Annual Report
and Accounts
2018
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
19
Statement of Directors’ Responsibilities
20
Report on Directors’ Remuneration
22
Corporate Governance Statement
30 Independent Auditors’ Report
34 Consolidated Statement of Comprehensive Income
35
Consolidated Statement of Financial Position
36
Consolidated Statement of Changes in Equity
37
Consolidated Statement of Cash Flows
38
Company Statement of Financial Position
39
Company Statement of Changes in Equity
40 Company Statement of Cash Flows
41
Notes to the Financial Statements
61 Corporate Information
Quadrise Fuels International plc
Annual Report and Financial Statements for the year ended 30 June 2018
Key developments
In July 2018, Quadrise signed an MoU with Freepoint Commodities, a leading US merchant of
physical commodities and financier of midstream and upstream commodity producing assets.
We are actively working with Freepoint on MSAR® projects in the Americas and Asia on an
exclusive basis. A number of high priority commercial opportunities have been identified that
we hope to jointly develop at pace.
In November 2017 Quadrise signed an MoA with JGC Corporation, the leading Japanese EPC
contractor, with strong and established relationships with the major Japanese refiners, utility
companies and shipping operators. We have continued working with JGC, meeting refiners and
consumers in Japan to review potential MSAR® projects and these discussions are continuing
positively.
In the Kingdom of Saudi Arabia, Quadrise acted in a central co-ordination role to enable the
planned commercial scale boiler trial to be ready to commence at the end of December 2017.
Whilst this did not proceed, due to the inability of our oil company partner to reach agreement
with the local power company, Quadrise did demonstrate its ability to project manage a large,
complex project on a tight timetable that was ready to commence as planned. Quadrise is
now working towards engagement at the appropriate level with parties who appreciate the
economic and environmental benefits arising from adoption of MSAR® within the Kingdom.
Quadrise continues to strongly believe that the use of high sulphur marine fuel and on-board
scrubber systems will be the lowest cost option to comply with the January 2020 IMO sulphur
emissions regulations. During 2018, vessel scrubber installations have risen, and the economics
of MSAR® combined with scrubber systems are becoming increasingly favourable with the
onset of 2020. This dynamic has assisted our continuing engagement with refiners, shippers
and engine manufacturers.
Quadrise continues to make progress in optimising MSAR® formulations for specific project
applications – in terms of both cost and performance. For some applications we are now
able to make MSAR® that is suitable for both marine and power applications from a single
formulation – that could negate the need for separate storage of marine and power products
– further improving project economics.
At 30 June 2018, the Company had cash reserves of £2.2 million which will enable continued
development of the business into early 2019 with a number of initiatives, including equity
funding, under consideration to provide longer-term financing for the business. The directors
have a high degree of confidence that sufficient progress can be demonstrated with business
development opportunities to provide support for a potential fundraising and we will provide
an update on our plans in due course.
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 Specialty
Chemicals (now rebranded as Nouryon, following
the acquisition by Carlyle and GIC), 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 400 million tons, with a current value in excess
of US$100 billion per annum.
Our management and board have extensive background
and experience in the specialised energy sectors involved,
and an unparalleled track record in commercial emulsion
fuels development and supply in marine fuels, oil refining,
power generation and general industrial applications.
Corporate Structure
100% QFI
100% QIL
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Quadrise MSAR® Fuel
MSAR®: A Proven, Established Technology
MSAR® technology draws on over 25 years of experience in the production of oil-in-
water emulsion-based asphalts and fuels. A direct substitute for HFO, MSAR® fuel is
establishing an enviable reputation as Quadrise engages with some of the largest
corporations in the energy and transport sectors.
MSAR® is a direct low cost substitute for
conventional Heavy Fuel Oil (“HFO”) used
in marine diesel engines, and for thermal
power and steam generation. MSAR®
technology is a potential game-changer for oil refiners
as it frees up valuable distillates traditionally used for
HFO manufacture, increasing profitability without
incurring significant expenditure.
The global HFO market exceeds 400 million tons per
annum, of which approximately 50% is currently 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 by the refinery
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 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 to consider Article 14 of
MARPOL (dealing with Sulphur Oxides and Particulate
emissions), voted 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 2025.
The global debate currently is whether there will be
sufficient distillate fuels available to meet the future
demand resulting from the MEPC decision. This year
many shipowners have started to install scrubbers on
their vessels, rather than pay for expensive 0.5% sulphur
fuels. 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
2018 overview
This has been a significant year for Quadrise and
one which has seen some major challenges, most
notably the inability of our oil company partner in
the Kingdom of Saudi Arabia (“KSA”) to reach agreement
with the local power company to progress the commercial
scale trial project, as they had promised. This was
hugely disappointing. However, I am very proud of the
progress that the team at Quadrise made in its central
co-ordination role, working with companies in Europe, the
KSA and the USA to enable this large, complex project to
be ready to proceed at the end of December 2017 – this
was a major feat for a company of our scale.
We do, however, realise that shareholder value is
ultimately delivered by results and not effort, that
these disappointments have eroded shareholder
confidence, and that we need to demonstrate that
the long-term support provided by our shareholders is
justified. We have seen some significant shifts during
the first half of calendar year 2018 in the global markets
for liquid fuels that are positive for Quadrise in the
medium-term. In the short-term, these market shifts
are providing a supportive backdrop for Quadrise to
work with refiners and fuel consumers in
the power, marine and industrial markets
to progress MSAR® projects.
Given the dynamic nature of the markets
that we are working in, progress will not
always be smooth, though we are well
positioned to capitalise on the significant
opportunities that we see. We do not
wish to underestimate the risks that we
continue to face, but it is also important to recognise
that we have actively reduced a number of these during
the year through our business development activities
and our work on major projects, including the planned
commercial-scale trial in the KSA.
Our approach to business development has evolved
during the year following a strategic decision to
broaden our engagement in our global markets, whilst
ensuring that we retain appropriate focus and control.
Outcomes of this process were the agreements with
JGC Corporation (“JGC”) and, more recently, Freepoint
Commodities LLP (“Freepoint”) which are enabling us to
6
work collaboratively to access their established networks
for mutual benefit. The Company has also signed
agreements with agents to explore specific opportunities,
and continues commercial dialogue with a number of
major corporations where there is a similar alignment of
interests in the fuel and bitumen industries respectively.
Alongside this, we have continued to invest in our
Research, Development and Innovation (“RDI”) activities,
testing residues for MSAR® compatibility from candidate
refineries and hosting visits for prospective major clients
to witness MSAR® being manufactured from their
samples at Quadrise Research Facility’s (“QRF”) new site.
QRF’s new site has been operational since the second
quarter of 2018, with improved RDI functionality at a
substantially reduced cost to the previous location.
The other cost reduction initiatives implemented during
the early part of the financial year have not adversely
impacted our activities and demonstrate that we are
aligned with our shareholders and remain focused on
delivering long-term shareholder value. We continued to
review our approach throughout the year to make further
savings where appropriate, and will continue to do so.
We have seen some significant shifts
during the first half of calendar year
2018 in the global markets for liquid fuels
that are positive for Quadrise in the
medium-term
We retain a 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®.
The businesses that we work with within Akzo Nobel
form part of the Speciality Chemicals operations that
are being purchased by Carlyle Group. This transaction
is expected to complete during calendar year 2018. The
agreements with Quadrise will not be affected
by the transaction and we look forward to continuing
to work with our partners under their new ownership
and brand.
Collectively, these actions will, we believe, enable us to
build a sustainable business based on the commercial
adoption of MSAR® technology at scale and, through
this, to build investor confidence and value which we are
determined to achieve.
relationships with the major Japanese refiners, utility
companies and shipping operators. Since this time, we
have been working with JGC and have met local refiners
and consumers in Japan to review potential MSAR®
projects and these discussions are continuing.
MSAR® Market Opportunities
Background
Our technology enables significant value to be created in
the refinery, by delivering a low-cost, modular, scalable,
upgrading technology to significantly increase
refinery yields of high value distillates whilst
creating a superior synthetic HFO for use in
power, marine and industrial applications.
