9th Apr 2008 07:39
D1 Oils Plc09 April 2008 Part 1 D1 Oils plc 9 April 2008 Preliminary Results for the Year Ended 31 December 2007 D1 Oils plc, the UK-based global producer of biodiesel, today announces itspreliminary results for the year ended 31 December 2007. Key Highlights • Successful placing to raise £14.9m net of expenses, subject to shareholder approval • Strategic re-positioning of D1Oils; • Ongoing focus on plant science and planting • Withdrawal from refining and trading Operational highlights for 2007 • Established global planting joint venture with BP to create a world-leading business in jatropha • Plant science operations to develop high-yielding varieties of jatropha progressing well • Commercial breeding and product placement trials commenced • Multiplication of higher-yielding E1 seed underway Financials • Gross cash at 31 December 2007 was £14.3m • Loss for the year was £46.1m (2006: £12.6m) Commenting on the results, Elliott Mannis, Chief Executive Officer, said: "We are pleased to announce a proposed placing to raise £14.9m net of expensesto support our continuing development of alternative sustainable feedstocks forthe production of biodiesel. We are particularly pleased that the placing isbeing supported by our leading shareholders who together represent approximately60% of the shareholder base. 2007 brought significant challenges for the biofuels industry, including risingfeedstock prices, growing concerns on sustainability and imports of heavilysubsidised US biodiesel. These challenges have reinforced the imperative at theheart of D1's business strategy: the need to develop low-cost supplies ofalternative, sustainable raw materials for biofuels that are not subject to thesame price pressures as food-grade cereals and oil seeds. Refining food-grade vegetable oils into biodiesel in Europe has developed into ahighly competitive market in which only very large scale operations are viable.We therefore intend to withdraw from this business and propose to close our UKrefining sites. We believe that the best way to deliver value for shareholdersis to leverage our technology and experience in jatropha to focus the businesson the upstream breeding, planting and managing of new varieties of sustainable,commercial biofuel crops. Our upstream plant science and related technologies,always core to our vision and business, will now be our main commercial thrust.Our successful fundraising now enables us to take that business to the nextlevel." Lord Oxburgh of Liverpool, Non-Executive Chairman, added: "The political momentum to reduce emissions from transport and enhance energysecurity remains substantial in the majority of developed economies, and thereis growing recognition of the potential for farmers in the developing world tomeet this demand. Against this background there is real concern that it will notbe possible to meet demand for both fuel and food without threatening forests indeveloping countries. In this situation, Jatropha curcas brings the advantagesof reforestation and sequestration of CO2 in the trees and their root systems,the production of a feedstock oil for biodiesel from the grain, and the creationof jobs in some of the poorest parts of the world." Contacts D1 Oils:Graham Prince, Head of Corporate CommunicationsTel: +44 (0) 1642 755580Mobile: +44 (0) 7973 323840 Brunswick Group:Kate HolgateTel: +44 (0) 20 7404 5959 Notes to Editors: D1 Oils plc is a biofuels technology company. Our strategy is to develop newenergy crops into sustainable commercial fuels. We provide technology andservices for the breeding, development, planting and harvesting of new varietiesof commercial biofuel crops, focusing on alternative, sustainable feedstocksthat are not subject to the same price pressures as food-grade crops. We have anestablished plant science and planting programme for Jatropha curcas, a robust,tropical oilseed bearing tree. Jatropha produces inedible oil feedstock forbiodiesel and is able to make use of land not suitable for arable agriculture. Report of the Chairman and the Chief Executive Officer Lord Oxburgh of Liverpool, Non-Executive Chairman, and Elliott Mannis, ChiefExecutive Officer The following is our report to shareholders of our results for the year ended 31December 2007. 2007 brought significant challenges for the biofuels industry, including risingfeedstock prices and growing concerns in Europe over the sustainability of somefeedstocks. Imports of heavily subsidised biodiesel from the United States (US)into the European market exacerbated these issues. These challenges havereinforced the imperative at the heart of D1's business strategy: the need todevelop low-cost, long-term supplies of alternative, sustainable feedstock forbiofuels that are not subject to the same price pressures as food-grade crops.BP's decision in 2007 to join D1 in a joint venture to develop global plantingof Jatropha curcas was, we believe, a significant endorsement of this approachto feedstock supply. It also recognised D1's lead in the plant science andcultivation practices required for the commercialisation of this new energycrop. We believe that the development of alternative, sustainable biofuelsfeedstocks, of which Jatropha curcas is one of the most promising, offerssignificant opportunities for growth in the biofuels sector. In the light ofthis potential and the continuing difficulties facing biodiesel refining inEuropean markets, the Board proposes to cease our refining and tradingoperations and to focus the business exclusively on the technology and servicesrequired for the upstream breeding, development and planting of new varieties ofcommercial biofuel crops. We began the year having successfully completed a placing in December 2006raising £49.2m, enabling us to fund the development of our plant scienceprogramme and to expand our United Kingdom refining capacity. In June 2007, weannounced our 50:50 joint venture with BP. This was approved by our shareholdersat an Extraordinary General Meeting (EGM) in July. The company formed for thepurposes of the joint venture, D1-BP Fuel Crops Limited, began operations inOctober 2007. The establishment of D1-BP Fuel Crops recognises the potential for thedevelopment of biofuels that make use of marginal land. In operational terms, itis turning the wide range of jatropha planting operations and relationshipsestablished by D1 worldwide since 2005 into a cohesive, integrated andsustainable production base for the supply of crude jatropha oil at competitiveprices. It also provides, through an exclusive supply arrangement between D1 andD1-BP Fuel Crops for the supply of jatropha seedlings and other services, asecure commercial foundation on which to build D1's plant science operationsglobally. In refining and trading, which is based in the United Kingdom, rising food oilprices and growing volumes of heavily subsidised US imports progressivelyfavoured only those operators able to refine at the largest scale and at thelowest unit cost of production. We therefore began to scale back our investmentin capacity and to purchase refined imported material to meet supply contracts.As a result of a thorough review of operations in this area, the Board's view isthat refining and trading no longer