31st Jan 2007 09:43
IPSA Group PLC31 January 2007 31st January 2007 IPSA Group PLC ("IPSA" or "the Company") Final Results IPSA, the AIM and AltX dual listed independent power plant developer withoperations in southern Africa, today announces its final results for the fifteenmonths to 30 September 2006. Highlights of the period include: • Placing and Admission to AIM in September 2005, raisingapproximately £8.0m; • Loss in the period of £1,027,000 of which £669,000 comprisesnon-trading foreign exchange losses; • Construction of the first independent gas-fired combined heat andpower plant in South Africa, at Newcastle, with a nominal power capacity of 18MW, from which first revenues are expected shortly; • Progressing the Coega Fast Track Project application for a 1,600 MWcombined cycle gas turbine; and • Obtained exclusive first rights to all coal from the Elitheni CleanCoal Project and progressing the application for a 400 MW mine mouth coal-firedproject at Elitheni. Since period end: • Introduction of the Company's ordinary shares to AltX, thealternative exchange of the JSE Limited; and • Placings of new shares with South African investors raising furtherfunds amounting to approximately £4.1m. Commenting, Peter Earl, Chief Executive of IPSA, said: "It has been very pleasing to see the progress that the Company has made towardsachieving its aim of being a significant force in the development, ownership andmanagement of independent power generation plants in Southern Africa. Southern Africa, and South Africa in particular, needs the rapid deployment ofnew power plants if economic development is not to be stifled and I believe IPSAis in a strong position to help service this need. This is an exciting time forthe Company and I look forward to the future with anticipation." For further information please contact: Peter Earl, CEO, IPSA Group PLC +44 (0)20 7793 5600 John Llewellyn-Lloyd, Noble & Company Limited +44 (0)20 7763 2200 CHAIRMAN'S STATEMENT FOR THE FIFTEEN MONTHS ENDED 30 SEPTEMBER 2006 On behalf of the Board of IPSA Group PLC, I am pleased to present toshareholders the Group's first Report and Accounts, which cover the period from1 July 2005 to 30 September 2006. In future we will be reporting annually withan accounting period also ending on 30 September. As anticipated during this initial period of investment in our first project,the Group made a loss. As set out in the Consolidated Income Statement,operating expenses amounted to £364,000. However, the reported loss in theperiod is £1,027,000, which includes £669,000 of exchange losses arising fromthe conversion of the Rand value of the physical plant assets in South Africa atthe rate of exchange on 30 September 2006 as compared to the rates of exchangeruling when sterling funds were lent to our South African subsidiary. Thesecurrency translation adjustments are non-trading items but are reported throughthe Income Statement in accordance with current international accountingstandards. During the period on which we are reporting, the Group has made considerableprogress towards its aim of being a significant force in the development,ownership and management of independent power generation plants in SouthernAfrica. It has completed the purchase of a CHP (combined heat and power)generation plant in England and has supervised the transportation and reassemblyof the plant in Newcastle, KwaZulu Natal. Reassembly has proceeded generallyaccording to plan and first revenues are expected shortly. This will be thefirst independent gas-fired power generation plant to have been built in SouthAfrica. To help meet the opportunities presenting themselves, the Company raisedexternal finance through an issue of shares and an initial flotation on the AIMmarket of the London Stock Exchange on 20 September 2005, followed by asecondary fundraising and listing on the AltX market of the JSE Limited, theJohannesburg Stock Exchange on 19 October 2006 (after the end of the periodcovered by these Accounts). As a result of these equity issues, the Company hasattracted as shareholders a number of leading institutional investors from boththe United Kingdom and South Africa. Macroeconomic developments in South Africa are generally working in our favour.Gross domestic product rose by approximately 4.3 per cent. in 2006 and isforecast to rise by a further 4 per cent. in 2007. Economic growth is leading toever-increasing demand for electricity and power cuts across South Africa sinceearly 2006 have underlined the need to build new power plants to meet risingdemand. South Africa needs significant new capacity every year just for thesupply-demand balance to stand still. We are well positioned to help meet thatgrowth in demand. It is the policy of the South African government to promote an equitabledistribution of wealth and economic prospects among the many different groups ofthe population, specifically those disadvantaged by the pre-1994 regime. Thispolicy is enshrined in the Broad-Based Black Economic Empowerment Act, whichbecame law in 2004. IPSA is in discussions with a number of black empowermentgroups with a view to one or more of them becoming our partners. With our first plant due to commence commercial operation shortly, a number ofother projects in the pipeline and demand