IPSA Group PLC Audited Results for the year ended 31 March 2015 (1840S)

TIDMIPSA

RNS Number : 1840S

IPSA Group PLC

15 March 2016

15 March 2016

IPSA GROUP PLC

("IPSA", the "Group" or the "Company")

Audited Results for the year ended 31 March 2015

IPSA, the AIM and AltX listed independent power plant developer with operations in southern Africa, today announces its audited results for the year ended 31 March 2015.

Highlights:

   --      Revenue of GBP3.6 million (year to 31 March 2014 - GBP3.7 million) 
   --      Group loss after tax of GBP6.9 million (year to 31 March 2014 - GBP0.4 Profit) 
   --      Plant gross loss of GBP4.6 million (year to 31 March 2014 - GBP1.0 million loss) 
   --      Plant operating loss GBP4.8 million (year to 31 March 2014 - GBP1.6 million loss) 
   --      Post balance sheet disposal of all subsidiaries for total consideration of GBP1.9m 

The accounts have been prepared on a "going concern" basis resulting in an adverse opinion from the auditors due to a differing view than that of the directors. The Company is reliant on the forbearance of its creditors whilst it seeks to realise its assets being principally the balance of plant held for sale and its receivable from Rurelec PLC. Whilst there is no formal agreement with the Group's principal creditor Ethos Energy or any other creditor for a moratorium on the amounts now due the board believes it will be able to realise sufficient proceeds from the sale of its assets and realisation of its debtors due to repay all of its creditors. However there can be no certainty that this will be the case and the risk remains that should this not be achievable in the time required that the Company may need to apply for administration.

It is the directors' intention to focus on the realisation of its assets and repayment of its creditors. Following the disposal of the groups operating subsidiary in February 2016 the Company is now an Aim Rule 15 cash shell and the Company is seeking an acquisition constituting a reverse takeover.

The Company's shares have been suspended from trading since 23 September 2015. Trading in the shares will continue to be suspended as the Company has not published its interim results for the six months ended 30 September 2015 in accordance with Aim Rule 18 which were due by 31 December 2015.

The Company is looking to publish the interim results as soon as possible.

The Group's financial statements will be posted to shareholders today and are now available on the Company's website at www.ipsagroup.co.uk together with the notice for the Company's AGM, which will be held at 10.30 am on 7 April 2016 at 17(th) Floor, Millbank Tower, 21-24 Millbank, London SW1P 4QP.

For further information contact:

Mark Otto, Acting CEO, IPSA Group PLC [phone]

Peter Earl, Director, IPSA Group PLC [phone]

James Joyce and James Bavister, WH Ireland Ltd (Nominated Adviser and Broker) [phone]

   Riaan van Heerden, PSG Capital (Pty.) Limited, (South African Sponsors)   [phone] 

Or visit IPSA's website: www.ipsagroup.co.uk

STRATEGIC REPORT

Dear Shareholder,

I present to the shareholders of IPSA Group PLC (the "Company") and its subsidiaries (together the "Group") the much delayed Report and Accounts for the year ended 31 March 2015. Since the year end, the Company has sold its principal operating business in South Africa by disposing of its shareholding in Blazeway Engineering Pty Ltd ("Blazeway") and this has affected the reporting of the Group accounts. Under IFRS accounting standards, the directors consider this disposal an adjusting event relating to IAS 10 after the Reporting Period, as the Group no longer expects to receive the future cash flows of the disposed entities. It is therefore appropriate that entity and consolidation adjustments are made to the carrying value of Blazeway to reflect the sale proceeds. Details of the disposal are contained in the Director's Report

The Company has for many years owned and operated Newcastle Cogeneration (Pty) Ltd, ("NewCogen") a wholly owned subsidiary of Blazeway which is a combined heat and power plant located in Newcastle, South Africa. The overall performance in 2015 saw higher operational efficiencies and higher output than previous years due in the main to the addition of a 1 MW Deutz engine. Announced after the year end, NewCogen was awarded a one year extension to its Medium Term Power Purchase Programme ("MTPPP") contract (with Eskom). NewCogen was also successful in drawing down a loan from the Industrial Development Corporation ("IDC") for the installation of the two Jenbacher gas engines. The Jenbacher Installation commenced and the engines were expected to be in commercial operation by the summer of 2016 resulting in an additional 3.8 MW being made available to the existing operation. However a chronic shortage of funds in late 2015 delayed that installation and placed further pressure on the Group's already tight cash position.

Consistent with prior years, we are required under the accounting rules to recognise an impairment of the generating assets at the year-end of GBP5.1m. In addition, we had recognised an impairment in the investment/loans to our subsidiary of GBP22.9m in view of the delays in it achieving profitability and the development status of further planned expansion. The proceeds to be received for the disposal are significantly less than the historical investment value resulting in an impairment of GBP23 million. The table in note 14 provides further information regarding the impact of various discount rates on the value of the assets.

