TIDMLCA
RNS Number : 2597X
Low Carbon Accelerator Limited
13 February 2012
13 February 2012
Low Carbon Accelerator Limited
Financial Results for the year ended 30 November 2011
Low Carbon Accelerator Limited ("LCA" or "the Company"), the AIM
listed specialist low-carbon investment company, announces its
financial results for the year ended 30 November 2011.
In summary:
-- Adjusted NAV decreased 53.3% in the last 12 months
-- The low carbon sector has not been immune to the impact of
the wider testing economic backdrop as bank finance has been scarce
and corporations have been preserving cash for core activities
-- After consultation with major shareholders, and in view of
the length of time which LCA has already held its investments and
the current sub-scale nature of the fund, the Board, with the
support of the Investment Manager, has decided to implement a
programme of planned realisations to deliver liquidity to
shareholders. A resolution to authorise the continuation of the
Company under a revised investing policy will be put to
Shareholders at the AGM to be held on 11 April 2012.
-- LCA will continue to support its existing portfolio companies
but does not intend to make any new investments
Enquiries:
Low Carbon Investors Limited Steve Mahon, CIO Tel: +44 (0)20 7631 2630
Andrew Affleck, Chairman
Grant Thornton Corporate Finance Colin Aaronson, Tel: +44 (0) 20 7383 5100
Melanie Frean
FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED 30 NOVEMBER 2011
30 November 30 November
2011 2010 Change
ADJUSTED NET ASSET VALUE (GBP'000) 24,269 51,921 (53.3)%
Adjusted net asset value per
ordinary share (pence) 28.2 60.3 (53.3)%
Ordinary share price (pence) 9.0 38.0 (76.3)%
Adjusted (loss)/profit per share
(pence) (32.1) 10.0 (421.2)%
------------------------------------ ------------ ------------ ---------
Note on Adjusted Net Asset Value
The Group's interest in Proven Energy Limited ("Proven Energy")
during the prior year ended 30 November 2010 was greater than 50%.
It was noted in the financial statements for the prior year that it
was the Board's intention to reduce this to a minority shareholding
within the following 12 months. However, in accordance with
accounting policies (see note 3(b)) the interest in Proven Energy
was designated as a "Non-current financial asset classified as held
for sale".
As set out in note 13, during the prior year ended 30 November
2010, and in line with the International Private Equity and Venture
Capital Valuation ("IPEV") Guidelines, the Board revised the fair
value of LCA's equity investment in Proven Energy from the historic
cost of GBP9.25 million to GBP19.9 million.
As set out in note 3(a) to these Financial Statements, it is the
Group's accounting policy to value its investment portfolio at fair
value in accordance with IPEV valuation guidelines. However,
International Financial Reporting Standards ("IFRS") 5 imposes
restrictions on upward revaluations of investments that are
classified as "Non-current financial assets classified as held for
sale". This applies even when the Board considers that such an
upward revaluation is required to reflect the Board's assessment of
the fair value of such an investment in accordance with IPEV
guidelines.
The Group has, therefore, provided below a reconciliation
between the Net Asset Value ("NAV") in accordance with IFRS (the
"Accounting NAV") and the NAV in accordance with IPEV valuation
guidelines (the "Adjusted NAV") (see note 19).
Proven Energy was placed into receivership on 16 September 2011
and a full provision against the carrying value of the Group's
investment in Proven Energy was made during the current year ended
30 November 2011.
As a result there is no difference between the Accounting NAV of
GBP24.3m and the Adjusted NAV at the end of the current period.
Net Asset Value NAV per share
30 November 2011 GBP'000 Pence
Accounting and Adjusted Net Asset Value 24,269 28.2
30 November 2010
Accounting Net Asset Value 41,271 47.9
Fair value adjustment to non-current
financial assets classified as held
for sale 10,650 12.4
Adjusted Net Asset Value 51,921 60.3
Further copies of these financial statements can be found on the
Group's website (www.lowcarbonaccelerator.com).
CHAIRMAN'S STATEMENT
I hereby present the fifth Annual Report and Accounts in respect
of Low Carbon Accelerator Limited ("LCA") and its subsidiaries
(together the "Group") for the year ended 30 November 2011.
The NAV of the Group as at 30 November 2011 was GBP24.3 million,
equivalent to 28.2 pence per Ordinary Share. This equates to a
53.3% decrease on the 30 November 2010 Adjusted NAV of 60.3 pence
per Ordinary Share.
The Board is extremely disappointed with the material loss in
shareholder value over the period. After consultation with major
shareholders, and in view of the length of time which LCA has
already held its investments and the current sub-scale nature of
the fund, the Board, with the support of the Investment Manager,
has decided to implement a programme of planned realisations to
deliver liquidity to shareholders. Although LCA will continue to
support its existing portfolio companies, it does not intend to
make any new investments.
Share Price Performance
During the year ended 30 November 2011, the LCA closing
mid-market share price decreased by 76.3% to 9.0 pence. The share
price represents a discount of 68.0% to the NAV per share as at 30
November 2011. Since the year-end the share price has weakened
slightly and at close of trading 8 February 2012 stood at 6.75
pence, which represents a 76.1% discount to the NAV per share.
Despite the significant fall in the NAV per share during the
year, the Board believes the magnitude of the discount is too large
given the Board's and the Investment Manager's expectation of value
that remains in the portfolio.
A more detailed description of the market and the Group's
investments can be found in the Investment Manager's Review, which
follows this statement.
Continuation of the Company
The average discount of the share price to the average net asset
value has again this year exceeded 5%. In light of this, in
accordance with its Articles of Incorporation, LCA has triggered
its discount floor provision for the financial year-ended 30
November 2011. As a result, a continuation vote by way of Ordinary
Resolution is to be proposed at the AGM, to be held on 11 April
2012.
In the event that the continuation vote is not passed, the Board
will, in accordance with the Company's articles, formulate
proposals to be put to shareholders to reorganise, reconstruct or
wind up LCA.
The Board and the Investment Manager understand the
shareholders' desire to see liquidity over the near-term. Based on
the current position of the Group's investment portfolio and the
expected timeframe over which disposals of the underlying assets
can most effectively be made, the Board is of the opinion that the
continuation of LCA and the amendment of its investment policy to
allow a realisation of the existing portfolio, is in the best
interests of shareholders and recommends that shareholders vote in
favour of the continuation resolution to be proposed at the
AGM.
John Hawkins Chairman 9 February 2012
INVESTMENT MANAGER'S REPORT
The year has undoubtedly proven to be a challenging operating
environment for almost all sectors of the economy and the global
economic conditions, as exacerbated by the Euro crisis, are
expected to remain uncertain at best. Policy makers and Central
Banks in almost all Western economies continue to attempt to
balance the need to reduce debt and deleverage, through the
implementation of, sometimes severe, austerity measures, with the
need to provide stimulus for economic growth as unemployment rates
tick higher and the risk of recession, or at the very least
long-term stagnation, continues to loom large.
