Final Results

RNS Number : 2027B
Enteq Upstream PLC
15 June 2016
 

Enteq Upstream plc

("Enteq", the "Company" or the "Group")

Final results for the year ended 31 March 2016

 

 

AIM traded Enteq Upstream plc, the oil & gas drilling technology company, today announces its financial results for the year ended 31 March 2016.

 

 

 

 

Key features

·     Full year revenue reduction of 66% mirrors reduction in North American rig count.

·     Normalised overhead1 reduced by 38% on an annualised basis.

·     Cash balances increased over both September 2015 and March 2015 positions.

 

 

Financial metrics    

                                    Years ended 31 March:


2016

2015

·     Revenue

$6.3m

$18.5m

·     Adjusted EBITDA2               

$(0.7)m

$(0.8)m

·     Inventory write down           

$2.7m

-

·     Impairment of intangible assets`          

-

$39.5m

·     Loss before tax    

$4.7m

$47.2m

·     Adjusted loss per share3

3.7 cents

3.1 cents

·     Loss per share

8.0 cents

80.1 cents

·     Cash balance        

$15.1m

$14.1m

 

Outlook

·     Uncertainty over oil price trend continues to impact customer confidence resulting in constrained capital expenditure and ongoing drilling cost reductions in North American market

·     Further market penetration anticipated in Far East, Middle East, Africa and Russia

·     Ongoing focus on cash conservation and overhead reductions

 

 

 

Martin Perry, CEO of Enteq Upstream plc, commented:

 

"Enteq has adapted to manage a rapidly declining market and has adjusted the cost base to preserve future cash balances and profitability. The business is secure and ready to respond to growth opportunities around the world and in North America when the market shows signs of recovery."



 

 

For further information, please contact:

Enteq Upstream plc                                                 +44 (0) 1494 618741

Martin Perry, Chief Executive Officer

David Steel, Finance Director

 

Investec Bank plc (Nomad and Broker)                             +44 (0) 20 7597 4000

Chris Treneman, Patrick Robb, David Anderson

 

 

 

 

 

 

  

 

 

 

1 Normalised overhead is reported administration expenses before amortisation adjusted for depreciation, bonus charges, R&D costs, PSP charges and provisions.

2 Adjusted EBITDA is reported profit before tax adjusted for interest, depreciation, amortisation, foreign exchange movements and exceptional items.

3 Adjusted loss per share is reported loss per share adjusted for exceptional items, amortisation and foreign exchange movements.


    

Chairman's statement

 

Review of the Year

The severe down-turn in the global oil and gas industry as a result of depressed oil prices has continued to adversely affect rig utilisation and hence revenues for Enteq.

The price for West Texas Intermediate Oil had an average price of $93.17 in 2014, $49.67 in 2015 and is forecast to average $40.32 for 2016 and $50.65 for 2017 (source U.S. Energy Information Administration, 10 May 2016). The land based rig count in North America dropped from 1,031 in April 2015 to 451 in April 2016, a reduction of 56%. The International count dropped from 902 to 726 (source Baker Hughes Rig count. 6 May 2016).

Enteq revenues reflected these reductions, falling from $18.5m in 2015 to $6.2m, a reduction of 66%.  Through protecting margins and very significant and early control of overheads, Enteq delivered an adjusted EBITDA loss of $0.7m which was inline with expectations.  Cash was preserved through the year with a cash balance of $15.1m at the end of March 2016, compared with a balance of $14.1m at the end of March 2015. An exceptional, one-off, non-cash reduction in the carrying value of inventory ($2.7m) was taken at the year-end in order to reflect the current trading patterns.

Despite the excess equipment available in the market due to the decline in activity Enteq has maintained customer loyalty and market share.

Employee numbers have further reduced from 56 at the end of March 2015 to 21 at the end of March 2016 and all those who have left deserve recognition and thanks for their past contributions. The remaining team work diligently to maintain the core of the company and be well positioned for any recovery.

