REG - Enteq Technologies - Final Results
21/08/2024 07:00
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RNS Number : 1688B Enteq Technologies PLC 21 August 2024
Enteq Technologies plc
("Enteq" or the "Company")
Final Results
Enteq Technologies plc (AIM: NTQ.L), the specialist energy services
engineering and technology company, today announces its audited final results
for the year ended 31 March 2024.
Key features
· Successful proof of SABER during a series of downhole drilling trials
in the United States. Post year end currently in customer field testing in an
operational environment.
· Filed additional patents covering the key operating regions with one
new patent granted in United Kingdom and more pending.
· Third-party IP valuation completed giving confidence in potential.
· Strategic sale of the XXT intellectual property and assets for $3.1
million, completed on time and as planned, during the year ended 31 March 2024
with the final payment received post year-end.
· Increased customer engagement, focused on the key international
operating regions.
· SABER fleet build underway, with initial units deployed to a customer
location and more under construction.
· Centralised technology development and engineering in a new leased
facility in Houston, United States.
· Continued investment in the SABER project of $1.8 million (2023: $2.6
million) and a further $0.4 million (2023: nil) of fleet build expenditure.
· Closing cash balance of $3.0 million (2023: $5.4 million).
Financial metrics
2024 2023
Units Continuing operations Discontinued operations Continuing operations Discontinued operations
Revenue USD million - - - 6.2
Gross profit margin % - - - 23.5%
Underlying overheads * USD million (3.2) - (1.7) (1.6)
EBITDA USD million (3.2) 1.0 (1.7) (0.2)
Profit/(loss) after taxation ** USD million (3.1) 1.0 (1.4) (1.4)
Profit/(loss) after taxation per share US cents (4.4) 1.4 (2.0) (2.0)
Cash and cash equivalents USD million 3.0 - 5.4 -
Investments in fleet build USD million 0.4 - - -
Investments in engineering projects USD million 1.8 - 2.6 -
* Prior to any intercompany interest charges
** All central costs have been allocated to continued operations
Outlook
During the year ending 31 March 2025 the Group expects:
· Robust market for Directional Drilling.
· Demand for more efficient competition.
· Full commercialisation of SABER.
· Regional partnerships to maximise deployment of SABER.
The 2024 information set out herein has been extracted from the audited annual
report and accounts for the year ended 31 March 2024. The Group is dependent
on its ability to fund operations going forward, which is dependent on the
underlying valuation of its key assets relating to the SABER tool and the
ability to realise value from these assets in the future. 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. Cash and cash
equivalents at 31 March 2024 were $3.0 million (audited) and at 31 July 2024
were $1.8 million (unaudited).
Andrew Law, CEO of Enteq Technologies plc, commented:
"With a fundamentally robust energy market, we expect to see strong demand in
the industry for new competition, notably in the RSS sector of drilling. As
such, we have been making progress towards securing customer agreements to
cover the key regions around the world.
With the technology now having been proven in trials including full
operational test environments, we look forward to successful conclusion of the
current customer test, and then on to commercial/revenue generating activity
commencing shortly.
The Company looks forward to fully introducing this potentially disruptive
technology into the market. The focus of commercialisation of SABER is through
deployment with new and existing customers in the key regions."
For further information, please contact:
Enteq Technologies
plc
+44 (0)20 8087 2202
www.enteq.com (http://www.enteq.com/)
Andrew Law, Chief Executive Officer
Cavendish Capital Markets Limited (NOMAD and Broker) +44 (0)20
7220 0500
Ed Frisby, George Lawson (Corporate Finance)
Andrew Burdis (ECM)
The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.
COMBINED CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S STATEMENT
Introduction
Enteq Technologies PLC ("Enteq" or "the Company" or "the Group") has a track
record of developing and commercialising technologies for the oil, gas,
geothermal and other energy transition sectors around the world. The primary
focus for the Group is the commercialisation of SABER (Steer-At-Bit Enteq
Rotary), a novel alternative to existing Rotary Steerable Systems ("RSS")
which steer the bit during the drilling of a well.
The SABER tool is based on a concept for a RSS, originally developed by Shell,
as an alternative, simpler solution to the conventional mechanically complex
incumbent RSS systems requiring pads or pistons to create steering forces. The
SABER tool reduces the mechanical complexity by using an internally directed
fluid pressure differential system. The SABER tool achieves true at-bit
steering for the first time in the industry and the simplified design gives
the potential to improve efficiencies, reliability and project uptime compared
to conventional RSS solutions.
