30 Jun 2009 07:00
| For Immediate Release | 30 June 2009 |
Molectra Group Limited (the "Company")
Final results for the year ended 31 December 2008
Molectra Group Limited (AIM:MOLE) today reports its final results for the year ended 31 December 2008.
Highlights for the year
Acquired 100% ownership of Molectra Australia
Change from fund to operating company
Strengthened management team
Name change to Molectra Group Limited
Board changes
Cash position at year end of £2.99m
Paul Gazzard, Chief Executive Officer commented: "2008 saw significant changes within the Board, structure and management of Molectra. The integration of these changes has been a demanding process, a process which is now complete and gives the Company a good base for the future. The Company has sufficient working capital for the next twelve months operations.
We are undertaking commercial negotiations both with potential licensees of the proprietary Molectra 'zero waste' tyre recycling process and potential buyers for a variety of value added end products. The Company's green credentials continue to present many opportunities in new and potentially exciting areas, and I look forward to capitalising upon them in the future."
For further information please contact:
| Molectra Group Ltd |
|
| Paul Gazzard | 01725 510 383 |
| Rodger Sargent | 020 7355 7660 |
| Arbuthnot Securities Limited | |
| Antonio Bossi | 020 7012 2000 |
| Threadneedle Communications Ltd | |
| Graham Herring | 020 7653 9500 |
A copy of the company's annual report for the year ended 31 December 2008, together with a notice of Annual General Meeting to be held on 16 July 2009 at Union House, Union Street, St. Helier, Jersey, Channel Islands, JE2 3RF at 10.00am, will be posted to shareholders today and is available from the Company's website at www.molectragroup.co.uk.
CHAIRMAN'S STATEMENT
These results for Molectra Group Limited ("Molectra") cover the year to 31 December 2008. Molectra is a Jersey incorporated company.
Molectra consolidated its investment in Molectra Australia Pty Ltd ("Molectra Australia"), the Australian based business that re-cycles and recovers materials including crumb rubber, oil and carbon from used vehicle tyres, by acquiring the remaining 42% of the company.
Financial performance
As at 31 December 2008, the Company had net assets of £4.57m (2007: £14.47m). The loss for the period was £11.98m (2007: £0.7m). The loss before exceptional items was £0.80m (2007: £0.25m). Exceptional items relate to the impairment of goodwill and intangible assets amounting to £5.29m, write off of the five Bauxsol technology sub-licences amounting to £4.98m and to aborted deal costs in relation to a corporate transaction amounting to £0.92m (see note 4). The increased loss was due to the change in structure from a fund to an operating company, which resulted in large due diligence, legal and accounting costs and poorly performing contracts within Molectra Australia. At 31 December 2008, the company had net cash of £2.99m.
Corporate activity & operations
On 15 April 2008, the AUD$1,700,000 outstanding loan from Molectra to Molectra Australia Pty Ltd ('MA') was converted into further shares in MA, taking the Company's stake in MA to 64.3%. At an EGM on 12 August 2008, shareholders ratified the acquisition of the remaining 35.7% of MA's share capital for 32,000,000 new Molectra ordinary shares. The Company also acquired the intellectual property which MA relies upon for its business, for a consideration of 16,000,000 new ordinary shares.
The Company changed from an externally managed investment company to an internally managed company whose principal business is conducted through its wholly owned subsidiary, MA. To reflect the change in the nature of business, the Company's name was changed to Molectra Group Limited. Paul Gazzard, Rodger Sargent, David Hassum and John Dobozy joined the Board of the Company. John Dobozy subsequently left the Board post year end.
These significant changes have allowed the Company to concentrate on the continued commercialisation of the Molectra proprietary 'zero waste' tyre recycling process and the production of value added products (VAP's) made from re-bonded, recycled rubber.
As announced post year end on 19 May 2009, the two VAP contracts were won; the equine anti-cast products and automotive accessory products are now non-performing. Minimal revenue was generated from the contracts, and the Company incurred significant operating and capital costs. Despite ongoing attempts to make these contracts commercial, a combination of contract-specific problems and the global recession has meant this has not been achieved to date.
This has prompted Molectra to actively pursue new commercial opportunities for other VAP's in a variety of sectors within Australia, in particular where currently there is either no sustainable or domestic option available. A number of sectors have been targeted, including food and beverage, aviation, ports, sporting, healthcare and government, and the reaction has been very encouraging. The Company continues to focus on the development of these new VAP markets and the conversion of interest into long term orders from high profile customers.
Driven by the number of enquiries received, the Company is also focusing upon delivering a turnkey solution for a Molectra tyre recycling plant to third party licensees. We have recently advanced our knowledge about the deliverability of such plants, including how to tailor them to meet the specific needs of clients, and this work has resulted in an increasing number of enquiries in 2009. The number of enquiries, and their diverse geographical nature, reflects the worldwide nature of the used tyre problem and the unmet demand for a deliverable, commercial solution. Our advanced knowledge has also led to further patents being filed surrounding the Company's proprietary process technology.
Other investments
The five Bauxsol technology sub-licences are non performing and non-core to the Company's future strategy and have been written off, resulting in a non-cash cost for the year of £4.98m.
Board changes
Given the change of the Company from a fund to an operating company, I, and my fellow Non-executive Director Roger King, are stepping down from the Board of Molectra after the AGM. I am delighted that Alan Kerr is joining the Board as Chairman, following the AGM. Alan has a vast experience in the renewable sector and capital markets, and is a valuable addition to the Board.
The resignation of Roger King, Roger Maddock and the appointment of Alan Kerr will, when taken together, mean the Company is likely to become tax resident in the United Kingdom. The Company may therefore fall within the charge to UK corporation tax in due course. The Company will remain a Jersey registered Company.
Cash
Retained cash and equivalents was £2.99m at 31 December 2008.
The future
Despite the global recession, the new management team in Australia has made great progress and the many commercial opportunities identified will continue to be pursued vigorously. The ever growing move to a green global environment is of great benefit to the Company and will bring us increasing opportunities in the future.
