Final Results & Proposed Board Changes
Active Energy Group Plc / EPIC: AEG / Sector: Alternative Energy
19 June 2018
Active Energy Group Plc ('Active Energy', 'AEG', the 'Company' or the 'Group')
Final Results for the Year Ended 31 December 2017 & Proposed Board Changes
Active Energy, the London quoted international biomass based renewable energy and forestry management business, announces its final results for the year ended 31 December 2017. The Company's Annual Report and financial statements for the year ended 31 December 2017 and the Company's 2018 Notice of AGM will be posted to shareholders shortly.
Overview
· Significant progress towards commercialisation of the Company's revolutionary direct drop-in coal replacement biomass fuel, CoalSwitch™, and its engineered soils derivative, PeatSwitch
· Inaugural five-tonne-per-hour CoalSwitch™ plant in Utah constructed and commissioned in Q1 2018, providing product for international utility companies, government agencies and coal power plant operators
· Ongoing negotiations regarding Forestry Management Agreement in Newfoundland & Labrador to secure additional supply of feedstock for CoalSwitch™ and to monetise underutilised forestry assets
· Expanded forestry management activities through AEG Timberlands during 2017 and H1 2018 including the recent Memorandum of Understanding with PowerWood Canada which has the potential to provide the Group with access to additional Forestry Management Agreements relating up to five million hectares of natural forestry in Alberta, Canada
· Exited interests in low margin, high-risk Ukrainian wood fibre operations to focus on high-margin opportunities in United States, Canada and Europe
· Raised US$15.9m (gross) of new capital through the issue of convertible loan notes and an oversubscribed placing involving both existing, new and institutional investors
In line with the focused corporate strategy and execution of the new opportunities in Canada and Europe, the Board announces that it has agreed with Richard Spinks that Richard should now focus his efforts on the development of new CoalSwitch™ opportunities in Poland, and, on the forestry management activities in North America. Accordingly, the Company announces that Richard Spinks will step down from his role as Chief Executive Officer of the Group at the forthcoming Annual General Meeting ('AGM'). Richard will remain on the Board where his contribution continues to be invaluable for both strategy and ensuring the future commercial success of the Group's expanding portfolio of projects. At the AGM, Michael Rowan will assume the responsibilities of Chief Executive Officer for the Group.
Richard Spinks, CEO of Active Energy, said: "This has been an important year for the development of the Group, and while it has not been without its challenges, I am confident that we have established a more robust business structure and adopted a more attractive expansion strategy to support future growth. Having successfully ceased the low-margin, high-risk wood fibre assets in Ukraine, we were able to focus our attention squarely on the more valuable opportunities elsewhere - primarily in USA, Canada and Europe.
"During the period in review, we successfully laid the groundwork for the commercial roll-out of CoalSwitch™ by developing its reputation globally, created a new product with PeatSwitch and proactively engaged with future prospective partners. In conjunction with this, we worked to progress the forestry management activities of the Group's business enabling us to act upon our strategy of monetising forestry assets as well as supporting future CoalSwitchTM and PeatSwitch operations.
"Post-year end, a lot of this hard work has come to fruition with several notable achievements including the commissioning of our first commercial CoalSwitch™ plant in Utah , the signing of an MoU with Young Living Farms for the construction of its first commercial PeatSwitch plant in Utah, the recent Memorandum of Understanding with PowerWood Canada regarding the prospective addition of further Forestry Management Agreements in Alberta, Canada and the successful testing and development of a new blended "SuperFuel", utilising CoalSwitch™ technology, as part of Its joint venture agreement in Poland.
"We have approached a pivotal moment in the Group's development and with that in mind, I am keen that the Group must now focus at all levels on the execution of these tremendous commercial opportunities. To that end, I look forward to my new role within the Group and look forward to supporting Michael Rowan in his new role. I remain entirely committed to the belief that Active Energy, with its revolutionary CoalSwitch™ technology, has significant potential as we move into a greener future."
CHAIRMAN'S STATEMENT
2017 saw the Group's CoalSwitch™ technology and Peatswitch derivative emerge as the Group's primary value driver, with international utility companies (including domestic heating fuel distributors), government agencies and coal power plant operators beginning to recognise the revolutionary potential of our 'drop-in' biomass fuel. The Board's main focus during the year was to commercialise the CoalSwitch™ process, following the successful testing at the initial demonstration plant in Salt Lake City during 2016. I am delighted to report that this was achieved post year end, with the opening of our inaugural five-tonne-per-hour CoalSwitch™ plant in Utah, and significant progress has been made in relation to our roll out and expansion of commercial activities during H1 2018.
The Board believes that the commercial opportunities associated with the CoalSwitch™ product are significant, as the product has the potential to be a direct, lower cost, higher energy substitute to traditional pellets and all other tested alternatives available in the market today. Furthermore, the wood pellet market has been growing significantly since 2014, most notably in Europe, and the next stage of significant growth is expected to be in Asia, particularly Japan and South Korea. The Company has been active in discussions with prospective customers in Asia and the Board hopes to be in a position to update the market with further developments regarding expansion in due course.
The dominance of our CoalSwitch™ division during 2017 reflected the Company's strategy refocusing the business on higher margin, higher growth opportunities associated with CoalSwitch™, and the recently launched PeatSwitch product, whilst continuing to focus on developing a substantial forestry management business to guarantee long-term feedstock requirements to complement these activities. To this end, as first reported in May 2017, AEG reduced its exposure to its low margin and high risk Ukrainian wood fibre business throughout the second half of 2017.
In tandem with our increased focus on CoalSwitch™ during 2017, our activity levels in respect to our Timberlands forestry management business have also increased markedly, and this work has begun to come to fruition post period end. The important strategic focus on Timberlands is two-fold: firstly, by securing feedstock for our growing CoalSwitch™ business we are able to demonstrate the security of long-term supply and thus attract further interest from large utility companies and government agencies to the various benefits of CoalSwitch™. Secondly, we are able to monetise underutilised or undervalued existing forestry assets, generating a new revenue stream for the Group and in so doing, re-energising the forestry industry in rural jurisdictions. The Board is confident that our Timberlands proposition will become an increasingly important part of AEG's overall strategy moving forwards.
Financial Review:
In March 2017 the Company raised US$14.15 million (before expenses) through the issue of convertible loan notes, for the construction of the first CoalSwitch™ plant and progressing the Timberlands' growth strategy. The Group received support from new institutional investors as well as existing shareholders, reflecting their endorsement of our strategy.
In November 2017 AEG raised a further £1.75 million (before expenses) via an oversubscribed placing of new equity with new and existing investors. These funds have predominantly been used to accelerate the commercial roll out of CoalSwitch™ and also provided the Group with additional working capital.
The year ended 31 December 2017 was a period of restructuring and refocus of the business and accordingly the consolidated income statement reflects this:
· Research and development costs of US$2,389,807 (2016: US$nil) reflect AEG's investment in the development of CoalSwitch™ and PeatSwitch technologies
· Administrative expenses were US$2,870,721 (2016: US$1,956,795) reflecting ongoing corporate costs and business development activity associated with CoalSwitch™ and PeatSwitch products
· Finance costs of US$3,031,054(2016: US$1,784,170), relate to debt servicing and foreign exchange losses
· Loss on discontinued operations of US$7,284,981(2016: Profit of US$1,528,339), relates to the poor trading performance of the Ukrainian wood fibre business; losses on sale of certain fixed assets of this operation; impairment of assets associated with this business and the loss relating to the cessation of the Ukrainian operating company ("Nikwood") following the sale of certain assets
· The tax credit of US$355,491(2016: US$8,985) reflects receipts associated with research and development tax credits.
Losses attributable to non-controlling interests combined with gains on assets results in a total comprehensive loss for the year attributable to owners of the parent of US$14,783,962 (2016: US$2,490,640).
It is important to note that the bare figures, need to be considered in the overall context of the development and reconfiguration of the business:
· During 2017, US$5.8 million was spent on research and development, construction of the CoalSwitch™ plant in Utah and business development associated with our CoalSwitch™ and PeatSwitch technologies and relevant intellectual property development. Given the potential opportunities associated with these products, the Board regards this as capital effectively deployed
· AEG continued to invest its time and efforts to secure the finalisation of the CTL and FMA in Newfoundland. Total expenditure on the development of these assets was US$0.9 million during the year ended 31 December 2017, which was recorded as development costs under intangible fixed assets
· The withdrawal from the Ukrainian business and the associated losses are, of course, unfortunate. However, the timely exit from this business has enabled AEG to limit its exposure to further liabilities, as well as recalibrating the risk profile of the Group
Outlook:
2017 was a pivotal year for AEG where the Board identified the key areas of opportunity and started to implement strategies to execute its commercialisation model and deliver shareholder value in 2018 and beyond.
During 2017 our board composition changed. In Q2 2017 Matteo Girlanda, our former Chief Operating Officer, who had been focussed primarily on our wood fibre business in Ukraine, stepped down from the Board. In Q1 2018, Brian Evans-Jones stepped down and shortly after, we welcomed Simon Melling as a Non-Executive Director. Simon brings with him over 30 years' experience of working in senior roles within the finance sector and was previously the CEO of AIM listed stockbroker Cenkos Securities Limited. We are already benefitting from his commercial and capital markets experience which will be invaluable as we build the profile of the Company and promote our unique products and investment proposition to the investment community.
The Group has now identified the regions which it wishes to operate in, primarily being USA, Canada and Europe. The aim is to secure the greatest market opportunities, including customers and strategic partnerships for CoalSwitch™ and develop derivative products such as PeatSwitch. To complement this, AEG continues to use its underlying knowledge and experience in forestry management to secure and monetise strategic timber licences; thereby generating additional revenue streams and underpinning long term contracts for CoalSwitch ™ through visibility of these secured feedstock arrangements.
In line with the focused corporate strategy and execution of the new opportunities in Canada and Europe, the Board and Richard Spinks have agreed that Richard should now focus his efforts on the development of CoalSwitch™, new business opportunities in Poland, and work with Antonio Esposito, a 20-year forestry professional, on the forestry management activities in North America. Richard has helped create these significant business opportunities and the Board acknowledges that these now require his undivided attention. Accordingly, he will step down from his role as Chief Executive Officer of the Group at the forthcoming Annual General Meeting ('AGM'), to maximise his time on these key projects. Richard will remain on the Board where his contribution will continue to be invaluable for both strategy and ensuring the future commercial success of AEG's portfolio. At the AGM, Michael Rowan will assume the responsibilities of Chief Executive Officer for the Group.
Furthermore, we remain active in identifying additional candidates to further bolster our Board and Senior Management team in the coming months as we enter the execution stage of our strategy and look to monetise our CoalSwitch™ and PeatSwitch products and bring into operation our significant forestry management opportunities, in existing and new markets.
2017 presented challenges, but with the continued dedication of our team, combined with the inherent value in our technology and business model, I am confident that we can reach our commercial and strategic goals, as we look to revolutionise the traditional coal fired-power and biomass industries, through the commercialisation of our second-generation biomass fuel and its derivative products.
Michael Rowan
Executive Chairman
18 June 2018
OPERATIONS REVIEW
The Group's primary activities are centred on the commercialisation of its CoalSwitch™ product and process, and the associated PeatSwitch product, together with its forestry management business, Timberlands. During 2017, the Group also conducted wood fibre and wood chip manufacturing operations in Ukraine, however these interests were formally wound up before the end of 2017.
CoalSwitch™
CoalSwitch™ uses patented technologies to create a new second generation biomass fuel which can be briquetted or pelleted as required by customers. CoalSwitch™ has a number of significant advantages compared with existing biomass fuels such as torrefied or white pellet alternatives, namely and among others:
· Lower unit costs reflecting lower feedstock costs. CoalSwitch™ technology can process lower quality fibre materials such as forestry residuals and waste wood including waste, bark, branches leaves, needles and salty hog thus reducing feedstock costs
· CoalSwitch™ has a higher energy density than alternative biomass fuels
· CoalSwitch™ has a higher bulk density than alternative biomass fuels
· CoalSwitch™ when pelletised is hydrophobic meaning that the pellets do not degrade in water in the same way as traditional white or torrefied pellets. In addition, CoalSwitch™ pellets can be transported with minimal losses/degradation due to being almost dust-free in storage, handling or transport
· CoalSwitch™ pellets can be used in coal fired power stations, without the need for significant capital expenditure for retrofitting and modifying existing coal burning facilities.
AEG first became involved in this ground-breaking technology in 2015. During 2016 work was primarily focused on research and development activities. 2017 was the pivotal year for commercialisation of CoalSwitch™ technology.
Commercial Activities in the USA
In September 2017, AEG announced that it was constructing a five-tonne-per-hour CoalSwitch™ plant at its premises in Utah, USA. In February 2018, AEG announced that this plant was officially open and operational. Since this announcement AEG has continued to operate the facility, albeit with the customary issues as one would expect when commissioning any new technology or equipment.
The Board regards the completion and initial operation of the plant as the major breakthrough in the development of the CoalSwitch™ business model, showing that positive laboratory results can be upscaled to industrial scale production facilities. The Company is now in discussions with global engineering procurement and construction contractors to ensure that future plants are constructed in an efficient and scalable manner.
Joint Venture in Poland and Test Results from the Polish Government
On 13 March 2018, AEG announced that it had signed a joint venture agreement with Cobant Sp. z o.o. ('Cobant'), a Polish research, development and environmental waste coal recovery company active in the land reclamation, environmental services and energy sectors. The aim of the joint venture is to explore additional opportunities to blend CoalSwitch™ with reclaimed coal from coal slurry dumps in Upper Silesia, Poland to produce a "SuperFuel" product with strong environmental credentials.
