Final results for the year ended 31 July 2017
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.
30 January 2018
InfraStrata plc
("InfraStrata" or the "Company")
Final results for the year ended 31 July 2017
InfraStrata plc (AIM: INFA), the only UK quoted company focused on gas storage, is pleased to announce its final results for the year ended 31 July 2017.
The full Annual Report and Financial Statements for the year ended 31 July 2017, which includes a notice of general meeting ("GM"), will be available later today from the Company's website, www.infrastrata.co.uk, and will be posted to shareholders tomorrow. The GM will be held at the offices of Kerman & Co LLP, 200 Strand, London WC2R 1DJ on 27 February 2018 at 11:00 a.m.
For further information, please contact:
|
InfraStrata plc Adrian Pocock, Chief Executive
|
c/o Yellow Jersey +44 (0)20 3735 8825 |
|
Allenby Capital Limited (AIM Nominated Adviser & Broker) Jeremy Porter / Alex Brearley / Liz Kirchner
|
+44 (0)20 3328 5656 |
|
Yellow Jersey Tim Thomson
|
+44 (0)20 3735 8825 |
-ENDS-
The Front End Engineering & Design (FEED) and Insitu Downhole Testing programme for the Islandmagee gas storage project is co-financed by the European Union's Connecting Europe Facility.
Disclaimer releasing the European Union from any liability in terms of the content of the dissemination materials:
"The sole responsibility of this publication lies with the author. The European Union is not responsible for any use that may be made of the information contained therein."
Notes:
Background on InfraStrata plc
InfraStrata is an independent gas storage company focused on the UK and Ireland.
Further information is available on the Company's website: www.infrastrata.co.uk.
Background on the Islandmagee Storage Project
The Islandmagee gas storage project is a proposed salt cavern gas storage facility located on Islandmagee in County Antrim, Northern Ireland.
The Board of InfraStrata believes that the proposed 500 million cubic metres Natural Gas Cavern Storage facility will provide over 25% of the UK's Natural Gas Storage once constructed, and will be situated adjacent to the Scotland Northern Ireland (gas) Pipeline (SNIP) and the Moyle 500 Megawatt Electricity Interconnector.
Work commenced in 2007 with the acquisition of 3D seismic data to image the Permian salt in the Larne Lough area. During 2012, planning permission was granted for the project and a gas storage licence was issued by the Utility Regulator. In 2015 a well was drilled to core the salt and confirm the technical feasibility of the project, supported in part by the Commission. To date approximately £11.5m has been invested in the project.
Further information is available on the project company's website: www.islandmageestorage.com.
Chairman's Statement
It is a privilege to serve as Chairman of InfraStrata plc (the "Company"). Since joining our Chief Executive, Adrian Pocock, on the Company's board of directors (the "Board") we have established a very pro-active Board with the addition of Matt Beardmore and Karen Campbell as non-executive directors.
The four of us are committed to taking the Company forwards and completing the necessary actions to commence the construction of the Islandmagee gas storage project in County Antrim, Northern Ireland (the "Project"). I must thank the previous Board for establishing the groundwork for the Project and a smooth handover to the new team. I would also thank all those involved in maintaining the very positive local support we retain in Northern Ireland. More importantly I must thank our Shareholders for their patience. We now must take this Company forward. We look forward rather than back, although by necessity the accounts reported today show activities before the new Board was appointed.
There is an indisputable need for the Project. The fundamentals of energy security and supply for the island of Ireland are in no doubt and we believe that Islandmagee can be the central energy hub providing the energy resource to help 'keep the lights on' in the foreseeable future. The announced decommissioning of the Rough gas storage facility in the UK, which has provided the majority of the country's gas storage capacity over recent years, has emphasised the UK's lack of natural gas storage. In due course, once constructed, this will be partially offset by Islandmagee. The unfortunate fire at Baumgarten in Austria during December 2017 highlighted the delicate supply and demand balance of gas resource throughout Europe. Gas prices spiked considerably and states of energy emergencies were announced. Islandmagee will therefore not only provide Shareholders with a return on their investment but also importantly to provide security of energy supply to the island of Ireland and the UK.
This fact was recognised and reaffirmed by the European Union confirming the extension of the EU Grant, originally set to expire in December 2017, for an additional year until December 2018, together with the renewal of our status as a Project of Common Interest (PCI).
The EU Grant provides 50%, up to a maximum of €4.024m, of the costs associated with the Front End Engineering & Design ("FEED") for Islandmagee. Utilisation of the EU Grant is subject to the Company obtaining matched funding from other sources. The Board is therefore focused on establishing this match funding. Under the terms of the EU Grant, certain activity milestones are required to be met, including completion of the FEED engineering report by 28 September 2018 and completion of the FEED by 20 December 2018.
In December 2017, we were pleased to announce that our wholly-owned subsidiary, InfraStrata UK Limited acquired the remaining 10% interest in the Islandmagee gas storage project company, Islandmagee Storage Limited ("IMSL") from Moyle Energy Investments Limited. Following this acquisition, we now own 100% of IMSL. The acquisition allows the Company to go forward with complete ownership and enhances our flexibility and decision-making processes.
Moyle has confirmed its commitment to enable the SNIP (Scotland to Northern Ireland) gas pipeline to facilitate gas flow in either direction between Northern Ireland and Scotland, thereby allowing IMSL to be of major interest to gas suppliers in Scotland, in England and Wales and further afield into Europe.
The Board has very tight control on the Company's funds and aims to be one of the most cost-efficient boards on the AIM market. Ongoing salary costs have been reduced by over 50% compared with those prior to the restructuring of the Board. The Board rely heavily on its own expertise to realise this project.
The Company has recently announced a placing to raise £375,000 before costs. Once completed, the funds from this placing will fund the Company's minimum levels of corporate costs and care and maintenance costs on the Project to the end of November 2018.
The further progression of the FEED will require the securing of additional funding, however, the Board currently believes that the FEED can be commenced on an overall budget that represents a significant reduction on previous estimates published by InfraStrata.
The Board has established good ongoing discussions with those that wish to potentially utilise the facility once built, and many major international organisations that wish to participate in the development of the Project.
We have created strong relationships with existing and newly interested parties and intend to build on these to deliver financial close for the FEED programme in the near future.
We look forward to a positive year for the Company.
Graham Lyon
Non-executive Chairman, 29th January 2018
Strategic Report
OPERATIONAL REVIEW - ISLANDMAGEE GAS STORAGE PROJECT
Review of the stages required to achieve shareholder value:
a. Concept Evaluation, FEED and commercialisation programme
b. Monetisation of the Project
c. Future Funding - UK Guarantees Scheme
a. Concept Evaluation, FEED and commercialisation programme
InfraStrata plc ("InfraStrata" or the "Company") is in the process of seeking to secure pre-contracted revenue agreements in relation to the Project's future storage capacity to support further project finance.
The demise of the Rough storage facility has focused the attention of some International and major gas traders to the fact that there has been a dramatic change in the UK Gas Storage and Trading Markets, and these are predicted to become more volatile due to factors such as lowered capacity, the impact of Brexit and recent problems with the European Gas Network.
We have an active dialogue with a number of potential 'Tenants' for the storage space that we hope to finalise in the near term, which will add a strong degree of assistance to our discussions with other institutions, in order to gain further funding.
We have examined the FEED and other costs in great detail, and anticipate that there may be cost efficiencies available to the project, which should become more apparent once we have the findings of the FEED. The Board is focused on completing the FEED Funding with a number of prospective partners, and hopes to reach a conclusion to this as soon as possible, bearing in mind that we can only progress at the rate of external parties. Further details are highlighted in the Review of the Year and Subsequent Events section of this report.
The extension of the EU Grant for a further year has assisted us greatly in seeking to finalise the funding package for the FEED, as the EU Grant gives the Company and its providers of prospective finance a greater degree of comfort in relation to the overall deliverability of the FEED.
This grant from the EU under the Connecting Europe Facility ("CEF") for 50% of the cost of FEED and related insitu downhole testing is for up to a maximum of €4.024m. An advance payment of €1.6m (£1.4m) was received in July 2016 and has since been held in a Euro denominated bank account pending completion of the remaining 50% funding required to both match the grant for FEED and also to complete the commercialisation programme. The balance of the grant will be received from the EU following completion of the FEED.
The new Board has generated many new initiatives and potential routes to market for the Project.
We are in discussion with a number of global gas producers keen to increase their ability to import and store gas into the UK. By participating in the Islandmagee project, this offers them the chance to increase volume, maximise their gas sale price, and take advantage of positive fluctuations in the gas price that are not currently available to them.
The potential increase in demand for gas both in Northern Ireland and the Republic of Ireland is predicted to grow strongly over the next few years.
The 'Gas to the West' Northern Ireland project is being carried out by Mutual Energy and has the support of the Northern Ireland Government, and is targeted to deliver gas to domestic and commercial customers that do not currently have access to mains gas.
The Island of Ireland does not currently have large scale gas storage facilities, and the current infrastructure still relies on oil-fired and coal-fired power stations, which means that without a storage facility, there will be the distinct possibility that the gas infrastructure is unable to satisfy demand, resulting in the need to rely on oil and coal-fired electricity generation, which is not a preference, from an environmental perspective. Wind Energy has grown over recent years, but when there is no wind there is greater demand for conventionally generated electricity, and the recent announcement concerning the proposed closure of the oil and coal-fired Kilroot Power Station is likely to increase the demand for gas-fired generation.
There is a new initiative from the Department for the Economy in Northern Ireland to support projects that provide Environmental benefits and Energy Security.
CBRE Capital Advisors has been appointed to manage a new Northern Ireland fund which was established in November 2017. The £100m fund will provide debt finance for real estate, regeneration, low carbon and infrastructure projects and will be managed on behalf of the Department of Finance and the Northern Ireland Strategic Investment Board. The Board has engaged with the Fund and hopes that its application will be favourably viewed, having already satisfied the high demands and standards required for the Project of Common Interest and EU INEA.
b. Monetisation of the Project
A number of events have taken place over the last twelve months in relation to the value of InfraStrata's interest in the Islandmagee Gas storage Project.
The post year-end purchase of Moyle Energy Investments Limited's remaining 10% shareholding interest in IMSL now gives InfraStrata complete ownership over the Project and 100% of its value.
