TIDMZRX 
 
RNS Number : 7313U 
Zirax PLC 
30 June 2009 
 

 
 
 
 
 
 
Zirax plc 
("Zirax" or the "Company") 
 
 
Preliminary Results for the year ended 31 December 2008 
 
 
Zirax, the AIM quoted speciality chemical company focused on the development, 
production and sale of oilfield process chemicals and de-icing solutions, today 
announces its preliminary results for the year ended 31 December 2008. 
 
 
 
 
Highlights 
 
 
 
 
Financial performance 
  *  Total revenues up 11% to $33.9m (2007: $30.7m) 
  *  Substantial increases in our cost base lead to gross margin reducing to 45% 
  (2007: 52%) 
  *  Pre-tax profit before exceptionals $0.7m (2007 profit: $5.3m) 
  *  Exceptional provision of $3.0m against deposits at financial institutions to 
  which access has been restricted (2007: nil) 
  *  Pre-tax loss after exceptionals $2.3m (2007 profit: $5.3m) 
 
 
 
 
 
Operating highlights 
  *  Since the year end, as part of negotiations to agree a new supply and licensing 
  agreement with Solvay, owners of the Rosignano plant, Solvay repaid to Zirax the 
  original advance payment of EUR2.2m (including interest of EUR0.2m) 
  *  Remains the second largest supplier of calcium chloride pellets globally and the 
  leading supplier in the Eastern Hemisphere 
  *  Major contract win to supply 14,000 MT pa to an oil producing company in the 
  Middle East 
  *  Sixth consecutive award of Moscow de-icing contract 
  *  Acquisition of Solith in January 2008 
 
 
 
 
 
Enquiries: 
 
 
+-----------------------------+-----------------------------+-----------------------------+ 
| Zirax                       | Fenlon Dunphy, CEO          |      T: +44 (0)20 7868 1694 | 
+-----------------------------+-----------------------------+-----------------------------+ 
|                             |                             |                             | 
+-----------------------------+-----------------------------+-----------------------------+ 
| Hanson Westhouse Limited    | Tim Metcalfe                |      T: +44 (0)20 7601 6100 | 
+-----------------------------+-----------------------------+-----------------------------+ 
|                             | Richard Baty                |                             | 
+-----------------------------+-----------------------------+-----------------------------+ 
|                             |                             |                             | 
+-----------------------------+-----------------------------+-----------------------------+ 
| Cardew Group                | Tim Robertson               |      T: +44 (0)20 7930 0777 | 
+-----------------------------+-----------------------------+-----------------------------+ 
|                             | David Roach                 |                             | 
+-----------------------------+-----------------------------+-----------------------------+ 
|                             | Daniela Cormano             |                             | 
+-----------------------------+-----------------------------+-----------------------------+ 
 
 
  Chairman's Statement 
 
 
2008 has been a difficult year for the business as a whole and the wider world 
economy. Our cost base for existing product has increased in these harder times 
and our margins have tightened. From the business development perspective, the 
delay in full supply of product from Rosignano is very disappointing and has 
created issues for the business both in the reduction of anticipated revenues 
and the increased cost pressure resulting from longer supply chains. This has 
delayed our strategy of further expansion into international markets. The 
renegotiations with Solvay and action plans to resolve the production problems 
are progressing well. We remain committed to geographic expansion and are 
focused on increasing the Group's capacity. 
 
 
It was important to us, as part of our renegotiation with Solvay that the EUR2.2m 
advance was returned to us, which has happened. However, it is more important 
that the capacity increase is restored and we currently anticipate this will 
happen in 2010. Whilst these renegotiations take place we continue to source 
product from Rosignano. We also see our future growth coming from supplying 
higher margin complimentary products; to this end we have already introduced two 
new products in 2009, Acid ExtrOil and Acid Blend, both of which are targeted at 
the enhanced oil recovery market, and there are further product launches planned 
for later in the year. 
 
 
In January 2008, we made our first strategic acquisition, buying 100% of the 
share capital of Solith Anlagenbau und Service GmbH ('Solith'). Solith, located 
in Austria, provides us with a platform to expand our footprint to the de-icing 
markets of Central and Western Europe. It provides an additional route to other 
industrial markets in Europe and we are pleased that it has been successful in 
securing non-seasonal business which means the Group is better utilising it's 
plant facility, a key aim at the time of acquisition. 
 
 
Importantly, we sold all available product during the year as demand continues 
to exceed supply, however, we are frustrated that we are not able to take full 
advantage due to supply issues at the Rosignano plant. Overall revenues 
increased by 11% to $33.9m (2007: $30.7m) and the seasonal effect of the 
de-icing segment of the business has been further reduced with Oilfield Process 
Chemical revenues now accounting for 75% of Group turnover compared to 52% in 
2007. We also increased the proportion of International revenues from 19% in 
2007 to 29% in 2008. However, as a result of the various difficulties outlined 
we are reporting an operating loss before an exceptional item of $0.8m for 2008 
as against an operating profit in 2007 of $4.7m. 
 
 
For the financial reporting year the Board has decided to take a prudent stance 
and make an exceptional provision of $3.0m against cash deposits at a financial 
institution in Russia where we believe there to be a greatly increased credit 
risk and access to the cash deposits has been restricted. The Board are 
currently negotiating to reach a solution with the financial institution. 
 
 
The Company's auditors have been unable to obtain appropriate audit evidence 
regarding the recoverability of this balance and $3.5m held at a local Russian 
bank, a related party, which the Directors are confident of recovering in full. 
As a result they have issued a disclaimer of opinion on their audit of the 
Group's consolidated financial statements. 
 
 
The above positions together with the general uncertainty in the Russian banking 
sector represent a possible material change in the financial condition of Zirax 
LLC and the Zirax Group. While the Board are confident of the Group's ability to 
continue to operate, the business is dependent on the continued support of its 
lenders, as technically some or all of the borrowings and facilities could 
become immediately repayable due to the possible material changes that have 
taken place. The majority of the Group's current facilities expire during 2009 
and some may need to be replaced to maintain an appropriate level of working 
capital. Therefore a key priority for the management team is to begin 
discussions with the individual lenders to ensure their continued support. 
 
 
Basic EPS shows a loss of 1.98 cents for 2008 from a profit of 2.17 cents in 
2007. No dividend is being declared for the period under review. However, the 
Board is committed to generating value for our shareholders, and keeps dividend 
payment under careful consideration. 
 
 
I would like to take this opportunity to thank all the employees of Zirax for 
their dedication and continued efforts to grow and develop the business. 
 
 
The directors believe that Zirax remains well positioned to grow the business 
based on the continuing strong growth in demand for its products. Our focus 
remains on delivering significant shareholder value. 
 
 
Sir Michael Oliver 
Chairman 
  Operating and Financial Review 
 
 
Zirax is primarily focused on the Oilfield Process Chemicals and high 
performance De-icing Solutions sectors, and to an increasing extent, the wider 
industrial market. In 2008 we continued our strategy of growing the Oilfield 
Process Chemicals segment of our business, taking it to 75% of our overall 
revenues. This has had the effect of further reducing the seasonality of our 
business. As a direct consequence, De-icing Solutions revenues now represent 16% 
of our revenue total. The remainder of Group revenue is derived from the 
Industrial Chemicals segment. However, 2008 was a difficult year at the margin 
and profit level with particularly significant increases in our distribution 
costs and our general and administrative expenses. The slower than anticipated 
product supply from Rosignano meant, not only reduced supply to generate 
additional revenue, but also that where we were developing business outside of 
Russia we still needed to source product from our Volgograd plant with the 
consequent additional distribution cost and reduced potential supply within 
Russia. 
 
 
Clearly 2008 and moving in to 2009 has signalled a revision of global economic 
fortunes. There will undoubtedly be difficult times ahead and it is hard for 
anyone to predict the immediate economic future. Zirax predominantly operates 
and sells in the Russian economic environment where the official inflation 
forecast for 2009 is a minimum of 13%, but unofficially is probably higher. The 
Russian Rouble has come under significant pressure, losing almost 50% of it's 
value against the US Dollar since 1 January 2008, although this has partially 
come back in recent months. The deterioration of the global economic environment 
during 2008 and its impact on the interbank market has resulted in restrictions 
on some of the Group's cash deposits in Russia which has lead the Group to 
provide for them and has reduced the headroom between debt and cash resources as 
at the year end. 
 
 
We remain committed to growing our business internationally. In 2008 revenues in 
international sales grew 70%, whilst Russian sales stayed almost constant 
compared to 2007. Overall, Russian sales represented 71% of revenues in 2008 
compared to 81% in 2007, and international sales were 29% of revenues compared 
to 19% in 2007. In November 2007 we announced the opening of Solvay's plant at 
Rosignano, Italy which should have provided us with an increase in annual 
capacity of approximately 55,000 MT. In May 2009 we announced that we had 
suspended our agreements with Solvay due to inconsistent quantities of calcium 
chloride production at the plant and had entered into renegotiations with them. 
We are re-evaluating with Solvay the timeline for achieving full capacity at the 
plant and currently anticipate that substantial progress will have been made 
towards reaching this target in 2010. This capacity will still be principally 
targeted at the growing demand from the oilfield process chemicals markets in 
nearby Africa and the Middle East, plus potential de-icing and industrial 
markets in Europe. Capacity out of Volgograd is 110,000 MT and Ebensee, Austria 
is 10,000 MT. 
 
 
We will continue to meet our aims of growing market share and the changing needs 
of our customers, who demand new, more efficient and environmentally friendly 
ways of delivering their end requirements. 
 
 
We are also actively investigating, through our own research and development, 
commercial collaborations and acquisitions, other potential applications and 
revenue streams. 
 
 
Our markets and strategy 
 
 
Oilfield Process Chemicals 
Our revenues within this sector grew 58% from $16.0m in 2007 to $25.3m in 2008, 
but our operating profit decreased by 80% from $2.2m to $0.4m in 2008. 
 
 
This revenue growth continues to come from the expanding Russian market along 
with our increased movement into international markets, particularly in the 
Middle East. With such a sizeable Russian market to target we see a good future 
for our existing products and for the development of new ones. When we have 
resolved the additional capacity availability from Italy, we will be well 
positioned, through existing and new contacts, to strengthen our international 
market share in the future. 
 
 
The exploration and development of new oil and natural gas wells may have slowed 
as a result of the economic downturn, but the need for more efficient production 
in the existing ones still results in a global increase in demand for oilfield 
process chemicals. Customers in the oilfield service sector impose strict 
quality requirements on any supplier of speciality chemicals, particularly when 
used in the drilling and commissioning of oil wells. 
 
 
We have developed our own brand of calcium chloride pellets, PelletOil(TM), with 
a smaller particle size and calcium chloride content of 94-98%, for use in this 
market. Products with such a high calcium chloride concentration are considered 
premium products in the oilfield service sector. 
 
 
Calcium Chloride is used as a component element in many applications within this 
market, including: 
 
 
  *  Completion Fluids to flush the drilling hole clean of solids prior to the 
  casings being cemented in place, 
  *  Drilling Muds to cool and lubricate the drill bit allowing longer bit life and 
  reducing drilling times by up to 25%, and 
  *  Enhanced Oil Recovery to improve the oil extraction percentages through chemical 
  flooding technologies. 
 
 
 
We have developed strong relationships with a number of the leading oilfield 
service companies, providing product for use in Africa, the Middle East, Russia, 
CIS and the North Sea. 
 
 
De-icing Solutions 
Despite a harder winter season just gone for 2008/09, in Europe and particularly 
our primary market of Russia, this followed a very mild winter season in 
2007/08. This meant that demand was low in 2008, as our customers entered the 
2008/09 winter season with high levels of stock left over from the previous 
season. Overall revenues from De-icing Solutions were 55% lower, down from 
$12.4m in 2007 to $5.5m in 2008. In addition, tighter margins meant that our 
operating profit decreased 89% from $3.7m in 2007 to $0.4m in 2008. 
 
 
We won the auction for a sixth consecutive year to provide de-icing products to 
Moscow City Council in the 2008/09 winter season. Revenues from this contract 
were lower this year due to the sequence of milder winters in Moscow over the 
previous two seasons which underlines our decision to further diversify our 
customer base. However, we still anticipate significant growth potential in this 
segment; in the short term, as the harder 2008/09 season has depleted stocks 
and, in the medium to longer term, through expanding into new markets. In 
January 2008 we acquired Solith, a young Austrian company focused on a very 
similar market place, as it provides higher performance de-icing product to the 
highways agencies of Austria. 
 
 
The prolonged use of salt can be harmful to vegetation and corrosive to metal, 
resulting in an increasing amount of environmental legislation being introduced 
worldwide to restrict the use of lower performance de-icing products. Naturally, 
this creates a gap in the market, which Zirax is able to fill. 
 
 
Our products are more efficient, as they penetrate the ice quicker than medium 
strength flakes, and better meet environmental concerns because of the 
significantly smaller quantities required to achieve the same result. Our 
de-icing products, IceMelt(TM) and calcium chloride pellets, give off heat as 
they dissolve, melting more ice faster at lower temperatures. IceMelt(TM) is our 
specially designed and patented high performance de-icing agent which also 
contains a corrosion inhibitor, making it particularly suited to use in 
municipal, commercial and retail applications. 
 
 
Industrial Chemicals 
Our revenues from other industrial opportunities grew 39% from $2.3m in 2007 to 
$3.1m in 2008, but our operating profit decreased by 60% from $0.5m to $0.2m in 
2008. We are developing some interesting new applications for our products 
within the paper and water treatment areas, and we look forward to building on 
these. 
 
 
Solith, in Austria, was purely a de-icing business when we acquired it. We are 
pleased to say that they have won on-going industrial contracts to provide them 
with all year round income. This will be a continuing strategy within this 
business as well. 
 
 
Business environment and competition 
 
 
Zirax remains the second largest supplier of calcium chloride pellets globally 
and the leading supplier in the Eastern Hemisphere. Although calcium chloride is 
widely supplied in medium strength flake and liquid format, we are one of very 
few manufacturers of high purity calcium chloride pellets. Our proprietary 
technological process is the result of a number of years of operations and an 
accumulation of technical knowledge. Without such technology and process 
knowledge, we believe it would require significant capital investment for a 
competitor to start similar production of calcium chloride pellets with 
comparable concentration levels. 
 
 
We firmly believe, and are actively engaged, in developing and producing 
complimentary products to offer alongside our higher specification calcium 
chloride. Such products will be well focused and targeted to offer a solution 
package. 
 
