REG - Active Energy Group - Final Results <Origin Href="QuoteRef">AEGR.L</Origin> - Part 3
15/06/2016 07:06
- Part 3: For the preceding part double click ID:nRSO2055Bb
2,188,122 2,209 2,190,331
Disposals - (21,715) (21,715)
Foreign exchange difference - (485) (485)
At 31 December 2015 2,967,931 29,488 2,997,419
Accumulated depreciation
At 31 December 2013 48,466 20,034 68,500
Charge for year 122,603 5,175 127,778
Disposals (96,059) (507) (96,566)
Foreign exchange difference - (532) (532)
At 31 December 2014 75,010 24,170 99,180
Charge for year 274,970 2,065 277,035
Foreign exchange difference - (428) (428)
At 31 December 2015 349,980 25,807 375,787
Net book value
At 31 December 2015 2,617,951 3,681 2,621,632
At 31 December 2014 704,799 25,309 730,108
Company Furniture and
office equipment
US$
Cost
At 31 December 2013 8,848
Additions 2,100
Foreign exchange difference (633)
At 31 December 2014 10,315
Foreign exchange difference (485)
At 31 December 2015 9,830
Accumulated depreciation
At 31 December 2013 7,253
Charge for year 1,944
Foreign exchange difference (532)
At 31 December 2014 8,665
Charge for year 650
Foreign exchange difference (428)
At 31 December 2015 8,887
Net book value
At 31 December 2015 943
At 31 December 2014 1,650
11. INVESTMENTS IN SUBSIDIARIES
US$
Cost
At 31 December 2013 5,495,432
Foreign exchange translation difference (318,632)
At 31 December 2014 5,176,800
Foreign exchange translation difference (243,309)
At 31 December 2015 4,933,491
Provision for impairment
At 31 December 2013 811,622
Foreign exchange translation difference (47,059)
At 31 December 2014 764,563
Foreign exchange translation difference (35,935)
At 31 December 2015 728,628
Net book value
At 31 December 2015 4,204,863
At 31 December 2014 4,412,237
At 31 December 2015 the Group held share capital of the following companies:
Subsidiary undertaking Country of incorporation Nature of business Percentage Holding
2015 2014
Cinpart EBT Limited Hong Kong Trustee 100 100
Active Energy Ukraine Limited Ukraine Wood chip processing and distribution 100 100
Nikofeso Holdings Limited Cyprus Wood chip distribution 100 100
Nikwood Company LLC* Ukraine Wood chip processing and distribution 100 100
Active Energy Trading (EMEA) SarL Switzerland Wood chip distribution 100 100
Active Energy Italia s.r.l. Italy Wood chip distribution 100 100
AEG Trading Limited United Kingdom Wood chip distribution 100 100
AEG Pelleting Limited United Kingdom Biomass for energy development 100 100
AEG Balkan Montenegro Dormant 100 100
AEG Coal Switch Limited* United Kingdom Biomass for energy development 36 -
AEG Biopower Limited United Kingdom Biomass for energy development 70 -
12. INVESTMENT IN ASSOCIATE
Group Company
2015 2014 2015 2014
US$ US$ US$ US$
Carrying value at beginning of the year 446,156 - 797,767
Contribution to associate arrangement 1,279,696 797,767 1,279,696 797,767
Share of loss for the year (619,262) (372,984) - -
Share of other comprehensive income for the year - translation of foreign operation 36,015 21,373 - -
Carrying value at end of the year 1,142,605 446,156 2,077,463 797,767
During 2014 the Group acquired a 45% interest in a joint venture, KAQUO Forestry & Natural Resources Development
Corporation (KAQUO), incorporated in Canada, to exclusively commercialise some forestry and agricultural land holdings
belonging to the indigenous Métis Settlements of Alberta in Western Canada. KAQUO's initial focus is on optimising the
value of the mature timberland and forestry assets on the land.
In terms of the agreement certain control decisions vest with the KAQUO board of directors, which may not necessarily
establish joint control by the respective parties. Under IAS 28 this arrangement is classified as an associate and has been
included in the consolidated financial statements using the equity method.
