| Wed 31 Jan 2007, 11:30 | | IPS - IPSA Group Plc - Final results |
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IPS
IPSA
IPS - IPSA Group Plc - Final results
IPSA GROUP PLC
Incorporated and registered in England and Wales)
Registration number 5496202)
AIM Share Code: IPSA AIM ISIN: GB00B0CJ3F01
JSE Share Code: IPS JSE ISIN: GB00B0CJ3F01
IPSA Group PLC ("IPSA" or "the Company")
FINAL RESULTS
IPSA, the AIM and AltX dual listed independent power plant
developer with operations in southern Africa, today announces
its final results for the fifteen months to 30 September 2006.
Highlights of the period include:
- Placing and Admission to AIM in September 2005, raising
approximately GBP8.0m;
- Loss in the period of GBP1,027,000 of which GBP669,000
comprises non-trading foreign exchange losses;
- Construction of the first independent gas-fired combined
heat and power plant in South Africa, at Newcastle, with a
nominal power capacity of 18 MW, from which first revenues are
expected shortly;
- Progressing the Coega Fast Track Project application for a
1,600 MW combined cycle gas turbine; and
- Obtained exclusive first rights to all coal from the
Elitheni Clean Coal Project and progressing the application
for a 400 MW mine mouth coal-fired project at Elitheni.
Since period end:
- Introduction of the Company`s ordinary shares to AltX, the
alternative exchange of the JSE Limited; and
- Placings of new shares with South African investors raising
further funds amounting to approximately GBP4.1m.
Commenting, Peter Earl, Chief Executive of IPSA, said:
"It has been very pleasing to see the progress that the
Company has made towards achieving its aim of being a
significant force in the development, ownership and management
of independent power generation plants in Southern Africa.
Southern Africa, and South Africa in particular, needs the
rapid deployment of new power plants if economic development
is not to be stifled and I believe IPSA is in a strong
position to help service this need. This is an exciting time
for the Company and I look forward to the future with
anticipation."
For further information please contact:
Peter Earl, CEO, IPSA Group PLC +44 (0)20 7793 5600
John Llewellyn-Lloyd, Noble & Company Limited +44 (0)20 7763
2200
CHAIRMAN`S STATEMENT FOR THE FIFTEEN MONTHS ENDED 30 SEPTEMBER
2006
On behalf of the Board of IPSA Group PLC, I am pleased to
present to shareholders the Group`s first Report and Accounts,
which cover the period from 1 July 2005 to 30 September 2006.
In future we will be reporting annually with an accounting
period also ending on 30 September.
As anticipated during this initial period of investment in our
first project, the Group made a loss. As set out in the
Consolidated Income Statement, operating expenses amounted to
GBP364,000. However, the reported loss in the period is
GBP1,027,000, which includes GBP669,000 of exchange losses
arising from the conversion of the Rand value of the physical
plant assets in South Africa at the rate of exchange on 30
September 2006 as compared to the rates of exchange ruling
when sterling funds were lent to our South African subsidiary.
These currency translation adjustments are non-trading items
but are reported through the Income Statement in accordance
with current international accounting standards.
During the period on which we are reporting, the Group has
made considerable progress towards its aim of being a
significant force in the development, ownership and management
of independent power generation plants in Southern Africa. It
has completed the purchase of a CHP (combined heat and power)
generation plant in England and has supervised the
transportation and reassembly of the plant in Newcastle,
KwaZulu Natal. Reassembly has proceeded generally according to
plan and first revenues are expected shortly. This will be the
first independent gas-fired power generation plant to have
been built in South Africa.
To help meet the opportunities presenting themselves, the
Company raised external finance through an issue of shares and
an initial flotation on the AIM market of the London Stock
Exchange on 20 September 2005, followed by a secondary
fundraising and listing on the AltX market of the JSE Limited,
the Johannesburg Stock Exchange on 19 October 2006 (after the
end of the period covered by these Accounts). As a result of
these equity issues, the Company has attracted as shareholders
a number of leading institutional investors from both the
United Kingdom and South Africa.
Macroeconomic developments in South Africa are generally
working in our favour. Gross domestic product rose by
approximately 4.3 per cent. in 2006 and is forecast to rise by
a further 4 per cent. in 2007. Economic growth is leading to
ever-increasing demand for electricity and power cuts across
South Africa since early 2006 have underlined the need to
build new power plants to meet rising demand. South Africa
needs significant new capacity every year just for the supply-
demand balance to stand still. We are well positioned to help
meet that growth in demand.
