TIDMAPR
RNS Number : 0853X
APR Energy PLC
26 August 2015
APR Energy plc
APR Energy plc
Results for the half-year ended 30 June 2015
-- Revenue down 52% to $122.2 million (H1 2014: $254.2 million)
primarily due to early termination of Libya
-- Adjusted EBITDA of $48.3 million (H1 2014: $141.7 million)
largely due to the Libya roll off and low utilisation, resulting in
a statutory loss of $64.5 million
-- 183MW of new contract wins and expansions, including in Egypt and Botswana
-- Contract renewals of 762MW year to date, for a rate of 88%
-- Majority of assets successfully removed from Libya;
demobilization more expensive than anticipated
-- Significant post-period progress on collection of outstanding
receivables of $19.1 million from Libya and Yemen partially offset
by provision for Angola of $7.0 million
-- Impairment of $24.2 million on Yemen assets to be reassessed
following post-period access to sites
-- On-going discussions with the Group's lenders regarding an
expected covenant breach at the end of third quarter (and
subsequent covenant testing dates), in the absence of an amendment
to the terms of the Group's loan facilities
APR Energy plc (LSE: APR) (the "Company" and together with its
subsidiaries, "APR Energy" or the "Group"), a global leader in
fast-track power solutions, announces its results for the half-year
ended 30 June 2015.
Laurence Anderson, Chief Executive Officer, said:
"It was a particularly challenging first half of 2015 as the
Company readjusted to the early termination of its project in Libya
and controlled shutdown in Yemen, as well as the customer latency
in the broader marketplace, all of which has impacted revenues and
profits. We secured two new projects, including a gas turbine plant
in Egypt that reinforces the applicability of our solutions to
industrial applications. We had strong renewals and several
expansions, demonstrating the customer satisfaction and operational
excellence we bring to each project. Our pipeline of opportunities
is solid, but many projects have been slower than expected to
materialise and we expect near-term lumpiness in our markets to
continue. In response to the financial impact of these challenges,
we have recently instituted strict cost controls, and enhanced
discipline around spending and inventory, and we have actively been
engaged with the Group lenders regarding the expected covenant
breach at the end of the third quarter."
Enquiries:
APR Energy plc
Lee Munro (investors) + 1 904 404 4576
Manisha Patel (investors) + 1 904 517 5135
Alan Chapple (media) + 1 904 223 2277
CNC Communications
Richard Campbell +44 (0) 20 3219 8801 / +44 (0) 7775 784 933
Charukie Dharmaratne +44 (0) 20 3219 8837 / +44 (0) 79 086
38579
An analyst presentation will be held this morning at 9:00am UK
time at Numis Securities, The London Stock Exchange Building, 10
Paternoster Row, St Pauls, EC4M 7LT (Please remember to bring photo
ID).
A webcast will be available via the following link:
http://view-w.tv/901-1205-16209/en
A conference call can be accessed via:
New York New York: +1 212 999 6659
Standard International Access: +44 (0) 20 3003 2666
UK Toll Free: 0808 109 0700
USA Toll Free: 1 866 966 5335
Participant pin - 4151746#
About APR Energy
APR Energy is the world's leading provider of fast-track mobile
turbine power. Our fast, flexible and full-service power solutions
provide customers with rapid access to reliable electricity when
and where they need it, for as long as they need it. Combining
state-of-the-art, fuel-efficient technology with industry-leading
expertise, our scalable turnkey plants help run cities, countries
and industries around the world, in both developed and developing
markets. For more information, visit the Company's website at
www.aprenergy.com.
Certain statements included in this announcement constitute, or
may constitute, forward-looking statements. Any statement in this
announcement that is not a statement of historical fact (including,
without limitation, statements regarding the Company's future
expectations, operations, financial performance, financial
condition and business) is or may be a forward-looking statement.
Such forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially
from those projected or implied in any forward-looking statement.
These risks and uncertainties include, among other factors,
changing economic, financial, business or other market conditions.
Although any such forward-looking statements reflect knowledge and
information available at the date of this announcement, reliance
should not be placed on them. Without limitation to the foregoing,
nothing in this announcement should be construed as a profit
forecast.
Interim management review
The first half of 2015 has been challenging, with
location-specific events outside our control and a pipeline of
opportunities that has taken longer than anticipated to mature. We
remain confident in our capacity to win large-scale, long-term
power contracts, but these deals take longer to finalise. In
response, management has increased its flexibility around contract
size and duration. The Group's track record demonstrates that
smaller, shorter deals have a high likelihood of renewal and even
expansion, eventually becoming larger, longer-term projects.
Management believes this diversified approach should help the Group
win a greater range of contracts and optimise fleet utilisation. In
addition, our supply chain enhancements and focus on financial
discipline should drive operational efficiencies.
Key accomplishments
During what has been widely considered a slow period for the
global interim power market, the Group secured a significant
project that will feature three GE gas turbines during development
of a major industrial facility in Egypt. This project will run for
at least 12 months and should be commissioned in the first quarter
of 2016. This contract - combined with our renewal for a mining
operation in Guatemala - reinforces the applicability of our
solutions to meet the power requirements of energy-intensive
industries.
The Group leveraged a strong customer relationship to secure a
two-year contract for 35MW of new capacity for Botswana Power
Company, adjacent to an existing facility previously installed by
APR Energy and later sold to the utility. The project, which will
be commissioned in late third quarter, will include equipment
redeployed from Libya. In addition, the Group signed new contracts
for 73MW of additional generating capacity at existing projects in
Indonesia, Myanmar and Senegal.
The period also saw a strong renewal rate with 762MW of contract
extensions - including the 250MW project in Uruguay for Usinas y
Trasmisiones Eléctrica.
The Group has now successfully removed the majority of its
assets from Libya and will continue to pursue all avenues to
preserve and recover the reminder. The remaining assets are
insured. We expect the demobilisation will be completed in the
third quarter. Post-period, the Group received $10.7 million in
receivables from Libya, and it continues to work diligently to
recover the outstanding balance.
Post-period, the Group also received payment of $8.4 million
from Yemen. This represents payment in full on the outstanding
project balance. As a result, the Group has reversed its previously
recorded provision of $8.2 million in the half-year. In addition,
the Group gained access to the project sites and equipment, which
will result in a re-evaluation of the $24 million impairment taken
in the second quarter due to the inability to safely enter the
country at that time.
The Group has made significant progress in its supply chain and
inventory management transformation, and implementation of a
supporting Enterprise Resource Planning system. These improvements
should enable enhanced decision-making with real-time access to
inventory, procurement and pricing data; faster and more
cost-effective logistics, demobilisation and remobilisation of
assets; and function-wide cost savings.
H1 2015 financial performance
Despite strong operational performance, significant contract
renewals and successful demobilisation of the majority of our
equipment in Libya during the first half of 2015, financial
performance for the period was muted.
Average utilisation during the period decreased 25 points to 52%
(H1 2014: 77%) driven primarily by the termination of the Libya
project and controlled shutdown of the Yemen project. Half-year
contract renewals were robust at 88%.
At the period end, total fleet capacity decreased by 2% to
2,058MW (31 December 2014: 2,108MW), resulting from the impairment
of the Yemen assets and the addition of assets for our expanded
Myanmar project. Fleet capital expenditure of $16 million (H1 2014:
$139 million) reflects ongoing maintenance, investment in 10MW of
capacity immediately deployed to Myanmar, and a decision to not
acquire any additional new fleet capacity in 2015.
Revenue decreased to $122 million (H1 2014: $254 million),
driven primarily by the early contract termination in Libya and
roll-off of projects in Bangladesh, Canada and Martinique, as well
as the controlled shutdown of the Yemen project.
