Interim Results
Alkane Energy PLC
21 September 2005
For immediate release 21 September 2005
Alkane Energy plc ('Alkane' or 'the Company')
Unaudited interim results for the half-year ended 30 June 2005
Alkane Energy (AIM: ALK) is an international renewable energy company that
designs, builds, operates and services methane treatment and generation plants.
These plants greatly reduce emissions of damaging greenhouse gases and play a
vital role in world-wide efforts to reduce global warming.
Financial Highlights
•Turnover down by 30% to £4,626,000 reflects timing of Pro2 revenue
recognition
•Pro2 order book at 92% of annual target at end August
•EBITDA loss narrowed to £380,000 (First Half 2004: £459,000)
•Reduction in loss to £875,000 (First Half 2004: loss £896,000)
•Loss per share reduced to 0.97p (First Half 2004: 1.00p)
Operational Highlights
UK
•Four new mine gas plants brought into production - two announced today
•8.1MW of containerised generation now in place
•Additional mine gas projects actively under investigation
•Significant rise in energy prices underpins viability of future mine gas
projects
Germany
•Record firm orders at Pro2
•Pro2 revenues continue to be second half weighted
•Strategic partnerships increasing sales of biogas renewable energy
systems
•First orders to new markets in Hungary and Russia
•Joarin mine gas electricity plant on stream
•Preparations underway at a second mine gas site
Commenting on the interim results, Chief Executive, Dr Cameron Davies, said:
'In the first half of 2005, Alkane has made substantial progress across the
group, with 5.4MW of generating capacity built and commissioned and a further
2.7MW added since the period end.
'The backdrop of sustained high energy prices has improved the economics of our
business and we are delighted with the progress made at an operational level. A
number of new mine gas projects, previously mothballed, are now being actively
investigated with a view to bringing them into operation as soon as practicable.
'As a specialist in renewable energy technology with a strong and established
base in Europe, Alkane is in an excellent position to benefit from new
opportunities in the mine gas, biogas, biomass and landfill industries.'
Enquiries:
Alkane Energy plc Tel: 01623 827927
Dr Cameron Davies
Buchanan Communications Tel: 020 7466 5000 (today)
Eric Burns Tel: 01943 883990 (thereafter)
Ben Willey Tel: 020 7466 5000
Chairman's Statement
Introduction
We have continued to make good progress towards our goal of becoming a
profitable electricity generator and supplier of systems and services for
renewable energy generation in the UK and worldwide.
The Company has broadened the base of its business by increasing its share of
existing markets and diversifying into new markets. As a result of our decision
to keep the full value chain from gas to electricity in-house, we completed two
new containerised mine gas plants in the period, at Bevercotes and Markham. As
announced today, Alkane has added two further sites to its portfolio, at
Mansfield Woodhouse and Whitwell.
In Germany, our turnover and profits continue to rise as the market for biogas
and other renewable energy systems increases. The nature of trading at Pro2, our
German subsidiary, means that revenue is significantly skewed towards the second
half of the year. This year is no exception with Pro2's firm order book for the
full year already at 92% of budget. Our mine gas project at Joarin in
Gelsenkirchen commenced generating renewable electricity in March.
Across Europe, energy prices are rising and the Company is in an excellent
position to take advantage of this improvement. A number of sites both in the UK
and Germany are under consideration for development and have the potential to
significantly increase our renewable generation capacity.
Financial Overview
During the six months ended 30 June 2005, the Company reported a reduction in
the loss for the period to £875,000 (First Half 2004: loss of £896,000). A
gross profit of £1,858,000 (First Half 2004: £2,578,000) was recorded,
reflecting the lower level of turnover at Pro2. The operating loss for the
period was £1,072,000 (First Half 2004: £952,000) whilst the loss per share was
reduced to 0.97p (First Half 2004: 1.00p).
Cash balances at the period end were £4,051,000 (31 December 2004: £5,716,000)
whilst net funds at the half-year end were £62,000 (31 December 2004:
£2,591,000). Receipts from the leasing of the plant at Joarin, Mansfield
Woodhouse and Whitwell, a total of £1,500,000, will be received in the second
half of the year.
Pro2 recorded turnover for the period of £3,951,000, reflecting a larger than
usual volume of work in progress as at 30 June, which is not recognised as
turnover until signed off by the customer on completion of commissioning.
The operating loss includes a provision of £160,000 against the investment made
in the Company's biogas project in Northern Ireland, further details of which
are provided below.