As a further contribution to cost reduction and as a reflection of the company's changed profile I will be stepping down from the position of Chairman at the AGM in September 2016 and will leave the company. Iain Paterson, currently a Non-Executive Director, will take the role of Chairman. Iain and Robin Pinchbeck, the other remaining Non-Executive Director, have many years of oil industry and public company experience.     

 

 

Prospects

The world macro-economic conditions of supply and demand in the oil & gas sector continue to create an uncertain market for drilling and the timing of any recovery cannot be certain.

Enteq continues to uncover new opportunities for sales of equipment outside North America and continues to maintain positive relationships within a changing customer base. Enteq's strong cash balance and continuing tight cost management means that the company is positioned to benefit from any market recovery.

 

 

 

Neil Warner

Chairman

 

Chief Executive's operating and strategic review

 

Market Overview

Enteq supplies Measurement While Drilling equipment to the oil and gas industry world-wide to enable directional drilling.

 

Directional drilling is carried out by oilfield service companies who either purchase equipment from 3rd parties such as Enteq or develop the equipment themselves. Measurement While Drilling equipment is used on every rig which drills directional wells.

 

Due to the sustained low oil price during 2015 and the first quarter of 2016, on-going reductions in the number of rigs drilling have occurred. In North America, which accounted for 90% of revenues in the last financial year, the rig count reduced from 1,031 to 451 during the year. There is therefore considerable excess capacity of equipment available, un-utilised, in the market.

 

During times of excess capacity, sales of new equipment and spare parts are severely restricted due to the 'cannibalisation' of spare equipment in order to keep operational systems in work at minimal costs.

 

Enteq has continued to develop markets outside North America, with some new agreements confirmed in the Middle East, Africa, Russia and the Far East. 

 

As a result of the poor market conditions a number of oilfield service companies have ceased trading and severe cuts have been made across all of the customer base, however relationships have been maintained wherever possible and overall market share should have been preserved. 

 

Competition

Some consolidation has taken place amongst other 3rd party suppliers of equipment and all players in the market have had to undergo significant reductions.   In the current depressed market place very little development or innovation has been taking place.   Enteq retains a strong independent position as a result of the strong balance sheet.

 

Product development and introductions

Enteq has maintained the core disciplines within engineering and software development.  A new software version and some added functionality have been released. A patent application for an innovation is in process.

 

Sales & Marketing

Regular contact is maintained with the entire customer base from the operational hub in Houston and by the Chief Operations Officer in North America. International opportunities and sales are generated from the UK office and by a representative in China. Business development trips are made as and when required.

 

Future strategic direction

Enteq will maintain a sustainable small business suitable to the current market conditions. The company is positioned for a recovering or stabilised market. International prospects remain good. By protecting the cash on the balance sheet Enteq can offer security but also, at the right time, take advantage of recovery opportunities by sensible investment. Enteq continues to believe in a long term strategy of consolidation of technologies and distribution.



 

 

Conclusion

Enteq has adapted to manage a rapidly declining market and has adjusted the cost base to preserve future cash balances and profitability. The business is secure and ready to respond to growth opportunities around the world and in North America when the market shows signs of recovery.

 

 

 

 

Martin Perry

Chief Executive Officer



Financial review

Results


Year ended 31 March 2016

$million

Year ended 31 March 2015

$million

Revenue

6.3

18.5

Gross profit

4.0

6.9

Overheads

(4.7)

(6.8)

Underlying adjusted EBITDA

(0.7)

0.1

Bad debt provisions

-

(0.9)

Adjusted EBITDA

(0.7)

(0.8)

Depreciation & amortisation

(1.3)

(6.6)

Foreign exchange

-

-

Other charges

(0.2)

(0.2)

Ongoing operating loss

(2.2)

(7.6)

Impairment charge

-

(39.5)

Inventory write down

(2.7)

-

Other exceptional items

0.1

(0.2)

Interest

0.1

0.1

Loss before tax

(4.7)

(47.2)

Tax

(0.1)

(0.1)

Loss after tax

(4.8)

(47.3)

 

