Interim Results

RNS Number : 3942P

Equatorial Palm Oil plc

18 August 2014

 



18 August 2014

EQUATORIAL PALM OIL PLC

("EPO" or the "Company")

Interim Results for the six months ended 30 June 2014

Equatorial Palm Oil plc, (AIM: PAL), the AIM listed palm oil production company with operations in Liberia, West Africa, announces its unaudited interim results for the six months ended 30 June 2014 (the "Period").

Highlights for the Period:

·      Full activities resumed at both Palm Bay and Butaw estates following the provision of funding from KL-Kepong International Ltd., a wholly owned subsidiary of Kuala Lumpur Kepong Berhad ("KLK"), to Liberian Palm Developments ("LPD")

·      KLK is the largest shareholder in EPO and the 50:50 joint venture partner with EPO in the operating company LPD

·      EPO Board strengthened by the appointment of KLK personnel

·      Joint venture agreement signed with KLK Agro Plantations Pte Ltd ("KLK Agro"), a wholly owned subsidiary of KLK for the operation and funding of LPD

·      Additional funding of up to US$35.5m available to LPD, through the issue of equity and funding commitments from KLK Agro, of which US$15m has been provided to date

·      Change of accounting reference date from 31 December to 30 September

Michael Frayne, Non-executive Chairman of Equatorial Palm Oil plc commented:

"The first half of 2014 has been very much part of rebuilding the Company as we welcome KLK as our largest shareholder and joint venture partner in LPD. Our Liberian oil palm development is once again fully operational and the securing of up to $35.5m in funding was a significant milestone for the business.

We welcome to the Board our KLK colleagues led by Lee Oi Hian, the Chief Executive Officer of KLK. The expertise not only at Board level but also at operational level in Liberia has been significantly enhanced with KLK's involvement.

Our goal of becoming a sustainable and efficient producer of oil palm products is on track and we are encouraged by the continual support of the communities in which we operate who want to re-invigorate the Liberian agricultural industry through the development of oil palm."

For further information, please contact: Equatorial Palm Oil plc Geoffrey Brown (Executive Director) www.epoil.co.uk	[phone]
Strand Hanson Limited (Nominated Adviser) James Harris / Andrew Emmott	[phone]
Mirabaud Securities LLP (Broker) Peter Krens	[phone]

CHAIRMAN'S STATEMENT

Joint Venture Agreement

During the period under review, the Company signed a joint venture agreement ("JVA") with KLK Agro for the funding and operation of LPD.

Funding

Under the terms of the JVA, LPD will receive up to US$35.5m in cash and funding commitments, of which US15m was received in April 2014 as a result of the issue of new equity in LPD to KLK Agro and EPO (through its wholly owned subsidiary Equatorial Biofuels (Guernsey) Limited ("EBGL")), which have each subscribed for US$7.5m of such new equity in LPD (the "Initial Funding").

In addition to the Initial Funding, KLK Agro has agreed to provide any further funding required by LPD up to a maximum of US$20.5m (the "KLK Funding Commitment") which may, at the discretion of KLK Agro, be provided by way of debt or preferential equity finance which will incur interest or preferential dividends (as appropriate) at USD LIBOR plus a maximum of 500 basis points. LPD also has the option to obtain financing from parties other than KLK irrespective of whether or not the KLK Funding Commitment has been fully invested in LPD and provided that the terms of such external financing are better than that of KLK's Funding Commitment.

The Initial Funding and the KLK Funding Commitment were also achieved with no further dilution for EPO shareholders.

Under the terms of the JVA, it has been agreed that certain matters can only be approved with the unanimous consent of the shareholders of LPD or the directors of LPD (as appropriate). The JVA also sets out standard warranties and indemnities which EPO and EBGL have been required to give to KLK Agro in relation to LPD's business and assets.

On 23 April 2014, the Company announced that it had issued 1,950,000 new ordinary shares of 1p each in the Company pursuant to the exercise of warrants at a price of 8 pence per Ordinary Share, raising £156,000 (US$262,275).

Operations of LPD                                                                                                                       

LPD has entered into an agreement with Taiko Plantations Sdn. Bhd. ("Taiko"), a wholly owned subsidiary of KLK (the "Management Agreement"), under the terms of which Taiko has been appointed to manage and conduct LPD's operations. The Management Agreement can be terminated by either party giving three months' written notice to the other party.

Under the terms of the Management Agreement, Taiko shall be paid a management fee by LPD as follows:

i.              US$1m per annum for the first four years from the date of signing of the Management Agreement; and

ii.            thereafter, a fee equivalent to 2.0 per cent. of the gross sale proceeds of palm products achieved by LPD.

