Preliminary Year End Results

RNS Number : 8112D

Impax Asset Management Group plc

09 December 2009

 



9 December 2009

IMPAX ASSET MANAGEMENT GROUP PLC

PRELIMINARY STATEMENT OF RESULTS

FOR THE YEAR ENDED 30 SEPTEMBER 2009

Impax Asset Management Group plc ("Impax"), the specialist environmental investment manager, today announces its preliminary results for the year ended 30 September 2009.

Financial highlights

• Final AUM of £1,263m, up 42% from £889m at 31 March 2009; full year increase of 15% from £1,098m 

• Revenues of £10.4m (2008: £11.4m), reflecting 10 months of lower equity markets during the period

• Profit before tax attributable to shareholders of £2.47m (2008: £3.51m - restated) 

• Earnings per share ("EPS") were 2.63 pence (adjusted), (2008: 3.36 pence (restated))  

• Strong investment performance sustained. The largest funds in each division performed as follows:

  • Quoted equities: Over 5 years ended 30 September 2009, NAV of Impax Environmental Markets plc increased by 79.9% compared to 38.1% increase in MSCI World Index

  • Private equity:  Performance of Impax New Energy Investors recently ranked by Preqin as first quartile (among infrastructure funds launched in 2005)

• Proposal to increase dividend to 0.40 pence per share (2008: 0.35 pence per share)

• Post year end, further increase in AUM to £1,419m as of 30 November 2009, including:  

  • €80m of a new €150m mandate from European institutional investor, with balance expected in early 2010

  • Mandate to manage Impax Asian Environmental Markets plc, a newly launched investment trust with £104.5m of gross assets

Keith Falconer, Chairman of Impax, said:

"This year's results demonstrate that Impax has taken a substantial step forward in building assets under management in spite of volatile market conditions.  

 "It is an exciting time to be managing funds targeting the environmental sector. The release of our annual results coincides with the start of the COP-15 conference in Copenhagen. Irrespective of the outcome, it is rational to conclude that interest in clean energy, energy efficiency and the drivers behind environmental markets will continue to strengthen for many years to come."

Ian Simm, Chief Executive of Impax, said:

"Public sector commitment to the areas in which Impax is investing has grown significantly. Since late 2008 more than US$500 billion of 'stimulus funding' has been pledged for deployment in the environmental sector. Crucially, institutional investors are increasingly persuaded that the sector offers credible potential for superior returns over the long term.

"We have a strong track record, powerful distribution partners and a highly qualified, committed investment team. This has so far resulted in strong asset flows and we are committed to maximising the opportunities ahead."

Analysts' briefing 

There will be a conference call for analysts at 9.00am on Wednesday, 9 December. A copy of the presentation will be available on the Impax website at www.impax.co.uk

Contacts

For further information please contact:

Impax Asset Management Group plc

Keith Falconer, Chairman

Ian Simm, CEO                 020 7434 1122

Noble & Company Limited

John Riddell, Director         020 7763 2200

Harry Stockdale                020 7763 2200

Penrose Financial 

Gay Collins                      020 7786 4882/07798 626282    [e-mail]  

Shona Prendergast           020 7786 4884                        [e-mail]

[e-mail]

CHAIRMAN'S STATEMENT

The period from the demise of Lehman Brothers in mid September 2008 to the present will surely be remembered as one of the most extraordinary in the history of finance and economics. Until the spring of 2009, the effects of a severe recession, collapsing credit and banking markets, high profile corporate failures and pronounced risk aversion had threatened to decimate the investment management sector. However, in recent months, following radical macroeconomic policy interventions, particularly quantitative easing and stimulus funding, confidence has improved, and at present we are in a more benign business environment.

In this context, in the financial year ending 30 September 2009, while Impax's revenue has not been immune to the stock market crash, the Group has taken a substantial step forward. Assets under discretionary and advisory management ("AUM") started the year at £1,098 million. As the market fell, we suffered only minimal redemptions and AUM reached a low of £889 million in March 2009 before rising to £1,263 million by the end of the Group's financial year. Since then, major new mandates from a European institutional investor and our new investment trust targeting the Asia Pacific region (described in more detail below) coupled with broadly rising markets have led to a further increase in AUM, which reached £1,419 million on 30 November 2009. 

This year, in recognition of our increasingly complex business, my statement is followed by a Chief Executive's Report, in which Ian Simm sets out more detail behind our performance, current status and plans.

RESULTS FOR THE YEAR AND PROPOSED DIVIDEND

During the year we have undertaken a review of the Group's accounting policies, and this has led to a number of corrections and improvements. Although none of these changes has materially impacted upon shareholders' equity, results for 2008 and 2009 now reflect in particular an amended basis of expensing the Group's long-term incentive scheme and the consolidation of one of the funds into which we have injected seed capital. Further information is included within the Prior Year Adjustment Note to the Preliminary Statement of Results.

Notwithstanding the significant overall rise in assets since the start of the period, our results also reflect the sharp fall in equity markets in late 2008 and early 2009. Turnover for the year was £10,391,196 (2008: £11,389,264), an 8.8 per cent decrease over the year. Turnover included £945,620 of exceptional non-recurring fees due under the management contract of our private equity fund.  

Profit before tax excluding minority interest was £2,472,992 (2008: £3,516,119 (restated)). This result included a charge of £551,579 (2008: £917,665 (restated)) for the Group's long-term incentive scheme.

The tax charge for the year was lower than the standard rate of corporation tax for the UK as a result of credits arising on recognition of deferred tax assets.  

Earnings per share ("EPS") were 2.63 pence (adjusted), a 22 per cent fall against last year (3.36 pence (restated)). These EPS numbers exclude the charges for the Group's long-term incentive scheme and therefore, in the Board's view, represent the most relevant measure of the years' earnings.