It is the policy of the South African government to promote an
equitable distribution of wealth and economic prospects among
the many different groups of the population, specifically
those disadvantaged by the pre-1994 regime. This policy is
enshrined in the Broad-Based Black Economic Empowerment Act,
which became law in 2004. IPSA is in discussions with a number
of black empowerment groups with a view to one or more of them
becoming our partners.
With our first plant due to commence commercial operation
shortly, a number of other projects in the pipeline and demand
for power increasing well beyond the capacity of the current
infrastructure to meet it, we look forward to the future with
great anticipation.
Stephen Hargrave
Chairman
CHIEF EXECUTIVE`S REVIEW OF OPERATIONS FOR THE FIFTEEN MONTHS
ENDED 30 SEPTEMBER 2006
At the time of presenting IPSA`s first full set of Accounts to
shareholders, I am pleased to report that IPSA is finalising
the testing and commissioning of South Africa`s first
privately financed independent power plant, which is also
South Africa`s first independent gas-fired power station. The
Newcastle Cogeneration Power Plant has been constructed within
a period of fourteen months of the start of construction. It
is a producer of both steam and electricity with a nominal
power capacity of 18 MW and the capability to deliver just
under 1 million tonnes of steam per annum. It operates as a
combined cycle gas turbine (CCGT) plant, again the first in
South Africa, using two Siemens Tornado gas turbines with two
Aalborg steam boilers capturing the waste heat and turning the
super-heated steam into additional electricity from a steam
turbine.
The equipment for Newcastle was originally installed in a
facility designed to supply a paper plant in Bury, East
Lancashire in the United Kingdom. IPSA has successfully
acquired, dismantled, shipped to South Africa and constructed
it and is now commissioning it in Newcastle. This complex
process was supervised by IPSA`s own project team and it is
our proposed model for future similar energy efficient power
plants in South Africa.
Historically, electricity in South Africa has been produced in
conventional coal-fired power stations. These typically have a
35 per cent. thermal efficiency, which means that two thirds
of the energy burned in those plants is wasted and vented back
into the atmosphere as yet another contribution to global
warming. IPSA`s Newcastle plant operating as a CCGT has a
thermal efficiency of nearly 56 per cent., which means that it
produces around 40 per cent. less CO2 than a conventional coal-
fired plant for every kilowatt hour of electricity it
generates. This is one of the lowest emissions of CO2 of any
thermal power plant in South Africa. For this reason the
management of IPSA believes that the Newcastle plant will be
eligible for carbon credits under the United Nations Clean
Development Mechanism under the Kyoto Protocol. An application
is being made to the Republic of South Africa`s Department of
Minerals and Energy ("DME") for the Newcastle plant to be
considered eligible for Carbon Credits under the United
Nations Clean Development Mechanism of the Kyoto Protocol for
the reduction of greenhouse gas emissions. In view of the high
baseline for thermal power generation in South Africa from low
efficiency coal-fired power plants which are heavy producers
of CO2, the directors of IPSA believe that Newcastle
Cogeneration could qualify for a material level of Carbon
Emission Reductions ("CERs") which would be an important
source of revenue once the plant enters commercial production.
Since construction began at Newcastle, the management of IPSA
has been in negotiations to increase steam sales on the
Karbochem industrial site where the plant is based and for the
sale of its electricity output to Eskom, the South African
state-owned electric utility.
During 2006 IPSA has been active in pursuing a number of other
important potential development projects in South Africa.
These include the Coega Fast Track Project just outside Port
Elizabeth, the Elitheni Clean Coal Project near Indwe and the
Prospecton Basin Project in Durban. Each of these projects is
subject to the necessary regulatory approvals being granted
and to financing being completed.
Coega is IPSA`s largest development project to date.
Originally planned as a CCGT project of 800 MW, it was
increased in size at the request of the DME to become a
project of 1,600 MW in two separate blocks of 800 MW each.
