Preliminary Results
EcoSecurities Group plc
27 February 2007
EcoSecurities Group plc
("EcoSecurities" or "the Group")
Preliminary Results For The Year Ended 31 December 2006
Dublin, Ireland - EcoSecurities Group plc ("EcoSecurities", or the "Group"), one
of the world's leading companies in the business of originating, implementing
and commercialising carbon credits from greenhouse gas emission reduction
projects, today announces its preliminary results for the year ended 31 December
2006.
Highlights
• Robust origination activity with 201 new projects added to the Group's
portfolio during the year, bringing the total to 353, up 132%.
• The Group's Certified Emission Reductions (CER) portfolio grew by 66
million tonnes in 2006 representing an increase of 73% during the year, bringing
the total gross contract volume to 156 million tonnes which is one of the
world's largest portfolios of CERs. In line with the Group's policy of
continually assessing the projects within the portfolio for expected operating
and regulatory performance, this total takes into account volume adjustments.
• On a net basis to EcoSecurities the CER portfolio grew by 119%, from
58 million tonnes to 127 million tonnes, due to the Group's focus on principal
projects and the purchase of CERs from projects where the Group previously had a
shared interest.
• The project portfolio now spans 36 countries and has further
diversified with 18 emissions reduction technologies and processes represented.
• Strategic business development agreements were signed with Standard
Bank and UOB Kay Hian to enhance project origination activities in South Africa
and Southeast Asia respectively.
• Accelerated implementation progress during the year with the number of
projects registered by the Group with the CDM Executive Board increasing to 53
at year end (2005: 13) demonstrating the success of the Group's efforts despite
a challenging regulatory environment.
• Demand for carbon credits was robust, forward sale agreements for CERs
totaling €287 million were completed during the year.
• Excellent progress made in the development of new markets with offices
and representatives opened in nine locations, expanding the Group's presence to
23 offices in 21 countries. The Group continued to expand rapidly in order to
take advantage of market opportunities, within cost expectations, and now has a
dominant platform in the CDM carbon credit project business.
• Project investment platform established, and €7 million of project
investments were committed during the year.
• Revenues for the year were up 35% to € 3.1 million, derived from
consulting activities, the first spot sales of CERs and from initial delivery of
CERs from a few projects, namely a landfill gas project in China, biomass fuel
switch projects in Brazil and a geothermal power project in Nicaragua.
• Loss before tax of €(19.5) million reflects expansion of headcount and
the geographic network and is in line with our expectations. The Group
maintained a strong net working capital balance of €48.3 million at 31 December
2006.
• Current trading and outlook is encouraging:
• The gross CER portfolio volume increased to 163 million tonnes at 15
February 2007, with 21 new projects added since 2006 year end.
• The Group continues to focus on principal agreements to maximise its
interest related to the carbon credits created.
• The external process of CDM project validation, host country approval
and CDM EB registration has been difficult over the past year and continues to
be challenging.
• Underlying development of the projects in the portfolio continued to
progress with 80 projects in the construction phase at present.
• Operational projects increased to 130 to date. These are expected to
produce 56 million CERs through to 2012.
• The expected Net Trading Margin on forward CER sales of 29 million
tonnes at 15 February 2007 totaled €154m which is up by €3m since year end.
Market interest in Japan has remained strong despite recent weakness in EUA
prices.
• Prices for Phase 2 EUAs have been soft during the year to date. The
divergence of Phase 1 and 2 EUAs prices has also focused demand for CERs on 2008
initial delivery dates.
• Capitalising upon its leading CDM project platform, the Group intends
to capture new opportunities resulting from a significant increase in investor
interest in emissions reductions projects, an increase in CER trading
opportunities in the secondary market, a dramatic change in the U.S. carbon
markets, and rapid growth in the global market for verified emissions reductions
for voluntary transactions.
• In this context, the Group's first agreement for the sale of Verified
Emissions Reductions to a voluntary emissions reduction retailer has been
agreed.
• Acquired the business of Trexler Climate + Energy Services, a
US-based, internationally recognized leader in the emerging field of climate
change risk management, to accelerate the Group's expansion and market
development activities in the US where carbon market interest is rapidly
increasing.
• Offices and representatives have been placed in 4 new locations,
including the Ukraine, Poland, and the Middle East(2), since year end, to expand
the Group's reach into new markets.
