27.	CAPITAL AND FINANCIAL RISK MANAGEMENT

Capital Management

The Group’s policy is to maintain a strong capital base to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors (loss)/earnings per share as a measure of performance, which the Group defines as (loss)/profit after tax divided by the weighted average number of shares in issue.

Fair Values

The table below sets out the Group’s classification of each class of financial assets/liabilities, their fair values and under which valuation method they are valued:

		Level 1			Level 2			Total carrying amount			Fair Value
	Note	US$’000			US$’000			US$’000			US$’000
December 31, 2023
Loans and receivables at amortised cost
Trade receivables	17		10,698			-			10,698			10,698
Cash and cash equivalents	18		3,691			-			3,691			3,691
Finance lease receivable	15, 17		155			-			155			155

			14,544			-			14,544			14,544

Liabilities at amortised cost
Senior secured term loan	23		-			(40,109	)		(40,109	)		(40,109	)
Convertible note	23		-			(14,542	)		(14,542	)		(14,542	)
Exchangeable note	23		-			(210	)		(210	)		(210	)
Lease liabilities	24		(12,566	)		-			(12,566	)		(12,566	)
Trade and other payables (excluding deferred income)	21		(12,752	)		-			(12,752	)		(12,752	)
Provisions	22		(50	)		-			(50	)		(50	)

			(25,368	)		(54,861	)		(80,229	)		(80,229	)
Fair value through profit and loss (FVPL)
Derivative liability - warrants	23		-			(526	)		(526	)		(526	)
Derivative asset – prepayment option	23		-			178			178			178

			-			(348	)		(348	)		(348	)

			(10,824	)		(55,209	)		(66,033	)		(66,033	)

For financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2: valuation techniques for which the lowest level of inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly

Level 3: valuation techniques for which the lowest level of inputs that have a significant effect on the recorded fair value are not based on observable market data.

		Level 1			Level 2			Total carrying amount			Fair Value
	Note	US$’000			US$’000			US$’000			US$’000
December 31, 2022
Loans and receivables at amortised cost
Trade receivables	17		12,620			-			12,620			12,620
Cash and cash equivalents	18		6,578			-			6,578			6,578
Finance lease receivable	15, 17		170			-			170			170
			19,368			-			19,368			19,368
Liabilities at amortised cost
Senior secured term loan	23		-			(44,301	)		(44,301	)		(44,301	)
Convertible note	23		-			(13,746	)		(13,746	)		(13,746	)
Exchangeable note¹	23		-			(210	)		(210	)		(210	)
Lease liabilities	24		(13,943	)		-			(13,943	)		(13,943	)
Trade and other payables (excluding deferred income)	21		(15,261	)		-			(15,261	)		(15,261	)
Provisions	22		(50	)		-			(50	)		(50	)

			(29,254	)		(58,257	)		(87,511	)		(87,511	)
Fair value through profit and loss (FVPL)
Derivative liability - warrants	23		-			(1,569	)		(1,569	)		(1,569	)
Derivative asset – prepayment option	23		-			128			128			128

			-			(1,441	)		(1,441	)		(1,441	)

			(9,886	)		(59,698	)		(69,584	)		(69,584	)

The valuation techniques used for instruments categorised as level 2 are described below:

The fair values of the options associated with the exchangeable notes are calculated in consultation with third-party valuation specialists due to the complexity of their nature. There are a number of inputs utilised in the valuation of the options, including share price, historical share price volatility, risk-free rate and the expected borrowing cost spread over the risk-free rate.

Financial Risk Management

The Group uses a range of financial instruments (including cash, finance leases, receivables, payables and derivatives) to fund its operations. These instruments are used to manage the liquidity of the Group. Working capital management is a key additional element in the effective management of overall liquidity. The Group does not trade in financial instruments or derivatives. The main risks arising from the utilization of these financial instruments are interest rate risk, liquidity risk and credit risk.

Interest rate risk

Effective and repricing analysis

The following tables sets out all interest-earning financial assets and interest-bearing financial liabilities held by the Group at December 31, 2023 and 2022, indicating their effective interest rates and the period in which they re-price:

As at December 31, 2023	Note	Effective interest rate			Total US$’000			6 mths or less US$’000			6 –12 mths US$’000			1-2 years US$’000			2-5 years US$’000			> 5 years US$’000
Cash and cash equivalents	18		0.00	%		3,691			3,691			-			-			-			-
Lease receivable	15,17		4.0	%		155			62			39			49			5			-
Exchangeable note¹	23		4.8	%		(210	)		-			-			-			-			(210	)
Senior secured term loan²	23		16.3	%		(40,109	)		-			-			-			(40,109	)		-
Convertible note³	23		1.5	%		(14,542	)		-			-			-			-			(14,542	)
Lease payable on Right of Use assets	24		5.0	%		(12,566	)		(812	)		(832	)		(1,745	)		(4,425	)		(4,752	)