LCA has no Euro denominated assets but the low carbon sector has
not been immune to the impact of this wider testing economic
backdrop as bank finance has been scarce and corporations have been
preserving cash for core activities, with a commensurate reduction
in their appetite for innovative new solutions. It was,
nevertheless, extremely disappointing to report during the year
that LCA would make a full provision of GBP21.65 million against
the carrying value of its investment in Proven Energy Limited
("Proven Energy"). Earlier in the year LCA invested a further
GBP1.6 million in total in the form of loans and received a payment
of GBP100,000 against outstanding loans. As such, of the total
provision of GBP21.65 million, GBP1.75 million related to
outstanding loans and the remainder to LCA's equity holding. The
total cost of this investment was GBP11.0 million as a combination
of both debt and equity.
On 13 September 2011, LCA announced that it had been informed by
the board of Proven Energy that due to a recent and acute technical
defect discovered on three turbines they had resolved to advise all
users of their P35-2 turbine to temporarily brake these systems and
to suspend sales of this model. All other models in the fleet,
however, continued to operate without interruption.
As a result of this acute technical defect and the suspension of
sales of the P35-2 model, and exacerbated by the current difficult
planning environment, Proven Energy was incurring losses that it
could not sustain without a further injection of cash. The Board
and the Investment Manager announced at the same time that it
anticipated having to make a substantial or total write-down of its
investment in Proven Energy. Subsequently, on 16 September the
company was placed in receivership.
Nevertheless, the Investment Manager believes that good value
remains within certain of the LCA portfolio of companies and on 6
June 2011 was pleased to announce that LCA had sold 175,747
Preference B shares in ResponsiveLoad Ltd (trading as "RLtec") to
Ombu Limited ("Ombu") for a cash consideration of GBP1.23 million.
This transaction represented a 23% uplift in the carrying value of
RLtec as set out in LCA's annual report for 30 November 2010 and a
70% increase in value by reference to LCA's adjusted book cost of
investment in RLtec.
It is widely expected that the challenging operating environment
noted above will continue during the coming period but the
Investment Manager continues to believe that driving the remaining
companies to value realisation in the next twelve months is a
realistic goal. This is predominantly due to the market opportunity
in the sub-sectors within which they operate (a more detailed
discussion of the portfolio companies is provided below).
Furthermore, a number of the companies are also backed by a strong
syndicate of investors providing both the financial capital but
also working closely with the companies to provide non-financial
support that is key to driving the top line. The strength of the
management teams of these companies will also be a key factor in
their continued success and the Investment Manager has been
pro-active in making changes to ensure the right skill sets are in
place to reflect the needs of the company for growth during these
challenging macro-economic conditions.
Company by company review
The Group made follow-on investments totalling GBP2.35 million
in three existing portfolio companies in the year ended 30 November
2011 (GBP2.0 million in loans and GBP350,000 for equity).
Sterling Planet Inc. ("Sterling Planet")
Sterling Planet is now LCA's largest investment by carrying
value and represents 56% of LCA's NAV. As reported in LCA's latest
interim report, the company has continued its discussions with a
number of parties regarding potential additional investment, which
would be used to strengthen the company's balance sheet further and
to consolidate its position as the market leader in its space in
the US. The Investment Manager also continues to play an active
role in progressing and structuring this transaction to enable it
to provide a path to liquidity for LCA.
The company has continued its primary growth effort on the
mandated market for Renewable Energy Credits ("RECs"). At full
maturity in 2030, annual compliance spending is estimated to reach
$38 billion. Prices for RECs in the mandated market are also much
higher than in the voluntary market, sometimes 10 to 20 times
higher.
Currently, California is the largest mandated market at $2.9
billion in 2011 with GBP2.1 billion of that activity resting with
four market participants. During the year, Sterling Planet's order
book for the delivery of RECs was given a significant boost, with
the company winning a material contract with a major utility
company in California. This has added to its existing customer base
of blue-chip companies such as Pepsi-Co, Detroit Edison and Intel
Corporation.
However, overall, the voluntary commercial market for RECs has
been weak during the year, predominantly driven by the focus of
businesses to manage their cost bases through the wider economic
concerns and issues that have continued during the year. In
particular, the price of voluntary RECs has seen a significant fall
over the last two years. However, with the continued increase in
demand for RECs coming from the mandatory markets, the company
expects the prices across all markets to rise over the next few
years.
RLtec
As noted above the Investment Manager believes the sale of LCA's
Preference B shares in RLtec to Ombu Limited for cash provides
evidence of the value creation amongst the stronger performers
within the LCA portfolio.
RLtec has continued its positive momentum in its work to deliver
load balancing services under its contract with National Grid.
RLtec provides a cost effective solution to grid balancing, which
is a market that continues to grow. During the period RLtec signed
a 10-year agreement with Sainsbury's to fit its dynamic demand
technology to the supermarket's heating and ventilation systems,
which went live on 1 March 2011. The company is also building a
strong pipeline of other potential load hosts that will increase
the volume of megawatts for which it provides load balancing
services.
The second phase of the Carbon Emissions Reduction Target (CERT)
programme with npower is continuing to progress well and provides
on-going demonstration of the carbon savings from Dynamic Demand.
The company has also established a subsidiary in the U.S. during
the year, which will serve as the platform from which RLtec will
roll-out its load balancing technology in the North American market
and trials with a number of the grid operators are in the process
of being set-up.
Lumenergi Inc. ("Lumenergi")
Whilst Lumenergi is in the expansion phase of its lifecycle, the
conversion of its growing pipeline into sales has proven more
challenging. On 9 November 2011, LCA announced that Lumenergi was
operating behind plan and given the difficult market conditions and
the time taken to implement a revised plan, a 25% provision was
made against the carrying value of this investment, being
GBP949,000, as adjusted for exchange differences.
However, the strong syndicate of investors in Lumenergi have
been working closely with the company to formulate a revised
strategy to more effectively execute its plan. This includes an
effort to strengthen the management team with a number of key
hires, which is currently on-going and to initiate a focused sales
strategy that takes advantage of the company's excellent technology
offering in the lighting controls and lighting management
market.
Lumenergi is a US based company that has developed intelligent
lighting technology that reduces lighting energy costs 50 to 70
percent, while typically delivering ROI in one to three years. This
unique technology incorporates advanced networked control system
with smooth dimming to lead buildings into the Smart Grid world.
The North American market for lighting and controls is forecasts to
grow by c.68% from $9.3 billion to $15.6 billion (source: McGraw
Hill) and the U.S. Federal and State governments represent the
largest market segment for advance lighting controls.
The company will require additional capital through its
expansion phase as it seeks to grow revenues and achieve cashflow
break-even and is in the process of negotiations with its investor
group. On 30 January 2012, LCA announced that it had made a further
investment of $200,000 (approx. GBP130,000) in Lumenergi Inc. in
the form of an unsecured short-term convertible loan, as part of a
total convertible loan of $1 million, alongside existing investors.
The loan bears a coupon of 10% and is repayable on or at 30 June
2012. It is expected that the loan will convert to equity at the
time of the next funding round.
It was also pleasing to note that Lumenergi has received the
Building Operating Management 2012 Top Products award for its
intelligent, network controlled lighting management solutions.
Vigor Renewables Limited ("Vigor")
On 26 January 2011, LCA announced that it has invested a further
GBP200,000 in Vigor in the form of a loan. On 28 October 2011, LCA
announced that it had invested an additional GBP200,000 in Vigor
also in the form of a loan. Both loans are secured.
