Emmerson Plc
Annual Report and Financial Statements
For the year ended 31 December 2019
EMMERSON PLC
CONTENTS
Chairman’s Statement
Directors’ Report
Statement of Directors’ Responsibilities
Corporate Governance Report
Report of the Independent Auditor
Consolidated Statement of Comprehensive Income
Consolidated Statements of Financial Position
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Financial Statements
Company Information
Page
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38
EMMERSON PLC
CHAIRMAN’S STATEMENT
YEAR ENDED 31 DECEMBER 2019
With the world’s population estimated to grow to over nine billion people by 2050, food production,
according to the Food and Agricultural Organization of the United Nations, will need to increase by 70%.
Naturally, this will drive the need for potash, a key plant nutrient essential to increasing food production
and quality over a broad range of crops; average global potash demand growth is estimated at 2-3%
per annum.
For targets to be met, new sources of potash will need to come on stream. Whilst there are other notable
projects advancing worldwide, not all potash deposits are created equal. We believe that our own
Khemisset Potash Project (“Khemisset” or “the Project”) in Morocco stands head and shoulders above
the competition with potentially world class attributes including a long mine life, industry leading low
capital cost to production, high margins and compelling economics.
As the Scoping Study announced towards the end of 2018 demonstrated, the Project has a potential
post-tax NPV10 of US$1.14 billion based on industry expert price forecasts and an average EBITDA
over the 20 year life of mine of over US$230 million per annum. During the period under review, we
built on this economic value with preliminary studies on two additional projects: the sale of salt by product
and the production of sulphate of potash (“SOP”). Including these projects takes the total attributable
NPV10 for Emmerson to over US$1.8 billion, with life of mine average annual post tax free cash of
around US$300 million per annum.
We are not the only ones who hold the view that Khemisset has stand-out credentials. During H1 2019,
we formalised key partnerships fundamental to the eventual financing of the Project. These included a
memorandum of understanding (“MoU”) with Afriquia Gaz to evaluate the various options available to
supply gas to the Project; a MoU with Euronext listed international, integrated, renewable energy
developer, Voltalia, to look at options to provide cost-saving electricity options at Khemisset; and a
Heads of Terms with a large fertiliser industry player with respect to offtake from Khemisset covering
100% of the phase 1 production of 800,000 tonnes of MOP per annum for an initial five-year period.
In addition to this, during the summer we were approached by a large European commercial bank with
an indicative offer for debt financing for Khemisset. The indication was based on highly conservative
assumptions applied by the bank, including a delivered potash price in Brazil of US$235/tonne, a 40%
discount to the spot price at the time. Despite these conservative assumptions, the bank indicated the
Project could comfortably sustain leverage of US$230 million, or approximately 60% of the total project
capital cost. We strongly believe that, with negotiation, this number can be significantly improved.
Other advances made during the year included positive results from both the environmental baseline
study and the comprehensive metallurgical test work programme. The latter confirmed the technical
viability of the processing method selected in the Scoping Study as well as the recovery rate
assumptions used and has also helped our process design engineers identify any areas of risk and
areas where they believe significant improvements from the Scoping Study can be made.
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EMMERSON PLC
CHAIRMAN’S STATEMENT (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
Furthermore, mid 2019, our study consultants conducted an end to end site visit to review all aspects of
the Project and its potential execution. This included inspecting the local project infrastructure (electrical,
roads, rail), potential plant sites and ports to provide vital information for the Options Study portion of
the Feasibility Study that assesses all parts of the Project both quantitatively and qualitatively, to ensure
that the optimal development strategy is identified.
Following this, later in September, we elected to use the Port of Casablanca as our go-forward port
option; this has advantages over our Scoping Study assumption, including an approximate US$7.5
million reduction in capital cost.
Other progress during the year included the consolidation of several permits into a single, larger area,
which will simplify the upcoming mining permit application. We were delighted with the strong support
we received during this process from the Moroccan Government and, in particular, the Ministry of
Energy, Mines and Sustainable Development.
On the corporate side, Emmerson remains well funded having raised an additional £2.25 million (pre
costs) to continue both fast tracking development and discussions with strategic partners; at 31
December 2019, Emmerson had a £2,071,000 cash position. Having provided strong support in the
capital raise, we appointed Shard Capital as joint broker.
As we advance Emmerson’s transition from developer to producer, our focus is first and foremost on
the completion of the Feasibility Study and associated studies during H2 2020, while other 2020 work
streams include the commencement of the mine permitting process, financing discussions, supply
negotiations, and the commencement of detailed design and engineering as well as engagement with
potential EPC/EPCM and contract mining partners.
To this end, 2020 has already seen the team maintain a fast paced development schedule. A preferred
site has been chosen, as has a secondary site, both of which provide access to local infrastructure.
Capital cost estimates required to connect our preferred plant site to the local road infrastructure have
been provided, which indicated a cost of only US$2 million, including a 15% contingency, a significant
cost saving relative to more remote potash projects globally. And the full IFC compliant Environmental
and Social Impact Assessment (“ESIA”) has commenced, which will enable us to set an H2 2020 target
date for the application for a Mining Permit for the Project. As part of this programme, we have
established a scientific partnership with the Rabat Scientific Institute with the purpose of providing
scholarships to students to study animal species in the local area around Khemisset. Furthermore,
constructive discussions with several potential partners for the future development of the Project
including financing options and technical partnerships are ongoing.
The unique combination of the potential for very high margins together with its proximal location to
numerous high-price end markets, excellent infrastructure and logistics options already in place as well
as favourable mining code and strong support from the Moroccan Government, underpins our
confidence that Khemisset is set to become a major supplier of potash to the African market for many
years to come. Indeed, there is little to rival the Project in the global potash development space based
on capital cost per tonne of production.
2
EMMERSON PLC
CHAIRMAN’S STATEMENT (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
While COVID-19 cannot be ignored and may impact us to a degree, having moved quickly to cut down
expenditure, we believe that 2020 will be another year of significant milestones for Emmerson as we
move ever closer to our goal of becoming part of the small group of potash producers in the world.
Finally, I would like to thank our shareholders as well as management team and advisers for all their
support and dedication, none more so than our CEO Hayden Locke who has worked tirelessly on behalf
of the Company over the past year. Therefore, it was with great pleasure to hear the news that Hayden
had been nominated for CEO of the year at the Mining Journal’s annual awards; he is a deserving
candidate.
Mark Connelly
Chairman
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EMMERSON PLC
DIRECTORS' REPORT
YEAR ENDED 31 DECEMBER 2019
The Directors present their report and the audited financial statements for the year ended 31 December
2019.
General information
Emmerson PLC (“the Company”), was incorporated in the Isle of Man under the Laws with registered
number 013301V on 1 March 2016. All of the Company’s Ordinary Shares were admitted to the London
Stock Exchange's Main Market and commenced trading on 15 February 2017.
Emmerson PLC’s primary focus is on developing the Khemisset Potash Project located in Northern
Morocco.
Results for the year and dividends
The total comprehensive income attributable to the equity holders of the Group for the year was a loss
of £1,164,000 (2018: loss of £1,703,000).
The Company paid no dividend during the year (2018: £nil).
Business performance for the year
As detailed in the Chairman’s Statement, development of the Khemisset Potash Project continued
during the period, with several significant milestones achieved.
Having received the results of the Scoping Study at the end of 2018, which confirmed the potential for
a low capex high margin mine, Emmerson further strengthened the Project’s economic value during
2019. Notably, with the addition of preliminary studies on two projects (the sale of salt by product and
the production of sulphate of potash), Emmerson increased the NPV10 of US$1.14 billion over a
minimum 20-year life of mine (“LOM”) stated in the Scoping Study to +US$1.8 billion.
The Company also advanced key logistical, infrastructure, off-take, and financing options, all of which
ensured the identification of the optimal development strategy and brought the Group closer to achieving
its target of becoming a potash producer in 2021. These included amongst others, the signing of a
Heads of Terms with a large fertiliser industry player regarding an off-take agreement, as well as an
indicative offer for debt financing. Furthermore, the Company received positive results from both the
environmental baseline study and the comprehensive metallurgical test work programme, and, as we
look ahead to applying for our mining permit, we also consolidated several permits into a single, larger
area, which will simplify this process.
Naturally, COVID-19 must be considered in all future strategies, however, we remain confident in hitting
our 2020 targets. These include completing the Feasibility Study during H2, starting the mine permitting
process, advancing financing and supply negotiations, commencing detailed design and engineering
plans, and engaging with potential EPC/EPCM and contract mining partners.
During the financial year, the Group made a loss per share of 0.17 pence (2018: a loss per share of
0.49 pence per share). Given the current stage of the Group’s exploration project, the Directors do not
consider there to be any other financial key performance indicators. The Group is well funded; as at 31
December 2019, it had a £2,071,000 cash position.