Total						(63,581	)		2,941			(793	)		(1,696	)		(44,529	)		(19,504	)

As at December 31, 2022	Note	Effective interest rate			Total US$’000			6 mths or less US$’000			6 –12 mths US$’000			1-2 years US$’000			2-5 years US$’000			> 5 years US$’000
Cash and cash equivalents	18		0.00	%		6,578			6,578			-			-			-			-
Lease receivable	15,17		4.0	%		170			46			41			49			34			-
Exchangeable note¹	23		4.8	%		(210	)		-			-			-			-			(210	)
Senior secured term loan²	23		15.4	%		(44,301	)		-			-			-			(44,301	)
Convertible note³	23		1.5	%		(13,746	)		-			-			-			-			(13,746	)
Lease payable on Right of Use assets			5.0	%		(13,898	)		(812	)		(819	)		(1,679	)		(4,522	)		(6,066	)
Lease payable on sale & leaseback transactions	24		5.0	%		(45	)		(35	)		(10	)		-			-			-

Total						(65,452	)		5,777			(788	)		(1,630	)		(48,789	)		(20,022	)

¹ The maturity of the exchangeable notes is based on the contractual maturity date of April 1, 2045.

² The senior secured term loan is a variable instrument. In January 2024, the amended term loan agreement reduced the annual rate of interest on the loan by 2.5% to 8.75% plus the greater of (a) Term Secured Overnight Financing Rate or (b) 4.0% per annum, and allows for a further 2.5% reduction in the base rate to 6.25% once the outstanding principal under the term loan falls below US$35 million. The loan matures in January 2026.

³ The 7-year convertible note was issued in May 2022 and is a fixed rate instrument which bears a fixed rate of interest of 1.5% per annum.

In broad terms, a one-percentage point increase in interest rates would increase interest income by US$Nil (2022: US$Nil) as at December 31, 2023 the Company holds no funds in interest-bearing accounts; while the annual impact on the interest expense would be an increase of US$417,000 (2022: US$467,500) on the costs of servicing the senior secured term loan.

Interest rate profile of financial assets / liabilities

The interest rate profile of financial assets/liabilities of the Group was as follows:

	December 31, 2023 US$‘000			December 31, 2022 US$‘000
Variable rate instruments
Cash at bank and in hand		3,691			6,578
Variable rate financial liabilities (senior secured term loan)		(40,109	)		(44,301	)

		(36,418	)		(37,723	)
Fixed rate instruments
Fixed rate financial liabilities (exchangeable note)		(210	)		(210	)
Fixed rate financial liabilities (convertible note)		(14,542	)		(13,746	)
Fixed rate financial liabilities (lease payables)		(12,566	)		(13,943	)
Financial assets (lease receivables)		155			170

		(27,163	)		(27,729	)

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial liabilities at fair value through profit and loss. Therefore, a change in interest rates at December 31, 2023 or December 31, 2022 would not affect profit or loss. There was no significant difference between the fair value and carrying value of the Group’s trade receivables and trade and other payables at December 31, 2023 and December 31, 2022 as all fell due within 6 months.

Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments:

As at December 31, 2023 US$’000	Carrying amount US$’000		Contractual cash flows US$’000		6 mths or less US$’000		6 mths – 12 mths US$’000		1-2 years US$’000		2-5 years US$’000		>5 years US$’000
Financial liabilities
Trade and other payables (excluding deferred income)		12,752		12,752		12,752		-		-		-		-
Lease payable on Right of Use assets		12,566		15,306		1,107		1,114		2,243		5,442		5,400
Senior secured term loan¹		40,109		56,121		3,461		3,461		6,922		42,277		-
Convertible note		14,542		21,650		150		150		300		900		20,150
Exchangeable notes		210		389		4		4		8		24		349

		80,179		106,218		17,474		4,729		9,473		48,643		25,899

¹ The contractual cash flows of interest on the senior secured term loan is estimated based on the prevailing interest rate at December 31, 2023

As at December 31, 2022 US$’000	Carrying amount US$’000		Contractual cash flows US$’000		6 mths or less US$’000		6 mths – 12 mths US$’000		1-2 years US$’000		2-5 years US$’000		>5 years US$’000
Financial liabilities
Trade and other payables (excluding deferred income)		15,261		15,261		15,261		-		-		-		-
Lease payable on Right of Use assets		13,898		17,196		1,120		1,130		2,240		5,739		6,967
Lease payable on sale & leaseback transactions		45		46		36		10		-		-		-
Senior secured term loan¹		44,301		69,519		4,194		3,595		7,190		54,540		-
Convertible note		13,746		21,900		150		150		300		900		20,400
Exchangeable notes		210		397		4		4		8		24		357


		87,461		124,319		20,765		4,889		9,738		61,203		27,724

¹ The contractual cash flows of interest on the senior secured term loan is estimated based on the prevailing interest rate at December 31, 2022.

