Preliminary Results
Camco International Ltd
06 March 2008
Camco International Limited
Preliminary results announcement
Camco International Limited ('Camco'), a leading climate change business in the
growing carbon and sustainable development markets, is pleased to announce its
preliminary results for the period ended 31 December 2007.
HIGHLIGHTS as at 31 December 2007
• Integrated climate change business model offering a full range of
carbon-related services
• 149.3m tonnes contracted (up 45% from 102.9m tonnes at 31 December 06)
• Acquisition of ESD creating additional value from consulting and advisory
services
• 46% growth in consultancy revenues, with profit of €0.41 million
• Strong consulting support in developing carbon portfolio and North America
presence
• McCommas Bluff landfill acquired in North America as anchor asset for
planned Climate Leaders asset management vehicle
• Winner of three prestigious industry awards, demonstrating market
leadership
FINANCIALS as at 31 December 2007
• Revenue of €10.44 million and loss for the period of €12.09 million
• Strong year-end cash position with €20.55 million cash and cash equivalents
• No 'guaranteed delivery' forward sale liabilities
CARBON PORTFOLIO as at 31 December 2007
• Revenue model based on high quality, mature projects
• Average project size in excess of 1.0m tonnes
• Management committed to delivering 127m tonnes in 1st Kyoto Commitment
Period
• 101.9m tonnes contracted on a carbon share basis
• Of which, 37.3m net tonnes in specie with average purchase price of
€7.25
• 39.1m tonnes contracted on a cash / revenue share basis
• 30.2m tonnes registered (or equivalent), and 11.6m tonnes submitted
for registration
• 2.7m tonnes delivered
HIGHLIGHTS to 29 February 2008
• Net portfolio increase of 0.8m tonnes (new projects of 5.6m tonnes,
less prudent adjustments of 4.8m tonnes)
• 40.0m tonnes now held in specie
• 7.6m tonne Beijing Taiyanggong project registered subject to corrections
• Registered projects now total 37.7m tonnes
• Additional projects submitted, taking the total submitted for
registration to 22.4m tonnes
• 60.1m tonnes registered or submitted for registration
• Strong growth in projects that are operational to 67.6m tonnes
• Strong growth in validated projects to 80.0m tonnes
Commenting on the results, David Potter, Camco Chairman said:
'We expect the strong performance of the Group in 2007 to be continued in 2008.
In particular, with carbon credit deliveries accelerating, I look forward to
seeing the carbon business move into profit this year.'
Jeff Kenna, Camco Chief Executive, said:
'In 2008 the Group expects to see the quality of its project portfolio
translated into significant deliveries of carbon credits. The exceptional effort
of our teams on the ground around the world continues to give me confidence that
our projects are robust and well managed.'
Progress through stage* (cumulative): 29 Feb 08 31 Dec 07 31 Dec 06
Contracted 150.1m 149.3m 102.9m
PDD complete 113.3m 107.0m 78.0m
Host LoA 87.8m 88.8m 43.0m
Validated 80.0m 56.6m 34.1m
Submitted for registration 60.1m 41.8m 2.8m
Registered 37.7m** 30.2m 2.8m
1st verification*** 12.3m 12.3m 2.3m
Issued / verified 2.7m 2.7m 0.6m
Financed 125.8m 126.8m 43.1m
Under construction 109.8m 98.6m 42.9m
Operational 67.6m 45.3m 5.5m
Sell-side ERPA 70.1m 69.7m 35.8m
* Clean development mechanism (CDM) stage or equivalent for JI and VER
projects
** Includes 7.6m Beijing Taiyanggong project
*** Projects that have been through at least 1 verification process or
equivalent
Carbon portfolio contract structures: 29 Feb 08 31 Dec 07 31 Dec 06
Contracted 150.1m 149.3m 102.9m
Carbon share 102.8m 101.9m -
(of which, held by Camco in specie) 40.0m 37.3m -
Cash share 39.7m 39.1m -
VERs 7.7m 8.3m -
Enquiries:
The Camco Group +44 (0)20 7121 6100
Jeff Kenna, Chief Executive Officer
Scott McGregor, Chief Financial Officer
KBC Peel Hunt Ltd (Nominated Adviser and Broker) +44 (0)20 7418 8900
Jonathan Marren
David Anderson
Gavin Anderson +44 (0)20 7554 1400
Ken Cronin
Kate Hill
Daniela Stawinoga
Group Investor Relations website www.camcoglobal.com
Please note that the Group website address has been revised. Investor relations
information can now be found at www.camcoglobal.com/secure/investor.php
Notes to editors:
The Camco Group is a leading climate change business in the growing carbon and
sustainable energy markets. We offer a full range of carbon-related services to
public and private organisations worldwide. The Group has a 20-year track record
and manages one of the world's largest carbon credit portfolios.
The Group consists of three business segments:
The Camco carbon assets business is a leading project developer with one of the
world's largest carbon credit portfolios. We partner with companies to identify,
develop and manage projects that reduce greenhouse gas emissions, and then
arrange the sale and delivery of carbon credits to international compliance
buyers and into the voluntary market.
The consulting practice consists of Bradshaw, ECCM, ESD and ESD Sinosphere. It
combines specialist technical, strategic and financial expertise and experience
accrued over two decades to deliver a sustainable low carbon society. We are
positioned to work with our clients to turn climate change liabilities into
economic, social and environmental assets.
Camco Ventures works with project and technology developers, early stage
businesses and investor Groups to commercialise climate change mitigation
technologies, projects and services. Part of this business is the Climate
Leaders' asset management vehicle.
CHAIRMAN'S STATEMENT
Last year I said that I felt we were well placed strategically and that climate
change opinion was 'coming our way'. This has been validated fully in 2007. The
4th Assessment Report from The Intergovernmental Panel on Climate Change and the
Stern Report were the two most significant independent studies that lent
empirical support to our strategy. The award of a Nobel Prize to the former
Group simply underlined how sustainability and climate change are the critical
issues of the 21st century.
