Impax Asset Management Regulatory News (IPX)

11 Dec 2006 14:40

Impax Group PLC11 December 2006 IMPAX GROUP PLC PRELIMINARY STATEMENT OF RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2006 Impax Group plc, the AIM quoted investment company which focuses exclusively onthe environmental markets sector, today announces its preliminary results forthe year ended 30 September 2006. Highlights • The Group has returned to profitability and funds managed within the asset management division have performed strongly. • Significant increase in funds under management which, following the recent expansion of Impax Environmental Markets plc, had grown to £434m at 30 September 2006 (2005: £170m; 2004: £69m) and which have further risen to £475m as at 30 November 2006. • Rising energy costs, unusual weather patterns and concerns over climate change have reinforced the strong prospects for the environmental sector. Commenting on the results, Keith Falconer, Chairman said: "Impax has enjoyed an extraordinary year with funds under management havingtripled in the past fifteen months. However, following a period of rapidgrowth, it is important that we consolidate our position and deliver returns forinvestors who have recently committed capital to our products. As aconsequence, the rate of expansion of our assets under management ("AUM") islikely to slow for a period." For further information please contact Keith Falconer, Chairman 07747 066637 Impax Group plc Ian Simm, Chief Executive 020 7432 2619 Impax Group plc CHAIRMAN'S STATEMENT Impax has had an excellent year and I am delighted to report that the Group hasreturned to profitability. This has been the result of a significant increasein assets under management ("AUM") which had grown to £434m at 30 September 2006(2005: £170m; 2004: £69m) and which have further risen to £475m as at 30November 2006. I provide further analysis of this increase below. The fundamental drivers of the sectors in which we specialise, namelyalternative energy, water treatment and waste management, continue to strengthenand there is mounting evidence that institutional investors in many countriesare making or preparing to make major allocations of funds to this area of themarket. Meanwhile, demand for capital in the sectors is building rapidly and weare seeing significant deal flow, particularly from companies that we have knownfor many years. As I have reported previously, our business model is to establish scaleablefunds to exploit the range of investment opportunities and to use third partiesto distribute our products. We have seen considerable success in implementingthis model. RESULTS FOR THE YEAR Turnover for the year was £3,840,030 (2005: £1,725,060), a 123% increase in theyear. Profit before tax was £213,076 (2005: loss of £593,214). This wasachieved despite two significant non-cash charges of £282,604 for amortisationof goodwill (2005: £282,604) and £316,200 for shares awarded in the Group's longterm incentive scheme (2005: £154,488). ASSET MANAGEMENT The strong growth in AUM has led this division to dominate the business, withdivisional turnover reaching £3,512,192 (2005: £1,170,882). As a consequence Iwould like to expand my normal comments on this division in order to provideshareholders with a better understanding of the products we offer. Quoted Equities Funds investing entirely or predominantly in quoted equities amounted to £331mat the end of the year. These funds are focused on the alternative energy, water and waste sectors, andinvest in companies that are enjoying premium rates of growth over the market asa whole. In our view, the fundamentals which drive this growth are likely tocontinue for a considerable period. Our investment managers have demonstratedthe skills required to identify such companies and we have invested in expandingthis team and its reach, and will continue to do so. Impax Environmental Markets plc ("IEM") IEM is an investment trust quoted on