Foreign exchange risk

The majority of the Group’s activities are conducted in US Dollars. Foreign exchange risk arises from the fluctuating value of the Group’s Euro denominated expenses as a result of the movement in the exchange rate between the US Dollar and the Euro. There were no forward contracts in place as at December 31, 2023 or December 31, 2022.

Foreign currency financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those reported to key management translated into US Dollars at the closing rate:

	EUR			GBP			SEK			CAD			BRL			Other
As at December 31, 2023	US$‘000			US$‘000			US$‘000			US$‘000			US$‘000			US$‘000
Cash		219			15			5			191			854			-
Trade and other receivable		856			100			-			533			1,533			-
Trade and other payables		(3,766	)		(100	)		(12	)		(220	)		(704	)		(1	)
Lease liabilities		(8,349	)		-			-			-			(241	)		-

Total exposure		(11,040	)		15			(7	)		504			1,442			(1	)

	EUR			GBP			SEK			CAD			BRL			Other
As at December 31, 2022	US$‘000			US$‘000			US$‘000			US$‘000			US$‘000			US$‘000
Cash		700			199			5			2,061			756			-
Trade and other receivable		1,001			27			-			950			1,443			-
Trade and other payables		(3,481	)		(5	)		(6	)		(473	)		(662	)		-
Lease liabilities		(9,024	)		-			-			-			(277	)		-

Total exposure		(10,804	)		221			(1	)		2,538			1,260			-

Sensitivity analysis

A 10% strengthening of the US Dollar against the Euro at December 31, 2023 would have increased profit and other equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

	Profit or Loss US$’000
December 31, 2023
Euro		1,004

December 31, 2022
Euro		982

A 10% weakening of the US Dollar against the Euro at December 31, 2023 would have decreased profit and other equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

	Profit or Loss US$000
December 31, 2023
Euro		(1,227	)

December 31, 2022
Euro		(1,200	)

Credit Risk

The Group has no significant concentrations of credit risk. Exposure to credit risk is monitored on an ongoing basis. The Group maintains specific provisions for potential credit losses. To date such losses have been within management’s expectations. Due to the large number of customers and the geographical dispersion of these customers, the Group has no significant concentrations of accounts receivable.

With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. The Group’s management considers that all of the above financial assets that are not impaired or past due for each of the 31 December reporting dates under review are of good credit quality.

The Group maintains cash and cash equivalents with various financial institutions. The Group performs regular and detailed evaluations of these financial institutions to assess their relative credit standing. The carrying amount reported in the balance sheet for cash and cash equivalents approximate their fair value.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is as follows:

	Carrying Value December 31, 2023 US$’000		Carrying Value December 31, 2022 US$’000
Third party trade receivables (Note 17)		10,698		12,620
Finance lease income receivable (Note 17)		155		170
Cash and cash equivalents (Note 18)		3,691		6,578

		14,544		19,368

The maximum exposure to credit risk for trade receivables and finance lease income receivable by geographic location is as follows:

	Carrying Value December 31, 2023 US$’000		Carrying Value December 31, 2022 US$’000
United States		4,041		6,061
Euro-zone countries		851		1,183
United Kingdom		126		67
Other regions		5,835		5,479

		10,853		12,790

The maximum exposure to credit risk for trade receivables and finance lease income receivable by type of customer is as follows:

	Carrying Value December 31, 2023 US$’000		Carrying Value December 31, 2022 US$’000
End-user customers		5,029		7,365
Distributors		5,399		4,630
Non-governmental organisations		425		795

		10,853		12,790

Due to the large number of customers and the geographical dispersion of these customers, the Group has no significant concentrations of accounts receivable.

Impairment Losses

The ageing of trade receivables at December 31, 2023 is as follows:

	Gross		Impairment		Expected Credit Loss Rate			Gross		Impairment		Expected Credit Loss Rate
	2023		2023		2023			2022		2022		2022
	US$’000		US$’000		%			US$’000		US$’000		%
Not past due		8,031		-		-			8,341		-		-
Past due 0-30 days		1,534		-		-			1,622		-		-
Past due 31-120 days		856		22		2.6	%		1,564		23		1.5	%
Greater than 120 days		2,601		2,302		88.5	%		3,783		2,668		70.5	%

		13,022		2,324		-			15,310		2,691		-

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

	2023			2022
	US$’000			US$’000
Balance at January 1		2,691			2,986
Charged to costs and expenses		715			1,240
Amounts written off during the year		(977	)		(1,535	)
Eliminated on disposal of business		(105	)		-

Balance at December 31		2,324			2,691

The allowance for impairment in respect of trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the account owing is possible. At this point the amount is considered irrecoverable and is written off against the financial asset directly.