REG - Enteq Technologies - Final Results
29/09/2023 14:30
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RNS Number : 2220O Enteq Technologies PLC 29 September 2023
Enteq Technologies plc
("Enteq" or the "Company" or the "Group")
Final results for the year ended 31 March 2023
Enteq (AIM: NTQ.L), the energy services technology supplier, today announces
its audited final results for the year ended 31 March 2023
Key features
· Total revenue $6.2m ($7.3m for year ended 31 Mar 2022)
· Gross and net cash balance increased to $5.4m
· Sale of freehold facility in Houston for $2.5m
· Post year-end sale of XXT intellectual property and assets for up to
$3.16m (Initial cash consideration of c.$1.89m plus up to c.$1.27m to be paid
in cash over a 12-month period).
· Continued investment in SABER project ($2.6m)
· The SABER Tool (SABER), successfully completed downhole drilling
testing, proving the system to be effective in an operational test
environment.
Financial metrics
Years ended 31 March
($m):
2023 2022
Continued operations Discontinued operations Continued operations Discontinued operations
Revenue 0.0 6.2 0.0 7.3
Gross profit margin 0.0 23% 0.0 36%
Underlying overheads ** (1.5) (1.1) (1.3) (1.0)
Adjusted EBITDA (1.5) 0.3 (1.3) 1.6
Exceptional items 0.0 (0.5) 0.0 0.0
Total post tax profit/(loss)* (1.4) (1.4) (1.6) 0.8
Post tax profit/(loss) per share (cents) (2.0) (2.0) (2.2) 1.1
Cash balance 5.4 0.0 4.8 0.0
Investment in engineering projects 2.6 0.0 2.7 0.0
*prior to intercompany interest charges
**all central costs allocated to the continued operation
Outlook
· Ongoing investment in the development and deployment of technologies
with significantly enhanced market size and differentiation.
Andrew Law, CEO of Enteq Technologies plc, commented:
"The SABER project has reached a pivotal milestone, having achieved proof of
SABER's novel concept whilst drilling in an operational test environment. The
engineering programme and Norway testing during the year led up to the
successful testing in Oklahoma which has provided us with validation needed to
advance with SABER commercialisation.
A number of efforts were realised during the year to focus on generating cash
to support the SABER project, notably the sale of the XXT product line and the
sale of the property.
We look forward to working alongside selected customers and industry partners
in different regions to bring this technology to the oil and gas, geothermal
and methane abatement markets and to deliver a positive and disruptive
impact."
( )
(1) The reconciliation between Underlying overheads and Administrative
expenses before amortisation is follows:
Year to 31 March 2023 Year to 31 March 2022
$m
$m
Total underlying
overheads
2.6
2.3
Depreciation - fixed
assets
0.2
0.2
Depreciation - rental
fleet
0.6
0.5
PSP Share
charge
0.2
0.2
Administrative expenses before
amortisation
8.6
3.2
(2) The reconciliation between Loss attributable to shareholders and Adjusted
EBITDA is follows:
Year to 31 March 2023 Year to 31 March 2022
$m
$m
Loss attributable to
shareholders
(2.8)
(0.8)
Exceptional
items
0.5
-
Amortisation
0.4
0.2
Depreciation - fixed
assets
0.2
0.2
Depreciation - rental
fleet
0.6
0.5
PSP Share
charge
0.2
0.2
Tax
(0.3)
-
Interest
-
-
Adjusted
EBITDA
(1.2)
0.3
Both the above alternative performance measures are shown as the Board
consider these to be key to the management as the business as a whole.
(3) The cash balance includes:
Year to 31 March 2023 Year to 31 March 2022
$m
$m
Cash and cash
equivalents
5.4
3.3
Bank
deposits
-
1.5
Cash
balance
5.4
4.8
The Company also separately issued today an AGM Trading Statement.
For further information, please contact:
Enteq Technologies
plc
+44 (0)20 8087 2202
www.enteq.com (http://www.enteq.com)
Andrew Law, Chief Executive Officer
Mark Ritchie, Chief Financial Officer
Cavendish Capital Markets Limited (NOMAD and
Broker)
+44 (0)20 7220 0500
Ed Frisby, Fergus Sullivan (Corporate Finance)
Andrew Burdis, Barney Hayward (ECM)
The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.