2007 also marked a major evolution of our strategy with the acquisition of ESD.
This transformed the company from a 'pure' carbon asset developer into a
globally integrated carbon and sustainable development Group. We now have
offices in 11 different countries and have made a major commitment to North
America where we now operate from two offices.
Acquisitions are generally risky, but in ESD we found a common aim and culture -
indeed the roots of Camco are grounded within ESD. As a result Jeff Kenna, the
founder of ESD, succeeded Tristan Fischer as CEO.
ESD brought 106 experienced consultants and seven new offices into our armoury;
their revenue development in 2007 has fully justified the Board's confidence in
the prospects for all our consulting activities.
The headline of our 2007 results - an increase in our contracted carbon
portfolio of 45% from 102.9m tonnes to 149.3m tonnes - is testament to our
strong growth story.
Our strategy remains to expand on a global basis using our advisory and
consulting services to open doors and find opportunities for our carbon asset
development business. We will work as both agents and principals, as we did on
the acquisition of McCommas Bluff landfill in Dallas, Texas, the anchor asset
for the Climate Leader's Asset management vehicle.
We are delighted with the progress made in North America, and the further
enhancement of our business in China, South East Asia, Russia, Eastern Europe
and Africa. We remain alert to acquisition or organic growth opportunities
worldwide.
The purchase of Bradshaw is an excellent example of our strategy at work and the
opportunities for marketing their services through our global network are
developing strongly.
In our maiden report we committed ourselves to maintaining a conservative
attitude to the valuation of our carbon portfolio. This policy, as well as tight
cash management, reporting and management systems, has proved valuable in 2007.
We believe we now have one of the world's strongest and best developed carbon
portfolios.
As indicated at the time of our flotation, we anticipated moving into
profitability in 2008 and the Board and management remain committed to that
goal.
David Potter
Camco
March 2008
GROUP BUSINESS REVIEW
The Camco Group is a leading climate change business in the growing carbon and
sustainable energy markets. We offer a full range of carbon-related services to
public and private organisations worldwide. The Group has a 20-year track record
and manages one of the world's largest carbon credit portfolios.
In 2007 we acquired several consulting and ventures businesses with expertise in
the environmental markets. The Group's strategy is to leverage the experience
and capability of the consulting practice to increase the number and range of
emission reduction projects the Group can identify, co-develop and manage.
As part of the Ventures business, Camco is in the process of establishing an
asset management vehicle, through which corporate or institutional investors can
invest in projects originated by Camco's network of offices around the world.
The vehicle will have its own origination capability, and be supported by
Camco's technical carbon teams.
The consulting and ventures businesses contribute to the integrated Group,
delivering high value project development opportunities into the core emission
reductions business. The value that these businesses bring to the Group is
significant.
Financial review
This year's annual report and accounts are broadly in line with management's
expectations. Revenue for the period was €10.44 million and came from the sale
of carbon credits and consultancy services. Camco has a conservative revenue
recognition policy, where we recognise revenues after services have been
provided, or after credits have been verified.
Revenues from the sale of carbon credits has been strong despite the Kyoto
compliance credit market not starting until January 2008. The Group has received
€2.88 million from the sales of either Certified Emission Reductions (CERs) or
Verified Emission Reductions (VERs).
We are very pleased with the performance of ESD. In 2007 revenues for the
consulting practice were €6.92 million. In 2006, like-for-like revenues were
€4.75 million, an increase of 46%. As the Camco Group acquired ESD on 30 April
2007 the percentage growth is based on pro-rated 2006 revenues.
In July, additional funds were raised to pursue growth in North America and
develop new business areas. These funds were partially invested in new markets
and increased operating costs by €1.84 million. There was also a cash and share
termination payment of €0.89 million, and foreign exchange losses of €2.39
million.
Treasury policy is to hold cash as low risk cash deposits in either US$, Euro,
GBP£ or other local currencies to match the demand for operating expenditures of
our global businesses. At year end, there was a loss of €1.93 million on the
GBP£ balance, and a €0.54 million loss on the US$ balance. The majority of the
losses (€2.26 million) are unrealised, with €0.13 million realised.
As a result of these adjustments administrative expenses were €14.87 million and
the resulting loss for the period was €12.09 million.
Operating loss before July 07 expansion €6.97 million
New business expansion:
North America expenditure €0.94 million
New business ventures €0.90 million
Other items:
Cash and share termination payment €0.89 million
Foreign exchange loss (unrealised) €2.39 million (€2.26 million)
Reported loss after adjustments €12.09 million
The balance sheet shows a net asset position of €58.24 million at 31 December
2007. This includes carbon development contracts (€13.30 million with
capitalised costs of €2.81 million in the year), goodwill and other intangibles
(€15.88 million) and cash and cash equivalents (€20.55 million).
Other notable assets include an asset held for sale of €8.37 million
representing the investment made in the McCommas Bluff Landfill project. This
project is intended to be the anchor asset for the Climate Leaders Asset
Management vehicle. The Group intends to transfer the McCommas asset into this
vehicle whereupon it will be managed by a dedicated asset management team.
Operational review
Management's primary focus in 2007 was to develop the carbon credit pipeline,
lay the groundwork for sales of carbon credits in 2008 and to integrate the
acquired businesses.
To support the rapid growth of the Group, there has been continued investment in
the operational infrastructure of the business including additional resource in
IT, HR and marketing as well as investment in staff development and training.
Growth has seen staff increase from 43 at 2006 financial year end to 207 as at
31 December 2007.
The Group's network expanded with new offices opening during the year in North
America, Malaysia and a second office in China. The carbon credits, consulting
and ventures businesses have successfully merged with joint offices in Beijing,
Denver, Kuala Lumpur, London and South Africa. We are pleased to announce the
promotion of Henrik Dalsgard to MD China, and would like to thank Alan Ho for
his hard work in 2007.