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EMMERSON PLC
DIRECTORS' REPORT (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
Principal risks and uncertainties
The Group operates in an uncertain environment and is subject to a number of risk factors. The Directors
have carried out a robust assessment of the principal risks facing the Group, including those that
threaten its business model, future performance, solvency or liquidity. They consider that the following
are the principal risk factors that could materially and adversely affect the Group’s future operating
results or financial position:
Deterioration in Moroccan economic conditions or in the potash market in particular
There is a risk that changes in the relevant law and legislation could have an adverse effect on the
Group’s future performance, expected return and or feasibility of the project.
The Group is also exposed to general economic risk, including changes in the economic outlook in its
principal markets and government changes in industrial, fiscal, monetary or regulatory policies.
The Board continues monitoring developments in the market in order to adapt. The management team
has wide-ranging expertise in mineral exploration which, together with a flexible cost structure, enable
the Group to adapt its organisation to changes in circumstances.
Funding risk
Although the Group has sufficient working capital for at least 12 months from the date of this report, the
Group may not be able to obtain additional financing as and when needed which could result in a delay
or indefinite postponement of exploration and development activities.
In common with many exploration entities, the Group will need to raise further funds in order to progress
the Group from the exploration phase into feasibility and eventually into production of revenues.
Dependence on key personnel
The Company has a small management team and the loss of a key individual could have an adverse
effect on the future of the Group’s business. The Group’s future success will also depend in large part
upon its ability to attract and retain highly skilled personnel. There can be no assurance that the Group
will be successful in attracting and retaining such personnel.
The Group seek to create a workplace that attracts, retains and engages its workforce. Efforts are also
made to attract new talent and skilled people.
Environmental risk
There may also be unforeseen environmental liabilities resulting from both future or historic exploration
or mining activities, which may be costly to remedy. In addition, potential environmental liabilities as a
result of unfulfilled environmental obligations by the previous owners may impact the Group. If the Group
is unable to fully remedy an environmental problem, it may be required to stop or suspend operations
or enter into interim compliance measures pending completion of the required remedy.
Environmental management systems are in place to mitigate environmental hazard risks. The Group
uses advisors with specialist knowledge in mining and related environmental management for reducing
the impacts of environmental risk.
Estimates of mineral reserves and resources
Mineral resources are estimates and no assurance can be given that any particular grade or tonnage
will be realised or that they will be converted into ore reserves or will ever qualify as a commercially
mineable (or viable) deposit which can be legally and economically exploited. As a result of these
uncertainties, there can be no assurance that any potential mineral resources defined by the Group’s
exploration programmes will result in profitable commercial mining operations.
The Directors are confident that they have put in place a strong management team capable of dealing
with the above issues as they arise.
5
EMMERSON PLC
Corporate Responsibility
DIRECTORS' REPORT (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
We have defined the scope of our Group’s responsible business practices as falling within the following
key focus areas:
• Health and Safety – ensuring the safety and well-being of our staff
• Environment – managing our environmental impact areas of waste, energy and water
• Employees – supporting our people to develop and flourish within the business
• Community – positive interaction with the communities in which we operate
• Ethical Standards – operating to the highest ethical standards
We remain committed to ensuring these activities become embedded in how we operate and contribute
towards the success of our business. This includes not only identifying and managing business risk but
exploring opportunities to add value to the business.
Corporate Governance
The statement on corporate governance can be found in the corporate governance report on pages 8-
12 of these financial statements. The corporate governance report forms part of this Directors report
and is incorporated into it by cross reference.
Financial risk management
The Group has exposure to the following risks from its use of financial instruments:
• Liquidity risk
• Market price risk
•
• Foreign exchange risk
• Credit risk
Interest rate risk: cash flow interest rate risk
Further details on the financial risks and suitable risk management system put in place by the
management are in note 11.
Events after the reporting period
Details of significant events that have occurred since 31 December 2019 are provided in note 17 to
these financial statements.
Going concern
The financial statements have been prepared on a going concern basis. The Group has not yet earned
revenues and is still in the exploration phase of its business. The operations of the Group are currently
financed from funds raised from shareholders. In common with many exploration entities, the Group will
need to raise further funds in order to progress the Group from the exploration phase into feasibility and
eventually into production of revenues.
The Directors are reasonably confident that funds will be forthcoming as and when they are required
and have received assurances to this effect as described in the Chairman’s Statement. However, the
Group has cash and cash equivalents of £2,071,000 at 31 December 2019 and the Directors are of the
view this is sufficient to fund the Group’s committed expenditure and maintain good title to the
exploration licences over the next 12 months from the date of approval of these financial statements,
without raising funds in this period.
As part of their assessment, the Directors have prepared cash-flow forecasts on the basis that cost
reduction and deferral measures are implemented over the going concern period as a result of the
current worldwide COVID 19 pandemic. The Directors have agreed, if circumstances require, to defer
payment of their fees until such time as adequate funding is received and if necessary, scale back
discretionary exploration activity.
6
EMMERSON PLC
DIRECTORS' REPORT (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
The Directors have a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis
of accounting in preparing the financial statements.
Director appointments and resignations during the year
The Directors who held office during the year and to the date of this report were:
Ed McDermott
Mark Connelly
Hayden Locke
Robert Wrixon
Appointed 24/06/16
Appointed 27/06/18
Appointed 04/06/18
Appointed 04/06/18
Directors interests
The Directors’ interest in the shares of the Company at 31 December 2019 and the date of this report
were:
Mark Connelly (Non-executive Chairman)
Hayden Locke
Robert Wrixon*
Edward McDermott (Non-executive)
Number of Ordinary
Share
479,261
1,475,135
44,233,411
350,000
% of Issued
Ordinary
Shares
0.07%
0.21%
6.44%
0.05%
*Robert Wrixon’s interest is held through Good Spirit International Limited.
Details of the Directors’ fees are given in note 5 to the financial statements. In addition, the Directors
were issued with share options. Share options disclosures are in note 13.
Disclosure of Information to Auditors
So far as the Directors are aware, there is no relevant audit information of which the Company’s auditors
are unaware, and each Director has taken all the steps that he ought to have taken as a Director in order
to make himself aware of any relevant audit information and to establish that the Company’s auditors
are aware of that information.
This report was approved by the Board on 29 April 2020 and signed on its behalf.
Mark Connelly
Chairman
7
EMMERSON PLC
STATEMENT OF DIRECTORS' RESPONSIBILITIES
YEAR ENDED 31 DECEMBER 2019
The Directors are responsible for preparing the Annual Report and the financial statements in
accordance with applicable law and regulations and have elected to prepare the financial statements in
accordance with International Financial Reporting Standards (“IFRSs”), as adopted by the European
Union (“EU”).
The financial statements are required to give a true and fair view of the state of affairs of the Group and
of the profit or loss of the Group for that year.
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 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 Group will continue in business.
The Directors are responsible for keeping proper accounting records that are sufficient to show and
explain the Group’s transactions and disclose with reasonable accuracy at any time its financial position.
They have general responsibility for taking such steps as are reasonably open to them to safeguard the
assets of the Group and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Company’s website; the work carried out by the auditors does not involve
the consideration of these matters and, accordingly, the auditors accept no responsibility for any
changes that may have occurred in the accounts since they were initially presented on the website.
Legislation governing the preparation and dissemination of financial statements may differ from one
jurisdiction to another.
Each of the Directors, whose names and functions are listed on page 10, confirm that, to the best of
their knowledge:
•
the financial statements, prepared in accordance with International Financial Reporting Standards
as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit
or loss of the Group;
the director’s report includes a fair review of the development and performance of the business and
the position of the Group, together with a description of the principal risks and uncertainties that they
face.
•
By Order of the Board
Mark Connelly
Chairman
29 April 2020
8
EMMERSON PLC
Introduction from the Chairman
CORPORATE GOVERNANCE REPORT
YEAR ENDED 31 DECEMBER 2019
The Board is committed to good corporate governance and, so far as appropriate, given the Group’s
size and the constitution of the Board, intends to comply with the QCA Guidelines on Corporate
Governance (“QCA Guidelines”). The Board believes this to be the most appropriate recognised
governance code for the Group.
This is a practical, outcome-oriented approach to corporate governance that is tailored for small and
mid-size quoted companies in the UK and which provides the Group with the framework to help ensure
that a strong level of governance is maintained.
As Chairman, I am responsible for leading an effective board, fostering a good corporate governance
culture, maintaining open communications with the shareholders and ensuring appropriate strategic
focus and direction for the Group. Notwithstanding the Board’s commitment to applying the QCA Code,
we will not seek to comply with the QCA Code where strict compliance in the future would be contrary
to the primary objective of delivering long-term value for the Company’s shareholders and stakeholders.
However, we do consider that following the QCA Code, and a framework of sound corporate governance
and an ethical culture, is conducive to long-term value creation for shareholders. All members of the
Board believe strongly in the importance of good corporate governance to assist in achieving objectives
and in accountability to stakeholders. In the statements that follow, the Board explains its approach to
governance in more detail.