EPO Board Changes

During the Period the following appointments were made to the EPO Board:

Mr Lee Oi Hian, aged 63

Mr Lee Oi Hian has been the Chief Executive Officer of KLK since 2001. He joined the Company in 1974 as an executive and was appointed to the Board of KLK in 1985. In 1988, he was appointed as Managing Director and became Chairman of KLK Group in 1993. He subsequently held the post of joint Chairman and Chief Executive Officer until 2008, when he relinquished his role as Chairman, remaining as Chief Executive Officer of the Group.

Mr Teh Sar Moh Nee, aged 58

Mr Teh Sar Moh Nee started his planting career in 1976 in Sime Darby Plantation Berhad before joining the KLK Group in 1984. He serves as Regional Director (Peninsular Malaysia) of the KLK Group and has also held the position of Chief Executive Officer at Ladang Perbadanan-Fima Berhad since May 2008.

Ms Yap Miow Kien, aged 45

Ms Yap Miow Kien joined KLK in 2002 and is currently its Company Secretary and Senior General Manager (Legal and Secretarial).

In addition, Mr Joseph Jaoudi and Mr Anthony Samaha resigned from the Board during the Period. Mr Michael Frayne became the Non-executive Chairman with Mr Geoffrey Brown continuing as Executive Director.

Port Access

LPD is in final negotiations with the National Port Authority of Liberia ("NPA") regarding a lease for land at the Port of Buchanan which is 24 kilometres from the Palm Bay estate. This port land has been identified as suitable to build a tank farm and storage facility for oil palm products. Once the tank farm facility has been built, LPD will use road tankers to transport its products from Palm Bay estate to the Port of Buchanan. The products will be stored in tanks of suitable size from where they will then be transferred onto parcel tankers that can berth at the port.

LPD has also entered into discussions with the NPA in respect to securing land in the Port of Greenville, which is close to Butaw estate, for the establishment of a tank farm and storage facility.

River Cess

In 2010, a Memorandum of Understanding ("MOU") was signed with the elected representatives of the people of River Cess County in order to work with them to develop a significant palm oil concession. With an expansion potential of up to 80,000 hectares and an optimum location between our two existing estates, River Cess remains a key development for the Company. Discussions are ongoing with local officials in order to convert the MOU into a full concession with the Liberian Government.

The Community and Sustainability

Sustainability is a long term objective for EPO. Having become a member of the Roundtable on Sustainable Palm Oil ("RSPO") in 2007, EPO has consistently adopted best practices and procedures to ensure that the CPO produced from our new plantings will meet with international sustainability standards, thereby enabling our CPO to be labelled "sustainable" palm oil.

The communities in which we operate are truly supportive of developing agriculture as a sustainable livelihood for all their people.  We only operate within the vicinity of consenting communities (free, prior and informed consent).

In addition, social responsibility remains a key commitment for us, and we continue to invest in the social and economic development of the local communities in and outside of our estates.  The skills of the local workforce are imperative to the efficiency of our oil palm development and we have recruited a number of experts from Indonesia and Malaysia who are working on the estates and bring with them their considerable knowledge and expertise of palm oil operations. Currently, we have over 1,200 workers with approximately 50% being women.

LPD continues to provide schools, health clinics, housing, roads, infrastructure and drinking water for citizens and communities who live both on and outside the Palm Bay and Butaw estates.

Ebola Update

At present there are no known occurrences of the Ebola virus on or near our estates. We have introduced a number of preventative measures at all of our sites, including hand washing and sanitation at multiple points, screening/barrier points in our health clinics, ongoing education and briefings to staff/workers and our local communities about hygiene and the precautionary measures that should be taken to minimise the possibility of becoming infected with the virus. LPD is also donating necessary medical equipment and supplies to the local authority medical clinics.We are closely monitoring the situation on and around our estates and working in conjunction with the Liberian government and other relevant local and international authorities to support all efforts to deal with this crisis.

Outlook

EPO now sits in a significantly stronger position as opposed to the same time last year. The signing of the JVA and securing the $35.5m of cash and funding commitments was the key for resumption of normal operations at the Liberian estates.

The growth in the palm oil market continues to be underpinned by compelling demographic and macro-economic trends. We remain confident that palm oil prices will improve as a result of limited supply and continuing strong demand.

Liberia remains politically stable under democratic rule and we are proud to be playing a part in the continuing programme of redevelopment in the Liberian agriculture industry and look forward to a successful 2014, delivering on our strategic objectives and creating shareholder value.