represent the best use of shareholders'funds. We therefore intend to withdraw from this business segment. Plant science and technology programme Plant science operations made solid progress throughout the year. Having builtup our collection of accessions of Jatropha curcas from around the globe, webegan commercial breeding and product placement trials for the crop. We startedmultiplication of our first generation E1 seed material, selected for higheryield and good biodiesel profile, and introduced our Sustainable Oil SupplyProgramme (SOSP) to enable oil production forecasting and to monitorimplementation of sustainability policies. We stepped up the pace of these activities following the creation of D1-BP FuelCrops. D1's plant science operation now acts as the exclusive supplier of eliteplanting material to the joint venture. We have expanded our plant scienceactivities to support joint venture planting in each region. D1-BP Fuel Crops isexpected to plant up to 50,000 hectares of E1 jatropha seedlings in 2008. D1's established plant science infrastructure for the development of jatropha asa commercial crop also enables the exploration of opportunities to develop arange of alternative, sustainable, energy crops into new commercial biofuels. Weare currently undertaking early stage investigation into several of these crops.In addition, our plant science team is also developing a processing technologyto enable the seedcake remaining after the extraction of oil from jatropha grainto be processed into animal feed. Relationships with established plant science and agricultural researchinstitutions are essential to the development of both our breeding programme andplanting practices. We are pleased to announce that D1 has recently concluded anagreement with the International Crops Research Institute for the Semi-AridTropics (ICRISAT) to undertake research into jatropha in Andhra Pradesh inIndia. D1-BP Fuel Crops Planting operations principally comprise D1-BP Fuel Crop's efforts to encouragethird parties to undertake the planting of jatropha across many global locationsand also to secure offtake agreements in respect of that planting. Our effortsin this regard have continued to increase and the estimated planted area hasgrown accordingly over the last 12 months. With effect from 1 October 2007, allof D1's existing planting of Jatropha curcas transferred to our joint venturewith BP, D1-BP Fuel Crops Limited, and all subsequent jatropha planting isconducted through the joint venture. Jatropha planting expanded significantly throughout the year, particularly inNorth East India where the partnership with Williamson Magor, one of India'sleading tea companies, planted more than 50,000 hectares in the current season.Total planting by Williamson Magor now stands at over 62,000 hectares. Plantingin South East Asia also expanded steadily during the year, and new relationshipswere established with new partners, including PT Astra Agro Lestari, part of theJardine Matheson Group. Progress in Africa was slower, and flooding and lowgermination rates due to the poor storage and transportation of seed led to thefailure of a proportion of planting in Zambia. The experience of poor germination and other general agricultural risks had ledto a thorough review of existing assets and their likely performance now thatgrowing conditions are better understood and planting is more mature. Asexperience has increased it is possible to assess more accurately the quantityand quality of successful jatropha planting and recognise where planting hasfailed or where suppliers lack sufficient reliability. As a result, provisionshave been recorded against planting, the majority with third parties with whomthere are arm's length supply agreements for grain and oil, that is eitherunlikely to deliver the requisite quantity and quality, or which is too far fromavailable logistics facilities to make harvest and transport viable. Following these provisions, total planting and rights to offtake at 31 March is192,016 hectares worldwide. This is lower than original expectations for the endof the current planting year, but as D1-BP Crops strengthens its planting andcrop management in the light of improving plant science expertise and greaterexperience on the ground, it has been necessary to slow the pace of planting aslocations and partners are reviewed for performance. It has not therefore beenpossible to replace all of the areas provided against with new plantingelsewhere. D1-BP Fuel Crops is evaluating a range of options for organisingplanting operations along with different models to optimise the future deliveryof oil to market. D1-BP Fuel Crops will produce its first modest volumes ofjatropha oil during the second half of 2008. Refining and trading Our refining and trading activities in 2007 were adversely impacted by acombination of high feedstock prices and imports of heavily subsidised biodieselfrom the US, so-called B99. Although we believe that B99 will eventually beaddressed, its impact has undermined the European biodiesel refining industry ingeneral, including D1's operations. We fully support the decision of the European Biodiesel Board (EBB) taken inNovember 2007 to lodge a complaint to the European Commission against B99exports from the US. This comprehensive legal action will take the form of ajoint anti-dumping and anti-subsidy complaint, possibly supported by WTOmeasures at a later stage. However, we do not expect the issue to be resolvedquickly. Although the introduction of the Renewable Transport Fuels Obligation (RTFO) inthe UK from April 2008 will create a market for biodiesel, we believe that UKdemand will largely be met by subsidised US imports. We do not see the UK asoffering a viable location for refining and trading to meet domestic demand forthe foreseeable future. We therefore intend to cease our refining and tradingoperations. As announced on 7 March 2008, we have commenced a consultationprocess with employees at both our Middlesbrough and Bromborough sites. We willconsult with employees in relation to the future of the sites, including theirpotential closure and sale. We believe, however, that Jatropha curcas presents a solution to the situationcurrently confronting the European biodiesel market. Jatropha will be availableat sufficiently low cost to compete advantageously with subsidised feedstockssuch as B99 in developed markets. It will also address concerns aroundsustainability, particularly land use change, by enabling farmers in thedeveloping world to become more productive through mixed cropping models thatcan produce food, animal feed and fuel. Offer period update On 20 March 2008, Karl Watkin announced that he was at a very preliminary stagein evaluating all options with regard to his shareholding in the Company,including an increase or decrease in his interest, and whether or not to make anoffer for the Company. Consequently, the Company is currently in an offerperiod. Finances Net Cash at 31 December 2007 was £7.8m. Gross cash was £14.3m. The loss for theyear was £46.1m (2006: £12.6m) and reflects both the poor trading conditions inthe second half of the year and the impairment of assets at Bromborough by£10.2m and at Middlesbrough by £12.6m. Concurrent