Interim Results

D1 Oils plc

Interim results

The unaudited interim results for the six months ended 30 June 2011 are hereby released to the market.

Overview

D1 Oils plc (D1) is an alternative energy crop company, which develops Jatropha curcas, a tropical oilseed bearing tree, into a sustainable energy crop that has potential as a source of biodiesel. Jatropha is a hardy crop that is able to grow on a wide range of soils, including soils which are sub-optimal for arable agriculture. Its grain is crushed to produce inedible oil that can be used directly or as a feedstock for biodiesel and a meal that has the potential to be processed into a high-value, protein source for animal feed.

As part of a Board development and reorganisation process commencing on 24 June 2011, Nicholas Myerson and I were appointed to the Board and took up the roles of Executive Director. On 1 July 2011, Martin Jarvis moved from his previous position of CEO to take up the role of Chief Operating Officer and subsequently on 14 July 2011 Barclay Forrest stepped down from the Board as Non-Executive Chairman and I assumed the position of Executive Chairman from that date. On behalf of the Board I would reiterate my thanks to Barclay for his contribution to the Company over recent years. Also on 14 July 2011 we were pleased to welcome Graham Woolfman, who joined the Board as a Non-Executive Director.

The Board is pleased to report that the Group continues to experience continuing upward price pressure for Crude Jatropha Oil (CJO), with prices currently exceeding $1,000 per tonne, ex works. The significant majority of the Jatropha grain collected by the Group is from regions in India adjacent to the Bay of Bengal, where D1's profile has enabled it to secure supplies of grain and CJO from third party suppliers, in addition to its relationship farmers.

As announced in July, the new Board has been undertaking a review of the Company`s operations and the immediate and longer term challenges and opportunities which the Company faces within its markets and product development plans.

Following this review, the Board has determined to focus the Group's operations in India, where there is strong demand for bio-fuel, and to commit an increasing proportion of its working capital to the country. This will enable the Group to consolidate grain storage and processing. In addition, the Group will look to obtain commodity trade finance for the 2012/2013 harvest season, which will be facilitated by centralised storage and processing.

To enable it to focus its resources on India, the Group will look to minimise the Group's expenditure in the UK, Zambia, Malawi and Indonesia. The Board also intends to suspend, until further notice, the Group's animal feed development programme, together with the related cattle trials.

The Board expects that these actions will enable it to further reduce the Group's overheads from a run rate of approximately £3.0 million per annum currently to approximately £2.2 million for the year ending 31 December 2012. The Board estimates that these savings will involve a one off exceptional cost of approximately £410,000.

India has in recent months experienced good rainfall, as a result of which the Directors anticipate improved yields from its maturing Jatropha crops this harvest season.

In light of the review, the Board is now targeting production of 2,000 tonnes of CJO, at a cost of approximately $690 per tonne, over the next Indian harvest season to May 2012. It is targeting to sell this production at an average price (ex works) of $1,000 per tonne. The Board anticipates, based on the assumptions underlying its business plan, that the Group's operations in India will achieve breakeven in 2013, although the Group itself is not expected to break even before 2014.

Finance

Group revenue from continuing operations was £0.2m (June 2010: £0.1m). The net loss from continuing operations was £1.9m (June 2010: £2.6m). The reduced loss compared to June 2010 reflects the progress made in reducing administrative expenses from £2.5m to £1.6m for the period.

The overall loss for the period was £1.9m (June 2010: £2.6m). The basic and diluted loss per share was 1.47p (June 2010: 2.05p).

Cost of sales rose significantly in the period due to greater expelling activity overseas in relation to grain collection.

During the period, the Group provided additional funding to its joint venture partner, D1 Williamson-Magor. The Group's policy is to not recognise any asset for the joint venture until cash flow is generated through the sale of CJO. In view of this, the additional funding of £100,100 was charged direct to the Income Statement as an impairment of the asset.

Finance income within the Income Statement includes the movement in foreign exchange on both retranslation of foreign currencies held overseas (in USD) and in loans extended by the Group to overseas subsidiaries to fund past overseas operations.

