Final Results
Impax Group PLC
11 December 2006
IMPAX GROUP PLC
PRELIMINARY STATEMENT OF RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2006
Impax Group plc, the AIM quoted investment company which focuses exclusively on
the environmental markets sector, today announces its preliminary results for
the year ended 30 September 2006.
Highlights
• The Group has returned to profitability and funds managed within the asset
management division have performed strongly.
• Significant increase in funds under management which, following the recent
expansion of Impax Environmental Markets plc, had grown to £434m at 30
September 2006 (2005: £170m; 2004: £69m) and which have further risen to
£475m as at 30 November 2006.
• Rising energy costs, unusual weather patterns and concerns over climate
change have reinforced the strong prospects for the environmental sector.
Commenting on the results, Keith Falconer, Chairman said:
'Impax has enjoyed an extraordinary year with funds under management having
tripled in the past fifteen months. However, following a period of rapid
growth, it is important that we consolidate our position and deliver returns for
investors who have recently committed capital to our products. As a
consequence, the rate of expansion of our assets under management ('AUM') is
likely to slow for a period.'
For further information please contact
Keith Falconer, Chairman 07747 066637
Impax Group plc
Ian Simm, Chief Executive 020 7432 2619
Impax Group plc
CHAIRMAN'S STATEMENT
Impax has had an excellent year and I am delighted to report that the Group has
returned to profitability. This has been the result of a significant increase
in assets under management ('AUM') which had grown to £434m at 30 September 2006
(2005: £170m; 2004: £69m) and which have further risen to £475m as at 30
November 2006. I provide further analysis of this increase below.
The fundamental drivers of the sectors in which we specialise, namely
alternative energy, water treatment and waste management, continue to strengthen
and there is mounting evidence that institutional investors in many countries
are making or preparing to make major allocations of funds to this area of the
market. Meanwhile, demand for capital in the sectors is building rapidly and we
are seeing significant deal flow, particularly from companies that we have known
for many years.
As I have reported previously, our business model is to establish scaleable
funds to exploit the range of investment opportunities and to use third parties
to distribute our products. We have seen considerable success in implementing
this model.
RESULTS FOR THE YEAR
Turnover for the year was £3,840,030 (2005: £1,725,060), a 123% increase in the
year. Profit before tax was £213,076 (2005: loss of £593,214). This was
achieved despite two significant non-cash charges of £282,604 for amortisation
of goodwill (2005: £282,604) and £316,200 for shares awarded in the Group's long
term incentive scheme (2005: £154,488).
ASSET MANAGEMENT
The strong growth in AUM has led this division to dominate the business, with
divisional turnover reaching £3,512,192 (2005: £1,170,882). As a consequence I
would like to expand my normal comments on this division in order to provide
shareholders with a better understanding of the products we offer.
Quoted Equities
Funds investing entirely or predominantly in quoted equities amounted to £331m
at the end of the year.
These funds are focused on the alternative energy, water and waste sectors, and
invest in companies that are enjoying premium rates of growth over the market as
a whole. In our view, the fundamentals which drive this growth are likely to
continue for a considerable period. Our investment managers have demonstrated
the skills required to identify such companies and we have invested in expanding
this team and its reach, and will continue to do so.
Impax Environmental Markets plc ('IEM')
IEM is an investment trust quoted on the London Stock Exchange which largely
invests in listed companies in our sectors. It is our largest fund with £199m
of total (net) assets as at 30 September 2006 (£47m as at 30 September 2005).
Following a sustained period when its shares traded at a premium to net asset
value, the trust has completed several placings of new shares, particularly two
C Share issues in November 2005 and August 2006 respectively. Such a rapid
expansion is unusual in the investment trust sector and we do not expect the
trust's assets to continue to expand at this rate.
Impax Environmental Markets (Ireland) ('IEMI')
This is an open-ended version of IEM and aims to have an identical portfolio.
This fund's total (net) assets grew from £26m to £56m over the year.
White Label Funds
As I have previously reported, we are also managing the ASN Milieu Waterfonds in
the Netherlands and are advising the Danish Alm. Brand Invest MiljoTeknologi
fund, both of which are open-ended. The Dutch fund in particular has expanded
considerably during this period, and had £56m of total (net) assets on 30
September 2006.
In addition, we have recently commenced sub-management of Parworld Environmental
Opportunities, part of a Luxembourg based fund promoted by BNP Paribas Asset
Management ('BNP PAM'). This fund, which also aims to mirror IEM, is registered
for distribution in a number of countries within continental Europe. On 30
September 2006, net assets were only €6.3m, but BNP PAM is now actively
promoting the fund.
Private Equity
Funds investing exclusively in private equity amounted to £103m at the end of
the year.