Business Development
Whilst MSAR® uses existing HFO infrastructure,
it does, like some oil products, require effective
segregation during transportation and storage
and minor modifications in engines/boilers. It is
supplied under term-contracts between the refiner and
the consumer. This requires Quadrise to bring together
both the refiners and the consumers to establish a
viable MSAR® project. Historically, our team has been
organised on sector lines, focused on the refining, power
and marine markets. During 2018, we have moved to a
structure that is project-based and brings together the
skills required in process engineering, project delivery and
operations/development for each specific application as
required. This change has further improved our ability
to progress our business development targets and,
ultimately, evolve these to commercial projects.
The key value driver for MSAR® is the price differential,
or spread, between high sulphur fuel oil and low
sulphur distillate fuels. During the period, the spread
has traded in the range of $163/t to $257/t (compared to
$143/t to $193/t in the prior period). These changes are
already being factored into the forward prices, with the
differential between gas oil and fuel oil for 2020 currently
over $330/t. This further enhances the economics and
creates significant opportunities for Quadrise in both
the power and marine markets. In November 2017 we
announced the signature of an MoA with JGC, the leading
Japanese EPC contractor, with strong and established
More recently in July 2018 we signed an MoU with
Freepoint, an established global merchant of physical
commodities and a financer of upstream and mid-
stream commodity-producing assets. Since signing
the MoU, we have been working with the Freepoint
team to prioritise MSAR® project opportunities in the
During 2018, we have moved to a
structure that is project-based and
brings together the skills required in
process engineering, project delivery
and operations/development for each
specific application
Americas and Asia on an exclusive basis, with a number
of identified counterparties, to enter into commercial
agreements for MSAR® production and supply
arrangements with fuel producers and consumers and
develop the high priority ones at pace.
Power Generation Opportunities
The fact that the MSAR® “Production to Combustion”
trial project in the KSA did not proceed as planned is
hugely disappointing. The KSA remains the world’s largest
market for the consumption of oil for power generation
and Quadrise will continue to pursue opportunities
there, as we believe use of MSAR® fuel could save the
government over $1 billion per year in fuel costs, reduce
power plant emissions and provide local job creation
throughout the supply chain. This will, however, require
a different approach to ensure that we are engaged
within the KSA at the appropriate level, with parties who
can see the significant benefits that would arise from
adoption of MSAR® and are able to direct the relevant
parties to co-operate to enable delivery.
We are continuing to develop other opportunities in the
power sector in other selected markets in the Middle
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
East, Africa, the Americas and the Far East (with the
potential to supply from Europe for some projects).
Quadrise will continue to address these either directly,
or through our relationships with YTL-PowerSeraya, JGC
and/or Freepoint, and others as appropriate.
Marine MSAR® Bunker Fuel
The marine market is experiencing a substantive
change with regards to the forthcoming International
Marine Organisation (“IMO”) regulations that are due
to commence on 1 January 2020. Most recently there
has been wider acceptance of the exhaust gas cleaning
system (“EGCS”, or “scrubber”) solution, with significant
momentum building and large orders recently announced
across all major segments including tankers, bulkers and
container ships. This is being driven by: a) increased
concern over distillate fuel availability and compatibility
potentially impacting operations; and b)
increasing oil prices and a widening of
the price spread between high and low
sulphur fuels leading to material increases
in fuel costs for shippers. The forward price
differential between gas oil and fuel oil for
early 2020 has now increased to over £330/t,
further improving the economics for both
MSAR® and EGCS opportunities, and we are using this
dynamic to increase our engagement with shippers and
engine manufacturers.
Whilst there will be a mix of compliance options,
Quadrise continue to believe that the use of high sulphur
fuel and on-board EGCS will be the lowest cost option,
with most market analysts forecasting a rise in EGCS
installations to 2020 and beyond, resulting in one third
of today’s high sulphur marine fuel demand in compliant
use. The developments outlined above highlight a
substantive change in marine industry sentiments over
the last 12 months.
Since the trial was suspended and then terminated early
by Maersk in 2017, we have continued our discussions
with them in relation to the Royalty Agreement and
other associated issues and opportunities.
RDI and Operations Activities
that has a dedicated pilot plant for testing, laboratory
analysis, engineering/operations support, and office
accommodation. The team at QRF managed this move
in a very short period whilst continuing to support major
project activity at the same time. The new facility is
better suited to our needs than the previous location and
its annualised fixed costs are over 65% lower.
Our approach to Research and Development remains
focused on supporting our business development
activities. We continued to make progress during the year
in optimising MSAR® formulations for specific project
applications – in terms of both cost and performance.
In addition, for some applications we are now able to
make MSAR® that is suitable for both marine and power
applications from a single formulation. This could negate
the need for separate storage of marine and power
products, thereby further improving project economics.
The new facility is better suited to our
needs than the previous location and its
annualised fixed costs are over 65% lower
Our collaboration with Dr Spence Taylor at the University
of Surrey continued and has provided further valuable
insight into the mechanisms that underpin the creation
of stable, cost effective, MSAR® emulsion fuels. This
work has now reached a stage where we can progress
the findings in-house at QRF and therefore when the
current programme of work is finalised in October 2018,
our formal agreement for collaborative research with the
University of Surrey will come to an end. However, we
will retain the opportunity to work with Dr Spence Taylor
on a consultancy basis as required.
Results for the Year
The consolidated after-tax loss for the year to 30 June
2018 was £3.3m (2017: £4.1m). This included production
and development costs of £2.0m (2017: £2.4m),
administration expenses of £1.5m (2017: £1.8m), a share
option charge of £0.1m (2017: £0.2m), interest income of
£18k (2017: £19k) and a tax credit of £294k (2017: £213k).
During the year, we moved QRF to a new location
Basic and diluted loss per share was 0.38p (2017: 0.48p).
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
Statement of Financial Position
At 30 June 2018, the Group had total assets of £6.5m
(2017: £9.5m). The most significant balances were
intangible assets of £2.9m (2017: £2.9m), property,
plant and equipment of £1.0m (2017: £1.1m), and cash of
£2.2m (2017: £5.0m). Further information on intangible
assets is provided in note 11 to the Group Financial
Statements.
We have been working extremely hard during 2018 to
develop a broader platform and pipeline of opportunities
for MSAR® technology across a larger number of projects.
Whilst we still have some way to go to progress these
to commercial contracts, there has been a real change
in the marine market, driven by the forthcoming IMO
2020 regulations, that has fundamentally improved the
economics for MSAR® projects. Alongside this, adding to
our existing relationships with YTL-PowerSeraya and JGC,
Cash Flow
The Group ended the year with £2.2m of cash
and cash equivalents (2017: £5.0m) with £3.0m
having been utilised in its operating activities
during the year (2017: £4.3m). The Group
continues to remain debt free.
Capital Structure
There has been a real change in
the marine market, driven by the
forthcoming IMO 2020 regulations,
that has fundamentally improved the
economics for MSAR® projects
The Company had 862,204,976 ordinary shares of 1p each
in issue at 30 June 2018. The Company’s current issued
share capital stands at 862,204,976 ordinary shares of 1p
each all with voting rights.
our MoU with Freepoint will enable us to progress new
projects and to potentially accelerate existing projects
opportunities globally across a range of sectors, and
we are working quickly to progress these at the earliest
possible opportunity.
Taxation
The Group has tax losses arising in the UK of
approximately £49.5m (2017: £47.3m) that are available,
under current legislation, to be carried forward against
future profits. £21.5m (2017: £19.1m) of the tax losses
carried forward represent trading losses within Quadrise
Fuels International plc, £25.8m (2017: £25.8m) represent
non-trade deficits arising on intangible assets within
Quadrise International Limited, £1.3m (2017: £1.6m)
represent pre-trading losses incurred by subsidiaries,
£0.8m (2017: £0.8m) represent management expenses
incurred by Quadrise International Limited, and £0.1m
(2017: £0.1m) represent capital losses within Quadrise
Fuels International plc.
Outlook – Current trading and prospects.
Notwithstanding the challenges faced in key markets
where the Company has dedicated its resources over
the period, Quadrise continues to believe that there are
substantial opportunities in the power generation and
marine markets for MSAR® in the near term.
We are looking at opportunities to utilise our MSAR®
manufacturing unit (“MMU”) currently installed at the
Cepsa refinery for new projects at other locations. As
Cepsa are planning a major refinery upgrade, we are
working co-operatively with them to ensure that we
can relocate our equipment in a timely manner, ideally
directly to a new 2019 active project. If this does not
prove to be practicable, we will relocate the MMU and
associated equipment to the manufacturer’s facility in
Denmark, to enable any modifications to be made to the
unit prior to deployment to a new MSAR® project.