IPSA has reserved both Siemens Westinghouse and Alstom gas
turbines to form the open cycle components of the twin block
project. Initially each block will operate using only the gas
turbines with conversion to combined cycle, using the similar
waste heat recovery systems as have been installed at
Newcastle, taking place at a later stage. Open cycle gas
turbines can be commissioned relatively quickly. IPSA expects
to be able to bring its open cycle units on line at Coega
within nine months of receiving planning consents and
regulatory approvals, subject to the necessary environmental
consents which are expected to take around six months to
obtain and also subject to financing being completed. This
fifteen month construction timetable is less than half the
time that it takes to build a modern coal-fired plant.
We intend that the full 1,600 MW Coega plant will eventually
run on liquified natural gas (LNG) imported into what will be
one of only two LNG receiving terminals currently planned for
South Africa. In the short term, however, the initial 1,000 MW
of open cycle capacity is expected to operate using liquid
fuels.
Elitheni is another IPSA development project which is being
accelerated to come on stream as soon as possible. This
project is a 400 MW mine mouth coal-fired project using state
of the art clean coal technology, one of the first such plants
planned by the private sector for South Africa. The plant is
to be built at Indwe, site of one of the earliest coal
deposits brought into production in South Africa. Situated in
the Eastern Cape north of both Port Elizabeth and East London,
the coal reserve was worked in the first part of the twentieth
century. IPSA has exclusive first rights to all coal from
Elitheni that is used for electricity production and we are
now carrying out the environmental impact assessment and
engineering studies required to obtain regulatory approval for
the plant.
The Group continues to be in discussions regarding a potential
gas-?red CHP plant to be located in the Prospecton Basin near
Durban and has received indications of interest from two
parties.
Elsewhere in Africa, IPSA is pursuing potential power projects
aimed to reduce environmental emissions which will in turn be
eligible for carbon credits. These include the proposed 50 MW
sugar bagasse-fired CHP plant at Simunye in Swaziland where
IPSA is working with Royal Swazi Sugar and the Government of
Swaziland. In Botswana, IPSA is working together with a
company specialising in coal bed methane extraction on
developing an electricity generation project using coal bed
methane to drive small gas engines. Coal bed methane is a
highly reactive greenhouse gas which, even more than carbon
dioxide, has a damaging effect in global warming. Finally,
IPSA is exploring power generation in Madagascar where the
size of the country has led to the over-use of diesel
generators which IPSA is looking to supplement or replace with
more environmentally friendly generation capacity.
Southern Africa and South Africa in particular, need the rapid
deployment of new power plants if economic development is not
to be stifled. The Kyoto Protocol has resulted in a highly
enlightened system for transferring resources from the
industrialised world to boost investment in clean power
solutions in the developing world. IPSA expects to be at the
forefront of that process in Africa.
Peter Earl
Chief Executive
CONSOLIDATED INCOME STATEMENT AND STATEMENT OF RECOGNISED
INCOME AND EXPENSE FOR THE FIFTEEN MONTHS ENDED 30 SEPTEMBER
2006
CONSOLIDATED INCOME STATEMENT
15 months ended
30.9.2006
Notes GBP`000
Revenue 4.6 -
Cost of sales -
Gross profit -
Administrative expenses 7 (364)
Other expenses 8 (738)
Finance income 9 75
Loss before tax (1,027)
Tax expense 10 -
Loss for the period 20 (1,027)
Loss per share 12
(1.88p)
STATEMENT OF RECOGNISED INCOME AND EXPENSE
Exchange differences on translation 20
(451)
of foreign operations
Loss for the financial period 20 (1,027)
Total recognised income and expense for the period (1,478)
The accompanying accounting policies and notes form an
integral part of these financial statements.
CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 2006
30.9.2006
Notes
GBP`000
Assets
Non-current assets
Property, plant and equipment 14 5,601
Intangible assets 13 833
6,434
Current assets
Trade and other receivables 17 196
Cash and cash equivalents 18 526
722
Total assets 7,156
Equity and liabilities
Capital and reserves attributable to
equity holders of the Company
Share capital 19 1,093
Share premium account 20 6,640
Foreign currency reserve 20 (451)
Profit and loss reserve 20
(1,027)
Total equity 6,255
Current liabilities
Trade and other payables 21 901
Total equity and liabilities 7,156
The financial statements were approved by the Board on 31
January 2007.
The accompanying accounting policies and notes form an
integral part of these financial statements.
