Interim Results
Alkane Energy PLC
20 September 2006
For Immediate Release 20 September 2006
Alkane Energy plc ('Alkane' or 'the Company')
Unaudited interim results for the half-year ended 30 June 2006
Alkane Energy is an international renewable energy business that captures
methane from coal mines, landfills, anaerobic digestion and waste water plants
and uses it as fuel for electricity generation. The Company designs, builds and
operates systems that reduce emissions of damaging greenhouse gases and that
play a vital role in worldwide efforts to combat climate change.
Financial Highlights
• Turnover up by 82% to £8,435,000 (2005 H1: £4,626,000)
• Reduction in post-tax loss to £520,000 (2005 H1: loss £894,000)
• Loss per share reduced to 0.57p (H1 2005: 1.00p)
• Net debt position of £2,867,000 (31 December 2005: £2,130,000)
Operational Highlights
United Kingdom
• Turnover up substantially at £1.82m (2005 H1: £0.168m)
• Moved into operating profit
• 8.1MW of containerised generation plants in operation
• Mine gas plants generated 28.5 million KWh (2005 H1: 9.4 million KWh)
• Equivalent of 6.35MW of direct gas sales to customers
• Warsop Energy Park now generating electricity
Germany
• Pro2 turnover up to £6,614,000(2005 H1: £3,951,000)
• Pro2 firm order book at end August is £27m
• Sales visibility well into 2007
Commenting on the interim results, Chief Executive, Dr Cameron Davies, said:
'Alkane has made good progress this year with record sales in the UK and
Germany. There was a very pleasing maiden operating profit for the UK business
leading to a 42% reduction in the Group's loss in the first half of 2006.
Continued high demand for energy in the UK has increased electricity prices
substantially in the past year. Our mine gas plants generated the equivalent of
around 28.5 million KWh of electricity up from 9.4 million KWh in the first half
of 2005.
Record sales at Pro2 are supported by favourable renewable energy legislation in
Germany and France and increasingly by the rapidly expanding emissions trading
market.'
Enquiries:
Alkane Energy plc - Dr Cameron Davies Tel: 01623 827927
Buchanan Communications Tel: 020 7466 5000 (today)
Eric Burns Tel: 01943 883990 (thereafter)
Alastair Watson Tel: 020 7466 5000
CHAIRMAN'S STATEMENT
Introduction
I am pleased to report that during the first half of 2006 Alkane has increased
its turnover by 82% to £8,435,000 as operations in both the UK and Germany have
made progress. In the UK, turnover rose from £675,000 in the corresponding
period of 2005 to £1,821,000, whilst in Germany turnover increased from
£3,951,000 to £6,614,000. As a result of a move into a profit (£134,000) by the
UK business, the loss after minority interests in the half year was reduced to
£520,000 from £894,000 in the first half of 2005.
The increase in UK revenue and profit was principally due to three of the plants
built in 2005 running with high availability at new contract prices of around
£50/MWh, together with encouraging gas sales at Wheldale, equivalent to 5MW of
electricity. Warsop, a new 1.35MW containerised generation plant in the East
Midlands, started generating electricity this month and is expected to
contribute in the second half. The company generated 28.5 million Kilowatt
hours of climate change levy exempt electricity during the period compared with
9.4 million in the same period in 2005.
In Germany, Pro2 turnover increased to £6,614,000 from £3,951,000, primarily
from the inclusion of sales of £2,421,000 in the 2006 figure that were
substantially, although not legally complete in 2005. These plants are now used
by customers on profitable long-term supply and operate contracts. The market
for biogas-fuelled renewable electricity plants is particularly buoyant and Pro2
is benefiting with substantial orders in place for delivery mainly in the fourth
quarter. The firm order book stood at £27 million at the end of July, giving
sales visibility well into 2007.
Financial Overview
During the six months ended 30 June 2006, the Group recorded turnover of
£8,435,000 (2005 H1: £4,626,000). In the UK turnover was £1,821,000,
substantially increased from £675,000 in 2005 due to the contribution of the new
sites completed during the second half of last year. Pro2's turnover was
£6,614,000 (2005 H1: £3,951,000), again reflecting this business' weighting
towards the second half.