The imminent closure of Centrica's storage facility at Rough in the North Sea has resulted in a major focus on the future importance of Islandmagee as a key component of the UK's overall gas storage facilities.
Rough is no longer categorised as a storage facility, and is now regarded as a production facility, with licenses issued to produce all remaining gas into the network, subject of course to leaving sufficient gas within the facility to ensure that safety pressures are maintained.
Once the UK has left the European Union, it may no longer have a right to demand gas from EU member states during times of gas shortage. Whilst free market mechanisms are likely to mean that gas will still be available, the potential for price volatility is likely to increase, resulting in greater interest in the Project from gas traders.
The continued reduction in gas production from the UK Continental Shelf also increases our reliance on imports from Europe and Liquid Natural Gas imports from further afield.
In December 2017, there was an unexpected series of events that resulted in major price volatility in the gas price, with prices spiking 49% and this is perhaps an indication of what could reoccur in the future.
The Company is in discussions with a number of major gas traders and producers that can see the future benefit of acquiring access to a large storage facility to enhance their ability to store and trade larger energy volumes in an increasingly restricted and unpredictable market.
We look forward to making announcements on the above themes in due course.
c. Future Funding - UK Guarantees Scheme
IMSL is pre-qualified to participate in the UK Guarantees Scheme. This is a UK Government supported scheme to provide support of up to 65% of the capital cost of important infrastructure projects, including: Drax B Power; Northern Line Extension; Mersey Gateway Bridge; Ineos Grangemouth Ethane Import and Storage Facilities; and Hinkley Point C.
This is carried out by the Government underwriting the principal sum and interest on sums advanced by the Government's banking partners.
InfraStrata's board has met with the Government's legal advisers and two of the participating banks.
The UK Guarantees Scheme is now administered by the Infrastructure and Projects Authority, which is part of HM Treasury.
Additional funding opportunities are available to the Project as a result of its status as a Project of Common Interest of the European Union.
REVIEW OF THE YEAR AND SUBSEQUENT EVENTS
On the 27th June at the General Meeting called by certain requisitioning shareholders, there was a vote in favour of changing the composition of the Board. All members of the previous Board were removed and in their place, Adrian Pocock and Peter Wale, being the requisitioning shareholders, were appointed.
Subsequently, further additions to the Board were made with the addition of Graham Lyon as Non-Executive Chairman and Matthew Beardmore and Karen Campbell as Non-Executive Directors. Due to his increasing commitments on other projects, Peter Wale resigned from the Board in November 2017.
Following a review of the shortest route to achieving progress for the Company, the Board established firm working relationships with many key players in the gas storage and energy trading markets.
The Board has worked hard with various partners to ensure that the European Union Project of Common Interest ("PCI") status was renewed and also to extend the INEA Grant for one year, to retain the ability to call on these funds to partially fund the FEED process. The PCI status was reconfirmed in December 2017 for a further two years.
The Board has consolidated the relationships with proposed Project contractors and is moving closer to concluding the final elements of the required funding, having regard to the best interests of the Shareholders in the medium and long term. It has been very difficult to balance the objective of ensuring the financial security of the Company against the short-term share price performance.
The announcement by Centrica of the closure of the Rough storage facility in the North Sea has highlighted the importance of the Islandmagee Project and has resulted in substantial new interest from energy traders and suppliers.
The Board is moving ahead in negotiations for forward commitments for the gas storage space and will make announcements once these become contractual.
In addition, the Board is also pursuing negotiations with gas producers that may wish to increase their ability to import liquefied natural gas into the UK and the European gas network. This has the potential to further enhance the energy security of the island of Ireland and the UK as a whole.
It is reassuring that the investors have backed InfraStrata with new investment in the Company and the additional working capital has enabled us to pursue our short and longer term objectives.
The Board has drastically cut costs, and the current overall Board costs are less than half of those expended previously, which makes a key contribution to the overall running costs of the Company.
Having reviewed all of the options available to the Company, the Board has decided that the best way to ensure the Company is able to utilise the European Union grant funding is to commence the FEED in order to comply with the prescribed timescales.
We are progressing contracts and the final elements of the funding and will report on this when we are in a position to do so.
On 4 November 2016, InfraStrata announced that following the completion of a tendering process, the Company had selected FEED contractors for the Project's Islandmagee above-ground facilities and for the sub-surface elements. The FEED will include a detailed plant design specification for the Project, a detailed project plan and cost estimate. The FEED contractors have international reputations and experience of working on many existing salt cavern storage projects, including in the UK.
The FEED contractors will provide loans in aggregate of up to £1.1m based on a total anticipated engineering budget of around £4m. These loans, which are subject to contracts being agreed and upon InfraStrata securing the remaining funding for the FEED, will be repayable at the Financial Investment Decision date ("FID"), when a decision will be made as to whether to proceed to construction, or on 31 December 2018, whichever is earlier. The loans will be secured on the assets of IMSL and attract interest at 10% per annum, which will be rolled up and paid on the loan repayment date.
On 16 March 2017, the Company announced that it had commenced the first phase of FEED, known as Concept Evaluation, funded using part of the net proceeds of the placing completed on 3 March 2017. Concept Evaluation involved the FEED contractors undertaking a value enhancement exercise on the Project's current design basis. The objective was to identify opportunities through which the current design and phasing could be optimised, to enhance the overall project value and in particular, to assess the potential for accelerating the delivery of capacity (or part thereof) to the gas markets. The Company commissioned a Concept Evaluation Report from Costain. This report was issued in June 2017 and contains commercially confidential information. However, the report does conclude that a phased approach to the construction of the facility is viable, economical and may offer the best value for money to the Company and its Shareholders.
The report highlights that a capital requirement of £200m based on approx. 200mcm of storage space has the potential to achieve first gas within three years of the FID. This enables the facility to be commercialised much quicker and to generate revenues earlier than it has previously been envisaged.
The remainder of the facility could then be constructed for an additional £85m to deliver the full operational capacity.
In addition to the capital and time requirements, the report also identifies the potential to save up to 30% on the cost of injection and withdrawal costs compared to the projections previously assumed for the Islandmagee Project.
The findings in this report are extremely positive for the Company and its Shareholders. The detailed FEED will build on these findings and test all of the assumptions and data to categorically evidence the feasibility of all items.
In connection with the placing to raise £810,000 (approximately £754,000 after expenses) that was completed in March 2017, the Company stated that part of the net proceeds would be used to provide additional working capital and cover the anticipated costs of the Project until the end of the year, depending on progress with the Concept Evaluation phase of the FEED. Having commenced the Concept Evaluation process and having seen the early results from the process, the Board was of the view that it was important that Concept Evaluation was completed in order to receive the full benefit of the outcome of the process (as described above) and to add value to the Project as a whole. The Company therefore committed to finance the entire Concept Evaluation phase. On 1 June 2017 and 19 October 2017, £130,000 and £500,000, respectively, were raised via a share placing to progress the ongoing work. A further placing to raise £375,000 for corporate costs and care and maintenance costs of its Project was announced just prior to the issue of this report.
Following the completion of the FEED and commercialisation programme the Project will be ready to move into construction and delivery. At that time the Company will further evaluate the optimum way to structure the funding of the initiation and delivery of that programme for Shareholders and will evaluate the available sources of funding, including both debt and equity participation, to fund the continuing operations of the Company and the commencement of construction. The full project construction is expected to be delivered over a number of years at an aggregate cost of approximately £300m and to be delivered on a phased basis.
The Board remains confident that the Islandmagee Project is economically viable and that following the completion of the FEED and commercialisation programme, the Company should be capable of attracting new investment for the Project.
OPERATIONAL REVIEW - FINANCE
Petroleum exploration and evaluation operations have been classified as discontinued. The Group recognised cash revenue from continuing operations of £Nil (2016: £500,000). (The 2016 revenue arose from the sale of data, which was a one off item). Management and administrative expenses totalled £895,404 (2016: £932,635) of which £725,820 (2016: £677,735) was attributable to continuing operations. The Group incurred a loss of £964,131 (2015: profit of £66,955) including a loss of £180,672 (2016: profit of £244,569) from discontinued operations. The profit in 2016 was stated after crediting a profit on the disposal of Exploration and Evaluation assets of £453,945. The loss for 2017 when added to the cumulative losses of £26,761,093 brought forward leaves a retained loss of £27,725,224 to be carried forward. Management and administrative expenditure is further analysed in note 5 to the financial statements.
Gross capital expenditure on the Islandmagee gas storage project during the year ended 31 July 2017 was £475,188, comprising costs associated with the completion of the Concept Evaluation phase of FEED, renewal of land options and other general Project costs. Net Exploration and Evaluation capital expenditure during the year ended 31 July 2017 was £6,902. All of the Company's petroleum exploration licence interests have now been assigned or relinquished and no further expenditure is expected.
In May 2015, the Company concluded a Convertible Loan Facility Agreement with Baron Oil Plc ("Baron") under which Baron provided a loan for €1.8m (approximately £1.4m) to InfraStrata which was used as working capital to bridge the receipt of the CEF grant, 70% of which amounting to €1.75m (approximately £1.35m) was received from the EU in May 2016 and placed into an escrow arrangement as security for the loan. In August 2016, the loan was repaid in full by release to Baron of the £1,358,063 held in escrow, a payment of £42,301 and a further payment of £136,134 for the interest on the loan which had been accrued and capitalised to intangible gas storage development costs at 31 July 2016. Following a revision to the terms of the Convertible Loan Facility Agreement announced on 26 September 2016, Baron had an accompanying option to acquire the number of ordinary shares in InfraStrata that represented 16.666% of the enlarged ordinary share capital of the Company (from time to time) for a payment of £1,536,498. This option expired on 31 March 2017 without being exercised.
On 5 January 2017, the Company entered into a new secured loan agreement with Baron for a facility of up to £300,000 to provide working capital for the Group and £200,000 of this facility was drawn down during January 2017. On 29 March 2017, the Company announced that following the completion of the placing to raise £810,000 before expenses (see below) it had repaid the £200,000 drawn down on the loan facility with Baron. The loan facility has been cancelled and its various security arrangements have been released.