We have continued to maintain close control on costs,
which remain well within budgeted limits, without any
adverse impact on our business development or research
and operations support activities. As a result, we had,
at the end of the period, cash resources of £2.2 million
which will enable continued development of the business
into early 2019 with a number of initiatives, including
equity funding, under consideration to provide longer
term financing for the business. The directors have a
high degree of confidence that sufficient progress can be
demonstrated with business development opportunities
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to provide support for a potential fundraising and we
will provide an update on our plans in due course.
Hemant Thanawala stepped down from his role as
Finance Director in August 2017 and became a non-
executive director. I would like to thank him for his
contribution to the business since its formation and
his valuable ongoing input in his current non-executive
capacity. All of the non-executive directors have
continued to provide valuable guidance to the business
during board and committee meetings and also as
required between meetings.
Jason Miles spearheads our business development
activities and is supported by our senior managers in
Operations, Projects and RDI. Everyone within QFI has
a made a significant contribution during the year, at
times in very challenging and frustrating circumstances,
and I thank them for their continued support to enable
us to deliver our growth potential. And I also thank our
shareholders for their continued patience as we put our
new strategy into effect. This will, we believe, enable us
to build a sustainable business based on the commercial
adoption of MSAR® technology at scale globally and,
through this, to build investor confidence and value
which we are determined to achieve.
Mike Kirk
Executive Chairman
21 September 2018
10
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 Strategic Report
For the year ended 30 June 2018
Principal Activity
Principal Business Risks
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 the Group’s 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 a cash balance of £2.2m as at 30 June
2018. The Directors acknowledge that this cash balance
will not be sufficient to cover the Group’s operating
requirements up to 30 June 2019. These conditions
indicate the existence of material uncertainty regarding
the Group’s and Company’s ability to continue as a
going concern.
The Directors have determined that the continuation
of the Group as a going concern is dependent upon
successfully raising sufficient funds in the short term,
and that they have a reasonable expectation that
such funds will be raised, although no binding funding
agreements are in place at the date of this report.
The Directors therefore have determined that it is
appropriate to prepare the financial statements on a
going concern basis.
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.
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.
Market risk
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, the relative competitiveness of
oil, gas and coal prices both for prompt and future
delivery, and the future use of hydrocarbons for energy,
utilities, transportation, petrochemicals and industrial
applications. The Group cannot mitigate this risk by
its nature, other than by increasing the potential
applicability of MSAR® technology to various sectors but
pays close attention to these markets in order to react in
a timely and effective manner and focus our efforts.
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
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
the global refining industry, targeting qualifying suppliers
matched to prospective major consumers.
Competition risks
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.
Technological risk
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.
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.
Other Business Risks
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.
12
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
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.
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
21 September 2018
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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 and Chair
of VIVID Housing (a housing association with c30,000
properties). 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. Mike has extensive
experience in the energy and oilfield/engineering services
and utilities sectors, as a senior corporate finance advisor
and non-executive director and works closely with
Jason and the senior management to support business
development and commercialisation plans.
Jason Miles
Chief Operating Officer
Jason spent over twelve
years of his career prior to
Quadrise developing emulsified
fuel projects; initially as a
process engineer for BP and
subsequently for PDVSA,
as Business Development
Manager where he implemented numerous Orimulsion®
projects globally. Jason has an honours degree in
chemical engineering from Loughborough University
and an Executive MBA from the Cass Business School in
London and is a chartered Chemical Engineer. Jason has
extensive emulsion fuel and oil market knowledge and is
responsible for managing MSAR® business development,
project delivery and commercialisation of the refining,
power, marine and industrial sectors.
14
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.
Dilipkumar Shah
Non-Executive Director
Dilip brings with him over
25 years of commercial
experience in trading, finance,
manufacturing and distribution.
Dilip has most recently been
involved in trading and
manufacturing in West Africa
with focus on Nigeria, Democratic Republic of Congo and
Ghana. He is a founder member of various successful
companies in West Africa involved in the distribution of
fertilizers, chemicals, tobacco related products and the
manufacture of food products. In addition, he serves on
the boards of a number of private UK and international
companies.
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
Philip Snaith
Non-Executive Director
Philip has spent more than
35 years with the Royal Dutch
Shell Group in senior executive
positions, latterly as General
Manager of Shell International
Trading & Shipping Company
Limited in London. Between
2004 and 2008, Philip spent four years in Singapore as
President of Shell International Eastern Trading Company
– with responsibility for Asia-Pacific trading portfolio.
Concurrent with this executive position, he was a non-
executive director of Shell Eastern Trading Company
(Pte) Ltd, with annual revenues of around US$55
billion, and was also Chairman of both Shell Tankers
Singapore (Pte) Ltd and Shell International Shipping
Services (Pte) Ltd. Philip holds an MBA from Cranfield
University, a BSc (Physics) from Imperial College and a
Diploma in Marketing (Dip.M) from the UK Chartered
Institute of Marketing. Philip is a member of the QFI
Audit 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 2018.
Results and Dividends
The consolidated loss from continuing operations after taxation for the year ended 30 June 2018 was £3.3m (2017:
£4.1m). The Directors do not recommend the payment of any dividend for the year (2017: £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)
Resolutions to re-elect Laurence Mutch and Hemant Thanawala as Directors, who retire by rotation, will be proposed
at the Annual General Meeting.
Directors’ Interests
The interests of the Directors holding office at 30 June 2018 were as follows:
Number of Shares held:
Directors
Hemant Thanawala 1
Jason Miles
Mike Kirk
Laurence Mutch
Philip Snaith
Dilipkumar Shah
Notes:
30 June 2018
Ordinary Shares of 1p Each
30 June 2017
Ordinary Shares of 1p Each
29,039,579
3,180,633
500,000
150,000
150,000
100,000
29,039,579
3,180,633
500,000
150,000
150,000
100,000
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 2018
Number of share options held:
Directors
Mike Kirk
Hemant Thanawala
Jason Miles
Laurence Mutch
Dilipkumar Shah
Substantial Shareholders
30 June 2018
Share Options
3,000,000
30 June 2017
Share Options
Exercisable up to
3,000,000
1 April 2024
3,500,000
500,000
5,000,000
1,500,000
3,500,000
500,000
3,500,000
500,000
5,000,000
1,500,000
3,500,000
500,000
1 April 2022
22 March 2024
1 April 2022
22 March 2024
1 April 2022
1 April 2022
The Board was aware of the following interests of 3% and over of the issued share capital of the Company as at the
date of this report.
Nature of Holding
Number of
Ordinary Shares Held
Percentage of Issued
Share Capital and Voting Rights
Ruudowen Limited
Intertrust Trustees Limited
Phibatec Limited
Anthony Lowrie
Hemant Thanawala
Vistra Trustees (Mauritius) Limited
Financial Instruments
Direct
Direct
Direct
Indirect
Direct/Indirect
Direct
54,738,353
51,660,660
51,562,500
31,521,705
29,039,579
26,096,845
6.35%
5.99%
5.98%
3.66%
3.37%
3.03%
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 21.
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.
17
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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, this 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 U.K. 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 22–29.
Annual General Meeting
The Annual General Meeting will be held on Friday 30 November 2018 as stated in the Notice, which accompanies this
Annual Report.
By order of the Board.
Audrey Clarke
Company Secretary
21 September 2018
18
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Strategic Report, Directors 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
21 September 2018
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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 2018 were as follows:
Short-Term
Employee Benefits
as paid
£’000s
Short-Term
Employee Benefits
deferred1
£’000s
Post-
Employment
Benefits
£’000s
Total
2018
£’000s
Total
2017
£’000s
102
200
102
28
26
-
-
458
91
-
5
13
13
-
-
122
14
16
8
-
-
-
-
38
207
216
115
41
39
-
-
618
191
244
171
32
67
13
-
718
Director
Mike Kirk
Jason Miles
Hemant Thanawala
Philip Snaith
Laurence Mutch
Ian Duckels
Dilipkumar Shah
Total
1: With effect from 1st September 2017, Mike Kirk agreed to reduce his cash salary by 50% and the Non-executive Directors each agreed to reduce their fees
to £24,000 per annum. The unpaid balance has been deferred for potential future payment, with an uplift of 25% due on the unpaid balance which is also
included in this column.