Roger Maddock
Non-Executive Director
Molectra Group Limited
PRINCIPAL ACCOUNTING POLICIES
Basis of Preparation
This financial information have been prepared in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) and adopted by the European Union, and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (IFRIC) and the Companies (Jersey) Law 1991 applicable to companies reporting under IFRS.
The financial information set out in this announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985 and the Companies (Jersey) Law 1991. The consolidated and company balance sheets at 31 December 2008 and the consolidated income statement, consolidated and company cash flow statements and associated notes for the year ended 31 December 2008 have been extracted from the audited statutory accounts which have received an unqualified audit report.
The financial information has been prepared under the historical cost convention.
The principal accounting policies of the company have remained unchanged from the previous year.
Adoption of new and revised standards
In the current year the group has adopted all of the new and revised Standards and Interpretations issued by the IASB (as adopted by the European Union) and the IFRIC of the IASB that are relevant to its operations and effective for annual reporting beginning on 1 January 2008. The adoption of these new and revised Standards and Interpretations has had no material impact on the accounting policies of the Group and methods of computation in the Group's and Company's financial statements.
IFRS Standards and interpretations not yet adopted
At the date of authorisation of these financial statements, the following new Standards and Interpretations which are yet to become mandatory have not been applied in the Group's 2008 financial statements:
| Standard or Interpretation | Effective for reporting periods starting on or after |
| IAS 1 Presentation of Financial Statements (revised 2007) | 1 January 2009 |
| IAS 23 Borrowing Costs (revised 2007) | 1 January 2009 |
| Amendment to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation | 1 January 2009 |
| IAS 27 Consolidated and Separate Financial Statements (Revised 2008) | 1 July 2009 |
| Amendment to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations | 1 January 2009 |
| IFRS 2 Share-based Payments | 1 January 2009 |
| IFRS 3 Business Combinations (Revised 2008) | 1 July 2009 |
| IFRS 8 Operating Segments | 1 January 2009 |
The impact of the above standards and interpretations is either not known or not yet reasonably estimable.
The directors are aware of other IFRSs and IFRICs issued by the IASB which are not applicable to the entity and therefore will have no impact on the financial performance and position of the Group. Accordingly no disclosure of these standards has been made.
Going concern
The Board of Directors produce and monitor cash flow forecasts in the ordinary course of business. Having reviewed the cash needs of the business, the Board are of the view that there are sufficient funds to meet the group's obligations for a year from the date of approval of these financial statements.
Basis of consolidation
The financial statements incorporate the financial statements of the company and entities controlled by the company (its subsidiaries) made up to 31 December 2008. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences up to the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of any minority interest. The excess of the cost of acquisition over the fair value of the group's share of the net assets acquired is recorded as goodwill.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered as impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.
Business combinations are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the basis for subsequent measurement in accordance with the Group accounting policies. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net asset of the acquired subsidiary at the date of acquisition.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the group's activities. Revenue is shown net of goods and services tax, returns, rebates and discounts.
Revenue from the sale of goods is recognised upon the delivery of goods to customers, which corresponds to the date of transfer of significant risks and rewards. Revenue from the rendering of a service is recognised upon delivery of the service to the customers.
Interest income is recognised on a time-apportionment basis using the effective interest rate method.
Exceptional items
The Group presents as exceptional items on the face of the income statement those significant items of income and expense which, because of their size, nature and infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods to assess trends in financial performance more readily.
Purchase of minority interest
Where the company has purchased a minority interest, it is accounted for by way of the parent-company model. Under this approach, the excess consideration over and above the minority purchased is classified as goodwill in the balance sheet.
Intangible assets
An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it is probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be reliably measured. The asset is deemed to be identifiable when it is separable or when it arises from contractual or other legal rights.
Intellectual property
Intellectual property is stated at cost less any provisions for amortisation and impairments. Intellectual property acquired as part of a business combination is capitalised separately from goodwill and is carried at fair value less accumulated amortisation and accumulated impairment losses. It is amortised over its useful life, estimated to be 20 years, using the straight line method.
Goodwill
Goodwill representing the excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses.
Impairment testing of goodwill, other intangible assets and property, plant and equipment
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at the cash-generating unit level. Goodwill is allocated to those cash-generating units that have arisen from business combinations and represent the lowest level within the Group at which management monitors the related cash flows.
Goodwill with an indefinite life, is tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.
Property, plant and equipment
Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses.
Plant and equipment is measured on the cost basis less depreciation and impairment losses.
Property, plant and equipment are tested for impairment whenever it is deemed necessary and in cases where the carrying amount may not be recoverable. The recoverable amount is assessed on the basis of expected net cash flows, which will be received from the assets employment and subsequent disposal. The expected net cash flows are discounted to present values in determining recoverable amounts.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Investments
Investments in subsidiaries are held at cost less any impairment.
Depreciation
The depreciable amount of all property, plant and equipment are calculated to write down the cost less estimated residual value of all plant and equipment by annual instalments over their expected useful lives to the Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives less residual value of the improvements. The residual values are reassessed annually for these assets.
The depreciation rates used for each class of depreciable assets are:
| Plant and equipment | 20% - 10% |
| Leasehold improvements | 7% |
| Office equipment and furniture | 25% - 20% |
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less.
Trade and other payables
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. These are classed as financial liabilities.
Other receivables
Other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of other receivables is established when there is objective evidence that the group will not be able to collect all amounts due. Other receivables excluding prepayments are classified as financial assets.
Expenses
All expenses are recognised in the income statement on an accruals basis.
Employee benefits
Provision is made for the company's liability for employee benefits arising from services rendered by employees to the balance sheet date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled.
Current and deferred income tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company's subsidiary operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Current and deferred income tax (continued)
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised in the income statement to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future.
The company is an Exempt Company for Jersey taxation purposes. The company pays an exempt company fee, for each company in the group, which is currently £600 per annum. With effect from the 2009 year of assessment Jersey has abolished the exempt company regime for existing companies. Profits arising in the Company for the 2009 year of assessment and future periods will be subject to tax at the rate of 0%.
Foreign currency
Items included in the financial statements of the subsidiaries are measured using the currency of the primary economic environment in which the subsidiaries operate ('the functional currency'). The consolidated financial statements are presented in 'Sterling' (£), which is the company's functional and presentational currency.
