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United Kingdom Registered Office
Riverbank House
2 Swan Lane
London, EC4R 3TT
Subsidiary
8 Portmuck Road
Islandmagee
Larne, Co And rim,
Northern Ireland,
BT40 3TW
www.infrastrataplc.com
STRATEGIC INFRASTRUCTURE
SOLUTIONS GLOBALLY
InfraStrata Plc
Annual Report & Financial Statements 2019
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Contents
01 Company Information
03 Chairman’s Report
06-18 Chief Executive Officer’s
Strategic Report
19-20 Chief Finance Officer’s Report
21-32 Directors' Report
33-36 Independent auditor’s report
38 Consolidated statement of comprehen-
sive income
39 Consolidated statement of
financial position
40 Company statement of
financial position
41-42 Consolidated statement of
changes in equity
43-44 Company statement of
changes in equity
45 Consolidated statement of
cash flows
46 Company statement of cash flows
48-63 Notes to the financial statements
Perivan 257501
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Company Information
Directors
Mr J M Wood (Chief Executive Officer & Interim Chairman)
Mr A S Raman (Chief Finance Officer)
Mr M J M Groat (Non-Executive Director)
Company secretary
Fieldfisher Secretaries Limited
Registered office
Auditors
Solicitors
Nominated Adviser
& Joint Broker
Joint Broker
Fieldfisher LLP
Riverbank House
2 Swan Lane
London
EC4R 3TT
PKF Littlejohn LLP
15 Westferry Circus
London
E14 4HD
Fieldfisher LLP
Riverbank House
2 Swan Lane
London
EC4R 3TT
Allenby Capital
5 St Helen’s Place
London
EC3A 6AB
Arden Partners plc
125 Old Broad Street
London
EC2N 1AR
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02 x InfraStrata Plc Annual Report and Financial Statements 2019
COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Chairman’s Report
It has been a privilege to serve as interim
Chairman of InfraStrata plc (the “Company”)
since March 2019; we have had a
transformational year. I am delighted to be
writing what will be my first and last yearly
statement as interim Chairman, looking back
at what we have achieved and looking
forward, as we move into the next phase.
2019 has been a very active year on various
fronts. As reported last year, we successfully
completed the Front-End Engineering and
Design Study (“FEED Study”) for the
Islandmagee gas storage project. The FEED
Study and its results underpinned further
negotiations with both offtake partners and
project financiers. We are very pleased to
have entered into a binding term sheet for a
gas storage capacity offtake deal with Vitol
S.A. (“Vitol”) in June 2019. Once we have
entered into the final Gas Storage Agreement
with Vitol based on this term sheet, the deal
will run for a minimum of 12 years. The
commercial structure agreed with Vitol allows
us to not only capture the baseload winter-
summer price spread annually but also
provides us with significant upside through
participation in spot and short-term price
arbitrage opportunities. Our salt caverns are
designed to respond rapidly to changes in
the physical conditions of the UK gas market
(under or over supply) which in turn creates
opportunities to absorb price volatilities in the
spot gas markets. Therefore, whilst the salt
caverns facilitate the balancing of the UK gas
network in periods of stress, this deal also
allows us to capture incremental margins
associated with spot price volatilities.
The technical and commercial capabilities of
the gas storage project have now been
proven and independently assessed by
numerous potential partners. The final piece
of the licensing regime that needs to be put
in place is the full marine licence. Between
August 2018 and April 2019, the Department
of Agriculture, Environment and Rural Affairs
(“DAERA”) had a change in stance in relation
to the issuance of the full marine licence,
from having accepted the data submitted
until April 2019 to requiring us to update the
various marine related reports. Upon
reflection, this changed position provided
DAERA and, consequently, the Company
adequate protection respectively against
any potential legal challenges at subsequent
stages of the project life cycle. Whilst the
Company has always worked towards
maintaining its “draft” marine license status,
any pre-enabling marine works would
inevitably require a marine environmental
baseline study as a starting point. Taking
this into consideration, we decided to
proceed as DAERA determined in order to
achieve the best outcome for all parties
involved. I am very pleased to report that
DAERA has studied our latest reports in
great depth and has instructed the
Company to issue notices to commence the
formal 42-day public consultation period.
Upon completion of this period and
satisfaction of any questions received, we
are confident that DAERA will be able to
grant the full marine licence. Once that is
achieved, we will formally have all the
licences in place, and it would enable us to
take the next steps towards project
construction. All the above provides the
foundations to raise equity and debt at the
project level as well as capitalise on any
potential government assistance that may
become available. Further, discussions are
currently on-going with various financing
partners, with the intention to complete
project financing and commence
construction. As a Board, we are trying to
ensure that we extract the best value that is
available in the financing markets in order to
protect shareholder value. We will be making
announcements in due course as soon as all
the various financing avenues have been
thoroughly analysed and a robust financing
deal has been agreed. The report of our
Chief Finance Officer in subsequent
sections of this report provides more details
on the various financing activities at the
corporate and project levels.
As early as December 2018, we, as a Board,
took a decision that we would embark on a
mission of transforming the Company from a
one-asset entity into an organisation that has
multiple assets in its portfolio, each asset
being at different phases of its respective
life-cycle. In keeping with that strategy, we
entered into an exclusivity agreement in July
2019 for a Floating Storage and
Regasification Unit Project (“FSRU Project”)
located in Barrow-in-Furness. I am pleased
to report that since then, we have conducted
a substantial amount of technical and
commercial due diligence in order to
ascertain the viability of this project. Our
findings have been very encouraging thus
far, yet more work needs to be done before
we are able to secure this project on
commercially attractive terms. Further, since
we announced our intention to acquire the
FSRU Project, we have seen a very healthy
interest from globally recognised Liquified
Natural Gas (“LNG”) companies that operate
across the spectrum of the LNG chain, from
construction to monetisation. Expressions of
Interest (“EoI”) have been received from the
largest LNG companies in Japan, South
Korea and North West Europe who desire to
partner with us on the construction of the
FSRU Project. In addition, very healthy
interest has now been established with some
of the largest LNG trading houses in the
world to book storage and regasification
capacity on a long-term basis. With the
ongoing debate surrounding climate
change, we believe that natural gas will
become the predominant feedstock for
power generation and will overtake coal and
fuel oil consumption in the years to come.
This bodes well for our vision and strategy of
deploying capital and other resources into
such energy related infrastructure projects.
As a Company, we welcome the introduction
and commercialisation of new technologies
and projects to mitigate the adverse effects
of climate change. It is a pressing concern
that needs to be addressed both at the
policy and project levels. However, clean
energy technologies that exist today, while
very exciting, still suffer from intermittency in
power generation. Until such time as clean
energy technologies are capable of
delivering steady baseload energy, natural
gas will continue to support global energy
networks making sure that our offices and
homes are lit and heated. Additionally, we
have now confirmed that our gas storage
caverns can be suitable for storing
hydrogen. Should the use of hydrogen
across the UK gas network grid become
mainstream, the Islandmagee gas storage
project will be ideally placed to play a
crucial role in the hydrogen storage market.
In line with our vision of expanding our
portfolio of assets, the single biggest
achievement for the Company this year, post
the balance sheet date, was the acquisition
of the assets of Harland and Wolff. On
5 December 2019, we formally completed
the acquisition and acquired the keys to this
iconic and historic facility in Belfast and are
rapidly on the way to generating our first
ever operating revenues in the Company’s
history. The acquisition of Harland and Wolff
was hard fought. We are proud of the fact
that our executive management team
secured the assets in the face of significant
global competition. It was the single-minded
focus, determination and nimbleness of the
team that achieved this historic and
commercially significant outcome. The
acquisition of Harland and Wolff enables us
to not only bring in-house a large part of the
engineering and fabrication requirements for
the Islandmagee gas storage project and
FSRU project, with resultant time and cost
savings, but also opens a plethora of
commercial revenue generating
opportunities for the Company across
multiple business segments. Our CEO’s
report in subsequent sections of this report
provides a detailed vision and strategy for
the Company in the months and years to
come. As a Board, we remain firmly
committed to this strategy.
The Board made a commitment to our
shareholders that we would be revenue
generating by the end of calendar year 2019
and with our contract win announced on
6 December 2019, we have fulfilled that
commitment. We will now focus our attention
towards growing those revenue numbers
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Chairman’s Report (continued)
and achieving a position of being
self-sustaining and cashflow positive.
The financial year that has gone past has
been challenging in numerous ways – Brexit
uncertainties, difficult capital market
conditions, geo-political tensions etc. The
single biggest challenge for the Board has
been to break the perception associated
with the Company’s legacy of being a semi-
dormant AIM company regularly seeking
funding via share placings in order to
sustain its activities. We believe that with at
least three projects in play, the Islandmagee
gas storage project, the FSRU project and
Harland and Wolff, we have broken that
market perception and have positioned
ourselves as a dynamic and ambitious
organisation that seeks to build a substantial
business creating significant value for its
shareholders in the process. Until such time
that we are consistently revenue generating,
there will continue to be pressures on cash.
We took a conscious decision to limit our
cash-burn rate as much as possible and
raise monies in the capital market only for
specific purposes. I am pleased that we
have achieved a significant set of project
results with a highly restricted monthly cash-
outflow. Going forward, we will continue to
monitor and restrict our overheads in order
to ensure that we extract the maximum value
for every pound spent. I understand and
appreciate the pain that equity dilution
causes. However, I strongly believe that we
have added substantially more value than
the dilution that has been caused in the
short term. This is primarily because the
book value of the assets purchased are
significantly higher than the monies that we
have raised to acquire them. Looking further
out, we believe that the longer-term value
accretion to shareholders has increased
substantially and our overall corporate
financial risk is now spread across the two
assets that we currently own.
As we move into the new calendar year, we
will be introducing new non-executive
directors and expanding the Board of
Directors. As a Board, we must be aligned,
share a common ethos and, most
importantly, be unanimous in our strategy for
the Company. The reconstituted Board of
Directors will be mandated to oversee and
strengthen our corporate governance
protocols and adequately challenge the
executive management team. As a
Company, we are set to grow rapidly in the
forthcoming year, and we recognise the
critical need for a well-qualified, astute and
motivated Board of Directors. The
appointment of Clive Richardson as
Chairman of the Company, with effect from
1 February 2020 and as announced on
27 December 2019, is a firm step forward
towards building such a Board of Directors.
Finally, I wish to place on record my heart-
felt thanks to everyone who has been
associated with the Company through this
year – our suppliers, contract counterparties
and advisers. I would especially like to thank
our shareholders for the faith that they have
placed in the Company and for having
supported us during the Harland and Wolff
acquisition. Without their support, this would
not have been possible. I also wish to thank
our new institutional shareholders who
subscribed to our shares during the equity
fundraise that took place in November 2019.
I warmly welcome them into the Company.
As we move forward, we have surrounded
ourselves with some of the biggest and most
credible names across all aspects of the
Company’s activities – institutional
shareholders, world class advisers and
contractors, globally renowned clients and
joint venture partners and, of course,
ownership of one of the most iconic heavy
engineering brands in the world. To distil our
thinking using a famous quotation: “We can
see further than others because we are
standing on the shoulders of giants.”
John Wood
Interim Chairman & CEO
08 January 2020
04 ❘ InfraStrata Plc Annual Report and Financial Statements 2019
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Strategic Report
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Chief Executive Officer’s Strategic Report
Overview
As I pass my first anniversary as Chief
Executive Officer of InfraStrata plc, it has
been a very challenging but exciting
twelve months to consolidate our position
as a small but growing company. At the
same time, I believe that we have made
tremendous progress in the various
activities that we have undertaken through
the year. After successfully completing the
Front-End Engineering and Design (FEED)
for our Islandmagee gas storage project at
the end of 2018, we commenced a deep
detailed review of all aspects of the
business. Additionally we had a number of
In last year’s Annual Report, I set out some
clear objectives:
1. Being revenue generative during 2019
after twelve years of regular dilution
I am delighted to report that we have
achieved that milestone through our
subsidiary, Harland & Wolff (Belfast) Limited,
by securing two ship maintenance contracts
from Sea Trucks on the day we completed
the acquisition transaction of the assets of
Harland and Wolff.
2. Moving away from being a one project
company
With the completion of the purchase of the
assets of Harland and Wolff in December
2019, we have completed this objective as
well. We also have several exciting projects
under evaluation, especially the Floating
Storage and Regasification Unit Project
(“FSRU project”) for which we currently have
exclusivity until 8 January 2020.
3. Delivering the Final Investment
Decision (“FID”) for our Islandmagee Gas
Storage Project
Whilst we are well advanced and have made
excellent progress this year in our financing
negotiations for the Islandmagee gas storage
project, we have taken a key decision to
delay FID from Q4 2019 as a result of the
outcome of the General Election and the fact
that we are now extremely likely to leave the
European Union.
The equity deal offered that we were
carefully considering and the offers that we
received previously would have resulted in
the Company selling down a substantial
portion of equity in the project to the
incoming project equity funding partner.
Following on from the General Election, we
believe that there will be other funding
options that may enable the Company to
retain more equity in the project by utilising
new schemes that are likely to be put in
place in 2020 as a consequence of Brexit.
We understand there will be more clarity on
what these new funding schemes are during
the first part of 2020. If they are found to be
unsuitable, commercially, strategically or
work streams that had to be completed in
their entirety over and above the FEED
scope and we put significant resources
into completing these legacy workstreams.
Upon reflection, 2019 has been a year of
stabilisation and building the foundations
for 2020 and beyond. With the acquisition
of the assets of Harland and Wolff in
December 2019, we are set up for a
thrilling 2020 and beyond as we start to
realise the potential of the business that
we are building and the substantial
increase in shareholder value that will
come as a part of this journey.
procedurally, we will not pursue them.
Instead, we will seek to revert to the
arrangements that we were working on in
2019. It is the Board’s opinion that we need
to fully explore these new options prior to
making a final commitment on FID given the
potentially significant impact that these new
funding options might have on our project
equity position. We have had discussions
with our potential project equity partners,
and they understand our position to delay
FID given the changing political and
associated financial landscape.
Although we have only been able to
complete two out of our three main
objectives, we believe this approach to FID is
in the best long-term interests of the
business, which may substantially improve
shareholder value in the mid to long term.
We are delighted to welcome Clive Richardson
to the business as our new Chairman (with
effect from 1 February 2020). We believe that
the skills and experience that he brings will
position us well for the future. We are
extremely lucky that he has agreed to join us,
and we now have a diverse and experienced
board with strength and depth.
The task of converting the draft marine
licence to a full marine license became more
complicated during 2019. The Department of
Agriculture, Environment and Rural Affairs
(“DAERA”) moved the goal posts as a result
of a few local protestors who do not want
gas storage or, for that matter, any other
project in “their back yard”, as it were. This
group has opposed every project in the
region over the past five years. We have,
however, dealt with the change in
requirements with good grace and
announced the commencement of the
42-day public consultation to enable the full
marine licence to be issued to us as soon as
such public consultation period closes, and
responses have been assessed.
Clearly this is a high-profile work stream and
we have undertaken substantial amounts of
additional environmental surveys and
baseline establishment works to ensure that
our data set is complete, up-to-date and
goes over and above the legal requirements.
06 ❘ InfraStrata Plc Annual Report and Financial Statements 2019
John Wood
Chief Executive Officer
We are not aware of any reason as to why
the marine licence will not be issued. We
expect this to be done early in 2020 after
following due process. We have not had any
issues raised by DAERA, which we believe
indicates that they are comfortable with the
data and reports produced that satisfy full
compliance with current regulations.
We are extremely pleased to have completed
the acquisition of the assets of Harland and
Wolff. The deal from commencement to
completion was achieved in three months.
Given the multiple stakeholder groups
involved in this process, completion within
these timelines is an achievement that we are
all very pleased with. The final acquisition
cost was well under the Board’s valuation as
well as independent valuations conducted
and, therefore, represents an excellent
investment. The income stream for this
multi-purpose fabrication facility will come
from internal group projects and external
projects. Early indications show that revenue
generation is likely to come from the
following sectors:
l Internal Projects
l Ship Repair & Maintenance
l Ship Conversion
l Offshore infrastructure/assets
l Fabrication
l Recycling
When operating at full capacity, the Board
estimates that the facility could eventually
generate significant revenues, dependent on
our marketing efforts, flow of internal
projects and the development of our pool of
skilled labour.
This acquisition provides the Company with
the opportunity to substantially reduce the
overall CAPEX of our flagship Islandmagee
gas storage project in addition to being cash
generating and self-sufficient, potentially
negating the need to return to the stock
market on a regular basis in order to provide
cash inflow for ongoing operations.
We remain in constant dialogue with
Meridian Holdings in relation to the proposed
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
FSRU project. We now have several potential offtake partners who
are very keen on acquiring the capacity that this asset will bring to
the market. Preliminary discussions thus far have indicated that they
may also provide some funding as part of the offtake agreement.
Whilst this is a highly exciting project we will only proceed when we
are fully satisfied with our evaluation of the risks involved. We expect
a decision to be taken on our involvement within H1 2020.
Within Islandmagee Energy Hub Ltd we have several additional and
interesting projects that are still in the incubation stage. We will look
at developing these projects given that the hydrogen and carbon
capture markets are showing some interesting levels of traction as
we move into 2020.
We have introduced a new approach to Safety, Health and
Environment (SHE) which we will be rolling out during 2020. Safety is
of upmost importance in our minds and we will do all we can to
ensure that no harm comes to any of our employees or to our
environment.
Board
At the beginning of 2019, our then Chairman
Graham Lyon tendered his resignation from
the business in order to concentrate on other
projects. I would like to place on record my
thanks to Graham for all his efforts in
arresting the free fall of the Company and its
subsidiaries, commencing the turnaround of
the business, laying the foundations of a new
team and providing a stable platform.
I have had the privilege of acting, in an
interim capacity, as Chairman for the
remainder of 2019. Whilst in an ideal world,
we would have appointed an immediate
replacement, the Board wished to find the
right candidate, limit cash burn and ensure
that it had a clear strategic direction prior to
making a new appointment. Dealing with all
the legacy matters and ironing out the
regulatory issues in relation to Islandmagee
opened up an entirely new long list of high-
quality candidates who had decades of
corporate and strategy experience.
We have, therefore, concluded that the board
moving into 2020 will now be expanded with
the addition of a new Non-Executive Director
and our new chairman thus positioning us for
growth in 2020 and beyond.
We have now made one board appointment,
Clive Richardson, who will fulfill the role of
Chairman from 1 February 2020. We are
confident that Clive will add extensive value
to our business in the long term. Clive has
significant experience in large contract
delivery across multiple markets including
defence and maritime and has been on the
board of several organisations. The added
strength and depth of knowledge that Clive
brings will complement the skills of the
existing board and provide significant
support to the executive team.
