27th Sep 2006 07:03
D1 Oils Plc27 September 2006 D1 Oils plc 27th September 2006 Interim Results for the six months ended 30 June 2006 D1 Oils plc, the UK-based global producer of biodiesel, today announces itsinterim results for the six months ended 30 June 2006. Highlights • Planted or obtained rights to approximately 110,000 hectares of jatropha: an increase of 68,000 hectares since March 2006 • Crop science programme on track to deliver elite jatropha seed for 2008 planting: targeting 50% yield improvement • Acquisition of Bromborough site for conversion to biodiesel refining: refinery capacity targets increased to 320,000 tonnes (2007) and 420,000 tonnes (2008) • Financing package to fund the roll-out of D1 20 refinery assets being finalised • Lord Oxburgh joins as Non-Executive Director; to become Chairman in 2007 Elliott Mannis, Chief Executive Officer of D1 Oils said: "The group has made significant progress over the last six months. The pace ofplanting has accelerated and we are planting in new areas such as China. Ourfirst refineries have been commissioned and we are increasing our refinerycapacity in the UK. The acquisition of the Bromborough site is a signal of ourintent to deliver on our vision to create a leading biodiesel business." Karl E. Watkin, Chairman of D1 Oils, said: "We are delighted that someone of the calibre of Lord Oxburgh has decided tojoin our Board with a view to taking over from me as Chairman. It is a greatcompliment to the D1 team that we have attracted such a distinguished scientist,businessman and advocate of action on climate change. We believe we have built a strong business that will play a key part in meetingthe global need for sustainable transport based on renewable biofuel, and we aredoing so in a way that is making a real difference to developing countries. I amparticularly proud that, by our estimation, our planting work has created theequivalent of more than 220,000 jobs in some of the world's poorest regions.This is a business that is making a difference in the world and the presence ofLord Oxburgh as its Chairman will enhance that capability immensely. I can thinkof no better person to lead the Board." Contacts D1 Oils: Graham Prince, Head of Corporate Communications Tel: +44 (0) 1642 755580 Mobile: +44 (0) 7973 323840 Brunswick Group: Kevin Byram / Mark Antelme Tel: +44 (0) 20 7404 5959 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 are pioneeringthe science, planting and production of inedible vegetable oils; we design,build, own, operate and market biodiesel refineries; and we source, transportand trade seeds and seedlings, seedcake, crude vegetable oils and biodiesel. Ourvision is to be the world's leading biodiesel business. Report of Karl E. Watkin, Chairman, and Elliott Mannis, Chief Executive Officer We are pleased to announce our results for the six months ended 30 June 2006 andto report that we are performing well in all of our three core activities ofagronomy, refining and trading. We are making substantial progress towardsrealising our vision of becoming a leading global biodiesel business. In agronomy, as of 15 September, together with our joint venture partners, wehave either planted or obtained rights to approximately 110,000 hectares ofplanted Jatropha curcas, an increase of over 40,000 hectares since our lastquarterly update. Further planting is underway in key locations in thedeveloping world, and includes significant new planting in China. We have madesubstantial advances in the crop science of inedible oil production, and weexpect to be able to deliver a new 'E1' elite jatropha seed with improved yieldpotential for planting in 2008. In refining, we have brought our first four biodiesel refineries in the UK intofull operation. We are finalising the terms of a financing package to fund theroll-out of our D1 20 refinery assets. We also plan to expand significantly ourUK operations with the acquisition of a new refining and distribution site atBromborough in Merseyside scheduled to be completed by year end. Once acquiredand operational, this site will enable us almost to double our targeted UKrefinery capacity from 220,000 tonnes to 420,000 tonnes. We believe that thiswill make us one of the leading UK refiners of biodiesel. In trading, we are in advanced discussions with a number of parties aroundpossible offtake agreements and we expect to provide further news shortly. Weare also advancing our trading and logistics capabilities to support ourplanting and refining as we grow internationally. We are very pleased to announce the appointment of Lord Oxburgh as aNon-Executive Director of the Company with the intention of his becomingChairman early next year. We believe his decision to join us is a validation ofwhat has been achieved over the period. Global context Global energy policies in the developed and emerging worlds are increasinglybeing driven by the imperative of energy security and the need to considerresponses to the environmental challenges of global warming. Transportation isthe second-largest user of fossil fuels, behind the power generation industry,and accounts for over 20% of global CO2 emissions. Transport