Final Results
Impax Group PLC
31 March 2003
31 March 2003
IMPAX GROUP PLC
PRELIMINARY STATEMENT OF RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2002
CHAIRMAN'S STATEMENT AND OPERATIONAL REVIEW
Against the backdrop of exceptionally difficult market conditions we have taken
important steps towards implementing the strategy, previously approved by
shareholders, of disposing of our oil assets and building a specialised
financial services business operating in the environmental infrastructure and
technology ('EIT') sector.
The underlying drivers for the EIT sector have strengthened during the year. In
April 2002, the Renewables Obligation was introduced, setting targets for
renewable energy usage in 2010 and providing a financial incentive framework to
achieve it. In February 2003, the Energy White Paper reaffirmed these targets
for renewable energy production in the UK and introduced new goals for 2020. In
the waste sector, the Chancellor of the Exchequer made commitments in November
2002 to increase the UK Landfill Tax by more than 150% over the next ten years,
thus strengthening the economic incentives to recycle waste.
Results for the Year
Our results for the year show an operating loss of £1,083,000 before the
exceptional costs associated with the impairment to the value of our Starks Oil
Field. The loss is arrived at after charging goodwill amortisation of £283,000,
the net loss on our oilfield activities of £32,000 and one-off restructuring
costs, following the acquisition in 2001 of the finance business, totalling
£179,000.
The Impax finance business acquired last year was expected to be loss-making
until sufficient funds under management provided the necessary foundation of
recurring income. As reported elsewhere in this statement, we have made
important strides forward with the launch of Impax Environmental Markets plc and
the winning of the tender to manage The Recycling Fund. However, falling stock
markets and conditions that are not conducive to launching new funds have made
our journey towards future profitability both longer and harder. The corporate
finance results for the year were also reduced by delays in the closing of
corporate finance transactions where we had anticipated significant income in
the year.
It is little comfort to know that other companies in the asset management and
corporate finance arena are experiencing similar difficulties. However, we
believe that the EIT sector will continue to strengthen over the coming years
and we are confident that the Company is well positioned to secure future
growth.
Recent developments
We were pleased to announce on 25 March 2003 that Impax Asset Management Ltd ('
IAM') has been selected to manage The Recycling Fund, a £5m venture capital
facility sponsored by the Waste and Resources Action Programme ('WRAP'), the
autonomous, government-funded agency, to promote recycling in the UK. The
selection of IAM to manage this fund, which is still subject to contract, is an
important success for the business. It will utilise and expand our network of
contacts in the industry and it reinforces Impax as the leading specialist
service provider in this field.
After a long period of negotiation, we have also been pleased to announce,
earlier today, that we have entered into an agreement for the sale of our
interest in the Starks Oil Field in Louisiana to Temsik Investments Ltd. The net
proceeds of sale, after costs and including the repayment of inter-company
balances, are estimated to amount to US$1,334,000 (£851,000) of which a
non-refundable deposit of US$ 100,000 (£64,000) was received today.
The buyer has until 30 May 2003 to complete the transaction, which is subject
only to additional confirmation of the title to the field. The Directors expect
the transaction to complete within the required period with a further payment of
$900,000 (£574,000) at that time. The balance of the sales proceeds is due by 30
June 2003.
In addition, we will receive a gas production note for a total amount of US$
300,000, payable at the rate of 10% of future gas sales net of related taxes,
with payments commencing six months after completion.
This important step marks the Group's exit from operational oil field
activities. The net proceeds of the sale will be used to repay indebtedness. The
Group retains the non-operational Nukern oil field in California and is
exploring its disposal.
Corporate Finance
Impax Capital Corporation Ltd ('ICC') focuses on the provision of corporate
finance advisory services to companies seeking merger, acquisition and project
development opportunities in the growing sectors of renewable energy, waste
management, recycling and water.
As anticipated in my Interim Statement, I am pleased to report an acceleration
of corporate interest in the renewable energy sector in the UK and Continental
Europe in response to European Directives and new legislation which became
effective in the UK during 2002. ICC continues to make good progress developing
relationships with a wide spectrum of contacts entering or already active in our
markets. In the last year, these relationships have resulted in a number of
advisory and consultancy mandates from major participants, upon which future
transaction related work and associated success fees are dependent.
