Final Results and Notice of A

RNS Number : 0607N

Equatorial Palm Oil plc

04 June 2010

 



Equatorial Palm Oil plc / Index: AIM / Epic: PAL / Sector: Food Producers

4 June 2010

Equatorial Palm Oil plc ('EPO' or 'the Company')

Final Results and Notice of Annual General Meeting

Equatorial Palm Oil plc, the AIM listed Liberian focussed sustainable oil palm plantation developer, announces its final results for the year ended 31 December 2009 and gives notice of its Annual General Meeting to be held at the offices of Sprecher Grier Halberstam LLP, 5th Floor, One America Square, Crosswall, London EC3N 2SG  on 30 June 2010 at 11am.  

Overview

·    Continued work throughout 2009 at Palm Bay and Butaw to prepare for plantation rehabilitation

·    Active development strategy focussed on becoming a large scale West African producer of sustainable palm oil

·    Successful £6.5m equity raising and admission of EPO's shares on AIM in February 2010

·    Cornerstone investor secured - BioPalm Energy Ltd, a subsidiary of Indian Conglomerate The Siva Group further to a £5 million placing

·    Reactivation of 3,000 ha of existing plantations at Palm Bay and 220,000 oil palm seeds ordered to be planted at nurseries being established at Palm Bay and Butaw plantations

·    First palm oil mill is in transit to Liberia from Malaysia with expected palm oil production in Q4 2010 to provide cash flow

·    Post tax loss of £943,000 (2008: £1,410,000) - reflects a reduction of over £620,000 in administrative expenditure throughout 2009

Chairman's Statement

It gives me pleasure to report on Equatorial Palm Oil Plc's progress over this pivotal reporting period.

During the year ended 31 December 2009, EPO undertook further positive preliminary operational and field activities in preparation for the rehabilitation and development of the Group's palm oil concessions in Liberia upon securing further funding by way of an admission to the Alternative Investment Market ('AIM') of the London Stock Exchange.

Subsequent to year end, the Company's financing endeavours culminated in a successful £6.5m equity raising and admission of EPO's shares on AIM in February 2010. In May 2010, we were very pleased to welcome BioPalm Energy Ltd ('BioPalm'), a subsidiary of Indian conglomerate The Siva Group, as a cornerstone investor following a £5m placement.  These two fund raisings have positioned the Group to move forward with implementing our strategy which is focussed on becoming a large scale West African producer of sustainable palm oil.

The Directors believe that EPO is ideally positioned to create value for shareholders given its land position of circa 169,000 hectares ('ha') in Liberia, our strong management team, defined development strategy, expected short term cash flow from the reactivation of existing plantations and a solid funding base.

Our operations in Liberia comprise three areas: 34,393 ha at Palm Bay Oil Palm Plantation ('Palm Bay'), 54,549 ha at Butaw Oil Palm Plantation ('Butaw'), and 80,000 ha in the River Cess County ('River Cess').  Palm Bay and Butaw are held under government ratified long term concessions and all three areas are considered highly suitable for sustainable oil palm plantation development.  Importantly, our plantation areas are well located, with established infrastructure, close to deep water ports and with access to suitable labour.

We aim to provide early cash flow through the reactivation of 3,000 ha. of existing plantations at Palm Bay.  As part of the reactivation, the Company announced on 2 June 2010 that our first palm oil mill is in transit to Liberia from Malaysia and is expected to be delivered to Liberia in July.  The Directors expect that production of palm oil, providing the Company with cash flow, will commence in Q4 this year.  Once production has started, we intend to sell CPO to the local market. In addition, we have ordered 220,000 oil palm seeds to be planted at nurseries being established at Palm Bay and Butaw.  Looking further ahead, our long term strategy is to plant 50,000 ha. of oil palm within ten years for sustainable CPO production with a target of producing 250,000 tonnes per annum ('tpa') and eventually extending our planting programme out to 100,000 ha.  In tandem with our own plantation development we have an out-grower (smallholder) programme which will enable local communities to gain direct ownership within the palm industry while also increasing production of crude palm oil.

Liberia provides the Company with a low cost production environment and immediate access to the sizeable and well established West African palm oil market.  The country has worked hard to stabilise its political system and we believe it has a highly encouraging investment outlook.  Our view is supported by recent investment in the country by major international companies including Arcelor Mittal and Firestone.  Importantly major international palm oil producers are active in Liberia with Sime Darby commencing operations and Golden Agri announcing significant palm oil investment plans.  The willingness of such companies to invest heavily in Liberia reaffirms the potential of this region for palm oil.

Palm oil is the most widely produced edible oil in the world and is indigenous to West Africa.  The Board believes that with the implementation of techniques from South East Asia and the latest seed genetics, Africa should again become a key player in the buoyant world CPO market. Furthermore, demand for CPO is increasing and is forecast to grow at an annualised growth rate of 5-6 per cent. between 2008 and 2015.  This will be facilitated by an increasing global population and improved standards of living, the latter being a primary driver in India and China.  Preference in diet has also played a part with the US seeing a 30% annualised growth in demand of CPO in the last seven years due to positive health findings and additionally, industrial demand has been underpinned by crude mineral oil prices.

Public awareness of palm oil has increased significantly in recent times and as an emerging developer we have first mover advantage in establishing new sustainable palm oil plantations.  It is the Board's view that a clear commitment to environmentally and socially sustainable palm oil production is not simply the only option but also very achievable.  We believe that if developed sustainably, palm oil can responsibly provide enormous benefits to countries such as Liberia whilst remaining an excellent investment.

Management

We have a strong management team in place that has extensive experience of both the region and the development of large scale oil palm plantations.  Both our Plantations Director Geoff Brown and Managing Director Peter Bayliss, have many years of direct experience working in the sector, with Geoff Brown having occupied the roles of Managing Director of London Sumatra Indonesia and Chairman of New Britain Palm Oil Ltd. We are confident that with an experienced management team behind us that we can move forward and implement our strategy effectively.

