AMPH.L Regulatory News (AMPH)

Aggregated Micro Power Holdings plc

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

Two further proposed wood fuels acquisitions

and

Final Results for the year ended 31 December 2015

Aggregated Micro Power Holdings plc (AIM: AMPH), which specialises in the sale of wood fuels and the development of distributed energy projects, announces two further proposed wood fuels acquisitions and its Final Results for the year ended 31 December 2015.

Highlights

· AMP Group revenues increased to £1.125m (2014: £0.253m), which includes £0.977m (2014: £0.117m) of development fees from biomass boiler developments

· Loss before tax of £7.201m (2014: £6.039m), which includes £7.071m (2014: £5.951m) of non-recurring losses relating to the exit of the gasification business

· Successful fundraising in March 2016 of £5.79m, comprising a placing of Ordinary Shares raising gross proceeds of £1.72m and issue of £4.07m nominal of Convertible Notes

· Successful completion of the acquisition of Forest Fuels in March 2016 which has demonstrated 20% growth in year-on-year turnover (a)

· Proposed acquisition of Midlands Wood Fuel, a profitable wood fuel supplier (b)

· Proposed acquisition of Mi-Generation customer base (c)

· Proposed issue of 5 year, 8% Convertible Notes of up to £5.0m nominal, including a minimum subscription for £1.155m of Convertible Notes by the sellers of Midlands Wood Fuel (b)

Richard Burrell, Chief Executive of Aggregated Micro Power Holdings plc, said:

"We have transformed and de-risked AMP over the last 18 months. We have completed the acquisition of Forest Fuels which has demonstrated 20% year-on-year growth in sales. We intend to add to this with the acquisitions of Midlands Wood Fuel and the Mi-Generation customer base which will increase our market share towards becoming the UK's leading supplier of biomass wood fuels. We have grown our project development business in biomass boilers and we are expanding into the development of grid balancing projects where we are in exclusivity on a number of projects. We are intending to issue further Convertible Notes in order to finance the proposed acquisitions and together with the strength of our project development pipeline, we look forward to the future with confidence."

(a) Forest Fuels Holdings Limited ("Forest Fuels") is a leading and profitable premium grade wood fuel supplier. In its draft statutory unaudited consolidated accounts for the year ended 31 March 2016, Forest Fuels delivered a 20% increase in turnover of £8.774m (2015: £7.307m) and profit before interest and tax of £0.328m (2015: £0.247m). The consideration for the acquisition of Forest Fuels was £2.815m in cash plus up to 2,500,000 Ordinary Shares in the AMP Group in performance-related deferred consideration.

(b) Midlands Wood Fuel Limited ("Midlands Wood Fuel") is a profitable premium grade wood fuel supplier. In its draft statutory unaudited consolidated accounts for the year ended 31 March 2016, Midlands Wood Fuel delivered turnover of £3.220m and profit before interest and tax of £0.173m. The consideration for the proposed acquisition is £1.4m plus repayment of debt of £0.91m, comprising up to 50% in cash, to be funded by a proposed issue of new Convertible Notes in the AMP Group to investors, with the balance to be subscribed by the sellers in new Convertible Notes in the AMP Group. For a period of 12 months from completion of the acquisition, the sellers of Midlands Wood Fuel have agreed not to transfer £1.155m nominal of Convertible Notes (save in limited circumstances). The share purchase agreement includes a locked box mechanism running from 31 March 2016 and warranties and a tax indemnity from the sellers in favour of AMP which are subject to customary limitations on liability.

(c) The Mi-Generation Limited ("Mi-Generation") customer base delivered turnover in the year ended 31 March 2016 of £1.886m and profit before interest and tax of £0.294m based on an estimated margin of 15.5%. The consideration for the proposed acquisition is up to £0.75m in cash, subject to novation of an agreed list of contracts as well as future customer volumes.