Looking ahead
The outlook for the Camco Group is positive; the carbon and sustainable
development markets are growing strongly and Camco is uniquely positioned to
take advantage of these opportunities. We have strength through our exposure to
both developed and emerging markets, with operations in China and South East
Asia, Russia, Africa, Europe and North America.
In 2008 we expect to progress our 150m tonne carbon portfolio through the Kyoto
regulatory process. Management are confident that we will deliver 127m carbon
credits into the market up to the end of the 1st Kyoto Commitment period.
We also expect to enter into contracts to place Camco's carbon credits with
compliance and financial buyers. This will lock in margins on approximately one
third of our carbon in specie. Our commercial team has demonstrated that it can
secure excellent value for our clients' carbon.
The North American team will contribute voluntary market credits to a Verified
Emission Reduction (VER) portfolio. Our expanding team in the US is establishing
a stronghold in this emerging market, with a service offering covering all
aspects of the carbon value chain from carbon assessment through to carbon asset
management.
The Group will continue to invest in building a sustainable business that will
consolidate the operational improvements made in 2007. This is forming the base
for a global business that will be a key contributor in the fight against
climate change in the coming years.
CARBON ASSETS
Camco is a leading carbon asset developer with one of the world's largest carbon
credit portfolios. We work closely with companies and investors to identify and
develop projects that reduce greenhouse gas emissions to generate carbon
credits. We then arrange the sale and delivery of carbon credits to
international compliance buyers and into the voluntary market.
Our business model is to develop emission reduction projects 'at risk'. This
means that Camco does not generate revenue until the carbon credits are
delivered. As a project co-developer, we build a trusting partnership with our
client that aligns our economic interests. There is stronger cooperation when
both parties are pulling in the same direction.
We have teams of carbon market experts based locally. Being 'on the ground'
gives us the ability to understand our markets, react quickly and to develop
long term relationships with our clients - essential when developing complex
emission reduction projects.
The contracted portfolio of carbon credits has grown from 102.9m tonnes to
149.3m tonnes, an increase of 45%, with additional increases in 2008. This takes
into account the adjustment management has made to the gross portfolio to
reflect known project delays or reduced operating capacity on project sites.
Camco has been open and transparent in its reporting of these write-downs, and
will continue to be so. The company's business plan is to contract 200m carbon
credits and deliver 127m tonnes during the 1st Phase of the Kyoto commitment
period.
The portfolio is of high quality, with large, mature, projects which we are
managing through the regulatory, construction and commercial processes. The
average project size is just over 1.0m tonnes, which means that it takes less
resource to secure the necessary approvals than a higher number of smaller
projects. The table below demonstrates continued progress:
Progress through stage* (cumulative): 29 Feb 08 31 Dec 07 31 Dec 06
Contracted 150.1m 149.3m 102.9m
PDD complete 113.3m 107.0m 78.0m
Host LoA 87.8m 88.8m 43.0m
Validated 80.0m 56.6m 34.1m
Submitted for registration 60.1m 41.8m 2.8m
Registered 37.7m** 30.2m 2.8m
1st verification*** 12.3m 12.3m 2.3m
Issued / verified 2.7m 2.7m 0.6m
Financed 125.8m 126.8m 43.1m
Under construction 109.8m 98.6m 42.9m
Operational 67.6m 45.3m 5.5m
Sell-side ERPA 70.1m 69.7m 35.8m
* Clean development mechanism stage or equivalent for JI and VER projects
** Includes 7.6m Beijing Taiyanggong project
*** Projects that have been through at least 1 verification process or
equivalent
The CDM Executive Board has indicated that they will register the Beijing
Taiyanggong project as long as stated corrections are made to the project
documentation. Camco considers the requested corrections to be straightforward
and is therefore confident that the project will be formally registered in due
course.
As at 29 February 2008, the contracted portfolio of 150.1m tonnes comprises
compliance credits (CERs and ERUs) and voluntary market offsets (VERs). The
contracted portfolio includes 7.7m VERs. The 142.4m compliance grade credits
(i.e. excluding VERs) are contracted either on a 'cash share' or 'carbon share'
basis.
Carbon share contracts total 102.8m tonnes of which Camco's in specie amount is
40.0m tonnes. Under these contracts Camco works in partnership with clients to
qualify and commercialise the credits and receives a carbon share which is
either free or purchased at a discounted price. The average purchase price
(including free carbon) is €7.35/tonne.
Cash share contracts total 39.7m tonnes. Under these contracts, Camco does not
physically receive any carbon credits but instead earns a commission or share of
the revenue from carbon credit sales.
Carbon portfolio contract structures 29 Feb 08 31 Dec 07 31 Dec 06
Contracted 150.1m 149.3m 102.9m
Cash share 39.7m 39.1m -
Carbon share 102.8m 101.9m -
VERs 7.7m 8.3m -
During the year, Camco has been awarded several industry prizes. Best Project
Developer - the Point Carbon Awards, Carbon Transaction of the Year -
Environmental Finance and an Environmental Markets prize in the Asian Energy
Business Awards. These awards demonstrate Camco's leading position in the
market.
2008 will be a watershed year for the carbon market. We will deliver significant
volumes of carbon credits into the European and Japanese markets where
compliance buyers have contracted to purchase carbon credits.
Over the coming years, we will continue to grow our carbon credit portfolio.
This will be achieved in the existing markets where we have a strong presence
such as China, Russia and Eastern Europe and also newer markets like North
America, Turkey and South East Asia. New sectors for emission reduction projects
will also be developed, such as land use, land use change & forestry ('LULUCF'),
and the building sector.
CONSULTANCY
During the year, Camco acquired the ESD consulting business which has 20-years'
expertise in the environmental markets. ESD has successfully integrated into the
Group enabling us to offer a full range of carbon-related services across
Europe, Africa, Asia and North America.
