Corac Group PLC Annual Report and Financial Statements 2013

Annual Report and
Financial Statements 2013

Company Number: 3152034
Annual Report and Financial Statements
2013 2
Table of Contents
Strategic Report
03 Corac in Focus
04 Business Highlights
05 Strategy in Action
08 Q&A With Phil Cartmell
12 Chairman and CEOs
Joint Statement
16 Finance and Operations
Statement
Corporate Governance
24 Board of Directors
25 Directors Report
27 Corporate Governance
Report
29 Remuneration Report
32 Independent Auditors
Report
Financial Report
33 Financial Statements
38 Notes to the Financial
Statements
Other Information
66 Company Information
is a combination of three advanced engineering and
technology businesses serving oil and gas, renewable
energy, industrial and defence sectors.
The Group works in partnership with system
integrators, prime contractors and end-users to build
sophisticated products that are placed at the heart
of business critical operational systems. These range
from offshore gas production platforms to nuclear
powered submarines.
With a consistent theme of engineering excellence
and innovation, Corac companies work on providing
advanced technologies or solutions for energy
systems, gas management and environment control.
The results are technically sophisticated, often
unique in their eld, and form the basis of long -term,
successful relationships.
The Group employs more than 170 people across three
sites in the UK, and supplies systems and services to
customers worldwide.
2013 3
Two established protable businesses and one
investing in future technology propositions.
A two-part strategy:
work closely with and maximise return from
an established global customer base
develop and commercialise new technologies
that drive long-term value
Atmosphere Control
International (ACI)
a defence business building upon
strong relationships in the UK
and Europe, whilst adding new
customers in Asia a strong
platform for long-term value.
Corac Energy
Technologies (CET)
a compressor company that
develops, tests and applies compact
high-speed turbomachinery.
Patented technologies are at
the core of customer systems in
gas production and renewable
energy sectors.
Hunt Thermal
Technologies (HTT)
a thermal engineering company
that builds large heat exchangers
for technically challenging
downstream oil and gas or process
industrial plants, worldwide.
Corac in Focus
4 2013
Business Highlights
Notes
1 The comparative 2012 fgures include a 9 month period post acquisition for ACI and HTT.
2 Adjusted EBITDA is defned as operating proft adjusted to add back depreciation of property, plant and equipment, amortisation and
impairment of acquired intangible assets, share based payment charges and exceptional items. Exceptional items are those items believed to
be exceptional in nature by virtue of their size and or incidence. See note 3 to the Financial Statements.
Financial
1
19.3m (2.9m) 13.7m
Group Revenue Adjusted EBITDA
2
Group Cash
2012: 15.3m 2012: (4.1m) 2012: 6.7m
Group Net Assets were 25.7m (2012: 18.4m).
Group year end order book stood at 14.2m (2012: 14.4m).
provides strong visibility for 2014 revenue
supported by a signicant pipeline of qualied potential sales opportunities
ACI - Strong nancial performance and
development of international business
3rd generation Combined Oxygen Generator System has
been successfully proven at sea and will become a core
contributor to ACIs business for the next 10 years
successful delivery of a CO
2
scrubber to an Asian customer
within a long-term, multi-unit programme, and agreement
to design and manufacture further improved CO
2

scrubbers for the follow-on class of vessels
frst sale of a re-generable CO
2
removal system for an Air
Independent Propulsion (AIP) submarine to another Asian
Navy provides a platform to expand in that
emerging market
CET - Proof of core technology and entry to
wider applications with additional partners
compact compressors were proven in customer tests both
with industrial process gases in the UK and in methane
at CETs proving ground in Cumbria, and more than 6,000
feet underground in a live gas well in Texas
expander technology in successful testing with our partner
which showed economic power generated
from waste process gases in a very compact and
efcient package
orders received for design of a compression system for
ofshore platform application and expander for generation
of electricity from waste energy in the gas network
HTT - Successful restructuring and
repositioning provides momentum for 2014
fundamental business review resulting in a change of
management, and a refocusing on its core strengths
and major customers
won and completed the early stages of a 1.6m order
for fve specialised heat exchanger units to be delivered in
Saudi Arabia in 2014
order from the UK division of a global speciality chemical
company worth approximately 1.1m for the design
and manufacture of 4 exchangers plus a full set of
interchangeable spares to be delivered in the UK during 2014
2013 5
Strategy in Action
Life Support Systems on Naval Vessels - ACI
ACI is recognised as a leading supplier of specialist
submarine air purifcation equipment. The success of the
Company is founded on:
innovation and engineering excellence in its core
atmosphere management products
design-level integration in the vessel during construction
intimate knowledge of the challenges and uniqueness of
the submarine environment
a track record of frst class delivery and service over
decades of system life
The solutions have lifetimes measured in decades, and ACI
provides through-life support that includes both scheduled
refurbishment and unscheduled service and repair.
The key technology underpinning the international sales
of CO
2
removal equipment is liquid MEA (Mono Ethanol
Amine) direct scrubbing technology. Variants have been in
use throughout the entire nuclear submarine community
for almost 50 years. This has been extended and developed
within the last 15 years for AlP (Air Independent Propulsion)
diesel electric submarines. Innovations developed by ACI
ofer the prospect of at least another 30 years of service.
The core technology is supported by other systems
for oxygen generation and removal of refrigerants and
other toxic gases to provide an integrated atmosphere
management solution which also meets the stringent
demands for noise, vibration and discharge that
characterise long-term submarine deployments.
The 3rd generation O
2
production system, known as the
Combined Oxygen Generation System (COGS) has been
successfully proven at sea and will become the backbone
of the ACI business for the next 10 years, with service and
refurbishment business potentially long after that.
ACI is exploring opportunities to transfer these
technologies into other environments that call for clean
air in confned spaces.
Coracs technologies at the heart of customer systems
Corac Group is a combination of three operating companies, two of which offer mature products
in their established markets, are protable and generate cash. The third company is investing
in commercialising future technology propositions. The Group strategy has two main elements.
First, we maximise the return from our tier 1 customer base: we work with some of the largest
and most successful organisations in the world and commit to delivering excellent products and
services to them, working efciently to create the greatest value from those relationships.
Secondly, we recognise the future value of innovation, and focus on the development of a select
group of technologies in which we have experience and identify a commercial opportunity. A
disciplined approach to development, working in partnership with integrators and end-users,
with constant technical and commercial review will drive long-term benet from this investment.
The strategy is implemented and supported by a management team that brings international,
technical and commercial experience, and a track record of success at this level. This team will
drive the Group towards prot and build shareholder value as a result.
2013 6
CET technologies have been
subject to extensive laboratory,
owloop and eld testing with
development partners in live gas
wells and industrial applications
in Europe, the United States
and the Far East.
2013 7
Compact Compressors and Expanders for
Energy and Oil & Gas Markets - CET
CET is a compressor company that was the frst to use gas
bearings for high-speed, compact, no-oil turbomachines. It
is an innovative business that develops technologies that
are at the heart of performance-enhancing systems in oil
and gas production and waste energy recovery.
As a technology developer, CET has created a portfolio of
patented IP. These technologies are deployed either as:
a central part of an end-user system, built to serve
specifc, site-related needs
the core of a volume commercial product, produced by
an OEM with technology licensed to the manufacturer
Coracs core technologies are:
compact, oil free compressors
contactless expanders for energy generation
rugged and compact electronic drive systems to control
electrical machines in harsh environments
CET technologies have been subject to extensive laboratory,
fowloop and feld testing with development partners in
live gas wells and industrial applications in Europe, the
United States and the Far East. An industrial compressor
using contactless bearings has been operating on a client
site for more than 4 years, accumulating more than 25,000
hours at 60 to 70 thousand rpm, with minimal service or
maintenance intervention.
The same technology has been applied in gas production
with a landmark test carried out during 2013 in Texas.
Three compressors acting together as a multi-stage system
ran for 140 hours, more than 6,000 feet underground,
in a live gas well.
Heat Exchange Systems for Downstream
Petrochemical and Industrial Plants - HTT
Hunt Thermal Technologies is a leading supplier of heat
exchangers operating in demanding applications, with
complex metallurgy and highly specialised technical
requirements in markets like downstream oil and gas or
chemical process industries.
The company applies advanced manufacturing techniques
to work with exotic metals. These are pioneering
manufacturing procedures that typically exceed industry
code requirements and are supported with exhaustive
quality testing.
Proven experience with exotic metals, including Duplex,
Super Duplex, Hastelloy and Cupronickel, means
the company can diferentiate itself from standard
commoditised fabrication, and ofer competitive solutions
to international customers in diverse market sectors.
HTT also designs and manufactures extended surface heat
exchangers for all forms of air and gas treatment and the
heating, cooling and condensing of all types of liquids and
vapours. All are custom designed and constructed to suit
specifc requirements. The full service includes problem
solving, analysis and design of bespoke units, manufacture,
installation and support.
Example installations include:
shell and tube exchangers in duplex and carbon steel for
ofshore platform operation in the southern North Sea
multiple duplex heat exchangers (each 14m long, weighing
13 tonnes) for a hydrocracker unit at an onshore oil
and gas facility
Combined Heat and Power (CHP) - gas to thermal fuid
Recuperator, heating almost 5000 kg/hr of thermal fuid
from 100C to 300C using exhaust gas at 400C
through a multi-section custom-designed extended
surface exchanger.
8 2013
It was a very busy time as the business evolved
and we put in place some changes to set
us up better for the long-term. We fnished
the bedding-in process with the acquired
companies and found the balance between
great products with solid long-term contracts,
particularly in ACI, and new technology
development to build the future.
We now have two businesses generating
proft and are confdent this will grow, and CET
heading towards commercialisation. 2014 will
be a big year to drive the business towards a
wider revenue stream that continues down the
path to make the group proftable.
Not at all. When we came in, the technology
looked a lot closer to delivery than it really was.
We have had to do a lot more than I expected
to secure the resources to bring technologies
to the table. Technology proving has taken a lot
longer than I thought and must face a lot more
challenges to be accepted as safe and efective.
Raising funds and buying the two companies
from Wellman was a part of that. We also had
to do a lot of internal evolution to focus on
what we are best at and then to give them our
best shot. We are a lot closer now and I think
this year will show how much efect all that
work can have on the business and our ability
to give a return to our stakeholders.
I still believe in the technology and its potential.
It is a slightly diferent picture now than I saw
when I frst came through the door, but the
team around me has done great things with
this business and I can see a path to get us
where we should be.
Q&A With Phil Cartmell
How do you look back on
the past year?
After four years with the
business, is it how you
expected it to be?
Q
Q
the team around me
has done great things
with this business and I
can see a path to get us
where we should be
2013 9
The focus is on proving technologies
in customer environments. There is a
delicate balance between proving that a
technology performs and can be made
available for general commercial use, and
the particular demands of a single use.
We also test in productive customer
facilities, which are only available to
us at certain times as dictated by their
business needs.
We feel that complex solutions can be
delivered, but these will involve many
parties, as we experienced during testing
in Texas. Our contribution may in fact be
a relatively small part of the deployment,
and focused on our specialist area, the
compact compressor.
At the Board level, we felt we were
spread a bit thin in key areas, so sat
down to work out the best shape to
take us forward. That was partly about
what the business had become, and
also where we saw it going in the next
few years. We needed to separate
the Chairmanship from the executive
leadership function, to focus more on
the operational performance of the
established businesses and to balance
this with strong fnancial controls. So, we
set about putting square pegs in square
holes and I am pleased that Jon and
Julia have joined us. It is a much more
balanced team and I am happy with how
it has worked so far.
HTT needed some work, as I felt they were
not making the most of what they had.
I am a frm believer in the value of good
leadership and I was delighted when we
met Neville Vickery in the spring. He was
just what we needed at the time and
has settled in very well at Dukinfeld. His
eforts to simplify the business and bring
in a business development specialist to
work alongside him have paid of well
with a strong second half and more to
come from that business.
We were really pleased to get our
compressors working on site in Texas
in April. This was a big step into new
territory, and we learned a lot as a result.
We did a lot of simulation and fowloop
testing before we went to Texas, based
on data supplied from the well by our
partner. Once in place, the compressors
worked well, but as they went through
the running sequence it was difcult to
tune them to get the full output. When
we took it out we could see why it came
out black and oily, which was a surprise
in what we understood was a relatively
clean and dry well.
We worked with our partners to fgure
things out, and two possibilities emerged.
Either the normal gas stream is worse
than we thought, or some material hit the
compressor as a result of the start-up
procedures.
We agreed that the compressor must
withstand both conditions, so our
partners are looking at the starting
procedures to minimise bad efects
whilst we look at making the compressor
more resilient. We are now waiting
for these actions to complete and an
opportunity to revisit the feld testing.
I look at it more as a Group plan, with
diferent contributions coming from each
of the three businesses. It is true, whilst
CET is still in the development phase
it is burning some cash and the other
companies contribute profts to reduce
the overall burn. The real integration
is deeper than that though. HTT are
expert fabricators and are supplying
goods to the CET build programme at
a much more economic rate than we
could achieve by sourcing from the open
market. Both companies are established
in mature markets with good long-term
prospects and that adds some
stability into the package that we were
missing before.
We have agency agreements in various
countries that originated in one of the
companies but are now being opened up
to allow access for the others products in
those locations, and this is proving to be
a very positive step.
The net amount raised was 10.8 million
and as explained in the placing document
this will be used to invest to complete the
development of our existing technologies,
including the completion of projects
with existing customers, building of test
facilities and investment in equipment for
multi-unit testing.
As we found in Texas, each well is unique,
and the systems we provide will be
bespoke variations on a core technology.
We think the focus will be on proving the
core technology; applications like the
DGC will then be built on that foundation.
For example, at the wellhead we can do
more to condition the gas before it gets
to the compressor, and that will help
us to deliver more standard systems in
those locations.
The compressor is the central part of
bigger systems with many other parties
involved. Our true skills lie with the
compressor, and I think this is where
we will focus our eforts in the future.
We can then work with others to add
ancillary systems and put the whole
package together at the well-site.
What are the business
challenges facing CET?
There were some
management changes.
What drove those?
What happened on
the DGC tests?
How are the acquired
companies supporting
the CET plan?
You raised funds in
December. How will
they be used?
How do you see the
DGC going forward?
Q Q Q
Q
Q
Q
both companies are
established in mature
markets with good
long-term prospects
work together
exibly to solve
a production
problem using our
core technology
10 2013
Q&A With Phil Cartmell (continued)
This is a big step forward. It came
as a result of us showing a working
compressor in our fowloop at Slough,
and is the path we would like to follow
more often in the future.
It takes existing technology and uses it
as a base for use in other locations and
applications. I think BP must have seen
the potential of the technology, not just
in Trinidad but possibly elsewhere.
The master agreement was set up to
make it easier for both parties to work
together fexibly to solve a production
problem using our core technology.
It was a similar story to BP really. We
have some proven technologies that
can show prospective partners what is
possible. We also have some creative
and talented engineers who can describe
what is possible in a range of uses. In this
case, the compressor acting in reverse
is an efcient generator of electricity in
a small package. To the engineers it is
a logical step; there is a lot of work to
do to make it real, but that is what CET
is in business to do make valuable
systems from a growing range of proven
technologies.
Proftable, and to be delivering proven
engineered solutions in strong markets
across the globe, with our innovation
skills working to add more products
to the portfolio that will improve the
returns in our businesses even more.
What does a Master
Service Agreement
with an oil major like
BP mean to Corac?
How did you get into
the renewable energy
market?
Where do you see
the group in three
years time?
Q Q
Q
make valuable
systems from
a growing
range of proven
technologies
Q&A With Phil Cartmell (continued)
2013
11
12 2013
Chairman and CEO joint statement
Overview
The year to 31 December 2013 was another exciting period of development for Corac. It was a
period in which we made major progress in the integration of ACI and HTT, and saw them deliver
a strong second half performance, which sets the Group up for growth in 2014. It was also a period
in which we saw signicant achievements in technology development by CET. This progress was
made in both our compressors in the oil and gas markets, and our expanders in renewable energy
applications.
The three group companies complement each other, with ACI and HTT providing a stable and
protable base within established markets. CET is developing a range of innovative compressors
and expanders using its own patented technologies, which are now within sight of achieving
commercial sales. The common theme is innovation and engineering excellence. This allows us
to differentiate ourselves and to nd those applications where core technologies can be used to
generate exceptional value.
Coracs goal is to become a protable engineering group that can balance technically superior
deliveries in our established markets with innovation and development of new propositions to
drive future growth.
Protable and
mature businesses
From revenue of 18.3m (2012 9 months: 15.1m)
ACI and HTT generated a combined Adjusted EBITDA
of 2.6m (2012 9 months: 2.3m) which underpinned
the fnancial performance of the Group. ACI grew its
profts last year, and HTT reshaped its management
team and put in place the foundations for growth in
2014. The focus of both companies is to grow their
businesses organically from their stable markets and
strong customer bases. Notable successes have already
been seen with additional export business for heat
exchangers in Saudi Arabia and CO
2
scrubbers in
South East Asia.
Both companies provide large-scale technical
equipment with the potential for ongoing support
business. This provides visibility of a mature pipeline
of future commercial value. Long-term relationships
also stimulate continuous improvement, and so the
products will evolve to remain competitive and ofer
further growth potential. An example is the investment
in advanced CO
2
removal systems to meet the
demands of future submarine programmes in the UK
and abroad over the next thirty years.
Building
future value
Long-term value will be built upon the ACI and HTT
foundations. In both cases, the Group has implemented
business development initiatives to focus on key
technical strengths to secure a diferentiated position
in international markets. To support this further, the
Groups geographical presence has been extended with
the appointment of a commercial agent in North Africa
and the opening of discussions with potential partners
in South America and Eastern Europe.
CETs focus is to prioritise its most valuable
technologies and deliver a business beneft at the
earliest opportunity. It will build value by demonstrating
the technical readiness of its core systems to partners
and established market leaders, and then work with
them to deliver commercial use. This modular approach
will allow CET to show progress more efectively, and
attract commercial revenues earlier in the process.
...notable successes have been
seen from a business development
approach that focused on key
technical strengths...
2013 13
Additional funding
From revenue of 18.3m (2012 9 months: 15.1m) ACI
and HTT generated a combined Adjusted EBITDA of 2.6m
(2012 9 months: 2.3m) which underpinned the fnancial
performance of the Group. ACI grew its profts last year,
and HTT reshaped its management team and put in place
the foundations for growth in 2014. The focus of both
companies is to grow their businesses organically from
their stable markets and strong customer bases. Notable
successes have already been seen with additional export
business for heat exchangers in Saudi Arabia and CO
2