Baron remains entitled to receive an additional £200,000 (the "Additional Payment") in the event of a sale or disposal by InfraStrata or its subsidiaries of substantially all of their assets, which comprise interests in the Islandmagee Project, and/or a change in control of InfraStrata or its subsidiaries within two years from the date of the loan agreement. In the event of a partial disposal of InfraStrata's or its subsidiaries' interests in the Islandmagee Project (whereby InfraStrata and InfraStrata UK Limited retain control of IMSL), the Additional Payment will be reduced to £100,000, with the remaining £100,000 payable in the event of a subsequent disposal or change in control of IMSL or the Islandmagee gas storage project during the two-year period. The accounting treatment of this contingent settlement financial liability is described in note 20 to the financial statements.
On 3 March 2017, the Company issued 162,000,000 shares of 0.01 penny at 0.5 pence each to raise £754,420 after expenses and on 1 June 2017 the Company issued 26,000,000 shares of 0.01 penny at 0.5 pence each to raise £120,809 after expenses.
The Group's cash and cash equivalents at 31 July 2017 were £1,548,169 (2016 - £3,812,069) including approximately £1.4 million (€1.6 million) received in advance from the EU in respect of the FEED programme grant which is held in a Euro denominated bank account pending completion of the remaining 50% funding required to match the grant for FEED.
On 20 October 2017, InfraStrata completed a placing of 125,000,000 new ordinary shares of 0.0001 penny at an issue price of 0.4 pence each to raise £457,586 after expenses. This was made in order to meet working capital expenses. A further placing to raise £375,000 for corporate costs and care and maintenance costs of its Project was announced just prior to the issue of this report. Once completed, the funds from this placing will fund the Company's minimum levels of corporate costs and care and maintenance costs on the Project to the end of November 2018
KEY PERFORMANCE INDICATORS
Key performance indicators ("KPIs"), both financial and non-financial, are used by the Board to monitor progress against predetermined objectives and our strategy:
The new Board has reviewed and revised these, and at the date of this report they are being achieved.
|
Objective
|
Definition |
KPIs |
|
We endeavour to develop projects in accordance with project schedules |
Predetermined and agreed project development schedules adhered to including renewal of EU Grants and PCI status |
Delivery of projects to comply with projected timescales. |
|
We aim to manage Group working capital prudently |
Management and control of working capital ensuring liquidity in order to satisfy Company Act and AIM Rules requirements |
Maintenance of capital to ensure liquidity and to meet Audit requirements. |
The KPIs are reported at Board meetings. Measurement entails analysing variance between expected and actual progress, financial position and financial performance
Since the appointment of the new Board, the KPIs have been met.
PRINCIPAL RISKS & UNCERTAINTIES
The Board is responsible for the effectiveness of the Group's risk management activities and internal control processes. As a participant in the gas storage development industry, the Group is exposed to a wide range of business risks in the conduct of its operations. The Group is exposed to financial, operational, strategic and external risks which are further described below. These risks are not exhaustive and additional risks or uncertainties may arise or become material in the future. Any of these risks, as well as other risks and uncertainties in this document, could have a material effect on the Group's business.
Financing - the risk of not obtaining sufficient financing
Access to adequate working capital is critical to our ability to pursue our existing and future projects and to continue as a going concern. A deterioration of the capital markets may reduce our ability to raise new equity funding. We work closely with our professional advisers and brokers to identify the optimum approach and timing to secure new equity financing to provide working capital.
As detailed in Note 2, the Group needs to raise funds to enable it to meet its liabilities after November 2018 and for the balance of the FEED costs not covered by agreed in principle loans and the EU grant. Although the EU grant has been extended to December 2018, as the United Kingdom will be leaving the European Union, this is unlikely to be extended further. To the extent that the grant cannot be used by the deadline and the grant funding is reduced, additional funding will be needed to cover the shortfall.
The Group seeks to manage risk for our shareholders by attracting investment through quality partners where possible thereby minimising our own commitments to pay project development costs. We do not make financial commitments unless such funding has been secured through joint venture partners or otherwise new investment in our projects or we have a high degree of confidence that it will be secured.
Strategic and external risks - failure to manage and grow the business while creating shareholder value
There is no assurance that the Group's gas storage development will be successful. We place a premium on recruitment and retention of suitably skilled personnel, compliance with applicable legislation and careful management of cash resources and requirements.
The successful progression of the Group's activities depends not only on technical success, but also on the ability of the Group to obtain appropriate financing through equity or debt financing or disposing of interests in projects or via other means.
We place great emphasis on regular communication with shareholders, including the release of announcements for the interim and annual results, and after significant developments. We seek to ensure that through such communication our shareholders are aware of our strategy and operations and that management has their continuing support. The Company's system of Corporate Governance is set out in the Report of the Directors on pages 11 to 13.
Operational risks - damage to shareholder value, environment, personnel or communities caused by operational failures
InfraStrata has recruited a new Board of Directors with relevant skills to manage the operational risks of our projects and ensure they are progressed in the shortest possible timescales in a cost effective manner. We have built up our core competencies in project development and have developed excellent relationships with government and public stakeholders in the geographical areas in which we operate.
Our management team works alongside strong and experienced joint venture partners in all projects and is supported by a highly effective network of carefully selected service delivery specialists such as environmental consultants and drilling engineering services. In this way we seek to mitigate the potential risk that we fail to be seen to be acting in a socially responsible manner and/or fail to maintain good local community relations.
On behalf of the Board
Adrian Pocock
Chief Executive Officer
29th January 2018
Consolidated statement of comprehensive income for the year ended 31 July 2017
|
|
Notes |
|
2017 |
|
2016 |
|
|
|
|
£ |
|
£ |
|
Continuing operations |
|
|
|
|
|
|
Revenue |
4 |
|
- |
|
500,000 |
|
|
|
|
|
|
|
|
Cost of sales |
|
|
- |
|
- |
|
|
|
|
|
|
|
|
Gross profit |
|
|
- |
|
500,000 |
|
|
|
|
|
|
|
|
Management and administrative expenses |
5 |
|
(725,820) |
|
(677,735) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(725,820) |
|
(177,735) |
|
|
|
|
|
|
|
|
Finance expense |
20 |
|
(58,000) |
|
- |
|
|
|
|
|
|
|
|
Finance income |
10 |
|
361 |
|
121 |
|
|
|
|
|
|
|
|
Loss before taxation |
|
|
(783,459) |
|
(177,614) |
|
|
|
|
|
|
|
|
Taxation |
11 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the year from continuing operations
|
3 |
|
(783,459) |
|
(177,614) |
|
(Loss) profit for the year from discontinued operations |
3 |
|
(180,672) |
|
244,569 |
|
|
|
|
|
|
|
|
(Loss) profit for the year attributable to the equity holders of the parent |
|
|
(964,131) |
|
66,955 |
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive (loss) profit for the year attributable to the equity holders of the parent |
|
|
(964,131) |
|
66,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share |
12 |
|
|
|
|
|
Continuing operations Discontinued operations Continuing and discontinued operations |
|
|
(0.30)p (0.07)p (0.37)p |
|
(0.10)p 0.14p 0.04p
|
Consolidated statement of financial position as at 31 July 2017
|
|
Notes |
|
2017 |
|
2016 |
|
|
|
|
£ |
|
£ |
|
Non-current assets |
|
|
|
|
|
|
Intangible fixed assets: Gas Storage Development Exploration & Evaluation Property, plant and equipment |
14 15 16 |
|
6,591,302 - 440,100 |
|
6,116,114 19,459 440,744 |
|
Deferred liability |
20
|
|
42,000 |
|
-
|
|
|
|
|
|
|
|
|
Total non-current assets |
|
|
7,073,402 |
|
6,576,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Trade and other receivables |
18 |
|
98,718 |
|
1,182,572 |
|
Deferred liability |
20 |
|
100,000 |
|
- |
|
Restricted cash |
19 |
|
- |
|
1,358,063 |
|
Cash and cash equivalents |
21 |
|
1,548,169 |
|
2,454,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,746,887 |
|
4,994,641
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Trade and other payables |
22 |
|
(149,625) |
|
(1,693,055) |
|
Grant received in advance |
19 |
|
(1,440,913) |
|
(1,358,886) |
|
Short-term borrowings |
19 |
|
- |
|
(1,400,364) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
(1,590,538) |
|
(4,452,305) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current assets |
|
|
156,349 |
|
542,336 |
|
|
|
|
|
|
|
|
Financial liability |
20 |
|
(200,000) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
|
|
7,029,751 |
|
7,118,653 |
|
|
|
|
|
|
|
|
Shareholders' funds |
|
|
|
|
|
|
Share capital |
24 |
|
10,853,460 |
|
10,834,660 |
|
Share premium |
|
|
14,297,307 |
|
13,440,878 |
|
Merger reserve |
25 |
|
8,988,112 |
|
8,988,112 |
|
Share based payment reserve |
26 |
|
616,096 |
|
616,096 |
|
Retained earnings |
|
|
(27,725,224) |
|
(26,761,093) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
7,029,751 |
|
7,118,653 |
|
|
|
|
|
|
|
Consolidated statement of changes in equity for the year ended 31 July 2017
|
|
Share capital |
Share premium |
Merger reserve |
Share based payment reserve |
Retained earnings |
Total equity |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
|
|
|
|
|
|
|
|
|
Balance at 31 July 2015 |
10,474,160 |
13,379,415 |
8,988,112 |
603,626 |
(26,828,048) |
6,617,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
66,955 |
66,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive profit for the year |
- |
- |
- |
- |
66,955 |
66,955 |
|
Shares issued |
360,500 |
90,125 |
- |
- |
- |
450,625 |
|
Share issue costs |
|
(28,662) |
|
|
|
(28,662) |
|
Share based payments |
- |
- |
- |
12,470 |
- |
12,470 |
|
|
|
|
|
|
|
|
|
Balance at 31 July 2016 |
10,834,660
|
13,440,878
|
8,988,112
|
616,096 |
(26,761,093) |
7,118,653
|
|
|
|
|
|
|
|
|
|
Loss for the year |
- |
- |
- |
- |
(964,131) |
(964,131) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the year |
- |
- |
- |
- |
(964,131) |
(964,131) |
|
Shares issued (Note 24) |
18,800 |
921,200 |
- |
- |
- |
940,000 |
|
|
|
|
|
|
|
|
|
Share issue costs |
|
(64,771) |
|
|
|
(64,771) |
|
Balance at 31 July 2017 |
10,853,460 |
14,297,307 |
8,988,112 |
616,096 |
(27,725,224) |
7,029,751 |
Consolidated statement of cash flows for the year ended 31 July 2017
|
|
Notes |
2017 |
|
2016 |
|
|
|
£ |
|
£ |
|
Operating activities |
|
|
|
|
|
Operating loss for the year |
|
(725,820) |
|
(177,735) |
|
Depreciation |
|
644 |
|
167 |
|
Decrease (Increase) in trade and other receivables |
|
1,083,854 |
|
(882,164) |
|
(Decrease) increase in trade and other payables |
|
(1,543,430) |
|
938,264 |
|
Share option expense |
|
- |
|
12,470 |
|
Exchange differences |
|
82,027 |
|
33,301 |
|
Cash (used in) discontinued operations |
|
(154,311) |
|
(180,933) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) continuing and discontinued operating activities |
|
(1,257,036) |
|
(256,630) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
Interest received |
|
361 |
|
121 |
|
Purchase of intangible assets: Gas Storage Development Exploration and Evaluation (discontinued) |
|
(475,188) (6,902) |
|
(608,760) (43,158) |
|
Proceeds from Exploration and Evaluation assets (discontinued): |
|
|
|
|
|
Disposals Receipt of back costs under farmout agreements |
|
- - |
|
626,459 252,481 |
|
Grants received |
|
- |
|
2,689,852 |
|
Purchase of equipment |
|
- |
|
(458) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) generated from investing activities |
|
(481,729) |
|
2,916,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
Proceeds on issue of ordinary shares |
|
875,229 |
|
421,963 |
|
Drawdown of short-term borrowings |
|
200,000 |
|
300,000 |
|
Repayment of short-term borrowings |
|
(1,600,364) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) generated from financing activities |
|
(525,135) |
|
721,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
(2,263,900) |
|
3,381,870 |
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
3,812,069 |
|
430,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
1,548,169 |
|
3,812,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents consist of: |
|
|
|
|
|
Restricted cash |
19 |
- |
|
1,358,063 |
|
Cash at bank |
21 |
1,548,169 |
|
2,454,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,548,169 |
|
3,812,069 |
|
|
|
|
|
|
Significant non-cash transactions
As disclosed in Note 20, the Group has recognised a financial liability in respect of contractual payments which may become due in any future disposal of its assets and a corresponding deferred asset which has been amortised. These transactions are non-cash items and do not appear in the statement of cash flows. In 2016 there were no material non-cash items.