The Group's balance sheet continues to strengthen. At the financial year end, equity attributable to shareholders had increased to £13,849,539 (2008:  £11,397,770 (restated)). There was no long-term debt and cash reserves readily available to the Group were £6,694,182 (2008: £7,028,619).

A year ago the Group's shareholders approved a proposal to pay a maiden dividend of 0.35 pence per share (for year ended 30 September 2008). Notwithstanding the events of the year and the consequent fall in the Group's revenues and profits, I am pleased to report that the Board recommends that the dividend be increased to 0.40 pence per share. This dividend proposal will be submitted for formal approval by shareholders at the forthcoming Annual General Meeting on 10 February 2010. If approved the dividend will be paid shortly thereafter on a date to be confirmed in a formal Notice of AGM. In recognition of the Group's stage of development, the Board does not currently intend to propose payment of interim dividends.

NAME CHANGE

In recognition of the Group's single focus on investment management, in September 2009, shareholders gave their overwhelming support to change the name of the Group from Impax Group plc to Impax Asset Management Group plc.  

BOARD OF DIRECTORS

In September this year, I announced that Vince O'Brien had agreed to join the Group's Board as a non-executive director with immediate effect, taking the number of directors to six. Vince, who is currently a director of Montagu Private Equity and has worked in the private equity industry for over twenty years, is ideally placed to enhance our private equity strategy. He is a past Chairman of the British Venture Capital Association and served on its Council for seven years. 

PROSPECTS

Governments around the world are rapidly building their understanding of how to reduce pollution and improve the efficiency of natural resource use, while realising that the private sector can rapidly deliver cost-effective solutions within competitive environmental markets. Earlier in the decade, institutional investors were understandably cautious about the rationale for long-term allocations to investment strategies targeting the environmental sector. However, there is now an overwhelming body of evidence supporting claims that growth rates in and investor returns from this sector can be expected to out-perform the mainstream economy. It is therefore logical to conclude that the number of attractive investment opportunities for the portfolios that we manage will continue to expand.

Impax's investment team has now been operating in this sector for over a decade and has experienced two full market cycles. With strong sector prospects, a scalable business model and a committed, experienced management team, I am confident that the Group is well positioned for further growth. 

J Keith R Falconer

8 December 2009

CHIEF EXECUTIVE'S REPORT

It is an exciting time to be managing funds targeting the environmental sector.  Hardly a day goes by without extensive press coverage of water scarcity, energy security, local air pollution, waste disposal problems or global warming, and institutional investors are increasingly persuaded that the sector offers credible potential for superior returns over the long term.  

The opportunities for a specialist investment manager in this area are highly attractive.  Since 1998, when Impax secured its first investment advisory mandate, environmental markets have expanded out of all recognition.  There are now over 1,300 quoted companies generating a total of ca. US$500 billion of revenue each year and expecting to deliver, on average, double-digit percentage annual earnings growth.  An investment management team that is able to understand the likely development and risks of environmental regulation and technology, and can compare business plans and valuations in different parts of the world, is ideally placed to identify mis-priced assets and to commit capital accordingly.

Impax focuses on the management of a small number of scalable investment strategies targeting the environmental sector that are distributed through a variety of profitable channels. As set out below, during the period under review we have made significant progress in building AUM across many of these channels, delivered excellent investment returns and continued to extend our capabilities in order to be ready to attract and manage further funds.

SECTOR DEVELOPMENTS

The environmental sector has seen many positive developments during the year. Unlike in previous recessions, when investment in environmental management and related infrastructure was typically deemed to be of low priority, it is encouraging that public sector commitment to the areas in which Impax is investing has grown significantly. Since late 2008, over US$500 billion of public money in the form of "stimulus funding" has been pledged for deployment in the sector, and this is expected to underpin demand for many private sector operators for several years.

Notwithstanding this unprecedented support, many governments have also continued to finalise and implement far-reaching environmental targets and regulations. For example, in December 2008, the European Union adopted a set of Directives that stipulate challenging requirements for renewable energy, energy efficiency and CO2 emissions targets by 2020. Subsequently, early in the New Year, the newly inaugurated President Obama began a programme to accelerate US policy in these areas as well as in the strengthening of a wider group of environmental markets, for example the development of a "smart" distribution grid for electric power. In parallel, the Chinese government has announced a suite of measures to support the rapid deployment of clean energy technologies, notably in power generation, vehicles and energy efficiency. 

ASSETS UNDER MANAGEMENT AND FUND FLOWS

As noted in the Chairman's Statement, Impax's AUM increased over the period from £1,098 million on 1 October 2008 to £1,263 million on 30 September 2009. The material component of this increase arose in our Quoted Equities division, in particular in funds or accounts domiciled in the European Union (ex UK and Ireland).  

The flow of funds into our quoted equities products can be analysed in two categories: "Impax-Label" funds, which we typically manage on behalf of UK investors and earn annual fees in the region of 0.9 per cent to 1.5 per cent of relevant AUM, and "Third Party Funds/Accounts", for which fees tend to be lower as we either receive them through third party distributors or offer discounts on large commitments. During the period we had modest net outflows from Impax Label funds but significant net inflows into Third Party Funds/Accounts; for example, the Environment Agency Pension Fund recently added £15 million to the segregated account that we have been managing for them since August 2008 (which was initially funded with £35 million). As noted below, this experience has prompted us to invest further in our internal sales team. 

Since the end of the period, there have been two major positive contributors to the further increase in AUM. First, as announced on 22 September 2009, we have received €80 million of a €150 million mandate from a European institutional investor to manage a quoted equities portfolio, and now expect to receive the balance early in 2010. Second, as noted below, on 22 October 2009 we commenced management of Impax Asian Environmental Markets plc, an investment trust, which launched with £104.5 million of gross assets.  