Michael Frayne

Chairman

18 August 2014

EQUATORIAL PALM OIL PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2014

	Note	Period ended 30 June 2014 (unaudited)	Period ended 30 June 2013 (unaudited)	Year ended 31 December 2013 (audited)
		$'000	$'000	$'000
Revenue		-	35	36
Administrative expenses		(628)	(898)	(3,282)
Share options expense	5	-	(97)	(98)
Operating loss		(628)	(959)	(3,344)
Interest income		206	108	366
Write down of loan to joint venture		-	-	(3,828)
Share of operating loss of associate (2013 - joint venture)	3	(323)	(805)	(1,395)
Loss for the period before and after taxation attributable to owners of the parent		(745)	(1,656)	(8,201)
Other comprehensive income
Exchange gains/(losses) arising on translation of foreign operations		316	(46)	541
Total comprehensive income for the period attributable to owners of the parent		(429)	(1,702)	(7,660)
Loss per share expressed in cents per share
- Basic & diluted	2	(0.2) cents	(1.1) cents	(4.4) cents

EQUATORIAL PALM OIL PLC

GROUP STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2014

	Note	30 June 2014 (unaudited)	31 December 2013 (audited)
		$'000	$'000
ASSETS
Non-current assets
Investment in associate (2013 - joint venture)	3	25,015	17,708
Receivables from associate (2013 - joint venture)		5,356	5,150
		30,371	22,858
Current assets
Trade and other receivables		58	128
Cash & cash equivalents		2,658	10,364
		2,716	10,492
LIABILITIES
Current liabilities
Trade and other payables		298	394
		298	394
Net current assets		2,418	10,098
NET ASSETS		32,789	32,956
SHAREHOLDERS' EQUITY
Share capital	4	5,598	5,565
Share premium		46,791	46,562
Warrant and option reserve	5	729	1,810
Foreign exchange reserve		937	621
Retained loss		(21,266)	(21,602)
Total equity		32,789	32,956

EQUATORIAL PALM OIL PLC

GROUP CASH FLOW STATEMENT

FOR THE PERIOD ENDED 30 JUNE 2014

	Period ended 30 June 2014 (unaudited)	Period ended 30 June 2013 (unaudited)	Year ended 31 December 2013 (audited)
	$'000	$'000	$'000
Cash flows from operating activities
Loss for the year before and after taxation Decrease/(increase) in receivables Increase/(decrease) in payables Write down of loan to joint venture Share options expensed Interest income Operating expenses settled in shares Share of operating loss of joint venture	(745) 70 (96) - - (206) - 323	(1,656) 546 185 - 97 - - 805	(8,201) (31) 211 3,828 98 (366) 375 1,395
Net cash outflow from operating activities	(654)	(23)	(2,691)
Cash flows from investing activities
Funds invested in and loaned to associate/joint venture	(7,630)	(5,656)	(9,045)
Proceeds from assignment of loan	-	-	2,000
Net cash outflow from investing activities	(7,630)	(5,656)	(7,045)
Cash flows from financing activities
Issue of ordinary share capital	262	4,976	19,701
Share issue costs Loan funds received	- -	(129) 335	(693) -
Net cash inflow from financing activities	262	5,182	19,008
Net (decrease)/increase in cash and cash equivalents	(8,022)	(497)	9,272
Cash and cash equivalents at beginning of period	10,364	551	551
Exchange gains/(losses) on cash and cash equivalents	316	(45)	541
Cash and cash equivalents at end of period	2,658	9	10,364

EQUATORIAL PALM OIL PLC

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2014

	Called up share capital	Share premium reserve	Foreign exchange reserve	Warrant and option reserve	Retained earnings	Total equity
	$'000	$'000	$'000	$'000	$'000	$'000
As at 1 January 2013	1,969	30,402	80	1,466	(13,881)	20,036
Share capital issued	476	4,500	-	-	-	4,976
Cost of share issue including warrants issued	-	(404)	-	275	-	(129)
Expiry of warrants	-	-	-	(480)	480	-
Share based payments	-	-	-	97	-	97
Total comprehensive income for the period	-	-	(46)	-	(1,656)	(1,702)
As at 30 June 2013	2,445	34,498	34	1,358	(15,057)	23,278
As at 1 January 2013	1,969	30,402	80	1,466	(13,881)	20,036
Share capital issued	3,596	17,579	-	-	-	21,175
Cost of share issue including warrants issued	-	(1,419)	-	726	664	(693)
Expiry of warrants	-	-	-	(480)	480	-
Share based payments	-	-	-	98	-	98
Total comprehensive income for the period	-	-	541	-	(8,201)	(7,660)
As at 31 December 2013	5,565	46,562	621	1,810	(21,602)	32,956
Share capital issued	33	229	-	-	-	262
Exercise and expiry of warrants and options	-	-	-	(1,081)	1,081	-
Total comprehensive income for the period	-	-	316	-	(745)	(429)
As at 30 June 2014	5,598	46,791	937	729	(21,266)	32,789

EQUATORIAL PALM OIL PLC

NOTES TO THE INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2014

1.     Basis of preparation

These consolidated financial statements have been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2013 Annual Report. The financial information for the half year ended 30 June 2014 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited.

