Half Yearly Report

24th Sep 2009 07:00



24 September 2009 AIM: CMM

Commoditrade Inc.

 ("Commoditrade" or "the Group")

Half Year Report 

for the six months ended 30 June 2009

Commoditrade Inc., the AIM-listed commodities investment group, announces its interim results for the six months ended 30 June 2009.

Summary Financials

Operations

Commenting on outlook, David Phipps, Chief Executive, said:

"The challenging market conditions experienced at the end of 2008, as anticipated, continued into the first half of 2009 and the tightening of liquidity in the base metals markets negatively impacted upon H1 Revenues. We expect the business to benefit from more normalised market conditions in the second half of the year.

"Our key focus has been to diversify our future revenue streams and we are pleased to have achieved our target of developing a robust core operational and risk platform to enable us to diversify in to other commodity areas by the end of the half year. As a result of this diversification strategy we will be entering into the energy market in the second half of the year closely followed by other product developments. We expect the benefits of this to accrue in 2010.

Enquiries:	www.commoditrade.net
Commoditrade Inc, David Phipps, Chief Executive	tel: +44(0)20 7245 1100
Nomad - Strand Partners James Harris/Angela Peace	tel: +44(0)20 7409 3494
Broker - Liberum Capital Chris Bowman/Ellen Francis	tel: +44(0)20 3100 2000
Media/IR - Hansard Group John Bick/Justine James	tel: +44(0) 20 7245 1100 tel: +44(0) 7872 061007

Interim Statement

Results

The vast majority of commodity trading is executed in US dollars and the Group's resultant revenue is generated in US dollars. Accordingly, when the Group reported its last final results on 23 March 2009 the board indicated that it proposed to change the Company's reporting currency, historically reported in GBP, to US dollars for future reporting periods. The half year results have been prepared in accordance with that change.

Gross revenue for the period was US$9.6 million before deduction of clearing and administration fees (2008: US$12.9 million).

Operational clearing and related administration costs were US$5.2 million (2008: US$4.3 million). Net loss for the period after direct trading costs and bonuses but before amortisation of intangible assets and share options charges, was US$3.0 million (2008: US$2.0 million profit). 

Total non-cash charges during the period amounted to US$9.3 million consisting of amortisation of intangible assets of US$7.1 million and charges associated with the issue of share options of US$2.2 million resulting in a loss before tax of US$12.3 million (2008: loss US$23.6 million). No final dividend is proposed.

As at 30 June 2009 the Group had no debt and its cash balances stood at US$8.5 million (2008: US$2.7 million).

Operational Review

We continued to see the challenging market conditions of 2008 carry on in to the first half of 2009. As mentioned in our year end statement we anticipated a downturn in market activity year on year but this was particularly true of the first quarter in the forward base metals markets in which we specialise. Whilst base metal flat price volatility has overall remained this has not been matched by an improvement in liquidity and as a result the board has maintained its policy of strict risk control and monitoring.

Despite the challenging market conditions, the Group's fee based income from its core brokerage business has been encouraging particularly in the second quarter. 

During the first six months the management team continued to make good progress with the restructuring of the Group's international and UK operations including both regulatory approvals and the Group's corporate structure. In addition on 20 February, following approval by the FSA, the Group completed the acquisition of the outstanding equity in its commodities fund management business.

The Group completed its programme commenced in late 2008 to build-out a new operational and risk platform in line with future strategy to introduce a range of asset trading desks.

On 7 May the Board was pleased to announce the appointment of Liberum Capital Limited as Broker to the Company. Strand Partners Limited are Nomad to the Company.

  Current Trading and Outlook 

The challenging market conditions experienced at the end of 2008, as anticipated, continued into the first half of 2009 and the tightening of liquidity in the base metals markets negatively impacted upon H1 Revenues. We expect the business to benefit from more normalised market conditions in the second half of the year.

Our key focus has been to diversify our future revenue streams and we are pleased to have achieved our target of developing a robust core operational and risk platform to enable us to diversify in to other commodity areas by the end of the half year. As a result of this diversification strategy we will be entering into the energy market in the second half of the year closely followed by other product developments. We expect the benefits of this to accrue in 2010.