The revenue outturn for 2002 reflects the fact that a number of success fees
anticipated from projects expected to achieve financial close during the year
failed to materialise due to planning permission issues, project delays or other
matters outside our control. As a consequence, no significant success fees were
recorded during the period. We continue to seek shorter cycle merger and
acquisition mandates to supplement longer lead time project related assignments
and are confident of an increasing flow of opportunities as consolidation
accelerates across the EIT sector.
Asset Management
During the year, IAM extended its activities within the EIT sector and now
manages or advises funds totalling over £50m. The major highlight of the year
was the launch on 22 February 2002 of Impax Environmental Markets plc ('IEM'),
an investment trust investing predominantly in quoted companies, for which IAM
is the investment manager. IEM has over 40 UK-based institutional shareholders.
IEM builds on IAM's experience, supporting the launch of and providing
investment advice to two similar funds: the Alm. Brand Invest 6 Environmental
Technology Fund, which is quoted on the Copenhagen Stock Exchange, and the ASN
Milieufonds Fund, which is quoted on the Amsterdam Stock Exchange. IAM's
relationship with these funds continued during the year.
IEM performed relatively well against its investment peer groups but the
weakness of global equity markets in general and environmental markets in
particular has reduced the net asset value of the fund from 98.25p at launch to
a recent range of 44p to 50p. This market weakness has similarly affected our
two European advisory funds. In each case our fee income is directly related to
the value of funds under management.
IAM has also continued to build its experience in private equity. The US$25
million facility which we manage for the International Finance Corporation is
now over 85% committed to unquoted companies in India, Kenya and Morocco
operating in the solar electricity industry and has been widely acknowledged as
pioneering the flow of capital into the significant market for off-grid power in
developing countries. The winning of the tender to be designated manager of The
Recycling Fund is another significant step forward for IAM.
Oil Interests
The disposal of the Starks Oil Field is to be achieved through the sale of Impax
US Holdings Inc following a restructuring of our US activities.
The results from the Starks Field for the twelve months are shown in the
Consolidated Profit and Loss Account as part of the Operating Loss for the
period. An impairment provision against the carrying value of the field,
reflecting the actual value anticipated to be recovered upon conclusion of
disposal, is shown separately as an exceptional item.
We retain the Nukern Oil Field in California and our focus now is on the
disposal of this asset. Nukern has not operated for some years but we continue
to maintain the field so as to satisfy regulatory and environmental
requirements. The disposal of Nukern will complete our exit from the oil
business, a necessary step planned to allow the repayment of our loan facilities
and to provide further cash to support the development of our specialist
financial services business.
Board Changes
Both Colin Weaver and Anthony Carroll retired from the Board during the year, in
Anthony's case following a period of ill health. We wish them both well and
thank them for their contributions to the Group over many years.
I would like to take this opportunity to thank our small team of professional
staff for their commitment and contribution to the Group throughout the year.
Outlook
Since the year-end, stock markets have fallen further with the consequent impact
on our fund management income. However, the management contract for The
Recycling Fund should bring a new source of recurring income and I am also
pleased to report an improvement in our corporate finance income arising from a
noticeably increased level of activity of the major participants in the
renewable energy markets.
