S y m p h o n y E n v i r o n m e n t a l T e c h n o l o g i e s p l c A n n u a l R e p o r t & A c c o u n t s 2 0 1 4 Making plastic smarter Symphony Environmental Technologies plc Annual Report & Accounts 2014 Symphony Environmental Technologies plc, operates globally and specialises in developing and marketing a wide range of innovative plastic products and other environmental technologies. In particular: > Symphony is the world leader in Controlled-life Plastic and sells both pro-degradant additives and finished plastic products. Our d2w additive is the only technology of this type to be awarded an Eco-Label, distinguishing it from all other oxo-biodegradable products on the market. > Symphony has developed a range of anti-bacterial and anti-fungal additives, trademarked d2p – “designed to protect” which can be incorporated into almost any kind of plastic, to protect against contamination. > Symphony has developed systems, trademarked d2t, to provide a unique identity to almost any kind of product, to guard against counterfeiting. > Symphony has developed an odour adsorber technology for plastic products. > Symphony’s products are marketed through a network of distributors serving nearly 100 countries worldwide. BUSINESS REVIEW 01 Highlights 02 Symphony at a glance 04 Chairman’s statement 06 Chief Executive’s review 08 Products 12 Global Network and Technical Services 13 Corporate social responsibility CORPORATE GOVERNANCE 14 Board of Directors 16 Strategic Report 17 Directors’ Report 18 Remuneration Report 19 Independent Auditor’s Report FINANCIAL STATEMENTS 20 Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position 22 Consolidated Statement of Changes in Equity 21 23 Consolidated Cash Flow Statement 24 Notes to the Annual Report and Accounts 45 Company Balance Sheet 46 Notes to the Company Balance Sheet A MULTI-BILLION DOLLAR MARKET… AND GROWING Playing safe Wader of Poland were the first children’s toy manufacturer to include our d2p anti-bacterial plastic technology in toys. Not bringing home more than you bargained for… Symphony launched a bag4life made with our d2p anti-bacterial technology. Combining technologies Garbage sacks containing oxo-biodegradable AND anti-bacterial technologies. Sweet smell of success Our new Odour Adsorber inhibits the development of odour in plastic products. Baby steps 2014 saw the highly successful launch of a range of baby products containing d2p. d2w and d2p products and additives are sold worldwide either directly to customers or, increasingly, through a growing network of authorised Distributors and Agents. A MULTI-BILLION DOLLAR MARKET… AND GROWING TONNES OF PLASTIC IS PRODUCED GLOBALLY 300MILLION 7% OF PLASTIC IS RECYCLED IN THE EU > 300 million tonnes of polymer products are produced in the world every year. > Conventional plastics can take many decades to break down. > A limited amount is recycled. > Extensive tests by Roediger laboratories have concluded that plastic products made with oxo-biodegradable technology may be recycled without any significant detriment to the newly formed recycled product. (Report – May 2012 & December 2013). > In an LCA (life cycle assessment) performed by Intertek (Report – May 2012) the d2w plastic performed better than any other material for making shopping bags. > Antibiotic resistance is a growing problem worldwide, with anti-microbial plastics predicted to be one of the fastest growing sectors in the industry. Baby steps 2014 saw the highly successful launch of a range of baby products containing d2p. 01 Highlights 2014 > Revenues decreased 12% to £6.35 million (2013: £7.19 million) > Gross profit decreased 11% to £3.16 million (2013: £3.55 million) > Operating loss reduced by 63% to £0.27 million (2013: loss £0.73 million, including £0.57 million non-recurring expenditure) > Loss after tax reduced by 56% to £0.31 million (2013: loss £0.71 million) > R&D costs included in loss, £0.41 million (2013: £0.55 million) > Plastics Sales and R&D Division EBITDA profit £0.08 million (2013: profit £0.22 million) > Recycling Technologies Division EBITDA loss £0.20 million (2013: loss £0.81 million) > Basic loss per share reduced by 58% to 0.23p (2013: loss per share 0.55p) > Cash used in operations reduced by 88% to £0.10 million (2013: £0.81 million) > Directors’ shareholding increased to 24.9% (2013: 19.5%) > £1.58 million raised in equity placing on 17 November 2014 > Awarded ABNT Eco-Label in January 2015 Pg 02 Symphony at a glance Pg 06 Chief Executive’s review Pg 08 For more information on our products For more information visit: www.symphonyenvironmental.com www. symphonyenvironmental. com/corporate Symphony Environmental Technologies plc Annual Report & Accounts 2014 FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEW 02 Symphony at a glance FROM A ONE PRODUCT COMPANY TO A BROAD TECHNOLOGIES GROUP Symphony is an international company, reaching every corner of the globe. We have a growing number of distributors giving us a presence in nearly 100 countries worldwide. PRODUCT INFORMATION OVERVIEW d2w is a masterbatch system which, when included in the manufacturing stage turns ordinary plastic at the end of its useful life into a material with a different molecular structure. At that stage it is no longer a plastic and has become a material which is inherently biodegradable in the open environment in the same way as a leaf. www.symphonyenvironmental.com/ degradable/d2w-controlledlife-plastic/ what-is-d2w/ See pages 08–09 OVERVIEW d2p is a masterbatch system with a family of products that provides protection from fungi, bacteria, odours and insects, amongst others . The active ingredients in d2p anti-microbial products have been successfully tested against over 50 common organisms and dangerous bacteria, such as MRSA, E.coli, Salmonella, Listeria, Pseudomonas and Aspergillus Niger. www.symphonyenvironmental.com/files/ uploaded/environmental/d2p%20ab.pdf www.symphonyenvironmental.com/files/ uploaded/environmental/d2p%20af.pdf See pages 10–11 Symphony Environmental Technologies plcAnnual Report & Accounts 2014 03 d2w PRODUCTS – Food packets – Bubble wrap – Cling film – Carrier bags – Frozen food packaging – Garbage sacks/ Bin liners – Gloves and aprons – Newspaper and magazine wrappers – Bottles, tubs and cups – Shrink wrap and pallet wrap d2p PRODUCTS – Agriculture – Clothing and accessories – Credit/debit cards – Electronic devices – Home: roofing, wall cladding and decking, tubing, piping, bed pans – Pet food packaging – Refuse sacks and long-life carrier bags – Sanitary: toilet seats, shower heads, shower curtains, hand dryers, toothbrush handles – Sports: ski boots, bowling shoes, insoles – Transportation: car interiors, tube, train, plane – Cutting/chopping boards – Flexible food packaging – Food containers – Fridges – Kitchen worktop coating – Kitchen utensils – Table cloths – Water coolers 75DISTRIBUTORS 97COUNTRIES OVERVIEW d2t is a suite of technologies that provide anti-counterfeiting performance. They offer the ability to determine the authenticity of your plastic packaging and other plastic products through a unique and sophisticated tracer system. d2t complements Symphony’s portable d2Dectector device. OVERVIEW The d2Detector is a portable XRF (X-ray) device that allows customers, and the authorities in countries with relevant legislation, to determine in less than 60 seconds whether or not a plastic product contains d2w, d2p or d2t additives as specified, and whether it contains any undesirable substances. See page 11 www.youtube.com/watch?v=jTlQRGZnrgg See page 11 FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 04 Chairman’s statement Nirj Deva, DL, FRSA, MEP Oxo-biodegradables are now seriously debated in the world’s largest markets including the European Union where they are trying to resolve the problems of waste minimisation and reducing plastic litter. The need for change is more apparent than before and oxo-biodegradables are in the right space at the right time. We were pleased that in March 2015, Symphony’s Chief Executive, Michael Laurier, was a speaker at the International Conference on the marine environment at the United Nations. We remain optimistic about our product positioning and are particularly pleased with certain external recognitions thereof, such as the recent award to Symphony of the prestigious ABNT Eco-Label. ABNT is accredited by INMETRO for certification of products, and INMETRO is a member of the International Accreditation Forum. The criteria for awarding an Eco-Label are to preserve environment quality and minimise pollution caused by production, use and disposal of products and services. Significant development work was undertaken during the year for both of our two main technologies, such costs totalling £0.41 million in the year (2013: £0.55 million). In addition, a new high-tech R&D facility was opened in May 2014 by our local mayor at our Head Office in Borehamwood, UK. We choose to make these significant investments in R&D as we see potential future demand for a broadened technology range. Our d2p “designed to protect” range has now increased to six product lines encompassing many different formulations including anti-microbial, odour adsorbing and insect repellent. Trials continue in many countries on end-products including toys, cutting boards, water pipes, tooth brushes, bags-for-life and gloves amongst many others. Some of these developments are with global multi-billion pound organisations. Trials and evaluations for both d2w and d2p products can take many years, especially with larger organisations. These are sometimes complex processes involving many departments and many personnel within the end-user including purchasing, marketing, technical, and product development. We have a large pipeline which ages from over two years to current covering many types of organisation in countries throughout our whole global distribution network, with a number of trials close to decision time. I am pleased to report a 63% reduction in the operating loss from £0.73 million in 2013 to £0.27 million in 2014. The loss in 2013 included £0.57 million of non-recurring expenditure (2014: £nil). Cash used in operations reduced by 88% to just £0.10 million in 2014 from £0.81 million in 2013. IDENTIFYING GROWTH OPPORTUNITY The balance sheet was strengthened in the final quarter after an equity placing raised £1.58 million in November 2014. Group revenues reduced by 12% from £7.19 million in 2013 to £6.35 million in 2014. Revenues are mainly derived from d2w masterbatch sales, and these had been affected by timing issues in a number of markets. As previously reported, legislative momentum in favour of d2w type products continues in several countries. Whilst there have been delays in implementation and enforcement of the legislation in certain jurisdictions, our local distributors have recently noticed material progress in this area. However, the Board remains cautious over the timing of sales in these locations. World’s first d2p bag 4 life. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 05 C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S However, due to the number of complexities involved in the final decision, whilst the projects are progressing well, the Board again remains cautious on timing of any sales from such trials and evaluations. In December 2014 Shaun Robinson was appointed to the Board of Symphony, and we are already grateful for his contribution to date. The Board is also pleased to have such strong commitment and support from Somerston Capital who participated in the placing in November 2014. This commitment to the business was reciprocated by Michael Laurier, with his purchase of an additional 750,000 shares at the time of the placing. With Shaun Robinson as a Board Director, the Directors’ have a beneficial interest in 24.9% of the Company’s ordinary shares (2013: 19.5%). I would like to thank the Board, the staff, and our Distributors for all their work in 2014, and we look forward to 2015 with confidence. N Deva DL FRSA MEP Chairman 10 April 2015 BUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.comKey Opportunities >Global business in nearly 100 countries. >In a multi-billion dollar market – 300 million tonnes of polymer produced annually. >Market set to grow at 4.4% per annum until 2020. >Anti-microbials predicted to be one of the fastest growing sectors. >Increasing legislation in favour of oxo-biodegradable plastic. >Huge potential in developing economies particularly Asia-pacific and Africa. >Continuing investment in R&D. 06 Chief Executive’s review Michael Laurier Trading results Group revenue decreased by 12% to £6.35 million (2013: £7.19 million), but Group gross profit margins increased slightly to 49.8% from 49.3% in 2013. The contribution from gross profit was £3.16 million (2013: £3.55 million). Recurring administrative expenses decreased by 8% to £3.26 million (2013: £3.53 million) due to the effect of savings implemented during 2013. Non-recurring administrative expense of £0.57 million were incurred in 2013 but there were no non-recurring items in 2014. Including non-recurring items, the Group made an operating loss of £0.27 million in 2014 compared to an operating loss of £0.73 million in 2013. This resulted in loss before tax of £0.39 million in 2014 (2013: loss £0.78 million). Excluding non-recurring items, the Group made an EBITDA loss of £0.14 million in 2014 (2013: loss £0.01 million) with an operating loss of £0.27 million (2013: loss £0.16 million). The Group reports a loss for the year of £0.31 million (2013: loss £0.71 million) with basic loss per share of 0.23 pence (2013: loss per share 0.55 pence). Development costs of £0.26 million were capitalised in 2014 (2013: £0.12 million), and the net book value of capitalised development costs at the end of the year amounted to £1.13 million. Further development