Information  X 
Enter a valid email address

Virotec Intl. PLC (VTI)

  Print      Mail a friend

Friday 18 April, 2008

Virotec Intl. PLC

Final Results

Virotec International PLC
18 April 2008

                           VIROTEC INTERNATIONAL PLC
                           ('Virotec' or the 'Group')

                        PRELIMINARY RESULTS ANNOUNCEMENT

18 April 2008

                              CHAIRMAN'S STATEMENT

Dear Shareholders

I am pleased to present the Group's financial report for the year ended 31
December 2007.

The Group achieved revenue for the year ended 31 December 2007 of AUD$3.52
million compared with AUD$1.57 million for six months ended 31 December 2006.
The loss for the year was AUD$13.4m, compared to a loss of AUD$7.6m for the six
months ended 31 December 2006. The comparative information provided is only for
the six month period to 31 December 2006 due to the change in the financial
reporting period from the end of June to the end of December as a consequence of
the change of domicile of the Group to the United Kingdom ('UK').

The Group's balance sheet for the year remains strong with net assets of
AUD$17.4m, limited borrowings and significant investments in two listed
companies (Hydrodec Group plc and The Greenhouse Fund Limited). These are
recorded at their book value in the balance sheet of AUD$9.7m whilst their
current market value is in excess of AUD$60m. The cash balance at the year end
was AUD$0.4m. This does not include approximately AUD$2m relating to the sale of
Hydrodec Group plc shares in December 2007, which was accounted for as a
receivable at year end and subsequently received in January 2008.

The Group continued to provide environmental remediation and waste treatment
services through the application of Group patented technologies in the following
areas:

Environmental Remediation

• ViroMineTM Technology - applications developed for the mining industry.
• ViroSoilTM Technology - applications developed for the agricultural,
  fertiliser and aquaculture industries.

Drinking Water, Wastewater and Solid Waste Treatment

• ViroFlowTM Technology - applications developed for the treatment of
  drinking water and wastewater and solid waste from industrial sites.
• ViroSewageTM Technology (referred to as ViroFilterTM Technology in the
  UK) - applications developed for the sewage industry.

The Group's operations are conducted in three geographic areas: Australia and
Asia, Europe and the United States of America ('USA').

Australia and Asia

In Australia and Asia, the Group's environmental remediation operations
continued to grow, with a record year in terms of revenue. The revenue for the
region for the year ended 31 December 2007 year was AUD$2.16m, compared with
AUD$0.89m for six months ended 31 December 2006. The Group has operated for the
longest period in the Australian market which has been the proving ground for
its core technologies. The various environmental remediation and waste treatment
applications have been commercially developed in Australia which has proven the
viability of the aforementioned technologies. The Group now has significant
market presence and forward orders in this region and will continue to increase
both its revenue and profitability in the coming year.

In March 2008, Virotec announced a significant new contract to supply solid
waste treatment services to Nyrstar Hobart Pty Ltd (formerly part of Zinifex
Ltd) using its ViroFlowTM Technology. The contract is to treat mercurous filter
cake and is expected to generate up to AUD$3.5m in revenue in 2008.  Work on the
contract has commenced and is expected to be completed by the end of the third
quarter of 2008.

Europe

In Europe, the primary focus to date has been within the UK. The revenue for the
year ended 31 December 2007 was AUD$0.56m compared to AUD$0.55m in the six
months ended 31 December 2006. Initially, the Group targeted water companies
with its ViroFilterTM Technology for phosphate removal from municipal wastewater.
This technology had been successfully trialled by an independent body, the Water
Research Council, and has now been verified by one of the UK's largest water
companies. Due to customer budgetary cycles, this part of the market has taken
longer than expected to penetrate. During the year, a new general manager for
the UK operations was appointed and the business is now expanding into other
areas of waste treatment, including hazardous solid waste management, that have
been successfully realised in Australia and which are expected to generate more
immediate sales in the UK.

The operations in Italy have been scaled back, with a view of finding a licencee
to look after the sales and marketing effort in the region.  All production
assets from Italy have been transferred to the USA where production for all
geographical regions will be now based.

United States of America

The revenue in the USA for the year ended 31 December 2007 was AUD$0.8m compared
to AUD$0.13m for the six months ended 31 December 2006. The USA is considered to
be our largest target market and three key industries have been identified for
near-term focus by the Group.

