Half Yearly Report

 

TIDMZRX 
 
RNS Number : 6391Z 
Zirax PLC 
25 September 2009 
 
? 
Zirax plc 
 ("Zirax" or the "Company") 
 
 
Interim Results for the six months to 30 June 2009 
 
 
Zirax, the AIM quoted speciality chemical company focused on the development, 
production and sale of oilfield process chemicals and de-icing solutions, 
announces its interim results for the six months to 30 June 2009. 
 
 
Highlights 
 
 
Highlights for the second largest supplier of calcium chloride pellets globally 
and the leading supplier in the Eastern Hemisphere include: 
 
 
Financial Performance 
 
 
  *  Sales volumes increased by 36%, driven by demand for de-icing products following 
  a harsher Russian winter 
  *  However, total revenues reduced to $14.6m (2008: $15.1m) due to a 38% fall in 
  the value of the Russian Rouble against the US Dollar 
  *  Operating profit $ nil (2008: loss $0.3m) 
  *  Pre-tax loss $1.2m (2008: loss $0.1m) 
  *  Oilfield process chemical revenues decreased to $9.5 m (2008: $12.8m) 
  *  De-icing solutions revenues increased to $3.7m (2008: $0.9m) 
 
 
 
Operating Highlights 
 
 
  *  Negotiations progressing to agree a new supply and licensing agreement at 
  Rosignano, having received the original advance payment of EUR2.2m back from 
  Solvay (including interest of EUR0.2m) 
  *  Successfully replaced our largest borrowing facility of $2.8m, after it came up 
  for renewal, by agreeing a new facility with an existing lender 
  *  Existing lenders remain supportive of the Company and its strategy 
  *  Introduced two new complimentary products, Acid ExtrOil and Acid Blend, 
  targeting the enhanced oil recovery market 
  *  Seventh consecutive award of Moscow de-icing contract 
 
 
 
Fenlon Dunphy, CEO commented: 
 
 
"Most importantly demand for Zirax products remains strong. We have not been 
able to take full advantage of this as a combination of factors, including the 
delay of the Rosignano plant coming fully on line and the 38% fall in the 
Russian Rouble against the US Dollar have all impacted profitability. In the 
short term these factors will have a negative impact on the Group's trading 
performance, however there are significant opportunities for Zirax to exploit 
both the oilfield and de-icing markets." 
 
 
Enquiries: 
 
 
+---------------------------+---------------------------+---------------------------+ 
| Zirax                     | Fenlon Dunphy, CEO        |    T: [phone] | 
+---------------------------+---------------------------+---------------------------+ 
|                           |                           |                           | 
+---------------------------+---------------------------+---------------------------+ 
| Hanson Westhouse Limited  | Tim Metcalfe              |    T: [phone] | 
+---------------------------+---------------------------+---------------------------+ 
|                           | Martin Davison            |                           | 
+---------------------------+---------------------------+---------------------------+ 
|                           |                           |                           | 
+---------------------------+---------------------------+---------------------------+ 
| Cardew Group              | Tim Robertson             |    T: [phone] | 
+---------------------------+---------------------------+---------------------------+ 
|                           | David Roach               |                           | 
+---------------------------+---------------------------+---------------------------+ 
|                           | Daniela Cormano           |                           | 
+---------------------------+---------------------------+---------------------------+ 
 
Interim Review 
 
 
 
 
Introduction 
 
 
Zirax, the speciality chemical company focused on the development, production 
and sale of oilfield process chemicals and de-icing solutions recorded an 
underlying sales volume increase of 36% in the first six months of 2009. 
However, the majority of our sales are transacted in Russian Roubles, the 
average value of which has weakened by 38% against the US Dollar between the 
first six months of 2008 and the same period in 2009. This meant an overall 
decrease in sales value of 3% for the first six months of 2009 compared to the 
same period in 2008. If foreign exchange rates had remained consistent with 
2008, then 2009 would have shown a sales value increase of 32%. 
 
 
In May we announced that we had initiated with Solvay a process to renegotiate 
the existing supply and licensing agreements at the Rosignano plant in Italy. We 
believe that the outcome will enable us to continue with our strategy of 
expanding the business internationally and meet continued customer demand for 
our premium grade products. Renegotiations are progressing well and we currently 
anticipate capacity coming back online in early 2010. 
 
 
For the financial reporting year 2008, the Board decided to adopt a prudent 
stance in relation to a financial institution in Russia, and made an exceptional 
provision of $3.0m against cash deposits where we believed there to be a greatly 
increased credit risk and access to the cash deposits had been restricted. We 
have not changed this position and we are still negotiating to reach a solution 
with the financial institution. 
 
 
General uncertainty remains in the Russian banking sector, but as in other parts 
of the world, there are signs of improvement. We reported in June, at the time 
of our Preliminary results, that the business is dependent on the continued 
support of its lenders, as technically some or all of the borrowings and 
facilities could become immediately repayable due to possible material changes 
in the Group's financial position. We are pleased to say that our lenders have 
remained supportive. It is still possible that we may still need to renew or 
replace facilities as they fall due during the next year, but we are confident 
that either existing lenders will renew or that new lenders can be found. In 
this respect we have already successfully replaced our largest borrowing 
facility of $2.8m, after it came up for renewal in September, by agreeing a new 
facility with an existing lender. 
 
 
Financial Review 
 
 
Total revenues for the six months to 30 June 2009 decreased 3% from the 
equivalent period in 2008 to $14.6m. Last winter signalled a return to harsher 
weather conditions and increased the demand for our de-icing products; as a 
result, sales of our high performance de-icing products increased to $3.7m, 
compared with $0.9m in 2008. Zirax's oilfield process chemicals segment of the 
business delivered sales of $9.5m, a reduction of 25% compared to the same 
period last year. This value reduction was primarily as a result of the weakened 
Russian Rouble, but also to a lesser extent as more product was directed towards 
the de-icing segment. The remaining industrial sector accounted for $1.3m of 
revenue, a small decrease from $1.4m in 2008. 
 
