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Monday 16 June, 2014

IndependentResources

Final Results

RNS Number : 6485J
Independent Resources PLC
16 June 2014
 

16 June 2014

 


 

Independent Resources plc

 


 

("Independent Resources" or the "Company" or the "Group)

 


 

Results for the fifteen months ended 31 December 2013

 


 

Highlights

 


 

●             Strategic repositioning to focus on conventional exploration and production opportunities

 


 

●             New experienced executive management team led by Greg Coleman

 


 

●             Significant progress made with ETAP and DGE re Ksar Hadada licence

 


 

●             Rivara project remains stalled pending resolution of court processes

 


 

●             Equity fundraising announced post period end to introduce new capital

 


 

Chairman's statement

 


 

Challenging times - getting back in control of our destiny

 


 

The 15 month period covered by these accounts from 1 October 2012 to 31 December 2013 has been a real challenge for the

 

company. Shareholders will remember that, in my statement in the accounts to 30 September 2012, I said that we were overwhelmed

 

by events we could not control. It has taken the period since then to reduce the Italian problems to scale, get a grip on the Tunisian

 

issues, strengthen the management of the company and refocus our strategy. As part of this strategic re-positioning  we have been

 

working on a number of attractive opportunities that would provide the company with increasing exposure over time to

 

hydrocarbon production in our area of interest. We look forward to sharing our progress on these potentially transformational

 

initiatives as they mature.

 


 

New Management team

 


 

Greg Coleman joined as CEO in March 2013.  Greg was a very senior executive within the BP Group and after leaving BP he

 

founded and was CEO of Canamens Limited. His background and experience is exactly what we need to refocus our strategy away

 

from reliance on Italy and into a range of more geographically diverse producing assets.

 


 

I am delighted that Greg has assembled an extremely capable team with a wide range of experience. Brian Hepp, as chief

 

operations officer brings a wealth of experience of managing field operations, while Owain Franks, a former senior

 

PricewaterhouseCoopers Partner has joined us as Commercial Director to work with Greg and the team in transforming the

 

company.

 


 

Tim James retired as CFO during the year and we are grateful to him for his stewardship of the company's finances.  Feilim McCole

 

has been appointed to replace Tim as Finance Director. Feilim has a strong big firm (Deloitte), interim management and corporate

 

finance background.

 


 

Ksar Hadada

 


 

During 2013 we have devoted considerable time and effort to protecting our interests in Tunisia and trying to achieve some

 

momentum. As I said in our last interim results announcement , the previous operator of the license, PetroAsian

 

(Tunisia) Limited owned by the Hoifu Energy Group (which is listed in Hong Kong) had conspicuously failed in its obligations

 

as operator putting the renewal of the licence in March 2014 at risk.

 


 

Following extensive discussions and negotiations, on 19 February 2014, ETAP, the Tunisian State Oil Company applied for an

 

exceptional extension of the license for two years to the relevant Ministry, the DGE. The DGE had previously signalled that they

 

wished this application to be made, that the company should become the operator and the other two minority parties should

 

remain in the license with the company moving to an 86.345% working interest.

 


 

We, in common with a number of other companies operating in Tunisia, are waiting on the final steps of the approval process. This

 

will take place at a meeting of the Consultative Committee on Hydrocarbons. This meeting has been somewhat delayed and we

 

are hopeful, following discussions with the DGE, that a meeting will take place in the near future allowing us, assuming approval

 

is given, to progress our plans.

 


 

Rivara

 


 

We continue to be impacted by the ripples from the earthquake in April 2012 which halted progress on the Rivara Gas Storage

 

project.  In November 2012, we announced the exit of our former joint venture partner ERG S.p.A.  While the commercial

 

arrangements agreed with ERG did result in a cash payment to the group, they also triggered a need to reverse part of the deemed

 

gain that accounting standards had required us to recognise in our 2008 accounts. The impact - a non-cash loss of £1.51 million -  is

 

reflected in this set of results.

 


 

We expect Administrative court proceedings to begin later this year in which we are contesting the position of the Emilia-Romagna

 

Region and the consequent position of the Ministry of Economic Development. This will not be a speedy process but is an

 

important step forwards.

 


 

We also feel vindicated by the recent findings of an international commission that there could not have been any link between our

 

activities at Rivara and the tragic earthquake in Emilia Romagna.

 


 

Fiume Bruna and Casoni (Ribolla Basin CBM assets)

 


 

I have signalled before that we are looking at our strategic options in relation to Italy. After the period covered by these accounts,

 

we have entered into discussions with the Ministry of Economic Development on the way forward. We continue to work with local

 

parties, partners and authorities to reduce project timelines to allow us to develop this potentially significant resource or to farm

 

out some part of it to a third party.

 


 

The prospective resources at Fiume Bruna and Casoni do represent a significant source of gas for local industry and the local

 

economy and we are keen to maximise shareholder value out of it. We also welcome that the new Italian Federal government

 

appears supportive of energy regime change, including a delayering of the approval regime in Italy but we do not expect this to

 

happen in the near term.