1.Drinking Water from Wells - The Group has spent a significant amount of time
  addressing the regulatory issues associated with drinking water, particularly
  where contaminants include radium, uranium, gross alpha and/or arsenic. The
  Group has two ViroFlowTM Technology filter systems installed at the date of 
  this report.

2.Phosphate Removal from Concentrated Animal Feeding Operation (CAFO) Lagoons -
  In June 2007, the Group was contracted to treat 13 lagoons for the largest hog
  farmer in the world. The treatments have been completed and it is expected 
  that further contracts to treat additional lagoons will follow. These results 
  will allow part of our ongoing sales efforts to target other CAFOs.

3.Wastewater Treatment Plants - To date a number of wastewater treatment plants
  have been contracted to use ViroFlowTM Technology to treat their waste lagoons
  for phosphate and odour reduction. These treatments have been successful and 
  the Group now has important reference sites to demonstrate the effectiveness 
  of the technology to other companies in the region.

In 2007 the sales effort in the USA was based in Colorado and also South
Carolina, where the Group operated through its 66% owned joint venture, Virotec
Aquasolve. Due to the disappointing result in 2007 an extensive review of the
operations was conducted by the Group. Following this review the Board dismissed
existing management of Virotec Aquasolve and commenced proceedings against them
to recover assets which they consider to be misapplied.  The majority of fixed
assets have been secured and the remaining assets for which recovery is sought
are not material in the context of the Group as a whole.  Nevertheless, this has
delayed the benefits of our sales efforts by several months.

Following the restructuring, all USA operations are now being managed directly
by CEO, Dr Lee Fergusson on a headcount of five employees, and they  are now
both financially and operationally structured to more closely resemble Virotec's
Australian operations, which are trading profitably.

Investment in Associate

Virotec holds 54,500,000 ordinary shares in Hydrodec Group plc ('Hydrodec')
representing 28.1 per cent. of its issued share capital. In addition, under a
royalty agreement, Virotec is entitled to receive five per cent. of revenues
generated by the Hydrodec technology.

At present, production of Hydrodec's SuperfineTM transformer oil at its
Australian facility is at near full capacity and demand continues to be strong,
driven primarily by an export order from a Turkish distributor which was
announced on 8 November 2007.

On 29 January 2008, Hydrodec announced it had made progress in the USA with the
construction of its first production plant in Ohio. A decision was also made to
accelerate the planning and construction of a second plant in Mississippi, which
is expected to be fully operational by the third quarter of 2009. In a trading
update announced on 28 February 2008, Hydrodec stated that it had reached a
price agreement with, and secured a conditional commitment from a transformer
oil buyer in the US to purchase more than 50 per cent. of the maximum production
capacity of the Ohio plant, plus a firm expression of interest in increasing
purchase quantities upon the commissioning of the Mississippi plant.

On 11 March 2008, Hydrodec announced its preliminary results for the year to 31
December 2007 which showed a pre-tax loss of £2.3m (2006: £2.8m) and a decrease
in net operating cash outflow to £0.6m (2006: £2.1m).

Investment

Virotec holds 30,000,000 ordinary shares in The Greenhouse Fund Limited
('Greenhouse') representing approximately 20 per cent. of its issued share
capital. Greenhouse is a Jersey domiciled, closed-ended investment company
established to invest principally in sustainable environmental technologies to
create a portfolio of investment holdings in the Environmental Sector.

Since inception Greenhouse has invested in the Environmental Sector acquiring
five BauxsolTM Technology sub-licences from Virotec and now owns approximately 
57 per cent. in Molectra Australia Pty Ltd, which is licensed to commercialise 
an advanced technology based on a sustainable process that re-cycles used 
vehicle tyres and recovers materials from them, including crumb rubber, oil and 
carbon.

As a result of a conservative accounting treatment this investment has been
written down to market value at 31 December 2007 resulting in an impairment loss
of AUD$3.5m being recorded in the current year.

Dividend

The Directors do not propose the payment of a dividend as they believe their
resources will provide a greater return by being re-invested in its business
operations.