Establish a strategy and business model which promote long-term value for shareholders
Emmerson's sole current activity is development of the Khemisset Potash Project located in Northern
Morocco. The project has a large JORC Resource Estimate (2012) of 311.4Mt @ 10.2% K2O and
significant exploration potential with an accelerated development pathway targeting a low capex, high
margin mine. Khemisset is perfectly located to capitalise on the expected growth of African fertiliser
consumption whilst also being located on the doorstep of European markets. This unique positioning
means the project will receive a premium netback price compared to existing potash producers. The
need to feed the world's rapidly increasing population is driving demand for potash and Emmerson is
well placed to benefit from the opportunities this presents.
Seek to understand and meet shareholder needs and expectations
The Company is committed to engaging and communicating openly with its shareholders to ensure that
its strategy, business model and performance are clearly understood. All Board members have
responsibility for shareholder liaison but queries are primarily delegated to the Company’s Advisors in
the first instance or the Company’s CEO.
Copies of the annual and interim reports are sent to all shareholders and copies can be downloaded
from the Company website https://www.emmersonplc.com; alternatively, they are available on request
by writing to the Company Secretary at 55 Athol St, Douglas, Isle of Man, IM1. Other Company
information for shareholders is also available on the website.
The Company also engages with shareholders at its AGM in each year, which gives investors the
opportunity to enter into dialogue with the Board and for the Board to receive feedback and take action
if and when necessary. The results of the AGM are subsequently announced via RNS and published on
the Company’s website.
Take into account wider stakeholder and social responsibilities and their implications for long-
term success
The Board is aware that engaging with its stakeholders is key and ultimately promotes the long -term
success of Emmerson Plc. The Group’s stakeholders include shareholders, members of staff of investee
companies and of Advisors and other service providers, suppliers, auditors, lenders, regulators, industry
bodies, and the surrounding communities of where its investments are located.
The Board as a whole are responsible for reviewing and monitoring the parties contracted to the
Company, including their service terms and conditions. The audit committee supports Board decisions
by considering and monitoring the risks to the Company.
9
EMMERSON PLC
CORPORATE GOVERNANCE REPORT (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
The Board is regularly updated on wider stakeholder views and issues concerning the existing projects
both formally at Board meetings and informally through ad hoc updates. The Board recognises the
importance of its social responsibilities concerning its investment decisions. The Company is committed
to continuing engagement with all stakeholders.
Embed effective risk management, considering both opportunities and threats, throughout the
organisation
The Directors are responsible for maintaining the Company’s systems of controls and risk management
in order to safeguard its assets.
Risk is monitored and assessed by the Board who meet at least quarterly and the audit committee who
will meet at least twice annually and are responsible for ensuring that the financial performance of the
Group is properly monitored and reported. This process includes reviews of annual and interim
accounts, results announcements, internal control systems, procedures and accounting policies.
The Board receives guidance from FIM Capital Limited, the administrator and Company Secretary to
the Group, covering updates to relevant legalisation and rules to ensure they remain fully informed and
able to make informed decisions.
Maintain the board as a well- functioning, balanced team led by the Chair
The Board consists of two executive directors and two non-executive directors. Details of each Director
are given in a later section of this report.
The Chairman is responsible for leading the Board, ensuring its effectiveness in all aspects of its role,
promoting a culture of openness of debate and communicating with the Group’s members on behalf of
the Board by facilitating the effective contribution of Non-Executive Directors and ensuring constructive
relations between Executive and Non-Executive Directors. The Chairman also ensures that Directors
receive accurate, timely and clear information. In doing so, this fosters a positive corporate governance
culture throughout the Group.
The Executive Directors work fulltime in the business and have minor outside business interests. The
Chief Executive Officer is responsible for managing the Group’s business and operations within the
parameters set by the Board.
The Non-Executive Directors are responsible for bringing independent judgement to the discussions
held by the Board, using their breadth of experience and understanding of the business. Their key
responsibilities are to constructively challenge and contribute to strategic proposals, and to monitor
performance, resources, and standards of conduct, compliance and control, whilst providing support to
executive management in developing the Group.
The Board is satisfied that it has a suitable balance between independence and knowledge of the
business to allow it to discharge its duties and responsibilities effectively.
The Board will hold at least 4 meetings each year with further ad hoc meetings held as required. The
Directors devote sufficient time to ensure the Group’s affairs are managed as efficiently as possible.
Board Attendance During the Year
The number of formal scheduled Board meetings held and attended by Directors during the year were
as follows: -
Mark Connelly
Hayden Locke
Ed McDermott
Rob Wrixon
5/5
5/5
5/5
5/5
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EMMERSON PLC
CORPORATE GOVERNANCE REPORT (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
Ensure that between them the Directors have the necessary up-to-date experience, skills and
capabilities
The Directors have extensive experience in the mining industry and a strong track record of value
creation. It is a proven Board and Management Team and it believes it has the correct balance of skills,
reflecting a broad range of commercial and professional skills across geographies and industries that is
necessary to ensure the Group is equipped to deliver its investment objective. Additionally, each Director
has experience in public markets. Information about each Director’s experience is given below.
Mark Connelly (Non-executive Chairman)
An internationally experienced financial and commercial executive with 30 years’ experience in the
financing and development of mining projects. He has worked with a number of multinational companies
and across multiple jurisdictions including Africa, Europe, Australia and the Americas. Most recently he
served as MD and CEO of Papillon Resources Limited that was sold in 2014 for approximately US$600
million. Mark has minor outside business interests.
Robert Wrixon (Executive Director)
Led Moroccan Salts Limited since its inception in 2013. Rob has over 20 years’ commercial experience,
primarily in the mining sector, including five years with Xstrata in various strategy roles, and as MD and
CEO of ASX listed Manhattan Corporation Limited and Haranga Resources Limited. He is a Director
and founding partner of Starboard Global Limited, a natural resource PE group and holds a PhD in
mineral engineering from the University of California, Berkeley.
Hayden Locke (Executive Director and CEO)
An experienced mining executive with 15 years’ experience in mining, private equity and investment
banking. Most recently he was Head of Corporate and Technical Services (Geology, Mining and
Processing) at ASX listed potash developer Highfield Resources. Prior to this, Hayden was Head of
Corporate for ASX listed Papillon Resources which was sold to B2Gold in 2014 for approximately
US$600 million. Hayden studied engineering, commerce and geology.
Edward McDermott (Non-executive Director)
A former investment banker with 15 years’ experience in the management and financing of small
companies. Currently a Non-Executive Director of AIM listed companies Fishing Republic Plc and
FastForward Innovations Ltd. He has previously served as a Director of AIM listed Stellar Resources
Plc and Noricum Gold Ltd. He is part of the corporate finance team at Optiva Securities Limited, the
Company’s joint corporate Broker.
Evaluate Board performance based on clear and relevant objectives, seeking continuous
improvement
All Board appointments have been made after consultation and detailed due diligence is carried out on
all new potential board candidates. The Board will consider using external advisers to review and
evaluate the effectiveness of the Board and Directors in future to supplement its own internal evaluation
processes.
The Group’s Rules require that all Directors are submitted for election at the AGM following their first
appointment to the Board and at least one third of the Directors are subject to retirement by rotation on
an annual basis to refresh the Board, irrespective of performance.
Promote a corporate culture that is based on ethical values and behaviours
The Board is mindful that the tone and culture set by the Board will impact many aspects of the Group
and the way that stakeholders behave and form views.
The Board has adopted a Bribery and Corruption Policy consistent with the requirements of the UK
Bribery Act 2010 and the Isle of Man Bribery Act 2013. Compliance with the policy will be regularly
reviewed at Board meetings.
Maintain governance structures and processes that are fit for purpose and support good
decision-making by the board.
A description of each Board member and their experience are displayed on the website at
https://www.emmersonplc.com.
11
EMMERSON PLC
CORPORATE GOVERNANCE REPORT (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
The Board of Directors is responsible for the determination of the investment policy of the Company and
for its overall supervision via the investment policy and objectives that it has set out. The Board is also
responsible for the Company’s day-to-day operations; however, since the Board members are all non-
executive, in order to fulfil these obligations, the Board has delegated operations through arrangements
with the Investment Adviser and Administrator.
There is no nomination committee separate to the full Board. The role of the nomination committee is
undertaken by the full Board.
The Board intends to meet formally at least four times each year. At each Board meeting the financial
performance of the Company and all other significant matters are reviewed so as to ensure the Directors
maintain overall control and supervision of the Company’s affairs. The Board receives investment
reports from the Asset Manager and Valuation and Portfolio Services Adviser and Committees.
