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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Sigmaroc Plc | LSE:SRC | London | Ordinary Share | GB00BYX5K988 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.60 | 0.93% | 64.80 | 64.60 | 64.80 | 64.80 | 63.90 | 64.30 | 518,050 | 16:35:15 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Investment Advice | 580.29M | 13.53M | 0.0121 | 53.39 | 720.2M |
From Apr 2019 to Apr 2024
TIDMSRC
RNS Number : 6496O
SigmaRoc PLC
21 May 2018
21 May 2018
SigmaRoc plc
('SigmaRoc' or the 'Company')
Audited full year results for year ended 31 December 2017
SigmaRoc plc, the AIM listed buy-and-build construction materials group, is pleased to announce its audited results for the year ended 31 December 2017.
Hot Features
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Financial highlights(1) 31 December 31 December 2016
2017
Underlying Revenue GBP27.1m GBP0.0m
Underlying EBITDA GBP5.5m (GBP2.4m)
Underlying EBITDA 20.3% n/a
margin
Underlying profit GBP2.6m (GBP2.4m)
before tax
Underlying EPS 2.0p (1.4p)
Cash GBP7.0m GBP0.2m
(1) Underlying results are stated before acquisition related expenses, certain finance costs, share option expense and warranty & indemnity insurance. References to an underlying profit measure throughout this Annual Report are defined on this basis.
Highlights
-- Targeted improvements exceeded: 37% EBITDA(2) uplift on 11% sales growth
-- Platform for growth established: four acquisitions in first year across two clusters
-- Solid asset backing confirmed: GBP41m Ronez asset valuation up from GBP22m
-- Ronez drill results successful: Expected quarry life of 40 years
-- Employee engagement strengthened: delivered Lost Time Injury free year
-- Overall execution of strategy successful: Group ready for further growth
(2) Year on year unaudited operational improvements when comparing Ronez unlevered operational results for 31/12/2016 with unlevered operational results (operational results exclude parent Company) of the Group for 31/12/2017.
David Barrett, Executive Chairman, commented:
"I am pleased to report a strong year in 2017 where we were able to exceed our expectations and build a solid platform from which to continue to deliver on our growth strategy."
"We successfully integrated our Channel Islands cluster. With the launch of the trading business and by applying our operational expertise, we were able to deliver a 37% uplift in EBITDA(2) from the cluster compared to the previous year. That highlights the value we are able to create from purchased assets and I look forward to updating the market at the appropriate time on the further development of our acquisition pipeline."
"I am pleased with the progress of developing our UK specialist concrete business with our two acquisitions late last year. We expect these businesses to contribute to further profit development in 2018. I look forward with confidence and have every expectation of making further substantial progress this year."
Max Vermorken, CEO, commented:
"Our strategy is performing well, having completed the first four months of 2018 with Group sales on target. The upward revaluation of our Channel Islands fixed assets, together with the freehold land in our UK precast cluster, shows the strong asset backing underpinning our business. This provides a strong platform from which to grow and we look forward to further development in 2018."
SigmaRoc will host a meeting for analysts at 9.30am today at Berenberg, 60 Threadneedle Street London EC2R 8HP. Please email ir@sigmaroc.com to arrange attendance. Conference call dial-in details are available upon request. A recording will also be available on request.
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain.
For further information, please contact:
SigmaRoc plc Tel: +44 (0) 207 Max Vermoken / Ian Osburn 002 1080 Strand Hanson (Nominated and Tel: +44 (0) 207 Financial adviser) 409 3494 James Spinney / James Dance Berenberg (Broker) Tel: +44 (0) 203 Ben Wright / Mark Whitmore 207 7800 / Laure Fine IFC Advisory (Financial PR) Tel: +44 (0) 203 Graham Herring / Miles Nolan 934 6630 / Zach Cohen
CHAIRMAN'S STATEMENT
Having completed a first full financial year as SigmaRoc plc (the 'Company') and its subsidiary undertakings (which together comprise the 'Group' or 'SigmaRoc'), I am proud to present the results achieved for the year ended 31 December 2017, the culmination of significant work by all in the Group. I would like to thank all SigmaRoc shareholders for their valuable support.
During the year, we successfully integrated our first cluster in the Channel Islands and proceeded to exceed the financial targets we had set. SigmaRoc acquired two further businesses, creating a new cluster of activity in the UK and providing a solid base from which to grow further. We are only at the start of this journey and see significant further opportunities to capture and create value for our employees, customers, shareholders and local communities. Health and safety is a priority for the Group and we are pleased to have completed the full year with both an excellent track record in this regard and a culture which we expect to continue.
The highlight of the year was the development of the Channel Islands cluster, integrating Ronez Limited ('Ronez') with the newly established shipping division, involving the incorporation of SigmaGsy Limited ('SigmaGsy'), which acquired highly specific equipment including a dedicated bulk cement carrier ('MV Ronez'). This was a complex operation, requiring the creation of the full back office infrastructure necessary to manage an integrated materials business.
We have also made significant progress to strengthen the Ronez business for the future. A drill campaign in Guernsey proved the viability of the planned new quarry at Chouet, while the planned quarry extension at Jersey is ongoing. Both schemes ensure that SigmaRoc's reserves in the Channel Islands are sufficient to last approximately another 40 years at the current levels of demand. We are also in the process of replacing and relocating the Jersey ready mix plant to ensure we can meet an expected increase in demand generated by a series of projects, including the proposed new hospital in Jersey.
Despite positive results for the Channel Islands cluster as a whole, with an 11% year-on-year sales increase, trading conditions across the Channel Islands remained only slightly above historical averages. Yet we are very pleased to report a solid underlying EBITDA performance of GBP5.5 million on GBP27.1 million revenue. This marked improvement year-on-year was primarily driven by our practice of operating local businesses as clusters, structured to best serve their local markets, provide a differentiated customer proposition and delivering cost efficiencies and profitability improvements. Furthermore, as management assessed during the purchase process, marking to market of Ronez's fixed assets resulted in a substantial increase in book valuation and minimal goodwill. This is testament to the good purchase price the Group was able to achieve for its first investment.
I would also like to highlight the solid health and safety performance achieved throughout 2017. We recorded a full year without recording a single Lost Time Injury. This a real testament to the workforce and management across the Group, who have resolutely focused on, and implemented, group safety initiatives. This remains a priority at every level of the Group as we continue to target Zero Harm and ongoing safety improvements.
While delivering improvements in our Channel Islands cluster, we did not forget that significant value creation at SigmaRoc lies with further consolidation of the fundamentally fragmented market of construction materials. We made an opening move in the UK in the second half of 2017 with the acquisition of Allen Concrete in October 2017 and subsequently, Poundfield Products (Group) Limited ('PPGL'), in December 2017. Both businesses are active in the precast and prestressed concrete sector, which we have identified as a value-added defensible product sector. They complement each other in terms of production location, product portfolio and skillset. Additionally, their combination and possible future expansion presents further opportunities for the Group.
The Group's overall net debt position only increased to GBP11.8 million following strong cash generation, allowing us to grow the business significantly and leaving the Group in a good leverage position. We expect the Group as it is today to be nearer its long term targeted net debt to EBITDA ratio of 1x by the end of this year.
The Board therefore believes that the outlook for the Group is very good. The markets in the Channel Islands are performing as expected. Jersey remains on trend with an increase in public expenditure on road networks, sea defences and other infrastructure. In Guernsey, after a number of subdued years, we are seeing volumes slightly up in 2018. The trend remains below some of its historically stronger years and we see potential for continued recovery over time. The shipping division launched last year remains a strong performer and continues to contribute strategically and to the overall performance of the Channel Island cluster.
In mainland UK, work to integrate the precast cluster is ongoing, following a similar path to the Channel Islands business in H1 2017. Strengthening operational and commercial efforts where our Group's expertise can bring benefits is key, with our industry leading health and safety standards being a priority. Our efforts have already generated tangible improvement, with the cluster delivering a solid revenue performance in the first quarter of 2018.
Looking further ahead it is evident that the value we create for shareholders lies in the identification, acquisition and integration of local businesses into local clusters which run at a high operational standard. The resources and management capacity required to pursue this process and deliver acquisitive growth is in place within the Group and we are pleased with the progress made towards delivering on our acquisition pipeline this year. The number of opportunities both in the UK and in selected European countries is encouraging and we remain disciplined in our selection and appraisal of target companies in line with our strategy.
We have every expectation of making further progress this year.
David Barrett
Executive Chairman
18 May 2018
CEO'S STATEMENT
Some seventeen months ago we launched SigmaRoc plc as a buy-and-build construction materials company, to drive shareholder value by creating clusters of connected and compatible quality businesses focused on their local and regional markets. Our 2017 results show we are delivering on our strategy having met our targets and I see plenty of opportunity ahead to build SigmaRoc into a significant operator in the construction materials sector. The review of 2017 below provides some colour to the achievements in our first full year and to what may lie ahead.
Review of business
On 5 January 2017 SigmaRoc completed its first acquisition, taking ownership of Ronez for approximately GBP45 million, in conjunction with raising approximately GBP50 million via the placing of 100 million new ordinary shares of one penny each in the capital of the Company ('Ordinary Shares') at a price of 40 pence per share and 10 million convertible loan notes at a price of GBP1 per note.
Ronez is a fully integrated producer of construction materials and operates two hard rock quarries and multiple associated business lines with production units across Jersey and Guernsey (the 'Islands'). Ronez provided the Group with a profitable and cash-generative base for the first cluster in the Channel Islands, from which to further execute upon its business plan.
The first half of 2017 was primarily focussed on successfully transitioning ownership, management and administration of Ronez into SigmaRoc and ensuring its continued operational and financial performance. This was a complex process requiring a calve-out from the seller and creation of new back office infrastructure for a fully integrated business, all the while continuing to service our customers and markets seamlessly. SigmaRoc and Ronez worked closely together to implement the change-over as expeditiously as the Board could have hoped and without disruption to the business. The strong financial results we publish today are a testimony to the success of this project.
Locking in synergies was a priority, which was aided by the launch of the SigmaGsy shipping division and acquisition of MV Ronez. The combination of these businesses under one management structure allowed us to deliver on the targeted financial improvement, at the same time as offering new services to the local market and local customers.
A further focus was the ongoing work to secure the long-term future of the Channel Islands business by developing new mineral resources which are of strategic importance to the Channel Islands and investing in capacity of required products. We committed to replace the Ready Mix concrete plant in Jersey and invested in our road contracting divisions.
A drilling programme has been undertaken on the historical quarry located in the Chouet Headland in Guernsey, to confirm the quality of this strategic mineral resource. The exploration involved five cored holes to prove the quality of the deposit, and 10 open holes that have been used to determine the depth of overburden across the proposed development. This assessment of the reserves has confirmed that the quantity of overburden is consistent with previous estimates and that, subject to satisfactory geotechnical conditions during extraction, up to 4.5 million tonnes of diorite and granodiorite aggregate is confirmed for potential extraction during the lifetime of the quarry. The draft development framework document for the future Chouet Quarry is being prepared for consideration by the Development and Planning Authority of the States of Guernsey and, subject to their approval, could be adopted during 2018.
The second half of 2017 was focused on the creation of a second, precast and prestressed concrete product cluster, which currently has operations in East Anglia and South East England. It became evident to us that an opportunity existed in the creation of a cluster focused on precast and prestressed concrete products, targeting the higher margin subset of that market. A first step in that direction was made through the acquisition of Topcrete Limited ('Topcrete') on 18 October 2017 for GBP12.5 million (net of cash acquired and repatriated to the vendors of Topcrete), comprising GBP9.0 million initial cash consideration and GBP3.5 million deferred cash consideration. Topcrete, via its wholly owned subsidiary Allen (Concrete) Limited ('Allen Concrete'), provides specialist wetcast concrete products in London and the Midlands.
In December 2017, the Group acquired PPGL for GBP10.25 million, comprising GBP9.5 million initial cash consideration and GBP0.75 million deferred consideration, payable by the issue of new Ordinary Shares to the vendor of PPGL. The initial cash consideration was funded by was of a placing of 34 million new Ordinary Shares at a price of 41 pence per share, raising in aggregate GBP13.94 million. PPGL, via its wholly owned subsidiary Poundfield Products Limited ('Poundfield'), provides specialised patented concrete products and systems within the United Kingdom specialising in complex infrastructure projects and retaining wall systems.