As reported in the Interim statement, our partnership with FTSE to design and market a range of environmental sector indices has continued to develop and is producing rising (though still modest) revenues for us. In June 2009, FTSE launched six additional indices, taking the total number of indices in the Environmental Markets Index Series to eighteen. There is currently ca. US$3 billion of capital either benchmarked to or tracking these indices, with institutional clients in North America and Asia as well as Europe. By contributing to a globally recognised standard for the categorisation of environmental markets and investments, we expect to build further credibility for the Impax brand and greater interest in our products. 

CASHFLOW

As is common in the investment management sector, we now enjoy healthy operating cashflow before movements in working capital, which was £2.7 million for the year (2008: £4.1 million), representing £0.23 million per month on average. Given the recent sharp increase in AUM, the current monthly cashflow run rate is substantially higher than this figure.

With only a limited requirement for regulatory and working capital, we expect operating cashflow to rise further as our business continues to scale. While keeping a prudent level of cash to provide a buffer in weak markets, our policy is to utilise this free cashflow to seed high potential new products while also paying dividends to shareholders and, from time to time, making modest share buy-backs at attractive prices.

In 2007, we invested €2.2 million to seed our hedge fund. Subsequently, in March 2008 we invested £1.5 million to seed IFSL Impax Environmental Leaders, the UK open-ended investment company that we manage; we have recently taken steps to hedge the equity market risk for this investment.  At 30 September 2009, these investments were valued at £3.3 million. Our intention is to leave these investments in place until the respective funds have had the opportunity of achieving critical mass.

As explained below, in 2010 we expect to be required to fund up to €3.13 million into Impax New Energy Investors LP, the private equity fund in which the Group is a limited partner and which we have successfully managed since August 2005. This investment is likely to be illiquid until the fund's portfolio is sold, most likely in 2-3 years.

On 9 October 2009, we announced that the Group had purchased 450,000 of its own shares. These shares, which we purchased at an average price of 32.4p, are currently held in treasury.  

INVESTMENT PERFORMANCE 

The delivery of excellent investment performance remains at the heart of our long-term strategy and day-to-day activity.  

Quoted Equities

Our quoted equities business has historically concentrated on the management of global portfolios, comprising either specialist stocks (Specialists/Pure Play Funds) or a combination of specialist stocks and more diversified companies (Leaders/All Cap Funds). I look forward to reporting on the performance of our more recently established Asia Pacific investment strategy next year.

Specialists/Pure Play Funds have once again sustained their out-performance. Between 1 October 2008 and 30 September 2009, the net asset value ("NAV") of Impax Environmental Markets plc ("IEM"), the investment trust that we have managed since its launch in February 2002, increased by 10.5 per cent, while the MSCI World Index rose by 9.3 per cent. Our other funds in this category produced similar performance. Over the five years ending 30 September 2009, IEM's NAV increased by 79.9 per cent while the corresponding increase in the MSCI World Index was 38.1 per cent. This track record, which covers a complete investment cycle, is an important component of our sales pitch to potential investors and/or their advisers. 

Leaders/All Cap Funds have benefited from mounting evidence that larger companies with significant and growing exposure to the environmental sector are delivering superior earnings and experiencing positive share price re-rating. For example, the net asset value of IFSL Impax Environmental Leaders fund rose 14.8 per cent over the period under review, while, as noted above, the MSCI World Index rose 9.3 per cent.  

Our hedge fund, which has a "long short" portfolio selected from our stock universe of environmental markets companies and related utilities has also performed well, and we continue to engage in dialogue with potential investors in this product.  

Private Equity

Towards the end of the most difficult year in recent memory for private equity, I am pleased to report that Impax New Energy Investors LP ("Fund I"), our principal private equity fund which has €125 million of committed capital, has further extended its strong track record. With over 80 per cent of its initial capital invested or committed, this fund is near the end of its investment period. Fund I has been recently ranked by Preqin as having first quartile performance for infrastructure funds launched in 2005,   and we are confident of reaching or exceeding the target returns agreed that were discussed with investors at the fund's launch.  

As noted in previous statements, our strategy is to fund the construction of renewable energy power generation assets based on low risk technology, avoiding significant development risk, and working with well capitalised counterparties. All the material assets of Fund I are fully funded, generating electric power, and performing ahead of expectations.

Impax became a limited partner in Fund I at launch in August 2005 with a commitment to invest €3.76 million. Alongside other investors, our capital calls for the fund have been bridged by a bank facility, with a first payment of €338,040 made in August 2009 and a final payment of €2.8 million due in January 2010, when the facility expires. We may then need to disburse up the balance of the commitment (ca. €612,000) during the remainder of calendar 2010. The Group has more than sufficient cash resources to be able to meet these commitments as they fall due. We expect that this investment will produce a significant gain for the Group when the fund's assets have been sold.

Following the adoption of the Renewable Energy Directive, which stipulates that the European Union must derive at least 20 per cent of its energy from renewable sources by 2020, there has been a further acceleration of attractive deal flow for funds with our investment strategy. Against this background, we have been successful in securing significant interest from investors in a second private equity fund, and are making good progress towards a first closing.

NEW "ASIA PACIFIC" PRODUCT

Over the past 3-4 years, we have been impressed by the pace of development of opportunities to invest in the environmental sector in the Asia Pacific region. With almost half the world's population, rapid rates of industrialisation and urbanisation, and rising standards of living, the region has developed significant environmental problems, which are restricting further economic development as well as reducing the quality of life. As governments have implemented environmental policy to address these issues, there has been a marked increase in the number of companies based in the region that are providing solutions to environmental problems as well as supplying expanding demand in other parts of the world, notably Europe and North America.  

Since 2006, we have been closely monitoring the development of these new environmental markets and companies, initially in consultation with two of our major shareholders, BNP Paribas Investment Partners ("BNPP IP", which has offices throughout the Asia Pacific region) and DIAM (based in Tokyo), and more recently with Ajia Partners, an investment management firm based in Hong Kong. We have also added to our London team individuals who have significant experience of researching and investing in Asian stocks.

