ENTEQ UPSTREAM PLC
ANNUAL REPORT
FOR THE YEAR TO 31 MARCH 2019
REGISTERED NUMBER: 07590845 (England and Wales)
Enteq Upstream Plc
Contents
Key features, Financial Metrics and Outlook
Company Information
Strategic Report:
Combined Chief Executive and Chairman’s report
Financial Review
Review of Principal Risks and Uncertainties
Corporate Governance:
Corporate Social Responsibility
Report of the Directors
Remuneration Committee Report
Corporate Governance Report
Financial Statements:
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Company Financial Statements
Page
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60
61
62
1
Enteq Upstream Plc
Key features, Financial Metrics and Outlook
Key features
• Significant growth in revenue (57%) and adjusted EBITDA1
• Adjusted EBITDA1 margin at 24%
• Positive adjusted earnings2
• Growth in both North American and International markets
•
Increased investment in new technologies and rental fleet
Financial metrics
Years ended 31 March:
• Revenue
• Adjusted EBITDA1
• Post tax loss for the period
• Adjusted earnings2
• Post tax loss per share
• Cash balance
2019
$10.2m
$2.5m
$0.1m
$0.0m
0.2 cents
$11.9m
2018
$6.5m
$0.2m
$0.6m
$(0.5)m
1.0 cents
$15.5m
Outlook
• Current market stability and oil price encourages cautious optimism
• On-going investment in new technology and rental fleet continues to create new opportunities in North America
• New customers poised for increased activity in international markets
• Strong balance sheet and investor support enables further investment opportunities
1 Adjusted EBITDA is reported profit before tax adjusted for interest, depreciation, amortisation, foreign exchange movements, Performance Share
Plan charges and exceptional items. See note 3.
2 Adjusted earnings is reported earnings adjusted for amortisation, foreign exchange movements and exceptional items. The March 2019 result is
$19k. See note 6 on page 45.
2
Enteq Upstream Plc
Company Information
For the year to 31 March 2019
DIRECTORS:
Chairman
Iain Paterson
Chairman of the Board, Chairman of Nomination Committee
Executive Directors
Martin Perry
David Steel
Non-Executive Director
Chief Executive Officer
Finance Director
Robin Pinchbeck
Chairman of the Remuneration and Audit Committees
SECRETARY
David Steel
REGISTERED OFFICE
The Courtyard
High Street
Ascot
Berkshire
SL5 7HP
REGISTERED NUMBER
07590845 (England and Wales)
AUDITORS
Grant Thornton UK LLP
Registered Auditors
1020 Eskdale Road
Winnersh
Wokingham
RG41 5TS
NOMINATED ADVISER & BROKER
Investec Bank plc
2 Gresham Street
London
EC2V 7QP
LEGAL ADVISORS
CMS Cameron McKenna Nabarro Olswang LLP
Cannon Place
78 Cannon Street
London
EC4N 6AF
REGISTRARS
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
3
Enteq Upstream Plc
Strategic Report
The above starts with the combined Chief Executive and Chairman’s report and continues to the end of the Review
of the Principle Risks and Uncertainties.
Combined Chief Executive and Chairman’s report
Introduction
Enteq supplies Measurement While Drilling (“MWD”) equipment to the world-wide oil and gas and geothermal
directional drilling sector. Directional drilling is carried out by oilfield service companies who either purchase
equipment from third parties, such as Enteq, or develop the equipment themselves. MWD equipment is required on
every rig which drills directional wells and currently Enteq’s equipment is estimated to be in use on more than 300
drilling rigs worldwide.
Enteq has a proven track record of providing extremely reliable and respected technology to regional / independent
drilling companies who wish to compete with the major international drilling companies. Enteq’s vision is to be the
technology provider of choice for these independent drilling companies, whether they operate at a local, regional or
national level.
Enteq intends to grow the business by increasing market share, both in North America and internationally, as well
as increasing its addressable market. This will be done by continuing to provide the most reliable equipment
available and broadening the range of technical solutions through its on-going engineering programme and
technology partnerships.
Review of the Year
Review of the Year
This year’s financial results show improved trading across the business, with the post tax result now at a breakeven
level. There has been significant growth in both revenue and adjusted EBITDA and there is a return to a positive
adjusted earnings per share. Revenue increased by 57% from $6.5m in the year to 31 March 2018 to this year’s
figure of $10.2m, primarily from increased rental revenue. Adjusted EBITDA has risen to $2.5m (March 2018:
$0.2m) and represents a margin of 24%. The decrease in cash of $3.6m during the year is accounted for, primarily,
through targeted investment in technology, engineering and rental assets. This investment has underpinned this
year’s growth and will support future growth opportunities.
The global oil and gas markets have had a relatively stable year, despite various political pressures and changing
international dynamics. Enteq strives to maintain and increase market share in this market whilst continuing to
invest in technology and business development to significantly the Group’s market presence.
The previous year’s transition of all US operations, without any business interruption, to the facility owned by Enteq
in South Houston, has enabled the management team to focus on refining both the manufacturing and sales processes.
Investment has continued in the engineering team, both those based in-house and through the targeted use of industry
expert sub-contractors. A new ‘game changing’ product line, PowerHop, which includes patented technology, was
launched at the global oil industry technology show, OTC, in May 2019 and garnered significant industry interest.
PowerHop field trials are expected to commence later this year.
A UK government backed ‘Innovate UK’ sponsored project is close to completion, on time and on budget. This
will result in the launch of a unique, patented, sensor which fulfils the project’s initial brief and enables Enteq to
offer increased functionality to its current and future customer base.
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Enteq Upstream Plc
In addition to internal technology development, Enteq has been successful in negotiating two new technology
partnerships during the year under review. An agreement was put in place with the US based Well Resolution
Technologies Ltd. for integrating their ‘At-Bit’ Logging While Drilling solution into our existing data telemetry
product. In addition, agreement has been reached with a Houston based partner, QDC, for an integrated sensor,
incorporating Enteq firmware into a competitive new generation MWD tool. Both these collaborations and the new
products were announced at OTC, in May 2019.
In North America, Enteq has responded to market conditions by significantly expanding the size of its kit rental
fleet, rising during the year from 14 to 32 kits. This has enabled capital constrained service companies to grow their
fleet of equipment and thus establish themselves as strong regional players. This model has also allowed a number
of strong regional directional drilling companies to re-establish themselves, with Enteq as their primary MWD
technology partner.
Drilling activity in North America has traditionally been highly focused around the Permian basin in Texas, but
during the year significant growth has also come from new shale oil opportunities, such as in the Rockies region of
Colorado. Enteq’s business model allows regional drilling companies to become active quickly and successfully in
these new shale plays.
The Group’s rental model, with the option for the customer to ultimately purchase the equipment, cements a long-
term relationship between these service companies and Enteq. To date, all equipment supplied on this basis has
remained with the customer, with no returns, and this model is expected to create on-going demand for further Enteq
technology.
Outside North America, Enteq has accelerated its international market presence with revenue of approximately
$0.9m, up from approximately $0.5m last year. Contracts for equipment have been delivered and operations
completed in the Far East, Middle East and in Europe. A number of these operations have been for Geothermal
energy development, a new market sector for Enteq.
During the year a new position of Director of International Business was created, with the appointee starting in
January 2019. A new international strategic direction has been established to better promote the Enteq opportunities
in the largest potential markets, China, Saudi Arabia and elsewhere.
Staff
There was a total of 33 employees at the end of the year, the same as the previous year end, but significantly up
from the 17 that were in place at 31 March 2017. Additional contract personnel have been used as needed in the
areas of engineering and production during specific times of high demand. The Board would like to recognise the
on-going loyalty, dedication and support of the personnel as Enteq re-establishes itself as a strong company, with
an excellent reputation for the reliability of equipment and commitment to customer support.
Reporting & performance indicators
A set of Key Performance Indicators are in place. These are reported weekly to senior management who review,
initiate action where required and follow-up. The following Key Performance Indicators, unchanged from the
previous year, are used:
Financial:
• Sales, gross profit margin, adjusted EBITDA, order intake and backlog, accounts receivable ageing,
inventory levels, rental fleet numbers and capital expenditure.
Other performance measures:
• Headcount, production hours worked, number of reportable Health and Safety Executive (“HSE”)
5
incidents.
Enteq Upstream Plc
Key market indicators regularly monitored by management and Board of Directors include: Global Rig Count, North
American Rig Count, West Texas Intermediate (“WTI”) Oil Price and Henry Hub Natural Gas Price.
Governance
Enteq is committed to maintaining high standards of Corporate Governance, as such on 10 July 2018, the Enteq
Board formally adopted the Quoted Company Alliance Code of Corporate Governance. More details are given on
page 23.
Prospects
Subject to any unforeseen macro-economic disruptions, the global market for oil & gas drilling appears to be in a
period of relative stability, which can only be beneficial to the prospects for growth for all those operating in this
sector.
Enteq is well positioned with both their current and evolving technologies to support drilling opportunities, wherever
they may be.
Strong business management, protection of the balance sheet in difficult times, yet willingness to invest in growth
potential gives us confidence that Enteq is well positioned to benefit from this market stability.
Iain Paterson
Chairman
Martin Perry
Chief Executive officer
6
Enteq Upstream Plc
Financial Review
Income Statement
Year to 31 March:
Revenue
Cost of Sales
Gross profit
Overheads
Adjusted EBITDA
Depreciation & amortisation
Other charges
Ongoing operating loss
Other exceptional items
Interest
Loss before tax
Tax
Loss after tax
2019
2018
$ million
$ million
10.2
(3.5)
6.7
(4.2)
2.5
(2.7)
(0.2)
(0.4)
-
0.2
(0.2)
0.1
(0.1)
6.5
(2.2)
4.3
(4.1)
0.2
(0.8)
(0.1)
(0.7)
(0.1)
0.2
(0.6)
-
(0.6)
The improvement in the Group’s financial results for the year ended 31 March 2019 arise from the stabilization in
both the North American and International markets. The price of a barrel of West Texas Intermediate (“WTI”) was
$65 at the start of April 2018 and $60 as at 31 March 2019, with an average of $63. In addition, the price has not
dropped below $47 in this 12-month period. This relative price stability has resulted in the North American rig count
rising from 1,003 at the start of the financial year to 1,025 at the end, with an average of 1,052. There was a steady
increase to 1,083 rigs working at the end of December 2018, with a decline thereafter to the year end position. As
Enteq’s revenue is derived from both rigs being added to customers’ fleets and on-going replacement of equipment
during rig operation, the North American market stability resulted in turnover rising from $6.0m last year to $9.3m
this year. Internationally, the market conditions eased as more projects were commissioned, resulting in revenue
rising from $0.5m to $0.9m.
The full year gross margin at 65%, was down slightly on last year’s figure of 67% due to a drop in the high margin
electronic component revenue from 55% of last year’s total revenue to only 40% this year. This was combined with
an increase in the lower margin mechanical component revenue from 19% last year to 21% this year. These effects
were countered, to some extent, by a rise in the high margin rental business (36% of this year’s revenue, as opposed
to only 15% last year).
Total overheads, at $4.2m, were virtually unchanged from last year’s figure. This reflected the stability in the
headcount numbers during the year, both starting and finishing the year at 33 posts. Both the size and structure of the
manufacturing/engineering centre, at South Houston, and the UK based head office/engineering team were unchanged
during the year.
The combined depreciation and amortisation charge was significantly up on the previous year due to the number of
kits in the rental fleet increasing from 14 last year end to 32 this year. This increase was reflected in the carrying
value of the rental fleet, growing from $2.1m as at 31 March 2018 to $3.4m at the end of this year.
The “Other charges” shown above relate, primarily, to the non-cash cost associated with the Performance Share Plan.
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Enteq Upstream Plc
Statement of Financial Position
Enteq’s net assets at the financial year-end comprised of the following items:
As at 31 March:
Intangible assets
Property, plant & equipment
Rental fleet
Net working capital
Cash
Net assets
2019
2018
$million
$million
2.4
2.3
3.4
4.0
11.9
24.0
1.2
2.3
2.1
2.5
15.5
23.6
The “Intangible assets” represent the value of the on-going R&D work, carried out by the engineering team and
capitalised to date, less the amortisation relating to the products fully commercialised (primarily software releases).
The increase during the year to $2.4m relates to the ongoing development of various new products, including the
connection-free communication controller.
The net book value of property, plant & equipment has remained at $2.3m due to the increase of $0.1m relating to the
investment in replacing production equipment at South Houston, being offset by a similar depreciation charge.
The increase in the net book value of the rental fleet reflects the number of kits rising from 14, as at 1 April 2018, to
32 at the year-end, as previously mentioned.
The $1.5m increase in net working capital is due, primarily, to the management’s decision to invest $0.7m in inventory
relating to a collaborative development of a seamless "At-Bit" solution, which is now commercially available;
underlying inventory rose by $0.5m and trade creditors reduced by $0.3m. Trade debtors were virtually unchanged.
Cash flows
Year to 31 March:
Adjusted EBITDA
Change in net working capital
Operational cash generated
Investment in rental fleet
Investment in R&D
CAPEX
Equipment disposal proceeds
Interest and share issues
Net cash movement
Opening cash balances
Closing cash balances
8
2019
2018
$ million
$ million
2.5
(1.5)
1.0
(3.8)
(1.3)
(0.2)
-
0.7
(3.6)
15.5
11.9
0.2
2.6
2.8
(2.2)
(0.7)
(0.2)
0.1
0.4
0.2
15.3
15.5
Enteq Upstream Plc
Whilst the Group delivered a much-improved adjusted EBITDA for the period, the investment in working capital
during the period meant that operational cash generated decreased to $1.0m from $2.8m as reported last year.
The continuing robustness of the balance sheet enabled further expansion of our market share through further
investment to increase the number of kits in our rental fleet.
The increase in R&D spend reflects the expansion of the number of engineering projects. These now include the
previously mentioned development of a new connection-free communication controller, in addition to the next
software upgrade and a number of other future revenue enhancing projects.
The CAPEX relates to the replacing of various production related equipment.
Overall, the Group saw a net cash outflow of $3.6m (2018: $0.2m inflow) reducing the Group’s closing cash balance
as at 31 March 2019 to $11.9m.
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 $11.9m as at 31 March 2019.
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 1% of total cash holdings, the same level as last year’s.
Annual General Meeting
The Company’s Annual General Meeting will be held on 25 September 2019 at 12.00 noon at the offices of Investec
Bank plc, 30 Gresham Street, London EC2V 7QP.
David Steel
Finance Director
11 June 2019
9
Enteq Upstream Plc
Review of Principal Risks and Uncertainties
The Board is responsible for the Group's risk management and during the year has undertaken a systematic review
of the key risks and uncertainties which face the Group. The Board establishes the framework for risk management
across the Group. It seeks to embed risk management and to facilitate the implementation of risk management
measures throughout the Group’s businesses. The Board refines its view of risks on an on-going basis and as the
Group’s businesses enter new markets and develop new products. A risk register is regularly updated and reviewed
by the Board, the last review being in November 2018.
The Directors believe the following risks, as set out in the Risk Register, to be the most significant for the Group.
The mitigating activities described below will help to reduce the likelihood or impact of each risk occurring,
although the Board recognises that it will not be possible to eliminate these risks entirely. The risks listed do not
necessarily comprise all those relating to the Group’s operations, or with an investment in the Group. The impact
of “Brexit” is not considered a risk as all product are shipped, and hence revenue is generated, from the US.