with the release of these results, the Company is announcing aproposed placing of ordinary shares at 25 pence per share to realise £14.9million, net of expenses. Based on the Board's revised business plan, the netfunds raised of £14.9 million are expected to allow the Company to remain cashpositive through to the end of 2009. Management We welcomed two new Non-Executive Directors to the Board in 2007. ProfessorChris Leaver, Emeritus Professor of Plant Science at Oxford University, joinedthe Board in July and brings significant and relevant scientific expertise.Moira Black, who has had an active and distinguished career in accountancy andpublic services, joined the Board in September. Chris Tawney, Group Finance Director, joined the Board in September 2007. Hispredecessor, Richard Gudgeon left the Board in September, but remains with thebusiness. Peter Davidson, a founder Non-Executive Director, also stepped down inSeptember when he left the business, as did Steve Douty, who stepped down inorder to join D1-BP Fuel Crops. Finally, Karl Watkin, founder and formerChairman, left the Board in March 2008. We thank all four for theircontributions to the business. Outlook Despite the difficulties in European biodiesel refining, the biofuels sector isexperiencing strong growth worldwide. The political momentum to reduce emissionsfrom transport and enhance energy security remains substantial in the majorityof developed economies, and there is growing recognition of the potential forfarmers in the developing world to meet this demand. Against this background,rising prices for food commodities highlight the concern that increasedproduction of grains and vegetable oils will not meet demand for both fuel andfood without threatening forests and other regions of environmental importancein developing countries. As a result, D1 sees increasing recognition of the needfor alternative, low-cost, sustainable feedstocks that can enable developingworld farmers to use marginal and unproductive land to co-produce both food andfuel. We believe that our primary feedstock, Jatropha curcas, can answer theseconcerns and is one of the most significant new oilseed crops for biofuels. Ittherefore offers D1 a major global market opportunity. The delivery in late 2008of the first quantities of jatropha oil from our planting will be ademonstration of our ability to deliver a sustainable biofuels business. Webelieve that the fundamentals of the biofuels market increasingly favour thealternative, sustainable feedstock approach that D1 has developed and whichdifferentiates us from the rest of the sector. We believe that the best way todeliver value for shareholders is to leverage our technology and experience injatropha to focus the business on the upstream breeding, planting and managingof new varieties of sustainable, commercial biofuel crops. Our upstream plantscience and related technologies, always core to our vision and business, willnow be the singular focus of our activities. Going forward D1 will comprise 100%of D1 Oils Plant Science plus our 50% investment in D1-BP Fuel Crops. Lord Oxburgh of LiverpoolNon-Executive Chairman Elliott MannisChief Executive Officer Operational review Plant science and technology Because they are environmentally elastic and bring unproductive land intocultivation, alternative biofuel feedstocks such as jatropha have the potentialto meet demand for biofuels without putting at risk food supplies or importantcarbon-rich or biodiverse environments. D1's position as a leading developer ofone of the most significant new oilseed crops for biofuels, Jatropha curcas,differentiates us significantly in a market that requires sustainable fuels at acompetitive price. We believe the growing public debate about the sustainabilityof biofuels reinforces and validates our strategy to build a business onalternatives to biodiesel derived from food oils. We made solid progress in our plant science programme during the year. Weexpanded our collection of Jatropha curcas accessions from around the globe, andbegan putting the most promising varieties from our already significantcollection through commercial breeding and product placement trials to identifyoptimal adaptation to different cultivation conditions. By the end of the year,we had a total of 33 product placement and research trial sites for jatropha inoperation worldwide. During the year the D1 plant science programme established a central breedingand development facility in Cape Verde and we transferred our global collectionof Jatropha curcas material to this site. We selected Cape Verde because of itsgeographical position within the equatorial band in which jatropha flourishes.We also expanded our research and testing infrastructure worldwide inanticipation of the growth in business from the D1-BP Fuel Crops joint venture.We have begun to establish new plant science development centres, and furtherfacilities are planned for other countries where D1-BP Fuel Crops will operate,enabling D1 to support fully the joint venture's planting activities. We continued the development of our breeding programme to create the firstcultivars for future selection of high-yielding jatropha varieties.Multiplication of our first generation E1 material, selected for higher yieldand good biodiesel profile, has begun in all three operating regions. D1-BP FuelCrops has already commenced planting of E1 material and intends to plant up to50,000 hectares with E1 seedlings in 2008. All of D1's seed orchards are nowoperational and have to date delivered some 20 tonnes of planting seed,sufficient to plant approximately 10,000 hectares of the E1 planting planned for2008. D1 is also building relationships with leading agricultural and plant scienceresearch institutions in operating regions. We recently signed an agreement withthe International Crops Research Institute for the Semi-Arid Tropics (ICRISAT)to undertake research into Jatropha curcas in Andhra Pradesh in India. ICRISAT(www.icrisat.org) undertakes agricultural research and capacity building forsustainable development in the dry tropics through better agriculture. D1 Oilsplant science will work with ICRISAT to collect, screen and identify jatrophawith high yield potential and oil content, develop suitable agronomy practicesfor sole cropping and identify the most profitable food and feed crops forintercropping with jatropha. ICRISAT will also train farmers and NGO workers andtrainers in nursery raising and cultivation of jatropha and assess the potentialof other other oil seeds in the region. We have also agreed a collaborativeproject with Katetsart University in Thailand to evaluate the growth and yieldof Chinese cabbage, tomato and sweet potato when using Jatropha curcas seedcakeas a fertilizer. A significant development in 2007 was D1's exclusive worldwide service agreementwith Keygene NV of the Netherlands (www.keygene.com). Keygene is one of theglobal leaders in the science of genetic fingerprinting, in particular molecularmarkers and marker-assisted breeding approaches. The agreement provides D1 withexclusive rights to contract research and molecular services carried out byKeygene on Jatropha curcas. Keygene's genetic fingerprinting technology enablesthe identification