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IPS - Ipsa Group Plc - Unaudited Interim Results For The Six Month Period To
31 March 2009 Chairman`s Statement
IPSA GROUP PLC
(Incorporated and registered in England and Wales)
(Registration Number 5496202)
AIM Share Code IPSA ISIN GB00BOCJ3F01
JSE Share Code IPS ISIN GB00BOCJ3F01
("IPSA" or "the company")
25 June 2009
UNAUDITED INTERIM RESULTS FOR THE SIX MONTH PERIOD TO 31 MARCH 2009
CHAIRMAN`S STATEMENT
In the six month period to 31 March 2009 the Group made a loss of GBP3.4m on
sales of just under GBP1.0m. The loss per share, fully-diluted, was 3.80p.
1) Newcastle Combined Heat and Power ("CHP") Plant
Having previously been commissioned and achieved sales of both steam and
electricity, the Newcastle CHP facility in KwaZulu Natal has stood idle while
waiting for the award of a power purchasing agreement with Eskom. As noted in
the accounts, the Company`s subsidiary in South Africa commenced selling steam
in September 2007 and electricity in October 2007 but sales of electricity have
been temporarily suspended since the end of September 2008 pending the
application for and grant of an electricity supply contract. The delay in being
awarded a contract has affected the Group`s cash flow to the extent that steam
sales have also been temporarily suspended since February 2009.
We are very hopeful that the power purchase agreement will be signed and
implemented in the near future. The Company shares the frustration of
shareholders that the agreement has taken so long to materialise. I can only
assure shareholders that this is not the result of any lack of effort on the
part of management, who have been working non-stop to finalise matters with
Eskom; but it must be acknowledged that for Eskom the Newcastle CHP project is
much less important than it is for IPSA. The resulting delay has had a number of
negative impacts on the Group. In particular, the refinancing of the Newcastle
project, already made more difficult by exceptionally poor conditions in
international credit markets following the financial collapse of late 2008, has
had to wait until an appropriate power purchase contract is in place, while the
Group`s profits and cashflow have been seriously hit by its obligations under
the take or pay agreement with our gas provider, Sasol. That is, we find
ourselves in a position of having to pay for gas we are not consuming while our
generators sit there with nothing to do.
2) Fiat Avio 501 D turbines
During the period under review, and since the period end, IPSA has conducted
negotiations with various parties outside South Africa for the sale of the
turbines formerly earmarked for the Coega project near Port Elizabeth. It had
become clear that the in-service date for the first 521 MW of open cycle gas
turbine capacity at Coega, originally targeted for mid-2009, could not be
achieved and IPSA has therefore been endeavouring to sell the four fully-
refurbished Fiat Avio 501 D turbines acquired by the Company in March 2007 for
the Coega project.
Despite various offers of interest, and moments when agreement appeared to be
within sight, no firm purchaser has yet been identified for the turbines. The
Directors continue to believe that the value of the turbines is considerably
higher than the all-in purchase price of GBP32.6 million. The turbines are
unusual in that they are able to run on heavy fuel oil, which makes them more
adaptable than many competitors. However the terms of the Company`s loan of
GBP15 million from Standard Bank require the Company to repay the loan in full
by the end of September 2009 and it is imperative that an appropriate
transaction is agreed by then, or that appropriate refinancing arrangements are
put in place.
3) Elitheni Clean Coal Holdings
The Group is developing over 500 MW of coal-fired capacity in the Eastern Cape
based on coal from the Elitheni coal mine at Indwe. The owners of the Elitheni
coal mine have announced increased coal reserves sufficient for IPSA to proceed
with the first 250 MW of coal-fired capacity on a fast track basis. Once again
the advancement of this project has been hindered by our lack of cash, and
further progress is dependent on the refinancing referred to above.
Overall it has been a very frustrating time. South Africa`s need for new
generating capacity is demonstrated by continuing power shortages in many parts
of the country; the authorities have been obliged to make arrangements with
other countries in the region to ensure uninterrupted supplies during the 2010
football World Cup. Our Newcastle facility has been waiting for the best part of
a year while the award of a long term power purchase agreement has been held up
by delays beyond our control. We are now very hopeful of good news on the power
purchase agreement in the near future - but previous experience has taught us to
be cautious about being too optimistic on timing.
The Company`s financial position, clearly, is difficult. We have some excellent
and valuable assets in the Newcastle plant and the four Fiat Avio turbines. On
the other hand we are very short of cash; indeed we have already announced that
during the period we were dependent for survival on funding from Independent
Power Corporation PLC ("IPC"), a company controlled by our own chief executive.
