TIDMGRPH
RNS Number : 1417P
Graphene NanoChem PLC
14 November 2016
14 November 2016
Graphene NanoChem plc
(the "Company" or the "Group")
Preliminary unaudited results for the twelve months ended 31
December 2015
Graphene NanoChem (AIM: GRPH), the international provider of
nanotechnology performance enhancing solutions for global
industries, announces its unaudited preliminary results for the 12
months ended 31 December 2015. These results relate to business
conducted by the Group, trading as Graphene NanoChem plc (the
"Company" or the "Group").
Re-establishing a Strong Foundation
-- Employing nanotechnology to enhance chemical & water
treatment solution performance and enable cost reduction giving a
unique value proposition.
-- Proven success in commercialising chemical & water
treatment solution applications with expansion into high margin
lines.
-- Partnerships with established industry players resulting in
stronger sales channels providing near and long term revenue
visibility.
-- Debt rationalization plan with Financial Institutions (FI) well progressed.
Financial Highlights
-- Group revenue decreased to GBP8.0million (2014: GBP48.3 million)
-- Gross loss of GBP0.6 million (2014: Gross Profit GBP1.6 million)
-- Impairment charges of GBP25.7 million (2014: None)
-- Loss before tax of GBP34.1 million (2014: GBP6.8 million)
-- Loss per share of 28.6p per share (2014: 5.7p)
-- Cash and cash equivalents at the end of the period was GBP0.6m (2014: GBP2.2m)
-- See note 2.2 to the financial statements in relation to going concern
Other Highlights
Business and Operational Highlights
-- US$28 million contract award or the deployment of Drilling
Solutions with a major national oil and gas company for an initial
period of three years.
-- 9 months testing for the certification of the biodegradable
status of Drilling Solutions (PlatDrill R Series) successfully
completed by the National Institute of Oceanography, India -
exceeding industry standard.
-- Successful deployment downhole of drilling solutions
HypeRGraph lube for a National Oil Company
-- Completed development of the integrated water treatment
technology offering PlatClean for diverse water industry use.
-- Began the structured exit from the low margin fuel additive
and crude palm oil (CPO) refining businesses.
-- Reduced the Group headcount from 131 to 45 personnel in line
with the realignment of business portfolio focusing on solid,
higher margin and longer term opportunities in chemicals and water
treatment solutions.
Post Period Events
Group Operations
-- The Group announced on 11(th) April 2016 a business
reorganization strategy.
-- Debt rationalization plan with FI undertaken as follows.
Note that all Sterling debt figures in the description below
have been calculated on the basis of exchange rates as at 31
December 2015.
a) Primary short term financier - Malaysian Debt Ventures Berhad
(MDV) - GBP14.6 million or 57% of the Groups FI debt is to MDV. The
Group has restructured the short term debt into a seven year long
term debt schedule as follows with customary conditions precedent
to be met;
(i) A two (2) year payment moratorium up to 31 December 2017;
(ii) An extended maturity date from November 2015 to December
2021; and
(iii) A pay down in the aggregate amount of GBP315,000 only in
2016 and 2017 respectively.
The Group has made the repayment of GBP315,000 for 2016 and the
successful restructuring bodes well for the Group as the moratorium
of payment and long-term repayment schedule enables the Group to
utilise operating cash flows for advancement of the Group's
businesses rather than payment of debt in the near term.
b) Primary long term debt financier - Bank Pembangunan Malaysia Berhad (BPMB)
In lieu of the Group's exiting from the fuel additive business,
non-core assets of the fuel additive business are in the process of
being sold for repayment of GBP9.2 million or 36% of the FI
debt.
Accordingly during the period, BPMB appointed Messrs. KPMG to
act as Receiver Managers for the process under a wholly owned
subsidiary of the Group namely Platinum Green Chemicals Sdn
Bhd.
In view of the exit from the fuel additive business, the
directors deemed it prudent to write down the asset values to its
force sale value as determined by a prominent valuer approved by
BPMB.
The assets as determined by the valuer have a force sale value
of GBP13.1 million providing 1.4 times cover over the debt to
BPMB
Similarly to the restructuring of the MDV debt, the repayment of
debt to BPMB via the proceeds from the sale of non-core assets will
alleviate cash flow constraints for the Group whilst focusing the
operating cash flows for advancement of the Group's businesses.
c) Secondary long term debt financier - Bank Kerjasama Rakyat Malaysia Berhad (BKRMB)
With the Group's exit from the crude palm oil (CPO) refining
business, the Group has been in engagement with BKRMB in
negotiating for the GBP1.7 million or 7% of FI debt to be repaid
via the sale of the non-core assets of the CPO refining
business.
To date, the respective parties are negotiating a settlement
arrangement that amongst others provides the Group a window of 12
months for the sale of the assets prior to repayment of outstanding
debt.
In view of the exit from the CPO refining business, the
directors deemed it prudent to write down the asset values to force
sale value as determined by a prominent valuer approved by
BKRMB.
The assets, as determined by the valuer, have a force sale value
of GBP5.1 million providing 3 times cover over the debt to
BKRMB.
The Group is confident that a settlement arrangement can be
concluded in the final quarter of 2016.
-- The Group has exited the low margin fuel additive and crude
palm oil (CPO) refining businesses (non-core businesses).
-- Significant cost cutting measures have been implemented
during the period and the Group's headcount has been reduced from
45 at 31 December 2015 to 21 to date.
-- In line with the business reorganization and the exit from
the non-core businesses, 2 subsidiaries of the Group namely
Platinum Nanochem Sdn Bhd and Platinum Green Chemicals Sdn Bhd are
in the process of being wound up.
-- Strategic focus by the Group is currently on the 3 high
margin platforms, the nanofluids (oil field chemicals) and water
treatment, and enhanced building materials offerings with strategic
partnerships and alliances entered into and efforts are continuing
in building other long term sustainable partnerships and
alliances.
Jespal Deol, Chief Executive Officer of Graphene NanoChem,
commented: "During the course of 2015, Graphene Nanochem has been
highly active in continuing to build its position as a significant
international provider of nanotechnology performance enhancing
solutions for global industries. Given our exposure to the troubled
oil and gas industry, we have spent this past year executing a
holistic turnaround plan to withstand the pressure of operating in
this challenging environment.
To this end, we have enjoyed a number of successes during the
period including improving our operational capabilities,
streamlining and recalibrating our business portfolio to focus on
higher margin opportunities and expanding our application reach
into areas such as water treatment which should help position us
for future growth in 2016 and beyond.
We are successfully implementing the holistic restructuring plan
that began in 2015 that focuses on growth strategies on the long
term, higher margin businesses. We are pleased to announce that we
have made significant progress with the debt rationalization plan
which, on successful completion, will significantly reduce the
Group's debt balance and interest rate expense which will have a
positive impact on the Group's balance sheet and cash flow. Our
cash position however remains challenging and we intend to
undertake a fundraise in the near future to strengthen the Group's
financial position and remain a going concern.
The trading suspension of GRPH shares occurred due to the longer
time that was required for completion of the audited financial
statements of the company for 2015 a direct result of the then
ongoing debt restructuring exercise that has subsequently been
successfully addressed and which is anticipated to be
unconditionally complete by year end. The Company will update on
the status of the trading suspension in due course.
We have had significant wins and are making good progress in
building the market for our solutions with our joint venture
partners. We have developed the market foundation for our
end-to-end Nanofluids solutions for oilfield chemical processes i.e
oil and gas drilling, recovery and production processes and have
now expanded our solution offerings into the Water and Polymer
industries.
The reorganized Graphene NanoChem is well positioned to advance
across its chosen sectors and markets. However there is still
considerable work to be done for the Group to realise the full
potential of its business platforms, the key being securing more
contract wins. We are focused towards achieving that through
existing project pipelines that we are currently working on and new
tenders and bids that we are participating in and that we believe
we have the opportunity to capitalize and build on."
Annual Report and Accounts and Annual General Meeting
The Company's annual report and accounts has been sent to
shareholders and shall shortly be made available on the Company's
website. The Company's annual general meeting will be held at 10.00
a.m. on 6 December 2016 at Academy House, London Road, Camberley,
Surrey GU15 3HL.
In accordance with AIM Rule 20, the Group's Annual Report and
Accounts for the year ending 31 December 2015, which incorporates
the Notice of AGM and Form of Proxy, has been posted to
shareholders and will shortly be made available on the Company's
website at: www.graphenenanochem.com.
For further information:
Graphene NanoChem Tel: +603 2282 3080
Jespal Deol, Chief Executive
Officer
Panmure Gordon (NOMAD and Broker)
Adam James / Tom Salvesen Tel: +44 (0) 20 7886
2500
Yellow Jersey PR
Dominic Barretto / Charles Goodwin Tel: +44 20 3735
/ Harriet Jackson 8825 / +44 7544275882
The information communicated in this announcement is inside
information for the purposes of Article 7 of Market Abuse
Regulation 596/2014 ("MAR").
Chairman's Statement
In 2015, the oil and gas industry faced the most severe cyclical
downturn in decades, affecting businesses across the spectrum and
caused disorientation for many industries. Graphene NanoChem is no
exception to this as we endured the continuing impact of the global
downturn of the industry and this has been reflected in the current
position of the Group. In addition to that the Group also faced the
internal challenges of managing its debt position.
In every challenge there also lies opportunity, and as a truly
flexible and entrepreneurial company, we adapted and adjusted. In
these challenging times, Graphene NanoChem's strength rests in our
ability to make the necessary adjustments to our business and
strategy, to concentrate on our key assets and to focus on new
opportunities. Following a comprehensive review of our business and
strategy, we developed a turnaround plan and started executing firm
actions and steps to reorganize our business, address our debt
position, reduce costs and rebuild our business.
We took the decision to begin exiting the asset-heavy, low
margin, fuel additive and crude palm oil businesses which
contributed significantly to reducing our cost base. In line with
this and international accounting standards, the said assets were
impaired to their forced sales values along with intangible assets
and goodwill, incurring impairment charges of GBP25.7 million for
the year. To align our cost structure and strengthen our delivery
capability, we continue to focus on the strategic outsourcing of
our non-core operations that enables an asset-light model in the
execution of the business and allow us to focus on value-add
integration. The result of these activities is a leaner and more
efficient Graphene NanoChem that focuses on its fundamental
competence of delivering disruptive, high margin applications of
our platform nanotechnologies.
The invaluable support of our financiers during this financial
year has been fundamental in allowing us to implement our
restructuring plan and to move to the next phase of our business
recalibration plan. A key milestone achievement to our turnaround
plan is the restructuring of our short-term debt of c. GBP14.5
million to Malaysia Debt Ventures Berhad into a longer term debt
repayment structure mapped against the Group's new business plan.
In conjunction with our secured financiers efforts are ongoing for
the disposal of our non-core assets to repay the Group's remaining
bank debt, as well as seeking additional equity finance in the near
term to continue trading as a going concern.
Looking at the business front, we are introducing new products
into the highly fragmented oil and gas industry - a new entrant in
a seasoned market space. That, by itself, has its own set of
challenges and more so in an industry with underlying rhythms which
move in terms of years and not months. For example, securing a well
for field trials alone would take between 8 - 15 months. The
downturn in the oil and gas market at this critical juncture in our
market-building phase no doubt has a double impact to the Group.
Delays and deferments in capital investments as the industry
struggles to establish the new 'normal' has had significant
financial impact to the Group. However, despite the difficulties in
the industry, we continue to secure new wins which I believe are
significant achievements in the current industry climate. We have
achieved considerable success in the field trials of our nanofluid
solutions with oil supermajors. These successes, which have
translated into commercial orders, validates our proposition of
increasing production, improving efficiency, reducing cost and
protecting the environment, and more importantly creating critical
market awareness and field track record for our products. This is
the right start towards market building and will augur well for us
when the industry recovers. Through our partnership with the Scomi
Group, we continue to enjoy global presence at 48 locations in 22
countries including the Middle East and Africa, where rapid future
growth is projected and we intend to continue building on that.
Graphene NanoChem remains unique, offering technology platforms
that we can provide across diverse applications in multiple
industries and we are keeping a key eye on the longer term as we
continue to work on new applications in lucrative areas and
sectors.
The challenging market condition has prompted us to prioritize
and accelerate focus our next growth opportunities in the Water
industry. We see significant advantage in our capability to enhance
existing products and solutions with our platform nanotechnologies,
and we continue to work in collaboration and partnership with
industry veterans, where necessary.
In March 2016, our water solutions platform was formally
launched at the Offshore Technology Conference. This marked our
expansion into the leading disruptive commercial applications of
our platform nanotechnologies. In Q2 2016 we secured the first
contract for our water treatment solution, for a greenfield
petroleum refinery project in Thailand. Water treatment is a
natural extension of the diverse applications of our nanotechnology
solutions within the equally diverse oil and gas market segments.
We have now expanded into a fully integrated water treatment
solutions supplier for multiple industry use. We are taking a more
diverse approach in our water treatment applications - we target
multiple market segments and geographical locations and work with
value-adding partners to secure market opportunities and deliver
integrated solutions to meet project requirements. The speed at
which we have achieved this was only made possible because of the
groundwork that we have laid in previous years, working with
industry experts.
We will continue to leverage our partnership with Scomi and
other strategic partners in deploying our water treatment solutions
globally with focus in Asia, Africa and the Middle East. I am also
pleased to report that we have been selected by TecnoConsult, an
international engineering procurement and construction expert, to
be its partner for water treatment solutions. This will give the
Group to leverage over TecnoConsult's geographical presence in 3
continents, and engineering expertise in turnkey solutions
projects. Our strategic alliance with TecnoConsult is the latest
validation of our cutting edge solutions offering and the potential
of its growth.
We will need some time to close on market opportunities that we
have developed for our Water business but I believe that decisive
actions taken by our management to reorganize the business and
address the consequential impact of the market downturn,
specifically in restructuring the Group's debt, reducing costs and
diversifying business has improved the Group's prospects
considerably. Our cash position remains challenging and we will be
undertaking a fundraise in the near future to strengthen the Groups
financial position.
The markets have been harsh, but Graphene NanoChem is emerging
smarter, leaner and more cost conscious and we continue to make
progress. Whilst we can't control the economic environment, we know
that we are taking the right steps and making the right decisions
for the current environment. Through our focus on delivering better
solutions and securing new business we will continue to grow.
I must extend my sincere gratitude to all the management and
staff of Graphene NanoChem and the Board for their continued
support during this challenging period for the Group. Finally, my
particular thanks to the financial institutions that continue to
support and facilitate our business reorganisation efforts through
this difficult period.
Tan Sri Dato' Sri Abi Musa Asa'ari bin Mohamed Nor
Non-Executive Chairman
CEO's Review
Overview
The last 18 months has been challenging for Graphene NanoChem.
We entered 2015 on the back of a significant debt burden against
plunging oil prices with the industry hitting its all-time low and
going almost into a standstill. Our phase of growth, closely tied
to the troubled oil and gas industry was significantly impacted and
consequently our financial position.
Given the challenges that we have faced, we have undertaken a
comprehensive review of Graphene NanoChem's position and this has
led to a decisive plan to clearly address the challenges for
continued growth. We remain confident of the value proposition, the
growth potential and long term prospects of the business. In order
to take Graphene NanoChem forward, the following key fronts are
being addressed; firstly, the debt position of the Group; secondly,
the Group's cost base and business structure; and thirdly, the
acceleration of the diversification of its business. Pursuant to
the review of Graphene's operations and growth strategy, we have
embarked on executing a holistic turnaround plan to streamline our
business operations, lower cost and restructure our debt with the
aim of addressing these challenges and driving the growth potential
of the business to deliver value ("Turnaround Plan").
Turnaround Plan
Phase 1 of the turnaround plan was to undertake a debt
restructuring plan for both the short and long term debt of the
Group. This has meant actively engaging with our financial
institutions for the restructuring of our debt and working out a
debt settlement plan to enable the Group to conserve cash outflow
against debt repayment and deploy its funds towards stabilizing and
growing the business. It has taken much longer than we originally
expected but we are pleased to report that a significant milestone
of Phase 1 has been met with the debt restructuring approval (with
customary conditions precedent to be met by year end) by our lead
financier, Malaysia Debt Ventures Berhad ("MDV Approval") resulting
in the conversion of our short term debt into a longer term debt
with a 2 year payment moratorium coupled with a minimal fixed pay
down and a 7 year repayment tenure mapped against the business plan
of the Group ("MDV Loan"). The MDV Loan represents 57% of the total
secured bank debt of the Group.
Underpinning the Group's turnaround plan is the focus on core
value add businesses that fit our strength and growth strategy. A
key decision made to this end is the exit from our asset-heavy
low-margin fuel additive and crude palm oil refining businesses
which carries the remaining 43% of the secured bank debt of the
Group and the disposal of its underperforming assets that will
enable the Group to reduce its bank debt and focus on solid, higher
margin and longer-term opportunities in our core businesses. The
assets realization process is currently ongoing in conjunction with
the secured financiers of our non-core subsidiaries ("Non-core
Subsidiaries") including dedicated efforts to liquidate these
non-core assets which, based on written down force sale values,
provides an assumed aggregated value cover of approximately 1.4
times of the bank debt of the Non-core Subsidiaries. We will
continue to manage the process of liquidation to ensure a smooth
exit from the non-core businesses.