scrubbers in South East Asia.
Board changes
In March 2013, the company announced the appointment
of an independent non-executive Chairman, refecting the
signifcant acceleration of the Groups development in the
preceding year, with the Chief Executive Ofcer continuing to
focus on providing vision, strategy and communication with
investors, customers and staf. Richard King, an existing
non-executive director, was appointed non-executive
Chairman and Phil Cartmell as Chief Executive Ofcer.
At the same time, we also appointed Julia Henderson as an
additional non-executive director, adding her experience of
advising entrepreneurial growth companies in a wide range
of sectors. In July, we separated the roles of Chief Financial
Ofcer (CFO) and Chief Operating Ofcer (COO) to refect
the increasing breadth of business activities. We welcomed
Jon Carter as CFO with a background in private equity
backed and leveraged companies in the manufacturing
and technology sectors, and Mark Crawford, previously CFO,
was appointed COO to drive business growth and delivery
across the three operating companies.These changes equip
the Board with a range and balance of skills and position us
well to continue the expansion of the Group.
19.3m (2.9m) 13.7m
Group Revenue Adjusted EBITDA
2
Group Cash
2012: 15.3m 2012: (4.1m) 2012: 6.7m
... the Groups geographical presence
has been extended with the
appointment of a commercial agent
in North Africa and the opening of
discussions with potential partners in
South America and Eastern Europe...
14 2013
Chairman and CEO joint statement (continued)
Financial results
Group revenue increased to 19.3m (2012: 15.3m), and
our Adjusted EBITDA loss before tax was 2.9m (2012:
4.1m). This improvement on 2012 was driven by a full-year
Adjusted EBITDA contribution from the ACI/HTT businesses
of 2.6m (2012 9 months: 2.3m), and a reduced Adjusted
EBITDA loss at CET of 3.5m (2012: 4.7m). The Groups loss
before tax for the year was 4.3m (2012: 6.1m).
Following the successful fundraising in December, we
closed the year with 13.7m (2012: 6.7m) of cash, which
allows us to continue to support the key development and
growth initiatives across the Group.
Outlook
The Group enjoys long-term successful relationships with
a number of tier 1 customers and partners. We have also
assembled a high quality leadership team, with an enviable
group of talented engineers, technicians, commercial and
administrative staf. We also have a growing portfolio of
products and an exciting innovation pipeline that will serve
us well for many years. The combination of all these factors
provides encouragement for 2014 and beyond.
The operational improvements made at ACI and HTT have
already led to further orders being secured soon after the
year end (as announced 14 January 2014). This growth of
the Group order book since the year end provides greater
visibility of revenue for the balance of 2014.
We anticipate the business development initiatives in these
companies to extend their products into new markets and
build propositions for emerging products. These plans are
expected to yield additional sales this year. Building upon
the technical milestones achieved this year, the CET strategy
is to focus on the demonstration of functioning systems
that can deliver the performance and reliability expected by
the markets in which we operate.
We are then confdent of moving to the next phase of
the product life with follow-on orders in 2014, and in
some cases the preparation for manufacturing by our
industrial partners.
Overall, we are pleased with the progress made in 2013
and how we are building the future value of the Group.
Phil Cartmell
Chief Executive Ofcer
Richard King
Non-executive Chairman
2013
15
16 2013
14 Annual Report and Financial Statements 2013

Non-executive Chairman Chief Executive Officer
Finance and Operations statement
Operational Focus
The operational focus in 2013 has concentrated on a number of areas:
Bedding in the ACI and HTT businesses and providing the platform for growth
Restructuring the HTT management team
Focus on the core technologies at CET and their applications in different sectors
Using the CET innovation skills to enhance the solutions across the group
Delivering the milestones on the CET partner programmes
Financial overview
The Group narrowed its losses in the year and is focusing on becoming profitable within the next
two years. The decision to acquire ACI and HTT in 2012 has positioned the Group with two
businesses generating profits and cash, and poised for growth. CET is moving towards
commercialisation and continuing to invest in compressor and expander technology. The successful
fundraising in December 2013 helped to boost cash reserves to 13.7m at year end, and Group Net
Assets to 25.7m (2012: 18.4m). The Group reduced its loss before tax by 1.8m to 4.3m and its
Adjusted EBITDA loss by 1.2m to 2.9m.

2013 2012
Adjusted EBITDA
1
M M Change %

ACI 2.3 1.7 35%
CET (3.5) (4.7) 26%
HTT 0.3 0.6 (50%)
Central costs (2.0) (1.7) 18%
Adjusted EBITDA
1
loss (2.9) (4.1) 29%

Note: The comparative 2012 figures for ACI and HTT were for a 9 month period post acquisition in
2012.
1 Adjusted EBITDA is defined as operating profit adjusted to add back depreciation of property, plant and equipment,
amortisation and impairment of acquired intangible assets, share based payment charges and exceptional items.
Exceptional items are those items believed to be exceptional in nature by virtue of their size and or incidence.

December 2013 Share Placing and Open Offer
The Group raised 10.8m (net of expenses) in a Placing and Open Offer completed in December
2013. The funds were raised principally to accelerate the CET path to commercialisation by funding
the completion of the existing research programmes, capital expenditure to fund improved testing
facilities and the build of multiple systems, permitting parallel testing to increase the efficiency of
the development cycle.

2013 17
2013 Annual Report and Financial Statement 15

Group Financial Key Performance Indicators
The Group Board and Executive Board monitor the performance of the business through monthly
reporting packs and in particular the following Key Performance Indicators (KPIs)

2013 2012

M M
Group

Revenue 19.3 15.3
Closing order book 14.2 14.4
Operating loss (4.3) (6.3)
Adjusted EBITDA loss (2.9) (4.1)
Net Cash 13.7 6.7
ACI

Revenue 10.7 7.5
Operating profit 1.5 1.1
Adjusted EBITDA 2.3 1.7
Margin 22% 23%
CET

Revenue 1.0 0.2
Operating loss (4.0) (5.1)
Adjusted EBITDA loss (3.5) (4.7)
R&D spend 3.0 3.2
HTT

Revenue 7.6 7.6
Operating profit 0.2 0.6
Adjusted EBITDA 0.3 0.6
Margin 4% 8%

Central Costs Adjusted EBITDA loss (2.0) (1.7)

Note: The comparative 2012 figures for ACI and HTT were for a 9 month period post acquisition in
2012.

Revenue
The Revenue movement was driven by the full year impact at ACI and HTT. This compares with a 9
month post acquisition period reported in 2012 for these businesses. ACI revenue increased slightly
on a pro-rata basis to 10.7m (2012 9 months 7.5m). HTT revenue for the full year in 2013 of
7.6m was equivalent to the 7.6m achieved in 9 months in 2012, reflecting a weak first half year
followed by the disruption caused by the management changes. Revenue at CET grew to 1.0m
from 0.2m in 2012 as the development contracts progressed steadily.
18 2013

Order Book
The Group order book remained steady at 14.2m (2012 14.4m) providing strong visibility for
revenue in 2014, as the majority of this work will be delivered in the year. Furthermore, the
pipeline of qualified opportunities was substantial at the year end and new orders taken since the
year end have led to the order book growing in the early part of 2014.
Adjusted EBITDA Loss
The Group Adjusted EBITDA loss was 2.9m (2012: 4.1m), which is an improvement on 2012,
driven principally by an improved Adjusted EBITDA performance from the ACI/HTT businesses of
2.6m (2012 9 months: 2.3m), and a reduced Adjusted EBITDA loss at CET of 3.5m (2012: 4.7m).
The movement between Group EBITDA loss and Group Adjusted EBITDA loss was 68k related to
share based payments. The statutory operating loss before tax for the year was 4.3m (2012:
6.1m).
Group Balance Sheet
The Groups net assets increased to 25.7m (2012: 18.4m), principally due to the Placing and
Open offer which raised 10.8m net of expenses.
Group Cash Flow
The Group ended the year with cash reserves of 13.7m (2012: 6.7m). The Placing and Open offer
increased cash reserves, and significantly reduced the financial risk profile of the business. Such
funding should permit the Group to progress the journey towards profitability as ACI and HTT
improve their revenue streams and CET technologies reach commercial readiness. The Groups
operations continue to absorb cash, 3.7m (2012: 4.1m) to fund the development projects,
despite the reduction in loss before tax reducing from 6.1m in 2012 to 4.3m in 2013. The relative
size of the Groups contracts continue to impact on the working capital requirements of the
business, as the movement in inventories, receivables and payables in 2013 was an outflow of
1.5m (2012: inflow 0.2m). This is due to the material nature of the cash flows of each project,
rather than any issues over recoverability of cash.
Risk Management
The Directors Report on page 25 describes the principal risks and uncertainties affecting the Group
and a summary of the actions taken by the Directors to mitigate the key financial risks.
Going concern
The Directors are satisfied that, notwithstanding economic uncertainty, the Group has adequate
resources to continue in business for the foreseeable future, and accordingly continue to adopt the
going concern basis in preparing the accounts. In reaching this conclusion, the directors have
considered forecasts that cover a period of greater than twelve months from the date of the
approval of these financial statements. The forecasts take into account the Groups existing cash
resources, and include consideration of certain downside scenarios, in particular in relation to CET
where there is inherently greater uncertainty as to the future cash flows of that business. The
Directors have also considered the mitigating actions available to them, including the ability of
management to make certain reductions to the Groups discretionary expenditure if required.

2013 19

Facilities
The methane compressor development has led to an enhancement of the company capability in
flowloop testing. As a result of experience in Texas, the company has built additional test facilities
in Slough to provide a true multi-phase facility. This will allow engineers to explore the boundaries
of operation with the introduction of fluids and solids into the gas stream. Commissioned in 2013,
the facilities will be completed early in 2014 to provide more comprehensive demonstration and
testing regime before compressors are deployed into live conditions.
People
Corac Group employs a diverse and highly talented mix of technical, commercial and administrative
staff. Total staff employed at the end of 2013 was 170 (31 December 2012: 165).
Some parts of the business must manage short-term fluctuations in activity levels and so a
proportion of contract resources are used. The Group does enjoy great continuity from its
permanent staff, and at the year end, just 5% of the workforce were contractors. Among our
permanent staff, we are proud of our low levels of turnover. Staff attrition in 2013 was less than 7%
of the permanent workforce.
Group companies work in highly technical and scientific disciplines and a significant proportion of
the team hold first degrees, Masters and PhDs. 11% of employees are women including several in
senior executive and technical positions, and we have 13 different nationalities bringing a broad
experience of global business and technology.
In the central team, we have a small group of flexible, highly skilled and widely experienced
business managers who work across the operating companies to provide specialist support and
extended coverage more efficiently than would be possible from inside the companies.
Youth development is also important to Corac companies and we currently have four apprentices
undergoing training and development, as well as many senior employees who have graduated from
our apprenticeship programme.
Processes
All operating companies are accredited to ISO 9001. ACI also has ISO 14001 and plans are in place
for all three companies to be accredited to ISO 9001, 14001 and 18001 by the end of 2014.
As part of the growing focus on managing our positions within contracts and projects, the function
of commercial management was concentrated in a Group function that supports the needs of the
operating businesses. Access to specialist skills provided in this way has allowed us to negotiate
more effectively with the large organisations we deal with, and has also shortened the lead time to
concluding sales in the year.
Group-wide health and safety procedures have led to the introduction of standard site risk
assessments and a series of factory-floor initiatives including regular team meetings and briefings
on local topics relevant to safety. This work began at HTT and is being extended further across the
Group. The Group has joined the British Safety Council and all employees will undergo their initial
training module and be certified as trained.

20 2013

Atmosphere Control International
In the first full year of Group ownership, ACI has made good progress. Revenue and Adjusted
EBITDA were slightly ahead of the comparative figures for the 9 month period of ownership in 2012,
and Adjusted EBITDA margins were consistent at around 23%. The segment operating profit of ACI
was 1.5m (2012 9 months: 1.1m). The order book did reduce from an exceptionally high 9.6m in
2012 (following the DCNS order announced in October 2012) to 5.9m in 2013, the majority of
which is due for completion in 2014. More than 3m in new orders have since been taken in the first
quarter of 2014.
Management priorities
ACI enjoys a very strong relationship with its primary customers, the UK MoD and BAeSystems, the
prime contracting shipbuilder. Established over many years and providing the bulk of the companys
revenue, maintaining these relationships is a priority. The approach is to deliver committed work to
expectations whilst also being proactive to understand future needs and respond effectively to
provide long-term business.
Growth will be incremental, and will come from two sources: other international programmes
specifying ACIs existing technologies, and cross selling other ACI equipment to extend the reach in
existing UK and international customers. Greater focus was paid to the business development
activity in 2013 with presence at exhibitions, new marketing material and lead generation
initiatives, creating a pipeline of sales opportunities that are expected to mature during 2014.
Submarine breathing system
Defence is a nationally focused business where large naval fleets will typically look for a domestic
source for major systems. ACI is the only UK provider of atmosphere management systems for
submarines. It also competes very effectively for business in nations that may not have their own
national source. In 2013 ACI was awarded contracts by two countries in the Asia Pacific region, one
for a further unit to continue an existing successful programme, and one was to enter a new
programme, which was secured against international competition. In these fleets, the submarines
are smaller, Air Independent Propulsion (AIP) boats, more commonly known as diesel-electric.
Development lead times are long in this sector, and work has started on an enhanced CO
2
scrubbing
system that will form the backbone of ACIs business over the next thirty years, as it responds to
calls for lower threshold levels of CO
2
on future vessels.
Textile ducting TexVent
ACIs TexVent product has received a lot of business development support during the year. As a
result of enhanced marketing effort, it was showcased at the DSEI exhibition at Excel in the
London Docklands. This has led to engagement with several potential new customers and
opportunities to apply the system beyond naval vessels. Civilian maritime markets and other
military uses such as temporary buildings, field hospitals etc. are all potential uses for this product.

2013 21

Hunt Thermal Technologies
HTT had a challenging year during which the management team was restructured and many of the
processes in the business were re-engineered. Following a weak first half performance, HTT
delivered an Adjusted EBITDA of 0.3m (2012 9 months: 0.6m), which was achieved principally in
the second half of the year. The segment operating profit for HTT was 0.1m (2012 9 months:
0.6m). Furthermore, the improved processes have led to a closing order book of 5.4m (2012:
3.4m) all of which will be completed in the early stages of 2014.
HTT has capabilities in design and manufacturing with advanced metals, which differentiate it from
the mass market (which tends to be commoditised, and with lower margins) and management
priorities are to exploit these qualities and maximise their impact and growth potential.
The management restructuring led the company to recognise and play to these strengths. Neville
Vickery, an experienced engineering business leader was recruited from David Brown Ltd, as
Managing Director. There followed a restructuring programme that reinforced the existing
operational management with new hires in finance and business development.
This leadership team has concentrated on what differentiates HTT from the commodity market and
promoted high specification systems in domestic and international markets. The result has followed
through into the order book with significant new orders and an active pipeline to prepare the
business for 2014.
HTT Renaming
Hunt Graham Limited was renamed to Hunt Thermal Technologies Limited at the end of the year.
The change provided an opportunity to reflect more accurately the nature of the business and its
strengths in the market.
Shell and tube heat exchangers
HTT set out in 2013 to consolidate its core business in the UK petrochemical sector, build upon this
and also extend into new export business that would be driven from its capability in complex and
large thermal systems.
This approach led to a significant contract award, as announced in July 2013, to supply multiple
heat exchangers to a major project in Saudi Arabia. This was secured through a competitive bid
process against an international peer group and demonstrates that HTT can compete on a global
scale where complex, high-integrity systems are the key requirement.
The order was placed by a global Engineering, Procurement and Construction (EPC) company who
are a leading supplier of process systems to the Oil and Gas industry. That project was valued in
excess of 1.6m to deliver five specialised heat exchanger units for delivery within one year. This
route to market is expected to be an increasing part of HTTs future business approach.
The contract has further value for the Group as it extends our activities in Saudi Arabia, alongside
Corac Energy Technologies' gas field compressor project and demonstrates the Group's strategy of
extending geographic presence and supporting key clients across the combined range of Corac
Group business.