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Chief Executive Officer’s Strategic Report (continued)
Clive Richardson - Chairman
On 27 December 2019 we were delighted to announce that Clive
Richardson has been appointed as our new Chairman, with effect
from 1 February 2020. Whilst I have enjoyed my interim stint in this
role, it is great to welcome Clive with his wealth of experience into the
role in order to allow me to fully concentrate on my main objective of
driving the business forward as CEO during 2020. Clive will take up
this position from 01 February 2020. This appointment will strengthen
our board substantially, provide further governance and facilitate a
clear strategic path going forward.
Most recently, Clive was Group CEO of V. Group, one of the world’s
largest providers of commercial ship management services with over
1,000 vessels under management. Clive held P&L responsibility,
reporting to the main board, and achieved significant organic growth
for shareholders throughout his tenure, also making several
acquisitions. Clive also introduced a core operating framework and
enhanced controls and governance which led to a significant
reduction in overheads, as well as leading the recapitalisation of the
business as required.
Between 2007 and 2009, Clive was Chief Operating Officer, EMEA,
and Chairman, QinetiQ Ventures for QinetiQ plc, formerly known as
the Defence Evaluation and Research Agency which was
subsequently privatised in February 2006. This signalled the start of
rapid growth and the business now reports annual revenues of
£1.4 billion. Clive held P&L responsibility for all operations outside of
North America and during his tenure, undertook three acquisitions in
Australia and two acquisitions in the information security sector. Clive
was also Chairman of QinetiQ Ventures’ partnership with Coller
Capital in the £80m Cody Gate Ventures fund.
Between 1989 and 2007 Clive was an executive at BAE Systems Plc.
He held several senior roles during his time there, including Chief
Executive of Insyte, Managing Director at Royal Ordnance plc and
Commercial Director at BAe Airbus. During his career Clive also held
senior positions at Marconi Electronic Devices Ltd and Westland
Helicopters Limited.
Between 2004 and 2009 Clive was a member of the National
Defence Industries Council, (the Government and Industry defence
consultation authority) and he was President of Tech UK, (the UK
trade association for the IT, telecoms and electronics sector),
between 2009 and 2011.
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Strategic vision
The development of a long-term strategic vision for the
Company was the first activity that I undertook after
being appointed Chief Executive Officer. It was clear
that a one project company was very high risk and
unsustainable in the long term. Our vision is, therefore,
to be a leading, global infrastructure development &
asset management company, being intimately involved
through the entire lifecycle of projects from conception
to decommissioning. We will participate in some
projects from end to end of the lifecycle, whilst in the
case of others, we may only develop or acquire to
operate them.
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Chief Executive Officer’s Strategic Report (continued)
STRATEGIC VISION
The development of a long-term strategic vision for the Company
was the first activity that I undertook after being appointed Chief
Executive Officer. It was clear that a one project company was very
high risk and unsustainable in the long term. Our vision is, therefore,
to be a leading, global energy infrastructure development and asset
management company, being intimately involved through the entire
lifecycle of projects from conception to decommissioning. We will
participate in some projects from end to end of the lifecycle, whilst in
the case of others, we may only develop or acquire to operate them.
Our goal is to spread the Company’s risk profile over several projects
and operations. Whilst, initially, we have restricted ourselves to a
single geographical location, we have global aspirations in the longer
term. The key update in our strategy from last year to this year is a
more concentrated approach to asset management, operations and
maintenance.
The model, whilst relatively simple, will allow us to continue to
enhance our balance sheet year on year. Income will be generated
from four main areas of operations; each new project may be
different and have specific nuances that need to be critically
assessed. Therefore, individual technical and commercial models will
be developed to ensure that maximum value is derived from every
potential project. The four areas of expertise that we hold and that
will lead to income generation and incremental shareholder
value are:
m Front End Project Development to FID (Final Investment Decision)
– Carried equity interest
m Construction Management & Project Delivery – Management fee
agreement
m Asset Operation, Management and Optimisation – Management
and operations fee agreement
m Retained equity income generation – Project profit sharing via
dividend distribution
Our strategic goal is to have numerous projects and facilities at
various stages of their respective lifecycles. The Board will identify
and assess projects that substantially fit the following criteria:
l Substantial infrastructure;
l Facility operational management;
l Key strategic requirement for the assets;
l Political stability in the project location;
l Long life operations of between 20 and 40 years;
l Risk of development can be mitigated to an acceptable level;
and/or
l State backed projects where grants for feasibility and construction
may be available.
The Board is focused on being in a position to consider returning
cash to shareholders in the form of dividends, whilst retaining
sufficient funds to invest in new value enhancing projects, as soon as
possible.
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HARLAND AND WOLFF ASSET ACQUISITION
During the FEED study it was clear that one of the challenges for the
Islandmagee gas storage project was the transportation of several
large items of plant and equipment onto site.
Given the restrictions relating to weight and physical size of
component structures, we put a lot of detailed analysis into the
transportation plan. In an effort to determine the most cost-effective
transportation route, numerous locally available sites and facilities
were considered. The Harland and Wolff site was visited in March
2019 and considered to be an optimum staging facility for
the project.
The advantage of being able to construct larger modules and have
less assembly work on-site was calculated to offer a substantial
CAPEX cost reduction for the Islandmagee gas storage project. With
the relatively short coastal passage of 23 nautical miles Harland and
Wolff is a fantastic acquisition from, inter alia, a geographical
perspective.
With more modules/components that can now be transported via
barge, this will lead to significantly less traffic on the local roads. In
addition, it will facilitate a higher level of utilisation of the Northern
Irish workforce. We have made a commitment at all stages of our
flagship Islandmagee gas storage project to utilise, where possible,
the local workforce. The utilisation of local labour and construction
within a nearby facility like Harland and Wolff will ease the
supervisory burden on the Company, increase efficiency and save on
costs. From an overall Group perspective, retention of margins on
fabrication work within a group company as opposed to passing it on
to a third-party fabrication company added to the attractiveness of
Harland and Wolff.
The other potential projects that are held within Islandmagee Energy
Hub Limited and the potential FRSU project, further strengthen the
Harland and Wolff acquisition rationale. In addition to our internal
projects, we believe that there are other lucrative asset management
markets that we can penetrate over time in order to reduce the
overheads burden on our internal projects as they come through into
Harland and Wolff. On that premise, clearly the facility lends itself to
other asset-based activities such as ship maintenance, conversion
and fabrication works across multiple sectors.
The corporate structure that is currently in place consists of four subsidiaries that are 100% owned by InfraStrata UK Ltd, which in turn is
100% owned by the Company. All subsidiaries should be able to be self-sufficient whilst benefiting from trading relationships, where possible,
with each other. Harland & Wolff (Belfast) Limited has a 100% owned subsidiary, Harland & Wolff Technical Services Limited which will carry
out preliminary and detailed design as well as consultancy works across a wide variety of projects.
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Chief Executive Officer’s Strategic Report (continued)
ISLANDMAGEE ENERGY LIMITED
Overview
Our flagship Islandmagee gas storage project was first established
back in 2010 when a layer of salt was discovered 1500m underneath
Larne Lough. This salt layer is ideal for the establishment of
underground gas storage caverns. The storage caverns are formed
by drilling wells from the well pad into the salt layer thereafter
removing the salt (in a brine solution) and discharging it into the fast-
flowing Irish Sea via the leaching plant and pumping station. The
rates and levels of discharge are highly regulated activities governed
by the regulations set by the Department of Agriculture, Environment
and Rural Affairs (“DAERA”). Our proposed discharge rates are well
within the legal environmental limits and we have further proposed a
monitoring programme that is in excess of these legal requirements.
The gas injection and withdrawal facility will be constructed on the
surface and this will facilitate moving gas from the network to be
injected into the caverns in times of excess supply and, conversely,
withdrawn from the caverns back into the gas network when there is
a shortage of gas supply.
The project is at an advanced stage and technically ready to award a
construction contract. Whilst the project has progressed over the
years, all areas of the project had not previously been brought up to
the same level of completion. This year has been about just that,
following on from feedback during the tender process undertaken in
Q1 2019. Clearly this has taken longer than we would have liked.
After moving into the CEO’s position, I undertook a full gap analysis
of all the elements of the project. This gap analysis highlighted
several additional work streams that needed to be completed in
order to bring the project to a “shovel-ready” status. I am pleased to
report that these additional work streams have now been
successfully completed.
We have additionally revisited all aspects of the project to ensure that
it complies with or exceeds regulatory standards. We have also
established internal systems and processes that significantly exceed
current regulations. This has achieved two objectives: one, it has
sought to mitigate concerns of locally formed protest groups; and
two, it has created an environment that is likely to avoid potential
delays in the future. One area where, legally, we could have argued
that the data was still compliant regardless of it being old in nature
was that surrounding the marine licence. We took the decision to
bring forward the pre-baselining environmental work in order to
protect against the possibility of objections that might be raised at a
later stage when construction is well underway. This work has now
been undertaken and submitted to DAERA. As part of this work
stream, a public consultation exercise will be conducted between
20th December 2019 and 7th February 2020 to satisfy any questions
raised. This process is routine in nature, and we see no reason why
the full marine licence will not be issued in due course early in 2020.
Unfortunately, with the establishment of a local protest group it has
lengthened the processing time to advance through the various
stages of the regulatory system, over which we have no control.
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Marine Licence
During 2019 we made excellent progress to seek to convert the draft
marine licence into a full marine licence. The marine licence is
required to discharge salt into the Irish sea inside the 12 nautical mile
limit. As part of the marine licence, an abstraction and discharge
licence is also required. Discharge outside the 12 nautical mile limit
was an option that was considered as plan “B” given that the
discharge requirements to be put in place were less onerous. A
review was undertaken during 2019 in relation to this plan “B”.
However, this has not been taken any further due to all planned
activities currently falling well inside the existing environmental limits.
The project currently has a draft marine licence as well as a full
abstraction and discharge licence. Given the age of the previously
available environmental studies and the potential for objections, the
Board took the decision to bring forward the pre-construction
baseline activities for all environmental survey works. These works
were carried out in the waters and coastal areas surrounding the
point of brine discharge. Numerous activities were undertaken
including measuring tidal flows, noise studies, bird studies, various
marine habitat studies, seabed samples, trawl sampling and other
marine related field work in order to collate and prepare a complete
set of data.
The field work was undertaken by independent marine scientists. The
samples were then analysed in laboratories prior to the final reports
being submitted to InfraStrata. In addition, brine discharge models
were constructed by a third-party expert and further independently
verified and corroborated by another independent third-party expert.
These workstreams were carried out during the summer and autumn
of 2019 and have been now adopted by DAERA as core project
documentation.
Whilst not legally necessary, the Board believed the data from these
workstreams would be required in early 2020 given that this was
always a condition of the draft licence. With the completion of all the
work and collation of the latest data, there will now be substantial
protection against any challenge that may be posed in relation to
historic data. In addition, a public consultation has been agreed to
share the new data that has been gathered throughout 2019. The
new data shows no adverse effects and demonstrates an
improvement in some areas. As a result of these efforts we believe a
full marine licence incorporating an updated abstraction and
discharge licence will be awarded in 2020.
The documents, inter alia, supplied, reviewed and approved by
DAERA are as follows:
l Environmental Conditions Update Report
Appendix A - General Arrangement Drawings
Appendix B - Brine Dispersion Modelling Report - FEED Update
Appendix C - Underwater Noise Modelling Plots
Appendix D - Benthic Survey Reports (Aquatic Services Unit)
Appendix E - Ecological Survey for Birds (RPS)
Appendix F - Cumulative Effects Assessment Stage 1 & 2
Appendix G - Biodiversity Data received from CEDaR
l The Updated Shadow Habitats Regulation Assessment
As part of the marine licence, we will be installing a monitoring
system. This system is designed to ensure that we only discharge
into the Irish Sea what has been licensed to be discharged. There
will be a system of buoys installed at sea at agreed distances from
the discharge point. These buoys will come with a suite of
sophisticated and fully calibrated scientific equipment that will
measure the discharge of brine at specific points.
The 2nd independent reviewer of the brine discharge model noted that it was the most
sophisticated and detailed set of models produced for this purpose.
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Chief Executive Officer’s Strategic Report (continued)
The equipment will relay data back to shore in real time where it will
be monitored by the Company and DAERA. Should at any point the
level of brine discharge increase over the licensed limits, an alarm
message will be sent to DAERA and the brine discharge operation
will be ceased until such time as the level of brine reverts to the
licensed levels.
We are aware of no reason why the marine licence will not be issued.
The public consultation commenced on 20 December 2019 and will
end on 07 February 2020. Whilst only 42 days are legally required for
a public consultation process, we have allowed a few extra days due
to the intervening holiday season. During this period the Company
will hold several consultation sessions that will build on the sessions
that were conducted between March and October 2019.
Project Funding
We have always assumed in our economic modellings that the
Islandmagee gas storage project would be funded via commercial
equity and debt. Whilst there remains the possibility of acquiring
some government or quasi-government funding especially after the
outcome of the December 2019 General Election, we have been
cautious in our approach towards making funding assumptions for
our flagship project. Additionally, we have had various offers that we
have been negotiating to term sheet stage. Each term sheet would
require the Company to sell down a portion of the equity to the
incoming equity provider resulting in our remaining equity stake to be
in the region of circa 20-30% along with the return of our back costs
which currently sit at circa £15m.
We have been working hard towards signing heads of terms on an
equity deal in 2019. The Board has, however, decided to pause this
process for a limited period. With the recent General Election result
clearly indicating that we will be leaving the European Union, we
believe that this change in circumstance will open up access to
several funding initiatives in the UK which may facilitate the Company
retaining the majority of the equity in Islandmagee Energy Limited.
This is important given the significant revenue streams that are
expected to flow from this project through its lifetime.
Whilst some shareholders will view this decision and delay as
disappointing, I have always stated that we are continually seeking to
improve long term shareholder value. We have been monitoring the
situation for several months and have held back from making a
decision. With the marine licence consultation running through until
February and the assessment period that will follow, we believe there
is a window of opportunity to explore this option. We will seek to
revert to the offers that we recently had on the table should this
current initiative not yield the results that we desire. We believe that
we will need a window of between three and six months during 2020
to fully assess the options, timescales and criteria involved in any
new proposed funding routes.
Reversal of the Scotland Northern Ireland Pipeline (SNIP)
Earlier in 2019, the Company, in conjunction with Mutual Energy,
submitted a speculative application to the European Union to fund a
FEED study for reversal, twinning and various upgrade works in
relation to the SNIP. When it became clear that the UK was leaving the
EU, we were advised that no further grants would be made available.
The Board believed this would be the most probable outcome but
decided to make an application nevertheless to determine if any real
appetite existed to award us a grant for studies as opposed to a
grant for works. Our previous cost estimates already have an
allowance for the FEED costs to progress this project. Ultimately, if
we are to fund the CAPEX of this project it will generate an income
stream over an extended period that will cover the cost of
development. Equally, Mutual Energy, as the operator, may choose to
fund this directly and enter into a utilisation agreement with
Islandmagee Energy Limited.
Given the perilous state of gas storage in the UK, especially with the
United Kingdom now set to leave the European Union, it is essential
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for the United Kingdom and the Island of Ireland to have immediately
available gas storage. The risk of blackouts will increase significantly
given that interconnectors from the EU will be closed in an emergency
situation, at which point gas supplies will be restricted. When fully
operational, the Islandmagee gas storage project is expected to
contribute 25% of the UK’s available gas storage capacity and is set
to become a key strategic asset to ensure security of gas supply to
the island of Ireland and the UK mainland as well.
The binding Heads of Terms that have been signed with Vitol, prior to
the Gas Storage Agreement, facilitate bringing the caverns online
sequentially up to a total of 500 million cubic metres of gas storage.
The cavern formation and operational schedule would not have the
requirement for the reversal of the SNIP until five years after the
commencement of construction of the initial three caverns. We
remain confident of agreeing a commercially viable solution with
Mutual Energy in this intervening period so that we do not have any
capacity related restrictions when all 7 caverns are in full commercial
operation.
Gas Storage Agreement (GSA)
As previously mentioned, a lot of detailed work was undertaken
during the negotiation of the Heads of Terms. Implementation of
these terms into the GSA is progressing well and will be brought to
conclusion in 2020. Drafts have now been exchanged between the
parties. Given that the commercial model that is being used is
pioneering and has not been devised previously, a number of back
tests and independent assessments have been conducted in order
to prove the effectiveness of this new commercial gas storage
model. The fact that we have managed to secure an element of the
traders’ profit into our agreement in addition to receiving 100% of the
classic seasonal spread bodes well for the future. For the avoidance
of doubt, the funding model that we adopt to construct the project
will not affect the GSA.
HARLAND & WOLFF (BELFAST)
LIMITED
Harland & Wolff (Belfast) Limited is the group’s new subsidiary
company that was used to acquire the assets of Harland and Wolff
from the administrators. This acquisition was completed on
5 December 2019. We launched an initial bid for the assets by
paying a non-refundable deposit of £500,000 in order to get first
mover advantage.
The final deal that has been agreed with the administrators is as
follows:
Structured payments
1 October 2019 Deposit paid – exclusivity secured £0.50m
4 December 2019 Interim part payment £3.30m
30 April 2020 Final payment £1.45m
TOTAL COST £5.25M
The Facility is made up of two sites. Site one includes the Belfast Dry
Dock and site two includes the new building and fabrication dock
along with 30,000m² of undercover fabrication space.
The facilities have deep water access and over 900m of quayside
berths between the two facilities. There are various deep water
pockets around both sites that will facilitate larger deep drafted
vessels and structures to berth and be worked on.
Two of the largest docking
facilities in Europe with
deep water access
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Chief Executive Officer’s Strategic Report (continued)
30,000m2 Fabrication
8.6m Deep Water Access
11.58m Dock Access
Whilst our primary purpose for acquiring the assets of Harland and
Wolff and establishing Harland & Wolff (Belfast) Limited is to
undertake various fabrication activities for our flagship Islandmagee
gas storage project and subsequent projects to be developed over
time, we are conscious that we need to keep the rate of cash burn on
overheads down to a minimum.
It is still early days given that we formally acquired the assets only on
05 December 2019, but we have been able to identify certain sectors
where we will be able to secure some additional projects to ensure
continuity of employment and further develop the skill set of the
employees whilst reducing the overhead burden of owning the
facility. We have been fortunate to have secured the first two vessel
dockings for asset maintenance, the first of which docked on
21 December 2019. These contracts represent the first ever
operating revenues for the Company.
Across all the markets from which we may look to secure projects,
the addressable market size in the UK is circa £15.15bn before
applying sensitivities, capacity constraints, competitiveness and
competency. The key indicator at this stage is that we clearly have a
large addressable market and of which we are confident that we can
obtain a small yet significant market share. The new management
team will further evaluate each market and the opportunities available
as we progress through 2020.
Internal Projects
The Company will continue to work through various valuation
processes and consider new projects to develop. It is likely that these
projects will require a certain degree of fabrication and utilisation of
the facilities available at Harland and Wolff. Typical projects in this
sector will range in value from £100-300m with a duration of
2-4 years.