for power increasing well beyond thecapacity of the current infrastructure to meet it, we look forward to the futurewith great anticipation. Stephen Hargrave Chairman CHIEF EXECUTIVE'S REVIEW OF OPERATIONS FOR THE FIFTEEN MONTHS ENDED 30 SEPTEMBER 2006 At the time of presenting IPSA's first full set of Accounts to shareholders, Iam pleased to report that IPSA is finalising the testing and commissioning ofSouth Africa's first privately financed independent power plant, which is alsoSouth Africa's first independent gas-fired power station. The NewcastleCogeneration Power Plant has been constructed within a period of fourteen monthsof the start of construction. It is a producer of both steam and electricitywith a nominal power capacity of 18 MW and the capability to deliver just under1 million tonnes of steam per annum. It operates as a combined cycle gas turbine(CCGT) plant, again the first in South Africa, using two Siemens Tornado gasturbines with two Aalborg steam boilers capturing the waste heat and turning thesuper-heated steam into additional electricity from a steam turbine. The equipment for Newcastle was originally installed in a facility designed tosupply a paper plant in Bury, East Lancashire in the United Kingdom. IPSA hassuccessfully acquired, dismantled, shipped to South Africa and constructed itand is now commissioning it in Newcastle. This complex process was supervised byIPSA's own project team and it is our proposed model for future similar energyefficient power plants in South Africa. Historically, electricity in South Africa has been produced in conventionalcoal-fired power stations. These typically have a 35 per cent. thermalefficiency, which means that two thirds of the energy burned in those plants iswasted and vented back into the atmosphere as yet another contribution to globalwarming. IPSA's Newcastle plant operating as a CCGT has a thermal efficiency ofnearly 56 per cent., which means that it produces around 40 per cent. less CO2than a conventional coal-fired plant for every kilowatt hour of electricity itgenerates. This is one of the lowest emissions of CO2 of any thermal power plantin South Africa. For this reason the management of IPSA believes that theNewcastle plant will be eligible for carbon credits under the United NationsClean Development Mechanism under the Kyoto Protocol. An application is beingmade to the Republic of South Africa's Department of Minerals and Energy ("DME")for the Newcastle plant to be considered eligible for Carbon Credits under theUnited Nations Clean Development Mechanism of the Kyoto Protocol for thereduction of greenhouse gas emissions. In view of the high baseline for thermalpower generation in South Africa from low efficiency coal-fired power plantswhich are heavy producers of CO2, the directors of IPSA believe that NewcastleCogeneration could qualify for a material level of Carbon Emission Reductions ("CERs") which would be an important source of revenue once the plant enterscommercial production. Since construction began at Newcastle, the management of IPSA has been innegotiations to increase steam sales on the Karbochem industrial site where theplant is based and for the sale of its electricity output to Eskom, the SouthAfrican state-owned electric utility. During 2006 IPSA has been active in pursuing a number of other importantpotential development projects in South Africa. These include the Coega FastTrack Project just outside Port Elizabeth, the Elitheni Clean Coal Project nearIndwe and the Prospecton Basin Project in Durban. Each of these projects issubject to the necessary regulatory approvals being granted and to financingbeing completed. Coega is IPSA's largest development project to date. Originally planned as aCCGT project of 800 MW, it was increased in size at the request of the DME tobecome a project of 1,600 MW in two separate blocks of 800 MW each. IPSA hasreserved both Siemens Westinghouse and Alstom gas turbines to form the opencycle components of the twin block project. Initially each block will operateusing only the gas turbines with conversion to combined cycle, using the similarwaste heat recovery systems as have been installed at Newcastle, taking place ata later stage. Open cycle gas turbines can be commissioned relatively quickly.IPSA expects to be able to bring its open cycle units on line at Coega withinnine months of receiving planning consents and regulatory approvals, subject tothe necessary environmental consents which are expected to take around sixmonths to obtain and also subject to financing being completed. This fifteenmonth construction timetable is less than half the time that it takes to build amodern coal-fired plant. We intend that the full 1,600 MW Coega plant will eventually run on liquifiednatural gas (LNG) imported into what will be one of only two LNG receivingterminals currently planned for South Africa. In the short term, however, theinitial 1,000 MW of open cycle capacity is expected to operate using liquidfuels. Elitheni is another IPSA development project which is being accelerated to comeon stream as soon as possible. This project is a 400 MW mine mouth coal-firedproject using state of the art clean coal technology, one of the first suchplants planned by the private sector for South Africa. The