / Decommissioning

The facility is one of a limited number in the UK that has a recycling licence into which disused and damaged structures and vessels can be brought and decommissioned in an environmentally friendly manner. General markets include offshore structures, production and defence vessels and subsea structures.

New Management Team

In addition to Harland & Wolff (Belfast) Limited we have also recently incorporated a new company, Harland & Wolff Technical Services Limited, which is 100% owned by Harland & Wolff (Belfast) Limited. This company shall incorporate all engineering functions internally, as well as serving external clients globally. The formation of the new team is a blend of global experience and the decades of experience of operations in the Harland & Wolff facility. The team has the experience to deliver the Islandmagee gas storage project, ship repair, ship conversion, fabrication, offshore and recycling projects.

The new team at Harland and Wolff includes:

 
 John Petticrew   Managing Director 
 Paul Blake       Operations Director 
 TBA              Commercial & BD Director 
 Stephen Mills    Director Sales Cruise & Ferry 
 Mark Giles       Director Sales Defence & Commercial 
 Con O Neil       Financial Director (Existing 
                   H&W employee) 
 Alan Haley       GM Harland & Wolff Technical 
                   Services Limited (Existing H&W 
                   employee) 
 Eoghan Rainey    Acting Health & Safety Director 
                   (Existing H&W Employee) 
 

John Petticrew has had decades of experience running similar facilities globally, his recent role was Vice President Operations at Seaspan Shipyard in Vancouver, Canada. John had 2,000 employees reporting into him with 5 divisional directors. In this role John oversaw the production for the National Shipbuilding Strategy for Canada building six vessels for the Navy and Coast Guard.

John was the Vice President of Engineering also for Seaspan, Technical Director for Gulf Marine Services and the Senior Project Director for Lamprell Energy Limited and held the position of New Building Manager for Dubai Dry Docks.

Commencing in 1987, John spent a decade at Saint John Ship Building serving as Superintendent and Production Manager. He brings with him a wealth of experience across fabrication, oil & gas, defence, ship repair and vessel construction.

Paul Blake has recently accepted the position as Operations Director of Harland and Wolff. Until recently Paul was the Head of Projects at ASRY (Arab Shipbuilding & Repair Yard Co in Bahrain. Prior to this Paul was a Project Manager at the Grand Bahamas Shipyard specialising in cruise vessel upgrades. Paul also held posts as Director and General Manager Atlantic & Peninsula Pty Ltd in Australia and as General Manager/Ship Repair Director at Topaz Energy & Marine in Dubai.

Stephen Mills and Mark Giles are proven sales executives and have decades of experience across all sectors and are a great addition to the team. We are currently in the process of finalising the appointment of the new Commercial and Business Development Director.

The new team at Harland and Wolff along with the existing workforce now have the requisite depth of knowledge and experience to turn this facility around into an efficient and profitable business in the months and years to come. I look forward to building a profitable and sustainable business around this iconic facility and globally renowned brand.

John Wood

Chief Executive Officer, 08 January 2020

Consolidated Statement of Comprehensive Income for the Year Ended 31 July 2019

 
 Continuing operations                       Note          2019        2018 
                                                            GBP         GBP 
 Revenue                                                      -           - 
 Management and administrative expenses             (1,383,294)   (863,413) 
 Other income                                3          300,000           - 
                                                   ------------  ---------- 
 Operating loss                              4      (1,083,294)   (863,413) 
                                                             18           - 
   Finance income 
 Finance costs                                         (99,436)   (100,000) 
 
 Loss before tax                                    (1,182,712)   (963,413) 
 Taxation                                    9                -           - 
                                                   ------------  ---------- 
 Loss for the year                                  (1,182,712)   (963,413) 
                                                   ============  ========== 
 
 Other comprehensive income                                   -           - 
 
 Total comprehensive loss for the 
  year attributable to the equity holders 
  of the parent                                     (1,182,712)   (963,413) 
                                                   ============  ========== 
 

Earnings Per Share:

 
 Basic and diluted    10   (0.09)p   (0.15)p 
                          ========  ======== 
 

Consolidated Statement of Financial Position as at 31 July 2019

 
                                    Note        31 July          31 July        1August 
                                                   2019             2018           2017 
                                                    GBP              GBP            GBP 
                                                           (As restated) 
 Assets 
 Non-current assets 
 Intangible assets                  11       10,168,605        7,479,690      6,591,302 
 Property, plant and equipment      12          738,825          440,100        440,100 
 Other asset                                          -                -         42,000 
                                          -------------  ---------------  ------------- 
 Total non-current assets                    10,907,430        7,919,790      7,073,402 
                                          -------------  ---------------  ------------- 
 Current assets 
 Trade and other receivables        14          202,066          264,491         98,718 
 Other asset                                          -                -        100,000 
 Cash and cash equivalents          15           11,240        1,790,979      1,548,169 
                                          -------------  ---------------  ------------- 
 Total current assets                           213,306        2,055,470      1,746,887 
                                          -------------  ---------------  ------------- 
 Current liabilities 
 Trade and other payables           16      (1,111,342)        (840,523)      (149,625) 
 Grant received in advance                            -        (924,642)    (1,440,913) 
 Short-term borrowings              26        (785,095)        (163,344)              - 
 Short-term financial liability     17            (988)        (200,000)              - 
                                          -------------  ---------------  ------------- 
 Total current liabilities                  (1,897,425)      (2,128,509)    (1,590,538) 
                                          -------------  ---------------  ------------- 
 Net current liabilities                    (1,684,119)         (73,039)        156,349 
                                          -------------  ---------------  ------------- 
 Non-current liabilities 
 Financial liability                26        (200,000)        (200,000)      (200,000) 
                                          -------------  ---------------  ------------- 
 Net assets                                   9,023,311        7,646,751      7,029,751 
                                          =============  ===============  ============= 
 Shareholders' funds 
 Share capital                      19       10,949,504       10,919,117     10,853,460 
 Share premium                               18,427,728       16,005,216     14,297,307 
 Merger reserve                               8,988,112        8,988,112      8,988,112 
 Share based payment reserve                    113,220            6,847        616,096 
 Warrant reserve                    28                -                -              - 
 Retained earnings                         (29,455,253)     (28,272,541)   (27,725,224) 
                                          -------------  ---------------  ------------- 
 Total equity                                 9,023,311        7,646,751      7,029,751 
                                          =============  ===============  ============= 
 
 

Consolidated Statement of Changes in Equity for the Year Ended 31 July 2019

 
                  Share capital   Share premium      Merger      Share based    Warrant        Retained   Total equity 
                            GBP             GBP     reserve        payment       Reserve       earnings            GBP 
                                                      GBP          reserve         GBP              GBP 
                                                                     GBP 
 At 1 August 
  2018 (As 
  restated)          10,919,117      16,005,216      8,988,112          6,847          -   (28,272,541)      7,646,751 
 Loss for the 
  year                        -               -              -              -          -    (1,182,712)    (1,182,712) 
 Total 
  comprehensive 
  income                      -               -              -              -          -    (1,182,712)    (1,182,712) 
 Shares issued           30,387       2,422,512              -              -          -              -      2,452,899 
 Share option 
  expense                     -               -              -        106,373          -              -        106,373 
                 --------------  --------------  -------------  -------------  ---------  -------------  ------------- 
 At 31 July 
  2019               10,949,504      18,427,728      8,988,112        113,220          -   (29,455,253)      9,023,311 
                 ==============  ==============  =============  =============  =========  =============  ============= 
 

Share capital: This represents the nominal value of equity shares in issue.

Share premium: This represents the premium paid above the nominal value of shares in issue.

Merger Reserve: The merger reserve represents the difference between the nominal value of the shares issued on the demerger and the combined share capital and share premium of lnfraStrata UK Limited at the date of the demerger.

