26th Sep 2007 07:02
Commoditrade Inc.26 September 2007 Commoditrade Inc. ("Commoditrade" or "the Company") Interim results for the six months ended 30 June 2007 Commoditrade Inc., (AIM: CMM), the AIM-listed commodities investment company,announces its interim results for the six months ended 30 June 2007.Commoditrade joined AIM in March 2005 with the primary objective of building,through investment and acquisition, a group specialising in the commoditiessector. Summary of Interim Results 6 months ended 6 months ended 30 June 2007 30 June 2006 Unaudited Unaudited £'000 £'000Gross revenue 15,184 8,869Net operating profit 10,444 4,621Profit per ordinary share, adjusted for amortisation 2.79p 2.23pand share option paymentBasic profit per ordinary share 0.94p 1.29pOrdinary shares in issue (m) 376.3m 371.3m • Commoditrade's gross revenue for the six months ended 30 June 2007 was£15.2 million (after a deduction of clearing and administration fees, which arecurrently charged at 25% of total revenues generated by the trading team). • The Company's performance was underpinned by continued high tradingvolumes and customer demand for its specialist brokerage services in base metalstraded on the London Metals Exchange ("LME"). • Commoditrade's net operating profit (after direct trading costs andtrader bonuses) for the period was £10.4 million. After non-cash costs, beingamortisation of £5.6 million and the issue of management share options of £1.4million, and corporate overhead costs, the profit before tax for the period was£3.5 million. • The Company's adjusted profit per ordinary share, before the deductionof non-cash items being amortisation and the share option issue, was 2.79 pence. The unadjusted basic profit per ordinary share for the period was 0.94 pence. • As at 30 June 2007 the Company had no debt and its cash balances stoodat £9.6 million. An additional £8.2 million of cash, earned during the period,is due to be received from the Company's clearer at the end of October 2007,giving an effective cash balance of £17.8 million. Operational Review and Update • Commoditrade has secured the services of the key members of thetrading team for a minimum period of three years. • Additionally, Commoditrade has renegotiated its contract with Sucden(UK) Limited, securing this agreement in future for a fixed net annual fee of£7.5m. This represents an effective reduction in the current fee arrangement,which is currently calculated as a percentage of revenues generated by thetrading team. The new contract will be effective from 1 May 2008 and is expectedto yield significant cost savings for Commoditrade going forward. • During the period, Commoditrade acquired sufficient shares in the LMEto bring its total holdings to 25,000 B shares, which now entitles the Companyto apply for a Category 1 membership of the LME. Current Trading and Outlook Commenting, Graham Butt, Chief Executive of Commoditrade, said: "The business has delivered strong growth in profits and cash generation overthe period and has continued to perform very strongly into the second half ofthe year. Trading activity has also increased markedly during the recentturbulent market conditions which has also benefitted the operationalperformance of the business in the second half." Enquiries: John Bickt: +44 (0) 20 7451 9800m:+44 (0)7917 649362 www.commoditrade.net James Harris/Angela PeaceStrand Partnerstel:+44(0) 20 7409 3494 Commoditrade Inc. Interim Statement Results The Board is pleased to report Commoditrade's unaudited results for the sixmonths ended 30 June 2007. The trading team produced a very strong tradingperformance over the period generating gross revenue of £15.2 million forCommoditrade. Commoditrade's gross revenue is calculated after the deduction offees paid to Sucden (UK) Limited, which are currently charged at 25% of revenuesgenerated by the trading team. After direct trading costs and trader bonuses, net trading profit for theCompany was £10.4 million. After deduction of non-cash items, being amortisationof £5.6 million and costs associated with the issue of share options to thetrading team of £1.4 million, and corporate overhead costs, the profit beforetax for the period was £3.5 million. The Company's adjusted profit per ordinary share, adjusted for non-cash itemsbeing amortisation and the costs associated with the share option issue, was2.79 pence. The unadjusted basic profit per ordinary share for the period was0.94 pence. There is no debt in the Company and cash and cash equivalents at 30 June 2007stood at £9.6 million. An additional £8.2 million of cash, earned during theperiod, is due to be received from the Company's clearer