EQTEC plc
2019 Annual Report
Financial Year ended 31 December 2019
Registered Number: 462861
EQTEC plc Annual Report and Accounts 2019
Contents
Directors and Advisers
Chairman’s Statement
Chief Executive’s Report
Corporate Governance Statement
Directors’ Report
Financial Statements
Consolidated statement of profit or loss
Consolidated statement of other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Company statement of financial position
Company statement of changes in equity
Company statement of cash flows
Notes to the consolidated financial statements
Independent Auditors’ Report to the members of EQTEC plc
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EQTEC plc Annual Report and Accounts 2019
Directors and Advisers
Directors
Ian Pearson – Non-Executive Chairman
David Palumbo – Chief Executive Officer
Gerry Madden – Finance Director and Company Secretary
Dr. Yoel Aleman – Chief Technical Officer
Thomas Quigley – Non-Executive Director
Registered Office
Building 1000, City Gate, Mahon, Cork T12 W7CV, Ireland
Nominated Adviser
Strand Hanson Limited, 26 Mount Row, Mayfair, London W1K 3SQ, UK
Broker
SI Capital Limited, 46 Bridge Street, Godalming, Surrey GU7 1HL, UK
Legal Advisors
McEvoy Corporate Law, 22 Fitzwilliam Place, Dublin 2, D02 R802, Ireland
Auditor
Registrar
Fieldfisher LLP, Riverbank House, 2 Swan Lane, London EC4R 3TT, UK
Grant Thornton, 13-18 City Quay, Dublin 2, D02 ED70, Ireland
Link Asset Services, 2 Grand Canal Square, Dublin 2, D02 A342, Ireland
The Company is incorporated in Ireland registered number 462861
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EQTEC plc Annual Report and Accounts 2019
Chairman’s Statement
I am very pleased to introduce EQTEC Group’s Final Results for 2019.
As we all struggle to look beyond the uncertainty caused by the COVID-19 crisis it is especially important in my view to recognise that in any
‘new normal’ world there will be a growing need to reduce and eliminate waste and produce clean energy. We have already seen governments
developing national green economy plans and many are looking to strengthen these as a way of rebuilding growth in their countries. More will
undoubtedly do so as they look again towards delivering on the Paris Agreement and their carbon reduction commitments.
EQTEC’s purpose as a company – to help the world reduce waste and generate green energy – is about making a sustainable contribution to
delivering on this agenda while at the same time as a publicly quoted company delivering returns for our investors in this growing market.
The strengths of the Group particularly lie in its technology, employees and partnerships, and in its relatively low-risk business model. During
the year we worked hard to develop further capabilities in all these areas. We also spent important time as a board and executive team refining
the company’s strategy and its focus on key target markets or verticals, as David explains in his CEO report.
This is our second year of reporting since the acquisition of the business of Eqtec Iberia, its intellectual property and its world leading Advanced
Gasification Technology. We are a now a completely focused waste-to-value company, using our proven proprietary Advanced Gasification
Technology to generate safe, green energy from over 50 different kinds of feedstock such as municipal, agricultural and industrial waste,
biomass, and plastics.
We collaborate with waste operators, developers, technologists, Engineering, Procurement and Construction (EPC) contractors and capital
providers to build sustainable waste elimination and green energy infrastructure. Our revenue comes from licensing and selling our technology,
supplying gasification reactors and equipment, and engineering and design services using our unique expertise. We also expect to receive
equity returns from projects in which we invest. Our strategy is to create a collaborative ecosystem within the waste-to-value sector through
entering into strategic relationships whereby waste operators, developers, technologists, EPC contractors and capital providers collaborate to
build sustainable waste elimination and clean energy infrastructure projects.
We were recently proud to be awarded the Green Economy Mark by the London Stock Exchange, and believe we are a good investment
opportunity for impact investors who want to generate a measurable environmental impact alongside the potential for financial returns. We
want to encourage more long-term impact investors to help us to grow faster and do more to help eliminate waste and generate green energy.
Encouragingly, we saw demand for our Advanced Gasification Technology in a number of markets trending significantly upwards during the
year and the Group entered 2020 with its strongest pipeline of customer positions and prospects for a number of years as it continues to move
towards sustained profitability.
Supported by the rest of the board our executive management team responded early to the Governmental advice issued on COVID-19, switching
rapidly to working from home in Ireland, Spain and the UK so as to safeguard our people, their families and our other stakeholders. Our team
have adapted well. People have successfully transitioned to working from home, with little disruption. We have experienced no reduction in our
design and engineering capability, and the delivery of these services to any of our projects. We have utilised video conferencing in order to
mitigate the loss of physical presence with existing and potential new clients. I would like to thank everyone for their dedication and resilience
through this difficult period and also our clients for their support in facilitating the move to remote working.
In terms of the future outlook, while the overall impact from Covid-19 remains uncertain despite the current challenging circumstances, we
appear to be maintaining momentum following an increase in commercial enquires and the addition of strategic partnerships in our core
geographies. We are continuing to advance our commercial pipeline in the US, and more recently in Greece, as well as advancing discussions
with parties that have expressed interest in EQTEC becoming their advanced gasification technology partner.
The Group has a strong management team in place and has consistently demonstrated that it can adapt and respond quickly to changing
financial and market conditions. The Board remains confident in its strategy and believes that the Group is well positioned to benefit from the
growth of the global waste to value market.
Ian Pearson
Non-Executive Chairman
12 June 2020
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EQTEC plc Annual Report and Accounts 2019
Chief Executive’s Report
This is my first report as Chief Executive, having been appointed in September 2019. I firmly believe in the potential of the Group's unique and
highly compelling Advance Gasification Technology and the ability of a very experienced team of people to ensure that the opportunity from
its portfolio of projects will be maximised.
Since my appointment my focus has been on establishing a strong foundation for growth, focusing on increasing sales from a lean organisation,
continuing to optimise the capital structure of the Company and establishing new funding structures for project finance.
Our technology and technical capabilities are unquestionable, we have a world class technology that it is proven and executed at commercial
scale successfully. We believe that this sets us apart from any competitors within our niche market. Building from this, our main goal from the
moment I joined as CEO, was to prove to our partners and to the market that we could attract project funders willing to finance our project
pipeline. Reaching financial close in our first project in the USA, North Fork, was a significant milestone for us. The next phase of our journey is
to prove the scalability of our business model by identifying more strategic partners whilst taking a portfolio approach. This would enable us to
attract more established project funders that in turn, should reduce the cost of capital for a project and the timing required to reach financial
close.
The Chairman has explained how we seek to create a collaborative ecosystem within the waste-to-value sector through entering into strategic
relationships. We have already entered into a number of key strategic partnerships with leading partners, including Phoenix Energy, COBRA and
more recently ewerGy the German EPC Group. We also strengthened our existing development, testing and research relationships with the
University of Lorraine in France and the University of Extremadura in Spain. We have a number of further strategic collaborations under
consideration. This collaborative approach is already presenting new opportunities to the Group which we believe will continue to expedite our
growth strategy.
I am particularly pleased with the progress being made in our three key verticals, in the US, the UK and in Europe and we are focused on building
on this progress to become an internationally recognised technology partner for Advanced Gasification across the Globe. Our focus is on:
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Recovery of clean energy from biomass: Focused on biomass energy with projects in the 2 to 5MW scale, particularly in the USA and
Europe. We are also exploring the opportunity to licence our technology in South East Asia, following referrals from INNIO Jenbacher,
one of our key technology partners.
Recovery of clean energy from waste streams in agri-food and industrial sectors: Focused on energy recovery for distributed industrial
energy transition applications, typically in the 2 to 10MW project scale, particularly in the Mediterranean area.
Elimination of Municipal Solid Waste ("MSW") and Refuse Derived Fuel ("RDF"): Focused on projects typically in the 5 to 25MW range,
particularly in the UK and Ireland.
The Group’s strategy is to build a leading position in its chosen markets. Our approach has been to tailor the design of our Advanced Gasification
Technology closely on customer requirements and which we feel gives us a commercial and technical edge. Development work is focussed on
areas where it is believed that there is the potential for us to be the reference technology partner and present a compelling value proposition
to the client.
We continue to build on our growth strategy focusing on maximising the opportunities that we expect to provide a stable base of regular
recurring and predictable revenues and profits. We strive for operational excellence so as to achieve a high level of new contract awards and
keep our existing clients happy. We have broadened our horizons to achieve scale and geographical coverage.
In our current scale-to-growth phase we believe that focus is the key. This could be a challenge for a company with the in-house technical
capabilities and desire we have to constantly innovate with breakthrough technologies to apply in a fast-changing world. We have focused the
business in targeted sectors in order to develop a profitable and cash-generative business that is understood by all stakeholders. We have no
doubt that each of these markets will grow unquestionably over the next few years based on the increasing drive for improved air quality
worldwide, the growth of renewables in the energy mix and the need to decarbonise industrial processes.
We rest assured that once we have proven scalability in these niche sectors, we will have both the financial resilience and growth platform for
EQTEC to be particularly positioned to continue to innovate and capture new segments of each market.
Review of Operations
EQTEC is the partner of choice for certain waste operators, EPC contractors and Project Developers looking to eliminate waste in a sustainable
profitable manner and produce clean electricity, heat and biofuels.
We provide our world leading Advance Gasification Technology and the technical, operational and development capabilities to make projects
happen. We collaborate with strong strategic partners.
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EQTEC plc Annual Report and Accounts 2019
Chief Executive’s Report – continued
This is a summary of the contracts and projects we are currently working on at the date of this report:
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Framework agreement signed with Phoenix Biomass Energy Inc. (“Phoenix”) to jointly develop biomass gasification power projects in
the US, with five projects already identified, including North Fork and NAPA
Acquire a 19.99% ownership of North Fork Community Power LLC (“NFCP”) which is developing a 2MW biomass project in North Fork,
California for a consideration of US$2.5 million satisfied by the supply of certain items of the existing equipment previously held at
EQTEC's Newry site
Equipment Sale and Services Contract signed with NFCP, with a sales value of €2.2 million to EQTEC, payable in stages according to a
schedule of certain agreed milestones. Achieved Financial Close and in January 2020 invoiced and received a first payment of €880,000.
Detailed engineering has since been completed on the project and a second payment of €770,000 was received in May 2020.
NAPA Project SPV relocated to an adjacent site to accommodate a larger 2MW capacity power plant, with planning having already been
resubmitted in July 2019. The client is still awaiting amendment of planning permits and construction and installation is intended to
start immediately after receipt of the permits.
Conditional MOU signed with COBRA Instalaciones Y Servicios and Scott Bros. Enterprises Limited to jointly develop the proposed
25MW Billingham Energy waste gasification and power plant. Subsequently agreed an extension to the MOU, and opened discussions
with potential co-developers and funders. EQTEC has instructed the work to provide a full quotation for the grid connection [paid the
initial deposit] and initiated technical due diligence with funders and insurance providers.
Completed c.€155,000 Transports Metropolitans de Barcelona ("TMB") maintenance contract and increased proactive business
development activities in this area, leading to a developing pipeline of potential new business for the Group, including further upgrade
and maintenance contracts in Spain.
Exclusivity Agreement signed for the proposed 1.18MW Biomasse31 Project in France.
Post year end
Entered into the MOU with German EPC company, ewerGy GmbH ("ewerGy") (which will operate in Greece via its local partner, Eco
Hellas SA), together with Greece based promoter and project developer, Agrigas Energy SA for the development of first advanced
gasification plant in Greece
Signed a Collaboration Framework Agreement (the "Agreement"), with ewerGy covering the key terms of the proposed cooperation for
the development of a portfolio of projects in Greece and the Balkan Region with 11 projects identified and already under review.
Awarded a contract for the upgrade of the existing syngas research and development facility at the University of Extremadura in
Badajoz, Spain, to testing of the production of biofuels from syngas using a Fisher-Tropsch process and unit.
Approval for RDF testing at the University of Lorraine plant in France. Discussions ongoing with a number of stakeholders to create a
consortium to carry out a testing programme of UK RDF at the plant.
Financial Review
Revenue in the financial year ended 31 December 2019 amounted to €1.7 million (2018: €2.2 million). The Group reported a loss for the financial
year of €3.6 million, a decrease on the prior year period loss of €8.2million for 2018. Losses before one off items and interest expensed were €2.6
million for the financial year.
As at 31 December 2019, net assets of the Group stood at €15.5 million (2018: €11.9 million) and the Group had net debt of €2.3 million (2018:
€5.5 million) including cash balances of €0.5 million (2018: €0.5 million).
As announced on 28 June 2019, the Group has agreed to restructure €3.16 million of its existing debt through a debt for equity swap, resulting
in a significant reduction in the Group’s debt obligations. Following the debt for equity swap, the debt plus accrued interest, was payable in full,
at the end of July 2020.
Two equity fundraises were successfully completed in July and December amounting in total to £1.8 million (€2 million) from new and existing
shareholders together with the issue of new ordinary shares to certain service providers at an agreed price of twice the equity subscription price,
thereby strengthening the balance sheet.
The Company identified a series of cash cost reduction initiatives, including cash salary reductions currently agreed through to July 2020, which
have been implemented. In order to preserve cash and further align senior managements’ interests with shareholders the executive
management team in total agreed to take shares in lieu of 40% of their cash remuneration, until 30 June 2020. Non-Executive Chairman, Ian
Pearson, also agreed to a 40% reduction in fees whilst Non-Executive Director, Thomas Quigley, agreed to take shares in lieu of his entire cash
remuneration until 30 June 2020. None of these shares have yet been issued.
In December 2019 we completed our acquisition of a 19.99% equity interest in North Fork Community Power LLC for the development of a 2
MW biomass project in North Fork, California for a consideration of US$2.5million (€2.2 million) which was satisfied by the supply of certain items
of existing equipment held at EQTEC's Newry site.
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EQTEC plc Annual Report and Accounts 2019
Chief Executive’s Report – continued
Subsequent to the year-end we also established an Employee Incentive Warrant Pool for all employees which will be used to
incentivise performance and align the interests of employees with those of shareholders
In January 2020 we completed the sale of certain equipment to Movialsa for €0.3 million, and agreed a collaboration to use its 6MW plant in
Spain, which utilises the Group’s proprietary gasification technology, as a showcase for the Group’s technology, with over 111,000 hours of
expected operational availability successfully achieved and externally audited.
In the last month we negotiated a reprofiling of existing loans plus interest of €2.7 million as at 1 June 2020 which were due to mature on 31
July 2020 resulting in the extension of the maturity dates to 30 June 2021.
Future plans & Outlook
We have a high degree of earnings visibility for FY20 on contracted or near contracted sales of technology with FY20 results expected to be
significantly weighted to second half of the financial year.
Global demand for Group’s technology and services remains strong. Early indications show demand increasing as more and more countries and
companies seek sustainable Green solutions to waste elimination and energy issues.
The Group continues to advance discussions with regard to a number of ongoing business development initiatives, including:
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Entry into the market in Greece through a strategic partnership with ewerGy for EPC, O&M and business development and exclusivity
in relation to its existing pipeline in the agricultural waste sector.
Project partnerships with potential investors in the USA whilst evaluating feasibility of additional two projects with Phoenix Energy.
Collaborations with developers in the UK and Ireland in relation to RDF, anaerobic digestion and waste gasification projects.
Collaboration with a large owner and operator of biomass energy, district heating and energy from waste infrastructure, to develop
a portfolio of projects together.
It is apparent to the Board that COVID-19, with the resultant restrictive social and travel practices and associated economic impact will have
some inevitable impact on the operations of the Group. It is too early at this stage to be confident in trying to make any accurate overall forecasts
of the impact that COVID-19 will have, for example, on employees, customers or growth. However, EQTEC is a strong and resilient business with
a proven technology and relatively low-risk business model, providing a good foundation to withstand the challenges of the COVID-19
pandemic. We continue to implement a number of measures to reduce the Group’s cash outflows and assist in managing its cash-flow in this
period.
The focus of the Board will be on building on the foundation for growth, focusing on increasing sales in the context of a leaner organisation and
continuing to solidify the capital structure of the Group. We are also constantly assessing funding requirements including various
options/opportunities to establish new funding structures for project finance and attracting the funding to continue with our activities and our
planned development programme.
We look forward to keeping shareholders updated on key developments going forward.
David Palumbo
Chief Executive Officer
12 June 2020
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EQTEC plc Annual Report and Accounts 2019
Corporate Governance Statement
The Board is committed to the highest standards of corporate governance and considers the Quoted Companies Alliance’s Corporate
Governance Code (“the QCA Code”) to be the most appropriate framework to adopt. The Directors have adopted the QCA Code and the
following sections explain how this is done. Where the Board adopts a different path from the QCA Principles to the extent they consider it
appropriate having regard to the size and resources of the Company, an explanation is provided.
In his capacity as independent Chairman, Ian Pearson has responsibility for ensuring that the Group has appropriate corporate governance
standards in place and the 10 principles in the QCA Code are applied within the Group as a whole.
Strategy and Business Model
The Company is focused on delivering shareholder value over the medium to long term by exploiting its proprietary advanced gasification
technology in sustainable waste to energy plants in the UK, the US and Europe.
We are a waste-to-value company, using our proven proprietary Advanced Gasification Technology to generate safe, green energy from over
50 different kinds of feedstock such as municipal, agricultural and industrial waste, biomass, and plastics. We collaborate with waste operators,
developers, technologists, EPC contractors and capital providers to build sustainable waste elimination and green energy infrastructure.
Our revenue comes from licensing and selling our technology, supplying gasification reactors and equipment, and engineering and design
services using our unique expertise. We also expect to receive equity returns from projects in which we invest.
We are quoted on AIM on London’s stock exchange, bear the Green Economy Mark awarded by the London Stock Exchange, and trade as
LSE:EQT. EQTEC is an ideal investment for Impact Investors who want to generate a measurable environmental impact alongside potential
financial returns.
The Board is focused on growing the business organically and where synergistic opportunities arise through acquisition.
The identification and management of risk in relation to the achievement of our strategic objectives and business model is dealt with in
“Managing and mitigating risk” below.
Engaging and Communicating with Shareholders
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. Institutional shareholders
and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are
encouraged to attend the Company’s Annual General Meeting. Investors also have access to current information on the Company though its
website, www.eqtecplc.com and via David Palumbo, CEO, who is available to answer investor relations enquiries.
Stakeholder Responsibilities
The Board recognises that the long-term success of the Group is reliant upon the efforts of the employees of the Group, its contractors and
suppliers and on the Group’s relationships with these and other stakeholders such as customers and regulators. The Board has put in place a
range of processes and systems to ensure that there is close Board oversight and contact with its key resources and relationships.
It is the Company’s intention that, over the coming year, all employees of the Group participate in a structured Group-wide annual assessment
process. This is designed to ensure there is an open and confidential dialogue with each person in the Group to help ensure successful two-way
communication with agreement on goals, targets and aspirations of the employee and the Group. These feedback processes will help to ensure
that the Group can respond to new issues and opportunities that arise to further the success of employees and the Group. In addition, the Board
ensures that all key relationships with, for example, customers and suppliers are the responsibility of, or are closely supervised by, one of the
directors.
Our technology and services have a positive impact on society and the environment. Through taking waste which cannot be recycled and
turning it into energy we reduce the need for landfill and contribute towards reducing carbon emissions and meeting renewable energy targets.
We are passionate about using our technology to deliver sustainable outcomes for the communities who are customers of the power plants
that use our technology, and to always deliver to the highest environmental standards.
Managing and mitigating risk
Effective risk management is critical to the achievement of our strategic objectives. Controls are integrated into all levels of our business. As a
board we continually assess our exposure to risk and seek to mitigate risks wherever possible.
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EQTEC plc Annual Report and Accounts 2019
The directors have established procedures for the purpose of providing a system of internal control. In addition, there are a range of Group
policies that are reviewed at least annually by the Board. These group policies cover matters such as share dealing and insider trading legislation.
The Board currently takes the view that an internal audit function is not considered necessary or practical due to the size of the Group and the
close day to day control exercised by the executive directors. However, the Board will continue to monitor the need for an internal audit function.
Identified principal risks to the achievement of our strategic business objectives are outlined below, together with their potential impact and
the mitigation measures in place. The Board believe these risks to be currently the most significant with the potential to impact our strategy, our
financial and operational performance and ultimately, our reputation. The board reviews its risk register, identifying new risks and updating on
an ongoing basis.
Key areas for on-going risk management are:
Winning and delivering contracts
Mitigation
Central to achieving our strategy is winning and successfully delivering our contract
portfolio. Our continuing financial health relies on our ability to successfully tender,
mobilise, operate, and manage such contracts. Winning new and retaining existing
contracts continues to be critical for the future success of our business.
Reputational risk
Maintaining a strong reputation is vital to our success as a business. Significant impact
to our reputation could be caused by an incident involving major harm to one of our
people or clients/partners, inadequate financial control processes, or failure to comply
with regulatory requirements. Impact of this type would potentially result in financial
penalties, losses of key contracts, an inability to win new business and challenges in
retaining key staff and recruiting new staff.
Attracting and Retaining Skilled People
Attracting and retaining the best skilled people at all levels of the business is critical.
This is particularly the case in ensuring we have access to a diverse range of views and
experience, and in attracting specific expertise at both managerial and operational
levels where the market may be highly competitive. Failure to attract new talent, or to
develop and retain our existing employees, could impact our ability to achieve our
strategic growth objectives. As we continue to grow and diversify into new areas, this
risk will continue to be a focus for the Board.
System process or control failure
We produce highly sophisticated and specialised engineering and design services
leading to products that incorporate or use leading-edge technology, including
hardware and software. Many of our products and services involve complex energy
infrastructure projects and accordingly the impact of a catastrophic product failure or
similar event could be significant. Any inability to deliver on time, to budget and to the
right quality could result in financial loss or reputational damage.
Access to grow the business and cash generation
Our financial strength makes us an attractive partner to our customers and suppliers.
