RNS Number:8356A
Virotec International Ld
03 April 2006
VIROTEC INTERNATIONAL LTD
ABN 81 004 801 398
HALF-YEAR FINANCIAL REPORT
31 December 2005
The financial information set out in this announcement, which was approved by
the board of Virotec on 31 March 2006, is unaudited.
The interim financial report for the six months to 31 December 2005 is currently
subject to an audit review in accordance with the requirements of the Australian
Corporations Act and the relevant accounting standards. This audit review is
expected to be finalised shortly, and at this time, no material changes are
expected to result from the audit review.
Index to Financial Report
Directors' Report 1
Condensed Consolidated Interim Income Statement for the six months ended 6
31 December 2005
Condensed Consolidated Interim Statement of Recognised Income and Expenses 7
for the six months ended 31 December 2005
Condensed Consolidated Interim Balance Sheet as at 31 December 2005 8
Condensed Consolidated Interim Statement of Cash Flows for the six months 9
ended 31 December 2005
Notes to the Financial Statements 10
All amounts are expressed in Australian dollars unless otherwise stated.
Directors' Report
The directors present their report together with the condensed consolidated
interim financial report of Virotec International Limited (the "Company") and
its controlled entities for the half-year ended 31 December 2005.
Directors
The directors of the Company in office at the date of this report or who held
office during or since the financial period are:
Name Position Period of directorship
Brian Sheeran Executive Chairman Appointed July 1997,
appointed Chairman July 1999
Bruno Bamonte Director and Chief Appointed December 1997
Financial Officer
John Glynn Non executive director Appointed March 2000
Prof. David Non executive director Appointed July 2000
McConchie
Neil Bardach Non executive director Appointed December 2003, resigned 30
September 2005
Principal activities
The principal activities of the consolidated entity during the financial year
were:
* providing sustainable solutions for wastewater and solids treatment
and environmental remediation; and
* research and development of environmental remediation technologies.
The Company also holds interests in a number of mining leases. The mining
activities have been scaled down significantly in recent years.
Review of operations
Environmental services
Environmental services are provided through its two divisions:-
Environmental Remediation
* ViroMine(TM) Technology - utilises a proprietary product range and
knowhow developed for the mining industry. The range of products has been
successfully trialled by the US EPA over the past four years and has been used
to remediate a number of sites around the world. There are a number of trials
underway and submissions are being considered by potential clients.
* ViroSoil(TM) Technology - utilises a proprietary product range and
knowhow developed for the agricultural, fertiliser and aquaculture industries.
The products have been and are being used by a number of clients in Australia.
Wastewater and solids treatment
* ViroFlow(TM) Technology - utilises a proprietary product range and
knowhow developed for the treatment of wastewater from industrial sites. In
Australia the products are currently being provided to a number of clients in a
number of industries with great success. During the year an electroplating
company in the USA has installed a ViroFlow system in their plant and a number
of trials are underway in Europe.
* ViroSewage(TM) Technology - utilises a proprietary product range and
knowhow developed for the sewage industry. Extensive trialling of this
technology has occurred or is occurring around the world with a small number of
commercial contracts being entered into for the ongoing supply of the Technology
at this stage.
Other
* Alumina Services - service to the alumina industry relating to the
treatment of their refinery residue. Trials for the use of the BaseconTM
Technology at a number of refineries are underway.
The strategic plan provides for each of the applications to be trialled to
demonstrate the capacity and viability of the Technologies on a commercial
basis. These trials are important steps in the commercialisation process. Once
the trials are completed the products are then rolled out to industry to
demonstrate their customer acceptance. The consolidated entity's strategy is to
use the results of these trials to make initial commercial sales in the industry
and then attract the appropriate strategic partners in the relevant industries
to market the Technologies throughout the world.
During the period, the consolidated entity completed work on a pilot project for
the Pennsylvania Department of Transport for the treatment of pyritic rock at
Interstate 99, Skytop Mountain, Pennsylvania. The consolidated entity has
invoiced AUD $965,605 during the half year.
In addition, the consolidated entity through its strategic partner Geoenvirotec
Co Ltd of Daegu, South Korea supplied its ViroMine(TM)Technology to complete a
large-scale remediation project at the former Ulsan Iron Mine located in Ulsan.
The consolidated entity also completed an agreement with Lane Xang Minerals
Limited, a subsidiary of Oxiana Resources Limited, for the supply of
ViroMine(TM) Technology at the Sepon Gold Mine in Savannakhet Province, Laos.
In July 2005, the Company also announced that it has entered into a strategic
alliance agreement with the Al-Othman Group. The agreement grants an exclusive
right to Al-Othman to market and sell Virotec's environmental services
throughout the Kingdom of Saudi Arabia for a renewable period of eighteen
months. The agreement includes a revenue performance target of AUD$5.0 million
in the first 18 months of operations and in the event the target is not met, a
Licensing Fee of AUD$200,000 will be payable. All costs associated with the
alliance and the implementation of projects is to be borne by the Al-Othman
Group, and Virotec has commenced supplying expertise and training to Al-Othman
staff during the period.
During the period there has been an increase in the number of revenue earning
projects, level of enquiry and awareness, particularly in Australia, with the
technologies gaining market acceptance. It is expected that this trend will
continue in the coming year.
During the period total revenue earned by the Environmental Consulting segment
was $2,150,666 and the net result for this segment was a profit of $76,535.
Research and development
The consolidated entity continued its commitment to further research, develop
and commercialise its technologies.
The Bauxsol(TM) Technology is able to bind trace metals and reduce acidity in
water and soils and is platform in nature as it applies to industries where
contamination by trace metals occurs and/or acidity is a concern. Work in the
period continues to focus on developing and refining products and procedures
related to the range of Bauxsol(TM) Products, which are then commercially
exploited by the Environmental Remediation division.
Research has continued into a number of technologies related to the
Bauxsol(TM)Technology including concrete, fertiliser, air filters and the
treatment of drinking water including the removal of arsenic. In addition,
effort has been directed to product development and ongoing research into
production and application methods.
Research, development and commercialisation of the consolidated entity's
technologies are expected to be ongoing. Expenditure incurred for research and
development (including commercialisation activities) during the period was
$1,505,281, which was expensed in accordance with the consolidated entity's
accounting policy.
As a result of the consolidated entity's ongoing research and development
activities, it holds the intellectual property for a number of technologies that
are in the early stage of development. Following the success of the sale of the
HydroDec(TM) Technology, the Company is examining options for the structuring of
these technologies. They are not considered to be part of the core business of
the Company and options being considered allow for their sale, partial sale, or
licensing. These technologies have significant potential, but are difficult to
accurately value. Therefore the Company has developed its strategy so that it
retains a carried interest in the technology to share in the potential upside
whilst eliminating the risk associated with investing further in the
technologies.
