Company Announcements

 

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2024

 

		2024	2023
	Note	USD '000	USD '000
Continuing operations
Revenue		-	-
Cost of sales		-	-
Gross profit/(loss)		-	-
Administrative expenses	5	(3,256)	(1,680)
Foreign exchange	5	(34)	5
Operating loss		(3,290)	(1,675)
Finance income	6	211	37
Finance costs	6	(29)	-
Loss before taxation		(3,108)	(1,638)
Taxation	7	-	280
Loss from continuing operations		(3,108)	(1,358)
Discontinued operations
Profit/(loss) from discontinued operations	20	990	(1,446)
Total comprehensive loss for the year		(2,118)	(2,804)
Earnings per share (in US cents) from continuing operations:
Basic	9	(4.4)	(2.0)
Diluted	9	(4.4)	(2.0)
Earnings per share (in US cents):
Basic	9	(3.0)	(4.0)
Diluted	9	(3.0)	(4.0)

 

The accounting policies and the notes form an integral part of these financial statements.

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FOR THE YEAR ENDED 31 MARCH 2024

 

		2024	2023
	Note	USD '000	USD '000
Non-current assets
Intangible assets	10	8,328	6,484
Property, plant and equipment	11	481	63
Right-of-use assets	16	176	-
		8,985	6,547
Current assets
Trade and other receivables	12	375	237
Cash and cash equivalents	13	2,989	5,351
Deferred consideration receivable	22	467	-
Assets held for sale	21	-	2,184
		3,831	7,772
Total assets		12,816	14,319
Current liabilities
Trade and other payables	15	1,444	1,243
Lease liabilities	16	94	-
		1,538	1,243
Non-current liabilities
Lease liabilities	16	200	-
		200	-
Net assets		11,078	13,076
Equity
Share capital	17	1,104	1,080
Share premium	17	92,280	92,037
Share based payment reserve	17	10	448
Retained earnings	17	(82,316)	(80,489)
Total equity		11,078	13,076

 

The accounting policies and the notes form an integral part of these financial statements.

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2024

 

	Share capital	Share premium	Share based payment reserve	Retained earnings	Total
	USD '000	USD '000	USD '000	USD '000	USD '000
Equity as at 1 April 2022	1,072	91,919	432	(77,894)	15,529
Loss for the year	-	-	-	(2,804)	(2,804)
Other comprehensive income	-	-	-	-	-
Total comprehensive loss	-	-	-	(2,804)	(2,804)
Issue of shares	8	118	-	-	126
Share based payment charge	-	-	225	-	225
Transfers between reserves	-	-	(209)	209	-
Total transactions with owners of the Company	8	118	16	209	351
Equity as at 31 March 2023	1,080	92,037	448	(80,489)	13,076
Loss for the year	-	-	-	(2,118)	(2,118)
Other comprehensive income	-	-	-	-	-
Total comprehensive loss	-	-	-	(2,118)	(2,118)
Issue of shares	24	243	-	-	267
Share based payment credit	-	-	(147)	-	(147)
Transfers between reserves	-	-	(291)	291	-
Total transactions with owners of the Company	24	243	(438)	291	120
Equity as at 31 March 2024	1,104	92,280	10	(82,316)	11,078

 

The accounting policies and the notes form an integral part of these financial statements.

 

Further detail of share capital, share premium, share based payment reserve and retained earnings can be found in Note 18.

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2024

 

		2024	2023
		USD '000	USD '000
Cash flows from/(used in) operating activities
Profit/(loss) before taxation from continuing operations		(3,108)	(1,638)
Profit/(loss) from discontinued operations		990	(1,446)
		(2,118)	(3,084)
Adjustments for:
Finance income		(211)	(37)
Finance expenses		29
Depreciation and amortisation		104	1,162
Impairment of right of use assets		92	-
Shares issued to employees in lieu of salary		267	-
Gain on sale of property, plant and equipment		-	(292)
Gain on sale of discontinued operations		(941)	-
Share based payment (credits)/charges		(147)	225
Foreign exchange difference		34	5
Operating cash (out)flows before movements in working capital		(2,891)	(2,021)
Decrease/(increase) in inventories		-	1,681
(Increase)/decrease in trade and other receivables		(138)	1,853
(Increase) in rental fleet assets		-	(255)
Increase/(decrease) in trade and other payables		153	(617)
Operating cash (out)/in flows		(2,876)	641
R&D tax relief credit received		-	280
Net cash (used in)/generated from operating activities		(2,876)	921
Cash flows generated from/(used in) investing activities
Purchase of property, plant and equipment assets		(441)	(25)
Disposal proceeds from property, plant and equipment assets		-	2,266
Expenditure on intangible assets		(1,844)	(2,639)
Proceeds from sale of discontinued operations		2,659	-
Funds placed on interest bearing deposit		-	1,500
Interest received		163	37
Net cash generated from investing activities		537	1,139
Net (decrease)/ increase in cash and cash equivalents		(2,339)	2,060
Foreign exchange movement		(23)	(5)
Cash and cash equivalents at the beginning of the financial year		5,351	3,296
Cash and cash equivalents at the end of the financial year		2,989	5,351

 

The main non-cash movements in the above statement of cash flows are depreciation and amortisation of $104,000 (2023: $1,162,000); shares issued to employees in lieu of salary of $267,000 (2023: nil); share based payment credit of $147,000 (2023: $225,000 charge); and impairment of right of use assets of $92,000 (2023: nil).

 

The accounting policies and the notes form an integral part of these financial statements.

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2024

 

1   GENERAL INFORMATION

 

The principal activities of Enteq Technologies PLC ("Enteq" or "the Group" or "the Company") and its subsidiaries is that of acquiring, consolidating and operating companies providing specialist reach and recovery products and technologies to the oil and gas services market.

 

Enteq Technologies PLC, the Group's ultimate parent Company, is a limited liability Company incorporated and domiciled in England and Wales with its registered office at 7 Albert Buildings, 49 Queen Victoria Street, London, EC4N 4SA. The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange.