 


 

Financial review

 


 

The results for the year reflect the cost of our significant efforts to deliver a transformational deal.

 


 

The group made a loss of £3.34 million during 2013 (2012: £1.82 million) of which £1.51 million related to restructuring of Rivara

 

Gas Storage (2012: £Nil), £1.34 million comprised ongoing administrative costs (2012: £1.24 million), £0.27 million comprised

 

professional fees and diligence costs related to potential acquisitions (2012: £Nil), and £0.22 million comprised non-cash

 

provisions for the issue of share options (2012: £0.15 million).

 


 

Consolidated net assets at 31 December 2013 were £10.92 million (2012: £13.34 million).   At this juncture, it has not been deemed

 

necessary to impair the carrying value of the group's Italian gas storage project at Rivara or that of our coal bed methane project

 

at Fiume Bruna and Casoni.  The board will continue to monitor this situation carefully, particularly in light of forthcoming legal

 

proceedings in relation to the Rivara Gas Storage project. 

 


 

At 31 December 2013, the consolidated balance sheet included approximately £5.58 million of past investment in relation to Rivara. 

 

While we continue to be confident in relation to our legal position, a material prolongation of or an adverse result from the

 

Court processes may result in the need for an impairment. The book value of past investment in relation to Fiume Bruna and

 

Casoni was approximately £4.32 million at 31 December 2013.

 


 

Cash generated from operations totalled £0.16 million (2012: £0.89 million used) after adjustments for non-cash items with capital

 

expenditures incurred during the year limited to £0.22 million (2012: £0.88 million).

 


 

There was £0.66 million of available cash at 31 December 2013.

 


 

To strengthen the group's financial position further the group recently announced a placing and open offer to raise up to a

 

maximum of £2.75 million of additional funds.

 


 

Going concern

 


 

The group had cash reserves of £0.21 million at 31 May 2014.

 


 

On 30 May 2014, the company announced a placing and open offer, which if the open offer is fully subscribed will provide total

 

gross proceeds of £2.75 million.

 


 

The directors anticipate that the cash available on the basis of a fully subscribed open offer this will be sufficient to cover non-

 

discretionary expenses for the next twelve months and the preparatory work in Ksar Hadada described in my letter accompanying

 

the placing and open offer documentation also available on our website.

 


 

In the event that the placing and open offer is not fully subscribed, the group will need additional funding to meet future costs. 

 

Accordingly the directors intend to continue to explore all forms of potential fundraising at both a corporate and asset level. If

 

the group is unable to raise sufficient funds then the group is unlikely to be able to continue as a going concern.

 


 

In order to meet all of the group's licence commitments, the group needs to raise further funds and is likely to require additional

 

sources of funding, including securing farm out partners for its projects.

 


 

Business development

 


 

A number of possible transactions are actively being pursued and we expect to report further in due course.

 


 

After the end of this reporting period we announced a fundraising by way of placing and open offer and at the time of writing we

 

expect it to be completed in mid June 2014. As a result of the placing and open offer the directors are satisfied that the company will

 

be in a financial position to meet its short-term obligations but will need further funds to allow it to bring its plans to fruition in full. 

 


 

We remain acutely cost conscious and value focused. We are keen to be able to make further announcements about the

 

opportunities on which Greg and the team are working on and I trust that we will be able to do so shortly.

 


 

Grayson Nash

 

Non-executive Chairman

 


 

For further information, please visit www.ir-plc.com or contact:

 


 

Greg Coleman

Independent Resources plc

020 3367 1134

 




 

Phil Davies

Charles Stanley Securities

020 7149 6942

 


(Nominated Adviser)


 




 

Simon Hudson

Tavistock Communications

020 7920 3150

 


 

Independent Resources plc

 


 

Consolidated statement of comprehensive income

 


 

Period ended 31 December 2013

 


 


Notes


Period to 31 December 2013


Year to 30 September 2012

 

Continuing operations

£


£

 





 

Revenue


                    -


                  -

 





 

Cost of sales

                    -


                  -

 


 

Gross profit

                    -


                  -

 


 

Administrative expenses

     (1,831,949)


   (1,387,942)

 


 

Reorganisation of Rivara Gas Storage srl


     (1,511,722)


                  -

 


 

Operating loss


     (3,343,671)


   (1,387,942)

 


 

Financial income


            2,455 


          5,784 

 


 

Financial expense

4

              (122)


      (437,077)

 


 

Loss on ordinary activities

 

before taxation

     (3,341,338)


   (1,819,235)

 


 

Taxation

5

                    -


                  -

 


 

Loss for the year

     (3,341,338)


   (1,819,235)

 


 

Other comprehensive income:

 


 

Exchange difference on translating foreign operations

 

- recycled through profit and loss

        704,123 


   (1,074,067)

