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Ipsa Group Plc - Audited Results for the year ended 31 March 2012
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" or “the Group”)
Audited Results for the year ended 31 March 2012
IPSA, the AIM and AltX dual listed independent power plant
developer with operations in Southern Africa, today announces
its audited results for the year ended 31 March 2012.
Highlights:
• Revenue of GBP4.4 million (18 months to 31 March 2011 -
GBP0.8 million)
• Group after tax profit of GBP5.6 million (18 months to 31
March 2011 - GBP5.2 million loss).
• Key components are:
o Plant operating loss of GBP0.9 million (18 months to
31 March 2011 - GBP2.2 million loss)
o Profit on sale of 2 turbines of GBP6.1 million (18
months to 31 March 2011 – nil)
o Credit of GBP3.6m arising from settlement with Sasol
(18 months to 31 March 2011 – release of accrual -
GBP1.2 million)
Since the year-end, settlement has been reached with Sasol over
their claim under the 2007 ‘take-or-pay’ contract funded by a
new loan from Sterling Trust Limited of GBP0.6 million. The
financial impact of this settlement has been reflected in these
financial statements.
Commenting, Richard Linnell, Chairman of IPSA, said:
“The year to 31 March 2012 has seen a significant improvement in
the trading performance of the plant in South Africa and, as
previously announced, in January this year, the Company sold 2
of its 4 turbines, realising a gross profit on this sale of
GBP6.1 million. Completion of the sale of the remaining 2
turbines is expected soon following which the working capital of
the Group will be stabilized. Since the year-end, the recently
announced settlement of the claim by Sasol is also important as
it removes a major uncertainty which was hindering refinancing
of the plant in South Africa.”
For further information contact:
Phil Metcalf, CEO, IPSA Group PLC +44 (0)20 7793 7676
Elizabeth Shaw, COO, IPSA Group PLC +44 (0)20 7793 7676
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John Llewellyn-Lloyd/ Harry Stockdale, Execution Noble & Co. Ltd
(Nominated Adviser and Joint Broker) +44 (0)20 7456 9191
James Joyce/Harry Ansell, W. H. Ireland Limited (Broker)
+44 (0)20 7220 1666
Riaan van Heerden, PSG Capital (Pty) Limited, (AltX Designated
Advisors)+27 (0)21 887 9602
Or visit IPSA's website: www.ipsagroup.co.uk
The financial information set out below does not constitute the
Company's statutory accounts for the year ended 31 March 2012 or
the 18 month period ended 31 March 2011 but is derived from
those accounts. Statutory accounts for 2011 have been delivered
to the registrar of companies, and those for 2012 will be
delivered in due course. The auditors have reported on those
accounts; their reports were (i) unqualified, (ii) include an
emphasis of matter on going concern without qualifying their
report, and (iii) did not contain a statement under section 498
(2) or (3) of the Companies Act 2006.
CHAIRMAN'S STATEMENT
I am pleased to present to the shareholders of IPSA Group PLC
(the “Group”) the Report and Accounts for the year ended 31
March 2012.
The year under review has seen a number of very significant
events, the principal one being the completion of the sale in
January 2012 of two of the four 701 DU turbines (the “Turbines”)
the Company has held since acquiring them for a project in South
Africa in March 2007.
Group turnover has increased significantly to GBP4.4 million
(2011 GBP0.8 million) as the operating results reflect 12 months
of electricity sales and 9 months of steam sales from the
Group’s plant in South Africa, as compared to just a few weeks
of sales reported in the period ended 31 March 2011. Although
the combined revenue of GBP4.4 million from electricity and
steam sales was not sufficient to record an operating profit
after depreciation, it does nonetheless represent a major
improvement as, excluding depreciation, the plant recorded a
gross profit of GBP730,000 (2011: gross loss GBP630,000) and an
operating loss, excluding depreciation, of just GBP60,000 (2011:
GBP970,000 loss).
The profit for the year also includes a profit of GBP6.1m
arising from the sale of the two turbines and, as a result of
this sale, I am pleased to report a major reduction in debt and
trade creditors. Debt, comprising loans and bank borrowings, at
31 March 2012 amounted to GBP7.3 million as compared to GBP19
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million at 31 March 2011. Trade creditors have fallen from GBP21
million to a little under GBP8 million. As previously reported
the Company originally acquired the four turbines for a proposed
project in South Africa and when it became clear that the
project would be delayed, the Board decided that it would be in
the best interests of shareholders to sell the turbines to a
third party rather than sell them to a Group owned project
company.
The process to sell the remaining two turbines continues to
experience delays. The Board is currently negotiating with a
number of potential buyers and at least two of these appear to
offer a realistic prospect of being able to complete on
satisfactory terms.
A major event since the year-end was reaching settlement with
Sasol Gas Limited in South Africa, announced in early August
2012. As previously reported, Sasol Gas was seeking penalties
and other costs in connection with their termination of the gas
contract in September 2009. Resolution of this dispute has
allowed us to release provisions made in prior years and these,
net of the settlement amount, have been credited to ‘other
income’.
Taken together, the improvement in the Newcogen plant operating
performance, the sale of two of the turbines and reaching a
settlement with Sasol means that if the sale of the remaining
two turbines is completed at the prices being negotiated, the
Group will have a positive cash balance and no debt, putting the
Group in a strong position to consider new power generating
projects in South Africa and neighbouring areas. I therefore
remain hopeful that the plans to expand the facility at
Newcastle in order to maximise the benefit of the existing MTPPP
contract will be fulfilled enabling the expanded operation to
move into a strong operating position before I next report to
you.
Finally, I wish to draw to your attention the fact that the
independent auditors have again included an emphasis of matter
paragraph in their unqualified audit opinion.
Richard Linnell
Chairman
31 August 2012
CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
NEWCOGEN
In the past year we have seen reliable operations at the
Newcastle Cogeneration power plant, with availability of over 95
per cent.
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Over its first full year of operation ending in March 2012,
NewCogen generated 46,470 MWh of electricity, predominantly
during peak hours on a two shifting basis, and delivered just
under 57,000 tonnes of steam. Electricity was delivered to Eskom
under the MTPPP contract, which remains in place until March
2015. Steam was delivered to Karbochem under ad hoc arrangements
in the absence of a firm long term contract.
During this period we have established excellent relationships
with Eskom, the local Newcastle Municipality and our gas
supplier, Spring Lights Gas (Pty) Limited (“Spring Lights”). We
consumed, during the 12 months to end of March 2012,
approximately 700,000 GJ of gas and suffered no penalties under
the contract we have in place with Spring Lights.
Electricity prices are adjusted annually under the MTPPP
contract. In April 2012, the price was increased by 9.8 per cent
in line with the December 2011 inflation figures. Gas prices are
adjusted twice a year, now taking place in April and October,
based on a combination of South African inflation figures and
the price of Brent Crude in ZAR. The April increase was broadly
in line with the increase in the electricity tariff, though an
increase of 8.1 per cent in July last year means that margins
have been slightly eroded. Future projections for gas price
increases are currently forecast to be less than the increase we
are anticipating in the electricity prices over the next year,
but margins are susceptible to oil price and foreign exchange
movements.
In the next six to nine months certain major maintenance
activities will be required on the gas turbines, which will
result in a reduction of revenues over approximately one month.
We continue to explore a number of opportunities to increase and
add to the capacity at the Newcastle site, with one programme
having already been completed. This was the implementation of
Water Injection for both gas turbines which has increased output
by over 300 kW, and has the additional environmental benefit of
reducing NOx emissions from the power plant. We are currently
examining a project which could add a further 50 MW to the
capacity at Newcastle although this development will take around
18-24 months to be implemented.
