Preliminary Results
Alkane Energy PLC
21 March 2007
For immediate release 21 March 2007
Alkane Energy plc
('Alkane', 'the Group' or 'the Company')
Unaudited preliminary results for the year ended 31 December 2006
Alkane is an international renewable energy company specialising in the design,
build, operation and servicing of climate change reduction and electricity
generation systems that use biogas, landfill gas, coal mine methane and sewage
gas as fuel.
Financial Highlights
• Pre-tax profit of £1,148,000 achieved in line with expectations
• Turnover increased by 39% to £27,319,000 (2005: £19,585,000)
• Operating profit of £1,117,000 (2005: loss £1,046,000, loss before
exceptionals £273,000)
• Profit before interest and taxation of £1,464,000 (2005: profit
£324,000, loss before exceptionals £248,000)
• Basic earnings per share 1.11p (2005: loss 0.25p)
• Net debt in 2006 £2,565,000, adjusted net debt reduced to £2,010,000
(2005: £2,130,000)
Operational Highlights
• Substantial growth in electricity sales to 59 million kWh (2005: 35
million kWh)
• Eight mine gas plants operational with capacity equivalent to 17MW
• Increasing political support for climate change reduction sector
Commenting on the preliminary results, Chief Executive, Dr Cameron Davies, said:
'I am pleased to report that Alkane has achieved a pre-tax profit of £1,148,000,
predominantly as a result of greater electricity generation capacity, favourable
energy prices, and tight control over costs. Our plants generated more than 59
million kilowatt hours of electricity in total during the year and reduced
carbon dioxide emissions equivalent to around 1,000 return flights from London
to New York. This achievement was made possible by the total commitment of
Alkane's team to complete projects on time and on budget.
In the UK, 2.7MW of decentralised generating capacity and the equivalent of 1MW
of direct gas supply was added in 2006 with three new plants having been opened.
Already, in 2007, an additional 1.35MW of generating capacity has been
installed on an existing site in order to maximise the use of our strategic
onshore gas reserves.
In Germany, Pro2 made good progress in 2006 and we expect to continue this in
2007 as the substantial firm order book is completed and the full benefit of new
financial management and controls is felt.
For further information please contact:
Alkane Energy plc Tel: 020 7466 5000 (Today)
Dr Cameron Davies Tel: 01623 827927
Buchanan Communications
Eric Burns Tel: 020 7466 5000 (Today)
Alastair Watson Tel: 01943 883990
Chairman's Statement
Introduction
I am pleased to announce a 39% increase in turnover to £27,319,000 and an
operating profit of £1,117,000 predominantly as a result of expanding our
installed electricity generation capacity and the backdrop of favourable energy
prices in the UK. During the year we brought on stream 2.7MW of new
decentralised generation capacity at Warsop and Mansfield 1, and at Mansfield 2
began direct gas sales via a pipeline to a new customer.
During the period, we took the opportunity to transfer one of our non-core
licences in exchange for £350,000 in cash plus access to two mine gas sites in
our core area of operation. The transfer represents a significant uplift in
value for Alkane and highlights the potential embedded value in the Group's
licence portfolio. Another licence, covering a flooded coal mine, was
transferred to a coal bed methane operator for £185,000 in the first quarter of
2007.
Improved financial management and control systems at Pro2, our German subsidiary
company, are already beginning to show benefit and, although profits at this
business were lower than expected, partly due to sales with a value of
£2,290,000 being pushed into 2007, the order book remains strong and we are
confident of a good out-turn for the current year.
Financial Overview
Alkane's turnover was 39% higher in 2006 at £27,319,000 compared to £19,585,000
in 2005. The Group made an operating profit of £1,117,000 (2005: loss
£1,046,000, loss before exceptionals £273,000). The earnings per share of 1.11p
is a substantial improvement over the loss per share of 0.25p in 2005.
Turnover in the UK business (including the Joarin mine gas project in Germany),
mainly achieved by the Group's eight mine gas plants, was £3,724,000 (2005:
£2,131,000) with an operating profit of £538,000 (2005: loss £1,463,000, loss
before exceptionals of £690,000). Profit before taxation was £822,000 compared
to a profit of £16,000 in 2005. (Before exceptionals there was a loss before
taxation of £456,000 in 2005).
In Germany, Pro2's sales in 2006 increased by 35% to £23,595,000 (2005:
£17,454,000). Sales with a value of £2,290,000 were deferred to 2007 due to the
bankruptcy of the original intended customer. The projects to which the sales
relate continue to be developed and we expect to make the sales in 2007.
