Final Results

29th Jun 2009 15:26



Alecto Energy plc ("Alecto" or "the Company")

Final results for the year ended 31 December 2008

CHAIRMAN'S REPORT

Operational Review

The Company's main investment in the year under review was the acquisition in March 2008 of 100% of the issued share capital of Oreion Australia Energy Pty Ltd ("Oreion"), satisfied by the issue of 50,000,000 new shares in the Company. The Company's objective was that, by virtue of the Commercialisation Agreements in place with CSIRO, Oreion would become a leading enabler of fuel cell technology, generating revenues through the sublicensing of the PEM Technology for the development, manufacture and sale of fuel cell test stations and PEM electrolysers, and subsequently through the technology development of direct hydrogen micro fuel cell products and the licensing of related fuel cell technology. In the second half of the year, the Group actively sought either a partner or additional funding to continue to develop the PEM Technology. 

In order to ensure Oreion's involvement in the continued development of the PEM Technology, Alecto would have been obligated to contribute approximately AUD$70,000 per month to the research and technology expenditure in order to comply with the terms of the Commercialisation Agreements.

After much time and effort spent trying to secure appropriate funding for the PEM Technology and Oreion, the Board of Directors made the difficult decision to terminate the agreements with CSIRO in relation to the development and commercialisation of the PEM Technology and associated products. The Board believed that conserving the remaining cash was in the best interests of the Company. 

The Company has started 2009 on a fresh page. We are continuing to pursue additional new investment opportunities in line with the investment strategy and are currently reviewing other potential projects. The investments may be either quoted or unquoted and may be in companies, partnerships, joint ventures or direct interests in energy projects. The Directors intend to undertake initial assessments and due diligence on potential investments themselves and will take appropriate professional advice if merited by the circumstances.

Financial Review

The loss for the year ended 31 December 2008 was £2,282,168. Included in this loss is the impairment of goodwill on the acquisition of Oreion of £1,920,371. The finance facility and other loans made by Alecto to Oreion have been fully provided for at the year end. These facilities totalled £1.6 million as at 31 December 2008. During the year the Company incurred costs on behalf of Oreion Energy Australia Pty Ltd for research & development, technical, commercialisation and legal costs totalling £294,132 (31 December 2007 : £938,564).

The Board remains confident that an appropriate transaction and the associated funding can be achieved and is committed to achieving the required outcome.

We appreciate that this is frustrating for shareholders and acknowledge the patience that has been afforded to the Group and the Board, and again reiterate our commitment to identify and acquire a new project or projects in line with the Company's investing policy.

Martin Thomas

Chairman

29 June 2009

  

BALANCE SHEETS

As at 31 December 2008

		Group		Company
	Note	2008 £		2008 £	2007 £
Non-Current Assets
Property, plant and equipment	6	292		292	1,894
Intangible assets	7	-		-	-
Investment in subsidiaries	8	-		-	-
Other receivables	9	-		-	-
		292		292	1,894
Current Assets
Trade and other receivables	9	21,435		20,418	1,561,328
Cash and cash equivalents	10	276,145		273,132	895,544
		297,580		293,550	2,456,872
Total Assets		297,872		293,842	2,458,766
Current Liabilities
Trade and other payables	12	102,465		102,465	368,377
Total Liabilities		102,465		102,465	368,377
Net Assets		195,407		191,377	2,090,389
Capital and Reserves Attributable to Equity Holders of the Company
Called up share capital	11	196,146		196,146	161,146
Share premium account		2,755,170		2,755,170	2,755,170
Merger reserve		-		405,000	-
Other reserves		175,707		175,707	175,707
Foreign currency translation reserve		(52,814)		-	-
Retained losses		(2,878,802)		(3,340,646)	(1,001,634)
Total Equity		195,407		191,377	2,090,389

The Financial Statements were approved and authorised for issue by the Board of Directors on 29 June 2009 and were signed on its behalf by:

Toby Howell

Non-Executive Director

  GROUP INCOME STATEMENT

For the year ended 31 December 2008

				Group
				Continuing Operations	Discontinuing Operations	Total
			Note	2008 £	2008 £	2008 £
Administration expenses				(226,017)	(36,179)	(262,196)
Other expenses				-	(282,960)	(282,960)
Other income			5	-	137,350	137,350
Other gains - net			13	-	39,690	39,690
Operating Loss			4	(226,017)	(142,099)	(368,116)
Impairment of goodwill			7	-	(1,920,371)	(1,920,371)
Finance income			16	13,566	-	13,566
Finance costs			16	-	(7,247)	(7,247)
Loss Before Taxation				(212,451)	(2,069,717)	(2,282,168)
Corporation tax expense			17	-	-	-
Loss for the Period				(212,451)	(2,069,717)	(2,282,168)
Attributable to Equity Holders				(212,451)	(2,069,717)	(2,282,168)
Loss per share attributable to the equity holders of the Company:
Basic and diluted			18	(0.08) pence	(0.77) pence	(0.85) pence