fuel is therefore akey sector being targeted for both greater energy security and reductions inemissions. We believe biofuel, and in particular biodiesel, is the mosteconomically realistic means to secure cost effective supplies of sustainabletransport energy in the medium-term. This option is increasingly supported bypolicy initiatives around the globe, particularly in the European Union. In theUK the introduction of a mandatory 5% biodiesel blend under the RenewableTransport Fuels Obligation (RTFO), to be phased in progressively from 2008 to2010, will create an annual market, we believe, for at least one million tonnesof biodiesel assuming a 5% blend. Although targets such as the RTFO will encourage both biodiesel and bioethanol,we believe the prospects for growth in biodiesel are greater. The growth in themarket share of diesel vehicles, driven by diesel's superior economy and new cleaner, better performing engine technologies, has been established for someyears. More than half of new cars sold in Europe last year were diesel. Inconsequence, we believe that diesel refining capacity in Europe has become constrained, and we would expect this to encourage further the adoption ofbiodiesel. We also believe that the ability of biodiesel to be integrated intothe existing fuel distribution and retail infrastructure more readily thanethanol, which requires different transport and storage regimes, will encouragethe fuel distribution industry to adopt biodiesel more rapidly. Similar trends can be recognised in key developing markets. The Indiangovernment is increasingly looking to develop a home-grown biodiesel industrybased in part on domestically sourced jatropha, and is working on settingtargets of a 5% biodiesel blend in 2012, rising to 10% by 2017 and beyond that20%. India has also witnessed a significant increase in diesel enginepenetration in transportation and increased demand for both vehicles and fuel. Fuel versus food Although in the short term most biodiesel will be produced by turning food cropsinto fuel, we believe that long-term advantage lies in the development ofhigh-yielding inedible oil crops, such as jatropha, to produce feedstock forbiodiesel. According to the International Energy Agency 15% of EU agriculturalland would be required to meet a biodiesel blend of 5% across the member states.Based on today's global production of the current main biodiesel feedstockcrops, even if all oil crops are used for biodiesel there is currently onlyenough resource to displace around 15% of global diesel consumption. Given thedemand for biodiesel feedstocks for food use, we believe it is very unlikelythat existing food crops can meet biodiesel demand in the volumes required.Furthermore, demand from the food industry for such oils is already rising. As aresult of the increasing demand for both food oils and biodiesel, we are alreadyseeing the prices for rapeseed, soya and palm increase considerably. We believe that inedible oils crops, such as jatropha, offer a viablealternative because they are not subject to the additional demand pressures offood use. Furthermore these crops do not require the same quality of land asfood crops. Governments of emerging economies are already focusing on the potential ofinedible oils that use non-arable land. As well as providing employment ineconomically disadvantaged rural areas, inedible oil production has thepotential to reverse the impact of deforestation and bring degraded land backinto productive use. Given the increasing concern about the impact of soya andpalm production on vulnerable rainforest habits, we believe the need fordevelopment of inedible oil crops that can take advantage of marginal land ispressing. Jatropha and other inedible oil crops have not seen the development in terms ofyields and growing techniques that crops for human consumption have undergone.We believe that the application of current agronomy techniques to jatropha andother inedible oil crops, in parallel with improved crop management, irrigation,fertilisation and weed control, will enable the development of the mostpromising wild varieties of jatropha into progressively higher yieldingindustrialised crops. This has already been accomplished successfully with foodcrops, notably rice, canola and soybean in the US, as well as palm. Offer period and funding update On 5 July 2006, we confirmed that the company was in very preliminarydiscussions with a number of parties which might or might not lead to anacquisition of a substantial shareholding in the company and/or an offer for theentire issued share capital of the company. These discussions, which have beenconducted with a view to assisting the company to accelerate significantly theroll out of its business plan, are continuing. A further update will be providedto the market as appropriate. There is no certainty that an offer will beforthcoming nor of the terms on which it might be made. Irrespective of theoutcome of these discussions, the Board aims to secure sufficient funding todeliver our existing plans and is confident that it can do so. Agronomy - planting programme We are continuing our pioneering work in the planting and