Over the summer period, our front and back office teams worked intensively with brokers Collins Stewart and with Ajia Partners to prepare for the launch of a new investment trust designed to provide investors with dedicated exposure to the stocks of Asian environmental sector companies.  This trust, Impax Asian Environmental Markets plc, launched on 22 October 2009 with £104.5 million of gross assets, making it the largest investment company IPO on the London Stock Exchange since July 2008. Impax is the new trust's investment manager and Ajia Partners is acting as our investment adviser. We are actively exploring options to establish new funds to provide investors with "open ended" access to the underlying portfolio.

DISTRIBUTION 

As an "investment-led" firm, the bulk of our resources has historically been devoted to investment management, the associated back and middle office functions, and marketing support to third party distributors. However, as investor interest in the environmental sector expands and demand for our services accelerates, we are also seeing increasing opportunities to sell products directly to investors, and are therefore in the process of making several hires to strengthen our sales team. 

In parallel, we are very encouraged by the commitment of our network of distributors to the promotion of our products. Since 2006, BNPP IP has been selling funds managed or advised by Impax in much of continental Europe, parts of East Asia and, since January 2009, Australia. At the end of the period, approximately 19 per cent of our AUM has been sourced through this route. During 2009, BNPP IP has been working towards the integration of the investment and sales teams of Fortis Investment Management (whose distribution is particularly strong in Scandinavia and the Benelux), and we believe that, from early 2010, the combined sales team will be able to attract significantly larger volumes for us.

In recent years, we have been exploring the potential for distribution of our products in North America, particularly the United States. As a first step, in March 2008 we commenced a sub-advisory mandate with Pax World, which is well known for socially responsible investment products; this fund has had excellent investment performance and has grown from US$1 million at launch to ca. US$17 million today. Since the start of calendar 2009, as noted above, the public policy debate in the US has moved decisively in the direction of alternative energy and energy efficiency in particular, and we have recently signed a distribution agreement with Titanium Asset Management, which sells investment products to the US pension plan market. I hope to be able to report positive news on this new partnership in due course.

INFRASTRUCTURE AND SUPPORT

Last year, we reported that we had made a significant investment in the infrastructure required to underpin further expansion of our business. Since the start of the year, this investment has continued, particularly to expand our support team (mainly operations and marketing), where headcount has increased from 12 to 17 staff.  

At the end of the year, our total headcount was 34 permanent and 4 temporary staff, up from 26 permanent staff at the start of the period.  In the light of these increases, we are well resourced in most departments.

OUTLOOK

The release of Impax's annual results for 2009 coincides with the first week of the COP-15 conference in Copenhagen where the future of policy to reduce global warming will be debated.  Irrespective of the outcome of this particular event, we believe that interest in clean energy, energy efficiency and the drivers behind environmental markets will continue to strengthen for many years to come, and that Impax's prospects are very strong.  Having identified the environmental investment opportunity in the mid 1990s, we now have an excellent track record, powerful distribution partners and a highly qualified team that is committed to maximising the opportunities ahead.  

Ian Simm

8 December 2009

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2009

		2009		2008
	Notes
				(restated)
		£		£
REVENUE	3	10,391,196		11,389,264
Operating costs		(7,515,926)		(7,237,312)
Long-term incentive scheme charge	4	(551,579)		(917,665)
Operating profit	4	2,323,691		3,234,287
Investment income		262,483		452,900
PROFIT BEFORE TAXATION		2,586,174		3,687,187
Taxation	5	(192,146)		(1,069,049)
PROFIT FOR THE YEAR		2,394,028		2,618,138
Attributable to:
- Equity holders of the      parent		2,280,846		2,447,070
- Minority interest		113,182		171,068
PROFIT FOR THE YEAR		2,394,028		2,618,138
EARNINGS PER SHARE
Basic	6	2.12p		2.45p
Diluted	6	1.97p		2.12p

CONSOLIDATED BALANCE SHEET

AS AT 30 SEPTEMBER 2009

	Notes				2009		2008
							(restated)
				£	£	£	£
ASSETS
Non-Current Assets
Goodwill				1,629,097		1,629,097
Intangible assets				142,818		72,816
Property, plant and equipment				421,604		537,004
Other financial assets				792,093		1,045,618
Investments				13,567		13,567
Trade and other receivables				65,094		65,094
Deferred tax asset	5			364,208		-
					3,428,481		3,363,196
Current Assets
Trade and other receivables				2,716,097		1,933,204
Other financial assets				452,204		247,671
Investments	8			3,926,992		4,171,550
Current tax asset	5			22,329		-
Cash and cash equivalents	9			10,284,390		7,028,619
					17,402,012		13,381,044
TOTAL ASSETS					20,830,493		16,744,240
EQUITY AND LIABILITIES:
Equity attributable to owners of the parent
Ordinary shares				1,155,824		1,155,824
Share premium				77,833		77,833
Exchange translation reserve				(157,467)		(154,104)
Own shares				(58,863)		(77,833)
Retained earnings				12,832,212		10,396,050
					13,849,539		11,397,770
Minority interest				1,686,801		1,165,705
					1,686,801		1,165,705
TOTAL EQUITY					15,536,340		12,563,475
Current Liabilities
Trade and other payables				4,610,218		3,925,326
Short-term borrowings	9			683,935		-
Current tax liability				-		255,439
					5,294,153		4,180,765
TOTAL EQUITY AND LIABILITIES					20,830,493		16,744,240