Trade and other receivables reduced significantly during the period since 31 December 2010 as that total of £899,700 included £250,000 of R&D tax credits and £380,000 of VAT recovered on the sale of the Bromborough site both of which were received in January 2011.

The Group's cash and cash equivalents and term deposits at 30 June 2011 amounted to £2.4m (June 2010: £5.5m). At 31 December 2010 the total was £3.5m.

Outlook

The new Board is enthusiastic and optimistic about the outlook for the Company. This spirit is based upon the new skill sets which have been added to an experienced team in the field, primarily in India. Whilst Jatropha has been a disappointment to the investment community over the past few years, D1 has positioned itself in the middle of two exciting opportunities; investment exposure in a BRIC country and in bio-fuels. The bulk of our revenue and profit for the foreseeable future will be derived from India and we will endeavour to maximise that unique opportunity within the agricultural and energy sectors. Whilst North American and European investment opportunities in these sectors remain limited and mature, India (in our view) will be the primary driver of growth and D1 shareholders will be involved in this market. Along with this position is the knowledge that the Jatropha paradigm is beginning to realise its potential albeit more slowly than initially thought. Plantings made in the middle of the 2000s are finally reaching maturity and we expect a trajectory of solid growth in revenues in the coming years. The combination of all of these factors will lead the company to allocate less of its capital to overhead and more to working capital, including off balance sheet financing in the form of commodity trade finance. We envisage that D1 will evolve into a more robust company focused on revenue generation and therefore value to shareholders in the medium to long term.

Steven Rudofsky

Executive Chairman

28 September 2011

Consolidated interim income statement

Unaudited results for the six months ended 30 June 2011

Consolidated interim statement of comprehensive income

Unaudited results for the six months ended 30 June 2011

Consolidated interim statement of changes in equity

Unaudited results for the six months ended 30 June 2011

Consolidated interim balance sheet

Unaudited results at 30 June 2011

Consolidated interim statement of cash flows

Unaudited results for the six months ended 30 June 2011

Notes to the interim financial statements

1. Basis of preparation

This interim report, which does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006, was approved by the Board on 28 September 2011. The condensed set of financial statements of this interim report has been prepared in accordance with accounting policies which were adopted in presenting the full year annual report and accounts for the year ending 31 December 2010.

The full year annual report and accounts will be prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The Group has not applied International Accounting Standard (IAS) 34 Interim Financial Reporting in the preparation of these condensed interim financial statements, as it is not mandatory for AIM-listed companies.

The financial information for the full preceding year does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006 and has been extracted from the statutory accounts for the financial year ended 31 December 2010 which have been delivered to the Registrar of Companies. Those accounts, which included an auditors' report which contained a 'disclaimer on opinion' qualification, did not contain a statement under Section 498(2) nor Section 498(3).

Fundamental accounting concept

The financial statements have been prepared on a going concern basis which assumes that the Company and the Group will continue in operating existence for the foreseeable future and meet its liabilities as they fall due. There are uncertainties that the Directors have had to consider in deciding to prepare the financial statements on the going concern basis which are set out below.

Business planning uncertainty

The Report of the Chairman on pages 1 and 2 sets out the strategy of the business and what it is seeking to achieve and the milestones it aims to reach. Whilst the Directors believe these milestones are realistic, there are inevitably uncertainties as to whether they will be achieved in full and in time. In addition, following the appointment of Steven Rudofsky and Nicholas Myerson on 24 June 2011, the Board has commenced a business plan review process to be concluded imminently. The review may or may not result in changes to the existing business plan. While the Board is confident it can deliver a Jatropha based strategy that is viable over the long term, until the business plan becomes more certain the Board cannot assess with certainty the implications for the Company of implementing a revised business plan and strategy.

