Interim Results

25th Sep 2008 07:00



25 September 2008

Commoditrade Inc.

("Commoditrade" or "the Group")

Interim results for the six months ended 30 June 2008

Commoditrade Inc., the AIM-listed commodities investment group, announces its interim results for the six months ended 30 June 2008. 

Results

Gross revenue for the period was £7.8 million before deduction of clearing and administration fees (2007: H1 revenue: £19.8 million and H2 revenue: £14.1 million).

Net cash flow from operating activities was broadly in line with the equivalent period in 2007 at £3.7 million (2007: £3.9 million).

As at 30 June 2008 the Company had no debt and its cash balances stood at £1.4 million after £3.9 million of cash was used in the final part of the Company's share buy-back programme and a final dividend was paid utilising a further £5.0 million of cash.

Operational clearing and related administration costs were lower at £1.9 million (2007 H1: £4.6 million).

Net income for the period after direct trading costs and bonuses and before amortisation of intangible assets, costs associated with the issue of share options and sign-on bonus payments to the trading team, was £2.15 million (2007: £10.5 million).

Total non-cash charges during the period amounted to £14.1 million consisting of amortisation of intangible assets of £5.9 million and costs associated with the issue of share options of £8.2 million, resulting in a loss before tax (after amortisation of intangible asset, share based payments and trading team sign-on bonuses) of £12.7 million (2007: profit £3.5 million).

The Company announced that it completed its share buy-back programme on 25 February 2008. During the last period of the programme the Company completed the purchase of 14,755,000 shares representing 3.8 per cent of the Company's issued share capital immediately prior to the buy-back, at a total cost of £3.9 million. Since the commencement of the programme on 26 November 2007, the Company purchased 45,505,000 shares representing 11.9 per cent. of the Company's issued share capital immediately prior to the buy-back, at a total cost of £11.22 million.

David Phipps was appointed as new Chief Executive on 3 September 2008 having joined the Group in May 2008 to advise the Board on strategy and the development of the business.

Strategy and Outlook

Commenting, David Phipps, New Chief Executive of Commoditrade, said:

"During the second quarter the management team commenced the first phase of a reorganisation of the Company's operational base to support the delivery of the strategic objectives to grow the business. As part of this restructuring the Company is now clearly delineated into brokerage and strategic trading and Commoditrade will look to replicate this operating base as it broadens its commodity portfolio to build a more diversified platform of revenue streams.

"The next phase of the Company's strategy is underway to achieve a scaleable corporate infrastructure that will optimise operational efficiency and also provide a flexible platform that will not only complement and enhance the existing base metals brokerage and trading operations but enable the Company to develop capabilities to provide additional products and services with the resultant diversification of revenue streams. 

In addition, the Board is analysing opportunities that can leverage potential strategic partners and additional distribution channels, initially for the Company's base metals operation.

"The Board is confident that the changes will give Commoditrade the platform it needs to grow the business going forward and early signs from trading in the third quarter indicate a return to more normalised trading conditions for the Company's core operations. "

Enquiries:  www.commoditrade.net

David Phipps, Chief Executive Commoditrade Inc	tel: +44(0)20 7245 1100 (on 25 September]
Simon Raggett, Strand Partners	tel: +44(0)20 7409 3494
John Bick, Hansard Group	tel: +44(0)20 7245 1100

  Commoditrade Inc.

Interim Statement

For the six months ended 30 June 2008

Results

In the six months to 30 June 2008 the Company experienced challenging market conditions at the same time as implementing a significant reorganisation of the business. Despite this, the LME trading team generated revenue of £7.75 million in the first six months generating a profit of £2.15 million after operating costs and trader bonuses but before amortisation of intangible assets, costs associated with the issue of share options and sign-on bonus payments.  

After deduction of non-cash items for amortisation of intangible assets of £5.9 million and costs associated with the issue of share options of £8.2 million and a cash charge relating to sign-on bonus payments to the trading team of £0.8 million, there was a loss for the period of £12.7 million (2007: profit £3.5 million). There was a loss per ordinary share for the period of 3.4 pence. 

Following an agreement reached in November 2007 with Sucden (UK) Limited, with effect from 1 May 2008, the provision of clearing and administration services were amended to a fix based fee structure from a percentage of trading profits. 