22 2013

Corac Energy Technologies
CET has continued to invest in the development of its compressor and expander technology,
resulting in the Adjusted EBITDA loss narrowing to 3.5m (2012: 4.7m). The segment operating loss
for CET was 4.0m (2012: 5.1m). Revenue at CET of 1.0m (2012: 0.2m) was a fivefold increase
on 2012, and was achieved across a number of development projects in both the oil and gas and
industrial sectors. Furthermore, the order book at year end stood at 2.9m (2012: 1.4m) of which
2.2m is in the oil and gas sector and 0.7m is in the industrial sector. The order book relates to
the value of partner funding for the development projects rather than true commercial sales, which
are expected to follow in 2014. The R&D spend of 3.0m (2012: 3.2m) remains significant, but was
lower than the previous year due to greater focus on efficiency and cost control.
At CET there has been much progress made during the year on the core technology elements.
Extensive testing of compressors and expanders has demonstrated the readiness of the core
technologies and the opportunities to develop them further towards new applications.
The management focus has evolved to ensure that the building blocks of technology are robust and
demonstrable. Field deployments of integrated systems rely on a number of external factors, many
outside our control. The focus has therefore evolved to maximise the confidence in the building
blocks and then to work with partners to put them into field applications.
Compact compressor single-stage
This is the application group that is growing from the original downhole systems. It is, relatively
speaking, the simpler of the methane compression systems, with a single stage of compression per
motor. Each motor/compressor unit produces a modest pressure ratio and will be deployed with
several in series to deliver higher ratios.
Following extensive testing in workshop and flowloop conditions, both at the Slough Technology
Centre and the methane test facility in Cumbria, compressors were deployed for the first time as
part of an integrated downhole compressor in a producing gas well in Texas in April 2013. The
compressors performed well for 140 hours at depths in excess of 6,000 feet, with inlet
temperatures approaching 100 degrees Celsius, and with condensate and other fluids in the gas
stream. These conditions are as harsh as these solutions are expected to meet in the intended
application wells. Work with the development partner continues in order to optimise the resilience
of the compressor to erosion and fouling challenges.
The success of this work was the stimulus for other projects to take the single-stage compressor
into new application areas. After much investigation of the potential for the technology, we signed
a Master Service Agreement in July 2013 with BP Trinidad and Tobago to create a larger variant of
the base compressor to be deployed on the deck of an unmanned offshore production platform.
This is an exciting development as it builds upon successful R&D work already completed to find a
new application point on high production rate wells.
Compact compressor multi-stage
This is regarded within CET as a separate development path with different challenges to the single-
stage machines. Based on a single, high power motor, this compressor has multiple stages mounted
on a single shaft within the enclosed compressor casing that sits between flanges in the production
pipework. The first application is under development with Saudi Aramco, having agreed an
extension to the original contract during 2013. The intent is to deploy the compressor with
supporting liquid management systems close to the wellhead.
Compact expander
The expander has been developed as a further variant to the compact single-stage compressor as a
means of identifying further application areas for the core technology. In this case, pressurised gas
spins the impeller to drive a permanent magnet generator, running on gas bearings, similar to those
used in the compressor, to produce electricity. The first system of its kind was developed with our
2013 23

industrial partner and successfully tested to show function and performance at the intended levels.
The system has since completed endurance testing over several months at the partner site.
A further contract was signed in December 2013 to extend the use of these systems in renewable
energy applications.
Outlook
The next phase of the Groups evolution will focus on getting the balance right between costs in
the operational businesses and investment across the Group to drive growth. We will invest in new
technologies plus any necessary facilities to improve operational efficiency and other support to
maximise returns from the regular business activities.
There will also be challenges as a result of growth. Capacity, skills, processes and the general
ability to deliver will be closely managed alongside external factors such as the supply chain to add
value and efficiency from the increased scale of the Groups activities.
Approval
The Strategic Report was approved by the Board of Directors on 1 April 2014 and signed on
its behalf by:

J P Carter M S Crawford
Chief Financial Officer Chief Operating Officer

Registered number: 3152034
Registered office: 683-685 Stirling Road, Slough, Berkshire SL1 4ST


industrial partner and successfully tested to show function and performance at the intended levels.
The system has since completed endurance testing over several months at the partner site.
A further contract was signed in December 2013 to extend the use of these systems in renewable
energy applications.
Outlook
The next phase of the Groups evolution will focus on getting the balance right between costs in
the operational businesses and investment across the Group to drive growth. We will invest in new
technologies plus any necessary facilities to improve operational efficiency and other support to
maximise returns from the regular business activities.
There will also be challenges as a result of growth. Capacity, skills, processes and the general
ability to deliver will be closely managed alongside external factors such as the supply chain to add
value and efficiency from the increased scale of the Groups activities.
Approval
The Strategic Report was approved by the Board of Directors on 1 April 2014 and signed on
its behalf by:

J P Carter M S Crawford
Chief Financial Officer Chief Operating Officer

Registered number: 3152034
Registered office: 683-685 Stirling Road, Slough, Berkshire SL1 4ST

JP Carter
Chief Financial Ofcer
MS Crawford
Chief Operating Ofcer
24 2013

Board of Directors
Executive Directors
Phil Cartmell
Chief Executive Officer
Phil Cartmell was appointed to the Board in September
2009. He has a highly active career in business, having
formerly been Chief Executive of Vega Group plc between
2001 and 2008, where he grew the company into a leading
European aerospace and defence business. In February
2008, Vega Group was acquired by Italian multi-national,
Finmeccanica, for a substantial premium. Phil has served
as a Non-Executive Director and adviser for a number of
companies including Alterian plc a leading provider of
Global Information Management solutions, where he was
Non-Executive Chairman until its acquisition by SDL plc in
January 2012 and Trafficmaster.
Jon Carter
Chief Financial Officer
Jon Carter was appointed to the Board in July 2013. Jon
was previously CFO at IPL Group Limited, a software
consultancy business, and part of a team that completed
an award winning leveraged buy-out in 2008. Jon started
his career in the corporate finance and corporate recovery
practices of Coopers and Lybrand in South Wales where he
qualified as a Chartered Accountant. Besides blue chip
experience at Compass plc, Jon has led the finance teams
in PE backed and leveraged businesses and successfully
completed a buy-out and exit at leading short run book
manufacturers Antony Rowe Group Limited.
Mark Crawford
Chief Operating Officer
Mark Crawford was appointed to the Board in November
2009. Prior to joining Corac Mark worked in a number of
commercial roles, the last of which was as a Director with
private equity backed Gondola, having previously gained
international experience with PepsiCo, Inc. Mark started
his career with Glaxo Pharmaceuticals UK Limited in
various strategic planning and financial roles and where he
gained his accountancy qualification with the Chartered
Institute of Management Accountants.

Non-Executive Directors
Richard King
Non-Executive Chairman
Richard King was appointed to the Board in February 2011
and became Chairman in March 2013. Richard spent 35
years with Ernst & Young LLP, becoming Managing Partner
of UK & Ireland and a member of both the EMEIA Board
and Global management group. Richard is a Fellow of the
Institute of Chartered Accountants in England and Wales
and worked extensively with growing businesses. Richard
is Chairman of both the Orchid Group and Grass Roots
Group, Non-Executive Director of CSF Group plc and
Allocate Software plc, is an advisory partner at Rockpool
Investments LLP and is on the advisory board of Frogmore
Property Group. He is also Chair of Trustees for the Willow
Foundation, a charitable organisation for seriously ill
children and adults.
Rohan Courtney OBE
Non-Executive Director
Rohan Courtney was appointed to the Board in April 2010
and chairs the Remuneration Committee. He was a career
banker for 27 years including 8 years as Chief Executive in
Europe of State Bank of New South Wales. He cofounded
UCG Association where he is a Trustee (first Chairman of
Trustees from 2009-2013), is Executive Chairman and
major shareholder in Clean Coal Limited, a UCG operator,
and has been involved in energy businesses for most of his
career. Rohan has served on a number of public company
boards and was a non-executive director of Tullow Oil plc,
one of Europe's largest Independent Oil and Gas
companies, from 1993 to 2007 (Senior Independent
Director from 2000-2007).
Julia Henderson
Non-executive Director
Julia Henderson was appointed to the board in March 2013
as a non-executive director and chairman of the Audit
Committee. Julia has over twenty five years' experience of
advising entrepreneurial growth companies in a wide
range of sectors. Her corporate finance career began at
ANZ Merchant Bank after which she became a co-founder
of Beeson Gregory, a mid-market investment bank (now
part of Investec). Julia is now an independent consultant
and non-executive director with private and quoted mid-
market companies. She was non-executive Chairman of
GTL Resources plc until its takeover in 2012 and is a non-
executive director of Alkane Energy plc and ECO Animal
Healthcare plc and Amati VCT plc.
2013 25
Directors Report

The directors present their report and audited financial
statements for the year ended 31 December 2013.
Principal Activity
Corac is a UK based group of advanced technology and
engineering companies.
Atmosphere Control International provides air purification
and oxygen generation equipment for submarines together
with air handling and distribution systems.
Corac Energy Technology specialises in the research and
development of technologies in the field of gas
compression and the design and manufacture of high
speed motors and generators using proprietary permanent
magnetic rotor and oil-less bearings.
Hunt Thermal Technologies is a leading manufacturer of
heat exchange equipment used in the cooling and heating
of large scale industrial processes.
Results and Dividends
The directors do not recommend the payment of a
dividend (2012: nil) and propose that the loss be added to
the deficit on reserves.
Research and Development
Total R&D expenditure in the year, including 2.0m cost
of sales within CET (2012: 0.2m), was 3.0m (2012:
3.2m), all of which was charged to the income statement
in the year.
Principal Risks and Uncertainties
In addition to financial risk management that is detailed in
note 25 to the financial statements, there are a number of
risks and uncertainties that could have a material impact
on the Group. Risks are reviewed by the Board and
appropriate processes and controls have been
implemented in respect of monitoring and control.
Principal business risks are as follows:
Commercial contracts for customers may be large
and long-term, with risks relating to contract
delivery and performance, including cost. Internal
procedures are designed to ensure that risks are
managed on a contract-by-contract basis so that
contracts are successfully delivered to customers on
time, on budget and to the highest quality
specification.
The Group has a niche position in the Defence
(naval) and Oil and Gas markets supplying specialist
equipment to a relatively narrow customer base and
the main external market risks relate to the
environmental factors within these specialist
sectors.
Researching and developing innovative technologies
carries a risk of failure to deliver within budgeted
cost and timetable or with adequate operating
performance and reliability. The Group has
assembled a broad based team with experience of
managing, developing technologies and project
management and has secured appropriate external
resources.
The market may not accept the Groups technology
solutions to achieve continuing support of existing
sales channels and the anticipated level and rate of
growth of future revenues. The Group continually
monitors the market place and works closely with
development partners and customers to advance the
Groups technologies.
General economic conditions and uncertainties on
potential partners plans for capital expenditure and
their ability and appetite to fund projects may
affect the business.
Technological change and the potential of
competitors to develop alternative solutions may
threaten the business. The Group has registered
patents covering key areas of its technology,
monitors relevant third party patents and has
developed significant know how.
It is important to retain key employees in the
development of the Groups technologies and
execution of its business plan. The Group seeks to
avoid over dependence upon specific employees and
formally documents key areas. The Group seeks to
retain staff and encourage their long-term
commitment by providing competitive remuneration
packages including company-wide share options.
The principal financial risk is the management of cash
during the development phase for the Group including:
Liquidity risk - the Group seeks to manage financial
risk by ensuring that sufficient liquidity is available
to meet foreseeable needs and by investing cash
assets safely and profitably. The Groups policy
throughout the year has been to achieve this
objective through managements day-to-day
involvement in business decisions rather than setting
maximum or minimum liquidity ratios. Group
policies are aimed at maximising liquidity and return
on cash through the use of short and medium term
bank deposits;
Foreign exchange risk - the Group undertakes
contracts denominated in foreign currencies
(principally Euro and US dollar) leading to an
exposure in exchange rate movements for both sales
and purchase transactions. Where they cannot be
offset, forward exchange contracts are utilised to
minimise the risk.
Credit risk - the Groups principal financial assets
are cash and trade receivables. The credit risk
associated with cash is managed by ensuring that
counterparties have high credit ratings assigned by
international credit rating agencies.
Interest rate risk - the Groups policy throughout
the year has been to place funds on deposit directly
with an approved list of banks maturities to match
the anticipated cash requirements of the Group; and

Capital Management
Capital consists of equity attributable to the equity
holders of the parent.
The primary objective of the Groups capital management
is to ensure that it maintains sufficient capital to support
the on-going expenditure requirements of the business
with a view to future commercial success from these
activities in order to maximise shareholder value.
The Group manages its capital structure and makes
adjustments to it in light of working capital requirements.
To adjust the capital structure, the Group issues new
shares. The Group currently has no debt financing.

26 2013
Directors Report continued
Creditor payment policy
The Group and Parent Company seek to agree payment
terms with their suppliers in advance of a transaction and
will pay in accordance with the agreed terms as long as
the Group and Parent Company are satisfied that the
supplier has provided goods and services in accordance
with the order.
The Groups creditor payment period was 40 days (2012:
54 days). The Parent Companys creditor payment period
was 46 days (2012: 54 days).
Employee Involvement
The Groups policy is to encourage involvement at all
levels, as it believes that this is essential for the success
of the business.
Disabled Employees
Full consideration is given to employment applications
from disabled persons who have the necessary aptitudes
and abilities. Where an employee becomes disabled while
employed, arrangements are made wherever practicable
to maintain employment. The company seeks to develop
the skills of disabled persons by providing applicable
training, taking into account their particular needs.
Directors' and Officers' Liability
Insurance
The Parent Company has purchased liability insurance
covering its directors and officers.
Directors and their Interests
The directors during the year were as follows:
Executive
P Cartmell
M S Crawford
J P Carter (appointed 22 July 2013)
Non-executive
R W King
R R Courtney OBE
J A Henderson (appointed 26 March 2013)
Directors interests in shares are shown in the
Remuneration report.
Related Party Transactions
These have been disclosed within note 28 to the accounts.
Auditor
Each of the persons who is a Director at the date of
approval of this Annual Report confirms that:
so far as the director is aware, there is no
relevant audit information of which the
companys auditors are unaware; and
the director has taken all steps that he/she
ought to have taken as a director in order to
make themselves aware of any relevant audit
information and to establish that the companys
auditors are aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the
Companies Act 2006.
Deloitte LLP has expressed willingness to continue in
office. In accordance with s489(4) of the Companies Act
2006 a resolution to re-appoint Deloitte LLP will be
proposed at the Annual General Meeting.
This report was approved on behalf of the Board on 1 April
2014 and signed by order of the Board.

M J Webb
Company Secretary
1 April 2014

Directors Report continued
Creditor payment policy
The Group and Parent Company seek to agree payment
terms with their suppliers in advance of a transaction and
will pay in accordance with the agreed terms as long as
the Group and Parent Company are satisfied that the
supplier has provided goods and services in accordance
with the order.
The Groups creditor payment period was 40 days (2012:
54 days). The Parent Companys creditor payment period
was 46 days (2012: 54 days).
Employee Involvement
The Groups policy is to encourage involvement at all
levels, as it believes that this is essential for the success
of the business.
Disabled Employees
Full consideration is given to employment applications
from disabled persons who have the necessary aptitudes
and abilities. Where an employee becomes disabled while
employed, arrangements are made wherever practicable
to maintain employment. The company seeks to develop
the skills of disabled persons by providing applicable
training, taking into account their particular needs.
Directors' and Officers' Liability
Insurance
The Parent Company has purchased liability insurance
covering its directors and officers.
Directors and their Interests
The directors during the year were as follows:
Executive
P Cartmell
M S Crawford
J P Carter (appointed 22 July 2013)
Non-executive
R W King
R R Courtney OBE
J A Henderson (appointed 26 March 2013)
Directors interests in shares are shown in the
Remuneration report.
Related Party Transactions
These have been disclosed within note 28 to the accounts.
Auditor
Each of the persons who is a Director at the date of
approval of this Annual Report confirms that:
so far as the director is aware, there is no
relevant audit information of which the
companys auditors are unaware; and
the director has taken all steps that he/she
ought to have taken as a director in order to
make themselves aware of any relevant audit
information and to establish that the companys
auditors are aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the
Companies Act 2006.
Deloitte LLP has expressed willingness to continue in
office. In accordance with s489(4) of the Companies Act
2006 a resolution to re-appoint Deloitte LLP will be
proposed at the Annual General Meeting.
This report was approved on behalf of the Board on 1 April
2014 and signed by order of the Board.

