TIDMENRT
RNS Number : 5839R
Environmental Recycling Tech. PLC
30 June 2015
30 June 2015
Environmental Recycling Technologies plc
Preliminary Results for the year ended 31 December 2014
Environmental Recycling Technologies plc which owns and is
developing applications for the patented rights to the Powder
Impression Moulding ("PIM") process, which converts mixed waste
plastics into commercially viable products, announces its
preliminary results for the year ended 31 December 2014.
Financial highlights
-- Revenue for the year ended 31 December 2014 GBP0.04 million
(2013: GBP0.12 million) arising from licence and royalty
agreements
-- Loss on operations GBP1.10 million (2013: GBP2.79 million)
Operational highlights
-- Installation and commissioning of powder preparation
equipment at ERT's specially designed processing facility
-- AXION Polymers received its first two orders from global
licencees for PIM powdered AXPLAS(TM)
-- Cooperation agreement signed with Ceramic Drying Systems
Limited for the supply and installation of turn-key PIM processing
equipment globally
-- Granted a non-exclusive licence in the state of Colorado for the production of flat sheet
-- Signed heads of terms for a GBP1m UK exclusive licence with a
newly established Joint Venture in the UK
Post Year End
-- The Company is in advanced discussions for the acquisition of
all of the issued share capital of a profitable company which, if
completed successfully, will provide the enlarged group with a more
balanced business and additional sales opportunities and
synergies.
Ken Brooks, Chairman, commented: "I am pleased to say that our
management team continues to make steady progress in a consolidated
approach to the commercialisation of PIM whilst also looking out
for wider and synergistic activities in the field of environmental
recycling in the light of new legislative drivers and greater
environmental consciousness."
For further information:
Environmental Recycling Technologies
plc www.ertplc.com
Telephone: +44 (0) 845
Ken Brooks, Chairman 071 1394
Roger Baynham, Deputy Chairman
W H Ireland
Telephone: +44 (0) 117
John Wakefield and Ed Allsopp 945 3470
Peterhouse Corporate Finance
Limited
Telephone: +44 (0) 20
Charles Goodfellow 7469 0930
Kreab
Telephone: +44 (0) 20
Robert Speed 7074 1800
The Company confirms that the Company's Annual Report and
Accounts for the year ended 31 December 2014 will be sent to
shareholders and will be available on the Company's website by 30
June 2015: www.ertplc.com.
Notes to editors:
Environmental Recycling Technologies plc (ERT) is a leading
developer of innovative technologies specifically focussing on
plastic waste recycling. The company holds the worldwide
intellectual property rights to the Powder Impression Moulding
(PIM) Process.
For more information about Environmental Recycling Technologies
plc please visit www.ertplc.com
Chairman's Report
Principal activities
The principal activity of the company is the licencing of the
intellectual property of the Powder Impression Moulding (PIM)
system to third parties for specific products and geographical
areas of the world in order to generate licence fees and on-going
royalties. The company works with collaborative partners who assist
with the commercialisation of the process.
Highlights
-- Installation and commissioning of powder preparation
equipment at our specially designed processing facility, in
cooperation with AXION Polymers
-- Our collaborative partner AXION Polymers received its first
two orders from our global licensees for PIM powdered AXPLAS(TM)
utilising the powder preparation equipment
-- Cooperation agreement signed with Ceramic Drying Systems
Limited for the supply and installation of turn-key PIM processing
equipment globally
-- Granted non-exclusive licence in the state of Colorado for the production of flat sheet
-- Signed heads of terms for a GBP1m UK exclusive licence with a
newly established Joint Venture in the UK for the production of
flat sheet
-- Significant strengthening of the executive and non-executive board
Results
-- Revenue from licence fees and royalties was GBP0.04 million (2013: GBP0.12 million) arising predominantly from licence and royalty income agreements
-- Administrative expenses reduced to GBP1.14 million (2013: GBP2.91 million)
-- The loss on operations was GBP1.10 million (2013: GBP2.79 million)
-- The loss after tax for the year reduced to GBP3.22 million (2013: GBP3.54 million)
-- The loss per share was 0.37 pence (2013: 0.42 pence)
Although the Company has reported another loss for the year, yet
again much progress has been made. Our current global licencees did
not achieve their expected milestones in bringing their products to
production. These delays impacted on the ability of the Company to
earn royalty revenues. Much progress was made with Axion to develop
a stream of PIM powdered material supplies for use by our global
licencees but this did not result in revenues in the financial
year. The year was spent putting the building blocks in place for
the future so that new licencees could be supported to enable them
to reduce the time to get products in to production.
Revenues include an increased contribution from Contour
Showers.