On 13 June, AEG announced that the joint venture had received confirmation from the Polish Government Burn Test Laboratory that testing had been completed on a new 'SuperFuel' product that utilises a blend of CoalSwitch ™with cleaned coal fines from Poland's legacy coal waste dumps. The results demonstrate that the "SuperFuel" has a similar calorific value to coal with significantly lower sulphur content and low ash and SOx and NOx emissions. The testing satisfies all the requirements of the Polish Government and its AntiSmog legislation.
The Board regards this test result as an important landmark for the commercial development of CoalSwitch™ and "SuperFuel". The joint venture intends to proceed to production and revenues as quickly as possible and accordingly, the Board and Richard Spinks have agreed that Richard should dedicate his time to ensure the future commercial success of this opportunity for both the joint venture and AEG.
Asian Activities
The group has been developing market interest and prospective customers in Japan and Northern Asia. In addition, Advanced Biomass Solutions ("ABS") was incorporated as an affiliate company to lead sales and project management activities in the region. Commercial enquiries have been increasing, notably from Thailand, Malaysia and Indonesia for the use of the CoalSwitch™ process in the utilisation of waste products from palm oil and other agricultural residues.
In December 2017, Brian Evans-Jones changed his role within the Group to focus on business development for ABS. In February 2018 Brian resigned from the Board of AEG plc and in June 2018 he resigned from his role within ABS.
In September 2017 ABS entered into an agreement with Lumino Capital LLC ("Lumino") regarding the financing, development and operation of eight CoalSwitch™ Plants across South East Asia. Given recent management changes at ABS and the new strategic focus of AEG toward the activities in North America and Europe, the Board will now reconsider the previous arrangements between ABS and Lumino and discuss the timing, construction and viability of future projects with Lumino. Progress on these projects has taken considerably longer than originally anticipated whilst other opportunties have accelerated in Canada and Europe and these now have taken priority for AEG. Nevertheless, Asia remains an important offtake market in the medium term.
PeatSwitch
During the development of the CoalSwitch™ technology, AEG's scientists identified that the technology can also be reconfigured to produce an enhanced soil replacement product from waste fibre. This advanced substrate can be easily adjusted and tailored to meet the specific requirements of an individual agricultural customer and more importantly specific plant type or species. In addition, AEG quickly identified that the cost to produce PeatSwitch is much lower than CoalSwitch™ and the ratio of feedstock to final product is much higher, further increasing the economic attractiveness of this product.
On 28 February 2018, AEG announced that it had entered into an initial supply agreement with Young Living Farms ('YLF'). The terms of the agreement state that YLF may supply AEG with up to 6,500 tonnes of feedstock in the form of a waste by-product which would then be processed into PeatSwitch substrate at the plant in Utah. The resulting PeatSwitch could then be resold post-processing back to YLF. Deliveries under this arrangement commenced shortly after the announcement. Following successful demonstration of the process, discussions were commenced with YLF to provide them, on-site, at their Mona, Utah, facility with their own processing plant.
On 11 June 2018, the Group announced that it had entered into a Memoradum of Understanding with YLF, pursuant to which YLF would become the first buyer of a PeatSwitch plant with an initial order to deliver a three-tonne-per-hour plant to their farm and production facility in Mona, Utah for a total consideration of US$3.4m. AEG and YLF have already commenced work to finalise and start construction. Contracts are being completed and the Group expects this initial plant to be completed and operational before the end of 2018. All parties expect this commercial relationship to continue to develop, with the sale of further plants at other YLF operations centres in the USA.
Timberlands
Overview
The mission of the Timberlands business is to identify, develop and manage forestry projects. This business has multiple benefits and advantages to AEG and the forestry owners, including, among others:
· Security and traceability of feedstock for CoalSwitch™ and PeatSwitch production plants located at these sites
· Using timber in CoalSwitch™ technology optimises output and value, as wood which is traditionally seen as waste, can be processed in CoalSwitch™ plants to produce value
· Access to secure long-term timber proprietary tenures should allow AEG to enter into significant and long-term supply agreements for its products without risk of market fluctuations in the supply chain
· The timber business and associated licences represent an asset against which debt can be secured, thereby facilitating lower cost group-wide financing for these projects and the associated plant
· Focus on timber licences previously viewed as economically marginal, enables regeneration for rural communities who have traditionally relied on the forestry industry for their livelihoods
· Control of the supply chain ensures co-ordinated environmental sustainability.
Newfoundland
In Q2 2017 the Company commenced discussions with the Canadian Province of Newfoundland and Labrador ("Province") and on 22 May 2017, announced that it had entered into an agreement in principle ("Agreement in Principle"). This arrangement envisaged the award of a Crown Timber Licence ("CTL") and a forestry management agreement ("FMA") with a renewable 20-year term, effectively becoming an 'evergreen' contract, relating to two Forest Management Districts, Districts 17 and 18 covering approximately 1.2 million hectares with 770,000 hectares being commercially viable mature, natural forestry, on the Great Northern Peninsular of Newfoundland.
The AIP permitted AEG the right to commercial cutting permits in Districts 17 and 18 in the Northern Peninsular. This was provided to AEG as a provision of conditional exclusivity over the area being negotiated and as a prelude to the award of the CTL and FMA in the Province as all parties completed the preparatory and regulatory work for the award of the FMA. The Province extended the AIP late in 2017 to further accommodate the regulatory preparations and process and to further demonstrate their commitment toward AEG.
On 12 October 2017, AEG submitted all final documents to the Ministry of Fisheries and Land Resources of the Crown Province of Newfoundland and Labrador associated with the CTL and FMA's. The submission included all requested documentation, including the proposed financial term sheets for the prospective FMAs.
During 2017 and H1 2018 AEG has continued to develop management and supplier capability as well as government relations, in order to ensure the future success of this business. Most notably this has involved:
· Outsourcing forestry management planning & operational supervision to Canadian forestry consultancy company, Zimmfor Management Services Ltd
· Putting in place outsourcing agreements with existing companies engaged in forestry operations, logging & saw milling activities in the area
· Collaborating closely with government departments such as the Ministry of Fisheries & Land Resources, the Ministry of Tourism, Culture, Innovation & Investment, the Ministry of Municipal Affairs & Environment, the Ministry of the Economy and the Justice Ministry of Newfoundland and Labrador
· Developing and reinforcing links with municipalities and local stakeholders, including the Town of St. Anthony, the St. Anthony Port Authority, the Town of Roddickton Bide-Arm and the Municipal University of Newfoundland
During the second half of 2017 and into the first quarter of 2018, the Ministry of Fisheries and Land Resources, with input from AEG and their consultants, had been working hard to enable the creation of the legislative framework to allow the issuance of FMAs in the Province. As this FMA is to be the first ever issued in the Province, a condition precedent to allow this to occur was that appropriate legislation to allow for FMA structures to exist in the Province was required. This legislation came into effect at the end of March 2018.
All involved in the process, including government agencies working with AEG, believe that AEG is now in the final stages of receiving full and final approval. AEG understands that all parties at the relevant Ministries are proceeding and AEG would like to thank everyone in both St. John's and Corner Brook, NL, who have worked so diligently with AEG.
The Board anticipates that the award of these FMAs and CTL will have a significant positive impact for the Province, the local communities on the Great Northern Peninsular and AEG:
· It will allow Timberlands to harvest and utilise up to 140,000 solid cubic metres of wood per annum
· It will be the catalyst for the upgrading and re-commissioning of an existing sawmill and provide a solid and reliable off take for the currently, significantly, under-employed local forestry operations on the Great Northern Peninsular
· The Board intends to install a 5 tonne per hour CoalSwitch™ processing facility at Roddickton in the first instance, enabling transformation of waste wood, forestry residues and pulpwood, as well as the sawmill waste, to be converted into CoalSwitch™ pellets, thereby optimising value from the three complementary businesses
· The geographical location of Newfoundland and Labrador and the forestry management tenures are ideally located, logistically, to take advantage of a number of significant market opportunities being developed by AEG in terms of creating and developing the European market for CoalSwitch™. The forestry and the nearby site of the proposed production facilities in Roddicktonis proximate to ocean port facilities, located at St. Anthony, Newfoundland. Therefore, AEG will have direct access to the shortest shipping routes for biomass fuels to Europe from North America
A number of parties have expressed interest in entering into offtake agreements for deliveries of CoalSwitch™ to customers in the European market once the CTL and FMA have been granted, and the Company intends to formalise these agreements as soon as practicable upon receipt of the CTL and FMA.
Alberta
On 17 May 2018, AEG announced an MoU with PowerWood Canada ("PowerWood') which subject to formal contract and available funding, will allow AEG to assume a controlling interest in PowerWood. PowerWood already has a number of forestry assets granted by the Crown in the name of the Province of Alberta. However, the owners of PowerWood are focussing on the development of biomass power generation in the Province and not on forestry management operations.
The owners of PowerWood are keen that AEG utilises both its forestry expertise and CoalSwitch™ processes to increase the underlying value of the aspen stands, the dominant species in these forests. All parties are proceeding as quickly as possible to complete these contractual arrangements and commence commercial activities. AEG remains hopeful that these activities may complement AEG's previous efforts in the Province.
With the strong support and encouragement of the Government of the Province of Alberta and the improved relationship between the Métis Settlements General Council under the stewardship of Metis Settlements General Council President Gerald Cunningham, AEG is increasingly confident that in future the Company's activities will likely involve the Métis Settlements, including their forestry assets and their local knowledge and experience.
Ukraine
Whilst AEG has no companies or business activities in Ukraine at this time, the Group retains its supply contract granted by the Lyubomi Forestry, which is the administrator of the Lyubomi Forest in the Ukraine. Following the extension of the contract term during the 2014, The remaining useful life on contractual relationships is 46 years. AEG is reviewing options to utilise this asset to provide feedstock, and therefore security of supply, to future CoalSwitch™ operations in Eastern Europe, notably Poland.
Wood Fibre
The Group suffered a significant downturn in the trading fortunes of its Ukrainian wood fibre business during H2 2016 and Q1 2017. This downturn was primarily driven by political events in Turkey specifically, the attempted coup d'état in July 2016, which had a negative impact on Turkish imports and thereby the export of our woodchip product to Turkey. In addition, three new competitors entered the Ukrainian woodchip production and export market, supplying what AEG believed to be an inferior quality product, at a time when the Turkish lira had been devalued. As a result of these factors gross margins deteriorated and the Board took the decision in April 2017 to suspend trading with a view to exiting the business as soon as practicable before it became untenable.
Following the announcement of our intention to reorganise AEG in May 2017, the Group's Directors began negotiations with its former Chief Operating Officer, Matteo Girlanda regarding a possible sale of the Group's Ukrainian assets. These negotiations did not come to fruition and it was therefore necessary to review further options. As a result various items of property, plant and equipment were sold to third parties, following which the operating company (Nikwood) was divested for a nominal amounting December 2017. As a result, the Group exited this business in accordance with its previously announced timeline, therefore reducing exposure to creditors and other ongoing liabilities. The Group retains ownership of certain equipment which it intends to either transfer to future European or North American CoalSwitch™ operations or realise on the open market.
The Board believes that exiting the Ukrainian wood fibre business has significantly reduced the Group's country, political and trading risk profiles, and has allowed the management team to focus the Company's resources on the development of the higher value CoalSwitch™, PeatSwitch and Timberlands business activities in North America and Europe.
Enquiries & Further Information:
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Website |
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www.aeg-plc.com |
www.linkedin.com/company/activeenergy
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Enquiries |
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Active Energy Group Plc |
Michael Rowan Executive Chairman |
michael.rowan@aegplc.com
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Richard Spinks Chief Executive Officer |
richard.spinks@aegplc.com
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Northland Capital Partners Limited Nominated Adviser
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David Hignell/Gerry Beaney |
Office: +44 (0)20 3861 6625 |
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Optiva Securities Ltd Broker |
Graeme Dickson/Ed McDermott |
Office: +44 (0)20 3137 1902 |
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St Brides Partners Financial PR Adviser |
Susie Geliher / Isabel de Salis |
info@stbridespartners.co.uk Office: +44 (0) 20 7236 1177 |
CONSOLIDATED STATEMENT OF INCOMEAND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
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Excluding |
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Discontinued |
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operations |
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Note |
2017 |
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2016 |
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US$ |
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US$ |
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REVENUE |
3 |
- |
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- |
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Cost of sales |
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- |
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- |
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GROSS PROFIT |
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- |
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- |
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R&D expenditure |
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(2,389,807) |
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- |
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Administrative expenses |
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(2,870,721) |
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(1,956,795) |
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|
|
|
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|
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OPERATING LOSS |
5 |
(5,260,528) |
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(1,956,795) |
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Finance income |
6 |
- |
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18,152 |
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Finance costs |
6 |
(3,031,054) |
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(1,784,170) |
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Share of loss of associate |
13 |
- |
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(305,151) |
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(Loss) from continuing operations |
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(8,291,582) |
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(4,027,964) |
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Income tax credit on continuing operations |
8 |
355,491 |
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8,985 |
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(Loss)/profit from discontinued operations |
7 |
(7,284,981) |
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1,528,339 |
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LOSS FOR THE PERIOD |
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(15,221,072) |
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(2,490,640) |
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Loss attributable to Non-controlling Interest |
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437,110 |
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- |
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Loss attributable to the Parent Company |
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(14,783,962) |
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(2,490,640) |
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OTHER COMPREHENSIVE INCOME/(EXPENSE): |
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Items that may be subsequently reclassified to profit or loss |
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Exchange differences on translation of foreign operations |
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137,734 |
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(106,675) |
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Exchange differences on translation of associate |
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- |
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189,450 |
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Revaluation of assets held for resale |
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331,585 |
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- |
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Total other comprehensive income |
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469,319 |
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82,775 |
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TOTAL COMPREHENSIVE LOSS FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE PARENT |
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(14,314,643) |
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(2,407,865) |
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(Loss) per share (US cent) - continuing operations |
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(0.90) |
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(0.61) |
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(Loss)/profit per share (US cent) - discontinued operations |
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(0.88) |
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0.23 |
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Basic and Diluted (loss) per share (US cent) |
9 |
(1.78) |
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(0.38) |
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent Company income statement.