 


 

Income tax relating to other comprehensive income

                    -


                  -

 


 

Total comprehensive loss for the year

     (2,637,215)


   (2,893,302)

 


 

Loss attributable to:

 


 

Owners of the parent

     (3,350,702)


   (1,781,779)

 


 

Non-controlling interests

            9,364 


       (37,456)

 


 


     (3,341,338)


   (1,819,235)

 


 

Total comprehensive loss attributable to:

 


 

Owners of the parent

     (2,664,623)


   (2,752,613)

 


 

Non-controlling interests


          27,408 


      (140,689)

 


 


     (2,637,215)


   (2,893,302)

 


 

Loss per share (pence)

6

 


 

From continuing operations

 


 

Basic

              (7.3)


             (3.9)

 


 

Diluted

              (7.3)


             (3.9)

 


 


 


 

Independent Resources plc

 


 

Consolidated statement of financial position

 


 

As at 31 December 2013

 


 


 



Notes

31 December 2013


30 September 2012

 


£  


£  

 

Non-current assets

 

   Property, plant and equipment


          19,883 


        21,133 

 

   Goodwill

7

        450,766 


       450,766 

 

   Other intangible assets

8

    10,128,364 


    9,466,113 

 


 


    10,599,013 


    9,938,012 

 


 

Current assets

 

   Other receivables

9

       464,850 


    3,634,449 


 

   Cash and cash equivalents


       663,117 


       729,786 


 


 


    1,127,967 


    4,364,235 


 


 

Current liabilities

 

  Trade and other payables


      (807,505)


      (960,671)


 


 


      (807,505)


      (960,671)


 

Net current assets

        320,462 


    3,403,564 

 


 

Net assets

    10,919,475 


  13,341,576 

 


 

Equity attributable to equity holders of the parent

 

   Share capital

10

        458,369 


       458,369 

 

   Share premium

11

    15,287,351 


  15,287,351 

 

   Share option reserve

        418,919 


       264,717 

 

   Foreign currency translation reserve

        611,235 


       (74,844)

 

   Retained earnings

     (5,856,399)


   (3,766,319)

 


 


    10,919,475 


  12,169,274 

 


 

Non-controlling interests

                    -


    1,172,302 

 


 

Total equity

    10,919,475 


  13,341,576 

 


 

  

 

Independent Resources plc

 


 

Statement of changes in equity

 


 

Period ended 31 December 2013

 


 


Retained

Share

Share

Share

Foreign

Total

Non-

Total

 


earnings

capital

premium

option

currency


controlling

equity

 


reserve

translation


interests


 






reserve



 


£  

£  

£  

£  

£  

£  

£  

£  

 

Consolidated


 



 

1 October 2011

(1,984,540)

458,369 

 15,287,351 

109,761 

     895,990 

14,766,931 

  1,312,991 

16,079,922 

 


 

Loss for the year

(1,781,779)

           -

                 -

    -

               -

(1,781,779)

     (37,456)

(1,819,235)

 

Exchange differences

                 -

           -

                -

            -

   (970,834)

   (970,834)

   (103,233)

(1,074,067)

 


 

Total comprehensive loss for the year

(1,781,779)

           -

               -

          -

   (970,834)

(2,752,613)

 (140,689)

(2,893,302)

 


 

Share-based payments

                 -

           -

                 -

154,956 

                -

     154,956 

                -

      154,956 

 



 

30 September 2012

(3,766,319)

458,369 

  15,287,351 

 264,717 

     (74,844)

 12,169,274 

  1,172,302 

  13,341,576 

 


 

1 October 2012

(3,766,319)

458,369 

  15,287,351 

 264,717 

  (74,844)

 12,169,274 

  1,172,302 

  13,341,576 

 


 

Loss for the period

(3,350,702)

        -

               -

           -

            -

(3,350,702)

        9,364 

  (3,341,338)

 

Exchange differences

                 -

           -

                 -

            -

     686,079 

     686,079 

       18,044 

       704,123 

 


 

Total comprehensive loss for the period

(3,350,702)

           -

              -

           -

   686,079 

(2,664,623)

       27,408 

(2,637,215)

 


 

Share options lapsed

        60,912 

           -

                -

(60,912)

              -

                -

             -

                  -

 

Share-based payments

                 -

           -

                 -

 215,114 

               -

     215,114 

                -

       215,114 

 

Non-controlling interest acquired by group

   1,199,710 

           -

                 -

            -

                -

  1,199,710 

(1,199,710)

                  -

 



 

31 December 2013

(5,856,399)

458,369 

  15,287,351 

      418,919 

     611,235 

 10,919,475 

                -

  10,919,475 

 


 

Independent Resources plc

 


 

Consolidated statement of cash flows

 


 

Period ended 31 December 2013

 


 


Period to 31 December 2013


Year to 30 September 2012

 


£


£

 

Cash flows from operating activities

 