expenditure of £0.41 million (2013: £0.55 million) was expensed directly to the statement of comprehensive income. Capitalised development costs represent 8% of expenses as detailed above. Within the total amount of £1.13 million capitalised to date less amortisation and impairment, £0.16 million relates to d2w products which have been developed and are being sold, while the balance of £0.97 million, relates to further environmental plastic applications still in development and where we believe significant revenues will be generated in the foreseeable future. The Group’s primary selling currency is the US Dollar. The Group self-hedges where possible by purchasing in US Dollars and has banking facilities in place in order to secure rates going forward. As at 31 December 2014 the Group had a net balance of US Dollar assets totalling $0.64 million (2013: $0.56 million). Segmental analysis The Group operates two business divisions being the Plastics Division (Symphony Environmental Limited or “SEL”) and the Much has been achieved in 2014 in the further development of our technologies, and product range. New IP formulations have been created, and major trials following signed agreements continue with some of the world’s largest companies. Michael Laurier was a guest speaker at the recent ‘One Ocean, Science for Sanctuaries Symposium’ held at the United Nations in New York. The commercial objectives have been clearly defined within each project and trial. The potential value, if only some of these trials succeed, is considerable. As a result, we have continued to invest resources into each project. Commercially for d2w, we have seen several countries either taking steps to enforce legislation or to pass new legislation in favour of oxo-biodegradable plastic technology. This is an unknown process so it has been difficult to predict timing or value, and as such, no material financial effect occurred in the year under review. For d2p, there is strong commercial interest to buy our technology, and small orders are now starting to be placed. We have continued to develop and process new formulations, conduct trials, and seek regulatory approvals in the countries and products that require these approvals. The d2p development has been significant since our formulations have expanded beyond polymer master-batch into active powders and liquids. The Group’s pre-tax loss for the year reduced to £0.39 million from £0.78 million in 2013. Within these losses, R&D expenditure of £0.41 million (2013: £0.55 million) was expensed in the statement of comprehensive income. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 DELIVERING AGAINST OUR STRATEGY 07 C O R P O R A T E G O V E R N A N C E evaluations. As stated above, there have been some orders to date, the volumes so far being small as expected. The new d2p bag4life, medical products, toys, food and non-food containers, and industrial packaging applications, are all areas where we expect substantial sales activity in the medium term. I am confident that our strategy will continue to work in a world that needs both of our main technologies d2w and d2p. Plastic pollution, health and food protection are, and will remain important concerns in today’s society. Our expectations for 2015 and beyond are to deliver positive and meaningful growth. Michael Laurier Chief Executive 10 April 2015 Recycling Technologies division (Symphony Recycling Limited or “SRT”). Within SEL there are two operating segments; “Plastics Sales” which generate and maintain revenues relating to plastic additives, masterbatches and finished products, and “Plastics R&D” which includes all new product development and research expenditure. Plastics Sales, which represent all Group sales, generated an EBITDA profit £0.49 million (2013: £0.78 million). Plastics R&D incurred an EBITDA loss of £0.41 million (2013: £0.55 million). SRT has no revenues to date and incurred expenditure of £0.22 million in the year, resulting in an EBITDA loss of the same amount (2013 expenditure and EBITDA loss: £0.81 million). As previously stated, the Board’s strategy is to commercialise SRT. We have reduced costs and are still investigating areas where this can be achieved. Cash flow The Group used cash of £0.10 million from operations (2013: cash used £0.81 million). The Group has a £1 million trade finance facility with HSBC Bank plc of which £0.15 million was drawn down as at 31 December 2014 (2013: £0.58 million). The invoice-finance facility increased in line with receivables. In addition to these facilities, the Group had borrowed a further £0.65 million through unsecured loans. These loans were repaid in January 2015. The Group had net cash in the bank of £0.59 million at the year-end (2013: £0.03 million), plus trade receivables of £1.27 million (2013: £1.16 million) and continues to work comfortably within its facilities. Outlook A positive trend clearly shows a strategy that is working across several key business drivers. The first being new legislation in support of oxo-biodegradable technology like d2w. The second is the enforcement and widening of the scope of existing legislation. The third is a gentle domino effect from the legislation together with a growing momentum of companies that want to upgrade their sustainability credentials without supply disruption or increased cost. The Group has seen an increase in d2w activity in the current year where there is legislation in place and indications of a strengthening position later in the year. There is a similar positive trend for the growing range of d2p products. Many of our global distributors have shown serious interest by requesting trials and product FINANCIAL STATEMENTSBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.comOur strategy is to deliver sustained revenue growth, improve and extend our product range and increase visibility and awareness of the Company and its achievements over the forthcoming year.MARKETS >We will continue to encourage legislation in favour of oxo-biodegradable plastic. >We will create value for end users and brand owners. >We will increase and defend our brand values. >We will strengthen our global distribution network. INVESTMENT >We will make continuous investment in research and development. >We will extend and improve our product range. 08 Products d2w controlled‑life technology The only biodegradable plastic additive to be awarded an Eco-Label. Garbage sacks containing d2w and d2p. ADDING OUR TECHNOLOGY TO PLASTICS Plastic is lightweight, flexible, strong, durable, heat sealable, impervious to moisture, recyclable, reusable, but whether by intent or accident, some plastic will always find its way into the environment on land and sea. PLASTIC IS FANTASTIC Plastic is an amazing invention. There is nothing like it for protecting our food and other goods from damage and contamination and for carrying them home from the shops. It is waterproof, strong and flexible, can be adapted for a variety of products and is not expensive. Every year 300 million tonnes of plastic polymer are produced globally. Unfortunately much of it ends up as litter either in landfill (if it can be collected) or causing a visual intrusion, blocking water courses, polluting the oceans and endangering wildlife. The very property that makes plastic fantastic, namely its durability, is also the reason that it is such an environmental nuisance after its useful life. Old-fashioned plastic can last for decades. d 2w INNOVATIVE PLASTIC IS THE ANSWER TO PLASTIC WASTE IN THE ENVIRONMENT What do we do with all the plastic waste that cannot realistically be collected? d2w is the answer to plastic waste that escapes collection and ends up in the open environment. Unlike ordinary plastic the life of a product made with d2w can be pre-determined at manufacture, typically six months for a bread bag and 18 months for a lightweight shopper bag. At the end of the useful life the plastic will degrade in the presence of oxygen until it is no longer a plastic and has become a material that will biodegrade in the open environment, eventually being bio-assimilated in the same way as a leaf – only quicker and leaving no toxic residues. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 09 This is not the case with conventional plastic that holds the carbon for many decades nor (vegetable-based) hydro-degradable plastics that release the carbon rapidly as CO2 gas. d2w has been tested for food-contact safety according to the requirements of the European Union Directive 2002/72/EC, and the Food and Drug Administration Code of the United States, Chapter 21. Furthermore a study carried out by Intertek in 2012 into the life cycle of shopping bags concluded that the environmental credentials of bags made with oxo-biodegradable plastic technology were ahead of bio-based and conventional plastic bags. Many countries are committed to using plastic products because at the present time there is nothing as low cost, flexible and efficient to replace them. Oxo-biodegradable plastic offers a sensible solution to plastic waste in the environment, a fact recognised by the United Arab Emirates who along with eight other countries have made this technology mandatory. They knew they could not collect all the plastic for recycling, so they decided to do something about it. All of this adds up to substantial positive PR for customers, being a practical demonstration of their concern for environment and their commitment to sustainability. With millions of tonnes of plastic used around the world, there is an urgent need to deal with the issues of disposal and pollution. THE WORLD’S ONLY ECO -LABEL Symphony’s d2w additive has been certified by ABNT (the Brazilian Association of Technical Standards) and has been awarded a coveted Eco-Label. It is the only oxo-biodegradable additive to qualify for an Eco-Label, and confirms the environmental credentials of the d2w additive, distinguishing it from all other oxo-biodegradable products on the market. d2w plastic can be made in existing polymer factories using existing machinery and workforce at little or no extra cost. CAN BE RECYCLED WITH CONVENTIONAL PLASTIC Better still, if it gets collected it can be recycled with conventional plastic, a fact confirmed by Roediger Laboratories, in May 2012 who concluded that plastic products made with d2w can be recycled without any significant detriment to the newly formed recycled product. THE CARBON VALUE Studies have demonstrated that one of the benefits of d2w oxo-biodegradable technology is that the carbon content of the plastic is ultimately shared with living organisms in the environment. Studies have also shown that the carbon based organic materials developed by the degradation mechanism are biodegradable and therefore absorbed by living organisms in the soil. (Biodegradation Tests of Oxo-biodegradable Polyolefins by Means of Single Microbial Species, University of Pisa 2009). FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 10 Products Anti‑bacterial and anti‑fungal technologies. Designed to protect. d2p family ANTI-MICROBIAL ANTI-BACTERIAL ANTI-BACTERIAL NATURAL ODOUR ADSORBER INSECTICIDE ANTI-FOULING Our Ethylene adsorber (EA) can prevent spoilage of perishable fruit, vegetables and flowers. d2p ANTI-MICROBIAL The primary purpose for d2p anti-microbial is to prevent bacterial and fungal contamination, whilst preserving the aesthetic and functional properties of the plastic article. It can be used in a wide spectrum of applications from water and irrigation pipes to cladding, paint, decking and greenhouse film. It is also used in clothing and sportswear, wet suits, lab coats, face masks, trainers and ski boots as well as garbage sacks and long-life carrier bags. The active ingredient in d2p (am) is registered for use as an anti-microbial with the US Environmental Protection Agency (EPA) and notified under the EU’s biocidal products Regulation (BPR-EU-no. 428/2012). d2p ANTI-BACTERIAL d2p has been tested again over 50 common organisms including dangerous bacteria such as MRSA, E.coli, Salmonella, Listeria, Pseudomonas and Aspergillus Niger. There is almost no limit to the number of uses for d2p anti-bacterial. In fact, anything that is made of plastic or has a plastic coating could have d2p incorporated at manufacture. This technology will inhibit the growth of bacteria in calculators, sports clothing, food processing equipment and a host of other applications. d2p ANTI-BACTERIAL NATURAL d2p natural is a unique direct food-contact, broad spectrum anti-bacterial with action against Gram-positive and Gram-negative bacteria. It is based on natural oil extracts from plants, dried and powdered. Symphony has developed suitable masterbatch applications for Polyolefins, Styrenics, Polyamides, PVC, Polycarbonate and Polyesters and it can be used in both food and non-food applications to fight healthcare and food industry infections. d2p ODOUR ADSORBER A relative newcomer to the d2p range of additives, our odour adsorber can be used in powder form or incorporated into plastic masterbatch. The product can also be used in packaging in a sachet. It inhibits the development of odour in plastic products and packaging and is suitable for conversion by all plastic processing technologies. The active ingredient used in our odour adsorber is a naturally occurring substance recognised as a food additive by both EFSA and the US FDA, and therefore the product can be incorporated into food packaging. Our Ethylene Adsorber (EA) can prevent spoilage of perishable fruit, vegetables and flowers. d2p INSECTICIDE Insecticidal plastic masterbatches are used to control pests in agriculture, horticulture, forestry, home and golf course applications. It can be formulated with a variety of insecticides into numerous products and flexible plastic films including banana bags and long-lasting insecticidal mosquito nets. d2p ANTI-FOULING Anti-fouling is used to control and reduce the growth of fouling organisms on vessels and other structures based in water. These fouling organisms can include barnacles and mussels. The growth of these organisms on the hull of a vessel minimises its operating efficiency and harms the environment through higher fuel consumption and emissions. The active ingredient in Symphony’s anti-fouling product has been approved by the European Commission for use in coating formulations under the Biocidal Products Regulation (BPR) “Product 21”. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 11 CASE STUDY Baby products made with d2p anti-bacterial additive No matter how thoroughly plastic items are cleaned, even using the harsh detergents available today, scratches and crevices that appear on the surface during use, harbour germs. These innovative products are produced in Poland and include anti-bacterial chamber pots, toilet trainer seats, bath tubs, bath seats and nappy pails in white, pink and blue. What’s more, they are already winning fans among parents in Poland according to Poland’s first parenting magazine “Mamo to ja” (Mom, it’s me) and beating competing products from well-known manufacturers. Maltex in Poland manufacture a range of baby products made with Symphony’s d2p anti-bacterial additive, which is added to the plastic during manufacture to create a surface hostile to bacteria, and give extra protection. d2p technology has been tested to ISO 22196 and JIS Z2801 to demonstrate that it is effective against over 50 dangerous organisms including E.coli, Pseudomonas, Aspergillus Niger and Salmonella. d2t Tag and Trace – Anti-counterfeiting technologies FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.comd2t is a range of anti-counterfeiting systems including a tracer masterbatch that gives plastic items unique traceable properties which can be identified using Symphony’s portable device, the d2Detector.By using the detector it is possible to tell instantly if a product is fake and provides brand owners with the reassurance that their products can be identified as genuine.For high value items Symphony offers a sophisticated electronic tagging system. 12 Global Network and Technical Services Symphony has its Head Office at Borehamwood, near London, where we have a laboratory for scientific testing, research and product development. Our new laboratory was formally opened in May 2014 by the Mayor. We are a global company with a presence in almost all parts of the world. We have developed and maintain successful distributors and sub-distributors worldwide, and we continue to grow our business. We work with our network to build relationships in their countries with suppliers, manufacturers, end users, and NGOs. We also regularly host a conference/training event to share ideas and inform our distributors about new developments and products. Our last conference saw 48 distributors coming from Europe, South America, South Africa, Japan, Asia, Middle East, Far East, New Zealand and the USA. Our team of scientists, technicians, and account managers have vast experience in the industry and maintain close relationships with research institutes, universities and test centres around the world to continually improve and develop our products. We offer unique quality-control systems, unmatched by other biodegradable additive suppliers, including free testing with written reports covering product-performance measurements and characteristics. Our masterbatches are manufactured in specialist factories which are audited and certified by our technical department. We have test facilities in several locations around the world to ensure continuity of supply and to minimise our environmental footprint. All products containing our additives are manufactured in accordance with our manufacturing instructions and technical data sheets, and then rigorously tested in our laboratories before commercial production commences. We give free technical support to manufacturers using Symphony’s masterbatches and our specialist engineers will travel to their factories if necessary. Not only can our customers rely on outstanding technical and after-sales support, but we also advise on production, processing, manufacturing and materials as well as public relations and marketing. In fact we make it our business to support their business. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 Corporate social responsibility 13 For Symphony, as an environmental technology company, sustainable development is an important matter. This means that we combine long-term economic objectives with social responsibility and environmental protection. We strongly believe in the benefits of the technologies we offer and have established goals that the Company and its people are trying to achieve daily. We understand that in today’s world it is difficult to be a responsible individual let alone a responsible business, and even more difficult to implement change towards a better future. It is therefore essential to establish best practices, support innovation and individual ambitions, and strengthen relationships with our partners and communities around the world. At Symphony we believe that our long-term future and profitability depend not only on our environmental, technical and social performance, but also our willingness to go above and beyond the necessary. In practice this means that we strive for excellence in operational performance and support for our customers, shareholders and staff. Symphony is accredited to the environmental standard ISO 14001, and to ISO 9001 for Quality Management. We are committed to low-energy lighting, and equipping our offices and laboratories with environmentally-friendly supplies. We also promote paperless administration and work on the best practice document-management systems. We are committed to recycling of materials following the “reduce, reuse and recycle” principles and strive to be the best that we can be. Wherever possible we utilise electronic communication and have established a global supply chain to minimise the impact of transporting supplies around the world. “ We are dedicated to helping create a sustainable future by finding low cost solutions to the world’s environmental problems.” We provide a nurturing business environment and regularly support students with work placements in all aspects of our business (in both the technical and administrative teams). We encourage our employees and distributors to continuously develop their knowledge and skills base by providing regular conferences, technical information and training opportunities. We are dedicated to helping create a sustainable future by finding low cost solutions to the world’s environmental problems. PARTNERING FOR CHANGE Symphony is proud to be a leader in advanced technologies that add to a sustainable future. We are open and we always welcome collaboration with our suppliers, customers, communities, governments and civil society. We build relations and partnerships with academic institutions, governments, NGOs and industry associations. B U S I N E S S R E V I E W C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S Symphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 14 Board of Directors 1. Nirj Deva, DL, FRSA, MEP Chairman of the Board BACKGROUND AND EXPERIENCE Mr. Deva has been a Member of the European Parliament since 1999 and is Vice-chairman of the Parliament’s International Development Committee. He is also Chairman of the EU-China Friendship Group. From 1992-97 he was a member of the UK Parliament. He has held a number of senior political appointments and has advised the boards of a number of public companies including International Leisure Group, Air Europe Plc, Tricentrol Oil Co Plc, EDS, Television South West, Thomas Howell Group, John Laing Plc, Aitken Spence, and Rothmans International Plc. 2. Michael Stephen, LL.M Deputy Chairman BACKGROUND AND EXPERIENCE Michael Stephen is Commercial Director and Deputy Chairman of the Plc, and Chairman of its subsidiary companies. He qualified as a Solicitor with Distinction in Company Law. He was called to the Bar, and practised from chambers in London for many years, dealing with civil cases in the High Court and Court of Appeal. He was a member of the UK Parliament 1992-97 and was a member of the Trade and Industry Select Committee and the Environment Select Committee of the House of Commons. 3. Michael Laurier Chief Executive Officer BACKGROUND AND EXPERIENCE Michael is the Chief Executive of the Company. Michael’s career began with his long established family packaging business, Brentwood Sack and Bag Co Limited. He took over responsibility for sales and production in the mid -1970s and changed the emphasis of the company’s business from jute products to polythene packaging, introducing the then innovative high density and medium density polythene bags into the UK market in 1975. He co-founded Symphony Plastics in 1995. 4. Ian Bristow, FCCA Finance Director and Company Secretary BACKGROUND AND EXPERIENCE Ian was in private practice for seven years, qualifying as a certified accountant in 1992. In 1994, he joined Brentapac UK Plc until it was sold in 1994. He went on to co-found Symphony Plastics in 1995. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 15 5. Michael Stephens Technical Director BACKGROUND AND EXPERIENCE Michael began his career with Excelsior Plastics Limited, a division of Unigate, progressing over a period of ten years to sales director. Leaving in 1981, he worked for Sempol Products, Autobar Group and ACP Plastics (a subsidiary of S P Metal Group), all manufacturers of packaging films. In 1988, Michael founded Skymark Packaging International Limited, serving the snack food, bakery, mail wrap, paper disposable markets, which he left in November 1997 to join Symphony. 6. Nicolas Clavel Non-Executive Director BACKGROUND AND EXPERIENCE Nicolas Clavel started his career in international banking in the mid seventies and his area of expertise has been structured trade finance and equity investments with a particular focus on Emerging Markets. He is Chief Investment Officer of Scipion Capital Ltd., (the Investment Manager of Scipion African Opportunities Fund SPC) and is personally CF 1, 3, 11 and CF30 approved by the UK Financial Services Authority. Nicolas is Swiss, and is based in London and Geneva. 7. Shaun Robinson Non-Executive Director BACKGROUND AND EXPERIENCE Shaun Robinson has nearly 20 years corporate finance, restructuring and active asset management experience, focusing on operational real estate with key specialities in hotels and healthcare. A chartered certified accountant, Shaun Robinson joined the Somerston Group in 2004 and is responsible for the groups’ business development, M&A and tax/corporate structuring. Shaun is also executive director of Richmount Management Limited, Somerston Health, Somerston Hotels and St James’s Hotels. FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 16 Strategic Report PRINCIPAL ACTIVITIES AND BUSINESS REVIEW The primary business activities of the Group are the development and supply of environmental plastic products to a global market, and the development of waste to value projects. The Group also supplies other flexible polythene and related products. A review of the business is given in the Chairman’s Statement on pages 04 and 05 together with the Chief Executive’s Review on pages 06 and 07. Future developments are summarised in the Outlook section of the Chief Executive’s Review on page 07. KEY PERFORMANCE INDICATORS The Directors have monitored the progress of the overall Group strategy by reference to certain financial and non-financial key performance indicators. Key performance indicator Sales d2w (£’000) Gross profit margin (%) Number of distributors 2014 6,352 50% 77 2013 Method of calculation 7,190 Sales revenue solely of d2w additives and products. 49% The ratio of gross profit to sales. 76 The number of distribution agreements signed. These are discussed within the Chairman’s Statement and the Trading Results section of the Chief Executive’s Review. PRINCIPAL RISKS AND UNCERTAINTIES The Directors have identified and continually monitor the principal risks and uncertainties of the Group. These may change over time as new risks emerge and others cease to be of concern. The principal risks of the Group are detailed below. FOREIGN EXCHANGE RISK The Group sells products in many countries and so generates revenues in US Dollars and Euros. Foreign exchange rates fluctuate and, as such, assets created in foreign currencies are liable to constant revaluations into their Sterling equivalent. The Group mitigates this risk by purchasing, where practicable, in currencies to match revenues. The Group also has exchange facilities with its bank to use as and when appropriate. COMPETITION RISK The Group faces competition from suppliers of similar products which could affect revenues and/or gross margins. The Group mitigates this risk by employing a large number of distributors globally who can concentrate on any competition issues within their market, and also by differentiating the Group’s products by branding and marketing activities. RAW MATERIAL PRICING AND AVAILABILIT Y The Group uses commodity and speciality materials in the make-up of its products. There is a risk of price volatility and material availability. The Group mitigates this risk by using more than one supplier of its products and continually researching separate supply alternatives for the materials used. BY ORDER OF THE BOARD I Bristow Company Secretary 10 April 2015 Symphony Environmental Technologies plcAnnual Report & Accounts 2014 Directors’ Report 17 The Directors present their report and the audited financial statements of the Group for the year ended 31 December 2014. responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. RESULTS AND DIVIDENDS The trading results for the year and the Group’s financial position at the end of the year are shown in the attached financial statements. The Directors confirm that: > so far as each Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and The loss for the year after taxation amounted to £305,000 (2013: loss £707,000). The Directors have not recommended a dividend. RESEARCH AND DEVELOPMENT The Group is involved in the research and development of environmental plastic products, and waste to value systems. THE DIRECTORS AND THEIR INTERESTS The Directors who served during the year and their interests in the shares of the Company are shown in the Remuneration Report. DIRECTORS’ RESPONSIBILITIES STATEMENT The Directors are responsible for preparing the Strategic Report, the 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 Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs). The parent Company’s own financial statements continue to be prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws). 