REG - Green Dragon Gas Ltd - Interim Results for the Six Months Ended June 2017 <Origin Href="QuoteRef">GDG.L</Origin> - Part 2
28/09/2017 07:08
- Part 2: For the preceding part double click ID:nRSb0638Sa
5 - 29 27 350
At 30 June 2017 21,682 - - 413 397 22,492
Net book value
At 30 June 2017 269,747 - - 271 581 270,599
At 31 December 2016 266,098 641 1,493 1,674 2,677 272,583
9 GAS EXPLORATION AND APPRAISAL ASSETS
Cost US$'000
At 1 January 2016 1,043,859
Additions 4,076
Capitalisation of internal costs 6,392
Share of gas exploration and appraisal assets from CUCBM 37,215
Exchange differences (57,425)
At 31 December 2016 (audited) 1,034,117
Additions 8,945
Capitalisation of internal costs 2,261
Share of gas exploration and appraisal assets from CUCBM 2,981
Exchange differences 17,929
At 30 June 2017 (unaudited) 1,066,233
10 TRADE AND OTHER RECEIVABLES
As at 30 June 2017 As at 31 December2016
US$'000 US$'000
Unaudited Audited
Trade receivables 3,616 3,227
Prepayments 623 2,446
Other receivables 6,703 6,321
Amount due from related parties 11,408 10,917
22,350 22,911
11 TRADE AND OTHER PAYABLES
As at 30 June 2017 As at 31 December2016
US$'000 US$'000
Unaudited Audited
Trade payables 6,338 6,640
Other payables 4,145 6,325
Amounts due to related parties 3,398 918
13,881 13,883
12 CONVERTIBLE NOTES
As at 30 June 2017 As at 31 December2016
US$'000 US$'000
Unaudited Audited
Brought forward from prior year 47,347 48,398
Accrued interest 2,067 4,784
Amendment of convertible notes - (2,851)
Accelerated finance charge - 516
Interest payment - (3,500)
49,414 47,347
As at 30 June 2017, the Company had one (31 December 2016: one) convertible
note in issue.
Convertible loan note issued 2014
(a) US$50 million 7% coupon convertible note due 2017
On 2 June 2014 ("Issue Date"), the Company issued a three-year convertible
note having a face value of US$50,000,000 with a maturity date of 1 June 2017
("Maturity Date"). The note bears interest at 7% per annum, payable on a
semi-annual basis. At the Maturity Date, the total sum of 100% of the
outstanding principal amount of the convertible note and the accrued interest
shall become payable, unless previously converted or redeemed.
The convertible note can be converted into ordinary shares of the Company at
the note holder's option at any time prior to the Maturity Date at US$9.34 per
share.
Convertible note amendment
(b) US$50 million 10% coupon convertible note due 2020
In December 2016, the Company reached agreement with the note holder to extend
the maturity of the US$50 million convertible note entered into in June 2014.
Under the agreement, the note remains unsecured, has a revised coupon of 10%
and a maturity date extended to 31 December 2020. The Company issued an option
for the note holder to require (one-time) early repayment on the original
maturity date, the option being exercisable at the discretion of the note
holder by 28 April 2017. The conversion price of the note was amended to
US$2.83 per share representing a 25% premium over the 13 December 2016 closing
price.
During the period, the Company reached agreement with the note holder to
extend the period during which the put option is exercisable to 27 October
2017.
At final maturity of the note, the note holder has the right to require the
Company to purchase all of its share holdings up to a maximum limit of
10,775,578 shares or 6.69% of the entire issued share capital of the Company
at a price based on the 90 day VWAP calculated as of 31 December 2020 and to
be settled prior to 30 April 2021. See the share buyback option liability
below.
(c) Accounting for convertible notes
On initial recognition, the fair value of the liability component of the
convertible loan note was determined using the prevailing market interest rate
of similar debts without conversion option and early redemption options. For
the note issued during 2014, the rate considered to be comparable was 10%. The
loan note is subsequently carried at amortised cost.
The equity element arising from the conversion option of their convertible
notes, being the residual value at initial recognition, is presented in the
equity heading "convertible note equity reserve".
On the amendment made of the convertible note in December 2016, the original
financial liability was extinguished and the convertible reserve was
transferred to retained earnings through reserves. The fair value of the
liability component of the amended convertible loan was determined using the
prevailing market interest rate of similar debts without conversion option and
early redemption options. The rate considered to be comparable was 12%. The
loan note is subsequently carried at amortised cost.