M J Webb
Company Secretary
1 April 2014

2013 27
Corporate Governance Report

Principles of Good Corporate
Governance
The Group is committed to high standards of corporate
governance. It has adopted procedures to institute good
governance insofar as it is practical and appropriate for an
organisation of its size and nature, notwithstanding the
fact that companies that have securities traded on the
Alternative Investment Market of the London Stock
Exchange (AIM) are not required to comply with the
Combined Code as appended to the Listing Rules issued by
the Financial Services Authority. Whilst not required to
comply with the Code, the Group has chosen to give
selected disclosures which they believe are necessary or
valuable to readers.
As the Group grows, it will regularly review the extent of
its corporate governance practices and procedures. At its
current stage of development, the Parent Company does
not consider it appropriate to be fully compliant with the
Combined Code.
Application of Principles
Directors
During the year the Board consisted of three full time
executive directors (two until July 2013) and three non-
executive directors (two until March 2013). The Board met
nine times in the year and is provided with relevant
information on financial, business and corporate matters
prior to meetings.
As a result of the transformation of the group, an
additional non-executive director was appointed to
proactively address the growing needs of the Board to
support the larger group of companies from a business and
corporate governance perspective. The roles of Chief
Financial Officer and Chief Operating Officer were
separated and an additional Executive Director was
appointed in July.
The Board is responsible for overall Group strategy,
acquisition and divestment policy, approval of the budget,
approval of major commercial contracts and capital
expenditure projects and consideration of significant
operational and financial matters. The Board monitors the
exposure to key business risks and reviews the progress of
the Group towards achievement of its budgets and
forecasts. This is achieved by the close involvement of the
executive directors in the day-to-day running of the
business and by regular reports submitted to and considered
at meetings of the Board and subcommittees. The Board
also considers employee issues, key appointments and
compliance with relevant legislation.
The Board has both an Audit and a Remuneration
Committee. The Board do not consider it necessary to
constitute a separate Nominations Committee and all
members of the Board are consulted on the potential
appointment of a new director or a company secretary.
All directors can receive appropriate training as necessary
and are able to take independent professional advice in
relation to their duties if necessary at the Parent
Companys expense. All directors are subject to re-
election every three years.
Relationship with shareholders
The Board attaches a high importance to maintaining good
relationships with all shareholders. The Board holds
regular meetings with institutional shareholders to keep
them updated on the Groups performance, strategy,
management and Board membership. In addition, the
Board welcomes as many shareholders as possible to
attend the Annual General Meeting and encourages an
open discussion after the formal proceedings. The
Executive Directors give regular briefings to a number of
analysts who cover the technology sector and actively
encourages more analysts to follow the Group.
Accountability and audit
Directors' responsibilities
The directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law, the
directors are required to prepare the Group and Parent
Company financial statements in accordance with
International Financial Reporting Standards (IFRS) as
adopted by the European Union.
Under company law, the directors must not approve the
accounts unless they are satisfied that they give a true
and fair view of the state of affairs of the company and of
the profit or loss of the company for that period. In
preparing these financial statements, the directors are
required to:
properly select and apply accounting policies
present information, including accounting policies,
in a manner that provides relevant, reliable,
comparable and understandable information
provide additional disclosures when compliance with
the specific requirements in IFRSs are insufficient to
enable users to understand the impact of particular
transactions, other events and conditions on the
entity's financial position and financial performance
assess the company's ability to continue as a going
concern
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the companys transactions and disclose with reasonable
accuracy at any time the financial position of the Group
and Parent Company and enable them to ensure that the
financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of
the company and hence for taking reasonable steps for
the prevention and detection of fraud and other
irregularities.
The directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the companys website. Legislation in the
United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
The directors confirm that to the best of their knowledge
the financial statements, prepared in accordance with
IFRS, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the company and
the undertakings included in the consolidation taken as a
whole; and the management report, which is incorporated
into the directors' report, includes a fair review of the
development and performance of the business and the
position of the Group taken as a whole, together with a
description of the principal risks and uncertainties that it
faces.

28 2013
Corporate Governance Report continued
As far as each of the directors is aware, there is no
relevant information of which the Parent Companys
auditor is unaware. Each director has taken all the steps
that they ought to have taken as a director in order to
make themselves aware of any relevant information and
to establish that the Parent Companys auditor is aware of
that information.
Audit Committee
During the year, the Audit Committee comprised three
non-executive directors (two until March 2013). The
Committee has specific terms of reference that deal with
its authority and duties. It meets at least twice a year,
with the Executive Directors, and the auditor attending by
invitation. The Committee reviews the independence and
objectivity of the auditor each year. The Committee
overviews the adequacy of the Group and Parent
Company's internal controls, accounting policies and
financial reporting and provides a forum through which
the Company's external auditor reports to the non-
executive directors.
The Board has decided that the size of the Group does not
justify a dedicated internal audit function. This position
will be reviewed as the Group's activities increase.
Going Concern
Discussion of going concern is included within the
accounting policies described in note 2 of the Notes to the
Financial Statements.
Internal Control and Risk
Management
The Board has overall responsibility for ensuring that the
Group and Parent Company have processes to identify,
evaluate and manage key risks. The nature of the Groups
business comprises a mix of commercial design,
manufacturing and service/maintenance as well as on-
going R&D. This calls for rigorous cost analysis and market
risk assessment. The system is designed to manage and
minimise risk of failure to achieve the Parent Company's
strategic objectives, and can only provide reasonable, and
not absolute, assurance against material misstatement or
loss.
Key areas of internal control are listed below:
the review of contract progress against milestones
and forecast expectations to ensure that contracts
are delivered on time and on budget
regular review of the technical development
programmes, the commercialisation of the Groups
technology and the financial performance of the
Group in the context of the Parent Company's
business plan
an organisation structure with clear executive
policies on recruitment, training, appraisals and
project management
an annual budget showing projected revenues,
costs, funding requirements and operational targets
approved by the Board and monitored for
performance against it
a system to ensure the security of the Groups
intellectual property

The directors consider that the present system of internal
control is sufficient for the needs of the Group and Parent
Company and adequately addresses the risks to which the
Group is perceived to be exposed.
On behalf of the Board

J A Henderson
Chairman
Audit Committee
1 April 2014

that information.
Audit Committee
Going Concern
Management
loss.
business plan
project management


J A Henderson
Chairman
Audit Committee
1 April 2014

that information.
Audit Committee
Going Concern
Management
loss.
business plan
project management


J A Henderson
Chairman
Audit Committee
1 April 2014

2013 29

Remuneration Report

Unaudited Information
Remuneration Committee
During the year, the Remuneration Committee was made up of three non-executive directors. The
Remuneration Committee was chaired by Mr R R Courtney OBE and was attended by the Chief
Executive by invitation. The Remuneration Committee sets and annually reviews the terms and
conditions of employment of the executive directors. The remuneration of non-executive directors
is fixed by the Board as a whole. The Remuneration Committee also monitors and reviews the
Group-wide appraisal process and approves the proposals from the executive directors for all
employees' remuneration and option arrangements.
Remuneration Policy
The Parent Company's policy on executive directors' remuneration is to attract and retain high
quality executives by paying competitive remuneration packages relevant to each director's role,
experience and the external market. The packages include a basic salary, pension contributions and
share options. Up to 2010, options granted incorporated individual performance conditions. From
2010, all new options were granted without performance conditions. On 24 September 2013,
options over 500,000 shares were granted to J P Carter. The options are exercisable in three equal
instalments, from 20 September 2014 at a price of 13.58 pence. No options were granted to the
Directors during the year to 31 December 2012.
Service Agreements
All Directors are appointed on 12 months rolling contracts and therefore have 12 month notice
periods. Non-Executive Directors are appointed on three year contracts, with no notice period.
Audited Information
Directors' Emoluments
Basic
salary
or fees
Pension
contributions
Other
Benefits
Total
emoluments
2013
Total
emoluments
2012
000 000 000 000 000
Executive
P Cartmell 260 17 - 277 518
J P Carter (appointed 22 July 2013) 60 - - 60 -
M S Crawford 205 14 - 219 203
Non-executive
R W King 41 - - 41 32
R R Courtney 35 - - 35 35
J A Henderson (appointed 26 March 2013) 23 - - 23 -

624

31

-

655

788

Page 6
30 2013

Remuneration Report continued

Directors' Share Options
The interests of the directors, who were in office at the end of the financial year, in options over
the shares of the Parent Company at 31 December 2013 and 31 December 2012 were:
As at Exercised Lapsed Issued As at
31 Dec 2012 in year in year in year 31 Dec 2013 Exercise
number number number number number price (p) Lapse date
Executive
P Cartmell 2,000,000 - - - 2,000,000 42.00 30 September 2019
P Cartmell 300,000 - - - 300,000 21.75 30 April 2020
P Cartmell 3,000,000 - - - 3,000,000 15.00 9 December 2020

J P Carter - - - 500,000 500,000 13.58 24 September 2023

M S Crawford 300,000 - - - 300,000 39.00 21 October 2019
M S Crawford 200,000 - - - 200,000 34.75 11 December 2019
M S Crawford 300,000 - - - 300,000 21.75 30 April 2020
M S Crawford 1,950,000 - - - 1,950,000 15.00 9 December 2020

Non-executive
R W King 250,000 - - - 250,000 15.00 7 February 2021

R R Courtney OBE 250,000 - - - 250,000 15.00 9 December 2020

The closing mid-market price of the Parent Companys shares as quoted on the Daily Official List as
published by the London Stock Exchange was 10.38p at 31 December 2013 and in the period 1
January 2013 to 31 December 2013 was a closing mid-market high of 16.88p per share and a low of
10.25p per share.


Directors' Share Options
The interests of the directors, who were in office at the end of the financial year, in options over
the shares of the Parent Company at 31 December 2013 and 31 December 2012 were:
As at Exercised Lapsed Issued As at
31 Dec 2012 in year in year in year 31 Dec 2013 Exercise
number number number number number price (p) Lapse date
Executive
P Cartmell 2,000,000 - - - 2,000,000 42.00 30 September 2019
P Cartmell 300,000 - - - 300,000 21.75 30 April 2020
P Cartmell 3,000,000 - - - 3,000,000 15.00 9 December 2020

J P Carter - - - 500,000 500,000 13.58 24 September 2023

M S Crawford 300,000 - - - 300,000 39.00 21 October 2019
M S Crawford 200,000 - - - 200,000 34.75 11 December 2019
M S Crawford 300,000 - - - 300,000 21.75 30 April 2020
M S Crawford 1,950,000 - - - 1,950,000 15.00 9 December 2020

Non-executive
R W King 250,000 - - - 250,000 15.00 7 February 2021

R R Courtney OBE 250,000 - - - 250,000 15.00 9 December 2020

The closing mid-market price of the Parent Companys shares as quoted on the Daily Official List as
published by the London Stock Exchange was 10.38p at 31 December 2013 and in the period 1
January 2013 to 31 December 2013 was a closing mid-market high of 16.88p per share and a low of
10.25p per share.

2013 31


Directors' Interests
The directors who held office at the end of the financial year had the following beneficial interests
in the ordinary share capital of the Parent Company at 31 December 2013, at 31 December 2012
and at the date of this report:

Number held at Number held at

31 December 2013 31 December 2012

Ordinary Shares of Ordinary Shares of

10 pence each 10 pence each

P Cartmell 1,737,920 1,187,920
J P Carter 250,000 -
M S Crawford 370,207 180,167
R W King 440,476 290,476
J A Henderson 100,000 -

On behalf of the Remuneration Committee

R R Courtney OBE
Chairman
1 April 2014


Directors' Interests
The directors who held office at the end of the financial year had the following beneficial interests
in the ordinary share capital of the Parent Company at 31 December 2013, at 31 December 2012
and at the date of this report:

Number held at Number held at

31 December 2013 31 December 2012

Ordinary Shares of Ordinary Shares of

10 pence each 10 pence each

P Cartmell 1,737,920 1,187,920
J P Carter 250,000 -
M S Crawford 370,207 180,167
R W King 440,476 290,476
J A Henderson 100,000 -

On behalf of the Remuneration Committee

R R Courtney OBE
Chairman
1 April 2014

32 2013

Independent Auditors Report
We have audited the financial statements of Corac Group
plc for the year ended 31 December 2013, which
comprise the consolidated statement of comprehensive
income, the consolidated and parent company statement
of financial position, the consolidated and parent
company statements of changes in equity, the
consolidated and parent company statement of cash
flows and the related notes 1 to 28. The financial
reporting framework that has been applied in their
preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European
Union and, as regards the parent company financial
statements, as applied in accordance with the provisions
of the Companies Act 2006.
This report is made solely to the companys members, as
a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been
undertaken so that we might state to the companys
members those matters we are required to state to them
in an auditors report and for no other purpose. To the
fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company
and the companys members as a body, for our audit
work, for this report, or for the opinions we have
formed.
Respective Responsibilities of
Directors and Auditor
As explained more fully in the directors responsibility
statement within the corporate governance report, the
directors are responsible for the preparation of the
financial statements and for being satisfied that they
give a true and fair view. Our responsibility is to audit
and express an opinion on the financial statements in
accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Boards
Ethical Standards for Auditors.
Scope of the Audit of the Financial
Statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the groups
and the parent companys circumstances and have been
consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made
by the directors; and the overall presentation of the
financial statements. In addition, we read all the
financial and non-financial information in the annual
report to identify material inconsistencies with the
audited financial statements and to identify any
information that is apparently materially incorrect based
on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If
we become aware of any apparent material
misstatements or inconsistencies we consider the
implications for our report.
Opinion on Financial Statements
In our opinion:
the financial statements give a true and fair view
of the state of the groups and of the parent
companys affairs as at 31 December 2013 and of
the groups loss for the year then ended;
the group financial statements have been properly
prepared in accordance with IFRSs as adopted by
the European Union;
the parent company financial statements have
been properly prepared in accordance with IFRSs as
adopted by the European Union and as applied in
accordance with the provisions of the Companies
Act 2006; and
the financial statements have been prepared in
accordance with the requirements of the
Companies Act 2006.
Opinion on other matter prescribed
by the Companies Act 2006
In our opinion;
the information given in the Strategic Report and
the Directors' Report for the financial year for
which the financial statements are prepared is
consistent with the financial statements.
Matters on which we are required to
report by exception
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
adequate accounting records have not been kept
by the parent company, or returns adequate for
our audit have not been received from branches
not visited by us; or
the parent company financial statements are not in
agreement with the accounting records and
returns; or
certain disclosures of Directors remuneration
specified by law are not made; or
we have not received all the information and
explanations we require for our audit.

Darren Longley FCA
Senior Statutory Auditor
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, UK
1 April 2014

Independent Auditors Report
We have audited the financial statements of Corac Group
plc for the year ended 31 December 2013, which
comprise the consolidated statement of comprehensive
income, the consolidated and parent company statement
of financial position, the consolidated and parent
company statements of changes in equity, the
consolidated and parent company statement of cash
flows and the related notes 1 to 28. The financial
reporting framework that has been applied in their
preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European
Union and, as regards the parent company financial
statements, as applied in accordance with the provisions
of the Companies Act 2006.
This report is made solely to the companys members, as
a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been
undertaken so that we might state to the companys
members those matters we are required to state to them
in an auditors report and for no other purpose. To the
fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company
and the companys members as a body, for our audit
work, for this report, or for the opinions we have
formed.
Respective Responsibilities of
Directors and Auditor
As explained more fully in the directors responsibility
statement within the corporate governance report, the
directors are responsible for the preparation of the
financial statements and for being satisfied that they
give a true and fair view. Our responsibility is to audit
and express an opinion on the financial statements in
accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Boards
Ethical Standards for Auditors.
Scope of the Audit of the Financial
Statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the groups
and the parent companys circumstances and have been
consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made
by the directors; and the overall presentation of the
financial statements. In addition, we read all the
financial and non-financial information in the annual
report to identify material inconsistencies with the
audited financial statements and to identify any
information that is apparently materially incorrect based
on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If
we become aware of any apparent material
misstatements or inconsistencies we consider the
implications for our report.
Opinion on Financial Statements
In our opinion:
the financial statements give a true and fair view
of the state of the groups and of the parent
companys affairs as at 31 December 2013 and of
the groups loss for the year then ended;
the group financial statements have been properly
prepared in accordance with IFRSs as adopted by
the European Union;
the parent company financial statements have
been properly prepared in accordance with IFRSs as
adopted by the European Union and as applied in
accordance with the provisions of the Companies
Act 2006; and
the financial statements have been prepared in
accordance with the requirements of the
Companies Act 2006.
Opinion on other matter prescribed
by the Companies Act 2006
In our opinion;
the information given in the Strategic Report and
the Directors' Report for the financial year for
which the financial statements are prepared is
consistent with the financial statements.
Matters on which we are required to
report by exception
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
adequate accounting records have not been kept
by the parent company, or returns adequate for
our audit have not been received from branches
not visited by us; or
the parent company financial statements are not in
agreement with the accounting records and
returns; or
certain disclosures of Directors remuneration
specified by law are not made; or
we have not received all the information and
explanations we require for our audit.

Darren Longley FCA
Senior Statutory Auditor
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, UK
1 April 2014

2013 33

Consolidated Statement of Comprehensive Income
for the year ended 31 December 2013

Group

2013 2012

Note

000 000
Revenue 3 19,330 15,299
Cost of sales (15,858) (11,845)

Gross profit 3,472 3,454

Distribution costs (219) (172)
Research and development costs (1,049) (2,986)
Administrative expenses (6,544) (6,570)

Operating loss 4 (4,340) (6,274)
Finance income 6 4 180

Loss before income tax

(4,336) (6,094)
Income tax credit 7 780 870

Total comprehensive loss for the year attributable to
shareholders
(3,556) (5,224)

Loss per share expressed in pence per share

Basic and diluted loss per share 8 (1.1) (1.8)

All results relate to continuing activities.
The notes on pages 36 to 63 form part of these financial statements.