Committees
Audit Committee
The Audit Committee is a sub-committee of the Board, currently consisting of Mark Connelly, Robert
Wrixon and Ed McDermott. The Audit Committee has met at least twice since the last Annual General
Meeting (“AGM”) and has reviewed the following, where relevant, with the executive directors and
external auditors of the Group:
• The audit plans and results of the external auditors’ examination and evaluation of the Group’s
systems of internal accounting controls;
• The Group’s financial and operating results and accounting policies;
• The financial statements of the Group before their submission to the Directors and external
auditors’ report on those financial statements;
• The quarterly, half-yearly and annual announcements as well as the related press releases on
the results and financial position of the Group;
• The co-operation and assistance given by the management to the Group’s external auditors;
and
• The re-appointment of the external auditors of the Group.
The Audit Committee following a review of the qualification, expertise and resources, effectiveness and
independence of the external auditors recommended to the Board that they be reappointed.
Remuneration Committee
The Remuneration Committee, consisting of the non-executive directors, is a sub-committee of the
Board and it will meet formally at least twice each year. The salaries, remuneration and other financial
benefits of the key management and the members of the Board of Directors is determined by the
Remuneration Committee having regard to the performance of individuals and market trends.
To date it has held one inaugural meeting.
Nomination Committee
The Company has not established a nomination committee as it is satisfied nominations can be
considered by the Board.
Communicate how the Group is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
The Board welcomes the views of all stakeholders who can contact the Directors or Company Secretary
with any queries they may have. The Executive Directors and advisers regularly engage with
shareholders.
The Board recognises the importance of maintaining strong relationships with shareholders, so we
understand their views and are aware of their issues and concerns.
12
EMMERSON PLC
CORPORATE GOVERNANCE REPORT (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
The management team continues to have close dialogue with local landowners and ensure any
concerns are addressed. The management team has met with the Minister of Mines in Morocco and
maintains a strong working relationship with its office.
The Company communicates with shareholders and other stakeholders through the Annual Report and
Accounts, full-year and half-year announcements, news announcements, the Annual General Meeting,
and website.
Historical information is available on the website. The Group’s financial reports and Notices of General
Meetings can also be found here https://www.emmersonplc.com/investors/corporate-documents/.
Reappointment of auditor
The auditors, PKF Littlejohn LLP, have indicated their willingness to continue in office and a resolution
seeking to reappoint them will be proposed at the Annual General Meeting.
The Board considers the annual report and financial statements, taken as a whole is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group’s position
and performance, business model and strategy.
On behalf of the Board
Mark Connelly
Chairman
29 April 2020
13
EMMERSON PLC
Opinion
REPORT OF THE INDEPENDENT AUDITOR
YEAR ENDED 31 DECEMBER 2019
We have audited the group financial statements of Emmerson Plc for the year ended 31 December 2019
which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of
Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of
Cash Flows and notes to the financial statements, including a summary of significant accounting
policies. The financial reporting framework that has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion, the group financial statements:
• give a true and fair view of the state of the group’s affairs as at 31 December 2019 and of the
group’s loss for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Isle of Man Companies Act
2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the
group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of matter
We draw your attention to note 2.4 of the financial statements, which describes the group’s assessment
of the COVID-19 impact on their ability to continue as a going concern. The group has explained that
the events arising from the COVID-19 outbreak do not impact its use of the going concern basis of
preparation nor do they cast significant doubt about the group’s ability to continue as a going concern
for a period of at least twelve months from the date when the financial statements are authorised for
issue.
Our opinion is not modified in this respect
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require
us to report to you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the group
financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties
that may cast significant doubt about the group’s ability to continue to adopt the going concern
basis of accounting for a period of at least twelve months from the date when the financial
statements are authorised for issue.
Our application of materiality
The scope of our audit was influenced by our application of materiality. The quantitative and qualitative
thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit
procedures. The materiality applied to the group financial statements was £150,000, based on 2% of
gross assets, because we believe assets to be the main driver of the business as the group is in the
exploration stage and no revenues are currently being generated. The performance materiality was
£90,000. For each component in the scope of our group audit, we allocated a materiality that was less
than our overall group materiality.
We agreed with the audit committee that we would report to the committee all differences identified
during the course of our audit in excess of £7,500.
14
EMMERSON PLC
REPORT OF THE INDEPENDENT AUDITOR (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
An overview of the scope of our audit
In designing our audit, we determined materiality and assessed the risk of material misstatement in the
financial statements. In particular, we looked at areas involving significant accounting estimates and
judgement by the directors and considered future events that are inherently uncertain. We also
addressed the risk of management override of internal controls, including among other matters
consideration of whether there was evidence of bias that represented a risk of material misstatement
due to fraud.
There were three significant components identified, two of which were subject to a full scope audit
conducted directly by PKF Littlejohn LLP. The remaining component, comprising the Moroccan sub-
group, is located in Morocco and was audited by a component auditor within the PKF network under our
instruction. The Engagement Partner and group audit team interacted regularly with the component
audit team during all stages of the audit and was responsible for the scope and direction of the audit
process. This, in conjunction with additional procedures performed, gave us appropriate evidence for
our opinion on the financial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of
the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.
Key Audit Matter
How the scope of our audit responded to the key audit
matter
Carrying value and recoverability
of intangible assets (refer note 8)
The group has reported intangible
assets of £6,172,000 in its Statement of
Financial Position as at 31 December
2019 which comprise exploration and
evaluation assets. The carrying value
and recoverability of these intangible
assets are tested annually for
impairment. The estimated recoverable
amount of this balance is subjective
due to the inherent uncertainty involved
in forecasting and discounting future
cash flows, taking into consideration
the stage of the project as it progresses
towards feasibility study stage.
We tested the group’s exploration licences to confirm good title
and standing.
We reviewed and evaluated the impairment assessment
prepared by management in relation to the Khemisset project.
Our procedures included an assessment of the exploration and
evaluation project with reference to the criteria listed within
IFRS 6, to include whether:
•
•
exploration and evaluation work to date indicates that the
carrying amount is unlikely to be recovered from further
development or sale; and
substantive expenditure on further exploration and evaluation
is not budgeted or planned.
We obtained and reviewed the independently prepared reports
commissioned in connection with the progression of the project
towards feasibility study stage to include, but not limited to, the
Scoping Study, the Environmental and Social Impact Assessment
baseline study, the Metallurgical Testing study, the increased
Mineral Resource Estimate and calculation of the NPV 10. We also
assessed the qualifications and independence of the firms and
individuals who prepared those reports.
We evaluated whether the model used to calculate value in use
complies with the requirements of IAS 36 ‘Impairment of Assets’,
including validating the key assumptions and inputs applied and,
where applicable, subjecting the key assumptions to sensitivity
analysis.
We tested directly, and reviewed the working papers prepared by
the component auditor, in respect of the capitalised additions in
the year for eligibility in accordance with IFRS 6. We also
reviewed the work performed by the component auditor in respect
of assessing compliance with the terms and conditions contained
in the exploration licenses.
15
EMMERSON PLC
REPORT OF THE INDEPENDENT AUDITOR (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
Other information
The other information comprises the information included in the annual report, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information. Our
opinion on the group financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Isle of Man
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept, or returns adequate for our audit have not
been received from branches not visited by us; or
•
the financial statements are not in agreement with the accounting records; 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.
Responsibilities of directors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable the preparation of group
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
16
EMMERSON PLC
Use of our report
REPORT OF THE INDEPENDENT AUDITOR
YEAR ENDED 31 DECEMBER 2019
This report is made solely to the company’s members, as a body, in accordance with our engagement
letter dated 22 November 2018. 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.
David Thompson (Engagement Partner)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
15 Westferry Circus
Canary Wharf
17
EMMERSON PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 DECEMBER 2019
Note
2019
£’000
2018
£’000
4
3
(985)
(161)
-
(1,146)
14
-
(1,131)
196
(698)
(1,633)
7
(158)
(1,132)
(1,784)
6
-
-
(1,132)
(1,784)
Continuing Operations
Administrative expenses
Net foreign exchange (loss)/gain
Reverse acquisition cost
Operating loss
Finance income
Finance costs
Loss before tax
Income tax
Loss for the year attributable to equity owners
Other comprehensive income
Items that may be subsequently reclassified to profit or
loss:
Exchange (loss)/gain on translating foreign operations
(32)
81
Total comprehensive income attributable to equity
owners
(1,164)
(1,703)
Earnings per share (pence)
Basic and diluted
7
(0.17)
(0.49)
The notes on pages 22 to 37 are an integral part of these consolidated financial statements.
18
EMMERSON PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
Non-current assets
Intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Total current liabilities
Net assets
Shareholders equity attributable to equity owners
Share capital
Share reserve
Reverse acquisition reserve
Retained earnings
Translation reserve
Total equity
Note
8
9
11
10
12
13
3
2019
£000
6,172
38
6,210
271
2,071
2,342
8,552
414
414
2018
£’000
3,699
40
3,739
352
3,351
3,703
7,442
440
440
8,138
7,002
10,408
386
1,651
(4,219)
(88)
8,138
8,265
229
1,651
(3,087)
(56)
7,002
These financial statements were approved by the Board on 29 April 2020 and signed on their behalf
by
Mark Connelly
Chairman
Robert Wrixon
Director
The notes on pages 22 to 37 are an integral part of these consolidated financial statements.