Adjusted EBITDA decreased to $48.3 million (H1 2014: $142
million) and adjusted EBITDA margin decreased to 39% (H1 2014:
56%). This EBITDA performance reflects the termination of the
contract in Libya and the controlled shutdown of the project in
Yemen, as well as the 52% utilisation rate.
Adjusted operating loss was $21 million (H1 2014: $72 million
profit), which is reflective of the challenges associated with
demobilising equipment for Libya and the decreased EBITDA from this
contract termination.
Adjusted basic loss per share was 43 cents (H1 2014: 55 cents
earnings per share), based on a weighted average number of shares
of 94.3 million (H1 2014: 94.3 million shares).
(MORE TO FOLLOW) Dow Jones Newswires
August 26, 2015 02:01 ET (06:01 GMT)
Adjusted return on capital employed decreased to (3)% (H1 2014:
12%) driven by the decrease in adjusted operating profit and the
timing of redeployments.
The Group's cash flow reflected repayments of borrowings, an
additional payment related to the 2014 purchase of gas turbines
from strategic partner GE and Libya demobilisation costs. Net cash
flow from operating activities totalled $18.5 million (H1 2014:
$144 million). As a result, the Group ended the period with net
debt of $602 million (31 December 2014: $546 million), excluding
capitalised financing fees.
Going concern
In determining the going concern basis on which to prepare this
interim report, the Directors have considered all factors likely to
affect the future development of the Group, its performance and its
financial position, including cash flows, liquidity position and
borrowing facilities and the risks and uncertainties associated
with its business activities. Specifically, the Directors have
considered the most recent financial forecasts, which have been
approved by the Board, and which cover the going concern period,
being a period of at least one year from the date of approval of
this interim report. In the going concern period, the key
assumptions within the forecasts considered by the Directors are
the timing of mobilisation and revenue generation of currently
unutilised assets (including the number of generators forecast to
be deployed) and existing contract renewal assumptions that impact
the timing of termination of existing contracts. The Directors have
considered the sensitivity of the forecasts to changes in these key
assumptions.
In considering the forecasts and sensitivities, and principally
as a result of recent political challenges in Libya and Yemen and
the associated impact on the Groups operational performance in
these geographies, the Directors consider there to be significant
likelihood that the Group could breach the financial covenants
contained in the terms of its loan facilities during the going
concern period, with an initial breach forecast to occur based on
the 30 September 2015 testing date (and subsequent covenant testing
dates), in the absence of amendment to the terms of the Group loan
facilities. A breach of those covenants could result in these
borrowings becoming repayable immediately.
Due to this risk, the Group is currently engaging with its
lenders regarding a modification of its financial covenants and
loan facilities. To achieve this, the Group has proactively engaged
the services of legal counsel and financial advisors with relevant
experience to assist with a prospective renegotiation of the
Group's current loan facilities or refinancing of the facilities,
with a view to allowing the Group to avoid any breach or return the
Group to compliance with its covenants and/or secure the necessary
amendments thereof.
Based on the current status of negotiations with the lenders,
and considering the financial forecasts and the longer term
prospects of the Company, the Directors believe that there is a
reasonable prospect that the group will be able to successfully
execute a renegotiation or refinancing of its loan facilities and
that the Company will have sufficient financial resources to
continue to operate for at least one year from the date of approval
of this document. Accordingly, whilst there remains a material
uncertainty as to the outcome, which casts significant doubt upon
the Group's ability to continue as a going concern and that,
therefore, the Group may be unable to realise its assets and
discharge its liabilities in the normal course of business, the
Board reaffirms its belief that adoption of the going concern basis
for the preparation of the Group's financial statements is
appropriate.
Outlook
With four months remaining in 2015, and considering the typical
interval between contract signature and revenue generation, we
anticipate limited additional benefit to our year-end financial
performance. Nonetheless, we remain confident in our pipeline and
believe a number of these opportunities will become
revenue-generating projects - albeit later than anticipated.
While the near-term latency and lumpiness we are experiencing is
a market-wide phenomenon, we believe our diversified approach,
increased emphasis on our business development process, and
reputation for operational excellence and customer satisfaction
places the Group in an advantageous position as opportunities
emerge.
Financial Review
Reported Reported Adjusted(1) Adjusted(1)
H1 2015 H1 2014 H1 2015 H1 2014
$ million (Unaudited) (Unaudited) (Unaudited) (Unaudited)
-------------------------------- ------------ ------------ ------------ ------------
Revenue 122.2 254.2 122.2 254.2
Cost of sales (151.3) (160.9) (127.1) (160.9)
Amortisation of intangible
assets - (17.2) - -
-------------------------------- ------------ ------------ ------------ ------------
Gross (loss)/ profit (29.1) 76.1 (4.9) 93.3
Doubtful accounts expense 6.9 - 6.9 -
Selling, general and
administrative expenses (23.0) (21.4) (23.0) (21.4)
--------------------------------- ------------ ------------ ------------ ------------
Operating (loss)/profit (45.2) 54.7 (21.0) 71.9
Integration and acquisition
related costs - (2.2) - -
Founder securities revaluation - 17.5 - -
Foreign exchange gain/(loss) 0.3 (0.2) 0.3 (0.2)
Finance income 1.0 0.7 1.0 0.7
Finance costs (14.5) (16.2) (14.5) (13.3)
--------------------------------- ------------ ------------ ------------ ------------
(Loss)/profit before
taxation (58.4) 54.3 (34.2) 59.1
Taxation (6.1) (7.1) (6.1) (7.1)
--------------------------------- ------------ ------------ ------------ ------------
(Loss)/profit for the
period (64.5) 47.2 (40.3) 52.0
--------------------------------- ------------
Total comprehensive
(loss)/profit for the
period (64.5) 47.2 (40.3) 52.0
--------------------------------- ------------ ------------ ------------ ------------
(Loss)/Earnings per
share
-------------------------- -------- ------ -------- ------
Basic (loss)/ earnings
per share ($) $(0.68) $0.50 $(0.43) $0.55
Diluted (loss)/ earnings
per share ($) $(0.68) $0.49 $(0.43) $0.54
--------------------------- -------- ------ -------- ------
Average utilisation across the first half remained subdued at
52% (H1 2014: 77%) driven primarily by the termination of the Libya
contract and the controlled shutdown of the Yemen project. Contract
renewals for the period were robust at 88% reflecting APR Energy's
commitment to operational excellence and strong customer
relationships.
At the period end, total fleet capacity decreased by 2% since 31
December 2014 (2,108MW) to 2,058MW, which is a result of the
stranded Yemen assets offset by the addition of assets for our
expanded Myanmar project.
Adjusted financial results and performance review
The Group uses adjusted unaudited financial information in
managing the business and evaluating the Group's underlying
performance. The Group adjusts for certain items including
amortisation of intangibles, founder securities revaluation
movements, integration and acquisition related costs and
impairments. A reconciliation to their statutory equivalents is
available within this Financial Review.