production of inediblevegetable oil crops, particularly jatropha. As of 15 September, together withour joint venture partners, we have planted or obtained rights to offtake from atotal of approximately 110,000 hectares of jatropha planting worldwide. Thesubstantial increase in planting is principally due to good progress in SouthEast Asia and India as well as the establishment of a new planting base inSouthern China. Our continuing ability to attract large scale commercial agronomy partners isdemonstrated by our joint venture with Williamson Magor, the Indian tea plantinggroup, which achieved planting of 5,500 hectares by 15 September in North EastIndia. In Africa, planting is now underway on a new area of 20,000 hectares inSwaziland in cooperation with the Swazi Government, and in Zambia we haverecently increased our land allocations for future planting to over 174,000hectares. In South East Asia, we have concluded a series of oil supplyagreements with Setia Group China, with whom we also aim to partner inIndonesia. To date D1 has secured rights to offtake from approximately 28,000hectares that Setia Group has planted in Southern China, including a model farmof 3,000 hectares. The cumulative planting position at 15 September is summarised in the tablebelow: Managed Contract Seed purchase Total plantations farming and oil supply agreements India - 12,740 26,419 39,159Southern Africa 5,155 - 2,000 7,155South East - 30,494 32,563 63,057Asia Total 5,155 43,234 60,982 109,371 The scale of planting achieved in the period demonstrates the determination ofthe business to deliver new planting and offtake agreements in often challengingbusiness conditions. A modest harvest will be collected from existing planting around the turn of theyear and this seed will be used principally as planting material. We will alsobe conducting the first end-to-end test of our supply chain, taking harvestedseed from the fields through a local expelling process and on to apre-processing and refining facility in the UK. Agronomy - jatropha crop science programme We continue to make excellent progress in our jatropha crop science programmewhich is focused on developing the most promising wild varieties of jatrophainto progressively higher yielding commercial crops. Working together withAgriom BV (www.agriom.nl) in the Netherlands, we have identified and collectedmore than 130 accessions of jatropha to assess variations and planting quality.The breeding programme to produce higher yields per tree is being carried out inthe Netherlands and results assessed in field trials in several plantingregions. We are now scaling up a number of promising accessions using vegetativepropagation. Agriom is commencing the cross-fertilisation of the most promisingjatropha sub-varieties to produce hybrids with further enhanced characteristics,including yield and quality improvement, higher oil content, and droughtresistance. We are also working with SBW International BV (www.stbw.nl), aleading Dutch tissue culture firm, to scale up the rapid production of selectedvarieties. From October our crop science programme will be headed by Dr Henk Joos who joinsus from Bayer CropScience as Plant Science and Agronomy Director. Dr Joos joinsD1 with considerable experience in the commercial development of corn, soybean,cotton, canola, rice and various tropical crops in different temperate andtropical countries. We plan to undertake the first planting with our 'E1' range of proprietary eliteseeds in 2008. We expect that this seed should deliver oil yields of at least2.7 tonnes per hectare when the trees attain maturity. These seeds will comprisea range of varieties to provide adaptation to local micro climates and to reducevulnerability to disease. Development of the E1 seed will continue to delivernew varieties and anticipated higher yields in keeping with the improvementsmade in commercial crops over the years. We expect the first volume harvests from initial planting undertaken with wildseed in 2006 to produce modest yields of crude jatropha oil in 2008. We expectthe yield from our planting of wild seed to improve such that, after 5-6 yearswith a well maintained crop, we can achieve yields of up to 1.7 tonnes perhectare. This should compare favourably with the yields from crops that have alreadyexperienced considerable development, including soya (c.0.4 tonnes per hectare)and rapeseed (c.1.0 tonnes per hectare) and with the potential to head over thelonger-term towards those of palm (c.4-5 tonnes per hectare). In addition to the work on the scientific breeding and propagation of jatropha,we believe we are taking a lead role in developing programmes to optimise theagriculture methods of commercial jatropha production, including irrigation,pruning methods, planting densities, fertilisers and microclimate control. Thiswork, begun at our Indian centre in Coimbatore, will also be carried out at theRegional Development Centres (RDCs) that we intend to establish in SouthernAfrica and South East Asia during the next 6-9 months. Early indications arethat substantial improvements can be delivered in oil yield using such methods.Deployment of training programmes to