19
EMMERSON PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2019
Share
Capital
£’000
Share
reserve
£’000
Reverse
Acquisition
reserve
£’000
Retained
earnings
£’000
Translation
reserve
£’000
Total
equity
£’000
Balance as at 1 January 2018
1,391
1,227
Loss for the year
Other comprehensive income:
Exchange gain on translating foreign
operations
Total comprehensive income
-
-
-
-
-
-
Issue of shares held in share reserve
Transfer to reverse acquisition reserve
1,227
(2,618)
(1,227)
-
Recognition of Emmerson Plc equity at
reverse acquisition
Issue of shares for acquisition of
subsidiary
Issue of shares for cash
Share issue costs
Issue of share options and warrants
967
1,084
7,338
(1,124)
-
-
-
-
-
229
-
-
-
-
-
2,618
117
(1,084)
-
-
-
Total transactions with owners
recognised directly in equity
6,874
(998)
1,651
(1,303)
(137)
1,178
(1,784)
-
(1,784)
-
81
81
(1,784)
81
(1,703)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,084
-
7,338
(1,124)
229
7,527
Balance as at 31 December 2018
8,265
229
1,651
(3,087)
(56)
7,002
Balance as at 1 January 2019
8,265
229
1,651
(3,087)
(56)
7,002
Loss for the year
Other comprehensive loss:
Exchange loss on translating foreign
operations
Total comprehensive loss
Issue of share options and warrants
Issue of shares for cash
Share issue costs
-
-
-
-
2,250
(107)
Balance as at 31 December 2019
10,408
-
-
-
157
-
-
386
-
-
-
-
-
-
(1,132)
-
(1,132)
-
(1,132)
(32)
(32)
(32)
(1,164)
-
-
-
-
-
-
157
2,250
(107)
8,138
1,651
(4,219)
(88)
i.
ii.
iii.
iv.
v.
The Ordinary Shares issued by the Company have a no par value and all fully paid. Further information
on share capital is in note 12 to the financial statements.
The share reserve arises on the grant of share options and warrants to Directors and employees under
the share option plan. Disclosures of share-based payments to Directors and employees is in note 13.
The Reverse acquisition reserve arose from the reverse takeover detailed in note 3.
The Retained earnings are cumulative earnings since incorporation less any dividends declared.
The translation reserve comprises translation differences arising from the translation of financial
statements of the Group’s foreign entities into Sterling (£).
The notes on pages 22 to 37 are an integral part of these consolidated financial statements.
20
EMMERSON PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 31 DECEMBER 2019
Cash flows from operating activities
Loss before tax
Finance cost
Share based payment
Reverse acquisition expense
Changes in working capital
Decrease/(Increase) in trade and other receivables
Decrease in trade and other payables
Notes
13
3
2019
£’000
(1,132)
-
157
-
81
(26)
2018
£’000
(1,784)
158
229
698
(139)
(327)
Net cash flows used in operating activities
(920)
(1,165)
Cash flows from investing activities
Exploration expenditure
Cash acquired on acquisition
Property, plant and equipment purchase
3
(2,473)
-
2
(1,258)
181
-
Net cash flow used in investing activities
(2,471)
(1,077)
Cash flows from financing activities
Shares issued (net of issue costs)
12
2,143
5,254
Net cash flow generated from financing activities
2,143
5,254
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Foreign exchange on cash and cash equivalents
Cash and cash equivalents at end of year
(1,248)
3,351
(32)
2,071
3,012
417
(78)
3,351
Major non-cash transactions
Significant non-cash transactions in respect of share issues are disclosed within note 13.
The notes on pages 22 to 37 are an integral part of these consolidated financial statements.
21
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2019
1.
General information
Emmerson Plc (the “Company”) is a company incorporated and domiciled in the Isle of Man, whose
shares were admitted to the Standard Listing segment of the Main market of the London Stock Exchange
on 15 February 2017.
The principal activity of the Group is the exploration, development and exploitation of a potash
development project in Morocco.
2.
Basis of preparation
General
2.1
These financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS and IFRIC interpretations) (“IFRS”) in force at the reporting date, and their
interpretations issued by the International Accounting Standards Board (“IASB”) as adopted for use
within the European Union. The financial statements have been prepared under the historical cost
convention except for the revaluation of certain financial instruments that are measured at fair value.
The financial statements have been rounded to the £’000.
Functional and presentational currency
2.2
The financial information of the Group is presented in UK Sterling, which is also the functional currency
of the Company. The individual financial statements of each of the Company’s wholly owned
subsidiaries are prepared in the currency of the primary economic environment in which it operates (its
functional currency).
Basis of consolidation
2.3
The Consolidated Financial Statements comprise the financial statements of the Company, Moroccan
Salts Limited and Moroccan Salts Limited’s subsidiaries (the “MSL Group”) following the business
combination which took place on 4 June 2018 (see note 3).
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group
obtains control. Control is achieved when the Group is exposed, or has rights, to variable returns from
its involvement with the investee and has the ability to affect those returns through its power over the
investee.
Generally, there is a presumption that a majority of voting rights result in control. To support this
presumption and when the Group has less than a majority of the voting or similar rights of an investee,
the Group considers all relevant facts and circumstances in assessing whether it has power over an
investee, including:
• The contractual arrangement with the other vote holders of the investee;
• Rights arising from other contractual arrangements; and
• The Group's voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They are deconsolidated from the date that
control ceases. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during
the period are included in the Group Financial Statements from the date the Group gains control until
the date the Group ceases to control the subsidiary.
All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-
group transactions that are recognised in assets, are eliminated in full.
All the Group’s companies have 31 December as their year-end. Consolidated financial statements are
prepared using uniform accounting policies for like transactions.
22
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
2.4
Going concern
The financial statements have been prepared on a going concern basis. The Group has not yet earned
revenues and is still in the exploration phase of its business. The operations of the Group are currently
financed from funds raised from shareholders. In common with many exploration entities, the Group will
need to raise further funds in order to progress the Group from the exploration phase into feasibility and
eventually into production of revenues.
The Directors are reasonably confident that funds will be forthcoming as and when they are required
and have received assurances to this effect as described in the Chairman’s Statement. However, the
Group has cash and cash equivalents of £2,071,000 at 31 December 2019 and the Directors are of the
view this is sufficient to fund the Group’s committed expenditure and maintain good title to the
exploration licences over the next 12 months from the date of approval of these financial statements,
without raising funds in this period.
As part of their assessment, the Directors have prepared cash-flow forecasts on the basis that cost
reduction and deferral measures are implemented over the going concern period as a result of the
current worldwide COVID 19 pandemic. The Directors have agreed, if circumstances require, to defer
payment of their fees until such time as adequate funding is received and if necessary, scale back
discretionary exploration activity.
The Directors have a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis
of accounting in preparing the financial statements.
2.5
Changes in accounting policies
Interpretations and amendments to published standards effective in 2019
The following standards, interpretations and amendments were adopted by the Group during the year:
IFRS 16 - Leases (effective 1 January 2019)
•
• Amendments to IFRS 2 – classification and measurement of share based payments transactions (effective 1
January 2019)
Interpretation to IFRIC 23 - Uncertainty over Income Tax Treatments (effective 1 January 2019)
•
• Annual improvements to IFRS Standards 2015-2017 Cycle (effective 1 January 2019)
The transition to these standards had no material impact on the Group. There were no long term
operating leases in the Group as at the transition date for IFRS 16; as such no adjustments were
made under this standard. Payments associated with short-term leases (12 months or less) and all
leases of low value assets are recognised on a straight line basis as an expense in profit or loss.
Standards, amendments and interpretations to published standards not yet effective
At the date of authorisation of these financial statements, the following standards and interpretations,
were in issue but not yet effective, and have not been early adopted by the Group:
• Amendments to References to the Conceptual Framework in IFRS Standards (effective 1 January 2020)
•
•
•
IFRS 3 (amendments) Definition of a Business (effective 1 January 2020)
IAS 1 and IAS 8 (amendments) Definition of material (effective 1 January 2020)
IAS 1 (amendments) Classification of liabilities as current or non-current (effective 1 January 2022)
The directors have reviewed the IFRS standards in issue which are effective for annual accounting years
ending on or after the stated effective date. In their view, none of these standards would have a material
impact on the financial statements of the Group.
23
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
Segment reporting
2.6
A business segment is a group of assets and operations engaged in providing products or services that
are subject to risks and returns that are different from those of other business segments. A geographical
segment is engaged in providing products or services within a particular economic environment that are
subject to risks and returns that are different from those of segments operating in other economic
environments.
