8 Apr 2015 07:00
8 April, 2015
SeaEnergy PLC
("SeaEnergy" or the "Company")
Unaudited Preliminary Results for the year ended 31 December 2014
SeaEnergy (AIM: SEA) announces its unaudited preliminary results for the year ended 31 December 2014.
Operational highlights:
· R2S growth and internationalisation
· Client base includes 4 of the 5 supermajors
· Group reorganisation and strategy focussed
· Business development team strengthened
Financial highlights:
· Revenues £7.4 million (2013: £5.1 million)
· Operating profit before non-recurring expenses £151,000 (2013: loss £370,000)
· Impairment to investment in Lansdowne Oil & Gas plc £2.3 million
· Loss for the year after tax of £2.5 million (2013: loss of £800,000)
· Loss per share 4.50 pence (2013: loss per share 1.45 pence)
· Net assets at 31 December 2014 £15.7 million (2013: £17.9 million)
David Sigsworth, Chairman, said:
"In the face of weaker oil prices, the Company has shown resilience by continuing to grow its client base across the globe. R2S VAM continues to show growth and attractive margin potential and as such the Board has decided to focus on that business and the complementary Consulting operation and to cease tendering for vessels. Whilst the latter has been a low cost part of the SeaEnergy portfolio, it has not delivered on its potential."
"With the growth seen through R2S and increased international activity, the Company is delighted that it has achieved its first operating profit before non-recurring expenses since implementing the services strategy in 2012. This achievement has been obscured by non-recurring expenses, in particular the impairment of our interest in Lansdowne Oil & Gas, but looking forward, the Board is confident that its new focus will enable the Company to achieve faster growth in the months and years ahead."
For further information contact:
SeaEnergy PLC |
| +44 1224 748480 |
John Aldersey-Williams, Chief Executive |
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Steven Bertram, Finance & Commercial Director |
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Stifel Nicolaus Europe Ltd - NOMAD |
| + 44 20 7710 7600 |
James Grace |
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Jessica Kalyanpur |
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Bell Pottinger - Public Relations |
| +44 20 3772 2500 |
Rollo Crichton -Stuart |
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Lucinda Alderson |
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www.seaenergy-plc.com
www.r2s.co.uk
www.seasm.com
www.lansdowneoilandgas.com
Chairman's Statement
Dear Shareholder,
Over the past year, SeaEnergy continued to make advances: we increased our international activity and achieved an operating profit before non-recurring expenses for the first time since implementing the services strategy. The move to an operating profit has been obscured by non-recurring expenses totalling £2.4 million, comprising a non-cash write-down of £2.3 million on the value of our interest in Lansdowne Oil & Gas plc and £150,000 for non-recurring costs relating to the reorganisation of the business.
In 2015 we are anticipating further growth and internationalisation, particularly in R2S VAM (Visual Asset Management), and the delivery of improved operating performance.
Strategy
When we set out our strategy in 2012, we recognised that each of the three chosen areas of activity - R2S VAM, Consulting and Marine - could grow into a strong business. After three years, it has become clear that R2S VAM and Consulting are delivering that potential while Marine has been less successful. As a result, the Board has decided to focus the Group's business on R2S VAM and Consulting, and to cease tendering for the provision of vessels. R2S VAM and Consulting offer attractive margins, strong growth potential and a high quality client list. The Chief Executive's Review describes this new focus in more detail.
Governance
The Board's principal priorities remain setting the strategy for the Group, providing leadership, ensuring that the necessary resources are available, reviewing management performance and maintaining the Group's values and standards.
The Group's vision is to be a sustainable, profitable and growing innovative energy services business, which builds strong relationships with clients and delivers sustainable shareholder returns. We expect to achieve this by prioritising our resources on the core R2S VAM and associated Consulting and visualisation activities which support our clients in reducing their costs. Work is continuing in implementing robust management systems across the Group, and we have passed Stage 1 accreditation for ISO 9001, with full accreditation expected later this year.
Risk Management and Health and Safety (HSE)
Safe operations remain a key priority across the SeaEnergy Group. Once again, I am pleased to report that SeaEnergy had no reportable HSE incidents during 2014. However, illness required one of our team members to be evacuated from Pemex's Ku-Maloob-Zaap platform complex during operations offshore Mexico, and we have incorporated the learnings and improvements which were identified in our project completion review into the risk management framework which we operate.
