Impax Asset Management Group plc
Results for the year ended 30 September 2014
London, 27 November 2014 - Impax Asset Management Group plc ("Impax" or the "Company"), the AIM quoted investment manager focused on environmental markets and related resource efficiency sectors, today reports final audited results for the year ending 30 September 2014 (the "Period").
Financial Performance
· Assets under management ("AUM") at year end: £2.8 billion (2013: £2.2 billion)
· Revenue: £20.4 million (2013: £18.5 million)
· Operating Earnings1 : £5.3 million (2013: £4.3 million)
· Profit before tax2: £3.5 million (2013: £3.4 million)
· Shareholders' equity £24.9 million (2013: £22.9 million)
Dividend
· Proposed final dividend of 1.1 pence per share (2013: 0.9 pence), augmenting the interim dividend of 0.3 pence per share (2013: zero)
Business Update
· Encouraging business development in the United States
· High level of inflows into the Water Strategy
· Strong mandate pipeline
· Addition of Sustainable Property capability
· Queen's Award for Enterprise: Sustainable Development
Keith Falconer, Chairman, commented:
"It is pleasing to report several milestones this year: the addition of a sustainable property capability in response to strong investor demand for this real asset class, a 25 per cent growth in our AUM, and the Company's Queen's Award for Enterprise: Sustainable Development."
"In line with the Company's progressive dividend policy, the Board is proposing an increased final dividend, which if approved, would raise the dividend payout over the year by 56% compared to 2013."
Ian Simm, Chief Executive, added:
"At a time of growing concern about the prospects for global economic growth, investors are increasingly attracted to environmental and resource efficiency markets. The drivers of these
markets continue to gather momentum with further news on climate change policy and the development of new technologies and stricter regulations."
"Our mandate pipeline is particularly encouraging and we are confident that the plan to build on our strong foundations will create further value for shareholders."
1 Revenue less operating costs excluding £0.5 million (2013: £0.2 million) charges due to EIA share schemes.
2 Adjusted to exclude the IFRS2 charge for share schemes satisfied by primary shares, and to include the full effect of share buybacks and the dilutive effect of option schemes.
Enquiries:
Ian Simm Tel: + 44 (0) 20 7434 1122 (switchboard)
Chief Executive
Impax Asset Management Group plc
www.impaxam.com
Anne Gilding Tel: +44 (0) 20 7434 1122 (switchboard)
Head of Brand Communications Tel: +44 (0) 20 7432 2602 (direct)
Impax Asset Management Group plc Tel: +44 (0) 7881 249612 (mobile)
www.impaxam.com Email: a.gilding@impaxam.com
Guy Wiehahn Tel: +44 (0) 20 7418 8893
Nominated Adviser
Peel Hunt LLP
Chairman's statement
At a time when investors are seeking to direct capital to markets with strong growth prospects and/or anomalous valuations, Impax's Target Markets are particularly attractive.
When I last reported to shareholders in November 2013, there were tangible signs of a sustained recovery in the global economy and investor sentiment was strengthening. Twelve months on, signals from central banks and major corporations are more mixed, and investor caution has increased. Nevertheless, prospects for resource efficiency and environmental markets, where Impax focuses its expertise ("Target Markets"), remain healthy, and the company has delivered significant growth in assets and operating profit.
During the Company's financial year from 1 October 2013 to 30 September 2014 (the "Period"), assets under discretionary and advisory management ("AUM") rose 25 per cent from £2.20 billion to £2.75 billion. As at 31 October 2013, AUM had increased further to £2.89 billion.
The case for investing in our Target Markets has strengthened considerably in the past year. Water has once again attracted attention as policymakers announced measures to address the chronic drought in the western United States; meanwhile, extreme rainfall has affected many countries, particularly the UK, prompting the need for improved flood defences and stormwater management. Although the price of oil has recently fallen, demand for energy efficiency products and services continues to build, underpinned by the long term regulatory frameworks and related investment programmes, for example in the automobile sector. Similarly, capital flows to provide new energy efficient transportation and basic needs infrastructure in emerging markets have remained buoyant.
At a time when investors are seeking to direct capital to markets with strong growth prospects and/or anomalous valuations, Impax's Target Markets are particularly attractive in this respect, and we have been able to attract a record level of inflows into our listed equity products and strategies, notably from continental Europe and the US. We have also made good progress in further extending our capabilities in "real assets" with the acquisition in July of a team with investment expertise in improving the sustainability of commercial property.
Results for the year
Revenue for the Period was £20.4 million (2013: £18.5 million). Operating earnings1 for the year were £5.3 million (2013: £4.3 million) and the associated operating margin was 26.1 per cent (2013: 23.5 per cent).
Profit before tax ("PBT") for the year was £3.5 million (2013: £3.4 million). PBT included a £0.5 million employer's National Insurance charge related to the Company's legacy Employee Incentive Arrangement ("EIA") arising from an increase in the Company's share price and £1.5 million of fair value losses on the Group's investments. Fair value losses mainly comprise a write down, as stated in the Company's Interim Report, of the Company's holding in its first private equity fund reflecting regulatory changes in Spain, and net losses in the Period related to index future hedges for the Company's seed investments in listed equity funds.
Diluted earnings per share was 2.79 pence (adjusted2) (2013: 2.77 pence (adjusted2).
As of 30 September 2014, cash reserves held by operating entities of the Group were £17.2 million (2013: £16.5 million), seed investments were £10.2 million (2013: £8.5 million) and shareholders' equity had increased to £24.9 million (2013: £22.9 million). The Company remained debt free during the Period.
Operating cash flow for the Period was £6.0 million (2013: £4.9 million). During the Period the Company spent £0.6 million buying back 1.2 million of its own shares.
Queen's Award for Enterprise: Sustainable Development
In the Interim Report, we announced that Impax had been honoured to receive the prestigious Queen's Award for Enterprise: Sustainable Development. This award recognises Impax's long, successful track record, our thought leadership in categorising resource efficiency markets, our contribution to facilitating the flow of capital to sustainable development projects and the achievements of our corporate responsibility and sustainability programmes. I would like to thank everyone who works at Impax on this tremendous achievement.
Proposed dividend for the Period
The Company is committed to a progressive dividend policy as a demonstration of commitment to increasing shareholder value. This year, the Company initiated the payment of an interim dividend of 0.3 pence per share, which was paid in June.
Given the encouraging progress this year, the Board recommends a final dividend of 1.1 pence per share. If approved by shareholders, the aggregated dividend payment for the full year would be 1.4 pence per share, which would represent a 56% per cent increase over the dividend for the previous year (2013: 0.9 pence).
The dividend proposal will be submitted for formal approval by shareholders at the Annual General Meeting on 4th February 2015. If approved, the dividend will be paid on or around 20th February 2015. The record date for the payment of the proposed dividend will be 23rd January 2015 and the ex-dividend date will be 22nd January 2015.