 
Results 
 
 
Total revenue for 2008 increased 11% from the previous year to $33.9m. Within 
our segments, sales of Oilfield Process Chemicals have grown to $25.3m, which is 
a 58% increase over 2007, whilst reducing our dependence on high performance 
De-icing products. Sales in this segment were $5.5m in 2008 from $12.4m in 2007. 
We have coupled this with an increase in the Industrial sector to $3.1m from 
$2.3m, further spreading our segment range and exploring new applications. 
 
 
Cost of sales showed a 28% increase from $14.6m in 2007 to $18.8m in 2008 as 
costs of raw materials and energy increased at a higher rate than our revenue. 
Distribution expenses grew 45% to $9.8m compared to $6.8m in 2007 reflecting the 
cost of supplying Europe and Middle East customers from Russia together with 
increased distribution costs within Russia. General and administrative expenses 
for 2008 include an exceptional impairment provision against cash and cash 
equivalents of $3.0m. Excluding this exceptional item, general and 
administrative expenses increased 36% to $6.1m in 2008 compared to $4.5m in 2007 
reflecting in part the increase in employee numbers from 211 at the end of 2007 
to 239 at the close of 2008, as we acquired the staff of Solith and expanded 
some administrative functions. 
 
 
Operating profit before exceptional item became negative at $(0.8)m in 2008 from 
$4.7m in 2007. 
 
 
An exceptional provision of $3.0m has been taken against cash deposits at a 
financial institution in Russia, where we believe there to be a greatly 
increased credit risk and access to the deposits has been restricted, resulting 
in an operating loss after exceptional item of $3.8m compared to a profit of 
$4.7m in 2007. Foreign exchange gains of $1.6m in 2008 resulted from significant 
movements in foreign currency exchange rates compared to a foreign exchange gain 
of $0.2m in 2007. This follows through to a loss before taxation of $2.3m in 
2008 compared to a profit before taxation of $5.3m in 2007. Loss for the year 
after tax was $3.4m compared to a profit of $3.7m in 2007. 
 
 
Basic EPS was a loss of 1.98 cents for 2008 compared to a profit of 2.17 cents 
in 2007. The basic EPS in 2008 before the exceptional item was a loss of 0.27 
cents. In line with the Board's stated strategy no dividend will be payable for 
the current period (nil: 2007). 
 
 
Capital expenditure 
Investment in property, plant and equipment and intangible assets of $1.9m in 
2008, primarily results from the continued expansion of our Volgograd plant and 
facility and the acquisition of patent rights. Additionally through the 
acquisition of Solith a further $0.9m of property, plant and equipment was 
brought in to the group along with $1.0m of goodwill. 
 
 
Cash flow 
In 2008 net cash generated from operations before exceptional items amounted to 
$4.6m compared to net cash used in operations of $3.4m in 2007. This net cash 
flow from operations was significantly increased in 2008 as a result of the 
reversal of the timing of the Moscow City council contract for the winter season 
2007/08, which was finalised late in the 2007 financial year resulting in a 
significantly higher closing receivable position at December 2007. 2008 was then 
significantly impacted by an exceptional provision of $3.0m against cash held at 
a financial institution resulting in net cash generated from operations of 
$1.7m. 
 
 
Cash capital expenditure was $1.9m as we continue the expansion of the Volgograd 
plant capacity and further secured our intellectual property. $0.5m was spent in 
cash on the acquisition of Solith. We were also able to reduce borrowings by a 
net $2.1m. 
 
 
Liquidity and financial risk 
Due to the exceptional provision against cash and cash equivalents it is 
possible some or all of the borrowings and facilities may become immediately 
repayable as a result of a possible material adverse change in the financial 
condition of Zirax LLC and the Zirax Group. In addition the possibility exists 
that the existing borrowings and facilities that expire during the next year 
will need to be replaced to maintain appropriate levels of working capital and 
that they may not be renewed on existing terms or at all by the Group's lenders. 
As a result the management team will immediately begin discussions with all the 
Group's lenders to seek their ongoing support for the business. The Group is 
trading profitably with a positive trading outlook underpinned by the continued 
strong demand for its products. The management are therefore reasonably 
confident of securing the ongoing support from the banks. Further details of the 
Group's liquidity position and going concern review are provided in note 2 and 
note 25. 
 
 
Future outlook 
 
 
The extraordinary economic events during 2008 made it a difficult year for 
Zirax. We are frustrated by the delay of product supply from Rosignano although 
we have recovered our initial advance payment of EUR2.2m (including interest) and 
we are confident that we can, with Solvay, resolve the technical issues at the 
plant. Our cost base was directly affected by the economic crisis during the 
year and as a consequence increased substantially in Russia and in the wider 
distribution market with freight and haulage rates particularly high through 
most of 2008 although these have eased in 2009. The volatility in distribution 
rates is a particular challenge for our business as they make up approximately 
25% of our overall cost base. Looking ahead, we expect costs associated with 
manufacturing and distribution to remain high; as we cannot simply pass on these 
increased costs in our selling price, we are focused on adapting our business 
model to operate in this environment. 
 
 
We have established a good base in terms of our customers and increasingly our 
geographic reach; we have also gained a reputation for quality. Volume and value 
of revenues have continued to increase year on year. We are now seeking to build 
on these positive aspects by searching out higher margin products to offer our 
customers a wider solution to meet their needs. 
 
 
We have already introduced two new products to the market in 2009, Acid ExtrOil 
and Acid Blend, both of which are specifically targeted at the enhanced oil 
recovery market. We are looking to align ourselves with innovative product and 
solution providers; this harder economic environment also opens up opportunities 
to such providers that can display solutions that are genuinely cost effective 
and increasingly environmentally beneficial. We are optimistic about future 
product developments. 
 
 
We continue to diversify our target markets in a controlled and focused fashion 
along with broadening the geography of our customer base that we target. In 
doing so, we are also mindful of the need to limit our distribution exposure, so 
we will seek to source product as close to our end target market as possible. 
 
 
In May 2009 Zirax made a supplier advance of 30m Russian Roubles ($893,000) to 
one of the Group's key suppliers, Kaustik, a related party, in respect of 
purchases of hydrochloric acid with repayment in the three months to September 
2009, in return for a price discount (see notes 24 and 27). 
 
 
Despite the difficulties of the last year, we have strengthened our reputation 
in the marketplace for quality and service. Not only do our customers demand 
more of our products, but they also seek and actively encourage us to source 
additional product for them. We are therefore confident that the Company will 
recover from this very challenging period, and be able to deliver significant 
shareholder value. 
 
 
Fenlon Dunphy 
Chief Executive Officer 
  Consolidated Income Statement 
for the Year Ended 31 December 2008 
 
 
+-----------------------------------------------------+----------+----------+----------+ 
|                                                     |    Notes |     2008 |     2007 | 
|                                                     |          |    $'000 |    $'000 | 
+-----------------------------------------------------+----------+----------+----------+ 
| Revenue                                             |        3 |   33,923 |   30,665 | 
+-----------------------------------------------------+----------+----------+----------+ 
| Cost of sales                                       |          | (18,796) | (14,628) | 
+-----------------------------------------------------+----------+----------+----------+ 
| Gross profit                                        |          |   15,127 |   16,037 | 
|                                                     |          |          |          | 
+-----------------------------------------------------+----------+----------+----------+ 
|                                                     |          |          |          | 
+-----------------------------------------------------+----------+----------+----------+ 
| Distribution expenses                               |          |  (9,815) |  (6,777) | 
+-----------------------------------------------------+----------+----------+----------+ 
| General and administrative expenses                 |          |  (9,093) |  (4,521) | 
+-----------------------------------------------------+----------+----------+----------+ 
| Operating (loss)/profit                             |     3, 4 |  (3,781) |    4,739 | 
+-----------------------------------------------------+----------+----------+----------+ 
| Operating (loss)/profit before exceptional item     |          |    (820) |    4,739 | 
+-----------------------------------------------------+----------+----------+----------+ 
| Exceptional impairment of cash and cash equivalents |       13 |  (2,961) |        - | 
+-----------------------------------------------------+----------+----------+----------+ 
| Operating (loss)/profit                             |     3, 4 |  (3,781) |    4,739 | 
+-----------------------------------------------------+----------+----------+----------+ 
|                                                     |          |          |          | 
+-----------------------------------------------------+----------+----------+----------+ 
| Interest receivable                                 |       25 |      471 |      495 | 
+-----------------------------------------------------+----------+----------+----------+ 
| Interest payable and similar charges                |       25 |    (586) |    (177) | 
+-----------------------------------------------------+----------+----------+----------+ 
| Net foreign exchange gain                           |          |    1,618 |      240 | 
+-----------------------------------------------------+----------+----------+----------+ 
| Net finance income                                  |          |    1,503 |      558 | 
+-----------------------------------------------------+----------+----------+----------+ 
| (Loss)/profit before taxation                       |          |  (2,278) |    5,297 | 
+-----------------------------------------------------+----------+----------+----------+ 
|                                                     |          |          |          | 
+-----------------------------------------------------+----------+----------+----------+ 
| Taxation                                            |        7 |  (1,140) |  (1,559) | 
+-----------------------------------------------------+----------+----------+----------+ 
| (Loss)/profit for the year                          |          |  (3,418) |    3,738 | 
+-----------------------------------------------------+----------+----------+----------+ 
|                                                     |          |          |          | 
+-----------------------------------------------------+----------+----------+----------+ 
| (Loss)/earnings per share expressed in US cents per |          |          |          | 
| share:                                              |          |          |          | 
+-----------------------------------------------------+----------+----------+----------+ 
| Basic                                               |        8 |   (1.98) |     2.17 | 
+-----------------------------------------------------+----------+----------+----------+ 
| Diluted                                             |        8 |   (1.98) |     2.17 | 
+-----------------------------------------------------+----------+----------+----------+ 
 
 
  Balance Sheets 
at 31 December 2008 
 
 
+--------------------------------+---------+----------+----------+----------+----------+ 
|                                |         |        Group        |      Company        | 
+--------------------------------+---------+---------------------+---------------------+ 
|                                |   Notes |    2008  |    2007  |    2008  |    2007  | 
|                                |         |    $'000 |    $'000 |    $'000 |    $'000 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Non-current assets             |         |          |          |          |          | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Property, plant and equipment  |       9 |   10,440 |   10,907 |        1 |        2 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Intangible assets              |      10 |    1,327 |      225 |        - |        - | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Investment in subsidiaries     |      26 |        - |        - |    6,581 |    8,463 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Trade and other receivables    |  12, 27 |    3,117 |    6,104 |    3,117 |    3,161 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Deferred income tax assets     |       7 |       46 |      202 |        - |        - | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Total non-current assets       |         |   14,930 |   17,438 |    9,699 |   11,626 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Current assets                 |         |          |          |          |          | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Inventories                    |      11 |    4,141 |    3,199 |        - |        - | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Trade and other receivables    |      12 |    5,632 |   11,524 |    5,179 |    8,979 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Cash and cash equivalents      |      13 |    4,367 |    8,156 |      250 |       13 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Total current assets           |         |   14,140 |   22,879 |    5,429 |    8,992 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Current liabilities            |         |          |          |          |          | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Short-term borrowings          |      14 |    3,562 |    4,153 |        - |        - | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Trade and other payables       |      15 |    4,125 |    5,633 |      500 |      373 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Current tax liabilities        |      16 |      222 |      891 |       30 |       17 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Total current liabilities      |         |    7,909 |   10,677 |      530 |      390 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Net current assets             |         |    6,231 |   12,202 |    4,899 |    8,602 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Long-term borrowings           |      14 |      692 |        - |        - |        - | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Net assets                     |         |   20,469 |   29,640 |   14,598 |   20,228 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Shareholders' equity           |         |          |          |          |          | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Share capital                  |      17 |    2,965 |    2,965 |    2,965 |    2,965 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Share premium                  |      19 |   11,194 |   11,194 |   11,194 |   11,194 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Other reserves                 |      20 |      465 |    6,218 |    3,518 |    8,967 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Profit and loss account        |      21 |    5,845 |    9,263 |  (3,079) |  (2,898) | 
+--------------------------------+---------+----------+----------+----------+----------+ 
| Total shareholders' equity     |         |   20,469 |   29,640 |   14,598 |   20,228 | 
+--------------------------------+---------+----------+----------+----------+----------+ 
 
 
 
 
 