• The combination of progress in carbon market development, a heightened
global interest in resolving climate change (e.g., publication of the Stern
Report and the IPCC 4th Assessment Report), and the success of the Group's
operating platform to date, points towards a positive outlook for the coming
year.
Mark Nicholls, Chairman of EcoSecurities, commented: "Many external developments
led to increased public awareness of climate change and improved the overall
environment for carbon trading in 2006. Looking ahead, tighter EU emissions
targets brought about by recent EU ETS National Allocation Plans, and
accelerating policy momentum in the United States, especially in California,
will contribute to the Group's further development in the global carbon market
in 2007."
"In 2007 the Group intends to build further upon its leadership position. In
addition to its core business within the CDM, EcoSecurities intends to expand
into the voluntary emissions reductions market as well as into the emerging US
market. Furthermore, the acquisition of Trexler Climate + Energy Services'
business, will enable the Group to move forward quickly into the emerging
domestic emissions reduction market in the US. In the capital markets, the
Group is pursuing opportunities related to secondary trading of CERs in addition
to arranging investments in emission reduction projects."
"The accelerating development of both the carbon market and of the Group's
operations in 2006, associated with an excellent start to the current financial
year, gives the Board confidence for continued growth in 2007 and beyond."
Analyst Meeting
The Group is holding a meeting for analysts today at 12:00 GMT. Analysts
wishing to attend should contact Ged Brumby at Citigate Dewe Rogerson on 020
7638 9571 (ged.brumby@citigatedr.co.uk) for further details.
For further information please contact:
EcoSecurities Group plc
Bruce Usher, CEO (27.02.07) 020 7638 9571
Pedro Moura Costa, COO (Thereafter) +353 1613 9814
Citigate Dewe Rogerson +44 (0) 20 7638 9571
Kevin Smith / Ged Brumby
The Preliminary Results accompany this press release.
About EcoSecurities:
EcoSecurities is one of the world's leading companies in the business of
originating, developing and trading carbon credits. EcoSecurities structures and
guides greenhouse gas emission reduction projects through the Kyoto Protocol,
working with both project developers and buyers of carbon credits.
EcoSecurities works with companies in developing and industrialising countries
to create carbon credits from projects that reduce emissions of greenhouse
gases. EcoSecurities has experience with projects in the areas of renewable
energy, agriculture and urban waste management, industrial efficiency, and
forestry. With a network of offices and representatives in 26 countries on five
continents, EcoSecurities has amassed one of the industry's largest and most
diversified portfolios of carbon projects. Today, the Group is working on 374
projects in 36 countries using 18 different technologies (encompassing 29
approved CDM methodologies), with the potential to generate more than 163
million carbon credits.
EcoSecurities also works with companies in the developed world to assist them in
meeting their greenhouse gas emission compliance targets. Utilising its highly
diversified carbon credit portfolio, EcoSecurities is able to structure carbon
credit transactions to fit compliance buyer's needs, and has executed
transactions with both private and public sector buyers in Europe, North America
and Japan.
Working at the forefront of carbon market development, EcoSecurities has been
involved in the development of many of the global carbon market's most important
milestones, including developing the world's first CDM project to be registered
under the Kyoto Protocol. EcoSecurities' consultancy division has been at the
forefront of significant policy and scientific developments in this field.
EcoSecurities has been recognised as the world's leading greenhouse gas advisory
firm over the last five years by reader surveys conducted by Environmental
Finance Magazine.
EcoSecurities Group plc is listed on the London Stock Exchange AIM (ticker ECO).
Additional information is available at www.ecosecurities.com.
Chairman's Statement
EcoSecurities' first full year of trading as a public company proved successful
with the Group achieving many significant milestones in regards to the
origination, implementation and commercialisation of Certified Emission
Reductions ("CERs" or "carbon credits"). The progress of the Group during the
year was made possible by the IPO in 2005 as well as continued carbon market
growth. This progress demonstrated that building a balance sheet and fully
developing a platform to originate, implement and commercialise carbon credit
projects in emerging markets has been a formula for success. During the year,
the Group brought 201 new projects into its portfolio which comprised at year
end 353 projects capable of generating 156 million tonnes of emissions
reductions. In line with the Group's policy of continually assessing the
projects within the portfolio for expected operating and regulatory performance,
this total takes into account volume adjustments for projects which are highly
uncertain. To demonstrate the scale of the positive impact that these projects
are having on the environment, these reductions are greater than the entire
emissions from France and Sweden regulated by the EU Emissions Trading Scheme ("
EU ETS") during 2005. It is also pleasing to note that this progress was made
while keeping costs within expectations and retaining a larger than expected
cash balance.
