Annual Report
and Accounts
2017
Contents
2
3
Company Statement
Quadrise MSAR® fuel
5
MSAR® and the environment
6
Chairman’s Statement
11 Strategic Report
14 Directors
16 Directors’ Report
20
Statement of Directors’ Responsibilities
21
Report on Directors’ Remuneration
22
Corporate Governance Statement
24
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
56 Corporate Information
Quadrise Fuels International plc
Annual Report and Financial Statements for the year ended 30 June 2017
Highlights
Significant work has been undertaken to progress contracts covering a
commercial scale trial project in the Kingdom of Saudi Arabia. The project
comprises the production of MSAR® fuel and its transportation to, and storage
and combustion at, a nominated power plant site. Quadrise has undertaken a
central coordination role in progressing the project and looks forward to providing
updates in due course.
The commercial scale MSAR® Manufacturing Unit at Cepsa was commissioned and
reliably produced around 50,000 barrels of Marine MSAR®. This fuel was bunkered
to the Maersk vessel Seago Istanbul, and burned whilst the vessel was on normal
operational service, with no fuel related issues during 9 months of operations.
Despite formal notification by Maersk of its intention to let the Operational
Trial Agreement expire (as a result of the IMO’s decision to adopt a lower cap
for marine fuel sulphur by January 2020) they confirmed that their experience
with MSAR® during the trial had been positive. Maersk have provided Quadrise
with the Interim LONO and the Interim Inspection Report produced by Wärtsilä,
which Quadrise is now using to develop opportunities with other operators to
commercialise MSAR®.
Quadrise remains debt free, with a £5.0 million cash balance at 30 June 2017
following a successful placing and open offer in October 2016 which raised £5.0
million. The Group has total assets of £9.5 million at 30 June 2017, which include
the MSAR® manufacturing facility at the Cepsa refinery in Spain, and investments
in our in-house R&D facility.
Quadrise continues to engage with a number of oil majors, regional power
companies and shipping companies to pursue opportunities for the production
and use of MSAR® for both marine and power applications.
Company Registration No. 05267512
1
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
2
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
4
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017 MSAR® and the environment
Lower Energy Costs
Lowest Cost Solution to Meet Future
Environmental Regulations
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.
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.
The International Maritime Organisation (IMO) has
been working to reduce harmful impacts of shipping
on the environment under Annex VI to the International
Convention for the Prevention of Pollution from Ships
(MARPOL Convention). The 70th session of the Marine
Environment Protection Committee (“MEPC”) meeting
on 24 to 28 October 2016 considered the report on the
“Assessment of the availability of fuel oil” relating to
Article 14 of MARPOL (dealing with Sulphur Oxides and
Particulate emissions). A decision was taken by the
MEPC to adopt a global cap for marine fuel sulphur
of no more than 0.5% by weight on 1st January 2020,
rather than defer the implementation to 1st January
2025.
The global debate currently is whether there will be
sufficient distillate fuels available to meet the future
demand resulting from the MEPC decision. 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 2017 together with an update
on significant events since the year end.
2020 compliance. Maersk confirmed that their experience
with MSAR® during the trial had been positive and
subsequently provided QFI with the Interim LONO and
the Interim Inspection Report produced by Wärtsilä.
Introduction
In the power market, Quadrise has made material
progress during 2017. Since signing the Memorandum of
Understanding (“MoU”) with our client in the Kingdom of
Saudi Arabia (“KSA”) in August 2016, we have undertaken
significant work, including detailed engineering studies,
to progress a commercial scale project comprising MSAR®
fuel production and its storage and consumption at a
nominated power plant site. Working in conjunction with
various entities within KSA and from Europe and the US,
Quadrise has taken a central coordination role,
and has progressed the project to a point that it
can commence immediately once all parties have
signed the multiple bilateral contracts and the
triparty contract that define the overall project.
We look forward to providing updates on this
project, as appropriate, in due course.
We are confident that the delivery of the KSA power
project will demonstrate the value of Quadrise’s MSAR®
technology and fuel in KSA on a commercial scale, and
the Company will continue to work with our partners
to further evaluate commercial options for MSAR®
production and supply in KSA to both marine and power
plant consumers. This will help to ensure that, pending a
successful trial and positive decision on the use of MSAR®
in KSA, our technology could be deployed rapidly at a
commercial scale.
Quadrise was able to make significant progress in a
number of areas in the marine market during the year
including: commissioning the commercial scale MSAR®
manufacturing facility at the refinery in Spain; reliably
producing around 7,000 tonnes of marine MSAR®; and
bunkering the MSAR® to the Maersk Line A/S (“Maersk”)
nominated vessel, Seago Istanbul, whilst the vessel was
on normal operational service. Although there were
no fuel related issues during the course of the marine
operational and LONO (‘Letter Of No Objection’) trial,
Maersk decided to conclude the trial early following their
policy decision to use low sulphur (0.5%) fuel for IMO
6
The intended migration to early stage commercial
revenues during calendar 2017 was dependent on a
decision by Maersk to adopt the use of MSAR® post the
interim inspection. Maersk’s policy decision to use low
sulphur fuel now means they will not use MSAR® and
we are progressing other opportunities to develop the
marine bunker market.
As a pre-revenue company, Quadrise has always been
conscious of the need to control costs, but given
the delay in progressing to early stage commercial
revenues, the Company has taken a number of actions
Quadrise was able to make significant
progress in a number of areas in the
marine market during the year
to reduce cash expenditure during the current year
by in excess of £500,000, representing 18% of the
Company’s underlying annualised fixed costs, whilst
retaining its ability to deliver its active projects and
pursue business development opportunities in the
power and marine markets.
Power Generation MSAR® Fuel
KSA is the world’s largest market for the consumption of
crude-oil and HFO for power generation, and the scale
and nature of the oil and power generation industries in
the region offer an enormous opportunity for Quadrise.
