28th Mar 2007 07:03
D1 Oils Plc28 March 2007 D1 Oils plc 28 March 2007 Preliminary Results for the Year Ended 31 December 2006 D1 Oils plc, the UK-based global producer of biodiesel, today announces itspreliminary results for the year ended 31 December 2006. Operational Highlights • Key strategic milestones achieved: o Significant progress made in developing higher yielding seeds o Planting programme on schedule: 145,000 hectares to date o First UK refining site in commercial operation on Teesside o Second site acquired for refining expansion on Merseyside o Jatropha oil processed to European standards for the first time o First offtake deal signed and first deliveries of biodiesel achieved • Business fully funded by £49.2m placing completed in December Strategy • D1 aims to be a global leader in low-cost inedible feedstock production and biodiesel processing • Strategy based on producing feedstocks that do not compete with food production and which can be grown sustainably on marginal land • D1 is investing in: o research and development to bring jatropha to higher-yield commercial production o jatropha planting footprint o technology and infrastructure for pre-processing and refining • The purpose of our combined upstream and downstream strategies is to deliver low-cost biodiesel production Commenting on the results, Elliott Mannis, Chief Executive Officer, said: "Business delivery in agronomy, refining and trading is on track, with aplanting footprint of 145,000 hectares as of mid-March, and good progress onrefining. Our strategy is to produce inedible oil sustainably from jatropha for low-cost production of biodiesel. We believe this sets us apart andgives us a distinct competitive advantage. Rising prices for edible oil and the reduction in crude prices have meant asignificant reduction in margins for the UK biofuels industry. Whilst this is anissue, it is also a validation of our strategy of focusing on low-cost,long-term supplies of inedible feedstock." Lord Oxburgh of Liverpool, Non-Executive Chairman, added: "The Company's strategy to create a vertically integrated business to develop non-food oils for the biodiesel industry is hugely important. D1 is working toensure that the infrastructure is in place to deliver jatropha oil into the UKduring 2008." Contacts D1 Oils:Graham Prince, Head of Corporate CommunicationsTel: +44 (0) 1642 755580Mobile: +44 (0) 7973 323840 Brunswick Group:Kevin ByramMark AntelmeTel: +44 (0) 20 7404 5959 An interview with Elliott Mannis, Chief Executive Officer, is now available invideo/audio and text at www.d1plc.com and at www.cantos.com Notes to Editors D1 Oils plc is a UK-based global producer of biodiesel. We are building a globalsupply chain and network that is sustainable and delivers value from'earth-to-engine'. Our operations cover agronomy, refining and trading. We arepioneering the science, planting and production of inedible vegetable oils; wedesign, build, own, operate and market biodiesel refineries; and we source,transport and trade seeds and seedlings, seedcake, crude vegetable oils andbiodiesel. Report of the Chairman and of the Chief Executive Officer We are pleased to report to shareholders our preliminary results for the yearended 31 December 2006, the second full year of D1's operation as a publiccompany. This is our first joint report on the progress of the business sinceLord Oxburgh of Liverpool became Non-Executive Chairman. These preliminary results were approved by the Board of Directors of D1 Oils plcon 27 March 2007. The year 2006 was one of substantial achievement across the business. At thestart of the year we had only just begun planting jatropha, and our refinerytechnology was not yet in commercial manufacture. One year on we believe we arean established global leader in the scientific and commercial development ofjatropha, and we have achieved significant planting worldwide. Our refinerytechnology is in commercial operation in Teesside, with further capacityexpansion underway on Merseyside. A successful placing in December raised £49.2mto fully fund the business. Over the past twelve months we believe we have builtthe foundations of a business that will deliver supplies of sustainable,inedible oils for biodiesel production. Operations 2006 began with the January appointment of Elliott Mannis as Chief ExecutiveOfficer and the subsequent redefinition of our organisation and future strategyaround the three core business activities of agronomy, refining and trading.With our direction and purpose set, we were able to achieve significant progressthroughout the business. In agronomy, together with our partners, we have a substantial jatropha plantingfootprint across our three operational regions of Southern Africa, India andSouth East Asia. By the end of 2006 we had planted or obtained rights to offtakefrom a total of over 124,000 hectares. As of mid March 2007 we have increasedthis to over 145,000 hectares and we fully expect this total to exceed 150,000by the end of the month. Under our jatropha plant science programme we havebegun trials of our first selections of jatropha material collected from aroundthe world during 2006. We are now producing our first selected E1 elite materialwith increased oil yields for planting in 2008. In refining, we brought our first biodiesel refineries in the UK into beneficialoperation, creating a total capacity of 32,000 tonnes at our Teesside site.During January 2007 we completed the acquisition of a second refining anddistribution site at Bromborough on Merseyside, which we anticipate will enableus to add a further 100,000 tonnes of capacity by the end of 2007. We alsosucceeded in processing crude jatropha oil into European standard biodiesel inMarch 2006. In trading, we began the development of a global supply chain to support ouragronomy and refining operations. Having received the first volume shipments ofsoya oil in the middle of 2006, we signed our first offtake deal with Petroplusfor supply of soya biodiesel in October and deliveries under contract were madeduring the year. In December we completed a successful fundraising and delivered £49.2m beforeexpenses, despite challenging market conditions. The funds raised will enable usto maintain our growth and development. On 1 February 2007 the Board stated that it was continuing negotiations begun in2006 with certain parties. Negotiations with one of these parties continue. Anon-binding Memorandum of Understanding regarding a strategic collaboration hasbeen agreed and a further announcement will follow in due course. Finances During the year we raised additional funding of £49.2m gross (£46.2m net ofexpenses). Net cash at 31 December was £48.2m. The loss for the year was £12.6mand reflects continuing investment for future growth. Management Subsequent to the year end, Karl Watkin, a founder of the Company, stood down asChairman to be replaced by Lord Oxburgh of Liverpool, who joined the Board inSeptember 2006. Karl Watkin remains with the Company as a Non-ExecutiveDirector. Peter Campbell, also a founder director, will step down from the Boardas of 31 March 2007. We would like to thank both for everything they havecontributed to the business. Outlook Transport energy policies across the globe are now increasingly driven by thechallenges of climate change and fuel security. We believe biofuels, and inparticular biodiesel, offer a means to secure cost-effective supplies ofsustainable transport fuel in the medium-term. Biofuels are increasinglysupported by national and regional policy initiatives. The European Union hasset a minimum biofuels blend target of 10% by 2020. In the UK a mandatorybiodiesel blend will be phased in progressively under the Renewable TransportFuels Obligation (RTFO). Meeting UK and European demand without recourse to imported feedstocks isincreasingly challenging. The short-term impact of lower diesel prices andincreased food-grade feedstock costs is now significantly impacting industrymargins, and we believe it prudent to plan for edible vegetable oil pricesremaining relatively high for the foreseeable future. Having protected ourmargins by securing supplies of soya at significantly lower prices earlier in2006, we are exploring alternative avenues to meet our offtake commitments. We believe this situation validates our strategy to develop supplies ofalternative, inedible oils like jatropha that are not subject to the same demandpressures as food oils. It is our objective to land crude jatropha oil in the UKat a target price that is very competitive with the cheaper food-gradealternatives and to be able to refine it profitably without government subsidyor support. We expect our first supplies of jatropha oil during 2008. Our goal is to concentrate on planting and offtake relationships that candeliver supplies of jatropha oil in commercial volumes, and to develop the rangeof logistics capabilities to bring that oil to market, both in producing regionsand in developed markets including the UK and continental Europe. The Board isconfident that our global team is well placed to realise this goal. On behalf ofthe Board we would like to take this opportunity to thank our executivemanagement, our business teams, and our partners and advisors for their hardwork and support over the year. Operations Section Agronomy - Plant Science and Planting During 2006 we continued to build on our first-mover advantage in jatropha. Webelieve we have developed our research and planting programmes such that we havea leading position in the development of jatropha as a commercial energy crop.Jatropha and other inedible oil crops have not seen the development in terms ofyields and growing techniques that crops for