 

Discontinuing Operations relate to the operations of Oreion Australia Energy Pty Ltd and any costs incurred by the Company relating to the CSIRO agreement (see note 22).

The loss for the Company for the year was £2,339,012 (31 December 2007 : £775,952).

No comparative information is presented for the Group for the year ended 31 December 2007 as the Group was not in existence at that date. The basic loss per share for the Company for the year ended 31 December 2007 was (0.34) pence. The Company has elected to take the exemption under Section 230 of the Companies Act 1985 from presenting the Parent Company Income Statement.

  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the year ended 31 December 2008

Group (£)	Share capital	Share Premium	Merger Reserve	Share option reserve	Translation reserve	Profit and loss account	Total equity
As at 1 January 2008	161,146	2,755,170	-	175,707	-	(1,001,634)	2,090,389
Share capital issued	35,000	-	405,000	-	-	-	440,000
Foreign currency	-	-	-	-	(52,814)	-	(52,814)
Loss for the year	-	-	-	-	-	(2,282,168)	(2,282,168)
Transfer of Goodwill Impairment to Reserve	-	-	(405,000)	-	-	405,000	-
As at 31 December 2008	196,146	2,755,170	-	175,707	(52,814)	(2,878,802)	195,407

The Statement of Changes in Shareholders' Equity for the Group shows the Company figures as at the beginning of the year plus the acquisition which created the Group for which the consolidated Financial Statements have been prepared.

Company (£)	Share capital	Share Premium	Merger Reserve	Share option reserve	Profit and loss account	Total equity
As at 1 January 2007	161,146	2,755,170	-	175,707	(225,682)	2,866,341
Loss for the year	-	-	-	-	(775,952)	(775,952)
As at 31 December 2007	161,146	2,755,170	-	175,707	(1,001,634)	2,090,389
Share capital issued	35,000	-	405,000	-	-	440,000
Loss for the year	-	-	-	-	(2,339,012)	(2,339,012)
As at 31 December 2008	196,146	2,755,170	405,000	175,707	(3,340,646)	191,377

The Company has taken advantage of the merger relief provisions available under section 131 of the Companies Act 1985 and the resultant merger reserve has been applied in the consolidated Financial Statements to write off part of the goodwill arising on the acquisition of Oreion Australia Energy Pty Ltd.

  GROUP CASH FLOW STATEMENT

For the year ended 31 December 2008

		Group
		Continuing Operations	Discontinuing Operations	Total
	Note	2008 £	2008 £	2008 £
Cash flows from operating activities
Operating loss		(226,017)	(142,099)	(368,116)
Adjustments for:
Depreciation		1,235	-	1,235
Profit from disposal of property, plant and equipment		(287)	-	(287)
Decrease/(increase) in prepayments		8,841	(806)	8,035
Decrease/(increase) in VAT receivable		181,200	(212)	180,988
Decrease in creditors		(7,853)	(191,709)	(199,562)
Decrease in accruals		(85,218)	-	(85,218)
Foreign exchange gain		-	(39,690)	(39,690)
Funding of discontinued operations		(2,111,331)	2,111,331	-
Net cash used in operations		(2,239,430)	1,736,815	(502,615)
Cash flows from investing activities
PEM commercialisation costs		-	(145,609)	(145,609)
Proceeds from sale of computer equipment		500	-	500
Interest paid		(7,247)	-	(7,247)
Interest received		13,566	-	13,566
Net cash generated/used in investing activities		6,819	(145,609)	(138,790)
Net decrease in cash and cash equivalents		(2,232,611)	1,591,206	(641,405)
Cash acquired on acquisition of subsidiary	19	-	22,006	22,006
Cash and cash equivalents at beginning of period		2,505,743	(1,610,199)	895,544
Cash and cash equivalents at end of period	10	273,132	3,013	276,145

