Final Results
Westmount Energy Limited
21 November 2007
WESTMOUNT ENERGY LIMITED
FINAL RESULTS AND NOTICE OF AGM
CHAIRMAN'S REVIEW
I am pleased to present the results for the 12 months ended 30 June 2007.
Although the results show a loss of £363,923 as compared to an adjusted profit
of £4,148,693 for the previous year the company has continued to focus its
efforts on realising value from its portfolio of investments. The previous
year's profit resulted from the sale of 40,000,000 ordinary shares of its
holding of 70,000,000 ordinary shares in Sterling Energy plc whereas for this
financial year there have been no sales of any of the company's investments.
Therefore the year's loss arises from the administrative costs incurred in
running the company over this period.
Following the death of the founder and Chairman Derek Williams, I was invited to
the Board and appointed Chairman on the 17 March 2007. The Board was further
strengthened by the appointment of Mervyn Bradlow on 11 May 2007. Mervyn, a
practicing stockbroker was a long time friend and adviser to Derek and will
assist in planning the future strategy of the company.
The restructured Board is conducting a detailed review of the company's future
strategy both in relation to its existing portfolio of investments as well as
considering other opportunities as they present themselves in order to create
value for the shareholders of the company.
Following on from this review and recorded in the following financial statements
as a post-balance sheet event, I am pleased to report that we disposed of our
holding of 3,762,268 ordinary shares in CDS Oil & Gas Group plc on 25 September
2007 at 22p per share for total value of £827,699. This realised a net cash
profit for the company after all costs of £289,071. The company had previously
provided a £500,000 convertible loan to CDS for their exploration programme in
North West Paraguay, South America. This was repaid by CDS by paying up and
subscribing for 37,622,687 new ordinary shares in CDS, which were subsequently
consolidated on a 1 for 10 basis.
The company's remaining investments are as follows:-
Sterling Energy plc ('Sterling')
Sterling is an AIM -traded oil and gas exploration and production company
operating in the Gulf of Mexico and Africa and recently published its interim
results for the first half of 2007. Sterling's strategy is to create value by
achieving a balance between production and exploration. Sterling has a growing
cash position and an active and largely carried exploration portfolio with 8
wells planned over the next year. Following the sale of 40,000,000 ordinary
shares in Sterling during 2006 the company retains a holding of 30,000,000
ordinary shares in Sterling.
Desire Petroleum plc ('Desire')
Through its shareholding of 5,500,000 ordinary shares in Desire, also an
AIM-listed company, the company has a significant indirect investment in the
exploration of the North Falkland Basin, South Atlantic. Desire has developed a
prospect portfolio and awaits the availability of a suitable drilling rig.
Desire reported a loss for the half-year ending 30 June 2007 of £628,000,
largely arising from foreign exchange losses and the non-cash charge for
share-based payments. The weakening of the US Dollar produced the exchange
losses on Desire's dollar funds, which are held for future exploration
programmes.
Eclipse Energy UK plc ('Eclipse')
Eclipse is not currently traded on a public market. It has made significant
progress over the last year with its combined Ormonde wind farm and gas to power
projects. Formal approval for the two projects, to proceed to development, was
given on 8 February 2007 by the Energy Minister, Lord Truscott. The innovative
hybrid development has the potential to generate up to 200 MW of electricity,
with almost half coming from the wind farm comprising up to 30 turbines, enough
energy to supply around 70,000 homes. The Ormonde project is located 10
kilometres offshore Barrow-in-Furness, Cumbria in the East Irish Sea. Eclipse
operates the undeveloped Ormonde North and South gas fields located in Blocks
113/28a and 113/29a held under licences P1032 and P1033. The company holds
244,000 ordinary fully paid shares in Eclipse at a book cost of £735,000.
The Future
Your Board is actively pursuing various opportunities to create value for the
shareholders of the company and have noted that the current share price is well
below that of the net asset value per share. I am pleased to be able to report
that the fully diluted net asset value per share as at the date of this review
is approximately 116p. This value is based upon the closing middle-market
quotation as derived from the London Stock Exchange as at 19 November 2007 in
respect of each of the quoted investments and a directors' valuation of £7.50
per ordinary share in respect of the unquoted investment in Eclipse.
If further circumstances allow we may consider disposals of our investments with
a view to returning capital to the shareholders.
We look forward with confidence to the future of Westmount Energy Limited.