Substantial headway was made in the development of new markets in Asia, the
Middle East, Africa, Latin America and the US during the year, with projects in
36 countries at year end. The Group increased staffing levels throughout the
year to improve its ability to originate and implement projects, and headcount
grew by 146%. Reflecting its global outlook, EcoSecurities has evolved into a
broadly multinational and multicultural company with its employees representing
over 40 nationalities.
In terms of processing the Group's project portfolio through the Clean
Development Mechanism's ("CDM") approval cycle, 40 of its projects were
registered with the CDM in 2006 and the Group's project portfolio has now begun
to produce CERs and generate revenues. This significant milestone was achieved
despite the well publicised industry-wide delays experienced in projects
obtaining external validation and verification, host country approval and in
obtaining registration with the CDM Executive Board ("CDM EB").
The Group has also led the industry in the commercialisation of its emissions
reduction portfolio with forward CER sales contracts representing future
revenues of €287m entered into during the year. Additionally, the Group sold
the first CERs issued from its projects into the spot market. A highlight of
the year was the emergence of Japan as a sizeable buyer of CERs.
As a complement to its project origination efforts, the Group established an
investment team to capitalise on project opportunities which require direct
investment. The team focuses on projects where the primary revenue stream
results from the production and sale of carbon credits, and made 32 investments
throughout the year.
EcoSecurities continues to be recognized as a market leader. In 2006 it was
voted 'Best Project Developer' by Point Carbon and by a readers' survey
conducted by the UK's Environmental Finance Magazine. The same survey elected
EcoSecurities' consulting division the 'Best GHG Advisory Group' for the sixth
consecutive year.
Many external developments led to increased public awareness of climate change
and improved the overall environment for carbon trading in 2006. In particular,
the publication of the Stern Report in the UK has helped focus attention on the
urgency of this subject and strongly emphasised the need for emissions trading
and carbon credits as a means to tackling this challenge. This was reinforced by
the publication of the 4th Assessment Report of the Intergovernmental Panel on
Climate Change, in January of 2007, which established that the main cause of
climate change is man-made. Looking ahead, tighter EU emissions targets brought
about by recent EU ETS National Allocation Plans, and accelerating policy
momentum in the United States, especially in California, will contribute to the
Group's further development in the global carbon market in 2007.
In 2007 the Group intends to build further upon its leadership position. In
addition to its core business within the CDM, EcoSecurities intends to expand
into the voluntary emissions reductions market as well as into the emerging US
carbon market. Furthermore, the acquisition of Trexler Climate + Energy
Services' business, which is being announced today, will enable the Group to
move forward quickly into the emerging domestic emissions reduction market in
the US. In the capital markets, the Group is pursuing opportunities related to
secondary trading of CERs in addition to arranging investments in emission
reduction projects.
The accelerating development of both the carbon market and of the Group's
operations in 2006, associated with an excellent start to the current financial
year, gives the Board confidence for continued growth in 2007 and beyond. "
Mark Nicholls
Chairman
Executive Directors' Review
Year-end 2006 marked both the end of EcoSecurities first full year on the London
AIM market and a year of rapid expansion and major milestone achievements. The
Group's geographic reach and depth of expertise have enabled it to build upon
its industry leadership in terms of portfolio size, growing its CER portfolio by
66 million tonnes during the year. The portfolio at the year end comprised 353
projects capable of generating up to 156m tonnes of emission reductions. The
Group's policy is to continually assess projects within the portfolio for
expected future operating and regulatory performance; the portfolio total takes
into account volume adjustments for projects which are highly uncertain. The
Group's market share remained significant, as 53 of the more than 400 projects
registered by the CDM Executive Board at year end were implemented by
EcoSecurities. Furthermore, the Group established itself as a market leader in
carbon credit commercialisation, by selling forward a further 22 million CERs
during the year, which are expected to generate €140 million in net trading
margins to the Group.