plant is to be builtat Indwe, site of one of the earliest coal deposits brought into production inSouth Africa. Situated in the Eastern Cape north of both Port Elizabeth and EastLondon, the coal reserve was worked in the first part of the twentieth century.IPSA has exclusive first rights to all coal from Elitheni that is used forelectricity production and we are now carrying out the environmental impactassessment and engineering studies required to obtain regulatory approval forthe plant. The Group continues to be in discussions regarding a potential gas-firedCHP plant to be located in the Prospecton Basin near Durban and has receivedindications of interest from two parties. Elsewhere in Africa, IPSA is pursuing potential power projects aimed to reduceenvironmental emissions which will in turn be eligible for carbon credits. Theseinclude the proposed 50 MW sugar bagasse-fired CHP plant at Simunye in Swazilandwhere IPSA is working with Royal Swazi Sugar and the Government of Swaziland. InBotswana, IPSA is working together with a company specialising in coal bedmethane extraction on developing an electricity generation project using coalbed methane to drive small gas engines. Coal bed methane is a highly reactivegreenhouse gas which, even more than carbon dioxide, has a damaging effect inglobal warming. Finally, IPSA is exploring power generation in Madagascar wherethe size of the country has led to the over-use of diesel generators which IPSAis looking to supplement or replace with more environmentally friendlygeneration capacity. Southern Africa and South Africa in particular, need the rapid deployment of newpower plants if economic development is not to be stifled. The Kyoto Protocolhas resulted in a highly enlightened system for transferring resources from theindustrialised world to boost investment in clean power solutions in thedeveloping world. IPSA expects to be at the forefront of that process in Africa. Peter Earl Chief Executive CONSOLIDATED INCOME STATEMENT AND STATEMENT OF RECOGNISED INCOME AND EXPENSEFOR THE FIFTEEN MONTHS ENDED 30 SEPTEMBER 2006 Consolidated income statement 15 months ended 30.9.2006 Notes £'000 Revenue 4.6 - Cost of sales - Gross profit - Administrative expenses 7 (364) Other expenses 8 (738) Finance income 9 75 Loss before tax (1,027) Tax expense 10 - Loss for the period 20 (1,027) Loss per share 12 (1.88p) Statement of recognised income and expense Exchange differences on translation 20 (451)of foreign operations Loss for the financial period 20 (1,027) Total recognised income and expense for the period (1,478) The accompanying accounting policies and notes form an integral part of these financial statements. CONSOLIDATED BALANCE SHEETAS AT 30 SEPTEMBER 2006 30.9.2006 Notes £'000AssetsNon-current assetsProperty, plant and equipment 14 5,601Intangible assets 13 833 6,434 Current assetsTrade and other receivables 17 196Cash and cash equivalents 18 526 722 Total assets 7,156 Equity and liabilitiesCapital and reserves attributable toequity holders of the CompanyShare capital 19 1,093Share premium account 20 6,640Foreign currency reserve 20 (451)Profit and loss reserve 20 (1,027) Total equity 6,255 Current liabilitiesTrade and other payables 21 901 Total equity and liabilities 7,156 The financial statements were approved by the Board on 31 January 2007. The accompanying accounting policies and notes form an integral part of these financial statements. CONSOLIDATED CASH FLOW STATEMENTFOR THE FIFTEEN MONTHS ENDED 30 SEPTEMBER 2006 15 months ended 30.9.2006 Notes £'000 Net cash outflow from 22 (846)operating activities Interest received 9 75 Net cash outflow from (771)operating activities Cash flows from investing activitiesPurchase of plant and equipment 14 (5,603)Net cash from subsidiary acquired 23,24 67Payment of deferred consideration 24 (400) Net cash used in investing activities (5,936) Net cash outflow before financing activities (6,707) Cash flows from financing activities Issue of shares (net of costs) 7,233 Net cash inflow from financing activities 7,233 Increase in cash and cash equivalents 526 Reconciliation and analysis of change in net funds Increase in cash during period 526 Cash and cash equivalents at start of period - Cash and cash equivalents at end of period 18 526 The accompanying accounting policies and notes form an integral part of thesefinancial statements. NOTES TO THE FINANCIAL STATEMENTS FOR THE FIFTEEN MONTHS ENDED 30 SEPTEMBER 2006 1 Nature of operations IPSA Group PLC and its subsidiaries' ("Group") principal activity is theconstruction, development and operation of electricity generation assets and thesupply of electricity to the wholesale market and major end-users. During theperiod under review, all of the Group's activities were located in the Republicof South Africa. 2 General information IPSA Group PLC is the Group's ultimate parent company. It is incorporated anddomiciled in England and Wales. The address of IPSA Group PLC's registeredoffice is given on the information page 2. IPSA Group PLC's shares are traded onthe Alternative Investment Market (AIM) in London and, since October 2006, theshares have had a dual listing on AltX (the Alternative Exchange of theJohannesburg market). The Company and the consolidated financial statements have been prepared inaccordance with International Financial Reporting Standards as adopted by the EUand International Financial Reporting Standards as issued by the InternationalAccounting Standards Board. The consolidated financial statements for the fifteen months period ended 30September 2006 were approved by the Board of directors on 31 January 2007. 