Preliminary Results

Released : 30 June 2017 07:03

RNS Number : 7006J
Graphene NanoChem PLC
30 June 2017
 

 

 

30 June 2017

 

 

 

Graphene NanoChem plc

 

(the "Company" or the "Group")

 

Results for the twelve months ended 31 December 2016

 

Graphene NanoChem (AIM: GRPH), the international provider of nanotechnology performance enhancing solutions for global industries, announces its audited results for the 12 months ended 31 December 2016. These results relate to business conducted by the Group, trading as Graphene NanoChem plc (the "Company" or the "Group").

On a stronger footing

·      Debt rationalisation plan completed albeit customary conditions precedent pending

·      Successful fund raise to support working capital needs

·      Proven technology platforms across 3 divisions

·      Strategic partnerships bearing stronger sales channels

Financial Highlights

·      Financial statements prepared on a deconsolidated basis

·      Group revenue increased to £0.26 million (2015: £0.06 million)

·      Gross Profit of  £0.04 million (2015: Gross Loss £0.09 million)

·      Bad debts written off of £16.22 million (2015: £0.15 million)

·      Loss for the year from continuing operations £16.87 million (2015: £9.13 million)

·      Total comprehensive loss of £8.34 million (2015: £33.28 million)

·      Loss per share of 7.16p per share (2015: 28.56p)

·      Cash and cash equivalents at the end of the period was £0.63m (2015: £0.56m)

(See note 2.2 to the financial statements in relation to going concern - emphasis of matter)

Other Highlights

Business and Operational Highlights

·      The Group announced on 11th April 2016 a business reorganization strategy based on its three divisions namely the Nanofluids, Water, and Polymers divisions.

·      Successful completion of the Group's debt rationalisation plan, subject to customary conditions precedent, with our key financiers agreed and a repayment structure for remaining debt mapped against the Group's recalibrated business plan that saw the conversion of short term debt into a longer term debt and a repayment tenue mapped against the business plan of the Group, as well as the reduction of the Group's total debt to its banking financiers from £24.94 million in 2015 to £20.30 million in 2016.

·      Exit from the capital heavy non-core businesses of the Group, which saw the winding-up and liquidation of two wholly-owned subsidiaries involved in the low margin fuel additive business and consequently significant reduction in the Group's headcount and administrative cost.

·      Post Shareholders' approval at the Annual General Meeting on 3rd December 2016, each Ordinary Share of the Company has been sub-divided into one New Ordinary Share of £0.01 nominal value and one Deferred Share of £0.19 nominal value. The Deferred Share has no right to vote, attend or speak at general meetings of the Company and has no right to receive any dividend or other distribution and will has only limited rights to participate in any return of capital on a winding up or liquidation of the Company. No application has been made to the London Stock Exchange for admission of the Deferred Shares to trading on AIM and no share certificates will be issued in respect of the Deferred Shares.

·      On 23rd December 2016, Darwin Capital Limited entered into an agreement with the Group to subscribe for up to £2.50m Senior Unsecured Zero Coupon Convertible Loan Notes with detachable Warrants to support working capital requirements of the Group and as part of Tranche 1 subscribed to £0.75m of the Loan Notes and 1,016,949 Warrants.

·      In the final quarter of 2016, the Group received a commercial order of 4,000 barrels of PlatDrill, valued at US$359,678, to service 2 wells in Changning, China, located at the southwest region where, in line with the China government policy to increase the development of its shale gas resources, more than 300 wells are expected to be drilled per year in the next 5 years, which is amongst the largest in terms of number of wells in Asia.

Post Period Events

Business and Operational Highlights

·      In the 1st quarter of 2017, the Group received a commercial order for PlatSurfF for trial, valued at US$118,800 that was deployed for use in one oil well in Q2 2017. The client has oil well rejuvenation needs for up to 110 oil wells in Turkmenistan and, upon successful trial, the Group shall commence negotiations for further purchase orders for the balance of their oil wells for utilisation over the next 12 - 24 months.

·    In the 2nd quarter 2017, the Group's polymer solutions was deployed in a paid pilot project in Malaysia where the enhanced material was approved and successfully used to convert and modify a warehouse building for a tier-1 international aerospace company that designs and manufacture commercial jetliners and aircrafts for the defense industry.

·      Darwin Capital Limited has in Tranche 2 subscribed to £1,000,000 of the Loan Notes and 1,355,932 Warrants. The funds raised from the issuance of the Loan Notes have been utilised for working capital needs of the Group in line with the business turnaround plan.

·      The Group has issued 17,472,730 new ordinary shares to Darwin Capital Limited in connection with the conversion of all Loan Notes under Tranche 1 and as the date of this announcement, the Group has 134,009,266 ordinary shares in issue.

·      The debt restructuring exercise the Company has undertaken is now expected to now be unconditional by the end of the 3rd Quarter 2017, post completion of the administrative process and other conditions precedent, including non-core asset sales.

Jespal Deol, Chief Executive Officer of Graphene NanoChem, commented: "Amid a difficult and challenging period for the oil and gas industry, we took the decisive action to execute a holistic turnaround plan for Graphene NanoChem in 2016 with the firm intention to address our challenges head on, internally and externally.

Our primary focus was debt reduction and a significant milestone achievement for us is the successful completion, subject to customary conditions precedent, of the debt rationalisation plan that has seen the conversion of our short term debt into a longer term debt and a repayment tenue mapped against the business plan of the Group. This effectively allows the Group to conserve cash outflow against debt repayment and deploy its funds towards stabilising the business. We anticipate that the debt restructuring exercise undertaken to now be unconditional by the end of the 3rd Quarter 2017 post completion of the administrative process and other conditions precedent, including non-core asset sales

 

We continue our strategic move towards an asset light approach business structure that enables us to refocus operations on our core competence of value addition leveraging on strategic partnerships, business collaborations and outsourcing models to deliver our solutions.

 

We are now entering the third phase of our Turnaround Plan, and to this end, our business platforms have been structured around three core areas that offer a diverse range of applications for potential and use - Nanofluids, Water Treatment and Polymers for Building Materials.

 

Our main priority now is securing contract wins and accordingly we are currently engaging in a number of activities to do just that. We look forward with confidence and optimism. That is where our immediate focus is."

 

Annual Report and Accounts and Annual General Meeting

The Company's annual report and accounts has been sent to shareholders and shall shortly be made available on the Company's website. The Company's annual general meeting will be held at 10.30 a.m. on 26 July 2017 at Academy House, London Road, Camberley, Surrey GU15 3HL.

In accordance with AIM Rule 20, the Group's Annual Report and Accounts for the year ending 31 December 2016, which incorporates the Notice of AGM and Form of Proxy, has been posted to shareholders and will shortly be made available on the Company's website at: www.graphenenanochem.com. 

 

For further information:

 

 

Graphene NanoChem

Jespal Deol, Chief Executive Officer

 

Tel: +603 2282 3080

Panmure Gordon (NOMAD and Broker)

Adam James / Tom Salvesen

 

 

Tel: +44 (0) 20 7886 2500

 

Yellow Jersey PR

Charles Goodwin / Harriet Jackson

 

Tel: +44 7747 788 221 /  +44 7544 275 882

 

The information communicated in this announcement is inside information for the purposes of Article 7 of Market Abuse Regulation 596/2014 ("MAR").

 

Chairman's Statement

TAN SRI DATO' SRI ABI MUSA ASA'ARI MOHAMED NOR

Non-Executive Chairman

 

Amid a difficult and challenging period for the oil and gas industry, we took the decisive action to execute a holistic turnaround plan for Graphene NanoChem in 2016 with the firm intention to address our challenges head on, internally and externally. Our objective is to create a leaner and more nimble Group that focuses on its fundamental competence of delivering disruptive, high margin applications of our platform nanotechnologies.

 

Our focus in the last 18 months has been to execute some of the key steps that would allow us to recalibrate our business, reduce our cost base, realistically address our debt position and to diversify our industry focus in businesses that have exciting growth opportunities. We have made significant strides forward, achieving two important milestones in our turnaround plan during the period.

 

Firstly, we successfully completed subject to customary conditions our debt rationalisation plan with our key financiers agreed and a repayment structure for remaining debt mapped against the Group's recalibrated business plan. Secondly, the Group's exit from the asset-heavy low margin fuel additive business has significantly contributed in reducing our cost base through head count reduction and relocation of operations to more appropriate facilities. Next on our agenda is the disposal of our non-core assets with proceeds to be applied towards further paring down of our financing debt. We anticipate that the debt restructuring exercise undertaken to now be unconditional by the 3rd Quarter, 2017 post completion of the administrative process.

 

Achieving these two milestones was critical to provide the Group with a solid platform to execute its business strategy under the turnaround plan, more so in the current operating environment, which has been an extremely volatile period for the oil and gas industry worldwide with the oil price dipping below US$30 per barrel in January 2016.

 

Running our business against this macro background has been arduous for all of us at Graphene NanoChem and our performance for the year was within the Group's expectation. The last 12 months has been particularly demanding as we persevere with our turnaround plan of transitioning Graphene NanoChem into an asset-light, leaner and more diversified Group focusing on its core competency of value-add integration.  

 

Despite the external challenges, we can take some measure of satisfaction that our key strategy has been kept on track and has, in some areas advanced.

 

The Scomi Group remains our key partner in the Nanofluids Division, supporting the commercial deployment of our value-add solutions into the oil and gas market. Whilst the industry slowdown has severely affected the division, we take great comfort on the number of successes of the deployment of our solutions in the field, specifically in creating the field performance track record. In the meantime we continue to work with the Scomi Group in various business development activities and initiatives bringing our solutions to market, gain market share and leverage into an anticipated industry recovery in due course.

 

We do not have the luxury or the financial muscle to wait the industry out and it is quite evident that the way forward for us is to accelerate the pace of our industry diversifications and continue building, within our current constraints. At its core Graphene NanoChem remains unique, offering technology platform that can be applied across diverse applications in multiple industries.

 

Our Water Division was launched in March 2016 and we are taking a more diverse approach in applications by targeting small and mid-size projects in multiple market segments. Our go-to-market model remains the same - in partnership with established industry partners - with whom we actively work with to pursue several project opportunities and if successful, will provide the Group with a significant market breakthrough and opportunity to expand.

 

We continue to pursue our diversification efforts strategy into 2017, with our polymer solutions for enhanced building materials ("EBM") introduced early this year and was successfully deployed in a pilot project undertaken for a global aerospace company.

 

Our progress to date has been due to our strong entrepreneurial culture; necessary for a relatively small company commercialising new technologies in well-established market place.

 

Our business recalibration exercise and working capital constraint had however led us to take a conservative approach in business development in 2016. We still have a lot more work to do to move the Group forward but our business platform is solid with exciting growth opportunities in new areas.

  

The next step is to actively secure business opportunities that would translate to quality revenue streams for the Group in the various application areas that we have developed, as we continue to complete the transition of the Group.

 

Much has been achieved in 2016 and we will continue to further progress our transition plan for Group with the steadfast support of our business stakeholders - from our shareholders, members of the board, financiers business partners and not the least, all the people at Graphene NanoChem to whom I wish to extend my gratitude and personal appreciation.

 

Tan Sri Dato' Seri Abi Musa Asa'ari bin Mohamed Nor

Non-Executive Chairman

CEO's Review

DATO JESPAL DEOL

Chief Executive Officer

 

The intervening years have been full of significant challenges which the Group has had to overcome. On the back of a debt burden and limited liquidity, we have had to endure the prolonged downturn of the oil and gas industry, an industry which is closely tied to our growth plan.

 

During 2015, we took the decision to address these challenges head on and the year under review has seen continued progress of our holistic turnaround plan to restructure our debt, reduce our cost base and streamline our operations to focus on our core competency of value adding while protecting our growth prospects and flexibility to diversify into new markets ("Turnaround Plan"). The delivery of the Turnaround Plan was the Group's primary goal for the year.

 

It certainly has been a formidable task for the Group and while there is still more to do, much has been achieved today to allow us to take the next step forward to our goal of creating a leaner, more agile and simplified company that is capable of exploiting new opportunities in our markets and delivering sustained revenue streams.

 

Our primary focus was debt reduction and a significant milestone achievement for us is the successful completion, subject to customary conditions precedent of Phase 1 of our Turnaround Plan which was the Group's debt rationalisation. This resulted in the conversion of our short term debt into a longer term debt and a repayment tenue mapped against the business plan of the Group as well as the reduction of the Group's total debt to its banking financiers ("Financiers") from £24.94 million in 2015 to £20.30 million in 2016. This effectively allows the Group to conserve cash outflow against debt repayment and deploy its funds towards stabilising the business.

 

Graphene NanoChem is also well underway in Phase 2 of our Turnaround Plan. We have now restructured Graphene Nanochem's financial objectives, more specifically in reducing our cost base and streamlining our business operations to create realisable value in select industry sectors. In line with our strategy to align our cost base with the business prospects, we continue to manage the process of our exit from the capital heavy non-core businesses of the Group which saw the winding-up and liquidation of our two wholly-owned subsidiaries involved in the low margin fuel additive business and a consequently significant reduction in the Group's headcount and administrative cost. The Group is also in active discussion for the disposal of its non-core assets that, if successful, would further reduce the Group total debt to its Financiers and add working capital to the Group. We anticipate that the restructuring exercise it has undertaken to now be unconditional by the 3rd Quarter 2017 post completion of the administrative process.

 

Of considerable importance is that this progress supports our strategic move towards an asset light approach business structure that enables us to refocus operations on our core competence of value addition leveraging on strategic partnerships, business collaborations and outsourcing models to deliver our solutions.

 

We have now entered into the third phase of our Turnaround Plan, and to this end, our business platforms have been structured around three core areas that offer a diverse range of applications for potential and use - Nanofluids, Water Treatment and Polymers for Building Materials.

 

 

OVERVIEW

 

The performance of the Group reflects the heavy restructuring that was carried out during the financial year together with the substantially prolonged downturn of the oil and gas industry, driven by sustained low oil prices. The year began with Brent crude prices experiencing the sharpest fall in 30 years to US$26 per barrel in January 2016 against the high of US$105 per barrel in June 2014. The average Brent crude oil prices trended at US$43.73 per barrel in 2016 as compared 2015 average price of US$52.39 in 2015, due to low demand and over supply. The net impact was substantial reduction of industry activities and overall industry slowdown compounded further by a weak world economy in 2016 with global GDP growth at 2.3% which was significantly lower than the average of nearly 3% over the past 20 years. The decline in activity had led to stunted market openings for our solutions and the consequent losses reported by the Group.

 

Pursuant to the winding up of its fuel additive business subsidiaries and resulting £16.22m impairment charge, the Group recorded a combined loss from impairment and discontinued operations of £10.49m for the period and a total comprehensive loss for the year of £8.34m.

 

Amid the slow rebound of the industry and market speculation that the "bottom cycle" has been reached for GNC it was evident that as a small company, the way forward is to align its operations with the short and medium term outlook of the industry and most importantly to leverage on its technology platforms to diversify.

 

Whilst we are confident of the market fundamentals of the oil and gas industry, we continue to remain cautious of the timing of its recovery and we need to operate on that basis. Our diversification into the Water Treatment and Building Materials sectors allows us to mitigate single sector exposure and the opportunity to balance changes in supply and market demand, variable economic conditions and shifts in market environment.

 

Despite ongoing challenges, we have a solid business platform to build a future for the Group. We have had some significant wins that validates the value proposition offered by our products and we are continuing to make good progress in building the markets for our solutions. 

 

Nanofluids

 

Our Nanofluids platform comprises an end-to-end spectrum of cost efficient solutions that tackle the oil and gas industry pain points, from addressing drilling challenges and time, recovery and production rates to regulatory health and safety and environmental concerns associated with oil and gas exploration and production activities.

 

The Scomi Group remains our primary market partner for our oilfield solutions and the Group continues to work closely with Scomi Group which has presence in 48 locations in 22 countries worldwide. The prolonged downturn in the oil and gas sector has to a large extent effected margins and volumes of some of our oilfield solutions, and to this end our strategy is to focus on products that have maintained higher margins and withstood oversupply in the industry whilst retaining our operational capability to benefit from an industry upturn. Together with the Scomi Group, we continue to actively work in bringing our solutions into new markets focusing on the Middle East and North African (MENA) regions and South East Asia. This includes supporting new project bids by the Scomi Group.

