RNS Number : 9066D
HydroDec Group plc
22 September 2008
22nd September 2008
Hydrodec Group plc
Unaudited Interim Results
Hydrodec Group plc (AIM: HYR) today announces unaudited Interim Results for the six months ended 30 June 2008.
Operational:
* First US plant in Ohio completed on time and under budget
* Acquisition of Virotec International plc
* CSIRO royalty pre-paid
* Commencement of export sales of SUPERfineTM to Turkey from Australia
* Development of Japanese market commenced
* Successful �5.0m placing in April 2008
* Commitment for off-take of over 50% of Ohio production
* Construction go-ahead for the second US plant in Laurel, Mississippi
Financial:
* Revenues: �2,039,312 (2007: �689,666)
* Net operating loss �1,285,697 (2007: �1,167,153)
* Net assets �27,243,271 (2007: �12,391,962)
Hydrodec Chairman John Gunn commented: "It was a great achievement to complete the Canton, Ohio plant on schedule and ahead of budget.
The response to SUPERfineTM in the US has been very positive, reflected by the securing of off-take demand in excess of 50% of Canton's
capacity before production has started. This is a significant testament to the market's reaction to the quality of SUPERfineTM oil and the
viability of Hydrodec's business model.
The Board has approved commencement of the Laurel, Mississippi plant and commissioning is expected in 2009 with further pre-sales
already taken. Australia's plant in Young, New South Wales, has continued smooth operation.
Our entry into the Japanese market is also making great progress. The recent signing of a MOU with Kobelco Eco-Solutions Co., Ltd.
(KES), in Japan sets the Company up to meet our objective to commence construction of a facility in Japan during 2009. The acquisition of
Virotec and the CSIRO royalty streams has eliminated a 10% charge on gross future revenue. This additional profit can be re-invested into
the business to fund future growth and business opportunities.
As demand and recognition for SUPERfineTM grows in the US and the worldwide increase in demand for transformer oil continues, Hydrodec
is now well positioned to provide a sustainable resource for its customers."
For further information please contact:
Hydrodec Group plc 020 7621 5774
John Gunn, Chairman
Numis Securities Limited 020 7260 1000
Nominated Adviser: Simon Blank
Corporate Broker: David Poutney/ Alex Ham
Curve PR 07764 197003
Emma Davis
CHAIRMAN'S STATEMENT
I am pleased to present Hydrodec's unaudited interim accounts for the six months ended 30 June 2008. Hydrodec's technology is an oil
refining process, producing new speciality oils, using spent oil as the primary feedstock. The process also removes dangerous contaminants
such as PCB's from oil and similar fluids. The technology can be applied to many speciality oils, but initially the Company is concentrating
on the transformer oil industry. Old transformer oil that has been refined through the Hydrodec process becomes SUPERfineTM oil.
Results for six months ended 30 June 2008
Turnover for the period increased by 196% over the first half of 2007 to �2,039,312 (2007: �689,666), with an overall operating loss of
�1,285,697 (2007: �1,167,153). The operating loss includes �507,240 of depreciation and the amortisation. Net assets increased by 120% to
�27,243,271 (30 June 2007: �12,391,962), including cash balances of �8,991,049 (30 June 2007: �2,284,324).
Commercial developments
USA
The handover from construction to commissioning for the new Canton, Ohio refinery took place in the week commencing 16th June. During
that week, the plant was pressurised and final dry testing commenced ahead of catalyst conditioning and first oil feed to the reactors.
Since then, SUPERfineTM transformer oil has completed wet commissioning and then independent quality assurance verification. Samples of the
oil have now been sent to Hydrodec's customers for their final approval. Canton has a production capacity in excess of 80,000 litres per
day.
There is already a commitment for the purchase of greater than 50% of the maximum production capacity of the new Canton plant plus a
firm expression of interest in increasing purchase quantities upon commissioning of the Laurel, Mississippi plant.
Construction of the second US plant in Laurel continues. With a similar capital investment, this plant will be 1 � times the size of
Canton and will have a production capacity of 120,000 litres per day. It is scheduled to start commercial operations during the second half
of 2009. Once operating, these plants will represent a ten fold increase of Hydrodec's existing SUPERfineTM production capacity.