ALAN LEVISON
Chairman
20 November 2007
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2007
(Expressed in United Kingdom Sterling)
Note As
restated
2007 2006
£ £ £ £
Turnover 2
Continuing operations - -
Discontinued operations - 1,118
- 1,118
Operating profit before
administrative expenses 2
Continuing operations - -
Discontinued operations - 1,118
- 1,118
Administrative expenses 3 (436,410) (459,686)
Profit on termination of oil
and gas field interests - 1,706,201
Profit on disposal of - 3,190,096
investments
Interest receivable 72,487 178,238
72,487 5,074,535
Net (loss)/profit on ordinary
activities before taxation 3 (363,923) 4,615,967
Taxation 5 - (467,274)
(Loss)/profit for the year (363,923) 4,148,693
Basic earnings per share 6 (4.89)p 55.27p
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 JUNE 2007
(Expressed in United Kingdom Sterling)
As
restated
2007 2006
£ £
(Loss)/profit retained for the year (363,923) 4,148,693
Cost of B share issue and share - (155,895)
consolidation
Total recognised gains and losses
relating to the year (363,923) 3,992,798
Prior period adjustment (see note 1 (143,664) -
(i))
Total (loss)/profit recognised since
last annual report
(507,587) 3,992,798
COMPANY PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2007
(Expressed in United Kingdom Sterling)
Note As
restated
2007 2006
£ £ £ £
Administrative expenses 3 (436,410) (459,518)
Income from shares in group
undertaking
- 1,267,250
Profit on disposal of - 3,190,096
investments
Interest receivable 72,487 170,620
72,487 4,627,966
Net (loss)/profit on ordinary
activities
before taxation 3 (363,923) 4,168,448
Taxation - -
(Loss)/profit for the year (363,923) 4,168,448
CONSOLIDATED AND COMPANY BALANCE SHEET
AT 30 JUNE 2007
(Expressed in United Kingdom Sterling)
As restated
Note 2007 2006
£ £ £ £
FIXED ASSETS
Investments 7 5,418,141 4,882,017
CURRENT ASSETS
Debtors 8 5,824 505,549
Cash at bank 540,609 880,222
546,433 1,385,771
CREDITORS: amounts falling
due within one year 9 (143,341) (176,148)
NET CURRENT ASSETS 403,092 1,209,623
TOTAL ASSETS LESS CURRENT
LIABILITIES 5,821,233 6,091,640
SHARE CAPITAL AND RESERVES
Share capital 10 1,488,000 1,496,686
Share premium account 11 679,469 668,220
Share option account 11 225,413 143,664
Capital redemption reserve 11 166,470 154,784
Profit and loss account 11 3,261,881 3,628,286
SHAREHOLDERS' FUNDS 12 5,821,233 6,091,640
These financial statements were approved by the board of directors on 20 November
2007.
P J RICHARDSON
Director
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2007
(Expressed in United Kingdom Sterling)
As restated
Note 2007 2006
£ £
Net cash outflow from operating
activities A (326,654) (325,752)
Returns on investments and
servicing of finance B 36,234 178,238
Taxation C - (500,869)
Capital expenditure and D - 9,028,860
financial investment
Cash (outflow)/inflow before (290,420) 8,380,477
financing
Financing E (49,193) (7,535,046)
(Decrease)/increase in cash in (339,613) 845,431
the year
Reconciliation of cash flow to
movement in net funds
(Decrease)/increase in cash in (339,613) 845,431
the year
Loan advance - 500,000
Change in net funds resulting (339,613) 1,345,431
from cash flows
Conversion of loan to equity (500,000) -
investment
Movement in net funds in the (839,613) 1,345,431
year
Net funds brought forward 1,380,222 34,791
Net funds carried forward F 540,609 1,380,222
A. RECONCILIATION OF NET OPERATING LOSS TO NET As restated
CASH OUTFLOW FROM OPERATING ACTIVITIES
2007 2006
£ £
Operating profit before administrative - 1,118
expenses
Administrative expenses (436,410) (459,686)
Cost attributable to issue of share options 142,709 143,664
(Increase)/decrease in prepayments and (146) 6,230
accrued income
Decrease in creditors and accrued expenses (32,807) (17,078)
Net cash outflow from operating
activities (326,654) (325,752)
B. RETURNS ON INVESTMENTS AND SERVICING OF 2007 2006
FINANCE
£ £
Interest received 36,234 178,238
Net cash inflow from returns on investments
and servicing of finance 36,234
178,238
C. TAXATION 2007 2006
£ £
Tax paid - (500,869)
Net cash outflow for taxation - (500,869)
D. CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT 2007 2006
£ £
Loan advance - (500,000)
Sale of fixed asset investments - 7,790,096
Termination of oil and gas field interests - 1,738,764
Net cash inflow from capital expenditure and
financial investment - 9,028,860
E. FINANCING 2007 2006
£ £
Redemption of B shares - (7,350,919)
Purchase of own shares (63,442) (28,232)
Cost of B share issue and share - (155,895)
consolidation
Issue of shares 14,249 -
Net cash outflow from financing (49,193) (7,535,046)
F. ANALYSIS OF NET FUNDS 1 July 30 June
2006 Cash flow Non cash 2007
£ £ £ £
Net funds
Cash at bank 880,222 (339,613) - 540,609
Debtor-loan receivable 500,000 - (500,000) -
1,380,222 (339,613) (500,000) 540,609
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
1. ACCOUNTING POLICIES
a) Accounting convention
The financial statements have been prepared under the historical cost convention
and in accordance with applicable accounting standards in the United Kingdom.