It was therefore identified as a primary target market
for Quadrise and we were delighted to announce in
early August 2016 the signing of an MoU to progress
discussions for a major production to combustion
project in KSA. As noted above, since signing the MoU
we have undertaken material work to progress this
commercial scale project, both with our client and
their technical advisors in KSA and at our research
facility, QRF. This is a complex, commercial-scale project
bringing together many major global organisations, with
Quadrise undertaking a central coordination role. It has
clearly demonstrated our ability, with limited resources
compared to our customers/partners, to bring on board,
and work on equal terms with, large multinational
organisations, demonstrating to them the many benefits
that Quadrise’s MSAR® technology and professional
services can provide.
During the remainder of this calendar year we will be
working to advance the KSA project, and will continue
with the practical work required to enable the trial
timetable to be met.
which confirmed that the MSAR® fuel had performed
well during the trial.
During this period the International Maritime
Organisation (IMO) had been working to reduce harmful
impacts of shipping on the environment under Annex
VI to the International Convention for the Prevention
of Pollution from Ships (MARPOL Convention). The 70th
session of the Marine Environment Protection Committee
(MEPC) meeting on 24 to 28 October 2016 considered the
report on the “Assessment of the availability of fuel oil”
We continue to develop other opportunities
in the power sector in selected markets in
KSA, the Middle East, Africa and Asia. Our
relationship with YTL Power Seraya remains
strong, though the opportunities remain
longer-term and linked to the availability of
suitable residue streams at a major refinery in
the region.
Marine MSAR® Bunker Fuel
Quadrise worked with Maersk for over five years
through a series of land-based and sea-borne trials,
culminating in the recent operational trial to achieve
a LONO from Wärtsilä after a 4,000 hour engine
inspection, with an Interim Inspection planned for
midway. It was a major achievement to commence
production of MSAR® at the Cepsa Gibraltar San Roque
Refinery, adjacent to the Algeciras Mediterranean
bunker hub, within 9 months of contract signature.
Over a period of 8 months through to February 2017,
we were reliably producing MSAR® to meet the vessel
schedule, latterly running on a 24 hour, two shift
basis, and in total around 7,000 tonnes of MSAR® were
successfully manufactured at Cepsa. Good progress
was made during the trial on board the Seago Istanbul
which ran until March 2017 with no material issues
encountered with the use of MSAR® fuel on the 68MW
Wärtsilä RT-Flex engine. In March 2017, the trial was
unfortunately suspended due to the vessel being
damaged in a collision with a sea buoy. When the
vessel was dry-docked to make repairs the planned
interim inspection of the engine was carried out by
Wärtsilä. Maersk confirmed that they were pleased
with the performance of MSAR® during the trial and
following the interim inspection Wartsila provided an
Interim LONO and an interim inspection report both of
Good progress was made during the trial
on board the Seago Istanbul which ran
until March 2017 with no material issues
encountered with the use of MSAR® fuel
relating to Article 14 of MARPOL (dealing with Sulphur
Oxides and Particulate emissions). A decision was taken
by MEPC to adopt the lower global cap for marine fuel
sulphur of no more than 0.5% by weight on 1st January
2020, rather than defer the implementation to 1st
January 2025. The decision was a significant shock to the
majority of industry stakeholders.
As a result of the MEPC70 outcome, and after a detailed
review of compliance options, Maersk took a policy
decision in May 2017 to only use low sulphur fuel for
IMO 2020 compliance and as a consequence decided to
conclude the trial at the interim phase. Whilst Maersk’s
decision was disappointing, the trial demonstrated that
MSAR® can be used on an operational vessel with a
normal crew, with no adverse impact on the engine or
the normal operations of the vessel.
Quadrise is using the positive results of the trial,
together with the interim LONO and the Inspection
Report to develop opportunities with other operators to
commercialise MSAR® in the marine bunker market. The
MEPC70 decision means that many operators will have
to decide whether to use more expensive low sulphur
(predominantly) diesel fuel to meet the regulations
or use high sulphur HFO with on-board exhaust gas
cleaning systems (“EGCS”, also known as scrubbers) for
compliance. Quadrise and many commentators believe
that high sulphur fuel and on-board EGCS will be the
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
lowest cost option, although at this stage only a small
number of operators have confirmed their position.
Carnival Cruises has indicated that it will, from 2020,
have installed EGCS on almost 100% of its fleet and it
expects to save approximately $700 million per year
on fuel post 2020, repaying the $1 billion capital cost
of installing EGCS in around 18 months. It has also
been reported that a major order by MSC for new large
container vessels will use EGCS.
Whilst Quadrise will focus on producing high sulphur
MSAR®, it should be noted that with appropriate
residue streams there is the potential to produce
low-sulphur MSAR® (below 0.5% equivalent, as was
the case at times during production at Cepsa) albeit
such “low sulphur” opportunities are likely to be
a less significant market for Quadrise than “high
sulphur”, where the fuel cost savings are likely to
be higher. MSAR® also provides other
benefits including a reduction in NOx and
particulates emissions which are likely to
be of increasing importance.
Our work with a number of oil majors to
evaluate the suitability of specific refining
residues for Marine MSAR® production
continues and these relationships also provide
opportunities to explore options for MSAR® production
and conversion of refinery units and steam generation
plants.
MSAR® Economics Remain Sound –
Strong Growth Potential
The key value driver for MSAR® is the price differential,
or spread, between high sulphur HFO and low sulphur
distillate fuels. During the last year, the spread has
traded in the range of $143/t to $193/t and is currently
at $201/t. However, the key factors that are expected
to drive the market in the run-up to 2020 are an
increase in demand for low sulphur distillate products
in the marine bunker market and a consequential
reduction in demand for high sulphur HFO products
until EGCS are more widely adopted. Forecasts in the
market indicate that this is expected to increase the
spread to a range of $320/t to $400/t which provides
a significant opportunity for Quadrise and MSAR®
technology in both the power and marine markets.