The results for the year to 31 March 2016 were significantly impacted by the dramatic decline in oil price between June 2014 and January 2015, which has continued on a more gently declining trend to the current level.   This continued fall significantly reduced Enteq's North American customers' order books, thus causing them to reduce the number of active rigs in their fleets.   In the period September 2014 to March 2016, the North American rig count dropped 77% to approximately 450, with a 49% reduction in the year to March 2016.   As revenue is derived from both rigs being added to customers' fleets and on-going replacement of items during rig operation, the dramatic reductions in active (revenue generating) rigs resulted in the 66% fall in revenue, to $6.2m.   International revenue (customers outside North America) was $0.6m; which, whilst down from $1.2m in the previous year, did include a new customer in Congo, Enteq's first sale in Africa.  The full year gross margin was 65%, up from 37% for the previous year.  This reflected both a movement in product mix to the higher margin lines (electronic components and rental) and a reduction in the number of direct non-manufacturing labour posts (primarily supervisory and logistic positions).  During the year, 23 direct labour posts were removed.   Total overheads, at $4.7m, were down $2.1m (32%) on the previous year's figure.   This reduction can be further split into $0.6m relating to the 6 staff posts removed during the year (plus the impact of similar posts removed during the previous 12 months) and $1.5m relating to non-staff costs.   This latter figure covers all overheads areas such as travel, marketing, maintenance, IT support, advisor and audit fees.  During the year both the Austin and North Houston offices were closed, saving both rent and other associated office running costs.

The combined depreciation and amortisation charge was significantly down, due to the write off of all Intangible Assets as at 31 March 2015.   This write off resulted in no related amortisation charge in the year to March 2016.

All indications are that the oil price is unlikely to significantly increase until at least mid to late 2017.  Even when the oil price does rise, there will be a further time lag before there is a rise in the active rig count and, hence, Enteq's addressable market.  The Board, therefore, took the view that the carrying value of the company's inventory needed to be brought into line with that which the market seems to be able to bear.  Hence, an exceptional, non-cash, inventory write down of $2.7m was taken during the period.

 

Included within "other exceptional items" were both the $0.3m cash settlement of the warranty claim against the vendors of the KMS business and the $0.1m of costs associated with the 29 staff redundancies made during the year.

 

The "Other charges" included in the ongoing operating loss for the year, primarily, relates to the non-cash charge associated with the Performance Share Plan.

 

The foreign exchange gain results from the movement in the GBP/USD exchange rate on the GBP cash balances held by Enteq.

 

 

Statement of Financial Position

Enteq's assets and liabilities at the year-end were as follows:

As at 31 March:

2016

$million

2015

$million

Other intangible assets

0.3

-

Plant & equipment

2.9

4.8

Net working capital

6.1

10.0

Cash

15.1

14.1

Net assets

24.4

28.9

 

Capital & reserves

24.4

28.9

 

The "Other intangible assets" represent the value of the R&D work, carried out by the engineering team, capitalised during the year.

The reduction in plant & equipment is primarily due to the $1.3m of depreciation during the year, but also reflects rental fleet assets coming off hire and hence back into inventory at the appropriate "used" value.  As previously mentioned, both the Austin and the North Houston locations were closed during the year.  Whilst most of the production equipment was re-located to South Houston, there were write-offs of remaining plant.

The $3.9m decrease in net working capital included the $2.7m non-cash write down of inventory plus the continuing unwinding of both trade receivables and payables due to the reduced level of activity. 

Cash flows

Year to 31 March:

 2016

$ million

2015

$ million

Underlying adjusted EBITDA

(0.7)

0.1

Change in operational working capital

1.7

1.1

Operational cash generated

1.0

1.2

Investment in R&D, rental fleet, Capex and finished goods

(0.3)

(5.9)

Warranty settlement received

0.3

-

Severance payments

(0.1)

(0.1)

Interest

0.1

0.1

Net cash movement

1.0

(4.7)

Opening cash balances

14.1

18.8

Foreign exchange movements

-

-

Closing cash balances

15.1

14.1

 

Due to the senior management's concentration on preserving cash since the major reduction in oil prices, the closing  cash balance of $15.1m is higher than both the previous year end ($14.1m) and that of the Interim results ($14.5m).

