30 Sep 2013 07:00
30 September 2013
EQUATORIAL PALM OIL PLC
("EPO" or the "Company")
Interim Results for the six months ended 30 June 2013
Equatorial Palm Oil plc, (AIM: PAL), the AIM listed palm oil development company with operations in Liberia, announces its unaudited interim results for the six months ended 30 June 2013 ("the Period").
Chairman's Statement
During the first half of 2013, the Company focussed on further progress of its oil palm assets in Liberia, West Africa, and setting the foundations for its large scale development. EPO has a 50:50 joint venture ("JV") share with Biopalm Energy Limited ("Biopalm") in all the oil palm assets held by Liberian Palm Developments Limited ("LPD"), the JV company that EPO manages on behalf of the JV partners.
Liberian Palm Developments Limited - Operational Review
In the first half of 2013, LPD planted 926 ha at Palm Bay Estate and 393 ha at Butaw Estate. A further 1,448 ha at Palm Bay and 444 ha at Butaw have been prepared ready for planting. Based on the planting completed this year and infrastructure in place, LPD believes that it is capable of planting 3,000 ha per annum from 2014 onwards, subject to availability of funding, as referred to below, on a timely basis.
During the Period, LPD appointed African Export-Import Bank ("Afreximbank") as a corporate advisory partner for the purpose of securing a US$140m financing facility (the "Facility") which is expected to be sufficient to fund the Palm Bay oil palm project located near the deepwater port of Buchanan in Liberia, West Africa.
In June 2013, final Environmental, Social, Impact Assessments ("ESIA") reports for Palm Bay Estate were submitted to LPD by independent environmental consultants, Coastal and Environmental Services. This is a key milestone for the Company, being the culmination of over two years of work. The environmental studies concluded, inter alia, that the oil palm development at the Palm Bay Estate is acceptable from an environmental and social perspective, and will result in sustainable benefits to the area.
These ESIA reports are a key requirement for the development funding institutions ("DFIs") from which the Company is seeking to secure debt funding. Work continued with Afreximbank who have been appointed by LPD to work with DFIs in order to secure funding for our projects in Liberia.
Funding of LPD
In December 2010, the Company entered into and announced a joint venture with Biopalm. As agreed under the terms of the joint venture agreement, dated 10 December 2010, entered into between Biopalm and EPO (the "Investment Agreement"), EPO, in February 2011, transferred its oil palm assets in Liberia together with US$7.5m to LPD, and Biopalm transferred US$22.5m to LPD. Under the Investment Agreement, Biopalm is required to arrange and/or contribute, either directly or through any member of its group, any external funding required by LPD (up to a maximum of US$30m) (the "Commitment").
On 8 July 2013, the Company announced that it had issued a written notice to Biopalm setting out that Biopalm is in material breach of its obligations under the Investment Agreement having failed to provide the Commitment.
On 14 August 2013, the Company announced that no resolution of the dispute had taken place and that the next step for dispute resolution is to seek resolution by arbitration.
As a result, EPO, since formation of the JV, has advanced $8.0m to LPD to date (in addition to $7.5m on inception of the JV in February 2011) in anticipation of the provision of the External Funding by Biopalm.
EPO continues to negotiate and work with Biopalm regarding the Commitment with a view to an amicable solution being reached, but has reserved all rights to take action against Biopalm under the Investment Agreement.
Until the long term funding of LPD is secured, the operations of LPD will be managed predominantly on a care and maintenance basis. LPD has the foundations, infrastructure and team in place to ramp up planting again quickly upon this funding being in place.
Financial review
The loss of the Group for the six months ended 30 June 2013 of US$1,656,000 (2012: US$1,570,000) was in line with expectations. Cash held by the Group as at 30 June 2013 was US$9,000 (2012: US$1,734,000).
In July 2013, the Company announced certain fund raising efforts had been concluded which included equity and loans.
On 16 July 2013, the Company announced it had entered into short term loan agreements with Adelise Services Limited ("Adelise"), a company associated with Michael Frayne, Executive Chairman of EPO, for the advance of £29,745 and US$425,000 to the Company (the "Adelise Loans").