the London Stock Exchange which largelyinvests in listed companies in our sectors. It is our largest fund with £199mof total (net) assets as at 30 September 2006 (£47m as at 30 September 2005). Following a sustained period when its shares traded at a premium to net assetvalue, the trust has completed several placings of new shares, particularly twoC Share issues in November 2005 and August 2006 respectively. Such a rapidexpansion is unusual in the investment trust sector and we do not expect thetrust's assets to continue to expand at this rate. Impax Environmental Markets (Ireland) ("IEMI") This is an open-ended version of IEM and aims to have an identical portfolio.This fund's total (net) assets grew from £26m to £56m over the year. White Label Funds As I have previously reported, we are also managing the ASN Milieu Waterfonds inthe Netherlands and are advising the Danish Alm. Brand Invest MiljoTeknologifund, both of which are open-ended. The Dutch fund in particular has expandedconsiderably during this period, and had £56m of total (net) assets on 30September 2006. In addition, we have recently commenced sub-management of Parworld EnvironmentalOpportunities, part of a Luxembourg based fund promoted by BNP Paribas AssetManagement ("BNP PAM"). This fund, which also aims to mirror IEM, is registeredfor distribution in a number of countries within continental Europe. On 30September 2006, net assets were only €6.3m, but BNP PAM is now activelypromoting the fund. Private Equity Funds investing exclusively in private equity amounted to £103m at the end ofthe year. A year ago I commented on the successful launch of the Impax New Energy Fund ("INEF") which aims to take advantage of the considerable investment opportunitiesin the European renewable energy sector. This fund, which was launched inAugust 2005 with €60m of assets, announced a second closing in May 2006 and afinal closing at the target amount of €125m in August 2006. In addition to fundraising, the team has built a large pipeline of potential investee companies andrecently reported its first deal, a €20m structured participation in the capitalof Airtricity UK, a successful and rapidly expanding developer and owner of windprojects. I am pleased to report that, during 2006, Impax has also started to commitdevelopment capital to established private companies that expect to provide anexit for investors within two years. This capital is sourced from IEM and IEMI,which are permitted to invest up to 10 per cent of net assets in suchopportunities. These funds are currently invested in four companies of thistype, and our investment managers report a strong deal flow. CORPORATE FINANCE Last year I mentioned that we had transferred some resource from this divisionto the asset management side. This process has continued and, as our privateequity activities have expanded, the Group has already realised considerablebenefits. Turnover in this division during the period was £327,838 (2005:£554,178), excluding charges made for services provided to other Groupactivities. BALANCE SHEET AND CASH FLOW At the end of July, all holders of the outstanding balance of the Group'sConvertible Unsecured Loan Stock elected to convert their holdings into newshares, thereby transforming the balance sheet and eliminating the Group'sinterest charge going forward. I am pleased to report that the Group's cash flow is now positive for the firsttime in many years. BOARD OF DIRECTORS In August 2005, Melville Haggard commenced a period of secondment with theDepartment of the Environment, Food and Rural Affairs to assist in thedevelopment of policy within the waste industry. This secondment was recentlyextended from one year to two years and as a consequence, we have acceptedMelville's resignation from the Group Board with effect from 11 December 2006.Melville has been with Impax since 1999 and I would like to thank him for hiscontribution to the leadership of the Group. PROSPECTS The