 

Loss before taxation

   (3,341,338)


  (1,819,235)

 

Adjustments for:

 


Depreciation of property, plant and equipment

        10,818 


       21,385 

 


Financial income

         (2,455)


        (5,784)

 


Financial expense

             122 


     437,077 

 


 


   (3,332,853)


  (1,366,557)

 

Decrease in other receivables

    3,433,381 


     228,481 

 

Increase in trade and other payables

     (153,166)


     96,779 

 

Share-based payments

      215,114 


     154,956 

 


 

Cash from/(used) in operations

      162,476 


    (886,341)

 


 

Income taxes received

                  -


                 -

 


 

Net cash from/(used) in operating activities

      162,476 


    (886,341)

 


 

Cash flows from investing activities

 


 

Interest received

          2,455 


         5,784 

 

Interest paid

            (122)


      (17,077)

 

Proceeds on disposal of property, plant and equipment

          1,495 


         5,042 

 

Purchase of intangible assets

     (222,913)


    (879,227)

 

Purchases of property, plant and equipment

       (10,060)


                 -

 


 

Net cash used in investing activities

     (229,145)


    (885,478)

 


 

Net decrease in cash and cash equivalents

       (66,669)


  (1,771,819)

 


 

Cash and cash equivalents at 1 October 2012

      729,786 


   2,501,605 

 


 

Cash and cash equivalents at 31 December 2013

      663,117 


     729,786 

 


 


 

Independent Resources plc

 


 

Notes to the final results for the fifteen month period ended 31 December 2013

 


 

1

Basis of preparation

 



 


The company's functional currency is the Euro, and presentational currency is Great British Pounds Sterling.

 



 


The financial information has been prepared in accordance with International Financial Reporting Standards

 


("IFRS"), IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies preparing

 


their accounts under IFRS, as adopted by the European Union, and the Companies Act 2006. The financial

 


information has been prepared under the historical cost convention, as modified by revaluations of financial assets

 


and financial liabilities at fair value through the statement of comprehensive income. Details of the accounting

 


policies applied are set out in the financial statements for the 12 months ended 30 September 2012 and have not

 


changed for the 15 month period ended 31 December 2013.

 



 


The financial information set out in this announcement does not constitute audited financial statements for the period

 


ended 31 December 2013. The financial information for the year ended 30 September 2012 is derived from the

 


statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on

 


those accounts: their report was unqualified but did include an emphasis of matter regarding the ongoing status of

 


the Rivara project.

 



 


The financial information for the period ended 31 December 2013 is derived from the financial statements, but does not

 


constitute the group's financial statements. The company's auditors have reported on the statutory financial

 


statements for the period ended 31 December 2013 and their report is unqualified, but, with the following emphases of

 


Matter:

 



 


"Development and exploration intangible asset

 



 


In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the

 


disclosures made in the financial statements concerning the process of the appeal before the Emilia Romagna

 


Bologna Administrative Court in respect of the approval of the development of the Rivara project. In the event

 


that the group is not successful in its appeal, the expenditure capitalised in respect of this project will be subject

 


to impairment testing. No adjustment has been made in relation to the carrying value of this capitalised

 


expenditure in the financial statements of the group or the carrying value of the company's investment in subsidiary

 


undertakings.

 



 


Going concern

 



 


In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the

 


disclosure made in the financial statements concerning the company's ability to continue as a going concern. The

 


financial statements have been prepared on the going concern basis, which depends on the ability of the company

 


to raise funds. These conditions, along with the other matters explained in the financial statements, indicate

 


the existence of a material uncertainty which may cast significant doubt about the company's ability to continue

 


as a going concern. The financial statements do not include the adjustments that would result if the company was

 


unable to continue as a going concern."

 



 


The financial information set out in this announcement was approved by the board on 13 June 2014.

 



 


The directors do not recommend the payment of a final dividend (2012: Nil).

 


 

2.

Business segments

 


 


The group has adopted IFRS 8 Operating segments. Per IFRS 8, operating segments are based on internal reports

 


about components of the group, which are regularly reviewed and used by the Board of Directors being the Chief

 


Operating Decision Maker ("CODM") for strategic decision making and resource allocation, in order to allocate

 


resources to the segment and to assess its performance. The group's reportable operating segments are as follows:

 



 


 


a.

Parent company

 


b.

Rivara

 


c.

Ribolla Basin CBM assets

 


d.

Ksar Hadada

 


 


The CODM monitors the operating results of each segment for the purpose of performance assessments and

 


making decisions on resource allocation. Performance is based on assessing progress made on projects and the

 


management of resources used. Segment assets and liabilities are presented inclusive of inter-segment balances.

 


 


The group did not generate any revenue during the period to 31 December 2013 nor in the year to 30 September

 


2012.

 


 


Information regarding each of the operations of each reportable segments is included in the following table.