Remuneration and share management
In accordance with the Company's remuneration policy, during the Period the Board granted 2.7 million ESOP options to management and staff in respect of their performance for the year ended 30 September 2014. The strike price was set at 47.9 pence and the options will vest on 31 December 2016.
Following a review of remuneration policy, the Remuneration Committee has decided to continue the practice of capping aggregate variable remuneration ("Variable Remuneration") across the Company at 45 per cent of operating earnings and variable remuneration. Cash bonuses payable in any year (grossed up by applicable employer's National Insurance) are equal to the Variable Remuneration less the fair value charge arising from employee share-based incentive schemes. The Company will continue to aim to pay market-median salaries.
Awards under the Company's Employee Share Option Plan ("ESOP") will cease in January 2015 with the grant of 3.7 million options. The Board continues to believe that equity incentives are an effective means to align interests between staff and shareholders, and following the success of the ESOP has decided to put in place a new Restricted Share Scheme ("RSS") under which modest amounts of shares are to be awarded to high performing staff. The RSS will initially run in parallel with the ESOP, with the award of 1.25 million Restricted Shares made in respect of individuals' performance for the Period. The RSS will then become the principal scheme for the award of share-based incentives.
The Board intends to continue to buy back the Company's shares from time to time after due consideration of attractive alternatives uses of the Company's cash resources. Shares purchased may be used to satisfy employee share-based award obligations, thus reducing the requirement to issue new shares.
Prospects
Since the end of the Period, economic indicators have continued to reflect an uncertain business climate, and investor sentiment is fragile. Nevertheless, interest in Impax's Target Markets has remained high, and our pipeline of new business indicates that we can continue to build our client base and value for shareholders.
J Keith R Falconer
26 November 2014
1 Revenue less operating costs excluding £0.5 million (2013 £0.2 million) charges due to EIA share schemes
2 Adjusted to exclude the IFRS2 charge for share schemes satisfied by primary shares, and to include the full effect of share buybacks and the dilutive effect of option schemes.
Chief Executive's report
Since Impax's interim statement, volatility has returned to financial markets as investors have compared the impact of increased geopolitical tension and weak economic growth prospects on the one hand against the potential benefits of low energy prices and the likelihood of effective intervention by central banks on the other. Nevertheless, Impax's prospects have continued to strengthen, providing reassurance that the Company is well positioned to deliver attractive returns to current and potential future clients.
Market developments and performance
The drivers behind resource efficiency and environmental markets maintained momentum during the Period, with further news on climate change policy, the development of new technologies and stricter regulations.
Over the past year we have witnessed severe heatwaves and drought in Australia and California, snow in Vietnam and the return of the polar vortex to North America. While the UK endured its wettest winter in 250 years, temperatures in parts of Russia and the Arctic have been 10 degrees centigrade above normal. This has coincided with a discernible shift in investors' expectations that policy makers around the world would take material action to address climate change. In particular, the United States and China have recently joined the European Union in announcing further commitments to limiting greenhouse gas ("GHG") emissions, and optimism is building that the next major climate change conference, which is set for December 2015 in Paris, could lead to agreement on binding targets.
Although the extreme weather and policy interventions associated with climate change are likely to impact many sectors, portfolios with significant allocations to fossil fuels carry the highest risk. Mark Carney, the governor of the Bank of England, recently reiterated his warning that the owners of some fossil fuel assets may not be able to burn all of their reserves if the world is to avoid catastrophic climate change, and called for investors to consider the implications of this analysis. Over the past twelve months, many endowments, public sector investors and religious institutions have committed to reduce or sell out of their fossil fuel holdings, with Stanford University, the Rockefeller Brothers Fund and the World Council of Churches being among the highest profile investors to take this step.
Full divestment is a major decision, and not one that most investors can or should make in haste. However, for those investors inclined to reduce their exposure to fossil fuels, several of Impax's strategies offer exposure to (retail) energy prices through companies active in renewable energy and energy efficiency markets while reducing the risk of adverse policy changes.
Our investment universe continues to expand as advances in technologies that improve the efficiency of resource use become commercially successful. Particularly interesting developments include improved motors and systems for hybrid vehicles. We believe vehicle hybridisation offers more compelling investment prospects than electric vehicles, which are likely to remain a niche market in the near term. We are also witnessing increasing technological sophistication in energy efficiency markets, for example in power network efficiency, including batteries, standby generators, smart metering and demand response systems and related software.
Around the world, regulators have continued to implement stringent environmental regulations. For example, in June the US Environmental Protection Agency announced a series of state-by-state GHG emission reduction targets for existing power plants, targeting a 30 per cent reduction in national CO2 emissions from the power sector by 2030 compared to 2005 levels. In China, the government announced a US$330 billion investment programme to tackle pollution of its scarce water resources, with the aim of improving the water quality by up to 50 per cent through investments in waste water treatment systems.
The demand for clean water will inevitably outstrip supply unless substantial long term commitments are made to improving water infrastructure and maximising the effective use of water, for example in agricultural irrigation. Calendar 2013 was the driest year on record in California, the most hydrologically altered region of the planet, while this summer many farmers have destroyed vast areas of perennial crops such as almonds simply because there is no water available for irrigation. Currently, the water value chain offers many compelling investment opportunities, for example companies that are set to benefit from the steady, long-term growth of the US construction industry and in the clean-up of water used for fracking. Developments in desalination technologies and water re-use in the drought affected states of the US are also presenting interesting investment prospects.
Notwithstanding the strong fundamentals, stocks active in Impax's Target Markets were sold off in the second half of the Period as investors switched into sectors with more defensive characteristics. In the six months to 31 March 2014, the FTSE Environmental Opportunities All Share Index ("EOAS") rose by 6.8 per cent, compared to 5.4 per cent for the MSCI AC World Index ("ACWI"); however, by 30 September 2014 the one year numbers for the EOAS and ACWI indices were 7.3 and 11.2 per cent respectively. Over the five years to 30 September 2014, the two indices had increased by 59.7 and 59.4 per cent respectively.
Assets under management and fund flows
During the Period we received record net inflows of £466 million into the Listed Equity funds that we manage or advise. The majority of inflows were from continental European and US investors into our third party listed equity funds, and our mandate pipeline from these regions remains promising. The value in Sterling of our private equity funds fell slightly due to foreign exchange effects, while we added ca. £22 million by acquiring a mandate to run a fund in the Property sector as set out below.
