PRELIMINARY RESULTS
Accsys Technologies PLC
28 June 2007
28th June 2007 AiM: AXS
Accsys Technologies PLC ('Accsys' or 'the Company')
PRELIMINARY RESULTS
FOR THE 12 MONTHS ENDED 31 MARCH 2007 (audited)
Highlights
• Successful construction, commissioning and start up of 30,000 cubic
metre commercial AccoyaTM wood production plant in Arnhem
• Demand for production capacity for current year and beyond, with
trading agreements in place
• Large order for AccoyaTM to be used to construct heavy-traffic road
bridges, confirms a major new global market opportunity
• Immediate plans to double capacity of the Arnhem facility to 60,000 m3
by mid 2009
• Strategic Partnership with Celanese Corporation, including 5.5% equity
investment and twenty year long term supply agreement
• Licence agency agreement signed with Skanfore S.A., for 500,000 cubic
metres capacity giving €10 million upfront licence revenue
• Expectations of additional licence options and agreements and
confidence of profitability in current financial year
• Investment in the business resulted in a loss of €22.6m (2006: €5.0m)
after impairment charges of €12.4m
• €27.5 million of liquid financial resources, no debt, before receipt
of Skanfore payment
• Willy Paterson-Brown, Executive Chairman, takes on the role of Chief
Executive Officer as well; Edward Pratt to become 'Senior Advisor, Projects'
• Agreement with Fortis, with plans to list the Company's shares on
Eurolist by Euronext Amsterdam by end of 2007
• Additional product development progress in wood fibre applications
Willy Paterson-Brown, Chairman and CEO, said: 'This has been an excellent year
for Accsys with progress on many fronts and we have high expectations for 2007/
8. Accsys has moved from a technology development company to a full scale
commercial operator with far reaching potential on a global basis. In AccoyaTM
wood, we have a quality product, universally accepted as being of the highest
standards with multiple applications.'
The audited financial statements for the year ended 31st March 2007 follow.
For further information, please contact:
Accsys Technologies PLC Willy Paterson-Brown, +44 (0) 20 8144 2510
www.accsysplc.com Chairman & Chief Executive
Collins Stewart Europe Limited Tim Mickley / Michael O'Brien +44 (0) 20 7523 8000
Parkgreen Communications Justine Howarth / Clare Irvine +44 (0) 20 7851 7480
ACCSYS TECHNOLOGIES PLC
Consolidated Financial Statements
Year Ended
31 March 2007
Annual report and financial statements for the year ended 31 March 2007
Chairman & Chief Executive's Business Review
Directors' Report
Corporate Governance
Report of the independent auditors
Consolidated profit and loss account
Balance sheets
Consolidated cash flow statement
Notes forming part of the financial statements
Directors William Paterson-Brown Chairman & Chief Executive
Stefan Allesch-Taylor Non-Executive Director
Gordon Campbell Non Executive Director
Tim Paterson-Brown Non-Executive Director
Glyn C Thomas Chief Financial Officer
Company Secretary Christopher C Morse
Company Number 5534340
Registered Office 7 Queen Street
Mayfair
London W1J 5PB
Bankers Barclays Bank PLC ABN Amro Bank Sarasin & Cie AG
180 Oxford Street Gele Rijdersplein Elisabethenstrasse 62
London 6800 KW Arnhem CH 4002 Basel
W1D 1EA The Netherlands Switzerland
Registrars SLC Registrars Limited
42 - 46 High Street
Esher
Surrey KT10 9QY
Auditors BDO Stoy Hayward LLP
8 Baker Street
London W1U 3LL
Lawyers Lawrence Graham LLP
4 More London Riverside
London SE1 2AU
Chairman & Chief Executive's Business Review
It is a great pleasure to be writing this statement. The last twelve months
have seen significant progress for your company and, in fact, we have achieved
the majority of the goals that we set for ourselves during the course of the
year.
We continue to increase our shareholder base, the list of which I believe any
company on AiM would be proud, and I would like to thank so many of you for the
strong support that you have given me personally and the Company as a whole,
over the past year.
Your Company, at the time of writing, has a market capitalization of over €600
million, the stock enjoying strong liquidity with an average of several hundred
thousand shares per day traded over the course of the year.
The year has witnessed many achievements, only some of which I summarize below:
Construction and commissioning of the wood modification plant
During the financial year we completed the physical construction of our
commercial scale wood modification plant, with the first batch of Accoya being
produced on 11th March 2007. We anticipate a period of around six months will
be required to optimise operation of the plant as operating processes are
finessed for the range of dimensions and conditions of the timber processed.
The wood modification reactors represent a substantial scale up of novel
technology to achieve full commercial scale. The capacity of the large scale
reactors is 30 m3 compared with 0.4 m3 for our pilot. Whilst we are still at a
relatively early stage of working up the plant and, as would be typical for a
new technology plant, we believe it will take us up to a year to bring the
operation to full capacity utilisation. Our team are confident that the core
reactor design is substantially validated by its performance so far. This is of
critical importance for our licensing plans.
We now have a series of trading agreements in place, including ones with BSW
Timber in the UK and Roggemann in Germany, and an agreement to supply Accoya for
the construction of two road bridges in the Netherlands. Due to growing
awareness and interest in Accoya's properties we are now planning to double our
capacity in Arnhem at the earliest opportunity to take our annual capacity to
around 60,000 cubic metres.
Celanese partnership agreement
In March 2007, we announced an agreement with Celanese Corporation which secures
a number of advantages for the Company and for potential licensees.
• It provides priority customer status for the group and its potential
licensees, worldwide;
• It underwrites the availability of the key bought-in raw material for the
Accsys process;
• It removes a key layer of operating risk for licensees
The acetyls supply and recycle agreement transaction with Celanese enables Titan
Wood to concentrate on its core wood acetylation technology. It gives our
future technology licensees the certainty that they will have a dependable
supply of the key raw material that they need, as well as offtake and re-cycling
of their spent by-product, wherever they are in the world.
It has been a goal of your board to secure a substantial strategic partner to
help us to accelerate the growth of our business. The equity investment and
contractual support of Celanese gives us a huge fillip, not only with the
additional financial resources needed to accelerate our market development work,
but also through their global presence and commitment to the growth of our
business.
Funds
The Celanese investment of €22m followed a small fund-raising of €9.5m completed
in November 2006, giving your Company the wherewithal to pursue its business
aggressively and exploit the competitive advantages during the coming years. As
of the time of writing, the Company has no debt and a cash position of €27m.
Developing end product applications
With our full scale plant coming into production, greater volumes of Accoya will
become available to facilitate the development of key end product applications
in a number of major national markets. A good example of this is the bridges
contract with the Province of Friesland. Extensive research and product
development confirmed the excellent properties of our material, with projected
life of 80 years in this demanding structural application. The award opens up a
major new market segment for your Company. We shall prioritise such new
application work as it drives demand generation, enables national
specifications and regulatory approval processes to be understood and tackled -
thereby opening up high volume end use opportunities for potential licensees.
Licensing
With our technology being validated at full commercial scale, we have been able
to progress discussions with a number of interested parties, in many parts of
the world, who are enthusiastic about the potential that Accoya offers. We have
testing programmes with large-scale licensees in windows, decking, cladding and
panel products in the USA, with sawmill operators and distributors in Europe,
with companies in the Middle East including a major construction company and
with large scale suppliers in Australasia, South America and the Far East.