Financial Review

In February 2010, the Company raised £6.5 million before expenses, by way of a placing of 49,398,337 ordinary shares at 17.5p as part of the Company's admission to AIM. Subsequently in May 2010, the Company raised £5 million before expenses, by way of a placing subscription with BioPalm for 33,333,333 ordinary shares at 15p.  The funds will be used for the continued development of the Company's 169,000 hectare land position and the acceleration of the plantation rollout programme.

For the year ended 31 December 2009, the Group reported an after tax loss of £943,000, down from the prior year loss of £1,410,000, reflecting a reduction of over £620,000 in administrative expenditure throughout 2009.  Over the course of the period, we invested in our land position and leases in preparation for the fundraising and admission to AIM post-period end, increasing the book value of our non-current assets to £7.3 million, up from £6.7m in 2008.

Outlook

We have a highly active development programme to crystallise the value of what I believe to be one of the most exciting palm oil opportunities in West Africa.  The reactivation of existing oil palms has commenced and we expect to be generating cash flow as soon as we receive delivery of our mill, which is being shipped from Malaysia in June 2010. Additionally, in tandem with our own development schedule, we are examining a number of strategic partnerships which we believe will fast track the development of our portfolio and assist us in becoming a major palm oil company in Liberia.

The Board is confident that EPO offers investors a comparably lower cost entry point for palm oil development and investment and looks forward to the development of this exciting opportunity.

Finally I would like to thank my fellow Board members and staff for their hard work and determination to date, all of which has placed us in an excellent position to take the Company forward.

Michael Frayne

Chairman

3 June 2010

Principal Activities and Review of Operations

The principal activities of the Company are the evaluation and development of the cultivation of oil palms for the production of crude palm oil and associated products in Liberia.

The Company holds two concession agreements with the Government of Liberia for the investment, rehabilitation and participation by the Company over 10,200 hectares of existing oil palm plantations and a further 78,548 hectares of agricultural land for development into oil palm plantations. The concession agreements are held by the wholly owned subsidiaries LIBINC Oil Palm Inc ('LIBINC') and Liberia Forest Products Inc ('LFPI') and include respectively the Palm Bay plantation in Grand Bassa County and the Butaw plantation in Sinoe County.

In addition, the Company has entered into a memorandum of intent with the River Cess County to establish a joint venture to develop oil palm plantations over at least a further 80,000 hectares.

The development of our land bank is progressing well and we have embarked upon our reactivation programme at Palm Bay. The existing plantations are considered to be in reasonable condition by the Independent Expert Agronomist, who believe that the plantations are capable of producing economic yields of fresh fruit bunches ('FFB') in areas which have not been used for shifting cultivation and where the number of palm oils per hectare is close to 140-180 plants per hectare.  With this in mind, we consider an area of 3,000 hectares at Palm Bay to be the most economically viable for rehabilitation.  Weeding and clearing of undergrowth has commenced and further to completion, we expect that the reactivation should immediately enhance land valuations.

Throughout 2009, we continued work on a number of preliminary operational activities at both Palm Bay and Butaw, conducting ongoing survey work to ensure that demographic and social reports on the existing inhabitants and ongoing economic activities in and around the concession areas are current.  These routine surveys continue to provide valuable data on population numbers and activities at both sites, providing the Company with significant opportunity to further develop dialogue with local stakeholders.  Communication between the Company and local communities is imperative and we are committed to maintaining consistent communication concerning development plans and future opportunities for employment.

Additionally, we have embarked upon an active recruitment programme and now have 125 employees who are engaged in preliminary field activities at Palm Bay and Butaw estates. We have been clearing and maintaining roads, concession boundaries lines and enabling access to be made to all areas of the existing plantings on both concessions and our increased workforce are vital in this process.

We have identified potential oil palm nursery sites and have cleared each concession in preparation for the establishment of seedling nurseries at both Palm Bay and Butaw. We have also placed an initial order of 220,000 oil palm seeds with Unipalm, the sales agent for Feronia Inc, whose seed garden is in The Democratic Republic of Congo. The seeds will be delivered in batches and have been developed and specifically cultivated for the West African palm oil sector, with the first batch delivered in May. Having prepared the nurseries, the seeds will immediately be planted and will provide seedlings to facilitate the Company's initial round of planting of circa 1,200 hectares of land, 600 hectares at each plantation.

Other ongoing work programmes include the clearing and surveying of existing social infrastructure at both concessions.  The Company has reviewed factory sites, office and workshop facilities and housing at the plantations and rehabilitation and repair plans have been compiled for implementation.

Additionally, rehabilitation and repair work has commenced on a number of priority social infrastructure projects including schools, clinics and priority housing together with associated water and sanitation facilities.  In particular, construction work commenced on two temporary elementary schools at Butaw which will provide schooling for between 300-400 students currently residing on the concession.  The schools will be completed in time to enable the enrolment of students in time for the commencement of the new academic year in September 2010.  We also commenced refurbishment work on the existing elementary school at Palm Bay and completion of this project will take place in time for the commencement of the new academic year when 400 local students are due to enrol.  Temporary school facilities have been provided at alternative sites at Palm Bay to enable studies to continue for the 350 existing students during the rehabilitation of the permanent school buildings.

We have also enhanced medical and first aid facilities at both concession areas.  The health facility at Butaw underwent further expansion during 2009 with the addition of a Maternity Unit and the establishment of a Malaria & TB Control Unit at the site as part of a nationwide programme spearheaded by the Ministry of Health. Patient numbers treated at the facility throughout 2009 averaged in the region of 500 consultations per month.   Renovation of a temporary First Aid Post at the Palm Bay concession was completed during the fourth quarter of 2009 and the facility became operational on the appointment of qualified health workers in December 2009. Early indications are that patient numbers will exceed 500 consultations per month at this facility.

Throughout 2009 routine security operations continued to be carried out by Company security personnel in conjunction with the Liberian National Police and aided by the establishment of Magisterial Courts on both concessions as provided for under the terms of the concession agreements signed with the Government of Liberia.  During the year there were no security breaches or incidents of note which occurred on either concession.