Personnel
In February 2015, following Board discussions, the Operations Director Mike Comerford decided to leave the business to pursue other interests. Mike made a significant contribution to SeaEnergy in its transition from a wind farm developer to an innovative energy services business, and the Board thanks him and wishes him well in his future endeavours.
Each strand of the business has a manager responsible for its operations and they all now report directly to the CEO.
During the year, the Business Development team was significantly strengthened, and we are expecting to see the continuing internationalisation of R2S VAM and associated Consulting, design and communications services as a result of this investment.
Outlook
The Group is well positioned for growth - R2S VAM is expanding internationally and showing resilience in the face of weaker oil prices. The complementary Consulting and visualisation services are developing their market positions. As already announced we have started the year with a major project for R2S VAM in a new market, Canada and are actively preparing for further work in the Gulf of Mexico.
In 2015 we are budgeting to achieve an improved operating performance. The Board is confident that the new focus on R2S VAM and Consulting will enable the Company to achieve faster growth.
David Sigsworth
Chairman
Chief Executive's Review
During 2014, SeaEnergy has seen continuing growth and internationalisation, particularly in R2S VAM and in 2015 we have focussed the Group on the businesses with the highest margin and growth potential. In this review I will describe the main developments during 2014 and the outlook for the Group for 2015.
Financial Review
Group revenue rose from £5.1 million in 2013 to £7.4 million in 2014 reflecting growth from both R2S VAM and Consulting and a first full year's activity from Marine's ship management operation.
For the first time since setting the energy services strategy in 2012, the Group reported an operating profit before non-recurring expenses of £151,000 for 2014 compared to a loss on the same basis of £370,000 in 2013. Operating expenses rose slightly by 3% from £2.2 million in 2013 to £2.3 million with expansion of the Business Development team and its activities slightly outweighing the cost reductions from previous restructuring.
The Group recorded two non-recurring expenses in 2014. The first relates to the impairment of the carrying value in the Group's investment in Lansdowne Oil & Gas plc, the fall in the market value of those shares required an impairment provision of £2.3 million to be made in 2014. The second item of £150,000 relates to the cost of the business reorganisation made during the year. In 2013 there was one non-recurring expense of £311,000 relating to Board restructuring.
In the year to 28 February 2014 R2S produced an EBITDA of £2.8 million, which was in excess of the £2.5 million required for the vendors to earn the maximum final earn-out payment of £4.6 million. SeaEnergy elected to settle the earn-out payment through the issue of 905,440 new ordinary 10p shares in the Company and £4.3 million in cash.
After reflecting the non-recurring expenses, operating expenses, net finance income and our shares of associates losses the Group recorded a pre-tax loss of £2.5 million, compared with a loss of £806,000 in 2013.
A tax provision of £75,000 has been made primarily to cover overseas taxes payable.
The use of cash in the settlement of the earn-out is also the primary reason that the Group recorded an overall cash outflow for 2014 of £4.7million (2013: outflow £824,000). At 31 December 2014 the Group had a small overdraft of £22,000 (2013: cash £4.7 million).
Strategy
We set out our strategy as an innovation-led energy services company in 2012. As we entered 2015, the Board reviewed progress against this strategy and recognised that the rapidly-growing R2S VAM software/service business has the potential to become a global business within a relatively short period of time.
In contrast, the Marine side of the business, although low cost, has not delivered value commensurate with the management effort required and business risk involved. This is a result of slower than expected development of the market, increasing competition and increased uncertainty.
Accordingly, the Board has taken the decision to focus the business on the R2S VAM and Consulting services, and to withdraw from tendering activity for new-build offshore wind farm vessels. As we had been expensing all costs for this activity there is no asset write off associated with this decision. We have commenced a review of the options open to us for the future of the now profitable ship management business.
Over the past few years, SeaEnergy has participated in a number of tenders for wind farm vessels and is recognised to have developed designs and concepts which are attractive and economic to end users. Under our focussed strategy, we will now seek opportunities to monetise our designs and intellectual property through the Consulting business.
Organisation
During the year, we made a number of organisational improvements. In April, we announced the reorganisation of the Return to Scene business, which then comprised R2S VAM, Max and Co and Forensic. We moved Max and Co and Forensic into the Consulting division, where their proven skills in making sense of complex information are best deployed to help clients and create value. This has allowed us to focus the Return to Scene subsidiary exclusively on delivery of the R2S VAM software/service. Our segmental reporting reflects this reorganisation for both 2013 and 2014.
