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D1 Oils Plc (NEOS)

  Print      Mail a friend       Annual reports

Tuesday 28 June, 2011

D1 Oils Plc

Annual Financial Report

RNS Number : 2122J
D1 Oils Plc
28 June 2011
 







ANNUAL FINANCIAL REPORT 2010

 

The audited accounts of D1 Oils plc for the financial year ended 31 December 2010 are hereby released to the market.

 

 

Overview

 

D1 Oils plc is an alternative energy crop company. We are pioneering the development of Jatropha curcas, a robust, tropical oilseed bearing tree, into a new sustainable energy crop that has the potential to replace food crops as a source of biodiesel. Jatropha is a hardy crop that is able to grow on a wide range of soils, including soils which are sub-optimal for arable agriculture. Its grain is crushed to produce an inedible oil and seedcake that has the potential to be processed into a high-value, protein source for animal feed on a commercial scale.

 

Through our efforts in recent years, many farmers across India, Africa and Asia have been encouraged to plant Jatropha and advised on how to farm the crop towards maturity.  We have contracts with these farmers that, in due course, we plan to purchase the grain harvest of these crops at the prevailing market price as they become ready for market.  Elsewhere in this annual report this arrangement is referred to as "contract farming" and "planting interests". D1 does not own this land or the crops growing on the land. As Jatropha grain harvests scale up, we are facilitating the transportation, processing and distribution of Jatropha oil and seedcake. In addition, we are investing in a research and development programme designed to scale up D1's proprietary process to turn part of the seedcake into animal feed.

 

Following the first substantial harvest in 2010/11, the business is moving towards delivering sufficient quantities of grain to make the business self-sustaining, promoting planting of next generation Jatropha and pioneering the conversion of seedcake into animal feed at commercial scale.

 

 

Chairman's statement

 

Introduction

 

I was appointed Chairman of the Company in March 2010, three months before the last annual report was issued, having been a Non-Executive Director since October 2004.

 

Since my last statement there have been a number of significant changes to both the Board and the structure of the company; most notably the spin-off of the majority of the Science & Technology part of the business.  My statement deals with these and other corporate matters.

 

A separate section of this Annual Report contains the Report of Martin Jarvis, our Chief Executive Officer and Chief Operations Officer, in which he sets out the progress made on our Jatropha activities over the last year. I am pleased to report that the business has made significant progress on delivering on its strategy during the last year with significant amounts of crude Jatropha oil ("CJO") being produced and sold in most geographies, but especially India; with the small amounts of "next generation" Jatropha planting beginning to demonstrate that with selected seed; properly planted and maintained, Jatropha can deliver sustainable economics for both farmer and industry; and with the Animal Feed Programme delivering a UK patent and continuing to meet milestones on the way to a commercial plant being up and running in 2012.

 

Strategy and funding

 

On 24 June 2011, the Company appointed two new directors, Steven Rudofsky and Nicholas Myerson, who will conduct a review of the Company's plan to be concluded no later than mid-August 2011. On the back of this review, the Board will endeavour to secure funds to deliver the agreed strategy. The Company has received correspondence from several large existing shareholders to confirm they support this process.

 

Outcome of General Meeting of 19 July 2010

 

On 19 July 2010 a General Meeting was held to vote on resolutions; contained within the requisition notice received from Evo Nominees Limited on behalf of Principle Capital Investments Limited ("PCIL") that the Company announced on 12 May 2010. This meeting had been adjourned from the original date, of 14 June, by agreement with PCIL.The resolutions to remove Ben Good, Henk Joos, Martin Jarvis and myself from the Board of D1 and to replace us with two individuals associated with PCIL were unanimously rejected. Following the meeting, the Board continued to deliver the existing strategy.

 

Sale of Bromborough site

 

On 2 July 2010 the Company announced the completion of the sale of the Bromborough site and therefore the completion of the final phase of the Company's withdrawal from downstream refining operations in accordance with its strategy. The sale was to Organic Waste Management Ltd for a price of £1.8m plus a deferred payment of £0.4m and a royalty of up to £0.4m based on the future biodiesel output of the site. I can confirm that the company has received to date the £2.2m payment and is looking forward to seeing the first royalty payments in the next 12 months.

 

Closing of Offer Period

 

Despite lengthy discussions with both Mission and a second, unnamed, offeror the Company concluded that no sale was imminent and, on advice from the Takeover Panel, declared that the Offer Period was closed on 15 October 2010.

 

Quinvita sale

 

Following approval by shareholders at the General Meeting held on 10 December 2010 the Company disposed of substantially all of its Jatropha plant science and technology services business, with the exception of the Animal Feed Programme, via the sale of all the issued share capital of D1 Oils Plant Science Limited and Quinvita Limited to companies owned by Henk Joos, Vincent Volckaert and Greta de Both. Since Henk was a Director of D1 Oils, Vincent was a Director of a subsidiary of the Company and Greta was an employee of a subsidiary of the Company this disposal was deemed a related party transaction.

 

D1 had continued with the science and technology work on the assumption, explicit in the Strategy Update of 25 November 2009, that enough revenue could be generated from the sale of seeds and services to fully fund the programme. Disappointingly this had turned out not to be the case and the Board concluded that, despite a strong belief in the value of the science and technology programme, the Company did not have the cash reserves to continue funding at approximately £1.5m p.a.. A solution was sought that realised as much value as possible from the work done to date, preserved as much of the intellectual property as possible, reduced expenditure as quickly as possible and allowed the programme to continue but with separate funding.

 

I believe that the final deal structure achieved this with the following key elements:

 

1.     Retention by D1 of all agronomy and breeding intellectual property developed to 1 November 2010;

2.     D1 providing Quinvita with £0.8m working capital - less than the cost of an orderly wind-up of approximately £1.1m;

3.     Issue of £0.8m in redeemable preference shares by Quinvita to the Company with a 5% coupon plus future royalties on Jatropha related sales on a sliding scale over 10 years (15% to year 5; 10% years 6 - 8; 5% years 9 - 10); and

4.     D1 becoming a member of Quinvita's agronomy and breeding platforms for a minimum of three years (subject to certain conditions) giving D1 access to ongoing Jatropha developments.

 

This transaction has effectively removed the cash burn, preserved intellectual property and given D1 the prospect of access to an ongoing agronomy and breeding improvement programme for Jatropha. At present the redeemable preference shares and royalties are impaired to nil until the timing and amount of repayments is more certain.

 

Financial statements for year ended 31 December 2010

The financial statements are attached and detailed comments thereon are included in Martin Jarvis's Report.

 

Principal risks and uncertainties

 

The attention of shareholders is drawn to the Directors' Report on pages 12 to 16, which sets out the principal risks and uncertainties faced by the Group.

 

Going concern

 

The financial statements have been prepared on a going concern basis which assumes that the Company and the Group will continue in operating existence for the foreseeable future and meet its liabilities as they fall due. There are uncertainties that the Directors have had to consider in deciding to prepare the financial statements on the going concern basis, which are summarised below.

 

Business planning uncertainty

 

The Report of the Chief Executive Officer on pages 6 to 9 sets out the strategy of the business and what it is seeking to achieve and the milestones it aims to reach. Whilst the Directors believe these milestones are realistic, there are inevitably uncertainties as to whether they will be achieved in full and in time.  In addition, following the appointment of Steven Rudofsky and Nicholas Myerson on 24 June 2011, the Board has commenced a business plan review process to be concluded no later than mid-August 2011. The review may or may not result in changes to the existing business plan. While the Board is confident it can deliver a Jatropha based strategy that is viable and cash generative over the longer term, until the business plan is finalised the Board cannot assess with certainty the implications of pursuing a revised business plan.

 

Funding uncertainty

 

The Directors informed the market over eighteen months ago that the Company would require a further injection of funds during 2011 and, as such, have been working on a new fund raising exercise. Following the appointment to the Board on 24 June 2011 of Steven Rudofsky and Nicholas Myerson, the Board now believes it will secure sufficient shareholder support to pass a resolution to enable sufficient funds to be raised once a successful business plan review has been completed. The Board currently intends to seek sufficient funds to cover the business's activities until key harvest and animal feed milestones are reached in mid-2012.  The Board believes that the case will be made in time for final follow on funding for capital investment ahead of the business becoming cash generative. The Board is encouraged by the feedback it has received to date on the willingness of existing shareholders to participate in a future fund raising. However, if the Directors are unable to secure the appropriate level of shareholder support for the strategy and associated future fund raising before late 2011 and again by mid-2012, the Company and the Group will be unable to continue as a going concern.

 

Directors' view

 

After making enquiries and considering these uncertainties, the Directors conclude that the implications of the business plan review and whether funding can be secured before cash resources are depleted are material uncertainties which may cast significant doubt about the Group and Company's ability to continue as a going concern in its current form. The Directors believe that these uncertainties can be managed and mitigated and the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. Consequently the Directors believe that it is appropriate to prepare the financial statements on a going concern basis.  

 

Should the strategic milestones not be achieved or the business plan be changed in a way which restricts the Group's ability to implement or fund the business plan, then the going concern basis would be invalid and adjustments may have to be made to reduce the value of the assets to their recoverable amount, to provide for any further liabilities which might arise and to reclassify fixed assets and long term liabilities to current assets and current liabilities.

 

The Board

 

Moira Black, Non-Executive Director, and Brian Myerson, Non-Executive Director and Chairman, stepped down from the Board in February 2010 and March 2010 respectively, as mentioned in the Chairman's statement in the 2009 Annual Report. We thank them for their contributions to the business.

 

Nicholas Ward joined the Board as Non-Executive Director in April 2010. On 4 August 2010 Nicholas Ward resigned from the Board; we thank him for his, albeit brief, contribution to the business.

 

On 27 August 2010, Ben Good stepped down as CEO and Finance Director. Martin Jarvis took over the CEO post, combining the role with that of Operations Director.

 

On 24 June 2011, Steven Rudofsky and Nicholas Myerson joined the Board as Executive Directors.

 

Section 656 - Serious loss of capital

 

The Companies Act 2006 requires a general meeting to be held to determine what, if any, steps should be taken to deal with the situation when net assets of a public company are half or less of its called-up share capital.  A general meeting for this purpose was held on 29 June 2010. No resolutions were proposed and it was concluded that no additional actions were required over and above the existing strategy.

 

Staff

 

2010 was a year of very significant change for D1 and this has continued into 2011; although it should be noted that operationally things have begun to settle down as significant quantities of grain have begun to flow, be crushed and be sold as oil.  We thank all our staff for the capability, commitment and hard work that they have shown in what has been a challenging and fast-moving corporate environment.

 

Conclusion

 

I would like to thank our shareholders for their interest and support through a very difficult, challenging and uncertain time for the business.

 

 

Barclay Forrest

Chairman

27 June 2011

 

 

Report of Chief Executive Officer

 

I took over as Chief Executive Officer on 27 August 2010, combining the role with that of Chief Operating Officer - dividing my time roughly 50/50 between the London office and the field in order to manage the corporate agenda whilst staying as close as possible to the operation during this exciting time for the Company.

 

Soon after taking over it proved necessary to complete a strategy review, particularly with the closing of the Offer Period and the relatively slow uptake of sales of seed and agronomy services compared to plan. The main result of this review was the sale of substantial parts of the Science & Technology business (covered in the Chairman's Statement) and that has left a very focussed business with a clear strategy:

 

·      Deliver value from the existing planting in India, Africa and Indonesia; demonstrate that we can collect grain; crush it to create CJO and sell that CJO at a profit both locally and into export markets. In other words prove that the Jatropha supply chain can operate at more than just trial volumes;

 

·      Plant small quantities of Jatropha 2.0, "next generation Jatropha", using selected seeds, planted and looked after properly to demonstrate that we have learned how to do this effectively and that growing Jatropha can be economically sustainable for both the farmer and the business;

 

·      Develop the animal feed technology to the point where we can demonstrate that it can deliver a substantial improvement in Jatropha economics at commercial scale;

 

·      Develop strategic customers for offtake of CJO;

 

·      Reduce central costs as much as possible whilst retaining the ability to develop strategic customers and to respond to opportunities; and

 

·      To secure the funding required to deliver this strategy.

 

With the reorganisation following the Science & Technology sale complete the overhead cash burn rate is currently down to £2.9m a year with further cost saving opportunities being explored.

 

Operations

 

D1's key value proposition in the medium term remains our ability to deliver increasing quantities of oil from our existing planting areas in India, Africa and Indonesia. The 2010/2011 season (twelve months ending June 2011) is the first time that substantial volumes have been delivered through our networks and as such the farmers have received a substantial increase in cash for the Jatropha that they have collected. The Board believes both farmers and customers are beginning to realise that Jatropha is a viable proposition and we have started to see farmers bringing the grain to us unbidden and customers chase us for supply. The Board was disappointed with collection in North East India as discussed below.

 

The Board believe we are now producing and selling more CJO than anyone else and this allows us to start to aggregate the available Jatropha for sale with us attracting both grain and CJO itself from 3rd parties that can be consolidated with our own production to better meet the needs of customers.

 

In addition to the existing planting we are now, for the second year, planting small quantities of selected seed with chosen farmers in Zambia, who have been trained to our standard operating procedures for planting, maintaining and harvesting Jatropha, The success of the first two seasons of Jatropha 2.0 has led to us planning to extend new planting to Indonesia during 2011.

 

Sales of CJO

As reported in the Company's operational update on 2 March 2011, D1 has continued to experience demand for greater quantities of CJO than it is able to supply and has, in the 6 months to the end of February, sold all of its production, some 500 tonnes. These sales have been achieved at an average, ex works, selling price of approximately US$975 per tonne. This price is slightly lower than anticipated due to a change in mix between local and export sales and between spot purchases for trial work and repeat purchases from commercial customers (both local and multi-national). The spot price is continuing to firm and D1 now has a strong backlog of orders for ex-tank sales in India at above $1,000 per tonne.

Sourcing of Jatropha grain

D1 continues to develop proprietary networks to source grain and market CJO principally in Central and North-West India (from both D1's contract farmers and established third party grain traders in those areas), North-East India (through its joint venture with Williamson-Magor ("D1-WM"), one of India's largest tea plantation groups), Zambia and Indonesia.

 

In Central and North-West India, late rains during November and December 2010 have caused the grain collection period to extend to the end of June 2011. Accordingly, the Board is not yet in a position to confirm final grain collection numbers for the season. Despite this delay grain sourced from D1's contract farmers in these areas has already exceeded expectations in many districts and the Board remains pleased with the performance of these regions and expects further significant growth in collection volumes in the next harvest season.

However, North East India experienced the heaviest rainfall, and lowest levels of sunshine, in June and July for thirty years, which led to depressed flowering and in turn reduced weeding and other activity by our partner farmers. As a result, yield in this region will fall significantly below expectations and consequently D1-WM has not extracted oil in the North-East this season. Despite this disappointing result, the Board continues to believe that North-East India can deliver substantial quantities of Jatropha grain, particularly with a normalisation of weather patterns.

Overall, grain collection in the other regions of activity is on track.

Accordingly, the Board estimates that D1 will now acquire sufficient grain and oil to deliver approximately 850 tonnes of CJO in the twelve months to June 2011 with additional grain harvest to spill over into the second half of 2011.

The Directors are pleased to report that the variable cost of D1's CJO in India (net of biomass sales credits) is currently running at about US$700 per tonne as compared to roughly US$850 a year ago mainly due to achieving high seedcake prices and lower expelling costs which have helped offset the higher transport costs experienced.

Given the successful grain yields delivered in Central & North-West India, Zambia and Indonesia, the Board remains confident that D1 will have both the grain and the supply chain organisation to deliver a substantial increase in CJO during the 2011/12 harvest season and in future years.

 

Animal Feed Programme

 

Our animal feed programme is focused on the commercial development of intellectual property which is unique in the industry.  We have a process, for which a UK patent was granted on 3 November 2010, which enables the production of Jatropha Kernel Meal ("JKM"), one of the co-products of oil extraction, as a high-protein content substance that is very suitable for sale as animal feed.  This creates an opportunity for a significant improvement in the economics of CJO production. Having successfully tested JKM as a protein source for rats, as announced in February 2010; and for chickens, as announced on 23 September 2010; JKM is now being evaluated in a 90 day cattle feeding trial in the USA. We are still on track for being able to achieve commercial deployment of this technology in 2012.

 

Business Development

 

The goal of our Business Development team is to acquire strategic customers - customers with large or very specific off-take requirements for CJO  (power generation customers or bio-lubricant customers for example) and customers who wish to be involved across the whole value chain (for instance in those cases where there is a distinct captive fuel requirement, like a mine). Debates with this type of customer have only become possible since D1 has been in a position to source quantities of CJO in the tens and hundreds of tonnes - even trial quantities for some of these customers are larger than would have been feasible to supply pre-2010.

 

Having shipped trial quantities amounting to some 70 tonnes in Q1 2011, we are now in discussions with three large European based multi-nationals and one Japanese based multi-national about large off-take deals.

 

The team is also in discussion with a number of customers about specific plantation projects for 100% use in specific local projects.

 

Accounts for year ended 31 December 2010

 

The financial results for the year ended 31 December 2010 primarily reflect the activities of the plantation operations and the science & technology business. In December 2010, the Group disposed of a substantial portion of the science & technology business and the results include a loss on disposal. The disposed portion of the science & technology business is included as a discontinued operation. The refining & trading business was discontinued in 2008.

 

Group revenue was £0.3m (2009: £1.8m) in the year ended 31 December 2010. The drop in revenue from 2009 reflects the re-acquisition of the D1-BP joint venture in mid-2009. Prior to the re-acquisition, the Group provided agronomy support to the joint venture as its sole customer. The loss on ordinary activities before taxation was £6.6m (2009: £5.2m) and the loss per ordinary share was 4.8p (2009: 4.0p).

 

Group revenue from continuing activities of £0.2m (2009: £0.1m) was primarily generated by sales of CJO and biomass in the Operations segment.