  COMPANY CASH FLOW STATEMENT

For the year ended 31 December 2008

		Company
		Continuing Operations	Dis-continuing Operations	Total	Continuing Operations	Dis-continuing Operations	Total
	Note	2008 £	2008 £	2008 £	2007 £	2007 £	2007 £
Cash flows from operating activities
Operating loss		(226,017)	(34,313)	(260,330)	(257,422)	(604,100)	(861,522)
Adjustments for:
Depreciation		1,235	--	1,235	1,447	-	1,447
Profit from disposal of equipment		(287)	-	(287)	-	-	-
Decrease / (increase) in prepayments		8,841	-	8,841	(4,720)	-	(4,720)
Decrease / (increase) in VAT receivable		181,200	-	181,200	(162,529)	-	(162,529)
Increase in other receivables		-	(294,265)	(294,265)	-	(804,257)	(804,257)
(Decrease) / increase in creditors		(7,853)	(172,554)	(180,407)	28,341	171,237	199,578
(Decrease) / increase in accruals		(85,218)	-	(85,218)	-	22,829	22,829
Funding of discontinued operations		(2,111,331)	2,111,331
Net cash used in operations		(2,239,430)	1,610,199	(629,231)	(394,883)	(1,214,291)	(1,609,174)
Cash flows from investing activities
Loans granted		-	-	-	-	(395,908)	(395,908)
Interest received		13,566	-	13,566	69,174	-	69,174
Interest paid		(7,247)	-	(7,247)	-	-	-
Proceeds from sale of computer equipment		500	-	500	-	-	-
Net cash generated / (used) in investing activities		6,819	-	6,819	69,174	(395,908)	(326,734)
Net (decrease) / increase in cash and cash equivalents		(2,232,611)	1,610,199	(622,412)	(325,709)	(1,610,199)	(1,935,908)
Cash and cash equivalents at beginning of period		2,505,743	(1,610,199)	895,544	2,831,452	-	2,831,452
Cash and cash equivalents at end of period	10	273,132	-	273,132	2,505,743	(1,610,199)	895,544

Significant Non-Cash Transactions

The Company acquired Oreion Australia Energy Pty Ltd on 14 March 2008 through the issue of 50,000,000 new ordinary shares in the Company valued at 0.88 pence per share being the market price at the date of issue.

ACCOUNTING POLICIES

For the year ended 31 December 2008

Summary of Significant Accounting Policies

The principal Accounting Policies applied in the preparation of these Financial Statements are set out below. These Policies have been consistently applied to all the periods presented, unless otherwise stated.

a) Basis of Preparation of Financial Statements

The Financial Statements have been prepared in accordance with EU-endorsed International Financial Reporting Standards (IFRSs) and International Financial Reporting Interpretations Committee (IFRIC) interpretations and the parts of the Companies Act 1985 applicable to companies reporting under IFRS. The Financial Statements have also been prepared under the historical cost convention other than financial assets and financial liabilities at fair value through profit or loss.

The Financial Statements are presented in Pound Sterling rounded to the nearest pound.

Alecto Energy Plc, the legal parent, is domiciled and incorporated in the United Kingdom.

The consolidated result for the year includes the parent's loss for the year and the subsidiary's loss for the period 14 March 2008 to 31 December 2008 representing the post acquisition period.

The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's Accounting Policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements are disclosed in Note 2.

b) Standards and Interpretations in Issue but not yet effective or not yet endorsed 

IFRS 8 "Operating Segments" requires companies to adopt a management approach to reporting on their operating segments. This standard is effective for periods beginning on or after 1 January 2009 and is not expected to have an impact on the Group's Financial Statements.

A revised version of IAS 1 "Presentation of Financial Statements" will require information in financial statements to be aggregated on the basis of shared characteristics, and introduce a statement of comprehensive income. This standard is effective for periods beginning on or after 1 January 2009 and is not expected to have an impact on the Group's Financial Statements.

A revised version of IAS 23 "Borrowing Costs" removes the option of immediately recognising as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. This standard is effective for periods beginning on or after 1 January 2009 and is not expected to have an impact on the Group's Financial Statements. 

An amendment to IFRS 2 "Share-based Payment" clarifies that vesting conditions are service conditions and performance conditions only, and specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. This standard is effective for periods beginning on or after 1 January 2009 and is not expected to have an impact on the Group's Financial Statements.

A revised version of IFRS 3 "Business Combinations" and amendments to IAS 27 "Consolidated and Separate Financial Statements" ensure that the accounting for business combinations is the same whether an entity is applying IFRSs or US GAAP. These standards are effective for periods beginning on or after 1 January 2009 and are not expected to have an impact on the Group's Financial Statements.