The main revenue driver for our business is licensing. We are developing
licensing packages and gearing up to resource the negotiation and support
required to secure a portfolio of licensed manufacturers of Accoya. We expect
to announce a number of new licenses during the course of the year on a wide
geographic scale, with the first significant licence revenue having already been
secured by our agreement with Skanfore S.A., described below:
Skanfore licensing agreement
Skanfore LLC is a privately owned trading group, based in Abu Dhabi, whose
evaluation of current and projected building projects within the GCC countries
identified significant opportunities for licensing Accoya production.
Accordingly, at the end of 2005, Skanfore took an initial option over licensed
capacity of 50,000 m3 per annum.
During the past fifteen months, Skanfore has identified a number of potential
licensees including three in the Gulf region - for Saudi Arabia, Dubai and Abu
Dhabi - each interested in a minimum 50,000 m3 capacity, as well as interest
from South Africa, Malaysia, China and Russia. Having sensed the potential
scale of demand for Accoya, Skanfore believes it can deploy substantial
resources to develop licensee demand across a large part of the globe and has
agreed to underwrite a substantial upfront payment to secure rights to license
Accoya.
Under the agreement announced on June 25th, Skanfore S.A. has taken rights to
license 500,000 m3 of annual production capacity and will make a payment of
€10m, representing 10% of the technology fees associated with this volume.
Skanfore will then receive a share of Technology Fees received by Accsys from
licenses it arranges. The Group stands to benefit substantially from Skanfore's
introductions whilst also reducing execution risk. The payment of €10m will
clearly represent the start of significant licence income for the Company, being
the main source of profits going forward.
Management
Edward Pratt, our Chief Executive Officer, has made a unique contribution to the
development of your business, over many years. Anyone who knows Eddie, knows
his passion and enthusiasm for Accoya, but will also be aware of his long
standing back injury. Having successfully seen the business through to the
commissioning of its full scale technology validation plant, Eddie is now
stepping down from his executive duties, as well as from the board, and will
take a break to undergo major spinal surgery. Following his treatment and
recuperation, he will take on the role of 'Senior Advisor, Projects', where, in
particular he will be closely involved in the development of our wood fibre
acetylation technology. We all wish him well and look forward to his return
later in the year. Effective immediately, I will now take over as CEO.
I also welcome a new General Manager of our Arnhem facility, Rombout van
Herwijnen, who joined us in May. Rombout will drive forward the development of
the end product applications, oversee the expansion of our Accoya production
facilities and lead a highly motivated high performance team who have helped to
create and grow this business from its inception.
Review of the Business
Our focus over the past year has been on:
• The commissioning of our novel acid cracking facility
• The construction and commissioning of the wood modification plant
• Recruiting and training our operating teams
• Securing reliable sources of raw materials, principally wood and acetyls
• Building brand equity and international recognition of our Accoya mark
• Developing key end product applications in large national markets
• Building interest amongst potential licensees in anticipation of our plant
coming on stream and providing validation of the process technology and the
economics
The financial results reflect the build up of operating costs, as staffing and
materials for commissioning activity is expensed, and the strengthening of
management to encompass marketing and licensing activities, with total operating
expenditure reported in the Profit & Loss Account rising from €5.9m to €10.3m.
The widespread enthusiasm shown for Accoya and our assessment of the scale of
interest that we see emerge to license our technology has led us to conclude
that the business should focus resolutely on wood acetylation. Accordingly, we
have scaled down our other activities apart from our development work on
acetylated wood fibre boards. As a result, we have terminated our efforts to
license other potential applications of our cracking technology, which without
the prospect of our deriving income become fully impaired in accounting terms
requiring the charge of €5.9m shown in the Profit & Loss Account as an
impairment of intangible assets.
Following our agreement with Celanese, our strategy on acetyls supply has
changed. We have undertaken a review of the commissioning work done on our
novel cracker design, concluding that without some considerable remediation work
on ancillary process equipment we would not be able to fully commission it. As
the cracker was out of use at 31st March 2007 and also required the remediation
work to be completed prior to it being fired up again, the 'value in use' for
accounting purposes became zero at the balance sheet date - requiring the
impairment charge of €6.6m shown in the Profit & Loss Account as an impairment
of tangible assets.
The loss for the year amounted to €22.6m (2006: €5.0m).
Conclusion
Your Company is well positioned for the challenges in the year ahead. We have
created a strong, solid base from which we are able to expand our business on a
global scale. Over the past two years, we have moved from a technology
development business to a full commercial operating business, with an order book
that is testament to the quality of our product, a brand that is increasingly
recognised as leading its field and an extremely promising new business
pipeline. In addition, our competitive advantage, financial strength and
licensing proposition has been reinforced by the exclusive support of the
world's largest acetyl's supplier, Celanese.
2006-7 has been a landmark year for your Company. The prospects for 2007-8 are
exciting. We expect to see significant revenue during the course of the year
ahead and hope to be able to report a profit for the year.
We will continue to explore ways to create the best shareholder value and return
possible. One such strategy will be to explore the opportunity of listing the
Company's shares on Eurolist by Euronext Amsterdam during the course of the next
six months, and to that end, we have engaged Fortis, one of Benelux's largest
banks.
As mentioned at the beginning of my statement, it has been a pleasure to serve
as your Chairman during the past year and I am confident that we can be
tremendously successful with the foundations that we have built and, perhaps
most importantly, with the continued excellent support from all our
shareholders.
Willy Paterson-Brown, Chairman & Chief Executive 28 June 2007
Directors' Report for the year ended 31 March 2007
The directors present their report together with the audited financial
statements for the year ended 31 March 2007.
Results and dividends
The consolidated profit and loss account for the year is set out on page 14.
The directors do not recommend payment of a dividend.
Principal activities and review of the business
The principal activity of the group is the development and commercialisation of
its proprietary technology for the manufacture of Accoya branded acetylated
wood. The group is also engaged in the development of other related process
technologies with potential applications in the wood and chemicals industries.
A review of the business is set out in the Chairman & Chief Executive's Business
Review on pages 1 to 3.
Financial instruments
Details of the use of financial instruments by the Company and its subsidiary
undertakings are set out in Note 22 of the financial statements.
Share issue
On 8 November 2006, the Company completed the placing of 6,623,172 new Ordinary
shares at a price of €1.48 each, raising €9,557,000 net of expenses. These
shares were issued under the dis-application authority vested in the directors
by the shareholders to issue additional shares up to 5% of the shares then in
issue.
Strategic Partnership with Celanese Corporation
On 28 March 2007, the Company announced a strategic partnership with Celanese
Corporation ('Celanese'). The arrangements provide for a long term exclusive
supply agreement for the provision of acetyls, the principal raw material to
acetylate wood, to both the group and its future licensees worldwide. Celanese
also signed an option agreement to evaluate and acquire the group's proprietary
acetic anhydride technology.
Celanese also agreed to subscribe for new Ordinary shares, subject to consent by
the Company's shareholders. Such consent was duly granted at an Extraordinary
General Meeting held on 15th May 2007 and Celanese duly subscribed for 8,115,883
new Ordinary shares at a price of €2.72 per share, a price determined as being
at a 5% premium to the closing share price on 27 March 2007, the date the
strategic partnership was entered into. The Extraordinary General Meeting also
approved the granting of an option to Celanese to subscribe for additional
Ordinary shares to increase its holding in the Company to 29.9% at the market
price when the option is exercised. This option has a life of three years and
may be exercised from the first anniversary of 15 May 2007.