The notes on page 38 to 65 form part of these financial statements.
34 2013

Consolidated and Parent Company Statement of Financial Position

Group Parent Company

2013 2012 2013 2012

Note 000 000 000 000
ASSETS

Non current assets

Goodwill 9 4,953 4,953 - -
Other intangible assets 10 10,739 11,631 - -
Property, plant and equipment 11 1,365 1,828 3 1,590
Investments 12 - - 16,147 10,910
Amounts owed by EBT 13 - - 167 198

17,057 18,412 16,317 12,698
Current assets

Inventories 14 38 44 - -
Trade and other receivables 17 2,716 3,339 683 1,266
Taxation recoverable

266 700 - 700
Cash and cash equivalents 18 13,749 6,651 10,537 4,714

16,769 10,734 11,220 6,680
Total assets

33,826 29,146 27,537 19,378
LIABILITIES

Current liabilities

Trade and other payables 19 (4,059) (7,347) (1,287) (2,283)
Taxation payable

(51) (52) - -

(4,110) (7,399) (1,287) (2,283)
Non-current liabilities
Deferred taxation 21 (2,148) (2,675) - -
Provisions 22 (1,862) (712) - (150)
(4,010) (3,387) - (150)
Total liabilities (8,120) (10,786) (1,287) (2,433)
Net assets

25,706 18,360 26,250 16,945
EQUITY

Share capital 23 42,246 30,788 42,246 30,788
Share premium

13,769 13,769 13,769 13,769
Capital redemption reserve

575 575 575 575
Own shares held by the EBT

(561) (551) - -
Share-based payments reserve

1,094 1,026 1,000 932
Retained earnings

(31,417) (27,247) (31,340) (29,119)
Total equity

25,706 18,360 26,250 16,945
The financial statements were approved and authorised for issue by the Board of Directors and were signed on its behalf on
1 April 2014. The notes on pages 38 to 65 form part of these financial statements.

P Cartmell J Carter
Chief Executive Chief Financial Officer
(Company number: 3152034)

Consolidated and Parent Company Statement of Financial Position


2013 2012 2013 2012

Note 000 000 000 000
ASSETS

Non current assets

Goodwill 9 4,953 4,953 - -
Other intangible assets 10 10,739 11,631 - -
Property, plant and equipment 11 1,365 1,828 3 1,590
Investments 12 - - 16,147 10,910
Amounts owed by EBT 13 - - 167 198

17,057 18,412 16,317 12,698
Current assets

Inventories 14 38 44 - -
Trade and other receivables 17 2,716 3,339 683 1,266
Taxation recoverable

266 700 - 700
Cash and cash equivalents 18 13,749 6,651 10,537 4,714

16,769 10,734 11,220 6,680
Total assets

33,826 29,146 27,537 19,378
LIABILITIES

Current liabilities

Trade and other payables 19 (4,059) (7,347) (1,287) (2,283)
Taxation payable

(51) (52) - -

(4,110) (7,399) (1,287) (2,283)
Non-current liabilities
Deferred taxation 21 (2,148) (2,675) - -
Provisions 22 (1,862) (712) - (150)
(4,010) (3,387) - (150)
Total liabilities (8,120) (10,786) (1,287) (2,433)
Net assets

25,706 18,360 26,250 16,945
EQUITY

Share capital 23 42,246 30,788 42,246 30,788
Share premium

13,769 13,769 13,769 13,769
Capital redemption reserve

575 575 575 575
Own shares held by the EBT

(561) (551) - -
Share-based payments reserve

1,094 1,026 1,000 932
Retained earnings

(31,417) (27,247) (31,340) (29,119)
Total equity

25,706 18,360 26,250 16,945
The financial statements were approved and authorised for issue by the Board of Directors and were signed on its behalf on
1 April 2014. The notes on pages 38 to 65 form part of these financial statements.

P Cartmell J Carter
Chief Executive Chief Financial Officer
(Company number: 3152034)
2013 35

Consolidated Statement of Changes in Equity

Group

Capital
Own
shares
Share-
based

Share Share redemption held by payments Retained

capital premium reserve EBT reserve earnings Total

000 000 000 000 000 000 000
Balance at
1 January 2012
24,740 13,523 575 (551) 883 (22,023) 17,147

Issue of shares 6,048 246 - - - - 6,294
IFRS 2 share option charge - - - - 143 - 143
Transactions with owners 6,048 246 - - 143 - 6,437
Total comprehensive loss - - - - - (5,224) (5,224)
Balance at
31 December 2012
30,788 13,769 575 (551) 1,026 (27,247) 18,360
Issue of shares 11,458 - - (10) - - 11,448
IFRS 2 share option charge - - - - 68 - 68
Transactions with owners 11,458 - - (10) 68 - 11,516
Total comprehensive loss - - - - - (3,556) (3,556)
Share issue costs - - - - - (614) (614)
Balance at
31 December 2013
42,246 13,769 575 (561) 1,094 (31,417) 25,706

The notes on pages 36 to 63 to form part of these financial statements.
36 2013

Parent Company Statement of Changes in Equity

Parent Company

Capital Share-based

Share Share redemption payments Retained

Capital premium reserve reserve earnings Total

000 000 000 000 000 000
Balance at
1 January 2012
24,740 13,523 575 789 (22,268) 17,359

Issue of shares 6,048 246 - - - 6,294
IFRS 2 share option charge - - - 143 - 143
Transactions with owners 6,048 246 - 143 - 6,437
Total Comprehensive Loss - - - - (6,851) (6,851)
Balance at
31 December 2012
30,788 13,769 575 932 (29,119) 16,945
Issue of shares 11,458 - - - - 11,458
IFRS 2 share option charge - - - 68 - 68
Transactions with owners 11,458 - - 68 - 11,526
Total comprehensive loss - - - - (1,607) (1,607)
Share issue costs - - - - (614) (614)
Balance at
31 December 2013
42,246 13,769 575 1,000 (31,340) 26,250


2013 37

Consolidated and Parent Company Statement of Cash Flows


2013 2012 2013 2012

Note 000 000 000 000
Operating activities

Loss before income tax

(4,336) (6,094) (2,053) (7,940)
Adjustments for:

Depreciation

505 478 1 418
Amortisation 816 605 - -
Impairment of other intangible assets 76 - - -
Finance income

(4) (180) (4) (180)
Share-based payment expense

68 143 41 143
Increase in impairment on loan to the EBT 13 - - 31 52
Decrease in inventories

6 95 - -
Decrease in trade and other receivables

623 2,455 1,029 502
(Decrease)/increase in trade and other payables

(3,288) (2,303) (996) 277
Increase/(decrease) in provisions 1,150 - (150) -

(4,384) (4,801) (2,101) (6,728)
Income tax received

686 731 700 731
Net cash used in operating activities

(3,698) (4,070) (1,401) (5,997)
Investing activities
Transfer of property plant and equipment to subsidiary

- - 1,590 -
Interest received

4 180 4 180
Purchase of property, plant and equipment

(42) (175) (4) (150)
Long-term loan to subsidiary - - (5,210) -
Acquisition of subsidiary undertakings - (10,910) - (10,910)
Net cash used in investing activities

(38) (10,905) (3,620) (10,880)
Financing activities

Proceeds from issue of shares 23 10,844 6,350 10,844 6,350
Purchase of own shares (10) - - -
Expenses of issue of shares 23 - (56) - (56)
Net cash from financing activities

10,834 6,294 10,844 6,294
Net increase/(decrease) in cash equivalents

7,098 (8,681) 5,823 (10,583)
Cash and cash equivalents at beginning of year

6,651 15,332 4,714 15,297

Cash and cash equivalents at end of year

13,749 6,651 10,537 4,714


38 2013

Notes to the Financial Statements

1. Nature of Operations
The principal activities of Corac Group plc and its
subsidiaries (the Group) undertaken by the ACI, CET and
HTT businesses comprise:
ACI: supplies air purification equipment, oxygen/hydrogen
generation and purification for submarines and air handling
and distribution systems in maritime and other
environments.
CET: specialises in the research and development of
technologies in the field of gas compression and the design
and manufacture of high speed motors and generators
using proprietary permanent magnetic rotor and oil-less
bearings
HTT: Production of specialised heat exchange equipment
used in the cooling and heating of large scale industrial
processes. HTT supply original equipment and spares, and
perform refurbishment and term support services to user
communities in oil & gas, chemical processing, power
generation, foods and pharmaceuticals from an integrated
design and production facility.
Corac Group plc (the Parent Company) is the Groups
ultimate parent company, which is incorporated under the
Companies Act and domiciled in the United Kingdom. The
address of the registered office of the Company is
Technology Centre, 683-685 Stirling Road, Slough,
Berkshire SL1 4ST. The Parent Companys shares are listed
on AIM.
2. Summary of Significant
Accounting Policies
2.1 Basis of preparation
The consolidated and Parent Company financial statements
have been prepared in accordance with applicable
International Financial Reporting Standards (IFRS) issued
by the International Accounting Standards Board as
adopted by the European Union. The consolidated financial
statements are presented in pounds sterling as this is the
currency of the primary economic environment in which
the Group operates, and all values are rounded to the
nearest thousand except when otherwise indicated.
The financial statements have been prepared under the
historical cost convention. The measurement bases and
principal accounting policies of the Group and Parent
Company are set out below. The accounting policies
adopted are consistent with those of the previous financial
year.
At the date of authorisation of these financial statements,
the following Standards and Interpretations which have not
been applied in these financial statements were in issue
but not yet effective (and in some cases had not yet been
adopted by the EU):
IFRS9 Financial Instruments
IFRS14 Regulatory Deferral Accounts
IFRS10, IFRS12 and IAS27 (amended) Investment
Entities
Annual Improvements to IFRSs (2010-2013) Cycles
IAS19 (amended) Defined Benefit Plans: Employee
Contributions
IAS32 (amended) Offsetting Financial Assets and
Financial Liabilities
IAS36 (amended) Recoverable Amount Disclosures for
Non Financial Assets
IAS39 (amended) Novation of Derivatives and
Continuation of Hedge Accounting.
IFRIC21 Levies

The directors do not expect that the adoption of the
standards listed above will have a material impact on the
financial statements of the Group in future periods.
Going concern
The Directors are satisfied that the Group has adequate
resources to continue in business for the foreseeable
future, and accordingly continue to adopt the going
concern basis in preparing the accounts. In reaching this
conclusion, the directors have considered forecasts that
cover a period of greater than twelve months from the
date of the approval of these financial statements. The
forecasts take into account the Groups existing cash
resources, and include consideration of certain downside
scenarios, in particular in relation to CET where there is
inherently greater uncertainty as to the future cash flows
of that business. The Directors have also considered the
mitigating actions available to them, including the ability
of management to make certain reductions to the Groups
discretionary expenditure if required.

2.2 Significant management judgements in
applying accounting policies
The significant management judgements in applying the
accounting policies of the Group and Parent Company that
have the most significant effect on the financial
statements are set out below.
(i) Recognition of revenue
Revenue from the provision of commercial and R&D
services is recognised when the outcome of the transaction
can be estimated reliably using the criteria set out below
in note 2.5 Revenues. As a consequence of the nature of
these services, this requires the exercise of judgement,
estimates and assumptions that are subject to uncertainty.
The estimation uncertainty with respect to revenues from
services is set out in note 2.3 Estimation uncertainty.
(ii) Capitalisation of development costs
Development costs are capitalised when all of the
conditions set out below in note 2.7 Research and
development have been met.
The Groups management continually monitors whether the
recognition requirements for development costs have been
met by any expenditure. The Group has not yet capitalised
any development costs as the criteria set out in IAS 38,
Intangible Assets, have not been met. R&D costs
expensed for the year ended 31 December 2013 (including
those classified as cost of sales within CET) were 3.0m
(2012: 3.2m).

2013 39
Notes to the Financial Statements continued

Accounting Policies (continued)
(iii) Deferred tax assets
The assessment of the probability of future taxable income
against which brought forward losses can be utilised is
based on the Groups latest budget forecast, which is
adjusted for significant non-taxable income and expenses
and specific limits to the use of any unused tax loss or
credit. If a positive forecast of taxable income indicates
the probable use of a loss, especially when it can be used
without time limit, a corresponding deferred tax asset is
recognised in full.
2.3 Key sources of estimation uncertainty
When preparing the financial statements management
undertakes a number of judgements, estimates and
assumptions about the recognition and measurement of
assets, liabilities, income and expenses based on historical
experience and other factors considered reasonable at the
time. Actual outcomes are likely to differ from the
estimates made by management and actual results will
seldom equal projected results.
Information about significant judgements, estimates and
assumptions, which have the most significant effect on the
recognition and measurement of assets, liabilities, income
and expenses, are discussed below.
(i) Recognition of revenue
The revenue recognised from commercial and R&D services
reflects managements best estimate of the contracts
outcome and stage of completion. The Groups
management review the contracts monthly, including the
costs to completion, which are subject to significant
estimation uncertainty.
(ii) R&D Tax Credits
The definition of qualifying R&D expenditure for the
purposes of R&D Tax Credits requires the exercise of
judgement, estimates and assumptions, which are subject
to uncertainty.
Qualifying R&D expenditure is defined by guidelines from
the Department for Business Enterprise and Regulatory
Reform, which are subject to interpretations by HM
Revenue & Customs.
The Group has recognised an R&D Tax Credit of 0.3m
(2012: 0.7m) in respect of the year ended 31 December
2013, which is subject to submission to and acceptance, by
HM Revenue & Customs.
(iii) Share-based payments
The calculation of the share-based payments expense
utilises assumptions and estimates (e.g. share volatility,
future exercise rates) which may differ from actual results.
Details of the accounting policy are set out in note 2.16(ii).
(iv) Impairment of goodwill
Determining whether goodwill is impaired requires an
estimation of the value in use of the cash-generating units
to which goodwill has been allocated. The value in use
calculation requires the entity to estimate the future cash
flows expected to arise from the cash-generating unit and
a suitable discount rate in order to calculate present value.
(v) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past
event, it is probable that the Group will be required to
settle that obligation and a reliable estimate can be made
of the amount of the obligation.
The amount recognised as a provision is the best estimate
of the consideration required to settle the present
obligation at the balance sheet date, taking into account
the risks and uncertainties surrounding the obligation.
Where a provision is measured using the cash flows
estimated to settle the present obligation, its carrying
amount is the present value of those cash flows (when the
effect of the time value of money is material).
When some or all of the economic benefits required to
settle a provision are expected to be recovered from a
third party, a receivable is recognised as an asset if it is
virtually certain that reimbursement will be received and
the amount of the receivable can be measured reliably.
(vi) Warranties
Provisions for the expected cost of warranty obligations
under local sale of goods legislation are recognised at the
date of sale of the relevant products, or at the date that
the need for remediation under warranty becomes known,
at the directors best estimate of the expenditure required
to settle the Groups obligation.
(vii) Onerous contracts
Present obligations arising under onerous contracts are
recognised and measured as provisions. An onerous
contract is considered to exist where the Group has a
contract under which the unavoidable costs of meeting the
obligations under the contract exceed the economic
benefits expected to be received under it.
2.4 Basis of consolidation
The consolidated financial statements incorporate the
financial statements of the Company and all entities
controlled by the company (its subsidiaries) and the Corac
Employee Benefit Trust (see note 24) made up to 31
December each year.
The results of subsidiaries acquired or disposed of during
the year are included in the consolidated statement of
comprehensive income from the effective date of
acquisition or up to the effective date of disposal, as
appropriate. Where necessary, adjustments are made to
the financial statements of subsidiaries to bring the
accounting policies used in to line with those used by the
group. All intra-group transactions, balances, income and
expenses are eliminated on consolidation.
Subsidiary undertakings are entities over which the Group
has the power to control the financial and operating
policies to obtain benefits from its activities. The Group
obtains and exercises control through voting rights.
The Corac Employee Benefit Trust, which is managed by an
independent trustee, is an employee share scheme
established for the benefit of and as an incentive for the
employees of the Group.
Unrealised gains on transactions between the Group and its
subsidiaries are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Amounts reported in
the financial statements of subsidiaries have been adjusted
where necessary to ensure consistency with the accounting
policies adopted by the Group.
The Parent Company has taken advantage of the exemption
available under section 408 of the Companies Act 2006 and
has not presented its profit and loss account. The Parent
Companys result for the year was a loss of 1.6m (2012:
6.9m).
40 2013
2. Summary of Significant Accounting
Policies (continued)
2.5 Revenues
Revenue is measured by reference to the fair value of
consideration received or receivable by the Group for
goods supplied and services provided, excluding VAT and
trade discounts. Revenue is recognised upon the
performance of services or transfer of risk to the customer.
(i) Sale of goods
Revenue from the sale of goods is recognised when all the
following conditions are satisfied:
the Group has transferred to the buyer the significant
risks and rewards of ownership of the goods
the Group retains neither continuing managerial
involvement to the degree usually associated with
ownership nor effective control over the goods sold
the amount of revenue can be measured reliably
it is probable that the economic benefits associated
with the transaction will flow to the entity
the costs incurred or to be incurred in respect of the
transaction can be measured reliably
(ii) Long-term contracts
Where the outcome of a long-term contract can be
estimated reliably, revenue and costs are recognised by
reference to the stage of completion of the contract
activity at the balance sheet date. This is measured by the
proportion that contract costs incurred for work performed
to date bear to the estimated total contract costs, except
where this would not be representative of the stage of
completion. Variations in contract work, claims and
incentive payments are included to the extent that the
amount can be measured reliably and its receipt is
considered probable.
Where the outcome of a long-term contract cannot be
estimated reliably, contract revenue is recognised to the
extent of contract costs incurred where it is probable they
will be recoverable. Contract costs are recognised as
expenses in the period in which they are incurred.
When it is probable that total committed contract costs
will exceed total contract revenue, the expected loss is
recognised as an expense immediately. In CET, the
expected loss is only recognised to the extent that there is
a contractual obligation on CET to deliver under the terms
of the contract.
(iii) Financing from R&D partners
When the outcome of a transaction involving prototype and
concept assessment, front end design, feasibility studies
and R&D work can be estimated reliably, revenue is
recognised by reference to the stage of completion at the
balance sheet date, taking into account any preferential
terms post commercialisation.
Where the outcome of a transaction cannot be estimated
reliably, revenue is recognised to the extent of stage
payments received.
2.6 Cost of sales
For funded development projects within CET, cost of sales
is deemed to represent that element of R&D spend
financed by development partners. As such, this is set to
equal revenues recognised from R&D activity. For all other
contracts (including all contracts within ACI and HTT) cost
of sales represents the actual costs of materials, direct
labour and overheads incurred with reference to the stage
of completion of the contract at the balance sheet date.
2.7 Research and development
Expenditure on research (or the research phase of an
internal project) is recognised as an expense in the period
in which it is incurred.
Development costs incurred on specific projects are
capitalised when all the following conditions are satisfied:
Completion of the intangible asset is technically
feasible so that it will be available for use or sale.
The Group intends to complete the intangible asset
and use or sell it.
The Group has the ability to use or sell the intangible
asset.
The intangible asset will generate probable future
economic benefits. Among other things, this requires
that there is a market for the output from the
intangible asset or for the intangible asset itself, or,
if it is to be used internally, the asset will be used in
generating such benefits.
There are adequate technical, financial and other
resources to complete the development and to use or
sell the intangible asset.
The expenditure attributable to the intangible asset
during its development can be measured reliably.