At the same time, we expanded the business development team, recruiting additional skilled personnel and tasked that team to support all aspects of the Group's offerings. This expanded team is now pursuing opportunities for R2S VAM and Consulting services across the world, from Australia, Africa, South East Asia and Middle East, to the UK and Europe and Mexico, the United States and Canada. These efforts are already beginning to bear fruit.
R2S VAM
In the year to 31 December 2014 R2S VAM achieved record turnover of £4.1 million, maintained its growth path and broadened its client base, whilst continuing to innovate with the roll-out of R2S version 3 and the development of innovative technologies.
During the year we captured assets in the UK, United States and Mexico, and early in 2015 added Canada to this list. Our client list now includes four of the five generally recognised international oil "supermajors" (BP, Chevron, Exxon, Shell and Total) and we added our first National Oil Company client (Pemex) as a client in 2014.
The significant fall in the oil price in the latter part of 2014 has led to some operators and contractors reducing overall activity levels and downsizing but so far we have seen limited project deferrals in response to oil price weakness. Our marketing efforts emphasise, and we believe that the operators recognise, the near term cost savings generated by R2S VAM. We are also increasingly winning business in decommissioning projects. We recently completed our first decommissioning-oriented project for BP's Miller platform. Our clients are clearly recognising the value of R2S VAM in planning and implementing this phase of project life - a phase which will be accelerated for some projects by the current oil price environment.
Our newly expanded Business Development team has been broadening our marketing effort in the oil and gas sector. In the US, we now have a permanent presence in Houston, where we are building on our existing relationships with a number of major oil companies. The near term prospects in the US are of a size that we are, for the first time, seeking to establish dedicated capture teams based there.
Elsewhere around the world our participation at the major Offshore South East Asia conference (OSEA) in early December launched our presence in this region, and we have been actively following up on a number of attractive leads identified at this conference.
We are also seeking opportunities for R2S VAM in sectors other than oil and gas: during 2014 we captured and built an R2S VAM model for one of the ships under our management, and we plan to leverage this experience into the marine sector.
Consulting
Consulting recorded increased revenue of £1.3 million in 2014 in what was a transitional period during which we reorganised the Consulting activities. As part of that reorganisation in early 2014, we combined our Max and Co digital media, design and communications agency with our Forensic and Consulting activities. We have now given this part of the Group its own clear identity - SE Innovation Limited. SE Innovation will hold the Intellectual Property applied throughout the Group, and will deliver consulting, design and communication services both in support of R2S VAM and to other clients.
We have also instituted an alignment and streamlining of our business processes, tying in with our ISO 9001 accreditation activity. This will help us to identify and capture opportunities for this part of the business with the existing R2S VAM client base that are already aware of the innovation and value we offer through R2S VAM.
Our consulting work for DONG continued throughout 2014 and into the first quarter of 2015, and we have a range of additional projects secured, being bid for or identified. Our work under the Knowledge Transfer Partnership with The Robert Gordon University is progressing well, and is adding detailed technical knowledge around complex resource optimisation challenges, which are expected to lead to consulting services and product opportunities in due course.
Max and Co, our digital media agency focussed on design and communications work, has identified growth potential within existing clients as well as new prospects, and has been actively innovating improved offerings and ways of working to clients to deliver a greater contribution to the Group. The Max and Co design team has designed this year's Annual Report for the Group.
Our work on the sensitive and high profile Hillsborough Inquiry has now been concluded, and the Forensic practice continues to generate revenue. Our recent Lunch and Learn event at the Lloyd's Building in London attracted considerable interest from the Insurance and Risk management community, who recognised R2S VAM and our forensic and analytical expertise as a powerful tool for cost and risk reduction in this sector. We have also recently held a similar event in Scotland and are actively following up on a number of leads in this area.
Marine
Revenues for Marine were significantly higher in 2014 at £1.9 million reflecting the commencement of ship management activities in May. Over the past few years, SeaEnergy has developed considerable expertise in optimised designs and operational approaches for offshore wind support vessels. The Board has taken the decision that SeaEnergy should not continue to bid these vessel designs directly with the intent of participating in the ownership and operation of these vessels, as it had become clear that the financial risks and rewards were not attractive relative to other opportunities available to the Group. All costs relating to this business were expensed as they were incurred and the decision to exit that activity does not create an asset write off and should result in slightly lower operating costs going forward.
We now plan to realise value from our accumulated knowledge and expertise through the Consulting business rather than through direct participation in the market and have already identified a number of potential clients, whom we can assist in developing their own tender responses.