Principal risks and uncertainties
The business, financial condition or results of operations of the Group could be
adversely affected by any of the risks set out below. The Group's systems of
control and protection are designed to help manage and control risks to an
appropriate level rather than to eliminate them.
The directors consider that the principal risks to achieving the Group's
objectives are those set out below.
(a) Economic and market conditions
The Group's operations comprise the manufacture of Accoya and licensing the
technology to do so to third parties. The cost and availability of key inputs
affects the profitability of the Group's own manufacturing whilst also impacting
the potential profitability of third parties interested in licensing the Group's
technology. The price of key inputs and security of supply are managed by the
group, partly through the development of long term contractual supply
agreements.
(b) Regulatory, legislative and reputational risks
The Group's operations are subject to extensive regulatory requirements,
particularly in relation to its manufacturing operations and employment
policies. Changes in laws and regulations and their enforcement may adversely
impact the Group's operations in terms of costs, changes to business practices
and restrictions on activities which could damage the Group's reputation and
brand.
(c) Employees
The Group's success depends on its ability to continue to attract, motivate and
retain highly qualified employees. The highly qualified employees required by
the Group in various capacities are sometimes in short supply in the labour
market.
(d) Intellectual property
The Group's strategy of licensing technology depends upon maintaining effective
protection of its intellectual properties. Protection is afforded by a
combination of patents, secrecy, confidentiality agreements and the structuring
of legal contracts relating to key engineering and supply arrangements.
Unauthorised use of the Group's intellectual property may adversely impact its
ability to license the technology and lead to additional expenditures to enforce
legal rights.
Key performance indicators
The directors consider the following to be key performance indicators by which
progress in the development of the business may be assessed:
• Progress in introducing Accoya into key end use applications (including
external doors, windows, decking and cladding) in major markets, which is
seen as an indicator of high volume future demand requiring supply from
local or foreign technology licensees of the group. Good progress has been
achieved in developing the first two such large national market end product
applications in Germany and the UK.
• Future expansion of licensed Accoya production capacity.
• Process improvements to reduce progressively the direct cost per m3 to
produce Accoya, optimising the utilisation of direct materials, utilities
and capacity utilised in the wood modification process.
Future developments
The directors' priorities for the Group's future development include:
• Driving the development of major end use applications adopting Accoya in
major markets
• Exploiting global demand for licensing proprietary technology for wood
modification
• Developing a commercial scale manufacturing process for the production of
acetylated wood fibre products in the MDF, OSB and fibreboard space.
Impact of adoption of International Financial Reporting Standards (IFRS)
A review of the impact of adopting IFRS has been undertaken and, other than in
respect of the amortisation of goodwill arising on consolidation (€412,000), the
directors are not aware of any significant adjustments that would be made to the
group and parent company financial statements of Accsys Technologies PLC for the
year ended 31 March 2007 or the comparative figures when the results and net
assets are reported under IFRS.
Significant shareholdings
The following shareholders held beneficial interests in the Ordinary shares
exceeding 3%:
MacNiven and Cameron Equity Holdings Limited 13.44%
Saad Investments Company Limited 8.61%
Oak Foundation USA Inc, and related parties 8.07%
Rajhi Holdings 6.07%
Celanese Chemicals Europe GmbH 5.46%
Rathbone Investment Management Limited 3.90%
UBS Wealth Management (UK) Limited 3.83%
Axa Framlington 3.50%
Directors
The directors of the company throughout the year were:
Willy Paterson-Brown
Stefan Allesch-Taylor
Gordon Campbell
Tim Paterson-Brown
Edward J Pratt resigned 26 June 2007
Glyn C Thomas
Directors' interests in the Ordinary shares of the Company are set out below:
Ordinary shares Options over Ordinary shares
31 March 2007 31 March 2006 31 March 2007 31 March 2006
Willy Paterson-Brown *20,000,000 *20,000,000 2,440,000 1,440,000
Stefan Allesch-Taylor *20,000,000 *20,000,000 - -
Gordon Campbell 48,172 48,172 - -
Tim Paterson-Brown *20,000,000 *20,000,000 - -
Edward J Pratt 720,618 618 1,720,000 1,440,000
Glyn C Thomas 480,618 618 1,230,000 960,000
Note * 20,000,000 Ordinary shares and 415,184 Deferred shares are
registered in the name of MacNiven and Cameron Equity Holdings Limited. Messrs
S Allesch-Taylor, W Paterson-Brown and Mr T Paterson-Brown have beneficial
interests in those shares as they are three of the discretionary beneficiaries
of a trust which owns the majority of the issued share capital of MacNiven and
Cameron Equity Holdings Limited. None of these persons can exercise, or
influence the exercise of, the voting rights of the Ordinary and Deferred shares
held by MacNiven and Cameron Equity Holdings Limited.
Directors' share options:
At Granted Exercised At 31
1 April 2006 during year during year March 2007
Willy Paterson-Brown
Vested at €0.46 720,000 - - 720,000
Unvested at €0.46 720,000 - - 720,000
Unvested at €2.59 - 1,000,000 - 1,000,000
Edward Pratt
Vested at €0.46 720,000 - 720,000 -
Unvested at €0.46 720,000 - - 720,000
Unvested at €2.59 - 1,000,000 - 1,000,000
Glyn Thomas
Vested at €0.46 480,000 - 480,000 -
Unvested at €0.46 480,000 - - 480,000
Unvested at €2.59 - 750,000 - 750,000
Options granted on 1 March 2005 at an exercise price of €0.46 per Ordinary share
vested 50% upon grant and 50% will vest upon the group achieving a cumulative €1
million in revenue from 1 April 2005. Once vested, these options may be
exercised until 30 March 2015.
Options granted on 28 March 2007 at an exercise price of €2.59 per Ordinary
share vest as to one third of the options granted upon achievement of each of
the following:
• Cumulative €5 million licence income recognised under
group accounting policies
• Cumulative €20 million revenue from sales of Accoya
• Announcement of annual group distributable earnings
exceeding €5 million
• Once vested, these options may be exercised until 31 March 2017.
Employment policies
The Group operates an equal opportunities policy from recruitment and selection,
through training and development, appraisal and promotion to retirement. It is
our policy to promote an environment free from discrimination, harassment and
victimisation, where everyone will receive equal treatment regardless of gender,
colour, ethnic or national origin, disability, age, marital status or sexual
orientation. All decisions relating to employment practises will be objective,
free from bias and based solely upon work criteria and individual merit.
Health and safety
Group companies have a responsibility to ensure that all reasonable precautions
are taken to provide and maintain working conditions for employees and visitors
alike, which are safe, healthy and in compliance with statutory requirements and
appropriate codes of practice.
The avoidance of occupational accidents and illnesses is given a high priority.
Detailed policies and procedures are in place to minimise risks and ensure
appropriate action is understood in the event of an incident. A dedicated
health and safety officer is retained at the Group's manufacturing facility.
Creditor payment policy
The Group's policy, in relation to all of its suppliers, is to negotiate terms
of payment when agreeing the terms of transactions, to ensure that those
suppliers are made aware of the terms of payment and to abide by those terms
provided that it is satisfied that the supplier has provided the goods or
services in accordance with the agreed terms and conditions. The Group does not
follow any universal code or standard on payment practice but subsidiary
companies are expected to establish payment terms consistent with local
procedures, custom and practice. The average number of days credit taken by the
Company is not a meaningful expression.
Going concern
After making enquiries, the Directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence for the
foreseeable future. For this reason, they continue to adopt the going concern
basis in preparing the financial statements.