human consumption have undergone.Application of the latest agronomy techniques will enable the development of themost promising uncultivated varieties of jatropha into progressivelyhigher-yielding industrialised crops. This has already been accomplishedsuccessfully with food crops, such as rice, canola, soya and palm. We believe that developing and securing supplies of alternative, inedible oilslike jatropha is important to the future of the biodiesel industry. Inedible oilcrops are a viable alternative source of biodiesel because they are not subjectto the additional demand pressures of food use and do not require the samequality of land as food crops. Given the increasing concern about the impact ofsoya and palm production on vulnerable rainforest habitats, the development ofinedible oil crops that can take advantage of marginal land is pressing.Further, the pricing of inedible oil crops should be directly correlated to theprice of crude oil. This is not the case for food crops due to the demandpressures from the food industry. Plant Science Our plant science programme has gathered a sufficiently wide range of jatrophamaterial to support the first ever commercial breeding and product placementtrials for this crop. We have now collected more than 200 accessions of jatrophafrom three different continents and over twenty countries. Using extensive fieldand laboratory data gathered from this material, we have established astructured breeding process and a global trials network to identify whichindividual jatropha cultivars are best adapted to the different cultivationzones in our target planting areas. We are developing our breeding programme tocreate the first cultivars of jatropha. These will be the basis for futureselection of high-yielding jatropha varieties. The infrastructure to support our plant science and product developmentactivities is expanding. In addition to our existing Regional Development Centre(RDC) at Coimbatore in Tamil Nadu, India, we have established a new RDC inSwaziland and will open a further centre in South East Asia shortly. We intendto establish a global jatropha breeding centre in West Africa and to openCountry Development Centres (CDCs) everywhere we operate. The first commercial outcome of the plant science programme is our 'E1' seedmaterial, selected for higher yield and good biodiesel profile. We expect thisseed will deliver oil yields of 2.7 tonnes per hectare under properly managedconditions when the trees attain maturity. Expected E1 yields compare favourablywith yields from crops that have already experienced considerable development,for example soya (c.0.4 tonnes per hectare) and rapeseed (c.1.0 tonnes perhectare). E1 seed multiplication is already underway in Southern Africa, Indiaand South East Asia, and we expect to be able to plant out up to 50,000 hectareswith this material in 2008. Further elite selections are already in preparationfor future planting. We anticipate that the development of these new selectionswill continue to deliver higher yields in line with the improvements made inother commercial crops. In the longer term we believe yields for jatropha havethe potential to approach those of palm (c.4-5 tonnes per hectare). We are further developing techniques to improve the speed, efficiency andquality of multiplication of selected material. To further ensure the quality ofour supply chain we have established different oil testing platforms. We havealso commenced a programme to develop jatropha seedcake via detoxification foruse as an alternative high-value animal feed protein source. In cooperation with joint venture partners and farmers we are introducing astewardship programme to seek to ensure the sustainable production of jatrophaoil. This Sustainable Oil Supply Programme (SOSP) will use training, farmingmanuals and on-farm demonstrations to enable higher-yield production fromplanting. As the programme develops we will be able to report on forecast oilquantities in addition to hectares planted. The SOSP will also encompass thedevelopment of technology for harvesting, expelling and logistics support, andthe implementation of policies for social, economic and environmentalsustainability of jatropha production. In addition to focusing on jatropha, we are now investigating several otherinedible oil crops. We aim to obtain modest quantities of these oils underofftake agreements this year for analysis. Planting Programme As of 16 March 2007, D1 has planted or obtained rights to offtake from a totalof over 145,000 hectares of jatropha worldwide and we expect this total toexceed 150,000 by the end of March. The table below summarises the position asat 16 March: Hectares Managed Contract Seed purchase and oil Total plantations farming supply agreements India South - 7,984 - 7,984 North - 8,300 2,000 10,300 East Rest - 5,093 22,924 28,017 Total - 21,377 24,924 46,301 Africa Swaziland 1,127 - 6,867 7,994 Zambia 2,161 17,316 - 19,477 Rest - - 5,028 5,028 Total 3,288 17,316 11,895 32,499 South China - - 28,000 28,000EastAsia Indonesia - 29,141 - 29,141 Rest - 4,780 4,904 9,684 Total - 33,921 32,904 66,825 Total 3,288 72,614 69,723 145,625 Certain of the figures in this table have been reclassified to reflect moreappropriately the nature of the underlying planting relationships. The table above indicates the broad geographic locations and types ofarrangements associated with jatropha planting worldwide in which D1 has aninterest. The level of investment costs and security of future oil supply areproportional to the degree of direct involvement by D1 and its joint venturepartners. Managed plantations are those farms where land and labour is controlled by D1,either through its subsidiaries or joint venture partners. Under contractfarming, the farmer plants his own trees on his own land. D1 and its partnersassist with the provision of seedlings and the arrangement of bank finance forplanting, and offer a buyback of harvested seeds with an offtake agreement,subject to a floor price and the achievement of agreed quality standards. Weprovide support and advice during cultivation, and monitor the condition of thecrops. Seed and oil supply agreements are arms-length supply contracts with thirdparties whereby D1, either directly or through joint venture partners, hasofftake arrangements in place over future output from jatropha plantations whichthe third party is developing. D1 has limited involvement in this planting andrelies on third parties to measure and manage the crop effectively. In Southern Africa, planting has picked up significant pace in Swaziland andZambia, and we expect these areas to be the principal deliverers of new plantingin March, April and May. In India our joint venture with Williamson Magor, thetea producer, has significantly expanded planting of jatropha during the year.South East Asia saw rapid growth in planting and offtake agreements during 2006.We have added depth to our management teams across the region to consolidate anddevelop the network of new relationships from our regional head office inSingapore. Given the scale and rapid pace of the planting undertaken in 2006, all of whichwas undertaken with wild seed, we expect to see variations in the quantity ofoil produced from that planting. We believe that well-maintained planting withwild seed has the potential to achieve yields of up to 1.7 tonnes of oil perhectare after 5-6 years when the trees are mature. However, some planting,particularly that carried out by third parties with lower levels of agronomyexpertise, may not achieve these yield levels. Our challenge is to ensure thatwe focus effort on the best areas in terms of climate patterns, soil quality andlogistics to achieve high yields and bring oil to market. This is one of the keystewardship objectives of our SOSP. D1 is developing a methodology to estimate future oil volumes that may beexpected to be generated from all current planting and future planting and thisdata will be disclosed as soon as it is available. We expect the first harvests from 2006 planting in 2008. The harvested grainwill be crushed to produce crude jatropha oil. We have constructed a prototypeexpeller at our RDC in Coimbatore, Tamil Nadu, which is capable of crushing atonne of grain per day. This will be the start point for our first end-to-endsupply chain test to take jatropha grain through a local crushing process and onto pre-processing and refining in the UK. The development of our capability tobring oil to market in advance of jatropha coming on stream is therefore amongthe most important management tasks for 2007. Refining - Capacity and Production Capacity During 2006 we successfully commissioned our first four UK refinery units at oursite in Middlesbrough. The first four D1 20 units give the site an interim totalproduction capacity of 32,000 tonnes per annum. The speed with which we put thisnew capacity in place reflects the strengths of the D1 modular technology andour growing technical capabilities in refinery process technology andengineering. In March 2006 we successfully processed jatropha oil to EN14214standard, confirming the crop's potential as a refining feedstock. We announced our intention to acquire a new refinery and distribution site atBromborough on Merseyside in September 2006 and completed the acquisition inJanuary 2007. By converting existing facilities at the site, which formerly produced fuel and lubricant additives, we intend to add 100,000 tonnes of newrefining capacity in 2007. The site has sufficient area and facilities toexpand production significantly, and the existing infrastructure will alsosupport the installation of pre-treatment facilities. We intend to commencevolume processing of