If any of the following risks were to materialise, the Group's businesses, financial condition, results or future
operations could be materially adversely affected.
INDUSTRY SPECIFIC RISKS
Fluctuations in oil and gas prices
Short-term fluctuations in oil and gas prices may lead to uncertainty in the oil and gas industry which can lead to
reduced investment in equipment by the Group’s customers. In addition, a longer-term fall in oil and gas prices
could reduce levels of cash flow in the industry which could in turn lead to the reduction or deferral of expenditure
in the reach and recovery market.
Although not under the Board’s control, the Board actively monitors key energy commodity prices and other
industry parameters and if appropriate, acts expeditiously to manage costs and working capital as necessary.
Economic fluctuations in territories where the Group’s products are used
Economic fluctuations in territories where the Group’s products are used create uncertainty and discourage
investment. The Group’s products are used by service companies, which may deploy its equipment and services in
territories outside their national markets. Fluctuations in such territories could reduce the market size for the Group’s
products.
Management and the Board, using their experience and judgment, monitor political and economic developments as
appropriate in order to minimise, where possible, the impact of such adverse events on the Group. Further, the
Group’s strategy of diversifying its customers, product lines and geographic markets helps to mitigate these risks.
RISKS RELATING TO THE GROUP'S STRATEGY
Acquisition opportunities
The Board continues to adopt a cautious approach to acquisition opportunities. The Board continues to monitor
and assess potential earning enhancing acquisitions.
GROUP SPECIFIC RISKS
Dependence on key personnel
The future success of the Group is substantially dependent on the continued services and continuing contributions
of its Directors and key employees. The loss of the services of any of its Directors or other key employees could
have a material adverse effect on the Group.
The Board believes dependence on key personnel is an acceptable risk. However, the Board periodically reviews
the capability and availability of the necessary skills to manage the Group and will seek suitable replacements or
additions where appropriate.
With the increase in staff numbers during the year, this risk has decreased. The Board continues to balance this risk
with the requirement to keep overhead spend constantly under review.
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Enteq Upstream Plc
Dependence on key customers
The Group is dependent on a relatively small number of key customers and the size of any individual order
may be substantial. The timing of these orders may materially impact on the Group results. The loss of business
due to any North America based customer going out of business has decreased during the year due to the
stabilization of the oil price and rising rig count numbers.
As well as active management of key customer relationships, the Group’s strategy also involves broadening
the customer base especially outside North America, providing mitigation against such dependence.
Cash balances
The level of the Group’s cash balance gives the Board significant comfort as to the future viability of the Group.
The majority of cash is held in deposit accounts in USD.
NON-SPECIFIC RISK FACTORS
Health, Safety & Environment
Safety is one of our core priorities. The Group is subject to a number of Health, Safety & Environment (“HSE”)
laws and regulations that affect its operations, facilities and products in each of the jurisdictions in which it
operates. The Group is committed to operating in compliance with all HSE laws and regulations relating to its
products, operations and business activities. However, there is a risk that it may have to incur unforeseen
expenditures to cover HSE liabilities, to maintain compliance with current or future HSE laws and regulations
or to undertake any necessary remedy.
The Board closely monitors safety reporting and HSE compliance both at each monthly meeting and during
visits to the Group’s businesses. The group has the appropriate insurance policies in place to cover any actions
brought against related to breaches in health and safety.
Infringement upon intellectual property rights
Patents and/or Know-How owned by the Group may be challenged by third parties and may not be enforceable
in certain parts of the world. In addition, agreements concerning intellectual property rights entered into by the
Group could be terminated and may have an adverse effect upon the Group’s business.
Where appropriate the Group protects the validity of its intellectual property via thorough patent and trademark
applications and will robustly defend any claims against it, if appropriate.
Business Interruption
Business interruption may occur as a result of a number of events, which are either within or outside the
Group’s control. These include: the failure or unavailability of operational and IT infrastructure; delay or
interruptions in the availability of products or services provided by third-party suppliers and natural disasters
such as earthquake, flooding and storms.
Mitigation is achieved by having a business continuity plan, relevant insurances and managing dependence on
key supplier relationships.
Threats to Cyber security
A compromise of the Group’s IT systems could cause significant disruption in production, shipments and cash
collection and lead to financial, intellectual property or commercially sensitive data losses.
The Group is mindful of the risk of cyber-attacks and breaches of cyber security. The company maintains
appropriate controls (such as IT system password protection, managing user access and privileges, malware
protection and network security) and compliance with relevant data protection regulations.
The Strategic Report set out on pages 4 to 11 was approved by the Board of Directors on 11 June and signed
on its behalf by:
Martin Perry
Chief Executive Officer
11 June 2019
11
Corporate Social Responsibility
Enteq Upstream Plc
Enteq is committed to developing relationships with its key stakeholders – employees, shareholders, customers,
suppliers and communities within the areas we operate. This report describes the policies and responsibilities which
Enteq has adopted to ensure that it is and remains a responsible global corporate citizen.
Our commitment to shareholders, employees and other key stakeholders is to create a sustainable organisation,
capable of delivering long-term positive returns and providing stability to our employees.
The Group has implemented key policies in respect of:
• Anti-bribery and Corruption
• Embargo compliance
• Data protection and privacy
• Corporate ethics & standards code of conduct, including employee ‘speak up’ policy
In addition, the Group has implemented procedures to ensure that it:
communicates appropriately with shareholders and employees;
•
• meets all health, safety and environmental legislative requirements; and
• meets the highest standards of business ethics in all its dealings, including strict compliance with both UK
and US legislation introduced to prevent bribery
Investor Communications
Communicating with the Company’s shareholders is of key importance to the Directors. We do so by press releases,
issued via the London Stock Exchange and institutional investor presentations. The Chief Executive and Finance
Director meet with major shareholders at least twice a year, following the announcement of the Group’s half and
full year results.
Employees
We continue to recognise that our employees are our most valuable asset. Both senior and local management have
ensured that all staff are kept informed of the changes to our trading patterns and fully explained the reasons behind
the actions taken during the year. As at 31 March 2019, the Group had 33 employees (2018: 33).
Health and Safety
The Group is committed to achieving and maintaining the highest standards of safety for its employees, customers,
suppliers and the public. Enteq aims for best practice and employs rigorous health and safety practices.
Health and Safety policies include:
• Regular audit and maintenance reviews of facilities, equipment, practices and procedures to ensure
compliance with prevailing standards and legislation and a safe environment for all those who work within
and around our facilities.
• Seeking accreditation and alignment with internationally recognised Quality Assurance standards.
• Monitoring and reporting to each Board meeting.
• Appropriate training and education of all staff.
The Group’s target is to achieve zero recordable incidents. Each local business is required to develop tailored policies
to reflect its daily business. These incorporate the Group’s approach to putting safety first and, at a minimum, to
comply with local regulatory requirements.
During the year, there were no fatalities across the Group’s operations with no reportable incidents (2018: nil).
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Enteq Upstream Plc
Environment
The Group is committed to the protection of the environment and developing manufacturing processes and
procedures which ensure that any adverse effects on the environment are kept to a practicable minimum. We take
the view that sustainable development is in the interests of all our stakeholders and include environmental issues in
our planning and decision-making.
The Group’s environmental policy is to look for opportunities and adopt practices that create a safer and cleaner
environment. We are particularly sensitive to the challenges for the industry in which we operate.
Key aspects of our environmental policies include:
• Keeping any adverse effects on the environment to a practicable minimum.
• Encouraging the reduction of waste and emissions and promoting awareness of recycled materials and use
of renewable resources.
• Encouraging employees to pay special regard to environmental issues and requirements in the communities
in which the Group operates.
Incorporating health, safety and environment considerations into the design of new facilities.
•
Business Ethics
The Group’s Directors and employees promote the highest standards of honesty and integrity in the way it goes
about its business, recognising that the Group’s reputation is of critical importance in the industry in which we
operate.
Through the Group’s Code of Conduct and compliance with the UK Bribery Act and the US Foreign and Corrupt
Practices Act, the Group has policies and controls in place detailing procedures on how the Group interacts with
customers, suppliers and governments around the world. These include a Global Gift and Entertainment Guideline
which codifies the standards and conduct which we set for our employees’ interactions with customers, suppliers
and other external parties.
David Steel
Company Secretary
11 June 2019
13
Enteq Upstream Plc
Report of the Directors
For the year to 31 March 2019
The directors present their report with the financial statements of the Group and the Company for the year to
31 March 2019.
DIRECTORS
The directors holding office at the year end are as follows:
Chief Executive Officer
Martin Perry
Martin Perry (57), formerly CEO of Sondex plc. Martin entered the oil industry in 1984, initially as a field engineer
after gaining an engineering degree at Exeter University. Martin then worked in the IT and Data Communications
industry, before leading the Management Buy Out at Sondex. Following the acquisition of Sondex by GE in 2007,
Martin was appointed CEO of GE’s Oilfield Technologies Division and subsequently served as Non-Executive
Chairman of 3 private equity-backed businesses.
Finance Director
David Steel
David Steel (58), is a Chartered Accountant who qualified in KPMG’s London office. David has held senior
finance positions in a wide variety of industries including international trade exhibitions and aerospace
manufacturing. Prior to joining Enteq he was Deputy Finance Director of a global provider of geoprediction tools
to the upstream oil and gas industry.
Non-Executive Chairman
Iain Paterson
Iain Paterson (72), formerly Chairman of Sondex plc and ITE Group plc, Non-Executive Director of Hunting plc,
Paladin Resources plc, MOL NyRt and of the Advisory Board of the Oman Oil Company, Iain has over 45 years’
experience in the oil industry. He held senior management positions at BP and was a main Board director of
Enterprise Oil plc. Iain also chairs the Company's Nomination Committee.
Non-Executive Director
Robin Pinchbeck
Robin Pinchbeck (66), formerly Executive Director at Petrofac Limited, where he founded and led the Operations
Services division, from 2002 until IPO in 2005. His earlier career included senior management roles at BP plc.
Former non-executive directorships include IGas plc, Sparrows Offshore Group Limited (Chairman), Sondex plc
and EnQuest plc. Robin chairs both the Company's Audit and Remuneration Committees.
No director requires re-election at the forthcoming Annual General Meeting.
Dividends
No dividends will be distributed for the year ended 31 March 2019 (year ended 31 March 2018: nil).
Changes in the Group during the Financial Year
There were no changes during the current financial year.
Post Balance Sheet Events
There were no post balance sheet events.
Research and Development
The Company maintains its commitment to research and development through the activities undertaken by the
Engineering team, now based in the South Houston location.
Risks and uncertainties
A review of the key risks and uncertainties affecting the Group is set out on pages 10 and 11. The Group’s exposure
to key financial risks is set out in note 25 to the financial statements, see page 56.
Directors’ and Officers’ Liability Insurance
The Company maintains insurance against certain liabilities, which could arise from a negligent act or a breach of
duty by its Directors and Officers in the discharge of their duties. This is a qualifying third-party indemnity
provision, which was in force throughout the financial year.
14
Enteq Upstream Plc
Annual General Meeting
The Annual General Meeting of the Company will take place on 25 September, 2019 at 30 Gresham Street,
London EC2V 7QP commencing at 12.00 noon. At the meeting, as well as routine matters, members will be asked
to receive the Report of the Directors and Accounts and to approve the auditors and their remuneration. Further
details of the resolutions are set out in the letter concerning the Annual General Meeting, which accompanies the
Notice of the Annual General Meeting.
Powers of the Directors
Subject to the Company’s Articles of Association, UK legislation and any directions prescribed by resolution of
the Company in general meeting, the business of the Company is managed by the Board. The Directors have been
authorised to allot and issue Ordinary shares and to make market purchases of the Company’s Ordinary shares.
These powers are exercised under authority of resolutions of the Company as adopted at incorporation.
Share Capital
The Company’s issued share capital comprises Ordinary shares of 1p each and Incentive shares of £1 each. As
at 31 March 2019, there were 63,885,427 Ordinary shares and 50,000 Incentive shares in issue. The movements
in share capital during the year are set out in note 18, see page 53.
Voting Rights and Restrictions on Transfer of Shares
On a show of hands at a general meeting of the Company, every holder of Ordinary shares present in person or by
proxy, and entitled to vote, has one vote, and, on a poll, every member present in person or by proxy and entitled
to vote has one vote for every Ordinary share held. The holders of the Incentive shares have no rights to vote or
receive dividends. Further details regarding voting at the Annual General Meeting can be found in the notes to
the Notice of the Annual General Meeting. None of the Ordinary shares carry any special rights with regard to
control of the Company. Proxy appointments and voting instructions must be received by the Company’s
Registrars not later than 48 hours before a general meeting.
A shareholder can lose his entitlement to vote at a general meeting where that shareholder has been served with a
disclosure notice and has failed to provide the Company with information concerning interests in those shares.
Shareholder’s rights to transfer shares are subject to the Company’s Articles of Association.
Substantial Interests
As at the latest practicable date prior to publication of this report, pursuant to the Disclosure and Transparency
Directive, issued by the Financial Conduct Authority, the major shareholders (over 4%) of the Company were as
follows:
Shareholder
Number of Ordinary
shares held
Percentage of issued
Ordinary Shares
Canaccord Genuity Wealth Mgt
Enteq Upstream plc Directors & Related Parties
Allianz Global Investors
Soros Fund Mgt
Mr P R Evershed
Octopus Investments
8,615,000
6,788,028
5,895,000
5,895,000
3,115,000
2,919,000
13.5
10.6
9.2
8.2
4.9
4.6
Political Donations
During the year the Company made no political donations.
Registrar
The address and contact details of Computershare, the Company’s Registrar, are listed at the front of this report.
Computershare is the Company’s single alternative inspection location, whereby individuals can inspect the
register of members. Individual shareholders may view their personal shareholder information online, through the
www.computershare.co.uk website.
Articles of Association
The Company’s Articles of Association may only be amended by special resolution at a general meeting of
shareholders. Where class rights are varied, such amendments must be approved by the members of each class of
share separately.
15
Enteq Upstream Plc
Statement of Directors’ Responsibilities
The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have prepared the Group financial statements in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the European Union and have elected to prepare the parent Company financial
statements in accordance with United Kingdom Generally Accepted Accounting Practice including Financial
Reporting Standard 101 – 'The Reduced Disclosure Framework' (FRS 101) and applicable laws including the
Companies Act 2006. Under Company law the directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit
or loss of the Company and Group for that period. In preparing these financial statements, the directors are
required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and accounting estimates that are reasonable and prudent;
- state whether applicable IFRS/UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the financial statements; and
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Statement as to Disclosure of Information to Auditors
The directors confirm that, in so far as each of the directors is aware, there is no relevant audit information of
which the Company’s auditors are unaware, and each director has taken all the steps that he ought to have taken
as a director in order to make himself aware of any relevant audit information and to establish that the Company’s
auditors are aware of that information.
The directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
Going Concern
The Group has significant cash resources and is now operating in a stabilised market, especially in North America.
As a consequence, the directors believe that the Group is well placed to manage its business risks successfully.
Accordingly, the Directors have a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future and consequently have adopted the going concern basis of
accounting in preparing these financial statements.
Auditors
Grant Thornton UK LLP will be proposed for reappointment at the forthcoming Annual General Meeting in
accordance with Section 489(4) of the Companies Act 2006.