 

Water

 

Working in collaboration with specialist equipment manufacturers, we apply our platform technology to tailor, enhance and integrate systems and solutions to meet the varied water treatment, recycling and reuse need of various industry sectors. Within the Water Division, we remain focused in bidding for and developing small to mid-sized projects within US$50 - US$150 million, where there is a niche unaddressed space in which larger companies are not active. Our target areas are treatment of produced and industrial water, sewage water, clean drinking water and desalination process where our technology platform has a competitive advantage.

 

Working with industry partners, we are making progress in identifying market opportunities and participating in project bids. We collaborate with the Drilling Waste Management Division of the Scomi Group to market our offshore solutions within the energy sector, focusing on recurring revenue-base model structure. Our strategic partnership with Millennium Engineering Corporation Sdn. Bhd. an experienced water and wastewater treatment company with over 60 credited projects further enhances our market reach and provides us with the execution capability in the deployment of our solutions into the lucrative global water market. Key regions that we are targeting are Asia, MENA and Africa, with off balance sheet financing structures identified for larger scale projects.

 

Polymer - Building Materials

 

A new core application area that we have been working on to create future value is in polymers, specifically in developing enhanced materials for Industrialised Building Systems ("IBS") that offers the advantages of quality, fit-for-purpose and cost effective materials with enhanced strength and durability that will support an IBS value proposition of increasing efficiency, productivity and speed, reducing time frames, costs and construction wastes and delivering affordable solutions. Population growth, urbanization and industrialization and expected growth in residential property constructions have led to huge requirement for innovative solutions for IBS. Low market penetration of IBS products is providing growth opportunities for existing participants and new entrants.

 

Our polymer solutions offering was deployed this year in a paid pilot project in Malaysia where our enhanced material was approved and successfully used to convert and modify a warehouse building for a tier-1 international aerospace company that designs and manufacture commercial jetliners and aircrafts for the defense industry, a testament to the strong value proposition of our solutions.

We are excited with the prospect of this sector and have been in detailed discussions with several potential partners for us to collaborate in exploring the opportunities in the IBS sector, focusing on affordable homes, student and worker accommodations projects where several recurring business models potential exist.

 

 

OUTLOOK

 

We are pleased to have achieved the targeted milestones of our Turnaround Plan in 2016 and we will continue to progress our plan forward.

 

To aid financial flexibility and strengthen the balance sheet, we are pleased that in December 2016, Darwin Capital Limited entered into an agreement with the Group to subscribe for up to £2.50m Senior Unsecured Zero Coupon Convertible Loan Notes with detachable Warrants ("Loan Notes and Warrants") to support working capital requirements of the Group. To date, Darwin has subscribed to £1.75m of the Loan Notes and Warrants.

 

We are in no doubt that there is still more work to be done before the Turnaround Plan is complete. We anticipate that the debt restructuring exercise has undertaken now to be concluded by 3rd quarter 2017. We certainly expect to spend the balance of the year 2017 and much of 2018, executing measures that would reassure our stakeholders that we are capable of successfully transforming Graphene NanoChem into a leaner, more agile and simplified company that is capable of exploiting new opportunities in our markets and deliver sustained revenue streams.

 

 

The volatility of the oil and gas market has resulted in working capital constraint for the Group and that is something that the Group will continue to address. We remain cautious about the recovery of the oil and gas sector but once there is improvement, we are well placed to benefit from opportunities that arise. We are confident that having strategically diversified the business, we are now well positioned to take advantage of new opportunities.

 

Our main priority now is securing contract wins and accordingly we are currently engaging in a number of activities to do just that. We look forward with confidence and optimism. That is where our immediate focus is.

 

Dato' Jespal Deol

Chief Executive

Financial Review

SUSHIL SINGH SIDHU

Chief Financial Officer

 

In the year under review, the Group's primary area of focus was to continue progressing the Group's business reorganization which started during the previous financial year. The focus of this process is Group debt rationalization and exit from the non-core businesses with focus on the nanofluids, water, and polymers divisions.

 

During the period and in line with the reorganization of the Group, the Group's non-core wholly owned subsidiary, namely Platinum Nanochem Sdn Bhd and its wholly owned subsidiary Platinum Green Chemicals Sdn Bhd, were wound up and are not expected to have a material impact on the Group's core business portfolio. The winding up of these two companies has resulted in a consequential loss of control of Platinum Nano G Sdn Bhd. These events have resulted in an impairment expense of £16.22m and gain from discontinued operations of £5.73m for the period.

 

In line with the events above, the Group's consolidated financial statement has been prepared on a deconsolidated basis that includes restating of the 2015 comparable figures in accordance with International Standards of Financial Reporting (IFRS).

 

The Group has made good progress on its debt rationalization plan with its Financial Institutions (FI") and has subject to customary conditions precedent reduced its debt balance by 19% from £24.94m (pre-deconsolidation) in 2015 to £20.30m in 2016. The lower and deferred debt repayment schedules enable utilization of operating cashflows in the near term for advancement of the recalibrated business plan rather than repayment of debt.

 

Having exited from the crude palm oil refining business, the Group is in the process of selling the assets of the business with proceeds from the proposed sale to be utilized for further reduction of FI debt and general working capital needs of the Group. We anticipate the sales to be completed by 3rd quarter 2017.

 

Against a backdrop of a weak world economy in 2016 and lower average Brent crude oil prices of $43.73 per barrel as opposed to 2015 average prices of $52.39, demand for oilfield chemicals within the oilfield drilling sector remained low which affected sales. This was also compounded by an oversupply of chemicals driving lower prices thus effecting margins. After elimination made for discontinued operations, Revenues for the period increased by 3.7x to £0.26m in 2016, and the Group showed a Gross Profit of £0.04m for the period as opposed to a Gross Loss of £0.10m from the preceding period. Albeit small, this profit validates the Group's move away to an asset light model which does not incur a fixed element of cost associated with major plant operations.

 

With the downturn affecting margins of some of our oilfield chemical products, the Group is developing a marketing strategy with the its oil and gas sector partner the Scomi Group, focused on products that have maintained higher margins and withstood oversupply in the industry. These products are primarily in the recovery sector of the oil field business, and the Group remains confident in margin maintenance due to the superior performance of the products over its competitors.

 

In diversifying its revenue base, the Group continues business development within the water and polymers divisions, both focused on realizing future sales based on current and future partnerships.

 

Depreciation and amortization charges have decreased significantly by 58% to £0.37m in 2016 compared to £0.88m in 2015 primarily due lower carrying value for assets post impairment in the previous financial year.

 

Total comprehensive loss for the year was £8.34m (2015: £33.28m) inclusive of impairment expenses and gains from discontinued operations.

Loss per share has decreased by 75% to 7.16p from 28.56p in the previous period.

 

 

Statement of Financial Position and Cashflows

 

Post deconsolidation total assets for the period have decreased by 71% to £6.49m (2015: £22.42m) and total liabilities have decreased by 21% to £22.44m (2015: £28.31m) resulting in a net liability position of £15.95m (2015: £5.89m).

 

Net cash outflow from operating activities for the year was £0.28m (2015: net cash inflow of £2.39m). The Group's year end cash balance stood at £0.63m (2015: £0.56m) as at 31 May 2017, the Group's cash and cash equivalent totaled £0.61m.

 

Notwithstanding the Group's current cash position and the going concern - emphasis of matter statement, the Directors believe that, the future prospects of the Group are robust as the Group moves from its business reorganization phase to new business implementation phase in the three divisions anchored on strong technology solutions and strategic partnerships.

 

Capital Structure and Funding

 

To improve financial flexibility and strengthen the balance sheet during the period, Darwin Capital Limited entered into an agreement with the Group to subscribe for up to £2.50m Senior Unsecured Zero Coupon Convertible Loan Notes (Loan Notes) with detachable Warrants with an exercise price of 18.4375p per Warrant (Warrants). To date, Darwin has subscribed to £750,000 of the Loan Notes and 1,016,949 Warrants in Tranche 1. In Tranche 2, Darwin has subscribed to £1,000,000 of the Loan Notes and 1,355,932 Warrants. The funds raised from the issuance of the Loan Notes have been utilised for working capital needs of the Group in line with the business turnaround.

 

As at 31st December 2016 the Group had 116,536,536 ordinary shares in issue (2015: 116,526,536). Since the year end, the group issued 17,472,730 new ordinary shares to Darwin in connection with the conversion of all Loan Notes under Tranche 1 and as the date of this report, the Group has 134,009,266 ordinary shares in issue.

 

The Group continues to manage and safeguard capital prudently for the benefit of its stakeholders. The Group will strive to achieve its business plans by managing its cash resources and maintaining an optimal capital structure with the ultimate aim of increasing shareholder value.

 

Sushil Singh Sidhu

Chief Financial Officer

 

 

Our Strategy

BUSINESS STRATEGY

 

Graphene NanoChem's strategy is to create and distribute value by bringing innovative, high value high margin solutions in attractive growth sectors that will deliver future earnings for our shareholders. The Group seeks to deliver this by progressing the following objectives:

 

STRATEGIC PRIORITY

Innovative, Solutions Driven Applications

Diversification of Sectors Focus

Partnership Model To Accelerate Growth

Innovative Delivery Models To Create Value

MEGATRENDS DRIVING GROWTH

Customised solutions that meet market needs and demand at the right cost.

Flexibility and adaptability to pursue opportunities across different market sectors 

 

Smart partnerships and collaborations as growth tool to realize market opportunities

 

Operational flexibility to enhance scalability and to reduce volatility through asset light strategy 

 

OUR APPROACH

·        Market-led innovation

·        Drive growth through value-add applications

·        Focus on performance and cost efficiency

 

·         Opportunity driven

·         Enhancing solutions portfolio

·         Strong core applications development pipeline

·         Go to market strategy via industry partnerships

·         Focus on synergistic technology offerings, market access and execution capabilities

 

·        Outsourcing model

·        Focus on core competency of providing value-add and extracting maximum value

·        Focus on growth prospect in high margin applications

 

 

GROWTH STRATEGY

 

Graphene Nanochem's strategy is to create and distribute value by bringing innovative, high value high margin solutions in attractive growth sectors that will deliver future earnings for our shareholders. The Group seeks to deliver this by progressing the following objectives:

 

·      deliver quality earnings by focusing on higher margin business segments

·      develop sustained market position in high growth sectors by leveraging on our technology platform and through continuous innovation

·      move to an asset-light model through structured independent manufacturing, focusing on value adding;

·     accelerate market penetration and expand geographical reach through quality value-add industry partnerships

 

The Group will continue to focus on its core strategy of advancing disruptive high margin applications of its platform nanotechnologies in markets that allows it to grow predictable and recurring revenue streams. Strategic partnerships with select industry partners remain a key strategy to accelerate new markets penetration and to enhance the scalability of our execution capability as we focus on securing contract wins for the Group.

 

Our Strategy

KEY PERFORMANCE INDICATORS

 

The Group has a range of performance indicators, both financial and non-financial, to monitor and manage the business. These are set at the individual customer level and for business units as well as for the Group as a whole. The Group's key performance indicators ("KPIs") are: headline operating margin, headline operating profit, net cash and net debt. These measures are used continually to manage the business, improve performance and compare results against targets.

 

PRINCIPAL RISKS & UNCERTAINTIES

 

Risk management forms an integral part of the business planning and review cycle. The Directors believe in the following risks to be the most significant for potential investors. However, the risks listed do not necessarily comprise all of those associated priority. Additional risks and uncertainties not currently known to the Directors, or which the Directors currently deem not to be significant, may also have an adverse effect on the Group and the information set out below does not purport to be an exhaustive summary of the risks affecting the Group. In particular, the Group's performance may be affected by the changes in market or economic conditions and in legal, regulatory and tax requirements. The Group has put in place controls and strategies to minimise these risks where possible.

 

 

Continued Market Volatility

 

Risk

The general economic climate remains volatile and is affected by numerous factors beyond the Group's control, many of which could impact its operations, business and profitability. These factors include supply and demand of capital, growth in gross domestic products, employment trends, international economic trends, currency exchange rate fluctuations, interest rates' volatility, inflation rate, global and regional political events and international events, as well as a range of other market forces, all of which have an impact on product demand and business costs. The price of oil and gas and how it determines the exploration and production activities in the oil and gas industry will continue to be  the key driver in the rollout of the Group's nanofluids solutions

 

Controls:

Exposure to this risk remains high, and may continue to have an adverse impact on the Group's business. The Group mitigates the risk  by maintaining tight inventory controls and proactive regular contact with customers through its partners, and thereby equipping itself with the ability to assess market demand and for the management to respond accordingly. The Board has also initiated several cost reduction programmes in the effort to significantly lower the Group's cost base, resulting in a more nimble organisation.

 

Reliance On Partners

 

Risk:

The Group is reliant on its relationship with the Scomi Group for the commercial rollout of its nanofluids solutions. Although progress is being made on gaining new accounts, applications as well as geographical reach, the substantial decrease in volumes across the oil and gas industry as a consequence of low prices, has resulted in a decline in activity during the year. Whilst Scomi Group remains as one of the world's leading oilfield service companies and its access to emerging markets provides the Group with a strong go-to-market platform, the exposure of the Group to one primary partner to the market remains high.

 

Controls:

With the aim of minimising the effect of this risk, the Group has progressed the commercial rollout of its water and polymer solutions into diversified markets and geographies, some of which are independent of Scomi Group. The Board will continue to rollout its products and develop partnerships / alliances in its effort to be more autonomous and reduce its dependency on Scomi Group. 

 

New Products, Projects and Technology Innovation

 

Risk:

All new technologies and products involve business risk both in terms of possible abortive expenditure, reputational risk, and potential customer claims or onerous contracts. The same is true in transferring technology and project executions The nature of the competitive market the Group operates in makes innovation a key to success, absence of which could erode margins and/or result in loss of market share even though such risks may have a material impact on the Group.

 

Controls:

The Group counters this risk by continuously investing in research and development resources and continuously focusing on application development path. The Board remains focused on ensuring quality assurance standards are constantly monitored, measured and regulated

 

 

 

 

Early Stage of Commercialisation and New Markets

 

Risk:

Whilst the Group has made initial sales of its nanofluids, the Group is still at early stage of commercial development. There are a number of operational, strategic and financial risks associated with early stage commercialisation efforts. The Group will continue to face risks frequently encountered by early stage companies looking to bring new applications to market. In particular, its future growth and prospects will depend on its ability to develop applications which have broad commercial appeal, to secure commercialisation partners on appropriate terms and to continue to improve its commercialisation functions and to secure sales on a timely basis, whilst at the same time maintaining effective cost controls.

 

Controls:

There are no guarantees that the Group will be able to implement the strategy detailed in its growth strategy successfully or at all. The Group will however approach this challenge and strive to implement its growth strategy in a competitive market through effective management planning and operational controls. The Group will mitigate such risks by using specialists in those areas where it currently believes it is still exposed.

 

Intellectual Property

 

Risk:

The Group is fundamentally based on a platform of intellectual properties ("IP"), which includes a combination of proprietary technologies owned by it (wholly or partly) or licensed to it. The Group's success depends on its ability, and the ability of any third party with which it may partner, in creating a defensible IP portfolios with adequate protection covering its intellectual property rights so as to preserve its exclusive rights in respect of its technology, to preserve the confidentiality of its own and its third party partners' know-how and to be able to operate without having third parties circumvent the rights that it owns, has licensed or has been licensed. The Group's products and technologies may in the process be alleged to infringe third parties' intellectual property or rights that may be granted in the future. The consequent risk will be that  the Group is sued for infringement, and  would need to demonstrate that its product or methods either do not infringe the relevant third party rights or that the rights of the third party are invalid.

 

Controls:

The Group will continue to closely monitor its IP in the areas in which it operates and additionally undertake its IP development efforts with due diligence so as to avert the emergence of such allegations or, at least put up the best credible defence to be successful in defending any such proceedings.

 

Dependence on Recruitment and Retention of Key Personnel

 

Risk:

The Group's business, future success and planned expansion of its operations will depend upon its ability to attract, train and retain qualified and appropriately skilled personnel and on the efforts and abilities of its executive officers and certain other key employees, particularly those with sales and sales management responsibilities, who are key to the Group's growth. The lack of an appropriately skilled workforce or comprehensive succession plans would adversely impact the Group's ability to perform. The Group's operations could be adversely affected if for any reason we were unable to attract or retain such officers or key employees.

