Half-yearly Report
30 September 2014
PowerHouse Energy Group plc
("PowerHouse", the "Group" or the "Company")
Interim results for the six months ended 30 June 2014
PowerHouse Energy Group plc, (AIM: PHE) announces its unaudited results for the
six months ended 30 June 2014.
Chairman's Statement
The first six months of FY2014 have allowed us to engage in a number of
commercial, technical and organizational advancements for the Company.
In the six months ended 30 June 2014, the Group incurred an unaudited loss
before and after taxation of $547,567 (2013: $403,707).
The integration of the Pyromex companies, the purchase of which was completed
in August 2013, into PowerHouse has continued in the period under review. The
team we have created through the acquisition has achieved new technical
milestones with the testing, thermal cycling and commissioning of our nominal 5
tonne per day (tpd) unit in Schwartzenbach Switzerland. This facility has
continued to generate significant commercial interest; the team has hosted
several dozen interested parties in utilizing the technology for the creation
of syngas and the conversion of that syngas into electricity. We have
demonstrated the Ultra High Temperature Gasification process of converting
multiple waste streams into clean synthesis gas on multiple occasions.
We have continued to operate "under the radar" as we have begun the front-end
engineering and design of various feed systems to integrate with our reactor
and identifying the ideal mechanisms for the conversion of our gas into both
electricity and synthetic natural gas - through a catalytic process. Given the
challenges facing the Continental natural gas supplies and some of the
geopolitical problems we are beginning to see in eastern Europe, we realize
that the inexpensive conversion of our synthesis gas into artificial natural
gas (through a straight-forward Nickel catalyst conversion) - which can be
delivered directly to the main natural gas infrastructure in any country - in
many cases, may provide greater economic advantages for our customers than the
simple generation of electricity.
The first six months of 2014 have allowed us to work more closely with
potential customers. During this process we have been broadening our
understanding of our customers' needs and the entire commercial ecosystem which
needs be developed to deliver a successful outcome and expanding our network
for the identification of mechanisms to finance the acquisition of our units.
We continue to work with a Polish Group in the design and development of the
complex hospital waste system it envisages in Warsaw but no firm order has been
made yet. The Directors expect this system would begin with a nominal 5 tpd
system and grow with the addition of a 25 tpd system as the customer acquires
additional hazardous waste streams for its enterprise. To date we have been
advised that it has identified four medical waste streams for processing as
well as another abundant stream of hazardous waste.
Concurrent with our potential customer activities in Poland, we have been
engaged in active discussions with groups from the UK, Switzerland, Germany,
Slovakia, Thailand, Singapore, Malaysia, Oman, Brazil and the United States.
Additionally, the first six months of 2014 have allowed us to have our team in
Eiting Germany (Munich) begin to integrate the newly engineered heating
mechanism, feed system, gas handling system and electrical generation into the
early design documents for the re-commissioned 25 tpd system. Our Senior
Project Manager for the re- commissioning of the Eiting facility as a
commercial enterprise is currently in Munich to begin the process of bringing
the system back on-line. By early 2015, the Directors anticipate having a
commercially operational facility operating in Munich which is capable of
demonstrating the economic viability of the technology.
In talking to prospective customers from around the world, and those here in
the UK, it is clear that the Group's Ultra High Temperature Gasification system
is an ideal solution for enterprises, communities and local councils. With a
small physical foot-print, the fact that our system creates no smoke or ash,
and the fact that we can create clean electricity - efficiently, economically,
and in an environmentally sustainable manner, exactly where the energy is
needed - positions us well in the Waste-to-Energy space.
The Directors believe that while there are over 130 companies that operate in
the Waste to Energy field, we believe that none possess the value proposition
that we bring to the table.
Our team continues to expand our knowledge-base with enhancements to the system
on a regular basis. The Directors believe that the efficiency of our reactor,
the ability to create a synthesis gas that is tuned to provide the ideal
constituent make-up for either electrical generation or catalytic methanation,
and the successful re-commissioning of our commercial facility in Munich will
move us forward as a competitive enterprise.
During FY2014, we have continued to rely exclusively on the financial support
of Hillgrove Investments Pty Limited ("Hillgrove") and during the period the
Company was advanced a further £104,352 under the convertible loan facility
dated 19 June 2012 which allows Hillgrove, at its discretion, to further fund
company operations as it has been doing to date. Furthermore, on 27 June 2014
Hillgrove provided a Letter of Support to ensure that the Company's debts are
paid as and when they are due and within the normal course of business.