Signed on behalf of the Board
David Steel
Company Secretary
11 June 2019
16
Enteq Upstream Plc
Remuneration Committee Report
For the year to 31 March 2019
Introduction
The Company is AIM-listed and therefore is not legally required to set out its remuneration policy but it is doing so on a
voluntary basis. To the extent that such principles are relevant to the current circumstances of the Company, the provisions
of inter alia the Directors' Remuneration Report Regulations 2008 and the Quoted Company Alliance Code are taken into
account. As required by AIM Rule 19, the Company has disclosed the remuneration received by its directors during the
financial period.
Remuneration Committee
The Remuneration Committee is responsible for determining the remuneration of the chairman and the executive directors,
including setting competitive salaries, annual performance targets and participation in the Company’s executive share-based
incentive plans. The Committee also takes account of the remuneration policy for the Group’s senior executives.
Remuneration policy
The Company's remuneration policy aims to encourage a performance-based culture, attract and retain high calibre executive
directors and align executive directors' and shareholders' interests. In determining such policy, the Remuneration Committee
takes into account all factors which it deems necessary, including the Company's wider pay structures. The objective of the
policy is to ensure that executive management are provided with appropriate incentives to encourage enhanced long-term
performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the
Company.
The remuneration policy of the Company has a number of principal components:
Salary and benefits
Basic salaries are determined by the Remuneration Committee bearing in mind the salaries paid in AIM-listed and other
same-sector companies. Executive directors also receive taxable benefits including life insurance policies and healthcare.
The Remuneration Committee has considered the requirements of the UK Corporate Governance Code (April 2016) to set
an upper limit for executive pay levels. However, the committee also recognises the need to attract and incentivise
management and therefore does not believe it is appropriate to set such limits at this stage of the Group's development,
although the appropriateness of all incentive packages are considered by the Committee. Any bonus will be subject to
Remuneration Committee approval. The Remuneration Committee will continue to monitor this policy.
Annual Bonus Plan
The annual grant of bonuses is conditional upon the achievement of targets by reference to agreed financial performance
measures. The scheme is applicable to all executive directors. For the financial year ended 31 March 2019, the targets related
to the group achieving the following targets: an underlying adjusted EBITDA at least equal to the Board approved budget; a
specific year-end cash balance; acquiring a certain number of new customers and the launch of new technologies. All
financial targets were achieved and, thus, the Remuneration Committee decided to pay the full amount as provided under the
scheme.
Long-term Incentive and Share Option plans
The Company believes that employee share ownership strengthens the link between their personal interests and those of the
shareholders. Consequently, the Company has put in place a Share Option Plan. All Group employees participate in the Plan,
except for members of the Board and two senior executives. The executive directors (Martin Perry and David Steel) plus
three senior executives are incentivised via the PSP scheme (see below).
On 17 September 2014, the Company introduced a Performance Share Plan (“PSP”) for the Executive Directors and other
key senior executives. The Remuneration Committee were given the power to grant awards at the nominal value of the
shares, but the exercise of which is subject to certain performance conditions. Such awards will lapse if not exercised within
10 years of grant. The participants in this Plan are no longer eligible for awards under the Share Option Plan or other Long-
term Incentive Plan. The details of the grants awarded under all incentive plans, to date, are shown in a table on page 19.
17
Directors' service contracts
All executive directors are employed under service contracts. The services of all executive directors may be terminated by
the provision of a maximum of 12 months' notice by the Company and the individual. Services of Non-Executive directors
may be terminated by the provision of a maximum of 3 months' notice by the Company and the individual.
Directors’ remuneration
The information contained within the Directors' Remuneration section of this report has been audited.
The annual remuneration rates of the directors in office during the year ended 31 March 2019 were as follows (all salaries
denominated in £ Sterling have been converted to US dollars):
Enteq Upstream Plc
Annual
Salaries,
Fees, Bonus
and Benefits
31/03/2019 a
Actual amounts
paid during the
year to
31/03/2019 b
Annual
Salaries,
Fees, Bonus
and Benefits
31/03/2018 a
Actual amounts
paid during the
year to
31/03/2018b
$ 000’s
$ 000’s
$ 000’s
$ 000’s
613
362
975
39
39
78
727
382
1,109
42
42
84
1,053
1,193
555
333
888
42
42
84
972
324
202
526
42
42
84
610
Martin Perry
David Steel
Total - Executive
Iain Paterson
Robin Pinchbeck
Total – Non executive
Total
Notes:
a
b
includes share-based payments and bonuses awards to be paid in following year
includes payments relating to the previous year
Martin Perry and David Steel received no increase in their salaries in the year to 31 March 2019 and have not received any
increases since they were appointed to the Board.
From 1st February 2015, elements of the Board’s remuneration were agreed to be settled in shares rather than cash. The
following elements of Board members’ compensation were settled in shares during year:
31 March 2019
$ 000’s
31 March 2018
$ 000’s
Martin Perry
David Steel
Total - Executive
Iain Paterson
Robin Pinchbeck
Total – Non executive
Total
415
200
615
42
42
84
699
128
57
185
42
42
84
269
18
Enteq Upstream Plc
Interests in share options and PSP options
Number of
Share Options
at 31/3/19
Number of
Share Options
at 31/3/18
Option
Price
(p)
David Steel:
Total
-
-
-
-
40,000
50,000
120,000
210,000
Vesting dates
63.0
62.0
48.6
February 2017
July 2017
January 2017
Given the share price at the date of signing of the financial statements, there is no value in any of the share options that are
currently vested.
Number of
PSP Options
at 31/3/19
Number of
PSP Options
at 31/3/18
-
-
457,692
230,769
540,000
270,000
714,286
367,347
460,526
157,895
457,692
230,769
540,000
270,000
-
-
Vesting dates
June 2018 (exercised)
June 2018 (exercised)
June 2019
June 2019
June 2020
June 2020
June 2021
June 2021
Martin Perry
David Steel
Martin Perry
David Steel
Martin Perry
David Steel
Martin Perry
David Steel
Total
2,580,094
2,116,882
The performance conditions for each of the PSP awards are as follows:
Vesting Date:
June 2019
June 2020
June 2021
Proportion awarded for compound annual growth rate in
Total Shareholder Return (“TSR”) * of:
30% or greater
10%
Less than 10%
Note: Award pro- rated if growth between 10% and 30%
Proportion awarded for adjusted EBITDA:
Weighting:
Start point:
Maximum of range achieved
Minimum of range achieved
TSR (share price) growth
Adjusted EBITDA
100%
33%
0%
n/a
n/a
100%
n/a
n/a
n/a
n/a
100%
33%
n/a
100%
100%
33%
0%
100%
33%
50%
50%
TSR (share price) growth
Adjusted EBITDA range
13p
n/a
n/a
$1.5m to $3.7m
24.5p
$2.5m to $4.7m
The total amount to be expensed over the vesting period of all the above options is determined by reference to the fair value
at the date of granting and the number of awards that are expected to vest.
* The TSR is defined as the difference between the share price on the date of the award (plus the sum of all dividends paid by the Company on one ordinary
share during the three-year measurement period) and the share price on the measurement date.
19
Interests in warrants
There were no interests held by directors or persons connected to the directors in warrants over shares in Enteq Upstream Plc
at 31 March 2019.
Highest paid director
The Companies Act 2006 requires certain disclosures about remuneration of the highest paid director taking into account
emoluments, gains in exercise of share options and amounts receivable under long-term incentive schemes. Details of this
remuneration are set out in note 7, see page 46.
Enteq Upstream Plc
Robin Pinchbeck
Chairman of the Remuneration Committee
11 June 2019
20
Enteq Upstream Plc
Corporate Governance Report
This report for shareholders sets out Enteq Upstream Plc’s approach to Corporate Governance. We have reported on
our Corporate Governance arrangements by drawing upon best practice available, including those aspects of the UK
Corporate Governance Code (April 2016) we consider to be relevant to the company. More details are given on page
24.
Board Composition
The Board of Enteq Upstream plc is responsible for determining strategic direction and reviewing management and
operational performance. Operational performance is delegated to the Executive Directors, who meet regularly to review
the performance of and prospects for the business. The composition of the Board is set out below.
Board
Audit
committee
Remuneration
committee
Nomination
committee
Martin Perry
David Steel
Iain Paterson
Robin Pinchbeck Non-Executive Director Member
Chief Executive Officer Member
Finance Director
Member
Non-Executive Director Chairman Member
Chairman
-
-
-
-
Member
Chairman
Member
-
Chairman
Member
In the year under review the Board formally met on 8 scheduled occasions, with additional meetings and conference
calls held as deemed necessary. All the directors attended every meeting.
The division of responsibilities between Iain Paterson, Chairman, and Martin Perry, CEO, has been clearly established
by way of written role statements, which have been prepared by the Board. The Chairman's main responsibilities are to
lead the Board, liaising as necessary with the CEO on developments between meetings of the Board, and to ensure the
CEO and his executive management team have appropriate objectives and that their performances against those
objectives are reviewed. The CEO is responsible to the Board for the executive management of the Group and for
liaising with the Chairman and keeping him informed on all matters.
Board Evaluation
Between the year end and the date of signing these accounts a Board evaluation was carried out by both the Non-
Executive and Executive Directors. The Board was regarded as effective and possessed sufficient skills and experience
to enable it to discharge its responsibilities appropriately. The evaluation further confirms the Board’s belief that the
Board balance and the composition of each main Board Committee is appropriate. In reviewing the Board, it was
concluded that the skills and experience the Executive Directors bring to the Board are complementary to each other
and those of the Non-Executive Directors.
Board Committees
The Board has three main committees to which it delegates responsibility and authority.
Audit Committee
The Audit Committee comprises solely of Non-Executive Directors of the Company. Whilst no members of the
committee have direct, recent financial experience they are considered to have the necessary skills to fulfil their duties
based on their knowledge of, and experience of working in, our core market. Financial advice is available externally
as and when they require it. The committee has met twice during the year under review.
21
Enteq Upstream Plc
Responsibilities
The responsibilities of the Audit Committee are set out on page 24.
External audit
The external auditors’ full year report includes a statement on their independence, their ability to remain objective and
to undertake an effective audit. The committee considers and assesses this independence statement on behalf of the
Board taking into account the level of fees paid particularly for non-audit services. The committee considers the
effectiveness of the audit by reviewing and taking account of Financial Reporting Council reports on the auditors; input
from executive management; consideration of responses to questions from the audit committee and the audit findings
reported to the committee.
Grant Thornton UK LLP have been the Group’s auditor since incorporation. The Audit Committee is satisfied with their
effectiveness and their independence and has, to date, not considered it necessary to require an independent tender
process.
The committee closely monitors fees paid to the auditors in respect of non-audit services, which are analysed within
note 9 on page 47. In 2019, fees for non-audit services totalled $41k in comparison to audit fees of $70k. The scope and
extent of non-audit work undertaken by the external auditor is monitored by, and, above certain thresholds, requires
prior approval from the committee to ensure that the provision of such services does not impair their independence or
objectivity.
Internal audit
To date, the Board has not considered it necessary or cost effective to employ a separate internal audit team. The senior
finance team carries out reviews on an on-going basis. These reviews are available to the Committee and encompass
the identification of the key business, financial, compliance and operational risks facing each operating location,
together with an assessment of the controls in place for managing and mitigating these risks. The committee will
continue to monitor the need for a separate internal audit function.
Remuneration Committee
The Remuneration Committee comprises solely of Non-Executive Directors of the Company and is responsible for
reviewing remuneration arrangements for the Board and other senior employees of the Group and for providing general
guidance on aspects of remuneration policy for the Group. The committee met twice during the year under review.
Nomination Committee
The Nomination Committee is responsible for reviewing and recommending executive and Non-Executive Board
appointments for the Group. The committee has not met during the year under review.
Prior to the appointment of a Director, the Nomination Committee undertakes an evaluation of the Board’s requirements
to ensure the balance of skill and experience is maintained to fulfil the Group’s strategy. When considering appointments
due consideration is also given to the diversity of the Board to ensure there is an appropriate mix of experience and skill
to enable the Board to operate as effectively as possible.
In accordance with the Corporate Governance Code's guidance for non-FTSE 350 companies on the re-election of
directors and the articles of association of the Company, all directors are subject to re-election at the first annual general
meeting after their appointment, and to re-election thereafter on a triennial basis.
22
Enteq Upstream Plc
Internal Controls
The Board acknowledges its responsibility for the Group’s system of internal control, for reviewing its effectiveness
and for compliance with relevant legislation. The internal control system, which has been in place throughout the year
under review, is structured to allow the Board to identify, evaluate and manage the significant risks to which the Group
is exposed. The system comprises the following elements:
• Management Structure – within operational parameters set by the Board, management is delegated to the Executive
Directors. The Executive Directors meet and communicate regularly with the Board to ensure a thorough and
consistent flow of information about the business.
• Reporting and Consolidation – the Group receives detailed financial information from subsidiaries, which take the
form of monthly management accounts, annual budgets and forecast projections. The Group also monitors and
reviews new UK Listing Rules, Disclosure and Transparency Rules, accounting standards, interpretations and
amendments and legislation and other statutory requirements. Subsidiary reporting entities are supported by
instruction from the Group. Data is subject to review and assessment by management through the monitoring of
key performance ratios and comparison to targets and budgets. The content and format of reporting is kept under
review and periodically amended to ensure appropriate information is available.
• Strategic Planning and Budgeting – strategic plans and budgets containing comprehensive financial projections are
formally presented to the Board for consideration and form the basis for monitoring performance.
• Legislative Compliance and Codes of Conduct – the Group has and is implementing procedures to ensure it meets
its legislative and other responsibilities. The Group has implemented formal procedures including the publication
of bribery and corruption policies and guidelines on interacting with customers, suppliers and agents, as well as
policies for gifts, entertainment and hospitality.
The Directors recognise the value and importance of maintaining the highest standards of corporate governance. To
this effect, on 10 July 2018, the Board agreed that the Quoted Companies Alliance’s (“QCA”) code of corporate
governance was the most appropriate for Enteq Upstream plc to follow, and so, was formally adopted. The main
principles of the QCA Code and how Enteq ensures that it is fully compliant with these principles are set out below:
• Establish a strategy and business model which promote long-term value for shareholders;
o Enteq has an established strategy and business model supplying the global Oil & Gas directional drilling market
with high-end, differentiated, robust Measurement While Drilling equipment and associated parts and
components. Both the strategy and business model are subject to Board review on at least an annual basis to
ensure that they provide the most appropriate way to provide long-term value for shareholders.
• Seek to understand and meet shareholder needs and expectations;
o The Executive Directors offer to meet the major shareholders after the announcement of both the year end and
interim results. As well as presenting an explanation of these results, these meetings give the shareholders an
opportunity to inform the Directors of both their needs and expectations. The AGM is an opportunity for all
shareholders to present their views to the whole Board. The Chairman is also available to meet shareholders
at any time.
• Consider wider stakeholder and social responsibilities and their implications for long-term success;
o Regular meetings are held with the staff to ensure that the strategic vision of the company is clearly presented.
o Meetings are held with other stakeholders as required.
o The manufacturing plant regularly re-assesses its impact on the environment and implements the appropriate
procedures minimise any adverse effects.
o Regular Health and Safety meetings are held with all staff to minimise the likelihood of any accidents and
“near misses”.