The positive change in operational working capital is primarily due to $1.6m reduction in trade receivables during the year.  As previously mentioned, there was a $0.3m receipt relating to the settlement of the KMS warranty claim and $0.1m of severance payments were made during the year.

Financial Capital Management

Enteq's financial position is robust. Enteq had no bank borrowings or other debt and had a closing cash position of $15.1m as at 31 March 2016.

Enteq monitors cash balances and movements daily and operates under treasury policies and procedures which are set by the Board.

The financial statements are presented in US dollars as the Company's primary economic environment, in which it operates and generates cash flows, is one of US dollars. Apart from its UK based overhead costs, substantially all other transactions are transacted in US dollars.

Enteq is subject to the foreign exchange rate fluctuations to the extent that it holds non-US Dollar cash deposits. These GBP denominated holdings are now approximately 2% of total cash holdings.

 

Annual Report and Accounts

The 2016 Annual Report and Accounts and a Notice of its Annual General Meeting has today been sent to shareholders and is available on the Company's website, www.enteq.com.



 

 

 

Annual General Meeting

The Company's Annual General Meeting will be held on 13 September 2016 at 12.00 noon at the offices of Investec Bank plc, 2 Gresham Street, London EC2V 7QP.   The documents sent to shareholders in connection with the Company's Annual General Meeting, are:

 

·      Report and Accounts for the year ended 31 March 2016;

·      Notice of Annual General Meeting; and

·      Proxy card.

 

Copies of these documents can also be obtained during normal business hours at the registered office of the company:

 

The Courtyard

High Street

Ascot

Berks SL5 7HP

 

 

 

 

David Steel

Finance Director

 



 

 

Enteq Upstream plc






Consolidated Income Statement

 

 











    Year to 31 March 2016

Year to 31 March 2015








Notes

$ 000's

$ 000's

$ 000's

$ 000's









Ongoing operations

Exceptional items

Total

Total







Revenue


6,289

-

6,289

18,525







Cost of Sales


(2,201)

-

(2,201)

(11,614)







Gross Profit


4,088

 -

4,088

6,911







Administrative expenses before amortisation


(6,225)

 -

(6,225)

(8,809)

Amortisation of acquired intangibles


(30)

-

(30)

(5,701)

Impairment of acquired intangibles including goodwill

6

-

-

(39,538)

Other exceptional items

3

(2,585)

(2,585)

(122)

Foreign exchange loss on operating activities


(1)

 -

(1)

(12)







Total Administrative expenses


(6,256)

(2,585)

(8,841)

(54,182)







Operating loss


(2,168)

(2,585)

(4,753)

(47,271)







Finance income


93

-

93

127







Loss before tax


(2,075)

(2,585)

(4,660)

(47,144)







Tax expense

4

(81)

-

(81)

(83)







Loss for the period


(2,156)

(2,585)

(4,741)

(47,227)













Loss attributable to:






Owners of the parent


(2,156)

(2,585)

(4,741)

(47,227)







 

 

 












Loss per share (in US cents):

   5





Basic




(8.0)

(80.1)

Diluted




(8.0)

(80.1)







Adjusted (loss)/earnings per share (in US cents):

5





Basic




(3.6)

(3.1)

Diluted




(3.6)

(3.1)



 

Enteq Upstream plc

 

Consolidated Statement of Comprehensive Income

 

 

 

 

 

 

 

 

Year to 31 March 2016

 

 

 

Year to 31 March 2015





$ 000's

$ 000's




Loss for the year

(4,741)

(47,227)




Other comprehensive income for the year:



Items that will not be reclassified subsequently to profit and loss

-

-

Items that will be reclassified subsequently to profit and loss

-

-

Total comprehensive income for the period

(4,741)

(47,227)




Total comprehensive income attributable to:



Owners of the parent

(4,741)

(47,227)



 

Enteq Upstream plc

 




Consolidated Statement of Financial Position

 



 

 



As at  31 March 2016

As at 31 March 2015

 


Notes

$ 000's

$ 000's

 

Assets




 

Non-current




 

Goodwill

 6a

-

-

 

Intangible assets

 6b

267

-

 

Property, plant and equipment


2,903

4,837

 