The consultancy practice's technical expertise will add value to our CDM and JI
projects. In addition, high quality carbon credits from our projects can be
purchased by consulting clients who are seeking to offset emissions they are
unable to reduce as part of their carbon management strategy.
Drawing on Camco's experience in the consulting and carbon asset management
business, the China team launched an innovative pilot project, to test the
feasibility of generating carbon credits from the use of fuel efficient stoves
in rural communities.
The opening of the new consulting office in South Africa, complimentary to the
services of the assets division office, created an integrated offering across
the Africa division. The division's solar power project in Tanzania performed
above initial targets, achieving major successes in the growing market for solar
power in East Africa.
Greater competition for business and for staff is expected in 2008. However
ESD's 20-year track record provides us with an excellent reputation to secure
new work, develop successful partnerships and recruit new staff. The market
opportunity is strong, and over the next three years we aim to leverage the
synergies created by the Camco and ESD merger.
VENTURES
Camco Ventures collaborates with technology start-ups, energy project
developers, investors, government agencies and manufacturers to commercialise
greenhouse gas technologies and low carbon projects and services. We provide the
management infrastructure, financial structuring, business planning and
technical support required to take each start-up business from inception to
commercialisation.
The Ventures business develops new services, project development or asset
management activities that support the integrated service offering. Once
successful, these initiatives will form part of the integrated Group, and will
no longer be categorised as 'Ventures'.
For example, an energy software product to help companies manage and reduce
their carbon emissions has been developed by Bradshaw, one of our consulting
businesses. The product will leverage the Group's client base of major
industrial companies in the UK and North America.
Last year, the Group acquired the McCommas Bluff landfill in Dallas, Texas, one
of the largest in North America. Specifically we have acquired a 17-year lease
to develop the site for improved collection and destruction of methane gas, one
of the most harmful contributors to global warming. The McCommas project will be
the anchor asset for the planned Climate Leaders asset management vehicle.
Initial commercial steps were taken to generate carbon credits under the Plan
Vivo methodology, a high quality framework for land use and forestry projects.
The Group is working with successful projects that have been established in
Mexico, Uganda and Mozambique, with more projects under development in Africa
and North America. This is an example of carbon asset business growing into new
sectors and geographies.
Abbreviated financial statements for the period from 1 January 2007 to 31
December 2007
Consolidated income statement for the period from 1 January 2007 to 31 December
2007
Consolidated income statement
for the year ended 31 December 2007
--------------------------------------------------------------------------------
Continuing
operations 2007 Period from
incorporation
to 31 December
2006
Notes €'000 €'000
----------- ------ ------ ------- -------- --------- --------
Revenue 3 10,444 830
---------------- ------ ------- -------- --------- --------
Cost of sales (4,365) (673)
----------------- ------ ------- -------- --------- --------
Gross profit 2 6,079 157
----------------- ------ ------- -------- --------- --------
Administration
expenses (14,872) (4,945)
----------------- ------ ------- -------- --------- --------
Share-based
payments (2,028) (577)
----------------- ------ ------- -------- --------- --------
Total
administration
expenses 4 (16,900) (5,522)
----------------- ------ ------- -------- --------- --------
Profit/(loss)
from
operations (10,821) (5,365)
----------------- ------ ------- -------- --------- --------
Finance income 5 1,171 1,450
----------------- ------ ------- -------- --------- --------
Finance expense 5 (2,582) (58)
----------------- ------ ------- -------- --------- --------
Profit/(loss)before tax (12,232) (3,973)
----------------- ------ ------- -------- --------- --------
Taxation 126 (2)
----------------- ------ ------- -------- --------- --------
Profit/(loss)
after tax (12,106) (3,975)
----------------- ------ ------- -------- --------- --------
Profit from
discontinued
operation (net
of tax) 9 16 -
----------------- ------ ------- -------- --------- --------
Loss for the
period (12,090) (3,975)
----------------- ------ ------- -------- --------- --------
Attributable to:
----------------- ------ -------- ------- --------- --------
Equity holders of the Company (12,131) (3,975)
Minority shareholders 41 -
----------- -------- ------ -------- ------- --------- --------
Loss for the
period (12,090) (3,975)
----------- ----- ------ ------ -------- ------- ---------
Basic and diluted loss per share in € cents
----------------- ------ -------- ------- --------- --------
Continuing operations (8.19) (3.42)
Loss for the period 6 (8.18) (3.42)
----------- -------- ------ -------- ------- --------- --------
Consolidated statement of recognised income and expense
for the year ended 31 December 2007
-------------------------------------------------------------------------------
Group Group
2007 2006
€'000 €'000
----------- ----- ------ -------- ------- --------- --------
Loss for the
period (12,090) (3,975)
----------------- ------ -------- ------- --------- --------
Exchange
differences on
translation of
foreign
operations 337 (22)
----------------- ------ -------- ------- --------- --------
Total
recognised
income and
expense for
the period (11,753) (3,997)
--------------------------- ------- --------- --------
Analysed to:
----------------- ------ -------- ------- --------- --------
Equity shareholders of the (11,794) (3,997)
Company ------ -------- ------- --------- --------
Minority interest in 41 -
subsidiary companies ------ -------- ------- --------- --------
(11,753) (3,997)
----------- ------ ------ -------- ------- --------- --------
Balance sheets
as at 31 December 2007
-------------------------------------------------------------------------------
Group Group Company Company
2007 2006 * 2007 2006
Notes €'000 €'000 €'000 €'000
----- ------ --- ------ ------- ------- ------- -------
Assets
-------------------- ------ ------- ------- ------- -------
Non-current assets
-------------------- ------ ------- ------- ------- -------
Property, plant and equipment 1,606 304 106 134
-------------------- ------ ------- ------- ------- -------
Goodwill on acquisition 7 14,413 1,156 - -
-------------------- ------ ------- ------- ------- -------