 

2   BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

 

The consolidated financial statements of the Group have been prepared in accordance with UK adopted international accounting standards and the requirements of the Companies Act 2006. They have been prepared under the assumption that the Group operates on a going concern basis.

 

The Group's financial statements have been prepared on an accrual basis and under the historical cost convention. Monetary amounts are expressed in United States Dollars ("USD or "$") and are rounded to the nearest thousand, except for earnings per share ("US cents").

 

The Group's financial statements are presented in USD as the Group's primary economic environment, in which it operates and generates cash flows uses this currency.

 

Going concern

 

The consolidated financial statements of the Group are prepared on a going concern basis. The Directors of the Group assert that the preparation of the consolidated financial statements on a going concern basis is appropriate, which is based upon a review of the future forecast performance of the Group for a period exceeding 12 months to 30 September 2025.

 

The Group monitors its funding and liquidity position throughout the year to ensure it has sufficient funds to meet its ongoing cash requirements. Cash forecasts are produced based on a number of inputs such as estimated revenues, margins, overheads, collection and payment terms, research and development spend and capital expenditure requirements. In preparing these forecasts, the Directors have considered the principal risks and uncertainties to which the business is exposed. As at 31 March 2024, the Group has available cash balances of $3.0 million (2023: $5.4 million) and no debt.

 

Cash flow forecasts prepared up to 30 September 2025, show sufficient cash resources to enable the funding of working capital, completing the testing of the SABER tool fleet and the completion of the build of the initial set of SABER tools in the fleet to enable the generation of revenue from this new technology. The Directors performed sensitivity analysis on the going concern assumptions to determine whether plausible downside scenarios which include cash conservation, leave the company with sufficient headroom. The cash forecasts indicate that the Group has adequate financial resources to continue to trade for the foreseeable future and meet its obligations as they fall due.

 

Adoption of new and revised standards

 

The Group applied for the first time certain standards and amendments. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

 

Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2 (effective 1 January 2023)

The amendments to IAS 1 and IFRS Practice Statement 2 "Making Materiality Judgements" provide guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their 'significant' accounting policies with a requirement to disclose their 'material' accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.

 

The amendments have had no impact on the Group's disclosures, nor on the measurement, recognition or presentation of any items in the Group's financial statements.

 

Future standards, amendments and interpretations

 

The following standards, amendments and interpretations are effective subsequent to the year end (years commencing 1 January 2024), and have not been early adopted. The Directors do not expect that the adoption of the standards and amendments listed below will have a material impact on the financial statements of the Group in future periods.

·    Amendments to IAS 1: Presentation of Financial Statements: Classification of Liabilities as Current or Non-current

·    Amendments to IAS 1: Classification of Liabilities as Current or Noncurrent - Deferral of Effective Date

·    Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback

·    Amendments to IAS 1 Presentation of Financial Statements: Non-current Liabilities with Covenants

·    Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Arrangements

3   SIGNIFICANT ACCOUNTING POLICIES

 

The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements, unless otherwise stated.

 

Compliance with applicable law and IFRS

 

The consolidated Financial Statements comprise those of the Company and its subsidiaries (together the "Group"). The consolidated Financial Statements of the Group have been prepared on the going concern basis and under the historical cost convention in accordance with UK International Accounting Standards, and in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

 

Basis of consolidation

 

The Group financial statements consolidate those of the parent Company and all of its subsidiaries as at 31 March 2024. Subsidiaries are all entities over which the Group has the power to control the financial and operating policies. The Group obtains and exercises control through more than half of the voting rights. All subsidiaries have a reporting date of 31 March 2024.

 

All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-Group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

 

Companies included in the consolidation:

 

	Country of incorporation	Nature of business	Group holding
Enteq Technologies USA Inc. (registered office at 533 Rankin Road, Houston, TX 77073, United States of America)	United States of America	Manufacture of down hole drilling equipment	100%
Enteq Upstream Limited (registered office at The Courtyard, 69 High Street, Ascot, SL5 7HP, United Kingdom)	England and Wales	Dormant (dissolved 25 July 2023)	100%

 

The financial statements of subsidiaries are included in the consolidated financial statements from the date at which control commences to the date that control ceases. There are no non-conforming accounting policies in any of the subsidiaries.

 

Foreign currencies

 

All companies in the Group have a functional currency of USD.

 

Foreign currency transactions are translated into the functional currency of the respective Group entity, using the foreign exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the financial year-end date are retranslated to the functional currency at the foreign exchange rate at that date. Foreign exchange differences arising on translation are recognised in profit or loss. 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.

 

The exchange rate used at the year-end is GBP 1.00: USD 1.26 (2023: GBP 1.00: USD 1.24).

 

Segmental reporting

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the executive members of the Board, at which level strategic decisions are made.

 

Revenue

 

Revenue from the discontinued business arose mainly from the sale and rental of Measurement While Drilling ("MWD") equipment. The revenue generated from the SABER tool is expected to also rise from the sale and rental of equipment. To determine whether to recognise revenue, the Group follows a 5-step process:

·    Identifying the contract with a customer;

·    Identifying the performance obligations;

·    Determining the transaction price;

·    Allocating the transaction price to the performance obligations; and

·    Recognising revenue when/as performance obligation(s) are satisfied.

Revenue from contracts with customers

 

Revenue is derived from selling equipment and is recognised at a point in time, when the Group satisfies performance obligation by transferring the promised goods to its customers. Revenue is recognised when the transfer of control takes place; this is taken to be at the point of despatch from the Group's facilities when the full legal title is transferred. The price is fixed from when the relevant sales order is received from the customers.

 

Rental - Operating leases

Revenue from rentals of equipment received under operating leases is recognised in the profit and loss account as the performance obligation under the lease contracts is satisfied over time, i.e. on a straight-line basis over the period of the lease. This revenue is deemed to be outside of the scope of FRS 16 'Leases' on the basis that the lessee has the right to cancel the lease and return the equipment at any time after the minimum rental term (typically the first 3 months). Following the return of the equipment the lessee has no further financial obligations and at no time during the rental period does lessee obtain legal title to the equipment.