* * ENDS * *

 For further information please visit www.epoil.co.uk, www.modipalm.com.my, or contact: 

Michael Frayne	Equatorial Palm Oil plc	Tel: [phone]
Peter Krens	Mirabaud Securities LLP	Tel: [phone]
Pascal Keane	Shore Capital & Corporate Limited	Tel: [phone]
Edward Mansfield	Shore Capital & Corporate Limited	Tel: [phone]
Hugo de Salis	St Brides Media & Finance Ltd	Tel: [phone]
Paul Youens	St Brides Media & Finance Ltd	Tel: [phone]

GROUP STATEMENT OF COMPREHENSIVE INCOME

As at 31 December 2009

	Note	2009 £'000	2008 £'000
Administrative expenses		(771)	(1,395)
Operating loss	3	(771)	(1,395)
Interest received	4	-	12
Interest payable	4	(172)	(27)
Loss on ordinary activities before taxation		(943)	(1,410)
Taxation on loss on ordinary activities	5	-	-
Loss for the year after taxation		(943)	(1,410)
Other Comprehensive income
Currency translation differences		(273)	359
Total comprehensive income for the year		(1,216)	(1,051)
Loss per share expressed in pence per share
- Basic & diluted	9	(2.9)p	(4.6)p

All of the operations are considered to be continuing.

GROUP BALANCE SHEET

As at 31 December 2009

	Note	2009 £'000	2008 £'000
ASSETS
Non-current assets
Intangible assets	11	7,232	6,663
Plant and equipment	15	58	75
		7,290	6,738
Current assets
Other receivables	16	347	14
Cash & cash equivalents	20	63	18
		410	32
LIABILITIES
Current liabilities
Trade and Other payables	17	2,009	1,091
Short term borrowings	18	2,002	774
		4,011	1,865
Net current (liabilities)		(3,601)	(1,833)
NET ASSETS		3,689	4,905
SHAREHOLDERS' EQUITY
Share Capital	19	320	320
Share premium		6,175	6,175
Other reserves		104	377
Retained loss		(2,910)	(1,967)
Total equity		3,689	4,905

COMPANY BALANCE SHEET

As at 31 December 2009

	Note	2009 £'000		2008 £'000
ASSETS
Non-current assets
Investments	13		-	-
Plant and equipment	15		22	44
			22	44
Current assets
Other receivables	16		7,623	6,420
Cash & cash equivalents	20		33	18
			7,656	6,438
LIABILITIES
Current liabilities
Trade and Other payables	17		1,994	1,091
Short term borrowings	18		2,002	774
			3,996	1,865
Net current assets			3,660	4,573
NET ASSETS			3,682	4,617
SHAREHOLDERS' EQUITY
Share capital	19		320	320
Share premium			6,175	6,175
Equity reserve	19		-	-
Other reserves			21	21
Retained loss			(2,834)	(1,899)
Total equity			3,682	4,617

CASH FLOW STATEMENTS

As at 31 December 2009

		Group 2009 £'000	Group 2008 £'000	Company 2009 £'000	Company 2008 £'000
Cash flows from operating activities
Operating Loss		(771)	(1,395)	(763)	(1,352)
(Increase)/decrease in trade and other receivables		(333)	67	(1,203)	(1,351)
Increase in trade and other payables		918	807	903	807
Depreciation		23	48	22	23
Net cash outflow from operating activities		(163)	(473)	(1,041)	(1,873)
Cash flows from investing activities
Interest Received		-	12	-	12
Payments to acquire intangible assets		(839)	(1,405)	-	-
Payments to acquire tangible assets		(9)	(5)	-	(5)
Net cash (outflow)/inflow from in investing activities		(848)	(1,398)	-	7
Cash flows from financing activities
Short term borrowings		1,228	774	1,228	774
Issue of ordinary share capital		-	-	-	-
Share issue costs		-	-	-	-
Interest paid		(172)	(27)	(172)	(27)
Net cash inflow from financing activities		1,056	747	1,056	747
Net increase/(decrease) in cash and cash equivalents		45	(1,124)	15	(1,119)
Cash and cash equivalents at beginning of period		18	1,142	18	1,137
Cash and cash equivalents at end of period		63	18	33	18

STATEMENT OF CHANGES IN EQUITY

For the period ended 31 December 2009

	Called up share capital	Share premium reserve	Foreign currency translation reserve	Equity reserve	Share based payment reserve	Retained earnings	Total equity
Group	£'000	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 January 2008	206	2,863	(3)	900	21	(557)	3,430
Share capital issued (Note 19)	114	3,312	-	(900)	-	-	2,526
Cost of share issue	-	-	-	-	-	-	-
(Loss) for the year	-	-	-	-	-	(1,410)	(1,410)
Share based payments	-	-	-	-	-	-	-
Currency translation differences	-	-	359	-	-	-	359
As at 31 December 2008	320	6,175	356	-	21	(1,967)	4,905
As at 1 January 2009	320	6,175	356	-	21	(1,967)	4,905
Share capital issued (Note 19)	-	-	-	-	-	-	-
Cost of share issue	-	-	-	-	-	-	-
(Loss) for the year	-	-	-	-	-	(943)	(943)
Share based payments	-	-	-	-	-	-	-
Currency translation differences	-	-	(273)	-	-	-	(273)
As at 31 December 2009	320	6,175	83	-	21	(2,910)	3,689

STATEMENT OF CHANGES IN EQUITY

For the period ended 31 December 2009

	Called up share capital	Share premium reserve	Foreign currency translation reserve	Equity reserve	Share based payment reserve	Retained earnings	Total equity
Company	£'000	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 January 2008	206	2,863	-	900	21	(532)	3,458
Share capital issued (Note 19)	114	3,312	-	(900)	-	-	2,526
Cost of share issue		-	-	-	-	-	-
(Loss) for the year		-	-	-		(1,367)	(1,367)
Share based payments	-	-	-	-	-	-	-
Currency translation differences	-	-	-	-	-	-	-
As at 31 December 2008	320	6,175	-	-	21	(1,899)	4,617
As at 1 January 2009	320	6,175	-	-	21	(1,899)	4,617
Share capital issued (Note 19)	-	-	-	-	-	-	-
Cost of share issue		-	-	-	-	-	-
(Loss) for the year		-	-	-		(935)	(935)
Share based payments	-	-	-	-	-	-	-
Currency translation differences	-	-	-	-	-	-	-
As at 31 December 2009	320	6,175	-	-	21	(2,834)	3,682

Notes

The financial information set out in this announcement does not constitute statutory accounts as defined in the Companies Act 2006.