David Phipps, Chief Executive	Graham Porter, Chairman
24 September 2009	24 September 2009

www.commoditrade.net

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2009

 

	Note	Six months ended 30 June 2009 Prior to non cash and sign on bonus costs	Six months ended 30 June 2009 Non cash and sign on bonus costs	Six months ended 30 June 2009 Total	Six months ended 30 June 2008 (restated) Prior to non cash and sign on bonus costs	Six months ended 30 June 2008 (restated) Non cash and sign on bonus costs	Six months ended 30 June 2008 (restated) Total
		US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Continuing operations
LME trading revenues		8,454	-	8,454	12,853	-	12,853
Clearing and related costs		(5,212)	-	(5,212)	(4,284)	-	(4,284)
Direct costs, financing charges and trader bonuses		(3,954)	-	(3,954)	(4,182)	-	(4,182)
Amortisation of intangible asset		-	(7,070)	(7,070)		(10,606)	(10,606)
		-------	-------	-------	-------	-------	-------
Net loss from associate	6	(712)	(7,070)	(7,782)	4,387	(10,606)	(6,219)
Revenue		1,096	-	1,096	-	-	-
Other income		-	-	-	265	-	265
Share based payment		-	(2,249)	(2,249)	-	(14,183)	(14,183)
Sign-on bonus payments		-	-	-	-	(772)	(772)
Other administrative expenses		(2,696)	-	(2,696)	(2,938)	-	(2,938)
Total administrative expenses		(2,696)	(2,249)	(4,945)	(2,938)	(14,955)	(17,893)
		-------	-------	-------	-------	-------	-------
Operating loss		(2,312)	(9,319)	(11,631)	1,714	(25,561)	(23,847)
Finance income		2	-	2	290	-	290
Finance cost		(711)	-	(711)	-	-	-
		-------	-------	-------	-------	-------	-------
Loss for the year before tax		(3,021)	(9,319)	(12,340)	2,004	(25,561)	(23,557)
Tax charge	4	-	-	-	-	-	-
		-------	-------	-------	-------	-------	-------
Net loss for the period		(3,021)	(9,319)	(12,340)	2,004	(25,561)	(23,557)
Other comprehensive income
Currency translation		-	(50)	(50)	-	-	-
Available for sale assets		359	-	359	-	(516)	(516)
		-------	-------	-------	-------	-------	-------
Total comprehensive income for the year		(2,662)	(9,369)	(12,031)	2,004	(26,077)	(24,073)
		-------	-------	-------	-------	-------	-------
Basic loss per share (cents)	5			(3.53)			(6.31)
Diluted loss per share (cents)	5			(3.53)			(6.31)
				-------			-------

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 December 2008

	Note	Prior to non cash and sign on bonus costs	Non cash and sign on bonus costs	Total
		US$'000	US$'000	US$'000
LME trading revenues		30,289	-	30,289
Clearing and related costs		(11,974)	-	(11,974)
Direct costs, financing charges and trader bonuses		(7,114)	-	(7,114)
Amortisation of intangible asset		-	(21,211)	(21,211)
		-------	-------	-------
Net loss from associate	6	11,201	(21,211)	(10,010)
Revenue		820	-	820
Other income		148	-	148
Share based payment		-	(22,369)	(22,369)
Sign-on bonus payments		-	(1,020)	(1,020)
Other administrative expenses		(6,203)	-	(6,203)
Available for sale assets write off		-	(2,238)	(2,238)
Total administrative expenses		(6,203)	(25,627)	(31,830)
		-------	-------	-------
Operating loss		5,966	(46,838)	(40,872)
Finance income		305	-	305
Finance cost		(314)	-	(314)
		-------	-------	-------
Loss for the year before tax		5,957	(46,838)	(40,881)
Tax charge	4	-	-	-
		-------	-------	-------
Loss for the year		5,957	(46,838)	(40,881)
		-------	-------	-------
Other comprehensive income
Available for sale assets			(354)	(354)
Total comprehensive income for the year		5,957	(47,192)	(41,235)
		-------	-------	-------
Basic loss per share (cents)	5			(11.86)
				-------
Diluted loss per share (cents)	5			(11.86)
				-------