8
Business Development
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 power generation
and marine bunkering 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 refining and bunker
fuel hubs in Europe, the Middle East and Asia.
Quadrise engages in significant and sustained business
development activity to enable collaborative projects to
be developed between the producers and the consumers.
We deliver our business development activities along
sector lines, to align with our clients in the refining,
Our present and intended clients are
large companies which presently account
for a substantial share of the production
and combustion of HFO
power and marine markets. We believe that the ability
to develop both the power and marine markets 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.
Research, Development and
Operations Activities
We continued to invest in our research and development,
operations and technical support activities during the
year. We now have two pilot-scale development MMUs
at the Quadrise Research Facility (“QRF”), including an
enhanced unit that can be used to test highly viscous
residues which must be heated to elevated temperatures
to be emulsified. We have also expanded our laboratory
facilities at QRF to be able to test the performance
of MSAR® produced in these development MMUs.
Another process engineer was recruited during the
period, to further enhance our operational and business
development capabilities.
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017 QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
Our programme of research at the University of Surrey
has been successful in enhancing our understanding
of the mechanisms that underpin the creation of
stable MSAR® emulsion fuels and we renewed our
arrangements for a further year in November 2016.
These arrangements will continue into 2018 in a
focused cost-efficient manner to enhance value for the
Company.
We retain our close working relationship with our
technology partner, Akzo Nobel, 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®, both of which were extended to
November 2018 during the year.
Cost Reduction Initiatives
As outlined previously, following the period end, the
Company took action to materially reduce cash costs,
whilst retaining our ability to deliver active projects and
pursue business development opportunities in the power
and marine markets.
As a result, Hemant Thanawala, agreed to step down
as Finance Director, on 10th August 2017, but remains on
the Board as a Non-executive Director and a member
of the Audit and Compensation Committees from
the same date. This enabled the Board to restructure,
reducing the number of Executive Directors from three
to two. The Finance Director functions were absorbed
within the existing senior team with the Financial
Controller, David Scott FCA, maintaining a focus on
sound cash management, allied with strong project
accounting. These steps enabled a significant reduction in
administration costs.
As Executive Chairman, I agreed to reduce my cash
salary by 50% with effect from 1st September 2017 for 12
months (subject to review and potential renewal at the
end of the period) with a potential future uplift of 25%
on the deferred element. In addition, the Non-executive
Directors of the Company, including Mr Thanawala,
agreed to reduce their directors’ fees by approximately
33% to £24,000 per annum, with the balance being
deferred, for potential future payment with an uplift of
25%. These potential future payments will be contingent
on the Company delivering demonstrable progress
during the next year.
We have also streamlined the senior management
team and now operate with two General Managers,
who in combination with the Chief Operating Officer
and Executive Chairman cover the refining, power
and marine segments. The senior team has significant
experience in these segments and practical experience of
delivering projects that require multiple stakeholders to
These actions will deliver cash-cost
savings in excess of £500,000 in
the current financial year
be brought together for successful delivery. In addition,
the laboratory personnel roles at QRF have been reduced
by one. The Company’s advisers have also agreed to a
significant reduction in fees.
In total, these actions will deliver cash-cost savings
in excess of £500,000 in the current financial year,
representing 18% of the Company’s annualised fixed
costs.
Results for the Year
The consolidated after-tax loss for the year to 30 June
2017 was £4.1m (2016: £4.8m). This included production
and development costs of £2.4m (2016: £2.2m),
administration expenses of £1.8m (2016: £2.0m), a
share option charge of £0.2m (2016: £0.8m), interest
income of £19k (2016: £41k) and a tax credit of £213k
(2016: £149k).
Basic and diluted loss per share was 0.48p (2016: 0.59p).
Statement of Financial Position
At 30 June 2017, the Group had total assets of £9.5m
(2016: £8.8m). The most significant balances were
intangible assets of £2.9m (2016: £2.9m), property,
plant and equipment of £1.1m (2016: £1.2m), and cash of
£5.0m (2016: £4.3m). Further information on intangible
assets is provided in note 13 to the Group Financial
Statements.
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Cash Flow
Outlook – Current trading and prospects.
The Group ended the year with £5.0m of cash and cash
equivalents (2016: £4.3m) with £5.0m having been raised
through the placing and open offer during the year, and
£4.3m having been utilised in its operating activities
during the year (2016: £3.7m). The Group continues to
remain debt free.
We have made significant progress in relation to the
trial in KSA since signing the MoU in August 2016 – with
extensive work including detailed engineering studies
and design work being carried out to ensure that MSAR®
fuel production can commence at the earliest possible
opportunity, ahead of the combustion element of the
Capital Structure
The Company had 809,585,162 ordinary
shares of 1p each in issue at 30 June 2016. As
announced on 12 October 2016, the Company
issued 42,500,000 new ordinary shares, and as
announced on 31 October 2016, the Company
issued a further 10,119,814 new ordinary shares,
raising a total of £5.0m (after expenses). The shares
placed and issued fell within the authorities granted to
the Board under sections 551 and 570 of the Companies
Act 2006 at the Annual General Meeting (“AGM”) of
27 November 2015. These authorities will be reviewed
again at the next AGM, as appropriate. The Company’s
current issued share capital stands at 862,204,976
ordinary shares of 1p each all with voting rights.
Taxation
The Group has tax losses arising in the UK of
approximately £47.3m (2016: £41.1m) that are available,
under current legislation, to be carried forward
against future profits. £19.1m (2016: £11.7m) of the tax
losses carried forward represent trading losses within
Quadrise Fuels International plc, £25.8m (2016: £25.8m)
represent non-trade deficits arising on intangible
assets within Quadrise International Limited, £1.6m
(2016: £1.6m) represent pre-trading losses incurred by
subsidiaries, £0.8m (2016: £1.9m) represent management
expenses incurred by Quadrise International Limited,
and £0.1m(2016: £0.1m) represent capital losses within
Quadrise Fuels International plc.