Notes to the financial information for the year ended 31 July 2017
The financial information set out in this announcement does not comprise the Group's statutory accounts for the years ended 31 July 2017 or 31 July 2016. The financial information has been extracted from the statutory accounts of the Group for the years ended 31 July 2017 and 31 July 2016.
The auditor, Nexia Smith & Williamson, has reported on the statutory accounts for the years ended 31 July 2017 and 2016; the reports were unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006. However, in their report on the statutory accounts for both the year ended 31 July 2017 and 31 July 2016, the auditor drew attention to the material uncertainties which exist with respect to the ability of the group to continue as a going concern and the carrying value of the Islandmagee gas storage facility should further funds to develop the project not be secured. These uncertainties are further explained below.
The statutory accounts for the year ended 31 July 2016 have been delivered to the Register of Companies; those for the year ended 31 July 2017 were approved by the Board on 29 January 2018 and will be delivered to the Registrar of Companies after the publication of this announcement.
1. General information
InfraStrata plc is a company incorporated in England & Wales under the Companies Acts 2006 and is domiciled in the United Kingdom and is listed on the AIM market of the London Stock Exchange. The company's registered office is 200 Strand, London, England, WC2R 1DJ.
2. Accounting policies
The financial statements for the year ended 31 July 2017 are based on the accounting policies set out below which have been consistently applied.
"Basis of preparation
InfraStrata plc adopted International Financial Reporting Standards (IFRS) as adopted by the European Union effective in July 2017, as the basis for preparation of its financial statements. The financial information has been prepared under the historical cost convention as modified by the revaluation of certain financial assets.
Going concern
The directors have prepared cash flow projections which indicate that, including the proceeds of the January 2018 placing, the Group and parent Company have sufficient funds to meet their corporate costs and the care and maintenance costs of Islandmagee gas storage project (the "Project") to the end of November 2018.
The next phase of the development of the Project is the completion of the FEED programme which will take to the end of December 2018 at a total estimated cost including all the Group's financial commitments during that period of £4.5 million. Of that total £3.1m is expected to be met by the grant from the EU and loans from the selected FEED contractors, leaving a further £1.4m additional funding requirement to complete not only the FEED but the commercialisation programme during 2018, and to cover corporate costs.
Under the terms of the EU Grant, certain activity milestones are required to be met, including completion of the FEED engineering report by 28 September 2018 and completion of the FEED by 20 December 2018. Failure to meet these milestones may result in the grant being reduced. The loans from the FEED contractors are subject to contracts being agreed and upon InfraStrata securing the remaining funding for the FEED. The loans are expected to be repayable at the Financial Investment Decision date ("FID"), when a decision will be made as to whether to proceed to construction, or on 31 December 2018, whichever is earlier.
The directors are in advanced discussions with potential key investors to the project and anticipate that the additional funding of £1.4m required to complete the FEED and commercialisation programme during 2018, and cover corporate costs, can be secured in the first quarter of 2018. However the timing and success of such fundraising cannot be guaranteed. After preparing cash flow forecasts, considering the cash currently on hand, and the progress towards gaining the additional funding as described above, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
Following the completion of the FEED and commercialisation programme at the end of 2018 the project will be ready to move into the Financial Investment Decisions stage, where it will evaluate the available sources of funding, including both debt and equity participation, to fund both the continuing operations of the Company beyond December 2018, the repayment of the FEED contractor loans, and construction and delivery of the programme for our shareholders. The full project construction is expected to be delivered on a phased basis over a number of years at an aggregate cost of approximately £300 million.
Should the Project not proceed as expected, the ability of the parent Company's subsidiaries to repay inter-company debt due to the parent Company would be in doubt.
The directors remain confident that the project is economically viable and that following the completion of the FEED and commercialisation programme, further new investment for the Company and the project will be secured. Having reviewed the value of gas storage assets in accordance with the principles set out below, and the value of balances due to the parent Company from its subsidiaries, the directors are of the opinion that these assets are not impaired in value.
However the success of the 2018 fundraising is uncertain. The directors have concluded that a material uncertainty exists that may cast significant doubt upon the Group's ability to continue as a going concern and therefore the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. Were the Group no longer a going concern, the Group's capitalised project development costs totalling £6,591,302 and amounts due to the Company from its subsidiaries amounting to £7,113,671 may become impaired in value, provision would be required for the future liabilities arising as a consequence of the Group ceasing business and assets and liabilities currently classified as non-current would be reclassified as current.
Adoption of new and revised standards
IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers have been adopted by the EU and minor changes to other standards arising from annual improvements have been issued but are yet to be adopted. None of these standards are expected to have a material effect on the Group financial statements. IFRS 16 Leases has also been issued; as the Group currently has no material leases, this is not expected to have a significant impact. The Group will assess the impact of the new standard on the Group in due course.
Basis of consolidation
The financial information incorporates the financial information of the Company and entities controlled by the Company. Control is achieved where the Company has power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
Business combinations and goodwill
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 profit or loss in the period of acquisition. Goodwill arising on consolidation is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss, and is not subsequently reversed.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker as required by IFRS 8 "Operating Segments". The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of directors. The accounting policies of the reportable segments are consistent with the accounting policies of the Group as a whole. Segment profit or loss represents the profit or loss attributable to equity holders of the parent attributable to each segment. This is the measure of profit that is reported to the Board of directors for the purpose of resource allocation and the assessment of segment performance. When assessing segment performance and considering the allocation of resources, the Board of directors review information about segment assets and liabilities.
Property plant and equipment
Property plant and equipment is stated at cost less accumulated depreciation and any recognised impairment loss. The initial cost of an asset comprises its purchase price or construction cost and any costs directly attributable to bringing the asset into operation.
Depreciation is charged so as to write off the cost of assets, over their estimated useful lives, using the straight-line method, once the asset has been brought into use, on the following basis:
|
Office equipment |
20-33% |
|
Freehold land |
0% |
The carrying values of property plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
Capitalisation and impairment of intangible gas storage assets
Costs of development of gas storage facilities are capitalised as intangible assets once it is probable that future economic benefits that are attributable to the assets will flow to the Group and until consent to construct has been awarded, at which time the capitalised costs are transferred to plant and equipment provided there being reasonable certainty of construction proceeding. The nature of these costs includes all direct costs incurred in project development, including any directly attributable finance costs. No amortisation or depreciation is provided until the storage facility is available for use.
An impairment test is performed annually and whenever events or circumstances arising during the development phase indicate that the carrying value of a development asset may exceed its recoverable amount. The aggregate carrying value is compared against the expected recoverable amount of the cash generating unit, generally by reference to the present value of the future net cash flows expected to be derived from storage revenue. The present value of future cash flows is calculated on the basis of future storage prices and cost levels as forecast at the statement of financial position date.
The cash generating unit applied for impairment test purposes is generally an individual gas storage facility. Where the carrying value of the facility is greater than the present value of its future cash flows a provision is made. Any such provisions are charged to cost of sales.
Government grants
Government grants are recognised only when there is reasonable assurance that the Group will comply with the conditions attaching to the grant and that the grants will be received. Capital grants are recognised to match the related development expenditure and are deducted in arriving at the carrying value of the related assets.
Investments
Investments in subsidiaries are stated at cost less provision for impairments.
Taxation
Tax expense represents the sum of the tax currently payable and any deferred tax. The taxable result differs from the net result as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised.
Deferred tax is charged or credited to the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities on a net basis.
Foreign currency
Transactions in foreign currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each statement of financial position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the statement of financial position date and gains or losses are taken to operating profit.
Leases
Leases are classified as finance leases or hire purchase lease contracts whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Rental costs under operating leases are charged on a straight-line basis over the lease term.
Share based payment transactions
Employees (including senior executives) of the Group receive part of their remuneration in the form of share based payment transactions, whereby employees render services as consideration for equity instruments (equity settled transactions).