This funding has kept the Group alive but it is not a bottomless well. The
current amount due to IPC is GBP0.63m, following the conversion of GBP0.55m of
existing loan into ordinary shares in the Company in March 2009. In addition,
interest payments of GBP0.58m are overdue in respect of the Company`s senior
secured bank loan.
Shareholders should note that the independent auditors included an emphasis of
matter paragraph in their unqualified opinion of the Group`s Financial
Statements for the year ended 30 September 2008 in light of the uncertainties at
the time.
It is essential for our survival that we make rapid progress with the
refinancing of the Newcastle facility and the sale of the Fiat Avio turbines.
Shareholders will be kept fully informed.
Stephen Hargrave
Chairman
25 June 2009
IPSA IPSA GROUP PLC
(Incorporated and registered in England and Wales)
(Registration Number 5496202)
AIM Share Code IPSA ISIN GB00BOCJ3F01
JSE Share Code IPS ISIN GB00BOCJ3F01
("IPSA" or "the company")
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE HALF YEAR ENDED 31 MARCH 2009
Notes 6 months to 6 months to
31/3/09 31/3/08
GBP`000 GBP`000
Revenue 3 955 957
Cost of sales 4 (1,663) (1,439)
Gross loss (708) (482)
Administrative expenses (492) (721)
Operating loss (1,200) (1,203)
Other (expenses) / income 5 (1,296) (3,639)
Finance (expense) / income (908) (10)
Loss before tax (3,404) (4,852)
Tax expense - -
Loss for the period (3,404) (4,852)
Loss per ordinary share 6 3.80p 5.42p
(basic, diluted and headline)
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (unaudited) for the half
year ended 31 March 2009
6 months to 6 months to
31/3/09 31/3/08
GBP`000 GBP`000
Loss for the period (3,404) (4,852)
Exchange difference on translation (250) 532
Total recognised loss for the period (3,654) (4,320)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
AT 31 MARCH 2009
Notes 31/3/09 30/9/08 31/3/08
GBP`000 GBP`000 GBP`000
Assets
Non-current assets
Intangible 7 708 750 833
Property, plant and
Equipment 8 12,217 11,574 32,960
12,925 12,324 33,793
Current assets
Assets held for resale 9 32,639 32,253 -
Trade and other receivables 290 1,454 651
Cash and cash equivalents 865 405 1,464
33,794 34,112 2,115
Total assets 46,719 46,436 35,908
Equity and liabilities
Equity attributable to equity holders
of the parent:
Share capital 1,901 1,792 1,792
Share premium account 26,002 25,267 25,267
Foreign currency reserve (704) (454) (18)
Retained loss (11,732) (8,328) (8,729)
Total equity 15,467 18,277 18,312
Non-current liabilities
Bank loan 10 - - 15,000
Current liabilities
Trade and other payables 11 15,147 12,017 2,596
Bank loan 10 15,000 15,000 -
Other borrowings 1,105 1,142 -
31,252 28,159 2,596
Total equity and liabilities 46,719 46,436 35,908
STATEMENT OF CONSOLIDATED CASH FLOWS (UNAUDITED)
FOR THE HALF YEAR ENDED 31 MARCH 2009
Notes 6 months to 6 months to
31/3/09 31/3/08
GBP`000 GBP`000
Cash generated from / (used in)
Operations 973 (12,337)
Interest (paid) / received (908) (10)
Net cash generated from / 65 (12,347)
(used in) operating activities
Cash flows from investing activities
Purchase of plant and equipment (26) (1,892)
Additions to assets for resale (386) -
(412) (1,892)
Cash flows from financing activities
Bank loan - 15,000
Other loans 513 -
Issue of shares (net of costs) 294 -
807 15,000
Increase in cash and cash equivalents 460 761
RECONCILIATION AND ANALYSIS OF CHANGE IN NET FUNDS
Increase in cash during the period 460 761
Cash and cash equivalents at start
of period 405 703
Cash and cash equivalents at
end of period 865 1,464
Reconciliation of loss before tax to net cash used in operations:
Loss for the period (3,404) (4,852)
Depreciation 348 109
Amortisation of intangible asset 42 -
Changes in working capital
Decrease in debtors 1,164 441
Increase / (decrease) in creditors 3,130 (10,124)
Exchange translation (1,215) 2,079
Interest net 908 10
Net cash generated from /
(used in) operations 973 (12,337)
NOTES TO THE UNAUDITED INTERIM STATEMENT FOR THE HALF YEAR ENDED 31 MARCH 2009
1. Basis of preparation
This interim statement is unaudited and does not constitute Statutory Accounts
within the meaning of Section 240 of the Companies Act 1985. Statutory Accounts
for the year ended 30 September 2008 have been filed with the Registrar of
Companies. The auditors have made a report on those Statutory Accounts under
Section 235 of the Companies Act 1985. The auditors` report is modified on the
basis of an emphasis of matter opinion and going concern but is otherwise
unqualified. The financial information contained in this interim statement has
been prepared in accordance with the Listing Rules of the Financial Services
Authority and all International Financial Reporting Standards (`IFRS`) in force
and expected to apply to the Group`s results for the year ended 30 September
2009 and on interpretations of those Standards released to date.