Assets under Management and Fund Flows
AUM movement Year to 30 September 2014 | Impax label listed equity funds £m | Third party listed equity funds and accounts £m | Private equity funds £m | Property funds | Total £m |
Total AUM at 30 September 2013 | 503 | 1,314 | 380 | - | 2,197 |
Net inflows | (17) | 483 | - | 22 | 489 |
Market movement and performance | 24 | 70 | (26) | - | 69 |
Total AUM at 30 September 2014 | 511 | 1,867 | 354 | 22 | 2,755 |
Investment performance
Listed Equity
Impax has some fifteen years of investing in global resource efficiency equity markets, following a high conviction, bottom-up, stock-picking approach to portfolio construction. We currently manage five distinct long-only investment strategies, covering global small and mid-cap, global all cap and more specialised strategies focusing on resource efficiency and environmental markets in Water, Asia-Pacific and Food & Agriculture.
Although our listed equity strategies were considerably ahead of global markets during 2013 and beat the MSCI ACWI during the first half of the Period, the second half sell off in resource efficiency and environmental markets stocks impacted annual performance. Reassuringly, over the same time period our target companies generally delivered on earnings expectations.
Our "small and mid-cap" Specialists strategy returned 5.0 per cent1 over the Period, compared to 11.2 per cent for the MSCI ACWI. Nevertheless, over the ten years to 30 September 2014, Specialists returned 166.6 per cent1 while the MSCI ACWI rose 102.8 per cent2.
Our "all cap" Leaders strategy had similar performance, returning 5.4% per cent1 over the Period. Between inception in March 2008 and the end of the Period, Leaders has returned 66.4%1, outperforming ACWI which has returned 60.2 per cent.
The Water strategy returned 9.3 per cent1 over the Period. Over the period between inception in January 2009 and 30 September 2014, this strategy returned 112.6 per cent1 compared to 84.4 per cent2 for the MSCI ACWI.
During the Period our Asia-Pacific strategy returned 22.5 per cent1, a strong performance versus the MSCI AC Asia Pacific Ex Japan Index which rose 5.8 per cent2.
Food and agriculture stocks generally had a challenging year, and our strategy, which is approaching its second anniversary, returned 0.4% over the Period.
Private Equity
Our private equity business has made further progress. Impax New Energy Investors II ("NEF II") now has over 370 Megawatts ("MW") of wind projects in operation or construction across Europe and some 20MW of solar assets operating in Italy. During the Period, NEF II invested in further projects in Ireland, Finland, Germany and Italy, with a sizeable commitment to onshore wind projects; the fund retains a material pipeline, both in these countries and in France, for construction in 2015 and beyond. At the end of the Period, the fund was 73 per cent invested or committed.
The assets held by Impax New Energy Investors I LP ("NEF I") continue to operate in line with or ahead of expectations. However, in June 2014, as part of a sequence of adverse regulatory changes, the Spanish Government announced some further amendments, which are expected to represent the final changes to the legislation governing the revenue received by this fund's assets. We remain focused on cost cutting and debt restructuring for these assets, while continuing to pursue our complex arbitration case against the Spanish Government alongside other major investors in the Spanish solar sector
Distribution
As previously reported, Impax pursues different routes to market in each region in order to balance cost effective and scalable distribution with demanding growth targets. In Continental Europe, our key distribution partners are ASN Bank, which is based in the Netherlands, and BNP Paribas Investment Partners ("BNPP"), which promotes our Specialists, Leaders and Water strategies. A notable success during the Period was the BNP Paribas Aqua fund whose net assets increased by 62 per cent to £591 million. The BNPP team has also developed and sold a structured product based on the Aqua portfolio in the French and Italian markets, which generates solid revenues at minimal cost. Our Leaders strategy also benefitted from robust long term performance and had net inflows of £85.5 million over the period.
In the UK, Impax Environmental Markets plc, our flagship client, boasts a strong ten year track record and is well positioned as one of the leading closed end resource efficiency funds. In addition to our UCITS platform of funds, which is domiciled in Ireland, we continue to sub-manage the Old Mutual Global Investors Ethical Fund.
Our client base in the US has developed rapidly over the last twelve months, and AUM have increased by some 220 per cent, reaching £248 million by the end of the Period. The principal contributors to this growth were the Pax World Global Environmental Markets fund, which follows our Leaders strategy and a new advisory mandate from a large American private bank, which reached £116 million by 30 September. We have also had further flows into our US private funds, including a commitment from a leading US endowment which was made after the end of the Period. We have an encouraging mandate pipeline from investors in the region.
Business development - new property investment business
In order to respond to current and anticipated future client demand, we continue to search for new additions to our product range. Of particular interest in the current investment climate is "real assets", which can offer investors low correlation to equities and bonds, protection against inflation and the potential for predictable income.
In July 2014 we announced the addition of a new asset class with the acquisition of a business investing in the commercial property sector. This comprised the management responsibility for the Climate Property Fund LP, which is in the latter stages of exiting its successful portfolio, and a two person team of experienced investment professionals.
Increasingly strict building regulations are driving demand for commercial property to be built or refurbished to exacting environmental standards, and sustainable buildings typically attract premium rents. Sustainable property appeals to many investors looking to generate higher returns or "green alpha", and to invest in an effectively future-proofed property portfolio. At a time of sustained investor interest in the property sector and increasing evidence that strong environmental performance can be a material driver of valuation, we believe that this business is highly complementary to our current product range, and we are exploring opportunities to raise additional assets for the team to manage.
Infrastructure and support
At the end of the Period our headcount was 61 full time equivalent staff compared to 57 at the same time last year. Staff numbers in our existing business areas continue to be stable; in addition to the two members of the property investment team, we expanded our client service capability in the US, including a marketing professional in the Portland, Oregon office which we opened in May, to service our growing client base and development prospects on the US West Coast. We do not anticipate significant headcount expansion in the near term, but may need a small number of additional staff to service new business in due course.
Regulatory environment
We continue to monitor the evolving requirements of global financial services regulation closely. Further to the requirements of the Alternative Investment Fund Managers Directive, during the Period we submitted our application for authorisation as an Alternative Investment Fund Manager ("AIFM") to the Financial Conduct Authority ("FCA"). In July we received full scope authorisation from the FCA to act as an AIFM for our clients.
Outlook
Last November I suggested that "investors may look back on 2013 as the high point of cheap money", and that, at a time of inflated asset prices, investment managers needed to pay particular attention to the quality of company earnings. One year on, with the possible exception of the US, most national or regional economies have yet to demonstrate that signs of recovery are robust, while corporate earnings are fragile in many areas.
Against this backdrop, it is encouraging that the companies targeted for investment by Impax are generally reporting solid results and an improving outlook, and investor interest in resource efficiency and environmental markets is growing.
We plan to build further on the Company's strong foundations, ensuring that our staff remain excited by the opportunities we can offer, our clients remain pleased with the service we provide, and conversations with prospective clients continue to develop.
Ian R Simm
26 November 2014
In line with market standards the strategy returns1 are calculated including the dividends reinvested, net of withholding taxes, gross of management fee and are represented in GBP; the returns for the MSCI ACWI 2 are net calculated including the dividends reinvested, net of withholding taxes. (Source: FactSet).