Combined Chief Executive and Chairman's report
Introduction
Enteq develops and provides downhole electronics and technologies for
measurement, data and control, which are used by the geothermal, methane
capture, oil and gas sectors around the world.
Specialist directional technologies, including Rotary Steerable Systems (RSS)
and Measurement While Drilling (MWD) are used by service companies around the
world who either purchase or rent equipment from third parties such as Enteq
or develop systems themselves.
The international RSS market is the target for new Enteq technology and is
currently estimated at over $2bn annually.
Enteq has a proven track record of providing extremely reliable and respected
technology to regional and independent service companies globally. Enteq is
commercialising game-changing technologies to deliver improvements in
efficiency, operating cost and reduced environmental impact in drilling.
Enteq's SABER technology is a novel RSS originated by Shell and subsequently
developed by Enteq under an exclusive IP and technology license agreement.
Enteq now has a rented operations facility in Houston, (having sold a freehold
in year-ending March 2023) and a technology centre in the UK. International
business is supported through a network of sales representatives.
Enteq plans to maximise growth through the commercialisation of SABER and
associated technologies in the substantial global directional drilling market.
Sale of XXT
The sale was a result of a strategic focus to improve the Company's medium
term cash position to underpin investment in product line development,
primarily the deployment of SABER, the rotary steerable drilling solution.
The XXT intellectual property (previously amortised over time to a book value
of nil) and associated product lines and trademark, together with selected
technology agreements, customer account receivable balances, and inventory
have been sold for a cash consideration of c.$1.89m; further selected customer
account receivables and inventory have also been sold for up to c.$1.27m to be
paid in cash over a 12 month period.
The Disposal reflects Enteq's focus on differentiated specialist MWD
technologies, and the rotary steerable sector (SABER) where there is a larger
addressable market.
Review of the Year
This year has been one of increasing the focus on the SABER technology
development project, resulting in a critical milestone being successfully
accomplished.
The SABER development project has progressed well during the year with the
most important milestone being the successful downhole drilling testing in
North America post financial year end, proving that the novel concept
underpinning SABER can steer effectively in operational test conditions. A
simplified design of the SABER control system was implemented during the year,
to widen the operating range and to improve operating effectiveness.
Continued customer and industry engagement on the SABER project confirmed
there is a high degree of appetite for this technology. SABER remains on-track
for commercialisation, with existing resources in place to complete the
remaining phase of the development project. A phased roll out is planned in
2024.
As a result of a strategic focus to improve the Company's cash position to
underpin investment in the development of SABER, Enteq sold the freehold
property in South Houston for $2.5m and sold the XXT intellectual property and
associated assets for an initial cash consideration of $1.89m (with selected
account receivables and inventory for up to c.$1.27m to be paid in cash over a
12-month period).
As significant overhead reductions were made in recent years, the underlying
overheads have remained steady in comparison to the previous year.
Staff
There were a total of 13 employees at the end of the year, down from the 15 at
the previous year end. The Board would like to recognise the on-going loyalty,
dedication, and support of the staff as Enteq continues with its excellent
reputation for the reliability of equipment and commitment to customer
support.
Prospects
Enteq has continued investment in the SABER RSS project development, having
achieved successful downhole drilling field test performance, to significantly
reduce the technical risk. Sustained testing has confirmed that the system has
performed to the design criteria and met all requirements to date.
Continued engineering of the project has resulted in an enhanced, simplified
design with a wider range of operation and a low cost to operate.
Extensive industry engagement with existing and new customers and partners,
both internationally and across North America, has confirmed that SABER is
on-track to meeting the market requirements for the geothermal, methane
capture and oil and gas sectors.
Financial Review
Income Statement
This is a pro-forma statement which is different in presentation to the
statutory format shown on page 35.
