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HydroDec Group plc (HYR)

  Print      Mail a friend       Annual reports

Friday 07 September, 2007

HydroDec Group plc

Interim Results

HydroDec Group plc
07 September 2007

                                                              7th September 2007

                               Hydrodec Group plc

                                Interim Results

Hydrodec Group plc (AIM:HYR) today announces unaudited Interim Results for the
six months ended 30 June 2007.


•         Superfine sales growth throughout the period and beyond
•         Significant developments in key US market
•         Successful £2.3m placing in June 2007
•         Transformer oil market continues to move in Hydrodec's favour


•         Revenues:                £689,666         (2006: £413,302)
•         Net operating loss       £1,167,153       (2006: £1,149,457)
•         Net assets               £12,391,962      (2005: £10,880,046)

Hydrodec Chairman John Gunn commented: 'Sales of Superfine are now surpassing
50% of Young's production capacity, and current trends indicate sold capacity
exceeding 75% in the near future, which is a tremendous achievement so soon into
Hydrodec's development. Commercial developments within the key US market
continue apace as negotiations on the US funding package are progressed in

The dynamics of the global transformer oil market continue to move in favour of
Superfine oil. The sustainable, controllable nature of Superfine is ever more
relevant in today's unpredictable world and I hope to report significant further
progress soon.'

For further information please contact:-

John Gunn, Chairman, Hydrodec Group plc                    Tel:  020 7236 6236

Emma Davis, Curve PR                                       Tel:  07764 197 003


I am pleased to present Hydrodec's unaudited interim accounts for the six months
ended 30th June 2007. Hydrodec's technology is an oil refining process,
producing new speciality oils, using spent oil as the primary feedstock. The
process also removes dangerous contaminants such as PCB's from oil and similar
fluids. The technology can be applied to many speciality oils, but initially the
Company is concentrating on the transformer oil industry. Old transformer oil
that has been refined through the Hydrodec process becomes Superfine oil.

Results for six months ended 30th June 2007

Turnover for the period increased by 67% to £689,666 (2006: £413,302), with an
overall operating loss of £1,167,153 (2006: £1,149,457). The operating loss
includes £358,099 of depreciation and the amortisation. Net assets increased by
14% to £12,391,962 (2006: £10,880,046), including cash balances of £2,284,324
(2006: £493,257).

Commercial developments

During the period, the Company secured Australian sales with significant
potential value. In February, it was announced Schneider Australia has agreed in
principle to allocate up to 75% of its annual new transformer oil purchase in
Australia, to Superfine. This represents an expected uptake of 3,000 litres of
Superfine per day, representing up to 15% of Hydrodec's production capacity in
Australia. Schneider Electric is a key manufacturer of distribution transformers
in Australia, supplying to major power utilities across the country and is one
of Australia's larger transformer oil purchasers.

In April, it was announced that two Australian power utilities, the two largest
electricity distribution companies in Victoria, have approved Superfine for use
in their new transformers. This, together with the previously announced approval
from a major South Australian distribution utility, means use of Superfine has
been approved by three companies that operate a large proportion of the
electricity distribution system across Southern Australia.

The Company was also recently awarded its first significant high-level PCB
contaminated equipment treatment project. The AU$250,000 contract involves the
treatment of 610 concentrated PCB filled capacitors and augments the previously
announced power industry hardware services business in Australia.

Funding and US developments

On 11th June, Hydrodec announced the placing of 9,200,000 new shares, raising
£2,300,000 gross (the 'Placing'). The funds from the Placing are being used to
commence construction of Hydrodec's first US plant in Canton, Ohio. Canton was
chosen due to its location in one of the major industrial regions in the USA,
close to both the suppliers of feedstock oil and potential Superfine transformer
oil customers.  As previously announced, the State of Ohio and the City of
Canton have also provided a package of incentives to Hydrodec. The Company has
received the majority of the necessary development and construction approvals
for the site. Construction of the plant, commencing with site earthworks and
major critical path items such as the tank farm, has now commenced. Orders are
being placed for equipment that has a long lead-time for delivery. All major
civil construction and building contracts will be put out to tender and are
expected to be awarded shortly thereafter.

Commencement of construction should enable major weather dependent works to be
completed prior to the onset of Ohio's harsh winter. Completion of these works
enables key process plant assembly activities to progress on schedule under
cover during the winter months, thus avoiding several months of delays to the
construction programme.

The Placing will also facilitate the creation of a formal US infrastructure for
Hydrodec, starting with the recruitment of Ohio staff, much of the cost of which
has been subsidised by the State. Hydrodec will be able to commence the next
stage of marketing and business development within the transformer oil industry
and further develop relations with existing operators. This will allow the
Company to seek expressions of interest and to negotiate possible take off
agreements, both supply-side for used feedstock oil and demand-side for

Hydrodec continues to finalise plans for the location and structure of a second
US plant to be located in Mississippi. A short-list of potential sites has been
identified, but there are a number of logistical and grant issues to be
confirmed with the State of Mississippi. Significant legal, logistical,
development work and lobbying has already taken place, and an announcement on a
location for the plant will be made as soon as this is finally determined.


