Final Results

RNS Number : 6097B

Camco International Ltd

22 February 2011

 



22 February 2011

Camco International Ltd

("Camco" or "the Company")

Final Results for the year ended 31 December 2010

Business successfully refocused to deliver profits and enhanced prospects for growth

Camco, a global developer of emission reductions and clean energy projects, is pleased to announce its consolidated final results for the year ended 31 December 2010.

HIGHLIGHTS as at 31 December 2010

•           Profit in 2010 of €10.1m (2009: loss of €10.9m)

•           Increased revenues to €30.0m in 2010 (2009: €27.8m)

•           Net assets of €61.2m of which €31.7m is net accrued income from carbon projects which are registered and operational and expected to deliver cash in the next 2.5 years

•           More than doubled the amount of carbon credits 8.1m tonnes issued in 2010 (2009: 3.3m tonnes)

•           Expansion of the Carbon portfolio including 30m tonnes of carbon credits contracts signed, delivering into phase three of the EU-Emissions Trading Scheme (EU-ETS)

•           Formed a financial and operational partnership with Khazanah Nasional Berhad (a Malaysian sovereign wealth fund) into Camco South East Asia Joint Venture, with USD $30m cash to expand business growth in one of the fastest growing regions in our sector

•           Established joint ventures in North America creating an investable pipeline greater than USD $300m of clean energy projects in the agricultural methane and industrial energy efficiency sectors

•           Turned around our Advisory business to deliver a strong profit of €0.8m 

Scott McGregor, Camco Chief Executive, said,

"The Company is in a strong position across all our markets after its 2010 turnaround and best performing year. Given the performance and focus of the business, we are in a prime position to seize the current opportunities, grow our projects business, deliver the current portfolio and build value for our customers and shareholders."

Enquiries:

Camco	[phone]
Scott McGregor, Chief Executive Officer
Andrew Twynam,  Finance Director
Peel Hunt LLP (Nominated Adviser and Broker)	[phone]
Andrew Chapman
Daniel Harris
M:Communications (Public Relations Advisor)
Charlotte Kirkham Elly Williamson Patrick d'Ancona	[phone] [phone] [phone]

About Camco

Camco International Limited (Camco, AIM: CAO) is a global developer of emission reductions and clean energy projects with operations in China, US, UK, Africa, Russia and Southeast Asia. Camco has a 20 year track record in project development, technical delivery and policy development, working with local industry, multinational companies, governments and regulatory bodies.

Some of our clients include Shell, Conch, Yangquan, HSBC, Aviva, Eli Lilly, Itochu, the EU Commission, United Nations, Carbon Trust, ADB, AWF, SIDA, EPA, and the UK, US, South African and Chinese Governments.

Camco's Clean Energy Project Development and Investment teams collaborate with industry, project developers, equipment providers and investor groups to create emissions-to-energy projects and maximise sustainable energy production across a range of industries; including agricultural methane, industrial energy efficiency, coal mine methane, municipal solid waste, biomass and landfill gas.

The Carbon Project Development business has created one of the largest emission reductions portfolios and has structured groundbreaking and innovative arrangements for the sale and delivery of emission reductions to compliance and voluntary buyers.

The Energy and Carbon Advisory teams provide strategic, commercial and technical expertise accrued over two decades to deliver low carbon energy and sustainable development solutions. The experience of this team spans emissions assessment, carbon management strategies and project delivery, as well as international energy and climate change policy.

Chairman's Report

I am delighted to report an exciting and profitable year for the Company. It has been nine months since I moved into my new role as Acting Chairman and I am happy to note 2010 was a highly successful and thriving year for Camco. We have seen market consolidation, which has changed the competitive landscape while Camco has secured its market leading position in our key regions. Our strategy of expanding our services to build a clean energy development business is right and achievable, and is underpinned by the increasing regulatory incentives to reduce emissions and develop clean energy in our markets.

The European Union has confirmed it will accept CDM projects registered before 2012 into the EU-ETS phase three, which operates until 2020. This is a major development for Camco as in 2010 we contracted a large portfolio of projects which are eligible under this legislative development (Camco does not own any carbon credits from HFC or N2O projects which are expected to be ineligible for phase three of the EU-ETS). While there has been recent press coverage of fraudulent trading in EUA allowances, this does not directly affect Camco, as we do not trade EUA allowances. Camco, as a carbon project developer, delivers from its projects, CERs or ERUs, which we can sell either OTC or spot. Unfortunately, in the short term these EUA allowance activities have resulted in negative sentiment in the European market generally. The positive consequence of such activities will, in the long term, be a more tightly controlled regulated market, which is better for all participants.