Share-based payments reserve: This represents the value of share-based payments provided to employees and Directors as part of their remuneration as part of the consideration paid. The reserve represents the fair value of options and performance share rights recognised as an expense. Upon exercise of options or performance share rights, any proceeds received are credited to share capital and share premium.

Retained earnings: This represents the accumulated profits and losses since inception of the business and adjustments relating to options and warrants.

Consolidated Statement of Cash Flows for the Year Ended 31 July 2019

 
                                                                      2019                    2018 
                                            Note                       GBP                     GBP 
Cash flows from operating activities 
Loss for the year                                              (1,182,712)               (863,413) 
Adjustments to cash flows from non-cash 
 items 
Depreciation and amortisation               4                          892                       - 
Profit on disposal of intangible assets     3                    (100,000)                       - 
Profit from disposals of investments        3                    (200,600)                       - 
Foreign exchange loss                       4                       11,055                (26,590) 
Finance income                                                        (18)                       - 
Finance expense                                                    102,460                       - 
Share option expense                                               172,638                  96,597 
                                                  ------------------------  ---------------------- 
                                                               (1,196,285)               (793,406) 
Working capital adjustments 
Decrease/(increase) in trade and other 
 receivables                                14                      38,121               (123,827) 
Increase in trade and other payables        16                     239,646                 690,952 
Cash generated from operations                                   (918,518)               (226,281) 
Income taxes received                       9                            -                       - 
                                                  ------------------------  ---------------------- 
Net cash flow from operating activities                          (918,518)               (226,281) 
                                                  ------------------------  ---------------------- 
Cash flows from investing activities 
Interest received                                                       18                       - 
Proceeds from issue of ordinary shares                           2,386,634               1,683,816 
Short term borrowings                                              621,751                 163,344 
Acquisitions of property plant and 
 equipment                                                       (299,617)                       - 
Acquisition of intangible assets            11                 (3,613,559)             (1,378,069) 
Proceeds from sale of intangible assets                            100,000                       - 
                                                  ------------------------  ---------------------- 
Net cash flows from investing activities                         (804,773)                 469,091 
Net increase/(decrease) in cash & 
 cash equivalents                                              (1,723,291)                 242,810 
Cash flows from financing activities 
Interest paid                                                     (57,436)                       - 
                                                  ------------------------  ---------------------- 
Net decrease in cash and cash equivalents                      (1,780,727)                 242,810 
Cash and cash equivalents at 1 August                            1,790,979               1,548,169 
                                                  ------------------------  ---------------------- 
Cash and cash equivalents at 31 July                                10,252               1,790,979 
                                                  ========================  ====================== 
Cash and cash equivalents consist 
 of: 
 Cash at bank                                                       10,252               1,790,979 
                                                  ========================  ====================== 
 
 

Notes to the Financial Statements for the Year Ended 31 July 2019

Net Debt Reconciliation

Consolidated Net Debt Reconciliation for the Year Ended 31 July 2019

 
   Other assets     Liabilities from 
                   financing activities 
 
 
                                 Cash/bank     Liquid investments   Borrowings    Borrowings 
                                  overdraft                          due within    due after 
                                                                     1 year        1 year 
 Net debt as at 1 August 
  2017                             1,548,169          (1,491,820)             -    (200,000) 
 Cash flows                          242,810             (50,854)     (363,344)            - 
 Foreign exchange adjustments              -                    -             -            - 
 Other changes (ii)                        -                    -             -            - 
                                ------------  -------------------  ------------  ----------- 
 Net debt as at 31 July 
  2018                             1,790,979          (1,542,674)     (363,344)    (200,000) 
 Cash flows                      (1,779,739)              633,398     (422,739)            - 
 Foreign exchange adjustments              -                    -             -            - 
 Other changes (ii)                        -                    -             -            - 
                                ------------  -------------------  ------------  ----------- 
 Net debt as at 31 July 
  2019                                11,240            (909,276)     (786,083)    (200,000) 
                                ------------  -------------------  ------------  ----------- 
 

Company Net Debt Reconciliation for the Year Ended 31 July 2019

 
                                           Other assets                 Liabilities from 
                                                                      financing activities 
                                 Cash/bank     Liquid investments   Borrowings    Borrowings 
                                  overdraft                          due within    due after 
                                                                     1 year        1 year 
 Net debt as at 1 August 
  2017                             1,545,779            5,653,131             -    (200,000) 
 Cash flows                          125,223            1,670,406     (200,000)            - 
 Foreign exchange adjustments              -                    -             -            - 
 Other changes                             -                    -             -            - 
                                ------------  -------------------  ------------  ----------- 
 Net debt as at 31 July 
  2018                             1,671,002            7,323,537     (200,000)    (200,000) 
 Cash flows                      (1,662,219)            2,986,095       199,012            - 
 Foreign exchange adjustments              -                    -             -            - 
 Other changes                             -                    -             -            - 
                                ------------  -------------------  ------------  ----------- 
 Net debt as at 31 July 
  2019                                 8,783           10,309,632         (988)    (200,000) 
                                ------------  -------------------  ------------  ----------- 
 
 
1  General information 
 

The company is a public company limited by share capital, incorporated and domiciled in the UK.

The address of its registered office is:

Fieldfisher Riverbank House

2 Swan Lane

London

EC4R 3TT

United Kingdom

The company's ordinary shares are traded on the Alternative Investment Market (AIM) of the London Stock Exchange under the ticker symbol INFA.

The principal activities of the Group throughout the year was the development of sub-surface gas storage facility.

The financial statements were authorised for issue by the Board on 8 January 2020.

 
2  Accounting policies 
 

Statement of compliance

The group financial statements have been prepared in accordance with International Financial Reporting Standards and its interpretations adopted by the EU ("adopted IFRS's") and the Companies Act 2006 applicable to companies reporting under IFRS.

Summary of significant accounting policies and key accounting estimates

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

The financial statements have been prepared in accordance with adopted International Financial Reporting Standards (IFRS) as adopted by the European Union and under historical cost accounting rules.

The financial statements are presented in Sterling which is the functional currency of the group and all values are rounded to the nearest Pound Sterling (GBP) unless otherwise stated.

Basis of consolidation

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the group's accounting policies.

Adoption of new and revised standards

(a) New standards, amendments and interpretations adopted by the Group

The company has applied the following standards and amendments for the first time for its annual reporting period commencing 1 August 2018:

   --     IFRS 9 Financial Instruments; 
   --     IFRS 15 Revenue from contracts with customers; 
   --     Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS 2; 
   --     Annual improvements 2014-2016 cycle; 
   --     Transfers to Investment Properties - Amendments to IAS 40; and 
   --     Interpretation 22, Foreign Currency Transactions and Advance Consideration 

IFRS 9

IFRS 9 (2014) "Financial Instruments" supersedes IFRS 9 (2009), IFRS 9 (2010) and IFRS 9 (2013). The finalised version of IFRS 9 contains accounting requirements for financial instruments, replacing IAS 39 "Financial Instruments: Recognition and Measurement". The content of IFRS 9 (2014) includes:

-- Classification and measurement - financial assets are classified by reference to the business model within which they are held and their contractual cash flow characteristics. The standard introduces a fair value through other comprehensive income category for certain debt instruments. Financial liabilities are classified in a similar manner to that under IAS 39 however there are differences in the requirements applying to the measurement of an entity's own risk.

-- Impairment - The standard introduces an expected credit loss model for the measurement of the impairment of financial assets, so it is no longer necessary for a credit event to have occurred before a credit loss is recognised.

-- Hedge accounting - The standard introduces a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures.

-- Derecognition - the requirements for the derecognition of financial assets and liabilities are carried from IAS 39.

None of these standards are considered to have a material effect on the Group financial statements.

(b) New standards, amendments and interpretations not yet adopted

The International Accounting Standards Board (IASB) has issued the following new and revised standards, amendments and Interpretations to existing standards that are not effective for the financial year ended 31 July 2019 and have not been adopted early.