Turnover includes £2,421,000 relating to sales that had been excluded from the
2005 accounts because they were not signed off by customers. These sales relate
to plant that is being utilised in the contracting business and were therefore
sold at no immediate margin as they will generate profits over the life of the
plant.
Gross profit in the six months ended 30 June 2006 was £2,558,000 (2005 H1:
£1,858,000). This increase arose mainly from the strong growth in the UK
business (up from £389,000 to £968,000). Pro2's gross profit increased to
£1,590,000 (2005 H1: £1,469,000).
The operating loss in the period increased to £1,128,000, (2005 H1: £1,072,000,
with a profit of £117,000 in the UK and a loss of £1,245,000 in Pro2. The
overall increased loss was due to an 18% increase in administrative expenses
from £3,266,000 to £3,853,000 caused by two main factors. The first was an
increase in rentals at Pro2 of £336,000 in respect of plant that is used in the
contracting business, the associated income being included in turnover.
Secondly, a review of all Pro2's outstanding debts determined that an additional
provision of £260,000 should be made for possible bad debts.
After finalisation of tax due, the amount payable is lower than previously
calculated and this has led to a reduction in the sum accrued. As a result a
tax credit of £98,000 is recorded in the six months to 30 June 2006 (2005 H1:
£66,000 charge).
The overall loss after minority interests for the period shows a reduction to
£520,000 (2005 H1: £894,000) whilst the loss per share was reduced to 0.57p
(2005 H1: 1.00p).
Net debt at 30 June 2006 stood at £2,867,000 (31 December 2005: £2,130,000)
whilst cash balances were £1,071,000 (31 December 2005: £2,090,000). Operating
cash inflow, after adjusting for the income from the sales excluded from 2005
(included in sale of fixed assets), was £514,000 (2005 H1: outflow of
£1,045,000). The principal use of cash was capital expenditure on the
development of two new UK mine gas projects. Current planned roll-out of the UK
mine gas portfolio is expected to take place without recourse to additional
equity funding.
Operational Review
United Kingdom
Mine Gas
Alkane's plants generated 28.5 million KWh of climate change levy exempt
electricity during the period compared with 9.4 million KWh of electricity
during 2005 H1. All the company's contracts for electricity sales from the
containerised generating plants are now established at prices around £50/MWh.
Construction of two new mine gas plants started during the period. The first,
at Warsop (1.35MW), exported electricity in early September. The second, in
Mansfield, is scheduled to commence operation in early October and will sell gas
equivalent to around 1.00MW of electricity direct to a customer. Revenue from
these plants will be reflected in the figures for the second half.
The 4.1MW Bevercotes generation plant has operated at near full capacity since
it was reopened in January following a borehole maintenance programme. A
similar maintenance programme is currently being undertaken at the Old Mill Lane
site.
An application for planning permission is being sought for a pilot biodiesel
generation plant at Markham in cooperation with a third party specialising in
this type of renewable energy generation.
As announced on 18 September, Alkane has transferred its non-core licence
covering part of the Selby mine to Harworth Power Limited, a wholly owned
subsidiary of UK Coal, for a cash payment of £350,000 and an agreement giving
Alkane access to two potential mine gas sites in its core area of the East
Midlands and South Yorkshire.
Gas reserves at partially developed and undeveloped sites within Alkane's mine
gas portfolio are under detailed investigation with the objective of building a
five-year electricity generation project pipeline.
Germany
Pro2
The demand for Pro2's containerised renewable energy systems, particularly for
biogas projects in Germany, continues to grow. This is reflected in Pro2's
order book which, as at 31 August, stood at £27m, giving sales visibility well
into 2007.
Pro2's international business is expanding as new renewable energy legislation
is enacted abroad and orders for carbon credits projects should follow in due
course. In France, a sales and service operation has been set up to cover
existing customers and new landfill gas fuelled power generation plants to be
built in 2007 as a result of the recently passed renewable energy law. Similar
operations have also been established in the Netherlands and Italy. In
Thailand, a new venture to sell and service Pro2's containerised generation
systems was set up during the period to take advantage of the market created by
the new renewable energy law.
In response to the significant increase in assembly plant throughput and
turnover during the past year, a senior finance manager was installed in June
charged with reinforcing high quality financial and reporting systems throughout
the company.
