Hydrodec Group plc
Annual Report and Accounts 2013
Hydrodec Group plc Annual Report and Accounts 2013
A unique renewable 
oil proposition Hydrodec Group plc    |   Annual Report and Accounts 2013
Strategic Report
2013 highlights 1
At a glance 2
Chairman’s statement 4
Our business 5
Market opportunity 6
Technology and patents 7
Our strategy 8
Chief Executive’s report 10
Chief Financial Officer’s review 15
Key performance indicators 18
Principal risks and uncertainties 20
Governance
Board of Directors 22
Introduction to governance 24
Report of the Directors 26
Corporate governance report 28
Remuneration Committee report 31
Audit Committee report 34
Financial Statements
Independent auditor’s report  35
Consolidated statement of income 36
Consolidated statement of  
comprehensive income 37
Consolidated statement of  
financial position 38
Consolidated statement of cash flows 39
Consolidated statement of changes  
in equity 40
Notes to the financial statements 41
Independent auditor’s report 62
Company balance sheet 63
AGM
Notice of Annual General Meeting 69
Explanatory information  
for the resolutions 72
Hydrodec Group plc is a cleantech industrial oil re-refiner.   
Our technology is a proven, highly efficient, oil re-refining and 
chemical process initially targeted at the multi-billion US$ market 
for transformer oil used by the world’s electricity industry . 
Spent oil is processed at two commercial plants with distinct 
competitive advantage delivered through very high recoveries 
(near 1 00 per cent), producing “as new” high quality oils at 
competitive cost and without environmentally harmful 
emissions. We recently acquired the business and assets of OSS 
Group, the UK’s largest collector , consolidator and processor of 
used lubricant oil. 1
www.hydrodec.com
201 3 highlights
“  In 20 1 3 Hydrodec achieved 
substantial growth in all key 
performance and business 
measures; two transformational 
transactions and another two 
strategic agreements are further 
evidence of real and material 
strategic progress. Operational 
momentum and business 
improvement enabled a successful 
balance sheet restructuring leaving 
the Company debt free and better 
structured to grow.
  As we resolve the aftermath of the 
Canton incident, we remain focused 
on a strategy to grow the business 
which will be delivered by securing 
access to the value chain, the 
application of “best in class” 
technology , the reduction of risk 
through partnership or acquisition 
and the rigorous focus on business 
costs and efficiency .”
Ian Smale
Chief Executive Officer
 – Core re-refining business increased revenue 1 1 per cent to US$28.9 million  
driven by 12 per cent improvement in sales volumes of premium quality 
SUPERFINE™ transformer oil and base oil to 25.2 million litres
 – Gross profit rose 76 per cent to US$9.4 million; re-refining margins at 26 per cent 
(2012: 21 per cent) and improved Group margins at 24 per cent
 – Higher utilisation of productive capacity in the re-refining business for the 1 1 months 
prior to the business interruption at Canton of 78 per cent (2012: 70 per cent) 
 – Achieved target of positive total EBITDA run-rate in September, October  
and November
 – Incident at the Canton plant in December halted US production – insurance claim 
for property damage and business interruption in progress with rebuild and 
expansion plans under way
 – Overall loss for the period widened to US$17 .4 million (2012: US$14.2 million) as a 
result of US$4.9 million non-cash, non-recurring finance charge in respect of loan 
stock repaid during the year
 – Strengthened balance sheet with US$21.9 million cash at year-end and parent 
company debt free
Strategic highlights
 – April – strategic partnership with G&S in US, securing feedstock and capital for 
major US expansion
 – September – acquisition of assets and business of OSS Group, securing feedstock 
and capability for UK market entry
 – October – successful placing and open offer raising £24 million 
 – November – collaboration with Essar Oil UK around re-refining opportunities  
in UK and co-location of Australian plant with Southern Oil Refining
   54%
Revenue up to US$40.1 million  
(2012: US$26.1 million), the ninth 
consecutive year of growth
   65%
Total oil sales of 37.0 million litres 
(2012: 22.5 million litres)
US$0.2m
Positive Operating EBITDA
1,2
 for 
first time (2012: US$2.8 million loss)
US$0.30
Gross unit margins per litre  
in the re-refining business  
(2012: US$0.24 per litre)
1
 EBITDA adjusted for growth expenditure of US$3.3 million (2012: US$2.2 million), share-based payment costs of US$0.5 
million (2012: US$0.5 million) and foreign exchange loss of US$0.7 million (2012: US$0.04 million) (“Operating EBITDA’’)
2
 on basis of assumed business interruption insurance coverage for Canton
Performance highlights
Strategic Report Governance Financial Statements 2
Hydrodec Group plc    |   Annual Report and Accounts 2013
At a glance
Hydrodec produces new, high quality transformer oil from globally distributed 
used and contaminated waste oil that would in many other situations be 
incinerated. The Group also collects and processes used lubricant oils producing 
fuel oil products. It intends to develop its existing re-refining technology for 
application on these used motor oils and other industrial oils in order to 
produce high quality base oils.
For more information visit our website at www.hydrodec.com 
*  Plant was damaged by incident in December 2013 – production expected to recommence Q4 2014 (two trains)
United Kingdom
Plant location
Stourport-on-Severn, Worcestershire (and 
national network of oil storage and transfer 
stations).
Process/products
Recycling used motor oil to produce 
processed fuel oil (“PFO”) and recycled fuel oil 
(“RFO”).
Capacity
Existing
65 million litres PFO and 10 million litres RFO 
per annum.
Planned
Establishment of two train transformer oil 
re-refinery and semi-commercial pilot plant for 
lubricant oil re-refinery in 2015.
United States
Plant location
Canton, Ohio.
Process/products
Re-refining used transformer oil to produce 
SUPERFINE™ transformer oil and base oil.
Capacity
Existing
27 million litres SUPERFINE™ per annum*.
Four “train” processing facility, supported by a 
state-of-the-art quality-control laboratory and 
a full service rail and truck loading facility. 
Planned
Expansion to six trains at Canton by Q1 2015 
and to 10 trains in 2016.
Australia
Plant location
Young, New South Wales
Process/products
Re-refining used transformer oil to produce 
SUPERFINE™ transformer oil and base oil.
Capacity
Existing
6.5 million litres SUPERFINE™ per annum.
Hydrodec’s first commercial processing facility 
– a single train processing unit.
Planned
Co-location of existing plant to Southern Oil 
Refinery at Wagga Wagga, New South Wales. 3
www.hydrodec.com
2009
Million US$
2010 2011 2012 2013
0
10
20
30
40
50
Five year revenue growth
SUPERFINE™
Hydrodec’s re-refined branded products are 
marketed as SUPERFINE™ transformer oil and 
base oil. The transformer oil, which is endorsed 
by leading original equipment manufacturers 
including ABB and Coopers, meets or exceeds 
international specifications for transformer 
oil, and in a blind test conducted by the 
Doble Laboratories in Boston SUPERFINE™
tested better than “new” refined oil from the 
four largest base oil competitors in 10 out of 
12 core tests for quality. The proven 
sustainability of the Hydrodec process will 
allow for its new, reusable oil to come with a 
carbon credit or offset as a source of value 
and a unique sales proposition – the first oil 
product globally to do so.
United Kingdom
Volume
2013* 2012 2011
Million litres
0
10
20
30
40
50
60
Partner
Acquired in 2013.
OSS is the UK’s largest collector, consolidator 
and processor of used lubricant oil and seller 
of PFO. It also provides complementary waste 
services for a “one-stop shop” total waste 
management offering to clients.
United States
Volume
2013 2012 2011
Million litres
0
5
10
15
20
25
Partner
25 per cent partner in Hydrodec of North 
America since 2013.
G&S is a leading New Jersey-based electricity 
transformer recovery services group.
G&S Technologies plant, Kearny, New Jersey
Australia
Volume
2013 2012 2011
Million litres
0
1
2
3
4
5
Partner
Proposed co-location and plant operator  
in 2014.
Southern Oil and its partner JJ Richards are 
leading collectors and re-refiners of general 
used lubricant oil in Australia.
Southern Oil plant at Wagga Wagga, NSW
*  Acquired in September 2013 out of administration OSS recycling plant at Stourport
Strategic Report Governance Financial Statements 4
Hydrodec Group plc    |   Annual Report and Accounts 2013
Chairman’ s statement
“ The key performance indicators of 
the original re-refining business 
– sales volumes, revenues, feedstock 
procurement, plant utilisation and 
margins – were all significantly 
higher in 20 1 3 than the prior year.“ 
2013 was my first full year in office and also the 
first in which Ian Smale and his management 
team sought to implement the Company’s 
new strategy as unveiled in September 2012.  
I am therefore pleased to report on a successful 
year in terms of the performance of the Group 
and the delivery of that strategy. 
The primary focus, as ever, was on the 
operational and financial performance of the 
existing business. The key performance 
indicators of the original re-refining business 
– sales volumes, revenues, feedstock 
procurement, plant utilisation and margins 
– were all significantly higher in 2013 than the 
prior year. Additionally the Board continues to 
strengthen the governance of the Company 
and this is covered in the Governance section 
of this Report from page 24.
Although our Company continues to report a 
statutory loss, larger this year due to the 
non-recurring, non-cash accounting treatment 
arising from the repayment of the loan stock, I 
would like to draw your attention to the key 
measure the Board and management use in 
reviewing the Group’s performance, namely 
EBITDA. Operating EBITDA (adjusted for 
expenditure on growth costs and other 
non-operating items) was positive for the first 
time ever and our Group operated at a positive 
total EBITDA run-rate (ie after those growth 
costs and other non-operating items) for 
September, October and November. These are 
significant achievements and bode well for the 
years ahead. 
Strategically, the G&S and OSS transactions 
were completed during the year and have 
already had a significant, positive impact on a 
number of the Group’s Key Performance 
Indicators (“KPIs”) for 2013 as Ian Smale and 
Chris Ellis expand on in their reports. The 
impact of the strategic agreement with Essar 
Oil in the UK will be of a longer wavelength 
whereas that with Southern Oil in Australia will 
be progressed in 2014. Alongside these 
partnership and acquisition developments, the 
placing and open offer, together with the 
repayment of all of the parent company’s debt, 
have resolved issues with the balance sheet 
which have held the Company back for too 
long and resulted in a year-end cash balance of 
US$22 million. I would like to welcome new 
shareholders to the Company as well as 
thanking many of the existing holders who also 
invested further in the 2013 funding round. This 
leaves the Company well placed for further 
strategic developments in the months ahead. 
I must of course refer to the fire at the Canton 
plant in December. Clearly this was a serious 
incident occurring just as the Company was 
developing real momentum into the year-end. 
I want to use this opportunity to offer my 
gratitude to the exemplary reaction of local 
management and staff and our partners G&S, 
and to acknowledge the support of local 
authorities, suppliers and customers. With the 
pending resolution of the insurance claim we 
shall shortly be able to focus all of our efforts in 
the US on the rebuilding and expansion of the 
Canton plant, with the restoration of 
production expected by the end of this year. 
I would like to draw your attention to the 
Notice of Annual General Meeting at the back 
of these Report and Accounts. This year’s AGM 
will be held in The Winchester Room, The 
Washington Mayfair Hotel, 5 Curzon Street, 
London W1J 5HE at 10.00 a.m. on Monday  
30 June 2014. 
Finally I would like to thank Ian, his 
management team and all the staff at 
Hydrodec for their efforts in 2013 as everyone 
played their part in a challenging yet ultimately 
successful year. The Board of Directors are 
looking forward to the remainder of 2014 and 
beyond with considerable optimism. 
Lord Moynihan
Chairman
21 May 2014 5
www.hydrodec.com
Our business
Hydrodec
Secure feedstock
Through value-chain 
integration
Re-refine/recycle
T echnology driven  
efficient processes
Sales
Premium quality 
“carbon-neutral” oils
Feedstock Processing Sales
Transformer oil
Used transformer oil sourced directly from 
utilities, or indirectly from hardware salvage, 
repair and service companies and used oil 
collectors/traders. 
Partnership with G&S provides “one-stop 
shop” offering for utilities in US treating used 
oil and hardware.
Cost influenced by prevailing diesel price 
(given potential alternative uses of used oil) 
and polychlorinated biphenyl (“PCB”) 
contamination levels (higher PCB material 
available at nil/negative cost). 
Transformer oil
Hydrodec’s unique, proprietary and industry-
leading hydrogenation re-refining technology. 
The process deconstructs PCBs and recovers 
more than 99 per cent of the used oil as new 
oil with de minimis air emissions and no 
hazardous waste by-products.
Transformer oil
Premium SUPERFINE™ transformer oil sold 
directly to original equipment manufacturers 
(“OEMs”) (ie manufacturers of transformer 
hardware for “first fill”) and utilities (new oil 
replacing old), or indirectly via distributors.
Premium SUPERFINE™ base oil sold directly or 
indirectly to other industrial users (eg inks, 
agriculture and mining).
Price influenced by ICIS benchmark index for 
Pale 60 base oil. 
Lubricant oil 
Used motor oils collected by own fleet of 
trucks from garages and service stations, 
aggregated at collection points and then 
transferred to recycling plant. 
Cost may be influenced by competing 
demand for feedstock from re-refiners 
(especially in Europe) but OSS “one-stop shop” 
total waste management service places it in a 
strong position in UK market. 
Lubricant oil 
Current – OSS recycling process produces 
two grades of fuel oil for industry: PFO 
(Gen3™), an environmentally friendly 
alternative to virgin fuel oils and RFO, an 
economical alternative to virgin fuel oil.
Future – developing Hydrodec’s transformer 
oil re-refining technology for application  
to lubricant oils.
Lubricant oil 
Current – PFO and RFO are sold into UK  
power and other industries and also for use as 
bunker fuel.
Future – high grade premium base oil output 
(Group II+/III) would be produced and sold to 
blenders (where various additive packs applied 
to establish characteristics for various lubricant 
oil end uses) for marketing and on sale.
 – Management with proven track record 
in oil industry 
 – Established renewable transformer oil 
business with proven technology 
 – Strategic partnership in US
 – Transformational new market entry in 
UK through acquisition of OSS; 
platform for new technology and 
European consolidation
 – Global market potential in transformer 
oil and major opportunities with next 
stage technology – robust potential 
for new protectable IP
 – Proven economic and business model; 
attractive returns in transformer oil 
re-refining, replicable in used lubricant 
oil market (> 15x larger) with significant 
upside option value
 – Continue to target value chain 
integration (feedstock) and capability 
Strategic Report Governance Financial Statements 6
Hydrodec Group plc    |   Annual Report and Accounts 2013
Market opportunity
Transformer oil Lubricant oils
Characteristics – Predominantly refined from naphthenic crudes
 – Specialised base oil having properties meeting long 
established power industry technical standards
 – Used in electricity transformers – an integral part  
of the world’s power transmission network
 – Predominantly refined from paraffinnic crudes
 – Additives to base oil produce different lubricant oils for 
different uses, including motor oil, hydraulic oil and 
other industrial oils
Environment – Global market 1.35 billion litres, growing at estimated 
5% CAGR to 2017
1
 
 – Valued at US$1.8 billion, growing c. 9% CAGR to 2018
2
 
 – Total naphthenic base oil supply of 3.7 billion litres will 
not meet projected demand of up to 5.0 billion litres
3
 
 – Hydrodec re-refining technology approved in US, 
Australia and Japan for treating PCB contaminated oil
 – Global market in excess of US$30 billion
 – UK is most attractive market in Europe 
 – UK low grade recycling market vs Europe, creates ideal 
technology opportunity
 – UK lubricant base oil demand estimated at 700 million 
litres per annum (predominantly imported)
 – UK used oil protocol regulates production and use of 
processed fuel oil (“PFO”) as produced by OSS
Sources of 
used oil
 – OECD: “75 per cent rule” – new oil displacing old oil
4
 
 – Direct from utilities: c. 25 per cent
 – Indirect channels in highly fragmented market
 – Alternative uses: incineration, fuel additives, 
regeneration, recycling
 – Total waste lubricant oil in UK c. 350 million litres per 
annum
 – Collection-based activity drives access to used oil
 – Active secondary market in bulk used oil in UK
Uses – Reused as new transformer oil into growing market
 – Sustainable “closed-loop” proposition with utilities
 – OEMs: ca. 40 per cent demand
 – Other naphthenic applications: base oil markets in inks, 
agriculture, mining and explosives
 – 170 million litres per annum of PFO produced in UK
5
 