The adjusted unaudited financial information has been prepared
as follows:
Revenue Operating Loss
loss for
the
$ million period
------------------------------ -------- ---------- --------
6 month statutory results to
30 June 2015 122.2 (45.2) (64.5)
Impairment of Yemen assets - 24.2 24.2
6 month adjusted results to
30 June 2015 122.2 (21.0) (40.3)
------------------------------ -------- ---------- --------
Revenue Operating Profit
profit for
the
$ million period
-------------------------------- -------- ---------- --------
6 month statutory results to
30 June 2014 254.2 54.7 47.2
Amortisation of intangible
assets - 17.2 17.2
Founder securities revaluation - - (17.5)
Integration and acquisition
related costs - - 2.2
Acquisition related finance
costs - - 2.9
6 month adjusted results to
30 June 2014 254.2 71.9 52.0
-------------------------------- -------- ---------- --------
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August 26, 2015 02:01 ET (06:01 GMT)
Reconciliation of adjusted operating (loss)/profit to adjusted
EBITDA:
Adjusted Adjusted
$ million H1 2015 H1 2014
------------------------------------ --------- ---------
Adjusted operating (loss)/ profit (21.0) 71.9
Depreciation 71.5 66.4
Equity-settled share-based payment
(income)/ expense (2.2) 3.4
------------------------------------ --------- ---------
Adjusted EBITDA 48.3 141.7
------------------------------------ --------- ---------
Revenues for the first half decreased to $122.2 million (H1
2014: $254.2 million) driven primarily by the early contract
termination in Libya and the roll-off of projects in Bangladesh,
Canada and Martinique as well as the controlled shutdown of the
project in Yemen.
Adjusted operating loss was $21.0 million (H1 2014: $71.9
million profit), which is reflective of the challenges associated
with demobilizing equipment for Libya and the decreased EBITDA from
this contract termination.
Adjusted net finance costs for the first half were $13.5 million
(H1 2014: $12.6 million) reflecting higher net debt levels as a
result of drawings made on the credit facility for the payment to
GE for four turbines offset by the timing of receipt of
receivables.
The Group's adjusted and reported tax charge for the first half
was $6.1 million (H1 2014: $7.1 million). The charge primarily
comprises withholding taxes of $2.0 million (H1 2014: $2.2 million)
and corporate income taxes of $4.1 million (H1 2014: $4.9
million).
Adjusted loss for the first half was $40.3 million (H1 2014:
$52.0 million profit) reflecting reduced EBITDA primarily from the
early contract termination in Libya.
Adjusted basic loss per share was 43 cents (H1 2014: 55 cents
earnings per share), based on a weighted average number of shares
of 94.3 million in both periods.
Adjusted EBITDA decreased to $48.3 million (H1 2014: $141.7
million) and adjusted EBITDA margin decreased to 40% (H1 2014:
56%). This EBITDA performance reflects the termination of the Libya
project and the 52% utilisation rate.
Financing and bank facilities
As at 30 June 2015, the Group reduced its gross debt by $48
million (excluding capitalised finance costs) to $617 million (31
December 2014: $665 million). Cash as of 30 June 2015 was $15.1
million (31 December 2014: $118.9 million) resulting in net debt of
$602 million (31 December 2014: $546 million).
Adjusted Return on Capital Employed
Adjusted Return on Capital Employed (ROCE) is a key performance
metric for the business. Adjusted return on capital employed
decreased to (3)% (H1 2014: 12%) driven by the decrease in adjusted
operating profit and the timing of redeployments.
Currencies
The Group has exposure to currency risk through a limited number
of its contracts, particularly its Indonesian and Australian
contracts.
Statutory financial results and performance review
The statutory results for APR Energy cover the six-month period
ended 30 June 2015.
Revenue
Revenue for the period was $122.2 million (H1 2014: $254.2
million), as described above.
Operating profit
Reported operating loss was $45.2 million (H1 2014: $54.7
million profit) reflecting decreased revenues and higher
depreciation charges, including the impairment of Yemen assets of
$24.2 million and Libya demobilisation expense.
Doubtful accounts expense
During the period management recognised the recovery of
receivables previously provided for as follows: Libya in the amount
of $10.7 million, Yemen in the amount of $8.4 million and others of
$1.3 million. Management provided for other receivables in the
amount of $11.2 million principally related to Angola. Management
continue to vigorously pursue collection of all impaired trade
receivables, however ultimately the Group may have to initiate
additional actions in order to recover such amounts. In light of
this, management has determined to provide for these amounts at 30
June 2015, given the uncertainty around the timing or ultimate
collectability of such balances.
Founder securities revaluation
Founder securities charge of $nil (H1 2014: $17.5 million)
reflects the reduction in the share price and reduced timeframe for
potential exercise.
Share-based payments
In accordance with IFRS 2, a non-cash credit of $2.2 million (H1
2014: $3.4 million expense) was recognised related to
equity-settled share-based payment transactions.
Finance cost
Net finance costs for the first half was $13.5 million (H1 2014:
$15.5 million) reflecting lower borrowing rates.
(Loss)/Earnings per share
Basic loss per share was $0.68 (H1 2014: earnings of $0.50)
based on a weighted average number of shares of 94.3 million in
both periods.
Liquidity and capital resources
Net debt (excluding capitalised finance fees of $13.9 million)
as at 30 June 2015 was $602 million ( 31 December 2014: $546
million).
A summary analysis of cash flows is set out in the table
below.
$ million H1 2015 H1 2014
------------------------------- -------- --------
Net cash from operating
activities 18.5 143.6
Net cash used in investing
activities (69.9) (94.8)
Net cash used in financing
activities (52.4) (30.7)
-------------------------------- -------- --------
Net (decrease)/increase
in cash and cash equivalents (103.8) 18.1
Cash and cash equivalents
at beginning of the year 118.9 33.9
-------------------------------- -------- --------
Cash and cash equivalents
at end of the period 15.1 52.0
-------------------------------- -------- --------
During the period, net cash flow from operating activities
totalled $18.5 million (H1 2014: $143.6 million) reflecting the
reduced revenue, increased expense associated with the
demobilization of Libya, the timing of receipt of receivables, and
the payment of taxes during the period.
Cash flow used in investing activities primarily comprised of
payments related to the 2014 purchase of gas turbines from General
Electric of $40 million.
Cash used in financing activities reflects the repayment of $58
million of debt (H1 2014: $45.0 million), including two quarterly
repayments of $4 million in connection with the term loan.
Statement of financial position
Property, plant and equipment
As at 30 June 2015, the Group held property, plant and equipment
of $1,072.6 million (31 December 2014: $1,139.3 million),
reflecting movement in the period for depreciation and the
impairment of the Yemen assets, offset by additions.
Fleet capital expenditure of $16 million (H1 2014: $139 million)
reflects the investment in 10MW of gas reciprocating engine
capacity immediately deployed to expand APR Energy's power plant in
Myanmar, and a decision to not acquire any additional new fleet
capacity in 2015.
Equity
As at 30 June 2015, the Group's total equity reduced to $569.0
million (31 December 2014: $635.7 million) as a result of the loss
for the period.
Treasury policies and risk management
The Group's activities give rise to a number of financial risks,
particularly market risk comprising foreign exchange and interest
rate risk, credit risk and liquidity risk.
Market risk
Market risk includes foreign exchange risk and interest rate
risk. The Group seeks to manage these risks to acceptable levels by
maintaining appropriate policies and procedures. In its
determination to enter into a contract, the Group will carry out a
risk assessment and determine the appropriate risk mitigation
strategies.
Market risk also includes the risk that cash derived from income
for services fulfilled under contract terms will become restricted
and not available for use in the on-going activities of the
business.
Foreign exchange risk
The Group has an exposure to transactional foreign exchange from
purchases or sales in currencies other than US dollars. In order to
minimise exposure to foreign exchange risk, the Group primarily
contracts in US dollars or in contracts with a price based on US
dollars at the date of transaction or payment if possible. In some
cases, the Group transacts in local currencies when purchasing
materials and supplies for project operations.
In limited circumstances, the Group may use derivative
instruments to hedge economically against foreign exchange risk.
Any hedges are limited in duration and correspond to the applicable
contract payments or receipts to which the derivatives are
associated. No such contracts have been entered into in 2015.