 
  Cash Flow Statement 
for the Year Ended 31 December 2008 
 
 
+---------------------------------------------+-----+--------+----------+---------+---------+---------+ 
|                                                   |        |       Group        |      Company      | 
+---------------------------------------------------+--------+--------------------+-------------------+ 
|                                                   |  Notes |     2008 |    2007 |    2008 |    2007 | 
|                                                   |        |    $'000 |   $'000 |   $'000 |   $'000 | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Cash flows from operating activities              |        |          |         |         |         | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| (Loss)/profit before taxation                     |        |  (2,278) |   5,297 |   (181) |   (616) | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Adjustments for:                                  |        |          |         |         |         | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Depreciation of property, plant and equipment     |        |    1,211 |     714 |       1 |       1 | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Amortisation of intangible assets                 |        |       27 |       7 |       - |       - | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Loss on disposal of property, plant and equipment |        |        - |      15 |       - |       - | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Share options expense                             |        |       97 |     122 |      97 |     122 | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Interest receivable                               |        |    (471) |   (495) |   (543) |   (804) | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Interest payable and similar charges              |        |      586 |     177 |       2 |       - | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Profit and loss before working capital changes    |        |    (828) |   5,837 |   (624) | (1,297) | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Increase in inventories                           |        |  (1,380) |   (940) |       - |       - | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Decrease/(increase) in trade and other            |        |    4,070 | (7,396) | (1,205) |     668 | 
| receivables                                       |        |          |         |         |         | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Increase/(decrease) in trade and other payables   |        |    1,484 |     131 |     172 |     (8) | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Increase/(decrease) in taxes payable              |        |       36 |      42 |       - |    (16) | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Cash from/(used in) operations                    |        |    3,382 | (2,326) | (1,657) |   (653) | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Taxes paid                                        |        |  (1,726) | (1,055) |       - |       - | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Net cash from/(used in) operating activities      |        |    1,656 | (3,381) | (1,657) |   (653) | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Net cash from/(used in) operating activities      |        |    4,617 | (3,381) | (1,657) |   (653) | 
| before exceptional item                           |        |          |         |         |         | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Exceptional impairment of cash and cash           |     13 |  (2,961) |       - |       - |       - | 
| equivalents                                       |        |          |         |         |         | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Net cash from/(used in) operating activities      |        |    1,656 | (3,381) | (1,657) |   (653) | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Cash flows from investing activities:             |        |          |         |         |         | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Interest received                                 |        |      355 |     347 |     747 |     478 | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Purchase of property, plant and equipment         |        |  (1,736) | (2,708) |       - |       - | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Purchase of intangible assets                     |        |    (179) |   (184) |       - |       - | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Acquisition of subsidiary (note 22)               |        |    (464) |       - |   (464) |       - | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Loans granted to subsidiaries                     |        |        - |       - | (1,138) |       - | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Repayment of loans to subsidiaries                |        |        - |       - |   2,787 |     200 | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Net cash (used in)/from investing activities      |        |  (2,024) | (2,545) |   1,932 |     678 | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Cash flows from financing activities:             |        |          |         |         |         | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Proceeds from borrowings                          |        |   16,082 |   6,190 |       - |       - | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Repayment of borrowings                           |        | (18,165) | (2,202) |       - |       - | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Interest paid                                     |        |    (543) |   (150) |       - |       - | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Net cash (used in)/from financing activities      |        |  (2,626) |   3,838 |       - |       - | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Net increase/(decrease) in cash and cash    |              |  (2,994) | (2,088) |     275 |      25 | 
| equivalents                                 |              |          |         |         |         | 
+---------------------------------------------+--------------+----------+---------+---------+---------+ 
| Cash and cash equivalents at beginning of   |              |    8,154 |   9,448 |      13 |     242 | 
| the year                                    |              |          |         |         |         | 
+---------------------------------------------+--------------+----------+---------+---------+---------+ 
| Effects of exchange rate changes                  |        |  (1,457) |     794 |    (38) |   (254) | 
+---------------------------------------------------+--------+----------+---------+---------+---------+ 
| Cash and cash equivalents at end of the year      |     13 |    3,703 |   8,154 |     250 |      13 | 
+---------------------------------------------+-----+--------+----------+---------+---------+---------+ 
 
 
 
 
  Consolidated Statement of Changes in Shareholders' Equity 
for the Year Ended 31 December 2008 
 
 
+-------------------------------------+---------+---------+----------+---------+---------+ 
|                                     |   Share |   Share |    Other |  Profit |   Total | 
|                                     |         |         |          |     and |         | 
|                                     | capital | premium | reserves |    loss |  equity | 
|                                     |   $'000 |   $'000 |    $'000 | account |   $'000 | 
|                                     |         |         |          |   $'000 |         | 
+-------------------------------------+---------+---------+----------+---------+---------+ 
| Balance at 1 January 2007           |   2,965 |  11,194 |    4,357 |   5,525 |  24,041 | 
+-------------------------------------+---------+---------+----------+---------+---------+ 
| Profit for the year                 |       - |       - |        - |   3,738 |   3,738 | 
+-------------------------------------+---------+---------+----------+---------+---------+ 
| Effect of exchange rates            |       - |       - |    1,739 |       - |   1,739 | 
+-------------------------------------+---------+---------+----------+---------+---------+ 
| Share options credit                |       - |       - |      122 |       - |     122 | 
+-------------------------------------+---------+---------+----------+---------+---------+ 
| Balance at 31 December 2007         |   2,965 |  11,194 |    6,218 |   9,263 |  29,640 | 
+-------------------------------------+---------+---------+----------+---------+---------+ 
| Loss for the year                   |       - |       - |        - | (3,418) | (3,418) | 
+-------------------------------------+---------+---------+----------+---------+---------+ 
| Effect of exchange rates            |       - |       - |  (5,850) |       - | (5,850) | 
+-------------------------------------+---------+---------+----------+---------+---------+ 
| Share options credit                |       - |       - |       97 |       - |      97 | 
+-------------------------------------+---------+---------+----------+---------+---------+ 
| Balance at 31 December 2008         |   2,965 |  11,194 |      465 |   5,845 |  20,469 | 
+-------------------------------------+---------+---------+----------+---------+---------+ 
 
 
Other reserves comprise the Merger, Translation and Other Reserves - see note 
20. 
 
 
 
 
  1.    General information 
 
 
The preliminary results announcement is for the year ended 31 December 2008. 
 
 
The financial information set out in this announcement does not constitute the 
statutory accounts of the Group or the parent company for the years ended 31 
December 2007 or 2008, but is extracted from those accounts. The Group and 
parent company statutory accounts for 2007 have been delivered to the Registrar 
of Companies and those for 2008 will be delivered following the company's annual 
general meeting. 
 
 
The auditors have reported on the Group and parent company statutory accounts 
for both 2007 and 2008. 
 
 
The auditors' report in respect of the Group financial statements for the year 
ended 31 December 2008 contained a disclaimer on the view given by the financial 
statements, due to the possible effect on the Group financial statements of a 
limitation in evidence in respect of: 
 
 
  *  a provision having been made against an amount receivable from a financial 
  institution in Russia of RR87m ($2,961,000) held with them on demand (as 
  disclosed in note 13) where the auditors have been unable to obtain sufficient 
  appropriate evidence regarding the recoverability of this amount and the need 
  for the provision; and 
 
 
 
  *  an amount of RR104m ($3,540,000) held with a related party bank (as disclosed in 
  note 23) where the auditors have been unable to obtain sufficient appropriate 
  evidence as to the recoverability of this amount. 
 
 
 
Their report for 2008 contained a statement under both s237(2) and s237(3) of 
the Companies Act 1985 as due to the limitation in evidence described above, the 
auditors had not obtained all the information and explanations that they 
considered necessary for the purposes of their audit and they were unable to 
determine whether proper accounting records had been maintained in respect of 
Zirax LLC, an overseas subsidiary company. 
 
 
In addition, their report in respect of the Group financial statements for the 
year ended 31 December 2008 contained an emphasis of matter regarding the 
existence of a material uncertainty which may cast doubt about the Group's 
ability to continue as a going concern (as disclosed in note 2). 
 
 
The auditors' report in respect of the parent company financial statements for 
the year ended 31 December 2008, which was unqualified, contained an emphasis of 
matter regarding the existence of a material uncertainty which may cast doubt 
about the parent company's ability to continue as a going concern (as disclosed 
in note 2).  Their report in respect of the parent company financial statements 
for 2008 did not contain a statement under s237(2) or s237(3) of the Companies 
Act 1985 
 
 
The auditors' report in respect of the Group and parent company financial 
statements for the year ended 31 December 2007 was unqualified, did not draw 
attention to any matters by way of emphasis without qualifying their report and 
did not contain a statement under s237(2) or s237(3) of the Companies Act 1985. 
 
 
The financial information contained in this preliminary announcement has been 
prepared in accordance with the accounting policies disclosed in the Group's 
annual financial statements for the year ended 31 December 2007, with the 
exception of the following new policies which are applicable for the year ended 
31 December 2008: 
 
 
Basis of consolidation 
 
 
The consolidated financial statements incorporate the financial statements of 
the Company and entities controlled by the Company (its subsidiaries) up to 31 
December each year. Except for Zirax LLC, which was accounted for using merger 
accounting, the net assets and results of acquired businesses are included in 
the consolidated accounts from their respective dates of acquisition, being the 
date on which the Group obtains control. 
 
 
Apart from Zirax LLC, which was accounted for using merger accounting, the 
acquisition of subsidiaries is accounted for using the purchase method. The cost 
of the acquisition is measured as the fair value of assets given, including cash 
paid, liabilities incurred or assumed, and equity instruments issued by the 
Group in exchange for control of the acquiree, plus any costs directly 
attributable to the business combination. 
 
 
The acquiree's identifiable assets, liabilities and contingent liabilities that 
meet the conditions for recognition under IFRS 3, Business Combinations are 
recognised at their fair value at the acquisition date. All intra-group 
transactions, balances, income and expenses are eliminated on consolidation. 
 
 
All intra-group transactions, balances, income and expense are eliminated on 
consolidation. 
 
 
Exceptional items 
 
 
Exceptional items are those significant items which are separately disclosed by 
virtue of their size or incidence to enable a full understanding of the Group's 
financial performance. Transactions which may give rise to exceptional items are 
principally gains or losses on disposal of investments, subsidiaries and 
impairment of assets. 
 
 
Goodwill 
 
 
Goodwill represents the difference between the fair value of consideration paid 
for new interests in group companies and the fair value of the Group's share of 
their net identifiable assets at the date of acquisition. Goodwill is 
capitalised and not amortised, but is subject to an annual review for 
impairment. Any impairment is charged to the income statement as it arises and 
impairment losses are not reversed. 
 
 
For the purpose of impairment testing, goodwill acquired in a business 
combination is allocated to each of the Group's cash generating units, or groups 
of cash generating units, that are expected to benefit from the combination. 
 
 
Impairment of non-financial assets 
 
 
Assets that have an indefinite useful life, for example goodwill, are not 
subject to amortisation and are tested annually for impairment. Assets subject 
to amortisation are reviewed for impairment, whenever there is an indication 
that the asset may not be recoverable. When an asset is tested for impairment 
the recoverable amount of the asset is estimated in order to determine the 
extent of any impairment loss. Where the asset does not generate cash flows that 
are independent from other assets, the Group estimates the recoverable amount of 
the cash generating unit to which the asset belongs. 
 
 
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 concerned. 
 
 
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 
(cash-generating unit) is reduced to its recoverable amount. An impairment loss 
is recognised immediately as an expense. 
 
 
An impairment loss is reversed only if there has been a change in the estimate 
used to determine the asset's recoverable amount since the last impairment loss 
was recognised. Where an impairment loss subsequently reverses, the carrying 
amount of the asset (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 as income immediately. 
 
 
2.    Going concern basis of preparation 
The directors have prepared forecasts for the business for the period to June 
2010 on the basis that the cash and cash equivalents held at a bank in Russia, a 
related party referred to in note 23, are available to the Group under the terms 
of the deposit, and have excluded the cash at a financial institution in Russia 
which has been provided against. These forecasts reflect the best estimate the 
directors can make concerning the performance of the underlying business which 
remains cash generative over the year as a whole. 
 
 
In preparing these forecasts, the directors have identified and considered the 
following uncertainties: 
 
 
  *  As a result of the provision of $2,961,000 against cash and cash equivalents 
  referred to in note 13, it is possible some or all of the borrowings and 
  facilities may become immediately repayable as a result of a possible material 
  adverse change in the financial condition of Zirax LLC and the Zirax group. 
 
 
 
  *  It is possible the Group may need to renew or replace existing borrowings after 
  they expire, and the possibility exists that they will not be renewed by the 
  Group's lenders nor that alternative lenders can be found. 
 
 
 
Both of the above factors give rise to a material uncertainty which may cast 
significant doubt upon the ability of the Group to continue as a going concern. 
 
 
Having carefully considered these uncertainties, the directors believe that: 
 
  *   There is a reasonable prospect that the Group's lenders will not seek the 
  immediate repayment of the Group's borrowings and  facilities although no 
  formal confirmation has been received to this effect. 
 
 
 
  *  Based on the Group's underlying financial performance to date and financial 
  performance shown by the Group's forecasts, there is a reasonable expectation 
  that the Group will be able to agree new borrowings and banking facilities when 
  the existing facilities expire. 
 
 
 
As a result of these considerations, the directors have a reasonable expectation 
that the Group can meet it's liabilities as they fall due for the foreseeable 
future. On this basis they believe that it is appropriate to prepare this 
financial information on a going concern basis. This financial information does 
not include any adjustment to the balance sheet intangible or tangible assets, 
the reclassification of long-term liabilities or provision for further 
liabilities that may be required should the going concern basis of accounting 
not be appropriate. 
 
 
3.    Segment information 
Primary reporting format - business segments 
At 31 December 2008, the Group is organised into three main business segments: 
(i) manufacture and sale of Oilfield Process Chemicals, (ii) manufacture and 
sale of De-icing Solutions and (iii) manufacture and sale of Industrial 
Chemicals. 
 
 
The Industrial Chemicals segment comprises sales principally to the paper and 
water treatment industries. These do not constitute separately reportable 
segments. 
 
 
The segment results for the period ended 31 December 2008 are as follows: 
+-------------------------------------+-----------+-----------+------------+---------+ 
|                                     |  Oilfield |  De-icing | Industrial |   Total | 
|                                     |           | Solutions |  Chemicals |   $'000 | 
|                                     |   Process |           |      $'000 |         | 
|                                     | Chemicals |     $'000 |            |         | 
|                                     |           |           |            |         | 
|                                     |     $'000 |           |            |         | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Revenue                             |   25, 263 |     5,533 |      3,127 |  33,923 | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Segment operating profit            |       448 |       420 |        194 |   1,062 | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Central costs                       |           |           |            | (1,882) | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Exceptional impairment of cash and  |           |           |            | (2,961) | 
| cash equivalents                    |           |           |            |         | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Operating loss                      |           |           |            | (3,781) | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Finance costs and net foreign       |           |           |            |   1,503 | 
| exchange                            |           |           |            |         | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Loss before taxation                |           |           |            | (2,278) | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Taxation                            |           |           |            | (1,140) | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Loss for the year                   |           |           |            | (3,418) | 
+-------------------------------------+-----------+-----------+------------+---------+ 
 
 
The segment results for the year ended 31 December 2007 are as follows: 
+-------------------------------------+-----------+-----------+------------+---------+ 
|                                     |  Oilfield |  De-icing | Industrial |   Total | 
|                                     |           | Solutions |  Chemicals |   $'000 | 
|                                     |   Process |           |      $'000 |         | 
|                                     | Chemicals |     $'000 |            |         | 
|                                     |           |           |            |         | 
|                                     |     $'000 |           |            |         | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Revenue                             |    16,040 |    12,374 |      2,251 |  30,665 | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Segment operating profit            |     2,208 |     3,719 |        475 |   6,402 | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Central costs                       |           |           |            | (1,663) | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Operating profit                    |           |           |            |   4,739 | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Finance costs and net foreign       |           |           |            |     558 | 
| exchange                            |           |           |            |         | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Profit before taxation              |           |           |            |   5,297 | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Taxation                            |           |           |            | (1,559) | 
+-------------------------------------+-----------+-----------+------------+---------+ 
| Profit for the year                 |           |           |            |   3,738 | 
+-------------------------------------+-----------+-----------+------------+---------+ 
 