The Group has always maintained its commitment to complete payment of outstanding sums to Ethos Energy Italia SpA ("Ethos") and to other creditors. This commitment is now totally dependent upon receiving the funds due from Rurelec PLC ("Rurelec") and the sale of the balance of plant pertaining to the 701 turbines (the "BOP") as the Company has no other sources of funding available to it at this time.

Strategy

The Company's strategy following the disposal of NewCogen is to sell the BOP for a target price of GBP4.0 million. The sale of the BOP at this figure or more will clear all remaining Company creditors, of which Ethos is by far the largest and leave IPSA as a quoted cash shell suitable as a partner for a potential reverse takeover candidate.

Group Results

Group turnover for the year was GBP3.6m (2014: GBP3.7m), the Group recorded a gross loss for 2015 of GBP5.3m (2014: loss of GBP957k). The operating loss increased from GBP2.3m last year to a loss of GBP6.78m in the current year.

The Directors have conducted an impairment review of the carrying value of the remaining ancillary equipment and consider that no impairment has occurred. The carrying value continues to be sufficient to cover a significant portion of the creditor position.

Following the sale of the remaining two turbines in June 2013 to Rurelec, the balance outstanding to the Group has only been paid in part through the settlement by Rurelec of EUR1.4m, after the year end, of the total outstanding amounts due to Ethos. The balance outstanding from Rurelec re the turbines is currently GBP1.8m. The balance due to Ethos has been fully provided in the accounts at GBP4.1m.

NewCogen

The plant recorded an overall loss for the year of GBP4.6m (2014: GBP2.5m) after reporting a GBP3.9m impairment and lower foreign currency losses as a result of the reorganisation of NewCogen's finances and the conversion of approximately GBP11.1m of its debt into South African Rand ("ZAR"). This debt is awaiting capitalisation approval from the South African Reserve Bank and is treated as equity in the Group Accounts.

The plant recorded an excess of revenues over gas costs of GBP0.5m (2014: GBP0.6m) and an operating loss of GBP4.6m (2014: GBP1.5m). In local currency, turnover was ZAR 65.0m (2014: ZAR 59.6m), and the operating loss, excluding depreciation and the impairment charge, was ZAR 3.7m (2014 ZAR 3.2m).

Board of Directors

The death of Phil Metcalf, IPSA's CEO, in November 2014 was a significant interruption to the Group's strategic drive. In July 2015 we announced the resignations of Peter Earl and Elizabeth Shaw and thank them both for their significant contributions since the Group was formed. Mark Otto who has acted as Chief Operating Officer since 2013 was appointed as Acting Chief Executive Officer to provide continuity of the operation in Newcastle and to resolve all the issues on hand pending the disposal of Blazeway and NewCogen. As announced on 1(st) March 2016 Peter Earl has re-joined the Board.

Neil Bryson, who has served as senior non-executive director for nine years and I have both decided this is a convenient juncture to step down from the board and therefore will not be standing for re-election. I would like to express the board's heartfelt thanks to Neil for his contribution through challenging times and wish him well. I have enjoyed the opportunity to bring competition into the electricity sector in South Africa through my involvement with IPSA and look forward to hearing that the new capacity at Newcastle has been successfully commissioned and that new BEE industry players have been brought into the business

Outlook

We have continued to work towards payment of our principal creditor Ethos and expect to meet all but the last EUR 2.65m in the coming weeks, this will be dependent on receipts from Rurelec. Progress is been made in terms of receiving funds from Rurelec but the disposal of the BOP will take more time as a result of tough global economic conditions.

P Earl

Director

14 March 2016

STRATEGIC REPORT - REVIEW OF OPERATIONS

NEWCOGEN

In the past year we have continued to see reliable operations at the NewCogen power plant, with availability remaining above 95 per cent. and thermal efficiencies improving with reliable operations. Our operating team has gained valuable experience in operating our Deutz gas engine and is fully engaged in preparations for operating the two Jenbacher engines.

March 15, 2016 11:10 ET (15:10 GMT)

Since the balance sheet date, the disposal of Blazeway was announced on 28(th) January 2016 for a total consideration of GBP1.9m. The sale includes 100% of the share capital of NewCogen, loss making owner of the Group's only operational asset. Under IFRS accounting standards the directors consider this an adjusting event relating to IAS 10 - Events After the Reporting Period, as the Group no longer expects to receive the future cash flows of the disposed entities. It is therefore appropriate that entity and consolidation adjustments are made to the carrying value of Blazeway to reflect the sale proceeds. The directors recognise that following this fundamental disposal, IPSA will become a cash shell and under AIM rule 15 will be deemed to be an investing company.

This information is provided by RNS

The company news service from the London Stock Exchange

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March 15, 2016 11:10 ET (15:10 GMT)