The Directors are of the opinion that the Group is engaged in a single segment of business being the
exploration activity of potash in one geographical area, being Morocco.
Financial instruments
2.7
A financial instrument is any contract that gives rise to a financial asset of on entity and a financial liability
or equity instrument of another.
(a) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair
value through OCI, or fair value through profit and loss.
The classification of financial assets at initial recognition that are debt instruments depends on the
financial asset’s contractual cash flow characteristics and the Group’s business model for managing
them. The Group initially measures a financial asset at its fair value plus, in the case of a financial asset
not at fair value through profit or loss, transaction costs.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI,
it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the
principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an
instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets
in order to generate cash flows. The business model determines whether cash flows will result from
collecting contractual cash flows, selling the financial assets, or both.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
• Financial assets at amortised cost (debt instruments)
• Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt
instruments)
• Financial assets designated at fair value through OCI with no recycling of cumulative gains and
losses upon derecognition (equity instruments)
• Financial assets at fair value through profit or loss
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The Group measures financial assets at amortised cost
if both of the following conditions are met:
• The financial asset is held within a business model with the objective to hold financial assets in order
to collect contractual cash flows; and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR)
method and are subject to impairment. Interest received is recognised as part of finance income in the
statement of profit or loss and other comprehensive income. Gains and losses are recognised in profit
or loss when the asset is derecognised, modified or impaired. The Group’s financial assets at amortised
cost include trade receivables (not subject to provisional pricing) and other receivables.
24
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial
position) when:
• The rights to receive cash flows from the asset have expired; or
• The Group has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-
through’ arrangement; and either (a) the Group has transferred substantially all the risks and
rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.
Impairment of financial assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held
at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows
due in accordance with the contract and all the cash flows that the Group expects to receive, discounted
at an approximation of the original EIR. The expected cash flows will include cash flows from the sale
of collateral held or other credit enhancements that are integral to the contractual terms.
The Group recognises an allowance for ECLs for all debt instruments not held at fair value through profit
or loss. ECLs are based on the difference between the contractual cash flows due in accordance with
the contract and all the cash flows that the Group expects to receive, discounted at an approximation of
the original EIR. The expected cash flows will include cash flows from the sale of collateral held or other
credit enhancements that are integral to the contractual terms. ECLs are recognised in two stages. For
credit exposures for which there has not been a significant increase in credit risk since initial recognition,
ECLs are provided for credit losses that result from default events that are possible within the next 12-
months (a 12-month ECL). For those credit exposures for which there has been a significant increase
in credit risk since initial recognition, a loss allowance is required for credit losses expected over the
remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables (not subject to provisional pricing) and other receivables due in less than 12
months, the Group applies the simplified approach in calculating ECLs, as permitted by IFRS 9.
Therefore, the Group does not track changes in credit risk, but instead, recognises a loss allowance
based on the financial asset’s lifetime ECL at each reporting date.
The Group considers a financial asset in default when contractual payments are 90 days past due.
However, in certain cases, the Group may also consider a financial asset to be in default when internal
or external information indicates that the Group is unlikely to receive the outstanding contractual
amounts in full before taking into account any credit enhancements held by the Group.
A financial asset is written off when there is no reasonable expectation of recovering the contractual
cash flows and usually occurs when past due for more than one year and not subject to enforcement
activity. At each reporting date, the Group assesses whether financial assets carried at amortised cost
are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset have occurred.
25
EMMERSON PLC
(b) Financial liabilities
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or
loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an
effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the
case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s
financial liabilities include trade and other payables and loans.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and
financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial
liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near
term. This category also includes derivative financial instruments entered into by the Group that are not
designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded
derivatives are also classified as held for trading unless they are designated as effective hedging
instruments. Gains or losses on liabilities held for trading are recognised in the statement of profit or
loss and other comprehensive income.
Loans and borrowings and trade and other payables
After initial recognition, interest-bearing loans and borrowings and trade and other payables are
subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in
the statement of profit or loss and other comprehensive income when the liabilities are derecognised,
as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or
costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the
statement of profit or loss and other comprehensive income.
This category generally applies to trade and other payables.
Derecognition
A financial liability is derecognised when the associated obligation is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different
terms, or the terms of an existing liability are substantially modified, such an exchange or modification
is treated as the derecognition of the original liability and the recognition of a new liability. The difference
in the respective carrying amounts is recognised in profit or loss and other comprehensive income.
(c) Financial liabilities
Liabilities within the scope of IFRS 9 are classified as financial liabilities at fair value through profit and
loss or other liabilities, as appropriate.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or
expires.
Financial liabilities included in trade and other payables are recognised initially at fair value and
subsequently at amortised cost.
26
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
Taxation
2.8
Current taxes are based on the results shown in the financial statements and are calculated according
to local tax rules, using tax rates enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements, determined using tax rates that are
expected to apply when the related deferred tax asset or liability is realised or settled. Deferred tax
assets are recognised only to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilised.
2.9
Intangible assets – exploration and evaluation expenditure
Exploration expenditure comprises all costs which are directly attributable to the exploration of a project
area.
When it has been established that a mineral deposit has development potential, all costs (direct and
applicable overheads) incurred in connection with the exploration and development of the mineral
deposits are capitalised until either production commences or the project is not considered economically
viable.
In the event of production commencing, exploration costs are amortised through administrative
expenses, over the expected life of the mineral reserves on a unit production basis. Other pre-trading
expenses are written off as incurred. For the purposes of impairment testing, intangible assets are
allocated to specific projects with each licence reviewed annually. Where a project is abandoned or is
considered to be of no further interest, the related costs are written off.
Intangible assets are not subject to amortisation and are tested annually for impairment. The
recoverability of all exploration costs, licenses and mineral resources is dependent on the ability of the
Group to obtain necessary financing to complete the development of reserves and future profitable
production, or proceeds from the disposition thereof.
2.10 Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes
cash on hand and deposits held at call with financial institutions.
2.11 Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at
the Statement of Financial Position 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.
On consolidation of a foreign operation, assets and liabilities are translated at the closing rate at the
date of the Statement of Financial Position, income and expenses for each Statement of Comprehensive
Income presented are translated at average exchange rates. All resulting exchange differences shall
be recognised in other comprehensive income and accumulated in equity.
27
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
2.12 Share-based payment arrangements
The Group operates equity-settled, share-based compensation plans, under which the entity receives
services from employees as consideration for equity instruments (options) of the Group. The fair value
of employee services received in exchange for the grant of share options are recognised as an expense.
The total expense to be apportioned over the vesting period is determined by reference to the fair value
of the options granted:
•
•
•
including any market performance conditions;
excluding the impact of any service and non-market performance vesting conditions; and
including the impact of any non-vesting conditions.
Non-market performance and service conditions are included in assumptions about the number of
options that are expected to vest. The total expense is recognised over the vesting period, which is the
period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting
period the Group revises its estimate of the number of options that are expected to vest.
The Group recognises the impact of the revision of original estimates, if any, in profit or loss, with a
corresponding adjustment to equity.
When options are exercised, the Company issues new shares. The proceeds received net of any directly
attributable transaction costs are credited to share capital (nominal value) and share premium.
The fair value of goods or services received in exchange for shares is recognised as an expense and
included within administrative expenses.
2.13 Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying
the group’s accounting policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the consolidated financial statements, are
disclosed below:
a) Recoverability of intangible assets
The Group tests annually for impairment or more frequently if there are indications that the intangible
assets might be impaired.
Determining whether the intangible assets are impaired requires an estimation of the value in use of the
cash generating units to which the intangible assets belong. Where impairment indicators are present,
the Group is required to evaluate the future cash flows expected to arise from the cash-generating unit
and the suitable discount rate in order to calculate the present value.
The carrying value of Group’s exploration and evaluation intangible assets at 31 December 2019 is
£6,172,000 (2018: £3,699,000).
b) Share based payments
The Group has made awards of options on its unissued share capital to certain directors and employees
as part of their remuneration package.
The valuation of these options involved making a number of critical estimates relating to price volatility,
future dividend yields, expected life of the options and interest rates. These assumptions are described
in more detail in note 13.
The expense charged to the Statement of Comprehensive Income during the year in relation to share
based payments was £157,000 (2018: £229,000).
28
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
Critical accounting estimates and judgements (continued)
c) Going concern
In their assessment of going concern, the Directors have prepared cash flow forecasts which require a
number of judgments to be made including the Directors ability to access further financing and to
implement cost saving and deferral measures, where necessary.
The Directors have prepared a cash flow forecast which assumes that the Group is not able to raise
additional funds within the going concern period and if that was the case, the forecasts demonstrate that
austerity measures can be implemented or significant project expenditure delayed to reduce the cash
outflows to the minimal contracted and committed expenditure while also maintaining the Group’s
licences and permits. Based on their assessment of the financial position, the Directors have a
reasonable expectation that the Group will be able to continue in operational existence for the next
twelve months and continue to adopt the going concern basis of accounting in preparing these financial
statements.