• Embed effective risk management, considering both opportunities and threats, throughout the organisation;
o The Board is responsible for the Group's risk management and undertakes a systematic review of the key risks
and uncertainties which face the Group. It seeks to embed risk management and to facilitate the implementation
of risk management measures throughout the Group’s businesses.
o A comprehensive risk register is maintained, which is regularly reviewed by the Board.
o Monthly reports relating to health and safety at work is presented to the Board.
23
Enteq Upstream Plc
• Maintain the board as a well-functioning, balanced team led by the chair;
o A “Board Effectiveness Review” is completed annually, with the results debated at the appropriate Board
meeting. This review includes an assessment of whether the Board has functioned in compliance with this
principle through assessing, inter alia, directors’ level of skills and experience, the Board’s performance,
review of company strategy, quantity and quality of board meetings.
• Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities;
o
In addition to being part of the “Board Effectiveness Review” outlined above, attendance at appropriate
external training courses and seminars is encouraged.
• Evaluate board performance based on clear and relevant objectives, seeking continuous improvement;
o A Board Effectiveness Review is carried out annually and is a rigorous process.
• Promote a corporate culture that is based on ethical values and behaviours;
o There are formalised policies covering areas such as anti-bribery and corruption, embargo compliance.
o There is a company-wide “speak up” policy covering breaches or potential breaches of our business principles,
unlawful conduct, financial malpractice or dangers to the public and the environment.
o The importance of ethical value and behaviours is included in the regular staff meetings mentioned above.
• Maintain governance structures and processes that are fit for purpose and support good decision-making by the
board; and
In addition to the Board, that comprise two executive and two non-executive directors, the following sub-
committees of the Board are in place, each having their own terms of reference and comprise solely of Non-
Executive Directors of the Company, except for the Nomination Committee which includes the Chief
Executive Officer:
o
o
▪ Audit Committee whose main responsibilities are:
▪ monitor and review reports from the Executive Directors, including the Group’s financial
statements and Stock Exchange announcements;
review reports from the Group’s external auditors;
▪ monitor and review the Group’s systems of internal control;
▪
▪ monitor any corporate governance and accounting developments;
▪ monitor the Group’s bribery act compliance procedures;
▪
consider and recommend to the Board the reappointment of the external auditor;
▪ Remuneration Committee whose main responsibilities are reviewing remuneration arrangements for
the Board and other senior employees of the Group and for providing general guidance on aspects of
remuneration policy for the Group
▪ Nomination Committee whose main responsibilities are the reviewing and recommending executive
and Non-Executive Board appointments for the Group.
• Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and
other relevant stakeholders.
o The compliance with this principle has been addressed through regular meetings with investors and regular
staff and other stakeholder meetings as outlined above.
David Steel
Company Secretary
11 June 2019
24
Enteq Upstream Plc
Independent auditor’s report to the members of Enteq Upstream plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Enteq Upstream plc (the ‘company’) and its subsidiaries
(together, the ‘group’) for the year ended 31 March 2019, which comprise the consolidated income
statement, the consolidated statement of comprehensive income, the consolidated statement of
financial position, the consolidated statement of changes in equity, the consolidated statement of cash
flows, the company statement of financial position, the company statement of changes in equity, the
company statement of cash flows, and the related notes, including summaries of significant accounting
policies.
The financial reporting framework that has been applied in the preparation of the group financial
statements is applicable law and International Financial reporting Standards (IFRSs) as adopted by
the European Union. The financial reporting framework that has been applied in the preparation of
the parent company financial statements is applicable law and United Kingdom Accounting Standards,
including Financial Reporting Standard 101 ‘Reduced Disclosures Framework’ (United Kingdom
Generally Accepted Accounting Practice).
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent
company’s affairs as at 31 March 2019 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union;
the parent company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit
of the financial statements’ section of our report. We are independent of the group and the parent company in
accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to
report to you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the group’s or the parent company’s ability to continue to adopt the going concern
basis of accounting for a period of at least twelve months from the date when the financial statements are
authorised for issue.
25
Enteq Upstream Plc
Overview of our audit approach
• Overall materiality: $250,000 which represents approximately 1%
of the group’s total assets at the planning stage.
• The key audit matters identified were:
▪ Occurrence of unpaid revenues arising from the sale of
goods, and valuation of trade receivables
▪ Valuation of intercompany balances (parent company only)
• We performed full scope audit procedures on the financial
information of each of Enteq Upstream plc, the UK parent
company and on the financial information of Enteq Upstream
USA Inc, the significant group component in the USA.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those that had the greatest effect on: the overall
audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Key Audit Matter - Group
How the matter was addressed in the audit – Group
Occurrence of unpaid revenues arising from the sale of
goods, and valuation of trade receivables
Total revenues in the year were $10.204m, including
$6.502m from the sale of goods. In addition, $2.089m of
trade receivables were outstanding at the year end, the
majority of which relate to the sale of goods. This key audit
matter concerns unpaid revenue arising from the sale of
goods.
The lower oil prices seen in recent years have made cash
conservation a priority for all businesses in the industry.
Enteq’s trade receivables days are high, and certain
customers have lengthy extended credit terms. Even though
these extended terms are standard practice in the industry,
it does raise a risk regarding recoverability of the balances,
given the associated judgments regarding recoverability
made by management.
At the same time, Enteq has been looking to expand its
customer base, and so is working with new customers in
unfamiliar territories as demonstrated by the increase in
sales to customers based outside North America (up to
$953k from $443k in the prior year). This can create
receivable
judgments around
balances. It can also create judgments around the initial
recognition of the revenue, given Enteq are establishing
agreements with new customers which could lead to
potential returns, in particular where there has been no
payment due to the extended credit terms.
We therefore identified the occurrence of unpaid revenues
arising from the sale of goods, and valuation of trade
receivables, as a significant risk, and as one of the most
significant assessed risks of material misstatement.
recoverability of
the
Our audit work included, but was not restricted to:
• Testing the appropriateness of revenue recognition policies by
comparing the policies adopted by management against IFRS,
including the new revenue standard IFRS 15;
• Testing a sample of unpaid revenue invoices at the year-end,
and agreeing to sales invoices and evidence that the risks and
rewards were transferred (such as proof of delivery);
• Analysing trade receivable balances over 90 days old and
identifying the higher risk balances based on invoice date,
amount, and customer location; and
• Obtaining management’s assessment of the recoverability of
these balances, and corroborating
to
correspondence with counterparties, historic payment patterns
and payments received since the yearend; and
it by reference
• Evaluating management’s ability to appropriately estimate the
bad debt provision by comparing current year bad debt write-
offs to previous provision estimates for the last two years.
The group’s accounting policies on revenues and receivables are
shown in note 4, on pages 38 and 41 respectively, and related
disclosures are included in note 15 on page 52.
Key observations
The audit work described above provided sufficient appropriate
audit evidence over the occurrence of unpaid revenues, and the
recoverability of associated receivables.
Where we identified balances for further discussion, management
had already considered their recoverability, and could provide
evidence to support their judgments.
After considering the likely timing of future receipts, management
reclassified a portion of trade receivables to be due in more than
one year, in line with similar assumptions made in the prior year.
26
Enteq Upstream Plc
Key Audit Matter – Parent
How the matter was addressed in the audit – Parent
•
Our audit work included, but was not restricted to:
• obtaining management's assessment, which included an
intercompany balance repayment schedule and an
overall impairment review for the group’s non-current
assets, which principally comprise the assets related to
Inc;
recalculating the arithmetical accuracy of both those
calculations;
testing the assumptions utilised in the impairment
review, including growth rates and discount rates by
corroborating to third market data;
testing the accuracy of management's forecasting
through a comparison of budget to actual data and
historical variance trends, as well as performing
sensitivity analysis on the key assumption which is
revenue growth.
•
•
The group’s accounting policies on intercompany balances
are shown in note 1, on page 63, and related disclosures are
included in note 5 on page 65.
Key observations
The audit work described above provided sufficient and
following
appropriate audit evidence and
conclusions were drawn:
the
• our analysis indicates headroom is sensitive to changes
in key assumptions
• we found that the assumptions made, and estimates used
were balanced
• We found no errors in the calculations
• as a result of the impairment review management
recorded an impairment of $5.0m. Our audit work did
not identify any additional impairment after the
management provision of $5.0m
Valuation of intercompany balances
Intercompany balances at the year end stand at net
$27.528m owed from Enteq Upstream USA Inc (Inc)
to Enteq Upstream Plc, which is made up of $18.936m
in trading balances and $8.592m in inter-company loan
notes. The directors make an annual assessment to
determine whether there are indicators that these
balances are impaired. In 2015 an impairment was
posted of $29.336m against the inter-company loan
notes which have a gross value of $37.928m.
Where indicators of impairment are identified and in
order to determine if these balances are impaired
management prepare discounted cash flow forecasts.
Assumptions to be applied can be highly judgemental
and can significantly impact the results of the
impairment review.
As the intercompany trade loan balance increased
significantly by $4.664m in the last year and Enteq
Upstream USA Inc was estimated to have a negative
cashflow, we
identified valuation of
intercompany balances as a significant risk, due to it
being an area of significant management judgement
and as one of the most significant assessed risks of
material misstatement.
therefore
27
Enteq Upstream Plc
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in
determining the nature, timing and extent of our audit work and in evaluating the results of that work.
Materiality was determined as follows:
Materiality measure
Group
Parent
Financial statements as a
whole
Performance materiality
used to drive the extent of
our testing
Specific materiality
$250,000 which is approximately 1% of the
group’s total assets at the planning stage.
This benchmark is considered the most
appropriate because cash makes up a
significant portion of total assets, which is a
key metric for investors. The group key
audit matter identified above relates to
unpaid revenue, which impacts the year end
cash and total asset position of the group,
demonstrating
the
total assets
appropriate benchmark.
Materiality for the current year is lower than
the level that we determined for the year
ended 31 March 2018 due to the estimated
decrease in the group’s total assets at the
planning stage when materiality was
determined.
to be
$249,000, which is approximately 1% of the group’s
total assets at the planning stage, capped at an
amount less than group materiality.
Group total assets is considered the most appropriate
benchmark as cash makes up a significant portion of
the parent company, and consequently the group’s
total assets, which is a key metric for investors. The
parent company
is a holding company with
significant intercompany balances with other group
components, and therefore group total assets is the
most appropriate benchmark .
Materiality for the current year is higher than the
level that we determined for the year ended 31
March 2018 due to a change in benchmark used from
the prior year.
$188,000, which
statement materiality.
is 75% of financial
$187,000, which is 75% of financial statement
materiality.
We determined a lower level of specific
materiality, for certain areas such as related
party
directors’
emoluments.
transactions
and
We determined a lower level of specific materiality,
for certain areas such as related party transactions
and directors’ emoluments.
Communication of
misstatements to the audit
committee
Amounts above $13,000 and misstatements
below that threshold that, in our view,
warrant reporting on qualitative grounds.
Amounts above $12,000 and misstatements below
that threshold that, in our view, warrant reporting on
qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for
potential uncorrected misstatements.
Overall materiality – Group
Overall materiality – Parent
Tolerance for potential uncorrected mis-statements
Performance materiality
28
Enteq Upstream Plc
An overview of the scope of our audit
Our audit approach was a risk based approach founded on a thorough understanding of the group’s business, it’s
environment and risk profile and in particular included:
• Evaluation by the group audit team of identified components to assess the significance of that component and to
determine the planned audit response based on a measure of materiality. Our assessment was based on the relative
materiality of each component entity to the group and an assessment of their audit risk;
• Performing full scope audit procedures at Enteq Upstream plc and Enteq Upstream USA Inc;
• Attendance at the stock count in Houston in respect of inventory held at the US component;
• Evaluating the group’s internal control environment, including an assessment of the design effectiveness of
controls over key financial statement risk areas identified as part of our audit risk assessment;
• On-site audit fieldwork visits to the sites Amersham (UK) and Houston (US);
• Reperforming the group consolidation, to confirm the accuracy of management’s computations and to
demonstrate the group financial information was consistent with the financial information per the audited
financial statements of the significant group components; and
• Substantive testing of 100% of group revenues
Other information
The directors are responsible for the other information. The other information comprises the information included in
the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the report of the directors for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the report of the directors have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in
the course of the audit, we have not identified material misstatements in the strategic report or the report of the
directors.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires
us to report to you if, in our opinion:
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
29
Enteq Upstream Plc
Responsibilities of directors for the financial statements
As explained more fully in the statement of directors’ responsibilities set out on page 16, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s
report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as
a body, for our audit work, for this report, or for the opinions we have formed.
Mark Bishop FCA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Reading
11 June 2019
30
Enteq Upstream Plc
Enteq Upstream Plc
Consolidated Income Statement
Revenue
Cost of Sales
Gross Profit
Administrative expenses before amortisation
Amortisation of acquired intangibles
Other exceptional items
Foreign exchange profit on operating activities
Total Administrative expenses
Operating loss
Finance income
Loss before tax
Tax
Loss for the period
Loss attributable to:
Owners of the parent
Loss per share (in US cents):
Basic
Diluted
Adjusted loss per share (in US cents):
Basic
Diluted
Notes
5
9
9
6
8
10
11
11
Year to 31
March 2019
Year to 31
March 2018
$ 000's
Total
10,204
(3,546)
6,658
(6,952)
(116)
(7)
6
(7,069)
(411)
246
(165)
67
(98)
$ 000's
Total
6,460
(2,141)
4,319
(4,994)
(92)
(57)
48
(5,095)
(776)
175
(601)
(3)
(604)
(98)
(604)
(0.2)
(0.2)
-
-
(1.0)
(1.0)
(0.8)
(0.8)
31
Enteq Upstream Plc
Enteq Upstream Plc
Consolidated Statement of Comprehensive Income
Loss for the year
Other comprehensive income for the year:
Items that will not be reclassified subsequently to profit and loss
Items that will be reclassified subsequently to profit and loss
Total comprehensive income for the period
Total comprehensive income attributable to:
Owners of the parent
Year to 31
March 2019
Year to 31
March 2018
$ 000's
$ 000's
(98)
-
-
(98)
(604)
-
-
(604)
(98)
(604)
32
Enteq Upstream Plc
Consolidated Statement of Financial Position
Enteq Upstream Plc
Assets
Non-current
Goodwill
Intangible assets
Property, plant and equipment
Trade and other receivables
Non-current assets
Current
Trade and other receivables
Inventories
Cash and cash equivalents
Current assets
Total assets
Equity and liabilities
Equity
Share capital
Share premium
Share based payment reserve
Retained earnings
Total equity
Liabilities
Current
Trade and other payables
Total liabilities
Total equity and liabilities
As at 31
March 2019
As at 31
March 2018
Notes
$ 000's
$ 000's
12a
12b
13
15
15
16
17
18
18
19
-
2,394
5,895
334
8,623
2,020
4,512
11,930
18,462
27,085
-
1,222
4,503
238
5,963
2,104
3,302
15,501
20,907
26,870
1,005
91,398
750
(69,105)
982
91,031
910
(69,351)
24,048
23,572
3,037
3,037
3,298
3,298
27,085
26,870
The financial statements were authorised for issue and approved by the Board of Directors on 11 June 2019 and were
signed on its behalf by:
David Steel
Director
33
Enteq Upstream Plc
Enteq Upstream Plc
Consolidated Statement of Changes in Equity
Called up
share
capital
$ 000's
Retained
earnings
$ 000's
Share
premium
$ 000's
Share
based
payment
reserve
$ 000's
Total
equity
$ 000's
As at 1 April 2018
982
(69,351)
91,031
910
23,572
Issue of share capital
Share based payment charge
Transfer of reserves
Transactions with owners
Loss for the year
Other comprehensive income for the year
Total comprehensive income
Total movement
23
-
-
23
-
-
-
23
-
-
344
344
(98)
-
(98)
246
367
-
367
-
-
-
-
184
(344)
(160)
-
-
-
367
(160)
390
184
-
574
(98)
-
(98)
476
As at 31 March 2019
1,005
(69,105)
91,398
750
24,048
Called up
share
capital
$ 000's
Retained
earnings
$ 000's
Share
premium
$ 000's
Share based
payment
reserve
$ 000's
As at 1 April 2017
963
(68,747)
90,718
Issue of share capital
Share based payment charge
Transactions with owners
Loss for the year
Other comprehensive income for the year
Total comprehensive income
Total movement
19
-
19
-
-
-
19
-
-
-
(604)
-
(604)
(604)
313
-
313
-
-
-
313
As at 31 March 2018
982
(69,351)
91,031
806
-
104
104
-
-
-
104
910
Total
equity
$ 000's
23,740
332
104
436
(604)
-
(604)
(168)
23,572
34
Enteq Upstream Plc
Enteq Upstream Plc
Consolidated Statement of Cash Flows
Cash flows from operating activities
Loss for the year
Tax (credit)/charge
Net finance income
Gain on disposal of fixed assets
Share-based payment non-cash charges
Foreign exchange charge
Depreciation and Amortisation charges
Tax paid
(Increase)/decrease in inventory
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Net cash from operating activities
Investing activities
Purchase of Property Plant and Equipment
Increase in rental fleet assets
Disposal proceeds of tangible fixed assets
Purchase of intangible fixed assets
Interest received
Net cash from investing activities
Financing activities
Share issue
Net cash from financing activities
Decrease/(increase) in cash and cash equivalents
Non-cash movements - foreign exchange
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Year to 31 March
2019
Year to 31 March
2018
$ 000's
$ 000's
(98)
(67)
(246)
(9)
186
(6)
2,691
2,451
-
(1,210)
(14)
(197)
1,030
(213)
(3,754)
9
(1,286)
246
(4,998)
391
391
(3,577)
6
15,501
11,930
(604)
3
(175)
(82)
104
(48)
853
51
(1)
64
1,582
910
2,781
(236)
(2,222)
133
(670)
175
(2,995)
332
332
118
48
15,335
15,501
35
Enteq Upstream Plc
Notes to the Consolidated Financial Statements
For the year to 31 March 2019
1.