The work to date has already seen
MSAR® positioned as an alternative
fuel source for KSA’s future power
generation requirements
trial commencing in the second half of 2018. It should
also be noted that the work to date has already seen
MSAR® positioned as an alternative fuel source for KSA’s
future power generation requirements, and subject to
agreement and conclusion of contractual arrangements,
and the successful outcome of the trial project, provides
the opportunity for commercial scale roll-out at pace.
Our work in the marine bunker market continues and
we are utilising the positive outcomes of the operational
and LONO trial to work with operators who see the use
of high-sulphur fuel and EGCS as providing the lowest
cost of compliance with the IMO 2020 sulphur standards.
During the current financial year and beyond, we expect
to see the industry accelerate its plans to actively
manage the impact of the forthcoming standards on
both operating costs and operational flexibility and this
will provide increased opportunities for Quadrise to
develop the market for marine MSAR®.
Mike Kirk
Executive Chairman
3 November 2017
10
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
Strategic Report
For the year ended 30 June 2017
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.
Going Concern
The Group had £5.0m in treasury as at 30 June 2017.
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 2017
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.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
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
3 November 2017
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Directors
Mike Kirk
Executive Chairman
Mike served as a corporate
finance partner at Cazenove
providing advisory services to
several 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 VIVID Housing (a housing association with c30,000
properties) and 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.
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.
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
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
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.
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.
14
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
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 the 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 committee,
and Chairman of the Compensation committee.
Hemant Thanawala
Non-Executive 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. Since becoming
a non-executive director in August 2017, Hemant serves on
the QFI Audit and Compensation committees.
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15
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 2017.
Results and Dividends
The consolidated loss from continuing operations after taxation for the year ended 30 June 2017 was £4.1m (2016:
£4.9m). The Directors do not recommend the payment of any dividend for the year (2016: £nil).
Directors
Those who served as Directors during the year are:
Mike Kirk (Executive Chairman)
Jason Miles (Chief Operating Officer)
n
n
n Hemant Thanawala (Finance Director) – stepped down on 10 August 2017 to become Non-executive Director
n
Laurence Mutch (Non-executive Director)
n Dilipkumar Shah (Non-executive Director)
n Philip Snaith (Non-executive Director)
n
Ian Duckels (Non-executive Director) – resigned 2 December 2016
Resolutions to re-elect Philip Snaith and Jason Miles as Directors, both of whom retire by rotation, will be proposed at
the Annual General Meeting.
Directors’ Interests
The interests of the Directors holding office at 30 June 2017 were as follows:
Number of Shares held:
Directors
Hemant Thanawala 1
Jason Miles
Mike Kirk
Laurence Mutch
Philip Snaith
Dilipkumar Shah
Notes:
30 June 2017
Ordinary Shares of 1p Each
30 June 2016
Ordinary Shares of 1p Each
29,039,579
3,180,633
500,000
150,000
150,000
100,000
27,210,553
2,880,633
Nil
Nil
Nil
Nil
1
Including 23,126,179 Ordinary Shares held by Lucrone Investments GmbH, a company in which Mr Thanawala has a beneficial interest.
16
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
Number of share options held:
Directors
Mike Kirk
Hemant Thanawala
Jason Miles
Laurence Mutch
Dilipkumar Shah
30 June 2017
Share Options
3,000,000
-
3,500,000
500,000
-
-
5,000,000
1,500,000
3,500,000
500,000
30 June 2016
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
500,000
Exercisable up to
1 April 2024
30 November 2017
1 April 2022
22 March 2024
31 December 2016
31 October 2017
1 April 2022
22 March 2024
1 April 2022
1 April 2022
On 1 July 2016, a total of 6 million share options granted by International Energy Group AG (“IEG”) over its own shares in
QFI were held by Hemant Thanawala and Jason Miles. Hemant Thanawala exercised 1 million of these options during the
financial year, with the remaining 5 million options being repurchased from Jason Miles by IEG. Refer to Note 19 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
Intertrust Trustees Limited
Ruudowen Limited
Phibatec Limited
Anthony Lowrie
Hemant Thanawala
Vistra Trustees (Mauritius) Limited
Direct
Direct
Direct
Indirect
Direct/Indirect
Direct
60,320,660
54,738,353
51,562,500
31,521,705
29,039,579
26,096,845
6.996%
6.35%
5.98%
3.66%
3.37%
3.03%
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Events After the End of the Reporting Period
On 10 August 2017, the Company announced that Hemant Thanawala had agreed to step down as Finance
Director, becoming a Non-executive Director, with immediate effect.
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 23.
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.
Future Developments
Further information regarding the future developments 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.
Board Committees
Information on the Audit and Compensation committees is included in the Corporate Governance section
of the Annual Report on pages 22–23.
18
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017 Annual General Meeting
The Annual General Meeting will be held on Friday 8 December 2017 as stated in the Notice, which accompanies this
Annual Report.
By order of the Board.
Audrey Clarke
Company Secretary
3 November 2017
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
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
3 November 2017
20
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 2017 were as follows:
Short-Term
Employee
Benefits
£’000s
Post-
Employment
Benefits
£’000s
Other Long-
Term Benefits
£’000s
Termination
Benefits
£’000s
Other
Benefits
£’000s
Total
2017
£’000s
Total
2016
£’000s
177
158
229
67
32
13
-
676
14
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-
-
-
42
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
191
171
244
67
32
13
-
718
68
184
254
72
32
32
-
642
Director
Mike Kirk
Hemant Thanawala
Jason Miles
Laurence Mutch
Philip Snaith
Ian Duckels
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
Repurchased by grantor during the year
Expired during the year
As at 30 June
30 June 2017
Number of Share Options
30 June 2016
Number of Share Options
25,000,000
-
(1,500,000)
(1,000,000)
(5,000,000)
-
17,500,000
29,850,000
5,000,000
(7,500,000)
-
-
(2,350,000)
25,000,000
A gain of £100k was realised on the exercise of share options by Directors during the year (2016: £nil).
