TIDMLCA
RNS Number : 9406K
Low Carbon Accelerator Limited
25 July 2011
25 July 2011
Low Carbon Accelerator Limited
Interim Report and Unaudited Financial Statements May 2011
Low Carbon Accelerator Limited ("LCA" or "the Company"), the AIM
listed specialist low-carbon investment company, announces its
interim results for the six months ended 31 May 2011.
Highlights of the report include:
-- Adjusted NAV growth of 8.3% in the last 12 months
-- Disposals of investments after the balance sheet date
realised GBP1.63 million
-- Majority of portfolio companies continue to demonstrate real
traction and are positioned for realisation and third party
investment in the near-term
Enquiries:
Low Carbon Investors Steve Mahon, CIO Tel: +44 (0)20 7631 2630
Limited Andrew Affleck, Chairman
Grant Thornton Corporate Colin Aaronson Tel: +44 (0) 20 7383 5100
Finance Melanie Frean
FINANCIAL HIGHLIGHTS FOR THE SIX MONTHS ENDED 31 MAY 2011
31 May 2011 31 May 2010
ADJUSTED NET ASSET VALUE (GBP'000) 48,318 44,618
Adjusted net asset value per ordinary
share (pence) 56.1 51.8
Ordinary share price (pence) 30.5 28.0
Profit/(loss) per share (pence) (4.2) 1.6
--------------------------------------- ------------ ------------
Note on Adjusted Net Asset Value
The Group's interest in Proven Energy Limited ("Proven Energy")
is currently greater than 50%. The Board expects that this will be
reduced to a minority holding in the near-term. However, in
accordance with the accounting policies (see note 2) its interest
in Proven Energy is currently designated as a "Non-current
financial asset classified as held for sale".
As set out in note 10, it was noted in the latest year-end
financial statements that in line with the International Private
Equity and Venture Capital Valuation ("IPEV") guidelines, the value
of LCA's equity investment in Proven Energy was increased during
that period from the historic cost of GBP9.25 million to GBP19.9
million, being an increase of GBP10.65 million.
As set out in note 2 to the Interim Report and Unaudited
Financial Statements, it is the Group's accounting policy to value
its investment portfolio at fair value in accordance with IPEV
guidelines. However, IFRS 5 imposes restrictions on upward
revaluations of investments that are classified as "Non-current
financial assets classified as held for sale". This applies even
when the Board considers that such an upward revaluation is
required to reflect the Board's assessment of the fair value of
such an investment in accordance with IPEV guidelines.
The Group has, therefore, provided below a reconciliation
between the NAV in accordance with International Financial
Reporting Standards ("IFRS") (the "Accounting NAV") and the NAV in
accordance with IPEV guidelines (the "Adjusted NAV") (see note
12).
The Board considers that the Adjusted NAV reflects the fair
value of the Group's investment portfolio at the balance sheet date
in accordance with IPEV guidelines. As such, the discussions in
both the Chairman's Statement and the Investment Manager's Report
refer throughout to the Adjusted NAV.
Net Asset Value NAV per share
31 May 2011 GBP'000 Pence
Accounting Net Asset Value 37,668 43.7
Fair value adjustment to non-current
financial assets classified as held
for sale 10,650 12.4
Adjusted Net Asset Value 48,318 56.1
31 May 2010
Accounting and Adjusted Net Asset Value 44,618 51.8
CHAIRMAN'S STATEMENT
I am pleased to present the Interim Report and Unaudited
Financial Statements in respect of Low Carbon Accelerator Limited
("LCA" or "the Company") for the period from 1 December 2010 to 31
May 2011.
Financial performance
The Adjusted NAV as at 31 May 2011 was GBP48.31 million,
equivalent to 56.1 pence per Ordinary Share. This equates to a 7.0%
decrease on the 30 November 2010 Adjusted NAV per Ordinary Share
and equates to a 8.3% increase to the NAV as at 31 May 2010.
LCA has continued to execute its clearly stated plan to drive
the Company's investments to realisation over the next 18 months.
On 6 June 2011, LCA announced that it had sold 175,747 Preference B
shares in ResponsiveLoad Ltd (trading as "RLtec") to Ombu Limited
("Ombu") for a cash consideration of GBP1.23 million. This
transaction represented a 23% uplift in the carrying value of RLtec
as set out in LCA's latest annual report and a 70% increase in
value by reference to LCA's adjusted book cost of investment in
RLtec.
On 7 July 2011, LCA announced that QuantaSol Limited
("Quantasol") had completed an agreement to sell its core assets,
including intellectual property rights, to JDSU Uniphase ("JDSU")
in a cash transaction. JDSU are a Nasdaq-listed world-leading
supplier of optical, communication and Concentrating Photovoltaic
("CPV") components. LCA will receive an initial payment of
GBP400,000 from the proceeds of this asset sale, with further
amounts due over the next 12 months. As such, LCA has written-down
the outstanding loans made to Quantasol by GBP500,000 and taken a
full provision of GBP2.38 million against the carrying value of its
equity investment as at the period end.