In Phase 2, we had concentrated on streamlining our business
structure and aligning our cost base against the new business plan.
The process commenced with our exit from the non-core businesses
resulting in major headcount and administrative cost reductions for
the Group. Parallel to this effort is our strategic move towards an
asset-light approach business model, refocusing our operations to a
value-adding process and through independent manufacturing. This
strategy eliminates the need for significant capital investment to
deliver our solutions and allows us to focus on our core competence
of value adding while protecting our growth prospects and
flexibility to continue building our business around new
markets.
To create realisable value, we have streamlined and structured
our business platforms around two areas that offer a diverse range
of applications potential - Nanofluids and Water Treatment. We have
made solid progress in both areas and although this may not be
obvious to our external stakeholders, we have enjoyed a number of
successes which will position us for growth in 2017 and beyond.
The Scomi Group remains the primary partner for our Nanofluids
applications in the Energy sector and through our Scomi
Partnership, we continue to enjoy market presence at 48 locations
in 22 countries for the deployment of our solutions. A leading
service provider for the energy industry, the Scomi Group provides
integrated oil drilling and completion services including waste
management and water treatment services to the oil and gas
industry. The current downturn in oil prices, deeper and more
prolonged than anticipated, has had a far-reaching impact on the
energy industry, which is continuing to determine the new 'normal'.
Today, we are facing close to a 60% drop in oil prices, due to an
oversupply in the market. No doubt the Group's market has been
severely impacted by the industry downturn and this has been
reflected in our revenues for the year, but we believe this hiatus
is temporary. The world's population will continue to grow,
creating long-term resource demand and, over time, we believe the
industry will right and balance itself. As an inelastic commodity,
a sudden positive snapback in prices comes with the territory. We
have built significant inroads from our successful field trials and
sales during the market downturn.We have developed the field track
record that demonstrated the technological and performance
excellence of our solutions, and hence we believe that we are well
positioned to benefit from an industry upturn.
We undertook swift action in addressing the industry hiatus by
embarking on Phase 3 of our turnaround plan to accelerate business
development efforts in expanding the applications of our solutions
in the Water industry. The global water market is currently
estimated at US$425.0 billion with strong demand for innovative
solutions that enable more efficient use of available water
resources, reusing and recycling of water to optimize and improve
water treatment processes and quality. Demand will continue to grow
with the market opportunities related to the water sector to reach
US$1 trillion by 2025.
We have made solid progress in our business development
activities in the Water sector. Scomi remains a strong partner for
the water treatment market in the energy sector and we are working
with Scomi to offer water treatment solutions for the oil and gas
sector in the Middle East region on a leasing model. At the same
time, we have developed and secured strategic partnerships with
industry stakeholders that enable us access to project-based market
opportunities and most importantly to enhance our delivery and
execution capabilities as we target to bid and secure project-based
contracts that will provide strong margins and returns to the
Group. We are continuing to work on new business development,
formalizing our partnerships and further refining our growth plans
in this sector and we hope to update our stakeholders as and when
we meet our targeted milestones in the new business.
Our turnaround plan is well underway and this has been made
possible by having a clear vision of where we want to take the
Group and rationalising our corporate structure so as to achieve
our goal in the quickest and most cost effective manner. We remain
confident in the market fundamentals, and what we have created
today is a leaner, more agile and simplified company that is now
capable of exploiting new opportunities in our markets.
Prospects
Despite ongoing challenges, we have a solid business platform to
build a future for the Group. We have had significant wins and are
making good progress in building the market for our solutions. We
have developed the market foundation for our end-to-end Nanofluids
solutions specifically within the areas of drilling, recovery and
treatment for the oilfield chemicals sector and have now expanded
our solution offerings into the Water industry with the opportunity
to leverage on our well established go-to-market infrastructure to
grow the business within our existing markets, to expand our
geographical spread and tap into new exciting market segments.
Nanofluids
In the energy industry, our Nanofluids platform comprises an
end-to-end spectrum of solutions that tackle the industry pain
points in a cost effective manner, from addressing drilling
challenges and time, recovery and production rates to regulatory
health, safety and environmental concerns associated with oil and
gas exploration and productions activities.
Having undergone rigorous testing protocols and successful field
trials with a number of oil majors and supermajors, our oilfield
products are now positioned by Scomi as the mainstream solutions
for new tenders and bids participated by Scomi. For our drilling
solutions, I am happy to report that our game changing disruptive
value proposition was field-validated in our first delivery of the
3-year contract win with Scomi in Myanmar where our product
delivered a 50% increase in drilling efficiency resulting in 40%
reduction in total drilling cost for the end customer, a national
oil company ("NOC"). This breakthrough performance have led to a
planned programme for our solutions to be deployed in other
operating geographies of the NOC, to commence with a well trial for
Thailand in 2017.
Successful trials concluded in Myanmar, Turkmenistan, Indonesia,
Vietnam and India have translated into purchase orders for our
water-based drilling fluids to replace existing product to service
ongoing drilling campaign in Turkmenistan until the end of 2017. We
anticipate that the product rollout in other trialed jurisdictions
to commence once drilling activity resumes. We have also closed our
first commercial order in Pakistan for our viscosifier this
year.
Our well simulation and recovery solution, which increases
production output without the use of hazardous and harsh chemicals,
was launched this year and is now undergoing commercial trial by an
NOC operating in Myanmar with encouraging results. We anticipate
having the opportunity to rollout our solution in other operating
locations of the NOC once the commercial trail is completed. At the
same time we are also in advanced negotiations with an NOC in India
and an international oil company operating in Turkmenistan for
deployment of our solution which will commence with well trials in
India and Turkmenistan this year.
Our field performance successes are providing us with the proven
track record hurdle demanded by the industry for mainstream
commercial deployment, strengthens our value proposition and tender
bids and shortens the time to market in this highly fragmented
industry. After the hiatus, we are today seeing indication of
activities resuming and subject to working capital availability; we
anticipate participating in 12 new oilfield tenders in the next 12
months in the South East Asia ("SEA") and the Middle East and North
Africa (MENA) regions with our proven track record.
Water
Working in collaboration with a specialized equipment
manufacturer, we apply our platform technology to tailor, customize
and integrate systems and solutions to meet the varied water
treatment, recycling and reuse needs of the energy, municipality,
power plant and industrial sectors. Our systems combine speed,
efficiency and extensiveness through a wide range of improved
processes and treatment solutions, designed in both modular and
centralized form to enhance productivity, reduce cost and ensure
environmental compliance for all aspects of water.
Our strategy is to focus on:
-- smaller to mid-sized markets where we have the competitive
advantage in technology and there is a niche unaddressed space in
which larger companies are not active in; and
-- geographical locations where we have developed local
partnerships and where we believe there are tremendous
opportunities and growth potential.
Key regions that we are currently developing are Southeast Asia,
South Asia, the Middle East North Africa (MENA) and the African
regions, for the following market segments:
(a) Produced & Industrial Water
For upstream oil and gas application, we are collaborating with
Scomi to capitalize on its captive drilling waste management
markets and our solution was formally launched in March 2016 at the
Offshore Technology Conference Asia to well-received industry
participants. Our partnership with Scomi further enables us to
combine our technology offering with in-depth industry expertise
and on-site services delivered by Scomi for each commercial
deployment providing us, with the ability to offer an attractive
value proposition for our environmental solutions and structuring a
recurring revenue model-base business platform for this market
segment. We are making positive inroads into the Middle East
markets and are currently at the technical data evaluation stage
with 2 NOCs for the customization of our modular produced water
solutions for offshore rigs and platforms operated by the NOCs in
the MENA region.
In downstream applications, our non-toxic biological pathway in
wastewater treatment has been selected as part of an integrated
water treatment solution for a greenfield petrochemical refinery
complex in Thailand with the letter of award issued in Q3 2016, a
further validation of our innovative solution offering in water
treatment.
Parallel to this, we are also in early stage discussion with an
international gas processing company operating in Egypt to develop
an integrated on-site wastewater treatment for a gas-processing
refinery on a design-build-own-operate-transfer model. The
wastewater is currently transported on daily basis for treatment at
offsite location and our solutions would eliminate costly haulage
expenses and environmental risk of spillage and non-compliance.
(b) Municipalities/Utilities
On the municipal side, we are working on three different
geographical-based fronts, namely, drinking water treatment, sewage
water treatment and desalination. Key to our execution strategy is
the local and international industry partnerships that we developed
to allow an integrated solutions offering on various business
models and structures from turnkey to build-own-operate-transfer
models.
Drinking Water Treatment
Our partnership model has enabled us to be pre-qualified for an
international government tender for water supply and distribution
system in South Asia and we expect to participate in the upcoming
tender to be issued in Q4 2016 in which, through our
partnership-consortium, we intend to offer a modern
decentralized-based water system to address the need for access to
clean drinking water for the region.
Sewage Water Treatment
Our alliance with Millennium Engineering Corporation, a process
water treatment specialist avails us with the delivery arm to
pursue and address the sewage water treatment markets which we are
developing in South Asia.
Desalination
For desalination opportunities, we have entered into a strategic
alliance agreement with Tecnoconsult International, an
international engineering procurement and construction expert in
turnkey solutions projects with geographical presence across 3
continents to design, develop and implement integrated customised
solutions to treat local source water and provide high purity water
for the region. Together with TecnoConsult, we have identified
project pipelines in MENA and Africa that we intend to develop and
pursue within the next 3 years.
Global water consumption doubles every 20 years. Today, water
scarcity, changing demographics, declining water quality, stringent
regulations and climate change impact have become major issues in
the global water sector, driven by rising demand due to population
and economic growth. The global water market is currently estimated
at US$425.0 billion with strong demand for innovative solutions
that enable more efficient use of available water resources,
reusing and recycling of water to enhance the quality of drinking.
Demand will continue to grow with the market expecting to reach
US$1 trillion by 2025 and leveraging on its technology platform,
Graphene NanoChem intends to capitalize on the opportunities to
address these water-related challenges focusing on speed, size and
cost reduction offered by its solutions.
Our key focus areas are the restructuring of bank debt that has
been progressing well, the advancement of the Nanofluids business
and the Water treatment business through strategic partnerships,
and a fundraise to recapitalize the Group.
We are confident that the measures that we have undertaken
enables the reorganized Graphene NanoChem to be well positioned to
advance across its chosen sectors and markets. Considerable work is
to be done for the Group to realise the full potential of its
business platforms, the key being securing more contract wins. We
are focused towards achieving that through existing project
pipelines, new tenders and bids that we are participating in.
Whilst no guarantees can be given that this stage, we anticipate to
meet customary conditions on the approved Phase 1 of the debt
restructuring by year end. Approval and completion of the Phase 2
debt restructuring and seeking of additional equity finance are
also expected by year end, in order to continue trading as a going
concern. Please refer to note 2.2 to the financial statements in
regards the material uncertainty over the Group's ability to
continue as a going concern.
Whilst cautious, we are optimistic on the market opportunities
and confident in the fundamentals of our strategy and look forward
to sustained earnings in the near future.
Dato' Jespal Deol
Chief Executive Officer
Business overview
Fiancial Review
Overview
Faced with macro-economic challenges of a global downturn in the
oil and gas markets in 2015, the Group has been taking decisive
action in reducing its cost base and recalibrating and streamlining
its portfolio of businesses to maximize growth opportunities. Our
focus has been on a holistic turnaround plan which includes debt
restructuring, reducing headcount and diversification from the
traditional low margin high volume fuel additive business to build
future foundations with new high margin technologies.
The Group's structured exit from the low margin, high volume
fuel additive and crude palm oil refining businesses began in 2015,
which is not expected to have any significant growth in margins.
This structured exit contributed to the lower revenues for the year
of GBP8.0 million. The 2nd phase of the proposed exit, is the
realisation of the assets and closure of the related subsidiaries
in the most expedient and efficient manner. In line with the
proposed exit and closure of subsidiaries, the Group incurred
GBP25.7 million in impairment charges on the assets of those
businesses for the year that contributed to the overall loss
attributable to shareholders of GBP32.9 million.
A key focus for the Group during the year was the holistic
restructuring of debt (with customary conditions precedent to be
met by year end 2016) mapped against the recalibrated business
plans of the Group. The Group successfully restructured c. GBP14.5
million in short term bank debt due in 2015 into a 7 year long term
debt schedule by extending the maturity date to December 2021, a
two year payment moratorium and payment in the aggregate amount of
GBP0.315 million in 2016 and 2017, effectively reducing the Group's
short and immediate term cash pressure within a challenging
operating environment amidst the oil and gas industry downturn. The
Group has made the GBP0.315 million payment for 2016 to date.
The c.GBP14.5 million in bank debt constitutes approximately 57%
of the Group's total debt to secured financiers and on the heels of
this success, the Group has progressed the second phase of its debt
restructuring plan with its remaining secured financiers, for the
settlement of its balance of secured debt of approximately GBP10.9
million (at a current average effective interest rate of 7.3%)
through the planned realisation and disposal of its non-core assets
and the utilisation of proceeds thereof towards reducing the
Group's term loan debt. Such non-core assets include the fuel
additive assets and the palm oil refinery. These non-core assets
have a written down force sale value of GBP18.2 million providing
an assumed c.1.4 times cover ratio over the outstanding debt.
The successful implementation of the restructuring plan, by year
end 2016 is expected to significantly reduce the Group's debt
balance and interest rate expense, which will have a positive
impact of strengthening the Group's balance sheet. Further, the
utilization of operating cash flows in the near term for
advancement of the recalibrated business plan rather than repayment
of debt obligations, bodes well for the Group as it focuses on
available resources and growth strategies on long term, higher
margin business opportunities.
In line with the reorganization of the Group, GNC is in the
process of winding up 2 non-core subsidiaries namely Platinum
Nanochem Sdn Bhd and Platinum Green Chemical Sdn Bhd;
1) Platinum Green Chemicals Sdn Bhd (PGC) winding up
KPMG Deal Advisory Sdn. Bhd. was appointed as receivers and
managers of Platinum Green Chemicals Sdn. Bhd. The appointment was
made by the Bank Pembangunan Malaysia Berhad via the Security Deed
and Debenture held and pursuant to Sections 188(1), 189(1) and
189(2) of the Malaysian Company Act 1965. Subsequent to this a
further winding up order for PGC via Section 218 of the Malaysian
Companies Act 1965 was received on 1 August 2016.
2) Platinum Nanochem Sdn Bhd (PNC) winding up
15 July 2016, a winding up order was received for Platinum
Nanochem Sdn. Bhd., a wholly owned subsidiary of Graphene Nanochem
Sdn. Bhd. pursuant to Section 218 of the Malaysian Companies Act
1965.
The proposed exit from the fuel additive and palm oil refining
businesses are not anticipated to have any material impact on the
Group's core business portfolio, consisting of the oilfield
chemicals and water solutions businesses, in which the Group is
continuing to have strong market traction and growth
opportunities.
In spite of the challenging period of the oil and gas industry,
compounded further by the financial restructuring undertaken, the
Group has delivered on its two core near term strategies:
-- establishing market access and presence in 48 locations and
22 countries with engagement, contracts, purchase orders and
upcoming tenders for Nanofluids through its Scomi Joint Venture,
negating the need to incur cost that would otherwise be required;
and
-- the launch of the enhanced water treatment solution platform
with marketing efforts focused towards securing early wins.
Operationally, 2016 continues to be a period of market building
for the Group and a number of commercial opportunities have been
identified to increase sales volumes and expand market reach
particularly in light of the urgent needs for water treatment
solutions and significant progress is being made.
For the larger water treatment projects currently pursued, the
Group is looking at various methods of financing including off
balance sheet structures.
Looking further ahead, improvements in key financial metrics can
be achieved and the deployment of our partnership based market
access strategy will continue to strengthen the business and
enhance shareholder returns. After a difficult year, the business
has been right sized with personnel reduction from 131 to 21
persons to date, is leaner and well positioned to capitalize upon
future prospects in the two large markets in which the Group
operates.
Operations
Revenue for the period decreased to GBP8.0 million in lieu of
the proposed exit from the high volume, low margin fuel additive
business.
Administrative expenses increased by 24% to approximately GBP3.4
million due to unfavourable foreign exchange movements during the
year. Finance costs in the period also decreased by 26% to
approximately GBP1.8 million. This was largely due to the debt
restructuring and payment and interest moratoriums given by one of
the Groups lenders given during the year.
Capital expenditure and product development expenses during the
year decreased by 99% to GBP0.7 million reflecting the completion
of the development phase for the current suite of products and
manufacturing capability.