Mine Gas
Methane volumes and purity have been lower than predicted at Alkane's German
mine gas project and a decision was therefore made to reduce the capacity to
1MW. This freed up a 1.35MW containerised generation plant which has been
transferred to Warsop in the UK and is already exporting electricity.
Carbon Emissions Trading
The market for containerised systems for mine safety and carbon emissions
reduction projects in China, Russia and India is continuing to develop in line
with the ratification process by the UNFCC (United Nations Framework Convention
on Climate Change). Alkane mine gas experts have recently visited and completed
studies on the carbon credits potential of several operating coal mines in
China. Requests for quotes have been received by Pro2 as a result, and we are
hopeful that our first order will soon be in place.
Prospects
Alkane has made good progress during the first half, with an increase in
turnover across all operations and a reduced loss. Looking ahead, we are
currently trading in line with market expectations and look forward with
confidence to the year-end results.
Gas reserves at potential new sites within Alkane's licence portfolio are under
detailed investigation with a view to building a five-year project pipeline.
Applications for planning consent are under way for the initial programme of new
mine gas plants and this effort will be increased as the portfolio review is
completed in the near future.
The strong growth in turnover at Alkane UK and Pro2 is set to continue, and the
positive effects of this should lead to tangible effects on the bottom line.
John Lander
Chairman
GROUP PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2006
Six months Six months Year ended
ended ended 31 December
30 June 2006 30 June 2005 2005
Restated Restated
(Unaudited) (Unaudited)
£ '000 £ '000 £ '000
TURNOVER 8,435 4,626 19,585
Cost of sales (5,877) (2,768) (14,028)
GROSS PROFIT 2,558 1,858 5,557
Administrative expenses - operating (3,853) (3,266) (6,439)
Administrative expenses - operating exceptional - - (773)
(3,853) (3,266) (7,212)
Other operating income 167 317 594
OPERATING LOSS (1,128) (1,091) (1,061)
Profit on sale of fixed assets - 5 25
Adjustments in respect of costs of fundamental - - 1,345
restructuring
(LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE (1,128) (1,086) 309
INTEREST
Interest receivable and similar income 65 128 214
Interest payable and similar charges (214) (164) (397)
(LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE (1,277) (1,122) 126
TAXATION
Taxation 98 (66) (225)
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (1,179) (1,188) (99)
Minority interests 659 294 (140)
LOSS FOR THE PERIOD (520) (894) (239)
Loss per ordinary share - basic and diluted (0.57p) (1.00p) (0.26p)
All turnover and results relate to continuing activities
The loss per ordinary share calculation represents total and continuing results
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six months Six months Year ended
ended ended 31 December
30 June 2006 30 June 2005 2005
Restated Restated
(Unaudited) (Unaudited)
£ '000 £ '000 £ '000
Loss for the period (520) (894) (239)
Exchange rate differences 42 (114) (73)
(478) (1,008) (312)
Losses recognised since last annual report (88) - -
TOTAL RECOGNISED GAINS AND LOSSES (566) (1,008) (312)
The implementation of FRS20 'Share-based Payment' has resulted in additional
losses of £88,000 being recorded in the current period. However these losses
have no impact on net assets.
