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IPS - IPSA GROUP PLC - Unaudited Interim Results for the Twelve Month Period to
30 September 2010
IPSA GROUP PLC
(Incorporated and registered in England and Wales)
(Registration Number 5496202)
AIM Share Code IPSA ISIN GB00BOCJ3F01
JSE Share Code IPS ISIN GB00B0CJ3F01
("IPSA" or "the company")
Unaudited Interim Results for the Twelve Month Period to 30 September 2010
Chairman`s Statement
I am pleased to report the Company`s interim results for the twelve month period
to 30 September 2010. This follows the recently announced change in the
Company`s accounting reference date to 31 March 2011. Full audited accounts will
be prepared for the 18 month period to 31 March 2011.
The results are broadly in line with our expectations. The net loss after tax
for the period was GBP1.2m (2009 - GBP5.5m), giving a basic loss per share of
1.27p (2009 - loss per share 5.92p). The operating loss for the period under
review was GBP2.1m (2009 - GBP2.2m). Other income (comprising storage costs, a
write-back of an overprovision in respect of gas not used and unrealised
exchange gains) was GBP2.1m (2009 - expense of GBP1.8m) and the net finance
expense was GBP1.2m (2009 - GBP1.5m).
Revenues of GBP675k (2009 - GBP1m) during the period represented a short term
supply agreement negotiated with Eskom in 2010 to assist with power supplies
during the FIFA World Cup.
NewCogen
During the period ended on 30th September 2010, NewCogen generated approximately
8,500 MWh of electricity for sale to Eskom between 22nd June and 31st August.
Sasol Gas supported us with an ad hoc gas contract for the period of the FIFA
World Cup, and the plant consumed a little under 130,000 GJ. With a higher gas
price and no steam sales, profitability was curtailed, but the operation was
cash positive during the period, with a gross operating margin (before staff and
other operating costs) of around GBP145,000 during just over two months of
operations.
On 31st August 2010, we announced the signing of the MTPPP contract with Eskom
and I am pleased that we have finally commenced generation and supply under this
contract as of 24th March 2011. Our new gas supplier is Spring Lights Gas
(Pty.) Limited, with whom we have entered into a five year contract which will
terminate in March 2016 unless extended by mutual agreement.
Margins are expected to suffer as a result of the increase in the oil price, a
component of the escalation mechanism in the gas contract. We are considering a
hedging contract to help protect against material movements in the price of
Brent oil.
In December 2010, Sasol Gas Limited served a summary judgement notification on
NewCogen which we announced we would defend vigorously. Discussions with Sasol
Gas`s attorneys are now ongoing. It is anticipated that the dispute will be
sent to arbitration later in the year if it is not settled amicably beforehand.
On 24th March 2011, the NewCogen plant was successfully restarted, following
another capital increase of GBP1m in February this year, which was used to fund
the working capital required (principally the security required for the gas
supply agreement with Spring Lights) for commencement of operations for power
supplied under the MTPPP contract with Eskom. Negotiations to put in place a
new long term steam agreement continue in order to maximise revenues from the
plant.
The Turbines
A number of indicative offers for all four of our 701 D turbines are under
consideration. Although the Marketing Agreement and associated debt standstill
agreement entered into in March 2010 terminated on 21st February 2011, IPSA
continues to work with both Standard Bank and TurboCare to ensure a disposal of
the Turbines with a view to settling its outstanding creditors, including the
GBP16.8m of loan principal and accrued but unpaid interest due to Standard Bank
and approximately Euro16.5 million of loan principal, accrued interest and
storage charges due to TurboCare for the refurbishment and storage of the
turbines, as soon as possible.
Working capital
In spite of the revenues which will arise from the recommencement of electricity
sales and the continuing very strict cost containment measures, the Group`s
working capital will continue to remain extremely tight until the Company is
able to realise cash from the sale of the turbines or secure external funding
for the operations in South Africa.
Other Projects
In spite of the lack of funds available to us to take significant steps towards
developing new generation projects, the Directors have continued to maintain an
active interest in developing further generation capacity in southern Africa.
There are a number of potential opportunities arising, particularly in South
Africa, as demand for electricity increases once more as a result of increased
mining and other energy intensive manufacturing activities.
All the same, the way forward for the private power sector in South Africa
continues to remain unclear. A tender for baseload power plants was announced
by Eskom in 2008 and IPSA was pre-qualified for the process. In addition, in
April 2010, IPSA pre-qualified for a proposed development at the Coega
development zone. However, little progress has been made on either project. As
a result of the delays in defining the baseload programme, IPSA terminated the
coal contract for the proposed plant at Indwe in October 2010.
Conclusion
This period has been eventful. I am pleased that I can report the restarting of
the cogeneration plant at Newcastle and the commencement of supply to Eskom
under the medium term power purchase contract. This has not been an easy time
for the Directors or the staff and stakeholders of NewCogen. I warmly thank
them for their continued support and hard work to get us past this hugely
important milestone, which is a very significant achievement both in terms of
the development of the Group and the electricity sector in South Africa.
