RNS Number:9952Y
Biofuels Corporation PLC
26 June 2007
Biofuels Corporation plc
("Biofuels" or "the Company")
Preliminary results for the year ended 31 March 2007
Biofuels, which operates the largest biodiesel plant in the UK and one of the
largest in Europe, announces results for the year ended 31 March 2007. A
separate announcement giving details of a proposed restructuring and related
matters is also being made today.
KEY POINTS
* Total of 101,410 tonnes of biodiesel produced and sold during the year
* Plant remediation plan in progress
* Revenues for the year of #51.0 million (2006: #1.9 million)
* Deterioration of market conditions during second half of the year
* Since November 2006, production limited to contracts providing
acceptable margins
* Loss before taxation of #32.0 million (2006: #74.4 million)
* Total borrowings at 31 March 2007 of #97.1 million
* Restructuring agreed with Barclays Bank, subject to shareholder approval
Mike Buzzacott, Chairman, comments:
"Biofuels Corporation is the largest producer of biodiesel in the UK and our
plant is close to becoming fully effective. The Board is still of the view that
the Renewable Transport Fuel Obligation in the UK and other government
programmes for mandated use of biofuels across Europe should underpin longer
term demand for biodiesel. However, the commercial future of the business
remains uncertain and so sources of future funding must be identified in order
to allow the company to survive whilst its markets develop.
"The proposed debt for equity swap will, if approved, give the business the
opportunity to obtain the funds it needs to go forward."
ENQUIRIES: 26 June 2007
College Hill 020 7457 2020
Mark Garraway
Gareth David
BIOFUELS CORPORATION PLC
Chairman's Statement
The year to 31 March 2007 has been a challenging year for the Company but an
important milestone has been achieved in that the Company has produced and sold
101,410 tonnes of biodiesel in the year.
The Company has continued to have difficulties with the plant and its design.
Whilst biodiesel production has gone well, the processing of all of its
intermediate products has been problematic. As announced previously, a plant
remediation programme has been put in place to rectify this with completion
being targeted for September 2007. When this programme is complete the plant is
expected to be able to operate at close to nameplate capacity and simultaneously
process all of its co-products. Not all biodiesel plants are able to reprocess
their co-products and this capability is designed to provide financial benefits
for the business and more general environmental benefits. The company is
actively pursuing a potential claim in respect of design deficiencies against
the plant providers, Energea.
Up until September 2006 biodiesel margins were relatively strong and underpinned
future business plans. However, recent market conditions have also been very
difficult for the Company. The combination of higher vegetable oil prices and
lower biodiesel prices have together meant that the Company has been unable to
make profit from the production of biodiesel. In particular the price of
European biodiesel has been depressed by US biodiesel that benefits from both
European market support mechanisms and US production subsidies. This situation
has been exacerbated by a high $/# exchange rate. The situation is having an
impact on European biodiesel producers in general.
As reported in the announcement dated 13 March 2007, the board maintained a
policy of limiting production, by only taking on contracts that provided
acceptable margins. This policy has proved effective in containing losses, and
effective cash management has allowed the Company and its subsidiaries (the "
Group") to trade within its banking facilities.
Results
Revenue for 2007 was #51.0 million (2006: #1.9 million). The loss before
exceptional items and financing costs was #10.1 million (2006: #9.3 million).
Pre tax losses include exceptional items of #12.0 million (of which #6.8 million
relates to an asset impairment charge made necessary by the financial position
of the Group) (2006: #53.7 million) and interest charges of #10.0 million (2006:
#11.7 million). The Group is reporting a pre-tax loss of #32.0 million (2006:
#74.4 million).
Financing and Proposed Debt for Equity Swap
The Group's debt was #97.1 million at 31st March 2007. Whilst the Group has
contained its losses it has required substantial additional funds to continue
trading, deliver its capital expenditure programmes and to service its debt and
considers that it is likely to require substantial further funds during the next
12 months. Since the year end the Group has secured #7.0 million additional "on
demand" overdraft facilities but believes that this will only be adequate to
cover its interim needs. Included within the accounts is a statement that, in
the absence of sufficient funds to cover the needs of the business over the next
12 months, the future of the business is materially uncertain.