 – Demand: industrial c. 80 million litres; UK power c. 350 
million litres; > 100 million litres bunker fuel (shipping)
 – Europe is short feedstock for oil recycling – creates 
additional demand
Competitive 
advantage
 – > 99% as new oil, no waste
 – Tests as better than new oil
 – Single-step re-refining process
 – Negligible emissions, “carbon neutral oil”
 – UK lags European and US recycling technology platform 
supported by regulation
 – Hydrodec lubricant re-refining technology potential to 
leapfrog existing Europe and US recycling technology
 – Potential for carbon credits from Hydrodec methodology
 – Consolidation opportunities
1 Source: Markets and Markets: Transformer oil market, Global Industry Trends & Forecast to 2017
2 Source: Markets and Markets: Transformer oil market, Global Industry Trends & Forecast to 2018
3 Source: Nynas European ICIS presentation, London 2014
4 Source: Hydrodec estimates
5 Source: Oil Recycling Association estimate
Hydrodec has proven its business model in the global transformer oil market. As we expand in 
this core market, we are also focusing on the materially larger lubricant oils market, initially in the 
UK and Europe. Following the acquisition of OSS we already recycle used lubricant oils but our 
intent is to develop the proven efficiencies of our re-refining technology into this wider market.  7
www.hydrodec.com
SUPERFINE™
Reactor
mixture
Scavenger 
system
Hydrogen
Scavenger
system
Water wash
Heater Reactor
Hydrogen
recycle 
To oxidiser
The patented Hydrodec hydrogenation re-refining process – transformer oil
 – Developed to treat PCBs 
 – IP protected; secured by operational 
know-how
 – Hydrogenation cleans and restores 
the hydrocarbon molecule
 – “New” renewable oil with semi-
synthetic properties
 – Approved by regulatory authorities 
in US, Australia and Japan
 – Proof of concept achieved in 
lubricant oil application
Our technology platform was originally 
developed in Australia in response to a 
challenge by the nation’s power industry  
to eliminate potentially carcinogenic 
polychlorinated biphenyls (“PCBs”) from  
used transformer oil. PCBs were routinely 
added to enhance the flame retardant 
performance of transformer oil globally  
until banned in the 1970s.
The technology now deployed commercially by 
Hydrodec in Australia and the United States is 
unique, proven, proprietary and industry-
leading. Not only does it deconstruct PCBs from 
transformer oil, the process also recovers more 
than 99 per cent of the used oil as new oil with 
de minimis air emissions and none of the 
hazardous waste materials normally associated 
with traditional re-refining processes.
We continue to develop and improve the 
technology and operating processes. In 
addition to ongoing IP protection secured by 
operational know-how, we are constantly 
striving for new technological 
advancements. We have recently applied for 
patent protection in respect of 
developments in the original transformer oil 
re-refining technology and we expect to 
submit an application in respect of 
hydrogenation in the treatment of used 
lubricant oil in the near future.
T echnology and patents
Strategic Report Governance Financial Statements 8
Hydrodec Group plc    |   Annual Report and Accounts 2013
Our strategy
Hydrodec aims to deliver outstanding growth in revenue and returns through 
the sustainable handling, treatment and re-refining of used oil; the application of 
its industry-leading clean technology creates new oil for original purpose and the 
world’s first “carbon-free” mineral oil accessing voluntary carbon offset credits.
18 months into the clean-technology,  
twin revenue stream strategy first 
published in 2012, it is appropriate to 
assess both current progress and future 
direction. The fundamental tenet of twin 
income streams: through technology 
licence royalty and equity participation 
where advantaged, remains appropriate 
and robust. 
Experience based on a pipeline of options 
informed by the strategy has shown greater 
optionality, better control and hence lower risk 
for Hydrodec through equity participation as a 
means to deliver growth rather than licensing 
through third parties. The barrier to progress in 
licensing is a function of legacy invested 
capital and small, undercapitalised operations 
which have insufficient incentive or capability 
to disrupt their established business.
We address these constraints through 
partnerships as key enablers of growth. 
Existing partnerships (or acquisitions) delivered 
in 2013 create a strategic blueprint for how we 
intend to proceed. Each opportunity is 
assessed on the basis of key attributes for 
business success: including, access to secure 
supplies of feedstock and value chain 
integration; access to markets; access to 
infrastructure and capability; access to scale 
and operating efficiencies; and the 
opportunity to share and minimise risk. The 
key components for success are feedstock, 
technology, capability and appropriate market 
access within a clear equity and licence margin 
model.
Transformer oil strategy
We believe Hydrodec has a unique 
competitive technology, a position now 
reinforced with a new application for patent 
protection and a world-first sustainable 
methodology for mineral oil that quantifies 
SUPERFINE™ transformer oil as a carbon 
offset, or “carbon neutral” oil. 
The current plan envisaged with partners G&S 
Technologies will see an increase to six trains of 
capacity at the Canton site during Q1 2015 
secured by feedstock sourced through 
Hydrodec of North America and G&S and 
ultimately creating 60 million litres of potential 
capacity, or up to 15 per cent of the current 
North American demand for new transformer 
oil as well as a material demand for naphthenic 
base oil for other applications including 
printing, agriculture and metalwork. 
Hydrodec’s upgraded plant will produce 
European-quality (500 hour certified) 
transformer oil, more efficiently. The 
carbon certification will make the product 
unique in the US, and globally. The new 
production units are designed to be 
standardised, modular, “plug and play”, 
easier and safer to maintain and operate, 
benefiting from eight years of learning 
through doing. They represent a 
step-change in the quality and integrity  
of the product and the operation.. 
The European market, and especially the UK, 
offers opportunities for the Hydrodec 
transformer oil technology starting with a 
proposed two train, 13 million litre, 
development in the UK. The new capacity will 
introduce new oil production in the UK to 
offset current imports, as well as offer a 
material and competitive upgrade to current 
regeneration practices at yields expected to 
be at least as attractive as the US. Other 
opportunities in Europe and elsewhere are 
being considered. In each case a targeted 
equity-participation and royalty approach is 
more likely to enable market access and 
growth than licensing alone, although that 
remains a possibility. Other opportunities, 
including Japan, remain under review as 
opportunities for investment or for licensing.
Lubricant base oil technology strategy
We believe that Hydrodec’s unique 
re-refining technology, including new 
patent protection application offers an 
extension of the world-first sustainable 
methodology for transformer oil that can 
increase efficiency and quality in general 
used oil recycling; a material global 
market. 9
www.hydrodec.com
Since proof of concept was established in 
December 2012, extensive testing has provided 
evidence that an extension of Hydrodec’s 
one-step catalytic hydrogenation process with 
a chemical pre-treatment and back-end 
reforming can produce an efficient, high 
quality and high recovery used oil re-refining 
process. The target is Group II+/III base oil 
(primarily imported into Europe currently), and 
a material quality (and recovery) improvement 
on existing competitive technologies.
Aspects of the testing are already being 
applied to the OSS processed fuel oil (“PFO”) 
technology in the UK with the potential to 
improve recoveries and product quality, and 
economic performance as a consequence. The 
OSS treatment may develop into a viable 
pre-treatment for used oil, and under any 
circumstance will be a very helpful transition 
business into full scale used oil re-refining.
A semi-commercial pilot scale plant is being 
engineered based on the test programme and 
will be commissioned in 2015. The pilot will 
inform full commercial design envisaged at 100 
million litres annual capacity which will be 
developed in 2016. The UK is an attractive 
market opportunity as there is no current 
material recycling to high quality base oil unlike 
some other existing European countries. The 
UK used oil protocol provides for treatment of 
used oil for use as fuel or waste oil which is the 
predominant default activity resulting in some 
used oil being exported to the higher margin 
European solutions. OSS ensures a secure 
starting position in UK feedstock. Base oil 
produced would offset imports and feed into 
an annual demand of 800 million litres in the UK.
Options for partnership and/or consolidation in 
Europe exist in a somewhat fragmented 
market and are under current review. In some 
cases, fit for purpose technology would have 
the potential to be enhanced. We believe that 
Hydrodec’s emerging technology platform, the 
potential for best-in-class recovery and quality 
and our sustainable reuseable oil offer can in 
due course transform the sector profitability 
and competitiveness.
Sustainability – the “green dividend”
Returning oil to its original purpose efficiently 
has created a world-first verifiable carbon 
methodology for mineral oil. Registration of 
past and future production in the US will allow 
monetisation through the US voluntary carbon 
offset market.
A key next step will be to extend the 
transformer oil methodology to the regulated 
carbon markets in California and the EU 
Emissions Trading System. Longer term the 
challenge will be to apply the same 
methodology to high quality base oil 
production from used  
lubricant oils.
There would be a strong case for regulatory 
support for reuse of quality re-refined oil as a 
means for both encouraging collection and 
processing, but also encouraging sustainable 
resource management – such concepts have 
been proposed in previous government 
papers but not yet implemented in the UK, or 
elsewhere in Europe.
Our progress in 201 3
G&S partnership  
(US)
April
 – Creates leading re-refiner of 
waste and PCB contaminated oil 
in North America
 – Secures feedstock for material 
growth through value-chain 
integration
 – Alliance of best in class 
technology and service 
provision creates compelling, 
sustainable one-stop offer for 
customers
 – De-risks expansion to 65 million 
litres p.a. (increase of 140 per 
cent), from four processing trains 
to six in 2015 and 10 in 2016
 – Establishes a recurring royalty 
for the technology at 5 per cent 
of revenues and business model 
for growth
OSS acquisition 
(UK)
September
 – Access to Europe and key UK 
market through a leading 
position in used oil collection 
and processing
 – Access to value-chain and 
capability creates a platform 
for SUPERFINE™ re-refining 
and sales
 – Accelerates development and 
commercialisation of 
Hydrodec’s new lubricant 
technology
 – Secures feedstock for 
lubricant re-refining in UK
 – Creates options for 
consolidation into Europe
Placing and open offer  
(£24 million)
October
 – Repositions Hydrodec for 
next stage of development
 – Enhances credibility with all 
stakeholders (customers, 
suppliers, investors)
 – Resolves balance sheet and 
capital structure – effectively 
debt free
 – Additional capital for specific 
identified growth 
opportunities
Southern Oil Refining (Aus)/
Essar Oil UK
November
 – Strategic relationships 
established with leading 
operators in Australia and  
UK with potential for 
collaboration in transformer 
oil and lubricant oil markets
Strategic Report Governance Financial Statements 10
Hydrodec Group plc    |   Annual Report and Accounts 2013
“ The management team remain 
focussed on a strategy to grow the 
business which will be delivered by 
securing access to the value chain, 
the application of “best in class” 
technology , the reduction of risk 
through partnership or acquisition 
and the rigorous focus on business 
costs and efficiency .”
2013 was quite a year – record revenues, sales 
volumes, feedstock procurement, plant 
utilisation and much improved margins; 
positive Operating EBITDA (pre growth costs) 
for the first time ever and positive total EBITDA 
run-rate for three successive months; two 
transformational strategic transactions 
completed and another two strategic 
relationships secured; and a positive resolution 
to the balance sheet structure. 
With a month of the year to go it appeared 
that our strategy had achieved real 
momentum only for the incident at Canton on 
1 December to occur. An explosion and fire at 
the plant effectively shut down production 
causing significant damage to the main 
reactors and ancillary equipment. Most 
importantly no one was hurt and the team in 
Canton together with the local emergency 
services and authorities responded to the 
unfortunate situation in exemplary fashion. 
Insurance cover is expected to provide for the 
rebuilding of the Canton business and for 
business interruption for the period the plant is 
down, so enabling it to re-emerge stronger 
and back on track with the original plan for an 
expanded business. 
Strategic developments
In line with the global strategy we outlined in 
September 2012, the management team 
completed a number of strategic initiatives 
during the year under review with the 
announcement of strategic relationships 
which we would expect to develop further in 
the future. These developments are intended 
to provide a platform for long-term growth 
and profitability, reduce execution and 
business risk, and to monetise Hydrodec’s 
proven cleantech sustainable oil re-refining 
process; from the core transformer oil business 
into the substantially larger used lubricant and 
base oil market. 
Strategic partnership with G&S in US
In April 2013 the Company entered into a 
strategic partnership with G&S Technologies 
Group (“G&S”) in order to grow its core 
transformer oil business and create the largest 
transformer oil re-refiner in the US. G&S is a 
leading New Jersey-based electricity 
transformer recovery services group with a 
50-year track record of serving the industrial 
and utility industries throughout the US. 
The commitment of feedstock from G&S to the 
new entity, Hydrodec of North America 
(“HoNA”), has enabled greater utilisation of 
existing available capacity in the US. It also 
provides HoNA with increased security of 
feedstock supply to support the planned 
expansion of US plant capacity from 27 million 
litres per annum to 65 million litres per annum. 
G&S has acquired a 25 per cent stake in HoNA 
which it will increase to 49.9 per cent as the 
expansion plans are delivered. 
The transaction also establishes a new 
recurring royalty for the technology which 
Hydrodec has licensed to HoNA. 
Acquisition of OSS Group
In September 2013 the Company acquired the 
principal assets and business of OSS Group 
Limited from its administrators. OSS is the UK’s 
largest collector, consolidator and processor of 
used lubricant oil and the largest seller of 
processed fuel oil (“PFO”). 
The used oil collection creates a competitive 
source of feedstock for new technology  
to upgrade PFO to higher margin lubricant 
base oils. 
The global market for lubricant oil is estimated 
to be in excess of US$30 billion per annum, 
materially larger than that for transformer oil 
(estimated at US$1.8 billion per annum); the UK 
is a key target market with little or no current 
upgraded oil recycling.
Chief Executive’ s report 11
www.hydrodec.com
G&S is a privately owned conglomerate 
based in New Jersey with a 50 year track 
record in the recovery and disposal of 
decommissioned transformers, treatment 
and handling of waste and/or contaminated 
transformer oils as well as associated asset 
recovery services. The group, which 
includes G&S Technologies and affiliation 
with TCI Alabama, Transformer Technologies 
(Oregon) and TCI of New York, serves the 
industrial and utility industries throughout 
the entire US offering its clients a wide 
range of services. 
Our partnership creates an alliance between 
the best asset recovery and service provider 
with the best oil re-refining technology, 
providing electrical utility industry 
customers with a compelling one-stop 
sustainability offer. The security of supply of 
used oil as feedstock for HoNA’s Canton 
re-refinery has materially de-risked our 
operations and future expansion activities  
in the US.
G&S Technologies – our 25% partner  
in Hydrodec of North America (“HoNA”)
Strategic Report Governance Financial Statements 12
Hydrodec Group plc    |   Annual Report and Accounts 2013
Chief Executive’ s report continued
Technology
Transformer oil
We have recently filed a provisional patent 
application to protect our operating and 
design intellectual property innovation in the 
original patented transformer oil re-refining 
technology developed over eight years  
of commercial operation. This reinforces  
the ongoing commercial protection of 
Hydrodec’s proprietary technology leadership  
in the production of sustainable and high 
quality transformer oil products at market 
competitive prices. The innovation contained 
in this new patent application will enhance 
process economy, reliability and consistency 
while operationally simplifying the core 
re-refining technology. 
Since the turn of the year, our re-refining 
methodology for transformer oil has been 
accepted by the US Carbon Registry as a 
carbon offset, or carbon saving process, 
providing us with the potential to monetise 
production as a carbon credit through the 
voluntary carbon offset market in the US. 
Lubricant oil
In December 2012, we announced proof of 
concept that extends Hydrodec’s proven 
technology into used paraffinic feedstock – 
both industrial and used crank case motor oils. 
The technology offers the potential for new 
types of high quality, low carbon lubricant 
base oils that meet or exceed the higher-end 
specifications, being Group II, II+ and/or Group 
III. Market intelligence suggests that the ability 
to produce a Group III product in particular 
would mark a significant breakthrough for 
re-refined products. 
We continue to make steady progress and 
expect to submit an application for patent 
protection to cover hydrogenation in the 
treatment of used lubricant oil in the near 
future. Test rigs covering all three stages of the 
more complex lubricant re-refining process are 
operating in Australia; the immediate objective 
is to determine the operating and design 
parameters for a semi-commercial pilot plant 
targeted for the UK in the first half of 201 5, subject 
to planning and other regulatory consents.
New markets 
New market entry remains under review in  
line with strategy and in a sector which offers  
a number of consolidation opportunities. 
Targets would include access to secure 
feedstock and complementary or proven 
technology that can offer accelerated 
deployment and potential business synergies. 
Europe is a key area of focus, with the US 
having more medium term opportunities.
Hydrodec has now dissolved the joint venture 
relationship with Kobelco-Eco in Japan 
pending a change in the regulatory and market 
conditions in the country that might offer 
renewed opportunity to access the material 
store of PCB contaminated used oil and 
hardware. While the regulatory environment 
has largely reconfirmed the extremely onerous 
restrictions on handling the legacy PCB issue, 
an extension of the completion date to 2026 
has reduced short-term necessity to develop 
solutions. We keep Japan under close review 
with the 2020 Tokyo Olympics targeted to 
enhance and promote best environmental 
practice as a possible catalyst for action; it 
remains a long wavelength opportunity.
Other strategic relationships
UK
The Company announced in November 2013 
that it had reached heads of terms on an 
agreement to collaborate with Essar Oil UK Ltd 
to develop re-refining opportunities in the UK. 
We anticipate combining the existing 
infrastructure, expertise and operating 
capability at Stanlow, the UK’s second largest 
refinery, with both Hydrodec’s proprietary 
technology and feedstock from OSS to create 
a lubricant oil re-refining hub. A combined 
transformer oil and lubricant base oil business 
in the UK would target up to 100 million litres 
per annum of processing capacity. 
Australia
Also in November 2013 the Group entered into 
an agreement to co-locate its Australian 
transformer oil re-refining operation at the 
Southern Oil Refining Pty Limited (“SOR”) 
lubricant oil re-refinery in Wagga Wagga, New 
South Wales (“NSW”). This will create a single 
re-refining site of scale in NSW, improving 
Hydrodec’s cost and operational efficiency, 
and substantially enhancing operational 
resilience. SOR will operate the combined 
facility under a tolling agreement.
SOR and its partner JJ Richards are leading 
collectors and re-refiners of general used 
lubricant oil in Australia and are currently 
commissioning their second re-refinery 
complex at Gladstone, Queensland. Hydrodec 
will retain all rights and ownership of the 
Hydrodec brand, business and technology in 
Australia and will continue to manage all 
commercial aspects of the business including 
used oil procurement as well as sales and 
marketing of SUPERFINE™ transformer oil  
and naphthenic base oil. We would expect the 
co-location to become effective later this year. OSS is the UK’s largest collector, consolidator 
and processor of used lubricant oil and seller 
of processed fuel oil. It has a national 
network of oil storage and transfer stations, 
serviced by a fleet of more than 90 trucks 
which collect used oil and other garage 
workshop waste from over 30,000 
customers. Used oil is converted into 
processed fuel oil at OSS’s plant at Stourport 
and principally sold on to the UK quarry  
and power industry. It also provides 
complementary waste services for a 
“one-stop shop” total waste management 
offering to clients. 
The combination of OSS’s access to used  
oil together with its operating capability 
makes it an ideal partner for Hydrodec to 
utilise Hydrodec’s existing transformer oil 
technology and to develop and ultimately 
deploy its new lubricant oils re-refining 
technology in the UK:
 – it offers the potential to provide over 60 
million litres per annum of feedstock 
which the Group intends to re-refine into 
a high grade lubricant base oil; 
 – it provides capability to collect used 
transformer oil from the UK power 
companies and overseas; and
 – it provides a platform to develop other 
opportunities to consolidate the oil 
collection and re-refining market in the 
UK and Europe.
OSS – acquired in September 201 3
Waste oil
collection
Parts
washers
Fuel oil Industrial
services
Hazardous
waste collection
Fragmentation 
services
Ancillary 
products
Waste oil
collection
Parts
washers
Fuel oil Industrial
services
Hazardous
waste collection
Fragmentation 
services
Ancillary 
products
Waste oil
collection
Parts
washers
Fuel oil Industrial
services
Hazardous
waste collection
Fragmentation 
services
Ancillary 
products
Waste oil
collection
Parts
washers
Fuel oil Industrial
services
Hazardous
waste collection
Fragmentation 
services
Ancillary 
products
Waste oil
collection
Parts
washers
Fuel oil Industrial
services
Hazardous
waste collection
Fragmentation 
services
Ancillary 
products
Waste oil
collection
Parts
washers
Fuel oil Industrial
services
Hazardous
waste collection
Fragmentation 
services
Ancillary 
products
Waste oil
collection
Parts
washers
Fuel oil Industrial
services
Hazardous
waste collection
Fragmentation 
services
Ancillary 
products
13
www.hydrodec.com
Strategic Report Governance Financial Statements 14
Hydrodec Group plc    |   Annual Report and Accounts 2013
Financial and operating performance
Given the execution of a number of strategic 
developments during 2013, we have this year 
included a Chief Financial Officer’s review 
which will provide further explanation behind 
the headline numbers in the statutory accounts. 
It will also provide more detail in respect of the 
financial and operating performance of the 
Group and I shall therefore limit my report to 
the Group level headline numbers.
2013 represented the ninth consecutive year of 
growth for the Company with revenues 
increasing a further 54 per cent to US$40.1 
million (2012: US$26.1 million). Total oil sales of 
37 .0 million litres represented an increase of 65 
per cent on 2012 (22.5 million litres). Gross 
profit rose 76 per cent to US$9.4 million (2012: 
US$5.4 million) with margins at 24 per cent 
(2012: 21 per cent).
I am pleased to report that Operating EBITDA 
(adjusted for growth costs, share-based 
payment costs and foreign exchange loss) was 
positive for the first time ever at US$0.2 million 
(2012: US$2.8 million loss). In line with our 
stated target during the year, we achieved a 
positive total EBITDA run-rate in September, 
October and November which bodes well for 
the future. 
The overall statutory loss for the year widened 
to US$17 .4 million (2012: US$14.2 million) once 
growth costs, the significantly increased 
interest charge (including the final, non-
recurring US$4.9 million non-cash amortisation 
of the unsecured loan stock) and depreciation 
and amortisation are included. 
Balance sheet and funding
Following the successful completion of the 
£24 million placing and open offer of new 
ordinary shares in November 2013, together 
with the repayment of £12.9 million of 
unsecured loan stock (in cash) and £5 million 
of secured loan notes and a £7 .5 million 
revolving credit facility (through the issue of 
new ordinary shares), the Company’s balance 
sheet was significantly stronger at the 
year-end. Net assets were US$69.6 million 
(2012: US$25.5 million), including US$21.9 
million in cash, and the parent Company is 
debt free.
This represents a significant breakthrough for 
the Group and formed a key element in the 
implementation of our strategy. The Company 
is now on a much firmer financial footing for the 
next phase of growth with renewed flexibility 
around its future funding requirements. 
Trading update and outlook
In respect of the Canton incident, the Group 
has submitted a claim for its total loss 
(including business interruption) which is 
under review by the insurers for final approval. 
On the basis of management’s assumed 
insurance proceeds for business interruption, 
the Company achieved a positive total EBITDA 
result for the first three months of 2014. There 
remains significant scope for further 
improvement in the UK and Australian 
operations through the rest of the year.
The Board expects that two re-refining 
processing units (“trains”) will be operational at 
Canton in the fourth quarter of 2014, with four 
more trains following in the first quarter of 
2015. This will bring capacity at Canton to 150 
per cent of that in operation prior to the 
incident in December last year, with further US 
expansion planned for later in 2015. Our local 
management team and partners G&S remain 
confident that neither feedstock supply nor 
customer demand, given an even higher 
specification end product arising from 
improved plant design, should prove material 
obstacles to the successful performance of the 
expanded plant.
In Australia, feedstock constraints have impacted 
performance in the year to date but these are 
showing signs of improvement ahead of the 
planned co-location with SOR which is likely  
to be effected in the fourth quarter.
The OSS oil recycling business in the UK has 
also experienced some feedstock constraints 
due to aggressive competition for used oil 
from European re-refiners. However, it 
continues to contribute positively to EBITDA 
and indeed its performance for the first 
quarter is ahead of our internal budget. 
Management remain confident that the 
business is progressing well and remains on 
track to return to its earlier levels of profitability 
within the next two years.
Whilst we continue to have line of sight to 
establishing our own “best in class” re-refining 
technology for lubricant oils and to target 2016 
for the commissioning of a full scale re-refining 
plant, the Board continues to monitor other 
opportunities which may enable the Company 
to move into this market at an earlier date.  
The Company’s current plans are to establish  
a “semi-commercial” scale pilot plant in the 
first half of 2015, subject to planning and 
regulatory consents. 
In terms of a transformer oil business in the UK, 
the Board continues to target the commissioning 
of a two train plant in the second quarter of 
2015, again subject to approvals. 
While there is little doubt that the unfortunate 
incident at Canton in December has slowed 
operational momentum, all indications are 
that the Group will re-emerge stronger in the 
US and march back to the original plan for 
expansion and growth. The wider market for 
re-refining remains a core target, through 
technology and, critically, access to feedstock. 
The market leading position enjoyed by OSS in 
the UK creates interesting strategic optionality 
for the development of our wider business 
strategy in new markets for re-refining. The 
management team remain focused on a 
strategy to grow the business which will be 
delivered by securing access to the value 
chain, the application of “best in class” 
technology, the reduction of risk through 
partnership or acquisition and the rigorous 
focus on business costs and efficiency.
I am pleased to thank the Board for their 
support, as well as our enlarged stakeholder 
base, as we continue to build a business based 
on our unique, renewable oil proposition. 
Ian Smale
Chief Executive Officer
21 May 2014
Chief Executive’ s report continued 15
www.hydrodec.com
In their reports both the Chairman and Chief 
Executive covered key areas of the strategic 
development of the Group as well as reporting 
on key aspects of its financial performance. The 
successful execution of major elements of our 
strategy in 201 3 have added further complexity 
to the Group’s financial statements than 
previously and as part of this review I have 
provided additional commentary where relevant. 
Revenue and operational performance
Group revenues increased by 54 per cent to 
US$40.1 million (2012: US$26.1 million), the 
ninth consecutive year of growth, driven by an 
1 1 per cent increase from the core re-refining 
business (US$28.9 million) and the acquisition 
of the OSS business in September (US$1 1.2 
million). Total oil sales of 37 .0 million litres 
represented an increase of 65 per cent over 
2012 (22.5 million litres). 
Gross unit margins in the re-refining business 
were significantly higher at US$0.30 per litre 
(201 2: US$0.24 per litre) despite lower product 
sales prices, driven by a combination of better 
feedstock acquisition, a higher proportion of PCB 
contaminated feedstock, volume impacts and 
improved procurement processes. Gross profit 
from the re-refining business rose 42 per cent to 
US$7 .6 million (201 2: US$5.4 million) despite the 
impact of the incident at Canton in December. 
Sales volumes for recycled oil products 
totalled 1 1.8 million litres, with 10.9 million litres 
of processed fuel oil (“PFO”) and the balance 
from recycled fuel oil (“RFO”). The recycling 
division contributed US$1.8 million of gross 
profit with recycling margins at 16 per cent.
Utilisation of productive capacity in the 
re-refining business for the 1 1 months prior to 
the business interruption at Canton improved 
significantly to 78 per cent (2012: 70 per cent), 
predominantly driven by greater access to 
feedstock following the strategic partnership 
with G&S. 
Overall employee costs and other operating 
costs increased by 15 per cent to US$16.5 
million (2012: US$14.3 million) reflecting the 
overhead acquired as part of the OSS 
acquisition (US$1.8 million) and the increased 
investment in the Company’s growth 
initiatives during the year, both in respect of 
the ongoing development of the technology 
as well as transaction fees and costs.
The overall operating loss improved to US$8.6 
million (201 2: US$9.2 million) whilst the 
underlying operating loss (pre growth costs, 
bargain purchase and amortisation of intangible 
assets) improved by 27 per cent to a loss of 
US$3.2 million (201 2: US$4.3 million). 
Internally the business is managed and 
performance measured by reference to 
Operating EBITDA (pre growth costs and other 
non-operating items), which was significantly 
improved at US$0.2 million (2012: US$2.8 million 
loss). As this is not a statutory accounting 
measure the table below reconciles this figure 
to the statutory operating loss:
    
US$’000
Operating EBITDA 187
Growth costs (3,256)
Bargain purchase 874
Depreciation (2,673)
Amortisation (2,499)
Share-based payment costs (530)
Foreign exchange loss (664)
Statutory operating loss (8,561)
 