3 Adoption of International Financial Reporting Standards The financial statements have been prepared in accordance with applicableInternational Financial Reporting Standards ("IFRS") as adopted by the EuropeanUnion. 4 Summary of accounting policies 4.1 Basis of preparation The financial statements have been prepared under the historical cost conventionand in accordance with applicable International Financial Reporting Standards ("IFRS") as adopted by the European Union. The measurement bases and principalaccounting policies of the Group are set out below. 4.2 Basis of consolidation The Group financial statements consolidate those of the Company and itssubsidiary undertakings drawn up to 30 September 2006. Subsidiaries are entities over which the Group has the power to control thefinancial and operating policies so as to obtain benefits from its activities.The Group obtains and exercises control through voting rights. The purchase of the Blazeway Engineering Limited group on 12 September 2005 wasconsidered to be a common control business combination and thus falls outsidethe scope of IFRS 3 as the combining entities were ultimately controlled by thesame parties in the same proportion both before and after the combination. As a result, the combination of IPSA Group PLC and Blazeway Engineering Limitedhas been accounted for by applying the principles of merger accounting ("poolingof interests") method. The provisional net assets and liabilities of theBlazeway group as at 12 September 2005 have been disclosed in note 23. The purchase of Newcastle Cogeneration Company (Proprietary) Limited by BlazewayEngineering Limited has been accounted for as an acquisition of a subsidiary andthe disclosures required by IFRS 3 have been made in relation to thisacquisition, see note 24. Unrealised gains on transactions between the Group and subsidiaries areeliminated. Unrealised losses are also eliminated unless the transactionprovides evidence of an impairment of the asset transferred. Amounts reported inthe financial statements of subsidiary entities have been adjusted wherenecessary to ensure consistency with the accounting policies adopted by theGroup. Acquisitions of subsidiaries are dealt with by the purchase method. The purchasemethod involves the recognition at fair value of all identifiable assets andliabilities, including contingent liabilities of the acquired company, at theacquisition date, regardless of whether or not they were recorded in thefinancial statements of the subsidiary prior to acquisition. On initialrecognition, the assets and liabilities of the acquired entity are included inthe consolidated balance sheet at their fair values, which are also used as thebases for subsequent measurement in accordance with the Group accountingpolicies. 4.3 Intangible assets acquired as part of a business combination In accordance with IFRS 3: Business Combinations, an intangible asset acquiredin a business combination is deemed to have a cost to the Group of its fairvalue at the acquisition date. The fair value of an intangible asset reflectsmarket expectations about the probability that the future economic benefitsembodied in the asset will flow to the Group. Where an intangible asset might beseparable, but only together with a related tangible or intangible asset, thegroup of assets is recognised as a single asset separately from the goodwillwhere the individual fair values of the assets in the group are not reliablymeasured. Where the individual fair value of the complementary assets isreliably measurable, the Group recognises them as a single asset, provided theindividual assets have similar lives. 4.4 Impairment of tangible and intangible fixed assets At each balance sheet date, the Group reviews the carrying amount of itstangible and intangible assets to determine whether there is any indication thatthose assets have suffered an impairment loss. If any such indication exists,the recoverable amount of the asset is estimated in order to determine theextent of the impairment loss (if any). Where it is not possible to estimate therecoverable amount of an individual asset, the Group estimates the recoverableamount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value inuse. In assessing value in use, the estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to theasset. If the recoverable amount of an asset (or cash-generating unit) is estimated tobe less than its carrying amount, the carrying amount of the asset (orcash-generating unit) is reduced to its recoverable amount. An impairment lossis recognised immediately in profit or loss, unless the relevant asset iscarried at a revalued amount, in which case the impairment loss is treated as arevaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset(or cash-generating unit) is increased to the revised estimate of itsrecoverable amount, but so that the increased carrying amount does not exceedthe carrying amount that would have been determined had no impairment loss beenrecognised for the asset (cash-generating unit) in prior years. A reversal of animpairment loss is recognised immediately in profit or loss, unless the relevantasset is carried at a revalued amount, in which case the reversal of theimpairment loss is treated as a revaluation increase. 