NewCogen takes the safety of its employees seriously and only
one incident was experienced during the year and no workplace
injuries have been reported. A full review of the incident was
conducted and the recommended changes in operating procedures
proposed have been implemented.
THE TURBINES
The sale of two of the Gas Turbines was completed for USD35
million with Bright Day in January 2012 and the proceeds
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distributed to Standard Bank and Turbocare, significantly
reducing the level of debt to both parties.
The contract for the sale of the second pair of Turbines to
Lezayre Holdings Limited terminated at the end of January 2012
and the deposit was distributed to creditors. IPSA is
continuing to work closely with this potential buyer who
continues to express firm interest in the turbines and is
hopeful of closing the sale as soon as possible. In the meantime
a further buyer has come forward and this transaction is also
being aggressively pursued. The IPSA Board is minded to take
whichever offer fully materialises first.
When the sale of the remaining two turbines is completed the
Directors expect that IPSA will be clear of all debts and will
have surplus funds which it can then apply to growing the
business in and around South Africa.
WORKING CAPITAL
Working capital has continued to be very tight for IPSA, but no
further support, other than funding for the Sasol settlement,
has been required at NewCogen to date.
During the period we have been able to reduce the exposure of
IPSA to its creditors as a result of the sale of two of the
Turbines. The Loan Notes previously held by RAB Capital have
been purchased by Sterling Trust and others, and new loan terms
have been offered to unsecured lenders, including the loan
noteholders, who have agreed to extend the loan terms to 31 July
2013 as announced on 27th July 2012.
With the much reduced level of exposure to Standard Bank and
Turbocare, and the settlement with Sasol Gas having been
achieved, our creditor position is much improved and we are
examining options for raising some modest additional funding to
resolve all outstanding creditor issues regardless of the timing
involved in selling the remaining gas turbines.
GENERAL AND OTHER PROJECTS
As far as we have been able to with limited funds, we have
continued to monitor the market and examine opportunities which
have arisen from time to time. With reserve margins at an all-
time low in South Africa and with a backdrop of positive
encouragement towards independent power producers (“IPPs”) in
South Africa, the resolution of the legacy problems at IPSA is
well timed, and we will have many excellent opportunities to
develop the business in the coming 12 months. Since joining as
the CEO in September of last year, there have been many
challenging moments, but I am encouraged to see the options
becoming available for growth in the future, and for IPSA to
start to realise its potential in a growing and welcoming
market.
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Phil Metcalf
Chief Executive
31 August 2012
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year
ended 31 March 2012
Notes 12 months 18 months
31/3/12 31/3/11
GBP’000 GBP’000
Revenue 4 4,371 801
Cost of sales 6 (4,438) (2,671)
Gross loss (67) (1,870)
Administrative 7 (1,380) (1,876)
expenses
Operating loss (1,447) (3,746)
Profit on sale of non- 8a 6,116 -
current asset
Other income 8b 2,200 955
Finance income 9 - 1
Finance expense 10 (1,227) (2,448)
Profit / (loss) before 5,642 (5,238)
tax
Tax expense 11 - -
Profit / (loss) after 5,642 (5,238)
tax
Other comprehensive
income
Exchange differences (980) (492)
on
translation of foreign
operation
Total comprehensive 4,662 (5,730)
income
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Profit / (loss) per 13 5.25p (5.47p)
ordinary share
(basic, diluted and
headline)
The accompanying accounting policies and notes form an integral
part of these financial statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 March 2012
Notes 31/3/12 31/3/11
GBP’000 GBP’000
Assets
Non-current assets
Intangible 14 - -
Property, plant and 15 11,070 13,319
equipment
11,070 13,319
Current assets
Trade and other 18 816 2,966
receivables
Cash and cash 19 35 33
equivalents
851 2,999
Non-current assets 20 15,712 31,629
classified as assets
held for sale
Total assets 27,633 47,947
Equity and liabilities
Equity attributable to equity holders of the parent:
Share capital 21 2,150 2,150
Share premium account 26,767 26,767
Foreign currency (3,034) (2,054)
reserve
Profit and loss (13,390) (19,032)
reserve
Total equity 12,493 7,831
Current liabilities
Trade and other 22 7,814 21,055
payables
Borrowings 23 7,326 19,061
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15,140 40,116
Total equity and 27,633 47,947
liabilities
The financial statements were approved by the Board on 31 August
2012.
P C Metcalf E R Shaw
Director Director
Company registration number: 5496202
The accompanying accounting policies and notes form an integral
part of these financial statements
PARENT COMPANY STATEMENT OF FINANCIAL POSITION as at 31 March
2012
Notes 31/3/12 31/3/11
GBP’000 GBP’000
Assets
Non-current assets
Investments 16 500 500
Trade and other 17 22,653 22,310
receivables
23,153 22,810
Current assets
Trade and other 18 21 2,049
receivables
Cash and cash 19 14 17
equivalents
35 2,066
Non-current assets 20 15,712 31,629
classified as assets
held for sale
Total assets 38,900 56,505
Equity and liabilities
Equity attributable to equity holders of the parent:
Share capital 21 2,150 2,150
Share premium account 26,767 26,767
Profit and loss (3,630) (7,470)
reserve
Total equity 25,287 21,447
Current liabilities
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Trade and other 22 6,664 16,342
payables
Borrowings 23 6,949 18,716
13,613 35,058
Total equity and 38,900 56,505
liabilities
The financial statements were approved by the Board on 31 August
2012.