crude jatropha vegetable oil in 2008. We also expect toearn ancillary revenues through letting site assets not required for biodieselproduction, for example warehouse space, to third parties. Internationally, we expect that approximately half of the vegetable oil weharvest from jatropha planting in developing countries will be refined and usedlocally, with the balance exported. We expect to deploy our modular D1 20refineries into our regional operations in combinations of the same semi-permanent clusters of four that we are currently operating on Teesside. Inaddition to utilising our proprietary refining technology we are also open tooverseas expansion of our refining activities via either the acquisition ofexisting plant for conversion, or investment into biodiesel refining projects,either new-build or pre-existing. Production Since the last quarter of 2006, refining margins across the UK industry havebeen affected by the combination of lower diesel prices and increased feedstockcosts. Soya prices in particular rose rapidly in the last year from US$630 pertonne in January 2006 to US$797 per tonne on 23 March 2007. In consequence weran our refineries below capacity to ensure that current stocks of soya oil,purchased at advantageous prices earlier in the year, last as long as possible.Sales of biodiesel for the year 2006 were 3,286 tonnes in total. Under these circumstances, as previously announced, we believe it is prudent toextend the timetable for the full rollout of our target of 320,000 tonnes ofrefining capacity from the end of 2007 until the end of 2008, after theintroduction of the RTFO. The introduction of the RTFO, increasing from a 2.5%blend in April 2008, to 3.75% in 2009 and 5% in 2010, will be supported by atotal subsidy regime of 35ppl (pence per litre), a combination of the existing20ppl duty reduction on biofuel and an additional buy-out price of 15ppl. Thissupport has been confirmed in the Budget of 21 March 2007 as continuing at leastuntil the fiscal year 2009/10, which we believe will enable a significant andpositive difference to margins to be achieved. We anticipate that the RTFO willcreate an annual UK market for at least one million tonnes of biodiesel by 2010.In the meantime, we are confident that, should there be a sustained return toincreased diesel prices and lower commodity prices, the refinery programme canbe accelerated to meet the increased demand that might result from theobligation. The current high prices for edible vegetable oils validates, we believe, ourstrategy to develop and secure supplies of jatropha and other alternative,non-food oils to meet demand. We remain confident in our target to land crudejatropha oil in the UK at a target price that is very competitive with thecheapest food-grade alternatives. The table below details the targeted cost ofjatropha (based on non-elite seeds) versus other feedstock vegetable oils. Feedstock vegetable oil at current prices* $ per tonne Rapeseed (RBD ex-tank UK) 944 Soya (RBD ex-tank Rotterdam) 797 Palm olein 632 Jatropha (D1 target for non-elite seed) 475 - 500 * Landed in Northern Europe Trading During 2006 we began to put the key trading functions in place to create theglobal supply chain necessary to deliver crude vegetable oil feedstocks andbiodiesel. In June we received the first marine tanker shipment of soya oil forrefining and the first shipments of palm methyl ester for blending. We alsobecame a member of the Roundtable for Sustainable Palm Oil. The challenge for2007 is to develop further the logistics capabilities we have in place todeliver low-cost, volume supplies of alternative, non-food oils. We expect thefirst crude jatropha oil from early harvests of planted material to be importedto the UK during 2008, and we will use this first production to test our supplychain capabilities. We signed our first offtake deal with Petroplus for supply of soya biodiesel inOctober 2006. The first delivery of product was made later that month. Having secured stocks of soya at prices significantly below current levelsearlier in 2006, we actively managed stocks consistent with producing positivemargins and meeting our contractual obligations. We are now exploringalternative avenues to meet our offtake commitments. During the year we also put in place the UK component of our global trading teamwith the recruitment of logistics, customer service and sales staff. Weanticipate that jatropha oil will be available for processing into biodiesel inthe UK market from 2008. During 2007 we will prepare the UK logistics elements,including shipping, storage, and pre-processing technology, that will enable usto complete the supply chain to deliver value from earth to engine. Safety, Health and Environment Jatropha is a member of the Euphorbiaceae family. In common with other crops ofthis family it contains a number of natural compounds that are biologicallyactive. Preparations of all parts of the plant, including seeds, leaves and barkare used for medicinal purposes. Jatropha seeds, seedcake and oil should behandled with care. We aim to ensure that in harvesting and processing jatropha,the exposure of individuals to biologically active compounds is kept to aminimum by use of suitable personal protective equipment and containmentmeasures. D1 is actively developing the health and safety standards andcompliance surrounding the processing of jatropha meal into oil for refininginto biodiesel. With the development of large scale Jatropha processing, D1intends to lead the development of safe handling of jatropha and its byproducts. We are pleased to report that in our planting and processing of jatropha, andthe commissioning and operation of our refineries, we operated throughout theyear in all regions with no reportable safety, health or environmentalincidents. Financial Review Key financials £m 2006 2005Turnover 1.6 0.5Gross operating loss (0.8) -Distribution & admin expenses (12.2) (8.7)Loss before tax (12.6) (7.9)Loss per share (pence) 39.98p 29.52pNet cash at 31 December 48.2 23.4 The continued development of the business is reflected in the financial resultsfor the year ended 31 December 2006. The financial results have been prepared on a basis consistent with previousperiods according to United Kingdom Generally Accepted Accounting Practices (UKGAAP). The only exception to this is that during the period the Group adoptedFRS 20 'Share-based payments', and accordingly has recognised a charge in thecurrent and preceding periods equivalent to the fair value of share options inissue. This has resulted in a current year charge of £1.135m and an increase inthe 2005 charge in relation to share-based payments of £0.47m. Total Group turnover of £1.6m (2005: £0.5m) in the year to 31 December 2006arose from the sale of 3,286 tonnes of biodiesel to our main offtake partner,Petroplus. These sales, which utilised lower cost soya feedstock purchased inthe summer, generated a gross operating loss after the cost of refining of£0.8m. Administrative expenses of £11.1m (2005: £8.6m) reflect the ongoing developmentof the business, particularly in the overseas subsidiaries. Included in thistotal are spending on agronomy of £0.7m; on regional operations of £3.5m; onbusiness development of £1.1m; and on refinery technology and research of £0.5m. Further investment in the technical and development teams both in agronomy andrefining have significantly strengthened these teams. Interest received of £0.6m (2005: £0.8m) relates to cash deposits held duringthe year. The loss on ordinary activities before and after taxation was £12.6m (2005:7.9m)and the loss per ordinary share was 39.98p (2005: 29.52p). As losses wereincurred, no corporation tax was payable. Net cash (defined as gross cash less mortgage and cash collateral) on hand at 31December 2006 was £48.2m (2005: £23.4m). Gross cash was £51.3m (2005: £24.2m),the mortgage loan was £0.8m (2005: £0.8m) and cash held as collateral was £2.3m(2005: £nil). The net inflow in the year to 31 December 2006 was £24.7m (2005:£14.7m). The most significant element in the cash flow was the proceeds from theshare placing which was completed in December, when £49.2m was raised beforeexpenses of £3.0m. During the year, significant investment was made at our Teesside site.Investment in site infrastructure, tankage and safety equipment was £7.0m.Investment in the build and commissioning of the four D1 20's amounts to £2.9m.There has also been an investment of £2.9m in the working capital reflecting thebuilding of our stock of vegetable oils for future processing. In November 2006 the Group secured a financing facility from Allied Irish Bankand Investec for up to six D1 20 units totalling £5.1m. This agreement providesfinance of £850k for each completed D1 20 unit. This facility allows an initialcash release of 35% with further annual cash releases over a 5 year period. CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 December 2006 Note 2006 Restated £000 2005 £000 Turnover: group and share of joint ventures 1,571.8 461.7Less: Share of joint ventures (11.5) (46.2)--------------------------- ---------- --------- ----------Group turnover 1,560.3 415.5Cost of sales (2,366.7) (399.9)--------------------------- ---------- --------- ----------Gross (loss)/profit (806.4) 15.6Distribution Costs (1,067.2) (101.2)Administrative expenses (11,146.8) (8,553.8)--------------------------- ---------- --------- ----------Operating loss 3 (13,020.4) (8,639.4)Share of operating losses in joint ventures (121.5) (32.9)Amortisation of goodwill arising onacquisition of joint ventures (6.3) (18.7)Bank interest receivable 566.4 764.1Interest payable and similar charges 6 (46.9) ---------------------------- ---------- --------- ----------Loss