 
The total depreciation and amortisation cost included in the income statements 
for the year ended 31 December 2008 and the year ended 31 December 2007 is as 
follows (note 9 and 10): 
+-------------------------------------+-----------+-----------+------------+-------+ 
|                                     |  Oilfield |  De-icing | Industrial | Total | 
|                                     |           | Solutions |  Chemicals | $'000 | 
|                                     |   Process |           |      $'000 |       | 
|                                     | Chemicals |     $'000 |            |       | 
|                                     |           |           |            |       | 
|                                     |     $'000 |           |            |       | 
+-------------------------------------+-----------+-----------+------------+-------+ 
| Year ended 31 December 2008         |       857 |       232 |        149 | 1,238 | 
+-------------------------------------+-----------+-----------+------------+-------+ 
| Year ended 31 December 2007         |       360 |       305 |         56 |   721 | 
+-------------------------------------+-----------+-----------+------------+-------+ 
 
 
  The segment assets and liabilities as at 31 December 2008 and capital 
expenditure for the period then ended are as follows: 
+-------------------------------------+-----------+-----------+------------+--------+ 
|                                     |  Oilfield |  De-icing | Industrial |  Total | 
|                                     |           | Solutions |  Chemicals |  $'000 | 
|                                     |   Process |           |      $'000 |        | 
|                                     | Chemicals |     $'000 |            |        | 
|                                     |           |           |            |        | 
|                                     |     $'000 |           |            |        | 
+-------------------------------------+-----------+-----------+------------+--------+ 
| Assets                              |    21,076 |     4,978 |      3,016 | 29,070 | 
+-------------------------------------+-----------+-----------+------------+--------+ 
| Liabilities                         |     5,447 |     1,897 |      1,257 |  8,601 | 
+-------------------------------------+-----------+-----------+------------+--------+ 
| Capital expenditure (note 9)        |     1,236 |       320 |        188 |  1,744 | 
+-------------------------------------+-----------+-----------+------------+--------+ 
| Expenditure on intangible assets    |       137 |       622 |        474 |  1,233 | 
| (note 10)                           |           |           |            |        | 
+-------------------------------------+-----------+-----------+------------+--------+ 
 
 
The segment assets and liabilities as at 31 December 2007 are as follows: 
+-------------------------------------+-----------+-----------+------------+--------+ 
|                                     |  Oilfield |  De-icing | Industrial |  Total | 
|                                     |           | Solutions |  Chemicals |  $'000 | 
|                                     |   Process |           |      $'000 |        | 
|                                     | Chemicals |     $'000 |            |        | 
|                                     |           |           |            |        | 
|                                     |     $'000 |           |            |        | 
+-------------------------------------+-----------+-----------+------------+--------+ 
| Assets                              |    20,406 |    14,386 |      5,525 | 40,317 | 
+-------------------------------------+-----------+-----------+------------+--------+ 
| Liabilities                         |     6,692 |     3,042 |        943 | 10,677 | 
+-------------------------------------+-----------+-----------+------------+--------+ 
| Capital expenditure (note 9)        |     1,509 |     1,284 |          - |  2,793 | 
+-------------------------------------+-----------+-----------+------------+--------+ 
| Expenditure on intangible assets    |         - |         - |        232 |    232 | 
| (note 10)                           |           |           |            |        | 
+-------------------------------------+-----------+-----------+------------+--------+ 
 
 
Segment assets consist primarily of property, plant and equipment, inventories, 
receivables and cash. Segment liabilities comprise operating liabilities. 
 
 
Secondary reporting format - geographical segments 
The Group sells its products to customers located in two main geographical 
segments: Russian sales and International sales. They are summarised in the 
table below. Sales in the Russian market are to customers located in the Russian 
Federation, where International sales are to the customers located mainly in 
Africa, Europe and CIS countries. The risks and rewards of selling to Africa, 
Europe and the CIS countries are deemed to be similar and so have been included 
as a single geographical segment. 
 
 
+------------------------------------------------+---------+---------------+--------+ 
|                                                | Russian | International |  Total | 
|                                                |   $'000 |         $'000 |  $'000 | 
+------------------------------------------------+---------+---------------+--------+ 
| Year ended 31 December 2008                    |  24,115 |         9,808 | 33,923 | 
+------------------------------------------------+---------+---------------+--------+ 
| Year ended 31 December 2007                    |  24,887 |         5,778 | 30,665 | 
+------------------------------------------------+---------+---------------+--------+ 
 
 
Revenues are allocated based on the country in which the customer is located. 
Assets and capital expenditure are primarily located or incurred in the Russian 
Federation. 
 
 
4.    Operating Loss/profit 
+----------------------------------------------------------+-------+-------+ 
|                                                          |  2008 |  2007 | 
|                                                          | $'000 | $'000 | 
+----------------------------------------------------------+-------+-------+ 
| Operating loss/profit is stated after charging:          |       |       | 
+----------------------------------------------------------+-------+-------+ 
| Depreciation and amortisation                            | 1,238 |   721 | 
+----------------------------------------------------------+-------+-------+ 
| Disclosure of Auditors' remuneration                     |       |       | 
+----------------------------------------------------------+-------+-------+ 
| Fees payable to the Company's auditors for the audit of  |   160 |   144 | 
| parent company and consolidated financial statements     |       |       | 
+----------------------------------------------------------+-------+-------+ 
| Fees payable to the Company's auditors and its           |       |       | 
| associates for other services:                           |       |       | 
+----------------------------------------------------------+-------+-------+ 
| Audit of the Company's subsidiaries pursuant to          |    74 |    55 | 
| legislation                                              |       |       | 
+----------------------------------------------------------+-------+-------+ 
|     Other services pursuant to legislation (i)           |   116 |   103 | 
+----------------------------------------------------------+-------+-------+ 
|     Tax services (ii)                                    |   156 |    64 | 
+----------------------------------------------------------+-------+-------+ 
|     Other services (iii)                                 |    80 |    13 | 
+----------------------------------------------------------+-------+-------+ 
| Total audit and non-audit fees                           |   586 |   379 | 
+----------------------------------------------------------+-------+-------+ 
 
 
(i) Other services pursuant to legislation include fees in respect of the 
interim review. (ii) Tax services include fees in respect of tax compliance and 
tax advice. (iii) Other services include legal advisory services and due 
diligence services. 
 
 
  5.    Staff information (including directors) 
+---------------------------------------------------------+-------+-------+-------+-------+ 
|                                                         |    Group      |    Company    | 
+---------------------------------------------------------+---------------+---------------+ 
|                                                         |  2008 |  2007 |  2008 |  2007 | 
|                                                         | $'000 | $'000 | $'000 | $'000 | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
| Employee costs were:                                    |       |       |       |       | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
| Wages and salaries                                      | 4,893 | 3,696 |   701 |   560 | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
| Social security costs                                   |   781 |   586 |    64 |    50 | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
| Pension costs                                           |    45 |    41 |    45 |    41 | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
| Share option costs                                      |    97 |   122 |    97 |   122 | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
|                                                         | 5,816 | 4,445 |   907 |   773 | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
 
 
The Group does not operate any pension schemes. Pension costs represent 
contributions paid to directors' personal pension schemes. 
 
 
The average number of employees (including directors) is as follows: 
+---------------------------------------------------------+--------+--------+--------+--------+ 
|                                                         |      Group      |    Company      | 
+---------------------------------------------------------+-----------------+-----------------+ 
|                                                         |   2008 |   2007 |   2008 |   2007 | 
|                                                         | Number | Number | Number | Number | 
+---------------------------------------------------------+--------+--------+--------+--------+ 
| Production                                              |    171 |    158 |      - |      - | 
+---------------------------------------------------------+--------+--------+--------+--------+ 
| Administrative                                          |     64 |     50 |      6 |      6 | 
+---------------------------------------------------------+--------+--------+--------+--------+ 
| Total                                                   |    235 |    208 |      6 |      6 | 
+---------------------------------------------------------+--------+--------+--------+--------+ 
 
 
6.    Directors' remuneration 
+-----------------------------------------------------------------------+-------+-------+ 
|                                                                       |  2008 |  2007 | 
|                                                                       | $'000 | $'000 | 
+-----------------------------------------------------------------------+-------+-------+ 
| Salaries and benefits                                                 |   976 |   744 | 
+-----------------------------------------------------------------------+-------+-------+ 
| Pension costs                                                         |    45 |    41 | 
+-----------------------------------------------------------------------+-------+-------+ 
| Termination benefits                                                  |   177 |     - | 
+-----------------------------------------------------------------------+-------+-------+ 
| Share option costs                                                    |    97 |   122 | 
+-----------------------------------------------------------------------+-------+-------+ 
|                                                                       | 1,295 |   907 | 
+-----------------------------------------------------------------------+-------+-------+ 
 
 
The remuneration of the highest paid director was $411,773: (2007: $300,000). 
 
 
Remuneration paid to key management personnel for their services is made up of a 
contractual salary and a performance bonus depending on operating results. 
Discretionary bonuses may also be payable to directors, which are approved by 
the shareholders' meeting, provided the Group has statutory profit for the year. 
There is no long-term compensation plan. Key management personnel includes only 
the directors. 
 
 
Termination benefits of $177,000 (2007: nil) were paid to Valery Andosov who 
resigned as a director on 29 September 2008. 
 
 
The following tables show the beneficial interests of the directors who held 
office at the end of the year in the ordinary shares of the Company and the 
interests of directors in share options: 
+------------------------------------------+--------------+--------------+--------------+ 
|                                          |  Shares held |    Additions |  Shares held | 
|                                          |           at |              |           at | 
|                                          |   1 January  |              |  31 December | 
|                                          |         2008 |              |         2008 | 
+------------------------------------------+--------------+--------------+--------------+ 
| Directors - shares:                      |              |              |              | 
+------------------------------------------+--------------+--------------+--------------+ 
| Sir Michael Oliver                       |            - |            - |            - | 
+------------------------------------------+--------------+--------------+--------------+ 
| Mr. Mikhail Baranov (a)                  |   66,979,166 |            - |   66,979,166 | 
+------------------------------------------+--------------+--------------+--------------+ 
| Mr. Fenlon Dunphy                        |            - |       50,000 |       50,000 | 
+------------------------------------------+--------------+--------------+--------------+ 
| Mr. Mikhail Petrushin (b)                |       67,340 |            - |       67,340 | 
+------------------------------------------+--------------+--------------+--------------+ 
| Mr. David Wood                           |            - |            - |            - | 
+------------------------------------------+--------------+--------------+--------------+ 
 
 
  *  Mr. Baranov's shares are held indirectly through Erith Group Limited, in which 
  he is a 50% shareholder and through 000 Yugo-Vostok Promkapital, in which he is 
  a 33.3% shareholder. The number of shares shown in the table above represent the 
  deemed interests of Mr Baranov. 
  *  Mr. Petrushin's shares are held indirectly through a close family member. 
 
 
 
 
+----------------------+----------+-----------+----------+-----------+----------------+ 
|                      | Exercise |  Options  |  Options |  Options  |        Nominal | 
|                      |          |   held at |  granted |   held at | exercise dates | 
|                      |    Price |         1 |  during  |        31 |                | 
|                      |    (GBP) |   January | the year |  December |                | 
|                      |          |      2008 |          |      2008 |                | 
+----------------------+----------+-----------+----------+-----------+----------------+ 
| Directors - options: |          |           |          |           |                | 
+----------------------+----------+-----------+----------+-----------+----------------+ 
| Mr. Mikhail          |     0.15 |   861,607 |        - |   861,607 |     05.06.07 - | 
| Petrushin            |          |           |          |           |       12.12.10 | 
+----------------------+----------+-----------+----------+-----------+----------------+ 
| Sir Michael Oliver   |     0.15 | 1,723,214 |        - | 1,723,214 |     02.04.08 - | 
|                      |          |           |          |           |       02.10.11 | 
+----------------------+----------+-----------+----------+-----------+----------------+ 
| Mr. David Wood       |     0.15 |   861,607 |        - |   861,607 |     02.04.08 - | 
|                      |          |           |          |           |       02.10.11 | 
+----------------------+----------+-----------+----------+-----------+----------------+ 
| Mr. Fenlon Dunphy    |     0.15 | 1,723,214 |        - | 1,723,214 |     27.06.08 - | 
|                      |          |           |          |           |       27.12.11 | 
+----------------------+----------+-----------+----------+-----------+----------------+ 
 
 
Options were issued under an employee share scheme approved by the Board of the 
Company on 12 December 2005 and will not be exercisable until 18 months from the 
date of grant of the option. No directors exercised any share options during the 
year. 
 
 
7.    Taxation 
+-----------------------------------------------------------------------+---------+---------+ 
|                                                                       |    2008 |    2007 | 
|                                                                       |   $'000 |   $'000 | 
+-----------------------------------------------------------------------+---------+---------+ 
| Taxation expense for the year:                                        |         |         | 
|                                                                       |         |         | 
+-----------------------------------------------------------------------+---------+---------+ 
| Current income tax expense                                            |   (984) | (1,737) | 
+-----------------------------------------------------------------------+---------+---------+ 
| Deferred tax                                                          |   (156) |     178 | 
+-----------------------------------------------------------------------+---------+---------+ 
| Taxation charge                                                       | (1,140) | (1,559) | 
+-----------------------------------------------------------------------+---------+---------+ 
 
 
The taxation charge for the year is higher (2007: higher) than the standard rate 
of corporation tax in the UK 28.5% (2007: 30%). The differences are explained 
below. 
+-----------------------------------------------------------------------+---------+---------+ 
|                                                                       |    2008 |    2007 | 
|                                                                       |   $'000 |   $'000 | 
+-----------------------------------------------------------------------+---------+---------+ 
| (Loss)/profit before taxation                                         | (2,278) |   5,297 | 
+-----------------------------------------------------------------------+---------+---------+ 
| Profit on ordinary activities multiplied by standard rate of          |     649 | (1,589) | 
| corporation tax of 28.5% (2007: 30%)                                  |         |         | 
+-----------------------------------------------------------------------+---------+---------+ 
| Effects of:                                                           |         |         | 
+-----------------------------------------------------------------------+---------+---------+ 
| Deferred tax credit recognised on tax losses                          |       - |   (149) | 
+-----------------------------------------------------------------------+---------+---------+ 
| Adjustment in respect of foreign taxation rates                       |     167 |     434 | 
+-----------------------------------------------------------------------+---------+---------+ 
| Non-deductible expenses and non-taxable income                        | (1,098) |   (248) | 
+-----------------------------------------------------------------------+---------+---------+ 
| Unrecognised deferred tax asset on unrelieved taxation losses carried |   (674) |   (148) | 
| forward                                                               |         |         | 
+-----------------------------------------------------------------------+---------+---------+ 
| Other differences                                                     |    (28) |    (37) | 
+-----------------------------------------------------------------------+---------+---------+ 
| Taxation                                                              |   (984) | (1,737) | 
+-----------------------------------------------------------------------+---------+---------+ 
 
 
The standard rate of corporation tax in the UK was reduced to 28% with effect 
from April 2008. 
 