The Group continues to own more than 50% of the shares in Proven
Energy Limited ("Proven Energy"). The Board's intention to reduce
LCA's shareholding to less than 50% in the near-term remains firm
and during the period the Investment Manager continued discussions
with a number of potential co-investors into Proven Energy with a
view to taking the Group's shareholding to a minority stake. These
discussions remain ongoing.
Investment activities
The Company made follow-on investments totalling GBP0.7 million
in loans into two existing portfolio companies in the six-months
ended 31 May 2011.
A more detailed description of the market and the Company's
investments can be found in the Investment Manager's Review, which
follows this statement.
Board
On 6 May 2011, Alan Mark Tanguy resigned as a Director and
stepped down from the Board.
The Board is pleased to welcome Andrew Neil Munro, who replaces
Mr. Tanguy, to the LCA Board. Mr. Munro was appointed as a
non-executive Director with effect from 6 May 2011.
Share performance
In the period 1 December 2010 to 31 May 2011, the Company's
closing mid-market share price decreased by 19.7% to 30.5 pence.
This share price represents a 45.6% discount to the Adjusted NAV
per share as at 31 May 2011. The share price has remained broadly
flat since the period end and at close of trading on 20 July 2011
stood at 29.25 pence.
Outlook
The Investment Manager continues to execute its strategy to
achieve material cash realisations from the existing portfolio over
the next 18 months. Whilst the wider economic market remains
challenging, and few sectors or businesses have had a smooth ride
since the start of the financial crisis in 2008, the Board and the
Investment Manager continue to believe that the strongest
performers within the Company's investment portfolio remain in a
favourable position. Indeed, the Board and the Investment Manager
believe that the realisation of value from the sale of part of its
equity holding in RLtec provides tangible evidence of the potential
that exists amongst the strongest performers within the LCA
portfolio.
John Hawkins Chairman 22 July 2011
INVESTMENT MANAGER'S REPORT
We are pleased to report that the year-on-year growth in the
Adjusted NAV of LCA as at 31 May 2011 was 8.3%. However, the
Adjusted NAV decreased by 7.0% on the Adjusted NAV reported in the
Company's latest year-end Report and Financial Statements as at 30
November 2010, following the partial provision against the
Company's investment in QuantaSol Limited ("Quantasol") and the
GBP920,000 negative currency impact due to the weakening of the
dollar against the pound during this period. As noted previously,
the Company does not hedge any currency exposure.
During the period, the Investment Manager has continued its
focus on executing the strategy of driving growth and value
realisation in its existing portfolio. The Investment Manager is in
ongoing discussions with a number of third parties regarding
companies within the portfolio, although it is not expected that
all such discussions will result in a liquidity event.
Nevertheless, the interest in the LCA portfolio is a reflection of
the mature nature of some of the companies within the portfolio and
the value that has been created.
The Investment Manager believes this is demonstrated by the sale
of its Preference B shares held in ResponsiveLoad Limited ("RLtec")
to Ombu Limited ("Ombu") that was announced on 6 June 2011. The
sale was conducted at a 70% increase in value by reference to LCA's
adjusted book cost of investment in RLtec.
As part of the strategy to drive the portfolio towards cash
realisations, the Investment Manager is taking particular note of
M&A activity within the low carbon sector. Whilst there has
been growing commitment from larger corporations to inject capital
into this sector the Investment Manager has noted previously that
we think it reasonable to assume that it will follow the same paths
that have been experienced in other technology sectors such as IT,
semiconductors, and biotech, where the initial proliferation of
innovative start-ups was followed by a phase of market
consolidation where such integration avoids the margin erosion
associated with horizontally distributed supply chains.
Market consolidation, which we are seeing in the sector, will
increase the price competitiveness and speed to market of many of
the technology vendors and, as such, corporate M&A activity is
expected to be the main source of exit and cash realisation for the
LCA portfolio.
With the solar industry subsector being amongst the more mature
areas of the low carbon sector, it is interesting to note that the
recent United Nations Environment Programme ("UNEP") and Bloomberg
New Energy Finance publication, "Global Trends in Renewable Energy
Investment 2011: Analysis of Trends and Issues in the financing of
Renewable Energy", states that "The solar industry saw significant
vertical integration in 2010, as overcapacity prompted cell and
module manufacturers to move downstream, buying project developers
to capture higher margins and secure a development pipeline."
Furthermore, the report states that "Bloomberg New Energy Finance
believes there is more consolidation and integration to come in
solar, as competition intensifies both upstream and downstream."
Indeed, as announced on 7 July 2011, Quantasol has reached an
agreement to sell its core assets, including intellectual property
rights, to JDS Uniphase ("JDSU"), a Nasdaq-listed world-leading
supplier of optical, communication and Concentrating Photovoltaic
("CPV") components, in a cash transaction.