Our ability to grow our business organically and by acquisition will be impacted if our
financial performance deteriorates, limiting our ability to access diverse sources of
funding on competitive terms. This may cause an increase in the cost of borrowing or
cash flow issues which could, in turn, further affect our financial performance. As a
people business, our staff costs remain our most significant area of expenditure. Our
ability to pay our people and suppliers regularly and at specific times relies not only on
funding being available but also upon effective cash conversion.
Reliance on material counterparties
We depend on a number of significant counterparties such as EPC contractors,
insurers, banks, clients, and suppliers to maintain our business activities. The failure of
a key business partner, supplier, subcontractor, financer or other provider could
materially affect the operational and financial effectiveness of our business and our
ability to trade. Ensuring ongoing relationships with our material counterparties will
underpin the Group’s ability to meet its strategic objectives.
Political and Regulatory Risk
Our technology can be deployed in a wide number of international markets and as
such we are exposed to different political and regulatory regimes with different risk
profiles.
Our tender, mobilisation and contract management processes operate under strict
delegated authorities and are subject to rigorous executive management oversight
and approval. These contracts are supported by teams of experienced tender,
mobilisation and operational delivery specialists to mitigate the risk of failure at any
stage. Ongoing contract assurance occurs together with regular dialogue to ensure
service delivery is consistent with customer expectations.
Mitigation
Strong corporate governance and dedicated senior management remain the key
elements of effective reputational management. Senior management provides a
model of best practice and guidance to ensure our values and expected behaviours
are clear and understood by everyone. As our business continues to grow and develop
we will remain strongly focused on protecting the strength of our reputation through
effective governance and leadership, and through cultivating open and transparent
relationships with all stakeholders.
Mitigation
Our business model has created a pipeline of opportunities for staff at every level of
the business. This will continue to be the case as the Group develops. Additionally, to
ensure a talent pool is identified, developed and ready for succession if needed, a
succession plan will be put in place over the coming year for key management. Our
focus on competency at all levels of the business continues to ensure that we develop
our people and enable them to successfully manage the changing profile of our
business. Incentive programmes are also in place to ensure key individuals are
retained.
Mitigation
The basis of our governance framework is provided by our core policies, which are
subject to continual review and enhancement to manage our growing and
diversifying business requirements in line with sound governance practice. We have
built extensive operational processes to ensure that our product design, engineering,
and other services we provide meet the most rigorous quality standards. Our internal
control procedures continue to be reviewed formally. We are in the process of
introducing interdependent operational and finance systems to achieve operational
efficiencies and transparent reporting.
Mitigation
We have developed and continue to enhance financial control procedures to oversee
and monitor financial performance and cash conversion. These include daily
monitoring of bank balances, weekly cash flow reporting, and regular financial
performance and balance sheet reviews, which include detailed working capital
reviews and forecasts. We believe we have strong banking, debt finance and equity
relationships, and appropriate levels of gearing for our business.
Mitigation
We have developed, through strategic partnerships, relationships with a number of
EPC contractors and also a pool of suppliers and providers to ensure limited
dependency on any one provider, in turn limiting the impact of any potential failure.
The Board reviews and monitors material counterparty risk and ensures that
concentration levels are kept to a minimum.
Mitigation
We monitor and evaluate political and regulatory risk at board level. Decisions
on the balance of our project pipeline are taken to ensure we are not over-
reliant on one particular market over time.
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EQTEC plc Annual Report and Accounts 2019
Corporate Governance Statement – continued
Board of Directors
The Board comprises three fulltime executive directors: the CEO David Palumbo, the FD Gerry Madden, and the CTO Dr Yoel Aleman; and two
independent non-executive directors: Ian Pearson, who acts as the Chairman, and Tom Quigley. Each non-executive director devotes as much
time as is required to carry out the roles and responsibilities that the director has agreed to take on.
The biographies of the Directors, who we consider to be the key managers of the business, are set out below:
Ian Pearson, Non-Executive Chairman
Ian was for five years the chairman of AIM listed OVCT2, a company which invested in a variety of renewal energy companies and was successfully
merged into Apollo VCT plc last year. He is currently a Non-Executive Director of Thames Water Utilities Limited, the UK’s biggest water company
with 15 million customers, and is Chairman of CODE Investing Ltd. He is also a senior adviser to BAI Communications plc and has previously been
a member of the UK Advisory Board of the accountants, PwC. During a distinguished Ministerial career from 2001-10 Ian Pearson held a number
of positions, including Minister for Trade & Foreign Affairs, Minister of State for Climate Change and the Environment, Minister for Science, and
Economic Secretary to the Treasury. He graduated from Balliol College, Oxford and has a Master’s degree and a Doctorate in Industrial and
Business Studies from the University of Warwick.
David Palumbo, Chief Executive Officer
David is an experienced entrepreneur with 20 years’ experience in private equity, business development and asset management. Since 2006,
David has founded and co-founded a number of companies in various industries such as renewable energy, wealth management, property and
real estate. David is the Founding and Managing Partner of Origen Capital LLP, a private investment firm representing family offices and private
consortia in Europe, CIS and Latin America. He has extensive experience in attracting funding for companies from seed stage, all the way to IPO
in exchanges in London, Frankfurt, Madrid and Paris. He has a BSc and a MSc in Electrical Engineering.
Gerry Madden, Finance Director
Gerry joined the Group in May 2007 as Finance Director and was Chief Executive from 2011 to 2017. With over 30 years of experience in Corporate
Finance and Business Strategy he has also built up extensive experience in renewable energy project development and the Green Economy. He
originally worked with international accountants KPMG and also founded and led an Advisory Practice partnering with Irish and International
businesses. He has also acted as a Non-Executive director for companies in the technology, healthcare, retail and renewable energy sectors. He
is a Fellow of the Institute of Chartered Accountants, a graduate of University College Cork and a Member of the Institute of Directors.
Yoel Aleman, Chief Technology Officer
Yoel is a highly experienced chemical engineer with over 20 years of experience in Biomass and Municipal Solid Waste Gasification. Since joining
EQTEC Iberia in 2010, he has designed, built, commissioned and operated gasification facilities on pilot plant and commercial scale, and is a
renowned trouble-shooter of failed gasification installations. He is the author of three technology patents related to power generation via
advanced fluidized bed gasification technology. Holding a PhD in Chemical Engineering, he has been an Associated Professor of Research at
several Universities in Europe.
Thomas Quigley, Non-Executive Director
Tom Quigley has had an executive career spanning over 25 years, mainly at board level, as Managing Director, CFO and CIO. This included being
a Managing Director of Close Brothers Corporate Finance, a Managing Director and Head of the Retail, Hospitality and Leisure sector investment
banking at ING Barings, London, and a Director of Terra Firma Capital Partners. Tom originally qualified as a Chartered Accountant at Price
Waterhouse in London and has amassed considerable financial and management experience across multiple sectors. Through his executive and
non-executive positions, Tom has worked in real estate, financial services, healthcare and banking, and across a number of jurisdictions.
Executive and non-executive directors are subject to re-election intervals as prescribed in the Company’s Articles of Association. At each Annual
General Meeting one-third of the Directors who are subject to retirement by rotation shall retire from office. They can then offer themselves for
re-election. The letters of appointment of all directors are available for inspection at the Company’s registered office during normal business
hours.
The Executive Directors are employed under service contracts requiring three months’ notice by either party. The Non-Executive Directors and
the Chairman receive payments under appointment letters which are terminable by three months’ notice by either party.
The Board encourages the ownership of shares in the Company by Executive and Non-Executive Directors alike and in normal circumstances
does not expect Directors to undertake dealings of a short-term nature. The Board considers ownership of Company shares by Non-Executive
Directors as a positive alignment of their interest with shareholders. The Board will periodically review the shareholdings of the independent
Non-Executive Directors and will seek guidance from its advisors if, at any time, it is concerned that the shareholding of any independent Non-
Executive Director may, or could appear to, conflict with their duties as an independent Non-Executive Director of the Company or their
10
EQTEC plc Annual Report and Accounts 2019
Corporate Governance Statement – continued
independence itself. Directors’ emoluments, including Directors’ interest in share options over the Group’s share capital, are set out in the Annual
Report.
The Board meets at least eight times a year. It has established an Audit Committee and a Remuneration Committee. The Board has agreed that
appointments to the Board are made by the Board as a whole and so has decided a separate Nominations Committee is unnecessary at this
time.
Skills, Capabilities and Board Performance
The Board of Directors has a strong mix of financial, operational, renewable energy, waste infrastructure, regulatory and political experience.
The Board recognises that it currently has limited diversity and this will form a part of any future recruitment consideration if the Board concludes
that replacement or additional directors are required.
The Company currently has two independent non-executive directors, Ian Pearson and Tom Quigley. The Company is satisfied that the
Company’s Board composition is appropriate given the Company’s size and stage of development. The Board will keep this matter under regular
review and to the extent additional independence is felt to be required on the Board, it shall be sought.
Internal evaluation of the Board, the Committee and individual directors is seen as an important next step in the development of the board and
one that will be addressed during the coming year. The aim is that this will be undertaken on an annual basis in the form of peer appraisal,
questionnaires and discussions to determine the effectiveness and performance in various areas as well as the directors’ continued
independence.
Corporate Culture
The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Group as a whole and that this will
impact the performance of the Group. The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the
Group as a whole and the way that employees behave.
A large part of the Group’s activities is centred upon addressing customer and market needs. Therefore, the importance of sound ethical values
and behaviours is crucial to the ability of the Group to successfully achieve its corporate objectives. The Board places great importance on this
aspect of corporate life and seeks to ensure that this flows through all that the Group does. The Board assessment of the culture within the
Group at the present time is one where there is respect for all individuals, there is open dialogue within the Group, and there is a commitment
to provide the best service possible to all the Group’s customers.
The Company has adopted a code for directors’ and employees’ dealings in securities which is appropriate for a company whose securities are
traded on AIM and is in accordance with Rule 21 of the AIM rules and the Market Abuse Regulation.
Governance Structures and Processes
Authority for all aspects of the Group’s activities rests with the Board. The respective responsibilities of the Chairman and Chief Executive Officer
arise as a consequence of delegation by the Board. The Board has adopted two statements; the first sets out matters which are reserved to the
Board and the second establishes the policy on delegation of authority. The Chairman is responsible for the effectiveness of the Board, while
management of the Group’s business and primary contact with shareholders has been delegated by the Board to the Chief Executive Officer.
Non-Executive Directors
The Board has adopted guidelines for the appointment of non-executive directors which have been in place and which have been observed
throughout the year. These provide for the orderly and constructive succession and rotation of the Chairman and non-executive directors insofar
as both the Chairman and non-executive directors will be appointed for an initial term of three years and may, at the Board’s discretion believing
it to be in the best interests of the Company, be appointed for subsequent terms. The Chairman may serve as a non-executive director before
commencing a first term as Chairman.
In accordance with the Companies Act 2014 of Ireland, the Board complies with the following duties:
-
-
-
-
-
-
to act in good faith in what the director considers to be the interests of the company;
to act honestly and responsibly in relation to the conduct of the affairs of the company;
to act in accordance with the company’s constitution and exercise powers only for the purposes allowed by law;
not to use the company’s property, information or opportunities for the Director’s own or anyone else’s benefit;
not to agree to a restriction of the exercise of independent judgement;
to avoid any conflicts of interest;
11
EQTEC plc Annual Report and Accounts 2019
Corporate Governance Statement – continued
-
-
to exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person;
to have regard to the interests of the members of the company, in addition to the duty to have regard to the interests of the
company’s employees in general.
Company Secretary
At present the Finance Director also acts as the Company Secretary. The Company has plans in place to separate the role from an executive
director at the appropriate time.
Audit Committee
The Audit Committee comprises Tom Quigley (Chairman) and Ian Pearson. Meetings are also attended by the Finance Director as appropriate.
It meets as required and specifically to review the Interim Report and Annual Report, and to consider the suitability and monitor the
effectiveness of internal control processes. The Audit Committee also reviews the findings of the external auditor and reviews accounting
policies and material accounting judgements. The Audit Committee normally meets at least three times in each financial year and has
unrestricted access to the Group’s external auditor.
Remuneration Committee
The Remuneration Committee comprises Ian Pearson (Chairman) and Tom Quigley. The Remuneration Committee reviews the performance of
the Executive Directors and makes recommendations to the Board on matters relating to their remuneration and terms of service. The
Remuneration Committee also makes recommendations to the Board on proposals for the granting of share options and other equity incentives
pursuant to any employee share option scheme or equity incentive plans in operation from time to time. The Remuneration Committee meets
at least annually. In exercising this role, the Directors have regard to the recommendations put forward by the QCA Guidelines.
Attendance at Board and Committee meetings
2019
Board
Number of Meetings
Ian Pearson
Ian Price (to 16/9/19)
David Palumbo (from 28/8/19)
Gerry Madden
Yoel Aleman (from 28/8/19)
Tom Quigley
Oscar Leiva (to 28/6/19)
15
15
8
4
15
4
10
1
Audit
Committee
1
Remuneration
Committee
1
1
1
1
1
Irish Takeover Panel and Takeover Rules
The Company is subject to the Irish Takeover Panel and Takeover Rules and mandatory bid, compulsory acquisition and buy-out provisions will
apply.
On behalf of the Board
Ian Pearson
Chairman
Date: 12 June 2020
David Palumbo
Director
12
EQTEC plc Annual Report and Accounts 2019
Directors’ Report
The Directors present their annual report and the audited financial statements of the Company and its subsidiaries, collectively known as
‘the Group’ for the financial year ended 31 December 2019.
Principal Activities, Business Review and Future Developments
The Group is a waste-to-value group, which uses its proven proprietary Advanced Gasification Technology to generate safe, green energy
from over 50 different kinds of feedstock such as municipal, agricultural and industrial waste, biomass, and plastics. The Group
collaborates with waste operators, developers, technologists, EPC contractors and capital providers to build sustainable waste elimination
and green energy infrastructure.
Revenue comes from licensing and selling its technology, supplying gasification reactors and equipment, and engineering and design
services using its unique expertise. The Group also expects to receive equity returns from projects in which we invest.
A review of the Group’s business and future developments is contained in the Chairman’s Statement and the Chief Executive’s Report on
pages 4 to 7.
Results and Dividends
The results for the financial year are set out on page 18. No dividends have been proposed by the Directors in the current financial year
(2018: €Nil).
Principal Risks and Uncertainties
The Group has a risk management structure in place, which is designed to identify, manage and mitigate business risk. Risk assessment and
evaluation is an essential part of the Group’s internal control system.
Information about the financial risk management objectives and policies of the Group, along with exposure of the Group to credit risk,
liquidity risk and market risk, is disclosed in Note 5 of the notes to the consolidated financial statements.
The Group is exposed to a number of other risks and uncertainties. These break into certain important strategic and operational risks
which we describe below. Our risk framework operates at the business and functional levels and is designed to identify, evaluate and
mitigate risks within each of the risk categories. Our reactions to material future developments as well as our competitors' reactions to
those developments will affect our future results.
Strategic Risks
Strategic risk relates to the Company's future business plans and strategies, including the risks associated with the global macro-
environment in which we operate, strategic partnerships; intellectual property; and other risks, including the demand for our products
and services, competitive threats, the success of investments in our technology and other product and service innovations, and public
policy.
Global macro-environment
Our operations and the execution of our business plans and strategies are subject to the effects of global competition and geopolitical
risks. They are also affected by local economic environments, including low interest rates, inflation, recession, currency volatility, currency
controls and actual or anticipated default on sovereign debt. Political changes and trends such as populism, economic nationalism and
sentiment toward multinational companies and resulting changes to trade, tax or other laws and policies may be disruptive, and can
interfere with our global operating model, our supply chain, our customers and all of our activities in a particular location. While some
global economic and political risks can be hedged using derivatives or other financial instruments and some are insurable, such attempts
to mitigate these risks are costly and not always successful.
Strategic partnerships
The success of our business depends on achieving our strategic objectives, including through entering into strategic partnerships with
significant construction entities and groups where we may have a lesser degree of control over the business operations, which may
expose us to additional operational, financial, legal or compliance risks.
Intellectual property
Our intellectual property portfolio may not prevent competitors from independently developing products and services similar to or
duplicative to ours, and the value of our intellectual property may be negatively impacted by external dependencies. Our patents and
other intellectual property may not prevent competitors from independently developing or selling products and services similar to or
duplicative of ours, and there can be no assurance that the resources invested by us to protect our intellectual property will be sufficient
or that our intellectual property portfolio will adequately deter misappropriation or improper use of our technology.
13
EQTEC plc Annual Report and Accounts 2019
Directors’ Report – continued
Principal Risks and Uncertainties - continued
If we are not able to protect our intellectual property, the value of our brand and other intangible assets may be diminished, and our
business may be adversely affected.
Impact of COVID-19
Since 31 December 2019, the spread of COVID-19 has severely impacted many local economies around the globe. In many countries,
businesses are being forced to cease or limit operations for long or indefinite periods of time. Measures taken to contain the spread of
the virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions
to businesses worldwide, resulting in an economic slowdown. Global stock markets have also experienced great volatility and a significant
weakening. Governments and central banks have responded with monetary and fiscal interventions to stabilise economic conditions.
We are closely monitoring the coronavirus situation, are following Government guidelines in all jurisdictions in which we operate and are
sharing these with colleagues. We are prepared to take action to deal with this situation as it changes. We have considered the potential
impact of COVID-19 in our scenario analysis.
Brexit
The short and long-term impact of Brexit continues to be unclear in respect of the degree of its impact on future economic growth in the
UK market or on any additional tariffs that may apply to UK businesses trading with the European Union if the trade negotiations during
the transition period do not result in an agreed way forward. The Group monitors this position and adjusts its forward plans where
appropriate particularly in relation to its supply chain and working capital requirements. EQTEC is well placed, with operations in Ireland,
the UK and Spain, to mitigate the impact of any Brexit related decisions on the Group’s performance.
Operational Risks
Operational risk relates to risks arising from systems, processes, people and external events that affect the operation of our businesses. It
includes product life cycle and execution; product safety and performance; information management and data protection and security,
including cybersecurity; supply chain and business disruption; and other risks, including human resources and reputation.
We may face operational challenges that could have a material adverse effect on our business, reputation, financial position and results
of operations, and we are dependent on the maintenance of existing product lines, market acceptance of new product and service
introductions and product and service innovations for continued revenue and earnings growth.
We produce highly sophisticated products and provide specialised services for both our and third-party products that incorporate or use
leading-edge technology, including both hardware and software. Many of our products and services involve complex industrial
machinery or infrastructure projects, such as waste to energy plants that use our gasification technology, and accordingly the impact of
a catastrophic product failure or similar event could be significant. While we have built extensive operational processes to ensure that
our product design, manufacture and servicing, and other services that we provide, meet the most rigorous quality standards, there can
be no assurance that we or our customers or other third parties will not experience operational process failures or other problems that
could result in potential product, safety, regulatory or environmental risks. Despite the existence of crisis management or business
continuity plans, operational failures or quality issues, including as a result of organisational changes, attrition or labour relations, could
have a material adverse effect on our business, reputation, financial position and results of operations. For a number of limited projects
where we take on the full scope of engineering, procurement, construction or other services, the potential risk is greater that operational,
quality or other issues at particular projects could adversely affect the Group’s results of operations.
The Group invests capital in developing and expanding its pipeline of waste to energy projects. The nature of the Group’s business model
means that the sales and project pipeline depend upon counterparties commissioning and financing major projects, the timing of which
is subject to many uncertainties and is not under the Group’s control. This implies that the timing of funds generated from projects can
be difficult to predict and could adversely affect the Group’s results of operations.
Supply chain
Significant raw material shortages, supplier capacity constraints, supplier production disruptions, supplier quality and sourcing issues or
price increases could increase our operating costs and adversely impact the competitive positions of our products. Our reliance on third-
party suppliers, contract manufacturers and service providers, and commodity markets to secure raw materials, parts, components and
sub-systems used in our products exposes us to volatility in the prices and availability of these materials, parts, components, systems and
services. A disruption in deliveries from our third-party suppliers, contract manufacturers or service providers, capacity constraints,
production disruptions, price increases, or decreased availability of raw materials or commodities, including as a result of catastrophic
events, could have an adverse effect on our ability to meet our commitments to customers or increase our operating costs. Quality,
capability and sourcing issues experienced by third-party providers can also adversely affect our costs, margin rates and the quality and
effectiveness of our products and services and result in liability and reputational harm.
14
EQTEC plc Annual Report and Accounts 2019
Directors’ Report - continued
Principal Risks and Uncertainties - continued
Liquidity
The cash requirements of the Group are forecast by the Board annually in advance and reviewed monthly by management, enabling the
Group’s cash requirements to be anticipated. The cash forecast includes assumptions with respect to working capital, development spend
and the timing of planning consents and financial close of projects. Significant delays in these expected timings may lead to a requirement
for additional cash and impinge on going concern.
Going Concern
The Group incurred a loss of €3,561,289 (2018: €8,209,679) during the financial year ended 31 December 2019 and had net current
liabilities of €1,953,659 (2018: €2,659,716) and net assets of €15,466,948 (31 December 2018: €11,870,707) at 31 December 2019.
The Group continues to invest capital in developing and expanding its pipeline of waste to energy projects. The nature of the Group’s
business model means that the sales and project pipeline depend upon counterparties commissioning and financing major projects, the
timing of which is subject to many uncertainties and is not under the Group’s control. This implies that the timing of funds generated
from projects can be difficult to predict.
Since 31 December 2019, the spread of COVID-19 has severely impacted many local economies around the globe. In many countries,
businesses are being forced to cease or limit operations for long or indefinite periods of time. Measures taken to contain the spread of
the virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions
to businesses worldwide, resulting in an economic slowdown. Global stock markets have also experienced great volatility and a significant
weakening. Governments and central banks have responded with monetary and fiscal interventions to stabilise economic conditions.
The degree of uncertainty associated with the outcome of the COVID-19 crisis increases significantly the further into the future forecasting
is undertaken. The nature and condition of the Group and the degree to which it is affected by external factors affect the judgement
regarding the outcome of the COVID-19 crisis. Any judgement about the future is based on information at the time at which the
judgement is made. Subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time
they were made. Management will continually assess the information available at the time of publication.