 

Controls:

The Group aims to mitigate this risk by in-house staff development, that is by giving its staff clear objectives and career paths. Remuneration packages are also regularly reviewed to ensure that key executives receive remuneration and benefits that closely commensurate best practices in market.

 

Industry Operating Environment

 

Risk:

In the past, cessation or delay of customers' test programmes has inhibited the Group's growth. The Group has little or no influence over the duration of testing, which nearly always takes longer than originally projected by its partner or the end customers. It is common for test programmes, particularly in safety-critical applications such as oilfield chemicals, to take several years to complete. It is also a risk that significant application development time is spent on test programmes that do not result in sales.

 

Controls:

The Group  mitigates the risk by establishing as early as possible the likelihood of a customer's test programme coming to fruition and that the potential commercial opportunities for the Group justifies embarking on the programme in the first place.

 

 

 

 

 

Bid Success and Contract Performance

 

Risk:

The Group is dependent on the success of its bid activities across its targeted sectors and applications. Bidding, by its nature, can be long and expensive and investment in such activity needs to be closely monitored to ensure adequate returns. The success and performance of the Group also depends on our businesses' ability to successfully execute their contractual obligations on terms that provide the expected returns. There is a risk that a particular project (including but not limited to, capital expenditure in relation to production expansion, meeting agreed standards or timescale and/or product development and commercialisation) could experience unforeseen delays and incur unexpected expenses, adversely impacting the implementation of the Group's strategy and the Group's reputation, business, financial condition and results of operations.

 

Controls:

The Group has developed and laid down its 'gatekeeping' process to assess on a business by business and project to project basis, or if necessary at a Group level, the risk and reward balance in deciding to bid for or execute contracts whether on our own account or in partnership with others. Further, the Group maintains rigorous quality standards in all of its operations and carefully assesses the terms on which it agrees to enter into contractual relationships at appropriate levels of responsibility.

 

Dependence of third party suppliers

 

Risk:

As part of the asset light model implemented by the Group in the past year, manufacturing is outsourced to third party suppliers enabling the Group to operate without the complexities of maintaining a plant. A third party supplier's failure to supply materials or components in a timely manner, or failure to supply materials and components that meet the Group's quality, quantity or cost requirements, or the Group's inability to obtain substitute sources for these materials and components in a timely manner or on terms acceptable to it, could harm its ability to meet its contractual obligations to its customers.

 

Controls:

Whilst the Group's contract manufacturers will manage their own supply chains, the Group will continue to hold good working relationships with (i) key component suppliers (which are likely to be used by contract manufacturers) and (ii) a more extensive supply chain to support its on-going development activities. The Group will establish good working relationships that ensure technical information about the Group's products are shared and enhanced collaboratively. The Group is also actively reviewing its contracting structure passing on delivery commitments to the suppliers in exchange for better prices incentivising them to commit to flawless delivery to its customers thus allowing the Group to meet its contractual obligations.

 

Litigation and Claims

 

Risk:

In addition to such litigation from time to time in the ordinary course of business which it managers with appropriate professional advice, the Group faces prospective risk of litigations arising from its winding up of / closing down its non-core fuel additive subsidiaries.

 

Controls:

The Group will continue to exercise due diligence in its day to day business operations in addition to be carefully guided, by specialists if necessary, to undertake and achieve its corporate re-structuring objective.

 

Environmental and Regulatory Considerations

 

Risk:

In addition to general UK and international laws, the Group's activities are subject to significant additional obligations, particularly in the jurisdictions that it operates in. In the context of changes in the regulatory environment, there is a risk that the Group can fail to adopt policies/processes to ensure compliance with emerging requirements. It is also difficult to predict the impact of future changes to laws or regulations or the introduction of new law or regulations that affect the Group and, from time to time, interpretation of existing laws or regulations may also change or the approach to enforcement may become more rigorous. It could also lead to high levels of scrutiny by regulators, enforcement agencies or authorities with associated increase in operational costs.

 

Control:

The Board recognises its roles and responsibilities as good corporate citizens in, not only the territories in which it is resident but also the territories in which it engages in business. The Group will consequently therefore ensure that it is adequately resourced, either in-house or out-sourced, with specialists who are knowledgeable with the laws of the territories in which it undertakes businesses so that the Group is properly advised on its roles and responsibilities as good citizens in all the territories where it has physical presence.

 

 

 

 

Financial Risk

 

Risk:

There are a number of financial risks, which will be outside the control of the Group, and which can affect revenues and/or costs, and neither the Company nor its subsidiaries currently hedges against such risks. These includes going concern risks (please refer to Note 2.2), varying international exchange rates, interest rates, world commodity prices, energy prices and supplies, raw materials prices and supplies, inflation and international trends in trade, tariffs and protectionism and changes in legal and regulatory framework.

 

Controls:

There can be no assurance that such variables will not have a material adverse impact on the Group's financial position or results of operations. The Board however will endeavour  to continue to mitigate this risk by boosting the Group's financial capability through constantly accessing sources of finance / capital such as its successful fund raise of up to £2.5 million in Unsecured Convertible Loan Notes from Darwin Strategic Capital during the financial year 2016, of which £1.75 million has been subscribed for to date.

 

Approval of Strategic Report

 

Part I of this Annual Report comprises the Strategic Report for the Group which has been drawn up and presented in accordance with, and in reliance upon, applicable English company law, in particular Chapter 4A of the Companies Act 2006, and the liabilities of the Directors in connection with this Annual Report shall be subject to the limitations and restrictions provided by such law.

 

It should be noted that the Strategic Report has been prepared for the Group as a whole and are deemed to form part of this report, and therefore gives greater emphasis to those matters, which are significant to Graphene NanoChem and its subsidiary undertakings when viewed as a whole.

 

Approved by the Board and signed on behalf of the Board.

 

Dato' Jespal                                                                            Sushil Sidhu

Chief Executive Officer                                                          Finance Director

 

 

Independent Auditor's Report

TO THE MEMBERS OF GRAPHENE NANOCHEM PLC

 

We have audited the financial statements of Graphene Nanochem Plc for the year ended 31 December 2016 which comprise the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash flows and the related notes.  The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European.

 

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.  Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's 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 and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

Respective responsibilities of Directors and Auditor

As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.  Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).  Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

 

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

 

Opinion on financial statements

In our opinion the financial statements:

• give a true and fair view of the state of the Group's affairs as at 31 December 2016 and of the Group's profit or loss for the year then ended;

• have been properly prepared in accordance with IFRSs as adopted by the European Union; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

 

Emphasis of matter - Going concern

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 2.2 to the financial statements concerning the Group ability to continue as a going concern. The Group incurred a net loss of £11,142,000 during the year ended 31 December 2016 and, at that date, the Group's had net current liabilities of £4,358,000. These conditions, along with the other matters explained in note 2.2 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern.  The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

 

Opinion on other matter prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

•      the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

•      the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Matters on which we are required to report by exception

In light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report and the Directors' Report.

 

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

•      adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

•      the financial statements are not in agreement with the accounting records and returns; or

•      certain disclosures of Directors' remuneration specified by law are not made; or

•      we have not received all the information and explanations we require for our audit.

 

 

 

 

Mark Ling (Senior statutory auditor)                                                                                                                                     1 Westferry Circus

For and on behalf of PKF Littlejohn LLP                                                                                                                       Canary Wharf

Statutory auditor                                                                                                                                                                 London E14 4HD

 

 

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2016

 

 

 

2016

2015

 

Notes

£'000

£'000

 

 

 

 

Continuing operations

 

 

 

Revenue

6

258

55

Cost of sales

 

(214)

(150)

Gross (loss)/profit

 

44

(95)

Other Income

8

20

10

Selling and distribution expenses

 

-

-

Administrative expenses

9

1,398

(755)

Bad debts written off

9

(16,222)

(146)

Impairment of fixed assets

14

-

(2,538)

Impairment of goodwill

15

-

(1,392)

Impairment of intangible assets

15

-

(4,401)

Finance income

11

-

2

Finance costs

11

(1,739)

(141)

Depreciation and amortization

 

(370)

(880)

Operating loss from continuing operations

 

(16,869)

(10,336)

Share of loss in a joint venture

4

(5)

-

Loss before tax from continuing operations

 

(16,874)

(10,336)

Income tax credit

12

-

1,202

Loss for the year from continuing operations

 

(16,874)

(9,134)

 

 

 

 

Discontinued operations

 

 

 

Profit/(loss) for the year from discontinued operations

7

5,732

(23,789)

Loss for the year attributable to the owners of the parent

 

(11,142)

(32,923)

 

 

 

 

Other comprehensive loss: items that may be subsequently reclassified to profit or loss

 

 

 

Net exchange differences on translating foreign operations

 

2,802

(360)

 

 

 

 

Total other comprehensive loss, net of tax

 

2,802

(360)

 

 

 

 

Total comprehensive loss

 

(8,340)

(33,283)

 

 

 

 

Earnings per share from continuing and discontinued operations attributable to owners of the parent

 

 

 

Basic earnings per share

 

 

 

 - From continuing operations

 

(12.08)p

(8.15)p

 - From discontinued operations

7

4.92p

(20.41)p

 - From total comprehensive loss

13

(7.16)p

                  (28.56)p

 

 

 

 

Diluted earnings per share

 

 

 

 - From continuing operations

 

(11.57)p

(8.15)p

 - From discontinued operations

13

4.71p

(20.41)p

 - From total comprehensive loss

13

(6.86)p

                  (28.56)p

 

 

The accompanying accounting policies and notes form an integral part of these financial statements

 

 

 

 

 

Consolidated Statement of Financial Position

As at 31 December 2016

 

 

2016

2015

 

Notes

£'000

£'000

 Assets

 

 

 

 Non-current assets

 

 

 

 Property, plant and equipment

14

5,640

5,095

 Intangible assets

15

41

41

 Investment in a joint venture

  4

60

19

 

 

5,741

5,155

Non-current assets directly associated with discontinued operations

 

-

15,536

 

 

5,741

20,691

 Current assets

 

 

 

 Inventories

16

16

56

 Trade and other receivables

17

105

115

 Cash and cash equivalents

18

630

21

 

 

751

192            

Current assets directly associated with discontinued operations

 

-

1,537

 

 

751

1,729

 

 

 

 

 Total assets

 

6,492

             22,420

 

 

 

 

 Liabilities

 

 

 

 Current liabilities

 

 

 

 Trade and other payables

19

2,143

134

 Borrowings

20

2,966

1,560

 

 

5,109

1,694

Current liabilities directly associated with discontinued operations

 

-

26,607

 

 

5,109

28,301

 Non-current liabilities

 

 

 

 Borrowings

20

17,334

-          

 

 

17,334

-

Non-current liabilities directly associated with discontinued operations

 

-

12

 

 

17,334

12

 

 

 

 

 Total liabilities

 

22,443

              28,313

 Net (liabilities)

 

(15,951)

(5,893)              

 

 

 

 

 Equity

 

 

 

 Share capital

22

             23,307

             23,307

 Share premium account

22

           139,639

           139,639

 Shares to be issued

 

206

-

 Reverse acquisition reserve

22

-

  (99,305)

 Translation reserve

22

(1,349)

(4,151)

 Irredeemable convertible preference shares

23

               -

               1,924

 Accumulated losses

 

           (177,754)

           (67,307)

 Shareholders' (deficiency) /equity

 

(15,951)

(5,893)

 

 

The accompanying accounting policies and notes form an integral part of these financial statements.

Company Registration No: 05712979

 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2016

 

Share Capital

Share Premium Account

Shares to be issued

Reverse Acquisition Reserve

Translation Reserve

Accumulated Losses

Equity Component of Preference Shares

Total Equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

At 1 January 2015

23,307

139,639

-

 (99,305)

(3,791)

        (34,384)

        2,249

27,715

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income:

 

 

 

 

 

 

 

 

Loss for the financial year

-

-

-

-

-

(32,923)

-

(32,923)

Foreign currency translation differences

-

-

-

-

(360)

-

(325)

(685)

 

-

-

-

-

(360)

(32,923)

(325)

(33,608)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2015

23,307

139,639

-

(99,305)

(4,151)

(67,307)

1,924

(5,893)

 

 

 

 

 

 

 

 

 

Total comprehensive income:

 

 

 

 

 

 

 

 

Loss for the financial year

-

-

-

-

-

(11,142)

-

(11,142)

Reversal of reverse acquisition reserve

-

-

-

99,305

-

(99,305)

-

-

Reversal to Profit & Loss

-

-

-

-

-

-

(2,210)

(2,210)

New Shares to be issued

-

-

206

-

-

-

-

206

Foreign currency translation differences

-

-

-

-

2,802

-

286

3,088

 

-

-

206

99,305

2,802

(110,447)

(1,924)

(10,058)

 

 

 

 

 

 

 

 

 

At 31 December 2016

23,307

139,639

206

-

(1,349)

(177,754)

-

(15,951)

 

 

All reserves are attributable to the equity holders of the parent Company.

 

Consolidated Statement of Cash Flows

For the year ended 31 December 2016

 

 

2016

2015

 

 

£'000

£'000

 

 

 

 

 Cash Flows From Operating Activities

 

 

 Loss before taxation 

(16,875)

(34,125)

 

 

 

 

 Adjustments for:

 

 

 Depreciation of property, plant and equipment

370

1,811

 Amortisation of intangible assets

1

855

 Impairment loss on disposal of former group undertaking

13,277

-

 Loss/(gain) on disposal of property, plant and equipment

-

5

 Inventory written off

45

693

 Bad debts written off

-

146

 Interest income

-

(2)

 Property, plant and equipment written off

-

2,350

 Impairment of goodwill

-

2,039

 Impairment of intangible assets

-

9,815

 Impairment of tangible fixed assets

-

13,840

 Share of loss in a joint venture

5

20

Impairment loss in joint venture

56

-

 Finance costs

1,739

1,840

Unrealised foreign exchange loss

17

-

Warrant issue

81

-

 

 

 

 

 (Increase)/decrease in :

 

 

 Trade and other receivables

15

4,769

 Inventories

-

592

 

 

 

 

 Increase /(decrease) in :

 

 

 Trade and other payables

989

(492)

 Cash Generated From Operations

(280)

4,156

 

 

 

 

 Net interest paid

-

(1,840)

 Income tax refund

-

72

 Net Cash From/(Used In) Operating Activities

(280)

2,388

 

 

 

 

 Cash Flows From Investing Activities

 

 

 Purchase of property, plant and equipment, net

-

(2,577)

 Subscription of shares in a joint venture

(119)

-

 Net cash used by discontinued operations

(2,711)

-

 Net Cash Used In Investing Activities

(2,830)

(2,577)

 

 

 

 

 Cash Flows From Financing Activities

 

 

 Issuance of Loan Notes

675

-

 Advances by related companies

209

-

 Net proceeds from/(repayment of) borrowings

(360)

(1,336)

 Net Cash Generated From/(Used In) Financing Activities

524

(1,336)

 

 

 

 

 Net (Decrease) In Cash and Cash Equivalents

(2,586)

(1,525)

 Cash and Cash Equivalents at beginning of year

558

2,227

 Effect of exchange rate differences on cash and cash equivalents

2,658

(144)

 Cash and Cash Equivalents at end of year (note 18)

630

558

 

The accompanying accounting policies and notes form an integral part of these financial statements.

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

1       General information

    

          Graphene Nanochem Plc is a public limited Company incorporated and domiciled in England.

 

          In 2013, the Company was formed through the reverse takeover of Platinum Nanochem Sdn. Bhd. ("PNC") by Biofutures International plc ("Biofutures") where £32.5 million was raised through a placing of 23.2 million ordinary shares with new investors. The enlarged Group's shares were readmitted to the AIM market on 26 March 2013 under the name of Graphene Nanochem plc.

 

The consolidated financial statements are presented as a continuation of the financial statements of Platinum Nanochem Sdn. Bhd. The consideration transferred was calculated after determining the fair value of the assets and liabilities of Biofutures at the transfer date. The consideration comprises the value of the additional shares that would need to have been purchased in Biofutures to acquire the entire share capital.

 

The Company and its subsidiaries were involved in the design, formulation and manufacturing of intermediate and performance chemicals and advanced nano-materials. During the year ended 31 December 2016 and subsequent to the balance sheet date, the Group commenced a restructuring of its business.

 

     2          Summary of significant accounting policies

 

          2.1  Basis of preparation

 

                 These consolidated financial statements of the Group are for the year ended 31 December 2016. They have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The consolidated financial statements have been prepared under the historical cost convention except where accounting standards require the use of fair values.