Canton incident and insurance
On 1 December 2013 an explosion and fire at 
the US plant in Canton, Ohio effectively shut 
down production causing significant damage 
to the main reactors and ancillary equipment. 
Since the date of the incident the Group along 
with its insurers and their loss adjusters, have 
gone through a process of establishing the 
extent of the damage caused, the costs to 
rebuild it and the estimated time it would take 
to re-establish full operational capability. The 
Group has submitted a claim for its total loss 
(including business interruption) which is under 
review by the insurers for final approval. Under 
its policy the Group has single incident 
coverage of US$35 million and in the opinion of 
the Directors is therefore adequately covered in 
respect of this claim. In anticipation of the 
resolution of the total claim the Group received 
US$2 million on account on 17 February 2014.
As at 31 December 2013 the Group has 
estimated a total impairment and write-off of 
assets of US$7 .2 million for which it has created a 
corresponding receivable due from the insurers. 
Based on actual orders and sales pipelines, and 
after taking account of the proceeds of sale of 
inventory held at the time of the incident, it has 
also assumed US$0.4 million of net income 
receivable for the period from 1 December to 
31 December recognised in revenue under the 
terms of its business interruption coverage.
Chief Financial Officer’ s review
“ Internally the business is managed 
and performance measured by 
reference to Operating EBITDA  
(pre growth costs and other 
non-operating items), which was 
significantly improved at US$0.2 
million (201 2: US$2.8 million loss).”
Strategic Report Governance Financial Statements 16
Hydrodec Group plc    |   Annual Report and Accounts 2013
Under the terms of the Group’s insurance, the 
Directors consider the above amounts 
represent the best estimate of amounts 
recoverable with certainty in respect of the 
period under review at the date of preparation 
of these financial statements. Confirmation of 
all amounts due to the Group above the value 
of these assets including any compensation for 
business interruption will only occur once the 
loss adjusters have completed their technical 
review and evaluation which the Directors 
believe is close to completion and at which 
time the total claim receivable can be properly 
estimated and recorded.
Finance costs
Following the successful completion of the 
placing and open offer of new ordinary shares in 
November the Group was able to repay (in cash 
and through the issue of new shares) all 
outstanding indebtedness with the exception of 
finance leases acquired as part of the OSS 
acquisition. The early repayment of the 
unsecured loan stock increased the finance costs 
charged in the year to US$9.1 million (201 2: US$5.3 
million), with US$4.9 million of this increase being 
a non-cash charge for the difference between 
the carrying value of the unsecured loan liability 
and its face value on repayment.
Bargain purchase
As well as the one-time costs and fees incurred 
as part of the Company’s growth initiatives, 
following the acquisition of the tangible assets 
and liabilities of the OSS Group out of 
administration on 6 September, a fair value 
exercise as required under IFRS 3 was carried out. 
Under this exercise both tangible and intangible 
assets and liabilities were attributed provisional 
fair values. The resulting excess of net fair value 
of the assets over the consideration paid is 
recognised in the consolidated statement of 
income (US$0.9 million) as required by the 
accounting standards.
Strategic developments
The Company successfully executed a number 
of strategic initiatives during the year, the key 
financial aspects of which are described below.
Partnership with G&S Technologies Group 
The Group disposed of 25 per cent of its interest 
in Hydrodec of North America LLC to the G&S 
Recycling Group LLC (“G&S”) on 16 April 2013. 
Under the terms of the agreement G&S made 
an initial payment of US$1.73 million based on a 
multiple of earnings for the year ended 31 
December 2012 (5 times EBITDA) with an 
additional amount payable on the excess of the 
2013 EBITDA over 2012 EBITDA paid at a multiple 
of 6.5 times. The total consideration is estimated 
at US$3.3 million resulting in a small loss on 
disposal of US$0.3 million. Under the terms of 
the partnership a royalty is also payable to the 
Hydrodec Group of 5 per cent of net revenue.
Acquisition of OSS Group
The Group acquired the principal business and 
assets of OSS Group Limited (“OSS”) from the 
administrator on 6 September 2013 for a total 
consideration of US$7 .7 million settled in cash 
on the date of acquisition. The total associated 
costs of acquiring OSS in respect of fees and 
transaction costs were US$0.3 million. OSS has 
made a positive contribution to EBITDA in its 
first six months and is well positioned to exceed 
the required return within the period targeted 
by management at the time of the acquisition.
Agreement with Essar Oil UK
The Company reached heads of terms on an 
agreement to collaborate with Essar Oil UK Ltd 
to develop re-refining opportunities in the UK in 
November 2013. Whilst two discrete re-refining 
operations are envisaged, no ongoing financial 
commitments by either party had been entered 
into at the balance sheet date.
Agreement with Southern Oil 
The Group entered into an agreement in 
November 201 3 to co-locate its Australian 
transformer oil business with the Southern Oil 
Refining (“SOR”) lubricant oil re-refinery in Wagga 
Wagga, New South Wales to create a single 
re-refining site of scale improving Hydrodec’s 
cost and operational efficiency as well as 
enhancing operational resilience. SOR will 
operate the combined facility under a tolling 
agreement. The implementation of this 
arrangement is linked to obtaining appropriate 
planning and operating permits to facilitate the 
move, the certainty for timing of which is beyond 
the Group’s control. Any benefits or costs 
incurred under this arrangement will commence 
at the time that such permits are granted. 
Transaction costs and fees of US$0.4 million were 
incurred in 201 3 to execute this agreement.
Amortisation and impairment of 
intangible assets
Amortisation of US$2.5 million (2012: US$2.1 
million) principally represents the annual 
charge relating to the Group’s intangible assets 
comprising of the Hydrodec technology and 
prepaid royalty, both of which are being 
amortised over anticipated useful lives of 15 
years from their acquisition date in 2004.
In accordance with accounting standards, the 
Board has reviewed the carrying value of 
goodwill and other intangible assets across the 
Group in the light of current trading and 
prospects and progress towards achieving the 
Group’s strategic plans. The Board concluded 
that the carrying value of goodwill and other 
intangible assets remained appropriate and 
that no impairment had occurred.
Segmental analysis
Following the acquisition of OSS in September 
2013 the Board, in its capacity as the Group’s 
Chief Operating Decision Maker (for the 
purposes of accounting standards), reviewed 
the continuing appropriateness of the Group’s 
operating segment disclosures. The Group 
now operates two clearly defined divisions 
– re-refining (the historic transformer oil 
business) and recycling (the OSS business) and, 
accordingly, the Board has concluded that the 
most appropriate segmental analysis for 
stakeholders is provided on this basis.
Operating cash flow and working capital
During the year we retained a strong focus on 
management of working capital within each of 
the divisions, with the aim of achieving an 
appropriate balance between commercial 
priorities and financial efficiency. Each division 
has a specific cash target which is monitored 
throughout the year and flexed according to 
demand levels. In addition, over the last 1 2 
months, the Group has successfully established 
working capital facilities in all of its principal 
operating units that properly reflect its 
commercial activities and give it greater flexibility 
in the execution of its commercial strategy. 
Despite increased levels of trading, the impact of 
the OSS acquisition and excluding the insurance 
income receivable, net cash outflow from 
operating activities improved by US$0.3 million 
over 201 2. If the impact of OSS is excluded, the 
net cash outflow would have shown an 
improvement of US$1.0 million on 201 2.
Chief Financial Officer’ s review continued 17
www.hydrodec.com
Credit management processes remain robust 
with no bad debts written off during the year. 
Continued proactive management of 
customer credit, which starts at the point of 
sale remains a priority for the businesses in 
2014 as we continue to seek to maximise 
commercial opportunities.
Capital expenditure
In 201 3 we continued our programme of targeted 
investment across each of the businesses. Overall 
net capital expenditure (excluding property, plant 
and equipment acquired as part of the acquisition 
of OSS) was US$ 1 .0 million (201 2: US$ 1 . 1 million) 
with most expenditure focused on projects 
related to providing more resilience in the 
re-refining division.
Liquidity
The Company successfully completed a 
placing and open offer of new ordinary shares 
in November 2013 under which it was able to 
repay £12.8 million of unsecured loan stock in 
cash and settle £5 million of secured loan 
notes and a £7 .5 million revolving credit facility 
through the issue of ordinary shares. As at 31 
December 2013 the Group’s net assets were 
US$ 69.6 million (2012: US$25.5 million) of 
which US$21.9 million was held in cash and the 
parent Company is debt free.
The Group has sufficient cash balances and 
undrawn banking facilities to finance all 
investment and capital expenditure included 
in its plan for the current year with an 
additional margin for contingencies.
Shares in issue 
Following the placing and open offer in 
November 2013 the Company issued 324.1 
million new ordinary shares which increased 
the total number of shares in issue to 803.2 
million. The basic and fully diluted weighted 
average number of shares in issue for 2013  
was 467 .8 million (2012: 407 .9 million). As at  
31 December 2013, 56.6 million shares were 
owned by a member of the Group and 
therefore treated as if they were treasury 
shares on consolidation (2012: 56.6 million). The 
Group intends to take the necessary steps to 
allow it to cancel these shares. The Hydrodec 
Employee Benefit Trust held 2.6 million shares 
as at 31 December 2013 (2012: 2.6 million).
Financial reporting
The financial information has been prepared 
under IFRS and in accordance with the Group’s 
accounting policies. There have been no 
changes to the Group’s accounting policies 
during the year ended 31 December 2013.
Going concern 
The Directors are confident, on the basis of 
current financial projections and facilities 
available, and after considering possible changes 
in trading performance, that the Group has 
sufficient resources for its operational needs for 
the next 1 2 months. Accordingly, the Directors 
continue to adopt the going concern basis.
Chris Ellis
Chief Financial Officer 
21 May 2014
Strategic Report Governance Financial Statements 18
Hydrodec Group plc    |   Annual Report and Accounts 2013
Key performance indicators
The Group monitors and measures performance against its KPIs, a number of 
which are highlighted below. These KPIs are in line with strategic priorities of the 
Group and provide a means of evaluating how well the Group is working 
together to deliver the long-term strategy . Additional KPIs may be reported in 
the future to reflect the integration and operation of the OSS recycling business.
Total revenue
2013 2012 2011
US$ million
Recycling Re-reﬁning
0
10
20
30
40
 
Purpose
To identify directional trend in sales revenue 
and evaluate the ability of the Group to grow 
its customer base
Target
To grow revenue year-on-year
Performance
Revenue has grown 54 per cent in 2013,  
driven by 1 1 per cent improvement in core 
re-refining business and acquisition of OSS 
recycling business
+54%
Gross margin
2013 2012 2011
Per cent
20
21
22
23
24
 
Purpose
To evaluate the profitability and financial 
health of the Group. A relative measure of each 
US$ of revenue remaining after all direct costs 
have been incurred
Target
To maintain and improve gross margin
Performance
Gross margins improved by 300 basis points to 
24 per cent, driven by 550 basis points increase 
to 26 per cent from re-refining segment 
partially offset by 16 per cent gross margin in 
recycling
23%
(2012: 21 per cent)
Operating EBITDA
2013 2012 2011
US$ million
–3
–2
–1
0
1
 
Purpose
To evaluate the operational performance and 
profitability of the Group
Target
2013 – to achieve a positive result. Future years 
– to outperform year-on-year 
Performance
Significant improvement on previous year and 
first positive result in the Group’s history
US$0.2m
(2012: US$2.8m loss)
Financial  
performance
Strategic financial  
performance 19
www.hydrodec.com
Re-refining utilisation 
2013* 2012 2011
Per cent
* Jan–Nov
0
20
40
60
80
1 00
 
Purpose
To measure utilisation of effective re-refining 
capacity
Target
85 per cent
Performance
Further year-on-year improvement towards 
target level
78%
(2012: 70 per cent)
Total volume
2013 2012 2011
Litres millions 
Recycling Re-reﬁning
0
10
20
30
40
 
Purpose
To identify directional trend in sales volumes 
and evaluate the ability of the Group to grow 
its customer base
Target
To grow sales volumes year-on-year
Performance
Volumes grew 65 per cent in 2013, driven by  
12 per cent improvement in core re-refining 
business and acquisition of OSS recycling 
business
+65%
Operational  
performance
* Jan – Nov
Strategic Report Governance Financial Statements 20
Hydrodec Group plc    |   Annual Report and Accounts 2013
Principal risks and uncertainties
The Board and management regularly review and monitor the key risks 
involved in running and operating the business. The table below sets out  
a number of these risks together with relevant mitigating factors.
Risk Description Mitigation
Resolution of Canton  
insurance claim
The Group is in the process of seeking 
settlement of its insurance claim in respect of 
the incident at Canton. A failure, or significant 
delay, in achieving the expected outcome may 
impact negatively on the anticipated financial 
performance and position of the Company for 
2013 and 2014.
An initial payment of US$2 million has 
already been received and management 
are encouraged by progress in respect of 
the balance of the claim. The Group has 
significantly greater cash resources than 
in previous years enabling it to continue 
to trade and develop its rebuild, 
expansion and strategic growth plans 
pending resolution.
Feedstock availability – 
transformer oil
The Group is dependent on sourcing of used 
oil feedstock from which to manufacture its 
SUPERFINE™ products. Historically this has 
provided the main operational challenge to 
the business due to competing uses for used 
transformer oil and/or long-established 
practices around waste incineration. 
The strategic partnership with G&S in the 
US, together with further investment in 
procurement capability and strategy 
development and the added profile and 
credibility of the Hydrodec process 
derived from the US EPA permit to treat 
PCB contaminated material, resulted in 
significantly improved feedstock volumes 
in 2013. The G&S relationship has 
significantly de-risked security of 
feedstock supply and underpins 
expansion in the key US market.
Feedstock availability –  
lubricant oils
The same issue applies as the Group expands 
its operations into lubricant oils.
The acquisition of the OSS business 
provides the Group with a strong market 
position in the UK for sourcing used 
motor oil.
New technology development
A key element of the Group’s expansion into the 
lubricant oils market relates to the ultimate 
successful commercial deployment of its 
technology to the re-refining of these oil types, 
either as a standalone or as an additive to 
available existing technology.
The Group has achieved proof of concept 
and is close to applying for patent 
protection. It proposes to build a 
semi-commercial scale pilot plant in 2015 
and full scale plant in 2016. The Board will 
monitor other opportunities to accelerate 
full market entry.
Permitting and relationship  
with regulators
The rebuild and expansion programme at 
Canton, the co-location project in Australia 
and any new plants and locations will require 
appropriate permitting and licences, over 
which the Group may have only have limited 
control as to timing and conditions attached.
The Group has developed very good 
relations and has a strong environmental 
and safety record with the relevant EPA 
and other national and local bodies in 
each of its countries of operation. 21
www.hydrodec.com
Risk Description Mitigation
Operational reliability and  
product quality
The Group is dependent on the continuing 
reliability of its operational plants and product 
quality, with risk of loss of revenue and 
reputation should it fail.
Investment in operational and capital 
expenditure, including human resource, 
to maintain and improve reliability and 
quality.
Concentration/loss of  
major customers
Sales in the US are relatively highly 
concentrated in a small number of key 
customers which, if lost, might have a material 
impact on the Group. 
The Group aims to build long-term 
relationships with our customers based on 
value, quality and service. Furthermore we 
continue to build our customer base and 
would expect to decrease the reliance on 
key customers over time.
Key executives and personnel
The Group’s future success is substantially 
dependent on the continued services and 
performance of its senior management team 
and its ability to attract and retain highly 
skilled and qualified personnel – particularly 
during the current stage of business and 
technology development.
The Remuneration Committee maintains 
a policy that aims to attract, motivate and 
retain key personnel for the Group. This 
incorporates a significant element of 
performance related remuneration to 
align interests with those of shareholders. 
Realising the opportunities  
for growth
Project risk, including integrity of the 
technology, commercial viability and need to 
develop partnerships in different business 
models.
Increased investment in human capability 
and R&D, together with improved 
communication with all stakeholders 
around the opportunities and 
requirements to fulfil them.
Competitors
The Group may face competition including 
from global competitors with larger capital 
resources.
The Group’s technology is its key 
differentiating factor and this is currently 
patent protected as well as commercial 
first mover advantage provided by 
know-how and trade secrets.
Market conditions
The overall growth and demand for the 
Group’s products is subject, to a certain extent, 
to the usual drivers of commercial activity (ie 
general economic conditions, interest rates, 
confidence levels, unemployment, housing 
starts, population growth, etc). This demand 
can be unpredictable and the Group has a 
relatively low visibility of future orders from its 
customers. During any economic downturn 
customers and competitors may apply 
pressure to prices and this pressure can lead to 
temporary and/or lasting changes in terms of 
pricing policies and market expectations.
Securing significant additional financing 
in 2013 has materially strengthened the 
Group’s ability to withstand future 
short-term downturns in its markets. 
Management prepares regular forecasts 
and reviews that can focus on remedial 
action plans required to deliver the 
desired performance. 
The Strategic Report was approved by the Board of Directors on 21 May 2014 and was signed on its behalf by:
Ian Smale  Chris Ellis
Chief Executive Officer Chief Financial Officer   
Strategic Report Governance Financial Statements 22
Hydrodec Group plc    |   Annual Report and Accounts 2013
Board of Directors
There were no changes to the composition of the Board during the year. All Directors shall retire at the AGM and all Directors shall put themselves 
forward for re-election. 
Lord Moynihan 
Chairman
Ian Smale
Chief Executive Officer
Chris Ellis
Chief Financial Officer
Mark McNamara
Senior Executive Director
Andrew Black
Non-executive Director
Alan Carruthers
Non-executive Director
Gillian Leates
Non-executive Director
Background and experience Lord Moynihan was previously 
Executive Chairman and Chief 
Executive of Consort Resources 
Limited and Executive Chairman 
of Clipper Windpower Europe 
Limited. Colin was a Member of 
Parliament in the UK for 10 years, 
serving as Minister for Energy 
from 1990 to 1992. He was the 
first Patron of the British Wind 
Energy Association and a 
member of the Royal Institute of 
International Affairs: Energy and 
Environment Programme 
Steering Committee. Colin stood 
down as Chairman of the British 
Olympic Association in 2012 after 
seven years, during which he 
oversaw Team GB’s successful 
performance in the Beijing and 
London Olympic Games. He was 
a Rowing Silver Medallist in the 
1980 Olympic Games.
Prior to joining the Board as CEO in 
January 2012, Ian had spent his 
entire career with BP plc and held 
various senior roles in a career 
spanning 30 years. He held a 
variety of leadership positions 
across BP , including Group Head of 
Strategy & Policy, Business Unit 
Leader for Commercial Marketing 
and Distribution in South Africa, 
Global Head of Mergers and 
Acquisitions, and President and 
Chief Executive of BP North Africa. 
Chris is a qualified chartered 
accountant and has more than  
20 years‘ board level finance and 
management experience of 
running a range of large, complex 
international businesses as well as 
small and medium-sized ventures, 
including a significant period 
within GE Capital. From 2009 to 
2012, he served as Global Chief 
Financial Officer of PPC 
Worldwide, a global healthcare 
business within UnitedHealth 
Group Inc, a New York Stock 
Exchange listed company with a 
market capitalisation of 
approximately US$60 billion.
Mark’s experience and 
background are primarily in  
the chemical engineering, 
technology and environmental 
services fields. He managed the 
construction and subsequent 
commissioning of the first 
Hydrodec plant in Australia in 
2004. Mark joined the Board in 
December 2004, at the time of 
the Company’s acquisition of the 
Hydrodec technology, originally 
as Chief Operating Officer and 
assumed the role of CEO in 
August 2005. He became Senior 
Executive Director on Ian Smale’s 
commencement of duties as CEO 
in January 2012 and is Head of 
Technology and International 
Projects within the Group.
Andrew is the co-founder of 
Betfair, the world’s leading online 
betting exchange and FTSE 250 
constituent, having devised its 
unique betting exchange model. 
He was a director of the Betfair 
Group from 1999 to 2010.
Alan has 27 years’ experience in 
the financial markets and from 
2003 to 2010 he was Global Head 
of Equities at Cazenove. During 
this time he was appointed a 
main board director and was a 
member of both the executive 
and operations committees.  
He helped spearhead the joint 
venture with J.P .Morgan in 2005 
and spent a year as Head of EMEA 
Cash Equities at J.P .Morgan 
Cazenove, following the buyout 
of Cazenove in January 201 1.
Gill brings with her a wealth of 
public market experience, having 
spent eight years at Schroder 
Investment Management as an 
analyst and fund manager and 
later serving as Investment 
Director on the main board of 
Majedie Investments PLC. She 
also served as a non-executive 
director of Majedie Asset 
Management Limited where she 
played a key role in setting up the 
UK pension fund management 
business in 2002.
Date of appointment Colin joined the Board  
and became Chairman in  
October 2012. 
Ian joined the Board as CEO in 
January 2012.
Chris joined the Board in July 2012 
as CFO. 
Mark joined the Board in 
December 2004. 
Andrew joined the Board in  
July 2011.
Alan joined the Board in  
August 2012. 
Gill joined the Board in June 2009.
External appointments Colin is a director of Rowan 
Companies plc (offshore drilling) 
and a number of renewable 
energy companies.
Ian is a non-executive director of 
Nexen Petroleum UK Ltd.
None. None. Andrew holds board seats at a 
number of companies, with a 
focus on technology.
None. Gill serves as non-executive 
Chairman of Verdes Management 
plc.
Committee memberships Colin chairs the Board’s 
Remuneration and Nominations 
Committees and also serves on 
the Board’s Audit Committee.
Ian serves on the Board’s 
Nominations Committee.
None. None. Andrew serves on the Board’s 
Remuneration and Nominations 
Committees.
Alan serves on the Board’s  
Audit, Nominations and 
Remuneration Committees.
Gill chairs the Board’s Audit 
Committee and also serves on 
the Board’s Remuneration and 
Nominations Committees.
Independence The Board consider Colin to be an 
independent Director, and 
consider that the historic one-off 
option grant does not impact 
upon his independence given its 
quantum and on basis that its 
award was supported by leading 
shareholders at the time.
Executive – non-independent. Executive – non-independent. Executive – non-independent. Non-independent due to 
significant shareholding.
The Board consider Alan to be an 
independent Director.
The Board consider Gill to be  
an independent Director, and 
consider that the historic one-off 
option grant does not impact 
upon her independence given  
its quantum and on basis that its 
award was supported by leading 
shareholders at the time. 23
www.hydrodec.com
Lord Moynihan 
Chairman
Ian Smale
Chief Executive Officer
Chris Ellis
Chief Financial Officer
Mark McNamara
Senior Executive Director
Andrew Black
Non-executive Director
Alan Carruthers
Non-executive Director
Gillian Leates
Non-executive Director
Background and experience Lord Moynihan was previously 
Executive Chairman and Chief 
Executive of Consort Resources 
Limited and Executive Chairman 
of Clipper Windpower Europe 
Limited. Colin was a Member of 
Parliament in the UK for 10 years, 
serving as Minister for Energy 
from 1990 to 1992. He was the 
first Patron of the British Wind 
Energy Association and a 
member of the Royal Institute of 
International Affairs: Energy and 
Environment Programme 
Steering Committee. Colin stood 
down as Chairman of the British 
Olympic Association in 2012 after 
seven years, during which he 
oversaw Team GB’s successful 
performance in the Beijing and 
London Olympic Games. He was 
a Rowing Silver Medallist in the 
1980 Olympic Games.
Prior to joining the Board as CEO in 
January 2012, Ian had spent his 
entire career with BP plc and held 
various senior roles in a career 
spanning 30 years. He held a 
variety of leadership positions 
across BP , including Group Head of 
Strategy & Policy, Business Unit 
Leader for Commercial Marketing 
and Distribution in South Africa, 
Global Head of Mergers and 
Acquisitions, and President and 
Chief Executive of BP North Africa. 
Chris is a qualified chartered 
accountant and has more than  
20 years‘ board level finance and 
management experience of 
running a range of large, complex 
international businesses as well as 
small and medium-sized ventures, 
including a significant period 
within GE Capital. From 2009 to 
2012, he served as Global Chief 
Financial Officer of PPC 
Worldwide, a global healthcare 
business within UnitedHealth 
Group Inc, a New York Stock 
Exchange listed company with a 
market capitalisation of 
approximately US$60 billion.
Mark’s experience and 
background are primarily in  
the chemical engineering, 
technology and environmental 
services fields. He managed the 
construction and subsequent 
commissioning of the first 
Hydrodec plant in Australia in 
2004. Mark joined the Board in 
December 2004, at the time of 
the Company’s acquisition of the 
Hydrodec technology, originally 
as Chief Operating Officer and 
assumed the role of CEO in 
August 2005. He became Senior 
Executive Director on Ian Smale’s 
commencement of duties as CEO 
in January 2012 and is Head of 
Technology and International 
Projects within the Group.
Andrew is the co-founder of 
Betfair, the world’s leading online 
betting exchange and FTSE 250 
constituent, having devised its 
unique betting exchange model. 
He was a director of the Betfair 
Group from 1999 to 2010.
Alan has 27 years’ experience in 
the financial markets and from 
2003 to 2010 he was Global Head 
of Equities at Cazenove. During 
this time he was appointed a 
main board director and was a 
member of both the executive 
and operations committees.  
He helped spearhead the joint 
venture with J.P .Morgan in 2005 
and spent a year as Head of EMEA 
Cash Equities at J.P .Morgan 
Cazenove, following the buyout 
of Cazenove in January 201 1.
Gill brings with her a wealth of 
public market experience, having 
spent eight years at Schroder 
Investment Management as an 
analyst and fund manager and 
later serving as Investment 
Director on the main board of 
Majedie Investments PLC. She 
also served as a non-executive 
director of Majedie Asset 
Management Limited where she 
played a key role in setting up the 
UK pension fund management 
business in 2002.
Date of appointment Colin joined the Board  
and became Chairman in  
October 2012. 
Ian joined the Board as CEO in 
January 2012.
Chris joined the Board in July 2012 
as CFO. 
Mark joined the Board in 
December 2004. 
Andrew joined the Board in  
July 2011.
Alan joined the Board in  
August 2012. 
Gill joined the Board in June 2009.
External appointments Colin is a director of Rowan 
Companies plc (offshore drilling) 
and a number of renewable 
energy companies.
Ian is a non-executive director of 
Nexen Petroleum UK Ltd.
None. None. Andrew holds board seats at a 
number of companies, with a 
focus on technology.
None. Gill serves as non-executive 
Chairman of Verdes Management 
plc.
Committee memberships Colin chairs the Board’s 
Remuneration and Nominations 
Committees and also serves on 
the Board’s Audit Committee.
Ian serves on the Board’s 
Nominations Committee.
None. None. Andrew serves on the Board’s 
Remuneration and Nominations 
Committees.
Alan serves on the Board’s  
Audit, Nominations and 
Remuneration Committees.
Gill chairs the Board’s Audit 
Committee and also serves on 
the Board’s Remuneration and 
Nominations Committees.
Independence The Board consider Colin to be an 
independent Director, and 
consider that the historic one-off 
option grant does not impact 
upon his independence given its 
quantum and on basis that its 
award was supported by leading 
shareholders at the time.
Executive – non-independent. Executive – non-independent. Executive – non-independent. Non-independent due to 
significant shareholding.
The Board consider Alan to be an 
independent Director.
The Board consider Gill to be  
an independent Director, and 
consider that the historic one-off 
option grant does not impact 
upon her independence given  
its quantum and on basis that its 
award was supported by leading 
shareholders at the time.
Strategic Report Governance Financial Statements 24
Hydrodec Group plc    |   Annual Report and Accounts 2013
Introduction to governance
Dear Shareholder ,
I am a strong believer that good corporate governance supports a 
Company’s long-term success. Constantly improving corporate 
governance is fundamentally about the culture of the governance 
model and should never become a box-ticking exercise.
As Chairman my primary responsibility is the 
delivery of that model, including running an 
effective Board and determining where 
responsibility lies within the Company for 
the delivery of key outputs. Good corporate 
governance involves having the appropriate 
structures for establishing and articulating 
the Board’s chosen strategy, while at the 
same time establishing the appetite for risk 
in its delivery. It also involves monitoring the 
performance of the Company’s 
management in delivering on that strategy 
and within that risk profile. 
Elsewhere in this Annual Report you can 
read about the Company’s strategy, the 
delivery thereof and the management of 
the key identified risks that arise out of  
this. On the following pages we have set  
out the key elements to the corporate 
governance structures currently in place  
in the Company. 
During the year the Company joined the 
Quoted Companies Alliance (“QCA”), an 
independent membership organisation  
that champions the interests of small to 
mid-size quoted companies. The QCA 
updated and reissued its own Corporate 
Governance Code for Small and Mid-Size 
Quoted Companies in 2013 (the “QCA 
Code”). The Board considers that the QCA 
Code provides the most appropriate 
guidance in respect of best corporate 
governance practice and disclosure for  
a company such as ours and the Board 
currently draws upon, and benchmarks  
itself against, this best practice and we  
have reported on our own corporate 
governance arrangements accordingly. 
As the Group is listed on the Alternative 
Investment Market it is not required to 
comply with the provisions of the UK 
Corporate Governance Code (the “Code”) 
issued in September 2012 and, having  
taken account of the additional costs and 
practicalities involved in doing so and the 
current size and structure of the Company, 
the Board considers it desirable to move 
towards compliance with the Code over  
the coming years as the Company grows.  
I expect to report on the additional measures 
the Company has taken during 2014 in my 
report next year. We believe this approach 
to the Code and the QCA Code is in the best 
interests of shareholders.  25
www.hydrodec.com
A key aspect of good corporate governance  
is how a company communicates with its 
shareholders. In recent years the management 
team has sought to improve its engagement 
with the Company’s institutional shareholders 
around interim and annual results. I have 
recently met a number of investors where the 
focus was on matters of governance including 
executive remuneration. However the 
Company accepts that it can be more difficult 
to engage with the retail shareholder base 
over and above its regulatory announcements 
and the Annual Report. Therefore, in order to 
facilitate improved communication, the Chief 
Executive, Ian Smale, now records regular 
video updates and/or audio interviews at the 
time of results announcements and on other 
material news flow which are posted to the 
Company’s website and also carried on other 
media. Furthermore, and best demonstrated 
during the aftermath of the Canton incident  
in December, greater use has been made of 
the website for the publication of news and 
updates which do not of themselves justify  
a formal announcement. We have received  
a good deal of positive feedback on these 
initiatives and will no doubt continue to 
improve in this respect. All shareholders are  
of course welcome to attend the Company’s 
AGM on 30 June and my colleagues and I look 
forward to welcoming you there. 
Also on the topic of communication the  
Board and management reviewed two of its 
key external adviser appointments during the 
year. Following a formal selection process at 
which the two joint incumbents and five other 
firms were invited to pitch, the Board resolved 
to appoint Peel Hunt as its new broker and 
nominated adviser (“NOMAD”). The broker is  
an important conduit to the institutional 
investor – existing and potential shareholders 
alike – and in accepting the role of NOMAD 
Peel Hunt were required to be comfortable 
with the Company’s corporate governance 
structure and processes generally. Later in  
the year the management carried out a similar 
pitch process for the public relations (“PR”) 
function and Vigo Communications were 
appointed as PR advisers to the Company.  
This is another important part of the 
Company’s communication with existing and 
potential investors and other stakeholders.
The function and activities of the Audit, 
Remuneration and Nominations Committees  
of the Board are described further in the 
coming pages. We have recently reviewed  
the Audit Committee’s oversight of the risk 
management process and we propose to 
introduce changes to enable the Board  
and the Audit Committee to develop and 
monitor a structured risk management system 
going forward.
Given the composition of the Board was 
reviewed and significantly refreshed at both 
executive and non-executive level in 2012,  
I did not oversee a formal evaluation of the 
performance of the Board, its committees 
and the individual Directors during 2013. 
However such a process is already under 
way in 2014 and I shall continue to review 
the composition of the Board to ensure 
there is an appropriate balance of functional 
and sector skills and experience for the next 
stage of the Company’s growth and 
development and to ensure that the Board 
works effectively together as a unit.  
In addition, and although not required  
by law or the Company’s articles, I have 
proposed that all Directors stand for annual 
re-election at the Company’s AGM, starting 
this year. 
Lord Moynihan
Chairman 
21 May 2014
Strategic Report Governance Financial Statements 26
Hydrodec Group plc    |   Annual Report and Accounts 2013
Report of the Directors
The Directors present their report together with the audited financial statements for the year ended 31 December 2013.
Results and dividends
The consolidated statement of income for the year is set out on page 36. No dividend has been declared or is proposed for the year. 
Directors and their interests
The Directors who served during the year are set out below, together with their beneficial interests in the ordinary shares of the Company: 
Biographical details are included on pages 22 and 23.
 31 December 2013 31 December 2012
Ordinary shares  
of 0.5 pence each Share options
Ordinary shares 
 of 0.5 pence each Share options 
Andrew Black 176,144,798 – 81,267,021 –
Alan Carruthers 1,278,888 – 390,000 –
Chris Ellis 892,293 – 447,849 –
Gillian Leates 136,020 500,000 120,000 500,000
Mark McNamara 180,555 6,500,000 166,667 6,500,000
Lord Moynihan 8,788,659 1,000,000 3,000,326 1,000,000
Ian Smale 473,469 – 400,000 –
Further details regarding the share options and the executive Directors’ interests in the Company’s Long Term Incentive Plan are provided in the 
Remuneration Committee Report on pages 31 to 33.
The following Directors had a beneficial interest in warrants to subscribe for ordinary shares: 
 