Normal overheads incurred in running the company, excluding the
impairment for available-for-sale financial assets and
amortisation, were GBP0.91 million (2013: GBP0.98 million). Normal
running costs include an additional expenditure of GBP0.15 million
on research and development (2013: GBP0.05 million) demonstrating
the increased effort that has been made to support the
commercialisation of PIM. In the circumstances the Board considers
it more appropriate to expense such additional costs rather than
increasing the recorded value of intangible assets.
Financing costs were GBP2.16 million (2013: GBP0.75 million)
made up of interest paid on the increased borrowings and the high
costs of finance for the short term loans that have been raised
over the course of the year.
Post Year End
The Company is in advanced discussions for the acquisition of
all of the issued share capital of a profitable, cash generative
company which, if completed successfully, will provide the enlarged
group with a more balanced business and additional sales
opportunities and synergies.
Our licencee operations
United Kingdom
-- Contour Showers - Contour continues to drive the production
forward for which ERT receives royalties. Contour is one of the
recent licencees that have capitalised on the availability of the
raw material AXPLAS(TM)
-- Mettalis - In 2015 ERT signed heads of terms for an exclusive
licence for the production of flat sheet into to the UK. This is by
way of a joint venture between ERT and Mettalis. This represents
the opportunity to re-establish the UK market for PIM sheets
United States
-- Brown Water Plastics (BWP) - Since receiving the first
million plus pound sterling order, BWP have engaged Arup, our
preferred construction partner, to work and develop mould
improvements. This is expected to reduce raw materials and
structural costs in the production of the barge covers. BWP
anticipates this will provide it with a commercial advantage over
its competitors
-- North Brook Plastics (NBP) - Whilst it has taken some time
for NBP to refine the PIM process, it is the 2nd licencee to place
an order for AXPLAS(TM). This has provided NBP the opportunity to
commission the line and get into production faster. ERT's polymer
lab technician has since visited NBP to support them through this
stage. We anticipate production formally to start in Q4 2015
-- Earth Enterprises LLC (EE) - ERT granted EE a non-exclusive
licence for the production of flat sheet. EE was awarded a Colorado
state grant for the capital to supply and install the equipment. It
is anticipated that the facility will be commissioned in Q4
2015
Collaborative partners
-- Arup - The ERT relationship with Arup continues to expand. As
mentioned previously, Arup are working on a project with our
licensee on various programmes. ERT also has the benefit of Mathew
Cooper on our board as a non-executive, to facilitate closer
project management development
-- AXION Polymers - Since the relocation of ERT's test facility
to the AXION polymers facility in Manchester, ERT has commissioned
and installed a powder processing facility to facilitate our
licencees' needs for suitable raw materials. As part of our
cooperation AXION has taken over the management of the equipment.
They have subsequently received orders from two licensees with a
further three seeking quotations. This is a milestone in the
organic growth of ERT, therefore enabling our licencee to get
product to market faster. As part of our relationship with AXION,
we are continuing to develop PIM recipes to meet the technical
requirements of the industry
-- Ceramic Drying Systems (CDS) - In May 2015 ERT signed
cooperation with CDS to supply turn-key PIM facilities globally.
This also represents a major turning point in ERT's growth. CDS has
a global reach, which will enable ERT to continue to expand its
licencee portfolio around the world
Our Board
In January 2014, the appointment of Jeremy Allen and Divyash
Patel as Non-Executive Directors was announced.
-- Mr Allen, the former Global Head of Dresdner Kleinwort's
Equity Research Department, is a highly regarded equity market
professional with 21 years' experience in the City
-- Mr Patel is a commercial consultant who advises on and
negotiates contracts for companies with innovative environmental
technologies for use in Asia
Subsequently, in 2014, John Mayfield, Mathew Cooper and John
Viviani were appointed to the board of ERT.
-- Mr. Mayfield joined ERT as an executive director from Avincis
Group where he led a Finance & Operations re-structuring
project for London & the Americas. He brings significant
experience in technology and international businesses, is ACCA
& CIMA qualified, and holds an MBA from Cranfield School of
Management
-- Mr. Cooper is an Associate at Arup Group Limited (Arup) and
has been instrumental in the collaborative relationship between ERT
and Arup, where he focuses on business strategy, new venture
development and operational performance improvement
-- Mr. Viviani, as Regional Operations Director at Viridor, was
responsible for (amongst other contracts and businesses) Europe's
largest municipal integrated waste, recycling and energy-from-waste
management contract, namely the Greater Manchester Private Finance
Initiative (PFI) contract, comprising GBP631 million capital
investment and operational management contracts worth GBP3.8
billion over 25 years to Viridor
Outlook
In 2015 ERT has agreed heads of terms for an exclusive licence
in the UK and signed a non-exclusive licence in the USA. The recent
announcement of the agreement with CDS will facilitate the
continuing traction ERT is experiencing for its exciting
technology.