Amendments to IFRS 1 "First-time Adoption of International Financial Reporting Standards" and IAS 27 "Consolidated and Separate Financial Statements" address concerns that retrospectively determining the cost of an investment in separate financial statements and applying the cost method in accordance with IAS 27 on first-time adoption of IFRS cannot, in some circumstances, be achieved without undue cost or effort. These standards are effective for periods beginning on or after 1 January 2009 and are not expected to have an impact on the Group's Financial Statements.

Amendments to IFRS 7 "Financial Instruments: Disclosures" require enhanced disclosures about fair value measurements and liquidity risk. This standard is effective for periods beginning on or after 1 January 2009, subject to EU endorsement, and is not expected to have an impact on the Group's Financial Statements.

Amendments to IAS 32 "Financial Instruments: Presentation" and IAS 1 "Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation" improve the accounting for particular types of financial instruments that have characteristics similar to ordinary shares but are at present classified as financial liabilities These standards are effective for periods beginning on or after 1 January 2009 and are not expected to have an impact on the Group's Financial Statements.

b) Standards and Interpretations in Issue but not yet effective or not yet endorsed (continued)

Amendments to IAS 39 "Financial Instruments: Recognition and Measurement" provide additional guidance on what can be designated as a hedged item. This standard is effective for periods beginning on or after 1 July 2009, subject to EU endorsement, and is not expected to have an impact on the Group's Financial Statements.

Amendments to IFRIC 9 "Reassessment of Embedded Derivatives" and IAS 39 "Financial Instruments: Recognition and Measurement" clarify the accounting treatment of embedded derivatives for entities that make use of the reclassification amendment issued by the IASB in October 2008. This standard is effective for periods ending on or after 30 June 2009, subject to EU endorsement, and is not expected to have an impact on the Group's Financial Statements.

IFRIC 12 "Service Concession Arrangements" addresses how service concession operators should apply existing IFRSs to account for the obligations they undertake and rights they receive in service concession arrangements. This standard is effective for periods beginning on or after 1 January 2009, subject to EU endorsement, and is not expected to have an impact on the Group's Financial Statements.

IFRIC 13 "Customer Loyalty Programmes" addresses accounting by entities that grant loyalty award credits to customers who buy goods or services. This standard is effective for periods beginning on or after 1 January 2009, subject to EU endorsement, and is not expected to have an impact on the Group's Financial Statements.

IFRIC 15 "Agreements for the Construction of Real Estate" provides guidance on how to determine whether an agreement for the construction of real estate is within the scope of IAS 11 Construction Contracts or IAS 18 Revenue and when revenue from the construction should be recognised. This standard is effective for periods beginning on or after 1 January 2009, subject to EU endorsement, and is not expected to have an impact on the Group's Financial Statements.

IFRIC 16 "Hedges of a Net Investment in a Foreign Operation" clarifies:

• whether risk arises from the foreign currency exposure to the functional currencies of the foreign operation and the parent entity, or from the foreign currency exposure to the functional currency of the foreign operation and the presentation currency of the parent entity's consolidated financial statements;

• which entity within a Group can hold a hedging instrument in a hedge of a net investment in a foreign operation, and in particular whether the parent entity holding the net investment in a foreign operation must also hold the hedging instrument;

• how an entity should determine the amounts to be reclassified from equity to profit or loss for both the hedging instrument and the hedged item when the entity disposes of the investment.

This standard is effective for periods beginning on or after 1 October 2008, subject to EU endorsement, and is not expected to have an impact on the Group's Financial Statements.

IFRIC 17 "Distributions of Non-cash Assets to Owners" standardises practice in the measurement of distributions of non cash assets to owners. This standard is effective for periods beginning on or after 1 July 2009, subject to EU endorsement, and is not expected to have an impact on the Group's Financial Statements.

IFRIC 18 "Transfers of Assets from Customers" clarifies the requirements of IFRS for agreements in which an entity receives from a customer an item of property, plant and equipment that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services (such as a supply of electricity, gas or water). This standard is effective for transfers of assets from customers received on or after 1 July 2009, subject to EU endorsement, and is not expected to have an impact on the Group's Financial Statements.

c) Basis of Consolidation

The Group Financial Statements consolidate the Financial Statements of Alecto Energy plc and the management accounts of all of its subsidiary undertakings made up to 31 December 2008.