The directors had carried out an evaluation of financial forecasts, sensitised to reflect a rational judgement of the level of inherent risk.
The forecasts which Management have prepared covering the next 12 months include certain assumptions with regard to required future
funding from third parties, such as drawdown of the available Altair loan facility, the costs of business development, overheads and the
timing and amount of any funds generated from sales of the Groups technology. The forecasts indicate that during this period the Group
will have funds to continue with its activities and its planned development program.
For these reasons, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements. The
financial statements do not include any adjustments that would result if the Group was unable to continue as a going concern.
Directors
The following Directors held office during the financial year and to the date of this report:
Gerry Madden
Ian Price (resigned 16 September 2019)
Oscar Leiva (resigned 28 June 2019)
Yoel Aleman (appointed 28 August 2019)
Ian Pearson
Thomas Quigley
David Palumbo (appointed 28 August 2019)
Directors’ and Secretary’s Interests in Shares
The Directors and secretary of EQTEC plc who held office at 31 December 2019 had the following interests in the Ordinary Shares of the Company:
Ian Pearson
David Palumbo
Gerry Madden
Yoel Aleman
Thomas Quigley
At 31 December 2019
537,634
204,545
1,386,817
67,310,508
15,345,063
At 31 December 2018 (or date of
appointment if later)
537,634
204,545
1,386,817
67,310,508
193,548
Gerry Madden had an interest in 14,926,161 “A” Ordinary Shares and 817,140 Deferred B Ordinary Shares at the beginning and end of the
financial year. The holders of the A and Deferred B Ordinary Shares are not entitled to participate in the profits or assets of the Company
and are not entitled to receive notice, attend, speak and vote at general meetings of the Company.
15
EQTEC plc Annual Report and Accounts 2019
Directors’ Report - continued
The directors and secretary who held office at 31 December 2019 did not have any interests in the share capital of any of the subsidiaries
of the Company.
Remuneration Committee Report
The Group’s policy on senior executive remuneration is designed to attract and retain people of the highest calibre who can bring their
experience and independent views to the policy, strategic decisions and governance of the Group.
In setting remuneration levels, the Remuneration Committee takes into consideration the remuneration practices of other companies of
similar size and scope. A key philosophy is that staff must be properly rewarded and motivated to perform in the best interests of the
shareholders. Details of Directors’ remuneration are included in Note 32 of the notes to the consolidated financial statements.
Accounting Records
The Directors believe that they have complied with the requirements of Sections 281 to 285 of the Companies Act 2014 with regard to
the keeping of accounting records by employing persons with appropriate expertise and by providing adequate resources to the
financial function. The accounting records are held at the Company's business address at Building 1000, City Gate, Mahon, Cork T12
W7CV, Ireland.
Important Events since the year end
Details of events occurring since 31 December 2019 which impact on the Group are included in Note 33 of the notes to the consolidated
financial statements.
Disclosure of information to auditors
Each of the persons who are Directors at the time when this Directors' report is approved has confirmed that:
•
•
so far as that Director is aware, there is no relevant audit information of which the Company's auditors are unaware, and
that Director has taken all the steps that ought to have been taken as a Director in order to be aware of any relevant audit
information and to establish that the Company's auditors are aware of that information.
Directors’ compliance statement
To ensure that the Company achieved material compliance with its relevant obligations, the Directors confirm that they have:
•
•
•
drawn up a compliance policy statement setting out the Company's policies respecting compliance by the Company with its
relevant obligations.
put in place appropriate arrangements and structures that are designed to secure material compliance with the Company's
relevant obligations.
conduct a review, during the financial year, of the arrangements and structures, referred to above.
Statement of directors’ responsibilities
The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable laws and
regulations and the AIM Rules for Companies.
Irish company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state
of affairs for the Group and the Company. Under that law the Directors have elected to prepare the financial statements in accordance
with International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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 assets, liabilities and financial position
of the Group and the Company as at the financial year end date and of the profit or loss of the Company for the financial year and
otherwise comply with the Companies Act 2014.
In preparing these financial statements, the Directors are required to:
•
•
•
•
select suitable accounting policies and then apply them consistently;
make judgments and accounting estimates that are reasonable and prudent;
state whether the financial statements have been prepared in accordance with applicable accounting standards, identify those
standards, and note the effect and the reasons for any material departure from those standards; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for ensuring that the Group and the Company keeps or causes to be kept adequate accounting records
which correctly explain and record the transactions of the Group and the Company, enable at all times the assets, liabilities, financial
position and profit or loss of the Group and the Company to be determined with reasonable accuracy, enable them to ensure that the
16
EQTEC plc Annual Report and Accounts 2019
Directors’ Report - continued
financial statements and Directors’ Report comply with the Companies Act 2014 and enable the financial statements to be audited. They
are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities. Legislation in Ireland governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Auditors
The auditors, Grant Thornton, Chartered Accountants and Statutory Audit Firm, continue in office in accordance with Section 383(2) of the
Companies Act 2014.
On behalf of the Board
Ian Pearson
Chairman
Date 12 June 2020
David Palumbo
Director
17
EQTEC plc Annual Report and Accounts 2019
Consolidated statement of profit or loss
for the financial year ended 31 December 2019
Revenue
Cost of sales
Gross profit/(loss)
Operating income/(expenses)
Administrative expenses
Other income
Reversal of impairment/(Impairment) of property, plant
and equipment and intangible assets
Impairment of inventories
Impairment of goodwill
Other gains/(losses)
Foreign currency losses
Operating loss
Finance costs
Loss before taxation
Income tax
Notes
8
9
10
11
18
23
19
12
13
15
16
2019
€
1,686,312
(1,598,250)
88,062
(2,677,995)
195,152
94,985
(98,851)
-
128,235
(187,249)
(2,457,661)
(1,125,312)
(3,582,973)
-
Loss for the financial year from continuing operations
Profit for the financial year from discontinued operations
31
(3,582,973)
21,684
2018
€
2,175,687
(2,253,389)
(77,702)
(2,762,864)
142,325
(2,121,637)
-
(1,427,038)
(772,046)
(14,813)
(7,033,775)
(1,212,662)
(8,246,437)
-
(8,246,437)
36,758
LOSS FOR THE FINANCIAL YEAR
(3,561,289)
(8,209,679)
Loss attributable to:
Owners of the company
Non-controlling interest
Basic loss per share:
From continuing operations
From continuing and discontinued operations
Diluted loss per share:
From continuing operations
From continuing and discontinued operations
17
17
17
17
The notes on pages 28 to 66 form part of these financial statements.
(3,764,519)
203,230
(6,992,090)
(1,217,589)
(3,561,289)
(8,209,679)
2019
€ per share
2018
€ per share
(0.001)
(0.001)
(0.001)
(0.001)
(0.004)
(0.004)
(0.004)
(0.004)
18
EQTEC plc Annual Report and Accounts 2019
Consolidated statement of other comprehensive income
for the financial year ended 31 December 2019
Loss for the financial year
(3,561,289)
(8,209,679)
2019
€
2018
€
Other comprehensive income/(loss)
Items that may be reclassified
subsequently to profit or loss
Exchange differences arising on retranslation
of foreign operations
118,066
(13,376)
118,066
(13,376)
Total comprehensive loss for the financial year
(3,443,223)
(8,223,055)
Attributable to:
Owners of the company
Non-controlling interests
The notes on pages 28 to 66 form part of these financial statements.
(3,669,812)
226,589
(7,005,976)
(1,217,079)
(3,443,223)
(8,223,055)
19
EQTEC plc Annual Report and Accounts 2019
Consolidated statement of financial position
At 31 December 2019
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Financial assets
Other financial investments
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets included in disposal group classified as held for
resale
Total current assets
Total assets
Notes
18
19
20
21
23
24
25
31
2019
€
271,255
15,283,459
2,229,006
17,324
2018
€
2,313,431
15,283,459
-
18,934
17,801,044
17,615,824
-
728,587
482,392
1,210,979
98,851
831,752
463,414
1,394,017
1,198,074
1,243,547
2,409,053
2,637,564
20,210,097
20,253,388
20
EQTEC plc Annual Report and Accounts 2019
Consolidated statement of financial position
At 31 December 2019 – continued
EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Accumulated deficit
Equity attributable to the owners of the company
Non-controlling interests
Total equity
Non-current liabilities
Borrowings
Lease liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Liabilities included in disposal group classified as held for
resale
Total current liabilities
Total equity and liabilities
Notes
26
26
27
28
29
30
28
29
31
2019
€
21,317,482
52,487,278
(56,011,538)
17,793,222
(2,326,274)
2018
€
19,182,850
47,582,446
(52,341,726)
14,423,570
(2,552,863)
15,466,948
11,870,707
188,729
191,708
3,085,401
-
380,437
3,085,401
876,071
2,556,960
82,726
3,515,757
1,494,706
2,889,092
-
4,383,798
846,955
913,482
4,362,712
5,297,280
20,210,097
20,253,388
The financial statements were approved by the Board of Directors on 12 June 2020 and signed on its behalf by:
Ian Pearson
Chairman
David Palumbo
Director
The notes on pages 28 to 66 form part of these financial statements.
21
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g
EQTEC plc Annual Report and Accounts 2019
Consolidated statement of cash flows
for the financial year ended 31 December 2019
Cash flows from operating activities
Loss for the financial year
Adjustments for:
Depreciation of property, plant and equipment
Gain on disposal of property, plant & equipment
Gain on disposal of investment
(Reversal of)/Impairment of property, plant and equipment
Impairment of goodwill
Impairment of inventories
Impairment of trade receivables
Impairment of other receivables
Bad debt expense
(Gain)/loss on debt for equity swap
Unrealised foreign exchange movements
Operating cash flows before working capital changes
Decrease/(Increase) in:
Inventories
Trade and other receivables
Decrease in Trade and other payables
Cash used in operating activities – continuing operations
Finance costs
Net cash used in operating activities – continuing
operations
Net cash generated from operating activities – discontinued
operations
Cash used in operating activities
Cash flows from investing activities
Additions to property, plant and equipment
Proceeds from the disposal of property, plant and
equipment
Proceeds from the sale of other investments
Proceeds from the sale of interest in associates
Net cash (used in)/ generated from investing activities –
continuing operations
Net cash generated from/(used in) investing activities –
discontinued operations
Net cash (used in)/generated from investing activities
Notes
2019
€
2018
€
(3,582,973)
(8,246,437)
18
20
18
19
23
24
24
12
31
18
20
31
100,261
-
(3,078)
(94,985)
-
98,851
150,379
60,000
3,255
(128,235)
70,439
17,058
(3,139)
-
2,121,637
1,427,038
-
-
-
-
772,046
(29,287)
(3,326,086)
(3,941,084)
-
204,097
(453,854)
(3,575,843)
1,125,312
68,273
(113,054)
(377,648)
(4,363,513)
1,212,662
(2,450,531)
(3,150,851)
110,184
142,956
(2,340,347)
(3,007,895)
(10,272)
-
1,610
3,078
(5,584)
6
(5,578)
(1,233)
3,139
-
-
1,906
(904)
1,002
23
EQTEC plc Annual Report and Accounts 2019
Consolidated statement of cash flows
for the financial year ended 31 December 2019 - continued
Cash flows from financing activities
Proceeds from borrowings and lease liabilities
Repayment of borrowings and lease liabilities
Loan issue costs
Proceeds from issue of ordinary shares
Share issue costs
Interest paid
Net cash generated from financing activities – continuing
operations
Net cash used in financing activities – discontinued operations
Net cash generated from financing activities
Net increase/ (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial
period
Cash and cash equivalents at the end of the financial period
Cash and cash equivalents included in disposal group
Cash and cash equivalents for continuing operations
Notes
28
28
28
31
25
31
25
Details of non-cash transactions are set out in Note 34 of the financial statements.
The notes on pages 28 to 66 form part of these financial statements.
2019
€
301,584
(1,019,978)
-
3,451,697
(223,556)
(32,091)
2,477,656
(111,106)
2,366,550
20,625
587,569
608,194
(125,802)
482,392
2018
€
6,036,706
(2,631,718)
(621,154)
66,017
(743,261)
(300,119)
1,806,471
(120,472)
1,685,999
(1,320,894)
1,908,463
587,569
(126,718)
460,851
24
EQTEC plc Annual Report and Accounts 2019
Company statement of financial position
At 31 December 2019
ASSETS
Non-current assets
Property, plant and equipment
Investment in subsidiary undertakings
Total non-current assets
Current assets
Trade and other receivables
Cash and bank balances
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Accumulated deficit
Total equity
Non-current liabilities
Borrowings
Total non-current liabilities
Current liabilities
Borrowings
Trade and other payables
Notes
18
20
24
25
26
26
28
28
30
2019
€
-
17,440,929
2018
€
822
17,367,967
17,440,929
17,368,789
1,334,004
448,619
1,963,851
384,704
1,782,623
2,348,555
19,223,552
19,717,344
21,317,482
71,421,358
(76,390,202)
19,182,850
66,516,526
(71,715,400)
16,348,638
13,983,976
-
-
2,426,045
448,869
2,771,448
2,771,448
2,676,364
285,556
Total current liabilities
2,874,914
2,961,920
Total equity and liabilities
19,223,552
19,717,344
The financial statements were approved by the Board of Directors on 12 June 2020 and signed on its behalf by:
Ian Pearson
Chairman
David Palumbo
Director
The notes on pages 28 to 66 form part of these financial statements.
25
EQTEC plc Annual Report and Accounts 2019
Company statement of changes in equity
for the financial year ended 31 December 2019
Share capital
€
Share premium
€
Accumulated
deficit
€
Total
€
Balance at 1 January 2018
18,724,196
63,508,244
(67,436,323)
14,796,117
Conversion of debt into equity (Note
26)
458,654
3,121,070
-
3,579,724
Share issue costs (Note 26)
-
(112,788)
-
(112,788)
Transactions with owners
458,654
3,008,282
-
3,466,936
Loss for the financial year (Note 35)
-
-
(4,279,077)
(4,279,077)
Total comprehensive loss for the
financial year
-
-
(4,279,077)
(4,279,077)
Balance at 31 December 2018
19,182,850
66,516,526
(71,715,400)
13,983,976
Issue of ordinary shares in EQTEC plc
(Note 26)
Conversion of debt into equity (Notes
26 and 28)
Share issue costs (Note 26)
Transactions with owners
Loss for the financial year (Note 35)
Total comprehensive loss for the
financial year
1,157,100
2,529,382
977,532
2,645,675
-
-
3,686,482
3,623,207
-
2,134,632
-
(270,225)
-
(270,225)
4,904,832
-
7,039,464
-
(4,674,802)
(4,674,802)
-
-
(4,674,802)
(4,674,802)
Balance at 31 December 2019
21,317,482
71,421,358
(76,390,202)
16,348,638
The notes on pages 28 to 66 form part of these financial statements.
26
EQTEC plc Annual Report and Accounts 2019
Company statement of cash flows
for the financial year ended 31 December 2019
Notes
2018
€
2019
€
(4,674,802)
(4,279,077)
18
18
20
24
24
12
18
20
28
28
28
616
206
1,083,703
1,427,038
30,000
489,689
60,000
3,255
(128,235)
(36,110)
(1,744,640)
(1,376,852)
79,251
(10,826)
323,096
411
-
1,151,593
1,149,432
-
113,493
-
-
772,046
(4,023)
(1,096,125)
(1,556,113)
55,580
(8,141)
(150,655)
(2,729,971)
(2,755,454)
-
-
-
301,584
(732,794)
3,451,697
(223,556)
-
(482)
2,796,449
66,478
382,141
448,619
(1,233)
(900,000)
(901,233)
6,036,706
(2,238,548)
66,017
(743,261)
(621,154)
(239,050)
2,260,710
(1,395,977)
1,778,118
382,141
Cash flows from operating activities
Loss before taxation
Adjustments for:
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Finance costs
Provision for impairment of investment in subsidiaries
Provision for impairment of trade and other receivables
Provision for impairment of intercompany balances
Provision for impairment of other receivables
Bad debt expense
(Gain)/Loss on debt for equity swap
Foreign currency losses/(gains) arising from retranslation of
borrowings
Operating cash flows before working capital changes
Funds advanced to inter-company accounts
Repayment of inter-company balances
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash used in operating activities
Cash flows from investing activities
Purchase of plant, property and equipment
Investment in subsidiaries
Net cash generated from/(used in) investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Proceeds from issue of ordinary shares
Share issue costs
Loan issue costs
Interest paid
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
25
The notes on pages 28 to 66 form part of these financial statements.
27
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
1.
GENERAL INFORMATION
EQTEC plc (“the Company”) is a company domiciled in Ireland. These financial statements for the financial year ended 31 December 2019
consolidate the individual financial statements of the Company and its subsidiaries (together referred to as ‘the Group’).
The Group is a waste-to-value group, which uses its proven proprietary Advanced Gasification Technology to generate safe, green energy
from over 50 different kinds of feedstock such as municipal, agricultural and industrial waste, biomass, and plastics. The Group collaborates
with waste operators, developers, technologists, EPC contractors and capital providers to build sustainable waste elimination and green
energy infrastructure.
Revenue comes from licensing and selling its technology, supplying gasification reactors and equipment, and engineering and design
services using its unique expertise. The Group also expects to receive equity returns from projects in which we invest.
2.
NEW OR REVISED STANDARDS OR INTERPRETATIONS
Impact of initial application of IFRS 16 Leases
In the current financial year, the Group has applied IFRS 16 (as issued by the IASB in January 2016) that is effective for annual periods that
begin on or after 1 January 2019.
IFRS 16 Leases replaces IAS 17 Leases, along with three interpretations (IFRIC 4 Determining whether an arrangement contains a lease, SIC 15
Operating leases – Incentives, and SIC 27 Evaluating the substance of transactions involving the legal form of a lease). The adoption of this new
Standard has resulted in the Group recognising a right-of-use asset and related lease liability in connection with all former operating leases
except for those identified as low-value or having a remaining lease term of less than 12 months from the date of initial application.
The new Standard has been applied using the modified retrospective approach, with the cumulative effect of adopting IFRS 16 being
recognised in equity as an adjustment to the opening balance of retained earnings for the current period. Prior periods have not been
restated.
For contracts in place at the date of initial application, the Group has elected to apply the definition of a lease from IAS 17 and IFRIC 4 and
has not applied IFRS 16 to arrangements that were previously not identified as lease under IAS 17 and IFRIC 4.
The Group has elected not to include initial direct costs in the measurement of the right-of-use asset for operating leases in existence at the
date of initial application of IFRS 16, being 1 January 2019. At this date, the Group has also elected to measure the right-of-use assets at an
amount equal to the lease liability adjusted for any prepaid or accrued lease payments that existed at the date of transition. Instead of
performing an impairment review on the right-of-use assets at the date of initial application, the Group has relied on its historic assessment
as to whether leases were onerous immediately before the date of initial application of IFRS 16.
On transition, for leases previously accounted for as operating leases with a remaining lease term of less than 12 months and for leases of
low-value assets the Group has applied the optional exemptions to not recognise right-of-use assets but to account for the lease expense
on a straight-line basis over the remaining lease term. For those leases previously classified as finance leases, the right-of-use asset and lease
liability are measured at the date of initial application at the same amounts as under IAS 17 immediately before the date of initial application.
On transition to IFRS 16 the weighted average incremental borrowing rate applied to lease liabilities recognised under IFRS 16 was 3%.
The Group has benefited from the use of hindsight for determining the lease term when considering options to extend and terminate leases.
The following is a reconciliation of the financial statement line items from IAS 17 to IFRS 16 at 1 January 2019:
Property, plant and equipment
Lease liabilities
Total
Carrying amount
at 31 December
2018
€
2,313,431
-
2,313,431
Reclassification
Remeasurement
IFRS 16 Carrying
amount at 1
January 2019
€
-
-
-
€
354,718
(354,718)
-
€
2,668,149
(354,718)
2,313,431
The following is a reconciliation of total operating lease commitments at 31 December 2018 (as disclosed in the financial statements to 31
December 2018) to the lease liabilities recognised at 1 January 2019:
Total operating lease commitments disclosed at 31 December 2018
Other minor adjustments related to commitment disclosures
Operating lease liabilities before discounting
Discounted using incremental borrowing rate
Operating lease liabilities
Finance lease obligations at 31 December 2018
Total lease liabilities recognised under IFRS 16 at 1 January 2019
28
€
360,000
18,025
378,025
(23,307)
354,718
-
354,718
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
2.
APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) - continued
Other new/revised standards and interpretations adopted in 2019
In the current financial year, the Group has applied a number of amendments to IFRS Standards and Interpretations issued by the
International Accounting Standards Board (IASB), as adopted by the European Union, that are effective for an annual period that begins on
or after 1 January 2019. Their adoption has not had any impact on the disclosures or on the amounts reported in these financial statements.
•
•
•
•
•
Amendments to IFRS 9 Prepayment Features with Negative Compensation;
Amendments to IAS 28 Long-Term Interests in Associates and Joint Ventures;
Amendments to IAS 19 Employee Benefits Plan Amendment, Curtailment or Settlement;
Annual Improvements to IFRS Standards 2015-2017 Cycle – minor amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23;
IFRIC 23 Uncertainty over Income Tax Treatments.
New and revised IFRS Standards in issue but not yet effective
The following new and revised Standards and Interpretations have not been adopted by the Group, whether endorsed by the European
Union or not. The Group is currently analysing the practical consequences of the new Standards and the effects of applying them to the
financial statements. The related standards and interpretations are:
•
•
•
•
•
IFRS 17 Insurance Contracts;
IFRS 10 and IAS 28 (amendments) Sale of Contribution of Assets between an Investor and its Associate or Joint Venture;
Amendments to IFRS 3 Definition of a business;
Amendments to IAS 1 and IAS 8 Definition of material;
Conceptual Framework Amendments to References to the Conceptual Framework in IFRS Standards.
The directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the
Group in future periods.
3.