on ordinary activities before taxation (12,628.7) (7,926.9)Tax on loss on ordinary activities 7 - ---------------------------- ---------- --------- ----------Retained loss for the financial yearwithdrawn from reserves 7, 19 (12,628.7) (7,926.9)--------------------------- ---------- --------- ----------Loss per ordinary shareBasic and diluted loss per ordinary share 9 39.98p 29.52p--------------------------- ---------- --------- ---------- All results derive from continuing operations. CONSOLIDATED STATEMENT OF TOTAL RECOGNISEDGAINS AND LOSSES For the year ended 31 December 2006 Year ended Year ended 31December 2006 31December 2005 £000 £000Loss for the financial year excluding share of loss in joint ventures. (12,500.9) (7,875.3)Share of joint ventures loss for the year (127.8) (51.6) --------- ----------Loss for the financial year attributable tomembers of the parent company (12,628.7) (7,926.9)-------------------------------- --------- ----------Currency translation difference on foreign currency net investments (591.6) (29.9)-------------------------------- --------- ----------Total recognised losses relating to the year (13,220.3) (7,956.8)-------------------------------- --------- ----------Prior year adjustment (as explained in note 1) (470.0) --------------------------------- --------- ----------Total gains and losses recognisedsince last annual report (13,690.3) --------------------------------- --------- ---------- CONSOLIDATED BALANCE SHEETAs at 31 December 2006 Note 31December Restated 2006 31December 2005 £000 £000Fixed assetsIntangible assets 10 60.6 64.1Tangible assets 11 14,676.3 4,170.0Other investments 12 18.2 14.0--------------------------- ---------- --------- ---------- 14,755.1 4,248.1 --------------------------- ---------- --------- ----------Current assetsDebtors:amounts falling due after one year 13 948.9 50.0amounts falling due within one year 13 898.3 675.3--------------------------- ---------- --------- ---------- 13 1,847.2 725.3Raw material stock 3,065.2 126.3Deposits 2,317.3 -Cash at bank and in hand 49,024.4 24,281.4--------------------------- ---------- --------- ---------- 56,254.1 25,133.0 --------------------------- ---------- --------- ----------Creditors: amounts fallingdue within one year 14 (5,685.1) (1,823.2)--------------------------- ---------- --------- ----------Net current assets 50,569.0 23,309.8--------------------------- ---------- --------- ----------Total assets less currentliabilities 65,324.1 27,557.9Creditors: amounts fallingdue after more than one year 15 (3,533.5) (840.0)Provisions for liabilities:Share of gross assets injoint ventures 12 480.0 75.0Share of gross liabilitiesin joint ventures 12 (634.6) (96.0)Share of net liabilitiesin associate 12 - (5.6)--------------------------- ---------- --------- ---------- (154.6) (26.6) --------------------------- ---------- --------- ----------Net assets 61,636.0 26,691.3--------------------------- ---------- --------- ----------Capital and reservesShare capital 18 614.8 312.3Share premium 19 83,832.2 37,104.7Merger reserve 19 437.7 437.7Own shares held 19 (484.0) (484.0)Profit and loss account 19 (22,764.7) (10,679.4)--------------------------- ---------- --------- ----------Total equity shareholders' funds 61,636.0 26,691.3--------------------------- ---------- --------- ---------- This preliminary announcement was approved by the Board of Directors on 27 March2007. Lord Oxburgh of Liverpool R K GudgeonChairman Group Finance Director COMPANY BALANCE SHEETAs at 31 December 2006 Note 31December 2006 31December 2005 £000 £000Fixed assets Investments 12 143.2 139.0--------------------------- ---------- --------- ----------Current assetsDebtors 13 33,160.9 11,716.6Deposits 2,317.3--------------------------- ---------- --------- ----------Cash at bank and in hand 46,252.0 23,685.8--------------------------- ---------- --------- ---------- 81,730.2 35,402.4Creditors: amounts falling duewithin one year 14 (1,329.8) (388.4)--------------------------- ---------- --------- ----------Net current assets 80,400.4 35,014.0--------------------------- ---------- --------- ----------Total assets less currentliabilities 80,543.6 35,153.0--------------------------- ---------- --------- ----------Net assets 80,543.6 35,153.0--------------------------- ---------- --------- ---------- Capital and reservesCalled up share capital 18 614.8 312.3Share premium 19 83,832.2 37,104.7Own shares held 19 (484.0) (484.0)Profit and loss account 19 (3,419.4) (1,780.0)--------------------------- ---------- --------- ----------Total equity shareholders' funds 80,543.6 35,153.0--------------------------- ---------- --------- ---------- CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2006 Note Year ended Year ended 31December 2006 31December 2005 £000 £000Net cash outflow from operatingactivities i (12,287.7) (7,747.2)Return on investments and servicingof finance ii 519.5 764.1Capital expenditure and financialinvestment ii (13,863.8) (3,445.0)Acquisitions ii - (25.0)--------------------------- ---------- --------- ----------Cash outflow before financing (25,632.0) (10,453.1)Financing ii 50,375.0 25,172.1--------------------------- ---------- --------- ----------Increase in cash in theperiod iii, iv 24,743.0 14,719.0--------------------------- ---------- --------- ---------- The consolidated cash flow statement should be read in conjunction with thenotes to the consolidated cash flow statement on pages 20 and 21. NOTES TO THE CASH FLOW STATEMENTFor the year ended 31 December 2006 i) RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Year ended Year ended 31December 2006 31December 2005 £000 £000 Operating loss (13,021.2) (8,639.4)Depreciation on tangible fixed assets 367.6 92.1Loss on disposal of fixed assets 17.7 -Amortisation of goodwill 3.5 3.5(Increase)/decrease in debtors (1,062.1) (646.0)Increase/(decrease) in creditors 3,210.8 988.9(Increase)/decrease in Stock (2,939.0) (126.3)FRS 20 1,135.0 580.0---------------------------- --------- ----------Net cash outflow from operatingactivities (12,287.7) (7,747.2)---------------------------- --------- ---------- ii) GROSS CASH FLOWS Year ended Year ended 31 December 31 December 2006 2005 £000 £000Returns on investment and servicing of financeBank interestreceived 566.4 764.1Bank interest paid (0.9)Interest element offinance leases (46.0) ------------------------------- -------- ---------- 519.5 764.1------------------------------ -------- ---------- Capital expenditure and financial investmentPayments to acquire tangible fixed assets (11,542.3) (3,461.2)Proceeds on disposal of leased assets - 30.2Funds transferred to Deposits (2,317.3) -Purchase of trade investments (4.2) (14.0)------------------------------ -------- ---------- (13,863.8) (3,445.0)------------------------------ -------- ---------- AcquisitionsPayment to acquire share of associatedcompany - (25.0)------------------------------ -------- ----------FinancingIssue of ordinary share capital 50,035.2 25,791.2Costs of raising finance (3,005.2) (1,397.5)Purchase of own shares - (3,479.9)Proceeds on disposal of own shares - 3,462.0Capital element of finance lease (55.0) (43.7)Mortgage - 840.0Proceeds from financing D1 20 units 3,400.0 ------------------------------- -------- ---------- 50,375.0 25,172.1------------------------------ -------- ---------- iii) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS Year ended Year ended 31 December 2006 31 December 2005 £000 £000 Increase in cash in the year 24,743.0 14,719.0Cash flow from movement in debt andlease financing 55.0 (796.3)--------------------------- --------- ----------Change in net funds resulting from cashflows 24,798.0 13,922.7New finance leases (3,400.0) -Other loans (12.8) ---------------------------- --------- ----------Increase in net funds in year 21,385.2 13,922.7Net funds at 1 January 23,441.4 9,518.7--------------------------- --------- ----------Net funds at 31 December 44,826.6 23,441.4--------------------------- --------- ---------- iv) ANALYSIS OF CHANGES IN NET FUNDS At 1 January Cash flows Other non-cash At 31December 2006 changes 2006 £000 £000 £000 £000Cash at bankand in hand 24,281.4 24,743.0 - 49,024.4Long term loans (840.0) - - (840.0)Finance leases - (3,345.0) - (3,345.0)Other loans - (12.8) - (12.8)---------------------- -------- ------- -------- ----------- 23,441.4 21,385.2 - 44,826.6---------------------- -------- ------- -------- ----------- v) Deposits Deposits represents amounts of £2,317.3k (2005: £nil) charged to Allied IrishBank as cash collateral for part of the finance lease creditor. The bank accountis held in the name of D1 Oils plc. NOTES TO THE PRELIMINARY STATEMENTSFor the year ended 31 December 2006 1. ACCOUNTING POLICIES The principal accounting policies adopted are described below. Basis of preparation The group financial statements consolidate the financial statements of thecompany and its subsidiary undertakings as at 31 December 2006. No profit andloss account is presented for D1Oils plc as permitted by section 230 of theCompanies Act 1985. Accounting convention The financial statements are prepared under the historical cost convention. Thefinancial statements are prepared in accordance with United Kingdom applicableaccounting standards. All acquisitions are accounted for under the acquisition method. Positivegoodwill arising on acquisitions is capitalised, classified as an asset on thebalance sheet and amortised on a straight line basis over its useful economiclife up to a presumed maximum of 20 years. It is reviewed for impairment at theend of the first full financial year following the acquisition and in otherperiods if events or changes in circumstances