2.
NATURE OF OPERATIONS
The principal activity of Enteq Upstream Plc and its subsidiaries is that of acquiring, consolidating and operating
companies providing specialist reach and recovery products and technologies to the upstream oil and gas services
market.
GENERAL INFORMATION AND STATEMENT OF COMPLIANCE WITH IFRS
Enteq Upstream Plc, the Group’s ultimate parent Company, is a limited liability Company incorporated and
domiciled in England and Wales. Its registered office is The Courtyard, High Street, Ascot, Berkshire, SL5 7HP.
Enteq’s shares are listed on the Alternative Investment Market of the London Stock Exchange. The consolidated
financial statements of the Group have been prepared in accordance with International Financial Reporting
Standards as adopted by the EU.
3. STANDARDS, AMENDMENTS AND INTERPRETATIONS OF ACCOUNTING POLICIES
Standards, amendments and interpretations to existing standards that are not yet effective and have not been
adopted early by the Group
At the date of authorisation of these financial statements, certain new standards, amendments and interpretations
to existing standards have been published by the IASB but are not yet effective, and have not been adopted early
by the Group. Management anticipates that all of the relevant pronouncements will be adopted in the Group’s
accounting policies for the first period beginning after the effective date of the pronouncement. The only standard
that is expected to be relevant to the Group’s financial statements is IFRS 16 'Leases'. On 13 January 2018, the
IASB released IFRS 16 'Leases', completing its long-running project on lease accounting. IFRS 16 will require
lessees to account for leases 'on-balance sheet' by recognising a 'right-of-use' asset and a lease liability. IFRS 16
is effective for annual reporting periods beginning on or after 1 January 2019. This may lead to assets being
recognised on the balance sheet for rented office space in Amersham, UK. Management do not expect any changes
to the treatment of revenue from rental kits.
4. ACCOUNTING POLICIES
Overall considerations
The consolidated financial statements have been prepared using the significant accounting policies and
measurement bases summarised below.
Basis of preparation
The financial statements have been prepared on the going concern basis under the historical cost convention, with
the exception of contingent consideration which is carried at fair value.
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 share placings, substantially all other
transactions are likely to be transacted in US dollars. The majority of the Company’s subsidiaries’ activities and
transactions therewith are expected to be in US dollars. The Parent Company’s functional currency is US dollars.
Basis of consolidation
The Group financial statements consolidate those of the parent Company and all of its subsidiaries as of 31 March
2019. Subsidiaries are all entities over which the Group has the power to control the financial and operating
policies. The Group obtains and exercises control through more than half of the voting rights. All subsidiaries have
a reporting date of 31 March 2019.
All transactions and balances between Group companies are eliminated on consolidation, including unrealised
gains and losses on transactions between Group companies. Where unrealised losses on intra-Group asset sales are
reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts
reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with
the accounting policies adopted by the Group.
36
Enteq Upstream Plc
Nature of business
Holding
Companies included in the consolidation:
Name
Enteq Upstream USA Inc.
Country of
incorporation
United States of America
Jeteq Drilling Limited
England & Wales
Dormant
Manufacturer of down hole drilling
equipment
100%
100%
The financial statements of subsidiaries are included in the consolidated financial statements from the date at which
control commences to the date that control ceases. There are no non-conforming accounting policies in any of the
subsidiaries.
Going concern
The board regularly reviews the Group's resources to ensure they are sufficient to continue trading for the
foreseeable future. It is therefore considered appropriate to use the going concern basis to compile these financial
statements. The main requirement is for sufficient financial resources to maintain the overhead required to fulfil
the pipeline of business.
The Group has significant cash resources which will enable it to trade through these conditions. As a consequence,
the directors believe that the Group is well placed to manage its business risks successfully. Accordingly, the
Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence
for the foreseeable future and consequently have adopted the going concern basis of accounting in preparing these
financial statements.
Business combinations
The Group applies the acquisition method in accounting for business combinations. The consideration transferred
by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets
transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any
asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of
whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets
acquired and liabilities assumed are generally measured at their acquisition-date fair values. Goodwill is stated
after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value
of consideration transferred, b) the recognised amount of any non-controlling interest in the acquiree and c)
acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of
identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess
amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.
Where the consideration for the business combination includes contingent consideration, management assess the
expected future liability based on the available information at the time of the acquisition, taking into account the
expected probability of achieving the relevant conditions and milestones. The expected liability is discounted to its
present value and unwound over the life of the liability, with the impact of the unwinding included in finance costs
over the life of the contingency. At each reporting date management re-estimates the total consideration expected
to be paid. Where, during the first 12 months following the acquisition, a change in the estimated contingent
consideration arises as a result of changes in underlying assumptions which should have been identified at the time
of the acquisition, the acquisition accounting is adjusted to reflect this. All other changes are reflected in profit or
loss for the period.
Foreign currencies
All companies in the Group have a functional currency of US dollars.
Foreign currency transactions are translated into the functional currency of the respective Group entity, using the
exchange rates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the
settlement of such transactions and from the re-measurement of monetary items denominated in foreign currency
at year-end exchange rates are recognised in profit or loss. The exchange rate used at the year-end is £1: $1.30 (31
March 2018 £1: $1.40). Non-monetary items are not retranslated at year-end and are measured at historical cost
(translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value
which are translated using the exchange rates at the date when fair value was determined.
37
Enteq Upstream Plc
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker has been identified as the executive members of the Board, at
which level strategic decisions are made.
Revenue
Revenue is measured as the fair value of the consideration received or receivable for the provision of goods or
services in the ordinary course of business, taking into account trade discounts and volume rebates, and is stated
net of sales taxes. Revenue is recognised when it is probable that the economic benefits associated with a
transaction will flow to the Group and the amount of revenue can be reliably measured.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been
transferred to the customer, which is normally on delivery of the products or collection by the customer, following
approval of the product by the customer.
Revenue from rentals paid under operating leases is recognised in the profit and loss account on a straight-line
basis over the period of the lease.
IFRS 15 ‘Revenue from Contracts with Customers’ has now been adopted. Following a management review, it
was concluded that it had no impact on revenue recognition either in the current or previous reported figures.
Government grants
Enteq has partnered with Imperial College London and the Chinese Institute of Petroleum Beijing to deliver smart
technologies for the optimal drilling, completion, design and management of wells including geothermal wells.
This project is funded by a grant from Innovate UK for a two-year period ending 30 April 2019.
Grant income is netted off against the related expenses in the statement of comprehensive income. It is recognised
as necessary to match it with the related costs, for which it is intended to compensate, on a systematic basis. It is
recognised only when there is reasonable assurance that (a) there is full compliance with any conditions attached
to the grant and (b) the grant will be received.
Interest
Interest income and expenses are reported on an accrual basis using the effective interest method.
Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service. Expenditure for warranties is
recognised and charged against the associated provision when the related revenue is recognised.
Exceptional items
Exceptional items are items of income and expenditure that, in the judgement of management, should be disclosed
separately on the basis that they are material, either by their nature or their size, to an understanding of our financial
performance and distort the comparability of our financial performance between periods.
Exceptional items relate to such categories as impairment charges, change to contingent consideration, and
severance costs.
38
Enteq Upstream Plc
Intangible Assets and Goodwill
a) Goodwill
Goodwill represents amounts arising on the acquisition of trade and related assets and liabilities.
Goodwill on acquisitions comprises the excess of the fair value of the consideration transferred over the net of the
acquisition date amounts of the identifiable assets acquired and liabilities assumed.
Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units and
is not amortised but is tested annually for impairment.
b) Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and
impairment.
c) Research and Development Expenditure
Research expenditure is recognised as an expense when it is incurred. Development expenditure is recognised as an
expense except that expenditure incurred on development projects is capitalised as long-term assets to the extent
that such expenditure is expected to generate future economic benefits. Development expenditure is capitalised if,
and only if the Group can demonstrate all of the following: -
•
•
•
•
•
•
its ability to measure reliably the expenditure attributable to the asset under development;
the product or process is technically and commercially feasible;
its future economic benefits are probable;
its ability to use or sell the developed asset;
the availability of adequate technical, financial and other resources to complete the asset under
development; and
its intention to complete the intangible asset and use or sell.
Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses, if
any. Development expenditure initially recognised as an expense is not recognised as assets in the subsequent period.
Development expenditure is amortised on a straight-line method over the useful lives of each product from when
the products are ready for sale or use. In the event that the expected future economic benefits are no longer probable
of being recovered, the development expenditure is written down to its recoverable amount.
Subsequent measurement
All intangible assets (other than Goodwill), including capitalised internally developed software, are accounted for
using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful
lives, as these assets are considered finite. Residual values and useful lives are reviewed at each reporting date. In
addition, they are subject to impairment testing as described below.
39
Enteq Upstream Plc
Amortisation
Amortisation is charged to overheads, within total administrative expenses, in the income statement on a straight-
line basis over the estimated useful lives of the intangible assets unless such lives are indefinite. Other intangible
assets are amortised from the date they are available for use. The estimated useful lives are determined separately
for each acquisition and fall within the following ranges:
Brand names
Customer relationships
Developed Technology
Non-compete agreement
5 – 20 years
11 – 13 years
4 – 7 years
5 years
Impairment testing of goodwill, other intangible assets and property, plant and equipment
For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent
cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are
tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit
from synergies of the related business combination and represent the lowest level within the Group at which
management monitors goodwill.
There is deemed to be just one cash generating unit (“CGU”) within the Group.
Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other
individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount
exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in use. To determine
the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines
a suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment
testing procedures are directly linked to the Group’s latest approved budget, adjusted as necessary to exclude the
effects of future reorganisations and asset enhancements. Discount factors are determined individually for each
cash-generating unit and reflect management’s assessment of respective risk profiles, such as market and asset-
specific risks factors. Impairment losses for cash-generating units reduce first the carrying amount of any goodwill
allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the
cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an
impairment loss previously recognised may no longer exist. An impairment charge is reversed if the cash-
generating unit’s recoverable amount exceeds its carrying amount, but only to the extent that this does not exceed
the original carrying value, had no impairment been recorded.
Property, plant and equipment
Tangible Property, Plant & Equipment are stated at cost, net of depreciation and any provision for impairment.
Depreciation is included within administrative expenses for all tangible assets at rates calculated to write off the
cost, less estimated residual value of each asset on a straight-line basis over useful economic life, as follows:
Land
Leasehold improvements
Buildings
Production equipment
Other equipment
Rental assets
Not depreciated
Over life of lease, or useful economic life, if shorter
35 years
4 to 7 years
3 to 7 years
Over the life of the asset, up to a maximum of 2 years
Management review the useful economic life and residual values of all assets on an annual basis.
Leased assets
Leases where the third-party lessor retains substantially all the risks and rewards of ownership are classified as
operating leases. Rentals payable under operating leases are charged to the consolidated statement of
comprehensive income on a straight-line basis over the period of the lease. Associated costs, such as maintenance
and insurance, are expensed as incurred. Lease incentives received are recognised in the statement of
comprehensive income on a straight-line basis as an integral part of the total lease expense. Leases where
substantially all the risks and rewards of ownership are transferred to the Group are classified as finance leases.
40
Enteq Upstream Plc
Financial instruments
Recognition, initial measurement and derecognition
Financial assets and liabilities are recognised on the Group’s Statement of Financial Position when the Group
becomes a party to the contractual provisions of the instrument. Financial assets are recognised initially at fair
value plus transaction costs. Financial liabilities are recorded initially at fair value net of transaction costs. Financial
assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the
financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is
extinguished, discharged, cancelled or expires.
All financial assets are subject to review for impairment at least at each reporting date to identify whether there is
any objective evidence that a financial asset or a Group of financial assets is impaired. Different criteria to
determine impairment are applied for each category of financial assets, which are described below. All income and
expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance
income or other financial items, except for impairment of trade receivables which is presented within other total
administrative expenses.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. After initial recognition, these are measured at amortised cost using the effective interest
method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The
Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.
Individually significant receivables are considered for impairment when they are past due or when other objective
evidence is received that a specific counterparty will default. Receivables that are not considered to be individually
impaired are reviewed for impairment in Groups, which are determined by reference to the industry and region of
a counterparty and other shared credit risk characteristics. The impairment loss estimate is then based on recent
historical counterparty default rates for each identified Group.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost, for inventory items that involve significant
manufacturing time, includes all expenses directly attributable to the manufacturing process as well as suitable
portions of related production overheads, based on normal operating capacity. The cost of inventory that do not
incur significant levels of manufacturing time are held at material cost only. Costs of ordinarily interchangeable
items are assigned using the first in, first out cost formula. Net realisable value is the estimated selling price in the
ordinary course of business less any applicable selling expenses.
Taxation
The charge for current income tax is based on the results for the period as adjusted for items that are non-assessable
or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the Statement of
Financial Position date.