The cost of equity settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting date). The cumulative expense recognised for equity settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The statement of comprehensive income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.
Where an equity settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.
Retirement benefit costs
The Company has a defined contribution plan which requires contributions to be made into an independently administered fund. The amount charged to the statement of comprehensive income in respect of pension costs reflects the contributions payable in the year. Differences between contributions payable during the year and contributions actually paid are shown as either accrued liabilities or prepaid assets in the statement of financial position.
Financial instruments
Financial assets and financial liabilities are recognised on the statement of financial position when the Group becomes a party to the contractual provisions of the instrument.
Trade, other receivables and cash and cash equivalents are measured at initial recognition at fair value and are subsequently measured at amortised cost using the effective interest method. A provision is established when there is objective evidence that the Group will not be able to collect all amounts due. The amount of any provision is recognised in the statement of comprehensive income. Cash and cash equivalents comprise cash held by the Group, short-term bank deposits with an original maturity of three months or less, and cash held in escrow ("restricted cash"). Restricted cash relates to amounts held in escrow which may only be used to repay the Baron Oil loan.
Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.
Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Convertible financial instruments denominated in foreign currencies are not treated as compound financial instruments on initial recognition or subsequently, including when the repayment of the instrument is agreed at a specific sterling rate using funds held in escrow.
Interest bearing bank loans, overdrafts and other loans are recorded at the proceeds received, net of direct issue costs. Finance costs are accounted for on an accruals basis in the statement of comprehensive income using the effective interest method.
Revenue
Revenue is recognised as the fair value of the consideration received or receivable and represents the amounts receivable for services delivered during the normal course of business. Revenue is recognised as the services are delivered.
Data licensing
Revenue from licensing of data to other parties is recognised in full upon the delivery of the data to the licensee.
Judgements in applying accounting policies and key sources of estimation uncertainty
Amounts included in the financial statements involve the use of judgement and/or estimation. These estimates and judgements are based on management's best knowledge of the relevant facts and circumstances, having regard to previous experience, but actual results may differ from the amounts included in the financial statements. Information about such judgements and estimation is contained in the accounting policies and/or the notes to the financial statements, and the key areas are summarised below.
Capitalisation of gas storage costs
The assessment of whether costs incurred on gas storage development should be capitalised or expensed involves judgement. Any expenditure where it is not probable that future economic benefits will flow to the Group are expensed. Management considers the nature of the costs incurred and the stage of project development and concludes whether it is appropriate to capitalise the costs. The key assumptions depend on whether it is probable that the expenditure will result future economic benefits that are attributable to the assets.
Review of gas storage project asset carrying values
The assessment of capitalised project costs for any indications of impairment involves judgement. When facts or circumstances suggest that impairment exists, a formal estimate of recoverable amount is performed and an impairment loss recognised to the extent that the carrying amount exceeds recoverable amount. Recoverable amount is determined to be the higher of fair value less costs to sell and value in use. The key assumptions are the net income expected to be generated from the facilities, the cost of construction and the date from which the facilities become operational. Management assigns values and dates to these inputs after taking into account market information, engineering design costing and the project programme. A discount rate of 8% is applied in determining gas storage project net present values. Salt cavern gas storage projects are long term investments and cash flows are therefore projected over periods greater than 5 years. Engineering design provides for a project life of 40 years. It is assumed that 100% of a project's capacity will be sold from the date that the capacity becomes operational.
Recognition of contingent financial liability
As detailed in note 20, the recognition or otherwise of the contingent liability arising from the January 2017 Baron Oil Plc loan agreement requires judgement as to whether the Group will dispose of an interest on the Islandmagee project prior to 4 January 2019. As at the date of approval of the financial statements it was not possible to reliably determine whether or not such a disposal will occur and therefore the contingent liability has been recognised in full."
3. Segment information
The directors have determined the Group's operating segments by reference to the risk profile of the Group's activities, which are affected predominately by location of the Group's assets. The Group's continuing gas storage operations are located in Northern Ireland. In both years presented petroleum exploration activities have been classified as discontinued operations.
|
2017 |
|
|
|||
|
|
Discontinued Operations -exploration |
Continuing operations - gas storage |
|||
|
|
Total |
Northern Ireland |
Central income and costs |
Total |
|
|
|
£ |
£ |
£ |
£ |
|
|
Revenue |
15,273 |
- |
- |
- |
|
|
Management & administrative expenses |
(169,584) |
(541,942) |
(183,878) |
(725,820) |
|
|
Impairment of Exploration & Evaluation assets |
(26,361) |
- |
- |
- |
|
|
Finance expense |
- |
- |
(58,000) |
(58,000) |
|
|
Finance income |
- |
- |
361 |
361 |
|
|
|
|
|
|
|
|
|
Pre and post tax loss for the year |
(180,672) |
(541,942) |
(241,517) |
(783,459) |
|
|
|
|
|
|
|
|
|
Analysis of: |
|
|
|
|
|
|
Assets by segment |
44,702 |
8,466,155 |
309,432 |
8,775,587 |
|
|
Liabilities by segment |
(44,702) |
(1,454,689) |
(291,147) |
(1,745,836) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
7,011,466 |
18,285 |
7,029,751 |
|
|
|
|
|
|
|
|
Cash flows from discontinued operations
Cash flows arising from discontinued operations comprise net cash used in discontinued operations of £154,311, and net cash used in investing activities of £6,902.
|
2016 |
|
|
|||
|
|
Discontinued |
|
|
||
|
|
Operations |
Continuing operations - gas storage |
|
||
|
|
-exploration Total |
Northern Ireland |
Central income and costs |
Total |
|
|
|
£ |
£ |
£ |
£ |
|
|
Revenue |
73,967 |
500,000 |
- |
500,000 |
|
|
Management & administrative expenses |
(254,900) |
(494,146) |
(183,589) |
(677,735) |
|
|
Profit on disposal of Exploration & Evaluation assets |
453,945 |
- |
- |
- |
|
|
Impairment of Exploration & Evaluation assets |
(28,443) |
- |
- |
- |
|
|
Finance income |
- |
- |
121 |
121 |
|
|
|
|
|
|
|
|
|
Pre and post tax profit / (loss) for the year |
244,569 |
5,854 |
(183,468) |
(177,614) |
|
|
|
|
|
|
|
|
|
Analysis of: |
|
|
|
|
|
|
Assets by segment |
1,497,566 |
9,266,058 |
807,334 |
10,073,392 |
|
|
Liabilities by segment |
(1,426,217) |
(2,922,841) |
(103,247) |
(3,026,088) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,349 |
6,343,217 |
704,087 |
7,047,304 |
|
|
|
|
|
|
|
|
Cash flows from discontinued operations
Cash flows arising from discontinued operations comprise net cash used in discontinued operations of £180,933, and net cash received from investing activities of £835,782.
|
4. |
Revenue |
|
2017 £ |
2016 £ |
|
|
Revenue comprises: |
|
|
|
|
|
Licensing of seismic data |
|
- |
500,000 |
|
|
|
|
|
|
|
|
|
|
- |
500,000
|
|
5. |
Profit or loss before taxation |
|
2017 £ |
2016 £ |
|||
|
|
Fees payable to the Group's auditor and its associates: - for the audit of the Company's annual financial statements |
|
17,050 |
17,050 |
|||
|
|
- for the audit of the Company's subsidiaries |
|
12,950 |
12,950 |
|||
|
|
- other services relating to taxation |
|
11,645 |
23,660 |
|||
|
|
- all other services |
|
3,400 |
3,825 |
|||
|
|
Depreciation |
|
644 |
167 |
|||
|
|
Net foreign exchange loss |
|
371 |
23,180 |
|||
|
|
Operating lease rentals - land and buildings |
|
14,275 |
30,000 |
|||
|
|
|
|
|
|
|||
|
|
Project management & company administrative expenditure |
|
2017 £ |
2016 £ |
|||
|
|
Management & administrative expenditure paid in cash Advisor costs relating to Islandmagee Storage |
|
820,714 11,771 |
853,850 41,520 |
|||
|
|
Advisor costs relating to Strategic Review and General Meeting |
|
61,904 |
- |
|||
|
|
Non-cash items: Share options expense |
|
- |
12,470 |
|||
|
|
Exchange differences |
|
371 |
23,180 |
|||
|
|
Depreciation |
|
644 |
167 |
|||
|
|
Pre-licence costs written off |
|
- |
1,448 |
|||
|
|
|
|
|
|
|||
|
|
|
|
895,404 |
932,635
|
|||
|
|
Attributable to: |
|
|
|
|||
|
|
Continuing operations |
|
725,820 |
677,735 |
|||
|
|
Discontinued operations |
|
169,584 |
254,900 |
|||
|
|
|
|
|
|
|||
|
|
|
|
895,401 |
932,635
|
|||
|
|
|
|
|
|
|||
|
6. |
Employee information
|
|
2017 Number |
2016 Number |
|||
|
|
Average number of Executive Directors and staff |
|
3 |
5 |
|||
|
|
|
|
|
|
|||
|
|
Staff costs for the above persons and Non-executive Directors: |
|
£ |
£
|
|||
|
|
Wages and salaries |
|
446,282 |
467,848 |
|||
|
|
Social security costs |
|
48,093 |
54,111 |
|||
|
|
Defined contribution pension plan expenditure and other costs |
|
3,509 |
10,412 |
|||
|
|
Other staff costs |
|
14,020 |
14,710 |
|||
|
|
Share based payments |
|
- |
12,470 |
|||
|
|
|
|
|
|
|||
|
|
Staff costs before recoveries and capitalisation |
|
511,904 |
559,551
|
|
||
|
|
|
|
|
|
|||
|
7. |
Directors' and key management emoluments and compensation |
|
2017 |
|
Salary & fees |
Benefits |
Pension |
Total 2017 |
|
|
|
£ |
£ |
£ |
£ |
|
Executive Directors |
|
|
|
|
|
|
Adrian Pocock (appointed 27 June 2017) Andrew Hindle (ceased 27 June 2017) Stewart McGarrity (ceased 27 June 2017) Anita Gardiner (resigned 25 June 2017) Non-executive directors Peter Wale (appointed 27 June 2017) Kenneth Ratcliff (ceased 27 June 2017) Maurice Hazzard (ceased 27 June 2017) |
7,404 |
- |
- |
7,404 |
|
|
82,305 |
3,337 |
- |
85,642 |
||
|
105,010 |
2,670 |
- |
107,680 |
||
|
104,635 |
750 |
- |
105,385 |
||
|
|
|
|
|
||
|
2,468 |
- |
- |
2,468 |
||
|
28,385 13,979 |
- - |
- - |
28,385 13,979 |
||
|
|
|
|
|
|
|
|
|
|
344,186 |
6,757 |
- |
350,943 |
|
Share based payment |
|
|
|
- |
|
|
Employers national insurance contributions |
|
|
|
42,314
|
|
|
|
|
|
|
|
393,257
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
On 1 October 2015, the Company implemented a Performance Incentive Scheme under which voluntary salary reductions were taken to preserve the Group's cash resources. The scheme ended on 30 September 2016 without the crystallisation of any incentive payments under the scheme.