3.
Business combination
On 4 June 2018, the Company acquired the entire issued share capital of MSL, a private company
incorporated in the British Virgin Islands, by way of a share for share exchange. MSL acted as the
ultimate holding company for four wholly owned Moroccan subsidiaries. MSL Minerals SARL is a wholly
owned subsidiary of MSL. MSL Minerals SARL was the shareholder of three further Moroccan
subsidiaries, being:
• Unisalts SARL:
• JMS SARL; and
• Mine de Centre SARL
Although the transaction resulted in MSL becoming a wholly owned subsidiary of the Company, the
transaction constitutes a reverse acquisition as the previous shareholders of MSL own a substantial
majority of the Ordinary Shares of the Company and two out of four members of the Board of Directors
of the Company are MSL shareholders and management.
In substance, the shareholders of MSL acquired a controlling interest in the Company and the
transaction has therefore been accounted for as a reverse acquisition. As the Company previously had
no investment activities and was engaged in acquiring MSL and raising equity financing to provide the
required funding for the operations of the acquisition and re-listing on the main market of the LSE, it did
not meet the definition of a business according to the definition in IFRS 3.
Accordingly, this reverse acquisition does not constitute a business combination and was accounted for
in accordance with IFRS 2 “Share-based Payments” and associated IFRIC guidance. Although, the
reverse acquisition is not a business combination, the Company has become a legal parent and is
required to apply IFRS 10 and prepare consolidated financial statements. The Directors have prepared
these financial statements using the reverse acquisition methodology, but rather than recognising
goodwill, the difference between the equity value given up by the MSL shareholders and the share of
the fair value of net assets gained by the MSL shareholders is charged to the statement of
comprehensive income as a share based payment on reverse acquisition, and represents in substance
the cost of acquiring a main market LSE quoted listing.
In accordance with reverse acquisition accounting principles, these consolidated financial statements
represent a continuation of the consolidated statements of MSL and its subsidiaries and include:
a. The assets and liabilities of MSL and its subsidiaries at their pre-acquisition carrying amounts and the
results for both years; and
b. The assets and liabilities of the Company as at 30 June 2018 and it’s results from 4 June 2018 to 30
June 2018.
29
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
Business combinations (continued)
On 4 June 2018, the Company issued 333,333,333 ordinary shares to acquire all 2,820 shares of MSL.
On 4 June 2018, the investment of Moroccan Salts Limited in the Company was valued at £1,084,000
(not including the £6,000,000 cash placing proceeds on the same date).
Because the legal subsidiary, MSL, was treated as the accounting acquirer and the legal Parent
Company, Emmerson Plc, was treated as the accounting subsidiary, the fair value of the shares deemed
to have been issued by MSL was calculated at £1,084,000 based on an assessment of the purchase
consideration for a 100% holding in Emmerson Plc.
The fair value of net assets of Emmerson Plc was £386,000 (not including the £6,000,000 cash placing
proceeds on the same date), as follows:
Cash and cash equivalents
Trade and other receivables1
£’000
181
205
386
1) Trade and other receivables are predominantly comprised of prepayments for transaction costs.
The difference between the deemed cost and the fair value of the net assets acquired therefore amounts
to £698,000 and has been expensed in accordance with IFRS 2 as a Share based payment to profit or
loss.
Any transaction costs associated with the issuing of shares are deducted from share capital reserve.
Mixed costs that relate to both share issuance and listing on the stock exchange are apportioned based
number of new shares issued to the total shares.
The reverse acquisition reserve that arose from the reverse takeover is made up as follows:
Pre-acquisition losses of Emmerson Plc¹
MSL share capital at acquisition²
Investment in Emmerson Plc³
Reverse acquisition expense⁴
£’000
(581)
2,618
(1,084)
698
1,651
The movement on the reverse acquisition reserve is as follows:
1) Elimination of pre-acquisition reserves of Emmerson Plc as at 4 June 2018.
2) MSL had issued share capital of US$ 3,201,000, equivalent to £2,618,000, as at 4 June 2018. As
these financial statements present the capital structure of the legal parent entity, the equity of MSL
is eliminated.
3) The Company issued 333,333,333 shares, valued at £1,084,000 for the entire issued capital of MSL.
4) The reverse acquisition expense represents the difference between the value of the equity issued
by the Company, and the deemed consideration given by MSL to acquire the Company.
4.
Expenses by nature
Project costs
Directors’ fees (note 5)
Share based payments (note 13)
Travel and accommodation
Listing fees and issue costs expensed
Auditors remuneration including associates
Professional and consultancy fees
Other expenses
Total
30
2019
£’000
43
162
157
128
-
41
392
62
985
2018
£’000
39
284
229
55
123
27
322
52
1,131
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
5.
Directors’ remuneration
Details of Directors’ remuneration during the year are as follows:
Edward McDermott
Hayden Locke
Mark Connelly
Robert Wrixon
2019
£'000
36
24
36
66
162
2018
£'000
46
154
18
66
284
Hayden Locke and Robert Wrixon also received fees for consultancy services which are disclosed within
note 15.
In addition, the Directors received share options in 2018, all with an exercise price of 3 pence. There
were no options exercised by Directors during the year. Further details on share options are in note 13.
Directors’ fees which are directly attributable to the exploration of a project area have been capitalised
as intangible assets.
6.
Income tax
Current tax:
Tax
Total tax
Reconciliation of income tax
Loss before tax
Loss before tax multiplied by domestic tax rates applicable to losses in
the respective countries
Effects of:
Non-taxation income/(non-deductible expenses)
Losses on which no deferred tax is recognised
Total tax
2019
£’000
2018
£’000
-
-
-
-
(1,132)
(1,784)
(11)
(14)
-
11
-
-
14
-
The weighted average applicable tax rate was 1% (2018: 1%). The Isle of Man has a 0% tax rate and
Morocco has 23% tax rate.
A deferred tax asset has not been recognised in respect of deductible temporary differences relating to
certain losses carried forward at the year end, as there is insufficient evidence that taxable profits will
be available in the foreseeable future against which the deductible temporary difference can be utilised.
The unrecognised deferred tax asset for the Group was approximately £25,000 (2018: £14,000). The
unrecognised deferred tax asset relating to Moroccan tax losses amounted to approximately £25,000
(2018: £14,000).
31
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
7.
Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings
Loss from continuing operations for the year
attributable to the equity holders of the Company
Number of shares
Weighted average number of ordinary shares for
the purpose of basic and diluted earnings per share
Basic and diluted earnings per share (pence)
2019
£’000
2018
£’000
(1,132)
(1,784)
654,484,033
(0.17)
361,230,854
(0.49)
The potential number of shares which could be issued following the exercise of options and warrants
currently outstanding amounts to 53,888,332 (see note 13). Dilutive earnings per share equals basic
earnings per share as, due to the losses incurred, there is no dilutive effect from the existing share
options and warrants.
8.
Intangible assets
The intangible assets consist of capitalised exploration and evaluation expenditure, including the cost
of acquiring the one mining licence and research permits held by the Company’s subsidiaries. The
potash properties are currently unproved reserves. Once properties are classified as proved reserves,
they will be transferred from intangible assets to tangible assets, and amortised over the life of the area
according to the rate of depletion of the economically recoverable costs.
Cost:
At the beginning of the year
Additions
Exchange differences
Total
2019
£’000
3,699
2,473
-
6,172
2018
£’000
2,304
1,258
137
3,699
Intangible assets are reviewed at each reporting date to determine whether there is objective evidence
of impairment. If any such indication exists, an impairment loss is recognised in the profit or loss as the
difference between the asset’s carrying amount and the present value of estimated future cash flows
discounted at the financial asset’s original effective interest rate.
The Directors therefore undertook an assessment of the following areas and circumstances that could
indicate the existence of impairment:
• The Group’s right to explore in an area has expired, or will expire in the near future without
renewal;
• No further exploration or evaluation is planned or budgeted for;
• A decision has been taken by the Board to discontinue exploration and evaluation in an area
due to the absence of a commercial level of reserves; or
• Sufficient data exists to indicate that the book value will not be fully recovered from future
development and production.
Following their assessment, the Directors concluded that no impairment charge was necessary for the
period ended 31 December 2019.
32
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
9.
Trade and other receivables
Other receivables
Prepayments
Total
10.
Trade and other payables
Other payables
Accruals
Total
11.
Financial instruments
Categories of financial instruments
Financial assets measured at amortised cost
Other receivables
Cash and cash equivalents
2019
£’000
236
35
271
2019
£’000
175
239
414
2019
£’000
271
2,071
2,342
2018
£’000
282
70
352
2018
£’000
282
158
440
2018
£’000
282
3,351
3,633
Financial liabilities measured at amortised cost
Other payables
175
282
Financial risk management objectives and policies
The Company is exposed through its operations to credit risk and liquidity risk. In common with all other
businesses, the Company is exposed to risks that arise from its use of financial instruments. This note
describes the Company’s objectives, policies and processes for managing those risks and the methods
used to measure them. Further quantitative information in respect of these risks is presented throughout
this financial information.