Impact of Brexit

Forest Fuels and Midlands Wood Fuel purchase round wood timber and wood chip from UK based suppliers whether they be forestry companies, sawmills or large estates. Forest Fuels has historically purchased a small quantity of imported wood pellets from Europe but this is entirely dependent upon prevailing prices and the euro exchange rate compared with the prices offered by domestic producers of wood pellet. Currently all of Forest Fuels import supply contracts for this year are in sterling. AMP Group, including Forest Fuels, is an entirely UK business and has no exports. 

AMP's projects business is partially dependent upon government subsidies and we do not foresee any significant changes to the status quo this year as Government renewable targets are enshrined in UK law under the Climate Change Act 2008. 

Change of accounting reference date

The Board of Directors has taken the decision to change the Group's accounting reference date from 31 December to 31 March.

The Board believe that this accounting period change enables the market and investors to gain greater clarity and understanding of the enlarged business model and trading following the acquisition of Forest Fuels and the proposed acquisitions of Midlands Wood Fuel and the Mi-Generation customer base.

In addition, the change of accounting reference date offers a number of additional advantages to the Group, including:

· providing existing and potential investors with 'clean' operational trading results for the enlarged business with effect from 1 April 2016; and

· aligning the Group's financial year with its seasonal sales calendar in the wood fuels market; and

As a result of this change, the Group's reporting calendar will be as follows:

· audited results for the three month period ending 31 March 2016 will be announced by 30 September 2016;

· unaudited interim results for the six month period ended 30 September 2016 will be announced by 31 December 2016; and

· audited results for the 12 month period ending 31 March 2017 will be announced by 30 September 2017.

Thereafter, financial statements will be published for the 6 and 12 month financial periods (September and March respectively), in accordance with the AIM Rules for Companies. This change will take effect immediately and all relevant authorities will be informed as required by Companies Act 2006, section 392.

Contacts

About Aggregated Micro Power Holdings plc

The AMP Group was established to develop, own and operate renewable energy generating facilities. It specialises in the sale of Wood Fuels and in the installation of distributed energy projects. AMP's wholly owned subsidiary Forest Fuels sells high quality wood chip and wood pellet to end customers throughout the UK, while its projects division installs biomass boiler and biomass CHP systems for a wide range of applications and customers. AMP is also active in developing projects for stand-by power generation facilities which aim to balance the transmission grid at times of peak demand.

http://www.ampplc.co.uk

Executive Chairman's Statement

The core strategy of AMP is to participate in the emerging small scale, distributed heat and power market. With each passing month, this market seems to evolve rapidly. Early stage technologies that pre-dated AMP were wind and solar, starting small and scaling-up to the extent that they now represent over 11% of the UK power generation infrastructure. In recent years, we have seen a focus on the renewable heat market involving predominantly biomass boilers, biomass CHP and anaerobic digestion. Once again, there is the similar pattern of starting small with generous subsidies and gradually scaling-up in size as subsidies are cut and Government targets are met.

The current installed renewable heat capacity in the UK market is 3% with a Government target of 12% by 2020. In the November 2015 Autumn Statement, the Government reaffirmed its commitment to the Renewable Heat Incentive and we are now seeing an encouraging outlook for biomass boiler developments through to 2020. As this market will grow in size and maturity each year, we expect our future focus will be on installing and providing fuel for larger scale biomass systems as well as district heating systems.

The next phase of the market development is power storage. This is already developing at pace and we are active in this market. It currently takes place as standby generation capacity, balancing the grid when the renewable mix (i.e. non base load) is not running at capacity. This will, over time, be supplied by batteries. We would observe that the biggest wealth creation event in the 2nd half of the 20th Century was the breaking of the mainframe and the emergence of distributed computing. We would contend that a similar event will occur in the power market, resulting in a dramatic reduction in dependence on the transmission grid and a seismic shift towards distributed power generation.