Available cash and cash equivalents at year-end were
approximately GBP0.6 million, to be used for continued deployment
in operations
2016 Outlook
The Group will look to ensure a strengthened balance sheet to
reflect the recalibrated portfolio of businesses, through the
realisation of our debt restructuring plan to improve short to
medium term liquidity and future debt balance.
As noted in note 2.2 to the financial statements, in view of the
net current liabilities and shareholders' deficiency of the Group,
the ongoing discussions with the Group's financiers and the
rationalization plan also being dependent upon the Group having
access to sufficient funds, the directors consider there is a
material uncertainty that casts significant doubt upon the Group's
ability to continue as a going concern. However the Directors
consider that it is appropriate to prepare the financial statements
of the Group and the Company on a going concern basis, and
accordingly, the financial statements do not include any
adjustments relating to the recoverability and classification of
assets and liabilities that may be necessary, if the going concern
basis of preparing the financial statements of the Group and of the
Company is not appropriate.
The Group will continue to establish a strong foundation in 2016
for both its Nanofluids and water solution business. Focusing on
achieving a resilient business model founded on high margin
products with a competitive cost profile.
We will continue to explore and develop joint ventures and new
business opportunities to deliver value to shareholders
Sushil Sidhu
Finance Director
OUR STRATEGY
Business Strategy
Graphene NanoChem's strategy is to deliver innovative, high
value high margin applications in attractive growth sectors that
will ensure sustained global growth that will translate to improved
earnings for our shareholders. The Group seeks to deliver this by
progressing the following objectives:
STRATEGIC Solutions Leading Partnership Continuous
OBJECTIVES Driven With High Model To Innovation
High Value Performance Accelerate for Sustained
Applications Green Solutions Growth Growth
------------- --------------------- --------------------- ------------------ --------------------
MEGATRS Customised Increased Global Innovation,
DRIVING best in demand business strong
GROWTH class applications, from users environment IP portfolio
manufacturing and stringent has evolved. and differentiated
know-how, regulations Amid rapid application
intellectual by regulatory change offerings
property, authorities driven to develop
platform for safe by globalisation and grow
technology and environmentally and increased long term
will be friendly business market
key to solutions complexity, platform
market that perform diversified and to
leadership as well customer increase
and increased as conventional needs and barriers
barriers products. speed, to entry.
to entry. companies
need to
respond
and adopt
accordingly.
Partnerships
and alliances
have become
an important
growth
tool to
enable
companies
to realise
market
opportunities.
------------- --------------------- --------------------- ------------------ --------------------
OUR APPROACH Investing The use The Group's We devote
in a portfolio of our approach resources
of proprietary graphene-integrated to strategic and tailor
technologies nanotechnology partnerships our innovation
aligned platform follows pipeline
to market as an enabling a strict in alignment
needs and tool to discipline. with market
requirements. deliver We focus needs as
Where necessary, differentiated on value well as
we expect applications add partnerships our expanding
to continue aligned with strong footprint
to grow to market technology and growth
by acquisition, needs. offering ambitions
adding Through or market focusing
technologies our holistic access, on higher
and applications approach, often with margin
that complement we deliver clearly markets.
the existing a complete identified
business suite of synergies
and planned solutions with our
growth that preserve existing
areas of natural businesses
the Group. resources and targeted
and protects growth
the environment. areas.
------------- --------------------- --------------------- ------------------ --------------------
Growth Strategy
Sustained growth remains an important strategic objective for
the Group and the Group intends to achieve this in the following
manner:
-- deliver quality earnings by focusing on higher margin business segments
-- develop sustained market position in high growth sectors by
leveraging on our technology platform and through continuous
innovation
-- move to an asset-light model through structured independent
manufacturing, focusing on creating and adding value
-- accelerate market penetration and expand geographical reach
through quality value-add industry partnerships
The Group will continue to focus on its core strategy of
advancing disruptive high margin applications of its platform
nanotechnologies in the markets that allows it to grow predictable
and recurring revenue streams. Breaking into the lucrative high end
of the O&G market is expected to open up extensive, long-term
global market for the Group for both its Nanofluids and Water
applications and the platform to diversify into other market
segments outside energy. With that, the Group is now moving onto
the next phase of development of market building and securing
long-term growth opportunities in its chosen industry segments.
Accordingly, the Graphene NanoChem board will continue to invest in
business and applications development and securing long-term
projects so as to deliver returns and sustained growth.
Key Performance Indicators
The Group has a range of performance indicators, both financial
and non-financial, to monitor and manage the business. These are
set at the individual customer level and for business units as well
as for the Group as a whole. The Group's key performance indicators
('KPIs') are: headline operating margin, headline operating profit,
net cash and net debt. These measures are used continually to
manage the business, improve performance and compare results
against targets.
Principal Risks and Uncertainties
Risk management forms an integral part of the business planning
and review cycle. The Directors believe in the following risks to
be the most significant for potential investors. However, the risks
listed do not necessarily comprise all of those associated
priority. Additional risks and uncertainties not currently known to
the Directors, or which the Directors currently deem not to be
significant, may also have an adverse effect on the Group and the
information set out below does not purport to be an exhaustive
summary of the risks affecting the Group. In particular, the
Group's performance may be affected by the changes in market or
economic conditions and in legal, regulatory and tax requirements.
The Group has put in place controls and strategies to minimise
these risks where possible.
Results affected by Continued Market Volatility
The general economic climate is volatile and is affected by
numerous factors beyond the Group's control, which could impact its
operations, business and profitability. These factors include
supply and demand of capital, growth in gross domestic products,
employment trends, international economic trends, currency exchange
rate fluctuations, interest rates' level, inflation rate, global
and regional political events and international events, as well as
a range of other market forces, all of which have an impact on
demand and business costs. Economic downturns, particularly in the
energy sector can adversely impact the end-users. The Group is
exposed to the consequences of fluctuation in the price of oil and
gas, as the supply and demand for oil is a key driver in the
rollout of the Group's Nanofluids solutions. O&G operators may
reduce or curtail operations if oil and gas prices fall to a level
where drilling as well as exploration and production activities
become uneconomical and this had and may continue to have, an
adverse impact on the Group's business. The Group maintains
flexibility to meet changes in demand by maintaining tight
inventory with maintaining regular contact with customers through
its partners, equipping it with the ability to assess the potential
impact and for the management to respond accordingly. The Board
monitors the situation and takes actions as required.
Reliance On Partners
The Group is reliant on its relationship with Scomi for the
commercial rollout of its Nanofluids solutions. Good progress is
being made on gaining new accounts, applications as well as
geographical reach, and ongoing activities with Scomi are currently
quite buoyant. Whilst Scomi, one of the world's leading oilfield
service company in the Emerging Markets provides a strong
go-to-market platform for the Group, the exposure to one primary
partner to market remains high. With the aim of minimising the
effect of this risk, the Group has progressed the commercial
rollout of its Water solutions into diversified markets and
geographies, some of which are independent of Scomi.
New Products, Projects and Technology Innovation
All new technologies and products involve business risk both in
terms of possible abortive expenditure, reputational risk, and
potential customer claims or onerous contracts. The same is true in
transferring technology and projects executions. Such risks may
have a material impact on the Group. The nature of the competitive
market we operate in makes innovation a key to success, absence of
which could erode margins and/or result in loss of market share.
The Group counters this risk by investing in research and
development resources and continuously focusing on application
development path.
Early Stage of Commercialisation and New Markets
Whilst the Group has made initial sales of its Nanofluids and
Water applications, the Group is still at early stage of commercial
development. There are a number of operational, strategic and
financial risks associated with early stage commercialisation
efforts. The Group will continue to face risks frequently
encountered by early stage companies looking to bring new
applications to market. In particular its future growth and
prospects will depend on its ability to develop applications which
have broad commercial appeal, to secure commercialisation partners
on appropriate terms and to continue to improve its
commercialisation functions and to secure sales on a timely basis,
whilst at the same time maintaining effective cost controls. There
are no guarantees that the Group will be able to implement the
strategy detailed in its growth strategy successfully or at all.
The ability of the Group to implement its strategy in a competitive
market will require effective management planning and operational
controls. If the Group fails to implement its business expansion
strategy then this may have a material adverse effect on the
Group's results of operations, financial condition and future
prospects. With the aim of minimising this risk, the Group is
working with specialist in those areas where it currently believes
it has exposure to risk.
Intellectual Property
The Group is fundamentally based on a platform of intellectual
properties (IP), which includes a combination of proprietary
technologies owned by it (wholly or partly) or licensed to it. The
Group's success depends on its ability, and the ability of any
third part with which it may partner, in creating a defensible IP
portfolio with adequate protection covering its intellectual
property rights so as to preserve its exclusive rights in respect
of its technology, to preserve the confidentiality of its own and
its third party partners' know-how and to be able to operate
without having third parties circumvent the rights that it owns,
has licensed or has been licensed. The Group's products and
technologies may infringe or be alleged to infringe third parties'
intellectual property or rights that may be granted in the future.
If the Group is sued for infringement, the Group would need to
demonstrate that its product or methods either do not infringe the
relevant third party rights or that the rights of the third party
are invalid and there can be no guarantee that the Group will be
successful in defending any such proceedings. The Group closely
monitors intellectual property in the areas in which it
operates.
Dependence on Recruitment and Retention of Key Personnel
The Group's business, future success and planned expansion of
its operations will depend upon its ability to attract, train and
retain qualified and appropriately skilled personnel and on the
efforts and abilities of its executive officers and certain other
key employees, particularly those with sales and sales management
responsibilities, who are key to the Group's growth. The lack of an
appropriately skilled workforce or comprehensive succession plans
would adversely impact our ability to perform. Our operations could
be adversely affected if for any reason we were unable to attract
or retain such officers or key employees. The Group aims to
mitigate this risk by in-house staff development while giving them
clear objectives and career paths.
Industry Operating Environment
In the past, cessation or delay of customers' test programmes
has inhibited the Group's growth. The Group has little or no
influence over the duration of testing, which nearly always takes
longer than originally projected by its partner or the end
customers. It is common for test programmes, particularly in
safety-critical applications such as oilfield chemicals, to take
several years to complete. It is also a risk that significant
application development time is spent on test programmes that do
not result in sales. We mitigate the risk by establishing as early
as possible the likelihood of a customer's test programme coming to
fruition and that the potential commercial opportunities for the
Group justifies embarking on the programme in the first place.
Bid Success and Contract Performance
The Group is dependent on the success of its bid activities
across its targeted sectors and applications. Bidding, by its
nature, can be long and expensive and investment in such activity
needs to be closely monitored to ensure adequate return. The
success and performance of the Group also depends on our
businesses' ability to successfully execute their contractual
obligations on terms that provide the expected returns. There is a
risk that a particular project (including but not limited to,
capital expenditure in relation to production expansion, meeting
agreed standards or timescale and/or product development and
commercialisation) could experience unforeseen delays and incur
unexpected expenses, adversely impacting the implementation of the
Group's strategy and the Group's business, financial condition and
results of operations. The Group has developed and laid down its
'gatekeeping' process to assess on a business by business and
project to project basis, or if necessary at a Group level, the
risk and reward balance in deciding to bid for or execute contracts
whether on our own account or in partnership with others. Further,
the Group maintains rigorous quality standards in all of its
operations and carefully assesses the terms on which it agrees to
enter into contractual relationships at appropriate levels of
responsibility.
Dependence of third party suppliers
Whilst the Group's contract manufacturers will manage their own
supply chains, the Group will continue to hold relationships with
(i) key component suppliers (which are likely to be used by
contract manufacturers) and (ii) a more extensive supply chain to
support its ongoing development activities. Whilst the Group has
sought to mitigate the risk attaching to its reliance on third
party suppliers through expanding its supplier base, a supplier's
failure to supply materials or components in a timely manner, or to
supply materials and components that meet the Group's quality,
quantity or cost requirements, or the Group's inability to obtain
substitute sources for these materials and components in a timely
manner or on terms acceptable to it, could harm its ability to meet
its contractual obligations to its customers.
Litigation and Claims
The Group is subject to litigation from time to time in the
ordinary course of business, and makes provision for the expected
cost based on appropriate professional advice. In particular, the
fuel additive subsidiaries of the Group, currently in the process
of closing down, are subject to litigations and winding up
proceedings which however are not expected to have a material
adverse impact on the Group's position. There is a risk that
additional litigation could be instigated in the future which could
have a material impact on the Group.
Environmental and Regulatory Considerations
In addition to general UK and international laws, our activities
are subject to significant additional obligations, particularly in
the jurisdictions that we operate in. In the context of changes in
the regulatory environment there is a risk that we fail to adopt
policies/processes to ensure compliance with emerging requirements.
It is also difficult to predict the impact of future changes to
laws or regulations or the introduction of new law or regulations
that affect us and, from time to time, interpretation of existing
laws or regulations may also change or the approach to enforcement
may become more rigorous. It could also lead to high levels of
scrutiny by regulators, enforcement agencies or authorities with
associated increase in operational costs.
Group May Continue to Make Losses
The Group has always been focused on developing commercial
applications. Notwithstanding the commencement of commercialisation
of its Nanofluids applications in the energy industry and the
progress of its business development activities in Water, the Group
expects to continue to make significant expenditure on R&D in
order to develop further its applications in the areas that have
been identified in its business expansion strategy.
Financial Risk
There are a number of financial risks, which will be outside the
control of the Group, and which can affect revenues and/or costs,
and neither the Company nor its subsidiaries currently hedges
against such risks. These includes going concern risks (please
refer to Note 2.2), varying international exchange rates, interest
rates, world commodity prices, energy prices and supplies, raw
materials prices and supplies, inflation and international trends
in trade, tariffs and protectionism and changes in legal and
regulatory framework. There can be no assurance that such variables
will not have a material adverse impact on the Group's financial
position or results of operations.
Policy on Financial Instruments
The Group's financial instruments comprise cash, borrowings,
short-term debtors and creditors arising from its operations. The
Group has not established a formal policy on the use of financial
instruments but assesses the risks faced by the Group as economic
conditions and the Group's operations develop.
Approval of Strategic Report
Part I of this Annual Report comprises the Strategic Report for
the Group which has been drawn up and presented in accordance with,
and in reliance upon, applicable English company law, in particular
Chapter 4A of the Companies Act 2006, and the liabilities of the
Directors in connection with this Annual Report shall be subject to
the limitations and restrictions provided by such law.
It should be noted that the Strategic Report has been prepared
for the Group as a whole and are deemed to form part of this
report, and therefore gives greater emphasis to those matters,
which are significant to Graphene NanoChem and its subsidiary
undertakings when viewed as a whole.
Approved by the Board and signed on behalf of the Board.
Dato' Jespal Deol Sushil Sidhu
Chief Executive Officer Finance Director
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2015
2015 2014
Notes GBP'000 GBP'000
Continuing operations
Revenue 6 7,971 48,324
Cost of sales (8,618) (46,741)
-------------------------- ---------------------------
Gross (loss)/profit (647) 1,583
Other Income 7 252 181
Selling and distribution expenses (114) (889)
Administrative expenses 8 (3,399) (2,738)
Impairment of fixed assets 13 (13,840) -
Impairment of goodwill 14 (2,039) -
Impairment of intangible assets 14 (9,815) -
Finance income 10 2 10
Finance costs 10 (1,840) (2,474)
Depreciation and amortization (2,665) (2,438)
-------------------------- ---------------------------
Operating loss (34,105) (6,765)
Share of loss in a joint venture 4 (20) (22)
-------------------------- ---------------------------
Loss before tax (34,125) (6,787)
Income tax credit 11 1,202 96
--------------------------
Loss for the year attributable
to the owners of the parent (32,923) (6,691)
-------------------------- ---------------------------
Other comprehensive loss: items
that may be subsequently reclassified
to profit or loss
Net exchange differences on
translating foreign operations (360) (121)
-------------------------- ---------------------------
Total other comprehensive loss,
net of tax (360) (121)
-------------------------- ---------------------------
Total comprehensive loss (33,283) (6,812)
========================== ===========================
(Loss) per share
- Basic and diluted 12 (28.56)p (5.74)p
========================== ===========================
The accompanying accounting policies and notes form an integral
part of these financial statements.