 

Non-current assets


3,170

4,837

 





 

Current




 

Trade and other receivables


3,423

5,019

 

Inventories


4,214

7,363

 

Cash and cash equivalents


15,121

14,091

 





 

Current assets


22,758

26,473

 




 


25,928

31,310

 





 





 

Equity and liabilities




 





 

Equity




 

Share capital


950

939

 

Share premium


90,558

90,395

 

Share based payment reserve


549

364

 

Retained earnings


(67,562)

(62,821)

 





 

Total equity


24,495

28,877

 





 

Liabilities




 

Current




 

Trade and other payables


1,433

2,433

 





 

Total liabilities


1,433

2,433

 




 


25,928

31,310

 

 



Enteq Upstream plc

 

Consolidated Statement of Changes in Equity

 





Share



Called up



based



share

Retained

Share

payment

Total


capital

earnings

premium

reserve

equity


$ 000's

$ 000's

$ 000's

$ 000's

$ 000's







Issue of share capital

11

-

163

-

174

Share based payment charge

-

-

-

185

185







Transactions with owners

11

-

163

185

359







Loss for the period

-

(4,741)

-

-

(4,741)







Other comprehensive expense for the year

-

-

-

-

-







Total comprehensive income

-

(4,741)

-

-

(4,741)







Total movement






As at 1 April 2015

939

(62,821)

90,395

364

28,877

As at 31 March 2016

950

(67,562)

90,558

549

24,495





























Share



Called up



based



share

Retained

Share

payment

Total


capital

earnings

premium

reserve

equity


$ 000's

$ 000's

$ 000's

$ 000's

$ 000's







Share based payment charge

-

-

-

142

142







Transactions with owners

-

-

-

142

142







Loss for the period

-

(47,227)

-

-

(47,227)







Other comprehensive expense for the year

-

-

-

-

-







Total comprehensive income

-

(47,227)

-

-

(47,227)







Total movement

-

(47,227)

-

142

(47,085)

As at 1 April 2014

939

(15,594)

90,395

222

75,962

As at 31 March 2015

939

(62,821)

90,395

364

28,877

 



 

Enteq Upstream plc

 

Consolidated Statement of Cash Flows

 


Year to 31 March 2016

Year to 31 March 2015


$ 000's

$ 000's




Cash flows from operating activities



Loss for the year

(4,741)

(47,227)




Net finance income

(93)

(127)

Loss on disposal of fixed assets

43

195

Share-based payment non-cash charges

185

142

Foreign exchange difference

1

12

Impairment of acquired intangibles and goodwill

-

39,538

Depreciation and Amortisation charges

1,349

6,665





(3,256)

(802)




Decrease/(increase) in inventory

3,714

(1,773)

Decrease in trade and other receivables

1,596

3,645

Decrease in trade and other payables

(1,000)

(2,429)




Net cash from operating activities

1,054

(1,359)







Investing activities



Purchase of tangible fixed assets

(66)

(2,297)

Disposal proceeds of tangible fixed assets

72

-

Purchase of intangible fixed assets

(297)

(1,197)

Interest received

93

127




Net cash from investing activities

(198)

(3,367)







Financing activities



Share issue

175

-




Net cash from financing activities

175

-







Increase/(decrease) in cash and cash equivalents

1,031

(4,726)




Non-cash movements - foreign exchange

(1)

(12)

Cash and cash equivalents at beginning of period

14,091

18,829




Cash and cash equivalents at end of period

15,121

14,091









 

 

Enteq Upstream plc

 

Notes to the consolidated financial statements

 

 



1.     BASIS OF PREPARATION

The results for the year ended 31 March 2016 have been prepared using the accounting policies and methods of computation consistent with those used in the Group's annual report for the year ended 31 March 2015.   The results have also been presented and prepared in a form consistent with that which will be adopted in the Group's annual report for the year ended 31 March 2016 and in accordance with the recognition and measurement requirements of the International Reporting Standards as adopted by the European Union.

 

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 March 2016 and the year ended 31 March 2015, but is derived from those accounts.   Statutory accounts for 2015 have been delivered to Companies House.  Those for the year ended 31 March 2016 will be delivered following the Company's Annual General Meeting on 13 September 2016.