 

Cost of sales and administration expenses from continuing operations of £3.6m (2009: £5.1m) reflected restructuring and cost-saving measures undertaken. The 2009 comparatives only include five months of costs in relation to plantation operations following the re-acquisition of these operations from the D1-BP joint venture in late July 2009. The gain on the re-acquisition of £2.8m was also recognised in the 2009 comparatives. The loss on continuing operations before tax was £3.6m (2009: £1.8m) and the loss per ordinary share was 2.6p (2009: 1.3p).

 

Group revenue from the discontinued operations was £0.2m (2009: £1.7m) and consisted of revenue from agronomy consulting services, which formed part of the Science & Technology segment. This consulting revenue was disappointing and the Board concluded that it was unlikely to cover the costs of the agronomy and breeding activities in the foreseeable future. As a consequence, in December 2010 the Board disposed of these activities to companies controlled by three senior D1 employees or directors. The disposal resulted in a £0.9m loss recognised in 2010. The loss primarily reflected the £0.8m cash that went with the disposed entities in return for £0.8m of Redeemable Preference Shares. D1 is also entitled to receive royalties on future Jatropha related sales on a sliding scale over 10 years (15% to year 5; 10% years 6 - 8; 5% years 9 - 10).

 

The total loss before tax from discontinued operations was £2.8m (2009: 3.4m) and the loss per ordinary share on discontinued operations was 2.2p (2009: 2.7p). The 2010 loss on discontinued operations included the release of a £1.1m provision in relation to the Bromborough refining site.

 

The Bromborough refining site was sold in July 2010 for £2.2m. In addition, the buyer agreed to pay the Group a royalty on future production capped at £0.4m. This royalty is classified as a contingent asset. The leases over two parcels of land adjacent to the Bromborough site were also transferred as part of the sale. If the new tenant defaults on the lease, responsibility may revert to D1. The maximum exposure is £2.0m and this item is disclosed as a contingent liability as the Board does not consider reversion to be likely.

 

Interest received of £0.0m (2007: £0.9m) relates to cash deposits held during the year and reflects lower prevailing interest rates in the UK and reducing Group cash deposit balances.

 

During 2011, the Board will consider whether to align the accounting year end of the Group to the Indian harvest season.

 

Outlook

 

Despite the uncertainties we face that are described in the Chairman's Statement and in note 1 to the financial statements, since the start of 2010 , we have seen positive developments on a range of external fronts in our view, each helpful to our plan. In the US and Europe, policy support for biofuels remains strong; and in our main supply market: India, support for bio-fuels continues to increase. The European Commission's biofuel policy review has so far been very supportive of the role sustainably produced vegetable oils can play in the European energy mix.  Recent events, notably the tragic events in Japan and the substantial increase in mineral oil and edible vegetable oil prices in the past year in our view highlight the fact that there is a continuing need to develop a range of alternative energy sources, Jatropha offers potential as a sustainable, low carbon alternative.

 

In some quarters there are concerns about the potentially distorting influence of western biofuels policies on rural economies in the developing world. However, Jatropha's strong credentials as a non-food crop, cultivable in a variety of different environmental conditions, including farm margins and on degraded farmlands (such as ex-tobacco projects) mean that it is excellently positioned to address these concerns and support, rather than detract from, food production.  In central India for example, our surveys indicate that over 90% of the land selected by farmers to grow Jatropha for us, was not previously being used to grow food. In Zambia we have supplied biodiesel and CJO to local farmers, who have replaced high cost imported petroleum fuel with lower cost locally produced biofuels and reduced their food production costs accordingly.  Gentrification and population growth in the developing world, alongside the global desire to replace fossil fuels and edible vegetable oils with alternative vegetable oils, are expected to increase demand for both high quality protein meals and non-food vegetable oil going forwards - Jatropha offers the potential to supply both.

 

This is all very helpful to D1: we believe we have pre-eminent operational scale and technical position in a clearly growing industry.  It increases the market for what we have to offer, and, alongside the progress we report here, reinforces our view that our plan has the prospect of delivering value to shareholders. The Board is committed to addressing the Group's fundraising requirement to enable this vision to be fulfilled.

 

 

Martin Jarvis

Chief Executive Officer

27 June 2011

 

 

Directors and advisors

 

Barclay Forrest OBE, FRAgS

Non-Executive Chairman, 69

Barclay Forrest farmed in Berwickshire, Scotland, and developed one of the UK´s largest drying, storing and haulage businesses for barley, wheat and rapeseed. He is a former Vice President of the Scottish NFU and past Chairman of British Cereal Exports where he was responsible for promoting to Europe, North Africa and China. He was Vice President of The China Britain Business Council, responsible for Food and Agriculture, and Chairman of the Oxford Farming Conference 2003. He is a Non-Executive Director and former Chairman of Helius Energy plc.

 

Martin Jarvis

Chief Executive Officer, 48

Martin Jarvis was formerly Chief Operating Officer and the Chief Executive Officer of D1-BP Fuel Crops Limited. Martin's earlier career includes 23 years at Unilever in a range of international manufacturing and supply chain management roles, including Global Supply Chain VP, with responsibilities throughout Asia, Africa and Europe.

 

Steven Rudofsky

Executive Director, 49

Steven Rudofsky began his career working for Marc Rich & Co. AG and Glencore AG where he traded both soft commodities and Ferro Alloys in Rotterdam and Zug. Thereafter he held senior management positions in London at Aletri Limited (Motor Oil Hellas), TransCanada Pipeline Ltd, Credit Agricole CIB and Crown Resources (Alfa Group of Russia). Since 2003, Steven has been focused on property development in Poland through Huntington Polska whilst also consulting on various commodity projects in Europe, North America, Middle East and Asia. Steven holds a BA cum laude in History and International Relations from Clark University and a JD from Emory University.  He has been a member of the New York Bar since 1988.

 

Nicholas Myerson

Executive Director, 26

Nicholas began his career as part of the corporate finance team at Dubai World, focusing on real estate and infrastructure investments in the Chinese, Indian, and Polish markets. Nicholas was until recently head analyst for Salamanca Capital, a London based private equity group, where he was responsible for the firm's infrastructure, commodity and mining investment portfolios. Nicholas holds a MA in Law from Cambridge University. Nicholas is the son of former D1 Oils plc Chairman, Brian Myerson, who is Executive Chairman of Principle Capital Group whose managed funds hold 27.5% of D1's ordinary shares. However, Nicholas confirms he is not a representative of the Principle Capital Group or its managed funds.

 

Company Secretary

Marie Edwards

Registered office

1 Park Row

Leeds LS1 5AB

Registered number

5212852

Broker and nominated advisor

WH Ireland Limited

24 Martin Lane

London EC4R 0DR

Bankers

Barclays Bank plc

PO Box 378

71 Grey Street

Newcastle upon Tyne NE99 1JP

Auditors

Ernst & Young LLP

Citygate

St James' Boulevard

Newcastle upon Tyne NE1 4JD

Solicitors

Pinsent Masons

30 Crown Place

London EC2A 4ES

 

Registrars

Capita IRG plc

The Registry

34 Beckenham Road

Kent BR3 4TU

 

 

Directors' report

 

The Directors present their report and the audited financial statements for D1 Oils plc (company number 5212852) for the year ended 31 December 2010.

 

Principal activity

The Company's principal activity is that of a holding company. D1 Oils plc is the parent company of a group of companies engaged in the development of Jatropha curcas as an alternative, sustainable feedstock for the production crude Jatropha oil ("CJO") and its co-products.

 

Review of business

During most of 2010, the ongoing business was divided into two business groups - Operations and Science & Technology.

 

In 2010, the Group made significant progress towards establishing itself as the world's leading Jatropha producer of CJO and its co-products. The Operations business group, which manages our planting interests to produce oil and co-products, delivered the first significant grain harvest in 2010/11. In India and Indonesia we have demonstrated that we have a supply chain, processing set up and customers to collect grain, process and sell the resulting CJO and seedcake. In Zambia we have instituted a programme for outgrowers to plant 'next generation' Jatropha that has started, and will continue, to demonstrate the returns available from Jatropha when planted and maintained in line with D1's best practice.

 

The Science & Technology business group also continued to progress its knowledge in the agronomy and breeding of animal feed. In addition, the proprietary process for turning the seedcake left over following oil extraction into a high protein animal feed took huge strides forward. The animal feed meal underwent tests in rats and chickens during 2010 with these tests raising no material concerns about the toxicity or palatability of the meal. In the UK, a patent application was granted for the extraction process and six further patent applications were filed in other jurisdictions.

 

Despite the scientific progress of the Science & Technology business, the revenue generated from these activities fell well short of expectation. As a result of this revenue shortfall, and the ongoing cost of the science & technology programme, a decision was taken to dispose of the Science & Technology business group except for animal feed activities. The disposed business activities were taken on by three senior members of D1 who oversaw these activities. D1 retains all intellectual property developed to the date of disposal.

 

The decision to focus solely on production of oil and its co-products including animal feed means the business still retains the primary activities to deliver shareholder value. Further details of the ongoing business and the disposal are in the Chairman's Statement and the Report of the Chief Executive Officer.

 

Principal risks and uncertainties

The principal risks and uncertainties facing the Group are assessed as funding risk, commercial risk, biological and planting risk, technology risk, competitive risk, contractual risk, lease reversion risk, political and legislative risk, and financial instrument risk.

 

Funding risk

The Group will continue to have a cash requirement until it becomes cash generating. The Group has restructured its activities to concentrate on planting operations that are likely to generate short to medium term revenue. The Group anticipates that this activity will position the business more attractively for investors to raise new funds during 2011. However, there is a risk that future funding will not materialise, in which case the activities of the Group may no longer be sustainable. The directors have been working on fund raising plans for some months now and communicating with shareholders and investors. This process is ongoing and under review.

 

Commercial risk 

Business volumes are anticipated to increase as a result of increasing yields. New technical, operational and commercial challenges may arise as a result of this increase in scale.  There is a substantial challenge to put in place or access further the infrastructure needed to collect, process, ship and distribute the products in viable quantities. The Group manages these risks by employing staff and engaging third parties with relevant skills to address these issues when they arise.

 

Biological risk

There are inherent biological risks associated with any agricultural activity, including pests, disease, drought, excessive rainfall and other stress factors. These risks are greater in new crops, such as Jatropha curcas, for which agronomy and husbandry practices are still being developed. The Group continues to learn from experience and apply these lessons to manage biological risk.

 

Technology risk

D1 has chosen Jatropha curcas as its crop as a source of vegetable oil for sale to biodiesel producers and other biofuels markets. The cultivation of Jatropha poses the normal risks associated with the cultivation of crops. In addition, Jatropha is a new crop for which planting and cropping practices are in development. We are addressing these issues through the work of our Operations group.  D1 has developed a process that expels crude vegetable oil from Jatropha seeds and purifies the meal left after oil extraction to produce high protein animal feed. Although the Company has proved the technical feasibility of the process, there is no guarantee that it will be successful when undertaken on a larger commercial scale nor that its product will pass the necessary animal feed trials. D1 has applied for patents for the process and, with some of those patents still pending approval, may be subject to challenge from similar, competing processes.

 

Competitive risk

Planting - The global development of the biofuels industry is leading to an increase in Jatropha planting operations worldwide. Our Operations group has significantly progressed its operations to become an established market leader in facilitating the planting of Jatropha and to develop its expelling and transport logistics to bring Jatropha vegetable oil to market.

 

Jatropha planting in which D1 has an interest comprises the following: 

 

·      managed plantations are those farms where land is farmed and labour is controlled by D1, either through its subsidiaries or through collaborations or joint ventures with local partners; and

·      contract farming where the farmer plants his own trees on his own land. D1 and its partners may assist with the provision of seedlings and the arrangement of bank finance for planting, and offer a buyback of harvested grains with an offtake agreement, subject to a floor price and the achievement of agreed quality standards, and provide support and advice during cultivation, and monitor the condition of the crops.

 

The rights to some planting are shared with third parties, such as joint venture partners, with whom D1 has worked to achieve rights to planting of Jatropha. As such, offtake from these areas of planting may well be shared with third parties.

 

In addition to the biological risks noted above, planting operations, and in particular contract farming over which D1 has less control, are subject to a range of commercial and contractual risks.  D1 or its subsidiaries or joint venture have relationships with over 115,000 farmers.  Planting undertaken by third parties can be difficult to measure and monitor in terms of performance. Furthermore, the rights to planting or offtake may prove difficult to enforce in various countries and prices payable will vary with local market conditions and the accessibility of the crop.

 

Contractual risk

There are inherent uncertainties and risks associated with entering into contracts with suppliers, customers, financial institutions, landowners and employees. It is possible that such contracts may become unenforceable and financial commitments may become onerous if circumstances change. The Group attempts to manage this risk through establishing good working relationships and dialogue with contracted parties.

 

Lease reversion risk

The group has disclosed a contingent liability related to the Bromborough refining site sold in July 2010. Specifically, the group will be liable for lease costs on two sites adjacent to the Bromborough property if the purchaser of the Bromborough sites defaults on the leases. If lease reversion occurs, any liability could be mitigated by sub-letting the leased sites.

 

Political and legislative risk

The Group operates on a global basis and must comply with a range of local legislative requirements and regulations that include: legal, regulatory and taxation requirements; trade standards; trade and transportation restrictions; and tariffs. Furthermore, the Group depends on the position and continued support of various third parties, including national governments. Any of these factors may be subject to changes which could adversely affect the Group's ability to do business, or the performance of its business.

 

In common with other crops, imports of Jatropha seed and seedlings are subject to biological material import regulations. In addition, as a new crop, a number of jurisdictions require additional regulatory measures prior to cultivating Jatropha on a larger scale. We continuously test to ensure that our product is in compliance. A significant number of the world's key economies either have or are in the process of implementing mandatory biodiesel blends and other policies to encourage the use of greener road transport fuel. In addition, many countries have incentives for renewable electricity generation, including generation using vegetable oil as a feedstock.  However, these policies continue to be opposed by environmental pressure groups concerned about the sustainability of biofuels.  Although Jatropha offers the potential to be one of the most promising sustainable feedstocks for biofuels, the policies that encourage the adoption of vegetable oil-based biofuels in national markets may be subject to policy change.

 

Financial risk

The Group's results from its operations overseas could be adversely affected by currency fluctuations and dividend and exchange controls. The Group looks to limit undue counterparty exposure, ensure sufficient working capital exists and monitor the management of risk at a country level. This is achieved by negotiating contracts in our regions of operation using local currencies and regulations. The Group also looks to manage currency fluctuation risk through forward contracts, such as the Euro forward taken out in 2010.

 

Research and development

The Group has an active research and development programme focused on animal feed.  Further details are included in the Report of the Chief Executive Officer.  

 

Safety, health and environment (SHE)

The Board considers managing the safety and health of our people and protecting the environment as a corporate governance priority.

 

Martin Jarvis, Chief Executive Officer, is ultimately responsible for SHE performance in D1 and also has functional responsibility. Fundamental to our management of SHE is the recognition that it is a line management responsibility and should not be delegated to a function. It is a responsibility of all managers and employees and this is regularly communicated and reinforced. We aim to continually test and improve SHE performance across our business.

 

During 2010 we continued our programme to raise awareness of behavioural safety throughout the Group. We have particularly focussed on improving the safety awareness of our people as regards moving vehicles; particularly in India as this is the largest source of accidents in the Group.

 

The key features of SHE include: a formal regime for reporting all incidents, including "near hits"; local investigation and measurement of performance to international standards; and assessment of key risks for each locality, in particular travel issues, field work and wildlife.

 

 A total of 2 major incidents leading to lost time were recorded in overseas operations during 2010, both involving motor vehicles in India. In both cases investigation highlighted that the employee was not at fault and luckily neither was serious. There were also several, similar incidents, which led to near hits.

 

As a result of this we repeated and re-enforced the defensive driving aspects of our two-wheeler training and took the step of prohibiting night-time driving in certain high risk areas.

 

Corporate and social responsibility

D1 Oils plc is committed to acting ethically and to contributing to the economic development of the regions where we operate. We believe strongly in the need to improve the quality of life of farmers and farming communities in the developing world.

 

Jatropha curcasis an energy crop that has the potential to produce commercial volumes of crude oil and biodiesel sustainably. Jatropha's environmental "elasticity" enables it to grow a wide range of poorer soils, including marginal land. Growing Jatropha need not threaten the supply of arable land for food production and can enable previously unused land to be brought back into production. Food crops can be intercropped with Jatropha trees in their first three to four years of growth, enabling co-production of food and food fuel. In addition, D1 is developing a proprietary process to turn seedcake derived from the expelling process into animal feed. D1 is committed to the sustainable planting of Jatropha and is working to establish sustainability standards for planting. In addition to evaluating the success and risk factors for commercial Jatropha planting in different regions, D1's field manuals and standard operating procedures are designed to enable operations to achieve to the highest standards of social, environmental and economic sustainability.

 

Disabled employees         

Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical with that of other employees.

 

Directors

The current Directors are listed on page 10 of this report. Moira Black, Brian Myerson and Ben Good left the Board on 2 February 2010, 12 March 2010 and 27 August 2010, respectively.  Barclay Forrest replaced Brian Myerson as Chairman from 12 March 2010. Nicholas Ward joined the board as Non-Executive Director from 7 April 2010 and left the Board on 4 August 2010. Steven Rudofsky and Nicholas Myerson joined the board as Executive Directors on 24 June 2011.

 

Dividends and transfers to reserves

No dividend has been paid or proposed for the period.

 

Corporate governance

As an AIM-listed company, there is no requirement to comply with the revised Combined Code, issued by the Financial Reporting Council in June 2008 (the "Combined Code"). However, the Directors recognise the value of the provisions set out in the Combined Code and have decided to provide limited corporate governance disclosures based on certain of the disclosures required of a fully listed company.

 

The Board has established an Audit Committee, a Remuneration Committee and a Nominations Committee, each with formally delegated duties and responsibilities. The Audit Committee comprises Barclay Forrest (Chairman) and Martin Jarvis.  Moira Black held the position of Chairman of this committee until February 2010, when she was replaced by Barclay Forrest.  Nicholas Ward was a member of this committee until his resignation from the Board in August 2010.   The Remuneration Committee comprises Barclay Forrest (Chairman) and Martin Jarvis.  Moira Black, Brian Myerson and Nicholas Ward stepped down from the committee when they left the Board. The Nominations Committee comprises Barclay Forrest (Chairman) and Martin Jarvis. Barclay Forrest replaced Brian Myerson as Chairman of the committee when the latter stepped down from the Board. Moira Black and Nicholas Ward stepped down from the committee when they left the Board.

