Interim Results

RNS Number : 1791P

Equatorial Palm Oil plc

30 September 2013

 



30 September 2013

EQUATORIAL PALM OIL PLC

("EPO" or the "Company")

Interim Results for the six months ended 30 June 2013

Equatorial Palm Oil plc, (AIM: PAL), the AIM listed palm oil development company with operations in Liberia, announces its unaudited interim results for the six months ended 30 June 2013 ("the Period").

Chairman's Statement

During the first half of 2013, the Company focussed on further progress of its oil palm assets in Liberia, West Africa, and setting the foundations for its large scale development.  EPO has a 50:50 joint venture ("JV") share with Biopalm Energy Limited ("Biopalm") in all the oil palm assets held by Liberian Palm Developments Limited ("LPD"), the JV company that EPO manages on behalf of the JV partners.

Liberian Palm Developments Limited - Operational Review

In the first half of 2013, LPD planted 926 ha at Palm Bay Estate and 393 ha at Butaw Estate. A further 1,448 ha at Palm Bay and 444 ha at Butaw have been prepared ready for planting.  Based on the planting completed this year and infrastructure in place, LPD believes that it is capable of planting 3,000 ha per annum from 2014 onwards, subject to availability of funding, as referred to below, on a timely basis.

During the Period, LPD appointed African Export-Import Bank ("Afreximbank") as a corporate advisory partner for the purpose of securing a US$140m financing facility (the "Facility") which is expected to be sufficient to fund the Palm Bay oil palm project located near the deepwater port of Buchanan in Liberia, West Africa.

In June 2013, final Environmental, Social, Impact Assessments ("ESIA") reports for Palm Bay Estate were submitted to LPD by independent environmental consultants, Coastal and Environmental Services. This is a key milestone for the Company, being the culmination of over two years of work. The environmental studies concluded, inter alia, that the oil palm development at the Palm Bay Estate is acceptable from an environmental and social perspective, and will result in sustainable benefits to the area.

These ESIA reports are a key requirement for the development funding institutions ("DFIs") from which the Company is seeking to secure debt funding. Work continued with Afreximbank who have been appointed by LPD to work with DFIs in order to secure funding for our projects in Liberia.

Funding of LPD

In December 2010, the Company entered into and announced a joint venture with Biopalm. As agreed under the terms of the joint venture agreement, dated 10 December 2010, entered into between Biopalm and EPO (the "Investment Agreement"), EPO, in February 2011, transferred its oil palm assets in Liberia together with US$7.5m to LPD, and Biopalm transferred US$22.5m to LPD. Under the Investment Agreement, Biopalm is required to arrange and/or contribute, either directly or through any member of its group, any external funding required by LPD  (up to a maximum of US$30m) (the "Commitment").

On 8 July 2013, the Company announced that it had issued a written notice to Biopalm setting out that Biopalm is in material breach of its obligations under the Investment Agreement having failed to provide the Commitment.  

On 14 August 2013, the Company announced that no resolution of the dispute had taken place and that the next step for dispute resolution is to seek resolution by arbitration.

As a result, EPO, since formation of the JV, has advanced $8.0m to LPD to date (in addition to $7.5m on inception of the JV in February 2011) in anticipation of the provision of the External Funding by Biopalm.

EPO continues to negotiate and work with Biopalm regarding the Commitment with a view to an amicable solution being reached, but has reserved all rights to take action against Biopalm under the Investment Agreement.

Until the long term funding of LPD is secured, the operations of LPD will be managed predominantly on a care and maintenance basis. LPD has the foundations, infrastructure and team in place to ramp up planting again quickly upon this funding being in place.

Financial review

The loss of the Group for the six months ended 30 June 2013 of US$1,656,000 (2012: US$1,570,000) was in line with expectations. Cash held by the Group as at 30 June 2013 was US$9,000 (2012: US$1,734,000).

In July 2013, the Company announced certain fund raising efforts had been concluded which included equity and loans.

On 16 July 2013, the Company announced it had entered into short term loan agreements with Adelise Services Limited ("Adelise"), a company associated with Michael Frayne, Executive Chairman of EPO, for the advance of £29,745 and US$425,000 to the Company (the "Adelise Loans").

On 24 July 2013, the Company announced the placement to existing and new shareholders of 37,637,000 ordinary shares for an aggregate consideration of £2,258,220 (US$3,465,239) ("the Placing"). At the same time, the Company announced that a loan of US$400,000 was made by the Company's joint venture partner Biopalm to LPD ("the Biopalm Loan").