P C Metcalf E R Shaw
Director Director
Company registration number: 5496202
The accompanying accounting policies and notes form an integral
part of these financial statements
CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 March
2012
12 months 18 months
31/3/12 31/3/11
GBP’000 GBP’000
Profit / (loss) for 5,642 (5,238)
the year / period
Add back net finance 1,227 2,447
expense
Add back profit on (6,116) -
sale of asset held for
sale
Adjustments for:
Depreciation 809 1,317
Impairment of - 666
intangible asset
Impairment of asset 780 -
held for sale
Translation and other 464 (1,648)
unrealised
exchange gains
Change in trade and 2,150 (586)
other receivables
Change in trade and (16,400) 1,179
other payables
Cash used in (11,444) (1,863)
operations
Interest paid (8) (243)
Net cash used in (11,452) (2,106)
operations
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Cash flows from
investing
activities
Purchase of plant and (1) (55)
equipment
Proceeds from sale of 22,912 -
asset held for sale
Deposit on asset held 1,257 624
for sale
24,168 569
Cash flow from
financing
activities
Loan note issued - 650
Other loans received 1,359 418
Other loans repaid (14,073) (624)
Issue of shares - 1,000
Issue costs - (10)
(12,714) 1,434
Increase / (decrease) 2 (103)
in cash
and cash equivalents
Cash and cash 33 136
equivalents
at start of year /
period
Cash and cash 35 33
equivalents
at end of year /
period
The accompanying accounting policies and notes form an integral
part of these financial statements
PARENT COMPANY STATEMENT OF CASH FLOWS for the year ended 31
March 2012
12 months 18 months
31/3/12 31/3/11
GBP’000 GBP’000
Profit / (loss) for 3,840 (2,603)
the year / period
Add back net finance 1,185 219
expense
Add back profit on (6,116) -
sale of asset held for
sale
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Adjustments for:
Impairment of asset 780 -
held for sale
Change in trade and 2,035 236
other receivables
Change in trade and (12,839) 1,573
other payables
Cash used in (11,115) (575)
operations
Interest paid - (60)
Net cash used in (11,115) (635)
operations
Cash flows from
investing
activities
Loan to subsidiary (343) (1,126)
Proceeds from sale of 22,912 -
asset held for sale
Deposit on asset held 1,257 624
for sale
23,826 (502)
Cash flow from
financing
activities
Loan note issued - 650
Other loans received 1,359 118
Other loans repaid (14,073) (624)
Issue of shares - 1,000
Issue costs - (10)
(12,714) 1,134
Decrease in cash (3) (3)
and cash equivalents
Cash and cash 17 20
equivalents
at start of year /
period
Cash and cash 14 17
equivalents
at end of year /
period
The accompanying accounting policies and notes form an integral
part of these financial statements
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended
31 March 2012
Share Share Foreign Profit and Total equity
capital premium currency loss reserve
account reserve
GBP’000 GBP’000 GBP’000 GBP’000 GBP’000
At 1.10.10 1,900 26,027 (1,562) (13,794) 12,571
Loss for the - - - (5,238) (5,238)
period
Other - - (492) - (492)
comprehensive
income / (loss)
Total - - (492) (5,238) (5,730)
comprehensive
income for the
period
Issue of shares 250 750 - - 1,000
Share issue costs - (10) - - (10)
Total transactions 250 740 - - 990
with owners
At 31.3.11 2,150 26,767 (2,054) (19,032) 7,831
Profit for the - - - 5,642 5,642
year
Other - - (980) - (980)
comprehensive
income / (loss)
Total - - (980) 5,642 4,662
comprehensive
income for the
year
At 31.3.12 2,150 26,767 (3,034) (13,390) 12,493
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY for the year ended
31 March 2012
Share Share Foreign Profit and Total
capital premium currency loss reserve equity
account reserve
GBP’000 GBP’000 GBP’000 GBP’000 GBP’000
At 1.10.10 1,900 26,027 - (4,867) 23,060
Loss for the - - - (2,603) (2,603)
period
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Total - - - (2,603) (2,603)
comprehensive
income for the
period
Issue of shares 250 750 - - 1,000
Share issue costs - (10) - - (10)
Total transactions 250 740 - - 990
with owners
At 31.3.11 2,150 26,767 - (7,470) 21,447
Profit for the - - - 3,840 3,840
year
Total - - - 3,840 3,840
comprehensive
income for the
year
At 31.3.12 2,150 26,767 - (3,630) 25,287
The accompanying accounting policies and notes form an integral
part of these financial statements
Notes to the Financial Statements for the year ended 31 March
2012
1 Principal activities and nature of operations
The principal activity of IPSA Group PLC and its subsidiaries
(the “Group”) is the construction, development and operation of
electricity generation assets and the supply of electricity to
the wholesale market and major end-users. The parent Company is
also involved in the purchase and sale of power related
equipment and products.
During the year under review, the Group’s operating activities
included the generation and sale of electricity by the Group’s
gas fired plant in Newcastle, Republic of South Africa, and the
sale of 2 turbines originally bought for a proposed project near
Port Elizabeth.
Further details are provided in the Chairman’s statement and the
Chief Executive’s review of operations.
2 General information
IPSA Group PLC is the Group’s ultimate Parent Company. It is
incorporated and domiciled in England and Wales. The address of
IPSA Group PLC’s registered office is given on the information
page. IPSA Group PLC’s shares are traded on the Alternative
Investment Market (“AIM”) in London and, since October 2006, the
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shares have had a dual listing on the Alternative Exchange of
the Johannesburg Stock Exchange (“AltX”).
3 Summary of accounting policies
3.1 Basis of preparation
The financial statements have been prepared under the historical
cost convention and in accordance with applicable International
Financial Reporting Standards (“IFRS”) as adopted by the
European Union. The measurement bases and principal accounting
policies of the Group are set out below.
3.2 Going concern
As set out in the Chairman’s statement and the Chief Executive’s
review, the Company’s subsidiary in South Africa is generating
electricity under a Medium-Term Power Purchase (“MTPPP”)
Agreement with Eskom and is also supplying steam to local
businesses, thereby producing positive cash flow, before
depreciation. The Directors are planning to increase the
capacity of the plant which, if successful, will mean that the
plant will operate profitably after depreciation.
Completion of the sale of the 2 remaining turbines on the
indicative terms proposed would enable the Company to repay the
borrowings from Standard Bank and other lenders, all of whom
have granted informal extensions of the original repayment
terms, settle the amounts owed to Turbocare under the
refurbishment agreement and provide sufficient working capital
for the foreseeable future.
Following the proposed sale of the 2 remaining turbines, the
Group’s only cash generating asset will be its subsidiary in
South Africa, until new projects are developed. The timing of
receiving repayments of the GBP22.0 million funding provided by
the Company for the construction of the plant, and future
dividends from South Africa, is dependent upon refinancing the
plant which is expected to prove more attractive to local
lenders now that a satisfactory settlement of the sums claimed
by Sasol under the previous “take-or-pay” gas supply agreement
has been concluded.
Accordingly, until the sale of the turbines is completed, there
remains a material degree of uncertainty regarding the Company
and the Group’s ability to continue as a going concern.
The Directors have concluded that the combination of these
circumstances represent a material uncertainty that casts
significant doubt upon the Company's ability to continue as a
going concern. Nevertheless the Directors do consider that there
is a reasonable expectation that the sale of the remaining 2
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turbines will complete on terms which will enable the Company to
repay all its borrowings and other liabilities and provide
adequate resources to continue in operational existence for the
foreseeable future. For these reasons, the Directors continue to
adopt the going concern basis in preparing the annual report and
accounts.
3.3 Basis of consolidation
The Group financial statements consolidate those of the Company
and its subsidiary undertakings drawn up to 31 March 2012.
Subsidiaries are entities over which the Group has the power to
control the financial and operating policies so as to obtain
benefits from its activities. The Group obtains and exercises
control through voting rights.
Unrealised gains on transactions between the Group and
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 subsidiary entities have been adjusted
where necessary to ensure consistency with the accounting
policies adopted by the Group.
Acquisitions of subsidiaries are dealt with by the acquisition
method. The acquisition method involves the recognition at fair
value of all identifiable assets and liabilities, including
contingent liabilities of the acquired company, at the
acquisition date, regardless of whether or not they were
recorded in the financial statements of the subsidiary prior to
acquisition. On initial recognition, the assets and liabilities
of the acquired entity are included in the consolidated balance
sheet at their fair values, which are also used as the bases for
subsequent measurement in accordance with the Group accounting
policies.
3.4 Intangible assets acquired as part of a business combination
In accordance with IFRS 3: Business Combinations, an intangible
asset acquired in a business combination is deemed to have a
cost to the Group of its fair value at the acquisition date. The
fair value of an intangible asset reflects market expectations
about the probability that the future economic benefits embodied
in the asset will flow to the Group. Where an intangible asset
might be separable, but only together with a related tangible or
intangible asset, the group of assets is recognised as a single
asset separately from the goodwill where the individual fair
values of the assets in the group are not reliably measured.
Where the individual fair value of the complementary assets is
reliably measurable, the Group recognises them as a single
asset, provided the individual assets have similar lives.
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Subsequent to initial recognition, intangible assets are
reported at cost less accumulated amortisation and accumulated
impairment losses. Amortisation is provided to write-off the
cost of the intangible asset over its useful economic life.