The financial information for the year ended 31 December 2008 has been extracted from the consolidated financial statements to that date which received an unmodified auditor's report and have been delivered to the Registrar of Companies.  The financial information for the year ended 31 December 2009 has been extracted from the consolidated financial statements to that date which have received an unmodified auditor's report but have not yet been delivered to the Registrar of Companies.

The financial statements and the Notice of Annual General Meeting are being posted to shareholders today and will be available later today from the Company's registered office, One America Square, Crosswall, London  EC3N 2SG and website at www.epoil.co.uk.

1. Summary of Significant Accounting Policies

The principal accounting policies are summarised below. They have all been applied consistently throughout the period.

Authorisation of financial statements

The consolidated financial statements of Equatorial Palm Oil Plc for the year ended 31 December 2009 were authorised for issue by the Board on 3 June 2010 and the balance sheets signed on the Board's behalf by Michael Frayne and Anthony Samaha.

Basis of accounting

These financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards as adopted by the European Union and IFRIC interpretations and with those parts of the Companies Act, 2006 applicable to companies reporting under IFRS.

Basis of consolidation

The consolidated financial statements comprise the financial statements of Equatorial Palm Oil Plc and its subsidiaries (the 'Group') as at 31 December each year.  The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. 

All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Revenue

The Group had no revenue during the year.

Foreign currencies

The consolidated financial statements are stated in thousands of Sterling (£), which is the reporting currency of the Group and the Company and all values are rounded to the nearest £'000 unless otherwise stated.  Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. As at the reporting date the assets and liabilities of these subsidiaries are translated into the presentation currency of the Company at the rate of exchange ruling at the balance sheet date and their income statements are translated at the average exchange rate for the year. The exchange differences arising on the translation are taken directly to a separate component of equity.  All other differences are taken to the income statement.  The relevant exchange rates used at year end were GBP:USD - 1.59 and GBP:AUD - 1.78.

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above.

Intangible assets                               

Intangible assets are recognised if it is probable that they will provide a future economic benefit to the Company and are recorded at cost less eventual amortisation and provision for impairment in value.

The costs in respect of project evaluation and the development of the cultivation of oil palms are capitalised at cost.  The developments are not yet at a stage where accounting for biological assets, under IAS 41, is deemed necessary.

Goodwill on consolidation is capitalised and shown within intangible assets.  Positive goodwill is subject to an annual impairment review, and negative goodwill is immediately written-off to the income statement when it arises. 

Investment

Investments in subsidiary undertakings are stated at cost less any provision for impairment in value, prior to their elimination on consolidation. 

Where the Group has entered into a contract to acquire a company, and the acquisition has not been completed at the balance date, but it is probable that the acquisition will be completed and provide a future economic benefit to the Group, the costs incurred in respect of that acquisition are capitalised.

Impairment of non-financial assets

Non-financial assets and identifiable intangibles, other than exploration and evaluation assets, are reviewed for impairment each reporting date and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  If the expected undiscounted future cash flow from the use of the assets and their eventual disposition is less than the carrying amount of the assets, an impairment loss is recognised and measured using the asset's fair value or discounted cash flows.

Property, Plant and Equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is provided on all plant and equipment to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight-line basis at the following annual rates:

Plant and Equipment                 25% - 33%

Vehicles                                   20%

All assets are subject to annual impairment reviews.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.  The tax currently payable is based on taxable profit for the period. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the Balance Sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.

Share-based payments

The Group has applied the requirements of IFRS 2 Share-based Payments.

Where equity instruments are granted to persons other than employees, the income statement is charged with the fair value of goods and services received, except where it is in respect to costs associated with the issue of securities, in which case it is charged to the share premium account.

Equity-settled share-based payments are measured at fair value at the date of grant. The fair value is determined using a Black-Scholes model.

Financial Instruments

The Group's financial assets consist of cash and trade and other receivables.

Cash consists of cash on hand and cash held on current account or on short-term deposits at variable interest rates.  Any interest earned is accrued monthly and classified as interest.

Trade and other receivables are stated at cost less impairment losses.

The Group's financial liabilities consist of trade and other payables and short-term borrowings, which are stated at their cost.  All interest and other borrowing costs incurred in connection with the above are expensed as incurred and reported as part of net financing costs in the income statement.  Convertible loan notes are included within short-term borrowings and treated as solely liability with no equity component due to the conversion terms being AIM admission placing price.

Going concern

These financial statements have been prepared on a going concern basis, taking into account the equity funds raised subsequent to the year end of £6.5 million and £5 million, before expenses, in February 2010 and May 2010, respectively.

Adoption of new and revised Accounting Standards

In the current year the Company has adopted all of the new and revised Standards and Interpretations issued by the Accounting Standards Board that are relevant to its operation and effective and mandatory for the current annual reporting period and there is no material financial impact on the financial statements of the group or the company.

IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements:

International Accounting Standards (IAS/IFRSs) and (Effective date)

IFRS 2	Amendment to IFRS 2 - Group cash settled and share-based payment transactions (1 January 2010)
IFRS 3	Business Combinations - revised January 2008 (1 July 2009)
IFRS 5	Measurement of non-current assets classified as held for sale (1 January 2010)
IAS 27	Consolidated and Separate Financial Statements - revised January 2008 (1 July 2009)
IAS 38	Intangible Assets (1 January 2010)
	International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 17	Distribution of non-cash assets to owners (1 July 2009)

2. Revenue and Segmental Analysis

The Group had no revenue during the period.

The Group operates in the business segment of the evaluation and development of the cultivation of oil palms.

The Group has material interests in two geographical segments, the United Kingdom and Liberia.   