Other intangible assets 7 1,463 - - -
-------------------- ------ ------- ------- ------- -------
Carbon development contracts 8 13,302 10,751 8,642 6,123
-------------------- ------ ------- ------- ------- -------
Investments in subsidiaries - - 18,020 4,997
-------------------- ------ ------- ------- ------- -------
Other investments 275 - - -
-------------------- ------ ------- ------- ------- -------
Deferred tax assets 414 - - -
-------------------- ------ ------- ------- ------- -------
Total non-current assets 31,473 12,211 26,768 11,254
-------------------- ------ ------- ------- ------- -------
Current assets
-------------------- ------ ------- ------- ------- -------
Prepayments and accrued income 3,277 496 1,917 429
-------------------- ------ ------- ------- ------- -------
Trade and other receivables 5,678 1,112 15,078 2,060
-------------------- ------ ------- ------- ------- -------
Cash and cash equivalents 20,552 24,719 19,098 24,063
-------------------- ------ ------- ------- ------- -------
Assets classified as held for sale 9 8,512 - - -
-------------------- ------ ------- ------- ------- -------
Total current assets 38,019 26,327 36,093 26,552
-------------------- ------ ------- ------- ------- -------
Total assets 69,492 38,538 62,861 37,806
-------------------- ------ ------- ------- ------- -------
------ ------- ------- ------- -------
Liabilities
-------------------- ------ ------- ------- ------- -------
Current liabilities
-------------------- ------ ------- ------- ------- -------
Current tax liability (917) (1) - -
----------------
------ ------- ------- ------- -------
Trade and other payables (5,759) (2,116) (1,172) (1,738)
-------------------- ------ ------- ------- ------- -------
Loans and borrowing (1,293) - - -
-------------------- ------ ------- ------- ------- -------
Provisions - - - -
-------------------- ------ ------- ------- ------- -------
Deferred consideration (1,861) - - -
-------------------- ------ ------- ------- ------- -------
Liabilities classified as held for
sale (143) - - -
-------------------- ------ ------- ------- ------- -------
Total current liabilities (9,973) (2,117) (1,172) (1,738)
-------------------- ------ ------- ------- ------- -------
Non-current liabilities
-------------------- ------ ------- ------- ------- -------
Loans and borrowing (297) - - -
-------------------- ------ ------- ------- ------- -------
Provisions (203) - - -
-------------------- ------ ------- ------- ------- -------
Deferred consideration (375) (1,814) - -
-------------------- ------ ------- ------- ------- -------
Deferred tax liabilities (409) - - -
-------------------- ------ ------- ------- ------- -------
Total non-current liabilities (1,284) (1,814) - -
-------------------- ------ ------- ------- ------- -------
Total liabilities (11,257) (3,931) (1,172) (1,738)
-------------------- ------ ------- ------- ------- -------
Net assets 58,235 34,607 61,689 36,068
-------------------- ------ ------- ------- ------- -------
Equity
-------------------- ------ ------- ------- ------- -------
Share capital 1,662 1,299 1,662 1,299
-------------------- ------ ------- ------- ------- -------
Share premium 70,997 36,909 70,997 36,909
-------------------- ------ ------- ------- ------- -------
Share-based payment reserve 2,567 577 2,567 577
-------------------- ------ ------- ------- ------- -------
Retained earnings (16,106) (3,975) (12,266) (2,536)
-------------------- ------ ------- ------- ------- -------
Translation reserve 315 (22) - -
-------------------- ------ ------- ------- ------- -------
Own shares (1,271) (181) (1,271) (181)
-------------------- ------ ------- ------- ------- -------
Total equity attributable to
shareholders of the Company 58,164 34,607 61,689 36,068
-------------------- ------ ------- ------- ------- -------
Minority interest 71 - - -
-------------------- ------ ------- ------- ------- -------
Total equity 58,235 34,607 61,689 36,068
-------------------- ------ ------- ------- ------- -------
* As restated (revision of fair value of consideration)
These financial statements were approved by the Board of directors on 5
March 2008 and were signed on its behalf by:
Scott McGregor
Chief Financial Officer
Director
Cash flow statements
for the year ended 31 December 2007
Group Group Company Company
2007 2006 2007 2006
Notes €'000 €'000 €'000 €'000
------- -------- -------- ------- -------
-------------------
Cash flow from operating
activities ------- -------- -------- ------- -------
-------------------
Revenue and deferred income
received 8,573 313 2,919 -
------------------- ------- -------- -------- ------- -------
Cash paid to suppliers and
employees * (20,766) (6,231) (8,135) (4,682)
------------------- ------- -------- -------- ------- -------
Interest received 1,254 565 1,228 551
------------------- ------- -------- -------- ------- -------
Interest paid (72) - - -
------------------- ------- -------- -------- ------- -------
Service fees paid to
subsidiaries - - (5,626) -
------------------- ------- -------- -------- ------- -------
Income tax paid (72) (1) - -
------------------- ------- -------- -------- ------- -------
Net cash flow from operating
activities (11,083) (5,354) (9,614) (4,131)
------------------- ------- -------- -------- ------- -------
Cash flow from investing
activities ------- -------- -------- ------- -------
-------------------
Payment for acquisition of
subsidiaries (5,295) (366) (4,710) -
------------------- ------- -------- -------- ------- -------
Repayment of loan notes
issued for acquisition of
subsidiary - (3,150) - (3,150)
------------------- ------- -------- -------- ------- -------
Net (overdraft)/cash acquired
with subsidiaries (985) 248 - -
------------------- ------- -------- -------- ------- -------
Payment for purchase of
carbon development contracts - (896) - (2,116)
------------------- ------- -------- -------- ------- -------
Payment for purchase of
property, plant and equipment (1,187) (330) (12) (149)
------------------- ------- -------- -------- ------- -------
Payment for asset held
for sale (8,369) - - -
------- -------- -------- ------- -------
Net cash flow from
investing (15,836) (4,494) (4,722) (5,415)
activities --- --- ------- -------- -------- ------- -------
---------------- --- --- ------- -------- -------- ------- -------
Cash flow from financing
activities ------- -------- -------- ------- -------
-------------------
Proceeds from the issue of
loan notes - 5,000 - 5,000
------------------- ------- -------- -------- ------- -------
Repayment of loan notes - (5,000) - (5,000)
------------------- ------- -------- -------- ------- -------
Loans made to subsidiaries - - (12,560) (1,384)
------------------- ------- -------- -------- ------- -------
Proceeds from issuance of
shares 24,280 37,074 24,280 37,074
------------------- ------- -------- -------- ------- -------