The market price of the Company’s shares at the end of the reporting period was 3.23p (2016: 11.63p) and the range
during the year was 2.95p to 14.00p (2016: 9.15p to 21.00p) per share.
Philip Snaith
Chairman of the Compensation Committee
3 November 2017
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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 three non-executive Directors (four during the period from 1 July 2016 to 2 December 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 two non-executive Directors (three during the period from 1 July
2016 to 2 December 2016) 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.
22
Compensation Committee
Until his resignation on 2 December 2016, Ian Duckels chaired the Compensation Committee with the other members
being Laurence Mutch and Philip Snaith. Following Ian Duckels resignation, the Compensation Committee was chaired
by 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.
Laurence Mutch
Chairman of the Audit Committee
3 November 2017
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
Independent Auditors’ Report
to the Shareholders of
Quadrise Fuels International plc
Opinion
We have audited the financial statements of Quadrise Fuels International Plc (the “Parent Company”) and its
subsidiaries (the “Group”) for the year ended 30 June 2017, which comprise:
n the Group statement of comprehensive income for the year ended 30 June 2017;
n the Group and Parent Company statements of financial position as at 30 June 2017;
n the Group and Parent Company statements of cash flows and statements of changes in equity for the year then
ended; and
n the notes to the financial statements, which include a summary of significant accounting policies and other
explanatory information.
The financial reporting framework that has been applied in the preparation of the Group and Parent Company
financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union.
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 2017 and of the Group’s loss for the period then ended;
n the Group’s financial statements have been properly prepared in accordance with International Financial Reporting
Standards as adopted by the European Union;
n the Parent Company’s financial statements have been properly prepared in accordance with International Financial
Reporting Standards as adopted by the European Union as applied in accordance with the requirements of the
Companies Act 2006; and
n the financial statements have been prepared in accordance with the requirements 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard,
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
24
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you
when:
n The directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
n The directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the Group’s and the Parent Company’s ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months from the date when the financial statements are authorised
for issue.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of materiality. An item is considered material if it could
reasonably be expected to change the economic decisions of a user of the financial statements. We used the concept
of materiality to both focus our testing and to evaluate the impact of misstatements identified.
Based on our professional judgement, we determined overall materiality for the Group financial statements as a whole
to be £300,000, based on a percentage of Group’s result for the period.
We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the
audit of the financial statements. Performance materiality is set based on the audit materiality as adjusted for the
judgements made as to the entity risk and our evaluation of the specific risk of each audit area having regard to the
internal control environment.
Where considered appropriate performance materiality may be reduced to a lower level, such as, for related party
transactions and directors’ remuneration.
We agreed with the Audit Committee to report to it all identified errors in excess of £9,000. Errors below that threshold
would also be reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds.
Overview of the scope of our audit
The Group and its subsidiaries are accounted for from one central operating location, the group’s registered office. Our
audit was conducted from the main operating location and all group companies were within the scope of our audit
testing.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
This is not a complete list of all risks identified by our audit.
Key audit matter
How the scope of our audit addressed the key audit matter
Valuation of intangible assets
The MSAR trade name has a carrying value of £2.9m, is considered
to have an indefinite useful life and is tested annually for
impairment. This requires an estimation of the value in use of
the intangible asset which requires management to estimate the
expected cash flows and select a suitable discount rate in order to
calculate the present value of those cash flows when making its
assessment.
We reviewed the underlying economic models challenging the key
assumptions made by management. Our review included:
n Considering the appropriateness of the assumptions concerning
the timing and discounting of the cash flows;
n Considered the various projects and opportunities in the pipeline
and the likelihood of them happening; and
n Performing scenario sensitivity analysis in relation to underlying
We have considered the evidence supporting the carrying value
of the intangible asset and that no impairment to the carrying
value is required.
assumptions.
Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They
were not designed to enable us to express an opinion on these matters individually and we express no such opinion.
Other information
The directors are responsible for the other information. The other information comprises the information included in
the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report,
we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our audit
n 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; and
n the Directors’ Report and Strategic Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception:
In light of the knowledge and understanding of the company and its environment obtained in the course of the audit,
we have not identified material misstatements in the strategic report or the directors’ report.
26
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017 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.
Responsibilities of the directors for the financial statements
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and Parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Stephen Bullock
Senior Statutory Auditor
For and on behalf of
Crowe Clark Whitehill LLP
Statutory Auditor
London
3 November 2017
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.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
Consolidated Statement
of Comprehensive Income
For the year ended 30 June 2017
Continuing operations
Revenue
Production and development costs
Other administration expenses
Share option charge
Foreign exchange loss
Operating loss
Finance costs
Finance income
Loss before tax
Taxation
Loss and total comprehensive loss for the year from continuing operations
Loss per share – pence
Basic
Diluted
Year ended
30 June 2017
£’000s
Year ended
30 June 2016
£’000s
Notes
126
(2,367)
(1,818)
(242)
(10)
(4,311)
(10)
19
(4,302)
213
2
(2,156)
(1,965)
(802)
(18)
(4,939)
(8)
41
(4,906)
149
(4,089)
(4,757)
(0.48)p
(0.48)p
(0.59)p
(0.59)p
19
5
8
9
10
11
11
28
Consolidated Statement of Financial Position
As at 30 June 2017
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Non-current assets
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Stock
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 2017
£’000s
As at
30 June 2016
£’000s
Notes
12
13
16
17
18
20
21
21
1,056
2,924
3,980
5,045
302
153
61
5,561
9,541
247
247
8,622
73,642
3,704
522
(77,196)
9,294
9,541
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
The financial statements, accompanying policies and notes 1 to 29 (forming an integral part of these financial statements),
were approved and authorised for issue by the Board on 3 November 2017 and were signed on its behalf by:
M. Kirk
Chairman
J. Miles
Director
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Consolidated Statement of Changes in Equity
For the year ended 30 June 2017
Issued
Capital
£’000s
Share
Premium
£’000s
Share
Option
Reserve
£’000s
Reverse
Acquisition
Reserve
£’000s
Accumulated
Losses
£’000s
1 July 2015
8,096
69,216
4,210
522
(69,900)
Loss and total
comprehensive loss for
the year
Share option charge
Transfer of balances
relating to expired
share options
30 June 2016
1 July 2016
Loss and total
comprehensive loss for
the year
Share option charge
Transfer of balances
relating to expired
share options
New shares issued net
of issue costs
30 June 2017
-
-
-
8,096
8,096
-
-
-
-
-
-
69,216
69,216
-
-
-
526
8,622
4,426
73,642
-
802
(308)
4,704
4,704
-
242
(1,242)
-
3,704
-
-
-
522
522
-
-
-
-
(4,757)
-
308
(74,349)
(74,349)
(4,089)
-
1,242
-
522
(77,196)
For an explanation of the nature and purpose of other reserves refer to note 21.