 
 New Standards _Effective Date_ 
 IFRS 16 - Leases                                         1 January 2019 
 IFRS 17 - Insurance Contracts                            1 January 2021 
 Amendments to Existing Standards 
 IFRSIC 23 Uncertainty over Income Tac Treatments*        1 January 2019 
 Annual Improvements to IFRSs (2015-2017 Cycle)           1 January 2019 
  * 
 Amendments to IFRS 9 Prepayment Features with            1 January 2019 
  Negative Compensation 
 Amendments to IAS 28 Long-term Interests in Associates   1 January 2019 
  and Joint Ventures 
 Amendments to IAS 19 Plan Amendment, Curtailment         1 January 2019 
  or Settlement 
 
        *    Not yet adopted by European Union 
 

IFRS 16 'Leases'

IFRS 16 'Leases' address the definition of a lease, recognition and measurement of leases and it establishes principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that most operating leases will be accounted for on the balance sheet. The standard replaces IAS 17, 'Leases' and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2019, with earlier adoption permitted.

Following the acquisition of Harland and Wolff, the directors are in the process of reviewing contracts to identify any additional lease arrangements that would need to be recognised under IFRS 16 in the next financial year.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

Going concern

The financial statements have been prepared on a going concern basis. The Group's assets are not generating revenues, operating cash outflows have been incurred in the year and an operating loss and cash outflow from operations is expected in the 12 months subsequent to the date of these financial statements being signed, and, as a result, the Group will need to raise funding to finance their ongoing activities.

Key considerations regarding going concern are in respect of the Islandmagee gas storage project ("the project") and Harland and Wolff ("H&W").

The next phase of the development of the Project is the co-ordinated assembly of the contracts and long-term funding arrangements for the Final Investment Decision ("FID") to be made. These include a long-term Gas Storage Agreement with an offtaker, an Engineering, Procurement and Construction ("EPC") contract with a managing contractor, and debt and equity financing. Only in the event that all of these elements are in place can the board confirm FID. The directors remain confident that the Project is economically viable and that, based on current discussions, funding will be available.

In December 2019, the Company announced its maiden operating revenues that has validated the acquisition of H&W and the newly assembled team at H&W are actively seeking to win new contracts. In addition, the directors are also in discussions with debt providers to raise additional capital for the operating costs of Harland and Wolff.

Based on the above management have prepared cash flow budgets and based on these the Directors have a reasonable expectation that the Group has access to adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the annual financial statements for the year ended 31 July 2019.

Should the Group be unable to continue trading, adjustments would have to be made to reduce the value of the assets to their recoverable amounts, to provide for further liabilities which might arise and to classify fixed assets as current.

The auditors make reference to a material uncertainty in relation to going concern within their audit report.

The directors remain confident that the Project is economically viable and following the successful completion of FEED, further funding for the Company and the Project will be secured. Having reviewed the value of gas storage assets in accordance with the principles set out below, and the value of balances due to the parent Company from its subsidiaries, the directors are of the opinion that these assets are not impaired in value.

However, the success of the current fund raising is uncertain, as is the outcome of the FID. The directors have concluded that without additional funding the group would be unable to meet its corporate and project costs and thus a material uncertainty exists that may cast significant doubt upon the Group's ability to continue as a going concern and therefore the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. Were the Group no longer a going concern, or if the FID is not positive, the Group's capitalised project development costs totalling GBP13,406,503 and amounts due to the Company from its subsidiaries amounting to GBP10,145,784 may become impaired in value. A provision would be required for the future liabilities arising as a consequence of the Group ceasing business and assets and liabilities currently classified as non-current would be reclassified as current.

With the acquisition of Harland and Wolff, the directors believe that the Company will be in a position to diversify the overall business of the Group and attract new business and revenue streams via the various business segments discussed in the Chief Executive Officer's Strategic Report. In December 2019, the Company announced its maiden operating revenues that has validated the acquisition of Harland and Wolff. The directors are currently in discussions with debt providers to raise additional capital for the operating costs of Harland and Wolff. Although the directors believe that this acquisition will lead to further revenue generation, the Group may be unable to discharge its liabilities in the event revenue generation does not come to fruition as envisaged or additional capital, whether debt or equity, is not injected into the Group.

Government grants

Governments grants are recognised only when there is reasonable assurance that the Group will comply with the conditions attaching to the grant and that the grants will be received. Capital grants are recognised to match the related development expenditure and are deducted in arriving at the carrying value of the related assets. Any grants that are received in advance of recognition are deferred.

Foreign currency transactions and balances

Transactions in foreign currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each statement of financial position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the statement of financial position date and gains or losses are taken to operating profit.

Tax

Tax expense represents the sum of the tax currently payable and any deferred tax. The taxable result differs from the net result as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset realised.

Deferred tax is charged or credited to the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities on a net basis.

Property, plant and equipment

Property, plant and equipment is stated in the statement of financial position at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

The cost of property, plant and equipment includes directly attributable incremental costs incurred in their acquisition and installation.

Depreciation

Depreciation is charged so as to write off the cost of assets, other than land and properties under construction over their estimated useful lives, as follows:

 
                  Depreciation method and 
Asset class        rate 
Freehold land     0% Straight line basis 
Office equipment  20-33% Straight line basis 
 

Business combinations

On acquisition, the assets and liabilities and contingent liabilities of subsidiaries are measured at their fair values at the date of acquisition. Any excess of cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to profit or loss in the period of acquisition. Goodwill arising on consolidation is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed. The financial effect of any change in ownership interest of a subsidiary that does not result in a change in control is recognised in equity

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker ("CODM") as required by IFRS 8 "Operating Segments". The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. The CODM consider, for under review, there to be only one operating segment being the development of gas storage facilities within the United Kingdom. As such no operating segment note is shown as it would be same as that shown in the primary statements.

Capitalisation and impairment of intangible gas storage assets

Costs of development of gas storage facilities are capitalised as intangible assets once it is probable that future economic benefits that are attributable to the assets will flow to the Group and until consent to construct has been awarded, at which time the capitalised costs are transferred to plant and equipment provided there being reasonable certainty of construction proceeding. The nature of these costs includes all direct costs incurred in project development, including any directly attributable finance costs. No amortisation or depreciation is provided until the storage facility is available for use.

An impairment test is performed annually and whenever events or circumstances arising during the development phase indicate that the carrying value of a development asset may exceed its recoverable amount. The aggregate carrying value is compared against the expected recoverable amount of the cash generating unit, generally by reference to the present value of the future net cash flows expected to be derived from storage revenue. The present value of future cash flows is calculated on the basis of future storage prices and cost levels as forecast at the statement of financial position date.

The cash generating unit applied for impairment test purposes is generally an individual gas storage facility. Where the carrying value of the facility is greater than the present value of its future cash flows a provision is made. Any such provisions are charged to cost of sales.

Amortisation

Amortisation is provided on intangible assets so as to write off the cost, less any estimated residual value, over their expected useful economic life as follows:

 
                  Amortisation method and 
Asset class        rate 
Storage facility  None until facility available 
                   for use. 
 

Investments

Investments in subsidiaries are stated at cost less provision for impairments.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Trade receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognised initially at the transaction price. They are subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for the impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables.

Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognised initially at the transaction price and subsequently measured at amortised cost using the effective interest method.

Borrowings

All borrowings are initially recorded at the amount of proceeds received, net of transaction costs. Borrowings are subsequently carried at amortised cost, with the difference between the proceeds, net of transaction costs, and the amount due on redemption being recognised as a charge to the statement of comprehensive income over the period of the relevant borrowing.

Interest expense is recognised on the basis of the effective interest method and is included in finance costs.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Leases

Rental costs under operating leases are charged on a straight-line basis over the lease term.

Share based payment transactions

Employees (including senior executives) of the Group receive part of their remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (equity settled transactions).

The cost of equity settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting date). The cumulative expense recognised for equity settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The statement of comprehensive income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.