The Investment Manager believes this pattern seen within the
solar sector is reflective of the trend likely to occur across
other areas of the low carbon sector as they reach a more mature
phase and fully expects the strongest performers within the
portfolio to be part of this process.
PORTFOLIO REVIEW
Proven Energy Limited ("Proven Energy")
During the period, LCA invested a further GBP500,000 in the form
of a convertible loan into Proven Energy. This loan took LCA's
total investment in the company to GBP9,900,000 of which
GBP9,250,000 takes the form of equity for a stake of 81.05% (75.08%
on a fully diluted basis post issuance of the senior management
incentive share scheme) and GBP650,000 makes up the total
outstanding convertible loan, after a repayment of GBP100,000 of
the existing convertible loan in February 2011. If the convertible
loan and related warrants are exercised, LCA's stake would rise to
approximately 88% on a fully diluted basis.
This further investment was to provide the company with
additional working capital for sales growth and to enable the
company to continue its product development to ensure that it
consolidates its market leading position in meeting the demands of
diverse geographies and challenging environments that have an
increasing need for off-grid power solutions. At the time of the
announcement on 26 April 2011 it was also noted that LCA expected
that it would make an additional investment in Proven over the
coming quarter to position the company to continue to deliver both
sales growth and profitability in the next year.
In line with this statement, on 1 July 2011, LCA announced that
it had made a further investment of GBP750,000 into Proven Energy
in the form of a secured loan.
Proven Energy remains an industry leader in small scale wind
with over 3,500 wind turbines in the field spanning 60 countries
and every continent. Proven Energy will continue to consolidate its
growing presence in markets around the globe. In particular, the US
and Asian markets will be key to the roll-out of the Proven Energy
suite of distributed wind turbines. The Investment Manager is
continuing its discussions with potential co-investors and we
continue to expect the company to play a significant role in the
inevitable consolidation of this sub-sector.
Sterling Planet Inc. ("Sterling Planet")
Sterling Planet reported its second consecutive annual net
profit for the year-ended 31 December 2010 and continues to grow
its order book for the delivery of Renewable Energy Certificates
("RECs") to its customer base that includes blue-chip companies
such as PepsiCo, Detroit Edison and Intel Corporation. The company
has also continued its good performance during 2011 and has
cemented its profitable position.
As a result of Sterling Planet's strong performance there is now
a growing interest in the company amongst prospective investors. As
noted in LCA's latest year-end financial statements, the company
continues discussions with a number of parties regarding potential
major additional investment, which would be used to strengthen the
company's balance sheet further and to consolidate its position as
the market leader in this space in the US.
The Investment Manager has noted the excellent performance of
Sterling Planet for some time now and continues to expect that the
company will drive value within the LCA portfolio.
RLtec
As noted above, the Investment Manager believes that the sale of
LCA's 175,747 Preference B shares in RLtec for a cash consideration
of GBP1.23 million to Ombu, provides strong evidence of the value
creation amongst the strongest performers within the LCA
portfolio.
Whilst the transaction was completed after LCA's half year-ended
31 May 2011, the carrying value of this investment as at this
balance sheet date has been increased by 23% over the existing
carrying value reported in LCA's Q1 2011 NAV announcement made on
26 April 2011 to reflect the price set at the time of this share
sale.
LCA retains a 31.5% stake in RLtec on a fully diluted basis and
it is anticipated that Ombu will make an investment directly into
RLtec in the near-term to fund its commercial roll-out.
RLtec has continued its positive momentum in its work to deliver
load balancing services under its contract with National Grid.
During the period RLtec signed a 10-year agreement with Sainsbury's
to fit its dynamic demand technology to the supermarket's heating
and ventilation systems, which went live on 1 March 2011.
Sainsbury's use of RLtec's technology will help to manage the
electricity supply and demand more efficiently across the entire
national grid and hence provide National Grid with significant cost
savings whilst also saving up to 10,000 tonnes of carbon emissions
per year from the date it went live. Furthermore, the technology
will boost energy efficiency at Sainsbury's.
LUMEnergi Inc. ("LUMEnergi")
LUMEnergi has entered the expansion phase of its lifecycle and
has continued to grow its pipeline during the period. Conversion of
the pipeline into sales in the latter part of the period has proved
more challenging as the company attempts to gain increased traction
in the private sector and is facing longer lead times in the
decision making process.
Quantasol
In the latest year-end financial statements the Investment
Manager reported that Quantasol was in the process of seeking
strategic partnerships to deliver its technology to the market. On
7 July 2011 the Company announced that Quantasol had completed an
agreement to sell its core assets, including intellectual property
rights, to JDSU and has taken a partial provision against the
carrying value of LCA's investment in Quantasol.
Vigor Renewables Limited ("Vigor")
On 26 January 2011, LCA announced that it has invested a further
GBP200,000 in Vigor in the form of an unsecured loan. The
additional capital was provided to enable Vigor to expand and
accelerate the current pipeline of projects over the next 12
months. Vigor has over 70 wind project sites at various stages of
the development process and expects to have completed its first
installation during the current quarter, slightly behind schedule
due to delays within the planning process.