background against which we operate is particularly supportive to our causeand after many years of development of the Impax business, I believe that we nowhave the resources to build on our established platform. In the wake of thestorms and droughts of 2005, this year has seen climate change rise to aprominent position on the global political agenda and Environmental Markets seemto be heading for sustained secular growth. However, following a period of rapid growth, it is important that we consolidateour position and deliver returns for investors who have recently committedcapital to our products. As a consequence, the rate of expansion of our AUM islikely to slow for a period. Finally I would like to thank my colleagues and the non-executive directors fortheir very hard work which has led to the uplift in shareholder value seen inthe past year. J Keith R Falconer 11 December 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended 30 September 2006 2006 2005 Note £ £ TURNOVER 3 3,840,030 1,725,060 Operating profit/(loss) 3 173,898 (657,475) Profit on disposal of investment 5 - 129,216 173,898 (528,259) Interest receivable and similar income 137,699 131,140Interest payable and similar charges (98,521) (196,095) PROFIT/(LOSS) ON ORDINARY ACTIVITIESBEFORE TAXATION 213,076 (593,214) Tax on profit/(loss) on ordinary activities 6 388,255 - PROFIT/(LOSS) FOR THE YEAR 601,331 (593,214) EARNINGS PER SHARE 9 Basic 1.08p (1.56)p Adjusted 2.16p (0.75)p CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year ended 30 September 2006 2006 2005 £ £ Profit/(loss) for the financial year 601,331 (593,214) Currency translation differences (131,579) 47,142 Total recognised profits/(losses) for the year 469,752 (546,072) CONSOLIDATED BALANCE SHEET As at 30 September 2006 2006 2005 £ £FIXED ASSETSIntangible fixed assets 1,346,493 1,629,097Tangible fixed assets 24,433 13,140Fixed asset investments 14,357 14,102 1,385,283 1,656,339 CURRENT ASSETSDebtors due after one year 1,593,507 2,041,998Debtors due in one year 1,904,235 1,269,282Investments 72,752 79,752Cash at bank and in hand 2,549,652 863,187 6,120,146 4,254,219 CREDITORS - amounts fallingdue within one year (1,300,289) (635,726) NET CURRENT ASSETS 4,819,857 3,618,493 TOTAL ASSETS LESS CURRENTLIABILITIES 6,205,140 5,274,832 CREDITORS - amounts fallingdue after more than one year- Convertible unsecured loan stock - (2,302,088) 6,205,140 2,972,744 CAPITAL AND RESERVES Called up share capital 9,591,824 8,973,635Share premium 2,723,483 835,794Exchange equalisation reserve (845,410) (713,831)Treasury shares (148,801) (72,700)Other reserve 487,355 154,488Profit and loss account (5,603,311) (6,204,642) EQUITY SHAREHOLDERS'FUNDS 6,205,140 2,972,744 CONSOLIDATED CASHFLOW STATEMENT Year ended 30 September 2006 2006 2005 Note £ £NET CASH INFLOW/(OUTFLOW) FROMOPERATING ACTIVITIES 10 1,337,917 (640,047) RETURNS ON INVESTMENTS ANDSERVICING OF FINANCE 11 86,117 (18,016) TAXATION 11 - - CAPITAL EXPENDITURE ANDFINANCIAL INVESTMENT 11 (23,871) 231,495 NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING 1,400,163 (426,568) FINANCING 11 80,750 82,000 INCREASE/(DECREASE) IN CASH 12 1,480,913 (344,568) RECONCILIATION OF NET CASHFLOW TOMOVEMENT IN NET DEBT INCREASE/(DECREASE) IN CASH IN YEAR 1,480,913 (344,568) CHANGES IN NET DEBT RESULTINGFROM CASHFLOWS 1,480,913 (344,568) NON CASH TRANSACTIONS- conversion of Loan Stock 2,302,088 (46,583)- movement on Treasury reserve (76,101) (72,700)- movement on Other reserve 408,968 231,213 TRANSLATION DIFFERENCES (131,579) 47,142 MOVEMENT IN NET DEBT IN THE YEAR 3,984,289 (185,496) NET DEBT AT 1 OCTOBER 2005 (1,438,901) (1,253,405) NET SURPLUS/(DEBT) AT 30 SEPTEMBER 2006 12 2,545,388 (1,438,901) IMPAX GROUP PLC NOTES TO THE PRELIMINARY STATEMENT 1 NATURE OF THE FINANCIAL INFORMATION The financial information set out above does not constitute fullaccounts for the purposes of section 240 of the Companies Act 1985. Thefinancial information has been extracted from the Group's accounts for the yearended 30 September 2006 on which the auditors, MRI Moores Rowland LLP, havegiven an unqualified opinion. 