Following the strategic decision not to participate directly in building, owning and operating vessels, the SeaEnergy Ship Management business is no longer a core asset and we are reviewing the options open to us for that business.
Legacy Assets
It remains our plan to realise the value of our legacy oil & gas assets over time and to return a portion of any gain realised to shareholders.
Lansdowne Oil & Gas plc has successfully concluded the farm-out of its Midleton prospect to Kinsale Energy, the operator of the nearby Kinsale Head gas field and exploration drilling is being planned. Lansdowne also announced that it has reached agreement on commercial terms with a proposed farm-in partner on its Barryroe asset (Lansdowne currently 20%), offshore Ireland. The licence operator, Providence Resources, made a similar announcement in relation to its 80% licence interest. However, as this farm-in is subject to closing conditions, most specifically the proposed partner raising the required level of financing, Lansdowne has not disclosed the detailed terms, and notes that there is no certainty that the farm-in will be concluded with the proposed farm in partner.
Despite the progress reported by Lansdowne the fall in its share price has required us to make a significant impairment provision of £2.3 million against the carrying value of ourinvestment. To the extent that the Lansdowne share price recovers we may be able to reverse the impairment provision.
In addition, on 10 March 2015 Lansdowne announced that it had closed a new fund raising, funding its activities through to the end of 2015. As SeaEnergy did not participate in this placing, our shareholding in Lansdowne Oil & Gas plc has been diluted to 18.72%.
SeaEnergy continues to be optimistic that Lansdowne will secure a farm-out deal on the Barryroe licence and we believe the value and the marketability of interest in Lansdowne will be clearer at that time.
We continue to monitor activity on our other legacy assets. Our UK royalty interest in Block 21/8a, containing the Scolty discovery, still awaits submission of a Field Development Plan, and the operator of our Bulgarian royalty interest is making development plans but has yet to produce gas at commercial rates.
Former executive chairman Mr Steve Remp retired from the Group in January 2012. As part of his severance arrangements Mr Remp took over two subsidiary companies with disputed non-core interests in Montenegro. Under these arrangements the Group retained the right to participate in any future realisations from those companies, up to a maximum amount of US $20 million.
The Board was pleased to learn that Mr Remp has secured the funding to pursue a substantial arbitration claim against the Government of Montenegro in relation to the disputed joint venture interests held by one of the two subsidiaries. He is supported by a legal team led by international law firms Steptoe & Johnson and Vinson & Elkins. To assist with the completion of these funding arrangements the Group has agreed to a modification of the 2012 agreement to facilitate the pursuit of the claim but the cap of US $20 million remains unchanged and, consistent with its previous statements, the Group is providing no part of the funding of the arbitration process.
Culture
We are building and enhancing our innovative and collaborative culture in a number of ways:
· All employees are encouraged to volunteer and develop ideas on how the business can innovate
· Our accreditation under ISO 9001, where we achieved stage 1 in early 2015
· We have added a number of staff members through the year, to bring additional capacity, particularly in R2S VAM, and also fresh ideas and intellectual firepower which can further improve how we work and what we offer
Outlook
SeaEnergy has refined the strategy we set out in 2012 and is now focussed on the parts of the business with the strongest growth potential, most attractive financial characteristics and best established client list. We expect to see strong internationalisation in R2S VAM in 2015, and more opportunities for additional complementary services being delivered in support of this and overall SeaEnergy looks forward to 2015 with confidence that it will deliver growth for shareholders.