Mining and exploration
In 2004 the Company granted an option to acquire its mining leases in the Drake
region of Northern New South Wales to Cazaly Resources Limited. The option,
which is subject to a number of conditions, has been assigned to Drake Resources
Limited, who are currently conducting a detailed assessment of the leases
including an exploration drilling program. The Company has agreed to extend the
option until June 2008.
The consolidated entity also holds a number of mining leases in North
Queensland. These areas are at different stages of evaluation and planning.
Work on these areas has been, and is planned to remain at the minimum required
to protect the Company's interest in the leases whilst the tenements are sold
and or relinquished where they are considered to have little or no value.
The Company is actively seeking to divest of these interests as they fall
outside of its core business. During the financial period a loss was generated
by the mining interests division of $77,116.
Other Activities
In July 2005, the Company raised $21.4 million (GBP#9.3 million) in a share
placement with institutions in the United Kingdom. The placement involved the
issue of 31,000,000 new ordinary shares in the Company at a price of GBP#0.30
per share. The proceeds from the placing are being used for the following
purposes:
* Expanding sales and marketing infrastructures in Europe;
* Expanding sales and marketing infrastructures in USA;
* Streamlining and expanding product distribution in the USA, Europe and
Australia; and
* General working capital.
As at 31 December 2005, the company maintained its investment in HydroDec Group
plc arising from the sale of the HydroDec(TM) Technology last year. Due to the
size of its holding in the company of 34%, Virotec is required to equity account
for this investment and this has lead to a charge in the Consolidated Interim
Income Statement for the period of $2,972,180, being the company's share of
HydroDec's result for the six months to 31 December 2005, accounted for under
IFRS. Virotec is confident that no further significant writedowns will be
necessary as it is expected that HydroDec will start to derive profits in future
years. As a result of this equity accounting entry, the carrying value of the
investment in the Consolidated Interim Balance Sheet has been reduced to
$7,513,364, which compares to the market value of Virotec's investment at the
date of this report of in excess of $50 million.
Likely Developments
The consolidated entity plans to expand its network of strategic alliances
throughout the world to allow for the marketing of its Technologies in the most
efficient and cost effective manner.
The consolidated entity will continue its research and development of further
applications of its Bauxsol(TM) Technology, Basecon(TM) Technology and other
technologies related to environmental management and remediation. The
consolidated entity will investigate the most appropriate way to obtain value
for its environmental technologies not considered part of its core business,
which may include sale, partial sale or sub-licensing of these technologies.
The consolidated entity will seek to retain a passive interest in its mining
assets by finding joint venture partners to assist in the exploitation of the
assets or by selling the assets and where possible retaining an interest by way
of royalty income. Where the mining tenements are not able to be sold, the
Company plans to complete all rehabilitation work and relinquish the leases.
Subsequent Events
Since the end of the half year, there has not arisen in the interval between the
end of the financial year and the date of this report any item, transaction or
event of a material or unusual nature likely, in the opinion of the directors,
to effect significantly the operations of the consolidated entity, the results
of those operations, or the state of affairs of the group
Bruno Bamonte
Director
31 March 2006
Virotec International Limited and its controlled entities
Condensed consolidated interim income statement
For the six months ended 31 December 2005
Consolidated
Note 31 December 31 December
2005 2004
$ $
Revenue from rendering of services and supply 2,150,666 703,062
of technologies
Financial income 423,208 152,299
Other income from operating activities 167,788 432,430
Gain on sale of controlled entity - 22,217,377
Depreciation and amortisation expenses (274,022) (155,510)
Research and development expenses (1,505,281) (586,276)
Mining interests expenses (77,116) (67,387)
Directors remuneration 7 (2,087,731) (3,010,149)
Expenses relating to rendering services and (2,074,131) (886,883)
supply of technologies
Professional, consulting and advisors fees (235,571) (149,840)
Administration and corporate expenses (3,156,183) (2,279,840)
Share of associates net loss for period 3 (2,972,180) (8,496,862)
---------- ---------
Profit / (loss) before income tax (9,640,553) 7,872,421
Income tax expense - (357,626)
---------- ---------
Net profit/(loss) (9,640,553) 7,514,795
---------- ---------
Basic profit/(loss) per share (cents) 5 (4.1) 3.7
Diluted profit/(loss) per share (cents) 5 (4.1) 3.7
The income statement is to be read in conjunction with the notes to the interim
financial statements set out on pages 10 to 27.
Condensed consolidated interim statement of recognised income and expense
For the six months ended 31 December 2005
Consolidated
Note 31 December 31 December
2005 2004
$ $
Change in fair value of financial assets 4 549,500 57,750
available for sale
Foreign exchange translation differences 4 (186,097) -
---------- ---------
Net income recognised directly in equity 363,403 57,750
---------- ---------
Profit / (loss) for the period (9,640,553) 7,514,795
---------- ---------
Total recognised income and expense for the 4 (9,277,150) 7,572,545
period ---------- ---------
Other movements in equity arising from transactions with shareholders are set
out in note 4.
The statement of recognised income and expense is to be read in conjunction with
the notes to the interim financial statements set out on pages 10 to 27.
Condensed consolidated interim balance sheet
As at 31 December 2005
Consolidated
Note 31 December 30 June
2005 2005
Current assets $ $
Cash and cash equivalents 15,722,022 2,411,999
Trade and other receivables 1,577,768 142,628
Inventories 965,849 1,492,049
Other 489,283 82,552
---------- ---------
Total Current Assets 18,754,922 4,129,228
---------- ---------
Non-current assets
Receivables 641,726 473,448
Other financial assets 628,250 78,750
Investments accounted for using the equity 3 7,513,364 10,843,004
method of accounting
Property, plant and equipment 2,472,301 1,732,886
---------- ---------
Total non-current assets 11,255,641 13,128,088
---------- ---------
Total assets 30,010,563 17,257,316
---------- ---------
Current liabilities
Trade and other payables 867,164 3,858,273
Interest-bearing loans and other 41,303 28,466
borrowings
Employee entitlements 81,951 92,120
Provisions 112,069 50,000
---------- ---------
Total current liabilities 1,102,487 4,028,859
---------- ---------
Non-current liabilities
Provisions 670,000 670,000
---------- ---------
Total non-current liabilities 670,000 670,000
---------- ---------
Total liabilities 1,772,487 4,698,859
---------- ---------
Net assets 28,238,076 12,558,457
---------- ---------
Equity
Issued capital 4 102,375,869 78,750,480
Reserve 4 6,338,558 4,618,987
Accumulated losses 4 (80,476,351) (70,811,010)
---------- ---------
Total equity 28,238,076 12,558,457
---------- ---------
This balance sheet is to be read in conjunction with the notes to the interim
financial statements on pages 10 to 27.