 

                 The financial statements of the Company have been prepared using FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland ("UK GAAP").

 

                 These consolidated financial statements are presented in Pounds Sterling ("£") which is the functional and presentation currency of the parent, and rounded to the nearest thousand ("£'000"). The functional currency of the subsidiaries is the Malaysian Ringgit as that is the currency of their primary economic environment. The directors have chosen to present these financial statements in Pounds Sterling due to the international exposure and shareholders of the entity.

 

                        The significant accounting policies set out below have been consistently applied, except where stated.

 

                 On publishing the parent Company financial statements here together with the Group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual Statement of Comprehensive Income statement and related notes that form a part of these approved financial statements.

 

                

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

2       Summary of significant accounting policies (Continued)

 

2.2 Going concern   

 

                 Although the Group recorded a net loss of £11,142,000 for the financial year ended 31 December 2016, the significant progress in the holistic business restructuring that includes the successful launching of two new divisions in the Water & Polymers markets, coupled with the similarly positive debt restructuring, gives the Directors optimism that the Group will continue to be operational in the foreseeable future.

 

                 The Group is in advanced discussions to dispose of identified non-core assets to a third party although no binding agreement has been entered into at the date of this report. In conjunction with the proposed disposal, the Group will utilize the proceeds from the sale to make full settlement of its debt owing to its primary short term financier and pay down the restructured debt of its primary long term financier. The successful conclusion of the above disposal and utilization of proceeds mentioned will positively impact the Group's indebtedness.

 

                 In addition to the above proposed disposal, the Group has successfully raised funds via an agreement with Darwin Capital Limited to subscribe for up to £2.50m Senior Unsecured Zero Coupon Convertible Loan Notes with detachable Warrants in three separate tranches to support working capital requirements of the Group. Tranche 1 of £0.75m and Tranche 2 of £1.00m has been subscribed to in December 2016 and May 2017 respectively.

 

                 The Directors have prepared financial forecasts which suggests that based on conversion of the anticipated sales pipelines, successful conclusion on the matters discussed above that the Group is able to continue to meet its obligations as and when they fall due.

 

The Directors  have at the  time  of  approving  the  financial  statements,  have considered the  going concern assumption, and  have concluded with reasonable expectation that the Group would continue as a going concern and have adequate resources to continue in operational existence for the foreseeable future. As the Directors consider that it is appropriate to prepare the financial statements of the Group and the Company on a going concern basis, the financial statements do not include any adjustments relating to the recoverability and classification of the assets and liabilities that may be necessary, if the going concern basis of preparing the financial statements of the Group and Company is not appropriate.

 

2.3 Standards and Interpretations effective in the current period

 

(a)   Accounting developments during 2016

 

                 The International Accounting Standards Board (IASB) issued various amendments and revisions to International Financial Reporting Standards and IFRIC interpretations. The amendments and revisions were applicable for the period ended 31 December 2016 but did not results in any material changes to the financial statements of the Group or Company.

 

The following standards were adopted by the Group during the year:

 

•     IAS 1 (Amendment) - Disclosure initiatives (effective 1 January 2016)*

•     IAS 16 and IAS 38 (Amendments) - Clarification of acceptable methods of depreciation and amortisation (effective 1 January 2016)*

•     IAS 19 - Employee benefits (Amendments) (effective 1 January 2016)*

•     IAS 27 (Amendment) - Equity method in separate financial statements (effective 1 January 2016)*

•     IAS 28 - Investment in associates (Amendments) (effective 1 January 2016)*

•     IFRS 10 - Consolidated financial statements (effective 1 January 2016)*

•     IFRS 11 (Amendment) - Accounting for acquisitions of interest in joint operations (effective 1 January 2016)*

•     IFRS 12 - Disclosure of interest in other entities (effective 1 January 2016)*

•     Annual improvement Cycle 2012-2014

 

*EU effective date                                                                                                                       

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

2       Summary of significant accounting policies (Continued)

 

          2.3 Standards and Interpretations effective in the current period (continued)

 

(b)   Accounting developments not yet adopted

 

                 Various new standards and amendments have been issued by the IASB up to the date of this report which are not applicable until future periods and have not yet been endorsed by the European Union.

 

                 At the date of authorisation of these financial statements, the following standards and interpretations, were in issue but not yet effective, and have not been early adopted by the Group:

 

•      IAS 7 - Statement of Cash Flow amendments (effective 1 January 2017)

•      IAS 12 (Amendment) - Recognitions of Deferred Tax Assets for Unrealised Losses (effective 1 January 2017)

•      IFRS 9 - Financial Instruments (2015) (effective 1 January 2018)*

•      IFRS 15 - Revenue from contracts with customers (effective 1 January 2018)*

•      IFRS 16 - Leases (effective 1 January 2019)

•      IFRS 2 - Classification and Measurement of Share-based Payment Transactions

•      IFRIC 22 - Foreign Currency Transactions and Advance Consideration (effective 1 January 2018)

•      IAS 40 - Transfers of Investment Property (effective 1 January 2018)

•      Annual improvement Cycle 2014-2016 (effective 1 January 2017/2018)

 

The Directors are actively considering the effects upon the financial statements and at the time of approval do not consider that the financial statements will be subject to material changes.

 

None of these is expected to have a significant effect on the consolidated financial statements of the Group, except the following set out below:

 

IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the 'hedged ratio' to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted subject to EU endorsement. The Group is yet to assess IFRS 9's full impact.

 

                 IFRS 15, 'Revenue from contracts with customers' deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 'Revenue' and IAS 11 'Construction contracts' and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted subject to EU endorsement. The Group is assessing the impact of IFRS 15.

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

2       Summary of significant accounting policies (Continued)

 

          2.3 Standards and Interpretations effective in the current period (continued)

 

(b)   Accounting developments not yet adopted (continued)

 

 

                 IFRS 16 'Leases' specifies how an IFRS reporter will recognise, measure, prepare and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from its predecessor IAS 17. The standard replaces IAS 17 'Leases' and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2019, with earlier adoption permitted if IFRS 15 'Revenue from contracts with customers' has also been applied (subject to EU endorsement).

 

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

 

2.4 Basis of Consolidation

 

The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries made up to 31 December 2016.

                                                                                                                                                     

Subsidiaries are entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

 

Subsidiaries are consolidated from the date on which control is transferred to the Group up to the effective date on which control ceases, as appropriate.

 

Intragroup transactions, balances, income and expenses are eliminated on consolidation. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

2    Summary of significant accounting policies (Continued)

 

2.4 Basis of Consolidation

 

 

(a)       Business Combinations

 

Acquisitions of businesses are accounted for using the acquisition method. Under the acquisition method, the consideration transferred for acquisition of a subsidiary is the fair value of the assets transferred, liabilities incurred and the equity interests issued by the Group at the acquisition date. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs, other than the costs to issue debt or equity securities, are recognised in profit or loss when incurred.

 

In a business combination achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.

 

Non-controlling interests in the acquiree may be initially measured either at fair value or at the non-controlling interests' proportionate share of the fair value of the acquiree's identifiable net assets at the date of acquisition.  The choice of measurement basis is made on a transaction-by-transaction basis.

 

The consolidated financial statements have been issued in the name of the legal parent (i.e. the accounting acquiree), but presented as a continuation of the financial statements of the legal subsidiary (i.e. the accounting acquirer).

 

The following principles have been applied:

 

(i)       The assets and liabilities of the legal subsidiary shall be recognised and measured in the consolidated financial statements at their pre-combination carrying amounts;

 

(ii)   The assets and liabilities of the legal parent shall be recognised and measured in the consolidated financial statements at their fair values at the acquisition date;

 

(iii) The retained profits and other equity balances (such as revaluation reserves and foreign exchange reserves) recognised in the consolidated financial statements shall be the retained profits and other equity balances of the legal subsidiary immediately before the business combination;

 

(iv)  The amount recognised as issued equity instruments (i.e. share capital and share premium) in the consolidated financial statements shall be determined by adding to the issued equity of the legal subsidiary immediately before the business combination the fair value of the legal parent (i.e. the deemed cost of the business combination); and

 

(v)    The equity structure appearing in the consolidated financial statements shall reflect the equity structure of the legal parent, including the equity instruments issued by the legal parent to effect the combination.

 

(b)       Joint Arrangements

 

Joint arrangements are arrangements of which the Group has joint control, established by contracts requiring unanimous consent for decisions about the activities that significantly affect the arrangements' returns.

 

Joint arrangements are reclassified and accounted for as follows:

 

·           A joint arrangement is classified as "joint operation" when the Group or the Company has rights to the assets and obligations for the liabilities relating to an arrangement. The Group account for each of its share of the assets, liabilities and transactions, including its share of those held or incurred jointly with the other investors, in relation to the joint operation.

·           A joint arrangement is classified as "joint venture" when the Group has rights only to the net assets of the arrangements. The Group accounts for its interest in the joint venture using the equity method.

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

2       Summary of significant accounting policies (Continued)

 

          2.5  Foreign currency translation

 

                 (a)  Functional and presentational currency

                        Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The consolidated financial statements are presented in sterling, which is the Company's functional and presentational currency.

 

(b)   Transactions and balances

                        Foreign currency transactions are translated into the functional currency of each individual entity using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the year end date are reported at the rate of exchange prevailing at that date. All exchange gains arising on retranslation of assets and liabilities are dealt with in the profit or loss.

 

                 (c)   Consolidation of overseas subsidiaries

                        Income and expenditure for overseas subsidiaries are included based upon monthly average exchange rates to give a fair approximation to the transaction rate.  Items of statement of financial position are included at the year-end exchange rate. All other differences are included within the translation reserve, including related goodwill and intangible assets, which are translated at the rate ruling at the year-end date.

 

          2.6  Property, plant and equipment

 

                 All property, plant and equipment (PPE) is shown at cost less subsequent depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the items. 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. All other repairs and maintenance are charged to the profit and loss during the financial period in which they are incurred.

 

          Depreciation on assets is calculated using the straight-line method so as to allocate the cost of each asset less its residual value over its estimated useful life.  The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date.

 

          The principal annual depreciation rates used to depreciate other assets are as follows:

 

Leasehold land

Over the lease period of 65 and 99 years

Buildings

2%

Motor vehicles

20%

Computer Equipment

Furniture, fittings and equipment

10-40%

20%

Plant and machinery

5 - 20%

Renovations

10-20%

 

Capital work-in-progress represents assets under construction, and which are not ready for commercial use at the end of the reporting period. Capital work-in-progress is stated at cost, and will be transferred to the relevant category of assets and depreciated accordingly when the assets are completed and ready for commercial use.

          Cost of capital work-in-progress includes direct cost, related expenditure and interest cost on borrowings taken to finance the acquisition of the assets to the date that the assets are completed and put in use.

 

         

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

2       Summary of significant accounting policies (Continued)

 

          2.6  Property, plant and equipment (Continued)

 

          Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when the cost is incurred and it is probable that the future economic benefits associated with the asset will flow to the Company and the cost of the asset can be measured reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-to-day servicing of equipment are recognised in profit or loss as incurred. Cost also comprises the initial estimate of dismantling and removing the asset and restoring the site on which it is located for which the Company is obligated to incur when the asset is acquired, if applicable.

      

          An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising from derecognition of the asset is recognised in profit or loss. The revaluation reserve included in equity is transferred directly to retained profits on retirement or disposal of the asset.

 

2.7     Goodwill and intangible assets

 

          Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition.  Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

 

          Goodwill is allocated to cash-generating units for the purposes of impairment testing.

 

          Identifiable intangible assets are recognised separately from goodwill on all acquisitions. Such assets are carried at fair value at the date of acquisition (i.e. as deemed cost). Such intangible assets are reviewed for impairment on an annual basis. Intangible assets are tested annually for impairment along with the goodwill.

 

Intangible assets comprise of the followings:

 

(a)    Research and development expenditure

 

Research expenditure is recognised as an expense when it is incurred.

 

Development expenditure is recognised as an expense except that costs incurred on development projects are capitalised as non-current assets to the extent that such expenditure is expected to generate future economic benefits.

 

Development expenditure is capitalised if, and only if an entity can demonstrate all of the following:

 

(i)       its ability to measure reliably the expenditure attributable to the asset under development;

 

(ii)    the product or process is technically and commercially feasible;

 

(iii)   its future economic benefits are probable;

 

(iv)    its intention to complete and the ability to use or sell the developed asset; and

 

(v)     the availability of adequate technical, financial and other resources to complete the asset under development.

 

Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses, if any. Development expenditure initially recognised as an expense is not recognised as assets in the subsequent period.

 

The development expenditure is amortised on a straight-line method over a period of 8 to 15 years when the products are ready for sale or use. In the event that the expected future economic benefits are no longer probable of being recovered, the development expenditure is written down to its recoverable amount.

 

(b)    Licences

 

        Separately acquired licence is shown at historical cost. Licence has a finite useful life and is carried at cost less accumulated amortisation. Impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. Any impairment is recognised immediately as an expense.

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

2       Summary of significant accounting policies (Continued)

 

(c)     Patents

 

Separately acquired patents are shown at historical cost. Patents have a finite useful life and are carried at cost less accumulated impairment. Impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the asset is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense.

 

2.8     Impairment testing of goodwill, other intangible assets and property, plant and equipment

 

          For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors the related cash flows.

 

          Goodwill, other individual assets or cash-generating units that include goodwill, other intangible assets with an indefinite useful life, and those intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

 

          An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

 

2.9     Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in-first-out basis and comprises the purchase price and incidentals incurred in bringing the inventories to their present location and condition.

            

Net realisable value represents the estimated selling price less the estimated costs of completion and the estimated costs necessary to make the sale.

 

Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories.

 

2.10   Trade and other receivables

 

Trade and other receivables are initially recognised at fair value, which is usually the original invoiced amount plus transaction costs, and subsequently carried at amortised cost using the effective interest method less provisions made for impairment of receivables.

 

An impairment loss is recognised when there is objective evidence that a financial asset is impaired. Management specifically reviews its loans and receivables financial assets and analyses historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in the customer payment terms when making a judgment to evaluate the adequacy of the allowance for impairment losses. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. If the expectation is different from the estimation, such difference will impact the carrying value of receivables.

 

2.11   Trade and other payables

 

Trade and other payables are initially recognised at fair value, which is usually the original invoiced amount, and subsequently carried at amortised cost using the effective interest method.

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

2       Summary of significant accounting policies (Continued)

 

2.12   Borrowing costs

Borrowing costs, directly attributable to the acquisition, construction or production of a qualifying asset, are capitalised as part of the cost of those assets, until such time as the assets are ready for their intended use or sale. Capitalisation of borrowing costs is suspended during extended periods in which active development is interrupted.

 

All other borrowing costs are recognised in profit or loss as expenses in the period in which they incurred.

 

2.13   Cash and cash equivalents

 

Cash and cash equivalents (readily convertible into a known amount of cash) include cash in hand and deposits held at call with banks with an original maturity of three months or less.  For the purpose of the cash flow statement, cash and cash equivalents are as defined above, net of outstanding bank overdrafts.

 

2.14      Financial Instruments

 

Financial instruments are recognised in the statements of financial position when the Group has become a party to the contractual provisions of the instruments.

 

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as an expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity.

 

Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

 

A financial instrument is recognised initially at its fair value. Transaction costs that are directly attributable to the acquisition or issue of the financial instrument (other than a financial instrument at fair value through profit or loss) are added to/deducted from the fair value on initial recognition, as appropriate.  Transaction costs on the financial instrument at fair value through profit or loss are recognised immediately in profit or loss.

 

Financial instruments recognised in the statements of financial position are disclosed in the individual policy statement associated with each item.

 

(a)     Financial Assets

 

On initial recognition, financial assets are classified as either financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables financial assets, or available-for-sale financial assets, as appropriate.

 

(i)         Financial Assets at Fair Value Through Profit or Loss

 

As at the end of the reporting period, there were no financial assets classified under this category.

 

(ii)        Held-to-maturity Investments

 

As at the end of the reporting period, there were no financial assets classified under this category.

 

(iii)       Loans and Receivables Financial Assets

 

Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables financial assets. Loans and receivables financial assets are measured at amortised cost using the effective interest method, less any impairment loss. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

 

(iv)        Available-for-sale Financial Assets

 

As at the end of the reporting period, there were no financial assets classified under this category except for loan and receivables.