STATEMENT OF ACCOUNTING POLICIES
Statement of Compliance, Basis of Preparation and Going Concern
The Group’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union (‘EU’) and effective at 31 December 2019 for all years presented as issued by the International Accounting
Standards Board.
The financial statements of the parent company, EQTEC plc have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union (‘EU’) effective at 31 December 2019 for all years presented as issued by the International
Accounting Standards Board and Irish Statute comprising the Companies Act 2014.
The consolidated financial statements are prepared under the historical cost convention except for certain financial assets and financial
liabilities which are measured at fair value. The principal accounting policies set out below have been applied consistently by the parent
company and by all of the Company’s subsidiaries to all years presented in these consolidated financial statements.
Comparative amounts have been represented where necessary, to present the financial statements on a consistent basis.
The consolidated financial statements are presented in euros and all values are not rounded, except when otherwise indicated.
The Group incurred a loss of €3,561,289 (2018: €8,209,679) during the financial year ended 31 December 2019 and had net current liabilities
of €1,953,659 (2018: €2,659,716) and net assets of €15,466,948 (31 December 2018: €11,870,707) at 31 December 2019.
The Group continues to invest capital in developing and expanding its pipeline of waste to energy projects. The nature of the Group’s
business model means that the sales and project pipeline depend upon counterparties commissioning and financing major projects, the
timing of which is subject to many uncertainties and is not under the Group’s control. This implies that the timing of funds generated from
projects can be difficult to predict.
Since 31 December 2019, the spread of COVID-19 has severely impacted many local economies around the globe. In many countries,
businesses are being forced to cease or limit operations for long or indefinite periods of time. Measures taken to contain the spread of the
virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to
businesses worldwide, resulting in an economic slowdown. Global stock markets have also experienced great volatility and a significant
weakening. Governments and central banks have responded with monetary and fiscal interventions to stabilise economic conditions.
The degree of uncertainty associated with the outcome of the COVID-19 crisis increases significantly the further into the future forecasting
is undertaken. The nature and condition of the Group and the degree to which it is affected by external factors affect the judgement
regarding the outcome of the COVID-19 crisis. Any judgement about the future is based on information at the time at which the judgement
is made. Subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were
made. Management will continually assess the information available at the time of publication.
29
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
3.
STATEMENT OF ACCOUNTING POLICIES - CONTINUED
Basis of Preparation and Going Concern – continued
The directors had carried out an evaluation of financial forecasts, sensitised to reflect a rational judgement of the level of inherent risk.
The forecasts which Management have prepared covering the next 12 months include certain assumptions with regard to required future
funding from third parties, such as drawdown of the available Altair loan facility, the costs of business development, overheads and the
timing and amount of any funds generated from sales of the Groups technology. The forecasts indicate that during this period the Group
will have funds to continue with its activities and its planned development program.
For these reasons, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements. The
financial statements do not include any adjustments that would result if the Group was unable to continue as a going concern.
Basis of consolidation
The Group financial statements consolidate those of the parent company and all of its subsidiaries as of 31 December 2019. All subsidiaries
have a reporting date of 31 December.
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.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the financial year are recognised from the
effective date of acquisition, or up to the effective date of disposal, as applicable. The Group attributes total comprehensive income or
loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests.
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. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair
values.
Step Acquisitions
Business combination achieved in stages is accounted for using acquisition method at acquisition date. The components of a business
combination, including previously held investments are remeasured at fair value at acquisition date and a gain or loss is recognised in the
consolidated statement of profit or loss.
Profit or loss from discontinued operations
A discontinued operation is a component of the Group that either has been disposed of or is classified as held for sale. Profit or loss from
discontinued operations comprises the post-tax profit or loss of discontinued operations and the post-tax gain or loss resulting from the
measurement and disposal of assets classified as held for sale (see also policy on non-current assets and liabilities classified as held for sale
and discontinued operations below and Note 31).
Investments in associates and joint ventures
Investments in associates and joint ventures are accounted for using the equity method. The carrying amount of the investment in
associates and joint ventures is increased or decreased to recognise the Group’s share of the profit or loss and other comprehensive
income of the associate and joint venture, adjusted where necessary to ensure consistency with the accounting policies of the Group.
When the Group’s share of losses on an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which
includes any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group
discontinues recognising its share of future losses. Additional losses are recognised only to the extent that the Group has incurred legal
or constructive obligations or made payments on behalf of the associate or joint venture.
Unrealised gains and losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of the
Group’s interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.
Investments in subsidiaries
Investments in subsidiaries in the Company’s statement of financial position are measured at cost less accumulated impairment. When
necessary, the entire carrying amount of the investment is tested for impairment by comparing its recoverable amount (higher of value
in use and fair value less costs to sell) with its carrying amount, any impairment loss recognised forms part of the carrying amount of the
investment. Any reversal of that impairment loss is recognised to the extent that the recoverable amount of the investment subsequently
increases.
30
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in Euro, which is also the functional currency of the parent company. The Group has
subsidiaries in the United Kingdom, whose functional currency is the GBP £.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates
prevailing at the dates 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), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when
fair value was determined.
Foreign operations
In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than Euro are
translated into Euro upon consolidation. The functional currency of the entities in the Group has remained unchanged during the
reporting financial year.
On consolidation, assets and liabilities have been translated into Euro at the closing rate at the reporting date. Goodwill and fair value
adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated
into Euro at the closing rate. Income and expenses have been translated into Euro at the average rate over the reporting financial year.
Exchange differences are charged or credited to other comprehensive income and recognised in the currency translation reserve in equity.
On disposal of a foreign operation, the related cumulative translation differences recognised in equity are reclassified to profit or loss and
are recognised as part of the gain or loss on disposal.
Segment reporting
The Group has two operating segments: the power generation segment and the technology sales segment. In identifying these operating
segments, management generally follows the Group’s service lines representing its main products and services.
Each operating segment is managed separately as each requires different technologies, marketing approaches and other resources. All
inter-segment transfers are carried out at arm’s length prices based on prices charged to unrelated customers in standalone sales of
identical goods or services.
For management purposes, the Group uses the same measurement policies as those used in its financial statements. In addition, corporate
assets which are not directly attributable to the business activities of any operating segment are not allocated to a segment. This primarily
applies to the Group’s central administration costs and directors’ salaries.
Revenue
Revenue arises from the rendering of services. Revenue is measured based on the consideration to which the Group expects to be entitled
in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers
control of a product or service to a customer. To determine whether to recognise revenue, the Group follows a 5-step process:
Identifying the contract with a customer;
Identifying the performance obligations;
1.
2.
3. Determining the transaction price;
4.
5.
Allocating the transaction price to the performance obligations; and
Recognising revenue when/as performance obligation(s) are satisfied.
The Group applies the revenue recognition criteria set out below to each separately identifiable component of the sales transaction. The
consideration received from these multiple-component transactions is allocated to each separately identifiable component in proportion
to its relative fair value. Revenue is recognised either at a point in time or over time, when the Group satisfies performance obligations by
transferring the promised goods or services to its customers.
Rendering of services
The Group generates revenues from after-sales service and maintenance, consulting, and construction contracts for renewable energy
systems. Consideration received for these services is initially deferred, included in other payables, and is recognised as revenue in the
financial year when the performance obligation is satisfied. In recognising after-sales service and maintenance revenues, the Group
determines the stage of completion by considering both the nature and timing of the services provided and its customer’s pattern of
consumption of those services, based on historical experience. Where the promised services are characterised by an indeterminate
number of acts over a specified year of time, revenue is recognised over time.
Revenue from consulting services is recognised when the services are provided by reference to the contract’s stage of completion at the
reporting date in the same way as construction contracts for renewable energy systems described below.
31
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Revenue - continued
Construction contracts for renewable energy systems
Construction contracts for renewable energy systems specify a fixed price for the design, development and installation of biomass
systems. When the outcome can be assessed reliably, contract revenue and associated costs are recognised by reference to the stage of
completion of the contract activity at the reporting date. Contract revenue is measured at the fair value of consideration received or
receivable and recognised over time on a cost-to-cost method. When the Group cannot measure the outcome of a contract reliably,
revenue is recognised only to the extent of contract costs that have been incurred and are recoverable. Contract costs are recognised in
the financial year in which they are incurred. In either situation, when it is probable that total contract costs will exceed total contract
revenue, the expected loss is recognised immediately in profit or loss.
A construction contract’s stage of completion is assessed by management by comparing costs incurred to date with the total costs
estimated for the contract (a procedure sometimes referred to as the cost-to-cost method). Only those costs that reflect work performed
are included in costs incurred to date. The gross amount due from customers for contract work is presented within trade and other
receivables for all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceeds progress billings.
The gross amount due to customers for contract work is presented within other liabilities for all contracts in progress for which progress
billings exceed costs incurred plus recognised profits (less recognised losses).
Interest and dividends
Interest income and expenses are reported on an accrual basis using the effective interest method. Dividends, other than those from
investments in associates and joint ventures, are recognised at the time the right to receive payment is established.
Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or as incurred. Expenditure for warranties is
recognised when the Group incurs an obligation, which is typically when the related goods are sold.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily
take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the
assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which
they are incurred.
Profit or loss from discontinued operations
A discontinued operation is a component of the Group that either has been disposed of or is classified as held for sale. Profit or loss from
discontinued operations comprises the post-tax profit or loss of discontinued operations and the post-tax gain or loss resulting from the
measurement and disposal of assets classified as held for sale.
Goodwill
Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately
recognised. Goodwill is carried at cost less accumulated impairment losses. Goodwill is not amortised but is reviewed for impairment at
least annually. Refer below for a description of impairment testing procedures.
Non-controlling interests
Non-controlling interests that are present ownership interest and entitle their holders to a proportionate share of the entity’s net assets
in the event of a liquidation may be initially measured either at fair value of at the non-controlling interests’ proportionate share of the
recognised amounts of the acquiree’s identifiable net assets. Other types of non-controlling interests are measured at fair value, or, when
applicable, on the basis specified in another IFRS.
Property, plant and equipment
Land and buildings and plant and equipment are initially recognised at acquisition cost or manufacturing cost, including any costs directly
attributable to bringing the assets to the location and condition necessary for them to be capable of operating in the manner intended
by the Group’s management. Leasehold buildings, plant and equipment are subsequently measured at cost less accumulated
depreciation and impairment losses. Depreciation is recognised on a straight-line basis to write down the cost less estimated residual
value of leasehold buildings and plant and equipment. The following useful lives are applied:
• Leasehold buildings: 5-50 years
• Office equipment: 2-5 years
• Wind Turbine: 20 years
Material residual value estimates and estimates of useful life are updated as required, but at least annually.
Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds
and the carrying amount of the assets and are recognised in profit or loss within other income or other expenses.
32
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Property, plant and equipment - continued
Construction in progress is stated at cost less any accumulated impairment loss. Cost comprises direct costs of construction as well as
interest expense and exchange differences capitalised during the year of construction and installation. Capitalisation of these costs ceases
and the asset in course of construction is transferred to fixed assets when substantially all the activities necessary to prepare the assets for
their intended use are completed. No depreciation is provided in respect of payments on account and asset in course of construction until
it is fully completed and ready for its intended use.
Leased assets
As described in Note 2, the Group has applied IFRS 16 using the modified retrospective approach and therefore comparative
information has not been restated. This means comparative information is still reported under IAS 17 and IFRIC 4.
Accounting policy applicable from 1 January 2019
For any new contracts entered into on or after 1 January 2019, the Group considers whether a contract is, or contains a lease. A lease is
defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange
for consideration’. To apply this definition, the Group assesses whether the contract meets three key evaluations which are whether:
• the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at
the time the asset is made available to the Group
• the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use,
considering its rights within the defined scope of the contract
• the Group has the right to direct the use of the identified asset throughout the period of use. The Group assess whether it has the right
to direct ‘how and for what purpose’ the asset is used throughout the period of use.
Measurement and recognition of leases
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset
is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an
estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease
commencement date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the
useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such
indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable
payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options
reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for
interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-
of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of
recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a
straight-line basis over the lease term.
On the statement of financial position, right-of-use assets have been included in property, plant and equipment and lease liabilities have
been included in trade and other payables.
Accounting policy applicable before 1 January 2019
Finance leases
Management applies judgment in considering the substance of a lease agreement and whether it transfers substantially all the risks and
rewards incidental to ownership of the leased asset. Key factors considered include the length of the lease term in relation to the economic
life of the asset, the present value of the minimum lease payments in relation to the asset’s fair value, and whether the Group obtains
ownership of the asset at the end of the lease term.
For leases of land and buildings, the minimum lease payments are first allocated to each component based on the relative fair values of
the respective lease interests. Each component is then evaluated separately for possible treatment as a finance lease, taking into
consideration the fact that land normally has an indefinite economic life. The interest element of lease payments is charged to profit or
loss, as finance costs over the year of the lease.
Operating leases
All other leases are treated as operating leases. Where the Group is a lessee, payments on operating lease agreements are recognised as
an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance, are expensed as incurred.
33
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Impairment testing of goodwill 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 a related business combination and
represent the lowest level within the Group at which management monitors goodwill. Cash-generating units to which goodwill has been
allocated (determined by the Group’s management as equivalent to its operating segments) 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 of disposal 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 discount 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 current market assessments of the time value of money and asset-specific risk 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 loss is
reversed if the asset’s or cash-generating unit’s recoverable amount exceeds its carrying amount.
Financial instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial
instrument and are measured initially at fair value adjusted for transaction costs, except for those carried at fair value through profit or
loss which are measured initially at fair value, and trade receivables that do not contain a significant financing component, which are
measured at the transaction price in accordance with IFRS 15. Subsequent measurement of financial assets and financial liabilities is
described below.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset
and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged,
cancelled or expires.
Classification and subsequent measurement of financial assets
For the purpose of subsequent measurement financial assets, other than those designated and effective as hedging instruments, are
classified into the following categories upon initial recognition:
•
•
•
amortised cost
fair value through profit or loss (FVTPL)
fair value through other comprehensive income (FVOCI)
In the periods presented, the Group does not have any financial assets categorised as FVTPL or FVOCI.
The classification is determined by both:
•
•
the Group’s business model for managing the financial asset; and
the contractual cash flow characteristics of the financial asset.
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 expenses.
Financial assets at amortised cost and impairment
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated at FVTPL):
•
•
they are held within the business model whose objective is to hold the financial asset and collect its contractual cash flows;
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
After initial recognition, they are measured at amortised cost using the effective interest method. 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 the counterparty and other shared credit risk characteristics. The
impairment loss estimate is then based on recent historical counterparty default rates for each identified group.
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.
34
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Financial instruments - continued
Classification and subsequent measurement of financial assets – continued
Financial assets at amortised cost - continued
The expected loss rates are based on the payment profile for sales over the past 48 months before 31 December 2019 and 1 January
respectively as well as the corresponding historical credit losses during that period. The historical rates are adjusted to reflect current and
forward-looking macroeconomic factors affecting the customer’s ability to settle the amount outstanding. The Group has identified gross
domestic product (GDP) and unemployment rates in the countries in which the customers are domiciled to be the most relevant factors
and accordingly adjusts historical loss rates for expected changes in these factors. However, given the short period exposed to credit risk,
the impact of these macroeconomic factors has not been considered significant within the reporting period.
Classification and subsequent measurement of financial liabilities
The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments.
Financial liabilities are measured subsequently at amortised cost using the effective interest method except for derivatives and financial
liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than
derivative financial instruments that are designated and effective as hedging instruments). All interest-related charges and, if applicable,
changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or finance income.
Derivative financial instruments and hedge accounting
Derivative financial instruments are accounted for at FVTPL except for derivatives designated as hedging instruments in cash flow hedge
relationships, which require a specific accounting treatment. To qualify for hedge accounting, the hedging relationship must meet several
strict conditions with respect to documentation, probability of occurrence of the hedged transaction and hedge effectiveness.
All derivative financial instruments used for hedge accounting are recognised initially at fair value and reported subsequently at fair value
in the statement of financial position.
To the extent that the hedge is effective, changes in the fair value of derivatives designated as hedging instruments in cash flow hedges
are recognised in other comprehensive income and included within the cash flow hedge reserve in equity. Any ineffectiveness in the
hedge relationship is recognised immediately in profit or loss.
At the time the hedged item affects profit or loss, any gain or loss previously recognised in other comprehensive income is reclassified
from equity to profit or loss and presented as a reclassification adjustment within other comprehensive income. However, if a non-financial
asset or liability is recognised as a result of the hedged transaction, the gains and losses previously recognised in other comprehensive
income are included in the initial measurement of the hedged item.
If a forecast transaction is no longer expected to occur, any related gain or loss recognised in other comprehensive income is transferred
immediately to profit or loss. If the hedging relationship ceases to meet the effectiveness conditions, hedge accounting is discontinued,
and the related gain or loss is held in the equity reserve until the forecast transaction occurs.
Fair values
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which inputs to the
fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are
described as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: valuation techniques for which the lowest level of inputs which have a significant effect on the recorded fair value are observable,
either directly or indirectly
Level 3: valuation techniques for which the lowest level of inputs that have a significant effect on the recorded fair value are not based on
observable market data
Income taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income
or directly in equity.
Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting
financial year. Deferred income taxes are calculated using the liability method.
Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible temporary difference will be
utilised against future taxable income. This is assessed based on the Group’s forecast of future operating results, adjusted for significant
non-taxable income and expenses and specific limits on the use of any unused tax loss or credit.
Deferred tax liabilities are generally recognised in full, although IAS 12 ‘Income Taxes’ specifies limited exemptions. As a result of these
exemptions the Group does not recognise deferred tax on temporary differences relating to goodwill, or to its investments in subsidiaries.
35
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments
maturing within 90 days from the date of acquisition that are readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value.
Non-current assets and liabilities classified as held for sale and discontinued operations
Non-current assets classified as held for sale are presented separately and measured at the lower of their carrying amounts immediately
prior to their classification as held for sale and their fair value less costs to sell. However, some held for sale assets such as financial assets
or deferred tax assets, continue to be measured in accordance with the Group’s relevant accounting policy for those assets. Once classified
as held for sale, the assets are not subject to depreciation or amortisation.
Any profit or loss arising from the sale or remeasurement of discontinued operations is presented as part of a single line item, profit or
loss from discontinued operations (See also policy on profit or loss from discontinued operations above).
Equity, reserves and dividend payments
Share capital represents the nominal (par) 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 financial year 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 payments
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values.
Where employees are rewarded using share-based payments, the fair value of employees’ services is determined indirectly by reference
to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market
vesting conditions (for example profitability and sales growth targets and performance conditions). All share-based remuneration is
ultimately recognised as an expense in profit or loss with a corresponding credit to retained earnings. If vesting years or other vesting
conditions apply, the expense is allocated over the vesting year, based on the best available estimate of the number of share options
expected to vest.
Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable.
Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous
estimates. Any adjustment to cumulative share-based compensation resulting from a revision is recognised in the current financial year.
The number of vested options ultimately exercised by holders does not impact the expense recorded in any financial year.
Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, are allocated to share capital up
to the nominal (or par) value of the shares issued with any excess being recorded as share premium.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour
costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated
using the weighted average cost method. Net realisable value represents the estimated selling price less all estimated costs of completion
and costs to be incurred in marketing, selling and distribution.
Short-term employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the
related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service. Liabilities
recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in
exchange for the related service.
Share Warrants
The Group has share warrants outstanding that were issued to loan notes holders as part of the loan agreements. These share warrants
are assessed under IAS 32 as instruments settled in an entity’s own equity instruments. The classification of this instrument as either a
financial liability or equity depends on the substance of the financial instruments rather that its legal form.
Provisions, contingent assets and contingent liabilities
Provisions for 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.
Restructuring provisions are recognised only if a detailed formal plan for the restructuring exists and management has either
communicated the plan’s main features to those affected or started implementation. Provisions are not recognised for future operating
losses.
36
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Provisions, contingent assets and contingent liabilities - continued
Any reimbursement that the Group is 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.
No liability is recognised if an outflow of economic resources as a result of present obligations is not probable. Such situations are disclosed
as contingent liabilities unless the outflow of resources is remote.
4.
SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES AND ESTIMATION UNCERTAINTY
When preparing the financial statements, management makes a number of judgements, estimates and assumptions about the
recognition and measurement of assets, liabilities, income and expenses.
Significant management judgements
The following are significant management judgements in applying the accounting policies of the Group that have the most significant
effect on the financial statements.
Going concern
As described in the basis of preparation and going concern in Note 3 above, the validity of the going concern basis is dependent upon
the Company sourcing finance required to continue to develop projects. After making enquiries and considering the matters referred to
in Note 3, the Directors have a reasonable expectation that the Company will source this financing and the Group will have adequate
resources to continue in operational existence for the foreseeable future. For these reasons, the Directors continue to adopt the going
concern basis of accounting in preparing the financial statements.
Control assessment in a business combination.
As disclosed in Note 20, the Group owns 50.02% of the voting rights in Newry Biomass Limited. One other company owns the remaining
voting rights. Management has reassessed its involvement in Newry Biomass Limited in accordance with IFRS 10’s revised control
definition and guidance and has concluded that it has control of Newry Biomass Limited.
Financial Instruments
The Group classifies a financial instrument, or its component parts, on initial recognition as a financial asset, a financial liability or an equity
instrument in accordance with the substance of the contractual agreement and the definitions of a financial asset, a financial liability or
an equity instrument. The substance of a financial instrument, rather than its legal form, governs its classification in the financial
statements.
Revenue
As revenue from construction contracts is recognised over time, the amount of revenue recognised in a reporting period depends on the
extent to which the performance obligation has been satisfied. It also requires significant judgment in determining the estimated costs
required to complete the promised work when applying the cost-to-cost method.
Assets held for disposal
On 27 March 2017, the Board of Directors announced its decision to dispose the wind turbine segment of the Group consisting of
Pluckanes Windfarm Limited, a wholly owned subsidiary of Reforce Energy Limited, are classified as assets held for disposal. The Board
considered the subsidiary to meet the criteria to be classified as held for sale at that date for the following reasons:
•
•
•
Pluckanes Windfarm Limited is available for immediate sale and can be sold to the buyer in its current condition.