In Asia the last year has seen a push by governments and the corporate sector to reduce emission and create a cleaner economy. China aims to cut the amount of carbon it emits per unit of economic output to 40 - 45% per cent less than the 2005 level by the year 2020. It has started developing internal cap and trade systems, with pilot schemes running in five provinces and eight cities, including Beijing. Other countries across South East Asia are also adopting a range of legislative steps to promote a cleaner economy. In Malaysia, for example, the feed in tariff legislative initiative has passed its first hearing in Parliament. This is just one of many regional initiatives to meet the ambitious emission reduction goals and our joint venture with Khazanah Nasional Berhad will see increasing market opportunities as a result of such legislative change.  

In North America, the California Air Resources Board adopted regulations that permit the use of carbon credit offsets to meet compliance targets from four project types, one of which is livestock projects. Camco has been working with eligible dairy farmers for the past two and a half years and we have the largest number of projects registered under the California Action Reserve's Livestock Protocol. This enables Camco to offer large, assured volumes of offsets into the Californian market. We expect an increasing demand from the scheduled start date of 1 January 2012.

Our advisory business extends our global reach and we have continued to provide thought leadership for our corporate and government clients. We have supported several governments on their Feed-In Tariffs legislation and our service in the UK on the Carbon Reduction Commitment has expanded considerably. These legislative developments create additional opportunities and we are in an excellent position to exploit them.

The COP16 in Cancun in December last year has provided clear guidance on a number of issues, not least the adoption of measures to speed up the registration and delivery process of Clean Development Mechanism projects, and strong support to prepare this mechanism to operate effectively beyond 2012. Our recent experience is that these changes are already improving the time it takes to register our projects. There is still insufficient clarity regarding international cap and trade mechanisms and we do not expect this to improve in the near term. However, in the absence of an international agreement on caps we are seeing strong development of regional schemes and bi-lateral agreements, which will underwrite the market and reduce emissions in the near term.

We expect to see more regulatory developments over the near to medium term which will have a positive impact on our business creating additional sources of revenues. These include: incentives in China to reduce emissions and introduce cap and trade pilot schemes; a regional offset scheme in Japan; a cap and trade scheme in South Korea; inclusion of other North American states and provinces in the Californian cap and trade scheme; and the development of emission reduction incentives in Australia.

Last year saw two Board changes. I am happy to welcome Yariv Cohen as an Executive Director to the Board. Mr. Cohen joined the board in May last year and has been a valuable addition to the team. David Potter resigned from the Board and I would like to thank him and our non-executive directors for the contribution that they made to the Company during the year.

Camco has taken important steps this year in delivering strong performance in all its business activities and preparing for the future. We have increased our efforts to work and communicate with shareholders and stakeholders. This will be a central focus in 2011. We have continued to be awarded industry accolades, such as the '2010 Commodity Business Award for the Renewable Energy Markets' and have once again been chosen as Best Project Developer in 2010 following similar awards over the previous three years. I would like to congratulate our management and staff on their achievements in 2010 and I look forward to another successful year in 2011.

Jeff Kenna

Acting Chairman

22 February 2011

CEO's Statement

During 2010, we completed a company turnaround to re-focus our activities in each of our regions. Strategically and operationally, the business is now focussed on reducing emissions and developing clean energy within an increasingly positive regulatory environment.

Across all regions we operate in, there is consensus by regulators that emissions must be reduced and clean energy developed. This creates different regulation, incentives and opportunities with the same goal - reducing emissions.

Camco's core capability is taking emissions and transforming them into energy. Moreover, we help create policies and transform regulation into business action. Across Camco this is the single activity we all share around the world. We help clients adapt to the evolving policies, thus creating better business and a cleaner economy.

Our in-county local teams work with businesses and governments to deliver emission reductions and develop clean energy. With our core technical and financial capabilities we have, in 2010, achieved all our ambitious business targets and delivered significant impact to our customers and partners.

Now firmly in its delivery phase our Carbon Project Development business is performing well. During the year we developed a large pipeline of clean energy projects in North America and Asia which will turn emissions into energy. We also raised capital for a joint venture in South East Asia and established a development platform in North America. Lastly, we have successfully restructured our advisory business to deliver its largest profit to date.

Performance

Carbon Project Development

In the carbon business, in China we accelerated registration of new projects and at 8.1m tonnes we have delivered more than double the issuance of the previous year (2009: 3.3m tonnes). This is thanks to our diligent and experienced technical team as well as efficiency improvements implemented this summer by the UN Executive Board in the registration process. Our emphasis this year was to accelerate carbon credit delivery and get our projects through the qualification process and issuing. This will continue in 2011. During the past year, we were also able to execute a number of profitable commercial transactions in the European and in the US markets delivering additional value through sales.