The following notes form part of these financial statements.
STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2017
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Group |
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Group |
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Company |
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Company |
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Note |
2017 |
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2016 |
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2017 |
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2016 |
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NON-CURRENT ASSETS |
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US$ |
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US$ |
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US$ |
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US$ |
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Intangible assets |
10 |
8,054,947 |
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6,925,002 |
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- |
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2,746,396 |
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Property, plant and equipment |
11 |
3,791,611 |
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2,562,145 |
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- |
|
262 |
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Investment in subsidiaries |
12 |
- |
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- |
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58,427 |
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2,040,292 |
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Investment in associate |
13 |
- |
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1,282,627 |
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- |
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2,333,177 |
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Loan to joint venture partner |
14 |
- |
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1,911,121 |
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- |
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1,911,121 |
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Available for sale financial assets |
15 |
786,873 |
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83,455 |
|
786,873 |
|
83,455 |
||
|
|
|
12,633,431 |
|
12,764,350 |
|
845,300 |
|
9,114,703 |
||
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
||
|
Inventory |
16 |
20,349 |
|
424,998 |
|
- |
|
- |
||
|
Trade and other receivables |
17 |
517,902 |
|
2,650,332 |
|
13,772,668 |
|
324,102 |
||
|
Cash and cash equivalents |
18 |
142,049 |
|
2,121,841 |
|
135,706 |
|
2,041,134 |
||
|
|
|
680,300 |
|
5,197,171 |
|
13,908,374 |
|
2,365,236 |
||
|
TOTAL ASSETS |
|
13,313,731 |
|
17,961,521 |
|
14,753,674 |
|
11,479,939 |
||
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
||
|
Trade and other payables |
19 |
1,944,676 |
|
3,021,152 |
|
1,122,458 |
|
1,408,036 |
||
|
Loans and borrowings |
22 |
- |
|
7,062,730 |
|
- |
|
4,123,600 |
||
|
Finance leases falling due in less than one year |
21 |
89,607 |
|
- |
|
- |
|
- |
||
|
Income tax liabilities |
|
- |
|
2,488 |
|
- |
|
- |
||
|
|
|
2,034,283 |
|
10,086,370 |
|
1,122,458 |
|
5,531,636 |
||
|
NON-CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
||
|
Deferred income tax liabilities |
20 |
384,169 |
|
393,137 |
|
- |
|
- |
||
|
Finance leases falling due in more than one year |
21 |
205,993 |
|
- |
|
- |
|
- |
||
|
Loans and borrowings |
22 |
13,224,252 |
|
580,000 |
|
13,224,252 |
|
580,000 |
||
|
|
|
13,814,414 |
|
973,137 |
|
13,224,252 |
|
580,000 |
||
|
TOTAL LIABILITIES |
|
15,848,697 |
|
11,059,507 |
|
14,346,710 |
|
6,111,636 |
||
|
NET ASSETS/(LIABILITIES) |
|
(2,534,966) |
|
6,902,014 |
|
406,964 |
|
5,368,303 |
||
|
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT |
|
|
|
|
||||||
|
Share capital |
23 |
14,493,246 |
|
12,621,134 |
|
14,493,246 |
|
12,621,134 |
||
|
Share premium |
|
14,740,478 |
|
13,469,916 |
|
14,740,478 |
|
13,469,916 |
||
|
Merger reserve |
|
2,350,175 |
|
2,350,175 |
|
2,350,175 |
|
2,350,175 |
||
|
Foreign exchange reserve |
|
108,080 |
|
(29,654) |
|
(403,220) |
|
(1,023,565) |
||
|
Own shares held reserve |
|
(779,222) |
|
(779,222) |
|
(779,222) |
|
(779,222) |
||
|
Convertible debt / warrant reserve |
|
2,930,209 |
|
1,075,301 |
|
2,930,209 |
|
1,075,301 |
||
|
Retained (loss) |
|
(35,950,264) |
|
(21,805,636) |
|
(32,924,702) |
|
(22,345,436) |
||
|
Non-controlling Interest |
|
(427,668) |
|
- |
|
- |
|
- |
||
|
TOTAL EQUITY |
|
(2,534,966)) |
|
6,902,014 |
|
406,964 |
|
5,368,303 |
||
The following notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2017
|
|
|
Group |
|
Group |
|
Company |
|
Company |
|
|
Note |
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
US$ |
|
US$ |
|
US$ |
|
US$ |
|
Cash (outflow)/inflow from operations |
26 |
(5,821,095) |
|
(982,318) |
|
(13,717,090) |
|
548,626 |
|
Income tax paid |
|
(6,684) |
|
(285,563) |
|
- |
|
- |
|
Net cash (outflow)/inflow from operating activities |
|
(5,827,779) |
|
(1,267,881) |
|
(13,717,090) |
|
548,626 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
Purchase of intangible assets |
|
(1,438,017) |
|
(163,257) |
|
- |
|
(163,257) |
|
Acquisition of investment |
|
- |
|
- |
|
(58,427) |
|
(581,801) |
|
Contribution to associate |
|
- |
|
(255,714) |
|
- |
|
(255,714) |
|
Loan to joint venture partner |
|
- |
|
(1,351,904) |
|
- |
|
(1,351,904) |
|
Purchase of property, plant and equipment |
|
(3,923,481) |
|
(285,113) |
|
- |
|
- |
|
Sale of property, plant and equipment |
|
221,504 |
|
58,020 |
|
- |
|
- |
|
Finance income |
|
- |
|
18,152 |
|
- |
|
- |
|
Net cash outflow from investing activities |
|
(5,139,994) |
|
(1,979,816) |
|
(58,427) |
|
(2,352,676) |
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
Issue of equity share capital, net of share issue costs |
|
3,142,674 |
|
2,921,762 |
|
3,142,674 |
|
2,921,762 |
|
Loans raised |
|
7,537,671 |
|
837,667 |
|
10,181,201 |
|
957,777 |
|
Finance expenses |
|
(1,693,031) |
|
(97,095) |
|
(1,454,191) |
|
(100,389) |
|
Net cash inflow from financing activities |
|
8,987,314 |
|
3,662,334 |
|
11,869,684 |
|
3,779,150 |
|
Net increase/(decrease) in cash and cash equivalents |
|
(1,980,459) |
|
414,637 |
|
(1,905,833) |
|
1,975,100 |
|
Cash and cash equivalents at beginning of the year |
|
2,121,841 |
|
1,643,855 |
|
2,041,134 |
|
43,335 |
|
Exchange (losses)/gains on cash and cash equivalents |
|
667 |
|
63,349 |
|
405 |
|
22,699 |
|
Cash and cash equivalents at end of the year |
18 |
142,049 |
|
2,121,841 |
|
135,706 |
|
2,041,134 |
GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
|
|
Share capital |
Share premium |
Merger reserve |
Foreign exchange reserve |
Own shares held reserve |
Convertible debt and warrant reserve |
Retained earnings |
|
|
|
Non-controlling Interest |
Total equity |
||||||||
|
|
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2015 |
10,099,329 |
8,603,703 |
2,350,175 |
(112,429) |
(1,229,630) |
1,075,301 |
(19,946,461) |
- |
839,988 |
|
Loss for the year |
- |
- |
- |
- |
- |
- |
(2,490,640) |
- |
(2,490,640) |
|
Other comprehensive income |
- |
- |
- |
82,775 |
- |
- |
- |
- |
82,775 |
|
Issue of share capital |
2,521,805 |
4,866,213 |
- |
- |
- |
- |
- |
- |
7,388,018 |
|
Own shares reserve |
- |
- |
- |
- |
450,408 |
- |
- |
- |
450,408 |
|
Share based payments |
- |
- |
- |
- |
- |
- |
631,465 |
- |
631,465 |
|
At 31 December 2016 |
12,621,134 |
13,469,916 |
2,350,175 |
(29,654) |
(779,222) |
1,075,301 |
(21,805,636) |
- |
6,902,014 |
|
Loss for the year |
- |
- |
- |
- |
- |
- |
(15,221,072) |
- |
(15,221,072) |
|
Other comprehensive income |
- |
- |
- |
137,734 |
- |
- |
331,585 |
- |
469,319 |
|
Issue of share capital |
1,872,112 |
1,270,562 |
- |
- |
- |
- |
- |
- |
3,142,674 |
|
Embedded derivative on issue of CLN |
- |
- |
- |
- |
- |
1,854,908 |
- |
- |
1,854,908 |
|
Share based payments |
- |
- |
- |
- |
- |
- |
307,749 |
- |
307,749 |
|
Minority Interest |
- |
- |
- |
- |
- |
- |
437,110 |
(427,668) |
9,442 |
|
At 31 December 2017 |
14,493,246 |
14,740,478 |
2,350,175 |
108,080 |
(779,222) |
2,930,209 |
(35,950,264) |
(427,668) |
(2,534,966) |
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
|
|
Share capital |
Share premium |
Merger reserve |
Foreign exchange reserve |
Own shares held reserve |
Convertible debt and warrant reserve |
Retained earnings |
|
|
Total equity |
||||||||
|
|
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2015 |
10,099,329 |
8,603,703 |
2,350,175 |
(399,473) |
(1,229,630) |
1,075,301 |
(15,683,653) |
4,815,752 |
|
Loss for the year |
- |
- |
- |
- |
- |
- |
(7,293,248) |
(7,293,248) |
|
Other comprehensive income |
- |
- |
- |
(624,092) |
- |
- |
- |
(624,092) |
|
Issue of share capital |
2,521,805 |
4,866,213 |
- |
- |
- |
- |
- |
7,388,018 |
|
Own shares reserve |
- |
- |
- |
- |
450,408 |
- |
- |
450,408 |
|
Share based payments |
- |
- |
- |
- |
- |
- |
631,465 |
631,465 |
|
At 31 December 2016 |
12,621,134 |
13,469,916 |
2,350,175 |
(1,023,565) |
(779,222) |
1,075,301 |
(22,345,436) |
5,368,303 |
|
Loss for the year |
- |
- |
- |
- |
- |
- |
(11,218,600) |
(11,218,600) |
|
Other comprehensive income |
- |
- |
- |
620,345 |
- |
- |
331,585 |
951,930 |
|
Issue of share capital |
1,872,112 |
1,270,562 |
- |
- |
- |
- |
- |
3,142,674 |
|
Embedded derivative on issue of CLN |
- |
- |
- |
- |
- |
1,854,908 |
- |
1,854,908 |
|
Share based payments |
- |
- |
- |
- |
- |
- |
307,749 |
307,749 |
|
At 31 December 2017 |
14,493,246 |
14,740,478 |
2,350,175 |
(403,220) |
(779,222) |
2,930,209 |
(32,924,702) |
406,964 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
1. ACCOUNTING POLICIES
General information
Active Energy Group plc is a company incorporated in England and Wales and quoted on the AIM market of the London Stock Exchange. The address of the registered office is disclose on page 1 of the annual report. The principal activity of the Group is described in the Strategic Report.
Basis of preparation
The principal accounting policies adopted in preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.
Both the Company financial statements and the Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards, International Accounting Standards and IFRIC interpretations (collectively IFRS) as adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared on the historical cost basis, as modified by the revaluation of property, plant and equipment, available for sale financial assets, and financial assets and liabilities, including derivative financial instruments, at fair value through profit or loss.
The preparation of financial statements in compliance with IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in the most appropriate application in applying the Group's accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in note 29.
Going concern
The Group's primary revenue generating business segment, the Ukrainian wood fibre business, was discontinued during 2017. As a result this unit has not generated any revenues in 2018. Following the discontinuance of this operating segment, the group has focused its efforts on the Coalswitch™ and Forestry and Natural Resources business segments. Neither of these business segments have generated material revenues at the date of signing these financial statements.
The Directors have considered the cash requirements of the business for the following 12 months. As part of this process, they have taken into account existing liabilities, along with detailed operating cash flow requirements. The projections prepared include ongoing running costs of the Group and committed expenditure at the date of approving the financial statements.
The Directors have identified a variety of potential sources of funds including issue of additional equity and/or debt, shareholder loans, tax credits and sale of investments and/or plant. In addition, the Directors have identified additional cost reductions which may be implemented if necessary.
Taking this into account and following a detailed review by the Directors of the Group's cash flow requirements, the directors believe that the Group will have sufficient cash resources to continue to trade for a period of at least 12 months from the date that the financial statements are signed. Consequently, the financial statements have been prepared on a going concern basis.
However, as of the date of signing these financial statements, none of the potential sources of funds have been finalised and therefore there can be no guarantee that further funds will be received. These circumstances indicate the existence of a material uncertainty which may cast significant doubt on the Company's ability to continue as a going concern.