IMPAX ASSET MANAGEMENT GROUP PLC |
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| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
|
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| FOR THE YEAR ENDED 30 SEPTEMBER 2014 |
|
|
|
|
|
|
|
|
|
|
|
| 2014 |
| 2013 |
|
|
|
|
|
|
|
|
|
|
| £000 |
| £000 |
|
|
|
|
|
| Revenue |
|
| 20,359 |
| 18,463 |
|
|
|
|
|
| Operating costs |
|
| (15,039) |
| (14,124) |
|
|
|
|
|
|
|
|
|
|
|
| Share based payment charge for EIA extension scheme | - |
| (280) | Other charges related to EIA schemes |
|
| (539) |
| 111 |
|
|
|
|
|
| Fair value loss on investments |
|
| (1,460) |
| (947) | Change in third party interest in consolidated funds |
| 7 |
| (32) | Investment income |
|
| 207 |
| 163 | Profit before taxation |
|
| 3,535 |
| 3,354 | Taxation |
|
| (279) |
| (397) | Profit for the year |
|
| 3,256 |
| 2,957 |
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income |
|
|
|
|
| Tax benefit on long-term incentive schemes |
|
| - | | 20 | Increase in value of cash flow hedges |
| 60 |
| 158 | Tax on change in value of cash flow hedges |
|
| (14) |
| (34) | Exchange differences on translation of foreign operations |
| 146 |
| 55 | 3rd party interest share of exchange differences on translation of foreign operations | - |
| (124) |
|
|
|
|
|
| Total other comprehensive income |
|
| 192 |
| 75 | Total comprehensive income for the period attributable to equity holders of the Parent Company | 3,448 |
| 3,032 |
|
|
|
|
|
| Basic earnings per share |
|
| 2.78p |
| 2.44p |
|
|
|
|
|
| Diluted earnings per share |
|
| 2.76p |
| 2.44p | | | | | | | |
IMPAX ASSET MANAGEMENT GROUP PLC |
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| CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
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| AS AT 30 SEPTEMBER 2014 |
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| 2014 | 2013 |
|
| £000 | £000 | £000 | £000 |
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|
|
|
|
| Assets |
|
|
|
|
| Goodwill |
| 1,665 |
| 1,629 |
| Intangible assets |
| 107 |
| 95 |
| Property, plant and equipment |
| 246 |
| 456 |
| Investments |
| 16 |
| 17 |
| Total non-current assets |
|
| 2,034 |
| 2,197 |
|
|
|
|
|
| Trade and other receivables |
| 3,097 |
| 3,145 |
| Derivative asset |
| 178 |
| 159 |
| Investments |
| 11,640 |
| 9,336 |
| Current tax asset |
| - |
| 19 |
| Margin account |
| 293 |
| 186 |
| Cash invested in money market funds and long-term deposit accounts |
| 10,615 |
| 12,873 |
| Cash and cash equivalents |
| 6,634 |
| 3,680 |
| Total current assets |
|
| 32,457 |
| 29,398 |
|
|
|
|
|
| Total assets |
|
| 34,491 |
| 31,595 |
|
|
|
|
|
| Equity and Liabilities |
|
|
|
|
| Ordinary shares |
| 1,277 |
| 1,277 |
| Share premium |
| 4,093 |
| 4,093 |
| Exchange translation reserve |
| (206) |
| (352) |
| Hedging reserve |
| 172 |
| 126 |
| Retained earnings |
| 19,523 |
| 17,800 |
| Total equity |
|
| 24,859 |
| 22,944 |
|
|
|
|
|
| Trade and other payables |
| 6,536 |
| 5,948 |
| Third party interest in consolidated funds |
| 1,119 |
| 549 |
| Current tax liability |
| 73 |
| 103 |
| Total current liabilities |
|
| 7,728 |
| 6,600 |
|
|
|
|
|
| Accruals |
| 207 |
| 399 |
| Deferred tax liability |
| 1,697 |
| 1,652 |
| Total non-current liabilities |
|
| 1,904 |
| 2,051 |
|
|
|
|
|
| Total equity and liabilities |
|
| 34,491 |
| 31,595 |
|
|
|
|
|
| | | | | | | | |
IMPAX ASSET MANAGEMENT GROUP PLC |
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| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY |
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| FOR THE YEAR ENDED 30 SEPTEMBER 2014 |
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| Share capital | Share premium | Exchange translation reserve | Hedging reserve | Retained earnings | Total Equity |
| £000 | £000 | £000 | £000 | £000 | £000 | Balance at 1 October 2012 | 1,156 | 78 | (283) | 2 | 21,616 | 22,569 | Transactions with owners: |
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| Dividends paid | - | - | - | - | (816) | (816) | Issue of shares to EBT 2012 | 121 | 4,015 | - | - | (4,136) | - | Shares acquired by Treasury and EBIT 2012 | - | - | - | - | (2,397) | (2,397) | Award of shares on option exercise | - | - | - | - | 41 | 41 | Long-term incentive scheme charge | - | - | - | - | 515 | 515 | Tax benefit on long-term incentive schemes | - | - | - | - | 20 | 20 | Profit for the year | 121 | 4,015 | - | - | (6,773) | (2,637) | - | - | - | - | 2,957 | 2,957 | Other comprehensive income |
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|
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|
|
|
|
|
| Cash flow hedge | - | - | - | 158 | - | 158 | Tax on cash flow hedge | - | - | - | (34) | - | (34) | Exchange differences on translation of foreign operations | - | - | 55 | - | - | 55 | 3rd party interest's share of exchange differences on translation of foreign operations | - | - | (124) | - | - | (124) |
| - | - | (69) | 124 | 2,957 | 3,012 | Balance at 30 September 2013 | 1,277 | 4,093 | (352) | 126 | 17,800 | 22,944 | Transactions with owners: |
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|
|
|
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| Dividends paid | - | - | - | - | (1,338) | (1,338) | Shares acquired by Treasury and EBT 2012 | - | - | - | - | (619) | (619) | Award of shares on option exercise | - | - | - | - | 47 | 47 | Long-term incentive scheme charge | - | - | - | - | 377 | 377 |
| - | - | - | - | (1,533) | (1,533) | Profit for the year | - | - | - | - | 3,256 | 3,256 | Other comprehensive income |
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|
|
|
|
|
|
|
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| Cash flow hedge | - | - | - | 60 | - | 60 | Tax on cash flow hedge | - | - | - | (14) | - | (14) | Exchange differences on translation of foreign operations | - | - | 146 | - | - | 146 |
| - | - | 146 | 46 | 3,256 | 3,448 | Balance at 30 September 2014 | 1,277 | 4,093 | (206) | 172 | 19,523 | 24,859 | | | | | | | | | | | | | | | |
IMPAX ASSET MANAGEMENT GROUP PLC |
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| CONSOLIDATED CASH FLOW STATEMENT |
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| FOR THE YEAR ENDED 30 SEPTEMBER 2014 |
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| 2014 |
| 2013 |
|
| £000 |
| £000 |
|
|
|
|
| Operating Activities: |
|
|
|
| Profit before taxation |
| 3,535 |
| 3,354 | Adjustments for: |
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|
|
| Investment income |
| (207) |
| (163) | Depreciation of property, plant & equipment |
| 243 |
| 275 | Amortisation of intangible assets |
| 83 |
| 65 | Fair value losses |
| 1,460 |
| 947 | Share-based payment |
| 377 |