The results and financial position of the company are expressed in pounds sterling, which is the functional currency of the company.
Transactions in currencies other than sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items and non monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses arising on retranslation are included in net profit or loss for the period.
The results and financial position of the subsidiary that has a functional currency different from the presentation currency is translated into the presentation currency as follows:
When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.
Key estimates
The preparation of these financial statements under IFRS as adopted by the European Union requires the group to make estimates and assumptions that affect the application of policies and reported amounts. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are discussed below.
Intangible assets
The group recognises intangible assets acquired as part of business combinations at fair value at the date of acquisition. The determination of these fair values is based upon management's judgement and includes assumptions on the timing and amount of future incremental cash flows generated by the assets and selection of an appropriate cost of capital. Furthermore, management must estimate the expected useful lives of intangible assets and charge amortisation on these assets accordingly. The amortisation period is the Directors' best estimate of the useful life of the licences, but this is difficult to predict with any certainty for new technologies.
Purchase of minority interest
The group apply the parent-company model in accounting for the purchase of minority interests.
Impairment
The group is required to test, at least annually, whether goodwill has suffered any impairment. The recoverable amount is determined based on the net realisable value of the cash generating unit. Intangible assets with a useful economic life of less than 20 years are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The market value of the group has been used as an approximation of the net realisable value of the business as a whole.
Impairment of property, plant and equipment
Property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. When a review for impairment is conducted, recoverable amounts are determined based on the net realisable value of the assets as part of the business as a whole.
Depreciation of property, plant and equipment
Depreciation is provided so as to write down assets to their residual values over their estimated useful lives as set out above. The selection of these estimated lives requires the exercise of management judgement.
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2008
| Note | 2008 | 2007 | |
| £ | £ | ||
| Revenue | 15,844 | 12,704 | |
| Operating expenses | |||
| Management fees | (147,134) | (196,000) | |
| Other operating expenses | (1,641,718) | (662,602) | |
| Amortisation of intangible assets | 8 | (233,923) | (388,982) |
| Depreciation of property, plant and equipment | 11 | (61,383) | (57,990) |
| Exceptional items | 4 | (11,180,480) | (470,000) |
| Total operating expenses | (13,264,638) | (1,775,574) | |
| Operating loss | (13,248,794) | (1,762,870) | |
| Finance income | |||
| Bank and deposit interest income | 227,053 | 380,481 | |
| Gains on re-measurement of investment loans carried at fair value through profit and loss | - | 658,436 | |
| Loss before taxation | (13,021,741) | (723,953) | |
| Taxation | 5 | 1,045,246 | - |
| Net loss for the year | (11,976,495) | (723,953) | |
|
| |||
| Attributable to: | |||
| Equity holders of the company | (11,784,721) | (474,840) | |
| Minority interest | (191,774) | (249,113) | |
| (11,976,495) | (723,953) | ||
| Basic and diluted loss per share (pence) | (6.78 ) | (0.31) | |
All transactions arise from continuing operations.
CONSOLIDATED AND COMPANY BALANCE SHEETS
For the year ended 31 December 2008
| Group | Company | ||||
| Note | 2008 | 2007 | 2008 | 2007 | |
| £ | £ | £ | £ | ||
| Non-current assets | |||||
| Intangible assets | 1,450,361 | 9,419,800 | - | - | |
| Investments in subsidiaries | - | - | 2,858,865 | 7,927,683 | |
| Property, plant and equipment | 11 | 756,078 | 588,400 | - | - |
| Investments held at fair value through profit and loss | - | - | - | - | |
| 2,206,439 | 10,008,200 | 2,858,865 | 7,927,683 | ||
| Current assets | |||||
| Other receivables | 13 | 59,494 | 222,975 | 15,860 | 541,287 |
| Cash and cash equivalents | 12 | 2,988,486 | 6,031,970 | 2,002,393 | 5,968,051 |
| 3,047,980 | 6,254,945 | 2,018,253 | 6,509,338 | ||
| Total assets | 5,254,419 | 16,263,145 | 4,877,118 | 14,437,021 | |
| Current liabilities | |||||
| Trade and other payables | 14 | (558,123) | (623,015) | (304,555) | (353,618) |
| (558,123) | (623,015) | (304,555) | (353,618) | ||
| Non-current liabilities | |||||
| Deferred income tax liabilities | 15 | (123,733) | (1,168,979) | - | - |
| Net assets | 4,572,563 | 14,471,151 | 4,572,563 | 14,083,403 | |
| Capital and reserves | |||||
| Share capital | 16 | 17,296,977 | 14,116,977 | 17,296,977 | 14,116,977 |
| Translation reserve | (33,702) | 15,219 | - | - | |
| Retained earnings | (12,690,712) | (779,655) | (12,724,414) | (33,574) | |
| 4,572,563 | 13,352,541 | 4,572,563 | 14,083,403 | ||
| Minority interests | - | 1,118,610 | - | - | |
| Shareholders' funds | 4,572,563 | 14,471,151 | 4,572,563 | 14,083,403 | |
| Net asset value per Ordinary share (pence) | 17 | 2.25 | 9.32 | 2.25 | 8.65 |
The financial statements were approved by the Board of Directors on 29 June 2009.