By geographical area	United Kingdom	Liberia	Total
	£'000	£'000	£'000
2009 Loss for the year ended 31 December 2009	(935)	(8)	(943)
Other segment information:
Additions to Intangible assets	-	839	839
Total Segment assets	400	7,300	7,700
Segment liabilities	(3,996)	(15)	(4,011)
2008 Loss for the year ended 31 December 2008	(1,367)	(43)	(1,410)
Other segment information:
Additions to Intangible assets	-	3,931	3,931
Total Segment assets	76	6,694	6,770
Segment liabilities	(1,865)	-	(1,865)

3. Operating Loss

The operating loss is stated after charging:

		Group 2009 £'000	Group 2008 £'000
Auditors' remuneration	- audit services	15	10
	- other services	-	30
Depreciation (note 15)		23	48
Directors' emoluments (note 8)		587	326

Auditors' remuneration for non-audit services provided during 2008 amounting to £30,000 relates to the provision of Reporting Accountants services for the proposed re-Admission to AIM.

4. Interest

	Group 2009 £'000	Group 2008 £'000
Received
Bank interest received	-	12
Payable
On short term borrowings	(172)	(27)

5. Taxation

	Group 2009 £'000	Group 2008 £'000
Current year taxation
UK corporation tax at 28% on results for the period (2008: 28.5%)	-	-
Factors affecting the tax charge for the period
Loss on ordinary activities before tax	(943)	(1,410)
Loss on ordinary activities at the UK standard rate of 28% (2008: 28.5%)	(264)	(402)
Effects:
Future tax benefit not brought to account	264	402
Current period taxation	-	-

No deferred tax assets have been created.

6. Directors' Emoluments

	Group 2009 £'000	Group 2008 £'000
Michael Frayne1	33	72
Ross Warner	6	36
Anthony Samaha	24	36
Geoff Brown	220	86
Peter Bayliss	131	76
Joseph Jaoudi	173	20
Total	587	326

1) Services provided by Adelise Services Ltd.

7. Compensation of Key Management Personnel (excluding Directors)

	Group 2009 £'000	Group 2008 £'000
Salaries	132	176
Social Security	3	3
Total	135	179

8. Staff Costs (including Directors)

	Group 2009 £'000	Group 2008 £'000
Staff Costs
Directors Fees	587	326
Salaries & Wages	304	520
Social Security Costs	55	32
Total Staff Costs	946	878
Capitalised to Intangible Assets	(419)	(512)
Total Staff Costs Expenses	527	366

The Group averaged 172 employees during the year ended 31 December 2009 (2008: 160).  The Company averaged 9 employees during the year ended 31 December 2009 (2008: 9).  The Group had an average of 20 employees involved in administration and an average of 152 employees involved in field and operational support activities for the year ended 31 December 2009 (2008: 9 and 151 respectively).

9. Loss Per Share

The basic loss per share is derived by dividing the loss for the period attributable to ordinary shareholders by the weighted average number of shares in issue.

As inclusion of the potential Ordinary shares would result in a decrease in the loss per share they are considered to be anti-dilutive, as such, a diluted earnings per share is not included.

	Group 2009 £'000	Group 2008 £'000
Loss for the period	(943)	(1,410)
Weighted average number of Ordinary shares of 1p in issue	32.0 million	30.7 million
Loss per share - basic	(2.9)p	(4.6)p

10. Financial Instruments

The Group's financial instruments, other than its investments, comprise cash and items arising directly from its operation such as trade receivables and trade payables, finance leases, and provisions.

The Group seeks to obtain a favourable interest rate on its cash balances through the use of bank treasury deposits.

At the period end the Group had a cash balance of £63,000, made up as follows:

	Group 2009 £'000	Group 2008 £'000
British pounds	33	17
US dollars	30	1

There is no material difference between the book value and fair value of the Group's cash.

As at 31 December 2009, the Group had three overseas subsidiaries which operated in Liberia and whose expenditure is primarily denominated in US dollars. Foreign exchange risk is inherent in the Group's activities and is accepted as such.

The majority of parent Company expenses are denominated in British pounds.

Management review the Group and Company's exposure to currency risk, interest rate risk, liquidity risk and credit risk on a regular basis and consider that through this review they manage the exposure of the Group and Company.

No formal policies have been put in place in order to hedge the Group and Company's activities to the exposure to currency risk or interest risk.

The Group and Company manage the interest rate risk associated with the Group cash assets by ensuring that interest rates are as favourable as possible, whether this is through investment in floating or fixed interest rate deposits, whilst managing the access the Group requires to the funds for working capital purposes.

11. Intangible Assets

	Group
	£'000
Net book value as at 1 January 2008	2,388
Acquired through business combination in February 2008	3,134
Currency translation	344
Development expenditure	797
Amortisation/Impairment	-
Net book value as at 31 December 2008	6,663
Currency translation adjustment	(270)
Development expenditure	839
Amortisation/Impairment	-
Net book value as at 31 December 2009	7,232

The Directors undertook an impairment review as at 31 December 2009 and as a result of this review no provision was required.  The land subject to the concession licence held by Liberia Forest Products Incorporated contains approximately 4,600 hectares of existing palm plantations which have not been maintained for a considerable period of time.  The directors have engaged agricultural experts to assess the possibility of regenerating the plantations and whilst the directors' are optimistic that the plantations can be regenerated, they consider it prudent to attribute nil value to the reexisting plantations until a detailed assessment of its economic potential value has been completed.

12. Business Combinations

2008

On 21 February 2008 EBF (Mauritius) Limited acquired 100% of the share capital of LIBINC Oil Palm Inc for cash consideration of USD200,000 (£137,931) and the issue of 84.2 million fully paid 'old' ordinary shares in the Company with an assessed fair value of 3p per share.  A further USD700,000 (£482,759) is payable to the vendors upon the Company completing its readmission to AIM.  LIBINC Oil Palm Inc was incorporated in Liberia on 4 October 2007 and at the date of acquisition was a non-trading entity of USD100 capital and the holder of a fifty year agreement with the Government of Liberia to rehabilitate and develop the Palm Bay Oil Palm plantation in Grand Bassa County, Liberia.  The fair value adjustment of this acquisition, as disclosed in note 11, amounted to £3,134,000.