Bid Approach

As advised to the market on 30 January 2008, Virotec was approached in relation
to proposals that might result in an offer being made for the Company. On 4
April 2008, Virotec  confirmed that discussions were on-going with one party,
and that Hydrodec had informed Virotec that it had purchased 7.75m shares (2.93
per cent. of the issued share capital) and noted its intention to make an offer
at around 12p for the Company and that it had support of shareholders holding
just below 30 per cent. of the issued share capital. Hydrodec announced that it
had increased its holding to just over 3 per cent. and that its all share offer
would be on the basis of 1 Hydrodec share for every 3.75 Virotec shares. Further
it stated that it was seeking the recommendation of the Virotec Board.

Virotec is progressing these discussions at a good pace and the Board of Virotec
hopes to be in a position to enable proposals to be put before shareholders as
soon as due diligence and the legal requirements have been completed.

Yours sincerely


Brian Sheeran
Executive Chairman


VIROTEC INTERNATIONAL PLC

Consolidated Balance Sheet (Unaudited)
As at 31 December 2007
                                        31 December 2007    31 December 2006
                                         AUD$'000            AUD$'000
Assets
Property, plant and equipment             5,366               6,019
Investments in equity accounted           2,916               5,396
investees
Investments                               6,800               9,680
Trade and other receivables                 450                 521
                                         ----------          ----------
Total non-current assets                 15,532              21,616
                                         ----------          ----------
Inventories                               1,031               1,475
Trade and other receivables               3,522               1,955
Cash and cash equivalents                   391               3,283
                                         ----------          ----------
Total current assets                      4,944               6,713
                                         ----------          ----------
Total assets                             20,476              28,329
                                         ----------          ----------
Equity
Share capital                             6,535               5,959
Share premium reserve                     8,140                   -
Other reserves                          101,441             105,944
Deficit                                 (98,732)            (86,890)
                                         ----------          ----------
Total equity                             17,384              25,013
                                         ----------          ----------
Liabilities
Interest-bearing loans and borrowings       290                 551
Provisions                                  731                 690
                                         ----------          ----------
Total non-current liabilities             1,021               1,241
                                         ----------          ----------
Interest-bearing loans and borrowings       392                 139
Trade and other payables                  1,556               1,705
Employee benefits                            98                 206
Provisions                                   25                  25
                                         ----------          ----------
Total current liabilities                 2,071               2,075
                                         ----------          ----------
Total liabilities                         3,092               3,316
                                         ----------          ----------
Total equity and liabilities             20,476              28,329
                                         ----------          ----------



VIROTEC INTERNATIONAL PLC

Consolidated Income Statement (Unaudited)
For the year ended 31 December 2007
                                      
                                         Year ended      Six months ended
                                      31 December 2007   31 December 2006
                                         AUD$'000         AUD$'000

Revenue                                   3,522            1,570
Cost of sales                            (1,924)          (1,053)
                                        -----------       ----------
Gross profit                              1,598              517

Gain on disposal of shares                2,262                -
Other income                                101               33
Impairment loss on investments           (3,543)               -
Sales and marketing expenses             (5,509)          (2,681)
Administrative expenses                  (6,660)          (4,195)
                                         -----------       ----------
Loss from operating activities          (11,751)          (6,326)
                                         -----------       ----------
Financial income                            158              204
Financial expenses                          (77)             (31)
                                         -----------       ----------
Net financing income                         81              173
                                         -----------       ----------
Share of loss of associate               (1,699)          (1,412)
                                         -----------       ----------
Loss before tax                         (13,369)          (7,565)
Taxation                                      -                -
                                         -----------       ----------
Loss after tax                          (13,369)          (7,565)
                                         -----------       ----------
Attributable to:
Equity holders of the parent            (13,369)          (7,565)
Minority                                      -                -
                                         -----------       ----------
Loss for the year                       (13,369)          (7,565)
                                         -----------       ----------
Earnings per ordinary share:
Basic earnings per share (AUD $)         (0.052)          (0.032)
                                         -----------       ----------



VIROTEC INTERNATIONAL PLC

Consolidated Statement of Recognised Income and Expense (Unaudited)
For the year ended 31 December 2007

                                      Year ended         Six months ended
                                    31 December 2007     31 December 2006
                                      AUD$'000             AUD$'000