 
The world economy still undoubtedly has difficult times ahead and it is hard for 
anyone to predict the immediate economic future. Zirax predominantly operates 
and sells in Russia where the official inflation forecast for 2009 is a minimum 
of 13%, but where many independent analysts forecast it is likely to be much 
higher. The Russian Rouble has come under significant pressure, losing 38% of 
its average value against the US Dollar between the first six months of 2008 and 
the same period in 2009. Zirax's cost of sales increased from $7.9m in 2008 to 
$8.2m in 2009. Distribution, sales and marketing expenses decreased to $3.9m 
compared with $4.7m in 2008, whilst General and Administrative expenses also 
decreased to $2.4m in 2009 compared with $2.8m in 2008. 
 
 
Overall the Group broke even at the operating profit level for the period, 
compared with a loss of $0.3m in 2008, and loss before tax was $1.2m compared 
with a loss of $0.1m in 2008. The significant movement between operating profit 
and loss before tax was driven by a $0.9m loss on foreign exchange. 
 
 
Despite the loss before tax for the period, there is a tax charge of $0.2m as a 
result of profits arising in Russia. 
 
 
Investment in fixed assets of $0.7m in the first half of 2009 primarily relates 
to the continued investment in our Volgograd plant and facility. 
 
 
Cash and cash equivalents increased from $4.4m at 31 December 2008 to $6.2m at 
30 June 2009. Cash used in operating activities was $1.3m, with the Group making 
a net cash investment in assets of $0.3m and raising net cash proceeds from bank 
funding of $2.7m. Any surplus funds are invested, but we do not undertake 
speculative treasury transactions. 
 
 
Basic EPS was a loss of 0.77 cents, compared with a loss of 0.35 cents in 2008. 
In line with the Board's stated strategy no dividend will be payable for the 
period. It remains the Board's view that the business is in a growth stage and, 
as such, it needs to maintain cash to fund its development. 
 
 
 
 
Operating Review 
 
 
Despite challenging conditions in the global economy and the impact of external 
factors on our business, Zirax's underlying sales volume performance remained 
strong. 2009, as in the previous year, continues to be a difficult one for the 
business and the wider world economy. Our cost base for existing product has 
increased in these harder times and our margins have tightened. 
 
 
The lack of full supply of product from Rosignano, Italy remains a frustration, 
but the renegotiations with Solvay are progressing well and we currently 
anticipate capacity coming back online in early 2010. As a result, Zirax has 
incurred extra distribution and administration costs, relating primarily to 
ensuring certain key customers continue to be supplied from our Volgograd 
facility. 
 
 
We have introduced two new complimentary products in this period, Acid ExtrOil 
and Acid Blend, both of which are targeted at the enhanced oil recovery market. 
We see our future growth in this sector coming from supplying higher margin 
complimentary products and there are further product launches planned for the 
near future. Sales of Acid ExtrOil and Acid Blend are modest at this stage, but 
we look forward to developing and integrating both as part of a specialist suite 
of products we offer to meet the specific needs and requirements of new and 
existing clients within the oil and gas sector. 
 
 
As a result of the harder 2008/09 winter season the demands from the de-icing 
segment were significantly higher than in the previous comparable period and 
consequently revenues in this segment increased to $3.7m, compared to $0.9m in 
2008. This meant less product was available to the oilfield chemicals sector, 
which saw revenues drop from $12.8m to $9.5m. But, as explained above, a more 
substantial element of this drop also resulted from the foreign exchange 
weakness. Once again, across all segments, we sold all available product during 
the period. 
 
 
For the upcoming 2009/10 winter season, we have secured for the seventh 
consecutive year the tenders to supply the City of Moscow with 20,000 MT of 
calcium chloride based de-icers, representing $4.0m in revenues. 
 
 
 
 
Outlook 
 
 
The extraordinary economic events of 2008 still effect 2009 and continue to make 
it difficult for Zirax. We remain frustrated by the delay of product supply from 
Rosignano, but are confident that we can, with Solvay, resolve the technical 
issues at the plant. Our cost base has been directly affected by the economic 
crisis. The volatility in distribution rates is a particular challenge for our 
business as they make up approximately 25% of our overall cost base. Looking 
ahead, we expect costs associated with manufacturing and distribution to remain 
high; as we cannot simply pass on these increased costs in our selling price, we 
are focused on adapting our business model to operate in this environment. We 
continue to diversify our target markets and we will seek to source product as 
close to our end market as possible. 
 
 
We have established a good base in terms of our customers and increasingly our 
geographic reach; we have also gained a reputation for quality. Volume and 
underlying value of revenues have continued to increase year on year. We are now 
seeking to build on these positive aspects by searching out higher margin 
products to offer our customers a wider solution to meet their needs. 
 
 
Despite current difficulties, we have strengthened our reputation in the 
marketplace for quality and service. Not only do our customers demand more of 
our products, but they also seek and actively encourage us to source additional 
product for them. We are therefore confident that the Company will recover from 
this very challenging period, and be able to deliver significant shareholder 
value. 
 
 
 
 
Fenlon Dunphy 
Chief Executive Officer 
  Independent Review Report to Zirax Plc 
 
 
Introduction 
We have been engaged by the Company to review the condensed set of financial 
statements in the half-yearly report for the six months ended 30 June 2009 which 
comprises the Consolidated Income Statement, the Consolidated Statement of 
Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement 
of Cash Flows, the Consolidated Statement of Changes in Equity and explanatory 
notes 1 to 6. 
 
 
We have read the other information contained in the half-yearly report and 
considered whether it contains any apparent misstatements or material 
inconsistencies with the financial information in the condensed set of financial 
statements. 
 
 
This report is made solely to the Company in accordance with the terms of our 
engagement to assist the Company in meeting the requirements of the AIM Rule 18. 
Our review has been undertaken so that we might state to the Company those 
matters we are required to state to it in this report and for no other purpose. 
To the fullest extent permitted by law, we do not accept or assume 
responsibility to anyone other than the Company for our review work, for this 
report or for the conclusions we have reached. 
 
 
Directors' responsibilities 
The half-yearly report is the responsibility of, and has been approved by, the 
directors. The directors are responsible for preparing the half-yearly report in 
accordance with AIM Rule 18. 
 