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 SEPTEMBER 2009

		Share capital		Share premium		Exchange translation reserve		Own shares
				(restated)		(restated)		(restated)
		£		£		£		£
Balance at 1 October 2007 as previously reported		1,094,991		18,970		(1,002,117)		(167,771)
Effect of prior year adjustment - Note 2		-		-		856,216		72,700
Balance at 1 October 2007 as restated		1,094,991		18,970		(145,901)		(95,071)
Minority interest recognised on consolidation of subsidiary		-		-		-		-
Long-term incentive scheme charge		-		-		-		-
Accrued cash equivalent of share options receivable by NOMAD		-		-		-		-
Accrued cash equivalent of share options cancelled by NOMAD		-		-		-		-
Exchange differences on consolidation		-		-		(8,203)		-
Profit for the year		-		-		-		-
Net issue of shares to Employee Benefit Trust		60,833		58,863		-		(58,863)
Net sale of shares from Employee Benefit Trust		-		-		-		-
Shares vested to employees from Employee Benefit Trust		-		-		-		76,101
Balance at 30 September 2008 (restated)		1,155,824		77,833		(154,104)		(77,833)
Dividends paid		-		-		-		-
Minority interest derecognised on disposal of subsidiary		-		-		-		-
Minority interest recognised on consolidation of subsidiary		-		-		-		-
Long term incentive scheme charge		-		-		-		-
Exchange differences on consolidation		-		-		(3,363)		-
Profit for the year		-		-		-
Shares vested to employees from Employee Benefit Trust		-				-		18,970
Balance at 30 September 2009		1,155,824		77,833		(157,467)		(58,863)

		Retained earnings		Equity attributable to owners of the parent		Minority Interest		Total
		(restated)		(restated)		(restated)		(restated)
		£		£		£		£
Balance at 1 October 2007 as previously reported		8,103,097		8,047,170		-		8,047,170
Effect of prior year adjustment - Note 2		(852,285)		76,631		-		76,631
Balance at 1 October 2007 as restated		7,250,812		8,123,801		-		8,123,801
Minority interest recognised on consolidation of subsidiary		-		-		994,637		994,637
Long-term incentive scheme charge		917,665		917,665		-		917,665
Accrued cash equivalent of share options receivable by NOMAD		33,336		33,336		-		33,336
Accrued cash equivalent of share options cancelled by NOMAD		(100,007)		(100,007)		-		(100,007)
Exchange differences on consolidation		-		(8,203)		-		(8,203)
Profit for the year		2,447,070		2,447,070		171,068		2,618,138
Net issue of shares to Employee Benefit Trust				60,833		-		60,833
Net sale of shares from Employee Benefit Trust		(152,826)		(152,826)		-		(152,826)
Shares vested to employees from Employee Benefit Trust		-		76,101		-		76,101
Balance at 30 September 2008 (restated)		10,396,050		11,397,770		1,165,705		12,563,475
Dividends paid		(377,297)		(377,297)		-		(377,297)
Minority interest derecognised on disposal of subsidiary		-		-		(1,165,705)		(1,165,705)
Minority interest recognised on consolidation of subsidiary		-		-		1,573,619		1,573,619
Long term incentive scheme charge		551,583		551,583		-		551,583
Exchange differences on consolidation		-		(3,363)		-		(3,363)
Profit for the year		2,280,846		2,280,846		113,182		2,394,028
Shares vested to employees from Employee Benefit Trust		(18,970)		-		-		-
Balance at 30 September 2009		12,832,212		13,849,539		1,686,801		15,536,340

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2009

		2009		2008
				(restated)
	Note	£		£
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit		2,323,691		3,234,287
Adjustments for:
Depreciation of property, plant & equipment		185,716		45,631
Amortisation of intangible assets		50,759		21,355
Revaluation of investments		(326,077)		38,617
Profit on sale of investments		-		(46,846)
Share-based payment		-		(108,505)
Long term incentive scheme charge		551,579		959,497
Translation differences		(87,040)		(76,131)
OPERATING CASH FLOWS BEFORE		2,698,628		4,067,905
MOVEMENT IN WORKING CAPITAL
Increase in receivables		(725,222)		(234,240)
(Decrease)/increase in payables		(849,438)		1,160,157
CASH GENERATED FROM OPERATIONS		1,123,968		4,993,822
Corporation tax paid		(834,120)		(956,631)
NET CASH GENERATED FROM		289,848		4,037,191
OPERATING ACTIVITIES
Investing activities:
Interest received		149,301		281,832
Cash acquired on consolidation of investment		2,906,273		-
Proceeds on sale of investments		-		1,622,236
Purchase of investments		(288,892)		(3,000,000)
Purchase of intangible assets		(120,761)		(59,626)
Purchase of property, plant & equipment		(70,316)		(535,429)
NET CASH GENERATED FROM/(USED BY)		2,575,605		(1,690,987)
INVESTMENT ACTIVITIES
Financing activities:
Dividends paid		(377,297)		-
Share capital issued		-		60,833
NET CASH (USED BY)/GENERATED FROM FINANCING		(377,297)		60,833
ACTIVITIES
NET INCREASE IN CASH AND		2,488,156		2,407,037
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS		7,028,619		4,553,654
AT BEGINNING OF YEAR
Effect of foreign exchange rate changes		83,680		67,928
CASH AND CASH EQUIVALENTS	9	9,600,455		7,028,619
AT END OF YEAR

NOTES TO THE PRELIMINARY STATEMENT OF RESULTS

1    BASIS OF PREPARATION

The financial information set out above does not constitute group's statutory financial statements for the years ended 30 September 2009 and 30 September 2008 but is derived from them. The 2008 financial statements have been filed with the Registrar of Companies; their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. Whilst the auditors have not reported on the financial statements for the year ended 30 September 2009, they anticipate issuing an unqualified report which will not contain statements under section 498(2) or (3) of the Companies Act 2006. The statutory accounts for the year ended 30 September 2009 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Group's Annual General Meeting. The financial information set out in this announcement was approved by the Board of Directors on 8 December 2009.

2    ACCOUNTING POLICIES

The financial statements have been prepared in accordance with International Financial Reporting Standards adopted for use by the European Union.