With the acquisition of these two businesses, SigmaRoc is now well positioned in the UK market for precast and prestressed products, targeting the industrial and agricultural sectors, as well as housing and specialist infrastructure projects. Both companies are heavily asset backed with significant land holdings and intellectual property in the form of patents and trademarks, making these businesses an ideal fit within the SigmaRoc business model. This cluster has the potential to be extended further to ensure better regional and/or product coverage, while the SigmaRoc team is focused on the integration of both businesses to drive synergies.
The results and progress delivered to date would not have been possible without the help and dedication of the circa 225 employees in the Group today. Some have been with their respective businesses for nearly 50 years, others joined recently, yet all have shown dedication and commitment to making their business a better place to work. Our safety record to date and the improvements achieved on that front are clear evidence of this.
Trading summary
Last year started positively with renewed confidence in the local markets of Jersey and Guernsey. Several housing and commercial projects commenced and volumes picked up in both Islands. In particular, the contracting division in Jersey was able to put in a stronger performance on the back of various road schemes. Several operational and procurement initiatives also started to take effect leading to a stronger first half in terms of profitability and operational EBITDA.
The second half of the year remained on trend, delivering a performance in line with the Board's expectations, yet Guernsey continued to perform below long term trends. A major waste management project in Guernsey was started in the year however delays mean a shift into 2018 of key volumes. Overall, the Channel Islands cluster performed well, delivering GBP26 million in revenue, representing an increase of 11% compared to 2016.
The timing of the Allen Concrete and Poundfield acquisitions in 2017 means their full impact will become apparent in 2018. In 2017, they contributed GBP1.1 million to revenues.
Group underlying EBITDA performance was strong, delivering GBP5.5 million, well ahead of Ronez's performance of 2016, yet incurring for the first time the full overheads attributable to standalone back office functions, as well as the full overhead of a quoted company. Our commitment to ensure shareholder value driven by structural changes to the Channel Islands cluster would at least equate to the overheads required to run a publicly quoted company was achieved.
As a Group we generated a full year underlying net profit after tax of nearly GBP2.1 million equating to an earnings per share of 2.02p. Total capital expenditure ('Capex') was GBP1.7 million, relatively limited when compared to total depreciation charge. This figure includes the investment in MV Ronez, as well as the mandatory drydock and special survey, which declared the ship to be in good condition with another decade of operating life. Group working capital increased GBP3.3m mainly as a result of consolidating the full balance sheet value of our UK acquisitions late in the year. Despite these, underlying Group cash flow from operations of GBP1.4m highlights the cash generating ability of the group.
We were very pleased with the result of the post-acquisition Purchase Price Allocation ('PPA') to assess the fair value of the Ronez assets. When acquired, the book value of Ronez's net assets was approximately GBP22 million. As management evaluated, the PPA process revalued the Ronez assets upward by GBP19 million to GBP41 million, leaving a residual goodwill of only GBP4 million. This is a real testimony to the quality of the business purchased. When combined with the fact that the freehold land assets in our UK precast cluster were valued at over GBP6.5 million, we are confident in the solid asset backing of the businesses purchased.
Strategic approach and outlook
We follow a strategy of building clusters of local and complementary businesses to deliver shareholder value from synergies, operational improvement and competitive advantage. We target assets which deliver a value proposition to customers and have local market presence resulting in improved margins which also have hard asset backing. The income stream is diversified and supported by quality assets that produce aggregates, concrete, precast and prestressed concrete and related products and services.
To date, our strategy is performing well, having completed the first four months of 2018 with Group sales on target, we look forward to further expansion across the year. Poor weather in February and March 2018 affected our product mix, however the diversified portfolio and asset base allowed us to maintain sales in both clusters.
Looking further ahead we, were pleased to announce that we closed a partnership with Tarmac Limited ('Tarmac'), the leading construction materials supplier in the UK for the production of one of our major retaining wall products, the ShuttablocTM system. This partnership will give us exposure to larger scale contracts while freeing us to focus on the core products manufactured at Poundfield.
We are also very pleased with the progress made in delivering on our acquisition pipeline. We continue to see opportunity to expand our operations and footprint through the acquisition, integration and development of high quality local businesses. We see a continued flow of opportunities at attractive prices, which allows us to be selective in determining our next move. We maintain our philosophy that local businesses in our sector are fundamentally better, with strong local branding, that can be built upon as part of a group with management, sales, operational and commercial expertise offering a superior customer proposition.
Overall, we remain optimistic about the future and of achieving further progress in 2018.
Events after the reporting period
A partnership agreement was signed with Tarmac, the UK's leading construction materials group, for the production and commercialisation of Poundfield's Shuttabloc retaining wall system. We believe Tarmac has the required installation capacity and resources to ensure the success of the product nationwide.
This report was approved by the Board on 18 May 2018.
Max Vermorken,
CEO
FINANCE DIRECTOR'S REPORT
I am pleased to report a strong year financially for the Group during which we exceeded our ambitious financial targets, which assisted us in making several key steps toward expanding our business. The year included the acquisitions of Ronez in January 2017, Topcrete in October 2017 and PPGL in December 2017, which are consolidated into our full year results from their respective dates of acquisition.
Our full year therefore generated revenue of GBP27.1 million (2016: GBP24.4 million for Ronez) of which GBP26 million was generated from our Channel Islands operations. The underlying earnings before our share of associated undertakings, depreciation, amortisation and tax ('EBITDA') was GBP5.5 million (2016: GBP4.8 million for Ronez). The profit before taxation for the Group for the year ended 31 December 2017 was GBP0.8 million.
The loss for the Company for the year ended 31 December 2017 before taxation amounts to GBP3.3 million (2016: loss GBP2.4 million). This included approximately GBP1.6 million of exceptional expenditure which is set out in further detail later in this report.
The Board monitors the activities and performance of the Group on a regular basis. The Board uses financial indicators based on budget versus actual to assess the performance of the Group. The indicators set out below will continue to be used by the Board to assess performance over the period to 31 December 2018.
2017 2016
-------------------------- ---------- -----------
Cash and cash equivalents 7,001,058 181,434
-------------------------- ---------- -----------
Revenue 27,073,686 36,000
-------------------------- ---------- -----------
Underlying EBITDA 5,504,375 (2,409,900)
-------------------------- ---------- -----------
Capital expenditure 1,793,164 4,590
-------------------------- ---------- -----------
Cash has increased due to a combination of profitable operations for the year and the December 2017 placing of new ordinary shares net of the acquisition costs for PPGL.
Revenue and underlying EBITDA is in line with expectations and management forecasts. Both were primarily generated by Ronez which was acquired in January 2017, with minor contributions from Topcrete and PPGL which were acquired late in the year.
Capital expenditure includes GBP500,000 for the acquisition of MV Ronez and the balance primarily relates to Ronez, consisting of new plant & machinery and improvements to existing infrastructure.
PPA
BDO UK undertook the Purchase Price Allocation ('PPA') exercise required under IFRS 3 to allocate a fair value to the acquired assets of Ronez.
The PPA process resulted in a reduction of goodwill recorded on the Statement of Financial Position of the Group for Ronez from GBP23 million to GBP4 million. As a consequence of the higher fixed asset value, the depreciation charge for 2017 for Ronez increased compared to earlier estimates.
The Group will undertake a similar exercise for the acquisitions of Topcrete and Poundfield, which will be reported in the financial results for the year ended 31 December 2018.
Non-underlying items
The Company's loss after taxation for 2017 amounts to GBP3.3 million, of which GBP1.6 million relates to non-underlying items, while the Group's non-underlying items totalled GBP1.7 million for the year due to a further GBP0.1 million of restructuring costs incurred in Ronez. These items relate to three categories. First, the Group incurred GBP0.62 million in acquisition related expenses relating to the purchase of Ronez, SigmaGsy, Topcrete and Poundfield. These also include transitional services agreement related costs in relation to Ronez and the required back office infrastructure.
Second, the Group incurred GBP0.3 million in legal and restructuring expenses relating to the bank debt facility and the required group restructuring in the context of the listing of the convertible loan notes on The International Stock Exchange.
Finally, two specific non-underlying expenses were recorded in relation to the reverse takeover of Ronez and re-admission to AIM, comprising a GBP0.44 million cost pertaining to warranty & indemnity insurance taken out by the Company to cover any potential exposure in the share purchase agreement for Ronez and a GBP0.37 million charge relating to the management option incentive scheme, which is a non-cash expense.
Interest and Tax
Net finance costs in the year totalled GBP0.76 million and included interest on the Group's convertible loan notes, bank finance facilities, as well as interest on finance leases and hire purchase agreements.
A tax charge of GBP0.49 million was recognised in the year, resulting in a tax charge on profitability generated from mineral extraction in the Channel Islands and profits generated through the Group's UK based operations.
Earnings per share
Basic earnings per share ('EPS') for the year was 0.34 pence (2016: loss 1.4 pence), struck after the non-underlying items mentioned above. Underlying basic EPS for the year totalled 2.02 pence (2016: loss 1.4 pence).
Statement of financial position
Net assets at 31 December 2017 were GBP50.5 million (2016: net liabilities of GBP1.4 million). During the year the Company issued 100 million new Ordinary Shares at a price of 40 pence per share for the acquisition of Ronez and a further 34 million new Ordinary Shares at a price of 41 pence per share for the acquisition of Poundfield. Net assets are underpinned by mineral, land & buildings and plant & machinery assets of the Group.
Cash flow
Cash consumed by operations was GBP0.36 million. The Group spent GBP60.8 million on acquisitions and GBP1.8 million on capital projects. GBP51.2 million (net of fees) was raised through the issue & allotment of shares in the Company, which was utilised to acquire three companies. The net result was a cash inflow for the year of GBP6.8 million. Net debt at 31 December 2017 was GBP11.8 million (2016: GBPnil).
Bank facilities
The Group secured debt facilities with Santander consisting of a GBP2 million revolving credit facility and an GBP18 million term facility (the 'Santander Term Facility') and a further "accordion" facility of GBP10 million. The Group's bank loans have a maturity date of 29 August 2020 and are subject to a variable interest rate based on LIBOR plus a margin depending on EBITDA. As at 31 December 2017, total undrawn facilities available to the Group amounted to GBP11 million plus the GBP10 million accordion.
The Group's bank facility is subject to covenants which are tested monthly and certified quarterly. These covenants are: Group interest cover ratio set at a minimum of 3.5 times EBITDA; a maximum adjusted leverage ratio, which is the ratio of total net debt including further borrowings such as the convertible loan notes to adjusted EBITDA, of 3.25 in 2018. At 31 December 2017 the Group comfortably complied with its bank facility covenants.
Dividends
Subject to availability of distributable reserves, dividends will be paid to shareholders when the Directors believe it is appropriate and prudent to do so. The focus of the Group at this stage of its development will be on delivering capital growth for shareholders. The Directors therefore do not recommend the payment of a dividend for the year (31 December 2016: nil).
Principal risks and uncertainties
The management of the business and the execution of the Group's strategy are subject to a number of risks. The key business risks affecting the Group are set out below.
Risks are formally reviewed by the Board, and appropriate processes are put in place to monitor and mitigate them. If more than one event occurs, it is possible that the overall effect of such events would compound the possible adverse effects on the Group.
Reserve and resource estimates
The Group's reporting reserves and resources are estimates, and so there is potential uncertainty over the amount of reserves held at the year-end. These may require revision based on future actual production. In addition, there is risk of new leases (in particular Chouet phase 2 and West extension at St John's) not being approved and, as such, leading to revised valuation and future income streams for the operations at Ronez.
Dependence on key personnel
The Group is dependent upon its executive management team. Whilst it has entered into contractual agreements with the aim of securing the services of these personnel, the retention of their services cannot be guaranteed. The development and success of the Group depends on its ability to recruit and retain high quality and experienced staff. The loss of the service of key personnel or the inability to attract additional qualified personnel as the Group grows could have an adverse effect on future business and financial conditions.