Notes to the Financial Statements

For the year ended 31 December 2016

 

2       Summary of significant accounting policies (Continued)

 

2.14      Financial Instruments (Continued)

 

(b)     Financial Liabilities

 

All financial liabilities are initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method other than those categorised as fair value through profit or loss.

 

Fair value through profit or loss category comprises financial liabilities that are either held for trading or are designated to eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise arise. Derivatives are also classified as held for trading unless they are designated as hedges.

 

(c)      Equity Instruments

 

(i)  Ordinary Shares

 

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from proceeds.

 

Dividends on ordinary shares are recognised as liabilities when approved for appropriation.

 

(ii) Irredeemable Convertible Preference Shares ("ICPS")

 

Preference shares are classified as equity if they are non-redeemable, or are redeemable but only at the Company's option, and any dividends are discretionary.  Dividends on preference shares are recognised as distributions within equity.

 

Preference shares are classified as financial liabilities if they are redeemable on a specific date or at the option of the preference shareholders, or if dividend payments are not discretionary.  Dividends thereon are recognised as interest expense in profit or loss as accrued.

 

(d)    Derecognition

 

A financial asset or part of it is derecognised when, and only when, the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in profit or loss.

 

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires.  On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

2       Summary of significant accounting policies (Continued)

 

2.15   Revenue recognition

 

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of discounts and returns. The Group recognises revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the entity, and when specific criteria have been met for each of the Group's activities, as described below.

 

(a)  Sales of goods

      Sales of refined palm oil, biofuels and nanofluids are recognised when the risks of obsolescence and loss have been transferred to the customers, and either the customers have accepted the products in accordance with the sales contract, the acceptance provisions have lapsed or the Group has objective evidence that all criteria for acceptance have been satisfied.

 

(b)  Rendering of services

      Palm oil tolling services are recognised when services are performed in accordance with the service contract.

 

(c)  Finance income

Interest income is recognised on an accrual basis using the effective interest method.

 

2.16   Deferred income tax

 

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.  The deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

 

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

 

2.17   Employee Benefits

 

(a)   Pension obligations

      Group companies do not operate defined contribution schemes but contribute to individual personal pension plan for certain employees by way of paying 12% of their gross salary costs in lieu of a scheme contribution as required by Malaysian law, which is accounted for as salary when payable.

 

(b)   Share-based payments

      The fair value of previous share options is calculated by the Company using the Black Scholes option pricing model, as the Directors believe that the options are likely to be exercised nearer to their expiry dates. The expense is recognised in the profit and loss on a straight line basis over the period from the date of award to the date of vesting, based on the Company's best estimate of shares that will eventually vest. A credit is recognised on the same basis in the share-based payment reserve.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

2       Summary of significant accounting policies (Continued)

 

2.18 Fair value measurements

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using a valuation technique. The measurement assumes that the transaction takes place either in the principal market or in the absence of a principal market, in the most advantageous market.  For non-financial asset, the fair value measurement takes into account a market's participant ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

 

For financial reporting purposes, the fair value measurements are analysed into level 1 to level 3 as follows:

Level 1:   Inputs are quoted prices (unadjusted) in active markets for identical assets or liability that the entity can access at the measurement date;

Level 2:  Inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly or indirectly; and

Level 3:    Inputs are unobservable inputs for the asset or liability.

 

The transfer of fair value between levels is determined as of the date of the event or change in circumstances that caused the transfer.

 

2.19 Contingent liabilities and contingent assets

 

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.  It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

 

A contingent liability is not recognised but is disclosed in the notes to the accounts.  When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision. A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Group. Contingent assets are not recognised but are disclosed in the notes to the accounts when an inflow of economic benefits is probable.  When inflow is virtually certain, an asset is recognised.

 

2.20     Judgements and estimates

 

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.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal to the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

(a)     Impairment of goodwill and intangible assets

Determining whether goodwill and intangible assets are impaired requires an estimation of the value-in-use of the cash-generating units to which goodwill and intangible assets have been allocated. The value-in-use calculation requires the Directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. (see note 15 for details). In view of the Group's planned exit from the palm oil refining and biodiesel businesses, goodwill and intangible assets have been fully impaired at the balance sheet date.

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

2       Summary of significant accounting policies (Continued)

 

2.20     Judgements and estimates (Continued)

 

(b)   Impairment of property, plant and equipment

 

The carrying amounts of property, plant and equipment are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated, which requires management judgement.

 

(c)    Impairment of trade receivables

 

An impairment loss is recognised when there is objective evidence that a trade receivable is impaired. Management has specifically reviewed trade receivables having specific regard to; historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in the customer payment terms when making a judgment to evaluate the adequacy of the allowance for impairment losses. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. If the expectation is different from the estimation, such difference will impact the carrying value of receivables. See Note 26 (b) for details regarding the Group's trade receivables.

 

(d)   Borrowings

 

                 As disclosed in Note 20, a novation agreement was completed to novate the loan amounting to £17,695,000 from its primary long term financier Malaysian Debt Ventures ("MDV") from Platinum Nanochem Sdn. Bhd. to Platinum Techsolve Sdn. Bhd. on 26 August 2016. During the year the Group also entered into a Consent Judgement with its primary short term financier Bank Kerjasama Rakyat Berhad ("BKRB") with the terms of payment stipulated in the aforesaid judgement. Subsequent to the financial year ended 31 December 2016 however, the Group has requested and been granted deferments in payments by BKRB. The carrying values of outstanding borrowings in Note 20 include accrued interest to date but exclude any penalties that the Group may incur once settlement has been reached with other lenders involving disposal of property, plant and equipment held by the banks as security.

 

(e)   Discontinued operations

 

Note 7 discusses the loss of control of Platinum Nanochem Sdn. Bhd. and its wholly owned subsidiaries Platinum Green Chemicals Sdn. Bhd. and Platinum Nano G Sdn. Bhd. in more detailed. The board has had difficulties in accessing complete financial information of these discontinued operations and hence has constructed financial statements from the Statement of Affairs submitted to the respective administrators, receivers and liquidators using best estimates and judgement.

 

(f)    Contingent liabilities

 

As disclosed in Note 25 to the financial statements, the provided a corporate guarantee for banking facilities granted to its subsidiary.

 

(g)   Going concern

 

Management of the Group has made a number of significant judgments about the applicability of the going concern basis of presentation of the financial statements. These are set out in note 2.2.

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

3          Subsidiaries

 

Graphene Nanochem plc has the following subsidiaries:

 

Name of subsidiaries

Effective equity interest

Registered address

Principal activities

 

2016

2015

 

 

 

%

%

 

 

Platinum Nanochem Sdn. Bhd.

-

100

Suite 1008 10th Floor Wisma Lim Foo Yong, 86 Jalan Raja Chulan

50200 Kuala Lumpur, Malaysia

Investment holding and provision of management services

Platinum Techsolve Sdn. Bhd.

100

100

Suite 1008 10th Floor Wisma Lim Foo Yong, 86 Jalan Raja Chulan

50200 Kuala Lumpur, Malaysia

Trading of oilfield chemicals products, water treatment products & polymers

Platinum Performance Chem Sdn Bhd.

100

100

Suite 1008 10th Floor Wisma Lim Foo Yong, 86 Jalan Raja Chulan

50200 Kuala Lumpur, Malaysia

Refining of crude palm oil, trading of oilfield chemical products

 

Platinum Nanochem Sdn. Bhd. has the following subsidiaries:

 

Name of subsidiaries

Effective equity interest

Registered address

Principal activities

 

2016

2015

 

 

 

%

%

 

 

Platinum Green Chemicals Sdn. Bhd.

-

100

Suite 1008 10th Floor Wisma Lim Foo Yong, 86 Jalan Raja Chulan

50200 Kuala Lumpur, Malaysia

Manufacturing of advanced chemicals and biofuels

Platinum Nano G Sdn. Bhd.

-

100

Suite 1008 10th Floor Wisma Lim Foo Yong, 86 Jalan Raja Chulan

50200 Kuala Lumpur, Malaysia

Manufacturing of advanced nano materials

 

 

Platinum Techsolve Sdn. Bhd. has the following subsidiaries and joint venture:

 

Name of subsidiaries

Effective equity interest

Registered address

Principal activities

 

2016

2015

 

 

 

%

%

 

 

Scomi Platinum Sdn. Bhd.

50

50

Suite 1008 10th Floor Wisma Lim Foo Yong, 86 Jalan Raja Chulan

50200 Kuala Lumpur, Malaysia

Manufacturing and trading of oilfield chemical products

 

 

All the above subsidiaries are incorporated in Malaysia.

Please refer to Note 7 for discontinued operations during the year.

 

4          Investment in a joint venture

 

 

2016

2015

 

£'000

£'000

 

 

 

Investment in a joint venture

78

78

Capital injection into joint venture

44

-

Share of loss

(5)

(20)

Foreign exchange adjustment

(57)

(39)

 

60

19

 

 

 

 

Scomi Platinum Sdn Bhd, a 50% owned joint venture in the Group which is principally engaged in manufacturing of speciality chemicals and other graphene-enhanced green chemicals.  The Group accounted for the joint venture by using the equity method.

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

Summarised financial information in respect of the Group's joint venture are set out below:

         

 

Year ended 31 December 2016

Year ended 31 December 2015

 

£'000

£'000

Revenue

-

    -

 

 

 

Loss after tax

(10)

(40)

 

 

 

Group's share of results for the year

(5)

(20)

 

 

 

Total assets

160

158

Total liabilities

(40)

(120)

Net assets

120

38

 

 

 

Group's share of joint venture net assets

60

19

 

 

 

5        Operating segments

 

          Management has determined the operating segments based on the reports reviewed by The Board that are used to make strategic decisions.

 

          Management has determined that the Group has one operating segment, which is refining and manufacturing and trading of oilfield chemicals (2015: one operating segment, refining and manufacturing of palm oil and biofuels as well as production of oilfield products). The financial information contained in these financial statements therefore relates solely to this segment. The Group's non-current assets consist of property, plant and equipment, goodwill and intangible assets, and are located entirely in Malaysia.

 

6        Revenue

 

 

 

2016

2015

 

 

 

£'000

£'000

Revenue from sales of second generation biofuels and refined palm oil

 

-

46

Revenue from sales of oil field products

 

 

258

9

 

 

 

258

55

 

7        Discontinued Operations

 

During the financial year, the Group lost control of the following entities:

                 

i)  Platinum Green Chemicals Sdn. Bhd.

 

Platinum Green Chemicals Sdn. Bhd. is a wholly owned subsidiary of Platinum Nanochem Sdn. Bhd., which in turn is a wholly owned subsidiary of Graphene Nanochem Sdn. Bhd. The Company's core operations are in the discontinued fuel additive business.

 

On 11 July 2016, KPMG Deal Advisory Sdn. Bhd. was appointed as receivers and managers of Platinum Green Chemicals Sdn. Bhd. The appointment was made by Bank Pembangunan Malaysia Berhad vide the Security Deed and Debenture held and pursuant to Sections 188(1), 189(1) and 189(2) of the Malaysian Company Act 1965. Upon this appointment, the powers of the directors were suspended with regards to all affairs and business of the Company. Subsequent to this appointment, a winding up order for Platinum Green Chemicals Sdn. Bhd. via Section 218 of the Malaysian Companies Act 1965 was received on 1 August 2016.

 

ii) Platinum Nanochem Sdn. Bhd.

 

Platinum Nanochem Sdn. Bhd. a wholly owned subsidiary of Graphene Nanochem Sdn. Bhd. and parent Company of Platinum  Green Chemicals Sdn. Bhd. and Platinum Nano G Sdn. Bhd. The Company's core operations are in the discontinued fuel additive business.

 

On 15 July 2016, a winding up order was received for Platinum Nanochem Sdn. Bhd. pursuant to Section 218 of the Malaysian Companies Act 1965. Upon receipt of this order, the powers of the directors were suspended with regards to all affairs and business of the Company and its subsidiaries.

Notes to the Financial Statements

For the year ended 31 December 2016

 

7               Discontinued Operations (continued)

 

iii)       Platinum Nano G Sdn. Bhd.

 

Platinum Nano G Sdn. Bhd. is a wholly owned subsidiary of Platinum Nanochem Sdn. Bhd., which in turn is a wholly owned subsidiary of Graphene Nanochem Sdn. Bhd. The Company's core operations are in the business of providing high technology and manufacturing of advanced materials.

 

On 15 July 2016, a winding up order was received for its parent Company Platinum Nanochem Sdn. Bhd. pursuant to Section 218 of the Malaysian Companies Act 1965. The directors deem this event as a loss of control of Platinum Nano G Sdn. Bhd. and subsequently have deconsolidated this entity from the Group accounts.

                

          The results of Platinum Nanochem Sdn. Bhd. (till 15 July 2016), Platinum Green Chemicals Sdn. Bhd. (till 11 July 2016) and Platinum Nano G Sdn. Bhd. (till 15 July 2016) are presented below:                                                         

                       

 

2016

2015

 

 

£'000

£'000

Revenue

 

900

7,916

Cost of sales

 

(683)

(8,468)

Gross profit

 

217

(552)

Other Income

 

(13)

242

Selling and distribution expenses

 

(126)

(114)

Administrative expenses

 

5,980

(2,498)

Impairment of fixed assets

 

-

(11,302)

Impairment of goodwill

 

-

(647)

Impairment of intangible assets

 

-

(5,414)

Finance costs

 

(325)

(1,699)

Depreciation and amortisation

 

(1)

(1,785)

Loss before tax for discontinued operations

 

5,732

(23,769)

Tax

 

-

(20)

Profit / (Loss) after tax for discontinued operations

 

5,732

(23,789)

 

                       

 

2016

2015

 

 

£'000

£'000

Assets

 

 

 

Property, plant and equipment

 

15,054

15,536

Inventories

 

198

193

Trade and other receivables

 

240

807

Cash and cash equivalents

 

513

537

 

Total assets directly associated with discontinued operations

 

16,005

17,073

 

 

 

 

Liabilities

 

 

 

Trade and other payables

 

21,297

3,229

Borrowings

 

10,726

23,384

 

Total liabilities directly associated with discontinued operations

 

32,023

26,613

 

Net (liabilities) directly associated with discontinued operations

 

(16,018)

(9,540)

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

7        Discontinued Operations (continued)

 

Basic Earnings per share from Discontinued Operations attributable to the Equity Holders of the Group during the year

 

 

 

2016

2015

 

Profit/(loss) from discontinued operation attributable to equity holders of the parent

£5,732,000

(£23,789,000)

Weighted average number of ordinary shares in issue

 

116,536,536

116,536,536

Basic earnings/(loss) per share in pence from discontinued operations

4.92p

(20.41)p

               

 

8        Other Income

                       

 

2016

2015

 

 

£'000

£'000

Realised gain on foreign currency exchange

-

               242

Rental income

20

10

Other income from discontinued operations

-

(242)

 

 

20

10

 

9        Administrative expenses & bad debts written off

                       

 

 

2016

2015

 

 

 

£'000

£'000

Included within administrative expenses are:

 

 

 

 

Employee benefit expenses

 

 

186

835

Rental of premises

 

 

35

62

Rental of equipment

 

 

-

28

Rental of motor vehicle

 

 

-

4

Rental of office equipment

 

 

-

2

Property, plant and equipment written off

 

 

-

2,340

Bad debts written off on loss of control of subsidiaries

 

 

16,222

146

Inventory written off

 

 

45

694

Compensation for loss to customer

 

 

86

-

Auditor's remuneration:

 

 

 

 

- Fees payable to the Group's auditor for the audit of the

Group's annual accounts

 

 

30

32

- Fees payable to the subsidiaries' auditor for the audit of the

subsidiaries' annual accounts

 

 

4

 

         

 

 

 

 

 

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

10      Directors and employees

 

          The employee benefit expense during the year was as follows:

                       

 

 

2016

2015

 

 

 

£'000

£'000

Salary and wages

 

 

174

766

Pension costs-defined contribution

 

 

11

69

Social security cost

 

 

1

-

 

 

 

186

835

 

          The number of employees inclusive of executive directors at year end was 14 (2015: 45).