John Aldersey-Williams
Chief Executive
SeaEnergy PLC
Consolidated Balance Sheet
As at 31 December 2014
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| 2014 | 2013 |
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| Unaudited | Audited |
| Note | £'000 | £'000 |
Assets |
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Non- current assets |
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Goodwill and other intangible assets |
| 11,912 | 11,943 |
Property, plant & equipment |
| 270 | 254 |
Investments in associates | 4 | 2,981 | 5,461 |
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| 15,163 | 17,658 |
Current assets |
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Trade and other receivables |
| 2,722 | 1,615 |
Deferred income tax asset |
| - | 44 |
Cash and cash equivalents |
| - | 4,677 |
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| 2,722 | 6.336 |
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Total assets |
| 17,885 | 23,994 |
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Liabilities |
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Current liabilities |
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Trade and other payables |
| (1,796) | (5,644) |
Bank overdraft |
| (22) | - |
Provisions |
| (12) | (10) |
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| (1,830) | (5,654) |
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Non-current liabilities |
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Deferred income tax liabilities |
| (350) | (448) |
Other non-current liabilities |
| (2) | (6) |
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| (352) | (454) |
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Total liabilities |
| (2,182) | (6,108) |
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Net assets |
| 15,703 | 17,886 |
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Shareholders' equity |
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Ordinary shares | 5 | 5,636 | 5,546 |
Treasury shares | 5 | (500) | (500) |
Share premium | 5 | 1,225 | 1,000 |
Redemption reserve | 5 | 1,920 | 1,920 |
Special reserve | 6 | 1,404 | 1,404 |
Retained earnings | 6 | 6,018 | 8,516 |
Total equity |
| 15,703 | 17,886 |
SeaEnergy PLC
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2014
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2014 |
2013 |
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| Unaudited | Audited |
| Note | £'000 | £'000 |
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Continuing operations |
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Turnover |
| 7,349 | 5,032 |
Rental income |
| 99 | 90 |
Revenue |
| 7,448 | 5,122 |
Cost of sales |
| (5,038) | (3,295) |
Gross profit |
| 2,410 | 1,827 |
Operating expenses |
| (2,259) | (2,197) |
Non-recurring expenses |
| (150) | (311) |
Operating profit / (loss) |
| 1 | (681) |
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Finance income |
| 34 | 54 |
Finance costs |
| (7) | (3) |
Finance income - net |
| 27 | 51 |
Impairment of investment in associate | 4 | (2,255) | - |
Share of results of associates and other movements |
| (225) | (174) |
Loss before income tax |
| (2,452) | (804) |
Income tax expense |
| (75) | (2) |
Loss from continuing operations |
| (2,527) | (806) |
Attributable to: |
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Owners of the parent |
| (2,527) | (806) |
Loss for year |
| (2,527) | (806) |
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Loss per share | 2 |
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Basic |
| (4.50p) | (1.45p) |
Diluted |
| (4.50p) | (1.45p) |
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SeaEnergy PLC
Consolidated Statement of Changes in Equity
For the year ended 31 December 2014
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| Group | Share capital £'000 | Treasury shares £'000 | Share premium £'000 | Redemption reserve £'000 | Special reserve £'000 | Retained earnings £'000 | Total equity £'000 | |||||||
| Audited |
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| At 1 January 2013 | 5,546 | (500) | 1,000 | 1,920 | 1,404 | 9,280 | 18,650 | |||||||
| Loss for the financial year | - | - | - | - | - | (806) | (806) | |||||||
| Share based payment transactions | - | - | - | - | - | 42 | 42 | |||||||
| At 31 December 2013 | 5,546 | (500) | 1,000 | 1,920 | 1,404 | 8,516 | 17,886 | |||||||
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| Unaudited |
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| At 1 January 2014 | 5,546 | (500) | 1,000 | 1,920 | 1,404 | 8,516 | 17,886 | |||||||
| Loss for the financial year | - | - | - | - | - | (2,527) | (2,527) | |||||||
| Share based payment transactions | - | - | - | - | - | 29 | 29 | |||||||
| Issue of new shares | 90 | - | 225 | - | - | - | 315 | |||||||
| At 31 December 2014 | 5,636 | (500) | 1,225 | 1,920 | 1,404 | 6,018 | 15,703 | |||||||
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SeaEnergy PLC
Consolidated Statement of Cash Flows
For the year ended 31 December 2014
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Note |
2014 |
2013 |
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| Unaudited | Audited |
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| £'000 | £'000 |
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Net cash used in operating activities | 7 | (73) | (934) |
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Cash flows from investing activities |
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Disposal of subsidiary undertaking |
| - | 849 |
Interest received |
| 16 | 80 |
Acquisition of intangible assets |
| (137) | (133) |
Acquisition of property, plant and equipment |
| (121) | (134) |
Proceeds from sale of property, plant & equipment |
| 19 | - |
Acquisition of subsidiary net of cash acquired |
| (4,285) | (500) |
Net cash generated by / (used in) investing activities |
| (4,508) | 162 |
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Cash flows from financing activities |
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Interest paid |
| (6) | (2) |
Tax paid |
| (129) | (17) |
Payment of finance lease liabilities |
| (4) | (32) |
Net cash used in financing activities |
| (139) | (51) |
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Effect of exchange rate fluctuations on cash held |
| 21 | (1) |
Net decrease in cash and cash equivalents |
| (4,699) | (824) |
Opening cash and cash equivalents |
| 4,677 | 5,501 |
Closing cash and cash equivalents |
| (22) | 4,677 |
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Notes to the Financial Information
For the year ended 31 December 2014
1. Basis of Presentation
The consolidated financial information for the year ended 31 December 2014 has been prepared on the basis of International Financial Reporting Standards ("IFRS") accounting policies to be adopted in the financial statements for the year ended 31 December 2014.