| 472 | Other charges related to EIA schemes |
| 539 |
| (111) | Change in third party interest in consolidated funds |
| (7) |
| 32 | Operating cash flows before movement in working capital | 6,023 |
| 4,871 | Decrease/(Increase) in receivables |
| 48 |
| (338) | (Increase) in margin account |
| (107) |
| (31) | Decrease in payables |
| (178) |
| (567) | Cash generated from operations |
| 5,786 |
| 3,935 | Corporation tax (paid) |
| (96) |
| (54) | Net cash generated from operating activities |
| 5,690 |
| 3,881 |
|
|
|
|
| Investing activities: |
|
|
|
| Investment income received |
| 207 |
| 163 | Settlement of investment related hedges |
| (1,244) |
| (1,115) | Proceeds on sale/redemption of investments |
| 1,809 |
| 47 | Purchase of investments held by the consolidated funds |
| (5,263) |
| (3,099) | Sale of investments held by the consolidated funds |
| 1,553 |
| 612 | Purchase of investments |
| (638) |
| (496) | Purchase of intangible assets |
| (28) |
| (14) | Purchase of property, plant & equipment |
| (33) |
| (28) | Net cash used in investing activities |
| (3,637) |
| (3,930) |
|
|
|
|
| Financing activities: |
|
|
|
| Dividends paid |
| (1,338) |
| (816) | Impax shares acquired by Treasury/EBT 2012 |
| (619) |
| (2,853) | Cash received on exercise of Impax share options |
| 47 |
| 41 | Decrease in cash held in money market funds and long term deposit accounts |
| 2,257 |
| 1,222 | Investment by third party into consolidated funds |
| 554 |
| 559 | Net cash generated from /(used in) financing activities |
| 901 |
| (1,847) |
|
|
|
|
|
|
|
|
|
| Net increase/(decrease) in cash and cash equivalents |
| 2,954 |
| (1,896) |
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents at beginning of year |
| 3,680 |
| 5,577 |
|
|
|
|
| Effect of foreign exchange rate changes |
| - |
| (1) |
|
|
|
|
| Cash and cash equivalents at end of year |
| 6,634 |
| 3,680 |
NOTES 1. REVENUE | | | | | | The Group has three reportable segments: "Listed Equity", "Private Equity" and "Property". The results of these segments have been aggregated into a single reportable segment for the purposes of these financial statements because they have characteristics so similar that they can be expected to have essentially the same future prospects. These segments have common investors, operate under the same regulatory regimes and their distribution channels are substantially the same. Additionally management allocates the resources of the Group as though there is one operating unit. | | | | | | | | Analysis of revenue by type of service: |
| | | | | |
| | 2014 | 2013 | | | |
| | £000 | £000 | Investment management | | |
| | 18,514 | 17,769 | Transaction fees | | |
| | 1,452 | 449 | Advisory fees | | | | | 393 | 245 | | | | | | 20,359 | 18,463 | | | | | | | | Analysis of revenue by the location of customers: | | | | | | | | 2014 | 2013 | | | | | | £000 | £000 | UK | | | | | 11,602 | 12,741 | Rest of the world | | | | | 8,757 | 5,722 | | | | | | 20,359 | 18,463 | | | | | | | | Analysis of 'Rest of the world' customer location: | | | | | | | | | 2014 | 2013 | | | | | | £000 | £000 | Ireland | | | | | 1,261 | 969 | France | | | | | 2,726 | 1,636 | Luxembourg | | | | | 1,212 | 1,189 | Netherlands | | | | | 1,063 | 850 | US | | | | | 713 | 242 | Other | | | | | 1,782 | 836 | | | | | | 8,757 | 5,722 | | Revenue from two of the Group's customers individually represented more than 10% of Group revenue (2013: three), equating to £3,529,000 and £5,474,000 (2013: £2,062,000, £3,380,000 and £5,289,000). | | | | | | | | Revenue includes £19,966,000 (2013: £18,218,000) from related parties. |
2. OPERATING COSTS | | | | 2014 | 2013 | | £000 | £000 | Wages and salaries, social security and pension costs and variable bonuses | 9,659 | 9,103 | Share-based payment charge | 377 | 192 | Other staff costs including contractors and Non-Executive Directors' fees | 864 | 693 | Depreciation of property, fixtures and equipment | 243 | 275 | Amortisation of intangible assets | 83 | 65 | Auditor's remuneration - subsidiary undertakings audit fees | 48 | 38 | Auditor's remuneration - parent company audit fees | 42 | 40 | Auditor's remuneration - tax compliance | 22 | 14 | Auditor's remuneration - other | 21 | 31 | Premises related | 1,097 | 1,020 | Travel | 267 | 238 | Information technology and communications | 686 | 654 | Other costs | 1,630 | 1,761 | | 15,039 | 14,124 | | | | |
3. SHARE-BASED PAYMENT CHARGES AND OTHER LONG TERM INCENTIVE SCHEME CHARGES | Share-based payment charges |
|
|
|
| | | Employee Incentive Arrangement (Extension Scheme) ("EIA Extension") | | | Under this scheme, share-based payment awards were granted in April 2011 to employees when the Trustee of the Impax Group Employee Benefit Trust 2004 ("the EBT") agreed to allocate 4 million Ordinary Shares to a sub-fund of the EBT of which Ian Simm, the Company's Chief Executive, and his family are beneficiaries and when 14.05 million Long Term Incentive Plan ("LTIP") options were awarded to other employees. The awards allocated to the EBT sub-fund for Ian Simm and his family ceased to be subject to revocation due to Ian Simm's continued employment by the Company on 30 September 2012.LTIP options have a 1p or nil exercise price and have vested to individuals who remained employed on 30 September 2012 or in respect of one individual only 15 January 2013. They are exercisable over a period from 1 October 2012 to 31 December 2020.The Group accrued for the International Financial Reporting Standard ("IFRS") 2 Share-Based Payment charge for shares allocated under the EBT and LTIP options from the date of grant, to the dates of vesting. This charge is excluded from the Group's definition of adjusted earnings. | |
|
|
|
| | | The awards made to Ian Simm and his family were valued at 68p. | | | | | | | | |
2011, 2012, 2013 and 2014 Employee Share Option Plan |
