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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Lb-Shell | LSE:LBP | London | Ordinary Share | GB00BNB7LQ31 | ORD 0.01P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.0275 | 0.025 | 0.03 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMLBP
RNS Number : 3289J
Lb-shell plc
29 March 2018
Lb-shell plc (formerly Intelligent Energy Holdings plc)
(LSE: LBP)
29 March 2018
LB-shell plc (formely Intelligent Energy Holdings plc)
RESULTS FOR THE FOURTEEN MONTHSED 30 NOVEMBER 2017
Lb-shell plc, ("the Company"), announces its audited financial results for the fourteen months ended 30 November 2017.
Lb-shell plc changed its accounting reference date to 30 November in order to reflect the impact of the sale of its business to Meditor Energy Limited on 25 October 2017. As a result the financial statements have been prepared on a stand-alone basis and no consolidated information is presented. Therefore the former trading subsidiaries are not reflected in the accounts and this more accurately reflects the position of the Company.
Hot Features
Premium
Financial 14 Months 12 months
KPI ended ended
30 November 30 September
2017 2016
GBPm GBPm
------------- ------------- --------------
Revenue - -
------------- ------------- --------------
Loss after
tax (1) 10.80 224.36
------------- ------------- --------------
Cash (2) 0.36 0.11
------------- ------------- --------------
(1) Loss after tax in the 14 months ended 30 November 2017 is after GBP10.1m of exceptional costs relating to impairments and a GBP4.9m exceptional gain on discharge of Convertible Loan Notes plus a related non-cash deferred tax credit of GBP1.1m. In the 12 months ended 30 September 2016 exceptional items amounted to GBP222.7m relating to impairments.
(2) Cash is defined as cash and cash equivalents and short term deposits.
Despite entering 2016/17 with a more streamlined and cost efficient structure than in previous periods and a refocussed commercial strategy, the past period was another difficult and disappointing one for the Company as revenue growth proved elusive.
As at 1 October 2016, and as clearly communicated to the market, the Group, as constituted at the time, had an estimated core underlying cash burn of GBP1.6 million a month and cash of GBP20.6 million. As the period progressed the Board:
-- undertook detailed discussions with various counterparts on potential trading solutions that would address the Company's revenue and funding or allow funding to be addressed separately;
-- reviewed and implemented selected cost control activity, with the proviso as the year progressed, of not materially impacting core capabilities to maintain longer term viability to assist in attracting a trading and funding solution;
-- sought to align the interests of stakeholders with a view to trying to fund and then to rescue the Company. This was complicated by the Company's consolidated negative EBITDA and ongoing revenue position, combined with the security granted (as part of the shareholder approved refinancing of the Company in May 2016) in favour of the Convertible Loan Note ("CLN") holders, which also meant that conventional debt raising options were not available to the Company;
-- in the second half of 2016/17 the Company ran an extensive process for the potential sale of some or all of the Company's business and assets, using Deloitte to project manage this activity;
-- received independent legal and financial advice on the duties of the Board to shareholders and to creditors, and on the Board's powers in relation to the sale of the Company's business and assets, from, as appropriate, Pinsent Masons LLP, Deloitte LLP and Stifel Nicolaus Europe Ltd;
-- updated the stock market by way of regulatory news service (RNS) announcements on the Company's position at appropriate intervals. These updates also acted in effect as an external message to third parties to make contact if they were interested in acquiring all or part of the Company's business and assets. These third parties would have included parties with which the Company had existing or potential customer or supplier relationships.
Unfortunately, the outcome of the above actions, which represented a wide-ranging market testing against a backdrop of structural constraints, meant that a trading related solution could not be delivered and there was one offer, and one offer only, for the Company's business and assets. This offer was received from Meditor, an existing CLN holder and shareholder for, GBP19.5m, enacted via its subsidiary, Meditor Energy Limited (collectively Meditor).
After detailed and extensive discussions with advisors, the Board approved the Meditor purchase, which was completed on 25 October 2017 less than one month prior to the Company exhausting its cash reserves. The offer clearly, therefore, represented the best outcome for the Company's creditors given the circumstances, as well as preserving the jobs of all employees. Unfortunately it did not leave any value for shareholders. The alternative to this transaction would, in the view of the advisors and the Board, have been an insolvent administration process, which would have returned less value for creditors.
Outlook
On 25 October 2017, the Directors announced that the Company would shortly thereafter arrange for the cancellation of the listing of the Company's ordinary shares and that the Company's remaining cash would be used in the orderly winding down or dissolution of the Company.
Subsequent to this date, the Directors have identified a viable continuation option for the Company, which could provide more value for shareholders than a wind down, orderly or potentially otherwise, of the Company (which is expected to provide no return for shareholders).
This is expected to involve the Company, under the leadership of a new board of directors and subject to the requisite shareholder approvals, acquiring a trading business using the proceeds of future additional funding. The Directors have undertaken discussions regarding this option with an experienced third party Corporate Finance firm, who believe that a suitable new board and a suitable trading business can be identified, and a non binding Heads of Agreement (HoA") has been signed with this party, under terms which the directors are satisfied provide a basis for preparing the financial statements on a going concern basis.
However, at the date of signing of the accounts no business has yet been identified, and there remains a risk that no such business will be identified, and a risk that suitable terms will not be reached.
In the event that the requisite conditions for the continuation option are not met, there is a significant risk that the Directors at the time would need to revert to the previous option of conducting a winding down (orderly or otherwise), or dissolution of the Company.
In addition, the unknown factors with respect to this potential continuation option mean that no financial projections are available with respect to the period subsequent to any recommencement of operations and so it is not possible to consider the future viability of those operations at this time.
Based on the above indications the directors believe that it remains appropriate to prepare the financial statements on a going concern basis. However the Directors have concluded that the factors discussed above represent a material uncertainty that may cast significant doubt regarding the Company's ability to continue as a going concern and, therefore, to continue realising its assets and discharging its liabilities in the normal course of business. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.
The Company report and accounts for the 14 months ended 30 November 2017 will shortly be available on the Company's website.
This announcement contains inside information. The person responsible for the release of this announcement on behalf of the Company is John Maguire, Director.
Enquiries:
John Maguire
28 March 2018
Director
For enquiries telephone: 07966 164357
Forward-looking statements
Certain statements made in this announcement are, or may be, forward-looking statements. These represent expectations for the Company's business, and involve risks and uncertainties. The Company has based these forward-looking statements on current expectations and projections about future events. However, because they involve known and unknown risks, uncertainties and other factors, which in some cases are beyond the Company's control, actual results or performance may differ materially from those expressed or implied by such statements. No reliance should be placed on such forward-looking statements. Without limitation to the foregoing, nothing in this announcement is intended to constitute (or should be construed as) a profit forecast.