In South East Asia we developed a large portfolio of carbon projects, mainly in Vietnam, Indonesia and Thailand. The portfolio covers a range of project types, such as hydropower, waste-water treatment and cogeneration technologies. These were transferred to our recent joint venture in South East Asia which is certain to further develop our efforts in the region.

Russia completed the first tender approval of Joint Implementation (JI) carbon projects of which our team had a great success receiving two approvals from the first batch of tenders.

In the US our team has rapidly developed our agricultural carbon portfolio and in addition we purchased a portfolio of existing US carbon projects. Camco is now the leading carbon developer in the agricultural waste-to-energy sector in the United States and is a leading provider of offsets from livestock projects through the Climate Action Reserve (CAR). This positions us well as a primary supplier of credits to the California carbon market, which is due to commence at the end of 2011.

Clean Energy Project Development and Investments

This year marked a quantum leap forward for Camco in developing clean energy projects. In our target regions South East Asia and China we have secured funds available for investment in emissions-to-energy projects and have developed a pipeline of projects ready for investment in the US. In North America we established a development platform for agricultural methane to energy projects.

In South East Asia we have formed a joint venture with Khazanah Nasional Berhad, the investment holding arm of the Government of Malaysia. The joint venture has been capitalised at an initial amount of USD$30m, which is available for investing in clean energy project development in the region. Investments in Asia will focus on industrial energy efficiency, biogas and biomass, leveraging our growing expertise in these sectors and the developing regulatory environment. In the coming year this will be an area of focus and we are planning to deploy this capital and build up our energy asset base.

Energy and Carbon Advisory

Our advisory business has done exceptionally well this year; moving from a €1.7 m loss in 2009 to a profit of €0.8 m. This was only possible thanks to the success of our team in winning new business, focussing delivery and growing our client base in the UK and Africa. Management restructuring has also lead to significant cost reductions.

In the UK, we have won €5.8m in new contracts. Across the business, 2010 sales targets have been exceeded. This year we will be looking to enhance our offering by strengthening client relationships and cross sales between the different sector consultants. We will continue to grow our client base supported by regulatory changes as well as a growing demand for clean energy and energy efficiency programmes.

In Africa, we have established ourselves as industry experts and have implemented a number of high impact projects in Kenya, South Africa and Tanzania. Last year Camco won several new advisory contracts such as developing the Climate Change Strategy for Lonmin, the third largest platinum mining company in the world and one of South Africa's most prestigious brands. Other advisory successes include the development of South Africa's Renewable Energy Feed-in Tariff Structure and follow-on contracts in Botswana and Uganda. Our REDD projects in Eastern Africa will further more provide us with great operational credibility as this sector develops.

Outlook

The Company is in a strong position across all our markets after its 2010 turnaround and best performing year to date. Governments and industry agree, across all the markets we operate in, that carbon emissions must be reduced and there is a push through incentives and policy to build clean energy projects. Given the performance and focus of the business, we are in a prime position to seize the current opportunities, grow our project business, deliver the current portfolio and build value for our customers and shareholders.

I am looking forward to an exciting year of growth ahead as we build on our 2010 achievements.

Scott McGregor

Chief Executive Officer

22 February 2011 

Financial Review

2010 was a successful year for Camco across all business segments. The Carbon project development business accelerated delivery of projects providing a segment result of €12.3m (2009: €8.4m) whilst the Advisory business moved to profitability with €0.8m profit (2009: loss €1.7m). The Investment clean energy project development business also progressed well with significant contractual rights developed over future project revenues.

Headline revenues grew by 8% to €30.0m (2009: €27.8m) whilst administration expenses were reduced by 7% or €1.4m as the Group received the full benefit of prior year restructuring programmes and tight cost control generally.

Accrued income

The Group has net current assets of €43.8m (2009: €44.7m). Net Carbon Development Contracts (CDC) accruals (in accrued income and other payables) account for a substantial portion of net current assets and grew from €28.0m at the beginning of the year to €31.7m at 31 December 2010. This balance represents the current fair value of consideration and future delivery cost of our registered and operational carbon projects. These are projects where our work is significantly complete and we're awaiting delivery. This net fair value accrued balance of €31.7m is a proxy for future cash and will shortly convert to cash as these projects deliver carbon credits, the majority of which are scheduled within the next 2.5 years. The increase in the year (net €3.7m) comes from new projects being registered and reaching operational stage (the point at which we recognise revenue and hence fair value our consideration) in 2010 and true-ups to the fair value of pre-2010 registered and operational projects. Each year as the Group completes its work and more projects become operational the fair value balance will increase. The balancing effect on this is cash collection, which occurs as projects deliver.