Uninsured risk
The Group may become subject to liability for hazards that cannot be insured against or third party claims that exceed the insurance cover. The Group may also be disrupted by a variety of risks and hazards that are beyond its control, including geological, geotechnical and seismic factors, environmental hazards, industrial accidents, occupation and health hazards and weather conditions or other acts of God.
Funding risk
The only sources of funding currently available to the Group are through the issue of additional equity capital in the Company or through debt financing. The Company's ability to raise further funds will depend on the success of the Group's activities and its investment strategy. The Group may not be successful in procuring funds on terms which are attractive and, if such funding is unavailable, the Group may be required to reduce the scope of its investment activities.
Financial Risks
The Group's operations expose it to a variety of financial risks that can include market risk (including foreign currency, price and interest rate risk), credit risk, and liquidity risk. The Group has a risk management programme in place that seeks to limit the adverse effects on the financial performance of the Group by monitoring levels of debt finance and the related finance costs. The Group does not use derivative financial instruments to manage interest rate costs and, as such, no hedge accounting is applied.
Details of the Group's financial risk management policies are set out in Note 3 to the Financial Statements.
Principal Activity
The principal activity of the Company is to make investments and/or acquire businesses and assets in the construction materials sector. The principal activity of the Group is production of high quality aggregates and supply of value-added construction materials.
Board composition and head office
The Board comprises three Executive Directors and three Non-Executive Directors. The Corporate Head Office of the Company is located in London, UK.
Directors & Directors' Interests
The Directors who served during the year ended 31 December 2017 are shown below and had, at that time the following beneficial interests in the shares of the Company:
31 December 1 January 2017
2017
------------------- -----------------
Ordinary Options Ordinary Options
Shares Shares
-------------------- -------- --------- -------- -------
Max Vermorken 183,032 4,368,188 20,032 -
-------------------- -------- --------- -------- -------
David Barrett 760,032 1,879,513 20,032 -
-------------------- -------- --------- -------- -------
Dominic Traynor - 26,014 - -
-------------------- -------- --------- -------- -------
Garth Palmer (1) 10,000 26,014 - -
-------------------- -------- --------- -------- -------
Patrick Dolberg (1) 75,000 304,580 - -
-------------------- -------- --------- -------- -------
Gary Drinkwater (1) - - - -
-------------------- -------- --------- -------- -------
(1) Appointed on 5 January 2017.
Further details on options can be found in Note 26 to the Financial Statements.
Corporate Responsibility
Environmental
SigmaRoc undertakes its activities in a manner that minimises or eliminates negative environmental impacts and maximises positive impacts of an environmental nature.
Health and safety
SigmaRoc operates a comprehensive health and safety programme to ensure the wellness and security of its employees. The control and eventual elimination of all work related hazards requires a dedicated team effort involving the active participation of all employees. A comprehensive health and safety programme is the primary means for delivering best practices in health and safety management. This programme is regularly updated to incorporate employee suggestions, lessons learned from past incidents and new guidelines related to new projects with the aim of identifying areas for further improvement of health and safety management. This results in continuous improvement of the health and safety programme. Employee involvement is regarded as fundamental in recognising and reporting unsafe conditions and avoiding events that may result in injuries and accidents.
Internal Controls
The Board recognises the importance of both financial and non-financial controls and has reviewed the Group's control environment and any related shortfalls during the year. Since the Group was established, the Directors are satisfied that, given the current size and activities of the Group, adequate internal controls have been implemented. Whilst they are aware that no system can provide absolute assurance against material misstatement or loss, in light of the current activity and proposed future development of the Group, continuing reviews of internal controls will be undertaken to ensure that they are adequate and effective.
Further details of corporate governance can be found in the Corporate Governance Report.
Going Concern
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and, therefore, continue to adopt the going concern basis in preparing the Annual Report and Financial Statements. Further details on their assumptions and their conclusion thereon are included in the statement on going concern included in Note 2.3 to the Financial Statements.
Directors' and Officers' Indemnity Insurance
The Company has made qualifying third-party indemnity provisions for the benefit of its Directors and Officers. These were made during the year and remain in force at the date of this report.
Events after the reporting period
Events after the reporting period are set out in Note 36 to the Financial Statements.
Policy and Practice on Payment of Creditors
The Group agrees terms and conditions for its business transactions with suppliers. Payment is then made in accordance with these terms, subject to the terms and conditions being met by the supplier. As at 31 December 2017, the Company had an average of 31 days (2016: 237 days) purchases outstanding in trade payables and the Group had an average of 39.
Future Developments
Details of future developments for the Group are disclosed in the Chairman's Statement and the CEO's Strategic Report.
Provision of Information to Auditor
So far as each of the Directors is aware at the time this report is approved:
-- there is no relevant audit information of which the Group's auditor is unaware; and
-- the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.
Auditor
PKF Littlejohn LLP has signified its willingness to continue in office as auditor.
This report was approved by the Board on 18 May 2018 and signed on its behalf.
Garth Palmer
CFO
Year ended 31 December Year ended 31 December
2017 2016
Non-underlying* Non-underlying*
(Note (Note
Underlying 11) Total Underlying 11) Total
Continued GBP GBP
operations Note GBP GBP GBP GBP
----------------- ---- ------------ --------------- ------------ ----------- --------------- -----------
Revenue 7 27,073,686 - 27,073,686 36,000 - 36,000
------------ --------------- ------------ ----------- --------------- -----------
Cost of sales 8 (21,120,246) - (21,120,246) - - -
Profit from
operations 5,953,440 - 5,953,440 36,000 - 36,000
------------ --------------- ------------ ----------- --------------- -----------
Administrative
expenses 8 (2,593,628) (1,676,126) (4,269,754) (1,975,869) - (1,975,869)
Net finance
(expense)/income 12 (704,816) (56,564) (761,380) 6,473 - 6,473
Other net
(losses)/gains 13 (70,088) - (70,088) (469,673) - (469,673)
Foreign Exchange (2,724) - (2,724) (548) (548)
Profit before
tax 2,582,184 (1,732,690) 849,494 (2,403,617) - (2,403,617)
------------ --------------- ------------ ----------- --------------- -----------
Tax expense 14 (494,036) - (494,036) (115) - (115)
Profit/(Loss) 2,088,148 (1,732,690) 355,458 (2,403,732) - (2,403,732)
------------ --------------- ------------ ----------- --------------- -----------
Profit/(Loss)
attributable
to:
Owners of the
parent 2,088,148 (1,732,690) 355,458 (2,403,732) - (2,403,732)
------------ --------------- ------------
2,088,148 (1,732,690) 355,458 (2,403,732) - (2,403,732)
------------ --------------- ------------ ----------- --------------- -----------
Basic earnings
per share
attributable
to owners of
the parent
(expressed
in pence per
share) 28 2.02 (1.68) 0.34 (1.40) - (1.40)
------------ --------------- ------------ ----------- --------------- -----------
Diluted earnings
per share
attributable
to owners of
the parent
(expressed
in pence per
share) 28 1.79 (1.48) 0.30 (1.40) - (1.40)
------------ --------------- ------------ ----------- --------------- -----------
* Non-underlying items represent acquisition related expenses, certain finance costs, share option expense and warranty & indemnity insurance. See Note 11 for more information.
Year Year
ended ended
31 December 31 December
2017 2016
Note GBP GBP
---------------------------------------- ----- ------------ ------------
Profit/(Loss) for the year 355,458 (2,403,732)
------------ ------------
Other comprehensive income:
Items that will or may be reclassified
to profit or loss:
Other comprehensive income - -
- -
------------ ------------
Total comprehensive income 355,458 (2,403,732)
------------ ------------
Total comprehensive income attributable
to:
Owners of the parent 355,458 (2,403,732)
Total comprehensive income for
the period 355,458 (2,403,732)
------------ ------------
Consolidated Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2017 2016 2017 2016
Note GBP GBP GBP GBP
---------------------------- ---- ----------- ----------- ----------- -----------
Non-current assets
Property, plant and
equipment 15 46,556,298 4,515 3,855 4,515
Intangible assets 16 18,955,402 - - -
Investments in subsidiary
undertakings 17 - - 57,267,057 -
65,511,700 4,515 57,270,912 4,515
----------- ----------- ----------- -----------
Current assets
Trade and other receivables 18 4,667,803 154,384 74,211 154,384
Inventories 19 4,441,663 - - -
Cash and cash equivalents 20 7,001,058 181,434 211,823 181,434
16,110,524 335,818 286,034 335,818
----------- ----------- ----------- -----------
Total assets 81,622,224 340,333 57,556,946 340,333
----------- ----------- ----------- -----------
Current liabilities
Trade and other payables 21 10,045,397 1,770,357 684,167 1,770,357
Current tax payable 621,714 - - -
Borrowings 22 92,411 - - -
10,759,522 1,770,357 684,167 1,770,357
----------- ----------- ----------- -----------
Non-current liabilities
Borrowings 22 18,679,901 - 10,000,000 -
Deferred tax liabilities 1,015,823 - - -
Provisions 23 632,011 - - -
----------- ----------- ----------- -----------
20,327,735 - 10,000,000 -
----------- ----------- ----------- -----------
Total Liabilities 31,087,257 1,770,357 10,684,167 1,770,357
----------- ----------- ----------- -----------
Net assets 50,534,967 (1,430,024) 46,872,779 (1,430,024)
----------- ----------- ----------- -----------
Equity attributable
to owners of the parent
Share capital 25 1,367,056 270,555 1,367,056 270,555
Share premium 25 50,161,904 266,667 50,161,904 266,667
Share option reserve 26 352,877 - 352,877 -
Other reserves 27 1,361,718 1,117,178 1,361,718 1,117,178
Retained earnings (2,708,588) (3,084,424) (6,370,776) (3,084,424)
----------- ----------- ----------- -----------
Total equity 50,534,967 (1,430,024) 46,872,779 (1,430,024)
----------- ----------- ----------- -----------
The Company has elected to take the exemption under Section 408 of the Companies Act 2006 from presenting the Company's Income Statement and Statement of Comprehensive Income.
The loss for the Company for the year ended 31 December 2017 was GBP3,306,730 (year ended 31 December 2016: GBP2,403,732).
The Financial Statements were approved and authorised for issue by the Board of Directors on 18 May 2018 and were signed on its behalf by Garth Palmer, Director.