Year to 31 March: Continued Discontinued Continued Discontinued
2023 2023 2022 2022
$ million $ million $ million $ million
Revenue 0.0 6.2 0.0 7.3
Cost of Sales 0.0 (4.8) 0.0 (4.7)
Gross profit 0.0 1.4 0.0 2.6
Overheads (1.5) (1.1) 1.3 1.0
Adjusted EBITDA (1.5) 0.3 (1.3) 1.6
Depreciation & amortisation 0.0 (1.2) 0.0 (0.8)
Other charges 0.2 0.0 0.3 0.0
Ongoing operating loss 1.7 (0.9) (1.6) 0.8
Exceptional items 0.0 (0.5) (0.3) 0.0
Operating Loss (1.7) (1.4) (1.6) 0.8
Interest - - - -
Loss before tax (1.7) (1.4) (1.6) 0.8
Tax 0.3 0.0 - -
Loss after tax (1.4) (1.4) (1.6) 0.8
The North American market saw a steady increase during the year with the rig
count rising from 673 as at 31 March 2022 to 758 as at 31 March 2023 an
increase of 85 (13%). This compares to an increase 243 (57%) in the previous
year. This was against a background of the price of a barrel of WTI falling
during the year to 31 March 2023 from $104 to $73 compared to a rise from $64
as of 31 March 2022. The oil price was at levels during the year under
review to be profitable for the operating companies that require the services
of Enteq's customers.
North American revenue was steady at $5.8m compared to the $6.2m reported last
year. The North American revenue was largely driven by demand for specific
third-party technologies, with revenues deliberately controlled by the Company
to maintain working capital efficiency. The international market continued to
experience challenges of capital availability, with international revenue at
$0.4m, down from the $1.1m reported last year.
The full year gross margin was 23%, down from last year's 36%, due to an
increasing proportion of revenue coming from the third party components
mentioned above.
Total underlying overheads, at $2.3m were at the same level as last year's
figure. This reflected the concentration on reducing all levels of overheads
in previous years without impacting the level of customer support given.
The combined depreciation and amortisation charge was up on the previous year
due to an increased level of amortisation on previously capitalised software
enhancements plus a higher level of depreciation on both the rental fleet and
the underlying assets.
The "Other charges" shown above relate, primarily, to the non-cash cost
associated with the Performance Share Plan.
Statement of Financial Position
This is a pro-forma statement which is different in presentation to the
statutory format shown on page 36.
Enteq's net assets at the financial year-end comprised of the following items:
As at 31 March: 2023 2022
$million $million
Intangible assets 6.4 4.1
Property, plant & equipment 0.1 2.2
Rental fleet - 0.3
Net working capital (1.0) 4.1
Assets held for sale 2.2 -
Cash balance 5.4 4.8
Net assets 13.1 15.5
Both the closing balance and the increase in the year in the intangible assets
relate to the on-going spend on the SABER rotary steerable system.
The net book value of property, plant & equipment at $0.1m is $2.1m down
primarily due to sale of the freehold Houston site plus the annual
depreciation charge.
The reduction in net book value of the rental fleet reflects the disposal of
all the rental kits during the year.
The net working capital of ($1.0m) has decreased by $5.1m during the year.
This is primarily due to a decrease in all major components; debtors down by
$3.3m; inventory down $2.4m countered by creditors down $0.6m. All these
movements relate to the strategic decision to move away from the lower margin
MWD market and no longer offering extended credit terms to the major
customers.
Cash flows
This is a pro-forma statement which is different in presentation to the
statutory format shown on page 38.
Overall, the Group saw a net cash inflow of $0.6m (2022: outflow of $3.3m)
increasing the Group's closing cash balance as at 31 March 2023 to $5.4m.
The major elements of the non-operational cashflow relates to the $3.0m of
on-going investment in the engineering projects, primarily the SABER tool and
the disposal of the freehold Houston site for a net $2.3m.
Year to 31 March: 2023 2022
$ million $ million
Adjusted EBITDA (2.0) 0.3
Change in net operational working capital 2.9 (0.2)
Operational cash generated 0.9 0.1
Net investment in rental fleet - (0.8)
Investment in engineering projects (2.6) (2.7)
Investment in fixed assets - (0.1)
Interest and share issues - 0.2
Disposal of fixed assets 2.3 -
Net cash movement 0.6 (3.3)
Opening cash balances 4.8 8.1
Closing cash balance 5.4 4.8
Financial Capital Management
Enteq's financial position continues to be robust. Enteq had no bank
borrowings, or other debt, and had a closing cash position of $5.3m as at 31
March 2023 ($4.8m as at 31(st) March 2022).