Joint Venture in South East Asia

In September, the Group entered into a Joint Venture agreement to create a new business in South East Asia. Camco SEA Ltd was set up with Khazanah Nasional Berhad contributing cash of €18.3m in the form of equity and convertible bonds. Camco contributed its South East Asia carbon portfolio valued at €12.5m and cash of €3.8m. The realisation of this value in the carbon portfolio led to other Carbon income in the period of €5.8m.

Cash and cash equivalents

At 31 December 2010, the Group had cash and cash equivalents of €12.4m (2009: €28.5m). The key movements in cash during 2010 were; carbon deliveries in 2010 (inflow €23.8m), carbon payables on deliveries in 2010 (outflow €10.9m), working capital prepayments for carbon (outflow €13.3m), advisory net contribution (inflow €0.9m), operating expenditure (outflow €14.6m), investment in Camco SEA JV (outflow €3.8m), new shares issued (inflow €2.2m) and other capital items (outflow €0.4m) complete the cash flow for the year.

Where possible, Camco waited with carbon sales from our own "in specie" portfolio to capture a higher carbon price in the future. The Company was successful in receiving upfront cash on a number of large carbon transactions (notably when the carbon price was higher) in 2009 and earlier which led to payable commitments in 2010. The net reduction in cash from capital transactions was €2m and included Camco's investment in the JV in SEA and new shares issued. This cash reduction from recurring operating activities was only €0.8m in the year.

The Directors consider the Group to be in a strong position to manage this cash position and continue creating value and profits in the future.

Carbon

The Carbon teams continued to achieve key regulatory milestones resulting in the Camco portfolio continuing to deliver as expected. This has led to accelerated issuances of 8.13m tonnes for 2010. Camco continues to originate projects, which we expect to be registered prior to the end of 2012, and hence eligible for delivery into the EU-ETS phase 3 and will therefore provide the Company with a revenue and cash stream from this business until at least 2020.

Advisory

The Advisory business moved to profitability with a 23% increase in gross margin and 21% decrease in costs. This led to a segment profit of €0.8m following a loss of €1.7m in 2009. This performance is based on a re-focussed operation and a re-balanced cost base following the 2009 restructuring. The net profit margin for this business has increased to 14% from loss making percentage in 2009. Order book value has increased to €2.0m during the year, which bodes well for 2011. Also in early 2011, it was announced that the two UK advisory businesses are merging which should bring additional synergies across business development, operations and administration. This business segment is well placed for continued growth in 2011.

Investments

The significant achievements for the project Investment team in 2010 were the creation of the South East Asian joint venture to focus on developing clean energy projects in the region and in the US the establishment of an Agricultural Methane to energy development platform. The US business has developed rights for a portfolio of projects being major dairy farms. As these projects close, Camco then receives management service fee revenue and an equity stake in future operating revenues. The Camco SEA joint venture has successfully raised €22m to invest in emissions to energy projects.

Operations

The Group operates through a network of offices in Europe, Africa, Asia and North America. In general, these offices do not enter into CDCs but provide marketing, origination and advisory services to the Company to enable it to do so. Once the Company has entered into CDCs the offices may also provide management services in respect of these contracts.

Andrew Twynam

Financial Director

February 2011

Management Share Issue

Camco intends to issue a further 3,164,840 new ordinary shares in the Company to directors and employees as part of the Camco International Limited Long Term Incentive Plan (LTIP). As part of this arrangement, senior management will receive 1,500,000 Ordinary Shares split between Scott McGregor, CEO (750,000) and Yariv Cohen, President (750,000). Following the proposed award of 3,164,840 LTIP shares, Scott McGregor will hold a total of 1,963,321 shares and Yariv Cohen a total of 1,950,000, representing 1.04% and 1.03% of the issued share capital respectively.

Camco International Limited

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2010

		2010	2009*
Continuing operations		€'000	€'000
Revenue		30,036	27,774
Cost of sales		(9,482)	(7,097)
Gross profit		20,554	20,677
Other income - carbon		5,770	-
Other income - net gain on disposal of investment		-	310
Other income - negative goodwill arising on acquisition		-	303
Administrative expenses		(17,836)	(18,890)
Restructuring charges		(82)	(432)
Impairment of goodwill on acquisition		-	(11,973)
Results from operating activities		8,406	(10,005)
Financial income		2,624	1,228
Financial expenses		(1,223)	(1,948)
Net financing income/(expense)		1,401	(720)
Share of loss of equity-accounted investees		(187)	-
Profit/(loss) before tax		9,620	(10,725)
Income tax expense		894	(130)
Profit/(loss) from continuing operations		10,514	(10,855)
Discontinued operation
Loss from discontinued operation (net of income tax)		(449)	(60)
Profit/(loss) for the year		10,065	(10,915)
Other comprehensive income
Exchange differences on translation of foreign operations		(784)	353
Total comprehensive income for the year		9,281	(10,562)
Profit/(loss)  for the year attributable to:
Equity holders of the parent		10,065	(10,597)
Non-controlling interest		-	(318)
Profit/(loss) for the year		10,065	(10,915)
Total comprehensive income for the year attributable to:
Equity holders of the parent		9,281	(10,277)
Non-controlling interest		-	(285)
Total comprehensive income for the year		9,281	(10,562)