Deferred income tax is the income tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation
of taxable profit and is accounted for using the Statement of Financial Position liability method. Deferred income
tax is provided in full and is recognised on temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred income tax liabilities are generally recognised on all taxable temporary differences and deferred tax assets
are recognised to the extent that it is probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference
arises from goodwill (or any discount on acquisition) or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting
profit. Deferred income tax is measured on an undiscounted basis at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised, based on tax rates and laws enacted or substantively
enacted at the balance sheet date. Deferred income tax is charged or credited in the income statement, except when
it relates to items charged or credited directly to equity or other comprehensive income, in which case the deferred
tax is also dealt with in equity or other comprehensive income. Deferred income tax liabilities are recognised on
taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the
reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future. Deferred income tax assets and liabilities are offset when they relate to income taxes levied by
the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
41
Enteq Upstream Plc
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly
liquid investments that are readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities.
Trade and other payables
Trade and other payables are not interest-bearing and are recognised initially at fair value. Subsequently they are
carried at amortised cost.
Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Equity, reserves and dividend payments
Share capital represents the nominal value of shares that have been issued. Share premium includes any premiums
received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from
share premium, net of any related income tax benefits.
Retained earnings include all current and prior period retained profits. All transactions with owners of the parent
are recorded separately within equity. Dividend distributions payable to equity shareholders are included in other
liabilities when the dividends have been approved in a general meeting prior to the reporting date.
Share based payment reserve
Represents the total accumulated share-based payment charge less any amounts transferred following the issue of
the relevant shares.
Pensions and short-term employee benefits
Pensions
The Group does not operate its own pension scheme but makes contributions to an individual’s personal
pension scheme, where appropriate.
Share based payments
All employees receive remuneration in the form of share-based payment transactions, whereby they render services
in exchange for rights over shares under the Enterprise Management Incentive Plan option scheme. The executive
directors and other senior managers receive remuneration in the form of share-based payment transactions, whereby
they render services in exchange for rights over shares under the Performance Share Plan. Both these schemes
have options that vest three years after the date of grant. The total amount to be expensed over the vesting period
of the options is determined by reference to the fair value at the date of granting and the number of awards that are
expected to vest. The fair value is based upon a Black-Scholes model taking into account different scenarios for
the possible outcomes of the Company's investment activities, using management's best estimates of these likely
outcomes. The total expense is based upon initial conditions and will crystallise smoothly over the vesting period
without reassessment of the initial fair value. The charge is annually reassessed, based on the total number of
options expected to vest. In addition, where there are changes to the terms of any agreements, the fair value is
reassessed at that time. The movement in cumulative expense is recognised in the profit and loss, with a
corresponding entry to the share-based payment reserve.
On 17 September 2014, the Company introduced a Performance Share Plan (“PSP”) for the Executive Directors
and other key senior managers. Any awards are made at the nominal value of the shares, but the exercise of these
awards is subject to certain performance conditions. During the life of each award a charge is made to the profit
and loss account representing the fair value of the benefit represented by each award the other side of the accounting
entry is to a corresponding reserve.
Incentive Shares
The amounts subscribed for the Incentive Shares that have previously lapsed have been recognised as a current
liability on the Statement of Financial Position as they become repayable if the Executive Directors leave office.
42
Enteq Upstream Plc
Provisions, contingent assets and contingent liabilities
Provisions for product warranties, legal disputes, onerous contracts or other claims are recognised when the Group
has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic
resources will be required from the Group and amounts can be estimated reliably. Timing or amount of the outflow
may still be uncertain. Provisions are not recognised for future operating losses. Provisions are measured at the
estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the
reporting date, including the risks and uncertainties associated with the present obligation. Where there are a
number of similar obligations, the likelihood that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. Provisions are discounted to their present values, where the time
value of money is material. Any reimbursement that the Group can be virtually certain to collect from a third party
with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of
the related provision. In those cases where the possible outflow of economic resources as a result of present
obligations is considered improbable or remote, no liability is recognised.
Critical accounting estimates and judgements
The preparation of the financial statements in conforming with adopted IFRS requires management to make
judgements, estimates and assumptions that affect the application of policies and reported amounts of assets,
liabilities, income, expenses and contingent liabilities. These will seldom equal the related actual results and
adjustments will consequently be necessary. Estimates are continually evaluated based on experience, consultation
with experts and reasonable expectations of future events.
Accounting estimates are applied in determining the carrying amounts of the following significant assets and
liabilities:
Share based payment
and incentive share
costs
The share-based payment costs and the incentive share costs have both been
calculated based on different scenarios for the possible outcomes of the
Group's investment activities using a Black-Scholes model. The total expense
is based upon initial conditions and will crystallise smoothly over the vesting
period of three and four years.
Accounting judgements are applied in determining the carrying amounts of the following significant assets and
liabilities:
Share premium
Acquired
intangibles and
goodwill
Functional
currency of the
parent
The costs that have been offset against the share premium are deemed to be
wholly and exclusively for the issue of shares. The directors have reviewed
all costs in relation to the share issue and those that did not fully relate to the
share issue have been recognised as an expense in the administrative
expenses.
The Group uses the present value of future cash flows to determine implied
fair value of the intangible assets arising on acquisition and hence in
determining the residual goodwill. In calculating the implied fair value,
significant management judgement is required in forecasting relevant cash
flows considering factors such as long-term growth rates, future margins,
timing and quantum of future replacement capital expenditure, future tax rates
and the selection of discount rates to reflect the risks involved. If alternative
management judgements were adopted then different recognition and
impairment outcomes could result. Neither intangibles nor goodwill were
acquired during the year.
Management shall ensure that no reasonably possible change in any of the
key assumptions would cause the carrying value of the CGU to materially
exceed its recoverable amount.
Management have considered a number of factors in order to determine the
functional currency of the parent Company. After due consideration,
management are of the opinion that this is US dollars. Whilst the Company is
based in the UK, a number of key indicators have led management to reach
this judgement. This includes, but is not limited, to the following key factors:
key strategic decisions, including those in relation to assessing acquisition on
an on-going basis and reviews of historical financial information, are made
43
Enteq Upstream Plc
Impairment of
intangible assets
based on information denominated in US$; Company has funded its overseas
subsidiary in a loan denominated in US$. Management also note that the
Company's strategy is to invest in services aligned to the oil and gas industry,
an industry which trades principally in US$.
An impairment test is carried out annually and involves a significant level of
judgement regarding factors such as future growth rates. Senior management
base this judgement on the best available industry and market data at that point
in time. The critical judgements and estimates are set out in note 12. As the
Group strategy unfolds, these assumptions may change. Any significant
downward variance in the assumptions may result in an impairment.
Recoverability of
trade debtors
Management carries out monthly reviews regarding the recoverability of
balances owed by customers. Where there is concern regarding the
recoverability of all or an element of a customer’s outstanding balance, an
appropriate bad debt provision is charge to the profit and loss account.
5. 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 Drilling Tools division are 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.
At present, there is only one operating segment and the information presented to the board is consistent with
the consolidated income statement and the consolidated statement of financial position. A key measurement used
by the board is Adjusted EBITDA. This reconciliation is included in note 6, below.
The revenues, net assets and non-current assets of the Group can be analysed by geographic location (post-
consolidation adjustments) as follows:
Revenues
North America
Rest of the world
Total Group revenue
Net Assets
Europe (UK)
United States
Total Group net assets
Non-current Assets
Europe (UK)
United States
Total Group non-current assets
31 March
2019
$ 000’s
9,251
953
10,204
31 March
2019
$ 000’s
10,315
13,733
24,048
31 March
2019
$ 000’s
-
8,623
8,623
31 March
2018
$ 000’s
6,017
443
6,460
31 March
2018
$ 000’s
13,673
9,899
23,572
31 March
2018
$ 000’s
-
5,963
5,963
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 3 customers that
contributed in excess of 10% of the Group’s total sales for the year (2018: 3). These customers
contributed $2,617k, $1,286k and $1,122k respectively. (2018: $1,371k, $927k and $881k). No revenue
relates to customers based in the UK (2018: none).
44
Enteq Upstream Plc
6. PROFIT AND LOSS ANALYSIS
The following analysis illustrates the performance of the Group’s activities, and reconciles the Group’s
loss for the period, as shown in the consolidated income statement, to adjusted earnings and adjusted
EBITDA.
Adjusted earnings and adjusted EBITDA are presented to provide a better indication of overall financial
performance and to reflect how the business is managed and measured on a day-to-day basis.
Loss attributable to ordinary shareholders
Exceptional items
Amortisation of acquired intangible assets (note 12b)
Foreign exchange movements
Adjusted earnings
Depreciation charge (note 13)
Finance income (note 8)
Performance Share Plan charge (note 20)
Tax (credit)/charge (note 10)
Adjusted EBITDA
The exceptional items can be analysed as follows:
31 March 2019
$ 000’s
31 March 2018
$ 000’s
(98)
7
116
(6)
19
2,575
(246)
173
(67)
2,454
(604)
57
92
(48)
(503)
760
(175)
138
3
223
31 March 2019
$ 000’s
31 March 2018
$ 000’s
Severance payments and other plant closure costs
Gain on sale of fixed assets
Other
Total exceptional items
16
(9)
-
7
143
(82)
(4)
57
7.
EMPLOYEES AND DIRECTORS
Wages and salaries
Social security costs
Equity settled transactions – in lieu of salaries
Equity settled transactions – share option and PSP charge
Pension and health costs
31 March 2019
$ 000’s
31 March 2018
$ 000’s
3,951
314
87
186
494
5,032
2,856
262
269
104
365
3,856
The average monthly number of employees during the year was as follows:
Directors
Senior management
Sales & marketing
Manufacturing & Technical
Finance & administration
No.
4
2
2
21
2
31
No.
4
4
3
9
2
22
45
Enteq Upstream Plc
$ 000’s
$ 000’s
Directors' remuneration
1,053
972
Information regarding the highest paid director is as
follows:
Emoluments
613
555
The directors are deemed to be 'Key Management'. This is detailed further in Note 23. Further details of
emoluments paid to directors, including details of the highest paid director are contained in the Remuneration
Committee report on pages 18 to 21.
Share plans
The Group has an equity-settled share option scheme. The total amount to be expensed over the vesting period is
determined by reference to the fair value at the date at which the options are granted. It is assumed that all options
will vest. The fair value is determined using a binomial model which assesses the likelihood of the Company
achieving certain goals in line with its strategy, ranging from failure to make any investments and return of funds
to investors, to achieving various rates of acquisitive growth. The cashflows attached to these different scenarios
are discounted over the vesting period at an annual rate of 14% and contribute to the estimated value of the
Company in line with each scenario's assessed weighting of likelihood of occurrence. The value of each share in
issue is therefore estimable and the consequent value to option holders calculable following their payment of the
exercise price.
Details of the share options outstanding at the end of the year are shown in note 20.
Enterprise Management Incentive Plan
The Group has established a share option plan that entitles all employees to purchase shares in the Company. See
note 20 for further details.
Performance Share Plan
The Group has established a share plan that entitles certain senior employees to acquire shares in the
Company if certain performance conditions are met. See note 20 for further details.
8. NET FINANCE INCOME
Interest earned on bank deposits
246
175
31 March 2019
$ 000’s
31 March 2018
$ 000’s
46
Enteq Upstream Plc
9. LOSS BEFORE INCOME TAX
The loss before income tax is stated after charging/(crediting):
31 March 2019
$ 000’s
31 March 2018
$ 000’s
Depreciation of tangible assets
Amortisation of intangible assets
Auditors' remuneration:
- Fees payable to the Company’s auditor for the audit
of the Company’s and Group’s annual accounts
- Tax compliance services
Share based payments
Foreign exchange gains
Gain on disposal of Property, Plant & Equipment
2,575
116
70
41
186
(6)
(9)
760
92
73
28
104
(48)
(82)
10. 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:
Loss on ordinary activities before tax
Loss on ordinary activities multiplied by the
standard rate of corporation tax in the UK of 19% (2018: 19%):
Effects of:
Items not subject to corporation tax
Tax losses to carry forward
Texas State Franchise Tax
Release of previous year over accrual for Texas State Franchise Tax
Total income tax
31 March
2019
$ 000’s
31 March
2018
$ 000’s
(165)
(601)
(31)
511
(480)
5
(72)
(67)
(114)
170
(56)
3
-
3
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 $0.7m; United States $15.7m (2018: UK $1.7m; United States $15.9m). There
were no significant deferred tax liabilities.
47
Enteq Upstream Plc
11. 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 $98k
(31 March 2018: loss of $604k) by the weighted average number of ordinary shares in issue during the year of
63,297k (31 March 2018: 61,616k).
Adjusted earnings per share
Adjusted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders, excluding
exceptional items, amortisation of intangible assets and foreign exchange profits or losses for the year of a profit
of $19k (31 March 2018: loss of $503k), by the weighted average number of ordinary shares in issue during the
year of 63,297k (31 March 2018: 61,616k).
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 adjusted diluted earnings per share information are considered to provide a fairer representation of the Group’s
trading performance. A reconciliation between basic earnings and adjusted earnings is shown below.
March 2019: EPS
Weighted
Earnings
average number
of shares
000’s
$ 000’s
Per-share
amount
US cents
Loss attributable to ordinary shareholders
Exceptional items
Amortisation of acquired intangible assets
Foreign exchange movements
Adjusted profit attributable to ordinary shareholders
(98)
7
116
(6)
19
63,297
(0.2)
63,297
-
March 2018: EPS
Weighted
Earnings
average number
of shares
000’s
$ 000’s
Per-share
amount
US cents
Loss attributable to ordinary shareholders
Exceptional items
Amortisation of acquired intangible assets
Foreign exchange movements
Adjusted loss attributable to ordinary shareholders
(604)
57
92
(48)
(503)
61,616
(1.0)
61,616
(0.8)
During the year Enteq Upstream Plc did not pay any dividends (2018: nil).
48
12. INTANGIBLE ASSETS
a) Goodwill
Cost:
As at 1 April 2018 and as at 31 March 2019
Impairment:
As at 1 April 2018 and as at 31 March 2019
Net Book Value:
As at 1 April 2018 and as at 31 March 2019
$ 000’s
19,619
19,619
-
b) Other Intangible Assets
Developed
technology
IPR&D
technology
Brand
names
Customer
relationships
$ 000’s
$ 000’s
$ 000’s
$ 000’s
Non-
compete
agreements
$ 000’s
Cost:
As at 1 April 2018
Capitalised in period
As at 31 March 2019
Amortisation/Impairment:
As at 1 April 2018
Charge for the year
As at 31 March 2019
Net Book Value:
As at 1 April 2018
As at 31 March 2019
12,676
147
12,823
12,510
116
12,626
165
197
8,164
1,141
9,305
7,108
-
7,108
1,057
2,197
1,240
-
1,240
1,240
-
1,240
-
-
20,586
-
20,586
20,586
-
20,586
-
-
Developed
technology
IPR&D
technology
Brand
names
Customer
relationships
$ 000’s
$ 000’s
$ 000’s
$ 000’s
Enteq Upstream Plc
Total
$ 000’s
48,597
1,288
49,885
47,375
116
47,491
1,222
2,394
Total
$ 000’s
47,928
6,769
48,597
47,283
92
47,375
5,931
-
5,931
5,931
-
5,931
-
-
Non-
compete
agreements
$ 000’s
5,931
-
5,931
5,931
-
5,931
20,586
-
20,586
20,586
-
20,586
-
-
-
-
645
1,222
Cost:
As at 1 April 2017
Capitalised in period
As at 31 March 2018
Amortisation/Impairment:
As at 1 April 2016
Charge for the year
As at 31 March 2018
Net Book Value:
As at 1 April 2017
As at 31 March 2018
12,676
-
12,676
12,418
92
12,510
258
165
7,495
669
8,164
7,108
-
7,108
387
1,057
1,240
-
1,240
1,240
-
1,240
-
-
49
Enteq Upstream Plc
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.