The recent co-operations with AXION, Arup and CDS have provided
ERT with a strong competitive advantage in the marketing and
delivery of the process, therefore providing the opportunity to
offer turn-key support to existing and new licencees.
ERT has positioned itself as the solutions provider to the
plastics industry. We are already starting to see the impact of
this with the quality of enquiries we are receiving.
ERT is receiving substantial interest from the USA and mainland
Europe. We recently hosted a meeting with a potential client from
Australasia.
We have seen recent legislation that is calling for the
following targets to be met:
-- July 2nd 2014 - The European Commission formally adopted
proposals for the future of waste and recycling targets within
Europe, as part of measures towards achieving a circular
economy
-- 2015 - EU Circular Economy Strategy; The European Commission
is aiming to present a new, more ambitious circular economy
strategy late in 2015, to transform Europe into a more competitive
resource-efficient economy
-- June 2015 - Plastics Industry Recycling Action Plan (PIRAP);
Plastics Europe Federation (PE), the British Plastics Federation
(BPF) and the Packaging and Films Association (PAFA)
-- 70% Recycling Target of municipal waste by 2030 - Key amongst
the proposals is an increased target for the member states to
recycle or reuse 70% of municipal waste by 2030, an increase on the
current 50% by 2020
-- 2025 Ban on land-filling Plastics - The Commission is also
proposing a ban on sending recyclable materials such as plastics to
landfill by 2025, as well as phasing out landfilling of waste by
2030
-- 2025 60% Plastics Recycling Target - The European Commission
legislative proposals set minimum recycling rates for packaging in
Europe increasing to 45% by 2020 and 60% by 2025
-- Resources Action Program (WRAP) launches PIRAP which provides
a road map for the plastic packaging supply chain to take action
and contribute towards achieving the UK government's target for
obligated users
With the increased pressure from governments around the globe to
rapidly increase collection and recycling targets, ERT is perfectly
positioned to offer a commercial, sound solution to the exponential
increased tonnages coming through the collection infrastructure.
The recent Heads of Terms with Mettalis is just one such example of
industry looking to add value to recyclable waste. This is achieved
by capitalising on the PIM process to convert waste plastic arising
into a sought after established product.
The management is confident with the recent cooperation
agreements and the strengthened board, we can look to the future to
continue to commercialise the PIM technology.
The recent co-operations have already borne fruit for ERT,
e.g:
-- 2 separate orders for the AXPLAS(TM) powder to ERT licencees
-- 1 licencee has engaged the services of ARUP to assist with product design and development
-- First turn-key proposal for the supply and implementation of
a fully automated PIM manufacturing facility
Principal risks and uncertainties
The company is exposed to a variety of risks in the conduct of
its normal operations. Whilst it is not possible to either
completely record or to quantify every material risk that the
company faces, below is a summary of those risks that the directors
believe are most significant to the company's business and could
have a material impact on future performance, causing it to differ
materially from expected or historic achieved results.
Commercialisation of the PIM process
The company's prime risk is the on-going commercialisation of
the PIM process which is still being developed. All costs of
product development are for each customer with the company
facilitating introductions to third parties. As noted above, ERT
has engaged with collaborative partners to provide services to
assist licencees in entering commercial production.
Licence fee and royalty revenues
The company hopes to achieve significant licence fee and royalty
revenues in the future which are subject to the successful
development of each customer's products being produced under
licence from ERT. Future royalty revenues have an inherent
uncertainty as they are principally derived from the number of
units produced by customers and are subject to variations in
patterns of demand.
Treasury function
The company monitors cash flow as part of its day-to-day control
procedures. The board considers cash flow projections and liquidity
risk at its meetings and ensures that appropriate facilities are
available to be drawn down upon as necessary.
Credit risk
The company's credit risk is primarily attributable to its trade
debtors. Credit risk is managed by running credit checks on
customers and by monitoring payments against contractual
agreements.
Customer concentration, programme dependencies and
relationships
The loss of, or deterioration in any single customer
relationship, could have a material impact on the company's
results. The board continues to look for opportunities to expand
the business' licencee base and in 2015 ERT has agreed terms for an
exclusive and non-exclusive licence in the UK and USA.
FINANCIAL REVIEW
Results
Revenue together with other income for the year ended 31
December 2014 was GBP0.04 million (2013: GBP0.12 million). The loss
on operations was GBP1.10 million (2013: GBP2.79 million). Total
comprehensive losses attributable to equity shareholders were
GBP3.22 million (2013: GBP3.54 million).