* as restated for discontinued activities 

Basic profit/(loss) per share in € cents
From continuing operations		5.93	(6.40)
From continuing and discontinued operations		5.67	(6.43)
Diluted profit/(loss) per share in € cents
From continuing operations		5.92	(6.34)
From continuing and discontinued operations		5.67	(6.38)

 

Consolidated Statement of Financial Position

at 31 December 2010  

		2010	2009
		€'000	€'000
Non-current assets
Property, plant and equipment		740	728
Goodwill on acquisition		1,959	2,149
Other intangible assets		452	789
Intangible assets - carbon in specie		2,030	-
Investments in associates and joint ventures		11,921	1,146
Other investments		236	225
Deferred tax assets		192	216
		17,530	5,253
Current assets
Work in progress - carbon development contracts		6,053	7,321
Prepayments and accrued income		45,510	37,096
Trade and other receivables		5,563	4,640
Cash and cash equivalents		12,382	28,463
		69,508	77,520
Total assets		87,038	82,773
Current liabilities
Loans and borrowings		(485)	(236)
Trade and other payables		(25,078)	(31,474)
Tax payable		(143)	(1,123)
Deferred consideration		-	(27)
		(25,706)	(32,860)
Non-current liabilities
Loans and borrowings		(12)	(5)
Deferred consideration		-	(32)
Deferred tax liabilities		(126)	(221)
		(138)	(258)
Total liabilities		(25,844)	(33,118)
Net assets		61,194	49,655

Equity attributable to equity holders of the Parent		2010 €'000	2009 €'000
Share capital		1,856	1,730
Share premium		74,861	72,277
Share-based payment reserve		1,173	1,856
Retained earnings		(15,645)	(25,711)
Translation reserve		(890)	(106)
Own shares		(161)	(391)
Total equity		61,194	49,655

These financial statements were approved and authorised for issue by the board of directors on 21 February 2011 and were signed on its behalf by:

Michael Farrow

Director

Consolidated Statement of Cash Flow

for year ended 31 December 2010

Continuing operations		2010	2009
		€'000	€'000
Cash flows from operating activities
Revenue, payments on account and deferred income received		32,193	26,162
Cash paid to suppliers		(35,728)	(10,750)
Cash paid to employees		(12,298)	(11,861)
Interest received		83	126
Interest paid		(16)	(74)
Service fees paid to subsidiaries		-	-
Income tax paid		(146)	(657)
Net cash (outflow)/inflow from operating activities		(15,912)	2,946
Cash flows from investing activities
Proceeds from sales of investments		1,303	2
Payment for acquisition of joint venture		(3,791)	-
Settlement of deferred consideration		-	(163)
Acquisition of property, plant and equipment		(309)	(127)
Net cash outflow from investing activities		(2,797)	(288)
Cash flows from financing activities
Proceeds from the issue of share capital		2,188	55
Proceeds from new loan		-	17
Repayment of borrowings		(18)	(312)
Payment of finance lease liabilities		(87)	(200)
Net cash inflow / (outflow)  from financing activities		2, 083	(440)
Net (decrease)/increase in net cash and cash equivalents		(16,626)	2,218
Net cash and cash equivalents at 1 January		28,324	26,155
Effect of foreign exchange rate fluctuations on cash held		209	(49)
Net cash and cash equivalents at 31 December		11,907	28,324

1        Significant accounting policies

Camco International Limited (the "Company") is a public company incorporated in Jersey under the Companies (Jersey) Law 1991. The address of its registered office is Channel House, Green Street, St Helier, Jersey JE2 4UH. The consolidated financial statements of the Company for the year ended 31 December 2010 comprise the Company, its subsidiaries and associates and jointly controlled entities (together the "Group"). The Company is admitted to the Alternative Investment Market ("AIM") of the London Stock Exchange.

A  Statement of compliance                                                                           

These consolidated financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the European Union ("adopted IFRS").

These consolidated financial statements have been prepared in accordance with and in compliance with the Companies (Jersey) Law 1991 an amendment to which means separate parent company financial statements are now not required.

These consolidated financial statements were approved by the Board on 21 February 2011.

B  Basis of preparation                                                                                   

The financial statements are presented in Euros, the functional currency of the Company, rounded to the nearest thousand Euros.                                                                                                           

The preparation of financial statements in conformity with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.    