Consolidated Statement of Financial Position
As at 31 December 2015
2015 2014
Notes GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 13 20,631 39,354
Goodwill 14 - 3,171
Intangible assets 14 41 11,284
Investment in a joint venture 4 19 56
20,691 53,865
-------------------- ---------------------
Current assets
Inventories 15 249 1,486
Trade and other receivables 16 922 5,641
Cash and cash equivalents 17 558 2,227
1,729 9,354
-------------------- ---------------------
Total assets 22,420 63,219
-------------------- ---------------------
Liabilities
Current liabilities
Trade and other payables 18 3,369 3,861
Borrowings 19 24,932 18,884
--------------------
28,301 22,745
-------------------- ---------------------
Non-current liabilities
Borrowings 19 12 11,557
Deferred tax liability 20 - 1,202
12 12,759
-------------------- ---------------------
Total liabilities 28,313 35,504
-------------------- ---------------------
Net (liabilities)/assets (5,893) 27,715
==================== =====================
Equity
Share capital 21 23,307 23,307
Share premium account 22 139,639 139,639
Reverse acquisition reserve 22 (99,305) (99,305)
Translation reserve 22 (4,151) (3,791)
Irredeemable convertible preference
shares 23 1,924 2,249
Accumulated losses (67,307) (34,384)
Shareholders' (deficiency)
/equity (5,893) 27,715
==================== =====================
The accompanying accounting policies and notes form an integral
part of these financial statements
Company Registration No: 05712979
Consolidated Statement of Changes in Equity
For the year ended 31 December 2015
Equity
Share Reverse Component
Share Premium Acquisition Translation Accumulated of Preference Total
Capital Account Reserve Reserve Losses Shares Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1January
2014 23,307 139,639 (99,305) (3,670) (27,693) 2,265 34,543
Total
comprehensive
income:
---------------------- ------------------------- ------------------------- ----------------- ------------------------- ------------------------- ---------------------------
Loss for the
financial
year - - - - (6,691) - (6,691)
Foreign
currency
translation
differences - - - (121) - (16) (137)
---------------------- ------------------------- ------------------------- ----------------- ------------------------- ------------------------- ---------------------------
- - - (121) (6,691) (16) (6,828)
At 31 December
2014 23,307 139,639 (99,305) (3,791) (34,384) 2,249 27,715
Total
comprehensive
income:
---------------------- ------------------------- ------------------------- ----------------- ------------------------- ------------------------- ---------------------------
Loss for the
financial
year - - - - (32,923) - (32,923)
Foreign
currency
translation
differences - - - (360) - (325) (685)
---------------------- ------------------------- ------------------------- ----------------- ------------------------- ------------------------- ---------------------------
- - - (360) (32,923) (325) (33,608)
At 31 December
2015 23,307 139,639 (99,305) (4,151) (67,307) 1,924 (5,893)
====================== ========================= ========================= ================= ========================= ========================= ===========================
All reserves are attributable to the equity holders of the
parent company.
Consolidated Statement of Cash Flows
For the year ended 31 December 2015
2015 2014
GBP'000 GBP'000
Cash Flows From Operating Activities
Loss before taxation (34,125) (6,787)
Adjustments for:
Depreciation of property, plant
and equipment 1,811 1,907
Amortisation of intangible assets 855 531
Loss/(gain) on disposal of property,
plant and equipment 5 (8)
Inventory written off 693 -
Bad debts written off 146 -
Interest income (2) (10)
Property, plant and equipment
written off 2,350 129
Impairment of goodwill 2,039 -
Impairment of intangible assets 9,815 -
Impairment of tangible fixed
assets 13,840 -
Share of loss in a joint venture 20 22
Finance costs 1,840 2,474
Operating loss before working
capital changes (713) (1,742)
(Increase)/decrease in :
Trade and other receivables 4,769 (1,007)
Inventories 592 1,584
Increase /(decrease) in :
Trade and other payables (492) 1,842
--------- ---------------------------------
Cash Generated From Operations 4,156 677
Net interest paid (1,840) (2,464)
Income tax refund 72 -
Net Cash From/(Used In) Operating
Activities 2,388 (1,787)
--------- ---------------------------------
Cash Flows From Investing Activities
Purchase of intangible assets - (3,859)
Purchase of property, plant and
equipment, net (2,577) (4,720)
Proceed from disposal of property,
plant and equipment - 8
Subscription of shares in a joint
venture - (78)
Net Cash Used In Investing Activities (2,577) (8,649)
--------- ---------------------------------
Cash Flows From Financing Activities
Net proceeds from/(repayment
of) borrowings (1,336) 5,088
Net Cash Generated From/(Used
In) Financing Activities (1,336) 5,088
--------- ---------------------------------
Net (Decrease) In Cash and Cash
Equivalents (1,525) (5,348)
Cash and Cash Equivalents at
beginning of year 2,227 7,368
Effect of exchange rate differences
on cash and cash equivalents (144) 207
Cash and Cash Equivalents at
end of year (note 17) 558 2,227
========= =================================
The accompanying accounting policies and notes form an integral
part of these financial statements.
Notes to the Financial Statements
For the year ended 31 December 2015
1 General information
Graphene Nanochem Plc is a public limited company incorporated
and domiciled in England.
In 2013, the Company was formed through the reverse takeover of
Platinum Nanochem Sdn. Bhd. ("PNC") by Biofutures International plc
("Biofutures") where GBP32.5 million was raised through a placing
of 23.2 million ordinary shares with new investors. The enlarged
group's shares were readmitted to the AIM market on 26 March 2013
under the name of Graphene Nanochem plc.
The consolidated financial statements are presented as a
continuation of the financial statements of Platinum Nanochem Sdn.
Bhd. The consideration transferred was calculated after determining
the fair value of the assets and liabilities of Biofutures at the
transfer date. The consideration comprises the value of the
additional shares that would need to have been purchased in
Biofutures to acquire the entire share capital. The consideration
transferred was not calculated based on the share price of the
listed shell at the date of the acquisition as trading in the
shares of the listed shell was suspended at that time. All other
transaction costs have been treated as post transaction costs in
profit or loss. The consideration transferred was calculated after
determining the fair value of the assets and liabilities of
Biofutures at the transfer date. The consideration comprises the
value of the additional shares that would need to have been
purchased in Biofutures to acquire the entire share capital
The share capital and share premium at the period end represent
the equity structure of the legal parent including the equity
instruments issued by the legal parent to effect the transaction.
This has been effected by the creation of another reserve to
reflect the reverse acquisition.
The Company and its subsidiaries were involved in the design,
formulation and manufacturing of intermediate and performance
chemicals and advanced nano-materials. During the year ended 31
December 2015 and subsequent to the balance sheet date, the Group
commenced a restructuring of its business.
2 Summary of significant accounting policies
2.1 Basis of preparation
These consolidated financial statements of the Group are for the
year ended 31 December 2015. They have been prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted
by the European Union. The consolidated financial statements have
been prepared under the historical cost convention except where
accounting standards require the use of fair values.
The financial statements of the Company have been prepared using
FRS 102 - The Financial Reporting Standard applicable in the UK and
Republic of Ireland ("new UK GAAP").
These consolidated financial statements are presented in Pounds
Sterling ("GBP") which is the functional and presentation currency
of the parent, and rounded to the nearest thousand ("GBP'000"). The
functional currency of the subsidiaries is the Malaysian Ringgit as
that is the currency of their primary economic environment. The
directors have chosen to present these financial statements in
Pounds Sterling due to the international exposure and shareholders
of the entity.
The significant accounting policies set out below have been
consistently applied, except where stated.
Notes to the Financial Statements
For the year ended 31 December 2015
2 Summary of significant accounting policies (Continued)
2.2 Going concern
Faced with the challenges of a global downturn in the oil and
gas markets, the Group has taken decisive action to improve
operating efficiencies, reduce its cost base and recalibrate and
streamline its portfolio of businesses to maximize growth
opportunities.
As part of the execution of its rationalization plan, the Group
is in the process of exiting the low margin fuel additive and palm
oil refining businesses, which are not expected to have any
significant growth in margins. In view of the proposed structured
exit, the directors deemed it prudent to impair the assets of those
businesses that resulted in the Group incurring a loss for the year
ended 31 December 2015 of GBP33,283,000 after impairment charges of
GBP25,694,000 and as at that date the Group and Company had net
current liabilities of GBP26,572,000 and GBP117,000, respectively,
and the Group and Company had a shareholders' deficiency of
GBP5,893,000 and GBP76,000, respectively.
During the year ended 31 December 2015, the Group has been in
discussions with its financiers on outstanding loan repayment
obligations and as at that date the Group had total secured
borrowings of GBP24,927,000 which have been reported in the
consolidated statement of financial position as being repayable on
demand (Note 19).
Subsequent to the balance sheet date, the Group successfully
negotiated the restructure of borrowings amounting to GBP14,463,000
repayable in instalments to 2021 with a 2 year repayment moratorium
and a pay down in the aggregate amount of GBP315,000 for 2016 and
2017 respectively. The pay down of GBP315,000 has been made for
2016. The Group remains in discussion with its other major lenders
to dispose of property plant and equipment ("PPE") used in the
Group's palm oil refining and biodiesel businesses, in order to
settle the remaining borrowings of GBP10,464,000. The PPE has been
recorded at an estimated forced sale value as disclosed in Note 13
to the financial statements the value of which is in excess of the
borrowings due. The carrying amount of PPE of GBP20,631,000
disclosed in the financial statements are at a forced sale value
estimated by the directors that are based on independent valuation
of the assets undertaken by independent valuer's approved by the
lenders.
The status of the Group's current borrowings are as follows:
Lender Lender Lender
1 2 3
-------------------------------- ---------- --------- --------
Borrowings as per Audited GBP14.4m GBP8.9m GBP1.6m
Accounts at 31(st) December
2015
-------------------------------- ---------- --------- --------
Borrowings as per Audited GBP14.6m GBP9.2m GBP1.7m
Accounts at 31(st) December
2015 and interest accumulated
till 30(th) June 2016 (less
principal paid)
-------------------------------- ---------- --------- --------
Borrowings Restructured Yes No No
-------------------------------- ---------- --------- --------
Is there a corporate guarantee Yes No Yes
against the parent company
Graphene Nanochem plc?
-------------------------------- ---------- --------- --------
Assets Pledged GBP13.1m GBP5.1m
(written down to forced sale
value during the year)
-------------------------------- ---------- --------- --------
Asset Cover Ratio at 31(st)
December 2015 1.4x 3.0x
-------------------------------------------- --------- --------
Borrowings post sale of PPE GBP7.3m nil nil
at forced sale value *
-------------------------------- ---------- --------- --------
* Assuming that PPE from Lender 2 and Lender 3 are realised at forced-sale value to settle outstanding loans from Lender 2 and Lender 3 and the balance used to reduce Lender 1 borrowings.
Upon completion of the rationalisation plan, the Group's plans
to realise the sale of its non-core assets at its carrying value to
fully repay Lenders 2 and 3 with excess funds to be utilized to
reduce the liabilities of Lender 1. If this is successfully
achieved the Group should see a carrying value of a single debt
going forward in the range of GBP7.3 mil depending on additional
costs that would be deducted for the restructuring.
Notes to the Financial Statements
For the year ended 31 December 2015
2 Summary of significant accounting policies (Continued)
2.2 Going concern (Continued)
As part of the restructuring exercise as per the announcement
made on 11 April 2016, a receiver and manager has been appointed by
Lender 2 to manage the sale of the non-core assets. The Directors
recognise the uncertainty over the value of the assets subject to
disposal, even though these assets have been written down to forced
sale value. Furthermore, Lender 2, does not have a corporate
guarantee from the parent company limiting recourse to the parent
company and its effects to the Group as a Going Concern.
The Group is confident that the 3.0x asset cover over borrowings
of Lender 3 of GBP1.6m is sufficient to fully settle the borrowings
upon sale of the PPE.
The business will be carried on in a new wholly-owned
subsidiary, Platinum TechSolve Sdn. Bhd., and will leverage on the
Group's proprietary nanotechnology platforms and joint venture with
SCOMI to provide performance enhancing solutions within the
oilfield chemicals and water treatment sectors that have higher
margins and longer term opportunities. The Group is continuing its
chemicals sales through SCOMI that are providing the Group with
working capital through payment upon order. The Group also has a
pipeline of water treatment projects in Asia, Africa and the Middle
East, funding for which is expected to be met via joint ventures,
specialist water treatment funds, private equity, and a proposed
equity offering in the coming months.
The implementation of the rationalisation plan, which management
believes will be successful, is expected to significantly reduce
the Group's debt balance and interest rate expense, which will have
a positive impact of strengthening the Group's balance sheet.
Further, the utilization of operating cash flows in the near term
for advancement of the recalibrated business plan rather than
repayment of debt, bodes well for the Group as it focuses on
available resources and growth strategies on long term, higher
margin business opportunities.
In view of the net current liabilities and shareholders'
deficiency of the Group, the ongoing discussions with the Group's
financiers and the rationalization plan also being dependent upon
the Group having access to sufficient funds, the directors consider
there is a material uncertainty that casts significant doubt upon
the Group's ability to continue as a going concern. However the
Directors consider that it is appropriate to prepare the financial
statements of the Group and the Company on a going concern basis,
and accordingly, the financial statements do not include any
adjustments relating to the recoverability and classification of
assets and liabilities that may be necessary, if the going concern
basis of preparing the financial statements of the Group and of the
Company is not appropriate.
2.4 Basis of Consolidation
The consolidated financial statements incorporate the financial
statements of the Company and all its subsidiaries made up to 31
December 2015.
Subsidiaries are entities (including structured entities)
controlled by the Group. The Group controls an entity when the
Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those
returns through its power over the investee.
Subsidiaries are consolidated from the date on which control is
transferred to the Group up to the effective date on which control
ceases, as appropriate.
Intragroup transactions, balances, income and expenses are
eliminated on consolidation. Where necessary, adjustments are made
to the financial statements of subsidiaries to ensure consistency
of accounting policies with those of the Group.
Notes to the Financial Statements
For the year ended 31 December 2015
2 Summary of significant accounting policies (Continued)
(a) Business Combinations
Acquisitions of businesses are accounted for using the
acquisition method. Under the acquisition method, the consideration
transferred for acquisition of a subsidiary is the fair value of
the assets transferred, liabilities incurred and the equity
interests issued by the Group at the acquisition date. The
consideration transferred includes the fair value of any asset or
liability resulting from a contingent consideration arrangement.
Acquisition-related costs, other than the costs to issue debt or
equity securities, are recognised in profit or loss when
incurred.
In a business combination achieved in stages, previously held
equity interests in the acquiree are remeasured to fair value at
the acquisition date and any corresponding gain or loss is
recognised in profit or loss.
Non-controlling interests in the acquiree may be initially
measured either at fair value or at the non-controlling interests'
proportionate share of the fair value of the acquiree's
identifiable net assets at the date of acquisition. The choice of
measurement basis is made on a transaction-by-transaction
basis.
The consolidated financial statements have been issued in the
name of the legal parent (i.e. the accounting acquiree), but
presented as a continuation of the financial statements of the
legal subsidiary (i.e. the accounting acquirer).
The following principles have been applied:
(i) The assets and liabilities of the legal subsidiary shall be
recognised and measured in the consolidated financial statements at
their pre-combination carrying amounts;
(ii) The assets and liabilities of the legal parent shall be
recognised and measured in the consolidated financial statements at
their fair values at the acquisition date;
(iii) The retained profits and other equity balances (such as
revaluation reserves and foreign exchange reserves) recognised in
the consolidated financial statements shall be the retained profits
and other equity balances of the legal subsidiary immediately
before the business combination;
(iv) The amount recognised as issued equity instruments (i.e.
share capital and share premium) in the consolidated financial
statements shall be determined by adding to the issued equity of
the legal subsidiary immediately before the business combination
the fair value of the legal parent (i.e. the deemed cost of the
business combination); and
(v) The equity structure appearing in the consolidated financial
statements shall reflect the equity structure of the legal parent,
including the equity instruments issued by the legal parent to
effect the combination.
(b) Joint Arrangements
Joint arrangements are arrangements of which the Group has joint
control, established by contracts requiring unanimous consent for
decisions about the activities that significantly affect the
arrangements' returns.
Joint arrangements are reclassified and accounted for as
follows:
-- A joint arrangement is classified as "joint operation" when
the Group or the Company has rights to the assets and obligations
for the liabilities relating to an arrangement. The Group account
for each of its share of the assets, liabilities and transactions,
including its share of those held or incurred jointly with the
other investors, in relation to the joint operation.
-- A joint arrangement is classified as "joint venture" when the
Group has rights only to the net assets of the arrangements. The
Group accounts for its interest in the joint venture using the
equity method.
Notes to the Financial Statements
For the year ended 31 December 2015
2 Summary of significant accounting policies (Continued)
2.5 Foreign currency translation
(a) Functional and presentational currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the "functional
currency"). The consolidated financial statements are presented in
sterling, which is the Company's functional and presentational
currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency of each individual entity using the exchange rates
prevailing at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies at the year end date
are reported at the rate of exchange prevailing at that date. All
exchange gains arising on retranslation of assets and liabilities
are dealt with in the profit or loss.
(c) Consolidation of overseas subsidiaries
Income and expenditure for overseas subsidiaries are included
based upon monthly average exchange rates to give a fair
approximation to the transaction rate. Items of statement of
financial position are included at the year-end exchange rate. All
other differences are included within the translation reserve,
including related goodwill and intangible assets, which are
translated at the rate ruling at the year-end date.
2.6 Property, plant and equipment
All property, plant and equipment (PPE) is shown at cost less
subsequent depreciation and impairment. Cost includes expenditure
that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the
profit and loss during the financial period in which they are
incurred.
Depreciation on assets is calculated using the straight-line
method so as to allocate the cost of each asset less its residual
value over its estimated useful life. The assets' residual values
and useful lives are reviewed, and adjusted if appropriate, at each
statement of financial position date.