Roger Maddock
Non-Executive Director
Molectra Group Limited
CONSOLIDATED AND COMPANY CASH FLOW STATEMENT
For the year ended 31 December 2008
| Group | Company | ||||
| Note | 2008 | 2007 | 2008 | 2007 | |
| £ | £ | ||||
| Cash inflow from operating activities | |||||
| Net (loss)/profit for the year | (11,976,495) | (723,953) | (12,690,841) | 144,503 | |
| Non-cash movements: | |||||
| - Amortisation | 233,923 | 388,982 | - | - | |
| - Depreciation | 61,383 | 57,990 | - | - | |
| - Interest receivable | (227,053) | - | (206,526) | - | |
| - Provision for legal claim | 120,000 | 120,000 | |||
| - Gains on re-measurement of investment loans carried at fair value through profit and loss | - | (658,436) | - | (658,436) | |
| - Write off of licences | 4,977,246 | ||||
| - Impairment of goodwill and intangible assets | 5,285,766 | ||||
| - Loss on subsidiary loan write off | - | - | 5,379,314 | - | |
| - Loss on impairment of investment | - | 5,385,316 | - | ||
| - Deferred taxation | (1,045,246) | ||||
| - Translation movements | (468,164) | - | - | - | |
| Changes in working capital (excluding the effects of acquisition and exchange differences on consolidation): | |||||
| - Other receivables | 142,036 | 9,897 | (12,206) | 8,153 | |
| - Other payables | (196,859) | 511,570 | (169,062) | 274,476 | |
| Net cash outflow from operating activities | (3,093,463) | (413,950) | (2,194,005) | (231,304) | |
| Cash flow from investing activities | |||||
| Interest received | 248,497 | - | 232,898 | - | |
| Purchase of property, plant and equipment | (180,118) | (261,270) | - | - | |
| Purchase of unlisted investments | - | - | - | (1,189,458) | |
| Purchase of intangibles | (18,400) | (269,028) | - | (269,028) | |
| Purchase of shares in subsidiary | 18 | - | (1,105,192) | - | - |
| Loans to subsidiary undertakings | - | (87,691) | (2,004,551) | (511,260) | |
| Net cash outflow from investing activities | 49,979 | (1,723,181) | (1,771,653) | (1,969,746) | |
| Net (decrease)/increase in cash and cash equivalents | (3,043,484) | (2,137,131) | (3,965,658) | (2,201,050) | |
| Cash and cash equivalents at 1 January 2008 | 6,031,970 | 8,169,101 | 5,968,051 | 8,169,101 | |
| Cash and cash equivalent at 31 December 2008 | 2,988,486 | 6,031,970 | 2,002,393 | 5,968,051 | |
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2008
Consolidated
| Share capital | Translation reserve | Retained earnings | Total equity attributable to equity holders | Minority Interests | Total equity | |
| £ | £ | £ | £ | £ | £ | |
| Balance at 1 January 2007 | 14,116,977 | - | (304,815) | 13,812,162 | - | 13,812,162 |
| Net income recognised directly to equity (exchange difference on translation of foreign subsidiary) | - | 15,219 | - | 15,219 | - | 15,219 |
| Loss for the year | - | - | (474,840) | (474,840) | (249,113) | (723,953) |
| Total recognised income and expense for the year | - | 15,219 | (474,840) | (459,621) | (249,113) | (708,734) |
| Share of minority interests on acquisition | - | - | - | - | 1,367,723 | 1,367,723 |
| At 31 December 2007 | 14,116,977 | 15,219 | (779,655) | 13,352,541 | 1,118,610 | 14,471,151 |
| Net income recognised directly to equity (exchange difference on translation of foreign subsidiary) | - | (48,921) | (126,336) | (175,257) | - | (175,257) |
| Loss for the year | - | - | (11,784,721) | (11,784,721) | (191,774) | (11,976,495) |
| Total recognised income and expense for the year | - | (48,921) | (11,911,057) | (11,959,978) | (191,774) | (12,151,752) |
| Issue of shares | 3,180,000 | - | - | 3,180,000 | - | 3,180,000 |
| Share of minority interests on acquisition | - | - | - | - | (926,836) | (926,836) |
| Balance at 31 December 2008 | 17,296,977 | (33,702) | (12,690,712) | 4,572,563 | - | 4,572,563 |
Company
| Share Capital | Translation reserve | Retained earnings | Total equity attributable to equity holders | Minority interests | Total equity | |
| £ | £ | £ | £ | £ | £ | |
| Balance at 1 January 2007 | 14,116,977 | - | (178,077) | 13,938,900 | - | 13,938,900 |
| Profit for the year | - | - | 144,503 | 144,503 | - | 144,503 |
| At 31 December 2007 | 14,116,977 | - | (33,574) | 14,083,403 | - | 14,083,403 |
| Loss for the year | - | - | (12,690,840) | (12,690,840) | - | (12,690,840) |
| Total recognised income and expense for the year | - | - | (12,690,840) | (12,690,840) | - | (12,690,840) |
| Issue of shares | 3,180,000 | - | - | 3,180,000 | - | 3,180,000 |
| Share of minority interests on acquisition | - | - | - | - | - | - |
| Balance at 31 December 2008 | 17,296,977 | - | (12,724,414) | 4,572,563 | - | 4,572,563 |
1 Segmental reporting
The Group only has one primary segment being investment in sustainable environmental technologies.
Geographical segments
The Group's business segments operate in both the United Kingdom and Australia. Segment assets are based on the geographical location of the assets:
| Segmental assets | ||
| 2008 | 2007 | |
| £ | £ | |
| United Kingdom | 3,468,615 | 11,708,256 |
| Australia | 1,785,804 | 4,554,889 |
| 5,254,419 | 16,263,145 | |
2 Management fee
| 2008 | 2007 | |
| £ | £ | |
| Management fee | 147,134 | 196,000 |
The management fee paid to Development Capital Management (Jersey) Limited was 2% per annum of the amount subscribed plus any gains retained by the Company for reinvestment.
The management agreement between the Company and the Manager was terminated during the year.
3 Other operating expenses
The loss before taxation is stated after:
| 2008 | 2007 | |
| £ | £ | |
| Legal and professional fees | 618,117 | 119,733 |
| Other administrative costs | 612,152 | 313,625 |
| Directors' remuneration | 148,139 | 47,955 |
| Marketing and public relations | 23,139 | 28,750 |
| Custodian fees and bank charges | 21,532 | 27,019 |
| Auditors' remuneration: | ||
| - For audit services to parent company | 27,500 | 32,500 |
| - For audit services to subsidiary | 7,310 | 7,500 |
| - For assurances services | 11,000 | 20,000 |
| - For tax services | 20,000 | - |
| Wages and salaries | 620,993 | 178,615 |
| Foreign exchange gains | (468,164) | - |
| Loan interest waived by minority interest shareholder | - | (113,095) |
| 1,641,718 | 662,602 |
4 Exceptional items
| 2008 | 2007 | |
| £ | £ | |
| Write off of Bauxsol licences (see note 8) | 4,977,246 | - |
| Impairment of intangible assets (see note 8) | 5,285,766 | - |
| Aborted deal costs | 450,000 | 470,000 |
| Legal and professional fees in connection with the reverse take-over | 467,468 | - |
| 11,180,480 | 470,000 |
Aborted deal costs include corporate finance fees to Grant Thornton UK LLP amounting to £82,000.
