Contents
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3
Company Statement
Quadrise MSAR® fuel
5
MSAR® and the environment
6
Chairman’s Statement
11 Financial Review
13 Strategic Report
16 Directors
18 Directors’ Report
22
Statement of Directors’ Responsibilities
23
Report on Directors’ Remuneration
24
Corporate Governance Statement
26
Independent Auditors’ Report
28 Consolidated Statement of Comprehensive Income
29
Consolidated Statement of Financial Position
30
Consolidated Statement of Changes in Equity
31
Consolidated Statement of Cash Flows
32
Company Statement of Financial Position
33
Company Statement of Changes in Equity
34
Company Statement of Cash Flows
35
Notes to the Financial Statements
59 Corporate Information
Quadrise Fuels International plc
Annual Report and Financial Statements for the year ended 30 June 2016
Highlights
The MSAR® production facility at the CEPSA San Roque refinery became fully
operational within 9 months of the LONO Operational Trial contracts being
signed. The LONO trial commenced in July 2016, and is progressing well with
positive initial feedback from Maersk. The trial is expected to complete by mid-
2017 with the possibility of an interim assessment in early 2017, leading to the
commencement of commercial rollout targeted for H2 2017.
In Saudi Arabia, a Memorandum of Understanding setting out the basis for a
large-scale production to combustion trial was signed on August 10 2016. The
trial is anticipated to commence prior to the end of 2017. Quadrise’s experience
of delivering a commercial scale MSAR® production facility at the CEPSA refinery
provides further confidence in meeting the envisaged timetable.
Quadrise continues to engage with a number of oil majors and regional power
companies to pursue opportunities for the production and use of MSAR® for both
marine and power applications.
Quadrise is now well positioned to implement commercial roll-out, with enhanced
operational resources and continued investment in our in-house research facility,
continuing collaboration with University of Surrey and the extension of our
agreements with AkzoNobel.
Quadrise remains debt free, with £4.3 million in cash reserves at 30 June 2016,
bolstered by a further £4.25 million gross raised through the Placing announced
on 12 October 2016. The Open Offer, also announced on the same date, should
provide a further up to £1 million gross when completed.
Company Registration No. 05267512
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Company Statement
Quadrise Fuels International plc (“QFI”) was listed
on the London Stock Exchange AIM market in
April 2006. QFI aims to be the premier global
oil-in-water emulsion fuels company. Through
our alliance with AkzoNobel, Quadrise has the capability
to provide first class technology, services and MSAR® fuel
products to our partners and customers.
Quadrise MSAR® fuels offer a low cost substitute for
conventional heavy fuel oil (“HFO”) for use in thermal
and diesel power generation plants and in industrial and
marine diesel engines. The worldwide HFO market
exceeds 450 million tons, with a current value in excess of
US$100 billion per annum.
Our management and board have extensive background
and experience in the specialised energy sectors involved,
and an unparalleled track record in commercial emulsion
fuels development and supply in marine fuels, oil refining,
power generation and general industrial applications.
Corporate Structure
100% QFI
100% QIL
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Quadrise MSAR® Fuel
MSAR®: A Proven, Established Technology
MSAR® technology draws on over 25 years of experience in the production of oil-in-
water emulsion-based asphalts and fuels. A direct substitute for HFO, MSAR® fuel is
establishing an enviable reputation as Quadrise engages with some of the largest
corporations in the energy and transport sectors.
MSAR® is a direct low cost substitute for
conventional Heavy Fuel Oil (“HFO”) used
in marine diesel engines, and for thermal
power and steam generation. MSAR®
technology is a potential game-changer for oil refiners
as it frees up valuable distillates traditionally used for
HFO manufacture, increasing profitability without
incurring significant expenditure.
The global HFO market exceeds 450 million tons
per annum, of which approximately 45% is used in
marine applications (as bunker fuel oil).
tie-ins being incorporated into scheduled maintenance
shutdowns. The MSAR® fuel that is produced is:
n extremely stable, with storage and handling possible
at ambient conditions
n transported to end-users in the same way as HFO.
MSAR®: How it Works:
The MSAR® production process is relatively simple:
The potential market for MSAR® is substantial; Quadrise
is focusing on two significant market segments:
1 Oil residues are taken from refinery rundowns and
cooled to under 200°C to achieve the required
viscosity (typically 300–500 centistokes).
n Marine MSAR®, a replacement bunker fuel, under joint
development with A.P. Møller-Maersk, the world’s
leading container shipping company.
2 Water, which can be derived from several utility
or waste-water sources, is added to the residue.
n MSAR®, a replacement HFO for stationary applications:
under joint development with several major oil and
power generation companies globally.
3 Special surfactants and chemicals are added to
stabilise the emulsion for long-term storage and
transport, and to promote complete combustion.
4 The mixture is processed in a proprietary MSAR®
MSAR® technology is modular and can be integrated into
an oil refinery in under 12 months, with any necessary
unit to a high hydrocarbon content (typically 70%)
oil-in-water emulsion.
The MSAR® Production Process
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MSAR® versus HFO: Key Benefits for End Users
Compared with HFO, MSAR® fuel offers:
n typically 10–20% cost savings per unit of energy
n at least 20% lower NOx emissions. MSAR® is a
pre-atomised fuel with a hydrocarbon particle
size of 5–10 microns (atomised fuel oil droplets
are typically 50–100 microns) and therefore
has enhanced combustion properties
n lower energy consumption. Unlike HFO, MSAR®
fuel can be handled at ambient temperature
and generally does not need to be heated for
viscosity control
n emissions of sulphur dioxide and carbon dioxide
that are generally equivalent to those incurred from
burning HFO.
MSAR® versus HFO – Key Benefits for Refiners
In a refinery producing HFO …
In a refinery producing MSAR®…
… typically just 50% of the crude processed is
sold as premium-value transport fuels
… some 70% of the crude processed is
sold as premium-value transport fuels
20–40%
DISTILLATES
HFO
60–80%
RESIDUALS
HFO requires 20 –40% premium
fuels to make residue flow
MSAR®
SYSTEMS ARE
SCALEABLE AND
MODULAR
The oil refinery recovers
10–20% transport fuels
for minimal capex
30%
WATER (INC. <1% ADDITIVES)
MSAR®
70%
RESIDUALS
MSAR® uses c. 30% water instead
of premium fuels to make
residue flow
MSAR® ENHANCES MARGINS
Because premium distillate fuels are replaced with low-cost water and a
small amount (<1%) of additives, a higher proportion of the more valuable
components of the oil barrel can be sold as higher-margin products
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2016 MSAR® and the environment
Lowest CO2 Option to Meet Forthcoming
Marine Specifications
Residual fuels have higher levels of sulphur and
impurities than distillate fuels, such as gas oil or diesel.
Therefore, where environmental legislation dictates,
either emissions scrubbing equipment is required or a
switch to a distillate or low sulphur fuel is needed for
compliance purposes. This is especially relevant in the
marine sector, where MARPOL fuel sulphur limits will
reduce in the future:
Lower Energy
The MSAR® process transforms hydrocarbons that are
solid at room temperatures into a product that can be
stored and transported at ambient temperatures. As a
result the energy requirements for handling and trans-
porting MSAR® are lower than HFO, which is generally
heated to temperatures of 50-100°C.
Lower NOx and PM (Black Carbon)
The emulsification of heavy fuels has been shown over
the years to be the most effective way of simultaneously
reducing particulate matter (“PM”) that includes unburned
carbon (also known as “Black Soot” or “Black Carbon”)
and nitrogen oxide (“NOx”) emissions during combustion.
MSAR® fuel is extremely stable, therefore it can be
distributed optimally in the combustion zone. Water
in the fuel immediately evaporates, causing secondary
atomisation and reducing combustion temperatures,
typically reducing NOx emissions by 20% or more.
NOx gases are significant atmospheric pollutants that
contribute to the formation of smog. NOx reacts with
ammonia, moisture, and other compounds to form nitric
acid vapour and related particles. Inhalation of these
particles can cause respiratory disease and lung damage.
Stringent targets therefore need to be met from utility
and marine fuel consumers.
Black Carbon results from the incomplete combustion of
hydrocarbon which associates with PM. Black Carbon is
estimated to be 5–15% of shipping particulate emissions.
It has the ability to warm the earth by absorbing heat in
the atmosphere and reducing the ability, on deposition,
for snow and ice to reflect sunlight. Studies indicate that
unburned carbon particulate emissions are the second
largest contributors to global warming.
The global debate currently is whether there will be
sufficient distillate fuels available to meet this potential
future demand. Refiners are questioning whether
to invest in the necessary upgrading equipment,
especially as the financial returns for these billion dollar
investments are uncertain and the overall environmental
impact (including increased CO2 emissions) are worse
from cradle to grave when compared with the status quo
of HFO plus scrubbing.
At a macro level, any refinery converting to MSAR®
technology increases the output of distillate hydro-
carbons and reduces the amount of hydrocarbons in the
conventional HFO ‘pool’. The investment for MSAR® is
several orders of magnitude less than the conventional
upgrading alternative and the environmental impact for
the refiner is significantly lower.
As some of the refinery cost savings for MSAR® versus
HFO production can be passed to the consumer, the
capital cost of installing scrubbing equipment can be
subsidised. This concept of ‘affordable compliance’ guides
Quadrise in commercialising MSAR® fuel.
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Chairman’s Statement
I am pleased to present this Annual Report for Quadrise
Fuels International plc (“Quadrise”, the “Company”, “QFI”
and together with its subsidiaries, the “Group”) for the
year ended 30 June 2016 together with an update on
significant events since the year end.
Quadrise’s Unique Offer
Quadrise has developed MSAR® as a less expensive,
cleaner synthetic heavy fuel oil (“HFO”). Produced
using QFI’s proprietary technology
and services, MSAR® offers both
producers and consumers of the fuel
significant economic and environmental
advantages. MSAR®, an oil in water
emulsion, is made by mixing the residual
streams from an oil refinery with water
and specialised chemicals in a proprietary production
process – instead of diluting the residuals with high value
distillate products as in the production of HFO.
MSAR® has superior characteristics compared with HFO:
n MSAR® can be stored and used at lower temperatures
than HFO.
n The small particle size (5-10 microns) of the residue
in MSAR® results in virtually complete combustion
– leading to improvements in engine efficiency and
significant reductions in carbon particulates in the
exhaust gases.
n The presence of water in MSAR® reduces the
combustion temperatures – leading to significant
reductions in NOx emissions.
developed jointly with AkzoNobel – one of the world’s
leading surface chemistry companies.
For the refiner, the production of MSAR® upgrades
the low value residue that is inherent in any oil refining
process by treating it with speciality chemicals and
water in a proprietary production process, rather than
diluting it with high value distillate to create HFO. This
releases material volumes of high value distillate for
sale (typically increasing from 50% to 70% of the overall
Excellent progress has been made during
the year on the marine operational
trial with the nominated Maersk vessel
successfully burning MSAR® since July 2016
output) – providing the potential to significantly increase
refining margins. For the consumer, MSAR® is offered at a
discount (on an energy equivalent basis) to HFO and also
offers environmental and handling benefits, compared
with HFO.
The two largest markets for the use of MSAR® as a low-
cost, efficient and environmentally friendly synthetic
HFO are the marine bunkering and power generation
markets. In both cases, it is necessary to engage with
both the producers (refiners) and consumers (shipping
companies and power utilities) to develop the significant
market opportunities. Significant work has been carried
out to demonstrate the proof of concept in these two
key end-user markets and current work is focused on
commercial scale trials, the successful conclusion of
which will be key milestones towards QFI developing
sustainable commercial revenues.
n MSAR® is provided at a lower price than HFO for the
Operational Highlights
equivalent energy output.
n Producing MSAR® allows the refiner to sell the higher
value distillates products that would otherwise be
used to dilute the residue in order to create HFO.
Quadrise acts as the technology and service partner to
both the producer and the consumer and aims to create
value through licence revenues from the production
of fuel and the sale of the chemicals and MSAR®
manufacturing systems. The core technology has been
Excellent progress has been made during the year
on the marine operational trial with the nominated
Maersk vessel successfully burning MSAR® since July
2016 on its regular scheduled route, whilst outside the
European Emission Control Area. The Company moved
from contract signature to an operational commercial
scale MSAR® Manufacturing Unit (“MMU”) at the Cepsa
Gibraltar San Roque Refinery within 9 months and
MSAR® is now being manufactured on a regular schedule.
The initial feedback from Maersk has been positive, with
6
the possibility of an interim assessment in early 2017
and completion of the trial by middle of 2017.
Targeted Business Development Programme
to Develop Commercial Market
In power generation, substantive progress was made
during the second half of the year and this culminated
in the execution of the Memorandum of Understanding
(“MoU”) in the Kingdom of Saudi Arabia (the “KSA”) in
August 2016. Since that time we have been working
with all parties to move this large-scale production to
combustion trial forward and we currently anticipate
being able to commence the combustion trial before
the end of 2017. Given that this is a large and complex
project, our recent experience in delivering a commercial
scale MSAR® production facility at the CEPSA refinery
on a very tight timetable provides a high degree of
confidence in meeting the envisaged timetable.
Economic Case for MSAR® Remains Sound at
Current Oil and Gas Prices.
The key value driver for MSAR® is the price differential,
or spread, between HFO and distillate fuels (essentially
diesel). The spread has remained in the range
$155 per tonne to $235 per tonne during the
financial year, and the economics of MSAR®
technology remains sound at these levels.