ensure good agronomic practice have begunon a large scale. We continue to explore uses for our jatropha seed cake. We are excited by ourcurrent findings that the seedcake can be economically processed into a highprotein content animal feed with much greater revenue potential than for lowervalue uses such as fertiliser. We continue to investigate the commercialpotential of this application. We are also taking our first steps towards developing a multi feedstockstrategy, including exploring offtake agreements for other inedible oils. Refining We aim to capitalise on the structural factors driving biodiesel demand in theUK and EU, and to use our first mover advantage to become one of the clearleaders in the sector. We believe that the attractive economics of our highly flexible, modular capacity, using predominantly third party edible oilfeedstocks, will be capable of generating significant returns as the UK marketresponds to the challenges of the RTFO. Our strategy to focus on refining ourown supplies of higher yielding jatropha and other inedible oils addressesmarket exposure to fluctuations in feedstock prices. We have made substantial progress on our refinery operations with the deploymentof our first four D1 20 refineries at our site in Middlesbrough. As planned,all four units are now in beneficial operation, giving us an interim production capacity of 32,000 tonnes per annum. Bringing these refineries into operation identified certain shortfalls in theoriginal design and configuration. These commissioning issues have put pressureon 2006 production and the volume of biodiesel to be produced in the final months of the year will be somewhat less than originally anticipated.Nonetheless we have been able both to identify and resolve the commissioningissues speedily and to use the experience gained to improve performance. Thefirst unit has now been run up to 106% of nameplate capacity. As a result, we believe we are now in a position to improve the performance ofour future D1 20 units, increasing annual unit capacity by 25% from 8,000 to10,000 tonnes. The additional five units currently in manufacture will be builtto the new specification and an extra sixth unit will be added. We hadanticipated that the next five units would be deployed to Middlesbrough by theend of the year, but given the time required to implement the design changes wenow expect deployment to take place in early 2007. This will enable us to add afurther 60,000 tonnes of capacity to the Middlesbrough site by early 2007,rather than the expected additional increase of 40,000 by year end 2006.Irrespective of the change in the timing of deployment, our production targetsremain unaltered. One of the advantages of D1's modular technology is that it enables us to buildand commission refineries much faster than competing technologies in anexpanding market. We would expect this to reduce as we deliver manufacturing improvements and economies. The ability of the D1 20 to refine different mixesof oils and oils of differing qualities is a key competitive advantage overlarge scale refining solutions. The experience gained in improving the D1 20 will also contribute to enhancingthe design, now underway, of the 50,000 tonne per annum refinery units. Ourplans for further capacity expansion include the deployment of these units in2007. We believe these will deliver at least five times the output at less thanfive times the capital cost of operation. The availability of both the 10,000tonne and 50,000 tonne refineries increases our market flexibility and coverage.The acquisition of a further site for both conversion to biodiesel productionand for deployment of the 10,000 and 50,000 tonne units is central to ourambition to be a leader in UK and global biodiesel refining capacity. We have therefore recently exchanged contracts to acquire a 47 acre site complete withproduction and storage facilities at Bromborough on Merseyside for £3m.Bromborough represents a second major biodiesel production, storage anddistribution centre to complement that already established in Middlesbrough.Once acquired and operational, the new site is expected during 2007 to have aninitial production capacity of 100,000 tonnes, with a further 100,000 tonnes ofplanned refinery capacity to be added in 2008. Conversion of the existing site to biodiesel production will enable us toincrease production capacity in 2007 at an estimated capital cost which issignificantly lower than construction of a new-built site. The site offersdistribution access within a 70 mile radius to large UK urban markets in theNorth and Midlands, as well as seaborne delivery to potential UK west coastrefinery customers and to Ireland. Combined with the planned production capacity from our Middlesbrough plant, theBromborough acquisition has the potential to increase our installed biodieselproduction capacity from our existing target of 220,000 tonnes by the end of2007 to 320,000 tonnes, rising to 420,000 tonnes by the end of 2008. We believethat D1 has the opportunity to become the one of the leading players in the UKand global markets by 2008. 