The equity element arising from the conversion option of the convertible
notes, being the residual value at initial recognition, is presented in the
equity heading "convertible note equity reserve".
The terms of the convertible note include a clause whereby if another loan
held by the Company becomes in default then the convertible note would also be
in default. At 31 December 2016, no other loans were in default but there was
a breach of covenants on the Company's public corporate bond, waiver of which
was subsequently obtained during the period (see note 13).
Share buyback option liability
As at 30 June 2017 As at 31 December2016
US$'000 US$'000
Unaudited Audited
Brought forward from prior year 7,924 -
Issue of share buyback option - 8,255
Revaluation of share buyback option (4,817) (371)
3,107 7,924
13 BONDS AND DERIVATIVE FINANCIAL INSTRUMENT
On 8 December 2014, Green Dragon Gas issued a public corporate bond (the
"Bond") in the amount of US$88,000,000. The bond was issued at a discount of
2.5% and is senior secured three-year paper due on 20 November 2017. The Bond
carries a 10% coupon payable semi-annually and also carries a redemption
premium of 2% at maturity. The Bond is secured by a pledge over the shares of
Greka Gas China, a wholly-owned subsidiary of Green Dragon Gas. The bond was
initially recorded at fair value and is subsequently carried at amortised
cost. Issue fees of US$1,893,000 were offset against the principal amount of
the bond and will be amortised as part of the effective interest rate charge
to the maturity date. The redemption premium is amortised as part of the
effective interest rate charge to the maturity date. The following table
summarises the movements in the bond:
As at 30 June 2017 As at 31 December2016
US$'000 US$'000
Unaudited Audited
Brought forward from prior year 88,795 86,807
Accrued interest 5,365 10,788
Interest payment (4,400) (8,800)
89,760 88,795
As disclosed in the Company's 2016 annual report, due to the non-inclusion of
CUCBM's revenue and related costs, the Company's 2015 financial statements
failed to meet two of the bonds' financial covenants. On 31 May 2017, the
Company has obtained a waiver for the reporting period ended on 31 December
2016 and 30 June 2017 from the bond holders for this non-compliance.
14 PROVISIONS
Details regarding the provision, along with movements in the year have been
disclosed in Note 17. At 30 June 2017, US$367,495,000 (31 December 2016:
US$388,702,000) represents the value of future production related to the
enhanced cost recovery from the ring-fenced CUCBM legacy wells that the Group
has agreed in the Framework Agreement with CUCBM will be used to satisfy the
Group's proportionate share of investment made by CUCBM in GSS. The balance
will be paid in kind from future production. There is no constructive or
substantive obligation on the Group to repay these amounts in cash should
future production from the ring-fenced legacy wells be insufficient to recover
the balance.
No discounting has been applied to the provision as it bears interest at
9.0%.
The cost recovery provision also includes US$13,000,000 (2016: US$13,000,000)
in respect of exploration costs incurred by CUCBM prior to the PSC period. The
Group has an option to increase its participating interest in the GSS Block
from its current 60% to 70% by investing two installments of US$6,500,000, one
prior to 31 December 2017, and the second prior to 31 December 2018. The
amount is unsecured and does not bear interest. Discounting is considered to
be immaterial.
15 SHARE CAPITAL AND RESERVES
Authorised Issued and fully paid
Number Number
of shares US$ of shares US$
At 1 January 2016, 31 December 2016 and 30 June 2017 ordinary shares of US$0.0001 each 500,000,000 50,000 156,072,289 15,607
Nature and purpose of reserves
(i) Share premium
The amount relates to subscription for or issue of shares in excess of nominal
value. The application of the share premium account is governed by the
Companies Law of the Cayman Islands.
(ii) Share redemption reserve
The amount represents the initial value of the liability in respect of the
option the company has granted to buy back shares.
(iii) Convertible note equity reserve
The amount represents the value of the unexercised equity component of the
convertible note issued by the Company recognised in accordance with the
Group's accounting policy.
(iv) Share based payment reserve
The amount relates to the fair value of the share options that have been
expensed through the income statement less amounts, if any, that have been
transferred to the retained earnings/deficit upon exercise.
(v) Foreign exchange reserve
The amount represents gains/losses arising from the translation of the
financial statements of foreign operation the functional currency of which is
different from the presentation currency of the Group.