 
As disclosed in note 1, the annual financial statements of the group are 
prepared in accordance with IFRS as adopted by the European Union. It is the 
responsibility of the directors to ensure that the condensed set of financial 
statements included in this half-yearly report have been prepared on a basis 
consistent with that which will be adopted in the Group's annual financial 
statements. 
 
 
Our responsibility 
Our responsibility is to express to the Company a conclusion on the condensed 
set of financial statements in the half-yearly report based on our review. 
 
 
Scope of review 
We conducted our review in accordance with International Standard on Review 
Engagements (UK and Ireland) 2410 "Review of Interim Financial Information 
Performed by the Independent Auditor of the Entity" issued by the Auditing 
Practices Board for use in the United Kingdom. A review of interim financial 
information consists of making enquiries, primarily of persons responsible for 
financial and accounting matters, and applying analytical and other review 
procedures. 
 
 
A review is substantially less in scope than an audit conducted in accordance 
with International Standards on Auditing (UK and Ireland) and consequently does 
not enable us to obtain assurance that we would become aware of all significant 
matters that might be identified in an audit. Accordingly we do not express an 
audit opinion. 
 
 
Basis for qualified conclusion 
The Independent Auditors' Report in respect of the financial statements of the 
group for the year ended 31 December 2008 disclaimed an opinion as a result of 
limited evidence being available to them in respect of the following matters (as 
reproduced from the 2008 Group audit report): 
  *  As set out in note 13 to the financial statements, a provision having been made 
  against an amount receivable from a financial institution in Russia of RR87m 
  ($2,961,000) held with them on demand. The auditors were unable to obtain 
  sufficient appropriate evidence as to the recoverability of this amount. 
  *  As set out in note 23 to the financial statements, an amount of RR104m 
  ($3,540,000) held with a related party bank. No provision had been made against 
  this amount and the auditors were unable to obtain sufficient appropriate 
  evidence as to the recoverability of this amount. 
 
 
 
Nothing has come to our attention during our review of the condensed set of 
financial statements for the 6 months ended 30 June 2009 to indicate that there 
has been any significant change to the matters referred to above. As described 
in note 1 to the condensed financial statements, exchange rate movements lead to 
the relevant balances expressed in the Group's presentation currency at 30 June 
2009 to be $2,780,000 and $3,324,000 respectively. Note 5 and note 7 to the 
condensed financial statements provides further information on this related 
party balance of $3,324,000. 
 
 
Qualified conclusion 
Except for the matters referred to above, based on our review, nothing has come 
to our attention that causes us to believe that the condensed set of financial 
statements in the half-yearly report for the six months ended 30 June 2009 is 
not prepared, in all material respects, in accordance with the requirements of 
the AIM rules. 
 
 
Emphasis of matter 
In forming our conclusion on the condensed set of financial statements, we have 
considered the adequacy of the disclosure made in note 1 of the financial 
statements concerning the group's ability to continue as a going concern. The 
conditions explained in note 1 indicate the existence of a material uncertainty 
which may cast significant doubt about the group's ability to continue as a 
going concern. The condensed set of financial statements do not include the 
adjustments that would result if the group was unable to continue as a going 
concern. 
 
 
+-------------------------------------+-------------------------------------+ 
| Nexia Smith & Williamson            |                         25 Moorgate | 
+-------------------------------------+-------------------------------------+ 
| Statutory Auditor                   |                              London | 
+-------------------------------------+-------------------------------------+ 
| Chartered Accountants               |                            EC2R 6AY | 
+-------------------------------------+-------------------------------------+ 
24th September 2009 
 
 
 
 
 
 
 
 
 
 
  Consolidated Income Statement 
For the Six Months Ended 30 June 2009 
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+ 
|                 |           Notes |   Six months to |   Six months to |         Year to | 
|                 |                 |    30 June 2009 |    30 June 2008 |     31 December | 
|                 |                 |                 |                 |            2008 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |        Reviewed |        Reviewed |         Audited | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |           $'000 |           $'000 |           $'000 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Revenue         |        2        |          14,577 |          15,065 |          33,923 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Cost of sales   |                 |         (8,225) |         (7,887) |        (18,796) | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |      ---------- |      ---------- |      ---------- | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Gross profit    |                 |           6,352 |           7,178 |          15,127 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Distribution    |                 |         (3,924) |         (4,687) |         (9,815) | 
| expenses        |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| General and     |                 |         (2,426) |         (2,757) |         (9,093) | 
| administrative  |                 |                 |                 |                 | 
| expenses        |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |      ---------- |      ---------- |      ---------- | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Operating       |        2        |               2 |           (266) |         (3,781) | 
| profit/(loss)   |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Operating       |                 |               2 |           (266) |           (820) | 
| (loss)/profit   |                 |                 |                 |                 | 
| before          |                 |                 |                 |                 | 
| exceptional     |                 |                 |                 |                 | 
| item            |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Exceptional     |                 |               - |               - |         (2,961) | 
| impairment of   |                 |                 |                 |                 | 
| cash and cash   |                 |                 |                 |                 | 
| equivalents     |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Operating       |        2        |               2 |           (266) |         (3,781) | 
| profit/(loss)   |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Interest        |                 |             142 |             267 |             471 | 
| receivable      |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Interest        |                 |           (423) |           (290) |           (586) | 
| payable and     |                 |                 |                 |                 | 
| similar charges |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Net foreign     |                 |           (900) |             171 |           1,618 | 
| exchange        |                 |                 |                 |                 | 
| (loss)/gain     |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |      ---------- |      ---------- |      ---------- | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Net finance     |                 |         (1,181) |             148 |           1,503 | 
| (costs)/income  |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Loss before     |                 |         (1,179) |           (118) |         (2,278) | 
| taxation        |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Taxation        |        4        |           (155) |           (484) |         (1,140) | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |      ---------- |      ---------- |      ---------- | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Loss for the    |                 |         (1,334) |           (602) |         (3,418) | 
| period          |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |      ---------- |      ---------- |      ---------- | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Earnings per share expressed in   |                 |                 |                 | 
| US cents per share:               |                 |                 |                 | 
+-----------------------------------+-----------------+-----------------+-----------------+ 
|                 |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Basic           |        3        |          (0.77) |          (0.35) |          (1.98) | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |      ---------- |      ---------- |      ---------- | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Diluted         |        3        |          (0.77) |          (0.35) |          (1.98) | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |          ====== |          ====== |          ====== | 
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+ 
 