Summarised financial information in relation to the joint venture is presented below:
2015 2014
US$ US$
At 31 December
Current assets 193 16,131
Current liabilities (2,095,365) (797,767)
Period ended 31 December
Revenues - -
Loss for the year (1,371,287) (829,131)
Other comprehensive income 57,558 47,496
Total comprehensive income (1,313,729) (781,636)
Dividends received by group from associate - -
Included in the above amounts are:
Depreciation and amortisation - -
Interest income - -
Interest expense - 2
Income tax expense - -
13. LOAN TO JOINT VENTURE PARTNER
Group Company
2015 2014 2015 2014
US$ US$ US$ US$
Advanced during the year 691,748 - 691,748 -
Carrying value at end of the year 691,748 - 691,748 -
In September 2015 the Group entered into a joint venture agreement with Biomass Energy Enhancements LLC ("BEE"),
incorporated in the United States, for the joint commercial development and exploitation of intellectual property assets
held by BEE in connection with biomass technologies. Under the terms of the agreement, the Company has obtained an option
to require BEE to transfer its intellectual property rights to a separate entity within which the Company will hold a 49%
shareholding. Once operations are established the IP will be licensed to AEG Coalswitch Limited, the trading entity of the
joint venture agreement in which the company has an effective interest of 35.7%. At 31 December 2015, AEG Coalswitch
Limited had not commenced trading but the Company had lent $822,000 to BEE in the form of 5% convertible loan notes. The
fair value of these loan notes has been determined by reference to market rates of interest, with the residual balance of
$103,762 being recorded as an interest in intellectual property and disclosed within intangible fixed assets.
14. AVAILABLE FOR SALE FINANCIAL ASSET
Group Company
2015 2014 2015 2014
US$ US$ US$ US$
Fair value at beginning of the year 93,191 - 93,191 -
Acquisition of unlisted securities 11,693 93,191 11,693 93,191
Foreign exchange translation (4,747) - (4,747) -
Fair value at end of the year 100,137 93,191 100,137 93,191
Available for sale assets consist of quoted equity instruments and is classified as non- current assets. There was no
significant movement in fair value of the equity instruments since its acquisition during the prior year. The
available-for-sale financial asset is denominated in Pound Sterling.
15. INVENTORIES
Group 2015 2014
US$ US$
Raw materials 195,478 239,129
Finished goods and goods for resale 110,731 287,769
Total inventories 306,209 526,898
The cost of inventories recognised as an expense and included in 'cost of sales' amounted to US$ 14,135,878 (2014:
US$13,071,570).
16. TRADE AND OTHER RECEIVABLES
Group Company
2015 2014 2015 2014
US$ US$ US$ US$
Current
Trade receivables 2,053,190 1,006,314 - -
Provision for impairment (838,984) (24,659) - -
Trade receivables - net 1,214,206 981,655 - -
Amounts due from group companies - - 3,830,948 4,465,383
Other receivables 432,593 1,497,632 40,345 17,191
VAT 592,905 58,389 12,056 35,209
Prepayments 334,384 313,006 - 9,339
Total 2,574,088 2,850,682 3,883,349 4,527,122
In the Directors' opinion the carrying values of trade and other receivables are stated at their fair value, after
deduction of appropriate allowances for irrecoverable amounts as these assets are not interest bearing and receipts occur
over a short period and are subject to an insignificant risk of changes in value.
Trade and other receivables that have not been received within the payment terms are classified as overdue. As at 31
December 2015 trade receivables of US$10,678 (2014: US$331,280) were overdue but not impaired. They relate to the customers
with no default history. The ageing analysis of these receivables is as follows:
2015 2014
US$ US$
Up to 3 months - -
3 to 6 months - 315,781
More than 6 months 10,678 15,499
10,678 331,280
As at 31 December 2015, Group trade receivables of US$838,984 (2014: US$24,659) were past due and impaired. The provision
for impairment is analysed as follows:
2015 2014
US$ US$
At beginning of the period 24,659 20,048
Provided during the year 838,984 -
Provision (released)/utilised (24,659) 4,611
838,984 24,659
An analysis of the Group's trade and other receivables classified as financial assets by currency is provided in note 24.