(vi) Retained deficit
The amount represents cumulative net gains and losses recognised in
consolidated profit or loss less any amounts reflected directly in other
reserves.
16 RELATED PARTY TRANSACTIONS
Save as disclosed in notes 10, 11, 13 and 18, there were no other related
party transactions that are required to be disclosed. Transactions between the
company and its subsidiary undertakings, which are related parties, have been
eliminated on consolidation and are not disclosed in this note. The related
party transactions of the Group during the period include the following
· Amounts due from related parties of US$11,408,000 (31 December 2016:
US$10,917,000) and amounts due to related parties of US$3,398,000 (31 December
2016: US$918,000) are companies that are subsidiaries of Greka Drilling Ltd.
and Greka Engineering & Technology Ltd. which are companies under common
control. The Group has contracts with both companies regarding drilling
services and gas processing respectively. All amounts due from related parties
are unsecured, interest free and repayable on demand.
· Amounts due from CNPC of US$3,365,000 (31 December 2016: Amounts due
from CNPC of US$1,487,000), which is a party to the production sharing
contracts on the activities of exploration, development and production of coal
bed methane, in respect of exploration costs incurred. The balance is
unsecured and interest-free.
· Amounts due to CUCBM under the Framework Agreement. These are detailed
in note 17.
· Drilling costs of US$626,000 (31 December 2016: US$3,300,000) on
services provided by wholly-owned subsidiaries of Greka Drilling Limited.
· Incurred infrastructure services costs of US$3,222,000 (31 December
2016: US$5,790,000) from wholly-owned subsidiaries of Greka Engineering and
Technology Limited.
· Sold gas of US$799,000 (31 December 2016: US$1,158,000) to a
wholly-owned subsidiary of Greka Engineering and Technology Limited for power
generation.
17 EVENTS AFTER REPORTING DATE
Other than the matters noted in the basis of preparation and going concern
paragraph in note 2 to the financial information, and the signing of
Memorandum of Understanding and Supplementary Agreements with CUCBM in note 18
to the financial information, there were no other significant events occurring
after 30 June 2017 up to the date of the Group's interim report for the period
ended 30 June 2017 that is required to be disclosed.
18 JOINT ARRANGEMENTS
The Group currently operates under six (2016: six) production sharing
contracts ("PSCs") for the exploration and development of CBM gas in the PRC.
Background
On 8 January 2003, the Group entered into four PSCs with CUCBM to explore,
develop and produce coal bed methane in five blocks comprising Shizhuang South
("GSS"), Chengzhuang ("GCZ"), Shizhuang North ("GSN"), Qinyuan ("GQY") and
Panxie East ("GPX"). GSS, GCZ, GSN and GQY are located in Shanxi Province with
PanxieEast located in Anhui Province.
In 2003 the Group also obtained the rights as foreign contractor related to
the Fengcheng ("GFC") PSC. This PSC, dated 13 August 1999, was originally
entered between Saba Petroleum Inc. as foreign contractor and CUCBM. Saba
Petroleum Inc. was a related company of the Group by way of the common
controlling shareholder, Mr. Randeep S. Grewal. The GFC block is located in
Jiangxi Province.
Under the terms of these five PSCs the Group, as operator, agreed to provide
funds and apply its technology and managerial experience and to cooperate with
CUCBM to explore, develop and produce coal bed methane from the license areas.
CUCBM as a state-owned enterprise is eligible to apply for the exclusive
rights for the exploitation of coal bed methane in the areas as defined in the
contracts.
The PSCs provide that all costs incurred in the exploration stage shall be
borne by the Group. The terms of the PSCs require the Group to cooperate with
the state partner to submit the Overall Development Plan to the relevant
authorities. Upon approval of the ODP by the Chinese authorities, the PSC
operations are determined to have entered the development stage. However, as
detailed in Note 2in circumstances when the approval of ODP is delayed other
factors, including the substantive nature of operations and cash generation,
may be considered to determine whether the development stage has been reached
regardless of formal ODP approval.