Subsidiaries are entities over which the Group has control. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity.

The Company acquired the Oreion Australia Energy Pty Ltd on 14 March 2008 through the issue of 50,000,000 new ordinary shares in the Company valued at 0.88 pence per share being the market price at the date of issue.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired, and liabilities and contingent liabilities assumed, in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group. All significant intercompany transactions and balances between Group enterprises are eliminated on consolidation.

The goodwill recognised on acquisition of £1,920,371 has been fully provided for as at 31 December 2008.

d) Going Concern

The Financial Statements have been prepared on a going concern basis notwithstanding that the Group incurred a net loss of £2,282,168 during the year ended 31 December 2008 (Company loss for year ended 31 December 2008 : £2,339,012 (31 December 2007 : £775,952)). Although the Company's assets are not generating revenues and an operating loss has been reported, the Directors believe that the Company has sufficient funds to undertake its operating activities over the next 12 months. However, as additional projects and acquisition targets are identified additional funding may be required. The amount of funding is unforeseen at this point of approval of these Financial Statements and the Company may be required to raise additional funds either via an issue of equity or through the issuance of debt. The Directors are confident that funds will be forthcoming when an appropriate investment is found. 

e) Segment Reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns different from those of other geographical segments.

f) Foreign Currencies 

Items included in the Financial Statements are initially measured using the currency of the primary economic environment in which the entities in the Group operate (their "functional currency"). This is Pounds Sterling for the legal parent and Australian Dollars for the subsidiary. The presentation currency for both the parent and the Group is Pounds Sterling. This reflects the primary economic environment in which the Group as a whole operates.

Transactions in currencies other than the functional currency are translated into the functional currency at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities are retranslated at the rates of exchange ruling at the balance sheet date. Foreign exchange differences on retranslation and settlement are recognised in the Income Statement.

g) Plant and Equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is provided on all tangible assets to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight line basis at the following annual rates:

Computer equipment - 40%

All assets are subject to annual impairment reviews.

h) Financial Assets

Financial assets consist of financial assets at fair value through profit or loss and loans and receivables.

All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument.

Financial assets other than those categorised as at fair value through profit or loss are recognised initially at fair value plus transaction costs. Financial assets categorised as at fair value through profit or loss are recognised initially at fair value with transaction costs expensed through the Income Statement.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Any change in their value through impairment or reversal of impairment is recognised in the Income Statement.

Provision for impairment of trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is the difference between the receivable's carrying amount and the present value of the estimated future cash flows.

Company investments in subsidiaries are carried at cost less impairment losses, less any pre-acquisition dividends received.

An assessment for impairment is undertaken at least annually.

i) Cash and Cash Equivalents

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

j) Taxation

Current tax is the tax currently payable based on the taxable profit for the year.

Tax losses available to be carried forward, and other tax credits to the Group, are recognised as deferred tax assets, to the extent that it is probable that there will be future taxable profits against which the temporary differences can be utilised.

k) Share Capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

l) Share Based Payments

The Group operates a share option scheme to encourage participation by Directors in the Group's performance. The fair value of the services received in exchange for the grant of options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of any options granted, excluding non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the Company revises its estimate of options that are expected to vest.

Where shares were issued in exchange for services rendered, the fair value of the shares was calculated as the fair value of the services provided.

m) Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed.

u) Impairment of Non-Financial Assets

The entity assesses at each reporting date whether an asset may be impaired. If any such indicator exists, the entity tests the asset for impairment by estimating the recoverable amount. If the recoverable amount is less than the carrying value of the asset, an impairment loss is required. In addition to this, assets with indefinite lives and goodwill are tested for impairment at least annually.

v) Borrowing Costs

All borrowing costs are expensed in the period in which they are incurred and are included in finance costs in the Income Statement.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2008

1. Financial Risk Management

Financial Risk Factors

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

Market Risk

The Group has been exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Australian Dollar. Foreign exchange risk arises from future commercial transactions denominated in a foreign currency. The Group maintains bank accounts in these currencies to reduce its exposure to this risk. The volume of transactions is not deemed sufficient to enter into forward contracts.

The Group has no exposure to equity securities price risk, as it has no listed equity investments.

The Group has interest-bearing assets. Interest-bearing assets include only cash balances, all of which earn interest at a fixed rate.

Credit Risk

Credit risk arises from cash and cash equivalents.

The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk.

Liquidity Risk

To date the Group has relied upon equity funding to finance operations. The Directors are confident that adequate funding will be forthcoming with which to finance operations. Controls over expenditure are carefully managed. 