of different jatropha cultivars through genetic markers. Thistechnology has the potential to increase significantly the effectiveness of D1'sbreeding programme for jatropha. During the year, we introduced our Sustainable Oil Supply Programme (SOSP) toimplement optimal agronomy practices based on sound science for the developmentof Jatropha curcas as a sustainable feedstock. Central to the programme is thesurveying of jatropha plantations to identify key success and risk factors forsustainable jatropha planting. Survey activity was begun by D1 in the first halfof the year in co-operation with joint venture partners and farmers, andcontinues in co-operation with D1-BP Fuel Crops. The surveys record performancedata to enable more accurate grain and oil production forecasts and also gatherwider information on planting and stewardship practices. The latter form thebasis of the ongoing development of recommended planting and maintenancemethods, training manuals and guidance for the optimisation of oil yields.Initially focusing on planting and cultivation, the surveys will also extend toharvesting and expelling techniques, logistics and storage. The programme alsomonitors the implementation of policies for social, economic and environmentalsustainability. D1 Oils plant science is the exclusive supplier to D1-BP Fuel Crops, on acost-plus basis, of selected, high-yielding jatropha seedlings. It also providestechnical agronomy support and expertise to support and implement the SOSPprogramme. D1-BP Fuel Crops will pay D1 an annual royalty fee for the high yieldperformance of the seedlings it has supplied. In addition to focusing on Jatropha curcas, we are undertaking early stageinvestigation into a range of alternative, sustainable crops for the productionof biofuel. Under the terms of our joint venture arrangements, D1-BP Fuel Cropshas a right to access (with the agreement of its shareholders) any new biodieselcrops that D1 may develop. The plant science team is also leading D1's feed programme to develop acommercial technology for the removal of anti-nutritional compounds present injatropha meal after oil extraction. Having quantified the compounds present inthe meal and measured their bioactivity, a laboratory extraction method has beendeveloped to test extracted fractions and ensure the removal of unwantedelements. We are now moving to the next stage of the development process tocreate a large-scale extraction method. D1-BP Fuel Crops D1-BP Fuel Crops Limited began operations on 1 October 2007. The new company isexpanding its international team to handle the range of new functions that willbe required for the delivery of crude jatropha oil to the market, includingsustainability and supply chain management. These new areas of expertise arebeing added to the core group of experienced D1 managers and field staff in theregions. D1-BP Fuel Crops has commenced a strategic review of its business and isevaluating a range of options for organising planting operations, logistics andprocessing to optimise the future delivery of oil to the developinginternational market for biofuels. Key to this planning process is establishingoil forecasts. Based on data gathered to date through surveys on the croppedarea being undertaken through the SOSP provided by D1, the joint venture is ontrack to deliver the first quantities of jatropha oil during the second half of2008. Initial quantities of oil are expected to be modest but should increaseyear on year as existing trees mature and as new trees become productive. Planting and planting relationships transferred by D1 into the D1-BP Fuel Cropsincluded the significantly expanded jatropha footprint achieved by D1 during thefirst half of 2007. This included planting in North East India in partnershipwith Williamson Magor, one of India's leading tea companies, which now stands atover 62,000 hectares. Planting in South East Asia, which expanded steadilyduring the year, includes relationships established with new partners inIndonesia, including PT Astra Agro Lestari, part of the Jardine Matheson Group,for the creation of a 500 hectare pilot jatropha plantation. As knowledge and experience of the performance of Jatropha curcas in differentclimate and soil conditions and under different planting and maintenance regimesincreases, D1-BP Fuel Crops is assessing the performance and commercialviability of the area planted to date and the viability of planting areas interms of logistics and access to markets. Greater rigour is being introducedinto relationships with third-party oil and seed suppliers. Relationships withsuppliers and the reliability of their planting and ability to deliver grain areregularly assessed. Where appropriate, D1-BP Fuel Crops is remeasuring thequantity of planting achieved as well as developing new ways to better measureand monitor planted areas in future. Relationships with suppliers whose plantingis unlikely to be viable or who are unable to deliver grain will likely bereplaced, subject to terms, with agreements with new partners whom the jointventure judges to be better positioned to deliver over the longer term. The table below indicates the broad geographic locations and types ofarrangements associated with jatropha planting worldwide in which D1-BP FuelCrops has an interest. The level of investment costs and security of future oilsupply are proportional to the degree of direct involvement by D1-BP Fuel Cropsand its joint venture partners. It is the policy of D1-BP Fuel Crops that wheretrees are lost due to natural wastage or mortality, or where planting has nottaken, such agricultural losses are reflected in the planting table as soon asthey are identified. This is in contrast to the previous policy of D1 Oilswhereby either replanting or new planting was undertaken in the followingplanting season and only the net increase in planting recorded. Where D1-BP FuelCrops considers replanting inappropriate or not possible, a provision is madeand the planting is reported net. The policy adopted by D1-BP Fuel Crops, whichwill also be adopted by D1 from Hereon, will lead to greater volatility inreported planting. Accordingly, D1-BP Fuel Crops has made provisions against planting that iseither unlikely to deliver the requisite quantity and quality, or which is toofar from available logistics facilities to make harvest and transport viable. D1has entered into discussions with D1-BP Fuel Crops and BP as to whether or notthere was a planting shortfall as at 31 July 2007, for purposes of the relevantprovisions of the joint venture agreement. A provision has been made in relationto this matter and the Directors' current assessment is that there will be nofurther financial obligation arising in this regard and they expect to reach asatisfactory agreement with their joint venture partner. Following these provisions, total planting and rights to offtake at 31 March2008 is assessed at 192,016 hectares. This is lower than original expectationsfor the end of the current planting year, but as D1-BP strengthens its plantingand crop management in the light of improving plant science expertise andgreater experience on the ground, it has been necessary to slow the pace ofplanting as locations and partners are reviewed for