Disclosure of information to auditors
All of the current directors have taken all the steps that they ought to have
taken to make themselves aware of any information needed by the company's
auditors for the purposes of their audit and to establish that the auditors are
aware of that information. The directors are not aware of any relevant audit
information of which the auditors are unaware.
Auditors
BDO Stoy Hayward LLP have expressed their willingness to continue in office and
a resolution to re-appoint them will be proposed at the annual general meeting.
By order of the Board
C C Morse
Secretary
Date: 28 June 2007
Accsys Technologies PLC
Corporate governance
Details of the Company's corporate governance arrangements are set out below.
The Board of Directors acknowledges the importance of the Principles set out in
The Combined Code issued by the Committee on Corporate Governance. Although the
Combined Code is not compulsory for AIM listed companies, the Board has applied
the principles as far as practicable and appropriate for a relatively small
public company.
We give below a statement as to how the Company applies the principles of
Section 1 of the Revised Code, together with a statement regarding its
compliance with specific provisions. The Board consists of an executive
Chairman, one other executive Director, and three non-executive Directors.
Gordon Campbell is considered to be the only independent non-executive. The
Company has been in compliance throughout the year with the provisions set out
in the Combined Code for Corporate Governance with the following exceptions:
• The Company does not meet the requirements regarding the independence of
non-executive directors.
• There is no formal training programme for new Directors on joining the
Board. This is contrary to provision A.5.1;
• The Board has not undertaken a formal and rigorous annual evaluation of
its own performance and the individual Directors. This is contrary to
provision A.6.1 but this is being reviewed;
• The non-executive Directors of the Company have not been appointed for
specific terms as required by provision A.7.2 but this is being reviewed;
and
• There is no formal performance evaluation or election process for the
appointment of non-executive Directors. This is contrary to provision A.7.2.
Following Willy Paterson-Brown's appointment, as of the date of this report, as
Chairman & Chief Executive, the Company does not meet the requirement for these
posts to be held separately.
The Board of Directors
Throughout the period, the Board comprised a Chairman, and at least one
executive Director.
The Board meets regularly and is responsible for strategy, performance, approval
of major capital projects and the framework of internal controls. The Board has
a formal schedule of matters specifically reserved to it for decision. To enable
the Board to discharge its duties, all Directors receive appropriate and timely
information. Briefing papers are distributed to all Directors in advance of
Board meetings. All Directors have access to the advice and services of the
Company Secretary. The appointment and removal of the Company Secretary is a
matter for the Board as a whole. In addition, procedures are in place to enable
the Directors to obtain independent professional advice in the furtherance of
their duties, if necessary, at the Company's expense.
During the year, all serving Directors attended the quarterly Board meetings
that were held. In addition to the scheduled meetings there is frequent contact
between all the Directors in connection with the Company's business including
audit and nomination & remuneration committee meetings which are held as
required, but as a minimum twice per annum.
Directors are subject to re-election by the shareholders at Annual General
Meetings. The Articles of Association provide that Directors will be subject to
re-election at the first opportunity after their appointment and the Board
submit to re-election at intervals of three years.
Audit Committee
The Audit Committee consists of Gordon Campbell (Chairman), Tim Paterson-Brown
and Stefan Allesch-Taylor. The Audit Committee meets at least twice a year and
is responsible for monitoring compliance with accounting and legal requirements
and for reviewing the annual and interim financial statements prior to their
submission for approval by the Board. The Committee also discusses the scope of
the audit and its findings and considers the appointment and fees of the
external auditors. The Audit Committee believes that it is not currently
appropriate for the company to maintain an internal audit function due to its
size.
The Audit Committee considers the independence and objectivity of the external
auditors on an annual basis, with particular regard to non-audit services. The
non-audit fees are considered by the Board not to affect the independence or
objectivity of the auditors. The Audit Committee monitors such costs in the
context of the audit fee for the period, ensuring that the value of non-audit
service does not increase to a level where it could affect the auditors'
objectivity and independence. The Board also receive an annual confirmation of
independence from the auditors.
Nomination & Remuneration Committee
The Nomination & Remuneration Committee consists of S. Allesch-Taylor
(Chairman), Tim Paterson-Brown and G Campbell. The Committee's role is to
consider and approve the nomination of directors and the remuneration and
benefits of the executive Directors, including the award of share options. In
framing the Company's remuneration policy, the Nomination & Remuneration
Committee has given full consideration to Section B of The Combined Code.
Internal financial Control
The Board is responsible for establishing and maintaining the Company's system
of internal financial control and places importance on maintaining a strong
control environment. The key procedures which the Directors have established
with a view to providing effective internal financial control are as follows:
• The Company's organisational structure has clear lines of responsibility.
• The Company prepares a comprehensive annual budget that is approved by the
Board. Monthly results are reported against the budget and variances are
closely monitored by the Directors.
• The Board is responsible for identifying the major business risks faced by
the Company and for determining the appropriate courses of action to manage
those risks.
The Directors recognise, however, that such a system of internal financial
control can only provide reasonable, not absolute, assurance against material
misstatement or loss. The Directors have reviewed the effectiveness of the
system of internal financial control as it operated during the period to 31
March 2007 and up to the date of approval of the annual report and accounts.
Relations with shareholders
Communications with shareholders are given high priority.
There is regular dialogue with shareholders including presentations after the
Company's preliminary announcement of the year end results. The board uses the
Annual General Meeting to communicate with investors and welcomes their
participation. The Chairman aims to ensure that the Directors are available at
Annual General Meetings to answer questions.
Directors' responsibilities statement
The directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable law and United Kingdom Generally
Accepted Accounting Practice.
Company law requires the Directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
Group and Company and of the profit or loss of the Group for that year. In
preparing those financial statements, the Directors are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgements and estimates that are reasonable and prudent;
• State whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements; and
• Prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company and the Group will continue in
business.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and of the Group in order to enable them to ensure that the financial
statements comply with the Companies Act 1985. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
Financial statements are published on the group's website in accordance with
legislation in the United Kingdom governing the preparation and dissemination of
financial statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the group's website is the responsibility of
the directors. The directors' responsibility also extends to the on-going
integrity of the financial statements contained therein.
Report of the independent auditors
Independent Auditor's Report to the Shareholders of Accsys Technologies PLC
We have audited the group and parent company financial statements (the
''financial statements'') of Accsys Technologies PLC for the year ended 31 March
2007 which comprise the Group Profit and Loss Account, the Group and Company
Balance Sheets, the Group Cash Flow Statement and the related notes. These
financial statements have been prepared under the accounting policies set out
therein.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the financial statements in
accordance with applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice) are set out in the Statement of
Directors' Responsibilities
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view and have been properly prepared in accordance with the Companies
Act 1985 and whether the information given in the Directors' Report is
consistent with those financial statements. We also report to you if, in our
opinion, the company has not kept proper accounting records, if we have not
received all the information and explanations we require for our audit, or if
information specified by law regarding directors' remuneration and other
transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it
is consistent with the audited financial statements. The other information
comprises only the Directors' Report, the Chairman's Business Review and the
statement of Corporate Governance. We consider the implications for our report
if we become aware of any apparent misstatements or material inconsistencies
with the financial statements. Our responsibilities do not extend to any other
information.