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. The50,000 tonne refinery units are also likely to feature in overseas deployments.In addition to utilising our proprietary refining technology, we are also opento overseas expansion of our refining activities via either the acquisition ofexisting plant for conversion or immediate use or investment into new biodieselrefining projects. Ports, refineries and other major industrial locations arelikely to be the prime locations for refinery installation. Trading We are in advanced discussions with a number of UK parties around possibleofftake agreements which will enable us to sell out the full productioncapacity of the Teesside site. We expect to announce the outcome of thesediscussions shortly. We have also recently hired a sales and marketing managerto target new customer sectors. No substantial quantities of biodiesel have yetbeen sold as the existing refining capacity has just recently attainedbeneficial operation. We continue to build our trading and logistics capabilities to meet the needs ofthe business globally. Our current soya oil feedstock is purchased oninternational markets and delivered to Teesside by marine tanker. Globally, weare exploring opportunities to deal in physical commodities, such as palm methylester. In Southern Africa, we have recently formed a joint venture with SouthernAlliance, a major grain and commodity trader in the region, for the trading ofagricultural commodities for the biofuels market. The joint venture will expandD1's capabilities in South Africa, Swaziland and Zambia in the transport andtrade of seeds, seedlings and seedcake and expelling and supply of oil tobiodiesel refineries. Finances Our ongoing investment in the development of our agronomy, refining and tradingstrategy is reflected in the financial results for the six months ended 30June, 2006. The financial results have been prepared on a basis consistent with previousperiods except that the Group has adopted one new accounting policy. During theperiod the Group adopted FRS20, Share Based Payments, and accordingly has recognised a charge in the current and preceding periods equivalent to the fairvalue of share options in issue. Total Group turnover of £32,000 (2005: £32,000) relates to sales of biodieselgenerated through testing of the first D1 20 and also the sale of seedlings tofarmers in India. Administrative expenses of £4.7m (2005: £3.4m restated) reflect the continuedinvestment in our internal resources and the development of Middlesbrough asour global headquarters. Significant investment has also been made in the operational teams in Southern Africa and South East Asia in order to facilitatethe delivery of our regional strategy. Interest earned of £0.4m (2005: £0.2m)relates to monies held on deposit. The loss on ordinary activities before and after taxation was £4.7m (2005: £3.3mrestated) and the loss per ordinary share was 15.17p (2005: 15.20p restated).As the Group has brought forward tax losses and losses were incurred in the period, there was no corporation tax payable. Cash in hand as of 30 June was £13.7m (2005: £26.4m) and net cash was £12.8m(2005: 26.4m). The difference between gross and net cash relates to themortgage on the Middlesbrough site of £0.8m (2005: £nil). The net cash outflowin the period reflects the investment of £4.8m in the manufacture andcommissioning of the first four D1 20's together with the associated tankageand infrastructure for both these and further units. There has also been aninvestment of £0.8m in working capital reflecting the building of our stock ofvegetable oils for future processing. A lease finance package to be provided by Allied Irish Bank and Investec for theroll out of our D1 20 units is being finalised. The proposed terms of theagreement include the sale and leaseback of the first four D1 20 units for avalue of £850,000 plus VAT per unit, with a facility to finance a further twoof the new 10,000 tonne units once completed. The facility will allow for aninitial cash release of 35%, with further annual cash releases scheduled overthe five year term of the agreement. We are confident that we can duplicatethese terms against further deployments. Additionally, in order to support the ambitions of the trading business we haveorganised appropriate lines of credit totaling $5m. Management We are delighted to announce the appointment of Lord Oxburgh as a Non-ExecutiveDirector of the Company with the intention of his becoming Chairman early nextyear. It is intended that when Lord Oxburgh succeeds to the Chairmanship, thepresent Chairman, Karl Watkin, will remain as a Non-Executive Director. Webelieve the involvement in the business of a scientist, businessman and advocateof action on climate change of the calibre and reputation of Ron Oxburgh affirmsnot only the progress which the company has made but also demonstrates thegrowing importance and maturity of the biofuels sector. Operational Summary These interim results mark a very important milestone in the development of D1.We have substantial planting underway, our agronomy research is progressingrapidly and our UK refineries are now operational. D1 has delivered verysubstantial progress in the first of half of 