The Group has licence agreements in place with subsidiaries of Shell which
gives Enteq the global rights for this novel technology and IP. Enteq has
developed and refined the concept for commercial use, with Enteq generating
additional protected IP. Following successful field testing, the SABER tool is
now in customer trials prior to commercial deployment.
The global RSS market is worth approximately $3.6 billion annually and is a
sub-set of the broader directional drilling market, worth $11.8 billion
annually, according to a recent 2023 report from Spears ((1)). The SABER tool
has the potential to drive operational efficiency across the world's
directional drilling applications, including hydrocarbon production,
geothermal energy, methane capture and CCS (carbon capture and storage). The
Group will provide the SABER tool to customers through a service arrangement
or equipment purchase, providing independent and regional directional drilling
companies more opportunity to compete with major integrated service companies
which have to date dominated this segment.
The Group's centre of product development and technical support has moved to a
newly rented facility in Houston, United States, closer to vendors and
customers, with the Board based in the United Kingdom and the United Arab
Emirates. Additional international business is supported through a network of
experienced third party sales team representatives.
((1)) Source: Spears and Associates, Directional Drilling Report, Q2 2023
Strategic sale of XXT
The sale of XXT, a Measurement While Drilling ("MWD") technology was the
outcome from a strategic review deciding to focus the business primarily on
the development and commercial deployment of SABER. The RSS market has a
significantly larger addressable market size and will offer greater
competitive differentiation and potential margin generation.
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 cash consideration of $3.1 million, with the final payment received
in May 2024, successfully completing the sale.
Review of the year
The financial year ended 31 March 2024 was focused on demonstrating that
Enteq's SABER tool could operate and steer effectively, which was successfully
concluded. This provided further proof-points for this fundamental concept,
building on the previous testing by Shell which also proved that this novel
concept works. In addition, efforts during the year were focused on building
customer demand and positioning the Group for the commercialisation of SABER
in this current year.
The SABER tool was successfully proven by Enteq in two separate series of
downhole drilling tests in a real drilling environment in the United States,
where the concept demonstrated that the system does steer effectively under
operational conditions. This builds on the previous proof of principle testing
completed by Shell and by Enteq in Norway.
To build and prove customer demand, the Group has increased the level of
engagement with customers, with customers attending drilling tests, and the
Group sharing results of the successful testing. Enteq has determined that the
technical performance of SABER can deliver a commercially viable tool to
address the needs of customers around the world.
To prepare for commercialisation the Group has centralised the technical,
operations and engineering team in Houston, United States and has benefitted
from bringing the engineering in-house to lock-down the design of the
commercial tool, initiating the fleet-build and engaging with potential
customers and distribution partners. Additional IP has been filed and granted,
with a United Kingdom patent granted to Enteq in August 2023.
Following the significant overhead reductions made in recent years, the
underlying overheads have remained steady in comparison to the previous year.
The year's financial results are fully explained in the Financial and Market
Review.
The Enteq Team
There were a total of 11 employees at the end of the year, down from the 13 at
the previous year-end, following the sale of XXT. The Board would like to
recognise the on-going loyalty, dedication and support of the team, both the
Group's employees and the team of trusted consultants, suppliers and partners,
as Enteq continues to develop this exciting technology and introduces it to
the market.
Reporting and performance indicators
The following Key Performance Indicators, unchanged from the previous year,
are used. These are reported to senior management who review, initiate action
where required and follow-up.
Financial:
· Revenue, gross profit margin, EBITDA and capital expenditure
(financial metrics are explained in the Financial and Market Review).
Other performance measures:
· Progression of technology development; and
· Headcount and number of reportable Health and Safety Executive
("HSE") incidents.
Key market indicators regularly monitored by management and the Board of
Directors include: Global Rig Count, North American Rig Count, Oil Prices
(both West Texas Intermediate and Brent) and the Henry Hub Natural Gas
Price.
Governance
Enteq is committed to maintaining high standards of Corporate Governance and
has adopted the Quoted Company Alliance Code of Corporate Governance.
Section 172 statement
Section 172 of The Companies Act 2006 states that a director of a company must
act in the way it considers, in good faith, would be most likely to promote
the success of the company for the benefit of its members as a whole. In doing
so a director of a company must have regard (amongst other matters) to:
(a) The likely consequences of any decision in the long term;
(b) The interests of the company's employees;
(c) The need to foster the company's business relationships with suppliers,
customers and others;
(d) The impact of the company's operations on the community and the
environment;
(e) The desirability of the company maintaining a reputation for high
standards of business conduct; and
(f) The need to act fairly as between members of the company.
The Board reviewed their current approach to corporate governance and decision
making, engagement with stakeholders and the Group's impact on the
environment. The following summarises how the Board fulfils its duties under
Section 172.