4.5 Foreign currency translation The financial information is presented in pounds sterling, which is also thefunctional currency of the parent company. In the separate financial statements of the consolidated entities, foreigncurrency transactions are translated into the functional currency of theindividual entity using the exchange rates prevailing at the dates of thetransactions (spot exchange rate). Foreign exchange gains and losses resultingfrom the settlement of such transactions and from the translation of remainingbalances at year-end exchange rates are recognised in the income statement under"other income" or "other expenses", respectively. In the consolidated financial statements, all separate financial statements ofsubsidiary entities, originally presented in a currency different from theGroup's presentation currency, have been converted into sterling. Assets andliabilities have been translated into sterling at the closing rate at thebalance sheet date. Income and expenses have been converted into sterling at theaverage rates over the reporting period. Any differences arising from thisprocedure have been charged / (credited) through the statement of recognisedincome and expenditure to the Foreign Currency Reserve. 4.6 Income and expense recognition Revenue is recognised upon the performance of services or transfer of risk tothe customer. In the fifteen month period to 30 September 2006 the Group'srevenue was nil as there were no sales to external customers. Operating expenses are recognised in the income statement upon utilisation ofthe service or at the date of their origin. All other income and expenses arereported on an accrual basis. 4.7 Property, plant and equipment Property, plant and equipment is stated at cost, net of depreciation and anyprovision for impairment. No depreciation is charged during the period ofconstruction. All operational plant and equipment in the course of construction is recorded asplant under construction until such time as it is brought into use by the Group.Plant under construction includes all direct expenditure. On completion, suchassets are transferred to the appropriate asset category. Depreciation is calculated to write down the cost or valuation less estimatedresidual value of all property, plant and equipment other than freehold land byequal annual instalments over their estimated useful economic lives. The periodsgenerally applicable are: Plant and equipment: 3 to 15 years The depreciation charged in the period to 30 September 2006 was minimal sincealmost all plant and equipment expenditure represented plant under construction. Material residual values are updated as required, but at least annually, whetheror not the asset is revalued. Where the carrying amount of an asset is greaterthan its estimated recoverable amount, it is written down immediately to itsrecoverable amount. 4.8 Taxation Current income tax assets and liabilities comprise those obligations to, orclaims from, fiscal authorities relating to the current or prior reportingperiod, that are unpaid at the balance sheet date. They are calculated accordingto the tax rates and tax laws applicable to the fiscal periods to which theyrelate, based on the taxable profit for the period. All changes to current taxassets or liabilities are recognised as a component of tax expense in the incomestatement or through the statement of recognised income and expense. Deferred income taxes are calculated using the liability method on temporarydifferences. Deferred tax is generally provided on the difference between thecarrying amounts of assets and liabilities and their tax bases. However,deferred tax is not provided on the initial recognition of goodwill, nor on theinitial recognition of an asset or liability unless the related transaction is abusiness combination or affect tax or accounting profit. Temporary differencesinclude those associated with shares in subsidiaries and joint ventures ifreversal of these temporary differences can be controlled by the Group and it isprobable that reversal will not occur in the foreseeable future. In addition,tax losses available to be carried forward as well as other income tax creditsto the Group are assessed for recognition as deferred tax assets. Deferred tax liabilities are provided for in full with no discounting. Deferredtax assets are recognised to the extent that it is probable that the underlyingdeductible temporary differences will be able to be offset against futuretaxable income. Current and deferred tax assets and liabilities are calculatedat tax rates that are expected to apply to their respective period ofrealisation, provided that they are enacted or substantively enacted at thebalance sheet date. Changes in deferred tax assets or liabilities are recognised as a component oftax expense in the income statement, except where they relate to items that arecharged or credited directly to equity (such as revaluation of land) in whichcase the related deferred tax is also charged or credited directly to equity. 