Where an equity settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

Share capital

Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis.

Defined contribution pension obligation

The Company has a defined contribution plan which requires contributions to be made into an independently administered fund. The amount charged to the statement of comprehensive income in respect of pension costs reflects the contributions payable in the year. Differences between contributions payable during the year and contributions actually paid are shown as either accrued liabilities or prepaid assets in the statement of financial position.

Financial instruments

IFRS 9 requires an entity to address the classification, measurement and recognition of financial assets and liabilities.

a) Classification

The Group classifies its financial assets in the following measurement categories:

-- those to be measured subsequently at fair value (either through OCI or through profit or loss); and

   --     those to be measured at amortised cost. 

The classification depends on the Group's business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will be recorded either in profit or loss or in OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). See Note 24 for further details.

The Group classifies financial assets as at amortised costs only if both of the following criteria are met:

-- the asset is held within a business model whose objective is to collect contractual cash flows; and

-- the contractual terms give rise to cash flows that are solely payment of principal and interest.

b) Recognition

Purchases and sales of financial assets are recognised on trade date (that is, the date on which the Group commits to purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.

Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Debt instruments

Amortised cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the statement of profit or loss.

Equity instruments

The Group subsequently measures all equity investments at fair value. Where the Group's management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group's right to receive payments is established. Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

Impairment

The Group assesses, on a forward looking basis, the expected credit losses associated with any debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

Earnings per share

Basic earnings per share is calculated by dividing:

-- The loss attributable to the owners of the company, excluding any costs of servicing equity other than ordinary shares;

-- By the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares.

 
 Critical accounting judgements and key sources 
  of estimation uncertainty 
 

Judgements in applying accounting policies and key sources of estimation uncertainty

Amounts included in the financial statements involve the use of judgement and/or estimation. These estimates and judgements are based on management's best knowledge of the relevant facts and circumstances, having regard to previous experience, but actual results may differ from the amounts included in the financial statements. Information about such judgements and estimation is contained in the accounting policies and/or the notes to the financial statements, and the key areas are summarised below.

Judgements

Capitalisation of gas storage costs - Note 11.

The assessment of whether costs incurred on gas storage development should be capitalised or expensed involves judgement. Any expenditure where it is not probable that future economic benefits will flow to the Group are expensed. Management considers the nature of the costs incurred and the stage of project development and concludes whether it is appropriate to capitalise the costs. The key assumptions depend on whether it is probable that the expenditure will result future economic benefits that are attributable to the assets.

Estimates

Review of gas storage project asset carrying values- Note 11.

The assessment of capitalised project costs for any indications of impairment involves judgement. When facts or circumstances suggest that impairment exists, a formal estimate of recoverable amount is performed, and an impairment loss recognised to the extent that the carrying amount exceeds recoverable amount. Recoverable amount is determined to be the higher of fair value less costs to sell and value in use. The key assumptions are the net income expected to be generated from the facilities, the cost of construction and the date from which the facilities become operational. Management assigns values and dates to these inputs after taking into account market information, engineering design costing and the project programme. A discount rate of 8% (2018: 8%) is applied in determining gas storage project net present values. Salt cavern gas storage projects are long term investments and cash flows are therefore projected over periods greater than 5 years. Engineering design provides for a project life of 40 years (2018: - 40 years). It is assumed that 100% (2018: 100%) of a project's capacity will be sold from the date that the capacity becomes operational.

Recoverability of intercompany balances

The directors remain confident that the project is economically viable and following the successful completion of FEED, further funding for the Company and the project will be secured. Having reviewed the value of gas storage assets in accordance with the principles set out below, and the value of balances due to the parent Company from its subsidiaries, the directors are of the opinion that these assets are not impaired in value.

However, the success of the current fund raising is uncertain, as is the outcome of the FID. The directors have concluded that without additional funding the group would be unable to meet its corporate and project costs and thus a material uncertainty exists that may cast significant doubt upon the Group's ability to continue as a going concern and therefore the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. Were the Group no longer a going concern, or if the FID is not positive, the Group's capitalised project development costs totalling GBP13,406,503 and amounts due to the Company from its subsidiaries amounting to GBP10,145,784 may become impaired in value. A provision would be required for the future liabilities arising as a consequence of the Group ceasing business and assets and liabilities currently classified as non-current would be reclassified as current.

Share Based Payments

The fair value of equity settled options granted is estimated as at the date of the grant using a Black-Scholes model, taking into account the terms and conditions upon which the options were granted and the following inputs: share price volatility of 85% based on the daily movement in the Company's share price during the course of the financial year, risk free interest rate of 0.93% based on a UK Government Bond 2 year Note Yield, no dividends to be paid over the options lives, and early exercise is not applicable.

 
3  Other income 
 

The analysis of the group's other gains and losses for the year is as follows:

 
                                                                2019    2018 
                                                                 GBP     GBP 
 Gain on disposal of intangible assets                       100,000       - 
 Gain from reversal of deferred consideration                200,000       - 
                                                             300,000       - 
 
   The Company announced in October 2018 the disposal of its 
   net profit interests in three offshore UK oil and gas licences 
   to Westmount Energy Limited for GBP100,000. 
   Following repayment and cancellation of a loan with Baron 
   Oil dated 5 January 2017 loan, Baron was entitled to receive 
   an additional GBP200,000 in the event of a sale or disposal 
   by InfraStrata or its subsidiaries, IMEL and InfraStrata 
   UK, of substantially all of their assets, which comprise 
   interests in the Islandmagee gas storage project, and/or 
   a change in control of InfraStrata, IMEL or InfraStrata UK, 
   within two years from the date of the loan agreement. This 
   potential liability expired on 05 January 2019 as none of 
   the conditions that could trigger payment to Baron Oil were 
   met. Therefore, the liability of GBP200,000 to Baron Oil 
   has been written off in full. 
 4                                                    Expenses by Nature 
 
 

Arrived at after charging/(crediting)

 
                                               2019     2018 
                                                GBP      GBP 
Management & administrative expenditure   1,263,478  764,811 
Share based payments                        106,373   96,597 
Depreciation expense                            892        - 
Foreign exchange gains                       12,551    2,005 
                                          ---------  ------- 
                                          1,383,294  863,413 
                                          =========  ======= 
 
 
5  Staff costs 
 

The aggregate payroll costs (including directors' remuneration) were as follows:

 
                                                2019     2018 
                                                 GBP      GBP 
Wages and salaries                           477,098  296,110 
Social security costs                         47,906   22,091 
Pension costs, defined contribution scheme     9,510      441 
Share-based payment expenses                 106,373        - 
Other employee expense                         3,673      250 
                                             -------  ------- 
                                             644,560  318,892 
                                             =======  ======= 
 

The average monthly number of persons employed by the group (including directors) during the year, analysed by category was as follows:

 
                                                                        2019                  2018 
                                                                         No.                   No. 
Administration and support                                                 5                     3 
                                                            ================  ==================== 
6                       Directors' remuneration 
 2019                               Salary        Benefits             Share               Pension         Total 
                                    & fees                             based                                2019 
                                                                    payments 
                                       GBP             GBP               GBP                   GBP           GBP 
 Executive Directors 
 John Wood                        212,500                -            32,739               4,750        249,989 
 Adrian Pocock 
  (resigned 
  12 September 2018)                33,576               -                                      50        33,626 
 Arun Raman                         97,267               -            15,000               2,494        114,761 
 Non-Executive 
 Directors 
 Graham V Lyon 
  (resigned 
  7 March 2019)                     20,000               -                 -                     -        20,000 
 Matthew Beardmore 
  (resigned 
  18 December 2018)                 13,952               -                 -                     -        13,952 
 Malcolm Groat 
  (appointed 
  22 March 2019)                    10,511               -                 -                    60        10,571 
 Judith Tweed                       26,000               -                 -                  640         26,640 
 Key Management 
 Andy Duncan (resigned)             70,417               -                 -               1,517          71,933 
                                484,222                  -          47,739               9,510        541,472 
                         -----------------  --------------  ----------------  --------------------  ------------ 
 
 

Note: Salary and fees paid to John Wood includes GBP75,000 as bonus payment made on successful completion of the FEED process. This bonus payment is a contractual payment agreed by the Board.