Income statement
for the 14 months ended 30 November 2017
14 months 12 months
ended ended
30 November 30 September
2017 2016
Notes GBP'000 GBP'000
------ ------------- --------------
Revenue - -
Cost of sales - -
------------- --------------
Gross profit - -
Other income 8 10 -
Administration costs
Impairment of subsidiary 8 (10,998) -
Impairment of JV 8 900 (6,974)
Impairment of receivable
from group company 8 - (215,708)
Other 8 (460) (212)
------------- --------------
Operating loss 8 (10,548) (222,894)
Analysed as:
Operating loss before exceptional
items 8 (450) (212)
- Exceptional items 9.1 (10,098) (222,682)
------------- --------------
Operating loss after exceptional
items (10,548) (222,894)
------------- --------------
Finance income - gain on
discharge of Convertible
Loan Notes 12.1 4,922 -
Finance income - other 12.1 - 3
Finance cost - Convertible
Loan Notes 12.2 (7,073) (2,267)
------------- --------------
Loss before tax (12,699) (225,158)
Income tax - (deferred tax
(non cash) including exceptional
income of GBP1,061,000, 2016:
GBPnil) 13.1 1,899 803
Loss for period attributable
to owners of the Company (10,800) (224,355)
============= ==============
Earnings per share (expressed
in pence per share)
Basic and diluted earnings
per share 14 (5.2) (116.1)
------------- --------------
All of the loss for the period is attributable to the owners of the Company.
The accompanying notes are an integral part of the financial statements.
Statement of comprehensive income
for the 14 months ended 30 November 2017
14 months 12 months
ended ended
30 November 30 September
2017 2016
GBP'000 GBP'000
------------- --------------
Loss for the period (10,800) (224,355)
Other comprehensive income
Items that are or may be - -
subsequently reclassified
to profit or loss
Comprehensive expense for
the period attributable to
owners of the Company (10,800) (224,355)
============= ==============
Statement of financial position
at 30 November 2017
30 November 30 September
2017 2016
Notes GBP'000 GBP'000
------ ------------ -------------
Non-current assets
Investments in subsidiaries
and joint ventures 15 - 10,132
------------ -------------
Current assets
Trade and other receivables 16 62 24,316
Cash and cash equivalents 17 357 106
------------ -------------
419 24,422
------------ -------------
Total assets 419 34,554
------------ -------------
Current liabilities
Trade and other payables 18 (67) (978)
------------ -------------
Non current liabilities
Deferred tax liability 13.3 - (1,676)
Liability component of Convertible
Loan Notes 19 - (20,748)
- (22,424)
------------ -------------
Total liabilities (67) (23,402)
------------ -------------
Net assets 352 11,152
============ =============
Equity attributable to owners
of the Company
Equity share capital 21 10,312 10,312
Share premium 22 223,299 223,299
Other reserves 22 7,484 12,787
Retained earnings (240,743) (235,246)
Total equity 352 11,152
============ =============
The accompanying notes are an integral part of the financial statements. The financial statements on were approved by the Board of Directors on 28 March 2018
Statement of changes in equity
for the 14 months ended 30 November 2017
Other reserves
---------------------------
Equity
component
Equity of Convertible
share Share Loan Capital Retained
capital premium Notes reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- ---------------- --------- ---------- ----------
Balance at 1 October
2015 9,416 222,877 - 7,484 (10,868) 228,909
Loss for the year - - - - (224,355) (224,355)
--------- --------- ---------------- --------- ---------- ----------
Total comprehensive
(loss) for the year - - - - (224,355) (224,355)
--------- --------- ---------------- --------- ---------- ----------
Shares issued 896 422 - - - 1,318
Issue of Convertible
Loan Notes - - 5,303 - - 5,303
Share-based payment
transactions - - - - 193 193
Share purchase - - - - (216) (216)
Total transactions
with owners, recognised
directly in equity 896 422 5,303 - (23) 6,598
--------- --------- ---------------- --------- ---------- ----------
Balance at 30 September
2016 10,312 223,299 5,303 7,484 (235,246) 11,152
Loss for the period - - - - (10,800) (10,800)
--------- --------- ---------------- --------- ---------- ----------
Total comprehensive
(loss) for the period - - - - (10,800) (10,800)
--------- --------- ---------------- --------- ---------- ----------
Redemption of Convertible
Loan Note - - (5,303) 5,303 -
--------- --------- ---------------- --------- ---------- ----------
Total transactions
with owners, recognised
directly in equity - - (5,303) - 5,303 -
--------- --------- ---------------- --------- ---------- ----------
Balance at 30 November
2017 10,312 223,299 - 7,484 (240,743) 352
========= ========= ================ ========= ========== ==========
Statement of cash flows
for the 14 months ended 30 November 2017
14 months 12 months
ended ended
30 November 30 September
2017 2016
Notes GBP'000 GBP'000
------ ------------- --------------
Operating activities
Loss before tax (12,699) (225,158)
Net financing expense 12 7,073 2,264
Impairment of subsidiary 8 10,998 -
Impairment of JV 15 (900) 6,974
Impairment of receivable
from group company 16 - 215,708
Gain on discharge of Convertible
Loan Notes 12 (4,922) -
------------- --------------
(450) (212)
Adjustment for:
Decrease/(increase) in trade
and other receivables 4,788 (26,152)
(Decrease) in trade and other
payables (187) (248)
------------- --------------
Net cash inflow / (outflow)
from operating activities 4,151 (26,612)
------------- --------------
Investing activities
Interest income 12.1 - 3
Investment in joint venture 15 - (740)
Proceeds on sale of group
companies 9.2 2,835 -
------------- --------------
Net cash inflow / (outflow)
from investing activities 2,835 (737)
------------- --------------
Financing activities
Interest paid on Convertible
Loan Notes (3,900) (952)
Issue of ordinary share capital 21 - 1,125
Issue of Convertible Loan
Notes (net of costs) 19 - 27,176
Discharge of Convertible
Loan Notes 9.2 (2,835) -
------------- --------------
Net cash (outflow)/inflow
from financing activities (6,735) 27,349
------------- --------------
Increase in cash and cash
equivalents 251 -
Cash and cash equivalents
at beginning of period 17 106 106
Cash and cash equivalents
at end of period 17 357 106
============= ==============
Notes to the financial statements
1 Authorisation of financial statements
The financial statements of Lb-shell plc ("the Company") for the 14 months ended 30 November 2017 were authorised for issue by the Board of Directors on 28 March 2018 and the statement of financial position was signed on the Board's behalf by Paul Heiden and John Maguire. Lb-shell plc is a listed public limited company incorporated and domiciled in England and Wales.
2 Accounts prepared on a stand-alone basis and disposal of business and assets 2.1 Accounts prepared on a stand-alone basis
Under section 399 of the Companies Act 2006, if at the end of a financial period the company is a parent company then the Directors, as well as preparing individual accounts for the year, must prepare group accounts for the year unless the company is exempt from that requirement.