 


 


Parent

Rivara

 Ribolla Basin

 Ksar

 Consolidation

 Total

 


company


 CBM assets

Hadada



 


£

£

 £

 £

 £

 £

 


Period to 31 December 2013

 


 


Interest revenue

155,807

         40,133

            2,876

         -

           (196,361)

           2,455

 


Interest expense

      (121)

(111,370)

        (84,992)

                -

        196,361

           (122)

 


Depreciation

                  -

           1,241

            9,577

                -

                        -

        10,818

 


Impairment of intangible assets

                  -

                  -

                   -

                -

                        -

                 -

 


Income tax

                  -

                  -

                   -

                -

                        -

                 -

 


Loss for the period before taxation

 (789,605)

(1,744,075)

   (382,330)

  (61,511)

       (363,817)

(3,341,338)

 


 


Assets

12,128,214

8,242,367

   4,456,656

   235,604

   (13,335,861)

 11,726,980

 


Liabilities

   (514,288)

(3,810,637)

    (4,285,358)

 (622,226)

         8,425,004

        (807,505)

 


 


Year to 30 September 2012

 


 


Interest revenue

       140,285

           2,147

                  6

               -

           (136,654)

          5,784

 


Interest expense

                  -

 (510,055)

        (63,676)

              -

         136,654

   (437,077)

 


Depreciation

                  -

           1,344

      20,041

                -

                        -

         21,385

 


Impairment of intangible assets

                  -

                  -

              -

                -

                        -

                  -

 


Income tax

                  -

                  -

                   -

                -

                        -

                 -

 


Loss for the year before taxation

(1,065,445)

 (758,419)

       (567,201)

 (20,084)

             591,914

 (1,819,235)

 


 


Assets

12,339,855

11,375,970

  4,128,810

   217,340

   (13,759,728)

 14,302,247

 


Liabilities

    (151,438)

(5,594,817)

    (4,001,708)

 (542,451)

         9,329,743

        (960,671)

 



 


The geographical split of non-current assets arises as follows:

 



 



 United

 Overseas

 Total

 



 Kingdom



 



 £

 £

 £

 


31 December 2013

 


 


Intangible assets

                     -

         10,128,364

      10,128,364

 


Goodwill

                     -

             450,766

            450,766

 


Property, plant and equipment

            1,852

               18,031

                 19,883

 


 


30 September 2012

 


 


Intangible assets

                     -

           9,466,113

         9,466,113

 


Goodwill

                     -

             450,766

            450,766

 


Property, plant and equipment

                     -

               21,133

                 21,133

 


 

3.

Reorganisation of Rivara Gas Storage srl (previously named ERG Rivara Storage srl)

 


 


On 22 November 2012 the company completed negotiations with the third party which held a non-controlling

 


interest in ERG Rivara Storage srl in order to bring back into full control of the group the valuable Rivara gas

 


storage project. The following reorganisation took place:

 


 


The non-controlling interest paid €1,400,000 (£1,182,432) for part settlement of the amount it owed in

 



respect of share capital issued by ERG Rivara Storage srl;

 


The non-controlling interest waived amounts owed by ERG Rivara Storage srl totalling €357,027

 



(£301,543);

 


ERG Rivara Storage srl cancelled the remaining amount due to it by the non-controlling interest of

 



€3,531,001 (£2,982,265) in relation to unpaid share capital and cancelled shares to this value. This amount

 



had previously been discounted by £1,169,000.

 


The non-controlling interest transferred its entire shareholding in ERG Rivara Storage srl to Independent

 



Gas Management srl for €1 (£1); and

 


ERG Rivara Storage srl changed its name to Rivara Gas Storage srl.

 


 


The amount recognised in the consolidated statement of comprehensive income for the period is calculated as

 


follows:

 


 


Period to 31 December 2013


Year to 30 September 2012

 


£  


£

 


Cancellation of amount due from non-controlling interest

 


(pre discounting adjustment)

       2,982,265


                         -

 


Discounting adjustment reversed

(1,169,000)


                         -

 


Amount due to non-controlling interest waived

        (301,543)


                         -

 


 


Loss on reorganisation

      1,511,722 


                         -

 






 

4.

Net financial expense




 



 


Net financial expense includes £Nil (Year to 30 September 2012: £420,000) relating to the decrease in the net present

 


value of receivables which are measured at amortised cost due to the unwinding of the effective interest implicit in

 


the discounting calculations. The charge for that year, rather than the more normal credit, arises from the expected

 


deferral of the Rivara appraisal programme.

 


 

5.