The accounts have been prepared on a going concern basis under the historical cost convention, with the exception of certain current asset investments.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Company (its subsidiaries) made up to 30 September each year. Control is achieved where the Company has the power to govern the financial and operating policies of a subsidiary.

Subsidiaries are accounted for using the acquisition method of accounting whereby the Group's results include the results of the acquired business from the date of acquisition.

All intra-group transactions and balances are eliminated on consolidation.  

Investments in funds in which the Group has more than 50% of the share of the net assets are consolidated from the date that control is gained until the date that control is lost due to dilution of the fund holding.

Investments in associates

The Group, in common with industry standard practice, seeds new funds with its own resources in order to establish a track record so that the funds may then be marketed to external investors. As new investors join the fund the Group's interest will dilute and ultimately the Group may divest entirely as commercial considerations allow. Investments in associates that are held by the Group are carried in the Balance Sheet at fair value even though the Group may have significant influence over those entities. This treatment is permitted by IAS 28, Investment in Associates, which allows investments held by venture capital and similar organisations to be excluded from the scope of IAS 28, provided that those investments upon initial recognition are designated as fair value through profit or loss or held for trading and accounted for in accordance with IAS 39 Financial Instruments: Recognition and Measurement, with changes in fair value recognised in profit or loss or equity in the period of change.

Foreign currencies

Foreign currency transactions of individual companies are translated at the rates ruling when they occurred. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date. Any differences are taken to the Income statement. Exchange differences arising on long term loans are charged to the Income Statement, this represents a change in the previous accounting policy. A prior year adjustment has resulted from this change in policy and is more fully described in Accounting Policies "Prior year adjustments."

On consolidation, the results of overseas operations are translated at the average rates of exchange during the year and their balance sheets translated into sterling at the rates of exchange ruling on the balance sheet date. Exchange differences that arise from translation of the opening net assets and results of foreign subsidiary undertakings are taken to reserves.

The average rate ruling in the accounting period for US Dollars was US$1.55 : £1 (2008: US$1.97: £1); the rate ruling at the balance sheet date was US$1.59: £1 (2008: US$1.82: £1). 

The average rate ruling in the accounting period for Euros was €1.15: £1 (2008: €1.30: £1); the rate ruling at the balance sheet date was €1.09: £1 (2008: €1.26: £1).

Employee Benefit Trust

In accordance with SIC 12 "Consolidation - special purpose entities", the Company includes the assets and liabilities of the trust within its balance sheet. In the event of the winding up of the Company, neither the shareholders nor the creditors would be entitled to the assets of the employee benefit trust.

Investment in own shares held in connection with the Group's employee share schemes are deducted from the shareholders' funds in accordance with IAS 32 "Financial Instruments: Disclosure and Presentation" until such time as they vest unconditionally to participating employees.

The fair value of employee services received in exchange for the grant of shares is recognised as an expense. The total amount to be expensed over the performance period, from grant date to vesting date, is determined by reference to the fair value of the shares determined at the date the employee is deemed to be fully aware of their potential entitlement and all conditions of vesting. As this date is later than the date that the scheme was approved by the shareholders, which was previously considered to be the start of the performance period, it has been necessary to correct prior periods charges through a Prior Year Adjustment. 

Prior year adjustment

The Group has made the following prior year adjustments:

The fair value of employee services received in exchange for the grant of shares is recognised as an expense. The total amount to be expensed over the performance period is determined by reference to the fair value of the shares determined at the date the employee is deemed to be fully aware of their entitlement and all conditions of vesting, the 'Grant Date'. As the Grant Date is now deemed to be later than previously recognised, the timing and quantum of charges arising from the EBT has changed and it has been necessary to correct prior periods through a Prior Year Adjustment. 

In addition shares within the Employee Benefit Trust that had fully vested but were still held by the EBT were previously consolidated as part of the Trust assets at year end. This treatment was incorrect and vested shares are no longer consolidated as Trust assets as these shares have been transferred to sub funds in which the employees and their families may benefit. The impact of these changes on the 2008 financial statements is as follows: 

	Group				Company
	Effect on the income statement		Effect on the balance sheet		Effect on the income statement		Effect on the balance sheet
	Dr/(Cr)		Dr/(Cr)		Dr/(Cr)		Dr/(Cr)
	£		£		£		£
Other receivables	-		(163,416)		-		(163,416)
Share premium	-		161,837		-		161,837
Own shares	-		(144,238)		-		(144,238)
Retained earnings	-		(344,515)		-		(50,928)
2008 EBT charge	490,332		-		196,745		-
Foreign exchange differences on long-term inter-company loans were previously treated as equity investments and translated at year-end rates with differences taken to reserves. However following a change in accounting policy, the exchange differences arising on long term loans are now recognised in the Income Statement. The effect of the change in accounting policy on the 2008 comparative figures is as follows:
	Group				Company
	Effect on the income statement		Effect on the balance sheet		Effect on the income statement		Effect on the balance sheet
	Dr/(Cr)		Dr/(Cr)		Dr/(Cr)		Dr/(Cr)
	£		£		£		£
Operating costs	(149,003)		-		(118,526)		-
Exchange translation reserve	-		(707,213)		-		(737,690)
Retained earnings	-		856,216		-		856,216
On 3 March 2008, the Company made an investment of £1,500,000 in the Impax Environmental Leaders Fund ("IEL"). The Group investment in IEL at September 2008 amounted to 53.8% of the NAV of IEL but as the Directors were of the opinion that as this investment was not controlled by the Group it was not reported as a subsidiary undertaking. The Directors are now of the opinion that this treatment was inappropriate and as a consequence there is a prior year adjustment to show this investment as a subsidiary. The effect of this adjustment on the 2008 comparative figures is as follows:
	Group				Company
	Effect on the income statement		Effect on the balance sheet		Effect on the income statement		Effect on the balance sheet
	Dr/(Cr)		Dr/(Cr)		Dr/(Cr)		Dr/(Cr)
	£		£		£		£
Investment in non-current asset investments	-		-		-		1,310,100
Current asset investments	-		1,165,705				(1,310,100)
Minority interest	-		(1,165,705)		-		-
Retained earnings	-		-		-		-