Ship Repair
Projects in this area will cover general routine maintenance and asset
management of marine assets including vessels and will utilise
mainly the Belfast Dry Dock and the numerous quayside berths
available onsite. This sector will be split further down into cruise &
ferry, defence, commercial and high-speed vessels. Contracts can
vary in value from £150,000 - £5m with a duration of between
7-14 days in dock or alongside the quay. Ease of entry into this
market and relatively low commercial risks are positive factors for this
sector. We have already entered this activity with the award of two
contracts in December 2019 by Sea Truck Ferries Limited.
16 ❘ InfraStrata Plc Annual Report and Financial Statements 2019
Ship Conversion
This area is more complex than standard ship repairs and requires a
more experienced management team. As detailed later on in this
report, we have assembled a team capable of handling these types
of projects. The general sectors for this type of work are across
cruise, construction vessels, defence and ferry. Contract values can
vary from £10m - £70m with a normal duration of 14-30+ days. The
entry point for this level of projects is more complex and requires an
experienced team to ensure the techno-commercial risks are
understood and adequately mitigated. With an experienced team
now in place, we will be well positioned to enter this market
during 2020.
Offshore infrastructure / assets
The facilities and employees of Harland & Wolff already enjoy vast
experience in this sector. The dock sizes lend themselves to larger
projects such as Floating Production Storage and Operating vessels
(“FPSO”), offshore structures and vessels as well as spooling and
subsea structures. This sector has a mixed use of the facilities
ranging from the utilisation of the fabrication halls through to blasting
and painting rooms and finally, the use of the quayside and dry
docks. Contracts can vary in value from £1m - £70m+ with project
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durations ranging from 14 days to in excess of 120 days for more complex projects. Given their experience over the last decade, the team are
well positioned to enter this market in the near future.
Steel Fabrication
The facility has 30,000m2 of undercover fabrication space and has blast and paint coating facilities that complement fabrication. Clearly, this
area will be extremely busy dealing with internal projects and it is, therefore, essential that this sector makes progress early in 2020 to upskill
the workforce. There are numerous contracts that we may be able to secure to advance this area including construction industry steel for office
buildings and factories, renewable and offshore infrastructure projects and completing defence vessel blocks including the construction of
new vessels. The contract value in this sector is varied and can be from £0.1m up to £200m+. This forms an integral part of physical asset
lifecycle management and each project will always be handled on a case by case basis in order to understand its risk profile whilst
maintaining economic efficiency.
Recycling / Decommissioning
The facility is one of a limited number in the UK that has a recycling licence into which disused and damaged structures and vessels can be
brought and decommissioned in an environmentally friendly manner. General markets include offshore structures, production and defence
vessels and subsea structures.
New Management Team
In addition to Harland & Wolff (Belfast) Limited we have also recently incorporated a new company, Harland & Wolff Technical Services
Limited, which is 100% owned by Harland & Wolff (Belfast) Limited. This company shall incorporate all engineering functions internally, as well
as serving external clients globally. The formation of the new team is a blend of global experience and the decades of experience of
operations in the Harland & Wolff facility. The team has the experience to deliver the Islandmagee gas storage project, ship repair, ship
conversion, fabrication, offshore and recycling projects.
The new team at Harland and Wolff includes:
John Petticrew
Managing Director
Paul Blake
TBA
Operations Director
Commercial & BD Director
Stephen Mills
Director Sales Cruise & Ferry
Mark Giles
Con O Neil
Alan Haley
Director Sales Defence & Commercial
Financial Director (Existing H&W employee)
GM Harland & Wolff Technical Services Limited (Existing H&W employee)
Eoghan Rainey
Acting Health & Safety Director (Existing H&W Employee)
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Chief Executive Officer’s Strategic Report (continued)
John Petticrew has had decades of experience running similar
facilities globally, his recent role was Vice President Operations at
Seaspan Shipyard in Vancouver, Canada. John had 2,000 employees
reporting into him with 5 divisional directors. In this role John oversaw
the production for the National Shipbuilding Strategy for Canada
building six vessels for the Navy and Coast Guard.
John was the Vice President of Engineering also for Seaspan,
Technical Director for Gulf Marine Services and the Senior Project
Director for Lamprell Energy Limited and held the position of New
Building Manager for Dubai Dry Docks.
Commencing in 1987, John spent a decade at Saint John Ship
Building serving as Superintendent and Production Manager. He
brings with him a wealth of experience across fabrication, oil & gas,
defence, ship repair and vessel construction.
Paul Blake has recently accepted the position as Operations Director
of Harland and Wolff. Until recently Paul was the Head of Projects at
ASRY (Arab Shipbuilding & Repair Yard Co in Bahrain. Prior to this
Paul was a Project Manager at the Grand Bahamas Shipyard
specialising in cruise vessel upgrades. Paul also held posts as
Director and General Manager Atlantic & Peninsula Pty Ltd in
Australia and as General Manager/Ship Repair Director at Topaz
Energy & Marine in Dubai.
Stephen Mills and Mark Giles are proven sales executives and have
decades of experience across all sectors and are a great addition to
the team. We are currently in the process of finalising the
appointment of the new Commercial and Business Development
Director.
The new team at Harland and Wolff along with the existing workforce
now have the requisite depth of knowledge and experience to turn
this facility around into an efficient and profitable business in the
months and years to come. I look forward to building a profitable and
sustainable business around this iconic facility and globally
renowned brand.
John Wood
Chief Executive Officer
08 January 2020
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Chief Finance Officer’s Report
Overview
I am delighted to write my maiden report to
you with the intention of sharing my
reflections on the last year through this
annual report. I joined the Company initially
as a Non-Executive Director in July 2018
and formally joined the executive
management team as Chief Finance Officer
in March 2019. At the very outset, I would
like to thank my predecessor, Andy Duncan,
for the formative work that he put in while
laying down the foundations of a strong
and robust finance function.
John Wood, our CEO, and I inherited
management of the Company that was at
the crossroads of its corporate existence.
Our challenge was to effectively recreate
the Company and turn it around from a one-
project company into an organisation that
has a sustainable future with multiple assets
in its portfolio. For a company of our size,
this has not been an easy task. However,
with the progress of the Islandmagee gas
storage project, the acquisition of assets of
Harland and Wolff (“Harland and Wolff”)
and the progress being made with the FSRU
project, we are confident of converting this
aspiration into reality. The key to a
successful business is to have the ability to
generate sustainable cashflows, build a
tangible balance sheet that de-risks the
overall profile of the Company and to,
ultimately, translate all of the above into
enhanced shareholder value. I believe that
we have, through this year, laid the firm
foundations of meeting these objectives.
Arun Raman
Chief Finance Officer
Operational Highlights
We ended the year with a net loss before tax
of £1.18 million (2018: loss of £963,413). We
had no revenues to report during the
financial year. Our total operating costs for
the year were £1.39 million (2018: £863,413).
Given the scale of our activities through the
year, we have been very careful about our
cash-burn rate and have kept it to
appropriate levels. Payments to employees,
suppliers and counterparties have been at
market and, sometimes, sub-market rates in
a combination of cash and shares, primarily
with a view to preserving as much cash as
possible. However, till such time as we are
fully revenue generating, material uncertainty
exists that may cast significant doubt on the
group’s ability to continue as a going
concern. Further details are available in the
Auditor’s Report and Note 2 to the accounts.
On 06 December 2019, we announced the
first ever operating revenues in the
Company’s history. This is a significant
achievement and comes on the back of the
acquisition of Harland and Wolff. The first
revenues announcement validates that the
acquisition has now set us on the path of
being revenue generative in the months and
years to come.
We made a commitment to our shareholders
that we would be revenue generating in
2019. Whilst we have fulfilled that
commitment, it was equally important for us,
as a Board, to embark on the path of being
financially self-sustaining and cash positive.
In the remainder of calendar year 2020, I
expect continued financing and cashflow
pressures until we reach a position of being
cash break-even. With the acquisition of
Harland and Wolff and funding progress
being made on the Islandmagee gas storage
project, we now have the capability of
achieving this goal. In the meanwhile, we will
continue to closely monitor our overheads.
Prior year adjustment
The 2019 financial statements include a prior
year adjustment in relation to the warrant
reserve in the Company’s statement of
financial position. Prior year adjustments
reflect a reversal of the share-based
payment expense recognised against the
share premium account as warrants were
investor warrants,and were not issued in
respect of services provided to the
Company. As a result, the warrant reserve
now shows a balance of nil (2018: £285,432)
and the share premium account has been
increased by £285,432. This prior year
adjustment has neither impacted the
Company’s Statement of Comprehensive
Income for either period presented nor
retained earnings.
Islandmagee Gas Storage Project
In regard to the Islandmagee gas storage
project, the challenge was to bring the
project to a point that made it bankable. The
completion of the FEED study and the
entering into a binding term sheet with Vitol
to become a long-term capacity offtake
client for 100% of the storage capacity have
achieved that objective. Today, we consider
that we have a project that is “shovel-ready”,
bankable and worthy of project finance
investment. The journey to bring the project
to this stage has not been easy. Whilst a lot
of technical work was already completed,
additional investment was required through
the year to complete unfinished work, update
the necessary marine and environmental
reports ahead of DAERA’s 42-day public
consultation process, acquire the remaining
tracts of land and, generally, bring the
project to a position of being financeable.
As I write this report, advanced discussions
have been undertaken with project equity
partners to finance the construction of the
Islandmagee gas storage project. Whilst we
would like these discussions to move at a
much faster pace and come to fruition as
soon as possible, there are certain realities
that we need to recognise:
1. Gas storage is a unique mid-stream
sector of which very few investors have a
deep knowledge and understanding.
Unlike traditional onshore and above-
ground oil storage installations, gas
storage is technically more challenging
and, therefore, requires additional layers
of technical due diligence to be
completed.
2. The method by which gas storage is
priced is vastly different from oil / product
storage. The correlation between the gas
storage capacity charge and gas prices
is high. Coupled with this, as a salt cavern
facility, there is a very high correlation with
spot gas price volatility as well. Whilst a
market related storage capacity charge
bodes well for the economics of the
project, it is usually not easy for investors
to understand the intricate mechanics of
how the different layers of storage
economics are constructed – from
baseload seasonal spreads to spot
optimisation to value capture in Sudden
Movement (“SUMO”) events. It has,
therefore, taken us time to break down
these inherently complex structures in
order to make them understandable to a
general infrastructure investor.
I am pleased to report that this exercise has
been successful and the investors whom we
have been engaged with now have an in-
depth understanding of the commercial
structure of gas storage. Following the
conclusion of the recent General Election,
we believe that there could be additional
funding opportunities available to us that will
allow the Company to retain a larger portion
of the project equity than originally
envisaged. The Board has, therefore,
decided that we must explore these
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Chief Finance Officer’s Report (continued)
additional options and determine if they are
commercially feasible within an appropriate
timeframe. Where we determine that these
new funding options are unsuitable, either
due to commercial reasons or the length of
time that it would take to put them in place,
we shall endeavour to revert to one of the
existing potential project investors and
conclude negotiations as soon as
practicable. Additionally, we continue to keep
other investor options open to provide us the
optionality of seeking investment from other
sources. Whilst discussions with a couple of
core investors have been at an advanced
stage, we have intentionally chosen to keep
discussions on-going with others in the event
current discussions do not come to fruition.
Capital raising activities
In January 2019, we raised a sum of
£1.50 million before costs through an equity
placing at 1.20 pence per share. The
proceeds were utilised for land acquisitions,
engineering design works to facilitate further
CAPEX savings and other pre-construction
enabling works.
Post the balance sheet date, in August 2019,
we raised a further £700,000 before costs at
0.45 pence per share in order to fund the
costs of establishing a pre-construction
environmental baseline.
Further, in November and December 2019,
we raised a total of £6,210,210 before costs.
Further details of these capital raises, as well
as details of a loan agreement, can be found
in the paragraph below entitled “Harland and
Wolff Acquisition”.
These funds were principally raised in order
to acquire the principal assets of the former
Harland and Wolff (Heavy Industries) Limited
and Harland and Wolff Group Plc from
administrator BDO NI, as well as for general
working capital purposes.
We consider that we now have the most
advanced new gas storage project in the UK.
From a commercial perspective, having a
first mover advantage is crucial as the UK
energy market transitions away from coal
and fuel oil to gas and renewables for its
demand requirements. With the acquisition of
Harland and Wolff, we have been able to add
a significant quantum of tangible and real
fixed assets to our Group balance sheet. This
has de-risked our financial position and
provided us with the ability to raise sensible
levels of debt in the corporate debt markets.
The financial markets through the course of
this year have probably been the most
challenging since the 2008 financial crisis.
Uncertainties surrounding Brexit had an
adverse impact on overall investor sentiment.
The problems associated with the various
Woodford funds sapped liquidity in capital
markets, depressed stock prices and made it
more difficult to attract new monies. The
impact of these events was felt across the
board and every company, big and small,
experienced financing pressures. We
successfully navigated our way through
these tough market conditions to not only
progress with the Islandmagee gas storage
project but to also activate our strategy of
becoming a multi-asset company. As Brexit
uncertainties ease off post the recent
General Election, we expect to see renewed
optimism flowing through the financial
markets with greater availability of both
equity and debt capital.
EU Grant Reclaim
We expect to receive our EU grant reclaim of
Euros 1.60 million shortly. I appreciate the
frustration and apprehensions of
shareholders given the length of time it has
taken to process this reclaim. This has been
down to the complex processes that we have
had to navigate in order to formally submit
our reclaim. We have had to go through
multiple technical and financial audits.
Further, we have had to co-ordinate with
multiple Member States and the various
regulatory departments within each Member
State. The challenge has been to co-ordinate
the requirements of each Member State and
satisfy each of their Terms of Reference in
order to obtain sign-off from each of them,
jointly and severally. I am pleased to report
that we have successfully completed all
these processes and we expect to receive
the grant reclaim proceeds in early 2020.
Harland and Wolff Acquisition
An immensely proud moment for all of us in
the acquisition of the Harland and Wolff
assets was when we took control of the
facility on 5 December 2019. We raised a
sum of £6 million before costs at a price of
0.30 pence per share via a share placing to
fund the acquisition. In addition, we raised a
sum of £210,210 through a subscription offer
to qualifying shareholders and a PrimaryBid
Offer, also at 0.30 pence per share. We also
entered into a conditional loan agreement
(the“Loan”) for a sum of £2.20 million with
Riverfort Global Opportunities PCC and YA II
PN Ltd (the “Investors”) in order to fund the
initial deposit of £500,000 that was paid to
BDO NI (the “Administrators”) as part
consideration of the total consideration price
of £5.25 million, of which a final instalment of
£1.45 million is payable by 30 April 2020. The
first drawdown of the Loan was for a sum of
£700,000 and a second drawdown of
£500,000 (after costs and initial interest
payment) was initiated to pay for the
November 2019 overheads for the Harland
and Wolff facility. Whilst the first drawdown is
subject to conversion into equity shares at
the Investors’ option, the second drawdown
is a pure debt facility that is due to be repaid
by 15 February 2020. Full terms of the Loan
are set out in the Company’s announcements
of 1 October 2019 and 11 and 14 November
2019.
The share placing was a success and I am
pleased to welcome a new set of institutional
investors to the Company, some of whom
hold disclosable interests of 3% and above.
An ideal shareholder base in any public
listed company consists of a healthy mix of
institutional investors who are expected to
provide a long-term interest and retail
investors who bring liquidity to the stock
respectively. I believe that we are now
heading towards that optimal ratio between
institutional and retail holdings. The fact that
the placing was institutional led is a
testament to the confidence that our new
investors have in the strategy of the
Company and in the functioning of the
executive management.
We have now established the foundations of
making our Company growth oriented and
cash generative. Over the course of the
current financial year, we shall continue to
make progress on all fronts with a focus on
generating value for all our shareholders. As
we move towards an optimal ratio of
institutional and retail shareholders, a larger
balance sheet and stronger cash generation,
the Company is now well placed to explore
innovative external financial structures that
are cost-effective. My intention is to keep any
future shareholder dilution to a minimum
through an optimum mix of internal cash
generation and sensible levels of corporate
debt.
Every company faces financing challenges
throughout its life cycle, but the key is to deal
with today’s priorities with an eye on
tomorrow’s potential.
Arun Raman
Chief Finance Officer
08 January 2020
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Directors' Report
for the year ended 31 July 2019
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Directors' Report (continued)
for the year ended 31 July 2019
The directors present their report and the audited consolidated financial statements for the year ended 31 July 2019.
DIRECTORS OF THE GROUP
The directors, who held office during the year, were as follows:
Mr J M Wood (Chief Executive Officer & Interim Chairman)
Mr A S Raman (Executive Director)
Mr M J M Groat (Non-Executive Director) (appointed 22 March 2019)
Mr G V Lyon (Resigned 7 March 2019)
Mr M P Beardmore (Resigned 18 December 2018)
Mr A R Pocock (Resigned 12 September 2018)
GENERAL
InfraStrata plc is incorporated and domiciled in England and Wales.
HEALTH, SAFETY AND ENVIRONMENT
There were no reportable health, safety or environmental incidents during the financial year.
SHARE CAPITAL
At the date of this report 3,682,856,289 ordinary shares are issued and fully paid (including all warrants exercised and fully paid at the date of
this report). Details of movements in share capital during the year are given in note 19 to the financial statements; post year end movements
are detailed in note 28.
RESULTS AND DIVIDENDS
The Group recognised cash revenue from continuing operations of £Nil (2018: £Nil). Management and administrative expenses totalled
£1,383,294 (2018: £863,413). The Group incurred a loss of £1,182,712 (2018: loss of £963,413). The loss for 2019 when added to the cumulative
losses of £28,272,541 brought forward and movements between reserves leaves a retained loss of £29,455,253 to be carried forward.
The directors do not recommend the payment of a dividend (2018: £nil).
RISK MANAGEMENT
The financial risk management objectives and policies of the Company in relation to the use of financial instruments, and the exposure of the
Company and its subsidiary undertakings to its main risks, credit risk and liquidity risk, are set out in note 27 to the financial statements. The
principal risks and uncertainties relating to the Group’s business and how we mitigate them are detailed in subsequent paragraphs.
PRINCIPAL RISKS AND UNCERTAINTIES
The board is responsible for the effectiveness of the Group's risk management activities and internal control processes. As a participant in the
gas storage development industry, the Group is exposed to a wide range of business risks in the conduct of its operations. The Group is
exposed to financial, operational, strategic and external risks which are further described below. These risks are not exhaustive and additional
risks or uncertainties may arise or become material in the future. A robust process of risk management and mitigation has been introduced
into the business and all risks associated with the Islandmagee Energy project (“the Project”) have been fully assessed.