EcoSecurities continued its tradition of "firsts" in 2006, such as developing
the Nanjing landfill gas to energy project, the first project ever to receive
CERs in China. The Group also entered the market for nitrous oxide emission
reduction projects and by year end had one the world's largest portfolio of
these projects. In addition, the Group undertook its first project investments,
and by year end had agreed to invest up to €7 million in 32 emissions reduction
projects.
Carbon markets experienced a volatile year in 2006 primarily due to uncertainty
over EU ETS National Allocation plans. Despite this volatility, the Group's
core activities prospered and growth in our portfolio of carbon credits projects
exceeded our expectations. Positive developments related to tougher national
allocations in Phase 2 of the EU ETS, as well as an accelerating policy momentum
in the Japanese and US markets, set the stage for a strong business environment
in 2007.
Origination
Origination of CDM projects during 2006 exceeded Directors' expectations. During
the year, 201 projects were added to the Group's portfolio, increasing the gross
contract volume by 73% from 90 million tonnes to 156 million tonnes. On a net
basis to EcoSecurities, i.e. adjusting for contract type (principal, project
development or agency), the portfolio grew from 58 million tonnes to 127 million
tonnes. The increase in net ownership of CERs was primarily due to a focus on
principal contracts for the purchase of CERs from CDM projects and to the
restructuring of its EcoMethane joint venture with Biogas Technology Ltd.,
whereby the Group will now acquire all the CERs generated from EcoMethane's
landfill gas projects.
The Group's portfolio also increased in technology diversification, with a main
highlight on the contracting of 26 projects in China which are expected to
reduce emissions of nitrous oxide, a greenhouse gas 310 times more potent than
CO2, which are capable of producing up to 20 million CERs to 2012. In order to
maintain geographical diversification, the Group continued its global expansion
by adding representative offices in Morocco, Jordan, Kenya, Guatemala, Malaysia,
Pakistan, the Philippines, South Africa, and Singapore. This brought the total
number of offices and representative offices to 23 at year end (2005:14).
EcoSecurities also signed strategic agreements with Standard Bank (the largest
retail bank in South Africa) and UOB Kay Hian (a division of the second largest
bank in Singapore) to maximise project origination activities in South Africa
and Southeast Asia.
Implementation
Despite the numerous delays experienced in external validation of projects,
obtaining host country approval and with the CDM EB in the processing of
projects, the number of projects registered by the Group increased to 53 (2005:
13) at year end. These registered projects are capable of producing 16 million
CERs through to 2012.
Of the 353 projects at contract and term sheet stage in total at year end, 283
were financed, more than 132 had completed Project Design Documents, 65 had been
validated and 67 had received Host Nation Approval. A total of 84 projects in
EcoSecurities portfolio were already operating at year end, and these alone are
capable of producing 39 million CERs through to 2012.
Key highlights of the CDM project implementation process for the Group included
the registration of the first poultry litter biomass-to-electricity project in
India and the registration of 28 methane recovery and electricity generation
projects in Mexico and the Philippines. In 2006, the CDM EB approved two new
methodologies relating to nitrous oxide and forestry activities, sectors in
which the Group has demonstrable expertise and exposure. Furthermore, the Group
conducted CER verifications for seven projects during the year.
Commercialisation
The Group made particularly strong progress in 2006 commercialising CERs. A
total of 29 million CERs had been sold forward at year end, up from 7 million in
2005 which represents expected total forward CER revenues of €328 million and
net trading margin of €151 million respectively. The Group's forward CER sales
margins have been strong during the year due to a number of factors including a
stronger balance sheet and the growth of the Group's portfolio which diversifies
risk and improves pricing.
2006 marked the first year the Group realized principal trading revenues
resulting from the sale of CERs produced by several projects, including a
landfill gas project in China, biomass fuel switch projects in Brazil and a
geothermal power project in Nicaragua.
Consulting
2006 was a year of expansion for EcoSecurities' consultancy division, which grew
its headcount to 18 at year end (2005: 10). This expansion in qualified
personnel required an expected increase in training resources and an adjustment
to operating as a larger function, but significantly enhanced the division's
ability to add value to the Group. The team spent a large part of the year
providing support to internal business development throughout the Group as part
of the rapid expansion of its operations. The division was also successful in
securing multiple sales to existing multinational clients such as the European
Investment Bank, Gas Natural from Spain, ESKOM from South Africa, and Sappi from
South Africa, demonstrating high levels of customer retention and satisfaction.