 
 7                                                    Auditors' remuneration 
                                                       During the year, the Group obtained the following services 
                                                       from the Company's auditor: 
                                                                                2019                            2018 
                                                                                 GBP                             GBP 
       Fees payable to the Company's auditor: 
      - For the audit of these financial statements                           15,000                          17,050 
      - For the audit of the subsidiaries                                     13,750                          12,950 
      - For other services relating to taxation                                    -                          11,645 
       - For other services                                                        -                           3,400 
                                                                              28,750                          45,045 
 
 
 
 
    8 Share based payment plans 
 
    A share-based payment plan was created in the year ended 31 July 2008. 
    All directors and employees are entitled to a grant of options subject 
    to the Board of Directors' approval. The options do not have a cash 
    settlement alternative. The options granted were Enterprise Management 
    Incentive share options for qualifying employees. These options have 
    now lapsed following the departure of these employees. 
    The following table illustrates the number and weighted average exercise 
    prices (WAEP) of, and movements in, share options during the year.                                         2019     2019          2018       2018 
                                           Number     WAEP        Number       WAEP 
                                                       GBP                      GBP 
     Outstanding at the beginning 
      of the year                    30,000,000       0.01   6,379,167       0.1807 
     Granted during the year         45,000,000     0.0076   30,000,000        0.01 
     Forfeited during the 
      year                           (38,862,108)   (0.01)   (6,379,167)   (0.1807) 
     Outstanding at the end 
      of the year                    36,137,892     0.0076   30,000,000        0.01 
                                    -------------  -------  ------------  --------- 
 
     Exercisable at the end          -              -        -             - 
      of the year 
                                    -------------  -------  ------------  --------- 
   A total of 45,000,000 options over 50% of the quantity of the Option 
     Shares as to GBP0.0001p for each Option Share and 50% of the quantity 
     of the Option Shares as to GBP0.0150p for each Option Share in the 
     Company ("Options") were granted to all the directors of the Company 
     on 11 January 2019, with J Wood receiving 35,000,000 Options and 
     A Duncan receiving 10,000,000 Options. 
 
    After the reporting period 38,862,108 options lapsed as a result 
     of G Lyon, A Pocock, M Beardmore, K Campbell and A Duncan departure 
     from the business during the year. 
 
 
    Options are exercisable in one tranche noted above with estimated 
     dates ranging from January 2020 through to end 2027 at an average 
     price of 0.0076p per share. The options will expire after five 
     years. 
    The weighted average remaining option life for the share options 
     outstanding at 31 July 2019 is 5 years (2018: 4 years). 
 
    The fair value of equity settled options granted is estimated 
     as at the date of the grant using a Black-Scholes model, taking 
     into account the terms and conditions upon which the options 
     were granted and the following inputs: share price volatility 
     of 85%, risk free interest rate of 0.93%, no dividends to be 
     paid over the options lives, and early exercise is not applicable. 
 

9 Income tax

The tax on profit before tax for the year is the same as the standard rate of corporation tax in the UK (2018 - the same as the standard rate of corporation tax in the UK) of 19% (2018 - 19%).

The differences are reconciled below:

 
                                                2019       2018 
                                                 GBP        GBP 
Loss before tax                          (1,182,712)  (963,413) 
                                         ===========  ========= 
Corporation tax at standard rate           (224,715)  (183,048) 
Increase from effect of unrelieved tax 
 losses carried forward                      224,715    183,048 
                                         -----------  --------- 
Total tax charge/(credit)                          -          - 
                                         ===========  ========= 
 

No tax charge/ credit arises in 2019 or in 2018 due to expenses not permitted for tax purposes and losses carried forward.

Factors that may affect the future tax charge

The Group has trading losses of GBP7,704,980 (2018: GBP6,565,719) which may reduce future tax charges. Future tax charges may also be reduced by capital allowances on cumulative capital expenditure.

No balance is recognised due to the uncertainty of future results.

10 Earnings per Share

 
                                                       2019          2018 
                                                        GBP           GBP 
 (Loss) profit 
 The (loss) profit for the purposes 
  of basic and diluted loss per share 
  being the net (loss) profit attributable 
  to equity shareholders 
 Continuing operations                          (1,182,712)     (963,413) 
 Number of shares 
 Weighted average number of ordinary 
  shares for the purpose of: 
 Basic earnings per share                     1,336,479,710   647,957,629 
 Basic and diluted earnings per share 
 Continuing Operations                              (0.09)p       (0.15)p 
 

11 Intangible assets

Group

 
                             Gas storage    Exploration 
                             development   & evaluation 
                                     GBP            GBP 
Cost 
At 1 August 2017               6,591,302         19,459 
Additions                      1,378,069          6,902 
Grant accrual during year      (489,681)              - 
                            ------------  ------------- 
At 31 July 2018                7,479,690         26,361 
                            ------------  ------------- 
At 1 August 2018               7,479,690         26,361 
Grant accrual during year      (950,622)              - 
Additions                      3,639,537              - 
Disposals                              -       (26,361) 
                            ------------  ------------- 
At 31 July 2019               10,168,605              - 
                            ------------  ------------- 
Impairment                             -         26,361 
                            ------------  ------------- 
At 31 July 2018                        -         26,361 
                            ------------  ------------- 
Net book value 
At 31 July 2019               10,168,605              - 
                            ============  ============= 
At 31 July 2018                7,479,690              - 
                            ============  ============= 
 

The Exploration and evaluation asset was written off during the year as the assets were fully impaired.

Group

 
                        Freehold land  Office equipment    Total 
                             GBP                    GBP      GBP 
Cost or valuation 
At 1 August 2017              440,100                 -  440,100 
                        -------------  ----------------  ------- 
At 31 July 2018               440,100                 -  440,100 
                        -------------  ----------------  ------- 
At 1 August 2018              440,100                 -  440,100 
Additions                     290,699             8,918  299,617 
                        -------------  ----------------  ------- 
At 31 July 2019               730,799             8,918  739,717 
                        -------------  ----------------  ------- 
Depreciation 
 At 1 August 2018                   -                 -        - 
 Charge for the year                -               892      892 
At 31 July 2019                     -               892      892 
                        -------------  ----------------  ------- 
Carrying amount 
At 31 July 2019               730,799             8,026  738,825 
                        =============  ================  ======= 
At 31 July 2018               440,100                 -  440,100 
                        =============  ================  ======= 
13                     Investments 
 
 

Group subsidiaries

Details of the group subsidiaries as at 31 July 2019 are as follows:

 
                                                                       Proportion 
                                                                        of ownership 
                                                                        interest 
                                                                        and voting 
                                                                        rights held 
Name of subsidiary    Principal activity       Registered office        2019          2018 
                                               Fieldfisher Riverbank 
                      Intermediate holding      House 
                       and gas storage          2 Swan Lane 
Infrastrata            project research         London EC4R 3TT 
 UK Limited*           company.                 England and Wales      100%           100% 
                                               8 Portmuck Road 
                      Gas storage and           Islandmagee 
                       energy infrastructure    County Antrim 
Islandmagee            development and          BT40 3TW 
 Energy Limited        operation                Northern Ireland       100%           100% 
                                               8 Portmuck Road 
                                                Islandmagee 
                                                County Antrim 
Islandmagee                                     BT40 3TW 
 Energy Hub Limited   Dormant                   Northern Ireland       100%           0% 
                                               Fieldfisher Riverbank 
                                                House 
                                                2 Swan Lane 
Infrastrata                                     London EC4R 3TT 
 Energy UK Limited    Dormant                   England and Wales      100%           0% 
                                               Fieldfisher Riverbank 
                                                House 
                                                2 Swan Lane 
Infrastrata                                     London EC4R 3TT 
 Project 2 Limited    Dormant                   England and Wales      100%           0% 
 

* indicates direct investment of the company

 
14                  Trade and other receivables 
                          Group               Company 
                     31 July  31 July     31 July    31 July 
                        2019     2018        2019       2018 
                         GBP      GBP         GBP        GBP 
Receivables from 
 related parties           -        -  10,351,634  8,831,741 
Other receivables    177,985  198,538      73,258    197,706 
Prepayments           24,081   23,953      24,081     23,953 
                     -------  -------  ----------  --------- 
                     202,066  222,491  10,448,973  9,053,400 
                     =======  =======  ==========  ========= 
 
 

The trade and other receivables classified as financial instruments are disclosed below. The company's exposure to credit and market risks, including maturity analysis, relating to trade and other receivables is disclosed in the financial risk review note.