FINANCING RISK - THE RISK OF NOT OBTAINING SUFFICIENT FINANCING
Access to adequate working capital is critical to our ability to pursue our existing and future projects and to continue as a going concern. A
deterioration of the capital markets may reduce our ability to raise new equity funding. We work closely with our professional advisers and
brokers to identify the optimum approach and timing to secure new equity financing to provide working capital.
The Group seeks to manage risk for our shareholders by attracting investment through quality partners where possible thereby minimising our
own commitments to pay project development costs. We do not make financial commitments unless such funding has been secured through
joint venture partners or otherwise new investment in our projects or we have a high degree of confidence that it will be secured.
STRATEGIC AND EXTERNAL RISKS - FAILURE TO MANAGE AND GROW THE BUSINESS WHILE CREATING SHAREHOLDER VALUE
There is no assurance that the Group's gas storage development will be successful, however this risk has been substantially reduced by
successfully completing the Front End Engineering and Design (“FEED”) works for the Project. We place a premium on recruitment and
retention of suitably skilled personnel, compliance with applicable legislation and careful management of cash resources and requirements.
The successful progression of the Group's activities depends not only on technical success, but also on the ability of the Group to obtain
appropriate financing through equity or debt financing or disposing of interests in projects or via other means.
We place great emphasis on regular communication with shareholders, including the release of announcements for the interim and annual
results, and after significant developments. We seek to ensure that through such communications our shareholders are aware of our strategy
and operations and that management has their continuing support. The Company's system of Corporate Governance is set out in the Report
of the Directors on page 24.
OPERATIONAL RISKS - DAMAGE TO SHAREHOLDER VALUE, ENVIRONMENT, PERSONNEL OR COMMUNITIES CAUSED BY
OPERATIONAL FAILURES
lnfraStrata has restructured its Board of Directors to include individuals with relevant skills to manage the operational risks of our projects and
ensure they are progressed in the shortest possible timescales in a cost effective manner. We have built up our core competencies in project
development and have developed excellent relationships with government and public stakeholders in the geographical areas in which we operate.
Our management team works alongside strong and experienced joint venture partners in all projects and is supported by a highly effective
network of carefully selected service delivery specialists such as environmental consultants and drilling engineering services. In this way we
seek to mitigate the potential risk that we fail to be seen to be acting in a socially responsible manner and/or fail to maintain good local
community relations.
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
DIRECTORS
The directors, who served during the year and subsequently, are detailed in the following table, which also highlights whether they are/were
executive positions or independent:
Executive Independent
G V Lyon (resigned 7 March 2019) 4
J Wood (appointed 27 June 2018) 4
A R Pocock (ceased 12 September 2018) 4
M P Beardmore (resigned 18 December 2018) 4
A S Raman (appointed 26 July 2018) 4
M J M Groat (appointed 22 March 2019) 4
All directors benefit from the provisions of individual directors’ Personal Indemnity insurance policies. Premiums payable to third parties are
as described in note 6 to the financial statements. Some of the current directors have been granted share options in the Company and details
can be found in note 8 to the financial statements.
The directors of the Company at the date of this Annual Report and their abridged CVs are as follows:
John Wood – Chief Executive Officer
John has enjoyed a distinguished career within the Oil and Gas sector, holding senior posts with BAE Systems, and was more recently the
Global Head of Oil and Gas with Aurecon, a global engineering and advisory firm. He has successfully undertaken projects in Australia, the
USA, Africa, Europe and the UK, building up extensive experience delivering pre-FEED and FEED (Front End Engineering Design), FID (Final
Investment Decision) and EPC (Engineering, Procurement and Construction) contracts involving storage and infrastructure developments. Prior
to his appointment as Chief Executive Officer at InfraStrata plc, John worked as a consultant for the company, and was closely involved in
negotiating and agreeing FEED contracts for the Islandmagee gas storage facility with Costain, DEEP KBB and WSP, as well as the
appointment of Evan Passaris (Atkins) as a specialist in salt cavern gas storage. During that time, John managed all FEED related activities on
behalf of the company.
John is ideally suited to overseeing the operational areas of InfraStrata’s Islandmagee gas storage project, given his wealth of technical
experience across a wide range of similar developments. He is a well-known and highly respected industry professional and has extensive
experience of working with InfraStrata’s FEED partners.
Arun Raman – Chief Finance Officer
Arun has spent the past 20 years within the commodities and infrastructure sector. While at Star Energy Group plc (now known as Petronas
Energy Trading Ltd.), he was responsible for commercialising its 10 BCF Humbly Grove Underground Gas Storage Project, including the
negotiation and commercial delivery of the Gas Storage Agreement with Vitol SA as the capacity offtake client. He also negotiated and
executed agreements with the National Grid in relation to physical gas flows between the Humbly Grove gas storage facility and the National
Transmission System. On the trading side, Arun set up trading desks for natural gas, power and carbon emissions for the group. Following on
from there, Arun was hired by Vitol Services Ltd. in London where he was actively trading carbon emissions and other commodities. He
specialises in commercial negotiations and monetising assets underpinned by commodity flows as well as trading of commodities around
such assets. Arun’s gas storage commercialisation experience will provide valuable insight as InfraStrata progresses with the Islandmagee
Project.
Arun is a qualified Chartered Accountant having completed his training with PricewaterhouseCoopers and Citibank N.A. in India. He has been
a member of the Institute of Chartered Accountants of India for the last 17 years post qualification, and also holds the designation of Certified
Internal Auditor awarded to him by the Institute of Internal Auditors, Florida, USA.
Malcolm Groat – Non-Executive Director
Malcolm has worked for many years as a consultant to companies in technology, natural resources and general commerce. Following an early
career with PWC in London, he held CFO, COO, and CEO roles in established corporations including the construction firm now called Arcadis.
Since 2004 Malcolm has served in non-executive director or chairman positions, today including Baronsmead Second Venture Trust PLC and
Tomco Energy PLC. Malcolm is a Fellow of the Institute of Directors, Fellow of the Royal Society for the Encouragement of Arts, Manufactures
and Commerce, and Fellow of the Institute of Chartered Accountants in England and Wales. He holds university degrees from St Andrews
(MA) and Warwick (MBA).
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Directors' Report (continued)
for the year ended 31 July 2019
DIRECTORS’ EMOLUMENTS
The directors’ emoluments are disclosed in note 6 to the Financial Statements.
DIRECTORS AND SUBSTANTIAL SHAREHOLDINGS
The directors of the Company held the following beneficial shareholdings as at 8 January 2020.
Ordinary shares of 0.01p each Number %
John Wood 46,618,062 1.27
Arun Raman 8,621,057 0.23
Malcolm Groat – –
The directors of the Company held the following beneficial shareholdings as at 31 July 2019.
Ordinary shares of 0.01p each Number %
John Wood 46,618,062 3.49
Arun Raman 1,954,397 0.15
The Company has also received notification of the following interests in 3% or more of the Company’s issued share capital as at 08 January
2020. The holdings and percentages presented are at the date of notification.
Ordinary shares of 0.01p each %
Lombard Odier Asset Management (Europe) Limited 9.56
Allianz Global Investors GmbH 9.28
Crux Asset Management Limited 8.19
Killik and Co LLP 4.40
Spreadex Limited 3.41
Harwood Capital LLP 3.18
CORPORATE GOVERNANCE
Corporate Governance Statement
The Board recognises the importance of good corporate governance and have chosen to apply the QCA Code. The QCA Code was
developed by the Quoted Companies Alliance (the “QCA”), the independent membership organisation that champions the interests of small to
mid-size quoted companies, in consultation with a number of significant institutional small company investors, as a suitable corporate
governance code applicable to AIM companies.
As stated by the QCA, good corporate governance is about “having the right people (in the right roles), working together, and doing the right
things to deliver value for shareholders as a whole over the medium to long-term”. This is achieved through a series of decisions made by the
Board, which needs to be kept dynamic, diverse and engender a consistent corporate culture throughout the InfraStrata plc group of
companies (the “Group”).
Our values are based on “Doing the right thing” for our people, suppliers, shareholders and other stakeholders. The Board believes this is vital
to creating a sustainable, growing business and is a key responsibility of the Group. This culture supports the Group’s objectives to grow the
business through acquiring and retaining customers. It is the Board’s job to ensure that the Group is managed for the long-term benefit of all
shareholders, with effective and efficient decision-making. Corporate governance is an important part of that job, reducing risk and adding
value to our business.
John Wood (Chief Executive Officer & Interim Chairman)
The Board has adopted the QCA Code in line with the London Stock Exchange’s recent changes to the AIM Rules requiring all AIM-quoted
issuers to adopt and comply with a recognised corporate governance code. To see how we address the key governance principles defined in
the QCA Code please refer to the below table.
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Deliver Growth
QCA Code Principle Application What we do and why
1. Establish a strategy
and business model
which promote
long-term value for
shareholders
The board must be able to express a shared
view of the company’s purpose, business
model and strategy. It should go beyond the
simple description of products and
corporate structures and set out how the
company intends to deliver shareholder
value in the medium to long-term.
It should demonstrate that the delivery of
long-term growth is underpinned by a clear
set of values aimed at protecting the
company from unnecessary risk and
securing its long-term future.
The Group’s strategy is explained fully within our Chief
Executive’s Strategic Report section.
Our strategy is principally focused around four key areas: (i)
identification of opportunities, primarily in the energy
infrastructure sector; (ii) development of projects using the skills
and experience of the Company’s management team; (iii)
monetisation of projects to deliver shareholder value; and (iv)
identifying future energy-related projects, to ensure we have a
balanced portfolio of projects at various stages of completion.
The key challenges to the business and how these are mitigated
are detailed further in this Annual Report.
2. Seek to understand
and meet
shareholder needs
and expectations
Directors must develop a good
understanding of the needs and
expectations of all elements of the
company’s shareholder base.
The board must manage shareholders’
expectations and should seek to understand
the motivations behind shareholder voting
decisions.
The Company remains committed to listening and communicating
openly with its shareholders to ensure that its strategy, business
model and performance are clearly understood. Understanding
what analysts and investors think about us and, in turn, helping
these audiences understand our business, is a key part of driving
our business forward and we actively seek dialogue with the
market. We do so via investor roadshows, attending conferences
and our regular reporting.
The Board recognises the AGM as an important opportunity to
meet shareholders. The Directors are available to listen to the
views of shareholders informally immediately following the AGM.
The AGM is the main forum for dialogue with retail shareholders
and the Board. The notice of AGM is sent to shareholders at least
21 days before the meeting. The chairman and the Executive
Directors attend the AGM and are available to answer questions
raised by shareholders. For each vote, the number of proxy votes
received for, against and withheld is announced at the meeting.
The results of the AGM are subsequently published on this
website.
The person at the Company with principal responsibility for
liaising with shareholders is: John Wood.
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Directors' Report (continued)
for the year ended 31 July 2019
QCA Code Principle Application What we do and why
3. Take into account
wider stakeholder
and social
responsibilities and
their implications
for long-term
success
4. Embed effective
risk management,
considering both
opportunities and
threats, throughout
the organisation
Long-term success relies upon good
relations with a range of different
stakeholder groups both internal (workforce)
and external (suppliers, customers,
regulators and others). The board needs to
identify the company’s stakeholders and
understand their needs, interests and
expectations.
Where matters that relate to the company’s
impact on society, the communities within
which it operates or the environment have
the potential to affect the company’s ability
to deliver shareholder value over the medium
to long-term, then those matters must be
integrated into the company’s strategy and
business model.
Feedback is an essential part of all control
mechanisms. Systems need to be in place to
solicit, consider and act on feedback from all
stakeholder groups.
The board needs to ensure that the
company’s risk management framework
identifies and addresses all relevant risks in
order to execute and deliver strategy;
companies need to consider their extended
business, including the company’s supply
chain, from key suppliers to end-customer.
Setting strategy includes determining the
extent of exposure to the identified risks that
the company is able to bear and willing to
take (risk tolerance and risk appetite).
Engaging with our stakeholders strengthens our relationships and
helps us make better business decisions to deliver on our
commitments. The Board stays abreast of stakeholder insights
into the issues that matter most to them and our business, which
enables the Board to understand and consider these issues in
decision-making. Aside from our shareholders and suppliers, our
core management team is one of our most important stakeholder
groups and the Board closely monitors any feedback it receives
from members of the team to ensure alignment of interests.
For more information please see our Directors’ Report under the
principal risks and uncertainties section in this Annual Report.
The Group encourages feedback from all those organisations
which it works or otherwise engages with.
The principal risks and uncertainties faced by the Group are
detailed in this Annual Report. We detail the risks to the business,
how these are mitigated and the change in the identified risk over
the last reporting period.
The Board considers risk to the business at Board meetings
(which are scheduled to take place at least quarterly). Due to the
recent changes at Board and management team level, Board
meetings have taken place with increased frequency.
Management are usually invited to attend the Board meetings,
but are asked to leave any meetings when the Board wishes to
discuss and/or otherwise resolve any Board-specific, confidential
or sensitive matters.
The Company formally reviews and documents the principal risks
to the business at least bi-annually.
The Board and management team are responsible for reviewing
and evaluating risk and the Executive Directors meet at monthly
intervals to review ongoing trading performance, discuss budgets
and forecasts, and new risks associated with ongoing trading and
projects. A risk committee has been recently established by the
Board (further details of which are contained in Principle 5
below).
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CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Maintain a Dynamic Management Framework
QCA Code Principle Application What we do and why
5. Maintain the
board as a
well-functioning,
balanced team led
by the chair
The board members have a collective
responsibility and legal obligation to promote
the interests of the company, and are
collectively responsible for defining
corporate governance arrangements.
Ultimate responsibility for the quality of, and
approach to, corporate governance lies with
the chair of the board.
The board (and any committees) should be
provided with high quality information in a
timely manner to facilitate proper
assessment of the matters requiring a
decision or insight.
The board should have an appropriate
balance between executive and non-
executive directors and should have at least
two independent non-executive directors.
Independence is a board judgement.
The board should be supported by
committees (e.g. audit, remuneration,
nomination) that have the necessary skills
and knowledge to discharge their duties and
responsibilities effectively.
Directors must commit the time necessary to
fulfil their roles.
The Board currently comprises two Executive Directors and one
Non-Executive Director. The Board considers the Non-Executive
Director to be independent. The Company has announced the
appointment of a new Non-Executive Chairman, with effect from
1 February 2020. The Company also intends to appoint a further
non-executive director early in 2020.
The Board is satisfied that it has a suitable balance between
independence on the one hand, and knowledge of the Company
on the other, to enable it to discharge its duties and
responsibilities effectively. All Directors are encouraged to use
their independent judgement and to challenge all matters,
whether strategic or operational. The Board intend to continue to
assess and monitor the Company’s requirements in this regard,
and expect to review the situation on an ongoing basis.
All Directors receive regular and timely information relating to the
Group’s operational and financial performance. Relevant
information is circulated to the Directors in advance of meetings.
In addition, minutes of the meetings of the Directors are
circulated to the Board for approval.
The Board has a formal schedule of matters reserved to it and is
supported by the Audit and Remuneration Committee. The
Committees’ Terms of Reference are available below this table.
The primary tasks of the CEO are as follows: (i) leads the
development and execution of long-term corporate strategy; (ii)
responsible for all day-to-day management decisions and
implementing corporate long and short-term plans; (iii) acts as
direct liaison between the Board and management team; and (iv)
communicates on behalf of the Company to internal and external
stakeholders.
The primary tasks of the CFO are as follows: (i) overseeing the
administrative, financial, and risk management operations of the
Company (ii) developing financial and operational strategy,
including the metrics linked to strategy; (iii) ongoing development
and monitoring of control systems designed to preserve
Company assets; and (iv) reporting accurate financial results.
The primary tasks of the Chairman are as follows: (i) leads the
Board and ensures its effective operation; (ii) providing support
and supervision to the management team; and (iii) monitoring
and upholding corporate governance standards.
The Board’s role is to oversee and manage the Group, in as a
responsible and efficient manner as possible. Broadly, the Board
focuses on four key areas: (1) establishing vision, mission and
values; (2) setting strategy and structure; (3) delegating to
management; and (4) exercising accountability to shareholders
and being responsible to relevant stakeholders.
The Company has the following committees: (i) Audit Committee
and (ii) Remuneration, Nomination and Corporate Governance
Committee.
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Directors' Report (continued)
for the year ended 31 July 2019
QCA Code Principle Application What we do and why
6. Ensure that
between them the
directors have the
necessary up-to-
date experience,
skills and
capabilities
The board must have an appropriate balance
of sector, financial and public markets skills
and experience, as well as an appropriate
balance of personal qualities and
capabilities. The board should understand
and challenge its own diversity, including
gender balance, as part of its composition.
The Board is satisfied that, between the Directors, it has an
effective and appropriate balance of skills and experience,
including in the areas of energy, engineering, finance, capital
markets, innovation and international trade. All Directors receive
regular and timely information on the Group’s operational and
financial performance. Relevant information is circulated to the
Directors in advance of meetings.
The board should not be dominated by one
person or a group of people. Strong
personal bonds can be important but can
also divide a board.
The Directors keep their skillsets up to date by attending relevant
industry and professional events, as well as receiving periodic
updates from the Company’s professional advisers regarding
regulatory developments.
As companies evolve, the mix of skills and
experience required on the board will
change, and board composition will need to
evolve to reflect this change.
The Directors’ service contracts are available for inspection at the
Company’s registered office and at each AGM.
All Directors retire by rotation at regular intervals in accordance
with the Company’s Articles of Association.
Appointment, removal and re-election of Directors The Board
makes decisions regarding the appointment and removal of
Directors, and there is a formal, rigorous and transparent
procedure for appointments. The Company’s Articles of
Association require that one-third of the Directors must stand for
re-election by shareholders annually in rotation; that all Directors
must stand for re-election at least once every three years; and
that any new Directors appointed during the year must stand for
election at the AGM immediately following their appointment.
Independent advice
All Directors are able to take independent professional advice in
the furtherance of their duties, if necessary, at the Company’s
expense. In addition, the Directors have direct access to the
advice and services of the Chief Financial Officer and Company
Secretary.
7. Evaluate board
performance based
on clear and
relevant objectives,
seeking continuous
improvement
The board should regularly review the
effectiveness of its performance as a unit, as
well as that of its committees and the
individual directors.
The individual contributions of each of the members of the Board
are regularly assessed to ensure that: (i) their contribution is
relevant and effective; (ii) that they are committed; and (iii) where
relevant, they have maintained their independence.
The board performance review may be
carried out internally or, ideally, externally
facilitated from time to time. The review
should identify development or mentoring
needs of individual directors or the wider
senior management team.
It is healthy for membership of the board to
be periodically refreshed.
Succession planning is a vital task for
boards. No member of the board should
become indispensable.
The Board intends to review the performance of the team as a
unit to ensure that the members of the Board collectively function
in an efficient and productive manner.
One-third of the Directors must stand for re-election by
shareholders annually in rotation and all Directors must stand for
re-election at least once every three years.