 13. Investments

Subsidiaries of Equatorial Palm Oil plc

Company	Country of Registration	Holding 2009	Holding 2008	Nature of business
Direct Equatorial Biofuels (Guernsey) Limited	Guernsey	100%	100%	Holding Company
Indirect EBF (Mauritius) Limited	Mauritius	100%	100%	Holding Company
EBF Liberia	Liberia	100%	100%	Operating company in Liberia
Liberia Forest Products Incorporated	Liberia	100%	100%	Operating company in Liberia
Liberia Agricultural Development Corporation	Liberia	100%	100%	Non-operating company in Liberia
LIBINC Oil Palm Inc.	Liberia	100%	100%	Operating company in Liberia

14. Loans to Subsidiaries

	Company 2009 £'000	Company 2008 £'000
Equatorial Biofuels (Guernsey) Limited	30	14
EBF (Mauritius) Limited	5,944	5,651
Equatorial Biofuels Liberia Incorporated	1,304	741
Total	7,278	6,406

The loans to subsidiaries are interest free and have no fixed repayment date.  They are denominated in US Dollars and are repayable on demand.  Repayment of loans is subject to the Director's assessment of the Group's requirements and availability of appropriate liquid resources.

15. Property, Plant and Equipment

Plant and Equipment	Group £'000	Company £'000
Cost
Opening cost at 1 January 2008	144	90
Additions	5	5
Currency translation adjustment	15	-
Closing cost at 31 December 2008	164	95
Additions	9	-
Currency translation adjustment	(3)	-
Closing cost at 31 December 2009	170	95
Depreciation
Opening balance at 1 January 2008	(41)	(28)
Charge for the year to 31 December 2008	(48)	(23)
Closing balance at 31 December 2008	(89)	(51)
Charge for year to 31 December 2009	(23)	(22)
Closing balance at 31 December 2009	(112)	(73)
Net Book Value
At 1 January 2009	75	44
At 31 December 2009	58	22

16. Other Receivables

	Group 2009 £'000	Group 2008 £'000	Company 2009 £'000	Company 2008 £'000
Other receivables (i)	42	8	40	8
Prepayments (ii)	305	6	305	6
Amounts owed by subsidiary undertakings as per note 14 (iii)	-	-	7,278	6,406
	347	14	7,623	6,420

(i) Other receivables are non-interest bearing and generally repayable between 30 and 60 days.

(ii) The Mill deposit of £264,000 has been fully reinstated in the 2009 Group and Company Balance Sheets reversing the 2008 provision made against its future recoverability.

(iii)The loans to subsidiaries are interest free and have no fixed repayment date.  They are denominated in US Dollars and are repayable on demand.

17. Trade and Other Payables

	Group 2009 £'000	Group 2008 £'000	Company 2009 £'000	Company 2008 £'000
Accruals	688	568	688	568
Trade payables	596	399	596	399
Other payables	725	124	710	124
	2,009	1,091	1,994	1,091

The Accruals balance includes an amount of £440,000 payable in respect of the acquisition of LIBINC Oil Palm Inc and the Company completing its readmission on AIM (2008: £483,000).

18. Short term borrowings

The short term borrowings of the Group and Company comprise:

			2009 £'000	2008 £'000
£ Convertible loan notes			1,234	-
AUD 200,000 convertible loan note			112	96
Accrued interest and rolled charges theron			45	3
Loans from Adelise Services Ltd			-	652
Interest thereon			5	23
AUD 500,000 Promissory Notes			280	-
Accrued interest and rolled charges thereon			96	-
US $350,000 refundable deposit from Agriterra			230	-
Total			2,002	774

The sterling Convertible Loan Notes were issued in connection with the pre-IPO fundraising as follows:

		£'000
to certain investors		524
to Adelise Services Ltd as converted debt		700
to trade creditors as payables settlement		10
		1,234

These loan notes are unsecured and interest free and were convertible into new Ordinary Shares upon Admission at the Placing Price of 17.5p with attached warrants.

No equity component of these convertible loan notes has been included in reserves.

The AUD 200,000 convertible loan note was repayable on 30 June 2009 with a 20% coupon at repayment.

The loans due to Adelise Services Ltd, a Company controlled by Michael Frayne, comprising of principal of £652,000 incur interest charged at 2% above LIBOR.

The financing obtained from Adelise Services Ltd by way of unsecured 6 month promissory notes and converted to convertible loan note are as follows:

On 27 March 2009, the Company received AUD100,000 provided by way of an unsecured 6 month promissory note to Adelise Services Limited with a repayable of AUD125,000 due on 26 September 2009.  This is now due and payable and accrues at a rate of 35% per annum until repaid.

On 16 April 2009, the Company received AUD300,000 provided by way of an unsecured 6 month promissory note to Adelise Services Limited with a repayable of AUD375,000 due on 15 October 2009.  This is now due and payable and accrues at a rate of 35% per annum until repaid.

On 30 April 2009, the Company received AUD100,000 provided by way of an unsecured 6 month promissory note to Adelise Services Limited with a repayment of AUD125,000 due on 29 October 2009.  This is now due and payble and accrues at a rate of 35% per annum until repaid.

On 18 August 2009 Agriterra Limited announced it had signed a Memorandum of Understanding to acquire Equatorial Biofuels (Guernsey) Limited, a wholly owned subsidiary of the Company for USD2.5 million cash and USD12m in shares in Agriterra including a refundable deposit of USD350,000.  On 22 September 2009 it was announced by Agriterra the MOU had been terminated.  The USD350,000 deposit shall become repayable to Agriterra effectively no later than 120 business days after 18 August 2009 together with interest at a rate of 12% per annum accuring from that initial date.

19. Called Up Share Capital

Authorised			2009 £'000	2008 £'000
100,000,000 Ordinary shares of 1p each			1,000	1,000
Allotted, called up and fully paid			2009 £'000	2008 £'000
32,020,000 Ordinary shares of 1p each			320	320

Subsequent to the year end, as a result of the Admission to AIM on 26 February 2010, the called up share capital was increased by the allotment of 49,398,337 ordinary shares at a placing price of 17.5p per share. In addition, as announced on 27 May 2010, the Company placed 33,333,333 ordinary shares at a placing price of 15p per share to BioPalm Energy Ltd.  

Share Options

No unconditional options were issued during the current period.

