Cleantech Building Materials plc

Transcription

1 Cleantech Building Materials plc INTERIM UNAUDITED FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2018 Registered Number: (England and Wales)

2 CONTENTS OF THE FINANCIAL STATEMENTS PAGE Interim Management Report 2 Unaudited consolidated Income Statement and Statement of Comprehensive Income 4 Unaudited consolidated Financial Position Statement 5 Unaudited consolidated Statement of Changes in Equity 6 Unaudited consolidated Cash Flow Statement 8 Notes to the consolidated Financial Statements 9-11

3 INTERIM MANAGEMENT REPORT Strategy and Objectives The CBM Group set the following primary strategic objectives for 2018: 1. To secure the land, permitting and financing required to commence the construction of its own Accoya wood manufacturing facility in China to enable the commercial production of its own Accoya wood during To increase sales of Accoya wood imported from Europe both to new and existing wholesalers, and directly to wood manufacturers. 3. To build commercial relationships with large-volume Chinese wood manufacturers in anticipation of significant Accoya wood capacity increase in the Chinese and ASEAN markets once the Group has commenced its commercial production of Accoya wood. The Group has made significant progress towards achieving these objectives during the six months ended 2018, including entering into several Offtake Distribution Agreements for the sale of Accoya wood during the period of , and the advanced stage negotiation of an agreement with a Chinese chemical group for the financing, construction and operation of its own Accoya wood manufacturing facility in China. Financial Review of the Business The CBM Group s revenues for the six months ended 2018 amounted to 385,000 (six months ended 2017: 294,000). The revenues were limited by the constrained supply of Accoya wood from Titan Wood Limited ( Titan Wood ), which is the Group s licensor and a wholly-owned subsidiary of Accsys Technologies plc ( Accsys ). Titan Wood is currently the sole worldwide producer of Accoya wood. There continues to be strong demand for Accoya wood from the Group s distributors. Accsys has announced that the first stage of Accsys Arnhem factory expansion was completed in June 2018, and the Group is now expecting additional volume allocation from the newly increased production capacity, which is expected to be available during the fourth quarter of 2018 and into The Group realised a net loss of 2,169,000 for the six months ended 2018 (six months ended 2017: 2,209,000). The net loss for the current period was mainly due to salaries and professional costs, and a lower than expected contribution margin from sales. Since reaffirming its Accoya licence agreement with Titan Wood in 2014, the CBM Group has been investing to increase its marketing and sales activities and has successfully appointed seven wholesalers and distributors of AccoyaÒ wood in the China and ASEAN regions. The Group has entered into two new Offtake Distribution agreements during the first half of 2018 with Seedatanarice of Thailand and Wise Group of Beijing, China. These agreements include escalating volume purchase commitments over a three-year period in exchange for market segment exclusivity and build on a similar agreement entered into with Xinli Door Group in China back in November All of these Offtake Distribution agreements are extendable beyond 2020 conditional on sales performance. The Group foresees a growing order book from 2018 onwards; but in the short term remains reliant on Titan Wood s supply of Accoya wood until it has completed the construction of its own Accoya wood factory. The CBM Group has been in the final phase of negotiations regarding financing and local support from a state-owned Chemical company in China to begin construction of the Group s first Accoya wood factory during However, as has been widely reported in the news, the Chinese national government has been implementing new policies related to the environment, which has had a material impact on the land available in chemical industrial parks, and on the approval process for new chemical-related projects, like the Accoya wood factory. This has caused some delay in the initiation of the Group s manufacturing facility. However, the Group has taken advantage of this delay to enter into negotiations with a second strategic partner, a private chemical group listed on the Shanghai stock exchange. The Group s management is working to get the best possible terms for our shareholders, ensuring that our factory is built on time and budget with a highly reputable partner, while securing a stable supply of timber and chemicals at attractive rates. Once the CBM Group is producing its own AccoyaÒ wood, now expected to be during the final quarter of 2020 depending on the speed of new regulatory approvals, the CBM Board believes the financial performance of the Group will be radically transformed. In the meantime, with Accsys June 2018 announcement regarding increased production capacity at its Arnhem factory, we expect that this should enable the Group to bridge the gap between current demand and supply until the Group s own AccoyaÒ wood facility is fully operational.