With high debt levels and in the absence of profitability the Group has been
dependent upon its bankers, Barclays Bank plc, to provide adequate funds to
continue to trade. Whilst Barclays has supported and continues to support the
Group, it has indicated as conditions of its continued support that the level of
secured debt must be reduced and that it must receive a significant equity stake
in Biofuels Corporation Trading Limited. Barclays has made proposals to the
Company in this regard. The Directors have negotiated these proposals and have
included them in a circular issued to shareholders. The proposals will be voted
upon by shareholders at an Extraordinary General Meeting of the Company on 23
July 2007.
BIOFUELS CORPORATION PLC
Chairman's statement (continued)
The effect of these proposals, if approved by the shareholders of the Company,
will be to transfer ownership of 94% of the equity in Biofuels Corporation
Trading Limited, the Group's principal subsidiary, to Barclays. These shares
will be paid up by application of #40 million of the existing debt owed to
Barclays. Furthermore the Company will become a private limited company and its
shares will no longer be traded upon AIM. In exchange, Barclays will release the
Company from its obligations to repay the #97.1 million of debt and will provide
sufficient funds to pay its creditors at the date at which the proposed
transaction is concluded.
As part of the Restructuring, the Company's executive directors, Sean Sutcliffe,
Andy Leeser and Richard Nickels, will have their existing terms of engagement
transferred to Biofuels Corporation Trading Limited, the principal operating
business. Clare Spottiswoode will, upon completion of the Restructuring, cease
to be a Director of the Company and will no longer be involved with the business
in any way. Mike Buzzacott and Geoff Brady will remain as Directors of the
Company and Paul Elliott will become a Director of the Company, which will
change its name to Earls Nook Limited.
The Board has undertaken a thorough review of the Group's options, including
seeking purchasers of the Company, but the Board has concluded that, given the
existing financial structure, neither a trade sale nor an equity fundraising is
possible taking into account the economic interests of the various stakeholders
in the Company. If Shareholders vote against these proposals, an insolvency
process will be unavoidable and in such circumstances, given the level of
existing debt, Shareholders will receive no value.
Board and Staff
This year has been a difficult one for the Group and its staff. Notwithstanding
the situation described above, the plant has become operational and will become
fully effective during the calendar year 2007. This has been both a complex
technical and commercial challenge. The progress achieved to date has been the
result of the hard work, skill and dedication of all the Group's employees. I
would thank them for all they have done.
Outlook
Biofuels Corporation is the largest producer of biodiesel in the UK and our
plant is close to becoming fully effective. The Board is still of the view that
the Renewable Transport Fuel Obligation in the UK and other government
programmes for mandated use of Biofuels across Europe should underpin longer
term demand for biodiesel. However, the Board considers that there are few
immediate indications that the oil industry is gearing itself up for
implementation of the Renewable Transport Fuel Obligation in the UK and that its
real impact on the Group, therefore, remains uncertain. Taken together with
subsidised US imports, the commercial future of the business remains uncertain
and so sources of future funding must be identified in order to allow the
Company to survive whilst its markets develop.
The proposed debt for equity swap will, if approved, give the business the
opportunity to obtain the funds it needs to go forward.