at the end of October2007, giving an effective cash balance of £17.8 million. Operational Review The business delivered strong results on the back of the continued high volumeof base metal trading on the LME over the period. High volumes have been drivenprimarily by a strong demand for the underlying base metals combined withvolatility in the base metal markets. There has been a resumption of buyingfrom China so far in 2007 and many other factors such as investment fundactivity are still providing support for the commodity market generally. Thekey markets for the trading team are copper, aluminium, nickel and zinc, all ofwhich enjoyed a strong performance, with aluminium and nickel in particularshowing strong growth compared to the prior period. The Company is pleased to report that it has secured the services of the keytraders in the trading team for a minimum period of three years. These tradershave been further incentivised through granting of options in Commoditrade,which will vest over a three year period. Commoditrade has renegotiated its contract with Sucden (UK) Limited, securingthis agreement in future for a fixed net annual fee of £7.5m. This representsan effective reduction in the current fee arrangement, which is currentlycalculated as a percentage of revenues generated by the trading team. The newcontract will be effective from 1 May 2008 and is expected to yield significantcost savings for Commoditrade going forward. Additionally, during the period, Commoditrade acquired sufficient shares in theLME to bring its total holding to 25,000 shares, which now entitles the Companyto a Category 1 membership of the LME. Corporate Update On 13 August 2007 the Company announced that active discussions were continuingwith a number of interested parties which may or may not lead to an offer forthe Company. The Board confirms that these discussions are actively ongoing. In addition, the Company confirmed that it was also in parallel discussions withpotential financial partners to secure additional capital for the Company, whichwill enable it to pursue a number of identified growth opportunities and otherpotential strategies to generate enhanced shareholder value. These discussionsare also actively ongoing and it remains the Board's intention to continue topursue all avenues that will enhance the growth in shareholder value. Current Trading and Outlook The business has delivered strong growth in profits and cash generation over theperiod and has continued to perform very strongly into the second half of theyear. Trading activity has also increased markedly, which has benefitted theoperational performance of the business in the second half. Graham Butt Chris AdamsChief Executive Chairman26 September 2007 26 September 2007 www.commoditrade.net Commoditrade Inc. Income Statement For the six months ended 30 June 2007 Unaudited six Unaudited months Audited Note Six ended year months 30 June ended ended 2006 31 30 June (As December 2007 restated) 2006 £'000 £'000 £'000 Continuing operations Income from associate 8 10,444 4,621 13,979Amortisation of (5,617) (1,875) (7,494)intangible asset withinassociateOther income 200 - -Administrative expenses (1,794) (151) (663) Operating profit 3,233 2,595 5,822 Finance income 4 287 4 94 Profit for the period 3,520 2,599 5,916before taxation Tax charge 6 - - - Net profit for the period 3,520 2,599 5,916 Profit per ordinary share- Basic 7 0.94p 1.29p 2.05p- Diluted 7 0.93p 1.27p 2.02p- Basic (Adjusted for amortisation and shareoption payment) 2.79p 2.23p 4.64p Commoditrade Inc. Statement of Changes in Equity Six months ended 30 June 2007 Share Profit based and Share Share Shares to Revaluation Translation payment loss capital premium be issued reserve reserve reserve account Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2006 103 339 - - - 20 (180) 282Issue of new shares 273 34,123 1,800 - - - - 36,196Cost of issue of new - (1,010) - - - - - (1,010)sharesNet profit for the - - - - - - 5,916 5,916periodCurrency translation - - - - (459) - - (459)At 31 December 2006 376 33,452 1,800 - (459) 20 5,736 40,925(audited) Net profit for the - - - - - - 3,520 3,520periodShare based payment - - - - - 1,365 - 1,365Available for sale - - - 35 - - - 35revaluationCurrency translation - - - - (138) - - (138)At 30 June 2007 376 33,452 1,800 35 (597) 1,385 9,256 45,707(unaudited) Commoditrade Inc. Balance Sheet At 30 June 2007 Unaudited six Note Unaudited months Audited Six ended year months 30 June ended ended 2006 31 30 June (As December 2007 restated) 2006 £'000 £'000 £'000 Assets Non-current assetsInvestment in associate 8 20,614 31,250 26,231Other receivable 10 1,027 1,052 