Condensed consolidated interim statement of cash flows
For the six months ended 31 December 2005
Consolidated
31 December 31 December
2005 2004
Cash flows from operating activities $ $
Cash receipts in the course of operations 715,525 1,117,744
Cash payments in the course of operations (6,802,797) (3,873,148)
--------- ---------
Cash generated from operations (6,087,272) (2,755,404)
Interest received 423,208 152,299
--------- ---------
Net cash provided by/(used in) operating (5,664,064) (2,603,105)
activities --------- ---------
Cash Flows From Investing Activities
Payments for property, plant and equipment (1,003,876) (669,829)
Proceeds received from sale of controlled - 1,243,345
entity
Repayment of loans - 1,243,345
Payments for research & development (1,505,281) (586,276)
Payments for mining interest expenses (77,116) (67,387)
Security deposits refunded / (paid) (168,279) 42,560
--------- ---------
Net cash provided by/(used in) investing (2,754,552) 1,205,758
activities --------- ---------
Cash flows from financing activities
Proceeds from issues of shares 22,444,519 70,500
Proceeds from borrowings 12,837 38,752
Share issue costs (728,717) -
--------- ---------
Net cash provided by/(used in) financing activities 21,728,639 109,252
--------- ---------
Net increase/(decrease) in cash held 13,310,023 (1,288,095)
Cash and cash equivalents at 1 July 2,411,999 7,666,699
--------- ---------
Cash and cash equivalents at 31 December 15,722,022 6,378,604
--------- ---------
This statement of cashflows is to be read in conjunction with the notes to the
interim financial statements set out on pages 10 to 27.
Notes to the condensed consolidated interim financial statements
1. Significant Accounting Policies
Virotec International Limited (the "Company") is a company domiciled in
Australia. The condensed consolidated interim financial report of the Company
for the six months ended 31 December 2005 comprise the Company and its
subsidiaries (together referred to as the "consolidated entity") and the
consolidated entity's interest in associates.
The condensed consolidated interim financial report was authorised for issue by
the directors on 31 March 2006.
(a) Statement of Compliance
The condensed consolidated interim financial report is a general purpose
financial report which has been prepared in accordance with Australian
Accounting Standards, Urgent Issues Group Interpretations adopted by the
Australian Accounting Standards Board ("AASB") and the Corporations Act 2001.
International Financial Reporting Standards ("IFRS") form the basis of
Australian Accounting Standards adopted by the AASB, being Australian
equivalents to IFRS ("AIFRS").
This is the consolidated entity's first AIFRS condensed consolidated interim
financial report for part of the period covered by the first AIFRS annual
financial report and AASB 1 First time adoption of Australian equivalents to
International Financial Reporting Standards. The condensed consolidated interim
financial report does not include all of the information required for a full
annual financial report.
The interim financial report is to be read in conjunction with the most recent
annual financial report, however, the basis of their preparation is different to
that of the most recent annual financial report due to the first time adoption
of AIFRSs. This report must also be read in conjunction with any public
announcements made by Virotec International Limited during the half year in
accordance with continuous disclosure obligations arising under the Corporations
Act 2001.
An explanation of how the transition to AIFRSs has affected the reported
financial position, financial performance and cash flows of the consolidated
entity is provided in note 9. This note includes reconciliations of equity and
profit or loss for comparative periods reported under Australian GAAP (previous
GAAP) to those reported for those periods under AIFRSs.
(b) Basis of Preparation
The financial report is presented in Australian dollars.
The financial report is prepared on the historical cost basis, except for
financial instruments classified as available-for-sale.
The preparation of an interim financial report in conformity with AASB 134
Interim Financial Reporting requires management to make judgements, estimates
and assumptions that affect the application of policies and reported amounts of
assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
This condensed consolidated interim financial report has been prepared on the
basis of AIFRSs in issue that are effective or available for early adoption at
the consolidated entity's first AIFRS annual reporting date, 30 June 2006.
The Australian Accounting Standards and UIG Interpretations that will be
effective or available for voluntary early adoption in the annual financial
statements for the period ended 30 June 2006 are still subject to change and
therefore cannot be determined with certainty. Accordingly, the accounting
policies for that annual period that are relevant to this interim financial
information will be determined only when the first AIFRS financial statements
are prepared at 30 June 2006.
The preparation of the condensed consolidated interim financial report in
accordance with AASB 134 resulted in changes to the accounting policies as
compared with the most recent annual financial statements prepared under
previous GAAP. The accounting policies set out below have been applied
consistently to all periods presented in these condensed consolidated interim
financial statements. They also have been applied in preparing an opening AIFRS
balance sheet at 1 July 2004 for the purposes of the transition to Australian
Accounting Standards - AIFRSs, as required by AASB 1.The impact of the
transition from previous GAAP to AIFRSs is explained in note 9.
The accounting policies have been applied consistently throughout the
consolidated entity for purposes of this condensed consolidated interim
financial report.
(c) Basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the
Company has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. In
assessing control, potential voting rights that presently are exercisable or
convertible are taken into account. The financial statements of subsidiaries are
included in the condensed consolidated interim financial report from the date
that control commences until the date that control ceases.
Associates
Associates are those entities in which the consolidated entity has significant
influence, but not control, over the financial and operating policies. The
condensed consolidated interim financial statements include the consolidated
entity's share of the total recognised gains and losses of associates on an
equity accounted basis, from the date that significant influence commences until
the date that significant influence ceases. When the consolidated entity's share
of losses exceeds its interest in an associate, the consolidated entity's
carrying amount is reduced to nil and recognition of further losses is
discontinued except to the extent that the consolidated entity has incurred
legal or constructive obligations or made payments on behalf of an associate.
Transactions eliminated on consolidation
Intragroup balances, and any unrealised gains and losses or income and expenses
arising from intragroup transactions, are eliminated in preparing the condensed
consolidated interim financial statements.
Unrealised gains arising from transactions with associates are eliminated to the
extent of the consolidated entity's interest in the entity with adjustments made
to the "Investment in associates" and "Share of associates' net profit"
accounts.
Unrealised losses are eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
Gains and losses are recognised as the contributed assets are consumed or sold
by the associates and jointly controlled entities or, if not consumed or sold by
the associate, when the consolidated entity's interest in such entities is
disposed of.
(d) Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated to
Australian dollars at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on translation are recognised in the income
statement. Non-monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated using the exchange rate at
the date of the transaction.
Financial statements of foreign operations
The assets and liabilities of foreign operations are translated to Australian
dollars at foreign exchange rates ruling at the balance sheet date. The revenues
and expenses of foreign operations, are translated to Australian dollars at
rates approximating the foreign exchange rates ruling at the dates of the
transactions.
(e) Property, plant and equipment
Owned assets
Items of property, plant and equipment are stated at cost less accumulated
depreciation (see below) and impairment losses. The cost of self-constructed
assets includes the cost of materials, direct labour, the initial estimate,
where relevant, of the costs of dismantling and removing the items and restoring
the site on which they are located, and an appropriate proportion of production
overheads.
Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items of property, plant and
equipment.