Operational Review
United Kingdom
Mine Gas
We are pleased to announce the completion of two new mine gas generation plants.
The plants, at Mansfield Woodhouse, Nottinghamshire and Whitwell, Derbyshire,
have a combined generating capacity of 2.7MW. Added to the 5.4MW output from
existing plants at Markham and Bevercotes, this takes Alkane's generating
capacity in the UK to 8.1MW.
Alkane's CMM plants in the UK are expected to capture approximately 20,000
tonnes of methane in 2005, equal to carbon dioxide savings of around 460,000
tonnes. This is equivalent to the carbon dioxide that would be saved by
operating around 300 one megawatt wind turbines.
Including the two new sites referred to above, four containerised electricity
generation plants have been built and brought into production and this portfolio
is performing in line with expectations. Contracts for electricity sales from
the sites at Mansfield Woodhouse and Whitwell were set in June at prices more
than 75% higher than those in place for Bevercotes and Markham. The timing of
the connection of these sites to the grid means that the full financial benefit
of this will be seen in the second half.
We have commenced a review of our partially developed and undeveloped mine gas
projects following the recent increase in both electricity and gas prices and
investigations are underway to bring forward the development of more sites where
the expected payback period is short.
Biogas
Our proposed biogas project at Fivemiletown, Northern Ireland, which is planned
to produce renewable electricity and organic fertiliser from bio-waste supplied
by local farms and food processors, has encountered difficulties in securing a
site for the plant. In view of this, we believe it prudent to make a provision
for the £160,000 invested in this project and this is reflected in the interim
results. We remain committed to the UK biogas market and discussions about
future projects have started with established waste operators about adding these
plants to existing waste sites, thus obviating the planning risks associated
with greenfield sites.
Germany
Pro2
The demand for containerised renewable energy systems, especially for biogas
projects, continues to grow and Pro2's healthy order book reflects this. New
mine gas cogeneration systems also experienced good demand during the period.
Although Pro2's turnover reduced to £3,951,000, compared with £6,263,000 for the
corresponding period in 2004, firm orders were at 92% of budget by the end of
August, and the business looks well on course to report continued progress at
the full year.
Mine Gas
Alkane's first German mine gas project, Joarin, developed with local partner
ATEC, has been generating electricity since March and is operating
satisfactorily. Under the German Renewable Energy Law 2000, the 1.8MW of
electricity exported from the plant is sold at a guaranteed premium price of
approximately £48/MWh to the local grid on a 20 year contract.
We have the option to participate in seven other similar projects and planning
applications have been submitted for boreholes into old mine workings at
Reinphan, Rialisa and Sabuela.
Mine Safety Systems
We have continued to actively market our containerised mine safety systems in
Russia and India and have welcomed delegations from coal mining companies in
both these nations and also from China. UK Trade and Investment, part of the
DTI, is supporting our marketing campaign and we expect our team to visit India
and China in the near future. A follow up visit to Russia is planned in order to
build on our first sale of a generation plant to that market. All of these
countries are expected to benefit from the Kyoto Clean Development Mechanism by
capturing mine methane and selling the resultant emissions credits.
Prospects
The first half of 2005 saw Alkane make considerable progress at an operational
level as mine gas sites were brought on stream in Germany and the UK. During the
second half, we expect a significant increase in revenues from our UK mine gas
generation assets and the completion of firm orders received by Pro2.
The new mine gas generation schemes are selling electricity at prices up to
three times higher that those prevailing at the low point in 2002 and this
backdrop underpins expected revenue growth at the UK operations. Turnover and
profits at Pro2 are set to make further progress whilst new export markets are
being pursued in Russia, India and China.
Alkane has built firm foundations for a profitable future in the renewable
energy systems and services market.