The actions required to complete the sale were initiated and negotiations with potential buyers have been identified and
monitored.
The Group remains committed in its plan to sell the disposal group.
For more details on the discontinued operation, refer to Note 31.
Leases - Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure
lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security,
the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore
reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries
that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for
example, when leases are not in the subsidiary’s functional currency).
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities,
income and expenses is provided below. Actual results may be substantially different.
37
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
4.
SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES AND ESTIMATION UNCERTAINTY - continued
Impairment of goodwill and non-financial assets
Determining whether goodwill and non-financial assets are impaired requires an estimation of the value in use of the cash generating
units to which the assets have been allocated. The value in use calculation requires the directors to estimate the future cash flows to arise
from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual cash flows are less than
expected, a material impairment may arise. The total property, plant and equipment reversal of impairment charges during the financial
year as included in Note 18 amounted to €94,985 (2018: Impairment cost of €2,121,637), while the impairment for goodwill during the
financial year as included in Note 19 amounted to €Nil (2018: €1,427,038).
Provision for impairment of financial assets
Determining whether the carrying value of financial assets has been impaired requires an estimation of the value in use of the investment
in subsidiaries and joint venture vehicles. The value in use calculation requires the directors to estimate the future cash flows expected to
arrive from these vehicles and a suitable discount rate in order to calculate present value. After reviewing these calculations, the directors
are satisfied that a net impairment cost of €Nil (2018: €Nil) be recognised in the Group accounts and €1,427,038 (2018: €1,149,432) be
recognised in the Company accounts of EQTEC plc. Details of this impairment are set out in Note 20.
Allowances for impairment of trade receivables
The Group estimates the allowance for doubtful trade receivables based on assessment of specific accounts where the Group has
objective evidence comprising default in payment terms or significant financial difficulty that certain customers are unable to meet their
financial obligations. In these cases, judgment used was based on the best available facts and circumstances including but not limited to,
the length of relationship. At 31 December 2019, provisions for doubtful debts amounted to €456,671 which represents 57% of trade
receivables at that date (31 December 2018: €306,292– 73%) (see note 24).
Deferred tax assets
Deferred tax is recognised based on differences between the carrying value of assets and liabilities and the tax value of assets and
liabilities. Deferred tax assets are only recognised to the extent that the Group estimates that future taxable profits will be available to
offset them.
Useful lives of depreciable assets
The annual depreciation charge depends primarily on the estimated lives of each type of asset and, in certain circumstances, estimates of
fair values and residual values. The directors annually review these asset lives and adjust them as necessary to reflect current thinking on
remaining lives in light of technological change, prospective economic utilisation and physical condition of the assets concerned. Changes
in asset lives can have significant impact on depreciation charges for the financial year. It is not practical to quantify the impact of changes
in asset lives on an overall basis, as asset lives are individually determined, and there are a significant number of asset lives in use. The
impact of any change would vary significantly depending on the individual changes in assets and the classes of assets impacted.
Fair value measurement
Management uses valuation techniques to determine the fair value of financial instruments (where active market quotes are not available)
and non-financial assets. This involves developing estimates and assumptions consistent with how market participants would price the
instrument. Management bases its assumptions on observable data as far as possible, but this is not always available. In that case
management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm’s
length transaction at the reporting date.
5.
FINANCIAL RISK MANAGEMENT
Financial risk management objectives and policies
The Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk, interest rate risk and foreign currency exchange risk.
The Group’s financial risk management programme aims to manage the Group’s exposure to the aforementioned risks in order to minimise
the potential adverse effects on the financial performance of the Group. The Group seeks to minimise the effects of these risks by
monitoring the working capital position, cash flows and interest rate exposure of the Group. There is close involvement by members of
the Board of Directors in the day-to-day running of the business.
Many of the Group’s transactions are carried out in Pounds Sterling. The Group’s exposure to price risk is not a significant risk as the Company
does not currently hold a portfolio of securities which may be materially impacted by a decline in market values.
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.
The Group’s maximum exposure to credit risk is represented by the balance sheet amount of each financial asset:
Trade and other receivables
Cash and cash equivalents
The Group’s credit risk is primarily attributable to its trade and other receivables.
38
2019
€
639,028
482,392
2018
€
279,388
463,414
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
5.
FINANCIAL RISK MANAGEMENT
The Group has adopted procedures in extending credit terms to customers and in monitoring its credit risk. The Group’s exposure to
credit risk arises from defaulting customers, with a maximum exposure equal to the carrying amount of the related receivables. Provisions
are made for impairment of trade receivables when there is default of payment terms and significant financial difficulty. On-going credit
evaluation is performed on the financial condition of accounts receivable at operating unit level at least on a monthly basis.
The Group does not have significant risk exposure to any single counterparty. Concentration of credit risk to any other counterparty did
not exceed 5% of gross monetary assets at any time during the financial year. The Group defines counterparties as having similar
characteristics if they are related parties.
Exposure to credit risk on cash deposits and liquid funds is monitored by directors. Cash held on deposit is with financial institutions in
the Ba rating category of Moody’s. The directors are of the opinion that the likelihood of default by a counter party leading to material
loss is minimal. The reconciliation of loss allowance is included in note 24).
Liquidity risk
The Group’s liquidity is managed by ensuring that sufficient facilities are available for the Group’s operations from diverse funding sources.
The Group uses cash flow forecasts to regularly monitor the funding requirements of the Group. The Group’s operations are funded by
cash generated from financing activities, borrowings from banks and investors and proceeds from the issuance of ordinary share capital.
The table below details the maturity of the Group’s liabilities as at 31 December 2019:
Trade and other payables
Lease liabilities
Investor loans
Bank borrowings
Notes
30
29
28
28
Up to 1 year
€
1 – 5 years
€
After 5
years
€
876,071
82,726
2,431,736
-
191,708
-
125,224
188,729
3,515,757
380,437
The table below details the maturity of the Group’s liabilities as at 31 December 2018:
Trade and other payables
Non-bank borrowings
Bank borrowings
Bank overdrafts
Notes
30
28
28
28
Up to 1 year
€
1 – 5 years
€
1,494,706
2,679,492
207,037
2,563
-
2,771,449
313,952
-
4,383,798
3,085,401
Total
€
876,071
274,434
2,431,736
313,953
3,896,194
Total
€
1,494,706
5,450,941
520,989
2,563
7,469,199
-
-
-
-
-
After 5
years
€
-
-
-
-
-
Interest rate risk
The primary source of the Group’s interest rate risk relates to bank loans and other debt instruments. The interest rates on these assets
and liabilities are disclosed above.
Bank borrowings and other debt instruments (excluding amounts in the disposal group) amounted to €2,745,689 and €5,974,493 in 31
December 2019 and 31 December 2018, respectively.
The interest rate risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate borrowings. The Group does
not engage in hedging activities. Bank borrowings and certain debt instruments are arranged at floating rates which are mainly based
upon EURIBOR and the prime lending rate of financial institutions thus exposing the Group to cash flow interest rate risk. The other
remaining debt instruments were arranged at fixed interest rates and expose the Group to a fixed cash outflow.
These bank borrowings and debt instruments are mostly medium-term to long-term in nature. Interest rates on loans received from
investors and shareholders are fixed in some cases while others are a fixed percentage greater than current prime lending rates. ‘Medium-
term’ refers to bank borrowings and debt instruments repayable between 2 and 5 years and ‘long-term’ to bank borrowings repayable
after more than 5 years.
39
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
5.
FINANCIAL RISK MANAGEMENT - continued
The sensitivity analysis below has been determined based on the exposure to interest rates for non-derivative instruments at the end of
the reporting financial year. For floating rate liabilities, the analysis is prepared assuming that the amount of the liability outstanding at
the end of the financial year was outstanding for the whole year. A 50-basis point increase or decrease is used when reporting interest
rate risk internally to key management personnel and represents management’s assessment of the reasonably possible changes in
interest rates.
If interest rates have been 50 basis points higher/lower and all other variables were held constant, the Group’s loss for the financial year
ended 31 December 2019 would increase/decrease by €5,646 (2018: decrease/increase by €7,124). This is mainly attributable to the
Group’s exposure to interest rates on its variable rate borrowings, which are primarily included in Eqtec Iberia SLU and in the disposal
group. The Group’s sensitivity to interest rates has decreased during the current financial year mainly due to the repayment of bank
borrowings in both Eqtec Iberia SLU and in the disposal group.
Foreign exchange risk
The Group is mainly exposed to future changes in the Sterling and the US Dollar relative to the Euro. These risks are managed by monthly
review of Sterling and US Dollar denominated monetary assets and monetary liabilities and assessment of the potential exchange rate
fluctuation exposure. The Group’s exposure to foreign exchange risk is not actively managed. Management will reassess their strategy to
foreign exchange risk in the future.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting
financial year are as follows:
Sterling
US Dollar
Liabilities
2019
€
1,345,407
1,418,028
2018
€
3,499,871
3,049,155
Assets
2019
€
720,511
-
2018
€
670,653
-
The following table details the Group’s sensitivity to a 10% increase and decrease in the Euro against the relevant foreign currencies. 10%
is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s
assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign
currency denominated monetary items and adjusts their translation at the year-end for a 10% change in foreign currency rates. The
sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is
in the currency other than the currency of the lender or the borrower. A positive number below indicates an increase in profit where the
Euro strengthens 10% against the relevant currency. For a 10% weakening of the Euro against the relative currency, there would be a
comparable impact on the loss, and the balances below will be negative.
Profit and loss
Sterling Impact
US Dollar Impact
2019
€
63,121
2018
€
285,780
31 Dec 2019
€
143,235
31 Dec 2018
€
269,015
The Group’s sensitivity to foreign currency has decreased during the current financial year mainly due to the settlement of debt
denominated in both sterling and US Dollar through the issue of equity.
6.
CAPITAL MANAGEMENT POLICIES AND PROCEDURES
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates, which are
detailed above. There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the
risk.
The Group manages its capital to ensure that the Group is able to continue as a going concern while maximising the return to shareholders
through the optimisation of the debt and equity balance.
The capital structure of the company consists of financial liabilities, cash and cash equivalents and equity attributable to the equity holders
of the parent company.
The Group’s management reviews the capital structure on a yearly basis. As part of the review, management considers the cost of capital
and risks associated with it. The Group’s overall strategy on capital risk management is to continue to improve the ratio of debt to equity.
40
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
5.
CAPITAL MANAGEMENT POLICIES AND PROCEDURES - continued
The gearing ratio of the Group for the financial year presented is as follows:
Borrowings
Lease liabilities
Cash and bank balances
Net debt
Equity
Net debt to equity ratio
31 Dec 2019
31 Dec 2018
€
2,745,689
274,434
(482,392)
2,537,731
17,793,222
€
5,974,493
-
(463,414)
5,511,079
14,423,570
14%
38%
Debt is defined as lease liabilities and borrowings of the Group while Equity includes all share capital, share premium and accumulated
deficit attributable to equity holders of the parent.
The movement in the net debt to equity ratio is as a result of the conversion of €3.6 million of debt into equity.
7.
SEGMENT INFORMATION
Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment
performance focuses on the products and services sold to customers. The Group’s reportable segments under IFRS 8 Operating Segments
are as follows:
Technology Sales: Being the sale of Gasification Technology and associated Engineering and Design Services;
Power Generation: Being the development and operation of renewable energy electricity and heat generating plants.
The chief operating decision maker is the Chief Executive Officer. Information regarding the Group’s current reportable segment is
presented below. The following is an analysis of the Group’s revenue and results from continuing operations by reportable segment:
Technology Sales
Power Generation
Total from continuing
operations
2019
€
1,664,874
21,438
1,686,312
Segment Revenue
2018
€
Segment Profit/(Loss)
2018
€
2019
€
2,134,028
41,659
(1,206,736)
235,305
(1,482,168)
(280,674)
2,175,687
(971,431)
(1,762,842)
Central administration costs and directors’ salaries
(Reversal of)/Impairment of property, plant and equipment and intangible assets
Impairment of inventories
Impairment of goodwill
Other income
Other gains and losses
Foreign currency losses
Finance costs
(1,618,502)
94,985
(98,851)
-
195,152
128,235
(187,249)
(1,125,312)
(1,077,724)
(2,121,637)
-
(1,427,038)
142,325
(772,046)
(14,813)
(1,212,662)
Loss before taxation (continuing operations)
(3,582,973)
(8,246,437)
Revenue reported above represents revenue generated from jointly controlled entities and external customers. Inter-segment sales for
the financial year amounted to €Nil (2018: €Nil). Included in revenues in the Power Generation Segment are revenues of €21,438 (2018:
€41,659) which arose from sales to GG Eco Energy Limited, an associate undertaking of EQTEC plc. This represents 1% (2018: 2%) of total
revenues in the financial year.
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in Note 3. Segment profit
or loss represents the profit or loss earned by each segment without allocation of central administration costs and directors’ salaries, other
operating income, share of profit or loss of jointly controlled entities, profit on disposal of jointly controlled entities, interest costs, interest
income and income tax expense. This is the measure reported to the chief operating decision maker for the purpose of resource allocation
and assessment of segment performance.
41
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
7.
SEGMENT INFORMATION - continued
Other segment information:
Technology sales
Power Generation
Head Office
Depreciation and amortisation
Additions to non-current assets
2019
€
99,644
-
617
2018
€
16,647
-
411
100,261
17,058
2019
€
10,272
-
-
10,272
2018
€
-
-
1,233
1,233
In addition to the depreciation and amortisation reported above, reversal of impairment losses of €94,985 (2018: impairment losses of
€2,121,637) and impairment losses of €Nil (2018: €1,427,038) were recognised in respect of property, plant, equipment and intangible
assets and goodwill respectively. These reversal of impairment losses and impairment losses were attributable as follows: Power
Generation Segment, Reversal of impairment losses €173,516 (2018: loss of €2,121,637); Technology Sales Impairment losses €78,326
(2018: loss of €1,427,038); Head Office Impairment losses €206 (2018: €Nil)
The Group operates in three principal geographical areas: Republic of Ireland (country of domicile), Spain and the United Kingdom. The
Group’s revenue from continuing operations from external customers and information about its non-current assets* by geographical
location are detailed below:
Republic of Ireland
Spain
United Kingdom
Revenue from Associates and External
Customers
Non-current assets*
2019
€
-
1,664,874
21,438
2018
€
-
2,134,028
41,659
1,686,312
2,175,687
2019
€
-
271,255
-
271,255
2018
€
822
84,234
2,228,375
2,313,431
*Non-current assets excluding goodwill, financial instruments, deferred tax and investment in jointly controlled entities and associates.
The management information provided to the chief operating decision maker does not include an analysis by reportable segment of
assets and liabilities and accordingly no analysis by reportable segment of total assets or total liabilities is disclosed.
8.
REVENUE
An analysis of the Group’s revenue for the financial year (excluding interest revenue), from continuing and discontinued operations, is as
follows:
Continuing
Discontinued
Revenue from technology sales
1,664,874
2,134,028
2019
€
2018
€
2019
2018
€
-
€
-
Revenue from the generation of energy from wind
-
-
193,614
183,660
Revenue from consultancy fees associated with the
generation of heat
21,438
41,659
-
-
9.
COST OF SALES
Materials purchased
ISEM trading fees
1,686,312
2,175,687
193,614
183,660
Continuing
Discontinued
2019
€
1,598,250
-
2018
€
2,253,389
-
2019
2018
€
-
€
-
955
275
1,598,250
2,253,389
955
275
42
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
10
ADMINISTRATIVE EXPENSES
Employee expenses
Office and operating expenses
Marketing expenses
Professional fees
Depreciation of property, plant & equipment
equipment (Note 18)
Gain on disposal of PPE
Reversal of impairment of investments (Note
20)
Bad debts and provision against trade and
other receivables (Note 24)
Travel and subsistence
Other miscellaneous expenses
Regulatory expenses
11.
OTHER INCOME
Income from insurance claim
Income from lease arrangements
Income from other services
Operating grants
Continuing
Discontinued
2019
€
2018
€
1,591,198
1,439,110
(65,634)
1,962
424,292
100,261
-
(3,078)
213,634
104,414
13,979
296,967
559,534
11,698
285,999
17,058
(3,139)
-
-
165,396
45,002
242,206
2019
2018
€
-
54,579
-
11,908
€
-
35,652
-
3,400
73,245
73,321
-
-
-
-
-
-
-
-
104
-
58
-
2,677,995
2,762,864
139,836
112,431
Continuing
Discontinued
2019
€
-
24,157
13,144
157,851
2018
€
108,027
23,000
8,400
2,898
2019
2018
€
-
-
-
€
-
-
-
-
-
195,152
142,325
-
-
12.
OTHER GAINS AND LOSSES
Continuing
Discontinued
Gain/(Loss) on debt for equity swap
128,235
(772,046)
2019
€
2018
€
2019
€
-
2018
€
-
During the financial year the Group extinguished some of its borrowings by issuing equity instruments. In accordance with IFRIC 19
Extinguishing Financial Liabilities with Equity Instruments, the gain recognised on these transactions was €128,235 (2018: loss of
€772,046).
43
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
13.
FINANCE COSTS AND INCOME
Finance Costs
Interest on loans, bank facilities and
overdrafts
Continuing
Discontinued
2019
€
2018
€
2019
€
2018
€
1,105,768
1,212,662
31,145
34,202
Interest expense for leasing arrangements
9,544
-
-
-
Other interest
10,000
-
-
-
Finance Income
Interest receivable on bank deposits
-
-
6
6
1,125,312
1,212,662
31,145
34,202
14.
EMPLOYEE DATA
Employee costs (including executive directors):
Salaries
Social insurance costs
Pension costs
2019
€
1,017,471
196,616
17,635
2018
€
1,070,394
183,756
-
1,231,722
1,254,150
Average number of employees (including executive directors)
Company
Average number of employees (including executive directors)
Capitalised employee costs in the financial year amounted to €Nil (2018 €Nil).
15.
LOSS BEFORE TAXATION
Loss before taxation on continuing operations is stated after
charging/(crediting):
Depreciation of property, plant and equipment (Note 18)
Profit on disposal of property, plant and equipment
Loss on foreign exchange
Directors’ remuneration:
(Note 32). for other services
termination of service as director
Impairment of inventories (Note 23)
Impairment of goodwill (Note 19)
(Reversal of)/ impairment losses of property, plant and
equipment charged to profit and loss (Note 18)
for services as directors
Auditor’s remuneration:
Audit of Group accounts
Tax advisory services
44
No.
12
3
2019
€
100,261
-
187,249
227,025
462,515
-
98,851
-
(94,985)
2019
€
50,000
10,700
60,700
No.
17
3
2018
€
17,058
(3,139)
14,813
167,245
478,852
10,093
-
1,427,038
2,121,637
2018
€
48,000
11,000
59,000
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
16.
INCOME TAX
Income tax expense comprises:
Current tax expense
Deferred tax credit
Adjustment for prior financial years
Tax expense
2019
€
-
-
-
-
2019
€
2018
€
-
-
-
-
2018
€
Loss before taxation
(3,561,289)
(8,209,679)
Applicable tax 12.50% (2018: 12.50%)
(445,161)
(1,026,210)
Effects of:
Amortisation & depreciation in excess of capital allowances
Expenses not deductible for tax purposes
Losses carried forward
Movement in deferred tax
Actual tax expense
21,688
(27,902)
451,375
-
-
-
11,297
540,090
474,823
-
-
-
The tax rate used for the reconciliation above is the corporate rate of 12.5% payable by corporate entities in Ireland on
taxable profits under tax law in that jurisdiction.
45
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
17.
LOSS PER SHARE
Basic loss per share
From continuing operations
From discontinued operations
Total basic loss per share
Diluted loss per share
From continuing operations
From discontinued operations
Total diluted loss per share
2019
€ per share
2018
€ per share
(0.001)
-
(0.001)
(0.001)
-
(0.001)
(0.004)
-
(0.004)
(0.004)
-
(0.004)
The loss and weighted average number of ordinary shares used in the calculation of the basic and diluted loss per share are as follows:
Loss for period attributable to equity holders of the parent
Profit for the period from discontinued operations used in the
calculation of basic earnings per share from discontinued operations
Losses used in the calculation of basic loss per share from continuing
operations
Weighted average number of ordinary shares for
the purposes of basic loss per share
Weighted average number of ordinary shares for
the purposes of diluted loss per share
2019
€
(3,764,519)
2018
€
(6,992,090)
21,684
36,758
(3,786,203)
(7,028,848)
No.
No.
2,576,585,384
1,563,237,257
2,576,585,384
1,563,237,257
Dilutive and anti-dilutive potential ordinary shares
The following potential ordinary shares were excluded in the diluted earnings per share calculation as they were anti-dilutive.
Share warrants in issue
Convertible loans in issue
Total anti-dilutive shares
Details of share warrants in issue outstanding at year-end are set out in Note 26.
2019
2018
297,800,062
331,566,767
629,366,829
339,000,429
10,000,000
349,000,429
46
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
18.