The division enjoyed continued success with methodology development, developing
four new methodologies that were ultimately approved by the CDM Methodology
Panel in 2006, bringing the Group's total to 13.
The Group is today announcing that it acquired the business of Trexler Climate +
Energy Services, an internationally recognized leader in the emerging field of
climate change risk management, operating in this sector since 1991. Based in
Portland, Oregon, USA, Trexler specialises in climate change mitigation
policies, projects and technologies, and will be merged with EcoSecurities'
existing Consultancy Division to create EcoSecurities Global Consulting
Services. The combined entity will provide strategic advisory services on a
global scale and significantly expands the Group's activities in the US market.
Operations
The Group developed its operational infrastructure during the year to support
its rapid development. A key achievement was the development of a bespoke
database to manage its growing portfolio of projects through the origination,
implementation and commercialisation process
Outlook
Prospects for 2007 are positive given the Group's leading position in the carbon
market. The Group's core business model - the global origination,
implementation, and commercialisation of carbon credits under the CDM - is
operating very successfully, and it is anticipated that EcoSecurities will be
able to generate CERs from an increasing number of projects that were originated
in prior years, thereby contributing to significant revenue growth. The Group
intends to continue to aggressively grow the number of projects and carbon
credits contracted, thereby expanding its diversified portfolio. Furthermore,
given the Group's pre-eminent position in the global emissions reductions
markets, in 2007 EcoSecurities intends to take advantage of previously untapped
opportunities. These include:
(i) arranging investment from third party capital providers seeking emission
reduction projects;
(ii) aggressively expanding in the United States to take advantage of the rapid
development in state and pending national cap and trade programs;
(iii) increased trading of secondary CERs as the market develops; and
(iv) originating Verified/Voluntary Emissions Reductions (VERs) from projects
in order to become a wholesale provider of VERs to the many voluntary
offset markets that are rapidly developing in Europe and the U.S.
EcoSecurities plans to continue to expand its global network to capitalise fully
on the volume of available project opportunities. The Group anticipates that
the expansion in the number of local offices and personnel will continue to
provide it with a competitive advantage in the origination of project
opportunities. Since year end offices and representatives have been placed in 4
new locations, including the Ukraine, Poland, and the Middle East.
The process of CDM project validation, host country approval and registration
has been difficult over the past year and continues to be challenging. However,
the Group expects that the number of its projects operating and generating
emissions reductions will grow significantly and that the CDM registration
process should become more efficient due to increased interaction between the
CDM EB, the CDM Secretariat and industry. Furthermore, the Group has planned a
significant expansion of its monitoring team, so that project performance can be
followed more closely to increase the likelihood of projects receiving CERs
within its initial expectations.
Lastly, with increasing awareness of climate change and the resulting expansion
of the voluntary carbon markets in the US and internationally, the Group intends
to expand into these markets through the provision of corporate strategy
services (carbon footprinting, carbon offsetting and internal emission reduction
measures) and becoming a supplier of VERs to these segments. The acquisition of
Trexler Climate + Energy Services' business will have an immediate impact on
EcoSecurities' presence in the rapidly developing U.S. carbon market and will
leverage the development of our voluntary market business.
In summary, our strategy for the year ahead is to maintain our primary focus on
originating, implementing and commercialising a highly diversified portfolio of
emission reduction projects, and to capitalise upon new opportunities that can
be easily leveraged from our core business. These opportunities result from a
significant increase in investor interest in emissions reductions projects, an
increase in CER trading opportunities in the secondary market, a dramatic change
in the U.S. carbon markets, and rapid growth in the global market for Voluntary
Emissions Reductions. It is our expectation that the combined strength of our
geographic network of local offices, the expertise of our operating units and
our highly diversified portfolio, leaves the Group well positioned to react
quickly and to maximise the value of these exciting new opportunities.
Financial Review
Income statement
Group revenue rose by 35% to €3.1milllion driven primarily by the
commercialisation of 0.4m CERs over the course of the year. This marked the
realisation by the Group of its carbon credit project origination,
implementation and commercialisation focus over the past several years.