Interest rate risk
The Group is primarily exposed to interest rate risk on its
borrowings. Borrowings issued at variable rates expose the Group to
cash flow interest rate risk. When applicable, the Group may elect
to hedge interest rate risk associated with debt or borrowings
under the credit facility by purchasing derivative instruments. As
at 30 June 2015 and 31 December 2014 there was an interest rate
hedge in place; see note 11 for further details.
Credit risk
Credit risk arises from cash and cash equivalents, deposits with
banks and financial institutions, as well as exposures to
outstanding receivables from customers. Due to the nature of the
Group's business in emerging markets, management believes the most
significant of these to be exposures to outstanding receivables
from customers.
To minimise the risk of a significant impact on the business due
to a customer defaulting on its commitments, the Group closely
monitors trade receivables. In addition, the Group utilises letters
of credit, contract insurance policies and up front deposits to
mitigate this risk.
Liquidity risk
(MORE TO FOLLOW) Dow Jones Newswires
August 26, 2015 02:01 ET (06:01 GMT)
Liquidity risk results from insufficient funding being available
to meet the Group's funding requirements as they arise. The Group
manages liquidity risk by maintaining adequate reserves of cash and
available committed facilities to meet the Group's short and
long-term funding requirements. The Group monitors the short-term
forecast and actual cash flows on a daily basis and medium- and
long-term requirements in line with the Group's long-term planning
processes.
Financing and bank facilities
On 31 March 2015, the Group completed an amendment to its senior
syndicated credit facilities, comprising a $450 million revolving
credit facility and a $320 million Term Loan through August 2019.
The amendment to the facilities provides the Group with additional
flexibility around certain financial covenants, notably an
increased leverage profile and the inclusion of a Fixed Charge
Coverage Ratio, which replaced the previous Interest Coverage Ratio
covenant for the remainder of the facilities' term; see note 2
Going Concern in the financial statements for further details.
Going concern
See note 2 for Going Concern statement.
Dividends
The Company did not declare a dividend at 30 June 2015 related
to its interim financial results.
Principal risks and uncertainties
There are a number of potential risks and uncertainties that
could have a material impact on the Group's performance over the
remaining six months of the financial year and that could cause
actual results to differ materially from expected and historical
results. A detailed explanation of the risks summarised below can
be found on pages 26 to 29 of the 2014 Annual Report, which is
available at www.aprenergy.com.
Strategic:
-- Failure to deliver the growth plan;
-- Contracts are temporary in nature and may be nonstandard;
-- Asset concentration.
Market:
-- Global political and economic conditions;
-- Volatility in customer demand, including event-driven demand;
-- Increase in competitive environment.
Operational:
-- Employee, contractor, and asset security;
-- Focus on developing markets - operations in difficult regions of the world;
-- Recruitment and retention of key staff;
-- Environmental, health and safety.
Financial:
-- Movement in cost inputs;
-- Payment default;
-- Funding risk.
The Directors consider that the principal risks and
uncertainties as discussed in the Annual Report for the year ended
31 December 2014 will continue to be the same in the second half of
the year. The Directors consider that the funding risk has
increased since the publishing of the Annual Report. See note 2
Going Concern in the financial statements.
Related party transactions
Related party transactions are disclosed in note 12 to the
condensed set of financial statements.
There have been no material changes in the related party
transactions described in the last annual report.
Responsibility Statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared
in accordance with International Accounting Standard 34 Interim
Financial Reporting;
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board
Laurence Anderson
Chief Executive Officer
26 August 2015
INDEPENDENT REVIEW REPORT TO APR ENERGY PLC
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2015 which comprises the Condensed
Consolidated Statement of Comprehensive Income, the Condensed
Consolidated Statement of Financial Position, the Condensed
Consolidated Statement of Changes in Equity, the Condensed
Consolidated Cash Flow Statement and related notes 1 to 14. We have
read the other information contained in the half-yearly financial
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to it in an
independent review 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, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union and IFRSs as issued by the IASB. The condensed set
of financial statements included in this half-yearly financial
report has been prepared in accordance with International
Accounting Standard 34 "Interim Financial Reporting," as adopted by
the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
Except as explained in the following paragraph, we conducted our
review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity"
issued by the Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of
making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Basis for qualified conclusion
Libya assets - During our audit of the 31 December 2014
financial statements, due to the unstable security conditions, we
were unable to travel to the Group's sites in Libya to observe the
existence and condition of the Group's property plant and equipment
and inventory assets of $300.6 million and $24.7 million
respectively, resulting in a qualified audit opinion.
During the six months ended 30 June 2015, the Group has
demobilised and relocated the majority of the property, plant and
equipment and inventory out of Libya to other locations. Due to the
continuing unstable security conditions in that country, the review
evidence available to us remained limited for those assets
remaining in Libya because we were unable to travel to the Group's
sites in Libya to observe the existence and condition of the
Group's remaining property plant and equipment and inventory
assets. In addition, for the reasons set out below under 'Warehouse
assets', we did not perform review procedures in respect of the
property, plant and equipment and inventory demobilised and
relocated out of Libya.
Warehouse assets - During our audit of the 31 December 2014
financial statements, physical verification testing of some other
fixed assets at locations where the Group's accounting records
indicated the assets were located (predominantly three warehouses),
identified $20.9 million of discrepancies. In total, through a
combination of the items tested and extrapolation thereof, we
estimated that there were $97.9 million assets at 31 December 2014
for which the location could not be adequately determined from the
accounting records. At that time, following further investigation,
we understood that the reason for the discrepancies was that the
assets had been transported to other sites and operational
locations (including Libya and Yemen) but we were unable to confirm
this from the Group's shipping documentation or from physical
verification, in part due to the security conditions in Libya and
Yemen, resulting in a further qualification to our audit
opinion.
During the six months ended 30 June 2015, the Group has
commenced an asset tagging and reconciliation process, which aims
to remediate discrepancies between operational and financial system
data. As the asset tagging and reconciliation activity is in
process but incomplete, we have not performed further asset
verification procedures during the half year review.
Qualified conclusion
Except for the possible effects of the matters described in the
basis for qualified conclusion section, based on our review,
nothing has come to our attention that causes us to believe that
the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2015 is not
prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Emphasis of matter
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In forming our conclusion on our review of the condensed
financial statements, we have considered the adequacy of the
disclosure made in note 2 to the condensed financial statements
concerning the Group's ability to continue as a going concern. The
Group had net debt of $601.9 million at 30 June 2015 and consider
that there is significant likelihood that the Group could breach
financial covenants within its loan facilities within the going
concern period, with an initial breach forecast to occur based on
the 30 September 2015 testing date and on subsequent covenant
testing dates in absence of amendment to the terms of the loan
facilities. If a covenant is breached, the lenders are able to call
the outstanding debt immediately. As explained in note 2 to the
condensed financial statements, the Group is engaged in a
prospective renegotiation of the Group's loan facilities. However,
these conditions indicate the existence of a material uncertainty
which may cast significant doubt about the Group's ability to
continue as a going concern. The financial statements do not
include the adjustments that would result if the Group was unable
to continue as a going concern. Our review conclusion is not
qualified in respect of this matter.