CONSOLIDATED CASH FLOW STATEMENT FOR THE FIFTEEN MONTHS ENDED
30 SEPTEMBER 2006
15 months ended
30.9.2006
Notes
GBP`000
Net cash outflow from 22 (846)
operating activities
Interest received 9 75
Net cash outflow from (771)
operating activities
Cash flows from investing activities
Purchase of plant and equipment 14 (5,603)
Net cash from subsidiary
acquired 23,24 67
Payment of deferred consideration 24 (400)
Net cash used in investing activities (5,936)
Net cash outflow before financing activities
(6,707)
Cash flows from financing activities
Issue of shares (net of costs) 7,233
Net cash inflow from financing activities 7,233
Increase in cash and cash equivalents 526
Reconciliation and analysis of change in net funds
Increase in cash during period 526
Cash and cash equivalents at start of period
-
Cash and cash equivalents at
end of period 18 526
The accompanying accounting policies and notes form an
integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FIFTEEN MONTHS ENDED
30 SEPTEMBER 2006
1 Nature of operations
IPSA Group PLC and its subsidiaries` ("Group") principal
activity is the construction, development and operation of
electricity generation assets and the supply of electricity to
the wholesale market and major end-users. During the period
under review, all of the Group`s activities were located in
the Republic of South Africa.
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 2. IPSA Group PLC`s shares are traded on the
Alternative Investment Market (AIM) in London and, since
October 2006, the shares have had a dual listing on AltX (the
Alternative Exchange of the Johannesburg market).
The Company and the consolidated financial statements have
been prepared in accordance with International Financial
Reporting Standards as adopted by the EU and International
Financial Reporting Standards as issued by the International
Accounting Standards Board.
The consolidated financial statements for the fifteen months
period ended 30 September 2006 were approved by the Board of
directors on 31 January 2007.
3 Adoption of International Financial Reporting Standards
The financial statements have been prepared in accordance with
applicable International Financial Reporting Standards
("IFRS") as adopted by the European Union.
4 Summary of accounting policies
4.1 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.
4.2 Basis of consolidation
The Group financial statements consolidate those of the
Company and its subsidiary undertakings drawn up to 30
September 2006.
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.
The purchase of the Blazeway Engineering Limited group on 12
September 2005 was considered to be a common control business
combination and thus falls outside the scope of IFRS 3 as the
combining entities were ultimately controlled by the same
parties in the same proportion both before and after the
combination.
As a result, the combination of IPSA Group PLC and Blazeway
Engineering Limited has been accounted for by applying the
principles of merger accounting ("pooling of interests")
method. The provisional net assets and liabilities of the
Blazeway group as at 12 September 2005 have been disclosed in
note 23.
The purchase of Newcastle Cogeneration Company (Proprietary)
Limited by Blazeway Engineering Limited has been accounted for
as an acquisition of a subsidiary and the disclosures required
by IFRS 3 have been made in relation to this acquisition, see
note 24.
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 purchase
method. The purchase 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.
4.3 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.
4.4 Impairment of tangible and intangible fixed 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.
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 (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.
4.5 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 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.
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 charged / (credited) through the
statement of recognised income and expenditure to the Foreign
Currency Reserve.
4.6 Income and expense recognition
Revenue is recognised upon the performance of services or
transfer of risk to the customer. In the fifteen month period
to 30 September 2006 the Group`s revenue was nil as there were
no sales to external customers.
Operating expenses are recognised in the income statement upon
utilisation of the service or at the date of their origin. All
other income and expenses are reported on an accrual basis.
4.7 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:
Plant and equipment: 3 to 15 years
The depreciation charged in the period to 30 September 2006
was minimal since almost all plant and equipment expenditure
represented plant under construction.
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.
4.8 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 in the income statement or through
the statement of recognised income and expense.
Deferred income taxes are calculated using the liability
method on temporary differences. Deferred tax is generally
provided on the difference between the carrying amounts of
assets and liabilities and their tax bases. However, deferred
tax is not provided on the initial recognition of goodwill,
nor on the initial recognition of an asset or liability unless
the related transaction is a business combination or affect
tax or accounting profit. Temporary differences include those
associated with shares in subsidiaries and joint ventures if
reversal of these temporary differences can be controlled by
the Group and it is probable that reversal will not occur in
the foreseeable future. In addition, tax losses available to
be carried forward as well as other income tax credits to the
Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided for in full with no
discounting. Deferred tax assets are recognised to the extent
that it is probable that the underlying deductible temporary
differences will be able to be offset against future taxable
income. Current and deferred tax assets and liabilities are
calculated at tax rates that are expected to apply to their
respective period of realisation, provided that they are
enacted or substantively enacted at the balance sheet date.