 

The financial information has been extracted from the Group's Annual Report for the year ended 31 March 2016.   The auditors have reported on these accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006. The Group intends to publish its 2016 Annual Report and Accounts in June 2016.

 

 

2.     SEGMENTAL REPORTING

For management purposes, the Group is currently organised into a single business unit, the Drilling Tools

division, which is currently based solely in the USA.

 

The principal activities of the Drilling Tools division is the design, manufacture and selling of specialised parts and products for Directional Drilling and Measurement While Drilling operations for use in the energy exploration and services sector of the Oil and Gas industry.

 

At present, there is only one operating segment and the information presented to the board is consistent with

the consolidated income statement and the consolidated statement of financial position.   A key measurement used by the board is Adjusted EBITDA.  This reconciliation is included in note 3, below.

 

The net assets and non-current assets of the Group can be analysed by geographic location (post-consolidation adjustments) as follows:

 

Net Assets


31 March 2016

31 March 2015


USD 000's

USD 000's




Europe (UK)

14,569

13,834

United States

                9,867

15,043

Total Group net assets

24,436

28,877

 

Non-current Assets


31 March 2016

31 March 2015


USD 000's

USD 000's




Europe (UK)

-

2

United States

                3,170

4,835

Total Group non-current assets

3,170

4,837

 

 

All of the Group's revenue arises from the sale of specialised parts and products for Directional Drilling and Measurement While Drilling operations.

 

The Group had three customers that contributed in excess of 10% of the Group's total sales for the year (2015: none).  No revenue relates to customers based in the UK (2015: none).

 

 

3.     PROFIT AND LOSS ANALYSIS

 

The following analysis illustrates the performance of the Group's activities, and reconciles the Group's profit, as shown in the consolidated income statement, to adjusted earnings. Adjusted earnings and underlying adjusted earnings are presented to provide a better indication of overall financial performance and to reflect how the business is managed and measured on a day-to-day basis. The adjusted earnings before interest, taxation, depreciation and amortisation ("adjusted EBITDA") is also presented as it is a key management metric.

 


31 March 2016

31 March 2015


USD 000's

USD 000's




Loss attributable to ordinary shareholders

(4,741)

(47,227)

Other exceptional items

2,585

122

Impairment of intangible assets

-

39,538

Amortisation of acquired intangible assets

30

5,701

Foreign exchange movements

1

12

Adjusted earnings

(2,125)

(1,854)




Depreciation charge

1,319

964

Finance income

(93)

(127)

PSP charge

199

93

Other non-recurring charges

-

57

Tax Charge

81

83




Adjusted EBITDA

(619)

(784)




 

The other exceptional items result from non-recurring costs.  The total can be analysed as follows:

 


31 March 2016

31 March 2015


USD 000's

USD 000's

 

Inventory write down

2,697

-

Warranty settlement

(255)

-

Severance payments

119

123

Other

24

(1)

Total exceptional items

2,585

122

 

 

 

4.     INCOME TAX

 

      Analysis of tax expense

No liability to UK corporation tax arose on ordinary activities for the period.

 

The tax assessed for the period is different from the standard rate of corporation tax in the UK. The difference is explained below:


31 March 2016

31 March 2015


USD 000's

USD 000's




Loss on ordinary activities before tax

(4,660)

(47,144)







Loss on ordinary activities multiplied by the

standard rate of corporation tax in the UK of 20% (2015: 21%):

 

(932)

 

(9,900)

Effects of:



Items not subject to corporation tax

270

9,703

Tax losses to carry forward

662

197

Texas State Franchise Tax

81

83




Total income tax

81

83

 

 

There has been no deferred taxation recognised in these financial statements due to the uncertainty surrounding the timing of the recovery of these amounts. The total losses available to the Group in the relevant tax jurisdictions are as follows: UK $3.1m; United States $11.5m (2015: UK $3.3m; United States $6.7m). There were no significant deferred tax liabilities.