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years. The most significant techniques for estimation are described in the accounting policies below.

The accounting policies set out below have been applied consistently in the year and presented in these consolidated financial statements. The accounting policies have been consistently applied across all Group entities for the purposes of producing these consolidated financial statements.          

The financial statements have been prepared on the historical cost basis and on a going concern basis. The Group's business activities, together with the financial position of the Group, its performance, cash flows and liquidity position are set out in the Directors' report.

The Group has considerable financial resources together with long-term contracts with a number of customers and suppliers across different geographic areas and industries. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

C  Accounting for Carbon Development Contracts ("CDCs")                                                   

The Group enters into CDCs with clients from which carbon credits are received. Carbon credits under the Kyoto Protocol, also known as Certified Emission Reductions ("CERs") or Emission Reduction Units ("ERUs") are generated through the highly regulated Carbon Development Mechanism ("CDM") and Joint Implementation ("JI") processes respectively. These follow a number of steps including the approval of the project methodology and monitoring procedures, project design, project approval by the Designated National Authority ("DNA"), project validation by a Designated Operational Entity or equivalent ("DOE"), project acceptance by the host country, registration, verification and certification by a DOE. Verification of carbon credit production takes place at least once a year during the production year. The Group works with the client at all stages of the process using proprietary knowledge and experience to negotiate this complex process. Carbon credits are also generated outside the Kyoto Protocol under voluntary or regional emission reduction schemes.

Revenue recognition on CDC consultancy services                                                                

The Group derives revenue from the provision of consultancy services to carbon project clients under CDCs. The Group receives payment for the services by either cash commission or non cash carbon credit. Revenue from CDCs is only recognised once the Group's services to secure the production of carbon credits are significantly complete and receipt of the consideration, be it cash or carbon credits, can be forecast reliably. Revenue is recognised once a CDC is registered by a DOE (where payment is due to Camco irrespective of a CDC's registration this criteria will not apply) and Camco has provided significantly all of its services.

The timing of revenue collection is uncertain as carbon credits may be generated over subsequent years as they are issued. The amount and timing of commission or carbon credits to be received may be dependent upon the number of carbon credits received by the customers, which is determined by assessing the specific technical, contract and economic risks identified on the project.

Revenue is recognised at the fair value of the consideration receivable from the contracts, at which point accrued income is recognised. The fair value is the estimated net value of the carbon credits to be received, which is dependent upon the expected number to be delivered and the intrinsic value. If the expected number or value of the carbon credits subsequently changes an adjustment is made to the accrued income balance with an associated credit or debit taken to revenue. The unwinding of any financing element of accrued income is recognised as finance income or expense.

The CDCs are scheduled to deliver of carbon credits under Clean Development Mechanism and other regional schemes until at least 2020. The Group and Company has taken advantage of the own use exemption in relation to carbon credits and as such does not account for the contract under IAS 39 and 32.

Treatment of CDC costs

CDC costs are presented under current assets as work in progress. CDCs acquired by the Group are recorded initially at cost (or fair value if through business combination).

Subsequently, the directly attributable costs are added to the carrying amount of CDCs. These costs are only carried forward to the extent that they are expected to be recouped through the successful completion of the contracts. The costs comprise consultancy fees, license costs, technical work and directly attributable administrative costs. All other costs are expensed as incurred. CDC costs carried as work in progress are stated at the lower of cost and net realisable value.      

Once the revenue recognition criteria on these contracts are met the CDC costs incurred on them are expensed in full. Accrued income is derecognised when the CERs or cash commission receivable under the CDC consultancy contracts are sold.

D  Revenue recognition on other consultancy services          

Advisory revenue from consultancy services provided is recognised in the income statement in proportion to the stage of completion of the consultancy contract. The stage of completion is assessed by reference to the overall contract value.

Investment revenue consists of management service fees which are recognised pro-rata over the period of the service contract.

E  Intangible assets                                                                             

Carbon in specie The Group has a number of carbon credit registry accounts used to receive carbon credits from its projects. These carbon credits are either transferred to buyers under existing sales contracts or, in the case of in specie consideration to the Group, sold for cash. Carbon credits held at the balance sheet date are recognised as an intangible asset and valued at the relevant market price or contract price.

F  Operating Segments                                                                                   

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. All operating segments' operating results are reviewed regularly by the Group's CEO to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets corporate expenses, and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill.

2          Segmental reporting

Operating segments

The Group comprises of the following main reporting segments:

1.    Carbon:The Carbon Project Development teams provide CDC consultancy services on carbon asset development, commercialisation and portfolio management.