Reconciliation of Share Options Granted to Directors
30 June 2018
Number of Share Options
30 June 2017
Number of Share Options
17,500,000
-
-
-
-
-
17,500,000
25,000,000
-
(1,500,000)
(1,000,000)
(5,000,000)
-
17,500,000
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
20
No gain was realised on the exercise of share options by Directors during the year (2017: £100k).
The market price of the Company’s shares at the end of the reporting period was 3.55p (2017: 3.23p) and the range
during the year was 2.48p to 14.13p (2017: 2.95p to 14.00p) per share.
Philip Snaith
Chairman of the Compensation Committee
21 September 2018
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
Corporate Governance Statement
Since admission to trading on AIM in 2006, the Company has adopted the UK Corporate Governance Code and at its
board meeting on 27th June 2018, the board of the Company resolved to apply the UK Corporate Governance Code,
published by the Financial Reporting Council, as revised in July 2018 (the “Code”).
The Code sets standards for good practice in relation to board leadership and effectiveness, remuneration,
accountability and relations with shareholders. The provisions of the Code (the 2018 version of which the Board has
resolved to adopt prior to it taking effect for Premium Listed Main Market Companies on 1 January 2019) which apply
to Quadrise Fuels International plc are set out below.
Principles of the UK Corporate Governance Code
Board Leadership & Company Purpose
A. Effective and entrepreneurial board promoting sustainable success, generating value for shareholders and
contributing to wider society.
B. Establish the company’s purpose, values & strategy. Directors to act with integrity and promote the desired
culture.
C. Ensure necessary resources to meet objectives and measure performance. Establish framework of controls which
enable risk to be assessed and managed.
D. Ensure effective engagement with and encourage participation from shareholders and stakeholders.
E. Workforce policies and practices are consistent with the company’s values and support long term sustainable
success. Workforce able to raise matters of concern.
Division of Responsibilities
F. Chair responsible for board effectiveness. Promote a culture of openness and debate, facilitate constructive board
relations and contribution of non-exec directors. Ensure accurate, timely and clear information.
G. Appropriate combination of exec and non-exec (particularly independent) directors so that no one individual or
group dominates. A clear division between board and company leadership.
H. Non-exec directors to have sufficient time to meet responsibilities and provide constructive challenge, strategic
guidance, specialist advice and hold executive management to account.
I.
Ensure policies, processes, information, time and resources required to function effectively and efficiently
Composition, Succession and Evaluation
J. A formal, rigorous and transparent procedure to board appointment. Establish a succession plan for board
and senior management, based on merit and objective criteria. Promote diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths.
K. Board and committees to have a combination of skills, experience and knowledge. Review length of service of the
board with membership regularly refreshed.
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L. The annual board evaluation to consider its composition, diversity and effective working together. Individual
evaluation to demonstrate whether each director continues to contribute effectively.
Audit, Risk and Internal Control
M. Establish formal and transparent policies and procedures to ensure independence and effectiveness of internal
and external audit functions. Satisfy itself on integrity of financial and narrative statements.
N. Present a fair, balanced and understandable assessment of company’s position and prospects.
O. Establish procedures to manage risk, oversee internal controls and determine nature and extent of principal risks in
achieving its long-term strategic objectives.
Remuneration
P. Policies and practices designed to support strategy and promote long-term sustainable success. Executive
remuneration aligned to purpose and values and clearly linked to successful delivery of company’s long-term
strategy.
Q. A formal and transparent procedure for developing policy on executive remuneration should be established. No
director involved in deciding their own remuneration.
R. Directors to exercise independent judgement and discretion when authorising remuneration outcomes, taking
account of company and individual performance and wider circumstances.
In terms of the Code, the effective application of the above Principles should be supported by high-quality reporting
on the Provisions. In accordance with the revised AIM Rule 26, a full report on compliance against the Code will be
available on the Company’s website from 28 September 2018. In addition, the Code prescribes that the Company’s
compliance against certain Provisions should be described in this Annual Report (see below – following the Chairman’s
Corporate Governance Statement).
Chairman’s Corporate Governance Statement
Dear Shareholders,
Since its original listing in April 2006, Quadrise Fuels International plc has applied strict corporate governance principles
in all our endeavours. As an example, each year the Board has (albeit informally) tested itself against the then
applicable UK Corporate Governance Code, and endeavoured to act on any perceived deficiencies.
With the implementation of the new AIM company corporate governance changes, effective 28 September 2018, it was
without hesitation that the Board chose to apply the Code as revised in July this year. We will provide details of the Code
on our website and explain where we comply, and if not, why and, if appropriate, what corrective steps we are taking to
address any deficiencies. This information will be reviewed each year and our website will disclose the review date.
As Executive Chairman, it is my duty together with my fellow Board members to promote and apply good standards
of corporate governance throughout our organisation. The Company is privileged to have a highly experienced Board,
setting clear values and strategy in our annual Business Plan, adopting the highest standards of integrity whilst
promoting a hands-on, friendly but professional culture.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
The year has not been without considerable disappointments to ourselves and shareholders. Nevertheless, through
a series of meetings with major shareholders, and the introduction of investor conference calls (29 March, 11 June, 1
August), we have endeavoured to keep shareholders fully informed (within the usual disclosure constraints) on the
Company’s strategic development plans.
The Company maintains a comprehensive suite of policies and practices appropriate for our size and stage of
development. Each of these is reviewed and signed off by at least one nominated executive or non-executive director
with considerable prior experience of the subject matter. The executive team frequently consult the chairmen of the
audit and compensation committees on planning, finance, legal and human resource matters.
In May and June each year the Board undertakes a structured risk assessment and the outcomes of this are
incorporated in the annual Business Plan and the associated financial modelling.
I trust these few examples illustrate that the Company has a healthy approach to oversight on behalf of all
shareholders and that high standards of corporate governance are inherent in our culture.
I and my fellow directors look forward again to meeting you at the AGM in London on 30 November 2018 and would
be delighted to discuss any element of our governance standards.
Mike Kirk
Executive Chairman
21 September 2018
Reporting against the Provisions of the Code
Provision 1: Opportunities and risks to future success.
The Chairman’s Statement at the beginning of this report describes the MSAR® market opportunities in the power
generation and marine bunker fuel sectors. The risks associated with our endeavours are amply illustrated by the
disappointments of the Production to Combustion” trial project in KSA, and the suspension and then termination of
the marine fuel trial by Maersk. Principal Business Risks are more fully covered on Pages 11–13. Notwithstanding the
challenges faced in our key markets, the board firmly believes in the sustainability of the Company’s business model.
Progress will not always be smooth, but we are well positioned to capitalise on past experience and the significant
opportunities that we see going forwards, such as the potential of the agreements with JGC Corporation and Freepoint
Commodities. The Company would not be able to attract the attention of partners of this calibre without clear
evidence of its standards of corporate governance.
Provision 2: Monitoring corporate culture
The Company does not formally assess and monitor culture – this being a small organisation, where any deviation
from policy, practices and behaviour at odds with the Company’s purpose and values would become quickly apparent
to management. The Quadrise team can be described as coherent and highly professional with a very clear sense
of purpose. Team meetings are held weekly where project progress is reviewed and remedial action taken. The
performance of all employees is assessed annually together with a discussion on career development plans. The
remuneration scheme for all employees includes the potential award of bonuses and options subject to company and
personal performance.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 Provision 3: Regular engagement with major shareholders
An extremely successful AGM was held on 8 December 2017 with some 70 shareholders in attendance. During 2018,
through a series of meetings with major shareholders, and the introduction of investor conference calls (29 March, 11 June,
1 August) with a total of over 240 shareholders dialling into these calls. The executive team has endeavoured to keep
shareholders fully informed (within the usual disclosure constraints) on the Company’s strategic development plans.
Provision 4: Action to be taken in the event there are 20% votes against a resolution
At the 2017 AGM, five ordinary resolutions and one special resolution were carried by at least 84% voting in favour.
Provision 5: Stakeholder engagement mechanisms
Being a small organisation with 12 employees, it is relatively straightforward for the Company to consider and respond
to views put forward from the workforce and other key stakeholders. In view of this, the Company does not have a
director appointed from the workforce, a formal workforce advisory panel or a designated non-executive director to
engage with the workforce.