 
15                          Cash and cash equivalents 
                                    Group               Company 
                               31 July    31 July  31 July    31 July 
                                  2019       2018     2019       2018 
                                   GBP        GBP      GBP        GBP 
Cash on hand                       646          -      646          - 
Cash at bank                    10,594  1,790,979    8,140  1,671,002 
                             ---------  ---------  -------  --------- 
                                11,240  1,790,979    8,786  1,671,002 
Bank overdrafts                  (988)          -    (988)          - 
                             ---------  ---------  -------  --------- 
Cash and cash equivalents 
 in statement of cash 
 flows                          10,252  1,790,979    7,798  1,671,002 
                             =========  =========  =======  ========= 
 
16                          Trade and other payables 
                                    Group               Company 
                               31 July    31 July  31 July    31 July 
                                  2019       2018     2019       2018 
                                   GBP        GBP      GBP        GBP 
Trade payables                 999,392    560,803   59,051    555,822 
Social security and 
 other taxes                    43,758      7,474   43,758      7,474 
Outstanding defined 
 contribution pension 
 costs                           4,708          -    4,708          - 
Preference shares 
 (see note 19)                  12,500     12,500   12,500     12,500 
Other creditors                 12,355     13,135    (179)          - 
Accrued expenses                38,629    246,611   19,504    229,425 
                             ---------  ---------  -------  --------- 
                             1,111,342    840,523  139,342    805,221 
                             =========  =========  =======  ========= 
 
 

The group's exposure to market and liquidity risks, including maturity analysis, related to trade and other payables is disclosed in the financial risk review note.

 
17                 Loans and borrowings 
                         Group            Company 
                    31 July  31 July  31 July  31 July 
                       2019     2018     2019     2018 
                        GBP      GBP      GBP      GBP 
Current loans and borrowings 
Bank overdrafts         988        -      988        - 
Other borrowings          -  200,000        -  200,000 
                    -------  -------  -------  ------- 
                        988  200,000      988  200,000 
                    =======  =======  =======  ======= 
 
 

Baron Loan

Following repayment and cancellation of a loan with Baron Oil dated 5 January 2017 loan, Baron remains entitled to receive an additional GBP200,000 in the event of a sale or disposal by InfraStrata or its subsidiaries, IMEL and InfraStrata UK, of substantially all of their assets, which comprise interests in the Islandmagee gas storage project, and/or a change in control of InfraStrata, IMEL or InfraStrata UK, within two years from the date of the loan agreement. The loan was not interest bearing and has been written off as this liability expired in January 2019.

The loans and borrowings classified as financial instruments are disclosed in the financial instruments note 26.

The group's exposure to market and liquidity risk; including maturity analysis, in respect of loans and borrowings is disclosed in the financial risk management and impairment note.

 
18  Pension and other schemes 
 

Defined contribution pension scheme

The group operates a defined contribution pension scheme. The pension cost charge for the year represents contributions payable by the group to the scheme and amounted to GBP9,403 (2018 - GBP441).

Contributions totalling GBP (4,708) (2018 - GBPNil) were payable to the scheme at the end of the year and are included in creditors.

 
19  Share capital and redeemable preference shares 
 

Allotted, called up and fully paid shares

 
                                  31 July                     31 July 
                                    2019                        2018 
                              No.           GBP           No.           GBP 
Ordinary shares 0.01p     1,336,479,710     133,648   1,032,607,285     103,261 
Deferred shares 1p of 
 GBP0.01 each               895,424,391   8,954,244     895,424,391   8,954,244 
Second deferred shares 
 0.01p of GBP0.00 each   18,616,118,301   1,861,612  18,616,118,301   1,861,612 
                                         10,949,504                  10,919,117 
                         ==============  ==========  ==============  ========== 
 
 
 Allotted,                   1p Ordinary Shares                                0.01p Ordinary Shares                   Total 
 called 
 up and fully 
 paid 
 Ordinary 
 shares 
                         Number                          GBP             Number                                  GBP                    GBP 
 At July 2017 
 Share 
  subdivision                           -                  -           376,041,599                         37,604                 37,604 
 Issue of 
  0.01p 
  Ordinary 
  shares                                -                  -           656,565,686                         65,657                 65,657 
 
 At 31 July 
  2018                                  -                  -        1,032,607,285                        103,261                103,261 
 Issue of 
  0.01p 
  Ordinary 
  shares                                -                  -           303,872,425                         30,387                 30,387 
 
 At 31 July 
  2019                                  -                  -        1,336,479,710                        133,648                133,648 
 
 
 Allotted,                   1p Ordinary Shares                                0.01p Ordinary Shares                   Total 
 called 
 and fully 
 paid 
 Deferred 
 Shares 
                         Number                          GBP             Number                                  GBP                    GBP 
 At July 2017          895,424,391            8,954,244           18,616,118,301                      1,861,612            10,815,856 
 Share                                  -                  -                            -                          -                      - 
 subdivision 
               --------------------------  -----------------  ---------------------------  -------------------------  --------------------- 
 At 31 July 
  2018 and 
  31 July 
  2019                 895,424,391            8,954,244           18,616,118,301                      1,861,612            10,815,856 
               --------------------------  -----------------  ---------------------------  -------------------------  --------------------- 
 
 
 Redeemable preference shares       Allotted called up 
  of GBP1 each                       and pert paid 
 (classified as liabilities)                  Number                               GBP 
 
 At 31 July 2019, 2018 and 31 
  July 2017                                             50,000                  12,500 
                                   ===========================  ====================== 
 

Redeemable preference shares

 
      The Redeemable preference shares of GBP1 each are redeemable at 
      the option of the company. They are redeemable at GBP1 per share 
     and carry no voting rights. The preference shares carry the right 
     to an annual dividend out of distributable profits of 0.00001% per 
     annum on the amount for the time being paid up on each such share 
   and do not carry any voting rights. The Company may redeem the shares 
      at any time by giving preference shareholders one week's notice. 
      Preference shareholders may require the Company to redeem their 
     shares at any time by giving six months' notice. In each case, any 
   redemption is at par and is subject to the provisions of the Companies 
      Act. The preference shares are treated as short-term liabilities 
                    and included within trade payables. 
                          Authorised share capital 
     The Company's articles do not specify an authorised share capital. 
          Objectives, policies and processes for managing capital 
     The Group's objectives when managing capital are to safeguard the 
     Group's ability to continue as a going concern in order to achieve 
                        its operational objectives. 
 
      The Group defines capital as being share capital plus reserves. 
      The Board of Directors monitors the level of capital as compared 
      to the Group's forecast cash flows and long-term commitments and 
     when necessary issues new shares. Dilution of existing shareholder 
      value is considered during all processes which may result in an 
                   alteration of share capital in issue. 
 
  Ordinary share capital in issue is managed as capital and the redeemable 
       preference shares in issue are managed as current liabilities. 
 