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 equity (such as revaluation of land) in which case
the related deferred tax is also charged or credited directly
to equity.
4.9 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 money
market instruments and 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 the income statement.
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.
4.10 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 interestrelated charges are recognised as an
expense in "finance cost" in the income statement. 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. Finance charges, including
premiums payable on settlement or redemption, and direct issue
costs are charged to the income statement 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.
4.11 Hedging instruments
The Group has not entered into any derivative financial
instruments for hedging or any other purpose.
4.12 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.
- "Profit and loss reserve" represents retained earnings.
4.13 Pensions
During the period under review, the Group did not operate or
contribute to any pension schemes.
4.14 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 area of
significant risk which may cause material adjustment to the
carrying value of assets and liabilities within the next
financial year is in respect of the assumptions used to value
intangible and tangible fixed assets. The Board has valued
intangible and tangible fixed assets at cost. However, given
the assets represent agreements and plant under construction
in respect of the supply of electricity over an extended
period, changes in technology, prices or industry practices
may result in the assumptions used in these valuations needing
to be changed.
5 Principal activity
The Group`s activities comprise the acquisition and
development of power generation assets in southern Africa.
6 Segment analysis
The following table provides a segmental analysis by
geographic region:
15 months to RSA UKIntra-Group Total
30 September 2006 eliminations
GBP`000 GBP`000 GBP`000 GBP`000
Administrative expenses (28) (336) - (364)
Other expenses (1,120) (69) 451 (738)
Finance income 8 296 (229) 75
Loss before tax (1,140) (109) 222 (1,027)
Tax expense - - - -
Loss for the period (1,140) (109) 222 (1,027)
Activities in RSA relate to Newcastle Cogeneration
(Proprietary) Limited and activities in UK relate to IPSA
Group PLC and Blazeway Engineering Ltd.
At 30 September 2006 RSA UKIntra-Group Total
eliminations
GBP`000 GBP`000 GBP`000 GBP`000
Total assets 6,021 7,812 (6,677) 7,156
Total liabilities 7,160 189 (6,448) 901
Plant under construction 5,830 - (229) 5,601
7 Administrative expenses 15 months to
30.9.2006
GBP`000
Expenditure incurred in administrative expenses is as follows:
Payroll and social security 185
Other administrative expenses 179
Total 364
Audit fees for the Group amounted to GBP20,000. Fees payable
to Grant Thornton UK LLP in respect of advisory services
amounted to GBP80,474 in connection with the Company`s listing
on AIM and GBP21,000 in connection with taxation advice. These
fees have been treated as a share issue costs and have been
charged to the share premium account.
8 Other expenses 15 months to
30.9.2006
GBP`000
Fees associated with listing on AIM 69
Foreign exchange losses 669
738
Foreign exchange losses have arisen as a result of the
conversion of physical assets located in South Africa into
sterling at the exchange rate ruling on 30 September 2006 as
compared to the exchange rates ruling at the times when
sterling funds were provided by the Company.
9 Finance income 15 months to
30.9.2006
GBP`000
Interest received on bank deposits 75
10 Tax expense
There is no tax charge arising on the results for the period
due to the losses incurred. The relationship between the
expected tax credit and the tax credit actually recognised is
as follows:
15 months to
30.9.2006
GBP`000
Loss for period before tax (1,027)
Standard rate of corporation tax in UK 30%
Expected tax credit 308
Tax effect of consolidation adjustments 67
Tax losses carried forward 375
Actual tax credit -
No deferred tax asset has been recognised in respect of the
tax losses of GBP375,000 carried forward owing to uncertainty
over the timing of future utilisation.
11 Loss attributable to the parent company
The loss attributable to the parent company, IPSA Group PLC,
was GBP109,000. As permitted by Section 230 of the Companies
Act 1985, no separate profit and loss account is presented in
respect of the parent company.
12 Loss per share
The basic loss per share is calculated by dividing the loss
for the period attributable to shareholders by the weighted
average number of shares in issue during the period.