The principal annual depreciation rates used to depreciate other
assets are as follows:
Leasehold land Over the lease period
of 65 and 99 years
Buildings 2%
Motor vehicles 20%
Furniture, fittings and
equipment 10-40%
Plant and machinery 5 - 20%
Renovations 10-20%
Capital work-in-progress represents assets under construction,
and which are not ready for commercial use at the end of the
reporting period. Capital work-in-progress is stated at cost, and
will be transferred to the relevant category of assets and
depreciated accordingly when the assets are completed and ready for
commercial use.
Cost of capital work-in-progress includes direct cost, related
expenditure and interest cost on borrowings taken to finance the
acquisition of the assets to the date that the assets are completed
and put in use.
Notes to the Financial Statements
For the year ended 31 December 2015
2 Summary of significant accounting policies (Continued)
2.6 Property, plant and equipment (Continued)
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when the cost
is incurred and it is probable that the future economic benefits
associated with the asset will flow to the Company and the cost of
the asset can be measured reliably. The carrying amount of parts
that are replaced is derecognised. The costs of the day-to-day
servicing of equipment are recognised in profit or loss as
incurred. Cost also comprises the initial estimate of dismantling
and removing the asset and restoring the site on which it is
located for which the Company is obligated to incur when the asset
is acquired, if applicable.
An item of property and equipment is derecognised upon disposal
or when no future economic benefits are expected from its use. Any
gain or loss arising from derecognition of the asset is recognised
in profit or loss. The revaluation reserve included in equity is
transferred directly to retained profits on retirement or disposal
of the asset.
2.7 Goodwill and intangible assets
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group's share of the net identifiable
assets of the acquired subsidiary at the date of acquisition.
Goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses. Gains and losses on the disposal of
an entity include the carrying amount of goodwill relating to the
entity sold.
Goodwill is allocated to cash-generating units for the purposes
of impairment testing.
Identifiable intangible assets are recognised separately from
goodwill on all acquisitions. Such assets are carried at fair value
at the date of acquisition (i.e. as deemed cost). Such intangible
assets are reviewed for impairment on an annual basis. Intangible
assets are tested annually for impairment along with the
goodwill.
Intangible assets comprise of the followings:
(a) Research and development expenditure
Research expenditure is recognised as an expense when it is
incurred.
Development expenditure is recognised as an expense except that
costs incurred on development projects are capitalised as
non-current assets to the extent that such expenditure is expected
to generate future economic benefits.
Development expenditure is capitalised if, and only if an entity
can demonstrate all of the following:
(i) its ability to measure reliably the expenditure attributable
to the asset under development;
(ii) the product or process is technically and commercially feasible;
(iii) its future economic benefits are probable;
(iv) its intention to complete and the ability to use or sell the developed asset; and
(v) the availability of adequate technical, financial and other
resources to complete the asset under development.
Capitalised development expenditure is measured at cost less
accumulated amortisation and impairment losses, if any. Development
expenditure initially recognised as an expense is not recognised as
assets in the subsequent period.
The development expenditure is amortised on a straight-line
method over a period of 8 to 15 years when the products are ready
for sale or use. In the event that the expected future economic
benefits are no longer probable of being recovered, the development
expenditure is written down to its recoverable amount.
(b) Licences
Separately acquired licence is shown at historical cost. Licence
has a finite useful life and is carried at cost less accumulated
amortisation. Amortisation is calculated using the straight-line
method to allocate the cost of licence over its estimated useful
lives of 10 years.
Notes to the Financial Statements
For the year ended 31 December 2015
2 Summary of significant accounting policies (Continued)
(c) Patents
Separately acquired patents are shown at historical cost.
Patents have a finite useful life and are carried at cost less
accumulated amortisation. Amortisation is calculated using the
straight-line method to allocate the cost of licences over their
estimated useful lives of 5 years.
2.8 Impairment testing of goodwill, other intangible assets and property, plant and equipment
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows (cash-generating units). As a result, some assets are tested
individually for impairment and some are tested at cash-generating
unit level. Goodwill is allocated to those cash-generating units
that are expected to benefit from synergies of the related business
combination and represent the lowest level within the Group at
which management monitors the related cash flows.
Goodwill, other individual assets or cash-generating units that
include goodwill, other intangible assets with an indefinite useful
life, and those intangible assets not yet available for use are
tested for impairment at least annually. All other individual
assets or cash-generating units are tested for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable.
An impairment loss is recognised for the amount by which the
asset's or cash-generating unit's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair
value, reflecting market conditions less costs to sell, and value
in use based on an internal discounted cash flow evaluation.
Impairment losses recognised for cash-generating units, to which
goodwill has been allocated, are credited initially to the carrying
amount of goodwill. Any remaining impairment loss is charged pro
rata to the other assets in the cash-generating unit. With the
exception of goodwill, all assets are subsequently reassessed for
indications that an impairment loss previously recognised may no
longer exist.
2.9 Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is determined on the first-in-first-out basis and
comprises the purchase price and incidentals incurred in bringing
the inventories to their present location and condition.
Net realisable value represents the estimated selling price less
the estimated costs of completion and the estimated costs necessary
to make the sale.
Reviews are made periodically by management on damaged, obsolete
and slow-moving inventories. These reviews require judgement and
estimates. Possible changes in these estimates could result in
revisions to the valuation of inventories.
2.10 Trade and other receivables
Trade and other receivables are initially recognised at fair
value, which is usually the original invoiced amount plus
transaction costs, and subsequently carried at amortised cost using
the effective interest method less provisions made for impairment
of receivables.
An impairment loss is recognised when there is objective
evidence that a financial asset is impaired. Management
specifically reviews its loans and receivables financial assets and
analyses historical bad debts, customer concentrations, customer
creditworthiness, current economic trends and changes in the
customer payment terms when making a judgment to evaluate the
adequacy of the allowance for impairment losses. Where there is
objective evidence of impairment, the amount and timing of future
cash flows are estimated based on historical loss experience for
assets with similar credit risk characteristics. If the expectation
is different from the estimation, such difference will impact the
carrying value of receivables.
2.11 Trade and other payables
Trade and other payables are initially recognised at fair value,
which is usually the original invoiced amount, and subsequently
carried at amortised cost using the effective interest method.
Notes to the Financial Statements
For the year ended 31 December 2015
2 Summary of significant accounting policies (Continued)
2.12 Borrowing costs
Borrowing costs, directly attributable to the acquisition,
construction or production of a qualifying asset, are capitalised
as part of the cost of those assets, until such time as the assets
are ready for their intended use or sale. Capitalisation of
borrowing costs is suspended during extended periods in which
active development is interrupted.
All other borrowing costs are recognised in profit or loss as
expenses in the period in which they incurred.
2.13 Cash and cash equivalents
Cash and cash equivalents (readily convertible into a known
amount of cash) include cash in hand and deposits held at call with
banks with an original maturity of three months or less. For the
purpose of the cash flow statement, cash and cash equivalents are
as defined above, net of outstanding bank overdrafts.
2.14 Financial Instruments
Financial instruments are recognised in the statements of
financial position when the Group has become a party to the
contractual provisions of the instruments.
Financial instruments are classified as liabilities or equity in
accordance with the substance of the contractual arrangement.
Interest, dividends, gains and losses relating to a financial
instrument classified as a liability, are reported as an expense or
income. Distributions to holders of financial instruments
classified as equity are charged directly to equity.
Financial instruments are offset when the Group has a legally
enforceable right to offset and intends to settle either on a net
basis or to realise the asset and settle the liability
simultaneously.
A financial instrument is recognised initially at its fair
value. Transaction costs that are directly attributable to the
acquisition or issue of the financial instrument (other than a
financial instrument at fair value through profit or loss) are
added to/deducted from the fair value on initial recognition, as
appropriate. Transaction costs on the financial instrument at fair
value through profit or loss are recognised immediately in profit
or loss.
Financial instruments recognised in the statements of financial
position are disclosed in the individual policy statement
associated with each item.
(a) Financial Assets
On initial recognition, financial assets are classified as
either financial assets at fair value through profit or loss,
held-to-maturity investments, loans and receivables financial
assets, or available-for-sale financial assets, as appropriate.
(i) Financial Assets at Fair Value Through Profit or Loss
As at the end of the reporting period, there were no financial
assets classified under this category.
(ii) Held-to-maturity Investments
As at the end of the reporting period, there were no financial
assets classified under this category.
(iii) Loans and Receivables Financial Assets
Trade receivables and other receivables that have fixed or
determinable payments that are not quoted in an active market are
classified as loans and receivables financial assets. Loans and
receivables financial assets are measured at amortised cost using
the effective interest method, less any impairment loss. Interest
income is recognised by applying the effective interest rate,
except for short-term receivables when the recognition of interest
would be immaterial.
(iv) Available-for-sale Financial Assets
As at the end of the reporting period, there were no financial
assets classified under this category except for loan and
receivables.
Notes to the Financial Statements
For the year ended 31 December 2015
2 Summary of significant accounting policies (Continued)
2.14 Financial Instruments (Continued)
(b) Financial Liabilities
All financial liabilities are initially at fair value plus
directly attributable transaction costs and subsequently measured
at amortised cost using the effective interest method other than
those categorised as fair value through profit or loss.
Fair value through profit or loss category comprises financial
liabilities that are either held for trading or are designated to
eliminate or significantly reduce a measurement or recognition
inconsistency that would otherwise arise. Derivatives are also
classified as held for trading unless they are designated as
hedges.
(c) Equity Instruments
(i) Ordinary Shares
Incremental costs directly attributable to the issue of new
ordinary shares or options are shown in equity as a deduction, net
of tax, from proceeds.
Dividends on ordinary shares are recognised as liabilities when
approved for appropriation.
(ii) Redeemable Convertible Cumulative Preference Shares
("RCCPS")
The redeemable convertible cumulative preference shares are
regarded as compound instruments, consisting of a liability
component and an equity component. The component of redeemable
convertible cumulative preference shares that exhibits
characteristics of a liability is recognised as a financial
liability in the statements of financial position, net of
transaction costs. The dividends on those shares are recognised as
interest expense in profit or loss using the effective interest
method. On issuance of the redeemable convertible cumulative
preference shares, the fair value of the liability component is
determined using a market rate for an equivalent non-convertible
debt and this amount is carried as a financial liability in
accordance with the Group's accounting policy.
The residual amount, after deducting the fair value of the
liability component, is the equity component and is included in
equity, net of transaction costs. The equity component is not
remeasured subsequent to initial recognition.
Transaction costs are apportioned between the liability and
equity components of the redeemable convertible cumulative
preference shares in proportion to their initial carrying
amounts.
(iii) Irredeemable Convertible Preference Shares ("ICPS")
Preference shares are classified as equity if they are
non-redeemable, or are redeemable but only at the Company's option,
and any dividends are discretionary. Dividends on preference shares
are recognised as distributions within equity.
Preference shares are classified as financial liabilities if
they are redeemable on a specific date or at the option of the
preference shareholders, or if dividend payments are not
discretionary. Dividends thereon are recognised as interest expense
in profit or loss as accrued.
(d) Derecognition
A financial asset or part of it is derecognised when, and only
when, the contractual rights to the cash flows from the financial
asset expire or the financial asset is transferred to another party
without retaining control or substantially all risks and rewards of
the asset. On derecognition of a financial asset, the difference
between the carrying amount and the sum of the consideration
received (including any new asset obtained less any new liability
assumed) and any cumulative gain or loss that had been recognised
in equity is recognised in profit or loss.
A financial liability or a part of it is derecognised when, and
only when, the obligation specified in the contract is discharged
or cancelled or expires. On derecognition of a financial liability,
the difference between the carrying amount of the financial
liability extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or
liabilities assumed, is recognised in profit or loss.
Notes to the Financial Statements
For the year ended 31 December 2015
2 Summary of significant accounting policies (Continued)
2.15 Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable, and represents amounts receivable for goods
supplied, stated net of discounts and returns. The Group recognises
revenue when the amount of revenue can be reliably measured and it
is probable that future economic benefits will flow to the entity,
and when specific criteria have been met for each of the Group's
activities, as described below.
(a) Sales of goods
Sales of refined palm oil, biofuels and nanofluids are
recognised when the risks of obsolescence and loss have been
transferred to the customers, and either the customers have
accepted the products in accordance with the sales contract, the
acceptance provisions have lapsed or the Group has objective
evidence that all criteria for acceptance have been satisfied.
(b) Rendering of services
Palm oil tolling services are recognised when services are
performed in accordance with the service contract.
(c) Finance income
Interest income is recognised on an accrual basis using the
effective interest method.
2.16 Deferred income tax
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the
consolidated financial statements. The deferred income tax is not
accounted for if it arises from initial recognition of an asset or
liability in a transaction, other than a business combination, that
at the time of the transaction affects neither accounting nor
taxable profit nor loss. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantially
enacted by the statement of financial position date and are
expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profit will be available against
which the temporary differences can be utilised.
2.17 Employee Benefits
(a) Pension obligations
Group companies do not operate defined contribution schemes but
contribute to individual personal pension plan for certain
employees by way of paying 12% of their gross salary costs in lieu
of a scheme contribution as required by Malaysian law, which is
accounted for as salary when payable.
(b) Share-based payments
The fair value of previous share options is calculated by the
Company using the Black Scholes option pricing model, as the
Directors believe that the options are likely to be exercised
nearer to their expiry dates. The expense is recognised in the
profit and loss on a straight line basis over the period from the
date of award to the date of vesting, based on the Company's best
estimate of shares that will eventually vest. A credit is
recognised on the same basis in the share-based payment
reserve.
Notes to the Financial Statements
For the year ended 31 December 2015
2 Summary of significant accounting policies (Continued)
2.18 Fair value measurements
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether
that price is directly observable or estimated using a valuation
technique. The measurement assumes that the transaction takes place
either in the principal market or in the absence of a principal
market, in the most advantageous market. For non-financial asset,
the fair value measurement takes into account a market's
participant ability to generate economic benefits by using the
asset in its highest and best use or by selling it to another
market participant that would use the asset in its highest and best
use.
For financial reporting purposes, the fair value measurements
are analysed into level 1 to level 3 as follows:
Level 1: Inputs are quoted prices (unadjusted) in active markets
for identical assets or liability that the entity can access at the
measurement date;
Level 2: Inputs are inputs, other than quoted prices included
within level 1, that are observable for the asset or liability,
either directly or indirectly; and
Level 3: Inputs are unobservable inputs for the asset or liability.
The transfer of fair value between levels is determined as of
the date of the event or change in circumstances that caused the
transfer.
2.19 Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from
past events and whose existence will only be confirmed by the
occurrence or non-occurrence of one or more uncertain future events
not wholly within the control of the Group. It can also be a
present obligation arising from past events that is not recognised
because it is not probable that outflow of economic resources will
be required or the amount of obligation cannot be measured
reliably.
A contingent liability is not recognised but is disclosed in the
notes to the accounts. When a change in the probability of an
outflow occurs so that the outflow is probable, it will then be
recognised as a provision. A contingent asset is a possible asset
that arises from past events and whose existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain
events not wholly within the control of the Group. Contingent
assets are not recognised but are disclosed in the notes to the
accounts when an inflow of economic benefits is probable. When
inflow is virtually certain, an asset is recognised.
2.20 Judgements and estimates
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal to the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are discussed below.
(a) Impairment of goodwill and intangible assets
Determining whether goodwill and intangible assets are impaired
requires an estimation of the value-in-use of the cash-generating
units to which goodwill and intangible assets have been allocated.
The value-in-use calculation requires the Directors to estimate the
future cash flows expected to arise from the cash-generating unit
and a suitable discount rate in order to calculate present value.
(see note 14 for details). In view of the Group's planned exit from
the palm oil refining and biodiesel businesses, goodwill and
intangible assets have been fully impaired at the balance sheet
date.
Notes to the Financial Statements
For the year ended 31 December 2015
2 Summary of significant accounting policies (Continued)
2.20 Judgements and estimates (Continued)
(b) Impairment of property, plant and equipment
The carrying amounts of property, plant and equipment are
reviewed at the end of each reporting period to determine whether
there is any indication of impairment. If any such indication
exists, then the asset's recoverable amount is estimated, which
requires management judgement. As disclosed in Note 13, management
has impaired property, plant and equipment to its estimated forced
sale value based on independent valuations arranged by the
Group.
(c) Impairment of trade receivables
An impairment loss is recognised when there is objective
evidence that a trade receivable is impaired. Management has
specifically reviewed trade receivables having specific regard to;
historical bad debts, customer concentrations, customer
creditworthiness, current economic trends and changes in the
customer payment terms when making a judgment to evaluate the
adequacy of the allowance for impairment losses. Where there is
objective evidence of impairment, the amount and timing of future
cash flows are estimated based on historical loss experience for
assets with similar credit risk characteristics. If the expectation
is different from the estimation, such difference will impact the
carrying value of receivables. See Note 25 (b) for details
regarding the group's trade receivables.