| 5,000,000 options over the Company's shares were granted in November 2011 under the 2011 Employee Share Option Plan ("2011 ESOP"), 3,000,000 options were granted in November 2012 under the 2012 Employee Share Option Plan ("2012 ESOP") and 3,056,000 options were granted in November 2013 under the 2013 Employee Share Option Plan ("2013 ESOP") to certain employees in respect of services provided from 1 October 2010 (2011 ESOP) or 1 October 2011 (2012 ESOP), or 1 October 2012 (2013 ESOP). The strike price of these options was set at a 10% premium to the average market price of the Company's shares for the 30 business days following the announcement of the results for each of the respective preceding financial year. The options do not have performance conditions but do have a time vesting condition such that the options vest subject to continued employment on 31 December 2014 (2011 ESOP), 31 December 2015 (2012 ESOP) and 31 December 2016 (2013 ESOP).In November 2014, the Board approved the grant of 3,704,000 options under the 2014 Employee Share Option Plan ("2014 ESOP") to certain employees in respect of services provided from 1 October 2013. The strike price of the options will be set at a 10% premium to the average market price of the Company's shares for the 30 business days following the announcement of the results for the year ended 30 September 2014. The options will not have performance conditions but do have a time vesting condition such that the options vest subject to continued employment on 31 December 2017. The employees will be notified of the key terms and conditions of these awards shortly after the announcement of results for the year ended 30 September 2014. | 2014 Restricted Share Scheme | In November 2014 the Board also approved the award of 1,250,000 shares under the 2014 Restricted Share Scheme ("2014 RSS") to certain employees in respect of services provided from 1 October 2013. The Shares will be held by a nominee for employees - they will receive dividends on the shares but will not be allowed to sell the shares. After a period of three years the employees will be gain unfettered access to one third of the shares, after four years a further third and after five years the final third.The charges for the year in relation to these schemes are offset by an equal reduction in the total cash bonus pool paid to employees. The fair value of the share options mentioned above is estimated using the Black Scholes Merton model. The fair value of the RSS awards is deemed to equal the market price of the shares awarded on the date of grant. An analysis of the options over the Company's shares is provided below: | 2014 | Weighted average exercise price p | Options outstanding at the start of the year | 18,128,895 | 20.3 | Options granted during the year* | 3,056,000 | 48.7 | Options forfeited during the year | (790,000) | 45.8 | Options exercised during the year | (5,310,940) | 1.0 | Options expired during the year | - | NA | Options outstanding at the end of the year | 15,083,955 | 31.5 | Options exercisable at the end of the year | 4,642,500 | 0.6 | * As noted above a further 3,704,000 options were approved for grant in November 2014. | For the options outstanding at the end of the period the exercise prices were nil or 1p for the LTIP, 49.6p for the ESOP 2011, 37.6p for the ESOP 2012 and 47.9p/54.0p for the ESOP 2013 and the weighted average remaining contractual life was 4.7 years. | | | | | | | | The total expense recognised for the year arising from share-based payment transactions was £377,000 (2013: £472,000). | |
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|
|
| | | Other charges related to EIA schemes | | | | | | 2014 | 2013 | | | | | | £000 | £000 | EIA NIC charge/(credit) EIA Extension NIC charge/(credit) Additional payments charge/(credit) | | 223 | (7) |
| 207 | (19) |
| 109 | (85) | |
|
|
|
| 539 | (111) | |
|
|
|
| | | EIA NIC charge |
|
|
|
| | | The Impax Group Employee Benefit Trust 2004 ('EBT 2004') holds Impax shares and other assets in sub-funds for the benefit of certain of the Group's past and current employees. The Impax shares were awarded under the Group's Employee Incentive Arrangement. The Group is required to pay Employers National Insurance Charge ("NIC") on the value of any assets that are transferred out of the Trust and has accrued for the estimated amount payable using the relevant share prices at the balance sheet date. The amount payable will fluctuate in line with the Impax share price, such fluctuations are recorded in the current period income statement. | |
|
|
|
| | | EIA Extension NIC charge | | | | | | The Group pays Employers NIC when individuals exercise their share options and accordingly accrues for the estimated amount that would be payable on exercise of these options using the year end share price. The amount accrued therefore varies from period to period in line with the Group's share price with any adjustment recorded through the income statement. | | | | | | | | Additional payments | | | | | | | Individuals receiving LTIP options are eligible for a retention payment payable after the end of the financial year in which each employee exercises his or her LTIP Options. The payment will be equal to the corporation tax benefit realised by the Group on the exercise of the LTIP options minus the amount of the Employer's NIC suffered by the Group on the exercise of the LTIP options. |
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4. EMPLOYMENT COSTS | | | | | | 2014 | 2013 | | | £000 | £000 | Wages, salaries and variable bonuses | 8,185 | 7,766 | Social security costs | | 1,015 | 931 | Pensions | | 459 | 406 | | | 9,659 | 9,103 | | | | | The Group contributes to private pension schemes. The assets of the schemes are held separately from those of the Group in independently administered funds. The pension cost represents contributions payable by the Group to the funds. Contributions totalling £226,000 (2013: £224,000) were payable to the funds at the year end and are included in trade and other payables. | | | | | The average number of persons (excluding Non-Executive Directors and including temporary staff), employed during the year was 56 (2013: 56). | | | | | | | 2014 | 2013 | | | No. | No. | Listed Equity | | 20 | 22 | Private Equity | | 11 | 12 | Marketing | | 12 | 9 | Group | | 13 | 13 | | | 56 | 56 | | | | | | Key management personnel are defined as members of the Board and/or the Executive Committee. The remuneration of key management personnel during the year was £2,055,123 with £77,709 of share-based payments (2013: £1,711,314 with £325,197 of share-based payments). | | | | | 5. INVESTMENT INCOME | | | | | | 2014 | 2013 | | | £000 | £000 | Bank interest | | 60 | 96 | Other investment income | | 147 | 67 | | | 207 | 163 | | | | | | | | | 6. TAXATION | | | | | | 2014 | 2013 | | | £000 | £000 | (a) Analysis of charge for the year | | | | Current tax expense: | | | | UK corporation tax | | - | 20 | Foreign taxes | | 68 | 124 | Adjustment in respect of prior years | 17 | (5) | Total current tax | | 85 | 139 | | | | | Deferred tax expense: | | | | Charge/(credit) for the year | | 203 | 142 | Adjustment in respect of prior years | (9) | 116 | Total deferred tax | | 194 | 258 | | | | | Total income tax expense | 279 | 397 | | | | | (b) Factors affecting the tax charge for the year | | | The tax assessment for the period is lower than the average rate of corporation tax in the UK of 22% (2013: lower). The differences are explained below: | | | 2014 | 2013 | | | £000 | £000 | Profit/(Loss) before tax | | 3,535 | 3,354 | | | | | Effective tax charge at 22% (2013: 23.5%) | 778 | 788 | | | | | Effects of: | | | | Non-deductible expenses and charges Non-taxable income Increase in tax deduction re share awards from share price increase Tax effect of previously unrecognised tax losses Adjustment in respect of previous years Effect of higher tax rates in foreign jurisdictions Exchange differences Change in UK tax rates | 40 | 235 | - | (16) | (241) | - | (61) | (267) | 8 | 111 | 18 | 10 | (247) | (147) | (16) | (317) | Total income tax expense | | 279 | 397 | | | | | | | | | | |