 
  Consolidated Statement of Comprehensive Income 
For the Six Months Ended 30 June 2009 
 
 
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+ 
|                 |                 |   Six months to |   Six months to |         Year to | 
|                 |                 |    30 June 2009 |    30 June 2008 |     31 December | 
|                 |                 |                 |                 |            2008 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |        Reviewed |        Reviewed |         Audited | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |           $'000 |           $'000 |           $'000 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Loss for the    |                 |         (1,334) |           (602) |         (3,418) | 
| period          |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |      ---------- |      ---------- |      ---------- | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Other           |                 |                 |                 |                 | 
| comprehensive   |                 |                 |                 |                 | 
| income:         |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Effect of       |                 |           (135) |           1,222 |         (5,850) | 
| exchange rates  |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |      ---------- |      ---------- |      ---------- | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
| Total           |                 |         (1,469) |             620 |         (9,268) | 
| comprehensive   |                 |                 |                 |                 | 
| income for the  |                 |                 |                 |                 | 
| period          |                 |                 |                 |                 | 
+-----------------+-----------------+-----------------+-----------------+-----------------+ 
|                 |                 |          ====== |          ====== |          ====== | 
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+ 
 
 
  Consolidated Balance Sheet 
At 30 June 2009 
 
 
+---------+-----+-----+-----+------+-----+-----+-----+------+-----+-----+-----+------+-----+-----+-----+ 
|               |           |    30 June |           |    30 June |           |         31 |           | 
|               |           |       2009 |           |       2008 |           |   December |           | 
|               |           |            |           |            |           |       2008 |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
|               |           |   Reviewed |           |   Reviewed |           |    Audited |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
|               |           |      $'000 |           |      $'000 |           |      $'000 |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Non-current   |           |            |           |            |           |            |           | 
| assets        |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Property,     |           |      9,960 |           |     12,621 |           |     10,440 |           | 
| plant and     |           |            |           |            |           |            |           | 
| equipment     |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Intangible    |           |      1,288 |           |      1,189 |           |      1,327 |           | 
| assets        |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Trade and     |           |          - |           |      6,414 |           |      3,117 |           | 
| other         |           |            |           |            |           |            |           | 
| receivables   |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Deferred      |           |          - |           |        211 |           |         46 |           | 
| income        |           |            |           |            |           |            |           | 
| tax           |           |            |           |            |           |            |           | 
| assets        |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
|               |           | ---------- |           | ---------- |           | ---------- |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Total         |           |     11,248 |           |     20,435 |           |     14,930 |           | 
| non-current   |           |            |           |            |           |            |           | 
| assets        |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
|               |           | ---------- |           | ---------- |           | ---------- |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Current       |           |            |           |            |           |            |           | 
| assets        |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Inventories   |           |      4,926 |           |      5,445 |           |      4,141 |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Trade and     |           |      6,110 |           |      6,015 |           |      5,632 |           | 
| other         |           |            |           |            |           |            |           | 
| receivables   |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Cash and      |           |      6,231 |           |      8,928 |           |      4,367 |           | 
| cash          |           |            |           |            |           |            |           | 
| equivalents   |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
|               |           | ---------- |           | ---------- |           | ---------- |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Total         |           |     17,267 |           |     20,388 |           |     14,140 |           | 
| current       |           |            |           |            |           |            |           | 
| assets        |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
|               |           | ---------- |           | ---------- |           | ---------- |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Current       |           |            |           |            |           |            |           | 
| liabilities   |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Short-term    |           |      6,738 |           |      2,496 |           |      3,562 |           | 
| borrowings    |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Current       |           |        136 |           |        271 |           |        222 |           | 
| tax           |           |            |           |            |           |            |           | 
| liabilities   |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Trade and     |           |      1,972 |           |      6,712 |           |      4,125 |           | 
| other         |           |            |           |            |           |            |           | 
| payables      |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
|               |           | ---------- |           | ---------- |           | ---------- |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Total         |           |      8,846 |           |      9,479 |           |      7,909 |           | 
| current       |           |            |           |            |           |            |           | 
| liabilities   |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
|               |           | ---------- |           | ---------- |           | ---------- |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Net           |           |      8,421 |           |     10,909 |           |      6,231 |           | 
| current       |           |            |           |            |           |            |           | 
| assets        |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
|               |           | ---------- |           | ---------- |           | ---------- |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Non-current   |           |            |           |            |           |            |           | 
| liabilities   |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Long-term     |           |        652 |           |      1,024 |           |        692 |           | 
| borrowings    |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Deferred      |           |          4 |           |          - |           |          - |           | 
| income        |           |            |           |            |           |            |           | 
| tax           |           |            |           |            |           |            |           | 
| liabilities   |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
|               |           | ---------- |           | ---------- |           | ---------- |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Total         |           |        656 |           |      1,024 |           |        692 |           | 
| non-current   |           |            |           |            |           |            |           | 
| liabilities   |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
|               |           | ---------- |           | ---------- |           | ---------- |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Net           |           |     19,013 |           |     30,320 |           |     20,469 |           | 
| assets        |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
|               |           |     ====== |           |     ====== |           |     ====== |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Shareholders' |           |            |           |            |           |            |           | 
| equity        |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Share         |           |      2,965 |           |      2,965 |           |      2,965 |           | 
| capital       |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Share         |           |     11,194 |           |     11,194 |           |     11,194 |           | 
| premium       |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Other         |           |        343 |           |      7,500 |           |        465 |           | 
| reserves      |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Profit        |           |      4,511 |           |      8,661 |           |      5,845 |           | 
| and loss      |           |            |           |            |           |            |           | 
| account       |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
|               |           | ---------- |           | ---------- |           | ---------- |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
| Total         |           |     19,013 |           |     30,320 |           |     20,469 |           | 
| shareholders' |           |            |           |            |           |            |           | 
| equity        |           |            |           |            |           |            |           | 
+---------------+-----------+------------+-----------+------------+-----------+------------+-----------+ 
|               |           |     ====== |           |     ====== |           |     ====== |           | 
+---------+-----+-----+-----+------+-----+-----+-----+------+-----+-----+-----+------+-----+-----+-----+ 
 