Share
Share Share option Other Retained
capital premium reserve reserves earnings Total
Note GBP GBP GBP GBP GBP GBP
------------------------ ---- --------- ----------- -------- --------- ----------- -----------
Balance as at
1 January 2016 579,361 - - 600,039 (680,692) 498,708
--------- ----------- -------- --------- ----------- -----------
Loss for the year - - - - (2,403,732) (2,403,732)
Total comprehensive
income for the
year - - - - (2,403,732) (2,403,732)
--------- ----------- -------- --------- ----------- -----------
Proceeds from
share issues 25 208,333 291,667 - - - 500,000
Issue costs - (25,000) - - - (25,000)
TeleMessage disposal (169,522) - - 169,522 - -
Capital re-organisation (347,617) - - 347,617 - -
--------- ----------- -------- --------- ----------- -----------
Transactions with
owners, recognised
directly in equity (308,806) 266,667 - 517,139 - 475,000
--------- ----------- -------- --------- ----------- -----------
Balance as at
31 December 2016 270,555 266,667 - 1,117,178 (3,084,424) (1,430,024)
--------- ----------- -------- --------- ----------- -----------
Balance as at
1 January 2017 270,555 266,667 - 1,117,178 (3,084,424) (1,430,024)
--------- ----------- -------- --------- ----------- -----------
Profit for the
year - - - - 355,458 355,458
Total comprehensive
income for the
period - - - - 355,458 355,458
--------- ----------- -------- --------- ----------- -----------
Contributions
by and distributions
to owners
Issue of ordinary
shares 25 1,341,041 52,624,974 - - - 53,966,015
Issue costs 25 - (2,729,737) - - - (2,729,737)
Share option charge - - 352,877 - 20,378 373,255
Share consolidation 25 (244,540) - - 244,540 - -
Total contributions
by and distributions
to owners 1,096,501 49,895,237 352,877 244,540 20,378 51,609,533
--------- ----------- -------- --------- ----------- -----------
Balance as at
31 December 2017 1,367,056 50,161,904 352,877 1,361,718 (2,708,588) 50,534,967
--------- ----------- -------- --------- ----------- -----------
Share
Share Share option Other Retained
capital premium reserve reserves earnings Total
Note GBP GBP GBP GBP GBP GBP
------------------------ ---- --------- ----------- -------- --------- ----------- -----------
Balance as at
1 January 2016 579,361 - - 600,039 (680,692) 498,708
--------- ----------- -------- --------- ----------- -----------
Loss for the year - - - - (2,403,732) (2,403,732)
Total comprehensive
income for the
year - - - - - -
--------- ----------- -------- --------- ----------- -----------
Proceeds from
share issues 208,333 291,667 - - - 500,000
Issue costs - (25,000) - - - (25,000)
TeleMessage disposal (169,522) - - 169,522 - -
Capital re-organisation (347,617) - - 347,617 - -
--------- ----------- -------- --------- ----------- -----------
Transactions with
owners, recognised
directly in equity (308,806) 266,667 - 517,139 (2,403,732) (1,928,732)
--------- ----------- -------- --------- ----------- -----------
Balance as at
31 December 2016 270,555 266,667 - 1,117,178 (3,084,424) (1,430,024)
--------- ----------- -------- --------- ----------- -----------
Balance as at
1 January 2017 270,555 266,667 - 1,117,178 (3,084,424) (1,430,024)
--------- ----------- -------- --------- ----------- -----------
Profit/(Loss) - - - - (3,306,730) (3,306,730)
Total comprehensive
income for the
period - - - - (3,306,730) (3,306,730)
--------- ----------- -------- --------- ----------- -----------
Contributions
by and distributions
to owners
Issue of ordinary
shares 25 1,341,041 52,624,974 - - - 53,966,015
Issue costs 25 - (2,729,737) - - - (2,729,737)
Share option charge - - 352,877 - 20,378 373,255
Share consolidation 25 (244,540) - - 244,540 - -
Total contributions
by and distributions
to owners 1,096,501 49,895,237 352,877 244,540 20,378 51,609,533
--------- ----------- -------- --------- ----------- -----------
Balance as at
31 December 2017 1,367,056 50,161,904 352,877 1,361,718 (6,370,776) 46,872,779
--------- ----------- -------- --------- ----------- -----------
Consolidated Company
-------------------------- --------------------------
Year Year Year Year
ended ended ended ended
31 December 31 December 31 December 31 December
2017 2016 2017 2016
Note GBP GBP GBP GBP
------------------------------ ---- ------------ ------------ ------------ ------------
Cash flows from operating
activities
Profit/(Loss) 355,458 (2,403,732) (3,306,730) (2,403,732)
Adjustments for:
15
Depreciation and amortisation 16 2,217,375 75 2,433 75
Impairment of Investment - 500,000 - 500,000
Share option expense 352,877 - 352,877 -
Share based payments 5,979 - 5,979 -
(Increase)/decrease
in trade and other
receivables 325,535 (101,384) 80,173 (101,384)
Increase in inventories (290,440) - - -
(Decrease)/increase
in trade and other
payables (3,328,733) 1,708,749 (1,071,791) 1,708,749
Net cash flows from
operating activities (361,949) (296,292) (3,937,059) (296,292)
------------ ------------ ------------ ------------
Investing activities
Purchase of property,
plant and equipment 15 (1,793,164) (4,590) (1,773) (4,590)
Cash paid for acquisition
of subsidiaries (net
of cash acquired) (60,821,496) - (1) -
Net loans with subsidiaries - - (57,267,056) -
Net cash used in investing
activities (62,614,660) (4,590) (57,268,830) (4,590)
------------ ------------ ------------ ------------
Financing activities
Proceeds from share
issue 53,966,015 500,000 53,966,015 500,000
Cost of share issue (2,729,737) (25,000) (2,729,737) (25,000)
Proceeds from debt
issue 10,000,000 - 10,000,000 -
Proceeds from borrowings 9,000,000 - - -
Cost of borrowings (427,640) - - -
Repayment of finance
lease obligations (12,405) - - -
------------ ------------ ------------ ------------
Net cash used in financing
activities 69,796,233 475,000 61,236,278 475,000
------------ ------------ ------------ ------------
Net increase in cash
and cash equivalents 6,819,624 174,118 30,389 174,118
Cash and cash equivalents
at beginning of period 181,434 7,316 181,434 7,316
Cash and cash equivalents
and end of period 20 7,001,058 181,434 211,823 181,434
------------ ------------ ------------ ------------
Major non-cash transactions
During the year ended 31 December 2017 GBP1.5 million of the acquisition cost for Topcrete was settled via off set against sums due form the vendors.
1. General information
The principal activity of SigmaRoc plc (the 'Company') is to make investments and/or acquire projects in the construction materials sector and through its subsidiaries (together the 'Group') is the production of high quality aggregates and supply of value-added construction materials. The Company's shares are admitted to trading on the AIM Market of the London Stock Exchange ('AIM'). The Company is incorporated and domiciled in the United Kingdom.
The address of its registered office is 7-9 Swallow Street, London, W1B 4DE.
2. Accounting policies
The principal accounting policies applied in the preparation of these Financial Statements are set out below ('Accounting Policies' or 'Policies'). These Policies have been consistently applied to all the periods presented, unless otherwise stated.
2.1. Basis of preparing the financial statements
The Financial Statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') and IFRIC Interpretations Committee ('IFRS IC') as adopted by the European Union. The Financial Statements have also been prepared under the historical cost convention.
The Financial Statements are presented in UK Pounds Sterling rounded to the nearest pound.
The preparation of Financial Statements in conformity with IFRS's requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's Accounting Policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Information are disclosed in Note 4.
a) Changes in accounting policy i) New and amended standards adopted by the Group
There are no IFRSs or IFRIC interpretations that were effective for the first time for the financial year beginning 1 January 2017 that had a material impact on the Group or Company.
ii) New standards, amendments and interpretations in issue but not yet effective or not yet endorsed and not early adopted
Standards, amendments and interpretations that are not yet effective and have not been early adopted are as follows:
Standard Impact on initial application Effective
date
--------------------- ------------------------------ -----------
IFRS 9 Financial Instruments 1 January
2018
--------------------- ------------------------------ -----------
IFRS 15 Revenue from Contracts 1 January
with Customers 2018
--------------------- ------------------------------ -----------
IFRS 16 Leases 1 January
2019
--------------------- ------------------------------ -----------
IFRS 2 (Amendments) Share-based payments 1 January
- classification and 2018
measurement
--------------------- ------------------------------ -----------
Annual Improvements 2014-2016 Cycle 1 January
2018
--------------------- ------------------------------ -----------
IFRIC Interpretation Foreign currency transactions 1 January
22 and advanced 2018
consideration
--------------------- ------------------------------ -----------
IFRIC 23 Uncertainty over Income *1 January
tax treatments 2018
--------------------- ------------------------------ -----------
IFRS 9 (Amendments) Prepayment features *1 January
with negative 2019
compensation
--------------------- ------------------------------ -----------
IAS 28 (Amendments) Long term interests *1 January
in associates and joint 2019
ventures
--------------------- ------------------------------ -----------
(*) Subject to EU endorsement
The Group is evaluating the impact of the new and amended standards above.
The operating leases currently held will be subject to IFRS 16 changes as all lease (subject to certain criteria) will be deemed finance leases. The impact of this will be monitored by management. All other standards are not expected to have a material impact on the Group's results or shareholders' funds.
2.2. Basis of consolidation
The Consolidated Financial Statements consolidate the Financial Statements of the Company and the accounts of all of its subsidiary undertakings for all periods presented.
Subsidiaries are 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.
The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred unless they result from the issuance of shares, in which case they are offset against the premium on those shares within equity.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.
Investments in subsidiaries are accounted for at cost less impairment.
Where considered appropriate, adjustments are made to the financial information of subsidiaries to bring the accounting policies used into line with those used by other members of the Group. All intercompany transactions and balances between Group enterprises are eliminated on consolidation.
2.3. Going concern
The Financial Statements have been prepared on a going concern basis. The Directors have a reasonable expectation that the Group and Company have 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 Financial Statements.
2.4. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. 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 that makes strategic decisions.
2.5. Foreign currencies
a) Functional and presentation currency
Items included in the Financial Statements are measured using the currency of the primary economic environment in which the entity operates (the 'functional currency'). The Financial Statements are presented in Pounds Sterling, rounded to the nearest pound, which is the Group's functional currency.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where such items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within 'finance income or costs'. All other foreign exchange gains and losses are presented in the income statement within 'Other net gains/(losses)'.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets measured at fair value, such as equities classified as available for sale, are included in other comprehensive income.
2.6. Intangible assets
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognised directly in the Income Statement.
As reported within the CEO's strategic report, a PPA was carried out to assess the fair value of the assets acquired in Ronez Limited as at the completion date. As a result of this exercise, goodwill decreased from GBP23m to GBP4m with the corresponding movement being with land and minerals, and fixed assets. The current accounting policies regarding the subsequent treatment of land and minerals, and fixed assets will apply to fair value uplift attributable to the PPA.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Other intangibles consist of capitalised development costs for assets produced that assist in the operations of the Group and incur revenue. These are amortised at 10% reducing balance. Impairment reviews are performed annually. Where the benefit of the intangible ceases or has been superseded, these are written off the income statement.
2.7. Property, plant and equipment
Property, plant and equipment is stated at cost, plus any purchase price allocation uplift, less accumulated depreciation and any accumulated impairment losses. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the Income Statement during the financial period in which they are incurred.
Depreciation is provided on all property, plant and equipment to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight-line basis (except the Poundfield group which uses the declining balance method) at the following annual rates:
Office equipment 12.5% - 50% Buildings 0 - 2% Plant and machinery 5% - 20% Furniture and vehicles 7.5% - 33.3% Construction in progress 0%
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised within 'Other net gains/(losses)' in the Income Statement.
2.8. Land, mineral rights and restoration costs
Land, quarry development costs, which include directly attributable construction overheads and mineral rights are recorded at cost plus any purchase price allocation uplift. Land and quarry development are depreciated and amortised, respectively, using the units of production method, based on estimated recoverable tonnage.
The depletion of mineral rights and depreciation of restoration costs are expensed by reference to the quarry activity during the period and remaining estimated amounts of mineral to be recovered over the expected life of the operation.
2.9. Financial assets
Classification
The Group's financial assets consist of loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges.
Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.
(ii) 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 balance sheet date. These are classified as non-current assets. The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents at the year-end.
Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade date - the date on which the Group commits to purchasing or selling the asset. Financial assets carried at fair value through profit or loss is initially recognised at fair value, and transaction costs are expensed in the Income Statement. Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred, and the Group has transferred substantially all of the risks and rewards of ownership.
Loans and receivables are subsequently carried at amortised cost using the effective interest method.
Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss are presented in the Income Statement within "Other (Losses)/Gains" in the period in which they arise.
Impairment of Financial Assets
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset, or a group of financial assets, is impaired. A financial asset, or a group of financial assets, is impaired and impairment losses are incurred, only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the assets (a "loss event"), and that loss event (or events) has an impact on the estimated future cash flows of the financial asset, or group of financial assets, that can be reliably estimated.
The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:
-- significant financial difficulty of the issuer or obligor; -- a breach of contract, such as a default or delinquency in interest or principal repayments;
-- the Group, for economic or legal reasons relating to the borrower's financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; and
-- it becomes probable that the borrower will enter bankruptcy or other financial reorganisation.
The Group first assesses whether objective evidence of impairment exists.
The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred), discounted at the financial asset's original effective interest rate. The asset's carrying amount is reduced and the loss is recognised in the Income Statement.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the Income Statement.
2.10. Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.
Weighted average cost is used to determine the cost of ordinarily interchangeable items.
2.11. Trade receivables
Trade receivables are amounts due from third parties in the ordinary course of business. If collection is expected in one year or less they are classified as current assets. If not, they are presented as non-current assets.
2.12. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and are subject to an insignificant risk of changes in value.
2.13. Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
2.14. Reserves
Share premium - the reserve for shares issued above the nominal value. This also includes the cost of share issues that occurred during the year.