3.5 Impairment of property, plant, equipment and intangible
assets
At each balance sheet date, the Group reviews the carrying
amount 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 in order to
determine the extent of the impairment loss (if any). Where it
is not possible to estimate the recoverable amount of an
individual asset, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs.
The 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.
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, unless the relevant asset is carried at a
revalued amount, in which case the impairment loss is treated as
a revaluation decrease.
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, unless the relevant asset is
carried at a revalued amount, in which case the reversal of the
impairment loss is treated as a revaluation increase.
3.6 Foreign currency translation
The financial information is presented in pounds sterling, which
is also the functional currency of the Parent Company.
In the separate financial statements of the consolidated
entities, foreign currency transactions are translated into the
functional currency of the individual entity using the exchange
rates prevailing at the dates of the transactions (spot exchange
16
rate). Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation of
remaining balances at year end exchange rates are recognised in
the income statement under “other income” or “other expenses”,
respectively.
In the consolidated financial statements, all separate financial
statements of subsidiary entities, originally presented in a
currency different from the Group’s presentation currency, have
been converted into sterling. Monetary assets and liabilities
have been translated into sterling at the closing rate at the
balance sheet date. Income and expenses have been converted into
sterling at the average rates over the reporting period. Any
differences arising from this procedure have been recognised in
other comprehensive income and accumulated in the Foreign
Currency Reserve.
3.7 Income and expense recognition
Revenue from the sale of goods and services is recognised when
i) the Group has transferred to the buyer the significant risks
and rewards of ownership of the goods and services which is when
supply has been made, ii) the amount of revenue can be reliably
measured and iii) the costs incurred or to be incurred in
respect of the transaction can be measured reliably.
In the year ended 31 March 2012 the Group’s revenue comprised
the sale of electricity and steam from the plant in South Africa
and the sale proceeds realised from the sale of 2 turbines held
as assets for sale.
Operating expenses are recognised in Profit or Loss upon
utilisation of the service or at the date of their origin. All
other income and expenses are reported on an accrual basis.
3.8 Property, plant and equipment
Property, plant and equipment is stated at cost, net of
depreciation and any provision for impairment. No depreciation
is charged during the period of construction.
All operational plant and equipment in the course of
construction is recorded as plant under construction until such
time as it is brought into use by the Group. Plant under
construction includes all direct expenditure. On completion,
such assets are transferred to the appropriate asset category.
Depreciation is calculated to write down the cost or valuation
less estimated residual value of all property, plant and
equipment other than freehold land by equal annual instalments
over their estimated useful economic lives. The periods
generally applicable are:
17
Plant and equipment: 3 to 15 years
Material residual values are updated as required, but at least
annually, whether or not the asset is revalued. Where the
carrying amount of an asset is greater than its estimated
recoverable amount, it is written down immediately to its
recoverable amount.
3.9 Non-current assets classified as held for sale
Assets are categorised as non-current assets classified as held
for sale when the Directors intend that the asset be sold rather
than employed as an operating asset. Non-current assets
classified as held for sale are valued at the lower of cost and
fair value less costs to sell.
3.10 Borrowing costs
All borrowing costs, and directly attributable borrowing costs,
are expensed as incurred except where the costs are directly
attributable to specific construction projects, in which case
the costs are capitalised as part of those assets.
3.11 Taxation
Current income tax assets and liabilities comprise those
obligations to, or claims from, fiscal authorities relating to
the current or prior reporting period, that are unpaid at the
balance sheet date. They are calculated according to the tax
rates and tax laws applicable to the fiscal periods to which
they relate, based on the taxable profit for the period. All
changes to current tax assets or liabilities are recognised as a
component of tax expense.
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising
in investments in subsidiaries except where the timing of the
reversal of the temporary difference can be controlled and it is
probable that the temporary difference will not reverse in the
foreseeable future.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in the income statement, except where
they relate to items that are charged or credited directly to
18
equity in which case the related deferred tax is also charged or
credited directly to equity.
3.12 Financial assets
The Group’s financial assets include cash and cash equivalents,
trade and other receivables.
Cash and cash equivalents include cash at bank and in hand as
well as short term highly liquid investments such as bank
deposits.
Receivables are non-derivative financial assets with fixed or
determinable payment dates that are not quoted in an active
market. They arise when the Group provides money, goods or
services directly to a debtor with no intention of trading the
receivable. Receivables are measured initially at fair value and
subsequently re-measured at amortised cost using the effective
interest method, less provision for impairment. Any impairment
is recognised in Profit or Loss.
Trade receivables are provided against when objective evidence
is received that the Group will not be able to collect all
amounts due to it in accordance with the original terms of the
receivables. The amount of the write-down is determined as the
difference between the asset’s carrying amount and the present
value of estimated cash flows.
3.13 Financial liabilities
Financial liabilities are obligations to pay cash or other
financial instruments and are recognised when the Group becomes
a party to the contractual provisions of the instrument. All
interest related charges are recognised as an expense in
"finance expense" in the Statement of Comprehensive Income
except to the extent that the costs are directly attributable to
specific construction projects. Bank and other loans are raised
for support of long term funding of the Group's operations. They
are recognised initially at fair value, net of transaction
costs. In subsequent periods, they are stated at amortised cost
using the effective interest method. Finance charges, including
premiums payable on settlement or redemption, and direct issue
costs are charged to Profit or Loss on an accruals basis using
the effective interest method and are added to the carrying
amount of the instrument to the extent that they are not settled
in the period in which they arise.
3.14 Hedging instruments
The Group has not entered into any derivative financial
instruments for hedging or for any other purpose.
19
3.15 Equity
Equity comprises the following:
• "Share capital" represents the nominal value of equity
shares;
• "Share premium" represents the excess over nominal value of
the fair value of consideration received for equity shares,
net of expenses of the share issue;
• "Foreign currency reserve" represents the differences
arising from translation of investments in overseas
subsidiaries; and
• "Profit and loss reserve" represents retained earnings.
3.16 Investment in subsidiary undertakings
The Company’s investments in subsidiary undertakings are stated
at cost less any provision for impairment.
3.17 Amounts due from subsidiaries
Amounts due from subsidiaries are measured initially at fair
value plus transaction costs and thereafter at amortised costs.
3.18 Key assumptions and estimates
The Group makes estimates and assumptions concerning the future.
The resulting estimates will, by definition, seldom equal the
related actual results. The Board has considered the critical
accounting estimates and assumptions used in the financial
statements and concluded that the main areas of significant risk
which may cause material adjustment to the carrying value of
assets and liabilities within the next financial year are in
respect of:
i) the value of the power plant in NewCogen, where recoverable,
has been assessed on a value in use basis amount based on
the assumptions that a) the MTPPP contract with Eskom will
continue for the foreseeable future and b) a discount rate
of 13 per cent, no impairment to these assets has occurred.
(The value in use calculation shows a recoverable amount
exceeding carrying value by GBP2.2 million. The discount
rate would need to increase to 15 per cent before the
carrying value was less than the recoverable amount); and
ii) the value of non-current assets classified as held for sale
where it has been assumed that the contracts in prospect
will complete at not less than their carrying value; and
iii) the going concern basis for the preparation of these
financial statements, further details of which are set out
in note 3.2.