As at the period end, being 30 November 2017, the Company was not a parent company and was not required to prepare group accounts. The Directors have presented these accounts for the Company as a stand-alone entity rather than the group in order to provide clarity about the remaining business and activities. For the avoidance of doubt, these accounts are not consolidated accounts.
2.2 Disposal of the business and assets prior to the period end
In the light of the uncertain outlook for the Company, including availability of funding required for it to remain a going concern, on 25 October 2017 the Board agreed to sell to Meditor Energy Limited (a newly incorporated subsidiary of Meditor European Master Fund Limited):
-- the Company's main operating subsidiary, Intelligent Energy Limited following a group reorganisation to place all other subsidiaries of the Company under Intelligent Energy Limited; and
-- the Company's investment in joint venture SMILE FC System Corporation ("SMILE JV"); and
-- the Company's remaining business and assets
for a total consideration of GBP19,500,000. This sale left the Company as non-trading.
The consideration of GBP19,500,000, representing all of the cash available to the Company other than that required to maintain the Company as a non-operating entity, was applied in full and final discharge of all principal, interest and any other amounts owing and other obligations, if any, of the Company to the holders of its GBP30 million secured, convertible and redeemable loan notes 2019 ("Convertible Loan Notes") issued in May 2016.
The Company's remaining cash, which is limited, is projected to be sufficient to maintain the Company at its current level of activity or alternatively to complete an orderly wind down or dissolution. Any cash remaining after a wind down would, under the terms of the sale agreement with Meditor Energy Limited, be remitted to Meditor Energy Limited as an adjustment to the sale consideration.
3 Basis of preparation
The financial statements have been prepared under a "going concern" basis, in accordance with International Financial Reporting Standards as adopted by the European Union as they apply to the financial statements of the Company for the period ended 30 November 2017 and applied in accordance with the Companies Act 2006.
The accounting policies which follow set out those policies which apply in preparing the financial statements for the 14 months ended 30 November 2017 and have, unless stated otherwise, been applied consistently and to all periods presented in these financial statements. The financial statements have been prepared on a historical cost basis, except where measurement of balance at fair value is required.
The financial statements are presented in Sterling and all values are rounded to the nearest one hundred thousand pounds except when otherwise indicated.
3.1 Change in accounting reference date to 30 November
The Company has extended its accounting reference date from 30 September to 30 November to enable the audited accounts of the Company for the period ended 30 November 2017 to reflect the sale of Intelligent Energy Limited, SMILE JV and the Company's remaining business and assets to Meditor Energy Limited and to reflect the Company becoming a non-trading company.
Accordingly, the current financial statements have been prepared for 14 months from 1 October 2016 to 30 November 2017 and, as a result, the comparative figures stated in the income statement, statement of comprehensive income, statement of changes in equity, statement of cashflows and the related notes are not comparable.
3.2 Going concern
On 25 October 2017, the Directors announced that the Company would shortly thereafter arrange for the cancellation of the listing of the Company's ordinary shares and that the Company's remaining cash would be used in the orderly winding down or dissolution of the Company.
Subsequent to this date, the Directors have identified a viable continuation option for the Company, which could provide more value for shareholders than a wind down, orderly or potentially otherwise, of the Company, (which is expected to provide no return for shareholders).
This is expected to involve the Company, under the leadership of a new board of directors and subject to the requisite shareholder approvals, acquiring a trading business using the proceeds of future additional funding. The Directors have undertaken discussions regarding this option with an experienced third party Corporate Finance firm, who believe that a suitable new board and a suitable trading business can be identified, and a non binding Heads of Agreement ("HoA") has been signed with this party, under terms which the Directors are satisfied provide a basis for preparing the financial statements on a going concern basis.
However, at the date of signing of the accounts no business has yet been identified, and there remains a risk that no such business will be identified, and a risk that suitable terms will not be reached.
In the event that the requisite conditions for the continuation option are not met, there is a significant risk that the Directors at the time would need to revert to the previous option of conducting a winding down (orderly or otherwise), or dissolution of the Company.
In addition,. the unknown factors with respect to this potential continuation option mean that no financial projections are available with respect to the period subsequent to any recommencement of operations and so it is not possible to consider the future viability of those operations at this time.
Based on the above indications the directors believe that it remains appropriate to prepare the financial statements on a going concern basis. However the Directors have concluded that the factors discussed above represent a material uncertainty that may cast significant doubt regarding the Company's ability to continue as a going concern and, therefore, to continue realising its assets and discharging its liabilities in the normal course of business. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.
4 Changes in accounting policy and disclosures 4.1 New standards, amendments and interpretations adopted by the Company
No new standards and amendments are applicable to the Company for the 14 months ended 30 November 2017.
4.2 New standards, amendments and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 October 2016 and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Company.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company.
5 Significant accounting estimates and judgements 5.1 Significant accounting estimates
The preparation of financial statements requires the Directors to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the statement of financial position date and the amounts reported for revenues and expenses during the period. The nature of estimation means that actual outcomes could differ from those estimates. The key sources of estimation uncertainty are set out below.
5.2 Share-based payments
The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted and the cost of cash-settled share awards with employees by reference to fair value. Estimating fair value requires the determination of the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the grant. This also requires determining the most appropriate inputs to the valuation model including the expected life of the option, volatility, forfeiture and dividend yield and making assumptions about them. Subsequent revaluation of the cash-settled liability requires further estimation of fair value at settlement or reporting date. The assumptions and models used are disclosed in note 23.
5.3 Fair value of Convertible Loan Notes
The Company issued Convertible Loan Notes during the year ended 30 September 2016. These Convertible Loan Notes comprised both a liability and an equity element. The equity element is calculated as the net proceeds receivable after deducting the liability element of the Convertible Loan Notes.
The liability element of the Convertible Loan Notes is calculated by discounting the cash flows of the instruments at an interest rate that would be available in the market for an equivalent financial liability. The estimation of this interest rate requires judgement on the part of the Directors.
5.4 Significant judgments in applying the accounting policies
Given the disposal of the Company's investments and businesses during the 14 months ended 30 November 2017, the principal uncertainty and judgment in applying accounting policies relates to the assumption that the Company remains a going concern. The financial statements have been prepared on that basis. Notwithstanding, if the accounts had not been prepared on a going concern basis then there would not have been any adjustments to the financial statements, including to the remaining assets and liabilities which are fixed in value.
6 Summary of significant accounting policies
The accounting policies which follow set out the significant policies which apply in preparing the financial statements for the period ended 30 November 2017.
6.1 Investment in subsidiaries and joint ventures
The Company recognises its investments in subsidiaries and joint ventures at cost. The investment is reviewed on an annual basis to determine whether the carrying amount is recoverable. In the event that the carrying amount is irrecoverable, provision is made to reduce the amount of the investment to the recoverable amount.