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 and profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to: > select suitable accounting policies and then apply them consistently; > make judgements and accounting estimates that are reasonable and prudent; > state whether applicable IFRSs or UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and > 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 > the Directors have taken all steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. GOING CONCERN Management have prepared a cash flow forecast for the ensuing twelve months from the approval of the financial statements where a forecast increase in sales will lead to increased cash through the use of the invoice discounting facility. Operating results for the start of 2015 have been in line with these forecasts. The Group has continued to make significant investment into new product development and anticipates sales growth from the launch of some of these products in the forthcoming year. Having reviewed the cash flow forecasts and the available headroom within existing facilities the Directors believe that the Group has sufficient cash resources to meet debt obligations as they fall due. For these reasons, the Directors are of the opinion that it is appropriate to continue to adopt the going concern basis in preparing these financial statements. CORPORATE GOVERNANCE The Group is committed to developing and adhering to high standards of corporate governance. As an AIM listed company, Symphony Environmental Technologies plc is not required to and does not apply the UK Corporate Governance Code as issued by the UK’s Listing Authority, however, it seeks to follow the principles of good governance as far as management believes it is practical for a Group of its size, nature and circumstances. FINANCIAL RISK MANAGEMENT POLICIES The Group’s financial risk management policies are detailed in note 3 to the financial statements. AUDITOR A resolution to appoint Grant Thornton UK LLP as auditor for the ensuing year will be proposed at the Annual General Meeting. BY ORDER OF THE BOARD I Bristow Company Secretary 10 April 2015 FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 18 Remuneration Report DIRECTORS’ EMOLUMENTS N Deva M Laurier I Bristow M Stephen M F Stephens N Clavel S Robinson (appointed 19 December 2014) Basic salary or fees £’000 Benefits £’000 Pension £’000 2014 Total Emoluments £’000 2013 Total Emoluments £’000 36 200 155 171 171 29 1 763 – 10 6 12 14 – – 42 – 50 15 – – – – 65 36 260 176 183 185 29 1 870 42 259 175 181 183 31 – 871 The Directors’ pensions, where applicable, are administered by those Directors. The Company has taken out insurance for its officers against liabilities in relation to the Company under Section 233 of the Companies Act 2006. DIRECTORS’ INTERESTS The Directors in office at the end of the year, together with their beneficial interests in the shares of the Company, were as follows: Ordinary Shares of £0.01 each N Deva M Laurier I Bristow M Stephen M F Stephens N Clavel S Robinson At 31 December 2014 At 1 January 2014 313,925 313,925 22,802,317 22,052,317 1,063,925 782,998 311,294 500,000 – 1,063,925 782,998 311,294 500,000 10,203,938 SHARE OPTIONS AND WARRANTS The Directors have share options and warrants, or interests in share options and warrants as follows: N Deva N Deva M Laurier M Laurier I Bristow I Bristow M Stephen M Stephen M Stephen M F Stephens N Clavel N Clavel S Robinson Number of share options or warrants Exercise price (pence per share) Exercisable from Exercisable to 1,500,000 250,000 1,851,500 350,000 3,000,000 280,000 1,200,000 2,000,000 210,000 210,000 500,000 250,000 893,110 4.500 9.875 4.500 9.125 4.500 9.125 6.250 4.500 9.125 9.125 4.500 9.875 15.000 26 November 2008 18 December 2010 26 November 2008 31 March 2010 26 November 2008 31 March 2010 28 April 2007 26 November 2008 31 March 2010 31 March 2010 16 October 2009 18 December 2010 14 November 2014 26 November 2018 18 December 2019 26 November 2018 30 March 2020 26 November 2018 30 March 2020 28 April 2017 26 November 2018 30 March 2020 30 March 2020 16 October 2018 18 December 2019 14 November 2017 The above share options and warrants are HM Revenue and Customs unapproved. See note 18 to the financial statements for the terms of the above options and warrants. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 Independent Auditor’s Report to the members of Symphony Environmental Technologies plc 19 SEPARATE OPINION IN RELATION TO IFRSS AS ISSUED BY THE IASB As explained in note 2 to the Group financial statements, the Group, in addition to complying with its legal obligation to apply IFRSs as adopted by the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (IASB). In our opinion the Group financial statements comply with IFRSs as issued by the IASB. OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006 In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: > 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 > the parent company financial statements are not in agreement with the accounting records and returns; or > certain disclosures of directors’ remuneration specified by law are not made; or > we have not received all the information and explanations we require for our audit. Giles M Mullins Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Central Milton Keynes 10 April 2015 We have audited the financial statements of Symphony Environmental Technologies plc for the year ended 31 December 2014 which comprise the consolidated statement of comprehensive income, consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated cash flow statement, the parent Company balance sheet and the related notes. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent Company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR As explained more fully in the Directors’ Responsibilities Statement set out on page 17, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/auditscopeprivate. OPINION ON FINANCIAL STATEMENTS In our opinion: > 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 31 December 2014 and of the Group’s loss for the year then ended; > the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; > the parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and > the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Symphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.comFINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEW 20 Consolidated Statement of Comprehensive Income for the year ended 31 December 2014 Revenue Cost of sales Gross profit Distribution costs Administrative expenses – recurring Administrative expenses – non-recurring Administrative expenses Operating loss – recurring Operating loss – non-recurring Operating loss Finance income Finance costs Loss for the year before tax Taxation Loss for the year Total comprehensive income for the year Basic loss per share Diluted loss per share 2014 2013 £’000 £’000 £’000 £’000 6,352 (3,191) 3,161 (165) 7,190 (3,644) 3,546 (179) (3,261) – (265) – (3,526) (570) (3,261) (4,096) (159) (570) (265) 1 (126) (390) 85 (305) (305) (0.23)p (0.23)p (729) 5 (54) (778) 71 (707) (707) (0.55)p (0.55)p Note 5 6 6 6 6 8 8 9 10 10 All results are attributable to the parent Company equity holders. There were no discontinued operations for either of the above periods. The accompanying notes form an integral part of these financial statements. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 Consolidated Statement of Financial Position as at 31 December 2014 21 Company number 3676824 Assets Non-current Property, plant and equipment Intangible assets Deferred income tax asset Current Inventories Trade and other receivables Cash and cash equivalents Total assets Equity Equity attributable to shareholders of Symphony Environmental Technologies plc Ordinary shares Share premium Retained earnings Total equity Liabilities Non-current Interest bearing loans and borrowings Current Interest bearing loans and borrowings Trade and other payables Total liabilities Total equity and liabilities Note 2014 £’000 2013 £’000 11 12 9a 15 16 17 18 18 18 20 20 19 372 1,169 1,142 394 937 1,142 2,683 2,473 576 1,425 938 2,939 5,622 528 1,366 130 2,024 4,497 1,446 3,077 (807) 1,281 1,650 (502) 3,716 2,429 – – 1,153 753 1,906 1,906 5,622 3 3 1,339 726 2,065 2,068 4,497 These financial statements were approved by the Board of Directors on 10 April 2015 and authorised for issue on 10 April 2015. They were signed on its behalf by: I Bristow FCCA Finance Director The accompanying notes form an integral part of these financial statements. FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 22 Consolidated Statement of Changes in Equity for the year ended 31 December 2014 Equity attributable to the equity holders of Symphony Environmental Technologies plc: For the year to 31 December 2014 Balance at 1 January 2014 Issue of share capital Transactions with owners Loss and total comprehensive income for the year Balance at 31 December 2014 For the year to 31 December 2013 Balance at 1 January 2013 Issue of share capital Transactions with owners Loss and total comprehensive income for the year Balance at 31 December 2013 The accompanying notes form an integral part of these financial statements. Share premium £’000 Retained earnings £’000 Total equity £’000 Share capital £’000 1,281 165 165 – 1,650 1,427 1,427 – 1,446 3,077 1,280 1 1,648 2 1 – 2 – 1,281 1,650 (502) – – (305) (807) 205 – – 2,429 1,592 1,592 (305) 3,716 3,133 3 3 (707) (502) (707) 2,429 Symphony Environmental Technologies plcAnnual Report & Accounts 2014 Consolidated Cash Flow Statement for the year ended 31 December 2014 23 Operating activities Net cash used in operations Tax received Net cash used in operating activities Investing activities Additions to property, plant and equipment Proceeds from disposals of property, plant and equipment Additions to intangible assets Net cash used in investing activities Financing activities New loans Movement in working capital facility Discharge of finance lease liability Proceeds from share issue Interest paid Net cash generated in financial activities Net change in cash and cash equivalents Cash and cash equivalents, beginning of year Foreign exchange provision loss Cash and cash equivalents, end of year Note 21 2014 £’000 2013 £’000 (180) 85 (95) (77) – (261) (338) – (432) (9) 1,592 (126) 1,025 592 29 (36) 585 (955) 145 (810) (21) 7 (126) (140) 650 359 (18) 3 (54) 940 (10) 57 (18) 29 The reconciliation to the cash and cash equivalents as reported in the statement of financial position is as follows: Loans and receivables: Cash at bank and in hand Financial liabilities measured at amortised cost: Bank overdraft Cash and cash equivalents, end of year The accompanying notes form an integral part of these financial statements. Note 17 20 2014 £’000 2013 £’000 938 130 (353) 585 (101) 29 FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 24 Notes to the Annual Report and Accounts 1 General information Symphony Environmental Technologies plc (“the Company”) and subsidiaries (together “the Group”) develop and supply environmental plastic additives and products, and develop waste to value systems. The Company, a public limited company, is the Group’s ultimate parent Company. It is incorporated and domiciled in England (Company number 3676824). The address of its registered office is 6 Elstree Gate, Elstree Way, Borehamwood, Hertfordshire, WD6 1JD, England. The Company’s shares are listed on the AIM market of the London Stock Exchange and as a level 1 ADR in New York. 2 Summary of significant accounting policies These consolidated financial statements have been prepared in accordance with the requirements of International Financial Reporting Standards (IFRS) as adopted by the European Union and also as issued by the International Accounting Standards Board (IASB). The accounting policies have remained unchanged from the previous year. Going concern Management have prepared a cash flow forecast for the ensuing twelve months from the approval of the financial statements where a forecast increase in sales will lead to increased cash through the use of the invoice discounting facility. Operating results for the start of 2015 have been in line with these forecasts. The Group has continued to make significant investment into new product development and anticipates sales growth from the launch of some of these products in the forthcoming year. Having reviewed the cash flow forecasts and the available headroom within existing facilities the Directors believe that the Group has sufficient cash resources to meet debt obligations as they fall due. For these reasons, the Directors are of the opinion that it is appropriate to continue to adopt the going concern basis in preparing these financial statements. Business combinations completed