2015 has been a year of two very distinct halves for AMP. On the one hand we experienced a very uncertain regulatory environment surrounding renewable energy policy in the run up to and immediately following the General Election and at the same time we encountered further commissioning issues at our gasification plant in Cumbria which resulted in its decommissioning and consequential impairment. On the other hand, we made excellent progress with the development and financing of our biomass boiler Energy Service Company ("ESCO") business and following the year end we were able to raise the necessary finance to acquire Forest Fuels which provides us with a strong national footprint to grow a significant wood fuels business.

On 25 November 2015, AMPIL1 tapped its existing issue raising an additional £5.7m taking its total size to over £12m. AMP's biomass boiler business is running ahead of management and IPO expectations and provided we continue to execute on our pipeline of biomass boiler installations, combined with us assisting AMPIL to raise additional loan notes, we will be able to earn a steady stream of development fees for AMP both in terms of the upfront fee of 10% of capital expenditure and, in time, from the deferred development fees which will be due to AMP from AMPIL.

The acquisition of Forest Fuels after the year end marks a significant development for AMP and for our strategic ambitions. The Acquisition will accelerate AMP's growth by providing a market leading distribution capability in wood fuels operating from 20 regional depots and providing us with a platform for further roll-up opportunities. Forest Fuels has a growing customer base and currently serves over 1,000 customers nationwide. By combining the business development activities and offering both long term financing for biomass boilers and CHP systems together with long term wood fuels contracts to end customers, there will be significant opportunities to increase our development fee revenues and generate income from associated wood fuel contracts.

The outlook for AMP with its revised strategy of focusing on biomass ESCOs and being a market leader and consolidator in the provision of wood fuels (wood pellet and wood chip) provides us with an exciting opportunity to maximise potential from a segment of the energy market that has been recently underpinned by renewed government support through to 2020.

Finally, in order to align our future financial reporting with the seasonality of biomass fuel sales and operations, AMP will, following the signing of these financial statements, change its reporting year from a calendar year end to a 31 March year end. In order to facilitate this change and to avoid reporting a 15 month first period (1 January 2016 - 31 March 2017), AMP will publish audited financial results for a short 3 month period (1 January 2016 - 31 March 2016) during September 2016 and in accordance with the change in year end, Interim Results for the 6 month period to 30 September 2016 will be published in December.

Neil Eckert, Executive Chairman

29 June 2016

Strategic Report

This report presents our Report and Accounts for the twelve months ending 31 December 2015.

Results

Group revenues increased to £1.125m (2014: £0.253m). This increase is due primarily to boiler project sales and development fees of £0.977m (2014: £0.117m).

The loss before tax increased to £7.201m (2014: £6.039m). The loss before tax includes the full impairment charge at Low Plains which amounts to £5.355m (2014: £2.225m), the write down of Work In Progress costs of £0.390m in respect to the development of the gasification projects in Devon and Kent, and the recognition of an additional expense of £0.182m for further committed spend on the gasification assets which have been incurred post year end. The 1MW gasification plant and gasification development costs have now been written down to zero.

Administrative expenses from continuing operations increased to £2.234m (2014: £2.162m).

Net assets decreased to £0.685m (2014: £7.887m). The balance sheet does not include any recognition for future deferred development fees that may be due from AMPIL.

Cash and cash equivalents decreased to £0.676m (2014: £4.727m).

On 9 March 2016, the company announced a fundraising of £5.79m comprising a placing of Ordinary Shares to raise gross proceeds of £1.72m and Convertible Notes raising £4.07m. Proceeds from the fund raise were used to finance the cash portion of the acquisition of Forest Fuels and to increase the company's working capital. As at 30 June 2016, cash and cash equivalents were £1.32m.