2.    Advisory:The Energy and Carbon Advisory teams provide strategic, commercial and technical expertise accrued over two decades to deliver low carbon energy and sustainable development solutions.

3.    Investments:The Clean Energy Project Development and Investment teams collaborate with industry, project developers, equipment providers and investor groups to create emissions-to-energy projects and maximise sustainable energy production across a range of industries; including agricultural methane, industrial energy efficiency, coal mine methane, municipal solid waste, biomass and landfill gas.

Inter segment transactions are carried out at arm's length.

Operating segments		Carbon		Advisory		Investment		Eliminations		Consolidated
		2010	2009	2010	2009	2010	2009	2010	2009	2010	2009
		€'000	€'000	€'000	€'000	€'000	€'000	€'000	€'000	€'000	€'000
Revenue		20,380	21,470	9,191	6,093	465	211	-	-	30,036	27,774
Inter-segment revenue		-	-	1,967	818	-	-	(1,967)	(818)	-	-
Total segment revenue		20,380	21,470	11,158	6,911	465	211	(1,967)	(818)	30,036	27,774
Segment gross margin		14,444	15,821	5,762	4,670	348	186		-	20,554	20,677
Other income - carbon		5,770	-	-	-	-	-	-	-	5,770	-
Segment result		12,286	8,385	789	(1,658)	(638)	(773)	-	-	12,437	5,954
Unallocated expenses										(3,847)	(3,258)
Share-based payments										(102)	(296)
Restructuring charges										(82)	(432)
Impairment of goodwill on acquisition										-	(11,973)
Results from operating activities										8,406	(10,005)
Finance income										2,624	1,228
Finance expense										(1,223)	(1,948)
Share of loss of equity accounted investees										(187)	-
Taxation										894	(130)
Loss from discontinued operation (net of income tax)										(449)	(60)
Profit/(loss) for the year										10,065	(10,915)
Segment assets		75,995	72,579	5,294	5,710	4,733	3,189	-	-	86,022	81,478
Other investments		-	-	-	-	236	225	-	-	236	225
Unallocated assets										780	1,070
Total assets										87,038	82,773
Segment liabilities		(21,201)	(28,788)	(3,485)	(2,448)	-	(1,153)	-	-	(24,686)	(32,389)
Unallocated liabilities										(1,158)	(729)
Total liabilities										25,844	(33,118)
Capital expenditure		156	268	137	162	235	3	-	-	528	433
Depreciation		273	413	240	299	27	2	-	-	540	714
Amortisation of intangible assets		-	-	337	337	-	-	-	-	337	337
Impairment losses on goodwill, intangible assets and property,
plant and equipment		-	-	120	11,690	-	283	-	-	120	11,973

 

 3        Other income 

Other Income - Carbon

On 27 September 2010, Camco International Limited ("CIL") signed an agreement with Khazanah Nasional Berhad ("Khazanah") to establish a developer of emission reduction and clean energy projects in South East Asia. Camco South East Asia Limited, a wholly owned subsidiary of the Company, issued 39.9% of the share capital to Khazanah in exchange for €10.8 million of cash. Camco contributed its existing South East Asian carbon portfolio, exclusivity to the region, brand and other intellectual property for €12.5 million (carrying value of €0.6m) and cash of €3.8 million in return for 60.1% holding.

On the same day, Camco South East Asia Limited issued a convertible bond to Khazanah for €7.5 million, convertible to shares at the end of 3 years or sooner under certain conditions. Camco Mauritius Limited ("CML") was issued a warrant over Camco South East Asia Limited shares amounting to €2.8 million, exercisable at any period over the next 3 years. If both instruments are fully exercised then the shareholdings would become 51% for CML and 49% for Khazanah (see Investments in associates and joint ventures note).

The warrant gives rise to a derivative financial asset whose initial fair value is deemed to be nil. The fair value of this asset will be re-assessed each balance sheet and any movement taken to profit and loss. The fair value will be calculated as the difference between the fair value of the warrant shares and the fixed warrant price.

	2010	2009
	€'000	€'000
Recognition of Group's ownership interest in joint venture at the end of the period	10,140	-
Assets of the Camco South East Asia business derecognised	(4,370)	-
Net gain on loss of control of the Camco South East Asia business	5,770	-

4        Administration expenses

Included in comprehensive income are the following:

	2010	2009
	€'000	€'000
Depreciation of property, plant and equipment - owned assets	460	563
Depreciation of property, plant and equipment - leased assets	80	151
Amortisation of intangible assets	337	337
Share-based payments	102	296
Other administrative costs	16,857	17,543
Administration expenses	17,836	18,890
Other expenses - restructuring charges	82	432
	17,918	19,322

5        Earnings per share

Profit/loss per share attributable to equity holders of the Company is calculated as follows:

		2010	2009
		€ cents per share	€ cents per share
Basic profit/(loss) per share
From continuing operations		5.93	(6.43)
From continuing and discontinued operation		5.67	(6.43)
Diluted profit/(loss) per share
From continuing operations		5.92	(6.38)
From continuing and discontinued operation		5.67	(6.38)
Profit/(loss) used in calculation of basic and diluted profit/(loss) per share		€'000	€'000
From continuing operations		10,514	(10,855)
From continuing and discontinued operation		10,065	(10,915)
Weighted average number of shares used in calculation
Basic		177,375,319	169,634,966
Diluted		177,648,693	171,204,246

Weighted average number of shares used in calculation - basic		2010	2009
		Number	Number
Number in issue at 1 January		173,007,585	167,509,965
Effect of own shares held		(4,627,388)	(4,000,619)
Effect of share options exercised		3,718,830	1,817,870
Effect of shares issued in the year		5,276,292	4,307,750
Weighted average number of basic shares at 31 December		177,375,319	169,634,966
Weighted average number of shares used in calculation - diluted		2010	2009
		Number	Number
Number in issue at 1 January		173,007,585	167,509,965
Effect of own shares held		(4,627,388)	(4,000,619)
Effect of share options exercised		3,718,830	1,817,870
Effect of shares issued in the year		5,276,292	4,307,750
Dilutive effect of share options granted		273,374	1,569,280
Weighted average number of diluted shares at 31 December		177,648,693	171,204,246

 

6        Investments in associates and joint ventures

The Group's share of loss in its equity accounted investees and joint ventures for the year was €187,000 (2009: nil). The Group has not recognised losses relating to ESD Biomass Ltd and Camco International Ltd (UK registered), totalling nil (2009: €22,000) since acquisition through business combination, since the Group has no obligation in respect of these losses. The Group has recognised its share of the net assets and cost of investment of AG Power LLC €558,000, Camco South East Asia Limited ("CSEA'') being €10,283,000, Renewable Energy Dynamics Holdings Limited ("REDH") being €1,080,000 (2009: €1,146,000).

Summary financial information for equity accounted investees, not adjusted for the percentage ownership held by the Group.

2010	Investment	Holding	Total assets	Total liabilities	Net assets	Revenue	Expenses	Profit/ (loss)
			€'000	€'000	€'000	€'000	€'000	€'000
CSEA	Joint Venture	60.1%**	30,392	(6,230)	24,162	-	(310)	(310)
Group elimination***			(7,052)	-	(7,052)	-	-	-
CSEA Total	Joint Venture	60.1%**	23,340	(6,230)	17,110	-	(310)	(310)
AG Power LLC	Joint Venture	40%	1,089	(1,089)	-	-	-	-
ESD Biomass Ltd	Joint venture	50%	-	(83)	(83)	-	-	-
Camco Int. Ltd	Joint venture	50%	-	-	-	-	-	-
REDH	Associate	62.9%*	1,958	(241)	1,717	13	(15)	2

2009	Investment	Holding	Total assets	Total liabilities	Net assets	Revenue	Expenses	Profit
			€'000	€'000	€'000	€'000	€'000	€'000
ESD Biomass Ltd	Joint venture	50%	1	(80)	(79)	-	(3)	(3)
Camco Int. Ltd	Joint venture	50%	-	-	-	-	-	-
REDH	Associate	68.7%*	1,667	-	1,667	-	-	-

* On 16 December 2009 REDH issued a call option that was immediately exercisable which if exercised would result in the Group no longer having control and as such the Group has accounted for REDH as an associate from this date onwards. REDH issued shares during 2010, which has reduced our shareholding from 68.7% to 62.9%.

**CSEA is a joint venture partnership between the Group and Khazanah Nasional Berhad ("Khazanah") where the contractual agreement sets joint control and unanimous consent of members for key strategic financial and operational activities of the company. On 27 September 2010, CSEA issued a convertible bond to Khazanah for €7.6 million, convertible to shares after 3 years or earlier in certain circumstances. Camco Mauritius Limited ("CML") was issued a warrant over Camco South East Asia Limited shares amounting to €2.8 million, exercisable at any period over the next 3 years. If both instruments are fully exercised then the shareholdings would become 51% for CML and 49% for Khazanah.

*** Group elimination has resulted due to the transfer of carbon assets (at carrying value of €0.6m) for €12.5m to the CSEA; therefore the Group is eliminating its share of gain.

The Group has made no provisions in respect Aof ESD Biomass Ltd and Camco International Ltd as there is no constructive or legal obligation for the Group to settle any future liabilities on their behalf investments which have nil or net liabilities hence are not recognised in these financial statements.

 

END

 

 

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