TIDMPAL
RNS Number : 4656I
Equatorial Palm Oil plc
14 December 2020
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF EU REGULATION 596/2014 ("MAR"). UPON PUBLICATION OF
THIS ANNOUNCEMENT, THIS INFORMATION IS NOW CONSIDERED TO BE IN THE
PUBLIC DOMAIN.
14 December 2020
EQUATORIAL PALM OIL PLC
("EPO" or the "Company")
Audited Results for the year ended 30 September 2020
Equatorial Palm Oil plc (AIM: PAL), the Rule 15 cash shell, is
pleased to announce its audited results for the year ended 30
September 2020.
Notice is hereby given that the Annual General Meeting of EPO
will be held at the offices of Hill Dickinson LLP, 8th Floor, The
Broadgate Tower, 20 Primrose Street, London, EC2A 2EW on 28th
January 2021 at 11.00 a.m.
The Company's Annual Report and Notice of Annual General Meeting
will shortly be posted to shareholders and made available on the
Company's website at www.epoil.co.uk .
For further information, please visit www.epoil.co.uk or
contact:
Equatorial Palm Oil plc
Michael Frayne (Executive Chairman) + 44 (0) 20 7317 6800
SPARK Advisory Partners (Nominated
Adviser)
Neil Baldwin +44 (0) 20 3368 3554
Mirabaud Securities Limited
(Joint Broker)
Peter Krens +44 (0) 20 7484 3510
Brandon Hill Capital Limited
(Joint Broker)
Jonathan Evans/Oliver Stansfield +44 (0) 20 3463 5000
CHAIRMAN'S STATEMENT
Introduction
Equatorial Palm Oil plc ("EPO or "the Company") is an AIM listed
company which, following the disposal of its 50 per cent. interest
in Liberian Palm Developments Limited ("LPD") and receipt of
shareholders' approval, became an AIM Rule 15 cash shell.
Operational Review
As announced on 18 May 2020, the Company's 100 per cent owned
subsidiary, Equatorial Biofuels (Guernsey) Limited ("Equatorial
Biofuels") entered into a Sale and Purchase Agreement ("SPA") to
dispose of its 50 per cent. interest in LPD to Kuala Lumpur Kepong
Berhad ("KLK") for nominal consideration. Under the terms of the
SPA, at completion:
- Equatorial Biofuels transferred its 50 per cent equity
interest in LPD to KLK Agro Plantations Pte Ltd (KLK Agro
Plantations"), a wholly-owned subsidiary of KLK ("Sale
Shares");
- EPO transferred its circa $6.2 million of outstanding debt
owed to EPO by LPD ("Loan Novation"), to KLK Agro Plantations;
and
- The consideration of the Sale Shares and the Loan Novation was GBP1.
Shareholders approved the disposal on 9 June 2020, with
completion occurring on 11 June 2020, after which the Company
sought to identify a suitable reverse takeover transaction.
On 20 August 2020, the Company announced that it had completed a
placing of 100,000,000 shares ("Placing Shares") at 0.4 pence
("Placing Price") per share to raise GBP400,000. The placing of the
shares was conditional on approval being given for a
re-organisation of the Company's share capital to reduce the
nominal of value of the Company's ordinary shares to 0.01 pence per
ordinary share at a general meeting of the Company. Approval was
given by shareholders at the general meeting on 8 September 2020.
Pursuant to the placing Brandon Hill Capital Ltd was appointed as
joint broker. Brandon Hill has been issued with 5,000,000 broker
warrants exercisable at the Placing Price for a period of 3 years
from Admission of the Placing Shares.
Net proceeds from the placing were to be used by the Company to
explore corporate opportunities and for working capital
purposes.
Board and Advisor Changes
With the Company becoming an AIM Rule 15 cash shell, it was
deemed prudent to reduce the number of board members of the
Company. Accordingly, on 18 June 2020, Mr Lee Oi Hian and Mr Lee
Guo Zhang and on 3 September 2020 Ms Yap Miow Kien and Mr Patrick
Kee Chuan Peng, all Non-Executive Directors of the Company resigned
as Directors.
On 3 September 2020, the Company appointed Mr Teh Kwan Wey as a
Non-Executive Director. Kwan Wey is a Malaysian National and
graduated with a Masters of Engineering, in Chemical Engineering
from Imperial College London in 2006. After graduating, Kwan Wey
remained in the UK and worked in investment banking before
returning to Malaysia to join Kuala Lumpur Kepong Berhad ("KLK") in
2009. He is currently the General Manager (Corporate) of KLK and
holds multiple corporate related responsibilities within KLK. Kwan
Wey is also a director of many of KLK's subsidiaries. KLK is the
major shareholder in the Company.
The Company expresses its gratitude to the recently retired
directors for all their support and guidance over the years and
wishes them well in their future endeavours. We welcome Kwan Wey as
a director of the Company.
On 26 June 2020, SPARK Advisory Partners Limited were appointed
as the Company's nominated adviser.
Financial Review
The loss of the Group for the year ended 30 September 2020 was
$6,211,000 (year ended 30 September 2019: US$15,131,000). The
majority of the loss comprised the disposal of the interest in its
investment in associate LPD, of $6,037,000. In the prior year, the
majority of the loss was the Company's share of the loss in
associate, LPD, of $15,090,000 (which was predominantly the
impairment of assets at Butaw Estate).
Cash held by the Group as at 30 September 2020 was US$ 1,172,000
(30 September 2019: US$651,000).
Post period end
On 21 October 2020, the Company announced that it has reached
conditional agreement with parties holding a majority of the shares
(51.4 per cent.) ("CML Majority") of Capital Metals Limited
("CML"), a company developing a high grade mineral sands project in
Sri Lanka, to acquire their shares in CML ("CML Shares") in
exchange for ordinary shares in the Company ("Ordinary
Shares").
In accordance with Rule 14 of the AIM Rules, the Company's
Ordinary Shares were suspended from trading on AIM with effect from
7.30 a.m. on 21 October 2020. Trading in the Company's Ordinary
Shares will remain suspended until the time at which shareholders
approve the acquisition in General Meeting, subject to the
provisions of AIM Rule 15.
Outlook
The Company is looking forward to completing the proposed
share-for-share acquisition of Capital Metals Limited and we
believe this acquisition will prove very attractive for all
shareholders. The mineral sands market is robust and the CML
project has a high grade resource in comparison to its peers.
The Company believes that the current COVID-19 situation
globally will have nil effect to the Company.
The next 12 months should prove to be an exciting time for the
Company and I look forward to updating our shareholders on further
progress and developments. I would like to take this opportunity to
thank my fellow directors, advisers, stakeholders and all our
shareholders for their continued support.
Michael Frayne
CHAIRMAN
13 December 2020
STRATEGIC REPORT
Performance and Outlook
The development, performance, financial position and outlook of
the Company are discussed in the Chairman's Statement on pages 3 to
4
Key performance indicators and milestones
The key performance indicators and milestones for EPO and its
subsidiaries (the "Group") provide a measure of our performance
against the key drivers of our strategy.
The key performance indicators of the Group for the reported
period include:
-- The Company overheads being kept minimal upon the Company
becoming an AIM Rule 15 cash shell.
The milestones of the Group for the reported period was;
-- GBP400,000 raised from sophisticated shareholders to further corporate actions
Section 172 Statement
Section 172 of the Companies Act 2006 requires Directors to take
into consideration the interests of stakeholders and other matters
in their decision making. The Directors continue to have regard to
the interests of the Company's employees and other stakeholders,
the impact of its activities on the community, the environment and
the Company's reputation for good business conduct, when making
decisions. In this context, acting in good faith and fairly, the
Directors consider what is most likely to promote the success of
the Company for its members in the long term. We explain in this
annual report, and reference below, how the Board engages with
stakeholders.
Likely consequences of any decisions in the long term
The Chairman's Statements at pages 3-4 in this Annual Report,
set out the Company's long-term rationale and strategy.
Interests of Employees
The Company's Corporate Governance Statement at pages 10-14 of
this Annual Report sets out (under board responsibilities) the
processes in place to safeguard the interests of employees.
Foster business relationships with suppliers, joint venture
partners and others
Potential suppliers and joint venture partners are considered in
the light of their suitability to comply with the Company's
policies.
Impact of operations on the community and environment
The Company has no current operations that impact upon the
community or environment. However, prior to the disposal of its
interest in LPD, through its partner KLK, produced Sustainability
Reports, that described the Company's ongoing community work and
illustrated its corporate social responsibility ("CSR")
policies.
If completion of the transaction with CML occurs, the Company
has a commitment to ensure future operations are conducted with as
limited as possible environmental impact, with CML in continual
discussions with all stakeholders with respect to the Sri Lankan
project.
The Company regularly reviews its Health, Safety &
Environment ('HSE') and other policies and works responsibly with
suppliers, and performance is monitored on an on-going basis.
Maintain a reputation for high standards of business conduct
The Corporate Governance section of this Annual Report at pages
10-14 sets out the Board and Committee structures and extensive
Board and Committee meetings held during the year, together with
the experience of executive management and the Board and the
Company's policies and procedures.
Act fairly as between members of the Company
The Board takes feedback from a wide range of shareholders
(large and small) and endeavours at every opportunity to pro --
actively engage with all shareholders (via regular news reporting
-- RNS) and engage with any specific shareholders in response to
particular queries they may have from time to time. The Board
considers that its key decisions during the year have impacted
equally on all members of the Company.
Business Risks and Uncertainties
Going concern and financial risks are discussed in Note 1 and
Note 7 respectively. Going concern is also set out in the
Directors' Report on page 9-10.
Although the acquisition of CML has not completed and is
conditional on a number of matters, the Group has set out some
risks relating to the Company and CML ("Enlarged Group").
If the acquisition of CML did not proceed the risks primarily
relate to
Financing
The Company is to remain cashflow negative for some time and the
Company may need to raise additional funds for working capital
purposes.
AIM Listing Status
If the Company does not complete the proposed acquisitions, or a
subsequent acquisition, within the time specified by the AIM Rules
the Company may become delisted from AIM.
If the transaction completes, the Company and CML ("Enlarged
Group") has identified certain other risks to the Enlarged Group's
business including:
COVID-19
The COVID-19 outbreak in 2020 could have an adverse effect on
the Company's business. Concerns are rapidly growing about the
global outbreak of COVID-19. The virus has spread rapidly across
the globe, including in the continents of Europe and North America.
The pandemic is having an unprecedented impact on the global
economy as the respective levels of government react to this public
health crisis, which has created significant uncertainties. As the
pandemic continues to grow, consumer fears about becoming ill with
the virus and recommendations and/or mandates from authorities to
avoid large gatherings of people or self-quarantine may continue to
increase, which has already affected, and may continue to affect
economic activity generally. The extent of the impact of the
pandemic on the Company's business, results of operations,
financial condition or prospects will depend largely on future
developments, including the duration of the spread of the outbreak,
the impact on capital and financial markets and the related impact
on consumer behaviour, all of which are highly uncertain and cannot
be predicted. This situation is changing rapidly, and additional
impacts may arise of which the Company is not aware currently,
however as at the date of the signing of the financial statement
has not had any impact on the Company.