Retained earnings - the retained earnings reserve includes all current and prior periods retained profit and losses.
Share option reserve - represents share options awarded by the Company.
Other reserves comprise the following:
Capital redemption reserve - the capital redemption reserve is the amount equivalent to the nominal value of shares redeemed by the Group.
Deferred shares - are shares that effectively do not have any rights or entitlements.
2.15. 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. If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method.
2.16. Provisions
The Group provides for the costs of restoring a site where a legal or constructive obligation exists. The estimated future costs for known restoration requirements are determined on a site-by-site basis and are calculated based on the present value of estimated future costs.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). The increase in provisions due to the passage of time is included in the consolidated statement of profit or loss and comprehensive loss.
2.17. Borrowings
Bank and other borrowings
Interest-bearing bank loans and overdrafts and other loans are recognised initially at fair value less attributable transaction costs. All borrowings are subsequently stated at amortised cost with the difference between initial net proceeds and redemption value recognised in the Income Statement over the period to redemption on an effective interest basis.
Compound financial instruments
Compound financial instruments issued by the Group for cash comprise convertible notes that can be converted to share capital at the option of the holder and include a host liability together with a derivative.
The derivative portion is initially recorded at fair value and the liability component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the derivative component.
Subsequent to their initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The derivative component of a compound financial instrument is held at fair value where material, determined using a Black Scholes model.
2.18. Taxation
Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
2.19. Non-underlying items
Non-underlying 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 Group. They are items that are material, not expected to be recurring and do not relate to the ongoing operations of the Group's business.
2.20. Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods or services supplied in course of ordinary business, stated net of discounts, returns and value added taxes. The Group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for the Group's activities described below.
Revenue from the sale of goods is recognised when delivery has taken place and the transfer of risks and rewards of ownership has been completed. The significant risks and rewards of products sold are transferred according to the specific delivery terms that have been formally agreed with the customer, generally upon delivery when the bill of lading is signed as evidence that they have accepted the product delivered to them.
Revenue from the provision of services is recognised as the services are rendered, in accordance with customer contractual terms.
2.21. Finance income
Interest income is recognised using the effective interest method.
2.22. Employee benefits - defined contribution plans
The Group maintains defined contribution plans for which the Group pays fixed contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis and will have no legal or constructive obligation to pay further amounts. The Group's contributions to defined contribution plans are charged to the Income Statement in the period to which the contributions relate.
2.23. Share based payments
The Group operates a number of equity-settled, share-based schemes, under which the entity receives services from employees or third party suppliers as consideration for equity instruments (options and warrants) of the Group. The fair value of the third party suppliers' services received in exchange for the grant of the options is recognised as an expense in the Statement of Comprehensive Income or charged to equity depending on the nature of the service provided. The value of the employee services received is expensed in the Income Statement and its value is determined by reference to the fair value of the options granted:
-- including any market performance conditions;
-- excluding the impact of any service and non-market performance vesting conditions (for example, profitability or sales growth targets, or remaining an employee of the entity over a specified time period); and
-- including the impact of any non-vesting conditions (for example, the requirement for employees to save).
Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense or charge is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Income Statement or equity as appropriate, with a corresponding adjustment to a separate reserve in equity.
When the options are exercised, the Company issues new shares. The proceeds received, net of any directly attributable transaction costs, are credited to share capital (nominal value) and share premium when the options are exercised.
2.24. Leases
The Group leases certain plant and equipment. Leases of plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised on the lease's commencement at the lower of the fair value of the leased assets 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 long-term borrowings. 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 obtained under finance leases are depreciated over their useful lives.
Leases of assets under which a significant amount of the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Operating lease payments are charged to the income statement on a straight-line basis over the period of the respective leases.
3. Financial risk management
3.1. Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.
Risk management is carried out by the UK based management team under policies approved by the Board of Directors.
a) Market risk
The Group is exposed to market risk, primarily relating to interest rate, foreign exchange and commodity prices. The Group does not hedge against market risks as the exposure is not deemed sufficient to enter into forward contracts. The Group has not sensitised the figures for fluctuations in interest rates, foreign exchange or commodity prices as the Directors are of the opinion that these fluctuations would not have a significant impact on the Financial Statements at the present time. The Directors will continue to assess the effect of movements in market risks on the Group's financial operations and initiate suitable risk management measures where necessary.
b) Credit risk
Credit risk arises from cash and cash equivalents as well as exposure to customers including outstanding receivables. To manage this risk, the Group periodically assesses the financial reliability of customers and counterparties.
No credit limits were exceeded during the period, and management does not expect any losses from non-performance by these counterparties.
c) Liquidity risk
The Group's continued future operations depend on the ability to raise sufficient working capital through the issue of equity share capital or debt. The Directors are reasonably confident that adequate funding will be forthcoming with which to finance operations. Controls over expenditure are carefully managed.
31 December
2017
-------------------- --------
Less Between Between
than 1 and 2 and Over
1 year 2 years 5 years 5 years
GBP GBP GBP GBP
------------------------- ---------- -------- ---------- --------
Borrowings 92,411 107,541 18,572,360 -
Trade and other payables 10,563,045 - - -
10,655,456 107,541 18,572,360 -
---------- -------- ---------- --------
3.2. Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, in order to enable the Group to continue its construction material investment activities, and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the issue of shares or sell assets to reduce debts.
The Group defines capital based on the total equity of the Company. The Group monitors its level of cash resources available against future planned operational activities and the Company may issue new shares in order to raise further funds from time to time.
The gearing ratio at 31 December 2017 is as follows:
Consolidated
------------------------
31 December 31 December
2017 2016
GBP GBP
-------------------------------------- ----------- -----------
Total borrowings (Note 22) 18,772,312 -
Less: Cash and cash equivalents (Note
20) (7,001,058) -
----------- -----------
Net debt 11,771,254 -
Total equity 50,534,697 -
Total capital 62,305,951 -
----------- -----------
Gearing ratio 0.19
----------- -----------
4. Critical accounting estimates
The preparation of the Financial Statements in conformity with IFRSs requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amount of expenses during the year. Actual results may vary from the estimates used to produce these Financial Statements.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Significant items subject to such estimates and assumptions include, but are not limited to:
a) Land and mineral reserves
The determination of fair values of land and mineral reserves are carried out by appropriately qualified persons in accordance with the Appraisal and Valuation standards published by the Royal Institution of Chartered Surveyors. The estimation of recoverable reserves is based upon factors such as estimates of commodity prices, future capital requirements and production costs along with geological assumptions and judgements.
The PPA included the revaluation of land and minerals based on the estimated remaining reserves within St John's and Les Vardes quarries. These are then valued based on the estimated remaining life of the mines and the net present value for the price per tonnage.
b) Estimated impairment of goodwill
The determination of fair values of assets acquired and liabilities assumed in a business combination involves the use of estimates and assumptions such as discount rates used and valuation models applied as well as goodwill allocation.
Goodwill has a carrying value of GBP17,827,833 as at 31 December 2017 (31 December 2016: GBPnil). The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2.6 to the Financial Statements.
Management has concluded that an impairment charge was not necessary to the carrying value of goodwill for the period ended 31 December 2017 (31 December 2016: GBPnil). See Note 2.6 to the Financial Statements.
c) Restoration provision
The Group's provision for restoration costs has a carrying value at 31 December 2017 of GBP632,011 and relate to the removal of the plant and equipment held at St John's and Les Vardes quarry. The cost of removal was determined by management for the removal and disposal of the machinery at the point of which the reserves are no longer available for business use.
The restoration provision is firstly inflated using the current rate of inflation as per the Bank of England. The future restoration provision is discounted to its present value based on the Group's incremental cost of borrowing.
d) Fair value of share options
The Group has made awards of options and warrants over its unissued share capital to certain Directors and employees as part of their remuneration packages. Certain warrants have also been issued to suppliers for various services received.
The valuation of these options and warrants involves making a number of critical estimates relating to price volatility, future dividend yields, expected life of the options and forfeiture rates. These assumptions have been described in more detail in Note 26 to the Financial Statements.
5. Dividends
No dividend has been declared or paid by the Group during the year ended 31 December 2017 (2016: nil).
6. Segment information
Management has determined the operating segments based on reports reviewed by the Board of Directors that are used to make strategic decisions. During the periods presented the Group had interests in three key geographical segments, being the United Kingdom, Guernsey and Jersey. Activities in the United Kingdom, Guernsey and Jersey relate to the production and sale of construction material products and services.
31 December 2017
----------
United
Kingdom Jersey Guernsey Total
GBP GBP GBP GBP
------------------------------- ---------- ---------- ---------- ----------
Revenue 1,074,378 15,707,082 10,292,226 27,073,686
---------- ---------- ---------- ----------
Profit/(loss) from operations
per reportable segment 167,344 3,172,563 2,613,533 5,953,440
---------- ---------- ---------- ----------
Additions to non-current
assets 21,424,128 16,516,826 27,566,231 65,507,185
Reportable segment assets 31,193,850 24,354,752 26,073,622 81,622,224
Reportable segment liabilities 27,671,645 2,004,249 1,411,363 31,087,257
---------- ---------- ---------- ----------
31 December 2016
United
Kingdom Jersey Guernsey Total
GBP GBP GBP GBP
------------------------------- --------- ------ -------- ---------
Revenue 36,000 - - 36,000
--------- ------ -------- ---------
Profit from operations
per reportable segment 36,000 - - 36,000
--------- ------ -------- ---------
Additions to non-current
assets 4,590 - - 4,590
Reportable segment assets 340,333 - - 340,333
Reportable segment liabilities 1,770,357 - - 1,770,357
--------- ------ -------- ---------
The only segment in 2016 was the United Kingdom as the Ronez acquisition was completed on 5 January 2017.
7. Revenue
Consolidated
------------------------
31 December 31 December
2017 2016
GBP GBP
--------------------- ----------- -----------
Upstream products 5,223,228 -
Value added products 14,524,305 -
Value added services 7,219,518 36,000
Other 106,635 -
27,073,686 36,000
----------- -----------
Upstream products revenue relates to the sale of aggregates and cement. Value added products is the sale of finished goods that have undertaken a manufacturing process within each of the subsidiaries. Value added services consists of the transportation, installation and contracting services provided.
8. Expenses by nature
Consolidated
------------------------
31 December 31 December
2017 2016
GBP GBP
-------------------------------------- ----------- -----------
Cost of sales
Changes in inventories of finished
goods and work in progress (96,628) -
Production cost of goods sold 8,493,169 -
Distribution and selling expenses 1,426,286 -
Raw materials and consumables used 759,492 -
Employee benefit expenses 8,136,776 -
Depreciation and amortisation expense 2,217,375 -
Other costs of sale 183,776 -
Total cost of sales 21,120,246 -
----------- -----------
Administrative expenses
Operational admin expenses 1,426,500 -
Corporate admin expenses 2,843,254 1,975,869
Total administrative expenses 4,269,754 1,975,869
----------- -----------
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company's auditors and its associates:
Consolidated
------------------------
31 December 31 December
2017 2016
GBP GBP
------------------------------------------- ----------- -----------
Fees payable to the Company's auditor
and its associates for the audit
of the Company and Consolidated Financial
Statements 55,000 20,000
Fees payable to the Company's auditor
and its associates for tax services 26,570 1,000
Fees paid or payable to the Company's
auditor and its associates for due
diligence and transactional services 108,077 -
Fees paid to the Company's auditor
for other services 9,470 -
190,247 21,000
----------- -----------
9. Employee benefits expense
Consolidated Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2017 2016 2017 2016
Staff costs (excluding
directors) GBP GBP GBP GBP
------------------------------ ----------- ----------- ----------- -----------
Salaries and wages 7,587,057 - 106,250 -
Post-employment benefits - - - -
Social security contributions
and similar taxes 515,595 - 13,444 -
Other employment costs 366,704 - 10,000 -
8,469,356 - 129,694 -
----------- ----------- ----------- -----------
Consolidated Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2017 2016 2017 2016
Average number of FTE
employees by function # # # #
----------------------- ----------- ----------- ----------- -----------
Management 14 - 1 -
Operations 130 - - -
Administration 18 - - -
162 - 1 -
----------- ----------- ----------- -----------
10. Directors' remuneration
31 December
2017
------------------ -------
Directors' Pension Options
fees benefits issued Total
GBP GBP GBP GBP
------------------------ ---------- --------- ------- -------
Executive Directors
David Barrett (1) 120,000 - 45,417 165,417
Garth Palmer (4) 40,000 4,000 5,094 49,094
Max Vermorken (1) 150,000 15,429 102,577 268,006
Non-executive Directors
Dominic Traynor (1) 25,000 2,929 5,094 33,023
Gary Drinkwater (4) 25,000 - - 25,000
Patrick Dolberg (4) 24,723 - 5,871 30,594
384,723 22,358 164,053 571,134
---------- --------- ------- -------
31 December
2016
------------------ ------
Directors' Pension Options
fees benefits issued Total
GBP GBP GBP GBP
------------------------ ---------- --------- ------- ------
Executive Directors
David Barrett (1) 4,290 - - 4,290
Guy Levit (3) 2,500 - - 2,500
Garth Palmer (4) - - - -
Max Vermorken (1) 4,290 - - 4,290
Non-executive Directors
Dominic Traynor (1) 4,290 - - 4,290
David Rubner (2) 2,500 - - 2,500
Gary Drinkwater (4) - - - -
Irvin Fishman (2) - - - -
Patrick Dolberg (4) - - - -
17,870 - - 17,870
---------- --------- ------- ------
(1) Appointed on 22 August 2016.