Our decision to decommission our 1MW gasification plant at Low Plains in Cumbria was driven by the lack of reliability and performance which resulted in reduced output and profitability. The resultant impairment of the asset is a disappointing outcome but the Directors believe that this is in the best long term interests of shareholders. During the latter half of the year, we did examine the feasibility of installing multiple, small-scale gasification CHP units but with the apparent lack of support for gasification in the government's recently published consultation on the future of the Renewable Heat Incentive ("RHI") and the ending of the support for small-scale electricity generation provided by Renewable Obligation Certificates (ROCs) in March 2017, following the year end the Directors have concluded that investing further sums into gasification projects can no longer be economically justified. The Group will also no longer develop CHP gasification developments at its proposed sites in Devon and Kent.

AMP Group strategy

The AMP Group's strategy is to develop and operate projects using small-scale technologies for converting biomass to energy and to sell the energy produced in the form of electricity, heat and wood fuel.

Following the post period-end acquisition of Forest Fuels, AMP's strategy is to focus on selling wood chip and wood pellet to end customers throughout the UK and to create a market leading business in the sale of renewable heat and fuel. The Directors believe that the Combined Group's wood fuels customer base can be grown by a combination of organic growth and in-fill acquisitions in strategic locations.

The acquisition of Forest Fuels will accelerate AMP's growth by providing a market leading distribution capability in wood fuels. Forest Fuels also provides AMP with a platform of 20 regional depots on which to seek installations of new biomass boilers in customer locations around its depot sites as well as a number of potential wood chip drying facilities to enable the sale of forced dried wood chip.

AMP continues to develop its small-scale biomass boiler projects which it has been successful in selling to AMP Infrastructure Limited ("AMPIL"). Under the terms of its contract with AMPIL, AMP receives an upfront 10% development fee on each project and when AMPIL Loan Notes are repaid, AMP is entitled to receive 100% of the excess returns in the form of deferred development fees.

AMP also has a significant development interest in two large scale biomass CHP developments in Immingham and Hull on two port-side locations that will be leased from Associated British Ports. Both these schemes have secured planning permission and grid connection offers for 49.0MW and 49.9MW respectively. Over the next twelve months, AMP and its development partners intend to secure external, off-balance sheet construction finance for these projects which is contingent on both schemes achieving Government incentives in the form of Contracts for Difference. The next auction for Contracts for Difference is expected to be concluded in the next 9-12 months, we have included further details surrounding the project in note 2(d).

The next phase of the market development is power storage. This is already developing apace and we are active in this market. It currently takes place as standby generation capacity, balancing the grid when the renewable electricity generation is not running in line with demand.

The Directors believe that the Combined Group's strengths in procurement, distribution, logistics, project development, funding and operations will broaden the Group's market and geographical presence across the biomass value chain, the power storage and stand by generation markets, enhancing margins and increasing development opportunities.

AMP is not a technology company, but a project developer. We are agnostic to technology, but have strong conviction in pursuing the strategy of aggregating micro power.

Industry and policy background

The UK heating market for wood chip and wood pellet is estimated by the company to amount to 450,000 tonnes per annum for wood pellet and 700,000 tonnes per year for wood chip based on Renewable Heat Incentive accredited installations. This market has grown more than fourfold in the last two years and is expected to continue to grow driven by the installation of larger biomass plant from the continuation of the Renewable Heat Incentive through to 2020 as confirmed by the Autumn Statement in November 2015.

The Renewable Heat Incentive for accredited installations is for a twenty year duration and the Directors expect good prospects for growth and stability in the market for wood fuels over the coming years.

The UK's drive to decarbonise (the Government has a legally binding target of reducing the UK's greenhouse gas emissions by 80% by 2050 against 1990 levels), is expected to require significant structural changes to the power market, with 8 GW of coal fired generating capacity already decommissioned since 2012 due to the Large Combustion Plant Directive and a further 8 GW to be decommissioned in the next 12 months. This represents 18.8% of current power generation; a reduction in supply, which in the Directors' opinion will help support the wholesale price of electricity in the near term.