On 24 July 2013, the Company announced the placement to existing and new shareholders of 37,637,000 ordinary shares for an aggregate consideration of £2,258,220 (US$3,465,239) ("the Placing"). At the same time, the Company announced that a loan of US$400,000 was made by the Company's joint venture partner Biopalm to LPD ("the Biopalm Loan").
On 29 July 2013, the Company announced an increase in the size of the placing announced on 24 July 2013 by a further 3,728,762 ordinary shares for an additional aggregate consideration of £223,726 (US$343,307). As part of the placing announced on 29 July 2013, Adelise converted £108,900 of the Adelise Loans into ordinary shares. The Company also announced on 29 July 2013 that Adelise had granted a US$500,000 revolving loan facility to the Company for the purpose of the Company's general working capital ("the Adelise Facility").
The placings announced on 24 July 2013 and 29 July 2013, the Biopalm Loan, the Adelise Facility and other loan facilities provided funds, in aggregate, of US$4,828,546 (the "July Raise").
The proceeds received by EPO from the placings announced on 24 July 2013 and 29 July 2013, were used to advance a loan of US$2.2m (the "Loan") to LPD. The Loan has been provided on a short-term basis and the interest accrued on the Loan is payable at a fixed rate of 8 per cent. per annum. The Loan is repayable on demand and is secured against the assets of LPD. The Loan provides short-term financing to support LPD's ongoing development of its oil palm projects in Liberia, West Africa, in advance of the resolution of Biopalm's External Funding obligation and the anticipated long term debt funding being sourced for LPD by Afreximbank.
The July Raise allowed the Company to clear the majority of creditors, including full repayment of the balance of the loan provided by Adelise announced 16 July 2013, and will allow the Company to continue to fund JV operations on a care and maintenance basis for approximately two months from today.
There a number of short term facilities and funding solutions currently at an advanced stage of negotiations but not yet finalised. Whilst there can be no certainty over the level of funds to be raised or that these funding sources will formally complete, the Directors remain confident in being able to raise further funds to finance future working capital requirements of the Group for the next twelve months of operations.
Once the short term funding position is secured, the Directors plan to work with Biopalm and Afreximbank to find a longer term funding solution such that it returns planting levels of oil palms to those originally planned. It is too early at this stage to indicate what form this longer term funding solution may take.
Summary and Outlook
The Company continues to hold a constructive dialogue with Biopalm regarding the Commitment LPD has reduced its workforce and is currently operating on a care and maintenance basis.
The key objective for LPD is to secure funding to reactivate planting and ramp up the planting rate year on year with a forward combined target of planting over 100,000 hectares by 2021. LPD is positioned to produce its first commercial production in 2014 from the oil palms planted in 2011. The Board believes that with our experienced management team, robust project economics and strong investment case, EPO can procure the funding necessary to deliver significant value and growth to shareholders.
Michael Frayne
Executive Chairman
30 September 2013
Enquiries:
Equatorial Palm Oil plc Michael Frayne (Chairman) www.epoil.co.uk | +44 (0) 7552 497 241
|
Strand Hanson Limited (Nominated Adviser) James Harris / James Bellman | +44 (0) 20 7409 3494 |
Mirabaud Securities LLP (Broker) Peter Krens | +44 (0) 20 7484 3510 |
EQUATORIAL PALM OIL PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2013
Note | Period ended 30 June 2013 (unaudited) | Period ended 30 June 2012 (unaudited) | Year ended 31 December 2012 (audited) | |
$'000 | $'000 | $'000 | ||
Revenue | 35 | 210 | 420 | |
Administrative expenses | (898) | (1,306) | (2,316) | |
Share options expense | 6 | (97) | - | (38) |
Operating loss | (959) | (1,096) | (1,934) | |
Interest income | 108 | - | - | |
Share of operating loss of joint venture | 4 | (805) | (474) | (1,880) |
Loss for the Period before and after taxation | (1,656) | (1,570) | (3,814) | |
Other comprehensive income | ||||