Dividends and loss per share
At 31 December 2014 as reported in the statement of financial
position, the company does not have distributable reserves and is
unable to declare a dividend. The basic and diluted loss per share
was 0.37 pence (2013: 0.42 pence).
Financing
Short term funding
Management's key area of financial focus is in securing funding
to meet the company's day to day liabilities as they fall due. The
company meets its day to day cost base by managing its cash
resources and securing appropriate levels of finance to settle
liabilities as they fall due. Additional net cash funds of GBP1.16
million (2013 GBP0.5 million) were raised from loans made to the
company by its lender Oxford Capital.
Total borrowings amounted to GBP6.08 million (2013: GBP3.14
million).
The Directors have received written assurance from Oxford
Capital, the lender of GBP6.08 million (2013: GBP3.14 million) that
there is no intention to request immediate repayment of the
liabilities and that subject to agreement, the lender would accept
repayment by way of a debt for equity swap. The Directors do not
expect there to be a requirement to repay the loans in cash during
the next 12 months.
Short term funding facilities have been organised to cover the
company's normal overheads. Written confirmation has been received
from Magna Group ("Magna)" confirming their willingness to make
available to the Company, if required, a Convertible Promissory
Note amounting to the value of $0.5 million on acceptable
terms.
Going concern
The company requires the continuation of loan funding from its
current lender and needs to obtain significant additional funding
in 2015 (either from the lender, new lenders or the raising of
funds from share issues) in order to continue trading and meet its
liabilities as they fall due for payment. In respect of the
assessment of going concern, the directors have prepared detailed
profit and cash flow forecasts for the period ending 31 December
2016. The cash flow forecast shows that the company is only able to
continue trading as a going concern if:
1) Oxford Capital (the current principal lender to the company
maintains its current level of funding (being loans of GBP6.08m) to
the company or withdraws such funding only in a manner that does
not create the need for cash payments to be made by the company
(such as a debt for equity swap). Oxford Capital has confirmed to
the directors in writing that it will not withdraw the GBP6.08m
funding being provided to the company (in a way that makes the
company unable to pay its debts as they fall due) during the period
of 12 months from the date of approval of the financial
statements.
2) Significant additional funding is made available to the
company during July / August 2015 either from the current principal
investor (Oxford Capital), new external lenders or the raising of
funds from share issues.
The directors acknowledge that the requirement for continuation
and enhancement of the funds being made available to the company
provides a significant degree of uncertainty in terms of going
concern. Based on discussions with Oxford Capital and the Nominated
Advisor the directors consider that there is a reasonable
expectation the additional funding required by the company in order
to continue trading and meet its liabilities as they fall due for
at least the period of 12 months from the date of approval of the
financial statements will be made available as and when required.
Further detail concerning going concern is set out in note 1 of the
financial statements.
Ken Brooks
Chairman
Statement of Comprehensive Income
Year ended 31 December 2014
Year ended Year ended
31 December 31 December
2014 2013
Continuing operations GBP'000 GBP'000
Revenue 37 119
Administrative expenses
Impairment - (1,683)
Other (1,139) (1,226)
Total administrative expenses (1,139) (2,909)
Loss on operations (1,102) (2,790)
Finance income - -
Finance costs (2,160) (752)
Loss for the year before income tax (3,262) (3,542)
Tax on loss on ordinary activities (44) -
Loss for the year attributable to
equity shareholders of the company (3,218) (3,542)
Total comprehensive loss for the year
attributable to equity shareholders
of
the company (3,218) (3,542)
Loss per share (pence)
Basic and diluted loss per share (0.37p) (0.42p)
Statement of Financial Position
At 31 December 2014
31 December 31 December
2014 2013
Assets GBP'000 GBP'000 GBP'000 GBP'000
Non-Current Assets
Intangible assets 1,510 1,755
Plant and Machinery 49 14
Investments 40 40
Total non current assets 1,599 1,809
Current assets
Trade and other receivables 81 130
Cash and cash equivalents 71 178
Total current assets 152 308
Total assets 1,751 2,117
Liabilities
Current liabilities
Trade and other payables 398 481
Borrowings 4,234 1,299
Total current liabilities 4,632 1,780
Non-Current current liabilities
Borrowings 1,841 1,841
Total Non-Current current liabilities 1,841 1,841
Total liabilities 6,473 3,621
Net liabilities (4,722) (1,504)
Equity attributable to the shareholders
of the parent
Share capital 19,861 19,861
Share premium reserve 37,436 37,436
Warrant reserve 87 87
Available-for-sale reserve (71) (71)
Retained earnings (62,035) (58,817)
Total equity (4,722) (1,504)
Statement of Changes in Equity
Year ended 31 December 2014
Available
Share Share Warrant -for-sale Retained
Capital Premium Reserves Reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Loss for year - - - - (3,218) (3,218)