For more information please see our Director’ Report in the
principal risks and uncertainties section of this Annual Report.
The Group encourages feedback from all those organisations
which it works or otherwise engages with.
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
QCA Code Principle Application What we do and why
The Chief Executive Officer’s Strategic Report details the
environmental values of the Group, where we outline our
commitments to act in a socially responsible manner and
maintain good local community relations.
We have appointed Judith Tweed, who is the person principally
responsible for managing and maintaining local community
relations in Islandmagee, Northern Ireland, to the board of
directors of the Group subsidiary Islandmagee Energy Limited.
The Board sees this as important for ensuring that the local
community we work realise how important we view our relations
with the local community.
The Group supports the growing awareness of social,
environmental and ethical matters when considering business
practices.
As well as the information contained in this matrix, which
identifies the Group’s commitment to and application of the QCA
Code, the Corporate Governance Statement in this Annual Report
details the Company’s governance structures and why they are
appropriate and suitable for it.
The Company encourages two-way communication with its
shareholders and responds quickly to all queries received. The
Chairman talks regularly with the Group’s major shareholders and
ensures that their views are communicated fully to the Board.
The Board recognises the AGM as an important opportunity to
meet private shareholders. The Directors are available to listen to
the views of shareholders informally immediately following the
AGM.
8. Promote a
corporate culture
that is based on
ethical values and
behaviours
9. Maintain
governance
structures and
processes that are
fit for purpose and
support good
decision-making by
the board
Build Trust
10. Communicate how
the company is
governed and is
performing by
maintaining a
dialogue with
shareholders and
other relevant
stakeholders.
The board should embody and promote a
corporate culture that is based on sound
ethical values and behaviours and use it as
an asset and a source of competitive
advantage.
The policy set by the board should be visible
in the actions and decisions of the chief
executive and the rest of the management
team. Corporate values should guide the
objectives and strategy of the company.
The culture should be visible in every aspect
of the business, including recruitment,
nominations, training and engagement. The
performance and reward system should
endorse the desired ethical behaviours
across all levels of the company.
The corporate culture should be
recognisable throughout the disclosures in
the annual report, website and any other
statements issued by the company.
The company should maintain governance
structures and processes in line with its
corporate culture and appropriate to its:
(cid:129) size and complexity; and
(cid:129) capacity, appetite and tolerance for risk.
The governance structures should evolve
over time in parallel with its objectives,
strategy and business model to reflect the
development of the company.
A healthy dialogue should exist between the
board and all of its stakeholders, including
shareholders, to enable all interested parties
to come to informed decisions about the
company.
In particular, appropriate communication and
reporting structure should exist between the
board and all constituent parts of its
shareholder base.
This will assist:
(cid:129) the communication of shareholders’ views
to the board; and
(cid:129) the shareholders’ understanding of the
unique circumstances and constraints
faced by the company.
It should be clear where these
communication practices are described
(annual report or website).
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Directors' Report (continued)
for the year ended 31 July 2019
The Board
At the financial year end the board comprised two executive directors and one non-executive director whose background and experience are
relevant to the Company’s activities. The directors are of the opinion that the expanded board with a new Chairman with effect from
01 February 2020 and another non-executive director (to be appointed early in 2020) will have a suitable balance and it is expected that
non-executive directors undertake a minimum of 18 days a year including attending board meetings and sitting on committees. The Directors’
report in this annual report sets out biographical details of each director and which directors the Board considers to be independent. The
board, through the directors, maintains regular contact with its professional advisers to ensure that the board develops an understanding of
the views of major shareholders about the Company. The board also intends to review the performance of the team as a unit to ensure that the
members of the board collectively function in an efficient and productive manner. All directors have access to the advice and services of the
Company Secretary who is responsible to the board for ensuring that the board procedures are followed and that the applicable rules and
regulations are complied with. In addition, the Company Secretary will ensure that the directors receive appropriate training as necessary. The
appointment and removal of the Company Secretary is a matter for the board as a whole.
The table below contains details on the number of meetings held during the period and individual director attendance.
Number of meetings held during the 2018/19 financial year
Executive Directors
Adrian Pocock (ceased 12 September 2018)
John Wood (appointed 27 June 2018)
Arun Raman (appointed 26 July 2018)
Non-Executive Directors
Graham Lyon (resigned 07 March 2019)
Matt Beardmore (resigned 18 December 2018)
Malcolm Groat (appointed 22 March 2019)
Board
28
No. of
meetings
attended
Audit
Committee
Remuneration
Committee
2
8
No. of
meetings
attended
No. of
meetings
attended
2
25
28
22
5
3
–
1
1
1
–
1
–
1
8
6
3
2
Audit Committee
Malcolm Groat is currently the only member of the Audit Committee due to him being the only current non-executive director. New
non-executive directors will join the Audit Committee. For the financial period to which this Annual Report relates, the members were
comprised of Arun Raman (former Chair), Graham Lyon and Matt Beardmore. There were two meetings of the Audit Committee during the
financial year which was attended by all members of the Committee. Senior representatives of the external auditor attend these meetings if
considered appropriate. The external auditor has unrestricted access to the Chairman of the committee.
The role of the Audit Committee includes:
l Consideration of the appointment of the external auditor and the audit fee.
l Reviewing the nature, scope and results of the external audit.
l Monitoring the integrity of the financial statements and interim report.
l Discussing with the auditors any problems and reservations arising from the interim and final results.
l Reviewing the auditor’s management letter and management’s response.
l Reviewing on behalf of the board the Group’s system of internal control and making recommendations to the board.
The Committee also keeps under review the necessity for establishing an internal audit function but considers that, given the size of the Group
and the close involvement of senior management in day-to-day operations, there is currently no requirement for such a function.
Notwithstanding the absence of an internal audit function, the Committee keeps under review the effectiveness of the Group’s internal controls
and risk management systems.
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CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Remuneration, Nomination and Corporate Governance Committee
Malcolm Groat is currently the only member of the Remuneration, Nomination and Corporate Governance Committee due to him being the only
current non-executive director. New non-executive directors will join this committee. For the financial period to which this Annual Report relates,
the members comprised Arun Raman (Chairman), Graham Lyon (former Chair), Matt Beardmore and Arun Raman. The committee met eight
times in the year to 31 July 2019.
The Group’s policy is to remunerate senior executives fairly in such a manner as to facilitate the recruitment, retention and motivation of staff.
The Remuneration Committee recommends to the board a framework for the remuneration of the Executive Directors and the senior
management of the Group.
The principal objectives of the Committee include:
l Determining and recommending to the board the remuneration policy for the Chief Executive and Executive Directors.
l Reviewing the design of share incentive plans for approval by the board and determining the annual award policy to Executive Directors
under existing plans.
The Committee remains acutely aware of the need to balance the financial performance of the Company with the need to maintain
incentivisation and motivation for the executive team.
Relations with Shareholders
Communication with shareholders is given high priority and the Company therefore communicates regularly with shareholders including the
release of announcements for the interim and annual results and after significant developments. The Annual General Meeting, which this year
is being held on 31 January 2020, is normally attended by all directors. Shareholders are invited to ask questions on matters including the
Group’s operations and performance and to meet with the directors after the formal proceedings have ended.
The Company maintains a website (www.infrastrataplc.com) for the purpose of improving information flow to shareholders as well as potential
investors. The website contains all regulatory and press announcements and financial reports as well as extensive corporate governance and
operational information about the Group’s activities. Enquiries from shareholders on matters relating to their holdings and the business of the
Group are welcomed. The board encourages shareholders to attend the Annual General Meeting, at which members of the board are
available to answer questions.
Internal controls
The directors are responsible for the Group’s system of internal controls, the setting of appropriate policies on those controls, and regular
assurance that the system is functioning effectively and that it is effective in managing business risk. Internal control systems are designed to
meet the particular needs of the Group and to manage rather than eliminate the risk of failure to meet business objectives. The internal
controls cover financial, operational and compliance matters and are reviewed on an on-going basis.
The directors consider that the frequency of board meetings and the information provided to the board in relation to Group operations assists
the identification, evaluation and management of significant risks relevant to its operations on a continuous basis.
The Group’s internal controls can only provide reasonable and not absolute assurance against material misstatement or loss or the risk of
failure to meet business objectives. Having thus monitored risk management and internal control processes in place, the board considers that
the Company’s internal control systems operated appropriately during the year and up to the date of signing of the Annual Report and
Financial Statements.
The Company’s business model and strategy is set out in the reports of the Interim Chairman and the CEO in this annual report. A summary of
the principal risks and uncertainties relating to the Group’s business and how the Board attempts to mitigate them are detailed in the Directors’
report of this annual report.
GOING CONCERN
Notwithstanding the loss incurred during the year under review, the Directors have a reasonable expectation that the Group will be able to
generate cash resources through revenue generation via contract wins and / or debt / equity raises to provide adequate resources to continue
operating for the foreseeable future. During the year and post year end the Group raised £9,365,765 before expenses indicating investor
support for the Group’s strategy and has, as previously announced, secured contract wins for its Harland and Wolff operations. The Directors
expect to deliver results which will lead to continuing market support. The Directors therefore consider it appropriate to continue to adopt the
going concern basis in the preparation of the financial statements. Further details on the Directors assumptions and conclusions are included
in the statement of going concern in Note 2.
The auditors have made reference to going concern by way of a material uncertainty within their audit report.
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Directors' Report (continued)
for the year ended 31 July 2019
DIRECTORS’ RESPONSIBILITIES
The directors acknowledge their responsibilities for preparing the Annual Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to
prepare the Group and Parent company 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 state of affairs of the Group and Parent company and of the profit or loss of the Group for that period. In
preparing these financial statements, the directors are required to:
l select suitable accounting policies and apply them consistently;
l make judgements and accounting estimates that are reasonable and prudent;
l state whether applicable International Financial Reporting Standards (IFRSs) as adopted by the European Union have been followed,
subject to any material departures disclosed and explained in the financial statements; and
l prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in
business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group's and the company’s
transactions and disclose with reasonable accuracy at any time the financial position of the group and the company and enable them to
ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group
and the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.
Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other
jurisdictions.
The company is compliant with AIM Rule 26 regarding the company’s website.
DISCLOSURE OF INFORMATION TO THE AUDITOR
In the case of each person who was a director at the time this report was approved: so far as the director was aware there was no relevant
audit information of which the Company’s auditor was unaware; and the director had taken all steps that the director ought to have taken as a
director to make himself or herself aware of any relevant audit information and to establish that the Company’s auditor was aware of that
information. This information is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
AUDITOR
A resolution to re-appoint the Company’s auditor, PKF Littlejohn LLP, will be proposed at the Annual General Meeting to be held on
31 January 2020.
On behalf of the board
John Wood (Chief Executive Officer & Interim Chairman)
Director
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Independent auditor’s report
to the members of InfraStrata plc
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Independent auditor’s report (continued)
to the members of InfraStrata plc
Opinion
We have audited the financial statements of InfraStrata Plc (the 'parent company') and its subsidiaries (the 'group') for the year ended
31 July 2019, which comprise the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Company
Statement of Financial Position, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated
Statement of Cash Flows, Company Statement of Cash Flows, and Notes to the Financial Statements, including a summary of significant
accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union, and as regards the parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
In our opinion:
l give a true and fair view of the state of the group's and the parent company's affairs as at 31 July 2019 and of the group's loss and parent
company’s loss for the year then ended;
l the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
l the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and
as applied in accordance with the provisions of the Companies Act 2006; and
l the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We
are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Material uncertainty related to going concern
We draw attention to the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position and the
Statement of Cash Flows in the financial statements, which indicates that the group incurred a net loss of £1.2 million and incurred cash
outflows during the year ended 31 July 2019 of £1.6 million and at that date had net current liabilities of £1.7 million respectively.
The financial statements have been prepared on a going concern basis, on the basis that there is receipt of new funds either through revenue
generation or debt / equity funding in order to meet committed expenditure for a period of at least twelve months from the date of approval of
these financial statements.
As stated in note 2, these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to
continue as a going concern.
Our opinion is not modified in respect of this matter.
Our application of materiality
The scope of our audit was influenced by our application of materiality, which determines the scope of our audit and the nature, timing and
extent of our procedures. The materiality applied to the group was £219,000, based on 2% of gross assets of the group. Gross assets have
been chosen as the driver for materiality as, during the financial year, the most significant item within the financial statements are the
capitalised costs in respect of the Islandmagee project which the group is seeking to develop and generate future revenue. The same basis
has been used for the calculation of materiality for the parent company, of £204,000.
Performance Materiality has been set as 60% of headline materiality for both the group and parent company, being £131,400 and £122,400
respectively.
We agreed with the audit committee that we would report to the committee all errors identified within the group and parent company during
our audit in excess of £10,950 and £10,200 respectively. This represents 5% of headline materiality.
Materiality has been reassessed at the closing stages of the audit taking into consideration new information which arose. No alterations were
made to materiality at the conclusion of the audit.
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INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
An overview of the scope of our audit
In designing our audit, we determined materiality and assessed the risk of material misstatement in the financial statements. In particular, we
looked at the areas including significant accounting estimates and judgements by the directors’ and considered future events that are
inherently uncertain in respect of the carrying value of intangible assets. We addressed the risk of material misstatement through
management override of controls, including among other matters consideration of whether there was evidence of bias that represented a risk
of material misstatement due to fraud.
At the year end, the group consisted of three entities. We have been appointed as auditor for each of these entities and carried out full audits.
The Islandmagee project, held through a subsidiary undertaking, represented the principal business unit of the group. We therefore tailored
the scope of the audit to focus our testing on this project.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including
those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter How the scope of our audit responded to the key audit matter
Carrying value of intangible assets (Note 11)
As at 31 July 2019 the group held intangible assets totalling
£10,168,605 in respect of the Islandmagee project.
The project is not yet revenue generating and therefore the carrying
value of the asset incorporates significant estimates and judgements
from management.
There is a risk that the intangible assets are impaired.
There is also a risk that capitalised costs do not meet the
requirement of the IFRS recognition criteria.
Our work included but was not limited to:
l Discussing and challenging management as to the status of the
project and its intended date of completion;
l Considering and challenging managements assumptions into the
discounted cash flow model which supports the carrying value of
the intangible asset;
l Performing sensitivity analysis on the key inputs into the
discounted cash flow model to confirm the current headroom;
and
l Ensuring all costs capitalised in the period met the capitalisation
criteria.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report
thereon. The directors are responsible for the other information. Our opinion on the group and parent company financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
l the information given in the strategic report and directors' report for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
l the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of our knowledge and understanding of the group and the parent company and their environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our
opinion:
l adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
l the parent company financial statements are not in agreement with the accounting records and returns; or
l certain disclosures of directors’ remuneration specified by law are not made; or
l we have not received all the information and explanations we require for our audit.
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Independent auditor’s report (continued)
to the members of InfraStrata plc
Responsibilities of directors
As explained more fully in the Statement of Directors' Responsibilities set out on page 32, the directors are responsible for the preparation of
the group and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the group and parent company financial statements, the directors are responsible for assessing the group’s and the parent
company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but
is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Joseph Archer
(Senior Statutory Auditor)
For and on behalf of
PKF Littlejohn LLP, Statutory Auditor
15 Westferry Circus
London
E14 4HD
Date: 08 January 2020
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CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Financial statements
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Consolidated statement of comprehensive income
for the year ended 31 July 2019
Continuing operations
Revenue
Management and administrative expenses
Other income
Operating loss
Finance income
Finance costs
Loss before tax
Taxation
Loss for the year
Other comprehensive income
Total comprehensive loss for the year attributable to the
equity holders of the parent
Earnings Per Share:
Basic and diluted
Note
2019
£
2018
£
–
(1,383,294)
300,000
3
4 (1,083,294)
18
(99,436)
–
(863,413)
–
(863,413)
–
(100,000)
(1,182,712)
–
9
(963,413)
–
(1,182,712)
(963,413)
–
–
(1,182,712)
(963,413)
10
(0.09)p
(0.15)p
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Consolidated statement of financial position
as at 31 July 2019
31 July
31 July 2018
2019 £
Note £ (As restated)
1 August
2017
£
Assets
Non-current assets
Intangible assets 11 10,168,605
Property, plant and equipment 12 738,825
Other asset –
7,479,690
440,100
–
6,591,302
440,100
42,000
Total non-current assets 10,907,430
7,919,790
7,073,402
Current assets
Trade and other receivables 14 202,066
Other asset –
Cash and cash equivalents 15 11,240
264,491
–
1,790,979
98,718
100,000
1,548,169
Total current assets 213,306
2,055,470
1,746,887
Current liabilities
Trade and other payables 16 (1,111,342)
Grant received in advance –
Short-term borrowings 26 (785,095)
Short-term financial liability 17 (988)
(840,523)
(924,642)
(163,344)
(200,000)
(149,625)
(1,440,913)
–
–
Total current liabilities (1,897,425)
(2,128,509)
(1,590,538)
Net current liabilities (1,684,119)
(73,039)
156,349
Non-current liabilities
Financial liability 26 (200,000)
(200,000)
(200,000)
Net assets 9,023,311
7,646,751
7,029,751
Shareholders’ funds
Share capital 19 10,949,504
Share premium 18,427,728
Merger reserve 8,988,112
Share based payment reserve 113,220
Warrant reserve 28 –
Retained earnings (29,455,253)
10,919,117
16,005,216
8,988,112
6,847
–
(28,272,541)
10,853,460
14,297,307
8,988,112
616,096
–
(27,725,224)
Total equity 9,023,311
7,646,751
7,029,751
With the proper authorisation, the financial statements can be amended after issue.
Approved by the Board on 8 January 2020 and signed on its behalf by:
Mr J M Wood
Director
InfraStrata Plc Annual Report and Financial Statements 2019 x 39
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Company statement of financial position
as at 31 July 2019
31 July
31 July 2018
2019 £
Note £ (As restated)
Assets
Non-current assets
Property, plant and equipment 12 8,026
Other asset –
Total non-current assets 8,026
–
–
–
1 August
2017
£
–
42,000
42,000
Current assets
Trade and other receivables 14 10,448,974
Other asset –
Cash and cash equivalents 15 8,783
9,053,400
42,000
1,671,002
7,211,230
100,000
1,545,779
Total current assets 10,457,757
10,766,402
8,857,009
Current liabilities
Trade and other payables 16 (139,342)
Grant received in advance –
Short-term financial liability 17 (988)
(805,221)
(924,642)
(200,000)
(117,186)
(1,440,913)
–
Total current liabilities (140,330)
(1,929,863)
(1,558,099)
Net current assets 10,317,427
8,836,539
7,298,910
Non-current liabilities
Financial liability 26 (200,000)
(200,000)
(200,000)
Net assets 10,125,453
8,636,540
7,140,910
Shareholders’ funds
Share capital 19 10,949,504
Share premium 18,427,728
Merger reserve 8,466,827
Share based payment reserve 113,220
Warrant reserve 28 –
Retained earnings (27,831,826)
10,919,117
16,005,216
8,466,827
6,847
–
(26,761,468)
10,853,460
14,297,307
8,466,827
616,096
–
(27,092,780)
Total equity 10,125,453
8,636,539
7,140,910
The loss for the period dealt with in the financial statements of lnfraStrata Plc was £1,070,357 (2018: £284,784). As provided by s408 of the
Companies Act 2006, no statement of comprehensive income is presented in respect of lnfraStrata Plc, the company.