indicate that the carrying valuemay not be recoverable. New Accounting Policies Share-based payments: In preparing the financial statements for the current year, the Group hasadopted FRS 20 'share-based payment'. The adoption of FRS 20 has resulted in achange in accounting policy for share based-payment transactions. FRS 20requires the fair value of options and share awards which ultimately vest to becharged to the profit and loss account over the vesting or performance period.For equity-settled transactions the fair value is determined at the date of thegrant using an appropriate pricing model. For cash-settled transactions fairvalue is established initially at the grant date and at each balance sheet datethereafter until the awards are settled. If an award fails to vest as the resultof certain types of performance condition not being satisfied, the charge to theincome statement will be adjusted to reflect this. At each balance sheet date before vesting, the cumulative expense is calculated,representing the extent to which the vesting period has expired and management'sbest estimate of the achievement or otherwise of non-market conditions and thenumber of equity instruments that will ultimately vest. The movement incumulative expense since the previous balance sheet date is recognised in theincome statement, with a corresponding entry in equity. Where the terms of an equity-settled award are modified or a new award isdesignated as replacing a cancelled or settled award, the cost based on theoriginal award terms continues to be recognised over the remainder of the newvesting period. In addition, an expense is recognised over the remainder of thenew vesting period for the incremental fair value of any modification, based onthe difference between the fair value of the original award and the fair valueof the modified award, both as measured on the date of the modification. Noreduction is recognised if this difference is negative. Where an equity-settled award is cancelled, it is treated as if it had vested onthe date of cancellation, and any cost not yet recognised in the incomestatement for the award is expensed immediately. Any compensation paid up to thefair value of the award at the cancellation or settlement date is deducted fromequity, with any excess over fair value being treated as an expense in theincome statement. The group has taken advantage of the transitional provisions of FRS 20 inrespect equity settled awards so as to apply FRS 20 only to those equity-settledawards granted after 7 November 2002 that had not vested before 1 January 2006. Previously, the group applied the provisions of UITF 17, under which the cost ofthese awards were accrued over the performance period of each plan based on theintrinsic value of equity settled awards or the estimated cost of cash-settledawards, and an adjustment was made to the latter to reflect the actual costincurred. Consequently the shares to be issued reserve, in both the group andcompany balance sheets has been reduced by £110,000 as at 31 December 2005.Additional staff costs of £1,135,000 (2005: £470,000) have been recognised inthe profit and loss account and the balance sheet respectively. Cost of sales: In 2005, the group included distribution costs within cost of sales. In order tomore accurately present the cost of sales and gross margin the group hasdisclosed these costs separate from cost of sales within distribution costs inthe profit and loss account. This has resulted in a restatement of the prioryears cost of sales figure, which has reduced by £101.2k, and an increase indistribution costs by the same amount. Existing Accounting Policies The following policies have been applied consistently throughout the year andthe preceding year. Turnover: Turnover represents amounts receivable for goods and services provided in thenormal course of business, net of trade discounts, VAT and other sales related taxes. Stock: Stocks are stated at the lower of cost or net realisable value. Stock, includingseeds and seedlings, also reflects the cost of direct labour and attributableoverheads. Net realisable value is based on estimated selling price, less othercosts expected to be incurred to completion and disposal. Provision is made forobsolete, slow-moving or defective items as appropriate. Joint Ventures: Entities in which the group holds an interest on a long term basis, and whichare jointly controlled by the Group with one or more other parties under acontractual agreement, are treated as joint ventures and are accounted for usingthe gross equity method. The consolidated profit and loss account includes thegroup's share of joint ventures profits less losses while the group's share ofboth the gross assets and the gross liabilities of the joint ventures are shownin the consolidated balance sheet. Goodwill arising on the acquisition of jointventures, representing any excess of the fair value of the share of identifiableassets and liabilities acquired, is capitalised and written off on a straightline basis over its useful economic life of 20 years. Any unamortised balance ofgoodwill is included in the carrying value of the investment in joint ventures. The carrying value of investments in Joint Ventures is reviewed for impairmentwhen events or changes in circumstances indicate the carrying value may not berecoverable. Associates: In the group financial statements investments in associates are accounted forusing the equity method. The consolidated profit and loss account includes thegroup's share of associates' profits less losses while the group's share of thenet assets of the associates is shown in the consolidated balance sheet.Goodwill arising on the acquisition of associates, representing any excess ofthe fair value of the share of identifiable assets and liabilities acquired, iscapitalised and written off on a straight line basis over its useful economiclife of 20 years. Any unamortised balance of goodwill is included in thecarrying value of the investment in associates. The carrying value of investments in Associates is reviewed for impairment whenevents or changes in circumstances indicate the carrying value may not berecoverable. Investments: Investments held as fixed assets are stated at cost less provision for anyimpairment. Tangible fixed assets and depreciation: Depreciation on fixed assets is calculated to write off their cost, lessestimated residual value, over their expected useful lives at the followingannual rates using the straight line method.Freehold land not depreciatedBuildings 20 yearsPlantations 30 yearsPlant and machinery 3 - 10 yearsMotor vehicles 3 - 5 yearsFixtures, fittings and equipment 3 - 5 years The carrying value of tangible fixed assets is reviewed for impairment whenevents or changes in circumstances indicate the carrying value may not berecoverable. Plantations The group's activities include the preparation of previously untreated groundand the planting of jatropha seeds and seedlings and subsequent cultivation.Once mature the jatropha trees bear seeds that contain crude jatropha oil. Thiscrude oil can be refined to produce bio diesel. The direct costs of sitepreparation and planting seedlings and cultivation to the point at which thetrees are mature and producing seeds, are capitalised and amortised over theuseful life of the trees, which is on average 30 years Foreign currencies: Monetary assets and liabilities denominated in overseas currencies aretranslated into sterling at the rate of exchange ruling at the balance sheetdate. Individual transactions are translated at the rate of exchange ruling onthe date of transaction. All exchange differences are taken to the profit andloss account, except for those relating to foreign currency loans, to the extentthey are used to finance foreign currency investments, which are taken directlyto reserves together with the exchange difference on the carrying amount of therelated investment. The results of overseas operations are translated at the closing rates ofexchange during the period and their balance sheets at the rates ruling at thebalance sheet date. Exchange differences arising on translation of the openingnet assets and on foreign currency borrowings, to the extent that they hedge thegroup's investment in such operations, are reported in the statement of totalrecognised gains and losses. Current tax: Current tax, including UK corporation tax and foreign tax, is provided atamounts expected to be paid (or recovered) using the tax rates and laws thathave been enacted or substantively enacted by the balance sheet date. Deferred taxation: Deferred taxation is provided in full on timing differences that result in anobligation at the balance sheet date to pay more tax, or a right to pay lesstax, at rates expected to apply when they crystallise based on current tax ratesand law. Timing differences arise from the inclusion of items of income andexpenditure in taxation computations in periods different from those in whichthey are included in financial statements. Deferred tax assets are recognised only to the extent that the directorsconsider it is more likely than not that there will be suitable taxable profitsfrom which the future reversal of the underlying timing differences can bededucted. Deferred tax is measured on an undiscounted basis at the tax rates that areexpected to apply in the periods in which timing differences reverse, based ontax rates and laws enacted or substantially enacted at the balance sheet date. Finance leases and hire purchase contracts: Assets held under finance leases and hire purchase contracts are capitalised attheir fair value on the inception of the leases and depreciated over the shorterof the term of the lease, and the estimated useful economic lives of the assets.The finance charges are allocated over the period of the lease in proportion tothe capital amount outstanding and are charged to the profit and loss account.Operating lease rentals are charged to profit and loss in equal annual amountsover the lease term. Research and development: Research and development expenditure is charged to the profit and loss accountas incurred. 