Balance at 1 January
2014 19,861 37,436 87 (71) (58,817) 1,504
Balance at 31 December
2014 19,861 37,436 87 (71) (62,035) (4,722)
Year ended 31 December 2013
Available
Share Share Warrant -for-sale Retained
Capital Premium Reserves Reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Loss for year - - - - (3,542) (3,542)
Issue of share capital 204 799 - - - 1,003
Warrants and options
lapsed - - (428) - 428 -
Losses on liabilities
settled in shares - - - - 20 20
Movement for the year 204 799 (428) - (3,094) (2,519)
Balance at 1 January
2013 19,657 36,637 515 (71) (55,723) 1,015
Balance at 31 December
2013 19,861 37,436 87 (71) (58,817) (1,504)
Statement of Cash Flow
Year ended 31 December 2014
31 December 31 December
2014 2013
GBP'000 GBP'000
Continuing Activities
Loss before tax (3,262) (3,542)
Adjusted for:
Depreciation on plant and machinery 10 4
Amortisation of intangible assets 245 245
Interests costs 421 109
Amortisation of debt issue costs 1,739 519
Losses/(gains) on liabilities settled
in shares - 20
Provision for trade receivables loan 29 1,683
Adjusted loss from operations (818) (962)
Decrease/(increase) in trade and other
receivables 44 (11)
(Decrease) in trade and other payables (79) (16)
Cash used by operations (853) (989)
Tax receipt 19 -
Net cash outflow from operations (834) (989)
Cash flows from investing activities
Purchase of plant and machinery (11) (9)
Net cash used in investing activities (11) (9)
Cash flow from financing activities
Issue of equity share capital - 693
Par reduction buy back - (6)
Share issue costs - (34)
Inception of loans 1,159 500
Interest paid (421) (109)
Net cash generated in financing activities 738 1,044
Net (decrease)/increase in cash (107) 46
Cash and cash equivalents at beginning
of period 178 132
Cash and cash equivalents at end of
period 71 178
Notes to the financial statements
1. Accounting policies
Basis of preparation
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise
stated.
These financial statements have been prepared in accordance with
International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively IFRS) issued
by the International Accounting Standards Board (IASB) as adopted
by the European Union ("adopted IFRS's"). The financial statements
have also been prepared in accordance with those parts of the
Companies Act 2006 applicable to companies preparing financial
statements in accordance with IFRS.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2014
or 2013, but is derived from those accounts.
Statutory accounts for 2013 have been delivered to the Registrar
of Companies and those for 2014 will be delivered prior to 30 June
2015. The auditors have reported on those accounts; their reports
were unqualified however, the 2014 accounts did include an Emphasis
of matter in relation to going concern which is detailed below:
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of the disclosures made
in Note 1 to the financial statements concerning the ability of the
Company to continue as a going concern. The disclosures indicate
that the Company will require additional funding over the next
twelve months to enable it to continue trading and meet its
liabilities as they fall due. The directors believe that this
additional funding can be raised either from a further share issue
or from an existing or new lender. The directors are confident that
such additional funding will be able to be obtained and have
therefore prepared the financial statements on the going concern
basis. These conditions indicate the existence of material
uncertainties which may cast significant doubt over the Company's
ability to continue as a going concern and therefore also its
ability to realise recorded value for its assets.
In 2013, the report was unqualified, however it did include an
emphasis of matters in relation to going concern. For both 2014 and
2013 the audit report did not contain statements under Section
498(2) or (3) of the Companies Act 2006.
Going concern
The company has reported another operating loss for the year and
has net liabilities of GBP4.72 million as at the balance sheet
date.
The directors have prepared detailed cash flow forecasts for the
period ended 31 December 2016. Based on their current expectations
of the progress of negotiation and current and new licence fees the
directors have a reasonable expectation that revenue will be
generated in line with the forecasts and will be available to
provide some level of underpinning to the cash flows of the Company
for the period to December 2016. The forecasts also assume that
Oxford Capital (the lender) will not seek cash repayment of any of
the GBP6.08 million of loan funding it has made available to the
company during at least the 12 months from the date of approval of
these financial statements. However, the forecasts indicate that
the company needs to obtain significant additional funding (around
GBP1.8 million) during July 2015 in order to continue trading and
meet its liabilities as they fall due for payment.
Written assurance has been received from the lender that there
is no intention to request repayment of the loan of GBP6.08 million
for at least the period within 12 months from the date of signing
these financial statements. In addition, the directors are in
discussions with the lender that will enable the company to settle
the outstanding loans of GBP6.08 million by the issue of shares in
the company rather than settling in cash.