 

The Audit Committee receives and reviews reports from management and the Company's auditors relating to the interim and annual financial statements and the accounting and internal control systems in use throughout the Group. The Audit Committee has unrestricted access to the Group's auditors.

 

The Remuneration Committee reviews the scale and structure of the Executive Directors' remuneration and the terms of their service contracts. The remuneration and terms and conditions of appointment of the Non-Executive Directors are set by the Board. The Remuneration Committee also administers the Group's share option scheme.

 

The Nominations Committee meets as required to consider and make recommendations on the appointment of Directors to the Board.

 

Since August 2010, the Board has only had two directors and consequently the operation of committees with separate directors has not been practicable.

 

Substantial interests

The following shareholdings of 3% or more of the ordinary share capital of the Company are set out in the register of members of the Company as at 23 June 2011:


Number of shares

%

Nature of holding

Principle Capital

34,889,089

27.54

Direct & Indirect

BlackRock Investment Management (UK)

12,465,798

9.84

Indirect

Lansdowne Partners LP

12,250,474

9.67

Indirect

Henderson Global Investors

11,748,429

9.27

Indirect

John Teeling

6,350,679

5.01

Indirect

Majedie Asset Management

4,039,647

3.19

Indirect






81,744,116

64.52


 

Policy on financial instruments

The Group's financial instruments comprise cash, and short-term debtors and creditors arising from its operations. The Group has not established a formal policy on the use of financial instruments but assesses the risks faced by the Group as economic conditions and the Group's operations develop. In 2010, the Group took a forward on approximately €1m to limit its exposure to fluctuating Euro to British Pound currency rates in relation to its Belgian and Dutch operations. The Group will reassess the need for hedging in 2011.

 

Supplier payment policy

It is Group policy to agree and clearly communicate the terms of payment as part of the commercial arrangements negotiated with suppliers and then to pay in accordance with those terms based upon the timely receipt of an accurate invoice. The holding company does not trade. The trade creditors' days of the Group for the year ended 31 December 2010 were 22 days calculated in accordance with the requirements set down in the Companies Act 2006.

 

Political and charitable donations

During the year the Group has made no political or charitable donations.

 

Directors' declaration

As far as each Director is aware, there is no relevant audit information of which the Company's auditors are unaware and each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

 

Serious loss of capital requirement

Under the Companies Act 2006, where the Group's net assets are half or less of its called-up share capital, the Directors are required to convene a general meeting to consider whether any, and if so what, steps should be taken to deal with the situation. Accordingly, a general meeting was held on 29 June 2010 to discuss this matter. The Board presented its ongoing plans for the business. No resolutions were proposed at the meeting.

 

 

Auditors

Ernst & Young LLP were appointed as auditors to the Group in 2006.

 

Approved by the Board of Directors and signed on behalf of the Board.

 

 

Martin Jarvis

Chief Executive Officer

27 June 2011

 

 

Statement of Directors' responsibilities

 

The Directors are responsible for preparing the annual review and the Group and Company financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards ('IFRSs') as adopted by the European Union.

 

Company law requires the directors to prepare Group and Company financial statements for each financial year. Under that law the Directors must not approve Group or Company financial statements unless they are satisfied that they present fairly the financial position and the financial performance and cash flows of the Group and the Company for that period. In preparing these financial statements, the Directors are required to:  

 

·      select suitable accounting policies in accordance with IAS 8 "Accounting Policies, Change in Accounting Estimates and Errors" and then apply them consistently;

·      present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

·      provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the financial position and financial performance of the Group and the Company;

·      state that the Group and the Company have complied with IFRSs, subject to any material departures disclosed and explained in the financial statements; and

·      make judgements and estimates that are reasonable and prudent.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and International Accounting Standards. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and irregularities.

 

Directors' declaration

As far as each Director is aware, at the date when this report was approved, there is no relevant audit information of which the Group's auditors are unaware and each Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Group's auditors are aware of that information.

 

Pages 12 to 16, inclusive, of this Annual Report comprise a Directors' Report that has been drawn up and presented in accordance with English company law and the liabilities of the Directors in connection with that report shall be subject to the limitations and restrictions provided by such law.

 

In particular, Directors would be liable to the Company (but not to any third party) if the Directors' Report contains errors as a result of recklessness or knowing misstatement or dishonest concealment of a material fact, but would not otherwise be liable.

 

Cautionary statement regarding forward-looking statements

This Annual Report has been prepared for the members of the Company and no one else. The Company, its Directors, employees or agents do not accept or assume responsibility to any other person in connection with this document and any such responsibility or liability is expressly disclaimed.

 

This Annual Report contains certain forward-looking statements with respect to the principal risks and uncertainties facing D1 Oils plc. By their nature, these statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. The forward-looking statements reflect the knowledge and information available at the date of preparation of this Annual Report, and will not be updated during the year. Nothing in this Annual Report should be construed as a profit forecast.

 

 

Independent auditors' report

to the members of D1 Oils plc

 

We have audited the financial statements of D1 Oils Plc for the year ended 31 December 2010 which comprise the Consolidated Income Statement, the Consolidated and Company Statements of Comprehensive Income, the Consolidated and Company Statements of Changes in Equity, the Consolidated and Company Balance Sheets, the Consolidated and Company Cash flow Statements and the related notes 1 to 30.  The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards ('IFRSs') as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

 

This report is made solely to the Company's members, as a body, in accordance with chapter 3 of Part 16 of the Companies Act 2006.  Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed. 

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement set out on page 17, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.  Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).  Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. Because of the matters described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

 

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error.  This includes an assessment of: whether the accounting policies are appropriate to the Group's and the parent Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.

Basis for disclaimer of opinion on financial statements

 In seeking to form an opinion on the financial statements we considered the implications of the significant uncertainties disclosed in note 1 to the financial statements concerning the following matters:

 

·      The business planning uncertainty which depends on the outcome of the Boards business planning review process which is expected to be concluded by August 2011. Until the business planning is finalised the Board cannot assess with certainty the implications of pursuing any revised business plan and its effect on the ability of the Company and the Group to continue as a going concern.

·      Achieving the milestones the Company aims to reach.  The Company needs to demonstrate that Jatropha can deliver sustainable economics for both farmer and industry.

·      The outcome of efforts by the Directors to raise new finance before the Company's cash resources are utilised.  The Directors currently estimate that new finance will need to be raised before late 2011 and then again by mid 2012.  Without such funding the Company and the Group will be unable to continue as a going concern.

 

There is potential for the uncertainties to interact with one another such that we have been unable to obtain sufficient appropriate audit evidence regarding the possible effect of the uncertainties taken together.

 

Disclaimer of opinion on financial statements

Because of the significance of the possible impact of the uncertainties, described in the Basis for Disclaimer of Opinion on Financial Statements paragraph, to the financial statements, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly we do not express an opinion on the financial statements.

 

Opinion on other matter prescribed by the Companies Act 2006

Notwithstanding our disclaimer of an opinion on the financial statements, in our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

 

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

 

·      adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us;

·      the parent Company financial statements are not in agreement with the accounting records and returns; or

·      certain disclosures of directors' remuneration specified by law are not made; or

·      we have not received all the information and explanations we require for our audit.

 

 

Mark Hatton (Senior statutory auditor)

for and on behalf of Ernst & Young LLP, Statutory Auditor

Newcastle upon-Tyne

27 June 2011

 

 

Notes:

 

 

1.             The maintenance and integrity of the D1 Oils plc web site is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site.

2.             Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

Consolidated income statement

for the year ended 31 December 2010

 



Year

Year



ended

ended



31 December

31 December



2010

2009




Restated


Note

£000

£000

Group revenue

3, 4

168.2

106.7

Cost of sales


(85.4)

(19.9)

Gross profit


82.8

86.8

Administrative expenses


(3,646.1)

(5,147.0)

Trading loss


(3,563.3)

(5,060.2)

Share of post tax losses of joint ventures accounted for using the equity method


12


(306.1)


(95.0)

Net gain on transfer of operation from joint venture

30

-

2,750.6

Group operating loss from continuing operations


(3,869.4)

(2,404.6)

Finance income

7

373.5

665.0

Finance costs

7

(57.8)

(21.7)

Loss from continuing operations before taxation


(3,553.7)

(1,761.3)

Tax credit

8

235.9

130.8

Loss for the period from continuing operations


(3,317.8)

(1,630.5)

Discontinued operations




Profit/(loss) for the year from discontinued operations

14

(2,770.6)

(3,397.2)

Total loss for the year


(6,088.4)

(5,027.7)

Loss for the period attributable to equity holders of the parent


(6,088.4)

(5,027.7)





Loss per ordinary share




Basic and diluted loss per ordinary share (pence)

9

(4.81)

(3.98)

Basic and diluted loss per ordinary share from continuing operations (pence)


9

(2.62)

 

(1.29)

No profit and loss account is presented by the Company as permitted by Section 408 of the Companies Act 2006. The Company's loss for the year was £9,070,800 (2009: £2,614,600).

 

Consolidated statement of comprehensive income

for the year ended 31 December 2010

 


Year

Year


ended

ended


31 December

31 December


2010

2009



Restated


£000

£000

Loss for the year

(6,088.4)

(5,027.7)

Exchange difference on retranslation of foreign operations

(302.2)

(62.3)

Exchange differences on disposed operations recognised in income statement

(12.5)

-

Total comprehensive income for the year

(6,403,1)

(5,090.0)

Attributable to:



Equity holders of the parent

(6,403,1)

(5,090.0)

Non-controlling interests

-

-

 

 

Consolidated balance sheet

as at 31 December 2010

 



As at

As at



31 December

31 December



2010

2009


Note

 £000

 £000

Assets




Non-current assets




Property, plant and equipment

10

169.2

399.2

Intangible assets

11

-

2.5

Investments accounted for using the equity method

12

-

206.1



169.2

607.8

Current assets




Inventories

15

211.4

100.9

Trade and other receivables

16

899.7

1,233.1

Other financial assets

17

90.0

4,547.6

Cash and short-term deposits

18

3,440.5

4,425.5



4,641.6

10,307.1

Assets held for resale

13

-

2,124.0

Total assets


4,810.8

13,038.9

Equities and liabilities




Current liabilities




Trade and other payables

19

(336.7)

(623.2)

Accruals and deferred income


(498.5)

(552.2)

Payments due to vendors

30

(4.1)

(51.0)

Provisions

20

(274.0)

(1,796.5)



(1,113.3)

(3,022.9)

Non-current liabilities




Payments due to vendors

30

(476.5)

(432.9)



(476.5)

(432.9)

Total liabilities


(1,589.8)

(3,455.8)

Net assets


3,221.0

9,583.1

Capital and reserves




Equity share capital

22

1,266.8

1,266.8

Share premium


99,290.3

99,290.3

Own shares held


(484.0)

(484.0)

Other reserves


437.7

437.7

Revenue reserves


(97,967.0)

(91,919.6)

Share option reserve


1,025.0

1,025.0

Currency translation reserve


(347.8)

(33.1)

Equity shareholders' funds


3,221.0

9,583.1

These financial statements were approved by the Board of Directors on 27 June 2011.

 

 

 

 

Martin Jarvis

Chief Executive Officer

 

Consolidated statement of changes in equity

for the year ended 31 December 2010

 




Own



Share

Currency



Share

Share

shares

Merger

Profit and

option

translation



capital

premium

held

reserve

loss reserve

reserve

reserve

Total


£000

£000

£000

£000

£000

£000

£000

£000

Group









At 1 January 2009



 1,266.3



 99,290.3



(484.0)



 437.7



(100,079.8)



 12,787.0



 29.2



 13,246.7

Loss for the year

-

-

-

-

(5,027.8)

-

-

(5,027.8)

Other comprehensive income

-

-

-

-

-

-

(62.3)

(62.3)

Total comprehensive income for the year




-




-




-




-




(5,027.8)




-




(62.3)




(5,090.1)

Transfer on cancellation of BP options




-




-




-




-




12,787.0




(12,787.0)

-




-

Issue of shares - net of expenses



0.5



-



-



-



-



-



-



0.5

Amendment of equity instruments - options granted to BP



-



-



-



-



-



1,025.0



-



1,025.0

Share-based payments



-



-



-



-



401.0



-

-



401.0










At 31 December 2009



1,266.8



99,290.3



(484.0)



437.7



(91,919.6)



1,025.0



(33.1)



9,583.1

Loss for the year

-

-

-

-

(6,088.4)

-

-

(6,088.4)

Other comprehensive income

-

-

-

-

-

-

(314.7)

(314.7)

Total comprehensive income for the year

-

-

-

-

(6,088.4)

-

(314.7)

(6,403.1)

Share-based payments

-

-

-

-

41.0

-

-

41.0

At 31 December 2010

1,266.8

99,290.3

(484.0)

437.7

(97,967.0)

1,025.0

(347.8)

3,221.0

 

Consolidated cash flow statement

for the year ended 31 December 2010

 


Year

Year


ended

ended


31 December

31 December


2010

2009



Restated


£000

£000

Operating activities



Loss for the year

(6,088.4)

(5,027.8)

Adjustments to reconcile loss for the year to net cash flow from operating activities:



Depreciation of property, plant and equipment, and amortisation of intangible assets

135.6

217.4

Impairment of assets held for sale

48.2

64.8

Share-based payments

41.0

401.0

Net gain on transfer of operation from joint venture

-

(2,750.6)

Net loss on disposal of science and technology activities

865.8

-

Loss on disposal of fixed assets

61.6

52.9

Share of post tax losses of joint ventures accounted for using the equity method

306.1

95.0

Finance income

(386.1)

(1,134.7)

Finance expense

59.4

104.3

Income tax credit

(235.9)

(171.6)

Tax paid

4.2

189.5

Increase in inventories

(110.5)

(20.9)

Decrease in trade and other receivables

889.5

218.7

Decrease in trade and other payables

(319.6)

(2,979.3)

Decrease in provisions

(1,461.9)

(4,004.5)

Net cash flow from operating activities

(6,191.0)

(14,745.8)

Investing activities



Interest received

48.1

310.4

Payments to acquire property, plant and equipment, and intangible assets

(66.9)

(61.0)

Funds transferred to deposits

4,409.5

861.0

Purchase of joint venture investments

(100.0)

-

Net cash outflow on disposal of science and technology activities

(800.0)

-

Net cash acquired from acquisitions

-

4,993.1

Proceeds from disposal of assets held for sale

1,696.1

953.0

Net cash flow from investing activities

5,186.8

7,056.5

Financing activities



Interest paid

-

(81.3)

Exercise of share options

-

0.5

Settlement of leases and mortgages

-

(2,661.7)

Repayment of mortgage

-

(30.0)

Repayment of capital element of finance leases

-

(190.1)

Net cash flow from financing activities

-

(2,962.6)

Net decrease in cash and cash equivalents

(1,004.2)

(10,651.9)

Cash and cash equivalents at the start of the year

4,425.5

15,055.9

Effects of exchange rates on cash at the start of the year

19.3

21.5

Cash and cash equivalents at the end of the year

3,440.6

4,425.5

 

 

Company statement of comprehensive income

for the year ended 31 December 2010

 


Year

Year


ended

ended


31 December

31 December


2010

2009


£000

£000

Loss for the year

(9,070.8)

(2,614.6)

Total comprehensive income for the year

(9,070.8)

(2,614.6)

Attributable to:



Equity holders of the parent

(9,070.8)

(2,614.6)

 

 

 

Company balance sheet

as at 31 December 2010

 



As at

As at



31 December

31 December



2010

2009


Note

£000

£000

Assets




Non-current assets




Property, plant and equipment

10

26.1

12.2

Amounts receivable from group undertakings

16

2,879.6

8,017.9

Investments in subsidiaries

12

125.9

125.1



3,031.6

8,155.2

Current assets




Trade and other receivables

16

353.1

161.5

Other financial assets

17

90.0

4,547.6

Cash and short-term deposits

18

2,983.0

2,600.8



3,426.1

7,309.9

Total assets


6,457.7

15,465.1

Equity and liabilities




Current liabilities




Trade and other payables

19

(315.9)

(222.6)

Accruals and deferred income


(304.4)

(245.3)

Provisions

20

(274.0)

(404.0)

Total liabilities


(894.3)

(871.9)

Net assets


5,563.4

14,593.2

Capital and reserves




Equity share capital

22

1,266.8

1,266.8

Share premium


99,290.3

99,290.3

Own shares held


(484.0)

(484.0)

Revenue reserves


(95,534.7)

(86,504.9)

Share option reserve


1,025.0

1,025.0

Equity shareholders' funds


5,563.4

14,593.2

These financial statements were approved by the Board of Directors on 27 June 2011.