The Group has not yet capitalised any development costs
as the criteria set out above have not been met, and all
such costs have been expensed as incurred.
The cost of an internally generated intangible asset
comprises all directly attributable costs necessary to
create, produce, and prepare the asset to be capable of
operating in the manner intended by management.
Following initial recognition, the related asset is amortised
over the period of the expected future sales with
impairment reviews being carried out at least annually.
The asset is carried at cost less any accumulated
amortisation and impairment losses.
The Group has not yet capitalised any development costs,
as the criteria set out above have not been met.
2.8 Finance income
Finance income represents interest earned on cash deposits
that is allocated over the relevant period.
2.9 Property, plant and equipment
Property, plant and equipment is stated at cost, net of
depreciation and any provision for impairment.
Depreciation is calculated to write down the cost less
estimated residual value of all property, plant and
equipment by equal annual instalments on a straight line
basis over their estimated useful economic lives. The rates
generally applicable are:
Computer equipment 33% per annum
Office furniture and fittings 20% per annum
Plant and machinery 10% to 20% per annum
Short leasehold improvements are depreciated over the
term of the lease.
Management reviews the useful lives and residual values of
all depreciable assets at each reporting date. At 31
December 2013, management assesses that the useful lives
represent the expected utility of the assets to the Group
and Parent Company.
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets or,
where shorter, over the term of the relevant lease. An
impairment loss is recognised for the amount by which the
assets carrying amount exceeds its recoverable amount.
2013 41

To determine the recoverable amount, management
estimates future cash flows from the asset based upon
long-term financial projections. The gain or loss arising on
the disposal or scrappage of an asset is determined as the
difference between the sales proceeds and the carrying
amount of the asset and is recognised in income.
2.10 Operating leases
Leases where substantially all the risks and benefits of
ownership of the asset are not transferred to the Group are
classified as operating leases and rentals payable are
charged to the income statement on a straight line basis
over the term of the lease.
2.11 Finance leases and hire purchase
commitments
Assets held under finance leases, which are leases where
substantially all the risks and rewards of the asset have
passed to the Group, and hire purchase contracts are
capitalised in the balance sheet and are depreciated over
the shorter of the lease term and the assets useful lives.
The capital elements of future obligations under leases and
hire purchase contracts are included as liabilities in the
balance sheet. The interest elements of the rental
obligations are charged to the income statement over the
periods of the leases and hire purchase contracts and
represent a constant proportion of the balance of capital
repayments outstanding.
2.12 Taxation
Income tax recoverable in respect of R&D cash tax credits
is recognised when the decision has been taken to claim
such amounts in cash. Until such a decision is made, the
potential tax benefit arising from R&D expenditure is
included in tax losses carried forward. The income tax
recoverable in respect of R&D cash tax credits is based
upon management estimates, judgements and assumptions
considered reasonable at the time but the actual income
tax recoverable may differ from those estimates.
The charge for current income tax is based on the results
for the period as adjusted for items that are non-assessable
or disallowed. It is calculated using tax rates that have
been enacted or substantively enacted by the balance
sheet date.
Deferred income tax is provided in full, using the liability
method, on temporary differences between the carrying
amounts of assets and liabilities in the financial statements
and the corresponding tax bases used in the computation of
taxable profit. A deferred income tax asset is recognised to
the extent that it is probable that taxable profits will be
available against which deductible temporary differences
can be utilised. For managements assessment of the
probability of future taxable income to utilise against
potential deferred tax assets in respect of brought forward
losses, see note 2.2(iii).
2.13 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and
demand deposits, together with other short-term, highly
liquid investments that are readily convertible into known
amounts of cash and which are subject to an insignificant
risk of changes in value.
2.14 Financial instruments
Financial assets and financial liabilities are recognised
when the Group or Parent Company becomes a party to the
contractual provisions of the financial instrument.
Financial assets are derecognised when the contractual
right to the cash flows from the financial asset expire, or
when the financial asset and all substantial risks and
rewards are transferred. A financial liability is
derecognised when it is extinguished, discharged,
cancelled or expires.
Financial assets and financial liabilities are measured
initially at fair value plus transaction costs, except for
financial assets and financial liabilities carried at fair value
through profit or loss, which are measured initially at fair
value.
Financial assets and financial liabilities are measured
subsequently as described below.
(i) Financial assets
For the purpose of subsequent measurement, financial
assets are classified into the following categories upon
initial recognition:
loans and receivables;
financial assets at fair value through profit or loss;
The category determines subsequent measurement and
whether any resulting income and expense is recognised in
profit or loss or equity.
All financial assets except for those at fair value through
profit or loss are subject to review for impairment at least
at each reporting date. Financial assets are impaired when
there is any objective evidence that a financial asset or a
group of financial assets is impaired. Different criteria to
determine impairment are applied for each category of
financial assets, which are described below.
All income and expenses relating to financial assets that
are recognised in profit or loss are presented within
Finance costs or Finance income except for
impairment of trade receivables, which is presented within
Administrative expenses.
The Group and Parent Companys cash and cash equivalents
fall into this category of financial instruments.
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market. After initial recognition, these are
recognised at amortised cost using the effective interest
rate method, less provision for impairment. Discounting is
omitted where the effect of discounting is immaterial.
Individually significant receivables are considered for
impairment when they are past due or when other
objective evidence is received that a specific counterparty
will default. Impairment of trade receivables are presented
within Administrative expenses.
(i) Financial liabilities
The Group and Parent Companys financial liabilities
comprise trade and other payables.
Financial liabilities are measured subsequently at
amortised cost using the effective interest rate method
except for financial liabilities held for trading or
designated at fair value through profit or loss, that are
carried subsequently at fair value with gains or losses
recognised in profit or loss. Discounting is omitted where
the effect of discounting is immaterial.

42 2013
2.15 Equity
Equity comprises the following:
Share capital which represents the nominal value
of equity shares.
Share premium which represents the excess over
nominal value of the fair value of consideration
received for equity shares, net of expenses of the
share issue.
Capital redemption reserve which constitutes a
non distributable reserve, which arose on the
acquisition by the Company of its own shares.
Own shares held by Employee Benefit Trust which
represents the costs of purchasing own shares held by
the Employee Benefit Trust.
Share-based payment reserve" which represents
equity-settled share-based employee remuneration
until such share options are exercised or lapse.
Retained earnings which represents retained
profits and losses.

2.16 Employee benefits
(i) Defined Contribution Pension Scheme
The Group operates a defined contribution stakeholder
pension scheme for employees. The assets of the scheme
are held separately from those of the Group. The pension
cost charged against profits represents the amounts
payable by the Group and is expensed as it becomes
payable.
(ii) Share-based payment
All equity-settled share-based payments are measured at
fair value at the date of grant, which is ultimately
recognised as an expense in the income statement with a
corresponding credit to reserves. Options are valued using
a Black-Scholes model.
If vesting periods or other non-market vesting conditions
apply, the expense is allocated over the vesting period,
based on the number of share options expected to vest.
This estimate takes into account a number of factors
including performance conditions applying to the relevant
options. Estimates are subsequently revised if there is any
indication that the number of share options expected to
vest differs from previous estimates. Any cumulative
adjustment prior to vesting is recognised in the current
period.
No adjustment is made to any expense recognised in prior
periods if share options ultimately exercised are different
to that estimated on vesting. Upon exercise of share
options, the proceeds received net of attributable
transaction costs are credited to share capital, and where
appropriate share premium.
(iii) Employee benefit trust
The assets and liabilities of the Employee Benefit Trust
("EBT") have been included in the Group accounts. Any
assets held by the Employee Benefit Trust cease to be
recognised on the Group balance sheet when the assets
vest unconditionally in identified beneficiaries.
The costs of purchasing own shares held by the Employee
Benefit Trust are shown as a deduction against
consolidated equity. The proceeds from the sale of own
shares held increase consolidated equity. Neither the
purchase nor sale of own shares leads to a gain or loss
being recognised in the Group income statement.
(iv) Short-term employee benefit costs
The undiscounted amount of short-term benefits
attributable to services that have been rendered in the
period are recognised as an expense, unless specifically
required or permitted within the scope of IFRS reporting to
be included in the cost of an asset. Any difference between
the amount of cost recognised and cash payments made is
treated as a liability or prepayment as appropriate.
2.17 Foreign currency translation
The Groups consolidated financial statements are
presented in pounds sterling, which is the functional
currency of all group entities. Foreign currency
transactions are translated into pounds sterling using the
exchange rates prevailing at the dates of the transactions
(spot exchange rates). Foreign currency gains and losses
resulting from the settlement of such transactions and
from the re-measurement of monetary items at year end
exchange rates are recognised in profit or loss.
2.18 Business combinations
Acquisitions of subsidiaries and businesses are accounted
for using the acquisition method. The consideration for
each acquisition is measured at the aggregate of the fair
values (at the date of exchange) of assets given, liabilities
incurred or assumed, and equity instruments issued by the
Group in exchange for control of the acquiree. Acquisition-
related costs are recognised in profit or loss as incurred.
The acquirees identifiable assets, liabilities and
contingent liabilities that meet the conditions for
recognition under IFRS 3(2008) are recognised at their fair
value at the acquisition date, except that deferred tax
assets or liabilities and liabilities are recognised and
measured in accordance with IAS 12 Income Taxes.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts
for the items for which the accounting is incomplete.
Those provisional amounts are adjusted during the
measurement period (see below), or additional assets or
liabilities are recognised, to reflect new information
obtained about facts and circumstances that existed as of
the acquisition date that, if known, would have affected
the amounts recognised as of that date.
The measurement period is the period from the date of
acquisition to the date the Group obtains complete
information about facts and circumstances that existed as
of the acquisition date, and is subject to a maximum of
one year.

2.16
2013 43

2.19 Goodwill
Goodwill arising in a business combination is recognised as
an asset at the date that control is acquired (the
acquisition date). Goodwill is measured as the excess of
the sum of the consideration transferred, the amount of
any non-controlling interest in the acquiree and the fair
value of the acquirers previously held equity interest (if
any) in the entity over the net of the acquisition-date
amounts of the identifiable assets acquired and the
liabilities assumed.
Goodwill is not amortised but is reviewed for impairment
at least annually. For the purpose of impairment testing,
goodwill is allocated to each of the Groups cash-
generating units expected to benefit from the synergies of
the combination. Cash-generating units to which goodwill
has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit
may be impaired. If the recoverable amount of the cash-
generating unit is less than the carrying amount of the
unit, the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the unit and
then to the other assets of the unit pro-rata on the basis of
the carrying amount of each asset in the unit. An
impairment loss recognised for goodwill is not reversed in a
subsequent period.
On disposal of a subsidiary, the attributable amount of
goodwill is included in the determination of the profit or
loss on disposal.
2.20 Impairment of tangible and intangible
assets excluding goodwill
Intangible assets other than goodwill that are acquired by
the Group are stated at cost less accumulated amortisation
(see below) and any impairment losses. At each balance
sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there
is any indication that those assets have suffered an
impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated to determine
the extent of the impairment loss (if any). 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. An
intangible asset with an indefinite useful life is tested for
impairment at least annually and whenever there is an
indication that the asset may be impaired.
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 for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating
unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit) is
reduced to its recoverable amount. An impairment loss is
recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the
carrying amount of the asset (or cash-generating unit) is
increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been
determined had no impairment loss been recognised for
the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in
profit or loss.
2.21 Amortisation
Amortisation is charged to the income statement on a
straight line basis over the estimated useful life of
intangible assets other than goodwill of 15 years.
2.22 Inventories
Inventories are stated at the lower of cost and net
realisable value. Cost comprises direct materials and,
where applicable, direct labour costs and those overheads
that have been incurred in bringing the inventories to their
present location and condition. Cost is calculated using the
weighted average method. Net realisable value represents
the estimated selling price less all estimated costs of
completion and costs to be incurred in marketing, selling
and distribution.
2.23 Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past
event, it is probable that the Group will be required to
settle that obligation and a reliable estimate can be made
of the amount of the obligation.
The amount recognised as a provision is the best estimate
of the consideration required to settle the present
obligation at the balance sheet date, taking into account
the risks and uncertainties surrounding the obligation.
Where a provision is measured using the cash flows
estimated to settle the present obligation, its carrying
amount is the present value of those cash flows.
When some or all of the economic benefits required to
settle a provision are expected to be recovered from a
third party, a receivable is recognised as an asset if it is
virtually certain that reimbursement will be received and
the amount of the receivable can be measured reliably.

44 2013
3. Segmental Reporting
Business segments
For management purposes, the Group is treated as three business units comprising:
Atmosphere Control International activities include the provision of air purification equipment for
submarines including oxygen/hydrogen generation and purification, air handling and distribution systems.
Corac Energy Technologies specialises in the research and development of technologies in the field of gas
compression and the design and manufacture of high speed motors and generators using proprietary
permanent magnetic rotor and oil-less bearings
Hunt Thermal Technologies activities include the manufacture of heat exchange equipment used in the
heating and cooling of large scale industrial processes.
Group Central Team costs incurred to support the businesses are charged out to the operating companies
leaving central unallocated costs that relate specifically to the Corac Group Plc operations.
The following table presents group revenue, profit and certain net asset information for each business
segment. The comparatives for 2012 include the post acquisition results of Atmosphere Control International
Limited and Hunt Thermal Technologies Limited for the nine months from 5 April to 31 December 2012.

2013 2012

000 000
Revenue

Atmosphere Control International 10,667 7,496
Corac Energy Technologies 1,049 220
Hunt Thermal Technologies 7,614 7,583
Group 19,330 15,299

Segment Operating Result

Corac Energy Technologies (3,954) (5,082)
Hunt Thermal Technologies 141 578
Central unallocated costs

(2,037) (2,823)
Group (4,340) (6,274)

Loss from operations (4,340) (6,274)
Finance Income 4 180
Loss before income tax (4,336) (6,094)
Income tax credit 780 870
Loss after tax (3,556) (5,224)

Segment net assets / (liabilities)
Corac Energy Technologies 2,411 6,112
Hunt Thermal Technologies 2,407 2,244
Corac Group 8,618 (250)
Total net assets 25,706 18,360

The segment operating result for HTT includes an impairment loss on intangible assets of 76,000 (2012:
nil) arising on the change of name of Hunt Graham Limited to Hunt Thermal Technologies Limited.