Finally, on the 27 June 2014 Hillgrove extended the maturity date of the
convertible loan note from 8 October 2014 to 7 October 2015. At 30 June 2014,
the amount owing to Hillgrove under the convertible loan note was $2,185,899
million.
The entire team and I will continue to make our best efforts to see that
Shareholders' faith in the Company is rewarded.
Keith Allaun
Chairman
30 September 2014
For additional information please contact:
PowerHouse Energy Group plc
Keith Allaun - Executive Chairman
Phone: +44 (0)20 7079 4407
Email: inquire@powerhousegroup.co.uk
Sanlam Securities UK Limited (Nomad and Joint Broker)
David Worlidge
Phone: +44 (0)20 7628 2200
Allenby Capital Limited (Joint Broker)
Nick Harriss/Nick Naylor
Phone:+44 (0) 20 3328 5656
Statement of Comprehensive Income
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Note 2014 2013 2013
US$ US$ US$
Revenue - - 3,330
Cost of sales - - (46,825)
Gross Loss - - (43,495)
Administrative expenses (437,587) (208,626) (614,132)
Operating loss (437,587) (208,626) (657,627)
Finance income - - 1
Finance costs (109,980) (195,081) (386,556)
Loss before and after taxation (547,567) (403,707) (1,044,182)
Foreign exchange arising on (99,539) 73,310 (160,183)
consolidation
Total comprehensive expense (647,106) (330,397) (1,204,365)
Total comprehensive expense
attributable to:
Owners of the Company (647,106) (330,397) (1,204,365)
Non-controlling interests - - -
Loss per share (US$) 3 (0.01) (0.01) less than(0.01)
The notes numbered 1 to 6 are an integral part of the interim financial information.
Statement of Changes in Equity
Shares and Accumulated Other Total
stock losses reserves
US$ US$ US$ US$
Balance at 1 January 2013 80,162,619 (19,697,145) (62,767,508) (2,302,034)
(audited)
Total comprehensive
income:
* Loss after taxation - (403,707) - (403,707)
* Foreign exchange - - 73,310 73,310
arising on
consolidation
Balance at 30 June 2013 80,162,619 ( 20,100,852) (62,694,198) (2,632,431)
(unaudited)
Transactions with equity
participants:
* Shares issued to 998,864 - - 998,864
settle liabilities
* - Shares issued to 26,558 - - 26,558
settle liabilities
* - Conversion of 18 - 310 328
warrants
Total comprehensive
income:
* Loss after taxation - (800,658) - (800,658)
* Foreign exchange - - (233,493) (233,493)
arising on
consolidation
Balance at 31 December 81,188,059 (20,901,510) (62,927,381) (2,640,832)
2013 (audited)
Transactions with equity
participants:
* Shares issued to 311,642 - 668,772 980,414
settle liabilities
* - Shares issued to 195,500 - 344,655 540,155
settle liabilities
Total comprehensive
expense:
* Loss after taxation - (547,567) - (547,567)
* Foreign exchange - - (99,539) (99,539)
arising on
consolidation
Balance at 30 June 2014 81,695,201 (21,449,077) (62,013,493) (1,767,369)
(unaudited)
The notes numbered 1 to 6 are an integral part of the interim financial information.
Statement of Financial Position
(Unaudited) (Unaudited) (Audited)
As at As at As at
30 June 30 June 31 December
Note 2014 2013 2013
US$ US$ US$
ASSETS
Non-current assets
Intangible assets 2,086,154 2,087,081
Property, plant and equipment 664,675 486 665,160
Investment in associate - - -
Total non-current assets 2,750,829 486 2,752,241
Current Assets
Trade and other receivables 50,238 6,690 54,311
Cash and cash equivalents 55,573 31,867 69,617
Total current assets 105,811 38,557 123,928
Total assets 2,856,640 39,043 2,876,169
LIABILITIES
Non-current liabilities
Loans 4 - (549,463) -
Total non-current liabilities - (549,463) -
Current liabilities
Loans 4 (2,185,899) (551,231) (2,542,038)
Trade and other payables 5 (2,438,110) (1,570,780) (2,974,963)
Total current liabilities (4,624,009) (2,122,011) (5,517,001)
Total liabilities (4,624,009) (2,671,474) (5,517,001)
Net liabilities (1,767,369) (2,632,431) (2,640,832)
EQUITY
Shares and stock 2 81,695,201 80,162,619 81,188,059
Other reserves (62,013,493) (62,694,198) (62,927,381)
Accumulated losses (21,449,077) (20,100,852) (20,901,510)
Total deficit (1,767,369) (2,632,431) (2,640,832)
The notes numbered 1 to 6 are an integral part of the interim financial
information.