6.2 Impairment of assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.
Impairment losses on continuing operations are recognised in the income statement. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior periods. Such reversal is recognised in the income statement unless the asset is carried at a re-valued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
6.3 Trade and other receivables
Trade receivables are recognised and carried at the lower of their original invoiced value and recoverable amount. Where the time value of money is material, receivables are carried at discounted cost. Provision is made when there is objective evidence that the Company will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being less than likely.
6.4 Trade and other payables
Trade and other payables are stated at cost. Trade payables are non-interest bearing.
6.5 Cash and cash equivalents and short term deposits
Cash and cash equivalents includes cash in hand, deposits held with banks and other short-term highly liquid investments with original maturities of three months or less. For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
The Company considers all bank deposits with original maturity dates of greater than three months and maturing in less than one year to be short term deposits.
6.6 Financial assets
The classification of financial assets depends on the purpose for which the financial assets were acquired and is determined at initial recognition.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the statement of financial position date which are classified as non-current assets. "Accounts receivable", "cash and cash equivalents" and "short term deposits" are classified as "Loans and receivables".
Loans and receivables are measured initially at fair value and then subsequently measured at amortised cost.
6.7 Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, net of directly attributable transaction costs.
Subsequent measurement
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method ("EIR method"). Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the EIR method amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR method. The EIR method amortisation is included in finance cost in the income statement.
De-recognition of financial assets and liabilities
A financial asset or liability is generally de-recognised when the contract that gives rise to it is settled, sold, cancelled or expires.
Compound financial instruments
Compound financial instruments issued by the Company comprise Convertible Loan Notes denominated in Sterling that can be converted to ordinary shares at the option of the holder, when the number of shares to be issued is fixed and does not vary with changes in fair value.
The liability component of compound financial instruments is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The equity component is initially recognised at the difference between the fair value of the compound financial instruments as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the IER method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition except on conversion or expiry.
Interest related to the financial liability is recognised in the income statement. On conversion, the financial liability is reclassified to equity and no gain or loss is recognised in the income statement.
6.8 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.
6.9 Share-based payments
Employees (including senior executives) of the Company receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments ("equity-settled transactions") and in the form of cash or other assets for amounts based on the price of the Company's equity instruments ("cash-settled transactions").
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted, and is recognised as an expense in the income statement over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. The fair value is determined using appropriate valuation models relevant to the structure of the scheme and include the Black-Scholes model and the Monte-Carlo model, further details of which are given in note 23.
In valuing equity-settled transactions, no account is taken of any service and performance conditions, other than performance conditions linked to the price of the shares of the Company (market conditions). Any other conditions which are required to be met in order for an employee to become fully entitled to an award, like market performance conditions, are taken into account in determining the grant date fair value.
The grant-date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
At each statement of financial position date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the number of equity instruments that will ultimately vest. The movement in cumulative expense since the previous statement of financial position date is recognised in the income statement, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative.
For cash-settled share awards the services received from employees are measured at fair value and recognised in the income statement as an expense over the vesting period with recognition of a corresponding liability. The fair value of the liability is re-measured at each reporting date and at the date of settlement with changes in fair values recognised in the income statement.
6.10 Leases
Leases where the lessor retains a significant portion of the risks and benefits of ownership of the asset are classified as operating leases and rentals payable are charged in the income statement on a straight-line basis over the lease term. Leases of property, plant and equipment where the Company has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the commencement of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in current and non-current liabilities as appropriate. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Assets acquired under finance lease are depreciated over the shorter of the useful life of the asset and the lease term.
6.11 Foreign currency translation
The Company's financial statements are presented in Sterling, which is its functional and presentation currency. Transactions in foreign currencies are initially recorded in the functional currency at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the statement of financial position date. All differences are taken to the income statement.
6.12 Segment reporting
The Company's activity was that of holding company owning shares in subsidiary and associated companies which were all sold prior to the balance sheet date of 30 November 2017 (see Note 2.2).
The Company is organised into one business segment being that of holding investments and associated funding. This is the primary way in which the Chief Operating Decision Maker ("CODM") is provided with financial information. The Directors believe that the CODM is the Board of Directors.
Cash generation / (absorption) of the Company and, prior to the sale of the businesses, revenue and EBITDA (earnings before interest, tax, depreciation, amortisation and share of joint venture results) of the investments held by the Company are the cash, revenue and profitability measures provided to the CODM and used in monitoring and managing performance of the business.
6.13 Income taxes
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the statement of financial position date. Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions: where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss; in respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised. Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the statement of financial position date. Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is recognised in the income statement.
6.14 Pensions and other post-retirement benefits
One Director (2016: two Directors) is accruing benefits under a defined contribution scheme, being a money purchase pension scheme which is operated by Intelligent Energy Limited. This is a pension scheme that has an agreed contribution rate from the employee and employer. Contributions are known and agreed in advance. The scheme consists of a grouping of individual pension contracts. Each employee owns their own contract, which benefits from the discount available to Intelligent Energy Limited, in which they can plan and save towards an optimum pension income in their retirement.
6.15 Exceptional items
Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Company. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.
7 Operating segments
The Company complies with IFRS 8 Operating Segments which requires operating segments to be identified and reported upon that are consistent with the level at which results are regularly reviewed by the entity's CODM. The CODM for the Company is the Lb-shell plc Board of Directors.
The Company's activity is holding investments as being its sole operating segment.
Major customers
The Company is an investment holding company and does not have direct customers.
Geographical information
The Company's country of domicile is the United Kingdom.
8 Expenses by nature
2017 2016
GBP'000 GBP'000
-------- --------
Income
Other (income) (10) -
Loss / costs
Impairment of subsidiary (see 10,998
note 15) -
Impairment of SMILE JV (see note
15) (900) 6,974
Impairment of receivable from
group company - 215,708
Legal and professional costs 442 212
Other expenses 18 -
Total other income and administration
costs 10,548 222,894
-------- --------
9 Exceptional charges and "netting off"
9.1 Exceptional charges
Exceptional charges have been recognised within the reported results as follows:
2017 2016
GBP'000 GBP'000
--------- ----------
Exceptional operating income/(costs)
Impairment of subsidiary (10,998) -
Impairment of SMILE JV 900 (6,974)
Impairment of receivable from
group company - (215,708)
--------- ----------
(10,098) (222,682)
Exceptional finance income
Gain on discharge of Convertible 4,922 -
Loan Notes (note 19)
--------- ----------
Exceptional charges before taxation (5,176) (222,682)
Exceptional income tax
Deferred tax on discharge of 1,061 -
Convertible Loan Notes (note
13.1)
--------- ----------
Total exceptional charges (4,115) (222,682)
--------- ----------
The total cash flow during the period in respect of exceptional charges was an inflow of GBP2,835,000 in respect of the sale of companies (2016: GBPnil). This is after the "netting off" detailed below.