GROUP BALANCE SHEET
at 30 June 2006
as at as at as at
30 June 2006 30 June 2005 31 December
2005
Restated Restated
(Unaudited) (Unaudited)
£'000 £'000 £'000
FIXED ASSETS
Intangible assets 741 911 793
Tangible assets
Tangible fixed assets - gas properties 5,388 3,784 4,997
Tangible fixed assets - other 3,449 3,848 5,706
Investments - 135 -
8,837 7,767 10,703
9,578 8,678 11,496
CURRENT ASSETS
Stock 7,020 5,547 3,427
Debtors: amounts falling due within one year 5,457 3,879 6,268
Debtors: amounts falling due after more than 340 186 393
one year
5,797 4,065 6,661
Investments 505 32 164
Cash at bank and in hand 1,071 4,051 2,090
14,393 13,695 12,342
CREDITORS: amounts falling due within one year (9,959) (8,290) (8,743)
NET CURRENT ASSETS 4,434 5,405 3,599
TOTAL ASSETS LESS CURRENT LIABILITIES 14,012 14,083 15,095
CREDITORS: amounts falling due after more than (2,991) (2,918) (2,976)
one year
PROVISIONS FOR LIABILITIES (1,634) (1,986) (1,644)
MINORITY INTERESTS (566) (766) (1,217)
NET ASSETS 8,821 8,413 9,258
CAPITAL AND RESERVES
Called up share capital 457 452 456
Share premium account 33,207 33,070 33,189
Fair value of share options 110 63 88
Profit and loss account (24,953) (25,172) (24,475)
TOTAL EQUITY SHAREHOLDERS' FUNDS 8,821 8,413 9,258
GROUP STATEMENT OF CASH FLOWS
for the six months ended 30 June 2006
Six months Six months Year ended
ended ended 31 December
30 June 2006 30 June 2005 2005
Restated Restated
(Unaudited) (Unaudited)
£ '000 £ '000 £ '000
NET CASH (OUTFLOW) / INFLOW FROM OPERATING (1,907) (1,045) 372
ACTIVITIES (note 5)
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received 68 150 249
Interest paid (42) (58) (71)
Interest element of sale and finance leaseback (61) - (88)
rentals
Interest element of finance lease rentals (58) (4) (269)
(93) 88 (179)
TAXATION
Overseas tax refunded/(paid) 81 (93) (248)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments to acquire intangible fixed assets (5) (6) (27)
Payments to acquire tangible fixed assets (699) (1,700) (5,126)
Receipts from the sale of tangible fixed assets 2,451 43 213
1,747 (1,663) (4,940)
MANAGEMENT OF LIQUID RESOURCES
Increase in current asset investment (340) - (134)
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertaking (20) (80) (80)
Net cash acquired with subsidiary undertaking - 13 3
(20) (67) (77)
NET CASH OUTFLOW BEFORE FINANCING (532) (2,780) (5,206)
FINANCING
Proceeds from sale and finance leaseback - - 1,644
Increase in long term loans - 910 30
Sale and finance leaseback rentals (105) - (419)
Repayment of long term loans (27) (144) (50)
Repayment of capital element of finance leases (371) (433) (586)
Issue of ordinary share capital 19 118 240
DECREASE IN CASH (note 6) (1,016) (2,329) (4,347)
NOTES TO THE ACCOUNTS
1. BASIS OF PREPARATION
These unaudited interim financial statements, which are for the six months ended
30 June 2006, 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 2005 statutory accounts. The financial
information for the year ended 31 December 2005 is derived from the Group's
statutory accounts for that year, as restated for the implementation of FRS20 '
Share-based Payment', which have been delivered to the Registrar of Companies
and on which the Group's auditors gave an unqualified report and which did not
contain a statement under Section 237(2) or (3) of the Companies Act 1985 and
did not contain an emphasis of matter reference. The auditors have made a
report under Section 235 of the Companies Act 1985 on the statutory accounts for
the year ended 31 December 2005. The auditors have carried out a review of the
financial information for the six months ended 30 June 2006.
In preparing the financial statements for the six months ended 30 June 2006 the
Group has adopted FRS20 'Share-based Payment' and has restated comparatives
accordingly. All options granted after 7 November 2002 have been included in
the valuation. This has had the effect of increasing the loss reported at 30
June 2005 by £19,000 and at 31 December 2005 by £44,000. A reserve, 'Fair value
of share options', has been created. At 30 June 2005 this stood at £63,000 and
at 31 December 2005 £88,000.