Government regulation and political risk
CML's operating activities are subject to laws and regulations
governing expropriation of property, health and worker safety,
employment standards, waste disposal, protection of the
environment, mine development, land and water use, prospecting,
mineral production, exports, taxes, labour standards, occupational
health standards, toxic wastes, the protection of endangered and
protected species and other matters in Sri Lanka. While CML
believes that it is in substantial compliance with all material
current laws and regulations affecting its activities, future
changes in applicable laws, regulations, agreements or changes in
their enforcement or regulatory interpretation could result in
changes in legal requirements or in the terms of existing permits
and agreements applicable to the CML or its properties, which could
have a material adverse impact on the CML's current operations or
planned exploration and development projects. Where required,
obtaining necessary permits and licenses can be a complex, time
consuming process and CML cannot assure whether any necessary
permits will be obtainable on acceptable terms, in a timely manner
or at all. The costs and delays associated with obtaining necessary
permits and complying with these permits and applicable laws and
regulations could stop or materially delay or restrict CML from
proceeding with any future exploration or development of its
properties. Any failure to comply with applicable laws and
regulations or permits, even if inadvertent, could result in
interruption or closure of exploration, development or mining
operations or material fines, penalties or other liabilities. The
CML project is located in Sri Lanka. CML's activities may be
affected in varying degrees by political stability and governmental
regulations. Any changes in regulations or shifts in political
attitudes in these countries or any other countries in which CML
may operate are beyond the control of CML and may adversely affect
its operations.
Early stage of operations
CML's operations are at an early stage of development. The
success of CML will depend on its ability to manage the project in
Sri Lanka and to take advantage of further opportunities which may
arise. On Admission, the CML will have no properties producing
positive cash flow and its ultimate success will depend on its
ability to generate cash flow from active mining operations in the
future and its ability to access capital markets for its
significant funding requirements. Significant capital investment
will be required to achieve commercial production. Losses are
likely to occur in the near future and there can be no assurance
that CML will be profitable in the future.
Mineral, metallurgical, and geological risks
Heavy minerals have been exploited in several areas of Sri
Lanka, however limited exploration has been undertaken in the South
East region of Sri Lanka, where the Project Licenses are located.
There is limited additional information on the mineralogy of heavy
minerals within the Project area other than that acquired by CML.
To date, most of the exploration has been undertaken by auger
drilling to a maximum depth of three metres and only recent
drilling has indicated to what depth the valuable mineral sands
extend. The assumptions currently adopted by engaged consultants in
the Mineral Resource Estimate for the Project may prove to be
wrong; impacting the proposed development programme
accordingly.
Environmental regulation
Environmental and safety legislation (e.g. in relation to
reclamation, disposal of waste products, protection of wildlife and
otherwise relating to environmental protection) may change in a
manner that may require stricter or additional standards than those
now in effect, a heightened degree of responsibility for companies
and their directors and employees and more stringent enforcement of
existing laws and regulations. There may also be unforeseen
environmental liabilities resulting from exploration or mining
activities, which may be costly to remedy. If CML is unable to
fully remedy an environmental problem, it may be required to stop
or suspend operations or enter into interim compliance measures
pending completion of the required remedy. The potential exposure
may be significant and could have a material adverse effect on CML.
CML has not purchased insurance for environmental risks (including
potential liability for pollution or other hazards as a result of
the disposal of waste products occurring from exploration and
production) as it is not generally available at a price which CML
regards as reasonable.
Financing
CML is also likely to remain cash flow negative for some time
and, although the Directors have confidence in the future revenue
earning potential of CML from its interests in the Project, there
can be no certainty that CML will achieve or sustain profitability
or positive cash flow from its operating activities.
CML will need to raise additional capital to fund the
development of the Project to the point at which it becomes
operational, and future heavy mineral prices, revenues, taxes,
capital expenditures and operating expenses and geological success
will all be factors which will have an impact on the amount of
additional capital required. Additionally, if CML acquires further
exploration assets or is granted additional permits, exploration
licenses this may increase its financial commitments in respect of
the Enlarged Group's exploration activities.
If CML is unable to obtain additional financing as and when
needed, it could result in a delay or postponement of the
Project.
This financing risk should be read in conjunction with the Going
Concern note 1 in the financial statements.
This report was approved by order of the board on 13 December
2020.
Michael Frayne
Chairman
Directors' Report
The Directors present their report together with the audited
financial statements of Equatorial Palm Oil plc and its
subsidiaries (the "Group") for the year ended 30 September
2020.
Principal Activities
Up until the disposal of the Company's interest in LPD, the
principal activity of the Group was the cultivation of oil palms
for the production of crude palm oil and associated products in
Liberia.
Subsequent to the disposal of the Company's interest in LPD, The
principal activity of the Company would be classified as an AIM
Rule 15 cash shell and, as such, the Company is required to make an
acquisition or acquisitions which constitute a reverse takeover
under AIM Rule 14 (or seek re-admission as an investing company (as
defined under the AIM Rules)), on or before the date falling six
months from completion of the Disposal, failing which, the
Company's Ordinary Shares would be suspended from trading on AIM
pursuant to AIM Rule 40. Admission of the Company's Ordinary Shares
to trading on AIM would be cancelled six months from the date of
suspension should the Company not complete such a transaction
during this time.
Results and Dividends
The loss of the Group after taxation for the 12 months ended 30
September 2020 amounted to $6,211,000 (12 months ended 30 September
2019 : Loss of $15,131,000) .
The Directors do not propose the payment of a dividend (2019:
nil).
Directors
The Directors who served during the year ended 30 September 2020
are as follows:
-- Michael Frayne
-- Geoffrey Brown
-- Teh Kwan Wey - appointed 3 September 2020
-- Lee Oi Hian - resigned 18 June 2020
-- Yap Miow Kien - resigned 3 September 2020
-- Lee Guo Zhang - resigned 18 June 2020
-- Patrick Kee Chuan Peng - resigned 3 September 2020
Insurance
The Group maintained insurance in respect of its Directors and
Officers against liabilities in relation to the Group.
Financial Instruments
Financial instrument risks are discussed in Note 7.
Events after the Reporting Period
Significant events after the reporting period, being 30
September 2020, but before the approval of these financial
statements, are set out in Note 21.
Going Concern
The financial statements have been prepared on a going concern
basis.
The Directors have prepared a cash flow forecast for the period
ending 31 March 2022, which considers the cash held by the Group at
the year end, less future administrative and planned
expenditure.
The forecasts do not assume that additional cash will be raised
by the Company or that the CML transaction will complete. These
forecasts show that the Company currently has sufficient cash to
pay the overheads of a cash shell throughout the forecast
period.
On 21 October 2020, the Company announced that it has reached
conditional agreement with parties holding a majority of the shares
(51.4 per cent.) ("CML Majority") of Capital Metals Limited
("CML"), a company developing a high grade mineral sands project in
Sri Lanka, to acquire their shares in CML ("CML Shares") in
exchange for ordinary shares in the Company ("Ordinary
Shares").
In accordance with Rule 14 of the AIM Rules, the Company's
Ordinary Shares were suspended from trading on AIM with effect from
7.30 a.m. on 21 October 2020. Trading in the Company's Ordinary
Shares will remain suspended until the time at which shareholders
approve the acquisition in General Meeting, subject to the
provisions of AIM Rule 15.
The Board are planning to raise sufficient funds to cover the
working capital requirements of CML before they complete the
transaction. There is a risk that the transaction will not complete
if there is no successful fundraising. As the Board will have to
approve the finalisation of the transaction, there is currently no
commitment to make this acquisition. Management have therefore
prepared the base cash flow forecast on the basis that the CML
transaction will not complete. If the Board were to approve the
acquisition, the Group and Company would require additional
funding.
Based upon the Group and Company's current cash balance and
forecast expenditure, the Directors consider that the Group and
Company will have sufficient cash to fund ongoing commitments for a
period of at least a year after the approval of these financial
statements.
Employment Policies and Remuneration
The Group is committed to promoting policies which ensure that
high calibre employees are attracted, retained and motivated, to
ensure ongoing success for the business. Employees and those who
seek to work with the Group are treated equally regardless of sex,
marital status, creed, age, colour, race or ethnic origin.
The Company remunerates the Directors at a level commensurate
with the size of the Company and the experience of its Directors.
The Remuneration Committee has reviewed the Directors' remuneration
and believes it upholds the objectives of the Company with regards
to this issue.
Details of Directors' emoluments and payments made for
professional services rendered are set out in Note 4 of the
financial statements.
Health & Safety
The Group's aim is to maintain its record of workplace safety.
In order to achieve this objective, the Group provides training and
support to employees and sets demanding standards for workplace
safety.
Auditors
The Company's auditor, BDO LLP, will be proposed for
reappointment in accordance with Section 485 of the Companies Act
2006. BDO has signified its willingness to continue in office as
auditor.
Corporate Governance
The Directors are committed to maintaining high standards of
corporate governance. The Directors have established procedures, so
far as is practicable given the Company's size, to comply with the
QCA Corporate Governance Code (the "QCA Code"). The Board
recognises the principles of the QCA Code, which focus on the
creation of medium to long-term value for shareholders without
stifling the entrepreneurial spirit in which small to medium sized
companies, such as EPO, have been created. The specific areas of
the QCA Code with which the Company does not apply are set out
below (and within the Corporate Governance section on the Company's
website - www.epoil.co.uk).
The Company has adopted and operates a share dealing code for
Directors and senior employees on substantially the same terms as
the Model Code, which is appended to the Listing Rules of the
UKLA.
The Board
The Board holds regular meetings and is responsible for
formulating, reviewing and approving EPO's strategy, budgets and
corporate actions and overseeing the Company's progress towards its
goals. To enable the Board to perform its duties, each of the
Directors has full access to all relevant information and to the
services of the Company Secretary. If necessary, the Non-Executive
Directors may take independent professional advice at the Company's
expense. The Board currently includes two Non-Executive Directors.
Full biographies for each Director are as follows:
Mr Michael Frayne
Executive Chairman
Michael holds a Bachelor of Commerce Degree majoring in
accounting and finance, a Bachelor of Science Degree majoring in
Geology and a Postgraduate Diploma in Applied Finance and
Investment from the Securities Institute of Australia. He is a
Chartered Accountant and a member of the Australian Institute of
Mining and Metallurgy. Michael previously worked for Ernst &
Young and consulted to a number of resource and commodity
companies. Following this, he worked directly in the resource
industry and spent time at Great Central Mines Ltd (now part of
Newmont Ltd) and in the corporate team at Minara Resources Ltd
(formerly Anaconda Nickel Ltd). Since 2002, Michael has provided
corporate management and advice to the resource, commodity and
energy sectors, successfully listing several companies with
projects in Australia, Southern Africa, Asia, North and South
America, onto AIM and the Australian Stock Exchange.