4 As at 2018, the CBM Group had cash and cash equivalents of 58,000 ( 2017: 1,000), Nil ( 2017: Nil) in interest bearing borrowings from independent third parties and net current liabilities of 1,377,000 ( 2017: 1,027,000). The Company increased its existing loan facility by a further 1.5 million during Feb 2018 to provide sufficient working capital to continue the expansion of its marketing and sales activities in China and the ASEAN markets, and to progress the financing and build plans for its own Accoya wood factory in China. The Group continues to closely manage its cash position to ensure that any costs of financing are mitigated as fully as possible. Prior period adjustment A retrospective adjustment has been made to reclassify the convertible loan facility from equity to non-current liabilities. The Directors consider this treatment better reflects the form and underlying substance of the instrument, as the amount outstanding is variable in the functional currency of the parent. ON BEHALF OF THE BOARD Jason Hung-Wen Wang CEO 22 August 2018

5 UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Notes Six months to Six months to Revenue Cost of inventories (359) (245) Gross profit Other revenue 5 - General and administrative expenses (1,838) (1,997) Loss from operations (1,807) (1,948) Finance costs (362) (261) Loss before taxation (2,169) (2,209) Income tax - - Loss for the period (2,169) (2,209) Allocation of loss for the period Shareholders of the Company (2,130) (2,167) Non-controlling interest (39) (42) Loss for the period (2,169) (2,209) Earnings per share (basic and diluted) 4 ( 0.06) ( 0.06) UNAUDITED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME Six months to Six months to Loss for the period (2,169) (2,209) Other comprehensive income for the period Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of financial statements of overseas subsidiaries (281) 12 Other comprehensive income for the period, net of tax (281) 12 Total comprehensive loss for the period, net of tax (2,450) (2,197) Attributable to shareholders of the Company (2,411) (2,155) Attributable to the non-controlling interest (39) (42) (2,450) (2,197)

6 UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Notes Restated Non-current assets Intangible asset 2 (a) 14,073 15,213 Property, plant and equipment ,073 15,218 Current assets Trade and other receivables Cash and cash equivalents Current liabilities Trade and other payables and accruals (1,676) (1,314) Interest-bearing borrowings - - (1,676) (1,314) Net current liabilities (1,377) (1,027) Total assets less current liabilities 12,696 14,191 Non-current liabilities Interest-bearing borrowings (7,262) (4,499) Licence fee payable 2 (b) (545) (545) (7,807) (5,044) Net assets 4,889 9,147 Equity attributable to shareholders of the Company Share capital 3 4,426 4,426 Share premium 1,074 1,074 Share based payment reserve 1,969 1,259 Merger reserve 35,713 35,713 Exchange reserves 1,974 2,059 Retained losses (40,553) (35,742) Shareholders of the Company 4,603 8,789 Non-controlling interest Total equity 4,889 9,147 The financial statements on pages 4 to 8 were authorised for issue by the Board of Directors on 22 August 2018 and were signed on its behalf by: Jason Hung-Wen Wang CEO Company number:

7 UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share capital Share premium Share based payments Merger reserve Exchange reserve Retained losses Total attributable to shareholders of parent Noncontrolling interest Total equity Restated At 1 January ,496 16,821 1,259 35,713 2,047 (51,496) 7, ,413 Transactions with owners: Acquisition of Non-controlling Interest (696) 204 (204) - Loan converted to shares 816 2, ,900-2,900 Cancellation of share premium account - (18,617) , (15,747) ,921 3,104 (204) 2,900 Other movements in Non-controlling interest capital contribution Loss for the period (2,167) (2,167) (42) (2,209) Other comprehensive income Exchange differences on translation of financial statements of overseas subsidiaries Total other comprehensive income Total comprehensive loss for the year (2,167) (2,155) (42) (2,197) At ,426 1,074 1,259 35,713 2,059 (35,742) 8, ,147 Transactions with owners: Share based payment for the year Other movements in Non-controlling interest capital contribution Loss for the period (2,681) (2,681) (46) (2,727) Other comprehensive loss Exchange differences on translation of financial statements of overseas subsidiaries (48) - (48) - (48) Total other comprehensive loss (48) - (48) - (48) Total comprehensive loss for the year (48) (2,681) (2,729) (46) (2,775) At 31 December ,426 1,074 1,760 35,713 2,011 (38,423) 6, ,879