Net cash flow from operating activities was broadly in line with the equivalent period in 2007 at £3.7 million (2007: £3.9 million). As at 30 June 2007 the Company had no debt and its cash balances stood at £1.4 million after £3.9 million of cash was used in the final part of the Company's share buy-back programme and a final dividend utilising a further £5.0 million of cash. In addition, the Company also has £3.0 million of non-current other receivables which are held on deposit with the Company's clearer.

As of 25 February 2008 the Company concluded its share buy-back programme which resulted in a total of £3.9 million being spent in the first half of 2008. During the programme, which commenced in November 2007, the Company purchased a total of 45,505,000 shares representing 11.9% of the issued share capital of the Company as at 26 November 2008. As announced in the preliminary results statement 31 December 2007 at the board approved a final dividend payment at a cost to the Company of £5.0 million. During the last 12 months the Company has returned a total of £15 million in cash to shareholders and remains debt free.

During the period the Company's newly incorporated CMM Asset Management ("CMMAM"), a wholly owned subsidiary of Commoditrade, commenced trading. CMMAM was formed to focus specifically on strategic trading in base metals futures and is overseen by Chris Adams, Group Investment Director and Dean Carr, Head of Strategic Trading. During the period the new operation has traded satisfactorily and in line with management expectations at this early stage, having only been operational for two months during the period. 

Senior hires have been made during the year to maintain the strength of the core LME trading team.

Board changes 

On 3 September the Company announced that David Phipps joined the Board as Chief Executive of the Company. David joined Commoditrade in May 2008, advising the Board on strategy and the reorganisation of the business. He has a very successful track record in building and running trading and broking operations in a number of segments in the commodities sector including base metals, energy, natural gas and power, emissions, soft commodities, agricultural and freight. He was latterly Co-Global Head of Commodities at UBS AG and prior to that was head of commodities at ABN AMRO Futures having joined from Merrill Lynch in 1996.

Graham Butt stepped down as Chief Executive, becoming Non-Executive Deputy Chairman and Graham Porter, Non-Executive Director, was appointed Non-Executive Chairman and Adrian Collins moved from Chairman to Non-Executive Director and Chairman of the Audit Committee.

Heading up all investment operations is Chris Adams, Group Investment Director, who is responsible for all group investment operations on an international basis and heads-up CMMAM. Andy Dobie is Operations Director, an executive role where he is responsible for day-to-day operations relating to the LME Team. 

Strategy and Outlook

During the second quarter the management team commenced the first phase of a reorganisation of the Company's operational base to support the delivery of the strategic objectives to grow the business. As part of this restructuring the Company is now clearly delineated into brokerage and strategic trading and Commoditrade will look to replicate this operating base as it broadens its commodity portfolio to build a more diversified platform of revenue streams.

The next phase of the Company's strategy is underway to achieve a scaleable corporate infrastructure that will optimise operational efficiency and also provide a flexible platform that will not only complement and enhance the existing base metals brokerage and trading operations but enable the Company to develop capabilities to provide additional products and services with the resultant diversification of revenue streams. 

In addition, the Board is analysing opportunities that can leverage potential strategic partners and additional distribution channels, initially for the Company's base metals operation.

The Board is confident that the changes will give Commoditrade the platform it needs to grow the business going forward and early signs from trading in the third quarter indicate a return to more normalised trading conditions for the Company's core operations. 

25 September 2008

Commoditrade Inc.