Mr Geoffrey Brown
Non-Executive Director
Geoffrey Brown has over 55 years' experience in the plantation
sector. He joined Harrisons & Crosfield plc in Malaysia in 1962
where he was employed on various estates growing oil palm and
rubber. He moved to Indonesia in 1976 and was made responsible for
Harrisons & Crosfield's interests in that country. He was
appointed Executive Chairman of London Sumatra Indonesia in 1982
and remained Managing Director of this large Indonesian plantation
company until 1998. In 1990, he was appointed an Executive Director
of Harrisons & Crosfield plc, responsible for the plantation
division. Harrisons & Crosfield plc owned and managed
plantations of rubber, oil palms, cocoa, coffee and tea in
Indonesia, and oil palm and coffee in Papua New Guinea. He remained
an Executive Director of Harrisons & Crosfield plc until the
company divested itself of its plantation interests in 1994. In
1999 and 2000, he co-ordinated the expansion of oil palm
plantations belonging to the Musim Mas Group in Indonesia and then
became a consultant specialising in plantation management. In 2006
he joined the EPO group of companies and has been an Executive
Director of EPO since the company was listed on the AIM market of
the London Stock Exchange in in 2010. He became a non-executive
director of the Company on 1 November 2019
Mr Teh Kwan Wey - appointed 3 September 2020
Non-Executive Director
Mr Teh Kwan Wey was appointed as a Non-Executive Director of the
Company in September 2020. He is General Manager (Corporate) for
KLK in Malaysia where he is responsible for in house corporate
finance advisory and execution including acquisitions, divestments,
fund raising and due diligence. Prior to this Mr Teh spent three
years at Lazard in the London Financial Advisory team where he
worked on a number of equity capital, M&A and LBO transactions
for clients across Europe, North America, the Middle East and Asia.
Mr Teh holds a Master of Engineering degree from Imperial College
London.
Mr Lee Oi Hian - resigned 18 June 2020
Non-Executive Director
Mr Lee Oi Hian has been the Chief Executive Officer of KLK since
2001. He joined the Company in 1974 as an executive and was
appointed to the Board of KLK in 1985. In 1988, he was appointed as
Managing Director and became Chairman of KLK Group in 1993. He
subsequently held the post of joint Chairman and Chief Executive
Officer until 2008, when he relinquished his role as Chairman,
remaining as Chief Executive Officer of the Group. He has served in
various positions in the plantations industry, including the
Malaysian Palm Oil Council, the Malaysian Palm Oil Board and the
Malaysian Cocoa Board. He is also currently the Chairman of Batu
Kawan Berhad, and a trustee of several charitable organisations. Mr
Lee Oi Hian is also an Honorary Fellow of the Malaysian Oil
Scientists' and Technologies' Association (MOSTA) and Honorary
Fellow of the Incorporated Society of Planters (FISP).
Ms Yap Miow Kien - resigned 3 September 2020
Non-Executive Director
Ms Yap Miow Kien joined KLK in 2002 and is currently its Company
Secretary and Senior General Manager (Legal and Secretariat). Prior
to joining KLK, Ms Yap was a partner in a law firm. She is an
Associate of the Malaysian Institute of Chartered Secretaries and
Administrators. She was called to the bar at Middle Temple and
completed a Bachelor of Law (Hons) at the University of Leeds.
Mr Lee Guo Zhang - resigned 18 June 2020
Non-Executive Director
Mr Lee Guo Zhang graduated with a bachelor's degree in Medicinal
& Biological Chemistry from the University of Nottingham in
2009. He joined KLK in 2010 as an executive and has experience
across various departments in the Company. He is currently
Assistant General Manager in the Plantations Division.
Mr Patrick Kee Chuan Peng - resigned 3 September 2020
Non-Executive Director
Mr Patrick Kee Chuan Peng has served KLK's subsidiaries in
various capacities from Assistant, Manager, General Manager to
Regional Director in West Malaysia, Sabah and Indonesia. He is an
Associate Member of the Incorporated Society of Planters. He has
also attended the Senior Management Development Programme conducted
by Harvard Business School and Advance Management Programme of
INSEAD.
The Board is satisfied that it has a suitable balance between
independence on the one hand, and knowledge of the Company on the
other, to enable it to discharge its duties and responsibilities
effectively, and that all Directors have adequate time to fill
their roles.
The role of the Chairman is to provide leadership of the Board
and ensure its effectiveness on all aspects of its remit to
maintain control of the Group. In addition, the Chairman is
responsible for the implementation and practice of sound corporate
governance.
The Board has delegated specific responsibilities to the
committees, with clearly defined terms of reference which are set
out by the Board, as described below.
The Audit Committee
The Company has established an Audit Committee, which comprises
three Directors, Mr Teh Kwan Wey, Mr Michael Frayne and is chaired
by Mr Geoffrey Brown. The Audit Committee meets at least twice each
year and at any other time when it is appropriate to consider and
discuss audit and accounting related issues. The Audit Committee is
responsible for monitoring the quality of internal controls and for
ensuring that the financial performance of the Company is properly
monitored, controlled and reported on. It reviews a wide range of
matters, including half-year and annual results before their
submission to the Board. It also meets the Company's auditor
without the executive Board members present and reviews reports
from the auditor relating to accounts and internal control
systems.
The Remuneration Committee
The Company has established a Remuneration Committee, which
comprises two Directors, Mr Geoffrey Brown and is chaired by Mr Teh
Kwan Wey. The Remuneration Committee reviews the performance of the
Executive Director(s) and sets the scale and structure of their
remuneration and the basis of their service agreements with due
regard to the interests of shareholders. In determining the
remuneration of Executive Directors, the Remuneration Committee
seeks to enable the Company to attract and retain executives of the
highest calibre. The Remuneration Committee also makes
recommendations to the Board concerning the allocation of share
options, bonus schemes, pension rights and compensation payments.
No Director is permitted to participate in discussions or decisions
concerning their own remuneration.
The Nominations Committee
The Company has established a Nominations Committee, which
comprises two Directors, Mr Geoffrey Brown and is chaired by Mr Teh
Kwan Wey. This Committee reviews the structure, size and
composition (including the skills, knowledge and experience)
required of the Board compared to its current position and makes
recommendations to the Board with regard to any changes. In
addition, it gives full consideration to succession planning for
Directors and other senior executives, and is responsible for
identifying, evaluating and nominating Board candidates. It also
reviews annually the time required from Non-Executive
Directors.
Application of the QCA Code
In the spirit of the QCA Code, it is the Board's job to ensure
that the Group is managed for the long-term benefit of all
shareholders and other stakeholders with effective and efficient
decision-making. Corporate governance is an important part of that
job, reducing risk and adding value to the Group. The Board will
continue to monitor the governance framework of the Group as it
grows.
The Company remains committed to listening to, and communicating
openly with, its shareholders to ensure that its strategy, business
model and performance are clearly understood. The AGM is a forum
for shareholders to engage in dialogue with the Board. The results
of the AGM will be published via RNS and on the Company's website.
In addition, the Board organises update meetings with both the
shareholders and the Company's joint brokers. Progress reports are
also made via RNS.
The Directors are responsible for EPO's system of internal
controls and reviewing its effectiveness. Although, no system of
internal control can completely eliminate the risk of failure to
achieve business objectives or provide absolute assurance against
material misstatement or loss, the Company's controls are designed
to provide reasonable assurance over the reliability of financial
information and EPO's assets.
Departure from the QCA Code:
In accordance with the AIM Rules for Companies, EPO departs from
the QCA Code in the following ways:
Principle 5 - "Maintain the board as a well-functioning,
balanced team led by the chair"
The QCA Code recommends that the Board has at least two
independent Non-Executive Directors. EPO only has one non-executive
director who is deemed by the Board to be independent, being
Geoffrey Brown, notwithstanding his prior tenure as an executive
director.
The Board strives to foster an attitude of independence of
character and judgement. An example of this is where there is a
related party transaction. In this instance a detailed Working
Paper is drawn up for the Non-Related Directors to ensure that the
transaction is fair and reasonable in all respects. Both the
Company's lawyers and the Nomad are also consulted as part of the
Non-Related Directors' deliberations.
The QCA Code recommends the Remuneration Committee should be
comprised of independent directors. The Company's Remuneration
Committee is currently made up of one independent non-executive
director and one non-executive director from KLK. The Board
believes the composition of the Remuneration Committee is
suitable.
Principle 7 - "Evaluate board performance based on clear and
relevant objectives, seeking continuous improvement"
EPO's Board is small and extremely focussed on implementing the
Company's strategy. However, given the size and nature of EPO, the
Board does not consider it appropriate to have a formal performance
evaluation procedure in place, as described and recommended in
Principle 7 of the QCA Code. The Board will closely monitor the
need for formal performance evaluation, in light of Principle 7 of
the QCA Code, as the Company develops.
Control Procedures
The Board has approved financial budgets and cash forecasts. In
addition, it has implemented procedures to ensure compliance with
accounting standards and effective reporting.
Provision of information to auditor
As far as the Directors are aware, there is no relevant audit
information of which the Company's auditor is unaware. Each
Director has taken appropriate steps to ensure that they are aware
of such relevant information, and that the Company's auditors is
aware of that information.
Annual General Meeting
This report and financial statements will be presented to
shareholders for their approval at an Annual General Meeting
("AGM"). The Notice of the AGM will be distributed to shareholders
together with the Annual Report.
By order of the Board
Michael Frayne
Chairman
13 December 2020
STATEMENT OF Directors' RESPONSIBILITIES
The directors are responsible for preparing the Strategic
Report, the Directors Report of the directors and the Financial
Statements of the Group and the Company in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law the Directors
have elected to prepare both the Group and parent Company Financial
Statements in accordance with International Financial Reporting
Standards ("IFRSs"), as adopted by the European Union. Under
company law the Directors must not approve the Financial Statements
unless they are satisfied that they give a true and fair view of
the state of affairs and profit or loss of the Company and of the
Group for that period. In preparing these Financial Statements, the
Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable IFRS's have been followed in the
Group Financial Statements, subject to any material departures
disclosed and explained in the Financial Statements; and
-- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company and the
Group will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and to enable them
to ensure that Financial Statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
Company and the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities. The
Directors confirm that:
-- so far as each Director is aware, there is no relevant audit
information of which the Group's auditor is unaware, and
-- the directors have taken all steps that they ought to have
taken as Directors in order to make themselves aware of any
relevant audit information and to establish that the auditor is
aware of that information.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the EPO
website. Legislation in the United Kingdom governing the
preparation and dissemination of the Financial Statements may
differ from legislation in other jurisdictions. The work carried
out by the auditor does not involve the consideration of the
maintenance and integrity of the website and, accordingly, the
auditor accepts no responsibility for any changes that may have
occurred in the Financial Statements since they were initially
presented on the Company's website.
They are further responsible for ensuring that the Strategic
Report and the Directors' Report and other information included in
the Annual Report and Financial Statements is prepared in
accordance with applicable law in the United Kingdom.
By order of the Board
Michael Frayne
Chairman
13 December 2020
Independent auditor's report to the members of Equatorial Palm
Oil plc
Opinion
We have audited the financial statements of Equatorial Palm Oil
plc (the 'parent Company') and its subsidiaries (the 'Group') for
the year ended 30 September 2020 which comprise the Group Statement
of Comprehensive Income, the Group Statement of Financial Position,
the Company Statement of Financial Position, the Group and Company
Statement of Cash Flows, the Group Statement of Changes in Equity,
the Company Statement of Changes in Equity and notes to the
financial statements, including a summary of significant accounting
policies.