This funding was to provide further working capital to enable
the company to develop its existing asset pool of projects. Vigor
is a project development company that aims to partner with
land-owners, as well as commercial property owners and managers, to
build, own and operate wind and solar power generating assets on
sites across the UK.
Vigor has now completed funding on 30 projects, which equates to
an installed capacity of 1.25MW across both solar and wind. The
company is now focused on developing the additional projects in its
pipeline, which it expects to complete in the next 3-4 months.
Vykson Limited ("Vykson")
On 29 June 2011, LCA announced that it had made a further equity
investment of GBP200,000 into Vykson as part of a total funding
round of GBP250,000 alongside an existing co-investor, QUBIS
Limited.
However, during the year, a 50% provision was taken against the
carrying value of LCA's investment in Vykson as it was operating
behind plan. Given the on-going delays in commercial progress, it
was decided to wind-down the company's operations whilst an
alternative strategy was decided upon. As such, LCA has now made a
full provision of GBP843,000 against the carrying value of this
investment.
QuantaSol Limited ("Quantasol")
On 7 July 2011, LCA announced that Quantasol had completed an
agreement to sell its core assets, including intellectual property
rights, to JDSU Uniphase ("JDSU") in a cash transaction. JDSU are a
Nasdaq-listed world-leading supplier of optical, communication and
Concentrating Photovoltaic ("CPV") components. LCA has received an
initial payment of GBP400,000 from the proceeds of this asset sale,
with further amounts due over the next 12 months. As such, LCA has
written-down the outstanding loans made to Quantasol by GBP500,000
and taken a full provision of GBP2.38 million against the carrying
value of its equity investment..
Eco-Solids International Limited ("Eco-Solids")
During the year Eco-Solids continued to execute its contract
signed with Yorkshire Water. However, due to ongoing delays in the
Validation Period, the company's working capital position became
more and more challenging and it was unable to raise sufficient
funding to see it through to a position of having an installed
customer base that enabled the company to become cashflow
positive.
During the year, a 50% provision was taken against the carrying
value of LCA's investment in Eco-Solids to reflect the challenges
faced by the company. After the year-end, it became clear that
these challenges were not readily surmountable and the company was
placed into administration on 3 January 2012. As a result, a full
write-down of GBP730,000 in the carrying value of this investment
has now been made.
Low Carbon Investors Limited 9 February 2012
CONSOLIDATED INCOME STATEMENT
For the year ended 30 November 2011
Year ended Year ended
30 November 30 November
2011 2010
Note GBP'000 GBP'000
Income
Interest income 88 149
Gain on sale of investment 11 230 -
Other income - 21
318 170
Expenses
Investment management fees (1,099) (1,156)
Net decrease in fair value of financial
assets and financial liabilities at
fair value through profit or loss 11 (4,236) (335)
Custodian, secretarial, brokers, Nomad
and administration fees (183) (175)
Provisions made against loan receivables 6 (2,395) (212)
Other operating expenses (157) (298)
Total operating expenses (8,070) (2,176)
Operating loss (7,752) (2,006)
Other comprehensive income - -
Write-down of non-current financial
assets classified as held for sale 13 (9,250) -
Total comprehensive expense (17,002) (2,006)
Basic loss per share (pence) 9 (19.7) (2.3)
Diluted loss per share (pence) 9 (19.7) (2.3)
Adjusted basic (loss)/profit per share
(pence) 10 (32.1) 10.0
Adjusted diluted (loss)/profit per
share (pence) 10 (32.1) 10.0
All income is attributable to the equity holders of the Company.
There are no minority interests.
All activities are derived from continuing activities.
The Group has no recognised gains or losses other than the
profit for the year.
The accompanying notes form an integral part of these financial
statements.
CONSOLIDATED BALANCE SHEET
As at 30 November 2011
2011 2010
Note GBP'000 GBP'000
NON-CURRENT ASSETS
Financial assets at fair value
through profit or loss 11 21,500 26,386
Long-term loans 12 200 -
21,700 26,386
CURRENT ASSETS
Cash and cash equivalents 2,040 4,169
Non-current financial assets classified
as held for sale 13 - 9,250
Other receivables 14 593 1,527
TOTAL CURRENT ASSETS 2,633 14,946
TOTAL ASSETS 24,333 41,332
CURRENT LIABILITIES
Other payables 15 (64) (61)
NET ASSETS 24,269 41,271
EQUITY
Share capital 16 - -
Share premium 17 52,720 52,720
Reserves 18 (28,451) (11,449)
TOTAL EQUITY 24,269 41,271
Number of ordinary shares ('000) 86,100 86,100
Net asset value (basic and diluted)
per share 19 28.2 47.9
Adjusted net asset value (basic
and diluted) per share 19 28.2 60.3
The accompanying notes form an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Retained
GBP'000 Share premium earnings Total
GBP'000 GBP'000 GBP'000
As at 30 November 2009 - 52,720 (9,443) 43,277
Total comprehensive loss for
the year - - (2,006) (2,006)
As at 30 November 2010 - 52,720 (11,449) 41,271
Total comprehensive loss for
the year - - (17,002) (17,002)
As at 30 November 2011 - 52,720 (28,451) 24,269
The accompanying notes form an integral part of these financial
statements.
CONSOLIDATED CASHFLOW STATEMENT for the year ended 30 November
2011
Year ended Year ended
30 November 30 November
2011 2010
Notes GBP'000 GBP'000
CASHFLOWS FROM OPERATING ACTIVITIES
Operating Loss for the period (7,752) (2,006)
Net changes in fair value of financial
assets and financial liabilities at
fair value through profit or loss 11 4,236 335
Gain on sale of investment 11 (230) -
Provisions made against loan receivables 6 2,395 212
Increase in other receivables excluding
short-term loans 14 (161) (119)
Increase/(decrease) in other payables 15 3 (71)
NET CASH OUTFLOWS FROM OPERATING ACTIVITIES (1,509) (1,649)
CASHFLOWS FROM INVESTING ACTIVITIES
Purchase of investments 11 (350) (2,019)
Sale of investments 11 1,230 -
Short-term loans 14 (1,800) (1,500)
Repayment of short-term loans 14 500 -
Long-term loans 12 (200) -
NET CASH OUTFLOWS FROM INVESTING ACTIVITIES (620) (3,519)
CASHFLOWS FROM FINANCING ACTIVITIES
Issue of ordinary shares 17 - -
Transaction costs on issue of ordinary
shares 17 - -
NET CASH INFLOWS FROM FINANCING ACTIVITIES - -
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,129) (5,168)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 4,169 9,337
CASH AND CASH EQUIVALENTS AT END OF
YEAR 2,040 4,169
The accompanying notes form an integral part of these financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 November 2011
1. GENERAL INFORMATION
Low Carbon Accelerator Limited ("LCA" or "the Company") is a
company incorporated and registered in Guernsey on 26 September
2006. LCA is a closed-end investment company with limited liability
under the Companies (Guernsey) Law, 2008, and its shares are
admitted to trading on the AIM market of the London Stock
Exchange.
The nature of LCA's operations and its principal activities are
set out in the Directors' report. The address of the LCA's
Registered Office is set out on page 1.
These financial statements are presented in Pounds Sterling
because that is the currency of the primary economic environment in
which the Company and its subsidiaries operate.