The Directors, having reviewed the Group and Company's budget for the next year, and other long term plans, are satisfied that the Group and Company have adequate resources and borrowing facilities to continue in operational existence for the foreseeable future and that therefore it is appropriate to continue to adopt the going concern basis in preparing these accounts.
The financial information for the years ended 31 December 2013 and 2014 contained in this document does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the years ended 31 December 2013 and 2014 has been extracted from the consolidated financial statements of SeaEnergy PLC for the year ended 31 December 2014.
The statutory accounts for the year ended 31 December 2014 will be delivered to the Registrar of Companies, and it is expected that the report of the auditors on those accounts will be unqualified. The comparative figures for the financial year ended 31 December 2013 are the equivalent of the Company's statutory accounts for that financial year. Those accounts, which were prepared under IFRS, have been reported on by the Company's auditors and delivered to the registrar of companies. The auditors issued an unqualified opinion on those accounts.
2. Loss per Ordinary Share
Loss per share attributable to owners of the parent arise from continuing operations as follows:
| (pence per share) | |
| 2014 | 2013 |
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- basic | (4.50) | (1.45) |
- diluted | (4.50) | (1.45) |
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The calculations were based on the following information.
| £'000 | £'000 |
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Loss attributable to owners of the parent | ||
- continuing operations | (2,527) | (806) |
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Weighted average number of shares in issue |
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- basic | 56,104,354 | 55,459,383 |
- diluted | 56,104,354 | 55,459,383 |
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For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Company has one class of potential ordinary shares; share options. Only share options that are exercisable at the reporting date are potential ordinary shares. The lowest exercise price of exercisable share options is 34 pence per share. This is above the average market price of the shares in issue for the year, therefore the exercise of the share options would have the effect of reducing the loss per share and consequently is not taken into account in the calculation for diluted loss per share.
3. Segmental Reporting
| R2S VAM £'000 | Consulting £'000 | Marine £'000 | Corporate £'000 | Group £'000 |
2014 |
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Turnover | 4,116 | 1,291 | 1,942 | - | 7,349 |
Rental Income | - | - | - | 99 | 99 |
Revenue |
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| 7,448 |
Non-recurring expenses | (148) | - | - | (2) | (150) |
Operating profit/(loss) | 2,109 | 180 | (79) | (2,059) | 151 |
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| 1 |
Finance income net |
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| 27 |
Share of associates including impairment provision ( oil & gas) |
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| (2,480) |
Taxation |
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| (75) |
Loss for the year |
|
|
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| (2,527) |
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2013 |
|
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|
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Turnover | 3,681 | 1,150 | 201 | - | 5,032 |
Rental Income | - | - | - | 90 | 90 |
Revenue |
|
|
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| 5,122 |
Non-recurring expenses | - | - | - | (311) | (311) |
Operating profit/(loss) | 1,878 | 143 | (383) | (2,008) | (370) |
|
|
|
|
| (681) |
Finance income net |
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|
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| 51 |
Share of associates ( oil & gas) |
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|
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| (174) |
Taxation |
|
|
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| (2) |
Loss for the year |
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| (806) |
4. Investments
| £'000 |
Investments in associates |
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At 1 January 2013 | 5,635 |
Other net asset movements | 38 |
Share of loss for year | (212) |
At 31 December 2013 | 5,461 |
|
|
At 1 January 2014 | 5,461 |
Other net asset movements | 19 |
Share of loss for year | (244) |
Impairment provision | (2,255) |
At 31 December 2014 | 2,981 |
|
|
|
|
The impairment provision relates to the carrying value in the Group's investment in Lansdowne Oil & Gas plc. The fall in the market value of those shares was deemed an indicator of impairment and an impairment review was carried out. As a result an impairment provision of £2.3 million was made in 2014.
