QFI.L Regulatory News (QFI)

25 Mar 2008 07:01

Quadrise Fuels International PLC25 March 2008 25 March 2008 Quadrise Fuels International plc Interim Results for the six months ended 31 December 2007 Quadrise Fuels International plc, the specialist producer of low cost emulsionfuels for use in power generation plants and other large scale steam raising andenergy consuming industries, announces its interim results for the six monthsended 31 December 2007. Highlights • The Company has made considerable progress in advancing its business over the past six months since last reporting to shareholders • Awareness and acceptance of the Quadrise re-fuelling proposition continues to grow as the Company enters the early adoption phase • Two lead projects are entering an accelerated development phase - an oil field steam flooding project and a power plant refuelling • The Company intends raising limited additional equity funds by mid 2008 for the two lead projects expected to progress to full development within 12 months • Operating costs, including both administrative overheads and project development expenses, were contained within budget • Akzo Nobel has formally confirmed the extension of the prime term of the Alliance Agreement by 2 years to end 2011 Commenting, Bill Howe, Chief Executive Officer, said: "Quadrise has made valuable progress on several fronts but the prime focus hascontinued to be on the early delivery of our lead projects. We now expect tocontract with clients and progress two lead projects to full-scale developmentwithin a 12 month time horizon. Commercialisation through these projects remainsour clear priority, but we are also active in positioning Quadrise in selectivedeveloping oil producing economies, which have longer-term commitment to oilfired power. The pre-commercial phase of our lead projects has taken longer thananticipated, but I am greatly encouraged by the traction now achieved at theproject level, the enthusiasm of our clients, and the commitment of our staffand associates." For additional information, please contact: Quadrise Fuels International plc +44 (0)20 7550 4930Ian WilliamsBill HoweHemant Thanawala Smith & Williamson Corporate Finance Limited +44 (0) 20 7131 4000Azhic BasirovSiobhan Sergeant Capital MS&L +44 (0) 20 7307 5330Penny FreerSteffan WilliamsJennifer Martin Chairman and CEO Statement Business Review The strategic review completed mid 2007 set the future priorities and path tocommercialisation for the Quadrise business. The strategy has two principalthrusts which are being progressed in parallel. These are: • to select and secure early re-fuelling project opportunities in OECD territories which will create active commercial installations providing a path to revenue, and live demonstration facilities. • to position Quadrise in the longer term for fuelling major energy consuming developments in oil producing countries like Saudi Arabia, Kuwait and Mexico where oil based power generation will continue and grow. In the six months to December 2007 significant progress was made on all frontswithin the framework of this guiding strategy. Power Plant Refuelling Experience has tempered our earlier expectations of lead times to closingre-fuelling project contracts. In practice the development stages aresequential, progressing on success. Quadrise is currently pursuing the refuelling of three oil fired power plantslocated in North America and Europe. Our lead power plant refuelling project isthe alignment of a major European refiner and a power company to create an MSARmanufacturing facility. Significant progress has been made on this project: • An MSAR manufacturing facility will be established on the refiner's site during Spring 2008. • This facility will supply sufficient fuel for one month of operation of a super-critical power plant fitted with advanced pollution control facilities that meet stringent European environmental standards. • MSAR fuel will be produced and sold under separate agreements under negotiation with the refinery and power company. • Commercial rates will apply to the initial batch of MSAR fuel, largely offsetting Quadrise's production costs of US$5 million. • Subject to finalisation of contracts, Quadrise will install a permanent MSAR production facility at the refinery capable of servicing 600MWe of base-load power from end 2009. In