There is, therefore, a compelling economic
case for conversion to MSAR® production
to enhance refinery margins, using a proven
technology with low capital costs and rapid
payback. We continue to make progress
with our major programmes in the marine and power
sectors and we are working with a number of refiners
considering participation in the envisaged global Marine
MSAR® supply network.
Oil and energy market conditions remained volatile
through the period, though the falls during the first
half of the year were recovered during the second half.
Although the current lower oil and gas prices do not
directly impact the economic case for our unique offer,
historically the pace and scale of the price changes have
extended decision making cycles for our key customers.
Our continued investment in business development
capacity in our key customer markets is enabling us
to respond positively to this challenge and we believe
that the positive progress on our key programmes
demonstrates this.
Quadrise targets specific sectors of very large global
bulk fuels markets, and our present and intended clients
are large companies which presently account for a
substantial share of the production and combustion of
HFO – refiners for production and the marine bunkering
and power generation sectors for consumption. We
believe that there are significant synergies in this
approach, as the major producers and consumers are
co-located around a small number of major refining and
bunker fuel hubs in Europe, the Middle East and Asia.
Both the producers and consumers are inherently
conservative and so building the customer base requires
Quadrise to engage in significant and sustained business
development activity to enable collaborative projects to
be developed. Our business development activities are
organised along sector lines, to align with our clients in
the refining, marine and power markets. We believe that
the ability to develop both the marine and power markets
We have been working with all parties
to move this large-scale production to
combustion trial forward and we currently
anticipate being able to commence the
combustion trial before the end of 2017
offers significant advantages to the producers, as it both
increases the available product market potential and
de-risks its development through the building of multiple
potential customers in different market segments.
All of our business development, research and support
activities are co-ordinated to ensure that we can
maximise the opportunity for development of a global
commercial market for MSAR® in the marine and power
sectors. We have highlighted below the background to
and progress in each of these sectors.
Marine MSAR2® Bunker Fuel
Quadrise has been working with Maersk for over 5 years
and this has culminated in the current operational and
LONO (‘Letter Of No Objection’) trials, which commenced
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2016
in the first half of 2016, with the MSAR® fuel being
manufactured using a commercial-scale MMU at the
CEPSA San Roque refinery, adjacent to the Algeciras
Mediterranean bunker hub.
Following the installation and commissioning of the
MMU during the second quarter of 2016, the first fuel
was bunkered to the nominated Maersk vessel
in the first few days of July 2016 and the
operational and LONO trial will run for a total
of 4,000 hours. It is anticipated that the trial
will be completed by the middle of 2017, as the
MSAR® fuel can only be burned when the vessel
is steaming outside of the European Emission
Control Area on its normal operating schedule.
At the date of this announcement, several additional
batches of marine MSAR® fuel have been successfully
produced and bunkered to the nominated vessel and the
trial continues to progress well on the vessel.
During the negotiation of the current agreements for the
trial with Maersk, the Royalty Agreement with Maersk
Line was extended to the tenth anniversary of the
date of first fully commercial Marine MSAR® – which is
presently expected to be mid-2027.
When LONO certification and other regulatory formalities
have been completed the early commercial phase should
get underway, subject to Quadrise agreeing appropriate
commercial terms with CEPSA and Maersk. Whilst the
initial focus would be to service Maersk Line’s nominated
requirements, Quadrise plans to work with other refiners
and shipping companies to accelerate the scope of the
commercial roll-out. The modular nature of the MMU and
associated infrastructure provides refiners with a simple,
quick and cost-effective means of scaling up production
to meet the anticipated rapidly increasing demand for
Marine MSAR®. The MMU capital cost is relatively modest
and the site infrastructure is designed for export of larger
quantities of fuel oil and hence MSAR® in the future.
Emission Control Areas (“ECAs”) have been in force since
January 2015 and are primarily being met by operators
switching to high-cost, low-sulphur marine diesel fuel;
though the option to use HFO and exhaust scrubbers
offers an alternative route for compliance. The pending
reductions in the IMO open ocean emission standards are
due to be discussed at the MEPC meeting of the IMO on
Following the installation and
commissioning of the MMU during the
second quarter of 2016, the first fuel was
bunkered to the nominated Maersk vessel
in the first few days of July 2016
24 to 28 October 2016 – and potentially a decision taken
for implementation in either 2020 or 2025. “High-sulphur”
MSAR® and exhaust scrubbers appear to offer the most
economic compliance option, though the use of higher-
cost low-sulphur marine diesel will be an option for
some operators. With appropriate residue streams there
is also the potential to produce low-sulphur MSAR®. It
should also be noted that MSAR® provides other benefits
including a reduction in NOx and particulates emissions
which are likely to be of increasing importance.
Alternative Fuels
The use of LNG as an alternative fuel for shipping has
increased in profile over the years – primarily as a result of
the fall in gas prices in the USA. The recent fall in oil prices
has resulted in HFO becoming more cost competitive than
LNG per unit energy in many circumstances. Therefore
there are likely to be cost constraints on the widespread
adoption of LNG as a replacement for HFO, although it
may be used in certain geographic and end-user market
niches. Given the scale of the global marine fuel market,
the development of the marine LNG fuel market is not
considered to have a material impact on the market
opportunity for marine MSAR®.
Macro Features of the Marine Fuel Market
Power Generation MSAR® Fuel
Emission Standards
Emission standards have an increasingly significant
impact on the market for marine bunker fuels. The more
stringent standards in the European and North American
The KSA is the world’s largest market for consumption of
crude-oil and HFO for power generation and the scale and
nature of the oil and power generation industries offers
an enormous opportunity for Quadrise. It was therefore
identified as the primary target market and we have been
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material at current oil prices and price spreads, though
lower gas prices are affecting competition in the
Singapore power generation market. The project is
dependent on MSAR® production by a major regional
refiner and this is only likely to start when there is a
market for Marine MSAR® through the Singapore bunker
hub – which we believe will be an integral part of the
post LONO commercial roll-out from 2017. Quadrise has
maintained relationships with a number of oil majors
and a number of technical evaluations have been
completed or are progressing to confirm the suitability
of specific refining residues for MSAR® production.
These relationships also provide opportunities to explore
options for MSAR® production and conversion of refinery
units and steam generation plant.
Enhancement of Research, Development and
Operations Activities
During the year we have enhanced our capacity and
capability in research and development, operations and
technical support activities, to ensure that we were able
to respond to the increase in activity during the current
trials and to enable us to support the planned commercial
roll-out following the successful completion of the trials.
This included expanding the team at QRF (where all our
in-house R&D is undertaken) together with additional
business development/process engineering support at
our head office. We also commenced a complementary
programme of research at the University of Surrey that,
through enhancing our understanding of the mechanisms
that underpin the creation of stable oil in water emulsion
fuels, supports our in-house development activities. This
has given Quadrise access to state of the art facilities and
working with our local partner there, the Rafid Group, on
a sustained basis for over 5 years. During this time, we
have developed good relationships and have been working
closely with a number of key parties and have undertaken
a number of studies and evaluation programmes.
We are delighted that we were able to announce in
early August 2016 the signing of an MoU to progress
discussions for a major production to combustion trial
in KSA. We are now engaged with our clients and their
advisors to progress from the MoU to definitive contracts
for the trial. The refining complex at which the MSAR®
will be produced and the major coastal power station
at which the combustion trial will take place have been
defined and Quadrise is working with all parties to scope
the requirements of this complex project which has to
be co-ordinated with the existing operating schedules
of both facilities. As part of the preparatory work carried
out during 2015, the refinery was able to undertake the
installation of “tie-ins” for the supply of the residue to
the planned emulsion fuel manufacturing unit during a
planned maintenance shut down at the end of 2015.
The recent experience that Quadrise has in designing,
installing and commissioning a commercial scale MMU at
CEPSA, together with our proven ability to manufacture
MSAR® on a commercial scale will be highly relevant
to the work required for the successful delivery of the
production element of the trial in KSA during 2017.
Future Marine, Power and Industrial Programmes
In addition to our work with Maersk, CEPSA and with a
number of parties in the KSA, Quadrise has been working
on a number of other carefully
selected opportunities with both
refiners as potential producers of
MSAR® fuels and power utilities and
shipping operators as consumers. As
noted previously, in many cases there
are synergies to expanding both the
bunker fuel and power generation
markets in parallel as this reduces the risks significantly
for both parties when there are multiple suppliers and
multiple consumers.
We have enhanced our capacity and capability
in research and development, operations and
technical support activities, to ensure that we
were able to respond to the increase in activity
world-renowned expertise in emulsions and is proving
to be an excellent partnership. We anticipate extending
the current arrangements when they expire in the fourth
quarter of 2016.
In Asia, we continue our relationship with YTL Power
Seraya and the prospective benefits continue to be
Central to our offer is the input and support of our
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technology partner, AkzoNobel, who has worked with
Quadrise for over a decade and with whom we have
a Joint Development Agreement and a Co-Operation
and Exclusive Purchase and Supply Agreement for the
chemicals used to create MSAR®. These agreements were
recently extended to November 2018 which will give
confidence to our customers that we are able to support
them when we enter into commercial agreements.
Board and Management
The board has developed during the year, in order to
ensure that we are in the best possible position to deliver
on the significant commercial opportunities that the
successful conclusion of the current
trials is expected to present during
2017 and beyond. After serving for 10
years, Ian Williams retired at the end
of March 2016 and I succeeded him as
Executive Chairman, working alongside our established
Chief Operating Officer, Jason Miles, and Finance Director,
Hemant Thanawala. We are working together very well
as a team.
We continue to benefit from the input of our experienced
non-executive directors, with Laurie Mutch chairing
the Audit Committee, and Ian Duckels chairing the
Compensation Committee – though on Ian’s previously
announced retirement, at the AGM in 2016, Phil Snaith
will take over as Chair of the Compensation Committee.
The board would like to take this opportunity to thank
both Ian Williams and Ian Duckels for their input and
support over many years.
As noted above, we have enhanced our capacity and
capability in research and development, operations and
technical support activities. In combination with our
existing business development activities, this has ensured
that we have been able to respond positively to the
challenges of supporting two substantial, commercial-
scale trial programmes, whilst having the capacity to plan
for our future commercial operations.
scale MMU producing MSAR® for use in a Maersk
nominated vessel whilst steaming on its normal
scheduled route. The trial has progressed well to date
and we expect further substantial progress towards
the required 4,000 hours for the LONO element to
be made during the remainder of 2016 and for the
trial to be completed by the middle of 2017. The
facility at CEPSA also provides QFI with a commercial
facility built to permanent standards that it is able to
showcase to potential clients. In KSA we are working
hard with all key participants to progress the planned
production to combustion trial and our experience at
CEPSA is proving to be invaluable in demonstrating our
capabilities and our experience in moving from design
Both the Marine and Power programmes
have reached defining stages
studies to a producing facility within tight timescales
in an operating refinery.
We believe that the successful completion of the current
trials are the last remaining steps to being able to
develop substantial commercial markets, subject to the
negotiation of suitable contracts, for the production and
sale of MSAR® and we are working hard to maximise the
opportunity that this will provide. Whilst there remain
challenges, we believe that MSAR® provides a compelling
economic and environmental offer to both producers and
consumers and that this will drive market uptake during
2017 and beyond.
Finally, the Board is seeking to enhance the Group’s
treasury through a proposed Placing of new ordinary
shares in the Company to raise approximately £4.0
million. The proposed funding is intended to enable the
Group to transition comfortably into the commercial
phase, upon the successful completion of the marine
operational/LONO and the KSA production to combustion
trials. The Company also intends to launch an Open Offer
of new ordinary shares to existing QFI shareholders of up
to an additional £1.0 million.
Outlook – Current Trading and Prospects.
Both the Marine and Power programmes have reached
defining stages. At CEPSA, we now have a commercial-
Mike Kirk
Executive Chairman
11 October 2016
10
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2016 Financial Review
Overview
Close attention to the Group’s treasury and effective
financial management has remained a firm ethos of the
Board and management of the Group during the year,
especially in view of the unavoidable delays in getting
the marine MSAR® trial with Maersk and the power
MSAR® trial with the KSA underway.
Since the start of the New Year, the marine MSAR® LONO
trial has been progressing well and a number of batches
of the fuel have already been produced at the CEPSA
refinery and burnt successfully in the Maersk nominated
vessel. At the current pace, this trial is expected to be
completed by the middle of 2017 and, on the successful
completion thereof, should progress to the execution of
the first commercial contracts.
The KSA production to combustion trial is also
progressing well since the year-end and the recent
execution of the MoU defines the outline timetable,
scope, scale and pace for the trial. All key parties are now
well engaged in commencing the trial in 2017, paving the
way for an anticipated commercial roll-out in 2018.
To support the lead up to full-scale commercial
operations over the next 2 years and to provide comfort
to our key clients of our good financial standing and
ability to perform when executing the first commercial
contracts, the board is taking the necessary actions
to strengthen our existing treasury further by raising
additional funds through a proposed placing and
proposed Open Offer as announced today. The proposed
Placing should provide approximately £4.0 million and the
proposed Open Offer should provide up to an additional
£1.0 million of funds. The board is confident that this
fundraising, in combination with the existing treasury,
will position the Group well to move to sustainable
commercial revenues and profitability.
Results for the Year
The consolidated after-tax loss for the year to 30
June 2016 was £4.8m (2015: £4.9m). This included
production and development costs of £2.2m (2015:
£1.3m), administration expenses of £2.0m (2015: £1.5m),
a share option charge of £0.8m (2015: £1.9m), interest
and other income of £192k (2015: £233k), and a charge
of £nil (2015: £0.4m) for adjustments to available for
sale investments.
Basic and diluted loss per share was 0.59p (2015: 0.61p).