MIKE BUZZACOTT
Chairman
26 June 2007
BIOFUELS CORPORATION PLC
Consolidated income statement for the year ended 31 March 2007
Year ended Year ended
31 March 2007 31 March 2006
#'000 #'000
Revenue 51,009 1,915
Cost of sales (54,646) (1,972)
Gross loss (3,637) (57)
Commodity hedge costs - (44,839)
Impairment loss on biodiesel plant (6,514) -
Impairment loss on other fixed assets (257) -
Plant start up and delay costs (3,489) (2,187)
Contractor payments (389) (3,882)
Other exceptional items (1,362) (2,818)
Other administrative expenses (6,494) (9,248)
Administrative expenses (18,505) (62,974)
Loss from operations (22,142) (63,031)
Finance income 143 330
Bank arrangement fees (3,215) (8,745)
Other finance costs (6,834) (2,975)
Finance costs (10,049) (11,720)
Loss before taxation (32,048) (74,421)
Tax expense 22 5
Loss for the year (32,026) (74,416)
Attributable to:
- Equity holders of the parent (32,026) (74,416)
Losses per share
- Basic and diluted (65.3p) (166.4p)
BIOFUELS CORPORATION PLC
Consolidated balance sheet at 31 March 2007
ADVANCE /D 12.25
Year ended Year ended
31 March 2007 31 March 2006
#'000 #'000
Assets
Non-current assets
Property, plant and equipment 34,354 42,331
Current assets
Inventories 3,693 6,146
Trade and other receivables 1,452 1,686
Cash and cash equivalents 630 739
5,775 8,571
Total assets 40,129 50,902
Capital and reserves attributable to equity
shareholders of the company
Share capital 495 451
Share premium reserve 51,817 44,431
Other reserve 842 842
Retained earnings (115,278) (83,838)
Total equity (62,124) (38,114)
Liabilities
Current liabilities
Term loan 79,794 77,900
Bank overdraft 17,330 2,862
Trade and other payables 5,129 8,239
Provisions - 15
Total liabilities 102,253 89,016
Total equity and liabilities 40,129 50,902
BIOFUELS CORPORATION PLC
Consolidated cash flow statement for the year ended 31 March 2007
ADVANCE /D 12.25
Year ended Year ended
31 March 2007 31 March 2006
#'000 #'000
Operating activities
Loss before taxation (32,048) (74,421)
Adjustments for:
Depreciation 2,987 36
Amortisation of deferred grant income (82) -
Impairment losses 6,771 -
Finance income (143) (330)
Finance costs 10,049 11,720
Loss on sale of assets 1 1
Share option charge 586 1,473
Commodity and other hedge contracts - 37,900
Operating loss before changes in working capital and
provisions (11,879) (25,094)
Change in inventories 2,453 (6,146)
Change in trade and other receivables 251 (639)
Change in liquid resources: cash held as guarantees 104 (726)
Change in trade and other payables (858) (2,907)
Cash generated from operations (9,929) (34,039)
Taxation received / (paid) 5 (27)
Interest received 143 330
Interest paid (8,988) (310)
Bank arrangement fees (2,275) (220)
Cash flows from operating activities (21,044) (34,266)
Investing activities
Purchase of property, plant and equipment (3,257) (27,757)
Cash proceeds from sale of assets 4 -
Financing activities
Issue of ordinary shares 7,430 30,904
Proceeds from bank borrowings 1,894 31,475
Grant income 500 750
9,824 63,129
(Decrease)/increase in cash and cash equivalents for cash
flow purposes (14,473) 1,106
Cash and cash equivalents for cash flow purposes brought
forward (2,849) (3,955)
Cash and cash equivalents for cash flow purposes carried
forward (17,322) (2,849)
BIOFUELS CORPORATION PLC
Consolidated statement of changes in equity for the year ended 31 March 2007
ADVANCE /D 12.25
Share Share Other Cash flow Retained Total
Capital Premium Reserves Hedge Earnings Equity
Reserve
#'000 #'000 #'000 #'000 #'000 #'000
Balance at 1 April 2005 308 13,670 842 (39,567) (10,895) (35,642)
Shares issued 143 30,761 - - - 30,904
Loss for the period - - - - (74,416) (74,416)
Cash flow hedges recycled
to income statement - - - 39,567 - 39,567
Total recognised gains
and losses - - - 39,567 (74,416) (34,849)
Employee share option
transfer to reserve - - - - 1,473 1,473
Balance at 31 March 2006 451 44,431 842 - (83,838) (38,114)
Shares issued 44 7,386 - - - 7,430
Loss for the period - - - - (32,026) (32,026)
Change in the fair value - - - 803 - 803
of the cash flow hedge
Cash flow hedges recycled
to income statement - - - (803) - (803)
- - - - (32,026) (32,026)
Total recognised losses
Employee share option - - - - 586 586
transfer to reserve
Balance at 31 March 2007 495 51,817 842 - (115,278) (62,124)
NOTES
1 Accounting policies
Basis of preparation
The following principal accounting policies have been applied consistently in
dealing with items which are considered material in relation to the financial
statements:
The results incorporated in the preliminary announcement have been prepared in
accordance with International Financial Reporting Standards (IFRS and IFRIC
interpretations) issued by the International Accounting Standards Board (IASB)
and with those parts of the Companies Act 1985 applicable to companies preparing
their accounts under IFRS.