Our report has been prepared pursuant to the requirements of the Companies Act
1985 and for no other purpose. No person is entitled to rely on this report
unless such a person is a person entitled to rely upon this report by virtue of
and for the purpose of the Companies Act 1985 or has been expressly authorised
to do so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other purpose and
we hereby expressly disclaim any and all such liability.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgments made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the group's and company's circumstances, consistently applied and adequately
disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion:
• the group financial statements give a true and fair view, in
accordance with United Kingdom Generally Accepted Accounting Practice, of the
state of the group's affairs as at 31 March 2007 and of its loss for the year
then ended;
• the parent company financial statements give a true and fair view, in
accordance with United Kingdom Generally Accepted Accounting Practice, of the
state of the parent company's affairs as at 31 March 2007;
• the financial statements have been properly prepared in accordance
with the Companies Act 1985; and
• the information given in the Directors' Report is consistent with the
financial statements.
BDO Stoy Hayward LLP
Chartered Accountants and Registered Auditors
London
Date: 28 June 2007
Consolidated profit and loss account for the year ended 31 March 2007
Note 2007 2006
€'000 €'000
Turnover 50 80
Administration expenses
General administrative expenses (10,265) (5,860)
Impairment of intangible fixed 11 (5,850) -
assets
Impairment of tangible fixed assets 12 (6,569) -
(22,684) (5,860)
Operating loss 5 (22,634) (5,780)
Interest receivable and similar income 6 37 782
Loss on ordinary activities before and
after taxation 19 (22,597) (4,998)
Basic and diluted loss per ordinary share 9 €(0.17) €(0.04)
All amounts relate to continuing activities.
There are no recognised gains or losses other than the loss for the year.
The notes on pages 17 to 32 form part of these financial statements.
Balance sheets at 31 March 2007
Note Group Group Company Company
2007 2006 2007 2006
€'000 €'000 €'000 €'000
Fixed assets
Intangible assets 11 7,437 13,715 - -
Tangible assets 12 21,611 10,693 - -
Investments 13 - - 6,000 11,383
29,048 24,408 6,000 11,383
Current assets
Stock 14 910 - - -
Debtors 15 1,085 8,411 38,668 19,646
Other investments 16 - 15,513 - 15,513
Cash at bank 10,825 4,577 10,455 4,023
12,820 28,501 49,123 39,182
Creditors: amounts falling due
within one year 17 3,102 1,984 3,581 23,666
Net current assets 9,718 26,517 45,542 15,516
Net assets 38,766 50,925 51,542 26,899
Capital and reserves
Called up share capital 18 1,554 1,473 1,554 1,473
Share premium account 19 35,689 25,504 35,689 25,504
Merger reserve 19 106,707 106,707 - -
Profit and loss account 19 (105,184) (82,759) 14,299 (78)
Shareholders' funds 38,766 50,925 51,542 26,899
The financial statements were approved by the Board and authorised for issue on
28 June 2007
Glyn Thomas )
) Directors
Willy Paterson-Brown )
The notes form part of these financial statements.
Consolidated cash flow statement for the year ended 31 March 2007
Note 2007 2007 2006 2006
€'000 €'000 €'000 €'000
Net cash outflow from operating
activities 25 (8,454) (4,468)
Returns on investments and
servicing of finance
Interest received 284 269
Net cash flow from returns on 284 269
investments and servicing of finance
Capital expenditure and financial
investment
Purchase of intangible fixed assets (200) -
Purchase of tangible fixed assets (18,220) (7,925)
Sale of tangible fixed assets - 53
(18,420) (7,872)
Cash outflow before use of liquid
resources and financing (26,590) (12,071)
Management of liquid resources
Decrease/(increase) in short term
bank and other deposits 1,726 (1,690)
Decrease/(increase) in other investments 15,266 (15,000)
16,992 (16,690)
Financing
Issue of share capital 10,518 27,000
Expenses of issue of share capital (252) (1,226)
Shares issued by subsidiary - 3,000
10,266 28,774
Increase in cash 26 668 13
The notes form part of these financial statements
Notes forming part of the financial statements for the year ended 31 March 2007
1 Corporate restructuring
During the comparative period the Group carried out a corporate re-restructuring
including the introduction of a new holding company, Accsys Technologies PLC.
The corporate restructuring was accounted for as a merger in accordance with
Financial Reporting Standard 6 'Acquisitions and Mergers' (FRS 6) see accounting
policies (note 2). The profit and loss account for the comparative year was
accordingly prepared as if the new holding company had been in existence
throughout both 2006 and prior periods.
2 Accounting policies
The financial statements have been prepared under the historical cost convention
and are in accordance with applicable accounting standards.
In preparing these financial statements, the group has adopted FRS20 'Share
Based Payments' for the first time.
The following principal accounting policies have been applied:
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
Accsys Technologies PLC and all its subsidiary undertakings throughout the year
ended 31 March 2007 and the comparative year, using the merger or acquisition
method of accounting as required. Where the acquisition method is used, the
results of subsidiary undertakings are included from the date of acquisition.
Intra-group sales and losses are eliminated fully on consolidation.
If the acquisition meets the criteria of a group reconstruction merger
accounting is used. In such instances the investment is recorded in the
Company's balance sheet at the nominal value of the shares issued together with
the fair value of any additional consideration paid.
In the Group financial statements, merged subsidiary undertakings are treated as
if they had always been a member of the Group. The results of such a subsidiary
are included for the whole period in the year it joins the Group. The
corresponding figures for the previous year include its results for that period,
the assets and liabilities at the previous balance sheet date and the shares
issued by the Company as consideration as if they had always been in issue. Any
difference between the nominal value of the shares acquired by the Company and
those issued by the Company to acquire them is taken to a merger reserve.
Goodwill
Goodwill arising on the acquisition of a subsidiary undertaking is the
difference between the fair value of the consideration paid and the fair value
of the identifiable assets and liabilities acquired. It is capitalised and is
being amortised over the directors' estimate of its remaining useful economic
life, of nine years from the date of acquisition.
Intellectual property rights
Intellectual property rights, including patents, which cover a portfolio of
novel chemical processes and products, are shown in the financial statements at
cost less any amounts by which the carrying value is assessed during an annual
review to have been impaired. No amortisation charge is made until plants
licensed to exploit the intellectual property are fully commissioned, thereafter
the carrying value is amortised in equal amounts over the useful economic life
up to a maximum of 20 years.
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less depreciation. Depreciation is
provided at rates calculated to write off the cost less estimated residual value
of each asset, except freehold land, over its expected useful life on a straight
line basis, as follows:
Plant and machinery These assets comprise pilot plants and production
facilities. The pilot plants are designed to validate technology designs and
generally have short lives, with depreciation rates between 33% and 50%.
Production facilities are depreciated from the start of commissioning at rates
applicable to the average asset lives expected for each class of asset, with
rates between 5% and 20%.
Office equipment between 20% and 50%.
Motor vehicles 20%.
Impairment of tangible and intangible fixed assets
The need for any fixed asset impairment write-down is assessed by comparison of
the carrying value of the asset against the higher of realisable value and value
in use.
Operating leases
The annual rentals payable under operating leases are charged to the profit and
loss account on a straight line basis over the term of the lease.
Development costs
Product development costs are written off as incurred.
Investments
Fixed asset investments are stated at cost less provision for diminution in
value.
Financial assets
Financial assets are recognised and derecognised on the trade date of their
purchase or sale. The group classifies its financial assets into one of the
following categories, depending on the purpose for which the asset was acquired.
The group's accounting policy for each category is as follows:
Loans and receivables: These assets are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. They
are carried at cost less any provision for impairment.
Stock
Stock is carried at the lower of cost and net realisable value.