5 Taxation
The components of tax expense comprise:
| 2008 | 2007 | |
| £ | £ | |
| - Current tax | - | - |
| - Deferred tax | 1,045,246 | - |
| 1,045,246 | - |
The tax payable on profit from ordinary activities before income tax is reconciled to the income tax expense as follows:
| 2008 | 2007 | |
| £ | £ | |
| Loss for the year before taxation | (13,021,741) | (723,953) |
| Less: amounts not subject to taxation | 12,103,533 | 163,618 |
| Representing losses from Molectra Australia Pty Limited | (918,208) | (560,335) |
| Tax recoverable on loss from ordinary activities before income tax at 30% (2007: 30%) | (275,462) | (168,101) |
| Less tax effect of: | ||
| - Tax losses not recognised as deferred tax assets | 275,462 | 168,101 |
| Income tax expense | - | - |
6 Loss attributable to the parent company
The loss attributable to the parent company, Molectra Group Ltd, was £12,690,840 (2007: profit £144,503). As permitted by Companies (Jersey) Law 1991, no separate income statement is presented in respect of the parent company.
7 Earnings per share
The earnings per Ordinary share is based on the net loss for the year attributable to equity holders of £11,784,721 (2007: £474,840) and on 173,848,000 (2007: 155,225,000) weighted average Ordinary shares in issue during the year.
The diluted return per Ordinary share is based on the net loss for the year attributable to equity holders and 173,848,000 (2007: 155,225,000) shares.
The number of potential ordinary shares issued increased post year end following the introduction of a share option scheme.
8 Intangible assets
Group
| Goodwill | Intellectual property | Total | |
| £ | £ | £ | |
| Cost | |||
| At 1 January 2007 | - | 5,069,539 | 5,069,539 |
| Additions | - | 291,376 | 291,376 |
| Acquisition of subsidiary | 678,007 | 3,896,598 | 4,574,605 |
| At 31 December 2007 | 678,007 | 9,257,513 | 9,935,520 |
| Addition | - | 1,078,400 | 1,078,400 |
| Acquisition of minority interest | 1,118,810 | - | 1,118,810 |
| Write off | - | (5,379,316) | (5,379,316) |
| Exchange differences | - | 340,209 | 340,209 |
| At 31 December 2008 | 1,796,817 | 5,296,806 | 7,093,623 |
| Amortisation | |||
| At 1 January 2007 | - | (126,738) | (126,738) |
| Amortisation charge | - | (388,982) | (388,982) |
| At 31 December 2007 | - | (515,720) | (515,720) |
| Amortisation charge | - | (233,923) | (233,923) |
| Write off | - | 402,070 | 402,070 |
| Impairment loss | (1,796,817) | (3,488,949) | (5,285,766) |
| Exchange differences | - | (9,923) | (9,923) |
| At 31 December 2008 | (1,796,817) | (3,846,445) | (5,643,262) |
| Net book value | |||
| At 31 December 2008 | - | 1,450,361 | 1,450,361 |
| At 31 December 2007 | 678,007 | 8,741,793 | 9,419,800 |
The useful economic life of the intellectual property is 20 years. Intellectual property consists of the licences acquired from Molectra IP (Mauritius) Limited, amounting to £1,037,917 and the remaining intellectual property of the Molectra recycling process not fully impaired of £412,444.
During the year, intellectual property relating to the five Bauxsol technology sub-licences, with a net book value of £4,977,246, were written off, as they are non-core to the Company's future strategy.
During the year, goodwill amounting to £1,118,810 was recognised in relation to the purchase of minority interest in Molectra Australia Pty Limited. Details of this transaction are included in note 18.
Impairment of goodwill and intellectual property
The directors have determined recoverable amount by reference to net realisable value using the group's market capitalisation at the 31 December 2008. At the year end, the market capitalisation of the group was £4,572,562. As a result, an impairment loss of £1,796,817 and £3,488,949 has been recognised against the carrying value of goodwill and intellectual property respectively.
9 Investments held at fair value through profit and loss
Company
| Unlisted investments | ||
| 2008 | 2007 | |
| £ | £ | |
| At 1 January | - | 718,873 |
| Additions | - | 1,189,458 |
| Fair value measurement through profit and loss | - | 658,436 |
| Reclassified to investment in subsidiary undertaking on exercise of convertible loan note (see note 16) | - | (2,566,767) |
| At 31 December | - | - |
During the prior year the group exercised its right to convert the convertible loan notes into ordinary shares in Molectra Australia Pty Limited. This resulted in a 58% shareholding in Molectra Australia Pty Limited. The investment was therefore reclassified as an investment in a subsidiary undertaking.
10 Investment in subsidiary undertakings
Company
| Shares | Loans | Total | |
| £ | £ | £ | |
| At 1 January 2007 | 2 | 5,069,539 | 5,069,541 |
| Additions | - | 291,375 | 291,375 |
| Exercise of convertible loan notes (see note 9 and 18) | 2,566,767 | - | 2,566,767 |
| At 31 December 2007 | 2,566,769 | 5,360,914 | 7,927,683 |
| Loans waived | - | (5,379,314) | (5,379,314) |
| Additions | 2,918,546 | 2,777,266 | 5,695,812 |
| Impairment loss | (5,385,316) | - | (5,385,316) |
| At 31 December 2008 | 99,999 | 2,758,866 | 2,858,865 |
| Shares | Loans | Total | |
| £ | £ | £ | |
| Greenhouse Organic Solutions Ltd | 1 | - | 1 |
| Molectra IP Development Ltd (formerly Greenhouse IP Development Ltd) | 1 | - | 1 |
| Molectra Australia Pty Ltd | 99,997 | - | 99,997 |
| 99,999 | - | 99,999 |
The Company holds 1 Ordinary share of £1 in Greenhouse Organic Solutions Ltd, which is incorporated in Jersey. This represents the entire issue share capital of this company. The principal activity of this company is to develop a regional treatment centre for high strength organic waste.