8 Share capital Share premium Share based Merger reserve payments Exchange reserve Retained losses Total attributable to shareholders of parent Noncontrolling interest Total equity At 31 December ,426 1,074 1,760 35,713 2,011 (38,423) 6, ,879 Transactions with owners: Share based payment for the year Other movements in Non-controlling interest - capital contribution Loss for the period (2,130) (2,130) (39) (2,169) Other comprehensive income Exchange differences on translation of financial statements of overseas subsidiaries (37) - (37) - (37) Total other comprehensive income (37) - (37) - (37) Total comprehensive loss for the year (37) (2,130) (2,167) (39) (2,206) At ,426 1,074 1,969 35,713 1,974 (40,553) 4, ,889

9 UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS Operating activities Loss before taxation (2,169) (2,209) Adjustments for: Finance costs Share based payment Depreciation 1 2 Amortisation of intangibles Operating loss before changes in working capital (1,027) (1,364) Decrease in inventories - - Increase in trade and other receivables 68 (11) Increase / (decrease) in trade and other payables Net cash used in operating activities (926) (1,212) Financing activities Proceeds of interest-bearing borrowings 1,256 1,373 Finance costs (362) (261) Net cash generated from financing activities 894 1,112 Net increase/(decrease) in cash and cash equivalents (32) (100) Cash and cash equivalents at beginning of period Effect of foreign exchange differences (30) (12) Cash and cash equivalents at end of period 58 1 Significant non-cash transactions A loan facility arrangement provides funding up to 7,500,000 at an interest rate of 15% per annum and with a maturity date of 31 Mar Both the loan holder and the Company have the right to convert any amount owing under the facility into Ordinary Shares prior to the maturity date.

10 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements comprise Cleantech Building Materials plc ( CBM or the Company ) and its subsidiaries (the CBM Group or the Group ). 1. BASIS OF PREPARATION CBM is a public limited liability company which is quoted on the Nasdaq First North, Copenhagen and is incorporated and domiciled in the UK. The address of the registered office is 7 Trebeck Street, London, W1J 7LU and the registered number of the company is The principal activities of the Group are the sale of specialist wood products, technology licensing, sourcing and procurement, business development and investment holding. The interim financial information has been prepared in accordance with the basis of the accounting policies set out in the annual report and accounts for the year ended 31 December 2017, which have been prepared in accordance with International Financial Reporting Standards as adopted for use by the European Union. The interim financial information is unaudited and does not constitute statutory accounts as defined in Section 434 of the Companies Act The same accounting policies, presentation and methods of computation have been followed in this unaudited interim financial information as those which were applied in the preparation of the Group's annual statements for the year ended 31 December 2017, upon which the auditors issued an unqualified opinion and which have been delivered to the registrar of companies. The interim financial information has been drawn up using accounting policies and presentation expected to be adopted in the Group's full financial statements for the year ended 31 December Any new standards that will be adopted in full for the first time in the year-end financial statements did not have a material impact on this interim financial information. Going concern Despite loan facilities being provided to the Group from a related party, ongoing negotiations with prospective strategic Chinese partners in relation to the financing, construction and operation of an Accoya wood manufacturing facility, and the Group s successful admission to Nasdaq First North, Copenhagen, the Group would still require additional funds to finance the construction and operation of its proposed Accoya wood manufacturing plant. At this stage, the additional funds raised, if any, and the timing of receipts cannot be determined. It is also uncertain as to whether these additional funds will be sufficient to finance the construction and operation of the manufacturing plant. Despite the uncertainty as to the outcome of the Group s business plan and whether additional funds may be raised, the directors are confident that the Group will be able to obtain sufficient funds to execute its business plan to fully realise the carrying amount of the non-current assets. Accordingly, the directors have concluded that no impairment is required against the non-current assets. However, the availability of additional funds and the execution of the Group s business plan are inherently uncertain. The directors have considered the future liquidity of the Group given the net loss of 2,169,000 (six months ended 2017: 2,209,000) during the current period and the net current liabilities as at 2018 of 1,377,000 ( 2017: 1,027,000); and the material uncertainty regarding the Group s ability to raise funding and to execute the Group s business plan. The directors have reviewed the Group s cash flow projections prepared by management covering a period of twelve months from the date of the interim financial information. Based on these cash flow projections, the Group will have sufficient financial resources in the twelve months to 31 August 2019 to meet its financial obligations as and when they fall due. Management s projections make key assumptions with regard to (i) the anticipated cash flows from the Group s operations and (ii) the availability of future funding from the loan facility. Should the Group be unable to continue as a going concern, adjustments would have to be made to restate the value of assets to their recoverable amounts, to provide for further liabilities that might arise and to reclassify non-current assets and non-current liabilities as current assets and current liabilities. The effect of these potential adjustments has not been reflected in the interim financial information. The interim financial information for the six months ended 2018 was approved by the Board on 22 August 2018.