Provision 9: The roles of chair and chief executive
Mike Kirk is Executive Chairman of the Company. This is seen as appropriate for the Company at this time, though this
will be reviewed as the Company progresses its development plans.
Provision 10: Independence of non-executive directors
The profiles and experience of the non-executive directors are provided on Page 14 of this report. Mr Dilip Shah is
closely associated with significant shareholders and is not considered independent. There are no circumstances that
might cause the Board to question Mr Philip Snaith’s independence, and he has the appropriate experience as a former
senior executive of the Royal Dutch Shell Group to chair the compensation committee.
Mr Hemant Thanawala stepped down from his role as Finance Director in August 2017 and became a non-executive
director. He is a significant shareholder and has share options, and has been an executive director of the Company
from 2006 to 2017. As a result, Mr Thanawala, cannot be formally considered independent. However, Mr Thanawala,
provides valuable input to the company and the board in a manner consistent with being an independent director. He
retires by rotation at the 2018 AGM and has put himself forward for re-election.
Non-executive director Laurence Mutch is also a Director of Laurie Mutch & Associates Limited, which has in the past
provided consulting services to the Group. The total fees charged for the year amounted to £nil (2017: £30k). He is a
shareholder and holds options in the Company, and has been a director since 2006. Mr Mutch has clearly indicated
that these potential impairments do not and have not hindered his ability to be independent and after careful
consideration the Board believes him to be independent. He was a former senior finance director of the Royal Dutch
Shell Group and has the appropriate and current experience to chair the audit committee. He retires by rotation at the
2018 AGM and has put himself forward for re-election.
Provision 12: Appointment of a Senior Independent Director
In view of its size, the Company has not appointed a Senior Independent Director. This will be reviewed as the
Company progresses its development plans.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
Provision 14: Meetings of the Board
During the year, the Board comprised the Executive Chairman, Chief Operating Officer and the Finance Director
(until 10 August 2017) as executive Directors and three non-executive Directors (four from 10 August 2017) 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.
The Board met on 14 occasions during the year including four formal quarterly meetings to discuss a formal scheduled
agenda covering key areas of the Group’s affairs including operational and financial performance and quarterly
management accounts. All relevant information is circulated in good time. The attendance record of each director is
shown below:
Director
Mike Kirk
Jason Miles
Laurence Mutch
Dilip Shah
Philip Snaith
Hemant Thanawala
Attendance
14
13
14
8
13
11
100%
93%
100%
57%
93%
79%
Provision 20: External search consultant
The Company did not make any new appointments to the Board during the year and did not therefore appoint an
external search consultant.
Provisions 21, 22 and 23: Evaluation of the Board.
The Board did not use the services of an external evaluator during the year. However, under the direction of the
Nominations Committee, the Board recently evaluated its performance, the contribution of each of the directors and
the effectiveness of the committees by way of a confidential survey completed by each director. The Company’s
Nomad, Smith & Williamson aggregated the results and have provided a summary to the Executive Chairman for
review by the Board.
Provisions 24, 25 and 26: The work of the audit committee
The Audit Committee is chaired by Laurence Mutch and comprises Philip Snaith, Laurence Mutch and Hemant
Thanawala, all of whom have recent and relevant financial experience and have competence in the oil sector. 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 committee meets at least four times a year and is responsible for monitoring
the integrity of the financial statements of the Company, keeping under review the scope and results of the audit, its
cost effectiveness and the independence and objectivity of the auditors. The committee provides advice on whether
the annual report and accounts are fair, balanced and understandable. Due to the size of the Company, there is
currently no internal audit function, although the committee has oversight responsibility for public reporting, overall
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 good governance and the Company’s internal controls. The committee annually assists management in the formal and
robust assessment of the Company’s risks. Other members of the Board, as well as the auditors, are invited to attend
the Audit Committee meetings as and when appropriate.
Significant Issues
The significant issues considered relating to the financial statements were Going Concern, the Valuation of Intangible
Assets and Management override of controls. The subject of Going Concern is covered in the Strategic Report on Page
11, in the Auditors Report on Page 30 and in Note 3 to the Financial Statements. The Valuation of Intangible Assets is
addressed in the Auditors Report on Page 32 and in Note 2.9 to the Financial Statements.
No Internal Audit function
An internal audit function is not appropriate at this time given the Company’s current size, but in view of this, the
Audit Committee and the Auditors view the risk of management override of controls a significant issue. In making their
assessment the Auditors considered specifically the controls over journals, any indication of unusual transactions and
any evidence of bias in the estimates made by management. The Auditors conclusion was that there is no evidence of
inappropriate management override of controls, and the Audit Committee endorsed this conclusion.
Assessment and Safeguarding the Independence and Effectiveness of the external audit process
Following a selection process conducted by the Audit Committee, Crowe U.K. LLP were appointed as auditors on 23
May 2011, and are reappointed each year by ordinary resolution put before the AGM. The committee has not identified
any issues with regards to integrity, objectivity and independence of the Auditors and therefore consider them to be
independent.
Provision 27: Board responsibility in preparing the accounts
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. In addition, the Board is responsible for preparing the annual report and
accounts, and considers this annual report and accounts, taken as a whole, to be fair, balanced and understandable,
and that it provides the information necessary for shareholders to assess the company’s position, performance,
business model and strategy.
Provision 28: Assessments of the Company’s Risks
Each year in the second quarter, the Audit Committee assists the Executive Team in a structured zero-based re-
assessment of the Company’s emerging and principal risks. This is conducted for each project and organisational
level including the Company’s research and development facility, QRF, and then aggregated for the Company as a
whole. The risk level is determined by its probability, impact on the Company, and whether the risk has increased or
decreased over the last 12 months. A summary of “Principal Risks and Uncertainties” is reviewed at a Board meeting.
Subsequently a Risk Mitigation Strategy and Action Plan is incorporated into the annual Business Planning exercise
conducted in June. The Risk Strategy and Action Plan is reviewed each year by the auditors who consider this to be a
robust assessment to be regularly monitored.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
Provision 29: Risk Management and Internal Control systems.
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.
The Company has a digital Policies and Procedures Directory comprising some 100 policies in 22 business categories.
The Policies and Procedures are intentionally kept short so that these are easy to refer to and are “living” documents.
Of note, each of these is reviewed and signed off by at least one nominated director (executive or non-executive) who
is required to have considerable prior experience of the subject matter. Expenditure and other authorities are subject
to a tight Authorities Matrix, reviewed regularly by the Audit Committee. QFI has a comprehensive disaster recovery
plan which is tested on a regular basis.
The Board has established a Bribery Policy, signed by all Directors and employees, to achieve compliance with the UK
Bribery Act 2010, which came into effect on 1st July 2011. 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. The Company has recently
implemented a GDPR policy and has online training facilities for Bribery and Corruption, GDPR and General Data
Protection. Completion of this training is encouraged for all employees and directors.
Provision 30: Going Concern
The subject of Going Concern is covered in the Strategic Report on Page 11, in the Auditors Report on Page 30 and in
Note 3 to the Financial Statements.
Provision 31: The prospects of the company
The Outlook for the Company is addressed as part of the Chairman’s Statement on Pages 6–10.
Provision 41: Compensation Committee
The Compensation Committee is chaired by Philip Snaith and comprises Philip Snaith, Laurence Mutch and Hemant
Thanawala. 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 committee works within the framework of a regularly reviewed compensation policy approved by the Board. It
meets at least twice a year and conducts performance appraisals of the Company and the Executive Chairman against
previously determined corporate performance targets adopted by the Board. External guidance is sought as necessary
in setting the terms of senior executive compensation including the award of bonuses and / or 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.
In determining executive director compensation, the committee places considerable importance on proportionality,
clearly linking remuneration to the delivery of long-term objectives and corporate strategy. In view of the
disappointing performance of the past year, no bonuses or share options were awarded to the Executive Team. In
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 designing remuneration policy, the committee has endeavoured to incorporate the principles of clarity, simplicity, and
predictability. As an external measure, the committee refers to remuneration surveys of AIM companies of similar size
and complexity, when these are readily available. Shareholder views on compensation have been expressed at the
AGM and in other meetings, and the committee has taken these and the company’s performance into account in its
deliberations. The committee nevertheless retains an attitude of applying discretion when this is applicable in regard
to outstanding individual performance.