Enteq monitors its cash balances daily and operates under treasury policies
and procedures which are set by the Board.
The financial statements are presented in US dollars as the Company's primary
economic environment, in which it operates and generates cash flows, is one of
US dollars. Apart from its UK based overhead costs, substantially all other
transactions are transacted in US dollars.
Enteq is subject to the foreign exchange rate fluctuations to the extent that
it holds non-US Dollar cash deposits. The year-end GBP denominated holdings
are approximately 3% of total cash holdings, down from the 5% of last year's
balance.
Annual General Meeting
The Company's Annual General Meeting was held on 29 September 2023 at 11am at
the offices of Cavendish Capital Markets, 1 Bartholomew Close, London, EC1A
7BL.
Annual Report and Notice of General Meeting
The Company's 2023 Annual Report and Accounts (together with a notice of
General Meeting proposing an ordinary resolution to receive the report of the
directors, the audited annual accounts and the auditors' report), will be
available on the Company's website later today, and will today be posted to
those shareholders who have requested to receive copies. The General Meeting
will take place at 11.00 a.m. on Monday 30 October 2023 at the offices of
Cavendish Financial plc, 1 Bartholomew Close, London, EC1A 7BL.
Mark Ritchie
Chief Financial Officer
29 September 2023
Enteq Technologies Plc
Consolidated Statement of profit or loss and other comprehensive income
Year to 31 March 2023 Year to 31 March 2022
Notes $ 000's $ 000's
Total Total
Continued Operations
Revenue - -
Cost of Sales - -
Gross Profit - -
Administrative expenses before amortisation 8 (1,680) (1,530)
Foreign exchange (loss)/profit on operating 5 (40)
activities 8
Total Administrative expenses (1,675) (1,570)
Operating loss (1,675) (1,570)
Finance income 7 37 16
Loss from continued operations (1,638) (1,554)
Tax expense 9 280 -
Loss from discontinued operations 24 (1,446) 767
Loss attributable to:
Total loss for the period (2,804) (787)
Earnings per share (in US cents) from continuing operations:
Basic (2.0) (2.2)
Diluted (2.0) (2.2)
Earnings per share (in US cents):
Basic (4.0) (1.1)
Diluted (4.0) (1.1)
Enteq Technologies Plc
Consolidated Statement of Financial Position
As at 31 As at 31
March 2023 March 2022
Notes $ 000's $ 000's
Assets
Non-current
Intangible assets 11 6,484 4,143
Property, plant and equipment 12 63 2,506
Non-current assets 6,547 6,649
Current
Trade and other receivables 14 237 3,537
Inventories 15 - 2,410
Cash and cash equivalents 16 5,351 3,296
Bank deposits 16 - 1,500
Assets held for sale 25 2,184 -
Current assets 7,772 10,743
Total assets 14,319 17,392
Equity and liabilities
Equity
Share capital 17 1,080 1,072
Share premium 17 92,037 91,919
Share based payment reserve 448 432
Retained earnings (80,489) (77,894)
Total equity 13,076 15,529
Liabilities
Current
Trade and other payables 18 1,243 1,863
Total liabilities 1,243 1,863
Total equity and liabilities 14,319 17,392
Mark Ritchie
Director
Enteq Technologies Plc
Consolidated Statement of Changes in Equity
For year ended 31(st) March 2023
Share
Called up based
share Retained Share payment Total
capital earnings premium reserve equity
$ 000's $ 000's $ 000's $ 000's $ 000's
As at 1 April 2022 1,072 (77,894) 91,919 432 15,529
Issue of share capital 8 - 118 - 126
Transfers between reserves - 209 - (209) -
Share based payment charge - - - 225 225
Transactions with owners 8 209 118 16 351
Loss for the year - (2,804) - - (2,804)
Other comprehensive income for the year - - - - -
Total comprehensive income - (2,804) - - (2,804)
Total movement 8 (2,595) 118 16 (2,453)
As at 31 March 2023 1,080 (80,489) 92,037 448 13,076
As at 1 April 2021 1,056 (77,324) 91,789 455 15,976
Issue of share capital 16 - 130 - 146
Transfers between reserves - 217 - (217) -
Share based payment charge - - - 194 194
Transactions with owners 16 217 130 (23) 340
Loss for the year - (787) - - (787)
Other comprehensive income for the year - - - - -
Total comprehensive income - (787) - - (787)
Total movement 16 (570) 130 (23) (447)
As at 31 March 2022 1,072 (77,894) 91,919 432 15,529
The accounting policies and notes on pages 40 to 64 form part of these
financial statements.
