ROSS GROUP PLC

Interim / Quarterly Report • Aug 29, 2019

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RNS Number : 6090K

Ross Group PLC

29 August 2019

Ross Group Plc Half Yearly Financial Report  30th June 2019

HALF YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 JUNE 2019

Financial Summary (6 months to  30 June 2019)	2019		2018
	£'000		£'000		Change
Group Revenue	-		68		-100%
Gross Profit/(Loss)	-		10		-100%
Profit/(Loss) before tax	(3,151)		10		-31,610%
Basic earnings per share	-28.1p		0.006p		-4,718%
Diluted earnings per share	-28.1p		0.006p		-4,718%

Chairman's Statement

For the half year to 30th June 2019, I would like to report that in this period, during which the acquisition of the start-up businesses within the Archipelago Aquaculture Group was duly completed in January 2019, the Ross Group PLC has now proceeded to implement its planned investment strategy and as a result has therefore subsequently made a net loss after tax of £3,151,000 without revenue,  which is both in line with management expectation and to the Board's satisfaction at this stage.

The Board in the first half 2019 has already started the process of integrating the respective start-up businesses acquired within its existing operations and is currently implementing its supply chain management protocols, procedures and respective disciplines, in order to put in place a vertically integrated organization that will be in a position to provide a forecast in the foreseeable future of being able to produce high quality Chitin in the years to come. 

Notwithstanding the previous years whereby we utilised our specialist supply chain management services in order to sustain our operational overhead - whilst also endeavouring and exploring other strategic opportunities - our efforts nowadays are fully focused on building a business that will hopefully become the best in the Chitin and/or Chitin-related industries. 

As a result, there has been no revenue during this period from any outside third party contracts.

As per the duly executed Sale & Purchase Agreement ("SPA") with Global Blue Technologies Group Inc. ("GBTGI"), all of the now enlarged Ross Group's overhead and cashflow are to be fully financed for at least the first 18 months, during which there are various performance-related SPA parameters in place in order to protect the value and integrity of this most important first acquisition.

Business Outlook

For the second half of 2019 the Board and myself will continue, along with our team of Advisors and Consultants, to work tirelessly with our new related-party GBTGI shareholders and their specialist management team in trying to successfully build a business through implementing our unique, patented production process (for which we recently received the internationally prestigious Green Chemical Award) and hopefully to be able to enter into proto-type pilot production phase and/or trials in the foreseeable future. 

In addition, we are also continuing to explore synergistic opportunities to further grow our overall business; both horizontally and vertically - so as to try to become the best in our chosen specialist industry.  

Dividend

No ordinary interim dividend is proposed after considering the result for the first half of the year, and the existing deficiency of retained reserves.

I would very much like to thank the members of the Board of Directors, as well as our contractors, consultants and advisors for all their continued, and highly appreciated, support, expertise and hard work.

Finally, as always, I would also like to personally extend my sincere thanks to our extraordinarily loyal and also now new (GBTGI) shareholders for all their continued confidence, patience and truly exceptional understanding.

However, please kindly know that this is now a new and exciting period for our Ross Group and I sincerely hope that we will all be able to enjoy an exciting future together. 

Barry Richard Pettitt

Chairman and Group Managing Director

Approved 29 August 2019

CONDENSED CONSOLIDATED INCOME STATEMENT UNAUDITED
	6 months		6 months		Year Ended
	ended 30 June		ended 30 June		31 Dec
	2019		2018		2018
	£'000		£'000		£'000
Group Revenue
Continuing Operations	-		68		70
Discontinuing Operations	-		-		-
Operating (Loss) / Profit
Continuing Operations	(2,926)		10		(196)
Discontinuing Operations	-		-		-
(Loss) / Profit before Finance Cost	(2,926)		10		(196)
Finance Cost	225		-		54
(Loss) / Profit before Taxation	(3,151)		10		(250)
Taxation	-		-		-
(Loss) / Profit for the Period	(3,151)		10		(250)
Earnings per share (pence)	-28.1		0.006		-0.14
Adjusted earnings per share (pence)	-28.1		0.006		-0.14