 31 December 2013 31 December 2012
16 pence  
exercise price
8 pence  
exercise price
16 pence  
exercise price
8 pence  
exercise price 
Andrew Black 13,000,000 7,000,000 10,000,000 7,000,000
Lord Moynihan 1,500,000 – – –
These warrants were granted in connection with subscriptions for the Company’s fixed rate secured loan note instruments, all of which have now been 
repaid. The warrants exercisable at 8p per ordinary share may be exercised at any time prior to 14 June 2016. The warrants exercisable at 16p per ordinary 
share may be exercised at any time prior to 1 9 December 201 7 . The grants of these warrants are unconnected with the Directors’ appointments to the Board.
Substantial shareholdings
As at 31 December 2013 the Company was aware of the following beneficial interest in 3 per cent or more of its issued voting share capital:
Shareholder Holding
Andrew Black 23.59%
Aviva plc (and subsidiaries) 15.85%
Thesis Asset Management plc 12.20%
Royal London Asset Management Limited 5.11%
Employee involvement
The Group’s policy is to encourage involvement at all levels, as it believes this is essential for the success of the business. Employees are encouraged to 
present their views and suggestions in respect of the Group’s performance and policies. An employee share investment plan is under consideration 
for adoption during 2014 to allow employees a tax efficient means of investing in the Company.
Occupational health and safety and environment (“OHSE”)
The Group operates complex industrial plants involving hazardous conditions, substances and materials. As a consequence it places great emphasis 
on our environmental performance and the safety of our employees and our broader communities and strives continuously to further improve in 
these areas. It has dedicated OHSE personnel providing advice and support to staff, customers, suppliers and other visitors, as well as coordinating the 
fulfilment of the Group’s regulatory obligations. 
Following the incident at Canton in December 2013 a full OHSE review was undertaken and the Board determined to establish a new OHSE 
Committee during the year. Currently the full Board sits as the OHSE Committee with the Chief Operating Officer also in attendance. During 2014 we 
propose to appoint a new Committee Chairman, independent from the Board and management. 27
www.hydrodec.com
Financial risk management objectives and policies
The Group’s financial instruments comprise cash, liquid resources and various items, such as trade receivables, trade payables and finance losses  
that arise directly from, or in support of, its operations. The main risks arising from the Group’s financial instruments are currency risk, interest rate risk, 
credit risk and liquidity risk. The Directors review the policies for managing each of these risks on an ongoing basis and they are summarised in note 
20 to the financial statements. These policies have remained unchanged from previous years.
Going concern
The financial statements have been prepared on the going concern basis, which assumes that the Group will have sufficient funds to continue in 
operational existence for the foreseeable future. The Group’s forecasts and projections, taking account of reasonably possible changes in trading 
performance, show that the Group should be able to operate within the level of its current available working capital and working capital facilities for 
the next 12 months. Therefore the Directors consider the going concern basis appropriate.
Directors’ indemnity and insurance
The Company has granted an indemnity to its Directors and officers under which the Company will indemnify them, subject to the terms of the deed 
of indemnity, against all costs, charges, losses and liabilities incurred by them in the performance of their duties. The Company has also arranged 
directors’ and officers’ liability insurance.
Related party transactions
In addition to the related party transactions disclosed in note 25 to the financial statements and as required by the AIM Rules, the Directors report that 
during the year Aviva plc (and its subsidiaries), being a holder of more than 10 per cent of the Company’s voting share capital at the time, subscribed 
for 37 ,244,444 ordinary shares for total consideration of £4,190,000 in the Company’s placing of shares in October 2013.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations. Company 
law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have to prepare financial statements in 
accordance with International Financial Reporting Standards as adopted by the European Union (“IFRSs”) and elected to prepare parent company 
financial statements in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). The 
financial statements are required by law to give a true and fair view of the state of affairs of the Group and parent company and of the profit or loss of 
the Company and Group for that period. In preparing these financial statements, the Directors are required to:
 – select suitable accounting policies and then apply them consistently;
 – make judgements and accounting estimates that are reasonable and prudent;
 – state whether applicable UK accounting standards and IFRS have been followed, subject to any material departures disclosed and explained in the  
financial statements; and 
 – prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
In so far as the Directors are aware:
 – there is no relevant audit information of which the Company’s auditors are unaware; and
 – the Directors have taken all steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to 
establish that the auditors are aware of that information.
The Directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the 
Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding 
the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. 
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Auditor
Grant Thornton UK LLP , offer themselves for reappointment as auditors in accordance with the section 489 of the Companies Act 2006.
On behalf of the Board
Ian Smale
Chief Executive Officer
21 May 2014
Company registration no. 5188355
Strategic Report Governance Financial Statements 28
Hydrodec Group plc    |   Annual Report and Accounts 2013
Role of the Board and management
The Board’s primary role is the protection and enhancement of long-term shareholder value. To fulfil this role, the Board is responsible for the overall 
management and corporate governance of the consolidated entity including its strategic direction, establishing goals for management and 
monitoring the achievement of these goals.
From time to time the Board may delegate or entrust to any Director holding executive office (including the CEO) such of its powers, authorities and 
discretions for such time and on such terms as it thinks fit. The Board has adopted a “Delegation of Board authority” which establishes those matters 
which it is considered appropriate remain within the overall control of the Board (or its committees) and those which are delegated to the CEO (or 
onwards as appropriate). This delegation authority was reviewed and updated during the year. In addition to overall Group strategy, the Board 
approves the annual budget and retains control over corporate activity (mergers, acquisitions, joint ventures, material disposals and investments) and 
material contract and financing decisions (over and above set value/credit-risk limits). 
Management’s role is to implement the strategic plan established by the Board and to work within the corporate governance and internal control 
parameters established by the Board.
Role of Chairman and Chief Executive Officer
There is a clear division of responsibilities between the running of the Board and the executive responsible for the Group’s business.
The Chairman is responsible for leadership of the Board, ensuring its effectiveness and setting the agenda for Board meetings. Once strategic 
objectives have been agreed by the Board, it is the Chief Executive Officer’s responsibility to ensure they are delivered upon and consistently to be 
accountable to the Board. The Chief Executive Officer regularly meets the executive management team which comprises the executive Directors and 
senior members of the management team. The day-to-day operations of the Group are managed by the executive management team. 
Board processes
The full Board hold meetings quarterly and at any other time as may be necessary to address any specific significant matters that may arise.
The agenda for Board meetings is prepared in conjunction with the Chairman. Submissions are circulated in advance and for regular quarterly Board 
meetings will include operational and financial updates together with papers relating to specific agenda items. 
Management prepare monthly finance reports which allow the Board to assess the Company’s activities and review its performance. Non-Board 
executives are regularly involved in Board discussions and Directors have other opportunities, including regular visits to operations, for contact with a 
wider group of employees.
To assist in the execution of its responsibilities, the Board has established an Audit Committee, a Remuneration Committee and a Nominations 
Committee and a framework for the management of the consolidated entity including a system of internal control.
The Board is ultimately responsible for the Company’s system of internal control and for reviewing its effectiveness. This includes financial, operational 
and compliance controls and risk-management systems. The Board has reviewed the effectiveness of the system of internal control during the year. In 
particular, it has reviewed and updated the process for identifying and evaluating the significant risks affecting the Company and policies by which 
these risks are managed. Internal control systems are designed to meet the Company’s particular needs and the risks to which it is exposed. 
Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their 
nature can only provide reasonable and not absolute assurance against misstatement and loss.
Corporate governance report 29
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Composition of the Board
The Board currently comprises seven Directors. This may be increased where it is felt that additional expertise is required in specific areas, or when an 
outstanding candidate is identified.
The composition of the Board is determined using the following principles:
 – a majority of the Board should be non-executive Directors;
 – the role of Chairman is to be filled by a non-executive Director;
 – the Board should have enough Directors to serve on various committees of the Board without overburdening the Directors or making it difficult 
for them to fully discharge their responsibilities;
 – the Company Secretary should not be a member of the Board but should attend meetings and should report directly to and advise the Chairman, 
and not the executives, on corporate governance matters; and 
 – Directors appointed by the Board are subject to election by shareholders at the following annual general meeting and thereafter Directors are 
subject to re-election every year. 
The Board has considered whether the appointment of a Senior Independent Director (“SID”) is necessary or appropriate given the current 
composition of the Board. At present the Board do not believe that such an appointment is required.
Conflict of interest
Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company. Where the 
Board believes that a significant conflict exists, the Director concerned is either not present or does not take part in discussions and voting at the 
meeting whilst the item is considered.
During the year Andrew Black recused himself from Board discussions and voting when his offer of a revolving credit facility to finance the acquisition 
of OSS was under consideration.
Independent professional advice and access to Company information
Each Director has the right of access to all relevant Company information and to the Company’s executives and, subject to prior consultation with the 
Chairman, may seek independent professional advice at the Company’s expense. A copy of any advice received by the Director is to be made 
available to all other members of the Board.
Committees
The report of the Remuneration Committee is set out on pages 31 to 33 and the report of the Audit Committee is set out on page 34.
Nominations Committee
The role of the Nominations Committee is documented in its Terms of Reference which were most recently reviewed and adopted by the Board of 
Directors in December 2012 and can be accessed on the Company’s website.
The objectives of the Nominations Committee are:
 – to ensure that the Company has a formal and transparent procedure for the appointment of new executive and non-executive Directors to the  
Board; and
 – to ensure that the Company reviews the balance and effectiveness of the Board and the senior executive management team, identifying the skills 
and experience needed for the next stage in the Company’s development and those individuals who might best provide them, including 
appropriate succession plans and considering possible internal candidates for future Board roles.
The members of the Nominations Committee for 2013 were Lord Moynihan (Chairman), Andrew Black, Alan Carruthers, Gillian Leates and Ian Smale. 
The Company Secretary also attends meetings.
The Committee plans to meet at least twice during the year in the future. The agenda for Nominations Committee meetings is prepared in 
conjunction with the Chairman. Submissions are circulated in advance relating to specific agenda items. 
Strategic Report Governance Financial Statements 30
Hydrodec Group plc    |   Annual Report and Accounts 2013
Directors’ attendance record
The following table provides details of attendance by Directors who served during the year at Board and committee meetings. Attendance of 
committee meetings is only shown for committee members and not invitees.
Board Remuneration Committee Nominations Committee Audit Committee
Number of 
meetings
Number 
attended
Number of 
meetings
Number 
attended
Number of 
meetings
Number 
attended
Number of 
meetings
Number 
attended
Andrew Black 8 7 3 3 1 1 – –
Alan Carruthers 8 7 3 3 1 1 5 3
Chris Ellis 8 8 – – – – – –
Gillian Leates 8 8 3 3 1 1 5 5
Mark McNamara 8 7 – – – – – –
Lord Moynihan 8 8 3 3 1 1 5 5
Ian Smale 8 8 – – 1 1 – –
The role of shareholders
The Board of Directors aims to ensure that the shareholders are informed of all major developments affecting the Company’s state of affairs. 
Information is communicated to shareholders as follows:
 – the release of announcements, trading updates and interim and annual financial statements through the Regulatory News Service and on the 
Company’s website; 
 – the release of video and audio material around results and material announcements on the Company’s website;
 – the full annual financial report is sent to all registered shareholders;
 – proposed major changes in the Company which may impact on share ownership rights are submitted to a vote of shareholders; and
 – notices of all meetings of shareholders are sent to all registered shareholders.
The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with 
the Company’s strategy and goals. Important issues are presented to the shareholders as separate resolutions. The Notice of Annual General Meeting 
is included at the end of this document.
The Company’s auditors are also invited to attend the Annual General Meeting and are available for discussion in relation to the Company’s financial 
statements. 
Corporate governance report continued 31
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Remuneration Committee report
The role of the Remuneration Committee is documented in its Terms of Reference which were most recently reviewed and adopted by the Board of 
Directors in December 2012 and can be accessed on the Company’s website.
The objectives of the Remuneration Committee are:
 – to ensure that the Company’s directors and senior executives are fairly rewarded for their individual contributions to the Company’s overall 
performance by determining their pay and other remuneration; and
 – to demonstrate to all shareholders that the general policy relating to and actual remuneration of individual senior executives of the Company is 
set by a committee of the Board members who have no personal interest in the outcome of the decisions and who will give due regard to the 
interests of the shareholders and to the financial and commercial health of the Company.
The members of the Remuneration Committee for 2013 were Lord Moynihan (Chairman), Andrew Black, Alan Carruthers and Gillian Leates. The 
Company Secretary also attends meetings.
The Chief Executive Officer may be invited to Remuneration Committee meetings at the discretion of the Committee. The Committee plans to meet 
at least twice during the year.
The agenda for Remuneration Committee meetings is prepared in conjunction with the Chairman. Submissions are circulated in advance and may 
include remuneration benchmark surveys and best practice guidelines together with papers relating to specific agenda items. 
Remuneration policy
The Remuneration Committee intends that its policy and practice should align with and support the implementation of the Company’s strategy and 
effective risk management for the long term. The Committee seeks to ensure that this principle is applied and it seeks to have regard to the views of 
shareholders. The policy is intended to motivate the right behaviours and to ensure that any risk created by the remuneration structure is acceptable 
to the Committee and within the risk appetite of the Board and its strategy.
Remuneration packages for the executive Directors currently comprise a combination of annual salary, annual performance bonus (part cash and part 
deferred into ordinary shares through a Joint Share Ownership Plan (“JSOP”)) and interests in a Long Term Incentive Plan (“LTIP”). Previously Directors 
were granted share options pursuant to a share option scheme but this is now only used occasionally and generally for those below the senior 
executive management team. 
Implementation of the policy
Salary
The Remuneration Committee continues to review the executive Directors’ salaries against appropriate benchmark surveys for executive directors of 
AIM companies of a similar scale. The Committee notes that the salaries fall towards the higher end of the 2013 benchmark range and it believes that 
these remain appropriate given the experience of the individuals concerned, the overall remuneration packages and the current growth phase of the 
Company. There was no increase in these base salaries in 2013.
The non-executive Directors’ fees (including those of the Chairman) are reviewed and benchmarked annually. They have not increased for several 
years. No additional fees are paid for serving on or chairing Board committees.
Annual bonus
Executive Directors and other members of the senior executive management team are entitled to participate in an annual bonus scheme pursuant to 
which they can earn up to 100 per cent of their base annual salary. Despite having qualified for an annual bonus for 2012 by reference to the 
performance parameters agreed at the start of that year they agreed to waive any entitlement. The performance parameters for the 2013 bonus 
related to:
 – a 60 per cent weighting towards “delivering the plan safely” with reference to EBITDA, EBITDA run-rate, production/utilisation and safe operations; and
 – a 40 per cent weighting towards “key milestones” including positive EBITDA trajectory, strategic transactions, expansion, IP development and 
investor relations.
The Remuneration Committee approved a total annual bonus pot for 2013 for the senior executive management team representing approximately 50 
per cent of the maximum potential aggregate bonus award. Individual bonuses were then agreed between the Committee and the Chief Executive 
Officer by reference to individual contributions towards the targets. In terms of benchmarking against AIM companies of a similar scale, the bonus 
awards to the Executive Directors are slightly higher than the 2013 median in terms of percentage of salary. 
50 per cent of the 2013 annual bonus was paid in cash in respect of that period. The balance was deferred by the senior executive management team 
into 2014 and will be settled through the issue of interests in a JSOP . 
Strategic Report Governance Financial Statements 32
Hydrodec Group plc    |   Annual Report and Accounts 2013
Long Term Incentive Plan
In November 201 1 shareholders approved the Hydrodec Group plc 2012 LTIP for the purposes of attracting, retaining and motivating key executives 
of the Group and securing greater alignment of shareholders’ and management’s interests with transparency over performance targets.
Awards were granted to selected members of the senior executive team effective 15 January 2012 and in the case of Chris Ellis on his appointment on 
7 July 2012. An award entitles the executive to receive a fixed proportion of a share pool conditional on achieving certain share price targets and 
continued employment within the Group. 
The aggregate number of ordinary shares in the share pool will be determined by reference to growth in the market capitalisation of the Company 
(less appropriate adjustments for fundraisings) and will be conditional on the achievement of the following share price targets on or before 15 January 
2015: 16 pence, 20 pence and 25 pence per ordinary share (each a “Share Price Threshold”). In the normal course, all Awards will vest on 15 January 
2015 subject to the achievement of the share price targets and continued employment with the Group. Awards will not vest at all unless the 16 pence 
Share Price Threshold is achieved.
To achieve a Share Price Threshold, the average closing price of an ordinary share over any 90 dealing day period ending on or before 15 January 2015 
must be equal to or exceed the relevant Share Price Threshold.
The aggregate value of ordinary shares comprised in the share pool will equal 15 per cent of the growth in market capitalisation of the Company 
between 1 November 201 1 and the first date on which a Share Price Threshold is met and successive subsequent growth in market capitalisation 
upon achievement of any higher Share Price Thresholds. The number of ordinary shares in the pool will be determined by reference to the closing 
mid-market price on each relevant date on which a Share Price Threshold is met.
The executive Directors who have been granted awards, and their proportion of the share pool, are as follows:
Ian Smale 33.33 per cent
Chris Ellis 20.00 per cent
Mark McNamara 13.33 per cent
During the year the existing awards were restructured as various classes of shares in Hydrodec Holdco Limited (“Holdco”), a subsidiary of Hydrodec 
Group plc. The Holdco articles of association entitle the individuals to exchange their Holdco shares for shares in the Company, determined by 
reference to the individual’s proportionate interest in the share pool, if the Share Price Thresholds are met.
Any shares in the Company acquired following exchange will be subject to restrictions on sale and transfer until 12 months after the date on which 
the relevant hurdle is met.
For illustrative purposes only the number of ordinary shares in the Company which may be issued to the executive Directors in exchange for their 
shares in Holdco if the 16p share price hurdle is met on or prior to 15 January 2015 (and assuming no further issue of shares in the Company prior to 
such date) is as follows:
Director
Number of 
ordinary shares* 
Ian Smale 11,250,000
Chris Ellis 6,750,000
Mark McNamara 4,500,000
 