9.2 "Netting off" of payments for the discharge of Convertible Loan Notes and sale of companies
As set out in note 2.2, the Company sold its main operating subsidiary, Intelligent Energy Limited, SMILE JV and its remaining business and assets to Meditor Energy Limited for consideration of GBP19,500,000. This consideration was applied to discharge of the Convertible Loan Notes, of which GBP16,665,000 was due to Meditor European Master Fund Limited ("Meditor") (as a Convertible Loan Note holder) and GBP2,835,000 was due to other holders of Convertible Loan Notes. Under the contract for the sale of the Company's businesses, the payment to Meditor as Convertible Loan Note holder was offset against the consideration due from Meditor Energy Limited as purchaser. This "netting off" is reflected in the presentation of the statement of cash flows.
10 Auditor's remuneration
2017 2016
GBP'000 GBP'000
-------- --------
Auditor's remuneration
Audit of the Company financial
statements 24 88
Non-audit fees: iXBRL tagging 1 1
-------- --------
Audit fees in prior years were expensed by Intelligent Energy Limited, then a subsidiary of the Company.
The table above excludes amounts paid to the auditor of subsidiaries which were sold to Meditor Energy Limited on 25 October 2017.
11 Employees and Directors' emoluments 11.1 Employee benefit expense
The employees of the Company comprised the Directors. The monthly average number of employees, being the Directors, during the periods were as follows:
2017 2016
number number
------- -------
Executive Directors 2 2
------- -------
The Executive Directors became Non-Executive Directors from the date of the sale to Meditor Energy Limited on 25 October 2017.
The average number of employees has been calculated for the Executive Directors who were employed full time. The Non-executive Directors have not been included in the above table because of the nature of their duties.
11.2 Directors' emoluments
The aggregate emoluments of the Directors of the Company are set out below
2017 2016
GBP'000 GBP'000
-------- --------
Aggregate emoluments 1,023 1,103
Aggregate amounts receivable
under long-term incentive plans 26 23
1,049 1,126
-------- --------
The emoluments of the Directors were paid by the Company's then wholly owned subsidiary, Intelligent Energy Limited. This subsidiary was sold to Meditor Energy Limited on 25 October 2017.
One Director (2016: two Directors) accrued benefits under a defined contribution scheme, being a money purchase pension scheme which is operated by Intelligent Energy Limited.
The former Chief Executive Officer stepped down from the Board on 9 June 2016. He received payment in lieu of notice equal to his basic salary, which, in accordance with his service contract, was paid in monthly
instalments up to May 2017. These payments are not shown in the above table.
With effect from 1 October 2017 the Non-executive Directors formally waived their right to receive emoluments. With effect from 25 October 2017, the all future liabilities for payments under the employment contracts of the two executive Directors were assumed by Intelligent Energy Limited.
12 Finance income and expense
12.1 Finance income
2017 2016
GBP'000 GBP'000
-------- --------
Gain on discharge of Convertible 4,922 -
Loan Notes (note 19)
Interest receivable on bank deposits - 3
-------- --------
4,922 3
-------- --------
The gain on discharge of the Convertible Loan Notes is calculated as the excess of the liability for principal and accrued interest relating to the Convertible Loan Notes as at date of discharge over the consideration of GBP19,500,000 in full and final discharge of those loan notes.
12.2 Finance expense
2017 2016
GBP'000 GBP'000
-------- --------
Finance expense on Convertible
Loan Notes (note 19) 7,073 2,267
-------- --------
The GBP30 million Convertible Loan Note is classified as a "compound financial instrument" for which the accounting policy is set out in note 6.7.
13 Income tax
13.1 Tax credit in the income statement
2017 2016
GBP'000 GBP'000
-------- --------
Current income tax
Adjustments relating to prior
years 223 540
-------- --------
Deferred tax (note 13.3)
Origination and reversal of temporary
differences 615 263
Release on discharge of Convertible 1,061 -
Loan Notes
-------- --------
1,676 263
-------- --------
Income tax credit reported in
the income statement 1,899 803
-------- --------
13.2 Factors affecting current tax credit
2017 2016
GBP'000 GBP'000
--------- ----------
(Loss) before tax (12,699) (225,158)
--------- ----------
Loss before tax multiplied by
the standard rate of
corporation tax in the UK of
19 per cent (2016: 20 per cent) (2,413) (45,032)
Expenses not deductible for tax 3,344 45,015
Income not taxable (935) -
Adjustments in respect of prior
years 223 540
Current year losses net of recognition
of tax effect of previously unrecognised
tax losses 1,680 280
1,899 803
--------- ----------
13.3 Deferred tax
The movement in deferred tax balances during the periods:
Balance Recognised Recognised Balance
at beginning in income in equity at end
of period statement of period
GBP'000 GBP'000 GBP'000 GBP'000
-------------- ----------- ----------- -----------
2017
Other timing differences (1,676) 1,676 - -
-------------- ----------- ----------- -----------
Net deferred tax
asset (1,676) 1,676 - -
-------------- ----------- ----------- -----------
2016
Other timing differences - 263 (1,939) (1,676)
-----------
Net deferred tax
asset - 263 (1,939) (1,676)
-------------- ----------- ----------- -----------
14 Earnings per share
Earnings per share is based on the Company's profit/(loss) attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding during the period.
2017 2016
------------ ------------
Earnings per share
- Basic (pence) (5.2) (116.1)
- Diluted (pence) (5.2) (116.1)
Loss for the financial period
(GBP'000) (10,800) (224,355)
------------ ------------
Weighted average number of shares Number Number
used:
- Issued ordinary shares at beginning
of period 206,239,331 188,325,451
- Effect of ordinary shares issued
during the period - 4,998,481
Basic weighted average number
of shares 206,239,331 193,323,932
------------ ------------
The impact of share options, share warrants and potential ordinary shares associated with the Convertible Loan Notes has an antidilutive impact on the earnings per share.
Share options, details of which are set out in note 23, and 375,000,000 potential ordinary shares in relation to the convertible debt (2016: 375,000,000) were excluded from the weighted-average number of ordinary shares used in the calculation of the diluted earnings per share because their effect would have been antidilutive.
15 Investments
Subsidiary Joint
undertakings ventures total
GBP'000 GBP'000 GBP'000
------------- --------- ---------
At 1 October 2015 9,962 6,234 16,196
Additions 170 740 910
Impairments - (6,974) (6,974)
------------- --------- ---------
At 30 September 2016 10,132 - 10,132
Capitalisation of loan receivable
by the Company 19,466 - 19,466
Impairments / reversal (10,998) 900 (10,098)
Disposals (18,600) (900) (19,500)
at 30 November 2017 - - -
------------- --------- ---------
In the period ended 30 November 2017 and prior to the sale to Meditor Energy Limited, the remaining amount owed by subsidiary undertakings to the Company, being GBP235,174,000, was extinguished by the issue of new ordinary shares in Intelligent Energy Limited. The increase in the carrying value of the investment in Intelligent Energy Limited represents this amount owing to the Company less the provision of GBP215,708,000.