17. CASH AND CASH EQUIVALENTS
Group Company
2015 2014 2015 2014
US$ US$ US$ US$
Cash in hand - 336 - 336
Bank accounts 1,643,855 3,227,078 43,335 136,657
1,643,855 3,227,414 43,335 136,993
18. TRADE AND OTHER PAYABLES
Group Company
2015 2014 2015 2014
US$ US$ US$ US$
Current
Trade payables 1,802,383 1,249,028 96,404 186,081
Social security and other taxes 26,486 10,699 7,839 -
Accruals and deferred income 1,094,241 365,916 690,836 356,739
Other payables 651,456 304,935 - 162
3,574,566 1,930,578 795,079 542,982
The carrying values of trade and other payables approximate their fair value, payments occur over a short period and are
subject to an insignificant risk of changes in value. Maturity analysis of the trade and other payables, excluding
borrowings, classified as financial liabilities measured at amortised cost, is as follows (the amounts shown are
undiscounted and represent the contractual cash-flows):
Group
2015 2014 2015 2014
US$ US$ US$ US$
Less than three months 3,548,080 1,823,718 795,079 542,982
Three to 12 months - 96,161 - -
3,548,080 1,919,879 795,079 542,982
An analysis of the Group's trade and other payables classified as financial liabilities by currency is provided in note
24.
19. DEFERRED TAXATION
Deferred tax is calculated on temporary differences under the liability method using tax rates applicable in the respective
Group entities' jurisdiction. The movement on the deferred tax account is shown below and the balance relates to deferred
tax on fair value adjustments related to intangibles:
2015 2014
US$ US$
Group
At beginning of the period 411,075 446,310
Effect of rate change - 23,490
Reversal of temporary differences (8,969) (58,725)
At the end of the period 402,106 411,075
The deferred tax liability relates to temporary differences arising on the fair valuation of intangible assets acquired in
a business combination in 2011.
No provision for the deferred tax asset in respect of tax losses has been made in the Group or Company due to the
uncertainty of the Group or Company being able to generate sufficient future taxable profits from which the future reversal
of the timing difference can be deducted. Deferred tax assets in respect of tax losses not recognised amount to
US$1,767,828 (2014: US$2,419,286) and US$1,736,676 (2014: US$2,267,550) for the Group and Company respectively.
20. LOANS AND BORROWINGS
The book value and fair value of loans and borrowings are as follows:
Group Book value Fair value Book value Fair value
2015 2015 2014 2014
US$ US$ US$ US$
Non-Current
Convertible debt - - 1,430,067 1,430,067
Unsecured loans 2,866,597 2,866,597 2,923,395 2,923,395
2,866,597 2,866,597 4,353,462 4,353,462
Current
Convertible debt 1,438,172 1,438,172 - -
Unsecured loans 4,129,130 4,129,130 1,739,130 1,739,130
5,567,302 5,567,302 1,739,130 1,739,130
Company Book value Fair value Book value Fair value
2015 2015 2014 2014
US$ US$ US$ US$
Non-Current
Convertible debt - - 1,430,067 1,430,067
Unsecured loans 2,866,597 2,866,597 2,923,395 2,923,395
2,866,597 2,866,597 4,353,462 4,353,462
Current
Convertible debt 1,438,172 1,438,172 - -
Unsecured loans 1,190,000 1,190,000 - -
2,628,172 2,628,172 - -
Unsecured loans
During the year the Group obtained an unsecured short term loan. Of the loan, US$1,886,000 bears interest at a rate of 15%
per annum and the remainder was interest free. The outstanding balance at year end was US$2,390,000.
Unsecured loans also include a facility granted in 2014 by a significant shareholder of the Group of up to US$2 million at
an interest rate of 15%. A further US$1 million was granted interest free. The fair value of the liability component at
inception and subsequent extension date was calculated using a market rate of interest of 15% and the balance recorded in
equity. These loans are for an indefinite period and require repayment notice of 366 days.