Non-compete agreements:
The value associated with the agreements signed by the Vendors of the acquired businesses not to compete in the
markets of the businesses acquired.
Goodwill and Impairment
The Group tests goodwill and other intangible assets annually for impairment. The impairment test carried out on
the balances as at 31 March 2019 indicated that there was no impairment of the full carrying value of both goodwill
and intangible assets.
There is deemed to be just one cash generating unit (“CGU”) within the Company. In previous years there were
deemed to be two, but from a financial & operational perspective both US locations are now being run as one unit.
The recoverable amount of the CGU is determined from value in use calculations. The key assumptions for the
value in use calculations are those regarding the future revenues, discount rates, growth rates and expected changes
to selling prices and direct costs during the period. Management estimates discount rates using pre-tax rates that
reflect current market assessment of the time value of money and the risks specific to the CGU. The growth rates
are based on management forecasts for the five years to March 2024. Cash flow forecasts are prepared from the
most recent financial plans approved by the Board.
The forecasts assume annual growth rates between 1% and 20% until 2024 and 3% thereafter in the long term.
These long-term growth rates do not exceed the long-term average growth rates for the industry as a whole.
The pre-tax rate used to discount cash flow forecasts is 13.5% (2018: 13.6%). Management have based this rate
on the following factors: a Risk Free Rate of 3.0%; a levered equity beta of 1.5; a market risk premium of 5.5%; a
small cap premium of 3.8% and an implied cost of debt of 4.5%.
Intangible assets
Any intangible assets acquired during the year represents their fair value at the date of acquisition.
Amortisation
All categories of intangible assets, apart from the Goodwill and the IPR&D technology, are being amortised over
their respective useful lives, on a straight-line basis. The remaining amortisation period of the intangible assets
is between 26 and 34 months.
50
13. PROPERTY, PLANT AND EQUIPMENT
Land
$000’s
Leasehold
improvements
$000’s
Buildings Production
Equipment
$000’s
$000’s
Rental
Fleet
$000’s
Other
Equipment
$000’s
Cost:
As at 1 April 2018
Additions
Disposals and transfers
As at 31 March 2019
Depreciation:
As at 1 April 2018
Charge for the year
Disposals
As at 31 March 2019
Net Book Value:
As at 1 April 2018
As at 31 March 2019
461
-
-
461
-
-
-
-
461
461
-
-
-
-
-
-
-
-
-
-
2,295
94
-
2,389
461
104
-
565
1,834
1,824
1,153
89
(4)
1,238
1,111
19
(4)
1,126
42
112
2,559
4,028
(509)
6,078
440
2,426
(236)
2,630
2,119
3,449
Enteq Upstream Plc
Total
$000’s
6,804
4,240
(513)
10,531
2,301
2,575
(240)
4,636
336
29
-
365
289
26
-
315
47
50
4,503
5,895
Total
$000’s
5,128
2,793
(1,117)
6,804
2,270
760
(729)
2,301
322
32
(18)
336
284
23
(18)
289
38
47
2,858
4,503
Land
$000’s
Leasehold
improvements
$000’s
Buildings Production
Equipment
$000’s
$000’s
Rental
Fleet
$000’s
Other
Equipment
$000’s
Cost:
As at 1 April 2017
Additions
Disposals
As at 31 March 2018
Depreciation:
As at 1 April 2017
Charge for the year
Disposals
As at 31 March 2018
Net Book Value:
As at 1 April 2017
As at 31 March 2018
461
-
-
461
-
-
-
-
461
461
102
-
(102)
-
40
10
(50)
-
62
-
2,120
175
-
2,295
372
89
-
461
1,748
1,834
1,334
27
(208)
1,153
1,302
18
(209)
1,111
32
42
789
2,559
(789)
2,559
272
620
(452)
440
517
2,119
51
Enteq Upstream Plc
14. DEFFERED TAX
No deferred tax balances have been recognised in the statement of financial position on the basis that the only
material balances related to taxable losses carried forward, which are uncertain as to their recoverability.
As disclosed in Note 10, deferred tax assets in the UK of $0.7m (tax value of $0.1m at 19%) and in the US of
$15.7m (tax value of $4.7m at 30%) (2018: UK $1.7m; US $15.9m), in relation to losses carried forward have not
been recognised.
15. TRADE AND OTHER RECEIVABLES
Trade receivables
Prepayments
Other receivables
The above can be analysed as follows:
Non-current
Current
31 March 2019
$000’s
31 March 2018
$000’s
2,089
123
142
2,354
334
2,020
2,354
2,087
158
97
2,342
238
2,104
2,342
The management believe that the carrying value is an approximation of fair value.
Bad debt provision
As at 1 April
Charged/released to income statement
Allowances used
As at 31 March
Aging profile of unprovided trade receivables
Not past due
Past due 31-90 days
Past due 91-120 days
Past due more than 120 days
16. INVENTORIES
Finished goods
Work in progress
Raw Materials
31 March 2019
$000’s
31 March 2018
$000’s
-
68
-
68
69
(50)
(19)
-
31 March 2019
$000’s
31 March 2018
$000’s
603
996
42
448
2,089
842
653
39
553
2,087
31 March 2019
$000’s
3,625
621
266
4,512
31 March 2018
$000’s
2,722
229
351
3,302
The value of inventory recognised within cost of sales was $3,610k (2018: $1,777k). The 31 March 2019
balance includes a provision for slow moving stock of $418k (31 March 2018: $213k). The stock provision
increased from $213k as at 31 March 2018 to $273k as at 31 March 2019.
52
Enteq Upstream Plc
17. CASH AND CASH EQUIVALENTS
Denominated in USD
Denominated in GBP
31 March 2019
$000’s
31 March 2018
$000’s
11,771
159
11,930
15,387
114
15,501
18. CALLED UP SHARE CAPITAL
Allotted, issued and fully paid ordinary shares of GBP 0.01 nominal value:
As at 1 April 2018
Issued during the year
Number
000’s
Share
Capital
$000’s
Share
Premium
$000’s
62,138
982
91,031
1,747
23
367
As at 1 March 2019
63,885
1,005
91,398
All shares issued carry the same voting rights.
The fair value of the lapsed incentive shares ($79,937) has been recognised as a current liability on the Statement
of Financial Position as it becomes repayable if the incentive shareholders leave office.
There were no costs associated with the share capital issued during the year.
The Companies Act 2006 abolished the concept of authorised share capital and, accordingly, there is no
Limit on the maximum number of shares that may be allotted by the Company.
Details of the incentive shares are included in note 7.
19. TRADE AND OTHER PAYABLES
Trade payables
Accrued expenses
Social security and other taxes
Other creditors
31 March 2019
$000’s
31 March 2018
$000’s
1,157
1,559
232
89
3,037
1,140
1,853
214
91
3,298
The management believe the carrying value is an approximation of the fair value. The average creditor days for
the period ending 31 March 2019 is 70 days (2018: 64 days).
20. EMPLOYEE BENEFITS
Enterprise Management Incentive Plan
The Group has established a share option plan that entitles all employees to purchase shares in the Company.
During the year to 31 March 2019 grants under the plan were made. In accordance with the scheme rules options
are exercisable at the market price of the shares at the date of the grant once all vesting conditions have been met.
Options vest after three years from the date of grant and expire after ten years.
53
Enteq Upstream Plc
The number and weighted average exercise prices of share options are as follows:
31 March 2019
31 March 2018
Weighted
average exercise
price (pence)
Number of
options
Weighted
average exercise
price (pence)
Number of
options
Outstanding at the beginning of the period
Granted during the period
Exercised during the period
Forfeited during the period
Outstanding at the end of the period
Exercisable at the end of the period
Highest exercise price (p)
Lowest exercise price (p)
28.5
31.5
-
54.5
21.0
13.0
31.0
13.0
649,500
219,000
-
(210,000)
658,500
199,500
24.4
22.5
13.8
17.8
28.5
34.7
63.0
13.0
793,500
180,000
(214,000)
(110,000)
649,500
409,500
The weighted average remaining contractual life of all outstanding share options is 2,608 days (2018: 2,405 days).
The fair value of services received in return for share options are measured by reference to the fair value of share
options granted. The estimate of the fair value of the services received is measured based on the Black-Scholes
model and expectations of early exercise are incorporated into this model.
The grant made during the year were as follows:
Grant Date
Fair value for option at grant date (pence)
Weighted average share price at date of grant (pence)
Weighted average exercise price
Expected volatility
Option life
Risk free interest rate
June
2018
9.3
31.5
31.5
50%
10 years
2.5%
The expected volatility is based on the historic volatility.
During the year, a charge of $12k (2018: $34k) has been included within the income statement in relation to the
above options.
Performance Share Plan
On the 17 September 2014, a Performance Share Plan was introduced for the executive directors and other senior
managers. In accordance with the scheme rules options are exercisable at the nominal value of the shares at the
date of the grant once all vesting conditions have been met. Options vest after three years from the date of grant
and expire after ten years. Options are settled in equity.
The number and weighted average exercise prices of share options are as follows:
Outstanding at the beginning of the period
Granted during the period
Exercised during the period
Lapsed during the period
Outstanding at the end of the period
Exercisable at the end of the period
31 March 2019
Number of options
31 March 2018
Number of options
4,257,932
1,974,026
(548,592)
(605,616)
5,077,750
77,849
4,482,216
1,850,000
-
(2,074,284)
4,257,932
1,232,057
The weighted average remaining contractual life of all outstanding Performance Share Plan options is 3,040 days
(2018: 3,051 days).
54
Enteq Upstream Plc
The fair value of services received in return for share options are measured by reference to the fair value of share
options granted, measured using the Black-Scholes model and expectations of early exercise are incorporated into
this model. The balance is adjusted each year in accordance with the number of awards expected to vest.
The grants made during the year were as follows:
Fair value for option at grant date (pence)
Share price at date of grant (pence)
Option life
Non
market
based
conditions
24.5
24.5
3 years
During the year a charge of $172k (2018: $138k) has been included within the income statement as a charge, for
the above options.
The charge of $184k (2018: $104k) shown in note 7 includes the charges for both the above schemes.
21. OPERATING LEASES
The Group has lease agreements in respect of properties and other equipment, for which payments extend over a
number of years. The total gross payments over the life of these leases, split by maturity date and type, are as
follows:
At 31 March 2019
Within one year
Within two to five years
At 31 March 2018
Within one year
Within two to five years
Property Equipment
$000’s
$000’s
Total
$000’s
6
-
6
3
-
3
9
-
9
Property Equipment
$000’s
$000’s
Total
$000’s
25
7
32
12
7
19
37
14
51
The lease expense during the year amounted to $27k (2018: $162k), representing the minimum lease payment.
22. OPERATING LEASES AS LESSOR
The Group leases out equipment under operating leases, the carrying value of which is shown in note 13.
Rental income during the year amounts to $3,703k (2018: $984k) included within revenue.
The lease contracts are all non-cancellable for 3 months from the commencement of the lease. As at
31 March 2019 there were no significant future minimum lease rentals (2018: nil).
23. RELATED PARTY DISCLOSURES
Transactions with key management personnel
The remuneration of the current directors, who are the key management personnel of the Group, is set out in the
remuneration committee report for each of the categories specified in IAS 24: ‘Related party disclosures’.
55
Enteq Upstream Plc
24. ULTIMATE CONTROLLING PARTY
There is no ultimate controlling party.
25. FINANCIAL INSTRUMENTS
Exposure to credit, interest rate, and currency and liquidity risk arises in the normal course of the Group’s business.
The Group’s overall strategy to minimise this risk is discussed below.
Objectives, policies and procedures
Treasury operations are conducted within a framework of policies and guidelines authorised by the Board and are
subject to internal control procedures. The objectives of the framework are to provide flexibility whilst minimising
risk and prohibiting speculative transactions or positions to be taken.
The Group’s principal financial instruments comprise cash and lines of bank credit. The main purpose of these
financial instruments is to raise finance for the Group’s operations. The Group has various other financial assets
and liabilities such as trade receivables and trade payables, which arise directly from its operations.
The main risks arising from the Group’s financial instruments are credit, interest rate, and currency and liquidity
risks. The Board reviews and agrees policies for managing these risks and they are summarised below.
Credit risk
Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The group is exposed to
credit risk from financial assets including cash and cash equivalents held at banks, trade and other receivables.
Credit risk management
The credit risk is managed on a group basis based on the Group's credit risk management policies and procedures.
The credit risk in respect of cash balances held with banks and deposits with banks are managed via diversification
of bank deposits, and are only with major reputable financial institutions.
The Group continuously monitors the credit quality of customers based on a credit rating scorecard. Where
available, external credit ratings and/or reports on customers are obtained and used. The group's policy is to deal
only with credit worthy counterparties. The credit terms range between 30 and 90 days. The credit terms for
customers as negotiated with customers are subject to an internal approval process which considers the credit rating
scorecard. The ongoing credit risk is managed through regular review of ageing analysis, together with credit limits
per customer.
Trade receivables consist of a large number of customers in various industries and geographical areas.
Security
The Group does not hold any security on the trade receivables balance. In addition, the group does not hold
collateral relating to other financial assets (e.g. derivative assets, cash and cash equivalents held with banks).
Trade receivables
The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade
receivables as these items do not have a significant financing component. In measuring the expected credit losses,
the trade receivables have been assessed on a collective basis as they possess shared credit risk characteristics. They
have been grouped based on the days past due and also according to the geographical location of customers.
The expected loss rates are based on the payment profile for sales over the past 48 months before 31 March 2019
and 1 April respectively as well as the corresponding historical credit losses during that period. The historical rates
are adjusted to reflect current and forwarding looking macroeconomic factors affecting the customer's ability to
settle the amount outstanding. On this basis the expected loss rates applicable to the outstanding unprovided trade
debtor balances for are zero.
56
Enteq Upstream Plc
Trade receivables are written off when there is no reasonable expectation of recovery. Failure to make payments
within 180 days from the invoice date and failure to engage with the Group on alternative payment arrangement
amongst other is considered indicators of no reasonable expectation of recovery.
Interest rate risk
The Group’s exposure to risk for changes in market interest rates relates primarily to the Group’s cash and cash
equivalents. The Group minimises that risk by using a series of short-term interest rate fixes.
A 1% increase in interest rates, in the average balances held on deposit during the year end, would result in an
increase in finance income of $128k per annum.
Foreign currency risk
The Group is exposed to foreign currency risk on cash balances denominated in sterling, as its reporting currency
is USD. The amount of currency held in sterling is reviewed on a regular basis, together with the cash flows
denominated in sterling, to ensure that this risk is minimised.
The Group’s funding strategy is to ensure that the business has sufficient resources to meet its various financial
commitments on an on-going basis. It achieves this objective by actively monitoring its forecast cash flows and
requirements. The Group is cautious in its approach, applying appropriate sensitivities to both the quantum and
timing of its projections.