The financial reporting framework that has been applied in the
preparation of the financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union and, as regards the parent Company financial
statements, as applied in accordance with the provisions of the
Companies Act 2006.
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the parent Company's affairs as at 30
September 2020 and of the Group's loss for the year then ended;
-- the Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the parent Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Group
and the parent Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the
UK, including the FRC's Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
were:
-- the directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the Group's or the parent Company's ability to continue
to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are
authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Risk description How our audit addressed the risk
------------------------------------------ -----------------------------------------
Going concern We obtained the Group's financial
As disclosed in Note 1, the financial forecast models, over a period
statements have been prepared of 15 months from the approval
on a going concern basis. of the financial statements,
Following the disposal of the and performed data integrity
Group's interest in Liberian and mechanical checks on the
Palm Development Limited (LPD), model.
The Group has currently has no We reviewed the Group's historical
operations providing cash inflow. overhead expenditure and compared
The Group and Company will need these with the forecasts to
to utilise existing cash reserves assess whether the forecasts
to fund its working capital needs are reasonable.
and any further developments We checked that the forecasts
that may arise as a result of did not include interest income
new investment opportunities. or management fee income, following
Directors have prepared the cash the disposal of LPD.
flow forecast to support the We reviewed board minutes and
going concern assumption. These RNS announcements for any indicators
projections include judgement that overheads would not be
and estimates, and accordingly in line with the forecasts.
this area is considered to be We reviewed the conditional
a key audit matter. agreement for the acquisition
of Capital Metals Limited to
confirm the transaction is subject
to the Group's Board approval
and therefore completion is
within the control of the Group.
We checked that the cash flow
forecasts prepared by the Board
exclude the potential Capital
Metals Limited transaction.
We reviewed the disclosures
in the notes to the financial
statement.
========================================== =======================================
Key observations:
Our key observations are set out in the Conclusion relating
to going concern section above.
-----------------------------------------------------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken based on the financial
statements. Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take into account
the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their effect on
the financial statements as a whole.
Group materiality Basis for materiality
--------- ------------------- ------------------------------------
FY 2020 USD 24,000 Materiality based on 2% of total
Group assets.
========= =================== ====================================
FY 2019 USD 1,500,000 Materiality based on 1.5% of total
LPD Group assets.
--------- ------------------- ------------------------------------
EPO disposed of their interest in Liberian Palm Development
Limited (LPD) during the year and became a cash shell. Based on
this we consider the total assets of the Group to be an appropriate
basis of materiality for the current year.
The materiality for the Financial Statements as a whole was USD
24,000 (FY 2019: USD 1.5 million), and the Group has one
significant component, the parent Company, whose materiality was
set at USD 23,000 (FY 2019: USD 1 million) using a benchmark of 96%
of Group materiality,
Performance materiality is the application of materiality at the
individual account or balance level set at an amount to reduce to
an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for
the financial statements as a whole. Performance materiality for
the Group and parent Company was set at USD 18,000 (2019: USD
1.1million) and USD 17,000 (2019: USD 750,000) respectively. This
was based on 75% of materiality.
We agreed with the audit committee that we would report to them
all individual audit differences identified during the course of
our audit in excess of USD 480 (2019: USD 75,000). We also agreed
to report differences below this threshold that, in our view
warranted reporting on qualitative grounds
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group's system of internal
control, and assessing the risks of material misstatement in the
financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there
was evidence of bias by the Directors that may have represented a
risk of material misstatement.
Whilst EPO is an AIM listed company, the Group disposed of their
interest in Liberian Palm Development Limited (LPD) during the year
and became a cash shell. We assessed there to be one significant
component being the parent Company.
A full scope audit was performed on the significant component by
BDO LLP.
Other components, prior to disposal of LPD, were assessed as
non-significant and subject to analytical review procedures carried
out by BDO LLP.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report other than the financial statements and our auditor's report
thereon. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We
have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and
the parent Company and its environment obtained in the course of
the audit, we have not identified material misstatements in the
strategic report or the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent Company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained in more fully in the statement of directors'
responsibilities set out on page 17, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group's and the parent Company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
Group or the parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Use of our report
This report is made solely to the Parent Company's members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to
the Parent Company's members those matters we are required to state
to them in an auditor's 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 Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Jack Draycott (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
13 December 2020
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
GROUP Statement OF COMPREHENSIVE INCOME
Notes Year ended Year ended
30 September
2020
$'000 30 September
2019
$'000
Revenue 11 11 167
Administrative expenses (543) (717)
Operating loss 2 (532) (550)
Interest income 10 358 503
Other income 11 - 6
Loss on disposal of receivable from associate 10 (6,037) -
Share of loss of associate 8 - (15,090)
--------------- ---------------
Loss for the year before and after taxation
attributable to owners of the Company 3 (6,211) (15,131)
--------------- ---------------
Other comprehensive income
Exchange losses arising on translation - -
of foreign operations
--------------- ---------------
Total comprehensive loss for the year
attributable to owners of the Company (6,211) (15,131)
--------------- ---------------
Loss per share expressed in cents per
share
- Basic & diluted 6 (1.7) cents (4.2) cents
The notes on pages 27 to 47 form part of these financial
statements.
Group STATEMENT OF FINANCIAL POSITION
Registered Number 05555087
As at As at
Notes 30 September 30 September
2020 2019
$'000 $'000
ASSETS
Non-current assets
Investment in associate 8 - -
Property, plant and equipment 2 3
Receivables from associate 10 - 6,223
2 6,226
Current assets
Trade and other receivables 12 69 21
Cash & cash equivalents 15 1,172 651
--------------- ---------------
1,241 672
LIABILITIES
Current liabilities
Trade and other payables 13 107 40
107 40
Net current assets 1,134 632
NET ASSETS 1,136 6,858
--------------- ---------------
SHAREHOLDERS' EQUITY
Share capital 14 5,611 5,598
Share premium 47,242 46,791
Share option & warrant reserve 25 -
Foreign exchange reserve 518 518
Retained loss (52,260) (46,049)
--------------- ---------------
Total equity 1,136 6,858
--------------------------------- -------- --------------- ---------------
The financial statements were approved by the Board of Directors
on 13 December 2020 and were signed on its behalf by:
Michael Frayne
Chairman
The notes on pages 27 to 47 form part of these financial
statements.
COmpany STATEMENT OF FINANCIAL POSITION
Registered Number 05555087
As at As at
Notes 30 September 30 September
2020 2019
$'000 $'000
--------------------------------- -------- --------------- ---------------
ASSETS
Non-current assets
Investment in subsidiaries 8 - -
Property, plant and equipment 2 3
Receivables from associate 10 - 6,223
2 6,226
Current assets
Trade and other receivables 12 67 20
Loans to subsidiaries 9 - 156
Cash & cash equivalents 15 1,172 651
--------------- ---------------
1,239 827
LIABILITIES
Current liabilities
Trade and other payables 13 107 40
107 40
Net current assets 1,132 787
NET ASSETS 1,134 7,013
--------------- ---------------
SHAREHOLDERS' EQUITY
Share capital 14 5,611 5,598
Share premium 47,242 46,791
Share option & warrant reserve 25 -
Foreign exchange reserve (1,086) (1,085)
Retained loss (50,658) (44,291)
--------------- ---------------
Total equity 1,134 7,013
--------------------------------- -------- --------------- ---------------
As permitted by section 408 of the Companies Act 2006, the
statement of comprehensive income of the Company has not been
separately presented in these financial statements. The Company
loss for the year was $6,367,000 (2019: $15,534,000).
The financial statements were approved by the Board of Directors
on 13 December 2020 and were signed on its behalf by:
Michael Frayne
Chairman
The notes on pages 27 to 47 form part of these financial
statements.
GROUP AND COMPANY STATEMENT OF Cash FlowS
Group Group Company Company
Year ended Year ended Year ended Year ended
30 September 30 September 30 September 30 September
2020 2019 2020 2019
$'000 $'000 $'000 $'000
---------------------------------------- ----- --------------- --------------- --------------- ---------------
Cash flows from operating
activities
Loss for the year before
and after taxation (6,211) (15,131) (6,367) (15,534)
Depreciation 1 1 1 1
(Increase) / Decrease
in receivables (39) 1 117 1
Decrease in payables 67 (13) 67 (13)
Interest income (358) (503) (358) (503)
Other income - - - (6)
Loss on disposal of associate 5,808 - 5,808 -
Share of loss of associate/impairment
of investment (less unrealised
forex gain) - 15,090 - 15,499
Net cash used by operating
activities (732) (555) (732) (555)
Cash flows from investing
activities
Purchase of property,
plant and equipment - (1) - (1)
Repayment of loan from
associate / subsidiary 124 559 334 559
Proceeds from disposal
of interest in LPD 373 - 373 -
Interest income received 254 510 254 510
Net cash generated by
investing activities 751 1,068 751 1,068
Cash flows from financing
activities
Issue of ordinary share
capital 489 - 489 -
Net cash flow from financing
activities 489 - 489 -
Net increase/(decrease)
in cash and cash equivalents 508 513 508 513
Cash and cash equivalents
at beginning of period 651 138 651 138
Exchange loss on cash
and cash equivalents 13 - 13 -
--------------- --------------- --------------- ---------------
Cash and cash equivalents
at end of period 1,172 651 1,172 651
----------------------------------------------- --------------- --------------- --------------- ---------------
The notes on pages 27 to 47 form part of these financial
statements.
GROUP Statement of Changes IN EQUITY
Share
Called Share option Foreign
up share premium & warrant exchange Retained Total
capital reserve reserve reserve earnings equity
$'000 $'000 $'000 $'000 $'000 $'000
GROUP
----------------------- ----------- ----------- ------------ ----------- ----------- ----------
As at 30 September
2018 5,598 46,791 - 518 (30,918) 21,989
----------- ----------- ------------ ----------- ----------- ----------
Loss for the year - - - - (15,131) (15,131)
Other comprehensive
loss for the year - - - - - -
----------- ----------- ------------ ----------- ----------- ----------
As at 30 September
2019 5,598 46,791 - 518 (46,049) 6,858
----------- ----------- ------------ ----------- ----------- ----------
Loss for the year - - - - (6,211) (6,211)
Other comprehensive
loss for the year - - - - - -
----------- ----------- ------------ ----------- ----------- ----------
Total comprehensive
loss for the year - - - - (6,211) (6,211)
Issue of shares
during the year 13 476 - - 489
Cost of share issue - (25) 25 - - -
As at 30 September
2020 5,611 47,242 25 518 (52,260) 1,136
----------------------- ----------- ----------- ------------ ----------- ----------- ----------
The following describes the nature and purpose of each reserve
within owners' equity:
Share capital Amount subscribed for share capital at nominal
value.
Share premium Amount subscribed for share capital in excess
of nominal value.
Share option & warrant Cumulative charge recognised under IFRS 2 in respect
reserve of share -- based
payment awards
Foreign exchange Foreign exchange differences arising on translating
into the reporting currency.