On 29 July 2013, the Company announced an increase in the size of the placing announced on 24 July 2013 by a further 3,728,762 ordinary shares for an additional aggregate consideration of £223,726 (US$343,307). As part of the placing announced on 29 July 2013, Adelise converted £108,900 of the Adelise Loans into ordinary shares. The Company also announced on 29 July 2013 that Adelise had granted a US$500,000 revolving loan facility to the Company for the purpose of the Company's general working capital ("the Adelise Facility").

The placings announced on 24 July 2013 and 29 July 2013, the Biopalm Loan, the Adelise Facility and other loan facilities provided funds, in aggregate, of US$4,828,546 (the "July Raise").

The proceeds received by EPO from the placings announced on 24 July 2013 and 29 July 2013, were used to advance a loan of US$2.2m (the "Loan") to LPD. The Loan has been provided on a short-term basis and the interest accrued on the Loan is payable at a fixed rate of 8 per cent. per annum.  The Loan is repayable on demand and is secured against the assets of LPD. The Loan provides short-term financing to support LPD's ongoing development of its oil palm projects in Liberia, West Africa, in advance of the resolution of Biopalm's External Funding obligation and the anticipated long term debt funding being sourced for LPD by Afreximbank.

The July Raise allowed the Company to clear the majority of creditors, including full repayment of the balance of the loan provided by Adelise announced 16 July 2013, and will allow the Company to continue to fund JV operations on a care and maintenance basis for approximately two months from today.

There a number of short term facilities and funding solutions currently at an advanced stage of negotiations but not yet finalised. Whilst there can be no certainty over the level of funds to be raised or that these funding sources will formally complete, the Directors remain confident in being able to raise further funds to finance future working capital requirements of the Group for the next twelve months of operations.

Once the short term funding position is secured, the Directors plan to work with Biopalm and Afreximbank to find a longer term funding solution such that it returns planting levels of oil palms to those originally planned. It is too early at this stage to indicate what form this longer term funding solution may take.

Summary and Outlook

The Company continues to hold a constructive dialogue with Biopalm regarding the Commitment LPD has reduced its workforce and is currently operating on a care and maintenance basis.

The key objective for LPD is to secure funding to reactivate planting and ramp up the planting rate year on year with a forward combined target of planting over 100,000 hectares by 2021. LPD is positioned to produce its first commercial production in 2014 from the oil palms planted in 2011. The Board believes that with our experienced management team, robust project economics and strong investment case, EPO can procure the funding necessary to deliver significant value and growth to shareholders.

Michael Frayne

Executive Chairman

30 September 2013

Enquiries:

Equatorial Palm Oil plc Michael Frayne (Chairman) www.epoil.co.uk	[phone]
Strand Hanson Limited (Nominated Adviser) James Harris / James Bellman	[phone]
Mirabaud Securities LLP (Broker) Peter Krens	[phone]

EQUATORIAL PALM OIL PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2013

	Note	Period ended 30 June 2013 (unaudited)	Period ended 30 June 2012 (unaudited)	Year ended 31 December 2012 (audited)
		$'000	$'000	$'000
Revenue		35	210	420
Administrative expenses		(898)	(1,306)	(2,316)
Share options expense	6	(97)	-	(38)
Operating loss		(959)	(1,096)	(1,934)
Interest income		108	-	-
Share of operating loss of joint venture	4	(805)	(474)	(1,880)
Loss for the Period before and after taxation		(1,656)	(1,570)	(3,814)
Other comprehensive income
Exchange gains/(losses) arising on translation of foreign operations		(46)	63	106
Total comprehensive income for the period		(1,702)	(1,507)	(3,708)
Loss per share expressed in cents per share
- Basic & diluted	3	(1.1) cents	(1.2) cents	(3.0) cents

EQUATORIAL PALM OIL PLC

GROUP STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2013

	Note	30 June 2013 (unaudited)	30 June 2012 (unaudited)	31 December 2012 (audited)
		$'000	$'000	$'000
ASSETS
Non-current assets
Investment in joint venture	4	18,298	20,508	19,103
		18,298	20,508	19,103
Current assets
Receivables from joint venture	4	5,656	-	-
Trade and other receivables		19	248	565
Cash & cash equivalents		9	1,734	551
		5,684	1,982	1,116
LIABILITIES
Current liabilities
Short term debt		335	-	-
Trade and other payables		369	291	183
		704	291	183
Net current assets		4,980	1,691	933
NET ASSETS		23,278	22,199	20,036
SHAREHOLDERS' EQUITY
Share capital	5	2,445	1,969	1,969
Share premium		34,498	30,402	30,402
Warrant and option reserve	6	1,358	1,030	1,466
Foreign exchange reserve		34	37	80
Retained loss		(15,057)	(11,239)	(13,881)
Total equity		23,278	22,199	20,036