Vigor is also in late stage discussions regarding the
development of projects on sites around the UK owned by a number of
large corporate businesses. Agreement and completion of these
projects would lead to a material increase in the number and value
of projects within Vigor's portfolio.
Vykson Limited ("Vykson")
On 29 June 2011, LCA announced that it had made a further equity
investment of GBP200,000 into Vykson as part of a total funding
round of GBP250,000 alongside an existing co-investor, QUBIS
Limited. LCA has now invested a total of GBP650,000 into Vykson and
holds an equity stake of 31% on a fully diluted basis, assuming
full vesting and exercise of share options under the management
incentive scheme.
Vykson's unique gas turbine engine enables the generation of
renewable power from low quality gas, such as that given off at
landfill sites, where the alternative is to flare at an economic
and environmental cost. Vykson's demonstration engine continues to
operate and generate power at a UK landfill site of a major UK
waste company. The additional funding will be used for the final
stages of development and testing of the demonstration engine as
Vykson drives towards the first stages of commercialisation of its
product.
Eco-Solids International Limited ("Eco-Solids")
The company continues to execute its contract signed with
Yorkshire Water. The Validation Period has now commenced and is
expected to last until approximately August. Successful
demonstration of Eco-Solids' Cellruptor installation will play a
key role in unlocking other sales prospects in the pipeline.
The company has also received confirmation that the first
Eco-Solids Process unit is now being installed in China.
The company's biggest challenge remains to be able to secure its
working capital requirements through to a position where it will
have an installed base that enables the company to be cashflow
positive.
Low Carbon Investors Limited 22 July 2011
INDEPENDENT REVIEW REPORT TO THE MEMBERS OF LOW CARBON
ACCELERATOR LIMITED
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the Interim Report for the six months
ended 31 May 2011 which comprises the consolidated income
statement, consolidated balance sheet, consolidated statement of
changes in equity, consolidated cash flow statement and the related
explanatory notes 1 to 15. We have read the other information
contained in the Interim Report and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Directors' responsibilities
The Interim Report, including the financial information
contained therein, is the responsibility of and has been approved
by the directors. The directors are responsible for preparing the
Interim Report in accordance with the rules of the London Stock
Exchange for companies trading securities on the Alternative
Investment Market ("AIM") which require that the half-yearly report
be presented and prepared in a form consistent with that which will
be adopted in the company's annual accounts having regard to the
accounting standards applicable to such annual accounts.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the Interim Report
based on our review.
Our report has been prepared in accordance with the terms of our
engagement to assist the company in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities
on the AIM and for no other purpose. No person is entitled to rely
on this report unless such a person is a person entitled to rely
upon this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior
written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we
hereby expressly disclaim any and all such liability
Scope of review
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 enquiries, 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.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the Interim Report for the six months ended 31 May 2011 is not
prepared, in all material respects, in accordance with the basis of
preparation as set out in note 2 and in accordance with the AIM
rules issued by the London Stock Exchange.
BDO Limited
Chartered Accountants
Place du Pre
Rue du Pre
Guernsey
22 July 2011
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED) FOR THE SIX
MONTHS ENDED 31 MAY 2011
2011 2010
Note GBP'000 GBP'000
Income
Interest income 28 8
Other income 1 8
29 16
Investment management fees 4 (640) (544)
Net (decrease)/increase in fair value
of financial assets at fair value through
profit or loss 9 (2,231) 2,058
Custodian, secretarial, broker, nomad
and administration fees (96) (80)
Directors' fees (44) (34)
Other operating expenses 5 (621) (75)
Total operating expenses (3,632) 1,325
(Loss)/profit for financial period (3,603) 1,341
Other comprehensive income - -
Total comprehensive (expense)/income (3,603) 1,341
Basic (loss)/earnings per share (pence) 7 (4.2) 1.6
Diluted (loss)/earnings per share (pence) 7 (4.2) 1.6
All activities are derived from continuing activities.
The Group has no recognised gains or losses other than the loss
(2010 - profit) for the period.
The accompanying notes are an integral part of this
statement.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) AS AT 31 MAY
2011
As at As at As at
31 May 30 Nov 31 May
2011 2010 2010
Note GBP'000 GBP'000 GBP'000
NON-CURRENT ASSETS
Financial assets at fair value
through profit or loss 9 24,155 26,386 26,922
CURRENT ASSETS
Cash and cash equivalents 2,746 4,169 6,583
Non-current financial assets
classified as held for sale 10 9,250 9,250 9,250
Other receivables 8 1,594 1,527 2,013
TOTAL CURRENT ASSETS 13,590 14,946 17,846
TOTAL ASSETS 37,745 41,332 44,768
CURRENT LIABILITIES
Other payables (77) (61) (150)
NET ASSETS 37,668 41,271 44,618
EQUITY
Share capital 11 - - -
Share premium 52,720 52,720 52,720
Reserves (15,052) (11,449) (8,102)
TOTAL EQUITY 37,668 41,271 44,618
Number of ordinary shares ('000) 86,100 86,100 86,100
Net asset value (basic and diluted)
per share (pence) 12 43.7 47.9 51.8
Adjusted net asset value (basic
and diluted) per share (pence) 12 56.1 60.3 51.8
The accompanying notes are an integral part of these financial
statements.