Statement of Financial Position
At 30 June 2016, the Group had total assets of £8.8m
(2015: £12.6m). The most significant balances were
intangible assets of £2.9m (2015: £2.9m), property, plant
and equipment of £1.2m (2015: £0.7m), and cash of £4.3m
(2015: £8.4m). Further information on intangible assets is
provided in note 14 to the Group Financial Statements.
Cash Flow
The Group ended the year with £4.3m of cash and cash
equivalents (2015: £8.4m) with £3.7m having been utilised
in its operating activities during the year (2015: £2.7m).
The Group continues to remain debt free.
Capital Structure
The Company had 809,585,162 ordinary shares of 1p each
in issue at 30 June 2016. The Company’s current issued
share capital remains at 809,585,162 ordinary shares of
1p each all with voting rights. However, this will change
shortly upon the completion of the Placing and Open
Offer, as mentioned above. Details of the revised issued
share capital will be notified to the shareholders through
an RNS at the appropriate time.
Treasury and Financial Risk Management
Control over treasury and financial risk management
is exercised by the Board and its Audit Committee
through the setting of policies and the regular review
of forecasts and financial exposures. Presently, the
Group’s financial instruments consist principally of cash
and liquid resources and other items such as accounts
receivable and payable, which arise directly from its
operations. It is still the Group’s policy not to undertake
any trading activity in financial instruments, including
derivatives.
The principal risks arising from the Group’s financial
instruments are those associated with interest, liquidity
and foreign exchange. The Board reviews and establishes
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2016
appropriate policies for the management of such risks
and monitors them on a regular basis.
Taxation
The Group has tax losses arising in the UK of
approximately £41.1m (2015: £40.7m) that are available,
under current legislation, to be carried forward against
future profits. £11.7m (2015: £11.2m) of the tax losses carried
forward represent trading losses within Quadrise Fuels
International plc, £25.8m (2015: £25.8m) represent non-
trade deficits arising on intangible assets within Quadrise
International Limited, £1.6m (2015: £1.7m) represent pre-
trading losses incurred by subsidiaries, £1.9m (2015: £1.9m)
represent management expenses incurred by Quadrise
International Limited, and £0.1m (2015: £0.1m) represent
capital losses within Quadrise Fuels International plc.
and LONO trial with Maersk and substantially progress
the production to combustion trial in KSA, providing a
clear pathway for moving the Group towards sustainable
commercial revenues and profitability from the following
year. With enhanced cash resources following the
proposed Placing and Open Offer, the Group will also
be well-positioned to enter into the early commercial
contracts with our clients having the confidence of our
ability to deliver the required operational and support
resourcing.
Tight financial management will continue to be
applied as a matter of good order and every care
and attention will be given to the negotiations of
the future commercial contracts to ensure that the
Group receives an equitable share of the material
value-add that our MSAR® technology offers to
the market.
Outlook
The key objectives for the current financial year are to
successfully complete the marine MSAR® operational
Hemant Thanawala
Finance Director
11 October 2016
12
Strategic Report
For the year ended 30 June 2016
Principal Activity
Market Risk
The principal activity of the Company is to develop
markets for its proprietary emulsion fuel (“MSAR®”) as
a low cost substitute for conventional heavy fuel oil
(“HFO”) for use in power generation plants and industrial
and marine diesel engines.
Business Review and Future Developments
A full review of the Group’s activities during the year,
recent events and future developments is contained in
the Chairman’s Statement.
Key Performance Indicators
The Group’s key performance indicators are development
and commercial performance against Group business
plans and project timetables established with clients, and
financial performance and position against the approved
budgets and cashflow forecasts. The Board regularly
reviews the Group business plans, project timetables,
budgets and cashflow forecasts in order to optimise the
application of available resources. Consideration of the
Group’s performance against Key Performance Indicators
is contained in the Chairman’s Statement and the
Financial Review.
Going Concern
The Group had £4.3m in treasury as at 30 June 2016.
Having conducted a full review of the updated business
plan, budgets and associated commitments at the
year end, the Directors concluded that the Group has
adequate financial resources to continue in operational
existence for at least the forthcoming year and therefore
continue to adopt the going concern basis in preparing
the accounts. Refer to Note 3 for further details.
Principal Business Risks
Set out below are certain risk factors relating to the
Group’s business. However, these may not include all of
the risk factors that could affect future results. Actual
results could differ materially from those anticipated as
a consequence of these and various other factors, and
those set forth in the Group’s other periodic and current
reports filed with the authorities from time to time.
The marketability of MSAR® fuels is affected by
numerous factors beyond the control of the Group.
These include variability of price spreads between
light and heavy oils and the relative competitiveness
of oil, gas and coal prices both for prompt and future
delivery. The Group cannot mitigate this risk by its
nature, but pays close attention to the energy
markets in order to be able to react in a timely and
effective manner.
Feedstock Sourcing
There is a risk in respect of appropriately located
and ongoing price competitive availability of heavy oil
residue feedstock as oil refiners seek to extract more
transportation fuels from each barrel of crude using
residue conversion processes. The Group mitigates this
risk where possible by utilising its deep understanding of
the global refining industry, targeting qualifying suppliers
matched to prospective major consumers.
Commercial Risks
There is a risk the Group will not achieve a commercial
return due to major unanticipated change in a key
variable or, more likely, the aggregate impact of changes
to several variables which results in sustained depressed
margins. Experience during early 2015 demonstrated that
the price spread between heavy fuel oil and diesel fuel
was relatively robust while crude oil prices collapsed.
As this price spread drives the Quadrise ‘value-add’, the
structure of the oil products market itself mitigates the
principal margin risk.
The competitive position could be affected by
changes to government regulations concerning taxation,
duties, specifications, importation and exportation of
hydrocarbon fuels and environmental aspects. Freight
costs contribute substantially to the final cost of
supplied products and a major change in the cost of
bulk liquid freight markets could have an adverse effect
on the economics of the fuels business. The Group
would mitigate this risk through establishing
appropriate flexibilities in the contractual framework,
offtake arrangements and price risk management
through hedging.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2016
Technological Risk
Other Business Risks
There is a risk that the technology used for the
production of MSAR® fuel may not be adequately
robust for all applications in respect of the character
and nature of the feedstock and the particular
parameters of transportation and storage pertaining
to a specific project. This risk may jeopardise the early
commercialisation of the technology and subsequent
implementation of projects; or give rise to significant
liabilities arising from defective fuel during plant
operations. The Group mitigates this risk by ensuring that
its highly experienced key personnel are closely involved
with all areas of MSAR® formulation and manufacture,
and that the MSAR® fuel is thoroughly tested before
being put into operational use.
Delay in commercialisation of MSAR® and funding risks
There is a risk that the commercialisation of MSAR®
could be delayed further due to unforeseen technical
and/or commercial challenges. This could mean that
the Group may need to raise further equity funds to
remain operational. Depending on market conditions and
investor sentiments, there is a risk that the Group may
be unable to raise the requested funds when necessary.
The Group mitigates this risk by maintaining strong
control over its pre-revenue expenditure, keeping up the
momentum on its key projects as far as possible, and
maintaining regular contact with the financial markets
and investor community.
Competition Risks
There is a risk that new competition could emerge
with similar technologies sufficiently differentiated to
challenge the MSAR® process. This could result, over
time, in further price competition and pressure on
margins beyond that assumed in the Group’s business
planning. This risk is mitigated by the limited global
pool of expertise in the emulsion fuel market combined
with an enhanced R&D programme aimed at optimising
cost and performance and protection of intellectual
property. The Group also makes best use of scarce
expertise by developing close relationships with strategic
counterparties such as AkzoNobel while ensuring that
key employees are suitably incentivised.
Dependence on Key Personnel
The Group’s business is dependent on obtaining and
retaining the services of key personnel of the appropriate
calibre as the business develops. The appointment in
recent years of key General Managers into a revised
organisation structure, the conversion of former
consultants to key full time posts and appointment of
chemical technologists and process engineers has reduced
risk and equipped the Company to meet future demands.
The success of the Group will continue to be dependent
on the expertise and experience of the Directors and
the management team, and the loss of personnel could
still have an adverse effect on the Group. The Group
mitigates this risk by ensuring that key personnel are
suitably incentivised and contractually bound.
Environmental Risks
The Group’s operations are subject to environmental
risks inherent in the oil processing and distribution
industry. The Group is subject to environmental laws
and regulations in connection with all of its operations.
Although the Group intends to be in compliance, in
all material respects, with all applicable environmental
laws and regulations, there are certain risks inherent
to its activities, such as accidental spills, leakages or
other circumstances that could subject the Group to
extensive liability.
Further, the Group may require approval from the
relevant authorities before it can undertake activities
which are likely to impact the environment. Failure to
obtain such approvals may prevent or delay the Group
from undertaking its desired activities. The Group is
unable to predict definitively the effect of additional
environmental laws and regulations, which may be
adopted in the future, including whether any such laws
or regulations would materially increase the Group’s cost
of doing business, or affect its operations in any area. The
Group mitigates this risk by ensuring compliance with
environmental legislation in the jurisdictions in which it
operates, and closely monitoring any pending regulation
or legislation to ensure compliance.
14
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2016
No Profit to Date
The Group has incurred aggregate losses since its
inception and it is therefore not possible to evaluate
its prospects based on past performance. There can
be no certainty that the Group will achieve or sustain
profitability or achieve or sustain positive cash flow from
its activities.
Corporate and Regulatory Formalities
The conduct of petroleum processing and distribution
requires compliance by the Group with numerous
procedures and formalities in many different national
jurisdictions. It may not in all cases be possible to
comply with or obtain waivers of all such formalities.
Additionally, functioning as a publicly listed Group
requires compliance with stock market regulations.
The group mitigates this risk through commitment to
a high standard of corporate governance and ‘fit for
purpose’ procedures, and by maintaining and applying
effective policies.
Economic, Political, Judicial, Administrative, Taxation or
other Regulatory Factors
The Group may be adversely affected by changes in
economic, political, judicial, administrative, taxation or
other regulatory factors, in the areas in which the Group
operates and conducts its principal activities.
Mike Kirk
Executive Chairman
11 October 2016
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Directors
Mike Kirk
Executive Chairman
Mike served as a corporate
finance partner at Cazenove
providing advisory services
to a number of clients in the
utilities, oil and gas and oilfield
service sectors. Whilst at
Cazenove, Mike led the flotation
of Wood Group, Expro International and KBC Advanced
Technologies (where he also served as a non-executive
director for 9 years). Since leaving the City, Mike has held
a portfolio of non-executive directorships for a variety
of companies and is currently Chairman of Portsmouth
Water, Chair of First Wessex (a housing association with
c20,000 properties) and Deputy Chair of TCV, a large UK
community volunteering charity. Prior to working in the
City, Mike worked in the chemical and nuclear industries
and has a BSc in Chemical Engineering from Leeds
University, an MSc in Nuclear Fuels Technology from
Imperial College and a Finance MBA from Cass Business
School. Mike is a member of the Nominations Committee.
Hemant Thanawala
Finance Director
Hemant is a Chartered
Accountant with over 30 years
professional and commercial
experience. He played a key role
in the AIM listings of Nautical
Petroleum plc in 2005 and
Quadrise Fuels International
plc in 2006, assuming the role of finance director in both
companies upon their listings. He remained on the board
of Nautical Petroleum plc until late 2008. Prior to 2005,
Hemant served as CFO of Masefield AG, a Swiss-based
energy trader, for a period of 4 years. Between 1989 and
2001, he served as CFO for Premier Telesports Group
and Rostel Group, with diversified business interests in
the emerging markets of Eastern Europe, Former Soviet
Union and Africa. Before that, Hemant was engaged in
professional practice, following his qualification with
KMG Thomson McLintock (now KPMG) in 1981.
16
Jason Miles
Chief Operating Officer
Jason spent over twelve
years of his career developing
emulsified fuel projects; initially
as a process engineer for BP
and subsequently for PDVSA,
as Business Development
Manager where he implemented
numerous Orimulsion® projects globally. Prior to joining
Quadrise in 2006 he spent two years as a Senior Oil
Consultant for OpenLink. Jason has an honours degree
in chemical engineering from Loughborough University
and an Executive MBA from the Cass Business School in
London. Jason is a chartered Chemical Engineer, he is also
on the board of QIL.
Laurence (‘Laurie’) Mutch
Non-Executive Director
Laurie is a management
consultant to multi-national
organisations. He had 25 years’
experience in the energy
industry with the Royal Dutch/
Shell Group where he sat on the
Board of Shell International Gas
& Power, as Executive Director for business development
in the Eastern Hemisphere. From 1994 to 1996, he was
the Finance Director in Shell International Gas, and
Principal Executive to the International Energy Agency’s
Coal Industry Advisory Board (CIAB). Prior roles include
senior management positions in Shell’s Coal and Chemical
Divisions. During his last two years of service he was
Group Chief Information Officer. Laurie holds a BSc in
Mathematics & Physics and an MSc in Astrophysics. He
is a member of the QFI Audit, Compensation and
Nominations committees.
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2016
Philip Snaith
Non-Executive Director
Philip has spent more than 35
years with the Royal Dutch
Shell group in senior executive
positions, latterly as General
Manager of Shell International
Trading & Shipping Company
Limited in London. Between
2004 and 2008, Philip spent four years in Singapore as
President of Shell International Eastern Trading Company
– with responsibility for Asia-Pacific trading portfolio.