The directors have also obtained written confirmation from Magna
Group confirming their willingness to make available to the
company, if required, a Convertible Promissory Note amounting to
the value of $0.5 million on acceptable terms to help cover the
company's normal overheads in the foreseeable future.
The directors consider that the recent and expected trading
performance, the requirement for the continuation of loan funding
from the principal lender and the need to obtain significant
additional funding in 2015 (either from the lender, new lenders or
the raising of funds from share issues) indicate the existence of
material uncertainties which may cast significant doubt over the
group's ability to continue as a going concern. However, the
directors are confident that the required funds will be made
available to the company at the time required. Accordingly the
directors continue to adopt the going concern basis in preparing
the annual report and accounts.
The financial statements do not include the adjustments to the
carrying value of assets that would result if the company was
unable to continue as a going concern.
2. Critical accounting estimates and judgements
The company makes certain estimates and assumptions regarding
the future. Estimates and judgements are continually evaluated
based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. In the future, actual experience may
differ from these estimates and assumptions. 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.
Judgements
Impairment of intangible assets
The company monitors market conditions to assess indications of
impairment. When an impairment review is performed the recoverable
amount is determined based on value in use calculations. The use of
this method requires the estimation of future cash flows and the
choice of a discount rate in order to calculate the present value
of the cash flows. The estimated discount rate is to reflect
current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows
have not been adjusted. The estimate of future cash flows included
in the current forecasts reflects the steps the business has taken
to recruit a Managing Director with sector expertise and the
development of a strategy to work more closely with licencees to
assist them in entering commercial production. Following this
important appointment and key change in the way the business
operates, the forecasts assume a significant increase in future
revenues compared to current levels, based on the expectation that
certain licensees will start to generate royalty income from
January 2016 onwards and that new licences and royalties can be
generated. Actual outcomes are inherently uncertain and may vary,
and if the actual future cash flows received were less than assumed
in the forecasts, then this will lower the value in use and may
result in an impairment. Intangible assets are shown in note 6. An
impairment charge of GBPnil has been made during the year (2013 -
GBPnil). The directors will continue to monitor the carrying value
of the intangible assets as the company progresses.
3. Revenue and segment information
The revenue and loss before tax are attributable to the
principal activities of the company being the licencing of the
intellectual property of the plastic Powder Impression Moulding
system to generate licence fees and on-going royalties.
In the opinion of the directors, the only operating segment is
the exploitation of the company's intellectual property. Whilst
customers may be operating in different economic environments the
company operates from the United Kingdom and all business is
subject to English law.
All assets are held in the UK.
Reporting of external revenue by location of customer is as
follows:
Year ended Year ended
31 December 31 December
2014 2013
GBP'000 GBP'000
United Kingdom 8 53
Middle East 29 66
37 119
Revenue arises from:
Year ended Year ended
31 December 31 December
2014 2013
GBP'000 GBP'000
Licence income - 66
Royalties 37 50
Other - 3
37 119
Revenues of GBP29,000 (2013: GBP66,000) related to customer A,
GBPnil (2013: GBP50,000) to customer B and GBP8,000 (2012:
GBP3,000) to customer C
4. Loss on operations before interest and finance
Loss on operations is stated after charging:
Year ended Year ended
31 December 31 December
2014 2013
GBP'000 GBP'000
Depreciation of plant and machinery 10 4
Amortisation of intangible fixed assets 245 245
Provision for trade receivable loan(note
5) - 1,683
Fees payable to the Company's auditor
in respect of :
- Audit of the Company's annual accounts 26 31
- Other services 8 8
- Tax services 11 6
5. Impairments
Year ended Year ended
31 December 31 December
2014 2013
GBP'000 GBP'000
Provision against trade receivables - 1,683
- 1,683
The amounts which became due for payment from 2K Manufacturing
at the beginning of July 2013 were not paid. Due to non-payment a
full provision of GBP1.61 million was made against the trade
receivable loan at 30 June 2013. A further provision of GBP0.07
million has been made against current receivables. 2K Manufacturing
subsequently was placed into administration in November 2013.
6. Finance costs
Year ended Year ended
31 December 31 December
2014 2013
GBP'000 GBP'000
Loan interest 243 109
Stock lending costs 1,739 519
Amortisation of finance costs 178 60
Capital reorganisation and open offer costs - 44
Loss in liabilities settled in shares - 20
Total finance costs 2,160 752
7. Earnings per share
Year ended Year ended
31 December 31 December
2014 2013
GBP'000 GBP'000
Numerator
Loss used for calculation of basic and diluted
EPS (3,218) (3,542)
Year ended Year ended
31 December 31 December
2014 2013
GBP'000 GBP'000
Denominator
Weighted average number of shares used in
basic and diluted EPS 869,563,733 842,184,787
At 31 December 2014, there were 5,550,000 (2013: 5,750,000) of
potentially issuable shares which are anti-dilutive; such shares
may become dilutive in future periods.