Taxation

 


Period to 31 December 2013


Year to 30 September 2012

 


£


£

 


Tax on profit on ordinary activities

 


 


Taxation charged based on profits for the period

 


 


UK corporation tax based on the results for the period

                     -


                         -

 


 


Total tax expense in income statement

                     -


                         -

 


 


Reconciliation of the tax expense

 


 


The tax assessed for the period is different from the standard rate of corporation tax in the UK (23.4%).  The

 


differences are explained below:

 


Period to 31 December 2013


Year to 30 September 2012

 


£


£

 


 


Loss on ordinary activities before taxation

     (3,341,338)


          (1,819,235)

 


 


Loss on ordinary activities multiplied by standard rate

 


of corporation tax in the UK of 23.4% (2012: 25%)

        (781,874)


             (454,808)

 


 


Effects of:

 


Expenses disallowed for tax purposes

           50,337 


                38,739 

 


Deferred tax not provided - tax losses carried forward

         731,537 


              416,069 

 


 


Total current tax

                     -


                         -

 


 


The group has tax losses available to be carried forward in certain subsidiaries and the parent. With anticipated

 


substantial lead times for the group's projects, and the possibility that these may therefore expire before their use, it

 


is not considered appropriate to anticipate an asset value for them.

 


 

6.

Loss per share

 


 


The calculation of basic and diluted loss per share at 31 December 2013 was based on the loss attributable to

 


ordinary shareholders of £3,350,702. The weighted average number of ordinary shares outstanding during the 

 


period ending 31 December 2013 and the effect of the potentially dilutive ordinary shares to be issued are  shown

 


below.

 


 


Period to 31 December 2013


Year to 30 September 2012

 


 £


 £

 


 


Net loss for the year

     (3,350,702)


          (1,781,779)

 


 


Basic weighted average ordinary shares

 


in issue during the period

     45,836,867 


         45,836,867 

 


 


Diluted weighted average ordinary shares

 


in issue during the period

     45,836,867 


         45,836,867 

 


 


In accordance with IAS 33 and as the average share price in the year is lower than the exercise price, the share

 


options do not have a dilutive impact on earnings per share for the period ending 31 December 2013.

 


 

7.

Goodwill (group)

 


Goodwill

 


£ 

 


31 December 2013

 


 


Cost

 


 


1 October 2012 and 31 December 2013

              450,766 

 


 


Carrying amount

 


 


31 December 2013

              450,766 

 


 


30 September 2012

              450,766 

 


 


30 September 2012


 


 


Cost

 


 


1 October 2011 and 30 September 2012

              450,766 

 


 


Carrying amount

 


 


30 September 2012

              450,766 

 


 


30 September 2011

              450,766 

 


 


The goodwill arises as a result of the acquisition of Independent Energy Solutions srl which contains the Ribolla

 


project.

 


 


A review of the latest management information and projections shows a net present value significantly in excess of

 


assets and liabilities relating to this project. No changes have been identified as being required to the main

 


assumptions which would have a corresponding material impact on the group.

 


 


The continuing analysis and testing of technical data continues to indicate that the project is feasible.

 


 


The group continues to work towards, and is confident of, obtaining all the necessary approvals from regulatory

 


authorities.

 


 


For the purpose of goodwill impairment testing, recoverable amounts have been determined based upon the

 


value in use of the Ribolla project and is considered further as part of intangible assets in note 8.

 


 


Value in use

 


 


Cash flows are projected for the periods up to the date that the project is expected to become commercially

 


operational and from then until operations are expected to cease, based upon management's expectations. These

 


dates depend on a number of variables, including the project's technical feasibility, regulatory approval, forecast

 


revenue prices and the associate development and operational costs.

 


 


The project is expected to generate revenue after five to nine years and to continue doing so for a further 35

 


years. The directors consider that projections calculated for a period greater than five years are justified as the

 


project is still in a development stage. The directors have used a constant rate of growth of 2.5% (2012: 2.5%)

 


to extrapolate the cash flow projections beyond the period in which the projects will commence to generate

 


revenue. This growth rate is considered to cover increases resulting from inflation and regulatory changes. The

 


discount rate used is 10.0% (2012: 10.0%).

 


 


Key assumptions used in value in use calculations

 


 


The key assumptions used in the value in use calculations for the goodwill asset are the anticipated quantity of

 


resource available for extraction, costs of plant and infrastructure, expected revenue prices, expected operational

 


costs, appropriate discount rates and foreign exchange rates. For further details please see note 9.

 



 


Management's assessment of the technical and commercial viability of the project is supported by the evaluation work

 


undertaken by appropriately qualified persons.

 



 


Management have assessed the project's individual net present value and thereby impairment on a variety of

 


bases and assumptions using, where appropriate, a number of discount rates.  The impairment tests are particularly

 


sensitive to changes in the key assumptions and changes to these assumptions could result in impairment;

 


however, all of the varying bases indicate a net present value significantly in excess of the value of goodwill.

 


 


Foreign exchange rates have been based on external market forecasts, after considering long-term market

 


expectations and the countries in which the group operates.

 


 

8.