Operating profit increased to £579,000 (2005: £417,000), and overall Pro2
contributed £144,000 to the Group profit compared to a loss of £70,000 in 2004.
Continued growth at Pro2 has meant that the £2,023,000 working capital loan
provided by Alkane in 2005 has been left in place to support the growing order
book. In parallel, negotiations are continuing with banks and finance providers
in Germany to refinance Pro2 with the injection of new equity and loan finance.
As a result of this, two planned new UK mine gas developments have been deferred
until later in the year and attention is currently focussed on expanding the
output from existing sites where the infrastructure is already in place.
In the UK, operating cash flows were positive, £674,000 inflow compared to
£85,000 in 2005. There was an operating cash outflow of £381,000 in Pro2 (2005:
inflow of £287,000) mainly due to the deferral of sales mentioned above.
Overall there was a net cash outflow of £594,000 (2004: £4,347,000) and the
Group finished the year with a slightly lower adjusted net debt (adjusted for
the effect of securities paid on finance lease transactions) of £2,010,000
compared with £2,130,000 at 31 December 2005. In the UK, there was a cash
outflow of £1,377,000, the majority of which was invested in the acquisition of
tangible fixed assets for projects developed during the year. At Pro2, overall
cash inflow was £783,000, with £2,388,000 coming from the sale and leaseback of
certain tangible fixed assets that were capitalised at the end of 2005.
Other operating income fell to £343,000, compared with £594,000 in 2005. This
was due to a reduction of £147,000 in consultancy income (one-off consultancy
fees of £150,000 were charged in 2005 in respect of the Fivemiletown biogas
project in Northern Ireland) and a reduction of £151,000 in payments received
from insurers in respect of the settlement of claims. The related costs are
included in administrative expenses.
The results for 2005 have been restated to reflect the implementation this year
of FRS20, 'Share-based payments'. The effect of the implementation was to
increase the reported loss in 2005 by £27,000.
Operating Review
UK Mine Gas Plants
Three new mine gas projects were completed during the year; Mansfield 1
(1.35MW), Mansfield 2 (gas sales), and Warsop (1.35MW). Mansfield 1 and Warsop
are decentralised power generation plants and Mansfield 2 supplies gas,
equivalent to approximately 1MW, direct to a customer for heating. Our
generating capacity has now increased to 10MW and total capacity is equivalent
to 16MW including direct gas sales to customers for heating and their own power
generation. Recently, in order to maximise the cash flow from exploitation of
our already developed gas reserves, we have transferred a 1.35MW generation
plant from Sherwood to the Mansfield site where capacity increased to 2.7MW.
This site is now operating at optimum production efficiency. We are currently
installing a smaller 0.7MW generator at Sherwood to resume generation at that
site.
The output from our portfolio of UK generation plants was 51 million kWh
compared with 23 million kWh in 2005, an increase of 123%. The quality of mine
gas from our boreholes and mine shafts remains good. Direct gas sales reduced
to 3.4 million therms (2005: 6.7 million therms) due to a pipe blockage at one
site.
Electricity sale prices from our sites averaged £45/MWh during 2006 (2005: £39/
MWh) and contributed strongly to our cash flow and profits. The recent fall in
wholesale electricity prices has led us to sign six month rather than longer
term supply contracts as and when these come up for renewal. Taking into
account contract renewals we expect the average price that we receive in 2007 to
be around £35/MWh. In addition to the wholesale price, UK mine gas projects
produce Climate Change Levy-exempt electricity and this adds around £3.50/MWh to
revenue from those projects. We anticipate that the lower average price
achieved for our output will be offset by increased production of electricity.
The economics of new sites are kept under constant review and as a result more
capacity is being installed on existing sites whilst the forward investment
programme has been confined to planning applications and land leases until a
clear view on the forward electricity curve becomes clearer later in the year.
Our mine gas plants in the UK and Germany continued to reduce methane emissions
from abandoned coal mines and in 2006 we captured the equivalent of 460,000
tonnes of carbon dioxide. This corresponds to saving the emissions from
approximately 1,000 return flights from London to New York and approximately 1.5
billion vehicle miles.
Pro2 Services Limited, our service and maintenance subsidiary, has now taken
over the majority of routine service and maintenance operations at Alkane's UK
generating and gas supply plants, replacing more expensive outsourced service
providers. It continues to provide gas flare and pumping system installation
and services for its other customers in the landfill gas and waste water
markets. Although this activity made a small loss of £25,000 in 2006, we expect
the company to be operating profitably in 2007.