The financial statements have been prepared under the historical cost convention
modified by the revaluation of derivative instruments held at fair value.
Going concern
The Directors have considered the likely cash requirements of the Group over the
next 12 months and believe that the current level of facilities, which are
provided on an on-demand basis and extend only until December 2007, are highly
unlikely to meet these requirements. These facilities total #106.1 million and
were agreed with Barclays on 31 May 2007. At the same time Barclays Bank plc has
agreed to defer the payment of interest due to them on borrowings since 1
January 2007 until 31 December 2007.
The Directors recognize that the Group has only been able to continue trading as
a result of the support of Barclays Bank plc, which has provided funding
facilities to the Group since flotation. Whilst Barclays continues to support
the Group, it has indicated as conditions of its continued support that the
level of secured debt must be reduced and that it must receive a significant
equity stake in Biofuels Corporation Trading Limited. Barclays has made
proposals to the Group in this regard and, having negotiated these proposals,
the Directors have included them in a circular to be issued to shareholders
dated 26 June 2007. The Directors believe that the Company will become subject
to an insolvency procedure if shareholders do not vote in favour of the
resolutions contained within that circular. Should shareholders vote in favour
of these resolutions, the Directors are hopeful that additional funding will be
provided by Barclays Bank plc in the future provided that the plant remediation
plan referred to in the Chairman's statement above can be completed
successfully.
In preparing financial forecasts to estimate the likely cash requirements of the
Group over the next 12 months, the Group has had to make certain assumptions
with regard to the price of vegetable oils, the price of biodiesel and several
other key factors. Each of these factors has a significant impact upon the
financial forecasts. The Directors note that the actual prices of these items
are highly volatile and are driven by markets over which the Group has no
control. The Directors have attempted to take a balanced and prudent view in
preparing these forecasts, however their accuracy is uncertain.
Despite these uncertainties, the Directors believe that shareholders have good
reason to vote in favour of the debt/equity swap and have a high level of
confidence that the remediation plan will be successful, which, in turn the
Directors believe will give the bank and the new shareholders in Biofuels
Corporation Trading Limited a strong commercial incentive to provide the
additional working capital facilities that will be required. For these reasons,
the Directors have prepared the financial statements on a going concern basis.
2 Loss for the period
This is arrived at after charging:
a) Exceptional items
Year ended Year ended
31 March 2007 31 March 2006
#'000 #'000
Commodity hedge costs - 44,839
Professional fees connected to refinancing 960 1,986
Contractor payments 389 3,882
Plant start up and delay costs 3,489 2,187
Impairment loss on biodiesel plant 6,514 -
Impairment loss on other fixed assets 257 -
Plant 2 FEED costs 402 -
Forward exchange contracts - 436
Interest rate swap closure costs - 396
12,011 53,726
Commodity hedge costs
By December 2005, it became clear that deliveries would not be made against a
sales contract which accounted for the majority of the notional value of the
commodity hedging instrument. In addition, other forecast sales to be made at
variable market prices which, at the end of the previous accounting period, had
been anticipated to account for, at least, the remainder of the notional value
of the commodity hedging instrument for which recognition of changes in the
value of that instrument had been deferred had, during the final months of 2005,
either been taken out as, or modified to being forecast as, fixed price
contracts. These two developments meant that the commodity hedging instrument,
which was designed to eliminate the risk of changes in purchase and sales prices
arising from changes in market prices, was rendered ineffective. In consequence
and since the commodity hedging instrument was settled in full in December 2005
as part of an agreement for new banking facilities, the whole of the remaining
deferred loss on the commodity hedging instrument was charged to the income
statement.