(2) Resigned on 22 August 2016.
(3) Resigned on 1 October 2016.
(4) Appointed on 5 January 2017.
Details of fees paid to companies and partnerships of which the Directors are related have been disclosed in Note 34.
11. Non-underlying items
As required by IFRS 3 - Business Combinations, acquisition costs have been expensed as incurred. Additionally, the Group incurred costs associated with obtaining debt financing, including advisory fees to restructure the Group to satisfy lender requirements.
Consolidated
------------------------
31 December 31 December
2017 2016
GBP GBP
----------------------------------- ----------- -----------
Acquisition related expenses 615,852 -
Restructuring expenses 303,629 -
Share option expense 373,255 -
Warranty & indemnity insurance for
Ronez acquisition 439,954 -
1,732,690 -
----------- -----------
Acquisition related expenses include costs relating to the acquisition and integration of Ronez Limited, Topcrete Limited and Poundfield Products (Group) Limited. Share option expenses relate to options awarded to the Directors and senior management in connection with the Group's first acquisition, Ronez. Share options relating to the Group's general long term incentive plans will be treated as underlying expenditure.
12. Net finance (expense)/income
Consolidated
------------------------
31 December 31 December
2017 2016
GBP GBP
--------------------------------------- ----------- -----------
Convertible loan note interest expense (596,645) -
Other interest (expense)/income (48,855) 6,473
Other finance (expense)/income (115,880) -
(761,380) 6,473
----------- -----------
13. Other net gains/(losses)
Consolidated
------------------------
31 December 31 December
2017 2016
GBP GBP
--------------------------------------- ----------- -----------
Gain/(losses) on disposal of property,
plant and equipment 17,000 (469,673)
Other gain/(loss) (87,088) -
(70,088) (469,673)
----------- -----------
14. Taxation
Consolidated
------------------------
31 December 31 December
2017 2016
Tax recognised in profit or loss GBP GBP
----------------------------------------- ----------- -----------
Current tax (531,992) (115)
Deferred tax 37,956 -
----------- -----------
Total tax charge in the Income Statement (494,036) (115)
----------- -----------
The tax on the Group's profit/(loss) before taxation differs from the theoretical amount that would arise using the weighted average tax rate applicable to the profits/(losses) of the consolidated entities as follows:
Consolidated
------------------------
31 December 31 December
2017 2016
GBP GBP
-------------------------------------- ----------- -----------
Profit/(loss) before tax subject
to charge 1,818,736 (2,403,619)
Non-taxable profit/(loss) (969,242) -
----------- -----------
Net profit/(loss) before taxation 849,494 (2,403,619)
----------- -----------
Tax at the applicable rate of 19.9% 361,928 480,724
----------- -----------
Effects of:
Expenditure not deductible for tax
purposes - 28
Timing differences (4,684) -
Differences on tax rates attributable
to other jurisdictions 2,494 -
Depreciation in excess of/(less than)
capital allowances 134,298 (903)
Net tax effect of losses carried
forward - (479,964)
----------- -----------
Tax charge (494,036) (115)
----------- -----------
The weighted average applicable tax rate of 19.9% (2016: 20%) used is a combination of the standard rate of corporation tax rate for entities in the United Kingdom of 19% (2016: 20%), and 20% (2016: 20%) in Jersey and Guernsey.
15. Property, plant and equipment
Consolidated
-------------------------------------------------------------------------
Land Plant Furniture
Office and and and Construction
Equipment minerals Buildings machinery vehicles in progress Total
GBP GBP GBP GBP GBP GBP GBP
------------------ ---------- ---------- ---------- ---------- --------- ------------ ----------
Cost
As at 1 January
2016 - - - - - - -
Additions 4,590 - - - - - 4,590
---------- ---------- ---------- ---------- --------- ------------ ----------
As at 31 December
2016 4,590 - - - - - 4,590
---------- ---------- ---------- ---------- --------- ------------ ----------
As at 1 January
2017 4,590 - - - - - 4,590
Acquired through
acquisition
of subsidiaries 350,382 23,833,225 17,212,767 13,431,383 6,975,803 500,447 62,304,007
Fair value
adjustment - 11,931,469 2,946,977 3,626,764 - - 18,505,210
Additions 1,773 95,875 161,780 604,919 928,817 - 1,793,164
Disposals - - (10,681) (83,308) - (61,812) (155,801)
---------- ---------- ---------- ---------- --------- ------------ ----------
As at 31 December
2017 356,745 35,860,569 20,310,843 17,579,758 7,904,620 438,635 82,451,170
---------- ---------- ---------- ---------- --------- ------------ ----------
Depreciation
As at 1 January
2016 - - - - - - -
Charge for
the year 75 - - - - - 75
As at 31 December
2016 75 - - - - - 75
---------- ---------- ---------- ---------- --------- ------------ ----------
As at 1 January
2017 75 - - - - - 75
Acquired through
acquisition
of subsidiaries 299,793 5,638,767 11,744,578 9,525,977 6,547,490 - 33,756,605
Charge for
the year 3,057 458,605 802,534 720,924 229,595 - 2,214,715
Disposals - - (10,681) (65,842) - - (76,523)
---------- ---------- ---------- ---------- --------- ------------ ----------
As at 31 December
2017 302,925 6,097,372 12,536,431 10,181,059 6,777,085 - 35,894,872
---------- ---------- ---------- ---------- --------- ------------ ----------
Net book value
---------- ---------- ---------- ---------- --------- ------------ ----------
As at 31 December
2016 4,515 - - - - - 4,515
---------- ---------- ---------- ---------- --------- ------------ ----------
As at 31 December
2017 53,820 29,763,197 7,774,412 7,398,699 1,127,535 438,635 46,556,298
---------- ---------- ---------- ---------- --------- ------------ ----------
Included within additions to furniture and vehicles is GBP500,000 relating to the acquisition of the MV Ronez.
Company
-----------------
Office
Equipment Total
GBP GBP
----------------------- ---------- -----
Cost
As at 1 January 2016 - -
Additions 4,590 4,590
---------- -----
As at 31 December 2016 4,590 4,590
---------- -----
As at 1 January 2017 4,590 4,590
Additions 1,773 1,773
Disposals - -
---------- -----
As at 31 December 2017 6,363 6,363
---------- -----
Depreciation
As at 1 January 2016 - -
Charge for the year 75 75
As at 31 December 2016 75 75
---------- -----
As at 1 January 2017 75 75
Charge for the year 2,433 2,433
Disposals - -
---------- -----
As at 31 December 2017 2,508 2,508
---------- -----
Net book value
---------- -----
As at 31 December 2016 4,515 4,515
---------- -----
As at 31 December 2017 3,855 3,855
---------- -----
16. Intangible assets
Consolidated
Intellectual
Goodwill property Branding Total
GBP GBP GBP GBP
--------------------------- ---------- ------------ -------- ----------
Cost & net book value
As at 1 January 2016 - - - -
As at 31 December 2016 - - - -
---------- ------------ -------- ----------
As at 1 January 2017 - - - -
Arising on acquisition of
Ronez (refer to Note 31) 3,875,516 - 486,000 4,361,516
Arising on acquisition of
Topcrete (refer to Note
31) 7,062,625 - - 7,062,625
Arising on acquisition of
Poundfield (refer to Note
31) 6,889,692 644,229 - 7,533,921
Amortisation - (2,660) - (2,660)
As at 31 December 2017 17,827,833 641,569 486,000 18,955,402
---------- ------------ -------- ----------
An adjustment has been made to reflect the initial accounting for the acquisitions of Topcrete Limited ('Topcrete') and Poundfield Products (Group) Limited ('Poundfield') by the Company, being the elimination of the investment in Topcrete and Poundfield against the non-monetary assets acquired and recognition of goodwill. The Company needs to determine the fair value of the net assets acquired pursuant to the acquisition of Topcrete and Poundfield within 12 months of their respective acquisition dates in accordance with IFRS 3. This process, known as a Purchase Price Allocation ('PPA') exercise may result in a reduction of goodwill, which may be material. The PPA process will require a valuation of identifiable intangible assets acquired
17. Investment in subsidiary undertakings
Company
------------------------
31 December 31 December
2017 2016
GBP GBP
---------------------------------- ----------- -----------
Shares in subsidiary undertakings
At beginning of the year - -
Additions 1 -
Disposals - -
----------- -----------
At period end 1 -
----------- -----------
Loan to Group undertakings 57,267,056 -
----------- -----------
Total 57,267,057 -
----------- -----------
Investments in Group undertakings are stated at cost less impairment.
Details of subsidiaries at 31 December 2017 are as follows:
Share Share
capital capital
Country held held
Name of subsidiary of incorporation by Company by Group Principal activities
---------------------- ----------------- ----------- ------------ --------------------
SigmaFin Limited England GBP1 Holding company
SigmaRoc Trading
Limited England GBP1 Dormant
SigmaGsy Limited Guernsey GBP1 Shipping logistics
Construction
Ronez Limited Jersey GBP2,500,000 materials
Pallot Tarmac (2002) Road contracting
Limited Jersey GBP2 services
Island Aggregates
Limited Guernsey GBP6,500 Waste recycling
Pre-cast concrete
Topcrete Limited England GBP926,828 producer
A. Larkin (Concrete)
Limited England GBP37,660 Dormant
Allen (Concrete)
Limited England GBP100 Holding company
Poundfield Products
(Group) Limited England GBP22,167 Holding company
Poundfield Products
(Holdings) Limited England GBP651 Holding company
Poundfield Innovations
Limited England GBP6,357 Patents & licencing
Poundfield Products Pre-cast concrete
Limited England GBP63,568 producer
Alfabloc Limited England GBP1 Dormant
Name of subsidiary Registered office address
---------------------- --------------------------------
7-9 Swallow Street, London, W1B
SigmaFin Limited 4DE
SigmaRoc Trading 7-9 Swallow Street, London, W1B
Limited 4DE
Les Vardes Quarry, Route de Port
Grat, St Sampson, Guernsey, GY2
SigmaGsy Limited 4TF
Ronez Quarry, La Route Du Nord,
Ronez Limited St John, Jersey, JE3 4AR
Pallot Tarmac (2002) Ronez Quarry, La Route Du Nord,
Limited St John, Jersey, JE3 4AR
Les Vardes Quarry, Route de Port
Island Aggregates Grat, St Sampson, Guernsey, GY2
Limited 4TF
38 Willow Lane, Mitcham, Surrey,
Topcrete Limited CR4 4NA
A. Larkin (Concrete) 38 Willow Lane, Mitcham, Surrey,
Limited CR4 4NA
Allen (Concrete) 38 Willow Lane, Mitcham, Surrey,
Limited CR4 4NA
Poundfield Products The Grove, Creeting St. Peter,
(Group) Limited Ipswich, England, IP6 8QG
Poundfield Products The Grove, Creeting St. Peter,
(Holdings) Limited Ipswich, England, IP6 8QG
Poundfield Innovations The Grove, Creeting St. Peter,
Limited Ipswich, England, IP6 8QG
Poundfield Products The Grove, Creeting St. Peter,
Limited Ipswich, England, IP6 8QG
The Grove, Creeting St. Peter,
Alfabloc Limited Ipswich, England, IP6 8QG
For the year ended 31 December 2017 the Company was entitled to exemption from audit under section 479A of the Companies Act 2006 related to the following subsidiary companies:
-- SigmaFin Limited -- SigmaRoc Trading Limited -- Topcrete Limited -- A. Larkin (Concrete) Limited -- Allen (Concrete) Limited -- Poundfield Products (Group) Limited -- Poundfield Products (Holdings) Limited -- Poundfield Innovations Limited -- Poundfield Products Limited -- Alfabloc Limited
Impairment review
The performance of the acquired companies for the year to 31 December 2017 are in line with expectations as at the respective dates of acquisition. Performance against forecast since the year end is in line with expectations. As such there have been no indications of impairment.