2. SEGMENTAL INFORMATION The group operates a vertically integrated business, in those areas of the worldwhere the group is represented. A geographical split of the business is asfollows: United Kingdom Africa Asia Pacific India Group £000 £000 £000 £000 £000Turnover:Year ended 31December 2006 Group andshare of jointventures 1,570.1 - 1.7 - 1,571.8Less: Share ofjoint ventures - - - (11.5) (11.5) --------- ------- ------- ------- -------Group turnover 1,570.1 - 1.7 (11.5) 1,560.3 --------- ------- ------- ------- ------- Year ended 31December 2005Group andshare of jointventures 372.9 - 7.0 81.8 461.7Less: Share ofjoint ventures - - - (46.2) (46.2)Group turnover 372.9 - 7.0 35.6 415.5 Loss on ordinaryactivities before taxation --------- ------- ------- ------- -------Year ended 31December 2006 (9,863.6) (1,668.5) (786.1) (310.5) (12,628.7) --------- ------- ------- ------- ------- Year ended 31December 2005(restated) (6,587.8) (682.5) (298.3) (358.3) (7,926.9) --------- ------- ------- ------- ------- Net assets/(liabilities) --------- ------- ------- ------- -------At 31 December2006 18,657.7 (2,386.1) (1,006.0) (618.9) 14,464.7 --------- ------- ------- -------Unallocatednet funds 47,143.9Share of netliabilities ofjoint ventures (154.6) ------- 61,636.0 ------- --------- ------- ------- ------- -------At 31 December2005 4,843.3 (940.7) (278.2) (347.9) 3,276.5 --------- ------- ------- -------Unallocatednet funds of 23,441.4Share of netliabilities ofjoint ventures (26.6) -------At 31 December2005 26,691.3 ------- Net finance income of £565.5k (2005: £764.1k) on central Group borrowings hasbeen included within the United Kingdom segment. The above table represents turnover by origin and by destination. 3. OPERATING LOSS Year Restated ended Year ended 31 December 31 December 2006 2005 £000 £000Operating loss is stated after charging (crediting):Depreciation:- owned assets 310.1 92.1- leased assets 57.5 - ---------- ---------- 367.6 92.1 ---------- ---------- Amortisation of goodwill 3.5 3.5Refinery research and development 267.1 580.3Agronomy research and development 708.9 323.1Auditors' remuneration (see note 3a) 146.9 142.5Operating lease rentals 156.0 60.1 ---------- ---------- 3a. Auditors' remuneration Year ended Year ended 31 December 31 December 2006 2005 £000 £000 The remuneration of the auditors is further analysedas follows: Audit of the financial statementsGroup 79.0 75.0 ---------- ----------Non audit services:Interim review 45.0 -Taxation advisory 18.0 67.5Overseas taxation advisory 4.9 -Services relating to corporate financetransactions 85.0 190.9Charged to share premium (85.0) (190.9) ---------- ---------- 67.9 67.5 ---------- ---------- ---------- ---------- 146.9 142.5 ---------- ---------- No amounts have been paid to the previous auditors in excess of those providedfor at the previous year end. All amounts payable in the year ended 31 December2005 are amounts payable to the previous auditors Deloitte & Touche LLP. Allamounts payable in the year ended 31 December 2006 are amounts payable to Ernst& Young LLP. 4. INFORMATION REGARDING EMPLOYEES Year ended Year ended 31 December 31 December 2006 2005 £000 £000Total average number employed by the group includingexecutive directors was:Executive directors 4 5Technical 25 5Administration and operational staff 70 45 ---------- ----------Total 99 55 ---------- ---------- The costs incurred in respect of these employees(including directors) were: £000 £000 Wages and salaries 4,867.4 2,281.0Social security costs 409.9 951.1 ---------- ---------- 5,277.3 3,232.1 ---------- ---------- Included in wages and salaries is a total expense of share-based payments of£1,135,000 (2005: £580,000) accounted for as equity-settled share-based paymenttransactions. Total average by the company including executivedirectors was: Executive directors 4 5Administration and operational staff 1 - ---------- ---------- Total 5 5 ---------- ---------- The costs incurred in respect of these employees(including £000 £000directors) were: Wages and salaries 714.4 750.9Social security costs 95.7 382.0 ---------- ---------- 810.1 1,132.9 ---------- ---------- 5. DIRECTORS' REMUNERATION Benefits Year ended Year ended Basic in kind 31 December 31 December Salaries Fees & other 2006 2005 £000 £000 £000 £000 £000Executive directors Elliott Michael Mannis 207.7 - 15.6 223.3 73.3Richard Keith Gudgeon (iii) 54.2 - 4.4 58.6 -Stephen Peter Douty 160.0 - 19.1 179.1 68.3William Peter Campbell 130.0 - 10.0 140.0 126.6Mark Lockhart Muir Quinn - - - - 283.2Alec David Worrall (ii) - - - - 75.0Philip Kenneth Wood (i) 162.5 - 1.9 164.4 150.6 Non-executive directorsKarl Eric Watkin 75.0 - - 75.0 143.7John Barclay Forrest 35.0 - - 35.0 27.5Clive Neil Morton 12.0 50.5 - 62.5 28.3Peter John Davidson 12.0 23.0 0.9 35.9 27.3Lord Oxburgh of Liverpool (iv) 12.5 - - 12.5 -Alec David Worrall (ii) - - - - 19.4 -------- -------- -------- -------- ---------- 860.9 73.5 51.9 986.3 1,023.2 -------- -------- -------- -------- ---------- i. Philip Kenneth Wood resigned as a director of the company on 16 January 2006. His contract entitled him to a payment of £150,000 on leaving office and is included in the table above accordingly. Further, on 2 February 2006 he exercised 78,125 ordinary shares at £1.28 per share and 150,000 ordinary shares at £1.60 per share. At this time options over 224,187 ordinary shares lapsed. He further exercised 70,000 ordinary shares at £1.60 per share on 31 May 2006. Philip Kenneth Wood still retains options over 444,186 ordinary shares at £1.60 per share until 31 July 2007. ii. Alec David Worrall resigned as a director on 31 March 2006. iii. Richard Keith Gudgeon was appointed a director on 25 May 2006. iv. Lord Oxburgh of Liverpool was appointed a director on 27 September 2006. v. On 13 April 2006 Mark Quinn exercised 39,062 ordinary shares at £1.28 per share. During the year ended 31 December 2006 the group incurred consultancy costs of£66,644 to the Morton Partnership (2005: £55,800), a company in which Clive NeilMorton is a director and shareholder; and £161,333 of consultancy to DavidsonTechnology Limited (2005: £129,000), a company in which Peter John Davidson hasindirect control. Directors' share options: Options Granted Exercised Lapsed in year Options Exercise Date ExpiryDirectors 1 Jan 2006 2006 31 Dec price exercisable date Karl EricWatkin 39,062 - - - 39,062 £1.280 October 2005 October 2014WilliamPeter 39,062 - - - 39,062 £1.280 October 2005 October 2014CampbellJohnBarclay 78,125 - - 78,125 £1.280 October 2005 October 2014ForrestPeterJohn 156,250 - - - 156,250 £1.280 October 2005 October 2014DavidsonCliveNeil 156,250 - - - 156,250 £1.280 October 2005 October 2014MortonMarkLockhart 39,062 - (39,062) - - £1.280 October 2005 October 2014MuirQuinnAlecDavid 39,062 - (39,062) - - £1.280 October 2005 October 2014WorrallPhilipKenneth 888,373 - (220,000) (224,187) 444,186 £1.600 January 2006 July 2007WoodPhilipKenneth 78,125 - (78,125) - - £1.280 October 2005 October 2014WoodWilliamPeter 106,897 - - - 106,897 £2.900 a) October 2015CampbellWilliamPeter - 136,363 - - 136,363 £2.640 a) March 2016CampbellElliottMichael 33,613 - - - 33,613 £2.975 a) May 2015MannisElliottMichael 132,075 - - - 132,075 £2.650 a) May 2015MannisElliottMichael - 500,000 - - 500,000 £2.000 a) January 2016MannisStephenPeter 56,497 - - - 56,497 £1.770 a) January 2015DoutyStephenPeter 132,075 - - - 132,075 £2.650 a) May 2015DoutyStephenPeter - 170,454 - - 170,454 £2.640 a) March 2016DoutyRichardKeith - 100,378 100,378 £2.640 a) March 2016Gudgeon ------- ------ ------- ------ ------- 1,974,528 907,195 (376,249) (224,187) 2,281,287 ------- ------ ------- ------ ------- a) These options have been granted as one third exercisable on the firstanniversary of the date of grant. Thereafter a further 1/36 accrues monthly overthe next 24 months so that the full amount granted is capable of exercise after3 years. The aggregate amounts of gains made by former directors on the exercise of shareoptions during the year amounted to £365,642, this represents the market priceof the shares in excess of the exercise price on the date the options wereexercised. A gain of £51,648 was made by Mark Quinn, which representscompensation for the loss of office. 6. INTEREST PAYABLE AND SIMILAR CHARGES Year ended Year ended 31 December 31 December 2006 2005 £000 £000Bank loans and overdrafts (0.9) -Finance charges payable under finance leases andhire purchase contracts (46.0) - ---------- ----------Group interest payable and similar charges (46.9) - ---------- ---------- 7. TAX ON LOSS ON ORDINARY ACTIVITIES The tax during the year was £nil (2005: £nil). (i)Factors affecting tax for the current year: The tax assessed for the year is lower than that resulting from applying thestandard rate of corporation tax in the UK of 30%. The differences are explainedbelow. Year ended Year ended 31 December 31 December 2006 2005 £000 £000 --------- ----------Loss on ordinary activities before tax (12,628.7) (7,926.9) --------- ----------Tax at 30% thereon (3,788.6) (2,378.0) --------- ----------Expenses not deductible for tax purposes 100.0 84.4Share option charge 340.5 140.9Capital allowances greater than depreciation - 16.1Losses for which no tax relief available 2,554.9 1,709.9Losses of overseas subsidiaries for which no taxrelief available 793.2 426.7 --------- ----------Current tax for the year - - --------- ---------- (ii) Factors that may affect future tax charges: At 31 December 2006 the group has estimated management expenses of £3.8m (2005:£2.1m) to carry forward to set off against future income and gains of the parentcompany and has estimated losses of £13.4m (2005: £6.5m) which will be availableto set against future trading profits of UK subsidiary companies. In additionoverseas subsidiary companies have estimated expenditure of £5.0m (2005: £1.6m)to set against future trading profits. A UK deferred tax asset of £5.3m (2005:£2.6m) has not been recognised in respect of accelerated capital allowances,management expenses and losses carried forward as there is insufficient evidencethat the asset will be recovered. 