1,052 21,641 32,302 27,283 CurrentAvailable for sale 9 3,237 - 2,064financial assetsTrade and other 10 11,255 4,466 4,772receivablesCash and cash 9,641 216 6,928equivalentsTotal current assets 24,133 4,682 13,764 Total assets 45,774 36,984 41,047 LiabilitiesCurrentTrade and other payables 11 67 404 122Total liabilities 67 404 122 EquityShare capital 13 376 371 376Share premium 33,452 32,570 33,452Shares to be issued 1,800 1,200 1,800Translation reserve (597) - (459)Share based payment 1,385 20 20reserveRevaluation reserve 35 - -Profit and loss account 9,256 2,419 5,736Total equity 45,707 36,580 40,925 Total equity and 45,744 36,984 41,047liabilities Commoditrade Inc. Cash Flow Statement For the six months ended 30 June 2007 Unaudited Unaudited six months Audited Six months ended year ended 30 June 2006 ended 31 30 June 2007 (As restated) December 2006 £'000 £'000 £'000 Operating activitiesProfit after tax 3,520 2,599 5,916Amortisation of intangible asset in associate 5,617 1,875 7,494Share based payment 1,365 - -Change in trade and other receivables (6,458) (4,431) (4,737)Change in trade and other payables (55) (580) (862)Foreign exchange (110) - (459) Net cash inflow/(outflow) from operating 3,879 (537) 7,352 activities Investing activities Purchase of associate - (16,425) (16,416) Purchase of available for sale financial assets (1,166) - (1,177) Net cash outflow from investing activities (1,166) (16,425) (17,593) Financing activities Issue of shares - 18,009 18,000 Share issue costs - (1,010) (1,010) Net cash inflow from financing activities - 16,999 16,990 Net increase in cash and cash equivalents 2,713 37 6,749 Cash and cash equivalents at beginning of period 6,928 179 179 Cash and cash equivalents at end of period 9,641 216 6,928 COMMODITRADE INC. Notes to the interim report For the six months ended 30 June 2007 1 GENERAL INFORMATION The information for the period ended 30 June 2007 does not constitute statutoryaccounts as defined in Section 240 of the Companies Act 1985. The figures forthe year ended 31 December 2006 have been extracted from the 2006 statutoryfinancial statements. The auditors' report on those accounts was unqualifiedand did not contain a statement under section 237(2) of the Companies Act 1985. 2 ACCOUNTING POLICIES Basis of preparation The Company was incorporated as a Corporation in the Cayman Islands which doesnot prescribe the adoption of any particular accounting framework. The Boardhas resolved that the Company will follow International Financial ReportingStandards (IFRS) and apply the Companies Act 1985 when preparing its annualfinancial statements. The figures for the six months ended period ended 30 June2006 have been restated to account for the acquisition of the Tambelan Interestas an interest in associate, rather than as an available for sale financialasset, consistent with the treatment adopted in the 31 December 2006 auditedfinancial statements The principal accounting policies of the Company are set out below. Associates Associates are those entities over which the Company is able to exertsignificant influence but which are neither subsidiaries nor interests in ajoint venture. Investments in associates are initially recognised at cost andsubsequently accounted for using the equity method. On initial acquisition of an associate, the investor's share of the net fairvalue of the associate's identifiable assets, liabilities and contingentliabilities is accounted for under IFRS 3 using the purchase method. Anygoodwill arising is treated in accordance with IFRS 3 and is not amortised butinstead is subject to an annual impairment review. Included in the identifiableassets are intangible assets which meet the relevant recognition criteria. Theunderlying intangible assets are thereafter amortised over their useful life. All subsequent changes to the share of interest in the equity of the associateare recognised in the Company's carrying amount of the investment. Changesresulting from the profit or loss generated by the associate are credited orcharged against "income from associates" in the income statement and thereforeaffect net results of the Company. These changes include subsequentdepreciation, amortisation or impairment of the fair value adjustments of assetsand liabilities. However, when the Company's share of losses in an associate equals or exceedsits interest in the associate, including any other unsecured receivables, theCompany does not recognise further losses, unless it has incurred obligations ormade payments on behalf of the associate. Once the associate then becomesprofit making profits are not recognised until they exceed the share of the lossthat had