EQUATORIAL PALM OIL PLC

GROUP CASH FLOW STATEMENT

FOR THE PERIOD ENDED 30 JUNE 2013

	Period ended 30 June 2013 (unaudited)	Period ended 30 June 2012 (unaudited)	Year ended 31 December 2012 (audited)
	$'000	$'000	$'000
Cash flows from operating activities
Loss for the year before and after taxation Decrease in receivables Increase in payables Share options expense Share of operating loss of joint venture	(1,656) 546 185 97 805	(1,570) 354 129 - 474	(3,814) 37 8 38 1,880
Net cash outflow from operating activities	(23)	(613)	(1,851)
Cash flows from investing activities
Funds loaned to joint venture	(5,656)	-	-
Net cash outflow from investing activities	(5,656)	-	-
Cash flows from financing activities
Loan funds received	335	-	-
Issue of ordinary share capital (net of expenses)	4,976	968	968
Share issue costs	(129)	-	-
Net cash inflow from financing activities	5,182	968	968
Net increase/(decrease) in cash and cash equivalents	(497)	355	(883)
Cash and cash equivalents at beginning of period	551	1,329	1,329
Exchange gains/(losses) on cash and cash equivalents	(45)	50	105
Cash and cash equivalents at end of period	9	1,734	551

EQUATORIAL PALM OIL PLC

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2013

	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 2012	1,914	29,489	(26)	2,092	(10,731)	22,738
Share capital issued	55	913	-	-	-	968
Exercise and expiry of warrants and options	-	-	-	(1,062)	1,062	-
Total comprehensive income for the period	-	-	63	-	(1,570)	(1,507)
As at 30 June 2012	1,969	30,402	37	1,030	(11,239)	22,199
As at 1 January 2012	1,914	29,489	(26)	2,092	(10,731)	22,738
Share capital issued	55	913	-	-	-	968
Exercise and expiry of warrants and options	-	-	-	(664)	664	-
Share-based payments	-	-	-	38	-	38
Total comprehensive income for the period	-	-	106	-	(3,814)	(3,708)
As at 31 December 2012	1,969	30,402	80	1,466	(13,881)	20,036
Share capital issued	476	4,500	-	-	-	4,976
Cost of share issue	-	(129)	-	-	-	(129)
Warrants issued in relation to share capital issued	-	(275)	-	275	-	-
Expiry of warrants and options	-	-	-	(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

EQUATORIAL PALM OIL PLC

NOTES TO THE INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2013

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 2012 Annual Report. The financial information for the half years ended 30 June 2013 and 30 June 2012 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 2012 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2012 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statement for 2012 was unqualified, but did draw attention by way of emphasis to the disclosures on going concern, 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.     Going Concern

In December 2010, the Company entered into and announced a joint venture with Biopalm. As agreed under the terms of the joint venture agreement, dated 10 December 2010, entered into between Biopalm and EPO (the "Investment Agreement"), EPO, in February 2011, transferred its oil palm assets in Liberia together with US$7.5m to LPD, and Biopalm transferred US$22.5m to LPD. Under the Investment Agreement, Biopalm is required to arrange and/or contribute, either directly or through any member of its group, any external funding required by LPD  (up to a maximum of US$30m) (the "Commitment").

On 8 July 2013, the Company announced that it had issued a written notice to Biopalm setting out that Biopalm is in material breach of its obligations under the Investment Agreement having failed to provide the Commitment.  

On 14 August 2013, the Company announced that no resolution of the dispute had taken place and that the next step for dispute resolution is to seek resolution by arbitration.

As a result, EPO, since formation of the JV, has advanced an additional $8.0m to LPD to date (in addition to $7.5m on inception of the JV in February 2011) in anticipation of the provision of the External Funding by Biopalm.

EPO continues to negotiate and work with Biopalm regarding the Commitment with a view to an amicable solution being reached, but has reserved all rights to take action against Biopalm under the Investment Agreement.

In July 2013, the Company announced certain fund raising efforts had been concluded which included equity and loans.