20
3.19 Standards, amendments and interpretations to existing
standards that are not yet effective and have not been early
adopted by the Group in the 31 March 2012 financial statements
At the date of authorisation of these financial statements
certain new standards, amendments and interpretations to
existing standards have been published but are not yet
effective. The Group has not early adopted any of these
pronouncements. The new Standards, amendments and
Interpretations that are expected to be relevant to the Group’s
financial statements are as follows:
Applicable for
Standard/interpretation Content financial
years
beginning
on/after
IFRS 9 Financial instruments: 1 January 2015
Classification and
measurement
IFRS 10 Consolidated Financial 1 January 2013
Statements
Amendments to IAS 1 Presentation of Items of 1 July 2012
Other Comprehensive
Income
Amendments to IAS 32 Offsetting Financial 1 January 2014
Assets and Financial
Liabilities -
IFRS 9, Financial instruments: Classification and measurement
In November 2009, the Board issued the first part of IFRS 9
relating to the classification and measurement of financial
assets. IFRS 9 will ultimately replace IAS 39. The standard
requires an entity to classify its financial assets on the basis
of the entity’s business model for managing the financial assets
and the contractual cash flow characteristics of the financial
asset, and subsequently measures the financial assets as either
at amortised cost or fair value. The new standard is mandatory
for annual periods beginning on or after 1 January 2013. The
Directors do not expect that the adoption of this standard will
have a material impact on the financial statements of the Group.
IFRS 10, Consolidated Financial Statements
IFRS 10 replaces the portion of IAS 27 ‘Consolidated and
Separate Financial Statements’ that addresses the accounting for
consolidated financial statements. It also includes the issues
raised in SIC-12 ‘Consolidation — Special Purpose Entities’.
IFRS 10 establishes a single control model that applies to all
entities including special purpose entities. The changes
introduced by IFRS 10 will require management to exercise
21
significant judgement to determine which entities are
controlled, and therefore are required to be consolidated by a
parent, compared with the requirements that were in IAS 27. This
standard becomes effective for annual periods beginning on or
after 1 January 2013. The Directors do not expect that the
adoption of this standard will have a material impact on the
financial statements of the Group.
Amendments to IAS 1, Presentation of Financial Statements (IAS 1
Amendments)
The IAS 1 Amendments require an entity to group items presented
in other comprehensive income into those that, in accordance
with other IFRSs: (a) will not be reclassified subsequently to
profit or loss and (b) will be reclassified subsequently to
profit or loss when specific conditions are met. It is
applicable for annual periods beginning on or after 1 July 2012.
The Group’s management expects this will change the current
presentation of items in other comprehensive income; however, it
will not affect the measurement or recognition of such items.
4 Segment analysis
IFRS 8 requires operating segments to be identified on the basis
of internal reports that are regularly reviewed by the chief
operating decision maker (considered to be the Board).
Management currently identifies two operating segments, being
operations in RSA (comprising the business of generating
electricity and steam) and the head office in the UK. These
operating segments are monitored and strategic decisions are
made on the basis of segment operating results. The electricity
is sold to Eskom (the main buyer on behalf of the Government in
South Africa) and the steam is sold to one industrial customer
which operates from premises adjacent to the plant.
The following table provides a segmental analysis.
Year ended RSA UK Inter- Total
31.03.12 group
GBP’000 GBP’000 GBP’000 GBP’000
Revenue 4,371 - - 4,371
Cost of sales (4,438) - - (4,438)
Gross loss (67) - - (67)
Administrative expenses (791) (589) - (1,380)
Operating loss (858) (589) - (1,447)
Profit on sale of non - 6,116 - 6,116
current asset
Other income / (expense) 3,202 (1,002) - 2,200
Finance expense (42) (685) (500) (1,227)
22
Profit / (loss) for year 2,302 3,840 (500) 5,642
Total assets 12,221 32,076 (16,664) 27,633
Total liabilities 18,191 13,613 (16,664) 15,140
Period ended 31.03.11 RSA UK Inter- Total
group
GBP’000 GBP’000 GBP’000 GBP’000
Revenue 801 - - 801
Cost of sales (2,671) - - (2,671)
Gross loss (1,870) - - (1,870)
Administrative expenses (336) (1,540) - (1,876)
Operating loss (2,206) (1,540) (3,746)
Other income / (expense) 1,800 (845) - 955
Finance expense (879) (218) (1,350) (2,447)
Loss for the period (1,285) (2,603) (1,350) (5,238)
Total assets 14,573 50,195 (16,821) 47,947
Total liabilities 21,856 35,081 (16,821) 40,116
5 Sensitivity analysis
The value of shareholder equity and the results for the Group
are affected by changes in exchange rates, prices for
electricity, steam and gas, and interest rates. The following
illustrates the effects of changes in these variables.
i) Sensitivity to exchange rates
The Group’s electricity generating assets, which also provide
steam to industrial customers, are located in South Africa and
therefore the sterling value of the revenues and costs from this
activity are affected by movements in the value of sterling
versus the ZAR.
The Parent Company has provided 100per cent of the funding for
the construction of the plant. The loans are denominated in
sterling and therefore the ZAR value of the loan is affected by
movements in the value of the ZAR versus sterling.
In 2007 the Parent Company acquired the Turbines from an Italian
manufacturer. The liability arising from the refurbishment,
storage and interest charges is denominated in euro and the
sterling liability outstanding during the year and at the year
end is therefore affected by movements in the exchange rate
between sterling and euro.
The exchange rates applicable to the results for the current
year and prior period were as follows:
Year to Period to
31.03.12 31.03.11
Closing rate
23
ZAR to GBP 12.27 10.95
Euro to GBP 1.20 1.14
Average rate
ZAR to GBP 11.83 11.42
Euro to GBP 1.16 1.15
The Group’s exposure to foreign 31.03.12 31.03.11
Foreign currency risk is as follows
ZAR net assets of non-Sterling GBP7.1m GBP9.5m
functional currency entities
Euro Monetary liabilities not held GBP4.6m GBP14.8m
in entities’ functional currency
A 10% change in the value of
Sterling on result for the year
ZAR GBP0.2m GBP0.1m
Euro GBP0.5m GBP1.3m
A 10% change in the value of
Sterling on net equity
ZAR GBP0.7m GBP0.8m
Euro GBP0.5m GBP1.3m
ii) Sensitivity to price changes in electricity sold and gas
purchased
The results of the Group are affected by the price that
electricity and steam is sold at and by the price paid for the
gas which is used by the turbines.
If the price of electricity and steam sold during the year had
been 10 per cent higher or lower, the result for the year would
have been GBP437,000 (18 months to 31.3.2011:GBP80,000) higher
or lower.
If the price paid for gas used during the year had been 10 per
cent higher or lower, the result for the year would have been
GBP321,000 (18 months to 31.3.2011: GBP63,000) lower or higher.
iii) Sensitivity to interest rates
The majority of the Group’s funding has been provided by share
capital. In 2008, the Group agreed a GBP15.0 million floating
rate bank loan to assist in the funding of the Turbines. At the
beginning of the year, this loan plus accrued interest amounted
to GBP17.2 million. In March 2012, repayments of the loan
reduced the value of the loan and accrued interest to GBP4.6
million. If the interest rate on the loan had been 10 per cent
higher or lower during the year, the effect on the finance
expense for the year would have been to increase or decrease the
24
finance expense by GBP71,000 (18 months to 31 3.2011:
GBP124,000).
The Group has other short term loans. A 10 per cent change in
the interest rate applied to these loans would have changed the
interest expense for the year by GBP27,000 (31.3.2011:
GBP12,000).