Depreciation
Depreciation is charged to the income statement on a straight-line basis over
the estimated useful lives of each part of an item of property, plant and
equipment (except for motor vehicles where diminishing value method is used).
Land is not depreciated. The depreciation rates used for each class of asset in
the current and comparative periods are as follows:
* plant and equipment 10% - 23% straight line
* motor vehicles 22.5% diminishing value
* office furniture and equipment 20% - 30% straight line
* computer equipment 33% straight line
The residual value, if not insignificant, is reassessed annually.
(f) Trade and other receivables
Trade and other receivables are stated at their cost less impairment losses.
(g) Inventories
Inventories are stated at the lower of cost and net realisable value. Net
realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses. The cost
of other inventories is based on the first-in first-out principle and includes
expenditure incurred in acquiring the inventories and bringing them to their
existing location and condition.
(h) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an
original maturity of three months or less. Bank overdrafts that are repayable on
demand and form an integral part of the consolidated entity's cash management
are included as a component of cash and cash equivalents for the purpose of the
statement of cash flows.
(i) Impairment
The carrying amounts of the consolidated entity's assets, other than inventories
and deferred tax assets, are reviewed at each balance sheet date to determine
whether there is any indication of impairment. If any such indication exists,
the asset's recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset or its
cash generating unit exceeds its recoverable amount. Impairment losses are
recognised in the income statement unless the asset has previously been
revalued, in which case the impairment loss is recognised as a reversal to the
extent of that previous revaluation with any excess recognised through the
income statement.
When a decline in the fair value of an available-for-sale financial asset has
been recognised directly in equity and there is objective evidence that the
asset is impaired, the cumulative loss that had been recognised directly in
equity is recognised in profit or loss even though the financial asset has not
been derecognised. The amount of the cumulative loss that is recognised in
profit or loss is the difference between the acquisition cost and current fair
value, less any impairment loss on that financial asset previously recognised in
profit or loss.
Calculation of recoverable amount
The recoverable amount of the consolidated entity's investments in receivables
with a short duration is not discounted.
The recoverable amount of other assets is the greater of their net selling price
and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to
the asset. For an asset that does not generate largely independent cash inflows,
the recoverable amount is determined for the cash-generating unit to which the
asset belongs.
Reversals of impairment
An impairment loss in respect of an investment in an equity instrument
classified as available for sale is not reversed through profit or loss.
In respect of other assets, an impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had been recognised.
(j) Employee benefits
Share-based payment transactions
The share option programme allows consolidated entity employees to acquire
shares of the Company. The fair value of options granted is recognised as an
employee expense with a corresponding increase in equity. The fair value is
measured at grant date and spread over the period during which the employees
become unconditionally entitled to the options. The fair value of the options
granted is measured using a Black-Scholes model, taking into account the terms
and conditions upon which the options were granted. The amount recognised as an
expense is adjusted to reflect the actual number of share options that vest
except where forfeiture is only due to share prices not achieving the threshold
for vesting.
Shares and performance rights may be issued to certain executives under Short
Term and Long Term Incentives schemes. The fair value of any shares and
performance rights granted to the executives is recognised as an expense with a
corresponding increase in equity. The fair value initially is measured at grant
date and spread over the period during which the employees become
unconditionally entitled to the shares and performance rights. The fair value of
the shares is measured by reference to the market price of the shares at grant
date. The fair value of performance rights is based on the market price of
shares given the short period on issue before converting to shares
Annual leave
Liabilities for employee benefits for annual leave represent present obligations
resulting from employee's services provided to reporting date, calculated at
undiscounted amounts based on remuneration wage and salary rates that the
consolidated entity expects to pay as at reporting date.
(k) Provisions
A provision is recognised in the balance sheet when the consolidated entity has
a present legal or constructive obligation as a result of a past event, and it
is probable that an outflow of economic benefits will be required to settle the
obligation. If the effect is material, provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, when appropriate, the risks specific
to the liability.
(l) Site restoration
In accordance with the consolidated entity's published environmental policy and
applicable legal requirements, a provision for site restoration in respect of
contaminated land is recognised when the land is contaminated.
The provision is the best estimate of the present value of the expenditure
required to settle the restoration obligation at the reporting date, based on
current legal requirements and technology. Future restoration costs are reviewed
annually and any changes are reflected in the present value of the restoration
provision at the end of the reporting period.
(m) Trade and other payables
Trade and other payables are stated at cost.
(n) Revenue
Goods sold and services rendered
Revenue from the sale of goods is recognised in the income statement when the
significant risks and rewards of ownership have been transferred to the buyer.
Revenue from services rendered is recognised in the income statement in
proportion to the stage of completion of the transaction at the balance sheet
date. The stage of completion is assessed by reference to surveys of work
performed. No revenue is recognised if there are significant uncertainties
regarding recovery of the consideration due, the costs incurred or to be
incurred cannot be measured reliably, there is a risk of return of goods or
there is continuing management involvement with the goods.
(o) Research and development
Expenditure on research activities, undertaken with the prospect of gaining new
scientific or technical knowledge and understanding, is recognised in the income
statement as an expense as incurred.
Expenditure on development activities, whereby research findings are applied to
a plan or design for the production of new of substantially improved products
and processes, is capitalised if the product or process is technically and
commercially feasible and the consolidated entity has sufficient resources to
complete development.
The expenditure capitalised includes the cost of materials, direct labour and an
appropriate proportion of overheads. Other development expenditure is recognised
in the income statement as an expense as incurred. Capitalised development
expenditure is stated at cost less accumulated amortisation and impairment
losses.
(p) Expenses
Operating lease payments
Payments made under operating leases are recognised in the income statement on a
straight-line basis over the term of the lease. Lease incentives received are
recognised in the income statement as an integral part of the total lease
expense.
Net financing costs
Net financing costs comprise interest payable on borrowings calculated using the
effective interest rate method, interest receivable on funds invested, and
foreign exchange gains and losses, that are recognised in the income statement.
Interest income is recognised in the income statement as it accrues, using the
effective interest method.
(q) Income tax
Income tax on the income statement for the periods presented comprises current
and deferred tax. Income tax is recognised in the income statement except to the
extent that it relates to items recognised directly in equity, in which case it
is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantially enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. The
following temporary differences are not provided for: goodwill not deductible
for tax purposes, the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit, and differences relating to investments
in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the balance
sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
Tax Consolidation
The Company is the head entity in a tax-consolidated group comprising the
Company and all of its Australian wholly owned subsidiaries. The implementation
date of the tax consolidations system for the tax-consolidated group was 1 July
2004.
The current and deferred tax amounts for the tax-consolidated group are
allocated among the entities in a group using an approach whereby each entity in
the tax-consolidated group measures its current and deferred taxes reflecting an
allocation of the group's current and deferred taxes with reference to the
individual entities transactions and balances. Deferred tax assets and deferred
tax liabilities are measured by reference to the carrying amounts of the assets
and liabilities in the respective entity's balance sheet and their tax values
applying under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from
unused tax losses assumed by the head entity from the subsidiaries in the tax
consolidated group are recognised in conjunction with any tax funding
arrangement amounts. Any difference between these amounts is recognised by the
Company as an equity contribution to or distribution from the subsidiary.