2013 45

3. Segmental Reporting (continued)
Geographical segments
The Groups operations are solely in the United Kingdom although some of the Groups revenues are to
customers outside the UK. All segment assets are located in the UK. The Groups revenues from external
customers are analysed into the following geographical areas:
2013 2012
000 000
Geographical analysis - revenue
United Kingdom 14,070 12,541
Rest of European Union 2,142 857
North America 656 10
Asia 796 1,073
Middle East 403 642
Rest of the World 1,263 176

Total revenue 19,330 15,299

Information about major customers
Revenue includes sales from customers who contributed 10% or more to the Groups revenue:
2013 2012
000 000
ACI
Customer 1 4,298 3,298
Customer 2 3,087 2,127
HTT
Customer 3 - 2,180
Customer 4 - 1,085

Total revenue 7,385 8,690

46 2013
3. Segmental Reporting (continued)
Results by Segment

Atmosphere
Control
International
Corac Energy
Technologies
Hunt Thermal
Technologies
Central
unallocated
costs
Group

000 000 000 000 000

2013

Segment operating result 1,510 (3,954) 141 (2,037) (4,340)
Depreciation, amortisation and
impairment
814 423 159 1 1,397
EBITDA
1
2,324 (3,531) 300 (2,036) (2,943)
Share based payments - 27 - 41 68
Adjusted EBITDA
2
2,324 (3,504) 300 (1,995) (2,875)

2012

Segment operating result 1,053 (5,082) 578 (2,823) (6,274)
Depreciation, amortisation and
impairment
600 418 65 - 1,083
EBITDA
1
1,653 (4,664) 643 (2,823) (5,191)
Share based payments - - - 143 143
Exceptional items - - - 980 980
Adjusted EBITDA
2
1,653 (4,664) 643 (1,700) (4,068)

1
EBITDA is defined as operating profit adjusted to add back depreciation of property, plant and equipment and amortisation
and impairment of acquired intangible assets.
2
Adjusted EBITDA is defined as operating profit adjusted to add back depreciation of property, plant and equipment,
amortisation and impairment of acquired intangible assets and any other acquisition related charges, share based payment
charges and exceptional items. Exceptional items are those items believed to be exceptional in nature by virtue of their size
and or incidence. There are no exceptional items in the current year. In the year to 31 December 2012, they comprise costs
of 980,000 associated with the acquisitions of ACI and HTT on 5 April 2012 and the associated equity fundraising on 2 April
2012.
2013 47

4. Operating Loss
The Group operating loss for the year is stated after charging the following. The comparatives for 2012 include
the post acquisition results of Atmosphere Control International Limited and Hunt Thermal Technologies
Limited for the nine months from 5 April to 31 December 2012.
Group
2013 2012
000 000
Staff costs
Wages and salaries 7,006 6,241
Social security costs 768 718
Other pension costs 384 326
8,158 7,285

Exceptional item: costs associated with the Wellman acquisition - 980
Impairment of intangible assets 76 - 76 -
Amortisation of intangible assets 816 605
Depreciation of property, plant & equipment 505 478
Operating lease expense - rent 776 611
Loss on foreign exchange - 50

Auditor's remuneration
Audit fees
Fees payable for the audit of the Parent Company
and consolidated financial statements
21 21
Fees payable for the audit of the subsidiary companies 36 32
57 53
Non-audit fees
Fees payable for statutory and regulatory services 6 10
Corporate finance services 21 95
Tax Compliance services 13 25
Total auditor remuneration 97 183

Included in wages and salaries is a total expense of share-based payments of 68,000 (2012: 143,000), all of
which arises from transactions accounted for as equity-settled share-based payment transactions.
Exceptional costs in 2012 relate to costs associated with the due diligence, advisor and broker fees relating to
the acquisition of Atmosphere Control International Limited and Hunt Thermal Technologies Limited on 5 April
2012.

48 2013
4. Operating Loss (continued)
Staff numbers
The average number of employees, including Directors, employed by the Group during the year (2012 includes
employees of Atmosphere Control International Limited and Hunt Thermal Technologies Limited from 5 April
2012) was as follows:
Group
2013 2012
Number Number

Engineering
120 87
Business Development
12 17
Administration
38 27
170 131

Pension costs
The Group operates a money purchase and a group stakeholder pension scheme. The assets of this scheme are
held separately from those of the Group in separately administered funds. The pension cost charge represents
contributions payable by the Group to these funds and amounted to 384,000 (2012: 326,000). No
contributions were prepaid or overdue at 31 December 2013 (2012: nil). The nature of the Groups scheme is
such that there is no possibility of a surplus or deficiency in funding arising from past service.

5. Directors Emoluments
Key management of the Group are members of the Board of Directors. Key management personnel
remuneration includes the following expenses:
Group
2013 2012
000 000
Emoluments 624 757
Pension contributions paid to defined contribution pension schemes 31 31

655 788
Two Directors (2012: two) accrued pension benefits during the year. No Director exercised share options during
the year (2012: nil).
Remuneration of the highest paid Director included above is as follows:
Group
2013 2012
000 000

Emoluments 260 500
Pension contributions 17 18

277 518

2013 49

6. Finance Income
Group
2013 2012
000 000
Interest income on bank deposits 4 180

7. Taxation
Credit to consolidated income statement
Group
2013 2012
000 000
Corporation tax - R&D credit
Current year 266 700
Prior year (over)/under provision (13) 31
253 731
Deferred tax 527 139
780 870

The tax credit for the period is lower than the standard rate of corporation tax in the UK of 23.25% (2012:
24.5%). The differences are explained as follows:
Group
2013 2012
000 000
Loss on ordinary activities before taxation 4,336 6,094
Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of
23.25% (2012: 24.5%)

1,008

1,493
Effect of:
Expenses not deductible for tax purposes
(166) (317)
Depreciation in excess of capital allowances
(82) (67)
Share -based payments
(16) (35)
R&D enhanced relief
250 714
Surrender of tax losses for R&D credit
(296) (728)
Trading losses carried forward
(454) (501)
Utilisation of losses brought forward
49 135
Other short term timing differences
(27) 6
Deferred taxation
527 139
Adjustment in respect of prior years
(13) 31
Tax credit for the year 780 870

At the balance sheet date, the Group has approximately 16.5m (2012: 15.1m) of unrelieved tax losses for
offset against future taxable profit. A deferred tax asset of 0.1m (2012: 0.1m) has been recognised in
respect of 0.5m (2012: 0.5m) of such losses (see note 17). No deferred tax asset has been recognised in
respect of the remaining 16.0m (2012: 14.6m), due to the uncertainty of timing of the generation of future
taxable profits.
50 2013

8. Loss per Share
The calculation of basic loss per share for the year ended 31 December 2013 is based upon a loss after tax of
3,556,000 (2012: 5,224,000) and a weighted average number of shares of 310,164,087 (2012: 291,007,168).
The weighted average number of shares has been reduced by the weighted average number of shares held by
the Employee Benefit Trust.
The issue of additional shares on exercise of employee share options would decrease the basic loss per share
and there is therefore no dilutive effect of employee share options.

9. Goodwill
Total
000
Cost and net book value
At beginning and end of year 4,953

Goodwill arose on the acquisition of Atmosphere Control International Limited and Hunt Thermal Technologies
Limited (formerly Hunt Graham Limited) on 5th April 2012.

In accordance with the requirements of IAS 36, Impairment of Assets, goodwill is allocated to the Groups cash
generating units, or groups of cash generating units, that are expected to benefit from the synergies of the
business combination that gave rise to the goodwill as analysed in the table below:

Total
000

Atmosphere Control International Limited 4,351
Hunt Thermal Technologies Limited 602

4,953

The goodwill balance has been tested for annual impairment on the following basis:
The carrying values of good will have been assessed by reference to value in use.
Cash flows based on forecast information for the next financial year, which has been approved by the Board and in the
case of recent acquisitions on detailed annual forecasts.
The key assumptions on which the impairment tests are based are a discount rate of 13.4%, a growth rate of 3% and
the forecast cash flows, pre-tax discount rates.
No impairments were identified as a result of this exercise.

2013 51

10. Other intangible assets

Technical
Know How
Customer
relationships

Trade name Total
000 000 000 000
Cost
At 1 January 2013 11,741 324 171 12,236

At 31 December 2013 11,741 324 171 12,236

Accumulated amortisation
At 1 January 2013 581 16 8 605
Charge for year 783 22 11 816
Impairment loss - - 76 76

At 31 December 2013 1,364 38 95 1,497

Net book value
At 31 December 2012 11,160 308 163 11,631

At 31 December 2013 10,377 286 76 10,739
Intangible assets above arose on the acquisition of Atmosphere Control International Limited and Hunt Thermal
Technologies Limited (formerly Hunt Graham Limited) on 5

April 2012.
Technical Know How is recognised as Atmosphere Control International Limiteds proprietary expertise and
experience of atmosphere management techniques in the defence environment.
The impairment of the Trade Name arose on the change of name of Hunt Graham Limited to Hunt Thermal
Technologies Limited on 5 December 2013.

52 2013
11. Property, Plant and Equipment

Group
Short Office

leasehold Computer furniture Plant &
improvements equipment & fittings Machinery Total
000 000 000 000 000
Cost
At 1 January 2012 1,612 348 44 549 2,553
Additions 19 71 40 45 175
Acquisition of subsidiaries - 15 53 205 273

At 31 December 2012 1,631 434 137 799 3,001
Additions - 30 2 10 42

At 31 December 2013 1,631 464 139 809 3,043

Accumulated depreciation
At 1 January 2012 3 298 22 372 695
Charge for year 324 42 26 86 478

At 31 December 2012 327 340 48 458 1,173
Charge for year 326 50 29 100 505

At 31 December 2013 653 390 77 558 1,678

Net book value
At 1 January 2012 1,609 50 22 177 1,858

At 31 December 2012 1,304 94 89 341 1,828

At 31 December 2013 978 74 62 251 1,365
The Groups obligations under finance leases (see note 20) are secured by the lessors title to the leased
assets, which have a carrying value of 44,000 (2012: 59,000).

2013 53

11. Property, Plant and Equipment (continued)

Parent Company
Short Office

leasehold Computer furniture Plant &
improvements equipment & fittings Machinery Total
000 000
000 000 000
Cost
At 1 January 2012 1,612 348 44 549 2,553
Additions 19 60 38 33 150

At 31 December 2012 1,631 408 82 582 2,703
Transfer to subsidiary (1,631) (408) (82) (582) (2,703)
Additions - 4 - - 4
At 31 December 2013 - 4 - - 4

Accumulated depreciation
At 1 January 2012 3 298 22 372 695
Charge for year 324 36 11 47 418
At 31 December 2012 327 334 33 419 1,113
Transfer to subsidiary (327) (334) (33) (419) (1,113)
Charge for year - 1 - - 1

At 31 December 2013 - 1 - - 1

Net book value
At 1 January 2012 1,609 50 22 177 1,858

At 31 December 2012 1,304 74 49 163 1,590

At 31 December 2013 - 3 - - 3

At 31 December 2013, there are no assets held under finance leases (2012: 59,000).
The transfer to the subsidiary represents the cost and accumulated depreciation of property, plant and
equipment transferred at book value to Corac Energy Technologies Limited by way of hive down on 1 January
2013 (see note 12).

54 2013
12. Investments in Subsidiary Undertakings
The Parent Companys investments comprise interests in group undertakings, details of which are listed below.
The Companies are wholly owned and are incorporated in England and Wales.

Parent Company
2013 2012
000 000
Cost and Net Book Value
At 1 January

10,910

-
Investment during year - 10,910
Long-term loan to subsidiary 5,210 -
Grant of share options to subsidiary company employees 27 -

At 31 December 16,147 10,910

The total cost of investment in subsidiary undertakings can be analysed as:
2013 2012
000 000
Investment in shares in Group undertakings
Long-term loan to subsidiary
10,910
5,210
10,910
-
Share options granted to subsidiary employees 27 -

16,147 10,910

The investment during the prior year arose on the acquisition of the entire issued share capitals of Atmosphere
Control International Limited and Hunt Thermal Technologies Limited (formerly Hunt Graham Limited) on 5

April 2012.
The long-term loan has been made to Corac Energy Technologies Limited. The loan is interest free and has no
fixed date for repayment.
Share options have been granted to employees of Corac Energy Technologies Ltd

2013 55

12. Investments in Subsidiary Undertakings (continued)

Name of undertaking

Description of shares
held
Proportion of nominal
value of shares held by
the Parent Company

Principal
Activity

Atmosphere Control International Limited 1.00 ordinary shares 100%
1

Corac Energy Technologies Limited 1.00 ordinary shares 100%
2

Hunt Thermal Technologies Limited
(formerly Hunt Graham Limited)
1.00 ordinary shares 100%
3

Corac Engineering Limited 1.00 ordinary shares 100% Dormant
Compact Radial Compressors Limited 0.0001 ordinary shares 100% Dormant
Wellman Defence Limited 1.00 ordinary shares 100% Dormant

1 Provision of air purification equipment for submarines including oxygen/hydrogen generation and purification, air
handling and distribution systems.
2. Corac Energy Technologies Limited was dormant during 2012 and commenced trading on 1 January 2013 in the field of
innovation and development of turbomachinery systems.
3 Manufacture of heat exchange equipment used in the heating and cooling of large scale industrial processes.

Transfer of Business and Assets to Corac Energy Technologies Limited
On 1 January 2013, the trading business, employees and certain assets and liabilities of the companys parent
company, Corac Group plc, were transferred to the Company by way of a legal hive down agreement.
The following assets and liabilities were transferred at book value. The transfer was funded via an
intercompany loan.

000
Property, plant and equipment cost 2,700-
Cumulative depreciation (1,110)
1,590
Trade and other receivables 308
Taxation recoverable 700
Trade and other payables (1,610)
Provisions (150)
Net assets transferred 838
The company also transferred to CET its accumulated carried forward tax losses of 13.0 million to offset
against future profits from the same trade.

56 2013
13. Amounts owed by Employee Benefit Trust
2013 2012 2013 2012
000 000 000 000
Amounts owed by EBT - - 600 600
Less: impairment - - (433) (402)

- - 167 198
The loan to the Employee Benefit Trust is interest free and unsecured. Details of the Employee Benefit Trust
are provided in note 24. The loan is repayable under the following circumstances:
(i) From receipt of consideration from the sale of shares in the Parent Company purchased with the loan; and
(ii) Following any lapses in options granted by the Employee Benefit Trust over shares in the Parent Company,
the Parent Company can force the sale of shares to repay the loan.
The loan is not expected to be fully repaid within the next 12 months.
Under the terms of the loan facility, should the Employee Benefit Trust be unable to repay the loan following
disposal of all its assets then the loan shall be considered waived.
The impairment against the loan is a result of movements in the number and open market value of the shares
in the Parent Company held by the Employee Benefit Trust, which could affect its ability to fund future loan
repayments.

14. Inventories
2013 2012 2013 2012
000 000 000 000

Raw materials 38 44 - -

15. Long-term Contracts
The carrying amounts presented in the Group balance sheet for long-term contracts relate to the following
categories of assets and liabilities:
2013 2012
000 000
Contracts in progress at the balance sheet date:
Amounts due from contract customers included in trade and other receivables 516 -
Amounts due to contract customers included in trade and other payables - (2,062)
Contract losses included in provisions (500) -

16 (2,062)

Contract costs incurred plus recognised profits less recognised losses to date 59,616 49,496
Less progress billings (59,600) (51,558)

16 (2,062)
2013 57

16. Financial Assets and Liabilities
The carrying amounts presented in the Consolidated and Parent Company balance sheets relate to the
following categories of assets and liabilities:

2013 2012 2013 2012
000 000 000 000

Financial assets
Amounts owed by EBT (note 13) - - 167 198
Trade and other receivables (note 17) 1,887 2,584 596 1,015
Cash and cash equivalents (note 18) 13,749 6,651 10,537 4,714

15,636 9,235 11,300 5,927

Financial liabilities - current
Trade payables (note 19) 2,412 2,134 765 361
Current obligation under hire purchase contracts (note
20)
12 12 - 12
Amount owed to subsidiary undertakings - - - 10
Non-current obligations under hire purchase contracts
(note 20)

25

37

-

37

2,449 2,183 765 420
See note 2.14 for a description of the accounting policies for each category of financial instruments. The fair
values are presented in the related notes. A description of the Groups risk management and objectives for
financial instruments is given in note 25.