2 ACCOUNTING POLICIES The accounting policies used throughout the Group have not differedfrom those published in last year's financial statements. 3 GEOGRAPHICAL ANALYSIS OF TURNOVER, OPERATING PROFIT AND NET ASSETS Turnover relates solely to the principal activities of the Group. Turnover 2006 2005 £ £ UK 3,540,040 1,698,515Europe 299,990 26,545USA - - 3,840,030 1,725,060 Operating profit/(loss) 2006 2005 £ £ UK 457,482 (363,629)Europe - -USA (980) (11,242)Goodwill amortisation (282,604) (282,604) 173,898 (657,475) Net assets 2006 2005 £ £ UK 4,334,910 581,560Europe (10,747) 73,758USA 1,880,977 2,317,426 6,205,140 2,972,744 BUSINESS ANALYSIS OF TURNOVER, OPERATING PROFIT AND NET ASSETS Turnover relates solely to the principal activities of the Group. Turnover 2006 2005 £ £ Investment services 3,512,192 1,170,882Financial advisory services 327,838 554,178 3,840,030 1,725,060 Operating profit/(loss) 2006 2005 £ £ Investment services 415,281 (606,124)Financial advisory services 41,221 231,253Goodwill amortisation (282,604) (282,604) 173,898 (657,475) Net assets 2006 2005 £ £ Investment services 5,717,881 2,069,910Financial advisory services 487,259 902,834(including deferred tax asset) 6,205,140 2,972,744 4 OPERATING PROFIT Operating profit is stated after charging £316,200 for a long termincentive scheme charge (2005: £154,488). On 4 February 2005, shareholders approved the establishment by the Company ofthe Impax Group Employee Benefit Trust (the "EBT") as part of the Company'semployee incentive arrangements. The allocation of Ordinary Shares to employees and their familiesvia the EBT by the Company in 2005 and 2006 as part of the long term incentivescheme has given rise to a charge of £316,200 (2005: £154,488) to the profit andloss account for the year. This forms part of a total charge of £948,600, being£463,464 evenly spread over the three years to 30 September 2007, which is theperformance period for the 2005 share award and being £485,136 evenly spreadover the three years to 30 September 2008, which is the performance period forthe 2006 share award. It is calculated in accordance with the requirements ofFRS 20 "Share based payments" by reference to the mid market price of anOrdinary Share of 6.375p on the approval date of 4 February 2005 and on theDirectors' assumption that the EBT performance criteria will be met and all ofthe shares will vest to employees and their families. The date of 4 February2005 has been agreed to be the grant date for all shares issued to employees andtheir families as this was the date when substantially all terms and conditionsof the scheme were agreed by all parties. 5 EXCEPTIONAL ITEMS 2006 2005 £ £ Profit on disposal of listed investment - 129,216 - 129,216 In 1999, the Group acquired shares in Ensyn Group Inc. ("Ensyn") with a value of£165,000, in consideration for fees. In 2002, full provision was made forimpairment of this unlisted investment. In April 2005 Ensyn merged with a subsidiary of Ivanhoe Energy Inc. ("Ivanhoe"),a listed company. The consideration for this merger took the form of acombination of cash, shares in Ivanhoe and shares in Ensyn. Following the merger the Group received the cash element of the considerationand subsequently sold part of its holding in Ivanhoe. These transactions havegiven rise to a gain of £294,216, being £165,000 write back of impairment ofunlisted investment and £129,216 profit on disposal of listed investment for theGroup for the year ended 30 September 2005 of which £236,609 has been realised. 