PROPERTY, PLANT & EQUIPMENT
Group
Cost
At 1 January 2018
Additions
Disposals
Foreign currency adjustment
At 31 December 2018
Adjustment on transition to
IFRS 16
Additions
Disposals
Consideration for acquisition
of associate (Note 20)
Foreign currency adjustment
Leasehold
Buildings
€
Motor
Vehicles
€
Office
equipment
€
Construction in
Progress
€
-
-
-
-
-
354,718
52,055
-
(52,055)
-
-
-
-
-
-
-
-
184,993
1,233
(14,396)
(1)
171,829
-
10,272
(840)
-
3
11,956,280
-
-
(149,723)
11,806,557
-
-
(294,960)
(9,745,158)
698,664
Total
€
12,193,328
1,233
(66,451)
(149,724)
11,978,386
354,718
10,272
(295,800)
(9,745,158)
698,667
At 31 December 2019
354,718
-
181,264
2,465,103
3,001,085
Accumulated depreciation
At 1 January 2018
Charge for the financial year
Charge on disposal
Impairment
Foreign currency adjustment
At 31 December 2018
Charge for the financial year
Charge on disposal
Consideration for acquisition
of associate (Note 20)
Impairment/Reversal of
impairment
Foreign currency adjustment
-
-
-
-
-
-
83,463
-
50,933
1,122
(52,055)
-
-
-
-
-
85,234
15,936
(14,396)
-
(1)
86,773
16,798
(840)
7,588,981
-
-
2,121,637
(132,436)
9,578,182
-
-
7,725,148
17,058
(66,451)
2,121,637
(132,437)
9,664,955
100,261
(840)
-
-
-
(7,516,152)
(7,516,152)
-
-
-
-
78,531
2
(173,516)
576,589
(94,985)
576,591
At 31 December 2019
83,463
-
181,264
2,465,103
2,729,830
Carrying amount
At 31 December 2018
-
-
85,056
2,228,375
2,313,431
At 31 December 2019
271,255
-
-
-
271,255
On 4 June 2019, the Group announced that it had entered into a legally binding agreement to acquire a 19.99% interest in NFCP on
financial close of the proposed construction and operation of a 2MW biomass plant (the "Project") by North Fork Community Power
LLC and this acquisition was completed on 31 December 2019. The consideration for the Company's investment is being solely satisfied
by the supply of construction in progress currently held at EQTEC's Newry site, valued at US$2.5 million (€2,229,006) (see note 20).
The Group carried out a review of the recoverable amount of property held by the Power Generation and Technology Sales operating
segments and by Head Office at 31 December 2019. The review led to recognition of a reversal of an impairment loss in the current
financial year of €94,985 (2018: impairment charge of €2,121,637), which has been recognised in profit or loss. The net reversal of the
impairment charge represents €300,000 of impairment charges reversed arising from the sale of equipment that had been previously
impaired in full, less additional impairment charges of €205,015 financial recorded in the year.
Included in the net carrying amount of property, plant and equipment are right-of-use assets as follows:
Leasehold buildings
Total right-of-use assets
47
31 Dec 2019
€
271,255
271,255
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
18.
PROPERTY, PLANT & EQUIPMENT – CONTINUED
The impairment losses have been shown separately in the consolidated statement of profit or loss.
Company
Cost
At 1 January 2018
Additions
At 31 December 2018
Additions
At 31 December 2019
Accumulated depreciation
At 1 January 2018
Charge for the financial year
At 31 December 2018
Charge for the financial year
Impairment
At 31 December 2019
Carrying amount
At 1 January 2019
At 31 December 2019
19.
INTANGIBLE ASSETS
Cost
Office
equipment
€
-
1,233
1,233
-
1,233
-
411
411
616
206
1,233
822
-
Goodwill
€
Total
€
-
1,233
1,233
-
1,233
-
411
411
616
206
1,233
822
-
Total
€
As at 1 January 2018, 31 December 2018 and
31 December 2019
16,710,497
16,710,497
Amortisation
As at 1 January 2018
Impairment losses
As at 31 December 2018
Impairment losses
As at 31 December 2019
Carrying value
As at 31 December 2018
As at 31 December 2019
-
1,427,038
1,427,038
-
1,427,038
15,283,459
15,283,459
-
1,427,038
1,427,038
-
1,427,038
15,283,459
15,283,459
48
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
19.
INTANGIBLE ASSETS – continued
Cash-generating units
Goodwill acquired in business combinations is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to
benefit from that business combination. A CGU is the smallest identifiable group of assets that generate cash inflows that are largely
independent of the cash inflows from other assets or group of assets. The CGUs represent the lowest level within the Group at which
the associated goodwill is assessed for internal management purposes and are not larger than the operating segments determined
in accordance with IFRS 8 Operating Segments. A total of 1 CGUs (2018: 1) have been identified and these are all associated with the
Technology Sales Segment. The carrying value of the goodwill within the Technology Sales Segment is €15,283,459 (2018:
€15,283,459).
In accordance with IAS 36 Impairment of Assets, the CGUs to which significant amounts of goodwill have been allocated are as follows:
2019
€
2018
€
Eqtec Iberia SLU
15,283,459
15,283,459
For the purpose of impairment testing, the discount rates applied to this CGU to which significant amounts of goodwill have been
allocated was 14% (2018: 14%) for the Eqtec Iberia CGU.
Annual test for impairment
Goodwill acquired through business combinations has been allocated to the above CGU for the purpose of impairment testing.
Impairment of goodwill occurs when the carrying value of the CGU is greater than the present value of the cash that it is expected to
generate (i.e. the recoverable amount). The Group reviews the carrying value of each CGU at least annually or more frequently if there
is an indication that a CGU may be impaired.
The recoverable amount of each CGU is determined from value-in-use calculations. The forecasts used in these calculations are based
on a financial plan approved by the Board of Directors, plus 5-year projections forecasted by management, and specifically excludes
any future acquisition activity.
The value in use calculation represents the present value of the future cash flows, including the terminal value, discounted at a rate
appropriate to each CGU. The real pre-tax discount rates used is 15%. These rates are based on the Group’s estimated weighted
average cost of capital, adjusted for risk, and are consistent with external sources of information.
The cash flows and the key assumptions used in the value in use calculations are determined based on management’s knowledge
and expectation of future trends in the industry. Expected future cash flows are, however, inherently uncertain and are therefore liable
to material change over time. The key assumptions used in the value in use calculations are subjective and include projected EBITDA
margins, net cash flows, discount rates used and the duration of the discounted cash flow model.
The directors are not currently aware of any other reasonably possible changes to key assumptions that would cause a unit’s carrying
amount to exceed its recoverable amount.
An impairment loss of €Nil (2018: €1,427,038) has been calculated for the financial year ended 31 December 2019.
49
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
20.
FINANCIAL ASSETS
GROUP
Investment in associate undertakings
At beginning of financial year
Reversal of impairment of investment in GG Eco Energy Limited
Disposal of investment in GG Eco Energy Limited
Investment in shares in North Fork Community Power LLC
At end of financial year
2019
€
-
3,078
(3,078)
2,229,006
2,229,006
2018
€
-
-
-
-
-
Investment in associate
Details of the Group’s interests in associated undertakings at 31 December 2019 is as follows:
Name of associated
undertaking
Country of
incorporation
Shareholding
Principal activity
North Fork Community
Power LLC
United States of
America
19.99%
Operator of biomass gasification power
project
On 4 June 2019, the Group announced that it had entered into a legally binding agreement to acquire a 19.99% interest in NFCP
on financial close of the proposed construction and operation of a 2MW biomass plant (the "Project") by North Fork Community
Power LLC and this acquisition was completed on 31 December 2019. For the first five years of operation the share of profits
from the associate is limited to 0.1999% rising to 19.99% thereafter. The consideration for the Company's investment is being
solely satisfied by the supply of certain items of the existing equipment currently held at EQTEC's Newry site, valued at US$2.5
million (€2,229,006) (See note 18), and no cash consideration is therefore required.
During the financial year, the Group disposed of its 30% interest in the shares of GG Eco Energy Limited at cost.
Summarised financial information in respect of the Group’s interests in associated undertakings is as follows:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets/(liabilities)
Group’s share of net assets of associated entities
Total revenues
Total expenses
Total loss for the financial year
Group’s share of profits of associated entities
2019
€
1,339,413
17,993,577
(18,721,867)
(34,885)
576,238
115,190
2019
€
257,440
(495,346)
(237,906)
-
2018
€
1,124,930
263,963
(1,176,779)
(1,299,410)
(1,087,296)
-
2018
€
542,171
(844,397)
(302,226)
-
50
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
20.
FINANCIAL ASSETS – continued
COMPANY
Investment in subsidiary undertakings
At beginning of financial year
Reclassification of inter-company balance as
contribution to capital in Eqtec Iberia
Investment in capital in Eqtec Iberia
Provision for impairment in investment in subsidiaries
2019
€
2018
€
16,796,663
15,896,663
1,500,000
-
-
900,000
(1,427,038)
-
At end of financial year
16,869,625
16,796,663
Loans to subsidiary undertakings
At beginning of financial year
Provision for impairment of investment in subsidiaries
571,304
1,720,736
-
(1,149,432)
At end of financial year
571,304
571,304
Total
17,440,929
17,367,967
Details of EQTEC plc subsidiaries at 31 December 2019 are as follows:
Name
Newry Biomass No. 1 Limited
React Biomass Limited
Reforce Energy Limited
Country of
Incorporation
Republic of Ireland
Republic of Ireland
Republic of Ireland
Pluckanes Windfarm Limited
Republic of Ireland
Grass Door Limited
United Kingdom
Shareholding
100%
100%
100%
100%
100%
Newry Biomass Limited
Northern Ireland
50.02%
Enfield Biomass Limited
United Kingdom
Moneygorm Wind Turbine
Limited
Eqtec No. 1 Limited
Eqtec Strategic Project Finance
Limited (formerly Plymouth
Biomass Limited)
Clay Cross Biomass Limited
Altilow Wind Turbine Limited
Republic of Ireland
Republic of Ireland
United Kingdom
United Kingdom
Republic of Ireland
Eqtec Iberia SLU
Spain
100%
100%
100%
100%
90%
100%
100%
Principal activity
Investment company
Investment company
Renewable energy development
company
Generation of electricity through
wind
Developer & operator of
biomass heat generating
projects
Energy utility company
Energy utility company
Dormant company
Investment company
Dormant company
Energy utility company
Generation of electricity through
wind
Provision of technical
engineering services
The shareholding in each company above is equivalent to the proportion of voting power held.
The registered office for all of the above companies is Building 1000, City Gate, Mahon, Cork, except for Enfield Biomass Limited,
Plymouth Biomass Limited, Clay Cross Biomass Limited and Grass Door Limited, whose registered office is 3 Stucley Place, London
NW1 8NS, England; Newry Biomass Limited, whose registered office is 68 Cloughanramer Road, Carnmeen, Newry, Co. Down BT34
1QG, Northern Ireland; and Eqtec Iberia SLU, whose registered office is Rosa Sensat nº 9-11 Planta 5ª, 08005 Barcelona, Spain.
51
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EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
21.
OTHER FINANCIAL INVESTMENTS
Bonds and Debentures
Less: Provision against investment in Bonds
Investment in Shares
Other investments
22.
DEFERRED TAXATION
2019
€
402,644
(402,644)
1,832
15,492
2018
€
402,644
(402,644)
1,832
17,102
17,324
18,934
A deferred tax asset has not been recognised at the statement of financial position date in respect of trading tax losses arising
from the Irish and UK subsidiaries. Due to the history of past losses, the company has not recognised any deferred tax asset in
respect of tax losses to be carried forward which are approximately €17.8 million at 31 December 2019 (2018: €14 million).
23.
INVENTORIES
Work in progress
2019
€
-
2018
€
98,851
For the financial year ended 31 December 2019, €Nil (2018: €68,273) of inventories was included in profit or loss as an expense
and €98,851 (2018: €Nil) was impaired resulting from write down of inventories.
24.
TRADE AND OTHER RECEIVABLES
Group
Trade receivables gross
Allowance for credit losses
Trade receivables net
VAT receivable
Payments on account
Advances to related undertakings
Allowance for credit losses
Prepayments
Receipts from share fundraise
Corporation tax
Other receivables
2019
€
805,425
(456,671)
348,754
18,226
-
60,000
(60,000)
66,773
235,130
4,560
55,144
2018
€
420,169
(306,292)
113,877
232,590
34,594
60,000
-
319,678
-
96
70,917
728,587
831,752
All amounts are short-term. The net carrying value of trade receivables is considered a reasonable approximation of fair value.
The following table shows an analysis of trade receivables split between past due and within terms accounts. Past due is when an
account exceeds the agreed terms of trade, which are typically 60 days.
Within terms
Past due more than one month but less than two months
Past due more than two months
2019
€
311,438
9,813
484,174
805,425
2018
€
35,196
2,377
382,596
420,169
53
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
24.
TRADE AND OTHER RECEIVABLES - continued
Included in the Group’s trade receivables balance are debtors with carrying amount of €27,503 (2018: €76,304) which are past due
at year end and for which the Group has not provided.
The Group does not hold any collateral over these balances. No interest is charged on overdue receivables. The quality of past due
not impaired trade receivables is considered good. The carrying amount of trade receivables approximates to their fair values.
The Group’s policy is to recognise an allowance for doubtful debts of 100% against all receivables over 120 days because historical
experience has been that trade receivables that are past due beyond 120 days are not recoverable. Allowances for doubtful debts
are recognised against trade receivables between 60 days and 120 days based on estimated irrecoverable amounts determined by
reference to past default experience of the counterparty and an analysis of the counterparty’s current financial position. The review
on these balances shows that all of the above amounts, with the exception of €2,039, (2018: €2,377) are considered recoverable.
In determining the recoverability of a trade receivable, the Group considers any changes in the credit quality of the trade receivable
from the date credit was initially granted up to the end of the current reporting financial year. The concentration of the credit risk
is limited due to the customer base being large and unrelated, and the fact that no one customer holds balances that exceeds 10%
of the gross assets of the Group. The maximum exposure risk to trade and other receivables at the reporting date by geographic
region, ignoring provisions, is as follows:
Ireland
Spain
United Kingdom
2019
€
30,000
475,425
300,000
805,425
2018
€
-
420,169
-
420,169
The aged analysis of other receivables is within terms.
The closing balance of the trade receivables loss allowance as at 31 December 2019 reconciles with the trade receivables loss
allowance opening balance as follows:
Loss allowance as at 1January 2018 calculated under IAS 39
IFRS 9 transition adjustment
Opening loss allowance as at 1 January 2018
Loss allowance recognised during the financial year
Loss allowance as at 31 December 2018 556
Loss allowance as at 31 December 2018
Loss allowance recognised during the gear
Loss allowance recognised during the financial year
Loss allowance as at 31 December 2019
€
306,292
-
306,292
-
306,292
150,379
456,671
The closing balance of the advances to related undertakings loss allowance as at 31 December 2019 reconciles with the advances
to related undertakings loss allowance opening balance as follows:
Loss allowance as at 1January 2018 calculated under IAS 39
IFRS 9 transition adjustment
Opening loss allowance as at 1 January 2018
Loss allowance recognised during the financial year
Loss allowance as at 31 December 2018 556
Loss allowance as at 31 December 2018
Loss allowance recognised during the gear
Loss allowance recognised during the financial year
Loss allowance as at 31 December 2019
There is no concentration of credit risk with respect to receivables as disclosed in Note 5 under credit risk.
€
-
-
-
-
-
60,000
60,000
54
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
24.
TRADE AND OTHER RECEIVABLES - continued
Company
Amounts due from subsidiary undertakings
Allowance for impairment of balances
Trade receivables
Allowance for credit losses
Advances to related undertakings
Allowance for credit losses
Prepayments
Receipts from share fundraise
Corporation Tax
VAT Receivable
Other receivables
2019
€
1,699,272
(665,771)
1,033,501
30,000
(30,000)
60,000
(60,000)
57,165
235,130
96
5,498
2,614
2018
€
1,756,008
(160,521)
1,595,487
-
-
60,000
-
248,866
-
96
13,721
45,681
1,334,004
1,963,851
The concentration of credit risk in the individual financial statements of EQTEC plc relates to amounts due from subsidiary
undertakings. The directors have reviewed these balances in the light of the impairment review carried out on the investments by
EQTEC plc in its subsidiaries.
The directors considered the future cash flows arising from subsidiaries and are satisfied that the appropriate impairment has been
applied to these balances.
25.
CASH AND CASH EQUIVALENTS
For the purposes of the cash flow statement, cash and cash equivalents include cash on hand and in banks and bank overdrafts. Cash
and cash equivalents at the end of the financial year as shown in the cash flow statement can be reconciled to the related items in the
balance sheet as follows:
Group
Cash and bank balances
Bank overdrafts (Note 28)
Sub-total
Cash and cash equivalents included in a disposal
group held for resale (Note 31)
Company
Cash and bank balances
Bank overdrafts (Note 28)
2019
€
482,392
-
482,392
125,802
608,194
448,619
-
448,619
2018
€
463,414
(2,563)
460,851
126,718
587,569
384,704
(2,563)
382,141
The carrying amount of the cash and cash equivalents is considered a reasonable approximation its fair value.
55
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
26.
EQUITY
Share Capital
At 31 December 2018
Ordinary shares of
€0.001 each
Deferred ordinary shares
of €0.40 each
Deferred “B” Ordinary
Shares of €0.099 each
Deferred convertible
“A” ordinary shares of
€0.01 each
At 31 December 2019
Ordinary shares of
€0.001 each
Deferred ordinary shares
of €0.40 each
Deferred “B” Ordinary
Shares of €0.099 each
Deferred convertible “A”
ordinary shares of €0.01
each
Authorised
Number
Allotted and
called up
Number
Authorised
€
Allotted and
called up
€
12,561,091,094
1,804,744,243
12,561,091
1,804,744
200,000,000
22,370,042
80,000,000
8,948,017
75,140,494
75,140,494
7,438,909
7,438,909
10,000,000,000
99,117,952
100,000,000
991,180
200,000,000
19,182,850
Authorised
Number
Allotted and
called up
Number
Authorised
€
Allotted and
called up
€
12,561,091,094
3,939,376,266
12,561,091
3,939,376
200,000,000
22,370,042
80,000,000
8,948,017
75,140,494
75,140,494
7,438,909
7,438,909
10,000,000,000
99,117,952
100,000,000
991,180
200,000,000
21,317,482
The holders of the ordinary shares are entitled to participate in the profits or assets of the Company (by way of payment of any
dividends, on a winding up or otherwise) and are entitled to receive notice, attend, speak and vote at general meetings of the
Company. Each ordinary share equates to one vote at meetings of the company.
The holders of the deferred convertible “A” ordinary shares are entitled to participate pari passu with ordinary shareholders in the
profits or assets of the Company on a winding-up, up to an amount equal to the par value paid in respect of such deferred convertible
“A” ordinary shares but are not entitled to participate in the profits or assets of the Company (by way of payment of any dividends or
otherwise). The holders of the deferred convertible “A” ordinary shares are not entitled to receive notice, attend, speak and vote at
general meetings of the Company.
The holders of the deferred ordinary shares and the deferred “B” ordinary shares are not entitled to participate in the profits or assets
of the Company (by way of payment of any dividends, on a winding up or otherwise) and are not entitled to receive notice, attend,
speak and vote at general meetings of the Company.
Share Premium
Proceeds received in excess of the nominal value of the shares issued during the financial year have been included in share premium,
less registration and other regulatory fees. Costs of new shares charged to equity amounted to €270,255 (2018: €112,788).
Company Share Premium
The share premium included in the consolidated and company statement of financial position is different by €18,934,080 due to the
reverse acquisition of the Group which occurred on 13 October 2008. The reverse acquisition resulted to a reverse acquisition reserve
which has been netted off against the share premium in the consolidated statement of financial position.
56
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
26.
EQUITY - continued
Movements in the financial year to 31 December 2019
Amounts of shares
Ordinary Shares of €0.001 each issued and fully paid
- Beginning of the period
- Issued on exercise of warrants
- Issued in lieu of borrowings
- Share issue private placement
Total Ordinary shares of €0.001 each authorised, issued and fully
paid at the end of the period
2019
2018
1,804,744,243
163,027,158
977,532,138
994,072,727
1,346,090,838
-
458,653,405
-
3,939,376,266
1,804,744,243
Share Warrants
As at 31 December 2019 the Company had 664,636,833 warrants outstanding (2018: 494,259,679).
No of warrants
Exercise price (pence)
Final exercise date
Fair value at grant
95,833,333
81,296,134
33,350,318
383,400,000
1,533,505
38,450,000
30,773,543
664,636,833
0.75
1.19
1.57
0.25
5.33
10.0
0.33
6/8/2020
4/7/2021
3/10/2021
2/12/2021
5/2/2022
13/7/2022
28/6/2024
27.
NON-CONTROLLING INTERESTS
Balance at beginning of financial year
Share of profit/(loss) for the financial year
Unrealised foreign exchange gains
2019
€
(2,552,863)
203,230
23,359
Balance at end of financial year
(2,326,274)
date
£
-
-
-
-
-
-
-
2018
€
(1,335,784)
(1,217,589)
510
(2,552,863)
28.
BORROWINGS
Group
Current liabilities
At amortised cost
Bank overdrafts
Bank borrowings
Convertible secured loan note (CSLN)
Non-convertible secured loan facility (NCSLF)
Other loans
Convertible secured loan facility (CSLF)
Non-current liabilities
At amortised cost
Bank borrowings
Convertible secured loan note (CSLN)
Non-convertible secured loan facility (NCSLF)
2019
€
2018
€
-
125,224
1,008,017
-
5,691
1,418,028
2,563
207,037
-
147,474
5,691
2,526,327
2,556,960
2,889,092
188,729
-
-
188,729
313,952
2,216,604
554,845
3,085,401
57
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
28.
BORROWINGS – continued
Company
Current liabilities
Bank overdrafts
Convertible secured loan (CSLN)
Non-convertible secured loan facility (NCSLF)
Convertible secured loan facility (CSLF)
Non-current liabilities
Convertible secured loan note (CSLN)
Convertible secured loan facility (NCSLF)
Borrowings at amortised cost
2019
€
2018
€
-
1,008,017
-
1,418,028
2,563
-
147,474
2,526,327
2,426,045
2,676,364
-
-
2,216,603
554,845
-
2,771,448
Both the convertible secured loan note and the convertible secured loan facility are secured through an intercreditor deed by
mortgage debentures, cross guarantees and share pledges over the Group. The interest rate on both loans is fixed at 12.5% and
both loans mature on 31 July 2020. All amounts outstanding under both loans are to be repaid as a single payment of principal and
accrued interest on 31 July 2020, together with a cash redemption fee of 8 per cent on the balances outstanding as at that date.