Costs of raising capital (357) (3,069) (357) (2,643)
------------------- ------- -------- -------- ------- -------
Payment of finance lease
liabilities (201) - - -
------------------- ------- -------- -------- ------- -------
Net cash flow from
financing 23,722 34,005 11,363 33,047
activities ------- -------- -------- ------- -------
---------------- --- --- ------- -------- -------- ------- -------
Change in cash and cash
equivalents and bank
overdraft (3,197) 24,157 (2,973) 23,501
------------------- ------- -------- -------- ------- -------
Opening cash and cash
equivalents and bank
overdraft 24,719 - 24,063 -
------------------- ------- -------- -------- ------- -------
Effect of exchange rate
fluctuations (1,909) 562 (1,992) 562
------------------- ------- -------- -------- ------- -------
Closing cash and cash
equivalents and bank
overdraft 19,613 24,719 19,098 24,063
------------------- ------- -------- -------- ------- -------
* Cash paid to suppliers by Group was €12,298,000 (2006: €4,214,000) and
employees €8,468,000 (2006: €2,017,000)
Notes to the financial statements
1 Abbreviated accounting policies
Camco International Limited (the 'Company') is a public company incorporated in
Jersey under Companies (Jersey) Law. 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 2007 comprise
the Company, its subsidiaries and associates and jointed controlled entities
(together the 'Group'). Separate financial statements of the Company are also
presented. The accounting policies of the Company are the same as for the Group
except where separately disclosed.
The Company is listed on the Alternative Investment Market ('AIM') of the London
Stock Exchange.
A Statement of compliance
These consolidated and separate company 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 and separate company financial statements have been prepared
in accordance with and in compliance with Companies (Jersey) Law 1991.
The consolidated and separate financial statements were approved by the Board on
5 March 2008.
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 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 period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods. The most significant techniques for estimation are described in
the accounting policies.
The accounting policies set out below have been applied consistently to the
period 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.
C Accounting for Carbon Development Contracts ('CDCs')
The Group enters into CDCs with clients from which carbon credits are produced.
Carbon credits, 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. 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 will take place at least once a year during this period. The
Group works with the client at all stages of the process using proprietary
knowledge and experience to negotiate this complex process.
Treatment of CDC costs
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.
Most of the Group's CDCs have not yet reached the stage at which income can be
recognised. Once the income recognition criteria on these contracts are met (as
described above), the CDC costs will be expensed on the basis of carbon credits
delivered as a proportion of total expected carbon credit production over the
contract period. Most of the contracts are expected to be terminated in 2012.
D Discontinued operations
A discontinued operation is a component of the Group's business that is held for
sale which was acquired exclusively with a view to resale. Classification as a
discontinued operation occurs when the operation meets the criteria to be
classified as held for sale.
E Assets held for sale
Non-current assets that are expected to be recovered primarily through sale
rather than through continuing use are classified as held for sale. Immediately
before classification as held for sale, the Group of assets are remeasured in
accordance with the Group's accounting policies. Thereafter generally the group
of assets are measured at the lower of their carrying amount and fair value less
cost to sell. Impairment losses on initial classification as held for sale and
subsequent gains or losses on remeasurement are recognised in profit or loss.
Gains are not recognised in excess of any cumulative impairment loss.
F Revenue
The Group has two sources of revenue, revenue relating to CDCs and consulting
revenues.
CDC revenue
Revenue from CDCs is recognised at the point that the carbon credit has been
verified by a DOE and the risk of delivery into the final CDM registry or
equivalent (the 'registry') is minimal. The Company expects that the
verification, and delivery into the registry would take place within six months
following the carbon credit production taking place. Where the Company takes
ownership rights in carbon credits from CDCs, revenue will be recognised when
verification, delivery and sales contracts for delivery are complete.
Voluntary Emission Reductions ('VERs') and other carbon credit revenue may be
generated from carbon credit projects not operating under CDM or JI processes.
The regulation criteria are agreed between all parties and generally revenue is
recognised from VERs when all acceptance and confirmation notices have been
issued by the relevant parties and the significant risks and rewards of
ownership have been transferred.
The CDCs are scheduled to deliver the majority of carbon credits over the
2008-2012 phase of the Kyoto Protocol.
In certain instances the Group will perform a management review on behalf of
third parties to deliver CDCs on a non recourse basis. In these instances
revenue is recognised on a time and materials basis.
Consulting revenue
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.
2 Segmental reporting
---------------------------------------
Segment information is presented in respect of the Group's business and
geographical segments. The primary format, business segments, is based on the
Group's management and internal reporting structure.
Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated to a segment on a reasonable
basis.
Segment capital expenditure is the total cost incurred during the year to
acquire segment assets, that are expected to be used for more than one period.
Business Segments
The Group comprises the following main business segments:
1. Consulting: The Group's consulting practice providing clients with low carbon
energy and sustainable development solutions.
2. Ventures: Enters into partnerships with project and technology developers to
commercialise climate change mitigation technologies and provide carbon asset
management services.
3. Carbon: Carbon asset devepment, commercialisation and portfolio management.
During 2006, the Group operated in one business segment, being that of CDCs
(Carbon). Following on from the acquistion of the ESD Group on the 30 April
2007, there are now two additional business segments, namely Consulting and
Ventures.