2006 and we are now integrating ouroperations into a single, sustainable business delivering value fromearth-to-engine. In creating this business we are not only doing something tangible to reduce theimpact of climate change through the development of sustainable biodiesel, butwe are doing it in a way that we believe will benefit many of the world's poorercountries through the growing of jatropha. We are very proud that our currentplanting operations have already created many thousands of new jobs for therural poor, particularly in Africa and India. Outlook The Board is pleased with the progress that the business has made in the firsthalf of the year, and is looking forward to continuing development in thesecond half. We believe that the shift to renewable fuels for transport offers opportunities for substantial business growth globally. Our strategy continuesto be set firmly on delivering value from earth-to-engine through agronomy,refining and trading. CONSOLIDATED PROFIT AND LOSS ACCOUNTUnaudited results for the six months ended 30 June 2006 Six months Six months Year ended 31 ended 30 June ended 30 June December 2006 2005 2005 Unaudited Unaudited Audited Note £000 £000 £000 Restated RestatedTurnover:Group and share of jointventure 32.6 32.1 461.7Less: Share of joint venture - (0.9) (46.2) -------- -------- ---------Group turnover 32.6 31.2 415.5Cost of sales (389.8) (24.5) (501.1) -------- -------- ---------GROSS (LOSS)/PROFIT (357.2) 6.7 (85.6)Administrative expenses (4,675.6) (3,441.2) (8,553.8) -------- -------- ---------OPERATING LOSS (5,032.8) (3,434.5) (8,639.4)Joint venture and associate:Share of operatinglosses and goodwillamortization (31.7) (17.0) (51.6) -------- -------- ---------Share of operating lossof joint venture (31.7) (17.0) (51.6) -------- -------- ---------GROUP OPERATING LOSS (5,064.5) (3,451.5) (8,691.0)Interest receivable andsimilar income 353.0 168.6 764.1Interest payable and similarcharges (26.8) - - -------- -------- ---------LOSS ON ORDINARY ACTIVITIESBEFORE TAXATION (4,738.3) (3,282.9) (7,926.9)Tax on loss on ordinary activities - - - -------- -------- ---------LOSS ON ORDINARY ACTIVITIESAFTER TAXATION 3 (4,738.3) (3,282.9) (7,926.9)Equity minority interests - - - -------- -------- ---------LOSS FOR THE FINANCIAL PERIODWITHDRAWN FROM RESERVES (4,738.3) (3,282.9) (7,926.9) -------- -------- --------- LOSS PER ORDINARY SHARE -------- -------- ---------Basic and diluted lossper ordinary share 4 15.17p 15.20p 30.14p -------- -------- --------- Consolidated statement of total recognised gains and lossesUnaudited results for the six months ended 30 June 2006 Six months Six months Year ended ended 30 June ended 30 June 31 December 2006 2005 2005 Unaudited Unaudited Audited £000 £000 £000 Restated RestatedLoss for the financial periodLoss for the financial period - Group (4,738.3) (3,282.9) (7,926.9)- associates and joint ventures - - (51.6)Currency translation difference 31.9 1.0 (29.9) -------- -------- ---------Total recognised loss for thefinancial period (4,706.4) (3,281.9) (8,008.4) -------- -------- --------- Reconciliation of movement in equity shareholders' fundsUnaudited results for the six months ended 30 June 2006 Six months Six months Year ended ended 30 June ended 30 June 31 December 2006 2005 2005 Unaudited Unaudited Audited £000 £000 £000 Loss for the financial period (4,738.3) (3,282.9) (7,926.9)Issue of shares by thecompany (net of expenses) 395.1 24,425.1 24,393.7Purchase of own shares - (3,479.8) (3,479.9)Proceeds on sale of own shares - - 3,462.0Share option charge (FRS 20) 505.0 205.0 580.0Currency translation difference 31.9 1.0 (29.9) -------- -------- ---------Net (decrease)/increase inequity shareholders' funds (3,806.3) 17,868.4 16,999.0Opening equity shareholders' funds 26,691.3 9,692.3 9,692.3 -------- -------- ---------Closing equity shareholders'funds 22,885.0 27,560.7 26,691.3 -------- -------- --------- CONSOLIDATED BALANCE SHEETUnaudited results for the six months ended 30 June 2006 As at As at As at 30 June 30 June 31 2006 2005 December 2005 Unaudited Unaudited Audited Note £000 £000 £000 Restated RestatedFIXED ASSETSIntangible 62.3 65.8 64.1Tangible 9,998.6 1,421.6 4,170.0Other Investments 14.0 - 14.0 -------- -------- --------- 10,074.9 1,487.4 4,248.1 -------- -------- ---------CURRENT ASSETSDebtors 1,204.6 793.9 725.3Stock 1,163.6 308.0 126.3Cash at bank and in hand 13,722.5 26,449.9 24,281.4 -------- -------- --------- 16,090.7 27,551.8 25,133.0CREDITORS: amountsfalling due within oneyear (2,387.6) (1,376.8) (1,823.2) -------- -------- ---------NET CURRENT ASSETS 13,703.1 26,175.0 23,309.8 -------- -------- ---------TOTAL ASSETS LESS CURRENTLIABILITIES 23,778.0 27,662.4 27,557.9CREDITORS: amounts falling due after more than one year (840.0) (84.7) (840.0)Provisions for liabilitiesand charges:Share of gross assets injoint venture 75.0 28.1 75.0Share of gross liabilities in joint venture (128.0) (45.1) (96.0)Share of net liabilities inassociate - - (5.6) -------- -------- --------- (53.0) (17.0) (26.6) -------- -------- ---------NET ASSETS 3 22,885.0 27,560.7 26,691.3 -------- -------- --------- CAPITAL AND RESERVESShare capital 