(d) Borrowings
As disclosed in Note 19, the Group has defaulted on its
borrowings during the year. Subsequent to the balance sheet date,
borrowings of GBP14,463,000 were restructured into a new facility
but negotiations with other lenders are ongoing. The carrying
values of outstanding borrowings in Note 19 include accrued
interest to date but exclude any penalties that the Group may incur
once settlement has been reached with other lenders involving
disposal of property, plant and equipment held by the banks as
security.
(e) Discontinued operations
As disclosed in Note 2.2, the Group is undertaking a restructure
of its debt and is in the process of exiting the palm oil refining
and biodiesel businesses and refocusing on higher margin and longer
term opportunities. As at the balance sheet date, the criteria set
out in IFRS 5 for these businesses to be disclosed as discontinued
or held for sale in the financial statements had not all been met.
Accordingly, they are presented as continuing operations in the
financial statements.
(f) Contingent liabilities
As disclosed in Note 24 to the financial statements, the Group
has received a claim from a supplier and based on legal advice no
provision for damages has been made as the case is not yet resolved
and the outcome uncertain.
(g) Going concern
Management of the Group has made a number of significant
judgments about the applicability of the going concern basis of
presentation of the financial statements. These are set out in note
2.2.
Notes to the Financial Statements
For the year ended 31 December 2015
3 Subsidiaries
Graphene Nanochem plc has the following subsidiaries:
Name of subsidiaries Effective Equity Principal activities
Interest
2015 2014
% %
Investment holding
Platinum Nanochem and provision of management
Sdn. Bhd. 100 100 services
Platinum Performance Refining of crude
Chem Sdn Bhd. 100 100 palm oil
Platinum Nanochem Sdn. Bhd. has the following subsidiaries and
joint venture:
Name of subsidiaries Effective Equity Principal activities
Interest
2015 2014
% %
Platinum Green Chemicals Manufacturing of advanced
Sdn. Bhd. 100 100 chemicals and biofuels
Platinum Nano G Manufacturing of advanced
Sdn. Bhd. 100 100 nano-materials
All the above subsidiaries are incorporated in Malaysia.
Following the Reverse Acquisition on 26 March 2013, Platinum
Nanochem Sdn. Bhd. is the accounting acquirer and Graphene Nanochem
plc is the legal parent.
4 Investment in a joint venture
2015 2014
GBP'000 GBP'000
Investment in a joint venture 78 78
Share of loss (20) (22)
Foreign exchange adjustment (39) -
-------- --------
19 56
-------- --------
Scomi Platinum Sdn Bhd, a 50% owned joint venture in the Group
which is principally engaged in manufacturing of speciality
chemicals and other graphene-enhanced green chemicals. The group
accounted for the joint venture by using the equity method.
Summarised financial information in respect of the Group's joint
venture are set out below:
Year ended Year ended
31 December 31 December
2015 2014
GBP'000 GBP'000
Revenue - -
------------- -------------
Loss after tax (40) (44)
------------- -------------
Group's share of results for the
year (20) (22)
------------- -------------
Total assets 158 112
Total liabilities (120) -
Net assets 38 112
------------- -------------
Group's share of joint venture
net assets 19 56
------------- -------------
Notes to the Financial Statements
For the year ended 31 December 2015
5 Operating segments
Management has determined the operating segments based on the
reports reviewed by The Board that are used to make strategic
decisions.
Management has determined that the Group has one operating
segment, which is refining and manufacturing of palm oil and
biofuels as well as production of oil field products which is
wholly operated in Malaysia. The financial information contained in
these financial statements therefore relates solely to this
segment. The Group's non-current assets consist of property, plant
and equipment, goodwill and intangible assets, and are located
entirely in Malaysia.
6 Revenue
2015 2014
GBP'000 GBP'000
Revenue from sales of
second generation biofuels
and refined palm oil 6,546 43,837
Revenue from sales
of oil field products 1,425 4,487
7,971 48,324
======== ==========
7 Other Income
2015 2014
GBP'000 GBP'000
Compensation from supplier - 83
Gain on disposal of
property, plant and
equipment - 8
Miscellaneous income - 28
Realised gain on foreign currency
exchange 242 59
Rental income 10 3
252 181
======== =================
8 Administrative expenses
2015 2014
GBP'000 GBP'000
Included within administrative
expenses are:
Employee benefit expenses 835 780
Rental of premises 62 74
Rental of equipment 28 3
Rental of motor vehicle 4 -
Rental of office equipment 2 -
Property, plant and equipment
written off 2,340 129
Bad debts written off 146 -
Inventory written off 694 -
Auditor's remuneration:
- Fees payable to the Group's
auditor for the audit of
the
Group's annual accounts 32 25
- Fees payable to the subsidiaries'
auditor for the audit of
the
subsidiaries' annual accounts 24 25
======== ========
Notes to the Financial Statements
For the year ended 31 December 2015
9 Directors and employees
The employee benefit expense during the year was as follows:
2015 2014
GBP'000 GBP'000
Salary and wages 766 701
Pension costs-defined
contribution 69 75
Social security cost - 4
835 780
======== ======================
The number of employees inclusive of executive directors at year
end was 45 (2014:131).
2015 2014
Number Number
Managerial 9 22
Administrative 11 36
Operational 25 73
45 131
======================= =======================
Remuneration in respect of Directors was as follows:
Basic Pension-Defined
salary contribution Total Total
Director and fees schemes 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
Tan Sri Abi Musa 12 - 12 12
Dato Jespal Deol 12 - 12 286
Sushil Sidhu 12 - 12 99
AM Cleverly Esq & Mrs
JCM Cleverly 12 - 12 12
Dato' Larry Gan 12 - 12 12
Patrick Dennis Howes 24 - 24 24
Dato' Mohamed Sallehuddin 12 - 12 8
96 - 96 453
========== ================ ======== ========
The number of Directors who accrued benefits under Company
pension schemes was as follows:
2015 2014
Number Number
Defined contribution
schemes 2 2
======= =======
10 Finance income/costs
2015 2014
GBP'000 GBP'000
Finance cost
Interest on bank borrowings 1,803 2,447
Interest paid to suppliers 37 27
1,840 2,474
======== ====================
Finance income
Interest income 2 10
2 10
=============
Notes to the Financial Statements
For the year ended 31 December 2015
11 Income tax
2015 2014
GBP'000 GBP'000
Current income tax - -
Deferred tax
Origination or recognition of temporary
differences (1,202) (96)
(1,202) (96)
=================== =====================
The tax on the Group's loss before tax differs from the loss
before taxation multiplied by the standard rate of corporation tax
in Malaysia due to the following:
2015 2014
GBP'000 GBP'000
Loss before tax (38,665) (6,787)
Tax calculated at the standard rate
of corporation tax in Malaysia: 25% (9,666) (1,697)
Expenses not deductible for tax purposes 4,893 299
Deferred tax credit not recognised
during the year 3,571 1,302
(1,202) (96)
========= =========
The temporary differences attributable
to the deferred tax assets and deferred
tax
liabilities which are not recognised
in the financial statements are as
follows:
Deferred tax assets:
- Unabsorbed capital allowances 20,934 28,073
- Unutilised tax losses 28,999 20,815
* Allowances for doubtful debts 459 -
50,392 48,888
Deferred tax liabilities:
- Accelerated capital allowances (13,782) (21,454)
--------- ---------
36,610 27,434
========= =========
The net deferred tax assets are not provided in view of the
uncertainty on the timing of their recoverability. The tax rate
applied is reflecting the average tax rate weighted in proportion
to accounting profit earned in each geographical territory.
12 Loss per share
Basic
Basic loss per share is calculated by dividing the loss
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year.
2015 2014
Loss attributable to equity
holders of the Company GBP33,283,000 GBP6,691,000
Weighted average number
of ordinary shares in issue 116,536,536 116,536,536
Basic loss per share in pence (28.56)p (5.74)p
============== =============
Diluted loss per share is calculated by adjusting the weighted
average number of ordinary shares outstanding to assume conversion
of all contracted dilutive potential ordinary shares. The Company
does not have any dilutive potential ordinary shares at the
reporting date. Accordingly, the diluted loss per share is the same
as the basic loss per share.
Notes to the Financial Statements
For the year ended 31 December 2015
13 Property, plant and equipment
Furniture,
fittings Plant
Leasehold Leasehold and and Motor Capital
land Buildings equipment machinery vehicles Renovation work-in-progress Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1
January
2014 2,752 1,219 288 33,855 400 243 4,446 43,203
Additions - 7 62 162 34 8 4,447 4,720
Disposal - - - - (28) - - (28)
Transfer - - - - - 92 (92) -
Written off - - - - - - (129) (129)
Foreign
exchange
adjustment (19) (9) (2) (237) (3) (3) (73) (346)
As at 31
December
2014 2,733 1,217 348 33,780 403 340 8,599 47,420
Additions - - 29 2,201 345 - 2 2,577
Disposal - - - (5) - - - (5)
Written off - - (150) (2,077) (449) - - (2,676)
Impairment (69) (378) (7) (6,030) - (65) (7,291) (13,840)
Foreign
exchange
adjustment (396) (176) (42) (2,535) (41) (44) (1,310) (4,544)
---------- ------------- ----------- ---------- --------- ----------- ----------------- ---------
As at 31
December
2015 2,268 663 178 25,334 258 231 - 28,932
---------- ------------- ----------- ---------- --------- ----------- ----------------- ---------
Accumulated
depreciation
As at 1
January
2014 264 96 218 5,286 157 229 - 6,250
Additions 36 25 37 1,733 61 15 - 1,907
Disposal - - - - (28) - (28)
Foreign
exchange
adjustment (2) (1) (2) (55) (1) (2) - (63)
As at 31
December
2014 298 120 253 6,964 189 242 - 8,066
Additions 50 5 30 1,669 38 19 - 1,811
Written off - - (121) (89) (116) - - (326)
Foreign
exchange
adjustment (47) (17) (31) (1,098) (21) (36) - (1,250)
---------- ------------- ----------- ---------- --------- ----------- ----------------- ---------
As at 31
December
2015 301 108 131 7,446 90 225 - 8,301
---------- ------------- ----------- ---------- --------- ----------- ----------------- ---------
Net book
value
as at 31
December
2015 1,967 555 47 17,888 168 6 - 20,631
========== ============= =========== ========== ========= =========== ================= =========
Net book
value
as at 31
December
2014 2,435 1,097 95 26,816 214 98 8,599 39,354
========== ============= =========== ========== ========= =========== ================= =========
The leasehold land, buildings, plant and machinery have been
pledged to licensed banks as security for banking facilities
granted to the Group as disclosed in Note 19.
The title of the leasehold land at Lahad Datu, Sabah, Malaysia
is yet to be transferred to the subsidiary company as it is held
under master title.
The Group's property, plant and equipment, including capital
work in progress, was subject to independent valuations during the
year which assessed both their current market value and forced sale
value. The valuations were performed in accordance with Malaysian
Valuation Standards and The Royal Institution of Surveyors,
Malaysia. As disclosed in Note 19, the Group has defaulted on its
bank loans and is in discussions with its lenders to dispose of the
secured fixed assets to settle the loans. Accordingly, fixed assets
have been impaired to their estimated forced sale values, as
determined by the valuations.
Notes to the Financial Statements
For the year ended 31 December 2015
14 Goodwill and Intangible assets
Development
Licenses Costs Patent Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 2014 7,528 2,589 3 3,176 13,296
Addition during the
year - 3,859 - - 3,859
Foreign exchange adjustment (4) (57) - (5) (66)
--------- ------------ -------- ----------- ---------
As at 31 December
2014 7,524 6,391 3 3,171 17,089
Disposal - - (3) - (3)
Impairment (4,942) (4,873) - (2,039) (11,854)
Transfer - (24) 24 - -
Foreign exchange adjustment (62) (620) - (1,132) (1,814)
As at 31 December
2015 2,520 874 24 - 3,418
--------- ------------ -------- ----------- ---------
Accumulated amortization
As at 1 January 2014 1,695 412 - - 2,107
Addition during the
year 392 138 1 - 531
Foreign exchange adjustment - (4) - - (4)
--------- ------------ -------- ----------- ---------
As at 31 December
2014 2,087 546 1 - 2,634
Addition during the
year 421 433 - - 854
Elimination of depreciation - - (1) - (1)
Foreign exchange adjustment (5) (105) - - (110)
--------- ------------ -------- ----------- ---------
As at 31 December
2015 2,503 874 - - 3,377
--------- ------------ -------- ----------- ---------
Net book value as
at 31 December 2015 17 - 24 - 41
========= ============ ======== =========== =========
Net book value as
at 31 December 2014 5,437 5,845 2 3,171 14,455
========= ============ ======== =========== =========
Goodwill
The carrying amount of goodwill is allocated to each operational
cash-generating unit as follows:
2015 2014
GBP'000 GBP'000
Manufacturing of advanced chemicals
and biofuels - 522
Manufacturing of advanced
nano-materials - 192
Refining of palm oil - 2457
- 3,171
=============================================== ========
Licenses
i) License for the usage of development, exploitation and
commercialisation of graphite nano-fibres and its derivatives;
and
ii) License for the manufacture of palm oil biodiesel and the
linked refinery license subsequently obtained. A useful economic
life of 20 years has been assumed as the license has no termination
date and the Group has full rights to the land. The production of
palm oil is also such an important commodity in Malaysia that its
production and demand is expected to continue indefinitely.
Notes to the Financial Statements
For the year ended 31 December 2015
14 Goodwill and Intangible assets (Continued)
Development costs
The details of the development costs are:
2015 2014
GBP'000 GBP'000
Biofuels - 799
Graphite nano-fibres - 803
Plat Drill - 3,790
Plat Quartz - 545
Graph Eat - 272
Plat Surf - 182
-------- --------
- 6,391
========= ========
Included in the development costs are:
2015 2014
GBP'000 GBP'000
Biofuels production costs - 159
Employee benefit expenses - 1,542
Material used - 3,769
Plat Drill production costs - 921
- 6,391
======================================= ========
The goodwill and intangible assets are tested for impairment
annually at the statement of financial position date, the Group
evaluates, among other factors, the duration and extent to which
their carrying amount is less that its cost and the recoverable
amounts. This including factors such as market conditions, changes
in business, operational strategies and significant changes
expected to take place in the near future.
The directors are of the opinion that the Group will not
generate sufficient future profits and cash flows from its palm oil
and biodiesel businesses and accordingly the goodwill and
intangible assets related those businesses have been fully
impaired.
15 Inventories
2015 2014
GBP'000 GBP'000
At cost,
Raw material 8 1,031
Finished goods 192 -
Consumable goods 31 21
-------- --------
231 1,052
At net realisable value,
Finished goods 18 434
-------- --------
249 1,486
======== ========
The amount of inventories recognised as an expense during the
year to 31 December 2015 was GBP8,493,000 (2014:
GBP41,948,000).
Notes to the Financial Statements
For the year ended 31 December 2015
16 Trade and other receivables
2015 2014
GBP'000 GBP'000
Trade receivables 511 4,587
Other receivables 132 348
Deposits 164 195
Prepayments 115 511
922 5,641
======== ========
The normal trade credit term is 30-90 days (2014: 30-90
days).
Included in prepayments, there are advances paid to trade
creditors for the purchase of raw materials amounting to
approximately GBP106,000 (2014 - GBP505,000).
17 Cash and cash equivalents
2015 2014
GBP'000 GBP'000
Fixed deposits with licensed banks 3 -
Cash and bank balances 555 2,227
558 2,227
======== ========
The deposits with licensed banks at the end of the reporting
period bore an effective interest rate of 3% (2014 - 3%) per annum.
The deposits have a maturity period of 30 days (2014 - 30
days).
18 Trade and other payables
2015 2014
GBP'000 GBP'000
Trade payables 1,845 2,435
Other payables 606 1,099
Accruals 918 327
3,369 3,861
======== ========
The trade and other payables of the group for this and the prior
year are due for payment within 30 - 60 days.
Included in other payables is an amount owing by Platinum Energy
Global Sdn Bhd of GBP20,000 (2014: GBP20,000). Platinum Energy
Global Sdn Bhd is a related party which hold ordinary shares in
Graphene Nanochem Plc and their director, Dato' Jespal Deol is also
the director of Graphene Nanochem Plc.