Foreign currency translation             (2,105)            (420)
differences for foreign operations
Net change in fair value of               1,298            (1,298)
available-for-sale financial assets    ----------         -----------
Income and expense recognised              (807)           (1,718)
directly in equity
Loss for the year                       (13,369)           (7,565)
                                       ----------         -----------
Total recognised income and expense     (14,176)           (9,283)
for the year                           ----------         -----------
Attributable to:
Equity holders of the Company           (14,176)           (9,283)
Minority interest                             -                 -
                                       ----------          -----------
Total recognised income and expense     (14,176)           (9,283)
for the year                           ----------          -----------



VIROTEC INTERNATIONAL PLC
Consolidated Statement of Cash Flows (Unaudited)

For the year ended 31 December 2007

                                               Year ended      Six months ended
                                             31 December 2007  31 December 2006
                                                 AUD$'000        AUD$'000

Cash flows from operating activities
Cash receipts in the course of operations         2,080             1,035
Cash payments in the course of operations        (9,100)           (7,049)
                                                 -----------       ----------
Cash absorbed by operations                      (7,020)           (6,014)
Interest received                                   158               205
Interest paid                                       (77)              (11)
                                                 -----------       ----------
Net cash flows from operating activities         (6,939)           (5,820)
                                                 -----------       ----------
Cash flows from investing activities
Proceeds from sale of property, plant and            21                20
equipment
Acquisition of property, plant and equipment       (557)           (2,395)
                                                 -----------       ----------
Net cash flows from investing activities           (536)           (2,375)
                                                 -----------       ----------
Cash flows from financing activities
Proceeds from the issue of share capital          4,984                 -
Share issue costs                                  (216)                -
Repayment of borrowings                            (185)                -
Increase in borrowings                                -               666
                                                 -----------       ----------
Net cash flows from financing activities          4,583               666
                                                 -----------       ----------
Net decrease in cash and cash equivalents        (2,892)           (7,529)
Cash and cash equivalents at 1 January            3,283            10,812
                                                 -----------       ----------
Cash and cash equivalents at 31 December            391             3,283
                                                 -----------       ----------


VIROTEC INTERNATIONAL PLC
Notes to the Consolidated Financial Statements

1. BASIS OF PREPARATION

The preliminary result statement has been prepared on the basis of the same
accounting policies as those set out in the financial statements for the year
ended 31 December 2006.  These summarised consolidated financial statements have
been prepared in accordance with International Financial Reporting Standards
('IFRS') as adopted by the EU under the historical cost convention.  They are
presented in Australian dollars, which is the functional currency of the group
because the significant events of the current and prior period occurred in
Australian dollars.

The preparation of financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.

2. SEGMENT REPORTING

Business segments

The Group has operated within one business segment in all financial periods
being environmental services - the provision of solutions to industry for the
treatment of contaminated water and soil.

The Group also retains mining tenements, however as they represent less than 10%
of the Group's assets, are not considered significant, and are therefore not
reported separately.

Geographical segments

The environmental services segment is managed on a worldwide basis, and has
operated in three principal geographical areas:
• Australia and Asia;
• Europe; and
• United States of America.

In presenting information on the basis of geographical segments, segment revenue
is based on the geographical location of customers.  Segment assets are based on
the geographical location of the assets.

                       Australia and Asia    USA         Europe     Consolidated
31 December 2007              AUD$'000    AUD$'000     AUD$'000       AUD$'000

Revenue                          2,164         800         558           3,522
                               ---------   ---------   ---------       ---------
Segment assets                   7,324       5,441       7,711          20,476
                               ---------   ---------   ---------       ---------
Capital expenditure                151         411          40             602
                               ---------   ---------   ---------       --------- 

31 December 2006
Revenue                            890         127         553           1,570
                               ---------   ---------   ---------       ---------
Segment assets                  19,913       6,418       1,998          28,329
                               ---------   ---------   ---------       ---------
Capital expenditure                 76       2,283          36           2,395
                               ---------   ---------   ---------       ---------

3. SHARE CAPITAL AND RESERVES

                     Number of   Nominal Value   Share Premium    Merger Reserve
                  Ordinary Shares                Reserve
Issues
                                   AUD$'000       AUD$'000         AUD$'000

Issued on incorporation       2           -              -               -

Shares issued  to   240,162,440       5,959              -          96,417
acquire Virotec
International Ltd     ---------     -------       --------         -------