5 318.7 312.4 312.3Share premium 5 37,493.8 37,136.0 37,104.7Merger reserve 5 437.7 437.7 437.7Own shares held 5 (484.0) (3,479.8) (484.0)Profit & loss reserve 5 (14,881.2) (6,845.6) (10,679.4) -------- -------- ---------TOTAL EQUITY SHAREHOLDERS'FUNDS 22,885.0 27,560.7 26,691.3 -------- -------- --------- CONSOLIDATED CASH FLOW STATEMENTUnaudited results for the six months ended 30 June 2006 Six months Six months Year ended 31 ended 30 June ended 30 June December 2006 2005 2005 Unaudited Unaudited Audited Note £000 £000 £000Net cash(outflow) fromoperating activities a (5,344.4) (3,678.9) (7,747.2) -------- -------- ---------Returns on investments andservicing of financeInterest received 326.2 168.6 764.1 -------- -------- ---------Net cash inflow fromreturns on investments 326.2 168.6 764.1 -------- -------- ---------Capital expenditure andfinancial investmentsPayments to acquire shareof associated company - - (25.0)Payments to acquiretangible fixed assets (5,936.2) (600.4) (3,445.0) -------- -------- ---------Net cashflow from capitalexpenditure (5,936.2) (600.4) (3,470.0) -------- -------- ---------FinancingIssue of ordinary sharecapital - 25,791.4 25,791.2Costs of raising finance - - (1,397.5)Expenses paid in connection with shareissues - (1,366.3) -Purchase of own shares - (3,479.8) (3,479.9)Proceeds on disposal ofown shares - - 3,462.0Proceeds from share sales 395.5 - -New long term loans - 58.9 -Working capital element offinance lease - (6.0) (43.7)Mortgage - - 840.0 -------- -------- ---------Net cashflow from financing 395.5 20,998.2 25,172.1 -------- -------- ---------(Decrease)/increase in cashin the period b (10,558.9) 16,887.5 14,719.0 -------- -------- --------- Notes to the consolidated cash flow statementUnaudited results for the six months ended 30 June 2006 a) Reconciliation of operating loss to operating cash flow Six months Six months Year ended 31 ended 30 June ended 30 June December 2006 2005 2005 Unaudited Unaudited Audited £000 £000 £000 Restated Restated Operating loss (5,032.8) (3,434.5) (8,639.4)Depreciation 109.3 10.9 92.1Amortisation of goodwill - 1.8 3.5Increase in debtors (479.3) (714.6) (646.0)Increase in stock (1,037.3) (308.0) (126.3)Increase in creditors 590.7 560.5 988.9Share option charge (FRS 20) 505.0 205.0 580.0 -------- -------- ---------Operating cash flow (5,344.4) (3,678.9) (7,747.2) -------- -------- --------- b) Reconciliation of net cash flow to movement in net funds Six months Six months Year ended 31 ended 30 June ended 30 June December 2006 2005 2005 Unaudited Unaudited Audited £000 £000 £000 Reconciliation of net cashflow to movement in net funds (Decrease)/increase in cashin the period (10,558.9) 16,887.5 14,719.0Cash inflow from the increase indebt and lease financing - (52.9) (796.3) -------- -------- ---------Change in net funds resulting from cash flows (10,558.9) 16,834.6 13,922.7(Decrease)/increase in netfunds in period (10,558.9) 16,834.6 13,922.7Net funds at beginning ofperiod 23,441.4 9,518.7 9,518.7 -------- -------- ---------Net funds at end of period 12,882.5 26,353.3 23,441.4 -------- -------- --------- c) Analysis of changes in net funds At 1 January Cash flows At 30 June 2006 2006 £000 £000 £000Cash at bank and in hand 24,281.4 (10,558.9) 13,722.5Long term loans (840.0) - (840.0) -------- -------- -------- 23,441.4 (10,558.9) 12,882.5 -------- -------- -------- NOTESUnaudited results for the six months ended 30 June 2006 1. Basis of preparation The interim results for the six months ended 30th June 2006 have not beenaudited, nor have the results for the equivalent period in 2005. The financialinformation contained in this interim report does not constitute statutoryaccounts within the meaning of s240 of the Companies Act 1985. Financialinformation has been prepared on a consistent basis using accounting policiesset out in the 2005 Annual Report except for the newly adopted policies below.The figures for the 12 months ended 31st December 2005 do not constitute thecompany's statutory accounts as defined in Section 240 of the Companies Act 1985for that period but have been extracted from the statutory accounts, which havebeen filed with the Registrar of Companies. The auditors have reported on thoseaccounts and that report was unqualified and did not contain a statement underSections 237(2) or 237(3) of the Companies Act 1985. 2. Accounting Policies New accounting policy These interim statements have been prepared on a basis consistent with thefinancial statements for the year ended 31 December 2005 except for the adoptionof FRS 20 noted below. The company has adopted FRS 20 - Share Based Payments for the year ending 31December 2006. In accordance with this standard, the cost of share optionsawarded to employees under the Group's share option schemes is measured byreference to their fair value at the date of grant. This cost is recognisedover the vesting period of the options based on the number of options which inthe opinion of the directors will ultimately vest. The impact on the six monthsto 30 June 2006 is a charge of £505k and the impact on the prior periods isdescribed further below. The Group has taken advantage of the transitionalprovisions contained within FRS 20 and has applied FRS 20 only to share optionsgranted after 7th November 2002 which had not vested at 1 January 2006. Comparative figures for the 6 months ended 30 June 2005 and the year ended 31December 2005 have been restated to apply the provisions of FRS 20, increasingadministrative expenses and consequently increasing losses for those periods, asfollows: Six months Year ended ended 30 June 31 December 2005 2005 £000 £000Loss on Ordinary activities aftertaxation prior to adjustment (3,077.9) (7,456.9)FRS20 Share option charge (205.0) (470.0)Loss on Ordinary activities aftertaxation restated (3,282.9) (7,926.9) The implementation of FRS 20 has no impact on net assets or cash flows in anyperiod. 