Geographical Segments
The CDC business is managed on a world-wide basis but operates in three
principle geographic areas, ERMEA (comprising Europe, Russia, Middle East and
Africa), Asia and Americas. In ERMEA the Group operates primarily in Russia,
Eastern Europe and Africa.
In Asia the Group operates primarily in the Republic of China. In Americas
the Group operates primarily in the United States of America. In presenting
information on the basis of geographical segments, segment revenue is based
on the geographical location of the projects generating carbon credits and not
the location of the Group entity recording the revenue. Segment assets are
based on the location of the project for CDCs and location of office for the
consulting business.
Business Segments
--------------------- --- ------ -------- --- ------- -----
------
Consulting Ventures Carbon Eliminations Consolidated
2007 2006 2007 2006 2007 2006 2007 2006 2007 2006
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
-------- ------- ------ ------ ------ ------ ------ ------ ------ -------
External
revenues 6,924 - 645 - 2,875 830 - - 10,444 830
Inter-segment
revenue 496 - - - - - (496) - - -
------- ------ ------ ------ ------ ------ ------ ------ ------- ------
Total segment
revenue 7,420 - 645 - 2,875 830 (496) - 10,444 830
------- ------ ------ ------ ------ ------ ------ ------ ------- ------
Segment gross
margin 5,148 - 337 - 1,090 157 (496) - 6,079 157
Segment result 406 - (776) - (6,026) (3,044) - - (6,396) (3,044)
------- ------ ------ ------ ------ ------ ------ ------ ------- ------
Unallocated
expenses (4,425) (2,321)
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------
Results from
operating
activities (10,821) (5,365)
Net finance
(expense)/ (1,411) 1,392
income
Taxation 126 (2)
Profit from
discontinued
operation (net
of tax) 16 -
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------
Loss for the
period (12,090) (3,975)
------- ------ ------ ------ ------ ------ ------ ------ ------- ------
Segment 20,729 - 146 - 45,321 38,538 - - 66,196 38,538
assets
Other
investments - - 275 - - - - - 275 -
Unallocated
assets 3,021 -
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------
Total assets 69,492 38,538
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------
Segment
liabilities (4,377) - (997) - (3,190) (3,931) - - (8,564) (3,931)
Unallocated
liabilities (2,693) -
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------
Total
liabilities (11,257) (3,931)
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------
Capital
expenditure 335 - 25 - 1,028 1,226 - - 1,388 1,266
Depreciation 210 - - - 169 27 - - 379 27
Amortisation
of intangible
assets 222 - - - - - - - 222 -
Impairment
losses of
intangible
assets and
property,
plant and
equipment - - - - 153 72 - - 153 72
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------
Geographical Segments
--------------------- --- ---- ------- ----- -------- ------ ------
ERMEA Asia Americas Consolidated
2007 2006 * 2007 2006 2007 2006 2007 2006*
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
------ ------- ------ ------- ------- ------ ------
Revenue from
external
customers 8,847 10 1,597 820 - - 10,444 830
Segment assets 48,783 28,066 12,060 10,472 8,649 - 69,492 38,538
Capital
expenditure 1,332 266 56 960 - - 1,388 1,226
-------- ---- ------ ------ ------- ------ ------- ------- ------ ------
* As restated (revision of fair value of consideration)
3 Revenue
----------------------------------------------
----- ----- ---- ----- ----- --------- --------
Revenue is derived
as follows. 2007 2006
€'000 €'000
--------- ------- ------ ----- ----- ---- ----- ----- --------- --------
CDC revenue 2,875 830
--------- ------- ------ ----- ----- ---- ----- ----- --------- --------
Consulting revenue 7,569 -
--------------- ------ ----- ----- ---- ----- ----- --------- --------
--------
10,444 830
--------- ------- ------ ----- ----- ---- ----- ----- --------- --------
4 Total administration expenses
----------------------------------------------
----- ----- ---- ----- ----- --------- --------
Total
administration
expenses are
analysed below. 2007 2006
€'000 €'000
--------- ------- ------ ----- ----- ---- ----- ----- --------- --------
Depreciation of
property, plant
and equipment -
owned assets 232 27
---------------------- ----- ---- ----- ----- --------- --------
Depreciation of
property, plant
and equipment -
leased assets 147 -
---------------------- ----- ---- ----- ----- --------- --------
Share-based
payments 2,028 577
--------------- ------ ----- ----- ---- ----- ----- --------- --------
Exceptional item -
discretionary M&A
expense - 439
------------------- ----- ----- ---- ----- ----- --------- --------
Other
administration
expenses 14,493 4,479
--------------- ------ ----- ----- ---- ----- ----- --------- --------
Total
administration
expenses 16,900 5,522
--------------- ------ ----- ----- ---- ----- ----- --------- --------
5 Net finance income
-----
--------- ------- ----- ---- ----- ----- --------- --------
2007 2006
---------
€'000 €'000
------- ------ ----- ----- ---- ----- ----- --------- --------
---------------------------
Finance income
--------------------------- ----- ----- --------- --------
Interest on bank
deposits 1,171 860
---------------------------
----- ----- --------- --------
Exchange movements
- unrealised - 490
------------------- ----- ----- ---- ----- ----- --------- --------
Exchange movements
- realised - 100
------------------- ----- ----- ---- ----- ----- --------- --------
1,171 1,450
--------------------------- ----- ----- --------- --------
Finance expense
--------------------------- ----- ----- --------- --------
Unwinding of
discount (note 21) (97) (58)
--------------------------- ----- ----- --------- --------
Interest on
overdraft and
borrowings (72) -
--------------------------- ----- ----- --------- --------
Interest on
finance lease
creditor (22) -
------------------- ----- ----- ---- ----- ----- --------- --------
Exchange movements
- unrealised (2,256)
------------------- ----- ----- ---- ----- ----- --------- --------
Exchange movements