Distributions firstly reduce the carrying amount of the investment in the
subsidiary and are then recognised as revenue.
The Company recognises deferred tax assets arising from unused tax losses of the
tax-consolidated group to the extent that it is probable that future taxable
profits of the tax-consolidated group will be available against which the asset
can be utilised.
Any subsequent period adjustments to deferred tax assets arising from unused tax
losses assumed from subsidiaries are recognised by the head entity only.
The members of the tax-consolidated group have entered into a tax funding
arrangement which sets out the funding obligations of members of the
tax-consolidated group in respect of tax amounts. The tax funding arrangements
require payments to/from the head entity equal to the current tax liability
(asset) assumed by the head entity and any tax-loss deferred tax asset assumed
by the head entity. The members of the tax-consolidated group have also entered
into a valid Tax Sharing Agreement under the tax consolidation legislation which
sets out the allocation of income tax liabilities between the entities should
the head entity default on its tax payment obligations and the treatment of
entities leaving the tax consolidated group.
(r) Segment reporting
A segment is a distinguishable component of the consolidated entity that is
engaged either in providing products or services (business segment), or in
providing products or services within a particular economic environment
(geographical segment), which is subject to risks and rewards that are different
from those of other segments.
(s) Goods and Services Tax
Revenue, expenses and assets are recognised net of the amount of goods and
services tax (GST), except where the amount of GST incurred is not recoverable
from the taxation authority. In these circumstances, the GST is recognised as
part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net
amount of GST recoverable from, or payable to, the taxation authority is
included as a current asset or liability in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis. The GST
components of cash flows arising from investing and financing activities which
are recoverable from, or payable to, the taxation authorities are classified as
operating cash flows.
2. Segment reporting
Segment information is presented in the condensed consolidated interim financial
statements in respect of the consolidated entity's business segments, which are
the primary basis of segment reporting. The business segment reporting format
reflects the consolidated entity's management and internal reporting structure.
Inter-segment pricing is determined on an arm's length basis.
Segment results include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis. Unallocated items comprise
mainly income-earning assets and revenue, interest-bearing loans, borrowings and
expenses, and corporate assets and expenses.
Business segments
The consolidated entity comprises of the following main business segments:
*environmental consulting
*mining interests
*research and development of environmental remediation
Business segments
For the six months ended 31 December 2005
31 December Environmental Mining Research and Unallocated Consolidated
2005 Consulting Interests Development
$ $ $ $ $
External 2,150,666 - - - 2,150,666
customer
revenue
Interest - - - 423,208 423,208
income
Other income - 3,464 - 164,324 167,788
--------- -------- -------- -------- --------
Total revenue 2,150,666 3,464 - 587,532 2,741,662
and income --------- -------- -------- -------- --------
Depreciation 251,093 3,196 - 19,733 274,022
and --------- -------- -------- -------- --------
amortisation
Segment 76,535 (77,116) (1,505,281) (8,134,691) (9,640,553)
operating --------- -------- -------- -------- --------
results
Acquisitions 994,166 9,710 - - 1,003,876
of non-current --------- -------- -------- -------- --------
assets
Segment 5,412,916 11,144 - 24,586,503 30,010,563
assets --------- -------- -------- -------- --------
Segment 673,792 720,000 - 378,695 1,772,487
liabilities --------- -------- -------- -------- --------
31 December Environmental Mining Research and Unallocated Consolidated
2004 Consulting Interests Development
$ $ $ $ $
External 703,062 - - - 703,062
customer
revenue
Interest - - - 152,299 152,299
income
Other income - - 19,909,520 2,740,287 22,649,807
--------- -------- -------- -------- --------
Total revenue 703,062 - 19,909,520 2,892,586 23,505,168
and income --------- -------- -------- -------- --------
Depreciation 88,199 7,150 - 60,161 155,510
and --------- -------- -------- -------- --------
amortisation
Segment (183,821) (67,387) 12,161,406 (4,037,777) 7,872,421
operating --------- -------- -------- -------- --------
results
Acquisitions 324,553 - 345,276 - 669,829
of non-current --------- -------- -------- -------- --------
assets
Segment 1,321,456 36,898 345,276 19,329,982 21,033,612
assets --------- -------- -------- -------- --------
Segment 277,050 840,000 - 2,201,671 3,318,721
liabilities --------- -------- -------- -------- --------
Geographical segments
In presenting information on the basis of geographical segments, segment revenue
is based on the geographical location of customers. Segment assets are based on
the geographical location of the assets.
For the six months ended 31 December 2005
31 December 2005 Australia and North Europe Consolidated
Asia America
$ $ $ $
External customer 1,001,246 974,499 174,921 2,150,666
revenue
1,001,246
Interest income 423,181 2 25 423,208
Other income 165,607 2,181 - 167,788
---------- -------- -------- --------
Total revenue and 1,590,034 976,682 174,946 2,741,662
income ---------- -------- -------- --------
Depreciation and 114,699 40,335 118,988 274,022
amortisation ---------- -------- -------- --------
Segment operating (6,816,697) (1,564,613) (1,259,243) (9,640,553)
results ---------- -------- -------- --------
Acquisitions of 94,684 330,698 578,494 1,003,876
non-current assets ---------- -------- -------- --------
Segment assets 25,265,191 2,762,125 1,983,247 30,010,563
---------- -------- -------- --------
Segment liabilities 1,259,329 288,702 224,456 1,772,487
---------- -------- -------- --------
31 December 2004 Australia and North Europe Consolidated
Asia America
$ $ $ $
External customer 435,828 45,939 221,295 703,062
revenue
Interest income 152,299 - - 152,299
Other income 22,649,807 - - 22,649,807
---------- -------- -------- --------
Total revenue and income 23,237,934 45,939 221,295 23,505,168
---------- -------- -------- --------
Depreciation and 117,269 6,551 31,690 155,510
amortisation ---------- -------- -------- --------
Segment operating 8,830,010 (273,253) (684,336) 7,872,421
results ---------- -------- -------- --------
Acquisitions of 568,733 94,045 7,051 669,829
non-current assets ---------- -------- -------- --------
Segment assets 19,996,966 132,617 904,029 21,033,612
---------- -------- -------- --------
Segment liabilities 2,834,534 67,659 416,528 3,318,721
---------- -------- -------- --------
3. Investments accounted for using the equity method
Details of investments accounted for using the equity method are as follows:
Name Principal Date Ownership Investment carrying Share of net losses
activities acquired interest amount
% 31 Dec 30 Jun 31 Dec 31 Dec
2005 2005 2005 2004
$ $ $ $
HydroDec Investment 20 Dec 34 7,513,364 10,843,004 (2,972,180) (8,496,862)
Group 2004
plc
Movement in carrying value 31 Dec 31 Dec
2005 2004
$ $
Carrying value of investment at beginning of 10,843,004 -
period
Investments in associates during the period - 20,231,760
Acquisition costs - 211,674
Elimination of unrealised portion of profit on sale - (8,517,914)
of controlled entity to associate
Share of associate's net profit / (loss) (2,972,180) 21,052
Share of associate's movements in reserves (357,460) -
---------- ---------
Carrying value of investment in associate at end of 7,513,364 11,946,572
period ---------- ---------
The consolidated entity retains an ongoing royalty from revenue generated from
the use of the Hydrodec Technology by HydroDec Group plc, of 5 per cent of its
gross revenue. The market value of the investment in HydroDec Group plc at 31
December 2005 was approximately $33 million.