Standards, interpretations and amendments to existing standards
At the date of authorisation of these financial statements, the IASB and IFRS Interpretations Committee have issued standards, interpretations and amendments which are applicable to the Company. These standards and interpretations are not effective for, and have not been adopted by the Company in the preparation of these financial statements. Management has not yet fully assessed the impact of these new standards.
· IFRS 1: First-time Adoption - Annual improvements 2014 - 2016 cycle (from 1 January 2018)
· IFRS 2: Amendments Share based payments - classification and measurement of share based payment transactions (from 1 January 2018)
· IFRS 4: Insurance Contracts - interaction of IFRS 4 and IFRS 9 (from 1 January 2018)
· IFRS 9: Financial Instruments - replaces IAS 39 in its entirety (from 1 January 2018)
· IFRS 15: Revenue from Contracts with Customers (from 1 January 2018)
· IFRS 16: Leases - replaces IAS 17 in its entirety (from 1 January 2019)
· IAS 28 Amendments: Investments in Associates and Joint Ventures - amendments resulting from annual improvements 2014-2016 cycle - clarifying certain fair value measurements (from 1 January 2018)
· IAS 39 Amendments: Financial Instruments -Recognition and measurement. Amendments to permit an entity to elect to continue to apply the hedge accounting requirements in IAS 39 for a fair value hedge of the interest rate exposure of a portion of a portfolio of financial assets or financial liabilities when IFRS 9 is applied and to extend the fair value option to certain contracts that meet the 'own use' scope exception (from 1 January 2018)
· IAS 40 Amendments: Investment Property - amendments to clarify transfers of property to or from investment property (from 1 January 2018)
· IFRIC 22 Amendments: Foreign currency transactions and advance consideration- amendments to clarify the accounting for transactions that include the receipt for payment of advance consideration in a foreign currency (from 1 January 2019)
Basis of consolidation
The financial information incorporates the results of the Company and entities controlled by the Company (its subsidiaries). Control is achieved when the Group has power over relevant activities, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The consolidated financial statements present the financial results of the Company and its subsidiaries (the Group) as if they formed a single entity. Where necessary, adjustments are made to the results of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
In the Company's statement of financial position, investments in subsidiaries are stated at cost less provisions for any permanent diminution in value.
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 value added taxes. The Group recognises revenue when the following conditions have been satisfied:
· the Group has transferred to the buyer the significant risks and rewards of ownership;
· the Group does not retain either the continuing managerial involvement normally associated with ownership or effective control over the goods;
· the amount of revenue can be reliably measured;
· it is probable that the economic benefits associated with the transaction will flow to the Group; and
· the costs to be incurred in respect of the transaction can be reliably measured.
Goodwill and business combinations
On acquisition, the assets and liabilities and contingent liabilities of subsidiaries are measured at their fair values at the date of acquisition. Any excess of cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition.
When the consideration transferred by the Group in a business combination includes assets or liabilities from a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the consideration paid. Changes in the fair value of the consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill.
Goodwill arising on consolidation is recognised as an intangible asset and reviewed for impairment at least annually by comparing the carrying value of the asset to the recoverable amount. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.
Associates
Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognised in the consolidated statement of financial position at cost. Subsequently associates are accounted for using the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the consolidated statement of profit and loss and other comprehensive income (except for losses in excess of the Group's investment in the associate unless there is an obligation to make good those losses).
Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate.
Any premium paid for an associate above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the associate. Where there is objective evidence that the investment in an associate has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.
Joint arrangements
Profits and losses arising on transactions between the Group and its joint ventures are recognised only to the extent of unrelated investors' interests in the joint venture. The investor's share in the Joint Venture profits and losses resulting from these transactions is eliminated against the carrying value of the Joint Venture. Any premium paid for an investment in a joint venture above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the investment in joint venture. Where there is objective evidence that the investment in a joint venture has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.
The Group accounts for its interests joint operations by recognising its share of assets, liabilities, revenues and expenses in accordance with its contractually conferred rights and obligations.
Impairment of non-financial assets (excluding inventories, investment properties and deferred tax assets)
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units ("CGUs"). Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected to benefit from the synergies of the combination giving rise to the goodwill. Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss recognised for goodwill is not reversed.
Intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives.
Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see note 29 related to critical estimates and judgements below).
Intangible assets
Internally generated intangible fixed assets are recognised if they meet the requirements set out by international accounting standards. Specifically,
· the asset must be separately identifiable that is to say that either it is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged; or it arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.
· The cost of the asset can be measured reliably;
· the technical feasibility of completing the intangible asset;
· the Group intends and is able to complete the intangible asset and use or sell it;
· the intangible asset will generate probable future economic benefits;
· there are available and adequate technical, financial and other resources to complete and to use or sell the intangible asset.
· Expenditure attributable to the intangible asset is measurable.
The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are disclosed in note 10.
Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost less accumulated depreciation and any recognised impairment loss. Cost includes the purchase price and all directly attributable costs. Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.
Plant and equipment - 2 to 10 years straight line
Furniture and office equipment - 2 to 5 years straight line
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less applicable selling expenses.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team including Executive Directors.
Financial instruments
The Group classifies its financial instruments into one of the categories discussed below, depending on the purpose for which the asset was acquired. The Group has not classified any of its financial assets as held to maturity, or at fair value through profit or loss.
The accounting policy for each category is as follows:
Loans and receivables
The Group's loans and receivables comprise trade and other receivables, loan to joint venture partner and cash and cash equivalents in the statement of financial position. These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and for the purpose of the statement of cash flows, bank overdrafts.
Available for sale financial assets
Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at fair value with changes in fair value recognised in other comprehensive income. When available for sale financial assets are sold or impaired, the accumulated fair value adjustments recognised in equity are transferred to the income statement. Dividends on available for sale equity instruments are recognised in the income statement as part of other income when the Group's right to receive payments is established.
Other financial liabilities
Other financial liabilities include the following items:
· Borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. These are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the statement of financial position. The interest expense includes initial transaction costs and premiums payable on redemption, as well as any interest or coupon payable while the liability is outstanding.
· Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.
Taxation
Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantively enacted by the year-end date.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:
· the initial recognition of goodwill;
· the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and
· investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available to utilise the difference. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/assets are settled/recovered.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
· the same taxable group company; or
· different Group entities which intend either to settle current tax assets/liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled/recovered.
Foreign currencies
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 they operate (their "functional currency"). The Company and Consolidated financial statements are presented in United States Dollar ("US Dollar", "US$"), which is the Group's presentation currency as the Group's activities are ultimately linked to the US Dollar. The Company's functional currency is Pound Sterling.
Transactions entered into by Group entities in a currency other than their functional currency are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.
On consolidation, the results of overseas operations are translated into the Group's presentation currency, US Dollars, at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve. Exchange differences recognised in the statement of comprehensive income of Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to the foreign exchange reserve on consolidation. On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal.
Convertible debt
The proceeds received on issue of the Group's convertible debt are allocated into their liability and equity components. The amount initially attributed to the debt component equals the discounted cash flows using a market rate of interest that would be payable on a similar debt instrument that does not include an option to convert. Subsequently, the debt component is accounted for as a financial liability measured at amortised cost until extinguished on conversion or maturity of the bond. The remainder of the proceeds are allocated to the conversion option and are recognised in the "Convertible debt reserve" within shareholders' equity, net of income tax effects.
Leased assets
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a "finance lease"), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest.
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an "operating lease"), the total rentals payable under the lease are charged to the consolidated income statement on a straight-line basis over the lease term.
Share based payments
Where employees receive remuneration in the form of shares or share options, the fair value of the share-based employee compensation arrangement at the date of the grant is recognised as an employee benefit expense in the consolidated income statement. The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value (excluding the effect of non-market-based vesting conditions) at the date of the grant. The assumptions underlying the number of awards expected to vest are subsequently adjusted for the effects of non-market-based vesting to reflect the conditions prevailing at the year-end date. Fair value is measured by the use of a Monte Carlo (JSOP options) or Black Scholes (other options) simulations. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of the non-transferability, exercise restrictions and behavioural considerations.
Where equity instruments are granted to persons other than employees, the consolidated income statement is charged with the fair value of goods and services received; except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
Own shares held
Consideration paid/received for the purchase/sale of shares held in escrow or in trust for the benefit of employees is recognised directly in equity. The nominal value of such shares held is presented within the "own shares held" reserve. Any excess of the consideration received on the sale of the shares over the weighted average cost of the shares sold is credited to retained earnings.
Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the Group consolidated income statement.
Investment in subsidiaries
Investments in subsidiaries are stated at cost less provision for impairment in the Company financial statements.
2. SEGMENTAL INFORMATION
The Group reports two operating continuing business segments:
• "Forestry & Natural Resources" denotes the Group's initiatives to secure ownership of the entire timber supply chain from forest to finished product
• "CoalSwitch™/PeatSwitch denotes the Group's renewable wood pellet and soil replacement business.
Revenues and costs associated with the Ukrainian Wood Fibre business have been reclassified as discontinued operations.
Factors that management used to identify the Group's reportable segments
The Group's reportable segments are strategic business units that offer different products. During the business development stage they are managed separately because each business operates in different markets and locations. In future it is likely that these business segments may be combined into single operations and reporting structures will be revisited accordingly.
Measurement of operating segment profit or loss
The Group evaluates segmental performance on the basis of profit or loss from operations calculated in accordance with IFRS but excluding corporate overheads, non-recurring losses, such as goodwill impairment, the effects of share-based payments, and joint venture profit and losses.
|
|
|
2017 |
2017 |
2017 |
|
|
|
Forestry & Natural Resources |
Coalswitch™/ Peatswitch |
Total |
|
|
|
US$ |
US$ |
US$ |
|
|
|
|
|
|
|
Total Revenue |
|
- |
- |
- |
|
Operating segment (loss) |
|
- |
(3,260,588) |
(3,260,588) |
|
Segment (loss) before tax |
|
- |
(3,260,588) |
(3,260,588) |
|
Tax charge |
|
- |
346,522 |
346,522 |
|
Segment (loss) for the year |
|
- |
(2,914,066) |
(2,914,066) |
|
|
|
|
|
|
|
|
|
2016 |
2016 |
2016 |
|
|
|
Forestry & Natural Resources |
Coalswitch™/ Peatswitch |
Total |
|
|
|
US$ |
US$ |
US$ |
|
|
|
|
|
|
|
Total Revenue |
|
- |
- |
- |
|
Operating segment (loss) |
|
(349,989) |
- |
(349,989) |
|
Segment (loss) before tax |
|
(349,989) |
- |
(349,989) |
|
Tax charge |
|
8,969 |
- |
8,969 |
|
Segment (loss) for the year |
|
(341,020) |
- |
(341,020) |
Profits and losses associated with the Ukrainian wood fibre business have been reclassified as discontinuing in 2017 and have therefore be excluded from the above analysis. All other finance costs relate to Group funding and are not allocated to an individual segment.
Capital expenditure relating to the Coalswitch™ segment was US$3,877,226 and capital expenditure relating to the Forestry and natural resource segment was US$896,957.
Reconciliation of reportable segment profit or loss, assets and liabilities to the Group's corresponding amounts are as follows:
|
|
2017 |
2016 |
|
|
US$ |
US$ |
|
|
|
|
|
Total (loss) from reportable segments |
(2,914,066) |
(341,020) |
|
Unallocated amount - corporate expenses |
(1,683,222) |
(1,280,476) |
|
Unallocated amount - finance income |
- |
18,152 |
|
Unallocated amount - finance expense |
(3,031,054) |
(1,784,170) |
|
Share based payments |
(307,749) |
(631,465) |
|
Discontinued operations |
(7,284,981) |
1,528,339 |
|
Loss for the period |
(15,221,072) |
(2,490,640) |
An analysis of non-current assets by location of assets is given below:
|
|
2017 |
2016 |
|
|
|
US$ |
US$ |
|
|
|
|
|
|
|
United Kingdom |
4,741,653 |
6,623,193 |
|
|
Ukraine |
2,170,583 |
4,858,530 |
|
|
Canada |
2,179,584 |
1,282,627 |
|
|
United States |
3,541,611 |
- |
|
|
|
12,633,431 |
12,764,350 |
|
3. REVENUE
All revenues relate to the Ukrainian wood fibre business have been reclassified as discontinued and therefore are not shown on the face of the income statement.
|
|
2017 |
2016 |
|
Group |
US$ |
US$ |
|
|
|
|
|
Sale of goods |
1,323,300 |
19,196,559 |
The following table analyses revenue by location of customer. All these revenues relate to the Ukrainian wood fibre business and have therefore been classified as discontinued in the 2017 financial statements.
|
|
2017 |
2016 |
|
|
US$ |
US$ |
|
Turkey |
856,869 |
19,186,708 |
|
Ukraine |
466,331 |
9,851 |
|
|
1,323,200 |
19,196,559 |
Revenue derived from a single external customer amounted to US$856,869 (2016:US$19,186,708), which relate to the Ukrainian Wood Fibre segment.