Total
£’000s
12,144
(4,757)
802
-
8,189
8,189
(4,089)
242
-
4,952
9,294
30
Consolidated Statement of Cash Flows
For the year ended 30 June 2017
Operating activities
Loss before tax from continuing operations
Depreciation
Loss on disposal of fixed assets
Finance costs
Finance income
Share option charge
Working capital adjustments
(Increase)/decrease in trade and other receivables
(Increase)/decrease in prepayments
(Decrease)/increase in trade and other payables
Increase in stock
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
New shares issued net of issue costs
Net cash inflow from financing activities
Notes
12
12
8
9
19
17
18
8
10
9
12
Net increase/(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
16
Year ended
30 June 2017
£’000s
Year ended
30 June 2016
£’000s
(4,302)
(4,906)
211
-
10
(19)
242
(5)
(33)
(329)
(61)
148
2
8
(41)
802
36
118
154
-
(4,286)
(3,679)
(10)
213
(4,083)
19
(111)
(92)
4,952
4,952
777
4,268
5,045
(8)
149
(3,538)
41
(596)
(555)
-
-
(4,093)
8,361
4,268
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Company Statement of Financial Position
As at 30 June 2017
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 2017
£’000s
As at
30 June 2016
£’000s
Notes
12
15
16
17
18
20
21
81
26,419
26,500
4,820
139
98
5,057
31,557
114
114
8,622
73,642
3,704
(54,525)
31,443
31,557
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
The loss for the year dealt with in the accounts of Quadrise Fuels International plc was £0.3m (2016: £1.0m).
The financial statements, accompanying policies and notes 1 to 29 (forming an integral part of these financial
statements), were approved and authorised for issue by the Board on 3 November 2017 and were signed on its behalf by:
M. Kirk
Chairman
J. Miles
Director
32
Company Statement of Changes in Equity
For the year ended 30 June 2017
1 July 2015
Loss and total comprehensive
loss for the year
Share option charge
Transfer of balances relating to expired
share options
30 June 2016
1 July 2016
Loss and total comprehensive
loss for the year
Share option charge
Transfer of balances relating
to expired share options
New shares issued net of issue costs
30 June 2017
Issued
Capital
£’000s
8,096
-
-
-
8,096
8,096
-
-
-
526
8,622
Share
Premium
£’000s
Revaluation
Reserve
£’000s
Accumulated
Losses
£’000s
69,216
4,210
(54,707)
-
-
-
69,216
69,216
-
-
-
4,426
73,642
-
802
(308)
4,704
4,704
-
242
(1,242)
-
3,704
(1,038)
-
308
(55,437)
(55,437)
(330)
-
1,242
-
(54,525)
Total
£’000s
26,815
(1,038)
802
-
26,579
26,579
(330)
242
-
4,952
31,443
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Company Statement of Cash Flows
For the year ended 30 June 2017
Operating activities
Loss before tax from continuing operations
Depreciation
Finance costs
Finance income
Share option charge
Working capital adjustments
(Increase)/decrease 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
Issue of Ordinary Share Capital
Net cash inflow from financing activities
Notes
12
8
9
19
17
18
9
12
15
Net increase/(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
16
Year ended
30 June 2017
£’000s
Year ended
30 June 2016
£’000s
(330)
(1,038)
44
2
(19)
242
29
(14)
(14)
(60)
(2)
(62)
19
(8)
(4,029)
(4,018)
4,952
4,952
872
3,948
4,820
45
2
(41)
802
(26)
(21)
(140)
(417)
(2)
(419)
41
(4)
(3,545)
(3,508)
-
-
(3,927)
7,875
3,948
34
Notes to the Financial Statements
1. General Information
Quadrise 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 2017.
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 2017
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.
(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 2017 is determined to be £2.9m (2016: £2.9m). Further
details are given in Note 13.
(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:
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.
36
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
(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 2017)
Statement of Comprehensive Income
(average rate throughout the financial year)
1.138
1.163
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.
(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
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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 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.
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
38
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017 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.
(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
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
n the Group has transferred the rights to receive cash flows from the asset, and
i. either has transferred substantially all the risks and rewards of the asset or
ii. 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.
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.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
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 profit or loss or other comprehensive income as appropriate.
(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) 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.
(2.21) 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.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
(2.22) 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 £5.0m in treasury as at 30 June 2017. 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. 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
Year ended
30 June 2017
£’000s
Year ended
30 June 2016
£’000s
17
17
7
219
211
19
19
20
282
148
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017 6. 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
Year ended
30 June 2017
Number
Year ended
30 June 2016
Number
3
12
3
9
Year ended
30 June 2017
£’000s
Year ended
30 June 2016
£’000s
1,530
193
97
1,820
1,516
185
111
1,812
Included in total staff costs are the costs of the Executive Directors as employed by the Company as follows:
Director
Mike Kirk
Wages and salaries
Pension costs
Hemant Thanawala
Wages and salaries
Pension costs
Jason Miles
Wages and salaries
Pension costs
Ian Williams
Wages and salaries
Pension costs
Total
Aggregate emoluments of the Directors of the Company
(excluding social security costs) were as follows:
Salaries and fees
Share option expense
Pension costs
Total
Year ended
30 June 2017
£’000s
Year ended
30 June 2016
£’000s
177
14
191
158
13
171
229
15
244
-
-
-
606
676
193
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911
44
4
48
171
13
184
240
14
254
167
28
195
681
786
612
59
1,457
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
Non-executive Directors fees for the year amounted to £83k (2016: £109k). Consulting fees paid to non-executive
Directors for the year amounted to £30k (2016: £48k).