18. Trade and other receivables
Consolidated Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2017 2016 2017 2016
GBP GBP GBP GBP
------------------ ----------- ----------- ----------- -----------
Trade receivables 3,934,952 - 35,416 -
Prepayments 438,981 13,113 38,795 13,113
VAT receivable - 141,271 - 141,271
Other receivables 293,870 - - -
----------- ----------- ----------- -----------
4,667,803 154,384 74,211 154,384
----------- ----------- ----------- -----------
The carrying value of trade and other receivables classified as loans and receivables approximates fair value. All trade and other receivables and denominated in British Pounds (GBP).
Other classes of financial assets included within trade and other receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security.
19. Inventories
Consolidated
------------------------
31 December 31 December
2017 2016
Cost and net book value GBP GBP
--------------------------------- ----------- -----------
Raw materials and consumables 1,255,641 -
Finished and semi-finished goods 2,320,870 -
Parts and supplies 656,342 -
Work in progress 208,810 -
----------- -----------
4,441,663 -
----------- -----------
The value of inventories recognised as a debit and included in cost of sales was GBP381,349 (31 December 2016: GBPnil).
20. Cash and cash equivalents
Consolidated Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2017 2016 2017 2016
GBP GBP GBP GBP
------------------------- ----------- ----------- ----------- -----------
Cash at bank and on hand 7,001,058 181,434 211,823 181,434
7,001,058 181,434 211,823 181,434
----------- ----------- ----------- -----------
All of the Group's cash at bank is held with institutions with an AA credit rating.
21. Trade and other payables
Consolidated Company
------------------------ ----------- -----------
31 December 31 December 31 December 31 December
2017 2016 2017 2016
GBP GBP GBP GBP
-------------------------- ----------- ----------- ----------- -----------
Trade payables 2,847,984 998,487 345,095 998,487
Wages payable 696,447 - - -
Accruals 1,117,360 771,870 404,186 771,870
VAT payable 484,046 - (102,653) -
Deferred consideration
payable for acquisitions 4,250,000 - - -
Other payables 649,560 - 37,539 -
----------- ----------- ----------- -----------
10,045,397 1,770,357 684,167 1,770,357
----------- ----------- ----------- -----------
All trade and other payables are denominated in UK Pounds.
22. Borrowings
Consolidated Company
------------------------ --------------------------
31 December 31 December 31 December 31 December
2017 2016 2017 2016
GBP GBP GBP GBP
-------------------------- ----------- ----------- ----------- -----------
Non-current liabilities
Santander term facility 8,572,360 - - -
Convertible loan notes 10,000,000 - 10,000,000 -
Finance lease liabilities 107,541 - - -
----------- ----------- ----------- -----------
18,679,901 - 10,000,000 -
----------- ----------- ----------- -----------
Current liabilities
Finance lease liabilities 92,411 - - -
----------- ----------- ----------- -----------
92,411 - - -
----------- ----------- ----------- -----------
On 5 January 2017 the Company issued 10,000,000 unsecured convertible loan notes at a par value of GBP1 per loan note accruing interest daily at a rate of 6% per annum and repayable on 5 January 2022 (the 'Loan Notes'). The Loan Notes are convertible into Ordinary Shares by the holders issuing a conversion notice any time prior to the repayment due date at a fixed price of GBP0.52 per Ordinary Share.
In April 2017 the Company entered into an GBP18 million term facility with Santander (the 'Facility') and on 18 October 2017 drew down GBP9 million to satisfy the initial cash consideration for Topcrete Limited. The Facility is secured by a floating charge over the assets of SigmaFin Limited and its subsidiary undertakings. Interest is charged at a rate between 1.5% and 2.75% above LIBOR ('Interest Margin'), based on the calculation of the adjusted leverage ratio for the relevant period. For the period ending 31 December 2017 the Interest Margin was 2%.
The carrying amounts and fair value of the non-current borrowings are:
Carrying amount Fair value
------------------------ --------------------------
31 December 31 December 31 December 31 December
2017 2016 2017 2016
GBP GBP GBP GBP
-------------------------- ----------- ----------- ----------- -----------
Santander term facility 8,572,360 - - -
Convertible loan notes 10,000,000 - 10,000,000 -
Finance lease liabilities 107,541 - - -
----------- ----------- ----------- -----------
18,679,901 - 10,000,000 -
----------- ----------- ----------- -----------
The fair values are based on cash flows discounted using the borrowing rate of 6% (2016: nil), which represents the cost of capital of the Group.
Finance Lease Liabilities
Lease liabilities are effectively secured, as the rights to the leased asset revert to the lessor in the event of default.
Consolidated
------------------------
31 December 31 December
2017 2016
Finance lease liabilities - minimum
lease payments GBP GBP
------------------------------------------- ----------- -----------
Not later than one year 92,411 -
Later than one year and no later than
five years 107,541 -
Later than five years - -
199,952 -
----------- -----------
Future finance charges on finance
lease liabilities 25,236 -
----------- -----------
Present value of finance lease liabilities 225,188 -
----------- -----------
The present value of finance lease liabilities is as follows:
Consolidated
------------------------
31 December 31 December
2017 2016
GBP GBP
------------------------------------------- ----------- -----------
Not later than one year 98,150 -
Later than one year and no later than
five years 103,494 -
Later than five years - -
Present value of finance lease liabilities 201,644 -
----------- -----------
Reconciliation of liabilities arising from financing activities is as follows:
Consolidated
Liabilities
arising
from
Long-term Short-term Lease financing
borrowings borrowings liabilities activities
GBP GBP GBP GBP
---------------------------- ----------- ----------- ------------ -----------
As at 1 January 2017 - - - -
Increase/(decrease) through
financing cash flows 18,572,360 - (12,405) 18,559,955
Increase through obtaining
control of subsidiaries - - 212,357 212,357
As at 31 December 2017 18,572,360 - 199,952 18,772,312
----------- ----------- ------------ -----------
23. Provisions
Consolidated
------------------------
31 December 31 December
2017 2016
GBP GBP
-------------------------------- ----------- -----------
As at 1 January - -
Accretion 632,011 -
Decrease in estimated liability - -
----------- -----------
632,011 -
----------- -----------
The restoration provision for the St John's and Les Vardes sites is based on the removal costs of the plant and machinery at both sites. cost estimates are increased at 4.1% (2016: nil%) for both sites annually to the anticipated future mine closure date. St John's quarry has an estimated expiry of 7 years, whereas Les Vardes is 5 years. The rate used is from the Retail Price Index as at December 2017 published by the Bank of England which is derived from the Office for National Statistics.
The future reclamation cost value is discounted by 4.58%% (2016: nil%) which is the weighted average cost of finance for the Santander debt facility and the convertible loan notes within the Group.
24. Financial Instruments by Category
31 December
Consolidated 2016
-------------------------
Loans
& receivables Total
Assets per Statement of Financial
Performance GBP GBP
--------------------------------------- -------------- ---------
Trade and other receivables (excluding
prepayments) 141,271 141,271
Cash and cash equivalents 181,434 181,434
-------------- ---------
322,705 322,705
-------------- ---------
At amortised
cost Total
Liabilities per Statement of Financial
Performance GBP GBP
--------------------------------------- -------------- ---------
Borrowings (excluding finance leases) - -
Finance lease liabilities - -
Trade and other payables (excluding
non-financial liabilities) 1,770,357 1,770,357
-------------- ---------
1,770,357 1,770,357
-------------- ---------
31 December
Consolidated 2017
--------------------------
Loans
& receivables Total
Assets per Statement of Financial
Performance GBP GBP
--------------------------------------- -------------- ----------
Trade and other receivables (excluding
prepayments) 4,228,822 4,228,822
Cash and cash equivalents 7,001,058 7,001,058
-------------- ----------
11,229,880 11,229,880
-------------- ----------
At amortised
cost Total
Liabilities per Statement of Financial
Performance GBP GBP
--------------------------------------- -------------- ----------
Borrowings (excluding finance leases) 18,572,360 18,572,360
Finance lease liabilities 199,952 199,952
Trade and other payables (excluding
non-financial liabilities) 10,667,111 10,667,111
-------------- ----------
29,439,423 29,439,423
-------------- ----------
31 December
Company 2016
-------------------------
Loans
& receivables Total
Assets per Statement of Financial
Performance GBP GBP
--------------------------------------- -------------- ---------
Trade and other receivables (excluding
prepayments) 141,271 141,271
Cash and cash equivalents 181,434 181,434
-------------- ---------
322,705 322,705
-------------- ---------
At amortised
cost Total
Liabilities per Statement of Financial
Performance GBP GBP
--------------------------------------- -------------- ---------
Borrowings (excluding finance leases) - -
Finance lease liabilities - -
Trade and other payables (excluding
non-financial liabilities) 1,770,357 1,770,357
-------------- ---------
1,770,357 1,770,357
-------------- ---------
31 December
Company 2017
--------------------------
Loans
& receivables Total
Assets per Statement of Financial
Performance GBP GBP
--------------------------------------- -------------- ----------
Trade and other receivables (excluding
prepayments) 35,416 35,416
Cash and cash equivalents 211,823 211,823
-------------- ----------
247,239 247,239
-------------- ----------
At amortised
cost Total
Liabilities per Statement of Financial
Performance GBP GBP
--------------------------------------- -------------- ----------
Borrowings (excluding finance leases) 10,000,000 10,000,000
Finance lease liabilities - -
Trade and other payables (excluding
non-financial liabilities) 684,167 684,167
-------------- ----------
10,684,167 10,684,167
-------------- ----------
25. Share capital and share premium
Number Ordinary Share
of shares shares premium Total
GBP GBP GBP
-------------------------- ------------- --------- ---------- ----------
Issued and fully paid
As at 1 January 2016 115,872,148 579,361 - 579,361
Capital re-organisation
- 22 August 2016 115,872,148 (347,617) - (347,617)
TeleMessage disposal
- 22 August 2016 (169,521,886) (169,522) - (169,522)
Issue of new shares
- 22 August 2016 (1) 208,333,333 208,333 266,667 475,000
------------- --------- ---------- ----------
As at 31 December 2016 270,555,743 270,555 266,667 537,222
------------- --------- ---------- ----------
As at 1 January 2017 270,555,743 270,555 266,667 537,222
Consolidation - 3 January
2017 (267,954,245) (244,540) - (244,540)
Issue of new shares
- 5 January 2017 (2) 100,000,000 1,000,000 36,862,713 37,862,713
Options Exercised -
3 May 2017 104,059 1,041 24,974 26,015
Issue of new shares
- 14 December 2017
(3) 34,000,000 340,000 13,007,550 13,347,550
------------- --------- ---------- ----------
As at 31 December 2017 136,705,557 1,367,056 50,161,904 51,528,960
------------- --------- ---------- ----------
(1) Includes issue costs of GBP25,000
(2) Includes issue costs of GBP2,137,287
(3) Includes issue costs of GBP592,450
On 3 January 2017 the Company undertook a 1 for 104 share ordinary share consolidation.
On 5 January 2017 the Company raised GBP40 million via the issue and allotment of 100,000,000 new ordinary shares of 1 pence each fully paid ('Ordinary Share') at a price of 40 pence per Ordinary Share.