 

Martin Jarvis

Chief Executive Officer

 

 

Company statement of changes in equity

for the year ended 31 December 2010

 



Own


Share


Share

Share

shares

Profit and

option


capital

premium

held

loss reserve

reserve

Total


£000

£000

£000

£000

£000

£000

Company







At 1 January 2009

1,266.3

99,290.3

(484.0)

(97,078.6)

12,787.0

15,781.0

-

-

-

(2,614.3)

-

(2,614.3)

Other comprehensive income

-

-

-

-

-

-

Total comprehensive income for the year

-

-

-

(2,614.3)

-

(2,614.3)

-

-

-

12,787.0

(12,787.0)

-

0.5 

-

-

-

0.5 

-

-

-

-

1,025.0

1,025.0

-

-

-

401.0

-

401.0

At 31 December 2009

1,266.8

99,290.3

(484.0)

(86,504.9)

1,025.0

14,593.2

-

-

-

(9,070.8)

-

(9,070.8)

Other comprehensive income

-

-

-

-

-

-

-

-

-

(9,070.8)

-

(9,070.8)

Share-based payments

-

-

-

41.0

-

41.0

At 31 December 2010

1,266.8

99,290.3

(484.0)

(95,534.7)

1,025.0

5,563.4

 

Company cash flow statement

for the year ended 31 December 2010

 


Year

Year


ended

ended


31 December

31 December


2010

2009


£000

£000

Operating activities



Loss for the year

(9,070.8)

(2,614.6)

Adjustments to reconcile loss for the year to net cash flow from operating activities:



Depreciation of property, plant and equipment

7.5

8.0

Share-based payments

41.0

401.0

Loss on disposal of fixed assets

6.9

-

Net gain on transfer of operation from joint venture

-

1,025.0

Impairment of amounts owed by Group undertakings

661.5

-

Write-off of amounts owed by Group undertakings

412.9

-

Finance income

(32.4)

163.0

Increase in trade and other receivables

(191.7)

439.8

Increase/(decrease) in trade and other payments

152.3

(310.6)

(Increase)/decrease in provisions

(130.0)

404.0

Net cash flow from operating activities

(8,142.8)

(484.4)

Investing activities



Interest received

32.4

232.0

Funds transferred to deposits

4,457.8

(1,860.1)

Investment in Group companies

(0.8)

-

Net repayments from/(loans to) Group companies

4,035.6

(8,017.9)

Net cash flow from investing activities

8,525.0

(9,646.0)

Financing activities



Exercise of share options

-

0.5

Net cash flow from financing activities

-

0.5

Net increase/(decrease) in cash and cash equivalents

382.2

(10,129.9)

Cash and cash equivalents at the start of the year

2,600.8

12,730.7

Cash and cash equivalents at the end of the year

2,983.0

2,600.8

 

Notes to the financial statements

for the year ended 31 December 2010

 

1. Authorisation of financial statements and compliance with IFRS

Fundamental accounting concept

The financial statements have been prepared on a going concern basis which assumes that the Company and the Group will continue in operating existence for the foreseeable future and meet its liabilities as they fall due. There are uncertainties that the Directors have had to consider in deciding to prepare the financial statements on the going concern basis, which are summarised below.

 

Business planning uncertainty

The Report of the Chief Executive Officer on pages 6 to 9 sets out the strategy of the business and what it is seeking to achieve and the milestones it aims to reach. Whilst the Directors believe these milestones are realistic, there are inevitably uncertainties as to whether they will be achieved in full and in time.  In addition, following the appointment of Steven Rudofsky and Nicholas Myerson on 24 June 2011, the Board has commenced a business plan review process to be concluded no later than mid-August 2011. The review may or may not result in changes to the existing business plan. While the Board is confident it can deliver a jatropha based strategy that is viable and cash generative over the longer term, until the business plan is finalised the Board cannot assess with certainty the implications of pursuing a revised business plan.

 

Funding uncertainty

The Directors informed the market over eighteen months ago that the Company would require a further injection of funds during 2011 and, as such, have been working on a new fund raising exercise. Following the appointment to the Board on 24 June 2011 of Steven Rudofsky and Nicholas Myerson, the Board now believes it will secure sufficient shareholder support to pass a resolution to enable sufficient funds to be raised once a successful business plan review has been completed. The Board currently intends to seek sufficient funds to cover the business's activities until key harvest and animal feed milestones are reached in mid-2012.  The Board believes that the case will be made in time for final follow on funding for capital investment ahead of the business becoming cash generative. The Board is encouraged by the feedback it has received to date on the willingness of existing shareholders to participate in a future fund raising. However, if the Directors are unable to secure the appropriate level of shareholder support for the strategy and associated future fund raising before late 2011 and again by mid-2012, the Company and the Group will be unable to continue as a going concern.

 

Directors' view

After making enquiries and considering these uncertainties, the Directors conclude that the implications of the business plan review and whether funding can be secured before cash resources are depleted are material uncertainties which may cast significant doubt about the Group and Company's ability to continue as a going concern in its current form. The Directors believe that these uncertainties can be managed and mitigated and the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. Consequently the Directors believe that it is appropriate to prepare the financial statements on a going concern basis.  

 

Should the strategic milestones not be achieved or the business plan be changed in a way which restricts the Group's ability to implement or fund the business plan, then the going concern basis would be invalid and adjustments may have to be made to reduce the value of the assets to their recoverable amount, to provide for any further liabilities which might arise and to reclassify fixed assets and long term liabilities to current assets and current liabilities.


Authorisation of financial statements

The financial statements of D1 Oils plc and its subsidiaries for the year ended 31 December 2010 were authorised by the Board of Directors on 27 June 2011 and the balance sheet was signed on the Board's behalf by Martin Jarvis, Chief Executive Officer. D1 Oils plc is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are traded on AIM.

 

2. Summary of significant accounting policies

 

Basis of preparation

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 December 2010 and applied in accordance with the Companies Act 2006.

 

The Group financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£000) except where otherwise indicated.

 

The revision of IAS 1 Presentation of Financial Statements (revised 2007) has introduced a number of changes in the format and content of the financial statements. The revised statement has required the reconciliation of movements in equity, previously disclosed in the notes, to be presented as a primary statement entitled 'statement of changes in equity'. In addition, the statement of recognised income and expense has been replaced by the 'statement of comprehensive income'. The revised standard requires this statement to include all items of recognised income and expense either in one single statement or in two linked statements. The Group has elected to present two statements.

 

Key sources of estimation uncertainty

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. The nature of estimation means that actual outcomes could differ from those estimates.

 

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

Impairment of non-financial assets

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill and other indefinite life tangible and intangible assets are tested for impairment annually and at other times when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. Where realisable value is used as the basis of valuation, management must estimate the net income realisable from the sale of the asset and apply an appropriate discount rate to the cash flows arising.

 

Share-based payments

The estimation of the share-based payment cost requires the selection of an appropriate valuation model, consideration as to the inputs necessary for the valuation model chosen and the estimation of the number of awards that will ultimately vest, inputs which arise from judgments relating to the probability of meeting non-market performing performance conditions and the continuing participation of employees. Where the non-vesting conditions are included in the valuation model, the Group recognises the goods or services received from a counterparty who satisfies all other vesting conditions irrespective of whether that market condition is satisfied.

 

Basis of consolidation

The Group financial statements consolidate the financial statements of D1 Oils plc and the entities it controls drawn up to 31 December each year.

 

Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.  Control comprises the power to govern the financial and operating polices of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights, currently exercisable or convertible voting rights, or by way of contractual agreement.

 

The financial statements of subsidiaries are prepared for the same reporting year as the parent Company and are based on consistent accounting policies. All inter-company balances and transactions, including unrealised profits arising from intra-group transactions, are eliminated.  Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries that is not held by the Group and is presented within equity in the consolidated balance sheet, separately from the parent Company's shareholders' equity.  When a subsidiary is not wholly owned by the Group and it incurs losses, amounts allocated to the minority are limited to the value in the balance sheet of the minority interest in the subsidiary's equity. Losses in excess of this limit have been allocated against the majority interest, except where the non-controlling interest is under an obligation to make good any loss.

 

Interests in joint ventures

A joint venture is defined in IAS 31 as a 'contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control'.

 

Where the joint venture is established through an interest in a company, partnership or other entity (a jointly controlled entity), the Group recognises its interest in the entity's assets and liabilities using the equity method of accounting.  Under the equity method, the interest in the joint venture is carried in the balance sheet at cost plus post-acquisition changes in the Group's share of its net assets, less distributions received and less any impairment in value of individual investments.  The Group income statement reflects the share of the jointly controlled entity's results after tax.  The Group statement of recognised income and expense reflects the Group's share of any income and expense recognised by the jointly controlled entity outside profit and loss.

 

Any goodwill arising on the acquisition of a jointly controlled entity, representing the excess of the cost of the investment compared to the Group's share of the net fair value of the entity's identifiable assets, liabilities and contingent liabilities, is included in the carrying amount of the jointly controlled entity and is not amortised.  To the extent that the net fair value of the entity's identifiable assets, liabilities and contingent liabilities is greater than the cost of the investment, a gain is recognised and added to the Group's share of the entity's profit or loss in the period in which the investment is acquired.

 

Financial statements of jointly controlled entities are prepared for the same reporting period as the Group.  Where necessary, adjustments are made to bring the accounting policies into line with those of the Group to take into account fair values assigned at the date of acquisition and to reflect impairment losses where appropriate.  Adjustments are also made in the Group's financial statements to eliminate the Group's share of unrealised gains and losses on transactions between the Group and its jointly controlled entities. 

 

The Group ceases to use the equity method on the date from which it no longer has joint control over, or significant influence in, the joint venture.

 

Where the financial statements of a jointly controlled entity used in the preparation of the financial statements are prepared as of a reporting date that is different from that of the Group, interim accounts are drawn up as at the Group reporting date and adjustments are made for the effects of significant transactions or events falling within the Group reporting period. 

 

Financial assets

 

Financial assets are recognised when the Group becomes party to the contracts that give rise to them and are classified as loans and receivables or held-to-maturity investments, as appropriate.  Financial assets also include cash and cash equivalents, trade and other receivables, other investments and derivative financial instruments. The Group determines the classification of its financial assets at initial recognition.  When financial assets are recognised initially, they are measured at fair value, being the transaction price plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. 

 

The subsequent measurement of financial assets classified as fair value financial assets is as follows:

 

The fair value of quoted investments is determined by reference to bid prices at the close of business on the balance sheet date.  When there is no active market, fair value is determined using valuation techniques.  These include using recent arm's length market transactions, reference to the current market value of another instrument which is substantially the same discounted cash flow analysis and pricing models.  Where fair value cannot be reliably estimated, assets are carried at cost.

 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, do not qualify as trading assets and have not been designated as either fair value through profit and loss or available for sale.  Such assets are carried at amortised cost using the effective interest method if the time value of money is significant.  Gains and losses are recognised in income when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

 

Derecognition of financial assets and liabilities

A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires.

 

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, such that the difference in the respective carrying amounts together with any costs or fees incurred are recognised in profit or loss.

 

Impairment of financial assets

The Group assesses at each balance sheet date whether a financial asset or group of assets is impaired. 

 

Assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition).  The carrying amount of the asset is reduced with the amount of the loss recognised in administration costs.

 

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed.  Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

 

Intangible assets

Research and development expenditure

The Group undertakes a range of plant science related research and development activities.

Breeding and cultivar research involves testing how well individual Jatropha curcas cultivars perform in identified growing areas. In these trials, the key performance characteristics of grain and oil yield and disease and insect resistance are measured, typically over a period of two years. On the basis of these tests, a number of the best performing cultivars are identified as technically feasible and are selected for commercial release. Any costs incurred up to the point of selection of these cultivars are regarded as research and are charged to the income statement as they are incurred. Costs subsequently incurred in producing the mother plants for planting seed orchards are classed as development expenditure and are capitalised as intangible assets. However, the useful economic life of any particular cultivar cannot be accurately predicted and may be as little as one year before it is superseded by the next generation. Therefore development expenditure is written off over a period of 12 months.

 

The animal feed programme investigates alternative uses for and the removal of anti-nutritional substances from the seedcake (meal) co-product created when oil is extracted from the Jatropha kernel. Any costs incurred in the design and construction of prototype processes and equipment are capitalised as intangible assets and charged against income over the useful economic life of the process. Otherwise costs are expensed to the income statement as incurred.

 

Software

Software is initially carried at cost and thereafter stated at cost less accumulated amortisation and accumulated impairment losses.  Intangible assets with a finite life have no residual value and are amortised on a straight-line basis over their expected useful economic lives of 3-5 years.

 

The carrying value of intangible assets is reviewed for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable.  In addition, the carrying value of capitalised development expenditure is reviewed for impairment annually before being brought into use.

 

Leases

Assets held under finance leases, which transfer to the Group substantially all of the risks and benefits incidental of ownership of the leased item, are capitalised at the inception of the lease, with a corresponding liability being recognised for the lower of the fair value of the leased asset and the present value of minimum lease payments. Lease payments are apportioned between reduction of the lease liability and finance charges in the income statement so as to achieve a constant rate of interest on the remaining balance of the liability. Assets held under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term.

 

Leases where the lessor retains a significant portion of the risks and benefits of ownership of the asset are classified as operating leases and rentals payable are charged in the income statement on a straight-line basis over the lease term.

 

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. Restricted deposits held as security are classified as financial assets rather than cash where the terms of the deposit mean that the balance cannot be readily converted to finance the day-to-day operations of the Group.

 

For the purpose of the consolidated cash flow statement, cash and cash equivalents are as defined above, net of outstanding bank overdrafts.

 

The Group endeavours to maintain sufficient cash at bank and in hand to fund operations in the short-term and invests surplus funds in term deposits to maximise interest revenue.

 

Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.  Borrowing costs attributable to assets under construction are recognised as an expense as incurred.

 

Depreciation is provided on all property, plant and equipment, other than land, on a straight-line basis over the expected useful life as follows:

 

Buildings

over 20 years

Plant and machinery

over 3-10 years

Motor vehicles

over 3-10 years

Fixtures, fittings and equipment

over 3-5 years

 

The carrying value of property, plant and equipment is reviewed for impairment and are written down immediately to their recoverable amount if events or changes in circumstance indicate the carrying value may not be recoverable. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.

 

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.  Any gain or loss arising on the derecognition of the asset is included in the income statement in the period of derecognition. 

 

Where assets are held under finance leases and there is reasonable certainty that the Group will obtain ownership of the asset by the end of the lease term (based on best estimates as at the balance sheet date), the asset is depreciated over its expected useful economic life. Otherwise, assets held under finance lease are depreciated over the shorter of the lease term and its useful economic life.

 

Agricultural assets

 

The Group grows Jatropha curcas, which meets the classification of an agriculture asset and is able to be recognised in the balance sheet if the following criteria are met:

 

·      the entity controls the asset as a result of past events;

·      it is probable that future economic benefits associated with the asset will flow to the entity; and

·      the fair value or cost of the asset can be measured reliably.

 

The Group passes the first two tests, however, in regard to the fair value test; it is presumed that fair value can be measured reliably.  This presumption is rebutted on the initial recognition of the agriculture assets because no market-determined prices or values are available nor can alternative estimates for fair value be considered reliable.  Therefore, the agriculture assets of the Group are measured at its cost less any accumulated depreciation and any accumulated impairment losses.

 

Agriculture assets include the preparations of previously untreated ground and the planting of Jatropha seeds and seedlings and subsequent cultivation.  Once mature the Jatropha trees bear seeds that contain crude Jatropha oil.  This crude oil can be refined to produce biodiesel. 

 

The direct costs of site preparation, planting seedlings and cultivation to the point at which the trees are mature and producing seeds, are capitalised and amortised over the useful life of the trees, which is on average 30 years.

 

Employee benefits

Defined contribution plans

The Group's funding of the defined contribution plans is charged to the income statement in the same year as the related service is provided.

 

Leave benefits

Annual leave is provided for over the period that the leave accrues.

 

Foreign currency translation

 

The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in Pounds Sterling, which is the functional currency of the Company, and the presentation currency for the Group consolidated financial statements.

 

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

 

Exchange differences are recognised in profit or loss in the period in which they arise except for:

 

·      exchange differences on transactions entered into to hedge certain foreign currency risks; and

·      exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on discontinuation of activities in the foreign operation or partial disposal of the net investment.

 

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity.

 

The Group has taken advantage of the exemption in IFRS 1 in respect of cumulative translation differences so as to record the cumulative translation differences for all foreign entities as nil as at 1 January 2006.

 

Business combinations and goodwill

Business combinations on or after 1 January 2006 are accounted for under IFRS 3 using the purchase method.  Any excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised in the balance sheet as goodwill and is not amortised.  To the extent that the net fair value of the acquired entity's identifiable assets, liabilities and contingent liabilities is greater than the cost of the investment, a gain is recognised immediately in the income statement.  Goodwill recognised as an asset as at 31 December 2005 is recorded at its carrying amount under UK GAAP and is not amortised.  Any goodwill asset arising on the acquisition of equity accounted entities is included within the cost of those entities. The Group elected to adopt the revised IFRS 3 issued in January 2008 for the 2009 financial statements. The only material impact of the adoption on the Group's 2009 acquisition was that the revised IFRS 3 required the costs of acquisition to be recognised as an expense. Other changes include altering the treatment of non-controlling interests (formerly minority interests) with an option to recognise these at full fair value as at the acquisition date and a requirement for previously held non-controlling interests to be fair valued as at the date control is obtained, with gains and losses recognised in the income statement.

 

 

After initial recognition, goodwill is stated at cost less any accumulated impairment losses, with the carrying value being reviewed for impairment, at least annually and whenever events or changes in circumstances indicate that the carrying value may be impaired.

 

For the purpose of impairment testing, goodwill is allocated to the related cash-generating units expected to benefit from the combination's synergies and monitored by management.  Where the recoverable amount of the cash-generating unit is less than its carrying amount, including goodwill, an impairment loss is recognised in the income statement. On disposal of a cash-generating unit, the allocated goodwill is taken into account when determining the gain or loss on disposal to be recognised in the income statement.

 

Inventories

Inventories are stated at the lower of cost and net realisable value.  Cost includes all costs incurred in bringing each product to its present location and condition, as follows:

 

Raw materials, consumables and goods held for resale           - purchase cost on a first-in, first-out basis

Work in progress and finished goods                                             - cost of direct materials and labour plus attributable overheads based on a normal level of activity, excluding borrowing costs

 

Net realisable value is based on estimated selling price less any further costs expected to be incurred to completion and disposal.

 

Trade and other receivables

Trade receivables, which generally have 30 day terms, are recognised and carried at the lower of their original invoiced value and recoverable amount.  Provision is made where there is objective evidence that the Group will not be able to recover balances in full.  Balances are written off when the probability of recovery is assessed as being remote.

 

Interest bearing loans and borrowings

Loans and borrowings are recognised when the Group becomes party to the related contracts and are measured initially at fair value, being the proceeds received less directly attributable transaction costs.

 

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method and taking into account any issue costs and any discount or premium on settlement.

Gains and losses arising on the repurchase, settlement or other cancellation of liabilities are recognised respectively in finance revenue and finance cost.

 

Income taxes

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date.

 

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:

 

·      where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither the accounting nor taxable profit or loss;

·      in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

·      deferred income tax assets are recognised only to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.