* assuming share price of 16p on the date on which the share price hurdle is met
If the 20p and/or 25p share price hurdles were to be met the number of shares would be considerably higher.
The mid-market price of an ordinary share was 12.25p on 1 January 2013 and 10.875p on 31 December 2013, with a high and low during the year of 
14.25p and 8.125p respectively. 
The Remuneration Committee would expect to introduce a new three year LTIP following the expiry of the existing scheme in January 2015 and only 
after having consulted with the Company’s principal shareholders. 
Directors’ remuneration
The following table shows emoluments paid to Directors during the financial year, applying the average exchange rates (AUD to USD and GBP to 
USD) used in the financial statements.
Remuneration Committee report continued 33
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Salary/fees
USD’000
Bonus
USD’000
Total emoluments
2013
USD’000
Total emoluments
20112
USD’000
Current Directors:
Andrew Black (non-executive) 55 – 55 55
Alan Carruthers (non-executive) 55 – 55 22*
Chris Ellis 391 117 508 191*
Gillian Leates (non-executive) 55 – 55 55
Mark McNamara 364 31 395 389
Lord Moynihan (non-executive Chairman) 110 – 110 21*
Ian Smale 470 145 615 458*
Past Directors:
Neil Gaskell (non-executive Chairman) – – – 90*
John Gunn (non-executive) – – – 86**
Paul Manchester – – – 142*
1,500 293 1,793 1,509
* from appointment or to resignation during period
** includes compensation for loss of office 
There were no pension contributions or benefits in kind made to Directors during the period (2012: USD 13,000 in pension contributions).
Share options
In 2005 the Company established an unapproved share option scheme pursuant to which certain Directors and other senior members of staff have 
been granted share options. Options granted under this scheme typically have a vesting schedule of between two to three years and exercise prices 
corresponding to the market price of a share at the date of grant.
With the exception of historic awards to Mark McNamara, none of the executive Directors have been granted options pursuant to this scheme. Indeed, with 
the introduction of the LTIP , the Committee would not expect to grant any further awards under this scheme to executive Directors except in exceptional 
circumstances (such as where the tax residence of individuals determines that they cannot participate efficiently in other schemes). On the appointment of 
certain non-executive Directors one-off awards of options have historically been made following consultation with principal shareholders.
The number, exercise price and earliest and latest dates of exercise of options over ordinary shares in the Company held by Directors at the end of the 
year were as follows:
Share  
options
Exercise price  
(pence)
Earliest exercise  
date
Latest exercise  
date
Gillian Leates 500,000 15.00p n/a 16 Jul 2019
Mark McNamara 5,000,000 11.50p 15 Jul 2005 29 Apr 2015
Mark McNamara 1,500,000 33.25p 24 Jan 2010 24 Jan 2018
Lord Moynihan 1,000,000 8.50p n/a 24 Oct 2022
Options issued to Gillian Leates and Lord Moynihan are only exercisable on the attainment of predetermined share price targets. 
No options were granted to Directors during the year and no options held by Directors were exercised, lapsed or forfeited during the year. 
Service contracts
The executive and non-executive Directors have entered into service contracts with the Group that are terminable by either party on not less than 12 
months’ prior notice (reducing to six months’ prior notice with effect from 15 January 2015).
Pensions and private healthcare
There are no pension or private healthcare arrangements in place for Directors, except for any mandatory contributions for superannuation as may be 
required by regulations in Australia. 
Directors’ share interests
The Directors’ shareholdings in the Company are set out in the Report of the Directors on page 26.
Lord Moynihan
Chairman of the Remuneration Committee
21 May 2014
Strategic Report Governance Financial Statements 34
Hydrodec Group plc    |   Annual Report and Accounts 2013
Audit Committee report
The role of the Audit Committee is documented in its Terms of Reference which were most recently reviewed and adopted by the Board in 
December 2012 and can be accessed on the Company’s website.
The purpose of the Committee is to assist the Board in the effective discharge of its responsibilities for financial reporting, corporate control and risk 
management. Its objectives are:
 – to increase shareholder confidence and to ensure the credibility and objectivity of published financial information;
 – to assist the Board in meeting its financial reporting responsibilities;
 – to assist the Board in ensuring the effectiveness of the Company’s internal accounting and financial controls;
 – to strengthen the independent position of the Company’s external auditors by providing channels of communication between them and the 
non-executive Directors; and
 – to review the performance of the Company’s external auditing functions.
The members of the Audit Committee for 2013 were Gillian Leates (Chairman), Alan Carruthers and Lord Moynihan. The Company Secretary also 
attends meetings.
The external auditors, the Chief Executive Officer and the Chief Financial Officer may be invited to Audit Committee meetings at the discretion of the 
Committee. The Committee plans to meet at least four times during the year.
The Audit Committee reviews the performance of the external auditors on an annual basis and plans to meet with then during the year as required to 
discuss audit planning, any potential changes in accounting policies or related accounting issues, any issues arising from the half year review or full 
year audit and any other special matters or investigations deemed necessary by the Board.
The agenda for Audit Committee meetings is prepared in conjunction with the Chairman. Submissions are circulated in advance and may include 
drafts of interim and annual financial statements, related papers from management, audit planning and key issues memoranda from the external 
auditors, and papers relating to specific agenda items. 
The main items addressed by the Audit Committee in the period since the approval and signing of the 2012 report and accounts have been:
 – review and approval of the 2013 unaudited interim financial statements;
 – independent consideration of the options, structure and terms for financing the acquisition of the OSS business and ultimate approval of Andrew 
Black’s offer of short-term finance (Andrew Black is not a member of the Audit Committee);
 – review of process for annual risk management review;
 – receiving and considering management’s risk management submissions; 
 – reviewing the Group’s finance function capability, particularly in the light of the acquisition of OSS; and
 – review and approval of the 2013 audited report and accounts.
In respect of the latter item, significant issues arising and considered included:
 – the accounting treatment for, any management estimates in respect of, and the appropriate disclosure around:
 - the Canton incident and related insurance claim;
 - the acquisition of the OSS business and treatment of the “bargain purchase” element arising from the fair value exercise;
 - the strategic partnership with G&S;
 - the repayment of the unsecured loan stock; 
 - share-based payments following restructuring of the Long Term Incentive Plan; and
 - segmental reporting – re-refining and recycling segments
 – a review of the Group’s going concern position;
 – a review of the carrying value of the Group’s intangible assets and whether any impairment was required; and 
 – a review of the non-audit services provided by Grant Thornton to ensure ongoing auditor independence.
Gillian Leates
Chairman of the Audit Committee 
21 May 2014 35
www.hydrodec.com
Independent auditor’ s report to the members of 
Hydrodec Group plc
We have audited the Group financial statements of Hydrodec Group plc for the year ended 31 December 2013 which comprise the consolidated 
statement of income, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated 
statement of cash flows, the consolidated statement of changes in equity and the related notes. The financial reporting framework that has been 
applied in their preparation is applicable law and International Financial Reporting Standards (“IFRSs”) as adopted by the European Union.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work 
has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for 
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the 
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of the Directors and auditor
As explained more fully in the Statement of Directors’ responsibilities set out on page 27 , the Directors are responsible for the preparation of the 
Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the 
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to 
comply with the Auditing Practices Board’s (“APB’s”) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at  
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion the Group financial statements:
 – give a true and fair view of the state of the Group’s affairs as at 31 December 2013 and of its loss for the year then ended;
 – have been properly prepared in accordance with IFRS as adopted by the European Union; and
 – have been prepared in accordance with the requirements of the Companies Act 2006.
Emphasis of matter – uncertain measurement of quantum of insurance claim
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in note 5 to the 
financial statements and of the disclosures of key sources of estimation uncertainty concerning the uncertain amount of the claim settlement from 
the Group’s insurers with regards to the explosion and fire at the US plant in Canton, Ohio. The Group has submitted a claim for its total loss including 
business interruption which is under review by the insurers for final approval. The ultimate amount to be received from the insurers is therefore 
unknown at this time and consequently the Directors have estimated a receivable amount for impaired property, plant and equipment based on the 
book value of the impaired assets at the time of the incident.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Report of the Directors for the financial year for which the Group financial 
statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
 – certain disclosures of Directors’ remuneration specified by law are not made; or
 – we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the parent company financial statements of Hydrodec Group plc for the year ended 31 December 2013. 
David Miller
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor
Chartered Accountants
London
21 May 2014
Governance Financial Statements Strategic Report 36
Hydrodec Group plc    |   Annual Report and Accounts 2013
Consolidated statement of income
For the year ended 31 December 2013
Note
2013
USD’000
2012
USD’000
Revenue 2 40,101 26,112
Cost of sales (30,664) (20,745)
Gross profit 9,437 5,367
Operating costs:
Employee benefit expense (8,595) (7,083)
Other operating costs (7,871) (7,244)
Depreciation (868) (182)
Foreign exchange loss (664) (35)
Total operating costs (17,998) (14,544)
Operating loss (8,561) (9,177)
Analysed as:   
Underlying operating loss (3,150) (4,343)
Growth costs 2 (3,256) (2,206)
Bargain purchase on acquisition 21 874 –
Amortisation of intangible assets 9 (2,499) (2,091)
Share-based payments costs 3 (530) (537)
Operating loss (8,561) (9,177)
Finance costs 4 (9,100) (5,343)
Impairment of property, plant and equipment 5 (7,160) –
Other income 5 7,160 –
Finance income 7 3
Profit/(loss) on sale of asset 3 (32)
Loss on ordinary activities before taxation (17,651) (14,549)
Income tax 6 202 353
Loss for the year (17,449) (14,196)
Loss for the year attributable to:
Non-controlling interests 259 –
Owners of the parent (17,708) (14,196)
Total loss for the year (17,449) (14,196)
Loss per share – basic/diluted 7 (3.73) cents (3.48) cents
The accompanying accounting policies and notes form an integral part of these financial statements. 37
www.hydrodec.com
Consolidated statement of comprehensive income
For the year ended 31 December 2013
2013
USD’000
2012
USD’000
Total loss for the year (17,449) (14,196)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (1,890) 594
Total comprehensive loss for the year (19,339) (13,602)
Other comprehensive income for the year attributable to:
Non-controlling interests 259 – 
Owners of the parent (19,598) (13,602)
Total comprehensive loss for the year (19,339) (13,602)
The accompanying accounting policies and notes form an integral part of these financial statements.
Governance Financial Statements Strategic Report 38
Hydrodec Group plc    |   Annual Report and Accounts 2013
Consolidated statement of financial position
As at 31 December 2013
Note
2013
USD’000
2012
USD’000
Non-current assets
Property, plant and equipment 8 22,866 22,959
Intangible assets 9 23,189 21,622
Investments 10 114 111
46,169 44,692
Current assets
Trade and other receivables 11 16,965 2,080
Inventories 12 1,572 1,432
Cash and cash equivalents 21,902 1,635
40,439 5,147
Current liabilities
Borrowings – bank overdraft – (542)
Trade and other payables 13 (12,587) (4,557)
Provisions 14 (34) (143)
(12,621) (5,242)
Net current assets/(liabilities) 27,818 (95)
Non-current liabilities
Employee obligations (105) (112)
Provisions 14 (952) (356)
Borrowings 15 (1,276) (16,979)
Deferred taxation 16 (2,025) (1,669)
(4,358) (19,116)
Net assets 69,629 25,481
Equity attributable to equity holders of the parent
Called up share capital 17 6,619 3,870
Share premium account 130,524 72,446
Equity reserve – 6,929
Merger reserve 48,940 47,967
Treasury reserve (44,186) (43,308)
Employee Benefit Trust (1,312) (1,286)
Foreign exchange reserve 2,850 4,906
Share option reserve 7,330 6,640
Profit and loss account (85,008) (72,683)
65,757 25,481
Non-controlling interests 3,872 –
Total equity 69,629 25,481
The financial statements were approved by the Board of Directors on 21 May 2014 and were signed on its behalf by:
Ian Smale Chris Ellis
Chief Executive Officer Chief Financial Officer 
The accompanying accounting policies and notes form an integral part of these financial statements. 39
www.hydrodec.com
Consolidated statement of cash flows
For the year ended 31 December 2013
2013
USD’000
2012
USD’000
Cash flows from operating activities
Loss before tax (17,651) (14,549)
Adjustments for:  
Net finance costs 9,093 5,340
Amortisation and depreciation 5,172 3,567
Bargain purchase recognised in statement of income (874) –
Loss/(gain) on disposal of fixed assets (3) 32
Share-based payment expense 530 537
Foreign exchange movement 381 90
Operating cash flows before working capital movements (3,352) (4,983)
(Decrease)/increase in inventories 533 (872)
(Increase)/decrease in receivables (1,517) 481
Increase in trade and other payables 250 826
Decrease in provisions (709) (208)
Taxes paid (108) – 
Net cash outflow from operating activities (4,903) (4,756)
Cash flows from investing activities
Acquisition of OSS Group (7,664) –
Purchase of property, plant and equipment (1,046) (1,151)
Proceeds from disposal of property, plant and equipment 16 15
Interest received 7 3
Net cash outflow from investing activities (8,687) (1,133)
Cash flows from financing activities
Issue of new shares 39,491 –
Costs of share issue (814) –
Proceeds from loans 17,446 4,039
Repayment of loans (21,085) (1,777)
Proceeds from sale of investment 1,733 –
Interest paid (1,924) (1,981)
Repayment of lease liabilities (470) (104)
Net cash inflow from financing 34,377 177
Increase /(decrease) in cash and cash equivalents 20,787 (5,712)
Movement in net cash
Cash 1,635 6,977
Bank overdraft (542) (222)
Exchange differences on cash and cash equivalents 22 50
Opening cash and cash equivalents 1,115 6,805
Increase /(decrease) in cash and cash equivalents 20,787 (5,712)
Closing cash and cash equivalents 21,902 1,093
Reported in the consolidated statement of financial position as:
Cash and cash equivalents 21,902 1,635
Borrowings – bank overdraft – (542)
21,902 1,093
The accompanying accounting policies and notes form an integral part of these financial statements.
Governance Financial Statements Strategic Report 40
Hydrodec Group plc    |   Annual Report and Accounts 2013
Consolidated statement of changes in equity
For the year ended 31 December 2013
Share
capital
USD’000
Share
premium
USD’000
Equity
 reserve
USD’000
Merger 
 reserve
USD’000
Treasury
 reserve
USD’000
Employee
 benefit
 trust
USD’000
Foreign
 exchange
 reserve
USD’000
Share
 option
 reserve
USD’000
Profit 
 and loss
 account
USD’000
Total 
attributable 
to owners 
of the 
parent
USD’000
Non-
controlling
interest
USD’000
Total
equity 
USD’000
At 1 January 2012 3,598 66,969 13,650 45,768 (41,322) (1,244) 5,815 5,803 (63,131) 35,906 – 35,906
Exchange differences 173 3,219 656 2,199 (1,986) (24) (4,258) 21 –  –  –  – 
Share-based payment –  –  –  –  –  –  – 838 –  838  –  838 
Issue of shares 99 2,258 –  –  – (18) –  –  –  2,339  –  2,339 
Transfer –  – (7,377) –  –  –  – (301) 7,678 –  –  – 
Transactions with owners 272 5,477 (6,721) 2,199 (1,986) (42) (4,258) 558 7,678 3,177 – 3,177
Exchange differences –  –  –  –  –  – 3,349 279 (3,034) 594 – 594
Loss for the year –  –  –  –  –  –  –  – (14,196) (14,196) – (14,196)
Total comprehensive 
income –  –  –  –  –  – 3,349 279 (17,230) (13,602) – (13,602)
At 31 December 2012 3,870 72,446 6,929 47,967 (43,308) (1,286) 4,906 6,640 (72,683) 25,481 – 25,481
Exchange differences 78 1,469 140 973 (878) (26) (1,774) 24 – 6 (6) – 
Share-based payment –  –  –  –  –  –  – 891 – 891 – 891
Issue of shares 2,671  57,423  –  –  – – –  –  – 60,094 – 60,094
Issue costs – (814) –  –  –  –  –  –  – (814) – (814)
Transfer –  – (7,069) –  –  –  – (361) 7,430 –  –  – 
Investment in subsidiary –  – –  –  –  –  – – (303) (303) 3,619 3,316
Transactions with owners
2,749 58,078 (6,929) 973 (878) (26) (1,829) 554 7,127 59,874 3,613 63,487
Exchange differences –  –  –  –  –  – (282) 136 (1,744) (1,890) – (1,890)
Loss for the year –  –  –  –  –  –  –  – (17,708) (17,708) 259 (17,449)
Total comprehensive 
income –  –  – –  –  – (282) 136 (19,452) (19,598) 259 (19,339)
At 31 December 2013 6,619 130,524 – 48,940 (44,186) (1,312) 2,850 7,330 (85,008) 65,757 3,872 69,629
A description of each reserve is set out in note 18.
The accompanying accounting policies and notes form an integral part of these financial statements. 41
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Notes to the financial statements
For the year ended 31 December 2013
1 Accounting policies
The Group’s principal activities are grouped into the following principal service lines:
 – re-refining of used transformer oil into, and sale of, new SUPERFINE™ oil; and
 – collection and treatment of waste lubricant oil and the sale of recycled oil products.
Hydrodec Group plc is incorporated and domiciled in England and Wales and situated at 50 Curzon Street, London. The Group’s shares are listed on 
the Alternative Investment Market of the London Stock Exchange.
Basis of preparation
The Group’s consolidated financial statements are prepared in accordance with the principal accounting policies adopted by the Group as set out 
below and International Financial Reporting Standards (“IFRS”) and International Financial Reporting Interpretations (“IFRC”) as adopted for use in the 
European Union (“EU”), and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The following standards have been amended or became effective during the year. The Group’s consolidated financial statements have been 
prepared in accordance with these changes where relevant:
 – IAS 1 Amendment: Presentation of other items of comprehensive income (effective 1 January 2013)
 – IAS 19 Amendment: Defined benefit plans (effective 1 January 2013) 
 – IFRS 13 Fair Value Measurement (effective 1 January 2013)
Application of these standards did not result in any impact on the financial statements for 2013.
IFRS standards and interpretations not yet adopted
The following standards and interpretations are in issue but not yet adopted by the EU:
 – IFRS 10 Consolidated Financial Statements (IASB effective date 1 January 2013*)
 – IFRS 1 1: Joint arrangements (IASB effective date 1 January 2013*)
 – IFRS 12: Disclosures of interest in other entities (IASB effective date 1 January 2013*)
 – IAS 27 (Revised), Separate Financial Statements (IASB effective date 1 January 2013*)
 – IAS 32 Amendment: Offsetting financial assets and financial liabilities (effective 1 January 2014)
 – Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36) (effective 1 January 2014)
*  EU mandatory effective date is 1 January 2014
Standards issued but not yet effective
In addition, the following is a list of standards that are in issue but are not effective in 2013, and have not yet been endorsed for use in the EU, together 
with the effective date of application to the Group:
 – IFRS 9: Financial instruments (no effective date)
The Directors do not anticipate that the adoption of these standards will have a material impact on the Group’s reported results.
The preparation of financial statements in accordance with IFRS requires the use of estimates and assumptions that affect the reported amounts of 
assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues 
and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, 
actual results may ultimately differ from those estimates.
Presentational currency
The Group presents its financial statements in US dollars translated at the closing rate each year, as the Group’s business is influenced by pricing in 
international commodity markets which are primarily dollar based.
Basis of consolidation
The Group financial statements consolidate those of the Company and its subsidiary undertakings drawn up to 31 December 2013. Subsidiaries are 
entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. All intra-group 
transactions, balances, income and expenses are eliminated on consolidation.
Business combinations
Business combinations are dealt with by the acquisition method. This involves the recognition at fair value of all identifiable assets and liabilities, 
including contingent liabilities of the subsidiary at the acquisition date whether or not they were recognised in the statements of the subsidiary prior 
to acquisition. On initial recognition the assets and liabilities of the subsidiary are included in the consolidated statement of financial position at their 
fair values which are also used as the bases for subsequent measurement in accordance with the Group accounting policies. The results of any 
subsidiary undertakings acquired during the period, where applicable, are included from the date of acquisition. Acquisition costs are recognised as 
an expense in the period in which they are incurred.
Governance Financial Statements Strategic Report 42
Hydrodec Group plc    |   Annual Report and Accounts 2013
Notes to the financial statements
For the year ended 31 December 2013
Disposal of non-controlling interest
Disposal of an investment where there is no loss of control is recognised in equity. No gain or loss on disposal is recorded in profit or loss.
Goodwill
Goodwill, representing the excess of the fair value of the consideration paid over the fair value of the identifiable net assets of subsidiary undertakings 
at the date of acquisition, is initially recognised as an asset at its fair value and is subsequently measured at cost less any accumulated impairment 
losses. If the fair values of identifiable net assets exceed fair value of consideration paid, the excess amount (ie gain on a bargain purchase) is 
recognised in profit or loss immediately.
Investments in associates 
Investments in associates are initially recognised at cost and subsequently accounted for using the equity method. Any goodwill or fair value 
adjustment attributable to the Group’s share in the associate is not recognised separately and is included in the amount recognised as investment in 
associates. The carrying amount of the investment in associates is increased or decreased to recognise the Group’s share of the profit or loss and other 
comprehensive income of the associate, adjusted where necessary to ensure consistency with the accounting policies of the Group. Unrealised gains 
and losses on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in those entities. Where unrealised 
losses are eliminated, the underlying asset is also tested for impairment.
Foreign currency translation
The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity 
operates (its functional currency). For the consolidated financial statements, the results and financial position of each entity are firstly expressed in 
sterling, which is the functional currency of the parent company. The presentational currency for the consolidated financial statements is US dollars at 
the rate of exchange ruling at the consolidated statement of financial position date, and at the average rate for the statement of comprehensive 
income where this approximates to the actual rate. Any differences arising from this procedure have been included in other comprehensive income.
Foreign currency transactions
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign 
currencies are retranslated at the rate of exchange ruling at the statement of financial position date. All differences are taken to profit or loss with the 
exception of differences on translation of the net investment in a foreign Group entity. These are taken directly to other comprehensive income until 
the disposal of the net investment, at which time they are re-classified from equity to profit or loss.
The assets and liabilities of overseas subsidiaries are translated at the rate of exchange ruling at the balance sheet date. The income statements of 
overseas subsidiaries are translated at the weighted average exchange rate. The exchange differences arising on the retranslation are taken to other 
comprehensive income. On disposal of a foreign entity, accumulated exchange differences are re-classified from equity to profit or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign operations and 
translated at the closing rate.
Revenue recognition
Revenues are recognised at fair value of the consideration receivable net of the amount of value added taxes.
Sale of goods
Sales revenue comprises revenue earned (net of returns, discounts and allowances) from the provision of products to entities outside the 
consolidated entity. Sales revenue is recognised when the risks and rewards of ownership of the goods passes to the customer, which is normally 
upon delivery, and when the amount of revenue can be measured reliably. 
Government grants
The Australian Government provides an incentive for product stewardship of used oil which is recognised at the point of delivery of the associated 
revenue stream.
 
Insurance income
The Company has business interruption insurance which provides coverage if business operations are suspended because of the loss of use of 
property and equipment resulting from a covered loss. Accordingly insurance income is recognised on an accrual basis as a result of an insurance 
event under the terms of such coverage.
Interest income
Interest income is brought to account as it accrues, using the effective interest method.  43
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Property, plant and equipment
Property, plant and equipment is measured at cost less accumulated depreciation.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of 
materials and direct labour, and any other costs directly attributable to bringing the asset to a working condition for its intended use.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of 
property, plant and equipment.
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future 
economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The cost of the day-to-day servicing of 
property, plant and equipment are recognised as an expense as incurred.
Depreciation is provided at rates calculated to write off the cost of property, plant and equipment, less their estimated residual value, over the 
expected useful lives on a diminishing value basis. The rates used vary between 5% and 33% per annum and residual values and useful economic 
lives are reassessed annually.
Assets are derecognised if subject to impairment.
Patents
All costs incurred in establishing and or maintaining patents are expensed in the period in which they are incurred.
Growth costs
Expenditure on growth costs is classified into two key categories:
Market expansion costs
Expenditure on extending existing products or operations into new markets is recognised as an expense in the period in which it is incurred.
New product development costs
Expenditure on new product development is recognised as an expense in the period in which it is incurred.
Development costs incurred on specific projects are capitalised when all the following conditions are satisfied:
 – completion of the intangible asset is technically feasible so that it will be available for use or sale;
 – the Group intends to complete the intangible asset and use or sell it;
 – the Group has the ability to use or sell the intangible asset;
 – the intangible asset will generate probable future economic benefits. Among other things this requires that there is a market for the output from 
the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits;
 – there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
 – the expenditure attributable to the intangible asset during its development can be measured reliably.
Costs incurred which do not meet the above criteria are expensed as incurred.
 