performance. It has not yettherefore been possible to replace all of the areas provided against with newplanting elsewhere. The table below summarises the total gross quantity of hectares of jatrophaplanting worldwide, over which D1 BP Fuel crops or joint venture or partnershiparrangements involving D1 BP Fuel Crops have rights: Seed purchase Managed Contract and oil supply Total plantations farming agreements hectares______________________________________________________________________________________________________________India North East - 62,455 - 62,455 South - 5,922 - 5,922 Rest - 2,860 23,833 26,693______________________________________________________________________________________________________________ - 71,237 23,833 95,070______________________________________________________________________________________________________________Africa Zambia 2,276 70 23,179 25,525 Swaziland 1,064 210 6,112 7,386 Rest 50 879 13,638 14,567______________________________________________________________________________________________________________ 3,390 1,159 42,929 47,478South East Asia Indonesia 18 19,250 20,132 39,400 Rest - 2,212 7,856 10,068______________________________________________________________________________________________________________ 18 21,462 27,988 49,468______________________________________________________________________________________________________________Total 3,408 93,858 94,750 192,016______________________________________________________________________________________________________________ Managed plantations are those farms where land and labour is controlled by D1-BPFuel Crops, either through its subsidiaries or joint venture partners. Undercontract farming, the farmer plants his own trees on his own land. D1-BP FuelCrops and its partners assist with the provision of seedlings and thearrangement of bank finance for planting, and offer a buyback of harvestedgrains with an offtake agreement, subject to a floor price and the achievementof agreed quality standards, and provide support and advice during cultivation,and monitor the condition of the crops. Seed and oil supply agreements are arm'slength supply contracts with third parties whereby D1-BP Fuel Crops, eitherdirectly or through joint venture partners, has offtake arrangements in placeover future output from jatropha plantations which the third party isdeveloping. D1-BP Fuel Crops has limited involvement in this planting and relieson third parties to measure and manage the crop effectively. The rights to some planting is shared with third parties, such as joint venturepartners, with whom D1 and D1-BP Fuel Crops have worked to achieve rights toplanting of jatropha. As such, offtake from these areas of planting may well beshared with those third parties. Based on the forecasts for oil delivery, D1-BP Fuel Crops is now reviewing wherebest to place crushing, expelling and preprocessing assets. As plantationsmature and we move closer to harvest and the crushing of grain for oil, D1-BPFuel Crops is preparing to deploy operational crushing and expelling units inZambia, North East India and Indonesia. Refining and trading Our activities in refining and trading during 2007 were impacted by the ongoingchallenges of high feedstock prices and by subsidised biodiesel imports from theUS. Refining margins across the industry came under increasing pressure fromrising vegetable oil prices at the beginning of the year. Although we werecushioned by stocks of vegetable oil previously purchased at lower prices, wewere forced to run our refineries below capacity. Prices continued to rise,however, and having processed existing stocks we ceased refining of virgin oilduring the third quarter of 2007. We were, however, able to take advantage ofthe flexibility of our modular D1 20 refinery units by refining parcels of "off-spec" material purchased from other suppliers. The import of heavily subsidised US biodiesel exacerbated the impact of risingfeedstock prices. Subsidised soya methyl ester began to enter the EU in volumein the form of a 99% soya biodiesel and a 1% mineral diesel blend, so-calledB99, around the middle of the year. US producers are currently eligible forsubsidies of US$1 for every gallon (approximately 13p per litre) of biodieselblended with mineral diesel, which then receives further subsidy in EU markets.As a result, we believe this largely set market prices in the EU and furthereroded refinery margins. It is estimated that up to one million tonnes of B99entered the EU during 2007. During 2007 we switched from refining virgin oil to purchasing and sellingquantities of B99 to meet obligations to our principal offtaker, Petroplus. Ourexperience by the end of 2007 was that, given higher feedstock prices andsubsidised imports, prices bid for such contracts were not at a level wherethere could be an adequate return. Consequently, our offtake agreement withPetroplus was not renewed when it ended in December 2007. We began 2007 with the intention to increase UK refining capacity in advance ofthe introduction of the RTFO in 2008. We increased the capacity of our Teessidesite to 42,000 tonnes in the first half of the year with the addition of a fifthrefinery unit. This was the first upgraded D1 30 unit with an enhanced capacityof 10,000 tonnes per year. Final commissioning was completed by the thirdquarter of 2007. However, as market conditions deteriorated, we held capacity atTeesside at 42,000 tonnes. Having completed the acquisition of our Bromboroughsite in January 2007, we began the conversion of the existing facilities, whichformerly produced fuel and lubricant additives, to create 100,000 tonnes ofinitial biodiesel refining capacity. As conditions changed, we slowed thetimetable for commissioning the first 50,000 tonnes of this capacity, andfinally suspended the addition of the second 50,000 tonnes. As a result of the fundamental changes underway in the European refining market,we intend to stop refining and trading and to concentrate our effortsexclusively on developing the upstream plant science services to breed, plantand manage new commercial biofuels crops. As announced on 7 March 2008, we havealready started a consultation process with employees at both our Middlesbroughand Bromborough sites. In so far as we have not done so already, we willcontinue to consult with employees in relation to the future of the sites,including their potential closure and sale. Safety, health and environment (SHE) During 2007 we enhanced our existing SHE polices, tested and improved ourperformance and raised internal awareness of behavioural safety. We undertook amajor programme of work to understand the potential for Jatropha curcas plantsand products to affect human health, and to ensure jatropha plants and productscomply with applicable European REACH (Regulation Evaluation and Authorisationof Chemicals) regulations. The programme, which is run jointly with BP, isexpected to continue through 2010 and will include formal occupational healthmonitoring and hygiene schemes. There were no reportable injuries or breaches ofenvironmental consents in 2007. Finance review The financial results for the year ended 31 December 2007 reflect the continuingdevelopment of the business