General objectives, policies and processes
The Directors have overall responsibility for the determination of the Company’s risk management
objectives and policies. Further details regarding these policies are set out below:
Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a
going concern in order to provide returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital.
The capital structure of the Group consists of issued capital, reserves and retained earnings. The
Directors reviews the capital structure on a semi-annual basis. As a part of this review, the Directors
consider the cost of capital, the risks associated with each class of capital and overall capital structure
risk management through the new share issues and share buy-backs as well as the issue of new debt
or the redemption of existing debt.
The management’s strategy remained unchanged from 2018.
33
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
Financial instruments (continued)
Financial risk management objectives and policies (continued)
Market price risk
The development and success of any project of the Group will be primarily dependent on the future
price of potash. Potash prices are subject to significant fluctuation and are affected by a number of
factors which are beyond the control of the Company. Future production from the Khemisset Project is
dependent on potash prices that are adequate to make the project economic.
Credit risk
The Company’s credit risk arises from cash and cash equivalents with banks and financial institutions.
For banks and financial institutions, only independently rated parties with minimum rating “A” are
accepted.
Liquidity risk
Liquidity risk arises from the Directors’ management of working capital. It is the risk that the Company
will encounter difficulty in meeting its financial obligations as they fall due.
The Directors’ policy is to ensure that the Company will always have sufficient cash to allow it to meet
its liabilities when they become due. To achieve this aim, the Directors seek to maintain a cash balance
sufficient to meet expected requirements.
The Directors have prepared cash flow projections on a monthly basis through to 30 September 2021.
At the end of the period under review, these projections indicated that the Group is expected to have
sufficient liquid resources to meet its obligations under all reasonably expected circumstances.
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various
currency exposures, primarily with respect to the United States Dollar (“US$”) and Morocco Dirham
(“MAD”). Foreign exchange risk arises from future commercial transactions, recognised monetary
assets and liabilities and net investments in foreign operations.
Net assets denominated in US$ and MAD at the year-end amounted to £0.82 million and net liability of
£0.06 million respectively.
At 31 December 2019, had the exchange rate between the Sterling and US$ increased or decreased
by 5% with all other variables held constant, the increase or decrease respectively in net assets would
amount to approximately £80,000 (2018: £68,000).
At 31 December 2019, had the exchange rate between the Sterling and MAD increased or decreased
by 5% with all other variables held constant, the increase or decrease respectively in net assets would
amount to approximately £6,000 (2018: £3,000).
The Group does not hedge against foreign exchange movements.
34
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
12.
Share capital
The Ordinary Shares issued by the Company have a no par value and all fully paid. Each Ordinary
Share carries one vote on a poll vote. The Company does not have a limited amount of authorised
capital.
Brought forward at 1 January 2018
Less share issue costs
Shares issued for cash
Shares issued in exchange for MSL shares
Shares issued to consultant Max Capital Private Ltd
Shares issue for convertible loan notes (see note 13)
Less share issue costs
As at 31 December 2018
Shares issue for cash
Less share issue costs
As at 31 December 2019
13.
Share based payments
Options
Number of
shares
48,183,344
200,000,000
333,333,333
14,500,000
30,115,708
-
626,132,385
60,000,000
-
686,132,385
£’000
1,133
(166)
967
6,000
1,084
435
903
(1,124)
8,265
2,250
(107)
10,408
The Group operates equity-settled, share-based compensation plans, under which the entity receives
services from Directors and employees as consideration for equity instruments (options) of the Group.
On 4 June 2018 and in conjunction with the business combination, the Placing and Re-Admission of the
Company to the London Stock Exchange, the Company granted the following share options all with an
exercise price of 3 pence and a maximum life of five years from the date they were issued. The options
vest in four equal portions on the date of grant, and on the 6, 12 and 18 month anniversaries.
Share options
Hayden Locke (director)
Robert Wrixon (director)
Ed McDermott (director)
Consultants
Others
Total
Number
issued
Expiry of
option year
12,000,000
6,000,000
6,000,000
7,500,000
11,000,000
42,500,000
5 years
5 years
5 years
5 years
5 years
During the year nil share options expired (2018: nil) and nil were forfeited (2018: nil). 31,875,000 options
were exercisable at the end of the year (2018: 21,250,000).
The weighted average exercise price for all the share options and warrants is 3 pence and the average
contractual life is 5 years (2018: 5 years).
The weighted average fair value of options granted during the year is 0.98 (2018: 0.98 pence).
35
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
Share based payments (continued)
The total expense recognised in the State of Comprehensive Income during the year was £157,000
(2018: £156,000). This fair value has been calculated using the Black-Scholes option pricing model.
The inputs into the model were as follows:
Number of options issued
Share price
Exercise price
Expected volatility
Expected life (yrs.)
Risk free interest rate
Dividend yield
2019
42,500,000
3.05 pence
3.00 pence
34%
5 years
1.3%
nil
Expected volatility was determined with reference to the historical volatility of the Company’s share price
and adjusted for future expectations.
The weighted average remaining contractual life of the share options outstanding at the end of the period
is years 3.5 years (2018: 4.5 years).
Warrants
The following options were issued as part of share subscriptions:
Warrants – 15 February 2017
Warrants – 4 June 2018
Total warrants
Number
issued
1,054,999
10,333,333
11,388,332
Expiry
2 years
1 years
The total expense recognised in the Statement of Comprehensive Income during the year was £nil
(2018: £73,000). This fair value has been calculated using the Black-Scholes option pricing model. The
inputs into the model were as follows:
Number of warrants issued
Share price
Exercise price
Expected volatility
Expected life (yrs.)
Risk free interest rate
Dividend yield
2018
11,388,332
3.05 pence
3.00 pence
34%
2-3 years
1.3%
nil
Expected volatility was determined with reference to the historical volatility of the Company’s share price
and adjusted for future expectations.
The total share based payment recognised in the Statement of Changes in Equity during the year was
£157,000 (2018: £229,000).
36
EMMERSON PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED 31 DECEMBER 2019
14.
Future rental payments
The commitments arising from operating leases are largely rental payments for buildings. The future
minimum lease payments (payables) under non-cancellable operating leases are:
Within one year
More than one year
As at end of year
15.
Related party transactions
Directors consultancy fees
2019
£’000
14
-
14
2018
£’000
3
-
3
Hayden Locke is a Director of the Company and is a director of Benson Capital Limited and Bentley
Capital Limited, which provide consulting services to the Company. During the year, Benson Capital
Limited and Bentley Capital Limited received total fees of £378,500 (2018: £274,000). The amount
outstanding as at year-end is £103,416 (2018: £ nil).
Robert Wrixon is a Director of the Company and also provides consulting services to the Company.
During the year, Robert Wrixon received fees of £84,000 (2018: £86,000). The amount outstanding as
at year-end is £ nil (2018: £ nil).
Details of directors’ remuneration during the year are given in note 5.
Other key management personnel
Phil Cleggett is the only key management personnel other than the Directors. Fees of £190,000 (2018:
£137,000) were paid during the year to Bremer Consulting Pty Ltd, a company Phil Cleggett controls
and the amount outstanding as at year-end is £45,500 (2018: £ 61,000).
There are no other related party transactions.
16.
Ultimate controlling party
The Directors consider that there is no controlling or ultimate controlling party of the Company.
17.
Events after the reporting date
The outbreak of the coronavirus pandemic in the months after the reporting date is considered to be a
non-adjusting event. As outlined in note 2.4, the Group is continuing to report on a going concern basis,
and while on site activity has been suspended, staff and consultants are working on desktop studies
and planning stage exploration activity to include the ongoing feasibility study. The Group’s response to
the outbreak is described in the Chairman’s Statement. The unknown length of the outbreak is a source
of uncertainty and the Board will continue to monitor events and to provide updates as the situation
develops.
18. Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have been deemed inside information for the
purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.
37
EMMERSON PLC
Company Information
Directors
Mark Connelly (Non-executive Chairman)
Hayden Locke
Robert Wrixon
Edward McDermott (Non-executive)
Registered Office
55 Athol St
Douglas
Isle of Man
IM1 1LA
Company No. 013301V
Administrator and Registered Agent
FIM Capital Limited
55 Athol St
Douglas
Isle of Man
IM1 1LA
Principal Place of Business
Third Floor
47 Charles Street
Mayfair
London
W1J 5EL
Auditor
PKF Littlejohn LLP
Statutory Auditor
15 Westferry Circus
London
E14 4HD
Broker
Optiva Securities Ltd
49 Berkeley Square
Mayfair
London
W1J 5AZ
Registrars
Share Registrars Limited
The Courtyard
17 West Street
Farnham
Surrey
GU9 7DR
38