Concurrent with this executive position, he was a non-
executive director of Shell Eastern Trading Company
(Pte) Ltd, with annual revenues of around US$55 billion,
and was also Chairman of both Shell Tankers Singapore
(Pte) Ltd and Shell International Shipping Services (Pte)
Ltd. Philip holds an MBA from Cranfield University, a
BSc (Physics) from Imperial College and a Diploma in
Marketing (Dip.M) from the UK Chartered Institute of
Marketing. Philip is a member of the QFI Audit and
Compensation committees.
Ian Duckels
Non-Executive Director
Ian has degrees in Chemistry,
Chemical Physics and Computer
Science and is also a qualified
accountant. He has extensive
experience in the oil and
energy sectors in senior roles
spanning refining technology
and plant management to global strategic planning
and international mergers and acquisitions. He also has
extensive experience of refinery management and joint
ventures. His last post in BP was as Chairman of the BP
Texaco Joint Venture Refinery in Rotterdam. On leaving
BP in 1995, Ian set up a specialist oil trading and refining
training activity in association with the Petroleum
Economist and in 1998 joined Quadrise Limited serving
as a director until it was acquired by QFI in 2006. Ian is a
member of the QFI Audit, and Compensation committees.
Dilipkumar Shah
Non-Executive Director
Dilip brings with him over
25 years of commercial
experience in trading, finance,
manufacturing and distribution.
Dilip has most recently been
involved in trading and
manufacturing in West Africa
with focus on Nigeria, Democratic Republic of Congo and
Ghana. He is a founder member of various successful
companies in West Africa involved in the distribution of
fertilizers, chemicals, tobacco related products and the
manufacture of food products. In addition, he serves on
the boards of a number of private UK and international
companies.
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Directors’ Report
The Directors present their report together with the audited accounts of Quadrise Fuels International plc (“the
Company”), and its subsidiaries, (“the Group”) for the year ended 30 June 2016.
Results and Dividends
The consolidated loss from continuing operations after taxation for the year ended 30 June 2016 was £4.8m (2015:
£4.9m). The Directors do not recommend the payment of any dividend for the year (2015: £nil).
Directors
Those who served as Directors during the year are:
n
n
Ian Williams (Executive Chairman) – resigned 31 March 2016
Mike Kirk (Executive Chairman) – appointed Executive Chairman 1 April 2016;
appointed as a Non-executive Director on 1 December 2015.
n Hemant Thanawala (Finance Director)
n
Jason Miles (Chief Operating Officer)
n
Ian Duckels (Non-executive Director)
n
Laurie Mutch (Non-executive Director)
n Dilipkumar Shah (Non-executive Director)
n Philip Snaith (Non-executive Director)
Resolutions to re-elect Hemant Thanawala and Dilipkumar Shah as Directors, both of whom retire by rotation, and a
resolution to appoint Mike Kirk as a Director will also be proposed at the Annual General Meeting.
Directors’ Interests
The interests of the Directors holding office at 30 June 2016 were as follows:
Number of Shares held:
Directors
Hemant Thanawala 1
Ian Duckels2
Jason Miles
Mike Kirk
Laurie Mutch
Dilipkumar Shah
Philip Snaith
Notes:
30 June 2016
Ordinary Shares of 1p Each
30 June 2015
Ordinary Shares of 1p Each
27,210,553
3,877,766
2,880,633
Nil
Nil
Nil
Nil
28,210,553
3,817,460
2,880,633
Nil
Nil
Nil
Nil
Including 20,347,153 Ordinary Shares held by Lucrone Investments GmbH, a company in which Mr Thanawala has a beneficial interest.
Including 2,757,154 Ordinary Shares held in the name of TD Direct Investing (Europe) Limited and 1,060,306 Ordinary Shares held in the name of Transact
Nominees Limited.
1
2
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2016
Number of share options held:
Directors
Mike Kirk
Hemant Thanawala
Jason Miles
Laurie Mutch
Ian Duckels
Dilipkumar Shah
30 June 2016
Share Options
30 June 2015
Share Options
3,000,000
-
1,000,000
3,500,000
500,000
2,500,000
2,500,000
5,000,000
1,500,000
-
3,500,000
1,500,000
500,000
–
2,000,000
1,000,000
3,500,000
-
2,500,000
2,500,000
5,000,000
-
350,000
3,500,000
1,500,000
500,000
Exercisable up to
1 April 2024
19 April 2016
30 November 2017
1 April 2022
22 March 2024
31 December 2016
31 October 2017
1 April 2022
22 March 2024
19 April 2016
1 April 2022
1 April 2022
1 April 2022
A total of 23.5 million share options were granted by International Energy Group AG (“IEG”), over its own shares in QFI, to
two existing QFI Directors as well as three former QFI Directors and three former QFI employees. Of these, 5 million were
exercised during the financial year (2015: 5.5 million) and 6 million remained outstanding at 30 June 2016. During the period
from 1 July 2016 to the date of this report, a further 1 million options were exercised, with the remaining 5 million options
being repurchased from the option holder by IEG. The outstanding share options as at 30 June 2016 are included in the
table above where applicable. Refer to Note 20 for further details.
Substantial Shareholders
The Board was aware of the following interests of 3% and over of the issued share capital of the Company as at the
date of this report.
Nature of Holding
Number of
Ordinary Shares Held
Percentage of Issued
Share Capital and Voting Rights
Ruudowen Limited
Phibatec Limited
Intertrust Trustees Limited
International Energy Group AG
Anthony Lowrie
Hemant Thanawala
Direct
Direct
Direct
Direct
Indirect
Direct/Indirect
Orangefield Corporation Trustees (Mauritius) Limited
Direct
54,738,353
51,562,500
48,546,746
32,943,515
31,521,705
27,210,553
25,781,250
6.76%
6.37%
5.996%
4.07%
3.89%
3.42%
3.18%
19
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Events After the End of the Reporting Period
On 10 August 2016, the Company announced the execution of a Memorandum of Understanding (“MOU”) which
defines the basis of collaboration between Quadrise and its clients in the Kingdom of Saudi Arabia to progress a
‘Production to Combustion’ trial at designated refinery and power plant facilities within the Kingdom.
On 14 September 2016, the Company announced the extension of contracts for the exclusive purchase and
supply of goods and services and for the exclusive joint development of emulsion fuels with AkzoNobel
group companies. The contract extensions ensure the continuity and ongoing support from AkzoNobel for the
commercialisation of MSAR® projects globally until at least November 2018.
The Company announced that it is proposing to raise approximately £4.0 million through a Placing, and up to an
additional £1.0 million through a proposed Open Offer.
Financial Instruments
The Group’s principal financial instruments comprise cash balances and other payables and receivables that arise in the
normal course of business. The risks associated with these financial instruments are disclosed in note 24. The Group’s
financial risk management objectives and policies are set out in note 2.21 to the financial statements.
Research and Development
The Group continues to invest in research and development associated with the design and manufacture of MSAR®
proprietary emulsion fuel. Further information regarding the research and development activities of the group is
contained in the Chairman’s Statement on pages 6–10 of this report.
Directors’ Liabilities
Subject to the conditions set out in the Companies Act 2006, the Company has arranged appropriate Directors’ and
Officers’ liability insurance to indemnify the Directors against liability in respect of proceedings brought by third
parties. Such provisions remain in force at the date of this report.
Disclosure of Information to Auditors
So far as each person who was a Director at the date of approving this report is aware, there is no relevant audit
information, being information needed by the auditor in connection with preparing its report, of which the auditor is
unaware. Having made enquiries of fellow Directors, each Director has taken all the steps that he ought to have taken
as a Director in order to have made himself aware of any relevant audit information and to establish that the auditor
is aware of that information.
Re-appointment of Auditors
In accordance with Section 489 of the Companies Act 2006, a resolution to re-appoint Crowe Clark Whitehill LLP will be
proposed at the next Annual General Meeting.
20
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015 Board Committees
Information on the Audit Committee and Compensation Committee is included in the Corporate Governance section of
the Annual Report on pages 24–25.
Annual General Meeting
The Annual General Meeting will be held on Friday 2 December 2016 as stated in the Notice, which accompanies this
Annual Report.
By order of the Board.
Audrey Clarke
Company Secretary
11 October 2016
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
Statement of Directors’ Responsibilities
The Directors are responsible 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 financial statements in accordance with International Financial Reporting
Standards (“IFRSs”) as adopted by the EU and applicable law.
Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that
period. In preparing these financial statements, the Directors are required to:
n select suitable accounting policies and then apply them consistently
n make judgments and accounting estimates that are reasonable and prudent
n state whether applicable accounting standards have been followed, subject to any material departures disclosed
and explained in the financial statements
n prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company
will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible
for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
They are further responsible for ensuring that the Strategic Report and Report of the Directors and other information
included in the Annual Report and Financial Statements is prepared in accordance with applicable law in the United
Kingdom.
The maintenance and integrity of the Quadrise Fuels International plc website is the responsibility of the Directors; the
work carried out by the auditors does not involve the consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred in the accounts since they were initially presented on
the website.
Legislation in the United Kingdom governing the preparation and dissemination of the accounts and the other
information included in annual reports may differ from legislation in other jurisdictions.
Mike Kirk
Executive Chairman
11 October 2016
22
Report on Directors’ Remuneration
Key Management Remuneration
The Compensation Committee of the Board of Directors is responsible for determining and reviewing compensation
arrangements for all key management personnel, regarded as the executive Directors and Officers of the Group. The
Compensation Committee assesses the appropriateness of the nature and amount of emoluments of such officers on a
periodic basis and is guided by an approved remuneration policy and takes into account relevant employment market
conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality
Board and executive team. The Compensation Committee additionally links part of key management remuneration to
the Company’s financial and operational performance.
Details of the nature and amount of each element of the emoluments of each member of Key Management for the
year ended 30 June 2016 were as follows:
Short-Term
Employee
Benefits
£’000s
Post-
Employment
Benefits
£’000s
Other Long-
Term Benefits
£’000s
Termination
Benefits
£’000s
Other
Benefits
£’000s
Total
2016
£’000s
Total
2015
£’000s
167
64
171
240
32
72
32
-
778
28
4
13
14
-
-
-
-
59
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
195
68
184
254
32
72
32
-
837
185
-
139
227
32
85
20
-
688
Director
Ian Williams
Mike Kirk
Hemant Thanawala
Jason Miles
Ian Duckels
Laurie Mutch
Philip Snaith
Dilipkumar Shah
Total
Reconciliation of Share Options Granted to Directors
As at 1 July
Granted during the year by QFI
Resignation of director
Exercised during the year
Expired during the year
As at 30 June
30 June 2016
Number of Share Options
30 June 2015
Number of Share Options
29,850,000
5,000,000
(7,500,000)
-
(2,350,000)
25,000,000
30,600,000
-
-
(750,000)
-
29,850,000
No gains were realised on the exercise of share options by Directors during the year (2015: £36k).
The market price of the Company’s shares at the end of the reporting period was 11.63 (2015: 12.75p) and the range
during the year was 9.15p to 21.00p (2015: 10.75p to 42.5p) per share.
Ian Duckels
Chairman of the Compensation Committee
11 October 2016
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Corporate Governance Statement
As the Company is listed on the AIM Market of the London Stock Exchange, it is not required to comply with the
provisions of the UK Corporate Governance Code (the “Code”). However, the Board is committed to high standards of
corporate governance and seeks to apply best practice to the extent that it is appropriate for a company of Quadrise’s
size and complexity.
Board of Directors
The Board is responsible for the direction and overall performance of the Group with emphasis on policy and strategy,
financial results and major operational issues.
During the year, the Board comprised the executive Chairman, Finance Director and Chief Operating Officer as
executive Directors and four non-executive Directors (five during the period from 1 December 2015 to 31 March 2016)
who are independent of management.
At each Annual General Meeting, one third of the Directors who are subject to retirement by rotation shall retire from
office provided that if their number is more than three, but not a multiple thereof, then the number nearest to but not
exceeding one-third shall retire.
Appropriate Directors’ and Officers’ liability insurance has been arranged by the Company.
Meetings of the Board of Directors
The Board meets at least four times a year, after all relevant information has been circulated in good time, to discuss a
formal scheduled agenda covering key areas of the Group’s affairs including operational and financial performance and
quarterly management accounts.
All members of the Board are expected to attend Board Meetings, which are scheduled in advance, all directors
attended at least 75% of quarterly meetings held during the year.
Audit Committee
During the year, the Audit Committee comprised three non-executive Directors and was chaired by Laurence Mutch.
The chairman of the Committee provides a written or detailed verbal report as necessary of every Audit Committee
meeting at the next Board Meeting.
The Audit Committee, which meets at least twice a year, is responsible for keeping under review the scope and results
of the audit, its cost effectiveness and the independence and objectivity of the auditors. Due to the size of the
Company, there is currently no internal audit function, although the Audit Committee has oversight responsibility for
public reporting, overall good governance and the Company’s internal controls.
Other members of the Board, as well as the auditors, are invited to attend the Audit Committee meetings as and when
appropriate.
24
Compensation Committee
Ian Duckels chaired the Compensation Committee during the year and its other members are Laurence Mutch and
Philip Snaith. The chairman of the Committee provides a written or detailed verbal report as necessary of every
Compensation Committee meeting at the next Board Meeting.
The Compensation Committee, which meets at least twice a year, is responsible for considering the remuneration
packages for executive Directors and the bonus and share option strategy for the Group and making recommendations
as appropriate. The Compensation Committee works within the framework of a Compensation Policy approved by the
Board.
The Compensation Committee is also responsible for reviewing the performance of the executive Directors and
ensuring that they are fairly and responsibly rewarded for their individual contributions to the Group’s overall
performance. The Committee’s scope extends to all remuneration of Directors including bonus and share options.