3    GEOGRAPHICAL ANALYSIS OF REVENUE, OPERATING PROFIT AND NET ASSETS

Revenue relates solely to the principal activities of the Group as follows:

												Consolidated revenue
												2009				2008
															(restated)
												£				£
Investment management (including Private Equity)												10,017,085				9,726,475
Transaction fees												66,255				1,045,147
Advisory fees												307,856				617,642
												10,391,196				11,389,264

Revenue of £10,391,196 includes £945,000 of exceptional management fees relating to Impax New Energy Fund, billed in the current financial year in accordance with the Limited Partnership Agreement.

						Consolidated revenue
						2009		2008
								(restated)
						£		£
UK						9,824,173		10,998,245
Europe						567,023		391,019
						10,391,196		11,389,264

The USA operation does not generate any revenue.

						Consolidated operating profit
						2009		2008
								(restated)
						£		£
UK						2,300,909		3,241,315
Europe						(4,650)		(379)
USA						27,432		(6,649)
						2,323,691		3,234,287

												Consolidated net assets
												2009				2008
															(restated)
												£				£
UK												12,609,099				10,103,794
Europe												(3,857)				687
USA												1,244,297				1,293,289
												13,849,539				11,397,770

4    OPERATING PROFIT

Operating profit is stated after charging £551,579 for a long-term incentive scheme charge (2008: £917,665).

On 4 February 2005 shareholders approved the establishment by the Company of the Impax Group Employee Benefit Trust (the "EBT") as part of the Company's employee incentive arrangements. The scheme provided for the issue of up to 18.25 million shares to employees over the three years ended 30 September 2007. On 30 September 2009 1,896,965 Ordinary Shares (2008: 7,610,080) were allocated to sub funds from which employees and their families may benefit in accordance with the terms of the Impax Group Employee Benefit Trust (herein referred to as "vested"). 

On 31 January 2008 shareholders approved an extension to the existing EBT whereby a further 18.25 million shares can be issued to employees with respect to performance in the three years ended 30 September 2010.

As a result the number of Ordinary Shares that the EBT holds that have not vested is 5,886,308 representing 5.1% of the Ordinary Shares in issue at 30 September 2009. The potential beneficiaries of the EBT include the present and former directors and employees of the Group and their respective families.

During the year ended 30 September 2009 the number of shares bought and sold by the EBT was nil.

Income Statement charge - original scheme (for the three years ended 30 September 2007)

The allocation of Ordinary Shares to employees and their families via the EBT by the Company for the three years ended 30 September 2007 as part of the long-term incentive scheme has given rise to a charge of £551,579 in the current year, representing shares that vested on 30th September 2009.

A prior year adjustment of £490,332 has been made to the previous year's charge, increasing it from £427,333 to £917,665. This represents: 

• a £45,965 charge for shares that vested on 30th September 2009

• a £871,700 charge for shares that vested on 30th September 2008

This charge has been calculated in accordance with the requirements of IFRS 2 "Share based payments" by reference to the mid-market price of an Ordinary Share on the date that the shares were granted and on the confirmation that the EBT performance criteria were met and that all shares vested fully. The charge is spread evenly from the grant date to the vesting date.

The grant date has been defined as the date that shares were allocated to employees.

Income Statement charge - scheme extension (for the three years ended 30 September 2010)

The allocation of Ordinary Shares to employees and their families via the EBT by the Company for the three years ended 30 September 2010 as part of the long-term incentive scheme will only give rise to a charge if and when shares are allocated to employees.

Consequently, because no shares were allocated in the year ended 30 September 2009 the charge to the Income Statement that relates to the scheme extension was £nil.

In accordance with the requirements of SIC 12 "Consolidation - special purpose entities" and IAS 32, the assets and liabilities of the EBT that have not yet been allocated to sub funds from which employees may benefit have been included in the Company's and Group's accounts resulting in the inclusion of £58,863 own shares and £77,833 share premium.

5    TAXATION

			2009		2008
					(restated)
			£		£
(a) Analysis of charge for the year
Current tax expense:
UK corporation tax			423,317		942,000
Adjustment in respect of previous years			133,037		(18,149)
			556,354		923,851
Deferred tax expense:
(Credit)/Charge for the year			(364,208)		157,648
Under/(over) provision in respect of prior periods			-		(12,450)
Total deferred tax			(364,208)		145,198
Total income tax expense from continuing and discontinuing operations			192,146		1,069,049

(b) Factors affecting the tax charge for the year
The tax assessment for the period is lower than the standard rate of corporation tax in the UK (28 per cent). The differences are explained below:
			2009		2008
					(restated)
			£		£
Tax:
Profit before tax			2,472,993		3,516,119
Effective tax charge at 28%			692,438		984,513
Effect of difference in tax rate compared with 28%			-		84,927
Effects of:
Non-taxable income / (Non-deductible expenses)			147,267		199,768
Tax effect of previously unrecognised tax losses			(622,977)		(134,645)
Tax effect of other previously unrecognised deferred tax assets			(157,619)		(47,365)
Other, incl. adjustment concerning previous years			133,037		(18,149)
Tax charge			192,146		1,069,049

(c) Deferred tax
The deferred tax asset included in the balance sheet is as follows:
		Accelerated capital allowances			Other temporary timing differences				Excess management charges				Total
		£			£				£				£
As at 1 October 2007		4,668			4,114				136,416				145,198
Charge to the income statement		(4,668)			(4,114)				(148,866)				(157,648)
Prior year credit		-			-				12,450				12,450
As at 30 September 2008		-			-				-				-
Credit to the income statement		30,569			63,966				269,673				364,208
As at 30 September 2009		30,569			63,966				269,673				364,208

The Group has tax losses of approximately £0.96m (2008: £1.6m) available for offset against future taxable profits in the UK.