 

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

 

Tax is charged or credited directly to equity if it relates to items that are credited or charged to equity.  Otherwise tax is recognised in the income statement.

 

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured.  Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes or duty.  The following criteria must also be met before revenue is recognised:

 

Sale of goods

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on dispatch of the goods.

 

Interest income

Finance revenue is recognised as interest accrued using the effective interest method, that is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instruments to its net carrying amount.

 

Borrowing costs

Borrowing costs on eligible capital projects are capitalised. Other borrowing costs are recognised as an expense when incurred.

 

Share-based payments

Equity-settled transactions

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become entitled to the award.  Fair value is determined by an external valuer using an appropriate pricing model.  In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions).

 

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.

 

At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions and of the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity.

 

Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period.  In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification.  No reduction is recognised if this difference is negative.

 

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the income statement for the award is expensed immediately.  Any compensation paid up to the fair value of the award at the cancellation is deducted from equity, with any excess over fair value being treated as an expense in the income statement.

 

Assets held for sale

When an asset or disposal group's carrying value will be recovered principally through a sale transaction rather than through continuing use, it is classified as held for sale and stated at the lower of carrying value and fair value less costs to sell. No depreciation is charged in respect of non-current assets classified as held for sale.

 

New standards and interpretations

The accounting policies adopted in the preparation of the Group's annual financial statements are consistent with those followed in the preparation of the annual financial statements for the year ended 31 December 2009, except for the adoption of new Standards and Interpretations as of 1 January 2010 listed below:

 

·      IFRS 2 - Amendment to IFRS 2 - Group cash-settled share-based payments. The amendments clarified the classification of share-based payment awards in parent and subsidiary companies and addressed plans not considered in the original Standard. The adoption of this amendment has not had a material impact on the financial position or performance of the Group.

 

The amendments to the following standards did not have any impact on the accounting policies, financial position or performance of the Group:

 

·      IAS 27 - Amendment - Consolidated and separate financial statements - effective 1 July 2009.

·      IAS 39 - Amendment - Eligible hedged items - effective 1 January 2010.

·      IFRIC 9 - Reassessment of embedded derivatives - effective 1 January 2010.

·      IFRIC 16 - Hedges of a net investment in a foreign operation - 1 January 2010.

·      IFRIC 17 - Distribution of non-cash assets to owners - effective 1 July 2009.

·      IFRIC 18 - Transfers of assets from customers - effective in EU no later than 1 January 2010.

·      Various - Annual improvements to IFRS - effective various dates but most 1 January 2010.

 

The IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements:

 

·      IFRS 1 - Amendment - First time adoption of IFRS - effective 1 July 2010.

·      IAS 24 - Amendment - Related party disclosures - effective 1 January 2010.

·      IAS 32 - Amendment - Financial instruments: presentation - effective 1 February 2010.

·      IFRIC 14 - Amendment - IAS 19 limit on a defined benefit asset - effective 1 January 2011.

·      IFRIC 19 - Extinguishing financial liabilities with equity instruments - effective 1 July 2010.

 

Except for the amended disclosure requirements of IAS 24, the Directors do not anticipate that the adoption of these standards will have a material impact on the Group's financial statements in the period of initial application.

 

The IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements that have not yet been endorsed by the European Union:

 

·      IFRS 1 - Amendment - First time adoption of IFRS - effective 1 July 2010.

·      IFRS 7 - Amendment - Financial instruments: disclosures - effective 1 July 2011

·      IFRS 9 - Financial instruments - effective 1 January 2013.

·      IFRS 10 - Consolidated financial statements - effective 1 January 2013.

·      IFRS 11 - Joint arrangements - effective 1 January 2013.

·      IFRS 12 - Disclosure of involvement with other entities - effective 1 January 2013.

·      IFRS 13 - Fair value measurement - effective 1 January 2013.

·      IAS 12 - Amendment - Income taxes - effective 1 January 2012.

·      IAS 27 - Amendment - Separate financial statements - effective 1 January 2013.

·      IAS 28 - Amendment - Investment in associates and joint ventures - effective 1 January 2013.

 

The Group has not yet assessed the impact of IFRS 9, IFRS 10, IFRS 11, IFRS 12, IFRS 13, IAS 27 nor IAS 28. The Directors do not anticipate that the adoption of amendments to IFRS 1, IFRS 7 and IAS 12 will have a material impact on the Group's financial statements in the period of initial application.

 

3. Segmental information

 

For management purposes, the Group is organised into business units according to the nature of the products and services and has the following operating segments:

 

·      The Operations segment is responsible for the commercial planting of Jatropha. Its activities include managing the outgrower network, collecting grain and selling crude Jatropha oil.

 

·      The Science & Technology segment provided Jatropha plant science and associated technical consulting services to third-parties, breeds seeds and seedlings for commercial planting and undertakes research and development activities on Jatropha and its co-products. In December 2010, the disposal of a substantial portion of this segment was effected, with the exception of the animal feed activity. The effective financial date of disposal was 1 November 2010. For the purposes of segmental reporting, the agronomy and breeding activities that were disposed of in 2010 are classified as discontinued while the ongoing animal feed activity is classified as continuing. Comparatives have been restated on this basis.

 

·      The Refining & Trading segment is an operation that was discontinued in 2008. In 2010, activity in this segment related to remaining refining and trading sites situated in the UK.

 

No operating segments have been aggregated to form the above reportable operating segments.

 

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss which in certain respects, as explained in the table below, is measured differently from profit or loss in the consolidated financial statements. Group financing (including finance costs and finance revenue), taxation and central administration are managed on a group basis and are not allocated to operating segments.

 

The following tables present revenue and profit and certain asset and liability information regarding the Group's business segments for the years ended 31 December 2010 and 2009.

 

Segment revenue and results

 










Operations

Science & Technology (continuing)

Continuing operations

Refining & Trading (discontinued)

Science & Technology (discontinued)

Discontinued operations

Group

Year ended 31 December 2010

£000

£000

£000

£000

£000

£000

£000

Revenue








Sales to external customers

105.2

63.0

168.2

-

165.9

165.9

334.1

Segment revenue

105.2

63.0

168.2

-

165.9

165.9

334.1

Results








Depreciation and amortisation

(67.1)

(8.0)

(75.1)

-

(38.7)

(38.7)

(113.8)

Share of profit/(loss) of joint ventures

(306.1)

-

(306.1)

-

-

-

(306.1)

Loss on disposal of agronomy and breeding business

-

-

-

-

(865.8)

(865.8)

(865.8)

Legal settlement gain

-

-

-

21.7

-

21.7

21.7

Interest expense

-

-

-

-

(1.6)

(1.6)

(1.6)

Impairment of assets held for sale

-

-

-

(0.7)

-

(0.7)

(0.7)

Other costs

(1,434.6)

(284.9)

(1,719.5)

902.0

(2,953.4)

(2,051.4)

(3,770.9)

Segment profit/(loss)

(1,702.6)

(229.9)

(1,932.5)

923.0

(3,693.6)

(2,770.6)

(4,703.1)

Central administration costs







(1,959.7)

Unallocated finance revenue







386.1

Unallocated finance costs







(57.8)

Taxation







246.1

Total loss for the year







(6,088.4)

 

 










Operations

Science & Technology (continuing)

Continuing operations

Refining & Trading (discontinued)

Science & Technology (discontinued)

Discontinued operations

Group


Restated

Restated

Restated

Restated

Restated

Restated

Restated

Year ended 31 December 2009

£000

£000

£000

£000

£000

£000

£000

Revenue








Sales to external customers

33.7

73.0

106.7

1.7

1,690.6

1,692.3

1,799.0

Segment revenue

33.7

73.0

106.7

1.7

1,690.6

1,692.3

1,799.0

Results








Depreciation and amortisation

(37.5)

(13.5)

(51.0)

-

(132.6)

(132.6)

(183.6)

Share of profit/(loss) of joint ventures

(95.0)

-

(95.0)

-

-

-

(95.0)

Gain on finance lease settlement

-

-

-

405.0

-

405.0

405.0

Legal settlement gain

-

-

-

692.4

-

692.4

692.4

Interest expense

-

-

-

(81.3)

-

(81.3)

(81.3)

Impairment of assets held for sale

-

-

-

(64.8)

-

(64.8)

(64.8)

Other costs

(1,142.8)

(388.9)

(1,531.7)

(1,913.8)

(4,042.3)

(5,956.1)

(7,487.8)

Segment profit/(loss)

(1,241.6)

(329.4)

(1,571.0)

(960.8)

(2,484.3)

(3,445.1)

(5,016.1)

Central administration costs







(3,640.7)

Net gain on transfer of operation from joint venture







2,812.9

Unallocated finance revenue







667.5

Unallocated finance costs







(23.0)

Taxation







171.7

Total loss for the year







(5,027.7)

 

The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 2. Segment profit represents the profit earned by each segment without allocation of central administration costs, investment gains or losses, unallocated finance revenue, unallocated finance costs and taxation. This is the measure used for reporting to the Group's chief operating decision makers for the purpose of allocation and assessment of segment performance.

 

Loss before tax on continuing operations

 







Year ended 31 December 2010

Year ended 31 December 2009








Restated







£000

£000

Operations






(1,702.6)

(1,241.6)

Science & Technology (continuing)






(229.9)

(329.4)

Central administration costs






(1,621.2)

(190.3)

Total loss before tax on continuing operations





(3,553.7)

(1,761.3)

 

Segment assets

 


Operations

Science & Technology (continuing)

Continuing operations

Refining & Trading (discontinued)

Science & Technology (discontinued)

Discontinued operations

Group

Year ended 31 December 2010



£000

£000

£000

£000

£000

Assets








Operating assets

487.5

26.1

513.6

401.5

-

401.5

915.1

Segment assets

487.5

26.1

513.6

401.5

-

401.5

915.1

Unallocated assets







3,895.7

Consolidated total assets







4,810.8

 


Operations

Science & Technology (continuing)

Continuing operations

Refining & Trading (discontinued)

Science & Technology (discontinued)

Discontinued operations

Group


Restated

Restated

Restated

Restated

Restated

Restated

Restated

Year ended 31 December 2009



£000

£000

£000

£000

£000

Assets








Equity accounted investments

206.1

-

206.1

-

-

-

206.1

Operating assets

1,242.6

30.8

1,273.4

2,477.2

1,084.0

3,561.2

4,834.6

Segment assets

1,448.7

30.8

1,479.5

2,477.2

1,084.0

3,561.2

5,040.7

Unallocated assets







7,998.2

Consolidated total assets







13,038.9

 

For the purposes of monitoring segment performance and allocating resources between segments, the Group's chief operating decision makers monitor the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments except assets relating to central administration.

 

Segment liabilities

 


Operations

Science & Technology (continuing)

Continuing operations

Refining & Trading (discontinued)

Science & Technology (discontinued)

Discontinued operations

Group

Year ended 31 December 2010



£000

£000

£000

£000

£000

Liabilities








Operating liabilities

(105.9)

-

(105.9)

(105.3)

(56.2)

(161.5)

(267.4)

Segment liabilities

(105.9)

-

(105.9)

(105.3)

(56.2)

(161.5)

(267.4)

Unallocated liabilities







(1,322.4)

Consolidated total liabilities







(1,589.8)

 


Operations

Science & Technology (continuing)

Continuing operations

Refining & Trading (discontinued)

Science & Technology (discontinued)

Discontinued operations

Group


Restated

Restated

Restated

Restated

Restated

Restated

Restated

Year ended 31 December 2009



£000

£000

£000

£000

£000

Liabilities








Operating liabilities

(158.3)

-

(158.3)

(1,471.3)

(470.6)

(1,941.9)

(2,100.2)

Segment liabilities

(158.3)

-

(158.3)

(1,471.3)

(470.6)

(1,941.9)

(2,100.2)

Unallocated liabilities







(1,355.6)

Consolidated total liabilities







(3,455.8)

 

 

For the purposes of monitoring segment performance and allocating resources between segments, the Group's chief operating decision makers monitor the operating and financial liabilities attributable to each segment. All liabilities are allocated to reportable segments except liabilities relating to central administration.

 

Capital expenditure

 


Operations

Science & Technology (continuing)

Continuing operations

Refining & Trading (discontinued)

Science & Technology (discontinued)

Discontinued operations

Group

Year ended 31 December 2010



£000

£000

£000

£000

£000

Capital expenditure

48.0

-

48.0

-

13.3

13.3

61.3

 


Operations

Science & Technology (continuing)

Continuing operations

Refining & Trading (discontinued)

Science & Technology (discontinued)

Discontinued operations

Group


Restated

Restated

Restated

Restated

Restated

Restated

Restated

Year ended 31 December 2009



£000

£000

£000

£000

£000

Capital expenditure

27.0

3.7

30.7

-

30.2

30.2

60.9

 

 

Geographical information

 

The Group's revenue from external customers and information about its segment assets (non-current assets excluding financial instruments, deferred tax assets, post-employment benefit assets, and rights arising under insurance contracts) by geographical location are detailed below:

 







Year ended 31 December 2010

Year ended 31 December 2009







£000

£000

Revenue from external customers








United Kingdom






103.8

1,573.9

India






82.4

-

Belgium






46.5

0.1

Netherlands






26.5

198.1

Cape Verde






44.1

26.9

Other






30.8

-

Total revenue from external customers






334.1

1,799.0

Non-current assets








United Kingdom






34.8

323.1

India






84.9

98.7

Cape Verde






-

53.7

Indonesia






20.8

44.8

Zambia






28.7

16.4

Thailand






-

50.8

Other






-

20.3

Total non-current assets






169.2

607.8

 

4. Revenue and administrative costs

Revenue recognised in the income statement is analysed as follows:


 Year ended

Year ended


31 December

31 December


2010

 2009



Restated


 £000

 £000

Continuing operations



Sales of goods

168.2

106.7

Finance revenue

58.8

602.7


227.0

709.4

Discontinued operations



Sales of goods

-

1,692.3

Finance revenue

12.6

469.8


12.6

2,162.1

No revenue was derived from exchanges of goods or services.

 

Group operating loss is stated after charging/(crediting):


 Year ended

Year ended


31 December

31 December


2010

 2009


 £000

 £000

Depreciation of plant, property and equipment

134.9

213.4

Amortisation of intangible assets

0.7

4.0

Impairment of assets held for sale

48.1

64.8

Net foreign currency differences

36.7

(323.7)

Net expenditure on research and development after tax credits

(20.1)

329.4

Auditors' remuneration



- audit fees

73.0

69.6

- interim audit

-

31.7

- overseas audit

60.0

60.0

- taxation services

35.4

76.5

- consulting services

2.4

9.7

Total

170.8

247.5

Payment under operating leases



- property

345.7

671.1

- plant and machinery

3.2

4.4

 

5. Staff numbers and costs

The average number of persons employed by the Group (including Directors) during the year, analysed by category was as follows:


 Year ended

Year ended


31 December

31 December


2010

 2009


 Number

Number

Executive Directors

1

2

Technical

45

57

Administration and operational staff

66

50

Total

112

109

 

Average staff numbers should drop considerably in 2011 following the disposal of a large portion of the Science & Technology division.

 

The costs incurred in respect of these employees (including Directors) were:


 Year ended

Year ended


31 December

31 December


2010

 2009


 £000

 £000

Wages and salaries

2,000.8

2,168.1

Social security costs

193.3

383.1

Other pension costs

50.6

64.5

Total

2,244.7

2,615.7

Other pension costs consist of contributions to defined contribution pension plans.

 

6. Key management remuneration







Year ended

Year ended

 







31 December

31 December

 







2010

2009

 








Restated

 







£000

£000

 

Executive Directors








 

Benjamin Richard Good (a)






139.5

180.0

 

Henk Jean Pierre Joos






154.1

190.6

 

Martin John Jarvis (b)






167.4

27.0

 

Non-Executive Directors








 

John Barclay Forrest






64.6

50.0

 

Moira Elizabeth Black






3.8

42.0

 

Charles John Nicholas Ward





52.1

-

 







581.5

489.6

 









 

Fees paid to third parties (c)




7.2

35.0


35.0

 

(a)       In 2010, in addition to remuneration of £139,500, Ben Good received £158,800 in termination benefits. In 2010, post employment benefits for Ben Good consisted of £10,300 in contributions to the defined contribution pension scheme operated by the Group (2009: £7,200).

(b)       In 2010, post employment benefits for Martin Jarvis consisted of £12,600 in contributions to the defined contribution pension scheme operated by the Group (2009: £1,100).

(c)       Fees paid to third parties in respect of the directorship of Brian Myerson.

 

The value of short-term employee benefits for key management personnel as measured in accordance with IAS 24 (which includes employer's national insurance contributions) is £633,700 (2009: £525,600).

 

The people identified as key management in the table above were also the directors of D1 Oils plc.

 

 


Options




Options





1 January

Granted

Exercised

Lapsed in

31 December

Exercise

Exercisable



 

2010(a)

 

2010

2010

 

 

2010 (c)

 

2010

price

date

Expiry date

John Barclay Forrest



 78,125

-

-

-

78,125



£1.28



October-05



October-14

Henk Jean Pierre Joos


 170,915

-

-

(170,915)

-


£2.30

(b)


October-16

Henk Jean Pierre Joos


 56,250

-

-


 (56,250)

-


£1.73

(b)


March-17

Benjamin Richard Good



 208,696

-

-



 (208,696)

-



£1.73

(b)



March-17

Benjamin Richard Good



 1,284,000

-

-



 (1,284,000)

-



£0.21

(b)



May-18

Henk Jean Pierre Joos


 1,417,000

-

-


(1,417,000)

-


£0.21

(b)


May-18

Martin John Jarvis


412,500

-

-

-

412,500


£0.10

(b)

September-19

Benjamin Richard Good



467,500

-

-



(467,500)

-


£0.10

(b)

September-19

Henk Jean Pierre Joos


450,000

-

-


(450,000)

-


£0.10

(b)

September-19


4,544,986

-

-

(4,054,361)

490,625




 

(a) Options in issue at 1 January 2010 or the date of appointment if later.