Exchange gains/(losses) arising on translation of foreign operations | (46) | 63 | 106 | |
Total comprehensive income for the period | (1,702) | (1,507) | (3,708) | |
Loss per share expressed in cents per share | ||||
- Basic & diluted | 3 | (1.1) cents | (1.2) cents | (3.0) cents |
EQUATORIAL PALM OIL PLC
GROUP STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2013
Note | 30 June 2013 (unaudited) | 30 June 2012 (unaudited) | 31 December 2012 (audited) | |
$'000 | $'000 | $'000 | ||
ASSETS | ||||
Non-current assets | ||||
Investment in joint venture | 4 | 18,298 | 20,508 | 19,103 |
18,298 | 20,508 | 19,103 | ||
Current assets | ||||
Receivables from joint venture | 4 | 5,656 | - | - |
Trade and other receivables | 19 | 248 | 565 | |
Cash & cash equivalents | 9 | 1,734 | 551 | |
5,684 | 1,982 | 1,116 | ||
LIABILITIES | ||||
Current liabilities | ||||
Short term debt | 335 | - | - | |
Trade and other payables | 369 | 291 | 183 | |
704 | 291 | 183 | ||
Net current assets | 4,980 | 1,691 | 933 | |
NET ASSETS | 23,278 | 22,199 | 20,036 | |
SHAREHOLDERS' EQUITY | ||||
Share capital | 5 | 2,445 | 1,969 | 1,969 |
Share premium | 34,498 | 30,402 | 30,402 | |
Warrant and option reserve | 6 | 1,358 | 1,030 | 1,466 |
Foreign exchange reserve | 34 | 37 | 80 | |
Retained loss | (15,057) | (11,239) | (13,881) | |
Total equity | 23,278 | 22,199 | 20,036 |
EQUATORIAL PALM OIL PLC
GROUP CASH FLOW STATEMENT
FOR THE PERIOD ENDED 30 JUNE 2013
Period ended 30 June 2013 (unaudited) | Period ended 30 June 2012 (unaudited) | Year ended 31 December 2012 (audited) | |
$'000 | $'000 | $'000 | |
Cash flows from operating activities | |||
Loss for the year before and after taxation Decrease in receivables Increase in payables Share options expense Share of operating loss of joint venture | (1,656) 546 185 97 805 | (1,570) 354 129 - 474 | (3,814) 37 8 38 1,880 |
Net cash outflow from operating activities | (23) | (613) | (1,851) |
Cash flows from investing activities | |||
Funds loaned to joint venture | (5,656) | - | - |
Net cash outflow from investing activities | (5,656) | - | - |
Cash flows from financing activities | |||
Loan funds received | 335 | - | - |
Issue of ordinary share capital (net of expenses) | 4,976 | 968 | 968 |
Share issue costs | (129) | - | - |
Net cash inflow from financing activities | 5,182 | 968 | 968 |
Net increase/(decrease) in cash and cash equivalents | (497) | 355 | (883) |
Cash and cash equivalents at beginning of period | 551 | 1,329 | 1,329 |
Exchange gains/(losses) on cash and cash equivalents | (45) | 50 | 105 |
Cash and cash equivalents at end of period | 9 | 1,734 | 551 |
EQUATORIAL PALM OIL PLC
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2013
Called up share capital | Share premium reserve | Foreign exchange reserve |
Warrant and option reserve | Retained earnings |
Total equity | |
$'000 | $'000 | $'000 | $'000 | $'000 | $'000 | |
As at 1 January 2012 | 1,914 | 29,489 | (26) | 2,092 | (10,731) | 22,738 |
Share capital issued | 55 | 913 | - | - | - | 968 |
Exercise and expiry of warrants and options | - | - | - | (1,062) | 1,062 | - |
Total comprehensive income for the period | - | - | 63 | - | (1,570) | (1,507) |
As at 30 June 2012 | 1,969 | 30,402 | 37 | 1,030 | (11,239) | 22,199 |
As at 1 January 2012 | 1,914 | 29,489 | (26) | 2,092 | (10,731) | 22,738 |
Share capital issued | 55 | 913 | - | - | - | 968 |
Exercise and expiry of warrants and options | - | - | - | (664) | 664 | - |
Share-based payments | - | - | - | 38 | - | 38 |
Total comprehensive income for the period | - | - | 106 | - | (3,814) | (3,708) |
As at 31 December 2012 | 1,969 | 30,402 | 80 | 1,466 | (13,881) | 20,036 |
Share capital issued | 476 | 4,500 | - | - | - | 4,976 |
Cost of share issue | - | (129) | - | - | - | (129) |
Warrants issued in relation to share capital issued | - | (275) | - | 275 | - | - |
Expiry of warrants and options | - | - | - | (480) | 480 | - |
Share-based payments | - | - | - | 97 | - | 97 |
Total comprehensive income for the period | - | - | (46) | - | (1,656) | (1,702) |
As at 30 June 2013 | 2,445 | 34,498 | 34 | 1,358 | (15,057) | 23,278 |
EQUATORIAL PALM OIL PLC
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
1. Basis of preparation
These consolidated financial statements have been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2012 Annual Report. The financial information for the half years ended 30 June 2013 and 30 June 2012 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited.