We believe that there are a number of features of the renewable energy market which are highly beneficial for the AMP Group:

• The UK's lack of energy security means that domestic energy production, especially renewable energy production, has a high value even in the absence of environmental factors and falling oil prices;

• In light of the gap between the UK's current and proposed energy supply mix, public policy support measures, including incentives, are generally expected to endure as has been evidenced by the announcement at the Autumn Spending Review in November 2015 that the Renewable Heat Incentive will be maintained through to 2020;

• The current installed renewable heat capacity in the UK market is 3% with a Government target of 12% by 2020;

• Current and proposed support measures specifically favour the smaller scale, de-centralised generation including district heating mains and industrial heat users which the AMP Group is targeting;

• By operating smaller scale facilities in close proximity to customers, the AMP Group is able to reduce energy

• delivery costs and exploit the price premium between retail and wholesale energy pricing; and

• The market for wood pellet and forced dried wood chip is growing rapidly and is strongly supported by RHI Regulations. From January 2013 to January 2016 the installed capacity of RHI accredited biomass boilers grew from 175 MW to 2,270 MW.

• The structure of the energy markets, in the UK and elsewhere, provide a commercial opportunity for the small scale energy facilities that comprise the AMP Group's primary areas of focus, making use of local energy sources to generate and supply energy close to the point of demand, so capturing higher retail prices for the energy produced and reducing the costs arising from energy delivery losses.

AMP Group objectives and KPIs for 2016 are as follows:

• Aim to be the market leader in wood fuels retailing (wood pellet and wood chip) via a combination of organic growth and targeted acquisitions;

• Grow pipeline of biomass boiler developments and existing boiler acquisitions generating development fees and future carried interest from AMPIL Loan Note issuance;

• Generate development fees and future carried interest from larger scale development projects, energy storage and from the capacity market where it makes commercial sense to do so;

• Supplement AMP's cash resources with additional new funding from one or a combination of: the issue of new Ordinary Shares for cash; the issue of new Convertible Notes; the refinancing of existing assets; raising project finance from third party providers; asset financing of core items of equipment; or any other compelling financing mechanism where the Directors consider doing so to be in the best interests of the company and its Shareholders.

Risk factors

The principal risks of the business are documented below:

Richard Burrell, Chief Executive Officer

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2015

Consolidated Statement of Financial Position

As at 31 December 2015

Consolidated Statement of Changes in Equity

For year ended 31 December 2015

Share capital: Nominal value of shares issued.

Share premium: Amount subscribed for share capital in excess of the nominal value.

Capital contribution: Relates to funding from the shareholders for which no share capital was issued and that funding meets the definition of an equity instrument.

Retained deficit: All other net losses and transactions with owners (e.g. dividends) not recognised elsewhere.

Merger reserve: Created on the issue of shares on acquisition of its subsidiary accounted for in line with the Company's Act 2006 provisions.

Other reserve: Amount raised through the use of a cashbox structure.

Consolidated Statement of Cash Flows

For year ended 31 December 2015

Notes to the financial statements

For the year ended 31 December 2015

1 Accounting policies

Basis of preparation

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

These financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRSs").

The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in Note 2. The financial statements are drawn up in Pound Sterling, the presentational currency of the Group.

Basis of consolidation

Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including:

· The size of the company's voting rights relative to both the size and dispersion of other parties who hold voting rights

· Substantive potential voting rights held by the company and by other parties

· Other contractual arrangements

· Historic patterns in voting attendance

The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

Going concern

After reviewing the  Group's  operations,  financial position  and  short  and  long  term cash  flow forecasts, the Directors  believe that  the Group has  adequate resources to continue operating and meet its financial obligations.

Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the company

New interpretations and a number of amendments are effective for the first time for periods beginning on (or after) 1 January 2015, and have been adopted in these financial statements. None of the amendments resulted in effect on the group's consolidated financial statements.

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group.

Management anticipates that all of the pronouncements will be adopted in the Group's accounting policy for the first period beginning after the effective date of the pronouncement. The new standards and interpretations are not expected to have a material impact on the Group's financial statements.