The condensed interim financial statements were approved by the
Board of Directors and authorised for issue on 22 July 2011.
Signed on behalf of the Board:
John Hawkins Christopher Spencer
Chairman Director
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED) FOR THE SIX MONTHS ENDED 31 MAY 2011
Retained
Share capital Share premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
As at 30 November 2009 - 52,720 (9,443) 43,277
Total comprehensive
income - - 1,341 1,341
As at 31 May 2010 - 52,720 (8,102) 44,618
Total comprehensive
expense - - (3,347) (3,347)
As at 30 November 2010 - 52,720 (11,449) 41,271
Total comprehensive
expense - - (3,603) (3,603)
As at 31 May 2011 - 52,720 (15,052) (37,668)
The accompanying notes are an integral part of this
statement.
CONDENSED CONSOLIDATED CASHFLOW STATEMENT (UNAUDITED) FOR THE
SIX MONTHS ENDED 31 MAY 2011
2011 2010
GBP'000 GBP'000
CASHFLOWS FROM OPERATING ACTIVITIES
Operating (loss)/profit for the period before
interest (3,631) 1,333
Net changes in fair value of financial assets
at fair value through profit or loss 2,231 (2,058)
Provision made against short-term loans 549 -
(increase)/decrease in other receivables (16) 50
Increase in other payables 16 18
NET CASH OUTFLOWS FROM OPERATING ACTIVITIES (851) (657)
CASHFLOWS FROM INVESTING ACTIVITIES
Interest received 28 8
Purchase of investments - (650)
NET CASH OUTFLOWS FROM INVESTING ACTIVITIES 28 (642)
CASHFLOWS FROM FINANCING ACTIVITIES
Short-term loans (700) (1,455)
Repayment of short-term loans 100 -
NET CASH OUTFLOWS FROM FINANCING ACTIVITIES (600) (1,455)
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,423) (2,754)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 4,169 9,337
CASH AND CASH EQUIVALENTS AT END OF PERIOD 2,746 6,583
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) FOR THE SIX MONTHS ENDED 31 MAY 2011
1. GENERAL INFORMATION
Low Carbon Accelerator Limited (the "Company") is a company
incorporated and registered in Guernsey on 26 September 2006. The
Company is an authorised closed-end investment company with limited
liability under the Companies (Guernsey) Law, 2008, and its shares
are admitted to trading on the AIM market of the London Stock
Exchange.
The address of the Company's Registered office is set out on
page 1.
2. BASIS OF PREPARATION
The unaudited interim financial statements have been prepared
using accounting policies consistent with International Financial
Reporting Standards (with the exception of IAS 34, Interim
Financial Reporting) which comprise standards and interpretations
approved by the International Accounting Standards and Standings
Committee as adopted by the European Union and that remain in
effect. These interim financial statements are unaudited but have
been reviewed by the auditors whose review report is set out on
page 8.
The financial information summarised does not constitute
statutory financial statements.
Significant accounting policies
The same accounting policies, presentation and methods of
computation are followed in these interim financial statements as
those followed in the preparation of the Group's annual financial
statements for the period ended 30 November 2010. The report of the
auditors on these financial statements was unqualified.
The financial statements have been prepared on the historical
cost basis, except for the revaluation of investments and foreign
currency derivatives. The condensed financial statements are
presented in Pounds Sterling and all values are rounded to the
nearest thousand (GBP'000) except when otherwise indicated.
As noted in the Group's annual financial statements for the
period ended 30 November 2010, IFRS 5 does not allow for upward
fair value adjustments to be made to assets classified as
"non-current financial assets classified as held for sale" in
excess of any previous impairments that had been applied to those
same assets. This restriction can mean, therefore, that where the
Board considers there to be an upward revaluation required of an
investment classified as a "non-current financial assets classified
as held for sale" in accordance with International Private Equity
and Venture Capital ("IPEV") valuation guidelines, this fair value
adjustment may not be made under IFRS if the asset had not
previously been impaired since reclassification, or to the extent
that such revaluation was in excess of a previous impairment since
the assets reclassification. As such, the treatment of non-current
financial assets classified as held for sale can, in certain
circumstances, conflict with the Group's general policy for valuing
its investment portfolio. Where this is the case, the Group
provides a reconciliation between the NAV in accordance with IFRS 5
("Accounting NAV") and the NAV in accordance with IPEV valuation
guidelines ("Adjusted NAV").
3. BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial
statements of the Company and entities (including special purpose
entities) controlled by the Company (its subsidiaries). Control is
achieved where the Company has the power to govern the financial
and operating policies of an entity so as to obtain benefits from
its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate. Where necessary, adjustments are made to
the financial statements of subsidiaries to bring their accounting
policies into line with those used by other members of the
Group.
All intra-group transactions, balances, income and expenses are
eliminated in full on consolidation.
The Company owns two investments via wholly owned intermediate
holding company structures. The acquisition of equity in, and the
provision of the loan to, the underlying investment was funded by a
long term loan account through the intermediate holding companies.
As a result of this structure, the Company falls under the
requirement to produce consolidated accounts.
To date, the Company continues to own more than 50% of the
equity in Proven Energy Limited ("Proven Energy"). As noted in the
year-end financial statements, the Board's intention to reduce
LCA's shareholding to a minority stake in the near-term remains
firm and the Investment Manager continues to pursue actively a
number of discussions with potential parties specifically seeking
investment opportunities in the small scale wind turbine market.
The Investment Manager is also actively considering, with the
management of Proven Energy, other strategies for the company that
would see LCA's shareholding reduce to less than 50%.
On this basis, and in accordance with IFRS 5, the Group has
continued not to consolidate the results of Proven Energy for the
six months ended 31 May 2011 and this investment is treated as held
for sale.
4. INVESTMENT MANAGEMENT FEES
Investment management fees are payable to Low Carbon Investors
Limited (the "Manager") for investment management services. These
are paid quarterly in advance and are equal to 0.625% per annum of
the Net Asset Value ("NAV") of the Company as at the last day of
the preceding quarter.
Additionally, the Manager will be paid an annual performance fee
equal to 20% of any amount by which the NAV of the Company at the
relevant year end exceeds the previous high watermark subject to
the performance hurdle test being met. The performance hurdle test
is met if the adjusted NAV at the end of the relevant performance
period exceeds an amount equal to the Hurdle Base (which, as at 31
May 2011, is 80.15 pence). There is no performance fee payable for
the period ending 31 May 2011.
5. OTHER OPERATING EXPENSES
31 May 31 May
2011 2010
GBP'000 GBP'000
Provision against long-term loan to Low
Carbon Accelerator Luxembourg Limited
s.a.r.l. - 75
Foreign currency gain from revaluation
of short-term loan to LUMEnergi Inc. - (108)
Provision against short-term loan to QuantaSol
Limited 500 -
Provision against other receivable from
Low Carbon Accelerator (Barbados) ISRL 49 -
Net changes to loan receivables 549 (33)
Other expenses 72 108
Total other operating expenses 621 75
6. DIVIDENDS
In accordance with the strategy set out in the Company's AIM
Admission Document, no dividend has been declared for the period
ending 31 May 2011.
7. BASIC AND DILUTED EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is based
on the loss (2010 - profit) for the period ending 31 May 2011 and
on 86,100,000 (2010 - 86,100,000) Ordinary Shares, being the
weighted average number of shares in issue during the period.
8. OTHER RECEIVABLES
31 May 30 Nov 31 May
2011 2010 2010
GBP'000 GBP'000 GBP'000
Short term loans
- Proven Energy Limited 650 250 -
- QuantaSol Limited 750 1,250 750
- Vigor Renewables Limited 200 - -
- LUMEnergi Inc. - - 1,193
1,600 1,500 1,943
Other receivables (6) 27 70
1,594 1,527 2,013
The loan to Proven Energy Limited is secured and accrues
interest at 10% per annum and is repayable on or before 31 March
2012. If the loan remains unpaid at this time, LCA can convert the
whole or part of the loan into equity in Proven Energy Limited.
The loan to Vigor Renewables Limited is unsecured and accrues
interest at 10% per annum and is repayable on or before 30 June
2012.
The short-term loan to QuantaSol Limited is unsecured and
accrues interest at 15.0% per annum and, at the request of LCA, can
either be converted into equity in QuantaSol Limited or repaid at
any time on or after 30 September 2010. On 7 July 2011, the Company
announced that Quantasol Limited had completed an agreement to sell
its core assets, including intellectual property rights, to JDS
Uniphase ("JDSU") in a cash transaction. LCA will receive an
initial payment of GBP400,000 from the proceeds of this asset sale,
with further balancing payments in due course. The proceeds will be
used as repayment towards the outstanding loans from LCA to
QuantaSol Limited. As a result, a provision of GBP500,000 has been
taken against the outstanding loan balance as at 31 May 2011 to
reflect the expected total repayment against the loan.
9. INVESTMENTS - DESIGNATED AT FAIR VALUE THROUGH PROFIT OR
LOSS
6 months 12 months 6 months
ended ended ended
31 May 30 Nov 31 May
2011 2010 2010
GBP'000 GBP'000 GBP'000
Brought forward 26,386 24,214 24,214
Additions during the period
- acquired for cash - 2,019 650
- loans converted into
equity - 488 -
Net changes in fair value through
profit or loss (2,231) (335) 2,058
Total financial assets at fair
value through profit or loss 24,155 26,386 26,922
The net changes in fair value through profit or loss represents
amounts relating to the revaluation of investments and foreign
currency gains or losses relating to investments made in currencies
other than GBP.