Stuart Bickerstaff
Chairman
31 March 2003
IMPAX GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 30 September 2002
2002 2001
Note £ £
TURNOVER
Continuing operations 1,416,080 882,703
Acquisitions - 585,034
2 1,416,080 1,467,737
OPERATING EXPENSES
Continuing operations (2,499,011) (1,007,274)
Acquisitions - (855,248)
Impairment in value of assets (2,631,434) -
(5,130,445) (1,862,522)
OPERATING LOSS
Continuing operations (1,082,931) (124,571)
Acquisitions - (270,214)
Impairment in value of assets 3 (2,631,434) -
2 (3,714,365) 394,785
Impairment in value of investments (215,330) -
Interest receivable and similar income 11,427 49,196
Interest payable (7,140) (20,114)
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (3,925,408) (365,703)
Tax on loss on ordinary activities 4 - (741)
LOSS FOR THE YEAR (3,925,408) (366,444)
LOSS PER SHARE 7
Basic (11.06)p (1.46)p
Fully diluted (10.29)p (1.44)p
Adjusted (2.24)p (1.18)p
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Year ended 30 September 2002
2002 2001
£ £
Loss for financial year (3,925,408) (366,444)
Currency translation differences (420,830) 12,576
Total recognised gains and losses for the year (4,346,238) (353,868)
IMPAX GROUP PLC
CONSOLIDATED BALANCE SHEET
As at 30 September 2002
2002 2001
£ £
FIXED ASSETS
Intangible fixed assets 2,476,909 2,762,955
Tangible fixed assets 5,085,736 8,256,130
Investments - 215,330
7,562,645 11,234,415
CURRENT ASSETS
Debtors 329,626 360,105
Cash at bank and in hand 380,311 1,038,008
709,937 1,398,113
CREDITORS - amounts falling due (1,152,267) (478,263)
within one year
NET CURRENT (LIABILITIES)/ASSETS (442,330) 919,850
TOTAL ASSETS LESS CURRENT LIABILITIES 7,120,315 12,154,265
CREDITORS - amounts falling due after more than one year - (677,874)
7,120,315 11,476,391
CAPITAL AND RESERVES
Called up share capital 8,871,441 8,871,441
Share premium 687,472 697,310
Merger reserve 2,197,944 2,197,944
Exchange equalisation reserve (182,653) 238,177
Profit and loss account (4,453,889) (528,481)
EQUITY SHAREHOLDERS' FUNDS 7,120,315 11,476,391
IMPAX GROUP PLC
CONSOLIDATED CASHFLOW STATEMENT
Year ended 30 September 2002
Note 2002 2001
£ £
NET CASH (OUTFLOW)/INFLOW FROM 8 (820,027) (503,723)
OPERATING ACTIVITIES
Returns on investments and servicing of finance 9 4,287 29,082
Tax paid - -
Capital expenditure and financial investment 9 (298,735) (1,285,572)
Management of liquid resources 9 (144,128) -
Acquisition 9 - 175,385
NET CASH OUTFLOW BEFORE FINANCING (1,258,603) (1,584,828)
Financing 9 573,257 2,381,931
(DECREASE)/INCREASE IN CASH 10 (685,346) 797,103
RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN NET DEBT
(Decrease)/Increase in cash in year (685,346) 797,103
Cash outflow/(inflow) from increase in net debt (429,129) 2,016,860
Changes in net debt resulting from cashflows (1,114,475) 2,813,963
Non cash transactions 640,570 -
Loan settled on acquisition of subsidiary - (500,000)
Translation differences (79,175) (3,337)
Movement in net debt in the year (553,080) 2,310,626
Net debt at 1 October 360,134 (1,950,492)
Net debt at 30 September (192,946) 360,134
IMPAX GROUP PLC
NOTES TO THE PRELIMINARY STATEMENT
1 Nature of the financial information
The financial information set out above does not constitute full accounts for
the purposes of section 240 of the Companies Act 1985. The financial information
has been extracted from the Company's accounts for the year ended 30 September
2002 on which the auditors, MRI Moores Rowland, have given an unqualified
opinion. The auditors in their report refer to the matters described in the
paragraph below.
Going Concern
The accounts have been prepared on a going concern basis, on the grounds that
the Group is able to secure future financing in order to meet its working
capital requirements. As described in this announcement, the Group has agreed
to dispose of its interest in the Starks Oil Field. The net proceeds of the sale
are estimated to be US$1,334,000 (£851,000), of which US$100,000 (£64,000) has
been received as a non-refundable deposit. If the sale does not complete, and
the Group is not able to secure alternative sources of financing, the Directors
recognise that there would then be uncertainty as to the Group's ability to
continue to trade. If the Group were unable to meet its working capital
requirements, adjustments would have to be made to reduce the balance sheet
value of assets to their recoverable amounts and to provide for further
liabilities that might arise.
2 Turnover, operating loss and net assets
Turnover relates solely to the principal activities of the Group.
Turnover
2002 2001
Analysis by class of business and geographical £ £
market
European Markets
Corporate finance advisory and asset 827,582 585,034
management services
US Markets
Oil & gas activities 588,498 882,703
1,416,080 1,467,737
Operating loss Net assets
2002 2001 2002 2001
£ £ £ £
Analysis by class of business and geographical
market
European Markets
Asset management & corporate finance advisory (527,531) (199,630) 256,110 248,584
Holding company costs (241,250) (238,888) 1,617,429 5,395,687
Goodwill amortisation (282,604) (70,584) - -
US Markets
Oil and gas activities (31,546) 114,317 5,249,563 5,790,214
Impairment provisions (2,631,434) - (2,787) 41,906
(3,714,365) (394,785) 7,120,315 11,476,391
3 Exceptional Items
2002 2001
£ £
Impairment in value of Starks Oil Field 2,631,434 -
======= =======
Impairment in value of unlisted investments 215,330 -
======= =======
As described in the Chairman's Statement, the Group has agreed to dispose of CSV
Holdings Inc which owns the Starks Oil Field for expected net proceeds of
US$1,334,000 (£851,000). The net asset value of CSV Holdings Inc at 30
September 2002 was £3,468,269 and, accordingly, a provision of £2,631,434 has
been made, using exchange rates ruling at 30 September 2002, to reflect the
estimated net proceeds of disposal.