The highest paid Director’s remuneration totalled £244k (2016: £254k), represented by all aggregate emoluments.
Refer to the Report of Directors’ Remuneration (on page 21) 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 24 – Related Party Transactions.
7. Losses Attributable to Quadrise Fuels International plc
The loss for the year dealt with in the accounts of Quadrise Fuels International plc was £0.3m (2016: £1.0m). As provided
by s.408 of the Companies Act 2006, no statement of comprehensive income is presented in respect of Quadrise Fuels
International plc.
8. Finance Costs
Bank charges
Total
9. Finance Income
Year ended
30 June 2017
£’000s
Year ended
30 June 2016
£’000s
10
10
8
8
All finance income recognised during the current and prior year has arisen from interest on bank deposits and loans.
10. Taxation
UK corporation tax credit
Total
No liability in respect of corporation tax arises as a result of trading losses.
Year ended
30 June 2017
£’000s
(213)
(213)
Year ended
30 June 2016
£’000s
(149)
(149)
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
Tax Reconciliation
Loss on continuing operations before taxation
Loss on continuing operations before taxation multiplied by
the UK corporation tax rate of 20% (2016: 20%)
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 2017
£’000s
(4,302)
(860)
91
(213)
769
(213)
Year ended
30 June 2016
£’000s
(4,906)
(981)
169
(149)
812
(149)
The Group has tax losses arising in the UK of approximately £47.3m (2016: £41.1m) that are available, under current
legislation, to be carried forward against future profits. £19.1m (2016: £11.7m) of the tax losses carried forward represent
trading losses within Quadrise Fuels International plc, £25.8m (2016: £25.8m) represent non-trade deficits arising on
intangible assets within Quadrise International Limited, £1.6m (2016: £1.6m) represent pre-trading losses incurred by
subsidiaries, £0.8m (2016: £1.9m) represent management expenses incurred by Quadrise International Limited, and
£0.1m (2016: £0.1m) represent capital losses within Quadrise Fuels International plc.
A deferred tax asset representing these losses and other timing differences at the statement of financial position date
of approximately £8.0m (2016: £8.2m) has not been recognised as a result of existing uncertainties in relation to its
realisation.
11. 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 2017
(4,089)
Year ended
30 June 2016
(4,757)
846,102,956
846,102,956
809,585,162
809,585,162
(0.48)p
(0.48)p
(0.59)p
(0.59)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 20.6m 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.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
12. 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 2016
Additions
Disposals
Closing balance – 30 June 2017
Depreciation
Opening balance – 1 July 2016
Depreciation charge for the year
Disposals
Closing balance – 30 June 2017
Net book value at 30 June 2017
99
8
-
107
(46)
(21)
-
(67)
40
89
2
-
91
(30)
(17)
-
(47)
44
43
-
-
43
(24)
(7)
-
(31)
12
16
-
-
16
(12)
(3)
-
(15)
1
1,251
101
-
1,352
(230)
(163)
-
(393)
1,498
111
-
1,609
(342)
(211)
-
(553)
959
1,056
Company
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
Software
£’000s
Office
Equipment
£’000s
Plant and
Machinery
£’000s
Total
£’000s
99
8
-
107
(46)
(22)
-
(68)
39
68
-
-
68
(28)
(12)
-
(40)
28
44
-
-
44
(24)
(7)
-
(31)
13
16
-
-
16
(12)
(3)
-
(15)
1
-
-
-
-
-
-
-
-
227
8
-
235
(110)
(44)
-
(154)
81
Cost
Opening balance – 1 July 2016
Additions
Disposals
Closing balance – 30 June 2017
Depreciation
Opening balance – 1 July 2016
Depreciation charge for the year
Disposals
Closing balance – 30 June 2017
Net book value at 30 June 2017
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
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
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
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
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
13. Intangible Assets
Consolidated
Cost
Opening balance – 1 July 2016
Additions
Closing balance – 30 June 2017
Amortisation and Impairment
Opening balance – 1 July 2016
Amortisation
Closing balance – 30 June 2017
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)
Total
£’000s
36,687
-
36,687
(33,763)
-
(33,763)
Net book value at 30 June 2017
-
2,924
-
2,924
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
Net book value at 30 June 2016
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.
Quadrise Canada Corporation’s (“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, being fully impaired in 2012. 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
48
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
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% (2016: 2.5%) and the pre-tax discount rate applied to the cash flow
projections is 12% (2016: 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.
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 2016.
14. Available for Sale Investments
At the statement of financial position date, the Group held a 20.44% share in the ordinary issued capital of Quadrise
Canada Corporation (“QCC”), a 3.75% share in the ordinary issued capital of Paxton Corporation (“Paxton”), a 9.54%
share in the ordinary issued capital of Optimal Resources Inc. (“ORI”) and a 16.86% share in the ordinary issued capital
of Porient Fuels Corporation (“Porient”), all of which are incorporated in Canada.
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 2017. The shares in each of these companies were valued at CAD $nil on 1
July 2016. Shareholder communications received during the year to 30 June 2017 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 2017.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
15. Investments in Subsidiaries
Direct Investment
Opening balance
Long term loans advanced
Closing balance
Company
30 June 2017
£’000s
Company
30 June 2016
£’000s
22,390
4,029
26,419
18,845
3,545
22,390
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 2017 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 2017. Holdings in subsidiaries are detailed in note 26.