2. BASIS OF PREPARATION
The consolidated financial statements incorporate the financial
statements LCA and entities (including special purpose entities)
controlled by LCA (its subsidiaries) (together known as "the
Group"). Control is achieved where the Company has the power to
govern the financial and operating policies of an entity so as to
obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate. Where necessary, adjustments are made to
the financial statements of subsidiaries to bring their accounting
policies into line with those used by other members of the
Group.
All intra-group transactions, balances, income and expenses are
eliminated in full on consolidation.
The Company holds two investments via a wholly owned
intermediate holding group structure. The acquisition of equity in
the underlying investments was funded by a long term loan account
through the intermediate holding companies.
It was noted in the financial statements for the prior year
ended 30 November 2010 that it was the Board's intention to seek to
reduce LCA's interest in Proven Energy Limited ("Proven Energy") to
a minority shareholding within the following 12 months.
On this basis, and in accordance with IFRS 5, the Group did not
consolidate the results of Proven Energy for the prior year ended
30 November 2010 and this investment was treated as held for sale
(see also note 13).
Subsequently, Proven Energy was placed into receivership on 16
September 2011. Whilst the final outcome of the receivership is as
yet unknown, a full provision against the carrying value of the
Group's investment in Proven Energy was made during the year ended
30 November 2011.
In accordance with Article 122(e)(i) of the Company's Articles
of Incorporation, a continuation vote will be put to the
Shareholders at the next Annual General Meeting on 11 April 2012,
as the average discount of the share price to Net Asset Value per
Ordinary Share exceeded 5% for the year ended 30 November 2011. The
Directors recommend a vote in favour of the continuation resolution
and believe it is in the best interests of Shareholders that the
Company continue as an investment company. The financial statements
are prepared on a going concern basis supported by the Directors'
current assessment of:
-- the Company's ability to continue in existence for the foreseeable future,
-- ongoing shareholder support for the continuation of the Company.
Based on the above, the Directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the foreseeable future, and they continue to adopt
the going concern basis.
3. SIGNIFICANT ACCOUNTING POLICIES
The financial statements are made up for the year ended 30
November 2011, and have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union.
The following is a description of the significant accounting
policies of the Group. The accounting policies are consistent with
those applied in the year ended 30 November 2010 and amended to
reflect the adoption of the new standards, amendments to standards
or interpretations which are mandatory for the first time for the
financial year ended 30 November 2011.
Standards, amendments and interpretations to published standards
not yet effective
-- IAS 1 (amended), "Presentation of Financial Statements"
(effective for periods commencing on or after 1 July 2012)
-- IAS 19 (amended), "Employee Benefits" (effective for periods
commencing on or after 1 January 2013)
-- IAS 28 (amended), "Investments in Associates" (effective for
periods commencing on or after 1 January 2013)
-- IAS 27 (amended), "Consolidated and Separate Financial
Statements" (effective for periods commencing on or after 1 January
2013)
-- IAS 12 (amended), "Income Taxes" (effective for periods
commencing on or after 1 January 2012)
-- IFRS 7 (amended), "Financial Instruments: Disclosures"
(effective for periods commencing on or after 1 July 2011)
-- IFRS 11, "Joint arrangements" (effective for periods commencing on or after 1 January 2013)
-- IFRS 9, "Financial Instruments - Classification and
Measurement" (effective for periods commencing on or after 1
January 2013)
-- IFRS 12, "Disclosures of interests in other entities" -
(effective for periods commencing on or after 1 January 2013)
-- IFRS 13, "Fair Value Measurement" (effective for periods
commencing on or after 1 January 2013)
-- IFRS 10, "Consolidated Financial Statements" (effective for
periods commencing on or after 1 January 2013)
The Directors anticipate that the adoption of these Standards
and Interpretations in future periods will have no material impact
on the financial statements of the Group.
The financial statements have been prepared under the historical
cost convention as modified by the revaluation of financial assets
and financial liabilities at fair value through profit or loss and
foreign currency derivatives.
The preparation of the financial statements requires the
Directors to make estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities, and
the disclosure of contingent liabilities at the date of the
financial statements. If in the future such estimates and
assumptions, which are based on the Directors' best judgement at
the date of the financial statements, deviate from actual
circumstances, the original estimates and assumptions will be
modified as appropriate in the period in the which the
circumstances change.
The principal accounting policies adopted are set out below.
(a) Financial assets at fair value through profit or loss
Classification
The Group classifies its equity investments as financial assets
at fair value through profit and loss and all such investments are
designated as such on acquisition. This includes investments in
associated undertakings that are held by the Group with a view to
the ultimate realisation of capital gains.
Financial assets and financial liabilities designated at fair
value through profit or loss at inception are those that are
managed and their performance evaluated on a fair value basis in
accordance with the Group's documented investment strategy. The
Group's policy is for the Investment Manager and the Board of
Directors to evaluate the information about these financial assets
on a fair value basis together with other related financial
information.
Recognition / De-recognition
Purchases and sales of investments are recognised on the date on
which the Group commits to purchase or sell the investment.
Investments are derecognised when the rights to receive cash flows
from the investments have expired or the Group has transferred
substantially all risks and rewards of ownership.
Measurement
Financial assets at fair value through profit or loss are
initially recognised at fair value. Transaction costs are expensed
as incurred in the income statement. Subsequent to initial
recognition, all financial assets at fair value through profit or
loss are measured at fair value.
Gains and losses arising from changes in the fair value of the
financial assets at fair value through profit or loss are presented
in the income statement in the period in which they arise. The net
gain or loss recognised in profit or loss incorporates any dividend
or interest earned on the financial asset.
Fair value estimation
The fair values of unlisted securities are established using
International Private Equity and Venture Capital ("IPEV") valuation
guidelines. The valuation methodology used most commonly by the
Group is the 'price of recent investment' contained in the IPEV
valuation guidelines. Where the investment being valued was itself
made recently, its cost will generally provide a good indication of
fair value. Where there has been any recent investment by third
parties, the price of that investment will provide a basis of the
valuation.
Where there has been a reasonable period of time since the time
of the most recent investment, and it is the Group's view that the
'price of the recent investment' no longer represents the true fair
value of the investment, the Group considers alternative
methodologies in the IPEV guidelines, being principally discounted
cash flows and price-earnings multiples. These methodologies
require management to make assumptions over the timing and nature
of future earnings and cash flows when calculating fair value.
Where the Directors do not believe there has been a material
change (positive or negative) in the fair value of an investment,
the investment is reported at the carrying value at the previous
reporting date.
All recorded values of investments are reviewed quarterly for
any indication of impairment and adjusted accordingly.
Classification of fair value measurements
The Company classifies fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used
in making the measurements. The fair value hierarchy has the
following levels:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2); and
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. For this purpose, the
significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on
unobservable inputs, the measurement is a level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement considering factors
specific to the asset or liability. The determination of what
constitutes "observable" requires significant judgement by the
Company. The Company considers observable data to be that market
data that is readily available, regularly distributed or updated,
reliable and verifiable, not proprietary, and provided by
independent sources that are actively involved in the relevant
market.
(b) Non-current financial assets classified as held for resale
Classification
On occasion the Group may take a majority shareholding in a
portfolio company. This is usually a result of the Group making a
follow-on investment in a Company in which it already holds a large
minority shareholding.