Pro2 Anlagentechnik GmbH
Our German subsidiary Pro2 continued to expand its operations in its home market
and internationally. The German biogas market remained buoyant during the year
and saw rapid growth, whilst in France a new renewable energy law has
substantially improved the economics of power generation from biogas and
landfill gas. As a consequence of the favourable renewable energy market,
contracted orders are already in place for more than £15m of sales for delivery
in 2007.
Pro2 has now been reorganised into a series of profit centres with senior
managers taking responsibility for their own unit. A new finance manager with
an experienced support team has reorganised the financial control system,
installed new stock control software and implemented a full review of cost
inputs and profit margins. The improved financial management and control
systems at Pro2 are already beginning to show results with quicker and better
reporting of key performance indicators and management accounts. Negotiations on
the provision of new equity and loan finance for Pro2's continued expansion are
continuing with a consortium of investors and banks in Germany.
The biomass crops to biogas sector is expanding rapidly and Pro2's sales in this
market continue to grow rapidly. This expansion is expected to continue in line
with the German Government's target of 8,000 biogas plants installed by 2010
compared with around 3,000 at present. In addition, there has been a
significant rise in orders for renewable electricity generation plants that use
biodiesel derived from sustainable crops as fuel.
In the climate change sector, Pro2 has become the preferred technology partner
for a clean development mechanism (CDM) project finance fund in China and
continues to have strong interest from customers for the supply of its
greenhouse gas reduction systems to the carbon credits sector.
German CMM
Alkane has decided not to pursue its options over mine gas sites in Germany as
the results from exploratory boreholes drilled at no cost to Alkane were
disappointing. Joarin is generating steadily at around 1MW and in response to
the lower than expected gas flow, one of the 1.35MW containerised generators was
transferred to Warsop in the UK where it is operating profitably.
Prospects
In 2006, we built on the foundations laid in previous years and have succeeded
in bringing the Group into profit. The prospects for 2007 are encouraging, in
spite of lower electricity prices, as our own strategic gas reserves help to
keep input costs down. We intend to increase our involvement in the climate
change and renewable energy sectors that have risen to the top of the political
agenda. We are actively seeking to grow the Group in this market segment
through an acquisition or a merger with a similar business.
In closing, I would like to thank my colleagues in the UK and Germany for their
hard work and dedication in turning Alkane into a profitable business with good
growth prospects.
John Lander
Chairman
GROUP PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2006
2006 2005
(unaudited) Restated*
£ '000 £ '000
TURNOVER 27,319 19,585
Cost of sales (18,981) (13,948)
GROSS PROFIT 8,338 5,637
Administrative expenses - operating (7,564) (6,504)
Administrative expenses - exceptional (Note 2) - (773)
(7,564) (7,277)
Other operating income 343 594
OPERATING PROFIT/(LOSS) 1,117 (1,046)
(Loss)/profit on sale of fixed assets (2) 25
Profit on sale of licence 350 -
Adjustments in respect of costs of fundamental restructuring (Note 2) - 1,345
PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST 1,464 324
Interest receivable and similar income 124 214
Interest payable and similar charges (440) (397)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 1,148 141
Taxation (66) (225)
PROFIT/(LOSS) ON ORDINARY ACTIVITIES AFTER TAXATION 1,082 (84)
Minority interests (67) (138)
PROFIT/(LOSS) FOR THE FINANCIAL YEAR 1,015 (222)
Earnings/(loss) per ordinary share - basic 1.11p (0.25p)
Earnings/(loss) per ordinary share - diluted 1.09p (0.25p)
All turnover and results relate to continuing activities.
The earnings/(loss) per ordinary share calculation represents total and
continuing results
*Restated for FRS20 'Share-based payments'.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
2006 2005
(unaudited) Restated
£ '000 £ '000
Profit/(loss) for the financial year 1,015 (222)
Exchange rate differences (86) (73)
929 (295)
Prior year adjustment - share based payments (56)
TOTAL RECOGNISED GAINS AND LOSSES 873
There was no change in net assets as at 1 January 2006 as a result of the
implementation of FRS20 'Share-based payments'.