4. EMPLOYEE COSTS AND DIRECTORS
|
|
2017 |
2016 |
|
Group |
US$ |
US$ |
|
Wages and salaries |
496,861 |
1,137,321 |
|
Social security costs |
73,959 |
80,418 |
|
|
570,820 |
1,217,739 |
|
Share based payments - others |
59,240 |
75,756 |
|
Share based payments - directors (note 24) |
248,509 |
555,709 |
|
|
878,569 |
1,849,204 |
The average monthly number of employees during the year was as follows:
|
|
2017 |
2016 |
|
Directors |
3 |
4 |
|
Administration |
11 |
14 |
|
Production |
25 |
32 |
|
|
39 |
50 |
|
|
|
|
Directors' and key management personnel remuneration
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. During the period these were considered to be the Directors of the Company listed on page 14.
|
|
2017 |
2016 |
|
|
US$ |
US$ |
|
Directors' emoluments |
719,293 |
667,161 |
|
Compensation for the loss of office |
- |
16,940 |
|
|
719,293 |
684,101 |
|
Share based payments (note 24) |
248,509 |
555,709 |
|
|
967,802 |
1,239,810 |
The emoluments of the highest paid Director for the year, including non-cash share based payments, were US$328,853 (2016: US$797,457).
5. OPERATING LOSS
|
Group |
2017 |
2016 |
|
The loss before income tax is stated after charging/(crediting): |
US$ |
US$ |
|
|
|
|
|
Operating leases - premises |
26,807 |
61,716 |
|
Operating leases - vehicles |
2,886 |
11,347 |
|
Operating leases - equipment |
29,045 |
38,709 |
|
Amortisation of intangible assets |
44,845 |
44,845 |
|
Depreciation |
280,473 |
344,495 |
|
Loss / (profit) on disposal of fixed assets/discontinued operations |
5,600,464 |
(58,020) |
|
Auditors' remuneration - parent company and consolidation |
34,000 |
31,000 |
|
Auditors' remuneration - subsidiaries |
20,500 |
9,000 |
|
Auditors' remuneration - taxation services |
9,400 |
2,000 |
|
Share based payments |
307,749 |
631,465 |
|
Foreign exchange (gains)/loss |
(754,703) |
37,864 |
6. FINANCE INCOME AND COSTS
|
|
2017 |
2016 |
|
Group |
US$ |
US$ |
|
Finance income |
|
|
|
Bank interest |
- |
18,152 |
|
|
|
|
|
Finance costs |
|
|
|
Interest on convertible loan |
958,299 |
160,447 |
|
Other loan interest and charges |
929,083 |
671,069 |
|
Foreign exchange losses |
1,143,672 |
952,654 |
|
Net finance costs |
3,031,054 |
1,784,170 |
Foreign exchanges losses primarily relate to movements in US$/Sterling exchange rates and resulting
7. LOSS FROM DISCONTINUED OPERATIONS
During 2017 AEG plc discontinued its Wood fibre business in Ukraine. Details of the circumstances surrounding this exit are provided in the Chairman's report and operational review. The results of this business are disclosed as a single line item in the Group Income and Expenditure Statement in accordance with IRFS5. Details of the results of these operations are shown below.
|
|
|
2017 |
2016 |
|
|
|
US$ |
US$ |
|
REVENUE |
|
1,323,200 |
19,196,559 |
|
Cost of sales |
|
(2,925,138) |
(16,344,727) |
|
GROSS PROFIT |
|
(1,608,938) |
2,851,832 |
|
Administrative expenses |
|
(719,519) |
(1,132,326) |
|
|
|
|
|
|
OPERATING (LOSS)/PROFIT |
|
(2,321,457) |
1,719,506 |
|
Finance income |
|
641,126 |
- |
|
Finance costs |
|
- |
(60,055) |
|
|
|
|
|
|
(Loss)/profit for the Period |
|
(1,680,331) |
1,659,451 |
|
Loss on sale of discontinued operations |
|
(5,600,464) |
- |
|
Income tax |
|
(4,186) |
(131,112) |
|
(Loss)/profit attributable to the Parent Company |
|
(7,284,981) |
1,528,339 |
Discontinued operations cashflows from operating activities were US$124,081 outflow (2016: US$1,177,035 outflow); cash flows from investing activities were US$221,504 inflow (2016: US$282,215 outflow); and cashflows arising from financing activities were US$nil (2016: US$60,055 outflow).
8. INCOME TAX
|
|
2017 |
|
2016 |
|
Group |
US$ |
|
US$ |
|
|
|
|
|
|
Current tax |
|
|
|
|
Overseas tax charge on discontinued operations |
4,187 |
|
131,112 |
|
R&D tax credit at 14.5% on continued operations |
(346,522) |
|
- |
|
|
|
|
|
|
Deferred tax |
|
|
|
|
Reversal of temporary differences |
(8,969) |
|
(8,969) |
|
Total income tax (credit)/charge |
(351,304) |
|
122,143 |
|
|
|
|
|
|
Breakdown between continuing and discontinuing operations |
|
|
|
|
Tax charge relating to discontinued operations |
4,187 |
|
131,112 |
|
Tax (credit)/charge relating to continued operations |
(355,491) |
|
(8,969) |
|
|
(351,304) |
|
122,143 |
Factors affecting the tax charge
The tax on the Group assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below:
|
|
2017 |
|
2016 |
|
|
US$ |
|
US$ |
|
|
|
|
|
|
Loss before income tax |
(15,572,377) |
|
(2,368,513) |
|
Standard rate of corporation tax |
19.25% |
|
20% |
|
Loss before tax multiplied by standard rate of corporation tax |
(2,997,683) |
|
(473,703) |
|
Effects of: |
|
|
|
|
Difference between R&D tax credit rate (14.5%) and effective rate |
113,516 |
|
- |
|
Non-deductible expenses |
1,553,856 |
|
581,262 |
|
Overseas tax rate difference from UK rate |
4,883 |
|
14,567 |
|
Income not taxable |
(264,739) |
|
- |
|
Accelerated depreciation |
15,839 |
|
- |
|
Losses carried forward |
1,223,022 |
|
- |
|
Current tax (credit)/charge |
(351,306) |
|
122,126 |
|
Tax charge relating to discontinued operations |
4,187 |
|
131,112 |
|
Tax (credit) relating to Continued operations |
(355,491) |
|
(8,986) |
The Finance Act 2017 confirmed that the main rate of corporation tax, which applies to most companies subject to UK tax, will be reduced from the 19% rate applying from 1 April 2017 to 17% from 1 April 2020.
Movements in the groups tax loss position can be summarised as follows:
|
|
US$ |
|
Tax losses brought forward at 1 January 2017 |
16,261,619 |
|
Adjusted Loss per A/c's |
8,743,174 |
|
Surrendered for R&D tax credit |
(2,389,807) |
|
Tax losses carried forward at 31 December 2017 |
22,614,986 |
This equates to a potential deferred tax asset of $4,296,847 at the year-end 2017, which has not been recognised due to uncertainties regarding the recoverability of this balance.
|
Tax effects of amounts which are not deductible/(taxable) in calculating taxable income are as follows: |
|||||
|
|
|
|
2017 |
|
2016 |
|
|
|
|
US$ |
|
US$ |
|
Intercompany loan written off |
399,295 |
|
541,483 |
||
|
Loss on disposal of investments |
184,206 |
|
- |
||
|
Impairment of investment |
848,402 |
|
- |
||
|
Share based payments |
59,242 |
|
- |
||
|
Legal and professional fees |
70,556 |
|
30,717 |
||
|
Revaluation of assets held for sale |
|
|
63,830 |
|
- |
|
Revaluation gains |
|
(-62,937) |
|
- |
|
|
Amortisation |
|
- |
|
8,969 |
|
|
Sundry items |
|
(-8,738) |
|
93 |
|
|
|
|
|
1,553,856 |
|
581,262 |
9. LOSS PER SHARE
Basic and diluted loss per share is calculated by dividing the loss attributable to equity holders of the company of US$14,783,962 (2016: US$2,490,640) by the weighted average number of ordinary shares in issue during the year, excluding own shares held, of 829,908,445(2016: 651,515,665).
At 31 December 2017, own shares held amounted to 33,212,841 (2016:33,212,841) ordinary shares. The weighted average number of own shares held by the company during the year are not included in the weighted average ordinary shares in issue during the financial year.
10. INTANGIBLE ASSETS
|
Group |
Goodwill |
Other intellectual property |
Development |
Total |
|
|
|
US$ |
US$ |
US$ |
US$ |
|
|
Cost |
|
|
|
|
|
|
At 31 December 2015 |
2,212,930 |
104,124 |
2,936,252 |
5,253,306 |
|
|
Foreign exchange difference |
- |
(17,287) |
- |
(17,287) |
|
|
Additions |
- |
2,659,910 |
- |
2,659,910 |
|
|
At 31 December 2016 |
2,212,930 |
2,746,747 |
2,936,252 |
7,895,929 |
|
|
Foreign exchange difference |
- |
- |
- |
- |
|
|
Additions |
- |
541,060 |
896,957 |
1,438,017 |
|
|
Disposals |
(2,212,930) |
- |
- |
(2,212,930) |
|
|
Costs incurred by JV partner |
- |
1,911,121 |
- |
1,911,121 |
|
|
Transfers from investment in associate |
- |
- |
1,282,627 |
1,282,627 |
|
|
R&D costs transferred to income statement |
- |
(1,244,045) |
- |
(1,244,045) |
|
|
At 31 December 2017 |
- |
3,954,883 |
5,115,836 |
9,070,719 |
|
|
|
|
|
|
|
|
|
Accumulated amortisation |
|
|
|
|
|
|
At 31 December 2015 |
- |
362 |
925,720 |
926,082 |
|
|
Charge for year |
- |
- |
44,845 |
44,845 |
|
|
At 31 December 2016 |
- |
362 |
970,565 |
970,927 |
|
|
Charge for year |
- |
- |
44,845 |
44,845 |
|
|
At 31 December 2017 |
- |
362 |
1,015,410 |
1,015,772 |
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
At 31 December 2017 |
- |
3,954,521 |
4,100,426 |
8,054,947 |
|
|
|
|
|
|
|
|
|
At 31 December 2016 |
2,212,930 |
2,746,385 |
1,965,687 |
6,925,002 |
|
|
Company |
Intellectual property |
|
|
US$ |
|
At 31 December 2015 |
103,762 |
|
Foreign exchange difference |
(17,276) |
|
Additions |
2,659,910 |
|
At 31 December 2016 |
2,746,396 |
|
Transfers to other group companies |
(2,746,396) |
|
At 31 December 2017 |
- |
|
Accumulated amortisation |
|
|
At 31 December 2015, 2016 and 2017 |
- |
|
Net book value |
|
|
At 31 December 2017 |
- |
|
|
|
|
At 31 December 2016 |
2,746,396 |
Goodwill
Goodwill arose from the acquisition of Nikofeso and was considered to relate solely to the underlying business acquired which is a single cash generating unit ("CGU"). The asset was reviewed at each balance sheet dates to assess if it had been impaired. This Company was sold at the end of 2017 and therefore the associated goodwill was included in loss on sale of discontinued operations in the Income and Expenditure Statement.
Other intellectual property
Other intellectual property comprises costs incurred to secure the rights and knowledge associated with the CoalSwitch™ and PeatSwitch technology.
In 2015 the Group entered into a joint venture agreement with Biomass Energy Enhancements LLC ("BEE"), incorporated in the United States, for the joint commercial development and exploitation of intellectual property assets held by BEE in connection with biomass technologies. A long term loan to BEE wasrecognised in the accounts to reflect monies loaned by AEG to the joint venture. An agreement was later reached with the other joint venture partners whereby AEG became the sole proprietor of this technology and as a result the loan balance was transferred to intangible fixed assets.
Ongoing research costs associated with this activity have been recognised in the income statement in line with IAS38. Costs which specifically relate to future plant design have been capitalised an intangible fixed assets.
Development assets
Development assest relate to the following:
Ukraine: The Group is party to a supply contract granted by the Lyubomi Forestry, which is the administrator of the Lyubomi Forest in the Ukraine. This contract was extended to October 2060 from 1 January 2015 and the Company is currently reviewing options to develop this asset as feedstock for CoalSwitch™ plants in Eastern Europe. The remaining useful life on the Ukrainian assets is assessed to be 42 years and the asset is being amortised over this period. Management undertakes
a review at each balance sheet date to assess whether these balances need to be impaired.
Northern Alberta: During 2014 the Group acquired a 45% interest in a joint venture, KAQUO Forestry & Natural Resources Development Corporation, incorporated in Canada, to exclusively commercialise forestry and agricultural land holdings belonging to the indigenous Métis Settlements of Alberta in Western Canada. Cost associated with this activity were originally recorded as Investments in Associates. This Joint Venture is no longer operational. However, AEG is continuing to work with the Canadian authorities and its partners in Northern Alberta to develop and secure title to these assets. As a result the costs incurred on the joint venture were transferred to intangible fixed assets during 2017, on the basis that these costs fulfil the definition of an internally generated intangible fixed asset under IAS38.
Newfoundland: On 22 May 2017, AEG announced that it had entered into an agreement in principle with the Canadian Province of Newfoundland and Labrador. This arrangement envisaged the award of a Crown Timber Licence ("CTL") and a forest management agreement ("FMA") for 20 years relating to two Forest Management Districts covering 1.2 million hectares. On 12 October 2017 AEG announced that it had submitted all final documents to the Ministry of Fisheries and Land Resources of the Crown Province of Newfoundland and Labrador associated with the CTL and the FMAs. During 2017 and 2018 AEG has continued to develop management and supplier capability as well as government relations. The Canadian authorities have informed AEG that all necessary documentation has now been received with regards to the final award of the FMAs and the Company is anticipating final award of the FMA's in due course.