addition, two North American opportunities are following a similar process ofalignment between identified refineries and power companies. These projects aretrailing the European development by approximately six months. Oil Field Development Our second lead project is underway with a European oil company involved with aWestern Hemisphere oil field where production is currently in decline. MSAR fuelwill be combusted to raise steam which will increase the production of some 5000wells in the oil field. • MSAR technology provides the only feasible short-term solution for steam generation and the economics are very favourable. • The prospective benefits of MSAR are sufficiently attractive for the oil company to reimburse Quadrise for its costs for the technical development of the project. • Subject to project development approval, we expect to establish a permanent MSAR production facility on site within 12 months. • The capacity of this plant would be expanded progressively, to potentially more than 500,000 tonnes of MSAR per annum. Quadrise owes the growing momentum in progressing its lead prospects to the highcalibre expertise of its management team and its keen focus on projects withpositive economic fundamentals for MSAR technology. Whilst we still have hurdlesto overcome, we are optimistic that these lead projects will demonstrate thecommercialisation of the technology and facilitate its wider application inQuadrise's other target markets. Quadrise Canada Corporation (QCC) QCC, in which the Company presently holds approximately 19% of the equity, had avery successful period from an operating perspective. Extensive large scaletrials were conducted at the R&D facilities of Alsthom Power in Connecticut,USA. These trials were attended by many oil and power sector representatives,including potential Quadrise customers. Visitors were impressed by the technicalperformance and pollution characteristics of MSAR fuel. QCC also made positiveprogress on new technical initiatives, including successful first patentregistration of their proprietary CO2 capture technology. These initiatives holdhigh promise for the future. QCC's core market, manufacture of MSAR as a steam raising fuel for heavy oilproduction in Canada, continues to hold high potential. This market has howeversuffered implementation delays due to the magnitude of the projects, as well asfiscal and permitting issues. This has coincided with a fund raising cycle and has resulted in QCC's early2008 fund raising being set, on advice, at C$3.00 per share. This is asubstantially lower price than had been anticipated. The Quadrise boardconsiders this reduction in price to be an aberration reflecting the verydifficult current financial market conditions and believes that the fundamentalsof the QCC core business remain extremely positive. In the circumstances the board of Quadrise has decided that a value of C$6.00 should be applied to our holding at this time. This results in a write down of £4.45 million in the value of our QCC shareholding in our interim accounts. Akzo Nobel Akzo Nobel works very closely with the Company and continues to provide valuedtechnical support to all our projects. Recognising the progress made by Quadrise in developing its lead opportunities,Akzo Nobel has formally agreed to extend the date of first notice of terminationof the Alliance Agreement under which Quadrise operates by a further two years.The Alliance Agreement will now run until at least December 2011. Ian WilliamsChairman Bill HoweChief Executive Officer Consolidated Income StatementFor the 6 months ended 31 December 2007 6 Months 6 Months Note ended ended 18 Months 31 December 31 December ended 2007 2006 30 June 2007 Unaudited Unaudited Audited £'000 £'000 £'000Continuing operations Other income 11 94 287 Write-off of goodwill on acquisition - - (584) Write-down of investments 6 (2,445) - - Amortisation of intangible assets (3,456) (3,456) (8,646) Administration expenses (1,298) (919) (3,439) ------- ------- --------Operating loss 3 (7,188) (4,281) (12,382) Finance costs - - (126) Finance revenue 155 247 507 Loan write-off gain - - 115 Foreign exchange (losses)/gains (343) 3 10 ------- ------- --------Loss before taxation (7,376) (4,031) (11,876) Taxation - - (41) ------- ------- --------Loss for the period from continuing operations (7,376) (4,031) (11,917) ------- ------- -------- Loss