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY UNAUDITED

		Share Capital		Accumulated Losses		Other Reserves		Total
		£'000		£'000		£'000		£'000
Balance at 1 Jan 2018		11,179		(35,634)		18,187		(6,268)
Profit for the period		-		10		-		10
Total recognised income		-		10		-		10
Balance at 30 June 2018		11,179		(35,624)		18,187		(6,258)
(Loss) / Profit for the period		-		(260)		-		(260)
Total recognised income		-		(260)		-		(260)
Value of conversion rights on convertible loans		-		-		5,127		5,127
Balance at 31 Dec 2018		11,179		(35,884)		23,314		(1,391)
Balance at 1 Jan 2019		11,179		(35,884)		23,314		(1,391)
(Loss) / Profit for the period		-		(3,151)		-		(3,151)
Total recognised income / (deficit)		-		(3,151)		-		(3,151)
Foreign exchange adjustment		-		(9)		-		(9)
Share capital issued		39		-		343		382
Movement on convertible loans		-		-		205		205
Balance at 30 June 2019		11,218		(39,044)		23,862		(3,964)

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION UNAUDITED

	6 months		6 months		Year Ended
	ended 30 June		ended 30 June		31 Dec
	2019		2018		2018
	£'000		£'000		£'000
Non Current Assets	19,039		-		-
Current Assets
Inventories	1,311		-		-
Trade and Other Receivables	6,570		79		83
Cash and Cash Equivalents	263		1		20
	8,144		80		103
Total Assets	27,183		80		103
Equity and Liabilities
Shareholders' Equity
Share Capital	11,218		11,179		11,179
Share Premium Account	3,146		2,803		2,803
Other Reserves	15,384		15,384		15,384
Convertible debentures	5,332		-		5,127
Retained Earnings	(39,044)		(35,624)		(35,884)
Total Equity	(3,964)		(6,258)		(1,391)
Non-Current Liabilities
Long Term Borrowings	29,767		6,072		632
Current Liabilities
Trade and Other Payables	856		256		316
Bank Overdraft and Loans	524		10		546
Total Liabilities	31,147		6,338		1,494
Total Equity and Liabilities	27,183		80		103

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS UNAUDITED

	6 months		6 months		Year Ended
	ended 30 June		ended 30 June		31 Dec
	2019		2018		2018
	£'000		£'000		£'000
Net Cash From/(Used In) Operating Activities	11,749		(18)		(114)
Net Cash Used In Investing Activities	(8,553)		-		(15)
Cash Flows From Financing Activities:
Amount withdrawn by Directors	(11)		-		(38)
Value of conversion rights on convertible shares	-		-		5,127
Proceeds from the issue of shares	382		-		-
Interest paid	-		-		(54)
Net Increase/(Decrease) In Borrowings	(3,324)		-		(4,905)
Net Cash Flow From Financing Activities	243		(18)		1
Net Increase/(Decrease) In Cash and Cash Equivalents	243		(18)		19
Cash and Cash Equivalent at Beginning of Period	20		19		1
Cash and Cash Equivalent at End of Period	263		1		20

Notes to the Interim Report

(1)      The financial information contained in these statements for the six months ended

30 June 2019 and 30 June 2018 is unaudited and does not constitute statutory

accounts as defined in section 434 of the Companies Act 2006.

These statements are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted in the EU.

The interim financial statements have been prepared on the basis of the

accounting policies set out in the audited statutory accounts for the year ended

31 December 2018 together with additional accounting policies as follows:-

Goodwill

Goodwill arising on consolidation arises from the fair value of the identifiable assets acquired by the group at the date of acquisition. An impairment loss calculation is undertaken at the financial period end of the assets acquired and any impairment in the value is taken to the Income Statement. The first impairment review is to be undertaken within a twelve-month period of the date of the acquisition and therefore this will take place in the 31 December 2019 financial statements.  The directors do not believe there is any indication of impairment at this time.

Intangible assets

These mainly consist of software and licences. Intangible assets are stated at cost less accumulated amortisation and impairment losses.

Licences are amortised over their term period or their estimated useful economic lives, as appropriate, on a straight-line basis which is considered to be 15 years.

Property, plant and equipment

Property plant and equipment are carried at cost or deemed cost (fair value on acquisition through business combination) less accumulated depreciation and impairment provisions.

Acquisition cost includes the purchase price plus other costs related to acquisition, such as freight, postage, duties, commissions, interest on investment loans recorded before the tangible assets are capitalised or before they are put into use.

The costs of expansion, modernisation, or improvements leading to increased productivity, capacity or efficiency are capitalised. Maintenance and repair expenses are expensed as incurred.