Consulting income decreased during 2006 and was lower than expected, resulting
from the focus on internal CDM project implementation. Margins on sales were as
expected, with the majority of CER sales during the year relating to agency
projects.
The growth in administrative expenses during the year are in line with
management's expectations and reflects the investment made in establishing the
Group's global operational presence. The primary business expense was in respect
to staff and staff related costs with headcount increasing from 85 to 209 during
the year.
Financing income totalled €2.4m mainly comprising interest earned from short
term bank deposits. Financing costs totalled €0.9 which was comprised of
interest on long term debt with Credit Suisse and unrealised exchange
differences on the Group's financial assets and liabilities.
While the Group as a whole operated at a loss, it incurred a tax charge of €0.6m
during the year due to tax charges at subsidiary company level.
The retained loss for the year increased to €20.0m in 2006 (2005: €4.3m)
resulting from higher costs due to an expansion in headcount of 135%, increasing
the number of offices and representatives by over 50% and increased public
company administration costs.
Balance sheet
Intangible assets increased by €3.3m during the year reflecting the Group's
policy to capitalise identifiable costs related to CDM project implementation.
Direct investment in project related facilities totalled €1.4m relating directly
to emissions reduction and related equipment together with €1.5m in other
project investments, capitalised labour and project development expenditure
which, in accordance with the Group's accounting policies, are deferred and
amortised based on expected future CER flows from the projects. In total, 32
CDM project investments were made in 8 countries. Non-current trade and other
receivables grew during the year to €0.5m due mainly to reimbursable CDM project
payments.
Current trade receivables grew during the year to €1.9m from €0.4m due mainly to
sales of CERs during the year, expected to be settled in 2007. Cash balances
declined during the year in accordance with the budgeted growth in operations,
though project related investments were lower than expected. Current trade and
other payables grew due to the future settlement of carbon trading activities
during the year and accrual of certain administrative expenses. Non-current
trade payables grew due to the receipt of a €3.0m premium on a call option
granted by the company on CERs to a European Government.
The increase in share capital and the share premium account during the year
reflects the exercise of employee share options and the reversal of an excess
provision in respect of IPO expenses in the share premium account.
Cash flow
The development of the Group's overseas operations resulted in operating cash
out flows of €13.0m during the year. The Group identified a number of CDM
project opportunities into which it invested €2.2m during the year. In addition,
the expansion of personnel, facilities and establishment of overseas operations
resulted in €1.3m of capital expenditure. The cash out flow from investing
activities totalled €6.2m which primarily consisted of project related
investments and office related equipment, although the level of investment
activity was lower than expected. Included within investing cash flows are
structured notes acquired by the Group for €1.3m which provide for future
deliveries of CERs. In respect of financing cash flows, the Group paid IPO
expenses of €2.2m. Restricted cash deposits grew during the year due to the
increased collateral requirements related to the growth in forward sales of
CERs. The depreciation of the US dollar over the course of 2006 resulted in the
majority of unrealised exchange differences on cash deposits of €1.1m. Overall,
cash out flows totalled €28.5m leaving strong year end cash reserves of €60.5m.
Impacts of IFRS
IFRS 2 requires all share-based transactions to be fair valued and a charge made
to the Income Statement to reflect the future 'cost' of their provision. The
Group has three share-based compensation schemes and in this period their
collective impact was to increase loss after tax by €0.4 million.
Hedging Policies
The Group has a treasury and commercial hedging policy that covers interest
rate, foreign exchange and commodity price hedging. Normally and where
appropriate, the Company may hedge up to 50% of anticipated net production of
carbon credits to protect cashflows against commodity price and exchange rate
fluctuation. Also, the Group maintains cash balances in major operating
currencies relative to operational cash requirements in those currencies and
uses other hedging arrangements in relation to specific currency exposures when
prudent.