The Group's share of the results of its principal associates and its aggregated assets and liabilities are as follows:
Name | Country of incorporation | Status | Assets | Liabilities | Revenues | Loss | Per cent. interest held in ordinary shares by Group |
|
|
| £'000 | £'000 | £'000 | £'000 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lansdowne Oil & Gas plc | England | AIM listed | 6,195 | (959) | - | (244) | 21.48 |
|
|
|
|
|
|
|
|
Mesopotamia Petroleum Company Limited* | England | Private | - | - | - | - | 40.21 |
|
|
|
|
|
|
|
|
The closing mid-market price for Lansdowne at 31 December 2014 was 9.875p per share (2013: 24p per share).
Following a placing by Lansdowne Oil & Gas plc in March 2015 the Group's interest in Lansdowne was diluted to 18.72%.
* Mesopotamia Petroleum Company Limited had net liabilities at 31 December 2013. The investment was written down to nil during 2009.
5. Share Capital and Premium
Date |
|
Number of shares (thousands) |
Ordinary shares £'000 |
Treasury shares £'000 |
Share premium £'000 |
Redemption reserve £'000 | Total £'000 |
At 31 December 2013 |
| 55,546 | 5,546 |
(500) |
1,000 | 1,920 | 7,966 |
9 April 2014 | Issue of shares | 905 | 90 |
- |
225 | - | 315 |
|
|
|
|
|
|
|
|
At 31 December 2014 |
| 56,451 | 5,636 |
(500) |
1,225 | 1,920 | 8,281 |
On 9 April 2014 the Company issued 905,440 new ordinary shares of 10 pence each at a price of 34.9 pence per share as part of the R2S Earn-out.
The principal trading market for the shares in the UK is the London Stock Exchange's Alternative Investment Market ("AIM") on which the shares have been traded since 14 November 1996.
6. Retained Earnings and Special Reserve
Retained Earnings |
|
|
|
| £'000 |
|
|
At 1 January 2013 | 9,280 |
Loss for the financial year | (806) |
Share based payments charge | 42 |
At 31 December 2013 | 8,516 |
|
|
|
|
At 1 January 2014 | 8,516 |
Loss for the financial year | (2,527) |
Share based payments charge | 29 |
At 31 December 2014 | 6 |
Special Reserve | £'000 |
|
|
As at 1 January 2013, 31 December 2013 and 31 December 2014 | 1,404 |
|
|
The Special Reserve was created in 2011 and represents the balance held by the Company pursuant to an Undertaking which it was required to give the Court in respect of creditor protection. The Undertaking required the transfer of £78.075 million from the Share Premium account to a Special Reserve upon the grant of the Court Order. In accordance with the terms of the Undertaking the Special Reserve has been reduced to £1.4 million and will be further reduced, and become distributable, as and when the related obligations at the date of the Court Order are satisfied.
7. Reconciliation of Loss before Income Tax to Cash used in Operations
|
2014 | 2013 |
|
£'000 | £'000 |
|
|
|
Loss for year from continuing operations | (2,452) | (804) |
Loss before tax | (2,452) | (804) |
Adjustments for: |
|
|
Net finance income | (27) | (51) |
Impairment of investment | 2,255 | - |
Depreciation of property, plant and equipment | 102 | 98 |
Gain on sale of property, plant & equipment | (16) | - |
Amortisation of intangible assets | 168 | 153 |
Equity settled share-based payment transactions | 29 | 42 |
Share of associate loss and other movements | 225 | 174 |
Operating cash flows before movements in working capital |
284 | (388) |
|
|
|
Change in trade and other receivables | (1,114) | (822) |
Change in trade and other payables | 755 | 274 |
Change in provisions | 2 | 2 |
Net cash used in operating activities |
(73) | (934) |
8. Related Party Transactions
(a) Directors of the Company
In addition to his role as a Non-Executive Director, D Laing is a partner in Ledingham Chalmers LLP, legal advisers to the Company. The Company incurred legal fees of £2,000 (2013: £2,000) for services provided by Ledingham Chalmers LLP.
(b) Directors of Return to Scene Limited
In addition to her role as a Director of wholly owned subsidiary R2S, S Khan is a partner in Nathan Maknight, Chartered Accountants. R2S incurred accountancy fees of £25,000 in the year to 31 December 2014 (2013: £15,000) for services provided by Nathan Maknight.
(c) Associates
The Group has made payments for administrative expenses on behalf of its associate company Mesopotamia
Petroleum Company Limited ("MPC"). The balance owed by MPC to the Group as at 31 December 2014 is
£465,000 (2012: £430,000). It is unsecured. In January 2011 the Company, along with all other MPC creditors,
agreed to defer the amount owed by MPC until January 2013. The Company has subsequently extended the deferred period. No interest is charged and no guarantee has been given. The Company has made full provision against this debt.