During the period the Company made the following upward
revaluations to investments:
-- ResponsiveLoad Limited ("RLtec")
On 6 June 2011, the Company announced that it had sold 175,747
Preference B shares in RLtec to Ombu Limited for a cash
consideration of GBP1,230,000. As such, the carrying value of this
investment at 31 May 2011 was increased by GBP1,064,000 to reflect
the valuation of the company set at the time of this
transaction.
During the period the Company made the following write-down
against investments:
-- Sterling Planet Inc. ("Sterling Planet")
A net foreign currency loss of GBP718,000 was made on this
investment, which reflects the appreciation of Sterling against the
US dollar in the period.
-- LUMEnergi Inc. ("LUMEnergi")
A net foreign currency loss of GBP202,000 was made on this
investment, which reflects the appreciation of Sterling against the
US dollar in the period.
-- QuantaSol Limited ("Quantasol")
On 7 July 2011, the Company announced that Quantasol had
completed an agreement to sell its core assets, including
intellectual property rights, to JDS Uniphase ("JDSU") in a cash
transaction. LCA will receive an initial payment of GBP400,000 from
the proceeds of this asset sale, with further amounts due over the
next 12 months.
The proceeds will be used as repayment towards the outstanding
loans from LCA to Quantasol (see note 8). As a result, a full
provision has been taken against the carrying value of LCA's equity
investment in Quantasol at 31 May 2011 to reflect the terms of the
transaction.
The table below summarises the underlying investments of the
Company. All of the investments, other than the investment in
EnergyMixx AG, are in unquoted companies.
Cost of 30
investment 31 May November 31 May
in 2011 Value 2010 Value 2010 Value
original of of of
Currency of currency investment investment investment
Company investment '000 GBP'000 GBP'000 GBP'000
Sterling
Planet, Inc. USD 7,000 12,957 13,675 14,659
Lumenergi Inc. USD 4,000 3,634 3,836 2,752
ResponsiveLoad
Limited GBP 2,750 5,691 4,627 4,023
QuantaSol
Limited GBP 2,375 - 2,375 2,375
Eco-Solids
International
Limited GBP 825 730 730 730
EnergyMixx AG GBP 1,100 - - 142
Vykson Limited GBP 450 643 643 643
Vigor
Renewables
Limited GBP 500 500 500 500
Vaperma Inc. CAN $ 7,150 - - 1,098
Total 24,155 26,386 26,922
10. NON-CURRENT FINANCIAL ASSETS CLASSIFIED AS HELD FOR SALE
It was noted in the latest year-end financial statements that in
line with the International Private Equity and Venture Capital
Valuation Guidelines, the value of LCA's equity investment in
Proven Energy was increased during that period from the historic
cost of GBP9.25 million to GBP19.9 million, being an increase of
GBP10.65 million.
To date, the Company continues to own more than 50% of the
equity in Proven Energy Limited ("Proven Energy"). As also noted in
the year-end financial statements, the Board's intention to reduce
LCA's shareholding to a minority stake in the near-term remains
firm (see note 3).
As such, the entire investment in Proven Energy has continued to
be classed as "Non-current financial assets classified as held for
sale" in the current period in accordance with IFRS 5. As IFRS 5
does not allow for the upward revaluation of assets classified as
"Non-current financial assets classified as held for sale" in
excess of any previous impairments that had been applied to those
same assets, the above fair value adjustment of GBP10.65 million
was not reflected in the Group's results for the 12 months ended 30
November 2010, or in its NAV as shown in the Consolidated Balance
Sheet as at 30 November 2010 nor at 31 May 2011. The Group has
therefore provided a reconciliation between the Accounting NAV and
the Adjusted NAV in note 12.
11. SHARE CAPITAL
Authorised No. GBP'000
Ordinary shares of no par value Unlimited -
Issued and fully paid
Ordinary shares of no par value 86,100,000 -
No.
Balance as at 31 May 2010 86,100,000
Issued (ordinary shares of GBP1 each) -
Balance as at 30 November 2010 86,100,000
Issued (ordinary shares of GBP1 each) -
Balance as at 31 May 2011 86,100,000
The Company has one class of ordinary shares which carry no
right to fixed income.
12. RECONCILIATION OF ACCOUNTING NAV AND ADJUSTED NAV
Net Asset NAV per
Value share
31 May 2011 GBP'000 Pence
Accounting Net Asset Value 37,668 43.7
Fair value adjustment to non-current
financial assets classified as held
for sale 10,650 12.4
Adjusted Net Asset Value 48,318 56.1
30 November 2010
Accounting Net Asset Value 41,271 47.9
Fair value adjustment to non-current
financial assets classified as held
for sale 10,650 12.4
Adjusted Net Asset Value 51,921 60.3
31 May 2010
Accounting and Adjusted Net Asset Value 44,618 51.8
The difference between the Accounting NAV of GBP37.7 million as
shown in the Consolidated Balance Sheet and the Adjusted NAV of
GBP48.3 million arises as a result of compliance with restrictions
on measurement of assets under IFRS 5 (see note 2).