b) Turnover
Turnover represents royalty and other income receivable by the group from its
oil and gas field interests.
c) Foreign currency
Transactions denominated in foreign currencies are translated to United Kingdom
Sterling at the rate prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated
into United Kingdom Sterling at the rate prevailing at the balance sheet date.
Exchange gains and losses are taken to administrative expenses in the profit and
loss account.
d) Taxation
United Kingdom Corporation Tax is provided on taxable profits at the appropriate
rate.
e) Investments
Fixed and current asset investments are stated at cost and are subject to review
for impairment. Any impairment is recognised in the profit and loss account in
the year in which it occurs. Profits or losses realised on the disposal of
individual fixed asset investments are calculated on an average cost basis.
f) Financial instruments
Financial assets and liabilities are initially recognised on the historical cost
basis, which approximate to fair value. The company recognises a financial asset
or financial liability in the balance sheet when it becomes a party to the
contractual provisions of the instrument.
Income and expenses associated with financial instruments are taken to the
profit and loss account on an accruals basis.
Impairment of financial assets is recognised in the profit and loss account in
the year in which it occurs.
g) Deferred taxation
If applicable, deferred tax is provided on timing differences which result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallise based on
current tax rates and law.
h) Basis of consolidation
The company sold its subsidiary during the previous financial year. The
comparative figures presented comprise the group financial statements,
incorporating the assets, liabilities and results of Westmount Energy Limited
and its subsidiary. The acquisition method of accounting was adopted. Under this
method the results of subsidiary undertakings acquired or disposed of during the
year are included in the consolidated results from, or up to, the effective date
of acquisition or disposal, being the date control passes. The consolidated
figures are re-presented as they are not materially different from the single
entity assets, liabilities and results.
i) Share options and prior period adjustment
The results for the year ended 30 June 2006 have been restated for the
application of Financial Reporting Standard 20: Share-based payment. The cost of
the share options are ascribed a fair value and accounted for as an
administration cost of the company with an equal Share Option Reserve being
created in Shareholders' Funds. The cost of the options issued and vested to
30 June 2006 equates to £143,664 and this has been accounted for as a prior
period adjustment (see note 11).
j) Capital redemption reserve and prior period adjustment
The results for the year ended 30 June 2006 have been restated by a prior period
adjustment to transfer an amount of £4,650 from Profit and Loss Account Reserves
to the Capital Redemption Reserve. This transfer is required by Jersey Company
Law when a company purchases its own shares and was omitted from the financial
statements for the year ended 30 June 2006 (see note 11).