8. PARENT COMPANY RESULT As permitted by Section 230 of the Companies Act, the profit and loss accountfor the parent company is not presented as part of these financial statements.The parent company's loss for the year ended 31 December 2006 amounted to£2,774,400. (31 December 2005: £1,900,300). 9. LOSS PER ORDINARY SHARE Loss per share has been calculated using the weighted average number of sharesin issue during the relevant financial periods in accordance with FRS 22. Forthe purposes of calculating the loss per ordinary share the weighted averagenumber of shares excludes 193,645 (2005: 193,645) shares held by the D1 OilsEmployee Benefit Trust as disclosed in note 18. The weighted average number of shares in issue is as detailed below and theearnings, being loss on ordinary activities after taxation, are £12,628,700.(2005: £7,926,900). The diluted loss per share is the same as the loss per share as the effect ofpotentially issuable shares is anti-dilutive. Year ended Year ended 31 December 31 December Restated 2006 2005 No. No. Weighted average number of shares 31,584,579 26,852,469 2006 2005 Pence PenceLoss per ordinary share - basic and diluted 39.98p 29.52p 10. INTANGIBLE ASSETS Goodwill £000CostAt 1 January 2006 and 31 December 2006 70.2 -------------- Accumulated depreciationAt 1 January 2006 6.1Charge for the year 3.5 --------------At 31 December 2006 9.6 -------------- Net book value At 31 December 2006 60.6 --------------At 31 December 2005 64.1 -------------- 11. TANGIBLE FIXED ASSETS Freehold Buildings Plantations Motor Plant and Fixtures land vehicles machinery and fittings Total £000 £000 £000 £000 £000 £000 £000 CostAt 1 January2006 1,283.2 - 650.7 24.4 2,218.9 73.7 4,250.9Additions - 25.8 138.8 14.0 11,092.3 271.4 11,542.3Disposals - - - (7.7) (6.2) (3.8) (17.7)Sale ofassets - - (650.7) - - - (650.7)to JV ------- ------- -------- ------- -------- ------- -------At 31December 2006 1,283.2 25.8 138.8 30.7 13,305.0 341.3 15,124.8 ------- ------- -------- ------- -------- ------- ------- AccumulateddepreciationAt 1 January2006 - - - 4.9 60.8 15.2 80.9Charge forthe year - 4.1 - 9.9 285.1 68.5 367.6 ------- ------- -------- ------- -------- ------- -------At 31 December 2006 - 4.1 - 14.8 345.9 83.7 448.5 ------- ------- -------- ------- -------- ------- ------- Net bookvalue ------- ------- -------- ------- -------- ------- -------At 31December 2006 1,283.2 21.7 138.8 15.9 12,959.1 257.6 14,676.3 ------- ------- -------- ------- -------- ------- -------At December2005 1,283.2 - 650.7 19.5 2,158.1 58.5 4,170.0 ------- ------- -------- ------- -------- ------- ------- During the year plantation assets in Swaziland were transferred into theSwaziland joint venture at cost which equated to the net book value. A debtordue from the joint venture has been recorded in the consolidated financialstatements in respect of the assets transferred. Included in the amounts for plant and machinery above is £6,585.0k (2005:£2,070.0k ) of assets in the course of construction. Included in the amounts for plant and machinery above are amounts relating toleased assets of £3.4m (2005: £nil). 12. INVESTMENTS IN GROUP UNDERTAKINGS Group Group Company Company 2006 2005 2006 2005 £0000 £000 £000 £000 Subsidiary undertakings - - 125.0 125.0Other investments 18.2 14.0 18.2 14.0 ------- ------- -------- --------Included in investments 18.2 14.0 143.2 139.0 ------- ------- -------- --------Associates - (5.6) - -Joint ventures (154.6) (21.0) - - ------- ------- -------- --------Included in provisions (154.6) (26.6) - - ------- ------- -------- -------- 12. INVESTMENTS IN GROUP UNDERTAKINGS (continued)Company subsidiary undertakings: £000 CostAt 1 January and 31 December 2006 125.0 ------- Provisions for impairmentAt 1 January and 31 December 2006 - ------- Net book valueAt 1 January and 31 December 2006 125.0 ------- Other investments: Group £000CostAt 1 January 2006 14.0Additions 4.2 -------At 31 December 2006 18.2 ------- Provisions for impairmentAt 1 January 2006 and 31 December 2006 - Net book valueAt 31 December 2006 18.2 ------- Group associates and joint ventures: 2006 £000Share of net assets/costAt 1 January 2006 (32.9)Share of retained loss in the year (121.7) -------At 31 December 2006 (154.6) ------- Provisions for impairment At 1 January and 31 December 2006 - ------- Goodwill -------At 1 January 2006 6.3 -------Written off (6.3) -------At 31 December 2006 - -------Net book value -------At 31 December 2006 (154.6) ------- At 31 December 2005 (26.6) ------- The company owns more than 10% of the share capital of the following companies: Nature of Country of ShareholderName Business Registration class Percentage D1 Oils Trading Limited Biodiesel UK Ordinary 100% tradingD1 Oil Subsidiary Limited Biodiesel UK Ordinary 100% tradingD1 (UK) Limited Biodiesel UK Ordinary 100% tradingD1 Oils Asia Pacific Inc Biodiesel Philippines Ordinary 100% tradingD1 Oils South Africa(PTY) Biodiesel South Africa Ordinary 95%Limited tradingD1 Oils Mohan Pvt Limited Biodiesel India Ordinary 50% tradingD1 Oils Swaziland PtyLimited Biodiesel Swaziland Ordinary 50% tradingD1 Oils Ghana (PTY) Biodiesel Ghana Ordinary 100%Limited tradingD1 Oils Malaysia SBN BHD Biodiesel Malaysia Ordinary 50% tradingD1 Oils India Pvt Limited Biodiesel India Ordinary 100% tradingGroupBio Limited Engine UK Ordinary 25% developmentD1 Oils Africa (PTY) Dormant South Africa Ordinary 100%LimitedD1 Oils Madagascar Biodiesel Madagascar Ordinary 100%Limited tradingD1 Oils Zambia Limited Biodiesel Zambia Ordinary 100% tradingD1 Oils Tanzania Limited Dormant Tanzania Ordinary 90%D1 Oils Asia Pacific PTELimited Biodiesel Singapore Ordinary 100% trading 13. DEBTORS Group Group Company Company 2006 2005 2006 2005 £000 £000 £000 £000Trade debtors 1,446.7 120.8 - -Other debtors 50.0 50.0Taxation and social security 4.3 267.1 - 267.1Amounts owed by group undertakings - - 33,152.7 11,392.6Prepayments and accrued income 346.2 287.4 8.2 56.9 -------- -------- ------- ------- 1,847.2 725.3 33,160.9 11,716.6 -------- -------- ------- ------- Amounts falling due after more than one year included above are: Group Group Company Company 2006 2005 2006 2005 £000 £000 £000 £000Amounts owed by joint ventures 898.9 - - -Other debtors 50.0 50.0 - - -------- -------- ------- ------- 948.9 50.0 - - -------- -------- ------- ------- 14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Group Group Company Company 2006 2005 2006 2005 £000 £000 £000 £000Obligations under financeleases (note 17) 604.3 - - -Current instalments due onloans 60.0 - - -Trade creditors 2,660.5 882.8 181.8 47.5Other loans - 3.2 - -Taxation and social security 151.4 72.4 42.5 -Accruals and deferred income 2,208.9 864.8 1,105.5 340.9 -------- --------- -------- -------- 5,685.1 1,823.2 1,329.8 388.4 -------- --------- -------- -------- 15. CREDITORS: AMOUNTS FALLING DUE AFTER ONE YEAR Group Group Company Company 2006 2005 2006 2005 £000 £000 £000 £000Mortgagepayable (note 16) 780.0 840.0 - -Loans due greater thanone year (note 16) 12.8 - - -Obligations under finance leases (note 17) 2,740.7 - - - --------- --------- -------- -------- 3,533,5 840.0 - - --------- --------- -------- -------- 16. BORROWINGS Group Group Company Company 2006 2005 2006 2005 £000 £000 £000 £000 Amounts due within oneyear or on demand 60.0 - - -Between oneand two years 72.8 60.0 - -Between twoand five years 120.0 180.0 - -Over five years 600.0 600.0 - - -------- -------- --------- -------- 852.8 840.0 - - -------- -------- --------- -------- The group borrowings in 2006 relate to the mortgage at the Forty Foot Road sitein Middlesbrough, TS2 1HG. The mortgage is secured by a fixed charge over theproperty. The interest rate payable on the loan is fixed at 1.75% over LIBOR forthe period of the mortgage which is repayable in 56 quarterly instalmentscommencing March 2007. 17. OBLIGATIONS UNDER FINANCE LEASES Group Group Company Company 2006 2005 2006 2005 £000 £000 £000 £000 Amountspayable withinone year 604.3 - - -Between twoand five years 2,740.7 - - - -------- -------- -------- -------- 3,345.0 - - - -------- -------- -------- -------- 18. CALLED UP SHARE CAPITAL 2006 2005 £000 £000Authorised -------- --------100,000,000 (2005:52,000,000) ordinaryshares of 1p each 1,000.0 520.0 -------- -------- Called up, allotted and fully paid -------- --------61,480,578 (200531,225,481) ordinaryshares of 1p each 614.8 312.3 -------- -------- On 28 December 2006, the company completed the placing of 29,838,848 newordinary shares. The company received cash consideration of £49,234.1k for thisplacing prior to expenses of £3,005.2k. During the year the authorised share capital was increased by £480k by thecreation of 48,000,000 ordinary shares of 1p each. During the year 416,249 ordinary shares with a nominal value £4162.49 wereallotted on the exercise of share options. On 2 February 2006 Philip KennethWood exercised options over 78,125 ordinary shares at £1.28 per share and150,000 ordinary shares at £1.60 per share. On 31 May 2006 he exercised optionsover a further 70,000 ordinary shares at £1.60 per share. On 13 April 2006 Mark Quinn exercised options over 39,062 ordinary shares at£1.28 per share. 