None of the Committee members has any day-to-day responsibility for running the Company and no Director
participates in discussions about his own remuneration.
UK Bribery Act 2010
The Board has established a Bribery Policy, signed by all Directors, to achieve compliance with the UK Bribery Act
2010, which came into effect on 1st July 2011. A training programme is in place for all Directors, staff and contractors.
Agreements with third parties contain statements that the Company and its associates are required to adhere at all
times to the UK Bribery Act 2010.
Internal Control
The Board is responsible for the effectiveness of the Group’s internal control system and is supplied with information
to enable it to discharge its duties. 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 and can only provide reasonable
and not absolute assurance against material misstatement or loss.
Laurie Mutch
Chairman of the Audit Committee
11 October 2016
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
Independent Auditor’s Report
to the Shareholders of
Quadrise Fuels International plc
We have audited the financial statements of Quadrise Fuels International plc for the year ended 30 June 2016 which
comprise of the Group and Parent Company Statements of Financial Position, the Group Statement of Comprehensive
Income, the Group and Parent Company Statement of Cash Flows, the Group and Parent Company Statement of
Changes in Equity and the related notes.
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.
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.
Respective Responsibilities of Directors and Auditors
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and
express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the Audit of the Financial Statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting policies are appropriate to the company’s circumstances
and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates
made by the directors; and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial information in the Chairman’s Statement, Financial Review,
Strategic Report, Directors’ Report and any other surround information to identify material inconsistencies with the
audited financial statements and to identify any information that is apparently materially incorrect based on, or
materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware
of any apparent material misstatements or inconsistencies we consider the implications for our report
Opinion on Financial Statements
In our opinion:
n the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs
as at 30 June 2016 and of the group’s loss for the year then ended;
n the group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
n the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union as applied in accordance with the provisions of the Companies Act 2006; and
26
n the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on Other Matters Prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which
the financial statements are prepared is consistent with the financial statements.
Matters on Which we are Required to Report by Exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to
you if, in our opinion:
n 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
n the parent company financial statements are not in agreement with the accounting records and returns; or
n certain disclosures of directors’ remuneration specified by law are not made; or
n we have not received all the information and explanations we require for our audit.
Leo Malkin
Senior Statutory Auditor
For and on behalf of
Crowe Clark Whitehill LLP
Statutory Auditor
St Bride’s House
10 Salisbury Square
London EC4Y 8EH
11 October 2016
Note:
The maintenance and integrity of the Quadrise Fuels International plc website is the responsibility of the directors. The work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements
since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
27
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
Consolidated Statement
of Comprehensive Income
For the year ended 30 June 2016
Continuing operations
Revenue
Other income
Production and development costs
Adjustment to available for sale investments
Other administration expenses
Share option charge
Foreign exchange loss
Operating loss
Finance costs
Finance income
Loss before tax
Taxation
Loss for the year from continuing operations
Other Comprehensive Income
Adjustment to available for sale investments – will be recycled
subsequently to profit and loss.
Other comprehensive loss for the year net of tax
Total comprehensive loss for the year
Loss for the year attributable to:
Owners of the Company
Non-controlling interest
Total comprehensive loss attributable to:
Owners of the Company
Non-controlling interest
Loss per share – pence
Basic
Diluted
28
Year ended
30 June 2016
£’000
Year ended
30 June 2015
£’000
Notes
5
15
20
6
9
10
11
15
2
-
(2,156)
-
(1,965)
(802)
(18)
(4,939)
(8)
41
(4,906)
149
66
39
(1,268)
(404)
(1,540)
(1,914)
(3)
(5,024)
(7)
56
(4,975)
72
(4,757) (4,903)
-
-
(1,035)
(1,035)
(4,757) (5,938)
(4,757)
-
(4,757)
-
12
12
(0.59)p
(0.59)p
(4,898)
(5)
(5,933)
(5)
(0.61)p
(0.61)p
Consolidated Statement of Financial Position
As at 30 June 2016
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Non-current assets
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables
CURRENT LIABILITIES
Equity attributable to equity holders of the parent
Issued share capital
Share premium
Share option reserve
Reverse acquisition reserve
Accumulated losses
Total shareholders’ equity
TOTAL EQUITY AND LIABILITIES
As at
30 June 2016
£’000
As at
30 June 2015
£’000
Notes
13
14
17
18
19
21
22
22
1,156
2,924
4,080
4,268
297
120
4,685
8,765
576
576
8,096
69,216
4,704
522
(74,349)
8,189
8,765
710
2,924
3,634
8,361
333
238
8,932
12,566
422
422
8,096
69,216
4,210
522
(69,900)
12,144
12,566
The financial statements, accompanying policies and notes 1 to 30 (forming an integral part of these financial
statements), were approved and authorised for issue by the Board on 11 October 2016 and were signed on its behalf by:
M. Kirk
Chairman
H. Thanawala
Finance Director
29
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Consolidated Statement of Changes in Equity
For the year ended 30 June 2016
Attributable to owners of the parent
Issued
Capital
£’000s
Share
Premium
£’000s
Revaluation
Reserve
£’000s
Share
Option
Reserve
£’000s
Reverse
Acquisition
Reserve
£’000s
Accumulated
Losses
£’000s
Total
£’000s
Non-
Controlling
Interest
£’000s
Total
Equity
£’000s
1 July 2014
8,072
68,633
1,035
3,045
522
(65,126)
16,181
(120)
16,061
Loss for the year
Fair value adjustments
Total comprehensive
loss for the year
Share option charge
Exercise of share
options
Transfer of balances
relating to expired
share options
-
-
-
-
8
-
-
-
-
-
99
-
Acquisition of Minority
Interest
16
484
30 June 2015
8,096
69,216
1 July 2015
8,096
69,216
Loss and total
comprehensive loss for
the year
Share option charge
Transfer of balances
relating to expired
share options
-
-
-
-
-
-
30 June 2016
8,096
69,216
-
(1,035)
(1,035)
-
-
-
-
-
-
-
-
-
-
-
-
-
1,914
(43)
(706)
-
4,210
4,210
-
802
(308)
4,704
-
-
-
-
-
-
-
522
522
-
-
-
(4,898)
(4,898)
-
(1,035)
(5)
-
(4,903)
(1,035)
(4,898)
(5,933)
(5)
(5,938)
-
1,914
43
107
706
-
-
-
-
(625)
(125)
125
1,914
107
-
-
12,144
12,144
(4,757)
802
-
8,189
-
-
-
-
-
-
(69,900)
12,144
(69,900)
12,144
(4,757)
(4,757)
-
802
308
-
522
(74,349)
8,189
For an explanation of the nature and purpose of other reserves refer to note 22.
30
Consolidated Statement of Cash Flows
For the year ended 30 June 2016
Operating activities
Loss before tax from continuing operations
Depreciation
Loss on disposal of fixed assets
Finance costs
Finance income
Adjustment to available for sale investments
Share option charge
Working capital adjustments
Decrease/(increase) in trade and other receivables
Decrease/(increase) in prepayments
Increase in trade and other payables
Cash utilised in operations
Finance costs
Taxation received
Net cash outflow from operating activities
Investing activities
Finance income
Purchase of property, plant and equipment
Net cash outflow from investing activities
Financing Activities
Exercise of share options
Net cash inflow from financing activities
Notes
13
13
9
10
15
20
18
19
9
11
10
13
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
17
Year ended
30 June 2016
£’000
Year ended
30 June 2015
£’000
(4,906)
(4,975)
148
2
8
(41)
-
802
36
118
154
(3,679)
(8)
149
(3,538)
41
(596)
(555)
-
-
(4,093)
8,361
4,268
108
14
7
(56)
404
1,914
(163)
(162)
181
(2,728)
(7)
72
(2,663)
56
(220)
(164)
107
107
(2,720)
11,081
8,361
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Company Statement of Financial Position
As at 30 June 2016
ASSETS
Non-current assets
Property, plant and equipment
Investments in subsidiaries
Non-current assets
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables
Current liabilities
Equity attributable to equity holders of the parent
Issued capital
Share premium
Share option reserve
Accumulated losses
Total shareholders’ equity
TOTAL EQUITY AND LIABILITIES
As at
30 June 2016
£’000s
As at
30 June 2015
£’000s
Notes
13
16
17
18
19
21
22
117
22,390
22,507
3,948
168
84
4,200
26,707
128
128
8,096
69,216
4,704
(55,437)
26,579
26,707
158
18,845
19,003
7,875
142
63
8,080
27,083
268
268
8,096
69,216
4,210
(54,707)
26,815
27,083
The financial statements, accompanying policies and notes 1 to 30 (forming an integral part of these financial
statements), were approved and authorised for issue by the Board on 11 October 2016 and were signed on its behalf by:
M. Kirk
Chairman
H. Thanawala
Finance Director
32
Company Statement of Changes in Equity
For the year ended 30 June 2016
Issued
Capital
£’000s
Share
Premium
£’000s
Revaluation
Reserve
£’000s
Share Option
Reserve
£’000s
Accumulated
Losses
£’000s
1 July 2014
Loss for the year
Fair value adjustments
Total comprehensive loss for the year
Share option charge
Exercise of share options
Transfer of balances relating to
expired share options
New shares issued net of issue costs
30 June 2015
1 July 2015
Loss and total comprehensive loss
for the year
Share option charge
Transfer of balances relating to
expired share options
8,072
68,633
-
-
-
-
8
-
16
-
-
-
-
99
-
484
8,096
8,096
69,216
69,216
-
-
-
-
-
-
30 June 2016
8,096
69,216
1,035
-
(1,035)
(1,035)
-
-
-
-
-
-
-
-
-
-
3,045
-
-
-
1,914
(43)
(706)
-
4,210
4,210
-
802
(308)
4,704
(53,187)
(2,269)
-
(2,269)
-
43
706
-
(54,707)
(54,707)
(1,038)
-
Total
£’000s
27,598
(2,269)
(1,035)
(3,304)
1,914
107
-
500
26,815
26,815
(1,038)
802
308
-
(55,437)
26,579
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Company Statement of Cash Flows
For the year ended 30 June 2016
Year ended
30 June 2016
£’000s
Year ended
30 June 2015
£’000s
(1,038)
(2,269)
45
2
(243)
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802
(26)
(21)
(140)
(619)
(2)
(621)
243
(4)
(3,545)
(3,306)
-
-
(3,927)
7,875
3,948
36
2
(365)
404
1,914
(26)
(8)
150
(162)
(2)
(164)
365
(75)
(2,912)
(2,622)
107
107
(2,679)
10,554
7,875
Operating activities
Loss before tax from continuing operations
Depreciation
Finance costs
Finance income
Adjustment to available for sale investments
Share option charge
Working capital adjustments
Increase in trade and other receivables
Increase in prepayments
(Decrease)/increase in trade and other payables
Cash utilised in operations
Finance costs
Net cash outflow from operating activities
Investing activities
Finance income
Purchase of property, plant and equipment
Loan to subsidiary
Net cash outflow from investing activities
Financing Activities
Exercise of share options
Net cash inflow from financing activities
Notes
13
9
10
15
20
18
19
10
13
16
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
17
34
Notes to the Financial Statements
1. General Information
Quadrise Fuels International plc (“QFI”, “Quadrise”, “Company”) and its subsidiaries (together “the Group”) are engaged
principally in the manufacture and marketing of emulsion fuel for use in power generation, industrial and marine diesel
engines and steam generation applications. The Company’s ordinary shares are listed on the AIM market of the London
Stock Exchange.
QFI was incorporated on 22 October 2004 as a limited company under UK Company Law with registered number
05267512. It is domiciled at, and is registered at, Gillingham House, 38-44 Gillingham Street, London, SW1V 1HU.
2. Summary of Significant Accounting Policies
The Board has reviewed the accounting policies set out below and considers them to be the most appropriate to the
Group’s business activities.
2.1. Basis of Preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS’s”)
as adopted by the European Union, and effective, or issued and early adopted, as at the date of these statements. The
financial statements have been prepared under the historical cost convention as modified for financial assets carried
at fair value.
At the date of authorisation of these financial statements, a number of Standards and Interpretations were in issue
but not yet effective. The directors do not anticipate that the adoption of these standards and interpretations, or any
of the amendments made to existing standards as a result of the annual improvements cycle, will have a material
effect on the financial statements in the year of initial application, except for the requirement of IFRS 16 to capitalise
long term operating leases.
The preparation of financial statements in conformity with IFRS accounting principles requires the use of estimates
and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and
the reported amounts of expenses during the reporting period. Although these estimates are based on management’s
best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.
2.2. Basis of Consolidation
The consolidated financial statements incorporate the financial statements of entities controlled by the Group as at 30
June 2016.
All inter-company balances, transactions, income and expenses and profits and losses resulting from intra-group
transactions are eliminated on consolidation. Subsidiaries are fully consolidated from the date of acquisition, being
the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.
Accounting policies of subsidiaries are consistent with those adopted by the Group.
Control is defined as when QFI, or a company which it controls, is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee. Thus
QFI demonstrates control when it has all the following:
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2016
n power over the investee;
n exposure, or rights, to variable returns from its involvement with the investee; and
n the ability to use its power over the investee to affect the amount of the investor’s returns.
Non-controlling interests at the balance sheet date, being the portion of the net assets of subsidiaries attributable to
equity interests that are not owned by the Group, whether directly or indirectly through subsidiaries, are presented
in the Consolidated Statement of Financial Position and Statement of Changes in Equity within equity, separately
from equity attributable to the equity holders of the Group. Non-controlling interests in the results of the Group are
presented on the face of the Consolidated Statement of Comprehensive Income as an allocation of the total profit or
loss for the year between non-controlling interests and the equity holders of the Group.