Decision making
The Board ensures that strategic initiatives feed directly into one or more of
the following fundamental ambitions - to be simple to do business with; to be
at all times customer oriented and inspire trust; and to achieve operational
excellence; as well as agility, speed and innovation. The Board review and
consider the various stakeholders when arriving at recommended business
decisions consistent with the strategy. The Group strategy aims to be
competitive, flexible and resilient while also responding to a rapidly
changing market situation. All decisions are reviewed at each Board meeting
and specifically at the annual Strategic Review. Examples of Board decision
making during this reporting period include:
· Reviewing the SABER commercial and technical progress;
· Reviewing the Group's operational structure to ensure the
organisational model remains fit for the future; this included the
streamlining of staff numbers and re-allocation of responsibilities;
· Reviewing of the skill set within the SABER team to maximise the
chances of successfully introducing this new product line; and
· Reviewing the Group's long-term strategic objectives. The progress
made during the year and principal risks to these objectives have been
addressed both in the Strategic Report and the Review of Principal Risks and
Uncertainties.
Employee engagement
The Board recognises that the staff are the most valuable asset in the
business. The Group strives to invest in training, coaching, and skills
acquisition, appropriate to the size of the Group and the team. Personal
development of employees remains a key pillar of the Group's strategy. The
Board aim to be a responsible employer in the approach to the pay and benefits
of employees. Furthermore, the health, safety and wellbeing of the staff is
one of the primary considerations in the way the Group does business.
Examples of the Board's engagement with employees this reporting period
include:
· Holding staff briefings on both the full year and interim results;
· Requesting that all employees participate in the monthly health and
safety meetings; and
· Reviewing the output of each of these meetings at Board meetings.
Business relationships
The Board engages with a variety of stakeholders, including shareholders,
customers, and suppliers, to inform and enable balanced decisions that
incorporate multiple viewpoints, whilst maintaining the Group's strategy. In
making decisions the Board considers outcomes from engagements with
stakeholders as well as the importance of maintaining the Group's integrity,
brand and reputation.
Examples of the Board's engagement with stakeholders during the reporting
period include:
· Receiving regular customer service performance updates and feedback
from potential customers to assist in decision making regarding new customer
focused initiatives;
· Working with both suppliers and potential customers to assist where
these stakeholders may be experiencing cashflow difficulties due to prevailing
market conditions; and
· Holding regular meetings with shareholders to explain both the full
year and interim results to assist investors to understand the strategic
direction of the Company.
Environment and stakeholders
Sustainability is an increasing focus within all the Group's activities. The
Board recognises the relevance of leading the Group in such a way that it
contributes to its stakeholders and the wider society. The Group has recently
committed to Net Zero on the SME Climate Hub programme and is a member of the
Global Methane Initiative.
Culture and values
The Group's culture is characterised by clear responsibility, mutual respect
and trust. Lawful conduct and fair competition are integral to its business
activities and an important condition for maintaining a reputation for high
standards of business conduct in order to secure long term success. The Group
is focused on people, with both customers and employees being at the heart of
its business. The Group embraces diversity, flexibility, sustainability and
continuous improvement throughout the organisation. The Group has a customer
centric philosophy with transparent, fair and simple processes. The Board and
senior management have taken active steps to drive cultural change and to
ensure corporate strategy and customer orientation principles and values are
embraced across the organisation.
Prospects
With a fundamentally robust energy market, the demand for efficient
directional drilling technologies continues to increase, alongside a strong
demand in the industry for competition, notably in the RSS market.
Building on the foundation of successful proof-of-concept trials in July 2023
and February 2024, Enteq's SABER technology is in customer testing in an
operational environment with units currently in Australia with a long-standing
customer. Additional customer agreements are currently being pursued covering
the key regions.
The Board is confident of progressing with the commercialisation of the SABER
tool and looks forward to fully introducing this potentially disruptive
technology into the market. The focus is on the commercialisation of SABER
through increasing the number of available tools and future deployment with
new and existing customers in the key regions. This technology has the
potential of producing attractive financial returns and a significant upside
in shareholder value.
FINANCIAL AND MARKET REVIEW
Market review
There is a significant potential addressable market for the SABER Tool, which
is an RSS technology within the Directional Drilling market. RSS captures
$3.6 billion of the $11.8 billion Directional Drilling annual global spend.
The RSS market for onshore United States and Canada is estimated at $1 billion
per year((1)), and independent Directional Drilling companies provide the
majority of onshore drilling services (versus multinational companies)((2)).
The international onshore market for RSS (excluding North America) is
estimated at $1 billion per year((3)).