Where it is determined that an asset is in the development stage based on
facts and circumstances then the associated investment balance is reclassified
from the exploration and appraisal category to the property, plant and
equipment category of fixed assets. The responsibility for procuring approval
of the ODP lies with the State partner. Once formally in the development stage
the cost sharing mechanisms within the PSCs become effective and development
and operating costs are borne by the partners in accordance with their
respective equity interests in the relevant PSCs. Once production commences
the cost recovery mechanism within the PSCs provides that the proceeds of
production output (after deduction of value-added tax and any royalty payable
to the Chinese tax authority) are allocated as follows:
· firstly towards operating costs recovery in the proportion above
mentioned (the "Sharing Proportion");
· secondly to exploration cost recovery; and
· thirdly to development cost recovery (including deemed interest as
appropriate).
Any unallocated revenue after cost recovery is allocated to the partners in
accordance with their equity participation in the PSC after calculating a
final royalty payable to the Chinese Authorities. The final royalty is based
on a sliding scale from 0% to the maximum payable of 15% and calculated over
total block production.
The five PSCs each have a term of 30 years, with a production period of not
more than 20 consecutive years commencing on a date determined by the Joint
Management Committee but aligned with the approval date of ODP. The JMC is
established in accordance with the PSC between the Group and CUCBM to oversee
the operations in the contracted area. Currently all the six blocks covered by
these five production sharing contracts are formally in the exploration stage
based on the Chinese requirement for ODP approval before transition to
development. In 2015 the assets associated with area 4 within the GSS block
were reclassified as property, plant and equipment due to the substantive
nature of the production operations and associated cash generation from this
area.
PSCs held with PetroChina (CNPC)
Chengzhuang block ("GCZ")
In August 2014, the Group finalised and signed the Cooperation Agreement with
PetroChina in respect of the GCZ block in accordance with a memorandum of
understanding previously entered in December 2013. GCZlies within the GSS
licence area and prior to the Cooperation Agreement was governed by the GSS
PSC. The Cooperation Agreement reaffirms the rights of the Group contained in
the PSC over the GCZ block. The Cooperation Agreement confirms the Group's 47%
participating interest in the block and defines the term of the agreement as
running from March 2010 to March 2033.
The Cooperation Agreement confirmed the Group's contribution to cumulative
capital expenditure and its share of net revenue. The Cooperation Agreement
also confirmed the Group's entitlement to its share of the downstream
infrastructure assets in place, including the gas gathering station, together
with the Group's funding obligation for those assets. The Group recorded
US$10,900,000 within property, plant and equipment in respect of its 47% share
in these assets in 2014 based on the final agreement of the costs associated
with the downstream infrastructure. The Group also elected to settle its
obligation for all historic amounts due to PetroChina through its share of
future production.
In 2015 PetroChina achieved cost recovery in respect of its historic
investment in the GCZ block. Following cost recovery by PetroChina the Group
is receiving its proportion of revenue in cash each month. As a result, the
billing arrangements for GCZ have moved to a full joint operations basis where
the Group receives its share of revenue on the conclusion of each month and is
separately cash-called for its share of opex and capex on a month-ahead basis.
Cash calls are reconciled to actual expenditure quarterly.
The following table summarises the Group's share of the capital expenditure
and net revenues arising from the GCZ block for the current period and prior
year. Depreciation figures have been excluded.
30 June2017US$'000Unaudited 31 December 2016US$'000Audited
Capital expenditure - -
Revenue and other income 5,666 11,764
Total operational costs and expenses (2,124) (4,998)
Net Profit 3,542 6,766
Amount due from/(to) PetroChina
Opening balance 1,487 (1,774)
Capital expenditure for GCZ block - -
Share of profit for GCZ block 3,542 6,766
Cash received (1,664) (7,053)
Closing balance 3,365 1,487
The balance due from PetroChina is included within trade and other
receivables, is unsecured and interest free.
Baotian-Qingshan block ('GGZ')
In addition, Greka Guizhou E&P Ltd., a subsidiary of the Company, is party to
a PSC with PetroChina to explore for and develop coal bed methane resources in
Guizhou Province. The Group has a 60% participating interest in GGZ and has
provided a performance bond against its pilot exploration programme commitment
in the amount of US$1,500,000 (31 December 2016: US$2,000,000). At 30 June
2017, the cumulative net investment made by the Group in GGZ was US$28,847,000
(31 December 2016: US$28,267,000), of which US$55,000 was invested in the six
months ended 30 June 2017.
PetroChina is a subsidiary of state-owned China National Petroleum Corporation
(CNPC), headquartered in Dongcheng District, Beijing.