The Company's investments in subsidiary undertakings, the SMILE JV and the remaining business were sold to Meditor Energy Limited on 25 October 2017 for consideration of GBP19,500,000. The legal transfer of the shares held by the Company in the SMILE JV is being transferred to Meditor Energy Limited as soon as reasonably practical and until such time the Company holds the shares on trust for Meditor Energy Limited.
16 Trade and other receivables
2017 2016
GBP'000 GBP'000
-------- ----------
Amounts owed by subsidiary undertakings - 240,024
Less: Provision for impairment - (215,708)
-------- ----------
- 24,316
Other receivables 62 -
62 24,316
-------- ----------
Amounts owed by subsidiary undertakings were denominated in UK Pounds.
During the period ended 30 November 2017, GBP30,000,000 of the amount owed was interest bearing. However, the interest receivable was deemed non-recoverable by the Company and was waived in the period. This balance was repayable in May 2019 but, at the option of the borrower, could be prepaid in part or in full.
All other balances were interest free and payable on demand.
As at 30 September 2016 amounts receivable from subsidiary undertakings were impaired by GBP215,708,000 to a recoverable amount of GBP24,316,000 based on a "value in use" calculation. In the period ended 30 November 2017 and prior to the sale to Meditor Energy Limited, all remaining amounts owed by subsidiary undertakings to the Company, being GBP235,174,000 owed by Intelligent Energy Limited (before the impairment of GBP215,708,000), were extinguished by the issue of new ordinary shares in Intelligent Energy Limited.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. There is a concentration of credit risk as the receivables were owing by Intelligent Energy
Limited. The Company does not hold any collateral as security.
17 Cash and cash equivalents
2017 2016
GBP'000 GBP'000
-------- --------
Bank current account 357 106
-------- --------
Cash at bank is held on current account and is non-interest bearing. The Company holds its current accounts with major banks in line with the Company's treasury policy.
18 Trade and other payables
2017 2016
GBP'000 GBP'000
-------- --------
Amounts owed to subsidiary undertakings - 169
Accrued interest on Convertible
Loan Notes (note 19) - 501
Other accruals 67 308
67 978
-------- --------
Trade and other payables are stated at cost. Trade payables comprised balances owing to then subsidiaries of the Company and were non-interest bearing and due on demand.
19 Convertible Loan Notes
2017 2016
GBP'000 GBP'000
--------- --------
Carrying amount of liability
As at 1 October 21,249 -
Proceeds from issue of Convertible
Loan Notes (30,000,000 notes
at GBP1 par value each) 30,000
Transaction costs (2,824)
--------
Net proceeds 27,176
--------
Amount classified as equity (net
of transaction costs of GBP752,000) - (7,242)
Interest expense (note 12.2) 7,073 2,267
Interest paid (3,900) (952)
Discharge on 25 October 2017
Amount repaid (note 9.2) (2,835) -
Amount settled (note 9.2) (16,665) -
Gain on discharge (note 9.1) (4,922) -
--------- --------
At period end - 21,249
--------- --------
Analysed
Current - 501
Non-current - 20,748
--------- --------
- 21,249
--------- --------
On 17 May 2016 the Company issued GBP30 million 13 per cent. secured, convertible and redeemable loan notes at a par value.
At the option of each Convertible Loan Note holder, the Convertible Loan Notes could be converted into ordinary shares in the Company at a conversion price of 8 pence per ordinary share at any time up until 17 May 2019 (the "Maturity Date"). The Company had no right to require the Convertible Loan Notes to be redeemed or converted. Unless previously redeemed or converted, the Convertible Loan Notes (together with all accrued but unpaid interest) would automatically be redeemed in full by the Company at par value on the Maturity Date.
Interest at 13.0 per cent. per annum was payable quarterly in arrears on the principal amount outstanding of the Convertible Loan Notes. In the income statement, the interest expense was calculated by applying an effective interest rate of 30.3 per cent on the liability component. The policy regarding financial liabilities is set out in note 6.7.
The Convertible Loan Notes were secured by way of an equitable charge over the Company's shares in its principal subsidiary, Intelligent Energy Limited.
On 25 October 2017 the Company sold its wholly owned subsidiary and the Company's remaining business and assets to Meditor Energy Limited for consideration of GBP19,500,000. This consideration of GBP19,500,000, representing all of the cash available to the Company other than that required to maintain the Company as a non-operating entity, was used in full and final discharge of all principal, interest and any other amounts owing and other obligations, if any, of the Company to the Convertible Loan Note holders.
20 Financial instruments
The carrying amount of the financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows
2017 2016
GBP'000 GBP'000
-------- --------
Trade and other receivables 62 24,316
Cash and cash equivalents 357 106
419 24,422
-------- --------
Accounting classifications and fair values
When measuring the fair value of an asset or liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation technique as follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
-- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
-- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
All financial assets/liabilities are recorded in the statement of financial position at amortised cost with carrying value being a reasonable approximation of fair value
Accounting classifications and fair values
The following tables show the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
Carrying amount
--------------------------------
Loans Other Total
and receivables financial
liabilities
30 November 2017 GBP'000 GBP'000 GBP'000
-------------------------------------- ----------------- ------------- --------
Financial assets not measured
at fair value
Trade and other receivables excl.
prepayments 62 - 62
Cash and cash equivalents 357 - 357
----------------- ------------- --------
419 - 419
----------------- ------------- --------
Financial liabilities not measured
at fair value
Trade and other payables excluding - - -
accruals
Liability component of Convertible - - -
Loan Notes
----------------- -------------
- - -
----------------- ------------- --------
Carrying amount
--------------------------------
Loans Other Total
and receivables financial
liabilities
30 September 2016 GBP'000 GBP'000 GBP'000
-------------------------------------- ----------------- ------------- --------
Financial assets not measured
at fair value
Trade and other receivables excl.
prepayments 24,316 - 24,316
Cash and cash equivalents 106 - 106
----------------- ------------- --------
24,422 - 24,422
----------------- ------------- --------
Financial liabilities not measured
at fair value
Trade and other payables excluding
accruals - 169 169
Liability component of Convertible
Loan Notes - 20,748 20,748
- 20,917 20,917
----------------- ------------- --------
The book value of the financial assets and financial liabilities not measured at fair value is in all cases considered to be fair value.
Liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments and exclude the impact of netting agreements.