in challenging market conditions, particularly fordownstream refining and trading activities. The financial results have been prepared under International Financial ReportingStandards (IFRS). The new accounting policies adopted, and the detail of theimpact of moving to IFRS, are set out in IFRS transition notes on Note 30 ofthese financial statements. Total Group revenue of £10.6m (2006: £1.6m) in the year to 31 December 2007arose from the sale of 20,632 tonnes of biodiesel primarily to Petroplus andConoco Philips. These sales generated a gross operating loss after the cost ofrefining of £5.1m (2006: £0.8m). Administrative expenses of £15.2m (2006: £12.2m) reflect the ongoing developmentof the business, particularly in plant science and agronomy. Included in thistotal are spending on plant science of £2.0m; on regional operations of £3.4m;on business development of £1.0m and on refinery technology and research of£0.4m. Interest received of £1.6m (2006: £0.6m) relates to cash deposits held duringthe year. The loss on ordinary activities before taxation was £46.1m (2006: £12.6m) andthe loss per ordinary share was 74.85p (2006: 39.98p). Gross cash in hand (defined as cash held in bank accounts and on deposit) as at31 December 2007 was £14.3m (2006: £51.4m). Net cash (defined as gross cash lessmortgage and cash held as collateral) as at 31 December 2007 amounted to £7.8m(2006: £48.3m). The differences between gross and net cash relate to themortgage on the Middlesbrough site of £0.8m (2006: £0.8m) and cash held ascollateral of £5.7m (2006: £2.3m). Cash held as collateral comprised £2.3m with Allied Irish Bank in respect offinance leases for the D1 20 modular refineries (2006: £2.3m), £2.0m in respectof a swap arrangement (2006: £nil), £1.1m against letters of credit (2006: £nil)and £0.3m against guarantees given to third parties (2006: £nil), all withBarclays Bank. The cash collateral held by Allied Irish Bank was reduced to£1.9m shortly after the year end. The cash collateral held by Barclays inrespect of the swap arrangement will be released when the swap terminates inApril 2008. As a result of the Board's intention to stop trading activities, theletter of credit facility will no longer be needed and the related cashcollateral has now been released. Concurrent with the release of these results the Company is announcing aproposed placing of ordinary shares at 25 pence per share to realise £14.9million, net of expenses. Based on the Board's revised business plan, the netfunds raised of £14.9 million are expected to allow the Company to remain cashpositive through to the end of 2009. On 1 October 2007, D1 established a 50/50 joint venture with BP, D1-BP FuelCrops Limited. Under the terms of the Joint Venture, D1 transferred all itsexisting planting and substantially all of its overseas operations into D1-BPFuel Crops and granted BP options over ordinary shares in D1 Oils plc as set outin note 13 to the accounts. In consideration BP has undertaken to fund the first£31.75m of the joint venture's working capital requirements; thereafter bothpartners will fund additional working capital requirements equally. D1'sinvestment in D1-BP Fuel Crops has been accounted for using the equity method inaccordance with IAS 31. International Accounting Standards require that a 'fair value' be calculated forthe options granted to BP and recorded as a reduction in the gain on thetransaction. The calculation of fair value utilises the share price of D1 Oilsplc at the date the options were irrevocably granted (the 'effective date') andthe historic volatility of the share price as key inputs. The effective date forthe options granted to BP was the date of D1 shareholder approval of theprospective transaction at the EGM on 27 July 2007. The D1 share price was £2.42at close on that date, and this, together with the above average volatility ofD1's share price, has produced a fair value for the options granted to BP of£12.8m. By way of illustration of the impact of changes in the share price onthe calculation, a share price of £2.00, typical of the period prior to theannouncement of the joint venture, would give a fair value for the options of£9.2m. A share price of £0.42, which was the share price on 31 March 2008, wouldgive a fair value of less than £0.5m. In view of the Board's intention to cease refining and trading operations andthe consultation with employees with regard to the possible closure of therefining sites at Middlesbrough and Bromborough, a decision has been made toimpair the assets at both sites down to their estimated net realisable values.In the case of the Middlesbrough site this is £4.8m based on the Board's bestestimates of the resale value of the modular refineries and of the market valueof the land and buildings at the site and in the case of Bromborough, this is£2.0m based on a recently updated third party professional valuation report onthe site. The total impairment charge for the year for both sites amounted to£22.8m. During the year, the Group secured overdraft facilities of £1.5m (2006: £nil)which have not been utilised at any time during the year and letter of creditfacilities of £3.0m (2006: £nil), both with Barclays Bank. Christopher TawneyGroup Finance Director Consolidated income statementfor the year ended 31 December 2007 Year Year ended ended 31 December 31 December 2007 2006 Note £000 £000___________________________________________________________________________________________________________________Group revenue 3.4 10,579.7 1,560.3Cost of sales (15,677.7) (2,366.7)___________________________________________________________________________________________________________________Gross loss (5,098.0) (806.4)Administrative expenses 4 (15,207.5) (12,212.9)___________________________________________________________________________________________________________________Gross trading loss (20,305.5) (13,019.3)Fixed asset impairment 10 (22,778.9) -Share of post tax losses of associates and joint ventures accounted for using the equity method 12 (1,516.5) (121.5)Exceptional item - net deficit on transfer of operation to joint venture 13 (2,764.3) -Impairment of goodwill arising on acquisition - (6.3)___________________________________________________________________________________________________________________Group operating loss from continuing operations (47,365.2) (13,147.1)Finance revenue 7 1,572.5 566.4Finance costs 7 (306.8) (46.9)___________________________________________________________________________________________________________________Loss from continuing operations before taxation (46,099.5) (12,627.6)Tax expense 8 (36.7) -___________________________________________________________________________________________________________________Loss for the year from continuing operations (46,136.2) (12,627.6)___________________________________________________________________________________________________________________ Loss per ordinary shareBasic and diluted loss per ordinary share (pence) 9 74.85 39.98___________________________________________________________________________________________________________________ No profit and loss account is presented by the Company as permitted by Section230 of the Companies Act 