Deloitte LLP
Chartered Accountants and Statutory Auditor
25 August 2015
London, United Kingdom
Condensed Consolidated Statement of Comprehensive Income
6 months 6 months Year
ended ended
30 June 30 June ended
2015 2014
(Unaudited) (Unaudited) 31 December
2014
$ million Note (Audited)
Revenue 4 122.2 254.2 485.7
Cost of sales (151.3) (160.9) (400.3)
Amortisation of intangible
assets - (17.2) (23.4)
Gross (loss)/profit (29.1) 76.1 62.0
Doubtful accounts expense 8 6.9 - (47.0)
Impairments - - (676.4)
Selling, general and
administrative expenses (23.0) (21.4) (41.1)
-------------------------------- ----- -------------- -------------- --------------
Operating (loss)/profit (45.2) 54.7 (702.5)
Integration and acquisition
related costs - (2.2) (4.6)
Founder securities revaluation 11 - 17.5 18.5
Foreign exchange gain/(loss) 0.3 (0.2) (0.8)
Finance income 1.0 0.7 1.6
Finance costs (14.5) (16.2) (35.8)
(Loss)/profit before
taxation (58.4) 54.3 (723.6)
Taxation 5 (6.1) (7.1) (27.0)
-------------------------------- ----- -------------- -------------- --------------
(Loss)/profit for the
period (64.5) 47.2 (750.6)
-------------------------------- ----- -------------- -------------- --------------
Total comprehensive
(loss)/earnings for
the period (64.5) 47.2 (750.6)
Earnings per share
Basic (loss)/earnings
per share (cents) 6 (68.4) 50.1 (796.4)
Diluted (loss)/earnings
per share (cents) 6 (68.4) 49.4 (796.4)
Condensed Consolidated Statement of Financial Position
30 June 30 June 31 December
2015 2014 2014
$ million Note (Unaudited) (Unaudited) (Audited)
Assets
Non-current assets
Goodwill - 622.6 -
Intangible assets - 53.1 -
Property, plant and
equipment 7 1,072.6 1,289.6 1,139.3
Deferred tax asset 0.2 7.7 0.2
Other non-current
assets 3.2 5.1 3.8
----------------------------- ----- -------------- -------------- ------------
Total non-current
assets 1,076.0 1,978.1 1,143.3
----------------------------- ----- -------------- -------------- ------------
Current assets
Inventories 78.5 67.9 79.5
Trade and other receivables 8 122.1 144.3 127.4
Cash and cash equivalents 15.1 52.0 118.9
Income tax receivable 1.9 3.4 0.2
Deposits 4.8 7.6 3.8
----------------------------- ----- -------------- -------------- ------------
Total current assets 222.4 275.2 329.8
----------------------------- ----- -------------- -------------- ------------
Total assets 1,298.4 2,253.3 1,473.1
----------------------------- ----- -------------- -------------- ------------
Liabilities
Current liabilities
Trade and other payables 68.0 159.4 111.1
Income tax payable 12.9 14.7 15.6
Deferred revenue 4.7 18.2 5.7
Borrowings 9 20.0 225.0 16.0
Decommissioning provisions 24.6 16.6 28.9
----------------------------- ----- -------------- -------------- ------------
Total current liabilities 130.2 433.9 177.3
----------------------------- ----- -------------- -------------- ------------
Non-current liabilities
Founder securities 11 - 1.0 -
Derivative liability 11 0.9 - 0.5
Deferred tax liability 2.8 3.2 2.0
Borrowings 9 583.1 338.6 639.5
Decommissioning provisions 12.4 40.0 18.1
----------------------------- ----- -------------- -------------- ------------
Total non-current
liabilities 599.2 382.8 660.1
----------------------------- ----- -------------- -------------- ------------
Total liabilities 729.4 816.7 837.4
----------------------------- ----- -------------- -------------- ------------
Equity
Share capital 15.2 15.2 15.2
Share premium 674.9 674.9 674.9
Other reserves 770.0 770.0 770.0
Equity reserves 10.0 10.3 12.2
Accumulated losses (901.1) (33.8) (836.6)
Total equity 569.0 1,436.6 635.7
----------------------------- ----- -------------- -------------- ------------
Total liabilities
and equity 1,298.4 2,253.3 1,473.1
----------------------------- ----- -------------- -------------- ------------
Condensed Consolidated Statement of Changes in Equity
For the six month period ended 30 June 2015
Share Share Other Equity Accumulated Total
$ million capital premium reserves reserves losses
Balance at 1 January
2014 15.2 674.9 770.0 6.9 (70.4) 1,396.6
---------------------------- -------- -------- --------- --------- ----------- -------
Profit for the period - - - - 47.2 47.2
---------------------------- -------- -------- --------- --------- ----------- -------
Total comprehensive
loss for the year - - - - 47.2 47.2
---------------------------- -------- -------- --------- --------- ----------- -------
Credit to equity for
equity-settled share-based
payment expense - - - 3.4 - 3.4
Dividends - - - - (10.6) (10.6)
---------------------------- -------- -------- --------- --------- ----------- -------
Balance at 30 June
2014 (unaudited) 15.2 674.9 770.0 10.3 (33.8) 1,436.6
---------------------------- -------- -------- --------- --------- ----------- -------
Balance at 1 January
2015 15.2 674.9 770.0 12.2 (836.6) 635.7
---------------------------- -------- -------- --------- --------- ----------- -------
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Loss for the period - - - - (64.5) (64.5)
Total comprehensive
loss for the period - - - - (64.5) (64.5)
Debit to equity for
equity-settled share-based
payment expense - - - (2.2) - (2.2)
Balance at 30 June
2015 (unaudited) 15.2 674.9 770.0 10.0 (901.1) 569.0
---------------------------- -------- -------- --------- --------- ----------- -------
Condensed Consolidated Cash Flow Statement
6 months
ended Year
6 months 30 June
ended 2014 ended
30 June (Unaudited) 31 December
2015 2014
$ million Note (Unaudited) (Audited)
Cash flows from operating
activities
(Loss)/profit for the period
before taxation (58.4) 54.3 (723.6)
Adjustments for:
Depreciation and amortisation 71.5 83.6 169.1
Impairments 24.2 - 717.4
(Loss)/profit on sale or
disposal of fixed assets - (0.2) 6.0
Doubtful accounts expense (6.9) - 47.0
Equity-settled share-based
payment (income)expense (2.2) 3.4 5.3
Founder securities revaluation 11 - (17.5) (18.5)
Loss on derivative financial
instruments 0.4 - 0.6
Finance Income (1.0) (0.7) (1.6)
Finance Expense 14.5 16.2 35.3
Movements in working capital:
(Increase)/decrease in trade
and other receivables (12.7) 41.9 43.0
Decrease/(increase) in inventories 1.0 (24.9) (36.5)
Decrease in other current
and non-current assets 23.9 0.2 1.7
Decrease in trade and other
payables (4.0) 17.1 (24.5)
Settlement of decommissioning
provisions (29.0) (2.3) (5.6)
Increase/(decrease) in other
liabilities 19.1 (9.4) (21.9)
------------------------------------ ----- -------------- -------------- --------------
40.4 161.7 193.1
Interest paid (11.0) (12.3) (23.2)
Interest received 1.0 0.1 0.1
Income taxes paid (11.9) (5.9) (15.5)
------------------------------------ ----- -------------- -------------- --------------
Net cash from operating activities 18.5 143.6 154.4
Cash flows from investing
activities
Purchases of property, plant
and equipment (68.9) (95.0) (116.8)
Purchases of intangible assets - - (6.9)
Proceeds on sale or disposal
of property, plant and equipment - 0.5 2.2
(Increase)/decrease in deposits (1.0) (0.3) 3.5
Net cash used in investing
activities (69.9) (94.8) (118.0)
------------------------------------ ----- -------------- -------------- --------------
Cash flows from financing
activities
Cash from borrowings 9 10.0 25.0 715.0
Repayment of borrowings 9 (58.0) (45.0) (640.0)
Dividends paid 10 - (10.6) (15.6)
Debt issuance costs (4.4) (0.1) (10.9)
Net cash (used in)/from financing
activities (52.4) (30.7) 48.5
------------------------------------ ----- -------------- -------------- --------------
Net (decrease)/increase in
cash and cash equivalents (103.8) 18.1 85.0
Cash and cash equivalents
at beginning of the period 118.9 33.9 33.9
------------------------------------ ----- -------------- -------------- --------------
Cash and cash equivalents
at end of the period 15.1 52.0 118.9
------------------------------------ ----- -------------- -------------- --------------
Included within cash and cash equivalents at 30 June 2015 is an
amount of $8.4 million which backs letters of credit and as such is
classified as restricted cash (31 December 2014: $10.7
million).