 

Interest

 

Interest income and expenses are reported on an accrual basis using the effective interest method.

 

Operating expenses

 

Operating expenses are recognised in profit or loss upon utilisation of the service. Expenditure for warranties is recognised and charged in the period the warranty costs are incurred.

 

Exceptional items

 

Exceptional items are items of income and expenditure that, in the judgement of management, should be disclosed separately on the basis that they are material, either by their nature or their size, to an understanding of our financial performance and distort the comparability of our financial performance between periods.

 

Exceptional items relate to such categories as impairment charges, and severance costs.

 

Intangible assets

(a) Other intangible assets

 

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment.

 

(b) Research and development expenditure

 

Research expenditure is recognised as an expense when it is incurred. Development expenditure is recognised as an expense except that expenditure incurred on development projects is capitalised as long-term assets to the extent that such expenditure is expected to generate future economic benefits. Development expenditure is capitalised if, and only if the Group can demonstrate all of the following:

 

·    its ability to measure reliably the expenditure attributable to the asset under development;

·    the product or process is technically and commercially feasible;

·    its future economic benefits are probable;

·    its ability to use or sell the developed asset;

·    the availability of adequate technical, financial and other resources to complete the asset under development; and

·    its intention to complete the intangible asset and use or sell.

Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses, if any. Development expenditure initially recognised as an expense is not recognised as assets in the subsequent period. Development expenditure is amortised on a straight-line method over the useful lives of each product from when the products are ready for sale or use. In the event that the expected future economic benefits are no longer probable of being recovered, the development expenditure is written down to its recoverable amount.

 

Subsequent measurement

 

All intangible assets including capitalised internally developed software, are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives, as these assets are considered finite. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing as described below.

 

Amortisation

 

Amortisation is charged to overheads, within total administrative expenses, in the statement of profit and loss on a straight-line basis over the estimated useful lives of the intangible assets unless such lives are indefinite. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are determined separately for each acquisition and fall within the following ranges:

 

In-process research and development ("IPR&D") technology                    5 to 20 years

 

Property, plant and equipment

 

Tangible property, plant and equipment are stated at cost, net of depreciation and any provision for impairment. Depreciation is included within administrative expenses for all tangible assets at rates calculated to write off the cost, less estimated residual value of each asset on a straight-line basis over useful economic life, as follows:

 

Land                                         Not depreciated

Buildings                                  10 to 35 years

Assets held for rental                Over the life of the asset or the rental period, whichever is the shortest

Other assets                             1 to 7 years

 

Spend on the build of new tools is included in "Assets under construction". Once the new tools are build they are transferred to "Assets held for rental" and depreciated in accordance with their appropriate useful economic life.

 

Management review the useful economic life and residual values of all assets on an annual basis.

 

Impairment

 

The SABER tool equipment and intangible asset is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is higher of an asset's fair value less costs to sell and value in use.

 

An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in use. To determine the value-in-use, an independent external valuation was obtained. The external valuation used management estimates of expected future cash flows from the CGU and determined a suitable interest rate in order to calculate the present value of those cash flows, taking into account management's assessment of respective risk profiles, such as market and asset-specific risks factors. The data used for impairment testing procedures are directly linked to the Group's latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements.

 

For impairment assessment purposes, an impairment test has been carried out associated with the intangible asset relating to the SABER project which is considered to be the only remaining cash generating unit ("CGU") within the Group. Further detail of the impairment review can be found in Note 10. It was concluded that the intangible asset does not need to be impaired (2023: nil).

 

Leases

 

For any new contracts entered into, the Group considers whether a contract is, or contains a lease. A lease is defined as 'a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration'. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:

·    the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group

·    the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract

·    the Group has the right to direct the use of the identified asset throughout the period of use.

The Group assess whether it has the right to direct 'how and for what purpose' the asset is used throughout the period of use.

 

Measurement and recognition of leases as a lessee

 

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group's incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.

 

The Group has elected not to recognise right-of-use assets and lease liabilities for leases that are short term and/or of low-value items. Lease payments associated with these leases is recognised as an expense on a straight-line basis over the lease term.

 

Financial instruments

           

Recognition and derecognition

 

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

 

Classification and initial measurement of financial assets

 

Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).

 

Financial assets are classified into the following categories:

·    amortised cost

·    fair value through profit or loss (FVTPL)

·    fair value through other comprehensive income (FVOCI).

In the periods presented the corporation does not have any financial assets categorised as either FVTPL or FVOCI.

 

All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses.

 

Subsequent measurement of financial assets

 

Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):

·    they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows

·    the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

After initial recognition, these are measured at amortised cost using the effective interest method.  Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.

 

Impairment of financial assets

 

IFRS 9's impairment requirements use more forward-looking information to recognise expected credit losses - the 'expected credit loss (ECL) model'. Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under IFRS 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss.

 

Trade and other receivables and contract assets

 

The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses. As the Group has so few customers with significant outstanding receivable balances the expected credit losses can be assessed on an individual customer by customer basis.

 

Classification and measurement of financial liabilities

 

The Group's financial liabilities include borrowings and trade and other payables. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss.

 

Inventories

 

Inventories are stated at the lower of cost and net realisable value. Cost, for inventory items that involve significant manufacturing time, includes all expenses directly attributable to the manufacturing process as well as suitable portions of related production overheads, based on normal operating capacity. The cost of inventory that do not incur significant levels of manufacturing time are held at material cost only.   Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses.

Taxation

 

The charge for current income tax is based on the results for the period as adjusted for items that are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the year-end date.

 

Deferred income tax is the income tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the Statement of Financial Position liability method. Deferred income tax is provided in full and is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred income tax liabilities are generally recognised on all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill (or any discount on acquisition) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. Deferred income tax is measured on an undiscounted basis at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rates and laws enacted or substantively enacted at the balance sheet date. Deferred income tax is charged or credited in the statement of profit and loss, except when it relates to items charged or credited directly to equity or other comprehensive income, in which case the deferred tax is also dealt with in equity or other comprehensive income. Deferred income tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

 

Cash and cash equivalents

 

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

 

Financial liabilities and equity

 

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

 

Trade and other payables

 

Trade and other payables are not interest-bearing and are recognised initially at fair value. Subsequently they are carried at amortised cost.