Approved by the Board on 8 January 2020 and signed on its behalf by:
Mr J M Wood
Director
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Consolidated statement of changes in equity
for the year ended 31 July 2018
Share
based
Share Share Merger payment Warrant Retained
capital premium reserve reserve Reserve earnings
£ £ £ £ £ £
At 1 August 2017 10,853,460 14,297,307 8,988,112 616,096 – (27,725,224)
Loss for the year – – – – – (963,413)
Total comprehensive income – – – – – (963,413)
Shares issued 65,657 1,824,073 – – – –
Share issue costs – (116,164) – – – –
Warrant Reserve – (285,432) – – 285,432 –
Prior year adjustment (see note 29) – 285,432 – – (285,432) –
Transfer on forfeiture of share options – – – (616,096) – 616,096
Share option expense – – – 6,847 – –
Due to Moyle Investments on first gas
storage (note 26) – – – – – (200,000)
(Restated)
Total equity
£
7,029,751
(963,413)
(963,413)
1,889,730
(116,164)
–
–
–
6,847
(200,000)
At 31 July 2018 (As restated) 10,919,117 16,005,216 8,988,112 6,847 – (28,272,541)
7,646,751
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Consolidated statement of changes in equity
for the year ended 31 July 2019
Share
based
Share Share Merger payment Warrant Retained
capital premium reserve reserve Reserve earnings
£ £ £ £ £ £
Total
equity
£
At 1 August 2018 (As restated) 10,919,117 16,005,216 8,988,112 6,847 – (28,272,541)
Loss for the year – – – – – (1,182,712)
7,646,751
(1,182,712)
Total comprehensive income – – – – – (1,182,712)
Shares issued 30,387 2,422,512 – – – –
Share option expense – – – 106,373 – –
(1,182,712)
2,452,899
106,373
At 31 July 2019 10,949,504 18,427,728 8,988,112 113,220 – (29,455,253)
9,023,311
Share capital: This represents the nominal value of equity shares in issue.
Share premium: This represents the premium paid above the nominal value of shares in issue.
Merger Reserve: The merger reserve represents the difference between the nominal value of the shares issued on the demerger and the
combined share capital and share premium of lnfraStrata UK Limited at the date of the demerger.
Share-based payments reserve: This represents the value of share-based payments provided to employees and Directors as part of their
remuneration as part of the consideration paid. The reserve represents the fair value of options and performance share rights recognised as
an expense. Upon exercise of options or performance share rights, any proceeds received are credited to share capital and share premium.
Retained earnings: This represents the accumulated profits and losses since inception of the business and adjustments relating to options
and warrants.
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Company statement of changes in equity
for the year ended 31 July 2018
Share
based
Share Share Merger payment Warrant Retained
capital premium reserve reserve Reserve earnings
£ £ £ £ £ £
Company
At 1 August 2017 10,853,460 14,297,307 8,466,827 616,096 – (27,092,780)
Loss for the year – – – – – (284,784)
Total comprehensive loss for the year – – – – – (284,784)
Shares issued 65,657 1,824,073 – – – –
Share issue costs – (116,164) – – – –
Warrant Reserve – (285,432) – – 285,432 –
Prior year adjustment (see note 29) – 285,432 – – (285,432) –
Transfer on forfeiture of share options – – – (616,096) – 616,096
Share option expense – – – 6,847 – –
Total
equity
£
7,140,910
(284,784)
(284,784)
1,889,730
(116,164)
–
–
–
6,847
At 31 July 2018 (As restated) 10,919,117 16,005,216 8,466,827 6,847 – (26,761,468)
8,636,539
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Company statement of changes in equity
for the year ended 31 July 2019
Share
based
Share Share Merger payment Retained
capital premium reserve reserve earnings
£ £ £ £ £
Company
At 1 August 2018 (As restated) 10,919,117 16,005,216 8,466,827 6,847 (26,761,468)
Loss for the year – – – – (1,070,358)
Total comprehensive income – – – – (1,070,358)
Shares issued 30,387 2,422,512 – – –
Share Option expense – – – 106,373 –
Total
equity
£
8,636,539
(1,070,358)
(1,070,358)
2,452,899
106,373
At 31 July 2019 10,949,504 18,427,728 8,466,827 113,220 (27,831,826) 10,125,453
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Consolidated statement of cash flows
for the year ended 31 July 2019
2019
Note £
2018
£
Cash flows from operating activities
Loss for the year (1,182,712)
Adjustments to cash flows from non-cash items
Depreciation and amortisation 4 892
Profit on disposal of intangible assets 3 (100,000)
Profit from disposals of investments 3 (200,600)
Foreign exchange loss 4 11,055
Finance income (18)
Finance expense 102,460
Share option expense 172,638
(863,413)
–
–
–
(26,590)
–
–
96,597
(1,196,285)
(793,406)
Working capital adjustments
Decrease/(increase) in trade and other receivables 14 38,121
Increase in trade and other payables 16 239,646
Cash generated from operations (918,518)
Income taxes received 9 –
(123,827)
690,952
(226,281)
–
Net cash flow from operating activities (918,518)
(226,281)
Cash flows from investing activities
Interest received 18
Proceeds from issue of ordinary shares 2,386,634
Short term borrowings 621,751
Acquisitions of property plant and equipment (299,617)
Acquisition of intangible assets 11 (3,613,559)
Proceeds from sale of intangible assets 100,000
Net cash flows from investing activities (804,773)
Net increase/(decrease) in cash & cash equivalents (1,723,291)
–
1,683,816
163,344
–
(1,378,069)
–
469,091
242,810
Cash flows from financing activities
Interest paid (57,436)
–
Net decrease in cash and cash equivalents (1,780,727)
Cash and cash equivalents at 1 August 1,790,979
242,810
1,548,169
Cash and cash equivalents at 31 July 10,252
1,790,979
Cash and cash equivalents consist of:
Cash at bank 10,252
1,790,979
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Company statement of cash flows
for the year ended 31 July 2019
2019
Note £
2018
£
Cash flows from operating activities
Loss for the year (1,070,358)
Adjustments to cash flows from non-cash items
Depreciation and amortisation 4 892
Profit on disposal of intangible assets 3 (100,000)
Profit from disposals of investments 3 (200,600)
Foreign exchange loss 4 9,527
Finance income (18)
Finance expense 42,000
Share option expense 172,638
(284,784)
–
–
–
(26,590)
–
100,000
96,597
(1,145,919)
(114,777)
Working capital adjustments
Increase in trade and other receivables 14 (1,383,071)
(Decrease)/increase in trade and other payables 16 (665,879)
Decrease in amounts owed to related parties (946,070)
Cash generated from operations (4,140,939)
Income taxes received 9 –
(2,131,796)
687,980
–
(1,443,816)
–
Net cash flow from operating activities (4,140,939)
(1,558,593)
Cash flows from investing activities
Interest received 18
Proceeds from issue of ordinary shares 2,386,634
Acquisitions of property plant and equipment (8,918)
Proceeds from sale of intangible assets 100,000
–
1,683,816
–
–
Net cash flows from investing activities 2,477,734
1,683,816
Net increase/(decrease) in cash & cash equivalents (1,663,205)
125,223
Cash flows from financing activities
Cash and cash equivalents at 1 August 1,671,002
1,545,779
Cash and cash equivalents at 31 July 7,797
1,671,002
Cash and cash equivalents consist of:
Cash at bank 7,797
1,671,002
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Consolidated net debt reconciliation
for the year ended 31 July 2019
Other assets Liabilities from financing activities
Cash/bank Liquid Borrowings due
overdraft investments within 1 year
Borrowings due
after 1 year
Net debt as at 1 August 2017 1,548,169 (1,491,820) –
Cash flows 242,810 (50,854) (363,344)
Foreign exchange adjustments – – –
Other changes (ii) – – –
Net debt as at 31 July 2018 1,790,979 (1,542,674) (363,344)
Cash flows (1,779,739) 633,398 (422,739)
Foreign exchange adjustments – – –
Other changes (ii) – – –
(200,000)
–
–
–
(200,000)
–
–
–
Net debt as at 31 July 2019 11,240 (909,276) (786,083)
(200,000)
Company net debt reconciliation
for the year ended 31 July 2019
Other assets Liabilities from financing activities
Cash/bank Liquid Borrowings due
overdraft investments within 1 year
Borrowings due
after 1 year
Net debt as at 1 August 2017 1,545,779 5,653,131 –
Cash flows 125,223 1,670,406 (200,000)
Foreign exchange adjustments – – –
Other changes – – –
Net debt as at 31 July 2018 1,671,002 7,323,537 (200,000)
Cash flows (1,662,219) 2,986,095 199,012
Foreign exchange adjustments – – –
Other changes – – –
(200,000)
–
–
–
(200,000)
–
–
–
Net debt as at 31 July 2019 8,783 10,309,632 (988)
(200,000)
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Notes to the financial statements
for the year ended 31 July 2019
1 General information
The company is a public company limited by share capital, incorporated and domiciled in the UK.
The address of its registered office is:
Fieldfisher Riverbank House
2 Swan Lane
London
EC4R 3TT
United Kingdom
The company’s ordinary shares are traded on the Alternative Investment Market (AIM) of the London Stock Exchange under the ticker
symbol INFA.
The principal activities of the Group throughout the year was the development of sub-surface gas storage facility.
The financial statements were authorised for issue by the Board on 8 January 2020.
Accounting policies
2
Statement of compliance
The group financial statements have been prepared in accordance with International Financial Reporting Standards and its interpretations
adopted by the EU (“adopted IFRS's”) and the Companies Act 2006 applicable to companies reporting under IFRS.
Summary of significant accounting policies and key accounting estimates
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The financial statements have been prepared in accordance with adopted International Financial Reporting Standards (IFRS) as adopted by
the European Union and under historical cost accounting rules.
The financial statements are presented in Sterling which is the functional currency of the group and all values are rounded to the nearest
Pound Sterling (£) unless otherwise stated.
Basis of consolidation
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the
date that control ceases.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are
also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the group’s accounting policies.
Adoption of new and revised standards
(a) New standards, amendments and interpretations adopted by the Group
The company has applied the following standards and amendments for the first time for its annual reporting period commencing 1 August
2018:
l IFRS 9 Financial Instruments;
l IFRS 15 Revenue from contracts with customers;
l Classification and Measurement of Share-based Payment Transactions – Amendments to IFRS 2;
l Annual improvements 2014-2016 cycle;
l Transfers to Investment Properties – Amendments to IAS 40; and
l Interpretation 22, Foreign Currency Transactions and Advance Consideration
IFRS 9
IFRS 9 (2014) “Financial Instruments” supersedes IFRS 9 (2009), IFRS 9 (2010) and IFRS 9 (2013). The finalised version of IFRS 9 contains
accounting requirements for financial instruments, replacing IAS 39 “Financial Instruments: Recognition and Measurement”. The content of
IFRS 9 (2014) includes:
l Classification and measurement – financial assets are classified by reference to the business model within which they are held and their
contractual cash flow characteristics. The standard introduces a fair value through other comprehensive income category for certain debt
instruments. Financial liabilities are classified in a similar manner to that under IAS 39 however there are differences in the requirements
applying to the measurement of an entity’s own risk.
l Impairment – The standard introduces an expected credit loss model for the measurement of the impairment of financial assets, so it is no
longer necessary for a credit event to have occurred before a credit loss is recognised.
l Hedge accounting – The standard introduces a new hedge accounting model that is designed to be more closely aligned with how entities
undertake risk management activities when hedging financial and non-financial risk exposures.
l Derecognition – the requirements for the derecognition of financial assets and liabilities are carried from IAS 39.
None of these standards are considered to have a material effect on the Group financial statements.
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Accounting policies continued
2
(b) New standards, amendments and interpretations not yet adopted
The International Accounting Standards Board (IASB) has issued the following new and revised standards, amendments and Interpretations to
existing standards that are not effective for the financial year ended 31 July 2019 and have not been adopted early.
New Standards
IFRS 16 – Leases
IFRS 17 – Insurance Contracts
Amendments to Existing Standards
IFRSIC 23 Uncertainty over Income Tax Treatments*
Annual Improvements to IFRSs (2015-2017 Cycle) *
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 Plan Amendment, Curtailment or Settlement
l Not yet adopted by European Union
Effective Date
1 January 2019
1 January 2021
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
IFRS 16 ‘Leases’
IFRS 16 ‘Leases’ address the definition of a lease, recognition and measurement of leases and it establishes principles for reporting useful
information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that
most operating leases will be accounted for on the balance sheet. The standard replaces IAS 17, ‘Leases’ and related interpretations. The
standard is effective for annual periods beginning on or after 1 January 2019, with earlier adoption permitted.
Following the acquisition of Harland and Wolff, the directors are in the process of reviewing contracts to identify any additional lease arrangements
that would need to be recognised under IFRS 16 in the next financial year.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
Going concern
The financial statements have been prepared on a going concern basis. The Group’s assets are not generating revenues, operating cash outflows
have been incurred in the year and an operating loss and cash outflow from operations is expected in the 12 months subsequent to the date of
these financial statements being signed, and, as a result, the Group will need to raise funding to finance their ongoing activities.
Key considerations regarding going concern are in respect of the Islandmagee gas storage project (“the project”) and Harland and Wolff (“H&W”).
The next phase of the development of the Project is the co-ordinated assembly of the contracts and long-term funding arrangements for the
Final Investment Decision (“FID”) to be made. These include a long-term Gas Storage Agreement with an offtaker, an Engineering, Procurement
and Construction (“EPC”) contract with a managing contractor, and debt and equity financing. Only in the event that all of these elements are in
place can the board confirm FID. The directors remain confident that the Project is economically viable and that, based on current discussions,
funding will be available.
In December 2019, the Company announced its maiden operating revenues that has validated the acquisition of H&W and the newly assembled
team at H&W are actively seeking to win new contracts. In addition, the directors are also in discussions with debt providers to raise additional
capital for the operating costs of Harland and Wolff.
Based on the above management have prepared cash flow budgets and based on these the Directors have a reasonable expectation that the
Group has access to adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going
concern basis of accounting in preparing the annual financial statements for the year ended 30 June 2019.
Should the Group be unable to continue trading, adjustments would have to be made to reduce the value of the assets to their recoverable
amounts, to provide for further liabilities which might arise and to classify fixed assets as current.
The auditors make reference to a material uncertainty in relation to going concern within their audit report.
The directors remain confident that the Project is economically viable and following the successful completion of FEED, further funding for the
Company and the Project will be secured. Having reviewed the value of gas storage assets in accordance with the principles set out below, and
the value of balances due to the parent Company from its subsidiaries, the directors are of the opinion that these assets are not impaired in
value.
However, the success of the current fund raising is uncertain, as is the outcome of the FID. The directors have concluded that without additional
funding the group would be unable to meet its corporate and project costs and thus a material uncertainty exists that may cast significant doubt
upon the Group's ability to continue as a going concern and therefore the Group may be unable to realise its assets and discharge its liabilities
in the normal course of business. Were the Group no longer a going concern, or if the FID is not positive, the Group's capitalised project
development costs totalling £13,406,503 and amounts due to the Company from its subsidiaries amounting to £10,145,784 may become impaired
in value. A provision would be required for the future liabilities arising as a consequence of the Group ceasing business and assets and liabilities
currently classified as non-current would be reclassified as current.
With the acquisition of Harland and Wolff, the directors believe that the Company will be in a position to diversify the overall business of the Group
and attract new business and revenue streams via the various business segments discussed in the Chief Executive Officer’s Strategic Report.
In December 2019, the Company announced its maiden operating revenues that has validated the acquisition of Harland and Wolff. The directors
are currently in discussions with debt providers to raise additional capital for the operating costs of Harland and Wolff. Although the directors
believe that this acquisition will lead to further revenue generation, the Group may be unable to discharge its liabilities in the event revenue
generation does not come to fruition as envisaged or additional capital, whether debt or equity, is not injected into the Group.
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Notes to the financial statements (continued)
for the year ended 31 July 2019
Accounting policies continued
2
Government grants
Governments grants are recognised only when there is reasonable assurance that the Group will comply with the conditions attaching to the
grant and that the grants will be received. Capital grants are recognised to match the related development expenditure and are deducted in
arriving at the carrying value of the related assets. Any grants that are received in advance of recognition are deferred.
Foreign currency transactions and balances
Transactions in foreign currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each statement of financial
position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the statement
of financial position date and gains or losses are taken to operating profit.
Tax
Tax expense represents the sum of the tax currently payable and any deferred tax. The taxable result differs from the net result as reported in
the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the statement of financial position date. Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the
computation of taxable profit and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill
or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries,
except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse
in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates
that are expected to apply in the period when the liability is settled, or the asset realised.
Deferred tax is charged or credited to the statement of comprehensive income, except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and
when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities on a net
basis.
Property, plant and equipment
Property, plant and equipment is stated in the statement of financial position at cost, less any subsequent accumulated depreciation and
subsequent accumulated impairment losses.
The cost of property, plant and equipment includes directly attributable incremental costs incurred in their acquisition and installation.
Depreciation
Depreciation is charged so as to write off the cost of assets, other than land and properties under construction over their estimated useful lives,
as follows:
Asset class Depreciation method and rate
Freehold land 0% Straight line basis
Office equipment 20-33% Straight line basis
Business combinations
On acquisition, the assets and liabilities and contingent liabilities of subsidiaries are measured at their fair values at the date of acquisition. Any
excess of cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to profit or loss in the period of
acquisition. Goodwill arising on consolidation is recognised as an asset and reviewed for impairment at least annually. Any impairment is
recognised immediately in profit or loss and is not subsequently reversed. The financial effect of any change in ownership interest of a subsidiary
that does not result in a change in control is recognised in equity
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (“CODM”)
as required by IFRS 8 “Operating Segments”. The chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of Directors. The CODM consider, for under review, there to be only
one operating segment being the development of gas storage facilities within the United Kingdom. As such no operating segment note is shown
as it would be same as that shown in the primary statements.
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Accounting policies continued
2
Capitalisation and impairment of intangible gas storage assets
Costs of development of gas storage facilities are capitalised as intangible assets once it is probable that future economic benefits that are
attributable to the assets will flow to the Group and until consent to construct has been awarded, at which time the capitalised costs are transferred
to plant and equipment provided there being reasonable certainty of construction proceeding. The nature of these costs includes all direct costs
incurred in project development, including any directly attributable finance costs. No amortisation or depreciation is provided until the storage
facility is available for use.