Notes to the Condensed Consolidated Financial Statements
1. General information
APR Energy plc ("the Company" and together with its
subsidiaries, "APR Energy" or "the Group") is incorporated in the
United Kingdom under the Companies Act. The address of the
registered office is 5th Floor, 6 St. Andrew Street, London EC4A
3AE, United Kingdom.
This condensed consolidated set of financial statements was
approved by the Board of Directors on [25 August 2015].
The information for the year ended 31 December 2014 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that
period has been delivered to the Registrar of Companies. The
auditor reported on those accounts and their report was qualified
because the auditor was not able to observe the existence and
condition of property plant and equipment, and inventory assets
with a value of $325.3 million in Libya, and also because their
physical verification testing in certain other locations identified
discrepancies between the accounting records and where certain
assets were located with a value of $97.9 million. As a result of
this, the audit report also contained statements under section
498(2) in relation to the auditor being unable to determine whether
adequate accounting records had been kept and section 498(3) in
relation to the auditor's failure to obtain necessary information
and explanations for the purpose of their audit. The auditor did
not draw attention to any matters by way of emphasis.
2. Accounting policies
Basis of preparation
The annual financial statements of APR Energy plc are prepared
in accordance with International Financial Reporting Standards
(IFRS). The financial statements have also been prepared in
accordance with IFRS as adopted by the European Union and therefore
the Group financial statements comply with Article 4 of the EU IAS
regulation. The Group financial statements also comply with IFRS
issued by the IASB.
The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
International Accounting Standard 34 Interim Financial Reporting,
as adopted by the European Union and have been prepared on the
basis of the accounting policies set out in the Group's financial
statements for the year ended 31 December 2014.
Changes in accounting policy
Since the 2014 Annual report and accounts was published no
significant new standards and interpretations have been issued.
Management will continue to monitor any developing standards
which it believes will have a material impact on the Group's
financial statements.
Going concern
In reaching their view on the preparation of the Group's
financial statements on a going concern basis, the directors are
required to consider whether the Group can continue in operational
existence for the foreseeable future.
In determining the basis on which to prepare this interim
report, the Directors have considered all factors likely to affect
the future development of the Group, its performance and its
financial position, including cash flows, liquidity position and
borrowing facilities and the risks and uncertainties associated
with its business activities. Specifically, the directors have
considered the most recent financial forecasts, which have been
approved by the Board, and which cover the going concern period,
being a period of at least one year from the date of approval of
this interim report. In the going concern period, the key
assumptions within the forecasts considered by the Directors are
the timing of mobilisation and revenue generation of currently
unutilised assets (including the number of generators forecast to
be deployed) and existing contract renewal assumptions that impact
the timing of termination of existing contracts. The Directors have
considered the sensitivity of the forecasts to changes in these key
assumptions.
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In considering the forecasts and sensitivities, and principally
as a result of recent political challenges in Libya and Yemen and
the associated impact on the Group's operational performance in
these geographies, the directors consider there to be significant
likelihood that the Group could breach the financial covenants
contained in the terms of its loan facilities during the going
concern period, with an initial breach forecast to occur based on
the 30 September 2015 testing date (and subsequent covenant testing
dates), in the absence of amendment to the terms of the Group's
loan facilities. A breach of those covenants could result in these
borrowings becoming repayable immediately.
Due to this risk, the Group is currently engaging with its
lenders regarding a modification of its financial covenants and
loan facilities. To achieve this, the Group has proactively engaged
the services of legal counsel and financial advisors with relevant
experience to assist with a prospective renegotiation of the
Group's current loan facilities or refinancing of the facilities,
with a view to allowing the Group to avoid any breach or return the
Group to compliance with its covenants and/or secure the necessary
amendments thereof.
Based on the current status of negotiations with the lenders,
and considering the financial forecasts and the longer term
prospects of the Company, the directors believe that there is a
reasonable prospect that the Group will be able successfully to
execute a renegotiation or refinancing of its loan facilities and
that the Company will have sufficient financial resources to
continue to operate for at least one year from the date of approval
of this document. Accordingly, whilst there remains a material
uncertainty as to the outcome, which casts significant doubt upon
the Group's ability to continue as a going concern and that,
therefore, the Group may be unable to realise its assets and
discharge its liabilities in the normal course of business, the
Board reaffirms its belief that adoption of the going concern basis
for the preparation of the Group's financial statements is
appropriate.
During the period, the Company impaired its Yemen assets by
$24.2 million at 30 June 2015 because, as a result of the security
circumstances in Yemen during the period, it did not maintain
control of these assets at that date.
Critical judgements and estimates
Impairment
Additionally, the Group identified an indicator of impairment on
the remaining balance of property, plant and equipment (PP&E)
at 30 June 2015. Because the Group had not previously identified
indicators of impairment on the whole balance of PP&E, the
Group assessed its methodology for testing PP&E for impairment,
including assessing the cash-generating unit ("CGU") at which
PP&E should be tested for impairment. As a result, an
impairment test was then performed.
The Directors have determined the business to have one CGU
focusing on the deployment, generation and sale of fast-track power
solutions.
The CGU to which PP&E has been allocated is tested for
impairment when there is an indication that the CGU may be
impaired. If the recoverable amount of the CGU is less than its
carrying amount, the impairment loss is allocated to reduce the
carrying amount of the individual CGU asset that is impaired.
Consistent with management's assessment that all PP&E is
contained in a single CGU, the Group allocates impairment of the
unit pro-rata on the basis of the carrying amount of each asset in
the unit.
At 30 June 2015, the market capitalisation of the Group was
lower than its net asset carrying value, which was considered to
represent an indicator of impairment. However, based on the
impairment analysis subsequently performed, the Company has
concluded that, with the exception of Yemen impaired assets as
detailed above, no further impairment existed as of 30 June
2015.
3. Segment reporting
Consistent with the Group's latest annual audited financial
statements, the Group continues to identify one operating segment
based on the financial information regularly provided to the chief
operating decision maker and the methods by which the chief
operating decision maker assesses the Group's performance and makes
decisions about resource allocation. As such, no segment reporting
is shown in these condensed consolidated financial statements.
4. Revenue
The following is an analysis of the Group's revenue from
continuing operations from its major products and services:
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
$ million 2015 2014 2014
Power revenues* 120.9 247.8 463.8
Finance lease revenues 1.0 - 32.7
Other revenues** 0.3 6.4 (10.8)
------------------------- --------- --------- -------------
Total revenues 122.2 254.2 485.7
------------------------- --------- --------- -------------
* Six months ended 30 June 2014 includes revenues of $13.5
million related to the terminated Australian contract, which
includes the drawdown of the letter of credit.
** Other revenues include penalties incurred during the period
in respect of contractual performance.
5. Taxation
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
$ million 2015 2014 2014
------------------------ --------- --------- -------------
Current tax
Current year 5.3 10.3 21.6
Prior year adjustments - - 2.3
5.3 10.3 23.9
------------------------ --------- --------- -------------
Deferred tax
Current year 0.8 (3.2) 3.1
Total tax expense 6.1 7.1 27.0
------------------------- --------- --------- -------------
Tax for the six month period comprises a current tax charge of
$5.3 million (H1 2014: $10.3 million) and a deferred tax charge of
$0.8 million (H1 2014: $3.2 million credit). Tax has been
calculated by using the forecast annual effective tax rate for each
tax-paying jurisdiction, applied to the actual pre-tax income of
each jurisdiction for the six month period, adjusted where
appropriate for any discrete items arising in the period.