not previously been recognised. Unrealised gains on transactions between the Company and its associates areeliminated to the extent of the Company's interest in the associates.Unrealised losses are also eliminated unless the transaction provides evidenceof an impairment of the asset transferred. Intangible assets Expenditure on intangible assets, including those in the Company's associates,is capitalised at cost and amortised over its estimated useful economic life. Impairment reviews The Company's assets are subject to impairment testing. For the purposes of assessing impairment, assets are grouped at the lowestlevels for which there are separately identifiable cash flows (cash-generatingunits). As a result, some assets are tested individually for impairment and someare tested at cash-generating unit level. Goodwill in particular is allocatedto those cash-generating units that are expected to benefit from synergies ofthe related business combination and represent the lowest level within theCompany at which management controls the related cash flows. Individual assets or cash-generating units that include goodwill and otherintangible assets with an indefinite useful life or those not yet available foruse are tested for impairment at least annually. All other individual assets orcash-generating units are tested for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's orcash-generating unit's carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of fair value, reflecting market conditionsless costs to sell and value in use, based on an internal discounted cash flowevaluation. Impairment losses recognised for cash-generating units, to whichgoodwill has been allocated, are credited initially to the carrying amount ofgoodwill. Any remaining impairment loss is charged pro rata to the other assetsin the cash generating unit. With the exception of goodwill, all assets aresubsequently reassessed for indications that an impairment loss previouslyrecognised may no longer exist. Financial assets The Company's financial assets include available for sale financial assets, cashand amounts due from associate and other receivables. All financial assets arerecognised on entering into contractual arrangements. All financial assets areinitially recognised at fair value, plus transaction costs. Derecognition of financial assets occurs when the rights to receive cash flowsfrom the investments expire or are transferred and substantially all of therisks and rewards of ownership have been transferred. An assessment forimpairment is undertaken at least at each balance sheet date whether or notthere is objective evidence that a financial asset or a group of financialassets is impaired. Amounts due from associate and other receivables are provided against whenobjective evidence is received that the Company will not be able to collect allamounts due to it in accordance with the original terms of the receivables. Theamount of the write-down is determined as the difference between the asset'scarrying amount and the present value of estimated future cash flows. Available for sale financial assets include non - derivative financial assetsthat are either designated to this category or do not qualify for inclusion inany other categories of financial assets. All financial assets of the categoryare subsequently measured at fair value, unless otherwise disclosed, withchanges in value recognised in equity, net of any effects arising from incometaxes. Gains and losses arising from securities classified as available forsale financial assets are recognised in the income statement when they are soldor when the investment is impaired. In the case of impairment any losspreviously recognised in equity is transferred to the income statement. Gainson equity instruments are not then recycled through the income statement asthese are dealt with in reserves. Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprisecash in hand and amounts repayable on demand with banks and short-term highlyliquid investments which are readily convertible into known amounts of cashwithout notice and which were within three months of maturity when acquired. Equity An equity instrument is any contract that evidences a residual interest in theassets of an entity after deducting all of its liabilities. Share capital is determined using the nominal value of shares that have beenissued. The share premium account represents premiums received on the initial issuing ofthe share capital. Any transaction costs associated with the issuing of sharesare deducted from share premium, net of any related income tax benefits. Shares to be issued represent future shares to be