EcoSecurities Group plc
Consolidated Income Statement for the year ended 31 December 2006
Year ended Year ended
31 December 31 December
2006 2005
€'000 €'000
Revenue 3,073 2,268
Cost of sales (1,374) (2,166)
Gross profit 1,699 102
Other operating income - 47
Administrative expenses (22,997) (3,350)
IPO preparation expenses 277 (1,286)
Net profit on disposal of joint ventures - 498
Loss before financing costs (21,021) (3,989)
Finance costs (857) (339)
Finance income 2,405 125
Loss before tax (19,473) (4,203)
Income tax expense (573) (115)
Loss for the financial year (20,046) (4,318)
Attributable to:
Equity holders of the Company (20,046) (4,344)
Minority interest - 26
(20,046) (4,318)
Loss per share expressed in cents per share
Basic and fully diluted earnings per share (21.74) (26.97)
EcoSecurities Group plc
Statement of Recognised Income and Expense for the year ended 31 December 2006
Year ended Year ended
31 December 31 December
2006 2005
€'000 €'000
Loss for the financial year (20,046) (4,318)
Currency translation reserve movement (22) (172)
Total recognised income and expenses for the year (20,068) (4,490)
Attributable to:
Equity shareholders of the Company (20,068) (4,521)
Minority interests - 31
(20,068) (4,490)
EcoSecurities Group plc
Consolidated Balance Sheet as at 31 December 2006
31 December 31 December
2006 2005
€'000 €'000
Assets
Non-current assets
Intangible assets 3,412 102
Property, plant and equipment 2,463 134
Trade and other receivables 531 -
Total non-current assets 6,406 236
Current assets
Trade and other receivables 5,020 1,320
Cash and cash equivalents 60,452 83,148
Total current assets 65,472 84,468
Total assets 71,878 84,704
Shareholders' equity
Issued capital 232 229
Share premium 76,446 75,853
Share based payment reserve 664 337
Currency translation reserve (74) (52)
Other reserves (573) (573)
Retained earnings (25,010) (5,022)
Total equity 51,685 70,772
Liabilities
Non-current liabilities
Interest bearing loans and borrowings - 8,752
Trade and other payables 3,040 -
Deferred tax liabilities 58 4
Total non-current liabilities 3,098 8,756
Current liabilities
Interest bearing loans and borrowings 7,582 35
Trade and other payables 8,885 5,028
Current tax creditors 628 113
Total current liabilities 17,095 5,176
Total liabilities 20,193 13,932
Total equity and liabilities 71,878 84,704
EcoSecurities Group plc
Consolidated cash flow statement for the year ended 31 December 2006
31 December 31 December
2006 2005
€'000 €'000
Loss for the financial year (20,046) (4,318)
Income tax expense 573 115
Finance costs 856 339
Finance income (2,405) (125)
Depreciation 377 27
Increase in trade and other receivables (3,980) (682)
Increase in trade and other payables 9,626 2,036
Loss on disposal of property, plant and equipment 139 -
Net profit on disposal of joint ventures - (498)
Share based payment 385 276
Foreign exchange differences (294) (100)
Interest paid (428) (270)
Interest received 2,170 65
Tax refunds received - 23
Net cash out flow from operating activities (13,027) (3,112)
Cash flows from investing activities
Cash paid to acquire minority interests - (477)
Purchase of property, plant and equipment (2,673) (132)
Purchase of intangible assets (3,487) (103)
Net cash proceeds from disposal of interest in - 477
joint ventures
Net cash used in investing activities (6,160) (235)
Cash flows from financing activities
Gross proceeds from the issue of ordinary share 85 83,667
capital
Admission costs paid (2,222) (5,557)
Net proceeds from issue of new loans - 8,745
Repayment of borrowings (300) (449)
Net restricted cash deposits (5,824) (583)
Net cash (used)/generated from financing activities (8,261) 85,823
Effects of foreign exchange on cash (1,072) 12
Net (decrease)/increase in cash and cash (28,520) 82,488
equivalents
Cash and cash equivalents at start of year 82,565 77
Cash and cash equivalents at end of year 54,045 82,565
EcoSecurities Group plc
Notes to the financial statements
1. Basis of preparation
This preliminary financial information has been derived from the Group's
consolidated financial statements for the year ended 31 December 2006 which have
been prepared in accordance with International Financial Reporting Standards
(IFRS) as approved by the EU. The accounting policies applied in preparing the
Group's consolidated financial statements for the year ended 31 December 2006
are as published in the Annual Report for 2005.
2. Business segments
The Group has defined the following two business segments based on its operating
activities as follows:
(a) Emissions Reductions. This segment comprises CDM project activities where
the Group contracts with project developers in order to acquire or sell CERs on
their behalf, or development activities where the Group develops its own
interest in CDM projects as either lead project entity, or, as part of a
strategic alliance
(b) Consulting and Advisory. This segment provides emissions reduction advisory
services to commercial and governmental organisations.