Statement of Cash Flows
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended 31
Note 30 June 30 June December
2014 2013 2013
US$ US$ US$
Cash flows from operating activities
Loss before taxation (547,567) (403,707) (1,204,365)
Adjustments for:
* Finance income - - (1)
* Finance costs 109,980 195,081 386,556
* Depreciation and amortisation 1,412 448 322
* Foreign exchange revaluations (99,539) - (160,183)
Changes in working capital:
* (Increase) / Decrease in trade 4,073 (3,033) (50,251)
and other receivables
* Increase / (Decrease) in trade 619,113 15,044 1,371,489
and other payables
* Taxation paid - - -
Net cash used in operations 87,472 (196,197) 343,567
Cash flows from financing activities
Share/stock issues (net of issue - - (756,919)
costs)
Finance income - - 1
Finance costs (109,980) (195,081) (386,556)
Loans received 185,085 412,651 861,212
Net cash flows from financing 75,105 217,570 (282,262)
activities
Net increase in cash and cash equivalents 12,367 21,403 61,295
Cash and cash equivalents at 69,617 11,492 11,492
beginning of period
Foreign exchange on cash balances 1,677 (1,028) (3,170)
Cash and cash equivalents at end of 55,573 31,867 69,617
period
The notes numbered 1 to 6 are an integral part of the interim financial
information.
Notes (forming part of the interim financial information)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing
with items which are considered material in relation to the financial
information.
1.1. Basis of preparation
This interim consolidated financial information is for the six months ended 30
June 2014 and has been prepared in accordance with International Accounting
Standard 34 "Interim Financial Statements". The accounting policies applied are
consistent with International Financial Reporting Standards ("IFRS") adopted
for use by the European Union. The accounting policies and methods of
computation used in the interim consolidated financial information are
consistent with those expected to be applied for the year ending 31 December
2014.
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 December 2013, but is derived from
those accounts. Statutory accounts for 2013 have been delivered to the
Registrar of Companies. The auditors have reported on those accounts: their
report was qualified and contained a disclaimer of opinion and contained
statements under section 498(2) or (3) of the Companies Act 2006.
1.2. Going concern
The Directors have considered all available information about the future events
when considering going concern. The Directors have reviewed cash flow
forecasts.
The convertible loan obtained from Hillgrove Investments Pty Limited is
considered sufficient to settle outstanding creditors, maintain the Group's
overhead and other planned events. In addition, the Company is in receipt of a
letter of intention of financial support from Hillgrove Investments Pty Limited
to ensure the Company continues to meet its obligations as they fall due and to
ensure it operates as a going concern until at least 27 June 2015. Based on
this, the Directors continue to adopt the going concern basis of accounting for
the preparation of the annual financial statements.
1.3. Functional and presentational currency
This interim financial information is presented in US dollars which is the
Group's functional currency. The principal rates used for translation are:
30 June 30 June
2014 2014
Closing Average
British Pounds $1.7 $1.68
2. SHARE CAPITAL
1.0 p Ordinary 4.5 p 4.0 p
shares Deferred Deferred
shares shares
Balance at 1 January 348,307,920 17,373,523 9,737,353
2014
* Issue of shares for - -
consideration
* Issue of shares to 40,188,674
settle liabilities
* Conversion of
warrants
Balance at 30 June 2014 388,496,594 17,373,523 9,737,353
The deferred shares have no voting rights and do not carry any entitlement to
attend general meetings of the Company. They will carry only a right to
participate in any return of capital once an amount of £100 has been paid in
respect of each ordinary share. The Company will be authorised at any time to
affect a transfer of the deferred shares without reference to the holders
thereof and for no consideration.