 
  Consolidated Statement of Cash Flows 
For the Six Months Ended 30 June 2009 
 
 
+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+ 
|                     |                 |   Six months to |   Six months to |        Year to  | 
|                     |                 |    30 June 2009 |    30 June 2008 |     31 December | 
|                     |                 |                 |                 |            2008 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |        Reviewed |        Reviewed |         Audited | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |           $'000 |           $'000 |           $'000 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Cash flows from     |                 |                 |                 |                 | 
| operating           |                 |                 |                 |                 | 
| activities          |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| (Loss)/profit       |                 |         (1,179) |           (118) |         (2,278) | 
| before taxation     |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Adjustments         |                 |                 |                 |                 | 
| for:                |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Depreciation of     |                 |             613 |             623 |           1,211 | 
| property, plant     |                 |                 |                 |                 | 
| and equipment       |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Amortisation of     |                 |              11 |              11 |              27 | 
| intangible          |                 |                 |                 |                 | 
| assets              |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Share options       |                 |              13 |              60 |              97 | 
| expense and         |                 |                 |                 |                 | 
| write-offs          |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Interest            |                 |           (142) |           (267) |           (471) | 
| receivable          |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Interest            |                 |             423 |             290 |             586 | 
| payable and         |                 |                 |                 |                 | 
| similar charges     |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |      ---------- |      ---------- |      ---------- | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Profit and loss     |                 |           (261) |             599 |           (828) | 
| before working      |                 |                 |                 |                 | 
| capital changes     |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Decrease in         |                 |           2,275 |           7,003 |           4,070 | 
| trade and other     |                 |                 |                 |                 | 
| receivables         |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Increase in         |                 |           (907) |         (1,697) |         (1,380) | 
| inventories         |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| (Decrease)/increase |                 |         (2,014) |           (719) |           1,484 | 
| in trade and other  |                 |                 |                 |                 | 
| payables            |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| (Decrease)/increase |                 |            (77) |              81 |              36 | 
| in taxes payable    |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |      ---------- |      ---------- |      ---------- | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Cash (used          |                 |           (984) |           5,267 |           3,382 | 
| in)/from            |                 |                 |                 |                 | 
| operations          |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Income taxes        |                 |           (276) |         (1,401) |         (1,726) | 
| paid                |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |      ---------- |      ---------- |      ---------- | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Net cash (used      |                 |         (1,260) |           3,866 |           1,656 | 
| in)/from            |                 |                 |                 |                 | 
| operating           |                 |                 |                 |                 | 
| activities          |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Net cash (used      |                 |         (1,260) |           3,866 |           4,617 | 
| in)/from            |                 |                 |                 |                 | 
| operating           |                 |                 |                 |                 | 
| activities          |                 |                 |                 |                 | 
| before              |                 |                 |                 |                 | 
| exceptional         |                 |                 |                 |                 | 
| item                |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Exceptional         |                 |               - |               - |         (2,961) | 
| impairment of       |                 |                 |                 |                 | 
| cash and cash       |                 |                 |                 |                 | 
| equivalents         |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Net cash (used      |                 |         (1,260) |           3,866 |           1,656 | 
| in)/from            |                 |                 |                 |                 | 
| operating           |                 |                 |                 |                 | 
| activities          |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |      ---------- |      ---------- |      ---------- | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Cash flows from     |                 |                 |                 |                 | 
| investing           |                 |                 |                 |                 | 
| activities:         |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Interest            |                 |             394 |             184 |             355 | 
| received            |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Purchase of         |                 |           (712) |           (753) |         (1,736) | 
| property, plant     |                 |                 |                 |                 | 
| and equipment       |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Purchase of         |                 |               - |           (126) |           (179) | 
| intangible          |                 |                 |                 |                 | 
| assets              |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Acquisition of      |                 |            (25) |           (457) |           (464) | 
| subsidiary          |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |      ---------- |      ---------- |      ---------- | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Net cash used       |                 |           (343) |         (1,152) |         (2,024) | 
| in investing        |                 |                 |                 |                 | 
| activities          |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |      ---------- |      ---------- |      ---------- | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Cash flows from     |                 |                 |                 |                 | 
| financing           |                 |                 |                 |                 | 
| activities:         |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Proceeds from       |                 |           3,161 |           2,556 |          16,082 | 
| borrowings          |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Repayment of        |                 |            (49) |         (4,358) |        (18,165) | 
| borrowings          |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Interest paid       |                 |           (420) |           (271) |           (543) | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |      ---------- |      ---------- |      ---------- | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Net cash            |                 |           2,692 |         (2,073) |         (2,626) | 
| from/(used in)      |                 |                 |                 |                 | 
| financing           |                 |                 |                 |                 | 
| activities          |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |      ---------- |      ---------- |      ---------- | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Net                 |                 |           1,089 |             641 |         (2,994) | 
| increase/(decrease) |                 |                 |                 |                 | 
| in cash and cash    |                 |                 |                 |                 | 
| equivalents         |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Cash and cash       |                 |           3,703 |           8,154 |           8,154 | 
| equivalents at      |                 |                 |                 |                 | 
| beginning of        |                 |                 |                 |                 | 
| the period          |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |      ---------- |      ---------- |      ---------- | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Effect of           |                 |             794 |             133 |         (1,457) | 
| exchange rate       |                 |                 |                 |                 | 
| changes             |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
| Cash and cash       |                 |           5,586 |           8,928 |           3,703 | 
| equivalents at      |                 |                 |                 |                 | 
| end of the          |                 |                 |                 |                 | 
| period              |                 |                 |                 |                 | 
+---------------------+-----------------+-----------------+-----------------+-----------------+ 
|                     |                 |      ---------- |      ---------- |      ---------- | 
+------------+--------+--------+--------+--------+--------+--------+--------+--------+--------+ 
Cash and cash equivalents at the end of the period include overdrafts of 
$645,000 (30 June 2008 : $nil, 
 31 December 2008 : $664,000). 
 