The Report on Directors’ Remuneration is on Page 20.
Laurence Mutch
Chairman of the Audit Committee
21 September 2018
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
Independent Auditors’ Report
to the Shareholders of
Quadrise Fuels International plc
Opinion
We have audited the financial statements of Quadrise Fuels plc (the “Parent Company”) and its subsidiaries (the
“Group”) for the year ended 30 June 2018, which comprise:
n the Group statement of comprehensive income for the year ended 30 June 2018;
n the Group and Parent Company statements of financial position as at 30 June 2018;
n the Group and Parent Company statements of cash flows for the year then ended;
n the Group and Parent Company statements of changes in equity for the year then ended; and
n the notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the 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 2018 and of the Group’s loss for the period then ended;
n the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union;
n the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union as applied in accordance with the provisions of the Companies Act 2006; and
n the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are independent of the Group 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
Material Uncertainty Related to Going Concern
We draw attention to Note 3 of the financial statements which indicates further funding will be required to finance
the Group’s and Parent Company’s operations. The Directors are confident that the Parent Company will be able to
raise these funds however there is no binding agreement in place at the date of this report.
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These conditions indicate the existence of a material uncertainty and may cast doubt on the ability of the Group and
Parent Company to continue as a going concern. Our opinion is not modified in respect of this matter. The financial
statements do not include the adjustments that would result if the Group and Parent Company were unable to
continue as a going concern.
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 £230,000, based on 7% of the 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 £7,000. 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.
In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined
the matters described below to be the key audit matters to be communicated in our report. This is not a complete list
of all risks identified by our audit.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
Key audit matter
How the scope of our audit addressed the key audit matter
Valuation of intangible assets
The MSAR® trade name, which 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 Group and the Parent Company and their environment obtained in
the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
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:
32
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 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.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
Stephen Bullock
Senior Statutory Auditor
For and on behalf of
Crowe U.K. LLP
Statutory Auditor, London
21 September 2018
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.
33
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Consolidated Statement
of Comprehensive Income
For the year ended 30 June 2018
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 2018
£’000s
Year ended
30 June 2017
£’000s
Notes
9
(2,002)
(1,518)
(53)
(3)
(3,567)
(7)
18
(3,556)
294
(3,262)
(0.38)p
(0.38)p
126
(2,367)
(1,818)
(242)
(10)
(4,311)
(10)
19
(4,302)
213
(4,089)
(0.48)p
(0.48)p
17
5
8
9
9
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Consolidated Statement of Financial Position
As at 30 June 2018
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 2018
£’000s
As at
30 June 2017
£’000s
Notes
10
11
14
15
16
18
19
19
961
2,924
3,885
2,229
188
122
61
2,600
6,485
400
400
8,622
73,642
3,432
522
(80,133)
6,085
6,485
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
The financial statements, accompanying policies and notes 1 to 26 (forming an integral part of these financial statements),
were approved and authorised for issue by the Board on 21 September 2018 and were signed on its behalf by:
M. Kirk
Chairman
J. Miles
Director
35
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Consolidated Statement of Changes in Equity
For the year ended 30 June 2018
Issued
Capital
£’000s
Share
Premium
£’000s
Share
Option
Reserve
£’000s
Reverse
Acquisition
Reserve
£’000s
Accumulated
Losses
£’000s
1 July 2016
8,096
69,216
4,704
522
(74,349)
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
1 July 2017
Loss and total
comprehensive loss for
the year
Share option charge
Transfer of balances
relating to expired
share options
-
-
-
526
8,622
8,622
-
-
-
-
-
-
4,426
73,642
73,642
-
-
-
30 June 2018
8,622
73,642
-
242
(1,242)
-
3,704
3,704
-
53
(325)
3,432
-
-
-
-
522
522
-
-
-
522
(4,089)
-
1,242
-
(77,196)
(77,196)
(3,262)
-
325
(80,133)
For an explanation of the nature and purpose of other reserves refer to note 19.
Total
£’000s
8,189
(4,089)
242
-
4,952
9,294
9,294
(3,262)
53
-
6,085
36
Consolidated Statement of Cash Flows
For the year ended 30 June 2018
Operating activities
Loss before tax from continuing operations
Depreciation
Finance costs paid
Finance income received
Share option charge
Working capital adjustments
Decrease/(increase) in trade and other receivables
Decrease/(increase) in prepayments
Increase/(decrease) in trade and other payables
Increase in stock
Cash utilised in operations
Finance costs paid
Taxation received
Net cash outflow from operating activities
Investing activities
Finance income received
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
10
17
15
16
8
10
Net (decrease)/increase 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
14
Year ended
30 June 2018
£’000s
Year ended
30 June 2017
£’000s
(3,556)
(4,302)
230
7
(18)
53
114
31
153
-
(2,986)
(7)
294
(2,699)
18
(135)
(117)
-
-
(2,816)
5,045
2,229
211
10
(19)
242
(5)
(33)
(329)
(61)
(4,286)
(10)
213
(4,083)
19
(111)
(92)
4,952
4,952
777
4,268
5,045
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Company Statement of Financial Position
As at 30 June 2018
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 2018
£’000s
As at
30 June 2017
£’000s
Notes
10
13
14
15
16
18
19
42
29,783
29,825
1,709
113
73
1,895
31,720
287
287
8,622
73,642
3,432
(54,263)
31,433
31,720
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
The loss for the year dealt with in the accounts of Quadrise Fuels International plc was £63,000 (2017: £330,000).
The financial statements, accompanying policies and notes 1 to 26 (forming an integral part of these financial
statements), were approved and authorised for issue by the Board on 21 September 2018 and were signed on its behalf
by:
M. Kirk
Chairman
J. Miles
Director
38
Company Statement of Changes in Equity
For the year ended 30 June 2018
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
1 July 2017
Loss and total comprehensive
loss for the year
Share option charge
Transfer of balances relating
to expired share options
Issued
Capital
£’000s
8,096
-
-
-
526
8,622
8,622
-
-
-
Share
Premium
£’000s
Share Option
Reserve
£’000s
Accumulated
Losses
£’000s
69,216
4,704
(55,437)
-
-
-
4,426
73,642
73,642
-
-
-
-
242
(1,242)
-
3,704
3,704
-
53
(325)
3,432
(330)
-
1,242
-
(54,525)
(54,525)
(63)
-
325
(54,263)
30 June 2018
8,622
73,642
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Total
£’000s
26,579
(330)
242
-
4,952
31,443
31,443
(63)
53
-
31,433
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Company Statement of Cash Flows
For the year ended 30 June 2018
Year ended
30 June 2018
£’000s
Year ended
30 June 2017
£’000s
Notes
Operating activities
Loss before tax from continuing operations
Depreciation
Finance costs paid
Finance income received
Share option charge
Working capital adjustments
Decrease in trade and other receivables
Decrease/(increase) in prepayments
Increase/(decrease) in trade and other payables
Cash generated by/(utilised in) operations
Finance costs paid
Net cash inflow/(outflow) from operating activities
Investing activities
Finance income received
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
10
17
15
16
10
13
Net (decrease)/increase 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
14
(63)
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1
(18)
53
26
25
173
236
(1)
235
18
-
(3,364)
(3,346)
-
-
(3,111)
4,820
1,709
(330)
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
40
Notes to the Financial Statements
1. General Information
Quadrise Fuels International plc (“QFI”, “Quadrise”, “Company”) and its subsidiaries (together “the Group”) are engaged
principally in the manufacture and marketing of emulsion fuel for use in power generation, industrial and marine diesel
engines and steam generation applications. The Company’s ordinary shares are listed on the AIM market of the London
Stock Exchange.
QFI was incorporated on 22 October 2004 as a limited company under UK Company Law with registered number
05267512. It is domiciled at, and is registered at, Gillingham House, 38-44 Gillingham Street, London, SW1V 1HU.
2. Summary of Significant Accounting Policies
The Board has reviewed the accounting policies set out below and considers them to be the most appropriate to the
Group’s business activities.
(2.1) Basis of Preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS’s”)
as adopted by the European Union, and effective, or issued and early adopted, as at the date of these statements. The
financial statements have been prepared under the historical cost convention as modified for financial assets carried
at fair value.