 
Deferred taxation 
In 2008, the Russian subsidiary's taxable profit was subject to taxation at 24%. 
Deferred taxation assets/liabilities of the Russian subsidiary are calculated at 
20% as at 31 December 2008 (2007: 24%). The net effect of the change in deferred 
taxation balances at the balance sheet dates is reflected in the income 
statement for the periods then ended. 
 
 
Deferred taxation assets and liabilities are only offset where there is a 
legally enforceable right of offset and there is an intention to settle the 
balances net. 
 
 
Taxation effect of deductible and taxable temporary differences: 
 
 
+----------------------------------------------------------------+--------------+--------------+--------------+ 
|                                                                | 31 December  |  Differences |  31 December | 
|                                                                |         2007 |  recognition |         2008 | 
|                                                                |        $'000 |          and |        $'000 | 
|                                                                |              |    reversals |              | 
|                                                                |              |        $'000 |              | 
+----------------------------------------------------------------+--------------+--------------+--------------+ 
| Property, plant and equipment                                  |         (34) |         (30) |         (64) | 
+----------------------------------------------------------------+--------------+--------------+--------------+ 
| Inventory                                                      |         (23) |           55 |           32 | 
+----------------------------------------------------------------+--------------+--------------+--------------+ 
| Accrued expenses                                               |           79 |            - |           79 | 
+----------------------------------------------------------------+--------------+--------------+--------------+ 
| Trade and other receivables                                    |            - |          (1) |          (1) | 
+----------------------------------------------------------------+--------------+--------------+--------------+ 
| Losses                                                         |          180 |        (180) |            - | 
+----------------------------------------------------------------+--------------+--------------+--------------+ 
| Total net deferred taxation                                    |          202 |        (156) |           46 | 
+----------------------------------------------------------------+--------------+--------------+--------------+ 
 
 
  8.    Earnings per share (EPS) 
Basic earnings per share 
+----------------------------------------------------------+---------+---------+ 
|                                                          |    2008 |    2007 | 
+----------------------------------------------------------+---------+---------+ 
| (Loss)/profit for the year ($'000)                       | (3,418) |   3,738 | 
+----------------------------------------------------------+---------+---------+ 
| Weighted average number of shares in issue ('000)        | 172,321 | 172,321 | 
+----------------------------------------------------------+---------+---------+ 
| Basic earnings per share (cents)                         |  (1.98) |    2.17 | 
+----------------------------------------------------------+---------+---------+ 
 
 
Diluted earnings per share 
As at 31 December 2008 the Company had no potentially dilutive financial 
instruments, options or contingent share obligations. As a result, there is no 
difference between basic EPS and diluted EPS. 
 
 
Basic earnings per share before exceptional items 
+----------------------------------------------------------+---------+---------+ 
|                                                          |    2008 |    2007 | 
|                                                          |         |         | 
+----------------------------------------------------------+---------+---------+ 
| (Loss)/profit for the year ($'000)                       | (3,418) |   3,738 | 
+----------------------------------------------------------+---------+---------+ 
| Add back exceptional impairment of cash and cash         |   2,961 |       - | 
| equivalents ($'000)                                      |         |         | 
+----------------------------------------------------------+---------+---------+ 
| (Loss)/profit for the year before exceptional items      |   (457) |   3,738 | 
| ($'000)                                                  |         |         | 
+----------------------------------------------------------+---------+---------+ 
| Weighted average number of shares in issue ('000)        | 172,321 | 172,321 | 
+----------------------------------------------------------+---------+---------+ 
| Basic earnings per share before exceptional items        |  (0.27) |    2.17 | 
| (cents)                                                  |         |         | 
+----------------------------------------------------------+---------+---------+ 
 
 
9.    Property, plant and equipment 
Group 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
|                           | Buildings | Vehicles |     Plant |       Assets |   Total  | 
|                           |           |          |       and |        under |    $'000 | 
|                           |     $'000 |    $'000 | equipment | construction |          | 
|                           |           |          |           |              |          | 
|                           |           |          |     $'000 |        $'000 |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Cost:                     |           |          |           |              |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Balance at 1 January 2008 |     4,514 |      129 |     6,622 |        1,860 |   13,125 | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Acquisitions (note 22)    |         - |       10 |       900 |            5 |      915 | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Additions                 |         - |       88 |       108 |        1,548 |    1,744 | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Disposals                 |         - |      (8) |      (30) |            - |     (38) | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Transfers                 |       155 |        - |     1,519 |      (1,674) |        - | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Translation difference    |     (767) |     (33) |   (1,357) |        (286) |  (2,443) | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Balance at 31 December    |     3,902 |      186 |     7,762 |        1,453 |   13,303 | 
| 2008                      |           |          |           |              |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Accumulated depreciation: |           |          |           |              |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Balance at 1 January 2008 |       391 |       37 |     1,790 |            - |    2,218 | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Depreciation charge       |       161 |      136 |       914 |            - |    1,211 | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Disposals                 |         - |      (8) |      (21) |            - |     (29) | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Translation difference    |      (88) |     (26) |     (423) |            - |    (537) | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Balance at 31 December    |       464 |      139 |     2,260 |            - |    2,863 | 
| 2008                      |           |          |           |              |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Net book value:           |           |          |           |              |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Balance at 31 December    |     3,438 |       47 |     5,502 |        1,453 |   10,440 | 
| 2008                      |           |          |           |              |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Balance at 31 December    |     4,123 |       92 |     4,832 |        1,860 |   10,907 | 
| 2007                      |           |          |           |              |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
 
 
 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
|                           | Buildings | Vehicles |     Plant |       Assets |   Total  | 
|                           |           |          |       and |        under |    $'000 | 
|                           |     $'000 |    $'000 | equipment | construction |          | 
|                           |           |          |           |              |          | 
|                           |           |          |     $'000 |        $'000 |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Cost:                     |           |          |           |              |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Balance at 1 January 2007 |     4,148 |       98 |     3,485 |        1,924 |    9,655 | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Additions                 |         - |       49 |         - |        2,744 |    2,793 | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Disposals                 |         - |     (25) |         - |            - |     (25) | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Transfers                 |        64 |        - |     2,884 |      (2,948) |        - | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Translation difference    |       302 |        7 |       253 |          140 |      702 | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Balance at 31 December    |     4,514 |      129 |     6,622 |        1,860 |   13,125 | 
| 2007                      |           |          |           |              |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Accumulated depreciation: |           |          |           |              |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Balance at 1 January 2007 |       238 |       16 |     1,126 |            - |    1,380 | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Depreciation charge       |       130 |       25 |       559 |            - |      714 | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Disposals                 |         - |      (6) |         - |            - |      (6) | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Translation difference    |        23 |        2 |       105 |            - |      130 | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Balance at 31 December    |       391 |       37 |     1,790 |            - |    2,218 | 
| 2007                      |           |          |           |              |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Net book value:           |           |          |           |              |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Balance at 31 December    |     4,123 |       92 |     4,832 |        1,860 |   10,907 | 
| 2007                      |           |          |           |              |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
| Balance at 31 December    |     3,910 |       82 |     2,359 |        1,924 |    8,275 | 
| 2006                      |           |          |           |              |          | 
+---------------------------+-----------+----------+-----------+--------------+----------+ 
 
 
Property, plant and equipment pledged as security for borrowings amounted to 
$2,583,000 (2007: nil). 
 
 
Company 
+----------------------------------------------------------+-----------+-------+ 
|                                                          |     Plant | Total | 
|                                                          |       and | $'000 | 
|                                                          | equipment |       | 
|                                                          |     $'000 |       | 
+----------------------------------------------------------+-----------+-------+ 
| Cost:                                                    |           |       | 
+----------------------------------------------------------+-----------+-------+ 
| Balance at 1 January 2008                                |         3 |     3 | 
+----------------------------------------------------------+-----------+-------+ 
| Additions                                                |         - |     - | 
+----------------------------------------------------------+-----------+-------+ 
| Balance at 31 December 2008                              |         3 |     3 | 
+----------------------------------------------------------+-----------+-------+ 
| Accumulated depreciation:                                |           |       | 
+----------------------------------------------------------+-----------+-------+ 
| Balance at 1 January 2008                                |         1 |     1 | 
+----------------------------------------------------------+-----------+-------+ 
| Depreciation charge                                      |         1 |     1 | 
+----------------------------------------------------------+-----------+-------+ 
| Balance at 31 December 2008                              |         2 |     2 | 
+----------------------------------------------------------+-----------+-------+ 
| Net book value:                                          |           |       | 
+----------------------------------------------------------+-----------+-------+ 
| Balance at 31 December 2008                              |         1 |     1 | 
+----------------------------------------------------------+-----------+-------+ 
| Balance at 31 December 2007                              |         2 |     2 | 
+----------------------------------------------------------+-----------+-------+ 
 
 
+----------------------------------------------------------+-----------+-------+ 
|                                                          |     Plant | Total | 
|                                                          |       and | $'000 | 
|                                                          | equipment |       | 
|                                                          |     $'000 |       | 
+----------------------------------------------------------+-----------+-------+ 
| Cost:                                                    |           |       | 
+----------------------------------------------------------+-----------+-------+ 
| Balance at 1 January 2007                                |         3 |     3 | 
+----------------------------------------------------------+-----------+-------+ 
| Additions                                                |         - |     - | 
+----------------------------------------------------------+-----------+-------+ 
| Balance at 31 December 2007                              |         3 |     3 | 
+----------------------------------------------------------+-----------+-------+ 
| Accumulated depreciation:                                |           |       | 
+----------------------------------------------------------+-----------+-------+ 
| Balance at 1 January 2007                                |         1 |     1 | 
+----------------------------------------------------------+-----------+-------+ 
| Depreciation charge                                      |         - |     - | 
+----------------------------------------------------------+-----------+-------+ 
| Balance at 31 December 2007                              |         1 |     1 | 
+----------------------------------------------------------+-----------+-------+ 
| Net book value:                                          |           |       | 
+----------------------------------------------------------+-----------+-------+ 
| Balance at 31 December 2007                              |         2 |     2 | 
+----------------------------------------------------------+-----------+-------+ 
| Balance at 31 December 2006                              |         2 |     2 | 
+----------------------------------------------------------+-----------+-------+ 
 
 
  10.    Intangible assets 
Group 
+-------------------------------------+---------+------------+----------+-------+ 
|                                     | Patents | Trademarks | Goodwill | Total | 
|                                     |   $'000 |      $'000 |          | $'000 | 
|                                     |         |            |    $'000 |       | 
|                                     |         |            |    (note |       | 
|                                     |         |            |      22) |       | 
+-------------------------------------+---------+------------+----------+-------+ 
| Cost:                               |         |            |          |       | 
+-------------------------------------+---------+------------+----------+-------+ 
| 1 January 2008                      |     208 |         24 |        - |   232 | 
+-------------------------------------+---------+------------+----------+-------+ 
| Additions                           |     180 |          - |    1,053 | 1,233 | 
+-------------------------------------+---------+------------+----------+-------+ 
| Translation difference              |    (62) |        (4) |     (43) | (109) | 
+-------------------------------------+---------+------------+----------+-------+ 
| Balance at 31 December 2008         |     326 |         20 |    1,010 | 1,356 | 
+-------------------------------------+---------+------------+----------+-------+ 
| Accumulated amortisation:           |         |            |          |       | 
+-------------------------------------+---------+------------+----------+-------+ 
| 1 January 2008                      |       5 |          2 |        - |     7 | 
+-------------------------------------+---------+------------+----------+-------+ 
| Amortisation charge                 |      24 |          3 |        - |    27 | 
+-------------------------------------+---------+------------+----------+-------+ 
| Translation difference              |     (4) |        (1) |        - |   (5) | 
+-------------------------------------+---------+------------+----------+-------+ 
| Balance at 31 December 2008         |      25 |          4 |        - |    29 | 
+-------------------------------------+---------+------------+----------+-------+ 
| Net book value:                     |         |            |          |       | 
+-------------------------------------+---------+------------+----------+-------+ 
| At 31 December 2008                 |     301 |         16 |    1,010 | 1,327 | 
+-------------------------------------+---------+------------+----------+-------+ 
| At 31 December 2007                 |     203 |         22 |        - |   225 | 
+-------------------------------------+---------+------------+----------+-------+ 
 
 
+------------------------------------------------+---------+------------+----------+---------+ 
|                                                | Patents | Trademarks | Goodwill |   Total | 
|                                                |   $'000 |      $'000 |          |   $'000 | 
|                                                |         |            |    $'000 |         | 
+------------------------------------------------+---------+------------+----------+---------+ 
| Cost:                                          |         |            |          |         | 
+------------------------------------------------+---------+------------+----------+---------+ 
| 1 January 2007                                 |       - |          - |        - |       - | 
+------------------------------------------------+---------+------------+----------+---------+ 
| Additions                                      |     208 |         24 |        - |     232 | 
+------------------------------------------------+---------+------------+----------+---------+ 
| Balance at 31 December 2007                    |     208 |         24 |        - |     232 | 
+------------------------------------------------+---------+------------+----------+---------+ 
| Accumulated amortisation:                      |         |            |          |         | 
+------------------------------------------------+---------+------------+----------+---------+ 
| 1 January 2007                                 |       - |          - |        - |       - | 
+------------------------------------------------+---------+------------+----------+---------+ 
| Amortisation charge                            |       5 |          2 |        - |       7 | 
+------------------------------------------------+---------+------------+----------+---------+ 
| Balance at 31 December 2007                    |       5 |          2 |        - |       7 | 
+------------------------------------------------+---------+------------+----------+---------+ 
| Net book value:                                |         |            |        - |         | 
+------------------------------------------------+---------+------------+----------+---------+ 
| At 31 December 2007                            |     203 |         22 |        - |     225 | 
+------------------------------------------------+---------+------------+----------+---------+ 
| At 31 December 2006                            |       - |          - |        - |       - | 
+------------------------------------------------+---------+------------+----------+---------+ 
 
 
Impairment testing of goodwill 
Goodwill acquired through business combinations has to be allocated for 
impairment testing purposes to individual cash-generating units ('CGU's') each 
representing the lowest level within the Group at which the goodwill is 
monitored for internal management purposes. CGUs in the Group correspond to 
operations in a particular country and the Goodwill has been allocated to the 
Austrian CGU. 
 