The Company holds 1 Ordinary share of £1 in Molectra IP Development Ltd which is incorporated in Jersey. This represents the entire issue share capital of this company. The principal activity of this company is intellectual property ownership. The authorised share capital of each is 10,000 shares of a nominal value of £1.
The company also holds 17,493 (2007: 8,633) ordinary AUD$1 shares in Molectra Australia Pty Ltd, a company incorporated in Australia. This represents 100% (2007: 58%) of the entire share capital of this company. The principal activity of this company is to effectively use state of the art technology to recycle tyres.
Investment in subsidiary undertakings (continued)
At the 31 December 2008, the investment was impaired to reflect the net asset position of the subsidiary.
During the year, loans due from Molectra IP Developments Limited amounting to £5,360,914 were waived.
11 Property, plant and equipment
| Leasehold improvement | Office equipment | Machinery | Total | |
| £ | £ | £ | £ | |
| Cost | ||||
| At 1 January 2007 | - | - | - | - |
| Acquisition | 19,002 | 1,796 | 364,322 | 385,120 |
| Additions | 459 | 3,628 | 257,183 | 261,270 |
| At 1 January 2008 | 19,461 | 5,424 | 621,505 | 646,390 |
| Additions | - | 11,571 | 168,547 | 180,118 |
| Exchange differences | 1,812 | 543 | 61,378 | 63,733 |
| At 31 December 2008 | 21,273 | 17,538 | 851,430 | 890,241 |
| Depreciation | ||||
| At 1 January 2007 | - | - | - | - |
| Charge for the year | (651) | (78) | (57,261) | (57,990) |
| At 1 January 2008 | (651) | (78) | (57,261) | (57,990) |
| Charge for the year | (2,245) | (1,783) | (57,355) | (61,383) |
| Foreign exchange differences | (268) | (154) | (14,368) | (14,790) |
| At 31 December 2008 | (3,164) | (2,015) | (128,984) | (134,163) |
| Net book value at 31 December 2008 | 18,109 | 15,523 | 722,446 | 756,078 |
| Net book value at 31 December 2007 | 18,810 | 5,346 | 564,244 | 588,400 |
12 Cash and cash equivalents
| Group | Company | |||
| 2008 | 2007 | 2008 | 2007 | |
| £ | £ | £ | £ | |
| Cash at bank and in hand | 19,392 | 1,063,633 | 5,000 | 999,714 |
| Short-term bank deposits | 2,969,094 | 4,968,337 | 1,997,393 | 4,968,337 |
| 2,988,486 | 6,031,970 | 2,002,393 | 5,968,051 | |
Cash at bank and in hand earns interest of floating rates based on daily bank deposit rates and is subject to interest rate risk as disclosed in note 20.
The fair value of the cash and cash equivalents approximate their book value.
For the purposes of the consolidated cashflow statement, cash and cash equivalents comprise cash at bank, cash in hand and short term deposits with an original maturity of three months or less held for the purpose of meeting short term cash commitments.
Cash at bank and in hand includes £14,000 (2007: £64,000) denominated in Australian Dollars. Disclosure on foreign exchange and interest rate risk management is disclosed in note 20.
13 Other receivables
| Group | Company | |||
| 2008 | 2007 | 2008 | 2007 | |
| £ | £ | £ | £ | |
| Bank and deposit interest receivable | 4,928 | 26,373 | - | 26,373 |
| Prepayments | 28,329 | 3,654 | 15,860 | 3,654 |
| Other receivables | 26,237 | 192,948 | - | - |
| Loans to subsidiary undertakings | - | - | - | 511,260 |
| 59,494 | 222,975 | 15,860 | 541,287 | |
The fair values of other receivables are not materially different from the carrying value.
Other receivables include £44,000 (2007: £166,000) denominated in Australian Dollars. Management of foreign exchange risk is disclosed in note 20.
14 Trade and other payables
| Group | Company | |||
| 2008 | 2007 | 2008 | 2007 | |
| £ | £ | £ | £ | |
| Trade payables | 192,035 | 248,075 | - | - |
| Accruals | 266,443 | 362,080 | 261,866 | - |
| Other payables | 99,645 | 12,860 | 42,689 | 353,618 |
| 558,123 | 623,015 | 304,555 | 353,618 | |
The fair value of trade and other payables are not materially different from their book value.
Trade and other payables include £254,000 (2007: £263,000) denominated in Australian Dollars. Management of foreign exchange risk is disclosed in note 20.
Company accruals include a provision for a legal claim. Further disclosure is considered seriously prejudicial.
15 Deferred income tax
The deferred income tax liability relates to the fair value adjustment on acquisition.
| Group | Company | |||
| 2008 | 2007 | 2008 | 2007 | |
| £ | £ | £ | £ | |
| At 1 January 2008 | 1,168,979 | - | - | - |
| Effect of amortisation of intangible asset | 1,439 | - | - | - |
| Effect of impairment loss | (1,046,685) | - | - | - |
| Fair value adjustments | - | 1,168,979 | - | - |
| At 31 December 2008 | 123,733 | 1,168,979 | - | - |
A deferred tax asset of £275,000 (2007: £136,000) relating to losses of Molectra Australia (Pty) Ltd has not been recognised, such tax would only become recoverable in the event that Molectra Australia (Pty) Ltd becomes profitable in future years. As at 31 December 2008, the future profitability could not be foreseen with any certainty.