Balance at 31       240,162,442       5,959              -          96,417
December 2006         ---------     -------       --------         -------

Balance at 1        240,162,442       5,959              -          96,417
January 2007
17,350,000          17,350,000          415          4,569               -
ordinary shares
of 1p issued for cash 
at a price of 12p
per share
6,655,789           6,655,789           161          3,798               -
ordinary shares of 
1p issued under 
executive share plans 
at a price of AUD$0.60 
per share
Capital raising costs      -             -             (227)             -
                    ---------      -------          --------        -------
Balance at 31    264,168,231         6,535            8,140         96,417
December 2007       ---------      -------          --------        -------


Authorised issued and fully paid share capital
                                                       2007            2006
                                                      AUD$'000      AUD$'000
Authorised share capital

900,000,000 ordinary shares of 1p each                 22,332        22,332
                                                      ---------     ----------
Called up, allotted and fully paid 264,168,231          6,535         5,959
ordinary shares of 1p each                            ---------     ----------

As at 31 December 2007 the Company has also granted a total of 10,860,000 
options (2006: 11,310,000 options).


              Share  Share  Merger Trans- Fair  Share  Retained Total Min- Total
            capital premium reservelation value based  earnings     ority Equity          
                    reserve        reserve res. payments            interest
                                                reserve     
                  AUD   AUD    AUD   AUD   AUD    AUD     AUD    AUD  AUD   AUD
                 $'000 $'000  $'000 $'000 $'000  $'000   $'000  $'000$'000 $'000
Effect of           -      -102,376  155      -  9,771 (79,325)32,977  47 33,024
reverse
acquisition
Total               -      -     -  (420)(1,298)    -  (7,565)(9,283)(47)(9,330)
recognised
income and
expense
Equity settled      -      -     -     -      -   1,319       -  1,319  -  1,319
transactions
Share issues      5,959    -(5,959)    -      -       -       -      -  -     -
                 ---------------------------------------------------------------
Balance at 31     5,959    - 96,417 (265)(1,298) 11,090 (86,890) 25,013 - 25,013
December 2006    ---------------------------------------------------------------

Balance at 1      5,959   -  96,417 (265)(1,298) 11,090 (86,890) 25,013 - 25,013
January 2007
Total                 -   -      - (2,105)1,298      - (13,369)(14,176)-(14,176)
recognised
income and
expense
Equity settled        -   -      -      -     -     434   1,357   1,791 -  1,791
transactions
Share issues        576 8,140    -      -     -  (4,130)    170   4,756 -  4,756
                  --------------------------------------------------------------
Balance at 31     6,535 8,140 96,417 (2,370)  -   7,394 (98,732) 17,384 - 17,384
December 2007     --------------------------------------------------------------   


4. EARNINGS PER SHARE

The calculation of the basic loss per share is based on the loss attributable to
ordinary shareholders divided by the weighted average number of shares in issue 
during the year.

                                             Year ended        Six months ended
                                         31 December 2007      31 December 2006
Weighted average number of ordinary
shares used in the calculation             257,983,256             240,162,442
of basic earnings per share              ---------------------------------------

The options outlined in Note 3 are potential ordinary shares which were not 
considered dilutive at 31 December 2007 or 31 December 2006.


5. ANNUAL REPORT

Copies of the annual report and accounts will be sent to shareholders in the 
near future and will be obtainable from the Company's head office and from its 
website at www.virotec.com.


6. STATUS OF THIS REPORT

The preliminary results for the year ended 31 December 2007 are unaudited.  The 
financial information included in this statement does not constitute the Group's
statutory accounts within the meaning of Section 240 of the Companies Act 1985. 
Statutory accounts for the year ended 31 December 2007 will be finalised on the 
basis of the financial information presented by the directors in the preliminary
announcement and will be delivered to the Registrar of Companies in due course.

The information given as the comparative figures for the six months ended 31 
December 2006 do not constitute the Group's statutory accounts for this 
financial period.  Statutory accounts for the six months ended 31 December 2006,
prepared in accordance with International Financial Reporting Standards as 
adopted by the European Union have been reported on the by the Group's auditors.
The report of the auditors was unqualified and did not contain a statement under
Section 237 (2) and (3) of the Companies Act 1985.




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