 
The impairment test involves determining the recoverable amount of the CGU and 
value in use calculations have been used to do this. Value in use is the present 
value of the future cash flows which are expected to be generated by the CGU. 
Future cash flows are based on business plans for a period of 5 years which 
reflect management's expectation based on past experience, adjusted to reflect 
market trends, economic conditions and key risks as appropriate. Cash flows 
beyond 5 years are extrapolated using an estimated terminal growth rate of 1% 
which does not exceed the average long term growth rate of the market in which 
the CGU operates. 
 
 
A pre-tax discount rate of 10.7% has been applied to cash flow projections, 
based on market data and reflecting the risk profile of the CGU. No impairment 
loss was recognised during the year and reasonably possible changes in the key 
assumptions listed above would not cause the recoverable amount of the CGU to 
fall below the carrying amount. 
 
 
11.    Inventories 
+--------------------------------------------------------------------+-------+-------+ 
|                                                                    |    Group      | 
+--------------------------------------------------------------------+---------------+ 
|                                                                    |  2008 |  2007 | 
|                                                                    | $'000 | $'000 | 
+--------------------------------------------------------------------+-------+-------+ 
| Materials and consumables                                          | 1,923 | 1,750 | 
+--------------------------------------------------------------------+-------+-------+ 
| Work in progress                                                   |   168 |   253 | 
+--------------------------------------------------------------------+-------+-------+ 
| Finished products                                                  | 2,050 | 1,196 | 
+--------------------------------------------------------------------+-------+-------+ 
|                                                                    | 4,141 | 3,199 | 
+--------------------------------------------------------------------+-------+-------+ 
 
 
The cost of inventories recognised as an expense in the year and included in 
costs of sales in the income statement amounted to $18,668,000 (2007: 
$14,628,000). This includes $247,300 (2007: nil) for inventory written down to 
net realisable value, now carried at $316,000. 
12.    Trade and other receivables 
+------------------------------------------------+---------+---------+---------+---------+ 
|                                                |      Group        |      Company      | 
+------------------------------------------------+-------------------+-------------------+ 
|                                                |    2008 |    2007 |    2008 |    2007 | 
|                                                |   $'000 |   $'000 |   $'000 |   $'000 | 
+------------------------------------------------+---------+---------+---------+---------+ 
| Trade receivables                              |   4,245 |   9,279 |       - |       - | 
+------------------------------------------------+---------+---------+---------+---------+ 
| Amounts owed by group undertakings             |       - |       - |   5,042 |   8,896 | 
+------------------------------------------------+---------+---------+---------+---------+ 
| Receivables from related parties (note 23)     |      31 |     449 |       - |       - | 
+------------------------------------------------+---------+---------+---------+---------+ 
| VAT recoverable                                |     629 |   1,107 |      30 |      41 | 
+------------------------------------------------+---------+---------+---------+---------+ 
| Other receivables                              |     727 |     689 |     107 |      42 | 
+------------------------------------------------+---------+---------+---------+---------+ 
| Advance payments (note 27)                     |   3,117 |   6,104 |   3,117 |   3,161 | 
+------------------------------------------------+---------+---------+---------+---------+ 
|                                                |   8,749 |  17,628 |   8,296 |  12,140 | 
+------------------------------------------------+---------+---------+---------+---------+ 
| Less Non-current portion:                      |         |         |         |         | 
+------------------------------------------------+---------+---------+---------+---------+ 
| Advance payments (note 27)                     | (3,117) | (6,104) | (3,117) | (3,161) | 
+------------------------------------------------+---------+---------+---------+---------+ 
| Current portion                                |   5,632 |  11,524 |   5,179 |   8,979 | 
+------------------------------------------------+---------+---------+---------+---------+ 
 
 
Trade receivables are denominated in Russian Roubles, except for $411,325 and 
$463,449 denominated in USD and EURO, as at 31 December 2008 respectively and 
$161,000 denominated in USD as at 31 December 2007. 
 
 
As of 31 December 2008, trade receivables of $3,632,000 (2007: $9,086,000) were 
fully performing. Trade receivables of $613,000 (2007: $193,000) were 
outstanding for more than 60 days, but not impaired. None of the financial 
assets that were fully performing have been renegotiated in the year. 
 
 
Trade receivables are considered on a case by case basis for possible impairment 
with reference to historical information about default rates. Where there are 
particular concerns about certain customers the business seeks to obtain advance 
payment before product delivery. Trade receivables due for more than 360 days 
with no guarantee available from the client are impaired. As of 31 December 2008 
trade receivables of $83,000 were impaired (2007: nil). 
 
 
13.    Cash and cash equivalents 
+--------------------------------------------------------+-------+-------+-------+-------+ 
|                                                        |    Group      |    Company    | 
+--------------------------------------------------------+---------------+---------------+ 
|                                                        |  2008 |  2007 |  2008 |  2007 | 
|                                                        | $'000 | $'000 | $'000 | $'000 | 
+--------------------------------------------------------+-------+-------+-------+-------+ 
| RR denominated cash and cash equivalents               | 4,063 | 7,888 |     - |     - | 
+--------------------------------------------------------+-------+-------+-------+-------+ 
| Other currency balances with banks                     |   304 |   268 |   250 |    13 | 
+--------------------------------------------------------+-------+-------+-------+-------+ 
|                                                        | 4,367 | 8,156 |   250 |    13 | 
+--------------------------------------------------------+-------+-------+-------+-------+ 
 
 
+-----------------------------------------------------------------------+-------+-------+ 
|                                                                       |    Group      | 
+-----------------------------------------------------------------------+---------------+ 
|                                                                       |  2008 |  2007 | 
|                                                                       | $'000 | $'000 | 
+-----------------------------------------------------------------------+-------+-------+ 
| Cash at bank and on hand                                              |   827 | 3,919 | 
+-----------------------------------------------------------------------+-------+-------+ 
| Short-term bank deposits                                              | 3,540 | 4,237 | 
+-----------------------------------------------------------------------+-------+-------+ 
|                                                                       | 4,367 | 8,156 | 
+-----------------------------------------------------------------------+-------+-------+ 
 
 
A provision of $2,961,000 has been taken against cash balances held at a 
financial institution where access to the cash has been restricted. No formal 
reason has been given to the company as to why the amount is not being repaid, 
however management believe that it is due to the impact of the deteriorating 
economic situation in Russia and the liquidity problems facing the Russian 
banking system on the financial institution in which the cash balance is held. 
 
 
Cash and bank overdrafts include the following for the purposes of the cash flow 
statement: 
+------------------------------------------------------+-------+-------+-------+-------+ 
|                                                      |    Group      |    Company    | 
+------------------------------------------------------+---------------+---------------+ 
|                                                      | 2008  | 2007  | 2008  | 2007  | 
|                                                      | $'000 | $'000 | $'000 | $'000 | 
+------------------------------------------------------+-------+-------+-------+-------+ 
| Cash and cash equivalents                            | 4,367 | 8,156 |   250 |    13 | 
+------------------------------------------------------+-------+-------+-------+-------+ 
| Bank overdrafts (note 14)                            | (664) |   (2) |     - |     - | 
+------------------------------------------------------+-------+-------+-------+-------+ 
|                                                      | 3,703 | 8,154 |   250 |    13 | 
+------------------------------------------------------+-------+-------+-------+-------+ 
 
 
  14.    Borrowings 
+--------------------------------------------------------------------+-------+-------+ 
|                                                                    |    Group      | 
+--------------------------------------------------------------------+---------------+ 
|                                                                    | 2008  | 2007  | 
|                                                                    | $'000 | $'000 | 
+--------------------------------------------------------------------+-------+-------+ 
| Short-term borrowings:                                             |       |       | 
+--------------------------------------------------------------------+-------+-------+ 
| Bank overdrafts (note 13)                                          |   664 |     2 | 
+--------------------------------------------------------------------+-------+-------+ 
| Bank borrowings                                                    | 2,898 | 4,151 | 
+--------------------------------------------------------------------+-------+-------+ 
|                                                                    | 3,562 | 4,153 | 
+--------------------------------------------------------------------+-------+-------+ 
| Long-term borrowings:                                              |       |       | 
+--------------------------------------------------------------------+-------+-------+ 
| Bank borrowings                                                    |   692 |     - | 
+--------------------------------------------------------------------+-------+-------+ 
|                                                                    |   692 |     - | 
+--------------------------------------------------------------------+-------+-------+ 
 
 
The interest rates at the balance sheet date were as follows: 
+----------------------------+----------+--------------+----------+----------+--------------+----------+ 
|                            |                2008                |                2007                | 
+----------------------------+------------------------------------+------------------------------------+ 
|                            |     Rate |     Currency |   Amount |     Rate |     Currency |   Amount | 
|                            |          |              |    $'000 |          |              |    $'000 | 
+----------------------------+----------+--------------+----------+----------+--------------+----------+ 
| Bank overdrafts            |     5.9% |        Euros |      664 |     8.7% |      Russian |        2 | 
|                            |          |              |          |          |      Roubles |          | 
+----------------------------+----------+--------------+----------+----------+--------------+----------+ 
| Short-term bank borrowings |    25.5% |      Russian |    2,050 |    10.5% |      Russian |    1,161 | 
|                            |          |      Roubles |          |          |      Roubles |          | 
+----------------------------+----------+--------------+----------+----------+--------------+----------+ 
| Short-term bank borrowings |     7.5% |        Euros |      848 |    12.7% |      Russian |      546 | 
|                            |          |              |          |          |      Roubles |          | 
+----------------------------+----------+--------------+----------+----------+--------------+----------+ 
| Short-term bank borrowings |        - |            - |        - |    15.0% |      Russian |    2,444 | 
|                            |          |              |          |          |      Roubles |          | 
+----------------------------+----------+--------------+----------+----------+--------------+----------+ 
| Long-term bank borrowings  |     5.6% |        Euros |      241 |        - |            - |        - | 
+----------------------------+----------+--------------+----------+----------+--------------+----------+ 
| Long-term bank borrowings  |     4.9% |        Euros |      451 |        - |            - |        - | 
+----------------------------+----------+--------------+----------+----------+--------------+----------+ 
|                            |          |              |    4,254 |          |              |    4,153 | 
+----------------------------+----------+--------------+----------+----------+--------------+----------+ 
 
 
Borrowings are secured with fixed or floating charges over the Group's assets. 
In 2007 no borrowings were secured. 
 
 
The maturity profile of borrowings and their key terms are disclosed in note 25. 
 
 
15.    Trade and other payables 
+---------------------------------------------------------+-------+-------+-------+-------+ 
|                                                         |    Group      |    Company    | 
+---------------------------------------------------------+---------------+---------------+ 
|                                                         | 2008  | 2007  | 2008  | 2007  | 
|                                                         | $'000 | $'000 | $'000 | $'000 | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
| Trade payables                                          | 2,283 | 1,285 |   185 |   139 | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
| Amounts due to related parties (note 23)                |   788 |   673 |     - |     - | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
| Other payables and accruals                             | 1,054 | 3,675 |   315 |   234 | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
|                                                         | 4,125 | 5,633 |   500 |   373 | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
 
 
16.    Current tax liabilities 
+---------------------------------------------------------+-------+-------+-------+-------+ 
|                                                         |    Group      |    Company    | 
+---------------------------------------------------------+---------------+---------------+ 
|                                                         | 2008  | 2007  | 2008  | 2007  | 
|                                                         | $'000 | $'000 | $'000 | $'000 | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
| Income tax                                              |     - |   714 |     - |     - | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
| VAT payable                                             |     5 |    15 |     - |     - | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
| Property and other taxes                                |   217 |   162 |    30 |    17 | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
|                                                         |   222 |   891 |    30 |    17 | 
+---------------------------------------------------------+-------+-------+-------+-------+ 
 
 
Value added tax of $5,000 as at 31 December 2008 (2007: $15,000) is payable to 
tax authorities when payments are received from customers or if relevant 
receivable balances are written off. 
 
 
17.    Share capital 
Group and Company 
+-----------------------------------------------------------------------+-------+-------+ 
|                                                                       | 2008  | 2007  | 
|                                                                       | $'000 | $'000 | 
+-----------------------------------------------------------------------+-------+-------+ 
| Authorised:                                                           |       |       | 
+-----------------------------------------------------------------------+-------+-------+ 
| 500,000,000 ordinary shares of 1p each                                | 8,602 | 8,602 | 
+-----------------------------------------------------------------------+-------+-------+ 
| Issued and fully paid:                                                |       |       | 
+-----------------------------------------------------------------------+-------+-------+ 
| 172,321,429 ordinary shares of 1p each                                | 2,965 | 2,965 | 
+-----------------------------------------------------------------------+-------+-------+ 
 
 
Potential issues of ordinary shares 
On 12 December 2005, Zirax plc entered into an option agreement with the 
directors and Hanson Westhouse LLP, the nominated adviser pursuant to which 
Zirax plc granted options to Hanson Westhouse LLP to subscribe for up to 
1,723,214 ordinary shares at the placing price of 15 pence. The option may be 
exercised at any time during the period of 5 years from admission to AIM 
provided that they may not be exercised in more than 4 tranches. The cost of 
Hanson Westhouse's options have been treated as issue costs and deducted from 
share premium, with a corresponding credit to other reserves. 
 
 
Details of options held by directors are disclosed in note 6. 
 