In addition, the Group has an unsecured loan facility of 20 million Ukrainian Hryvnias (UAH), approximately US$1.7 million,
which is repayable by 1 June 2016 and has been extended until Group finances permit repayment. The loan is subject to a
"participation fee agreement", which required the Group to pay the lender US$1 per metric tonne of woodchip contained in
any shipment during the period between 1 March 2015 and 31 December 2015. Between 1 July 2014 and 28 February 2015 the fee
was US$5 per metric tonne. The participation fee agreement was waived subsequent to year end.
Convertible debt
In June 2013 the parent company issued 1,000,000 notes of 9% convertible loan at a face value of £1 each (US$1.65). The
loan is repayable in 3 years from the issue date at its total face value of £1,000,000 (US$1,553,200) or can be converted
at any time into shares at the holder's option at the rate of 1 share per 1.75 pence (2.72US cent) of loan, and was issued
together with warrants to subscribe for 19,047,619 shares at a price of 1.75 pence (2.72 US cent) within a three year
period (see note 22). The value of the liability component and the equity conversion component were determined at the date
the instrument was issued.
The fair value of the liability component, included in non-current borrowings, at inception was calculated using a market
interest rate for an equivalent instrument without conversion option. The imputed interest applied was 15%.
Maturity analysis of loan and borrowings is as follows (the amounts shown are undiscounted and represent the contractual
cash-flows):
Group Up to 3 months Between 3 and 12 months Between 1 and 2 years Between 2 and 5 years Total
US$ US$ US$ US$ US$
At 31 December 2015
Convertible debt - 1,438,172 - - 1,438,172
Unsecured loans 500,000 3,629,130 2,866,597 - 6,995,727
500,000 5,109,330 2,866,597 - 8,433,899
At 31 December 2014
Convertible debt - - 1,553,200 - 1,553,200
Unsecured loans - 1,739,130 4,353,462 - 6,092,592
- 1,739,130 5,906,662 - 7,645,792
Company Up to 3 months Between 3 and 12 months Between 1 and 2 years Between 2 and 5 years Total
US$ US$ US$ US$ US$
At 31 December 2015
Convertible debt - 1,438,172 - - 1,438,172
Unsecured loans 500,000 690,000 2,866,597 - 4,056,597
500,000 2,038,172 2,866,597 - 5,494,769
At 31 December 2014
Convertible debt - - 1,430,067 - 1,430,067
Unsecured loans - - 2,923,395 - 2,923,395
- - 4,353,462 - 4,353,462
21. CALLED UP SHARE CAPITAL
2015 2015 2014 2014
Number US$ Number US$
Allotted, called up and fully paid
Ordinary shares of 1p each
At 1 January 621,475,570 9,774,327 618,625,570 9,726,034
Shares issued for cash 20,683,333 325,002 450,000 7,619
Shares issued to settle liabilities - - 400,000 6,516
Shares issued to acquire an investment - - 2,000,000 34,158
As at 31 December 2014 642,158,903 10,099,329 621,475,570 9,774,327
Shares issued for Cash
The Company issued 20,683,333 shares for a total consideration of US$1,584,441 during the year, as follows:
· 88, 000 shares on 11 May 2015 at 1.9 US cent each in settlement of former employee share based payments.
· 20,000,000 shares on 29 June2015 at 7.9 US cent each, being a new shareholder equity contribution.
· 95,333 shares on 29 July 2015 at prices varying between 2.0 and 4.7 US cent each in settlement of former employee
share based payments exercised.
· 500,000 shares on 29 July 2015 at 1.6 US cent each in settlement of former employee share based payments exercised.
During 2014 the Company issued 2,850,000 shares for a total consideration of US$108,160 as follows:
· 400,000 shares at 3.7US cent (2.2 pence) each in settlement of professional fees payable in December 2013. The shares
were recorded at fair value and the excess over the extinguished liability was recorded as an expense to the income
statement and included in the amount disclosed for the share based payment charge.
· In May 2014, 450,000 shares were issued at 1.7US cent (1 pence) each in settlement of former employee share based
payments.