- realised (135) -
------------------- ----- ----- ----
----- ----- --------- --------
(2,582) (58)
--------- ------- ------ ----- ----- ---- ----- ----- --------- --------
Net finance income (1,411) 1,392
--------------------------- ----- ----- --------- --------
6 Loss per share
----------------------------------------------
Loss per share attributable to
equity holders of the Company is
calculated as follows. 2007 2006
----- ----- --------- --------
--------- ---- ----- ----- --------- --------
Cents Cents
per share per share
--------- ------- ------ ----- ----- ---- ----- ----- --------- --------
Basic and diluted
loss per share (8.18) (3.42)
--------------- ------ ----- ----- ---- ----- ----- --------- --------
€'000
--------- ------- ------ ----- ----- ---- ----- ----- --------- --------
Loss used in
calculation of
basic and diluted
loss per share (12,090) (3,975)
---------------------- ----- ---- ----- ----- --------- --------
Weighted average
number of shares
used in
calculation 147,676,792 116,307,918
---------------------- ----- ---- ----- ----- --------- --------
7 Goodwill on acquisition and other intangible
assets --- --------- ------- --------
---------------------------
Group Group Group
-------------------------- Goodwill on Other Total
acquisition intangible
assets
€'000 €'000 €'000
----------- ------- --------
---------------
Cost at 1 January 2007
1,156 - 1,156
--------------- ------ ----- ----- ---- --- --------- ------- --------
Acquisitions 13,801 1,685 15,486
------------------------- ---- --- --------- ------- --------
Revision to
original purchase
consideration (1,075) - (1,075)
------------------------- ---- --- --------- ------- --------
Revision to
provisional fair
values at
acquisition 531 - 531
------------------- ----- ----- ---- --- --------- ------- --------
--------
Cost at 31
December 2007 14,413 1,685 16,098
--------------- ------ ----- ----- ---- --- --------- ------- --------
Impairment & amortisation at - - -
1 January 2007 ----- ---- --- --------- ------- --------
----------------------
-------
Amortisation
charge - (222) (222)
--------------- --------
----- ---- --- --------- ------- --------
Amortisation at 31
December 2007 - (222) (222)
---------------------- ----- ---- --- --------- ------- --------
Net book value at
31 December 2006 1,156 - 1,156
---------------------- ----- ---- --- --------- ------- --------
Net book value at
30 December 2007 14,413 1,463 15,876
---------------------- ----- ---- --- --------- ------- --------
Goodwill in the period arose on the acquisition of ESD Partners Limited and its subsidiaries
and Bradshaw Consulting Limited.
8 Carbon development contracts
------------------------- ------- ------- -------- -------
Group Group Company Company
2007 2006* 2007 2006
€'000 €'000 €'000 €'000
------- ------- -------- -------
-------------------------
Cost at 1 January
2007 & 8 February
2006 as previously
stated 12,389 - 6,123 -
------------------------- --- ------- ------- -------- -------
Revision to
provisional fair
values at
acquisition (1,498) -
------------------- ----- ----- --- ------- ------- -------- -------
Cost at 1 January
2007 & 8 February
2006 as restated 10,891 - 6,123 -
---------------------- ----- --- ------- ------- -------- -------
Acquisitions - 9,210 - 4,716
--------- ------- ------ ----- ----- --- ------- ------- -------- -------
Carbon development
contract costs
capitalised 2,811 1,681 2,599 1,407
-------------------
------ ----- ----- --- ------- ------- -------- -------
Cost at 31
December 13,702 10,891 8,722 6,123
--------------- ------ ----- ----- --- ------- ------- -------- -------
Utilisation and
write-down at 1
January 2007 & 8
February 2006 (140) - - -
------------------------- --- ------- ------- -------- -------
Amount charged to
cost of sales in
the period (107) (68) (80) -
---------------------- ----- --- ------- ------- -------- -------
Write-down of CDC
costs previously
capitalised (153) (72) - -
---------------------- ----- --- ------- ------- -------- -------
Utilisation and
write-down at 31
December (400) (140) (80) -
---------------------- ----- --- ------- ------- -------- -------
Net book value at
1 January 2007 & 8
February 2006 as
restated 10,751 - 6,123 -
-------------------------
--- ------- ------- -------- -------
Net book value at
31 December 13,302 10,751 8,642 6,123
---------------------- ----- --- ------- ------- -------- -------
* As restated (revision of fair value of consideration).
The write-down of CDC costs was recognised following a review of the carrying
amounts of CDCs. Where the discounted future cash flows on the contract were
deemed insufficient to support the recoverability of the asset a write-down to
the lower value was made.
9 Asset and liabilities classified as held for sale
----------------------------------------------
On 29 November 2007, the Group purchased the assets related to operating and
developing the McCommas Bluff landfill methane collection and destruction plant
for cash consideration of €7,822,000. The McCommas project is intended to be
sold to a carbon asset fund within 6 to 9 months. The Group intends to transfer
the McCommas asset into this fund whereupon it will be managed by a dedicated
operations team based in North America.
.
--------- ------- ------ ----- ----- ---- ----- ----- --------- --------
McCommas 2007 2006
€'000 €'000
--------- ------- ------ ----- ----- ---- ----- ----- --------- --------
Property, plant
and equipment 7,822 -
--------------- ------ ----- ----- ---- ----- ----- --------- --------
Prepayments and
accrued income 690 -
--------------- ------ ----- ----- ---- ----- ----- --------- --------
Assets classified
as held for sale 8,512 -
--------------- ------ ----- ----- ---- ----- ----- --------- --------
--------- ------- ------ ----- ----- ---- ----- ----- --------- --------
Trade and
other (143) -
payables ------- ------ ----- ----- ---- ----- ----- --------- --------
---------
Liabilities
classified as held
for sale (143) -
--------------- ------ ----- ----- ---- ----- ----- --------- --------
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