At the date of authorisation of these financial statements, a number of Standards and Interpretations were in issue
but not yet effective. IFRS 15 (revenue from contracts with customers), IFRS 9 (financial instruments) and IFRS 16
(leases) require adoption by the Group in the next financial year.
The directors do not conclude 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, would have a material effect on these
financial statements. Due to the immateriality of revenues for 2018, adoption of IFRS 15 would have no material effect.
IFRS 9 does not apply to the operations of the Group, and as the Group has no material leases as at 30 June 2018, the
adoption of IFRS 16 would have no material effect.
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 2018.
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
41
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
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:
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 2018 is determined to be £2.9m (2017: £2.9m). Further
details are given in Note 11.
(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.
(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
42
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
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. 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
USA
EUR
Statement of Financial Position
(closing rate at 30 June 2018)
Statement of Comprehensive Income
(average rate throughout the financial year)
1.315
1.129
1.348
1.130
USA
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
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
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reviewed annually to determine whether indefinite life assessment continues to be supportable and, if not, the change
in the useful life assessment from indefinite to finite is made on a prospective basis.
Research expenditure is recognised as an expense when it is incurred.
Development expenditure is recognised as an expense except that costs incurred on development projects are
capitalised as long-term assets to the extent that such expenditure is expected to generate future economic benefits.
(2.10) Property, plant and equipment:
Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using a
straight line method with an allowance for estimated residual values. Rates are determined based on the estimated
useful lives of the assets as follows:
Plant and equipment
3 to 15 years
Additions to property, plant and equipment are comprised of the cost of the contracted services, direct labour and
materials. Depreciation commences in the month the asset is placed in service.
(2.11) Financial Instruments
Financial assets and liabilities are recognised in the Group’s statement of financial position when the Group becomes
a party to the contractual provisions of the instrument. The Group currently does not use derivative financial
instruments to manage or hedge financial exposures or liabilities.
(2.12) Investments and other Financial Assets
Financial assets are classified as either financial assets at fair value through profit and loss, loans and receivables, held
to maturity investments or available for sale financial assets, as appropriate. When financial assets are recognised
initially, they are at fair value. The Group determines the classification of its financial assets at initial recognition and,
where allowed and appropriate, re-evaluates this designation at each financial year-end.
Investments in Subsidiaries
Investments in subsidiaries are carried at cost less impairment. The Company tests investments annually for
impairment, or more frequently if there are indications that they might be impaired. Impairment is based on the value
in use of the subsidiaries.
Available for Sale Investments
Available for sale investments are those non-derivative financial assets that are designated as available for sale or are
not classified as loans and receivables, held to maturity investments or financial assets at fair value through profit
and loss. After initial recognition, available for sale financial assets are measured at fair value with gains or losses
being recognised as a separate component of equity until the investment is derecognised or until the investment is
determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in the
statement of comprehensive income.
44
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 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) 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:
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
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.
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.
(2.17) Employee Retirement Benefits
The Group maintains a defined contribution pension plan for providing employee retirement benefits. The retirement
benefit plan is generally funded by contributions from the Group to an independent entity that operates the
retirement benefit schemes. Current service cost for the defined contribution plan 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.
(2.18) 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. 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.
46
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 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.
(2.19) 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, 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.
(2.20) 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 a cash balance of £2.2m as at 30 June 2018. The Directors acknowledge that this cash balance will not
be sufficient to cover the Group’s operating requirements up to 30 June 2019. These conditions indicate the existence
of material uncertainty which may cast significant doubt about the Group’s and Company’s ability to continue as a
going concern.
The Directors determine that the continuation of the Group as a going concern is dependent upon successfully raising
sufficient funds in the short term, and have a reasonable expectation that such funds will be raised, although no
binding funding agreement is in place at the date of this report. The Directors therefore have determined that it is
appropriate to prepare the financial statements on a going concern basis
The financial statements do not include the adjustment which would result if the Group and Company were unable to
continue as a going concern.
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.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
Year ended
30 June 2018
£’000s
Year ended
30 June 2017
£’000s
15
15
8
269
230
17
17
7
219
211
Year ended
30 June 2018
Number
Year ended
30 June 2017
Number
2
10
3
12
Year ended
30 June 2018
£’000s
Year ended
30 June 2017
£’000s
1,316
162
84
1,562
1,530
193
97
1,820
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
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
48
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 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 - as paid
Wages and salaries – deferred1
Pension costs
Hemant Thanawala
Wages and salaries - as paid
Wages and salaries – deferred1
Pension costs
Jason Miles
Wages and salaries – as paid
Pension costs
Total
Aggregate emoluments of the Directors of the Company
(excluding social security costs) were as follows:
Salaries and fees – as paid
Salaries and fees – deferred1
Share option expense
Pension costs
Total
Year ended
30 June 2018
£’000s
Year ended
30 June 2017
£’000s
102
91
14
207
102
5
8
115
200
16
216
538
458
122
42
38
660
177
-
14
191
158
-
13
171
229
15
244
606
676
-
193
42
911
1 - With effect from 1st September 2017, Mike Kirk agreed to reduce his cash salary by 50% and the Non-executive Directors each agreed to reduce their fees
to £24,000 per annum. The unpaid balance has been deferred for potential future payment, with an uplift of 25% due on the unpaid balance which is included
above.
Non-executive Directors fees for the year amounted to £80k (2017: £83k), this includes a deferred element of £26k.
Consulting fees paid to non-executive Directors for the year amounted to £nil (2017: £30k).
The highest paid Director’s remuneration totalled £216k (2017: £244k), represented by all aggregate emoluments.
Refer to the Report of Directors’ Remuneration (on page 20) 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 22 – Related Party Transactions.
7. Losses Attributable to Quadrise Fuels International plc
As provided by s.408 of the Companies Act 2006, no statement of comprehensive income is presented in respect of
Quadrise Fuels International plc.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
8. Taxation
UK corporation tax credit
Total
No liability in respect of corporation tax arises as a result of trading losses.
Tax Reconciliation
Loss on continuing operations before taxation
Loss on continuing operations before taxation multiplied by
the UK corporation tax rate of 19% (2017: 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 2018
£’000s
(294)
(294)
Year ended
30 June 2017
£’000s
(213)
(213)
Year ended
30 June 2018
£’000s
Year ended
30 June 2017
£’000s
(3,262)
(620)
51
(294)
569
(294)
(4,302)
(860)
91
(213)
769
(213)
The Group has tax losses arising in the UK of approximately £49.5m (2017: £47.3m) that are available, under current
legislation, to be carried forward against future profits. £21.5m (2017: £19.1m) of the tax losses carried forward represent
trading losses within Quadrise Fuels International plc, £25.8m (2017: £25.8m) represent non-trade deficits arising on
intangible assets within Quadrise International Limited, £1.3m (2017: £1.6m) represent pre-trading losses incurred by
subsidiaries, £0.8m (2017: £0.8m) represent management expenses incurred by Quadrise International Limited, and
£0.1m (2017: £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 £8.4m (2017: £8.0m) has not been recognised as a result of existing uncertainties in relation to its realisation.
9. 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
50
Year ended
30 June 2018
Year ended
30 June 2017
(3,262)
(4,089)
862,204,976
862,204,976
846,102,956
846,102,956
(0.38)p
(0.38)p
(0.48)p
(0.48)p
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
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 22.0m 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.