Enteq Technologies Plc
Consolidated Statement of Cash Flows
Year to 31 March 2023 Year to 31 March 2022
$ 000's $ 000's
Cash flows from operating activities
Loss from continued activities (1,638) (1,554)
Loss from discontinued activities (1,446) 767
Finance income (37) (16)
Gain on disposal of FA's (292) (30)
Share-based payment non-cash charges 225 194
Foreign exchange difference 5 (40)
Depreciation/Amortisation 1,162 840
(2,021) 163
Tax received from continuing operations 280 0
Decrease/(Increase) in inventory 1,681 478
Decrease in trade and other receivables 1,853 (964)
Decrease in trade and other payables (617) 320
Increase in rental fleet assets (255) (817)
Net cash from operating activities 921 (822)
Investing activities
Purchase of tangible fixed assets (25) (58)
Disposal proceeds of tangible fixed assets 2,266 30
Purchase of intangible fixed assets (2,639) (2,614)
Funds place on interest nearing deposit 1,500 (1,500)
Interest received 37 16
Net cash from investing activities 1,139 (4,127)
Financing activities
Share issue - 145
Net cash from financing activities - 145
Increase in cash and cash equivalents 2,060 (4,803)
Non-cash movements - foreign exchange (5) 40
Cash and cash equivalents at beginning of period 3,296 8,059
Cash and cash equivalents at end of period 5,351 3,296
1. BASIS OF PREPARATION
The Group's financial statements have been prepared on an accrual basis and
under the historical cost convention. Monetary amounts are expressed in US
dollars and are rounded to the nearest thousands, except for earnings per
share.
The Company's financial statements are presented in US dollars as the
Company's primary economic environment, in which it operates and generates
cash flows uses this currency.
SEGMENTAL REPORTING
For management purposes, the Group is currently organised into a single
business unit, the Drilling Tools division, which is currently based solely in
the USA.
The principal activities of the group is the design, manufacture and selling
of specialised parts and products for Directional Drilling and Measurement
While Drilling operations for use in the energy exploration and services
sector of the Oil and Gas industry. Revenue is only generated by the selling
activity.
At present, there is only one operating segment and the information presented
to the board is consistent with
the consolidated profit and loss statement and the consolidated statement of
financial position.
The revenues, net assets and non-current assets of the Group can be analysed
by geographic location (post-consolidation adjustments) as follows:
Revenues
31 March 2023 31 March 2022
$ 000's $ 000's
United States of America 5,846 6,201
China 278 187
Rest of the world 56 228
Europe 38 51
Central Asia 22 396
Australasia 3 243
Total Group revenue 6,245 7,306
31 March 2023 31 March 2022
$ 000's $ 000's
Contracts with customers 5,701 6,364
Operating lease income 544 942
Total Group revenue 6,245 7,306
Net Assets
31 March 2023 31 March 2022
$ 000's $ 000's
Europe (UK) 4,276 3,649
United States 8,800 11,880
Total Group net assets 13,076 15,529
Non-current Assets
31 March 2023 31 March 2022
$ 000's $ 000's
Europe (UK) 63 -
United States 6,484 6,649
Total Group non-current assets 6,547 6,649
All of the Group's revenue arises from the sale and rental of specialised
parts and products for Directional Drilling and Measurement While Drilling
operations. The Group had 2 customers that contributed in excess of 10% of
the Group's total sales for the year (2022: 2). These customers contributed
$2,903k and $1,520k respectively. (2022: $4,086k and $1,014k). No revenue
relates to customers based in the UK (2022: none).