Funding uncertainty

The Company's Board informed the market over eighteen months ago that the Company would require a further injection of funds during 2011 and, as such, had been working on a new fund raising exercise. The Board composition changed significantly with the appointment to the Board on 24 June 2011 of Steven Rudofsky and Nicholas Myerson, and the Board currently believes it will secure sufficient shareholder support to pass a resolution to enable sufficient funds to be raised once a successful business plan review has been completed. The Board currently intends to seek sufficient funds to cover the business's activities until key harvest milestones are reached in mid-2012. The Board believes that the case can then be made in time for further funding for capital and working capital investment ahead of the business becoming cash stable. The Board is encouraged by the feedback it has received to date on the willingness of existing shareholders to participate in a fund raising. However, if the Directors are unable to secure the appropriate level of shareholder support for the strategy and associated future fund raising before late 2011 and again as required by mid-2012, the Company and the Group will be unable to continue as a going concern.

Directors' view

After making enquiries and considering these uncertainties, the Directors conclude that the implications of the business plan review and whether funding can be secured before cash resources are depleted are material uncertainties which may cast significant doubt about the Group and Company's ability to continue as a going concern in its current form. The Directors believe that the impact of these uncertainties should be manageable and the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. Consequently the Directors believe that it is appropriate to prepare the financial statements on a going concern basis.

Should the proposed fund raising not be successful, the strategic milestones not be achieved or the business plan be changed in a way which restricts the Group's ability to implement or fund the business plan, then the going concern basis would be invalid and adjustments may have to be made to reduce the value of the assets to their recoverable amount, to provide for any further liabilities which might arise and to reclassify fixed assets and long term liabilities to current assets and current liabilities.

Significant accounting policies

The accounting policies adopted in the preparation of the Group's interim financial statements are consistent with those followed in the preparation of the annual financial statements for the year ended 31 December 2010, except for the adoption of new Standards and Interpretations as of 1 January 2011 listed below:

·; IFRS 2 - Amendment to IFRS 2 - Group Cash-settled Share-based Payments. The amendments clarified the classification of share-based payment awards in parent and subsidiary companies and addressed plans not considered in the original Standard. The adoption of this amendment has not had a material impact on the financial position or performance of the Group.

The amendments to the following standards did not have any impact on the accounting policies, financial position or performance of the Group:

·; IAS 27 - Amendment - Consolidated and separate financial statements - effective 1 July 2009.

·; IAS 39 - Amendment - Eligible hedged items - effective 1 January 2010.

·; IFRIC 9 - Reassessment of embedded derivatives - effective 1 January 2010.

·; IFRIC 16 - Hedges of a net investment in a foreign operation - 1 January 2010.

·; IFRIC 17 - Distribution of non-cash assets to owners - effective 1 July 2009.

·; IFRIC 18 - Transfers of assets from customers - effective in EU no later than 1 January 2010.

·; Various - Annual improvements to IFRS - effective various dates but most 1 January 2010.

The IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements:

·; IFRS 1 - Amendment - First time adoption of IFRS - effective 1 July 2010.

·; IAS 24 - Amendment - Related party disclosures - effective 1 January 2010.

·; IAS 32 - Amendment - Financial instruments: presentation - effective 1 February 2010.

·; IFRIC 14 - Amendment - IAS 19 limit on a defined benefit asset - effective 1 January 2011.

·; IFRIC 19 - Extinguishing financial liabilities with equity instruments - effective 1 July 2010.

Except for the amended disclosure requirements of IAS 24, the Directors do not anticipate that the adoption of these standards will have a material impact on the Group's financial statements in the period of initial application.

The IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements that have not yet been endorsed by the European Union:

·; IFRS 1 - Amendment - First time adoption of IFRS - effective 1 July 2010.

·; IFRS 7 - Amendment - Financial instruments: disclosures - effective 1 July 2011

·; IFRS 9 - Financial instruments - effective 1 January 2013.

·; IFRS 10 - Consolidated financial statements - effective 1 January 2013.

·; IFRS 11 - Joint arrangements - effective 1 January 2013.

·; IFRS 12 - Disclosure of involvement with other entities - effective 1 January 2013.

·; IFRS 13 - Fair value measurement - effective 1 January 2013.

·; IAS 12 - Amendment - Income taxes - effective 1 January 2012.