11 2. INTANGIBLE ASSET AND LICENCE FEE PAYABLE a) Intangible asset Intellectual Property Rights Cost As at 2018 and ,383 19,383 Less: Accumulated amortisation Beginning of the period 4,740 3,600 Amortisation End of the period 5,310 4,170 Net book value As at 2018 and ,073 15,213 On 12 August 2010, Diamond Wood and Titan Wood entered into the Technology Licence Agreement in order to replace previous licence agreements signed in prior years. The key terms of the Licence Agreement are summarised as follows: Grant of rights Titan Wood granted Diamond Wood the rights to use patent and technical information ( Intellectual Property Rights ) as follows: i) an exclusive licence to use the Intellectual Property Rights in the PRC, including the Special Administrative Regions and Taiwan plus the member states of the Association of South East Asian Countries (ASEAN) (the Territory ). ii) iii) an exclusive licence to use the Intellectual Property Rights in the Territory to manufacture a maximum capacity of 750,000m 3 of Accoya wood annually until the expiry of the Term of the Licence; and an exclusive licence to market, distribute and sell Accoya wood until 1 July 2030 for the ASEAN markets, so long as at 1 July 2020, Diamond Wood is operating an Accoya wood production facility capable of producing more than 114,172m3 of estimated capacity, and actively promoting the distribution and sale of Accoya wood. a right of first refusal to enter into exclusive licensing arrangements for Tricoya Wood Elements technology in the PRC. The Company may sub-licence the Intellectual Property Rights to its subsidiaries or any affiliate of the Company without obtaining consent from Titan Wood. Provision of technology assistance services Titan Wood Technology B.V. ( TWTBV ) agrees to provide advice and services to support the Group to construct facilities and commission the licenced capacity. Service fees are charged by TWTBV to the Group at a per diem charge per person, plus all associated expenses. No such services were provided by TWTBV during the period (six months ended 2017: none). If sufficient funds are not obtained such that the manufacturing plant is not constructed, the Group s ability to execute its current business plan and recover the carrying value of the intangible asset would be in doubt and the asset may become impaired.

12 2. INTANGIBLE ASSET AND LICENCE FEE PAYABLE (continued) b) Licence fee payable The Group has a licence fee payable as follows: Present value of the minimum fee payable Total minimum fee payable As at 2018 and 2017 Repayable - over one year but not exceeding two years As at 2018, the licence fee payable was 545,000, which will be settled nine months after the plant construction commences according to the Licence Agreement. According to the Licence Agreement, Diamond Wood shall also pay Titan Wood a royalty fee ( Royalty Fee ) of 25 per m 3 of Accoya wood sold for the first 20 years following commissioning of the respective production project and thereafter, an amount equal to 25% of the royalty payable during the last year of payments. As plant construction has not yet commenced as at 2018, the repayment term of licence fee payable is not yet effective and no such royalty fee is due. 3. SHARE CAPITAL Number of shares 000 Issued and fully paid At 1 January ,498,707 4,426 Issued during the period - - At ,498,707 4, LOSS PER SHARE a) Basic loss per share The calculation of basic loss per share is based on the loss attributable to owners of the Group of approximately 2,130,000 (six months ended 2017: 2,167,000) and the weighted average number of 36,498,707 ordinary shares (six months ended 2017: 34,334,948 ordinary shares) in issue during the period. b) Diluted loss per share In accordance with IAS 33 Earnings per share, where an entity has reported a loss for the period, the shares are not diluted. 5. SUBSEQUENT EVENTS There were no significant events occurring after the reporting date.