6 Cost of sales Year ended Period
ended
31.03.12 31.03.11
GBP’000 GBP’000
Gas 3,218 634
Depreciation 798 1,238
Other 422 799
4,438 2,671
7 Administrative expenses Year ended Period
ended
31.03.12 31.03.11
GBP’000 GBP’000
Payroll and social security 786 1,113
Other administrative expenses 555 716
Audit fees 39 47
1,380 1,876
Audit fees comprise GBP29,000 (18 months to 31.3.2011:
GBP31,000) paid to the Company’s auditors and GBP10,000 (18
months to 31.3.2011: GBP16,000) paid to the auditors in respect
of the audit of subsidiary companies.
8a Profit on sale of non-current Year ended Period
asset ended
31.03.12 31.03.11
GBP’000 GBP’000
Sale proceeds 22,912 -
Costs (16,796) -
Profit on sale 6,116 -
In 2007, the Company acquired 4 gas turbines. Following
refurbishment of the turbines, the Company intended to sell the
turbines to its subsidiary in South Africa which was tendering
for a major power project. Due to weakening economic conditions,
the project was delayed and it was decided that it was in the
best interests of shareholders to sell the turbines to a third
party. During the year, 2 of the turbines were sold. It is
expected that the remaining two turbines will be sold during
2012 (see note 20).
8b Other income Year ended Period
25
ended
31.03.12 31.03.11
GBP’000 GBP’000
Storage and insurance charges(1) (256) (1,267)
Costs re loan for turbines(2) (320) -
Write-down value of turbine (780) -
equipment(3)
Adjustment on gas ”take-or-pay” 3,230 1,240
contract(4)
Foreign currency gains on inter- - 1,226
group loans(5)
Other foreign currency gains / 326 422
(losses)(6)
Impairment charge(7) - (666)
2,200 955
1. These costs relate to storage and insurance of the 2
remaining Turbines (see note 8a and note 20).
2. During the year, Standard Bank levied charges, including
legal fees, on the loan in connection with the turbines.
3. When the turbines were acquired in 2007, the Company also
acquired some ancillary equipment at a cost of GBP1.2 million.
This equipment remains unsold and has been written-down to
GBP400,000 which the Directors consider is the current market
value.
4. In prior periods, the plant in Newcastle was unable to supply
electricity due to the absence of an electricity offtake
agreement with the result that the gas purchased for the plant
was less than the minimum offtake level required under a “take-
or-pay” contract with Sasol, a gas supplier in South Africa. At
30 September 2009 an accrual was made in respect of the
shortfall in that year. The adjustment at 31 March 2011
represents a reduction in the accrual following a review of the
accrual.
The adjustment in the current year represents the difference
between the amount which Sasol has agreed to settle its claim
for gas not supplied and the amount which had been provided in
respect of potential claims at 31 March 2011
5. The Company’s loan to NewCogen is a sterling denominated
loan. The gain in the 18 month period to 31 March 2011 arose as
a result of the strengthening of the ZAR versus sterling. Since
1 April 2011, any gain or loss arising on this loan as a result
of movements in the value of the ZAR versus sterling has been
recognised as a movement through the Foreign Currency Reserve as
the loan is now regarded as quasi-equity.
26
6. Exchange gains arising on the euro liability to Turbocare as
a result of the value of the Euro weakening against sterling.
7. Following the temporary cessation of steam generation in
2009, the steam supply contract was terminated and accordingly
the carrying value of the contract was impaired to nil.
9 Finance income Year ended Period
ended
31.03.12 31.03.11
GBP’000 GBP’000
Interest received on bank deposits - 1
10 Finance expense Year ended Period
ended
31.03.12 31.03.11
GBP’000 GBP’000
Bank interest(1) 708 1,242
Loan note interest(2) 48 41
Other loans interest(3) 222 113
Other interest(4) 249 1,052
1,227 2,448
1. Bank interest comprises interest on the Standard Bank loan.
(see also note 24).
2. Loan note interest comprises interest on the GBP650,000 loan
note (see also note 24).
3. Other loans interest comprises interest on other loans (see
also note 24).
4. Other interest represents an accrual for interest payable on
the overdue sum due to Turbocare. In the prior period, other
interest also included a provision for interest which may
have become payable to Sasol in respect of a claim which has
now been settled with no interest becoming due.
11 Tax expense / credit
No UK corporation tax or foreign tax is payable on the results
of the Group. The relationship between the expected tax credit
and the tax credit actually recognised is as follows:
Year ended Period
ended
31.03.12 31.03.11
GBP’000 GBP’000
27
Profit / (loss) for the year / 5,642 (5,238)
period before tax
Expected tax charge / (credit) based 1,580 (1,467)
on standard rate of
UK corporation tax at 28 per cent
Tax losses utilised (1,580) -
Reduction in / (addition to) tax 1,580 (1,467)
losses carried forward
No deferred tax asset has been recognised owing to uncertainty
as to the timing and utilisation of the tax losses. In the event
that a deferred tax asset was recognised at the balance sheet
date, it is estimated that the value of the deferred tax asset
would be GBP3.7 million (31.3.2011: GBP5.3 million) in respect
of the Group and GBP0.9 million (31.3.2011: GBP2.1 million) in
respect of the Company.
12 Profit attributable to the parent company
The profit attributable to the Parent Company, IPSA Group PLC,
was GBP3.8 million (18 months to 31.3.2011: GBP2.6 million
loss). As permitted by Section 408 of the Companies Act 2006, no
separate profit and loss account is presented in respect of the
Parent Company.
13 Profit per share
The profit per share (period ended 31.3.2011 – loss) is
calculated by dividing the result for the year / period
attributable to shareholders by the weighted average number of
shares in issue during the year / period.
Year ended Period
ended
31.03.12 31.03.11
Profit / (loss) attributable to GBP5.6m (GBP5.2m)
equity holders of the Company
Average number of shares in issue 107.5m 95.8m
Basic, diluted and headline profit / 5.25p (5.47p)
(loss) per share
There is no difference between the basic and diluted earnings
per share as the 6.8m warrants outstanding during the year were
exercisable at a price either at or above the share price of the
Company and therefore had no dilution effect.
14 Intangible assets 31.03.12 31.03.11
GBP’000 GBP’000
Net book value at beginning of year - 666
/ period
Adjustment following impairment - (666)
28
review
Net book value at end of year / - -
period
The intangible asset represented the Directors’ estimate of the
fair value of a contract, owned by NewCogen at the date of
acquisition, to supply steam from the electricity generating
plant. As a result of the termination of the contract following
temporary cessation of the supply of steam, the Directors wrote-
off the asset.
15 Plant and equipment 31.03.12 31.03.11
GBP’000 GBP’000
Cost
At beginning of year / period 16,075 15,312
Addition in year / period 1 55
Disposal - (510)
Exchange adjustment (1,767) 1,218
At end of year / period 14,309 16,075
Depreciation
At beginning of year / period 2,756 1,334
Charge for the year / period 798 1,317
Exchange adjustment (315) 105
At end of year / period 3,239 2,756
Net book value at start of year / 13,319 13,978
period
Net book value at end of year / 11,070 13,319
period
Property, plant and equipment has been valued at cost. It
represents the 18 MW plant in NewCogen.