2. TURNOVER: SEGMENTAL INFORMATION
By class of business Oil & Gas
Field
Interests Investments Total
Group and company £ £ £
2007
Turnover - - -
Net profit before taxation
Segment profit - - -
Common costs (436,410)
(436,410)
Interest and similar fees receivable 72,487
(363,923)
Net assets
Segment net assets - 5,418,141 5,418,141
Unallocated net assets 403,092
5,821,233
As restated 2006
Turnover 1,118 - 1,118
Net profit before taxation
Segment profit 1,118 - 1,118
Common costs (459,686)
(458,568)
Profit on termination of oil and gas
fields
interests 1,706,201
Profit on disposal of investments 3,190,096
Interest and similar fees receivable 178,238
4,615,967
Net assets
Segment net assets - 5,382,017 5,382,017
Unallocated net assets 709,623
6,091,640
2. TURNOVER: SEGMENTAL INFORMATION (continued)
By geographical area
North
Sea Investments Total
Group and company £ £ £
2007
Turnover - - -
Net profit before taxation
Segment profit - - -
Common costs (436,410)
(436,410)
Interest receivable 72,487
(363,923)
Net assets
South America 536,124
South Atlantic 697,017
American and African regions 3,450,000
European regions 735,000
Segment net assets - 5,418,141 5,418,141
Unallocated net assets 403,092
5,821,233
As restated 2006
Turnover 1,118 - 1,118
Net loss before taxation
Segment profit 1,118 - 1,118
Common costs (459,686)
(458,568)
Profit on termination of oil and gas
fields interests 1,706,201
Profit on disposal of 3,190,096
investments
Interest receivable 178,238
4,615,967
Net assets
South America 500,000
South Atlantic 697,017
American and African regions 3,450,000
European regions 735,000
Segment net assets - 5,382,017 5,382,017
Unallocated net assets 709,623
6,091,640
As
restated
3. NET (LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
2007 2006
£ £
Group and company
Net (loss)/profit on ordinary activities before taxation is
stated after charging:
Directors' emoluments 221,515 234,430
Auditors' remuneration 14,000 12,000
Other auditors' costs - consultancy 2,588 2,618
2007 2006
Continuing Discontinued Total Continuing Discontinued Total
£ £ £ £ £ £
Administrative 436,410 - 436,410 459,518 168 459,686
expenses
4. REMUNERATION OF DIRECTORS
As restated
2007 2006
Salary/ Salary/
fees Fees
Group and company £ £
Highest paid director 49,227 91,733
Other executive directors 169,494 142,697
Non-executive director 2,794 -
221,515 234,430
Directors' remuneration includes the cost of 450,000 (2006: 600,000) share
options granted to three (2006: four) directors, at a weighted average fair
value of 43.25p, on 22 December 2005. During the current year, the 150,000
options granted to the late D G Williams expired. The fair value of these
expired options has been credited to reserves.
During the year, legal and professional fees totalling £2,448 were paid to
Ogier, a firm in which M S D Yates is a partner, in respect of services charged
on an arms length basis as the company's legal advisors.
The company does not employ any staff except for its board of directors. The
company does not contribute to the pensions or any other long-term incentive
schemes on behalf of its directors.
5. TAXATION
The company has exempt company status for Jersey tax purposes and has paid
exempt company tax at the fixed rate of £600 per annum. As no relationship
exists between the tax and the level of the company's activities, the tax has
been included in administrative expenses.
As restated
2006
2007
£ £
The charge for group taxation comprises:
United Kingdom corporation tax
Current year at 30% (2006 : 30%) - 467,274
6. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the (loss)/profit for
the year after taxation: £(363,923) (2006: £4,148,693). The weighted average
number of shares in issue during the year was 7,440,867 (2006: 7,506,060). As
explained in note 10 there are share options in issue over the company's
ordinary shares. Since the exercise price of these options at 30 June 2007 was
above the market price, they are deemed to have no dilution effect on earnings
per share and diluted earnings per share are consequently the same as basic
earnings per share.
As restated
7. INVESTMENTS 2007 2006
£ £
Fixed asset investments
CDS Oil & Gas Group plc ('CDS')
3,762,268 ordinary, fully
paid shares at cost (2006: Nil) (a) 536,124 -
Desire Petroleum plc ('Desire')
5,500,000 ordinary, fully paid
shares at cost (2006: 5,500,000) (b) 697,017 697,017
Eclipse Energy UK plc (2006: Eclipse Energy
Company Limited) ('Eclipse')
244,000 ordinary, fully paid
shares at cost (2006: 244,000) (c) 735,000 735,000
Sterling Energy plc ('Sterling')
30,000,000 ordinary, fully
paid shares at cost (2006: 30,000,000) (d) 3,450,000 3,450,000
5,418,141 4,882,017
(a) On 30 June 2007 the group's holding of 3,762,268 ordinary fully paid shares
represented 3.70% of the issued share capital of CDS.
(b) On 30 June 2007 the market value of the group's holding of 5,500,000
ordinary fully paid shares, representing 2.47% of the issued share capital of
Desire, was £1,663,750 (30.25p per share).
(c) This investment represents 13.62% of the issued share capital of Eclipse.
As the investment is currently unquoted, the market value of the group's holding
is not readily available. In the directors' opinion the value of the investment
is not less than the carrying amount.
(d) On 30 June 2007 the market value of the group's holding of 30,000,000
ordinary fully paid shares representing 1.92% of the issued share capital of
Sterling was £4,875,000 (16.25p per share).
As restated
8. DEBTORS: amounts 2007 2006
falling due within one year £ £
Loan receivable - 500,000
Prepayments and accrued income 5,824 5,549
5,824 505,549
On 19 January 2006 the company provided a convertible loan of £500,000 to CDS
Oil & Gas Group plc ('CDS') to be utilised solely towards the funding of its
exploration programme in the Chaco Basin in North West Paraguay, South America.