  The Group is not subject to any externally imposed capital requirements 
      and there are no restrictions in place over the different types 
                                 of shares. 
20               Warrants 
 

As at the date of this report, the Company has the following warrants outstanding that remain to be exercised and converted into the Company's ordinary shares:

 
 Expiry date    Number of warrants    Strike Price     Value GBP 
                                      GBP per share 
 10/04/2020         92,113,427           0.0048        442,144.45 
               -------------------  ---------------  ------------- 
 30/04/2020         43,796,148           0.0048        210,221.51 
               -------------------  ---------------  ------------- 
 20/07/2020         4,817,708            0.0048        23,125.00 
               -------------------  ---------------  ------------- 
 18/01/2021         5,000,000            0.0048        24,000.00 
               -------------------  ---------------  ------------- 
 22/02/2021        155,555,555            0.01        1,555,555.55 
               -------------------  ---------------  ------------- 
 04/12/2021         45,652,174           0.0069        315,000.00 
               -------------------  ---------------  ------------- 
 04/12/2021         52,083,334           0.0048        250,000.00 
               -------------------  ---------------  ------------- 
 Total             399,018,346                        2,820,046.51 
               -------------------  ---------------  ------------- 
 

21 Related party transactions

The executive services of Graham Lyon are provided through Soncer Limited, a private oil and gas leadership consulting firm, in which Graham is sole director. The executive fees paid during the period were GBP20,000 (2018: GBP16,000) and the balance outstanding at 31 July 2019 was GBPNil.

Prior to his employment in April 2019, the non-executive services of Arun Raman were provided through Mira Energy Group Limited, a private consulting company in which Arun is a sole director. The executive fees paid during the period were GBP35,600 (2018: GBPNil) and the balance outstanding at 31 July 2019 was GBPNil.

Details of directors' remuneration is disclosed in Note 6.

22 Control of the Group

There is no ultimate controlling party of Infrastrata Plc

23 Grants received in advance

In May 2016, the Company signed a grant agreement with the European Commission's Connecting Europe Facility in relation to the Islandmagee gas storage project for a maximum of EUR4.024 million or up to 50% of the costs of Front End Engineering and Design ("FEED") for the project. An advance of 40% of the maximum grant amounting to EUR1.6 million was received and held in a Euro denominated bank account (included in Cash and cash equivalents in the statement of financial position).

24 Financial instruments

Financial assets

 
                                  Group       Group      Company     Company 
                                   2019        2018         2019        2018 
                                    GBP         GBP          GBP         GBP 
-----------------------------  --------  ----------  -----------  ---------- 
 Trade and other receivables    202,066      26,978       84,838      26,978 
 Due from subsidiary 
  undertakings                        -           -   10,351,634   8,831,740 
 Cash and Cash Equivalents       11,240   1,790,979        7,799   1,671,002 
-----------------------------  --------  ----------  -----------  ---------- 
 

Financial liabilities

 
                               Group     Group   Company   Company 
                                2019      2018      2019      2018 
                                 GBP       GBP       GBP       GBP 
--------------------------  --------  --------  --------  -------- 
 Current liabilities 
 Baron loan                        -   200,000         -   200,000 
 Costain loan                785,095   163,344         -         - 
--------------------------  --------  --------  --------  -------- 
                             785,095   363,344         -   200,000 
--------------------------  --------  --------  --------  -------- 
 Non-current liabilities 
 Baron loan                        -         -         -         - 
 Moyle investments           200,000   200,000   200,000   200,000 
--------------------------  --------  --------  --------  -------- 
                             200,000   200,000   200,000   200,000 
--------------------------  --------  --------  --------  -------- 
 
 
 

Baron Loan

Following repayment and cancellation of a loan with Baron Oil dated 5 January 2017 loan, Baron remains entitled to receive an additional GBP200,000 in the event of a sale or disposal by InfraStrata or its subsidiaries, IMEL and InfraStrata UK, of substantially all of their assets, which comprise interests in the Islandmagee gas storage project, and/or a change in control of InfraStrata, IMEL or InfraStrata UK, within two years from the date of the loan agreement. The loan was not interest bearing and has been written off as this liability expired in January 2019.

Under IFRS 9 - Financial Instruments the Company is required to recognise the fair value of this contingent settlement financial liability at inception and to subsequently recognise the liability at its amortised cost. The full liability of GBP200,000 has now been written off in the consolidated statement of financial position, as this liability expired in January 2019.

Costain Loan

In April 2018, IMEL concluded a Secured Development Loan Agreement with Costain Oil, Gas & Process Limited ("Costain"). Costain is the principal contractor in the FEED programme and in return for its services to IMEL, it agreed to provide a secured loan so as to facilitate the further development of the Islandmagee gas storage project. The loan is secured on the assets of Islandmagee Energy Limited.

At 31 July 2019 the Costain loan required to be repaid, together with accrued interest of 10% per annum, on the earlier of FID being taken to proceed with the Project; or any sale of IMEL or the Project itself; or 31 July 2019. The loan terms were amended on 25 September 2018 to change the backstop date from 31 July 2019 to 31 December 2019. At 31 July 2019, IMEL had drawn down GBP785,095 of this loan and this is disclosed as short-term borrowings in the Group accounts.

Moyle Investments - amounts due

In December 2017, the Company's wholly-owned subsidiary, InfraStrata UK Limited increased its ownership in IMEL from 90% to 100% by acquiring the remaining 10% interest from Moyle Energy Investments Limited at par value. In recognition of the support by Moyle of the gas storage project at Islandmagee, InfraStrata plc will pay Moyle GBP200,000 on first storage of gas.

The Group and Company's financial instruments comprise cash and cash equivalents, long and short-term borrowings and items such as trade and other receivables and trade and other payables which arise directly from the Group's operations. The Group's operations expose it to a variety of financial risks including credit risk, interest rate risk, foreign currency exchange risk and liquidity risk. Given the size of the Group, the directors have not delegated the responsibility of monitoring financial risk management to a subcommittee of the board. The objectives of the financial instrument policies are to reduce the Group and Company's exposure to financial risk. The policies set by the Board of Directors are implemented by the Company's finance staff.

Credit risk

The credit risk on liquid funds is limited because the Group and Company policy is to only deal with counter parties with high credit ratings. The Group has held all funds in Bank of Scotland during the last two years. In the directors' view there is a low risk of the bank holding the Group's funds at year end failing in the foreseeable future. The carrying amount of financial assets represents the maximum credit exposure.

The reconciling items between the trade and other receivables presented above and that presented in note 13 are VAT receivable and prepayments. No receivables are past due but not impaired.

Interest rate risk

The Company and Group are exposed to interest rate risk as a result of positive cash balances, denominated in sterling, which earn interest at variable rates. Any surplus cash is held on deposit with Bank of Scotland. An effective interest rate increase or decrease by 1% on the cash and cash equivalents balance at year end would result in a before tax financial effect of an increase or decrease of GBP112 (2018: GBP17,910).

As disclosed in note 28, the Group and Company's long-term borrowings at 31 July 2019 bear interest at a fixed rate of 10% per annum. No sensitivity has been disclosed as the rate is fixed for the duration of the loan.

Liquidity risk

The total carrying value of Group and Company financial liabilities is disclosed in note 28 (financial liability) and in note 15 (trade and other payables). The Company seeks to issue share capital, gain loan funding and/or dispose of assets when external funds are required. The reconciling items between the contractual maturities presented below and that presented in notes 28 and 15 are taxes and accruals. The following table shows the contractual maturities of the Group's and Company's financial liabilities, all of which are measured at amortised cost.