3. Segmental Reporting Although all results derive from a single class of business the Group operatesin a number of different countries. An analysis of turnover, loss for thefinancial period, and net assets/(liabilities) by geographical area is set outbelow. The analysis by geographical area reflects the principal regions in whichthe Group is active. Six months Six months Year ended 31 ended 30 June ended 30 June December 2006 2005 2005 Unaudited Unaudited Audited £000 £000 £000 Restated RestatedLoss on ordinary activities beforetaxUK (3,744.6) (2,914.0) (6,587.8)India (154.8) (40.0) (306.7)Joint Venture (India) (31.7) (17.0) (51.6)Africa (628.6) (237.8) (682.5)Asia Pacific (178.6) (74.1) (298.3) -------- -------- --------Loss on ordinary activities before tax (4,738.3) (3,282.9) (7,926.9) -------- -------- -------- Net Assets/(Liabilities)UK 25,769.4 27,996.9 28,258.1India (445.9) (42.4) (326.9)Joint Venture (India) (53.0) (17.0) (21.0)Africa (1,937.9) (304.1) (940.7)Asia Pacific (447.6) (72.7) (278.2) -------- -------- --------Net assets/(liabilities) 22,885.0 27,560.7 26,691.3 -------- -------- -------- 4. Loss per Ordinary share Six months Six months Year ended 31 ended 30 June ended 30 June December 2006 2005 2005 Unaudited Unaudited Audited No. No. No. Restated RestatedWeighted average number of shares inissue 31,231,472 21,603,108 26,297,460 ---------- ---------- ---------- Pence Pence PenceLoss per ordinary share- basic and diluted 15.17p 15.20 30.14p -------- -------- -------- The number of shares in issue at 31 December 2005 was 31,255,481. The totalnumber of shares in issue at 30 June 2006 was 31,601,730. For the purposes ofcalculating the loss per ordinary share the weighted average number of sharesexcludes 193,665 shares held by the D1 Oils plc Employee Benefit Trust. Nodiluted loss per share has been disclosed as the share options areanti-dilutive. 5. Movement on Reserves Share Capital Share Premium Merger Reserve Own Shares Held P&L Reserve Total £000 £000 £000 £000 £000 £000 Restated RestatedOpeningbalanceas at 1 January2006 312.3 37,104.7 437.7 (484.0) (10,679.4) 26,691.3Retainedloss for theperiod - - - - (4,738.3) (4,738.3)Issue ofshares bythe company 6.4 389.1 - - - 395.5Shareoption charge - - - - 505.0 505.0Exchangemovements - - - - 31.5 31.5 ------- ------- ------- ------- ------- -------At 30June 2006 318.7 37,493.8 437.7 (484.0) (14,881.2) 22,885.0 ------- ------- ------- ------- ------- ------- 6. Approval by the Board of Directors The interim report was approved by the Board of Directors on the 26th September2006. INDEPENDENT REVIEW REPORT TO D1 OILS plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the Consolidated Profit andLoss Account, Consolidated Balance Sheet, Consolidated Cash Flow Statement andthe related notes 1 to 5. We have read the other information contained in theinterim report which comprises only the report of the Chairman and ChiefExecutive Officer and considered whether it contains any apparent misstatementsor material inconsistencies with the financial information. Our responsibilitiesdo not extend to any other information. This report is made solely to the company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assetsliabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly we do not express an audit opinion on the financial information. Review conclusion APB Bulletin 1999/4 requires that we notify you that we have not reviewed thecomparative figures included in the interim report. On the basis of our review, with the exception of the matter described in thepreceding paragraph, we are not aware of any material modifications that shouldbe made to the financial information as presented for the six months ended 30June 2006. Ernst & Young LLPNewcastle upon Tyne27 September 2006 Notes: 1. The maintenance and integrity of the D1 Oils plc web site is theresponsibility of the directors; the work carried out by Ernst & Young LLP doesnot involve consideration of these matters and, accordingly, Ernst & Young LLPaccept no responsibility for any changes that may have occurred to the financialstatements since they were initially presented on the web site.2. Legislation in the United Kingdom governing the preparation and disseminationof financial statements may differ from legislation in other jurisdictions This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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