|
|
Aggregate emoluments above include amounts for the value of options to acquire ordinary shares in the Company granted or held by directors. No director held any Enterprise Management Incentive or other options at 31 July 2017 and no options were exercised by any person who was a director at any time during the 2017 and 2016 financial years. |
|
|||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
|
Executive Directors and directors' indemnity insurance premiums of £15,914 (2016: £15,624) were paid in respect of all directors. Since October 2015 no director has participated in the Group Stakeholder Pension Plan.
|
|
|||||||||||||||||||||||||||||
|
8. |
Share based payment plans |
||||||||||||||||||||||||||||||
|
|
A share based payment plan was created in the year ended 31 July 2008. All directors and employees are entitled to a grant of options subject to the Board of directors' approval. The options do not have a cash settlement alternative. The options granted are Enterprise Management Incentive share options for qualifying employees. The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year.
|
|
|||||||||||||||||||||||||||||
|
|
|
2017 |
|
2017 |
|
2016 |
|
2016 |
|
||||||||||||||||||||||
|
|
|
Number |
|
WAEP |
|
Number |
|
WAEP |
|
||||||||||||||||||||||
|
|
|
|
|
£ |
|
|
|
£ |
|
||||||||||||||||||||||
|
|
Outstanding at the beginning of the year |
6,379,167 |
|
0.1807 |
|
6,379,167 |
|
0.1807 |
|
||||||||||||||||||||||
|
|
Granted during the year |
- |
|
- |
|
- |
|
- |
|
||||||||||||||||||||||
|
|
Forfeited during the year |
- |
|
- |
|
- |
|
- |
|
||||||||||||||||||||||
|
|
Outstanding at the end of the year |
6,379,167 |
|
0.1807 |
|
6,379,167 |
|
0.1807 |
|
||||||||||||||||||||||
|
|
Exercisable at the end of the year |
6,379,167 |
|
0.1807 |
|
6,379,167 |
|
0.1807 |
|
||||||||||||||||||||||
|
|
The range of exercise prices for options outstanding at the end of the year was £0.10 - £2.28. The weighted average remaining option life for the share options outstanding at 31 July 2017 is 4 years (2016: 5 years). The fair value of equity settled options granted is estimated as at the date of the grant using a Black-Scholes model, taking into account the terms and conditions upon which the options were granted. |
|
|||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
9. |
Retirement benefits |
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
The Group operates a defined contribution retirement plan for all qualifying employees who wish to participate. The assets of the scheme are held separately from those of the Group in funds under the control of independent trustees. The total cost charged to expenses of £3,509 (2016: £10,412) represents contributions payable to the scheme by the Group at rates specified in the rules of the scheme for the year. As at 31 July 2017, employer and employee contributions of £Nil (2016: £585) due in respect of the current period had not been paid over to the scheme. |
|
|||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
|
10. |
Finance income |
|
2017 £ |
2016 £ |
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
|
|
Interest on bank deposits |
|
361 |
121
|
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
|
11. |
Income tax |
|
2017 £ |
2016 £ |
|||
|
|
|
The major components of income tax expense for the years ended 31 July 2017 and 2016 are: |
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
a) Income tax recognised in profit or loss |
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
Continuing operations Current income tax charge/(credit) |
|
- |
- |
|||
|
|
|
Adjustments in respect of current income tax of previous years |
|
- |
- |
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
Total Current tax |
|
- |
- |
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
Deferred tax charge/(credit) |
|
|
|
|||
|
|
|
- origination and reversal of timing differences |
|
- |
- |
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
Total deferred tax |
|
- |
- |
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
||||||
|
|
|
b) A reconciliation between tax expense and the product of accounting loss from continuing operations for the years ended 31 July 2017 and 2016 is as follows: |
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
Accounting loss before tax from continuing operations |
|
(783,459) |
(177,614)
|
|||
|
|
|
|
|
|
|
|||
|
|
|
Loss on continuing activities multiplied by the standard rate of tax (19.67%; 2016: 20%) |
|
(154,106) |
(35,524) |
|||
|
|
|
Expenses not permitted for tax purposes |
|
11,535 |
2,527 |
|||
|
|
|
Tax losses carried forward Items not subject to tax |
|
142,571 - |
67,693 (34,696) |
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
- |
- |
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
The accounting loss from discontinued operations is £180,672 (2016 - profit - £244,569). No tax charge / credit arises in 2017 due to expenses not permitted for tax purposes and losses carried forward. No tax charge arose on the 2016 profit as the profit was not subject to tax.
c) Factors that may affect the future tax charge
The Group has trading losses of £5,700,467 (2016: £4,821,243) which may reduce future tax charges. Future tax charges may also be reduced by capital allowances on cumulative capital expenditure.
No balance is recognised due to the uncertainty of future results.
|
12. |
Earnings per share |
|
2017 £ |
2016 £ |
|
|
(Loss) profit |
|
|
|
|
|
The (loss) profit for the purposes of basic and diluted loss per share being the net (loss) profit attributable to equity shareholders |
|
|
|
|
|
Continuing operations |
|
(783,459) |
(177,614) |
|
|
Discontinued operations |
|
(180,672) |
244,569 |
|
|
Continuing and discontinued operations |
|
(964,131) |
66,955 |
|
|
|
|
|
|
|
|
Number of shares |
|
|
|
|
|
Weighted average number of ordinary shares for the purposes of: Basic earnings per share
|
|
259,405,983 |
172,318,503 |
|
|
Basic and diluted earnings per share |
|
|
|
|
|
Continuing operations Discontinued operations Continuing and discontinued operations
|
|
(0.30)p (0.07)p (0.37)p
|
(0.10)p 0.14p 0.04p
|
|
|
|
|
|
|
|
|
For 2017, the share options were not dilutive as a loss was incurred. For 2016 the share options were not dilutive as the exercise price on all options in issue was in excess of the average price of the Company's shares throughout the year. |
|||
|
13. |
(Loss) profit attributable to InfraStrata plc |
|
|
|
|
|
|
The loss for the period dealt with in the financial statements of InfraStrata plc was £214,326 (2016 profit: £722,481).
|
14. |
Intangible assets - Gas Storage Development |
|
Group |
||||
|
|
|
|
£ |
||||
|
|
Cost |
|
|
||||
|
|
At 1 August 2015 |
|
5,704,951 |
||||
|
|
Additions
|
|
608,760
|
||||
|
|
Grant accrual during year (note 19) |
|
(197,597) |
||||
|
|
At 31 July 2016
|
|
6,116,114
|
||||
|
|
Additions |
|
475,188 |
||||
|
|
|
|
|
||||
|
|
Net book value At 31 July 2017 |
|
6,591,302 |
||||
|
|
|
|
|
|
|||
Capitalised finance costs
Additions during the year to 31 July 2017 include capitalised finance costs totalling £16,002 (2016 - £135,843).
Capital and other commitments
In the event that the project does not proceed to development IMSL would have an obligation to reinstate the area of the well-pad which has already been constructed. This is an unrecognised contingent liability estimated at £100,000 (2016: £100,000). At 31 July 2017 the Group had capital commitments of £nil (2016: £Nil) relating to the project.
|
|
|
|
|
|||
|
15. |
Intangible assets - Exploration & Evaluation |
|
Group |
|||
|
|
|
|
£ |
|
||
|
|
Cost |
|
|
|
||
|
|
At 1 August 2015 |
|
429,139 |
|
||
|
|
|
|
|
|
||
|
|
Additions |
|
43,158 |
|
||
|
|
Disposals |
(424,395) |
|
|||
|
|
Impairments |
(28,443) |
|
|||
|
|
|
|
|
|
||
|
|
At 31 July 2016
|
|
19,459 |
|
||
|
|
Additions Disposals Impairments
|
|
6,902 - (26,361) |
|
||
|
|
Net book value At 31 July 2017 |
|
-
|
|
||
The Company's interest in exploration licence PL1/10 was assigned on 16 February 2017 with no consideration payable. The Company's interest in exploration licence P2123 was relinquished on 19 December 2016.