It is the Group's investment policy where possible to hold large
minority shareholdings in its investments. Where the Group does
take a majority shareholding in one of its portfolio companies, the
Group will usually look to reduce this shareholding to a minority
position within 12 months either by selling some of its stake to a
third party, or by raising further equity into the portfolio
company, and thereby reducing the Group's shareholding to less than
50%.
Where the Group acquires a majority stake in an equity
investment with the intention to bring that stake down to a
minority shareholding within the following 12 month period, the
Group classifies that equity investment as a current asset under
"non-current financial assets classified as held for sale", in
accordance with IFRS 5 - Non-current Assets Held for Sale and
Discontinued Operations.
Recognition / De-recognition
Investments held as "financial assets at fair value through
profit or loss" are reclassified as "non-current financial assets
classified as held for sale" on the date on which the Group
purchases further shares in the investee company and such purchase
results in the Group owning more than 50% of the shares of the
investee company and where the intention is to reduce the Group's
shareholding to less than 50% within 12 months of such
purchase.
Investments held as "non-current financial assets classified as
held for sale" are derecognised when the rights to receive cash
flows from the investments have expired or the Group has
transferred substantially all risks and rewards of ownership.
Investments held as "non-current financial assets classified as
held for sale" are reclassified as "financial assets at fair value
through profit or loss" when the Group's shareholding in the
relevant investee company falls to less than 50%.
Measurement
Non-current financial assets classified as held for sale are
valued at the lower of carrying value at the date at which the
assets were classified as such or fair value less costs to
sell.
IFRS 5 does not allow for upward fair value adjustments to be
made to assets classified as "non-current financial assets
classified as held for sale" in excess of any previous impairments
that had been applied to those same assets. This restriction can
mean, therefore, that where the Board considers there to be an
upward revaluation required of an investment classified as a
"non-current financial assets classified as held for sale" in
accordance with International Private Equity and Venture Capital
("IPEV") valuation guidelines, this fair value adjustment may not
be made under IFRS if the asset had not previously been impaired
since reclassification or to the extent that such revaluation was
in excess of a previous impairment since the assets
reclassification. As such, the treatment of non-current financial
assets classified as held for sale can, in certain circumstances,
conflict with the Group's general policy for valuing its investment
portfolio. Where this is the case, the Group provides a
reconciliation between the NAV in accordance with IFRS 5
("Accounting NAV") and the NAV in accordance with IPEV valuation
guidelines ("Adjusted NAV").
(c) Revenue recognition
Interest income is accrued on a time basis, by reference to the
principal outstanding and the effective interest rates
applicable.
Dividend income is recognised in the income statement when the
Group's right to receive payment is established.
(d) Expenses
Expenses are accounted for on an accruals basis. Expenses are
charged through the income statement except where they relate to
the raising of capital.
(e) Foreign currency translation
Functional and presentation currency
The performance of the Group is measured in Pounds Sterling
(GBP). The Board of Directors considers GBP as the currency that
most faithfully represents the economic effects of the underlying
transactions, events and conditions, and thus is the functional
currency.
The financial statements are presented in GBP.
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income
statement. Translation differences on non-monetary financial assets
and liabilities such as equities at fair value through profit or
loss are recognised in the income statement within the fair value
net gain or loss.
(f) Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangement entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the company after deducting all
of its liabilities.
(g) Loans receivable
Loans receivable that have fixed or determinable payments that
are not quoted in an active market are classified as 'loans and
receivables'. Loans and receivables are measured at amortised cost
using the effective interest method less any impairment. Interest
income is recognised by applying the effective interest rate,
except for short-term receivables where the recognition of interest
would be immaterial.
(h) Financial instruments
Financial assets and financial liabilities are recognised on the
Group's balance sheet when the Group becomes party to the
contractual provisions of the instrument.
The Group shall offset financial assets and financial
liabilities if the Group has a legally enforceable right to set off
the recognised amounts and interests and intends to settle on a net
basis.
(i) Cash and cash equivalents
Cash at bank and short term deposits are carried at cost. Cash
and cash equivalents consist of cash in hand, short term deposits
in banks and money market instruments with an original maturity of
three months or less.
(j) Trade and other receivables.
Other receivables do not carry any interest and are short-term
in nature and are accordingly stated at their nominal value as
reduced by appropriate allowances for estimated irrecoverable
amounts.
(k) Trade and other payables
Trade and other payables are not interest-bearing and are stated
at their nominal value.
(l) Investments in associates
An associate is an entity over which the Group has significant
influence and that is neither a subsidiary nor an interest in a
joint venture. Significant influence is the power to participate in
the financial and operating policy decisions of the investee but is
not control or joint control over those policies.
Investments which fall within the definition of an associate
under IAS 28 (Investments in Associates) are accounted for as
investments held at fair value through profit and loss, as
permitted by that standard. IAS 28 requires certain disclosures to
be made about associates, including summary historical financial
information, even where these associates have been accounted for in
accordance with IAS 39 and held at fair value. The Group has a
number of investments which fall within the definition of an
associate, all of which are held at fair value.
The disclosures required by IAS 28 have not been made. It is
considered that, in the context of the current investment
portfolio, such information would not be useful to users of the
accounts. Information is considered useful if it helps users assess
the net asset value of the Group or the future growth therein. Many
factors are taken into account in determining the fair value of
individual investments, of which historical financial information
is only one. Taken alone, this information would not be useful in
making such an assessment and may even be misleading in some
instances.
4. MATERIAL AGREEMENTS
(a) Under the terms of the Investment Management Agreement dated
6 October 2006, a management fee is payable to Low Carbon Investors
Limited ("LCI") for investment management services. These are paid
quarterly in advance and are equal to 0.625% of the adjusted net
asset value ("Adjusted NAV") of the Group (see note 19), as at the
last day of the preceding quarter.
In addition, LCI will be paid an annual performance fee equal to
20% of any amount by which the Adjusted NAV of the Group at the
relevant year end exceeds the previous high watermark subject to
performance exceeding the previous high watermark plus a hurdle
rate of 7.5%.
On 30 June 2009 the Investment Management Agreement was amended
to reset the Hurdle Base, on a weighted average basis, following
the issue by the Group of any new Ordinary Shares pursuant to a
placing for cash.
(b) Under the terms of the Broker Agreement dated 6 October 2006, subsequently amended on 19 December 2006, between RBS Hoare Govett and the Company, RBS Hoare Govett is entitled to a retainer fee as appointed broker of the Company. The retainer fee is at a rate of not less than GBP25,000 per annum and increasing at a rate of GBP1,000 per annum for each GBP1 million by which the net assets of the Group exceeds GBP50 million subject to a maximum fee of GBP75,000 per annum where the net assets of the Group are equal to, or exceed, GBP100 million.
(c) Under the Terms of Engagement dated 18 December 2006, the
Company is liable to pay a retainer's fee to Grant Thornton for its
services as nominated adviser. The retainer fee is at a rate of
GBP25,000 per annum payable quarterly in advance.
5. SEGMENT INFORMATION
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors of the
Group.
For management purposes, the Group is organised into one
business segment which focuses on achieving medium term capital
growth by investing in early stage low carbon companies.