Where the carrying amount of an asset is greater than the amount that it is estimated to be recoverable, it is written down to its recoverable amount.

The Group depreciates its property, plant and equipment on a straight line basis in order to write off the cost of each asset less the estimated residual value over its estimated useful life as follows:

Building	39 years straight line basis
Leasehold Improvements	Over the term of the lease
Plant, Machinery and Equipment	7 years straight line basis
Right of use assets	Over the term of the lease

Leases

IFRS 16 leases accounting has been applied from 1 January 2019. Finance lease arrangements for the group's overseas locations are recognised in the Consolidated Statement of Financial Position on signing of the lease as a right-of-use asset. The lease cost will be recognised as the depreciation of the right-of-use asset over the term of the lease.

A lease liability is recognised on signing of the lease equal to the present value of the lease payments and estimated renovation costs discounted using a borrowing rate determined by the company. The interest expense will be recognised in the Consolidated Income Statement as the lease payments are made.

The impact of the implementation of IFRS 16 is reflected in the acquisition of AAG.

Inventory

Inventories are measured at the lower of cost and net realisable value.

Foreign currencies

Transactions in currencies other than the functional currency (foreign currencies) are translated into the functional currency at exchange rates which approximate those applicable at transaction dates. Foreign currency monetary assets and liabilities at the statement of financial position date are translated into the functional currency at exchange rates ruling at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the statement of comprehensive income.

(2)      Reconciliation of Operating Profit to Net Cash Flows From Operating

Activities

	6 months		6 months		Year Ended
	ended 30 June		ended 30 June		31 Dec
	2019		2018		2018
	£'000		£'000		£'000
Operating (Loss) / Profit On Continuing Activities	(2,926)		10		(196)
Impairment	-		-		15
Exchange difference	(9)		-		-
Depreciation and Amortisation	1,478		-		-
(Increase)/ Decrease In Inventories	(1,311)		-		-
(Increase)/ Decrease In Trade and Other Receivables	(102)		(75)		(68)
Increase/(Decrease) In Trade and Other Payables	14,619		47		135
Net Cash Generated From/(Used In) Operations	11,749		(18)		(114)

(3)       No ordinary interim dividend is proposed for 2019 (2018 - £Nil).

(4)      The comparative cash flow for the year ended 31 December 2018 has been

extracted from the audited accounts. The cash flows for the six months ended 30

June 2019 and 30 June 2018 are unaudited.

(5)       Reconciliation of Movements In Equity

	6 months		6 months		Year Ended
	ended 30 June		ended 30 June		31 Dec
	2019		2018		2018
	£'000		£'000		£'000
Share Premium Account
Brought Forward	2,803		2,803		2,803
Movement	343		-		-
Carried Forward	3,146		2,803		2,803
Other Reserves
Brought Forward	15,384		15,384		15,384
Movement	-		-		-
Carried Forward	15,384		15,384		15,384
Retained Earnings
Brought Forward	(35,884)		(35,634)		(35,634)
(Loss) / Profit for the Period	(3,151)		10		(250)
Foreign exchange adjustment	(9)		-		-
Carried Forward	(39,044)		(35,624)		(35,884)
Convertible Debenture
Brought Forward	5,127		-		-
Movement	205		5,127		-
Carried Forward	5,332		5,127		-

(6)       On the 7 January 2019 the company acquired the entire capital of Archipelago Aquaculture Group LLC ("AAG"), a company registered in the United States, for equity consideration amounting to £202,731 representing the issue of 21,340,104 Ordinary Shares at a market value of .95p per share in a share for share exchange.

AAG are specific supply chain companies involved in the research and development of Chitin.

The fair value of the group acquired is as follows

	£,000
Non current assets	19,940
Inventory	1,096
Trade and other receivables	5,206
Cash and cash equivalents	1,178
Current liabilities	(447)
Non current liabilities	(26,973)
Net Identifiable assets acquired	-
Add Goodwill	203
Total Consideration	203

AAG group generated a loss to the group for the period amounting to £2,879,000

(7)       Non Current Assets

			Intellectual Property		Property, Plant &
	Goodwill		Licences		Equipment		Total
	£'000		£'000		£'000		£'000
Cost
At 1 January 2019	-		-		-		-
Additions	956		12,661		6,900		20,517
At 30 June 2019	956		12,661		6,900		20,517
Depreciation / Amortisation
At 1 January 2019	-		-		-		-
Charge for the period	-		1,318		160		1,478
At 30 June 2019	-		1,318		160		1,478
Net Book Value
At 30 June 2019	956		11,343		6,740		19,039
At 1 January 2019	-		-		-		-