Intangible assets
Intangible assets acquired separately from a business are capitalised at cost. Intangible assets acquired as part of an acquisition of a business are 
capitalised separately from goodwill if the fair value can be measured reliably on initial recognition. Intangible assets, excluding development costs, 
created within the business are not capitalised and expenditure is charged against profits in the year in which it is incurred.
The carrying values of intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value may 
not be recoverable.
Intangible assets, other than goodwill, are amortised over their estimated useful economic life.
Impairment of tangible and intangible assets
At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether 
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is 
estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual 
asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.
Governance Financial Statements Strategic Report 44
Hydrodec Group plc    |   Annual Report and Accounts 2013
Notes to the financial statements
For the year ended 31 December 2013
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted 
to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. 
If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or 
cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is 
carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating) unit is increased to the revised estimate of its 
recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no 
impairment loss been recognised for the asset (cash generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit 
or loss, unless the relevant assets are carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Goodwill is not amortised but is subject to an impairment review on an annual basis or more frequently when events or changes in circumstances 
indicate it might be impaired. Any impairment is charged to the statement of comprehensive income in the period in which it arises and is not 
subject to subsequent reversal.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand deposits that are readily convertible into known amounts of cash and which are 
subject to an insignificant risk of changes in value. 
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and 
the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the 
Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.
The fair value of the liability portion of the unsecured loan stock (which was previously convertible) was determined using a market interest rate for an 
equivalent non-convertible instrument. The amount was recorded as a liability on an amortised cost basis until extinguished on repayment of the loan stock. 
The remainder of the proceeds was allocated to the conversion option, which was recognised and included in shareholders equity.
Derecognition of financial liabilities
A financial liability is removed from the balance sheet when the obligation is discharged, or cancelled, or expires. On the redemption or settlement of 
debt securities issued by the Group, the Group derecognises the debt instrument and records a gain or loss being the difference between the debt’s 
carrying amount and the cost of redemption or settlement. The same treatment applies where the debt is settled via the issue of new ordinary shares 
calculated by reference to the prevailing market price of those shares.
Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at fair value of the consideration received net of issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. 
Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
All interest costs are charged to the income statement.
Share-based payments
The Group issues equity-settled share-based payments to certain employees and Directors. Equity-settled share-based payments are measured at fair 
value of the instruments granted (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the 
grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of 
the shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions. 
Warrants
The Group has issued equity-settled warrants in connection with fixed rate loan notes. Equity-settled warrants are measured at fair value of the 
instruments granted (excluding the effect of non-market-based exercise conditions) at the date of grant. The fair value determined at the grant date 
of the equity-settled share-based payments is expensed on a straight-line basis over the exercise period (or until fixed rate loan notes are repaid), 
based on the Group’s estimate of the shares that will eventually be issued and adjusted for the effect of non-market-based exercise conditions.  45
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Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, 
less the estimated costs of selling expenses.
The cost of inventories is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to 
their existing locations and condition.
Provisions
Provisions are recognised when:
 – the Group has a present legal or constructive obligation as a result of a past event;
 – it is probable that an outflow of resources will be required to settle the obligation; and
 – a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, 
taking into account the risks and uncertainties surrounding the obligation.
Trade and other receivables
Trade receivables, which generally have 30-day terms, are recognised initially at fair value and subsequently measured at amortised cost using the 
effective interest rate method less provisions for impairment. Provision against trade receivables is made when there is objective evidence that the 
Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is 
determined as the difference between the asset’s carrying amount and the present value of estimated future cash flows.
Leasing
Leased assets
Leases under which the consolidated entity assumes substantially all the risks and benefits of ownership are classified as finance leases. Other leases 
are classified as operating leases.
Finance leases
A lease asset and a lease liability equal to the lower of the present value of the minimum lease payments and fair value are recorded at the inception 
of the lease.
The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the income 
statement over the period of the lease.
Operating leases
Payments made under operating leases are expensed on a straight-line basis over the period of the lease.
Taxation
Current tax is the tax currently payable based on taxable profit for the year.
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference 
between the carrying amounts of assets and liabilities and their 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 subsidiaries and joint ventures is not provided if reversal of these temporary 
differences can be controlled by the Group and it is probable that 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 provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying 
deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated 
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.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items 
that are charged or credited directly to other comprehensive income or equity in which case the related deferred tax is also charged or credited 
directly to other comprehensive income or equity.
Governance Financial Statements Strategic Report 46
Hydrodec Group plc    |   Annual Report and Accounts 2013
Notes to the financial statements
For the year ended 31 December 2013
Employee Benefit Trust
The assets and liabilities of the Employee Benefit Trust (“EBT”) have been included in the Group accounts. Any assets held by the EBT cease to be 
recognised on the Group balance sheet when the assets vest unconditionally in identified beneficiaries.
The costs of purchasing own shares held by the EBT are shown as a deduction against equity. The proceeds from the sale of own shares held increase 
equity. Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the consolidated statement of comprehensive income.
Going concern
The financial statements have been prepared on the going concern basis, which assumes that the Group will have sufficient funds to continue in 
operational existence for the foreseeable future. The Group’s forecasts and projections, taking account of reasonably possible changes in trading 
performance, show that the Group should be able to operate within the level of its current available working capital and working capital facilities for 
the next 12 months.
Key judgements in applying the Group’s accounting policies
In the process of applying the Group’s accounting policies, which are described in this note, management has not been required to make any 
judgements that have a significant effect on the amounts recognised in the financial statements, apart from those involving estimations, which are 
dealt with below.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant effect 
on the amounts of assets and liabilities within the next financial year, are discussed below.
Valuation and amortisation of intangible assets and goodwill
The intangible assets carried forward relate to the intellectual property and goodwill acquired by the Group in 2004, and through the acquisition of 
Virotec International plc and reclassification of a royalty prepaid in 2008. The original cost of £19.5 million is amortised over the estimated useful life of 
the asset. The intellectual property consists of know-how and trade secrets relating to the technology, some of which is covered in a patent. It is 
management’s view that the useful life of the intellectual property will extend far beyond the life of the patent and for the purposes of calculating the 
period over which the costs are amortised it has been estimated that the cost will be amortised over 15 years (note 9).
The intangible assets recognised during the year relate to customer contracts and brand name acquired by the Group through the acquisition of the 
principal business and assets of OSS Group Limited (note 21). The original cost of £2.8 million is amortised over the estimated useful life of the assets 
which management estimate will be three years for these purposes (note 9).
Impairment of goodwill and other intangibles
There are a number of assumptions management have considered in performing impairment reviews of goodwill and intangible assets. In 
determining whether goodwill and intangible assets are impaired, an estimation of value in use of cash generating units to which goodwill and other 
intangible assets are allocated is made. The value in use calculation requires the Directors to estimate the future cash flows expected to arise from the 
cash generating unit and a suitable discount rate in order to calculate present value (note 9).
Estimation of insurance receivable
An estimate is triggered by an insurance event with reference to the relevant sections of the insurance policy. In determining the business interruption 
receivable, income is based on actual orders and sales pipelines at the time of the event. The Directors have estimated a receivable for impaired 
property, plant and equipment based on the book value of the impaired assets at the time of the incident whilst recognising, on the basis of existing 
knowledge, that the outcome in the next financial year could be materially different (note 5).
Useful lives and impairment of property, plant and equipment
Property, plant and equipment are depreciated over its useful life. The useful life is based on the management’s estimates of the period that the assets 
will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the 
carrying value and amounts charged to the income statement in specific periods (note 8).
In determining whether property, plant and equipment assets are impaired, if the recoverable amount of an asset is less than its carrying amount, the 
carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss with amounts charged to the statement of 
comprehensive income in the relevant periods (note 8).
Provisions
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the 
reporting date. In making this assessment management have referenced third party costs and the likelihood of the full cost being incurred (note 14). 47
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2 Revenue and operating loss
2.1. Segment analysis
Following the acquisition of the principal assets and business of OSS Group Limited in September 2013, the Group now operates two main operating 
segments:
 – Re-refining: principally the treatment of used transformer oil and the sale of SUPERFINE
TM
 oil
 – Recycling: principally the collection and treatment of waste lubricant oil and the sale of recycled oil products
The financial information detailed below is frequently reviewed by the Board (the Chief Operating Decision Maker):
Year ended 31 December 2013
Re-refining
USD’000
Recycling
USD’000
Unallocated
 USD’000
Total
USD’000
Revenue 28,857 11,244 – 40,101
Underlying operating EBITDA 3,980 10 (3,803) 187
Growth costs (2,453) (266) (537) (3,256)
Bargain purchase – 874 – 874
Depreciation (2,498) (138) (37) (2,673)
Amortisation (2,133) (366) – (2,499)
Share-based payment costs – – (530) (530)
Foreign exchange loss (664) – – (664)
Operating (loss)/profit (3,768) 114 (4,907) (8,561)
    
Year ended 31 December 2012
Re-refining
USD’000
Recycling
USD’000
Unallocated
 USD’000
Total
USD’000
Revenue
26,112 – – 26,112
Underlying operating EBITDA (524) – (2,308) (2,832)
Growth costs (1,635) – (571) (2,206)
Depreciation (1,456) – (20) (1,476)
Amortisation (2,091) – – (2,091)
Share-based payment costs – – (537) (537)
Foreign exchange (loss)/gain 18 – (53) (35)
Operating loss (5,688) – (3,489) (9,177)
2.2. Geographic analysis
The Group’s revenues from external customers and its non-current assets are divided into the following geographical areas:
        2013        2012
Revenue 
USD’000
Non-current assets 
USD’000
Revenue 
USD’000
Non-current assets 
USD’000
UK 11,244 13,467 – –
USA 20,603 6,289 18,372 13,994
Australia 8,254 14,675 7,740 16,954
Unallocated – 11,738 – 13,744
40,101 46,169 26,112 44,692
Revenue substantially comprises amounts earned on receivables from trade customers. During the year one customer in the US accounted for more 
than 10 per cent of the Group’s total revenue. Revenue recognised during the year and the amounts outstanding at the year-end in respect of that 
customer were as follows:
        2013        2012
Revenue
USD’000
Outstanding at year end
USD’000
Revenue
USD’000
Outstanding at year end
USD’000
Customer 10,080 180 9,201 344
Governance Financial Statements Strategic Report 48
Hydrodec Group plc    |   Annual Report and Accounts 2013
Notes to the financial statements
For the year ended 31 December 2013
2.3. Loss on ordinary activities
The loss on ordinary activities before taxation is stated after charging/(crediting) the following amounts:
2013
USD’000
2012
USD’000
Revenue - grant income (2,327) (1,986)
Cost of goods sold
– inventory expensed 16,479 11,443
– other direct costs 8,514 5,406
– employee benefit expense 3,865 2,602
– depreciation 1,805 1,294
Amortisation 2,499 2,091
Share-based payments 530 537
Depreciation 868 182
Impairment of property, plant and equipment 7,160 –
Operating lease rentals – land and buildings 621 425
Treatment of Young contaminated material (58) (167)
Exchange loss 664 35
Fees payable to the Company’s auditor for the audit of the annual accounts 69  69
Fees payable to the Company’s auditor and its associates for other services: 
– the audit of the Company’s subsidiaries 70  70
– tax and other services 116 24 
Fees paid to the Group auditors and its associates for non-audit services to the Company itself are not disclosed in the individual accounts of 
Hydrodec Group plc because the Company’s consolidated financial statements are required to disclose such fees on a consolidated basis.
2013
USD’000
2012
USD’000
Capital expenditure
– property, plant and equipment 1,047 1,151
 
2.4. Growth costs
The business continues to invest in long term strategic growth initiates focused on geographic expansion and research and development. These 
costs are analysed as follows:
2013
USD’000
2012
USD’000
Market expansion development costs 1,747 1,622
New product development 675 437
Transaction fees and one-time costs 834 147
3,256 2,206
Recognised in:
2013
USD’000
2012
USD’000
Employee benefit expense 1,588 1,153
Other operating costs 1,668 1,053
3,256 2,206 49
www.hydrodec.com
3 Directors and employees
Staff costs, excluding key management personnel (shown below), during the year were as follows:
2013
USD’000
2012
USD’000
Wages and salaries 9,673 7,524
Payroll taxes 820 528
Share-based payments 218 173
10,711 8,225
The average number of employees of the Group during the year was:
2013
Number
2012
Number
Operations 129 66
Corporate office 12 11
141 77
The remuneration of the Group’s key management personnel (including executive Directors), are set out below. Additional information on 
remuneration, share options and pension contributions can be found in the Remuneration Committee Report.
2013
USD’000
2012
USD’000
Wages and salaries 1,793 1,509
Payroll taxes 174 124
Share-based payments 312 364
2,279 1,997
The highest paid Director received emoluments of USD 615,000 (2012: USD 458,000). Pension contributions for Directors totalled USD nil  
(2012: USD 13,000).
4 Finance costs
2013
USD’000
2012
USD’000
Bank overdrafts and leases 70 43
Loan stock 8,221 4,582
Fixed rate loan notes 641 710
Revolving credit facility 168 8
9,100 5,343
As a result of the repayment of the unsecured loan stock during the period (see note 15), the loan stock finance cost includes a non-cash element of 
USD 4,937 ,000 representing the difference between the carrying value of the unsecured loan stock liability and the redemption value of the 
unsecured loan stock repaid on 8 November 2013.
A short-term revolving credit facility was provided by Andrew Black, a Director, during the period to finance the acquisition of the principal business 
and assets of OSS Group Limited in September 2013. Interest was payable at 7 per cent per annum. This facility was fully repaid (through the issue of 
new ordinary shares at 1 1.25p per share) in November 2013 as part of the fundraising and debt repayment program (see note 17). 
 
Governance Financial Statements Strategic Report 50
Hydrodec Group plc    |   Annual Report and Accounts 2013
Notes to the financial statements
For the year ended 31 December 2013
5 Impairment and other income
On 1 December 2013 an explosion and fire at the US plant in Canton, Ohio effectively shut down production there causing significant damage to the 
main reactors and ancillary equipment. Since the date of the incident the Company along with its insurers and their loss adjusters have gone through 
a process of establishing the extent of the damage caused, the costs to rebuild it and the estimated time it would take to re-establish full operational 
capability. The Company has submitted a claim for its total loss including business interruption which is under review by the insurers for final approval. 
Under its policy the Company has single incident coverage of USD 35,000,000 and in the opinion of the Directors is therefore adequately covered in 
respect of this claim.
Accordingly as at 31 December 2013 the Group has estimated a total impairment and write off of assets of USD 7 ,160,000 for which it has created a 
corresponding receivable due from the insurers. Based on actual orders and sales pipelines, and after taking account of the proceeds of sale of 
inventory held at the time of the incident, it has also assumed USD 436,000 of net income receivable for the period from 1 December to 31 December 
recognised in revenue under the terms of its business interruption coverage.
Under the terms of the Group’s insurance, the Directors consider the above amounts represent the best estimate of amounts recoverable with 
certainty in respect of the period under review at the date of preparation of these financial statements. Confirmation of all amounts due to the Group 
above the value of these assets including any compensation for business interruption will only occur once the loss adjusters have completed their 
technical review and evaluation which the Directors believe is close to completion and at which time the total claim receivable can be properly 
estimated and recorded.
6 Income tax
2013
USD’000
2012
USD’000
Current tax (108) –
Deferred tax
Reversal of temporary differences 259 238
Adjustment for change in UK tax rate 51 115
Total tax 202 353
Loss on ordinary activities before taxation (17,651) (14,549)
Rate of corporation tax in the United Kingdom of 23.25 per cent (2012: 24.5 per cent) (4,104) (3,565)
Effects of:
Current tax expense (108) –
Expenses not deductible for tax purposes 735 521
Release of deferred tax 310 353
Tax losses not recognised 3,369 3,044
202 353
A deferred tax asset of approximately USD 17 ,854,000 (2012: USD 13,927 ,000) in respect of unused losses against future taxable profits is not recognised 
due to the uncertainty of future taxable profits. 
7 Loss per share
The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of 
shares in issue during the year.
The weighted average number of shares used in the calculations are set out below:
2013
Number of shares
2012
Number of shares
467,828,531 407,944,242
In 2012 and 2013, the share options and warrants were anti-dilutive and diluted earnings per share is the same as basic. The calculation of the 
weighted average number of shares excludes shares which are now held by a member of the Group and in respect of which votes may not be cast at 
a general meeting (which are treated as treasury shares) and also shares held by the Employee Benefit Trust. 51
www.hydrodec.com
8 Property, plant and equipment
Land and buildings
USD’000
Plant and equipment
USD’000
Total 
USD’000
Cost
At 31 December 2011 6,231 23,172 29,403
Change in exchange rates 39 236 275
Additions 17 1,134 1,151
Disposals – (158) (158)
At 31 December 2012 6,287 24,384 30,671
Change in exchange rates (242) (1,655) (1,897)
Acquisition 1,953 7,962 9,915
Additions 43 1,004 1,047
Impairment (3,064) (6,206) (9,270)
Disposals – (186) (186)
At 31 December 2013 4,977 25,303 30,280
Accumulated depreciation
At 31 December 2011 497 5,687 6,184
Change in exchange rates 3 80 83
Depreciation charge for the year 125 1,351 1,476
Disposals – (31) (31)
At 31 December 2012 625 7,087 7,712
Change in exchange rates (25) (827) (852)
Depreciation charge for the year 118 2,555 2,673
Impairment (388) (1,722) (2,110)
Disposals – (9) (9)
At 31 December 2013 330 7,084 7,414
Carrying amount
At 31 December 2013 4,647 18,219 22,866
At 31 December 2012 5,662 17,297 22,959
Buildings are depreciated at various rates depending on the estimated life of the item. The rates of depreciation vary between 2.5 per cent and 10 per 
cent per annum.
Plant and equipment is depreciated at various rates depending on the estimated life of the item. The rates of depreciation vary between 5 per cent 
and 33 per cent per annum.
The impairment is the result of the assessment of the property, plant and equipment destroyed in the Canton fire on 1 December 2013. Where the 
recoverable amount of an asset is determined to be less than its carrying amount the asset has been treated as impaired (note 5).
The carrying amount of the Group’s plant and equipment includes USD 3,127 ,000 (2012: USD 303,000) in respect of assets held under finance leases.
 
Governance Financial Statements Strategic Report 52
Hydrodec Group plc    |   Annual Report and Accounts 2013
9 Intangible assets
Re-refining Recycling
Royalty
USD’000
Hydrodec 
technology
USD’000
Goodwill
USD’000
Contracts
USD’000
Brand name
USD’000
Total
USD’000
Cost
At 31 December 2011 5,684 24,183 6,289 – – 36,156
Exchange translation 131 1,162 302 – – 1,595
At 31 December 2012 5,815 25,345 6,591 – – 37,751
Exchange translation (805) 514 134 – – (157)
Acquisition (note 21.1) – – – 2,354 2,201 4,555
At 31 December 2013 5,010 25,859 6,725 2,354 2,201 42,149
Accumulated amortisation and impairment
At 31 December 2011 1,829 8,455 3,087 – – 13,371
Exchange translation 81 438 148 – – 667
Provided in the year 530 1,561 – – – 2,091
At 31 December 2012 2,440 10,454 3,235 – – 16,129
Exchange translation (38) 297 65 4 4 332
Provided in the year 523 1,610 – 175 191 2,499
At 31 December 2013 2,925 12,361 3,300 179 195 18,960
Carrying amount
At 31 December 2013 2,085 13,498 3,425 2,175 2,006 23,189
At 31 December 2012 3,375 14,891 3,356 – – 21,622
The Group tests intangible assets annually for impairment or more frequently if there are indications that the carrying value might be impaired. The 
Group considers it has two cash generating units (“CGUs”) – re-refining and recycling. Re-refining relates to the global exploitation of the Hydrodec 
re-refining technology (currently operating in respect of the treatment of used transformer oil and the production and sale of SUPERFINE™ oils) and 
recycling relates to the recently acquired OSS business (principally focused on the collection and treatment of other waste oils and the sale of recycled 
oil products). The recoverable amounts of the CGU are determined from the value in use calculations.
Re-refining
The royalty was recorded at cost in 2008 and represented the right to receive income based on the quantity of SUPERFINE™ oil produced for a period 
of 15 years and commenced in 2004. It is being amortised on a straight-line basis and, at 31 December 2013, the remaining unamortised life of the 
asset was seven years. 
The Hydrodec technology is being amortised over its anticipated useful life of 15 years. The intangible asset carried forward relates to intellectual 
property acquired by the Group in 2004. The intellectual property consists of know-how and trade secrets relating to the technology, some of which 
is covered by a patent. The patent expired in 2013 in respect of certain countries but continues in respect of the US. It is management’s view that the 
useful life of the intellectual property will extend far beyond the life of the patent and for the purposes of calculating the period over which the costs 
will be amortised it has been estimated that the minimum useful life of the technology is 15 years. At 31 December 2013, the remaining unamortised 
life of the asset was seven years.
Goodwill of USD 2,904,000 arose on the acquisition of Oil Treatment Services Pty Ltd in 2005, which has been fully provided for, and the balance 
relates to the acquisition of Virotec International plc in 2008.
Value in use is the present value of the projected cash flows of this CGU. The key assumptions regarding the value in use calculations were budgeted 
growth in revenues, budgeted gross profit margins and the discount rate applied. Budgeted revenue growth and budgeted gross profit margins were 
estimated based on actual performance over the past two financial years and expected market changes. 
The discount rate used (13.8 per cent) is a pre-tax rate and reflects the risks specific to the relevant CGU. The Group prepares cash flow forecasts, based 
on the most recent financial budgets approved by management, which cover a five-year period. After the five-year forecast period a static growth 
rate of 0 per cent is applied thereafter.
The cash flow projections anticipate significant investment and expansion in existing and new markets. This is considered consistent with the stage of 
the development of the Company and the identified market opportunities that have been assessed. Included within this are various sensitivities, one 
of which is no further expansion. Even against this key sensitivity, although the headroom is small, there is no impairment.
Notes to the financial statements
For the year ended 31 December 2013 53
www.hydrodec.com
Recycling
The customer contracts (USD 2,354,000) and brand name (USD 2,201,000) were recognised on acquisition of the principal assets and business of OSS 
Group Limited as part of the fair value assessment of the assets acquired (see note 21) and will be amortised over their anticipated useful life. Both 
items will be amortised on a straight-line basis and, at 31 December 2013, the remaining unamortised life of the assets was three years. 
10 Investments
Through its Japanese subsidiary, the Group owns a 50 per cent interest in Hydrotek Eco Japan Co Limited, a 47 .5 per cent interest in Pacific Eco 
Refining Co Limited and a 5 per cent interest in Central Eco Cycle Co Limited. These entities have not commenced trading and accordingly no 
financial statements have been incorporated into the consolidated financial statements.
11 Trade and other receivables
2013
USD’000
2012
USD’000
Trade receivables 6,098 1,191
Other receivables – insurance proceeds (note 5) 7,160 –
Other receivables 2,444 526
Other taxation and social security 74 69
Prepayments and accrued income 1,189 294
16,965 2,080
All trade receivable amounts are short term. The carrying value is considered a fair approximation of their fair value. All of the Group’s trade and other 
receivables have been reviewed for indicators of impairment. On acquisition of OSS, certain trade receivables were found to be impaired and an 
allowance for credit losses of USD 340,000 (2012: USD nil) was included in the acquisition balance sheet (note 21.1). 
At 31 December 2013, some of the unimpaired trade receivables are past their due date but all are considered recoverable. The analysis of financial 
assets is as follows:
2013
USD’000
2012
USD’000
Less than one month 5,347 1,091
Past due but not impaired 751 100
6,098 1,191
Credit sales are only made after credit approval procedures are completed, and the carrying value represents the Group’s maximum exposure to 
credit risk.
Included in other receivables is deferred consideration of USD 1,584,000 payable by G&S Oil Recycling Group LLC (see note 21.2).
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
2013
USD’000
2012
USD’000
Sterling 5,455 303
Australian dollars 1,004 888
United States dollars 10,506 874
Japanese yen – 15
16,965 2,080
Governance Financial Statements Strategic Report 54
Hydrodec Group plc    |   Annual Report and Accounts 2013
12 Inventories
2013
USD’000
2012
USD’000
Raw materials 1,309 392
Finished goods at cost 263 1,040
1,572 1,432
All inventory is carried at cost.
13 Trade and other payables
2013
USD’000
2012
USD’000
Trade payables 3,568 1,415
Accruals 7,508 2,540
Finance lease obligations due within 1 year 1,072 92
Deferred income 439 510
12,587 4,557
The carrying value of trade and other payables are considered to be a reasonable approximation of fair value. 
14 Provisions
2013
USD’000
2012
USD’000
Remediation of contaminated stock 
Current 34 143
Non-current 302 356
Remediation of contaminated land 
Non-current 650 –
986 499
The movement in the provision is represented by:
2013
USD’000
At 31 December 2012 499
Change in exchange rates (68)
Additional provisions 650
Released to income statement (57)
Utilised in the period for contaminated stock (38)
At 31 December 2013 986
The remediation of contaminated stock provision of USD 336,000 relates to stocks of materials at the Young facility dating from the plant’s original 
function, ownership and business strategy. During the period the Company was able to process certain materials for which it incurred costs for 
remediation services charged to the provision. The cost for treatment and disposal has been reassessed by management and the current remaining 
provision is deemed to be adequate.
The remediation of contaminated land provision of USD 650,000 was recognised on acquisition of the principal assets and business of OSS Group 
Limited as part of the fair value assessment of the assets acquired (see note 21.1). The provision represents the costs of remediation of land occupied 
by the Group’s operations as estimated by the Directors following advice from an external environmental consultant.
15 Non-current liabilities – borrowings
2013
USD’000
2012
USD’000
Unsecured loan stock – 13,732
Fixed rate loan notes – 2015 – 3,231
Finance lease liabilities due in 1–5 years 1,276 16
1,276 16,979
Notes to the financial statements
For the year ended 31 December 2013 55
www.hydrodec.com
Unsecured loan stock
In November 2007 , the Company issued £13,800,000 of convertible unsecured loan stock, convertible at the loan stock holder’s option into ordinary 
share capital of the Company at a price of 19p, subject to anti-dilutive conditions for subsequent share issues at below market price.
 