The Group operates in two main geographical areas. The
geographic split of its non-current assets and non-current
financial assets classified as held for sale as at 30 November 2011
was:
2011 2010
GBP'000 GBP'000
UK 5,111 18,124
USA 16,389 17,512
21,500 35,636
6. PROVISIONS MADE AGAINST LOAN RECEIVABLES
2011 2010
GBP'000 GBP'000
Provision against long-term loan to Low
Carbon Accelerator Luxembourg Limited
s.a.r.l. - 85
Provision against other receivable Low
Carbon Accelerator Luxembourg Limited
s.a.r.l. 20 -
Provision against other receivable from
Low Carbon Accelerator (Barbados) ISRL 49
Provision against interest receivable
on short-term loan to QuantaSol Limited - 127
Provision against short-term loan to
QuantaSol Limited 500 -
Provision against interest receivable
on short-term loan to Proven Energy Limited 76 -
Provision against short-term loan to
Proven Energy Limited 1,750 -
2,395 212
7. TAXATION
The Company has been granted exemption from income tax in
Guernsey under the Income Tax (Exempt Bodies) (Bailiwick of
Guernsey) Ordinance, 1989. As such it will not be liable to income
tax in Guernsey other than on Guernsey source income (excluding
deposit interest on funds deposited with a Guernsey bank). No
withholding tax is applicable to distributions to shareholders by
the Company.
The companies in which the Group has made an investment are
subject to taxation in their relevant jurisdiction.
8. DIVIDENDS
In accordance with the strategy set out in the Company's AIM
Admission Document, no dividend has been declared for the year to
30 November 2011 (2010 - GBPnil).
9. BASIC AND DILUTED EARNINGS PER SHARE
The calculation of basic and diluted return per share is based
on the return on ordinary activities for the year ending 30
November 2011 and on 86,100,000 (2009 - 86,100,000) Ordinary
Shares, being the weighted average number of shares in issue during
the period.
10. RECONCILIATION OF LOSS PER SHARE
Result for Profit/(loss)
the period per share
30 November 2011 GBP'000 Pence
Basic and adjusted loss (17,002) (19.7)
Write-down of non-current financial
assets classified as held for sale (10,650) (12.4)
Adjusted loss (27,652) (32.1)
30 November 2010
Basic loss (2,006) (2.3)
Fair value adjustment to non-current
financial assets classified as held
for sale 10,650 12.3
Adjusted Profit 8,644 10.0
The difference between the loss for the year of GBP17.0 million
as shown in the Consolidated Income Statement and the Adjusted loss
for the year of GBP27.7 million arises as a result of compliance
with restrictions on measurement of assets under IFRS 5.
As set out in note 3(a) to these Financial Statements, it is the
Group's accounting policy to value its investment portfolio at fair
value in accordance with International Private Equity and Venture
Capital Valuation ("IPEV") valuation guidelines. However, IFRS 5
prevents the Group from making upward revaluations of investments
that are classified as "Non-current financial assets classified as
held for sale" in excess of any previous impairments that had been
applied to those same assets, even where the Board considers that
such an upward revaluation is required to reflect the Board's
assessment of the fair value of such an investment in accordance
with IPEV guidelines.
During the prior year ended 30 November 2010, and in line with
the IPEV valuation guidelines, the Board revised the fair value of
LCA's equity investment in Proven Energy from the historic cost of
GBP9.25 million to GBP19.9 million, being an increase of GBP10.65
million. As compliance with IFRS takes precedence over the Group's
general valuation policy for investments, the uplift of GBP10.65
million in the value of the Group's investment in Proven Energy was
not reflected in the Consolidated Income Statement for the that
year and a reconciliation between the loss for year and the
Adjusted profit for the year was provided.
Proven Energy was placed into receivership on 16 September 2011.
Whilst the final outcome of the receivership is as yet unknown, a
full provision against the carrying value of the Group's investment
in Proven Energy was made during the year ended 30 November
2011.
As such, a reconciliation between the loss for the current year,
which reflects the write-down in Proven Energy's valuation in
accordance with IFRS 5, and the Adjusted loss, which reflects the
write-down of Proven Energy's valuation in accordance with IPEV
valuation guidelines, has been provided.
11. INVESTMENTS - DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
2011 2010
GBP'000 GBP'000
Total financial assets at fair value
through profit or loss at beginning of
year 26,386 24,214
Additions during the year
* acquired for cash 350 2,019
* loans from prior year converted into equity - 488
* disposed for cash (1,230) -
* gain on sale of investment 230 -
Net changes in fair value through profit
or loss (4,236) (335)
Total financial assets at fair value
through profit or loss at end of year 21,500 26,386
The net changes in fair value through profit or loss represents
amounts relating to the revaluation of investments and foreign
currency gains or losses relating to investments made in currencies
other than GBP.
The Group had a net loss on foreign exchange of GBP173,000
during the year (2010 - gain GBP825,000) and is included within
"Net changes in fair value through profit or loss".
During the year the Group made the following upward revaluations
to investments:
-- ResponsiveLoad Limited ("RLtec")
On 6 June 2011, LCA announced that it had sold 175,747
Preference B shares in RLtec to Ombu Limited for a cash
consideration of GBP1,230,000, which realised a gain of GBP230,000.
The carrying value of the remaining investment was increased by
GBP834,000 to reflect the valuation of the company set at the time
of the transaction
During the year the Group made the following provisions and
write-downs against investments:
-- Sterling Planet Inc.
A net foreign currency loss of GBP134,000 was made on this
investment, which reflects the appreciation of sterling against the
US dollar in the period.
-- Lumenergi Inc. ("Lumenergi")
A net foreign currency loss of GBP39,000 was made on this
investment, which reflects the appreciation of sterling against the
US dollar in the period.
During the year, given the difficult market conditions and the
time taken to execute a revised strategy to bring the company back
on track, a provision of 25% was also been made against the
carrying value of LCA's investment in Lumenergi, being GBP949,000
as adjusted for currency differences.
-- QuantaSol Limited ("Quantasol")
On 7 July 2011, LCA announced that Quantasol had completed an
agreement to sell its core assets, including intellectual property
rights, to JDS Uniphase in a cash transaction. LCA has received an
initial payment of GBP400,000 from the proceeds of this asset sale,
with further amounts due over the next 12 months.
The proceeds will be used as repayment towards the outstanding
loans from LCA to Quantasol (see note 14). As a result, during the
year, a full provision was taken against the carrying value of
LCA's equity investment in Quantasol.
-- Eco-Solids International Limited ("Eco-Solids")
During the year, a 50% provision was taken against the carrying
value of LCA's investment in Eco-Solids to reflect the challenges
faced by the company. After the year-end, it became clear that
these challenges were not readily surmountable and the company was
placed into administration. As a result, a full write-down of the
carrying value of this investment has now been made.
-- Vykson Limited ("Vykson")
During the year, a 50% provision was taken against the carrying
value of LCA's investment in Vykson as it was operating behind
plan. Given the on-going delays in commercial progress, LCA has now
made a full provision against the carrying value of this
investment.
The table below summarises the underlying investments of the
Group. All of the investments are in unquoted companies.