 
18.    Share-based payments 
The Group has granted five tranches of equity settled options with a fixed 
exercise price equal to the placing price of the shares at the date of admission 
to AIM. The options were granted to certain directors and Hanson Westhouse LLP, 
as explained in notes 6 and 17. Options were valued using the Black-Scholes 
option pricing model and the charge for the year was $97,000 (2007: $122,000). 
No performance conditions were included in the fair value calculations. The 
share awards outstanding at 31 December 2008 and 31 December 2007 are as 
follows: 
+---------------------------------------------------------+--------------+--------------+--------------+--------------+ 
| Grant date                                              |   Number of  | Share price  |  Fair value  |  Fair value  | 
|                                                         |      shares  |     on grant |  (price) on  |          GBP | 
|                                                         |     granted  |         date |  grant date  |              | 
|                                                         |              |      (pence) |      (pence) |              | 
+---------------------------------------------------------+--------------+--------------+--------------+--------------+ 
| 12 December 2005                                        |      861,607 |          15p |        4.73p |       40,754 | 
+---------------------------------------------------------+--------------+--------------+--------------+--------------+ 
| 12 December 2005                                        |    1,723,214 |          15p |        4.73p |       81,508 | 
+---------------------------------------------------------+--------------+--------------+--------------+--------------+ 
| 2 October 2006                                          |      861,607 |       14.25p |        2.64p |       22,777 | 
+---------------------------------------------------------+--------------+--------------+--------------+--------------+ 
| 2 October 2006                                          |    1,723,214 |       14.25p |        2.64p |       45,554 | 
+---------------------------------------------------------+--------------+--------------+--------------+--------------+ 
| 27 December 2006                                        |    1,723,214 |          14p |        2.48p |       42,653 | 
+---------------------------------------------------------+--------------+--------------+--------------+--------------+ 
 
 
A reconciliation of option movements is as follows: 
+------------------------------------------------------------------+----------+----------+ 
|                                                                  |  Number  | Weighted | 
|                                                                  |   ('000) |          | 
|                                                                  |          | average  | 
|                                                                  |          | exercise | 
|                                                                  |          |    price | 
+------------------------------------------------------------------+----------+----------+ 
| Outstanding at 1 January 2008                                    |    6,893 |      15p | 
+------------------------------------------------------------------+----------+----------+ 
| Granted                                                          |        - |        - | 
+------------------------------------------------------------------+----------+----------+ 
| Exercised                                                        |        - |        - | 
+------------------------------------------------------------------+----------+----------+ 
| Outstanding at 31 December 2008                                  |    6,893 |      15p | 
+------------------------------------------------------------------+----------+----------+ 
| Exercisable at 31 December 2008                                  |    6,893 |      15p | 
+------------------------------------------------------------------+----------+----------+ 
 
 
There were no options granted or exercised during 2007. 
 
 
19.    Share premium 
+------------------------------------------------------------------+----------+----------+ 
|                                                                  |    Group |  Company | 
|                                                                  |    $'000 |    $'000 | 
+------------------------------------------------------------------+----------+----------+ 
| At 31 December 2007 and 31 December 2008                         |   11,194 |   11,194 | 
+------------------------------------------------------------------+----------+----------+ 
 
 
20.    Other reserves 
Group 
+-----------------------------------------------+----------+-------------+----------+----------+ 
|                                               |  Merger  | Translation |   Other  |    Total | 
|                                               |  reserve |     reserve |  reserve |    $'000 | 
|                                               |    $'000 |       $'000 |    $'000 |          | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
| At 1 January 2007                             |    3,430 |       2,066 |  (1,139) |    4,357 | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
| Effect of exchange rates                      |        - |       1,739 |        - |    1,739 | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
| Share options credit                          |        - |           - |      122 |      122 | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
| At 31 December 2007                           |    3,430 |       3,805 |  (1,017) |    6,218 | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
| Effect of exchange rates                      |        - |     (5,850) |        - |  (5,850) | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
| Share options credit                          |        - |           - |       97 |       97 | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
| At 31 December 2008                           |    3,430 |     (2,045) |    (920) |      465 | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
 
 
The other reserve principally relates to the difference upon consolidation 
resulting from merger accounting as discussed below, and share options issued. 
 
 
On 15 November 2005, the Company acquired the entire share capital of Zirax LLC 
and the Group accounted for the combination using merger accounting. The 
consideration was satisfied by the issue of 90,625,000 equity shares of 
$1,559,000. The premium of $3,430,000 on the issue of these shares was taken to 
the merger reserve. The difference of $1,177,000 arising on consolidation 
between the value of Zirax plc shares issued ($4,989,000) and the nominal value 
of Zirax LLC shares acquired ($3,812,000) was debited to other reserves. 
 
 
  Company 
+-----------------------------------------------+----------+-------------+----------+----------+ 
|                                               |  Merger  | Translation |   Other  |    Total | 
|                                               |  reserve |     reserve |  reserve |    $'000 | 
|                                               |    $'000 |       $'000 |    $'000 |          | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
| At 1 January 2007                             |    5,730 |       1,518 |      186 |    7,434 | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
| Effect of exchange rates                      |        - |       1,411 |        - |    1,411 | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
| Share options credit                          |        - |           - |      122 |      122 | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
| At 31 December 2007                           |    5,730 |       2,929 |      308 |    8,967 | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
| Effect of exchange rates                      |        - |     (5,546) |        - |  (5,546) | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
| Share options credit                          |        - |           - |       97 |       97 | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
| At 31 December 2008                           |    5,730 |     (2,617) |      405 |    3,518 | 
+-----------------------------------------------+----------+-------------+----------+----------+ 
 
 
21.    Profit and loss account 
+------------------------------------------------------------------+----------+----------+ 
|                                                                  |    Group |  Company | 
|                                                                  |    $'000 |    $'000 | 
+------------------------------------------------------------------+----------+----------+ 
| At 1 January 2007                                                |    5,525 |  (2,283) | 
+------------------------------------------------------------------+----------+----------+ 
| Profit/(loss) for the year                                       |    3,738 |    (615) | 
+------------------------------------------------------------------+----------+----------+ 
| At 31 December 2007                                              |    9,263 |  (2,898) | 
+------------------------------------------------------------------+----------+----------+ 
| Loss for the year                                                |  (3,418) |    (181) | 
+------------------------------------------------------------------+----------+----------+ 
| At 31 December 2008                                              |    5,845 |  (3,079) | 
+------------------------------------------------------------------+----------+----------+ 
 
 
The directors have not presented an individual income statement for the Company, 
as permitted by s230 of the Companies Act 1985, although the Company's income 
statement has been approved by the Board. 
 
 
22.    Acquisition of subsidiary 
On 18 January 2008, the Group acquired 100% of the share capital of Solith 
Anlagenbau und Service GmbH ('Solith'). Solith, located in Austria, specialises 
in the production and distribution of value added de-icing products, including 
calcium chloride derivative "Brine C", used for motorway de-icing maintenance. 
The maximum consideration payable by Zirax is EUR3.8m, satisfied by a cash payment 
of EUR200,000 on completion, deferred payments of EUR100,000 in five equal 
instalments over 5 years and the balance of up to EUR3.5m, payable via a two-tier 
performance related earn out arrangement for the sale of product in Austria over 
a maximum period of six years. It is not currently considered probable that any 
significant consideration will arise on the earn-out. 
 
 
The assets and liabilities arising from the acquisition, are as follows: 
+------------------------------------------------+----------+------------+----------+ 
|                                                | Carrying |       Fair |    Total | 
|                                                |    Value |      Value |    $'000 | 
|                                                |    $'000 | Adjustment |          | 
|                                                |          |      $'000 |          | 
+------------------------------------------------+----------+------------+----------+ 
| Fixed Assets                                   |      819 |         96 |      915 | 
+------------------------------------------------+----------+------------+----------+ 
| Inventories                                    |      179 |        143 |      322 | 
+------------------------------------------------+----------+------------+----------+ 
| Other net current liabilities                  |    (464) |          - |    (464) | 
+------------------------------------------------+----------+------------+----------+ 
| Borrowings                                     |  (1,244) |          - |  (1,244) | 
+------------------------------------------------+----------+------------+----------+ 
| Net liabilities                                |    (710) |        239 |    (471) | 
+------------------------------------------------+----------+------------+----------+ 
| Purchase consideration:                        |          |            |          | 
+------------------------------------------------+----------+------------+----------+ 
| Cash paid                                      |          |            |      323 | 
+------------------------------------------------+----------+------------+----------+ 
| Direct costs relating to acquisition           |          |            |      141 | 
+------------------------------------------------+----------+------------+----------+ 
| Deferred consideration                         |          |            |      118 | 
+------------------------------------------------+----------+------------+----------+ 
|                                                |          |            |      582 | 
+------------------------------------------------+----------+------------+----------+ 
| Fair value of net liabilities acquired         |          |            |      471 | 
+------------------------------------------------+----------+------------+----------+ 
| Goodwill                                       |          |            |    1,053 | 
+------------------------------------------------+----------+------------+----------+ 
 
 
The goodwill is attributable to Solith providing the Group a platform from which 
to expand throughout the de-icing markets of Central and Western Europe. 
 
 
Solith's loss for the period since acquisition was $0.7m. Because of the 
proximity of the acquisition to the start of the period, the revenue and loss of 
the Group, stated as if the acquisition had taken place at the start of the 
period, would not be significantly different to the revenue and loss disclosed 
in the income statement. 
 
 
  23.    Balances and transactions with related parties 
Parties are considered to be related if one party has the ability to control the 
other party or exercise significant influence over the other party in making 
financial or operational decisions as defined by IAS 24 "Related Party 
Disclosures". In considering each possible related party relationship, attention 
is directed to the substance of the relationship, not merely the legal form. 
Related parties may enter into transactions which unrelated parties might not, 
and transactions between related parties may not be effected on the same terms, 
conditions and amounts as transactions between unrelated parties. 
 
 
The nature of the related party relationships for those related parties with 
whom the Group entered into significant transactions or had significant balances 
outstanding at 31 December 2008 and 31 December 2007 are detailed below. In 
accordance with IAS 24 disclosure is not required of transactions and balances 
between Group companies where such transactions are eliminated upon 
consolidation. 
 
 
All sales between the Group and its related parties are based on the market 
prices current at the time of sales. All inventory purchases made by the Group 
from its related parties are based on the market prices current at the time of 
purchase. 
 
 
(i)    Balances with related parties: 
+----------------------------------------------------+-------------------+-------+-------+ 
| Balance sheet caption                              |      Relationship |  2008 |  2007 | 
|                                                    |                   | $'000 | $'000 | 
+----------------------------------------------------+-------------------+-------+-------+ 
| Trade receivable from and prepayments to:          |                   |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
| OAO Kaustik                                        |      Under common |    31 |    61 | 
|                                                    |           control |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
|                                                    |                   |    31 |    61 | 
+----------------------------------------------------+-------------------+-------+-------+ 
| Cash and cash equivalents with:                    |                   |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
| Inkarobank                                         |      Under common | 3,540 | 4,237 | 
|                                                    |           control |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
|                                                    |                   | 3,540 | 4,237 | 
+----------------------------------------------------+-------------------+-------+-------+ 
| Trade payables to:                                 |                   |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
| OAO Plastcard                                      |      Under common |    32 |    36 | 
|                                                    |           control |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
| OAO Kaustik                                        |      Under common |   506 |   626 | 
|                                                    |           control |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
| OOO European Chemical Company                      |      Under common |    35 |    11 | 
|                                                    |           control |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
|                                                    |                   |   573 |   673 | 
+----------------------------------------------------+-------------------+-------+-------+ 
| Short-term borrowings with:                        |                   |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
| Inkarobank                                         |      Under common |     - | 2,444 | 
|                                                    |           control |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
|                                                    |                   |     - | 2,444 | 
+----------------------------------------------------+-------------------+-------+-------+ 
 
 
(ii)    Transactions with related parties: 
+----------------------------------------------------+-------------------+-------+-------+ 
| Income statement caption                           |      Relationship |  2008 |  2007 | 
|                                                    |                   | $'000 | $'000 | 
+----------------------------------------------------+-------------------+-------+-------+ 
| Revenue from transactions with:                    |                   |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
| OAO Kaustik                                        |      Under common |   193 |   289 | 
|                                                    |           control |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
|                                                    |                   |   193 |   289 | 
+----------------------------------------------------+-------------------+-------+-------+ 
 
 
Revenue from transactions with OAO Kaustik is represented mainly by an operating 
lease of production equipment. 
 
 
+----------------------------------------------------+-------------------+-------+-------+ 
| Income statement caption                           |      Relationship |  2008 |  2007 | 
|                                                    |                   | $'000 | $'000 | 
+----------------------------------------------------+-------------------+-------+-------+ 
| Inventory purchases:                               |                   |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
| OAO Kaustik                                        |      Under common | 9,097 | 8,076 | 
|                                                    |           control |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
| OAO Plastcard                                      |      Under common |   204 |   104 | 
|                                                    |           control |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
| OOO European Chemical Company                      |      Under common |    99 |    58 | 
|                                                    |           control |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
|                                                    |                   | 9,400 | 8,238 | 
+----------------------------------------------------+-------------------+-------+-------+ 
| Production services purchases:                     |                   |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
| OAO Kaustik                                        |      Under common |   283 |   764 | 
|                                                    |           control |       |       | 
+----------------------------------------------------+-------------------+-------+-------+ 
 
 
  (iii)    Other related party matters 
On 1 September 2005 Zirax LLC entered into a 20 year term framework agreement 
with OAO Kaustik for the supply of raw materials and the provision of utilities 
and services. This agreement has been entered into on an "arms' length basis". 
The prices for the supply of goods and services under the framework agreement 
and any other contract entered into between the parties pursuant thereto are 
determined for the first year of its term and subject to review thereafter in 
accordance with the formula set out therein. Pursuant to this framework 
agreement the parties executed several one-year agreements for the supply of 
hydrochloric acid, liquid calcium chloride, lime-milk, hot water, steam, natural 
gas, settled water, power, maintenance and repair, transport and 
telecommunications, waste purification and disposal services. 
 
 
(iv)    Related party transactions of the Company 
The Company received interest on a loan to Zirax LLC of $426,000 (2007: 
$652,000). 
 
 
24.    Contingencies, commitments and operating risks 
(i)    Contingent liabilities 
Following the acquisition of Solith, contingent consideration is payable as 
disclosed in note 22. At the date of acquisition, it was not considered probable 
that these monies would be payable and there is no change in this assessment at 
the year end. 
 