 
 
 
Consolidated Statement of Changes in Equity 
For the Six Months Ended 30 June 2009 
 
 
+-------+-------+-------+-------+-------+-------+-------+-------+-------+-------+-------+-------+ 
|               |         Share |         Share |         Other |    Profit and |         Total | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
|               |       capital |       premium |      reserves |  loss account |        equity | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
|               |         $'000 |         $'000 |         $'000 |         $'000 |         $'000 | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
| Period ended  |               |               |               |               |               | 
| 30 June 2008  |               |               |               |               |               | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
| Total         |             - |             - |         1,222 |         (602) |           620 | 
| comprehensive |               |               |               |               |               | 
| income for    |               |               |               |               |               | 
| the period    |               |               |               |               |               | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
| Share options |             - |             - |            60 |             - |            60 | 
| credit        |               |               |               |               |               | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
| Balance at 1  |         2,965 |        11,194 |         6,218 |         9,263 |        29,640 | 
| January 2008  |               |               |               |               |               | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
|               |       ------- |     --------- |       ------- |       ------- |     --------- | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
| Balance at 30 |         2,965 |        11,194 |         7,500 |         8,661 |        30,320 | 
| June 2008     |               |               |               |               |               | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
|               |       ------- |     --------- |       ------- |       ------- |     --------- | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
|               |               |               |               |               |               | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
| Period ended  |               |               |               |               |               | 
| 30 June 2009  |               |               |               |               |               | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
| Total         |             - |             - |         (135) |       (1,334) |       (1,469) | 
| comprehensive |               |               |               |               |               | 
| income for    |               |               |               |               |               | 
| the period    |               |               |               |               |               | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
| Share options |             - |             - |            13 |             - |            13 | 
| credit        |               |               |               |               |               | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
| Balance at 1  |         2,965 |        11,194 |           465 |         5,845 |        20,469 | 
| January 2009  |               |               |               |               |               | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
|               |       ------- |     --------- |       ------- |       ------- |     --------- | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
| Balance at 30 |         2,965 |        11,194 |           343 |         4,511 |        19,013 | 
| June 2009     |               |               |               |               |               | 
+---------------+---------------+---------------+---------------+---------------+---------------+ 
|               |          ==== |         ===== |          ==== |          ==== |         ===== | 
+-------+-------+-------+-------+-------+-------+-------+-------+-------+-------+-------+-------+ 
 
 
 
 
 
 
 
 
 
 
 
1.    Basis of preparation 
 
 
Accounting Policies 
 
 
The interim financial information in this report has been prepared using 
accounting policies consistent with IFRS as adopted by the European Union. IFRS 
is subject to amendment and interpretation by the International Accounting 
Standards Board (IASB) and the International Financial Reporting Interpretations 
Committee (IFRIC) and there is an ongoing process of review and endorsement by 
the European Commission. The financial information has been prepared on the 
basis of IFRS that the Directors expect to be adopted by the European Union and 
applicable as at 31 December 2009. 
 
 
The accounting policies applied are consistent with those of the annual 
financial statements for the year ended 31 December 2008. The presentation of 
the primary financial statements has been modified in order to comply with IAS 1 
(revised). However the revised standard has no impact on the reported results or 
financial position of the Group. The Group has adopted IFRS 8 'Operating 
Segments' but this has not had an impact on the basis of segmentation. Taxes on 
income in the interim periods are accrued using the tax rate that would be 
applicable to expected total annual earnings. 
 
 
Non-statutory accounts 
 
 
The financial information for the 6 months ended 30 June 2009 and 30 June 2008 
is unaudited.  The financial information for the year ended 31 December 2008 set 
out in this interim report does not constitute the Group's statutory accounts 
for that period. The statutory accounts for the year ended 31 December 2008 have 
been delivered to the Registrar of Companies. The auditors reported the 
following matters on those accounts: 
 
 
  *  a disclaimer on the view given by the financial statements, due to the 
  possibleeffect on the Group financial statements of a limitation in evidence in 
  respect of: 
 
 
 
-    a provision having been made against an amount receivable from a financial 
institution in 
 

    Russia of RR87m (30 June 2009: $2,780,000; 31 December 
2008: $2,961,000) held with 
 

    them on demand where the auditors had been 
unable to obtain sufficient appropriate 
 

    evidence regarding the 
recoverability of this amount and the need for the provision; and 
 
 
-    an amount of RR104m (30 June 2009: $3,324,000; 31 December 2008: 
$3,540,000) 
 

    held with a related party bank against which no provision 
had been made and where the 
 

    auditors had been unable to obtain 
sufficient appropriate evidence as to the 
 

    recoverability of this 
amount. 
 
 
  *  a statement under both s237(2) and s237(3) of the Companies Act 1985 as due to 
  the limitation in evidence described above, the auditors had not obtained all 
  the information and explanations that they considered necessary for the purposes 
  of their audit and they were unable to determine whether proper accounting 
  records had been maintained in respect of Zirax LLC, an overseas subsidiary 
  company. 
 
 
 
  *  an emphasis of matter regarding the existence of a material uncertainty which 
  may cast significant doubt about the Group's ability to continue as a going 
  concern. 
 
 
 
Going concern 
 
 
The directors have prepared forecasts for the business for the period to 
September 2010. These forecasts reflect the best estimate the directors can make 
concerning the performance of the underlying business which remains cash 
generative over the year as a whole. In preparing these forecasts, the directors 
have identified that it is possible the Group may need to renew or replace 
existing borrowings after they expire, and the possibility exists that they will 
not be renewed by the Group's lenders nor that alternative lenders can be found. 
This gives rise to a material uncertainty which may cast significant doubt upon 
the ability of the Group to continue as a going concern. 
 
 
Having carefully considered this uncertainty, the directors believe that based 
on the Group's underlying financial performance to date and financial 
performance shown by the Group's forecasts, there is a reasonable expectation 
that the Group will be able to agree new borrowings and banking facilities when 
the existing facilities expire. This view was supported by the repayment in 
early September of $2.8m of borrowings that had reached the end of their term, 
which were successfully replaced with borrowings from an alternate lender. 
 