 

Equity instruments

 

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

 

Equity, reserves and dividend payments

 

Share capital represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

 

Retained earnings include all current and prior period retained profits. All transactions with owners of the parent are recorded separately within equity. Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a general meeting prior to the reporting date.

 

Share based payment reserve

 

Represents the total accumulated share-based payment charge less any amounts transferred following the issue of the relevant shares.

 

Pensions and short-term employee benefits

 

Pensions

 

The Group does not operate its own pension scheme but makes contributions to an individual's personal pension scheme, where appropriate.

 

Share based payments

 

The group operates two equity settled compensation plans, the Performance Share plan and the Enterprise Management Incentive plan. The fair value determined at the grant date of the equity settled share based payments is expensed over the vesting period, based on

the Group's estimate of awards that will eventually vest. Fair value is measured by the use of the Black-Scholes and Monte Carlo option

pricing models.

 

Both these schemes have options that vest three years after the date of grant and expire ten years after that date. The total amounts to be expensed to the Profit and Loss account over the vesting period of the options is determined by reference to the fair value at the date of granting and the number of awards that are expected to vest. The charge is annually reassessed, based on the total number of options expected to vest. The movement in cumulative expense is recognised in the profit and loss, with a corresponding entry to the share-based payment reserve. The Enterprise Management Incentive plan does not have any performance conditions attached whereas the Performance Share plan does. 

 

The Performance Share plan contained either a combination or market and non-market based elements or solely market based elements which are defined as follows:

 

Market based

 

The grant date fair value granted takes into account the impact of any market conditions and does not take into account service and non-market conditions. The fair value is not adjusted for subsequent changes in the fair value and differences between estimated and actual outcome of market conditions. If a market condition is not met, then the share based payment cost is nevertheless recognised, assuming that all other vesting conditions are met and even though an employee would not be entitled to receive the share based payment.

 

Non-market based

 

Recognition is initially based on the number of instruments for which any required non-market conditions are expected to be met. Subsequently, recognition of share based payment cost is trued-up for changes in estimates regarding the achievement of the conditions at each reporting date and at vesting date so that to reflect the number of instruments for which non-market conditions actually satisfied.  If a non-market condition is not met, then no share based payment cost is recognised on cumulative basis and any previously recognised cost is reversed.

 

Critical accounting estimates and judgements

 

The preparation of the financial statements in conforming with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income, expenses and contingent liabilities. These will seldom equal the related actual results and adjustments will consequently be necessary. Estimates are continually evaluated based on experience, consultation with experts and reasonable expectations of future events. The carrying value of both the inventory and intangible assets are the key areas where significant judgement are required.

 

The areas of critical estimates include inventory valuation and impairment assessments and cost recognised relating to  the R&D projects capitalised within intangible assets. Accounting judgements are applied in determining the carrying amounts of the following significant assets and liabilities:

 

Impairment of intangible assets

 

An impairment test is carried out annually and involves a significant level of judgement and estimates regarding factors such as future growth rates. Senior management base this judgement on the best available industry and market data at that point in time. The critical judgements and estimates are set out in Note 10. As the Group strategy unfolds, these assumptions may change. Any significant downward variance in the assumptions may result in an impairment.

 

Costs recognised relating to R&D projects capitalised

 

The Group has to apply judgement in determining whether costs incurred on R&D projects should be capitalised within intangible assets or expensed. The Group has a policy of capitalising development costs as set out above. The judgement is based on the assessment of the nature of capitalised costs and the level of these costs are considered to be directly related based on the criteria set out above, including some of the salary costs. This includes a portion of directors' and employees' salaries as stated in the Note 5.

 

Discontinued operations

 

The Group classifies a component of its business as a discontinued operation when it has either been disposed of or is classified as held for sale, and that component represents a separate major line of business or geographical area of operations, or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations.

 

Discontinued operations are presented separately in the statement of profit and loss, showing the results of the discontinued operations, net of tax, distinct from continuing operations. Assets and liabilities of discontinued operations are measured in accordance with the applicable IFRS standards before reclassification as held for sale. Gains or losses on the disposal of discontinued operations are recognised in the period in which the disposal occurs.

 

Assets held for sale

 

Non-current assets, or disposal groups, are classified as held for sale when their carrying amount is expected to be recovered principally through a sale transaction rather than through continuing use, and a sale is considered highly probable.

 

Non-current assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Depreciation or amortisation on these assets ceases upon classification as held for sale. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in the statement of profit and loss.

 

4   SEGMENTAL REPORTING

 

For management purposes, the Group is currently organised into a single business unit, the Drilling Tools division, which is currently based solely in the United States.

 

The principal activities of the Group is the design, manufacture and selling of specialised products for Directional Drilling and Measurement While Drilling ("MWD") operations for use in the oil, gas, geothermal and other energy transition sectors around the world. Revenue in the year was generated from the discontinued business and arose from the sale of MWD equipment.

 

Following disposal of the XXT business in April 2023, at present, there is only one operating segment relating to SABER and the information presented to the board is consistent with the consolidated profit and loss statement and the consolidated statement of financial position.  

 

The revenues, net assets and non-current assets of the Group can be analysed by geographic location (post-consolidation adjustments) as follows:

 

Revenues

 

		2024	2023
		USD '000	USD '000
United States of America		49	5,846
China		-	278
Rest of the world		-	56
Europe		-	38
Central Asia		-	22
Australasia		-	3
		49	6,245
Contracts with customers		49	5,701
Operating lease income		-	544
		49	6,245

 

Net assets

 

		2024	2023
		USD '000	USD '000
United States of America		9,031	8,800
Europe		2,047	4,276
		11,078	13,076

 

Non-current assets

 

		2024	2023
		USD '000	USD '000
United States of America		8,949	6,484
Europe		36	63
		8,985	6,547

 

All revenue generated in the year is from discontinued operations. Refer to Note 20 for details on performance of discontinued operations.