2.3. Changes in Accounting Principles and Adoption of New and Revised Standards
The accounting policies adopted are consistent with those of the previous financial year. There have been no new or
revised standards or interpretations during the year which have had an impact on the financial information of the Group.
2.4. Significant Accounting Estimates and Assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the statement of
financial position date that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities in the next financial period are discussed below:
n Intangible Assets – The Group tests intangible assets annually for impairment or more frequently if there are
indications that they might be impaired. This requires an estimation of the value in use of the intangible asset.
Estimating the value in use requires management to make an estimate of the expected future cash flows from
the intangible assets and also to choose a suitable discount rate in order to calculate the present value of those
cash flows. The carrying value of intangible assets at 30 June 2016 is determined to be £2.9m (2015: £2.9m). Further
details are given in Note 14.
n Available for Sale Investments – The Group reviews the fair value of its unquoted equity instruments at
each statement of financial position date. This requires management to make an estimate of the fair value of
the unquoted securities in the absence of an active market. Uncertainty also exists due to the early stage of
development of certain of the investments. The fair value of available for sale investments at 30 June 2016 is
determined to be £nil (2015: £nil). Further details are given in Note 15.
2.5. Revenue Recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the
revenues can be reliably measured. Revenue is recognised at the fair value of the consideration received, excluding
discounts, rebates, and other sales taxes or duty. The following recognition criteria must also be met before revenue is
recognised:
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2016
Sale of Goods
Revenue for the sale of goods is recognised when the significant risks and rewards of ownership of the goods have
passed to the buyer.
Interest Income
Revenue is recognised as interest accrues.
Dividends
Revenue is recognised when the Group’s right to receive the payment is established.
2.6. Foreign Currencies
The Group financial statements are presented in sterling, which is the Company’s functional and presentation currency.
Each entity in the Group uses Sterling as its own functional currency and items included in the financial statements
of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded
using the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies are re-translated at the functional currency rate of exchange ruling at the statement of financial
position date. Any resulting exchange differences are included in the statement of comprehensive income. Non-
monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when
the fair value was determined.
The following exchange rates are used in the Group’s major currencies:
ISO Code
EUR
Statement of Financial Position
(closing rate at 30 June 2016)
Statement of Comprehensive Income
(average rate throughout the financial year)
1.206
1.337
Europe
2.7. Finance Costs
Finance costs include interest charges and other costs incurred in connection with the borrowing of funds and are
expensed as incurred. Interest and costs are accounted for on the accruals basis and are recognised through the
statement of comprehensive income in full. No interest or borrowing costs have been capitalised.
2.8. Business Combinations
Acquisition of subsidiaries is accounted for using the purchase method. The results of businesses acquired are
consolidated from the effective date of acquisition, whereby upon acquisition of a business or an associate, net assets
are stated at fair value.
On 18 April 2006, Zareba plc (renamed Quadrise Fuels International plc) became the legal parent of Quadrise
International Limited in a share-for-share transaction. Due to the relative size of the companies, the shareholders of
Quadrise International Limited became the majority shareholders of Quadrise Fuels International plc. Accordingly, the
substance of the combination was that Quadrise International Limited acquired Quadrise Fuels International plc and
was therefore accounted for as a reverse acquisition under IFRS 3.
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2.9. Intangible Assets
Intangible assets acquired separately are measured initially at cost. The costs of intangible assets acquired in a business
combination are measured at the fair value as at the date of acquisition. Following initial recognition, intangible assets
are carried at cost less any accumulated amortisation and accumulated impairment loss.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever
there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method
for an intangible asset with a finite useful life are reviewed at each financial year-end. Changes in the expected useful
life or the expected pattern of consumption of future economic benefits embodied in the assets are accounted for
by changing the amortisation period or method, as appropriate, and treated as a change in accounting estimate. The
intangible assets of finite life are amortised over 93 months. The amortisation expense on intangible assets with finite
lives is recognised in the statement of comprehensive income in the expenses category consistent with the function of
the intangible asset.
Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-
generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is
reviewed annually to determine whether indefinite life assessment continues to be supportable and, if not, the change
in the useful life assessment from indefinite to finite is made on a prospective basis.
Research expenditure is recognised as an expense when it is incurred.
Development expenditure is recognised as an expense except that costs incurred on development projects are
capitalised as long-term assets to the extent that such expenditure is expected to generate future economic benefits.
2.10. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using a
straight line method with an allowance for estimated residual values. Rates are determined based on the estimated
useful lives of the assets as follows:
Plant and equipment
3 to 15 years
Additions to property, plant and equipment are comprised of the cost of the contracted services, direct labour and
materials. Depreciation commences in the month the asset is placed in service.
2.11. Financial Instruments
Financial assets and liabilities are recognised in the Group’s statement of financial position when the Group becomes
a party to the contractual provisions of the instrument. The Group currently does not use derivative financial
instruments to manage or hedge financial exposures or liabilities.
2.12. Investments and other Financial Assets
Financial assets are classified as either financial assets at fair value through profit and loss, loans and receivables, held
to maturity investments or available for sale financial assets, as appropriate. When financial assets are recognised
initially, they are at fair value. The Group determines the classification of its financial assets at initial recognition and,
where allowed and appropriate, re-evaluates this designation at each financial year-end.
38
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015 Investments in Subsidiaries
Investments in subsidiaries are carried at cost less impairment. The Company tests investments annually for
impairment, or more frequently if there are indications that they might be impaired. Impairment is based on the value
in use of the subsidiaries.
Available-for-Sale Investments
Available-for-sale investments are those non-derivative financial assets that are designated as available for sale or
are not classified as loans and receivables, held to maturity investments or financial assets at fair value through profit
and loss. After initial recognition, available for sale financial assets are measured at fair value with gains or losses
being recognised as a separate component of equity until the investment is derecognised or until the investment is
determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in the
statement of comprehensive income.
The fair value of investments that are actively traded in organised financial markets is determined by reference to
quoted market bid prices at the closure of business on the statement of financial position date. For investments where
there is no active market, fair value is determined using valuation techniques. Such techniques include using recent
arm’s length market transactions, reference to the current market value, discounted cash flow analysis and option
pricing models.
2.13. Impairment
At each statement of financial position date, reviews are carried out on the carrying amounts of tangible and
intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any,
of the impairment loss. Where the asset does not generate cash flows that are independent from the other assets,
estimates are made of the cash-generating unit to which the asset belongs. Intangible assets with an indefinite useful
life are tested for impairment at least annually and whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value, less costs to sell, and value in use. In assessing value in use,
estimated future cash flows are discounted to their present value using a discount rate appropriate to the specific
asset or cash-generating unit. If the recoverable amount of an asset or cash-generating unit is estimated to be less
than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable
amount. Impairment losses are recognised immediately in the statement of comprehensive income.
2.14. Cash and Cash Equivalents
For the purposes of the statement of cash flows, cash and cash equivalents comprise cash-in-hand bank balances, call
money and unrestricted time deposit balances with a maturity of 90 days or less.
2.15. Trade and Other Receivables and Payables
Trade and other receivables and trade and other payables are initially recognised at fair value. Fair value is considered
to be the original invoice amount, discounted where material, for short-term receivables and payables. Long term
receivables and payables are measured at amortised cost using the effective interest rate method. Where receivables
are denominated in a foreign currency, retranslation is made in accordance with the foreign currency accounting policy
previously stated.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
2.16. Derecognition and Impairment of Financial Assets and Liabilities
Financial Assets
A financial asset is derecognised where:
n the right to receive cash flows from the asset has expired;
n the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full
without material delay to a third party under a pass-through arrangement; or
n the Group has transferred the rights to receive cash flows from the asset, and
l either has transferred substantially all the risks and rewards of the asset, or
l
has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.
Financial Liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of
the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is
recognised in the statement of comprehensive income.
2.17. Taxation
Current Tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the tax authorities. The tax rates and the tax laws used to compute the amount are those
that are enacted or substantively enacted by the statement of financial position date.
Deferred Tax
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the financial statements, with the following exceptions:
n where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither accounting nor
taxable profit or loss;
n in respect of taxable temporary differences associated with investment in subsidiaries, associates and joint
ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that
the temporary differences will not reverse in the foreseeable future and
n deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected
to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively
enacted at the statement of financial position date.
The carrying amount of deferred income tax assets is reviewed at each statement of financial position date. Deferred
income tax assets and liabilities are offset, only if a legal enforcement right exists to set off current tax assets against
current tax liabilities, the deferred income taxes related to the same taxation authority and that authority permits the
Group to make a single net payment.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity.
Otherwise income tax is recognised in the statement of comprehensive income.
2.18. Employee Benefits
The Group maintains various defined contribution plans for providing employee benefits, which conform to laws and
practices in the countries concerned. Retirement benefit plans are generally funded by contributions from both the
employees and the Companies to independent entities (multi-employer plan) that operate the retirement benefit
schemes. Current service cost for defined contribution plans is equivalent to the employer’s contributions due for
that period. The Group’s contributions to the defined contribution pension plans are charged to the statement of
comprehensive income in the year to which they relate.
2.19. Share-based Payments
Employees (including Directors and senior executives) of the Group receive remuneration in the form of share-based
payment transactions, whereby these individuals render services as consideration for equity instruments (“equity-
settled transactions”). These individuals are granted share option rights approved by the Board, which can only be
settled in shares of the respective companies that award the equity-settled transactions. Share options rights are also
granted to these individuals by a major shareholder over their shares held. No cash settled awards have been made or
are planned.
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
individuals become fully entitled to the award (“vesting point”). 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 and value that will ultimately vest. The statement
of comprehensive income charge for the year represents the movement in the cumulative expense recognised as at
the beginning and end of that period.
The fair value of share-based remuneration is determined at the date of grant and recognised as an expense in the
statement of comprehensive income on a straight-line basis over the vesting period, taking account of the estimated
number of shares that will vest. The fair value is determined by use of a Black Scholes model.
2.20. Separately Disclosable Items
Items that are material in size and unusual and infrequent in nature are presented as separately disclosable items
in the statement of comprehensive income or separately disclosed in the notes to the financial statements. The
Directors are of the opinion that the separate recording of these items provides helpful information about the Group’s
underlying business performance.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
2.21. Financial Risk Management, Recognition and Accounting
The Group’s multi-national operations expose it to a variety of financial risks that include the effects of changes in
foreign currency exchange rates, credit risks, equity securities prices, liquidity and interest rates. The Group has in place
a risk management programme that seeks to limit the adverse effects on the financial performance of the Group. The
Board has approved the risk management policies applied by the Group.
These policies are implemented by central finance that prepares regular reports to enable prompt identification of
financial risks so that appropriate actions may be taken. The Group has a policy and procedures manual that sets out
specific guidelines to manage foreign exchange risk, interest rate risk, credit risk and the use of financial instruments to
manage these. No forward hedging activities are undertaken.
2.22. Financial Risk Management Objectives and Policies
The QFI business model relies on bespoke contracts that do not contain any derivative financial instruments. The
Group does not enter into any forward exchange rate contracts.
The main financial risks arising from the Group’s activities are cash flow interest rate risk, liquidity risk, foreign currency
risk, price risk (fair value) and credit risk. The Board reviews and agrees policies for managing each of these risks and
they are summarised as:
n Cash Flow Interest Rate Risk – the Group’s exposure to the risk of changes in market interest rates relates
primarily to the Group’s deposit accounts with major banking institutions. The Group’s policy is to manage its
interest income using a mixture of fixed and floating rate deposit accounts.
n Liquidity Risk – the Group raises funds as required on the basis of budgeted expenditure and inflows. When
funds are sought, the Group balances the costs and benefits of equity and debt financing. When funds are received
they are deposited with banks of high standing in order to obtain market interest rates.
n Foreign Currency Risk – the Group’s significant operations are in the UK, however movements in exchange
rates can affect its financial results. Currently this risk to the financial position of the Group is not considered to be
significant to warrant hedging or other risk management solutions.
n Price Risk – the carrying amount of the following financial assets and liabilities approximate to their fair value due
to their short term nature: cash accounts, accounts receivable and accounts payable. Available for sale investments
are valued at fair value based on recent shareholder transactions or the underlying net asset base. The Group
monitors market conditions regularly and considers the market conditions when buying or selling investments.
n Credit Risk – with respect to credit risk arising from other financial assets of the Group, which comprise cash and
time deposits and accounts receivable, the Group’s exposure to credit risk arises from default of the counterparty,
with a minimum exposure equal to the carrying amount of these instruments. The credit risk on cash is limited as
cash is placed with substantial financial institutions.
2.23. Events After the End of the Reporting Period
Post year-end events that provide additional information about the Group’s position at the statement of financial
position date and are adjusting events are reflected in the financial statements. Post year-end events that are not
adjusting events are disclosed in the notes when material.
42
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015 2.24. Segment Reporting
An operating segment is a component of the Group that engages in business activities from which it may earn
revenues and incur expenses. All operating segments’ operating results are reviewed regularly by the chief operating
decision maker, which is the Board, to make decisions about resources to be allocated to the segment and to assess its
performance, and for which discrete financial information is available.
Segment results that are reported to the Board include items directly attributable to a segment as well as those that
can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets and head office expenses.
2.25. Leasing Commitments
Office rental charges payable under operating leases are charged to the Statement of Comprehensive Income as part
of administration expenses over the lease term.
3. Going Concern
The Group’s business activities and financial position, together with the factors likely to affect its future development,
performance and position are set out in the Chairman’s Statement.