58 2013
17. Trade and Other Receivables
2013 2012 2013 2012
000 000 000 000
Financial assets:
Trade receivables 1,371 2,584 - 113
Amounts owed by subsidiary undertakings - - 596 902
Amounts due from construction contract customers
(note 15)
516 - - -
1,887 2,584 596 1,015
Non-financial assets:
Prepayments and accrued income 582 563 23 207
Deferred tax 148 148 - -
Other taxes 99 44 64 44

2,716 3,339 683 1,266
The carrying value of trade and other receivables is considered a reasonable approximation of fair value due to
their short term nature. A provision of 272,000 for impairments of receivables was assumed on acquisition of
Hunt Thermal Technologies Limited on 5 April 2012. Subsequently during 2013, the Group has made a provision
of 59,000 at ACI in respect of a doubtful receivable from one customer. With this exception, no other
allowances for doubtful receivables have been made because there has not been a significant change in credit
quality and the amounts are still considered recoverable. The average age of these receivables is 20 days
(2012: 81 days). The ageing of past due but not impaired receivables is:
2013 2012 2013 2012
000 000 000 000
0-30 days 434 391 - -
31-60 days 39 687 - -
61-90 days - - - -
>90 days 3 199 - -
476 1,277 - -
In 2013 a rent deposit of 55,000 (2012:55,000) and contract retentions of nil (2012:59,000) due after more
than one year are included within Prepayments and accrued income.
Trade receivables disclosed above are classified as loans and receivables and are therefore measured at
amortised cost. Credit terms are negotiated as part of each individual contract. No interest is charged on the
receivables from the date of the invoice. The Group does not hold any collateral or other credit enhancements
over any of its trade receivables nor does it have a legal right of offset against any amounts owed by the Group
to the counterparty.
Deferred tax comprises: Group
2013 2012
000 000
Accelerated capital allowances and other temporary differences 42 24
Tax losses carried forward 106 124
148 148
The deferred tax asset is expected to be recovered in more than one year.
At the balance sheet date, the Group has unused tax losses of 16.5m (2012: 15.1m) available for offset
against future profits. A deferred tax asset has been recognised in respect of 0.5m (2012: 0.5m) of such
losses. No deferred tax asset has been recognised in respect of the remaining 16.0m (2012: 14.6m) due to

2013 59

17. Trade and Other Receivables (continued)
the uncertainty of the timing of future taxable profits. Unrecognised tax losses are losses that may be carried
forward indefinitely

18. Cash and Cash Equivalents


2013 2012 2013 2012

000 000 000 000
Cash and cash equivalents 13,749 6,651 10,537 4,714
The funds were placed on floating interest rate deposit as follows:
2013 2012 2013 2012
000 000 000 000
Cash at bank and in hand 13,749 6,651 10,537 4,714

19. Trade and Other Payables
2013 2012 2013 2012
000 000 000 000

Financial liabilities:
Amounts falling due within one year

Trade payables 2,412 2,134 765 361
Obligations under hire purchase contracts 12 12 - 12
Amount owed to subsidiary undertakings - - - 10

Amounts falling due after one year
Obligations under hire purchase contracts

29

37

-

37
2,453 2,183 765 420
Non-financial liabilities:
Accrued expenses

Amounts due to construction contract customers
(see note 15)
1,377

-
2,289

2,062
459

-
1,533

214
Other taxes and social security
229 813 63 116
4,059 7,347 1,287 2,283

The carrying values of trade and other payables are considered to be a reasonable estimate of their fair
values.
Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
The average credit period taken for trade purchases is 40 days (2012: 54 days). For most suppliers no interest
is charged on the trade payables. The Group has financial risk management policies in place to ensure that all
payables are paid within the pre-agreed credit terms.
60 2013
20. Obligations under Finance Leases and Hire Purchase Contracts
The company uses finance leases and hire purchase contracts to acquire plant and machinery. Future minimum lease
payments under hire purchase contracts are as follows:

2013 2012 2013 2012
000 000 000 000
Future minimum payments due:
Not later than one year

14

14

-

14
After one year but not more than five years 27 41 - 41
41 55 - 55

Less finance charges allocated to future periods

(4)

(6)

-

(6)
Present value of minimum lease payments 37 49 - 49
The present value of minimum lease payments is
analysed as follows:

Not later than one year 12 12 - 12
After one year but not more than five years 25 37 - 37
37 49 - 49

The average lease term is 5 years. For the year ended 31 December 2012, the average effective borrowing rate
was 5.9% (2012: 5.9%). Interest rates are fixed at the contract date. All leases are on a fixed repayment basis
and no arrangements have been entered into for contingent rental payments.
All lease obligations are denominated in sterling. The groups obligations under finance leases are secured by
the lessors rights over the leased assets as disclosed in note 11.
The fair value of the groups lease obligations is approximately equal to their carrying amount.

21. Deferred Taxation


2013 2012 2013 2012

000 000 000

At 1 January 2,675 - -
Deferred tax liability arising in the year - 2,814 - -
Credit to Comprehensive Income (527) (139) - -

At 31 December 2,148 2,675 -

The deferred tax liability arose in respect of intangible assets acquired on the acquisition of Atmosphere
Control International Limited and Hunt Thermal Technologies Limited (formerly Hunt Graham Limited) on 5
April 2012.

2013 61

22. Provisions

Group Parent

Warranty Contracts Property Total Property

000 000 000 000 000
At 1 January 2013 382 - 330 712 150
Transferred to subsidiary - - - - (150)
Utilised (35) - - (35) -
Released to Comprehensive Income (70) - - (70) -
Charged to Comprehensive Income 755 500 - 1,255 -
At 31 December 2013 1,032 500 330 1,862 -
The warranty provision recognises future claims for rectification and repair to goods sold and remaining under
a contractual warranty period, the majority of which are expected to be incurred in the next one to three
years.
The contract provision represents foreseeable losses on contracts in progress. These are expected to be
incurred in the next one to two years.
The property provision recognises future costs of building dilapidations arising under the terms of property
leases.

23. Share Capital

Parent Company

2013 2012

000 000
Allotted, called up and fully paid
422,464,726 (2012: 307,880,146 ) ordinary shares of 10p each 42,246 30,788
Number Number

At 1 January 307,880,416 247,404,225
Issued during year 114,584,310 60,476,191

At 31 December 422,464,726 307,880,416
In accordance with the Articles of Association for the Company adopted on 19 May 2011, the share capital of
the Company consists of an unlimited number of ordinary shares of nominal value 10 pence each.
All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the
shareholders meeting of Corac Group plc. None of the Parent Company shares are held by any company in the
Group. The Employee Benefit Trust holds shares in the Parent Company as set out in note 24.
On 11 June 2013, the Company issued 50,000 new ordinary shares of 10p each following the exercise of an
employee share option issued at 10 pence per share under the Enterprise Management Incentive (EMI) Scheme.
These shares were subsequently admitted for trading on AIM.
Following the approval at a General Meeting of the Company on 19 December 2013, the Company issued as a
placement 110,000,000 new ordinary shares of 10p each and 4,534,310 new ordinary shares of 10p each as the
result of an Open Offer. All shares were issued at a price of 10p each and all were subsequently admitted for
trading on AIM. Expenses of 614,000 associated with the issue have been recognised in equity.
Options
The Group has two unapproved share option schemes and an Enterprise Management Incentive (EMI) scheme.
Share options have been granted by both the Parent Company and the Corac Employee Benefit Trust (note 24)
under the rules of these schemes. The share options granted by the Employee Benefit Trust have no dilutive
effect on the Parent Company's share capital.

62 2013
23. Share Capital (continued)

Unapproved schemes EMI scheme Total

Number of options
Parent
Company

EBT
Parent
Company

EBT
Parent
Company

EBT

Total
At 1 January 2013 10,885,755 300,000 7,780,547 678,338 18,666,302 978,338 19,644,64
0
Exercised during the year - - (50,000) - (50,000) - (50,000)
Lapsed during the year - - (1,985,577) (108,334) (1,985,577) (108,334) (2,093,911)
Granted during the year - - 2,583,184 - 2,583,184 - 2,583,184
At 31 December 2013 10,885,755 300,000 8,328,154 570,004 19,213,909 870,004 20,083,913
The exercise of options issued prior to April 2010, is subject to the satisfaction of the applicable performance
conditions. At 31 December 2013, performance conditions not satisfied relate to the market price of the
ordinary shares of the Parent Company as quoted on AIM. Generally, options will lapse on cessation of
employment or ten years from issue.
The movement on the Groups share option schemes is summarised in the table below.

2013 2012
weighted weighted
2013 average 2012 average
number exercise number exercise
of options price (pence) of options price (pence)
As at 1 January 2013 19,644,640 22.4 17,530,987 24.8
Exercised during the year (50,000) 10.0 - -
Lapsed during the year (2,093,911) 12.8 (1,512,310) 22.1
Granted during the year 2,583,184 13.8 3,625,963 11.0
At 31 December 2013 20,083,913 22.4 19,644,640 22.4
Exercisable at 31 December 2013 16,225,662 24.6 12,599,783 27.3

50,000 share options were exercised during the year (2012: nil). The options outstanding at 31 December 2013
had exercise prices as shown in the following table and a weighted average remaining contractual life of 6.6
years.
At 31 December 2013 options over ordinary 10p shares together with the fair value per option granted and the
assumptions used in the calculation of fair value for awards made after 7 November 2002, are set out in the
table below.
The closing market price of the Parent Company's shares at 31 December 2013 was 10.38p and the range
during the year was between 10.25p and 16.88p.
Expected volatility is a measure of the amount by which a share price is expected to fluctuate during a period.
For options issued after 2009, expected volatility was based on the volatility of the Parent Companys shares
during the previous 12 months. For options issued in earlier periods, the volatility of the Parent Company's
share price was calculated as the average of annualised standard deviations of daily continuously compounded
returns on the Parent Company's stock, calculated over 1, 2 and 3 years back from the date of grant where
possible.
The risk-free rate is the yield to maturity on the date of grant of a UK Gilt Strip, with term to maturity equal
to the expected life of the option.
The group recognised total expenses of 68,000 and 143,000 related to equity-settled share-based payment
transactions in 2013 and 2012 respectively.

2013 63

23. Share Capital (continued)

Date of
grant Number
Option
price per
share
Pence
Closing
share price
at grant
Pence
Exercise
price
Pence
Expected
volatility
%
Risk-free
interest
rate
%
Fair value
per share
Pence

2004 35,000 * 33.00 33.00 33.00 37.69 4.50 31.28
2005 15,002 * 31.25 32.25 31.25 38.54 4.20 13.36
2006 420,002 * 37.50 36.50 37.50 38.26 4.30 11.41
2007 463,336 36.00 36.00 36.00 35.44 5.35 7.20
2007 855,000 39.00 38.50 39.00 35.04 5.30 9.45
2007 30,000 48.50 49.50 48.50 35.53 5.51 14.75
2007 550,000 51.50 51.50 51.50 29.32 4.58 10.10
2007 470,000 53.67 52.00 53.67 29.32 4.58 7.99
2008 300,000 * 14.90 16.75 14.90 79.50 2.76 7.96
2008 290,000 14.90 16.75 14.90 79.50 2.76 7.96
2009 2,000,000 42.00 41.40 42.00 69.13 0.86 15.19
2009 300,000 39.00 35.75 39.00 69.13 1.04 12.34
2009 200,000 34.75 32.00 34.75 69.13 1.02 11.08
2010 100,000 * 25.25 24.52 25.25 67.61 1.27 8.78
2010 390,000 25.25 24.52 25.25 67.61 1.27 8.78
2010 1,200,000 21.75 22.00 21.75 50.63 1.20 6.31
2010 400,000 15.40 14.92 15.40 37.09 0.78 2.93
2010 6,705,000 15.00 14.80 15.00 37.43 0.80 3.04
2010 515,270 15.08 15.50 15.08 37.43 0.88 3.45
2011 250,000 14.15 14.25 14.15 40.71 1.32 3.35
2011 250,000 14.85 15.00 14.85 40.71 1.63 3.58
2012 774,649 11.83 11.75 11.83 36.28 0.45 2.34
2012 500,000 11.25 11.25 11.25 36.28 0.47 2.27
2012 368,000 10.00 9.50 10.00 36.28 0.51 1.73
2012 128,500 10.00 9.13 10.00 31.02 0.32 1.25
2012 190,000 13.67 14.25 13.67 42.23 0.28 3.53
2013 1,634,154 14.00 14.00 14.00 42.23 0.35 3.25
2013 500,000 13.58 13.37 13.58 25.01 0.54 1.81
2013 250,000 12.96 12.88 12.96 20.44 0.51 1.75

20,083,913

* These options were issued by the Employee Benefit Trust.
All options expire 10 years after the date of grant.
The dividend yield of 0% in all cases reflects the absence of dividends and of a clear dividend policy statement
at the relevant dates of grant.

64 2013
24. Employee Benefit Trust
On 8 November 2002, the Parent Company established the Corac Employee Benefit Trust, an employee benefit
trust, as an employees' share scheme for the benefit of and as an incentive for the employees of the Group.
The Corac Employee Benefit Trust is managed by an independent trustee.
At 31 December 2013 the Parent Company had loaned 600,000 (2012: 600,000) to the Corac Employee
Benefit Trust. With this loan the Trustee purchased shares in the Parent Company and, at 31 December 2013,
the Corac Employee Benefit Trust held 1,606,769 (2012: 1,506,347) ordinary shares in Corac Group plc with a
book cost of 653,352 (2012: 643,310) which had a market value of 166,702 (2012: 197,633). As set out in
note 2.17(ii), neither the purchase nor sale of shares in the Parent Company leads to a gain or loss being
recognised in the consolidated statement of comprehensive income but instead these are shown as movements
on consolidated equity.
Options have been granted over 870,004 (2012: 978,338) shares to certain employees being:, 35,000 at 33.0p
per share until 15 December 2014, 15,002 at 31.25p per share until 28 December 2015, 420,002 at 37.5p per
share until 27 July 2016, 300,000 at 14.9p per share until 30 December 2018 and 100,000 at 25.25p per share
until 23 June 2019. Options issued prior to 2010 are subject to performance conditions. At 31 December 2013,
performance conditions not satisfied relate to the market price of the ordinary shares of the Parent Company
as quoted on AIM.
The Parent Company intends to fund any shortfall should the Employee Benefit Trust need to purchase more
shares to fulfil its obligations to option holders.
Dividends on the shares owned by the Employee Benefit Trust, the purchase of which was funded by an
interest free loan to the Employee Benefit Trust from the Parent Company, are waived on the condition that
the Trustee shall not be liable for any losses to the Employee Benefit Trust as a result of the waiver.
25. Risk Management Objectives and Policies
Liquidity risk
Until the Group achieves cash flow breakeven from the sale of its products and services, it will seek to finance
its operations by raising equity financing on the AIM and investing the proceeds on a short term basis as its
development proceeds. The Group seeks to manage financial risk to ensure sufficient liquidity to meet
foreseeable requirements until cash flow breakeven and to invest cash profitably and at low risk.
The Group holds investments in bank deposits as a liquid resource to fund its operations. The Groups strategy
for managing cash is to maximise interest income whilst ensuring availability to match the profile of the
Groups expenditure. Liquidity is further managed by tight controls over expenditure.

Credit risk
The Groups exposure to credit risk arises from holding cash and cash equivalents. The Group places funds on
deposit directly with banks. Group credit policy limits deposits to an approved list of specific banks, which is
compiled taking into account various factors including credit ratings.
The Groups exposure to credit risk is also attributable to its trade receivables, which, as set out in note 17, at
31 December 2013 were 1,371,000 (2012: 2,584,000). The amounts presented in the balance sheet are net
of allowances for doubtful receivables, estimated by the Groups management based on prior experience and
their assessment of the current economic environment. There are doubtful receivables of 59,000 at the end
of 2013 (2012: nil).

Interest rate risk
A further risk arising from the Groups financial instruments is interest rate risk. The Directors consider the
principal element of risk directly arising from changes in interest rates relates to the level of interest income
earned on bank deposits. Funds are invested to maintain a balance between accessibility of funds and
competitive rates of return whilst investing funds safely.
It is, and has been throughout the period under review, the Groups policy that no trading in financial
instruments shall be undertaken.
Foreign currency risk
The Group undertakes contracts denominated in foreign currencies (principally Euro and US dollar) leading to
an exposure in exchange rate movements for both sales and purchase transactions. Where they cannot be
offset, forward exchange contracts are utilised to minimise the risk.
2013 65

26. Financial Commitments under Operating Leases
Future minimum lease payments under non-cancellable operating leases are as follows:

2013 2012 2013 2012
000 000 000 000
Land and buildings
Within one year 777 706 55 221
From one to five years 2,305 2,180 - 590
In more than five years 6,046 4,555 - -
9,128 7,441 55 811
Office equipment and motor vehicles
Within one year 77 121 14 49
From one year to five years 95 131 8 60
172 252 22 109

9,300 7,693 77 920

No Company in the Group sub-leases any of their leased premises.
Land and building operating lease payments represent rentals payable by the group for all of its properties.
Leases are negotiated for periods of between 1 and 25 years and rentals are fixed for an average of 5 years.
At 31 December 2013, the Group had no capital commitments (2012: nil).

27. Contingent Liabilities
As part of the Groups long-term contract trading activities, 184,000 of performance and warranty bonds
(2012: 447,000) have been issued to customers. No liability is expected to arise and no provision is made in
the accounts.
The Group has received a legal claim from a customer. In the opinion of the Directors, this claim is without
merit, and adequate provision for costs has been made within the financial statements. The Group has applied
the provisions of IAS 37 (92), which permits exemption from full disclosure of this claim as it considers that to
do so could be seriously prejudicial to the outcome of the claim.

28. Related Party Transactions
During the year, no transactions took place between the Group and other entities with common directorship or
controlled by a related party.

66 2013
Company Information
Company Number
3152034
Directors
P Cartmell
Chief Executive Offcer
J P Carter
Chief Financial Offcer
(appointed 22 July 2013)
M S Crawford
Chief Operating Offcer
R W King
Non-executive Chairman
R R Courtney OBE
J A Henderson
(appointed 26 March 2013)
Secretary
M J Webb
Registered Offce
Technology Centre
683-685 Stirling Road
Slough
Berkshire
SL1 4ST
Nominated Adviser and Broker
Cenkos Securities plc
6-8 Tokenhouse Yard
London
EC2R 7AS
Nominated Adviser and Broker
Cenkos Securities plc
6-8 Tokenhouse Yard
London
EC2R 7AS
2013 67
Auditor
Deloitte LLP
Abbots House,
Abbey Street,
Reading
RG1 3BD
Solicitor
Nabarro LLP
Lacon House,
84 Theobalds Road,
London
WC1X 8RW
Bankers
National Westminster Bank plc
1 Penn Road,
Beaconsfeld,
Buckinghamshire
HP9 2PU
Barclays Bank plc
One Snowhill,
Queensway,
Birmingham
B4 6GN
Patent Agent
Mathys & Squire LLP
120 Holborn,
London
EC1N 2SQ
Registrar
Equiniti
PO Box 4630
Aspect House,
Spencer Road, Lancing
West Sussex
BN99 6QQ
Financial PR
MHP Communications
60 Great Portland Street,
London
W1W 7RT
Technology Centre,
683-685 Stirling Road,
Slough, Berkshire, SL1 4ST
Tel: +44 (0)1753 285 800
Fax (0)1753 285 801
email: info@corac.co.uk www.corac.co.uk
Registered in England & Wales No. 3152034

Corac Group PLC Annual Report and Financial Statements 2013

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