8. Intangible assets
Intellectual
Licences Property Total
GBP'000 GBP'000 GBP'000
Cost
At 1 January 2014 1,250 15,247 16,497
As 31 December 2014 1,250 15,247 16,497
Amortisation
At 1 January 2014 522 14,220 14,742
Charge for the year 102 143 245
At 31 December 2014 624 14,363 14,987
Net book value
At 31 December 2014 626 884 1,510
At 31 December 2013 728 1,027 1,755
Intellectual
Licences Property Total
GBP'000 GBP'000 GBP'000
Cost
At 1 January 2013 1,250 15,247 16,497
As 31 December 2013 1,250 15,247 16,497
Amortisation
At 1 January 2013 420 14,077 14,497
Charge for the year 102 143 245
At 31 December 2013 522 14,220 14,742
Net book value
At 31 December 2013 728 1,027 1,755
At 31 December 2012 830 1,170 2,000
Licence fees are initially recognised at cost and are amortised
over their useful economic life of 20 years. At 31 December 2014,
the remaining amortisation period is 12 years.
Intellectual property is initially recognised at cost and is
amortised over its estimated useful economic life of 20 years
aligned to the underlying patents that have been granted. At 31
December 2014, the remaining amortisation period is 6 years.
The directors have performed a detailed impairment review to
assess the recorded carrying value of the above assets against the
net present value (discounted at an appropriate rate) expected to
be generated from licences and royalties in the future. The
methodology is adopted is explained in note 2.
The directors recognise that historic trading performance does
not support the recorded carrying values of intangible assets but
are confident the recent changes in the Board and the change in
business and operational focus will result in a significant
increase in future licence income and royalties. On this basis the
directors consider that no impairment to the recorded carrying
value of the above assets is required.
9. Plant and Machinery
Plant
&
Machinery Total
GBP'000 GBP'000
Cost
At 1 January
2014 18 18
Additions 45 45
At 31 December
2014 63 63
Depreciation
At 1 January
2014 4 4
Charge for the
year 10 10
At 31 December
2014 14 14
Net book value
At 31 December
2014 49 49
At 31 December
2013 14 14
Plant
&
Machinery Total
GBP'000 GBP'000
Cost
At 1 January
2013 9 9
Additions 9 9
At 31 December
2013 18 18
Depreciation
At 1 January - -
2013
Charge for the
year 4 4
At 31 December
2013 4 4
Net book value
At 31 December
2013 14 14
At 31 December
2012 9 9
10. Investments
Unlisted
Shares Total
GBP'000 GBP'000
Carrying value
At 1 January 2014 40 40
At 31 December
2014 40 40
Unlisted
Shares Total
GBP'000 GBP'000
Carrying value
At 1 January
2013 40 40
At 31 December
2013 40 40
Unlisted shares are carried at cost.
Associated company
The following entity meets the definition of an associate:
Proportion of voting rights
Name Country of incorporation Held at 31 December 2014
Delta Waste Management Limited United Kingdom 40%
Delta Waste Management Limited has not been accounted for as an
associated undertaking. The cumulative profit and loss is not
material to the company.
11. Trade and other receivables
31 December 31 December
2014 2013
Current - due within one year GBP'000 GBP'000
Trade receivables - 52
VAT recoverable 15 33
Other debtors and prepayments 66 45
81 130
31 December 31 December
2014 2013
Current - due within one year GBP'000 GBP'000
Trade receivables 29 127
Trade receivables loan - 150
Provision (29) (225)
- 52
31 December 31 December
2014 2013
Non-current - due within one GBP'000 GBP'000
year
Trade receivables - 1,458
Provision - (1,458)
- -
The ageing analysis of receivables past due but not impaired is
as follows:
31 December 31 December
2014 2013
Current - due within one year GBP'000 GBP'000
3 - 6 months - 15
6 - 9 months - 37
- 52
All receivable balances are in sterling.
The company's main income is from licence and royalty fees.
Accrued income and receivables relating to the UK licence holder
are regularly reviewed by the board of directors to assess the
recoverability of amounts due.
During 2012, accrued income of GBP1,708,000 was converted to a
non-interest bearing trade loan repayable over five years. This
debt arose from the renegotiation of the licence with 2K
Manufacturing. At 30 June 2013, a provision was made of
GBP1,608,000 against this trade receivable due to non-payment of
the current outstanding balance due. A further provision of
GBP75,000 has been made against current receivables. 2K
Manufacturing was placed into administration in November 2013.