Consolidated Income Statement

For the six months ended 30 June 2008

			Six months ended 30 June 2008	Six months ended 30 June 2008	Six months ended 30 June 2008	Six months ended 30 June 2007	Six months ended 30 June 2007	Six months ended 30 June 2007
	Note		Prior to non cash and sign on bonus costs	Non cash and sign on bonus costs	Total	Prior to non cash and sign on bonus costs	Non cash and sign on bonus costs	Total
			£'000	£'000	£'000	£'000	£'000	£'000
LME trading revenues			7,750	-	7,750	19,799	-	19,799
Clearing and related costs			(1,895)	-	(1,895)	(4,615)	-	(4,615)
Direct costs, financing charges and trader bonuses			(3,006)	-	(3,006)	(4,740)	-	(4,740)
Amortisation of intangible asset			-	(5,872)	(5,872)	-	(5,617)	(5,617)
			–––––––	–––––––	–––––––	–––––––	–––––––	–––––––
Net income/(loss) from associate		6	2,849	(5,872)	(3,023)	10,444	(5,617)	4,827
Other income			134	-	134	200	-	200
Administrative expenses -share based payment			-	(8,218)	(8,218)	-	(1,365)	(1,365)
Administrative expenses - sign-on bonus payments			-	(757)	(757)	-	-	-
Administrative expenses - other			(975)	-	(975)	(429)	-	(429)
Total administrative expenses			(975)	(8,975)	(9,950)	(429)	(1,365)	(1,794)
			–––––––	–––––––	–––––––	–––––––	–––––––	–––––––
Operating profit/(loss)			2,008	(14,847)	(12,839)	10,215	(6,982)	3,233
Finance income			147	-	147	287	-	287
			–––––––	–––––––	–––––––	–––––––	–––––––	–––––––
Profit/(loss) for the year before tax			2,155	(14,847)	(12,692)	10,502	(6,982)	3,520
Tax charge		4	-	-	-	-	-	-
			–––––––	–––––––	–––––––	–––––––	–––––––	–––––––
Net profit/(loss) for the year			2,155	(14,847)	(12,692)	10,502	(6,982)	3,520
			–––––––	–––––––	–––––––	–––––––	–––––––	–––––––
Basic (loss)/profit per share (pence)		5			(3.40p)			0.93p
					–––––––			–––––––
Diluted (loss)/profit per share (pence)		5			(3.40p)			0.93p
					–––––––			–––––––

 

Commoditrade Inc. Consolidated Income Statement For the year ended 30 December 2007
	Note	Prior to non cash and sign on bonus costs	Non cash and sign on bonus costs	Total
		£'000	£'000	£'000
LME trading revenues		33,880	-	33,880
Clearing and related costs		(8,470)	-	(8,470)
Direct costs, financing charges and trader bonuses		(7,834)	-	(7,834)
Amortisation of intangible asset		-	(12,063)	(12,063)
		–––––––	–––––––	–––––––
Net income/(loss) from associate	6	17,576	(12,063)	5,513
Other income		416	-	416
Administrative expenses -share based payment		-	(5,459)	(5,459)
Administrative expenses - sign-on bonus payments		-	(5,487)	(5,487)
Administrative expenses - other		(1,888)	-	(1,888)
Total administrative expenses		(1,888)	(10,946)	(12,834)
		–––––––	–––––––	–––––––
Operating profit/(loss)		16,104	(23,009)	(6,905)
Finance income		644	-	644
		–––––––	–––––––	–––––––
Profit/(loss) for the year before tax		16,748	(23,009)	(6,261)
Tax charge	4	-	-	-
		–––––––	–––––––	–––––––
Net profit/(loss) for the year		16,748	(23,009)	(6,261)
		–––––––	–––––––	–––––––
Basic loss per share (pence)	5			(1.66)p
				–––––––
Diluted loss per share (pence)	5			(1.66)p
				–––––––

 

Commoditrade Inc. Consolidated Statement of Changes in Equity Six months ended 30 June 2008
	Share capital	Capital redemption reserve	Share premium	Shares to be issued	Transla- tion reserve	Profit and loss account	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2007	376	-	33,452	1,800	(459)	5,756	40,925
Currency translation	-	-	-	-	(470)	-	(470)
Available for sale assets	-	-	-	-	-	(119)	(119)
Net expense recognised in equity	-	-	-	-	(470)	(119)	(589)
Net loss for the year	-	-	-	-	-	(6,261)	(6,261)
Total recognised income and expenses for year	-	-	-	-	(470)	(6,380)	(6,850)
Issue of new shares	6	-	3,279	(1,800)	-	-	1,485
Shares cancelled	(40)	40	-	-	-	(10,225)	(10,225)
Share based payment	-	-	-	-	-	5,459	5,459
At 31 December 2007 (audited)	342	40	36,731	-	(929)	(5,390)	30,794
Currency translation	-	-	-	-	19	-	19
Available for sale assets	-	-	-	-	-	(259)	(259)
Net expense recognised in equity	-	-	-	-	19	(259)	(240)
Net loss for the period	-	-	-	-	-	(12,692)	(12,692)
Total recognised income and expenses for period	-	-	-	-	19	(12,951)	(12,932)
Issue of new shares	13	-	-	-	-	-	13
Shares cancelled	(6)	6	-	-	-	(1,039)	(1,039)
Share based payment	-	-	-	-	-	8,218	8,218
Dividends	-	-	-	-	-	(5,060)	(5,060)
At 30 June 2008 (unaudited)	349	46	36,731	-	(910)	(16,222)	19,994