On 1 November 2012, these conversion rights lapsed and the stock became an unsecured loan, repayable at the Company’s determination.  
On 8 November 2013, the outstanding balance of £12,790,000 was repaid in full together with accrued interest. 
Fixed rate loan notes
Between 24 December 2012 and 27 June 2013, the Company received subscriptions for a total of £5,000,000 of fixed rate loan notes 2015. The notes 
were secured over Group assets. Interest was payable at 5 per cent per annum. On 8 November 2013, the loan notes were repaid in full (through the 
issue of new ordinary shares at 1 1.25p per share) and the security was released as part of the fundraising and debt repayment programme (see note 
17).
Finance leases
Finance leases are secured over the assets to which they relate.
16 Deferred taxation
USD’000
At 31 December 201 1 1,936
Transfer to statement of comprehensive income (353)
Change in exchange rates 86
At 31 December 2012 1,669
Recognised on acquisition (note 21.1) 646
Transfer to statement of comprehensive income (310)
Change in exchange rates 20
At 31 December 2013 2,025
17 Share capital
Issued and fully paid ordinary shares of 0.5 pence each
2013
Number of shares
2012
Number of shares
At the beginning of the year 479,137,027 466,854,531
Issued for cash 212,983,000 –
Issued in settlement of loans 111,111,111 12,282,496
803,231,138 479,137,027
  
2013
USD’000
2012
USD’000
At the beginning of the year 3,870 3,598
Exchange translation 78 173
Issued for cash 1,755 –
Issued in settlement of loans 916 99
6,619 3,870
On 8 November 2013 the Company issued 212,983,000 new ordinary shares for cash at a price of 1 1.25p per share pursuant to a placing and open 
offer. At the same time the Company issued 1 1 1,1 1 1,1 1 1 new ordinary shares at a price of 1 1.25p per share in consideration for the repayment of 
£5,000,000 of fixed rate loan notes – 2015 (see note 15) and a £7 ,500,000 revolving credit facility (see note 4). 
VIN Australia Pty Ltd, a member of the Group, holds 54,500,000 ordinary shares in Hydrodec Group plc pursuant to the acquisition of Virotec 
International plc in 2008. Votes in respect of these shares, and a further 2,173,333 shares issued pursuant to that acquisition, may not be cast in a 
general meeting of Hydrodec Group plc and as such they are treated as if they were treasury shares on consolidation.
Warrants
In 201 1, the Company issued 10,750,000 warrants in connection with the issue of £2,000,000 of fixed rate loan notes – 2014. The warrants have an 
exercise price of 8p per share with an exercise window from 14 June 2013 to 14 June 2016.
Between 24 December 2012 and 27 June 2013, the Company issued an additional 25,000,000 warrants in connection with the issue of £5,000,000 of 
fixed rate loan notes – 2015. The warrants have an exercise price of 16p per share with an exercise window from 19 June 2013 to 19 December 2017 . 
 
Governance Financial Statements Strategic Report 56
Hydrodec Group plc    |   Annual Report and Accounts 2013
18 Reserves
The share premium account represents the excess over the nominal value of shares allotted.
The merger reserve arose on the acquisition of Virotec International plc.
The treasury reserves are shares held by a subsidiary undertaking in the parent company that were acquired as part of the acquisition of Virotec 
International plc.
The Employee Benefit Trust represents the value of shares held on trust for the benefit of employees.
The foreign exchange reserve records differences arising from the translation of the net investment in subsidiaries.
The share option reserve represents accumulated charges made under IFRS 2 in respect of share-based payments.
19 Share-based payments
Long Term Incentive Plan
In November 201 1 shareholders approved the Hydrodec Group plc 2012 Long Term Incentive Plan (the “LTIP”) for the purposes of attracting, retaining 
and motivating key executives of the Group and securing greater alignment of shareholders’ and management’s interests with transparency over 
performance targets.
Awards were granted to selected members of the senior executive team effective 15 January 2012 (or on later appointment) and will be conditional 
on the achievement of the following share price targets on or before 15 January 2015: 16 pence, 20 pence and 25 pence per ordinary share (each a 
“Share Price Threshold”). Awards will not vest at all unless the 16 pence Share Price Threshold is achieved.
The aggregate value of ordinary shares in the share pool will equal 15 per cent of the growth in market capitalisation of the Company between  
1 November 201 1 and the first date on which a Share Price Threshold is met and successive subsequent growth in market capitalisation upon 
achievement of any higher Share Price Thresholds (in each case as adjusted to reflect any cash subscribed for the issue of shares by the Company 
during the relevant period). 
During the period the existing awards were restructured as various classes of shares in Hydrodec Holdco Limited (“Holdco”), a subsidiary of Hydrodec 
Group plc, which was treated as a modification of the existing accounting treatment. The Holdco articles of association entitle the individuals to 
exchange their Holdco shares for shares in the Company, determined by reference to the individual’s proportionate interest in the share pool, if the 
Share Price Thresholds are met.
Equity-settled share option scheme
The Company has a share option scheme for selected employees and Directors of the Group. Options are generally exercisable at a price equal to the 
quoted market price of the Company’s shares on the date of grant. The vesting period for each grant is variable and typically between two and five 
years. A total of 1,000,000 options were granted during the year and a total of 1,500,000 options granted to previous Directors and employees of the 
Company lapsed or were forfeited during the year. No options were exercised in the year. The total number of options in issue is shown below:
Number
2013
Weighted average  
exercise price Number
2012
Weighted average  
exercise price
At the beginning of the year 20,450,000 17.9p 20,966,667 18.4p
Issued in the year 1,000,000 11.5p 1,500,000 9.1p
Exercised in the year – – (166,667) 6.8p
Lapsed/forfeited during the year (1,500,000) 21.6p (1,850,000) 17.8p
At the end of the year 19,950,000 16.9p 20,450,000 17.9p
Fair value is determined by reference to the fair value of the instrument granted to the employee. The expected life used in the Black-Scholes option 
pricing model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural 
considerations. 
Notes to the financial statements
For the year ended 31 December 2013 57
www.hydrodec.com
These fair values were calculated using a Black-Scholes option pricing model as follows: 
2013 2012
Weighted average share price 19.47p 19.98p
Weighted average exercise price 17.34p 17.9p
Expected volatility 92% 89%
Expected life 6.24yrs 6.47yrs
Risk free rate 4.3% 4.3%
Expected dividend yield 0.0% 0.0%
Expected volatility was assessed based on the volatility of the Company’s shares since incorporation. The share options outstanding at the end of the 
year have exercise prices of between 6.9p and 33.25p per share. In the Directors’ experience, the expected life of an employee share option is 10 years 
from the date of grant.
20 Financial instruments
Capital management risk
The Group manages its capital structure to ensure it will be able to continue as a going concern. The Group’s financial instruments comprise cash, and 
various items, such as trade and other receivables (note 1 1) and trade payables and finance leases (note 13) that arise directly from or in support of its 
operations. No trading in financial instruments is undertaken.
The main risks arising from the Group’s financial instruments are interest rate, currency and liquidity. The Board reviews and agrees policies for 
managing each of these risks and they are summarised below. These policies have remained unchanged during the year.
Liquidity risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and 
profitably. The Group manages liquidity risk by the pooling of cash resources and depositing funds available for investment in approved financial 
instruments with financial institutions. Counterparty risk with respect to cash and cash equivalents is managed by only investing in banks and 
financial instruments with good credit ratings. Management does not expect any losses from the non-performance of these counterparties.
Interest rate risk
The Group finances its operations through equity Group funds which are invested in deposit accounts with the objective of maintaining a balance 
between accessibility of funds and competitive rates of return. The weighted average interest rate received on deposited funds was 2.76 per cent 
(2012: 0.3 per cent) during the year.
Interest costs of items acquired under lease arrangements are fixed at the time the lease is entered into for the term of the lease, which carry a 
weighted average interest cost of 7 .9 per cent (2012: 8.1 per cent) per annum.
The Directors consider the only element of risk from changes in interest rates arises on bank deposits which are not expected to give rise to a material 
adjustment to the reported results for either 2013 or 2012.
The table below analyses the Group’s financial liabilities into relevant groupings based on the remaining period at the balance sheet date to the 
contractual maturity date.
Trade and other payables
Balance sheet
USD’000
Contractual cash flows
USD’000
Less than 1 year
USD’000
Between 1 year and 2 years
USD’000
Between 2 year and 5 years
USD’000
At December 2013 11,514 11,514 11,514 – –
At December 2012 4,465 4,465 4,465 – –
Credit risk
The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful 
receivables, estimated by the Group’s management based on prior experience and their assessment of the current economic environment. The 
maximum exposure to credit risk for the Group is USD 6,098,000 (2012: USD 1,191,000), and there are no material concentrations of credit risk, other 
than as set out in note 2.
The credit risk on liquid funds is limited because the counterparties are reputable banks.
Governance Financial Statements Strategic Report 58
Hydrodec Group plc    |   Annual Report and Accounts 2013
Currency risk
The Group is exposed to translation and transaction foreign exchange risk. The currencies where the Group is most exposed to volatility are UK 
sterling and Australian dollars. The Group’s policy is to match, as far as possible, its principal projected cash flows by currency.
Transactions and balances of entities within the Group are denominated in the local functional currencies and had the following balances 
denominated in UK sterling and Australian dollars:
     UK sterling     Australian dollars
2013
USD’000
2012
USD’000
2013
USD’000
2012
USD’000
Trade and other payables 18 – – (30)
Currently, no hedging instruments are used. The Group keeps under review the extent of its exposure to currency fluctuations.
The following table illustrates the sensitivity of the net result for the year and equity in regards to the Group’s financial assets and financial liabilities 
and the US dollar to British pound and Australian dollar exchange rates. There is insignificant currency risk arising within the Group, but the 
presentation of the Group results can be affected by presentation in US dollars. It assumes a percentage change in the exchange rate based on the 
foreign currency financial instruments held at each balance sheet date. Both of these percentages have been determined based on the average 
market volatility in exchange rates in the previous 12 months.
     UK sterling     Australian dollars
2013
USD’000
2012
USD’000
2013
USD’000
2012
USD’000
Currency fluctuation 4% 1% 6% 1%
If the US dollar had strengthened against each currency by the percentage above retrospectively, then this would have had the following impact:
     2013     2012
GBP 
USD’000
AUD 
USD’000
GBP 
USD’000
AUD 
USD’000
Net result for the year 680 95 88 25
Equity (514) 49 166 13
If the US dollar had weakened against each currency by the percentage above retrospectively, then this would have had the following impact:
     2013     2012
GBP 
USD’000
AUD 
USD’000
GBP 
USD’000
AUD 
USD’000
Net result for the year (680) (95) (88) (25)
Equity 514 (49) (166) (13)
Exposure to foreign exchange rates varies during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is 
considered to be representative of the Group’s exposure to currency risk.
Fair values
The Directors consider there to be no material difference between the book value and fair value of the Group’s financial instruments in either financial 
year.
Notes to the financial statements
For the year ended 31 December 2013 59
www.hydrodec.com
21 Acquisitions and disposals
21.1 Acquisition of OSS Group 
On 6 September 2013, the Group acquired the principal business and assets of OSS Group Limited (“OSS”) from the administrators of OSS. The 
acquisition was made as part of the Group’s strategy to develop its existing re-refining technology for deployment in the re-refining of used lubricant 
oils. The acquisition of OSS secures significant feedstock for the UK market and provides a platform to develop other opportunities to consolidate the 
oil collection and re-refining market in the UK and Europe. 
The details of the business combination are as follows:
Fair values
2013
USD’000
Amount settled in cash 7,664
Recognised amounts of identifiable net assets
Property, plant and equipment 9,915
Other intangible assets 4,555
Total non-current assets 14,470
Trade and other receivables 4,076
Inventories 672
Total current assets 4,748
Trade and other payables (7,832)
Total current liabilities (7,832)
Borrowings (1,551)
Provisions (651)
Deferred tax liability (646)
Total non-current liabilities (2,848)
Identifiable net assets 8,538
Bargain purchase on acquisition (874)
Consideration settled in cash 7,664
Acquisition costs charged to expenses 266
Net cash paid relating to the acquisition 7,930
Consideration 
The acquisition of OSS was settled in cash amounting to USD 7 ,664,000. The gain on bargain purchase arising from the purchase of a business in a 
distressed state and acquisition-related costs are not included as part of consideration transferred and have been recognised as an expense in the 
consolidated statement of income, as part of other operating costs. Post-acquisition trading and profitability for the acquired business is set out in 
note 2. No pre-acquisition activity is disclosed as the assets were acquired pursuant to an administration.
Identifiable net assets
The fair value of the trade and other receivables acquired as part of the business combination amounted to USD 4,076,000 with a gross contractual 
amount of USD 4,416,000. As of the acquisition date, the Group’s best estimate of the contractual cash flow not expected to be collected amounted  
to USD 340,000.
Other intangible assets
Intangible assets recognised on acquisition comprised of customer contracts fair valued at USD 2,354,000 and brand name fair valued at  
USD 2,201,000. These primarily related to expected future profitability. These are expected to have a finite useful life and accordingly the related 
carrying amounts will be amortised on a straight-line basis.
Governance Financial Statements Strategic Report 60
Hydrodec Group plc    |   Annual Report and Accounts 2013
21.2 Sale of interest in Hydrodec of North America 
On 16 April 2013 the Group sold a 25 per cent interest in Hydrodec of North America LLC (“HoNA”) to G&S Oil Recycling Group LLC (“G&S”) for total 
consideration based on a multiple of earnings for the years ended 31 December 2012 (5 times EBITDA) and 2013 (6.5 times EBITDA). Management have 
estimated the value of the consideration to be USD 3,310,000 (of which cash of USD 1,733,000 was received in the period), resulting in a loss on sale of 
investment of USD 302,000. The value of the remaining consideration has been included in “Other receivables” (see note 10). Additionally a royalty 
stream of 5 per cent of net revenue is payable to a member of the Group under the terms of the strategic partnership with G&S.
Included in the agreement with G&S is the potential for the sale of a further 24.9 per cent of HoNA in two equal tranches, conditional on a number of 
future actions to be undertaken by both parties. The value of the consideration is set at a price to be determined by earnings for the years ended 31 
December 2012 and 2013. 
The details of the sale of the initial interest of 25 per cent are as follows:
USD’000
Value disposed 3,619
Consideration received (1,733)
Deferred consideration subject to earn out (1,584)
Loss on sale of interest (302)
22 Capital commitments
At 31 December 2013, the Group had contractual capital commitments of USD 385,000 (2012: USD nil) in relation to the US expansion programme and 
research and development equipment. There were no other material contractual commitments.
23 Contingent liabilities
There were no contingent liabilities at 31 December 2013 or 31 December 2012.
24 Financial commitments
The Group has entered into commercial leases on certain properties. There are no restrictions placed upon the lessee by entering into these leases.
The present value of future minimum rentals payable under non-cancellable operating leases are as follows:
2013
USD’000
2012
USD’000
Within one year 1,368 329
Between one and five years 1,378 277
2,746 606
25 Related party transactions
AirTerAq Pty Ltd, a company in which a Director, Mark McNamara has an interest, supplied services to the value of USD 395,000 during 2013 (2012: USD 
389,000) and was owed at 31 December 2013 USD 61,500 (2012: USD 49,500). These services were for the provision of Mr McNamara as a Director of the 
Company.
G&S Technologies, a company in which G&S Oil Recycling Group LLC (the holder of a 25 per cent interest in Hydrodec of North America LLC (“HoNA”)) 
has an interest, supplied feedstock to the value of USD 4,200,000 in 2013 subsequent to taking an interest in HoNA (2012: USD nil) and was owed at 31 
December 2013 USD 289,000 (2012: USD nil). 
Between 24 December 2012 and 27 June 2013, Andrew Black, a Director, subscribed for USD 4,120,000 of fixed rate loan notes 2015, secured over 
Group assets (see note 14). On 19 March 2013, Lord Moynihan, a Director, subscribed for USD 494,000 of the loan notes. In accordance with the terms 
of these subscriptions, Andrew Black and Lord Moynihan were granted 13 million and 1.5 million of warrants to subscribe for ordinary shares at 16p 
per share (respectively). Andrew Black also provided a USD 12,361,000 revolving credit facility relating to the acquisition of the principal assets and 
business of OSS in September 2013 (see note 4). The Company repaid the loan notes and revolving credit facility on 8 November 2013 through the 
issue of new ordinary shares at 1 1.25p per share, with Andrew Black and Lord Moynihan issued 89,777 ,778 and 2,666,667 new ordinary shares 
respectively. Total interest paid on these loan instruments to Andrew Black and Lord Moynihan during the period were USD 383,000 and USD 22,000 
respectively.
Notes to the financial statements
For the year ended 31 December 2013 61
www.hydrodec.com
The following Directors subscribed in cash for the following number of new ordinary shares at 1 1.25p per share as part of a placing which was 
completed on 8 November 2013:
Lord Moynihan 2,666,667 
Alan Carruthers 888,889
Chris Ellis 444,444
None of the transactions incorporate special terms and conditions, and no guarantees were given or received.
26 Post balance sheet events 
Insurance receipts
As detailed in note 5, in anticipation of the resolution of the total claim the Group received USD 2,000,000 on account from our insurers on 17 
February 2014.
Warrants
On 26 March 2014 the Company issued 125,000 new ordinary shares pursuant to the receipt of an exercise notice in respect of warrants to subscribe 
for ordinary shares at an exercise price of 8p per share and exercise proceeds of £10,000. 
Governance Financial Statements Strategic Report 62
Hydrodec Group plc    |   Annual Report and Accounts 2013
We have audited the parent company financial statements of Hydrodec Group plc for the year ended 31 December 2013 which comprise the parent 
company balance sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and 
United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of part 16 of the Companies Act 2006. Our audit work 
has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for 
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the 
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the Statement of Directors’ responsibilities set out on page 27 , the directors are responsible for the preparation of the 
parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion 
on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those 
standards require us to comply with the Auditing Practices Board’s (“APB’s”) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at  
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion the parent company financial statements:
 – give a true and fair view of the state of the Company’s affairs as at 31 December 2013;
 – have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
 – have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on the matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements 
are prepared is consistent with the parent company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
 – adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from 
branches not visited by us; or
 – the parent company financial statements are not in agreement with the accounting records and returns; or
 – certain disclosures of Directors’ remuneration specified by law are not made; or
 – we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the Group financial statements of Hydrodec Group plc for the year ended 31 December 2013. That report includes an 
emphasis of matter.
David Miller
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
21 May 2014
Independent auditor’ s report to the members of 
Hydrodec Group plc 63
www.hydrodec.com
Note
2013
£’000
2012
£’000
Fixed assets
Tangible assets 30 73 96
Investments 31 38,133 38,879
38,206 38,975
Current assets
Debtors 32 953 941
Amounts due from subsidiary undertakings 32 8,272 1,342
Cash at bank 11,014 431
20,239 2,714
Creditors: amounts falling due within one year
Amounts due to subsidiary undertakings (164) (161)
Trade and other creditors 33 (539) (367)
(703) (528)
Net current assets 19,536 2,186
Total assets less current liabilities 57,742 41,161
Creditors: amounts falling due after more than one year 34 – (10,501)
57,742 30,660
Equity attributable to equity holders of the parent
Called up share capital 35 4,016 2,396
Share premium account 36 108,885 74,539
Equity reserve 36 – 4,289
Treasury reserve 36 (649) (649)
Share option reserve 36 1,017 680
Profit and loss account 36 (55,527) (50,595)
Total equity 57,742 30,660
The financial statements were approved by the Board of Directors on 21 May 2014 and were signed on its behalf by:
Ian Smale Chris Ellis
Chief Executive Officer Chief Financial Officer 
The accompanying accounting policies and notes form an integral part of these financial statements.
Company balance sheet
As at 31 December 2013
Governance Financial Statements Strategic Report 64
Hydrodec Group plc    |   Annual Report and Accounts 2013
Notes to the financial statements
For the year ended 31 December 2013
27 Significant accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by that Act, the separate 
financial statements have been prepared in accordance with all applicable United Kingdom accounting standards. The principal accounting policies 
of the Company are set out below.
The financial statements have been prepared on the historical cost basis.
Investments
Investments in subsidiaries are recorded at cost, less amount written off.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements entered 
into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the 
assets of the Company after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are 
set out below.
The fair value of the liability portion of the unsecured loan stock (which was previously convertible into shares) was determined using a market interest 
rate for an equivalent non-convertible instrument. The amount was recorded as a liability on an amortised cost basis until extinguished on repayment of 
the loan stock. The remainder of the proceeds was allocated to the conversion option, which was recognised and included in shareholders’ equity.
Tangible fixed assets and depreciation
Depreciation is calculated to write down the cost less estimated residual value of all tangible fixed assets other than freehold land by equal annual 
instalments over their expected useful lives. The rates generally applicable are:
Fixtures, fittings and equipment   30 per cent diminishing value
Employee Benefit Trust
The assets and liabilities of the Employee Benefit Trust (“EBT”) have been included in the Company accounts. Any assets held by the EBT cease to be 
recognised on the Group balance sheet when the assets vest unconditionally in identified beneficiaries.
The costs of purchasing own shares held by the EBT are shown as a deduction against equity. The proceeds from the sale of own shares held increase 
equity. Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the Company income statement.
Share-based payments
The Company issues equity-settled share-based payments to certain employees and Directors. Equity-settled share-based payments are measured at 
fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the 
equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of the shares that 
will eventually vest and adjustment for the effect of non-market-based vesting conditions.
Warrants 
The Company has issued equity-settled warrants in connection with fixed rate loan notes. Equity-settled warrants are measured at fair value of the 
instruments granted (excluding the effect of non-market-based exercise conditions) at the date of grant. The fair value determined at the grant date 
of the equity-settled share-based payments is expensed on a straight-line basis over the exercise period (or until fixed rate loan notes are repaid), 
based on the Group’s estimate of the shares that will eventually be issued and adjusted for the effect of non-market-based exercise conditions. 
Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at fair value of the consideration received net of issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. 
Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
All interest costs are charged to the income statement.
Taxation
Deferred tax is recognised on all timing differences where the transactions or events that give the Group an obligation to pay more tax in the future, 
or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax assets are recognised when it is more likely than not that 
they will be recovered. Deferred tax is measured using rates of tax that have been enacted or substantively enacted by the balance sheet date. 65
www.hydrodec.com
Going concern
As set out in note 1 of the Group financial statements, the financial statements have been prepared on the going concern basis, which assumes that 
the Group will have sufficient funds to continue in operational existence for the foreseeable future. 
28 Directors 
Directors’ emoluments paid during the year were:
2013
£’000
2012
£’000
Emoluments 1,145 952
The highest paid Director received emoluments totalling £393,000 (2012: £289,000). Pension contributions for Directors were £nil (2012: £7 ,500).
29 Loss attributable to the shareholders of the Company
The Company is an investment holding company. As permitted by section 408 of the Companies Act 2006, the Company’s profit and loss account has 
not been included in these accounts. The loss on ordinary activities attributable to shareholders of the Company dealt with in these accounts was 
£9,439,000 (2012: £2,675,000).
30 Tangible fixed assets
Fixtures and equipment  
£’000
Cost
At 1 January 2012 139
Additions in the year –
At 31 December 2013 139
Depreciation
At 1 January 2012 43
Provided in the year 23
At 31 December 2013 66
Carrying amount
At 31 December 2013
73
At 31 December 2012 96
31 Investments
Shares in subsidiary 
undertakings
£’000
Loans to subsidiary 
 undertakings
£’000
Total
£’000
Cost
At 31 December 2012 57,752 611 58,363
Additions – – –
At 31 December 2013 57,752 611 58,363
  
Accumulated impairment  
At 31 December 2012 19,484 – 19,484
Increase in provision 746 – 746
At 31 December 2013 20,230 – 20,230
Carrying amount
At 31 December 2013
37,522 611 38,133
At 31 December 2012 38,268 611 38,879
 
Governance Financial Statements Strategic Report 66
Hydrodec Group plc    |   Annual Report and Accounts 2013
The subsidiary undertakings at 31 December 2013 are listed below:
Country of incorporation 
and principal operations
Ordinary share 
capital held Activity
Hydrodec Holdco Limited UK 100% Holding company
Hydrodec Development Corporation Pty Limited* Australia 100% Technology and holding company
Hydrodec Australia Pty Limited** Australia 100% Oil treatment services
Hydrodec Inc* USA 100% Holding company
Hydrodec Holdings LLC *** USA 100% Holding company
Hydrodec of North America LLC**** USA 75% Oil treatment services
Hydrodec (UK) Limited* UK 100% Oil treatment services
Virotec International plc UK 100% Holding company
VIN Australia Pty Ltd***** Australia 100% Investment company
Hydrodec Japan Co Limited Japan 100% Holding company
*  Held through Hydrodec Holdco Limited
**   Held through Hydrodec Development Corporation Pty Limited
***
 
  Held through Hydrodec Inc
****
  
Held through Hydrodec Holdings LLC
*****  Held through Virotec International plc
The joint venture undertakings at 31 December 2013 are listed below:
Country of incorporation 
and principal operations
Ordinary share 
capital held Activity
Hydrotek Eco Japan Co Limited
^
Japan 50% Patent holding company
Pacific Eco Refining Co Limited
^
Japan 47.5% Oil treatment services
^
  Held through Hydrodec Japan Co Limited
32 Debtors and amounts due from subsidiaries
2013
£’000
2012
£’000
Other debtors 953 941
Amounts due from subsidiary undertakings 8,272 1,342
9,225 2,283
The amount due from subsidiaries relate to the ongoing funding provided to the principal trading subsidiaries during their development phase.  
All intercompany amounts are repayable on demand. The timing of the repayment of this debt is uncertain and unlikely to be within one year. 
33 Trade and other creditors
2013
£’000
2012
£’000
Trade creditors 59 82
Other creditors 98 139
Accruals 382 146
539 367
Notes to the financial statements
For the year ended 31 December 2013 67
www.hydrodec.com
34 Creditors: amounts falling due after more than one year
2013
£’000
2012
£’000
Unsecured loan stock – 8,501
Fixed rate loan notes – 2015 – 2,000
– 10,501
Unsecured loan stock
In November 2007 , the Company issued £13,800,000 of convertible unsecured loan stock, convertible at the loan stock holder’s option into ordinary  
share capital of the Company at a price of 19p, subject to anti-dilutive conditions for subsequent share issues at below market price.
 