PSCs held with CUCBM (CNOOC)
Framework Agreement with CUCBM
On 31 March 2014, and following the identification of unauthorised drilling
activities across several of the Group's blocks by CUCBM, the Group entered a
Framework Agreement CUCBM the purpose of which was to amend and clarify the
rights of both the Group and CUCBM in relation to the PSCs jointly held
between the parties. Under the terms of the Framework agreement, the Group's
percentage share in the relevant blocks were updated and confirmed as
follows:
PSC GDG share CUCBM share
Shizhuang South 60% 40% GDG share increasing to 70% on payment of US$13,000,000 to CUCBM
Shizhuang North 50% 50%
Quinyan Area A 10% 90%
Quinyan Area B 60% 40%
Fengcheng 49%* 51%
Panxie East 60%* 40%
* unchanged
The Framework Agreement reaffirmed the status of the PSC's. Under the PSCs,
the exploration costs were due to be incurred by the Group, with the Group
carrying the exploration risk and the associated costs being recovered from
future production. Notwithstanding the terms of the PSC, CUCBM undertook
significant unauthorised exploration work within the license area incurring
gross expenditure of US$611,300,000 related to the drilling of wells and the
establishment of certain infrastructure across the PSC blocks.
Under the PSC, the Group had the legal right to enforce its interest in the
asset as if it had been incurred 100% by the Group in the exploration phase
and benefit accordingly from the costs incurred by CUCBM. However, as part of
the negotiation of the Framework Agreement the Group agreed to reimburse CUCBM
for what otherwise would have represented the Group's share of the historic
expenditure by allowing CUCBM to recover its historic costs in kind from an
enhanced participation share (over and above CUCBMs equity interest in the
PSC) in ring-fenced gas production from the relevant wells. A constructive
obligation related to the agreement to reimburse CUCBM in kind is considered
to exist given the nature of the transaction and the substance of the
negotiation between the parties.
The amount to be reimbursed through future production from the ring-fenced
wells is considered sufficiently certain given the status of well development,
the extent of in-place infrastructure and estimated reserves associated with
the wells. Accordingly, the Group has recorded its proportionate share of the
assets in accordance with its equity interest in the PSC. A provision
representing the estimated value of production from the ring-fenced wells that
the Group will forgo in order to settle its share of the costs incurred has
also been recorded.
Settlement remains dependent upon sufficient future production arising from
the ring-fenced wells.
The following table summarises the cost recovery provision which also
represents the Group's cumulative share of capital expenditure:
As at30 June2017US$'000Unaudited As at 31 December 2016US$'000Audited
Opening balance 401,702 370,217
Capital additions in the period 6,332 57,076
FX (gain)/loss 7,956 (25,591)
Closing provision for amounts due to CUCBM 415,990 401,702
The cumulative expenditure by CUCBM across the PSCs, which the Group is
reimbursing through future production, bears interest at 9%. No discounting of
the provision applies given the interest bearing nature.
Under the original Shizhuang South PSC and as reaffirmed by the Framework
Agreement US$13,000,000 included within provisions (2016: US$13,000,000)
represent amounts payable to CUCBM in respect of exploration costs incurred by
CUCBM on GSS prior to the original PSC between the parties. The Group has an
option to increase its participating interest in the GSS Block from its
current 60% to 70% by investing two installments of US$6,500,000, one prior to
31 December 2017, and the second prior to 31 December 2018. The balance is
unsecured, and interest-free. Discounting is considered immaterial. The
obligation is classified as a provision given the option to increase its
participating interest in the GSS Block is at the Company.
Shizhuang North PSC
Under the terms of the Framework Agreement, the Group agreed to reduce its
interest in the GSN Block by 10% in return for CUCBM providing the Group with
a carried interest of US$100,000,000 related to exploration and development
expenditure across the block. The Group has incurred US$7,700,000 on the block
which is currently held as exploration asset. No gain in respect of the
committed future expenditure as compared to the 10% interest in the Group's
existing assets has been recognised under the Group's accounting policy.
Memorandum of Understanding with CUCBM ("MoU")
On 8 September 2017, the Group entered a MoU with CUCBM the purpose of which
was to further clarify the rights of both the Group and CUCBM in relation to
the PSCs jointly held between the parties, and the Framework Agreement entered
into on 31 March 2014. The MoU provides the Group an option to increase its
participating interest in the GSS Block from 60% to 70% by investing two
installments of US$6,500,000, one prior to 31 December 2017, and the second
prior to 31 December 2018. Increasing interest in the Block will encompass
CUCBM's legacy wells, which were drilled prior to 31 July 2014, following cost
recovery.