4. Capital and reserves
Reconciliation of movement in capital and reserves
Attributable to equity holders of the parent
Consolidated Share Foreign Equity Fair Value Retained Total
capital currency based Reserve earnings equity
reserve payments
reserve
Balance at 1 78,750,480 (125,499) 4,735,735 8,750 (70,811,010) 12,558,457
July 2005
Total - (186,097) - 549,500 (9,640,553) (9,277,150)
recognised
income and
expense
Equity settled - - 1,356,169 - (24,789) 1,331,380
transactions
Shares 23,625,389 - - - - 23,625,389
issued -------- ------- ------- ------ -------- -------
Balance at 31 102,375,869 (311,596) 6,091,904 558,250 (80,476,351) 28,238,076
December 2005 -------- ------- ------- ------ -------- -------
(a) Share capital
The consolidated entity recorded the following amounts within shareholder's
equity as a result of the issuance of ordinary shares
31 December 30 June
2005 2005
$ $
Opening balance 204,417,005 ordinary shares (1 July 78,750,480 75,880,823
2004: 200,209,630 ordinary shares)
Add the following share issues: -
150,000 ordinary shares issued as a result of the - 70,500
exercise of options at $0.47
3,242,375 ordinary shares issued at $0.74 per share - 2,399,657
pursuant to executive incentive schemes as approved
by shareholders
300,000 shares issued at $0.54 to non-executive - 162,000
directors as approved at the Annual General Meeting
on 1 December 2004
100,000 ordinary shares issued as a result of the - 30,000
exercise of options at $0.30
415,000 ordinary shares issued as a result of the - 207,500
exercise of options at $0.50
2,478,889 ordinary shares issued at $0.73 per share 1,809,587 -
pursuant to executive incentive schemes as approved
by shareholders
31,000,000 ordinary shares issued for cash at 21,413,769 -
GBP??0.30 ($0.6908) per share
300,000 ordinary shares issued as a result of the 63,000 -
exercise of options at $0.21
1,447,500 ordinary shares issued as a result of the 723,750 -
exercise of options at $0.50
400,000 ordinary shares issued as a result of the 244,000
exercise of options at $0.61
119,048 shares issued at $0.84 to settle an 100,000 -
outstanding liability -------- --------
Closing balance 240,162,442 ordinary shares 102,375,869 78,750,480
(30 June 2005: 204,417,005 ordinary shares)
-------- --------
(b) Options 31 December 30 June
2005 2005
Number Number
The following share options were on issue at 31 December 2005:
Exercisable on or before 30 July 2005 at $1.00 each - 1,100,000
Exercisable on or before 31 October 2005 at $0.61 each - 400,000
Exercisable on or before 31 October 2005 at $0.21 each - 300,000
Exercisable on or before 31 March 2006 at $0.50 each - 750,000
Exercisable on or before 30 September 2006 at $0.50 each 70,000 685,000
Exercisable on or before 31 March 2007 at $0.50 each 12,500 72,500
Exercisable on or before 30 September 2007 at $0.50 each 702,500 1,005,000
Exercisable on or before 30 September 2010 at $1.00 each 1,000,000 -
Exercisable on or before 30 September 2011 at $1.00 each 2,000,000 -
Exercisable on or before 30 September 2012 at $1.00 each 2,000,000 -
--------- ---------
5,785,000 4,312,500
--------- ---------
5. Earnings per share
The calculation of basic earnings per share is calculated as follows:
2005 2004
$ $
Profit / (loss) attributable to ordinary (9,640,553) 7,514,795
shareholders --------- ---------
Number Number
Weighted average number of ordinary shares at 31 237,595,830 201,980,756
December --------- ---------
$ $
Basic earnings/(loss) per share (0.041) 0.037
--------- ---------
There were no potential ordinary shares on issue at 31 December 2005 or 31
December 2004 that were materially dilutive.
6. Contingent Liabilities
There were no changes in contingent liabilities since 30 June 2005.
7. Share-based payments
Executive Incentive Schemes
The executive directors, being the Executive Chairman ("EC") and Chief Financial
Officer ("CFO"), receive remuneration which includes a fixed base remuneration
payable in cash, and equity components to provide short term and long term
incentive. The current agreements with the EC and CFO were agreed by the board
in September 2003, and the equity components of the agreements were approved by
shareholders at the Annual General Meeting of the Company held on 28 November
2003. Given the stage of development of the Company and requirements which that
entails, the Board determined that it was appropriate to offer significant
incentive in the form of equity to the executive directors to align their
interests with shareholders.
The Short Term Incentive Plans ("STI") covers the years ending 30 June 2003,
2004 and 2005. The STI provides that the executive directors are eligible to
receive an award of up to 200% of their base remuneration based on performance
for the relevant year against various criteria. The awards are payable in the
form of at least 70% shares and up to 30% in cash. The criteria are
commercially sensitive and cover issues relating to the successful
commercialisation of the Company's technologies. If the executive director
remains employed by Virotec on the third anniversary after an award is granted
under the STI, additional shares of an equivalent number will be issued
("Matching shares"). Any shares issued pursuant to the STI are not able to be
disposed of until one year after the issue of the shares.
The Long Term Incentive Plans ("LTI") covers the years ending 30 June 2004, 2005
and 2006 and provides that the executive directors are eligible to receive
performance rights which are exercisable into ordinary shares on a one for one
basis which are issued based on performance against other Australian listed
companies and the growth in revenue achieved during the year. A maximum of
400,000 performance rights may be issued to the EC and 280,000 performance
rights to the CFO in each of the 3 years covered by the LTI. The performance
rights are normally converted into shares within one day of issue.
The amounts are calculated using the fair value of the securities issued or to
be issued at the respective grants dates. Fair value is calculated by reference
to the market price of ordinary shares on the date of grant of the securities
and the fair value is expensed over the applicable vesting period, if any.