· In July 2014, 2,000,000 shares were issued when the market price was 4.4US cent (2.6 pence) each pursuant to the
acquisition of an investment in Alpha Prospects plc, classified as available-for-sale financial asset (see note 13).
22. SHARE OPTIONS AND WARRANTS
The Company has entered into share option arrangements under which the holders are entitled to subscribe for a percentage
of the Company's ordinary share capital from time to time. All options vest immediately with the exception of 118,662,543
(2014: 40 million) options which are based on various market, service and performance conditions. The number of warrants
and share options exercisable at 31 December 2015 was 263,459,701 (2014: 185,930,491).
The movements of warrants and share options during the period were as follows:
2015 2014
Weighted average exercise price (US cent) Number of Warrants and Share Options Weighted average exercise price (US cent) Number of Warrants and Share Options
Outstanding at beginning of the period 3.3 185,480,491 3.3 185,930,491
Granted 1.7 78,662,543 - -
Exercised 1.9 (683,333) 1.6 (450,000)
Outstanding at end of the period 2.6 263,459,701 3.1 185,480,491
At 31 December 2015, the weighted average remaining contractual life of warrants and share options exercisable was 5.8
years (2014 - 4.0 years). There were no options granted in 2014. The weighted average fair value of options and warrants
granted during the year, estimated using the Black-Scholes option-pricing models was 7.2US cent. The estimated fair values
of options granted during 2015 were based on the following weighted average assumptions:
Options
Option pricing model Black Scholes
2015
Weighted average share price at date of grant 8.27 cent
Weighted average exercise price 7.52 cent
Expected life 5 years
Expected volatility 177.3%
Expected dividend yield 0%
Risk free interest rate 1.31%
The volatility assumption, measured at the standard deviation of expected share price returns, is based on a statistical
analysis of daily share prices.
The charge for equity settled share based payments in the year ended 31 December 2015 was US$1,380,782 (2013: US$266,557).
Options outstanding at 31 December 2015 were exercisable as follows:
2015 2014
Exercise price range (Pence, US cent in brackets) Number Number
0.000p (0 cent) 60,662,543 -
1.000p (1.553 cent) - 500,000
1.250p (1.942 cent) 119,757,775 119,891,108
1.500p (2.330 cent) 7,500,000 7,500,000
1.750p (2.718 cent) 19,047,619 19,047,619
3.000p (4.657 cent) 25,950,000 26,000,000
5.000p (7.401 cent) 18,000,000 -
6.375p (9.902 cent) 1,823,480 1,823,480
7.000p (10.872 cent) 1,214,284 1,214,284
7.500p (11.649 cent) 9,000,000 9,000,000
20.000p (31.064 cent) 504,000 504,000
At the end of the period 263,459,701 185,480,491
The above disclosures apply to both the Company and the Group.
JSOP awards
Under the JSOP, shares in the Company are jointly purchased at fair market value by the participating employee and the
trustees of the JSOP trust, with such shares held in the JSOP trust. For accounting purposes the awards are valued as
employee share options.
The JSOP trust holds the shares of the JSOP until such time as the JSOP shares are vested and the participating employee
exercises their rights under the JSOP. The JSOP trust is granted an interest bearing loan by the Company in order to fund
the purchase of its interest in the JSOP shares. The loan held by the trust is eliminated on consolidation in the
financial statements of the Group. The Company funded portion of the share purchase price is deemed to be held in treasury
until such time as the shares are transferred to the employee and is recorded as a reduction in equity in both the Group
and Company financial statements.
The exercise price of the "option" is deemed to be the issue price of the shares. The awards vest based on a market
condition, which requires the shares to meet a specific share price hurdle, or a change in control condition, as defined by
the plan. Under the JSOP and subject to the vesting of the employee's interest, the participating employee will, when the
JSOP shares are sold, be entitled to a share of the proceeds of sale equal to the growth in market value of the JSOP shares
versus the exercise price, less simple interest on the original share purchase price, net of executives' cash contribution
at inception, as agreed for each grant (the "Carry Charge"). The balance of proceeds will remain to the benefit of the
JSOP trust and be applied to the repayment of the loan originally made by the Company to the JSOP trust. Any funds
remaining in the JSOP trust after settlement of the loan and any expenses of the JSOP trust are for the benefit of the
Company.