John Lander
Chairman
GROUP PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2005
Six months Six months Year ended
ended ended 31 December
30 June 2005 30 June 2004 2004
(Unaudited) (Unaudited)
£ '000 £ '000 £ '000
TURNOVER 4,626 6,604 19,785
Cost of sales (2,768) (4,026) (14,910)
GROSS PROFIT 1,858 2,578 4,875
Administrative expenses (3,247) (3,687) (6,041)
Other operating income 317 157 413
OPERATING LOSS (1,072) (952) (753)
Profit on sale of fixed assets 5 - 371
LOSS ON ORDINARY ACTIVITIES BEFORE
INTEREST (1,067) (952) (382)
Interest receivable and similar 128 186 430
income
Interest payable and similar charges (164) (98) (332)
LOSS ON ORDINARY ACTIVITIES BEFORE
TAXATION (1,103) (864) (284)
Taxation (66) (23) (267)
LOSS ATTRIBUTABLE TO SHAREHOLDERS (1,169) (887) (551)
Minority interests 294 (9) (163)
LOSS FOR THE PERIOD (875) (896) (714)
Loss per ordinary share - basic and
diluted (0.97p) (1.00p) (0.80p)
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six months Six months Year ended
ended ended 31 December
30 June 2005 30 June 2004 2004
(Unaudited) (Unaudited)
£ '000 £ '000 £ '000
Loss for the period (875) (896) (714)
Exchange rate differences (114) (113) (2)
TOTAL RECOGNISED GAINS AND LOSSES (989) (1,009) (716)
GROUP BALANCE SHEET
at 30 June 2005
as at as at as at
30 June 2005 30 June 2004 31 December
(Unaudited) (Unaudited) 2004
£'000 £'000 £'000
FIXED ASSETS
Intangible assets 911 776 873
Tangible assets
Tangible fixed assets - gas
properties 242 787 431
Tangible fixed assets - generation 3,542 - 2,243
Tangible fixed assets - other 3,848 3,079 4,293
Investments 135 144 -
7,767 4,010 6,967
8,678 4,786 7,840
CURRENT ASSETS
Stock 5,547 3,928 1,505
Debtors: amounts falling due
within one year 3,879 4,090 6,349
Debtors: amounts falling due after
more than one year 186 295 258
Investments 32 29 30
Cash at bank and in hand 4,051 7,235 5,716
13,695 15,577 13,858
CREDITORS: amounts falling due
within one year (8,290) (6,415) (6,645)
NET CURRENT ASSETS 5,405 9,162 7,213
TOTAL ASSETS LESS CURRENT
LIABILITIES 14,083 13,948 15,053
CREDITORS: amounts falling due
after more than one year (2,918) (1,897) (2,665)
PROVISIONS FOR LIABILITIES AND
CHARGES (1,986) (2,000) (1,998)
MINORITY INTERESTS (766) (1,059) (1,104)
NET ASSETS 8,413 8,992 9,286
CAPITAL AND RESERVES
Called up share capital 452 449 449
Share premium account 33,070 32,955 32,956
Profit and loss account (25,109) (24,412) (24,119)
TOTAL EQUITY SHAREHOLDERS' FUNDS 8,413 8,992 9,286
GROUP STATEMENT OF CASH FLOWS
for the six months ended 30 June 2005
Six months Six months Year ended
ended ended 31 December
30 June 2005 30 June 2004 2004
(Unaudited) (Unaudited)
£ '000 £ '000 £ '000
NET CASH OUTFLOW FROM OPERATING
ACTIVITIES (note 6) (1,045) (1,114) (261)
RETURNS ON INVESTMENT AND SERVICING
OF FINANCE
Interest received 150 152 405
Interest paid (58) (42) (121)
Interest element of finance lease
payments (4) (12) (93)
88 98 191
TAXATION
Overseas tax paid (93) (19) (84)
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT
Payments to acquire intangible fixed
assets (6) (7) (8)
Payments to acquire tangible fixed (1,700) (262) (2,946)
assets
Receipts from the sale of tangible
fixed assets 43 5 695
(1,663) (264) (2,259)
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertaking (80) (163) (162)
Net cash acquired with subsidiary
undertaking 13 149 149
(67) (14) (13)
NET CASH OUTFLOW BEFORE FINANCING (2,780) (1,313) (2,426)
FINANCING
Increase in long term loans 910 - -
Repayment of long term loans (144) (23) (48)
Capital element of finance lease
rental payments (433) (173) (573)
Issue of ordinary share capital 118 8 8
DECREASE IN CASH (note 7) (2,329) (1,501) (3,039)
NOTES TO THE ACCOUNTS
1. BASIS OF PREPARATION
These unaudited interim financial statements, which are for the six months ended
30 June 2005, do not constitute Statutory Accounts within the meaning of Section
240 of the Companies Act 1985. They have been prepared using the accounting
policies set out in the Group's 2004 statutory accounts. The financial
information for the year ended 31 December 2004 is derived from the Group's
statutory accounts for that year which have been delivered to the Registrar of
Companies and on which the Group's auditors gave an unqualified report. The
auditors have not made a report under Section 235 of the Companies Act 1985 on
the statutory accounts for the year ended 31 December 2004. The auditors have
carried out a review of the financial information for the six months ended 30
June 2005.