 

5   OPERATING LOSS

 

Operating losses are stated after charging/(crediting):

 

		2024	2023
		USD '000	USD '000
Auditors' remuneration		66	74
Share based payment (credit)/charge		(147)	225
Depreciation		104	-
Impairment		92	-
Foreign exchange loss/(gain)		34	(5)

 

Other significant administrative expenses are detailed below. Depreciation and amortisation charges for 2023 are related to discontinued operations (Note 20).

 

The total employee benefit expenses which are either capitalised or included in administrative expenses are noted below. During the year $0.4 million of the below salaries were capitalised as part of intangible assets (2023: $0.7 million).

 

		2024	2023
		USD '000	USD '000
Wages and salaries		1,338	1,525
Pension costs		49	237
Social security costs		132	164
Share based payment (credit)/charge		(147)	225
		1,372	2,151

 

Disclosures on directors' remuneration, share options, long-term incentive schemes and pension entitlements required by the Companies Act 2006 are contained in the tables and notes within the Remuneration Committee report.

 

The monthly average number of employees during the year was as follows:

 

		2024	2023
		No.	No.
Directors		5	5
Senior management		1	1
Operations		4	4
Sales and administrative		-	4
		10	14

 

Services provided by the Group's auditor:

 

		2024	2023
		USD '000	USD '000
Fees payable to the Group's auditor for audit of the financial statements		66	-
Fees payable to the Group's predecessor auditor for audit of the financial statements		-	74
		66	74

 

6   FINANCE INCOME AND FINANCE EXPENSES

 

Finance income

 

		2024	2023
		USD '000	USD '000
Bank interest receivable		211	37

 

Finance expenses

 

		2024	2023
		USD '000	USD '000
Interest on lease liabilities		29	-

 

7   TAXATION

 

No corporation tax charge arose on ordinary activities for the year. The tax assessed for the year differs from the standard rate of corporation tax in the United Kingdom. The differences are explained below:

 

		2024	2023
		USD '000	USD '000
Profit/(loss) before taxation from continuing operations		(3,108)	(1,638)
Profit/(loss) from discontinued operations		990	(1,446)
		(2,118)	(3,084)
Tax calculated at the effective tax rate of 25% (2023: 19%)		(530)	(586)
Effects of:
Items not subject to corporation tax		21	473
Tax losses to carry forward		509	113
R&D tax credit		-	280
		-	280

 

Tax losses for which no deferred tax balances have been recognised are disclosed in Note 8.

 

8   DEFERRED TAXATION

 

No deferred taxation balances have been recognised in the financial statements on the basis that the only material balances relate to taxable losses carried forward, which are uncertain as to the recoverability.

 

The total losses available to the Group in the relevant tax jurisdictions are as follows: United Kingdom $1.7 million; United States $21.1 million (2023: United Kingdom nil; United States $22.6 million), these tax losses have no expiry date. There were no significant deferred tax liabilities.

 

9   EARNINGS PER SHARE AND DIVIDENDS

 

Basic earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number

of ordinary shares in issue during the year.

 

Diluted earnings per share

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive

potential ordinary shares. The Group has dilutive potential ordinary shares arising from share options granted to employees under the

share schemes as detailed in Note 18 of these financial statements.

 

As the Group is loss making, any potential ordinary shares have the effect of being anti-dilutive. Therefore, the diluted earnings per share is the same as the basic earnings per share.

 

	Units	2024	2023
Earnings attributable to equity shareholders of the Group:
Loss from continuing operations	USD '000	3,108	1,358
Loss for the year	USD '000	2,118	2,804
Number of shares:
Weighted average number of ordinary shares at year end	'000	70,898	69,484
Dilutive effect of share based payment plans	'000	-	-
	'000	70,898	69,484
Earnings per share from continuing operations:
Basic earnings per share	US cents	(4.4)	(2.0)
Diluted earnings per share	US cents	(4.4)	(2.0)
Earnings per share:
Basic earnings per share	US cents	(3.0)	(4.0)
Diluted earnings per share	US cents	(3.0)	(4.0)

 

Earnings per share from discontinued operations:
Basic earnings per share	US cents	1.4	(2.0)
Diluted earnings per share	US cents	1.4	(2.0)

 

Dividends

During the year the Group did not pay any dividends (2023: nil).

 

10 INTANGIBLE ASSETS

 

				IPR&D technology	Developed technology	Total
				USD '000	USD '000	USD '000
Cost
As at 1 April 2022				15,267	13,237	28,504
Additions				2,639	-	2,639
Transfer				(102)	102	-
As at 31 March 2023				17,804	13,339	31,143
Additions				1,844	-	1,844
As at 31 March 2024				19,648	13,339	32,987
Accumulated amortisation
As at 1 April 2022				11,320	13,041	24,361
Charge for the year				-	408	408
Disposals				-	(110)	(110)
As at 31 March 2023				11,320	13,339	24,659
Charge for the year				-	-	-
As at 31 March 2024				11,320	13,339	24,659
Net book value
As at 31 March 2023				6,484	-	6,484
As at 31 March 2024				8,328	-	8,328

 

Developed technology is technology which is currently commercialised and embedded within the current product offering. In-process research and development ("IPR&D") technology relates to technology which is in the final stages of field testing, has demonstrable commercial value and is expected to be launched within the foreseeable future.

 

Intangible assets are amortised on a straight-line basis over their respective useful lives. The SABER project will have its useful life assessed once the field trials have been completed which will give a better estimate of the useful life of this asset.

 

Impairment review

 

Due to the sale of the XXT business assets, the SABER project is now considered to be only main cash generating unit ("CGU"). This CGU is in the carried forward value for IPR&D technology in the table above with a value of $8.3 million (2023: $6.5 million).