The annual financial statements of Equatorial Palm Oil plc are prepared in accordance with IFRSs as adopted by the European Union. The comparative financial information for the year ended 31 December 2013 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2013 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statement for 2013 was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The same accounting policies, presentation and methods of computation are followed in these condensed consolidated financial statements as were applied in the Group's latest annual audited financial statements.

In addition, the IASB has issued a number of IFRS and IFRIC amendments or interpretations since the last annual report was published. It is not expected that any of these will have a material impact on the Group.

2.     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.

	Period ended 30 June 2014 (unaudited)	Period ended 30 June 2013 (unaudited)	Year ended 31 December 2013 (audited)
	$'000	$'000	$'000
Loss for the period	(745)	(1,656)	(8,201)
Weighted average number of Ordinary shares of 1p in issue	355.0 million	145.7 million	184.8 million
Loss per share - basic	(0.2) cents	(1.1) cents	(4.4) cents

3.     Investment in associate (2013 - joint venture)

The Company, through its investment in Equatorial Biofuels (Guernsey) Limited, owns a 50% interest in Liberian Palm Developments Limited ("LPD").

During the period, a new Joint Venture Agreement ("JVA") was signed pursuant to which cash and funding commitments of up to $35.5m is being made available to be provided to LPD. Under the JVA, the Company retained a 50% economic and voting interest in LPD. Also under the JVA, KLK has the power to appoint the Chairman to the Board of LPD and in the case of a tied vote the Chairman has the casting vote. For this reason, the Company accounts for its investment in LPD as an equity investment in which it has significant influence. There is no change to the recognition and measurement of the Company's investment in LPD when compared to the prior periods. However, the investment is now described within the statement of comprehensive income and the statement of financial position as "Investment in associate" rather than "Investment in joint venture".

The Company's interest in LPD is as follows:

	$'000
Interest in joint venture at 1 January 2013	19,103
Share of losses of joint venture	(805)
Interest in joint venture at 30 June 2013	18,298
Interest in joint venture at 1 January 2013	19,103
Share of losses of joint venture	(1,395)
Interest in joint venture at 31 December 2013	17,708
Interest in joint venture at 1 January 2014	17,708
Investment in associate	7,630
Share of losses of associate	(323)
Interest in associate at 30 June 2014	25,015

The results of Liberian Palm Developments Limited for the period of six months to 30 June 2014 were as follows:

	30 June 2014	30 June 2013	31 December 2013
	$'000	$'000	$'000
Non-current assets	49,100	37,322	40,155
Current assets	17,343	7,807	10,574
Current liabilities	(16,413)	(8.740)	(15,313)
TOTAL NET ASSETS	50,030	36,389	35,416
Income	30	132	160
Expenses	(675)	(1,741)	(2,949)
Loss after tax	(645)	(1,609)	(2,789)

4.     Called up share capital

Allotted, called up and fully paid	Period ended 30 June 2014 $'000	Period ended 30 June 2013 $'000	Period ended 31 December 2013 $'000
356,277,502 (31 December 2013 - 354,327,502) Ordinary shares of 1p each	5,598	2,445	5,565

During the period the Group issued 1,950,000 shares at an average price of 8 pence per share ($0.13 cents).

5.     Share based payments

Warrants

Details of the warrants outstanding during the Period are as follows:

		Number of warrants		Weighted average exercise price
	Outstanding at 1 January 2013	8,188,928		17.5p
	Issued during the period	28,716,590		8.3p
	Expired during the period	(5,990,171)		17.5p
	Outstanding and exercisable at 1 January 2014	30,915,347		9.0p
	Exercised during the period	(1,950,000)		8.0p
	Expired during the period	(10,000,000)		8.0p
	Outstanding and exercisable at 30 June 2014	18,965,347		9.6p

As at 30 June 2014 the following warrants to subscribe for Ordinary shares were outstanding:

Category	Over Number of Shares	Expiry Date
Apr-15 Warrants, exercisable at 8.0p	11,950,000	6 April 2015
Jul-16 Warrants, exercisable at 10.0p	4,816,590	16 July 2016
5yr Warrants, exercisable at 17.5p	2,198,757	26 February 2015
Total	18,965,347

Share options

Details of the options outstanding during the Period are as follows:

	Outstanding at 1 January 2014	Expired during the period	Outstanding at 30 June 2014	Exercisable at 30 June 2014
Options exercisable at 17.5p	9,770,200	(9,770,200)	-	-

6.     Availability of financial information

Copies of this interim financial information will be available on the Company's website.

 

END

 

 

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