 

                       

 

 

2016

2015

 

 

 

Number

Number

Directors & Managerial

 

 

5

                   9

Administrative

 

 

5

                     11

Operational

 

 

4

25

 

 

 

14

                 45

 

Remuneration in respect of Directors was as follows:

Director

 

Basic salary and fees

Pension-Defined contribution schemes

Total           

 2016

Total         

   2015

 

 

£'000

£'000

£'000

£'000

Tan Sri Abi Musa

 

12

-

12

12

Dato Jespal Deol

 

3

-

3

12

Sushil Sidhu

 

2

-

2

12

AM Cleverly Esq & Mrs JCM Cleverly

-

-

-

12

Dato' Larry Gan

12

-

12

12

Patrick Dennis Howes

24

-

24

24

Dato' Mohamed Sallehuddin

12

-

12

12

 

 

65

-

65

96

         

          The salary and benefit payable to directors totaling £60,000 was accrued as at 31 December 2016

 

          The number of Directors who accrued benefits under Company pension schemes was as follows:

                       

 

 

2016

2015

 

 

 

Number

Number

Defined contribution schemes

 

 

2

2

 

11      Finance income/costs

 

 

2016

2015

 

 

£'000

£'000

 

 

 

Finance cost

 

 

Interest on bank borrowings

1,739

1,803

Interest paid to suppliers

 

-

37

Finance costs from discontinued operations

 

-

(1,699)

 

 

1,739

141

 

Finance income

 

 

Interest income

-

2

 

 

-

           2

       

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

12       Income tax

 

 

2016

2015

 

 

£'000

£'000

 

 

 

 

Current income tax

 

                  -

                  -

 

 

 

Deferred tax

-

 

Origination or recognition of temporary differences

-

(1,202)

 

-

-

(1,202)

 

   The tax on the Group's loss before tax differs from the loss before taxation multiplied by the standard rate of corporation tax in Malaysia due to the following:

 

 

2016

2015

 

 

£'000

£'000

 

 

 

Loss before tax

(16,269)

(38,665)

 

 

 

Tax calculated at the standard rate of corporation tax in Malaysia: 24% (2015:25%)

(3,905)

(9,666)

Expenses not deductible for tax purposes

4,342

4,893

Deferred tax credit not recognised during the year

(437)

3,571

 

 

-

(1,202)

The temporary differences attributable to the deferred tax assets and deferred tax

 

 

  liabilities which are not recognised in the financial statements are as follows:

 

 

 

 

 

Deferred tax assets:

 

 

- Unabsorbed capital allowances

8,660

20,934

- Unutilised tax losses

2,880

28,999

-               Allowances for doubtful debts

516

459

 

12,056

50,392

Deferred tax liabilities:

 

 

- Accelerated capital allowances

-

(13,782)

 

12,056

36,610

 

The net deferred tax assets are not provided in view of the uncertainty on the timing of their recoverability. The tax rate applied is reflecting the average tax rate weighted in proportion to accounting profit earned in each geographical territory.

 

13      Earnings per share

 

          Basic

 

Basic earnings per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

 

 

2016

2015

Loss attributable to equity holders of the Company

(£14,072,000)

(£9,494,000)

Profit/(loss) from discontinued operation attributable to equity holders of the parent

£5,732,000

(£23,789,000)

Total

(£8,340,000)

(£33,283,000)

 

 

 

Weighted average number of ordinary shares in issue

 

116,536,536

116,536,536

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

13      Earnings per share (continued)

 

Basic (continued)

 

 

Earnings per share from continuing and discontinued operations attributable to owners of the parent

 

 

 

Diluted earnings per share

 

 

 

 - From continuing operations

 

(12.08)p

(8.15)p

 - From discontinued operations

 

4.92p

(20.41)p

 - From total comprehensive loss

(7.16)p

(28.56)p

 

 

Diluted

 

Diluted earnings per share is a performance metric calculated to gauge the quality of earnings if all convertible securities were exercised. Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all contracted dilutive potential ordinary shares. The Directors have computed the diluted earnings per share by assuming that all convertible securities on issue at year end is converted at a price of 18.4375p.

 

 

 

2016

2015

Conversion of 30 Loan Notes, par value £25,000 each

 

4,067,797

-

Conversion of 1,016,949 Warrants, exercise price 18.4375p

 

1,016,949

-

Total additional shares post conversion

 

5,084,746

-

 

 

 

 

Enlarged number of shares of Group

 

121,621,282

116,536,536

 

 

 

 

Earnings per share from continuing and discontinued operations attributable to owners of the parent

 

 

 

Diluted earnings per share

 

 

 

 - From continuing operations

 

(11.57)p

(8.15)p

 - From discontinued operations

 

4.71p

(20.41)p

 - From total comprehensive loss

 

(6.86)p

                  (28.56)p

 

 

 

 

 

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

14      Property, plant and equipment

         

 

Leasehold land

Leasehold Buildings

Furniture, fittings and equipment

Computer & Software

Plant and machinery

Motor vehicles

Renovation

Capital work-in-progress

Total

 

 £'000

 £'000

 £'000

 £'000

 £'000

 £'000

 £'000

 £'000

 £'000

Cost

 

 

 

 

 

 

 

 

 

As at 1 January 2015

2,733

1,217

348

-

33,780

403

340

8,599

47,420

Additions

-

-

29

-

2,201

345

-

2

2,577

Disposal

-

-

-

-

(5)

-

-

-

(5)

Transfer

-

-

(150)

-

(2,077)

(449)

-

-

(2,676)

Written off

(69)

(378)

(7)

-

(6,030)

-

(65)

(7,291)

(13,840)

Foreign exchange adjustment

(396)

(176)

(42)

-

(2,535)

(41)

(44)

(1,310)

(4,544)

Discontinued operations

(1,554)

(112)

(178)

-

(21,504)

(258)

(231)

-

(23,837)

As at 31 December 2015

714

551

-

-

3,830

-

-

-

5,095

Additions

-

-

-

145

-

-

-

-

145

Disposal

-

-

-

-

-

-

-

-

-

Written off

-

-

-

-

-

-

-

-

-

Impairment

-

-

-

-

-

-

-

-

-

Foreign exchange adjustment

106

82

-

-

571

-

-

-

759

As at 31 December 2016

820

633

-

145

4,401

-

-

-

5,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

 

As at 1 January 2015

298

120

253

-

6,964

189

242

-

8,066

Additions

50

5

30

-

1,669

38

19

-

1,811

Disposal

-

-

(121)

-

(89)

(116)

-

-

(326)

Foreign exchange adjustment

(47)

(17)

(31)

-

(1,098)

(21)

(36)

-

(1,250)

Discontinued operations

(301)

(108)

(131)

-

(7,446)

(90)

(225)

-

(8,301)

As at 31 December 2015

-

-

-

-

-

-

-

-

-

Additions

18

14

-

44

294

-

-

-

370

Written off

-

-

-

-

-

-

-

-

-

Foreign exchange adjustment

(1)

(1)

-

-

(9)

-

-

-

(11)

As at 31 December 2016

17

13

-

44

285

-

-

-

359

 

 

 

 

 

 

 

 

 

 

Net book value as at 31 December 2016

803

620

-

101

4,116

-

-

-

5,640

 

 

 

 

 

 

 

 

 

 

Net book value as at 31 December 2015

714

551

-

-

3,849

-

-

-

5,095

 

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

14      Property, plant and equipment (continued)

 

The leasehold land, buildings, plant and machinery owned by Platinum Performance Chem Sdn. Bhd. have been pledged to licensed banks as security for banking facilities granted to the Group as disclosed in Note 20.

 

The title of the leasehold land owned by Platinum Performance Chem Sdn. Bhd. at Lahad Datu, Sabah, Malaysia is yet to be transferred to the subsidiary Company as it is held under master title.

 

The Group's property, plant and equipment, including capital work in progress, was subject to independent valuations once every 3 years which assessed both their current market value and forced sale value. The valuations were performed in accordance with Malaysian Valuation Standards and The Royal Institution of Surveyors, Malaysia. In the previous financial year, fixed assets have been impaired to their estimated forced sale values, as determined by the valuations.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

15      Goodwill and Intangible assets

         

 

Licenses

Development Costs

Patent

 

Goodwill

Total

 

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

As at 1 January 2015

7,524

6,391

3

3,171

17,089

Disposal

-

-

(3)

-

(3)

Impairment

(4,942)

(4,873)

-

(2,039)

(11,854)

Transfer

-

(24)

24

-

-

Foreign exchange adjustment

(62)

(620)

-

(1,132)

(1,814)

Discontinued operations

(2,502)

(874)

-

-

(3,376)

As at 31 December 2015

18

-

24

-

42

Disposal

-

-

-

-

-

Impairment

-

-

-

-

-

Transfer

-

-

-

-

-

Foreign exchange adjustment

-

-

-

-

-

As at 31 December 2016

18

-

24

-

42

 

 

 

 

 

 

Accumulated amortization

 

 

 

 

 

As at 1 January 2015

2,087

546

1

-

2,634

Addition during the year

421

433

-

-

854

Elimination of depreciation

-

-

(1)

-

(1)

Foreign exchange adjustment

(5)

(105)

-

-

(110)

Discontinued operations

(2,502)

(874)

-

-

(3,376)

As at 31 December 2015

1

-

-

-

1

Addition during the year

-

-

-

-

-

Elimination of depreciation

-

-

-

-

-

Foreign exchange adjustment

-

-

-

-

-

As at 31 December 2016

1

-

-

-

1

 

 

 

 

 

 

Net book value as at 31 December 2016

17

-

24

-

41

 

 

 

 

 

 

Net book value as at 31 December 2015

17

-

24

-

41

 

Goodwill

 

The carrying amount of goodwill has been fully impaired in the previous financial year.

 

Licenses

 

i)   License for the usage of development, exploitation and commercialisation of graphite nano-fibres and its derivatives; and

ii)  License for the manufacture of palm oil biodiesel and the linked refinery license subsequently obtained. A useful economic life of 20 years has been assumed as the license has no termination date and the Group has full rights to the land. The production of palm oil is also such an important commodity in Malaysia that its production and demand is expected to continue indefinitely.

 

Development Costs

 

          The carrying amount of development costs has been fully impaired in the previous financial year.

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

15      Goodwill and Intangible assets (Continued)

 

 

The goodwill and intangible assets are tested for impairment annually at the statement of financial position date, the Group evaluates, among other factors, the duration and extent to which their carrying amount is less that its cost and the recoverable amounts. This including factors such as market conditions, changes in business, operational strategies and significant changes expected to take place in the near future.

 

The directors are of the opinion that the Group will not generate sufficient future profits and cash flows from its palm oil and biodiesel businesses and accordingly the goodwill and intangible assets related those businesses have been fully impaired.

 

16      Inventories

           

 

 

2016

2015

 

 

 

£'000

£'000

At cost,

 

 

Raw material

 

-

8

Finished goods

 

-

192

Consumable goods

 

16

31

Inventories associated with discontinued operations

 

-

(175)

 

 

16

56

At net realisable value,

 

 

 

Finished goods

 

-

18

Inventories associated with discontinued operations

 

-

(18)

 

 

16

56

 

 

 

 

 

The amount of inventories recognised as an expense during the year to 31 December 2016 was £nil (2015: £8,493,000). The amount of inventories written off during the year to 31 December 2016 was £45,000 (2015: £nil)

 

17      Trade and other receivables

 

 

2016

2015

 

 

£'000

£'000

Trade receivables

 

-

511

Other receivables

 

27

132

Deposits

 

28

164

Prepayments

 

50

115

Trade and other receivables from discontinued operations

 

-

(807)

 

 

105

115

 

The normal trade credit term is 30-60 days (2015: 30-90 days).

 

Included in prepayments, there are advances paid to trade creditors for the purchase of raw materials amounting to approximately £nil (2015: £106,000).

 

 

 

 

 

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

         

18      Cash and cash equivalents

 

 

2016

2015

 

 

£'000

£'000

Fixed deposits with licensed banks

-

3

Cash and bank balances

630

555

Cash and cash equivalents from discontinued operations

-

(537)

 

 

630

21

         

                   

The deposits with licensed banks at the end of the reporting period bore an effective interest rate of nil (2015: 3%) per annum. The deposits have a maturity period of nil (2015: 30 days).

 

19      Trade and other payables

                       

 

2016

2015

 

 

£'000

£'000

Trade payables

 

-

1,838

Other payables

 

1,964

606

Accruals

 

179

919

Trade and other payables from discontinued operations

 

-

(3,229)

 

 

2,143

134

                   

Within other payables is the amount of £436,000 in respect of short term loans. These loans bear no interest, are security free and are repayable at various dates on or before 31 December 2017.

The trade and other payables (excluding short term loans) of the Group are due for payment within 30-60 days (2015: 30-60 days).

 

20      Bank borrowings

 

2016

2015

 

£'000

£'000

The details of bank borrowings are:

 

 

Term loans

20,300

10,464

Finance lease

-

16

Revolving credits

-

14,463

Bank Borrowings from discontinued operations

-

(23,383)

 

20,300

1,560

 

 

 

The bank borrowings are repayable as follows:

 

 

Shown as current liabilities

 

 

Term loans

2,966

10,464

Finance lease

-

5

Revolving credits

-

14,463

Borrowings directly related to discontinued operations

-

(23,372)

 

2,966

1,560

Shown as non-current liabilities

 

                

Term loans

 

 

Between one and two years

3,608

-

Between two and five years

13,726

-

More than five years

-

-

 

17,334

-

Finance lease

 

 

Between one and two years

-

12

Finance lease directly related to discontinued operations

-

(12)

 

20,300

1,560

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

20      Bank borrowings (continued)

 

          Term loans and Revolving credits

 

 The term loans and revolving credits are secured as follows:

 

(a)       first party first fixed charge over the leasehold land, buildings, plant and machinery of certain subsidiaries as disclosed In Note 14;

 

(b)       fixed and floating charge over all present and future assets of certain subsidiaries; both movable and immovable;

 

(c)                 assignment of all the subsidiaries' right under the relevant contract/agreements related to the capital work-in-progress assignable to the bank, applicable insurance, permits and liquidated damages, performance bonds/guarantees and licenses;

 

(d)       deed of assignment of contract proceeds over executed sales off-take agreements between the borrower and the buyer; and

 

(e)       irrevocable joint and several guarantees by the Company, all directors of a subsidiary and certain directors of the Company.

 

 

Term loans bear weighted average effective interest rates ranged from 7.25% to 8.10% (2015: 7.25% to 8.10%) per annum and revolving credits bear weighted average effective interest rates ranged from 7.25% to 8.0% (2015: 7.25% to 8.0%) per annum.

 

Finance lease bears a weighted average effective Interest rate of nil (2015: 6.96%) per annum.

 

On 26 August 2016, a novation agreement was completed to novate the loan amounting to £17,695,000 from Malaysian Debt Ventures ("MDV") from Platinum Nanochem Sdn. Bhd. to Platinum Techsolve Sdn. Bhd. The said facility has a tenure from 1 November 2015 to 31 December 2021 and bears an effective finance charge of 8% per annum on daily rest payable semi-annually in advance subject to periodic review at discretion of MDV.

 

During the year the Group also entered into a Consent Judgement with its short term financier, Bank Kerjasama Rakyat Berhad ("BKRB"), with the terms of payment stipulated in the aforesaid judgement. Subsequent to the financial year ended 31 December 2016, the Group has requested and been granted deferments in payments by BKRB.

 

21      Deferred tax liability

 

 

£'000

 

The movement on the deferred tax liability are as follows:

 

 

As at 1 January 2015

 

   1,202

Recognised in statement of comprehensive income

 

(1,202)

As at 31 December 2015

 

   -

Recognised in statement of comprehensive income

 

-

As at 31 December 2016

 

-

 

 

 

22      Share capital and options

 

 

        2016

       2015

       2016

      2015

 

Number of shares

             £'000                 £'000

Issued and Fully Paid-Up:

 

 

 

 

At 1 January and 31 December

 

 

 

 

 

 

 

 

 

Ordinary shares of 0.20p each

-

116,536,536

-

23,307

 

 

 

 

 

Ordinary shares of 0.01p each

116,536,536

-

1,165

-

Deferred shares of 0.19p each

116,536,536

-

22,142

-

 

 

 

 

 

 

233,073,072

116,536,536

23,307

23,307

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

22      Share capital and options (continued)

 

At the Company's last Annual General Meeting held on 6 December 2016, approval was given by Shareholders, inter alia for a Capital Reorganisation, whereby each Existing Ordinary Share of £0.20 nominal value was to be sub-divided into one New Ordinary Shares of £0.01 nominal value and a 2016 Deferred Share of £0.19 nominal value.