An impairment test is performed annually and whenever events or circumstances arising during the development phase indicate that the carrying
value of a development asset may exceed its recoverable amount. The aggregate carrying value is compared against the expected recoverable
amount of the cash generating unit, generally by reference to the present value of the future net cash flows expected to be derived from storage
revenue. The present value of future cash flows is calculated on the basis of future storage prices and cost levels as forecast at the statement of
financial position date.
The cash generating unit applied for impairment test purposes is generally an individual gas storage facility. Where the carrying value of the
facility is greater than the present value of its future cash flows a provision is made. Any such provisions are charged to cost of sales.
Amortisation
Amortisation is provided on intangible assets so as to write off the cost, less any estimated residual value, over their expected useful economic
life as follows:
Asset class Amortisation method and rate
Storage facility None until facility available for use.
Investments
Investments in subsidiaries are stated at cost less provision for impairments.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible
to a known amount of cash and are subject to an insignificant risk of changes in value.
Trade receivables
Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection
is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are
presented as non-current assets.
Trade receivables are recognised initially at the transaction price. They are subsequently measured at amortised cost using the effective interest
method, less provision for impairment. A provision for the impairment of trade receivables is established when there is objective evidence that
the group will not be able to collect all amounts due according to the original terms of the receivables.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts
payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer).
If not, they are presented as non-current liabilities.
Trade payables are recognised initially at the transaction price and subsequently measured at amortised cost using the effective interest method.
Borrowings
All borrowings are initially recorded at the amount of proceeds received, net of transaction costs. Borrowings are subsequently carried at
amortised cost, with the difference between the proceeds, net of transaction costs, and the amount due on redemption being recognised as a
charge to the statement of comprehensive income over the period of the relevant borrowing.
Interest expense is recognised on the basis of the effective interest method and is included in finance costs.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months
after the reporting date.
Leases
Rental costs under operating leases are charged on a straight-line basis over the lease term.
Share based payment transactions
Employees (including senior executives) of the Group receive part of their remuneration in the form of share-based payment transactions, whereby
employees render services as consideration for equity instruments (equity settled transactions).
The cost of equity settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance
and or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting date).
The cumulative expense recognised for equity settled transactions at each reporting date until the vesting date reflects the extent to which the
vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The statement of
comprehensive income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end
of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance
conditions are satisfied.
Where an equity settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for
the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award
on the date that is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the
previous paragraph.
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Notes to the financial statements (continued)
for the year ended 31 July 2019
Accounting policies continued
2
Share capital
Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable,
net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement
is on a present value basis.
Defined contribution pension obligation
The Company has a defined contribution plan which requires contributions to be made into an independently administered fund. The amount
charged to the statement of comprehensive income in respect of pension costs reflects the contributions payable in the year. Differences between
contributions payable during the year and contributions actually paid are shown as either accrued liabilities or prepaid assets in the statement
of financial position.
Financial instruments
IFRS 9 requires an entity to address the classification, measurement and recognition of financial assets and liabilities.
a) Classification
The Group classifies its financial assets in the following measurement categories:
l those to be measured subsequently at fair value (either through OCI or through profit or loss); and
l those to be measured at amortised cost.
The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will be recorded either in profit or loss or in OCI. For investments in equity instruments that
are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for
the equity investment at fair value through other comprehensive income (FVOCI). See Note 24 for further details.
The Group classifies financial assets as at amortised costs only if both of the following criteria are met:
l the asset is held within a business model whose objective is to collect contractual cash flows; and
l the contractual terms give rise to cash flows that are solely payment of principal and interest.
b) Recognition
Purchases and sales of financial assets are recognised on trade date (that is, the date on which the Group commits to purchase or sell the
asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred
and the Group has transferred substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or
loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Debt instruments
Amortised cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and
interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest
rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with
foreign exchange gains and losses. Impairment losses are presented as a separate line item in the statement of profit or loss.
Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains
and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the
derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group’s
right to receive payments is established. Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the
statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are
not reported separately from other changes in fair value.
Impairment
The Group assesses, on a forward looking basis, the expected credit losses associated with any debt instruments carried at amortised cost. The
impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Group
applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the
receivables.
Earnings per share
Basic earnings per share is calculated by dividing:
l The loss attributable to the owners of the company, excluding any costs of servicing equity other than ordinary shares;
l By the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares
issued during the year and excluding treasury shares.
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Accounting policies continued
2
Critical accounting judgements and key sources of estimation uncertainty
Judgements in applying accounting policies and key sources of estimation uncertainty
Amounts included in the financial statements involve the use of judgement and/or estimation. These estimates and judgements are based on
management's best knowledge of the relevant facts and circumstances, having regard to previous experience, but actual results may differ from
the amounts included in the financial statements. Information about such judgements and estimation is contained in the accounting policies
and/or the notes to the financial statements, and the key areas are summarised below.
Judgements
Capitalisation of gas storage costs - Note 11.
The assessment of whether costs incurred on gas storage development should be capitalised or expensed involves judgement. Any expenditure
where it is not probable that future economic benefits will flow to the Group are expensed. Management considers the nature of the costs incurred
and the stage of project development and concludes whether it is appropriate to capitalise the costs. The key assumptions depend on whether
it is probable that the expenditure will result in future economic benefits that are attributable to the assets.
Estimates
Review of gas storage project asset carrying values- note 11.
The assessment of capitalised project costs for any indications of impairment involves judgement. When facts or circumstances suggest that
impairment exists, a formal estimate of recoverable amount is performed, and an impairment loss recognised to the extent that the carrying
amount exceeds recoverable amount. Recoverable amount is determined to be the higher of fair value less costs to sell and value in use. The
key assumptions are the net income expected to be generated from the facilities, the cost of construction and the date from which the facilities
become operational. Management assigns values and dates to these inputs after taking into account market information, engineering design
costing and the project programme. A discount rate of 8% (2018: 8%) is applied in determining gas storage project net present values. Salt
cavern gas storage projects are long term investments and cash flows are therefore projected over periods greater than 5 years. Engineering
design provides for a project life of 40 years (2018: - 40 years). It is assumed that 100% (2018: 100%) of a project's capacity will be sold from
the date that the capacity becomes operational.
Recoverability of intercompany balances
The directors remain confident that the project is economically viable and following the successful completion of FEED, further funding for the
Company and the project will be secured. Having reviewed the value of gas storage assets in accordance with the principles set out below, and
the value of balances due to the parent Company from its subsidiaries, the directors are of the opinion that these assets are not impaired in
value.
However, the success of the current fund raising is uncertain, as is the outcome of the FID. The directors have concluded that without additional
funding the group would be unable to meet its corporate and project costs and thus a material uncertainty exists that may cast significant doubt
upon the Group’s ability to continue as a going concern and therefore the Group may be unable to realise its assets and discharge its liabilities
in the normal course of business. Were the Group no longer a going concern, or if the FID is not positive, the Group’s capitalised project
development costs totalling £13,406,503 and amounts due to the Company from its subsidiaries amounting to £10,145,784 may become impaired
in value. A provision would be required for the future liabilities arising as a consequence of the Group ceasing business and assets and liabilities
currently classified as non-current would be reclassified as current.
Share Based Payments
The fair value of equity settled options granted is estimated as at the date of the grant using a Black-Scholes model, taking into account the
terms and conditions upon which the options were granted and the following inputs: share price volatility of 85% based on the daily movement
in the Company’s share price during the course of the financial year, risk free interest rate of 0.93% based on a UK Government Bond 2 year
Note Yield, no dividends to be paid over the options lives, and early exercise is not applicable.
3 Other income
The analysis of the group's other gains and losses for the year is as follows:
Gain on disposal of intangible assets
Gain from reversal of deferred consideration
2019
£
100,000
200,000
300,000
2018
£
–
–
–
The Company announced in October 2018 the disposal of its net profit interests in three offshore UK oil and gas licences to Westmount Energy
Limited for £100,000.
Following repayment and cancellation of a loan with Baron Oil dated 5 January 2017 loan, Baron was entitled to receive an additional £200,000
in the event of a sale or disposal by InfraStrata or its subsidiaries, IMEL and InfraStrata UK, of substantially all of their assets, which comprise
interests in the Islandmagee gas storage project, and/or a change in control of InfraStrata, IMEL or InfraStrata UK, within two years from the
date of the loan agreement. This potential liability expired on 05 January 2019 as none of the conditions that could trigger payment to Baron Oil
were met. Therefore, the liability of £200,000 to Baron Oil has been written off in full.
InfraStrata Plc Annual Report and Financial Statements 2019 x 53
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Notes to the financial statements (continued)
for the year ended 31 July 2019
4
Expenses by Nature
Arrived at after charging/(crediting)
Management & administrative expenditure
Share based payments
Depreciation expense
Foreign exchange gains
Staff costs
5
The aggregate payroll costs (including directors' remuneration) were as follows:
Wages and salaries
Social security costs
Pension costs, defined contribution scheme
Share-based payment expenses
Other employee expense
2019
£
1,263,478
106,373
892
12,551
2018
£
764,811
96,597
–
2,005
1,383,294
863,413
2019
£
477,098
47,906
9,510
106,373
3,673
2018
£
296,110
22,091
441
–
250
644,560
318,892
The average monthly number of persons employed by the group (including directors) during the year, analysed by category was as follows:
Administration and support
Directors' remuneration
6
2019
Salary
& fees Benefits
£ £
Executive Directors
John Wood
Adrian Pocock (resigned 12 September 2018)
Arun Raman
Non-Executive Directors
Graham V Lyon (resigned 7 March 2019)
Matthew Beardmore (resigned 18 December 2018)
Malcolm Groat (appointed 22 March 2019)
Judith Tweed
Key Management
Andy Duncan (resigned)
212,500
33,576
97,267
20,000
13,952
10,511
26,000
70,417
484,222
–
–
–
–
–
–
–
–
–
2019
No.
5
Pension
£
4,750
50
2,494
–
–
60
640
2018
No.
3
Total
2019
£
249,989
33,626
114,761
20,000
13,952
10,571
26,640
1,517
9,510
71,933
541,472
Share based
payments
£
32,739
15,000
–
–
–
–
–
47,739
Note: Salary and fees paid to John Wood includes £75,000 as a bonus payment made on successful completion of the FEED process. This
bonus payment is a contractual payment agreed by the Board.
Auditors' remuneration
7
During the year, the Group obtained the following services from the Company’s auditor:
Fees payable to the Company’s auditor:
- For the audit of these financial statements
- For the audit of the subsidiaries
- For other services relating to taxation
- For other services
54 x InfraStrata Plc Annual Report and Financial Statements 2019
2019
£
2018
£
15,000
13,750
–
–
28,750
17,050
12,950
11,645
3,400
45,045
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Share based payment plans
8
A share-based payment plan was created in the year ended 31 July 2008. All directors and employees are entitled to a grant of options subject
to the Board of Directors’ approval. The options do not have a cash settlement alternative. The options granted were Enterprise Management
Incentive share options for qualifying employees. These options have now lapsed following the departure of these employees.
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
2019 2019
Number WAEP
£
2018
Number
2018
WAEP
£
6,379,167
30,000,000 0.01
45,000,000 0.0076 30,000,000
(6,379,167)
(38,862,108) (0.01)
0.1807
0.01
(0.1807)
36,137,892 0.0076 30,000,000
– –
–
0.01
–
A total of 45,000,000 options over 50% of the quantity of the Option Shares as to £0.0001p for each Option Share and 50% of the quantity of the
Option Shares as to £0.0150p for each Option Share in the Company (“Options”) were granted to all the directors of the Company on 11 January
2019, with J Wood receiving 35,000,000 Options and A Duncan receiving 10,000,000 Options.
After the reporting period 38,862,108 options lapsed as a result of G Lyon, A Pocock, M Beardmore, K Campbell and A Duncan departure from
the business during the year.
Options are exercisable in one tranche noted above with estimated dates ranging from January 2020 through to end 2027 at an average price
of 0.0076p per share. The options will expire after five years.
The weighted average remaining option life for the share options outstanding at 31 July 2019 is 5 years (2018: 4 years).
The fair value of equity settled options granted is estimated as at the date of the grant using a Black-Scholes model, taking into account the
terms and conditions upon which the options were granted and the following inputs: share price volatility of 85%, risk free interest rate of 0.93%,
no dividends to be paid over the options lives, and early exercise is not applicable.
Income tax
9
The tax on profit before tax for the year is the same as the standard rate of corporation tax in the UK (2018 - the same as the standard rate of
corporation tax in the UK) of 19% (2018 - 19%).
The differences are reconciled below:
Loss before tax
Corporation tax at standard rate
Increase from effect of unrelieved tax losses carried forward
Total tax charge/(credit)
2019
£
2018
£
(1,182,712)
(963,413)
(224,715)
224,715
(183,048)
183,048
–
–
No tax charge/ credit arises in 2019 or in 2018 due to expenses not permitted for tax purposes and losses carried forward.
Factors that may affect the future tax charge.
The Group has trading losses of £7,704,980 (2018: £6,565,719) which may reduce future tax charges. Future tax charges may also be reduced
by capital allowances on cumulative capital expenditure.
No balance is recognised due to the uncertainty of future results.
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Notes to the financial statements (continued)
for the year ended 31 July 2019
10 Earnings per Share
(Loss) profit
The (loss) profit for the purposes of basic and diluted loss per share being the net (loss) profit
attributable to equity shareholders
Continuing operations
Number of shares
Weighted average number of ordinary shares for the purpose of:
Basic earnings per share
2019
£
2018
£
(1,182,712)
(963,413)
1,336,479,710
647,957,629
Basic and diluted earnings per share
Continuing Operations (0.09)p (0.15)p
11 Intangible assets
Group
Cost
At 1 August 2017
Additions
Grant accrual during year
At 31 July 2018
At 1 August 2018
Grant accrual during year
Additions
Disposals
At 31 July 2019
Impairment
At 31 July 2018
Net book value
At 31 July 2019
At 31 July 2018
The Exploration and evaluation asset was written off during the year as the assets were fully impaired.
12 Property, plant and equipment
Group
Cost or valuation
At 1 August 2017
At 31 July 2018
At 1 August 2018
Additions
At 31 July 2019
Depreciation
At 1 August 2018
Charge for the year
At 31 July 2019
Carrying amount
At 31 July 2019
At 31 July 2018
56 x InfraStrata Plc Annual Report and Financial Statements 2019
Gas storage Exploration &
evaluation
development
£
£
6,591,302
1,378,069
(489,681)
7,479,690
7,479,690
(950,622)
3,639,537
–
10,168,605
–
–
19,459
6,902
–
26,361
26,361
–
–
(26,361)
–
26,361
26,361
10,168,605
7,479,690
–
–
Freehold
land
£
Office
equipment
£
Total
£
440,100
440,100
440,100
290,699
730,799
–
–
–
–
–
–
8,918
8,918
–
892
892
440,100
440,100
440,100
299,617
739,717
–
892
892
730,799
8,026
738,825
440,100
–
440,100
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13 Investments
Group subsidiaries
Details of the group subsidiaries as at 31 July 2019 are as follows:
Name of subsidiary
Principal activity
Registered office
InfraStrata UK Limited*
Intermediate holding and
gas storage project research
company.
Fieldfisher Riverbank House
2 Swan Lane
London EC4R 3TT
England and Wales
Proportion of
ownership
interest and
voting rights
held
2019
100%
2018
100%
100%
100%
100%
0%
100%
0%
100%
0%
8 Portmuck Road
Islandmagee
County Antrim
BT40 3TW
Northern Ireland
8 Portmuck Road
Islandmagee
County Antrim
BT40 3TW
Northern Ireland
Fieldfisher Riverbank House
2 Swan Lane
London EC4R 3TT
England and Wales
Fieldfisher Riverbank House
2 Swan Lane
London EC4R 3TT
England and Wales
Group
31 July
2019
£
–
177,985
24,081
Group
31 July
2018
£
Company
31 July
2019
£
Company
31 July
2018
£
– 10,351,634 8,831,741
197,706
23,953
73,258
24,081
198,538
23,953
Islandmagee Energy Limited
Gas storage and energy
infrastructure development
and operation
Islandmagee Energy Hub Limited
Dormant
InfraStrata Energy UK Limited
Dormant
InfraStrata Project 2 Limited
Dormant
* indicates direct investment of the company
14 Trade and other receivables
Receivables from related parties
Other receivables
Prepayments
The trade and other receivables classified as financial instruments are disclosed below. The company's exposure to credit and market risks,
including maturity analysis, relating to trade and other receivables is disclosed in the financial risk review note.
202,066
222,491 10,448,973 9,053,400
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Notes to the financial statements (continued)
for the year ended 31 July 2019
15 Cash and cash equivalents
Cash on hand
Cash at bank
Bank overdrafts
Cash and cash equivalents in statement of cash flows
16 Trade and other payables
Trade payables
Social security and other taxes
Outstanding defined contribution pension costs
Preference shares (see note 19)
Other creditors
Accrued expenses
Group
31 July
2019
£
Group
31 July
2018
£
Company
31 July
2019
£
Company
31 July
2018
£
646
–
10,594 1,790,979
11,240 1,790,979
–
(988)
646
–
8,140 1,671,002
8,786 1,671,002
–
(988)
10,252 1,790,979
7,798 1,671,002
Group
31 July
2019
£
999,392
43,758
4,708
12,500
12,355
38,629
Group
31 July
2018
£
560,803
7,474
–
12,500
13,135
246,611
Company
31 July
2019
£
59,051
43,758
4,708
12,500
(179)
19,504
Company
31 July
2018
£
555,822
7,474
–
12,500
–
229,425
1,111,342
840,523
139,342
805,221
The group's exposure to market and liquidity risks, including maturity analysis, related to trade and other payables is disclosed in the financial
risk review note.
17 Loans and borrowings
Current loans and borrowings
Bank overdrafts
Other borrowings
Group
31 July
2019
£
Group
31 July
2018
£
Company
31 July
2019
£
Company
31 July
2018
£
988
–
988
–
200,000
200,000
988
–
988
–
200,000
200,000
Baron Loan
Following repayment and cancellation of a loan with Baron Oil dated 5 January 2017 loan, Baron remains entitled to receive an additional
£200,000 in the event of a sale or disposal by InfraStrata or its subsidiaries, IMEL and InfraStrata UK, of substantially all of their assets, which
comprise interests in the Islandmagee gas storage project, and/or a change in control of InfraStrata, IMEL or InfraStrata UK, within two years
from the date of the loan agreement. The loan was not interest bearing and has been written off as this liability expired in January 2019.
The loans and borrowings classified as financial instruments are disclosed in the financial instruments note 26.
The group's exposure to market and liquidity risk; including maturity analysis, in respect of loans and borrowings is disclosed in the financial
risk management and impairment note.