On 16 July 2013, the Company announced it had entered into short term loan agreements with Adelise Services Limited ("Adelise"), a company associated with Michael Frayne, Executive Chairman of EPO, for the advance of £29,745 and US$425,000 to the Company (the "Adelise Loans").

The July Raise allowed the Company to clear the majority of creditors, including full repayment of the balance of the loan provided by Adelise announced 16 July 2013, and will allow the Company to continue to fund JV operations on a care and maintenance basis for approximately two months from today.

There a number of short term facilities and funding solutions currently at an advanced stage of negotiations but not yet finalised. Whilst there can be no certainty over the level of funds to be raised or that these funding sources will formally complete, the Directors remain confident in being able to raise further funds to finance future working capital requirements of the Group for the next twelve months of operations.

Whilst the Board remains confident in its ability to raise funds, the conditions set out above indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern, which would principally relate to the impairment of the investment in the JV.

3.     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 2013 (unaudited)	Period ended 30 June 2012 (unaudited)	Year ended 31 December 2012 (audited)
	$'000	$'000	$'000
Loss for the period	(1,656)	(1,570)	(3,814)
Weighted average number of Ordinary shares of 1p in issue	145.7 million	127.3 million	127.8 million
Loss per share - basic	(1.1) cents	(1.2) cents	(3.0) cents

4.     Investment in joint venture

The results of the joint venture for the period of six months to 30 June 2013 were as follows:

	30 June 2013	30 June 2012	31 December 2012
	$'000	$'000	$'000
Non-current assets	37,322	27,412	31,693
Current assets	7,807	14,270	8,089
Non-current liabilities	-	-	-
Current liabilities	(8,740)1	(664)	(1,576)
TOTAL NET ASSETS	36,389	41,018	38,206
1 $5,656,000 relates to amounts payable to the Company
Income	132	574	1,693
Expenses	(1,741)	(1,522)	(5,453)
Loss after tax	(1,609)	(948)	(3,760)

The Company, through its investment in Equatorial Biofuels (Guernsey) Limited, owns a 50% interest in Liberian Palm Developments Limited. The Company's interest in Liberian Palm Developments Limited is as follows:

	$'000
Interest in joint venture at 1 January 2012	20,982
Share of losses of joint venture	(474)
Interest in joint venture at 30 June 2012	20,508
Interest in joint venture at 1 January 2012	20,982
Share of losses of joint venture	(1,879)
Interest in joint venture at 31 December 2012	19,103
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

5.     Called up share capital

Allotted, called up and fully paid	Period ended 30 June 2013 $'000	Period ended 30 June 2012 $'000	Period ended 31 December 2012 $'000
159,144,092 Ordinary shares of 1p each (2012: 128,316,434)	2,445	1,969	1,969

During the Period the Group issued 30,827,658 shares at an average price of 10.4 pence per share ($0.16 cents).

6.     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	23,900,000		13.8p
	Expired during the period	(5,990,171)		17.5p
	Outstanding at 30 June 2013	26,098,757		14.1p
	Exercisable at 30 June 2013	26,098,757		14.1p

As at 30 June 2013 the following warrants to subscribe for Ordinary shares were outstanding:

Category	Over Number of Shares	Expiry Date
Apr-15 Warrants, exercisable at 15.0p	11,950,000	6 April 2015
Apr-14 Warrants, exercisable at 12.5p	11,950,000	7 April 2014
5yr Warrants, exercisable at 17.5p	2,198,757	26 February 2015
3yr Warrants, exercisable at 17.5p	-	26 February 2013
2yr Warrants, exercisable at 17.5p	-	26 February 2012
Total	26,098,757

Share options

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

	Outstanding at 1 January 2013	Issued during the period	Exercised during the period	Outstanding at 30 June 2013	Exercisable at 30 June 2013
Options exercisable at 17.5p	9,770,200	-	-	9,770,200	7,477,650

7.     Events after the reporting period

Default notice issued to Biopalm Energy Limited

On 8 July 2013, the Company announced that it issued a written notice to Biopalm setting out that Biopalm is in material breach of its obligations under the Investment Agreement.

On 14 August 2013, the Company announced that no resolution of the dispute had taken place and that the next step for dispute resolution was to seek resolution by arbitration.

Placing and Loan

The July Raise, as detailed above, provided funds, in aggregate, of US$4,828,546.

8.     Availability of accounts

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

 

END

 

 

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