Notes to the Financial Statements
For the year ended 31 December 2015
19 Bank borrowings
2015 2014
GBP'000 GBP'000
The details of bank borrowings are:
Term loans 10,464 13,697
Finance lease 16 26
Revolving credits 14,463 16,718
-------- ------------------
24,943 30,441
======== ==================
The bank borrowings are repayable
as follows:
Shown as current liabilities
Term loans 10,464 2,160
Finance lease 5 6
Revolving credits 14,463 16,718
24,932 18,884
======== ==================
Shown as non-current liabilities
Term loans
Between one and two years - 2,177
Between two and five years - 8,601
More than five years - 759
-------- ------------------
- 11,537
Finance lease
Between one and two years 12 20
24,943 11,557
======== ==================
Term loans and Revolving credits
The term loans and revolving credits are secured as follows:
(a) first party first fixed charge over the leasehold land,
buildings, plant and machinery of certain subsidiaries as disclosed
In Note 13;
(b) fixed and floating charge over all present and future assets
of certain subsidiaries; both movable and immovable;
(c) assignment of all the subsidiaries' right under the relevant
contract/agreements related to the capital work-in-progress
assignable to the bank, applicable insurance, permits and
liquidated damages, performance bonds/guarantees and licenses;
(d) deed of assignment of contract proceeds over executed sales
off-take agreements between the borrower and the buyer; and
(e) irrevocable joint and several guarantees by the Company, all
directors of a subsidiary and certain directors of the Company.
Term loans bear weighted average effective interest rates ranged
from 7.25% to 8.10% (2014: 7.25% to 8.10%) per annum and revolving
credits bear weighted average effective interest rates ranged from
7.25% to 8.0% (2014: 7.25% to 8.0%) per annum.
Finance lease bears a weighted average effective Interest rate
of 4.46% (2013: 6.96%) per annum.
During the year, the Group was unable to continue to pay
installments on its borrowings and was in default. Accordingly, all
bank loans have been disclosed as current liabilities at the
balance sheet date.
Subsequent to the balance sheet date, the Group successfully
negotiated the restructure of borrowings amounting to GBP14,463,000
into a non-revolving project finance facility repayable on demand
or otherwise by installments up to 2021. The Group remains in
discussion with its other lenders to dispose of property, plant and
equipment in order to settle the remaining borrowings of
GBP10,464,000.
Notes to the Financial Statements
For the year ended 31 December 2015
20 Deferred tax liability
GBP'000
The movement on the deferred tax liability
are as follows:
As at 1 January 2014 1,298
Recognised in statement of comprehensive
income (96)
As at 31 December 2014 1,202
Recognised in statement of comprehensive
income (1,202)
--------
As at 31 December 2015 -
========
2015 2014
GBP'000 GBP'000
The deferred tax liability is attributable
to:
The fair value of the intangible assets
arising from the reverse takeover
exercise in previous financial year - 1,202
--------- --------
- 1,202
====================================================== ========
21 Share capital and options
2015 2014 2015 2014
Number of shares GBP'000 GBP'000
Issued and Fully Paid-Up:
At 1 January and 31 December 116,536,536 116,536,536 23,307 23,307
============ ============ =============== =============
There was no share option movement during the year and options
outstanding at 31 December 2014 and 2015 were exercisable as
follows:
Date of grant Type of arrangement Number granted Exercise price
Expiry date
5 February 2010 Option 56,500 80.92p 5 May 2015
All the share option expired on 5 May 2015.
22 Description and purpose of reserves
The reserves included in the Consolidated Statement of Changes
in Equity are as follows:
Share capital - represents the nominal value of the shares issued.
Share premium - represents the premium over nominal value paid
for the shares issued, less costs of issuing shares.
Translation reserve - represents the differences arising on translation of foreign operations into the presentational currency.
Reverse acquisition reserve - represents the premium on shares
issued as consideration for the reverse acquisition of Platinum
Nanochem Sdn. Bhd. which was acquired by way of share for share
exchange.
Notes to the Financial Statements
For the year ended 31 December 2015
23 Preference Shares
2015 2014
GBP'000 GBP'000
Irredeemable convertible preference
shares
-------- --------
As at 1 January 2,249 2,359
Foreign exchange adjustment (325) (110)
-------- --------
1,924 2,249
======== ========
Irredeemable convertible preference shares
In the year ended 31 December 2013, the subsidiary of the
Company issued 12,250,000 irredeemable convertible preference
shares of RM1 each as consideration for the acquisition of plant
and machinery.
The rights attached to the irredeemable convertible preference
shares ("ICPS") are as follows:
(a) The ICPS shall not carry any fixed rate of dividend. The
ICPS holder shall be entitled, on an As If Converted Basis, to such
dividend and at such rate as may be declared over the ordinary
shares of the subsidiary from time to time. "As If Converted Basis"
means the notional conversion of all the ICPS held by a holder on
the date falling immediately prior to the record date for the
dividends on the ordinary shares of the subsidiary.
(b) The ICPS holder does not have the right to vote at any
liquidation, dissolution, winding up or other repayment of capital
of the subsidiary. The holder of the ICPS shall participate
rateably with the holders of ordinary shares of the subsidiary in
any surplus assets.
(c) All of the outstanding ICPS shall be converted on a one to
one basis by the subsidiary into fully paid new ordinary shares in
the share capital of the subsidiary within fourteen (14) days from
the successful commissioning of a 50 tonne per annum facility for
the production of various forms of carbonaceous materials.
(d) The holder of the ICPS shall carry no right to vote at any
general meeting of the subsidiary except with regard to the
following circumstances:-
(i) upon any resolution which directly varies the rights attached to the ICPS; and
(ii) upon any resolution for the winding up of the subsidiary.
(e) The new ordinary shares will rank pari passu in all respects
with the then existing ordinary shares of the subsidiary.
The ICPS had matured since June 2013, has yet to be converted
during the financial year.
24 Contingent liabilities
At the date of the report, the Company provided a corporate
guarantee for banking facilities granted to its subsidiary
amounting to GBP 15,905,000 (2014: GBP1,983,000 ).
During the year, several of the Group's suppliers lodged a claim
against Platinum Nanochem Sdn. Bhd, a subsidiary company, for
unpaid amounts of MYR1,068,500 (approximately GBP168,000) plus
damages. Platinum Nanochem is counterclaiming for the sum of MYR
21,355,383 (approximately of GBP3,355,000). Based on legal advice,
management are of the opinion the outcome of this case should be in
the Group's favour, however provision has been made in these
financial statements for estimated costs of MYR1,130,139
(GBP177,000).
Notes to the Financial Statements
For the year ended 31 December 2015
25 Financial instruments
The Group's activities expose it to a variety of financial
risks: market risks (including foreign currency risk, interest rate
risk and equity price risk), credit risk and liquidity risk. The
Group's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group's financial performance. The
Group's treasury policy is set by the Board and is reviewed
regularly. Further detail regarding risk exposure and risk
management policies is provided below.
The carrying amounts of the Group's financial assets and
liabilities as at 31 December 2015 are as follows:
2015 2014
GBP'000 GBP'000
Current assets
Trade and other receivables 922 5,641
Cash and bank balances 558 2,227
-------- --------
Loans and receivables carried at
amortised cost 1,480 7,868
-------- --------
Current liabilities
-------- --------
Trade and other payables 3,370 3,861
Borrowings 24,932 18,884
-------- --------
28,302 22,745
Non-current liabilities
Borrowings 11 11,557
Other financial liabilities carried
at amortised cost 28,313 34,302
-------- --------
Risk management is carried out centrally under policies approved
by the Board.
(a) Market risk
Foreign Currency Risk
The Group is exposed to foreign currency risk on transactions
and balances that are denominated in currencies other than Pound
Sterling. The currencies giving rise to this risk are primarily
United States Dollar and Malaysian Ringgit. Foreign currency risk
is monitored closely on an ongoing basis to ensure that the net
exposure is at an acceptable level. On occasion, the Group enters
into forward foreign currency contracts to hedge against its
foreign currency risk.
The carrying amounts of the Group's foreign currency denominated
monetary assets and monetary liabilities at the reporting date are
as follows:
United
2015 States Malaysian
Dollar Ringgit Total
GBP'000 GBP'000 GBP'000
Trade and other receivables 106 804 910
Fixed deposits with licenced
banks - 3 3
Cash and bank balances - 407 407
Trade and other payables (2) (2,601) (2,603)
Borrowings - (24,944) (24,944)
-------- ---------- ---------
Net exposure 104 (26,331) (26,227)
======== ========== =========
United
States Malaysian
2014 Dollar Ringgit Total
GBP'000 GBP'000 GBP'000
Trade and other receivables 3,397 2,243 5,640
Cash and bank balances 3 1,402 1,405
Trade and other payables (96) (3,765) (3,861)
Borrowings - (30,441) (30,441)
-------- ---------- ---------
Net exposure 3,304 (30,561) (27,257)
======== ========== =========
Notes to the Financial Statements
For the year ended 31 December 2015
25 Financial instruments (Continued)
(a) Market risk (Continued)
Foreign Currency Risk (Continued)
For the year ended 31 December 2015, if the Malaysian Ringgit
had strengthened or weakened by 5% against the Sterling with all
other variables held constant, the impact on the loss before tax
would have been increased and decreased by GBP1,315,000 (2014:
GBP1,528,000).
For the year ended 31 December 2015, if the United States Dollar
had strengthened or weakened by 5% against the Sterling with all
other variables held constant, the impact on the loss before tax
would have been increased and decreased by GBP5,000 (2014:
GBP165,000 ) .
Cash flow and fair value interest rate risk
The Group's cash flow interest rate risk arises from money
market deposits and bank borrowings. Interest rate risk is the risk
that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in market interest rates. The
Group's exposure to interest rate risk arises mainly from money
market deposits and bank borrowings. The Group's policy is to
obtain the most favourable interest rates available. Any surplus
funds of the Group will be placed with licensed financial
institutions to generate interest income.
Bank borrowings bear a variable rate of interest which expose
the Group to cash flow interest rate risk. The Group does not
consider the risk to be significant in view of the nature of the
Group's current activities. A 100 basis point change represents
management's estimate of a possible change in interest rates at the
reporting date. If interest rates had been 100 basis points higher
and all other variables remained constant, the impact on the
Group's profit and loss would have been GBP249,000 (2014:
GBP304,000).
(b) Credit risk
The Group's exposure to credit risk, or the risk of
counterparties defaulting, arises mainly from trade and other
receivables. The Group manages its exposure to credit risk by the
application of credit approvals, credit limits and monitoring
procedures on an ongoing basis. For other financial assets
(including quoted investments, cash and bank balances and
derivatives), the Group minimises credit risk by dealing
exclusively with high credit rating counterparties.
The Group establishes an allowance for impairment that
represents its estimate of incurred losses in respect of the trade
and other receivables as appropriate. The main components of this
allowance are a specific loss component that relates to
individually significant exposures, and a collective loss component
established for groups of similar assets in respect of losses that
have been incurred but not yet identified. Impairment is estimated
by management based on prior experience and the current economic
environment.
(i) Credit risk concentration profile
The Group's major concentration of credit risk relates to the
amounts owing by three (3) customers which constituted
approximately 81% (2014 - 97%) of its trade receivables at the end
of the reporting period.
The revenue generated by the three customers were as
follows:
Customer 1 - GBP727,352 [9%] (2014 - GBP1,661,023 Percentage of
revenue [3%])
Customer 2 - GBP595,715 [7%] (2014 - Nil Percentage of revenue [0%])
Customer 3 - GBP85,162 [1%] (2014 - Nil Percentage of revenue
[0%])
(ii) Exposure to credit risk
As the Group does not hold any collateral, the maximum exposure
to credit risk is represented by the carrying amount of the
financial assets as at the end of the reporting period.
Notes to the Financial Statements
For the year ended 31 December 2015
25 Financial instruments (Continued)
(b) Credit risk (Continued)
(iii) Ageing analysis
Gross Individual Collective Carrying
Amount Impairment Impairment Value
GBP'000 GBP'000 GBP'000 GBP'000
2015
Not past due 285 - - 285
Past due:
- 3 to 6 months 226 - - 226
- over 6 months 146 (146) - -
-------- ----------- ----------- ---------
657 (146) - 511
======== =========== =========== =========
Gross Individual Collective Carrying
Amount Impairment Impairment Value
GBP'000 GBP'000 GBP'000 GBP'000
2014
Not past due 3,449 - - 3,449
Past due:
- 1 to 3 months 1,099 - - 1,099
- 3 to 6 months 39 - - 39
4,587 - - 4,587
======== =========== =========== =========
Trade receivables that are past due but not impaired
The Group believes that no impairment allowance is necessary in
respect of these trade receivables. They are substantially
companies with good collection track record and no recent history
of default.
Trade receivables that are neither past due nor impaired
A significant portion of trade receivables that are neither past
due nor impaired are regular customers that have been transacting
with the Group. The Group uses ageing analysis to monitor the
credit quality of the trade receivables. Any receivables having
significant balances past due or more than 180 days, which are
deemed to have higher credit risk, are monitored individually.
(c) Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in settling its financial obligations that are settled
with cash or another financial asset. The Directors' objective is
to maintain, as much as possible, a level of its cash and bank
balances adequate enough to ensure that there will be sufficient
liquidity to meet its liabilities when they fall due. The following
set forth the remaining contractual maturities of financial
liabilities as at:
< 1 1-2 2-5
GBP'000 On demand year years years Total
31 December 2015
Trade and other
payables and accruals 3,370 - - - 3,370
Borrowings 24,927 5 11 - 24,943
---------- ------- ------- ------- --------
28,297 5 11 - 28,313
========== ======= ======= ======= ========
31 December 2014
Trade and other
payables and accruals 3,861 - - - 3,861
Borrowings - 18,884 2,197 9,360 30,441
---------- ------- ------- ------- --------
3,861 18,884 2,197 9,360 34,302
========== ======= ======= ======= ========
Notes to the Financial Statements
For the year ended 31 December 2015
25 Financial instruments (Continued)
(d) Fair value information
As at the end of the reporting period, there were no financial
instruments carried at fair values. The fair values of the
financial assets and financial liabilities approximated their
carrying amounts due to relatively short-term maturity of the
financial instruments (maturing within the next 12 months). The
fair values are determined by discounting the relevant cash flows
at rates equal to the current market interest rate plus appropriate
credit rating, where necessary.
Set out below is a comparison by class of the carrying amounts
of fair value of the Group's financial instruments, other than
those whose carrying amounts are a reasonable approximation of fair
value:
Carrying Fair
GBP'000 Type value value
31 December 2015
Financial assets
Level
Property, plant and equipment 3 20,631 20,631
Level
Goodwill 3 - -
Level
Intangible assets 3 41 41
20,672 20,672
========= =======
31 December 2014
Financial assets
Level
Property, plant and equipment 3 39,354 39,354
Level
Goodwill 3 3,171 3,171
Level
Intangible asset 3 11,284 11,284
--------- -------
53,809 53,809
========= =======
(e) Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
The Group considers capital to be its equity reserves as shown
in the consolidated statement of financial position plus net debt.
At the current stage of the Group's life cycle, the Group's
objective in managing its capital is to ensure that funds raised
meet the cash requirements. Capital at 31 December 2015 and 31
December 2014 was as follows:
2015 2014 2013
GBP'000 GBP'000 GBP'000
Total borrowings (Note 19) 24,943 30,441 25,353
Less: Cash and cash equivalents
(Note17) (558) (2,227) (7,368)
-------- -------- --------
Net debt 24,385 28,214 17,985
Total equity (5,895) 27,715 34,543
-------- -------- --------
18,490 55,929 52,528
======== ======== ========
Breach of loan agreements
Interest and principal payments of GBP 5.08 million on the
Groups loans with a carrying amount of GBP24.93 million was overdue
on 31 December 2015.
In 2016, out of the total debt, GBP 14.45 million of debt has
been restructured with repayments of principal and interest
rescheduled from 2016 to 2021.
For the balance of debt totalling GBP 10.49 million management
is in negotiations with lenders for repayment via the sale of the
Groups non-core assets.
Notes to the Financial Statements
For the year ended 31 December 2015
26 Capital commitments
2015 2014
GBP'000 GBP'000
Contracted but not provided for in
the financial statements:
Purchase of property, plant and equipment - 308
========= ========
27 Operating lease commitments
Leases as lessee
The Group leases two office premises and office equipment under
operating leases. The lease period of office premises is two (2)
years with an option to renew after that date and office equipment
is five (5) years.
2015 2014
GBP'000 GBP'000
Not more than one year 28 66
Later than one year and not later
than five years 3 7
-------- --------
31 73
-------- --------
28 Related party transactions
Identities of related parties
(a) In relation to the information detailed elsewhere in the
financial statements, the Group has a controlling related party
relationship with its subsidiary as disclosed in Note 3 to the
financial statements.
(b) Other than those disclosed elsewhere in the financial
statements, the Group and the Company also carried out the
following significant transactions with the related parties during
the financial year:-
2015 2014
GBP'000 GBP'000
Key management personnel:
- Salaries and other benefits 308 415
- Defined contribution plan 34 38
======== ========
29 Control
The Company is under the control of its shareholders and not any
one party.
30 Subsequent events
During the year the Group defaulted on its loans (Note 19), and
subsequent to the balance sheet date the Group restructured part of
its debt and entered into discussion with other lenders to sell its
non-core fixed assets in order to settle loan liabilities (Notes 13
and 19). Subsequent to the balance sheet date, the Group
incorporated a new subsidiary, Platinum Techsolve Sdn Bhd., which
will hold the Group's restructured operations.