Retained earnings Cumulative other net gains and losses recognised
in the financial statements.
The notes on pages 27 to 47 form part of these financial
statements.
COMPANY Statement of Changes IN EQUITY
Share
Called Share option Foreign
up share premium & warrant exchange Retained Total
capital reserve reserve reserve earnings equity
$'000 $'000 $'000 $'000 $'000 $'000
COMPANY
----------------------- ----------- ----------- ------------ ----------- ----------- ----------
As at 30 September
2018 5,598 46,791 - (742) (28,757) 22,890
----------- ----------- ------------ ----------- ----------- ----------
Loss for the year - - - - (15,534) (15,534)
Other comprehensive
loss for the year - - - (343) - (343)
----------- ----------- ------------ ----------- ----------- ----------
As at 30 September
2019 5,598 46,791 - (1,085) (44,291) 7,013
----------- ----------- ------------ ----------- ----------- ----------
Loss for the year - - - - (6,367) (6,367)
Other comprehensive
loss for the year - - - (1) - (1)
----------- ----------- ------------ ----------- ----------- ----------
Total comprehensive
loss for the year - - - (1) (6,367) (6,368)
Issue of shares
during the year 13 476 - - 489
Cost of share issue - (25) 25 - - -
As at 30 September
2020 5,611 47,242 25 (1,086) (50,658) 1,134
----------------------- ----------- ----------- ------------ ----------- ----------- ----------
The following describes the nature and purpose of each reserve
within owners' equity:
Share capital Amount subscribed for share capital at nominal
value.
Share premium Amount subscribed for share capital in excess
of nominal value.
Share option & warrant Cumulative charge recognised under IFRS 2 in respect
reserve of share -- based
payment awards
Foreign exchange Foreign exchange differences arising on translating
into the reporting currency.
Retained earnings Cumulative other net gains and losses recognised
in the financial statements.
The notes on pages 27 to 47 form part of these financial
statements.
1. Summary of Significant Accounting Policies
The principal accounting policies are summarised below. They
have all been applied consistently throughout the period.
Authorisation of financial statements
The consolidated financial statements of EPO, a company
registered in England and Wales with registered address being 6th
Floor, 60 Gracechurch Street, London, United Kingdom, EC3V 0HR, for
the year ended 30 September 2020 were authorised for issue by the
Board of Directors on 13 December 2020 and the statements of
financial position signed on the Board's behalf by Michael
Frayne.
Basis of preparation
These financial statements have been prepared under the
historical cost convention and in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union and IFRIC interpretations and with those parts of the
Companies Act, 2006 applicable to companies reporting under
IFRS.
The financial statements have been prepared to the nearest
$'000.
These financial statements have been prepared on a going concern
basis, as disclosed in the Directors' Report.
Going concern
The financial statements have been prepared on a going concern
basis.
The Directors have prepared a cash flow forecast for the period
ending 31 March 2022, which considers the cash held by the Group at
the year end, less future administrative and planned
expenditure.
The forecasts do not assume that additional cash will be raised
by the Company or that the CML transaction will complete. These
forecasts show that the Company currently has sufficient cash to
pay the overheads of a cash shell throughout the forecast
period.
On 21 October 2020, the Company announced that it has reached
conditional agreement with parties holding a majority of the shares
(51.4 per cent.) ("CML Majority") of Capital Metals Limited
("CML"), a company developing a high grade mineral sands project in
Sri Lanka, to acquire their shares in CML ("CML Shares") in
exchange for ordinary shares in the Company ("Ordinary
Shares").
In accordance with Rule 14 of the AIM Rules, the Company's
Ordinary Shares were suspended from trading on AIM with effect from
7.30 a.m. on 21 October 2020. Trading in the Company's Ordinary
Shares will remain suspended until the time at which shareholders
approve the acquisition in General Meeting, subject to the
provisions of AIM Rule 15.
The Board are planning to raise sufficient funds to cover the
working capital requirements of CML before they complete the
transaction. There is a risk that the transaction will not complete
if there is no successful fundraising. As the Board will have to
approve the finalisation of the transaction, there is currently no
commitment to make this acquisition. Management have therefore
prepared the base cash flow forecast on the basis that the CML
transaction will not complete. If the Board were to approve the
acquisition, the Group and Company would require additional
funding.
Based upon the Group and Company's current cash balance and
forecast expenditure, the Directors consider that the Group and
Company will have sufficient cash to fund ongoing commitments for a
period of at least a year after the approval of these financial
statements.
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee;
exposure to variable returns from the investee; and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control. The
consolidated financial statements comprise the financial statements
of the Company and its subsidiaries (the "Group"). The financial
statements of the subsidiaries are prepared for the same reporting
period as the parent Company, using consistent accounting
policies.
All intra-group balances, transactions, income and expenses and
profits and losses resulting from intra-group transactions, are
eliminated in full.
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date that such control
ceases.
Foreign currency translation
(i) Functional and presentation currency
Items included in the individual financial statements of each of
the Group's entities are measured using the currency of the primary
economic environment in which the entity operated ('the functional
currency') for the majority of the current year up until the time
of the disposal of its interest in LPD. The consolidated financial
statements are presented in US Dollars, which is EPO's presentation
currency and differs from its functional currency, which is
Sterling. The Company's strategy was focused on developing its
investment in Liberian oil palm funded by shareholder equity which
are principally denominated in Sterling. The Company's associate
operations were funded by shareholder equity and other financial
liabilities, which were principally denominated in US dollars.
Following on the conversion of the Company to an AIM Rule 15 cash
shell as approved by shareholders during the year, the Company
announced the proposed RTO of Capital Metals Limited ("CML"), a
company developing a mineral sands project in Sri Lanka. CML's
functional currency is US Dollars, hence the Company will maintain
the US dollar as its functional currency.
(ii) Transactions and balances
Transactions denominated in a foreign currency are translated
into the functional currency at the exchange rate at the date of
the transaction. Assets and liabilities in foreign currencies are
translated to the functional currency at rates of exchange ruling
at the reporting date. Gains or losses arising from settlement of
transactions and from translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies
are recognised in the statement of comprehensive income for the
period.
(iii) Group companies
The results and financial position of all the Group entities
that have a functional currency different from the presentation
currency were translated into the presentation currency as
follows:
- assets and liabilities for each statement of financial
position presented were translated at the closing rate at the date
of the statement of financial position;
- income and expenses for each statement of comprehensive income
were translated at the average exchange rate; and
- all resulting exchange differences were recognised as a separate component of equity.
On consolidation, exchange differences arising from the
translation of the net investment in foreign operations was taken
to shareholders' equity. When a foreign operation is partially
disposed or sold, exchange differences that were recorded in equity
were recognised in the statement of comprehensive income as part of
the gain or loss on sale.
Investment in associate
The Group's interest in LPD is disclosed in Note 8 . This
investment was included in the financial statements and accounted
for using the equity method. The Group's share of the gains or
losses of LPD were included within the statement of comprehensive
income, except for exchange gains and losses on translation. Where
the Group's share of the loss of LPD is in excess of the carrying
value of the Group's investment in LPD, the share of the Group's
loss that is recognised by the Group was limited to the total
carrying value of its investment. LPD prepared financial statements
in accordance with the Group's accounting policies.
In the Company only financial statements investments in
subsidiary undertakings are stated at cost less any provision for
impairment in value.
During the year, the Group disposed of its interest in LPD,
hence as at 30 September 2020, there was no investment in
associate, which had been impaired fully during the prior year.
Impairment of non-financial assets
Non-financial assets are subject to impairment tests whenever
events or changes in circumstances indicate that their carrying
amount may not be recoverable. Where the carrying value of an asset
exceeds its recoverable amount (i.e. the higher of value in use and
fair value less costs to sell), the asset is written down
accordingly.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest group of assets to which it belongs for which there are
separately identifiable cash flows/ its cash generating units
('CGUs').
Impairment charges are included in profit or loss, except to the
extent they reverse gains previously recognised in other
comprehensive income.
Property, plant and equipment
The accounting policies of the Group's associate in respect of
property, plant and equipment were:
Property, plant and equipment were stated at cost less
accumulated depreciation and any accumulated impairment losses.
Up until the disposal of its 50% interest in LPD during the
current year, Palm oil trees before maturity were measured at
accumulated cost, and depreciation commenced upon reaching
maturity.
Oil palms which were not yet harvestable or not producing fresh
fruit bunches ("FFB"), were classified as immature and were valued
at cost. This was comprised of all costs such as direct materials,
labour and an appropriate proportion of overheads incurred to bring
the oil palms to maturity. Once classified as mature, these costs
were recognised through profit or loss.
Depreciation was provided on all plant and equipment to write
off the cost less estimated residual value of each asset over its
expected useful economic life at the following annual rates:
Straight-Line
Bulking Station / Kernel Crusher Plant 10%
Buildings 7%
Plant and Equipment 20% - 33%
Vehicles 20% - 33%
Palm Oil Mill 10%
Palm Oil Trees 5%
Assets under construction were carried within a separate
category of property, plant and equipment at cost and were not
depreciated until commissioned.
Liberian leasehold (concession) land was depreciated on a
straight-line basis over the term of the agreement being 55
years.
Plantation development comprised all plantation development
costs such as direct materials, labour and an appropriate
proportion of fixed overheads.
Biological Assets
The accounting policies of the Group's associate in respect of
Biological assets were:
Up until the disposal of its 50% interest in LPD during the
current year, the FFB on the mature oil palms was carried at fair
value less cost to sell. Fair value of FFB was determined using the
income approach which considers the net cash flow that would be
generated from the unharvested FFB. To arrive at the fair value,
management considered the oil content of unharvested FFB to be at
its highest 15 days prior to harvest, those unharvested FFB more
than 15 days prior to harvest were excluded from the valuation as
their oil content was considered immaterial.
Revenue Recognition
Up until the disposal of its 50% interest in LPD during the
current year, the accounting policies of the Company and Group's
associate in respect of revenue recognition are:
IFRS 15 was adopted from 1 October 2018. There were no material
changes to the revenue arising from the adoption.
Performance obligations and timing of revenue recognition
EPO's revenue was derived from management services provided to
the associate LPD. This revenue was recognised when the management
services are provided as per the signed agreement on a quarterly
basis.
The associate's revenue was derived from its subsidiary selling
oil palm products with revenue recognised at a point in time when
control of the oil palm products has transferred to the
customer.
This is generally when the products are delivered to the
customer. However, for export sales, control is transferred when
delivered to the port of departure. This depends on the specific
terms of the contract with a customer. There is limited judgement
needed in identifying the point control passes: once physical
delivery of the products to the agreed location has occurred, the
associate no longer has physical possession and retains none of the
significant risks and rewards of the products in question.
Determining the transaction price
The Company's and associate's revenue was derived from fixed
price contracts, i.e. management fees agreement and oil palm
product sale agreements respectively. Therefore, the amount of
revenue to be earned from each contract was determined by reference
to those fixed prices.