The Board considers that the Adjusted NAV reflects the fair
value of the Group's investment portfolio at the balance sheet date
in accordance with IPEV guidelines.
13. POST BALANCE SHEET EVENTS
Between the balance sheet date and 22 July 2011 the following
events occurred:
a. ResponsiveLoad Limited ("RLtec")
On 6 June 2011, the Company announced that it had sold 175,747
Preference B shares in RLtec to Ombu Limited ("Ombu") for a cash
consideration of GBP1.23 million. The transaction represented a 23%
uplift in the current carrying value of RLtec as set out in LCA's
latest annual report and a 70% increase in value by reference to
LCA's adjusted book cost of investment in RLtec.
b. Vykson Limited ("Vykson")
On 29 June 2011, the Company announced that it had made a
further equity investment of GBP200,000 in Vykson as part of a
total funding round of GBP250,000 alongside an existing
co-investor, QUBIS Ltd. LCA has now invested a total of GBP650,000
into Vykson and holds an equity stake of 31% on a fully diluted
basis, assuming full vesting and exercise of share options under
the management incentive scheme.
c. Proven Energy Limited ("Proven Energy")
On 1 July 2011, the Company announced that it had made a further
investment of GBP750,000 in Proven Energy in the form of a secured
loan. This follow-on investment takes LCA's total investment in
Proven Energy to GBP10,650,000 of which GBP9,250,000 represents an
equity stake of 81.05% (75.08% on a fully diluted basis post
issuance of the senior management team incentive share scheme),
GBP650,000 represents the convertible loan and GBP750,000
represents the secured loan. If the convertible loan and related
warrants are exercised, LCA's stake would rise to approximately 88%
on a fully diluted basis.
d. QuantaSol Limited ("Quantasol")
On 7 July 2011, the Company announced that Quantasol had
completed an agreement to sell its core assets, including
intellectual property rights, to JDS Uniphase ("JDSU") in a cash
transaction. LCA will receive an initial payment of GBP400,000 from
the proceeds of this asset sale, with further amounts due over the
next 12 months.
14. FINANCIAL COMMITMENTS
As at 22 July 2011 the Company has no commitments to companies
in its portfolio.
15. RELATED PARTY TRANSACTIONS
During the period the Company continued to undertake the
following related party transactions:
a. The Company has appointed Low Carbon Investors Limited, a
Company in which David Nussbaum holds shares, provides advisory
services, and sits on the investment committee, to provide
investment management services. During the period the Company paid
a management fee to Low Carbon Investors Limited of GBP640,000
(2010 - GBP544,000).
b. RBS Hoare Govett Limited provides corporate broking and
financial advisory services to the Group and is a wholly-owned
subsidiary of The Royal Bank of Scotland N.V., which is a
shareholder in the Company. The advisory fees charged during the
period by RBS Hoare Govett Limited amounted to GBP12,500 (2010 -
GBP12,500).
c. LCA Board members Alan Mark Tanguy (who resigned from the
Board of LCA on 6 May 2011) and Andrew Neil Munro (who was
appointed to the Board of LCA on 6 May 2011) are employees of Ogier
Fiduciary Services (Guernsey) Limited and Mr. Tanguy was a director
of certain of its subsidiaries including Ogier Fund Administration
(Guernsey) Limited. Ogier Fund Administration (Guernsey) Limited
provides administration services to LCA. During the period LCA paid
fees of GBP77,000 (2010 - GBP57,000) to Ogier Fund Administration
(Guernsey) Limited.
About Low Carbon Accelerator: www.lowcarbon.gg
Low Carbon Accelerator Limited is a closed ended investment
company created to invest in a portfolio of fast-growing low carbon
businesses. The Company listed on the AIM Market of the London
Stock Exchange on 11 October 2006, raising GBP44.5 million. On 26
June 2009, the Company announced that it had raised a further GBP10
million, net of expenses, following the successful placing of a
further 41.6 million shares.
The Company's investment objective is to provide shareholders
with an attractive return on their investment primarily through
significant minority (predominately 25% and above) holdings in a
diverse portfolio of unquoted private companies providing low
carbon products and services.
The Company invests principally in companies which provide low
carbon products and services across the following sectors:
-- Energy efficiency (reductions in energy inputs at source,
improved conversion and reductions at point of use)
-- Energy generation (sustainable and clean energy, micro and
distributed generation)
The Company's investment strategy is to target trading
businesses with patentable technologies and products with a clear
commercial application and the opportunity to gain a large market
share of a new or expanding market. The Company focuses on
businesses with experienced management teams who have developed
commercially viable products providing easily adoptable solutions
which deliver immediate reductions in carbon dioxide emissions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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