A year ago I commented on the successful launch of the Impax New Energy Fund ('
INEF') which aims to take advantage of the considerable investment opportunities
in the European renewable energy sector. This fund, which was launched in
August 2005 with €60m of assets, announced a second closing in May 2006 and a
final closing at the target amount of €125m in August 2006. In addition to fund
raising, the team has built a large pipeline of potential investee companies and
recently reported its first deal, a €20m structured participation in the capital
of Airtricity UK, a successful and rapidly expanding developer and owner of wind
projects.
I am pleased to report that, during 2006, Impax has also started to commit
development capital to established private companies that expect to provide an
exit for investors within two years. This capital is sourced from IEM and IEMI,
which are permitted to invest up to 10 per cent of net assets in such
opportunities. These funds are currently invested in four companies of this
type, and our investment managers report a strong deal flow.
CORPORATE FINANCE
Last year I mentioned that we had transferred some resource from this division
to the asset management side. This process has continued and, as our private
equity activities have expanded, the Group has already realised considerable
benefits. Turnover in this division during the period was £327,838 (2005:
£554,178), excluding charges made for services provided to other Group
activities.
BALANCE SHEET AND CASH FLOW
At the end of July, all holders of the outstanding balance of the Group's
Convertible Unsecured Loan Stock elected to convert their holdings into new
shares, thereby transforming the balance sheet and eliminating the Group's
interest charge going forward.
I am pleased to report that the Group's cash flow is now positive for the first
time in many years.
BOARD OF DIRECTORS
In August 2005, Melville Haggard commenced a period of secondment with the
Department of the Environment, Food and Rural Affairs to assist in the
development of policy within the waste industry. This secondment was recently
extended from one year to two years and as a consequence, we have accepted
Melville's resignation from the Group Board with effect from 11 December 2006.
Melville has been with Impax since 1999 and I would like to thank him for his
contribution to the leadership of the Group.
PROSPECTS
The background against which we operate is particularly supportive to our cause
and after many years of development of the Impax business, I believe that we now
have the resources to build on our established platform. In the wake of the
storms and droughts of 2005, this year has seen climate change rise to a
prominent position on the global political agenda and Environmental Markets seem
to be heading for sustained secular growth.
However, following a period of rapid growth, it is important that we consolidate
our position and deliver returns for investors who have recently committed
capital to our products. As a consequence, the rate of expansion of our AUM is
likely to slow for a period.
Finally I would like to thank my colleagues and the non-executive directors for
their very hard work which has led to the uplift in shareholder value seen in
the past year.
J Keith R Falconer
11 December 2006
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 30 September 2006
2006 2005
Note £ £
TURNOVER 3 3,840,030 1,725,060
Operating profit/(loss) 3 173,898 (657,475)
Profit on disposal of investment 5 - 129,216
173,898 (528,259)
Interest receivable and similar income 137,699 131,140
Interest payable and similar charges (98,521) (196,095)
PROFIT/(LOSS) ON ORDINARY ACTIVITIES
BEFORE TAXATION 213,076 (593,214)
Tax on profit/(loss) on ordinary activities 6 388,255 -
PROFIT/(LOSS) FOR THE YEAR 601,331 (593,214)
EARNINGS PER SHARE 9
Basic 1.08p (1.56)p
Adjusted 2.16p (0.75)p
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Year ended 30 September 2006
2006 2005
£ £
Profit/(loss) for the financial year 601,331 (593,214)
Currency translation differences (131,579) 47,142
Total recognised profits/(losses) for the year 469,752 (546,072)
CONSOLIDATED BALANCE SHEET
As at 30 September 2006
2006 2005
£ £
FIXED ASSETS
Intangible fixed assets 1,346,493 1,629,097
Tangible fixed assets 24,433 13,140
Fixed asset investments 14,357 14,102
1,385,283 1,656,339
CURRENT ASSETS
Debtors due after one year 1,593,507 2,041,998
Debtors due in one year 1,904,235 1,269,282
Investments 72,752 79,752
Cash at bank and in hand 2,549,652 863,187
6,120,146 4,254,219
CREDITORS - amounts falling
due within one year (1,300,289) (635,726)
NET CURRENT ASSETS 4,819,857 3,618,493
TOTAL ASSETS LESS CURRENT
LIABILITIES 6,205,140 5,274,832
CREDITORS - amounts falling
due after more than one year
- Convertible unsecured loan stock - (2,302,088)
6,205,140 2,972,744
CAPITAL AND RESERVES
Called up share capital 9,591,824 8,973,635
Share premium 2,723,483 835,794
Exchange equalisation reserve (845,410) (713,831)
Treasury shares (148,801) (72,700)
Other reserve 487,355 154,488
Profit and loss account (5,603,311) (6,204,642)
EQUITY SHAREHOLDERS'
FUNDS 6,205,140 2,972,744
CONSOLIDATED CASHFLOW STATEMENT
Year ended 30 September 2006
2006 2005
Note £ £
NET CASH INFLOW/(OUTFLOW) FROM
OPERATING ACTIVITIES 10 1,337,917 (640,047)
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE 11 86,117 (18,016)
TAXATION 11 - -
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT 11 (23,871) 231,495
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING 1,400,163 (426,568)
FINANCING 11 80,750 82,000
INCREASE/(DECREASE) IN CASH 12 1,480,913 (344,568)
RECONCILIATION OF NET CASHFLOW TO
MOVEMENT IN NET DEBT
INCREASE/(DECREASE) IN CASH IN YEAR 1,480,913 (344,568)
CHANGES IN NET DEBT RESULTING
FROM CASHFLOWS 1,480,913 (344,568)
NON CASH TRANSACTIONS
- conversion of Loan Stock 2,302,088 (46,583)
- movement on Treasury reserve (76,101) (72,700)
- movement on Other reserve 408,968 231,213
TRANSLATION DIFFERENCES (131,579) 47,142
MOVEMENT IN NET DEBT IN THE YEAR 3,984,289 (185,496)
NET DEBT AT 1 OCTOBER 2005 (1,438,901) (1,253,405)
NET SURPLUS/(DEBT) AT 30 SEPTEMBER 2006 12 2,545,388 (1,438,901)
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 Group's accounts for the year
ended 30 September 2006 on which the auditors, MRI Moores Rowland LLP, have
given an unqualified opinion.