As at 31 December 2009 the options in issue, which have been restated for the April 2008 1 for 10 share consolidation, were:

Exercise Price	Expiry Date		Options in Issue 31 December 2009
30p	14 February 2011		300,000

No options lapsed or were cancelled and no options were exercised during the period.

Subsequent to the year end, options to subscribe for 8,350,000 Ordinary Shares at the Placing Price within 5 years after the date of grant have been granted to the Directors, management and others by the Company conditional on Admission as follows:-

			Number of	Number of	Number of
			Options	Options	Options
		Number of	Exercisable	Exercisable	Exercisable
		Options	on	on	on
		Exercisable	Performance	Performance	Performance
		on Grant	Milestone 1¹	Milestone 2²	Milestone 3³	TOTAL
Directors
Peter Bayliss		500,000	500,000	500,000	500,000	2,000,000
Michael Frayne		312,500	312,500	312,500	312,500	1,250,000
Joe Jaoudi		312,500	312,500	312,500	312,500	1,250,000
Geoff Brown		250,000	250,000	250,000	250,000	1,000,000
Anthony Samaha		250,000	250,000	250,000	250,000	1,000,000
Employees		137,500	137,500	137,500	137,500	550,000

Others	325,000	325,000	325,000	325,000	1,300,000
					________
Total					8,350,000

¹ Performance Milestone 1 is Commission 5 tonne per hour mill at Palm Bay.

² Performance Milestone 2 is the production of 4,000 tonnes of CPO from mills owned by the Group.

³ Performance Milestone 3 is the planting of first 2,500 hectares of new palm oil plantation.

20. Analysis of changes in net funds

	Group 2009 £'000	Group 2008 £'000	Company 2009 £'000	Company 2008 £'000
Balance at beginning of period	18	1,142	18	1,137
Change during the period	45	(1,124)	15	(1,119)
Balance at the end of the period	63	18	33	18

21. Commitments

Operating lease commitments

Operating leases relate to office facilities.  The Company entered into a 5 year lease with a break clause after 3 years.

	Group 2009 £'000	Group 2008 £'000	Company 2009 £'000	Company 2008 £'000
Non-cancellable operating lease payments:
Not longer than one year	-	100	-	100
Longer than one year and not longer than five years	182	-	182	-
	182	100	182	100

Liberia commitments

Under the investment agreements entered into by LFPI and LIBINC, the Group is obliged to spend USD14.245m during the four years from 31 December 2007.  The majority of this expenditure is likely to be incurred in the later part of this four year period.

 Placement Commitments

Pursuant to a mandate letter (the "Mandate Letter") dated 8 December 2009 from Mombaur McCabe Limited  ("MML") to the Company, MML has agreed to provide placement agent services to the Company.  MML's services will be to (i) introduce the Company to a well-capitalised strategic investor with a long-term strategic interest in West African palm oil ("Strategic Investor") and (ii) participate in negotiations, to the extent requested, with a view to protecting and enhancing the interests of the Company.

Under the Mandate Letter, the Company has agreed to pay MML a fee equal to 3.5% of the gross proceeds invested by the Strategic Investor in the Placing plus a fee equal to 3.5% of the first US$20,000,000 and 1% of any amount above US$20,000,000 invested by the Strategic Investor subsequently.  In addition, the Company has agreed to reimburse MML for any reasonable out of pocket expenses.

The Company has agreed to indemnify any director, officer, employee, controlling person, representative or agent of MML and MML's subsidiaries, affiliates and associated companies from and against any losses, claims, damages, charges or liabilities relating to or arising out of MML's services under the Mandate Letter, except in certain limited circumstances.

The Mandate Letter is governed by English law and any disputes shall be decided by arbitration in London in accordance with the rules of the London Court of International Arbitration.

22. Related Party Transactions

There is no ultimate controlling party.

Included within short term borrowings and disclosed in note 18 are interest bearing loans due to Adelise Services Ltd ("Adelise"), a company controlled by Michael Frayne of £376,000 comprising principal of £280,000 and interest charged of £96,000 calculated at 2% above LIBOR, together with Convertible Loan Notes amounting to £700,000. 

Details of related party transactions in relation to services provided by Adelise, a company associated with Michael Frayne, are disclosed in note 6.

Irvine Energy Plc ("Irvine") made payments for serviced office facilities and administrative support to the Company, who shares common board members with Irvine. These payments are all on arms' length terms and amount to £18,000 for the financial period. There were no amounts outstanding to or from Irvine at the year-end or at the previous year-end in respect of these services.

Details of loans to subsidiaries are disclosed in note 14.

Included within other payables are unpaid directors' fees as follows:

	2009 £'000	2008 £'000
Michael Frayne	90	57
Ross Warner	22	16
Geoff Brown	220	-
Anthony Samaha	40	16
Peter Bayliss	131	-
Joseph Jaoudi	193	20
Total	696	109

Also included within other payables are amounts owing to a director and a former director as follows:

	2009 £'000	2008 £'000
Ross Warner	10	10
Anthony Samaha	4	3
Total	14	13

A wholly owned subsidiary of the Company, Equatorial Biofuels (Liberia) Inc. has been granted a residential lease by a key Company employee, David Parker, in the City of Monrovia.  The monthly rent under the lease is US$5,750.

On 3 November 2006, Sanita Investments Limited (the "Landlord") granted to the Company a lease in respect of Floors 1 to 4, 94 Jermyn Street, London SW1 6JE (the "Lease").  The principal terms of the Lease provided that the term of the Lease was 5 years from the date of the Lease (the "Term"), the yearly rent payable by the Company to the Landlord for the first 3 years of the Term was £99,150, the yearly rent payable by the Company for the next 2 years of the Term was the higher of £99,150 and the market rent for the premises based on a rent review carried out by the Landlord 3 years after the date of the Lease and the Lease may be terminated on the third anniversary of the date of the Lease by the Company giving not less than 6 months' termination notice to the Landlord provided that there is no material breach by the Company of any terms or covenants of the Lease and the Company gives full vacant possession of the premises in accordance with the covenants contained in the Lease.