Japan
Visits to the Australian plant by key Japanese parties commenced in March 2008 and in June Hydrodec announced the signing of a MOU with
Sanyu Plant Service Co (Sanyu). Commencement of work on this MOU has lead to the development of a more powerful MOU with KES, a majority
owned subsidiary of Kobe Steel, and one of Japans most respected industrial companies. Sanyu has withdrawn on amicable terms in favour of
KES.
KES is the environmental business unit of the Kobe Steel Group, one of Japan's most prominent industrial companies. KES has extensive
business in the treatment of PCB contaminated electrical equipment and transformer oil, has advanced technology and engineering capabilities
in the environmental field, has strong research and development capabilities and has established and comprehensive links with the Japanese
power industry.
The MOU with KES creates a binding agreement between the companies and commits Hydrodec exclusively to KES for the six month term of the
agreement. The objectives of the agreement include finalisation of the feasibility of the Hydrodec business in Japan, establishment of terms
under which the parties may enter into a cooperative business arrangement in Japan and documentation of the terms of conduct of a mutually
acceptable master agreement between the parties.
Australia
In May and June SUPERfineTM sales averaged 500,000 litres per month, close to the maximum capacity of the plant. The Young plant
continues to supply Turkey and to meet continued growing demand from the domestic market.
Placing
Hydrodec placed 10,000,000 new ordinary shares at a price of 50.0 pence per share to raise �5.0 million (before expenses) in April. The
placing provided Hydrodec with additional funds required for its offer for Virotec International plc as well as for general corporate
purposes, including the further expansion of Hydrodec's operations.
Acquisitions
The acquisition of Virotec International plc ("VTI") was completed in June for a total consideration of �35.2 million, a breakdown of
which is contained at Note 8 in the release. This resulted in an additional 64,689,227 new Hydrodec shares being issued. The assets acquired
included the royalty stream owed to Virotec as well as Virotec's 54.5 million Hydrodec shares. These are now held as treasury shares.
The other royalty stream Hydrodec paid was due to CSIRO (Commonwealth Scientific and Industrial Research Organisation), owner and
licensor of the Hydrodec patent. This was a royalty of 5% of the gross revenue earned by the company from the Hydrodec technology for the
life of the patent. In May, CSIRO agreed to accept a one-off cash payment of AUD$5.6 million (�2.7 million) as complete pre-payment of all
royalties due under the Hydrodec technology licence agreement (the "Licence Agreement").
The transformer oil market
Continued price volatility in crude oil markets has seen a corresponding volatility in the price of used oil as well as transformer oil.
Furthermore unusually violent storms in the Gulf Coast area have impacted production and refinery capacity in Texas and Louisiana that has
had a direct impact on base oil supplies. Based upon these and other factors, the market price for transformer oil increased during the
period. List price increases were announced by producers in the USA and escalating crude oil prices have started to feed through to the
market place. Power industry infrastructure replacement programs and upgrades are also gathering momentum in the USA and Australia,
increasing short and medium term demand for transformer oils. The ongoing tight supply situation combined with increasing price and demand
is providing progressive improvement in Hydrodec's competitive position in its two current key markets Australia and the USA and its
potential Japanese market. In addition a major opportunity exists for the treatment of PCB contaminated oil especially in Japan, USA and Europe.
Current trading
SUPERfineTM sales volumes have increased throughout the period and this trend has continued post period end.
The future
Sales progress in Australia continues to be encouraging with repeat orders from Turkey and an increased level of interest from the
domestic market. Opportunities exist for the Australian plant to supply other countries such as Indonesia, New Zealand, and possibly the
West Coast of the USA and these are actively being pursued.
The treatment of other specialty oils for recycling e.g. hydraulic oils continues to be evaluated at the request of major producers and
users in this sector and it is hoped this will lead to significant commercial opportunities. The market potential for Hydrodec in these
areas is many times the size of the transformer oil market. In addition, Hydrodec has ambitions to establish a re-manufacturing business for
dangerous waste products such as PCBs and POPs.
The potential for Hydrodec in the USA, Japan and other international markets is huge and exciting opportunities await us. We are
confident in the quality of SUPERfineTM and believe that we can satisfy customer demand and exceed customer expectations. The commencement
of the Canton plant in September marks a milestone for Hydrodec as it becomes a global company.