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2009

	Note	Unaudited Six months ended 30 June 2009 US$'000	Unaudited six months ended 30 June 2008 (restated) US$'000	Audited year ended  31 December 2008 (restated) US$'000
Assets
Non-current assets
Goodwill	13	2,671	-	-
Investment in associate	6	-	17,676	7,070
Property plant and equipment		1,040	-	-
Other receivable	8	2,000	6,000	2,000
		5,711	23,676	9,070
Current
Available for sale financial assets	7	3,327	6,434	2,668
Trade and other receivables	8	4,009	3,942	7,811
Cash and cash equivalents		8,534	2,702	8,274
Total current assets		15,870	13,078	18,753
Total assets		21,581	36,754	27,823
Liabilities
Current
Trade and other payables	9	3,753	168	213
Total liabilities		3,753	168	213
Equity
Share capital	10	629	629	629
Capital redemption reserve		92	92	92
Share premium		66,496	66,496	66,496
Translation reserve		(50)	-	-
Profit and loss account		(49,339)	(30,631)	(39,607)
Total equity		17,828	36,586	27,610
Total equity and liabilities		21,581	36,754	27,823

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months ended 30 June 2009

		Share capital	Share premium account	Capital redemption reserve	Translation reserve	Profit and loss account	Total equity
		US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 1 January 2009		629	66,496	92	-	(39,607)	27,610
Share-based payments		-	-	-	-	2,249	2,249
Transactions with owners		629	66,496	92		(37,358)	29,859
Loss for the period		-	-	-	-	(12,340)	(12,340)
Other comprehensive income:
Reclassification to profit or loss in respect of the available for sale asset		-	-	-	-	359	359
Exchange differences on translation of foreign operations		-	-	-	(50)	-	(50)
Total comprehensive income for the period		-	-	-	(50)	(11,981)	(12,031)
Balance at 30 June 2009		629	66,496	92	(50)	(49,339)	17,828

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months ended 30 June 2008

	Share capital	Share premium account	Shares to be issued	Capital redemption reserve	Translation reserve	Profit and loss account	Total equity
	(restated)	(restated)	(restated)	(restated)	(restated)	(restated)	(restated)
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 1 January 2008	615	66,496	-	81	-	(8,873)	58,319
Dividends	-	-	-	-	-	(9,826)	(9,826)
Share-based payments	-	-	-	-	-	14,183	14,183
Shares cancelled	(11)	-	-	11	-	-	-
Issue of share capital	25					(2,042)	(2,017)
Transactions with owners	629	66,496	-	92	-	(6,558)	60,659
Loss for the period	-	-	-	-	-	(23,557)	(23,557)
Other comprehensive income:
Available for sale financial assets
- current year losses	-	-	-	-	-	(516)	(516)
Total comprehensive income for the period	-	-	-	-	-	(24,073)	(24,073)
Balance at 30 June 2008	629	66,496	-	92	-	(30,631)	36,586

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2008

	Share capital	Share premium account	Shares to be issued	Capital redemption reserve	Translation reserve	Profit and loss account	Total equity
	(restated)	(restated)	(restated)	(restated)	(restated)	(restated)	(restated)
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 1 January 2008	615	66,496	-	81	-	(8,873)	58,319
Dividends	-	-	-	-	-	(9,826)	(9,826)
Share-based payments	-	-	-	-	-	22,369	22,369
Shares cancelled	(11)	-	-	11	-	-	-
Issue of share capital	25	-	-	-	-	(2,042)	(2,017)
Transactions with owners	629	66,496	-	92	-	1,628	68,845
Loss for the period	-	-	-	-	-	(40,881)	(40,881)
Other comprehensive income:
- current year losses	-	-	-	-	-	(1,028)	(1,028)
- reclassification to profit or loss	-					674	674
Total comprehensive income for the period	-	-	-	-	-	(41,235)	(41,235)
Balance at 31 December  2008	629	66,496	-	92	-	(39,607)	27,610

CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2009

	Unaudited Six months ended 30 June 2009 US$'000	Unaudited six months ended 30 June 2008 (restated) US$'000	Audited year ended  31 December 2008 (restated) US$'000
Operating activities
Loss after tax	(12,340)	(23,557)	(40,881)
Permanent diminution of available for sale asset	-	-	2,238
Amortisation of intangible asset in associate	7,070	10,606	21,211
Depreciation of property plant and equipment	52	-	-
Share based payment	2,249	14,183	22,369
Change in trade and other receivables	3,990	5,847	2,008
Change in trade and other payables	3,386	(121)	(85)
Foreign exchange	(50)	(7)	-
Net cash inflow from operating activities	4,357	6,951	6,860
Investing activities
Purchase of other receivable	-	(3,970)	-
Sale of available for sale financial assets	-	-	1,090
Purchase of available for sale financial assets	(300)	-	-
Purchase of business	(3,059)	-	-
Purchase of property plant and equipment	(1,079)	-	-
Revaluation of available for sale asset	-	-	604
Net cash (outflow)/ inflow from investing activities	(4,438)	(3,970)	1,694
Financing activities
Purchase of own shares	-	(7,616)	(7,616)
Issue of shares	-	25	25
Dividends paid	-	(9,826)	(9,826)
Net cash outflow from financing activities	-	(17,417)	(17,417)
Net decrease in cash and cash equivalents	(81)	(14,435)	(8,863)
Cash acquired on acquisition of business	341	-	-
Cash and cash equivalents at beginning of period	8,274	17,137	17,137
Cash and cash equivalents at end of period	8,534	2,702	8,274

The information for the period ended 30 June 2009 does not constitute statutory accounts as defined in the Companies Act 2006. The figures for the year ended 31 December 2008 have been extracted from the 2008 statutory financial statements. The auditors' report on those accounts was unqualified. 

Basis of preparation

The Company was incorporated as a Corporation in the Cayman Islands which does not prescribe the adoption of any particular accounting framework. The Board has resolved that the Group will follow International Financial Reporting Standards (IFRS).

The Company's shares are listed on the AIM market of the London Stock Exchange.

The principal accounting policies of the Group remain unchanged from those set out in the Group's 2008 financial statements except for the adoption of IAS 1 Presentation of Financial Statements (Revised 2007), IFRS 8 Operating Segments and a change in the presentational currency of the company in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates.

The adoption of IAS 1 (Revised 2007) does not affect the financial position or profits of the Group, but gives rise to additional disclosures. The measurement and recognition of the Group's assets, liabilities, income and expenses is unchanged, however, some items that were recognised directly in equity are now recognised in other comprehensive income, for example gains/losses on available for sale financial assets. IAS 1 (Revised 2007) affects the presentation of owner changes in equity and introduces a 'Statement of comprehensive income'.

The adoption of IFRS 8 has not changed the segments that are disclosed in the interim financial statements.

The presentational currency of the Group has been changed from Sterling to US dollars as the principal functional currency of the Group is US dollars. As a consequence all comparative numbers are restated.

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements.

Critical judgments and key sources of estimation uncertainty

The key sources of estimation uncertainty the Directors have made in preparing this interim report are as follows:

The Directors consider that the critical judgments in applying the accounting policies, as detailed above, in preparing this interim report are as follows:

(a) By business segment (primary segment):

As defined under IFRS 8, the only material business segment the Group has is that of an investment group specialising in investments in the commodities trading sector.

(b) By geographical segment (secondary segment):

Under the definitions contained in IFRS 8, the only material geographic segment that the Group operates in is currently Europe.