18 Pension and other schemes
Defined contribution pension scheme
The group operates a defined contribution pension scheme. The pension cost charge for the year represents contributions payable by the
group to the scheme and amounted to £9,403 (2018 - £441).
Contributions totalling £ (4,708) (2018 - £Nil) were payable to the scheme at the end of the year and are included in creditors.
58 x InfraStrata Plc Annual Report and Financial Statements 2019
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
19 Share capital and redeemable preference shares
Allotted, called up and fully paid shares
31 July 2019 31 July 2018
No. £ No. £
Ordinary shares 0.01p 1,336,479,710 133,648 1,032,607,285 103,261
Deferred shares 1p of £0.01 each 895,424,391 8,954,244 895,424,391 8,954,244
Second deferred shares 0.01p of £0.00 each 18,616,118,301 1,861,612 18,616,118,301 1,861,612
10,949,504 10,919,117
Allotted, called up and fully paid
Ordinary shares
1p Ordinary Shares 0.01p Ordinary Shares Total
Number £ Number £ £
At July 2017
Share subdivision – – 376,041,599 37,604 37,604
Issue of 0.01p Ordinary shares – – 656,565,686 65,657 65,657
At 31 July 2018 – – 1,032,607,285 103,261 103,261
Issue of 0.01p Ordinary shares – – 303,872,425 30,387 30,387
At 31 July 2019 – – 1,336,479,710 133,648 133,648
Allotted, called and fully paid
Deferred Shares
1p Ordinary Shares 0.01p Ordinary Shares Total
Number £ Number £ £
At July 2017 895,424,391 8,954,244 18,616,118,301 1,861,612 10,815,856
Share subdivision – – – – –
At 31 July 2018 and 31 July 2019 895,424,391 8,954,244 18,616,118,301 1,861,612 10,815,856
Redeemable preference shares of £1 each
(classified as liabilities)
Allotted called up and pert paid
Number £
At 31 July 2019, 2018 and 31 July 2017 50,000 12,500
Redeemable preference shares
The Redeemable preference shares of £1 each are redeemable at the option of the company. They are redeemable at £1 per share and carry
no voting rights. The preference shares carry the right to an annual dividend out of distributable profits of 0.00001% per annum on the amount
for the time being paid up on each such share and do not carry any voting rights. The Company may redeem the shares at any time by giving
preference shareholders one week's notice. Preference shareholders may require the Company to redeem their shares at any time by giving
six months' notice. In each case, any redemption is at par and is subject to the provisions of the Companies Act. The preference shares are
treated as short-term liabilities and included within trade payables.
Authorised share capital
The Company’s articles do not specify an authorised share capital.
Objectives, policies and processes for managing capital
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to achieve its
operational objectives.
The Group defines capital as being share capital plus reserves. The Board of Directors monitors the level of capital as compared to the
Group’s forecast cash flows and long-term commitments and when necessary issues new shares. Dilution of existing shareholder value is
considered during all processes which may result in an alteration of share capital in issue.
Ordinary share capital in issue is managed as capital and the redeemable preference shares in issue are managed as current liabilities.
The Group is not subject to any externally imposed capital requirements and there are no restrictions in place over the different types of
shares.
InfraStrata Plc Annual Report and Financial Statements 2019 x 59
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Notes to the financial statements (continued)
for the year ended 31 July 2019
20 Warrants
As at the date of this report, the Company has the following warrants outstanding that remain to be exercised and converted into the
Company’s ordinary shares:
Expiry date
Number of Strike Price
warrants £ per share
Value £
442,144.45
10/04/2020 92,113,427 0.0048
210,221.51
30/04/2020 43,796,148 0.0048
23,125.00
20/07/2020 4,817,708 0.0048
18/01/2021 5,000,000 0.0048
24,000.00
22/02/2021 155,555,555 0.01 1,555,555.55
315,000.00
04/12/2021 45,652,174 0.0069
250,000.00
04/12/2021 52,083,334 0.0048
Total 399,018,346 2,820,046.51
21 Related party transactions
The executive services of Graham Lyon are provided through Soncer Limited, a private oil and gas leadership consulting firm, in which
Graham is sole director. The executive fees paid during the period were £20,000 (2018: £16,000) and the balance outstanding at 31 July 2019
was £Nil.
Prior to his employment in April 2019, the non-executive services of Arun Raman were provided through Mira Energy Group Limited, a private
consulting company in which Arun is a sole director. The executive fees paid during the period were £35,600 (2018: £Nil) and the balance
outstanding at 31 July 2019 was £Nil.
Details of directors’ remuneration is disclosed in Note 6.
22 Control of the Group
There is no ultimate controlling party of InfraStrata Plc
23 Grants received in advance
In May 2016, the Company signed a grant agreement with the European Commission’s Connecting Europe Facility in relation to the
Islandmagee gas storage project for a maximum of €4.024 million or up to 50% of the costs of Front End Engineering and Design (“FEED”) for
the project. An advance of 40% of the maximum grant amounting to €1.6 million was received and held in a Euro denominated bank account
(included in Cash and cash equivalents in the statement of financial position).
24 Financial instruments
Financial assets
Trade and other receivables
Due from subsidiary undertakings
Cash and Cash Equivalents
Financial liabilities
Current liabilities
Baron loan
Costain loan
Non-current liabilities
Baron loan
Moyle investments
60 x InfraStrata Plc Annual Report and Financial Statements 2019
Group
2019
£
202,066
–
11,240
Group
2018
£
Company
2019
£
Company
2018
£
26,978
84,838
– 10,351,634
7,799
26,978
8,831,740
1,671,002
1,790,979
Group
2019
£
Group
2018
£
Company
2019
£
Company
2018
£
–
785,095
785,095
200,000
163,344
363,344
–
–
–
200,000
–
200,000
–
200,000
200,000
–
200,000
200,000
–
200,000
–
200,000
200,000
200,000
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
24 Financial instruments continued
Baron Loan
Following repayment and cancellation of a loan with Baron Oil dated 5 January 2017 loan, Baron remains entitled to receive an additional
£200,000 in the event of a sale or disposal by InfraStrata or its subsidiaries, IMEL and InfraStrata UK, of substantially all of their assets, which
comprise interests in the Islandmagee gas storage project, and/or a change in control of InfraStrata, IMEL or InfraStrata UK, within two years
from the date of the loan agreement. The loan was not interest bearing and has been written off as this liability expired in January 2019.
Under IFRS 9 – Financial Instruments the Company is required to recognise the fair value of this contingent settlement financial liability at
inception and to subsequently recognise the liability at its amortised cost. The full liability of £200,000 has now been written off in the
consolidated statement of financial position, as this liability expired in January 2019.
Costain Loan
In April 2018, IMEL concluded a Secured Development Loan Agreement with Costain Oil, Gas & Process Limited (“Costain”). Costain is the
principal contractor in the FEED programme and in return for its services to IMEL, it agreed to provide a secured loan so as to facilitate the
further development of the Islandmagee gas storage project. The loan is secured on the assets of Islandmagee Energy Limited.
At 31 July 2019 the Costain loan required to be repaid, together with accrued interest of 10% per annum, on the earlier of FID being taken to
proceed with the Project; or any sale of IMEL or the Project itself; or 31 July 2019. The loan terms were amended on 25 September 2018 to
change the backstop date from 31 July 2019 to 31 December 2019. At 31 July 2019, IMEL had drawn down £785,095 of this loan and this is
disclosed as short-term borrowings in the Group accounts.
Moyle Investments – amounts due
In December 2017, the Company’s wholly-owned subsidiary, InfraStrata UK Limited increased its ownership in IMEL from 90% to 100% by
acquiring the remaining 10% interest from Moyle Energy Investments Limited at par value. In recognition of the support by Moyle of the gas
storage project at Islandmagee, InfraStrata plc will pay Moyle £200,000 on first storage of gas.
The Group and Company’s financial instruments comprise cash and cash equivalents, long and short-term borrowings and items such as
trade and other receivables and trade and other payables which arise directly from the Group’s operations. The Group’s operations expose it
to a variety of financial risks including credit risk, interest rate risk, foreign currency exchange risk and liquidity risk. Given the size of the
Group, the directors have not delegated the responsibility of monitoring financial risk management to a subcommittee of the board. The
objectives of the financial instrument policies are to reduce the Group and Company’s exposure to financial risk. The policies set by the Board
of Directors are implemented by the Company’s finance staff.
Credit risk
The credit risk on liquid funds is limited because the Group and Company policy is to only deal with counter parties with high credit ratings.
The Group has held all funds in Bank of Scotland during the last two years. In the directors’ view there is a low risk of the bank holding the
Group’s funds at year end failing in the foreseeable future. The carrying amount of financial assets represents the maximum credit exposure.
The reconciling items between the trade and other receivables presented above and that presented in note 13 are VAT receivable and
prepayments. No receivables are past due but not impaired.
Interest rate risk
The Company and Group are exposed to interest rate risk as a result of positive cash balances, denominated in sterling, which earn interest at
variable rates. Any surplus cash is held on deposit with Bank of Scotland. An effective interest rate increase or decrease by 1% on the cash
and cash equivalents balance at year end would result in a before tax financial effect of an increase or decrease of £112 (2018: £17,910).
As disclosed in note 28, the Group and Company’s long-term borrowings at 31 July 2019 bear interest at a fixed rate of 10% per annum. No
sensitivity has been disclosed as the rate is fixed for the duration of the loan.
Liquidity risk
The total carrying value of Group and Company financial liabilities is disclosed in note 24 (financial liability) and in note 15 (trade and other
payables). The Company seeks to issue share capital, gain loan funding and/or dispose of assets when external funds are required. The
reconciling items between the contractual maturities presented below and that presented in notes 28 and 15 are taxes and accruals. The
following table shows the contractual maturities of the Group’s and Company’s financial liabilities, all of which are measured at amortised cost.
Trade and other payables
Within one month
More than one month less than one year
Financial liability (Note 28)
Within one month
–
More than one month less than one year
785,095
More than one year 200,000
999,392
–
560,803
–
59,051
–
555,822
–
–
363,344
200,000
–
–
200,000
–
200,000
200,000
Group
2019
£
Group
2018
£
Company
2019
£
Company
2018
£
InfraStrata Plc Annual Report and Financial Statements 2019 x 61
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Notes to the financial statements (continued)
for the year ended 31 July 2019
25 Prior year adjustment
The 2019 financial statements include a prior year adjustment in relation to the warrant reserve in the Company’s statement of financial
position. Prior year adjustments reflect a reversal of the share based payment expense recognised against the share premium account as
warrants were investor warrants, and were not issued in respect of services provided to the Company. As a result, the warrant reserve now
shows a balance of nil (2018: £285,432) and the share premium account has been increased by £285,432. This prior year adjustment has
neither impacted the Company’s Statement of Comprehensive Income for either period presented nor retained earnings.
26 Post Balance Sheet Events
On 01 August 2019, the Company announced that is has raised £700,000 (before expenses) through a placing of 155,555,555 new ordinary
shares of 0.01p each in the Company (“Placing Shares”) at an issue price of 0.45p per share (the “Placing”). For each Placing Share
subscribed in the Placing, the Company will issue one warrant to subscribe for one new ordinary share of 0.01p in the Company (“Ordinary
Share”) at 1p per share (the “Warrants”). The net proceeds of the Placing was used to fund the costs of establishing a pre-construction
environmental baseline. An environmental baseline is required to track changes against it throughout the construction and operational phases
of the Islandmagee gas storage project. This work has now been completed following which the Department of Agriculture, Environment and
Rural Affairs (“DAERA”) has instructed the Company to commence a 42-day public consultation period commencing on 20 December 2019
and ending on 07 February 2020 as reported to the shareholders on 19 December 2019. Following completion of this public consultation
period and subject to any questions raised therein being satisfactorily resolved, the Company expects that DAERA will issue a full marine
licence after following due process.
On 01 October 2019 the Company announced that it had signed heads of terms to purchase the principal assets of Harland and Wolff Heavy
Industries Limited and Harland and Wolff Group Plc (the “Assets”) from administrator BDO NI (“Administrators”) for a total consideration of
£6 million (the “Acquisition”). The Assets comprise of a multi-purpose fabrication facility, quaysides and docking facilities (the “Facility”) in the
port of Belfast, Northern Ireland, ideally suited for the energy infrastructure industry and the Company's projects. The key highlights
announced on this date included the following:
– This strategic acquisition enables InfraStrata to bring in-house a large part of the fabrication requirements for the Company's Islandmagee
Gas Storage Project and proposed FSRU project (the “Projects”).
– By utilising the Assets, the Company anticipates reducing the capital cost (“Capex”) of each of its Projects by 10% - 15% and the
construction timelines are expected to be reduced by 3-5 months.
– 100% of the 79 employees who did not opt for voluntary redundancy earlier in the year will be retained immediately following completion
of the Acquisition.
– The InfraStrata Board plans to significantly increase the size of the workforce by several hundred over the next five years as it
progresses the development of its infrastructure projects. The number of employees at the Islandmagee Gas Storage Project will also
scale to 400 during construction and will employ circa 60 personnel when in operation.
– New management team for the Facility anticipated to be employed by the end of 2019 in addition to bringing on-board the experience of
those employees who were previously employed - the Assets will be run independently to InfraStrata's other projects.
– The highly skilled workforce presents the Company with an opportunity to create secondary revenue streams through the provision of
services to the energy, maritime and defence sectors should such opportunities arise in future.
– Exclusivity over the Assets has been secured, and with a £500,000 cash deposit payment to the Administrator, BDO NI, to be made
imminently from a new loan facility. The Acquisition is subject to, inter alia, final contract and funding by 31 October 2019, or
31 December 2019 if the Backstop Date (as defined below) comes into force. The £5.5 million balance of the Acquisition consideration
is payable in two tranches: £3.3 million by 31 October 2019 (or the Backstop Date) and £2.2 million by 30 April 2020, which is proposed
to be funded by a debt and equity mix. The Company is already in advanced discussions with asset backed lenders and financial
institutions to put in place medium to long term debt structures.
On the same date, the Company announced that it had entered into a £2.20 million conditional loan agreement (“Loan”) with Riverfort Global
Opportunities PCC and YA II PN Ltd (the “Investors”). Of the total loan amount, £700,000 was initially drawn down in order to pay for the non-
refundable deposit to the Administrator. This £700,000 of the initial drawdown is subject to conversion rights. At the date of this report, the total
amount converted by the Investors is £450,000 leaving the outstanding balance at £250,000.
On 11 November 2019, the Company announced a proposed placing of new Ordinary Shares by way of an accelerated bookbuild to raise a
minimum of £6.0 million (the “Placing”) and that, further to the announcements on 1 October and 1 November 2019, it has entered into a
conditional contract to purchase the principal assets of the former Harland and Wolff Heavy Industries Limited and Harland and Wolff Group
Plc (together, “Harland & Wolff”) from administrator BDO NI (the “Acquisition”). Immediately thereafter, on 11 November 2019, the Company
announced that the conditional Placing has raised £6.0 million (before expenses) through the placing of 1,999,999,950 new Ordinary Shares
with certain existing and new institutional investors at an issue price of 0.3 pence per share. Additionally, the Company exercised its option
with the Investors to drawdown a further £500,000 (£555,555 gross) of the Loan to pay the Administrators the running costs of the Assets for
the month of November. This second drawdown is a mezzanine debt facility with no conversion rights save in the event of a default on its
repayment that is due on 15 February 2020.
In order to provide the Company’s current shareholders the opportunity to subscribe to further ordinary shares, on 20 November 2019, the
Company announced an offer of new ordinary shares of 0.1p each in the Company (“Ordinary Shares”) to shareholders (the “Offer”) and an
offer of Ordinary Shares on the PrimaryBid platform (the “PrimaryBid Offer”) to raise collectively gross proceeds of up to £1 million (the
“Fundraise”). The Company announced on 06 December 2019 that it had raised a total of £210,209.73 (before expenses) which resulted in the
issue of 70,069,903 Fundraise Shares at 0.3p per share.
62 x InfraStrata Plc Annual Report and Financial Statements 2019
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COMPANY
INFORMATION
CHAIRMAN’S
REPORT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
26 Post Balance Sheet Events continued
As at the date of this report, the Company’s issued share capital now stands at 3,682,856,289 ordinary shares of 0.01 pence each.
On 05 December 2019, the Company announced the formal acquisition of the Assets of Harland and Wolff. The total consideration for the
acquisition was as follows:
Particulars
Tranche 1
Tranche 2
Tranche 3
Total
Value £ Remarks
500,000 Paid on 01 October 2019
3,300,000 Paid on 04 December 2019
1,450,000 Payable on 30 April 2020
5,250,000 Full and final consideration
The directors are currently assessing the fair value of the assets acquired on completion of the Harland and Wolff transaction.
An independent third-party valuation conducted in August 2019 has ascribed a value for all the assets to be between £10.90 million
and £11.80 million.
On 06 December 2019, the Company announced its first ever operating revenues via its fully owned subsidiary, Harland and Wolff (Belfast)
Limited. The Company was awarded the repair and maintenance work for two vessels of Sea Truck Ferries Limited and their dockings were
due to take place on 20 December 2019 and 28 December 2019. As at the date of this report, both dockings have been successfully
completed, contracts duly executed and monies received from the client.
With the EU funds not being received before 31 December 2019, the Board has agreed with Costain Plc to extend the repayment date of the
Costain Loan Facility (“Costain Loan”), originally announced on 04 November 2016 and due on 31 December 2019, with an accrued value of
£810,669 as at 31 December 2019, to 31 December 2020 or on receipt of the EU grant reclaim, whichever is earlier.
27 Chief Operating Decision Maker (“CODM”)
The Chief Operating Decision Maker (“CODM”) is the Board of directors and that the directors consider there to be, for the year in question,
only one operating segment, being the development of gas storage facilities in the UK. As such no operating is segment is shown as it would
be the same as that shown in the primary statements.
InfraStrata Plc Annual Report and Financial Statements 2019 ❘ 63
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Contents
01 Company Information
03 Chairman’s Report
06-18 Chief Executive Officer’s
Strategic Report
19-20 Chief Finance Officer’s Report
21-32 Directors' Report
33-36 Independent auditor’s report
38 Consolidated statement of comprehen-
sive income
39 Consolidated statement of
financial position
40 Company statement of
financial position
41-42 Consolidated statement of
changes in equity
43-44 Company statement of
changes in equity
45 Consolidated statement of
cash flows
46 Company statement of cash flows
48-63 Notes to the financial statements
Perivan 257501
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United Kingdom Registered Office
Riverbank House
2 Swan Lane
London, EC4R 3TT
Subsidiary
8 Portmuck Road
Islandmagee
Larne, Co And rim,
Northern Ireland,
BT40 3TW
www.infrastrataplc.com
STRATEGIC INFRASTRUCTURE
SOLUTIONS GLOBALLY
InfraStrata Plc
Annual Report & Financial Statements 2019