15 months to
30.9.2006
Loss attributable to equity holders of the company
GBP1,026,798
Total shares in issue at 30 September 2006 54,629,630
Basic loss per share (1.88p)
13 Intangible assets
30.9.2006
GBP`000
Additions arising on acquisition of subsidiary 833
Cost at 30 September 2006 833
The intangible asset represents the provisional fair value of
a contract, owned by Newcastle Cogeneration (Proprietary)
Limited, to supply steam to the electricity generating plant.
Amortisation over the life of the contract will begin to be
charged when the supply of electricity from the plant
commences.
14 Property, plant and equipment
Plant under
construction
GBP`000
Additions 5,603
Cost at 30 September 2006 5,603
Depreciation - charge for period 2
Net book value at 30 September 2006 5,601
Plant under construction has been valued at cost and
represents expenditure incurred during the period to 30
September 2006.
15 Investments
The Company owns the entire issued share capital of Blazeway
Engineering Ltd which in turn owns the entire issued share
capital of Newcastle Cogeneration (Proprietary) Limited.
16Trade and other receivables receivable after more than 1
year
30.9.2006
GBP`000
Receivables due after more than 1 year -
17Trade and other receivables receivable in less than 1 year
30.9.2006
GBP`000
Pre-paid taxes 162
Other prepayments 34
196
18 Cash and cash equivalents
30.9.2006
GBP`000
Cash at bank and in hand 18
Short-term bank deposits 508
526
19 Share capital
30.9.2006
GBP`000
a) Authorised
150,000,000 ordinary shares of 2p each 3,000
b) Allotted, called-up and fully paid
54,629,630 ordinary shares of 2p each 1,093
Reconciliation of movement in share capital during the period
Number GBP
On incorporation (1 July 2005) - 2 ordinary
shares of GBP1 each 2 2
Subdivision of each ordinary GBP1 share into
50 shares of 2p each 98 -
on 12 September 2005
Allotment in consideration of acquisition
of Blazeway 24,999,900 499,998
Engineering Limited on
12 September 2005 at par
Allotment on admission to the AIM
market of the London 29,629,630 592,593
Stock Exchange on
20 September 2005 at 27p per share
At 30 September 2006 54,629,630 1,092,593
The difference between the total consideration arising from
shares issued and the nominal value of the shares issued has
been credited to the share premium account (note 20).
20 Statement of changes in shareholders` equity
Share Share Foreign Profit and Total
capital premium currency loss
reserve reserve
GBP`000 GBP`000 GBP`000 GBP`000 GBP`000
On incorporation - - - - -
Allotment - 12.9.05 500 - - - 500
Allotment - 20.9.05 593 7,407 - - 8,000
Share issue costs - (767) - - (767)
Translation difference - - (451) - (451)
Loss for the period - - - (1,027) (1,027)
Balance at
30 September 2006 1,093 6,640 (451) (1,027) 6,255
21 Trade and other payables
30.9.2006
GBP`000
Trade creditors 856
Accruals 45
901
22 Reconciliation of loss before tax to cash
30.9.2006
outflow from operations GBP`000
Loss before tax (1,027)
Depreciation 2
Changes in working capital
Trade and other receivables (196)
Trade and other payables 901
Exchange adjustment (451)
Interest received (75)
Net cash outflow from operating activities (846)
23 Common control business combination
30.9.2006
GBP`000
Fair values of assets and liabilities at
date of combination
Intangible fixed asset 833
Debtors 42
Creditors (400)
Net cash acquired 25
Net assets acquired 500
Consideration
Issue of ordinary shares 500
Total 500
On 12 September 2005, the company acquired 100% of the issued
share capital of Blazeway Engineering Ltd for GBP500,000. The
purchase price was settled by the issue of 24,999,900 ordinary
shares of 2p each. Blazeway Engineering Limited owns 100% of
the issued share capital of Newcastle Cogeneration
(Proprietary) Limited, having acquired the shares on 9 May
2005 for GBP875,000.