Contractual
cashflows
--------- ---------- -------- ------------ --------
Less 4 to 2 to
Carrying On than 12 1 to 2 3
amount demand 3 months months years years Total
30 November GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2017
----------------- ---------- --------- ---------- -------- ------------ -------- --------
Trade and other - - - - - - -
payables
Convertible - - - - - - -
loan notes
- - - - - - -
---------- --------- ---------------------------- -------- ------------ -------- --------
Contractual
cashflows
-------- --------- -------- ------------ --------
Less 4 to 2 to
Carrying On than 12 1 to 2 3
amount demand 3 months months years years Total
30 September GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2016
----------------- --------- -------- --------- -------- ------------ -------- --------
Trade and other
payables 169 169 - - - - 169
Convertible
loan notes 20,748 - 983 2,917 3,900 32,917 40,717
20,917 169 983 2,917 3,900 32,917 40,886
--------- -------- --------- -------- ------------ -------- --------
The holders of the Convertible Loan Notes had the option to convert the loan notes into shares at any time during the period up to maturity on 17 May 2019. The GBP30 million principal of the Convertible Loan Notes payable on 17 May 2019 included in the above contractual cashflows would arise only if the loan note holders do not convert in which case they are redeemable on maturity.
21 Issued share capital
2017 2016
------------ ------------
Issued, called up and fully paid
- number 206,239,331 206,239,331
- GBP'000 10,312 10,312
------------ ------------
Holders of the ordinary shares of 5p nominal value each are entitled to receive dividends and other distributions and to attend and vote at any general meeting.
No new shares were allotted in the period from 1 October 2016.
The issue of ordinary shares during the period ended 30 November 2017 generated additional gross funds of GBPnil (2016: GBP1,125,000) for the Company.
The issue of ordinary shares in the year ended 30 September 2016 comprised: the issue of 14,062,500 ordinary shares at 8p pence per share (proceeds GBP1,125,000) to Meditor European Master Fund Limited representing half of the arrangement fee related to its underwriting of the Company's GBP30 million Convertible Loan Note issue as envisaged in the circular sent to shareholders on 23 May 2016; and the issue of 3,851,380 shares for the MIP share award (see note 23).
22 Reserves
Equity share capital
The balance classified as share capital relates to the nominal value of shares on issue of the Company's equity share capital, comprising ordinary shares of nominal value 5 pence each.
Share premium
The balance classified as share premium relates to the aggregate net proceeds less nominal value of shares on issue of the Company's equity share capital.
Other reserves
Equity component of Convertible Loan Notes
The Company issued Convertible Loan Notes with equity and liability elements. The Convertible Loan Note proceeds, after deducting the liability element, is deemed the equity element and has been accounted for in reserves.
On 25 October 2017 a payment of GBP19,500,000 was made by the Company to the Convertible Loan Note holders in full and final discharge of all principal, interest and any other amounts owing and other obligations, if any, of the Company to the Convertible Loan Note holders. The realised element of GBP5,303,000 has been transferred to retained earnings.
Merger reserve
The balance classified as other reserves relates to the acquisitions of Advanced Power Sources Limited and Intelligent Energy Limited.
23 Share-based payment plans
An equity-settled total share based payment expense of GBPnil (2016 GBP193,000) was recognised in the period.
The Company issued a number of share-based payment plans to employees including share options and share awards as described below.
2001 and 2009 Share Option Schemes
The exercise price of the options was fixed and determined on the date of the grant. The option holders had the option to purchase ordinary shares at the option price between the exercise dates. The fair value of the options was estimated at the grant date using a Black-Scholes model, taking into account the terms and conditions upon which the options were granted. The contractual life of each option granted is varied. The schemes are equity-settled share based payments and there are no cash settlement alternatives.
The 2009 Share Option Scheme was subject to specific performance criteria being met.
The following table illustrates the number and weighted average exercise prices ("WAEP") of, and movements in, the share options during the year in relation to the 2001 and 2009 Share Option Schemes:
2017 2017 2016 2016
WAEP WAEP
number pence number pence
--------- ------ ---------- ------
Outstanding at
1 October 82,500 84 312,500 133
Exercised during - - - -
the period
Expired during
the period (82,500) 84 (230,000) 150
--------- ----------
Outstanding at
period end - - 82,500 84
--------- ----------
Exercisable at
period end - - 82,500 84
--------- ----------
At 30 September 2016 the weighted average remaining contractual life for the 2001 and 2009 scheme share options outstanding was 0.54 years. There were no options granted during the current or prior year under the 2001 or 2009 schemes.
The range of exercise prices for options outstanding under these scheme at 30 September 2016 was 80p to 90p. The share price at 30 September 2016 was 12 pence.
The Company has taken advantage of the exemption in IFRS 1 in respect of equity-settled awards so as to apply IFRS 2 only to those equity-settled awards granted after 7 November 2002.
The following inputs were used in a Black-Scholes model to estimate the value of the options at grant date for the 2001 and 2009 share-based payment plans:
Dividend yield (%) -
Expected volatility (%) 40%
Risk-free interest rate (%) 0.77%
Expected life of option (years) 2 to 8.5
Weighted average share price (GBP) 1.00
Model used: Black-Scholes
--------------
The expected life of the options was based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflected the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.
2013 Management Incentive Plan ("MIP")
The Company introduced the HM Revenue & Customs approved MIP during 2013.
The purpose of the MIP was to provide participants with an opportunity to participate directly in the growth of the value of the Company by receiving the MIP award. This allowed the participants to share in a pool of value, "the MIP Pool", which was linked to the growth in the value of the Company's shares. Participants received shares and share options in the Company if the Company was sold, taken over or was floated on a stock exchange ("Exit Event").
Awards were granted to certain employees under the MIP scheme rules on 7 March 2014. The admission to the London Stock Exchange in July 2014 ("IPO") was an Exit Event under the MIP scheme rules. The size of the MIP Pool was determined by reference to 16 per cent. of the difference between the price at which shares were offered to investors in the Company's IPO ("Offer Price") of GBP3.40 and GBP2.30. Each participant's share of the MIP Pool was converted into the number of shares (awarded in the form of (a) MIP Share Options and (b) MIP Share Awards) determined by reference to the Offer Price with the MIP Award vesting as follows:
-- One third on the date of the IPO; -- One third on the first anniversary of the date of the IPO; and -- One third on the second anniversary of the date of the IPO
During the year ended 30 September 2014 810,000 share options were granted and 5,446,133 shares were awarded to the MIP scheme participants.
MIP Share Options
The following table illustrates the number and weighted average exercise prices ("WAEP") of, and movements in, the share options during the year in relation to the MIP.
2017 2017 2016 2016
WAEP WAEP
number pence number pence
---------- ------ ---------- ------
Outstanding at
1 October 300,000 100 650,000 100
Granted during - - - -
the period
Forfeited (300,000) - (350,000) 100
Outstanding at
period end - - 300,000 100
Exercisable at
period end - - 300,000 100
---------- ----------
One third of the granted share options (270,000 options) vested on 9 July 2014 on listing of the Company on the London Stock Exchange. 190,000 of the remaining options vested on 9 July 2015 and 190,000 vested on 9 July 2016.