10. 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 2017
Additions
Closing balance – 30 June 2018
Depreciation
Opening balance – 1 July 2017
Depreciation charge for the year
Closing balance – 30 June 2018
Net book value at 30 June 2018
107
59
166
(67)
(42)
(109)
57
91
-
91
(47)
(16)
(63)
28
43
-
43
(31)
(5)
(36)
7
16
-
16
(15)
(1)
(16)
-
1,352
76
1,428
(393)
(166)
(559)
1,609
135
1,744
(553)
(230)
(783)
869
961
Company
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
Software
£’000s
Office
Equipment
£’000s
Plant and
Machinery
£’000s
Total
£’000s
Cost
Opening balance – 1 July 2017
Additions
Closing balance – 30 June 2018
Depreciation
Opening balance – 1 July 2017
Depreciation charge for the year
Closing balance – 30 June 2018
Net book value at 30 June 2018
107
-
107
(68)
(22)
(90)
17
68
-
68
(40)
(11)
(51)
17
44
-
44
(31)
(5)
(36)
8
16
-
16
(15)
(1)
(16)
-
-
-
-
-
-
-
-
235
-
235
(154)
(39)
(193)
42
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
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
Closing balance – 30 June 2017
Depreciation
Opening balance – 1 July 2016
Depreciation charge for the year
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
Cost
Opening balance – 1 July 2016
Additions
Closing balance – 30 June 2017
Depreciation
Opening balance – 1 July 2016
Depreciation charge for the year
Closing balance – 30 June 2017
Net book value at 30 June 2017
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
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
11. Intangible Assets
Consolidated
Cost
QCC Royalty
Payments
£’000s
MSAR®
Trade Name
£’000s
Technology
and Know-How
£’000s
Total
£’000s
Balance as at 1 July 2017 and 30 June 2018
7,686
3,100
25,901
36,687
Amortisation and Impairment
Balance as at 1 July 2017 and 30 June 2018
Net book value at 30 June 2018
Cost
(7,686)
-
(176)
2,924
(25,901)
-
(33,763)
2,924
Balance as at 1 July 2016 and 30 June 2017
7,686
3,100
25,901
36,687
Amortisation and Impairment
Balance as at 1 July 2016 and 30 June 2017
Net book value at 30 June 2017
(7,686)
-
(176)
2,924
(25,901)
-
(33,763)
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, but the QCC royalty payments intangible asset
became fully impaired in 2012.
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 amortised in 2012. The Group does not have any internally
generated intangibles.
The recoverable amount of intangible assets is determined based on a ‘value in use’ calculation using cash flow forecasts
derived from the most recent financial model information available. These cash flow forecasts extend to 30 June 2035 to
ensure the full benefit of all current projects is realised. The rationale for using a timescale up to 2035 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 intangible, the pre-tax discount rate applied to the cash flow projections is 20% (2017: 12%)
and the growth rate used for the extrapolation of cash flows beyond budgeted projections is 0% (2017: 2.5%). As a result
of the operational developments during the financial year, the Directors have adjusted the rates used in the 2018 ‘value in
use’ calculations.
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
A 5% increase in the discount rate used would result in no impairment charge for the MSAR® trade name intangible.
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 2018.
12 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 2018. The shares in each of these companies were valued at CAD $nil on 1
July 2017. Shareholder communications received during the year to 30 June 2018 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 2018.
13. Investments in Subsidiaries
Company
30 June 2018
£’000s
Company
30 June 2017
£’000s
26,419
3,364
29,783
22,390
4,029
26,419
Direct Investment
Opening balance
Long term loans advanced
Closing balance
54
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 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 2018 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 2018. Holdings in subsidiaries are detailed in note 24.
14. Cash and Cash Equivalents
Cash at bank
Total
15. Trade and Other Receivables
Trade receivables
Other receivables
Other taxes
Total
Consolidated
30 June 2018
£’000s
Consolidated
30 June 2017
£’000s
Company
30 June 2018
£’000s
2,229
2,229
5,045
5,045
1,709
1,709
Company
30 June 2017
£’000s
4,820
4,820
Consolidated
30 June 2018
£’000s
Consolidated
30 June 2017
£’000s
Company
30 June 2018
£’000s
Company
30 June 2017
£’000s
11
96
81
188
54
109
139
302
-
91
22
113
-
110
29
139
Group receivables of £nil (2017: £15k) and Company receivables of £nil (2017: nil) were past due at year-end.
16. Trade and Other Payables
Trade payables
Other taxes
Accruals
Total
Consolidated
30 June 2018
£’000s
Consolidated
30 June 2017
£’000s
Company
30 June 2018
£’000s
Company
30 June 2017
£’000s
106
44
250
400
107
68
72
247
55
24
208
287
33
40
41
114
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 2018 amount to 23 days (2017: 17 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 (2017:£nil).
55
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
17. 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 2018
24,000,000
-
-
(1,500,000)
-
22,500,000
22,000,000
WAEP
(Pence)
30 June 2018
27.41
-
-
35.16
-
26.90
27.30
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
27.41
29.95
The weighted average remaining contractual life of the 22.5 million options outstanding at the statement of financial
position date is 4.23 years (2017: 5.23 years). The weighted average share price during the year was 5.55p (2017: 9.59p)
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
Group. Options may be also exercised within one year of an employee leaving the Group at the discretion of the Board.
The Company issued no share options to employees during the year (2017: 0.5 million). In 2017, the weighted average
exercise price of options issued was 9.03p and the weighted average fair value was 2.60p.
The fair value was calculated using the Black Scholes option pricing model. The weighted average inputs were as
follows:
2018
-
-
-
-
-
2017
5.94p
9.03p
0.25%
72.3%
4 years
Stock price
Exercise price
Interest rate
Volatility
Expected term
56
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 18. Share Capital
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 (2017: 862,204,976) Ordinary shares of £0.01 each
8,622,050
8,622,050
2018
£
2017
£
19. 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. .
20. Pension Commitments
For direct employees of Quadrise Fuels International plc, the Company contributes between 7% and 8% of salary to a
defined contribution pension scheme. Pension cost to the Company for the year amounted to £84k (2017: £97k).
21. 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 2018
£’000s
Consolidated
30 June 2017
£’000s
Company
30 June 2018
£’000s
Company
30 June 2017
£’000s
Financial assets
Loans and receivables – Cash and cash equivalents
Loans and receivables – Trade and other receivables
2,229
188
5,045
163
1,709
113
4,820
109
Financial liabilities
Other financial liabilities – Trade and other payables
150
178
79
74
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
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 2018 were assets of US$48k (2017: US$19k) and €99k (2017:
liabilities of €268k).
A 10% strengthening of Sterling against the Euro at the statement of financial position date would have increased loss
for the year by £9k (2017: reduction in loss of £20k) whilst a 10% weakening of Sterling against the Euro would have
reduced loss for the year by £10k (2017: increase in loss of £22k). This analysis assumes that all other variables remain
constant.
A 10% strengthening of Sterling against the US$ at the statement of financial position date would have increased loss
for the year by £4k (2017: £2k) whilst a 10% weakening of Sterling against the US$ would have reduced loss for the year
by £5k (2017: £2k). 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 £21k (2017: £50k) per annum. A decrease in interest rates of 1% will increase loss for the year by
approximately £6k (2017: £18k) per annum.
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 £188k at 30 June 2018 (2017: £297k), of which £nil (2017: £nil) was receivable from related
parties. Receivables of £188k 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.
58
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 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 2018.
22. 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 £nil (2017: £30k). The balance payable
at the statement of financial position date was £nil (2017: £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.
23. 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. .
24. 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
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.
59
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QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018
25. Commitments and Contingencies
The Group and the Company have entered into commercial leases for the rental of operational and office premises.
The leases expire on 28 February 2019 and 25th March 2019, and there are no restrictions placed on the Group or
Company by entering into these leases. The minimum future lease payments for non-cancellable leases are as follows:
Consolidated
30 June 2018
£’000s
Consolidated
30 June 2017
£’000s
Company
30 June 2018
£’000s
Company
30 June 2017
£’000s
Operational and office premises
One year
Two to five years
96
-
106
81
81
-
106
81
Additionally, the Group and the Company have no capital commitments or contingent liabilities as at the statement of
financial position date.
26. 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.
60
QUADRISE FUELS INTERNATIONAL plc | ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 2018 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
Broker
Stockdale Securities
100 Wood Street
London
EC2V 7A
Solicitors
Bircham Dyson Bell
50 Broadway
London
SW1H 0BL
Registrars
Share Registrars Ltd
The Courtyard
17 West Street
Farnham
Surrey
GU9 7DR
Auditors
Crowe U.K. LLP
St Bride’s House
10 Salisbury Square
London
EC4Y 8EH
Bankers
Coutts & Co
440 Strand
London
WC2R 0QS
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Printed by Swan Press Ltd, Shoreham-by-Sea • www.swanpress.co.uk
Front cover design: Vivid • vividcontentagency.com
Design and typesetting: Louis Mackay • www.louismackaydesign.co.uk
Gillingham House • 38–44 Gillingham Street • London SW1V 1HU
t: +44 (0) 20 7031 7321 • f: +44 (0) 20 7031 7339
www.quadrisefuels.com