December 2005 December 2004
$ $
Amounts paid in cash during the period (620,526) (791,107)
Equity based payments (1,467,205) (2,219,042)
--------- ---------
Total directors remuneration (2,087,731) (3,010,149)
--------- ---------
Option Incentive Scheme
The Company has an option incentive scheme which was approved by shareholders at
the annual general meeting on 29 November 2000 and amended on 30 November 2005
(the "VOIS"). The Scheme provides for eligible employees to receive options
over ordinary shares each year for no consideration. The board may from time to
time resolve to invite eligible employees to apply for a number of options as
determined by the board. The maximum number of options able to be issued under
the scheme is 15% of the total number of shares on issue. Each option is
convertible to one ordinary share. There are no voting rights attached to the
unissued ordinary shares. Voting rights will be attached to the unissued
ordinary shares when the options have been exercised. The exercise price of the
options, determined in accordance with the rules of the Scheme, is based on the
weighted average price of the Company's shares traded during the five business
days preceding the date of granting the option or such higher price as the
directors determine. All options expire on the earlier of their expiry date or
termination of the employee's employment.
The fair value is expensed over the vesting period of the options, if any. The
fair value may be discounted for the probability of any performance hurdles
being achieved related to company performance. The amounts charged as an expense
are calculated using a Black-Scholes calculation. When calculating the
Black-Scholes formula the following variables were used, the risk free rate of
return of 5.5% p.a., volatility of 80%, the underlying share price at the date
of grant and the expiry date of the particular class of option.
December 2005 December 2004
$ $
Amount charged as an expense during the 26,802 297,114
period --------- ---------
8. Subsequent Events
There has not arisen in the interval between the end of the financial year and
the date of this report any item, transaction or event of a material or unusual
nature likely, in the opinion of the directors of the company, to effect
significantly the operations of the consolidated entity, the results of those
operations, or the state of affairs of the consolidated entity.
9. Explanation of transition to AIFRSs
As stated in note 1(a), these are the consolidated entity's first consolidated
interim financial statements for part of the period covered by the first AIFRS
annual consolidated financial statements prepared in accordance with Australian
Accounting Standards - AIFRSs.
The accounting policies in note 1 have been applied in preparing the condensed
consolidated interim financial statements for the six months ended 31 December
2005, the comparative information for the six months ended 31 December 2004, the
financial statements for the year ended 30 June 2005 and the preparation of an
opening AIFRS balance sheet at 1 January 2005 (the consolidated entity's date of
transition).
In preparing its opening AIFRS balance sheet, comparative information for the
six months ended 31 December 2005 and financial statements for the year ended 30
June 2005, the consolidated entity has adjusted amounts previously recorded in
financial statements prepared in accordance with its old basis of accounting
(previous GAAP).
An explanation of how the transition from the previous GAAP to AIFRS has
affected the consolidated entity's financial position and financial performance
is set out in the following tables and the notes that accompany the tables.
There were no material adjustments to the consolidated entity's cash flow
statements.
Reconciliation of equity
Note Previous GAAP Effect of transition AIFRSs
$ to AIFRSs 1 Jul 2004 $
$
Current assets
Cash and cash 7,666,699 7,666,699
equivalents
Trade and other 281,364 281,364
receivables
Inventory - -
Other 278,666 278,666
-------- -------- --------
Total current 8,226,729 8,226,729
assets -------- -------- --------
Non-current
assets
Trade and other 507,371 507,371
receivables
Other financial (c) 70,000 70,000
assets
Investments (b) - -
accounted for using
the equity method
Property, plant and 1,849,563 1,849,563
equipment -------- -------- --------
Total non-current 2,426,934 2,426,934
assets -------- -------- --------
Total assets 10,653,663 10,653,663
-------- -------- --------
Current
liabilities
Trade and other 3,477,116 3,477,116
payables
Interest-bearing - -
loans
Provisions 163,016 163,016
Deferred tax (d) - -
liabilities -------- -------- --------
Total current 3,640,132 3,640,132
liabilities -------- -------- --------
Interest-bearing - -
loans
Provisions 790,000 790,000
-------- -------- --------
Total non-current 790,000 790,000
liabilities -------- -------- --------
Total liabilities 4,430,132 4,430,132
-------- -------- --------
Net assets 6,223,531 6,223,531
-------- -------- --------
Equity
Issued capital (a) 75,880,823 - 75,880,823
Reserves (a)(b) - 1,021,856 1,021,856
(c)
Accumulated (a)(b) (69,657,292) (1,021,856) (70,679,148)
losses (c)(d) -------- -------- --------
Total equity 6,223,531 - 6,223,531
-------- -------- --------
Note Previous GAAP Effect of transition AIFRSs
to AIFRSs 31 Dec 2004 $
$ $
Current assets
Cash and cash 6,378,604 6,378,604
equivalents
Trade and other 231,683 231,683
receivables
Inventory - -
Other 216,539 216,539
-------- -------- --------
Total current 6,826,826 6,826,826
assets -------- -------- --------
Non-current
assets
Trade and other 466,606 466,606
receivables
Other financial (c) 70,000 57,750 127,750
assets
Investments (b) 10,973,740 972,832 11,946,572
accounted for using
the equity method
Property, plant and 1,665,858 1,665,858
equipment -------- -------- --------
Total non-current 13,176,204 1,030,582 14,206,786
assets -------- -------- --------
Total assets 20,003,030 1,030,582 21,033,612
-------- -------- --------
Current
liabilities
Trade and other 716,900 716,900
payables
Interest-bearing 5,478 5,478
loans
Provisions 1,415,450 1,415,450
Deferred tax (d) 931,245 (573,626) 357,619
liabilities -------- -------- --------
Total current 3,069,073 (573,626) 2,495,447
liabilities -------- -------- --------
Interest-bearing 33,274 33,274
loans
Provisions 790,000 790,000
-------- -------- --------
Total non-current 823,274 823,274
liabilities -------- -------- --------
Total liabilities 3,892,347 (573,626) 3,318,721
-------- -------- --------
Net assets 16,110,683 1,604,208 17,714,891
-------- -------- --------
Equity
Issued capital (a) 77,993,900 519,080 78,512,980
Reserves (a)(b) - 2,366,257 2,366,257
(c)
Accumulated (a)(b) (61,883,217) (1,281,129) (63,164,346)
losses (c)(d) -------- -------- --------
Total equity 16,110,683 1,604,208 17,714,891
-------- -------- --------
Note Previous GAAP Effect of transition AIFRSs
to AIFRSs 30 June 2005 $
$ $
Current assets
Cash and cash 2,411,999 2,411,999
equivalents
Trade and other 142,628 142,628
receivables
Inventory 1,492,049 1,492,049
Other 82,552 82,552
-------- -------- --------
Total current 4,129,228 4,129,228
assets -------- -------- --------
Non-current
assets
Trade and other 473,448 473,448
receivables