GROUP BALANCE SHEET
at 31 December 2006
2006 2005
(unaudited) Restated
£'000 £'000
FIXED ASSETS
Intangible assets 685 793
Tangible fixed assets - gas properties 6,241 4,997
Tangible fixed assets - other 3,576 5,706
9,817 10,703
Investments 3 -
10,505 11,496
CURRENT ASSETS
Stock 6,631 3,427
Debtors: amounts falling due within one year 7,036 6,268
Debtors: amounts falling due after more than 732 393
one year
7,768 6,661
Investments 512 164
Cash at bank and in hand 946 2,090
15,857 12,342
CREDITORS: amounts falling due within one year (10,256) (8,743)
NET CURRENT ASSETS 5,601 3,599
TOTAL ASSETS LESS CURRENT LIABILITIES 16,106 15,095
CREDITORS: amounts falling due after more than (2,982) (2,976)
one year
PROVISIONS FOR LIABILITIES (1,603) (1,644)
MINORITY INTERESTS (1,261) (1,217)
NET ASSETS 10,260 9,258
CAPITAL AND RESERVES
Called up share capital 459 456
Share premium account 33,234 33,189
Fair value of share options 81 56
Profit and loss account (23,514) (24,443)
TOTAL EQUITY SHAREHOLDERS' FUNDS 10,260 9,258
GROUP STATEMENT OF CASH FLOWS
for the twelve months ended 31 December 2006
2006 2005
(unaudited) Restated
£ '000 £ '000
NET CASH INFLOW FROM OPERATING ACTIVITIES 293 372
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received 122 249
Interest paid (65) (71)
Interest element of sale and finance leaseback rentals (137) (88)
Interest element of finance lease rental payments (207) (269)
(287) (179)
TAXATION
Overseas tax paid (151) (248)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments to acquire intangible fixed assets (5) (27)
Payments to acquire tangible fixed assets (1,852) (5,126)
Receipts from the sale of tangible fixed assets 2,388 213
Receipts from the sale of licences 350 -
Payments in respect of securities* (555) -
326 (4,940)
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertaking (20) (80)
Net cash acquired with subsidiary undertaking - 3
(20) (77)
MANAGEMENT OF LIQUID RESOURCES
Increase in current asset investment (351) (134)
NET CASH OUTFLOW BEFORE FINANCING (190) (5,206)
FINANCING
Proceeds from sale and finance leaseback 550 1,644
Increase in long term loans - 30
Sale and finance leaseback rental payments (243) (419)
Repayment of long term loans (60) (50)
Capital element of finance lease rental payments (699) (586)
Issue of ordinary share capital 48 240
DECREASE IN CASH (594) (4,347)
* This relates to securities given under sale and leaseback transactions
NOTES TO THE ACCOUNTS
1. The preliminary unaudited financial statements for the year ended 31
December 2006 were approved by the board of directors on 20 March 2007. They
were prepared on the same basis and with the same accounting policies as set out
in the accounts for the year ended 31 December 2005, except for the
implementation of FRS20 'Share-based payments'.
2. EXCEPTIONAL ITEMS
2006 2005
(unaudited) Restated
£ '000 £ '000
Operating:
Impairment of tangible fixed assets - gas properties (note a) - (524)
Write-down of advances made (note b) - (249)
- (773)
Non-Operating:
Reversal of impairment of tangible fixed assets - gas - 967
properties (note a)
Reassessment of provision for the restoration of sites (note c) - 378
- 1,345
a. During 2003 a fundamental restructuring of the business was implemented
following the decision taken by the Group to suspend the development of new mine
gas projects in the UK and to pursue a new strategy. UK development sites were
written down to nil. Operating sites were written down to reflect their value
in use. This was determined using a discounted cash flow model applying a
discount rate of 10% reflecting the expected return on capital of such projects.
As a result of sustained increases in wholesale electricity prices the
development of new mine gas projects in the UK recommenced in 2005. Accordingly
a review was made in 2005 of sites in operation at 31 December 2005 and a
further calculation made of their value in use over their expected useful life
of up to 10 years, applying a discount rate of 10%. This resulted in a £967,000
reversal of the previous impairment and a further impairment of £524,000 within
fixed assets - gas properties.
b. in 2005 the development of a potential biogas project in Fivemiletown in
Northern Ireland was halted after a failure to secure land and planning
permission, and the Group withdrew from the development of large-scale biogas
projects. The costs written off in 2005 were £249,000 representing the amount
advanced by Alkane Biogas Limited, a subsidiary undertaking, to Biogas Ireland
Limited, together with other costs associated with the withdrawal.
c. As part of the fundamental reorganisation referred to in note a, a provision
of £2,000,000 for the restoration of all sites as required under the terms of
planning permissions or under lease conditions was established. It was
anticipated that most of the provision would be utilised within the next two
financial years, therefore the amount of the provision was not discounted.