The Group had £4.3m in treasury as at 30 June 2016. The Directors have carried out a detailed assessment of going
concern as part of the financial reporting process, and having conducted a full review of the updated business
plan, budgets and associated commitments at the year end, have concluded that the Group has adequate financial
resources to continue in operational existence for at least the forthcoming year and therefore continue to adopt the
going concern basis in preparing the accounts.
4. Segmental Information
For the purpose of segmental information the reportable operating segment is determined to be the business
segment. The Group principally has one business segment, the results of which are regularly reviewed by the Board.
This business segment is a business to produce emulsion fuel (or supply the associated technology to third parties)
as a low cost substitute for conventional heavy fuel oil (“HFO”) for use in power generation plants and industrial and
marine diesel engines.
Geographical Segments
The Group’s only geographical segment during the year was the UK.
5. Other Income
Other income includes:
Recoverable costs recharged to related parties
Total
Year ended
30 June 2016
£’000s
Year ended
30 June 2015
£’000s
-
-
39
39
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
Year ended
30 June 2016
£’000s
Year ended
30 June 2015
£’000s
19
19
20
282
148
18
18
11
238
108
Year ended
30 June 2016
Number
Year ended
30 June 2015
Number
3
9
2
6
Year ended
30 June 2016
£’000s
Year ended
30 June 2015
£’000
1,516
185
111
1,812
809
83
75
967
6. Operating Loss
Operating loss is stated after charging:
Fees payable to the Company’s auditor for the audit of the
Company’s annual accounts.
Fees payable to the Company’s auditor and its associates for other services:
Audit of accounts of subsidiaries
Tax compliance services
Consultants and other professional fees (including legal)
Depreciation of property, plant and equipment
7. Staff Cost
Head count
Average number of employees of the Group (including executive Directors employed
by the Company) during the year was:
Management
Technical staff / support / other
Staff costs
Wages and salaries
Social security costs
Pension costs
Total
44
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015 Included in total staff costs are the costs of the Executive Directors as employed by the Company as follows:
Director
Ian Williams
Wages and salaries
Pension costs
Mike Kirk
Wages and salaries
Pension costs
Hemant Thanawala
Wages and salaries
Pension costs
Jason Miles
Wages and salaries
Pension costs
Total
Aggregate emoluments of the Directors of the Company were as follows
Share option expense
Salaries and fees
Pension costs
Total
Year ended
30 June 2016
£’000s
Year ended
30 June 2015
£’000s
167
28
195
44
4
48
171
13
184
240
14
254
681
612
786
59
1,457
154
31
185
-
-
-
129
10
139
154
11
165
489
1,713
645
52
2,410
Non-executive Directors fees for the year amounted to £109k (2015: £103k). Consulting fees paid to non-executive
Directors for the year amounted to £48k (2015: £103k).
The highest paid Director’s remuneration totalled £254k (2015: £263k), represented by all aggregate emoluments.
Refer to the Report of Directors’ Remuneration (on page 23) for further details, the Key Management Personnel referred
to therein are the Directors of the Company.
Further details regarding Non-executive Directors’ remuneration are disclosed in note 25 – Related Party Transactions.
45
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
8. Losses Attributable to Quadrise Fuels International plc
The loss for the year dealt with in the accounts of Quadrise Fuels International plc was £1.0m (2015: £2.3m). As provided
by s.408 of the Companies Act 2006, no statement of comprehensive income is presented in respect of Quadrise Fuels
International plc.
9. Finance Costs
Bank charges
Total
10. Finance Income
Year ended
30 June 2016
£’000s
Year ended
30 June 2015
£’000s
8
8
7
7
All finance income recognised during the current and prior year has arisen from interest on bank deposits and loans.
11. Taxation
UK corporation tax credit
Total
No liability in respect of corporation tax arises as a result of trading losses.
Tax Reconciliation
Loss on continuing operations before taxation
Loss on continuing operations before taxation multiplied by
the UK corporation tax rate of 20% (2015: 20.75%)
Effects of:
Non-deductible expenditure
R&D tax credit
Tax losses carried forward
Total taxation credit on loss from continuing operations
Year ended
30 June 2016
£’000s
(149)
(149)
Year ended
30 June 2016
£’000s
(4,906)
(981)
169
(149)
812
(149)
Year ended
30 June 2015
£’000s
(72)
(72)
Year ended
30 June 2015
£’000s
(4,975)
(1,032)
500
(72)
533
(72)
The Group has tax losses arising in the UK of approximately £41.1m (2015: £40.7m) that are available, under current
legislation, to be carried forward against future profits. £11.7m (2015: £11.2m) of the tax losses carried forward represent
trading losses within Quadrise Fuels International plc, £25.8m (2015: £25.8m) represent non-trade deficits arising on
intangible assets within Quadrise International Limited, £1.6m (2015: £1.7m) represent pre-trading losses incurred by
subsidiaries, £1.9m (2015: £1.9m) represent management expenses incurred by Quadrise International Limited, and £0.1m
(2015: £0.1m) represent capital losses within Quadrise Fuels International plc.
46
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
A deferred tax asset representing these losses and other timing differences at the statement of financial position date of
approximately £8.2m (2015: £8.1m) has not been recognised as a result of existing uncertainties in relation to its realisation.
12. Loss Per Share
The calculation of loss per share is based on the following loss and number of shares:
Loss for the year (£’000s)
Weighted average number of shares:
Basic
Diluted
Loss per share:
Basic
Diluted
Year ended
30 June 2016
(4,757)
Year ended
30 June 2015
(4,898)
809,585,162
809,585,162
808,656,176
808,656,176
(0.59)p
(0.59)p
(0.61)p
(0.61)p
Basic loss per share is calculated by dividing the loss for the year from continuing operations of the Group by the
weighted average number of ordinary shares in issue during the year.
For diluted loss per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
potential dilutive options over ordinary shares. Potential ordinary shares resulting from the exercise of share options have
an anti-dilutive effect due to the Group being in a loss position. As a result, diluted loss per share is disclosed as the same
value as basic loss per share. The 26.3m dilutive share options issued by the Company and which are outstanding at year-
end could potentially dilute earnings per share in the future if exercised when the Group is in a profit making position.
13. Property, plant and equipment
Consolidated
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
Software
£’000s
Office
Equipment
£’000s
Plant and
Machinery
£’000s
Total
£’000s
Cost
Opening balance – 1 July 2015
Additions
Disposals
Closing balance – 30 June 2016
Depreciation
Opening balance – 1 July 2015
Depreciation charge for the year
Disposals
Closing balance – 30 June 2016
Net book value at 30 June 2016
99
-
-
99
(26)
(20)
-
(46)
53
70
19
-
89
(14)
(16)
-
(30)
59
43
-
-
43
(15)
(9)
-
(24)
19
16
-
-
16
(9)
(3)
-
(12)
4
682
577
(8)
1,251
(136)
(100)
6
(230)
910
596
(8)
1,498
(200)
(148)
6
(342)
1,021
1,156
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
Company
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
Software
£’000s
Office
Equipment
£’000s
Plant and
Machinery
£’000s
Total
£’000s
Cost
Opening balance – 1 July 2015
Additions
Disposals
Closing balance – 30 June 2016
Depreciation
Opening balance – 1 July 2015
Depreciation charge for the year
Disposals
Closing balance – 30 June 2016
Net book value at 30 June 2016
Property, plant and equipment
99
-
-
99
(26)
(20)
-
(46)
53
64
4
-
68
(14)
(14)
-
(28)
40
44
-
-
44
(16)
(8)
-
(24)
20
16
-
-
16
(9)
(3)
-
(12)
4
-
-
-
-
-
-
-
-
223
4
-
227
(65)
(45)
-
(110)
117
Consolidated
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
Software
£’000s
Office
Equipment
£’000s
Plant and
Machinery
£’000s
Total
£’000s
94
5
-
99
(6)
(20)
-
(26)
73
21
49
-
70
(7)
(7)
-
(14)
56
17
26
-
43
(9)
(6)
-
(15)
28
16
-
-
16
(6)
(3)
-
(9)
7
559
140
(17)
682
(67)
(72)
3
(136)
546
707
220
(17)
910
(95)
(108)
3
(200)
710
Cost
Opening balance – 1 July 2014
Additions
Disposals
Closing balance – 30 June 2015
Depreciation
Opening balance – 1 July 2014
Depreciation charge for the year
Disposals
Closing balance – 30 June 2015
Net book value at 30 June 2015
48
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
Company
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
Software
£’000s
Office
Equipment
£’000s
Plant and
Machinery
£’000s
Total
£’000s
Cost
Opening balance – 1 July 2014
Additions
Disposals
Closing balance – 30 June 2015
Depreciation
Opening balance – 1 July 2014
Depreciation charge for the year
Disposals
Closing balance – 30 June 2015
Net book value at 30 June 2015
14. Intangible Assets
Consolidated
Cost
Opening balance – 1 July 2015
Additions
Closing balance – 30 June 2016
Amortisation and Impairment
Opening balance – 1 July 2015
Amortisation
Closing balance – 30 June 2016
94
5
-
99
(6)
(20)
-
(26)
73
20
44
-
64
(7)
(7)
-
(14)
50
18
26
-
44
(10)
(6)
-
(16)
28
16
-
-
16
(6)
(3)
-
(9)
7
-
-
-
-
-
-
-
-
QCC Royalty
Payments
£’000s
MSAR®
Trade Name
£’000s
Technology
and Know-How
£’000s
7,686
-
7,686
(7,686)
-
(7,686)
3,100
-
3,100
(176)
-
(176)
25,901
-
25,901
(25,901)
-
(25,901)
148
75
-
223
(29)
(36)
-
(65)
158
Total
£’000s
36,687
-
36,687
(33,763)
-
(33,763)
Net book value at 30 June 2016
-
2,924
-
2,924
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
Consolidated
Cost
Opening balance – 1 July 2014
Additions
Closing balance – 30 June 2015
Amortisation and Impairment
Opening balance – 1 July 2014
Amortisation
Closing balance – 30 June 2015
Net book value at 30 June 2015
QCC Royalty
Payments
£’000s
MSAR®
Trade Name
£’000s
Technology
and Know-How
£’000s
7,686
-
7,686
(7,686)
-
(7,686)
-
3,100
-
3,100
(176)
-
(176)
2,924
Total
£’000s
36,687
-
36,687
(33,763)
-
(33,763)
25,901
-
25,901
(25,901)
-
(25,901)
-
2,924
Intangible assets comprise intellectual property with a cost of £36.7m, including assets of finite and indefinite life.
QCC’s royalty payments of £7.7m and the MSAR® trade name of £3.1m are termed as assets having indefinite life as it
is assessed that there is no foreseeable limit to the period over which the assets would be expected to generate net
cash inflows for the Group, as they arise from cashflows resulting from Quadrise and QCC gaining a permanent market
share. The assets with indefinite life are not amortised. The remaining intangibles amounting to £25.9m, primarily
made up of technology and know-how, are considered as finite assets and were amortised over 93 months. The Group
does not have any internally generated intangibles.
The Group tests intangible assets annually for impairment, or more frequently if there are indications that they might
be impaired. The recoverable amount of intangible assets is determined based on a value in use calculation using cash
flow forecasts derived from the most recent financial model information available. These cash flow forecasts extend
to the year 2032 to ensure the full benefit of all current projects is realised. The rationale for using a timescale up to
2032 with the growth projections forecast, is that as time progresses, Quadrise expects to gain an increasing foothold
in the existing HFO market (~ 450m tonnes p.a.) which is already well established. The key assumptions used in
these calculations include discount rates, turnover projections, growth rates, joint venture participation expectations,
expected gross margins and the lifespan of the project. Management estimates the discount rates using pre-tax rates
that reflect current market assessments of the time value of money and risks specific to expected future projects.
Turnover projections, growth rates, margins and project lifespans are all estimated based on the latest business models
and the most recent discussions with customers, suppliers and other business partners.
For the MSAR® trade name and technology and know-how intangible, the growth rate used for the extrapolation of
cash flows beyond budgeted projections is 2.5% (2015: 2.5%) and the pre-tax discount rate applied to the cash flow
projections is 12% (2015: 12%).
A 5% increase in the discount rate used would result in no impairment charge for the MSAR® trade name intangible
asset or the Technology and know-how intangible asset. A 5% decrease in the discount rate used would also result in
no impairment charge.
50
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
Amortisation of Intangible Assets
The Board has reviewed the accounting policy for intangible assets and has amortised those assets which have a
finite life. All intangible assets with a finite life were fully amortised as at 30 June 2015, and a non-cash charge of £nil
(2015: £nil) was recorded in the statement of comprehensive income for the year ended 30 June 2016.
15. Available for Sale Investments
Unquoted securities
Opening balance
Changes in fair value
Impairment charge
Closing balance
Consolidated
30 June 2016
£’000s
Consolidated
30 June 2015
£’000s
Company
30 June 2016
£’000s
Company
30 June 2015
£’000s
-
-
-
-
1,439
(1,035)
(404)
-
-
-
-
-
1,439
(1,035)
(404)
-
Unquoted securities represent the Group’s investment in Quadrise Canada Corporation (“QCC”), Paxton Corporation
(“Paxton”), Optimal Resources Inc. (“ORI”) and Porient Fuels Corporation (“Porient”), all of which are incorporated in
Canada.
At the statement of financial position date, the Group held a 20.44% share in the ordinary issued capital of QCC, a
3.75% share in the ordinary issued capital of Paxton, a 9.54% share in the ordinary issued capital of ORI and a 16.86%
share in the ordinary issued capital of Porient.