Capital Risk Management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

2. Critical Accounting Estimates and Judgements

The preparation of the combined financial statements in conformity with IFRSs requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the year. 

Share based payment transaction

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they were granted. The fair value is determined using a Black-Scholes model.

Impairment of Goodwill

The goodwill arising on the acquisition has been impaired in full as the Directors do not consider this reflects any increase in the value of the Group's assets.

3. Segmental Information

At 31 December 2008, the Group operates in one business segment, make investments and/or acquire projects in the energy sector. During the year Group has interests in two geographical segments, the United Kingdom and Australia. The parent Company operates a head office based in the United Kingdom which incurred certain administration and corporate costs.

Geographical Segments

The Group's business segments operate in two main geographical areas.

The Group had no turnover during the year. 

	Group
	Continuing Operations	Discontinuing Operations	Total
Operating Loss	2008 £	2008 £	2008 £
Australia	-	107,786	107,786
UK	226,017	34,313	260,330
Total	226,017	142,099	368,116

	Group
Total Assets	2008 £
Australia	4,030
UK	293,842
Total	297,872

Total assets are allocated based on asset location.

	Group
Total Liabilities	2008 £
UK	102,465

	Group
	Continuing Operations	Discontinuing Operations	Total
Depreciation	2008 £	2008 £	2008 £
UK	1,235	-	1,235

4. Operating Loss

The operating loss is stated after charging:	Group
	2008 £
Fees payable to the Company's auditors for the audit of the Parent Company and consolidated accounts	15,000
Fees payable to the Company's auditors for tax services	1,000
Depreciation	1,235
Profit on disposal of property, plant and equipment	(287)

5. Other Income

	Group
	2008 £
Costs recharged to Oreion Energy Australia Pty Ltd	137,350

During the year the Company incurred costs on behalf of Oreion Australia Energy Pty Ltd for research & development, technical, commercialisation and legal costs totalling £294,132 (31 December 2007 : £938,564). These costs have been recharged to Oreion Australia Energy Pty Ltd by way of a management fee. £137,350 of this management fee relates to the period pre-acquisition and as a result is not eliminated on consolidation.

6. Property, Plant and Equipment

						Company
						Computer equipment £
Cost
Balance as at 1 January 2007						3,617
As at 31 December 2007						3,617
Disposals						(1,516)
As at 31 December 2008						2,101
Depreciation
Balance as at 1 January 2007						276
Charge for the year						1,447
As at 31 December 2007						1,723
Charge for the year						1,235
Write back on disposal						(1,149)
As at 31 December 2008						1,809
Net book value as at 31 December 2007						1,894
Net book value as at 31 December 2008						292

						Group
						Computer equipment £
Cost
Opening						3,617
Disposals						(1,516)
As at 31 December 2008						2,101
Depreciation
Opening						1,723
Charge for the year						1,235
Write back on disposal						(1,149)
As at 31 December 2008						1,809
Net book value as at 31 December 2008						292

7. Intangible Fixed Assets

	Group
	Goodwill £
Cost
Balance as at 1 January 2008	-
Goodwill arising on acquisition	1,920,371
Impairment losses	(1,920,371)
As at 31 December 2008	-

The goodwill arising on the acquisition has been impaired in full as the Directors do not consider this goodwill reflects any increase in the value of the Group's assets. 

8. Investments in Subsidiary Undertakings

	Company
Shares in Group Undertakings	2008 £	2007 £
At 1 January	-	-
Additions	440,000	-
Impairment losses	(440,000)	-
At 31 December	-	-

Investments in Group undertakings are stated at cost, which is the fair value of the consideration paid, less impairment provision.

At 31 December 2008 the investment has been fully impaired as the Directors believe it to hold no value to the Company. 

Details of Subsidiary Undertakings

Name of subsidiary	Place of establishment	Registered capital	Share capital held	Principal activities
Oreion Australia Energy Pty Ltd	Australia	Ordinary shares AUD$6,250	100%	Dormant

The Subsidiary undertaking became dormant following the decision to terminate the Commercialisation Agreements in the year (refer Note 22).