2011 2010
Cost of Cost of
investment investment
in original Value of in original Value of
Currency currency investment currency investment
of investment '000 GBP'000 '000 GBP'000
Sterling Planet,
Inc. USD 7,000 13,541 7,000 13,675
ResponsiveLoad
Limited GBP 2,354 4,461 3,354 4,627
Lumenergi Inc USD 5,973 2,848 5,973 3,836
Vigor Renewables
Limited GBP 650 650 500 500
Quantasol Limited GBP 2,375 - 2,375 2,375
Eco-Solids International
Limited GBP 825 - 825 730
Vykson Limited GBP 650 - 450 643
Group total 21,500 26,386
12. LONG-TERM LOANS
2011 2010
GBP'000 GBP'000
Vigor Renewables Limited 200 -
The loan to Vigor Renewables Limited is secured and accrues
interest at a rate of 8% per annum and is repayable on 26 April
2013.
13. NON-CURRENT FINANCIAL ASSETS CLASSIFIED AS HELD FOR SALE
During the year the Group made the following provision against
non-current financial assets classified as held for resale:
Proven Energy
It was noted in the financial statements for the prior year
ended 30 November 2010 that it was the Board's intention to seek to
reduce LCA's interest in Proven Energy Limited ("Proven Energy") to
a minority shareholding within the following 12 months.
On this basis, and in accordance with IFRS 5, the Group did not
consolidate the results of Proven Energy for the prior year ended
30 November 2010 and this investment was treated as held for
sale.
Proven Energy was subsequently placed into receivership on 16
September 2011. Whilst the final outcome of the receivership is as
yet unknown, during the current year ended 30 November 2011 a full
provision of GBP9.25m was made against the carrying value of the
Group's investment in Proven Energy.
14. OTHER RECEIVABLES
2011 2010
GBP'000 GBP'000
Proven Energy Limited - 250
QuantaSol Limited 350 1,250
Vigor Renewables Limited 200 -
Prepayments 15 13
Other receivables 28 14
593 1,527
During the year, a further GBP1.6m in short-term loans was made
to Proven Energy Limited ("Proven Energy") and a repayment of
GBP100,000 was made to LCA against its outstanding loans. Proven
Energy was subsequently placed into receivership on 16 September
2011. Whilst the final outcome of the receivership is as yet
unknown, a full provision was made against the GBP1.75m in
outstanding loans made to the Proven Energy.
On 7 July 2011, the Company announced that Quantasol Limited
("Quantasol") had completed an agreement to sell its core assets,
including intellectual property rights, to JDS Uniphase in a cash
transaction. The proceeds will be used as repayment towards the
outstanding loans from LCA to Quantasol. As a result, a provision
of GBP500,000 was taken against the outstanding loan balance to
reflect the expected total repayment against the loan. LCA has
received an initial payment of GBP400,000 from the proceeds of this
asset sale, with further balancing payments due over the next
twelve months.
The loan to Vigor Renewables Limited is secured and accrues
interest at a rate of 8% per annum and is repayable on 31 March
2012.
15. OTHER PAYABLES
2011 2010
GBP'000 GBP'000
Trade creditors 54 22
Accruals 10 39
64 61
16. SHARE CAPITAL
Authorised No. GBP'000
Ordinary shares of no par value Unlimited -
Issued and fully paid
Ordinary shares of no par value 86,100,000 -
No.
Balance as at 30 November 2010 86,100,000
Issued (ordinary shares of no par value) -
Balance as at 30 November 2011 86,100,000
The Company has one class of ordinary shares which carry no
right to fixed income.
17. SHARE PREMIUM
GBP'000
Balance as at 30 November 2010 and
2011 52,720
18. RECONCILIATION OF MOVEMENT IN RESERVES
GBP'000
Balance as at 30 November 2010 (11,449)
Total comprehensive expense (17,002)
Balance as at 30 November 2011 (28,451)
19. RECONCILIATION OF ACCOUNTING NAV AND ADJUSTED NAV
Net Asset NAV per
Value share
30 November 2011 GBP'000 Pence
Accounting and Adjusted Net Asset Value 24,269 28.2
30 November 2010
Accounting Net Asset Value 41,271 47.9
Fair value adjustment to non-current
financial assets classified as held
for sale 10,650 12.4
Adjusted Net Asset Value 51,921 60.3
The difference between the Accounting NAV at the prior year end
30 November 2010 of GBP41.3 million as shown in the Consolidated
Balance Sheet and the Adjusted NAV for the same period of GBP51.9
million arises as a result of compliance with restrictions on
measurement of assets under IFRS 5.
During the prior year ended 30 November 2010, and in line with
the International Private Equity and Venture Capital Valuation
("IPEV") Guidelines, the Board revised the fair value of LCA's
equity investment in Proven Energy from the historic cost of
GBP9.25 million to GBP19.9 million, being an increase of GBP10.65
million.
As set out in note 3(a) to these Financial Statements, it is the
Group's accounting policy to value its investment portfolio at fair
value in accordance with International Private Equity and Venture
Capital ("IPEV") valuation guidelines. However, IFRS 5 prevents the
Group from making upward revaluations of investments that are
classified as "Non-current financial assets classified as held for
sale" in excess of any previous impairments that had been applied
to those same assets, even where the Board considers that such an
upward revaluation is required to reflect the Board's assessment of
the fair value of such an investment in accordance with IPEV
guidelines.
As compliance with IFRS takes precedence over the Group's
general valuation policy for investments, the uplift of GBP10.65
million in the value of the Group's investment in Proven Energy at
the prior year end 30 November 2010 was not reflected in the
Consolidated Balance Sheet.
Subsequently, Proven Energy was placed into receivership on 16
September 2011. Whilst the final outcome of the receivership is as
yet unknown, a full provision against the carrying value of the
Group's investment in Proven Energy was made during the year ended
30 November 2011. As a result there is no difference between the
Accounting NAV of GBP24.3m and the Adjusted NAV at the end of the
current period.
20. FINANCIAL RISK MANAGEMENT
The Group's activities expose it to a variety of financial
risks: market price risk, credit risk, interest rate risk, currency
risk and liquidity risk. The Group's overall risk management
programme focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the Group's
financial performance. The risk management policies employed by the
Group to manage these risks are discussed below:
Market price risk
The Group's equity securities are susceptible to market price
risk arising from uncertainties about future values of the
investment securities. The Investment Manager provides the Group
with investment recommendations that are consistent with the
Group's objectives. The Board of Directors reviews these
recommendations before the investment decisions are
implemented.
The method of valuation of these investments is described within
the accounting policies. The nature of the Group's investments, all
being unquoted investments in private companies, means that the
investments are valued by the Directors after due consideration of
the most recent available information from the underlying
investments as adjusted where relevant by the Directors.
All of the Group's "Financial assets at fair value through
profit or loss" and "Non-current financial assets classified as
held for sale" on the balance sheet are classified as Level 3 in
the fair value hierarchy. Investments classified within level 3
have significant unobservable inputs. Level 3 instruments include
unquoted equity instruments which the Company values in accordance
with the International Private Equity and Venture Capital valuation
guidelines.
Credit risk
The Group is exposed to credit risk in respect of its cash and
cash equivalents, arising from possible default of the relevant
counterparty, with a maximum exposure equal to the carrying value
of those assets. The credit risk on liquid funds is limited because
the counterparties are banks with high credit-ratings assigned by
international credit-rating agencies. The Group monitors the
placement of cash balances on an ongoing basis.