4.9 Financial assets The Group's financial assets include cash and cash equivalents, trade and otherreceivables. Cash and cash equivalents include cash at bank and in hand as well as short termhighly liquid investments such as money market instruments and bank deposits. Receivables are non-derivative financial assets with fixed or determinablepayment dates that are not quoted in an active market. They arise when the Groupprovides money, goods or services directly to a debtor with no intention oftrading the receivable. Receivables are measured initially at fair value andsubsequently re-measured at amortised cost using the effective interest method,less provision for impairment. Any impairment is recognised in the incomestatement. Trade receivables are provided against when objective evidence is received thatthe Group will not be able to collect all amounts due to it in accordance withthe original terms of the receivables. The amount of the write-down isdetermined as the difference between the asset's carrying amount and the presentvalue of estimated cash flows. 4.10 Financial liabilities Financial liabilities are obligations to pay cash or other financial instrumentsand are recognised when the Group becomes a party to the contractual provisionsof the instrument. All interest-related charges are recognised as an expense in"finance cost" in the income statement. Bank and other loans are raised forsupport of long term funding of the Group's operations. They are recognisedinitially at fair value, net of transaction costs. Finance charges, includingpremiums payable on settlement or redemption, and direct issue costs are chargedto the income statement on an accruals basis using the effective interest methodand are added to the carrying amount of the instrument to the extent that theyare not settled in the period in which they arise. 4.11 Hedging instruments The Group has not entered into any derivative financial instruments for hedgingor any other purpose. 4.12 Equity Equity comprises the following: • "Share capital" represents the nominal value of equity shares. • "Share premium" represents the excess over nominal value of the fairvalue of consideration received for equity shares, net of expenses of the shareissue. • "Foreign currency reserve" represents the differences arising fromtranslation of investments in overseas subsidiaries. • "Profit and loss reserve" represents retained earnings. 4.13 Pensions During the period under review, the Group did not operate or contribute to anypension schemes. 4.14 Key assumptions and estimates The Group makes estimates and assumptions concerning the future. The resultingestimates will, by definition, seldom equal the related actual results. TheBoard has considered the critical accounting estimates and assumptions used inthe financial statements and concluded that the main area of significant riskwhich may cause material adjustment to the carrying value of assets andliabilities within the next financial year is in respect of the assumptions usedto value intangible and tangible fixed assets. The Board has valued intangibleand tangible fixed assets at cost. However, given the assets representagreements and plant under construction in respect of the supply of electricityover an extended period, changes in technology, prices or industry practices mayresult in the assumptions used in these valuations needing to be changed. 5 Principal activity The Group's activities comprise the acquisition and development of powergeneration assets in southern Africa. 6 Segment analysis The following table provides a segmental analysis by geographic region: 15 months to RSA UK Intra-Group Total 30 September 2006 eliminations £'000 £'000 £'000 £'000 Administrative expenses (28) (336) - (364) Other expenses (1,120) (69) 451 (738) Finance income 8 296 (229) 75 Loss before tax (1,140) (109) 222 (1,027) Tax expense - - - - Loss for the period (1,140) (109) 222 (1,027) Activities in RSA relate to Newcastle Cogeneration (Proprietary) Limited and activities in UK relate to IPSA Group PLC and Blazeway Engineering Ltd. At 30 September 2006 RSA UK Intra-Group Total eliminations £'000 £'000 £'000 £'000 Total assets 6,021 7,812 (6,677) 7,156 Total liabilities 7,160 189 (6,448) 901 Plant under construction 5,830 - (229) 5,601 7 Administrative expenses 15 months to 30.9.2006 £'000Expenditure incurred in administrative expenses is as follows: Payroll and social security 185 Other administrative expenses 179 Total 364 Audit fees for the Group amounted to £20,000. Fees payable to Grant Thornton UK LLP in respect of advisory services amounted to £80,474 in connection with the Company's listing on AIM and £21,000 in connection with taxation advice. These fees have been treated as a share issue costs and have been charged to the share premium account. 8 Other expenses 15 months to 30.9.2006 £'000 Fees associated with listing on AIM 69Foreign exchange losses 669 738 Foreign exchange losses have arisen as a result of the conversion of physical assets located in South Africa into sterling at the exchange rate ruling on 30 September 2006 as compared to the exchange rates ruling at the times when sterling funds were provided by the Company. 