16 Share capital
| 2008 | 2007 | |
| £ | £ | |
| Authorised | ||
| Founder shares of no par value | 10 | 10 |
| Ordinary shares of no par value | Unlimited | Unlimited |
| Issued and fully paid: | ||
| 2 founder shares of no par value | - | - |
| 27,225,000 ordinary shares issued on 14 December 2005 at 1p | 272,250 | 272,250 |
| 98,000,000 ordinary shares issued on 22 December 2005 at 10p | 9,800,000 | 9,800,000 |
| 30,000,000 ordinary shares issued on 29 June 2006 at 15p | 4,500,000 | 4,500,000 |
| 48,000,000 ordinary shares issued on 12 August 2008 at 6.625p | 3,180,000 | - |
| 203,225,002 ordinary shares in issue (2007: 155,225,002) | 17,752,250 | 14,572,250 |
| Less admission costs off-set against share capital | (455,273) | (455,273) |
| 17,296,977 | 14,116,977 |
Founder shares carry no right to vote at the general meeting of the company as there are Participating Ordinary Shares in issue. Participating Ordinary shares have priority on winding up the company.
The 48,000,000 ordinary shares were issued to acquire the remaining minority interest in Molectra Australia Pty Limited and associated intellectual property (see notes 18 and 25).
17 Net asset value per share
The asset value per ordinary share is based on the net assets attributable to equity shareholders of £4,572,563 (2007: £14,471,151) and on 203,225,000 (2007: 155,255,000) ordinary shares in issue at the year end.
18 Purchase of minority interest
The company's total shareholding in Molectra Australia Pty Limited at 1 January 2008 was 58%.
On 28 March 2008, the company converted an intercompany loan note with a cost of £798,545 (AUD$ 1,735,000) in exchange for a 6.3% stake in Molectra Australia Pty Limited. This equated to an increase in the company's shareholding of 6.3%.
On 12 August 2008, the company issued 32 million shares in exchange for the remaining shares in Molectra Australia Pty Limited, bringing its total shareholding to 100%.
19 Financial assets and liabilities balance sheet classification
Group 2008
| Loans and receivables | At fair value through profit or loss | Non financial assets | Total | |
| £ | £ | £ | £ | |
| Balance sheet headings - assets | ||||
| Intangible assets | - | - | 1,450,361 | 1,450,361 |
| Property, plant and equipment | - | - | 756,078 | 756,078 |
| Investments held at fair value through profit and loss | - | - | - | - |
| Other receivables | 31,165 | - | - | 31,165 |
| Prepayments | - | - | 28,329 | 28,329 |
| Cash and cash equivalent | 2,988,486 | - | - | 2,988,486 |
| 3,019,651 | - | 2,234,768 | 5,254,419 |
Group 2007
| Loans and receivables | At fair value through profit or loss | Non financial assets | Total | |
| £ | £ | £ | £ | |
| Balance sheet headings - assets | ||||
| Intangible assets | - | - | 9,419,800 | 9,419,800 |
| Property, plant and equipment | - | - | 588,400 | 588,400 |
| Investments held at fair value through profit and loss | - | - | - | - |
| Other receivables | 219,321 | - | - | 219,321 |
| Prepayments | - | - | 3,654 | 3,654 |
| Cash and cash equivalent | 6,031,970 | - | - | 6,031,970 |
| 6,251,291 | - | 10,011,854 | 16,263,145 |
Company 2008
| Loans and receivables | At fair value through profit or loss | Non financial assets | Total | |
| £ | £ | £ | £ | |
| Balance sheet headings - assets | ||||
| Intangible assets | - | - | - | - |
| Investment in subsidiaries | - | - | 99,999 | 99,999 |
| Property, plant and equipment | - | - | - | - |
| Investments held at fair value through profit and loss | - | - | - | - |
| Loans | 2,758,866 | - | - | 2,578,866 |
| Prepayments | - | - | 15,860 | 15,860 |
| Cash and cash equivalent | 2,002,393 | - | - | 2,002,393 |
| 4,761,259 | - | 115,859 | 4,877,118 |
Company 2007
| Loans and receivables | At fair value through profit or loss | Non financial assets | Total | |
| £ | £ | £ | £ | |
| Balance sheet headings - assets | ||||
| Intangible assets | - | - | - | - |
| Investment in subsidiaries | - | - | 7,927,683 | 7,927,683 |
| Property, plant and equipment | - | - | - | - |
| Investments held at fair value through profit and loss | - | - | - | - |
| Other receivable | 537,633 | - | - | 537,633 |
| Prepayments | - | - | 3,654 | 3,654 |
| Cash and cash equivalent | 5,968,051 | - | - | 5,968,051 |
| 6,505,684 | - | 7,931,337 | 14,437,021 |
Financial assets and liabilities balance sheet classification (continued)
Group 2008
| Other financial liabilities | Non financial liabilities | Total | |
| £ | £ | £ | |
| Balance sheet headings - liabilities | |||
| Trade and other payables | 192,035 | - | 192,035 |
| Accruals | - | 266,443 | 266,443 |
| Other payables | 99,645 | - | 99,645 |
| Deferred tax liabilities | - | 123,733 | 123,733 |
| 291,680 | 390,176 | 681,856 |
Group 2007
| Other financial liabilities | Non financial liabilities | Total | |
| £ | £ | £ | |
| Balance sheet headings - liabilities | |||
| Trade and other payables | 248,074 | - | 248,074 |
| Accruals | - | 362,080 | 362,080 |
| Other payables | 12,860 | - | 12,860 |
| Deferred tax liabilities | - | 1,168,979 | 1,168,979 |
| 260,934 | 1,531,059 | 1,791,993 |
Company 2008
| Other financial liabilities | Non financial liabilities | Total | |
| £ | £ | £ | |
| Balance sheet headings - liabilities | |||
| Trade and other payables | - | - | - |
| Accruals | - | 261,866 | 261,866 |
| Other payables | 42,689 | - | 42,689 |
| Deferred tax liabilities | - | - | - |
| 42,689 | 261,866 | 304,555 |
Company 2007
| Other financial liabilities | Non financial liabilities | Total | |
| £ | £ | £ | |
| Balance sheet headings - liabilities | |||
| Trade and other payables | - | - | - |
| Accruals | - | - | - |
| Other payables | - | 353,618 | 353,618 |
| Deferred tax liabilities | - | - | - |
| - | 353,618 | 353,618 |
20 Risk management objectives and policies
The Group and Company's financial instruments comprise cash balances and receivables and payables that arise directly from its operations, for example, accrued income with respect to deposit bank interest and purchases awaiting settlement.