2. Accounting policies
This interim statement has been prepared in accordance with the Group`s IFRS
accounting policies. These policies were set out in the Group`s Financial
Statements for the year ended 30 September 2008.
3. Revenue
The Company`s subsidiary in South Africa commenced selling steam in September
2007 and electricity in October 2007. Sales of electricity have been temporarily
suspended since the end of September 2008 pending the application and
prospective grant of an electricity supply contract. The delay in being awarded
an electricity supply contract has affected the Group`s cash flow to the extent
that steam sales have also been temporarily suspended since February 2009.
4. Cost of sales
Cost of sales has exceeded sales revenues as a result of the low sales volume
following the temporary suspension of electricity sales. In the prior period,
cost of sales included gas consumed during testing of the plant.
5. Other expenses
Other expenses included:
a) Exchange losses of GBP1.5m arising on the amount outstanding in respect of
the refurbishment costs of the equipment originally acquired for the Coega
project and now held as an `asset for re-sale`
b) Exchange gains of GBP1.1m arising in the Company`s subsidiary on sterling
denominated loans from the Company which have funded the construction of the
generating plant in South Africa
c) A provision of GBP0.9m under the gas `take-or-pay` contract. The suspension
of electricity sales has resulted in a shortfall against the minimum off-take
required under the contact and this sum of GBP0.9m represents the pro-rata
shortfall at 31 March 2009.
6. Loss per share
The loss per ordinary share has been calculated on the loss for the period of
GBP3.404m (2008 - GBP4.852m) divided by the weighted average number (89,564,081)
of ordinary shares in issue during the period (2007 - 89,564,081). There is no
difference between the basic, diluted and headline calculations.
7. Intangible
The intangible non-current asset represents the fair value of the supply
contract owned by Newcastle Cogeneration (Proprietary) Limited.
8. Property, plant and equipment
Property, plant and machinery comprises the plant in South Africa and, at 31
March 2008, also included the plant acquired for the Coega project (GBP23.1m) -
see note 9 below.
9. Assets held for resale
As set out in the 30 September 2008 Financial Statements, the Board has decided
to sell the 4 steam turbines which were originally acquired for the Coega
project as a result of the uncertainty over the timing of the project and the
expected delays as compared to the original proposed timetable.
10. Bank loan
In March 2008, the Company obtained a bank loan of GBP15m to finance the final
instalment payment for the plant acquired for the Coega project. The loan is
repayable in September 2009. Interest is at LIBOR plus 3.255%.
11. Trade and other payables
Included within trade and other payables is an amount of Euro12.4m (GBP11.5m)
owing to the manufacturer which has refurbished the 4 steam turbines held for
resale. This amount is not payable until the machines are sold.
12. The Board of Directors approved this interim statement on 25 June 2009. This
interim statement has not been audited.
13. Copies of this statement are being sent to all shareholders on the register
at today`s date. Copies may be obtained from the Company`s registered office,
5th Floor, Prince Consort House, Albert Embankment, London SE1 7TJ.
About IPSA:
IPSA Group PLC is a British company established to develop power generation
projects in southern Africa. It is managed by a team with a strong track record
in developing power projects worldwide and with considerable experience in
Southern Africa.
IPSA floated on the AIM market of the London Stock Exchange in September 2005
and obtained a dual listing on the Altx market of the Johannesburg Stock
Exchange in October 2006.
LONDON
25 June 2009
FOR FURTHER INFORMATION CONTACT:
Peter Earl, CEO, IPSA Group PLC: +44 (0)20 7793 7676
Elizabeth Shaw, COO, IPSA Group PLC: +44 (0)20 7793 7676
John Llewellyn-Lloyd / Sunil Sanikop, Noble & Company Ltd: +44 (0)20 7763 2200
(Nominated Adviser and Joint Broker)
Allan Piper, Tavistock Communications: +44 (0)20 7920 3150
(UK PR Advisers)
Dino Theodorou, PSG Capital (Pty.) Limited: +27 (11) 797 8400
(South African Sponsors)
Or visit IPSA`s website: www.ipsagroup.co.uk
Date: 25/06/2009 13:00:01 Supplied by www.sharenet.co.za
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