16. Cash and Cash Equivalents
Cash at bank
Total
17. Trade and Other Receivables
Trade receivables
Other receivables
Other taxes
Total
Consolidated
30 June 2017
£’000s
Consolidated
30 June 2016
£’000s
Company
30 June 2017
£’000s
5,045
5,045
4,268
4,268
4,820
4,820
Company
30 June 2016
£’000s
3,948
3,948
Consolidated
30 June 2017
£’000s
Consolidated
30 June 2016
£’000s
Company
30 June 2017
£’000s
Company
30 June 2016
£’000s
54
109
139
302
-
297
-
297
-
110
29
139
-
168
-
168
Group receivables of £15k (2016: £nil) and Company receivables of £nil (2016: nil) were past due at year-end.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
18. Trade and Other Payables
Trade payables
Other taxes
Payable to related parties
Accruals
Total
Consolidated
30 June 2017
£’000s
Consolidated
30 June 2016
£’000s
Company
30 June 2017
£’000s
Company
30 June 2016
£’000s
175
-
-
72
247
377
60
12
127
576
73
-
-
41
114
34
42
6
46
128
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 2017 amount to 28 days (2016: 62 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 £nil (2016:£12k).
19. Share Options
Movement in the year:
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
Repurchased by grantor 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 2017
33,133,333
500,000
(5,000,000)
(3,633,333)
(1,000,000)
24,000,000
20,583,333
WAEP
(Pence)
30 June 2017
23.60
9.03
1.00
32.26
0.01
23.60
29.95
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
The weighted average remaining contractual life of the 24 million options outstanding at the statement of financial
position date is 5.23 years (2016: 4.75 years). The weighted average share price during the year was 9.59p (2016: 13.38p)
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 Schemes are equity settled plans, and fair value is measured at the grant date of the option. Options
issued under the Schemes vest over a two year or three year period provided the recipient remains an employee of the
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
Group. Options may be also exercised within one year of an employee leaving the Group at the discretion of the Board.
On 1 July 2016, a total of 6 million share options granted by International Energy Group AG (“IEG”) over its own shares
in QFI were held by Hemant Thanawala and Jason Miles. Hemant Thanawala exercised 1 million of these options during
the financial year, with the remaining 5 million options being repurchased from Jason Miles by IEG.
The Company issued 0.5 million share options to employees during the year (2016: 6.0 million) the weighted average
exercise price of these options was 9.03p (2016: 12.81p) and the weighted average fair value was 2.60p (2016: 6.92p). The
exercise price of the options issued during the year was 9.03p (2016: 12.1p to 18.1p).
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
Expected term
20. Share Capital
2017
5.94p
9.03p
0.25%
72.3%
2016
12.80p
12.81p
0.5%
73.2%
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:
862,204,976 (2016: 809,585,162) Ordinary shares of £0.01 each
8,622,050
8,095,852
On 18 October 2016 42,500,000 Ordinary shares of £0.01 each were issued. On 1 November 2016, 10,119,814 Ordinary
shares of £0.01 each were issued.
2017
£
2016
£
21. 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.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017 22. 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 £97k (2016: £51k).
23. 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 2017
£’000s
Consolidated
30 June 2016
£’000s
Company
30 June 2017
£’000s
Company
30 June 2016
£’000s
Financial assets
Loans and receivables – Cash and cash equivalents
Loans and receivables – Trade and other receivables
5,045
163
4,268
333
4,820
109
3,948
133
Financial liabilities
Other financial liabilities – Trade and other payables
178
516
74
86
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 balances in other currencies at 30 June 2017 were assets of US$19k (2016: US$nil) and liabilities of
€4k (2016: net liabilities of €268k).
A 10% strengthening of Sterling against the Euro at the statement of financial position date would have reduced loss
for the year by £nil (2016: £20k) whilst a 10% weakening of Sterling against the Euro would have increased loss for the
year by £nil (2016: £22k). This analysis assumes that all other variables remain constant.
A 10% strengthening of Sterling against the US$ at the statement of financial position date would have increased loss
for the year by £2k (2016: £nil) whilst a 10% weakening of Sterling against the US$ would have reduced loss for the year
by £2k (2016: £nil). 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 £50k (2016: £42k) per annum.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017
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 £302k at 30 June 2017 (2016: £297k), of which £nil (2016: £nil) was receivable from related
parties. Receivables of £302k 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 2017.
24. Related Party Transactions
Non-executive Director Laurence 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 £30k (2016: £43k). The balance
payable at the statement of financial position date was £nil (2016: £12k).
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 £nil (2016: £12k). The balance payable at the statement of financial position
date was £nil (2016: £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.
25. 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.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2017 26. Subsidiaries
The financial statements include those of Quadrise Fuels International plc and the following subsidiaries:
Name
Quadrise International Limited
Quadrise Limited
Quadrise KSA Limited
Quadrise Marine Limited
Country of
Incorporation/
Registration
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Percentage
Interest Held
and Voting Rights
Class of Share Held
100%
100%
100%
100%
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.
The registered office for all subsidiaries is Gillingham House, 38-44 Gillingham Street, London, SW1V 1HU.
27. Commitments and Contingencies
The Group and the Company have entered into a commercial lease for office rental. This lease expires on 25th 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 2017
£’000s
30 June 2016
£’000s
106
81
-
106
187
-
Additionally, the Group and the Company have no capital commitments or contingent liabilities as at the statement of
financial position date.
28. Events After the End of the Reporting Period
On 10 August 2017, the Company announced that Hemant Thanawala had agreed to step down as Finance Director,
becoming a Non-executive Director, with immediate effect.
29. 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 2017
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
57
Gillingham House • 38–44 Gillingham Street • London SW1V 1HU
t: +44 (0) 20 7031 7321 • f: +44 (0) 20 7031 7339
www.quadrisefuels.com