·; IAS 27 - Amendment - Separate financial statements - effective 1 January 2013.

·; IAS 28 - Amendment - Investment in associates and joint ventures - effective 1 January 2013.

The Group has not yet assessed the impact of IFRS 9, IFRS 10, IFRS 11, IFRS 12, IFRS 13, IAS 27 nor IAS 28. The Directors do not anticipate that the adoption of amendments to IFRS 1, IFRS 7 and IAS 12 will have a material impact on the Group's financial statements in the period of initial application.

2. Segmental information

For management purposes, the Group is organised into business units according to the nature of the products and services and has the following operating segments:

·; The Operations segment is responsible for the commercial planting of Jatropha. Its activities include managing the outgrower network, collecting grain and selling CJO.

·; The Science & Technology segment provided Jatropha plant science and associated technical consulting services to third-parties, breeding seeds and seedlings for commercial planting and undertakes research and development activities on Jatropha and its co-products. In December 2010, the disposal of a substantial portion of this segment was effected, with the exception of the animal feed activity. The effective financial date of disposal was 1 November 2010. For the purposes of segmental reporting, the agronomy and breeding activities that were disposed of in 2010 are classified as discontinued while the ongoing animal feed activity is classified as continuing. Comparatives have been restated on this basis.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss which in certain respects, as explained in the table below, is measured differently from profit or loss in the consolidated financial statements. Group financing (including finance costs and finance revenue), taxation and central administration are managed on a group basis and are not allocated to operating segments.

3. Loss per ordinary share

The number of shares in issue at 31 December 2010 and at 30 June 2011 was 126,675,219. For the purposes of calculating the loss per ordinary share the weighted average number of shares excludes 193,645 shares held by the D1 Oils plc Employee Benefit Trust. The diluted loss per share does not differ from the basic loss per share as the share options are anti-dilutive.

For the purposes of calculating earnings per share, the following profit figures were used:

4. Other financial assets

Other financial assets comprise the following:

5. Contingent assets

At 30 June 2011, the Group had three contingent assets:

1. D1 Oils Trading Limited has commenced proceedings to recover amounts due under a note, beneficial entitlement of which was assigned to the company as a result of a previous settlement. The note issuer has delayed payment of the note. D1 Oils Trading Limited has not recognised an asset in relation to this note as the amount and timing of cash flows from the note are uncertain. The maximum amount recoverable by D1 under the note before interest is US$1.2m.

2. In addition to the sale of the Bromborough refining site, the buyer of the site agreed to pay D1 Oils Trading Limited a net royalty of £0.4m plus VAT based on Bromborough's future production volumes of biodiesel. The Group has not recognised an asset in relation to this entitlement as the amount and timing of cash flows are uncertain.

3. As part of the disposal of the agronomy and breeding activities in the Science & Technology division in December 2010, the Company received Cumulative Redeemable Preference Shares (CRPS) with a nominal value of a £0.8m and a 5% coupon due for repayment in 2015. In addition, the Company is entitled to future royalties on Jatropha related sales on a sliding scale over 10 years (15% to year 5; 10% years 6 - 8; 5% years 9 - 10). The Group has not recognised an asset in relation to CRPSs or the royalties as the amount and timing of cash flows are uncertain

6. Contingent liabilities

At 30 June 2011, the Group had two contingent liabilities:

1. As part of the sale of the Bromborough site, the lease obligations for two parcels of land adjacent to the Bromborough site were passed to the buyers. The two leases are first cancellable in 2021. If the buyer defaults on these lease obligations, the obligation may fall to D1. The maximum exposure is £2.0m but various mitigations, such as sub-lets, are available. This obligation remains contingent on the buyer defaulting and the Board does not consider the risk sufficiently likely to recognise a liability.

7. Approval by the Board of Directors

The Interim Report was approved by the Board of Directors on 28 September 2011.

Directors and advisors

For further information please contact:-

D1 Oils plc +44 (0) 20 7936 9104

Steven Rudofsky

Executive Chairman

WH Ireland + 44 (0) 20 7220 0470

Chris Fielding

Ends