Allocating amounts to performance obligations
For both the management fee agreement and oil palm product sales
contract, there was a fixed unit price for services rendered and
product sold respectively. Therefore, there was no judgement
involved in allocating the contract price to the management
services rendered or each oil palm product unit ordered in such
contracts of EPO and the associate respectively.
Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax. The tax currently payable is based on taxable
profit for the period. The Group's liability for current tax is
calculated using tax rates that have been enacted or substantively
enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the
statement of financial position liability method. Deferred tax is
calculated at the tax rates that are expected to apply in the
period when the liability is settled, or the asset is realised.
Financial Instruments
The standard requires an entity to address the classification,
measurement and recognition of financial assets and
liabilities.
a) Classification
The Group classifies its financial assets in the following
measurement categories:
-- those to be measured subsequently at fair value (either
through OCI or through profit or loss); and
-- those to be measured at amortised cost.
The classification depends on the Group's business model for
managing the financial assets and the contractual terms of the cash
flows.
Amortised cost
Management accounts for loan receivables at amortised cost as
the objective is to hold these assets in order to collect
contractual cash flows and the contractual cash flows are solely
payments of principal and interest. They are initially recognised
at fair value plus transaction costs that are directly attributable
to their acquisition or issue and are subsequently carried at
amortised cost using the effective interest rate method, less
provision for impairment.
Impairment provisions for receivables from related parties and
loans to related parties are recognised based on a forward-looking
expected credit loss model. The methodology used to determine the
amount of the provision is based on whether there has been a
significant increase in credit risk since initial recognition of
the financial asset.
For those where the credit risk has not increased significantly
since initial recognition of the financial asset, twelve month
expected credit losses along with gross interest income are
recognised. For those for which credit risk has increased
significantly, lifetime expected credit losses along with the gross
interest income are recognised.
For those that are determined to be credit impaired, lifetime
expected credit losses along with interest income on a net basis
are recognised.
For assets measured at fair value, gains and losses will be
recorded either in profit or loss or in OCI. For investments in
equity instruments that are not held for trading, this will depend
on whether the Group has made an irrevocable election at the time
of initial recognition to account for the equity investment at fair
value through other comprehensive income (FVOCI).
Recognition
Purchases and sales of financial assets are recognised on trade
date (that is, the date on which the Group commits to purchase or
sell the asset). Financial assets are derecognised when the rights
to receive cash flows from the financial assets have expired or
have been transferred and the Group has transferred substantially
all the risks and rewards of ownership.
b) Measurement
At initial recognition, the Group measures a financial asset at
its fair value plus, in the case of a financial asset not at fair
value through profit or loss (FVPL), transaction costs that are
directly attributable to the acquisition of the financial
asset.
Transaction costs of financial assets carried at FVPL are
expensed in profit or loss.
Debt instruments
Amortised cost: Assets that are held for collection of
contractual cash flows, where those cash flows represent solely
payments of principal and interest, are measured at amortised cost.
Interest income from these financial assets is included in finance
income using the effective interest rate method. Any gain or loss
arising on derecognition is recognised directly in profit or loss
and presented in other gains/ (losses) together with foreign
exchange gains and losses. Impairment losses are presented as a
separate line item in the statement of profit or loss.
Equity instruments
The Group subsequently measures all equity investments at fair
value. Where the Group's management has elected to present fair
value gains and losses on equity investments in OCI, there is no
subsequent reclassification of fair value gains and losses to
profit or loss following the derecognition of the investment.
Dividends from such investments continue to be recognised in the
statement of comprehensive income as other income when the Group's
right to receive payments is established. Changes in the fair value
of financial assets at FVPL are recognised in other gains/ (losses)
in the statement of comprehensive income as applicable. Impairment
losses (and reversal of impairment losses) on equity investments
measured at FVOCI are not reported separately from other changes in
fair value.
Leases
Leases are recognised as a right-of-use asset and a
corresponding lease liability at the date at which the leased asset
is available for use by the Group.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
- Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
- Variable lease payments that are based on an index or a rate,
initially measured using the index or rate as at the commencement
date;
- Amounts expected to be payable by the Group under residual value guarantees;
- The exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
- Payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the Group, the lessee's
incremental borrowing rate is used, being the rate that the
individual lessee would have to pay to borrow the funds necessary
to obtain an asset of similar value to the right-of-use asset in a
similar economic environment with similar terms, security and
conditions.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit or loss over the lease
period. Right-of-use assets are measured at cost which comprises
the following:
- The amount of the initial measurement of the lease liability;
- Any lease payments made at or before the commencement date
less any lease incentives received;
- Any initial direct costs; and
- Restoration costs.
Right-of-use assets are depreciated over the shorter of the
asset's useful life and the lease term on a straight line basis. If
the Group is reasonably certain to exercise a purchase option, the
right-of-use asset is depreciated over the underlying asset's
useful life.
Payments associated with short-term leases (term less than 12
months) and all leases of low-value assets (generally less than
$5k) are recognised on a straight-line basis as an expense in
profit or loss.
Segment information
The Group complies with IFRS 8 Operating Segments, which
requires operating segments to be identified on the basis of
internal reports about components of the Group that are regularly
reviewed by the chief operating decision maker to allocate
resources to the segments and to assess their performance.
In the opinion of the Directors, the operations of the Group
comprised one class of business, being the cultivation of oil palms
for the production of crude palm oil and associated products in
Liberia, up until the disposal of its 50% interest in LPD during
the current year.
Critical accounting estimates and judgements
The preparation of the consolidated financial statements in
conformity with IFRSs requires management to make estimates and
assumptions that affect the application of policies and reported
amounts of assets, liabilities, income, expenses and related
disclosures. The estimates and underlying assumptions are based on
practical experience and various other factors that are believed to
be reasonable under the circumstances, the results of which form
the basis for making the judgments about carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Changes in accounting estimates may be necessary, if
there are changes in the circumstances on which the estimate was
based or as a result of new information. Such changes are made in
the period in which the estimate is revised.
Critical accounting judgements
In the process of applying the Company and Group accounting
policies, management has made the following judgements based on the
relevant facts and circumstances including macro-economic
circumstances and, where applicable, interpretation of underlying
agreements, which have the most significant effect on the amounts
recognised in the financial statements.
(i) Determination of control of subsidiaries and joint
arrangements (Note 8)
The Company, through its investment in Equatorial Biofuels
(Guernsey) Limited, owned a 50% interest in LPD for part of the
reporting period.
In the period ended 30 September 2014, a Joint Venture Agreement
("JVA") was signed pursuant to which cash and funding commitments
of up to $35.5m were made available to LPD. Under the JVA, the
Company retained a 50% economic and voting interest in LPD. Also,
under the JVA, KLK has the power to appoint the Chairman to the
Board of LPD and in the case of a tied vote the Chairman has the
casting vote. For this reason, the Company accounted for its
investment in LPD as an equity investment in which it has
significant influence, up until the time of disposal of its 50%
interest in LPD during the current year.
Key sources of estimation uncertainty
In the process of applying the Company and Group's accounting
policies, management has made key estimates and assumptions
concerning the future and other key sources of estimation
uncertainty. The key areas where management have made estimates and
assumptions are:
i) Impairments and impairment reversals in investments (Note
8)
Investments in subsidiaries and associates are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying value may not be fully recoverable. If an asset's
recoverable amount is less than the asset's carrying amount, an
impairment loss is recognised in the statement of comprehensive
income. If the asset was impaired in prior periods and their
recoverable amount exceeds their carrying amount, an impairment
reversal is recorded in the statement of comprehensive income.
Future cash flow estimates which are used to calculate the asset's
recoverable amount are discounted using an asset specific discount
rate and are based on expectations about future operations of the
associate, primarily comprising estimates about production and
sales volumes, commodity prices (considering current and future
prices, price trends and related factors), available development
land and concessions, operating costs and capital expenditures.
Estimates are reviewed regularly by management. Changes in such
estimates and in particular, deterioration in the commodity pricing
outlook and production volumes, could impact the recoverable values
of the investment in subsidiaries and associates, whereby some or
all of the carrying amount may be impaired or the impairment charge
reversed (if pricing outlook and production volumes improves
significantly) with the impact recorded in the statement of
comprehensive income. In the prior year, the investment in LPD
through EPO's wholly owned subsidiary, Equatorial Biofuels
(Guernsey) Limited was fully impaired to nil.
i) Impairments of loan receivable (Note 10)
Impairment assessment of loan receivable from associate is
assessed using the IFRS 9 criteria which involves the use of
judgement and assumptions due to the consideration of
forward-looking information.
Following the disposal of the interest in LPD during the current
year for nominal value, the loan receivable due from the associate
was assessed for impairment in line with the requirements of IFRS
9. In applying the IFRS 9 criteria, management have fully impaired
the receivable from associate to nil.
Adoption of new and amended Accounting Standards
a) New standards, interpretations and amendments effective from
1 January 2019
New standards impacting the Group that will be adopted in the
annual financial statements for the year ended 31 December 2019,
and which have given rise to changes in the Group's accounting
policies are:
-- IFRS 16 Leases (IFRS 16); and
-- IFRIC 23 Uncertainty over Income Tax Treatments (IFRIC 23)
new and amended standards and Interpretations issued by the IASB
that will apply for the first time in the next annual financial
statements are not expected to impact the Group as they are either
not relevant to the Group's activities or require accounting which
is consistent with the Group's current accounting policies.
b) New standards, interpretations and amendments not yet
effective
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that the group has decided
not to adopt early. The following amendments are effective for the
period beginning 1 January 2020:
-- IAS 1 Presentation of Financial Statements and IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
(Amendment - Definition of Material)
-- IFRS 3 Business Combinations (Amendment - Definition of Business)
-- Revised Conceptual Framework for Financial Reporting
In January 2020, the IASB issued amendments to IAS 1, which
clarify the criteria used to determine whether liabilities are
classified as current or non-current. These amendments clarify that
current or non-current classification is based on whether an entity
has a right at the end of the reporting period to defer settlement
of the liability for at least twelve months after the reporting
period. The amendments also clarify that 'settlement' includes the
transfer of cash, goods, services, or equity instruments unless the
obligation to transfer equity instruments arises from a conversion
feature classified as an equity instrument separately from the
liability component of a compound financial instrument. The
amendments are effective for annual reporting periods beginning on
or after 1 January 2022.
Management is currently assessing the impact of these new
accounting standards and amendments.
2. Operating Loss
The operating loss is stated after charging:
Group Group
Year ended Year ended
30 September 30 September
2020 2019
$'000 $'000
---------------------------------------------- -------------- --------------
Auditors' remuneration - audit services 42 33
- other services - 4
Directors' emoluments (Note 4 ) 131 186
Operating lease charges * 39 45
---------------------------------------------- -------------- --------------
In addition to the above, the Auditors charged $9,000 (2019 -
$54,500) in relation to the associate. The costs were borne by the
associate.