The Group did not enter into any further derivative contracts during the
remainder of the financial year and did not hold any derivative contracts at 31
March 2007.
Professional fees
The professional fees relate to costs incurred with the raising of additional
working capital facilities and refinancing the business.
Contractor Payments
The Group has made additional payments to sub-contractors on behalf of the main
contractor for the provision of the first plant. The Group considers that these
amounts are unlikely to be recovered in the short to medium term and therefore a
provision has been made against these further sums.
Plant start up and delay costs
Plant start up and delay costs consists primary of additional storage costs to
store intermediate by-products, additional maintenance remedial activity on the
biodiesel plant and associated commissioning costs of the plant.
2 Loss for the period (continued)
Impairment loss
The recoverable amount of the assets is its fair value less costs to sell
obtained by reference to external market valuations of the business. Therefore,
the difference between this value and the carry forward net book value of the
assets prior to impairment, has been charged to the income statement in
accordance with IAS 36 'Impairment of assets'.
Plant 2 FEED costs
The Group has made payments in connection with front end engineering design
costs for capacity expansion.
Forward exchange contracts
In July 2006 a sizeable proportion of future sales to December 2006 denominated
in Euros were not matched by equivalent expenditures in the same currency.
Therefore, the Group entered into a forward exchange contract to convert Euros
into US dollars which was required to meet certain costs (predominantly
vegetable oils). After 30 September 2006 it became clear that the foreign
exchange exposure of the business had changed to a significant extent and future
expected currency flows no longer matched the notional value of the hedging
instrument. The remaining components of the forward exchange contract were
therefore cancelled. The Group made a small gain on the cancellation.
b) Other administrative expenses
Year ended Year ended
31 March 2007 31 March 2006
#'000 #'000
Depreciation 72 36
Auditors' remuneration
Fees payable to the Company's auditor for the audit
of the financial statements 14 14
Audit of the financial statements of the company's
subsidiary pursuant to legislation 21 11
Other services pursuant to legislation (being interim
review costs) 51 13
Other services relating to taxation 6 43
All other services (being grant claims) - 2
Hire of plant and machinery - operating leases 16 8
Hire of other assets - operating leases 51 57
Engineering spares write-off 568 -
Foreign exchange gain (73) (270)
Share option charge 586 1,473
3 EARNINGS PER SHARE
The losses per ordinary share have been calculated using the weighted average
number of shares in issue during the relevant financial periods. The weighted
average number of equity shares in issue is 49,037,461 (31 March 2006:
44,734,260). There are 3,858,799 (2006: 3,505,760) potentially issuable shares
that have not been included in the diluted EPS as they are antidilutive. The
earnings, being the losses after tax are #32,026,000 (31 March 2006: loss
#74,416,000).
4 SECTION 240
The announcement set out above does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985 for the year ended 31 March
2007 or for the year ended 31 March 2006, but are derived from those accounts.
Statutory accounts for the year ended 31 March 2006 have been delivered to the
Registrar of Companies.
The auditors have reported on the 2007 and 2006 accounts; their reports were
unqualified but included references to matters to which the auditors drew
attention by way of emphasis, without qualifying their reports, in respect of
uncertainties over the Group's ability to continue as a going concern. The
reports did not contain a statement under section 237(2) or (3) of the Companies
Act 1985.
The accounts have yet to be delivered to the Registrar of Companies. The annual
report and accounts will be posted to shareholders shortly and will also be
available on the Company's website, www.biofuelscorp.com. The Annual General
Meeting of the Company to consider these accounts will be held on 23rd July
2007.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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