prior to date of transition to IFRS The Group has not restated business combinations which took place prior to the date of transition to IFRS. Accordingly, the classification of the combination remains unchanged from that used under UK GAAP. The assets and liabilities are recognised at date of transition, and are measured using their United Kingdom Generally Accepted Accounting Practice (GAAP) carrying amount. Business combinations exemption The Group financial statements consolidate the financial statements of the Company and all subsidiary undertakings. The acquisition of Symphony Environmental Limited (formerly Symphony Plastics Limited) on 9 December 1999 was accounted for under merger accounting under UK GAAP and has been treated in this manner under IFRS as the business combination exemption has been adopted in these Annual Report and Accounts. The merger accounting method requires assets and liabilities to not be adjusted to fair value and the results of the subsidiary to be included as if it had always been part of the Group. Therefore, the results of the Group include both the results pre and post-acquisition. Segment reporting The segmental profile for the Group has been adjusted to show a fairer position for the revenue generating side of the Plastics business and separately, the investments in Plastics R&D. There are currently three operating segments. “Plastics Sales” generate and maintain revenues relating to plastic additives, masterbatches and finished products. “Plastics R&D” includes all new product development and research expenditure. The “Recycling Technologies” segment includes all activities involved in the development of tyre and rubber recycling systems. Each of the operating segments is managed separately as each of these service lines requires different technologies and other resources as well as marketing approaches. All inter-segments transfers are carried out at arm’s length prices. The measurement policies the Group uses for segment reporting under IFRS 8 are the same as those used in its financial statements. Corporate assets which are not directly attributable to the business activities of any operating segment are not allocated to a segment. Segment information is presented in accordance with IFRS 8 for all periods presented. IFRS 8 only requires disclosure of segment information. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 25 Revenue Degradable and non-degradable goods, and associated products (plastics segment) Revenue is stated at the fair value of the consideration receivable and excludes VAT and trade discounts. The Group’s revenue is from sale of goods. Revenue from the sale of goods is recognised when all of the following conditions have been satisfied: a) ownership of the significant risks and rewards has been transferred to the buyer. This may be based upon shipment or delivery depending upon specific contractual terms, whereby the Group relies on INCOTERMs (a series of pre-defined commercial terms published by the International Chamber of Commerce) to assess this; b) the amount of revenue can be measured effectively whereby the Group sells goods after receipt of confirmed orders; c) it is probable that the economic benefits associated with the transaction will flow to the entity; and d) the costs incurred or to be incurred in respect of the transaction can be measured reliably. Non-recurring items Expenditure is classified as non-recurring where the cost is considered to be material, one-off, and will not continue in future. Intangible assets Research and development costs Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred. Development costs incurred on specific projects are capitalised when all the following conditions are satisfied: – completion of the intangible asset is technically feasible so that it will be available for use or sale; – the Group intends to complete the intangible asset and use or sell it; – the Group has the ability to use or sell the intangible asset; – the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits; – there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and – the expenditure attributable to the intangible asset during its development can be measured reliably. Development costs not meeting the criteria for capitalisation are expensed as incurred. The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management. The nature of the Group’s activities in the field of development work renders some internally generated intangible assets unable to meet the above criteria at present. Amortisation commences upon completion of the asset and is shown within administrative expenses and is included at the following rate: Plastic masterbatches and other additives – 15 years straight line. Careful judgement by the Directors is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each balance sheet date. Trademarks Trademarks represent the cost of registration and are carried at cost less amortisation. Amortisation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows: Trademarks – 10 years straight line. FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 26 Notes to the Annual Report and Accounts continued 2 Summary of significant accounting policies continued Property, plant and equipment Property, plant and equipment are stated at cost, net of depreciation and any provision for impairment. Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows: Plant and machinery Fixtures and fittings Fixtures and fittings Elstree Gate Motor vehicles Office equipment – 20% reducing balance. – 25% reducing balance. – 10% straight line. – 20% reducing balance. – 25% straight line. The residual value and useful economic lives are reconsidered annually. Impairment testing of intangible assets and property, plant and equipment For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Those intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Inventories Inventories are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. Cost is determined on the basis of purchase value on a first-in first-out basis. Leased assets In accordance with International Accounting Standard (IAS) 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards related to the ownership of the leased asset. The related asset is recognised at the time of inception of the lease at the fair value of the leased asset or, if lower, the present value of the minimum lease payments plus incidental payments, if any, to be borne by the lessee. A corresponding amount is recognised as a finance leasing liability. The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to profit or loss over the period of the lease. All other leases are regarded as operating leases and the payments made under them are charged to profit or loss on a straight line basis over the lease term. Lease incentives are spread over the term of the lease. Pension costs The Group operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those of the Group. The pension costs charged against profits are the contributions payable to the scheme in respect of the accounting period. Taxation Current tax is the tax currently payable based on taxable profit for the year. Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. Tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Changes in deferred tax assets or liabilities are recognised as a component of tax expense in profit or loss, except where they either relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity, or where they relate to items charged or credited in other comprehensive income the deferred tax change is recognised in other comprehensive income. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 27 Foreign currencies Monetary assets and liabilities in foreign currencies are translated into Sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into Sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are taken into account in arriving at the operating result. Financial assets Financial assets are divided into the following categories: loans and receivables, and available-for-sale financial assets. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which they were acquired. All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets are initially recognised at fair value plus transaction costs. The Group currently has the following financial assets: Trade receivables Trade receivables are categorised as loans and receivables. Trade receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade receivables are measured subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in profit or loss. Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write- down is determined as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted using the original effective interest rate. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Group’s available-for-sale financial assets are the equity investments in Symphony Bin Hilal LLC, American Plastic Technologies LLC and Oxobioplast Inc. The equity investments in Symphony Bin Hilal LLC, American Plastic Technologies LLC and Oxobioplast Inc. are measured at cost less any impairment charges, as their fair values cannot currently be estimated reliably. Impairment charges are recognised in profit or loss. An assessment for impairment is undertaken at least at each balance sheet date. A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for derecognition. A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the Group retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay the cash flows to one or more recipients. A financial asset that is transferred qualifies for derecognition if the Group transfers substantially all the risks and rewards of ownership of the asset, or if the Group neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset. Cash and cash equivalents Cash and cash equivalents comprise cash in hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. Finance lease receivables Goods sold under finance leases are recognised as a sale on date of the finance lease agreement or if later, when substantially all the risks and rewards of ownership of the asset have passed to the lessee. The capital element of future lessee obligations is included in assets in the statement of financial position. The interest elements of the rental obligations are credited to profit and loss over the periods of the leases and represent a constant proportion of the balance of capital repayments outstanding. Rentals receivable under operating leases are credited to profit and loss on a straight line basis over the lease term. Financial liabilities Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. The Group’s financial liabilities include trade payables, other payables, bank overdraft, bank loans and other loans. These are classified as financial liabilities measured at amortised cost. FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 28 Notes to the Annual Report and Accounts continued 2 Summary of significant accounting policies continued Financial liabilities measured at amortised cost are initially recognised at fair values net of direct issue costs. Finance charges are charged to profit and loss, where applicable, on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent they are not settled in the period in which they arose. A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires. Equity-settled share-based payments All share-based payment arrangements granted after 7 November 2002 that had not vested prior to 1 January 2007 are recognised in the financial statements. All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of the instrument granted are determined using the Black-Scholes model. This fair value is appraised at the grant date. The fair value is charged to profit and loss between the date of issue and the date the share options vest with a corresponding credit taken to equity. Equity Equity comprises the following: – “Share capital” represents the nominal value of equity shares; – “Share premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue; and – “Retained earnings” represents non distributed reserves. Standards and interpretations in issue but not yet effective At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group. Management anticipates that all of the pronouncements will be adopted in the Group’s accounting policy for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group’s financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group’s financial statements. IFRS 9 Financial Instruments (effective from 1 January 2015) The IASB aims to replace IAS 39 Financial Instruments: Recognition and Measurement in its entirety with the replacement standard to be effective for annual periods beginning 1 January 2015. IFRS 9 is the first part of Phase 1 of this project. The main phases are: Phase 1: Classification and Measurement. Phase 2: Impairment methodology. Phase 3: Hedge accounting. In addition, a separate project is dealing with derecognition. Management have yet to assess the impact that this amendment is likely to have on the financial statements of the Group. However, they do not expect to implement the amendments until all chapters of the IAS 39 replacement have been published and they can comprehensively assess the impact of all changes. IFRS 15, “Revenue from Contracts with Customers” (effective from 1 January 2017) IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 “Revenue”, IAS 11 “Construction Contracts”, and several revenue-related interpretations. The new standard establishes a control-based revenue recognition model and provides additional guidance in many areas not covered in detail under existing IFRSs, including how to account for arrangements with multiple performance obligations, variable pricing, customer refund rights, supplier repurchase options, and other common complexities. IFRS 15 is effective for reporting periods beginning on or after 1 January 2017. Management consider that IFRS 15 will have no material impact upon these consolidated financial statements. The Group’s management have yet to assess the impact of these new standards. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 29 3 Financial risk management The main risks arising from the Group’s financial instruments are liquidity risk, interest rate risk, currency risk and credit risk. The Directors review and agree policies for managing each of these risks and they are summarised below. These policies have remained unchanged from previous years. The Group’s financial assets and liabilities are summarised as follows: Financial assets: Cash and cash equivalents Loans and receivables Financial liabilities: Financial liabilities measured at amortised cost 2014 £’000 2013 £’000 938 1,304 2,242 1,788 1,788 130 1,206 1,336 1,947 1,947 Liquidity risk The Group seeks to manage financial risk to ensure financial liquidity is available to meet foreseeable needs and to invest cash assets safely and profitability. Short-term flexibility is achieved through trade finance arrangements and overdrafts. Having reviewed the maturity of financial liabilities and the forecast cash flows for the forthcoming twelve month period, the Directors believe that sufficient cash will be generated from trading operations to meet debt obligations as they fall due. The maturity of financial liabilities as at 31 December 2014 is summarised as follows: Gross cash flows: Zero to sixty days Trade payables and accruals £’000 682 682 Finance leases £’000 3 3 Loans £’000 797 797 Bank £’000 353 353 Total £’000 1,835 1,835 The maturity of financial liabilities as at 31 December 2013 is summarised as follows: Gross cash flows: Zero to sixty days Sixty-one days to three months Four months to six months Seven months to one year One year to three years Trade payables and accruals £’000 Finance leases £’000 Loans £’000 Bank £’000 Total £’000 650 – – – – 650 3 – 3 5 3 579 – – 650 – 14 1,229 101 – – – – 101 1,333 – 3 655 3 1,994 FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 30 Notes to the Annual Report and Accounts continued 3 Financial risk management continued Interest rate risk The Group seeks to reduce its exposure to interest rate risk where possible, but this is offset by the availability of trade finance arrangements which are transaction specific to meet liquidity needs and so have variable interest rate terms. Sensitivities have been looked at in the range of an absolute rate increase of 5% or a decrease of 1% which enable an objective calculation to be made depending on any interest rate changes in the future. Any rate changes would be outside the control of the Company. The Group’s exposure to interest rate risk as at 31 December 2014 is summarised as follows: Cash and cash equivalents Trade receivables VAT Other debtors Trade payables Other payables Bank overdraft Lease purchase Other loans Sensitivity: increase in interest rates of 5% Sensitivity: decrease in interest rates of 1% Fixed £’000 Variable £’000 – – – 12 12 – – – (3) (650) (641) – – 938 – – – 938 – – (353) – (147) (438) (22) 4 The Group’s exposure to interest rate risk as at 31 December 2013 is summarised as follows: Cash and cash equivalents Trade receivables VAT Other debtors Trade payables Other payables Bank overdraft Lease purchase Other loans Sensitivity: increase in interest rates of 5% Sensitivity: decrease in interest rates of 1% Sensitivity shows the effect on equity profit and loss. Fixed £’000 Variable £’000 – – – 25 25 – – – (12) (650) (637) – – 130 – – – 130 – – (101) – (579) (550) (28) 6 Zero £’000 – 1,274 59 18 1,351 (464) (71) – – – 816 – – Zero £’000 – 1,162 83 19 1264 (488) (76) – – – 700 – – Total £’000 938 1,274 59 30 2,301 (464) (71) (353) (3) (797) (613) (22) 4 Total £’000 130 1,162 83 44 1419 (488) (76) (101) (12) (1,229) (487) (28) 6 Symphony Environmental Technologies plcAnnual Report & Accounts 2014 31 Currency risk The Group operates in overseas markets and is subject to currency exposure on transactions undertaken during the year. The Group hedges the transactions where possible by buying goods and selling them in the same currency. The Group also has bank facilities available for hedging purposes. A summary of foreign currency financial assets and liabilities as stated in the statement of financial position together with a sensitivity analysis showing the effect of a 10% change in rate with Sterling is shown below: Financial assets Financial liabilities Net balance Effect of 10% Sterling increase Effect of 10% Sterling decrease Financial assets Financial liabilities Net balance Effect of 10% Sterling increase Effect of 10% Sterling decrease Currency Euro Euro Euro USD USD USD Currency balance 2014 ’000 €570 €(367) €203 $1,535 $(899) $636 Sterling 2014 £’000 443 (285) 158 (14) 18 985 (577) 408 (37) 45 Currency balance 2013 ’000 €331 €(298) €33 $1,681 $(1,122) $559 Sterling 2013 £’000 276 (249) 27 (2) 3 1,014 (677) 337 (31) 37 Sensitivity shows the effect on equity and profit and loss. A 10% change is shown to enable an objective calculation to be made on exchange rates which may be assumed for the future. Credit risk The Group’s exposure to credit risk is limited to the carrying value of financial assets at the balance sheet date, summarised as follows: Loans and receivables: Trade receivables Finance lease receivables Cash and cash equivalents 2014 £’000 2013 £’000 1,274 12 938 2,224 1,162 25 130 1,317 The credit risk associated with the cash is limited as the counterparties have high credit ratings assigned by international credit-rating agencies. The principal credit risk arises therefore from trade receivables. The seven largest customer balances at the end of the year make up 68% (2013: 68%) of the above trade receivables. In order to manage credit risk the Directors set limits for customers based on a combination of payment history, third-party credit references and use of credit insurance. These limits are reviewed regularly. The maturity of overdue debts is set out in note 16. During the period debts totalling £70,836 (2013: £15,000) were written off. The amount written off of £70,836 had been provided for in previous years (2013: £nil). Capital requirements Interest bearing loans and borrowings are monitored regularly to ensure the Group has sufficient liquidity and its exposure to interest rate risk is mitigated. Management consider the capital of the Group comprises the share capital and interest bearing loans and borrowings as detailed in note 25. The Company satisfies the Companies Act 2006 requirement to hold £50,000 issued and authorised share capital. The rule that 25% must be paid up is also satisfied, by reference to note 18. FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 32 Notes to the Annual Report and Accounts continued 4 Critical accounting estimates and judgements Estimates and judgements are evaluated continually and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from those actions. In preparing these accounts the following areas were considered to involve significant judgements and estimates: Capitalisation of development costs Judgements and estimates relating to the capitalisation of development costs are detailed in note 2. Recoverability of capitalised development cost Judgements and estimates relating to capitalised development costs are detailed in note 12. Share option judgements Judgements and estimates relating to share-based payment charges are detailed in note 18. Going concern Judgements and estimates relating to going concern are detailed in note 2. Bad debts Provisions for bad debts are shown in note 16. Bad debt provisions are made when there is objective evidence of impairment. Where there is no provision then it is due to adequate credit insurance being in place, or cash has been received since the end of the year, or adequate information exists to support the recoverability of the debt. Recognition of deferred tax assets Judgements and estimates relating to a deferred tax asset are detailed in note 9a. 5 Segmental information The chief operating decision maker of the Group is the Board of Directors and they review the business in three main segments, the supply of plastic products, the development of plastic products, and the development of recycling technologies. The segmental results for the year ended 31 December 2014 are as follows: Business segments 12 months to 31 December 2014 Segment revenues Apportioned costs EBITDA Depreciation and amortisation Interest Taxation Profit/(loss) for the year The segmental results for the year ended 31 December 2013 are as follows: Business segments 12 months to 31 December 2013 Segment revenues Apportioned costs EBITDA Depreciation and amortisation Interest Taxation Profit/(loss) for the year Revenues stated are from external customers. There were no inter-segment revenues for the above periods. Plastics Sales £’000 6,352 (5,864) 488 (103) (125) – 260 Plastics Sales £’000 7,190 (6,413) 777 (124) (49) – 604 Plastics R&D £’000 Recycling Tech. £’000 Group £’000 6,352 (6,489) (138) (128) (125) 85 – (219) (219) – – 16 (203) (305) – (406) (406) (25) – 69 (362) Plastics R&D £’000 Recycling Tech. £’000 – (553) (553) (24) – 71 (506) – (805) (805) – – – (805) Group £’000 7,190 (7,771) (581) (148) (49) 71 (707) Symphony Environmental Technologies plcAnnual Report & Accounts 2014 33 There has been no change in total assets other than in the ordinary course of business. Segmental assets primarily consist of property, plant and equipment, intangible assets, inventories, trade and other receivables and cash and cash equivalents. Segmental liabilities comprise operating liabilities. The segment assets and liabilities at 31 December 2014 and capital expenditure for the year then ended are as follows: £’000 Assets Liabilities Capital expenditure Depreciation and amortisation Plastics Sales and Plastics R&D 5,622 (1,906) 77 118 Recycling Tech. – – 24 – Group 5,622 (1,906) 101 118 The segment assets and liabilities at 31 December 2013 and capital expenditure for the year then ended are as follows: £’000 Assets Liabilities Capital expenditure Depreciation and amortisation Plastics Sales and Plastics R&D 4,497 (2,068) 134 148 Recycling Tech. – – 15 – Group 4,497 (2,068) 149 148 Segmental assets and liabilities are reported to the chief operating decision maker under the two Divisions stated above. Geographical areas The Group’s revenues from external customers and its non-current assets (assets other than financial instruments) are divided into the following geographical areas: Geographical areas UK Europe Americas Other Total 2014 £’000 Revenue 274 1,131 3,060 1,887 6,352 2014 £’000 Non-current assets 1,541 – – – 1,541 2013 £’000 Revenue 337 1,161 3,406 2,286 7,190 2013 £’000 Non-current assets 1,825 – – – 1,825 Major customers One customer accounted for greater than 10% of total Group revenues for 2014 (2013: two customers). The customer accounted for £852,000, or 13% of total Group revenues, (in 2013 one customer accounted for £1,108,000, or 15% of the total Group revenues, another customer accounted for £750,000 or 10% of total Group revenues). FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 34 Notes to the Annual Report and Accounts continued 6 Operating loss The operating loss is stated after charging: Non-recurring items Depreciation Amortisation Loss on disposal of property, plant and equipment Impairment of intangible asset Research and development expenditure not capitalised Operating lease rentals: Land and buildings Plant and equipment Fees payable to the Company’s auditor for the audit of the financial statements Fees payable to the Company’s auditor for other services: Audit of the financial statements of the Company’s subsidiaries pursuant to legislation Interim review Other services relating to taxation Net foreign exchange gain 2014 £’000 – 89 29 10 – 406 93 5 11 26 1 7 (10) 2013 £’000 570 119 29 1 494 383 107 6 11 26 1 7 (5) Non-recurring items within administrative expenses for 2013 comprise of £76,000 of costs incurred in the transfer of operations from one of the Group’s UK facilities to the Head Office, and an impairment charge of £494,000, details of which are given in note 12. 7 Employee benefit expense Wages and salaries Social security costs Other pension costs Average number of people employed: Testing and technical Selling Administration Management Marketing Total average headcount Remuneration in respect of the Directors was as follows: Emoluments Pension contributions 2014 £’000 1,614 198 75 1,887 2013 £’000 1,732 203 76 2,011 2014 2013 4 8 8 6 – 7 8 8 6 1 26 30 2014 £’000 805 65 870 2013 £’000 806 65 871 Symphony Environmental Technologies plcAnnual Report & Accounts 2014 Key management remuneration: Short-term employee benefits Post-employment benefits 35 2014 £’000 805 65 870 2013 £’000 806 65 871 The Directors are considered to be the key management personnel of the Group. Further details on Directors’ remuneration and share options are set out in the Remuneration Report. 