(c) Deferred Tax | | | | | | The deferred tax (liability) included in the Consolidated Statement of Financial Position is as follows: | | | | | | | | | | | | Accelerated capital allowances | Other temporary differences | Income not yet taxable | Share based payment scheme | Total | | | £000 | £000 | £000 | £000 | £000 | As at 1 October 2012 Charge to equity Exchange differences on consolidation Credit/(Charge) to the income statement As at 30 September 2013 Charge to equity Exchange differences on consolidation Credit/(Charge) to the income statement As at 30 September 2014 | (9) | 206 | (2,645) | 1,235 | (1,213) | - | (34) | - | - | (34) | - | - | (147) | - | (147) | 46 | (327) | 495 | (472) | (258) | 37 | (155) | (2,297) | 763 | (1,652) | - | (13) | - | - | (13) | - | - | 163 | - | 163 | 12 | 415 | (369) | (253) | (195) | 49 | 247 | (2,503) | 510 | (1,697) | | | | | | | | | If and when the EBT Trustee agrees to transfer assets held in the EBT to beneficiaries and if the assets transferred are in the form of the Company's Ordinary Shares, the Group expects to be eligible for a corporation tax deduction equal to the value of those Ordinary Shares. The Group has not recognised a deferred tax asset in respect of these amounts which would amount to £1,623,000. The Group also has nil capital losses carried forward (2013: £235,000). | | | | | | | | | | | | |
7. EARNINGS AND EARNINGS PER SHARE | | | | Adjusted earnings | | | | | | | | In order to better reflect the underlying economic performance of the Group, an adjusted earnings has been calculated. The adjustment i) excludes the IFRS 2 Share-Based Payment charge in respect of schemes where shares awarded are intended to be satisfied by the issue of new shares (EIA Original and EIA Extension Schemes), and ii) includes the tax benefit recognised in other comprehensive income in respect of transfers out of the EBT and the exercising of options over the Company's shares. | | | | | | | | | | | | | | | 2014 | 2013 | | | | | | | £000 | £000 | | Earnings Share-based payment charge Tax benefit on long-term incentive scheme included in other comprehensive income | 3,256 | 2,957 | | - | 280 | | - | 20 | | Adjusted earnings | | | | | 3,256 | 3,257 | | | | | | | | | | The earnings per share on an IFRS and adjusted basis are as shown below. | | | Adjusted earnings per share | | | | | |
|
| Adjusted earnings for the year | Shares | Earnings per share | | | | | | £000 | '000 | | 2014 | | | | | | | | Basic adjusted | | | | 3,256 | 116,199 | 2.80p | | | | | |
|
|
| | Diluted adjusted | | | | 3,256 | 116,658 | 2.79p | | | | | | | | | | 2013 | | | | | | | | Basic adjusted | | | | 3,257 | 117,463 | 2.77p | | | | | | | | | | Diluted adjusted | | | | 3,257 | 117,463 | 2.77p | | | | | | | | | | The number of Ordinary Shares used in the calculation of dilutive adjusted earning per shares excludes the number of shares held in Treasury or the EBTs at the end of the year and includes an adjustment for the dilutive impact of the share schemes. The dilutive impact of the ESOP and RSS share schemes is calculated in the same way as for IFRS earnings per share. | | | | | | | | | |
| | | | | 2014 | 2013 | | | | | | | '000 | '000 | | Shares in issue | | 127,749 | 127,749 | | Shares held in Treasury or EBT (excluding those held to satisfy awards under the EIA Extension) | (11,550) | (10,286) | | Number of shares used in the calculation of basic adjusted earnings per share | 116,199 | 117,463 | | Dilutive effect of ESOP and RSS share schemes | 459 | - | | | | | | | | | | Number of shares used in the calculation of diluted adjusted earnings per share | 116,658 | 117,463 | | | | | | | | | | | | IFRS earnings per share | | | | | | | |
| |
|
| Earnings for the year | Shares | Earnings per share | | |
|
| £000 | '000 | | 2014 | |
|
| | | | Basic | |
|
| 3,256 | 117,314 | 2.78p | | |
|
| | | | Diluted | |
|
| 3,256 | 117,773 | 2.76p | | |
|
| | | | 2013 | |
|
| | | | Basic | |
|
| 2,957 | 121,318 | 2.44p | | |
|
| | | | Diluted | |
|
| 2,957 | 121,318 | 2.44p | | | | | | | | | The weighted average number of Ordinary Shares for the purposes of diluted earnings per share reconciles to the weighted average number of Ordinary Shares used in the calculation of basic earnings per share as follows: | | | | | | | 2014 | 2013 | | | | | | | '000 | '000 | | Weighted average number of Ordinary Shares used in the calculation of basic earnings per share | | 117,314 | 121,318 | | Additional dilutive shares re share schemes | | 5,350 | - | | Adjustment to reflect option exercise proceeds and future service from employees receiving awards | (4,891) | - | | Weighted average number of Ordinary Shares used in the calculation of diluted earnings per share | | 117,773 | 121,318 | | | | | | The Basic earnings per shares includes vested LTIP option shares on the basis that these have an inconsequential exercise price (1p or 0p). | | | | | | | | | | |
8. DIVIDEND | | | | | | | The Directors propose a dividend of 1.1p per share for the year ended 30 September 2014 (2013: 0.90p per share). This, combined with the interim dividend of 0.30p (2013: nil) which was paid on 20 June 2014 gives a total dividend for the year of 1.40p (2013: 0.90p). The dividend will be submitted for formal approval at the Annual General Meeting to be held on 4 February 2015. These financial statements do not reflect this dividend payable, which will be accounted for in shareholders' equity as an appropriation of retained earnings in the year ended 30 September 2015. | | | | | | | | The dividend for the year ended 30 September 2013 was paid on 17 February 2013, being 0.90p per share. The Trustees of the EBT waived their rights to part of this dividend, leading to a total dividend payment of £1,004,000. This payment is reflected in the Statement of Changes in Equity. |