The loan was repaid by paying up and subscribing for on 29 December 2006,
37,622,687 new ordinary shares of 1p each (subsequently consolidated into 10p
shares after a 1 for 10 share reorganisation) in CDS worth £536,124, being
£500,000 capital and £36,124 accrued interest thereon.
As
restated
9. CREDITORS: amounts 2007 2006
falling due within one year £ £
Amounts due to shareholders 112,170 155,761
Accrued expenses 31,171 20,387
143,341 176,148
As
restated
10. SHARE CAPITAL 2007 2006
£ £
Authorised:
10,000,000 shares of 20p each 2,000,000 2,000,000
Allotted and fully 2007 2006 2007 2006
paid: Shares Shares £ £
In issue 7,440,000 7,483,430 1,488,000 1,496,686
Ordinary Ordinary
shares shares
Movement: 20p £
Balance at 1 July 2006 7,483,430 1,496,686
Issue of shares 15,000 3,000
Purchase of own shares (58,430) (11,686)
Balance at 30 June 2007 7,440,000 1,488,000
As at 30 June 2007, options over 600,000 (2006: 750,000) ordinary 20p shares
were outstanding. The options were granted on 22 December 2005, with a weighted
average vesting date of 17 May 2007, and with an exercise price of 103.50p. The
decrease in outstanding share options is due to the expiry of 150,000 options.
The options are exercisable at the election of the option holder, over various
periods, expiring 31 December 2012. The 600,000 (2006: 750,000) outstanding
share options granted on 22 December 2005 have been ascribed a weighted average
fair value of 43.25p each and are ascribed an expense for the year ended
30 June 2007 of £142,709 (2006: £143,664).
The fair value of the options was calculated using the Black Scholes valuation
model with the following inputs: share price at date of grant 107p, exercise
price 103.5p, weighted average volatility rate 41.2872%, dividend yield 0%,
weighted average vesting period 1.4 years, weighted average expected term to
maturity 4.2112 years, and weighted average risk free rate of interest 4.2227%.
At each date of grant the volatility of the company was estimated as the
standard deviations of daily historical continuously compounded returns over a
period commensurate with the expected life of the option, back from the date of
grant, and annualized by the factor of square root 252, assuming 252 trading
days per year. The risk-free rate is the yield to maturity on the date of grant
of a UK Gilt Strip, with term to maturity equal to the life of the option. The
expected life of the options is estimated as the mid-point between the date of
grant and the date of expiry of the option.
11. SHARE PREMIUM Share Share Capital Profit &
ACCOUNT AND Premium Option Redemption Loss
RESERVES Account Account Reserve Account
£ £ £ £
Balance at 1 July 2006 668,220 - 150,134 3,776,600
Prior period adjustment
(see note 1 (i)) - 143,664 - (143,664)
Prior period adjustment
(see note 1 (j)) - - 4,650 (4,650)
Restated balance at
1 July 2006 668,220 143,664 154,784 3,628,286
Shares issued 11,249 - - -
Cost of share options - 142,709 - -
Expired share options (60,960) 60,960
Purchase of own shares - - - (51,756)
Transfer between reserves - - 11,686 (11,686)
Loss for the year - - - (363,923)
Balance at 30 June 2007 679,469 225,413 166,470 3,261,881
As restated
12. RECONCILIATION OF MOVEMENTS IN 2007 2000
SHAREHOLDERS' FUNDS £ £
(Loss)/profit for the year (363,923) 4,148,693
Issue of shares at a premium 14,249 -
Cost of share options 142,709 143,664
Issue of B shares - (7,506,680)
Cost of B share issue and share consolidation - (155,895)
Purchase of own shares (63,442) (28,232)
Opening shareholders' funds 6,091,640 9,490,090
Closing shareholders' funds 5,821,233 6,091,640
13. POST BALANCE SHEET EVENTS
On 6 September 2007 the company granted 150,000 options over its 20p ordinary
shares to Mr A Levison, a director, at an exercise price of 108p. The options
expire on 31 December 2012.
On 25 September 2007 the company sold its entire shareholding of 3,762,268
ordinary shares in CDS Oil & Gas Group plc (CDS) at 22p per share. The
investment arose from the convertible loan the company provided to CDS on 19
January 2006.
Notice of Meeting
Notice is hereby given that the Annual General Meeting of Westmount Energy
Limited will be held at Whiteley Chambers, Don Street, St. Helier, Jersey, JE4
9WG Channel Islands on Wednesday,
19 December 2007 at 11.45 am.
Contacts:
Westmount Energy Limited
Paul Anderson, Director
Tel: 01534 814209
Ruegg & Co Limited
Gavin Burnell
Tel: 020 7584 3663
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