 
As a result of these considerations, the directors have a reasonable expectation 
that the Group can meet it's liabilities as they fall due for the foreseeable 
future. On this basis they believe that it is appropriate to prepare the interim 
financial statements on a going concern basis. The interim financial statements 
do not include any adjustment to intangible or tangible assets, the 
reclassification of long-term liabilities or provision for further liabilities 
that may be required should the going concern basis of accounting not be 
appropriate. 
 
 
 
 
2.Segment information 
The Group is managed around three groups of product and services offerings: 
Oilfield Process Chemicals, De-icing Solutions and Industrial Chemicals. 
Oilfield process chemicals include all products and services aimed at providing 
enhanced processing capabilities offered to the Oil and Gas industry. De-icing 
Solutions include all products and services aimed at providing a de-icing 
function for Government and municipal entities, businesses and consumers. All 
other customer groups are covered by Industrial Chemicals with the most 
significant customer group being the paper industry. 
The segment results for the period ended 30 June 2009 are as follows: 
+--------------------------+--------------+------------+------------+------------+ 
|                          |     Oilfield |   De-icing | Industrial |      Total | 
|                          |      Process | Solutions  |  Chemicals |            | 
|                          |   Chemicals  |            |            |            | 
+--------------------------+--------------+------------+------------+------------+ 
|                          |        $'000 |      $'000 |      $'000 |      $'000 | 
+--------------------------+--------------+------------+------------+------------+ 
|                          |              |            |            |            | 
+--------------------------+--------------+------------+------------+------------+ 
| Revenue                  |        9,542 |      3,743 |      1,292 |     14,577 | 
+--------------------------+--------------+------------+------------+------------+ 
|                          |              |            |            |            | 
+--------------------------+--------------+------------+------------+------------+ 
| Segment profit/(loss)    |        2,411 |        602 |        332 |      3,345 | 
+--------------------------+--------------+------------+------------+------------+ 
| Non customer specific    |              |            |            |    (3,343) | 
| distribution costs and   |              |            |            |            | 
| overheads                |              |            |            |            | 
+--------------------------+--------------+------------+------------+------------+ 
|                          |              |            |            |  --------- | 
+--------------------------+--------------+------------+------------+------------+ 
| Operating Profit         |              |            |            |          2 | 
+--------------------------+--------------+------------+------------+------------+ 
|                          |              |            |            |      ===== | 
+--------------------------+--------------+------------+------------+------------+ 
 
 
The segment results for the period ended 30 June 2008 were as follows: 
+--------------------------+--------------+------------+------------+------------+ 
|                          |     Oilfield |   De-icing | Industrial |      Total | 
|                          |      Process | Solutions  |  Chemicals |            | 
|                          |   Chemicals  |            |            |            | 
+--------------------------+--------------+------------+------------+------------+ 
|                          |        $'000 |      $'000 |      $'000 |      $'000 | 
+--------------------------+--------------+------------+------------+------------+ 
|                          |              |            |            |            | 
+--------------------------+--------------+------------+------------+------------+ 
| Revenue                  |       12,791 |        865 |      1,409 |     15,065 | 
+--------------------------+--------------+------------+------------+------------+ 
|                          |              |            |            |            | 
+--------------------------+--------------+------------+------------+------------+ 
| Segment profit/(loss)    |        2,910 |        216 |        366 |      3,492 | 
+--------------------------+--------------+------------+------------+------------+ 
| Non customer specific    |              |            |            |    (3,758) | 
| distribution costs and   |              |            |            |            | 
| overheads                |              |            |            |            | 
+--------------------------+--------------+------------+------------+------------+ 
|                          |              |            |            |  --------- | 
+--------------------------+--------------+------------+------------+------------+ 
| Operating Profit         |              |            |            |      (266) | 
+--------------------------+--------------+------------+------------+------------+ 
|                          |              |            |            |      ===== | 
+--------------------------+--------------+------------+------------+------------+ 
 
 
 
 
 
 
3.    Earnings per share (EPS) 
+-------------------------------------------+-------------+-------------+ 
|                                           |  Six months |  Six months | 
|                                           |          to |          to | 
|                                           |     30 June |     30 June | 
|                                           |        2009 |        2008 | 
+-------------------------------------------+-------------+-------------+ 
|                                           |             |             | 
+-------------------------------------------+-------------+-------------+ 
| (Loss)/profit for the period ($'000)      |     (1,334) |       (602) | 
+-------------------------------------------+-------------+-------------+ 
|                                           |   --------- |   --------- | 
+-------------------------------------------+-------------+-------------+ 
| Number of shares - weighted average       |             |             | 
+-------------------------------------------+-------------+-------------+ 
| Basic ('000)                              |     172,321 |     172,321 | 
+-------------------------------------------+-------------+-------------+ 
|                                           |             |             | 
+-------------------------------------------+-------------+-------------+ 
| Basic earnings per share (cents)          |      (0.77) |      (0.35) | 
+-------------------------------------------+-------------+-------------+ 
|                                           |  ---------- |  ---------- | 
+-------------------------------------------+-------------+-------------+ 
| Number of shares - weighted average       |             |             | 
+-------------------------------------------+-------------+-------------+ 
| Diluted ('000)                            |     172,321 |     172,321 | 
+-------------------------------------------+-------------+-------------+ 
|                                           |             |             | 
+-------------------------------------------+-------------+-------------+ 
| Diluted earnings per share (cents)        |      (0.77) |      (0.35) | 
+-------------------------------------------+-------------+-------------+ 
|                                           |  ---------- |  ---------- | 
+-------------------------------------------+-------------+-------------+ 
 
 
4.    Taxation 
Despite the loss before tax for the six months ended 30 June 2009, there is a 
current tax charge of $155,000 as a result of profit earned in Russia. 
 