The annual financial statements of Equatorial Palm Oil plc are prepared in accordance with IFRSs as adopted by the European Union. The comparative financial information for the year ended 31 December 2012 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2012 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statement for 2012 was unqualified, but did draw attention by way of emphasis to the disclosures on going concern, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
The same accounting policies, presentation and methods of computation are followed in these condensed consolidated financial statements as were applied in the Group's latest annual audited financial statements.
In addition, the IASB has issued a number of IFRS and IFRIC amendments or interpretations since the last annual report was published. It is not expected that any of these will have a material impact on the Group.
2. Going Concern
In December 2010, the Company entered into and announced a joint venture with Biopalm. As agreed under the terms of the joint venture agreement, dated 10 December 2010, entered into between Biopalm and EPO (the "Investment Agreement"), EPO, in February 2011, transferred its oil palm assets in Liberia together with US$7.5m to LPD, and Biopalm transferred US$22.5m to LPD. Under the Investment Agreement, Biopalm is required to arrange and/or contribute, either directly or through any member of its group, any external funding required by LPD (up to a maximum of US$30m) (the "Commitment").
On 8 July 2013, the Company announced that it had issued a written notice to Biopalm setting out that Biopalm is in material breach of its obligations under the Investment Agreement having failed to provide the Commitment.
On 14 August 2013, the Company announced that no resolution of the dispute had taken place and that the next step for dispute resolution is to seek resolution by arbitration.
As a result, EPO, since formation of the JV, has advanced an additional $8.0m to LPD to date (in addition to $7.5m on inception of the JV in February 2011) in anticipation of the provision of the External Funding by Biopalm.
EPO continues to negotiate and work with Biopalm regarding the Commitment with a view to an amicable solution being reached, but has reserved all rights to take action against Biopalm under the Investment Agreement.
In July 2013, the Company announced certain fund raising efforts had been concluded which included equity and loans.
On 16 July 2013, the Company announced it had entered into short term loan agreements with Adelise Services Limited ("Adelise"), a company associated with Michael Frayne, Executive Chairman of EPO, for the advance of £29,745 and US$425,000 to the Company (the "Adelise Loans").
The July Raise allowed the Company to clear the majority of creditors, including full repayment of the balance of the loan provided by Adelise announced 16 July 2013, and will allow the Company to continue to fund JV operations on a care and maintenance basis for approximately two months from today.
There a number of short term facilities and funding solutions currently at an advanced stage of negotiations but not yet finalised. Whilst there can be no certainty over the level of funds to be raised or that these funding sources will formally complete, the Directors remain confident in being able to raise further funds to finance future working capital requirements of the Group for the next twelve months of operations.
Whilst the Board remains confident in its ability to raise funds, the conditions set out above indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern, which would principally relate to the impairment of the investment in the JV.
3. Loss per share
The basic loss per share is derived by dividing the loss for the Period attributable to ordinary shareholders by the weighted average number of shares in issue.
As inclusion of the potential Ordinary shares would result in a decrease in the loss per share they are considered to be anti-dilutive, as such, a diluted earnings per share is not included.