9. Trade and Other Receivables

	Group		Company
	2008 £		2008 £	2007 £
Other receivables (note 19)	-		1,628,604	1,334,472
Provision for non-recovery of other receivables	-		(1,628,604)	-
Prepayments	17,286		16,480	25,321
VAT receivable	4,149		3,938	185,138
Accrued interest income	-		-	16,397
	21,435		20,418	1,561,328

10. Cash and Cash Equivalents

	Group		Company
	2008 £		2008 £	2007 £
Cash at bank and on hand	276,145		273,132	895,544

11. Called-Up Share Capital

	Number	£
Authorised
Ordinary shares of 0.07 p each	20,000,000,000	14,000,000

There has been no movement in the authorised share capital during the year

Issued	Number of shares	Ordinary shares £		Share premium £	Total £
At 1 January 2008	230,207,901	161,146		2,755,170	2,916,316
Acquisition of subsidiary	50,000,000	35,000		-	35,000
At 31 December 2008	280,207,901	196,146		2,755,170	2,951,316

Share Options

Share options outstanding and exercisable at the end of the year have the following expiry date and exercise prices:

				Shares
Expiry date		Exercise price in £ per share		2008	2007
2 August 2011		0.02		5,755,199	5,755,199

The options are exercisable starting immediately from the date of grant and lapse on the fifth anniversary of the date of grant. The Company or Group has no legal or constructive obligation to settle or repurchase the options in cash.

The fair value of the share options was determined using the Black Scholes valuation model. The parameters used are detailed below:

	2006 Options
Option granted on:	02/08/2006
Option life (years)	5 years
Risk free rate	4.6%
Expected volatility	70%
Expected dividend yield	-
Marketability discount	80%
Total fair value of options granted (£000)	48

The expected volatility is based on historical volatility for the 6 months prior to the date of granting.

The risk free rate return is based on zero yield government bonds for a term consistent with the option life.

During the year there were no options granted, forfeited or exercised (2007 : Nil).

12. Trade and Other Payables

	Group		Company
	2008 £		2008 £	2007 £
Trade payables	87,465		87,465	268,158
Accrued expenses	15,000		15,000	100,219
	102,465		102,465	368,377

13. Other Gains - Net

	Group
	2008 £
Net foreign exchange gains	39,690

14. Employees

The Company had no full time employees during the year. The Directors provided professional services as required on a part-time basis. Details of Directors' fees are disclosed in note 15.

15. Directors' Remuneration

	Directors' Fees			Options Issued
	2008 £	2007 £		2008 £	2007 £
Non-executive Directors
Martin Thomas	19,888	23,956		-	-
Toby Howell	17,500	30,000		-	-
Malcolm James (3)	8,500	18,000		-	-
Christopher Lambert (1)	-	18,000		-	-
Jade Styants (2)	-	30,000		-	-
	45,888	119,956		-	-

Resigned 4 February 2008

Resigned 21 February 2008

Malcolm James' Directors fees were paid to Terasse (WA) Pty Ltd

No pension benefits are provided for any Director.  The Directors agreed to waive any fees payable from July 2008.

16. Finance Income and Costs

	Group
	2008 £
Interest expense	(7,247)
Interest received from Bank	13,566
Net Finance Income	6,319

17. Taxation

	Group
	2008 £
Loss before tax	(2,282,168)
Tax at the applicable rate of 28.33%	(646,538)
Net tax effect of losses carried forward	646,538
Tax charge	-

No tax charge or credit arises on the loss for the period.

The tax rate used is a combination of the 28.25% standard rate of corporation tax in the UK, 30% Australian federal tax rate to give an applicable rate of 28.33%.

The Group has tax losses of approximately £1,264,389 (2007: £1,000,686) available to carry forward against future taxable profits. A deferred tax asset has not been recognised because of uncertainty over the timing of future taxable profits against which the losses may be offset.

18. Loss per Share

The calculation of the total basic loss per share of 0.85 pence is based on the loss attributable to ordinary shareholders of £2,282,168 and on the weighted average number of ordinary shares of 270,235,223 in issue during the period. The calculation of the basic loss per share from continuing operations of 0.08 pence is based on the loss attributable to ordinary shareholders from continuing operations of £212,451. The basic loss per share from discontinued operations of 0.77 pence is based on the loss attributable to ordinary shareholders from discontinued operations of £2,069,717.

In accordance with IAS 33, no diluted earnings per share is presented as the effect on the exercise of share options would be to decrease the loss per share.

Details of share options that could potentially dilute earnings per share in future periods are set out in Note 11.

19. Business Combinations

The Company acquired 100% of the issued share capital of Oreion Australia Energy Pty Ltd on 14 March 2008 through the issue of 50,000,000 new ordinary shares in the Company at a consideration price of 2p per share.