31 Subsequent changes in composition of the Group
Post the financial period, in line with the business
rationalisation plan announced on 11 April 2016, to date the
following changes were effected:
i) Platinum Green Chemicals Sdn. Bhd.
Platinum Green Chemicals Sdn. Bhd. is a wholly owned subsidiary
of Platinum Nanochem Sdn. Bhd., which in turn is a wholly owned
subsidiary of Graphene Nanochem Sdn. Bhd. The Company's core
operations are in the discontinued fuel additive business.
On 11 July 2016, KPMG Deal Advisory Sdn. Bhd. was appointed as
receivers and managers of Platinum Green Chemicals Sdn. Bhd. The
appointment was made by Bank Pembangunan Malaysia Berhad vide the
Security Deed and Debenture held and pursuant to Sections 188(1),
189(1) and 189(2) of the Malaysian Company Act 1965. Subsequent to
this appointment, a winding up order for Platinum Green Chemicals
Sdn. Bhd. via Section 218 of the Malaysian Companies Act 1965 was
received on 1 August 2016.
ii) Platinum Nanochem Sdn. Bhd.
Platinum Nanochem Sdn. Bhd. a wholly owned subsidiary of
Graphene Nanochem Sdn. Bhd. and parent company of Platinum Green
Chemicals Sdn. Bhd. and Platinum Nano G Sdn. Bhd. The Company's
core operations are in the discontinued fuel additive business.
On 15 July 2016, a winding up order was received for Platinum
Nanochem Sdn. Bhd. pursuant to Section 218 of the Malaysian
Companies Act 1965.
Statement of Financial Position
(Parent Company)
As At 31 December 2015
2015 2014
Notes GBP000 GBP000
Fixed assets
Investments in subsidiaries 3 - 21,268
Amounts owed by subsidiaries 5 - 28,600
Intangible assets 4 41 -
41 49,868
Current assets
Other debtors 5 12 16
Cash at bank and in hand - 821
12 837
Current liabilities
Bank overdraft (12) -
Creditors: amounts falling due within one year 6 (117) (55)
(129) (55)
Net current liabilities (117) 782
Net assets / (liabilities) (76) 50,650
Capital and reserves
Share capital 7 23,307 23,307
Share premium account 8 37,639 37,639
Profit and loss account 8 (61,022) (10,296)
Shareholders' funds 8 (76) 50,650
Statement of Changes in Equity
(Parent Company)
As At 31 December 2015
Share
Share Premium Accumulated Total
Capital Account Losses Equity
GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2014 23,307 37,639 (678) 60,268
Total comprehensive loss
------------- ---------------- ---------------- ------------------
Loss for the financial
year - - (9,618) (9,618)
- - (9,618) (9,618)
At 31 December 2014 23,307 37,639 (10,296) 50,650
Total comprehensive loss
------------- ---------------- ---------------- ------------------
Loss for the financial
year - - (50,726) (50,726)
- - (50,726) (50,726)
At 31 December 2015 23,307 37,639 (61,022) (76)
============= ================ ================ ==================
Statement of Cash Flows
(Parent Company)
As At 31 December 2015
2015 2014
GBP'000 GBP'000
Cash Flows From Operating Activities
Loss before taxation (50,726) (9,618)
Adjustments for:
Amortisation of intangible assets 1 -
Impairment of investment in subsidiaries 21,268 9,257
Provision against amount owed
by group undertakings 26,759 -
Interest expense - 180
Interest income (168) (1,233)
--------- ------------------------------
Operating loss before working
capital changes (2,866) (1,414)
Decrease in :
Trade and other receivables 4 37
Increase in :
Trade and other payables 62 43
--------- ------------------------------
Cash Generated From/(Used In)
Operations (2,800) (1,334)
Net interest received 168 1,233
Net interest paid - (180)
Net Cash Used In Operating Activities (2,632) (281)
--------- ------------------------------
Cash Flows (For)/From Investing
Activities
Purchase of intangible assets (42) -
Investment in subsidiaries - (12,513)
Repayment by subsidiaries 1,841 12,569
Net Cash (Used In)/Generated
From Investing Activities 1,799 56
--------- ------------------------------
Net Decrease In Cash and Cash
Equivalents (833) (225)
Cash and Cash Equivalents at
beginning of year 821 1,046
Cash and Cash Equivalents at
end of year (12) 821
========= ==============================
Notes to the Financial Statements (Parent Company)
For the year ended 31 December 2015
General information
Graphene Nanochem Plc ("the Company") is the UK holding company
of a group of companies which are involved in the design,
formulation and manufacturing of intermediate and performance
chemicals and advanced nano-materials. The registered address of
the company is Academy House, London Road, Camberley, Surrey, GU15
3HL.
Principal accounting policies
Basis of preparation
The financial statements have been prepared under the historical
cost convention and using UK financial reporting standards and
applicable law which together comprise with FRS 102 - The Financial
Reporting Standard applicable in the UK and Republic of Ireland.
("new UK GAAP"). The consolidated financial statements of the Group
have been shown separately and are prepared using IFRS as adopted
by the European Union.
Information on impact of first-time adoption of FRS 102 is given
in note 15.
Under Section 408 of the Companies Act 2006, the Company is
exempt from the requirement to present its own profit and loss
account (see Note 13).
The Company is entitled to the merger relief offered by Section
612 of the Companies Act 2006 in respect of the consideration
received in excess of the nominal value of the equity shares issued
in connection with the acquisition of Platinum Performance Chem Sdn
Bhd (formerly known as Zurex Corporation Sdn Bhd).
The principal accounting policies of the Company are set out
below. There were no recognised gains or losses for the year other
than the loss for the year.
The financial statements have been prepared on the going concern
basis as explained in Note 2.2 to the consolidated financial
statements.
Income from investments
Investment income comprises interest receivable from the
licensed banks and is recognised on an accrual basis using the
effective interest method.
Deferred taxation
Deferred tax is recognised in respect of all timing differences
that have originated but not reversed at the balance sheet date
where transactions or events have occurred at that date that will
result in an obligation to pay more, or a right to pay less or to
receive more, tax, with the following exceptions:
-- provision is made for tax on gains arising from the
revaluation (and similar fair value adjustments) of fixed assets,
and gains on disposal of fixed assets that have been rolled over
into replacement assets, only to the extent that, at the balance
sheet date, there is a binding agreement to dispose of the assets
concerned. However, no provision is made where, on the basis of all
available evidence at the balance sheet date, it is more likely
than not that the taxable gain will be rolled over into replacement
assets and charged to tax only where the replacement assets are
sold;
-- provision is made for deferred tax that would arise on
remittance of the retained earnings of overseas subsidiaries,
associates and joint ventures only to the extent that, at the
balance sheet date, dividends have been accrued as receivable;
and
-- deferred tax assets are recognised only to the extent that
the Directors consider that it is more likely than not that there
will be suitable taxable profits from which the future reversal of
the underlying timing differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax
rates that are expected to apply in the periods in which timing
differences reverse, based on tax rates and laws enacted or
substantively enacted at the balance sheet date.
Notes to the Financial Statements (Parent Company)
For the year ended 31 December 2015
Principal accounting policies (Continued)
Foreign currency
Transactions in foreign currencies are translated at the
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities in foreign currencies are translated at the
rates of exchange ruling at the balance sheet date. Any gain or
loss arising from a change in exchange rates subsequent to the date
of the transaction is included as an exchange gain or loss in the
profit and loss account.
Investment in subsidiary
Investments in subsidiary companies are stated at cost less
provision for any impairment where the underlying business does not
support the carrying value of the investment.
Share-based payments
Pursuant to Reverse acquisition exercise, all existing long term
incentive plans granted have been superseded by new long term
incentive plans.
Financial instruments
Financial assets and liabilities are recognised in the
statements of financial position when the Company has become a
party to the contractual provisions of the instruments.
The Company's financial assets and liabilities are initially
measured at fair value plus any directly attributable transaction
costs. The carrying value of the Company's financial assets,
primarily cash and bank balances, and liabilities, primarily the
Company's payables and other accrued expenses, approximate their
fair values.
(i) Financial assets
On initial recognition, financial assets are classified as
either financial assets at fair value through profit or loss,
held-to-maturity investments, loans and receivables financial
assets, or available-for-sale financial assets, as appropriate.
-- Trade and other receivables
Trade and other receivables (including deposits and prepayments)
that have fixed or determinable payments that are not quoted in an
active market are classified as other receivables, deposits, and
prepayments. Other receivables, deposits, and prepayments are
measured at amortised cost using the effective interest method,
less any impairment loss. Interest income is recognised by applying
the effective interest rate, except for short-term receivables when
the recognition of interest would be immaterial.
(ii) Financial liabilities and equity instruments
Financial liabilities are classified as liabilities or equity in
accordance with the substance of the contractual arrangement.
Interest, dividends, gains and losses relating to financial
liabilities are reported in profit or loss. Distributions to
holders of financial liabilities are classified as equity and
charged directly to equity.
-- Financial liabilities
Financial liabilities comprise long-term borrowings, short-term
borrowings, trade and other payables and accruals, measured at
amortised cost using the effective interest method.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash payments
(including all fees on points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial liability, or, where appropriate, a shorter period to the
net carrying amount on initial recognition.
-- Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all its
liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
Notes to the Financial Statements (Parent Company)
For the year ended 31 December 2015
Principal accounting policies (Continued)
Critical accounting judgments and key sources of estimation
uncertainty
In the application of the Company's accounting policies, which
are described in note 3, the Directors are required to make
judgments, estimates and assumptions about the carrying amounts of
assets and liabilities that are not apparent from other sources.
The estimates and assumptions are based on historical experience
and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
The following are the key assumptions concerning the future and
other key sources of estimation uncertainty at the statement of
financial position date that have a significant risk of causing a
significant adjustment to the carrying amounts of assets and
liabilities in the Financial statements:
Carrying value of investment in and loans due from
subsidiaries
Management's assessment for impairment of investment and long
term loans in subsidiaries is based on the estimation of value in
use of the cash generating unit (CGU) by forecasting the expected
future cash flows for a period of up to five years, using a
suitable discount rate in order to calculate the present value of
those cash flows.
As the Company's subsidiaries have ceased operations and are in
negotiations with various banks to dispose of fixed assets to
settle overdue loans, management has fully impaired the carrying
values of investments in subsidiaries and loans due from
subsidiaries.
Recognition of deferred tax assets
The recognition of deferred tax assets is based upon whether it
is more likely than not that sufficient and suitable taxable
profits will be available in the future against which the reversal
of temporary differences can be deducted. To determine the future
taxable profits, reference is made to the latest available profit
forecasts. Where the temporary differences are related to losses,
relevant tax law is considered to determine the availability of the
losses to offset against the future taxable profits.
Notes to the Financial Statements (Parent Company)
For the year ended 31 December 2015
1 Administrative expenses
2015 2014
GBP'000 GBP'000
Included within administrative
expenses are:
Amortisation of intangible
assets 1 -
Auditors remuneration
- Fees payable to the company's
auditor for the audit of the
annual accounts 32 25
2 Directors and employees
The employee benefit expense during the year was as follows:
2015 2014
GBP'000 GBP'000
Salary and wages including
gratitude 96 93
-------- -------------------
There was no employee except for the number of directors during
the year was 6 (2014:7).
Remuneration in respect of Directors was as follows:
Basic Pension-Defined
salary contribution Total Total
Director and fees schemes 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
Tan Sri Abi Musa 12 - 12 12
Dato Jespal Deol 12 - 12 12
Sushil Sidhu 12 - 12 12
Am Cleverly Esq &
Mrs JCM Cleverly 12 - 12 12
Dato' Larry Gan 12 - 12 12
Patrick Dennis Howes 24 - 24 24
Dato' Mohamed Sallehuddin 12 - 12 9
96 - 96 93
========== ========================== ======== =============
3 Investments in subsidiaries
2015 2014
GBP'000 GBP'000
Cost
At 1 January 30,525 18,012
Additions - 12,513
-------- --------
At 31 December 30,525 30,525
-------- --------
Permanent diminutions
At 1 January 9,257 -
Impairment for the
year 21,268 9,257
-------- --------
At 31 December 30,525 9,257
-------- --------
Net book value - 21,268
======== ========
In financial year of 2014, Graphene Nanochem Plc increased the
shareholding in a subsidiary, Platinum Performance Chemicals Sdn
Bhd via capitalization of an amount of GBP12,513,000 owed by the
Subsidiary.
Notes to the Financial Statements (Parent Company)
For the year ended 31 December 2015
3 Investments in subsidiaries (Continued)
Graphene Nanochem plc has the following subsidiaries:
Name of subsidiaries Country Effective Principal activities
of incorporation Equity interest
2015 2014
% %
Investment holding
Platinum Nanochem and provision of management
Sdn. Bhd. Malaysia 100 100 services
Platinum Performance Refining of crude
Chem Sdn Bhd. Malaysia 100 100 palm oil
Platinum Nanochem Sdn. Bhd. has the following subsidiaries and
joint venture:
Name of subsidiaries Country Effective Principal activities
of incorporation Equity interest
2015 2014
% %
Platinum Green
Chemicals Sdn. Manufacturing of advanced
Bhd. Malaysia 100 100 chemicals and biofuels
Platinum Nano Manufacturing of advanced
G Sdn. Bhd. Malaysia 100 100 nano-materials
Manufacturing of speciality
chemicals and other
Scomi Platinum graphene-enhanced
Sdn. Bhd. Malaysia 50 50 green chemicals
Investments in subsidiaries and a joint venture are shown at
cost less impairment loss.
As the Company's subsidiaries have ceased operations and are in
negotiations with various banks to dispose of fixed assets to
settle overdue loans, management has fully impaired the carrying
values of investments in subsidiaries and loans due from
subsidiaries.
Notes to the Financial Statements (Parent Company)
For the year ended 31 December 2015
4 Intangible assets
Licence Patents Total
GBP'000 GBP'000 GBP'000
Cost
As at 1 January 2014 - - -
Transfer from subsidiary
undertakings 18 24 42
As at 31 December 2015 18 24 42
-------- -------- --------
Accumulated amortisation
As at 1 January 2014 - - -
Transfer from subsidiary
undertakings 1 - 1
As at 31 December 2015 1 - 1
-------- -------- --------
Net book value as at
31 December 2015 17 24 41
======== ======== ========
5 Debtors
2015 2014
GBP'000 GBP'000
Due within more than
one year
Amounts owed by subsidiaries 26,759 28,600
Less: provision allowance (26,759) -
--------- --------
Net amount owed by
subsidiaries - 28,600
Due within one year
Other debtors 12 16
--------- --------
12 28,616
========= ========
6 Creditors: amounts falling due within one year
2015 2014
GBP'000 GBP'000
Accruals and deferred
income 117 55
-------- --------
117 55
======== ========
7 Share capital and options
2015 2014 2015 2014
Number of shares GBP'000
Issued and Fully Paid-Up:
At 1 January and 31 December 116,536,536 116,536,536 23,307 23,307
============ ============ ======== =======
All issued shares are fully paid. Details of the share options
outstanding at 31 December 2015 are shown in note 21 of the
consolidated financial statements.
Notes to the Financial Statements (Parent Company)
For the year ended 31 December 2015
8 Statement of reserves
Share Premium Profit and
account loss account
GBP000 GBP000
At 1 January 2014 37,639 (678)
Loss for the year - (9,618)
-------------- --------------
At 31 December 2014 37,639 (10,296)
Loss for the year - (50,726)
At 31 December 2015 37,639 (61,022)
-------------- --------------
9 Capital commitments
The Company had no contracted capital commitments at 31 December
2015 (2014: GBPnil).
10 Contingent liability
The Company has provided a guarantee in respect of bank
borrowings of its subsidiaries totaling GBP15,905,000 (2014:
GBP1,983,000).
11 Transactions with Directors and other related parties
The Company has taken advantage of the exemption in FRS102 and
has not disclosed transactions with wholly owned Group
undertakings. There are no other related party transactions with
the Company. The Company is under the control of its shareholders
and not any one party.
12 Company profit and loss account
The Company has taken advantage of the exemption available under
Section 408 of the Companies Act 2006 and has not presented its own
profit and loss account. The loss of the Company for the year was
GBP50,726,000 (2014: loss GBP9,618,000).
13 Financial instruments
The carrying amounts of the Company's financial assets and
liabilities as at 31 December 2015 are as follows:
2015 2014
GBP'000 GBP'000
Financial assets
Trade and other receivables 12 16
Cash and bank balances - 821
-------- --------
12 837
-------- --------
Financial liabilities carried at
amortised costs
-------- --------
Trade and other payables 117 55
Borrowings 12 -
-------- --------
129 55
-------- --------
14 First time adoption of FRS 102
The accounting policies applied under the entity's previous
accounting framework are not materiality difference to the
accounting policies that are compliant with FRS 102 and there has
been no material impact on equity or profit or loss. Accordingly,
no reconciliation from the entity's previous accounting framework
has been presented.
15 Subsequent events
Refer to Notes 30 and 31 of the consolidated financial
statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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