issued under arrangements inplace at the balance sheet date. The revaluation reserve reflects changes in the value of available for salefinancial assets. Foreign currency translation differences are included in the translationreserve. The share based payment reserve represents the value of services provided undershare based payments. The profit and loss account includes all current and prior period results asdisclosed in the income statement. Share based payments All share based payment arrangements are recognised in the financial statements.Details of share based remuneration are set out in note 14 to the interimreport. All services received in exchange for the grant of any share based remunerationare measured at their fair values. These are indirectly determined by referenceto the fair value of the share options/warrants awarded. Their value isappraised at the grant date and excludes the impact of any non-market vestingconditions (for example, profitability and sales growth targets). Share based payments are ultimately recognised as an expense in profit or lossor included as part of the cost of share issues with a corresponding credit tothe share based payment reserve, net of deferred tax where applicable. Ifvesting periods or other vesting conditions apply, the expense is allocated overthe vesting period, based on the best available estimate of the number of shareoptions/warrants expected to vest. Non-market vesting conditions are included inassumptions about the number of options that are expected to become exercisable.Estimates are subsequently revised, if there is any indication that the numberof share options/warrants expected to vest differs from previous estimates. Noadjustment is made to the expense or share issue cost recognised in priorperiods if fewer share options/warrants ultimately are exercised than originallyestimated. Upon exercise of share options/warrants, the proceeds received net of anydirectly attributable transaction costs up to the nominal value of the sharesissued are allocated to share capital with any excess being recorded as sharepremium. Financial liabilities Financial liabilities represent obligations to deliver cash or another financialasset to another entity. The Company's financial liabilities include trade andother payables. Financial liabilities are recognised when the Company becomes a party to thecontractual agreements of the instrument. All interest related charges arerecognised as an expense in "finance cost" in the income statement. Trade payables are recognised at their nominal value. Taxation Current income tax assets and/or liabilities comprise those obligations to, orclaims from, fiscal authorities relating to the current or prior reportingperiod, that are unpaid at the balance sheet date. They are calculated accordingto the tax rates and tax laws applicable to the fiscal periods to which theyrelate, based on the taxable result for the year. All changes to current taxassets or liabilities are recognised as a component of tax expense in the incomestatement. Deferred income taxes are calculated using the liability method on temporarydifferences. This involves the comparison of the carrying amounts of assets andliabilities in the consolidated financial statements with their respective taxbases. In addition, tax losses available to be carried forward as well as otherincome tax credits to the Company are assessed for recognition as deferred taxassets. Deferred tax liabilities are always provided for in full. Deferred tax assetsare recognised to the extent that it is probable that they will be able to beoffset against future taxable income. Deferred tax assets and liabilities arecalculated, without discounting, at tax rates that are expected to apply totheir respective period of realisation, provided they are enacted orsubstantively enacted at the balance sheet date. Most changes in deferred tax assets or liabilities are recognised as a componentof tax expense in the income statement. Only changes in deferred tax assets orliabilities that relate to a change in value of assets or liabilities that ischarged directly to equity are charged or credited directly to equity. Dividends Dividend distributions to shareholders are included in 'other short termfinancial liabilities' when the dividends are approved by the shareholders'meeting. Other provisions, contingent liabilities and contingent assets Other provisions are recognised when present obligations will probably lead toan outflow of economic resources from the Company and they can be estimatedreliably. Timing or amount of the outflow may still be uncertain. A presentobligation arises from the presence of a