Share based payments
Effective 1 April 2006, the Group adopted FRS20 Share Based Payments. A fair
value for the share options awarded is measured at the date of grant. The
aggregate amount of the cumulative charge in respect of all periods to 31 March
2007 is €172,000. This includes an amount of €95,000 in respect of prior
periods which is considered immaterial in the context of the prior period
results. Accordingly, the results and the balance sheets for the prior period
have not been restated and the entire amount has been charged in arriving at the
result for the year to 31 March 2007.
Share based payments, continued
Where share options are awarded to employees, the fair value of the options at
the date of grant is charged to the profit and loss account over the vesting
period. Non market vesting conditions are taken into account by adjusting the
number of equity instruments expected to vest at each balance sheet date so
that, ultimately, the cumulative amount recognised over the vesting period is
based on the number of options which eventually vest. Market vesting conditions
are factored into the fair value of the options granted. The cumulative expense
is not adjusted for failure to achieve a market vesting condition.
Pensions
The pension costs charged in the financial statements represent the
contributions payable by the company to individuals personal money purchase
schemes during the period in accordance with FRS 17.
Deferred taxation
Deferred tax is provided in full in respect of taxation deferred by timing
differences between the treatment of certain items for taxation and accounting
purposes except for deferred tax assets which are only recognised to the extent
that the group anticipates making sufficient taxable profits in the future to
absorb the reversal of the underlying timing differences. Deferred tax balances
are not discounted.
Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated
into euro at the rates of exchange ruling at the balance sheet date.
Transactions in other currencies are recorded at the rate ruling at the date of
the transaction. All differences are taken to profit and loss account.
The exchange rate used at 31 March 2007 was €1.47 to £1 (2006: €1.45 to £1).
Government grants
Grants relating to expenditure on tangible fixed assets are credited to the
profit and loss account at the same rate as the depreciation on the assets to
which the grant relates. The deferred element of grants is included in
creditors as deferred income. Grants of a revenue nature are credited to the
profit and loss account in the period to which they relate.
Liquid resources
For the purposes of the cash flow statement, liquid resources are defined as
current asset investments and short term deposits.
3 Employees
Group Group
2007 2006
€'000 €'000
Staff costs consist of:
Wages and salaries 2,392 1,609
Social security costs 606 189
Other pension costs 89 122
3,087 1,920
The average number of employees, including executive directors, during
the year was as follows: Number Number
Administration 17 11
Operating 18 10
35 21
The Company has no employees.
4 Directors' remuneration
2007 2006
€'000 €'000
Directors' remuneration consists of:
Directors' emoluments 725 743
Gains on exercise of share options 2,556 -
Company contributions to money purchase pension schemes 64 71
Amounts paid to third parties in respect of directors' services 407 362
3,752 1,176
Emoluments disclosed above include the following amounts paid to the highest paid director:
Emoluments for qualifying services 1,903 419
Company contributions to money purchase pension schemes 21 21
The group makes contributions to 2 (2006: 2) directors' personal pension plans.
Out of the share based payments charge (note 5) €107,000 (2006: € nil) relates to the directors.
5 Operating loss
2007 2006
€'000 €'000
This has been arrived at after charging:
Depreciation of tangible assets 733
21
Impairment of plant and machinery 6,569 531
Amortisation of intangible fixed assets 628 -
Impairment of intangible fixed assets 5,850 -
Product development costs 277 380
Operating lease rentals 361 286
Auditors' remuneration for audit services 80 54
Remuneration of auditors for non-audit - -
work
Admission to AiM expenses - 565
Foreign exchange costs 7 3
Share based payments 172 -
and after crediting:
Research subsidies from governmental agencies (43) (308)
Included in admission to AiM expenses in 2006 are corporate finance fees of
€110,000 paid to the auditors. A further €38,000 of corporate finance fees paid
to the auditors in 2006 was charged to the share premium account.
6 Interest receivable and similar income
2007 2006
€'000 €'000
Interest receivable on bank and other deposits 284 269
(Decrease)/increase in market value of current asset investments (247) 513
37 782
7 Taxation on loss from ordinary activities
2007 2006
€'000 €'000
Current tax
UK corporation tax on loss for the year - -
Adjustment in respect of previous years - -
Total current tax - -
Factors affecting the corporation tax charge for the year
Loss on ordinary activities before tax (22,597) (4,998)
Loss on ordinary activities at the standard rate
of corporation tax in the UK of 30% (2006 - 30%) (6,779) (1,499)
Effects of:
Expenses not deductible for tax purposes 1,983 345
Capital allowances in excess of depreciation (599) (125)
Increase in tax losses carried forward 5,395 1,279
Current tax charge for year - -
Deferred taxation
The potential deferred tax asset of the group arising from tax losses carried
forward and the excess of depreciation over capital allowances are set out
below. As the recoverability of these amounts in the foreseeable future is
uncertain, the potential deferred tax assets have not been recognised.
2007 2006
€'000 €'000
Tax losses carried forward 8,939 2,793
Excess of depreciation over capital allowances 179 264
9,118 3,057
The Company has no significant potential deferred tax assets or liabilities
8 Loss for the financial period
As permitted by section 230 of the Companies Act 1985, the parent company's
profit and loss account has not been included in these financial statements.
The loss for the financial period includes a profit of €6,195,000 (2006: loss of
€78,000) which is dealt with in the financial statements of the parent company.
The result for year includes a realised gain of €10,881,000 arising from the
liquidation of a former holding company.
9 Loss per Accsys Technologies PLC share
The loss per share shown below is calculated based upon the weighted average
number of Accsys Technologies PLC Ordinary shares in issue
2007 2006
Weighted average number of Ordinary shares in issue 135,217,231 116,975,026
Loss for the year €'000 (22,597) (4,998)
Loss per share €(0.17) €(0.04)
Since none of the Accsys Technologies PLC's potential Ordinary shares are dilutive, there is no
difference between basic and diluted loss per share. At 31 March 2007, the Company had 9,660,500
(2006: 5,688,000) options over Ordinary shares which are potentially dilutive in the future.
10 Share based payments
Options granted on 1 March 2005 at an exercise price of €0.46 per
Ordinary share vested 50% upon grant and 50% will vest upon the group achieving
a cumulative €1 million in revenue from 1 April 2005. Once vested, these
options may be exercised until 30 March 2015. At 31 March 2007, 4,129,000 of
these options were outstanding.
Options granted on 14 June 2006 at an exercise price of €1.20 per Ordinary share
vested immediately but are not exercisable before 14 June 2009. These options
may be exercised until 14 June 2016. At 31 March 2007, 438,500 of these options
were outstanding.
Options granted on 28 March 2007 at an exercise price of €2.59 per Ordinary
share vest as to one third of the options granted upon achievement of each of
the following:
• Cumulative €5 million licence income recognised under group accounting
policies
• Cumulative €20 million revenue from sales of Accoya
• Announcement of annual group distributable earnings exceeding €5
million
Once vested, these options may be exercised until 31 March 2017. At 31 March
2007, 5,093,000 of these options were outstanding.
Unless discretion is exercised by the Nomination & Remuneration Committee, all
options are forfeit following an optionholders termination of contract.