An EGM to grant the directors authority to enable the Company to issue 10% of
the enlarged issued share capital of the Company for cash on a non-pre-emptive
basis without recourse to shareholders was held and passed on 10th July 2007.

The transformer oil market

The market price for transformer oil increased during the period. List price
increases were announced by producers in the USA and escalating crude oil prices
have started to feed through to the market place. Power industry infrastructure
replacement programs and upgrades are also gathering momentum in the USA and
Australia, increasing short and medium term demand for transformer oils. The
ongoing tight supply situation combined with increasing price and demand is
providing progressive improvement in Hydrodec's competitive position in its two
current key markets Australia and the USA.

In Japan, a review of regulations pertaining to PCB contaminated transformer
oils is indicating a substantial program of oil treatment over the coming ten
years creating a substantial opportunity for Hydrodec to accelerate development
of a position in the Japanese market.

Current trading

Superfine sales volumes have increased throughout the period and this trend has
continued post period end. Sales are now surpassing 50% of Young's production
capacity and the current trend indicates sold capacity exceeding 75% in the near

The future

Sales progress in Australia in the period was most encouraging. The switch by
Schneider Electric to Superfine and approvals from Hong Kong owned utilities
represent an important shift in the new transformer oil market in Australia.
Towards the end of the period the two primary power distribution utilities
serving the highest growth region of Australia consented to the use of Superfine
in new transformer hardware.  It demonstrated the technical credentials of
Superfine for use in new transformer and associated equipment and confirms the
competitiveness of Hydrodec's refining process in the new oil market.

A crucial step in Hydrodec's development is the construction of the Ohio plant.
This, together with the development of the Mississippi plant, shows the serious
intentions Hydrodec have within the US transformer oil market. I hope to be able
to announce further details of the financing arrangements for these two plants

The dynamics of the global transformer oil market continue to move in favour of
Superfine oil. The key advantages of sustainability, a predictable price and the
world-class product that Hydrodec provide remain as compelling as ever in
today's market place. I look forward to announcing further significant corporate
and commercial developments soon.

John Gunn
Non-executive Chairman
7th September 2007


                                                                   Note  (Unaudited)      (Unaudited)
                                                                         6 months ended   6 months ended
                                                                         30 June 2007     30 June 2006

                                                                         £                £

Turnover                                                                 689,666          413,302

Cost of sales                                                            (271,180)        (164,849)

Gross profit                                                             418,486          248,453

Administrative expenses                                                  (1,585,639)      (1,397,910)

Operating loss                                                           (1,167,153)      (1,149,457)

Interest receivable                                                      21,149           53,928

Loss on ordinary activities before and after taxation                    (1,146,004)      (1,095,529)

Loss retained for the period                                             (1,146,004)      (1,095,529)

Loss per share
Basic                                                             4      (0.62)p          (0.61)p

                                                                             (Unaudited)   (Unaudited)
                                                                             6 months      6 months
                                                                             ended         ended
                                                                             30 June 2007  30 June 2006
                                                                             £             £

Loss for the financial period                                                (1,146,004)   (1,095,529)
Currency differences                                                         181,312       (159,611)
Total recognised losses                                                      (964,692)     (1,255,140)

                                                                  Note  (Unaudited)      (Unaudited)
                                                                        As at            As at
                                                                        30 June 2007     30 June 2006
                                                                        £                £
Fixed assets
Intangible                                                       6      6,555,003        7,079,403
Tangible assets                                                         3,843,678        3,450,036
                                                                        10,398,681       10,529,439

Current assets
Debtors                                                                 323,863          375,116
Inventory                                                               189,022          -
Prepayments                                                             68,170           -
Cash at bank and in hand                                                2,284,324        493,257
                                                                        2,865,379        868,373

Creditors: amounts falling due within one year                          (445,070)        (376,054)

Net current assets                                                      2,420,309        492,319

Creditors: amounts falling due after one year                           (427,028)        (141,712)

Total assets less current liabilities                                   12,391,962       10,880,046

Capital and reserves
Called up share capital                                                 969,227          893,227
Share premium account                                                   19,125,567       15,325,306
Share options reserve                                                   2,253,134        1,913,889
Foreign exchange reserve                                                (3,704)          (163,473)
Profit and loss account                                                 (9,952,262)      (7,088,903)

Equity shareholders' funds                                       7      12,391,962       10,880,046


                                                                       Note  (Unaudited)   (Unaudited)
                                                                             6 months      6 months
                                                                              ended         ended
                                                                             30 June 2007  30 June 2006
                                                                             £             £