Costs incurred in acquiring these potential licences (in Northern Alberta and Newfoundland) have been recorded as additions to intangible fixed assets in 2017. These costs will be amortised over the period of awarded licences. No amortisation has been recognised in the current accounting period pending licence awards and commencement of production. Management undertakes a review at each balance sheet date to assess whether these balances need to be impaired.
11. PROPERTY, PLANT AND EQUIPMENT
|
Group |
|
Plant and equipment |
Furniture and office equipment |
Total |
|
|
|
US$ |
US$ |
US$ |
|
Cost |
|
|
|
|
|
At 31 December 2015 |
|
2,967,931 |
29,488 |
2,997,419 |
|
Foreign exchange difference |
|
(1,638) |
- |
(1,638) |
|
Additions |
|
282,255 |
2,858 |
285,113 |
|
Disposals |
|
(60,939) |
- |
(60,939) |
|
At 31 December 2016 |
|
3,187,609 |
32,346 |
3,219,955 |
|
Foreign exchange difference |
|
(534,717) |
768 |
(533,949) |
|
Additions |
|
4,219,081 |
- |
4,219,081 |
|
Disposals |
|
(3,080,362) |
(24,154) |
(3,104,516) |
|
At 31 December 2017 |
|
3,791,611 |
8,960 |
3,800,571 |
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
|
|
|
At 31 December 2015 |
|
349,980 |
25,807 |
375,787 |
|
Foreign exchange difference |
|
(1,533) |
- |
(1,533) |
|
Elimination on disposal |
|
(60,939) |
- |
(60,939) |
|
Charge for year |
|
341,125 |
3,370 |
344,495 |
|
At 31 December 2016 |
|
628,633 |
29,177 |
657,810 |
|
Foreign exchange difference |
|
(155,592) |
(20,737) |
(176,329) |
|
Elimination on disposal |
|
(752,588) |
(406) |
(752,994) |
|
Charge for year |
|
279,547 |
926 |
280,473 |
|
At 31 December 2017 |
|
- |
8,960 |
8,960 |
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
At 31 December 2017 |
|
3,791,611 |
- |
3,791,611 |
|
|
|
|
|
|
|
At 31 December 2016 |
|
2,558,976 |
3,169 |
2,562,145 |
The net book value of asset held under finance leases included within Property, Plant & Equipment above are US$345,600 (2016:nil). No depreciation (2016:nil) has been charged on these assets as the machinery had not been brought into use at the balance sheet date.
Additions in the year primarily relate to the construction of the inaugural Coalswitch™ plant in Utah. The exchange rates movements relate to the reduction in value of the Ukrainian Wood Fibre business, which was denominated in Ukrainian Hryvnia. This business was discontinued during 2017.
|
Company |
|
|
|
Furniture and office equipment |
|
|
|
|
|
US$ |
|
Cost |
|
|
|
|
|
At 31 December 2015 |
|
|
|
9,830 |
|
Foreign exchange difference |
|
|
|
(1,637) |
|
At 31 December 2016 |
|
|
|
8,193 |
|
Foreign exchange difference |
|
|
|
767 |
|
At 31 December 2017 |
|
|
|
8,960 |
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
|
|
|
At 31 December 2015 |
|
|
|
8,887 |
|
Foreign exchange difference |
|
|
|
(1,532) |
|
Charge for year |
|
|
|
576 |
|
At 31 December 2016 |
|
|
|
7,931 |
|
Charge for year |
|
|
|
755 |
|
Foreign exchange difference |
|
|
|
274 |
|
At 31 December 2017 |
|
|
|
8,960 |
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
At 31 December 2017 |
|
|
|
- |
|
|
|
|
|
|
|
At 31 December 2016 |
|
|
|
262 |
12. INVESTMENTS IN SUBSIDIARIES
|
Company |
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
US$ |
|
At 31 December 2015 |
|
|
|
4,933,491 |
|
Additions |
|
|
|
581,801 |
|
Foreign exchange translation difference |
|
|
|
(903,722) |
|
At 31 December 2016 |
|
|
|
4,611,570 |
|
Additions |
|
|
|
58,431 |
|
Disposals |
|
|
|
(546,804) |
|
Foreign exchange translation difference |
|
|
|
431,848 |
|
At 31 December 2017 |
|
|
|
4,555,045 |
|
Provision for impairment |
|
|
|
|
|
At 31 December 2015 |
|
|
|
728,628 |
|
Charge for the period |
|
|
|
1,964,027 |
|
Foreign exchange translation difference |
|
|
|
(121,377) |
|
At 31 December 2016 |
|
|
|
2,571,278 |
|
Charge for the period |
|
|
|
1,684,557 |
|
Foreign exchange translation difference |
|
|
|
240,783 |
|
At 31 December 2017 |
|
|
|
4,496,618 |
|
Net book value |
|
|
|
|
|
At 31 December 2017 |
|
|
|
58,427 |
|
|
|
|
|
|
|
At 31 December 2016 |
|
|
|
2,040,292 |
The exchange rates movements in 2017 reflect the appreciation of the British Pound against the US Dollar, which resulted in a corresponding increase in the value of investments denominated in Sterling.
At 31 December 2017 the Group held share capital of the following companies:
|
Subsidiary undertaking |
Country of incorporation |
Nature of business |
Percentage Holding |
|||
|
|
|
|
2017 |
2016 |
||
|
AE Ukraine |
Ukraine |
Woodchip processing and distribution |
100 |
100 |
||
|
Nikofeso Holdings Limited |
Cyprus |
Wood chip distribution |
100 |
100 |
||
|
Nikwood Company LLC* |
Ukraine |
Wood chip processing and distribution |
- |
100 |
||
|
AETrading (EMEA) SarL |
Switzerland |
Wood chip distribution |
100 |
100 |
||
|
Active Energy Italia s.r.l. |
Italy |
Wood chip distribution |
- |
100 |
||
|
AEG Trading Limited |
United Kingdom |
Wood chip distribution |
100 |
100 |
||
|
AEG Pelleting Limited |
United Kingdom |
Biomass for energy development |
100 |
100 |
||
|
AEG Balkan |
Montenegro |
Dormant |
- |
100 |
||
|
AEG Biopower Limited |
United Kingdom |
Biomass for energy development |
100 |
100 |
||
|
AEG Coalswitch Limited |
United Kingdom |
Biomass for energy development |
100 |
- |
||
|
ABS plc |
United Kingdom |
Biomass for energy development |
85 |
- |
||
|
Timberlands Int. Ltd |
United Kingdom |
Biomass for energy development |
95 |
- |
||
|
Alpha Prospects Ltd |
United Kingdom |
Energy/Natural resources investments holding company |
4.2 |
4.1 |
||
13. INVESTMENT IN ASSOCIATE
|
|
Group |
Group |
Company |
Company |
|
|
2017 |
2016 |
2017 |
2016 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Carrying value at beginning of the year |
1,282,627 |
1,142,605 |
2,333,176 |
2,077,463 |
|
Contribution to associate arrangement |
- |
255,721 |
- |
255,714 |
|
Share of loss for the year |
- |
(305,151) |
|
- |
|
Share of other comprehensive income for the year - translation of foreign operation |
- |
189,452 |
- |
- |
|
Transfer to intangible fixed assets |
(1,282,627) |
- |
- |
- |
|
Transfer to other group companies |
- |
- |
(2,333,176) |
- |
|
Carrying value at end of the year |
- |
1,282,627 |
- |
2,333,177 |
|
|
|
|
|
|
During 2014 the Group acquired a 45% interest in a joint venture, KAQUO Forestry & Natural Resources Development Corporation (KAQUO), incorporated in Canada, to exclusively commercialise forestry and agricultural land holdings belonging to the indigenous Métis Settlements of Alberta in Western Canada.
This joint venture is no longer operational and the licences were not awarded as anticipated. However, AEG is continuing to work with the Canadian authorities and its partners in Alberta to develop and secure title to these assets. As a result the costs incurred on the joint venture have been transferred to intangible fixed assets.
Summarised financial information in relation to the joint venture is presented below:
|
|
2017 |
2016 |
|
|
US$ |
US$ |
|
At 31 December |
|
|
|
Current assets |
- |
- |
|
Current liabilities |
- |
(2,334,546) |
|
|
|
|
|
Period ended 31 December |
|
|
|
Revenues |
- |
- |
|
Loss for the year |
- |
(678,113) |
|
Other comprehensive income |
- |
421,000 |
|
Total comprehensive income |
- |
(257,113) |
14. LOAN TO JOINT VENTURE PARTNER
|
|
Group |
Group |
Company |
Company |
|
|
2017 |
2016 |
2017 |
2016 |
|
|
US$ |
US$ |
US$ |
US$ |
|
|
|
|
|
|
|
Carrying value at beginning of the year |
1,911,121 |
691,748 |
1,911,121 |
691,748 |
|
Foreign exchange differences |
- |
(132,531) |
- |
(132,531) |
|
Advanced during the year |
- |
1,351,904 |
- |
1,351,904 |
|
Transfer to intangible fixed assets |
(1,911,121) |
- |
- |
- |
|
Transfer to other group companies |
- |
- |
(1,911,121) |
- |
|
Carrying value at end of the year |
- |
1,911,121 |
- |
1,911,121 |
In September 2015 the Group entered into a joint venture agreement with Biomass Energy Enhancements LLC ("BEE"), incorporated in the United States, for the joint commercial development and exploitation of intellectual property assets held by BEE in connection with biomass technologies.
A long term loan to BEE was recognised in the accounts to reflect monies loaned by AEG to the joint venture. An agreement was later reached with the other joint venture partners whereby AEG became the sole proprietor of this technology and as a result the loan balance was transferred to intangible fixed assets.
15. AVAILABLE FOR SALE FINANCIAL ASSET
|
|
Group |
Group |
Company |
Company |
|
|
2017 |
2016 |
2017 |
2016 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Fair value at beginning of the year |
83,455 |
100,137 |
83,455 |
100,137 |
|
Revaluation to market value |
786,393 |
- |
786,393 |
- |
|
Foreign exchange translation |
(83,065) |
(16,682) |
(83,065) |
(16,682) |
|
Fair value at end of the year |
786,873 |
83,455 |
786,873 |
83,455 |
Available for sale assets consist of an unquoted equity instrument which is classified as non- current assets. The asset was revalued in 2017 based on the proceeds received from issue of shares by this entity, less a discount to reflect the absence of a liquid market for these shares. The available-for-sale financial asset is denominated in Pound Sterling.
16. INVENTORIES
|
Group |
2017 |
2016 |
|
|
US$ |
US$ |
|
Raw materials |
20,349 |
143,855 |
|
Finished goods and goods for resale |
- |
281,143 |
|
Total inventories |
20,349 |
424,998 |
The cost of inventories recognised as an expense and included in 'cost of sales' within discontinued operations amounted to US$521,080 (2016: US$10,434,931).
17. TRADE AND OTHER RECEIVABLES
|
|
Group |
Group |
Company |
Company |
|
|
2017 |
2016 |
2017 |
2016 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Current |
|
|
|
|
|
Trade receivables |
128,136 |
268,980 |
128,136 |
- |
|
Amounts due from group companies |
- |
- |
13,629,890 |
275,589 |
|
Other receivables |
1,198 |
381,111 |
- |
15,449 |
|
VAT |
42,046 |
233,713 |
14,642 |
33,064 |
|
Prepayments |
- |
1,766,528 |
- |
- |
|
Corporation tax credit receivable |
346,522 |
- |
- |
- |
|
Total |
517,902 |
2,650,332 |
13,772,668 |
324,102 |
In the Directors' opinion the carrying values of trade and other receivables are stated at their fair value, after deduction of appropriate allowances for irrecoverable amounts as these assets are not interest bearing and receipts occur over a short period and are subject to an insignificant risk of changes in value.
Trade and other receivables that have not been received within the payment terms are classified as overdue. As at 31 December 2017 trade receivables of US$Nil (2016: US$Nil) were overdue.
As at 31 December 2017, Group trade receivables of US$NIL (2016: US$NIL) were overdue and impaired. The provision for impairment is analysed as follows:
|
|
2017 |
2016 |
|
|
US$ |
US$ |
|
|
|
|
|
At beginning of the period |
- |
838,984 |
|
Provided during the year |
- |
(838,984) |
|
Provision (released)/utilised |
- |
- |
|
|
- |
- |
An analysis of the Group's trade and other receivables classified as financial assets by currency is provided in note 27.
18. CASH AND CASH EQUIVALENTS
|
|
Group |
Group |
Company |
Company |
|
|
2017 |
2016 |
2017 |
2016 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Bank accounts |
142,049 |
2,121,841 |
135,706 |
2,041,134 |
|
|
142,049 |
2,121,841 |
135,706 |
2,041,134 |
19. TRADE AND OTHER PAYABLES
|
|
Group |
Group |
Company |
Company |
|
|
2017 |
2016 |
2017 |
2016 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Current |
|
|
|
|
|
Trade payables |
936,111 |
799,816 |
200,512 |
268,549 |
|
Social security and other taxes |
45,902 |
40,920 |
41,598 |
26,331 |
|
Accruals and deferred income |
866,594 |
1,493,623 |
859,279 |
1,113,156 |
|
Other payables |
96,069 |
686,793 |
21,069 |
- |
|
|
1,944,676 |
3,021,152 |
1,122,458 |
1,408,036 |
The carrying values of trade and other payables approximate their fair value as payments occur over a short period and the risk of material changes in value is insignificant. The following table analyses the maturity of the trade and other payables, excluding borrowings. These are classified as financial liabilities on the balance sheet and they are measured at amortised cost.
|
|
Group |
Group |
Company |
Company |
|
|
2017 |
2016 |
2017 |
2016 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Less than three months |
1,944,676 |
3,021,152 |
372,458 |
1,408,036 |
|
Three to 12 months |
- |
- |
750,000 |
- |
|
|
1,944,676 |
3,021,152 |
1,122,458 |
1,408,036 |
The amounts shown are undiscounted and represent the contractual cash-flows. An analysis of the Group's trade and other payables classified as financial liabilities by currency is provided in note 27.