* Given the short-term nature of the operating lease relating to
the rental of office it has been recognised on a straight line
basis charge to the profit or loss and not accounted for under IFRS
16 Leases.
3. Taxation
Group Group
Year ended Year ended
30 September 30 September
2020 2019
$'000 $'000
-------------------------------------------- -------------- --------------
Factors affecting the tax charge for
the year
Loss on ordinary activities before tax (6,211) (15,131)
Loss on ordinary activities at the UK
standard rate of 19% (2019: 19%) (1,180) (2,875)
Effects:
Share of operating loss of associate
not taxable - 2,867
Expenses not deductible for tax purposes 1,182 -
Utilisation of previous unrecognized (2) -
tax losses carried forward
Tax losses carried forward not recognised - 8
Total taxation - -
-------------------------------------------- -------------- --------------
No deferred tax assets have been recognised (2019: nil). The
Group has total carried forward losses of $7,731,000 (2018:
$7,357,000). The taxed value of the unrecognised deferred tax asset
is $1,451,000 (2019: $1,390,000) and these losses do not
expire.
4. Directors' emoluments
Year ended Year ended
30 September 30 September
2020 2019
$'000 $'000
--------------------------------- ---------------- ----------------
Michael Frayne 64 64
Geoffrey Brown 67 122
Teh Kwan Wey (1) (2) - -
Lee Oi Hian (1) (3) - -
Teh Sar Moh Nee (1) (5) - -
Yap Miow Kien (1) (4) - -
Patrick Kee Chuan Peng (1) (4) - -
Lee Guo Zhang (1) (3) - -
---------------- ----------------
Total 131 186
--------------------------------- ---------------- ----------------
(1) KLK representatives are not remunerated by the Company
(2) Appointed 3 September 2020
(3) Resigned 18 June 2020
(4) Resigned 3 September 2020
(5) Resigned 8 May 2019
5. Staff Costs (including Directors and Key Management Personnel)
Group Group
Year ended Year ended
30 September 30 September
2020 2019
$'000 $'000
Staff Costs
Short term employee benefits 263 352
Post-employment benefits - -
Other long term benefits - -
Termination benefits - -
Share based payments - -
Total Staff Costs 263 352
------------------------------- --------------- ---------------
The total social security cost on directors' remuneration was
$25,000 (30 September 2019: $39,000) which is included in short
term employee benefits.
Key Management Personnel includes the Directors of the Company
and senior management. Key management personnel are those persons
having authority and responsibility for planning, directing and
controlling the activities of the Group, including the directors of
the Company listed on pages 11 to 12.
The Group and Company averaged 3 employees during the year ended
30 September 2020 of which all were involved in administration
activities (30 September 2019: 3).
6. Loss Per Share
The basic loss per share is derived by dividing the loss for the
year attributable to ordinary shareholders by the weighted average
number of shares in issue.
As inclusion of the potential ordinary shares would result in a
decrease in the loss per share they are considered to be
anti-dilutive, as such, diluted earnings per share is equivalent to
basic earnings per share.
Group Group
Year ended Year ended
30 September 30 September
2020 2019
$'000 $'000
--------------------------------------------- --------------- ---------------
Loss for the year (6,211) (15,131)
Weighted average number of ordinary shares
of 1p in issue 361.7 million 356.3 million
Loss per share - basic and diluted (1.7) cents (4.2) cents
--------------------------------------------- --------------- ---------------
7. Financial Instruments
The Group (including the Company, its subsidiary and its
interest in LPD) is exposed through its operations to the following
risks:
-- Credit risk
-- Liquidity risk
-- Foreign exchange risk
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
Principal financial instruments
The principal financial instruments used by the Group, and
classified as loans and receivables, from which financial
instrument risk arises are as follows:
-- Receivables from associate;
-- Trade and other receivables;
-- Cash and cash equivalents;
-- Loans to associates; and
-- Loans to subsidiaries.
Financial instruments by category
Financial assets:
Group Amortised cost (loans
and receivables)
2020 2019
$'000 $'000
Cash and cash equivalents 1,172 651
Trade and other receivables 69 21
Receivables from associates - 6,223
Total financial assets 1,231 6,895
------------ -----------
Company Amortised cost (loans
and receivables)
2020 2019
$'000 $'000
Cash and cash equivalents 1,172 651
Trade and other receivables 67 20
Loans to subsidiaries - 156
Receivable from associate - 6,223
Total financial assets 1,239 7,050
------------ -----------
Financial liabilities:
Group Amortised cost
2020 2019
$'000 $'000
Trade and other payables 107 40
Total financial liabilities 107 40
-------- --------
Company Amortised cost
2020 2019
$'000 $'000
Trade and other payables 107 40
Total financial liabilities 107 40
-------- --------
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and, whilst
retaining responsibility for them, it has delegated the authority
for designing and operating processes that ensure the effective
implementation of the objectives and policies to the Group's
finance function. The overall objective of the Board is to set
policies that seek to reduce risk exposure as far as possible
without unduly affecting the Group's competitiveness and
flexibility. Further details regarding these policies are set out
below:
Credit risk
The Company is exposed to credit risk from its cash deposits
which are held with HSBC UK which has a credit rating of A2 from
Moody's. Management has assessed no expected credit losses on these
deposits.
The Group was exposed to credit risk from its loans to LPD. The
ability of LPD to repay its debts is supported by a joint venture
agreement between the Company and KLK (refer Note 8) and the
projected future cash flows from the plantation.
The Group does not enter into derivatives to manage credit
risk.
At the reporting date the Group does not envisage any losses
from non-performance of counterparties.
The maximum exposure to credit risk at the reporting date from
the Group's financial assets is the carrying value of each
financial asset. The Group does not hold any collateral as
security.
Interest rate risk
The Group is exposed to fluctuations of the LIBOR rate on the
interest accrued relating to its receivable due from associate. The
Group measures its risk through a sensitivity analysis considering
10% favourable and adverse changes in the LIBOR rate. As at 30
September 2020 a movement in the LIBOR (which was <4% at 30
September 2020) by 10% would not result in an increase or decrease
in the interest accrued as interest is accrued at the higher of
LIBOR + 4% or 8%.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall
due.
The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due.
The Directors receive information regarding cash balances on a
monthly basis. As soon as funding shortfalls are identified, the
Directors take action to identify and subsequently secure the
necessary funds from existing or new investors or in the form of
short and long term borrowings. Further disclosure of going concern
is given in Note 1 and the Directors' Report.
Foreign exchange risk
Foreign exchange risk arises because the Group has operations
located in the UK and prior to the disposal of LPD, Liberia, which
enter into transactions in currencies which are not the same as the
functional currency of the Company. Only in exceptional
circumstances will the Group consider hedging its net investments
in overseas operations, as generally it does not consider that the
reduction in foreign currency exposure warrants the cash flow risk
created from such hedging techniques. Wherever possible in order to
monitor the continuing effectiveness of this policy, the Board,
through their approval of capital expenditure budgets and review of
the monthly management accounts, considers the effectiveness of the
policy on an ongoing basis.
Foreign currency sensitivity analysis
The Group is mainly exposed to currency rate fluctuations of the
UK Pound versus the US Dollar, and measures its foreign currency
risk through a sensitivity analysis considering 10% favourable and
adverse changes in market rates on exposed monetary assets and
liabilities denominated in UK Pounds. At 30 September 2020 a 10%
revaluation of the Pound against the Dollar would have resulted in
a $115,708 increase or decrease in the net assets of the Group (30
September 2019: $67,281).
Capital management policies
The Group considers its capital to be its ordinary share
capital, share premium, other reserves, and retained deficit. The
Board of Directors has established principles for the management of
the Group's capital resources based on a long-term strategy that
continually evaluates and monitors the achievement of corporate
objectives. Specific capital management policies set forth include
the following:
-- Sufficient resources to maintain and develop its concessions
and to maximise discretionary spending on further accelerating its
plantation development;
-- The reinvestment of profits into new and existing assets that
fit the corporate objectives;
-- To identify the appropriate mix of debt, equity and partner
sharing opportunities in order to maintain and comply with its
growth and development plans alongside those commitments of its
concession agreements with a view of generating the highest returns
to shareholders overall with the most advantageous timing of
investment flows;
-- Retain maximum flexibility to allocate capital resources
between new planting and production of CPO enhancing projects based
on available funds and the quality of opportunities.
On a regular basis, management receives financial and
operational performance reports that enable continuous management
of assets, liabilities and liquidity.
The above policies and practices are consistent with strategies
and objectives employed in prior years and are expected to remain
consistent in the extension of future resource allocation
objectives.
8. Investment in associate & subsidiaries
Up until the disposal during the year, the Company, through its
investment in Equatorial Biofuels (Guernsey) Limited, held a 50%
interest in LPD.
In the period ended 30 September 2014, a Joint Venture Agreement
("JVA") was signed pursuant to which cash and funding commitments
of up to $35.5m were made available to LPD. Under the JVA, the
Company retained a 50% economic and voting interest in LPD. Also,
under the JVA, KLK has the power to appoint the Chairman to the
Board of LPD and in the case of a tied vote the Chairman has the
casting vote. For this reason, the Company accounted for its
investment in LPD as an equity investment in which it had
significant influence.
The Group and Company's interest in LPD is as follows:
30 September 30 September
2020 2019
$'000 $'000
Interest in associate at beginning of
year - 15,090
Share of losses of associate - (15,090)
Disposal of interest in associated during
the year - -
--------------- --------------
Interest in associate at end of year - -
--------------- --------------
The Group's 50% share in the loss for the year ended 30
September 2019 of $25,838,000 was in excess of the Company's
carrying value of LPD of $15,090,000 resulting in just the amount
of the carrying value being recognised as the Group's share of the
loss in LPD as shown below:
30 September
2019
$'000
Non-current assets 94,289
Current assets 7,472
Non-current liabilities (121,571)
Current liabilities (1,687)
--------------
TOTAL NET ASSETS (21,497)
--------------
Group's share (50%) -
Income 3,012
Expenses (56,593)
Taxation 1,904
--------------
Loss after tax and total comprehensive
income (51,677)
--------------
Group's share of loss - 50% (25,838)
Group's share of loss recognised (15,090)
Group's share of loss not recognised (10,748)
--------------
In June 2020, EPO Plc disposed-off its 50% interest in LPD to
KLK, its JV partner at the time. At the point of disposal, LPD had
generated revenue of $5,354,000 (2019: $1,470,000), with no
reversal of previous impairments. The Group has not recognising its
share of losses for the 9 months period, as LPD had not generated
sufficient income that exceeds the unrecognised losses brought
forward of 10,748,000.
Subsidiaries and associates of EPO
Holding Holding
Country 30 September 30 September
Company of Registration 2020 2019 Nature of business
------------------------------- ------------------- --------------- --------------- ---------------------
Direct (subsidiaries)
Equatorial Biofuels
(Guernsey) Limited Guernsey 100% 100% Holding Company
Indirect (associates)
Liberian Palm Developments
Limited (1) Mauritius - 50% Holding Company
EBF (Mauritius) Limited
(2) Mauritius - 50% Holding Company
EPO (Mauritius) Limited
(2) Mauritius - 50% Holding Company
Equatorial Palm Oil Operating company
(Liberia) Inc (3) Liberia - 50% in Liberia
Liberia Forest Products Operating company
Incorporated (4) Liberia - 50% in Liberia
Liberia Agricultural Non-operating
Development Corporation company in
(3) Liberia - 50% Liberia
LIBINC Oil Palm Inc. Operating company
(4) Liberia - 50% in Liberia
------------------------------- ------------------- --------------- --------------- ---------------------
(1) 50% held by Equatorial Biofuels (Guernsey) Limited
(2) 100% held by Liberian Palm Developments Limited
(3) 100% held by EPO (Mauritius) Limited
(4) 100% held by EBF (Mauritius) Limited
The Company's investment in Equatorial Biofuels (Guernsey)
Limited is as follows:
30 September 30 September
2020 2019
$'000 $'000
Investment at beginning of year - 15,842
Impairment - (15,842)
--------------- --------------
Investment at end of year - -
--------------- --------------
Management has assessed the recoverable amount of the Company's
investment at year end and concluded the carrying amount is fully
impaired. Refer to the critical accounting estimates above for the
inputs in management's impairment assessment.