8 Finance income and costs Interest income: Finance lease interest Total finance income Interest expense: Bank borrowings Other interest Finance charges Total finance costs Net finance costs 9 Taxation Net deferred tax (see note 9a) R&D tax credit Total income tax credit No tax arises on the loss for the year. 2014 £’000 2013 £’000 1 1 4 121 1 126 125 2014 £’000 – 85 85 5 5 5 46 3 54 49 2013 £’000 (74) 145 71 The tax assessed for the year is different from the standard rate of corporation tax in the UK of 21% (2013: 23%). The change in the rate of standard corporation tax is due to the rates being changed by UK Government legislation. The differences in tax assessed against the standard rate of corporation tax are explained as follows: Loss for the year before tax Tax calculated by rate of tax on the result Effective rate for year at 21.5% (3m @ 23% and 9m @ 21%) Expenses not deductible for tax purposes Depreciation in excess of capital allowances Capital allowances in excess of depreciation R & D tax relief Tax losses carried forward Sundry items Movement in deferred income tax asset (see note 9a) R&D tax credit Total income tax credit 2014 £’000 (390) (84) (2) 4 – (6) 28 64 (4) – 85 85 2013 £’000 (778) (179) (2) 123 11 – (8) 55 – (74) 145 71 FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 36 Notes to the Annual Report and Accounts continued 9a Deferred income tax asset Deferred income tax asset brought forward Change in tax rate Recognised in the year Deferred income tax asset carried forward 2014 £’000 1,142 – – 1,142 2013 £’000 1,216 (171) 97 1,142 The deferred tax asset relates to tax losses. There are tax losses of approximately £13,400,000 (2013: £13,300,000). Of these tax losses, a £nil deferred tax adjustment has been recognised in this year’s accounts (2013: negative £74,000) resulting in a total asset recognised of £1,142,000 (2013: £1,142,000). There is a total potential tax asset of £2,680,000 using a rate of 20%, being the corporation tax rate UK Parliament has currently set. The recognition of the deferred tax asset is based on sensitising management forecasts to estimate the future taxable profits against which the losses will be relieved. Judgements have been made in respect to profitability going forward based upon current sales leads and market receptiveness to anticipated product launches. Other key estimates relate to foreign exchange rates. 10 Loss per share and dividends The calculation of basic earnings per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares on the assumed conversion of all dilutive options and warrants. Reconciliations of the loss and weighted average numbers of shares used in the calculations are set out below: Basic and diluted Loss attributable to equity holders of the Company Weighted average number of ordinary shares in issue Basic loss per share 2014 2013 £(305,000) £(707,000) 130,255,952 128,010,884 (0.23) pence (0.55) pence Dilutive effect of weighted average options Total of weighted average shares together with dilutive effect of weighted options – 130,255,952 – 128,010,884 Diluted loss per share (0.23) pence (0.55) pence No dividends were paid for the year ended 31 December 2014 (2013: £nil). The effect of options in 2014 and 2013 are anti-dilutive. 23,126,500 options were outstanding at the end of the year which may become dilutive in future years. The loss before non-recurring items is £305,000 (2013: £137,000) and the basic and diluted loss per share using the weighted average number of ordinary shares of 130,255,952 (2013: 128,010,884) is 0.23 pence (2013: loss 0.55 pence). Symphony Environmental Technologies plcAnnual Report & Accounts 2014 11 Property, plant and equipment At 1 January 2013 Cost Accumulated depreciation Net book amount Year ended 31 December 2013 Opening net book amount Additions Disposals Depreciation charge Eliminated on disposal Closing net book amount At 1 January 2014 Cost Accumulated depreciation Net book amount Year ended 31 December 2014 Opening net book amount Additions Transfer to/from other class Disposals Depreciation charge Depreciation charge transferred to/from other class Eliminated on disposal Closing net book amount At 31 December 2014 Cost Accumulated depreciation Net book amount Plant & machinery £’000 Fixtures & fittings £’000 Fixtures & fittings Elstree Gate £’000 Motor vehicles £’000 Office equipment £’000 358 (142) 216 216 1 – (44) – 173 359 (186) 173 173 12 8 (5) (33) (2) – 153 374 (221) 153 67 (59) 8 8 – – (3) – 5 67 (62) 5 5 – – (67) – – 62 – – – – 236 (60) 176 176 6 – (24) – 158 242 (84) 158 158 51 (8) – (27) 2 – 176 285 (109) 176 127 (82) 45 45 – (22) (10) 15 28 105 (77) 28 28 – – – (9) – – 19 105 (86) 19 160 (106) 54 54 14 – (38) – 30 174 (144) 30 30 14 – – (20) – 24 188 (164) 24 952 (580) 372 37 Total £’000 948 (449) 499 499 21 (22) (119) 15 394 947 (553) 394 394 77 – (72) (89) – 62 372 Included within net book value of motor vehicles, plant and machinery, and office equipment is £2,000 (2013: £5,000) relating to assets held under finance leases and hire purchase contracts. The depreciation charged to the financial statements in the year in respect of such assets amounted to £3,000 (2013: £9,000). FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 38 Notes to the Annual Report and Accounts continued 12 Intangible assets At 1 January 2013 Cost Accumulated amortisation Net book amount Year ended 31 December 2013 Opening net book amount Additions Impairment charge Amortisation charge Closing net book amount At 1 January 2014 Cost Accumulated amortisation Accumulated impairment Net book amount Year ended 31 December 2014 Opening net book amount Additions Amortisation charge Closing net book amount At 31 December 2014 Cost Accumulated amortisation Accumulated impairment Net book amount Development costs £’000 Trademarks £’000 Total £’000 1,424 (116) 1,308 1,308 124 (494) (24) 914 1,548 (140) (494) 914 914 235 (24) 1,125 1,783 (164) (494) 1,125 59 (33) 26 26 2 – (5) 23 61 (38) – 23 23 26 (5) 44 87 (43) – 44 1,483 (149) 1,334 1,334 126 (494) (29) 937 1,609 (178) (494) 937 937 261 (29) 1,169 1,870 (207) (494) 1,169 The Group relies on the continued development of its product range and in so doing is maintaining satisfactory goals in fulfilling its strategy (see Chairman’s Statement and Chief Executive’s Review). After taking this into account together with the considerations of liquidity risk, see note 3, the Directors do not believe that there are any indicators of impairment other than detailed below. Development costs are capitalised in accordance with the policy set out in note 2. In capitalising these costs, judgements are made relating to ongoing feasibility and commerciality of products and systems being developed. In making these judgements, cash flow forecasts are used and these include significant estimates in respect to sales forecasts and future foreign exchange rates. During 2014 there have been no impairments of intangible assets. In 2013 the Group recognised an impairment charge of £494,000 against an individual asset within the Recycling Tech Division comprised of capitalised development costs. Following a strategic decision taken by the Directors to look to complete the development of the product outside of the Group, it was determined that the asset should be fully impaired. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 13 Subsidiary undertakings Principal subsidiaries: Name Country of incorporation Nature of business Symphony Environmental Limited England and Wales Supply of environmental polyolefin products and ancillaries Symphony Packaging Limited D2W Limited Symphony Plastics (2010) Limited Symphony Recycling Technologies Limited England and Wales Development of recycling England and Wales Dormant England and Wales Dormant England and Wales Dormant Elstree Gate Services Limited Symphony Environmental (Jamaica) Limited Jamaica systems England and Wales Dormant Dormant All of the above subsidiaries are consolidated in the Group financial statements. 14 Available for sale financial assets All non-current Beginning and end of year 39 Proportion of ordinary shares held by parent Proportion of ordinary shares held by the Group 100% 100% 0% 0% 0% 100% 100% 0% 100% 100% 100% 100% 100% 100% 2014 £’000 – 2013 £’000 – The Company holds 30% of the ordinary share capital of Symphony Bin Hilal Plastics LLC, a company incorporated in the United Arab Emirates. The Directors are of the opinion that this is an investment as the Directors do not have significant influence because they have no financial or management control. A full impairment had been made against this in 2012 due to limited availability of financial information. The Company holds 30% of Tyre Recycling Technologies Limited, a company registered in England and Wales. The company is dormant. The Company holds 10% of the ordinary share capital of American Plastic Technologies plc, a company incorporated in the United States of America. The Directors are of the opinion that this is an investment as the Directors do not have significant influence because they have no financial or management control. The investment in American Plastics Technologies plc is measured at cost less impairment charges as the fair value cannot be estimated readily. The cost of this investment was £nil. The Company holds c.5% of the ordinary share capital of Oxobioplast Inc., a company incorporated in the United States of America. The Directors are of the opinion that this is an investment as the Directors do not have significant influence because they have no financial or management control. The investment in Oxobioplast Inc. is measured at cost less impairment charges as the fair value cannot be estimated readily. The cost of this investment was £nil. There is no collateral on the above amounts. 15 Inventories Finished goods and goods for resale 2014 £’000 576 2013 £’000 528 The cost of inventories recognised as an expense and included in “cost of sales” amounted to £3,200,000 (2013: £3,513,000). There is a provision of £10,000 for the impairment of inventories (2013: £17,000). There is no collateral on the above amounts. FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 40 Notes to the Annual Report and Accounts continued 16 Trade and other receivables Loans and receivables: Trade receivables Receivables under finance leases Other debtors VAT Prepayments 2014 £’000 2013 £’000 1,274 12 18 59 62 1,425 1,162 25 19 83 77 1,366 The Directors consider that the carrying value of trade and other receivables approximates to their fair values. There is a provision of £117,000 for the impairment of receivables (2013: £270,000). The maximum credit risk exposure at the balance sheet date equates to the carrying value of trade receivables. Further disclosures are set out in note 3. Included in trade receivables at 31 December 2014 are debtors which are past due but where no provision has been made as there has not been a change in the credit worthiness of these debtors and the amounts are considered recoverable. As of 31 December 2014 trade receivables of £137,000 (2013: £27,000) were past due and not impaired. The ageing analysis of these trade receivables is as follows: More than three months but less than six months More than six months but not more than one year 2014 £’000 121 16 137 2013 £’000 11 16 27 Due to the different markets that the Group operates in, trade terms vary from cash on shipment of goods to payment under letter of credit due 150 days from shipment. Trade receivables are secured against the facilities provided by the Group’s bankers. Lease agreements in which the other party, as lessee, is to be regarded as the economic owner of the leased assets give rise to accounts receivable in the amount of the discounted future lease payments. These receivables amounted to £12,000 as of 31 December 2014 (2013: £25,000). The receivables under finance leases for 2014 are as follows: £’000 Not later than one year As at 31 December 2014 The receivables under finance leases for 2013 were as follows: £’000 Not later than one year As at 31 December 2013 Total future payments Unearned interest income 14 14 2 2 Total future payments Unearned interest income 27 27 2 2 Present value 12 12 Present value 25 25 The leases, which relate to d2Detectors, are typically cancellable after the first six months and run for a period of two years. The contracts include an option to purchase the leased equipment at any time between the initial six month period and the full term of two years. The purchase price lies between 33% and 75% of the gross investment at the inception of the lease, resulting from the timing the option to purchase is exercised. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 17 Cash and cash equivalents Loans and receivables: Cash at bank and in hand 41 2014 £’000 2013 £’000 938 130 The carrying amount of cash equivalents approximates to their fair values. There is no collateral on the above amounts. 18 Equity At 1 January 2013 Loss for the year Proceeds from shares issued At 31 December 2013 At 1 January 2014 Loss for the year Proceeds from shares issued At 31 December 2014 Group and Company Group Ordinary shares Number Ordinary shares £’000 Share premium £’000 Retained earnings £’000 127,994,377 – 125,000 128,119,377 128,119,377 – 16,450,000 1,280 – 1 1,281 1,281 – 165 1,648 – 2 1,650 1,650 – 1,427 205 (707) – (502) (502) (267) – Total £’000 3,133 (707) 3 2,429 2,429 (267) 1,592 144,569,377 1,446 3,077 (769) 3,754 Proceeds from shares issued The following ordinary shares were issued during the year: Date 20 January 2014 28 April 2014 19 May 2014 17 November 2014 24 December 2014 Ordinary shares Number 100,000 450,000 150,000 12,800,000 2,950,000 Details Consideration £ Premium £ Exercise of options Exercise of options Exercise of options 2,750 11,063 3,563 Placing 1,280,000 295,000 Placing 1,750 6,563 2,063 1,152,000 265,500 Share options and warrants As at 31 December 2014 the Group maintained an approved share-based payment scheme for employee compensation. For the options granted to vest, the Group must have achieved an earnings per share in excess of 0.001p and employees must serve a specified amount of time. All share-based employee compensation will be settled in equity. The Group has no legal or constructive obligation to repurchase or settle the options. As at 31 December 2014 there were 3,375,000 staff options outstanding. No staff options were issued in 2014. On 14 November 2014 the Group granted 6,700,000 warrants exercisable at 15p for three years to Somerston Environmental Technologies Ltd. Mr Shaun Robinson, a Director of Symphony Environmental Technologies Plc has interests of 13.33% in Somerston Environmental Technologies Ltd which represents 893,110 warrants. FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 42 Notes to the Annual Report and Accounts continued 18 Equity continued The Group has also issued unapproved share options and warrants. Approved and unapproved share options, warrants and weighted average exercise price are as follows for the reporting periods presented: Outstanding at 1 January Granted Exercised Forfeited/lapsed Outstanding at 31 December 2014 Weighted average exercise price £ 0.06 0.15 0.02 0.05 Number 18,151,500 100,000 (125,000) (500,000) Number 17,626,500 6,700,000 (700,000) (500,000) 23,126,500 0.09 17,626,500 2013 Weighted average exercise price £ 0.06 0.05 0.02 0.08 0.06 The weighted average share price at the date options were exercised was 9p (2013: 7p). The number of share options and warrants exercisable at 31 December 2014 was 23,126,500 (2013: 17,626,500). The weighted average exercise price of those shares exercisable was 9p (2013: 6p). The weighted average option contractual life is eight years (2013: ten years) and the range of exercise prices is 2.375p to 15p (2013: 2.375p to 12p). Directors Directors’ interests in shares and share incentives are contained in the Remuneration Report. IFRS2 expense There is an IFRS share-based charge for the year of £nil (2013: £nil). 