There is no tax charge for any period. The Group does not operate in the United Kingdom and there is no tax arising on its operations. The relationship between the expected tax expense at 28% and 30% and the tax expense/income actually recognised in the income statement can be reconciled as follows:

	Unaudited six months ended 30 June 2009 US$'000	Unaudited six months ended 30 June 2008 (restated) US$'000	Audited year ended  31 December 2008 (restated) US$'000
(Loss) for the period before taxation	(12,340)	(23,557)	(40,881)
Tax rate	28%	30%	30%
Expected tax credit	(3,455)	(7,067)	(12,264)
Losses not subject to tax	3,455	7,067	12,264
Actual tax credit	-	-	-

The calculation of the basic loss per share is based on the net loss for the period of US$12,340,000 (period ended 30 June 2008: US$23,557,000; year ended 31 December 2008: US$40,881,000) divided by the weighted average number of shares in issue during the period of 349,268,114 (period ended 30 June 2008 : 373,439,054; year ended 31 December 2008 : 344,465,505). The share options are anti-dilutive for all periods.

The (loss)/earnings per share adjusted to exclude the impact of amortisation of intangible assets within the associate and the share options charge is as follows:

	Unaudited six months ended 30 June 2009 US$'000	Unaudited six months ended 30 June 2008 (restated) US$'000	Audited year ended  31 December 2008 (restated) US$'000
Net loss for the period	(12,340)	(23,557)	(40,881)
Amortisation of intangible asset within associate	7,070	10,606	21,211
Share options charge	2,249	14,183	22,369
Adjusted net (loss)/profit for the period	(3,021)	1,232	2,699

Based on the adjusted net (loss)/profit for the period and the basic and fully diluted weighted average number of shares in issue, the basic and fully diluted adjusted (loss)/earnings per share is as follows: 

	Unaudited six months ended 30 June 2009 Cents	Unaudited six months ended 30 June 2008 (restated) Cents	Audited year ended  31 December 2008 (restated) Cents
Basic	(0.86)	0.33	0.78
Diluted	(0.86)	0.33	0.71

The share options for the period ended 30 June 2009 are anti-dilutive. The diluted adjusted earnings per share is based on a weighted average number of shares - issued on fully diluted basis of 376,931,735 for the period ended 30 June 2008 and 381,288,186 for the year ended 31 December 2008.

	Unaudited six months ended 30 June 2009 US$'000	Unaudited six months ended 30 June 2008 (restated) US$'000	Audited year ended  31 December 2008 (restated) US$'000
(Loss)/profit for the period	(712)	4,387	11,201
Transferred to prepayments and accrued income	-	-
Amortisation	(7,070)	(10,606)	(21,211)
	(7,782)	(6,219)	(10,010)
Decrease in amounts included in trade and other receivables	4,045	5,551	2,770
Bonuses beyond contractual amounts treated as administrative expenses	-	(772)	(772)
Cash received from associate	(3,333)	(9,165)	(13,199)
Net movement	(7,070)	(10,605)	(21,211)
Net book value brought forward	7,070	28,281	28,281
Net book value carried forward	-	17,676	7,070

 

 

	Unaudited 30 June 2009	Unaudited 30 June 2008 (restated)	Audited 31 December 2008 (restated)
	US$'000	US$'000	US$'000
Interest in profits of AMCO		1,612	-
AMCO Commodities Fund Limited	300	1,090	-
Interest in LME Holdings Limited	3,027	3,732	2,668
	3,327	6,434	2,668

	Unaudited 30 June 2009	Unaudited 30 June 2008 (restated)	Audited 31 December 2008(restated)
	US$'000	US$'000	US$'000
Non-current
Other receivables	2,000	6,000	2,000
Current
Amounts due from associated business	2,110	3,374	6,155
Other receivables	1,797	547	1,243
Prepayments and accrued income	102	21	413
Trade and other receivables, net	4,009	3,942	7,811

The non-current other receivable represents a deposit held by Sucden (UK) Limited to support any losses which the trading team may incur. It is repayable on termination of the agreement with Sucden (UK) Limited.

Amounts due from associated business and other receivables are usually due within 120 days and do not bear any effective interest rate.