(8)       Inventory	30 June	31 Dec	30 June
	2019	2018	2018
	£'000	£'000	£'000
Raw materials	1,271	-	-
Finished goods	40	-	-
	1,311	-	-

(9)       Current Assets

	30 June	31 Dec	30 June
	2019	2018	2018
	£'000	£'000	£'000
Trade receivables	68	68	68
Prepayments and accrued income	55	-	-
Other debtors	51	5	11
Directors loan	22	10	-
Loans to associated undertakings	6,374	-	-
	6,570	83	79

(10)       Current Liabilities

	30 June	31 Dec	30 June
	2019	2018	2018
	£'000	£'000	£'000
Trade payables	226	201	179
Other creditors	78	23	27
Accruals and deferred income	345	92	23
Directors loan	-	27	-
Lease creditor	207	-
Debentures	524	367
Other loans	-	179	10
	1,380	862	266

(11)       Non Current Liabilities

	30 June	31 Dec	30 June
	2019	2018	2018
	£'000	£'000	£'000
Accruals and deferred income	14,286	-	-
Licence fee payable	11,964	-	-
Lease creditor	489	-	-
Debentures	420	632	-
Loans from associated undertakings	2,608	-	6,072
	29,767	632	6,072

(12)       The Group is supported by short term borrowings from its larger

shareholders and supporters by way of formal agreements. At 30 June 2018 total borrowings from One World Limited were £4,010,000 and £2,062,172 from Excite Enterprises Limited, neither of which is a related party.

On 27 September 2018 two convertible loan debentures were issued for £4,010,000 and £2,062,172 with a coupon rate of 5%.

The loan notes are convertible into Ordinary shares of the parent entity in three years after the date of issue. The convertible loan debenture will give right to a percentage of the issued share capital of the parent company at the date of conversion. Each tranche of £1 million debenture owed by the long term holders correspond to 4.925% of the issued share capital at the date of conversion, resulting in a fixed percentage of the issued share capital of the company to be allotted to the loan holders regardless of the value / amount of the share capital of the company.

	30 June	31 Dec
	2019	2018
	£'000	£'000
Face value of notes issued	6,072	6,072
Value of conversion rights	5,332	5,127
Convertible loan debenture liability	740	945
Interest expense	151	54

During the period a subsidiary company, Ross Group Plc Inc, received a loan from One World Limited amounting to $800,000 which equates to £639,720. Interest is charged on this loan at 6%

On 29 January 2019 the company issued 17,947,943 Ordinary Shares to GBTGI for a total cash consideration of £179,479.

During the period the group received working capital from GBTGI and its affiliated companies amounting to £1,968,120 and made loans to them amounting to £6,374,361.

GBTGI have provided assurance to the Ross Group that they will fund ongoing cashflow requirements for a period of 18 months from January 2019.

(13)       The Chief Operating Decision Maker (CODM) has considered the requirements of future segmental reporting following the acquisition of US based AAG in January 2019.

At this stage the AAG group is in start up and is not revenue generating. This group is therefore reported as one reportable segment to the CODM.

As the UK activities of the Ross Group are less than 10 percent in terms of assets, liabilities and loss for the period and no revenue has been generated throughout the group during this financial period the CODM believes the information already disclosed in the interim financial statements is adequate to fulfill the requirements of IFRS 8 segmental reporting, this will be reconsidered at the year end and in future periods as AAG begins to trade.

(14)       The Interim Report will be sent by mail to all registered shareholders

and copies will be available from the Company's registered office at 71-75 Shelton Street, London, WC2H 9JQ. A downloadable copy will also be posted on the Company's website www.ross-group.co.uk

Responsibility statement:

The Directors confirm that, to the best of their knowledge: -

a)    the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

b)    the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c)    the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

On behalf of the Board

B Pettitt                          

Chief Executive Officer                        

Ross Group plc

Registered Office

71 - 75 Shelton Street

London WC2H 9JQ

Contact - M Simon, Non Executive Director

Tel. - 0203 978 4598

Email - info@ross-group.co.uk

Website - www.ross-group.co.uk

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