The Company acquired Oreion Australia Energy Pty Ltd for the purposes of furthering the commercialisation of the PEM Technology.

In the absence of a reliable valuation for the Oreion Australia Energy Pty Ltd (as its shares are not quoted), the cost of combination has been calculated using the fair value of all of the issued equity instruments of Alecto Energy plc at the date of acquisition.

The unaudited interim results of the Group accounted for the acquisition of Oreion Australia Energy Pty Ltd using the deemed value of the consideration shares of 2p resulting in a purchase consideration of £1,000,000. In accordance with IFRS, the purchase consideration in these Financial Statements is the fair value of the shares issued based on the published share price at the date of issue. As a result there is a £560,000 difference between the consideration reported within these Financial Statements and that reported in the interim results for the period ended 30 June 2008.

Details of new assets acquired and goodwill are:

					£
Purchase consideration
Fair value of shares issued					440,000
Total purchase consideration					440,000
Fair value of net liabilities acquired					1,480,371
Goodwill (Note 7)					1,920,371

The goodwill arising on the acquisition related to the PEM Technology and related commercialisation agreements between Oreion and CSIRO. At 31 December 2008 the goodwill has been impaired in full as the Directors do not consider this reflects any increase in the value of the Group's assets. 

The fair value of the shares issued was based on the published share price (14 March 2008).

The assets and liabilities as of 14 March 2008 arising from the acquisition are as follows:

	Fair Value £	Acquiree's carrying amount £
Cash	22,006	22,006
Other prepayments	781	781
GST receivable	1,801	1,801
Trade creditors	(18,798)	(18,798)
Finance facility - Alecto Energy Plc	(410,247)	(410,247)
Other payables - Alecto Energy Plc	(1,075,914)	(1,075,914)
Net liabilities	1,480,371	1,480,371

The amount of losses since the acquisition date included in the consolidated income statement that relate to the purchased subsidiary was £102,786. Had the subsidiary been acquired on the first day of the accounting period the consolidated loss for the year would have been £2,283,976.

20. Related Party Transactions

Loan from Alecto Energy plc to Oreion Australia Energy Pty Ltd

As at 31 December 2008 there are amounts receivable of £1,628,604 from Oreion Australia Energy Pty Ltd. Interest was charged on the loans at a rate of 9% per annum up to 30 June 2008 when it was agreed that any future interest would be forgiven. The loan to the subsidiary together with accrued interest of £27,647 have been provided for in full in the accounts of the Company.

Other Transactions

Claridge House Services Limited (CHS) is a company set up for the purpose of administering a serviced office for a number of companies, including Alecto Energy Plc. The Directors of CHS as at 31 December 2008 included Toby Howell. The Company has entered into an agreement with CHS for the provision of serviced office accommodation as well as bookkeeping and receptionist services, for a monthly fee payable quarterly in advance. During the year CHS invoiced the Company £49,003 (2007: £60,426) in respect of serviced office costs. Subsequent to year end the Company amended the agreement with CHS to reduce the monthly payment to £500 per month.

21. Ultimate Controlling Party

The Directors believe there to be no ultimate controlling party.

22. Events after the Balance Sheet Date

Before the year end management made the decision to terminate the operations of Oreion and the various agreements with CSIRO. On 29 January 2009 the Company formally signed termination agreements in relation to the commercialisation of CSIRO's hydrogen micro fuel cell technology ("PEM Technology").

All costs relating to Oreion and the PEM Technology have been included in these Financial Statements. No further costs will be incurred after the balance sheet date.

23.Other

Publication of non-statutory accounts

The financial information set out in this announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. Statutory accounts for 2008 will be delivered to the Registrar following the Company's Annual General Meeting to be held at the London Marriott Hotel Park Lane, 140 Park Lane, London W1K 7AA at 2.30pm on Friday 31 July 2009. The Independent Auditors have reported on these accounts. Their report was unqualified and did not contain statements under section 237(2) or (2) of the Companies Act 1985. 

Other information 

The report and accounts for the year ended 31 December 2008 will be posted to shareholders shortly and copies will also be available via the website (www.alectoenergy.com) in accordance with AIM Rule 26 and at the Company's registered office, 200 Strand, London WC2R 1DJ.

Contacts

Alecto Energy plc Toby Howell / Gregory Kuenzel  HB Corporate Limited Edward Hutton

+44 20 7182 1748 +44 20 7510 8600

ENDFR FLMITMMMTBRL

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