6 TAX ON PROFIT ON ORDINARY ACTIVITIES 2006 2005 £ £UK taxation is based on the profit/(loss) for the year at arate equivalent to 30% (2005: 30%): - - Current year tax charge - - Deferred tax credit (388,255) - 2006 2005 £ £Factors affecting the tax charge for the year Profit/(loss) on ordinary activities before taxation 213,076 (593,214) Tax at 30% of profit/(loss) on ordinary activities before 63,923 (177,964)taxation Effects of:Capital gains - 32,956Prior year trading losses utilised - (18,269)Current year trading losses utilised - (14,687)Non-deductible expenses 111,660 207,555Capital allowances (4,717) (3,927)Non chargeable income (3,240) (94,908)Amortisation 84,781 84,781Losses utilised (252,407) (15,537) Current year tax charge - - The Group has tax losses of approximately £4.0m (2005: £4.7m) available foroffset against future taxable profits in the UK. A deferred tax asset of£388,255 (2005: £nil) has been recognised in respect of £1,294,183 (2005: £nil)of such losses due to the predictability of future profit streams. 7 FOREIGN CURRENCIES The results of subsidiary undertakings reporting in foreign currencies aretranslated at the average rate ruling in the accounting year (US$1.80: £1; 2005:US$1.85: £1) and the assets and liabilities at the rate ruling at the balancesheet date (US$1.87: £1; 2005: US$1.76: £1). 8 DIVIDENDS No dividend is proposed. 9 EARNINGS PER SHARE The calculation of profit per share is based on the profit for theyear of £601,331 and on the weighted average number of ordinary shares in issueof 55,592,580 (2005: loss of £593,214 on shares in issue of 38,065,022). In order to show results from operating activities on a comparable basis, anadjusted profit per share has been calculated which excludes goodwillamortisation of £282,604 (2005: £282,604), exceptional items of £nil (2005:£129,216) and long term incentive scheme charge of £316,200 (2005: £154,488). 10 RECONCILIATION OF OPERATING PROFIT TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES 2006 2005 £ £ Operating profit/(loss) 173,898 (657,475)Write back impairment of unlisted investment - (165,000)Revaluation of listed/unlisted investment 7,000 (22,145)Depreciation charges 12,323 7,542Amortisation of goodwill 282,604 282,604Decrease/(increase) in debtors 201,793 (245,211)Increase in creditors 660,299 159,638 Net cash inflow/(outflow) from operating activities 1,337,917 (640,047) 11 ANALYSIS OF CHANGES IN CASHFLOWS DURING THE YEAR 2006 2005RETURNS ON INVESTMENTS £ £AND SERVICING OF FINANCE Interest received 137,699 131,140Interest paid (51,582) (149,156) 86,117 (18,016) CAPITAL EXPENDITURE ANDFINANCIAL INVESTMENT Payments to acquire tangible fixed assets (23,616) (5,114)Proceeds from sale of investments - 236,609Payments to acquire investments (255) - (23,871) 231,495 FINANCING Issue of share capital 80,750 82,000 80,750 82,000 12 ANALYSIS OF CHANGES IN NET DEBT 1 October Cash Translation Non-cash 30 September 2005 Flow Difference transactions 2006 £ £ £ £ £Cash at bank and in hand 863,187 1,485,177 (131,579) 332,867 2,549,652Bank overdraft - (4,264) - - (4,264)Debt due after one year (2,302,088) - - 2,302,088 -NET (DEBT)/SURPLUS (1,438,901) 1,480,913 (131,579) 2,634,955 2,545,388 13 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 2006 2005 £ £ Profit/(loss) for the financial year 601,331 (593,214)Conversion of Loan Stock 2,442,906 357Costs of issue - Loan Stock (93,879) -Issue of Shares - EBT 80,750 82,000Treasury Shares - EBT (76,101) (72,700)Other Reserve - EBT 316,200 154,488Other Reserve - accrued NOMAD fee 16,667 -Translation adjustments (131,579) 47,142Share premium on marketdisposal of shares from EBT 76,101 76,725 Net increase/(reduction) inshareholders' funds 3,232,396 (305,202) Opening shareholders' funds 2,972,744 3,277,946 Closing shareholders' funds 6,205,140 2,972,744 Copies of the report and accounts of the Company for the year ended30 September 2006 will be sent to shareholders. Copies will also be available onthe Company's web site www.impax.co.uk and may be collected from the RegisteredOffice. Registered Office: Broughton House 6-8 Sackville Street London W1S 3DG This information is provided by RNS The company news service from the London Stock Exchange