Shizhuang South PSC Supplementary Agreement
On 8 September 2017, the Group entered a Shizhuang South PSC Supplementary
Agreement with CUCBM. The Agreement stipulates that legacy wells investments
are to be recovered by both parties on an accelerated basis, with 90% of gross
profit to be distributed to the cost recovery, instead of 70% as per PSC. The
remaining 10% is to be distributed between the participating interest of 60%
to the Group and 40 % to CUCBM. The Agreement also provides that the Group is
to operate CS15 wells and CUCBM has exclusivity in CS3 wells in designated
Area 2 of 60 km2.
Shizhuang North PSC Supplementary Agreement
On 8 September 2017, the Group entered a Shizhuang North PSC Supplementary
Agreement with CUCBM. The Agreement extended the exploration period to 14
April 2019.
CUCBM is majority owned by China National Offshore Oil Corp and is
headquartered in Dongcheng District, Beijing.
19 DEFERRED TAXATION
(a) Deferred tax assets
US$'000
At 1 January 2016 2,169
Reversal of temporary difference 50
Exchange differences (140)
At 31 December 2016 - audited 2,079
Reversal of temporary difference 13
Exchange differences 42
At 30 June 2017 (unaudited) 2,134
(b) Deferred tax liabilities
US$'000
At 1 January 2016 154,352
Reversal of temporary difference (178)
Exchange differences (9,343)
At 31 December 2016 - audited 144,831
Reversal of temporary difference (463)
Exchange differences 3,150
At 30 June 2017 (unaudited) 147,518
As at30 June2017US$'000 As at31 December 2016US$'000
Unaudited Audited
Recognised deferred tax (liabilities) and assets at PRC rate of 25%
Deferred tax assets and liabilities are attributable to the following:
Fair value adjustments in exploration and evaluation assets (147,518) (144,831)
Tax losses - overseas 2,134 2,079
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following:
Tax losses - overseas 6,503 6,503
Potential unrecognised tax benefit at PRC rate of 25% 1,626 1,626
The deductible temporary timing differences do not expire under current tax
legislation. PRC tax losses expire after five years. Deferred tax assets have
not been recognised in respect of the full value of these items because at
this point in the Groups development it is not virtually certain that future
taxable profits will be available against which the Group companies can
utilise the benefits of these tax losses in the near future. The Group has not
offset deferred tax assets and liabilities across different jurisdictions.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
(a) the Condensed Financial Statements have been prepared in accordance with
IAS 34 Interim Financial Reporting, as adopted by the European Union, and give
a true and fair view of the assets, liabilities, financial position and profit
of the Group; and
(b) the Interim Management Report includes a fair review of the information
required by FCA's Disclosure Guidance and Transparency Rules (DTR 4.2.7 R and
4.2.8 R).
On behalf of the Board
Randeep S. Grewal
Founder & Chairman
27 September 2017
Interim Review Report for Green Dragon Gas Ltd.
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2017 which comprises the condensed consolidated statement of
comprehensive income, condensed consolidated statement of financial position,
condensed consolidated statement of changes in equity, the condensed
consolidated statement of cash-flows and the related notes.
We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of
financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and has been
approved by the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. The condensed set of financial
statements included in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, ''Interim Financial
Reporting'', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Our report has been prepared in accordance with the terms of our engagement to
assist the company in meeting its responsibilities in respect of half-yearly
financial reporting in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so
by our prior written consent. Save as above, we do not accept responsibility
for this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information
Performed by the Independent Auditor of the Entity'', issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2017 is not prepared, in all
material respects, in accordance with International Accounting Standard 34, as
adopted by the European Union, and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Material uncertainty related to going concern
In forming our opinion on the condensed set of financial statements, which is
not modified, we have considered the adequacy of the disclosures made in note
2 to the financial statements concerning the Group's ability to continue as a
going concern. The group needs to refinance its debt and liabilities as
disclosed further in note 2, but there are currently no binding agreements in
place. These conditions, along with the other matters explained in note 2 to
the condensed set of Financial Statements, indicate the existence of a
material uncertainty which may cast significant doubt about the Group's
ability to continue as a going concern. The condensed set of financial
statements do not include the adjustments that would result if the Group was
unable to continue as a going concern.
This information is provided by RNS
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