(b) These options have been granted as one third exercisable on the first anniversary of their date of grant. Thereafter a further 1/36 vests each month over the next 24 months so that the full amount is capable of being exercised after three years. The aggregate amounts of gains made by former Directors on the exercise of share options during the year amounted to £nil (2009: £2,125). This represents the market price of the shares in excess of the exercise price on the date the options were exercised.

(c) Share option lapsed upon cessation of employment or engagement with the Group.

 

7. Finance revenue and costs


 Year ended

Year ended


31 December

31 December

Continuing operations

2010

 2009



Restated


 £000

 £000

Interest received on bank deposits

34.6

176.6

Net foreign exchange movements

338.9

488.4

Finance revenue

373.5

665.0

Other finance charges

(47.7)

(21.7)

Interest accretion on deferred consideration payable

(10.1)

-

Finance costs

(57.8)

(21.7)

 

8. Taxation

Tax recognised in the income statement



Continuing operations


Discontinued operations


Total


Year ended

Year ended

Year ended

Year ended

 Year ended

Year ended


31 December

31 December

31 December

31 December

31 December

31 December


2010

2009

2010

2009

2010

 2009



Restated


Restated


Restated


£000

£000

£000

£000

 £000

 £000

Current tax credit - UK

(250.0)

(22.6)

-

(47.9)

(250.0)

(70.5)

Current tax expense/ (credit) - overseas

14.1

(108.2)

(10.2)

7.0

3.9

(101.2)

Tax reported in consolidated income statement

(235.9)

(130.8)

(10.2)

(40.9)

(246.1)


(171.7)

 

Reconciliation

A reconciliation of total tax applicable to accounting profit before tax at the Group's effective tax rate for the years ended 31 December 2010 and 31 December 2009 is as follows:


 Year ended

Year ended


31 December

31 December


2010

 2009


 £000

 £000

Loss on continuing activities before taxation

(3,553.7)

(1,761.3)

Loss on discontinued activities before taxation

(2,780.8)

(3,438.2)

Total loss on ordinary activities before taxation

(6,334.5)

(5,199.5)

At United Kingdom tax rate of 28%

(1,773.7)

(1,455.9)

Expenditure not allowable for tax purposes

(173.8)

73.4

Unrecognised deferred tax asset on impairment of assets

-

13.2

Share option charge

11.5

112.3

Share of loss of joint venture

85.7

26.6

Effect of different tax rates of subsidiaries in other jurisdictions

(1.3)

(2.3)

Non-taxable net gain on transfer of operations from joint venture

-

(770.2)

Unrecognised tax losses

1,883.5

2,258.0

Utilisation of prior year losses

(5.7)

(152.8)

Write back of investment impairment

-

(41.5)

Research and development tax credits

(263.9)

(232.5)

Disallowed loss on disposal of investments

(8.4)

-

Total tax income reported in consolidated income statement

(246.1)

(171.7)

 

The Group has trading tax losses of £57.2m (2009: £39.9m) that are available indefinitely for offset against future taxable profits of the same trade in the companies in which they arose. The value of the unrecognised trading tax losses at the current tax rate is £15.4m (2009: £11.2m). Deferred tax assets have not been recognised in respect of these trading losses as the companies with losses are not forecast to generate taxable profits for several years and the losses are not transferrable. In addition, the Group has capital tax losses of £13.4m (2009: £17.6m) available for offset against future capital gains. Deferred tax assets have not been recognised in respect of these capital losses as they are not expected to be utilised in the foreseeable future. The UK Government has announced that the future rate of Corporation Tax will fall to 23% by 2014. If enacted, this would have no material affect as no deferred tax asset is recognised.

 

9. Loss per ordinary share


 Year ended

Year ended


31 December

31 December


2010

 2009

For Group

 Number

Number

Weighted average number of shares in issue

126,481,574

126,438,697

 


Pence

Pence

Loss per ordinary share - basic and diluted

(4.81)

(3.98)

 


 Year ended

Year ended


31 December

31 December


2010

 2009



Restated

For Group from continuing operations

Number

Number

Weighted average number of shares in issue

126,481,574

126,438,697

 


Pence

Pence

Loss per ordinary share - basic and diluted

(2.62)

(1.29)

 

The number of shares in issue at 31 December 2010 was 126,675,219 (2009: 126,675,219). For the purposes of calculating the loss per ordinary share the weighted average number of shares excludes 193,645 shares (2009: 193,645 shares) held by the D1 Oils plc Employee Benefit Trust. No diluted loss per share has been disclosed as the share options are anti-dilutive. For the purposes of calculating earnings per share, the following profit figures were used:


 Year ended

Year ended


31 December

31 December


2010

 2009



Restated


 £000

 £000

Loss for the period attributable to equity holders of the parent from continuing operations

(3,317.8)

(1,630.5)

Loss for the period attributable to equity holders of the parent from discontinued operations

(2,770.6)


(3,397.2)

Total loss for the period attributable to equity holders of the parent

(6,088.4)

(5,027.7)

 

10. Property, plant and equipment




 Motor

 Plant and

 Fixtures





vehicles

machinery

and fittings

 Total

Group



 £000

 £000

 £000

 £000

Cost







At 1 January 2009



 33.6

 387.9

 200.2

 621.7

Additions



11.8

37.2

12.0

61.0

Acquired from D1-BP Fuel Crops



29.6

68.0

5.1

102.7

Disposal



(0.4)

(23.9)

(133.2)

(157.5)

Reclassify assets between categories




-


7.9


(7.9)


-

Foreign exchange movements




0.8


(2.3)


(1.4)


(2.9)

At 31 December 2009



75.4

474.8

74.8

625.0

Additions



25.5

41.2

0.2

66.9

Disposal



(42.2)

(221.4)

(48.9)

(312.5)

Foreign exchange movements



3.5

12.4

0.6

16.5

At 31 December 2010



62.2

307.0

26.7

395.9

Accumulated depreciation







At 1 January 2009



 29.6

 55.8

 34.0

 119.4

Charge for the year



10.6

174.2

28.6

213.4

Reclassify between categories



-

(20.1)

20.1

-

Elimination on disposal



(12.2)

(51.8)

(40.6)

(104.6)

Foreign exchange movements



-

(1.1)

(1.3)

(2.4)

At 31 December 2009



28.0

157.0

40.8

225.8

Charge for the year



22.8

101.3

10.8

134.9

Elimination on disposal



(27.3)

(79.5)

(36.9)

(143.7)

Foreign exchange movements



1.2

7.3

1.2

9.7

At 31 December 2010



24.7

186.1

15.9

226.7

Net book value







At 31 December 2010



37.5

120.9

10.8

169.2

At 31 December 2009



47.4

317.8

34.0

399.2

At 1 January 2009



4.0

332.1

166.2

502.3

 


 Plant and

Fixtures and



machinery

 fittings

 Total

Company

 £000

 £000

 £000

Cost




At 1 January 2009 and 31 December 2009

 5.8

 18.0

 23.8

Additions

28.3

-

28.3

Disposals

(5.8)

(18.0)

(23.8)

At 31 December 2010

28.3

-

28.3

Accumulated depreciation




At 1 January 2009

 1.0

 2.6

 3.6

Charge for the year

1.9

6.1

8.0

At 31 December 2009

2.9

8.7

11.6

Charge for the year

3.5

4.0

7.5

Disposals

(4.2)

(12.7)

(16.9)

At 31 December 2010

2.2

-

2.2

Net book value




At 31 December 2010

26.1

-

26.1

At 31 December 2009

2.9

9.3

12.2

At 1 January 2009

4.8

15.4

20.2

 

11. Intangible assets

Group

Software




licences

Goodwill

Total


£000

£000

£000

Cost




At 1 January 2009

 91.4

 64.1

 155.5

Disposals

(56.7)

 -

(56.7)

Foreign exchange movements

(0.1)

-

(0.1)

At 31 December 2009

34.6

64.1

98.7

Disposals

(7.5)

-

(7.5)

Foreign exchange movements

(0.7)

-

(0.7)

At 31 December 2010

26.4

64.1

90.5

Accumulated amortisation




At 1 January 2009

 84.8

 64.1

 148.9

Charge for the year

4.0

-

4.0

Disposals

(56.7)

-

(56.7)

At 31 December 2009

32.1

64.1

96.2

Charge for the year

0.7

-

0.7

Disposals

(6.0)

-

(6.0)

Foreign exchange movements

(0.4)

-

(0.4)

At 31 December 2010

26.4

64.1

90.5

Net book value




At 31 December 2010

-

-

-

At 31 December 2009

2.5

-

2.5

At 1 January 2009

6.6

 -

6.6

 

Goodwill arose on the acquisition of D1 Oil Subsidiary Limited by D1 Oils Trading Limited in 2004. It represents the excess of the fair value of the acquired net assets over their book value. As from 1 January 2006, the date of transition to reporting under IFRS, goodwill is no longer amortised but is now subject to annual impairment testing. The Directors took the decision to impair the carrying value of the goodwill in 2008 in light of the decision to cease refining and trading operations in the UK.

 

In 2008, software licences used in the refining and trading activities were impaired following the decision to close this operation.

 

The Company had no recognised intangible assets in 2009 or 2010.

 

12. Investments in subsidiaries and jointly controlled entities

The Company ultimately owns more than 10% of the share capital of the following companies:

Name

Nature of business

Country of incorporation

Shareholder class

Holding by D1 Oils plc

Percentage

D1 (UK) Limited

Biofuels

UK

Ordinary

Indirect

100%

D1 Oil Subsidiary Limited

Biofuels

UK

Ordinary

Direct

100%

D1 Oils Africa (Pty) Limited

Biofuels

Swaziland

Ordinary

Indirect

100%

D1 Oils Ghana Pty Limited

Dormant

Ghana

Ordinary

Indirect

100%

D1 Oils India Private Limited

Biofuels

India

Ordinary

Indirect

100%

D1 Oils Madagascar SARL

Biofuels

Madagascar

Ordinary

Indirect

99%

D1 Oils Malaysia Sdn Bhd

Dormant

Malaysia

Ordinary

Indirect

50%

D1 Oils Philippines Inc

Biofuels

Philippines

Ordinary

Indirect

100%

D1 Oils Plant Science (Zambia) Limited

Biofuels

Zambia

Ordinary

Indirect

100%

D1 Oils Plant Science Africa (Pty) Limited

Biofuels

South Africa

Ordinary

Indirect

100%

D1 Oils South Africa (Pty) Limited

Biofuels

South Africa

Ordinary

Indirect

95%

PT D1 Oils Plant Science Indonesia

Dormant

Indonesia

Ordinary

Direct

100%

D1 Oils Trading Limited

Biofuels

UK

Ordinary

Direct

100%

D1 Oils Ltd (Malawi)

Biofuels

Malawi

Ordinary

Indirect

100%

D1 Oils Fuel Crops Limited

Biofuels investment

UK

Ordinary

Indirect

100%

Fuel Crops Limited

Dormant

UK

Ordinary

Indirect

100%

Middlesbrough Oils UK Limited

Biofuels

UK

Ordinary

Indirect

100%

D1 Mohan Bio Oils Limited

Biofuels

India

Ordinary

Indirect

50%

D1 Williamson Magor Bio Fuel Limited

Biofuels

India

Ordinary

Indirect

50%

D1-BP Fuel Crops South Africa (Pty) Limited

Biofuels

South Africa

Ordinary

Indirect

95%

D1-BP Fuel Crops Zambia Limited

Biofuels

Zambia

Ordinary

Indirect

100%

D1 Oils Fuel Crops India Private Limited

Biofuels

India

Ordinary

Indirect

100%

D1-BP Fuel Crops Asia Pacific Pte Limited

Biofuels

Singapore

Ordinary

Indirect

100%

PT D1 Oils Indonesia

Biofuels

Indonesia

Ordinary

Indirect

100%

D1-BP Fuel Crops Malaysia SDN BHD

Dormant

Malaysia

Ordinary

Indirect

100%

D1-BP Fuel Crops Philippines, Inc

Dormant

Philippines

Ordinary

Indirect

100%

 

Investments in the Group comprise interests in joint ventures and trade investments. Investments in the Company comprise interests in subsidiary undertakings and trade investments.

 



D1-BP





Fuel Crops

Other




joint venture

joint ventures

Total

Group


£000

£000

£000

Cost





1 January 2009


-

-

-

Acquired through acquisition of D1-BP Fuel Crops Limited


-

301.1

301.1

Additional investment


-

-

-

Share of joint ventures' results


-

(95.0)

(95.0)

31 December 2009


-

206.1

206.1

Additional investment


-

100.0

100.0

Share of joint ventures' results


-

(306.1)

(306.1)

31 December 2010


-

-

-

 

At 1 January 2009, the Group was a 50% shareholder in D1-BP Fuel Crops, a joint venture valued at £nil in the Group accounts. On 27 July 2009, the Group purchased BP International's 50% holding in the share capital of D1-BP Fuel Crops.

 

Part of the activities the Group acquired as part of the acquisition of the whole of the D1-BP Fuel Crops share capital was a joint venture. The joint venture is a 50:50 partnership with Williamson Magor to undertake plantation activities in India. The Group equity accounts for the joint venture.

 










Subsidiary





undertakings

Company




£000

Cost





1 January 2009




125.1

31 December 2009




125.1

Additional investment




0.8

31 December 2010




125.9

 

The Group's share of the joint ventures' assets and liabilities are as follows:


2010

2009


£000

£000

Current assets

1,970.1

483.5

Non-current assets

31.8

32.2

Current liabilities

(320.6)

(309.6)

Non-current liabilities

-

-

Share of net assets of joint ventures (before impairment)

1,681.3

206.1

 

The Group's share of the joint ventures' losses is as follows:


2010

2009


£000

£000

Revenue

42.9

58.9

Net operating costs

(616.3)

(168.4)

Operating loss

(573.4)

(109.5)

Net finance income

7.5

11.8

Loss before tax

(565.9)

(97.7)

Income tax credit

-

2.7

Cap on joint venture losses

259.8

-

Share of losses of joint ventures

(306.1)

(95.0)

 

The Group did not recognise joint venture losses that would have reduced the joint venture investment below £nil. The Group is not exposed to joint venture liabilities in excess of its investment in the joint venture.

 

The D1-Williamson Magor joint venture had no capital commitments as at 31 December 2010.

 

13. Assets held for sale

In April 2008, the Group announced its intentions to exit from biodiesel refining and trading activities undertaken at its Middlesbrough and Bromborough sites. The following assets used in the refining and trading operations were reclassified as held for sale in April 2008. On 2 July 2010, the Group sold the Bromborough site and associated prepaid insurance for £2.2m. The sale price net of selling costs was £48,100 below the carrying value of the Bromborough site at 31 December 2009 and was recognised as an impairment to the asset in 2010. The Group is also due to receive up to £0.4m based on future production volumes from the site. The royalty has been classified as a contingent asset due to uncertainty about its timing and amount.

 



 Freehold

 Prepaid




land

insurance

 Total

As at 31 December 2010


 £000

 £000

 £000

Bromborough - site


-

-

-

 

 



 Freehold

 Prepaid




land

insurance

 Total

As at 31 December 2009


 £000

 £000

 £000

Bromborough - site


 2,000.0

124.0

2,124.0

 

14. Discontinued operations

By the end of 2010, the Group had two discontinued operations: i) Refining & Trading; and ii) the agronomy and breeding activities in Science & Technology.

 

Refining & Trading

 

On 9 April 2008, the Group announced the decision of its Board to cease biodiesel refining and trading operations. The two refining sites at Middlesbrough and Bromborough in the UK were closed. Closure of these businesses resulted in the sites and refining equipment being reclassified from plant, property and equipment to assets held for sale. The Middlesbrough site and associated assets were sold in June 2009. On 2 July 2010, the Group sold the Bromborough site and associated prepaid insurance for £2.2m. The Group is also due to receive up to £0.4m based on future production volumes from the site. The royalty has been classified as a contingent asset due to uncertainty about its timing and amount. At 31 December 2010, the refining and trading operations remained classified as discontinued operations.

 

The results of the refining and trading activities of the Group for the year are presented below:


 Year ended

Year ended


31 December

31 December


2010

 2009


 £000

 £000

Revenue

-

1.7

Expenses

971.1

(1,221.4)

Gross profit/(loss)

971.1

(1,219.7)

Asset impairment

(48.1)

(64.8)

Operating loss

923.0

(1,284.5)

Finance income

-

405.0

Finance costs

-

(81.3)

Profit/(loss) before tax from discontinued operation

923.0

(960.8)

Tax income

-

47.9

Profit/(loss) from discontinued operation

923.0

(912.9)

 

The 2009 expenses include the recovery of costs of £0.7m from a settlement with a US company.

 

The assets and liabilities of the refining and trading operations held for sale at 31 December are as follows:


 As at

As at


31 December

31 December


2010

 2009


 £000

 £000

Assets held for sale

-

2,124.0

 

The net cash flows incurred by the refining and trading operations are as follows:


Year ended

Year ended


31 December

31 December


2010

 2009


 £000

 £000

Operating

(244.0)

(374.3)

Investing

1,695.4

953.0

Financing

-

(3,368.1)

Net cash inflow/(outflow)

1,451.4

(2,789.4)

 

Agronomy and breeding activities in Science & Technology

 

In December 2010, the Group completed the disposal of the agronomy and breeding activities within the Science & Technology division with an effective financial date of 1 November 2010. The disposed entities are known as 'Quinvita'. The disposal was made on, inter alia, the following terms:

1.     Retention by the Company of all agronomy and breeding intellectual property developed to 1 November 2010;

2.     The Company provided Quinvita with £0.8m working capital;

3.     Issue of £0.8m in redeemable preference shares by Quinvita to the Company with a 5% coupon plus future royalties on Jatropha related sales on a sliding scale over 10 years (15% to year 5; 10% years 6 - 8; 5% years 9 - 10); and

4.     The Group became a member of Quinvita's agronomy and breeding platforms for a minimum of three years (subject to certain conditions) giving the Group access to ongoing Jatropha developments.

 

No value has been ascribed to the Redeemable Preference Shares or the royalty entitlements at the year end on the basis that their fair value is assessed as nil at this point in time.