1985. The Company's loss for the year was £72,266,700(2006: £2,774,400). Consolidated balance sheetas at 31 December 2007 As at As at 31 December 31 December 2007 2006 Note £000 £000___________________________________________________________________________________________________________________AssetsNon-current assetsProperty, plant and equipment 10 6,984.3 14,486.3Biological assets - 74.5Intangible assets 11 41.3 119.1Trade and other receivables - 948.9Investments accounted for using the equity method 12 15,180.5 -Other investments 12 - 18.2___________________________________________________________________________________________________________________ 22,206.1 15,647.0 Current assetsInventories 15 2,220.3 3,023.3Trade and other receivables 16 4,118.7 898.3Other financial assets 17 11,021.6 2,317.3Cash and short-term deposits 18 3,596.6 49,066.3___________________________________________________________________________________________________________________ 20,957.2 55,305.2Assets held for resale 14 100.0 100.0___________________________________________________________________________________________________________________Total assets 43,263.3 71,052.2___________________________________________________________________________________________________________________ Equity and liabilitiesCurrent liabilitiesTrade and other payables 19 (2,367.4) (2,811.9)Interest-bearing loans and borrowings 20 (492.9) (476.1)Accruals and deferred income (1,678.9) (2,208.9)Other financial liabilities 22 (1,135.3) -Provisions 23 (3,000.0) -___________________________________________________________________________________________________________________ (8,674.5) (5,496.9)Non-current liabilitiesInterest-bearing loans and borrowings 20 (3,307.2) (3,763.6)Investments accounted for using the equity method 12 - (154.6)___________________________________________________________________________________________________________________ (3,307.2) (3,918.2)___________________________________________________________________________________________________________________Total liabilities (11,981.7) (9,415.1)___________________________________________________________________________________________________________________Net assets 31,281.6 61,637.1___________________________________________________________________________________________________________________ As at As at 31 December 31 December 2007 2006 Note £000 £000___________________________________________________________________________________________________________________Capital and reservesEquity share capital 25, 26 622.4 614.8Share premium 26 85,051.4 83,832.2Own shares held 26 (484.0) (484.0)Other reserves 26 437.7 437.7Revenue reserves 26 (66,451.2) (22,172.0)Share option reserve 26 12,787.0 -Currency translation reserve 26 (681.7) (591.6)___________________________________________________________________________________________________________________Equity shareholders' funds 31,281.6 61,637.1___________________________________________________________________________________________________________________ These financial statements were approved by the Board of Directors on 8 April 2008. Lord Oxburgh of Liverpool Christopher TawneyChairman Group Finance Director Consolidated statement of recognised income and expensefor the year ended 31 December 2007 Year Year ended ended 31 December 31 December 2007 2006 £000 £000___________________________________________________________________________________________________________________Income and expense recognised directly in equityLosses on cash flow hedges taken to equity (1,100.6) -Exchange difference on retranslation of foreign operations (90.1) (591.6)___________________________________________________________________________________________________________________Net income recognised directly in equity (1,190.7) (591.6) Transfers to the income statementLosses on cash flow hedges taken to cost of sales 1,100.6 -___________________________________________________________________________________________________________________Net transfers to the income statement 1,100.6 - Loss for the year (46,136.2) (12,627.6)___________________________________________________________________________________________________________________Total recognised income and expense for the year (46,226.3) (13,219.2)___________________________________________________________________________________________________________________ Attributable to: Equity holders of the parent (46,226.3) (13,219.2)___________________________________________________________________________________________________________________ Consolidated cash flow statementfor the year ended 31 December 2007 Year Year ended ended 31 December 31 December 2007 2006 £000 £000___________________________________________________________________________________________________________________Operating activitiesLoss for the year before tax (46,099.5) (12,627.6)Adjustments to reconcile loss for the year before tax to net cash flowfrom operating activities:Depreciation of property, plant and equipment, and intangible assets 863.8 367.6Impairment of fixed assets 22,778.9 -Impairment of goodwill on acquisition of joint ventures - 6.3Impairment of goodwill 64.1 -Impairment of investments 60.0 -Share-based payments 1,857.0 1,135.0Profit on disposal of investments (7.0) -Loss on disposal of fixed assets - 17.7Exceptional item 2,764.3 -Cash items within exceptional item (2,393.9) -Share of post tax losses of joint ventures accounted for using the equity method 1,516.5 121.5Finance income (1,286.9) (566.4)Finance expense 306.8 46.9Decrease/(increase) in inventories 803.3 (2,897.1)Increase in trade and other receivables (1,992.7) (1,062.1)Increase in other financial assets (56.3) -Decrease in trade and other payables 1,510.9 3,210.8Increase in other financial liabilities 1,135.3 -Increase in provisions (3,000.0) -___________________________________________________________________________________________________________________Net cash flow from operating activities (21,175.4) (12,247.4)___________________________________________________________________________________________________________________Investing activitiesInterest received 1,286.9 566.4Payments to acquire property, plant and equipment (16,580.4) (11,582.6)Payments to acquire intangible fixed assets (4.7) -Funds transferred to deposits (8,362.4) (2,317.3)Purchase of joint venture investments (903.5) -Purchase of trade investments (60.0) (4.2)Sale of trade investments 25.2 -___________________________________________________________________________________________________________________Net cash flow from investing activities (24,598.9) (13,337.7)___________________________________________________________________________________________________________________ Year Year ended ended 31 December 31 December 2007 2006 £000 £000___________________________________________________________________________________________________________________Financing activitiesInterest paid (306.8) (46.9)Exercise of share options 1,008.2 47,030.0Bonus shares 136.5 -New borrowings 36.4 3,400.0Settlement of non-current liabilities 2006 (12.8) -Repayment of mortgage (60.0) -Repayment