Period ended 30 June 2013 (unaudited) | Period ended 30 June 2012 (unaudited) | Year ended 31 December 2012 (audited) | |
$'000 | $'000 | $'000 | |
Loss for the period | (1,656) | (1,570) | (3,814) |
Weighted average number of Ordinary shares of 1p in issue | 145.7 million | 127.3 million | 127.8 million |
Loss per share - basic | (1.1) cents | (1.2) cents | (3.0) cents |
4. Investment in joint venture
The results of the joint venture for the period of six months to 30 June 2013 were as follows:
30 June 2013 | 30 June 2012 | 31 December 2012 | |
$'000 | $'000 | $'000 | |
Non-current assets | 37,322 | 27,412 | 31,693 |
Current assets | 7,807 | 14,270 | 8,089 |
Non-current liabilities | - | - | - |
Current liabilities | (8,740)1 | (664) | (1,576) |
TOTAL NET ASSETS | 36,389 | 41,018 | 38,206 |
1 $5,656,000 relates to amounts payable to the Company
| |||
Income | 132 | 574 | 1,693 |
Expenses | (1,741) | (1,522) | (5,453) |
Loss after tax | (1,609) | (948) | (3,760) |
The Company, through its investment in Equatorial Biofuels (Guernsey) Limited, owns a 50% interest in Liberian Palm Developments Limited. The Company's interest in Liberian Palm Developments Limited is as follows:
$'000 | |
Interest in joint venture at 1 January 2012 | 20,982 |
Share of losses of joint venture | (474) |
Interest in joint venture at 30 June 2012 | 20,508 |
Interest in joint venture at 1 January 2012 | 20,982 |
Share of losses of joint venture | (1,879) |
Interest in joint venture at 31 December 2012 | 19,103 |
Interest in joint venture at 1 January 2013 | 19,103 |
Share of losses of joint venture | (805) |
Interest in joint venture at 30 June 2013 | 18,298 |
5. Called up share capital
Allotted, called up and fully paid | Period ended 30 June 2013 $'000
| Period ended 30 June 2012 $'000
| Period ended 31 December 2012 $'000
|
159,144,092 Ordinary shares of 1p each (2012: 128,316,434) |
2,445 |
1,969 |
1,969 |
During the Period the Group issued 30,827,658 shares at an average price of 10.4 pence per share ($0.16 cents).
6. Share based payments
Warrants
Details of the warrants outstanding during the Period are as follows:
| |||||
Number of warrants | Weighted average exercise price | ||||
Outstanding at 1 January 2013 | 8,188,928 | 17.5p | |||
Issued during the period | 23,900,000 | 13.8p | |||
Expired during the period | (5,990,171) | 17.5p | |||
|
| ||||
Outstanding at 30 June 2013 | 26,098,757 | 14.1p | |||
|
| ||||
Exercisable at 30 June 2013 | 26,098,757 | 14.1p | |||
As at 30 June 2013 the following warrants to subscribe for Ordinary shares were outstanding:
Category | Over Number of Shares | Expiry Date |
Apr-15 Warrants, exercisable at 15.0p | 11,950,000 | 6 April 2015 |
Apr-14 Warrants, exercisable at 12.5p | 11,950,000 | 7 April 2014 |
5yr Warrants, exercisable at 17.5p | 2,198,757 | 26 February 2015 |
3yr Warrants, exercisable at 17.5p | - | 26 February 2013 |
2yr Warrants, exercisable at 17.5p | - | 26 February 2012 |
Total | 26,098,757 |
Share options
Details of the options outstanding during the Period are as follows:
Outstanding at 1 January 2013 | Issued during the period | Exercised during the period | Outstanding at 30 June 2013 | Exercisable at 30 June 2013 | |
Options exercisable at 17.5p | 9,770,200 | - | - | 9,770,200 | 7,477,650 |
7. Events after the reporting period
Default notice issued to Biopalm Energy Limited
On 8 July 2013, the Company announced that it issued a written notice to Biopalm setting out that Biopalm is in material breach of its obligations under the Investment Agreement.
On 14 August 2013, the Company announced that no resolution of the dispute had taken place and that the next step for dispute resolution was to seek resolution by arbitration.
Placing and Loan
The July Raise, as detailed above, provided funds, in aggregate, of US$4,828,546.
8. Availability of accounts
Copies of this interim financial information will be available on the Company's website.