Richard Linnell
Chairman
30 March 2011
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)for the 12
month period ended 30 September 2010
Notes 12 months 12 months
30/9/10 30/9/09
unaudited audited
GBP`000 GBP`000
Revenue 3 675 1,039
Cost of sales 4 (1,657) (2,227)
Gross loss (982) (1,188)
Administrative (1,126) (985)
expenses
Operating loss (2,108) (2,173)
Other income / 5 2,107 (1,792)
(expense)
Finance expense (net) (1,207) (1,501)
Loss before tax (1,208) (5,466)
Tax expense - -
Loss after tax (1,208) (5,466)
Loss per ordinary 6 (1.27p) (5.92p)
share
(basic, diluted and
headline)
Other comprehensive
income
Exchange differences (382) (1,108)
on
translation of foreign
operation
Total comprehensive (1,590) (6,574)
loss
attributable to equity
shareholders
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (unaudited)at 30
September 2010
Notes 30/9/10 30/9/09
unaudited audited
GBP`000 GBP`000
Assets
Non-current assets
Intangible 7 583 666
Property, plant and 8 13,656 13,978
equipment
14,239 14,644
Current assets
Trade and other 2,154 2,380
receivables
Cash and cash 258 136
equivalents
2,412 2,516
Non-current assets 9 31,629 32,253
classified as assets
held for sale
Total assets 48,280 49,413
Equity and liabilities
Equity attributable to equity holders of the parent:
Share capital 1,900 1,900
Share premium account 26,027 26,027
Foreign currency (1,944) (1,562)
reserve
Profit and loss (15,002) (13,794)
reserve
Total equity 10,981 12,571
Current liabilities
Trade and other 10 19,502 19,553
payables
Borrowings 11 17,797 17,289
37,299 36,842
Total equity and 48,280 49,413
liabilities
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
for the twelve month period ended 30 September 2010
12 months 12 months
30/9/10 30/9/09
unaudited audited
GBP`000 GBP`000
Loss for the period (1,208) (5,466)
Add back net finance 1,207 1,501
expense
Adjustments for:
Depreciation 807 813
Amortisation of 83 84
intangible
Translation and (1,770) (4,296)
unrealised
exchange gains
Change in trade and 96 (925)
other receivables
Change in trade and (49) 7,195
other payables
Cash used in (834) (1,094)
operations
Interest paid (61) (81)
Net cash used in (895) (1,175)
operations
Cash flows from
investing
activities
Purchase of plant and - (30)
equipment
Deposit (non 624 -
refundable)
on asset held for
resale
624 (30)
Cash flow from
financing
activities
Loan note issued 650 -
Other loans received 367 618
Other loans repaid (624) (550)
Issue of shares (net - 868
of costs)
393 936
Increase / (decrease) 122 (269)
in cash
and cash equivalents
Cash and cash 136 405
equivalents
at start of period
Cash and cash 258 136
equivalents
at end of period
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)for the twelve
month period ended 30 September 2010
Share Share Foreign Profit and Total
capital premium currency loss equity
account reserve reserve
GBP`000 GBP`000 GBP`000 GBP`000 GBP`000
At 1.10.09 1,900 26,027 (1,562) (13,794) 12,571
Total recognised - - (382) (1,208) (1,590)
expense
for the period
At 30.9.10 1,900 26,027 (1,944) (15,002) 10,981
Notes to the unaudited Interim Statement for the twelve month period ended 30
September 2010
1. Basis of preparation
These condensed consolidated interim financial statements do not constitute
statutory accounts within the meaning of Section 435 of the Companies Act 2006.
The comparative figures for the year ended 30 September 2009 were derived from
the statutory accounts for that year which have been delivered to the Registrar
of Companies. Those accounts which contained an unqualified audit report, with
an emphasis of matter paragraph on going concern, did not contain any statements
under sections 489(2) or (3) of the Companies Act 2006. The financial
information contained in this interim statement has been prepared in accordance
with all relevant International Reporting Standards (`IFRS`) in force and
expected to apply to the Group`s results for the 18 month period ending 31 March
2011 and on interpretations of those Standards released to date.
2. Accounting policies
These condensed consolidated interim financial statements have been prepared in
accordance with the Group`s IFRS accounting policies. These policies are set out
in the Group`s financial statements for the year ended 30 September 2009.
3. Revenue
The Company`s subsidiary in South Africa, Newcastle Cogeneration (Proprietary)
Ltd ("Newcogen") commenced selling steam in September 2007 and electricity in
October 2007. As explained in detail in the financial statements to 30 September
2009, sales of electricity and steam were temporarily suspended, save for a
short period during the World Cup, pending the application and prospective grant
of an electricity supply contract. As set out in the Chairman`s statement, a
long term supply contract was awarded in August 2010 and following agreement of
a gas supply contract in February 2011, electricity generation has recently
recommenced.
4. Cost of sales
Cost of sales comprises cost of gas, routine plant maintenance, depreciation and
other direct costs.