legal or constructive commitment thathas resulted from past events, for example, legal disputes or onerous contracts. Provisions are measured at the estimated expenditure required to settle thepresent obligation, based on the most reliable evidence available at the balancesheet date, including the risks and uncertainties associated with the presentobligation. Any reimbursement expected to be received in the course ofsettlement of the present obligation is recognised, if virtually certain as aseparate asset, not exceeding the amount of the related provision. Where thereare a number of similar obligations, the likelihood that an outflow will berequired in settlement is determined by considering the class of obligations asa whole. In addition, long term provisions are discounted to their presentvalues, where time value of money is material. All provisions are reviewed at each balance sheet date and adjusted to reflectthe current best estimate. In those cases where the possible outflow of economic resource as a result ofpresent obligations is considered improbable or remote, or the amount to beprovided for cannot be measured reliably, no liability is recognised in thebalance sheet. Probable inflows of economic benefits to the Company that do notyet meet the recognition criteria of an asset are considered contingent assets. Functional currency The functional currency of the Company is United States dollars. However, forpresentation purposes, the financial statements are prepared in United Kingdomsterling. Transactions in foreign currencies are translated into the presentationalcurrency at the approximate rates ruling on the dates of the transactions.Monetary assets and liabilities denominated in foreign currencies are translatedinto the presentational currency at the approximate rates ruling on the balancesheet date. Gains and losses arising on exchange from the functional to thepresentational currency are taken to the currency translation reserve in equity. Financial instruments Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the entityafter deducting all of its financial liabilities. Where the contractual obligations of financial instruments (including sharecapital) are equivalent to a similar debt instrument, those financialinstruments are classed as financial liabilities. Financial liabilities arepresented as such in the balance sheet. Finance costs and gains or lossesrelating to financial liabilities are included in the statement of total return.Finance costs are calculated so as to produce a constant rate of return on theoutstanding liability. Where the contractual terms of share capital do not have any terms meeting thedefinition of a financial liability then this is classed as an equityinstrument. Dividends and distributions relating to equity instruments aredebited direct to equity. Key sources of estimation uncertainty and critical judgements The key source of estimation uncertainty and critical judgement in preparing theinterim report concerns the valuation of the share options granted and theestimate of the period over which the share options are likely to vest. TheDirectors have decided that a vesting period of three years is most likely andtherefore the fair value of share options granted is being charged to the incomestatement over this period. 3 SEGMENTAL REPORTING (a) By business segment (primary segment): As defined under International Accounting Standard 14 (IAS14), the only materialbusiness segment the Company has is that of an investment company. (b) By geographical segment (secondary segment): Under the definitions contained in IAS 14, the only material geographic segmentthat the Company operates in is currently Dubai. 4 FINANCE INCOME Unaudited Unaudited Audited six months six months year ended ended ended 31 December 30 June 2007 30 June 2006 2006 £'000 £'000 £'000 Interest paid and payable (45) - -Interest received and receivable 332 4 94 287 4 94 5 EMPLOYEES REMUNERATION Employee benefits expense Expense recognised for employee benefits is analysed below: Unaudited Unaudited Audited six months six months year ended ended ended 31 December 30 June 2007 30 June 2006 2006 £'000 £'000 £'000 Directors fees 133 20 109Share based payment charge 1,365 - - 1,498 20 109 The average number of persons (including directors)employed by the Company during the period was: 5 3 5 6 TAX There is no tax charge for any period. The Company does not operate in theUnited Kingdom and there is no tax arising on its operations. The relationshipbetween the expected tax expense at 30% and the tax expense actually recognisedin the income statement can be reconciled as follows: Unaudited six months