Commoditrade Inc. Consolidated Balance Sheet At 30 June 2008
	Note	Unaudited Six months ended 30 June 2008 £'000	Unaudited six months ended 30 June 2007 £'000	Audited year ended  31 December 2007 £'000
Assets
Non-current assets
Investment in associate	6	9,781	20,614	15,653
Other receivable	8	3,013	1,027	1,022
		12,794	21,641	16,675
Current
Available for sale financial assets	7	3,232	3,237	3,503
Trade and other receivables	8	2,696	11,255	4,934
Cash and cash equivalents		1,357	9,641	8,636
Total current assets		7,285	24,133	17,073
Total assets		20,079	45,774	33,748
Liabilities
Current
Trade and other payables	9	85	67	2,954
Total liabilities		85	67	2,954
Equity
Share capital	10	349	376	342
Capital redemption reserve		46	-	40
Share premium		36,731	33,452	36,731
Shares to be issued		-	1,800	-
Translation reserve		(910)	(597)	(929)
Profit and loss account		(16,222)	10,676	(5,390)
Total equity		19,994	45,707	30,794
Total equity and liabilities		20,079	45,774	33,748

Commoditrade Inc. Consolidated Cash Flow Statement For the six months ended 30 June 2008
		Unaudited Six months ended 30 June 2008 £'000	Unaudited six months ended 30 June 2007 £'000	Audited year ended  31 December 2007 £'000
Operating activities
(Loss)/profit after tax		(12,692)	3,520	(6,261)
Amortisation of intangible asset in associate		5,872	5,617	12,063
Share based payment		8,218	1,365	5,459
Change in trade and other receivables		2,238	(6,458)	(132)
Change in trade and other payables		(62)	(55)	25
Foreign exchange		55	(110)	(451)
Net cash inflow from operating activities		3,629	3,879	10,703
Investing activities
Purchase of other receivable		(2,009)	-	-
Purchase of available for sale financial assets		-	(1,166)	(1,577)
Net cash outflow from investing activities		(2,009)	(1,166)	(1,577)
Financing activities
Purchase of own shares		(3,852)	-	(7,418)
Issue of shares		13	-	-
Dividends paid		(5,060)	-	-
Net cash outflow from financing activities		(8,899)	-	(7,418)
Net (decrease)/increase in cash and cash equivalents		(7,279)	2,713	1,708
Cash and cash equivalents at beginning of period		8,636	6,928	6,928
Cash and cash equivalents at end of period		1,357	9,641	8,636

Commoditrade Inc. 

Consolidated Income Statement

For the six months ended 30 June 2008

1. general information

The information for the period ended 30 June 2008 does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The figures for the year ended 31 December 2007 have been extracted from the 2007 statutory financial statements. The auditors' report on those accounts was unqualified and 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 does not prescribe the adoption of any particular accounting framework. The Board has resolved that the Group will follow International Financial Reporting Standards (IFRS) and apply the Companies Act 1985 when preparing its annual financial statements.

The principal accounting policies of the Group are set out below.

Basis of consolidation

The consolidated financial information incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to the balance sheet date. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

Associates

Associates are those entities over which the Group is able to exert significant influence but which are neither subsidiaries nor interests in a joint venture. Investments in associates are initially recognised at cost and subsequently accounted for using the equity method. 

On initial acquisition of an associate, the investor's share of the net fair value of the associate's identifiable assets, liabilities and contingent liabilities is accounted for using the purchase method. Any goodwill arising, which represents the excess of the cost of acquisition over fair value of the identifiable assets and liabilities acquired, is treated in accordance with IFRS 3 and is not amortised but instead is subject to an annual impairment review. Included in the identifiable assets are intangible assets which meet the relevant recognition criteria. The underlying intangible assets are thereafter amortised over their useful life.

All subsequent changes to the share of interest in the equity of the associate are recognised in the Group 's carrying amount of the investment. Changes resulting from the profit or loss generated by the associate are charged against "net income from associate" in the income statement and therefore affect net results of the Group. These changes include impairment or the fair value adjustments of assets and liabilities.

