HYR.L Regulatory News (HYR)

7 Sep 2007 07:01

HydroDec Group plc07 September 2007 7th September 2007 Hydrodec Group plc Interim Results Hydrodec Group plc (AIM:HYR) today announces unaudited Interim Results for thesix months ended 30 June 2007. Operational: • 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 Financial: • 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 surpassing50% of Young's production capacity, and current trends indicate sold capacityexceeding 75% in the near future, which is a tremendous achievement so soon intoHydrodec's development. Commercial developments within the key US marketcontinue apace as negotiations on the US funding package are progressed inparallel. The dynamics of the global transformer oil market continue to move in favour ofSuperfine oil. The sustainable, controllable nature of Superfine is ever morerelevant in today's unpredictable world and I hope to report significant furtherprogress soon." For further information please contact:- John Gunn, Chairman, Hydrodec Group plc Tel: 020 7236 6236 Emma Davis, Curve PR Tel: 07764 197 003 CHAIRMANS STATEMENT I am pleased to present Hydrodec's unaudited interim accounts for the six monthsended 30th June 2007. Hydrodec's technology is an oil refining process,producing new speciality oils, using spent oil as the primary feedstock. Theprocess also removes dangerous contaminants such as PCB's from oil and similarfluids. The technology can be applied to many speciality oils, but initially theCompany is concentrating on the transformer oil industry. Old transformer oilthat 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 anoverall operating loss of £1,167,153 (2006: £1,149,457). The operating lossincludes £358,099 of depreciation and the amortisation. Net assets increased by14% 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 significantpotential value. In February, it was announced Schneider Australia has agreed inprinciple to allocate up to 75% of its annual new transformer oil purchase inAustralia, to Superfine. This represents an expected uptake of 3,000 litres ofSuperfine per day, representing up to 15% of Hydrodec's production capacity inAustralia. Schneider Electric is a key manufacturer of distribution transformersin Australia, supplying to major power utilities across the country and is oneof Australia's larger transformer oil purchasers. In April, it was announced that two Australian power utilities, the two largestelectricity distribution companies in Victoria, have approved Superfine for usein their new transformers. This, together with the previously announced approvalfrom a major South Australian distribution utility, means use of Superfine hasbeen approved by three companies that operate a large proportion of theelectricity distribution system across Southern Australia. The Company was also recently awarded its first significant high-level PCBcontaminated equipment treatment project. The AU$250,000 contract involves thetreatment of 610 concentrated PCB filled capacitors and augments the previouslyannounced 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 tocommence construction of Hydrodec's first US plant in Canton, Ohio. Canton waschosen 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 transformeroil customers. As previously announced, the State of Ohio and the City ofCanton have also provided a package of incentives to Hydrodec. The Company hasreceived the majority of the necessary development and construction approvalsfor the site. Construction of the plant, commencing with site earthworks andmajor critical path items such as the tank farm, has now commenced. Orders arebeing placed for equipment that has a long lead-time for delivery. All majorcivil construction and building contracts will be put out to tender and areexpected to be awarded shortly thereafter. Commencement of construction should enable major weather dependent works to becompleted prior to the onset of Ohio's harsh winter. Completion of these worksenables key process plant assembly activities to progress on schedule undercover during the winter months, thus avoiding several months of delays to theconstruction programme. The Placing will also facilitate the creation of a formal US infrastructure forHydrodec, starting with the recruitment of Ohio staff, much of the cost of whichhas been subsidised by the State. Hydrodec will be able to commence the nextstage of marketing and business development within the transformer oil industryand further develop relations with existing operators. This will allow theCompany to seek expressions of interest and to negotiate possible take offagreements, both supply-side for used feedstock oil and demand-side forSuperfine. Hydrodec continues to finalise plans for the location and structure of a secondUS plant to be located in Mississippi. A short-list of potential sites has beenidentified, but there are a number of logistical and grant issues to beconfirmed with the State of Mississippi. Significant legal, logistical,development work and lobbying has already taken place, and an announcement on alocation for the plant will be made as soon as this is finally determined. EGM An EGM to grant the directors authority to enable the Company to issue 10% ofthe enlarged issued share capital of the Company for cash on a non-pre-emptivebasis 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 priceincreases were announced by producers in the USA and escalating crude oil priceshave started to feed through to the market place. Power industry infrastructurereplacement programs and upgrades are also gathering momentum in the USA andAustralia, increasing short and medium term demand for transformer oils. Theongoing tight supply situation combined with increasing price and demand isproviding progressive improvement in Hydrodec's competitive position in its twocurrent key markets Australia and the USA. In Japan, a review of regulations pertaining to PCB contaminated transformeroils