 

An independent third party valuation of the IP was done by a reputable professional services firm in this field to affirm the Directors' confidence in the valuation of the IP. The recoverable amount of the CGU at the year-end date was assessed on the basis of this valuation and is determined from value in use calculations both where the asset is currently in use or will be in the near future. The Directors have applied the income to determine the carrying value for the SABER project and intangible assets being carried in these financial statements.

 

The Income Approach involves calculating the value of an intangible asset based on the aggregate stream of net economic benefits that ownership of such asset entails. That benefit stream, net of any costs associated with its generation, is discounted to its net present value ("NPV") to determine the value of the intangible asset at the time of the valuation. The application of this approach requires the projection of economic benefits (incremental net income, or net cost savings) that are directly generated by the asset over its economic life. These projections are converted into NPV by using a present value discount rate, which represents the required rate of return on the intangible asset.

 

The key assumptions made by the directors for the discounted cash flow workings are:

·    projected revenue from the specific application of the IP;

·    expected royalty savings based on the selected market royalty rates;

·    the expected royalty payments to the Shell Entities;

·    the duration of the License Agreements (term); and

·    the applicable discount rate.

The valuation of the IP was conducted under four (4) scenarios using a combination of different fleet sizes and capital expenditures.

 

Changes to the above assumptions would impact the valuation assessment. For each of the four scenarios a sensitivity analysis was conducted, varying the two variables that the model is most sensitive to:

·    Royalty rates; and

·    Discount rates.

A royalty rate of 7.5% was used for the valuation and a sensitivity analysis done on the ranges of royalty rates of 5.0% and 10.0%. A lower royalty rate of 5.0% will result in a lower valuation by 47.3% whilst a higher royalty rate of 10.0% will result in a higher valuation by 47.3%.

A discount rate of 13.0% was used for the valuation and a sensitivity analysis done on the ranges of discount rates of 10.0% and 16.0%. A lower discount rate of 10.0% will result in a higher valuation by 34.4% whilst a higher discount rate of 16.0% will result in a lower valuation by 24.0%.

None of the sensitivities above result in an impairment of the net book value of the intangibles held in the financial statements at year end. There still remains a buffer of 53.0% over the net book value of the intangibles when using the lowest value point in the sensitivity analysis above.

The Directors have not accounted for the possibility of any onerous obligations arising with the contracts as there is no reason to expect that these will arise at this stage in the business life cycle.

Currently the SABER project is towards the end of the development phase and is forecast to be cash generating from Q3 of calendar year 2024.

 

11 PROPERTY, PLANT AND EQUIPMENT

 

	Assets under const- ruction	Assets held for rental	Land	Buildings	Other assets	Total
	USD '000	USD '000	USD '000	USD '000	USD '000	USD '000
Cost
As at 1 April 2022	-	834	461	2,440	448	4,183
Additions	-	-	-	-	25	25
Disposals	-	(834)	(461)	(2,440)	(13)	(3,748)
As at 31 March 2023	-	-	-	-	460	460
Additions	432	-	-	-	9	441
Disposals	-	-	-	-	(97)	(97)
As at 31 March 2024	432	-	-	-	372	804
Accumulated depreciation
As at 1 April 2022	-	516	-	862	299	1,677
Charge for the year	-	573	-	84	111	768
Disposals	-	(1,089)	-	(946)	(13)	(2,048)
As at 31 March 2023	-	-	-	-	397	397
Charge for the year	-	-	-	-	23	23
Disposals	-	-	-	-	(97)	(97)
As at 31 March 2024	-	-	-	-	323	323
Net book value
As at 31 March 2023	-	-	-	-	63	63
As at 31 March 2024	432	-	-	-	49	481

 

Assets under construction relates to SABER fleet build expenditure.

12 TRADE AND OTHER RECEIVABLES

 

		2024	2023
		USD '000	USD '000
Trade receivables		100	98
Prepayments		165	72
Other receivables		110	67
		375	237

 

The Directors consider that the carrying amount of trade receivables and accrued income approximates to fair value. Information about the Group's exposure to credit and market risks, and impairment losses for trade receivables is included in Note 24.

 

13 CASH AND CASH EQUIVALENTS

 

		2024	2023
		USD '000	USD '000
USD denominated balances		2,347	5,184
GBP denominated balances		642	167
		2,989	5,351

 

The Directors consider that the carrying amount of cash and cash equivalents equates to fair value.

 

14 INVENTORIES

 

		2024	2023
		USD '000	USD '000
Finished goods		-	1,136
Work in progress		-	102
Raw materials and consumables		-	81
		-	1,319
Impairment		-	(587)
Reclassification as assets held for sale (Note 21)		-	(732)
		-	-

 

15 TRADE AND OTHER PAYABLES

 

		2024	2023
		USD '000	USD '000
Trade payables		723	788
Accruals and other payables		721	455
		1,444	1,243

 

The Directors consider that the carrying amount of trade and other payables equates to fair value. The Group's exposure to currency and liquidity risks is included in Note 24.

 

16 LEASES

 

The Group leases warehouses, offices and other facilities in the United Kingdom and the United States. The lease terms range from 3 to 10 years.

 

Right-of-use assets

 

			Property leases
			USD '000
As at 1 April 2023			-
Additions			352
Depreciation charge for the year			(84)
Impairment			(92)
As at 31 March 2024			176

 

Lease liabilities

 

		2024	2023
		USD '000	USD '000
As at 1 April		-	-
Additions		352	-
Lease interest		29	-
Payments		(87)	-
As at 31 March		294	-
Current		94	-
Non-current		200	-
		294	-

 

Lease payments are included within cash flows from operating activities in the statement of cash flows. Refer to Note 24 for more information on maturity analysis of lease liabilities.

 

17 SHARE CAPITAL AND RESERVES

Issued share capital

 

		Number of Ordinary and Incentive shares	Amount USD '000
As at 31 March 2023		69,724,006	1,080
As at 31 March 2024		71,667,814	1,104

 

The Company has 71,617,814 (2023: 69,674,006) ordinary shares and 50,000 (2023: 50,000) incentive shares in issue.