6    EARNINGS PER SHARE

Earnings per share (EPS) on a basic and diluted basis are as follows:

			Profit for the year		Ordinary shares in issue (weighted average)		Earnings per share
2009
Basic			2,280,846		107,799,158		2.12p
Diluted			2,280,846		115,582,431		1.97p
2008 (as restated)
Basic			2,447,070		99,995,832		2.45p
Diluted			2,447,070		115,582,431		2.12p

The 2008 comparatives are restated for the reasons disclosed in the Accounting Policies "Prior Year Adjustments". The effect of these restatements is that Basic EPS for 2008 has reduced from 2.54p to 2.45p and on a Diluted EPS has reduced from 2.93p to 2.12p. 

Shares allocated to the Employee Benefit Trust (EBT), but not yet vested, are classified as 'own shares' on consolidation and are considered to have a dilutive effect on EPS.

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: 

					2009		2008
Weighted average number of ordinary shares used in the calculation of basic earnings per share
					107,799,158		99,995,832
Weighted average EBT shares not yet vested					7,783,273		15,586,599
Weighted average number of ordinary shares used in the calculation of diluted earnings per share
					115,582,431		115,582,431

In order to show results from operating activities on a comparable basis, an adjusted profit after tax per share has been calculated which excludes the long-term incentive scheme charge:

					2009		2008
					£		£
Profit after tax attributable to owners of the parent
					2,280,846		2,447,070
Long-term incentive scheme charge					551,579		917,665
Adjusted profit for the year					2,832,425		3,364,735
			Adjusted profit for the year		Ordinary shares in issue (weighted average)		Earnings per share
2009
Basic adjusted			2,832,425		107,799,158		2.63p
Diluted adjusted			2,832,425		115,582,431		2.45p
2008 (as restated)
Basic adjusted			3,364,735		99,995,832		3.36p
Diluted adjusted			3,364,735		115,582,431		2.91p

7    DIVIDEND

The directors propose a dividend of 0.40p per share (totalling £438,777) for the year ended 30 September 2009 (2008: 0.35p per share, totalling £377,297). The dividend will be submitted for formal approval at the Annual General Meeting to be held on 10 February 2010. 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 ending 30 September 2010.

The dividend for the year ended 30 September 2008 was paid on 20 February 2009, being 0.35p per share. The trustees of the Employee Benefit Trust waived their rights to part of this dividend, leading to a total dividend payment of £377,297. This payment is reflected in the Statement of Changes in Equity.

8    CURRENT ASSET INVESTMENTS

			Unlisted investments		Listed investments		Total
					(restated)		(restated)
			£		£		£
Cost or Valuation
At 1 October 2008 as previously reported			11,344		2,994,501		3,005,845
Prior year adjustment - note 2			-		1,165,705		1,165,705
At 1 October 2008			11,344		4,160,206		4,171,550
Additions			288,892		-		288,892
Disposal of investments on non consolidation of an associate			-		(1,165,705)		(1,165,705)
Transfer to subsidiary undertaking			-		(1,816,474)		(1,816,474)
Acquisition of listed investments on consolidation of subsidiary			-		2,122,652		2,122,652
Revaluations			-		326,077		326,077
Disposals			-		-		-
At 30 September 2009			300,236		3,626,756		3,926,992
Net book value
At 30 September 2009			300,236		3,626,756		3,926,992
At 30 September 2008			11,344		4,160,206		4,171,550

On 21 May 2007, the Company made an investment of €2,200,000 (£1,506,851) in the Impax Absolute Return Fund ("IARF"). The investment took the form of a subscription of 22,000 Euro Class A shares in the IARF, at €100 per share. The IARF, which is managed by a subsidiary undertaking of the Company had a total net asset value ("NAV") of €4,012,000 at 30 September 2009. The Group's investment in the IARF represents 52.98% of the NAV at 30 September 2009 (2008: 44.2%). At 30 September 2009 this investment has been reported as a subsidiary and the underlying investments consolidated.

On 3 March 2008, the Group made an investment of £1,500,000 in the Impax Environmental Leaders Fund ("IEL"). The 53.8% investment in IEL at 30 September 2008 has been restated as a consolidated subsidiary for 2008 but the holding of 28.11% at 30 September 2009 has not been consolidated and instead the Group has applied exemptions from IAS 28 "Associates" available to Venture Capital and Hedge fund businesses not to equity account for this investment as an associate. 

These listed investments are revalued to market value.

The Group has a €3.76m commitment to Impax New Energy Investors LP, a partnership based in England and Wales. The addition in unlisted investments in the year of £288,892 represents the first loan call of €338,040 (9% of the Group commitment) on this investment. 

The unlisted investment is valued at fair market value. 

9    CASH AND CASH EQUIVALENTS

For the purposes of the cash flow statement, cash and cash equivalents includes the following:

				2009		2008
				£		£
Cash at bank and in hand
	Readily available for the principal operating activities of the Group			6,694,182		7,028,619
	Not available for the Group			3,590,208		-
				10,284,390		7,028,619
Short-term borrowings
	Readily available for the principal operating activities of the Group			-		-
	Not available for the Group			(683,935)		-
				(683,935)		-
Cash and cash equivalents				9,600,455		7,028,619

Cash balances of the Group at 30 September 2009 includes £3,590,208 (2008: nil) of cash held and £683,935 (2008: nil) of short-term borrowings acquired on consolidation of the hedge fund ("IARF"). These amounts (net total: £2,906,273) are held with the same counter-party and are subject to full right of offset. The Group exercises no direct control over these funds.

 

END

 

 

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