As stated in note a, the development of new mine gas projects in the UK
recommenced in 2005. Accordingly the timing of the utilisation of the provision
has been extended to be over the period up to 2015. It then became appropriate
that discounting was applied. The provision was reassessed taking account of
utilisation to date and new sites added, and a discount rate of 10% was applied.
The amount of the provision on this basis was £1,588,000.
3. EARNINGS PER ORDINARY SHARE
The earnings per ordinary share are based on a profit of £1,015,000 (2005
restated: loss of £222,000) on a weighted average of 91,540,638 ordinary shares
(2005 restated: 90,424,387).
Diluted earnings per ordinary share are based on a weighted average of
93,214,959 ordinary shares - this represents a dilution by 1,674,321 ordinary
shares in respect of share options held by directors and employees. The loss
attributable to ordinary shareholders and the number of shares for the purpose
of calculating the diluted loss per ordinary share for 2005 are identical to
those used for the basic loss per share. This is because the exercise of share
options would have the result of reducing the loss per ordinary share in that
year, and is therefore not dilutive under the terms of FRS22 'Earnings per
share'.
4. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2006 2005
(unaudited) Restated
£ '000 £ '000
Decrease in cash (594) (4,347)
Proceeds from sale and finance leaseback (550) (1,644)
Increase in long term loans - (30)
Repayment of sale and finance leaseback rentals 243 419
Repayment of long term loans 60 50
Capital element of finance lease rental payments 699 586
Purchase of liquid resources 351 134
CHANGE IN NET DEBT ARISING FROM CASH FLOWS 209 (4,832)
Finance leases entered into (698) -
Exchange rate differences 54 84
CHANGE IN NET DEBT (435) (4,748)
NET (DEBT)/FUNDS AT 1 JANUARY - RESTATED (2,130) 2,618
NET DEBT AT 31 DECEMBER (2,565) (2,130)
5. RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING ACTIVITIES
2006 2005
(unaudited) Restated
£ '000 £ '000
Operating profit/(loss) 1,117 (1,046)
Exceptional items - operating - 773
Depreciation 1,373 1,442
Amortisation 112 186
Fair value of share options 28 29
Increase in stock (3,270) (1,965)
Increase in debtors (640) (388)
Increase/(decrease) in creditors 1,611 1,373
Decrease in provisions (38) (32)
NET CASH INFLOW FROM OPERATING ACTIVITIES 293 372
6. ANALYSIS OF NET DEBT
As at Cash flow Exchange As at
1st January Other rate 31 December
2006 non-cash differences 2006
Restated movements (unaudited)
£ '000 £ '000 £ '000 £ '000 £ '000
Cash at bank and in hand 2,090 (1,141) - (3) 946
Overdraft (729) 547 - 14 (168)
1,361 (594) - 11 778
Liquid resources 164 351 - (3) 512
Sale and finance leaseback (1,225) (307) - - (1,532)
Long term loans (292) 60 - 5 (227)
Finance leases (2,138) 699 (698) 41 (2,096)
NET DEBT (2,130) 209 (698) 54 (2,565)
Security on sale and leaseback - 555 - - 555
ADJUSTED NET DEBT* (2,130) 764 (698) 54 (2,010)
* This includes the effect of securities paid on finance lease transactions
which is closely related to those items.
7. GENERAL NOTE
a. The preliminary unaudited financial information set out
above does not constitute full accounts within the meaning of Section 240 of the
Companies Act 1985.
b. Audited statutory accounts in respect of the year ended 31
December 2005 have been delivered to the Registrar of Companies and those
accounts were subject to an unqualified report by the auditors and did not
contain an emphasis of matter reference or a statement under Section 237 (2) or
(3) of the Companies Act 1985.
c. Copies of the audited annual report and accounts for the
year ended 31 December 2006 will be sent to shareholders during April 2007 and
will be available from the Company's registered office - Edwinstowe House, High
Street, Edwinstowe, Nottinghamshire NG21 9PR.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 1 day ago The Renewables Infrastructure Group Limited
- 1 day ago The Renewables Infrastructure Group Limited
- 1 day ago Smurfit Westrock (DI)
- 1 day ago Menhaden Resource Efficiency
- 1 day ago BP