is indicating a substantial program of oil treatment over the coming tenyears creating a substantial opportunity for Hydrodec to accelerate developmentof a position in the Japanese market. Current trading Superfine sales volumes have increased throughout the period and this trend hascontinued post period end. Sales are now surpassing 50% of Young's productioncapacity and the current trend indicates sold capacity exceeding 75% in the nearfuture. The future Sales progress in Australia in the period was most encouraging. The switch bySchneider Electric to Superfine and approvals from Hong Kong owned utilitiesrepresent an important shift in the new transformer oil market in Australia.Towards the end of the period the two primary power distribution utilitiesserving the highest growth region of Australia consented to the use of Superfinein new transformer hardware. It demonstrated the technical credentials ofSuperfine for use in new transformer and associated equipment and confirms thecompetitiveness 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 seriousintentions Hydrodec have within the US transformer oil market. I hope to be ableto announce further details of the financing arrangements for these two plantssoon. The dynamics of the global transformer oil market continue to move in favour ofSuperfine oil. The key advantages of sustainability, a predictable price and theworld-class product that Hydrodec provide remain as compelling as ever intoday's market place. I look forward to announcing further significant corporateand commercial developments soon. John GunnNon-executive Chairman7th September 2007 CONSOLIDATED PROFIT AND LOSS 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 shareBasic 4 (0.62)p (0.61)p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (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) CONSOLIDATED BALANCE SHEET Note (Unaudited) (Unaudited) As at As at 30 June 2007 30 June 2006 £ £Fixed assetsIntangible 6 6,555,003 7,079,403Tangible assets 3,843,678 3,450,036 10,398,681 10,529,439 Current assetsDebtors 323,863 375,116Inventory 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 reservesCalled up share capital 969,227 893,227Share premium account 19,125,567 15,325,306Share options reserve 2,253,134 1,913,889Foreign 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 CASH FLOW STATEMENT 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 financeInterest received 21,149 53,928 Taxation - - Capital expenditure and financial investmentPayments to acquire tangible fixed assets (134,173) (1,353,818) FinancingIssue of new shares 2,300,000 72,617Share issue costs (92,000) -Previous years share issue costs refunded 72,261 - (Decrease)/increase in cash 9 1,261,444 (2,767,355) NOTES TO THE INTERIM REPORT 1 BASIS OF PREPARATION The interim consolidated financial statements for the six months ended 30 June2007 have been prepared under applicable International Financial ReportingStandards adopted by the European Union ("IFRS") which include InternationalAccounting Standards and interpretations issued by the International AccountingStandards Board and its committees, which are expected to be endorsed by theEuropean Union. This interim financial information has been prepared on the historical costbasis. The accounting policies applied are consistent with those adopted anddisclosed in the annual financial statements for the period ended 31 December2006. The financial information included in this document does not comprise statutoryaccounts within the meaning of section 240 of the Companies act 1985. Thecomparative figures for the financial period ended 31 December 2006 areextracted from the statutory financial statements for that period which havebeen filed with he Registrar of Companies and on which the auditor gave anunqualified report, without any statement under section 237 (2) or (3) of theCompanies Act 1985. The financial information is unaudited and has not been reviewed by the auditor. 2 PUBLICATION OF NON-STATUTORY ACCOUNTS The financial information set out in this interim report does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. 3 TAXATION There is no tax charge for the interim period. 4 EARNINGS PER SHARE 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 5 DIVIDENDS No dividends have been paid or proposed for the period. 6 INTANGIBLE FIXED ASSETS (Unaudited) £CostAt 31 December 2006 and 30 June 2007 7,866,003 AmortisationAt 31 December 2006 1,048,800Charge for the period 262,200At 30 June 2007 1,311,000 Net book valueAt 30 June 2007 6,555,003 At 31 December 2006 6,817,203 The goodwill arises on the acquisition of Hydrodec Development Corporation PtyLimited and is being amortised over its estimated useful life of 15 years. 7 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS (Unaudited) As at 30 June 2007 No.AuthorisedOrdinary shares of 0.5 pence each 800,000,000 Issued and fully paid - ordinary shares of 0.5 pence eachAt 31 December 2006 184,645,400Issued for cash 9,200,000At 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 10,963,311Recognition of value of options 113,082 113,082issued to employeesForeign exchange differences 181,312 181,312Loss for the period (1,146,004) (1,146,004)Issue of shares 46,000 2,254,000 2,300,000Issue costs (92,000) (92,000)Refund of VAT on expenses 72,261 72,261previously written off to Sharepremium 969,227 19,125,567 (3,704) (9,952,262) 2,253,134 12,391,962 8 NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES (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 13,262Amortisation of goodwill 262,200 262,200Share 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 32,802Finance charges 138,686 -Movement in Foreign Exchange (3,749) (159,611)Net cash (outflow)/inflow from operating activities (905,793) (1,540,082) 9 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT (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 3,260,612Net 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