20. DEFERRED TAXATION
Deferred tax is calculated on temporary differences under the liability method using tax rates applicable in the respective Group entities' jurisdiction. The movement on the deferred tax account is shown below and the balance relates to deferred tax on fair value adjustments related to intangibles:
|
Group |
2017 |
2016 |
|
|
US$ |
US$ |
|
At beginning of the period |
393,137 |
402,106 |
|
Reversal of temporary differences |
(8,968) |
(8,969) |
|
At the end of the period |
384,169 |
393,137 |
The deferred tax liability relates to temporary differences arising on the fair valuation of intangible assets acquired in 2011.
No provision for the deferred tax asset in respect of tax losses has been made in the Group or Company due to the uncertainty of the Group or Company being able to generate sufficient future taxable profits from which the future reversal of the timing difference can be deducted. See note 8 for further details of this balance.
21. FINANCE LEASES
The future minimum finance lease payments are as follows:
|
|
Group |
Group |
Company |
Company |
|
|
2017 |
2016 |
2017 |
2016 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Less than 1 year |
89,607 |
- |
- |
- |
|
Between 1 and 3 years |
205,993 |
- |
- |
- |
|
|
295,600 |
- |
- |
- |
The finance lease relates to a Pellet Mill leased from the manufacturer for use at the Utah CoalSwitch™ plant. The lease term is 3 years. At the end of the lease term the company has the option to purchase the asset for $1.
22. LOANS AND BORROWINGS
The book value and fair value of loans and borrowings are as follows:
|
Group |
Book value |
Fair value |
Book value |
Fair value |
|
|
2017 |
2017 |
2016 |
2016 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Non-Current |
|
|
|
|
|
Convertible debt |
13,224,252 |
13,224,252 |
- |
- |
|
Unsecured loans |
- |
- |
580,000 |
580,000 |
|
|
13,224,252 |
13,224,252 |
580,000 |
580,000 |
|
Current |
|
|
|
|
|
Convertible debt |
- |
- |
1,233,600 |
1,233,600 |
|
Unsecured loans |
- |
- |
5,829,130 |
5,829,130 |
|
|
- |
- |
7,062,730 |
7,062,730 |
|
Total loans and borrowings |
13,224,252 |
13,224,252 |
7,642,730 |
7,642,730 |
|
Company |
Book value |
Fair value |
Book value |
Fair value |
|
|
2017 |
2017 |
2016 |
2016 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Non-Current |
|
|
|
|
|
Convertible debt |
13,224,252 |
13,224,252 |
- |
- |
|
Unsecured loans |
- |
- |
580,000 |
580,000 |
|
|
13,224,252 |
13,224,252 |
580,000 |
580,000 |
|
Current |
|
|
|
|
|
Convertible debt |
- |
- |
1,233,600 |
1,233,600 |
|
Unsecured loans |
- |
- |
2,890,000 |
2,890,000 |
|
|
- |
- |
4,123,600 |
4,123,600 |
|
|
13,224,252 |
13,224,252 |
4,703,600 |
4,703,600 |
Unsecured loans
During the year the Group repaid all outstanding unsecured short term loans.
Convertible debt
On the 14 March 2017 the company successfully completed a fund raising of £11.57 million before expenses (or $14.15 million) through the issue of convertible loan notes ('CLNs') to new and existing investors. The CLNs have a maturity date of 14 March 2022 and have been listed on the International Securities Exchange. The CLN can be converted into ordinary shares of AEG plc, at any time prior to the Maturity Date, at a 30% premium to 2.535p, being the Company's 10 day Volume Weighted Average Price immediately prior to the issue date. The fair value of the liability component at inception was calculated using a market interest rate for an equivalent instrument without conversion option. The CLN has a coupon rate of 8% and the imputed interest rate applied was 12%.
On 15 March 2017 the Convertible Loan Note to Brahma Finance for £1,000,000 was repaid in full and settled.
The following table analyses the maturity of loan and borrowings. The amounts shown are undiscounted and represent contractual cash-flows.
|
Group |
Up to 3 months |
Between 3 and 12 months |
Between 1 and 2 years |
Between 2 and 5 years |
Total |
|
||||||
|
|
US$ |
US$ |
US$ |
US$ |
US$ |
|
||||||
|
At 31 December 2017 |
|
|
|
|
|
|
||||||
|
Convertible debt |
- |
- |
- |
13,224,252 |
13,224,252 |
|
||||||
|
|
- |
- |
- |
13,224,252 |
13,224,252 |
|
||||||
|
At 31 December 2016 |
|
|
|
|
|
|
||||||
|
Convertible debt |
1,233,600 |
- |
- |
- |
1,233,600 |
|
||||||
|
Unsecured loans |
204,000 |
5,625,130 |
580,000 |
- |
6,409,130 |
|
||||||
|
|
1,437,600 |
5,625,130 |
580,000 |
- |
7,642,730 |
|
||||||
|
|
|
|
|
|
|
|
||||||
|
|
Company
|
Up to 3 months |
Between 3 and 12 months |
Between 1 and 2 years |
Between 2 and 5 years |
Total |
||||||
|
|
|
US$ |
US$ |
US$ |
US$ |
US$ |
||||||
|
|
At 31 December 2017 |
|
|
|
|
|
||||||
|
|
Convertible debt |
- |
- |
- |
13,224,252 |
13,224,252 |
||||||
|
|
|
- |
- |
- |
13,224,252 |
13,224,252 |
||||||
|
|
|
US$ |
US$ |
US$ |
US$ |
US$ |
||||||
|
|
At 31 December 2016 |
|
|
|
|
|
||||||
|
|
Convertible debt |
1,233,600 |
- |
- |
- |
1,233,600 |
||||||
|
|
Unsecured loans |
204,000 |
2,686,000 |
580,000 |
- |
3,470,000 |
||||||
|
|
|
1,437,600 |
2,686,000 |
580,000 |
- |
4,703,600 |
||||||
23. CALLED UP SHARE CAPITAL
|
|
2017 |
2017 |
2016 |
2016 |
|
|
Number |
US$ |
Number |
US$ |
|
Allotted, called up and fully paid |
|
|
|
|
|
Ordinary shares of 1p each |
|
|
|
|
|
At 1 January |
840,381,500 |
12,621,134 |
642,158,903 |
10,099,329 |
|
Issue of shares |
142,689,776 |
1,872,112 |
198,222,597 |
2,521,805 |
|
As at 31 December |
983,071,276 |
14,493,246 |
840,381,500 |
12,621,134 |
Shares issued for Cash
During 2017 the Company issued 142,689,776 ordinary shares for a total consideration of US$3.3m as follows:
· On 27 June 2017 the company issued 17,623,110 ordinary shares at 1.6 US cents satisfying exercise notices over warrants in issue.
· On 6 November 2017 the company issued 83,333,333 ordinary shares at 2.7 US cents following a new share placement.
· On 21 December 2017 the company issued 40,000,000 ordinary shares at 1.6 US cents satisfying exercise notices over share options in issue.
· On 21 December 2017 the company issued 1,733,333 ordinary shares at 1.6 US cents satisfying exercise notices over warrants in issue.
During 2016 the Company issued 198,222,597 ordinary shares for a total consideration of US$7.3m as follows:
· On 29 June 2016 the company issued 1,554,666 ordinary shares at 1.6 US cent satisfying exercise notice over warrants in issue.
· On 4 July 2016 the company issued 586,661 ordinary shares at 1.6 US cent satisfying exercise notice over warrants in issue.
· On 3 August 2016 the company issued 77,358,491 ordinary shares at 3.5 US cent, being a new shareholder equity contribution.
· On 24 November 2016 the company issued 88,722,779 ordinary shares at 3.3 US cent in settlement of existing debt and acquisition of an investment in the BEE joint venture. Of these shares 29,287,159 were issued from Treasury shares.
· On 21 December 2016 the company issued 30,000,000 ordinary shares at 3.4 US cent in settlement of convertible debt.
24. SHARE OPTIONS AND WARRANTS
From time to time the Company has entered into share option arrangements under which the holders are entitled to subscribe for a percentage of the Company's ordinary share capital. All options vest immediately with the exception of 14,166,667(2016: 95,500,000) options which are based on various market, service and performance conditions. The number of warrants and share options exercisable at 31 December 2017 was 127,325,099 (2016: 239,655,831).
The movements of warrants and share options during the period were as follows:
|
|
Weighted average exercise price (UK pence) |
Number of Warrants and Share Options |
Weighted average exercise price (UK pence) |
Number of Warrants and Share Options |
|
|
|
|
|
|
|
Outstanding at beginning of the period |
1.96 |
239,655,831 |
1.68 |
267,959,701 |
|
Cancelled |
1.09 |
(54,707,622) |
0.57 |
(26,162,543) |
|
Granted |
- |
- |
- |
- |
|
Exercised |
1.25 |
(57,623,110) |
1.25 |
(2,141,327) |
|
Outstanding at end of the period |
2.72 |
127,325,099 |
1.96 |
239,655,831 |
At 31 December 2017, the weighted average remaining contractual life of warrants and share options exercisable was 4.02 years (2016 - 5.02 years). There were no share options granted during the year (2016:nil). Therefore no information is provided regarding the weighted average assumptions associated with estimating the fair values of options granted.
There was charge for equity settled share based payments of US$307,749 (2016: US$631,465) in the income statement for the year ended 31 December 2017. In addition, during the year ended 31 December 2017 certain nil-cost options were cancelled. This resulted in a credit to equity settled share based payments of US$1,044,452. This was not shown in the income statement for the year ended 31 December 2017, but was recorded as a reserve transfer.
Options and warrants outstanding at 31 December 2017 were exercisable as follows:
|
|
2017 |
2016 |
|
Exercise price range (Pence, US cent in brackets) |
Number |
Number |
|
|
|
|
|
0.000p (0 cent) |
- |
37,500,000 |
|
1.250p (1.686 cent) |
56,500,000 |
117,616,448 |
|
1.500p (2.023 cent) |
7,500,000 |
7,500,000 |
|
1.750p (2.360 cent) |
19,047,619 |
19,047,619 |
|
3.000p (4.047cent) |
13,450,000 |
25,950,000 |
|
5.000p (6.745 cent) |
15,000,000 |
15,000,000 |
|
6.000p (8.094 cent) |
4,500,000 |
4,500,000 |
|
6.375p (8.600 cent) |
1,823,480 |
1,823,480 |
|
7.000p (9.444 cent) |
- |
1,214,284 |
|
7.500p (10.118 cent) |
9,000,000 |
9,000,000 |
|
20.000p (26.982 cent) |
504,000 |
504,000 |
|
|
|
|
|
At the end of the period |
127,325,099 |
239,655,831 |
The above disclosures apply to both the Company and the Group.
JSOP awards
Under the JSOP, shares in the Company are jointly purchased at fair market value by the participating employee and the trustees of the JSOP trust, with such shares held in the JSOP trust. For accounting purposes the awards are valued as employee share options.
The JSOP trust holds the shares of the JSOP until such time as the JSOP shares are vested and the participating employee exercises their rights under the JSOP. The JSOP trust is granted an interest bearing loan by the Company in order to fund the purchase of its interest in the JSOP shares. The loan held by the trust is eliminated on consolidation in the financial statements of the Group. The Company funded portion of the share purchase price is deemed to be held in treasury until such time as the shares are transferred to the employee and is recorded as a reduction in equity in both the Group and Company financial statements.
The exercise price of the "option" is deemed to be the issue price of the shares. The awards vest based on a market condition, which requires the shares to meet a specific share price hurdle, or a change in control condition, as defined by the plan. Under the JSOP and subject to the vesting of the employee's interest, the participating employee will, when the JSOP shares are sold, be entitled to a share of the proceeds of sale equal to the growth in market value of the JSOP shares versus the exercise price, less simple interest on the original share purchase price, net of executives' cash contribution at inception, as agreed for each grant (the "Carry Charge"). The balance of proceeds will remain to the benefit of the JSOP trust and be applied to the repayment of the loan originally made by the Company to the JSOP trust. Any funds remaining in the JSOP trust after settlement of the loan and any expenses of the JSOP trust are for the benefit of the Company.
The Group measures the fair value of the awards using the Monte Carlo (JSOP options) or Black Scholes (other options) simulations and the share based payment expense is recorded over the expected life of the option. The full value of the JSOP awards is calculated using the Monte Carlo simulation and share based payment expenses are recognised in the income statement in accordance with the provisions of IFRS2. No awards were made in 2017. The share based payment charge for the year is US $Nil (2016: US$13,450) related to the JSOP awards.
The Group granted 15,000,000 JSOP awards on 4 July 2013. The JSOP awards granted during 2013 contained a share price hurdle of 3p per share. The awards vested in 2015, but all remain outstanding at year end. The above disclosures apply to both the Company and the Group.