The dynamics of the global transformer oil market continue to move in favour of SUPERfineTM oil. The key advantages of sustainability, a
predictable price and supply and the world-class product that Hydrodec provide remain as compelling as ever in today's market place. I look
forward to announcing further significant corporate and commercial developments soon.
John Gunn
Non-executive Chairman
22nd September 2008
CONSOLIDATED PROFIT AND LOSS
Note (Unaudited) (Unaudited)
6 months ended 30 6 months ended 30
June 2008 June 2007
� �
Turnover 2,039,312 689,666
Cost of sales (496,385) (271,180)
Gross profit 1,542,927 418,486
Administrative expenses (2,828,624) (1,585,639)
Operating loss (1,285,697) (1,167,153)
Interest income/(expenditure) 6 (573,763) 21,149
Loss on ordinary activities (1,859,460) (1,146,004)
before and after taxation
Loss retained for the period (1,859,460) (1,146,004)
Loss per share
Basic (0.96)p (0.62)p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
(Unaudited) (Unaudited)
6 months 6 months
ended ended
30 June 30 June
2008 2007
� �
Loss for the financial period (1,859,460) (1,146,004)
Currency differences 343,380 181,312
Total recognised losses (1,516,080) (964,692)
CONSOLIDATED BALANCE SHEET
Note (Unaudited) (Unaudited)
As at As at
30 June 2008 30 June 2007
� �
Non-current assets
Tangible assets 9,786,252 3,843,678
Intangible 7 15,032,453 6,555,003
Other non-current assets - 2,704,240 -
prepaid royalties
27,522,945 10,398,681
Current assets
Debtors 854,336 323,863
Investment 8 2,227,500 -
Inventory 105,978 189,022
Prepayments and other 652,954 68,170
receivables
Cash at bank and in hand 8,991,049 2,284,324
12,831,817 2,865,379
Current trade and other (6,603,323) (445,070)
creditors
Net current assets 6,228,494 2,420,309
Non current liabilities (6,508,168) (427,028)
Total assets less liabilities 27,243,271 12,391,962
Capital and reserves
Called up share capital 1,332,727 969,227
Share premium account 53,570,935 19,125,567
Equity reserve 9,538,900 -
EBT and treasury shares (27,440,095) -
Share options reserve 2,690,389 2,253,134
Foreign exchange reserve 496,996 (3,704)
Profit and loss account (12,946,581) (9,952,262)
Equity shareholders' funds 9 27,243,271 12,391,962
CASH FLOW STATEMENT
Note (Unaudited) (Unaudited)
6 months 6 months
ended ended
30 June 30 June 2007
2008
� �
Cashflows from operating activities
Operating loss (1,285,697) (1,167,153)
Depreciation 245,040 95,899
Amortisation of other intangible assets 262,200 262,200
Finance costs - 138,686
Share based payment expense 213,000 113,082
Foreign exchange movement 343,380 (3,749)
Increase in inventories 26,833 (113,661)
(Increase)/decrease in amounts receivable 736,155 (207,421)
Increase/(decrease) in amounts payable (1,148,838) (23,676)
Net cash outflow from operating activities (607,927) (905,793)
Cashflows from investing activities
Purchase of property plant and equipment (3,172,833) (134,173)
Purchase of Investment (4,111,677) -
Interest paid (165,600) -
Bank interest and other income received 200,213 21,149
Net cash outflow from investing activities (7,249,897) (113,024)
Cashflows from financing activities
Issue of new shares 5,000,000 2,300,000
Costs of share issue (200,000) (19,729)
Repayment of lease liabilities (80,311) -
Net cash inflow from financing 4,719,689 2,280,271
Increase/(decrease) in cash and cash equivalents (3,138,135) 1,261,444
Movement in net cash
Opening cash and cash equivalents 12,129,184 891,913
Increase/(decrease) in cash and cash equivalents (3,138,135) 1,261,444
Closing cash and cash equivalents 8,991,049 2,153,357
NOTES TO THE INTERIM REPORT
1 BASIS OF PREPARATION
The interim consolidated financial statements for the six months ended 30 June 2008 have been prepared under applicable International
Financial Reporting Standards adopted by the European Union ("IFRS") which include International Accounting Standards and interpretations
issued by the International Accounting Standards Board and its committees, which are expected to be endorsed by the European Union.
This interim financial information has been prepared on the historical cost basis. The accounting policies applied are consistent with
those adopted and disclosed in the annual financial statements for the period ended 31 December 2007.