2 ACCOUNTING POLICIES
The accounting policies used throughout the Group have not differed
from those published in last year's financial statements.
3 GEOGRAPHICAL ANALYSIS OF TURNOVER, OPERATING PROFIT AND NET ASSETS
Turnover relates solely to the principal activities of the Group.
Turnover
2006 2005
£ £
UK 3,540,040 1,698,515
Europe 299,990 26,545
USA - -
3,840,030 1,725,060
Operating profit/(loss)
2006 2005
£ £
UK 457,482 (363,629)
Europe - -
USA (980) (11,242)
Goodwill amortisation (282,604) (282,604)
173,898 (657,475)
Net assets
2006 2005
£ £
UK 4,334,910 581,560
Europe (10,747) 73,758
USA 1,880,977 2,317,426
6,205,140 2,972,744
BUSINESS ANALYSIS OF TURNOVER, OPERATING PROFIT AND NET ASSETS
Turnover relates solely to the principal activities of the Group.
Turnover
2006 2005
£ £
Investment services 3,512,192 1,170,882
Financial advisory services 327,838 554,178
3,840,030 1,725,060
Operating profit/(loss)
2006 2005
£ £
Investment services 415,281 (606,124)
Financial advisory services 41,221 231,253
Goodwill amortisation (282,604) (282,604)
173,898 (657,475)
Net assets
2006 2005
£ £
Investment services 5,717,881 2,069,910
Financial advisory services 487,259 902,834
(including deferred tax asset)
6,205,140 2,972,744
4 OPERATING PROFIT
Operating profit is stated after charging £316,200 for a long term
incentive scheme charge (2005: £154,488).
On 4 February 2005, shareholders approved the establishment by the Company of
the Impax Group Employee Benefit Trust (the 'EBT') as part of the Company's
employee incentive arrangements.
The allocation of Ordinary Shares to employees and their families
via the EBT by the Company in 2005 and 2006 as part of the long term incentive
scheme has given rise to a charge of £316,200 (2005: £154,488) to the profit and
loss account for the year. This forms part of a total charge of £948,600, being
£463,464 evenly spread over the three years to 30 September 2007, which is the
performance period for the 2005 share award and being £485,136 evenly spread
over the three years to 30 September 2008, which is the performance period for
the 2006 share award. It is calculated in accordance with the requirements of
FRS 20 'Share based payments' by reference to the mid market price of an
Ordinary Share of 6.375p on the approval date of 4 February 2005 and on the
Directors' assumption that the EBT performance criteria will be met and all of
the shares will vest to employees and their families. The date of 4 February
2005 has been agreed to be the grant date for all shares issued to employees and
their families as this was the date when substantially all terms and conditions
of the scheme were agreed by all parties.
5 EXCEPTIONAL ITEMS
2006 2005
£ £
Profit on disposal of listed investment - 129,216
- 129,216
In 1999, the Group acquired shares in Ensyn Group Inc. ('Ensyn') with a value of
£165,000, in consideration for fees. In 2002, full provision was made for
impairment of this unlisted investment.
In April 2005 Ensyn merged with a subsidiary of Ivanhoe Energy Inc. ('Ivanhoe'),
a listed company. The consideration for this merger took the form of a
combination of cash, shares in Ivanhoe and shares in Ensyn.