25. RESERVES
The following describes the nature and purpose of each reserve within equity:
|
Reserve |
Description and purpose |
|
Share premium |
Amounts subscribed for share capital in excess of nominal value. |
|
Merger reserve |
Difference between fair value and nominal value of shares issued to acquire 90% or more interest in subsidiaries. |
|
Foreign exchange reserve |
Gains/losses arising on retranslating the net assets of overseas operations into US Dollars. |
|
Own shares held reserve |
Cost of own shares held by the employee benefit trust, the JSOP trust or the company as shares held in escrow. |
|
Convertible debt and warrant reserve |
Equity component of the convertible loan and the fair value of equity component of warrants issued that do not form part of a share based payment. |
|
Retained earnings/ Accumulated loss |
Cumulative net gains and losses recognised in the consolidated statement of comprehensive income.
|
26. NOTES SUPPORTING THE STATEMENT OF CASH FLOWS
Reconciliation of loss before taxation to cash outflows from operating activities
|
Group |
|
2017 |
2016 |
|
|
|
US$ |
US$ |
|
Loss for the period |
|
(15,221,072) |
(2,490,640) |
|
Adjustments for: |
|
|
|
|
Share of loss of associate |
|
- |
305,151 |
|
Share based payment expense |
|
307,749 |
631,465 |
|
Depreciation |
|
280,473 |
344,495 |
|
Amortisation of intangibles |
|
44,835 |
44,845 |
|
R&D expensed to income statement |
|
1,244,045 |
- |
|
Write off of goodwill |
|
2,212,930 |
- |
|
Loss/ (profit) on disposal of PP&E |
|
2,130,018 |
(58,020) |
|
Revaluation of investments for resale |
|
(454,928) |
- |
|
Foreign currency translations |
|
(556,421) |
(899,328) |
|
Finance income |
|
- |
(18,152) |
|
Finance expenses |
|
3,031,054 |
1,844,225 |
|
Income tax |
|
(4,781) |
122,143 |
|
|
|
(6,986,098) |
(173,816) |
|
Decrease/(increase) in inventories |
|
404,649 |
(118,789) |
|
Decrease/(increase) in trade and other receivables |
|
2,132,430 |
(76,244) |
|
(Decrease) in trade and other payables |
|
(1,372,076) |
(613,469) |
|
Net cash outflow from operating activities |
|
(5,821,095) |
(982,318) |
|
Company |
|
2017 |
2016 |
|
|
|
US$ |
US$ |
|
Loss for the period |
|
(11,218,600) |
(7,293,248) |
|
Adjustments for: |
|
|
|
|
Share based payment expense |
|
307,749 |
631,465 |
|
Depreciation |
|
755 |
576 |
|
Impairment of investments/ intercompany debtors |
|
2,040,292 |
2,846,709 |
|
Revaluation of investments for resale |
|
(454,928) |
- |
|
Foreign currency translations |
|
702,918 |
(527,845) |
|
Finance income |
|
- |
- |
|
Finance expenses |
|
1,648,174 |
1,661,491 |
|
|
|
(6,973,640) |
(2,680,852) |
|
(Increase)/decrease in trade and other receivables |
|
(6,457,872) |
592,506 |
|
(Decrease)/increase in trade and other payables |
|
(285,578) |
2,636,972 |
|
Net cash inflow/(outflow) from operating activities |
|
(13,717,090) |
548,626 |
27. FINANCIAL INSTRUMENTS
The Group's treasury policy is to avoid transactions of a speculative nature. In the course of trade the Group is exposed to a number of financial risks that can be categorised as market, credit and liquidity risks. The board reviews these risks and their impact on the activities of the Group on an ongoing basis.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
· Trade and other receivables
· Cash and cash equivalents
· Trade and other payables
· Available-for-sale financial assets
· Loans and borrowings
· Loan to joint venture partner
A summary of the financial instruments held by category is provided below:
|
|
Group |
Group |
Company |
Company |
|
|
2017 |
2016 |
2017 |
2016 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Financial assets |
|
|
|
|
|
Loans and receivables |
|
|
|
|
|
Cash and cash equivalents |
142,049 |
2,121,841 |
135,706 |
2,041,134 |
|
Trade and other receivables |
129,334 |
650,091 |
13,758,026 |
291,038 |
|
Loan to joint venture partner |
- |
1,911,121 |
- |
1,911,121 |
|
|
271,383 |
4,683,053 |
13,893,732 |
4,243,293 |
|
Available-for-sale financial asset |
786,873 |
83,455 |
786,873 |
83,455 |
|
Total financial assets |
1,058,256 |
4,766,508 |
14,680,605 |
4,326,748 |
|
|
Group |
Group |
Company |
Company |
|
|
|
2017 |
2016 |
2017 |
2016 |
|
|
|
US$ |
US$ |
US$ |
US$ |
|
|
Financial liabilities |
|
|
|
|
|
|
Financial liabilities at amortised cost |
|
|
|
|
|
|
Trade and other payables |
2,240,276 |
3,021,152 |
1,122,458 |
1,408,036 |
|
|
Loans and Borrowings |
13,224,252 |
7,642,730 |
13,224,252 |
4,703,600 |
|
|
|
15,464,528 |
10,663,882 |
14,346,710 |
6,111,636 |
|
Fair value measurement
The fair value measurement of the Group's financial and non-financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the 'fair value hierarchy'):
Level 1: Quoted prices in active markets for identical items (unadjusted)
Level 2: Observable direct or indirect inputs other than Level 1 inputs
Level 3: Unobservable inputs (i.e. not derived from market data).
The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item.
Transfers of items between levels are recognised in the period they occur.
The only financial asset carried at fair value consists of the available for sale financial asset, which is classified as level 3.
Market Risk
Currency risk
The Group's financial risk management objective is broadly to seek to make neither profit nor loss from exposure to currency or interest rate risks. The Group is exposed to transactional foreign exchange risk and takes profits and losses as they arise, as in the opinion of the directors, the cost of hedging against fluctuations would be greater than the potential benefits.
The carrying amounts of the group's trade and other receivable financial instruments are denominated in the following currencies:
|
|
Group |
Group |
Company |
Company |
|
|
2017 |
2016 |
2017 |
2016 |
|
|
US$ |
US$ |
US$ |
US$ |
|
US Dollar |
- |
574,952 |
13,629,890 |
275,589 |
|
UK Pound sterling |
129,334 |
45,445 |
- |
15,449 |
|
Euro |
- |
1,052 |
128,136 |
- |
|
Ukrainian Hryvnia |
- |
28,642 |
- |
- |
|
|
129,334 |
650,091 |
13,758,026 |
291,038 |
The carrying amounts of the group's cash and cash equivalents are denominated in the following currencies:
|
|
Group |
Group |
Company |
Company |
|
|
2017 |
2016 |
2017 |
2016 |
|
|
US$ |
US$ |
US$ |
US$ |
|
US Dollar |
134,510 |
2,016,005 |
132,262 |
2,011,994 |
|
UK Pound sterling |
3,945 |
33,005 |
3,244 |
28,786 |
|
Euro |
2,214 |
1,881 |
200 |
354 |
|
Ukrainian Hryvnia |
1,381 |
70,950 |
- |
- |
|
|
142,050 |
2,121,841 |
135,706 |
2,041,134 |
Information about the Group's loans and borrowings are provided in note 22.
The carrying amounts of the group's trade and other payable financial instruments are denominated in the following currencies:
|
|
Group |
Group |
Company |
Company |
|
|
2017 |
2016 |
2017 |
2016 |
|
|
US$ |
US$ |
US$ |
US$ |
|
US Dollar |
1,106,200 |
2,498,548 |
- |
1,113,156 |
|
UK Pound sterling |
1,122,457 |
291,776 |
1,122,458 |
294,880 |
|
Euro |
4,304 |
16,135 |
- |
- |
|
Ukrainian Hryvnia |
7,315 |
214,693 |
- |
- |
|
|
2,240,276 |
3,021,152 |
1,122,458 |
1,408,036 |
The effect of a 5 per cent strengthening of the US Dollar at the reporting date on the foreign denominated financial instruments carried at that date would, all variables held constant, would have resulted in a decrease in the net loss for the period and increased net assets by US$7,107 (2016: US$100,800). A 5 per cent weakening in the exchange rate would, on the same basis, have increased the net loss and decreased net assets by the same amount.
Interest rate risk
The Group and Company finances its operations through a mixture of equity and loans. The Group and Company exposure to interest rate fluctuations on its borrowings has been limited by the terms of the Convertible Loan Notes described in note 22.
Credit risk
Operational
The Group is mainly exposed to credit risk from credit agreements and sales. It is the Group's policy, implemented locally, to assess the credit risk of new customers before entering contracts. Such credit ratings, taking into account local business practices are then factored into trading decisions. The Group does not enter into any derivatives to manage credit risk. Further information on Trade and other receivables are presented in note 17.
Financial
Financial risk relates to non-performance by banks in respect of cash deposits and is mitigated by the selection of institutions with a strong credit rating.
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The Group finances its operations through a mix of equity and borrowings. The Group's objective is to provide funding for future growth. The Group's policies aim to ensure sufficient liquidity is available to meet foreseeable needs through the preparation of short and long term forecasts. Further disclosure of the Directors' consideration of going concern is included in note 1.
The Group had no bank loans or invoice finance facilities at 31 December 2017 (2016: Nil). The Group had no overdraft at 31 December 2017 (2016: Nil) and no personal guarantees were in place.
Capital risk management
The Group's objective when managing capital is to establish and maintain a capital structure that safeguards the Group as a going concern and provides a return to shareholders.
28. RELATED PARTY DISCLOSURES
Details of Director's remuneration are given in the Report of the Directors.
Transactions between the Company and its subsidiaries, which are related parties to the Company, have been eliminated on consolidation. During the year in the Company's financial statements, the Company made net cash recoveries from fellow Group companies of US$nil (2016: net cash recoveries of US$2,702,684).
The Company's intercompany receivable balances at the year-end were as follows:
|
|
2017 |
2016 |
|
|
|
US$ |
US$ |
|
|
Amounts due from Group companies |
13,629,890 |
275,589 |
|
29. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of financial information in conformity with International Financial Reporting Standards requires management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the year-end date and the reported amounts of revenues and expenses during the reporting period.
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 significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were as follows:
Impairment of goodwill, intangible fixed assets and other assets
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable amount of cash generating units 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. Actual outcomes may vary. Intangible fixed assets and other assets are considered for impairment where such indicators exist using value in use calculations or fair value and recoverability estimates. The use of these methods similarly 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.
Share based payments
In determining the fair value of equity settled share based payments and the related charge to the income statement, the Group makes assumptions about future events and market conditions. In particular, judgements must be made as to the fair value of each award granted. The fair value is determined using a valuation model which is dependent on further estimates, including the Group's future dividend policy, the timing with which options will be exercised and the future volatility in the price of the Group' shares. Such assumptions are based on publicly available information and reflect market expectations and advice taken from qualified personnel. Different assumptions about these factors to those made by the Group could materially affect the reported value of share based payments.
Useful lives of intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives. Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts charged to the consolidated statement of comprehensive income in specific periods.
Recognition of development costs within intangible fixed assets
The Group undertakes certain development activity which is recognised within intangible fixed assets, if it meets certain criteria laid down by international accounting standards. This means that management is required to assess various factors associated with these assets to determine whether the asset is separately identifiable, that it is probable that future economic benefits attributable to will arise; the technical feasibility of completing the asset; that the Group intends and is able to complete the asset; and there are available and adequate technical, financial and other resources to complete the asset. All these matters involve technical and economic judgement and changes to these assessment can result in significant variations in the carrying value and amounts charged to the consolidated statement of comprehensive income in specific periods.
29. CAPITAL AND OPERATING COMMITMENTS
Capital commitments at the 31 December 2017 were $408,908 (2016: $436,220). Operating lease commitments at the 31 December 2017 were $11,142 (2016: $54,142). All amounts were due within one year.
30. SUBSEQUENT EVENTS
The key business developments since 31 December 2017 were as follows:
· On 4 February 2018 the Group announced that its first commercial CoalSwitch™ plant in Utah, United States (the 'Plant'), would be officially opened later that week.
· On 13 March 2018 the Group announced that it has signed a joint venture agreement with Cobant Sp. z o.o. a Polish research, development and coal recovery/production company, to explore opportunities to commercialise the Company's CoalSwitch™ product in blends with reclaimed coal from coal slurry dumps in Upper Silesia, Poland.
· On 17 May 2018 the Group announced that it had signed a Memorandum of Understanding to acquire a controlling interest in PowerWood Canada Corp, a privately owned Canadian company which holds substantial forestry assets in Alberta, Canada.
· On 11 June 2018 the Group announced the proposed sale of an advanced organic soil manufacturing facility to Young Living Farms, utilising the Company's proprietary PeatSwitch technology, for a total cash payment of US$3.4 million.
· On 13 June 2018 the Group announced that two laboratories, including a Polish Government laboratory, had conducted independent tests of the new 'Super Fuel' product that utilises a blend of AEG's revolutionary CoalSwitch™ component with reclaimed and cleaned coal fines from Poland's legacy coal waste dumps. The results of these tests indicated that the new "Super Fuel" had a similar calorific value to coal (>23MJ/Kg), but with significantly low sulphur content <0.9%, low ash content, and low SOx and NOx emissions when combusted
· In the period from the 31 December 2017 to the date of issue of this report Company issued 49,633,227 equity shares due to conversions of CLN to equity.
Further details are provided in the chairman's statement.
31. ULTIMATE CONTROLLING PARTY
In the opinion of the directors there is no one ultimate controlling party.
**ENDS**
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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