The holders of both loans have been given the right, at their sole discretion, to convert the outstanding principal and interest in part
or in full, at any time up to 31 July 2020 into new Ordinary Shares at 0.66 pence per share. The redemption fee of 8 per cent will not
be payable on any debt converted in this manner. However, the holders of the convertible secured loan note, being Altair
Investment Group Limited the Company’s 28.87 per cent shareholder, can only elect to convert if such exercise would not trigger
an obligation under Rule 9 of the Irish Takeover Rules to make a general offer for the balance of issued shares in the capital of the
Company.
The face value of the convertible secured loan note at 31 December 2019, including accrued interest, is €1,070,915 (31 December
2018: €2,216,604). The face value of the convertible secured loan facility and accrued interest at 31 December 2019 is €1,501,825 (31
December 2018: €2,853,811).
Bank borrowings comprise two loans from Banco Popular in Spain which are unsecured. The first loan has a balance of €98,690
carries a fixed interest rate of 2.6% and matures on 13 January 2021. The second loan has a balance of €215,263 carries a fixed interest
rate of 7.8% and matures on 9 March 2025.
The non-convertible secured loan facility (NCSLF) was at a fixed rate of 15% paid monthly in arrears. The NCSLF was for a five-year
term and the principal together with any accrued interest was repaid by a bullet repayment during June 2019. The NCSLF was
secured by mortgage debentures, cross guarantees and share pledges over EQTEC and its subsidiary companies.
58
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EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
29.
LEASES
Lease liabilities are presented in the statement of financial position as follows:
Group
Current
Non-current
2019
€
82,726
191,708
274,434
2018
€
-
-
-
The Group has a lease for its office in Iberia, Spain. With the exception of short-term leases and leases of low-value underlying
assets, each lease is reflected on the statement of financial position as a right-of-use asset and a lease liability. The Group
classifies its right-of-use assets in a consistent manner to its property, plant and equipment (see Note 18).
Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another
party, the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by
incurring a substantive termination fee. Some leases contain an option to purchase the underlying leased asset outright at the
end of the lease, or to extend the lease for a further term. The Group is prohibited from selling or pledging the underlying leased
assets as security. For leases over office buildings, the Group must keep those properties in a good state of repair and return
the premises in their original condition at the end of the lease. Further, the Group must insure items of property, plant and
equipment and incur maintenance fees on such items in accordance with the lease contracts.
The table below describes the nature of the Group’s leasing activities by type of right-of-use asset recognized in the statement
of financial position:
Right-of-use
asset
No. of right-
of-use assets
leased
Range of
remaining
term
Average
remaining
lease term
No. of leases
with
extension
options
No of leases
with options
to purchase
No of leases
with variable
payments
linked to an
index
No of leases
with
termination
options
Office
Building
1
3.25 years
3.25 years
0
0
0
0
The lease liabilities are secured by the related underlying asset. Further minimum lease payments at 31 December 2019 were
as follows:
1-2 years
Minimum lease payments due
3-4 years
2-3 years
4-5 years
Within 1
year
€
€
€
€
2019
Lease payments
Finance charges
Net Present Values
2018
Lease payments
Finance charges
Net Present Values
89,828
(7,102)
82,726
89,828
(4,585)
85,243
89,828
(1,993)
87,835
18,714
(84)
18,630
-
-
-
-
-
-
-
-
-
-
-
-
After 5
years
€
-
-
-
-
-
-
Total
€
288,198
(13,764)
274,434
-
-
--
€
-
-
-
-
-
-
Lease payments not recognised as a liability
The Group has elected not to recognise a lease liability for short-term leases (leases with an expected term of 12 months or less) or for
leases of low value assets. Payments made under such leases are expensed on a straight-line basis. The expense related to payments
not included in the measurement of the lease liability is as follows:
Short term leases
Leases of low-value assets
2019
€
20,216
10,863
31,079
61
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
29.
LEASES - continued
At 31 December 2019, the Group was committed to short-term leases and the total commitment at that date was €18,060.
Total cash outflow for lease liabilities for the financial year ended 31 December 2019 was €80,284 (2018: €Nil).
Additional information on the right-to-use assets by class of assets is as follows:
Leasehold Buildings
Total Right-of-use assets
Carrying Amount (Note 18)
€
271,255
271,255
Depreciation Expense
€
83,463
83,463
Impairment
€
-
-
The right-of-use assets are included in the same line item as where the corresponding underlying assets would be presented if they
were owned.
30.
TRADE AND OTHER PAYABLES
Group
VAT payable
Trade payables
Other payables
Accruals
PAYE & social welfare
2019
€
25,214
196,221
69,075
517,139
68,422
876,071
2018
€
23,000
725,576
56,890
600,334
88,906
1,494,706
The carrying amount of trade and other payables approximates fair value. All trade and other payables fall due within one year.
Trade and other creditors are payable at various dates in accordance with the suppliers’ usual and customary credit terms.
Corporation tax and other taxes including social insurance are repayable at various dates over the coming months in
accordance with the applicable statutory provisions.
Company
Trade payables
Other creditors
Amounts payable to subsidiary undertakings
PAYE & social welfare
Accruals
2019
€
17,120
1,250
17,880
13,095
399,524
448,869
2018
€
127,411
1,250
12,881
20,065
123,949
285,556
The carrying amount of trade and other payables approximates fair value. All trade and other payables fall due within one year.
31.
DISPOSAL GROUP CLASSIFIED AS HELD FOR RESALE AND DISCONTINUED OPERATIONS
The Group is in negotiations with certain parties with respect to the sale of its subsidiary, Pluckanes Windfarm Limited, which is involved
in the generation of electricity through wind. The disposal is consistent with the Group’s long-term policy to focus its activities as a
technology solution company for waste gasification to energy projects. The disposal is expected to be complete in Q2 2020.
Consequently, assets and liabilities allocable to Pluckanes Windfarm Limited were classified as a disposal group. Revenues and
expenses, gains and losses relating to the discontinuation of this subgroup have been eliminated from profit or loss from the Group’s
continuing activities and are shown as a single line item on the face of the statement of profit or loss. The combined results of the
discontinued operations included in the loss for the financial year are set out below.
62
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
31. DISPOSAL GROUP CLASSIFIED AS HELD FOR RESALE AND DISCONTINUED OPERATIONS – continued
Profit for the financial year from discontinued operations
Revenue (Note 8)
Cost of sales (Note 9)
Administrative Expenses (Note 10)
Operating Profit
Finance Costs (Note 13)
Finance Income (Note 13)
Profit from discontinued operations before tax
Tax Expenses
Profit for the financial year from discontinued operations (attributable
to owners of the Company)
2019
€
193,614
(955)
192,659
(139,836)
52,823
(31,145)
6
21,684
-
21,684
Cash flows generated by Pluckanes Windfarm Limited for the financial years under review are as follows:
Cash flows from discontinued operations
Operating activities
Investing activities
Financing activities
2019
€
110,184
6
(111,106)
2018
€
183,660
(275)
183,385
(112,431)
70,954
(34,202)
6
36,758
-
36,758
2018
€
142,956
(904)
(120,472)
Net cash flows (used in)/generated from discontinued operations
(916)
21,580
The carrying amount of assets and liabilities in this disposal group are summarised as follows:
Assets classified as held for resale:
Non-current assets:
Property, plant and equipment
Current assets:
Trade and other receivables
Cash and cash equivalents (Note 25)
2019
€
2018
€
1,017,613
1,090,858
54,659
125,802
25,971
126,718
Assets classified as held for resale
1,198,074
1,243,547
Liabilities classified as held for resale:
Current liabilities:
Borrowings
Trade and other payables
821,634
25,321
901,250
12,232
Liabilities classified as held for resale
846,955
913,482
The directors of the Company expect that the fair value less costs to sell Pluckanes Windfarm Limited will be higher than the aggregate
carrying amount of the related assets and liabilities. Therefore, no impairment loss was recognised on reclassification of the assets and
liabilities as held for resale.
63
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
32.
RELATED PARTY TRANSACTIONS
The Group’s related parties include Altair Group Investment Limited (“Altair”), who at 31 December 2019 held 28.87% of the shares in
the Company, the associate companies and key management.
Transactions with Altair
During the financial year ended 31 December 2019, Altair advanced €301,584 (2018: €148,951) to the Group by way of borrowings.
During the financial year ended 31 December 2019, the Group repaid borrowings of €Nil (2018: €426,740) by way of cash and €2,562,329
(2018: €438,767) by way of conversion into equity. Interest payable to Altair for the financial year ended 31 December 2019 amounted
to €397,356 (2018: €343,639); this includes a redemption fee of €114,583 (2018: €Nil) with respect to a redemption fee for the early
settlement of the loan.
Included in borrowings, net of amortisation costs, at 31 December 2019 is an amount of €1,070,915 (2018: €3,064,245) due to Altair
from the Group and entitled the Convertible Secured Loan Note (CSLN).
Transactions with key management personnel
Key management of the Group are the members of EQTEC plc’s board of directors. Key management personnel remuneration includes
the following:
Directors
I Pearson
N O’Brien
(Resigned 2018)
L Sanchez
(Resigned 2018)
O Leiva (Resigned
28/6/2019)
T Quigley
I Price (Resigned
16/9/19)
G Madden
Y Aleman
(Appointed
28/8/19)
D Palumbo
(Appointed
28/8/19)
Total
Fees/Salaries
/Expenses
€’000
68
-
-
12
42
164
262
92
85
725
Termination
€’000
Other
Pension
€’000
€’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12
-
-
-
12
2019
€’000
68
-
-
12
42
176
262
92
85
737
2018
€’000
68
34
145
40
35
84
262
-
-
668
At 31 December 2019, directors’ remuneration unpaid (including past directors) amounted to €183,547 (31 December 2018: €23,642).
As announced by the Company on 9 July 2019, these unpaid remuneration is to be applied (net of any required tax deductions) in
subscribing for new ordinary shares of €0.001 each in the capital of the Company at a price of 0.33 pence per share, being equal to the
placing price of the placing announced on 28 June 2019.
Prior to becoming a director, Mr D Palumbo provided advisory services to the company. The cost of these services amounted to €103,201
(2018: €43,786) for the financial year ended 31 December 2019.
On 9 July 2019, the Company agreed to issue 15,151,515 new Ordinary Shares to Mr Thomas Quigley, non-executive director of the
Company, trading as Cloudberry Corporate Advisers, in lieu of corporate advisory fees to the value of £50,000 in relation to the debt
restructuring announced on 28 June 2019.
Details of each director’s interests in shares that were in office at the year-end are shown in the Directors’ Report.
Transactions with associate undertakings
During the financial year ended 31 December 2019, sales of €21,438 were made to associate undertakings (2018: €41,659).
64
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
33.
EVENTS AFTER THE BALANCE SHEET DATE
COVID-19
Since 31 December 2019, the spread of COVID-19 has severely impacted many local economies around the globe. In many countries,
businesses are being forced to cease or limit operations for long or indefinite periods of time. Measures taken to contain the spread of the
virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to
businesses worldwide, resulting in an economic slowdown. Global stock markets have also experienced great volatility and a significant
weakening. Governments and central banks have responded with monetary and fiscal interventions to stabilise economic conditions.
On 23 March 2019, the Company provided an update on how the Company is managing and responding to the current global health situation
and the rapidly evolving circumstances surrounding the spread of COVID-19. The safety of EQTEC’s staff, their families, the Company’s
customers and partners are the priority for EQTEC. With offices in the UK, Spain and Ireland, the impact of COVID-19 and government
recommendations varies in each location. Accordingly, the Company continues to assess the risks and adapt our plans and actions in
consultation with our local stakeholders.
The following are the results of actions taken by the Group in response to the crisis:
people have successfully transitioned to working from home, with little disruption and minor loss of efficiency
experienced no reduction in our design and engineering capability, and the delivery of these services to any of our projects
video conferencing is mitigating loss of physical presence with existing and potential new clients
•
•
•
• manageable loss of efficiency and levels of disruption expected to continue, as project management controls and internal management
•
•
systems are re-calibrated
no delay in milestone payments and whilst some exposure exists on the supply side with some potential loss of efficiency, all possible
steps are being taken to mitigate and limit any risk
given the uncertainty and rapidly changing nature of the situation, the Company is working to protect its cash resources by pro-actively
managing its capital expenditure and working capital, as well as identifying opportunities for expenditure savings that will not impact
on the long-term success of the Company.
Management assessed that the recoverability of the assets of the Group are not affected by COVID-19.
The degree of uncertainty associated with the outcome of the COVID-19 crisis increases significantly the further into the future forecasting is
undertaken. The nature and condition of the Group and the degree to which it is affected by external factors affect the judgement regarding
the outcome of the COVID-19 crisis. Any judgement about the future is based on information at the time at which the judgement is made.
Subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made.
Management will continually assess the information available at the time of publication.
Reprofiling of borrowings
On 1 June 2020, the Company announced that it had negotiated a reprofiling of existing loans plus interest of €2.7 million which were due to
mature on 31 July 2020 resulting in the extension of the maturity dates to 30 June 2021.
No other adjusting or significant non-adjusting events have occurred between the 31 December reporting date and the date of authorisation.
34.
NON-CASH TRANSACTIONS
During the financial year, the Group entered into the following non-cash investing and financing activities which are not reflected in the
consolidated statement of cash flows:
Issue of shares in settlement of borrowings and other liabilities
35.
COMPANY PROFIT AND LOSS
2019
€
3,623,207
2018
€
2,807,678
As a consolidated group income statement is published, a separate income statement for the parent company is omitted from the Group’s
financial statements by virtue of section 304(2) of the Companies Act, 2014. The Company’s loss for the financial year ended 31 December
2019 was €4,674,802 (2018: €4,279,077).
36.
CONTINGENT LIABILITIES
The interest rate on both the convertible secured loan note and the convertible secured loan facility is fixed at 12.5% and both loans mature
on 31 July 2020. All amounts outstanding under both loans are to be repaid as a single payment of principal and accrued interest on 31 July
2020, together with a cash redemption fee of 8 per cent. on the balances outstanding as at that date. The holders of both loans have been
given the right, at their sole discretion, to convert the outstanding principal and interest in part or in full, at any time up to 31 July 2020 into
new Ordinary Shares at 0.66 pence per share. The redemption fee of 8 per cent. will not be payable on any debt converted in this manner.
However, the holders of the convertible secured loan note, being Altair Investment Group Limited the Company’s 28.8 per cent shareholder,
can only elect to convert if such exercise would not trigger an obligation under Rule 9 of the Irish Takeover Rules to make a general offer for
the balance of issued shares in the capital of the Company.
65
EQTEC plc Annual Report and Accounts 2019
Notes to the consolidated financial statements
36.
CONTINGENT LIABILITIES – continued
Under IFRS 9, as the cash redemption fee is payable on the condition that the lender has not converted debt into equity, there is no legal
obligation to pay cash at the date of the contract, so no recognition is required in the accounts. If the loans were to be repaid in cash on 31
July 2020, a redemption fee of €205,819 would be recognised in the financial statements at 31 December 2019.
37.
COMMITMENTS UNDER OPERATNG LEASES
As described in Note 2, the Group has applied IFRS 16 using the modified retrospective approach and therefore comparative information
has not been restated. This means comparative information is still reported under IAS 17 and IFRIC 4. At 31 December 2018, the Group had
future minimum lease payments under non-cancellable operating leases as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
Late than 5 years
38.
APPROVAL OF FINANCIAL STATEMENT
These consolidated financial statements were approved by the Board of Directors on 12 June 2020.
2018
€
72,000
288,000
-
360,000
66
Inde(cid:393)enden(cid:410) a(cid:437)di(cid:410)o(cid:396)(cid:859)(cid:400) (cid:396)e(cid:393)o(cid:396)(cid:410) (cid:410)o (cid:410)he membe(cid:396)(cid:400) of E(cid:395)(cid:410)ec Plc
Opinion
We have audited the financial statements of Eqtec Plc (cid:894)(cid:410)he (cid:862)Compan(cid:455)(cid:863)(cid:895) and i(cid:410)(cid:400) (cid:400)(cid:437)b(cid:400)idia(cid:396)ie(cid:400) (cid:894)(cid:410)oge(cid:410)he(cid:396) (cid:410)he (cid:862)G(cid:396)o(cid:437)p(cid:863)(cid:895), which comprise the
Consolidated statement of profit or loss, Consolidated statement of other comprehensive income, Consolidated statement of financial
position, Consolidated statement of changes in equity, Consolidated statement of cash flows, Company statement of financial position,
Company statement of changes in equity, Company statement of cash flows for the financial year ended 31 December 2019 and the related
notes to the financial statements, including the summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is Irish law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion:
(cid:120)
the consolidated financial statements give a true and fair view in accordance with IFRSs as adopted by European Union,
of (cid:410)he a(cid:400)(cid:400)e(cid:410)(cid:400)(cid:853) liabili(cid:410)ie(cid:400) and financial po(cid:400)i(cid:410)ion of (cid:410)he G(cid:396)o(cid:437)p a(cid:410) (cid:1007)(cid:1005) Decembe(cid:396) (cid:1006)(cid:1004)(cid:1005)(cid:1013) and of (cid:410)he G(cid:396)o(cid:437)p(cid:859)(cid:400) financial
performance and cash flows for the financial year then ended;
the Company statement of financial position gives a true and fair view, in accordance with IFRSs as adopted by European
Union, of the assets, liabilities and financial position of the Company as at 31 December 2019 and of its cash flows for
the financial year then ended; and
the financial statements have been properly prepared and in accordance with the requirements of the Companies Act
2014.
(cid:120)
(cid:120)
Basis for opinion
We conducted our audit in acco(cid:396)dance (cid:449)i(cid:410)h In(cid:410)e(cid:396)na(cid:410)ional S(cid:410)anda(cid:396)d(cid:400) on A(cid:437)di(cid:410)ing (cid:894)I(cid:396)eland(cid:895) (cid:894)(cid:858)ISA(cid:400) (Ireland)(cid:859)(cid:895) and applicable la(cid:449)(cid:856) O(cid:437)(cid:396)
(cid:396)e(cid:400)pon(cid:400)ibili(cid:410)ie(cid:400) (cid:437)nde(cid:396) (cid:410)ho(cid:400)e (cid:400)(cid:410)anda(cid:396)d(cid:400) a(cid:396)e f(cid:437)(cid:396)(cid:410)he(cid:396) de(cid:400)c(cid:396)ibed in (cid:410)he (cid:858)Re(cid:400)pon(cid:400)ibili(cid:410)ie(cid:400) of (cid:410)he a(cid:437)di(cid:410)o(cid:396) fo(cid:396) (cid:410)he a(cid:437)di(cid:410) of (cid:410)he financial (cid:400)(cid:410)a(cid:410)emen(cid:410)(cid:400)(cid:859)
section of our report. We are independent of the Group and Company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in Ireland, namely the Irish Auditing and Accounting Supervisory Authority (IAASA) Ethical Standard
concerning the integrity, objectivity and independence of the auditor and the ethical pronouncements established by Chartered Accountants
Ireland, applied as determined to be appropriate in the circumstances of the entity. 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.
Material uncertainty related to going concern
In forming our opinion, which is not modified, we draw attention to the di(cid:400)clo(cid:400)(cid:437)(cid:396)e(cid:400) made in (cid:410)he Di(cid:396)ec(cid:410)o(cid:396)(cid:400)(cid:859) Repo(cid:396)(cid:410), Notes 3 and 4 to the
financial statements in respect of the ability of the Group to continue as a going concern(cid:856) The G(cid:396)o(cid:437)p inc(cid:437)(cid:396)(cid:396)ed a ne(cid:410) lo(cid:400)(cid:400) of (cid:934)3,561,289 for
the financial year ended 31 December 2019 and had ne(cid:410) c(cid:437)(cid:396)(cid:396)en(cid:410) liabili(cid:410)ie(cid:400) of (cid:934)1,953,659 and acc(cid:437)m(cid:437)la(cid:410)ed defici(cid:410) of (cid:934)56,011,538 as at 31
December 2019.
The(cid:400)e condi(cid:410)ion(cid:400)(cid:853) along (cid:449)i(cid:410)h (cid:410)he ma(cid:410)(cid:410)e(cid:396)(cid:400) e(cid:454)plained in (cid:410)he Di(cid:396)ec(cid:410)o(cid:396)(cid:400)(cid:859) Repo(cid:396)(cid:410), Notes 3 and 4 to the financial statements, indicate the
e(cid:454)i(cid:400)(cid:410)ence of a ma(cid:410)e(cid:396)ial (cid:437)nce(cid:396)(cid:410)ain(cid:410)(cid:455) (cid:449)hich ma(cid:455) ca(cid:400)(cid:410) (cid:400)ignifican(cid:410) do(cid:437)b(cid:410) o(cid:448)e(cid:396) (cid:410)he G(cid:396)o(cid:437)p(cid:859)(cid:400) abili(cid:410)(cid:455) (cid:410)o con(cid:410)in(cid:437)e a(cid:400) a going conce(cid:396)n. The validity of
the going concern basis is dependent on the continued development of the Group(cid:859)s sales pipeline and use of existing and future funding
lines. Managemen(cid:410) plan(cid:400) in (cid:396)ega(cid:396)d (cid:410)o (cid:410)he(cid:400)e ma(cid:410)(cid:410)e(cid:396)(cid:400) a(cid:396)e al(cid:400)o de(cid:400)c(cid:396)ibed in (cid:410)he Di(cid:396)ec(cid:410)o(cid:396)(cid:400)(cid:859) Repo(cid:396)(cid:410), Notes 3 and 4. The Directors are confident
that the finance will be secured, and the Group will have adequate resources to continue in operational existence for the foreseeable
future. For these reasons, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Emphasis of matter (cid:884) Impairment of goodwill
In forming our opinion on the consolidated financial statements, which is not modified, we have considered the adequacy of the disclosures
made in Note 19 to the consolidated financial (cid:400)(cid:410)a(cid:410)emen(cid:410)(cid:400) conce(cid:396)ning (cid:410)he Di(cid:396)ec(cid:410)o(cid:396)(cid:859)(cid:400) a(cid:400)(cid:400)e(cid:400)(cid:400)men(cid:410) of (cid:410)he impai(cid:396)men(cid:410) of (cid:410)he G(cid:396)o(cid:437)p(cid:859)(cid:400) good(cid:449)ill
(cid:449)hich amo(cid:437)n(cid:410)ed (cid:410)o (cid:934)(cid:1005)(cid:1009)(cid:853)(cid:1006)(cid:1012)(cid:1007)(cid:853)(cid:1008)(cid:1009)(cid:1013) and (cid:1011)(cid:1009)(cid:856)62(cid:1081) of (cid:410)he G(cid:396)o(cid:437)p(cid:859)(cid:400) (cid:410)o(cid:410)al a(cid:400)(cid:400)e(cid:410)(cid:400)(cid:856) The preparation of the consolidated financial statements requires
management to make estimates and judgements that affect the reported amounts of assets and liabilities at the date of the consolidated
financial statements and the reported amount of income and expenses during the reporting period. Management bases its estimates and
judgements on future cash flows and on other factors that are believed to be reasonable under the circumstances. Actual results may differ
from the estimates under different assumptions or conditions.