 

Issued share capital represents the number of shares in issue at their nominal value (GBP 0.01). The holders of Ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. The holders of Incentive shares have no rights to vote or receive dividends.

 

On 1 June 2023, the Company issued 890,133 newly authorised shares to directors at a subscription price of a range between GBP 0.1000 and GBP 0.1180 in compensation for elements of remuneration foregone in respect of the period 1 August 2022 to 30 April 2023.

 

On 1 November 2023, the Company issued a further 1,053,675 newly authorised shares to directors at a subscription price of GBP 0.1125 in compensation for elements of remuneration foregone in respect of the period 1 May 2023 to 31 October 2023.

 

Share premium

Share premium represents the amount over the par value which was received by the Group upon the sale of the ordinary shares.

 

Share based payment reserve

The share based payment reserve is built up of charges in relation to equity settled share based payment arrangements which have been recognised within the consolidated statement of profit and loss.

 

Retained earnings

The movement in retained earnings is as set out in the consolidated statement of changes in equity. Retained earnings represent cumulative profits or losses, net of dividends and other adjustments.

 

18 EMPLOYEE BENEFITS

 

Performance share plan

A Performance Share Plan is in place for the Executive Directors and other senior managers. In accordance with the scheme rules options are exercisable at the nominal value of the shares at the date of the grant once all vesting conditions have been met. Options are settled in equity and vest after three years from the date of grant and expire after ten years.

 

			2024	2023
			Number of options	Number of options
Outstanding at the beginning of the year			5,616,383	4,604,792
Granted			2,368,421	1,946,207
Exercised			-	-
Forfeited			(2,546,819)	(934,616)
Outstanding at the end of the year			5,437,984	5,616,383
Exercisable at the end of the year			-	-

 

The weighted average remaining contractual life of all outstanding Performance Share Plan options is 326 days (2023: 428 days).

 

The fair value of services received in return for share options are measured by reference to the fair value of share options granted, measured using the Black-Scholes and Monte Carlo option pricing models. The balance is adjusted each year in accordance with the number of awards expected to vest.

 

The grants made during the year were as follows:

 

				October 2023
Valuation model				Monte-Carlo
Weighted average share price (GBP)				0.0100
Exercise price (GBP)				0.9500
Expected dividend yield				0%
Expected volatility				26.0%
Risk-free interest rate				4.3%
Expected term (years) - vesting period				3.0
Weighted average fair value (GBP)				0.2400

 

During the year a credit of $147K (2023: $212K charge) has been included within the statement of profit and loss in relation to the above options.

 

Enterprise management incentive plan

The Group has a share option plan that entitles all employees to purchase shares in the Company. During the year to 31 March 2024 grants under the plan were made. In accordance with the scheme rules options are exercisable at the market price of the shares at the date of the grant once all vesting conditions have been met. Options vest after three years from the date of grant and expire after ten years. Options are settled by the issue of new shares.

 

			2024	2023
			Number of options	Number of options
Outstanding at the beginning of the year			170,000	234,500
Granted			-	170,000
Exercised			-	-
Forfeited			(130,000)	(234,500)
Outstanding at the end of the year			40,000	170,000
Exercisable at the end of the year			-	-

 

The weighted average remaining contractual life of all outstanding share options is 461 days (2023: 505 days).

 

The fair value of services received in return for share options are measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on the Black-Scholes model and expectations of early exercise are incorporated into this model.

 

There were no grants made during the year (2023: 170,000 share options).

 

During the year no charge (2023: $13K) has been included within the statement of profit and loss in relation to the above options.

 

19 RELATED PARTY DISCLOSURES

 

Key management personnel

Full details of the Directors' remuneration and interests are set out in the Remuneration Committee report. Directors' interests in the ordinary shares of the Group are included in the Remuneration Committee report.

 

Included within the accounts are transactions of $3.8K with DWA Consultants (FZCO) for consultancy services provided by David MacNeill, who is also a director of the company. These services were provided prior to David MacNeill becoming a Director of Enteq Technologies PLC. The amount remains unpaid as at the year end.

 

Entity with significant influence over the Group

There are no entities with significant influence over the Group.

 

20 DISCONTINUED OPERATIONS

 

On 11 April 2023, the XXT intellectual property (previously amortised over time to a book value of nil) and associated product lines and trademark, together with selected technology agreements, customer account receivable balances and inventory were sold for a consideration of $3.2 million, made up of an upfront payment of $1.9 million and a deferred consideration of $1.3 million of which $0.5 million was outstanding at 31 March 2024 (Note 22).

 

The business relating to the XXT was reclassified as a discontinued operation as at 31 March 2023 and the associated assets were classified as held for sale. The remaining deferred consideration at year end is disclosed under Note 22.

 

		2024	2023
		USD '000	USD '000
Revenue		49	6,245
Gain on sale		941	-
Cost of sales		-	(4,777)
Administrative expenses		-	(1,984)
Amortisation		-	(408)
Other exceptional items		-	(522)
Profit/(loss) from discontinued operations		990	(1,446)

 

21 ASSETS HELD FOR SALE

 

The following assets, in relation to the discontinued operations (Note 20), have been classified as held for sale:

 

		2024	2023
		USD '000	USD '000
Accounts receivable		-	1,452
Inventory held for resale		-	732
		-	2,184

 

There was no liability directly associated with asset held for sale.

 

22 DEFERRED CONSIDERATION RECEIVABLE

 

The following amounts, in relation to the discontinued operations (Note 20), are classified as deferred receivable. This balance has been fully settled following the year-end, in May 2024.

 

		2024	2023
		USD '000	USD '000
Deferred receivable		467	-

 

23 SUBSEQUENT EVENTS

 

Post year end, in May 2024, the Group received the final consideration of $0.5 million (Note 22) in relation to the sale of the XXT intellectual property and assets. There were no other adjusting or non-adjusting events that occurred after the year end date and up to the date of signing the financial statements.

 

24 FINANCIAL INSTRUMENTS

 

Exposure to credit, interest rate, and currency and liquidity risk arises in the normal course of the Group's business. The Group's overall strategy to minimise this risk is discussed below.