· IFRS 9 Financial Instruments (effective 1 January 2018)

· Annual Improvements to IFRS 2012-2014 Cycle(effective 1 February 2016)

· Defined Benefit plans IAS 19: Employee Contributions: Amendments to IAS 19 (effective 1 February 2015)

· Accounting for Acquisitions of Interests in Joint Operations: Amendments to IFRS 11(effective 1 January 2016)

· Clarification of Acceptable Methods of Depreciation and Amortisation: Amendments to IAS 16 and IAS 38 (effective 1 January 2016)

· Equity Method in Separate Financial Statements (Amendments to IAS 27) (effective 1 January 2016)

· IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018)

· Annual Improvements to IFRSs (2012-2014 Cycle) (effective 1 January 2016)

· IFRS 16 Leases (effective 1 January 2016)

· Amendments to IAS 12 : Recognition of Deferred Tax Assets for unrealised losses (effective 1 January 2017)

· Amendments to IAS 7: Disclosure initiative (effective 1 January 2017).

Revenue recognition

Revenue for the Group is measured at the fair value of the consideration received or receivable. The Group recognises revenue for services provided it is probable that future economic benefits will flow to the entity.

Development, management and consultancy fees are recognised in the period that the service is rendered.

In circumstances where biomass boiler projects are constructed and commissioned before being sold by the Group, revenues and the costs of sales are recognised gross under IAS 18 when the risks and rewards of ownership transfer. Commissioning is typically defined as the point at which the boiler is run consistently at its generating capacity and or at the point of RHI accreditation.

In circumstances where biomass boiler projects are sold at financial close (development stage) and where the majority of installation costs are funded by the buyer, revenues from the sale of a project are recognised as development fees and development costs which are directly attributable to the development of biomass boiler projects and any costs which are recharged at cost are recorded in work in progress and subsequently transferred to cost of sales at financial close. Financial close is typically defined as the point at which projects have a full suite of documentation (which may include a license to occupy, lease, heat off take agreement) acceptable to the buyer.

AMP has also acted as agent for other developers introducing projects to AMPIL. In such circumstances development fees have been shared and the fees have been recognised net of any commissions payable to third parties.

Revenues from electricity, ROCs and RHI are recognised at the point of generation and are based on the combination of sales prices achieved, the average market prices observed for ROC sales, published tariff levels and metered generation.

Retirement Benefits: Defined contribution schemes

Contributions to defined contribution schemes are charged to the profit and loss in the year to which they relate.

Property, plant and equipment

All property, plant and equipment are stated at cost less depreciation. Such costs include costs directly attributable to making the asset capable of operating as intended. Costs attributable to assets under construction are included within the capitalised costs of those assets and include refurbishment and commissioning costs. In particular, any interest on loans relating directly to the construction of the biomass gasification power station are capitalised until it is ready for commercial production.

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs.

Depreciation on assets under construction does not commence until they are complete and available for use.

Depreciation is provided on all items of property, plant and equipment so as to write off their carrying value over the expected useful economic lives. It is provided at the following rates:

Plant and machinery - 3-20 years straight line

Fixtures and fittings - 3-5 years straight line

Office equipment - 3-5 years straight line

Computer equipment - 3-5 years straight line

Motor vehicle - 3-5 years straight line

Impairment

Impairment tests on other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss recognised for goodwill is not reversed.

Financial instruments

The Group classifies its financial assets and liabilities as receivables and loans, discussed below, due to the purpose for which the asset or liability was acquired.

Financial assets

The Group's financial assets mainly comprise of cash, trade and other receivables. Cash comprises cash in hand and deposits held at call with banks.

Trade and other receivables are not interest bearing and are stated at their nominal value as reduced by appropriate impairments for irrecoverable amounts or additional costs required to effect recovery.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable.