The Group measures the fair value of the awards using Monte Carlo simulations and the share based payment expense is
recorded over the expected life of the option. Having established the full value of the JSOP awards using the Monte Carlo
simulation outlined above a deduction is made in respect of the anticipated Carry Charge in order that the expense recorded
in the financial statements only represents the participating employee's net interest in the awards. No awards were made
in 2014. The total fair value of the 2013 awards, after offsetting the Carry Charge, was US$93,154. Within the share based
payment charge for the year is US$30,337 (2014: US$16,339) related to the JSOP awards.
On exercise of the JSOP awards by the employee the Carry Charge due to the Company will be recognised as share premium,
arising from the sale of shares held in escrow.
The Group granted 15 000,000 JSOP awards on 4 July 2013. The JSOP awards granted during 2013 contained a share price hurdle
of 3p per share. The awards vested in 2015, but all remain outstanding at year end. The above disclosures apply to both the
Company and the Group.
23. RESERVES
The following describes the nature and purpose of each reserve within equity:
Reserve Description and purpose
Share premium Amounts subscribed for share capital in excess of nominal value
Merger reserve Difference between fair value and nominal value of shares issued to acquire 90% or more interest in subsidiaries
Foreign exchange reserve Gains/losses arising on retranslating the net assets of overseas operations into Pound Sterling
Own shares held reserve Cost of own shares held by the employee benefit trust, the JSOP trust or the company as shares held in escrow
Convertible debt and warrant reserve Equity component of the convertible loan and the fair value of equity component of warrants issued that do not form part of a share based payment
Retained earnings/Accumulated loss Cumulative net gains and losses recognised in the consolidated statement of comprehensive income
24. NOTES SUPPORTING THE STATEMENT OF CASH FLOWS
Reconciliation of loss before taxation to cash outflows from operating activities
2015 2014
Group US$ US$
Loss for the period (5,701,819) (2,783,393)
Adjustments for:
Share of loss of associate 619,262 372,984
Share based payment expense 1,380,782 266,557
Depreciation 277,035 127,778
Amortisation of intangibles 44,845 293,743
Loss/(profit) on disposal of property, plant and equipment - (171)
Professional services settled through issue of shares - 7,350
Finance income - (5,896)
Finance expenses 1,437,162 1,077,420
Income tax 232,752 78,161
(1,709,981) (565,467)
Decrease in inventories 220,689 893,985
(Increase) in trade and other receivables 276,594 (1,976,814)
Increase in trade and other payables 508,205 501,574
Net cash inflow/(outflow) from operating activities (704,493) (1,146,722)
2015 2014
Company US$ US$
Loss for the period (2,940,516) (2,831,863)
Adjustments for:
Share based payment expense 1,380,782 266,557
Depreciation 650 1,944
Professional services settled through issue of shares - 7,350
Finance income - (5,896)
Finance expenses 663,258 666,015
(895,826) (1,895,893)
Increase in trade and other receivables 643,773 (922,903)
Increase in trade and other payables (322,235) (285,717)
Net cash outflow from operating activities (574,288) (3,104,513)
Significant non-cash transactions are as follows:
2015 2014
US$ US$
Equity consideration for available-for-sale asset acquisition - 93,191
Equity consideration for operating expense settlement - 7,350
25. FINANCIAL INSTRUMENTS
The Group's treasury policy is to avoid transactions of a speculative nature. In the course of trade the Group is exposed
to a number of financial risks that can be categorised as market, credit and liquidity risks. The board has identified the
risks within each category and considers the impact on the activities of the Group as part of their regular meeting
routine.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
· Trade and other receivables
· Cash and cash equivalents
· Trade and other payables
· Available-for-sale financial assets
· Loans and borrowings
· Loan to joint venture partner
A summary of the financial instruments held by category is provided below:
Group Company
2015 2014 2015 2014
US$ US$ US$ US$
Financial assets
Loans and receivables
Cash and cash equivalents 1,643,855 3,227,414 43,335 136,993