16 Investments 31.03.12 30.03.11
GBP’000 GBP’000
Investment in subsidiary companies 500 500
i) Investment in Blazeway Engineering Ltd
The Company owns 100per cent of the issued share capital of
Blazeway Engineering Ltd (a company incorporated in England and
Wales, company number 5356014). The investment has been valued
at cost. Blazeway Engineering Ltd owns 100per cent of Newcastle
Cogeneration (Pty.) Ltd (a company incorporated in the RSA).
ii) Investment in Elitheni Clean Coal Holdings Ltd
The Company owns 100 per cent of the issued share capital of
Elitheni Clean Coal Holdings Ltd (“ECCH”), a company
incorporated under the British Virgin Islands Companies Act 2004
29
(company number 1437070). ECCH owns 100 per cent of the issued
share capital of Indwe Power (Pty) Ltd (“IPPL”), a company
incorporated in RSA. ECCH was incorporated as a vehicle to
acquire land which, subject to planning approvals, was intended
as a potential site for the construction of a coal fired
generating plant to be owned by IPPL. During a prior period, the
Company acquired an option over suitable land at a cost,
including fees, of GBP133,000. However, the Directors decided to
allow the option to lapse following the decision to terminate
the coal supply agreement between IPPL and Strategic Natural
Resources PLC. The cost of acquiring the option was written-off
in an earlier period.
17 Trade and other receivables due 31.03.12 31.03.11
in
more than 1 year GBP’000 GBP’000
a) Group - -
b) Company
Amount due from subsidiary 22,653 22,310
Imputed interest at the rate of 3 month LIBOR plus 1.5 per cent,
amounting to GBP0.5 million, has been added to the loan during
the year (18 months to 31.3.2011: GBP1.4 million). ZAR 30
million / GBP2.7 million of the loan has been subordinated in
favour of other creditors of NewCogen.
18 Trade and other receivables due 31.03.12 31.03.11
in less than 1 year
GBP’000 GBP’000
a) Group
Trade receivables 441 112
Gas deposit(1) 261 685
Vat receivable(2) 12 2,040
Other receivables and prepayments 102 129
816 2,966
b) Company
Trade receivable - -
Vat receivable(2) - 2,040
Other receivables and prepayments 21 9
21 2,049
1. This comprises a non interest bearing deposit of ZAR 3.2
million which has been paid to NewCogen’s gas supplier as
collateral against amounts owing in respect of gas supplied.
2. Vat receivable at 31.3.2011 of GBP2.0 million represented
amounts of Vat charged by Turbocare for the refurbishment and
storage of the Turbines. In the opinion of the Directors,
supported by independent advice, Vat is not due on the
30
refurbishment or storage costs since the supply relates to work
done on equipment which will be exported. However, pending
reaching an agreement with Turbocare, the Directors have decided
that at 31 March 2012 the amount should be added to the cost of
the Turbines.
All trade and other receivables are unsecured and are not past
their due dates. In the opinion of the Directors, the fair
values of receivables are not materially different to the
carrying values shown above.
19 Cash and cash equivalents 31.03.12 31.03.11
GBP’000 GBP’000
a) Group
Cash at bank and in hand 35 33
b) Company
Cash at bank and in hand 14 17
20 Assets held for sale 31.03.12 31.03.11
GBP’000 GBP’000
Siemens Gas Turbines 15,712 31,629
These assets comprise the 2 (31 March 2011 – 4) turbines, plus
ancillary equipment, which were acquired in 2007 for the Coega
project at a cost of GBP21.8 million. During 2008, the Company
refurbished the turbines at a cost of GBP9.8 million and GBP0.6
million was added to the cost in respect of interest on a
GBP15.0 million bank loan which was used to partly finance their
purchase and is secured by a first charge on the assets.
Following the completion of their refurbishment and the delay in
the timetable for the Coega project, it was decided in 2009 to
sell the Turbines and since then the asset has been reclassified
as ‘assets held for sale’. Sale of 2 of the turbines was
completed in January 2012 (see note 8a). The carrying value of
the remaining two turbines is GBP15.3 million and the carrying
value of the ancillary equipment is GBP0.4 million.
The Directors consider, on the basis of contracts in prospect,
that the fair value, based on ‘open market value’, is in excess
of the carrying value. ‘Open market value’ assumes willing buyer
and willing seller.
21 Share capital 31.03.12 31.03.11
GBP’000 GBP’000
a) Authorised
150,000,000 ordinary shares of 2p 3,000 3,000
each
b) Fully paid
107,504,018 ordinary shares of 2p 2,150 2,150
each
31
c) Movement Number GBP’000
At 1 October 2009 95,004,081 1,900
Allotment in February 2011 12,500,000 250
At 31 March 2011 and 2012 107,504,081 2,150
The shares allotted in February 2011 were issued at 8 pence per
share for cash. The premium, net of GBP10,000 of expenses was
credited to the share premium account.
At the year end, a total of 6.8 million warrants were
outstanding, exercisable as follows – 6.5 million between the
repayment date of the GBP650,000 loan note (see note 23 below)
and 30 months thereafter at 5 pence per share and 300,000 at any
time before 16 June 2012 at 15 pence per share.
22 Trade and other payables 31.03.12 31.03.11
GBP’000 GBP’000
a) Group
Trade payables(1)`(2) 6,232 20,008
Other payables(3) 1,582 1,047
7,814 21,055
b) Company
Trade payables(1)(2) 5,286 15,401
Other payables 1,378 941
6,664 16,342
Trade payables include:
1. An amount of Euro5.5 million / GBP4.6 million (31.3.2011:
Euro16.8 million / GBP14.8 million) owing to Turbocare in
respect of the refurbishment work (which was completed in 2008
on the turbines originally acquired for the Coega project) plus
storage charges and interest (calculated at 1 month EURIBOR plus
1 per cent per annum on the amount outstanding). Included within
the Euro5.5 million is an amount of Euro2.3 million of VAT (see
note 18-2 above) which the Directors do not regard as being due.
The amount owing is overdue following the termination of a
formal standstill agreement originally entered into in March
2010.
2. An amount of GBP0.6 million (31.3.2011: GBP4.4 million) in
respect of amounts claimed by Sasol under the now terminated
“take-or-pay” contract. The figure of GBP0.6 million represents
the amount at which Sasol has, since the year end, agreed to
accept in full and final settlement of its claims under the
“take-or-pay” contract.
3. Other payables includes an accrual for Directors’
remuneration and salaries of GBP1.2 million (31.3.2011:
32
GBP840,000) accrued but unpaid in respect of remuneration due to
the Directors and one employee – see also note 28.
23 Borrowings 31.03.12 31.03.11
GBP’000 GBP’000
a) Group
Bank loan and overdue interest(1) 4,601 17,239
Loan note(2) 650 650
Overdue interest on loan note(2) 89 41
Other loans including accrued 1,986 1,131
interest(3)
7,326 19,061
b) Company
Bank loan and overdue interest(1) 4,601 17,239
Loan note(2) 650 650
Overdue interest on loan note(2) 89 41
Other loans including accrued 1,609 786
interest(3)
6,949 18,716
1. The bank loan was originally repayable on 30 September 2009.
Formal extensions have been granted since then though since 31
March 2012 the balance is overdue and subject to an informal
standstill arrangement pending the sale of the remaining 2
turbines. Interest is calculated on 3 month LIBOR plus a margin
of 2.25 per cent and a default margin of 2 per cent. The
interest rate applicable at 31 March 2012 was 4.5 per cent (31
March 2011: 4.5 per cent). Interest charged during the year
amounted to GBP0.7 million (31 March 2011: GBP1.2 million).
Charges added to the loan during the year, in respect of fees
associated with an extension of the repayment date amounted to
GBP673,000. The loan is secured by a first charge on the
turbines.
2. The loan note was issued in March 2010. Interest is payable
at 6 per cent per annum plus a default margin of 2 per cent. The
original repayment date of the loan note has been extended to 31
July 2013. Holders of the loan notes are entitled to subscribe
for a total of 6.5 million ordinary shares at a price of 5 pence
per share or such lower price at which any future ordinary
shares are issued prior to exercise.