9 Finance income 15 months to 30.9.2006 £'000 Interest received on bank deposits 75 10 Tax expense There is no tax charge arising on the results for the period due to the losses incurred. The relationship between the expected taxcredit and the tax credit actually recognised is as follows: 15 months to 30.9.2006 £'000Loss for period before tax (1,027)Standard rate of corporation tax in UK 30%Expected tax credit 308Tax effect of consolidation adjustments 67Tax losses carried forward 375Actual tax credit - No deferred tax asset has been recognised in respect of the tax losses of £375,000 carried forward owing to uncertainty over the timing of future utilisation. 11 Loss attributable to the parent company The loss attributable to the parent company, IPSA Group PLC, was £109,000. As permitted by Section 230 of the Companies Act 1985, no separate profit and loss account is presented in respect of the parent company. 12 Loss per share The basic loss per share is calculated by dividing the loss for the period attributable to shareholders by the weighted average number of shares in issue during the period. 15 months to 30.9.2006 Loss attributable to equity holders of the company £1,026,798Total shares in issue at 30 September 2006 54,629,630 Basic loss per share (1.88p) 13 Intangible assets 30.9.2006 £'000 Additions arising on acquisition of subsidiary 833Cost at 30 September 2006 833 The intangible asset represents the provisional fair value of a contract, owned by Newcastle Cogeneration (Proprietary) Limited, to supply steam to theelectricity generating plant. Amortisation over the life of the contract willbegin to be charged when the supply of electricity from the plant commences. 14 Property, plant and equipment Plant under construction £'000 Additions 5,603Cost at 30 September 2006 5,603 Depreciation - charge for period 2 Net book value at 30 September 2006 5,601 Plant under construction has been valued at cost and represents expenditure incurred during the period to 30 September 2006. 15 Investments The Company owns the entire issued share capital of Blazeway Engineering Ltd which in turn owns the entire issued share capital of Newcastle Cogeneration (Proprietary) Limited. 16 Trade and other receivables receivable after more than 1 year 30.9.2006 £'000 Receivables due after more than 1 year - 17 Trade and other receivables receivable in less than 1 year 30.9.2006 £'000 Pre-paid taxes 162Other prepayments 34 196 18 Cash and cash equivalents 30.9.2006 £'000 Cash at bank and in hand 18Short-term bank deposits 508 526 19 Share capital 30.9.2006 £'000a) Authorised 150,000,000 ordinary shares of 2p each 3,000 b) Allotted, called-up and fully paid 54,629,630 ordinary shares of 2p each 1,093 Reconciliation of movement in share capital during the period Number £ On incorporation (1 July 2005) - 2 ordinary shares of £1 each 2 2Subdivision of each ordinary £1 share into 50 shares of 2p each 98 - on 12 September 2005Allotment in consideration of acquisition of Blazeway 24,999,900 499,998 Engineering Limited on 12 September 2005 at parAllotment on admission to the AIM market of the London 29,629,630 592,593 Stock Exchange on 20 September 2005 at 27p per share At 30 September 2006 54,629,630 1,092,593 The difference between the total consideration arising from shares issued and the nominal value of the shares issued has been credited to the share premium account (note 20). 20 Statement of changes in shareholders' equity Share Share Foreign Profit and Total capital premium currency loss reserve reserve £'000 £'000 £'000 £'000 £'000 On incorporation - - - - -Allotment - 12.9.05 500 - - - 500Allotment - 20.9.05 593 7,407 - - 8,000Share issue costs - (767) - - (767)Translation difference - - (451) - (451)Loss for the period - - - (1,027) (1,027)Balance at 30 September 2006 1,093 6,640 (451) (1,027) 6,255 21 Trade and other payables 30.9.2006 £'000 Trade creditors 856Accruals 45 901 22 Reconciliation of loss before tax to cash 30.9.2006 outflow from operations £'000 Loss before tax (1,027)Depreciation 2Changes in working capital Trade and other receivables (196) Trade and other payables 901Exchange adjustment (451)Interest received (75)Net cash outflow from operating activities (846) 23 Common control business combination 30.9.2006 £'000Fair values of assets and liabilities at date of combination Intangible fixed asset 833 Debtors 42 Creditors (400) Net cash acquired 25 Net assets acquired 500 Consideration Issue of ordinary shares 500 Total 500 On 12 September 2005, the company acquired 100% of the issued share capital ofBlazeway Engineering Ltd for £500,000. The purchase price was settled by theissue of 24,999,900 ordinary shares of 2p each. Blazeway Engineering Limitedowns 100% of the issued share capital of Newcastle Cogeneration (Proprietary)Limited, having acquired the shares on 9 May 2005 for £875,000. 24 Acquisition of subsidiary entities 30.9.2006 £'000Provisional values of assets and liabilities acquired Intangible fixed asset 833 Cash and bank balances 42 Net assets acquired 875 Consideration Cash 475 Deferred consideration 400 Total 875 On 9 May 2005, Blazeway Engineering Ltd acquired 100% of the issued sharecapital of Newcastle Cogeneration (Proprietary) Limited for £875,000. Thepurchase price was settled by £475,000 of cash and £400,000 of deferred consideration. The deferred consideration was paid during the period. 