2. TURNOVER
Turnover is attributable to two continuing activities:
a) the extraction and sale of gas from coal measures for power generation
and burner tip use; and
b) the manufacturing, supplying and operating of gas handling and power
generation equipment across a range of gases.
Turnover is derived from three geographical segments. There is no material
difference between turnover analysed by origin and by destination.
Segmental analysis by activity Extraction of Manufacturing Group
gas from coal supplying and total
measures operating
equipment
£ '000 £ '000 £ '000
Six months ended 30 June 2005 (unaudited)
Turnover 675 3,951 4,626
Loss before
tax and
minority
interests (518) (585) (1,103)
Six months ended 30 June 2004 (unaudited)
Turnover 341 6,263 6,604
(Loss)/profit
before tax and
minority
interests (932) 68 (864)
Year ended 31 December 2004
Turnover 699 19,086 19,785
(Loss)/profit
before tax and
minority
interests (1,190) 906 (284)
Geographical segmental United Kingdom Continental Rest of Group
analysis Europe the World total
£ '000 £ '000 £ '000 £ '000
Six months ended 30 June 2005
(unaudited)
Turnover 444 4,182 - 4,626
(Loss)/profit before
tax and minority
interests (740) (368) 5 (1,103)
Six months ended 30 June 2004
(unaudited)
Turnover 341 6,263 - 6,604
(Loss)/profit before
tax and minority
interests (932) 68 - (864)
Year ended 31 December 2004
Turnover 707 19,074 4 19,785
(Loss)/profit before
tax and minority
interests (1,186) 529 373 (284)
3. ACQUISITION OF PRO2 SERVICES LIMITED
On 23 March 2005 the Company acquired 100% of the issued share capital of Farley
Energy Engineering Limited (Farley) for a consideration of £70,000 and
associated costs of £10,000. Farley had net liabilities of £9,000 at the date of
acquisition, and provisional goodwill arising on the acquisition is £89,000.
Farley has been renamed Pro2 Services Limited.
4. LOSS PER SHARE
The basic and diluted loss per ordinary share is based on a loss of £875,000
(six months ended 30 June 2004: loss of £896,000; year ended 31 December 2004:
loss of £714,000) on a weighted average of 89,829,303 ordinary shares (six
months ended 30 June 2004: 89,690,633; year ended 31 December 2004: 89,732,717).
5. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Six months Six months Year ended
ended ended 31 December
30 June 2005 30 June 2004 2004
(Unaudited) (Unaudited)
£ '000 £ '000 £ '000
Decrease in cash (2,329) (1,501) (3,039)
Repayment of long term loans 144 23 48
Capital element of finance lease
rental payments 433 173 573
CHANGE IN NET FUNDS ARISING FROM
CASH FLOWS (1,752) (1,305) (2,418)
Increase in long term loan (910) - -
Finance leases entered into - - (1,046)
Exchange rate differences 133 107 (7)
CHANGE IN NET FUNDS (2,529) (1,198) (3,471)
NET FUNDS AT START OF PERIOD 2,591 6,062 6,062
NET FUNDS AT END OF PERIOD 62 4,864 2,591
6. RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING ACTIVITIES
Six months Six months Year ended
ended ended 31 December
30 June 2005 30 June 2004 2004
(Unaudited) (Unaudited)
£ '000 £ '000 £ '000
Operating loss (1,072) (952) (753)
Depreciation 636 450 920
Amortisation 56 43 109
(Increase)/decrease in stock (4,109) (1,560) 987
Decrease/(increase) in debtors 2,316 553 (1,627)
Increase in creditors 1,141 352 105
Decrease in provisions (13) - (2)
NET CASH OUTFLOW FROM OPERATING
ACTIVITIES (1,045) (1,114) (261)
7. ANALYSIS OF NET FUNDS
As at Cash flow Exchange As at
1 January rate 30 June
2005 differences 2005
(unaudited)
£ '000 £ '000 £ '000 £ '000
Cash at bank and in hand 5,716 (1,657) (8) 4,051
Overdraft - (672) - (672)
5,716 (2,329) (8) 3,379
Long term loans (322) (766) 15 (1,073)
Finance leases (2,803) 433 126 (2,244)
2,591 (2,662) 133 62
8. GENERAL NOTE
Copies of this interim report have been sent to registered shareholders and
further copies are available from the Company's registered office.
This information is provided by RNS
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