 

The results of the discontinued portion of the Science & Technology division for the year are presented below:

 


 Year ended

Year ended


31 December

31 December


2010

 2009


 £000

 £000

Revenue

165.8

1,690.6

Expenses

(3,014.8)

(4,231.4)

Operating loss

(2,849.0)

(2,540.8)

Finance income

12.6

64.8

Finance costs

(1.6)

(1.3)

Trading loss before tax from discontinued operation

(2,838.0)

(2,477.3)

Tax income / (expense)

10.2

(7.0)

Trading loss from discontinued operation

(2,827.8)

(2,484.3)




Loss on disposal of agronomy and breeding business

(865.8)

-




Loss from discontinued operation

(3,693.6)

(2,484.3)

 

The net cash flows incurred by the discontinued portion of the Science & Technology division are as follows:


Year ended

Year ended


31 December

31 December


2010

 2009


 £000

 £000

Operating

(1,534.6)

(2,425.5)

Investing

(800.0)

-

Financing

-

-

Net cash outflow

(2,334.6)

(2,425.5)

 

Losses and loss per share for the discontinued operations

 

The losses from discontinued operations are as follows:

 


Year ended

Year ended


31 December

31 December


2010

 2009


 £000

 £000

Profit/(loss) from discontinued Refining & Trading operations

923.0

(912.9)

Loss from discontinued portion of Science & Technology operations

(3,693.6)

(2,484.3)

Total loss from discontinued operations

(2,770.6)

(3,397.2)

 

 

The losses per share for the discontinued operations are as follows:



Restated


 Year ended

Year ended


31 December

31 December


2010

 2009


 pence

pence

Basic and diluted from discontinued operations

(2.19)

(2.69)

 

15. Inventories


Group

Group

Company

Company


2010

2009

2010

2009


£000

£000

£000

£000

Raw material stock

163.0

77.6

 -

 -

Work in progress

-

-

 -

 -

Finished product

48.4

 23.3

 -

 -

Total

211.4

 100.9

 -

 -

 

16. Trade and other receivables


Group

Group

Company

Company


2010

2009

2010

2009


£000

£000

£000

£000

Non-current





Amounts owed by Group undertakings

 -

 -

2,879.6

8,017.9


-

-

2,879.6

8,017.9

Current





Trade receivables

0.9

42.0

-

-

Other receivables

788.4

661.9

301.6

48.7

Prepayments and accrued income

62.9

269.8

28.5

92.7

Taxation and social security

47.5

259.4

23.0

20.1


899.7

1,233.1

353.1

161.5

 

As at 31 December 2010 there were no impairments of trade receivables with a nominal value of £nil (2009: £42,000). There were no movements in provision for the impairment of receivables in 2010.

 


Individually

Collectively



impaired

impaired

Total


£000

£000

£000

At 1 January 2009

-

-

-

At 1 January 2010

-

-

-

At 31 December 2010

-

-

-

The Company had no impairment provisions at any time during 2010 or 2009.

 

As at 31 December 2010, the ageing of receivables is as follows:

Group at 31 December 2010


Not yet

Overdue

Overdue

Overdue



due

<30 days

31-60 days

>60 days

Total


£000

£000

£000

£000

£000

Gross trade receivables as at 31 December 2010

0.9

-

-

-

0.9

Other receivables

408.6

-

-

379.8

788.4

Impairment

-

-

-

-

-

Net trade receivables as at 31 December 2010

409.5

-

-

379.8

789.3

 

Group at 31 December 2009


 Not yet

 Overdue

 Overdue

 Overdue



 due

 <30 days

 31-60 days

 >60 days

 Total


£000

£000

£000

£000

£000

Gross trade receivables as at 31 December 2009

11.0

-

25.3

5.7

42.0

Other receivables

661.9

-

-

-

661.9

Impairment

-

-

-

-

-

Net trade receivables as at 31 December 2009

672.9

-

25.3

5.7

703.9

 

Company at 31 December 2010


Not yet

 Overdue

 Overdue

 Overdue



due

 <30 days

 31-60 days

 >60 days

 Total


£000

£000

£000

£000

£000

Amounts owed by Group undertakings

2,879.6

-

-

-

2,879.6

Other receivables

353.1

-

-

-

353.1

Net trade receivables as at 31 December 2010

3,232.7

-

-

-

3,232.7

 

Company at 31 December 2009


Not yet

 Overdue

 Overdue

 Overdue



due

 <30 days

 31-60 days

 >60 days

 Total


£000

£000

£000

£000

£000

Amounts owed by Group undertakings

8,017.9

-

-

-

8,017.9

Other receivables

48.7

-

-

-

48.7

Net trade receivables as at 31 December 2009

8,066.6

-

-

-

8,066.6

 

The Company has advanced funds to subsidiary companies to meet their working capital and capital expenditure funding requirements. Amounts owed by Group companies have no fixed repayment date. The Company has not made any calls on subsidiary companies to repay these amounts so they have been classified as not yet due.  Amounts owed by Group companies that are not part of the ongoing plans for the Group have been impaired to their estimated realisable amount.  The balance of amounts owed by Group undertakings of £3.2m represents the balances due from various group companies which forms an integral part of the Group's strategy and the Directors believe there is a reasonable expectation that this amount will be recoverable in full in the future. The Group received payment of all past due receivables in January 2011

 

The Group has no concerns over the credit quality of amounts which are overdue and not impaired. No receivables have been impaired. Trade receivables are non-interest bearing and on 30 day terms. The Group does not hold any collateral or other credit enhancements over these balances nor does it have a legal right to offset against any amounts owed by the Group to the counterparty. Given the small number of debtors, the Group assesses the credit risk from each debtor through scrutiny of the debtor's finances in a manner commensurate with the level of credit exposure. The Group has no specific concerns about its receivables that are neither past due nor impaired.

 

17. Other financial assets


Group

Group

Company

Company


2010

2009

2010

2009


£000

£000

£000

£000

Other cash deposits

-

4,534.1

-

4,534.1

Accrued bank interest

-

13.5

-

13.5

Euro forward deposit(a)

90.0

-

90.0

-


90.0

4,547.6

90.0

4,547.6

(a) The Company deposited £90,000 with its foreign exchange supplier as part of an arrangement to purchase Euro's at a fixed price.

 

18. Cash and short-term deposits


Group

Group

Company

Company


2010

2009

2010

2009


£000

£000

£000

£000

Cash at bank and in hand

2,439.4

2,425.5

1,981.9

600.8

Short-term deposits

1,001.1

2,000.0

1,001.1

2,000.0


3,440.5

4,425.5

2,983.0

2,600.8

 

Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods up to three months depending on the immediate cash requirements of the Group and earn interest at varying short-term deposit rates. In practice these deposits are returnable on an at call basis. The fair value of Group cash and cash equivalents at 31 December 2010 is £3,440,500 (2009: £4,425,500). The fair value of Company cash and cash equivalents at 31 December 2010 is £2,983,000 (2009: £2,600,800).

 

19. Trade and other payables


Group

Group

Company

Company


2010

2009

2010

2009


£000

£000

£000

£000

Current





Trade payables

96.1

364.4

87.4

174.6

Other payables

214.4

91.5

198.9

-

Taxation and social security

26.2

167.3

29.6

48.0


336.7

623.2

315.9

222.6

Trade payables are non-interest bearing and the average creditor days is 22.

 

20. Provisions

 

Group



Contract


Group



Redundancy

settlement

Onerous

contractual



provision (a)

provision (b)

Contracts(c)

commitments



£000

£000

£000

£000

Current






At 1 January 2010


154.0

310.3

1,332.2

1,796.5

Used in the year


(130.0)

(60.3)

-

(190.3)

Additions in the year


-

-

-

-

Released in the year


-

-

(1,332.2)

(1,332.2)

At 31 December 2010


24.0

250.0

-

274.0

(a)       The redundancy provision covers redundancy plans announced in 2009 but yet to be finalised.

(b)       The contract settlement provision covers possible settlement of various contracts. The details are not disclosed as they are commercially sensitive and may influence the outcome of the matters.

(c)       The onerous contract provision related to the Bromborough site. It was released following the sale of the site.

 

Company




Contract

Company




Redundancy

settlement

contractual




provision (a)

Provision(b)

commitments




£000

£000

£000

Current






At 1 January 2010



154.0

250.0

404.0

Used in the year



(130.0)

-

(130.0)

At 31 December 2010



24.0

250.0

274.0

(a)     The redundancy provision covers redundancy plans announced in 2009 but yet to be finalised.

(b)     The contract settlement provision covers possible settlement of various contracts.

 

21. Operating lease commitments

Future minimum rentals payable under non-cancellable operating leases as at 31 December 2010 are as follows:


Group

Group

Group

Group


Land and

Plant and

Land and

Plant and


buildings

equipment

buildings

equipment


2010

2010

2009

2009


£000

£000

£000

£000

Within one year

158.4

1.1

410.1

2.2

After one year but not more than five years

102.5

0.3

720.3

3.5

After more than five years

15.7

-

1,185.2

-


276.6

1.4

2,315.6

5.7

 

The Group had entered into commercial leases on certain property and items of equipment.  There are two property leases at Bromborough.  Each lease runs until the year 2106 and each lease contains a break clause exercisable in 2021.  The equipment leases have an average duration of between one and four years. There are no restrictions placed upon the lessee by entering into these leases.

 


Company

Company


Land and

Land and


buildings

buildings


2010

2009


£000

£000

Within one year

21.8

24.5

After one year but not more than five years

-

-

After more than five years

-

-


21.8

24.5

 

22. Issued share capital


Group and

Group and

Group and

Group and


Company

Company

Company

Company


2010

2009

2010

2009


No. of shares

No. of shares

£000

£000

Called up, allotted and fully paid





At 1 January

126,675,219

126,625,219

1,266.8

1,266.3

Issued on exercise of share options

-

50,000

-

0.5

At 31 December

126,675,219

126,675,219

1,266.8

1,266.8

The Company has one class of ordinary shares which carry no rights to fixed income.

 

23. Equity

Share capital

Share capital represents the nominal value of shares issued by the Company.

 

Share premium

Share premium represents the premium over the nominal value raised on the issue of shares by the Company.

 

Own shares held

D1 Oils Employee Benefit Trust holds 193,645 shares in D1 Oils plc which were acquired at a total cost of £484,000. Shares held by the trust can be purchased by employees exercising options under the Group's option scheme. At 31 December 2010, the shares had a market value of £10,670.

 

Merger reserve

The merger reserve arose when the Company acquired 100% of the issued share capital of D1 Oils Trading Limited in consideration for ordinary shares in D1 Oils plc. The acquisition was accounted for under the rules of merger accounting as a group reorganisation with the share premium being adjusted through the merger reserve.

 

Share option reserve

The share option reserve at 31 December 2009 arose on the Group's acquisition of BP International's 50% of the D1-BP Joint Venture. Existing share options were replaced with 24,119,088 share options with exercise prices of between 13p and 18.5p as part of the consideration for the acquisition.

 

Currency translation reserve

The currency translation reserve captures currency movements between the presentation currency of the Group, British Pounds, and the functional currencies used by the Group.

 

24. Related party disclosures and principal subsidiary undertakings

Intra-group loans with subsidiary companies

 

During the year, the Company provided net funding to subsidiary companies or received net funding from subsidiary companies within the Group as follows:


2010

2009


£000

£000

D1 Oils Trading Limited

(1,352.3)

5,330.2

D1 Oils Plant Science Limited

2,704.6

2,425.5

D1 (UK) Limited

(144.0)

-

D1 Oil Subsidiary Limited

(1,256.7)

491.4

PT D1 Oils Indonesia

28.6

-

D1 Oils Plant Science (Zambia) Limited

605.2

-

Fuel Crops Limited

(165.0)

-

Total

420.4

8,247.1

 

During the year, D1 Oils Plant Science Limited repaid £5,095,098 of its loan to D1 Oils plc, primarily through the transfer of animal feed assets to D1 Oils plc. Prior to the disposal of the agronomy and breeding business, the remaining intra-group loans to D1 Oils Plant Science Limited totalling £412,880 were written off. D1 Oils Plant Science Limited was one of the companies sold.

 

At 31 December, net funding balances due to the Company from subsidiary undertakings or by the Company to subsidiary undertakings were as follows:

 


2010

2009


£000

£000

D1 Oils Trading Limited

55,445.7

56,798.0

D1 Oils Plant Science Limited

-

2,803.4

D1 (UK) Limited

15,809.9

15,953.9

D1 Oil Subsidiary Limited

9,666.5

10,923.2

PT Oils Indonesia

28.6

-

D1 Oils Plant Science (Zambia) Limited

605.2

-

Fuel Crops Limited

(165.0)

-

Middlesbrough Oils UK Limited

(2,500.0)

(2,500.0)

Impairment of receivables

(72,326.1)

(77,853.5)

Total

6,564.8

6,125.0

 

The Company does not anticipate any repayments being made within one year. Balances in excess of expected repayments have been impaired. The funding is not subject to any interest charge. The impairment charge in 2010 was £nil (2009: £nil).

 

Disposal of agronomy and breeding business

 

Background

In December 2010, the Group disposed of its agronomy and breeding research business following the conclusion by the Board that the Group was unable to afford the ongoing costs of approximately £1.5m per annum in the absence of substantial revenue generation.

 

The agronomy and breeding business was acquired by entities controlled by three key management personnel, including Henk Joos, a director D1 Oils plc, and Vincent Volckaert, a director of a subsidiary of D1 Oils plc. Post disposal, the agronomy and breeding business was renamed "Quinvita".

 

Along with the disposal of the assets relating to the agronomy and breeding business, this business was sold with cash or an entitlement to receive cash of £0.8m in exchange for Redeemable Preference Shares in the head entity of the Quinvita Group. The Board estimated that an orderly wind up of these activities would cost at least £1.1m and create substantial challenges to access to comparable know-how.

 

Immediately prior to the disposal to Quinvita, all loans between continuing group companies and exiting companies were written off.

 

Transfer of animal feed activities from D1 Oils Plant Science Limited to D1 Oils plc

One of the entities disposed of to Quinvita, D1 Oils Plant Science Limited, owned and operated the Group's animal feed research activity. Prior to the disposal, all assets and agreements relating to the animal feed activity were sold by D1 Oils Plant Science Limited to D1 Oils plc in exchange for a reduction in the loan owed by D1 Oils Plant Science Limited to D1 Oils plc as consideration.  In addition to intangible assets, the following assets were transferred at:

 



£000

Property, plant and equipment


22.8

Other receivables


252.9

Total


275.7

 

Disposal of agronomy and breeding business to key management personnel

Under the terms of the transaction, the Group companies in Belgium, the Netherlands, Cape Verde, Thailand and Malawi solely undertaking agronomy and breeding activities were sold along with certain other related assets in India and Indonesia (hereafter "the A&B Business"). The transaction was approved by shareholders on 10 December 2010 with the financial handover effective on 1 November 2010.

 

In consideration for the purchase of the A&B Business, Quinvita issued £0.8m in nominal value of Redeemable Preference Shares to the Company. At 31 December 2010, the Redeemable Preference Shares were fair valued at £nil. The Redeemable Preference Shares are redeemable by 1 November 2015. A cumulative annual compound dividend of 5 per cent is payable by no later than 1 November 2015 based on the outstanding par value of the Redeemable Preference Shares.

 

The Redeemable Preference Shares will also become redeemable, in the event there is a change of control in either the voting rights or shareholding of Quinvita. On a change of control, in addition to redemption of the Redeemable Preference Shares, Quinvita will also pay the Company two times the outstanding par value of the Redeemable Preference Shares.

 

In the event of an equity fund raising which results in a third party holding more than 50 per cent of the shares in Quinvita, but (inter alia) total funds raised are less then £15m, Quinvita will redeem a part or all of the Redeemable Preference Shares.  At least 50 per cent of the outstanding Redeemable Preference Shares (including the accrued dividends) in the case of a £5m fundraising, 75 per cent of the same where £10m is raised, 100 per cent in the case of a £15m fundraising and pro-rata for any amount in between.

 

In exchange for the issue of the Redeemable Preference Shares, the Company provided Quinvita with £0.8m of working capital cash. This included the cash balances of the A&B Business of £0.7m with the remainder payable in two further tranches - the last of which was paid to Quinvita in March 2011. At 31 December 2010, the Company owed £0.1m to Quinvita. Including the cash, the companies sold in this transaction contained the following assets and liabilities at 1 November 2010.



£000

Property, plant and equipment


164.4

Intangible assets


0.5

Trade and other receivables


101.1

Cash


800.0

Trade and other payables


(131.6)

Accruals and deferred income


(8.0)

Provisions


(60.6)

Net assets


865.8

 

Quinvita is required to pay the Company royalties on all Jatropha revenues generated by Quinvita at rates of:

·   15 per cent from 1 November 2010 to 31 October 2015

·   10 per cent from 1 November 2015 to 31 October 2018

·   5 per cent from 1 November 2018 to 31 October 2020

 

The Company has not recognised assets in relation to the Redeemable Preference Shares or the royalties due to uncertainty of timing and amount of cash flows from these assets while Quinvita is a fledgling business.  These items are disclosed as contingent assets.

 

With no consideration recognised by the Group for Redeemable Preference Shares or revenue royalties, the loss incurred by the Group on disposal of the A&B Business was £0.9m.

 

The Group has retained ownership of all intellectual property which has been developed across the Group up to 1 November 2010, where this intellectual property is used by the Group's retained businesses.  The Group has given customary non-compete undertakings in relation to the agronomy and breeding activities.

 

The Company has retained the animal feed programme including all associated tangible assets and intellectual property.  Quinvita is exclusively licensed to sub-license the use of the animal feed technology globally, subject to the Group retaining the right to use the technology for its own business purposes (including for purposes of the Group building and operating its own animal feed extraction plants).  Quinvita's license lasts for a period of 15 years after the first extraction plant becomes operational, or until 31 December 2027 (whichever is earlier).  The sub-licences that Quinvita grants to third parties will themselves be valid for up to 20 years.  Quinvita will pay the company a royalty on all sub-licensing revenue received by Quinvita at the rate of 20 per cent for the first 5 years of each sub-licence and 15 per cent thereafter.