Audited Unaudited ended year six months 30 June ended ended 2006 31 30 June (As December 2007 restated) 2006 £'000 £'000 £'000 Profit for the period 3,520 2,599 5,916before taxation Tax rate 30% 30% 30% Expected tax expense 1,056 780 1,775Income not subject to (1,056) (780) (1,775)taxActual tax expense - - - 7 PROFIT PER ORDINARY SHARE The calculation of the basic profit per ordinary share is based on the netprofit for the period of £3,520,000 (period ended 30 June 2006 : £2,599,000 asrestated; year ended 31 December 2006 : £5,916,000) divided by the weightedaverage number of shares in issue during the period of 376,273,114 (period ended30 June 2006 : 200,950,417; year ended 31 December 2006 : 288,715,832). The diluted profit per ordinary share is based on a weighted average number ofshares in issue on a fully diluted basis of 380,035,845, (period ended 30 June2006 : 204,663,148; year ended 31 December 2006 : 292,478,563). Profit per ordinary share adjusted to exclude the impact of amortisation ofintangible assets within the associate and the share options charge iscalculated as follows: Unaudited six Unaudited months Audited six ended year months 30 June ended ended 2006 31 30 June (As December 2007 restated) 2006 £'000 £'000 £'000 Profit for the 3,520 2,599 5,916period beforetaxationAmortisation of 5,617 1,875 7,494intangible assetwithin associateShare options charge 1,365 - - Adjusted profit for 10,502 4,474 13,410the period beforetaxation Based on the adjusted profit for the period before taxation and the basic andfully diluted weighted average number of shares in issue as detailed above, thebasic and fully diluted adjusted profit per share is as follows: Unaudited Unaudited six Audited six months year months ended ended ended 30 June 2006 31 30 June (As December 2007 restated) 2006 pence pence pence Basic 2.79 2.23 4.64Diluted 2.76 2.19 4.58 8 INVESTMENT IN ASSOCIATE Unaudited Unaudited six months Audited six months ended year ended ended 30 June 2006 31 December 30 June 2007 (As restated) 2006 £'000 £'000 £'000 Additions at cost - 33,125 33,725Profit for the period 10,444 4,621 13,979Transferred to prepayments and accrued income (2,366) - -Foreign exchange 109 (235) (239)Amortisation (5,617) (1,875) (7,494) 2,570 35,636 39,971Included in trade and other receivables (8,187) (4,386) (4,473)Cash received from associate - - (9,267)Net movement (5,617) 31,250 26,231Net book value brought forward 26,231 - -Net book value carried forward 20,614 31,250 26,231 9 AVAILABLE FOR SALE FINANCIAL ASSETS The available for sale financial assets represent the following:- 1. Cost of acquiring a 75% interest in the net profits of commoditiesinvestment management company AMCO Commodities LLP ("AMCO") together with theCompany's investment in the AMCO Commodities Fund Limited which is managed byAMCO. 2. Costs of acquiring shares in LME Holdings Limited. In accordance with the accounting policy of the Company all available for salefinancial assets are measured at fair value. 10 TRADE AND OTHER RECEIVABLES Unaudited Unaudited Audited 30 June 30 June 31 2007 2006 December 2006 £'000 £'000 £'000 Non-currentOther 1,027 1,052 1,052receivables CurrentAmounts due from 8,187 4,386 4,473associateOther 342 69 142receivablesPrepayments and 2,726 11 157accrued incomeTrade and other 11,255 4,466 4,772receivables, net 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 repayableon termination of the agreement with Sucden (UK) Limited. Amounts due from associate and other receivables are usually due within 30 - 120days and do not bear any effective interest rate. Prepayments and accrued income includes a prepaid bonus of £2.4 million to thetrading team. The fair value of these short term financial assets is not individuallydetermined as the carrying amount is a reasonable approximation of fair value. 11 TRADE AND OTHER PAYABLES Unaudited Unaudited Audited 30 June 30 June 31 December 2007 2006 2006 £'000 £'000 £'000 Trade and other 40 290 91payablesOther creditors - 95 -Accruals and 27 19 31deferred incomeTrade and other 67 404 122payables, net The fair value of trade and other payables has not been disclosed as, due totheir short duration, management considers the carrying amounts recognised inthe balance sheet to be a reasonable approximation of their fair value. 12 DEFERRED TAX ASSETS AND LIABILITIES There are no deferred taxes arising from temporary differences at 30 June 2007,30 June 2006 or 31 December 2006. 