On 1 November 2012, these conversion rights lapsed and the stock became an unsecured loan, repayable at the Company’s determination.  
On 8 November 2013, the outstanding balance of £12,790,000 was repaid in full together with accrued interest. 
Fixed rate loan notes
Between 24 December 2012 and 27 June 2013, the Company received subscriptions for a total of £5,000,000 of fixed rate loan notes 2015. The notes 
were secured over Group assets. Interest was payable at 5 per cent per annum. On 8 November 2013, the loan notes were repaid in full (through the 
issue of new ordinary shares at 1 1.25p per share) and the security was released as part of the fundraising and debt repayment programme (see note 18).
35 Share capital
2013
£
2012
£
Issued and fully paid 803,231,138 ordinary shares of 0.5p each 4,016 2,396
During the period the Company issued 324,094,1 1 1 new ordinary shares at a price of 1 1.25p per share, of which 1 1 1,1 1 1,1 1 1 were issued in consideration 
for the repayment of £5,000,000 of fixed rate loan notes 2015 and a £7 ,500,000 revolving credit facility and the balance were issued for cash pursuant 
to a placing and open offer. 
36 Reconciliation of movements in shareholders’ funds
Share
 capital
£’000
Share
premium
£’000
Equity
 reserve
£’000
Treasury
 reserve
£’000
Share
 option
 reserve
£’000
Profit 
 and loss
 account
£’000
Total
£’000
At 1 January 2012 2,334 73,141 8,856 (649) 335 (52,674) 31,343
Share issues 62 1,398 – – – – 1,460
Share-based payment – – – – 532 – 532
Transfers – – (4,567) – (187) 4,754 –
Loss for the year – – – – – (2,675) (2,675)
At 1 January 2013 2,396 74,539 4,289 (649) 680 (50,595) 30,660
Share issues 1,620  34,840 – – – – 36,460 
Issue costs – (494) – – – – (494)
Share-based payment – – – – 555 – 555 
Transfers – – (4,289) – (218) 4,507 –
Loss for the year – – – – – (9,439) (9,439)
At 31 December 2013 4,016 108,885 – (649) 1,017 (55,527) 57,742
       
 
Governance Financial Statements Strategic Report 68
Hydrodec Group plc    |   Annual Report and Accounts 2013
37 Related party transactions
The Company has taken advantage of the exemption in Financial Reporting Standard no.8 “Related party disclosures” and has not disclosed 
transactions with Group undertakings.
Between 24 December 2012 and 27 June 2013, Andrew Black, a Director, subscribed for £2,600,000 of fixed rate loan notes 2015, secured over Group 
assets. On 19 March 2013, Lord Moynihan, a Director, subscribed for £300,000 of the loan notes. In accordance with the terms of these subscriptions, 
Andrew Black and Lord Moynihan were granted 13 million and 1.5 million of warrants to subscribe for ordinary shares at 16p per share (respectively). 
Andrew Black also provided a £7 ,500,000 revolving credit facility relating to the acquisition of the principal assets and business of OSS in September 
2013. The Company repaid the loan notes and revolving credit facility on 8 November 2013 through the issue of new ordinary shares at 1 1.25p per 
share, with Andrew Black and Lord Moynihan issued 89,777 ,778 and 2,666,667 new ordinary shares respectively. Total interest paid on these loan 
instruments to Andrew Black and Lord Moynihan during the period were £244,600 and £13,900 respectively.
The following Directors subscribed in cash for the following number of new ordinary shares at 1 1.25p per share as part of a placing which was 
completed on 8 November 2013:
Lord Moynihan 2,666,667 
Alan Carruthers 888,889
Chris Ellis 444,444
None of the transactions incorporate special terms and conditions, and no guarantees were given or received.
38 Post balance sheet events 
On 26 March 2014, the Company issued 125,000 new ordinary shares pursuant to the receipt of an exercise notice in respect of warrants to subscribe 
for ordinary shares at an exercise price of 8p per share and exercise proceeds of £10,000. 
Notes to the financial statements
For the year ended 31 December 2013 69
www.hydrodec.com
NOTICE OF ANNUAL GENERAL MEETING
Hydrodec Group plc
(incorporated and registered in England and Wales under the Companies Act 1985 with registered no. 05188355)
NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of Hydrodec Group plc (the “Company”) will be held in The Winchester Room, The 
Washington Mayfair Hotel, 5 Curzon Street, London W1J 5HE at 10.00 a.m. on 30 June 2014. The business of the meeting will be to consider and, if 
thought fit, to pass the following resolutions (the “Resolutions”), of which Resolutions 1 to 10 will be proposed as ordinary resolutions of the Company 
and Resolutions 1 1 and 12 will be proposed as special resolutions of the Company:
ORDINARY BUSINESS:
1. To receive and adopt the Report of the Directors and the audited accounts of the Company for the year ended 31 December 2013 together with 
the report of the auditors thereon. 
2. To re-elect Andrew Black who retires at the meeting and who, being eligible, offers himself for re-election as a director of the Company (each a 
“Director” and together the “Directors”).
3. To re-elect Alan Carruthers who retires at the meeting and who, being eligible, offers himself for re-election as a Director. 
4. To re-elect Christopher Ellis who retires at the meeting and who, being eligible, offers himself for re-election as a Director. 
5. To re-elect Gillian Leates who retires at the meeting and who, being eligible, offers herself for re-election as a Director. 
6. To re-elect Mark McNamara who retires at the meeting and who, being eligible, offers himself for re-election as a Director. 
7. To re-elect Lord Moynihan who retires at the meeting and who, being eligible, offers himself for re-election as a Director. 
8. To re-elect Ian Smale who retires at the meeting and who, being eligible, offers himself for re-election as a Director. 
9. To re-appoint Grant Thornton UK LLP as auditors of the Company from the conclusion of this meeting until the conclusion of the next general 
meeting at which accounts are laid before the Company and to authorise the Directors to fix their remuneration. 
SPECIAL BUSINESS:
10. That, in substitution for all subsisting authorities to the extent unused, the Directors be and they are hereby generally and unconditionally 
authorised in accordance with section 551 of the Companies Act 2006 (“CA 2006”) to exercise all the powers of the Company to allot shares in the 
Company and to grant rights to subscribe for, or to convert any security into, shares in the Company:
A.  up to an aggregate nominal amount of £1,338,000; and
B.  comprising equity securities (within the meaning of section 560 of the CA 2006) up to a further aggregate nominal amount of £1,338,000 in 
connection with an offer by way of a rights issue:
i. to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
ii.  to holders of other equity securities as required by the rights of those securities or as the Directors otherwise consider necessary, 
 and so that the Directors may impose any limits or restrictions and make any arrangements which they consider necessary or appropriate to deal 
with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or the 
requirements of any regulatory body or stock exchange or any other matter (including any such problems arising by virtue of equity securities 
being represented by depositary receipts).
 The authorities conferred on the Directors under paragraphs (A) and (B) above shall expire at the conclusion of the next Annual General Meeting 
of the Company after the passing of this Resolution or 15 months after the passing of this Resolution, whichever is the earlier save that under each 
authority the Company may, before such expiry, make an offer or agreement which would or might require shares to be allotted or rights to 
subscribe for, or to convert any security into, shares to be granted after such expiry and the Directors may allot shares or grant rights to subscribe 
for, or to convert any security into, shares (as the case may be) in pursuance of such an offer or agreement as if the authority conferred hereby had 
not expired. 70
Hydrodec Group plc    |   Annual Report and Accounts 2013
11. That, subject to the passing of Resolution 10 above and in substitution for all subsisting authorities to the extent unused, the Directors be and they 
are hereby empowered pursuant to sections 570 and 573 of the CA 2006 to allot equity securities (within the meaning of section 560 of the CA 
2006) for cash pursuant to the authority conferred under Resolution 10 or by way of a sale of treasury shares, as if section 561(1) of the CA 2006 did 
not apply to such allotment provided that the power conferred by this resolution shall be limited to:
A.  the allotment of equity securities of the Company in connection with an issue or offer of equity securities to the holders of ordinary shares in 
the capital of the Company in proportion (as nearly as may be) to their existing holdings of such shares (excluding any shares held by the 
Company as treasury shares (within the meaning of section 724 of the CA 2006)) on the record date for such allotment or in accordance with 
the rights attached to such shares but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in 
relation to fractional entitlements or as a result of legal or practical problems under the laws of or the requirements of any regulatory body or 
any stock exchange in any territory or any other matter;
B.  pursuant to the grant or exercise of any share awards or share options pursuant to any share options scheme or long term incentive scheme of 
the Company in force from time to time; and 
C.  the allotment, otherwise than pursuant to paragraphs (A) and (B) above, of equity securities of the Company or the sale or transfer of treasury 
shares which is treated as an allotment of equity securities under section 560(3) of the CA 2006 up to an aggregate nominal value equal to 
£400,000; 
 and unless previously renewed, revoked, varied or extended this power shall expire on the earlier of the date which is 15 months from the date of 
the passing of this Resolution and the conclusion of the next Annual General Meeting of the Company except that the Company may before the 
expiry of this power make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors 
may allot equity securities in pursuance of such offer or agreement as if this power had not expired.
12. That the articles of association produced to the meeting and initialled by the Chairman of the meeting for the purpose of identification be 
adopted as the articles of association in substitution for, and to the exclusion of, the existing articles of association (including those provisions of 
the Company’s memorandum of association which, by virtue of section 28 CA 2006, are treated as provisions of the Company’s articles of 
association).
By order of the Board  Registered office 
Michael Preen  50 Curzon Street 
Company Secretary London W1J 7UW
  30 May 2014 71
www.hydrodec.com
NOTES:
1. A member of the Company entitled to attend, speak and vote at this meeting is entitled to appoint one or more proxies to attend, speak and vote 
in that member’s place. A member may appoint more than one proxy in relation to this meeting provided that each proxy is appointed to exercise 
rights attached to a different share or shares held by that member. A proxy need not also be a member. Completion and return of a Form of Proxy 
(or any CREST Proxy Instruction, as described in notes 6 to 8) will not preclude a member from attending and voting at the meeting should the 
member so decide. A Form of Proxy accompanies this notice. If you wish to appoint multiple proxies please photocopy the Form of Proxy, fill in 
each copy in respect of different shares and send the multiple forms together to the Company’s registrars, Capita Registrars, in accordance with 
note 2 below. Alternatively you may appoint multiple proxies by CREST Proxy Instruction in accordance with note 6 below.
2. To be valid, the enclosed Form of Proxy and any power of attorney or other authority (if any) under which it is signed (or a copy certified notarially, 
or in some other manner approved by the Board) must be completed and returned so as to reach the Company’s registrars, Capita Asset Services, 
PXS 1, 34 Beckenham Road, Beckenham, BR3 4ZF by 10 a.m. on 28 June 2014 (or, if the meeting is adjourned, not less than 48 hours before the time 
fixed for the holding of the adjourned meeting).
3. In the event that a poll is demanded at the meeting, and such poll is to be taken more than 48 hours thereafter, the enclosed Form of Proxy 
(together with any documents of authority required by note 2) may be returned to the Company’s registrars, Capita Registrars at the address in 
note 2 above so as to arrive not later than 24 hours before the time appointed for such poll. In the event that a poll is demanded at the meeting, 
and such poll is not taken at the meeting, but is taken less than 48 hours after the meeting, the enclosed Form of Proxy (together with any 
documents of authority required by note 2) may be delivered at the meeting to the Chairman of the meeting or to the secretary or any director of 
the Company.
4. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 (as amended), to be entitled to attend and vote at the meeting (and for 
the purpose of determining the number of votes a member may cast), members must be entered on the Register of Members of the Company by 
6 p.m. on 27 June 2014.
5. In the case of joint holders, the signature of only one of the joint holders is required on the Form of Proxy, but the vote of the senior (by order in 
the register of members) who tenders a vote will be accepted to the exclusion of the others.
6. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for this meeting 
and any adjournment(s) thereof by utilising the procedures described in the CREST Manual. CREST personal members or other CREST sponsored 
members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service 
provider(s), who will be able to take the appropriate action on their behalf.
7. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be 
properly authenticated in accordance with Euroclear UK & Ireland Limited’s (“Euroclear”) specifications and must contain the information required 
for such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by the Company’s agent (ID RA10) 
by the latest time for proxy appointments set out in note 2 above. For this purpose, the time of receipt will be taken to be the time (as determined 
by the timestamp applied to the message by the CREST Application Host) from which the Company’s agent is able to retrieve the message by 
enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be 
communicated to the appointee through other means.
8. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear does not make available 
special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of 
CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or 
sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such 
action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, 
CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST 
Manual concerning practical limitations of the CREST system and timings (www.euroclear.com/CREST).
9. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities 
Regulations 2001 (as amended). 72
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EXPLANATORY INFORMATION FOR THE RESOLUTIONS
The following explanatory information is provided by way of background to the special business of the meeting:
Authority of Directors to allot shares (Resolution 10 – ordinary resolution)
The authority given to the Directors to allot further shares in the capital of the Company requires the prior authorisation of the shareholders in general 
meeting under section 551 of the Companies Act 2006. The authority granted at the Company’s last general meeting is due to expire at this year’s 
Annual General Meeting.
Accordingly, Resolution 10 will be proposed as an ordinary resolution to grant new authorities to allot shares and grant rights to subscribe for, or 
convert any security into, shares: (i) up to an aggregate nominal amount of £1,338,000 and (ii) in connection with a rights issue up to an aggregate 
nominal amount (when added to allotments under paragraph (A) of the Resolution) of £1,338,000. These amounts represent approximately one third 
and approximately two thirds respectively of the total issued ordinary share capital of the Company, in accordance with current guidelines. This 
authority will expire immediately following the Annual General Meeting in 2015 or, if earlier, 15 months following the Resolution being passed.
Disapplication of pre-emption rights (Resolution 11 – special resolution)
If the Directors wish to exercise the authority under Resolution 10 and offer shares (or sell any shares which the Company may purchase and elect to 
hold as treasury shares) for cash, the Companies Act 2006 requires that, unless shareholders have given specific authority for the waiver of the 
statutory pre-emption rights, the new shares be offered first to existing shareholders in proportion to their existing shareholdings. In certain 
circumstances, it may be in the best interests of the Company to allot new shares (or to grant rights over shares) for cash without first offering them to 
existing shareholders in proportion to their holdings. The authority granted at the Company’s last general meeting is due to expire at this year’s 
Annual General Meeting. Accordingly, Resolution 1 1 would authorise the Directors to disapply the strict statutory pre-emption provisions.
This would provide the Directors with a degree of flexibility to act in the best interests of the Company by allotting shares for cash: (i) by way of a 
rights issue, open offer or other offer of securities in favour of existing shareholders in proportion to their shareholdings (subject to certain exclusions); 
(ii) pursuant to any long term incentive plan or share option scheme; and (iii) to persons other than pro rata to existing shareholders up to an 
aggregate nominal value of £400,000, which is equivalent to approximately 10 per cent of the Company’s issued share capital. This authority will 
expire immediately following the Annual General Meeting in 2015 or, if earlier, 15 months following the Resolution being passed.
Amendment of the articles of association (Resolution 12 – special resolution)
It is proposed in resolution 12 to adopt new articles of association (the “New Articles”) in order to update the Company’s current articles of association 
(the “Current Articles”) primarily to take account of various provisions of the Companies Act 2006 and certain other legislation.
The principal changes introduced in the New Articles are summarised in Appendix 1 below. Other changes, which are of a minor, technical or 
clarifying nature and also some more minor changes which merely reflect changes made by the Companies Act 2006 or the Shareholders’ Rights 
Regulations, or conform the language of the New Articles with that used in the model articles for public companies produced by the Department for 
Business, Innovation and Skills have not been noted in Appendix 1. The New Articles showing all the changes to the Current Articles are available for 
inspection at the Company’s registered office from the date of this notice until the date of the Annual General Meeting and at the place of the Annual 
General Meeting from 15 minutes prior to the start of the meeting until its conclusion.
Action to be taken 
You will find enclosed a Form of Proxy for use at the Annual General Meeting. Please complete, sign and return the enclosed form as soon as possible 
in accordance with the instructions printed thereon, whether or not you intend to be present at the Annual General Meeting. Forms of Proxy should 
be returned so as to be received by Capita Asset Services, PXS 1, 34 Beckenham Road, Beckenham, BR3 4ZF as soon as possible and in any event no 
later than 48 hours before the time appointed for holding the Annual General Meeting.
Recommendation 
Your Directors consider that all the Resolutions to be put to the meeting are in the best interests of the Company and its shareholders as a whole and 
unanimously recommend shareholders to vote in favour of all the Resolutions, as they intend to do in respect of their own beneficial holdings. 73
www.hydrodec.com
Appendix 1
EXPLANATORY NOTES OF PRINCIPAL CHANGES TO THE COMPANY’S ARTICLES OF ASSOCIATION
1. The Company’s objects
The provisions regulating the operations of the Company are currently set out in the Company’s memorandum and articles of association. The 
Company’s memorandum contains, among other things, the objects clause which sets out the scope of the activities the Company is authorised to 
undertake. This is drafted to give a wide scope.
The Companies Act 2006 significantly reduced the constitutional significance of a company’s memorandum. The Companies Act 2006 provides that a 
memorandum will record only the names of subscribers and the number of shares each subscriber has agreed to take in the company. Under the 
Companies Act 2006 the objects clause and all other provisions which are contained in a company’s memorandum are deemed to be contained in 
the company’s articles of association but the company can remove these provisions by special resolution. 
Further the Companies Act 2006 states that unless a company’s articles provide otherwise, a company’s objects are unrestricted. This abolishes the 
need for companies to have objects clauses. For this reason the Company is proposing to remove its objects clause together with all other provisions 
of its memorandum which, by virtue of the Companies Act 2006, are treated as forming part of the Company’s articles of association as of 1 October 
2009. Resolution 12 confirms the removal of these provisions for the Company. As the effect of this resolution will be to remove the statement 
currently in the Company’s memorandum of association regarding limited liability, the New Articles also contain an express statement regarding the 
limited liability of shareholders.
2. Articles which duplicate statutory provisions
Provisions in the Current Articles which replicate provisions contained in the Companies Act 2006 are in the main to be removed in the New Articles. 
This is in line with the approach advocated by the Government that statutory provisions should not be duplicated in a company’s constitution. 
3. Authorised share capital and unissued shares
The Companies Act 2006 abolishes the requirement for a company to have an authorised share capital and the New Articles reflect this. Directors will 
still be limited as to the number of shares they can at any time allot because allotment authority continues to be required under the Companies Act 
2006, save in respect of employee share schemes.
4. Redeemable shares
Under the Companies Act 1985, if a company wished to issue redeemable shares, it had to include in its articles the terms and manner of redemption. 
The Companies Act 2006 enables directors to determine such matters instead provided they are so authorised by the articles. The New Articles 
contain such an authorisation. The Company has no plans to issue redeemable shares but if it did so the Directors would need shareholders’ authority 
to issue new shares in the usual way.
5. Authority to purchase own shares, consolidate and sub-divide shares, and reduce share capital
Under the Companies Act 1985, a company required specific enabling provisions in its articles to purchase its own shares, to consolidate or sub-divide 
its shares and to reduce its share capital or other undistributable reserves as well as shareholder authority to undertake the relevant action. The 
Current Articles include these enabling provisions. Under the Companies Act 2006 a company will only require shareholder authority to do any of 
these things and it will no longer be necessary for articles to contain enabling provisions. Accordingly the relevant enabling provisions have been 
removed in the New Articles.
6. Provision for employees on cessation of business
The Companies Act 2006 provides that the powers of the directors of a company to make provision for a person employed or formerly employed by 
the company or any of its subsidiaries in connection with the cessation or transfer to any person of the whole or part of the undertaking of the 
company or that subsidiary, may only be exercised by the directors if they are so authorised by the company’s articles or by the company in general 
meeting. The New Articles provide that the Directors may exercise this power.
7. Use of seals
Under the Companies Act 1985, a company required authority in its articles to have an official seal for use abroad. Under the Companies Act 2006, 
such authority will no longer be required. Accordingly, the relevant authorisation has been removed in the New Articles.
The New Articles provide an alternative option for execution of documents (other than share certificates). Under the New Articles, when the seal is 
affixed to a document it may be signed by one authorised person in the presence of a witness, whereas previously the requirement was for signature 
by either a Director and the secretary or two Directors or such other person or persons as the Directors may approve. 74
Hydrodec Group plc    |   Annual Report and Accounts 2013
8. Suspension of registration of share transfers
The Current Articles permit the Directors to suspend the registration of transfers. Under the Companies Act 2006 share transfers must be registered as 
soon as practicable. The power in the Current Articles to suspend the registration of transfers is inconsistent with this requirement. Accordingly, this 
power has been removed in the New Articles.
9. Vacation of office by Directors
The Current Articles specify the circumstances in which a Director must vacate office. The New Articles update these provisions to treat physical illness 
in the same manner as mental illness. 
10. Voting by proxies on a show of hands
The Shareholders’ Rights Regulations have amended the Companies Act 2006 so that it now provides that each proxy appointed by a member has 
one vote on a show of hands unless the proxy is appointed by more than one member in which case the proxy has one vote for and one vote against 
if the proxy has been instructed by one or more members to vote for the resolution and by one or more members to vote against the resolution. The 
Current Articles have been amended to reflect these changes.
11. Notice of board meetings
Under the Current Articles, when a Director is abroad he can request that notice of Directors’ meetings are sent to him at a specified address and if he 
does not do so he is not entitled to receive notice while he is away. This provision has been removed, as modern communications mean that there 
may be no particular obstacle to giving notice to a Director who is abroad. It has been replaced with a more general provision that a Director is 
treated as having waived his entitlement to notice, unless he supplies the Company with the information necessary to ensure that he receives notice 
of a meeting before it takes place.
12. Records to be kept
The provision in the Current Articles requiring the Board to keep accounting records has been removed as this requirement is contained in the 
Companies Act 2006.
13. Distribution of assets otherwise than in cash
The Current Articles contain provisions dealing with the distribution of assets in kind in the event of the Company going into liquidation. These 
provisions have been removed in the New Articles on the grounds that a provision about the powers of liquidators is a matter for insolvency law 
rather than the articles and that the Insolvency Act 1986 confers powers on the liquidator which would enable it to do what is envisaged by the 
Current Articles.
14. General
Generally the opportunity has been taken to bring clearer language into the New Articles and in some areas to conform the language of the New 
Articles with that used in the model articles for public companies produced by the Department for Business, Innovation and Skills. 75
www.hydrodec.com
Notes 76
Hydrodec Group plc    |   Annual Report and Accounts 2013
Notes www.hydrodec.com
Directors and advisers
Company registration number: 5188355
Registered office: 50 Curzon Street  
London W1J 7UW
Directors: Lord Moynihan (Non-executive Chairman)
Andrew Black (Non-executive Director)
Alan Carruthers (Non-executive Director)
Gillian Leates (Non-executive Director)
Ian Smale (Chief Executive Officer)
Chris Ellis (Chief Financial Officer)
Mark McNamara (Senior Executive Director)
Company secretary: Michael Preen
Nominated adviser and broker: Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
Solicitors: Norton Rose Fulbright LLP
3 More London Riverside
London SE1 2AQ
Registrars: Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Auditor: Grant Thornton UK LLP
Registered Auditor
Chartered Accountants
Grant Thornton House
Melton Street
Euston Square
London NW1 2EP Hydrodec Group plc Annual Report and Accounts 2013
Hydrodec Group plc
50 Curzon Street
London
W1J 7UW
www.hydrodec.com