5. Other income / 12 months 12 months
(expense) 30/9/10 30/9/09
GBP`000 GBP`000
Exchange gains / 689 (1,414)
(losses)1
Exchange gains2 1,081 3,352
Storage costs3 (905) (762)
Gas - take or pay4 1,242 (2,968)
Total 2,107 (1,792)
1 Exchange gains / (losses) arising on the Euro denominated amount owing to
Turbocare in respect of the refurbishment costs of the 4 Siemens gas turbines
which were originally acquired for the Coega project and are now held as an
`asset held for resale`;
2 Exchange gains arising in the Company`s subsidiary (Newcogen) on sterling
denominated loans from the Company which have funded the construction of the
generating plant in South Africa;
3 Storage costs in respect of the storage of the 4 Siemens gas turbines pending
their sale (see note 9 below);
4 The `take-or-pay` gas contract was terminated by Sasol in July 2009. During
prior periods the charge represents the difference between the minimum offtake
level required under the `take-or-pay` contract and the gas actually used since
for certain periods the plant in Newcastle was unable to operate due to the
absence of a electricity offtake agreement. The credit in the current period
represents the write-back of over-provisions in prior periods.
6. Loss per share 12 months 12 months
30/9/10 30/9/09
Average number of 95.0m 92.3m
shares
in issue during the
period
Loss for the period GBP1.208m GBP5.466m
Loss per ordinary 1.27p 5.92p
share
(basic, diluted and
headline)
7. Intangible
The intangible non-current asset represents the fair value of the steam supply
contract owned by Newcogen.
8. Property, plant and equipment
Property, plant and equipment comprises the electricity generating plant in
South Africa owned by Newcogen.
9. Assets held for resale
The 4 Siemens gas turbines are owned by the Company and are for sale. The
turbines were originally acquired for the Coega project in South Africa but in
view of the delay in the project, the Board decided that it would be in the best
interest of shareholders to sell the turbines.
In December 2009, a conditional contract was entered into for the disposal of
one turbine and a non-refundable deposit of US$1m was received by way of set-off
against a loan from Independent Power Corporation PLC. This deposit has been
deducted from the cost of the turbines.
On 5th March 2010, the Company entered into an agency agreement with Standard
Bank and Turbocare in respect of the marketing of the 4 Siemens gas turbines and
the distribution of the proceeds received in connection with the sale. The
agreement also provided for a standstill agreement whereby Turbocare and
Standard Bank (see notes 10a and 11a below) undertook that they would not take
proceedings against the Company to recover debts owed to them and that they
would not enforce any security rights they may have during the term of the
agreement. This agreement terminated on 31 January 2011 but has been informally
extended pending the outcome of current negotiations with parties interested in
acquiring the turbines.
10. Trade and other payables
Trade and other payables includes:
a) An amount of GBP14.2m (2009 - GBP14m) owing to Turbocare, the supplier of the
4 Siemens gas turbines, in respect of the refurbishment and storage of the
turbines, plus interest. As set out in note 9 above, the Company, Turbocare and
Standard Bank entered into a standstill agreement (now terminated) with respect
to the payment of the amounts owing and also an agreement covering the marketing
of the turbines and the distribution of the sale proceeds.
b) An amount of GBP3.6m (2009 - GBP4.3m) claimed by Sasol against the Company`s
subsidiary, Newcogen. The claim is being disputed and the parties expect to
refer the claim to arbitration proceedings later in the year if settlement is
not achieved before then. The claim relates to amounts invoiced by Sasol prior
to the termination of the gas supply agreement by Sasol in 2009.
11. Borrowings
Included within borrowings are the following loans:
a) Amount due to Standard Bank - GBP16.8m, including interest (2009 - GBP16m).
In March 2008, the Company obtained a bank loan of GBP15m from Standard Bank to
finance the final instalment payment for the purchase of the 4 Siemens gas
turbines. The loan was originally repayable in September 2009 but had been
extended (now terminated), as set out in note 9 above, under the standstill
agreement between the Company, Turbocare and Standard Bank.
b) Loan note - GBP672k, including interest (2009 - nil). On 5 March 2010, the
Company issued a GBP650k unsecured loan note, with interest payable at 6%. The
loan note was originally repayable by 31 January 2011 or the earlier of a change
of control of the Company or the sale of two of the steam turbines or a full or
partial sale of certain plant and equipment in South Africa. The repayment date
has been extended to 30 April 2011. The loan note holders were issued warrants
over 6.5m ordinary shares exercisable between the repayment date and 30 months
thereafter at the lower of 19 pence per share and the price at which any future
ordinary shares are issued prior to such exercise.
c) Other loans - GBP1m, including interest (2009 - GBP1.3m), comprising
unsecured loans, with interest rates of between 5% and 12%, repayable within 12
months.
12. The Board of Directors approved this interim statement on 30 March 2011.
This interim statement has not been audited.
13. Copies of this announcement 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
31 March 2011
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, Execution Noble & Company Ltd
Harry Stockdale (Nominated Adviser and Broker) +44 (0)20 7456 9191
Riaan van Heerden, PSG Capital (Pty.) Limited, (South African Sponsors) +27 11
326 5083
Or visit IPSA`s website: www.ipsagroup.co.uk
Date: 31/03/2011 08:00:07 Supplied by www.sharenet.co.za
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