However, when the Group 's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Once the associate then becomes profit making, profits are not recognised until they exceed the share of the loss that had not previously been recognised.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Intangible assets

Expenditure on intangible assets, including those in the Group's associates, is capitalised at cost, which represents fair value at the acquisition date, and amortised over its estimated useful economic life. After initial recognition intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Dividends

Dividend distributions to shareholders are included in 'other short term financial liabilities' when the dividends are approved by the shareholders' meeting.

Impairment reviews

The Group's assets are subject to impairment testing.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

Individual assets or cash-generating units that include intangible assets with an indefinite useful life or those not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised in the income statement for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell and value in use, based on an internal discounted cash flow evaluation. Any impairment loss is charged pro rata to the assets in the cash generating unit. An impairment loss is reversed if there has been a favourable change in the estimates used to determine the assets recoverable amount and only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of amortisation, if no impairment loss had been recognised.

Financial assets

The Group's financial assets include available for sale financial assets, cash and cash equivalents, amounts due from associate and other receivables. 

All financial assets are recognised on entering into contractual arrangements. All financial assets are initially recognised at fair value, plus transaction costs.

Derecognition of financial assets occurs when the rights to receive cash flows from the investments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. An assessment for impairment is undertaken at least at each balance sheet date whether or not there is objective evidence that a financial asset or a group of financial assets is impaired.

Amounts due from associate and other receivables are subsequently measured at amortised cost using the effective interest method. They are provided against when objective evidence is received that the Group will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows.

Available for sale financial assets include non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any other categories of financial assets. All financial assets of the category are subsequently measured at fair value, unless otherwise disclosed, with changes in value recognised in equity, net of any effects arising from income taxes. Gains and losses arising from securities classified as available for sale financial assets are recognised in the income statement when they are sold or when the investment is impaired. In the case of impairment any loss previously recognised in equity is transferred to the income statement. Gains on equity instruments are not then recycled through the income statement as these are dealt with in reserves.

When a decline in the fair value of an available for sale investment has been recognised directly in equity, and there is objective evidence that the asset is impaired, the cumulative loss that has been recognised directly in equity is removed from equity and recognised in the income statement even though the financial asset has not been derecognised. Impairment losses previously recognised on equity instruments will not be reversed to the income statement in subsequent periods. Impairment losses previously recognised in the income statement on debt securities are subsequently reversed if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

Available for sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments, are measured at cost less any identified impairment losses at each balance sheet date subsequent to initial recognition. An impairment loss is recognised in the income statement when there is objective evidence that the asset is impaired. The amount of the impairment loss is measured as the difference between the carrying amount of the asset and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not reverse in subsequent periods.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and amounts repayable on demand with banks and short-term highly liquid investments which are readily convertible into known amounts of cash without notice, are subject to the insignificant risk of changes in value and which were within three months of maturity when acquired.

Equity

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

Share capital is determined using the nominal value of shares that have been issued.

The capital redemption reserve represents the nominal value of shares cancelled on the purchase of own shares in order to maintain the capital base of the Company.

The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Shares to be issued represent future shares to be issued under arrangements in place at the balance sheet date.

Foreign currency translation differences recognised directly in equity are included in the translation reserve.

Retained earnings includes all current and prior period results as disclosed in the income statement together with the cumulative amount of share based expenses and movements in available for sale financial assets which are both transferred to equity.

Share based payments

All share based payment arrangements, granted after 7 November 2002 and not vested on 6 January 2005, are recognised in the financial statements. The Group operates equity settled share based remuneration plans for the remuneration of its employees and has issued a share warrant.

All services received in exchange for the grant of any share based remuneration are measured at their fair values. These are indirectly determined by reference to the fair value of the share options/warrants awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets).

Share based payments are ultimately recognised as an expense in the income statement with a corresponding credit to retained earnings in equity, net of deferred tax where applicable. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options/warrants expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised, if there is any indication that the number of share options/warrants expected to vest differs from previous estimates. No adjustment is made to the expense or share issue cost recognised in prior periods if fewer share options/warrants ultimately are exercised than originally estimated.

Upon exercise of share options/warrants, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium.

Financial liabilities

Financial liabilities represent obligations to deliver cash or another financial asset to another entity. The Group's financial liabilities include trade and other payables.

Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All financial liabilities are recognised initially at fair value, net of direct issue costs, and are subsequently recorded at amortised cost using the effective interest method with interest related charges recognised as an expense in the income statement.

Taxation

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable result for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in the income statement.

Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the financial statements with their respective tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability, unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in associates is not provided if reversal of the temporary differences can be controlled by the Group and it is probable the reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

Most changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement. Only changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities that is charged directly to equity are charged or credited directly to equity.

Provisions, contingent liabilities and contingent assets

Provisions are recognised when present obligations will probably lead to an outflow of economic resources from the Group and they can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events, for example, legal disputes or onerous contracts. 

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the balance sheet date, including the risks and uncertainties associated with the present obligation. Any reimbursement expected to be received in the course of settlement of the present obligation is recognised, if virtually certain as a separate asset, not exceeding the amount of the related provision. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. In addition, long term provisions are discounted to their present values, where time value of money is material.

All provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.

In those cases where the possible outflow of economic resource as a result of present obligations is considered improbable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognised in the balance sheet. Probable inflows of economic benefits to the Group that do not yet meet the recognition criteria of an asset are considered contingent assets. 

Functional currency

The functional currency of the Group is United States dollars. However, for presentation purposes, the financial statements are prepared in United Kingdom sterling. The Group has selected a presentation currency that differs from the functional currency as the Company is listed on AIM.

Transactions in foreign currencies are translated into the functional currency at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that are measured at historic cost in a foreign currency are translated at the exchange rate at the date of transaction. Non-monetary assets that are measured at fair value in a foreign currency are translated into the functional currency using the exchange rates at the date when the fair value was determined

Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the income statement in the period in which they arise. Exchange differences on non-monetary items are recognised in the statement of changes in equity to the extent that they relate to a gain or loss on that non-monetary item taken to the statement of changes in equity, otherwise such gains and losses are recognised in the income statement.

Transactions in foreign currencies are translated into the presentational currency at the approximate rates ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the presentational currency at the approximate rates ruling on the balance sheet date. Gains and losses arising on exchange from the functional to the presentational currency are taken to the currency translation reserve in equity.

Financial instruments

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

Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the income statement. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability.

Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity.

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 fair value of the available for sale financial assets, and

the assumptions used to calculate the fair value of share options.

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

the accounting for the Tambalan Interest as an associate on the basis the Group has significant influencebut not control;

the use of the functional currency of United States Dollars as that is the currency in which the majority of the associates transactions are undertaken;

the existence of the intangible asset in the associate;

the inclusion in the income statement of an analysis of the net income from associate as the Directors consider this is essential to understand the financial information of the Group and 

the categorisation of certain financial assets as available for sale.

3. segmental reporting

(a) By business segment (primary segment):

As defined under International Accounting Standard 14 (IAS14), 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 IAS 14, the only material geographic segment that the Group operates in is currently Europe.

4. tax 

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 profit of the associate is not taxable as profits are remitted to Switzerland to a non Swiss company and are therefore not taxable. The relationship between the expected tax expense at 30% and the tax expense/income actually recognised in the income statement can be reconciled as follows:

	Unaudited six months ended 30 June 2008 £'000	Unaudited six months ended 30 June 2007 £'000	Audited year ended  31 December 2007 £'000
(Loss)/profit for the period before taxation	(12,692)	3,520	(6,261)
Tax rate	30%	30%	30%
Expected tax (credit)/expense	(3,808)	1,056	(1,878)
Losses/(income) not subject to tax	3,808	(1,056)	1,878
Actual tax expense	-	-	-

5. (LOSS)/EARNINGS per share

The calculation of the basic (loss)/earnings per share is based on the net loss for the period of £12,692,000 (period ended 30 June 2007 : profit £3,520,000, year ended 31 December 2007 : loss £6,261,000) divided by the weighted average number of shares in issue during the period of 373,439,054 (period ended 30 June 2007 : 379,273,114, year ended 31 December 2007 : 377,118,251).

The diluted profit per share is based on a weighted average number of shares in issue on a fully diluted basis of 376,931,735, (period ended 30 June 2007 : 380,035,845, year ended 31 December 2007 : 380,538,732).