12. Trade and other payables - current
31 December 31 December
2014 2013
GBP'000 GBP'000
Trade payables 262 191
Social security and other
taxes 4 6
Accruals and deferred income 131 210
Other payables 1 74
398 481
Book value is a fair approximation for fair value and debts are
due for repayment under normal trading terms.
All trade and other payables fall due for payment within one
year.
13. Borrowings
31 December 31 December
2014 2013
Current - due within one year GBP'000 GBP'000
Short term borrowings 4,234 1,299
Current borrowings 4,234 1,299
Long term - due more than
one year
Long term borrowings 1,841 1,841
Total borrowings 6,075 3,140
The carrying value (which is a reasonable approximation to fair
value) of borrowings analysed by lender is as follows:
31 December 31 December
2014 2013
GBP'000 GBP'000
Oxford Capital 6,075 3,140
Total borrowings 6,075 3,140
Cash loans advanced during the year totalled GBP1,159,000 (2013:
GBP500,000). A further GBP1,911,906 (2013: GBP578,722) costs were
incurred for finance charges for short term loans and arrangement
fees. Loans totalling GBPnil (2013: GBPnil) were repaid and GBPnil
(2013: GBP350,000) was converted during the year into Ordinary
Shares.
The company has no other borrowing facilities.
On 12 October 2012, the balance of the Company's debt at that
date (including all interest and fees) amounting to GBP1,841,369
was converted to a secured five year loan note carrying an interest
rate of 2% above the Bank of England base rate. The balance of
loans outstanding carries interest at 7.5%.
14. Related party transactions
Invoices totalling GBP63,188 (2013: GBP47,099) were received
from the A H Brooks Partnership for services rendered and
recoverable expenses. The partners are K W Brooks and Mrs N Brooks,
wife of K W Brooks. The amount outstanding at the year-end was
GBP5,430 (2013: GBP6,869), which was due to the A H Brooks
Partnership.
Aston Hall Limited invoiced GBP49,524 (2013: GBP55,542) to the
Company in respect of Director's fees and expenses for D C
Shepley-Cuthbert who is also a director and controlling party of
Aston Hall Limited. The amount outstanding at the year-end was
GBP2,949 (2013: GBP7,123).
Delta Waste Management Limited invoiced GBP24,416 (2013:
GBP45,574) to the Company in respect of consultancy fees and
expenses for L A Clayton. Expenses outstanding at the year-end were
GBP1,313 (2013: GBP600). Some of the amounts invoiced were offset
against short term-loans made to Delta Waste Management Limited
during the year of GBP4,243 (2013: GBP19,374) of which GBP13,794
(2013: GBP18,037) was outstanding at the year-end and is included
in other debtors.
Jeremy Allen Consultancy Services invoiced GBP15,236 (2013:
GBPnil) in respect of directors fees and expenses for J N Allen.
The amount outstanding at the year-end was GBP3,941 (2013:
GBPnil).
Oakridge Business Services Limited invoiced GBP4,500 (2013:
GBP15,000) to the Company in respect of Director's fees for R J
Baynham. The amount outstanding at the year-end was GBPnil (2013:
GBP3,750).
15. Share based payments
Environmental Recycling Technologies plc operates an unapproved
option scheme for Executive Directors, senior management and
certain employees.
2014 2013
Weighted Weighted
average Average
Exercise price Exercise price
(pence) number (pence) Number
Outstanding at the beginning of the year 9 5,650,000 7 34,311,000
Granted during the year - - - -
Exercised during the year - - - -
Lapsed during the year 72 (200,000) 7 (28,661,000)
6 5,450,000 9 5,650,000
All share options outstanding at 31 December 2014 had vested and
were exercisable. The outstanding options were all due to lapse at
2 October 2015.
The exercise price of options outstanding at the end of the year
ranged between 2.5 pence and 48 pence (2013: 2.5 pence and 72
pence) and their weighted average contractual life was 0.16 years
(2013: 1.4 years)
Environmental Recycling Technologies plc issues warrants to
third parties for the provision of services rendered and the
provision of finance.
2014 2013
Weighted Weighted
average Average
Exercise Exercise
price price
(pence) number (pence) Number
Outstanding at the beginning
of the year 2 100,000 7 4,668,185
Granted during the year - - - -
Exercised during the year - - - -
Lapsed during the year - - 7 (4,568,185)
2 100,000 2 100,000
All warrants outstanding at 31 December 2014 had vested and were
exercisable. The warrants are due to lapse on 11 September
2015.
The exercise price of warrants outstanding at the end of the
year was 2.5 pence (2013: 2.5 pence) and their weighted average
contractual life was 1.7 years (2013: 1.7 years)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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