3. Other loans, plus accrued interest comprise:
Group Company Group Company
31.3.12 31.3.12 31.3.11 31.3.11
GBP’000 GBP’000 GBP’000 GBP’000
Loan 1 356 356 319 319
Loan 2 1,059 1,046 261 244
Loan 3 140 140 135 135
Loan 4 67 67 88 88
33
Loan 5 364 - 328 -
Total 1,986 1,609 1,131 786
These other loans were due to be repaid by 31 July 2012 and the
lenders have informally agreed to extend the repayment date
pending the sale of the 2 turbines. Interest rates on the loans
vary between 0.75 per cent and 12 per cent.
All borrowings are denominated in sterling.
24 Financial instruments and risk management
The Group is exposed to a variety of financial risks which
result from both its operating and investing risks. The Group’s
risk management is coordinated to secure the Group's short to
medium term cash flows by minimising the exposure to financial
markets. The Group does not actively engage in the trading of
financial assets for speculative purposes nor does it write
options. The most significant risks to which the Group is
exposed are described below. As the Group has only one operating
subsidiary, the impact on the parent Company is deemed to be
materially similar to the impact on the Group.
a) Foreign currency risk
The Group’s principal trading operations are based in South
Africa and as a result the Group has exposure to currency
exchange rate fluctuations in the ZAR relative to sterling.
b) Interest rate risk
Group funds are invested in short term deposit accounts, with
a maturity of less than three months, with the objective of
maintaining a balance between accessibility of funds and
competitive rates of return.
c) Liquidity risk
The Group attempts to anticipate the future cash requirements
for each project and seeks to put in place appropriate equity
and debt facilities to match the funding requirements of these
projects. Given the delays experienced in projects to date and
the extended time taken to secure a buyer for the Company’s
turbines, the Company has necessarily obtained extensions to
credit facilities. As set out in note 3.2, the Directors
anticipate that the proceeds from the sale of the turbines
will provide the Group and the Company with sufficient working
capital for the foreseeable future but until that time, the
Group and the Company will be dependent upon its creditors
continuing to grant extended terms.
d) Credit risk
Generally, the maximum credit risk exposure of financial
assets is the carrying amount of the financial assets as shown
on the face of the balance sheet (or in the detailed analysis
34
provided in the notes to the financial statements). Credit
risk, therefore, is only disclosed in circumstances where the
maximum potential loss differs significantly from the
financial asset’s carrying amount. The Group’s trade and other
receivables are actively monitored to avoid significant
concentrations of credit risk.
The financial assets and liabilities of the Group and the
Company are classified as follows:
Group Group Company Company
Loans and Amortised Loans and Amortised
receivables cost receivables cost
31.03.2012 GBP’000 GBP’000 GBP’000 GBP’000
Trade and - - 22,653 -
other
receivables
> 1 year
Trade and 702 - - -
other
receivables
< 1 year
Cash and 35 - 14 -
cash
equivalents
Trade and - (7,814) - (6,664)
other
payables
Borrowings - (7,326) - (6,949)
737 (15,140) 22,667 (13,613)
31.3.2011 GBP’000 GBP’000 GBP’000 GBP’000
Trade and - - 22,310 -
other
receivables
> 1 year
Trade and 797 - - -
other
receivables
< 1 year
Cash and 33 - 17 -
cash
equivalents
Trade and (21,055) - (16,342)
other
payables
Borrowings - (19.061) - (18,716)
35
830 (40,116) 22,327 (35,058)
In the opinion of the Directors, there is no significant
difference between the fair values of the Group’s and the
Company’s financial assets and liabilities and their carrying
values.
25 Capital commitments
There were no outstanding capital commitments at the year end.
26 Contingent liabilities
As a result of NewCogen ceasing steam production in February
2009, NewCogen’s steam customers have indicated that they may
make a claim against NewCogen for additional costs of working,
based on their costs of procuring replacement steam. To date, no
claim has been lodged and the Directors of NewCogen are of the
opinion that no liability exists.
27 Related party transactions
Material transactions with related parties during the year were
as follows:
i) Charge to the Company of GBP60,000 by Independent Power
Corporation PLC (“IPC”) under a “Shared Services Agreement”
for the provision of offices and other administrative
services. P Earl, E Shaw and P Metcalf are Directors of IPC.
A sum of GBP252,000 was owing to IPC at 31 March 2011
(31.3.2011: GBP191,000).
ii) Short term loan from IPC amounting to GBP1.1 million,
including accrued interest, at 31 March 2012 (31.3.2011:
GBP261,000). Interest on the loan, which is being charged at
8 per cent, amounted to GBP142,000 (18 months to 31.3.2011:
GBP41,000). The loan was due to be repaid on 31 July 2012
and an informal extension has been granted pending the sale
of the remaining 2 turbines.
iii) An accrual for Group salaries (short term employee
benefits) payable to key management totalling GBP340,000
during the year (18 months to 31.3.2011: GBP860,000
including prior periods).
iv) Return of a deposit of USUSD 1.0 million / GBP650,000 to IPC
in connection with a proposed sale of one turbine.
Transactions between the Company and NewCogen:
i) Increase in unsecured loans by the Company to NewCogen of
GBP0.3 million (18 months to 31.3.2011: GBP2.5 million).
36
ii) Charge for imputed interest of GBP500,000 (18 months to 31
3.11: GBP1.35 million).
28 Directors’ and employee costs Year ended Period
ended
31.03.12 31.03.11
GBP’000 GBP’000
Aggregate remuneration of all
employees and
Directors, including national 786 1,113
insurance
The remuneration of Directors who served during the year was:
Salary Salary Fees Fees Total Total
2012 2011 2012 2011 2012 2011
GBP’000 GBP’000 GBP’000 GBP’000 GBP’000 GBP’000
R
Linnell - - 45 38 45 38
N Bryson - - 25 44 25 44
M Cox 30 80 - - 30 80
P Earl 37 140 - - 37 140
J Eyre 52 131 - - 52 131
P - - 40 3 40 3
Metcalf
R - - 25 61 25 61
Sampson
E Shaw 52 131 - - 52 131
S n/a 75 - - n/a 75
Hargrave
J West n/a 5 n/a 21 n/a 26
171 562 135 167 306 729
All of the above salaries and fees, including the comparative
amounts, were unpaid at the year end. It is intended that these
unpaid salaries and fees be paid when there are sufficient cash
resources available.
The Group considers the Directors to be the key management
personnel.
The average number of employees in the Group, including
Directors, was 25 (31.3.2011 – 22).
29 Post balance sheet date events
In August 2012, the Company’s subsidiary, Newcastle Cogeneration
(Pty.) Ltd reached an agreement with Sasol Gas in connection
with the gas supply contract terminated in September 2009. The
claim was settled at ZAR 7 million (GBP0.6 million) and
accordingly the liability reflected in these Financial
37
Statements is GBP0.6 million. The credit of GBP3.2 million in
‘Other income’ represents the difference between the value of
the claim accrued at 31 March 2011 and the settlement figure.
In July 2012 NewCogen entered into a new loan agreement with
Sterling Trust Ltd for a further GBP0.6 million loan in order to
fund the Sasol settlement payment. The terms of the loan are: a)
interest on the first GBP0.155 million of loan to accrue at 1.25
per cent per month and 1 per cent per month on the balance. The
new facility is repayable, together with accrued interest
thereon, on the earlier of the sale of the Company’s remaining
two turbines and 26 January 2013.
London
3 September 2012
Designated Advisor: PSG Capital (Pty) Limited
38
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