At 30 September 2016 the weighted average remaining contractual life for the MIP share options outstanding was 0.5 years. The weighted average fair value of options granted under the MIP, determined by the Monte-Carlo valuation model was 110p per option.
The expected life of the options was based on historical data and the scheme rules option expiry date of April 2017. It was not necessarily indicative of exercise patterns that may have occurred. The expected volatility reflected the assumption that the historical volatility was indicative of future trends, which may also not necessarily have been be the actual outcome. The MIP scheme was equity-settled and the fair value was measured at the grant date.
MIP Share Awards
The following table illustrates the number and weighted average fair value ("WAFV") at grant date of shares awarded, forfeited and vested in relation to the MIP.
2017 2017 2016 2016
WAEP WAEP
number pence number pence
-------- ------- ------------ ------
At 1 October - - 1,869,784 104
Forfeited - - (149,283) 104
Vested - - (1,720,501) -
At period end - - - -
-------- ------------
Share awards were granted on 7 March 2014. On admission of the Company's shares to the London Stock Exchange on 9 July 2014 the first tranche of the share award vested with the MIP participants. Part of the first tranche of the share award was modified by the Company issuing a reduced number of 1,147,487 shares and settling a number of share awards in cash instead of facilitating sales of ordinary shares under the award.
2,137,938 of the share awards vested on 9 July 2015 and 1,720,501 share awards vested on 9 July 2016.
The following inputs were used in a Monte-Carlo model to estimate the value of the options and share awards at grant date for the MIP share-based payment plans:
Dividend yield (%) -
Grant date 7 March 2014
Expected volatility (%) 39.24%
Risk-free interest rate (%) 1.09%
Expected life of option (years) 3
Share price at grant date (GBP) 2.50
Model used: Monte Carlo Algorithm
----------------------
Sharesave plan
A sharesave plan was implemented during the year ended 30 September 2015 eligible to all UK employees of Intelligent Energy Limited. Employees participated by making monthly saving contributions over a period of three years, linked to the grant of an option over the Company's shares with an option price at a 20% discount to the market price of the share at grant. 508,679 options were granted under the scheme of which 481,251 (2016: 423,501) have subsequently been forfeited.
24 Commitments
The Company has no commitments.
25 Related-party transactions
During the period the Company entered into transactions in the ordinary course of business with other related parties being subsidiary companies. On 25 October 2017 the Company sold all its interests in its subsidiary companies and its SMILE JV to Meditor Energy Limited.
Transactions entered into, and trading balances outstanding at 30 September 2016 and 30 November 2017 with other related parties, are as follows:
Purchases Amounts Amounts
Sales from owed by owed to
to
related related related related
party party party party
GBP'000 GBP'000 GBP'000 GBP'000
Subsidiaries (see
note below)
2017 - - - -
2016 - - 240,024 -
The amount owed by related-party subsidiaries at 30 September 2016 referred to the intercompany debt with Intelligent Energy Limited. As detailed in note 16 a provision for impairment of amounts receivable from Intelligent Energy Limited of GBP215,708,000 was recognised in the year ended 30 September 2016. No change to the provision for impairment was made in the 14 months to 30 November 2017. However, on 25 October 2017 the balance of GBP235,174,000 (before the abovementioned provision) owing from Intelligent Energy Limited to the Company was extinguished by the issue by Intelligent Energy Limited of ordinary shares to the Company.
Prior to its sale to Meditor Energy Limited on 25 October 2017, Intelligent Energy Limited paid certain expenses related to the Company, being its then shareholder.
Terms and conditions of transactions with related parties
The related-party transactions were made on terms equivalent to those that prevail in arm's length transactions.
Sale of business to Meditor Energy Limited
With respect to the transaction on 25 October 2017, the Board confirms that the sale of the Company's business and assets (which completed on 25 October 2017) was negotiated and agreed on an arm's length basis.
The Board entered into this transaction only after due and appropriate consideration. In particular, before committing to this course of action, the Board:
-- undertook detailed discussions with various counterparts on potential trading solutions (notwithstanding the backdrop of a slower evolution of the fuel cell market than had been anticipated);
-- sought to align the interests of major stakeholders with a view to trying to rescue the Company;
-- reviewed and implemented cost control activity where this did not impact core capabilities. Notwithstanding this activity, the Company had an ongoing underlying cash burn of GBP1.6m a month which could not be supported from cash reserves. The Company's negative EBITDA and revenue position, combined with the security granted (as part of the refinancing of the Company in May 2016) in favour of the Convertible Loan Note holders, meant that conventional debt raising options were not available to the Company;
-- ran an extensive process for the potential sale of some or all of the Company's business and assets, using Deloitte LLP to project manage this activity;
-- received independent legal and financial advice on the duties of the Board to shareholders and to creditors, and on the Board's powers in relation to the sale of the Company's business and assets, from Pinsent Masons LLP, Deloitte LLP and Stifel Nicolaus Europe Ltd;
-- updated the stock market on the Company's position at appropriate intervals. These updates also acted in effect as an external message to third parties to make contact if they were interested in acquiring all or part of the Company's business and assets. These third parties would have included parties with which the Company had existing or potential customer or supplier relationships.
The outcome of the above actions, which represented a wide-ranging market testing against a backdrop of structural constraints, was one offer, and one offer only, for the Company's business and assets - this offer was from Meditor European Master Fund Limited.
In the opinion of the Board, the Meditor transaction, which completed on 25 October 2017, therefore represented the best outcome for the Company's creditors given the (clearly challenging) circumstances, as well as saving the jobs of the remaining employees in the business.
Key management compensation
Key management personnel are deemed to be the Directors of the Company. The compensation paid or payable to key management for employee services is shown below:
2017 2016
GBP'000 GBP'000
-------- --------
Salaries and other short-term
employee benefits 1,049 1,126
Share-based payments - -
Total 1,049 1,126
-------- --------
The expense was recorded in the accounts of Intelligent Energy Limited which was a wholly owned subsidiary of the Company until 25 October 2017 when its entire share capital was sold to Meditor Energy Limited.
26 Contingent assets and liabilities 26.1 Sale of business to Meditor Energy Limited
The following contingent asset and liability arises under the sale and purchase agreement dated 25 October 2017 under which the Company sold its shares Intelligent Energy Limited, SMILE JV and the Company's remaining business and assets to Meditor Energy Limited.
Contingent liability
Immediately prior to completion by the Company of any members' voluntary liquidation, dissolution, strike off or analogous process, the Company shall transfer to Meditor Energy Limited all cash amounts less GBP1, and unless the parties otherwise agree, all and any other assets owned, held or enjoyed by or that otherwise remain available to Intelligent Energy Limited.
26.2 Other contingent assets or liabilities
There are no lawsuits, actions or administrative, arbitration or other proceedings or governmental investigations pending against or relating to the Company.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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March 29, 2018 02:01 ET (06:01 GMT)
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