PRIMARY Emissions Consulting Total
reductions and advisory
€'000 €'000 €'000
Revenue 2,038 1,035 3,073
Segment result (18,192) (1,305) (19,497)
Unallocated Group (1,524)
expenses
Operating loss (21,021)
Net finance income 1,548
Income tax expense (573)
Loss after tax (20,046)
Segment assets 14,555 1,271 15,826
Unallocated Group 56,052
assets
Total assets 71,878
Segment liabilities (14,579) (1,011) (15,590)
Unallocated Group (4,603)
liabilities
Total liabilities (20,193)
Non-cash expenses
Capital expenditure 6,135 25 6,160
Depreciation/ 355 23 377
Amortisation
SECONDARY Revenue Segment Capital
assets expenditure
€'000 €'000 €'000
Europe 823 68,011 4,089
North America 1,605 636 150
South America 477 724 475
Africa 92 24 0
Asia 76 2,483 1,446
3,073 71,878 6,160
The Group has historically been involved in the provision of consulting and
advisory services and has accordingly reported all costs and revenues and
attributed all assets and liabilities to that segment. Up to 31 December 2005,
no revenue had been attributed to the emissions reductions segment and no
separate reporting of segments results presented. The assets and liabilities of
the Group previously classified entirely within the consulting and advisory
segment are being allocated in some cases to other activities or are
unallocated.
3. Loss per share
Basic loss per share is calculated by dividing the losses attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year.
The weighted average number of ordinary shares is calculated as follows:
Year ended Year ended
31 December 2006 31 December 2005
('000) ('000)
Issued ordinary shares
Start of year 91,627 10,305
Effect of shares issued during the year 584 5,805
Weighted average number of shares for year 92,211 16,110
Basic and fully diluted loss per share is calculated as follows:
Year ended Year ended
31 December 31 December
2006 2005
Loss for the year attributable to equity shareholders of the
company (€'000) (20,046) (4,344)
Weighted average number of shares ('000) 92,211 16,110
Loss per share (cent (€)) (21.74) (26.97)
There is no difference between basic and fully diluted loss per share as the
inclusion of the share options in the calculation of the weighted average number
of shares would have the effect of reducing the loss per share. The potential
dilutive effect on the weighted average number of ordinary shares would be to
increase the weighted average number of ordinary shares by 8,763,408 shares and
comprises the dilutive effect of the share options issued under the employee
share option schemes, together with the dilutive effect of the warrants issued
to Cargill, which vested on 31 August 2006.
The adjusted loss per share has been presented to show the impact on basic
earnings per share of the IPO preparation expenses and the net profit on
disposal of the joint ventures as follows:
Year ended Year ended
31 December 31 December
2006 2005
€'000 €'000
Loss for the year attributable to equity shareholders
of the company (20,046) (4,344)
IPO preparation expenses (277) 1,286
Disposal of joint ventures - (498)
(20,323) (3,556)
Adjusted loss per share (cent (€)) (22.04) (22.07)
4. Cash and cash equivalents
Year ended Year ended
31 December 31 December
2006 2005
€'000 €'000
Cash at bank and in hand 4,411 422
Short term bank deposits 49,634 82,143
54,045 82,565
Restricted cash 6,407 583
60,452 83,148
The Group's short term bank deposits are invested in money market accounts.
Details of these deposits are as follows:
Balance invested Weighted Weighted
average average term
€'000 interest rate (days)
Currency
Euro 37,965 3.54% 10
Sterling 1,599 5.18% 19
US Dollar 10,070 5.30% 66
49,634
5. Share premium account
Year ended Year ended
31 December 31 December
2006 2005
€'000 €'000
Start of year 75,853 -
Premium on shares issued in share for share exchange in the
year, net of expenses - 30,519
Premium on shares issued for cash 82 79,269
Transaction costs 511 (7,586)
Reserve arising on share for share exchange - (26,349)
End of year 76,446 75,853
Transactions costs amounting to €0.5 million have been written back to the share
premium account in the period as a result of the over-estimation of costs
relating to the IPO in 2005.
This information is provided by RNS
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