 

After the Share Capital Reorganisation there will be no change to the number of ordinary shares in issue which means there will be 116,536,536 New Ordinary Shares in issue. The Deferred Shares will have no value or voting rights and will not be issued with a share certificate in respect of the Deferred Shares and they will not be listed on AIM. 

 

          Description and purpose of reserves

 

          The reserves included in the Consolidated Statement of Changes in Equity are as follows:

 

          Share capital                          - represents the nominal value of the shares issued.

 

Share premium                      -  represents the premium over nominal value paid for the shares issued, less costs of issuing shares.        

 

          Translation reserve               - represents the differences arising on translation of foreign operations into the presentational currency.

 

Reverse acquisition reserve - represented the premium on shares issued as consideration for the reverse acquisition of Platinum           Nanochem Sdn. Bhd. which was acquired by way of share for share exchange.

 

23      Preference Shares

           

 

2016

2015

 

 

£'000

£'000

 

 

 

 

Irredeemable convertible preference shares

 

 

 

As at 1 January

 

1,924

2,249

Foreign exchange adjustment

 

286

(325)

Preference Shares written off directly related to discontinued operations

 

(2,210)

-

As at 31 December

 

-

1,924

 

Irredeemable convertible preference shares

 

In the year ended 31 December 2013, the subsidiary of the Company issued 12,250,000 irredeemable convertible preference shares of RM1 each as consideration for the acquisition of plant and machinery.

 

The rights attached to the irredeemable convertible preference shares ("ICPS") are as follows:

 

(a)            The ICPS shall not carry any fixed rate of dividend. The ICPS holder shall be entitled, on an As If Converted Basis, to such dividend and at such rate as may be declared over the ordinary shares of the subsidiary from time to time. "As If Converted Basis" means the notional conversion of all the ICPS held by a holder on the date falling immediately prior to the record date for the dividends on the ordinary shares of the subsidiary.

 

(b)            The ICPS holder does not have the right to vote at any liquidation, dissolution, winding up or other repayment of capital of the subsidiary. The holder of the ICPS shall participate rateably with the holders of ordinary shares of the subsidiary in any surplus assets.

 

(c)              All of the outstanding ICPS shall be converted on a one to one basis by the subsidiary into fully paid new ordinary shares in the share capital of the subsidiary within fourteen (14) days from the successful commissioning of a 50 tonne per annum facility for the production of various forms of carbonaceous materials.

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

23      Preference Shares (continued)

 

Irredeemable convertible preference shares (continued)

 

(d)            The holder of the ICPS shall carry no right to vote at any general meeting of the subsidiary except with regard to the following circumstances:-

 

(i)      upon any resolution which directly varies the rights attached to the ICPS; and

(ii)     upon any resolution for the winding up of the subsidiary.

 

(e)            The new ordinary shares will rank pari passu in all respects with the then existing ordinary shares of the subsidiary.

 

          The ICPS is held by Platinum Nanochem Sdn. Bhd. and has been written off during the financial year as the Group has lost control of this subsidiary. Please refer to Note 7 for further details.

 

24      Share Warrants

 

At financial year end, the Company had issued to Darwin Capital Limited 1,016,949 Ordinary Shares Warrants at an exercise price of 18.4375 pence per new Ordinary Share. The Warrants can be exercised over a five-year period from 23 December 2016.

 

25      Contingent liabilities

 

          At the date of the report, the Company provided a corporate guarantee for banking facilities granted to its subsidiary amounting to £17,695,000  (2015: £15,905,000).

 

26      Financial instruments

 

          The Group's activities expose it to a variety of financial risks: market risks (including foreign currency risk, interest rate risk and equity price 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. The Group's treasury policy is set by the Board and is reviewed regularly. Further detail regarding risk exposure and risk management policies is provided below.

 

The carrying amounts of the Group's financial assets and liabilities as at 31 December 2016 are as follows:

           

 

2016

2015

 

 

£'000

£'000

Current assets

 

 

 

Trade and other receivables

 

105

922

Cash and bank balances

 

630

558

Current assets directly associated with discontinued operations

 

-

(1344)

Loans and receivables carried at amortised cost

 

735

136

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

 

2,143

3,370

Borrowings

 

2,966

24,932

Current liabilities directly associated with discontinued operations

 

-

(26,614)

 

 

5,109

1,688

Non-current liabilities

 

 

 

Borrowings

 

17,334

12

Non-current liabilities directly associated with discontinued operations

 

-

(6)

Other financial liabilities carried at amortised cost

 

22,443

1,694

 

          Risk management is carried out centrally under policies approved by the Board.

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

26      Financial instruments (continued)

 

(a)                  Market risk (continued)

 

The Group is exposed to foreign currency risk on transactions and balances that are denominated in currencies other than Pound Sterling. The currencies giving rise to this risk are primarily United States Dollar and Malaysian Ringgit. Foreign currency risk is monitored closely on an ongoing basis to ensure that the net exposure is at an acceptable level. On occasion, the Group enters into forward foreign currency contracts to hedge against its foreign currency risk.

 

The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:

 

United

 

 

2016

States

Malaysian

 

 

Dollar

Ringgit

Total

 

£'000

£'000

£'000

Trade and other receivables

-

86

86

Fixed deposits with licenced banks

-

-

-

Cash and bank balances

-

139

139

Trade and other payables

-

733

733

Borrowings

-

20,300

20,300

Net exposure

-

21,258

21,258

 

 

 

 

Foreign Currency Risk (continued)

 

United

 

 

 

States

Malaysian

 

2015

Dollar

Ringgit

Total

 

£'000

£'000

£'000

Trade and other receivables

106

804

910

Fixed deposits with licenced banks

-

3

3

Cash and bank balances

-

407

407

Trade and other payables

(2)

(2,601)

(2,603)

Borrowings

-

(24,944)

(24,944)

Net exposure

104

(26,331)

(26,227)

         

                 For the year ended 31 December 2016, if the Malaysian Ringgit had strengthened or weakened by up to 5% against the Sterling with all other variables held constant, the impact on the loss before tax would have been increased and decreased by £637,000 (2015: £1,315,000).

                

Cash flow and fair value interest rate risk

 

                 The Group's cash flow interest rate risk arises from money market deposits and bank borrowings.  Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group's exposure to interest rate risk arises mainly from money market deposits and bank borrowings.  The Group's policy is to obtain the most favourable interest rates available. Any surplus funds of the Group will be placed with licensed financial institutions to generate interest income.

 

                 Bank borrowings bear a variable rate of interest which expose the Group to cash flow interest rate risk. The Group does not consider the risk to be significant in view of the nature of the Group's current activities. A 100 basis point change represents management's estimate of a possible change in interest rates at the reporting date. If interest rates had been 100 basis points higher and all other variables remained constant, the impact on the Group's profit and loss would have been £203,000 (2015: £249,000).

 

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

26      Financial instruments (continued)

 

          (b)   Credit risk (continued)

 

The Group's exposure to credit risk, or the risk of counterparties defaulting, arises mainly from trade and other receivables. The Group manages its exposure to credit risk by the application of credit approvals, credit limits and monitoring procedures on an ongoing basis. For other financial assets (including quoted investments, cash and bank balances and derivatives), the Group minimises credit risk by dealing exclusively with high credit rating counterparties.

 

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of the trade and other receivables as appropriate. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for Groups of similar assets in respect of losses that have been incurred but not yet identified. Impairment is estimated by management based on prior experience and the current economic environment.

 

 

(i)      Credit risk concentration profile

 

The Group's major concentration of credit risk relates to the amounts owing by three (3) customers which constituted approximately % (2015 - 81%) of its trade receivables at the end of the reporting period. 

 

The revenue generated by the three customers were as follows:

 

Customer 1                - £258,451 [100%]                 (2015 - £727,352 Percentage of revenue [9%]) 

Customer 2                - nil [-%]                                                (2015 - £595,715 Percentage of revenue [7%]) 

Customer 3                - nil [-%]                                                (2015 - £85,162 Percentage of revenue [1%]) 

 

Prior figures were part of discontinued operations in the current year.

 

 (ii)    Exposure to credit risk

 

As the Group does not hold any collateral, the maximum exposure to credit risk is represented by the carrying amount of the financial assets as at the end of the reporting period.

 

(iii)   Ageing analysis

 

 

 

 

 

2016

 

 

 

 

 

 

 

 

 

There are no trade receivables in the statement of financial position at 31 December 2016

 

 

 

 

 

 

 

 

 

 

 

 

Gross

Individual

Collective

Carrying

 

Amount

Impairment

Impairment

Value

 

£'000

£'000

£'000

£'000

2015

 

 

 

 

 

 

 

 

 

Not past due

285

-

-

285

 

 

 

 

 

Past due:

 

 

 

 

-  1 to 3 months

226

-

-

226

-  3 to 6 months

146

(146)

-

-

 

657

(146)

-

511

 

 

Trade receivables that are past due but not impaired. Prior figures were part of discontinued operations in the current year.

 

The Group believes that no impairment allowance is necessary in respect of these trade receivables. They are substantially companies with good collection track record and no recent history of default.

 

A significant portion of trade receivables that are neither past due nor impaired are regular customers that have been transacting with the Group. The Group uses ageing analysis to monitor the credit quality of the trade receivables. Any receivables having significant balances past due or more than 180 days, which are deemed to have higher credit risk, are monitored individually.

Notes to the Financial Statements

For the year ended 31 December 2016

 

26      Financial instruments (continued)

 

          (c)   Liquidity risk

 

                        Liquidity risk is the risk that the Group will encounter difficulty in settling its financial obligations that are settled with cash or another financial asset. The Directors' objective is to maintain, as much as possible, a level of its cash and bank balances adequate enough to ensure that there will be sufficient liquidity to meet its liabilities when they fall due. The following set forth the remaining contractual maturities of financial liabilities as at:

 

£'000

On demand

< 1 year

1-2 years

2-5   years

 

Total

 

 

 

 

 

 

31 December 2016

 

 

 

 

 

Trade and other payables and accruals

2,143

-

-

-

2,143

Borrowings

-

2,966

3,608

13,726

20,300

 

2,143

2,966

3,608

13,726

22,443

31 December 2015

 

 

 

 

 

Trade and other payables and accruals

3,370

-

-

-

3,370

Borrowings

24,927

5

11

-

24,943

 

28,297

5

11

-

28,313

 

(d)  Fair value information

 

As at the end of the reporting period, there were no financial instruments carried at fair values. The fair values of the financial assets and financial liabilities approximated their carrying amounts due to relatively short-term maturity of the financial instruments (maturing within the next 12 months). The fair values are determined by discounting the relevant cash flows at rates equal to the current market interest rate plus appropriate credit rating, where necessary.

 

 Set out below is a comparison by class of the carrying amounts of fair value of the Group's financial instruments, other than those whose carrying amounts are a reasonable approximation of fair value:

 

£'000

Type

Carrying value

Fair value

 

 

 

 

31 December 2016

 

 

 

Financial assets

 

 

 

Property, plant and equipment

Level 3

5,640

5,640

Intangible assets

Level 3

41

41

 

 

5,681

5,681

31 December 2015

 

 

 

Financial assets

 

 

 

Property, plant and equipment

Level 3

20,631

20,631

Intangible asset

Level 3

41

41

 

 

20,672

20,672

 

(e)  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 provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

 

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

26      Financial instruments (continued)

 

(e)  Capital risk management

 

The Group considers capital to be its equity reserves as shown in the consolidated statement of financial position plus net debt. At the current stage of the Group's life cycle, the Group's objective in managing its capital is to ensure that funds raised meet the cash requirements. Capital at 31 December 2016 and 31 December 2014 was as follows:

 

 

2016

2015

 

£'000

£'000

Total borrowings (Note 20)

20,300

24,943

Less: Cash and cash equivalents (Note18)

(630)

(558)

(2,227)

Net debt

19,670

24,385

28,214

Total equity

(15,426)

(5,893)

27,715

 

4,244

18,492

55,929

 

27      Operating lease commitments

 

Leases as lessee

 

The Group leases two office premises and office equipment under operating leases. The lease period of office premises is two years with an option to renew after that date and office equipment is five years.

 

 

2016

2015

 

£'000

£'000

Not more than one year

1

28

Later than one year and not later than five years

2

3

 

3

31

28      Related party transactions

 

Identities of related parties

 

(a)   In relation to the information detailed elsewhere in the financial statements, the Group has a controlling related party relationship with its subsidiary as disclosed in Note 3 to the financial statements.

 

(b)   Other than those disclosed elsewhere in the financial statements, the Group and the Company also carried out the following significant transactions with the related parties during the financial year:-

 

 

 

2016

2015

 

 

£'000

£'000

Key management personnel:

 

 

- Salaries and other benefits

65

308

- Defined contribution plan

-

34

 

The salary and benefit payable to key management totaling £60,000 was accrued as at 31 December 2016.

29      Control

 

          The Company is under the control of its shareholders and not any one party.

 

30      Significant event

 

During the financial year on the 23 December 2016, the Group executed a subscription agreement with Darwin Capital Limited for the issuance of up to £2.5m of Senior Unsecured Zero Coupon Convertible Loan Notes ("Loan Notes") with detachable Warrants in 3 separate tranches. In tranche 1 a total of 30 Loan Notes of £ 25,000 each, was issued along with 1,016,949 detachable warrants. These warrants can be exercised over a five-year period from 23 December 2016.

 

Notes to the Financial Statements

For the year ended 31 December 2016

 

31      Subsequent events

 

          Post financial year end Darwin Capital Limited converted the 30 Loan Notes issued from tranche 1 as follows:

 

Date

Loan Notes Issued

Aggregate Value

Loan Notes Converted

Aggregate Value

New Ordinary Shares Issued

Loan Note Balance

23 December 2016

30

£750,000

-

-

-

30

 

 

 

 

 

 

 

03 February 2017

-

-

(4)

(£100,000)

1,349,674

26

08 March 2017

-

-

(6)

(£150,000)

3,052,279

20

03 April 2017

-

-

(10)

(£250,000)

6,130,011

10

12 April 2017

-

-

(10)

(£250,000)

6,940,766

-

 

On 15 May 2017, the Group issued a further 40 Loan Notes in tranche 2 with an aggregate value of £1,000,000 with 1,355,932 detachable warrants at an exercise price of 18.4375 pence per new Ordinary Share. The Warrants can be exercised over a five-year period from 15 May 2017.

 

At date of this report the enlarged share capital of the Group consists of 134,009,266 ordinary shares at 1p each and total detachable warrants outstanding are 2,372,881

 

 

 

 

Independent Auditor's Report

TO THE MEMBERS OF GRAPHENE NANOCHEM PLC

 

We have audited the financial statements of Graphene Nanochem Plc for the year ended 31 December 2016 which comprise the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and the related notes.  The financial reporting framework that has been applied in their preparation is applicable law United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland".

 

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.  Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's 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 and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

Respective responsibilities of Directors and Auditor

As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.  Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).  Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

 

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

 

Opinion on financial statements

In our opinion the financial statements:

•      give a true and fair view of the state of the Company's affairs as at 31 December 2016 and of the Company's profit for the year then ended;

•      have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

•      have been prepared in accordance with the requirements of the Companies Act 2006.

 

Emphasis of matter - Going concern

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 2.2 to the Consolidated Group's financial statements concerning the Company's ability to continue as a going concern.  While the Company made a net profit of £1,669,000 during the year ended 31 December 2016, at that date, the Company had net current assets of £1,657,000.  These conditions, along with the other matters explained in note 2.6 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt on the Company's ability to continue as a going concern.  The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern.

 

Opinion on other matter prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

•      the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

•      the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.

 

 

 

 

 

 

 

 

 

Matters on which we are required to report by exception

In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report and the Directors' Report.