Outstanding options granted under the share option scheme are as follows:
Number of outstanding Weighted average remaining
options at 31 March contractual life, in years Option
Date of grant 2007 2006 2007 2006 price
1 March 2005 4,129,000 5,688,000 7.9 8.9 € 0.46
14 June 2006 438,500 - 9.2 - € 1.20
28 March 2007 5,093,000 - 10.0 - € 2.59
Movements in the weighted average values are as follows:
2007 2007 2006 2006
Weighted Weighted
average average
exercise exercise
price Number price Number
Outstanding at 1 April € 0.46 5,688,000 € 0.46 5,688,000
Granted during the year € 2.48 5,531,500 -
Exercised during the year € 0.46 (1,559,000) -
Outstanding at 31 March € 1.62 9,660,500 € 0.46 5,688,000
The exercise price of options outstanding at the end of the year ranged between
€0.46 and €2.59 (2006: €0.46) and their weighted average contractual life was
9.1 years (2006: 8.9 years).
Of the total number of options outstanding at the year end, 1,285,000 (2006:
2,844,000) had vested and were exercisable at the end of the year.
The weighted average share price (at the date of exercise) of options exercised
during the year was €2.37 (2006: not applicable).
The weighted average fair value of each option granted during the year was €0.33
(2006: not applicable).
The fair value of executive share options granted during the year is calculated
based on a modified Black-Scholes model assuming inputs shown below:
Grant date 28 Mar 07 14 Jun 06 1 Mar 05
Share price at grant date € 2.59 € 1.20 € 0.46
Exercise price € 2.59 € 1.20 € 0.46
Expected life 3 3 3
Contractual life 10 10 10
Risk free rate 4.92% 4.63% 4.37%
Expected volatility 15% 15% 15%
Expected dividend yield 0% 0% 0%
Fair value of option € 0.346 € 0.120 € 0.044
10 Share based payments (continued)
Volatility has been estimated by reference to the historic volatility since
October 2005 when the Company's shares were listed on AiM. The resulting fair
value is expensed over the vesting period of the options on the assumption that
a proportion of options will lapse over the service period as employees leave
the Group.
11 Intangible fixed assets
Intellectual Goodwill
property on
Group rights consolidation Total
€'000 €'000 €'000
Cost
At 1 April 2006 73,000 4,249 77,249
Additions 200 - 200
At 31 March 2007 73,200 4,249 77,449
Amortisation
At 1 April 2006 62,985 549 63,534
Amortisation 216 412 628
Impairment 5,850 - 5,850
At 31 March 2007 69,051 961 70,012
Net book value
At 31 March 2007 4,149 3,288 7,437
At 31 March 2006 10,015 3,700 13,715
The directors have undertaken an impairment review (using the value in use
method) of the carrying value of the intellectual property rights. These rights
relate to a number of potential technology applications. Following the most
recent impairment review, the directors resolved that the carrying value in
respect of potential applications which are no longer being actively pursued,
nor are likely to be resourced in the foreseeable future, should be treated as
fully impaired. The carrying value in respect of applications which are
currently being developed is based upon an evaluation of future potential
licence fees and production royalty fees using a post tax discount rate of 25%.
12 Tangible assets
Freehold Production Office
Group land facilities equipment Total
€'000 €'000 €'000 €'000
Cost or valuation
At 1 April 2006 950 10,490 40 11,480
Additions 329 17,774 117 18,220
Disposals - (134) (4) (138)
At 31 March 2007 1,279 28,130 153 29,562
Depreciation
At 1 April 2006 - 768 19 787
Charge for the year - 683 50 733
Impairment - 6,569 - 6,569
Disposals - (134) (4) (138)
At 31 March 2007 - 7,886 65 7,951
Net book value
At 31 March 2007 1,279 20,244 88 21,611
At 31 March 2006 950 9,722 21 10,693
The directors have reviewed the economic lives of the tangible fixed assets.
Following extensive commissioning trials, the prototype anhydride cracker has
been decommissioned pending remediation work required before it can be brought
into service. Accordingly, at the balance sheet date it is treated as fully
impaired. Following completion of the remediation work and successful
commissioning of the cracker, its useful life will be re-estimated. Accordingly,
an amount of €6,569,000 has been recognised as an impairment.
13 Fixed asset investments
Company
Shares in subsidiary undertakings €'000
Cost
At 1 April 2006 11,383
Liquidation of subsidiary (1,203)
At 31 March 2007 10,180
Impairment
At 1 April 2006 -
Impairment charge (4,180)
At 31 March 2007 (4,180)
Net book value
At 31 March 2007 6,000
At 31 March 2006 11,383
Shares in subsidiaries have been impaired following the impairment review
undertaken on intangible and tangible assets referred to in notes 11 and 12.
The following were the principal subsidiary undertakings at the end of the year
and have all been included in the financial statements:
Country of registration % shares
Subsidiary undertakings or incorporation Class held
International Cellulose Company Overseas Limited Gibraltar Ordinary 100
International Chemical Company BV Netherlands Ordinary 100
Titan Wood BV Netherlands Ordinary 100
Titan Wood Limited England Ordinary 100
The shares in Titan Wood BV are held indirectly by the company.
The principal activities of these companies were as follows:
International Cellulose Company Overseas Limited The ownership and exploitation of patents and
technical know how (collectively intellectual property
rights), relating to the acetylation of cellulose and
production of acetic anhydride.
International Chemical Company BV The technical validation and demonstration of patents
and technical know-how relating to the acetylation of
wood fibre, cellulose and production of acetic anhydride.
Titan Wood BV The manufacture of Accoya, acetylated wood.
Titan Wood Limited Establishing global market penetration of Accoya as the
premium wood for external applications requiring
durability, stability and reliability through the
licensing of
the Group's proprietary process for wood acetylation.
14 Stock
Group Group
2007 2006
€'000 €'000
Raw materials 898 -
Finished goods 12 -
910 -
15 Debtors
Group Group Company Company
2007 2006 2007 2006
€'000 €'000 €'000 €'000
Amounts owed by subsidiary - - 38,638 12,316
undertakings
Other debtors 906 943 - -
Other loans and deposits - 7,306 - 7,306
Prepayments and accrued income 179 162 30 24
1,085 8,411 38,668 19,646
All amounts fall due for payment within one year. Other loans and deposits at
31 March 2006 included €5,616,000 of interest bearing deposits.
16 Other investments
Group Group Company Company
2007 2006 2007 2006
€'000 €'000 €'000 €'000
Unlisted securities available
for resale - 15,513 - 15,513
At 31 March 2006, the Company held 9,643,256 redeemable shares of €0.000015 each
in the Tactica Euro Balanced Opportunities Fund, managed by Goldman Sachs
International.
17 Creditors: amounts falling due within one year
Group Group Company Company
2007 2006 2007 2006
€'000 €'000 €'000 €'000
Trade creditors 1,938 1,777 134 -
Amounts owed to subsidiary
undertakings - - 3,432 23,651
Taxes and social security costs 470 55 - -
Accruals and deferred income 694 152 15 15
3,102 1,984 3,581 23,666
18 Share capital
2007 2006
€'000 €'000
Authorised
Equity share capital
200,000,000 ordinary shares of €0.01 each 2,000 2,000
1,000,000 deferred shares of 10p each 148 148
2,148 2,148
Allotted
Equity share capital
140,645,619 (2006: 132,463,447) ordinary shares of €0.01 each 1,406 1,325
1,000,000 deferred shares of 10p each 148 148
1,554 1,473
The deferred shares have no right to receive a dividend, no right to attend,
speak or vote at general meetings of the Company and only a right to participate
in a winding up after €100,000 has been paid on each Ordinary share.