Trade and other receivables 1,646,799 2,479,287 3,871,293 4,482,574
Loan to joint venture partner 691,748 - 691,748 -
3,982,402 5,706,701 4,606,376 4,619,567
Available-for-sale financial asset 100,137 93,191 100,137 93,191
Total financial assets 4,082,539 5,799,892 4,706,513 4,712,758
Group Company
2015 2014 2015 2014
US$ US$ US$ US$
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables 3,548,080 1,919,879 787,240 542,982
Loans and Borrowings 8,433,899 6,092,592 5,494,769 4,353,462
11,981,979 8,012,471 6,282,009 4,896,444
Fair value measurement
The fair value measurement of the Group's financial and non-financial assets and liabilities utilises market observable
inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different
levels based on how observable the inputs used in the valuation technique utilised are (the 'fair value hierarchy'):
Level 1: Quoted prices in active markets for identical items (unadjusted)
Level 2: Observable direct or indirect inputs other than Level 1 inputs
Level 3: Unobservable inputs (i.e. not derived from market data).
The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant
effect on the fair value measurement of the item.
Transfers of items between levels are recognised in the period they occur.
The only financial asset carried at fair value consists of the available for sale financial asset, which is classified as
level 3.
Market Risk
Currency risk
The Group's financial risk management objective is broadly to seek to make neither profit nor loss from exposure to
currency or interest rate risks. The Group is exposed to transactional foreign exchange risk and takes profits and losses
as they arise, as in the opinion of the directors, the cost of hedging against fluctuations would be greater than the
related benefit from doing so.
The carrying amounts of the group's trade and other receivable financial instruments are denominated in the following
currencies:
Group Company
2015 2014 2015 2014
US$ US$ US$ US$
US Dollar 1,594,988 1,038,475 3,830,948 4,368,257
UK Pound sterling 40,344 75,168 40,345 114,317
Euro - 644,780 - -
Ukranian Hryvnia 11,467 720,864 - -
1,646,799 2,479,287 3,871,293 4,482,574
The carrying amounts of the group's cash and cash equivalents are denominated in the following currencies:
Group Company
2015 2014 2015 2014
US$ US$ US$ US$
US Dollar 707,585 2,948,858 35,743 51,613
UK Pound sterling 8,677 86,480 6,549 84,114
Euro 11,791 7,534 1,043 1,266
Ukranian Hryvnia 915,802 184,542 - -
1,643,855 3,227,414 43,335 136,993
Information about the Group's loans and borrowings are provided in note 20.
The carrying amounts of the group's trade and other payable financial instruments are denominated in the following
currencies:
Group
2015 2014 2015 2014
US$ US$ US$ US$
US Dollar 3,063,966 1,216,548 499,098 -
UK Pound sterling 288,142 542,658 288,142 542,982
Euro - 16,477 - -
Ukranian Hryvnia 1,395,972 144,196 - -
4,748,080 1,919,879 787,240 542,982
The effect of a 5 per cent strengthening of the US Dollar at the reporting date on the foreign denominated financial
instruments carried at that date would, all variables held constant, have resulted in a decrease in the net loss for the
period and increased net assets by US$106,710 (2014: US$22,946 reduction). A 5 per cent weakening in the exchange rate
would, on the same basis, have increased the net loss and decreased net assets by the same amount.
Interest rate risk
The Group and Company finances its operations through a mixture of equity introductions and loans. The Group and Company
exposure to interest rate fluctuations on its borrowings has been limited by the terms of the Unsecured Loans described in
note 19, all of which bear fixed interest rates, or returns directly linked to operational output. The Directors monitor
the shipment of woodchip quantities as part of its efforts to manage the group's exposure to interest rate risk.
Credit risk
Operational
The Group is mainly exposed to credit risk from credit agreements and sales. It is the Group's policy, implemented locally,
to assess the credit risk of new customers before entering contracts. Such credit ratings, taking into account local
business practices are then factored into any decisions. The Group does not enter into any derivatives to manage credit
risk. Further information on Trade and other receivables are presented in note 15.