 

The Group has joined Quinvita's membership platforms for a minimum of three years (subject to certain conditions) to maintain access to agronomy knowledge, developments and new seed varieties developed in the future by Quinvita.  The Group is able to purchase seeds from Quinvita at preferential rates.

 

In order to secure funding for continued research, the A&B Business successfully submitted a proposal to the Dutch government for a grant of up to £200,000 in relation to a project in Cape Verde for the selection and production of superior Jatropha curcas seed. The Group supported this application by providing an indemnity and certain security in favour of Agriom BV (the A&B Business's partner in the proposed project) (the "Agriverde Guarantee"). In return for keeping the Agriverde Guarantee in place, Quinvita has agreed to provide its platform services at no cost for a period of 18 months following completion of the Disposal or, if earlier, until the Agriverde Guarantee ceases to be a contingent liability of the Group.  However, in the event the Agriverde Guarantee is enforced and the Group suffers or incurs any loss or liability, Quinvita shall issue to the Company an additional number of Redeemable Preference Shares at par as is equivalent in value to the loss or liability so incurred.

 

Director remuneration

Any other related party transaction involving Directors related to remuneration and is shown in note 6.

 

25. Share-based payments - Group and Company

 

All employees share option plan

Awards are made to staff at the discretion of the Board of Directors either on appointment, at salary review time, or any other time that the Directors deem appropriate. There are no specific performance criteria attached to the options.

 

Options vest in one of two ways:

 

1.     Options granted vest 1/3 after 12 months, 1/3 after 24 months and the remaining 1/3 after 36 months.

2.     Options granted vest 1/3 after 12 months with the remaining 2/3 vesting in equal monthly instalments over the next 24 months.

 

Equity settlement is applied to all options, there is no cash alternative.

 

The expected life of the options has been assessed at 2.5 years for options which vest 1 year from grant and 4 years for options which vest after 1 year. The contractual life of the options is 10 years.

 

 The fair value of the awards are calculated using the Black-Scholes model and subsequently adjusted for gain dependency, assessed at 15%, and forfeitures, assessed at 10% over the life of the award. A volatility adjustment considered appropriate for the sector and the age of the Group is included in the calculation.  In forming the

volatility assumption, the Directors have considered the volatility of the share price since the date of listing. The volatility of companies operating in the same sector has also been reviewed. Based on these factors, volatility has been assessed at 65% for awards granted before 1 March 2007, 60% for awards granted after 1 March 2007 but before 1 January 2008, 70% for awards granted after 1 January 2008 but before 1 January 2009 and 95% for awards granted after 1 January 2009. Appropriate risk free rates (as defined by the Bank of England) between 2.1% and 5.6% have been applied to individual awards. A zero dividend yield has been assumed.

 

The expenditure recognised in the income statement of the Group and the Company for share-based payments in respect of employee services received during the year to 31 December 2010 is £41,200 (2009: £401,000). This expense all relates to equity-settled, share-based payment transactions.

 

The following table illustrates the number and weighted average exercise price (WAEP) of, and movements in, share options during the year.


2010

2010

2009

2009


Number

WAEP

Number

WAEP

Outstanding at 1 January

11,419,985

0.57

12,171,570

0.77

Granted during the year

-

-

1,917,500

0.10

Forfeited during the year

(5,586,807)

0.34

(2,619,085)

1.13

Exercised

-

-

(50,000)

0.01

Outstanding at 31 December

5,833,178

0.79

11,419,985

0.57

Exercisable at 31 December

5,060,151

0.88

6,195,550

0.89

The range of exercise prices for options outstanding at the end of the year was 10p - 297.5p. The weighted average remaining contractual life of the options in issue at 31 December 2010 is 6.8 years.

 

No options were granted in 2010.

 

BP International Limited share options

 

As part of the agreement to acquire the remaining of D1-BP Fuel Crops Limited from BP International Limited on 27 July 2009, the Company brought BP up to the 16 per cent entitlement of the issued share capital of the Company. The options are exercisable at the following prices:

 

Options

Exercise price

6,029,772 ordinary shares

13p per share

6,029,772 ordinary shares

14p per share

6,029,772 ordinary shares

16p per share

6,029,772 ordinary shares

18.5p per share

 

These options are exercisable at any time between 27 July 2009 and 27 July 2019.

 

The fair value of the awards was calculated using the Black-Scholes model. A volatility assumption of 87% was included in the calculation and considered appropriate for the sector and age of the Group. In forming the volatility assumption the Directors considered the volatility of the share price over the three years to the date of grant. An appropriate risk free rate as defined by the Bank of England of 3.75% and a zero dividend yield are applied to the calculation.

The total fair value of these options for the Group and the Company was £1.0m and was all recognised in equity in the year to 31 December 2009.The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, these options during the year.

 


2010

2010

2009

2009


Number

WAEP

Number

WAEP

Outstanding at 1 January

24,119,088

0.15

-

-

Granted during the year

-

-

24,119,088

0.15

Outstanding at 31 December

24,119,088

0.15

24,119,088

0.15

Exercisable at 31 December

24,119,088

0.15

24,119,088

0.15

 

The weighted average fair value per option of options granted to BP International Limited during the year was 15p. The range of exercise prices for options outstanding at the end of the year was 13p - 18.5p. The weighted average remaining contractual life of the options in issue at 31 December 2010 is 8.6 years.

 

26. Financial risk management objectives and policies

The main risks arising from the Group's 2010 operations were interest rate risk, liquidity risk, foreign currency translation risk and certain commodity price risks. The main risk arising from the Company's 2010 operations is interest rate risk.

 

Interest rate risk

 

'At call' cash

The Group and Company retain cash in 'at call' bank accounts to cover working capital requirements. Funds held 'at call' on floating interest rates at 31 December 2010 totalled £2,439,400 (2009: £2,425,500) in the Group and £1,981,900 (2009: £600,800) in the Company.

 

The following table demonstrates the sensitivity of the Group and Company's profit before tax and equity to a reasonably possible change in floating interest rates, with all other variables held constant, that may impact interest on 'at call' cash.


Increase/

Group

Group

Company

Company


decrease

Effect on loss

Effect on

Effect on loss

Effect on


in floating

before tax

equity

before tax

equity


interest rate

£000

£000

£000

£000

2010

+0.5%

12.1

12.1

9.9

9.9


-0.5%

(12.1)

(12.1)

(9.9)

(9.9)

2009

+0.5%

12.1

12.1

3.0

3.0


-0.5%

(12.1)

(12.1)

(3.0)

(3.0)

 

Fixed term deposits

The Company invests surplus funds on behalf of the Group in fixed rate term deposits. Funds held on fixed rate term deposits at 31 December 2010 totalled £1,001,100 (2009: £6,534,100).

 

The following table demonstrates the sensitivity of the Group's profit before tax and equity to a reasonably possible change in interest rates on term deposits, with all other variables held constant that may impact the Company and the Group following the maturity of the deposits and subsequent reinvestment of the funds.

 


Increase/




decrease

Effect on

Effect on


in term deposit

loss before tax

equity


interest rate

£000

£000

2010

+1%

10.0

10.0


-1%

(10.0)

(10.0)

2009

+1%

65.3

65.3


-1%

(65.3)

(65.3)

 

Foreign exchange risk

 

During 2010, the Group entered into a forward contract for Euros to cover the expenditure of its Belgian and Netherlands operations. The forward contract was to purchase €1.0m at €1.1075/£1.00 during the year to 29 March 2011. In 2010, an expense of £31,800 was recognised to reflect the impact of the strengthened British Pound against the Euro in relation to the outstanding forward contract at 31 December 2010 (2009: £nil).

 

Liquidity risk

The Group seeks to manage financial risk to ensure sufficient liquid funds are available to meet foreseeable needs while investing cash assets safely and profitably.

 

The Group is almost solely financed by equity. The Group manages liquidity risk by maintaining adequate reserves to meet short-term funding requirements while investing excess funds in bank term deposits. If required, these deposits can be recalled immediately.

 

The table below summarises the maturity profile of the Group's financial liabilities at 31 December 2010 and 2009 based on contractual undiscounted payments. Interest rates on variable rate loans are based on the rate prevailing at the balance sheet date.



Less than






On demand

3 months

3 to 12 months

1 to 5 years

> 5 years

Total

Year ended 31 December 2010

£000

£000

£000

£000

£000

£000

Trade and other payables

-

96.1

-

-

-

96.1

 



Less than






On demand

3 months

3 to 12 months

1 to 5 years

> 5 years

Total

Year ended 31 December 2009

£000

£000

£000

£000

£000

£000

Trade and other payables

-

364.4

-

-

-

364.4

 

Managing capital

The Group aims to optimise its capital structure by holding an appropriate level of debt relative to equity in order to maximise shareholder value. The appropriate level of debt is set with reference to a number of factors and financial ratios including expected operating and capital expenditure cash flows, contingent liabilities and the level of restricted cash as well as the general economic environment. The Group aims to control its capital structure by issuing new shares and raising debt finance to the extent that it is possible on commercially acceptable terms. The economic conditions currently prevailing within the biofuels industry have restricted the Group's ability to raise debt finance and exert any significant degree of control over its gearing ratio. As a consequence, the Group is currently financed primarily from equity. The Group monitors capital using a gearing ratio, being loans and borrowings divided by equity funds plus loans and borrowings.

 


 Year ended

Year ended


31 December

31 December


2010

 2009


 £000

 £000

Loans and borrowings



Obligations under finance leases

-

-

Instalments due on mortgage

-

-

Total loans and borrowings

-

-

Equity

2,590.1

8,637.5

Total equity and loans and borrowings

2,590.1

8,637.5

Gearing ratio

0.0%

0.0%

Equity includes all capital and reserves of the Group attributable to the equity holders of the parent. The Group is primarily financed through equity and it should be noted that the equity component in the gearing ratio calculation includes the impact of retained losses.

 

Fair values of financial assets and financial liabilities

Set out below is a comparison by category of carrying amounts and fair values of all of the Group and Company's financial instruments that are carried in the financial statements.

 

Group

Book value

Fair value

Book value

Fair value


2010

2010

2009

2009


£000

£000

£000

£000

Financial assets





Cash and short-term deposits

3,440.5

3,440.5

4,425.5

4,425.5

Long-term deposits and cash collateral

90.0

90.0

4,547.6

4,547.6

Financial liabilities





Interest-bearing loans and borrowings

-

-

-

-

Finance lease and hire purchase agreements

-

-

-

-

 

Company

Book value

Fair value

Book value

Fair value


2010

2010

2009

2009


£000

£000

£000

£000

Financial assets





Cash and short-term deposits

2,983.0

2,983.0

2,600.8

2,600.8

Long-term deposits and cash collateral

90.0

90.0

4,547.6

4,547.6

 

The fair value of the financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices. The fair value of all the financial assets and financial liabilities above were determined on this basis.

 

27. Contingent assets

At 31 December 2010, the Group had three contingent assets:

 

1.     D1 Oils Trading Limited has commenced proceedings to recover amounts due under a note, beneficial entitlement of which was assigned to the company as a result of a previous settlement. The note issuer has delayed payment of the note. D1 Oils Trading Limited has not recognised an asset in relation to this note as the amount and timing of cash flows from the note are uncertain. The maximum amount recoverable by D1 under the note before interest is US$1.2m.

 

2.     In addition to the sale of the Bromborough refining site, the buyer of the site agreed to pay D1 Oils Trading Limited a net royalty of £0.4m plus VAT based on Bromborough's future production volumes of biodiesel. The Group has not recognised an asset in relation to this entitlement as the amount and timing of cash flows are uncertain.

 

3.     As part of the disposal of the agronomy and breeding activities in the Science & Technology division in December 2010, the Company received Redeemable Preference Shares with a nominal value of a £0.8m and a 5% coupon due for repayment in 2015. In addition, the Company is entitled to future royalties on Jatropha related sales on a sliding scale over 10 years (15% to year 5; 10% years 6 - 8; 5% years 9 - 10). The Group has not recognised an asset in relation to Redeemable Preference Shares or the royalties as the amount and timing of cash flows are uncertain.

 

28. Contingent liabilities

At 31 December 2010, the Group had two contingent liabilities:

 

1.     As part of the sale of the Bromborough site, the lease obligations for two parcels of land adjacent to the Bromborough site were passed to the buyers. The two leases are first cancellable in 2021. If the buyer defaults on these lease obligations, the obligation may fall to D1 Oils plc. The maximum exposure is £2.0m but various mitigations, such as sub-lets, are available. This obligation remains contingent on the buyer defaulting and the Board does not consider the risk sufficiently likely to recognise a liability.

 

2.     The Science & Technology division successfully submitted a proposal to the Dutch government for a grant of up to £200,000 in relation to a project in Cape Verde for the selection and production of superior Jatropha curcas seed. The Group supported this application by providing an indemnity and certain security in favour of Agriom BV (the partner in the proposed project) (the "Agriverde Guarantee"). Upon disposal of the agronomy and breeding business in the Science & Technology division, the Group continued to secure the Agriverde Guarantee in exchange for membership of the platform services provided by the disposed business at no cost for a period of 18 months or, if earlier, until the Agriverde Guarantee ceases to be a contingent liability of the Group.  In the event the Agriverde Guarantee is enforced and the Group suffers or incurs any loss or liability, the disposed agronomy and breeding business shall issue to the Company equity equivalent in value to the loss or liability so incurred.

 

29. Capital commitments

 

At the end of the year capital commitments were:


2010

2009


£000

£000

Contracted but not provided for in the accounts

-

-

 

30. Acquisition of subsidiary

 

Note 30 provides an explanation of the 2009 comparative net gain on transfer of operation from joint venture in the Consolidated Income Statement and the payments due to vendors.

 

On 27 July 2009, the Group acquired 50% of the issued share capital of D1-BP Fuel Crops Limited from BP International Limited to bring the Group's total interest in the issued share capital of D1-BP Fuel Crops Limited to 100%. D1-BP Fuel Crops Limited (subsequently renamed D1 Fuel Crops Limited) is the parent company of a group of companies involved in Jatropha plantation activities. The transaction has been accounted for by the purchase method of accounting.

 

At the time of the acquisition of the remaining 50% of issued share capital in D1-BP Fuel Crops Limited on 27 July 2009, the Group is also required to reassess the fair value of its original 50% investment in the Group. The carrying value of the original investment was nil.

 

The accounting for the business combination is provisional. Due to the nature and location of many of D1-BP Fuel Crops Limited's operations, valuations of non-European acquired group's assets and liabilities are yet to be finalised.

 

Prior to the acquisition of D1-BP Fuel Crops Limited by the Group, the assets were written down to recoverable value by the management of D1-BP Fuel Crops Limited.

 

2009


Book value

Fair value



£000

£000

Non-current assets




Property, plant and equipment


96.6

96.6

Investments accounted for using the equity method


301.1

301.1



397.7

397.7

Current assets




Inventories


59.7

59.7

Trade and other receivables


654.5

654.5

Cash and short-term deposits


5,493.1

5,493.1



6,207.3

6,207.3

Total assets


6,605.0

6,605.0

Equities and liabilities




Current liabilities




Trade and other payables


(989.3)

(989.3)

Accruals and deferred income


(878.8)

(878.8)



(1,868.1)

(1,868.1)

Total liabilities


(1,868.1)

(1,868.1)

Net assets


4,736.9

4,736.9

 Consideration



£000

Cash



500.0

Deferred consideration (a)



461.4

Share options (b)



1,025.0

Total consideration



1,986.4

 




£000

Fair value of original investment



2,368.5

Negative goodwill on acquisition



382.1

 

Gain on original investment



£000

Fair value of original investment



2,368.5

Investment carrying value prior to 27 July 2009 acquisition



-

Gain on original investment



2,368.5

 

Total investment



£000

Total gain on acquisition of D1-BP Fuel Crops



2,750.6

 

(a)       Deferred consideration is a payment of £30 for every tonne of the first 20,000 tonnes of crude Jatropha oil, up to maximum of 600,000, produced by the D1 group and sold to third parties. To the extent not already paid, the 600,000 deferred consideration is payable by D1 at the latest by 31 December 2014.

(b)       Share option consideration consisted of four tranches of 6,029,772 share options with respective exercise prices of 13p, 14p, 16p and 18.5p. The share options are exercisable at any time up to 27 July 2019. The fair value of the awards was calculated using the Black-Scholes model. A volatility assumption of 87% was included in the calculation and considered appropriate for the sector and age of the Group. In forming the volatility assumption the Directors considered the volatility of the share price over the three years to the date of grant. An appropriate risk free rate as defined by the Bank of England of 3.75% and a zero dividend yield are applied to the calculation.

 

The Group acquired BP's 50% share of the D1-BP Fuel Crops group to integrate its plantation activities into the Group and benefit from its synergies with the existing plant science operation.

 

The excess of fair value over consideration resulted in a gain on the acquisition of £2.8m (negative goodwill of £0.4m and gain on investment £2.4m). The gain reflects the different valuations and plans the joint venture partners had for the business.

 

Of the acquired receivables, the gross amount receivable and fair value was £654,500 with all amounts expected to be collected.

 

As a result of the business combination, the pre-existing contract for provision of plant science services from the Group to the D1-BP Fuel Crops Limited group was terminated. Under this arrangement, in 2009 prior to the 27 July 2009 acquisition, the Group recognised revenue for services to the D1-BP Fuel Crops Limited joint venture of £1,495,834.

 

The acquired D1-BP Fuel Crops Limited group contributed £0.05 to revenue and £0.9m loss to loss before tax for the period between the date of acquisition and 31 December 2009.

 

If the acquisition of the company had been completed on 1 January 2009, Group revenues for the period would have been £1.8m. The Group loss would not have changed as the 2009 pre-acquisition loss of the D1-BP Fuel Crops Limited group of £7.9m would have been offset by an additional gain on acquisition of the same amount.

 

The amounts payable to vendors is discounted to present value. The amounts payable will unwind to £600,000 by 31 December 2014 at the latest. At the balance sheet date, the discounted amounts payable to BP were as follows:

 


2010

2009


£000

£000

Payable to vendors - current

(4.1)

(51.0)

Payable to vendors - non current

(476.5)

(432.9)

Total

(480.6)

(483.9)

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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