Other intangible assets (group)

 


 


Development and exploration

 



Rivara gas

Ribolla Basin

Ksar Hadada

Total

 



storage

CBM assets

exploration


 



facility


acreage


 



£  

£  

£  

£  

 


31 December 2013

 


 


Cost

 


 


1 October 2012

   5,236,000 

      4,013,233 

          1,297,709 

         10,546,942 

 


Exchange differences

      248,709 

         190,629 

                        -

              439,338 

 


Additions

      100,288 

         112,997 

                9,628 

              222,913 

 


 


31 December 2013

   5,584,997 

      4,316,859 

          1,307,337 

         11,209,193 

 


 


Amortisation

 


 


1 October 2012

                  -

                     -

          1,080,829 

           1,080,829 

 


Impairment charge for the period

                  -

                     -

                        -

                         -

 


 


31 December 2013

                  -

                     -

          1,080,829 

           1,080,829 

 


 


Carrying amount

 


 


31 December 2013

   5,584,997 

      4,316,859 

            226,508 

         10,128,364 

 


 


30 September 2012

   5,236,000 

      4,013,233 

            216,880 

           9,466,113 

 


 


30 September 2012


 


 


Cost

 


 


1 October 2011

   4,892,610 

      4,265,886 

          1,237,818 

         10,396,314 

 


Exchange differences

     (389,229)

        (339,370)

                        -

             (728,599)

 


Additions

      732,619 

           86,717 

              59,891 

              879,227 

 


 


30 September 2012

   5,236,000 

      4,013,233 

          1,297,709 

         10,546,942 

 


 


Amortisation

 


 


1 October 2011

                  -

                     -

          1,080,829 

           1,080,829 

 


Impairment charge for the year

                  -

                     -

                        -

                         -

 


 


30 September 2012

                  -

                     -

          1,080,829 

           1,080,829 

 


 


Carrying amount

 


 


30 September 2012

   5,236,000 

      4,013,233 

            216,880 

           9,466,113 

 


 


30 September 2011

   4,892,610 

      4,265,886 

            156,989 

           9,315,485 

 


 


The primary intangible assets are all internally generated.

 


 


For the purpose of impairment testing of intangible assets, recoverable amounts have been determined based

 


upon the value in use of the group's three projects.

 


 


Rivara gas storage facility and Ribolla Basin CBM assets

 


 


Despite the expected delay, a review of the latest management information and projections shows a net present

 


value significantly in excess of assets and liabilities relating to the projects. The main assumptions indicate that no

 


significant change has arisen on these calculations which would materially impact on the group.

 


 


The continuing analysis and testing of technical data continues to indicate that the projects are feasible.

 


 


The group continues to work towards, and is confident of, obtaining all the necessary approvals from regulatory

 


authorities. The group anticipates being able to raise the necessary finance to continue to develop the projects.

 


 


Value in use

 


 


Value in use has been calculated separately for the group's Rivara gas storage facility and Ribolla Basin CBM

 


assets. Cash flows are projected for the periods up to the date that the projects are expected to

 


become commercially operational and from then until operations are expected to cease, based upon management's

 


expectations. These dates depend on a number of variables, including the project's technical feasibility, regulatory

 


approval, forecast revenue prices and the associated development and operational costs.

 


 


The projects are expected to generate revenue after five to nine years and to continue doing so for a further 35

 


years. The directors consider that projections calculated for a period greater than five years are justified as the

 


projects are still in a development stage.

 


 


Key assumptions used in value in use calculations

 


 


The key assumptions used in the value in use calculations for the intangible assets are the expected storage and

 


useable capacity of the Rivara project, the anticipated quantity of resource available for extraction for the Ribolla

 


Basin project, costs of plant and infrastructure, expected revenue prices (specifically gas prices), expected

 


operational costs, appropriate discount rates and foreign exchange rates.

 


 


Management's assessment of the technical and commercial viability of the projects is supported by the evaluation

 


work undertaken by appropriately qualified persons.

 


 


Management has assessed the projects' individual net present values and thereby impairment on a variety of

 


bases and assumptions using, where appropriate, a number of discount rates.  The impairment tests are

 


particularly sensitive to changes in the key assumptions, and changes to these assumptions could result in

 


impairment; however, all of the varying bases indicate a net present value significantly in excess of the value of

 


the intangible assets.

 


 


Foreign exchange rates have been based on external market forecasts, after considering long-term market

 


expectations and the countries in which the group operates.

 


 


The key assumptions used in the value in use calculations are as follows:

 


 


Assumption


Sensitivity

 


factor *

 


 


Rivara gas storage facility:

 


 


Growth rate

2.0%


+278.4%

 


Discount rate

7.0%


+32.1%

 


Capital expenditure

-


+26.0%

 


 


Ribolla Basin CBM assets:

 


 


Growth rate

2.5%


+127.2%

 


Discount rate

10.0%


+53.3%

 


Gas price

€0.27 per cubic metre


-19.3%

 


Capital expenditure

-


+29.5%

 


 


The growth rates are considered to cover increases resulting from inflation and regulatory changes.