The value of the goodwill is based on the best estimates of the Directors. As part of our audit, we have gained sufficient audit evidence
supporting the assumptions of the model. However, in view of uncertainty in relation to the future events that affects the timing of revenue
cash flows and significance of this balance to the consolidated financial statements, we consider that it should be drawn to your attention.
The consolidated financial statements do not reflect the adjustments that might arise should the assumptions used in the impairment
model change.
67
Inde(cid:393)enden(cid:410) a(cid:437)di(cid:410)o(cid:396)(cid:859)(cid:400) (cid:396)e(cid:393)o(cid:396)(cid:410) (cid:410)o (cid:410)he membe(cid:396)(cid:400) of E(cid:395)(cid:410)ec Plc (continued)
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current year and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified,
including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and the directing of
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 therefore we do not provide a separate opinion on these matters.
In addi(cid:410)ion (cid:410)o (cid:410)he ma(cid:410)(cid:410)e(cid:396) de(cid:400)c(cid:396)ibed in (cid:858)(cid:859)Ma(cid:410)e(cid:396)ial (cid:437)nce(cid:396)(cid:410)ain(cid:410)(cid:455) (cid:396)ela(cid:410)ed (cid:410)o going conce(cid:396)n(cid:859)(cid:859)(cid:853) (cid:449)e ha(cid:448)e de(cid:410)e(cid:396)mined the matters described below
to be the key audit matters to be communicated in our report.
Overall audit strategy
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular,
we looked at where the directors made subjective judgements as discussed in the key audit matters section. We also addressed the risk of
management override of internal controls, including evaluating whether there was any evidence of potential bias that could result in a risk
of material misstatement due to fraud.
How we tailored the audit scope
The Group has two operating segments: the power generation segment and the technology sales segment. We tailored the scope of our
audit taking into account the areas where the risk of misstatement was considered material to the Group, taking into account the nature
of (cid:410)he G(cid:396)o(cid:437)p(cid:859)(cid:400) b(cid:437)(cid:400)ine(cid:400)(cid:400) and (cid:410)he ind(cid:437)(cid:400)(cid:410)(cid:396)(cid:455) in (cid:449)hich i(cid:410) ope(cid:396)a(cid:410)e(cid:400)(cid:856) We performed an audit of the complete financial information of all the
componen(cid:410)(cid:400) of (cid:410)he G(cid:396)o(cid:437)p(cid:856) Componen(cid:410)(cid:400)(cid:859) (cid:396)ep(cid:396)e(cid:400)en(cid:410) b(cid:437)(cid:400)ine(cid:400)(cid:400) (cid:437)ni(cid:410)(cid:400) ac(cid:396)o(cid:400)(cid:400) (cid:410)he G(cid:396)o(cid:437)p con(cid:400)ide(cid:396)ed fo(cid:396) a(cid:437)di(cid:410) (cid:400)coping p(cid:437)(cid:396)po(cid:400)e(cid:400)(cid:856)
In establishing the overall approach to our audit, we assessed the risk of material misstatement at a Group level, taking into account the
nature, likelihood and potential magnitude of any misstatement. As part of our risk assessment, we considered the control environment in
place at Eqtec plc.
Materiality and audit approach
The scope of our audit is influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures
and to evaluate the effect of misstatements, both individually and on the financial statements as a whole.
Based on our professional judgment, we determined materiality for the Group as follows: 1% of total assets (excluding goodwill) for the
financial year ended 31 December 2019. We agreed with the board of directors that we would report to them misstatements identified
during our audit above 5% of materiality as well as misstatements below that amount that, in our view, warranted reporting for qualitative
reasons.
Significant matters identified
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are set out
below as significant matters together with an explanation of how we tailored our audit to address these specific areas in order to provide
an opinion on the financial statements as a whole. This is not a complete list of all risks identified by our audit.
Impairment of goodwill
The Group had significant amount of goodwill arising from the acquisition of Eqtec Iberia SLU in 2017 (see Note 19). Goodwill amounted to
(cid:934)(cid:1005)(cid:1009)(cid:853)(cid:1006)(cid:1012)(cid:1007)(cid:853)(cid:1008)(cid:1009)(cid:1013) a(cid:400) of (cid:1007)(cid:1005) Decembe(cid:396) (cid:1006)(cid:1004)(cid:1005)(cid:1013)(cid:856) E(cid:395)(cid:410)ec Ibe(cid:396)ia SLU inc(cid:437)(cid:396)(cid:396)ed lo(cid:400)(cid:400)e(cid:400) amo(cid:437)n(cid:410)ing (cid:410)o (cid:934)(cid:1005)(cid:853)230,192 in 2019 which we have identified as an
indica(cid:410)o(cid:396) of impai(cid:396)men(cid:410)(cid:856) We ob(cid:410)ained managemen(cid:410)(cid:859)(cid:400) di(cid:400)co(cid:437)n(cid:410)ed ca(cid:400)h flo(cid:449) p(cid:396)ojec(cid:410)ion(cid:400) in (cid:400)(cid:437)ppo(cid:396)(cid:410) of (cid:410)he (cid:396)eco(cid:448)e(cid:396)abili(cid:410)(cid:455) of (cid:410)hi(cid:400) goodwill.
Due to the subjective estimates inherent in this calculation, this was a key judgmental area that our audit concentrated on.
Our response
For this risk, our audit procedures included the following testing:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Evaluated, challenged managemen(cid:410)(cid:859)(cid:400) f(cid:437)(cid:410)(cid:437)(cid:396)e ca(cid:400)h flo(cid:449) fo(cid:396)eca(cid:400)(cid:410)(cid:400) and (cid:410)he p(cid:396)oce(cid:400)(cid:400) b(cid:455) (cid:449)hich (cid:410)he(cid:455) (cid:449)e(cid:396)e d(cid:396)a(cid:449)n (cid:437)p and tested the
integrity and mathematical accuracy of the impairment model;
Tested the significant assumptions and estimates used in preparing the cash flows which includes revenue forecasts, gross profit
rates and discount rates and reviewed reasonableness of growth rates used for the projection and compared them against proven
track record of performance;
Tested the adequacy of discount rate used and evaluated the model in determining the value in use of the cash generating unit;
Performed sensitivity analysis to determine reasonableness of the input variables used in the impairment model; and
Con(cid:400)ide(cid:396)ed (cid:410)he ade(cid:395)(cid:437)ac(cid:455) of (cid:410)he G(cid:396)o(cid:437)p(cid:859)(cid:400) di(cid:400)clo(cid:400)(cid:437)(cid:396)e(cid:400) (cid:396)ela(cid:410)ing (cid:410)o good(cid:449)ill and (cid:410)he annual impairment review with the requirements
included in the consolidated financial statements in accordance with IFRSs as adopted by European Union.
68
Inde(cid:393)enden(cid:410) a(cid:437)di(cid:410)o(cid:396)(cid:859)(cid:400) (cid:396)e(cid:393)o(cid:396)(cid:410) (cid:410)o (cid:410)he membe(cid:396)(cid:400) of E(cid:395)(cid:410)ec Plc (continued)
Other information
O(cid:410)he(cid:396) info(cid:396)ma(cid:410)ion comp(cid:396)i(cid:400)e(cid:400) info(cid:396)ma(cid:410)ion incl(cid:437)ded in (cid:410)he Ann(cid:437)al Repo(cid:396)(cid:410)(cid:853) o(cid:410)he(cid:396) (cid:410)han (cid:410)he financial (cid:400)(cid:410)a(cid:410)emen(cid:410)(cid:400) and o(cid:437)(cid:396) a(cid:437)di(cid:410)o(cid:396)(cid:859)(cid:400) report
(cid:410)he(cid:396)eon(cid:853) incl(cid:437)ding (cid:410)he Di(cid:396)ec(cid:410)o(cid:396)(cid:400)(cid:859) Repo(cid:396)(cid:410)(cid:856) The di(cid:396)ec(cid:410)o(cid:396)(cid:400) a(cid:396)e (cid:396)e(cid:400)pon(cid:400)ible fo(cid:396) (cid:410)he o(cid:410)he(cid:396) info(cid:396)ma(cid:410)ion(cid:856) O(cid:437)(cid:396) opinion on (cid:410)he 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 in the financial statements, 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.
Matters on which we are required to report by the Companies Act 2014
(cid:120)
(cid:120)
(cid:120)
(cid:120)
We have obtained all the information and explanations which we consider necessary for the purposes of our audit.
In our opinion the accounting records of the Company were sufficient to permit the financial statements to be readily and
properly audited.
The financial statements are in agreement with the accounting records.
In o(cid:437)(cid:396) opinion (cid:410)he info(cid:396)ma(cid:410)ion gi(cid:448)en in (cid:410)he Di(cid:396)ec(cid:410)o(cid:396)(cid:400)(cid:859) Repo(cid:396)(cid:410) i(cid:400) con(cid:400)i(cid:400)(cid:410)en(cid:410) (cid:449)i(cid:410)h (cid:410)he financial (cid:400)(cid:410)a(cid:410)emen(cid:410)(cid:400)(cid:856) Based solely on the work
(cid:437)nde(cid:396)(cid:410)aken in (cid:410)he co(cid:437)(cid:396)(cid:400)e of o(cid:437)(cid:396) a(cid:437)di(cid:410)(cid:853) in o(cid:437)(cid:396) opinion(cid:853) (cid:410)he Di(cid:396)ec(cid:410)o(cid:396)(cid:400)(cid:859) Repo(cid:396)(cid:410) ha(cid:400) been p(cid:396)epa(cid:396)ed in acco(cid:396)dance (cid:449)i(cid:410)h (cid:410)he
requirements of the Companies Act 2014.
Matters on which we are required to report by exception
Based on our knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified
ma(cid:410)e(cid:396)ial mi(cid:400)(cid:400)(cid:410)a(cid:410)emen(cid:410)(cid:400) in (cid:410)he Di(cid:396)ec(cid:410)o(cid:396)(cid:400)(cid:859) Repo(cid:396)(cid:410)(cid:856) Unde(cid:396) (cid:410)he Companie(cid:400) Ac(cid:410) (cid:1006)(cid:1004)(cid:1005)(cid:1008)(cid:853) (cid:449)e a(cid:396)e (cid:396)e(cid:395)(cid:437)i(cid:396)ed (cid:410)o (cid:396)epo(cid:396)(cid:410) (cid:410)o (cid:455)o(cid:437) if(cid:853) in our opinion, the
di(cid:400)clo(cid:400)(cid:437)(cid:396)e(cid:400) of di(cid:396)ec(cid:410)o(cid:396)(cid:400)(cid:859) (cid:396)em(cid:437)ne(cid:396)a(cid:410)ion and (cid:410)(cid:396)an(cid:400)ac(cid:410)ion(cid:400) (cid:400)pecified b(cid:455) (cid:400)ec(cid:410)ion(cid:400) (cid:1007)(cid:1004)(cid:1009) (cid:410)o (cid:1007)(cid:1005)(cid:1006) of (cid:410)he Ac(cid:410) ha(cid:448)e no(cid:410) been made(cid:856) We have no
exceptions to report arising from this responsibility.
Responsibilities of the management and those charged with governance for the financial statements
As explained more fully in the Statement of Di(cid:396)ec(cid:410)o(cid:396)(cid:400)(cid:859) responsibilities, management is responsible for the preparation of the financial
statements which give a true and fair view in accordance with IFRSs as adopted by the European Union, and for such internal control as
directors determine necessary to enable the preparation of financial statements are free from material misstatement, whether due to fraud
or error.
In p(cid:396)epa(cid:396)ing (cid:410)he financial (cid:400)(cid:410)a(cid:410)emen(cid:410)(cid:400)(cid:853) managemen(cid:410) i(cid:400) (cid:396)e(cid:400)pon(cid:400)ible fo(cid:396) a(cid:400)(cid:400)e(cid:400)(cid:400)ing (cid:410)he G(cid:396)o(cid:437)p and Compan(cid:455)(cid:859)(cid:400) abili(cid:410)(cid:455) (cid:410)o con(cid:410)in(cid:437)e a(cid:400) a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management
either intends to liquidate the Group orCompany or to cease operations, or has no realistic alternative but to do so.
Those cha(cid:396)ged (cid:449)i(cid:410)h go(cid:448)e(cid:396)nance a(cid:396)e (cid:396)e(cid:400)pon(cid:400)ible fo(cid:396) o(cid:448)e(cid:396)(cid:400)eeing (cid:410)he G(cid:396)o(cid:437)p and Compan(cid:455)(cid:859)(cid:400) financial (cid:396)epo(cid:396)(cid:410)ing p(cid:396)oce(cid:400)(cid:400)(cid:856)
Responsibilities of the auditor for the audit of the financial statements
An a(cid:437)di(cid:410)o(cid:396)(cid:859)(cid:400) objec(cid:410)i(cid:448)e(cid:400) a(cid:396)e (cid:410)o ob(cid:410)ain (cid:396)ea(cid:400)onable a(cid:400)(cid:400)(cid:437)(cid:396)ance abo(cid:437)(cid:410) (cid:449)he(cid:410)he(cid:396) the financial statements as a whole are free from material
mi(cid:400)(cid:400)(cid:410)a(cid:410)emen(cid:410)(cid:853) (cid:449)he(cid:410)he(cid:396) d(cid:437)e (cid:410)o f(cid:396)a(cid:437)d o(cid:396) e(cid:396)(cid:396)o(cid:396)(cid:853) and (cid:410)o i(cid:400)(cid:400)(cid:437)e an a(cid:437)di(cid:410)o(cid:396)(cid:859)(cid:400) (cid:396)epo(cid:396)(cid:410) (cid:410)ha(cid:410) incl(cid:437)de(cid:400) o(cid:437)(cid:396) opinion(cid:856) Rea(cid:400)onable a(cid:400)(cid:400)(cid:437)(cid:396)ance is a high level
of assurance but is not a guarantee that an audit conducted in accordance with ISAs 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.
As part of an audit in accordance with ISAs, the auditor exercises professional judgment and maintain professional scepticism throughout
the audit. The auditor will also:
(cid:120)
(cid:120)
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for their opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
ci(cid:396)c(cid:437)m(cid:400)(cid:410)ance(cid:400)(cid:853) b(cid:437)(cid:410) no(cid:410) fo(cid:396) (cid:410)he p(cid:437)(cid:396)po(cid:400)e of e(cid:454)p(cid:396)e(cid:400)(cid:400)ing an opinion on (cid:410)he effec(cid:410)i(cid:448)ene(cid:400)(cid:400) of (cid:410)he G(cid:396)o(cid:437)p and Compan(cid:455)(cid:859)(cid:400) in(cid:410)e(cid:396)nal
control.
69
Inde(cid:393)enden(cid:410) a(cid:437)di(cid:410)o(cid:396)(cid:859)(cid:400) (cid:396)e(cid:393)o(cid:396)(cid:410) (cid:410)o (cid:410)he membe(cid:396)(cid:400) of E(cid:395)(cid:410)ec Plc (continued)
Responsibilities of the auditor for the audit of the financial statements (continued)
(cid:120)
(cid:120)
(cid:120)
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.
Concl(cid:437)de on (cid:410)he app(cid:396)op(cid:396)ia(cid:410)ene(cid:400)(cid:400) of managemen(cid:410)(cid:859)(cid:400) (cid:437)(cid:400)e of (cid:410)he going conce(cid:396)n ba(cid:400)i(cid:400) of acco(cid:437)n(cid:410)ing and(cid:853) ba(cid:400)ed on (cid:410)he a(cid:437)di(cid:410) e(cid:448)idence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group and
Compan(cid:455)(cid:859)(cid:400) abili(cid:410)(cid:455) (cid:410)o con(cid:410)in(cid:437)e a(cid:400) a going conce(cid:396)n(cid:856) If (cid:410)he(cid:455) concl(cid:437)de (cid:410)ha(cid:410) a ma(cid:410)e(cid:396)ial (cid:437)nce(cid:396)(cid:410)ain(cid:410)(cid:455) e(cid:454)i(cid:400)(cid:410)(cid:400)(cid:853) (cid:410)he(cid:455) a(cid:396)e (cid:396)e(cid:395)(cid:437)i(cid:396)ed (cid:410)o draw
a(cid:410)(cid:410)en(cid:410)ion in (cid:410)he a(cid:437)di(cid:410)o(cid:396)(cid:859)(cid:400) (cid:396)epo(cid:396)(cid:410) (cid:410)o (cid:410)he (cid:396)ela(cid:410)ed di(cid:400)clo(cid:400)(cid:437)(cid:396)e(cid:400) in (cid:410)he financial statements or, if such disclosures are inadequate, to
modif(cid:455) (cid:410)hei(cid:396) opinion(cid:856) Thei(cid:396) concl(cid:437)(cid:400)ion(cid:400) a(cid:396)e ba(cid:400)ed on (cid:410)he a(cid:437)di(cid:410) e(cid:448)idence ob(cid:410)ained (cid:437)p (cid:410)o (cid:410)he da(cid:410)e of (cid:410)he a(cid:437)di(cid:410)o(cid:396)(cid:859)(cid:400) (cid:396)epo(cid:396)(cid:410)(cid:856) Ho(cid:449)ever,
future events or conditions may cause the Group and the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events in a matter that achieves a true and fair view.
The auditor communicates with those charged with governance regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that may be identified during the audit.
Whe(cid:396)e (cid:410)he a(cid:437)di(cid:410)o(cid:396) i(cid:400) (cid:396)epo(cid:396)(cid:410)ing on (cid:410)he a(cid:437)di(cid:410) of (cid:410)he G(cid:396)o(cid:437)p(cid:853) (cid:410)he a(cid:437)di(cid:410)o(cid:396)(cid:400)(cid:859) (cid:396)e(cid:400)pon(cid:400)ibili(cid:410)ie(cid:400) a(cid:396)e (cid:410)o obtain sufficient appropriate audit evidence
regarding the financial information of the entities or business activities within the Group to express an opinion on the Group financial
statements. The auditor is responsible for the direction, supervision and performance of the audit, and the auditor remain solely
(cid:396)e(cid:400)pon(cid:400)ible fo(cid:396) (cid:410)he a(cid:437)di(cid:410)o(cid:396)(cid:859)(cid:400) opinion(cid:856)
The auditor also provides those charged with governance with a statement that they have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on
their independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, the auditor determines those matters that were of most significance
in the audit of the financial statements of the current year and are therefore the key audit matters. These matters are described in the
a(cid:437)di(cid:410)o(cid:396)(cid:859)(cid:400) (cid:396)epo(cid:396)(cid:410) (cid:437)nle(cid:400)(cid:400) la(cid:449) o(cid:396) (cid:396)eg(cid:437)la(cid:410)ion p(cid:396)ecl(cid:437)de(cid:400) p(cid:437)blic di(cid:400)clo(cid:400)(cid:437)(cid:396)e abo(cid:437)t the matter or when, in extremely rare circumstances, the auditor
determines that a matter should not be communicated in the report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The purpose of our audit work and to whom we owe our responsibilities
Thi(cid:400) (cid:396)epo(cid:396)(cid:410) i(cid:400) made (cid:400)olel(cid:455) (cid:410)o (cid:410)he Compan(cid:455)(cid:859)(cid:400) membe(cid:396)(cid:400)(cid:853) a(cid:400) a bod(cid:455)(cid:853) in acco(cid:396)dance (cid:449)i(cid:410)h (cid:400)ec(cid:410)ion (cid:1007)(cid:1013)(cid:1005) of (cid:410)he Companie(cid:400) Ac(cid:410) (cid:1006)(cid:1004)(cid:1005)(cid:1008)(cid:856) O(cid:437)(cid:396) audit work
has been undertaken so that we migh(cid:410) (cid:400)(cid:410)a(cid:410)e (cid:410)o (cid:410)he Compan(cid:455)(cid:859)(cid:400) membe(cid:396)(cid:400) (cid:410)ho(cid:400)e ma(cid:410)(cid:410)e(cid:396)(cid:400) (cid:449)e a(cid:396)e (cid:396)e(cid:395)(cid:437)i(cid:396)ed (cid:410)o (cid:400)(cid:410)a(cid:410)e (cid:410)o (cid:410)hem in an a(cid:437)di(cid:410)o(cid:396)(cid:859)(cid:400)
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 Compan(cid:455)(cid:859)(cid:400) membe(cid:396)(cid:400) a(cid:400) a bod(cid:455)(cid:853) fo(cid:396) o(cid:437)(cid:396) a(cid:437)di(cid:410) (cid:449)o(cid:396)k(cid:853) fo(cid:396) (cid:410)hi(cid:400) (cid:396)epo(cid:396)(cid:410)(cid:853) o(cid:396) fo(cid:396) (cid:410)he opinion(cid:400) (cid:449)e ha(cid:448)e fo(cid:396)med(cid:856)
Cathal Kelly
For and on behalf of
Grant Thornton
Chartered Accountants & Statutory Audit Firm
Dublin 2
Date: 12 June 2020
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