The top three major multinational service companies currently generate
approximately 60% of the global Directional Drilling market through
proprietary technologies((1)). Independent Directional Drilling and regional
service companies need access to third party technologies (such as SABER) to
compete.
((1)) Source: Spears and Associates, Directional Drilling Report, Q2 2023
((2)) Kimberlite Report IADD forum
((3)) Management estimate
Statement of profit and loss
This is a pro-forma statement of profit and loss which differs in presentation
to the statutory format.
2024 2023
Continuing operations Discontinued operations Continuing operations Discontinued operations
USD million USD million USD million USD million
Revenue - - - 6.2
Cost of sales - - - (4.8)
Gross profit - - - 1.4
Overheads (3.2) - (1.7) (1.6)
Gain on sale - 1.0 - -
EBITDA (3.2) 1.0 (1.7) (0.2)
Depreciation, depletion and amortisation (0.1) - - (1.2)
Operating (loss)/profit (3.3) 1.0 (1.7) (1.4)
Interest 0.2 - - -
Profit/(loss) before taxation (3.1) 1.0 (1.7) (1.4)
Taxation - - 0.3 -
Profit/(loss) after taxation (3.1) 1.0 (1.4) (1.4)
Total underlying overheads were $3.2 million for the financial year (2023:
$3.3 million). Following the sale of XXT, the Group incurred additional
one-off overheads such as centralising the technology development and
engineering in a new leased facility in Houston, in an effort to streamline
business costs, focus on the ongoing development and testing of SABER and
commence commercialisation efforts. An impairment charge on right of use
assets of $0.1 million (2023: nil) is included in overheads as a result of
this restructure.
The gain on sale in 2024 shown above includes the gain on sale of the XXT
business and the final minor revenues from the sale of discontinued MWD stock.
Statement of financial position
This is a pro-forma statement of financial position which is different in
presentation to the statutory format.
The Group's net assets at the financial year-end comprised of the following
items:
2024 2023
USD million USD million
Intangible assets 8.3 6.4
Property, plant and equipment 0.5 0.1
Net working capital (1.1) (1.0)
Cash and cash equivalents 3.0 5.4
Deferred consideration 0.5 -
Assets held for sale - 2.2
Right-of-use assets 0.2 -
Lease liabilities (0.3) -
Net assets 11.1 13.1
Both the closing balance and the increase in the year in the intangible assets
relate to the on-going spend on the SABER rotary steerable system.
The increase in net book value of property, plant and equipment is primarily
due to additions in assets under construction relating to SABER tool build.
Cash flows
This is a pro-forma statement of cash flows which is different in presentation
to the statutory format.
Overall, the Group saw a net cash outflow of $2.4 million (2023: net cash
inflow of $2.1 million). The major elements of the non-operational cash flow
relates to the on-going investment activities in engineering projects,
primarily the SABER tool.
2024 2023
USD million USD million
Opening cash and cash equivalents 5.4 3.3
Operating cash flows (3.0) 0.9
Investing cash flows 0.6 1.1
Net cash (out)/in flow (2.4) 2.1
Closing cash and cash equivalents 3.0 5.4
Financial capital management
The Group had no bank borrowings, or other debt, and had a closing cash
position of $3.0 million at year-end (2023: $5.4 million).
The Group monitors its cash balances daily and operates under treasury
policies and procedures which are set by the Board.
The financial statements are presented in US dollars ("USD" or "$") as the
Group's primary economic environment, in which it operates and generates cash
flows. Apart from the United Kingdom based overhead costs which are transacted
in Pound sterling ("GBP"), substantially all other transactions are transacted
in USD.
The Group is subject to foreign exchange rate fluctuations to the extent that
it holds non-US dollar cash deposits. The year-end GBP denominated holdings
are approximately 3.0% of the total Group cash holdings (2023: 5.0%).
Annual Report and Annual General Meeting
The Company's Annual General Meeting will be held on 25 September 2024 at 11am
at the offices of Cavendish Capital Markets, 1 Bartholomew Close, London, EC1A
7BL. The Company's 2024 Annual Report and Accounts will be available on the
Company's website later today and will be posted to those shareholders who
have requested to receive copies.
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. United States of America Manufacture of down hole drilling equipment 100%
(registered office at 533 Rankin Road, Houston, TX 77073, United States of
America)
Enteq Upstream Limited England and Wales Dormant (dissolved 25 July 2023) 100%
(registered office at The Courtyard, 69 High Street, Ascot, SL5 7HP, United
Kingdom)
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 - 74
statements
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- Assets held for rental Land Buildings Other assets Total
ruction
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 More than 12 months
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 - -
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