A 1% increase in the GBP/USD foreign exchange rate, on the GBP denominated year end cash balances, would
result in a foreign exchange gain of $2k. The year-end balance was chosen due to the highly fluctuating level of
GBP denominated cash held during the year.
Liquidity risk
The Group manages its liquidity risk by ensuring that the balances of cash on deposit gives it sufficient access to
liquid funds to meet both its immediate and longer-term needs. In addition, the Group regularly reviews the access
to commercial bank lines of credit.
Capital management
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and
healthy capital ratios in order to support its current business, and allow it to take advantage of development
opportunities when they arise therefore allowing the Group to maximise Shareholder value at all times.
The Group manages its capital structure, primarily Shareholders’ equity, and makes adjustments to it, in light of
changes in economic conditions and development opportunities. To maintain or adjust the capital structure, the
Group may adjust the dividend payment to Shareholders, return capital to Shareholders or issue new shares. The
Group’s ordinary shares are quoted on the AIM market of the London Stock Exchange. This affords it access to
investors which seek access to growth opportunities of the sort which the Group is targeting to acquire.
Debt is not employed in the Group at present and the limited working capital requirements are currently financed
out of cash reserves. Details of the current equity structure can be seen on the Consolidated Statement of Financial
Position. There are no capital requirements that are externally imposed.
No changes were made in the objectives, policies or processes during the years ending 31 March 2019.
Estimation of fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial
instruments reflected in the table, below.
Trade and other receivables/payables
The directors consider that the carrying amount of these balances approximates to their fair value.
The only allowances maintained by the Company for credit losses relate to allowances for bad and doubtful debts
relating to trade receivables.
Categories of financial instruments
Financial liabilities and assets included in the Statement of Financial Position relate to the following IAS 39
categories:
57
Enteq Upstream Plc
31 March 2019
Statement of Financial Position headings – liabilities
Trade payables
Social security and other taxes
Other creditors
Accrued expenses
Total
Statement of Financial Position headings – assets
Trade receivables
Prepayments
Other receivables
Cash and cash equivalents
Total
31 March 2018
Statement of Financial Position headings – liabilities
Trade payables
Social security and other taxes
Other creditors
Accrued expenses
Total
Other
Financial
Liabilities
$000
Non-
Financial
Liabilities
$000
1,157
-
89
1,559
2,805
-
232
-
-
232
Total for
Statement of
Financial
Position
heading
$000
1,157
232
89
1,559
3,037
Loans and
receivables
$000
Non-
Financial
Assets
$000
Total for
Statement of
Financial
Position
heading
$000
2,089
-
142
11,930
14,161
-
123
-
-
123
2,089
123
142
11,930
14,284
Other
Financial
Liabilities
$000
Non-
Financial
Liabilities
$000
Total for
Statement of
Financial
Position
heading
$000
1,140
-
91
1,853
3,084
-
214
-
-
214
1,140
214
91
1,853
3,298
58
Enteq Upstream Plc
Statement of Financial Position headings – assets
Trade receivables
Prepayments
Other receivables
Cash and cash equivalents
Total
Loans and
receivables
$000
Non-
Financial
Assets
$000
Total for
Statement of
Financial
Position
heading
$000
2,087
-
97
15,501
17,685
-
158
-
-
158
2,087
158
97
15,501
17,843
The directors are of the opinion that there is no material difference between the book value and the fair value of any
of the Group’s assets or liabilities. The contractual maturity of all financial liabilities are as follows:
31 March 2019
31 March 2018
Within 3 months
$000’s
3 to 12 months
$000’s
12 to 18 months
$000’s
2,754
3,084
-
-
-
-
26. CAPITAL COMMITMENTS
Other than those included in the statement of financial position, there were no material capital or other financial
commitments in place at the year end. Further, there was no authorised but not contracted for capital expenditure
at the year end.
27. POST-REPORTING DATE EVENTS
No adjusting events have occurred.
59
Enteq Upstream Plc
Enteq Upstream Plc
Company Statement of Financial Position
Fixed assets
Tangible Fixed Assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Debtors: amounts falling due after one year
Inter-Company loan notes
Creditors: amounts falling due within one year
Trade and other payables
Total assets less current liabilities
Capital and reserves
Called up share capital
Share premium
Share based payment reserve
Retained earnings
Total equity
Notes
3
4
5
6
7
8
9
9
31 March 2019
$ 000's
31 March 2018
$ 000's
-
-
-
14,119
11,212
30,331
-
-
-
14,408
14,702
29,110
8,592
8,592
(1,080)
32,843
(1,163)
36,539
1,005
91,398
750
(60,310)
32,843
982
91,031
910
(56,384)
36,539
The parent Company's loss for the financial year was $4,270k (2018: Profit of $831k). The financial statements were
approved by the Board of Directors on 11 June 2019 and were signed on its behalf by:
David Steel
Director
60
Enteq Upstream Plc
Enteq Upstream Plc
Company Statement of Changes in Equity
Called up
share
capital
$ 000's
Retained
earnings
$ 000's
Share
premium
$ 000's
Share
based
payment
reserve
$ 000's
Total
equity
$ 000's
As at 1 April 2018
982
(56,384)
91,031
910
36,539
Issue of share capital
Share based payment credit
Transfer of reserves
Transactions with owners
Loss for the period
Other comprehensive expense for the year
Total comprehensive income
23
-
-
23
-
-
-
-
-
344
344
(4,270)
-
(4,270)
367
-
367
-
-
-
-
184
(344)
(160)
-
-
-
390
184
-
574
(4,270)
-
(4,270)
Total movement
23
(3,926)
367
(160)
(3,696)
As at 31 March 2019
1,005
(60,310)
91,398
750
32,843
Called up
share
capital
$ 000's
Retained
earnings
$ 000's
Share
premium
$ 000's
Share
based
payment
reserve
$ 000's
As at 1 April 2017
963
(57,215)
90,718
Issue of share capital
Share based payment charge
Transactions with owners
Profit for the period
Other comprehensive expense for the year
Total comprehensive income
Total movement
19
-
19
-
-
-
19
-
-
-
831
-
831
831
313
-
313
-
-
-
313
As at 31 March 2018
982
(56,384)
91,031
807
-
103
103
-
-
-
103
910
Total
equity
$ 000's
35,273
332
103
435
831
-
831
1,266
36,539
61
Enteq Upstream Plc
Notes to the Company Statement of Financial Position
For the year to 31 March 2019
1.
SIGNIFICANT ACCOUNTING POLICIES
Basis of accounting
Enteq Upstream Plc is a Company incorporated in the United Kingdom under the Companies Act 2006. The address
of the registered office is given in the Company Information found on page 3.
Statement of compliance
These financial statements have been prepared in accordance with applicable accounting standards and in
accordance with Financial Reporting Standard 101 – 'The Reduced Disclosure Framework' (FRS 101). The
principal accounting policies adopted in the preparation of these financial statements are set out below. These
policies have all been applied consistently throughout the year unless otherwise stated.
Basis of preparation
The financial statements have been prepared on a going concern basis under the historical cost convention.
The board regularly reviews the Company’s resources to ensure they are sufficient to continue trading for the
foreseeable future. It is therefore considered appropriate to use the going concern basis to compile these financial
statements. The main requirement is for sufficient financial resources to maintain the overhead required to fulfil
the pipeline of business.
The financial statements are presented in US dollars as the majority of the Company’s subsidiaries’ activities and
transactions are in US dollars.
Management notes that the Company's strategy is to invest in services aligned to the oil and gas industry, an
industry which trades principally in US$. All future operations and sources of funding are also expected to be
located in the US for the foreseeable future.
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company is not
presented as part of these financial statements. The Company’s profit is disclosed on page 62.
In preparing these financial statements the Company has taken advantage of the following disclosure exemptions
conferred by FRS 101:
• The requirements of IAS 24: related party disclosures to disclose related party transactions entered
in to between two or more members of the group as they are wholly owned within the group;
• Presentation of comparative reconciliations for intangible assets and property, plant and equipment;
• Disclosure of key management personnel compensation;
• Capital management disclosures;
• Presentation of a comparative reconciliation of the number of shares outstanding at the beginning
and at the end of the period;
• The effect of future accounting standards not adopted;
• Certain share-based payment disclosures; and
• Disclosures in respect of financial instruments (other than disclosures required as a result of recording
financial instruments at fair value).
Parent company
The Company is a wholly owned subsidiary of Enteq Upstream PLC which prepares publicly available
consolidated financial statements in accordance with IFRS. This Company is included in the consolidated financial
statements of Enteq Upstream PLC for the year ended 31 March 2019. These accounts are available from The
Courtyard, High Street, Ascot, Berkshire, SL5 7HP.
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Enteq Upstream Plc
Foreign currencies
Foreign currency transactions are translated into the local currency of the Company, US dollars, using the exchange
rates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of
such transactions and from the remeasurement of monetary items denominated in foreign currency at year-end
exchange rates are recognised in profit or loss.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the
exchange rates at the transaction date).
Tangible assets
Tangible assets are stated at cost less accumulated depreciation and any impairment in value. The initial cost of an
asset comprises its purchase price or construction cost, and any costs directly attributable to bringing the asset into
operation. The purchase price or construction cost is the aggregate amount paid and the fair value of any other
consideration given to acquire the asset.
The estimated useful lives are determined separately for each category and are as follows:
Computer equipment
Office equipment
3 years
1 year
A tangible fixed asset is derecognised upon disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of the item) is included in the administrative
expenses in the year the item is derecognised.
Investments
Fixed asset investments in subsidiaries are shown at cost less provision for impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly
liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant
risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company
after deducting all of its liabilities.
Trade and other payables
Trade and other payables are not interest-bearing and are recognised initially at fair value. Subsequently they are
carried at amortised cost.
Amounts due from or to group companies
Amounts due from or to group companies are initially recognised at fair value being the present value of future
interest and capital receipts discounted at the market rate of interest for a similar financial asset or liability. For
group loans which are due on demand or where there is no significant difference between the amount due/payable
and fair value on initial recognition then such loans are carried at the amount due/payable on an amortised cost
basis. Interest receivable or payable on the loan is recognised in profit or loss under the effective interest method.
Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
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Enteq Upstream Plc
Equity, reserves and dividend payments
Share capital represents the nominal value of shares that have been issued. Share premium includes any premiums
received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from
share premium, net of any related income tax benefits.
Retained earnings include all current and prior period retained profits. All transactions with owners of the parent
are recorded separately within equity. Dividend distributions payable to equity shareholders are included in other
liabilities when the dividends have been approved in a general meeting prior to the reporting date.
Share based payment reserve
Represents the total accumulated share-based payment charge less any amounts transferred following the issue of
the relevant shares.
Taxation
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered)
using the tax rates and laws that have been enacted or substantively enacted by the Statement of Financial Position
date.
Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the
Statement of Financial Position date where transactions or events that result in an obligation to pay more tax in the
future or a right to pay less tax in the future have occurred at the Statement of Financial Position date. Temporary
differences are differences between the Company’s taxable profits and its results as stated in the financial
statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in
which they are recognised in the financial statements.
Share based payments
All employees receive remuneration in the form of share-based payment transactions, whereby they render services
in exchange for rights over shares under the Enterprise Management Incentive Plan option scheme. The executive
directors and other senior managers receive remuneration in the form of share-based payment transactions, whereby
they render services in exchange for rights over shares under the Performance Share Plan. Both these schemes
have options that vest three years after the date of grant. The total amount to be expensed over the vesting period
of the options is determined by reference to the fair value at the date of granting and the number of awards that are
expected to vest. The fair value is based upon a Black-Scholes model taking into account different scenarios for
the possible outcomes of the Company's investment activities, using management's best estimates of these likely
outcomes. The total expense is based upon initial conditions and will crystallise smoothly over the vesting period
without reassessment of the initial fair value. The charge is annually reassessed, based on the total number of
options expected to vest. In addition, where there are changes to the terms of any agreements, the fair value is
reassessed at that time. The movement in cumulative expense is recognised in the profit and loss, with a
corresponding entry to the share-based payment reserve.
On 17 September 2014, the Company introduced a Performance Share Plan (“PSP”) for the Executive Directors
and other key senior managers. The awards at the nominal value of the shares, but the exercise of which is subject
to certain performance conditions.
Incentive Shares
The Incentive Shares do not carry any voting or dividend rights and are not transferable. The amounts subscribed
for the Incentive Shares have been recognised as a current liability on the Statement of Financial Position as they
become repayable if the Executive Directors leave office.
2.
PROFIT FOR THE YEAR
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company is not
presented as part of these financial statements. The parent Company's loss for the financial year was $4,270k
(2018: profit of $831k).
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Enteq Upstream Plc
3.
TANGIBLE FIXED ASSETS
Cost:
As at 1 April 2018 and 31 March 2019
Depreciation:
As at 1 April 2018
Charge for the year
As at 31 March 2019
Net Book Value:
As at 1 April 2018
As at 31 March 2019
4.
INVESTMENTS
Cost
As at 1 April 2018 and 31 March 2019
Impairment
As at 1 April 2018 and 31 March 2019
Net book value
As at 1 April 2018 and 31 March 2019
Computer
equipment
$000’s
Office
equipment
$000’s
Total
$000’s
10
10
-
10
-
-
5
5
-
5
-
-
15
15
-
15
-
-
Shares in
Group
undertakings
$000’s
23,285
23,285
-
The Group or the Company's investments at the Statement of Financial Position date in the share capital of companies
represent the following:
Name
Enteq Upstream USA Inc.
Country of incorporation Nature of business
United States of America Manufacturer of down hole drilling
Jeteq Drilling Limited
England & Wales
equipment
Dormant
Holding
100%
100%
5.
DEBTORS
Amounts falling due within one year:
Amounts owed by Group undertakings
Prepayments
Other debtors
31 March 2019
$000’s
31 March 2018
$000’s
13,936
41
142
14,119
14,272
39
97
14,408
The management believe that the carrying value is an approximation of fair value. The 31 March 2019 balance includes
a provision of $5,000k to cover any issues regarding recoverability (31 March 2018: $nil).
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Enteq Upstream Plc
6.
CASH AT BANK AND IN HAND
Denominated in USD
Denominated in GBP
7.
INTER-COMPANY LOAN NOTES
Receivable from Enteq Upstream USA Inc:
As at 1 April
Provision
As at 31 March
8.
CREDITORS
Accrued expenses
Trade payables
Social security and other taxes
Other creditors
31 March 2019
$000’s
31 March 2018
$000’s
11,054
158
11,212
14,588
114
14,702
31 March 2019
$000’s
31 March 2018
$000’s
37,928
(29,336)
8,592
37,928
(29,336)
8,592
31 March 2019
$000’s
31 March 2018
$000’s
910
3
87
80
1,080
943
94
46
80
1,163
The management believe the carrying value is an approximation of the fair value. The average creditor days for
the period ending 31 March 2019 is 30 days (2018: 35 days).
9.
CALLED UP SHARE CAPITAL
Allotted, issued and fully paid ordinary shares of GBP 0.01 nominal value:
As at 1 April 2018
Issued during the year
Number
000’s
Share
Capital
$000’s
Share
Premium
$000’s
62,138
982
91,031
1,747
23
367
As at 1 March 2019
63,885
1,005
91,398
All shares issued carry the same voting rights.
10. RELATED PARTY DISCLOSURES
Details of directors’ remuneration and other transactions are set out on pages 17 to 20.
11. ULTIMATE CONTROLLING PARTY
There is no ultimate controlling party.
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