Profit 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 2008 £'000	Unaudited six months ended 30 June 2007 £'000	Audited year ended  31 December 2007 £'000
Net (loss)/profit for the period	(12,692)	3,520	(6,261)
Amortisation of intangible asset within associate	5,872	5,617	12,063
Share options charge	8,218	1,365	5,459
Adjusted net profit for the period	1,398	10,502	11,261

Based on the adjusted net profit for the period and the basic and fully diluted weighted average number of shares in issue as detailed above, the basic and fully diluted adjusted profit per share is as follows: 

	Unaudited six months ended 30 June 2008 Pence	Unaudited six months ended 30 June 2006 pence	Audited year ended  31 December 2007 pence
Basic	0.37	2.77	2.99
Diluted	0.37	2.76	2.96

6. investment in associate

	Unaudited six months ended 30 June 2008 £'000	Unaudited six months ended 30 June 2007 £'000	Audited year ended  31 December 2007 £'000
	Unaudited six months ended 30 June 2008 £'000	Unaudited six months ended 30 June 2007 £'000	Audited year ended  31 December 2007 £'000
Additions at cost	-	-	1,485
Profit for the period	2,849	10,444	17,576
Transferred to prepayments and accrued income	-	(2,366)	-
Foreign exchange	110	109	(303)
Amortisation	(5,872)	(5,617)	(12,063)
	(2,913)	2,570	6,695
Increase in amounts included in trade and other receivables	2,088	(8,187)	(25)
Bonuses beyond contractual amounts treated as administrative expenses	(394)	-	(4,737)
Cash received from associate	(4,653)	-	(12,511)
Net movement	(5,872)	(5,617)	(10,578)
Net book value brought forward	15,653	26,231	26,231
Net book value carried forward	9,781	20,614	15,653

7. available for sale financial assets

	Unaudited 30 June 2008	Unaudited 30 June 2007	Audited 31 December 2007
	£'000	£'000	£'000
Interest in profits of AMCO	811	1,537	1,070
AMCO Commodities Fund Limited	546	534	558
Interest in LME Holdings Limited	1,875	1,166	1,875
	3,232	3,237	3,503

8. trade and other receivables

	Unaudited 30 June 2008	Unaudited 30 June 2007	Audited 31 December 2007
	£'000	£'000	£'000
Non-current
Other receivables	3,013	1,027	1,022
Current
Amounts due from associate	2,410	8,187	4,498
Other receivables	275	342	304
Prepayments and accrued income	11	2,726	132
Trade and other receivables, net	2,696	11,255	4,934

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 associate and other receivables are usually due within 120 days and do not bear any effective interest rate.

Prepayments and accrued income includes a prepaid bonus of £2.4 million to the trading team at 30 June 2007.

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

9. trade and other payables

	Unaudited 30 June 2008	Unaudited 30 June 2007	Audited 31 December 2007
	£'000	£'000	£'000
Trade and other payables	71	40	104
Other creditors	-	-	2,807
Accruals and deferred income	14	27	43
Trade and other payables, net	85	67	2,954

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. 

10. share capital

	Unaudited 30 June 2008	Unaudited 30 June 2007	Audited 31 December 2007
	£'000	£'000	£'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 2007: 376,172,114, 31 December 2007: 342,048,114) ordinary shares of 0.1p	349	376	342

Allotments during the period

On 29 May 2008, 12,500,000 ordinary shares of 0.1p were issued at par upon exercise of share options.

Share buy back programme

During the period from 1 January 2008 to 30 June 2008, 5,280,000 shares were bought back by the Company and immediately cancelled. The total cost of the buy back programme in the period was £1,039,000 at an average price of 19.67p per share. The range of prices at which the shares were bought back was 21.08p per share to 18.59p per share.

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 0.1p 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 £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.

11. SHARE OPTIONS

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:

400% 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 2008, the Group had the following options outstanding: 

Date of original grant	Dates exercisable	Grant  price	Market price at  date of issue	At 30 June  2008 Number	Fair value  at 30 June   2008
1 May 2007	After 30 April 2010 subject to any take over of the Company	0.1p	54.0p	35,000,000	53.992p

During the period 12,500,000 share options were exercised.

A share based payment expense of £8,218,000 has been recognised in the income statement for the period ended 30 June 2008 (period ended 30 June 2007 : £1,365,000, year ended 31 December 2007 : £5,459,000).

ENDIR FKQKNOBKDQCB

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Related Shares:

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