Following the merger the Group received the cash element of the consideration
and subsequently sold part of its holding in Ivanhoe. These transactions have
given rise to a gain of £294,216, being £165,000 write back of impairment of
unlisted investment and £129,216 profit on disposal of listed investment for the
Group for the year ended 30 September 2005 of which £236,609 has been realised.
6 TAX ON PROFIT ON ORDINARY ACTIVITIES
2006 2005
£ £
UK taxation is based on the profit/(loss) for the year at a
rate equivalent to 30% (2005: 30%): - -
Current year tax charge - -
Deferred tax credit (388,255) -
2006 2005
£ £
Factors affecting the tax charge for the year
Profit/(loss) on ordinary activities before taxation 213,076 (593,214)
Tax at 30% of profit/(loss) on ordinary activities before 63,923 (177,964)
taxation
Effects of:
Capital gains - 32,956
Prior year trading losses utilised - (18,269)
Current year trading losses utilised - (14,687)
Non-deductible expenses 111,660 207,555
Capital allowances (4,717) (3,927)
Non chargeable income (3,240) (94,908)
Amortisation 84,781 84,781
Losses utilised (252,407) (15,537)
Current year tax charge - -
The Group has tax losses of approximately £4.0m (2005: £4.7m) available for
offset against future taxable profits in the UK. A deferred tax asset of
£388,255 (2005: £nil) has been recognised in respect of £1,294,183 (2005: £nil)
of such losses due to the predictability of future profit streams.
7 FOREIGN CURRENCIES
The results of subsidiary undertakings reporting in foreign currencies are
translated at the average rate ruling in the accounting year (US$1.80: £1; 2005:
US$1.85: £1) and the assets and liabilities at the rate ruling at the balance
sheet date (US$1.87: £1; 2005: US$1.76: £1).
8 DIVIDENDS
No dividend is proposed.
9 EARNINGS PER SHARE
The calculation of profit per share is based on the profit for the
year of £601,331 and on the weighted average number of ordinary shares in issue
of 55,592,580 (2005: loss of £593,214 on shares in issue of 38,065,022).
In order to show results from operating activities on a comparable basis, an
adjusted profit per share has been calculated which excludes goodwill
amortisation of £282,604 (2005: £282,604), exceptional items of £nil (2005:
£129,216) and long term incentive scheme charge of £316,200 (2005: £154,488).
10 RECONCILIATION OF OPERATING PROFIT TO NET
CASH OUTFLOW FROM OPERATING ACTIVITIES
2006 2005
£ £
Operating profit/(loss) 173,898 (657,475)
Write back impairment of unlisted investment - (165,000)
Revaluation of listed/unlisted investment 7,000 (22,145)
Depreciation charges 12,323 7,542
Amortisation of goodwill 282,604 282,604
Decrease/(increase) in debtors 201,793 (245,211)
Increase in creditors 660,299 159,638
Net cash inflow/(outflow) from operating activities 1,337,917 (640,047)
11 ANALYSIS OF CHANGES IN CASHFLOWS
DURING THE YEAR
2006 2005
RETURNS ON INVESTMENTS £ £
AND SERVICING OF FINANCE
Interest received 137,699 131,140
Interest paid (51,582) (149,156)
86,117 (18,016)
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets (23,616) (5,114)
Proceeds from sale of investments - 236,609
Payments to acquire investments (255) -
(23,871) 231,495
FINANCING
Issue of share capital 80,750 82,000
80,750 82,000
12 ANALYSIS OF CHANGES IN NET DEBT
1 October Cash Translation Non-cash 30 September
2005 Flow Difference transactions 2006
£ £ £ £ £
Cash at bank and in hand 863,187 1,485,177 (131,579) 332,867 2,549,652
Bank overdraft - (4,264) - - (4,264)
Debt due after one year (2,302,088) - - 2,302,088 -
NET (DEBT)/SURPLUS (1,438,901) 1,480,913 (131,579) 2,634,955 2,545,388
13 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
2006 2005
£ £
Profit/(loss) for the financial year 601,331 (593,214)
Conversion of Loan Stock 2,442,906 357
Costs of issue - Loan Stock (93,879) -
Issue of Shares - EBT 80,750 82,000
Treasury Shares - EBT (76,101) (72,700)
Other Reserve - EBT 316,200 154,488
Other Reserve - accrued NOMAD fee 16,667 -
Translation adjustments (131,579) 47,142
Share premium on market
disposal of shares from EBT 76,101 76,725
Net increase/(reduction) in
shareholders' funds 3,232,396 (305,202)
Opening shareholders' funds 2,972,744 3,277,946
Closing shareholders' funds 6,205,140 2,972,744
Copies of the report and accounts of the Company for the year ended
30 September 2006 will be sent to shareholders. Copies will also be available on
the Company's web site www.impax.co.uk and may be collected from the Registered
Office.
Registered Office:
Broughton House
6-8 Sackville Street
London W1S 3DG
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