3. LOSS PER SHARE
(Unaudited) (Unaudited) (Audited)
As at As at As at
30 June 30 June 31 December
2014 2013 2013
Total comprehensive expense (US$) (403,707) (403,707) (1,204,365)
Weighted average number of shares 286,534,426 286,534,426 285,425,948
Loss per share (US$) (0.01) (0.01) less than(0.01)
4. LOANS
(Unaudited) (Unaudited) (Audited)
As at As at As at
30 June 30 June 31 December
Notes 2014 2013 2013
US$ US$ US$
Accrued dividends on preferred 4.1 - 33,000 -
stock
Citi bank business loan 4.2 - 26,913 -
Aspermont loan 4.3 - 491,318 550,036
Hillgrove Investments Pty 4.4 2,185,899 549,463 1,992,002
Limited
Total loans 2,185,899 1,100,694 2,542,038
Classified as:
* Current 2,185,899 551,231 2,542,038
* Non-current - 549,463 -
The Aspermont loan consists of Aspermont Ltd, Dilato Holdings Pty Ltd and Tesla
Nominees Pty Ltd. These parties collectively provided a facility of $165,640 to
the Company repayable by 18 May 2012, which incurs interest at a default rate
of 7 per cent per month. On 2 April 2014 the Company negotiated a settlement to
repay the loan in full by way of issue and allotment for 11,500,000 1 pence
shares in the Company.
4.1. Accrued dividends on preferred stock
The accrued dividends were fully settled during the year to 31 December 2013.
4.2. Citi bank business loan
The loan from Citi Bank was fully settled during the year to 31 December 2013.
4.3. Aspermont loan
The Aspermont loans consist of Aspermont Ltd, Dilato Holdings Pty Ltd and Tesla
Nominees Pty Ltd. These parties collectively provided a facility of £100,000 to
the Group repayable by 18 May 2012, which incurs interest at a default rate of
7 per cent per month.
On 2 April 2014 the Company has negotiated for the loan to repaid in full by
way of issue and allotment for 11,500,000 1 pence shares in the Company.
4.4. Hillgrove Loan
Hillgrove Investments Pty Limited ("Hillgrove") has provided the PowerHouse
Energy Group plc with a convertible loan agreement amounting to $2,185,899 -
which can be increased at Hillgrove's option. The loan is secured by a
debenture over the assets of the company and carries interest of 15 per cent
per annum.
Hillgrove have provided a letter of support indicating they are willing to
increase the loan amount pending any unforeseeable or material changes to the
Group's current circumstances until at least 27 June 2015.
5. Trade and other payables
(Unaudited) (Unaudited) (Audited)
As at As at As at
30 June 30 June 31 December
2014 2013 2013
US$ US$ US$
Trade creditors 1,913,640 240,369 1,445,921
Salary and wage - -
accruals
RenewMe 275,039 1,011,120 1,155,966
Customer deposits - 150,000 -
Other accruals 249,431 169,291 373,076
Total trade and other 2,438,110 1,570,780 2,974,963
payables
Classified as:
* Current 2,438,110 1,570,780 2,974,963
* Non-current - - -
5.1. RenewMe
RenewMe Limited had been granted exclusive rights by Pyromex to use, own,
assemble and install and operate Pyromex systems in territories also licensed
to the Company's subsidiary PowerHouse Energy, Inc. The Company entered into a
settlement agreement with RenewMe whereby the parties agreed to change the
respective exclusive rights pertaining to the Pyromex technology. Under the
original settlement agreement Powerhouse Energy, Inc. had the obligation to pay
five instalments of EUR 200,000 annually beginning 30 June 2011. The Company
guaranteed the obligations under the agreement of PowerHouse Energy, Inc. As
PowerHouse Energy, Inc is unable to meets its obligations, all remaining
amounts (EUR 800,000) due under the original settlement agreement have been
recognised as a liability.
On 3 March 2014 the Company announced that a settlement had been reached with
Renewme to release its claimed geographical licenses to use our technology
under a disputed royalty agreement with Pyromex and other claims against the
Company in return for EUR 211,000 and the issue of 18,331,996 new Ordinary Shares
in the Company. While the equity portion of that settlement has been satisfied,
the cash payment has not been settled and the agreement has not been completed.
The Company is in active discussion with Renewme to finalize an agreement.
6. AVAILABILITY OF THE INTERIM RESULTS
A copy of this announcement will be available at the Company's registered
office (16 Great Queen Street, London WC2B 5DG) and on its website -
www.powerhouseenergy.net. A copy of the interim results will not be sent to
shareholders.
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