The Group is not taxable in certain jurisdictions where either
the jurisdictions do not impose an income tax or the entity is
treated as a flow-through entity for local country tax
purposes.
The structure of the Group generally results in each entity or
branch operating within only one tax jurisdiction. In general,
income tax is imposed on taxable income earned in the applicable
tax jurisdiction. Withholding taxes are imposed based upon local
country tax laws. In the jurisdictions where the Group operates,
these taxes may be imposed on cross border payments to related
parties. In general, withholding taxes are imposed on payments such
as rents, dividends and certain service payments or gross receipts
from customers.
6. Earnings per share
From continuing operations
The calculation of the basic and diluted (loss)/earnings per
share is based on the following data:
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
-------------------------------------- ------------- ------------- -------------
(Loss)/profit for the purposes
of basic and diluted earnings
per share being net (loss)/profit
attributable to the owners of
the Company ($m) (64.5) 47.2 (750.6)
-------------------------------------- ------------- ------------- -------------
Weighted average number of ordinary
shares for the purpose of basic
earnings per share (number of
shares) 94,251,622 94,251,622 94,251,622
-------------------------------------- ------------- ------------- -------------
Weighted average number of ordinary
shares for the purpose of diluted
earnings per share(1) (number
of shares) 94,251,622 94,478,797 94,251,622
-------------------------------------- ------------- ------------- -------------
Earnings per ordinary share
-------------------------------------- ------------- ------------- -------------
Basic (loss)/earning per share
(cents) (68.4) 50.1 (796.4)
-------------------------------------- ------------- ------------- -------------
Diluted (loss)/earnings per share
(cents) (68.4) 49.4 (796.4)
-------------------------------------- ------------- ------------- -------------
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(1) Founder securities are not considered dilutive for the
periods ended 30 June 2015, 30 June 2014 and 31 December 2014 as
the exercise price was above the period end share price. The
Founder securities are also not considered dilutive as the
associated performance conditions had not been met at 30 June 2015,
30 June 2014 and 31 December 2014. Additionally, all outstanding,
unexercised stock options are not considered dilutive for the
periods ended 30 June 2015 and 31 December 2014.
7. Property, plant and equipment
Machinery Mobilisation Demobilisation Other Total
$ million and equipment equipment
--------------- ----------------------- -------------------- ---------------------- --------------- -------------
Cost:
At 1 January
2014 1,208.3 87.2 35.5 4.4 1,335.4
Additions 146.9 17.7 8.2 0.6 173.4
Disposals (41.3) (6.3) (4.9) - (52.5)
--------------- ----------------------- -------------------- ---------------------- --------------- -------------
At 31 December
2014 1,313.9 98.6 38.8 5.0 1,456.3
Additions 9.3 1.0 18.5 0.2 29.0
At 30 June 2015 1,323.2 99.6 57.3 5.2 1,485.3
--------------- ----------------------- -------------------- ---------------------- --------------- -------------
Accumulated
depreciation:
At 1 January
2014 111.7 18.6 9.2 1.6 141.1
Charge for the
period 97.4 37.5 9.2 1.6 145.7
Disposals (6.2) (4.5) - - (10.7)
Impairment 8.5 21.5 11.0 - 41.0
--------------- ----------------------- -------------------- ---------------------- --------------- -------------
At 31 December
2014 211.4 73.1 29.4 3.2 317.1
Charge for the
period 36.9 11.9 22.6 0.1 71.4
Impairment 24.2 - - - 24.2
--------------- ----------------------- -------------------- ---------------------- --------------- -------------
At 30 June 2015 272.5 85.0 51.9 3.3 412.7
--------------- ----------------------- -------------------- ---------------------- --------------- -------------
Net book value:
--------------- ----------------------- -------------------- ---------------------- --------------- -------------
30 June 2015 1,050.7 14.6 5.4 1.9 1,072.6
--------------- ----------------------- -------------------- ---------------------- --------------- -------------
31 December
2014 1,102.5 25.5 9.5 1.8 1,139.3
--------------- ----------------------- -------------------- ---------------------- --------------- -------------
Depreciation and impairment (see note 2) is presented within
cost of sales in the condensed consolidated statement of
comprehensive income.
As of 30 June 2015, the Group's commitments related to the
purchase of property, plant and equipment were $nil million (31
December 2014: $9.9 million).
8. Trade and other receivables
30 June 31 December 30 June
$ million 2015 2014 2014
---------------------------------------- ------- ----------- -------
Amount receivable under contract 130.7 130.7 131.2
Less: allowance for doubtful accounts (39.3) (48.5) (1.5)
---------------------------------------- ------- ----------- -------
Net trade receivables 91.4 82.2 129.7
Finance lease receivables 16.8 32.9 -
VAT receivables 0.7 2.7 2.5
Other receivables 13.2 9.6 12.1
---------------------------------------- ------- ----------- -------
122.1 127.4 144.3
During 2014, the Group recognised a $32.9 million finance lease
receivable associated with the planned disposal of certain non-core
assets in Uruguay. The remaining balance at 30 June 2015 of $16.8
million is expected to be recovered in 2015.
Trade receivables
The average credit period on the sales of goods at 30 June 2015
was 195 days (31 December 2014: 98 days). The Group assesses its
ability to collect receivables that are past due and provides for
an adequate allowance for doubtful accounts based on the financial
stability, recent payment history of the customer, letters of
credit in place and other pertinent factors related to the
creditworthiness of the customer. The allowance for doubtful
accounts includes specific amounts for those accounts that are
deemed likely to be uncollectable.
30 June 31 December 30 June
2015 2014 2014
-------------------- ------- ----------- -------
Current 21.0 36.3 79.6
31-90 days 25.5 50.5 44.1
More than 90 days 84.2 43.9 7.5
-------------------- ------- ----------- -------
130.7 130.7 131.2
The movement in respect of the provision for impairment of trade
receivables in the year was as follows:
6 months ended Year ended
30 June 31 December
$ million 2015 2014
------------------------- -------------- ------------
Balance at beginning of
period 48.5 1.5
Charge to the statement
of comprehensive income 11.2 47.0
Reversed (20.4) -
Balance at end of period 39.3 48.5
In determining the recoverability of a trade receivable, the
Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the end
of the reporting period. There is a concentration of credit risk
because there are a limited number of customers and as at 30 June
2015 the three individually significant aggregate amounts owed by
individual customers after the provision of impairment was applied,
were $26.0 million, $18.3 million and $10.7 million (31 December
2014: three individual customers of $34.7 million, $18.5 million
and $16.5 million). The risk associated with individual customers
is partially mitigated by the letters of credit we obtain from
customers on commencement of a contract. Management reviews
concentration credit risk on a regular basis and ensures that where
the net exposure exceeds certain thresholds appropriate actions are
taken. This is performed on a customer by customer basis and takes
account of the billing terms, letters of credit and local customs
and practices.
The Directors believe that the carrying value of trade and other
receivables after the provision of impairment approximate their
fair value.
During the period management recognised the recovery of
receivables previously provided for as follows: Libya in the amount
of $10.7 million, Yemen in the amount of $8.4 million and others of
$1.3 million. Management provided for other receivables in the
amount of $11.2 million principally related to Angola. Management
continue to vigorously pursue collection of all impaired trade
receivables, however ultimately the Group may have to initiate
additional actions in order to recover such amounts. In light of
this, management has determined to provide for these amounts at 30
June 2015, given the uncertainty around the timing or ultimate
collectability of such balances.