Movements in allotted, called up and fully paid share capital comprise: Deferred Ordinary
shares of shares of
10p each €0.01 each
€'000 €'000
At 31 March 2006 148 1,325
Placing - 66
On exercise of share options - 15
At 31 March 2007 148 1,406
On 14 September 2005, the Company made offers for the entire issued share
capital of Accsys Chemicals PLC on the basis of one new Ordinary share of €0.01
for each existing Ordinary share and of one new Deferred share of 10p for every
48.1715 existing Deferred shares. After acceptances exceeded 90%, the Company
exercised compulsory purchase powers under the Companies Act to acquire the
outstanding Ordinary and Deferred shares. A total of 105,463,445 Ordinary
shares and 1,000,000 Deferred shares were issued in consideration. On 22
November 2005, the Company completed its acquisition of the Ordinary and
Deferred shares of Accsys Chemicals PLC, which became wholly owned, and also
completed the offer in respect of options over Ordinary shares in Accsys
Chemicals PLC.
On 26 October 2005, the Company placed 27,000,000 new Ordinary shares at a price
of €1.00 each raising €25,209,000 after expenses and its Ordinary shares were
admitted to AIM.
On 8 November 2006, the Company placed 6,623,172 new Ordinary shares at a price
of €1.48 each raising €9,557,000 after expenses.
Options over 1,559,000 Ordinary shares were exercised during the year at a price
of €0.46 each. Details of outstanding options granted over Ordinary shares in
the Company are set out in Note 10.
19 Reserves
Share Profit
premium Merger and loss
account reserve account
Group €'000 €'000 €'000
Balance at 1 April 2006 25,504 106,707 (82,759)
Premium on shares issued 10,437 - -
Issue costs (252) - -
Share based payment charges - - 172
Loss for the period - - (22,597)
Balance at 31 March 2007 35,689 106,707 (105,184)
Share Profit
premium and loss
account account
Company €'000 €'000
Balance at 1 April 2006 25,504 (78)
Premium on shares issued 10,437 -
Issue costs (252) -
Share based payment charges - 172
Profit for the period - 6,195
Unrealised gain on liquidation of former holding company - 8,010
Balance at 31 March 2007 35,689 14,299
In the comparative period, the Company utilised merger relief available under
(S)131 of the Companies Act 1985 in respect of the shares issued to acquire the
former holding company, Accsys Chemicals PLC. The Profit and loss account of
the Company includes €8,010,000 of non distributable reserves arising from the
liquidation of Accsys Chemicals PLC
20 Commitments under operating leases
As at 31 March 2007, the group had annual commitments under non-cancellable
operating leases as set out below:
Land and Land and
buildings buildings
2007 2006
€'000 €'000
Operating leases which expire:
In two to five years 361 286
The company has no annual commitments under non-cancellable operating leases.
21 Reconciliation of movements in shareholders' funds
2007 2006
Group €'000 €'000
Loss for the financial year (22,597) (4,998)
Share based payment charges 172 -
Proceeds from issue of shares 10,266 25,774
Shares issued by subsidiary - 4,195
Net (decrease)/increase in shareholders' funds (12,159) 24,971
Opening shareholders' funds 50,925 25,954
Closing shareholders' funds 38,766 50,925
Company
Profit/(loss) for the financial
year 6,195 (78)
Unrealised gain on liquidation of former holding company 8,010 -
Share based payment charges 172 -
Shares issued to acquire Accsys Chemicals PLC - 1,203
Proceeds from issue of shares 10,266 25,774
Net increase/(decrease) in shareholders' funds 24,643 26,899
Opening shareholders' funds 26,899 -
Closing shareholders' funds 51,542 26,899
22 Financial instruments
The group's treasury policy is structured to ensure that
adequate financial resources are available for the development of its business
whilst managing its currency, interest rate and counterparty credit risks. The
group's Treasury strategy and policy are developed centrally and approved by the
board.
Currency exposures are limited as the Group's functional currency
is the euro. A minor proportion of administrative expenditure is incurred in
pounds sterling.
Counterparty credit risks arise principally in relation to the
Group's short term liquid resources of €9,580,000 (2006: €26,819,000). These
have been placed directly or indirectly with high quality financial institutions
or are represented by a diversified portfolio managed within clearly defined
investment guidelines by a highly reputable investment manager.
Group Group Company Company
2007 2006 2007 2006
€'000 €'000 €'000 €'000
Gross financial assets comprise:
Redeemable preference shares - 15,513 - 15,513
Other financial assets:
Other loans and deposits - 7,306 - 7,306
Money market deposits 9,580 4,000 9,580 4,000
Money at call 1,220 540 872 21
Money at call in sterling 25 37 3 2
10,825 27,396 10,455 26,842
Redeemable preference shares were redeemable at the holder's option on one
month's notice and are carried at fair value. This was been determined as the
net asset value reported by the investment manager at the balance sheet date.
In the opinion of the directors, there is no material difference between the
book value and the fair value of other financial assets. All other financial
assets have interest rates fixed for less than nine (2006: three) months at a
weighted average of 3.12% (2006: 2.55%). Apart from minimal amounts denominated
in sterling currency, all financial assets are denominated in euro.
At the balance sheet date, the Group has financial liabilities of €1,938,000
(2006: €1,777,000) comprising trade creditors. The Company has no financial
liabilities. In the opinion of the directors, there is no material difference
between the book value and the fair value of financial liabilities.
23 Related party transactions
Mr William Paterson-Brown is a director of Khalidiya Investments SA. During the
year the Company paid €406,795 (2006: €425,376) in respect of directors services
provided by Khalidiya Investments SA.
24 Capital commitments
2007 2006
Group €'000 €'000
Contracted but not provided for 1,776 8,936
25 Reconciliation of operating loss to net cash outflow from
operating activities
2007 2006
€'000 €'000
Operating loss (22,634) (5,780)
Share based payment charges 172 -
Depreciation of tangible fixed assets 733 21
Impairment of tangible fixed assets 6,569 -
Amortisation of intangible fixed assets 628 531
Impairment of intangible fixed assets 5,850 -
(Increase) in stock (910) -
Decrease/(increase) in debtors 20 (497)
Increase in creditors 1,118 1,257
Net cash outflow from operating activities (8,454) (4,468)
26 Reconciliation of net cash inflow to movement in net funds
2007 2006
€'000 €'000
Increase in cash in the year 668 13
Cash (inflow)/outflow from changes in liquid resources (16,992) 16,690
Shares issued in subsidiary in settlement of debt - 1,195
Movement in net funds in the year (16,324) 17,898
(Decrease)/increase in value of current asset investment (247) 513
Opening net funds 27,396 8,985
Closing net funds 10,825 27,396
27 Analysis of net funds
2007 2006
€'000 €'000
Increase in cash in the year 668 13
Cash (inflow)/outflow from changes in liquid resources (16,992) 16,690
Shares issued in subsidiary in settlement of debt - 1,195
Movement in net funds in the year (16,324) 17,898
(Decrease)/increase in value of current asset investment (247) 513
Opening net funds 27,396 8,985
Closing net funds 10,825 27,396
28 Post balance sheet events
On 21 May 2007, 8,115,883 new Ordinary shares were issued to Celanese
Corporation at a price of €2.72 each for a cash consideration of €22,075,000.
On 25 June 2007, the Company announced an agreement with Skanfore SA under which
rights to negotiate certain technology licenses were exchanged for a premium
payable to the Group of €10m.
Further details of the transaction are provided in the Chairman's Statement and
the Directors' Report.
This information is provided by RNS
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