19. MOVEMENT ON RESERVES Share Share premium Shares to be Merger Own shares held Profit & Loss capital issued issued reserve issued £000 £000 £000 £000 £000GroupAt 1 January2006 asoriginallystated 312.3 37,104.7 110.0 437.7 (484.0) (10,789.4)Restatementfor change inshare-basedpayment policy - - (110.0) - - 110.0At 1 January 2006 312.3 37,104.7 - 437.7 (484.0) (10,679.4)Loss for the year - - - - - (12,628.7)Share issue 302.5 49,732.7 - - - -Share issue costs - (3,005.2) - - - -Share optionscharge (FRS 20) - - - - - 1,135.0Foreign exchangedifferences - - - - (591.6)----------------- ------- ------- ------- ------- ------- -------At 31 December2006 614.8 83,832.2 - 437.7 (484.0) (22,764.7)----------------- ------- ------- ------- ------- ------- ------- CompanyAt 1 January2006 asoriginallystated 312.3 37,104.7 110.0 - (484.0) (1,890.0)Restatementfor change inshare-basedpayment policy - - (110.0) - - 110.0At 1 January2006 312.3 37,104.7 - - (484.0) (1,780.0)Loss for theyear - - - - - (2,774.4)Share optionscharge (FRS 20) - - - - - 1,135.0Share issue 302.5 49,732.7 - - - -Share issuecosts - (3,005.2) - - - ------------------- ------ ------- ------- ------- ------- -------At 31 December2006 614.8 83,832.2 - - (484.0) (3,419.4)------------------ ------ ------- ------- ------- ------- ------- The D1 Oils Employee Benefit Trust holds 193,645 (2005: 193,645) shares in D1Oils plc with a market value of £328,228 (2005: £339,847). The shares have anominal value of 1p each, £1,936.45 (2005: £1,936.45). 20. RECONCILIATION OF MOVEMENT IN CONSOLIDATED EQUITY SHAREHOLDERS' FUNDS Year Year ended Ended 31 December 31 December 2006 2005 £000 £000Loss for the year (12,628.7) (7,926.9)Shares issued in the year (net of issue costs) 47,030.0 24,393.7Merger reserve adjustment - -Purchase of own shares - (3,479.9)Proceeds on sale of own shares - 3,462.0Share options charge (FRS 20) 1,135.0 580.0Foreign exchange on retranslating subsidiaries (591.6) (29.9)--------------------------------- --------- ---------Net addition to shareholders' funds 34,944.7 16,999.0Opening equity shareholders' funds 26,691.3 9,692.3--------------------------------- --------- ---------Closing equity shareholders' funds 61,636.0 26,691.3--------------------------------- --------- --------- 21. SHARE BASED PAYMENTS All employees share option plan Awards are made to all levels of staff at the discretion of the Board ofDirectors either on appointment, at salary review time, or any other time thatthe Directors deem appropriate. There are no specific performance criteriaattached to the options. Options granted vest 1/3 after one year with the remaining 2/3 vesting in equalmonthly instalments over the next two years. Equity settlement is applied to alloptions, there is no cash settlement alternative. The expected life of the options has been assessed at 2.5 years. The contractuallife of the options is ten years. The fair value of the awards are calculated using the Black-Scholes model andsubsequently adjusted for gain dependency, assessed at 15%, and forfeitures,assessed at 10% over the life of the award. A volatility adjustment in thecalculation of 65% is included and considered appropriate for the sector and ageof the Group. An appropriate risk free rate as defined by The Bank of Englandand a zero dividend yield are applied to the calculation. The exposure recognised in for share-based payments in respect of employeeservices received during the year to 31 December 2006 is £1,135,000 (2005:£580,000). This expense all relates to equity-settled share-based paymenttransactions). In forming the volatility assumption the directors have considered thevolatility of the share price since the date of listing. The volatility ofcompanies operating in the same sector has also been reviewed. Based on thesefactors the volatility assumption hasbeen assessed at 65%. The following table illustrates the number and weighted average exercise prices(WAEP) of, and movements in, share options during the year. 2006 2005 2005 2005 No. WAEP No. WAEP Outstanding as at 1 January 2,577,216 1.76 1,815,580 1.53Granted during the year 1,514,799 2.47 761,636 2.30Forfeited during the year 224,187 1.45 -Exercised 415,311 1.60 -Outstanding at 31 December 3,452,517 2.12 2,577,216 1.76 -------- -------- -------- --------Exercisable at31 December 1,615,180 1.75 927,207 1.28 -------- -------- -------- -------- The weighted average fair value per option of options granted during the yearwas 98.6p (2005: 117.1p). The range of exercise prices for options outstandingat the end of the year was £1.28 £3.35(2005: £1.28 £3.35). 22. FINANCIAL INSTRUMENTS The main risks arising from the group's operations are interest rate risk,liquidity risk, foreign currency translation risk and certain commodity pricerisks. The group does not trade in financial instruments. In the opinion of thedirectors the fair value of the group's financial instruments are not materiallydifferent to the book value. The group's financial assets predominantly comprise cash which earns interest ata floating rate based on LIBOR. At 31 December 2006 the average interest earnedon the cash balance was 4.84% (2005: 4.48%). Interest rate risk profile of financial liabilities The interest rate profile of the financial liabilities of the group as at 31December 2006 is as follows: Total £,000 Floating rate financial liabilities 2006 4,185.0 4,185.0 2005 840.0 840.0 The floating rate financial liabilities comprise a mortgage Liquidity Risk The group seeks to manage financial risk, to ensure sufficient liquidity isavailable to meet foreseeable needs while investing cash assets safely andprofitably. Interest Rate Risk The group has one mortgage obligation the terms of which include a floatinginterest rate of 1.75% above LIBOR. The capital outstanding at 31 December 2006was £840,000. (2005 : £840,000 at 1.75% above LIBOR.) Foreign Currency Translation Risk No significant currency risks arise through the consolidation of overseassubsidiaries at 31 December 2006. The directors are actively developing anappropriate means of mitigating the risk of these entities as they become a moresignificant element of the business. The Group cash balances split by currency and shown as a sterling equivalent,converted at Bank of England exchange rates at 31 December are: 2006 2005 £000 £000 British Pounds 51,234.1 23,691.3US Dollars 1.1 287.8Indian Rupees 32.1 138.8South African Rand 45.0 35.4Swaziland Lilangeni - 30.3Euros - 64.8Malaysian Ringgits 26.6 30.1Ghanaian Cedi 1.4 1.9Filipino Peso 1.4 1.0------------- --------------- ------------- Total 51,341.7 24,281.4 ------------- --------------- ------------- Commodity Price Risks During 2006 the group did not engage in commodity related financial instruments,including hedging. As the group commences supply agreements, in the coming, yearthey will monitor the prices for raw oils and enter into forward purchasecontracts where they seek to fix the cost to the Group in order to be able tosatisfy the contracts. 23. FINANCIAL COMMITMENTS Capital commitments Amounts contracted for but not provided in the financial statements amounted to£2,700,000 for the group and the company (2005: nil). Supply commitments From time to time the company enters into supply commitments for the supply ofjatropha oil and seeds as described in the foreign currency translation risksection of note 22. All of these contracts are denominated in US Dollars. 24. RELATED PARTY TRANSACTIONS The group has a 50:50 joint venture agreement with a joint venture partner,Mohan Breweries and Distilleries Limited relating to D1 Oils Mohan Pty Limited.The agreement requires Mohan Breweries and Distilleries Limited to lead onplanting and for D1Oils Trading Limited to lead on design and technology. D1Oils Trading Limited did not introduce any working capital into the jointventure during the year. There were no amounts outstanding at 31 December 2006. The group has a 50:50 joint venture agreement with a joint venture partner, NingCorporation relating D1 Swaziland Ltd. The agreement relates to The NingCorporation providing land, management and labour for a managed plantation sitein Hluti. D1 Oils Trading Ltd is providing working capital and intellectualproperty. Theamounts outstanding at 31 December 2006 amounted to £898.9k (2005:£nil) The group also has an associate agreement with GroupBio Limited to providesponsorship funding to develop and race a biofuel racing car. During the yearended 31 December 2006 D1 Oils Trading Limited introduced £nil (2005: £25,000)of share capital and £nil (2005: £65,000) of sponsorship funding. There were noamounts outstanding at 31 December 2006. Any related party transactions which apply to company directors are shown innote 5 above. 25. POST BALANCE SHEET EVENTS On 10 January 2007 the Group completed the acquisition of the refining site inBromborough for cash consideration of £3.0m. 26. REPORT AND FINANCIAL STATEMENTS The above financial information does not constitute statutory accounts asdefined in section 240 of the Companies Act 1985. It is based on the unauditedstatutory accounts for the year ended 31 December 2006 on which the auditorsexpect to issue an unqualified audit opinion and the audited statutory accountsfor the year ended 31 December 2005 on which Deloitte & Touche LLP issued anunqualified audit opinion. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
NEOS.L