23. Post Balance Date Events

Convertible Loan Notes

The Company has issued various Convertible Loan Notes during November 2009 to February 2010 to certain investors in connection with the pre-IPO fundraising undertaken by the Company in November 2009.  The aggregate nominal amount of convertible loan notes issued is £2,096,560 of which £1,391,000 was issued at 31 December 2009.  All these loan notes are convertible into new Ordinary Shares upon Admission at the Placing Price with attached Warrants on conversion. 

Warrant Agreements

Pursuant to warrant instruments dated 22 February 2010 and executed by the Company, the Company created warrants which give the right, conditional upon Admission, to subscribe for Ordinary Shares at the Placing Price.  Pursuant to a board resolution passed on 22 February 2010, the Board resolved to issue:

(a) to Mirabaud and Shore Capital, conditional upon Admission, Warrants to subscribe for 1,843,400 Ordinary Shares to be exercised at any time between the date of issue and the date falling on the fifth anniversary of Admission;

(b) to broker for Investor Subscription Letter, conditional on Admission, Warrants to subscribe for 15,000 Ordinary Shares to be exercised between the date of issue and the date falling on the fifth anniversary of Admission;

(c) Warrant to subscribe for 11,980,337 Ordinary Shares to holders of Convertible Loan Notes on the basis of one Warrant for every Ordinary Share arising on Convertible Loan Notes, half of which will be exercisable between the date of conversion (i.e. the date of Admission), and the date falling on the third anniversary of Admission and half of which will be exercisable between the date of conversion (i.e. the date of Admission) and the date falling on the second anniversary of Admission;

(d) Warrants to subscribe for 18,627,500 Ordinary Shares to Placees and to the Investor Subscription Letter on the basis of one Warrant for every two Placing Shares (or Subscription Shares subscribed for in the case of the Investor under the Investor Subscription Letter) exercisable on or before the date falling on the second anniversary of Admission; and

(e) Warrants to subscribe for 81,500 Ordinary Shares under or in connection with the Facility Letters to be exercised at any time between the date of issue and the date falling on the second anniversary of Admission.

Options

Conditional upon Admission to AIM it has been agreed to grant options to subscribe for 8,350,000 Ordinary Shares at the placing price within five years after the date of grant to the Directors, Management and others, with a proportion of certain of these options subject to performance milestones (see Note 19).

Investor Subscription

Pursuant to an investor subscription letter dated 10 February 2010 from the Company to Andrew Milne (the ''Investor'') and a letter of confirmation dated 10 February 2010 from the Investor to the Company (together, the ''Investor Subscription Letter''), the Company has agreed to issue, and the Investor has irrevocably agreed to subscribe for, 6,857,143 Ordinary Shares at a price of 17.5 pence per Ordinary Share (the ''Subscription''). In addition, the Company has agreed to issue the Investor with 1 Warrant for every two ordinary Shares subscribed for pursuant to the Investor Subscription Letter.

The Company and the Investor have agreed that the Subscription shall be structured as follows:

(a) on or prior to the date immediately preceding Admission, the Investor shall subscribe for, and make settlement in respect of the first tranche of the Subscription being, 300,000 Ordinary Shares (and the Investor will be issued with 150,000 Warrants); and

(b) on or prior to the date which is 12 months following the date of Admission, the Investor shall subscribe for, and make settlement in respect of, the second tranche of the Subscription being a further 6,557,143 Ordinary Shares (''Second Tranche Shares'') (and the Investor shall be issued with 3,278,571 Warrants) of which the Investor must subscribe for, and make settlement in respect of, at least 1,500,000 Ordinary Shares (in respect of which the Investor will be issued with 750,000 Warrants) on or prior to the date which is 6 months from the date of Admission.

Subscription for Second Tranche Shares shall be by way of notice from the Investor to the Company specifying the number of Second Tranche Shares the Investor wishes to subscribe for (''Subscription Notice''). Each Subscription Notice must be for a minimum of 300,000 Second Tranche Shares (or, if less, the balance of the Second Tranche Shares the Investor is required to subscribe for under the Investor Subscription Letter).

The Subscription is conditional on Admission becoming effective on or before 26 February 2010 (or such later date as may be notified by the Company to the Investor not being later than 31 March 2010). The allotment and issue of the Second Tranche Shares will also be conditional on admission of such Second Tranche Shares to trading on AIM by no later than the date which is 10 days from the date of the relevant Subscription Notice.

The Company shall pay to the Investor's broker commission of 5 per cent. of the aggregate value of gross monies raised under the Investor Subscription Letter at the Placing Price and, pursuant to a warrant instrument, grant Warrants to subscribe for such number of Ordinary Shares equivalent to 5 per cent. of the aggregate of the number of Subscription Shares to be issued under the Investor Subscription Letter.

The Investor Subscription Letter contains a number of warranties and representations given by the Investor to the Company in connection with the Subscription, including, without limitation, that the Investor can subscribe for Ordinary Shares in accordance with all applicable laws.

The Investor Subscription Letter is governed by English law and the Company and the Investor have agreed to submit to the non-exclusive jurisdiction of the English courts in respect of any disputes that may arise out of it.

Credit Facilities

The three credit facility letters dated 22 February 2010 between the Company and respectively Michael Frayne, Anthony Samaha and Mirabaud Investment Management Limited, and referred to in the Company's Placing and Admission to AIM document dated 23 February 2010, were terminated on 3 June 2010 following the completion of the £5m placement to BioPalm announced in May 2010, in accordance with the terms of the three credit facility letters.

Placement to BioPalm Energy Ltd

On 27 May 2010 the Company announced       a subscription agreement with BioPalm Energy Ltd, a subsidiary of Indian conglomerate The Siva Group, to raise £5 million, before expenses, by way of a placing of 33,333,333 ordinary shares at 15p.

24. Profit and Loss Account of the Parent Company

As permitted by section 408 of the Companies Act 2006, the profit and loss account of the parent company has not been separately presented in these accounts.  The parent company loss for the year was £935,572 (2008: £1,367,036).

25. Notice of Annual General Meeting

The Company's Annual General Meeting will be held at the offices of Sprecher Grier Halberstam LLP, 5th Floor, One America Square, Crosswall, London EC3N 2SG on Wednesday 30th June 2010 at 11 am.

 

END

 

 

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