The fair value of these short term financial assets is not individually determined as the carrying amount is a reasonable approximation of fair value.

	Unaudited 30 June 2009	Unaudited 30 June 2008 (restated)	Audited 31 December 2008(restated)
	US$'000	US$'000	US$'000
Trade and other payables	809	141	46
Other creditors	2,698	-	122
Accruals and deferred income	246	27	45
Trade and other payables, net	3,753	168	213

The fair value of trade and other payables has not been disclosed as, due to their short duration, management considers the carrying amounts recognised in the balance sheet to be a reasonable approximation of their fair value.

	Unaudited 30 June 2009	Unaudited 30 June 2008 (restated)	Audited 31 December 2008 (restated)
	US$'000	US$'000	US$'000
Authorised
1,000,000,000 ordinary shares of 0.1p	1,000	1,000	1,000
Allotted, issued and fully paid
349,268,114 (30 June 2008: 349,268,114; 31 December 2008:  349,268,114) ordinary shares of 0.1p	629	629	629

Warrants

On 8 March 2005 a warrant was issued to Strand Partners Limited, the Company's Nominated Advisor, in connection with their role in the admission of the Company to the AIM market. The warrant entitles Strand Partners Limited to subscribe, at a price of 10p per share, for such number of ordinary shares as are equivalent (on a fully diluted basis) to one per cent. of the issued ordinary share capital of the Company at that time. The issued warrant may be exercised at any time during the period from 8 March 2005 to 8 March 2010.

The fair value of the warrants granted was determined using the Black-Schöles valuation model and US$20,000 of share based expense has been included in the share premium account as a cost of the admission to AIM which gave rise to a share based payment reserve. No liabilities were recognised due to share based payment transactions.

The Group has adopted an employee Share Option Scheme (the "Employee Share Option Scheme") in order to incentivise key management and staff. The fair value of options granted was determined using the Black- Schöles valuation model. Significant inputs into the calculations were as follows:

At 30 June 2009, the Group had the following options outstanding: 

Date of original grant	Dates exercisable	Grant  price	Market price at  date of issue	At 30 June  2009 Number	Fair value  at 30 June   2009
1 May 2008	After 30 April 2010 subject to any take over of the Company	0.1p	54.0p	35,000,000	53.992p

During the period no share options were exercised.

A share based payment expense of US$2,249,000 has been recognised in the statement of comprehensive income for the period ended 30 June 2009 (period ended 30 June 2008 : US$14,183,000; year ended 31 December 2008 : US$22,369,000).

12 Reporting Currency

Historically the Group has reported in Sterling. The board changed this to US dollars for accounting period commencing on or after 1 January 2009. The majority of commodity trading is effected and the Group's result and revenue is generated in US dollars. Changing the reporting currency to US dollars more closely reflects the trading activities of the Group.

On 20 February 2009 Commoditrade Inc acquired the entire share capital of AMCO Management Services Limited, a business regulated by the Financial Services Authority based in the United Kingdom. The principal activity of AMCO Management Services Limited is asset management.

The book values under IFRS and the provisional fair values of the assets and liabilities acquired as at the date of acquisition were as follows:

	Book value before acquisition under IFRS	Fair value adjustments	Fair value to Commoditrade Inc.
	US$'000	US$'000	US$'000
Non current assets
Property, plant and equipment	13	-	13
Current assets
Trade and other receivables	188	-	188
Cash	341	-	341
Total assets	542	-	542
Current liabilities
Trade and other payables	(154)	-	(154)
Total liabilities	(154)	-	(154)
Net assets	388	-	388
Goodwill arising on acquisition	2,671	-	2,671
Consideration	3,059	-	3,059
Consideration
Cash			2,880
Costs associated with the acquisition settled in cash			179
			3,059

The directors consider that no separate identifiable intangible assets arise on acquisition. The goodwill is not amortised but reviewed for impairment annually.

Chris Adams, a director of the Company, is also a director of AMCO Management Services Limited.

ENDIR DXLFLKKBZBBV

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