The Company has a retained Net Profits Interest in each of exploration licences P1918, P2222 and P2235. No value has been ascribed to the Net Profits Interests retained on each of the licence interests as it is not possible to determine a reliable fair value for these instruments.
|
16. |
Property, plant and equipment |
|
|||
|
|
Group |
Freehold property |
Office equipment |
Total |
|
|
|
|
£ |
£ |
£ |
|
|
|
Cost |
|
|
|
|
|
|
At 1 August 2015 |
440,100 |
83,318 |
523,418 |
|
|
|
Additions |
- |
458 |
458 |
|
|
|
At 31 July 2016 |
440,100 |
83,776 |
523,876 |
|
|
|
Additions |
- |
- |
- |
|
|
|
Written-off |
- |
(83,776) |
(83,776) |
|
|
|
At 31 July 2017 |
440,100 |
- |
440,100 |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
At 1 August 2015 |
- |
82,965 |
82,965 |
|
|
|
Charge for the year |
- |
167 |
167
|
|
|
|
At 31 July 2016 |
- |
83,132 |
83,132 |
|
|
|
Charge for the year Written-off |
- - |
644 (83,776) |
644 (83,776) |
|
|
|
At 31 July 2016 |
- |
- |
- |
|
|
|
Net book value |
|
|
|
|
|
|
At 31 July 2017 |
440,100 |
-
|
440,100 |
|
|
|
|
|
|
|
|
|
|
At 31 July 2016 |
440,100 |
644 |
440,744
|
|
|
17. |
Subsidiaries |
|
|
|
||
|
|
The Company's subsidiary undertakings at 31 July 2017**, all of which are wholly owned unless indicated otherwise, are as follows: |
|||||
|
|
|
|||||
|
|
InfraStrata UK Limited |
Holding and corporate |
England |
|||
|
|
|
|
|
|||
|
|
InfraStrata UK Limited owns the following subsidiary undertakings: |
|
|
|||
|
|
Islandmagee Storage Limited (90% owned*) |
Sub surface gas storage developer |
Northern Ireland |
|||
Infrastrata UK Limited's registered office address is 200 Strand, London, England, WC2R 1DJ. Islandmagee Storage Limited's registered office address is 8 Portmuck Road, Islandmagee, Larne, Co Antrim, Northern Ireland, BT40 3TW,
* In September 2016 InfraStrata UK Limited increased its interest in Islandmagee Storage Limited from 65% to 90% effected by the issue of new shares in Islandmagee Storage Limited which reduced Moyle's interest from 35% to 10%. The transaction will mean that when the construction and operation of the facility is certain or when the current shareholders' interests in the project are monetised Moyle will no longer have to advance IMSL approximately £2m plus interest to enable Islandmagee Storage Limited to partially repay shareholders loans paid to date by InfraStrata UK Limited. As detailed in note 29, after the year end InfraStrata UK Limited increased its ownership to 100%.
Under the terms of a preliminary shareholder agreement entered into by InfraStrata UK Limited and Moyle in January 2010, InfraStrata UK Limited continues to assume one hundred percent of the risks and rewards of ownership of Islandmagee Storage Limited (including voting rights) until such time as Moyle settles its share of the intercompany loan to Islandmagee Storage Limited when the construction and operation of the facility is certain or when the current shareholders' interests in the project are monetised. Therefore InfraStrata plc includes 100% of the results, assets and liabilities of Islandmagee Storage Limited in its financial statements.
** During the year the Company's subsidiaries Portland Gas Limited, Portland Gas Storage Limited and Portland Gas Transportation Limited were dissolved. These companies had no assets or liabilities other than loans from or to other group companies which had been fully impaired in the Company's financial statements at 31 July 2016.
The Company has impaired its investment in InfraStrata UK Limited and loan receivable from InfraStrata UK Limited as required.
|
18. |
Trade and other receivables |
Group 2017 |
Group 2016 |
|
|
|
£ |
£ |
|
|
Amounts due from Group undertakings |
- |
- |
|
|
Trade receivables |
44,702 |
1,104,115 |
|
|
Other receivables |
32,708 |
37,587 |
|
|
Prepayments |
21,308 |
40,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
98,718 |
1,182,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
19. Grants and short-term borrowings
Short-term borrowings and restricted cash
In May 2015, the Company concluded a Convertible Loan Facility Agreement with Baron Oil Plc ("Baron") under which Baron provided a loan for €1.8 million (£1,400,364) to InfraStrata which was used as working capital to bridge the receipt of the CEF grant, 70% of which amounting to €1.75 million (£1,358,063) was received from the EU in May 2016 and placed into an escrow arrangement as security for the loan. In August 2016, the loan was repaid in full by release to Baron of the £1,358,063 held in escrow, a payment of £42,301 and a further payment of £136,134 for the interest on the loan which had been accrued and capitalised to intangible gas storage development costs at 31 July 2016. Following a revision to the terms of the Convertible Loan Facility Agreement announced on 26 September 2016, Baron had an accompanying option to acquire the number of ordinary shares in InfraStrata that represented 16.666% of the enlarged ordinary share capital of InfraStrata (from time to time) for a payment of £1,536,498. This option expired on 31 March 2017 without being exercised.
On 5 January 2017, the Company entered into a new secured loan agreement with Baron for a facility of up to £300,000 to provide working capital for the Group and £200,000 of this facility was drawn down during January 2017. On 29 March 2017, the Company repaid the £200,000 drawn down on the loan facility with Baron. The loan facility was cancelled and its various security arrangements were released. The Company is exposed to a contingent financial liability arising from this loan agreement - see note 20.
Grant received in advance
In May 2016, the Company signed a further grant agreement with the European Commission's Connecting Europe Facility in relation to the Islandmagee gas storage project for a maximum of €4.024 million or up to 50% of the costs of Front End Engineering and Design ("FEED") for the project. An advance of 40% of the maximum grant amounting to €1.6 million has since been held in in a Euro denominated bank account (included in Cash and cash equivalents in the statement of financial position) pending completion of the remaining 50% funding required to match the grant and is included in the statement of financial position as a current liability.
At the prevailing year end exchange rate the cash balance included in the statement of financial position is £1,432,408 (2016: £1,350,781) and the grant received in advance is £1,440,913 (2016: £1,358,886).
20. Financial liability
Following repayment and cancellation of the 5 January 2017 loan (see note 19 above) Baron remains entitled to receive an additional £200,000 (the "Additional Payment") in the event of a sale or disposal by InfraStrata or its subsidiaries, Islandmagee Storage Limited and InfraStrata UK Limited, of substantially all of their assets, which comprise interests in the Islandmagee gas storage project, and/or a change in control of the Company, Islandmagee Storage Limited or InfraStrata UK Limited, within two years from the date of the loan agreement. In the event of a partial disposal of the Company, Islandmagee Storage Limited or InfraStrata UK Limited's interests in the Islandmagee gas storage project (whereby the Company and InfraStrata UK Limited retain control of Islandmagee Storage Limited), the Additional Payment will be reduced to £100,000, with the remaining £100,000 payable in the event of a subsequent disposal or change in control of Islandmagee Storage Limited or the Islandmagee gas storage project during the two year period.
Under IAS 39 - Financial Instruments: Recognition and Measurement the Company is required to recognise the fair value of this contingent settlement financial liability at inception and to subsequently recognise the liability at its amortised cost, using the effective interest rate method, adjusting the expected future cash flows as required. Establishing the fair value of the liability and subsequently its amortised cost requires the determination of the expected future cash flows; if it is not possible to reliably estimate these, then the full contractual cash flows are used. The directors are currently unable to reliably determine whether a change in control of InfraStrata or a sale or partial disposal of its subsidiaries or their interests in the Islandmagee gas storage will take place in the period to 4 January 2019. Therefore, the full liability of £200,000 was recognised at inception as a financial liability in the consolidated statement of financial position. In establishing this fair value, discounting for the time value of money has been ignored as immaterial
At inception, IAS 39 requires that the liability initially recognised be deferred thus creating a corresponding asset which is amortised as an expense to the consolidated statement of comprehensive income over the two year period from 5 January 2017. The amortisation is undertaken on a straight line basis, save that if there is a reduction in the amortised cost of the corresponding liability arising from reductions in expected future cash flows, the amortisation will be accelerated accordingly.
Amortisation for the period 5 January to 31 July 2017 of £58,000 has been classified as a finance expense in the statement of comprehensive income. The remaining asset has been recognised as a deferred liability, with £42,000 included as a non-current asset and £100,000 as a current asset being the proportion of the liability which is expected to be amortised within twelve months.
The expect future cash flows will be reviewed at each period end and to the extent the future cash out flows are not expected to crystallise, the amortised cost of the liability will be adjusted, resulting in corresponding credits to the consolidated statement of comprehensive income. If the expected future cash flows are subsequently reinstated, the liability is increased and a debit to the consolidated statement comprehensive income will arise. As at the year end, it is still not possible to reliability determine if there will be a change in ownership of the subsidiaries and therefore the contingent liability continues to be recognised in full.
|
21. |
Cash and cash equivalents |
Group 2017 |
Group 2016 |
|
|
|
£ |
£ |
|
|
|
|
|
|
|
Restricted cash |
- |
1,358,063 |
|
|
Cash at bank |
1,548,169 |
2,454,006 |
|
|
|
1,548,169 |
3,812,069
|
|
|
|
|
|
|
|
The directors consider that the carrying amount of these assets approximates their fair value. The credit risk on liquid funds is limited because the counter-parties are banks with high credit ratings.
|
|
22. |
Trade and other payables |
Group 2017 |
Group 2016 |
|
|
|
£ |
£ |
|
|
|
|
|
|
|
Trade creditors |
71,889 |
550,253 |
|
|
Preference shares (note 24) |
12,500 |
12,500 |
|
|
Other taxation and social security |
18,949 |
707,331 |
|
|
Accruals |
46,287
|
422,971 |
|
|
|
|
|
|
|
|
149,625 |
1,693,055 |
|
|
|
|
|
|
|
|
|
|
|
|
The directors consider that the carrying amount of trade and other payables approximates to their fair value. |
||||||
|
|
|
|
|
|
|
|
|
|
23. |
Financial assets and liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group's financial instruments comprise cash and cash equivalents, short-term borrowings and items such as trade and other receivables and trade and other payables which arise directly from the Group's operations. The Group's operations expose it to a variety of financial risks including credit risk, interest rate risk, foreign currency exchange risk and liquidity risk. Given the size of the Group, the directors have not delegated the responsibility of monitoring financial risk management to a subcommittee of the Board. The objectives of the financial instrument policies are to reduce the Group's exposure to financial risk. The policies set by the Board of directors are implemented by the Company's finance department.
Credit risk
The credit risk on liquid funds is limited because the Group policy is to only deal with counter parties with high credit ratings. With the exception of the funds held in an escrow account and classified as restricted cash at 31 July 2016, the Group has held all funds in Bank of Scotland during the last two years. In the directors' view there is a low risk of the bank holding the Group's funds at year end failing in the foreseeable future.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
|
|
|
Group 2017 |
Group 2016 |
|
|
|
£ |
£ |
|
|
Trade and other receivables |
70,349 |
- 1,141,702 |
|
|
Due from subsidiary undertakings |
- |
- |
|
|
Restricted cash |
- |
1,358,063 |
|
|
Cash and cash equivalents |
1,548,169 |
2,454,006 |
|
|
|
|
|
The reconciling items between the trade and other receivables presented above and that presented in note 18 are VAT receivable and prepayments. No receivables are past due but not impaired.