The unlisted investments relate to minority interests in US corporations
acquired in previous years as part of corporate finance transactions. The
Directors believe that in the current economic climate it is prudent to reduce
the carrying value of these investments to nil.
4 Tax on loss on ordinary activities
2001 2000
£ £
UK corporation tax re prior year - 741
- 741
No liability to current year UK corporation tax arises on the results for the
year. The Group has tax losses of £2,382,612 (2000: £1,851,358) available for
offset against future taxable profits in the UK.
5 Foreign currencies
The results of subsidiary undertakings reporting in foreign currencies are
translated at the average rate ruling in the accounting period (US$1.46: £1;
2001: US$1.44: £1) and the assets and liabilities at the rate ruling at the
balance sheet date (US$1.56: £1; 2001: US$1.48: £1).
6 Dividends
No dividend is proposed.
7 Loss per share
The calculation of loss per share is based on the loss for the year of
£3,925,408 and on the weighted average number of ordinary shares in issue of
35,485,764 (2001: Loss of £366,444, shares in issue 25,074,065).
The calculation of diluted loss per share is based on the weighted average
number of shares outstanding adjusted by the dilutive share options. These
adjustments give rise to an increase in the weighted average number of shares
outstanding to 38,145,858 (2001: 25,496,197).
In order to show results from operating activities on a comparable basis, an
adjusted loss per share has been calculated which excludes goodwill amortisation
of £282,604 (2001: £70,584) and exceptional items of £2,856,764 (2001: £ nil)
from the result for the year.
8 Reconciliation of operating loss to net cash outflow from operating
activities
2002 2001
£ £
Operating loss (3,714,365) (394,785)
Impairment provisions 2,631,434 -
Depreciation and depletion charges 154,153 163,960
Amortisation charge 290,104 76,418
(Increase) in debtors (135,600) (84,765)
(Decrease)/increase in creditors (45,753) (264,551)
Net cash outflow from operating activities (820,027) (503,723)
9 Analysis of changes in cashflows during the year
2002 2001
£ £
Returns on investments and servicing of finance
Interest received 11,427 49,196
Interest paid (7,140) (20,114)
4,287 29,082
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (298,735) (1,026,616)
Capitalised acquisition costs - (258,956)
(298,735) (1,285,572)
Management of liquid resources
Cash held on deposit to support oil activities 144,128 -
Acquisition
Cash acquired on acquisition - 175,385
Financing
Ordinary share capital issued - 4,715,000
Share issue costs - (316,209)
Other loans - (500,000)
Repayment of bank loan - (1,516,860)
Increase in working capital loan 573,257 -
573,257 2,381,931
10 Analysis of changes in net funds
1 October Cash Flow Non-cash Translation 30 September
2001 Transaction Difference 2002
£ £ £ £ £
Cash at bank and in hand 1,038,008 (685,346) - (116,479) 236,183
Cash on deposit - 144,128 - - 144,128
Debt due within one year - (573,257) - - (573,257)
Debt due after one year (677,874) - 640,570 37,304 -
360,134 (1,114,475) 640,570 (79,175) (192,946)
The movement in debt due after one year relates to the Production Note payable
against future profits of the Starks Oil Field. The impairment in the value of
the field is balanced by the elimination of this future liability.
Copies of the report and accounts of the Company for the year ended 30 September
2002 are available on the Company's web site www.impax.co.uk and may be
collected from the Registered Office. Copies are being sent to shareholders.
Registered Office:
Broughton House
6-8 Sackville Street
London W1S 3DG
For further information please contact:
Nigel Taunt, Group Finance Director 020 7434 1122
Impax Group plc
John Webb 020 7490 3788
Marshall Securities Limited
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