25 Financial risk management The Group is exposed to a variety of financial risks which result from both itsoperating and investing risks. The Group's risk management is coordinated tosecure the Group's short to medium term cash flows by minimising the exposure tofinancial markets. The Group does not actively engage in the trading offinancial assets for speculative purposes nor does it write options. The mostsignificant risks to which the Group is exposed are described below: a) Foreign currency risk The Group is exposed to translation and transaction foreign exchange risk.Foreign exchange differences on retranslation of these assets and liabilitiesare taken to the profit and loss account of the Group. The Group's principaltrading operations are based in South Africa and as a result the Group hasexposure to currency exchange rate fluctuations in the Rand relative toSterling. b) Interest rate risk Group funds are invested in short term deposit accounts, with a maturity of lessthan three months, with the objective of maintaining a balance betweenaccessibility of funds and competitive rates of return. c) Liquidity risk The Group seeks to manage financial risk by ensuring sufficient liquidity isavailable to meet foreseeable needs and to invest cash assets safely andprofitably. d) Credit risk Generally, the maximum credit risk exposure of financial assets is the carryingamount of the financial assets as shown on the face of the balance sheet (or inthe detailed analysis provided in the notes to the financial statements). Creditrisk, therefore, is only disclosed in circumstances where the maximum potentialloss differs significantly from the financial asset's carrying amount. TheGroup's trade and other receivables are actively monitored to avoid significantconcentrations of credit risk. e) Fair values In the opinion of the directors, there is no significant difference between thefair values of the Group's and the Company's assets and liabilities and theircarrying values. 26 Capital commitments The Group is in the process of constructing a major power plant in the Republicof South Africa. Expenditure incurred to 30 September 2006 amounted to£5,550,961. It is anticipated that further expenditure of £2.0m will be requiredto bring the plant into operation. 27 Contingent liabilities At 30 September 2006, the Group's only contingent liability related to apurchase agreement entered into by Newcastle Cogeneration (Proprietary) Limitedin respect of minimum purchases from a supplier amounting to ZAR 22m (£1.6m)within one year and a total of ZAR 121m (£8.7m) over the subsequent 4 years. Theagreement commenced on 1 July 2006 and terminates on 30 June 2011. 28 Related party transactions Material transactions with related parties during the period were as follows: i) Acquisition of Blazeway Engineering Limited for £875,000 fromIndependent Power Corporation PLC. ii) Payment by the Company of £60,000 to Independent Power Corporation PLCunder a "Shared Services Agreement" for the provision of offices and otheradministrative services. Payment by the Company of £229,538 to Independent Power Operations Ltd forservices relating to the dismantling and transportation of plant and equipment.Independent Power Operations Ltd is a wholly owned subsidiary of IndependentPower Corporation PLC. Payment by Newcastle Cogeneration (Proprietary) Ltd of £20,670 to IndependentPower Corporation PLC for civil works P Earl is a shareholder and director of Independent Power Corporation PLC and JWest and E Shaw are directors. A sum of £22,670 was owing to Independent PowerCorporation PLC at 30 September 2006. iii) Payment by the Company of US$3.85m to EPG for the purchase of theCHP plant. EPG is a wholly owned subsidiary of European Power Systems A.G. whichacquired and holds 2.8 per cent. of the issued share capital of the Company. iv) Payment by Newcastle Cogeneration (Proprietary) Ltd of ZAR 372,781 toFreydan Properties (Pty.) Ltd for use of office facilities and ZAR 10,290,894 toFirst Tech cc for civil works. C Lewis is a shareholder and director in FreydanProperties (Pty.) Ltd and a shareholder in First Tech cc and a former directorof the Company. v) Payment by the Group of salaries to key management totalling£170,329. 29 Directors and employee costs 30.9.2006 £'000 Aggregate remuneration of all employees and directors 185 Remuneration paid to directors Salary Other Total emoluments £'000 £'000 £'000 S Hargrave (non-executive) 30 - 30 N Bryson - 5 5 P Earl 30 - 30 J Eyre 30 - 30 C Lewis (resigned) 13 - 13 E Shaw 30 - 30 J West (non-executive) 3 12 15 Total 136 17 153 'Other' remuneration includes £5,000 paid to Balmyle Ltd, a company controlledby N Bryson and £17,000 paid to Jimmy West Associates Ltd, a company controlledby J West. The average number of employees in the Group, including directors, was 7. 30 Post balance sheet date event In October 2006, the Company's shares were admitted to AltX (the AlternativeExchange of the JSE Ltd) and 11,499,839 new ordinary 2p shares were placed withSouth African investors at an average price of ZAR 5.84 (£0.40) raising £4.16mnet of costs. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
IPSA.L