Interest rate risk
The Group is exposed to interest rate risk as a result of positive cash balances, denominated in sterling and in euros, which earn interest at variable rates. Any surplus cash is held on deposit with Bank of Scotland. An effective interest rate increase or decrease by 1% on the cash and cash equivalents balance at year end would result in a before tax financial effect of an increase or decrease of £15,482 (2016: £24,540).
As disclosed in note 19, the Group's short-term borrowings at 31 July 2016 bore interest at a fixed rate of 8% and were repaid in full with interest in August 2016.
Foreign currency risk
At 31 July 2017, €1.6 million (£1,440,913) received in advance in respect of a grant for the FEED study on Islandmagee gas storage project was held in a Euro denominated bank account pending completion of the remaining 50% funding required to match the grant. The value of the amount received will be converted into sterling when the match funding has been secured to pay for suppliers on the FEED study in sterling.
|
The currency risk disclosures are as follows: |
|
||||||||
|
|
|
|
|
|
|||||
|
|
|
Group 2017 |
|
Group 2016 |
|
||||
|
|
|
|
|
|
|||||
|
|
|
USD |
|
USD |
|
||||
|
|
Cash and cash equivalents |
- |
|
£1,046 |
|
||||
|
|
|
|
|
|
|
||||
|
|
|
Euros |
|
Euros |
|
||||
|
|
Cash and cash equivalents |
£1,432,408 |
|
£1,350,781 |
|
||||
|
|
Grant received in advance |
(£1,440,913) |
|
(£1,358,886) |
|
||||
|
|
Short term convertible borrowings and accrued interest |
- |
|
(£178,435) |
|
||||
|
|
|
|
|
|
|
||||
|
|
The book value of financial assets and liabilities disclosed is considered to be equal to fair value. |
|
|||||||
|
|
|
||||||||
|
|
Liquidity risk
The total carrying value of Group and Company financial liabilities is disclosed in note 21 (trade and other payables) and in note 20 (financial liability). The Company seeks to issue share capital or dispose of assets when external funds are required. The reconciling items between the contractual maturities presented below and that presented in notes 21 and 20 are taxes and accruals. The following table shows the contractual maturities of the Group's and Company's financial liabilities, all of which are measured at amortised cost.
|
||||||||
|
|
|
Group 2017 |
Group 2016 |
|
|
|
£ |
£ |
|
|
Trade & other payables |
|
|
|
|
Within one month |
71,889 |
550,253 |
|
|
More than one month less than one year |
- |
- |
|
|
Short term Borrowings |
|
|
|
|
Within one month |
- |
1,400,364 |
|
|
More than one month less than one year |
- |
- |
|
|
Financial liability (Note 20) |
|
|
|
|
Within one month |
- |
- |
|
|
More than one month less than one year |
|
- |
|
|
More than one year
|
200,000 |
- |
|
|
|
||
|
24. |
Share capital and redeemable preference shares |
|
|||
|
|
|
|
|
||
|
|
Share capital classed as equity |
2017 |
2016 |
||
|
|
|
Number |
£ |
Number |
£ |
|
|
Ordinary shares of 0.01p |
376,041,599 |
37,604 |
- |
- |
|
|
Ordinary shares of 1p |
- |
- |
188,041,599 |
1,880,416 |
|
|
Deferred shares of 1p |
895,424,391 |
8,954,244 |
895,424,391 |
8,954,244 |
|
|
Second deferred shares of 0.01p |
18,616,118,301 |
1,861,612 |
- |
- |
|
|
|
|
|
|
|
|
|
|
|
10,853,460 |
|
10,834,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
Allotted, called up and fully paid Ordinary shares |
1p Ordinary Shares |
0.01p Ordinary Shares |
Total |
||
|
|
|
Number |
£ |
Number |
£ |
£ |
|
|
At 31 July 2015 |
151,991,599 |
1,519,916 |
- |
- |
1,519,916 |
|
|
|
|
|
|
|
|
|
|
Issue of 1p ordinary shares |
36,050,000 |
360,500 |
- |
- |
360,500 |
|
|
|
|
|
|
|
|
|
|
- At 31 July 2016 |
188,041,599 |
1,880,416 |
- |
- |
1,880,416 |
|
|
|
|
|
|
|
|
|
|
Share subdivision |
(188,041,599) |
(1,880,416) |
188,041,599 |
18,804 |
(1,861,612) |
|
|
Issue of 0.01p Ordinary shares |
- |
- |
188,000,000 |
18,800 |
18,800 |
|
|
|
|
|
|
|
|
|
|
At 31 July 2017 |
- |
- |
376,041,599 |
37,604 |
37,604 |
|
|
|
|
|
|
|
|
|
|
Allotted, called and fully paid Deferred Shares |
1p Deferred Shares |
0.01p Second Deferred Shares |
Total |
||
|
|
|
Number |
£ |
Number |
£ |
£ |
|
|
At 31 July 2015 and 31 July 2016 |
895,424,391 |
8,954,244 |
- |
- |
8,954,244 |
|
|
|
|
|
|
|
|
|
|
Share subdivision |
- |
- |
18,616,118,301 |
1,861,612 |
1,861,612 |
|
|
|
|
|
|
|
|
|
|
At 31 July 2017 |
895,424,391 |
8,954,244 |
18,616,118,301 |
1,861,612 |
10,815,856 |
|
|
|
|
|
|
|
|
|
|
Redeemable preference shares of £1 each (classified as liabilities)
|
|
Allotted called up and part paid |
|
||||||
|
|
|
|
|
|
Number
|
£ |
|
|||
|
At 31 July 2017, 2016 and 2015 |
|
|
|
|
50,000 |
12,500 |
|
|||
On 31 January 2017, following approval at the Company's AGM, the existing ordinary shares of 1 pence each were subdivided into 1 New Ordinary Share of 0.01 penny and 99 Second Deferred Shares of 0.01 penny each.
Neither the Deferred Shares nor Second Deferred Shares carry any rights to vote or any dividend rights, are not admitted to AIM and holders will only be entitled to a payment on return of capital or winding up of the Company after each of the holders of the Ordinary Shares has received a payment of £10,000,000 on each such share.
On 3 March 2017, the Company issued 162,000,000 shares of 0.01 penny each at 0.5 pence to raise £810,000, before expenses, to institutional and other shareholders. The expenses of the issue totalled £55,580.
On 1 June 2017, the Company issued 26,000,000 shares of 0.01 penny each at 0.5 pence to raise £130,000, before expenses, to institutional and other shareholders. The expenses of the issue totalled £9,191.
Details of share issues post year end are given in note 29.
Preference shares
The preference shares carry the right to an annual dividend out of distributable profits of 0.00001% per annum on the amount for the time being paid up on each such share and do not carry any voting rights. The Company may redeem the shares at any time by giving preference shareholders one week's notice. Preference shareholders may require the Company to redeem their shares at any time by giving six months' notice. In each case, any redemption is at par and is subject to the provisions of the Companies Act. The preference shares are treated as short-term liabilities and included within trade payables.
Authorised share capital
The Company's articles do not specify an authorised share capital.
Objectives, policies and processes for managing capital
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to achieve its operational objectives.
The Group defines capital as being share capital plus reserves. The Board of directors monitors the level of capital as compared to the Group's forecast cash flows and long term commitments and when necessary issues new shares. Dilution of existing shareholder value is considered during all processes which may result in an alteration of share capital in issue.
Ordinary share capital in issue is managed as capital and the redeemable preference shares in issue are managed as current liabilities.
The Group is not subject to any externally imposed capital requirements.
|
25. |
Merger reserve |
|
|
|
|
|
|
|
|
Group
The merger reserve represents the difference between the nominal value of the shares issued on the demerger and the combined share capital and share premium of InfraStrata UK Limited at the date of the demerger.
|
||||||
|
26. |
Share based payment reserve |
|
|
|
|
|
|
|
|
The reserve for share based payments is used to record the value of equity settled share based payments awarded to employees and transfers out of this reserve are made upon the exercise or expiration of the share awards. The transfer in of £12,470 in 2016 related to the share option expense for the year. There were no options forfeited or exercised during the year (2016: £nil). For further information on the share based payment scheme see note 8.
|
||||||
|
27. |
Operating lease commitments |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
|
Future minimum rentals payable under non-cancellable operating leases as at 31 July are as follows: |
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
Land and buildings |
Land and buildings |
||||||||||
|
|
|
|
|
|
2017 |
2016 |
||||||||||
|
|
|
|
|
|
£ |
£ |
||||||||||
|
|
Amounts due: |
|
|
|
|
|
||||||||||
|
|
Within one year |
|
|
|
- |
15,000 |
||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
|
Operating lease payments represent rentals payable by the Group for office premises. The lease was terminated in January 2017. |
|||||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
28. |
Related party transactions |
|
||||||||||||||
|
|
Until January 2017 InfraStrata plc leased the Group's head office from Toffee Limited, a company of which Andrew Hindle (director of InfraStrata plc until 27 June 2017) is a director and shareholder. The rent and service charges paid during the period were £14,275 (2016: £32,500) and an additional £4,460 was paid for associated charges. The balance outstanding at 31 July 2017 was £nil (2016: £nil).
|
|||||||||||||||
|
29. |
Events after the reporting period
On 20 October 2017, InfraStrata completed a placing of 125,000,000 new ordinary shares of 0.01 penny at an issue price of 0.4 pence each to raise £457,586 after expenses. This was made in order to meet working capital expenses.
The Company has recently announced a placing to raise £375,000 before expenses. Once completed, the funds from this placing will fund the Company's minimum levels of corporate costs and care and maintenance costs on the Project to the end of November 2018.
In November 2017 a new non-executive board were announced. The chairman's statement and the Strategic report note activities since the financial year close of 31st July 2017.
In December 2017, the Company's wholly-owned subsidiary, InfraStrata UK Limited increased its ownership in IMSL from 90% to 100% by acquiring the remaining 10% interest from Moyle Energy Investments Limited.
The European Union confirmed the extension of the EU Grant, originally set to expire in December 2017, for an additional year until December 2018, together with the renewal of the Project's status as a Project of Common Interest (PCI).
|
|
|
|
30. |
Control of the Group |
|
|
|
|
|
|
|
|
|
There is no ultimate controlling party of InfraStrata plc. |
||
This information is provided by RNS
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