of capital element of finance leases (361.3) (55.0)___________________________________________________________________________________________________________________Net cash flow from financing activities 440.2 50,328.1___________________________________________________________________________________________________________________Net (decrease)/increase in cash and cash equivalents (45,334.1) 24,743.0Cash and cash equivalents at the start of the year 49,024.4 24,281.4Effects of exchange rates (93.7) -___________________________________________________________________________________________________________________Cash and cash equivalents at the end of the year 3,596.6 49,024.4___________________________________________________________________________________________________________________ Cash and cash equivalents comprises the following: Year Year ended ended 31 December 31 December 2007 2006 Note £000 £000___________________________________________________________________________________________________________________ Cash at bank and in hand 18 3,206.3 2,261.8Short-term deposits 18 390.3 46,804.5Short-term borrowings and overdrafts 20 - (41.9)___________________________________________________________________________________________________________________ 3,596.6 49,024.4___________________________________________________________________________________________________________________ Company balance sheetas at 31 December 2007 As at As at 31 December 31 December 2007 2006 Note £000 £000___________________________________________________________________________________________________________________AssetsNon-current assetsOther investments 12 12,912.0 143.2___________________________________________________________________________________________________________________ 12,912.0 143.2Current assetsTrade and other receivables 16 457.7 33,160.9Other financial assets 17 8,704.3 -Cash and short-term deposits 18 3,025.8 48,569.3___________________________________________________________________________________________________________________ 12,187.8 81,730.2___________________________________________________________________________________________________________________Total assets 25,099.8 81,873.4___________________________________________________________________________________________________________________ Equity and liabilitiesCurrent liabilitiesTrade and other payables 19 (377.0) (224.3)Accruals and deferred income (541.5) (1,105.5)Financial liabilities 22 (33.6) -___________________________________________________________________________________________________________________Total liabilities (952.1) (1,329.8)___________________________________________________________________________________________________________________Net assets 24,147.7 80,543.6___________________________________________________________________________________________________________________Capital and reservesEquity share capital 25, 26 622.4 614.8Share premium 26 85,051.4 83,832.2Own shares held 26 (484.0) (484.0)Revenue reserves 26 (73,829.1) (3,419.4)Share option reserve 12,787.0 -___________________________________________________________________________________________________________________Equity shareholders' funds 24,147.7 80,543.6___________________________________________________________________________________________________________________ These financial statements were approved by the Board of Directors on 8 April 2008. Lord Oxburgh of Liverpool Christopher TawneyChairman Group Finance Director Company statement of recognised income and expensefor the year ended 31 December 2007 Year Year ended ended 31 December 31 December 2007 2006 £000 £000___________________________________________________________________________________________________________________Loss for the period (72,266.7) (2,774.4)___________________________________________________________________________________________________________________Total recognised income and expense for the period (72,266.7) (2,774.4)___________________________________________________________________________________________________________________ Attributable to: Equity holders of the parent (72,266.7) (2,774.4)___________________________________________________________________________________________________________________ Company cash flow statementfor the year ended 31 December 2007 Year Year ended ended 31 December 31 December 2007 2006 £000 £000___________________________________________________________________________________________________________________Operating activitiesLoss for the year before tax (72,266.7) (2,774.4)Adjustments to reconcile loss for the year before tax to net cash flowfrom operating activities:Share-based payments 1,857.0 1,135.0Profit on disposal of investments (7.0) -Impairment of amounts owed by Group undertakings 70,890.1 -Finance income (1,451.5) (564.1)Increase in trade and other receivables (38,529.3) (21,444.3)Increase in trade and other payables (295.1) 941.4___________________________________________________________________________________________________________________Net cash flow from operating activities (39,802.5) (22,706.4)___________________________________________________________________________________________________________________Investing activitiesInterest received 1,451.5 564.1Funds transferred to deposits (8,362.4)Purchase of trade investments - (4.2)Sale of trade investments 25.2 -___________________________________________________________________________________________________________________Net cash flow from investing activities (6,885.7) 559.9___________________________________________________________________________________________________________________Financing activitiesExercise of share options 1,008.2 47,030.0Bonus shares 136.5 -___________________________________________________________________________________________________________________Net cash flow from financing activities 1,144.7 47,030.0___________________________________________________________________________________________________________________Net (decrease)/increase in cash and cash equivalents (45,543.5) 24,883.5Cash and cash equivalents at the start of the period 48,569.3 23,685.8___________________________________________________________________________________________________________________Cash and cash equivalents at the end of the year 3,025.8 48,569.3___________________________________________________________________________________________________________________ Year Year ended ended 31 December 31 December 2007 2006 Note £000 £000___________________________________________________________________________________________________________________Cash and cash equivalents is comprised as follows:Cash at bank and in hand 18 2,635.5 1,764.8Short-term deposits 18 390.3 46,804.5___________________________________________________________________________________________________________________ 3,025.8 48,569.3___________________________________________________________________________________________________________________ MORE TO FOLLOW This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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