Net cash (outflow)/inflow from operating activities                          (905,793)     (1,540,082)

Returns on investments and servicing of finance
Interest received                                                            21,149        53,928

Taxation                                                                     -             -

Capital expenditure and financial investment
Payments to acquire tangible fixed assets                                    (134,173)     (1,353,818)

Issue of new shares                                                          2,300,000     72,617
Share issue costs                                                            (92,000)      -
Previous years share issue costs refunded                                    72,261        -

(Decrease)/increase in cash                                            9     1,261,444     (2,767,355)



The interim consolidated financial statements for the six months ended 30 June
2007 have been prepared under applicable International Financial Reporting
Standards adopted by the European Union ('IFRS') which include International
Accounting Standards and interpretations issued by the International Accounting
Standards Board and its committees, which are expected to be endorsed by the
European Union.

This interim financial information has been prepared on the historical cost
basis. The accounting policies applied are consistent with those adopted and
disclosed in the annual financial statements for the period ended 31 December

The financial information included in this document does not comprise statutory
accounts within the meaning of section 240 of the Companies act 1985.  The
comparative figures for the financial period ended 31 December 2006 are
extracted from the statutory financial statements for that period which have
been filed with he Registrar of Companies and on which the auditor gave an
unqualified report, without any statement under section 237 (2) or (3) of the
Companies Act 1985.

The financial information is unaudited and has not been reviewed by the auditor.


The financial information set out in this interim report does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985.


There is no tax charge for the interim period.

                                                                6 months ended      6 months ended
                                                                30 June 2007        30 June 2006
                                                                £                   £

Loss for the financial period                                   (1,146,005)         1,095,529

                                                                Number              Number
                                                                 of shares           of shares

Weighted average number of shares in issue                      185,611,148         178,645,402

For basic earnings per share                                    ( 0.62 )p           (0.61)p


No dividends have been paid or proposed for the period.

At 31 December 2006 and 30 June 2007                                                        7,866,003

At 31 December 2006                                                                         1,048,800
Charge for the period                                                                       262,200
At 30 June 2007                                                                             1,311,000

Net book value
At 30 June 2007                                                                             6,555,003

At 31 December 2006                                                                         6,817,203

The goodwill arises on the acquisition of Hydrodec Development Corporation Pty
Limited and is being amortised over its estimated useful life of 15 years.

                                                                                      As at
                                                                                      30 June 2007
Ordinary shares of  0.5 pence each                                                     800,000,000

Issued and fully paid - ordinary shares of 0.5 pence each
At 31 December 2006                                                                    184,645,400
Issued for cash                                                                          9,200,000
At 30 June 2007                                                                        193,845,400

The company issued the following 0.5 pence ordinary shares during the period:

Date of issue              Number of shares          Issue price            Total consideration
11 June 2007               9,200,000                 25 pence               2,300,000

                                  Share       Share      Foreign    Profit and    Share       Total
                                 capital     premium    exchange   loss account   option
                                                         reserve                 reserve
                                    £           £           £           £           £           £

At 31 December 2006                923,227  16,891,306   (185,016)  (8,806,258)  2,140,052   10,963,311
Recognition of value of options                                                    113,082      113,082
issued to employees
Foreign exchange differences                               181,312                              181,312
Loss for the period                                                 (1,146,004)             (1,146,004)
Issue of shares                     46,000   2,254,000                                        2,300,000
Issue costs                                   (92,000)                                         (92,000)
Refund of VAT on expenses                       72,261                                           72,261
previously written off to Share
                                   969,227  19,125,567     (3,704)  (9,952,262)  2,253,134 12,391,962


                                                                        (Unaudited)      (Unaudited)
                                                                        6 months ended   6 months ended
                                                                         30 June 2007     30 June 2006
                                                                        £                £

Operating loss                                                          (1,167,153)      (1,149,457)
Depreciation                                                            95,899           13,262
Amortisation of goodwill                                                262,200          262,200
Share based payments                                                    113,082          -
(Increase) in debtors                                                   (128,533)        (119,496)
(Increase) in prepayments and other receivables                         (78,888)         -
Decrease in inventories                                                 (113,661)        2,526
(Decrease) in creditors                                                 (25,473)         (422,308)
Increase in employee entitlements                                       1,797            32,802
Finance charges                                                         138,686          -
Movement in Foreign Exchange                                            (3,749)          (159,611)
Net cash (outflow)/inflow from operating activities                     (905,793)        (1,540,082)


                                                                             (Unaudited)   (Unaudited)
                                                                             6 months      6 months
                                                                             ended         ended
                                                                             30 June 2007  30 June 2006
                                                                             £             £

(Decrease)/increase in cash in the period                                    1,261,444     (2,767,355)
Net funds at the beginning of the period                                     891,913       3,260,612
Net funds at the end of the period                                           2,153,357     493,257

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