13 SHARE CAPITAL Unaudited Unaudited Audited 30 June 30 June 31 December 2007 2006 2006 £'000 £'000 £'000Authorised1,000,000,000 ordinary shares of 0.1p 1,000 1,000 1,000 Allotted, issued and fully paid376,273,114 (30 June 2006: 371,273,114; 31 December 2006: 376,273,114) ordinary shares of 0.1p 376 371 376 Warrants On 8 March 2005 a warrant was issued to Strand Partners Limited, the Company'sNominated Advisor, in connection with their role in the admission of the Companyto the AIM market. The warrant entitles Strand Partners Limited to subscribe,at a price of 0.1p per share, for such number of ordinary shares as areequivalent (on a fully diluted basis) to one per cent. of the issued ordinaryshare capital of the Company at that time. The issued warrant may be exercisedat 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-Scholesvaluation model and £20,000 of share based expense has been included in theshare premium account as a cost of the admission to AIM which gave rise to ashare based payment reserve. No liabilities were recognised due to share basedpayment transactions. 14 SHARE OPTIONS The Company has adopted an employee Share Option Scheme (the "Employee ShareOption Scheme") in order to incentivise key management and staff. The fairvalue of options granted was determined using the Black- Scholes valuationmodel. Significant inputs into the calculations were as follows: • 100% volatility based on expected share price (ascertained by reference to historic share prices of both the Company and comparable listed companies)• a risk free interest rate of 5.25% At 30 June 2007, the Company had the following options outstanding: Market price at date of At 30 June Fair value Grant issue 2007 at 30 JuneDate of original grant Dates exercisable price Number 2007 After 30 April 2010 subject to 1 May 2007 any take over of the Company 0.1p 54.0p 45,500,000 53.992p A share based payment expense of £1,365,000 has been recognised in the incomestatement for the period ended 30 June 2007 (period ended 30 June 2006: £nil;year ended 31 December 2006 : £nil). 15 RELATED PARTY TRANSACTIONS In the period ended 30 June 2007 companies within a group headed by ashareholder in the Company, charged fees amounting to £221,853 for accountingand administrative services to the Company (period ended 30 June 2006 :£207,611; year ended 31 December 2006: £444,763). 16 FINANCIAL INSTRUMENTS The Company uses financial instruments comprising cash and equity investments.The Company seeks to manage financial risk, to ensure sufficient liquidity isavailable to meet foreseeable needs and to invest cash safely and profitably.The Company is exposed to a variety of financial risks which result from bothits operating and investing activities. The Company's risk management isclosely monitored by the board of directors, and focuses on actively securingthe Company's short to medium term cash flows by minimising the exposure tofinancial markets. Borrowing facilitiesThe Company has no borrowing facilities available to it. Interest rate riskThe Company finances its operations through cash at bank and through sharecapital raised. All financial assets earn interest at floating rates, basedupon Bank of England base rates. The Company seeks to manage financial risks to ensure sufficient liquidity isavailable to meet foreseeable needs and to invest cash assets safely andprofitably. The Company is exposed to interest rate risk as it has significantcash deposits. Exposures are managed by depositing funds in short term bankaccounts. The cash and cash equivalents are invested such that the maximumavailable interest rate is achieved. The Company currently has no financial liabilities with floating interest rates. Market price riskThe Company's exposure to market price risk consists mainly of uncertaintyconcerning future movements in the level or volatility of market prices ofmetals traded on the London Metals Exchange in which the trading team hold aposition. This risk arises due to the Company bearing the full losses, ifincurred, of the trading team. This risk is managed by the use of variousmechanisms put in place by Sucden (UK) Limited who control the trading team.The Company monitors the exposure via regular reports from Sucden (UK) Limited. Foreign currency risk The principal foreign currency in which the Company earns income is UnitedStates Dollars and therefore the Company's profits can be affected significantlyby movements in US dollar exchange rates. The Company does not seek to hedgethis exposure, instead it operates bank accounts in both dollars and sterling inan attempt to mitigate its downside exposure to currency fluctuations. Included within trade and other receivables in an amount of £8.2 million whichis receivable in US$. -------------------------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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