The Group is also exposed to credit risk in respect of the loans
granted to its investments and subsidiaries, with a maximum
exposure equal to the value of the loans advanced. The Group
manages the credit risk of third party borrowers by regularly
reviewing their underlying financial performance.
Interest rate risk
A significant proportion of the Group's financial assets and
liabilities are non-interest bearing.
The short-term loan of GBP200,000 made in the year to Vigor
Renewables Limited bears a fixed coupon and is repayable before or
at 31 March 2012. The long-term loan of GBP200,000 made in the year
to Vigor Renewables Limited bears a fixed coupon and is repayable
before or at 26 April 2013.
As such, the Group is not subject to significant amounts of risk
due to fluctuations in the prevailing levels of market interest
rates.
The following table summarises the Group's exposure to interest
rate risks.
Interest Non-interest
bearing bearing Total
As at 30 November 2011 GBP'000 GBP'000 GBP'000
Assets
Financial assets at fair value
through profit or loss - 21,500 21,500
Long-term loans 200 - 200
Cash and cash equivalents 2,040 - 2,040
Trade and other receivables 550 43 593
2,790 21,543 24,333
Liabilities
Trade and other payables - (64) (64)
Total interest gap 2,790 21,479 24,269
As at 30 November 2011, if interest rates had been 200 basis
points higher with all other variables held constant, profit after
tax for the year and net assets would have been GBP67,000 higher,
mainly as a result of higher interest expense on floating rate
deposits.
Interest Non-interest
bearing bearing Total
As at 30 November 2010 GBP'000 GBP'000 GBP'000
Assets
Financial assets at fair value
through profit or loss - 26,386 26,386
Cash and cash equivalents 4,169 - 4,169
Non-current financial assets
classified as held for sale - 9,250 9,250
Trade and other receivables 1,500 27 1,527
5,669 35,663 41,332
Liabilities
Trade and other payables - (61) (61)
Total interest gap 5,669 35,602 41,271
Currency risk
The Group has assets denominated in currencies other than GBP,
the functional currency. The Group is therefore exposed to currency
risk, as the value of the assets and liabilities denominated in
other currencies will fluctuate due to changes in exchange rates.
The Group does not enter into hedging contracts in relation to such
investments.
The table below summarises the Group's exposure to currency
risks at the period end.
2011 2010
Amount Amount
in currency in currency
Currency '000 GBP'000 '000 GBP'000
Assets
Financial assets
at fair value through
profit or loss USD 25,780 16,389 27,273 17,512
As at 30 November 2011, if foreign currency rates against the
value of GBP had been 30% higher or 30% lower with all other
variables held constant, profit after tax for the year and net
assets would have been GBP3.8 million lower or GBP7.0 million
higher respectively, as a result of higher/lower exchange rates on
assets denominated in currencies other than GBP.
Liquidity risk
The Group's financial instruments include investments in
unlisted securities, which are not traded in an organised public
market and may generally be illiquid. As a result, the Group may
not be able to liquidate quickly its investments in these
instruments at an amount close to fair value in order to respond to
its liquidity requirements or to specific events.
As at 30 November 2011 the Group had a cash balance of GBP2.0
million, and total liabilities of GBP64,000. The Group has no
gearing.
Capital Management
The Group monitors capital which comprises all components of
equity (i.e. share premium and revenue reserves). The Group's
objective when maintaining capital is to safeguard the Group's
ability to continue as a going concern, so that it can continue to
provide returns for shareholders
The Directors set and manage the amount of capital required in
proportion to risk. It is not proposed that the Group will have any
long-term or fixed structured gearing. However, the Group may
borrow for the purpose of the orderly settlement of transactions,
to implement any currency hedging strategy or for other general
working capital purposes. Borrowings by the Group itself will not
exceed 25% of the Net Asset Value at the time of drawdown. The
Group may also be indirectly exposed to the effect of gearing to
the extent that investee companies have outstanding borrowings.
The Group is not subject to any external capital requirements.
As at 30 November 2011 the Group had no borrowings.
21. POST BALANCE SHEET EVENTS
Between the balance sheet date and 9 February 2012 the Group
announced that it had made a further investment of $200,000
(approx. GBP130,000) in Lumenergi Inc. in the form of an unsecured
short-term convertible loan. The loan bears a coupon of 10% and is
repayable on or at 30 June 2012. It is expected that the loan will
convert to equity at the time of the next funding round.
22. FINANCIAL COMMITMENTS
As at 9 February 2012, the Group has no commitments to companies
in its portfolio.
23. RELATED PARTY TRANSACTIONS
a. The Company has appointed Low Carbon Investors Limited, a
company in which David Nussbaum has a minority shareholding and
provides advisory services, to provide investment management
services. During the year the Group paid a management fee to Low
Carbon Investors Limited of GBP1,099,000 (2010 - GBP1,156,000).
b. RBS Hoare Govett Limited provides corporate broking and
financial advisory services to the Group and is a wholly-owned
subsidiary of The Royal Bank of Scotland N.V., which is a
shareholder in the Company. The advisory fees charged during the
period by RBS Hoare Govett Limited amounted to GBP25,000 (2010 -
GBP25,000).
c. During the period until his resignation from the Board of LCA
on 6 May 2011, Alan Mark Tanguy was an employee of Ogier Fiduciary
Services (Guernsey) Limited and a director of certain of its
subsidiaries including Ogier Fund Administration (Guernsey). Andrew
Neil Munro (who was appointed to the Board of LCA on 6 May 2011) is
an employee of Ogier Fiduciary Services (Guernsey) Limited. Ogier
Fund Administration (Guernsey) Limited provides administration
services to LCA. During the period the LCA paid fees of GBP134,000
(2010 - GBP126,000) to Ogier Fund Administration (Guernsey)
Limited.
The financial information set out in this announcement does not
constitute the LCA's statutory accounts for the year ended 30
November 2011 but is derived from those accounts. A copy of the
annual report and accounts will be made available on the Company's
website www.lowcarbon.gg and posted to shareholders shortly.
About Low Carbon Accelerator: www.lowcarbon.gg
Low Carbon Accelerator Limited is a closed ended investment
company created to invest in a portfolio of fast-growing low carbon
businesses. The Company listed on the AIM Market of the London
Stock Exchange on 11 October 2006, raising GBP44.5 million. On 26
June 2009, the Company announced that it had raised a further GBP10
million, net of expenses, following the successful placing of a
further 41.6 million shares.
The Company's investment objective is to provide shareholders
with an attractive return on their investment primarily through
significant minority (predominately 25% and above) holdings in a
diverse portfolio of unquoted private companies providing low
carbon products and services.
The Company invests principally in companies which provide low
carbon products and services across the following sectors:
-- Energy efficiency (reductions in energy inputs at source,
improved conversion and reductions at point of use)
-- Energy generation (sustainable and clean energy, micro and distributed generation)
The Company's investment strategy is to target trading
businesses with patentable technologies and products with a clear
commercial application and the opportunity to gain a large market
share of a new or expanding market. The Company focuses on
businesses with experienced management teams who have developed
commercially viable products providing easily adoptable solutions
which deliver immediate reductions in carbon dioxide emissions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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