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 Manufacturing
Extraction of supplying and
gas from coal operating Group
measures equipment total
£ '000 £ '000 £ '000
Six months ended 30 June 2006 (unaudited)
Sales to third parties 1,627 6,808 8,435
Profit/(loss) on ordinary activities before 187 (1,315) (1,128)
interest
Net finance costs (27) (122) (149)
Profit/(loss) before tax and minority interests 160 (1,437) (1,277)
Six months ended 30 June 2005 Restated
(unaudited)
Sales to third parties 675 3,951 4,626
Loss on ordinary activities before interest (619) (467) (1,086)
Net finance income/(costs) 82 (118) (36)
Loss before tax and minority interests (537) (585) (1,122)
Year ended 31 December 2005 Restated
Sales to third parties 2,036 17,549 19,585
Profit on ordinary activities before interest 29 280 309
Net finance income/(costs) 81 (264) (183)
Profit before tax and minority interests 110 16 126
Geographical segmental analysis United Continental Rest of Group
Kingdom Europe the World total
£ '000 £ '000 £ '000 £ '000
Six months ended 30 June 2006 (unaudited)
Sales to third parties 1,636 6,799 - 8,435
Loss on ordinary activities before interest (20) (1,108) - (1,128)
Net finance costs (26) (123) - (149)
Loss before tax and minority interests (46) (1,231) - (1,277)
Six months ended 30 June 2005 Restated
(unaudited)
Sales to third parties 444 4,182 - 4,626
(Loss)/profit on ordinary activities before (841) (250) 5 (1,086)
interest
Net finance income/(costs) 82 (118) - (36)
(Loss)/profit before tax and minority (759) (368) 5 (1,122)
interests
Year ended 31 December 2005 Restated
Sales to third parties 1,531 18,054 - 19,585
(Loss)/profit before tax and minority (524) 833 - 309
interests
Net finance income/(costs) 72 (255) - (183)
(Loss)/profit before tax and minority (452) 578 - 126
interests
3. LOSS PER ORDINARY SHARE
The basic and diluted loss per ordinary share is based on a loss of £520,000
(six months ended 30 June 2005: loss of £894,000; year ended 31 December 2005:
loss of £239,000) on a weighted average of 91,381,910 ordinary shares (six
months ended 30 June 2005: 89,829,303; year ended 31 December 2005: 90,424,387).
4. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Six months Six months Year ended
ended ended 31 December
30 June 2006 30 June 2005 2005
Restated Restated
(Unaudited) (Unaudited)
£ '000 £ '000 £ '000
Decrease in cash (1,016) (2,329) (4,347)
Proceeds from sale and finance leaseback - - (1,644)
Increase in long term loans - (910) (30)
Payment of sale and finance leaseback rentals 105 - 419
Repayment of long term loans 27 144 50
Repayment of capital element of finance leases 371 433 586
Purchase of liquid resources 340 - 134
CHANGE IN NET DEBT ARISING FROM CASH FLOWS (173) (2,662) (4,832)
Finance leases entered into (536) - -
Exchange rate differences (28) 133 84
MOVEMENT IN NET (DEBT)/ FUNDS (737) (2,529) (4,748)
NET (DEBT)/FUNDS AT START OF PERIOD (2,130) 2,591 2,618
NET (DEBT)/FUNDS AT END OF PERIOD (2,867) 62 (2,130)
5. RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING ACTIVITIES
Six months Six months Year ended
ended ended 31 December
30 June 2006 30 June 2005 2005
Restated Restated
(Unaudited) (Unaudited)
£ '000 £ '000 £ '000
Operating loss (1,128) (1,091) (1,061)
Exceptional item - operating - - 773
Depreciation 674 636 1,442
Amortisation 57 56 186
Fair value of share options 22 19 44
Increase in stock (3,563) (4,109) (1,965)
Decrease/(increase) in debtors 914 2,316 (388)
Increase in creditors 1,118 1,141 1,373
Decrease in provisions (1) (13) (32)
NET CASH (OUTFLOW)/INFLOW FROM OPERATING (1,907) (1,045) 372
ACTIVITIES
6. ANALYSIS OF NET DEBT
As at Cash Other Exchange As at
1 January flow non-cash rate 30 June
2006 Movements differences 2006
Restated (unaudited)
£ '000 £ '000 £ '000 £ '000 £ '000
Cash at bank and in hand 2,090 (1,019) - -
1,071
Overdraft (729) 3 - (7) (733)
1,361) (1,016) - (7) 338
Liquid resources 164 340 - 1 505
Sale and finance leaseback (1,225) 105 - - (1,120)
Long term loans (292) 27 - (3) (268)
Finance leases (2,138) (536) (19) (2,322)
371
(2,130) (173) (536) (28)
(2,867)
7. GENERAL NOTE
Copies of this interim report will be sent to registered shareholders and
further copies will be available from the Company's registered office.
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