Financial
Financial risk relates to non-performance by banks in respect of cash deposits and is mitigated by the selection of
institutions with a strong credit rating.
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on
its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they
fall due.
The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they
become due. To achieve this aim, the Group finances its operations through a mix of equity and borrowings. The Group's
objective is to provide funding for future growth and achieve a balance between continuity and flexibility through loan and
overdraft facilities. The Group's policies ensure sufficient liquidity is available to meet foreseeable needs through the
preparation of short and long term forecasts. The Group's requirements are constant throughout the year and relate largely
to working capital which is managed through the use of surplus cash. Further disclosure of the Directors' consideration of
going concern is included in note 1.
The Group had no bank loans or invoice finance facilities at 31 December 2015 (2014: Nil). The Group had no overdraft at 31
December 2015 (2014: Nil) and no debentures or personal guarantees were in place.
Capital risk management
The Group's objective when managing capital is to establish and maintain a capital structure that safeguards the Group as a
going concern and then provides a return to shareholders.
26. RELATED PARTY DISCLOSURES
Details of Director's remuneration are given in the Directors' Report.
Transactions between the Company and its subsidiaries, which are related parties to the Company, have been eliminated on
consolidation. During the year in the Company's financial statements, the Company made net cash recoveries from fellow
Group companies of US$634,435 (2014: net cash advances of US$1,232,171).
Intercompany receivable balances remain outstanding at the year end as follows:
2015 2014
US$ US$
Amounts due from Group companies 3,830,948 4,465,383
During 2014 the Group advanced a loan of E30,000 to a company controlled by the Group's Chief Operations Officer, Matteo
Girlanda. The amount is due to be repaid following the year end.
27. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of financial information in conformity with International Financial Reporting Standards requires management
to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of
contingent assets and liabilities at the year-end date and the reported amounts of revenues and expenses during the
reporting period.
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. The significant judgements made
by management in applying the Group's accounting policies and the key sources of estimation uncertainty were:
Impairment of goodwill and other assets
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable amount of
cash generating units is determined based on value in use calculations. The use of this method requires the estimation of
future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. Actual
outcomes may vary. Other assets are considered for impairment where such indicators exist using value in use calculations
or fair value and recoverability estimates. The use of these methods similarly requires the estimation of future cash flows
and the choice of a discount rate in order to calculate the present value of the cash flows.
Share based payments
In determining the fair value of equity settled share based payments and the related charge to the income statement, the
Group makes assumptions about future events and market conditions. In particular, judgements must be made as the fair
value of each award granted. The fair value is determined using a valuation model which is dependent on further estimates,
including the Group's future dividend policy, the timing with which options will be exercised and the future volatility in
the price of the Group' shares. Such assumptions are based on publicly available information and reflect market
expectations and advice taken from qualified personnel. Different assumptions about these factors to those made by the
Group could materially affect the reported value of share based payments.
Useful lives of intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives. Useful lives are
based on the management's estimates of the period that the assets will generate revenue, which are periodically reviewed
for continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts
charged to the consolidated statement of comprehensive income in specific periods.
Determination of fair values of intangible assets acquired and contingent consideration in business combinations
The fair values of contractual relationships assumed in a business combination are based on the discounted cash flows
expected to be derived from the use and eventual sale of the asset. The use of this method requires the estimation of
future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. Actual
outcomes may vary.
The fair value of contingent consideration is based on an estimation of the probability of the contingent event occurring
during the earn-out period. Changes to estimates can result in significant variations in the carrying value and amounts
charged to the consolidated statement of comprehensive income in specific periods.
Assessing the nature of joint arrangements and associates
For all joint arrangements structured in separate vehicles the Group must assess the substance of the joint arrangement in
determining whether it is classified as a joint venture or joint operation. This assessment requires the Group to consider
whether it has rights to the joint arrangement's net assets (in which case it is classified as a joint venture), or rights
to and obligations
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