per share - pence Basic 4 (1.59) p (0.95) p (2.74) p Diluted 4 (1.59) p (0.95) p (2.74) p Consolidated Balance SheetAs at 31 December 2007 As at As at As at 31 December 31 December 30 June 2007 2006 2007 Unaudited Unaudited Audited Notes £'000 £'000 £'000 Assets Non-current assets Intangible assets 5 24,585 31,521 28,041 Available for sale investments 6 11,684 15,914 16,131 Equipment 1 1 1 ------ ------ ------Non-current assets 36,270 47,436 44,173 ------ ------ ------Current Assets Cash and cash equivalents 4,787 10,615 5,874 Trade and other receivables 247 206 66 Prepayments 5 43 7 ------ ------ ------Current Assets 5,039 10,864 5,947 ------ ------ ------TOTAL ASSETS 41,309 58,300 50,120 ------ ------ ------Equity and liabilities Non-current liabilities Deferred tax - 600 - ------ ------ ------Non-current liabilities - 600 - ------ ------ ------Current liabilities Trade and other payables 688 3,906 755 Tax payable - 39 - ------ ------ ------Current liabilities 688 3,945 755 ------ ------ ------Equity attributable to equity holders of the parent Issued capital 4,617 4,617 4,617 Share premium 53,634 53,565 53,634 Revaluation reserve - 2,002 2,002 Other reserves 1,663 276 1,029 Accumulated losses (19,293) (6,705) (11,917) ------- ------ -------Total shareholders' equity 40,621 53,755 49,365 ------- ------ ------- TOTAL EQUITY AND LIABILITIES 41,309 58,300 50,120 ------- ------ ------- Consolidated Statement of Changes in EquityFor the 6 months ended 31 December 2007 Accumulated Share Share Revaluation Share Foreign Reverse Total Losses Capital Premium reserve Option currency acquisition reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Loss for the financial period (7,376) - - - - - - (7,376) Revaluation of QCC shares - - - (2,002) - 342 - (1,660) Share options reserve - - - - 292 - - 292 ------ ----- ----- ------ ----- ---- ----- ------Net change in shareholders' equity (7,376) - - (2,002) 292 342 - (8,744) Shareholders' equity broughtforward at 1 July2007 (11,917) 4,617 53,634 2,002 507 - 522 49,365 ------- ----- ------ ------ ----- ---- ----- ------Shareholders' equity at 31 December 2007 (19,293) 4,617 53,634 - 799 342 522 40,621 ------- ----- ------ ------ ----- ---- ----- ------ Consolidated Cash Flow StatementFor the 6 months ended 31 December 2007 6 Months 6 Months 18 Months ended ended ended 31 December 31 December 30 June 2007 2006 2007 Unaudited Unaudited Audited £'000 £'000 £'000 Operating activities Loss before tax from continuing operations (7,376) (4,031) (11,876) Interest expense - - 126 Interest income (89) (247) (507) Income tax paid - - 41 Write-down of investments 2,445 - - Write-off of goodwill on acquisition - - 584 Write-down of intangibles 3,456 3,456 8,646 Foreign exchange gain 343 (3) (10) Share-based payments expenses 292 - 507 Write-off of capitalised development costs - 856 911 Forex gain/(loss) on investments - (104) (115) ------ ------- -------Working capital adjustments (929) (73) (1,693) Increase in trade and other receivables (186) (206) (73) (Decrease)/increase in trade and other payables (127) 181 (427) ------- ------- -------Cash outflows from operations (1,242) (98) (2,193) Interest paid - - (126) Income tax paid - - (41) ------- ------- -------Net cash outflows from operating activities (1,242) (98) (2,360) ------- ------- ------- Investing activities Purchase of investments held-for-sale - - (845) Acquisition of subsidiaries, net of cash acquired - - (3,416) Interest received 155 247 507 ------- ------- -------Net cash inflows/(outflows) from investing activities 155 247 (3,754) ------- ------- ------- Financing activities Proceeds from issue of shares - - 12,940 Transaction costs incurred with share issues - - (952) Net cash inflows from financing activities - - 11,988 Net (decrease)/increase in cash and cash equivalents (1,087) 149 5,874 Cash and cash equivalents at the beginning of the year 5,874 10,466 - ------- ------ ------Cash and cash equivalents at the end of the year 4,787 10,615 5,874 ======= ====== ====== Notes 1. General Information Quadrise Fuels International plc ("QFI", "Quadrise", "Company") and itssubsidiaries ("the Group") are engaged principally in the manufacture andmarketing of emulsified fuel for power generation and steam raising activities.The Company's ordinary shares are listed on the AIM market