9. CURRENT ASSET INVESTMENTS | | | | | | | | | Unlisted investments | Listed investments | Total | | | | | £000 | £000 | £000 | At 1 October 2012 | | | | 3,027 | 5,683 | 8,710 | Additions | | | | 496 | 3,099 | 3,595 | Fair value movements | | | | (14) | 409 | 395 | Deconsolidation of IGRO | | | | 3,162 | (5,867) | (2,705) | Repayments/disposals | | | | (47) | (612) | (659) | At 30 September 2013 | | | | 6,624 | 2,712 | 9,336 | Additions | | | | 638 | 5,263 | 5,901 | Fair value movements | | | | (261) | 88 | (173) | Repayments/disposals | | | | (1,809) | (1,553) | (3,362) | Foreign exchange | | | | - | (62) | (62) | At 30 September 2014 | | | | 5,192 | 6,448 | 11,640 | | | | | | | | | | | | | | | Listed investments | | | | | | | Impax Fundamental Long-term Opportunities in Water Fund | | | On 31 January 2014 the Group launched the Impax Fundamental Long-term Opportunities in Water Fund LP ("IFLOW") and invested, from its own resources $5,000,000 into the fund. IFLOW invests in listed equities using the Group's Water Strategy. The Group's investment represented more than 50% of IFLOW's NAV from the date of launch to 30 September 2014 and accordingly has been consolidated throughout this period with its underlying investments included in listed equities in the table above. | Impax Global Resource Optimization Fund ("IGRO") | | | | In December 2011 the Group launched the Impax Green Markets Fund LP and invested, from its cash reserves, $5,000,000 into the fund. The Fund's name was subsequently changed to the Impax Global Resource Optimization Fund. IGRO invests in listed equities using the Group's Environmental Specialists Strategy. The Group's investment represented more than 50% of IGRO's NAV from the date of launch to 1 December 2012 and accordingly the IGRO has been consolidated until this date with its underlying investments included in listed investments in the table above. Thereafter the Group's investment in the fund is included in Unlisted investments. | Impax Food and Agriculture Fund | | | | | On 1 December 2012 the Group launched the Impax Food and Agricuture Fund ("IFAF") and invested, from its own resources £2,000,000 into the fund. The IFAF invests in listed equities using the Group's Food and Agriculture Strategy. The Group's investment represented more than 50% of the IFAF's NAV from the date of launch to 30 September 2014 and accordingly has been consolidated throughout this period with its underlying investments included in listed equities in the table above. | The investments held by the IFAF are revalued to market value using quoted market prices that are available at the date of these financial statements. The quoted market price is the current bid price. Unlisted investments The unlisted investments principally comprise the Group's investment in its private equity funds, Impax New Energy Investors LP and Impax New Energy Investors II LP ("INEI" and "INEI II"). The fair value of the investments in INEI II is calculated using the discounted cash flow method. The key assumptions for this valuation, which consists mainly of investments in wind farms, is the discount rate. The discount rate was determined by reference to market transactions for equivalent assets. A rise of 1% in the discount rate applied to cash flows would result in a decrease in profit from operations and net assets of £127,000. A 1% reduction in the discount rate would result in a corresponding increase of £136,000 in profit from operations and net assets. | | | | | | | | | | | | | |
The INEI I investment, which is recorded at a fair value of £708,000, consists mainly of investments in Spanish solar farms (accounting for 78% of the partnership's valuation) which are reliant on tariff subsidies. The fair value of this investment was determined using a discounted cash flow approach. These investments have been adversely impacted by the significant retroactive reforms of the Spanish energy markets and covenants for loans held by the investment have been breached. The partnership is still in negotiations with the relevant banks to restructure the loans and is also in the process of pursuing a claim for compensation from the Spanish government. In the event that the banks take possession of the assets and the claims for compensation are unsuccessful the investment would be impaired by £504,000. The unlisted investments include £4,830,000 in related parties of the Group (2013: £6,261,000). 10. CASH AND CASH EQUIVALENTS AND CASH INVESTED IN MONEY MARKET FUNDS AND LONG-TERM DEPOSITS | The Group invests part of its surplus cash in money market funds and long-term deposits. The Group can redeem investments in the former within 24 hours; long-term deposits range between six to twelve months. The Group considers its total cash reserves to be the total of its cash at bank and in hand held by operating entities of the Group, and cash invested in money market funds and long-term deposit accounts. Amounts held are shown below. | Cash reserves: | | | | | | |
| | | | | 2014 | 2013 | | | | | | £000 | £000 | Cash and cash equivalents Cash invested in money market funds and long term deposit accounts | 6,560 | 3,620 | 10,615 | 12,873 | | 17,175 | 16,493 | Cash and cash equivalents includes the following: | | | | | | 2014 | 2013 |
| | | | | £000 | £000 | Cash at bank and in hand | | | | | | | - Held by operating entities of the Group - Held by the consolidated funds | 6,560 | 3,620 | 74 | 60 | | | 6,634 | 3,680 | | | | | | | | |
11. ORDINARY SHARES | | | | | | | | | 2014 | 2014 | 2013 | 2013 | Issued and fully paid | Number | £000 | Number | £000 | Ordinary shares of 1p each | | | |
| | At 1 October | | | 127,749,098 | 1,277 | 115,582,431 | 1,156 | Issue of shares to EBT 2012 | | - | - | 12,166,667 | 121 | At 30 September | | | 127,749,098 | 1,277 | 127,749,098 | 1,277 | | | | | | | | | | | | | | | | |
12. OWN SHARES AND TREASURY SHARES | | | | | | | | | | | | | | Treasury shares | Treasury shares | Own shares | Own shares | | | | Number | £000 | Number | £000 | At 1 October 2012 | | | 4,699,000 | 1,932 | 1,888,273 | 19 | Treasury purchases | | | 275,000 | 92 | - | - | Issue of shares to EBT 2012 | | - | - | 12,166,667 | 4,136 | EBT 2012 purchase of Treasury Shares | | (4,974,000) | (2,024) | 4,974,000 | 1,692 | Satisfaction of option exercises | | - | - | (5,341,500) | (1,814) | EBT 2012 purchases | | | - | - | 6,552,329 | 2,298 | At 30 September 2013 | | | - | - | 20,239,769 | 6,331 | Satisfaction of option exercises | | - | - | (5,310,940) | (1,806) | EBT 2012 purchases | | | - | - | 1,263,791 | 619 | At 30 September 2014 | | | - | - | 16,192,620 | 5,144 | | | | | | | | |
13. ACCOUNTING POLICIES Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards adopted for use by the European Union. The Directors have, at the time of approving the financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and have concluded that it is appropriate to adopt the going concern basis in preparing the financial statements of the Group. The financial statements have been prepared under the historical cost convention, with the exception of the revaluation of certain investments and derivatives being measured at fair value. |
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