On 3 May 2017 the Company issued 104,059 new Ordinary Shares as a result of an exercise of 104,059 options exercisable at 25 pence each.
On 14 December 2017 the Company raised GBP13.94 million via the issue and allotment of 34,000,000 new Ordinary Shares at a price of 41 pence per Ordinary Share.
26. Share options
Share options and warrants outstanding and exercisable at the end of the year have the following expiry dates and exercise prices:
Options & Warrants
------------------------
31 December 31 December
2017 2016
Exercise price
in GBP per
Grant date Expiry date share GBP GBP
--------------- --------------- -------------- ----------- -----------
5 January 2017 4 January 2022 0.44 46,900 -
5 January 2017 22 August 2021 0.25 15,083 -
5 January 2017 5 January 2022 0.25 56,039 -
5 January 2017 5 January 2022 0.40 234,854 -
352,876 -
----------- -----------
The Company and Group have no legal or constructive obligation to settle or repurchase the options or warrants in cash.
The fair value of the share options and warrants was determined using the Black Scholes valuation model. The parameters used are detailed below:
2017 2017 2017 2017
Options Options Options Options
A B C D
----------------------- --------- --------- --------- ----------
Granted on 5/1/2017 5/1/2017 5/1/2017 5/1/2017
Life (years) 5 4 5 5
Share price 0.4250 0.425 0.425 0.425
Risk free rate 0.52% 0.52% 0.52% 0.52%
Expected volatility 24.81% 24.81% 24.81% 4.03%
Expected dividend
yield - - - -
Marketability discount 50% - - 50%
Total fair value GBP46,900 GBP15,083 GBP76,418 GBP234,854
The risk-free rate of return is based on zero yield government bonds for a term consistent with the option life.
A 50% discount was applied to Options A & D due to the uncertainty surrounding the future performance of the Group. This is the first year of which acquisitions have been made and these have not had a significant impact on the Company's share price. Therefore a 50% discount was applied to reflect the Company is still in an early stage with regards to acquiring niche company's and building value for the shareholders.
A reconciliation of options and warrants granted over the year to 31 December 2017 is shown below:
31 December 31 December
2017 2016
--------------------- -----------------
Weighted Weighted
average average
exercise exercise
price price
Number GBP Number GBP
------------------------- ---------- --------- ------ ---------
Outstanding at beginning
of the year - - - -
Granted 13,677,502 0.40 - -
Exercised (104,059) 0.25 - -
Outstanding as at year
end 13,573,443 0.40 - -
---------- --------- ------ ---------
Exercisable at year end 13,573,443 0.40 - -
---------- --------- ------ ---------
27. Other reserves
Consolidated
-----------------------------------------------------------
Foreign
Capital currency
Deferred Revaluation redemption translation
shares reserve reserve reserve Total
GBP GBP GBP GBP GBP
------------------------ -------- ----------- ----------- ------------ ---------
As at 1 January
2016 - - - - -
Disposal of TeleMessage 169,522 - - (185,935) (16,413)
-------- ----------- ----------- ------------ ---------
Capital re-organisation 347,617 - - - 347,617
-------- ----------- ----------- ------------ ---------
As at 31 December
2016 517,139 - 600,039 - 1,117,178
-------- ----------- ----------- ------------ ---------
As at 1 January
2017 - - - -
Capital re-organisation 244,540 - - 244,540
As at 31 December
2017 761,679 - 600,039 1,361,718
-------- ----------- ----------- ------------ ---------
Company
Foreign
Capital currency
Deferred Revaluation redemption translation
shares reserve reserve reserve Total
GBP GBP GBP GBP GBP
------------------------ -------- ----------- ----------- ------------ ---------
As at 1 January
2016 - - 600,039 185,935 785,974
Disposal of TeleMessage 169,522 - - (185,935) (16,413)
Capital re-organisation 347,617 - - - 347,617
-------- ----------- ----------- ------------ ---------
As at 31 December
2016 517,139 - 600,039 - 1,117,178
-------- ----------- ----------- ------------ ---------
As at 1 January
2017 - - - -
Capital re-organisation 244,540 - - 244,540
As at 31 December
2017 761,679 - 600,039 1,361,718
-------- ----------- ----------- ------------ ---------
28. Earnings per share
The calculation of the total basic earnings per share of 0.34 pence (2016: loss of 1.4 pence) is calculated by dividing the profit attributable to shareholders of GBP355,458 (2016: loss of GBP2,403,734) by the weighted average number of ordinary shares of 103,251,598 (2016: 171,659,674) in issue during the period.
Diluted earnings per share of 0.30 pence (2016: loss of 1.4 pence) is calculated by dividing the profit attributable to shareholders of GBP355,458 (2016: loss GBP2,403,734) by the weighted average number of ordinary shares in issue during the period plus the weighted average number of share options and warrants to subscribe for ordinary shares in the Company, which together total 116,779,209 (2016: 171,659,674).
Details of share options that could potentially dilute earnings per share in future periods are disclosed in Note 26.
29. Fair value estimation
There are no financial instruments carried at fair value.
30. Fair value of financial assets and liabilities measured at amortised costs
Financial assets and liabilities comprise the following:
-- Trade and other receivables -- Cash and cash equivalents -- Trade and other payables
The fair values of these items equate to their carrying values as at the reporting date.
31. Business combinations
Ronez Limited
On 5 January 2017 the Group acquired 100% of the share capital of Ronez Limited ('Ronez') and subsidiaries for cash consideration of GBP45,181,874. Ronez is registered and incorporated in Jersey. The principal activity is the production of high quality aggregates and supply of value-added construction materials.
The following table summarises the consideration paid for Ronez and the values of the assets and equity assumed at the acquisition date.
Total consideration GBP
-------------------- ----------
Cash 45,181,874
----------
45,181,874
----------
Fair Fair
Book value value
value adjustments on acquisition
Recognised amounts of assets
and liabilities acquired GBP GBP GBP
------------------------------ ----------- ------------ ---------------
Cash and cash equivalents 320,155 - 320,155
Trade and other receivables 1,827,448 - 1,827,448
Other current assets 339,269 - 339,269
Inventories 2,025,587 - 2,025,587
Property, plant & equipment 20,413,966 18,505,210 38,919,176
Intangible assets - 486,000 486,000
Trade and other payables (1,985,568) - (1,985,568)
Provisions for liabilities (625,709) - (625,709)
----------- ------------
Total identifiable net assets 22,315,148 18,991,210 41,306,358
----------- ------------ ---------------
Goodwill (refer to note 16) 3,875,516
---------------
Total consideration 45,181,874
---------------
In accordance with IFRS 3, the Group has undertaken a PPA process to determine the fair value of the net assets acquired in connection with the acquisition of Ronez.
An independent expert was engaged to carry out this process. The fair value adjustments resulting from the PPA review have been made to:
-- Revalue certain mineral reserves and resources to reflect fair value at the date of acquisition;
-- Revalue other tangible fixed assets such as non-mineral bearing land, buildings and plant as at the date of the acquisition; and
-- Recognise intangible asset in relation to the Ronez trade name.
The goodwill arising represents the skills of the existing workforce and residual goodwill.
Since 5 January 2017 Ronez has contributed a profit of GBP2,565,000 and revenue of GBP25,999,308. Had Ronez been consolidated from 1 January 2017, the consolidated statement of income would show a profit of GBP2,565,000 and revenue of GBP25,999,308.
Topcrete Limited
On 18 October 2017 the Group acquired 100% of the share capital of Topcrete Limited ('Topcrete') and subsidiaries for total consideration of GBP16.26 million. Topcrete is registered and incorporated in the United Kingdom. The principal activity, via Topcrete's wholly owned subsidiary Allen (Concrete) Limited, is the production of specialist wetcast concrete products.
The following table summarises the consideration paid for Topcrete and the values of the assets and equity assumed at the acquisition date.
Total consideration GBP
----------------------------------------- ----------
Initial cash 9,000,000
Deferred cash 3,500,000
Working capital adjustment 181,231
Cash acquired and repatriated to vendors 3,584,765
----------
16,265,996
----------
Recognised amounts of assets and liabilities
acquired GBP
--------------------------------------------- ----------
Cash and cash equivalents 342,212
Trade and other receivables 827,324
Other assets 3,571,239
Inventories 482,715
Property, plant & equipment 5,648,961
Intangible assets -
Trade and other payables (973,957)
Tax liabilities (695,123)
Total identifiable net assets 9,203,371
----------
Goodwill (refer to note 16) 7,062,625
----------
Total consideration 16,265,996
----------
Since 18 October 2017 Topcrete has contributed a profit of GBP158,460 and revenue of GBP810,908. Had Topcrete been consolidated from 1 January 2017, the consolidated statement of income would show a profit of GBP1,194,914 and revenue of GBP4,254,818.
Poundfield Products (Group) Limited
On 19 December 2017 the Group acquired 100% of the share capital of Poundfield Products (Group) Limited ('Poundfield') and subsidiaries for an initial cash consideration of GBP7.3 million (being GBP9.5 million less adjustments for various obligations assumed by the Group as part of the acquisition). Poundfield is registered and incorporated in the United Kingdom. The principal activity, via Poundfield's wholly owned subsidiary Poundfield Products Limited, is the production of patented specialist concrete products and systems.
The following table summarises the consideration paid for Poundfield and the values of the assets and equity assumed at the acquisition date.
Total consideration GBP
---------------------------- ---------
Initial cash 7,301,989
Deferred shares 750,000
Working capital adjustments 42,310
---------
8,094,299
---------
Recognised amounts of assets and liabilities
acquired GBP
--------------------------------------------- -----------
Cash and cash equivalents -
Trade and other receivables 1,947,536
Inventories 1,642,921
Property, plant & equipment 2,484,476
Intangible assets 644,229
Overdraft facility (1,469,677)
Trade and other payables (3,463,507)
Tax liabilities (581,371)
Total identifiable net assets 1,204,607
-----------
Goodwill (refer to Note 16) 6,889,692
-----------
Total consideration 8,094,299
-----------
Since 19 December 2017 Poundfield has contributed a profit of GBP125,641 and revenue of GBP263,469. Had Poundfield been consolidated from 1 January 2017, the consolidated statement of income would show additional profit of GBP107,985 and revenue of GBP8,467,691.
32. Operating lease commitments
The Group leases land for plant and road access under non-cancellable operating lease agreements. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Consolidated
------------------------
31 December 31 December
2017 2016
GBP GBP
---------------------------------- ----------- -----------
Not later than one year 43,481 -
Later than one year but not later
than five years 126,912 -
Later than five years 173,461
343,854 -
----------- -----------
33. Contingencies
The Group is not aware of any personal injury or damage claims open against the Group. There are no pending matters that the Group expects to be material in relation to the Group's business, financial result or results of operations.
34. Related party transactions
Loans with Group undertakings
Amounts receivable/(payable) as a result of loans granted to/(from) subsidiary undertakings are as follows:
Company
------------------------
31 December 31 December
2017 2016
GBP GBP
----------------- ----------- -----------
Ronez Limited (1,197,186) -
SigmaGsy Limited 3,094,885
SigmaFin Limited 55,369,357 -
57,267,056 -
----------- -----------
Loans granted to or from subsidiaries are unsecured, interest free and repayable in Pounds Sterling when sufficient cash resources are available.
All intra Group transactions are eliminated on consolidation.
Other transactions
Heytesbury Corporate LLP, a limited liability partnership of which Garth Palmer is a partner, invoiced a fee of GBP72,000 (2016: GBP83,695) for the provision of corporate management and consulting services to the Company. No balance was outstanding at the year-end.
Ronaldsons LLP, a limited liability partnership of which Dominic Traynor was a partner, invoiced a fee of GBP36,502 (2016: GBP36,100) for the provision of legal services to the Company in relation to the acquisition of Ronez Limited. A balance of GBP14,898 was outstanding at the year-end.
35. Ultimate controlling party
The Directors believe there is no ultimate controlling party.
36. Events after the reporting date
On 27 March 2018 the Company entered into a licences agreement with Tarmac Trading Limited for the manufacture, distribution and installation of its Shuttlebloc system developed by Poundfield Products Limited.
- ends -
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END
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