of the London StockExchange. QFI, the legal parent company, was incorporated on 22 October 2004 as a limitedcompany under the Companies Act with registered number 05267512. It isdomiciled at, and is registered at Parnell House, 25 Wilton Road, London SW1V1YD. 2. Basis of Preparation The interim accounts have been prepared in accordance with InternationalFinancial Reporting Standards and on the basis of the accounting policies setout in the June 2007 annual report and accounts. The interim report is unauditedand does not constitute statutory accounts as defined in Section 240 of theCompanies Act 1985, but is based on the latest statutory accounts. These accountsupon which the auditors issued an unqualified opinion, have been delivered tothe registrar of companies. The interim report for the six months ended 31 December 2007 was approved by theDirectors on 20 March 2008. 3. Operating loss Operating loss is stated 6 Months ended 6 Months ended 18 Months endedafter charging: 31 December 2007 31 December 2006 30 June 2007 Unaudited Unaudited Audited £'000 £'000 £'000 Goodwill write off - - 584 Amortisation charge on intangible assets 3,456 5,188 8,646 Investment write-off - refer note 6 2,445 - - Share option charge 292 - 507 4. Loss Per Share The calculation of loss per share is based on the following loss and number ofshares: 6 Months ended 6 months ended 18 Months ended 31 December 2007 31 December 2006 30 June 2007 Loss for the period from (7,376) (4,031) (11,917)continuing operations (£000's) Weighted average number of shares: Basic 461,726,857 424,774,023 435,424,442Diluted 461,726,857 424,774,023 435,424,442 Loss per share: Basic (1.59) p (0.95) p (2.74) pDiluted (1.59) p (0.95) p (2.74) p 5. Intangible assets £'000Intellectual Property Cost At 1 July 2007 36,687Additions - ------At 31 December 2007 36,687 ------Amortisation At 1 July 2007 (8,646)Charge for the period (3,456) -------At 31 December 2007 (12,102) --------Net book value at 31 December 2007 24,585 --------Net book value at 1 July 2007 28,041 -------- Intangibles include intellectual property of £36.7m acquired from QuadriseInternational Ltd., on 19 April 2006, which comprises assets of finite andinfinite life. Quadrise Canada Corporation's royalty income of £7.7m and theMSAR Trade name of £3.1m are termed as assets having infinite life and hencenot amortised. The remaining intangibles amounting to £25.9m, which is primarilymade up of technology and know-how, are considered as finite assets andamortised over 45 months. The Board has adopted an amortisation policy on thoseassets, which have a finite life. As a consequence of adopting this policy, anon-cash charge of £3.5m has been recognised in the income statement during theperiod. 6. Available for Sale Investments Unquoted securities represent the Group's investment in Quadrise CanadaCorporation and Paxton Corporation, both of which are incorporated in Canada. Asat the balance sheet date the Group held a 19.19% share in the ordinary issuedcapital of Quadrise Canada Corporation and a 7.77% share in the ordinary issuedcapital of Paxton Corporation. The Directors do not consider that they havesignificant influence over either entity and as such these investments are notaccounted for as associates. As at the period end, the directors have performed a review of the fair value ofthe unquoted securities. Due to the lack of an active market in either of thesecurities, the directors considered other factors such as past equity placingpricing and independent assessment of risked net present value of theenterprises to arrive at their conclusion of the fair value. As a result of thatreview, the directors have concluded that the carrying value of Quadrise CanadaCorporation should be adjusted to C$6.00 per share in the accounts. The mostrecent independent assessment of the risked net present value of the enterpriseis however C$16.65. With regard to Paxton Corporation, the directors haveconcluded from their review that no adjustment is necessary as at the periodend. 7. Copies of the announcement Copies of the announcement will be available on the Company's website atwww.quadrisefuels.com and from the Company's registered office, Parnell House,25 Wilton Road, London SW1V 1YD for a period of one month. This information is provided by RNS The company news service from the London Stock Exchange