The financial information is unaudited and has not been reviewed by the auditor.
2 publication of non-statutory accounts
The financial information set out in this interim report does not constitute statutory accounts as defined in Section 240 of the
Companies Act 1985.
3 TAXATION
There is no tax charge for the interim period.
4 EARNINGS PER SHARE
6 months ended 6 months ended
30 June 2008 30 June 2007
� �
Loss for the financial period (1,859,460) (1,146,005)
Number Number
of shares of shares
Weighted average number of 193,857,392 185,611,148
shares in issue*
* The weighted average shares on issue have been reduced
by the weighted average number of Treasury and EBT shares
held.
For basic earnings per share ( 0.96 )p (0.62)p
5 DIVIDENDS
No dividends have been paid or proposed for the period.
6 INTEREST
6 months ended 6 months ended
30 June 2008 30 June 2007
� �
Interest expense - Convertible Notes (786,007) -
Interest income 212,244 21,149
Net Interest for the financial period (573,763) 21,149
7 INTANGIBLE ASSETS
Note (Unaudited)
�
Cost
At 31 December 2007 9,868,780
Intangible assets acquired 8 9,001,850
At 30 June 2008 18,870,630
Amortisation
At 31 December 2007 3,575,977
Charge for the period 262,200
At 30 June 2008 3,838,177
Net book value
At 30 June 2008 15,032,453
At 31 December 2007 6,292,803
8 Acquisition of virotec international plc
The acquisition of the Virotec International plc Group ("VTI") was completed on 25 June 2008. The acquisition was a cash and scrip offer
and was funded from existing cash reserves. The offer was completed by the issue of 64,689,227 ordinary shares and the payment of �2.8
million.
The acquisition of VTI had the following effect on the Group's assets and liabilities:
Fair value Provisional fair values
Book value adjustments
� � �
Intangible assets** - 6,924,500
6,924,500
Property, plant and equipment - -
-
Treasury stock* - 26,160,000
26,160,000
Investments*** 5,180,141 (2,952,641)
2,227,500
Trade receivables and other 82,335 -
82,335
debtors
Cash at bank 7,979 -
7,979
Current liabilities (212,435) -
(212,435)
Provisions - -
-
Deferred tax liabilities - (2,077,350)
(2,077,350)
5,058,020 28,054,509
33,112,529
Net cash paid****
3,456,428
Shares issued
30,007,629
Deferred consideration
604,951
Acquisition costs
1,120,871
Consideration
35,189,879
Goodwill on acquisition
2,077,350
* The acquisition of VTI included 54.5 million shares in the Hydrodec Group. These shares have been treated as Treasury Stock.
** Intangible asset acquired is the Royalty payable from Hydrodec to VTI.
*** Investment represents shares held in Molectra Group Ltd (previously The Greenhouse Fund Ltd)
**** Net cash includes �648,750 relating to Virotec shares purchased prior to the offer being made.
Fair values have been assessed on a provisional basis pending finalisation of the rationalisation of group accounting procedures, which
cover a number of different reporting regimes throughout the world. Deferred tax has been provided on all fair value adjustments as
applicable and on purchased goodwill where a tax benefit will be obtained against future taxable benefits.
The valuation of intangible assets has been estimated at this stage.
9 RECONCILIATION OF MOVeMENT IN SHAREHOLDERS' FUNDS
(Unaudited)
As at
30 June 2008
No.
Authorised
Ordinary shares of 0.5 pence each 800,000,000
Issued and fully paid - ordinary shares of 0.5 pence each
At 31 December 2007 193,845,400
Issues to acquire investment 64,689,227
Issued to satisfy Convertible Notes 184,212
Issued for cash 10,000,000
At 30 June 2008 268,718,839
The company issued the following 0.5 pence ordinary shares during the period:
Date of issue Number of shares Issue price Total consideration
�
21 April 2008 10,000,000 50 pence 5,000,000
27 May 2008 184,212 19 pence 35,000
25 June 2008 64,689,227 48 pence 31,050,829*
* Net share consideration for Acquisition of Virotec International plc (VTI)
Total share consideration 31,050,829
Less shares issued to Hydrodec as a VTI shareholder (1,043,200)
Net Consideration in Note 8 30,007,626
This information is provided by RNS
The company news service from the London Stock Exchange
END
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