 

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

•      adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

•      the financial statements are not in agreement with the accounting records and returns; or

•      certain disclosures of Directors' remuneration specified by law are not made; or

•      we have not received all the information and explanations we require for our audit

 

 

 

 

 

Mark Ling (Senior statutory auditor)                                                                                                                                     1 Westferry Circus

For and on behalf of PKF Littlejohn LLP                                                                                                                       Canary Wharf

Statutory auditor                                                                                                                                                                 London E14 4HD

 

 

 

 

 

Statement of Financial Position

(Parent Company)

As At 31 December 2016

 

                                                                                                                                                                            2016                               2015

                                                                                                                                           Notes                       £000                               £000

Fixed assets                                                                                                                                                                                                           

Property, plant & equipment                                                                                            5                             101                                     -

Intangible assets                                                                                                               7                               41                                   41

 

                                                                                                                                                                              142                                   41

            

Current assets                                                                                                                                                                                                        

Other debtors                                                                                                                      8                               19                                   12

Amount owed by subsidiaries                                                                                         8                          3,632                                     -

Cash at bank and in hand                                                                                                                                 41                                     -

            

                                                                                                                                                                           3,692                                   12

Current liabilities                                                                                                                                                                                                   

Bank overdraft                                                                                                                                                        -                                 (12)

Creditors: amounts falling due within one year                                                          9                        (2,035)                              (117)

                   

                                                                                                                                                                         (2,035)                              (129)

                   

Net current assets / (liabilities)                                                                                                                       1,657                               (117)                             

 

Net assets / (liabilities)                                                                                                                                    1,799                                 (76)

                   

 

 

Capital and reserves                                                                                                                                                                                              

Share capital                                                                                                                      10                       23,307                            23,307

Share premium account                                                                                                   11                       37,639                            37,639

Shares to be issued                                                                                                                                          206                                     -

Profit and loss account                                                                                                     11                     (59,353)                         (61,022)

 

Shareholders' funds                                                                                                              11                         1,799                                 (76)

                   

On publishing the parent Company financial statements here together with the Group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual Statement of Comprehensive Income statement and related notes that form a part of these approved financial statements.

 

The profit for the year is £1,669,000 (2015: Loss £50,726,000)

Company Registration No: 05712979

 

Statement of Changes in Equity

(Parent Company)

As At 31 December 2016

 

 

 

Share Capital

Share Premium Account

Shares to be issued

Accumulated Losses

Total Equity

 

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

At 1 January 2015

23,307

37,639

-

        (10,296)

50,650

 

 

 

 

 

 

Total comprehensive loss

 

 

 

 

 

Loss for the financial year

-

-

-

(50,726)

(50,726)

 

-

-

-

(50,726)

(50,726)

 

 

 

 

 

 

At 31 December 2015

23,307

37,639

-

(61,022)

(76)

 

 

 

 

 

 

Total comprehensive loss

 

 

 

 

 

New Shares to be issued

-

-

206

-

206

Profit for the financial year

-

-

-

1,669

1,669

 

-

-

206

1,669

1,875

 

 

 

 

 

 

At 31 December 2016

23,307

37,639

206

(59,353)

1,799

 

 

 

 

Statement of Cash Flows

(Parent Company)

As At 31 December 2016

 

 

 

 

2016

2015

 

 

£'000

£'000

 

 

 

 

 Cash Flows From Operating Activities

 

 

 Loss before taxation 

1,669

(50,726)

 

 

 

 

 Adjustments for:

 

 

 Depreciation of PPE

44

-

 Amortisation of intangible assets

1

1

 Impairment of investment in subsidiaries

-

21,268

 Provision against amount owed by former Group undertakings

(3,268)

26,759

 Interest income

-

(168)

 Warrant issue

81

-

 

 

 

 

 (Increase) / Decrease in :

 

 

 Trade and other receivables

(7)

4

 Increase / (Decrease) in :

 

 

 Trade and other payables

851

62

 Other payable and accrued expenses

7

-

 Cash Generated From / (Used In) Operations

(622)

(2,800)

 

 

 

 

 Net interest received

-

168

 Net interest paid

-

-

 Net Cash Used In Operating Activities

(622)

(2,632)

 

 

 

 

 Cash Flows (For) / From Investing Activities

 

 

 Purchase of intangible assets

-

(42)

 Repayment by subsidiaries

-

1,841

 Loan to subsidiaries

(436)

-

 Net Cash (Used In) / Generated From Investing Activities

(436)

1,799

 

 

 

 

Cash Flows (For) / From Financing Activities

 

 

 

Issuance of loan notes

 

675

-

Loan from third party

 

436

-

Net Cash (Used In) / Generated From Financing Activities

1,111

  -

 

 

 

 Net Decrease In Cash and Cash Equivalents

53

(833)

 Cash and Cash Equivalents at beginning of year

(12)

821

 Cash and Cash Equivalents at end of year

41

(12)

         

 

 

 

Notes to the Financial Statements (Parent Company)

For the year ended 31 December 2016

1   General information

 

Graphene Nanochem Plc ("the Company") is the UK holding company of a Group of companies which are involved in the design, formulation and manufacturing of intermediate and performance chemicals and advanced nano-materials. The registered address of the Company is Academy House, London Road, Camberley, Surrey, GU15 3HL.

2   Principal accounting policies

 

2.1    Basis of preparation

 

The financial statements have been prepared under the historical cost convention and using UK financial reporting standards and applicable law which together comprise with FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland. ("UK GAAP"). The consolidated financial statements of the Group have been shown separately and are prepared using IFRS as adopted by the European Union.

 

Information on impact of first-time adoption of FRS 102 is given in note 17.

 

On publishing the parent Company financial statements here together with the Group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual Statement of Comprehensive Income statement and related notes that form a part of these approved financial statements.

 

The Company is entitled to the merger relief offered by Section 612 of the Companies Act 2006 in respect of the consideration received in excess of the nominal value of the equity shares issued in connection with the acquisition of Platinum Performance Chem Sdn Bhd (formerly known as Zurex Corporation Sdn Bhd).

 

The principal accounting policies of the Company are set out below. There were no recognised gains or losses for the year other than the loss for the year.

 

The financial statements have been prepared on the going concern basis as explained in Note 2.2 to the consolidated financial statements.

 

2.2   Income from investments

 

Investment income comprises interest receivable from the licensed banks and is recognised on an accrual basis using the effective interest method.

 

2.3   Deferred taxation

 

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the following exceptions:

 

  provision is made for tax on gains arising from the revaluation (and similar fair value adjustments) of fixed assets, and gains on disposal of fixed assets that have been rolled over into replacement assets, only to the extent that, at the balance sheet date, there is a binding agreement to dispose of the assets concerned. However, no provision is made where, on the basis of all available evidence at the balance sheet date, it is more likely than not that the taxable gain will be rolled over into replacement assets and charged to tax only where the replacement assets are sold;

 

  provision is made for deferred tax that would arise on remittance of the retained earnings of overseas subsidiaries, associates and joint ventures only to the extent that, at the balance sheet date, dividends have been accrued as receivable; and

 

  deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

 

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

 

 

 

 

 

 

Notes to the Financial Statements (Parent Company)

For the year ended 31 December 2016

2   Principal accounting policies (Continued)

 

2.4   Foreign currency

 

Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the profit and loss account.

 

2.5   Financial instruments

 

Financial assets and liabilities are recognised in the statements of financial position when the Company has become a party to the contractual provisions of the instruments.

 

The Company's financial assets and liabilities are initially measured at fair value plus any directly attributable transaction costs. The carrying value of the Company's financial assets, primarily cash and bank balances, and liabilities, primarily the Company's payables and other accrued expenses, approximate their fair values.

 

(i)   Financial assets

On initial recognition, financial assets are classified as either financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables financial assets, or available-for-sale financial assets, as appropriate.

 

·      Trade and other receivables

Trade and other receivables (including deposits and prepayments) that have fixed or determinable payments that are not quoted in an active market are classified as other receivables, deposits, and prepayments. Other receivables, deposits, and prepayments are measured at amortised cost using the effective interest method, less any impairment loss. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

 

(ii)   Financial liabilities and equity instruments

Financial liabilities are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to financial liabilities are reported in profit or loss. Distributions to holders of financial liabilities are classified as equity and charged directly to equity.

 

·      Financial liabilities

Financial liabilities comprise long-term borrowings, short-term borrowings, trade and other payables and accruals, measured at amortised cost using the effective interest method.

 

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

 

·      Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all its liabilities.  Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.       

 

 

 

Notes to the Financial Statements (Parent Company)

For the year ended 31 December 2016

2   Principal accounting policies (Continued)

2.6   Critical accounting judgments and key sources of estimation uncertainty

 

In the application of the Company's accounting policies, the Directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not apparent from other sources.  The estimates and assumptions are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 

The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date that have a significant risk of causing a significant adjustment to the carrying amounts of assets and liabilities in the Financial statements:

 

2.7   Carrying value of investment in and loans due from subsidiaries

 

Management's assessment for impairment of investment and long term loans in subsidiaries is based on the estimation of value in use of the cash generating unit (CGU) by forecasting the expected future cash flows for a period of up to five years, using a suitable discount rate in order to calculate the present value of those cash flows.

 

As the Company's subsidiaries have ceased operations and are in negotiations with various banks to dispose of fixed assets to settle overdue loans, management has fully impaired the carrying values of investments in subsidiaries and loans due from subsidiaries.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the Financial Statements (Parent Company)

For the year ended 31 December 2016

 

3        Administrative expenses

                       

 

 

2016

2015

 

 

 

£'000

£'000

Included within administrative expenses are:

 

 

 

 

Amortisation of intangible assets

 

 

-

1

Auditors remuneration

 

 

 

 

- Fees payable to the Company's auditor for the audit of the

annual accounts

 

 

30

32  

 

 

 

 

 

 

4        Directors and employees

 

          The employee benefit expense during the year was as follows:

                       

 

 

2016

2015

 

 

 

£'000

£'000

Salary and wages including gratitude

 

 

65

                 96

 

          There was no employee except for the number of directors during the year was 6 (2015:7).

 

Remuneration in respect of Directors was as follows:

Director

 

Basic salary and fees

Pension-Defined contribution schemes

Total           

 2016

Total         

   2015

 

 

£'000

£'000

£'000

£'000

Tan Sri Abi Musa

 

12

                         -  

 

12

Dato Jespal Deol

 

3

                       -

 

12

Sushil Sidhu

 

2

                         -

 

12

Am Cleverly Esq & Mrs JCM Cleverly

-

                         -  

 

12

Dato' Larry Gan

12

                         -  

 

12

Patrick Dennis Howes

24

-

 

24

Dato' Mohamed Sallehuddin

12

-

 

12

 

 

65

                       -

 

           96

 

 

The salary and benefit payable to key management totaling £60,000 was accrued as at 31 December 2016

5        Property, plant & equipment

                       

 

 

2016

2015

 

 

 

£'000

£'000

Cost

 

 

 

 

At 1 January

 

 

 

 

Additions

 

 

145-

-

 

 

 

 

-

At 31 December

 

 

145

-

Accumulated Depreciation

 

 

 

 

At 1 January

 

 

-

-

Additions

 

 

44

-

At 31 December

 

 

44

-

 

 

 

 

 

Net Book Value

 

 

 

 

At 31 December

 

 

101

-

 

 

 

 

 

Notes to the Financial Statements (Parent Company)

For the year ended 31 December 2016

 

6        Investments in subsidiaries

                       

 

 

2016

2015

 

 

 

£'000

£'000

Cost

 

 

 

 

At 1 January

 

 

30,525

30,525

Additions

 

 

-

-

At 31 December

 

 

30,525

30,525

 

 

 

 

 

Permanent diminutions

 

 

 

 

At 1 January

 

 

30,525

9,257

Impairment for the year

 

 

-

21,268

At 31 December

 

 

30,525

30,525

 

 

 

 

 

Net book value

 

 

-

-

         

Please refer to Notes 3 & 7 of the consolidated financial statements for list of subsidiaries and discontinued operations.

 

Investments in subsidiaries and a joint venture are shown at cost less impairment loss.

  

As some of the Company's subsidiaries have ceased operations and are in negotiations with various banks to dispose of fixed assets to settle overdue loans, management has fully impaired the carrying values of these investments in subsidiaries and loans due from subsidiaries.

 

7        Intangible assets

         

 

Licenses

Patents

Total

 

£'000

£'000

£'000

Cost

 

 

 

As at 1 January 2016

18

24

42

Transfer from subsidiary undertakings

-

-

-

As at 31 December 2016

18

24

42

 

 

 

 

Accumulated amortisation

 

 

 

As at 1 January 2016

1

-

1

Transfer from subsidiary undertakings

-

-

-

As at 31 December 2016

1

-

1

 

 

 

 

Net book value as at 31 December 2016

17

24

41

 

 

 

 

 

8        Debtors

                       

 

 

2016

2015

 

 

 

£'000

£'000

Due within more than one year

 

 

 

 

Amounts owed by subsidiaries

 

 

3,632

26,759

Less: provision allowance

 

 

-

(26,759)

Net amount owed by subsidiaries

 

 

3,632

-

 

 

 

 

 

Due within one year

 

 

 

 

Other debtors

 

 

19

12

 

 

 

3,651

12

 

 

         

Notes to the Financial Statements (Parent Company)

For the year ended 31 December 2016

 

9        Creditors: amounts falling due within one year

 

                       

 

 

2016

2015

 

 

 

£'000

£'000

 

 

 

 

 

Accruals and deferred income

 

 

1,410

117

Borrowings

 

 

625

 

 

 

 

2,035

117

 

10     Share capital and options

 

 

        2016

   2015

    2016

 2015

 

Number of shares

£'000

Issued and Fully Paid-Up:

 

 

 

 

At 1 January and 31 December

 

 

 

 

 

 

 

 

 

Ordinary shares of 0.20p each

-

116,536,536

-

23,307

 

 

 

 

 

Ordinary shares of 0.01p each

116,536,536

-

1,165

-

Deferred shares of 0.19p each

116,536,536

-

22,142

-

 

 

 

 

 

 

233,073,072

116,536,536

23,307

23,307

 

 

At the Company's last Annual General Meeting held on 6 December 2016, approval was given by Shareholders, inter alia for a Capital Reorganisation, whereby each Existing Ordinary Share of 0.2p nominal value was to be sub-divided into one New Ordinary Shares of £0.01 nominal value and a 2016 Deferred Share of £0.19 nominal value.

 

After the Share Capital Reorganisation there will be no change to the number of ordinary shares in issue which means there will be 116,536,536 New Ordinary Shares in issue. The Deferred Shares will have no value or voting rights and will not be issued with a share certificate in respect of the Deferred Shares and they will not be listed on AIM. 

 

 

11      Statement of reserves

                   

 

Share Premium account

£000

Profit and loss account

£000

At 1 January 2015

37,639

(10,296)

Loss for the year

-

(50,726)

At 31 December 2015

37,639

(61,022)

Profit for the year

-

1,669

At 31 December 2016

37,639

(59,353)

            

12      Capital commitments

 

          The Company had no contracted capital commitments at 31 December 2016 (2015: £nil). 

 

13      Contingent liability

 

          The Company has provided a guarantee in respect of bank borrowings of its subsidiaries totaling £17,695,000 (2015: £15,905,000).

 

 

 

 

 

Notes to the Financial Statements (Parent Company)

For the year ended 31 December 2016

 

14      Transactions with Directors and other related parties

 

          The Company has taken advantage of the exemption in FRS102 and has not disclosed transactions with wholly owned Group undertakings.   There are no other related party transactions with the Company. The Company is under the control of its shareholders and not any one party.

 

15      Company profit and loss account

 

          The Company has taken advantage of the exemption available under Section 408 of the Companies Act 2006 and has not presented its own profit and loss account. The profit of the Company for the year was £1,669,000 (2015: loss £50,726,000).

 

16      Financial instruments

 

The carrying amounts of the Company's financial assets and liabilities as at 31 December 2016 are as follows:

 

           

 

2016

2015

 

 

£'000

£'000

Financial assets

 

 

 

Trade and other receivables

 

19

12

Cash and bank balances

 

41

-

 

 

60

12

 

 

 

 

Financial liabilities carried at amortised costs

 

 

 

Trade and other payables

 

1,410

117

Borrowings

 

625

12

 

 

2,035

129

 

17      Operating lease commitments

 

Leases as lessee

 

The Group leases two office premises and office equipment under operating leases. The lease period of office premises is two years with an option to renew after that date and office equipment is five years.

         

 

2016

2015

 

£'000

£'000

Not more than one year

1

28

Later than one year and not later than five years

2

3

 

3

31

 

18      First time adoption of FRS 102

 

          The accounting policies applied under the entity's previous accounting framework are not materiality difference to the accounting policies that are compliant with FRS 102 and there has been no material impact on equity or profit or loss.  Accordingly, no reconciliation from the entity's previous accounting framework has been presented.

 

19      Significant event

 

          Refer to Note 30 of the consolidated financial statements.

 

20      Subsequent events

 

          Refer to Note 31 of the consolidated financial statements.


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