2. EXCEPTIONAL ITEMS
The exceptional items can be analysed as follows:
31 March 2023 31 March 2022
$ 000's $ 000's
Reduction in value of inventory 554 -
Reduction in value of trade receivables 212 -
Bad debt written off 140 -
Severance payments and other plant closure costs 14 37
Gain on sale of fixed assets (292) (30)
Other 68 -
Total exceptional items 696 7
All exceptional items relate to
discontinued activities.
3. INCOME TAX
Analysis of tax expense
No liability to UK corporation tax arose on ordinary activities for the
period.
Factors affecting the tax charge
The tax assessed for the period is different from the standard rate of
corporation tax in the UK. The difference is explained below:
31 March 2023 31 March 2022
$ 000's $ 000's
Loss on ordinary activities before tax (3,084) (787)
Loss on ordinary activities multiplied by the
standard rate of corporation tax in the UK of 19% (2022: 19%): (586) (149)
Effects of:
Items not subject to corporation tax 473 (31)
Tax losses to carry forward 113 181
R&D tax credit 280 -
Total income tax 280 -
There has been no deferred taxation recognised in these financial statements
due to the uncertainty surrounding the timing of the recovery of these
amounts. The total losses available to the Group in the relevant tax
jurisdictions are as follows: UK $0.0m; United States $22.6m (2022: UK $0.5m;
United States $22.2m). There were no significant deferred tax liabilities.
These tax losses have no expiry date. Tax losses for which no deferred tax
balances have been recognised are disclose in Note 14.
4. EARNINGS PER SHARE AND DIVIDENDS
Basic earnings per share
Basic earnings per share is calculated by dividing the loss attributable to
ordinary shareholders for the year of $2,804k (31 March 2022: loss of $787k)
by the weighted average number of ordinary shares in issue during the year of
69,484k (31 March 2022: 68,604k).
As the Group is loss making, any potential ordinary shares have the effect of
being anti-dilutive. Therefore, the diluted EPS is the same as the basic
EPS. As the year end share price is below the weighted average option price
of all the options issued, the adjusted diluted EPS is the same as adjusted
EPS.
The number of outstanding share options, including senior managers, that are
not included in the above figures are as follows:
31 March 2023 31 March 2022
000's 000's
EMI plan 170 233
PSP plan 5,616 3,670
Total 5,786 3,903
.
March 2023: EPS Weighted average number of shares Per-share amount
Earnings
$ 000's 000's US cents
Loss attributable to ordinary shareholders 2,804 69,484 (4.0)
March 2022: EPS Weighted average number of shares Per-share amount
Earnings
$ 000's 000's US cents
Loss attributable to ordinary shareholders 787 68,604 (1.1)
During the year Enteq Technologies Plc did not pay any dividends (2022: nil).
5. INTANGIBLE ASSETS
Other Intangible Assets
Developed technology IPR&D technology Brand names Customer relationships Total
$ 000's $ 000's $ 000's $ 000's $ 000's
Cost:
As at 1 April 2022 13,237 15,267 1,240 - 29,744
Transfer 102 (102) - - -
Capitalised in period - 2,639 - - 2,639
As at 31 March 2023 13,339 17,804 1,240 - 32,383
Amortisation/Impairment:
As at 1 April 2022 13,041 11,320 1,240 - 25,601
Writte off during the year (110) - - - (110)
Charge for the year 408 - - - 408
As at 31 March 2023 13,339 11,320 1,240 - 25,899
Net Book Value:
As at 1 April 2022 196 3,947 - - 4,143
As at 31 March 2023 - 6,484 - - 6,484
Cost:
As at 1 April 2021 12,842 13,048 1,240 20,586 47,716
Transfers 275 (275) - - -
Disposal - - - (20,586) (20,586)
Capitalised in period 120 2,494 - - 2,614
As at 31 March 2022 13,237 15,267 1,240 - 29,744
Amortisation/Impairment:
As at 1 April 2021 12,842 11,320 1,240 20,586 45,988
Disposal - - - (20,586) (20,586)
Charge for the year 199 - - - 199
As at 31 March 2022 13,041 11,320 1,240 - 25,601
Net Book Value:
As at 1 April 2021 - 1,728 - - 1,728
As at 31 March 2022 196 3,947 - - 4,143
The main categories of Intangible Assets are as follows:
Developed technology:
This is technology which is currently commercialised and embedded within the
current product offering.