Financial liabilities

The Group's financial liabilities mainly comprise of a shareholder loan, a finance lease, trade and other payables and a provision for deferred consideration. More information is provided in notes 15 and 16.

The Group classifies its financial liabilities as other financial liabilities and at fair value through profit and loss.

Loans are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost ensuring the interest

element of the borrowing is expensed over the repayment period at a constant rate.

Deferred consideration relating to the acquisition of subsidiary companies is accounted for under IFRS 3 and valued at fair value at the end of each reporting date. It is adjusted against goodwill within 12 months following the acquisition and through the income statement thereafter.

Trade and other payables are not interest bearing and are stated at their nominal amount.

Share Capital

Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability. The Group's Ordinary Shares are classified as equity instruments.

Leased Assets

Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a "finance lease"), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the consolidated statement of comprehensive income over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor.

Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an 'operating lease'), the total rentals payable under the lease are charged to the consolidated statement of comprehensive income on a straight line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight line basis.

Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:

- the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

- investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantially enacted by the consolidated statement of financial position date and are expected to apply when the deferred tax liabilities or assets are settled or recovered. Deferred tax balances are not discounted.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either: the same taxable Group company; or different company entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets and liabilities are expected to be settled or recovered.

Operating Segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the management team including the Chairman, Chief Executive Officer, and Chief Financial Officer.

Management monitors the operating results of business segments separately for the purpose of making decisions about resources to be allocated and of assessing performance. Segment performance is evaluated based on operating profit or loss. Finance costs, finance income and income taxes are managed on a group basis (note 3).

Foreign currency

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.

Share-based payments

Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period.

Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the profit and loss over the remaining vesting period.

Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged with the fair value of goods and services received.

Inventories

Raw materials and consumables are initially recognised at cost, and subsequently at the lower of the cost and net realisable value. Cost comprises all costs incurred in bringing the inventories to their present location and condition. Raw materials and consumables are used on a first in, first out basis. Work In Progress relates to expenditure on biomass boiler and CHP projects, which are recognised at cost until they are sold.

Costs which are directly attributable to the development of biomass boiler and CHP projects, and which have a reasonable expectation of obtaining the consents required for further development, and to the extent that those costs do not exceed expected recoverable amounts, are treated as Work In Progress and not expensed.

2 Critical accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including the expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Judgements and accounting estimates and assumptions

(a) Property, plant and equipment

Property, plant and equipment is depreciated over the useful lives of the assets. Useful lives are based on management's estimates of the period that the assets will generate revenue, which are reviewed annually for continued appropriateness. The carrying values are tested for impairment when there is an indication that the value of the assets might be impaired. Impairment tests are based upon future cash flow forecasts and these forecasts are based upon management judgement. Future events could cause the assumptions to change, therefore this could have an adverse effect on the future results of the Group.

(b) Fair value of deferred consideration

The fair value of Neil Eckert's and Richard Burrell's deferred contingent consideration relating to the Group's merger and acquisition of AMP Energy Services Limited (formerly Environova Consulting Limited) and Mathieson Biomass Limited respectively has been valued to market and recognised in the statements of comprehensive income and financial position. For details of the estimates and judgements see note 23.

(c) Impairment of fixed assets and development costs

All assets are reviewed for indicators of impairment. Impairment tests are carried out when there is a trigger event. The recoverable amount of the fixed assets is calculated using a discounted cash flow ('DCF') model where an appropriate, or market based, discount rate is applied to future cash flows expected to be generated by the assets. Under IAS 36 an asset is impaired if its carrying value is greater than its recoverable amount or fair value.  For details of the estimates and judgements see note 11.

(d) Loan receivables

The Real Ventures loan receivables are currently being held at cost ahead of the government's auction for Contracts for Difference which is scheduled for later in the year. Management remain confident that the loans will be repaid if the projects are successful in the auction.