24 Acquisition of subsidiary entities
30.9.2006
GBP`000
Provisional values of assets and liabilities acquired
Intangible fixed asset 833
Cash and bank balances 42
Net assets acquired 875
Consideration
Cash 475
Deferred consideration 400
Total 875
On 9 May 2005, Blazeway Engineering Ltd acquired 100% of the
issued share capital of Newcastle Cogeneration (Proprietary)
Limited for GBP875,000. The purchase price was settled by
GBP475,000 of cash and GBP400,000 of deferred consideration.
The deferred consideration was paid during the period.
25 Financial 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:
a) Foreign currency risk
The Group is exposed to translation and transaction foreign
exchange risk. Foreign exchange differences on retranslation
of these assets and liabilities are taken to the profit and
loss account of the Group. 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
Rand 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 seeks to manage financial risk by ensuring
sufficient liquidity is available to meet foreseeable needs
and to invest cash assets safely and profitably.
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
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.
e) Fair values
In the opinion of the directors, there is no significant
difference between the fair values of the Group`s and the
Company`s assets and liabilities and their carrying values.
26 Capital commitments
The Group is in the process of constructing a major power
plant in the Republic of South Africa. Expenditure incurred to
30 September 2006 amounted to GBP5,550,961. It is anticipated
that further expenditure of GBP2.0m will be required to bring
the plant into operation.
27 Contingent liabilities
At 30 September 2006, the Group`s only contingent liability
related to a purchase agreement entered into by Newcastle
Cogeneration (Proprietary) Limited in respect of minimum
purchases from a supplier amounting to ZAR 22m (GBP1.6m)
within one year and a total of ZAR 121m (GBP8.7m) over the
subsequent 4 years. The agreement commenced on 1 July 2006 and
terminates on 30 June 2011.
28 Related party transactions
Material transactions with related parties during the period
were as follows:
1. Acquisition of Blazeway Engineering Limited for GBP875,000
from Independent Power Corporation PLC.
2. Payment by the Company of GBP60,000 to Independent Power
Corporation PLC under a "Shared Services Agreement" for the
provision of offices and other administrative services.
3. Payment by the Company of GBP229,538 to Independent Power
Operations Ltd for services relating to the dismantling and
transportation of plant and equipment. Independent Power
Operations Ltd is a wholly owned subsidiary of Independent
Power Corporation PLC.
4. Payment by Newcastle Cogeneration (Proprietary) Ltd of
GBP20,670 to Independent Power Corporation PLC for civil works
5. P Earl is a shareholder and director of Independent Power
Corporation PLC and J West and E Shaw are directors. A sum of
GBP22,670 was owing to Independent Power Corporation PLC at 30
September 2006.
6. Payment by the Company of US$3.85m to EPG for the purchase
of the CHP plant. EPG is a wholly owned subsidiary of European
Power Systems A.G. which acquired and holds 2.8 per cent. of
the issued share capital of the Company.
7. Payment by Newcastle Cogeneration (Proprietary) Ltd of ZAR
372,781 to Freydan Properties (Pty.) Ltd for use of office
facilities and ZAR 10,290,894 to First Tech cc for civil
works. C Lewis is a shareholder and director in Freydan
Properties (Pty.) Ltd and a shareholder in First Tech cc and a
former director of the Company.
8. Payment by the Group of salaries to key management
totalling GBP170,329.
29 Directors and employee costs
30.9.2006
GBP`000
Aggregate remuneration of all employees and directors 185
Remuneration paid to directors Salary Other Total
emoluments
GBP`000 GBP`000 GBP`000
S Hargrave (non-executive) 30 - 30
N Bryson - 5 5
P Earl 30 - 30
J Eyre 30 - 30
C Lewis (resigned) 13 - 13
E Shaw 30 - 30
J West (non-executive) 3 12 15
Total 136 17 153
`Other` remuneration includes GBP5,000 paid to Balmyle Ltd, a
company controlled by N Bryson and GBP17,000 paid to Jimmy
West Associates Ltd, a company controlled by J West.
The average number of employees in the Group, including
directors, was 7.
30 Post balance sheet date event
In October 2006, the Company`s shares were admitted to AltX
(the Alternative Exchange of the JSE Ltd) and 11,499,839 new
ordinary 2p shares were placed with South African investors at
an average price of ZAR 5.84 (GBP0.40) raising GBP4.16m net of
costs.
Sponsor
Standard Bank
AIM nominated advisor
Noble & Company Limited
Date: 31/01/2007 11:30:01 Produced by the JSE SENS Department.