IPR&D technology:
This is technology which is in the final stages of field testing, has
demonstrable commercial value and is expected to be launched within the
foreseeable future.
Brand names:
The value associated with the various trading names used within the Group.
Customer relationships:
The value associated with the on-going trading relationships with the key
customers acquired.
Impairment Review
Impairment Review
Due to the sale of the XXT business assets, there is now considered to be only
one main cash generating unit ("CGU") - that is relating to the SABER project.
This CGU is in the carried forward value for IPR&D technology in the table
above with a value of $6,484k (2022: $3,947k)
The recoverable amount of the CGU at the balance sheet date was assessed as a
directors' valuation (2022: directors' valuation) and is determined from value
in use calculations both where the asset is currently in use or will be in the
near future. The directors have applied a discounted cashflow approach to
determine the carrying value for the SABER project and intangible asset being
carried in these financial statements.
The key assumptions made by the directors (2022: directors) for the discounted
cash flow workings are:
- the expected roll out of the technology over five years to 31 March 2028
(2022: not disclosed);
- an exit value at the beginning of year six on an estimated multiple;
- that the roll out will not be significantly impacted by competing
technologies (2022: same assumption);
- that the Group will introduce a phased roll out of rental units of between 5
and 20 in each key region from 1 April 2024 onwards (2022: not disclosed) with
a typical number of days usage per unit;
- each rental unit will generate a similar amount of revenue per unit
irrespective of the region in which it operates (2022: not disclosed);
- the expected operating life of each rental unit is >5 years and annual
servicing costs for each have been included in the workings (2022: not
disclosed);
- that the expected revenues arise from projects based upon agreements in
place as well as agreements which currently do not yet exist and that the
Group will put in place an appropriate plan to field the number of rental
units in the model (2022: same assumption);
- that the company currently has the financial resources to build the number
of rental units and that there is no requirement at present to raise
additional income from new fund raises (2022: same assumption), whilst noting
that additional scenarios are continuously under evaluation to provide
financing to further accelerate fleet build-up;
- applying a discount rate to cashflow of 25% (2022: 13.4%) assessed by a
review of discount rates for projects within similar and competing sectors
which was considered to provide a reasonable estimate of a weighted average
cost of capital for a company benefiting from the assumed roll out;
- that the field testing is successful and completed and that the technology
can be rolled out commercially from 1 January 2024 without any fundamental
developmental challenges.
Changes to the above assumptions would impact the valuation assessment.
The Directors believe that the key sensitivities in the valuation are as
follows:
(i) The directors have assumed a phased build-up of
rental units to be in operation in each key region from 1 April 2024 onwards.
Sensitivity workings with a reduction to the total of 10 rental units showed a
decrease in valuation by between $2 million to $4 million.
(ii) The discount rate applied to the cashflows.
Sensitivity workings with a discount rate 5% higher at 30% would decrease the
valuation by between $3.0 million and $6.0 million.
(iii) Inflation - an increase in the inflation assumption
above that assumed by the directors valuation of 5%.
(iv) Growth rates - The directors have assumed growth rates
in revenues of 33% once the SABER business has been established, resulting
from the fleet expansion.
The Directors have not accounted for the possibility of any onerous
obligations arising with the contracts as there is no reason to expect that
these will arise at this stage in the business life cycle.
Currently the SABER project is towards the end of the development phase and is
forecast to be cash generating from 31 May 2024.
6. RESPONSIBILITY STATEMENT OF THE DIRECTORS
To the best of the knowledge of the Directors (whose names and functions are
set out below), the final results announcement has been prepared using
accounting policies and methods of computation consistent with those used in
the Group's annual report for the year ended 31 March 2022 and adopted for the
financial year ended 31 March 2023, gives a true and fair view of the assets,
liabilities, financial position and profits and losses for the Company and the
undertakings included in the consolidation taken as a whole.
Executive Directors
Andrew
Law
Chief Executive Officer
Mark
Ritchie
Chief Financial
Officer
Non-Executive Directors
Martin
Perry
Chairman
Neil Hartley
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