 
                                Group     Group     Company     Company 
                                 2019      2018    2019 GBP    2018 GBP 
                                  GBP       GBP 
---------------------------  --------  --------  ----------  ---------- 
 Trade and other payables 
 Within one month             999,392   560,803      59,051     555,822 
 More than one month less 
  than one year                     -         -           -           - 
 Financial liability (Note 
  28) 
 Within one month                   -         -           -           - 
 More than one month less 
  than one year               785,095   363,344           -     200,000 
 More than one year           200,000   200,000     200,000     200,000 
---------------------------  --------  --------  ----------  ---------- 
 
 

25 Prior year adjustment

The 2019 financial statements include a prior year adjustment in relation to the warrant reserve in the Company's statement of financial position. Prior year adjustments reflect a reversal of the share based payment expense recognised against the share premium account as warrants were investor warrants, and were not issued in respect of services provided to the Company. As a result, the warrant reserve now shows a balance of nil (2018: GBP285,432) and the share premium account has been increased by GBP285,432. This prior year adjustment has neither impacted the Company's Statement of Comprehensive Income for either period presented nor retained earnings.

26 Post Balance Sheet Events

On 01 August 2019, the Company announced that is had raised GBP700,000 (before expenses) through a placing of 155,555,555 new ordinary shares of 0.01p each in the Company ("Placing Shares") at an issue price of 0.45p per share (the "Placing"). For each Placing Share subscribed in the Placing, the Company issued one warrant to subscribe for one new ordinary share of 0.01p in the Company ("Ordinary Share") at 1p per share (the "Warrants"). The net proceeds of the Placing were used to fund the costs of establishing a pre-construction environmental baseline. An environmental baseline is required to track changes against it throughout the construction and operational phases of the Islandmagee gas storage project. This work has now been completed following which the Department of Agriculture, Environment and Rural Affairs ("DAERA") has instructed the Company to commence a 42-day public consultation period commencing on 20 December 2019 and ending on 07 February 2020 as announced on 19 December 2019. Following completion of this public consultation period and subject to any questions raised therein being satisfactorily resolved, the Company expects that DAERA will issue a full marine licence after following due process.

On 01 October 2019 the Company announced that it had signed heads of terms to purchase the principal assets of Harland and Wolff Heavy Industries Limited and Harland and Wolff Group Plc (the "Assets") from administrator BDO NI ("Administrators") for a total consideration of GBP6 million (the "Acquisition"). The Assets comprise of a multi-purpose fabrication facility, quaysides and docking facilities (the "Facility") in the port of Belfast, Northern Ireland, ideally suited for the energy infrastructure industry and the Company's projects. The key highlights announced on this date included the following:

-- This strategic acquisition enables InfraStrata to bring in-house a large part of the fabrication requirements for the Company's Islandmagee Gas Storage Project and proposed FSRU project (the "Projects").

-- By utilising the Assets, the Company anticipates reducing the capital cost ("Capex") of each of its Projects by 10% - 15% and the construction timelines are expected to be reduced by 3-5 months.

-- 100% of the 79 employees who did not opt for voluntary redundancy earlier in the year will be retained immediately following completion of the Acquisition.

-- The InfraStrata Board plans to significantly increase the size of the workforce by several hundred over the next five years as it progresses the development of its infrastructure projects. The number of employees at the Islandmagee Gas Storage Project will also scale to 400 during construction and will employ circa 60 personnel when in operation.

-- New management team for the Facility anticipated to be employed by the end of 2019 in addition to bringing on-board the experience of those employees who were previously employed - the Assets will be run independently to InfraStrata's other projects.

-- The highly skilled workforce presents the Company with an opportunity to create secondary revenue streams through the provision of services to the energy, maritime and defence sectors should such opportunities arise in future.

-- Exclusivity over the Assets has been secured, and with a GBP500,000 cash deposit payment to the Administrator, BDO NI, to be made imminently from a new loan facility. The Acquisition is subject to, inter alia, final contract and funding by 31 October 2019, or 31 December 2019 if the Backstop Date (as defined below) comes into force. The GBP5.5 million balance of the Acquisition consideration is payable in two tranches: GBP3.3 million by 31 October 2019 (or the Backstop Date) and GBP2.2 million by 30 April 2020, which is proposed to be funded by a debt and equity mix. The Company is already in advanced discussions with asset backed lenders and financial institutions to put in place medium to long term debt structures.

On the same date, the Company announced that it had entered into a GBP2.20 million conditional loan agreement ("Loan") with Riverfort Global Opportunities PCC and YA II PN Ltd (the "Investors"). Of the total loan amount, GBP700,000 was initially drawn down in order to pay for the non-refundable deposit to the Administrator. This GBP700,000 of the initial drawdown is subject to conversion rights. At the date of this report, the total amount converted by the Investors is GBP450,000 leaving the outstanding balance at GBP250,000.

On 11 November 2019, the Company announced a proposed placing of new Ordinary Shares by way of an accelerated bookbuild to raise a minimum of GBP6.0 million (the "Placing") and that, further to the announcements on 1 October and 1 November 2019, it has entered into a conditional contract to purchase the principal assets of the former Harland and Wolff Heavy Industries Limited and Harland and Wolff Group Plc (together, "Harland & Wolff") from administrator BDO NI (the "Acquisition"). Immediately thereafter, on 11 November 2019, the Company announced that the conditional Placing has raised GBP6.0 million (before expenses) through the placing of 1,999,999,950 new Ordinary Shares with certain existing and new institutional investors at an issue price of 0.3 pence per share. Additionally, the Company exercised its option with the Investors to drawdown a further GBP500,000 (GBP555,555 gross) of the Loan to pay the Administrators the running costs of the Assets for the month of November. This second drawdown is a mezzanine debt facility with no conversion rights save in the event of a default on its repayment that is due on 15 February 2020.

In order to provide the Company's current shareholders the opportunity to subscribe to further ordinary shares, on 20 November 2019, the Company announced an offer of new ordinary shares of 0.1p each in the Company ("Ordinary Shares") to shareholders (the "Offer") and an offer of Ordinary Shares on the PrimaryBid platform (the "PrimaryBid Offer") to raise collectively gross proceeds of up to GBP1 million (the "Fundraise"). The Company announced on 06 December 2019 that it had raised a total of GBP210,209.73 (before expenses) which resulted in the issue of 70,069,903 Fundraise Shares at 0.3p per share.

As at the date of this report, the Company's issued share capital now stands at 3,682,856,289 ordinary shares of 0.01 pence each.

On 05 December 2019, the Company announced the formal acquisition of the Assets of Harland and Wolff. The total consideration for the acquisition was as follows:

 
 Particulars   Value GBP   Remarks 
 Tranche 1      500,000    Paid on 01 October 2019 
              ----------  ----------------------------- 
 Tranche 2     3,300,000   Paid on 04 December 2019 
              ----------  ----------------------------- 
 Tranche 3     1,450,000   Payable on 30 April 2020 
              ----------  ----------------------------- 
 Total         5,250,000   Full and final consideration 
              ----------  ----------------------------- 
 

The directors are currently assessing the fair value of the assets acquired on completion of the Harland and Wolff transaction. An independent third-party valuation conducted in August 2019 has ascribed a value for all the assets to be between GBP10.90 million and GBP11.80 million.

On 06 December 2019, the Company announced its first ever operating revenues via its fully owned subsidiary, Harland and Wolff (Belfast) Limited. The Company was awarded the repair and maintenance work for two vessels of Sea Truck Ferries Limited and their dockings were due to take place on 20 December 2019 and 28 December 2019. As at the date of this report, both dockings have been successfully completed, contracts duly executed and monies received from the client.

With the EU funds not being received before 31 December 2019, the Board has agreed with Costain Plc to extend the repayment date of the Costain Loan Facility ("Costain Loan"), originally announced on 04 November 2016 and due on 31 December 2019, with an accrued value of GBP810,669 as at 31 December 2019, to 31 December 2020 or on receipt of the EU grant reclaim, whichever is earlier.

27 Chief Operating Decision Maker ("CODM")

The Chief Operating Decision Maker (" CODM") is the Board of directors and that the directors consider there to be, for the year in question, only one operating segment, being the development of gas storage facilities in the UK. As such no operating is segment is shown as it would be the same as that shown in the primary statements.

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

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