A deferred tax asset on carried forward loss has not been recognised on the basis that there is no certainty over the profits for the twelve-month period following the year end losses carried forward to be utilised against future profits of £11,719,711 (2014: £9,753,103). Deferred tax unrecognised at the end of the year amounts to £2,109,548 (2014: £1,755,559). The deferred tax rate for 31 December 2015 is 18% being the substantively enacted rate at the end of the year. 

The main rate of UK corporation tax has decreased from 21% to 20% from 1 April 2015, resulting in an effective corporation tax rate of 20.25% for this accounting period. This will further reduce to 19% from 1 April 2017 and 18% from 1 April 2020. This change has been substantively enacted before the reporting date.

*Reclassification relates to Gasification assets which are now included in work in progress at year end, following Management's decision to become a developer.

Impairment of Low Plains

Following the decision to close the 1MW gasification plant at Low Plains which occurred in the Autumn of 2015 and the subsequent decision after year end to cease operations at Low Plains and transfer the remaining assets to the Landlord in exchange for the termination of the lease for no cost, the Directors have decided to write off all the assets at Low Plains. This has resulted in an impairment of £5,354,918 and a further expense of £50,922 has been recognised for committed development costs incurred at Low Plains post year end.

The basic and diluted earnings per share have been calculated using the loss attributable to shareholders of the parent company, Aggregated Micro Power Holdings plc. The basic and dilutive loss per share are the same as the Group made a loss in the year. 

7 Events after the reporting period

The Group has earned development fees of £148,904 in 2016 from the sale of seven biomass boiler projects to Aggregated Micro Power Infrastructure Limited. It has collected £609,960 owed to it from a former employee and has received a tax credit of £169,680 in connection with R&D activities carried out at Low Plains.

On 30 March 2016, the Group also completed on the acquisition of Forest Fuels Holdings Limited for an initial consideration of £2,815,000 plus up to 2,500,000 Ordinary Shares in performance-related deferred consideration, of which 1,000,000 Ordinary Shares are linked to the same TSR conditions set out above in note 23 and 1,500,000 Ordinary Shares are linked to the average EBITDA of Forest Fuels in the two financial periods ending (i) 31 December 2016 and 31 December 2017; and, (ii) 31 December 2017 and 31 December 2018. Given the latest valuation outcome of Neil Eckert's and Richard Burrell's deferred consideration the Directors believe that the value of the TSR element of Forest Fuels' deferred consideration is immaterial at this stage and that a formal valuation at this time is unnecessary.

The acquisition was funded from the issue of £4.07m Convertible Loan Notes (which included the effective conversion of a £740,231 existing director loan into Convertible Notes and subscriptions for Convertible Notes by two of the Sellers of Forest Fuels for an aggregate nominal amount of £500,000) and the placing of 3,190,000 Ordinary Shares at 54 pence per Ordinary Share. The balance of proceeds will be used for growth working capital.

In their filed statutory unaudited consolidated accounts for the year to 31 March 2015, Forest Fuels delivered turnover of £7.3 million and profit before tax of £160,558, and as at 31 March 2015, Forest Fuels had a net asset value of £458,537.

The unaudited provisional balance sheet for Forest Fuels as at 31 March 2016 (i.e. the day immediately following the acquisition) showed a Net Asset value of £1,073,956 resulting in a goodwill asset for the Group of £1,741,044. Given the short amount of time since the acquisition, the Directors have not yet completed their assessment of the fair values of the assets acquired. The provisional balance sheet for Forest Fuels is as follows:

Finally an additional 200,000 EMI options were awarded to AMP staff.

8 Annual Report and Notice of AGM

The Company's Report and Accounts for the year ended 31 December 2015 together with the Notice of Annual General Meeting are available to view on the Company's website: www.ampplc.co.uk and are being sent to shareholders today. The Annual General Meeting will be held at 10.00 am on 26 July 2016 at the Company's Registered office: 5 Clifford Street, London W1S 2LG.