 

 

 

5.     EARNINGS PER SHARE AND DIVIDENDS

 

Basic earnings per share

Basic earnings per share is calculated by dividing the loss attributable to ordinary shareholders for the year of $4,741k (31 March 2015: loss of $47,227k) by the weighted average number of ordinary shares in issue during the year of 59,336k (31 March 2015: 58,954k).

 

Adjusted earnings per share

Adjusted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders, excluding exceptional items, amortisation of intangible assets and foreign exchange profits or losses for the year of a loss of $2,125k (31 March 2015: loss of $1,854k), by the weighted average number of ordinary shares in issue during the year of 59,336k (31 March 2015: 58,954k).

 

As the Group is loss making, any potential ordinary shares have the effect of being anti-dilutive.   Therefore, the diluted EPS is the same as the basic EPS.  As the year end share price is below the option price of all the options issued, the adjusted diluted EPS the same as adjusted EPS.

 

The adjusted diluted earnings per share information are considered to provide a fairer representation of the Group's trading performance. A reconciliation between basic earnings and adjusted earnings is shown below.

 

 

March 2016:

EPS

 

Earnings

Weighted average  number of shares

Per-share amount


 USD 000's

000's

  US cents





Loss attributable to ordinary shareholders

(4,741)

59,336

(8.0)

Exceptional items

2,585



Amortisation of acquired intangible assets

30



Foreign exchange movements

1



Adjusted loss attributable to ordinary shareholders

(2,125)

59,336

(3.6)

 

 

 

March 2015:

EPS

 

Earnings

Weighted average  number of shares

Per-share amount


 USD 000's

000's

  US cents





Loss attributable to ordinary shareholders

(47,227)

58,954

(80.1)

Exceptional items

122



Impairment of intangible assets

39,538



Amortisation of acquired intangible assets

5,701



Foreign exchange movements

12



Adjusted loss attributable to ordinary shareholders

(1,854)

58,954

(3.1)

 

 

 

During the year Enteq Upstream Plc did not pay any dividends (2015: nil).

 



 

 

6.     INTANGIBLE ASSETS

 

a)     Goodwill



USD 000's




Cost:


As at 31 March 2015 and as at 31 March 2016

19,619



Impairment:


As at 31 March 2015 and as at 31 March 2016

19,619

 

Net Book Value:


As at 1 April 2015 and as at 31 March 2016

-

 

 

 

Cost:


As at 31 March 2014 and as at 31 March 2015

19,619



Impairment:


As at 1 April 2014

(4,492)

Charge in year

(15,127)

As at 31 March 2015

19,619

 

Net Book Value:


As at 1 April 2014

15,127

As at 31 March 2015

-

 

 

 

 

b)     Other Intangible Assets

 

 


Developed technology

IPR&D technology

Brand names

Customer relationships

Non- compete agreements

Total


USD 000's

USD 000's

USD 000's

USD 000's

USD 000's

USD 000's

Cost:







As at 1 April 2015

12,320

7,108

1,240

20,586

5,931

47,185

Transfers

180

(180)

-

-

-

-

Capitalised in period

-

297

-

-

-

297

As at 31 March 2016

12,500

7,225

1,240

20,586

5,931

47,482








Amortisation/Impairment:







As at 1 April 2015

(12,320)

(7,108)

(1,240)

(20,586)

(5,931)

(47,185)

Charge for the year

(30)

-

-

-

-

(30)

As at 31 March 2016

(12,350)

(7,108)

(1,240)

(20,586)

(5,931)

(47,215)








Net Book Value:







As at 1 April 2015

-

-

-

-

-

-

As at 31 March 2016

150

117

-

-

-

267

 



 

 

 


Developed technology

IPR&D technology

Brand names

Customer relationships

Non- compete agreements

Total


USD 000's

USD 000's

USD 000's

USD 000's

USD 000's

USD 000's

Cost:







As at 1 April 2014

11,364

6,867

1,240

20,586

5,931

45,988

Acquired in period

130

-

-

-

-

130

Transfers

826

(826)

-

-

-

-

Capitalised in period

-

1,067

-

-

-

1,067

As at 31 March 2015

12,320

7,108

1,240

20,586

5,931

47,185








Amortisation/Impairment:







As at 1 April 2014

(6,128)

(1,189)

(116)

(6,868)

(2,770)

(17,071)

Charge for the year

(2,511)

(634)

(62)

(1,484)

(1,011)

(5,701)

Impairment charge

(3,681)

(5,285)

(1,062)

(12,234)

(2,150)

(24,413)

As at 31 March 2015

(12,320)

(7,108)

(1,240)

(20,586)

(5,931)

(47,185)








Net Book Value:







As at 1 April 2014

5,236

5,678

1,124

13,718

3,162

28,917

As at 31 March 2015

-

-

-

-

-

-

 

 

 

There is deemed to be just one two cash generating unit ("CGU") within the Company. In previous years there were deemed to be two, but from a financial & operational perspective both US locations are now being run as one unit.

 

The main categories of Intangible Assets are as follows:

 

Developed technology:

This is technology which is currently commercialised and embedded within the current product offering.

 

IPR&D technology:

This is technology which is in the final stages of field testing, has demonstrable commercial value and is expected to be launched within the next 12 months.

 

Brand names:

The value associated with the various trading names used within the Group.

 

Customer relationships:

The value associated with the on-going trading relationships with the key customers acquired.

 

Non-compete agreements:

The value associated with the agreements signed by the Vendors of the acquired businesses not to compete in the markets of the businesses acquired.

 

Goodwill and Impairment

 

The Group tests goodwill and other intangible assets annually for impairment. The impairment test carried out on the balances as at 31 March 2016 indicated that there was no impairment of the full carrying value of both goodwill and intangibles assets. 

 

The recoverable amount of the CGU is determined from value in use calculations.  The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period.   Management estimates discount rates using pre-tax rates that reflect current market assessment of the time value of money and the risks specific to the CGU.  The growth rates are based on management forecasts for the five years to March 2021.  Cash flow forecasts are prepared from the most recent financial plans approved by the Board.

 

The forecasts assume annual growth rates between 1% and 30% until 2021 and 3% thereafter in the long term.   These long-term growth rates do not exceed the long-term average growth rates for the industry as a whole.



 

 

The pre-tax rate used to discount cash flow forecasts is 13.2% (2015: 13.1%).  Management have based this rate on the following factors: a Risk Free Rate of 2.6%; a levered equity beta of 1.5; a market risk premium of 5.5%; a small cap premium of 3.81% and an implied cost of debt of 4.53%.

 

 

Intangible assets

 

The intangible assets acquired during the year represent their fair value at the date of acquisition.

 

Amortisation

 

All categories of intangible assets, apart from Goodwill, are being amortised over their respective useful lives, on a straight line basis.  These are set out in the Accounting Policies note (above).  The remaining amortisation period of the intangible assets is 34 months.

 

 

 

7.     GOING CONCERN

 

After considering the current financial projections of the Group and taking into account the cash needs of the business and availability of funds, the Directors have a reasonable expectation that the group has adequate resources to continue its operations for the foreseeable future.  For this reason, they continue to adopt a "going concern" basis in preparing the Statement of Annual Results.

 

 

 

 

8.     RESPONSIBILITY STATEMENT OF THE DIRECTORS

 

To the best of the knowledge of the Directors (whose names and function are set out below), the preliminary announcement which has been prepared using accounting policies and methods of computation consistent with those used in the Group's annual report for the year ended 31 March 2015 and adopted for the financial year ended 31 March 2016, gives a true and fair view of the assets, liabilities, financial position and profit for the Company and the undertakings included in the consolidation taken as a whole; and

 

Pursuant to Disclosure and Transparency Rules, Chaplet 4, the Directors' Report of the Company's annual report will include a fair review of the development and performance of the business taken as a whole, together with a description of the principal risks and uncertainties faced by the business.

 

Executive Directors

Martin Perry                                   Chief Executive Officer

Raymond Garcia                               Chief Operations Officer

David Steel                                    Finance Director                            

 

Non-Executive Directors

Neil Warner                                   Chairman

Iain Paterson                                                                       

Robin Pinchbeck          

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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