 


 


* The sensitivity factor is the percentage change in each specific assumption which would, on its own, result in the

 


net present value equal to the carrying value of the intangible asset in the accounts.

 



 


The discount rates used vary depending on the nature of the projects and the anticipated stability and longevity of

 


expected cash flows.

 



 


Potential impairment of the Rivara project

 



 


The Group holds a 100% interest in Rivara Gas Storage srl Intangible assets include an amount of £5,576,000 with

 


respect to project expenditure. The regional council, Regione Emilia Romagna, where the project is located is

 


currently denying authorisation for project development. However authorisation has been granted by the national

 


government. As a result Rivara Gas Storage srl has appealed against this decision to the Emilia Romogna Bologna

 


Administrative Court and this appeal is due to be heard in thesecond half of 2014

 



 


In the event that Rivara Gas Storage srl's appeal was to be unsuccessful, there may be an indication of impairment

 


of the capitalised expenditure which could significantly reduce the carrying value of this asset.

 



 

9.

Other receivables

 


31 December 2013

30 September 2012

 



£ 


£ 

 



 


Deferred subscription payments due from non-controlling interest


                  -


          2,781,677 

 


Other receivables


      401,180 


            804,979 

 


Prepayments


        63,670 


              47,793 

 


 



      464,850 


          3,634,449 

 


 


Other receivables in the group and the company principally comprise recoverable Value Added Tax and expenditure

 


recharged to project partners.

 


 


The directors consider that the carrying amount of trade and other receivables approximated their fair value.

 


 


Deferred subscription payments due from non-controlling interest had been classified as current as the amounts

 


receivable were anticipated to be realised within the asset's normal operating cycle. See note 3 with regards to

 


the renegotiation and settlement of this amount during the period to 31 December 2013.

 


 



 

10.

Share capital

 


31 December 2013

30 September 2012

 


Group

Company

Group

Company

 


£ 

£ 

£ 

£ 

 


Issued, called up and fully paid

 


45,836,867 (2012: 45,836,867)

 


ordinary shares of 1p

      458,369 

         458,369 

       458,369 

    458,369 

 


 


The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per

 


share at meetings of the company.

 


 

11.

Share premium account

 


31 December 2013

30 September 2012

 


Group

Company

Group

Company

 


£ 

£ 

£ 

£ 

 


 


1 October and 31 December

  15,287,351 

     15,287,351 

        15,287,351 

     15,287,351 

 


 

12.

Share-based payments



The share option scheme, which was adopted by the company on 25 November 2005, was established to reward


and incentivise the executive management team for delivering share price growth. The share option scheme is


administered by the Remuneration Committee.



One-off options of 16,667 granted to A R H Thomas in recognition of his contribution at the time of the company's


AIM admission remain exercisable.



On 4 March 2013 the company issued 200,000 share options to W G Coleman upon his appointment to the board


as chief executive officer.



Details of this tranche of share options outstanding at the year end are as follows:



Date of grant

01/10/2012

Issued/

31/12/2013

Date from which

Lapse

Exercise


Number of

lapsed in

Number of

options may be

date

Price per


options

the period

options

first exercised


option



18/01/2011

  2,175,000

   (285,000)

1,890,000

5/01/2014

5/01/2016

43p


4/03/2013

               -

     200,000

200,000

4/03/2013

3/03/2023

1p



The options outstanding at the end of the year have a weighted average remaining contractual life of 2 years.



The fair values of the options granted on 18 January 2011 were calculated using the binomial option pricing model.


The inputs into the model were as follows:



Stock price

43p



Exercise price

43p



Interest rate

3.51%



Volatility

65%



Time to maturity

5 years



Number of steps


60



Exercise factor

66.289




The fair values of the options granted on 4 March 2013 were calculated using the Black-Scholes option pricing model.


The inputs into the model were as follows:



Weighted average share price

10.62p



Weighted average exercise price

1p



Expected volatility

92.00%



Expected life

10 years



Risk free rate

2.10%



Expected dividend yield

Nil




The expected volatility was determined with reference to the company's share price since it was admitted for trading


on AIM in December 2005. The expected life used in the model has been adjusted, based on management's best


estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.



The group recognised total expenses of £215,114 (2012: £154,956) related to equity-settled, share-based payment


transactions during the period.  Of the amount recognised in the current period £20,573 related to the options issued


to G Coleman, as detailed above, the value of which has been recognised in full as they could be exercised


immediately.


Registered office


Independent Resources plc

Tower Bridge House, St Katharine's Way, London E1W 1DD

Email: [email protected]


Commercial office


1st Floor, 12 Melcombe Place, London, NW1 6JJ, United Kingdom

Telephone: +44 (0) 203 367 1134

Fax: +44 (0) 203 170 7551

Email: [email protected]


Technical office


Viale Liegi 41, 00198 Rome, Italy

Telephone: +39 06 853594

Fax: +39 06 2549 6286

Email: [email protected]

 


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