 

Objectives, policies and procedures

 

Treasury operations are conducted within a framework of policies and guidelines authorised by the Board and are subject to internal control procedures. The objectives of the framework are to provide flexibility whilst minimising risk and prohibiting speculative transactions or positions to be taken.

 

The Group's principal financial instruments comprise cash and lines of bank credit. The main purpose of these financial instruments is to raise finance for the Group's operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

 

The main risks arising from the Group's financial instruments are credit, interest rate, and currency and liquidity risks. The Board reviews and agrees policies for managing these risks and they are summarised below.

 

Credit risk

 

Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The group is exposed to credit risk from financial assets including cash and cash equivalents held at banks, trade and other receivables.

 

Credit risk management

 

The credit risk is managed on a group basis based on the Group's credit risk management policies and procedures. The credit risk in respect of cash balances held with banks and deposits with banks are managed via diversification of bank deposits, and are only with major reputable financial institutions.

 

The Group continuously monitors the credit quality of customers based on a credit rating scorecard. Where available, external credit ratings and/or reports on customers are obtained and used. The group's policy is to deal only with credit worthy counterparties. The credit terms range between 30 and 90 days. The credit terms for customers as negotiated with customers are subject to an internal approval process which considers the credit rating scorecard. The ongoing credit risk is managed through regular review of ageing analysis, together with credit limits per customer.

 

Trade receivables consist of a large number of customers in various industries and geographical areas.

 

Security

 

The Group does not hold any security on the trade receivables balance. In addition, the group does not hold collateral relating to other financial assets (e.g. derivative assets, cash and cash equivalents held with banks).

 

Trade receivables

 

The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing component. As the Group has so few customers with significant outstanding receivable balances the expected credit losses can be assessed on an individual customer by customer basis.

 

The expected loss rates are based on the payment profile for sales over the past 48 months before 31 March 2022 and 1 April respectively as well as the corresponding historical credit losses during that period. The historical rates are adjusted to reflect current and forwarding looking macroeconomic factors affecting the customer's ability to settle the amount outstanding. On this basis the expected loss associated with the outstanding unprovided trade debtor balances for is not material.

 

Trade receivables are written off when there is no reasonable expectation of recovery. Failure to make payments within 180 days from the invoice date and failure to engage with the Group on alternative payment arrangement amongst other is considered indicators of no reasonable expectation of recovery.

 

Interest rate risk

 

The Group's exposure to risk for changes in market interest rates relates primarily to the Group's cash and cash equivalents. The Group minimises that risk by using a series of short-term interest rate fixes.

 

Foreign currency risk

 

The Group is exposed to foreign currency risk on cash balances denominated in GBP, as its reporting currency is USD. The amount of currency held in GBP is reviewed on a regular basis, together with the cash flows denominated in GBP, to ensure that this risk is minimised.

 

The Group's funding strategy is to ensure that the business has sufficient resources to meet its various financial commitments on an on-going basis. It achieves this objective by actively monitoring its forecast cash flows and requirements. The Group is cautious in its approach, applying appropriate sensitivities to both the quantum and timing of its projections.

A 1.0% increase in the GBP/USD foreign exchange rate, on the GBP denominated year end cash balances, would result in a foreign exchange loss of $1.0 thousand.

 

Liquidity risk

 

The Group manages its liquidity risk by ensuring that the balances of cash on deposit gives it sufficient access to liquid funds to meet both its immediate and longer-term needs. In addition, the Group regularly reviews the access to commercial bank lines of credit.

 

Capital management

 

The primary objective of the Group's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its current business, and allow it to take advantage of development opportunities when they arise therefore allowing the Group to maximise Shareholder value at all times.

 

The Group manages its capital structure, primarily Shareholders' equity, and makes adjustments to it, in light of changes in economic conditions and development opportunities. To maintain or adjust the capital structure, the Group may adjust the dividend payment to Shareholders, return capital to Shareholders or issue new shares. The Group's ordinary shares are quoted on the AIM market of the London Stock Exchange. This affords it access to investors which seek access to growth opportunities of the sort which the Group is targeting to acquire.

 

Debt is not employed in the Group at present and the limited working capital requirements are currently financed out of cash reserves.   Details of the current equity structure can be seen on the Consolidated Statement of Financial Position. There are no capital requirements that are externally imposed.

 

No changes were made in the objectives, policies or processes during the year ending 31 March 2024.

 

Trade and other receivables/payables

 

The Directors consider that the carrying amount of these balances approximates to their fair value. The only allowances maintained by the Company for credit losses relate to allowances for bad and doubtful debts relating to trade receivables.

 

Categories of financial instruments

 

Financial liabilities and assets included in the Statement of Financial Position relate to the following IFRS 9 categories:

 

		Financial assets and liabilities at amortised cost	Non-financial assets and liabilities	Total
		USD '000	USD '000	USD '000
2024
Assets
Trade and other receivables		210	165	375
Cash and cash equivalents		2,989	-	2,989
Deferred consideration		467	-	467
		3,666	165	3,831
Liabilities
Trade and other payables		(1,444)	-	(1,444)
Lease liabilities		(294)	-	(294)
		(1,738)	-	(1,738)
		1,928	165	2,093

 

		Financial assets and liabilities at amortised cost	Non-financial assets and liabilities	Total
		USD '000	USD '000	USD '000
2023
Assets
Trade and other receivables		165	72	237
Cash and cash equivalents		5,351	-	5,351
Assets held for sale		2,184	-	2,184
		7,700	72	7,772
Liabilities
Trade and other payables		(1,123)	(120)	(1,243)
		6,577	(48)	6,529

 

The Directors are of the opinion that there is no material difference between the book value and the fair value of any of the Group's assets or liabilities. The contractual maturity of all financial liabilities are as follows:

 

		Less than 6 months	6 to 12 months	More than 12 months
		USD '000	USD '000	USD '000
2024
Trade and other payables		1,444	-	-
Lease liabilities		45	49	200
		1,489	49	200
2023
Trade and other payables		1,243	-	-