Other financial (c) 70,000 8,750 78,750
assets
Investments (b) 10,120,225 722,779 10,843,004
accounted for using
the equity method
Property, plant and 1,732,886 1,732,886
equipment -------- -------- --------
Total non-current 12,396,559 731,529 13,128,088
assets -------- -------- --------
Total assets 16,525,787 731,529 17,257,316
-------- -------- --------
Current
liabilities
Trade and other 3,858,273 3,858,273
payables
Interest-bearing 28,466 28,466
loans
Provisions 142,120 142,120
Deferred tax (d) - -
liabilities -------- -------- --------
Total current 4,028,859 4,028,859
liabilities -------- -------- --------
Interest-bearing - -
loans
Provisions 670,000 670,000
-------- -------- --------
Total non-current 670,000 670,000
liabilities -------- -------- --------
Total liabilities 4,698,859 4,698,859
-------- -------- --------
Net assets 11,826,928 731,529 12,558,457
-------- -------- --------
Equity
Issued capital (a) 78,231,400 519,080 78,750,480
Reserves (a)(b) - 4,618,986 4,618,986
(c)
Accumulated (a)(b) (66,404,472) (4,406,538) (70,811,010)
losses (c)(d) -------- -------- --------
Total equity 11,826,928 731,529 12,558,457
-------- -------- --------
Reconciliation of profit / (loss)
Note Previous Effect of transition to AIFRSs
GAAP AIFRSs for the six
months ended
31 Dec 2004
$ $
Revenue from 703,062 703,062
rendering of
services and supply
of technologies
Proceeds from sale (b) 20,635,792 1,581,585 22,217,377
of subsidiary
Financial income 152,299 152,299
Other operating 432,430 432,430
income
Depreciation (155,510) (155,510)
expense
Research and (586,276) (586,276)
development
expense
Mining interests (67,387) (67,387)
expense
Directors (a) (1,501,531) (1,508,618) (3,010,149)
remuneration
Cost of rendering (886,883) (886,883)
services and supply
of technologies
Professional, (149,840) (149,840)
consulting and
advisors fees
Administration and (a) (1,982,726) (297,114) (2,279,840)
corporate expenses
Share of associates (b) (7,888,110) (608,752) (8,496,862)
net loss for the -------- ---------- ---------
period
Profit from ordinary 8,705,320 (832,899) 7,872,421
activities before
income tax
Income tax expense (d) (931,245) 573,619 (357,626)
-------- ---------- ---------
Profit for the 7,774,075 (259,280) 7,514,795
period -------- ---------- ---------
Basic earnings per 0.038 0.037
share from
continuing
operations
Diluted earnings per 0.038 0.037
share from
continuing
operations
Note Previous GAAP Effect of transition AIFRSs
to AIFRSs for the year
ended 30
Jun 2005
$ $
Revenue from 1,657,781 1,657,781
rendering of
services and supply
of technologies
Proceeds from sale (b) 20,635,791 1,581,585 22,217,376
of subsidiary
Financial income 299,778 299,778
Other operating 1,014,075 1,014,075
income
Depreciation (321,526) (321,526)
expense
Research and (1,321,259) (1,321,259)
development
expense
Mining interests (136,830) (136,830)
expense
Directors (a) (3,940,594) (2,498,157) (6,438,751)
remuneration
Cost of rendering (1,370,699) (1,370,699)
services and supply
of technologies
Professional, (107,600) (107,600)
consulting and
advisors fees
Administration and (a) (4,414,474) (297,114) (4,711,588)
corporate
expenses
Share of associates (b) (8,741,623) (2,170,995) (10,912,618)
net loss for the --------- --------- -------
period
Profit from 3,252,820 (3,384,681) (131,861)
ordinary activities
before income tax
Income tax (d) - -
expense --------- --------- -------
Profit for the 3,252,820 (3,384,681) (131,861)
period --------- --------- -------
Basic earnings per 0.016 (0.001)
share from
continuing
operations
Diluted earnings 0.016 (0.001)
per share from
continuing
operations
Notes to the reconciliation of equity and profit/(loss)
(a) The consolidated entity applied AASB 2 to its active share-based payment
arrangements from 1 July 2004 except for equity-settled share-based payment
arrangements granted before 7 November 2002. The consolidated entity has granted
equity-settled share-based payments in 2004 and 2005.
Under previous GAAP, the consolidated entity did not account for equity settled
share based payments in a manner consistent with AASB 2 and share options were
accounted for at intrinsic value taking into account the expired vesting period
at each reporting date. Such payments are now recognised at fair value in
accordance with AASB 2.
The adoption of AASB 2 has resulted in an increase in reserves and an increase
in accumulated losses of $1,021,856 as at 1 July 2004, $2,308,508 for the period
ended 31 December 2004 and $3,298,047 for the period ended 30 June 2005. In
addition an increase of $519,080 in issued capital resulted in the period ended
31 December 2004 and 30 June 2005 due to an increase in the calculated fair
value of equity issued.
The effect in the consolidated entity of accounting for equity-settled
share-based payment transactions at fair value is to increase directors'
remuneration by $1,508,618 for the six months ended 31 December 2004 and by
$2,498,157 for the year ended 30 June 2005.
The effect in the consolidated entity of accounting for share options at fair
value is to increase administration expenses by $297,114 for the six months
ended 31 December 2004 and by $297,114 for the year ended 30 June 2005.
(b) The adoption of IFRS has resulted in changes to the carrying value and
shares of net profit or loss from the consolidated entity's investment in its
associate HydroDec Group plc, in which it owns 33.59% at 31 December 2005.
The consolidated entity's investment in HydroDec received in the form of shares
has been increased to the fair value of shares received on acquisition,
resulting in an increase in revenue and a decrease in accumulated losses of
$1,581,585 for the period ended 31 December 2004 and the year ended 30 June
2005. Previously under AGAAP a discount was applied to the parcel of shares
received to recognise a discount that would have been required to place such a
parcel.
Due to HydroDec's adoption of IFRS, the consolidated entity's share of
HydroDec's losses have increased by $608,752 for the period ended 31 December
2004 and $2,170,995 for the period ended 30 June 2005. For the period to 30
June 2005, the consolidated entity also recorded an increase in equity of
$1,312,249 representing its share of movements in HydroDec's reserves.
The net effect of the above changes is the carrying value of the investment
increased by $972,832 as at 31 December 2004 and $722,779 as at 30 June 2005.
(c) In accordance with AASBs, available-for-sale investments have been
recognised as assets at fair value. Under previous GAAP, all equity investments
were recognised at cost.
The effect of measuring available-for-sale equity securities at fair value is to
increase the carrying value of the fair value reserve by $nil, $57,750 and
$8,750 respectively, at 1 July 2004, 31 December 2004 and 30 June 2005.
(d) Due to changes in the carrying value of assets identified above, as
well as the availability of deferred tax assets not brought to account, tax
liabilities and accumulated losses at 31 December 2004 decreased by $573,626.
The level of deferred tax assets not recognised at 30 June 2005 resulted in no
adjustment to tax balances at that date.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR IJMJTMMMMMTF
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