9. Borrowings
Revolving Term- Total
credit loan
$ million facility
-------------------------- --------- ------- -------
At 1 January 2014 340.0 250.0 590.0
-------------------------- --------- ------- -------
Cash from borrowings 395.0 320.0 715.0
Repayment of borrowings (390.0) (250.0) (640.0)
-------------------------- --------- ------- -------
At 31 December 2014 345.0 320.0 665.0
-------------------------- --------- ------- -------
Cash from borrowings 10.0 - 10.0
Repayment of borrowings (50.0) (8.0) (58.0)
-------------------------- --------- ------- -------
At 30 June 2015 305.0 312.0 617.0
-------------------------- --------- ------- -------
Capitalised debt issuance
costs (13.9)
-------------------------- --------- ------- -------
603.1
-------------------------- --------- ------- -------
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In 2011, the Group entered into a committed, secured revolving
credit facility of $400 million with a group of international
banks, with a maturity date of 28 November 2016.
In May 2013, the Group entered into a committed, secured term
loan of $150 million with several of the existing group of
international banks involved with the revolving credit facility.
This term loan was then subsequently extended in October 2013 by an
additional $100 million to $250 million, with a maturity date of 1
January 2015, with quarterly repayments of $12.5 million commencing
on 31 March 2014.
In August 2014, the Group announced that it had closed and
funded a new syndicated credit facility for the Group. The expanded
$770 million facility, comprising a $450 million revolving credit
facility and $320 million term loan, replaced the Group's previous
$400 million revolving credit facility and $250 million term
loan.
On 31 March 2015, the Group has successfully completed an
amendment to its new senior syndicated credit facilities,
comprising a $450 million revolving credit facility and a $320
million Term Loan through August 2019. The amendment to the
facilities provides the Group with additional flexibility around
certain financial covenants, notably an increased leverage profile
and the inclusion of a Fixed Charge Coverage Ratio, which replaced
the previous Interest Coverage Ratio covenant for the remainder of
the facilities' term.
As of 30 June 2015, $55.2 million (31 December 2014: $60.0
million) of letters of credit are outstanding against the revolving
credit facility. As of 30 June 2015, the available amount of the
undrawn facilities was $89.8 million (31 December 2014: $45.0
million).
The facilities provide for the funding of capital expenditures,
working capital requirements and letters of credit. Key financial
covenants include a Total Leverage Ratio and a Fixed Charge
Coverage Ratio. The LIBOR spread on the facilities is dependent on
the Total Leverage Ratio and the Term Loan requires quarterly
repayments of 1.25%-3.75% throughout the term.
See note 2 Going Concern for further discussion.
The revolving credit facility and term loan are secured with the
equity and assets of the majority of the Group's subsidiary
undertakings. The Directors believe that the carrying value of
borrowings approximate their fair value.
If the interest rates had been 50 basis points higher/lower and
all other variables were held constant, the Group's total
comprehensive profit would have increased/decreased by $1.4 million
(H1 2014: $0.7 million). This is mainly due to the Group's exposure
to interest rates on its variable rate borrowings.
Bid/performance bonds
The Group has a need to post bid or performance bonds associated
with customer contracts. These bonds are typically issued from the
Group's revolving credit facility or backed by a cash deposit. As
of 30 June 2015 the Group had $7.2 million (31 December 2014: $9.9
million) backed by cash deposits.
10. Dividends
The Company did not declare a dividend at 30 June 2015 related
to its interim financial results (2014: $5.3 million at 3.3 pence
per share).
The Company did not declare at 31 December 2014 or pay and
dividends related to its year-end financial results. (2013: $10.6
million at 6.7 pence per share paid in 2014).
11. Derivative financial instruments
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 based on the degree to which
the fair value is observable:
-- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
-- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
-- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
Level Level Level Total
$ million 1 2 3
-------------------- ----- ----- ----- -----
At 30 June 2015
Interest rate swap - 0.9 - 0.9
-------------------- ----- ----- ----- -----
- 0.9 - 0.9
-------------------- ----- ----- ----- -----
At 31 December 2014
Interest rate swap - 0.5 - 0.5
Founder securities - - - -
- 0.5 - 0.5
-------------------- ----- ----- ----- -----
There were no transfers between Level 1 and 2 during the current
or prior period.
Interest
rate swap
$ million (level 2)
--------------------- ----- -------------
At 1 January 2014 18.5
Change in fair value (18.5)
------------------------------- ----------
At 31 December 2014 -
Change in fair value -
------------------------------- ----------
At 30 June 2015 -
------------------------------- ----------
In November 2014, the Group entered into a 5 year interest rate
swap on a notional amount of $80 million, which swapped variable
one month LIBOR rate for a fixed rate. The Group has not applied
hedge accounting on this instrument and the change in fair value is
therefore recognised directly in the statement of comprehensive
income through finance costs.
Founder
securities
(level
$ million 3)
--------------------- -----------
At 1 January 2014 18.5
Change in fair value (18.5)
------------------------ -----------
At 31 December 2014 -
Change in fair value -
------------------------ -----------
At 30 June 2015 -
------------------------ -----------
The Founder securities revaluation in the current period
resulted in a gain of $nil (H1 2014: $17.5 million) recognised in
the condensed consolidated statement of comprehensive income.
Subject to the satisfaction of the performance condition, the
holders of the Founder securities have the right to require the
Company to acquire the Founder securities in exchange for the issue
to the holders of the Founder securities of such number of ordinary
shares, as described in the 2014 Annual report and accounts.
For 30 June 2015, the Group continues to use a Monte Carlo
simulation model to value the Founder securities, which
incorporates a binomial tree to value the Founder securities as of
the date of the performance condition being achieved within the
Monte Carlo simulation. This model simulates the future Company
ordinary share price, on a daily basis, using a Geometric Brownian
Motion in a risk-neutral framework. The valuation output of this
model is then discounted to reflect the lack of marketability of
the Founder securities using a protective put option method. The
inputs used for the Monte Carlo simulation model were:
30 June 31 Dec
2015 2014
------------------------- -------- --------
Balance sheet date share
price $1.76 $2.90
Expected volatility 26% 26%
Remaining life 347 days 530 days
Lack of marketability 0 days 0 days
period
Risk-free rate 1.2% 1.2%
Expected dividend yield 0.0% 5.1%
--------------------------- -------- --------
A change in the expected volatility by 1% would have a $nil (H1
2014: $0.3 million) impact on the reported fair value.
The expected volatility was determined by calculating the
historical and implied volatilities of the Company and several
comparable listed entity share prices over the previous three
years.
12. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
JCLA Holdings, LLC is a related party due to its owners being
the Chairman and CEO of APR Energy plc.
Consulting services from JCLA Holdings, LLC (and its
subsidiaries) were incurred by the Group during the period
presented. These consulting services were made at an arm's length
market price. The total expense for the period was $0.2 million (H1
2014: $0.1 million). The services rendered were all paid in cash.
No guarantees have been given or received.
CJJ Aviation II, LLC is a related party due to its owner being
the Chairman of APR Energy plc. CJJ Aviation II, LLC provides
travel arrangement services to the Group. These services were made
at an arm's length market price. The total expense for the period
was $nil (H1 2014: $0.2). The services rendered were all paid in
cash. No guarantees have been given or received.
At 30 June 2015, JCLA Holdings, LLC and CJJ Aviation II, LLC
were owed $nil by the Group due to expenses having been paid by the
Group (31 December 2014: $nil).
13. Contingent liabilities
Impact of operating in First, Second and Third-Tier
countries
At 30 June 2015, the Group had operations in various countries
across several continents. Operating in these countries subjects
the Group to the inherent risk of changes in law, regulations, and
governmental policy and stability. The Group has utilised insurance
and letters of credit to help mitigate these risks and no provision
has been recorded.
Legal and environmental
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