(d) Compensation of Key Management Personnel
| 2014 £'000 | 2013 £'000 |
Short term employee benefits | 1,339 | 1,352 |
Post-employment benefits | 181 | 126 |
Share based payment | 29 | 33 |
National insurance | 168 | 170 |
| 1,717 | 1,681 |
C Moar resigned as a Director on 18 June 2013 and is included in the table above for 2013
9. Business Combination
(a) Acquisition of Return to Scene Limited ("R2S")
On 23 August 2012, the Group acquired the entire issued share capital of R2S an unlisted company based in
Aberdeen and specialising in Visual Asset Management. The Group acquired R2S in line with its strategy of
building and acquiring innovative and complementary energy services businesses.
Purchase consideration | Paid | £'000 |
Initial cash consideration | August 2012 | 5,000 |
Deferred cash consideration | March 2013 | 500 |
Earn-out consideration | April 2014 | 4,600 |
Total consideration |
| 10,100 |
Deferred cash consideration
In accordance with the purchase agreement contingent consideration of £500,000 was due to the vendors of
R2S subject to certain revenue targets being met. These targets were met in February 2013 and accordingly the
payment of £500,000 was made to the vendors in March 2013.
Earn-out consideration
Additional Earn-out consideration totalling £4.6 million became payable in April 2014 as the R2S EBITDA for the year ending 28 February 2014 exceeded the target of £2.5 million. The £4.6 million was settled in April 2014 by the payment of £4.3 million of cash and the issue of 905,440 new 10p ordinary shares in SeaEnergy PLC at an issue price of 34.9p being the average mid-market price for the 5 days prior to issue. No further amounts are payable and the acquisition Earn-out is complete.
(b) Eagle HC Limited
On 14 May 2008 the Group acquired Eagle HC Limited ("Eagle"). Eagle owns a portfolio of North Sea royalty interests that were accumulated by Exploration Geosciences Limited ("EGL"). Consideration totalling £1.75 million was paid in 2008 through the issue of 4,173,648 ordinary shares in the Company.
A further £500,000 becomes payable when cash flow from the royalty portfolio commences. All such contingent
consideration can be settled at the Company's option, either in cash or through the issue of new shares.
Eagle was non-trading during the financial year and had no effect on the Group profit and loss account for the year.
While there is no evidence of impairment to the assets since their purchase, the projects remain at an early stage,
with a Field Development Plan over one of royalty areas, expected to be submitted shortly. Consequently the Board believes it is too early for it to determine that the final sum of £500,000 will be payable or to develop a reliable estimate of when any cash flows from production might arise. It therefore has not recognised a liability (and additional goodwill) for this contingent deferred consideration.
10. Contingent Liability
Under the terms of a joint venture ("JV") agreement dated 26 February 2009 between the Iraqi Drilling Company ("IDC") and the Company's associate Mesopotamia Petroleum Company Limited ("MPC"), MPC was required to confirm its share of the initial JV funding by a prescribed date and failure to do so was to result in liability for a penalty of US $2.2 million. MPC's liability for this penalty was guaranteed jointly and severally by the Company, another MPC shareholder and an associate of that shareholder.
In July 2009 IDC unilaterally purported to terminate the JV while MPC argued that it was entitled to an extension of the date by which its share of JV funding was to be confirmed.
In October 2011 IDC commenced an action against MPC in the Specialised Commercial Court in Baghdad
claiming payment of the penalty sum. A Power of Attorney has been provided to local counsel to allow them to manage Court proceedings as appropriate. A series of postponements followed while certain documents were translated into Arabic as required by the Court. On 28 August 2012 the Court ruling decided against MPC and upheld the first decision that it is liable to pay the penalty. MPC has appealed against this decision and its directors are reviewing the Court's latest decision and the options available to it. As at the date of issue of these results, no further Court rulings have been announced since August 2012 and it is unclear when the next ruling will be made.
11. Annual Report, Financial Statements and Annual General Meeting
The Annual Report and Financial Statements, including the Notice of the Annual General Meeting, will be posted to shareholders shortly and will be available from the Company's website www.seaenergy-plc.com and from Britannia House, Endeavour Drive, Arnhall Business Park, Westhill, Aberdeenshire AB32 6UF.