The main risks the Group and Company faces from its financial instruments are (i) credit risk, (ii) interest rate risk and (iii) foreign exchange risk and (iv) liquidity risk.
The Boards regularly reviews and agrees policies for managing each of these risks. The company's policies for managing these risks are summarised below and have been applied throughout the period. The numerical disclosures exclude short-term debtors and creditors as their carrying amount is considered to be a reasonable approximation of their fair value.
(i) Credit risk
Group and Company
Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions and accounts receivable.
Group
The Group and Company's cash and cash equivalents are mainly deposited with one third party financial institution. The company is therefore at risk from the failure of this third party institution. The maximum exposure to this credit risk is £2,989,000 (2007: £6,032,000).
The group's and company's credit risk with respect to other receivables is minimal.
The Group's credit exposure with respect to other receivables of £59,000 (2007: £223,000) has been reviewed for indicators of impairment. No provision was deemed necessary. The age of the other receivables past due (over 60 days) but not impaired is not more than 6 months.
(ii) Interest rate risk
The interest rate risk profile of financial assets of the Group and Company at the balance sheet date was as follows:
| Fixed interest | Floating interest | |
| £ | £ | |
| Sterling cash deposit | 1,997,393 | 5,000 |
| Australian dollar cash deposit | 971,701 | 14,392 |
| 2,969,094 | 19,392 |
The group and company have minimal exposure to interest rate risks with no external third party borrowing and majority of cash and cash equivalents being denominated in fixed interest accounts.
As at 31 December 2008, if interest rates had increased by 0.5%, pre-tax losses would have decreased by £1,000. If interest rates had decreased by 0.5% pre-tax losses would have accordingly increased by £1,000. In the opinion of the directors, a 0.5% change is a reasonably probable estimate and reflects current market conditions.
Risk management objectives and policies (continued)
(iii) Foreign exchange risk
The group has an overseas operation in Australia which gives rise to limited exposure to foreign exchange risk arising primarily with respect to the Australian Dollar currency. Foreign exchange risk mainly arises from future commercial transactions with investments in the foreign operation.
Group
As at 31 December 2008, if the Sterling had strengthened by 10% against the Australian Dollar, with all other variables being constant the net assets of the group on translation of the foreign subsidiary would have decreased by £14,000, being recognised within equity.
If the Sterling had weakened by 10% against the Australian Dollar, with all other variables being constant the net assets of the group on translation of the foreign subsidiary would have increased by £17,000 being recognised within equity.
As at 31 December 2008, the effect of any foreign exchange movement to the group income statement is not deemed to be material.
Company
The company's foreign exchange risk is minimal.
Currency exposure
Group
An analysis of the group's currency exposure is detailed below:
| 2008 | 2008 | 2007 | 2007 | |
| Net monetary assets | Unlisted investments | Net monetary assets | Unlisted investments | |
| £ | £ | £ | £ | |
| Australian Dollar | 776,000 | - | (9,000) | - |
The net monetary assets in foreign subsidiary includes cash and cash equivalents of £986,000 (2007: £64,000) trade and other receivables of £44,000 (2007: £190,000) and trade and other payables of £254,000 (2007: £263,000).
Company
The currency exposure in the company is not material.
(iv) Liquidity risk
Group and Company
The liquidity risk is not deemed to be material to the Group or company as at 31 December 2008. The Group and company had sufficient cash reserves of £3m and £2m respectively (2007: £6m and £6m respectively).
As at 31 December 2008, the company has other payables of £43,000 (2007: £354,000) payable within 3 months from the year-end.
The group has trade and other payables of £292,000 (2007: £261,000) payable within 3 months from the year end.
21 Capital management policies and procedures
The group's objectives when managing capital are to safeguard the group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
We constantly review our capital structure. Due to the current liquidity position there is no requirement for any loans or capital or shares buyback. There are no externally imposed capital requirements.
The group monitors capital on the basis of the working capital, cash balances, monthly and yearly forecasts. Total capital is calculated as 'equity' which comprises share capital and reserves as shown in consolidated statement of changes in equity.
22 Capital commitments
Group and Company
There were no capital commitments at 31 December 2008 or 31 December 2007.
23 Contingent assets/liabilities
There were no contingent liabilities in the group or company at 31 December 2008 or 31 December 2007.
24 Directors interests and remuneration
The total compensation paid to directors over the year was £148,139 (2007: £47,955), split between salaries amounting to £107,925 (2007: £nil), and fees amounting to £40,214 (2007: £47,955).
Nigel William Wray, who resigned on 11 June 2008, controls or is beneficially interested in 40.31% of the partnership capital of PIHL Equity LLP, which owns 17,500,000 shares in the company.
Roger Maddock owns 250,000 ordinary shares, Rodger Sargent owns 3,000,000 ordinary shares and
Paul Gazzard owns 3,500,000 ordinary shares.
25 Transactions with directors /and other related parties
Virotec Investments Pty Limited hold 30,000,000 shares and Brian Sheeran was both deputy Chairman of the Company (until his resignation on 13 June 2008) and Executive Chairman of Virotec International plc.
Company
During the year, the company waived loans amounting to £5.38m with Molectra IP Developments Limited, a subsidiary undertaking.
During the year, the company issued 16m shares to Molectra Holdings (Mauritius) Limited in exchange for the residual intellectual property rights it had retained in the Molectra recycling process. At the time of the transaction, John Dobozy was a director of both the company and Molectra Holdings (Mauritius) Limited.
Transactions with directors /and other related parties (continued)
During the year, the company converted an intercompany loan note with a cost of £798,545 (AUD$ 1,735,000) in exchange for a 6.3% stake in Molectra Australia Pty Limited.
At the year end, the company had a loan receivable outstanding from Molectra Australia Pty Limited of £1.7m (2007: £511,000).
26 Subsequent events
On 18 March 2009, the company repurchased 30m shares from Andrew Dickson and Peter Dickson at a cost of £300,000, representing a price of 1p per share.
On 24 March 2009, the company adopted a new share option scheme, under which the company has authority to grant options to employees or directors of, and consultants to, the company and any of its subsidiaries. The number of shares under issue cannot exceed 10% of the company's issued share capital as at the date of grant.