 
(ii)    Lease commitments 
A 31 December, the total of future minimum lease payments under non-cancellable 
operating leases for each of the following periods were: 
+-----------------------------------------------------------------------+-------+-------+ 
|                                                                       |  2008 |  2007 | 
|                                                                       | $'000 | $'000 | 
+-----------------------------------------------------------------------+-------+-------+ 
| Within one year                                                       |   195 |    20 | 
+-----------------------------------------------------------------------+-------+-------+ 
| Between one and five years                                            |   454 |    81 | 
+-----------------------------------------------------------------------+-------+-------+ 
| After five years                                                      |   956 |   838 | 
+-----------------------------------------------------------------------+-------+-------+ 
|                                                                       | 1,605 |   939 | 
+-----------------------------------------------------------------------+-------+-------+ 
 
 
 
 
Lease and sub-lease payments recognised as an expense in the year were $430,000 
(2007: $249,000). 
 
 
(iii)    Operating environment 
The Russian Federation continues to display certain characteristics of an 
emerging market. These characteristics include, but are not limited to, the 
existence of a currency that is not freely convertible in most countries outside 
of the Russian Federation, restrictive currency controls, and relatively high 
inflation. The tax, currency and customs legislation within the Russian 
Federation is subject to varying interpretations, and changes, which can occur 
frequently. 
 
 
The future economic direction of the Russian Federation is largely dependent 
upon the effectiveness of economic, financial and monetary measures undertaken 
by the Government, together with tax, legal, regulatory, and political 
developments. The Russian banking and other financial systems are not well 
developed or regulated and the applicable legislation is subject to differing 
interpretations and inconsistent applications. The recent banking crisis that 
has affected financial institutions around the world has impacted the Russian 
banking system and Russian companies including Zirax LLC may be subject to 
further liquidity constraints which might have a material adverse effect on the 
Group's business. 
 
 
(iv)    Concentration risk 
The Group relies significantly on relationships with other entities (including 
customers and suppliers) and also on good relationships with Russian regulatory 
and Government departments. The Group also relies upon third parties to provide 
essential Russian services on a contractual basis. 
 
 
With the growth of the Oil and Gas segment, the revenues from Rosneft, through a 
service company, have become significant. The proportion of Group sales to 
Rosneft in 2008 is 49% (2007: 30%). In addition, the Group's business has a 
dependency on the results of annual tenders conducted by the Government of 
Moscow city. The proportion of sales under such tenders in 2008 is 10% (2007: 
39%). The Group aims to mitigate these risks by diversifying the customer base, 
particularly by growing the international business and also by developing the 
industrial chemicals segment. 
 
 
Zirax LLC has signed supply agreements with Kaustik for the provision of raw 
materials, the subcontracting of IceMeltTM production, support services and 
access to Zirax LLC's facility. Whilst Zirax LLC has a long-term supply contract 
with Kaustik which is mutually beneficial (in that it provides for a reliable 
off-take for Kaustik's hydrochloric acid produced as a by-product of its 
activities and a cost effective source of supply of hydrochloric acid for Zirax 
LLC), it cannot be excluded that the cost of supply of hydrochloric acid will be 
increased in due course. Furthermore, the contract may be terminated at a 
relatively short notice by either party. The ongoing relationship with Kaustik 
is therefore a material factor in the Group's ongoing success. 
 
 
With the current economic environment in Russia, there is a further risk that 
Kaustik could face liquidity difficulties and ultimately bankruptcy. However, 
Kaustik is owned by Nikochem which is considered by a Russian Government 
Commission to be one of Russia's economically strategic organisations and for 
which the Russian Government has prioritised economic assistance. Although 
Kaustik is not directly named as an economically strategic company, the 
Directors take comfort that it will receive support if necessary as part of the 
Nikochem Group but this is not guaranteed. As yet there have been no known 
instances of the Russian Government being asked to provide support so this 
mechanism is unproven. 
 
 
In May 2009, the Group was approached by Kaustik for assistance with short term 
liquidity issues. As a key supplier, the Group agreed to provide short term 
assistance in the form of advance payments against purchases of hydrochloric 
acid (see note 27) to help ease Kaustik's short term liquidity issues and ensure 
continued supplies. 
 
 
While the Directors have no reason to believe otherwise, there can be no 
assurance that the Group's existing relationships will continue or that new ones 
will be successfully formed and the Group could be adversely affected by changes 
to such relationships or difficulties in forming new ones. Any circumstance, 
which causes the early termination or non-renewal of one of these key business 
relationships, could adversely impact upon the Group, its business, operating 
results or prospects. 
 
 
(v)    Taxation 
Russian tax, currency and customs legislation is subject to varying 
interpretations, and changes, which can occur frequently. Management's 
interpretation of such legislation as applied to the transactions and activity 
of the Group may be challenged by the relevant regional and federal authorities. 
Recent events within the Russian Federation suggest that the tax authorities may 
be taking a more assertive position in their interpretation of the legislation 
and assessments, and it is possible that transactions and activities that have 
not been challenged in the past may be challenged. As a result, significant 
additional taxes, penalties and interest may be assessed. Fiscal periods remain 
open to review by the authorities in respect of taxes for three calendar years 
preceding the year of review. Under certain circumstances reviews may cover 
longer periods. 
 
 
As at 31 December 2008 management believes that its interpretation of the 
relevant legislation is appropriate and the Group's tax, currency and customs 
positions will be sustained. 
 
 
(vi)    Environmental matters 
The enforcement of environmental regulation in Russian Federation is evolving 
and the enforcement posture of government authorities is continually being 
reconsidered. The Group periodically evaluates its obligations related to 
environmental pollution. As obligations are determined, they are provided 
immediately. Potential liabilities, which might arise as a result of changes in 
existing regulations, civil litigation or legislation, cannot be estimated but 
could be material. In the current enforcement climate, under existing 
legislation, management believes that there are no significant liabilities for 
environmental damage. 
 
 
(vii) Insurance 
The Group holds insurance policies to cover risks related to its export 
shipments and transportation of goods to customers. Property, plant and 
equipment were brought into the insurance programme from 2007. 
 
 
(viii) Company guarantees 
The company has issued guarantees of $1.4m relating to the borrowings of 
subsidiary undertakings. 
 
 
25.    Financial Instruments 
 
 
Financial assets and liabilities 
Under IAS 39, the Group's trade receivables and other receivables and cash and 
cash equivalents are classified as 'Loans and receivables', and trade and other 
payables, short-term borrowings and long-term borrowings are classified as 
'Financial liabilities measured at amortised cost'. 
 
 
The carrying values of the Group's loans and receivables and financial 
liabilities measured at amortised cost approximate their fair value. 
 
 
Interest receivable in the income statement relates wholly to financial 
instruments classified as loans and receivables and interest payable and similar 
charges relates wholly to financial liabilities measured at amortised cost. 
 
 
  Financial Risk 
(i)    Credit risk 
Financial assets, which potentially subject the Group to credit risk, consist 
principally of trade receivables and deposits with financial institutions. The 
Group has policies in place to ensure that sales of products and services are 
made to customers with an appropriate credit history; in certain circumstances 
payment is required in advance of product delivery. The carrying amount of 
accounts receivable and deposits, net of provisions for impairment, represents 
the maximum amount exposed to credit risk. 
 
 
The Group has no significant concentrations of credit risk, apart from Rosneft 
and the Government of Moscow city, which are managed through regular customer 
communication. Although collection of receivables could be influenced by 
economic factors, management believes that there is no significant risk of loss 
to the Group beyond the provision already recorded. 
 
 
Cash and cash equivalents includes $6,564,000 held in local Russian Banks 
against which an impairment of $2,961,000 has been taken (see note 13). The 
remaining cash is held in international western banks. 
 
 
(ii)    Foreign exchange risk 
The Group operates internationally and is exposed to foreign exchange risk 
arising from various currency exposures. Foreign exchange risk arises from 
future commercial transactions, recognised assets and liabilities and net 
investments in foreign operations. The Group does not have formal arrangements 
to mitigate the foreign exchange risks of the Group's operations. 
 
 
At 31 December 2008, if RR had weakened/strengthened by 10% with all other 
variables held constant, post-tax profit for the year would have been $322,000 
lower/higher (2007: $194,000 higher/lower), mainly as a result of foreign 
exchange gains/losses on translation of USD trade receivables and Euro 
denominated borrowings. 
 
 
At 31 December 2008, if Euro had weakened/strengthened by 10% with all other 
variables held constant, post-tax profit for the year would have been $365,000 
lower/higher mainly as a result of foreign exchange gains/losses on transition 
of Euro denominated borrowings and Euro advance payments. 
 
 
(iii)    Interest rate risk 
The Group's income and operating cash flows are substantially independent of 
changes in market interest rates. The Group is exposed to interest rate risk 
through market fluctuations of borrowings. At 31 December 2008, if interest 
rates had been 1% higher/lower with all other variables held constant, post-tax 
profit for the year would have been $30,000 (2007: $9,000) lower/higher. 
 
 
(iv)    Liquidity risk 
The Group does not generally have significant liquidity risk as it seeks to 
maintain cash resources (including cash held in short term deposits) sufficient 
to cover its borrowings. 
 
 
However, the deterioration of the global economic environment during 2008 and 
its impact on the economy and financial institutions of Russia has resulted in 
restrictions on some of the Group's deposits which has lead the Group to provide 
for them and has reduced the headroom between debt and cash resources as at the 
year end. 
 
 
Subsequent to the year end the Group has had EUR2.2m returned from Solvay as part 
of the ongoing renegotiations of the supply and licencing agreements and has put 
in place $3.0m of new borrowings (see note 27) which has improved the Group's 
working capital position. 
 
 
On an ongoing basis, the Board monitors rolling forecasts of the Group's 
headroom on the basis of expected cash flow. This is generally carried out at 
local level in the operating companies of the Group in accordance with practice 
and limits set by the Group. 
 
 
Details of the maturities of the Group's financial liabilities based on the 
earliest contractual maturity date are given below. Details of commitments and 
contingencies are provided in note 24. 
 
 
 
+-------------------------------------+----------+----------+----------+----------+ 
| As at 31 December 2008              |    Less  | Between  | Between  |    Over  | 
|                                     |   than 1 |  1 and 2 |  2 and 5 | 5 years  | 
|                                     |     year |    years |    years |    $'000 | 
|                                     |    $'000 |    $'000 |    $'000 |          | 
+-------------------------------------+----------+----------+----------+----------+ 
| Bank overdrafts                     |      664 |        - |        - |        - | 
+-------------------------------------+----------+----------+----------+----------+ 
| Bank borrowings                     |    2,979 |       83 |      257 |      271 | 
+-------------------------------------+----------+----------+----------+----------+ 
| Trade and other payables            |    4,125 |        - |        - |        - | 
+-------------------------------------+----------+----------+----------+----------+ 
 
 
+-------------------------------------+----------+----------+----------+----------+ 
| As at 31 December 2007              |    Less  | Between  | Between  |    Over  | 
|                                     |   than 1 |  1 and 2 |  2 and 5 | 5 years  | 
|                                     |     year |    years |    years |    $'000 | 
|                                     |    $'000 |    $'000 |    $'000 |          | 
+-------------------------------------+----------+----------+----------+----------+ 
| Bank overdrafts                     |        2 |        - |        - |        - | 
+-------------------------------------+----------+----------+----------+----------+ 
| Bank borrowings                     |    4,153 |        - |        - |        - | 
+-------------------------------------+----------+----------+----------+----------+ 
| Trade and other payables            |    5,633 |        - |        - |        - | 
+-------------------------------------+----------+----------+----------+----------+ 
 
 
No Group borrowings contain financial covenants, however they all contain the 
equivalent of material adverse change clauses. 
 
 
26.    investment in subsidiary undertakings 
+--------------------------------------------------------------------+----------+ 
|                                                                    |  Company | 
|                                                                    |    $'000 | 
+--------------------------------------------------------------------+----------+ 
| At 1 January 2008                                                  |    8,463 | 
+--------------------------------------------------------------------+----------+ 
| Additions during the year (note 22)                                |      582 | 
+--------------------------------------------------------------------+----------+ 
| Translation difference                                             |  (2,464) | 
+--------------------------------------------------------------------+----------+ 
| At 31 December 2008                                                |    6,581 | 
+--------------------------------------------------------------------+----------+ 
 
 
The investment in the Russian subsidiary undertaking is stated at book value of 
net assets acquired in the subsidiary undertaking. The investment in the UK 
subsidiary undertaking which was incorporated during 2006 was a nominal amount 
of $3. 
 
 
Details of the subsidiary undertakings whose results are consolidated in this 
financial information are as follows: 
+------------------------------------------+---------------+--------------+---------------+ 
| Name and nature of business              |      Country  |     Type of  |        Group  | 
|                                          |            of |       share  |     effective | 
|                                          | incorporation |              |  shareholding | 
|                                          |           and |              |               | 
|                                          |  registration |              |               | 
+------------------------------------------+---------------+--------------+---------------+ 
| Zirax LLC - producer and distributor of  |        Russia |      Charter |          100% | 
| chemicals                                |               |      capital |               | 
+------------------------------------------+---------------+--------------+---------------+ 
| Zirax (UK) Limited - distributor of      |       England |     Ordinary |          100% | 
| chemicals                                |               |              |               | 
+------------------------------------------+---------------+--------------+---------------+ 
| Solith Anlagenbau und Service GmbH -     |       Austria |     Ordinary |          100% | 
| producer and distributor of chemicals    |               |              |               | 
+------------------------------------------+---------------+--------------+---------------+ 
 
 
27.    post balance sheet events 
The Company, together with Solvay S.A. ('Solvay') have initiated a process of 
renegotiation of the existing supply and licensing agreements at the Rosignano 
plant in Italy. The common aim of both parties is to revisit the provisions of 
those agreements, in particular with regard to the technical performance of the 
production unit. 
 
 
As part of this process, on 19 May 2009, the EUR2.0m ($2.7m) of advance payments 
that the Company had made pursuant to the supply agreement was received back by 
the Company, along with EUR0.2m ($0.3m) of interest. The Company continues to 
source product from the Rosignano plant while renegotiations take place. 
 
 
Since the year end the Group has put in place new borrowings in Russia of $3.0m 
which are secured over fixed assets and repayable within a year. 
 
 
Following discussions with one of the company's key suppliers, Kaustik (a 
related partly) a supplier advance of 30m Russian Roubles ($893,000) in respect 
of purchases of hydrochloric acid was made to them in May 2009. The repayment of 
the advance is scheduled to be made in three equal instalments due on the last 
day of July, August and September 2009. In addition Kaustik will provide a 5% 
discount from the commercial price for hydrochloric acid, on identified 
quantities which are supplied by Kaustik to Zirax through August 2009, 
representing an effective rate of return on the advance of 17%. 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
 FR CKCKPOBKDNAB 
 

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