9. Loans to subsidiaries
Company Company
30 September 30 September
2019
2020 $'000
$'000
----------------- ---------------------------------------------------------
Equatorial Biofuels (Guernsey) Limited - 156
----------------- ---------------
Total - 156
----------------------------------------- ----------------- ---------------
The loan to the subsidiary is interest free and has no fixed
repayment date.- During the year the loan to subsidiary was written
down to nil following the disposal of the Company's interest in
LDP. It is denominated in UK Pounds. Repayment of loans is subject
to the Directors' assessment of the Group's requirements and
availability of appropriate liquid resources.
10. Non-current receivables
Group Group Company Company
30 September 30 September 30 September 30 September
2019 2020
2020 $'000 $'000 2019
$'000 $'000
-------------------------------- ---------------- --------------- --------------- ---------------
Receivable due from associate - 6,223 - 6,223
---------------- --------------- --------------- ---------------
- 6,223 - 6,223
------------------------------------------------- --------------- --------------- ---------------
The receivable due from the associate related to a loan,
denominated in US Dollar. On 7 November 2018, the Company extended
the loan for an additional five-year term concluding on 6 November
2023, that will accrue interest at a rate of LIBOR + 4% or 8% per
annum, whichever is higher. Interest will accrue on the principal
amount of the loan (including any accrued interest) and is
repayable in full at the end of the five-year term or earlier at
the discretion of LPD.
The loan receivable from associated was classified as a
financial asset in accordance with IFRS 9 and measured at amortised
cost.
30 September 30 September
2020 2019
$'000 $'000
Receivable due from associate at beginning
of year 6,223 6,789
Interest paid by associate (251) (510)
Interest income accrued 355 503
Repayment by associate (124) (559)
Receivable due from associate at date
of disposal 6,203 -
-------------- --------------
Receivable due from associate at end
of year - 6,223
-------------- --------------
On 11 June 2020, the Company completed the disposal of its 50
per cent. in Liberian Palm Developments Limited ("LPD) to Kuala
Lumpur Kepong ("KLK") which resulted in a loss on disposal of
$6,037,000.
Loss on disposal
$'000
Carrying value of loan before disposal 6,203
Costs of disposal 207
Consideration (373)
-------
Loss on disposal 6,037
-------
The receivable due from associate was assessed for impairment in
line with the requirements of IFRS 9 prior to the disposal of the
Company's interest in LPD and no impairment was recognised.
Interest on term deposits earned during the year was $3,000
(2019: nil). Making total interest income for the year of $358,000
(2019: $503,000).
11. Revenue and other income
Group Group
30 September 30 September
2020 2019
$'000 $'000
Rental income - 6
Other Income - 6
--------------------------------------- --------------- ---------------
Management fees income 11 167
--------------- ---------------
Revenue 11 167
--------------------------------------- --------------- ---------------
12. Trade and other receivables
Group Group Company Company
30 September 30 September 30 September 30 September
2020 2019 2020 2019
$'000 $'000 $'000 $'000
Prepayments - 2 - 2
VAT receivables 43 - 43 -
Other receivables 26 19 24 18
--------------- --------------- --------------- ---------------
69 21 67 20
-------------------- --------------- --------------- --------------- ---------------
The fair value of all receivables is the same as their carrying
values stated above and there are no expected losses on other
receivables to be recognised under IFRS 9. No ageing analysis is
considered necessary as the Group has no trade receivable which
would require analysis to be disclosed under the requirements of
IFRS 7.
The carrying amounts of the Group and Company's trade and other
receivables are denominated in the following currencies:
Group Group Company Company
30 September 30 September 30 September 30 September
2020 2019 2020 2019
$'000 $'000 $'000 $'000
UK Pounds 67 20 67 20
US Dollars 2 1 2 -
--------------- --------------- --------------- ---------------
69 21 69 20
------------- --------------- --------------- --------------- ---------------
13. Trade and other payables
Group Group Company Company
30 September 30 September 30 September 30 September
2020 2019 2020 2019
$'000 $'000 $'000 $'000
Trade payables 107 38 107 38
Other payables - 2 - 2
--------------- --------------- --------------- ---------------
107 40 107 40
----------------- --------------- --------------- --------------- ---------------
14. Called up share capital
2020 2019
No. $'000 No. $'000
Ordinary shares at
1 October 356,277,502 5,598 356,277,502 5,598
Subdivision: deferred - (5,552) - -
shares
New shares issued 100,000,000 13 - -
------------- --------- ------------- -------
Ordinary shares carried
forward 456,277,502 59 356,277,502 5,598
Deferred shares 356,277,502 5,552 - -
------------- --------- ------------- -------
812,555,004 5,611 356,277,502 5,598
-------------------------- ------------- --------- ------------- -------
During the year, the Company created a new class of share:
deferred shares. The existing ordinary shares were subdivided into
equal numbers of both ordinary and deferred shares. The value of
the shares was split in a ratio of 9:1 such that in addition to the
ordinary shares noted above, the Company now has 356,277,502
deferred shares with a value of GBP5,552,000.
The deferred shares do not have any voting rights but do carry
dividend and capital distribution rights to the extent of GBP1.00
in aggregate over the class at the discretion of management.
Additionally, at the same time as the subdivision of ordinary
shares referred above, the Company issued 100,000,000 shares at
0.04p each to raise GBP400,000 before costs.
15. Warrants to subscribe for ordinary shares
In connection with the placing of 100,000,000 shares at 0.4p in
August 2020, 5,000,000 broker warrants to subscribe for shares in
the Company were issued to Brandon Hill at an exercise price of
0.4p per share with an expiry date of three years from the date of
issue of the share placement.
Exercise Issued Exercised Outstanding
price at 30 September
2020
5,000,000
Brandon Hill warrants 0.4p 5,000,000 - *
---------- ----------- ----------- ------------------
* representing 0.62% of the issued share capital of the
Company.
The estimated fair values of the Brandon Hill warrants,
calculated using the Black-Scholes model was $25,000 which was
changed to the share premium account to recognise the cost of
issuing the warrants.
The inputs to the model were as follows:
Share price 0.66p
Subscription price 0.40p
---------
Expected volatility 75%
---------
Risk free rate of interest 0.20%
---------
Expected dividend yield 0%
---------
Expected life 3 years
---------
Expected volatility was determined by reference to the
historical volatility of the Company's share price.
16. Cash
The Group and Company's breakdown of cash held is as
follows:
30 September 30 September
2020 2019
$'000 $'000
Cash on hand / at bank 672 90
Cash held in 1-month deposit 500 561
-------------- --------------
1,172 651
-------------- --------------
There are no restrictions, collateral or guarantees on the cash
and cash equivalents.
17. Related Party Transactions
Disposal of interest in LPD
On 11 June 2020, the Company completed the disposal of its 50
per cent in Liberian Palm Developments Limited ("LPD) to Kuala
Lumpur Kepong ("KLK") for nominal consideration which resulted in a
loss of disposal of $5,933,000.
Recharges between EPO and LPD
For the year ended 30 September 2020, EPO recharged LPD $11,000
(2019: $167,000) with $nil outstanding at year end (2019:
$41,000).
Loans to subsidiaries and receivables from associates
Details of loans to subsidiaries are disclosed in Note 9 and
receivables from associates in Note 10 .
18. Capital commitments
There were no capital commitments at 30 September 2020 (2019:
None)
19. Contingent liabilities
There were no contingent liabilities at 30 September 2020 (2019:
None)
20. Controlling entity
The parent company and ultimate controlling company is Kuala
Lumpur Kepong Berhad ("KLK") , a company incorporated in Malaysia,
the financial statements of which are available from www.klk.com.my
. KLK own and control 49.08% of the Company's share capital as at
30 September 2020 (2019: 62.86%) and they are deemed to be the
ultimate controlling entity.
21. Events after the reporting period
On 21 October 2020 the Company announced that it had reached
conditional agreement with parties holding a majority of the shares
(51.4 per cent.) ("CML Majority") of Capital Metals Limited
("CML"), a company developing a mineral sands project in Sri Lanka,
to acquire their shares in CML ("CML Shares") in exchange for
ordinary shares in the Company.
The proposed acquisition ("Proposed Acquisition") would
constitute a reverse takeover transaction pursuant to the AIM Rules
for Companies (the "AIM Rules"). Following the Proposed
Acquisition, the CML business would constitute all of the Company's
business. The conditional offer agreement was signed with the CML
Majority.
The Company issued the same conditional offer agreement to the
remaining shareholders in CML ("CML Minority") which, if accepted,
will result in the acquisition (subject to the conditions set out
below) of up to 100 per cent. of the entire issued share capital of
CML ("CML Shares") for an aggregate total consideration of GBP15.84
million by the issue of up to 132,000,000 new Ordinary Shares in
the Company ("Consideration Shares"). This equates to a price of 12
pence per Consideration Share ("Issue Price") to be issued
following the proposed 20:1 share consolidation (equivalent to 0.6
pence per existing Ordinary Share).
The conditional offer agreement specified, inter alia, the
following terms:
- In consideration for the acquisition of the CML Shares, the
Company proposed to issue 1 Consideration Share for every 1.235 CML
Shares sold.
- That completion of the Proposed Acquisition is conditional, amongst other things, on
o the passing of resolutions at a general meeting to be convened
by the Company, to approve the Proposed Acquisition, a 20:1 share
consolidation, and a placing of new ordinary shares ("Placing
Shares") in the Company ("the Placing"); and
o admission of the Placing Shares and Consideration Shares to
trading on AIM ("Admission") becoming effective on or before 31
March 2021.
Completion of the conditional offer agreement is conditional on
acceptances being received from the holders of CML Shares holding
more than 75 per cent. of the issued CML Shares (unless otherwise
agreed between CML and the Company, with the approval of the
Company's Nominated Adviser). On 12 November 2020, the Company
agreed with CML to provide a loan of $50,000 for CML working
capital purposes. The loan attracts an interest rate of 1% per
month which will compound monthly. The loan is repayable within 12
months of 12 November 2020.
22. Availability of financial statements
The audited Annual Report and Financial Statements for the
period ended 30 September 2020 will shortly be sent to shareholders
and published at www.epoil.co.uk .
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END
FR KKNBNOBDDFBD
(END) Dow Jones Newswires
December 14, 2020 02:00 ET (07:00 GMT)
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