QCC is independent of the Group and is responsible for its own policy-making decisions. There have been no material
transactions between QCC and the Group during the period or any interchange of managerial personnel. As a result,
the Directors do not consider that they have significant influence over QCC and as such this investment is not
accounted for as an associate.
The Group has no immediate intention to dispose of its available for sale investments unless a beneficial opportunity
to realise these investments arises.
Given that there is no active market in the shares of any of above companies, the Directors have determined the fair
value of the unquoted securities at 30 June 2016. In this regard, the Directors considered other factors such as past
equity placing pricing and assessment of risked net present value of the enterprises to arrive at their conclusion on any
impairment for all of the unquoted securities.
The shares in each of these companies were valued at CAD $nil on 1 July 2015. Shareholder communications received
during the year to 30 June 2016 indicate that the business models for each of these companies remain highly uncertain,
with minimal possibility of any material value being recovered from their asset base. On that basis, the directors have
determined that the investments should continue to remain valued at CAD $nil at 30 June 2016.
51
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
16. Investments in Subsidiaries
Direct Investment
Opening balance
Acquisition of ROE Projects Ltd
Long term loans advanced
Closing balance
Company
30 June 2016
£’000s
Company
30 June 2015
£’000s
18,845
-
3,545
22,390
15,433
500
2,912
18,845
The acquisition of ROE projects was made to acquire the remaining non-controlling interest within the Group and as
such is treated as a transaction within equity and therefore IFRS 3 ‘Business Combinations’ has not been applied.
The Company tests investments annually for impairment, or more frequently if there are indications that they might
be impaired. Impairment is based on the value in use of the subsidiaries. The Directors performed a review of the
value in use of the investments at 30 June 2016 by assessing the value in use of the financial assets and liabilities in
the underlying subsidiaries. Based on this the Directors concluded that no impairment is necessary for the year ended
30 June 2016. Holdings in subsidiaries are detailed in note 27.
17. Cash and Cash Equivalents
Cash at bank
Total
18. Trade and Other Receivables
Trade receivables
Other receivables
Receivable from related parties
Total
Consolidated
30 June 2016
£’000s
Consolidated
30 June 2015
£’000s
Company
30 June 2016
£’000s
4,268
4,268
8,361
8,361
3,948
3,948
Company
30 June 2015
£’000s
7,875
7,875
Consolidated
30 June 2016
£’000s
Consolidated
30 June 2015
£’000s
Company
30 June 2016
£’000s
Company
30 June 2015
£’000s
-
297
-
297
3
325
5
333
-
168
-
168
-
137
5
142
Group receivables of £nil (2015: £nil) and Company receivables of £nil (2015: nil) were past due at year-end.
52
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
19. Trade and Other Payables
Trade payables
Other taxes
Payable to related parties
Accruals
Total
Consolidated
30 June 2016
£’000s
Consolidated
30 June 2015
£’000s
Company
30 June 2016
£’000s
Company
30 June 2015
£’000s
377
60
12
127
576
145
132
23
122
422
34
42
6
46
128
76
132
7
53
268
There are no material differences between the fair value of trade and other payables and their carrying values at
year-end.
Trade payables as at 30 June 2016 amount to 62 days (2015: 55 days) of purchases made in the year. All trade
payables balances are less than 30 days old.
Amounts due to related parties at year end amounted to £12k (2015:£23k).
20. Share Options
Movement in theYear:
The following table illustrates the number and weighted average exercise prices (“WAEP”) of, and movements in, share
options during the year:
Outstanding as at 1 July
Granted during the year
Expired during the year
Exercised during the year
Options outstanding as at 30 June
Exercisable as at 30 June
Number
30 June 2016
40,450,000
6,000,000
(8,316,667)
(5,000,000)
33,133,333
26,300,000
WAEP
(Pence)
30 June 2016
22.08
12.81
20.68
0.80
23.60
26.07
Number
30 June 2015
43,600,000
3,100,000
-
(6,250,000)
40,450,000
31,016,667
WAEP
(Pence)
30 June 2015
19.16
23.80
-
2.59
22.08
19.31
The weighted average remaining contractual life of the 33.13 million options outstanding at the statement of financial
position date is 4.75 years (2015: 4.55 years). The weighted average share price during the year was 13.38p (2015: 23.84p)
per share.
The expected volatility of the options reflects the assumption that historical volatility is indicative of future trends,
which may not necessarily be the actual outcome. The expected life of the options is based on historical data available
at the time of the option issue and is not necessarily indicative of future trends, which may not necessarily be the
actual outcome.
The Share Option Scheme is an equity settled plan and fair value is measured at the grant date of the option. Options
issued under the Scheme vest over a two year period provided the recipient remains an employee of the Group.
Options may be also exercised within one year of an employee leaving the Group at the discretion of the Board.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
The Company issued 6.0 million share options to employees during the year (2015: 3.1 million) the weighted average
exercise price of these options was 12.81p (2015: 23.8p) and the weighted average fair value was 6.92p (2015: 13.8p). The
exercise price of the options issued during the year ranged from 12.1p to 18.1p (2015: 12.1p to 32.3p).
The fair value was calculated using the Black Scholes option pricing model. The weighted average inputs were as
follows:
Stock price
Exercise price
Interest rate
Volatility
Time to maturity
21. Share Capital
2016
12.80p
12.81p
0.5%
73.2%
2015
20.5p
23.6p
0.5%
77.3%
4 years
4 years
The company has one class of ordinary share capital which carries no rights to fixed income, any preferences or restrictions.
Issued and fully paid:
809,585,162 (2015: 809,585,162) Ordinary shares of £0.01 each
8,095,852
8,095,852
2016
£
2015
£
22. Other Reserves
Nature and Purpose of other Reserves
Reverse Acquisition Reserve
The reverse acquisition reserve arose on the reverse acquisition of Zareba plc (now Quadrise Fuels International plc) by
Quadrise International Limited on 18 April 2006 as accounted for under IFRS 3.
Share Option Reserve
The share option reserve is used to record the cumulative fair value of share options granted by the Company net of
lapsed and exercised options.
23. Pension Commitments
For direct employees of Quadrise Fuels International plc, the Company contributes between 7% and 20% of salary to a
defined contribution pension scheme. Pension cost to the Company for the year amounted to £57k (2015: £51k).
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015 24. Derivatives and Other Financial Instruments
The Group’s principal financial instruments comprise available for sale investments, cash balances, accounts payable
and accounts receivable arising in the normal course of its operations.
The financial instruments of the Group and the Company at year-end are:
Consolidated
30 June 2016
£’000s
Consolidated
30 June 2015
£’000s
Company
30 June 2016
£’000s
Company
30 June 2015
£’000s
Financial assets
Loans and receivables – Cash and cash equivalents
Loans and receivables – Trade and other receivables
4,268
133
8,361
333
3,948
133
7,875
142
Financial liabilities
Other financial liabilities – Trade and other payables
516
422
86
268
All receivables and payables are current and due within 30 days.
Foreign Currency Exchange Risk
The Group does not generally undertake foreign currency hedging. The majority of the Group’s transactions are
denominated in Sterling and it uses this as its reporting currency. Exposure to any foreign exchange movements exists
primarily in the Euro currency.
The net monetary liabilities in other currencies at 30 June 2016 were €268k (2015: net assets of €252k).
A 10% strengthening of Sterling against the Euro at the statement of financial position date would have reduced loss
for the year by £20k (2015: an increase in loss of £16k) whilst a 10% weakening of Sterling against the Euro would have
increased loss for the year by £22k (2015: a reduction in loss of £18k). This analysis assumes that all other variables
remain constant.
Interest Rate Risk
The Group has floating rate financial assets in the form of deposit accounts with major banking institutions; however,
it is not currently subjected to any other interest rate risk.
Based on cash balances at the statement of financial position date, a rise in interest rates of 1% will reduce loss for the
year by approximately £42k (2015: £78k) per annum.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
Liquidity Risk
The Group regularly reviews its major funding positions to ensure that it has adequate financial resources in meeting
its financial obligations. The Group takes liquidity risk into consideration when deciding its sources of funds.
Credit Risk
The Group had receivables of £297k at 30 June 2016 (2015: £333k), of which £nil (2015: £5k) was receivable from related
parties. Receivables of £297k represent the maximum credit risk to which the Group is exposed.
Capital Risk Management
The Group defines capital as the total equity of the Group. The Group’s objectives when managing capital are to
safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits
for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain
or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
Fair Value of Financial Assets and Liabilities
There are no material differences between the fair value of the Group’s financial assets and liabilities and their carrying
values in the financial information.
Borrowings Facilities
The Group had no external borrowing facilities as at 30 June 2016.
25. Related Party Transactions
Non-executive Director Laurie Mutch is also a Director of Laurie Mutch & Associates Limited, which has provided
consulting services to the Group. The total fees charged for the year amounted to £43k (2015: £41k). The balance payable
at the statement of financial position date was £12k (2015: £21k).
Jason Miles was also a Director of ROE Projects Limited, which provided consulting services to the group until its
acquisition by the Company on 22 October 2014. The total fees charged for the year amount to £nil (2015: £62k). The
balance payable at the statement of financial position date was £nil (2015: £nil).
Mike Kirk provided consulting services to the group prior to his appointment as Executive Chairman on 1 April 2016. The
total fees charged for the year amount to £12k (2015: £nil). The balance payable at the statement of financial position
date was £nil (2015: £nil).
Ian Williams and Hemant Thanawala were directors of International Energy Services Limited (“IESL”). QFI provided
services to IESL during the year for which QFI received income of £nil (2015: £39k). The balance receivable at the
statement of financial position date was £nil (2015: £nil).
QFI defines key management personnel as the Directors of the Company. There are no transactions with Directors,
other than their remuneration as disclosed in the Report of Directors’ Remuneration.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015 26. Ultimate Parent Undertaking and Controlling Party
The directors have determined that there is no Controlling Party as no individual shareholder holds a controlling
interest in the Company.
27. Subsidiaries
The financial statements include the financial statements of Quadrise Fuels International plc and the following
subsidiaries:
Name
Quadrise International Limited
Quadrise Limited
Quadrise KSA Limited
Quadrise Americas Limited*
Quadrise Marine Limited
Quadrise Asia Limited*
ROE Projects Limited
Country of
Incorporation/
Registration
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Percentage
Interest Held
and Voting Rights
Class of Share Held
100%
100%
100%
100%
100%
100%
100%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Quadrise Fuels International plc and its subsidiaries are involved in the production and development of MSAR®
emulsion fuel (along with supplying the associated technology to third parties) as a low cost substitute for
conventional heavy fuel oil for use in power generation plants and industrial and marine diesel engines.
* On 30 June 2016, as a result of an internal Group restructuring exercise, management made application to the
Registrar of Companies for Quadrise Americas Limited and Quadrise Asia Limited, two wholly owned subsidiaries of
the Group, to be struck off from the Register of Companies at Companies House.
28. Commitments and Contingencies
The Group and the Company have entered into a commercial lease for office rental. This lease expires on 25 March
2019, and there are no restrictions placed on the Group or Company by entering into this lease. The minimum future
lease payments for the non-cancellable lease are as follows:
Office premises
One year
Two to five years
After five years
30 June 2016
£’000s
30 June 2015
£’000s
106
187
-
106
293
-
Additionally, the Group and the Company have no capital commitments or contingent liabilities as at the statement of
financial position date.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015
29. Events After the End of the Reporting Period
On 10 August 2016, the Company announced the execution of a Memorandum of Understanding (“MOU”) which defines
the basis of collaboration between Quadrise and its clients in the Kingdom of Saudi Arabia to progress a ‘Production to
Combustion’ trial at designated refinery and power plant facilities within the Kingdom.
On 14 September 2016, the Company announced the extension of contracts for the exclusive purchase and supply of
goods and services and for the exclusive joint development of emulsion fuels with AkzoNobel group companies. The
contract extensions ensure the continuity and ongoing support from AkzoNobel for the commercialisation of MSAR®
projects globally until at least November 2018.
The Company announced that it is proposing to raise approximately £4.0 million through a Placing, and up to an
additional £1.0 million through a proposed Open Offer.
30. Copies of the Annual Report
Copies of the annual report will be posted to shareholders and will be available shortly from the Company’s website
at www.quadrisefuels.com and from the Company’s registered office, Gillingham House, 38-44 Gillingham Street,
London, SW1V 1HU.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2015 Corporate Information
Registered Office
Gillingham House
38-44 Gillingham Street
London
SW1V 1HU
Company Secretary
Audrey Clarke FCIS
Gillingham House
38-44 Gillingham Street
London
SW1V 1HU
Nominated Adviser
Smith and Williamson Corporate Finance Limited
25 Moorgate
London
EC2R 6AY
Broker
Peel Hunt
Moor House
120 London Wall
London,
EC2Y 5ET
Solicitors
Bircham Dyson Bell
50 Broadway
London
SW1H 0BL
Registrars
Share Registrars Ltd
The Courtyard
17 West Street
Farnham
Surrey
GU9 7DR
Auditors
Crowe Clark Whitehill LLP
St Bride’s House
10 Salisbury Square
London
EC4Y 8EH
Bankers
Coutts & Co
440 Strand
London
WC2R 0QS
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Printed by Swan Press Ltd, Shoreham-by-Sea • www.swanpress.co.uk
Front cover design: Vivid • vividcontentagency.com
Design and typesetting: Louis Mackay • www.louismackaydesign.co.uk
Gillingham House • 38–44 Gillingham Street • London SW1V 1HU
t: +44 (0) 20 7031 7321 • f: +44 (0) 20 7031 7339
www.quadrisefuels.com