19 Trade and other payables Current Financial liabilities measured at amortised cost: Trade payables Social security and other taxes Accruals and deferred income Fair value is not materially different to book value. There is no collateral on the above amounts. 20 Interest bearing loans and borrowings Non-current Finance lease liabilities Current Financial liabilities measured at amortised cost: Bank overdraft Other loans Finance lease liabilities 2014 £’000 2013 £’000 464 71 218 753 488 76 162 726 2014 £’000 2013 £’000 – – 353 797 3 1,153 3 3 101 1,229 9 1,339 The bank overdraft of £353,000 (2013: £101,000) is included within the Cash Flow Statement within cash and cash equivalents. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 43 Other loans include: An amount due relating to the invoice financing facility totalling £147,000 (2013: £579,000). Interest is charged at 2.96% over HSBC Bank plc base rate per annum. An amount due to Michelle Laurier, spouse of Michael Laurier, of £150,000 (2013: £150,000). Interest is charged at 2% per month (See Note 23). An amount due to an unconnected individual of £500,000 (2013: £500,000). Interest is charged at 12% per annum. The loans from Michelle Laurier and an unconnected individual of £150,000 and £500,000 respectively, were repaid in January 2015. Commitments under finance leases and hire purchase agreements mature as follows: Amounts payable within one year Amounts payable between one and two years Gross 2014 £’000 Gross 2013 £’000 Net 2014 £’000 Net 2013 £’000 3 – 3 10 3 13 3 – 3 9 3 12 The finance leases are for the purchase of sundry equipment (note 11). There is no collateral on the above amounts except for finance lease liabilities which are secured against the asset that they finance. 21 Net cash used in operations Loss after tax Adjustments for: Depreciation Amortisation Impairment of intangible asset Loss on disposal Share-based payments Impairment of financial asset Tax credit Interest expense Changes in working capital: Inventories Trade and other receivables Trade and other payables Cash used in operations 22 Commitments 2014 £’000 2013 £’000 (305) (707) 89 29 – 10 – – (85) 126 (47) (24) 27 (180) 119 29 494 1 – – (71) 54 108 (542) (440) (955) The future aggregate minimum lease payments under non-cancellable operating leases are as follows: No later than one year Later than one year and no later than five years Greater than five years 23 Related party transactions 2014 £’000 128 471 29 628 2013 £’000 113 151 – 264 During 2013 Michelle Laurier, spouse of Michael Laurier, loaned the company £150,000. Interest on the loan was calculated at 2% per month. £150,000 was outstanding at 31 December 2014 (2013: £150,000). This loan was repaid in January 2015. 24 Post balance sheet events There have been no significant post balance sheet events. FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 44 Notes to the Annual Report and Accounts continued 25 Capital management The Group’s capital management objectives are: – to ensure the Group’s ability to continue as a going concern; and – to provide an adequate return to shareholders The Group monitors capital on the basis of the gearing ratio calculated as net debt divided by total capital. Net debt is calculated as total borrowings as shown in the Consolidated Statement of Financial Position less cash and cash equivalents. Total capital is calculated as equity as shown in the Consolidated Statement of Financial Position plus net debt. The Group’s goal in capital management is to maintain an optimal gearing ratio, this has changed from 2013 where the goal was to maintain a capital-to-overall financing ratio of 1:1 to 1:3. The gearing ratio has been restated for 2013. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. 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. The gearing ratios at 31 December 2014 and 2013 were as follows: Total borrowings Cash and cash equivalents Net debt Total equity Borrowings Overall financing Gearing ratio 2014 £’000 1,153 (938) 215 3,716 1,153 4,869 4% 2013 £’000 1,342 (130) 1,212 2,429 1,342 3,771 32% The ratio-decrease during 2014 is due to both the increase in equity, being new shares issued during the year, which resulted in the high cash and cash equivalents balance at the year end. The Group will endeavour to optimise the ratio depending on the position of the Group and its general requirements. 26 Capital commitments The Group had capital commitments totalling £nil at the end of the year (2013: £nil). The following pages contain the balance sheet and accompanying notes for the parent Company prepared under UK GAAP. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 Company Balance Sheet at 31 December 2014 Company number 3676824 Fixed assets Tangible assets Investments Current assets Debtors Cash at bank and in hand Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Capital and reserves Share capital Share premium account Profit and loss account 45 Note 28 29 30 31 32 34 35 35 2014 £’000 2013 £’000 4 2,150 2,154 3,301 921 4,222 593 3,520 5,783 – 5,783 1,446 3,077 1,260 5,783 11 2,150 2,161 2,520 9 2,529 69 2,460 4,621 508 4,113 1,281 1,650 1,182 4,113 The Company has applied the exemption under section 408 of the Companies Act 2006 not to present a profit and loss account for the year ended 31 December 2014. There are no recognised gains or losses other than its profit for the year as detailed in note 36. These financial statements were approved by the Directors on 10 April 2015 and are signed on their behalf by: I Bristow FCCA Finance Director The accompanying notes form an integral part of these financial statements. FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 46 Notes to the Company Balance Sheet 27 Principal accounting policies Basis of accounting The Company financial statements have been prepared under the historical cost convention and in accordance with United Kingdom Generally Accepted Accounting Practice (GAAP). Fixed assets Tangible fixed assets are stated at cost, net of depreciation and any provision for impairment. Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows: Plant and machinery Motor vehicles – 20% reducing balance. – 20% reducing balance. Leasing and hire purchase commitments Assets held under finance leases, which are leases where substantially all the risks and rewards of ownership of the asset have passed to the Company, and hire purchase contracts, are capitalised in the balance sheet and are depreciated over their useful lives. The capital elements of future obligations under the leases and hire purchase contracts are included as liabilities in the balance sheet. The interest elements of the rental obligations are charged in the profit and loss account over the periods of the leases and hire purchase contracts and represent a constant proportion of the balance of capital repayments outstanding. Rentals payable under operating leases are charged in the profit and loss account on a straight line basis over the lease term. Pension costs Company pensions are operated within the Group pension scheme. The Group operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those of the Group. The annual contributions payable in respect to the Company are charged to the profit and loss account. Deferred taxation Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more tax, with the following exception: deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date. Foreign currencies Monetary assets and liabilities in foreign currencies are translated into Sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into Sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are taken into account in arriving at the operating profit. Investments Investments are included at cost less amounts written off. Financial instruments Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities. Where the contractual obligations of the financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classified as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability. Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classified as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 47 Equity-settled share-based payments All share-based payment arrangements granted after 7 November 2002 that had not vested prior to 1 January 2007 are recognised in the financial statements. All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values are determined by reference to the fair value of the instrument granted to the employee. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions. The fair value is charged to the profit and loss account between the date of issue and the date the share options vest with a corresponding credit taken to shareholders’ funds. 28 Tangible fixed assets Cost At 1 January 2014 Transfer to other company within the Group At 31 December 2014 Depreciation At 1 January 2014 Charge for the year Transfer to other company within the Group At 31 December 2014 Net book value At 31 December 2014 At 31 December 2013 Plant & machinery £’000 Motor vehicles £’000 Total £’000 27 (27) – 22 – (22) – – 5 35 – 35 29 2 – 31 4 6 62 (27) 35 51 2 (22) 31 4 11 Included within the net book value of £4,000 is £nil (2013: £nil) relating to assets held under finance leases and hire purchase contracts. The depreciation charged to the financial statements in the year in respect of such assets amounted to £nil (2013: £3,000). 29 Investments Shares in Group undertakings At beginning and end of the year Group undertakings are detailed in note 13. 30 Debtors Amounts owed by Group undertakings VAT Other debtors Prepayments 31 Creditors: amounts falling due within one year Trade creditors Loans Accruals 2014 £’000 2,150 2013 £’000 2,150 2014 £’000 3,286 5 5 5 3,301 2014 £’000 21 500 72 593 2013 £’000 2,510 4 – 6 2,520 2013 £’000 10 – 59 69 FINANCIAL STATEMENTSCORPORATE GOVERNANCEBUSINESS REVIEWSymphony Environmental Technologies plcAnnual Report & Accounts 2014www.symphonyenvironmental.com 48 Notes to the Company Balance Sheet continued 32 Creditors: amounts falling after more than one year Amounts owed to Group undertakings Loans 2014 £’000 – – – 2013 £’000 8 500 508 33 Contingent liabilities The Company has guaranteed all monies due to its bankers by Symphony Environmental Limited, Symphony Recycling Technologies Limited and Symphony Plastics (2010) Limited. At 31 December 2014 the net indebtedness of these companies amounted to £nil (2013: £nil). 34 Share capital The Company’s share capital is detailed in note 18. 35 Reserves At 1 January 2014 Retained profit for the year New equity share capital subscribed At 31 December 2014 Share premium account £’000 1,650 – 1,427 3,077 Profit and loss account ’000 1,182 78 – 1,260 36 Parent Company own accounts Symphony Environmental Technologies plc has not presented its own profit and loss account and related notes as permitted by Section 408 of the Companies Act 2006. The profit for the financial year dealt with in the financial statements of the parent Company is £78,000 (2013: profit £108,000). 37 Directors and employees All employees of Symphony Environmental Technologies plc are Directors. See note 7 of the Group consolidated accounts The average number of staff employed by the Company during the financial year amounted to: Management The aggregate payroll costs of the above were: Wages and salaries Social security costs 2014 No. 2 2013 No. 2 2014 £’000 2013 £’000 65 7 72 73 8 81 The company has taken advantage of the FRS8 exemption that allows intra-Group transactions with a 100% subsidiary to not be disclosed. There were no other related party transactions throughout the period. Symphony Environmental Technologies plcAnnual Report & Accounts 2014 Company information COMPANY REGISTRATION NUMBER 3676824 REGISTERED OFFICE 6 Elstree Gate Elstree Way Borehamwood Hertfordshire WD6 1JD DIRECTORS N J Deva DL, FRSA, MEP Non-Executive Chairman M N Laurier Chief Executive Officer I Bristow FCCA Finance Director M Stephen LL.M Commercial Director & Deputy Chairman M F Stephens Technical Director N Clavel Non-Executive Director S Robinson Non-Executive Director Secretary I Bristow NOMINATED ADVISER AND BROKER Cantor Fitzgerald Europe One Churchill Place Canary Wharf London EC14 5RD BANKERS HSBC Bank Plc 103 Station Road Edgware Middlesex HA8 7JJ SOLICITORS Olswang 90 High Holborn London WC1V 6XX AUDITORS Grant Thornton UK LLP Chartered Accountants Registered Statutory Auditors Grant Thornton House 202 Silbury Boulevard Central Milton Keynes MK9 1LW REGISTRARS Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU www.symphonyenvironmental.com