 
 
 
5.    Balances and transactions with related parties 
(i)    Balances with related parties: 
+---------------------------+--------------------+------------+------------+ 
| Balance sheet caption     | Relationship       | Six months | Six months | 
|                           |                    |      ended |   ended 30 | 
|                           |                    |    30 June |  June 2008 | 
|                           |                    |       2009 |            | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |      $'000 |      $'000 | 
+---------------------------+--------------------+------------+------------+ 
| Trade receivable from and |                    |            |            | 
+---------------------------+--------------------+------------+------------+ 
| prepayments to:           |                    |            |            | 
+---------------------------+--------------------+------------+------------+ 
| OAO Kaustik               | Under common       |      1,044 |         30 | 
|                           | control            |            |            | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    | ---------- | ---------- | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |      1,044 |         30 | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |     ====== |     ====== | 
+---------------------------+--------------------+------------+------------+ 
| Cash and cash             |                    |            |            | 
| equivalents:              |                    |            |            | 
+---------------------------+--------------------+------------+------------+ 
| Inkarobank (*)            | Under common       |      3,327 |      4,463 | 
|                           | control            |            |            | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |     ====== |     ====== | 
+---------------------------+--------------------+------------+------------+ 
| Trade payables to:        |                    |            |            | 
+---------------------------+--------------------+------------+------------+ 
| OAO Plastcard             | Under common       |          - |         71 | 
|                           | control            |            |            | 
+---------------------------+--------------------+------------+------------+ 
| OAO Kaustik               | Under common       |         10 |        636 | 
|                           | control            |            |            | 
+---------------------------+--------------------+------------+------------+ 
| OOO European Chemical     | Under common       |          - |          4 | 
|                           | control            |            |            | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    | ---------- | ---------- | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |         10 |        711 | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |     ====== |     ====== | 
+---------------------------+--------------------+------------+------------+ 
| Short-term borrowings:    |                    |            |            | 
+---------------------------+--------------------+------------+------------+ 
| Inkarobank                | Under common       |          - |        639 | 
|                           | control            |            |            | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |     ====== |     ====== | 
+---------------------------+--------------------+------------+------------+ 
* Of this balance, $3,324,000 was temporarily deposited in another bank between 
25 June 2009 and 2 July 2009 as described in Note 7 and accordingly as at 30 
June 2009 was not deposited at Inkarobank. Since the change in deposit 
institution was temporary, the directors believe no material change in the 
status of the amount as described in Note 1 has occurred as at 30 June 2009. 
 
(ii)    Transactions with related parties: 
+---------------------------+--------------------+------------+------------+ 
| Income statement caption  | Relationship       | Six months | Six months | 
|                           |                    |      ended |      ended | 
|                           |                    |    30 June |    30 June | 
|                           |                    |       2009 |       2008 | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |      $'000 |      $'000 | 
+---------------------------+--------------------+------------+------------+ 
| Revenue from transactions |                    |            |            | 
| with:                     |                    |            |            | 
+---------------------------+--------------------+------------+------------+ 
| OAO Kaustik               | Under common       |         55 |        104 | 
|                           | control            |            |            | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    | ---------- | ---------- | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |         55 |        104 | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |     ====== |     ====== | 
+---------------------------+--------------------+------------+------------+ 
| Inventory purchases:      |                    |            |            | 
+---------------------------+--------------------+------------+------------+ 
| OAO Kaustik               | Under common       |      4,376 |      4,361 | 
|                           | control            |            |            | 
+---------------------------+--------------------+------------+------------+ 
| OOO Evroles               | Under common       |          - |        182 | 
|                           | control            |            |            | 
+---------------------------+--------------------+------------+------------+ 
| OOO European Chemical     | Under common       |          9 |          - | 
|                           | control            |            |            | 
+---------------------------+--------------------+------------+------------+ 
| OOO VTC                   | Under common       |        248 |          - | 
|                           | control            |            |            | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    | ---------- | ---------- | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |      4,633 |      4,543 | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |     ====== |     ====== | 
+---------------------------+--------------------+------------+------------+ 
| Production services       |                    |            |            | 
| purchases:                |                    |            |            | 
+---------------------------+--------------------+------------+------------+ 
| OAO Kaustik               | Under common       |          - |        294 | 
|                           | control            |            |            | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |     ====== |     ====== | 
+---------------------------+--------------------+------------+------------+ 
| Interest income:          |                    |            |            | 
+---------------------------+--------------------+------------+------------+ 
| Incarobank                | Under common       |        127 |        181 | 
|                           | control            |            |            | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |     ====== |     ====== | 
+---------------------------+--------------------+------------+------------+ 
| Interest expense:         |                    |            |            | 
+---------------------------+--------------------+------------+------------+ 
| Incarobank                | Under common       |          - |        128 | 
|                           | control            |            |            | 
+---------------------------+--------------------+------------+------------+ 
|                           |                    |     ====== |     ====== | 
+---------------------------+--------------------+------------+------------+ 
 
 
 
 
6.    Exchange rates 
Exchange rates for the US dollar during the period were: 
+-----------+------------+-----------+------------+-------------+-----------+-----------+ 
|           |    Average |  Average  |    Average |     Closing |   Closing |   Closing | 
|           |    rate to |  rate to  |    rate to |        rate |      rate |   rate at | 
|           |    30 June |  30 June  |         31 |         at  |       at  |        31 | 
|           |       2009 |   2008    |   December |     30 June |   30 June |  December | 
|           |            |           |       2008 |        2009 |      2008 |      2008 | 
|           |            |           |            |             |           |           | 
+-----------+------------+-----------+------------+-------------+-----------+-----------+ 
| USD 1 -   |     0.6696 |    0.5043 |     0.5390 |      0.6053 |    0.5011 |    0.6906 | 
| GBP       |            |           |            |             |           |           | 
+-----------+------------+-----------+------------+-------------+-----------+-----------+ 
| USD 1 -   |    33.0679 |   23.8924 |    24.8736 |     31.2904 |   23.4573 |   29.3804 | 
| RR        |            |           |            |             |           |           | 
+-----------+------------+-----------+------------+-------------+-----------+-----------+ 
 
 
 
 
7.    Subsequent events 
On 25 June 2009, the $3,324,000 deposited at Inkarobank was temporarily 
deposited in another bank. On 2 July 2009 the deposit was returned to Inkarobank 
and converted into promissory notes which can be redeemed on notice to 
Inkarobank not before 28 June 2010. As a result, the Group ceased to hold cash 
or cash equivalents of $3,324,000 and commenced to hold the promissory notes 
referred to above. Subsequently, on 23 September 2009, the promissory notes were 
converted into a 3 month cash deposit. 
 
 
 
 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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