AGM Statement

RNS Number : 3296T

TEG Group (The) PLC

04 June 2009

 

For release

7:00am

4 June 2009

 

 

THE TEG GROUP PLC (TEG)

('TEG' or 'the Company')

 

AGM STATEMENT

 

 

At the Annual General Meeting of The TEG Group Plc ('TEG' or 'the Company'), the AIM-listed cutting edge green technology company, which converts organic wastes into natural organic fertiliser, which is to be held today (4 June 2009) at The Malmaison, Piccadilly, Manchester, Non-Executive Chairman, Nigel Moore will make the following statement:

 

'I am pleased to report that your company continues to make very significant progress and since we last met we have achieved a number of considerable milestones. Last year we discussed that the company had strengthened its position in the composting market and developed a number of opportunities that we expected to come to fruition in 2008. I am very pleased to report that 2008 was indeed the defining year we expected.

 

Full year turnover for 2008 was £12.7m, which compares very favourably to £2.2m in 2007 and losses were reduced to £1.5m against a £3.0m loss in the previous year. Pleasingly, the Group recorded a gross profit of close to £2m against a loss of £236,000 in 2007.

 

As reported, trading in all aspects of the Group's operations improved significantly in 2008. Revenues from plant sales increased substantially with two further facilities being completed and with the commencement of the first facility in Greater Manchester. Revenues from the TEG operating plants increased by 68% and the first revenues were generated by NOFCO and from third party maintenance contracts.

 

The Group has a healthy gross cash position with a closing balance as at 31 December 2008 of £6.8m.

 

You will all be aware that Financial Close on the Greater Manchester PFI contract was achieved on the 9 April this year and TEG's contract with its customer Costain was concluded at the same time. This was a very important milestone for the Company.  TEG's contract is for the construction of 4 TEG Silo Cage in-vessel composting plants to be constructed between 2008 and 2011 and the value of the contract to TEG is approximately £38m. The first facility under construction is in Rochdale, where building works have been underway since June 2008.  

 

Moving onto our other construction projects, the construction of TEG's sixth facility, for Gwynedd Council, was completed on schedule in April 2008. The plant has run well since handover and TEG has been awarded a maintenance contract to carry out scheduled maintenance on the facility. Construction of the plant for Verdia Horticulture Limited was completed in December 2008.  

 

Expansion of the Company's Todmorden facility was completed as planned to accommodate increased sales volumes. A further 12,000 tonnes per annum of capacity was installed by the end of the year bringing the total capacity to approximately 37,000 tonnes per annum.  

 

Sales have increased at all TEG owned facilities and we have seen particular success at Sherdley Farm and Todmorden. Sales at Sherdley Farm increased in 2008 by over 130% on the same period in 2007, while sales at Todmorden grew so quickly, it is now the highest turnover facility in the Company's portfolio. Customers now include five Local Authorities in addition to Veolia, Greater Manchester Waste Limited, Heinz and Schwan. Sales at the plant in Perth were 8% higher in 2008 than in 2007 and the Board is pleased with the continued sales growth. Customer density is lower than at the other TEG facilities and the market is increasingly competitive, but despite this, the facility continues to contribute a positive gross margin to the Group.

 

Our subsidiary company, NOFCO, the Natural Organic Fertiliser Company, has continued to make excellent progress in the development of end markets for TEG's compost product. The prestigious PAS100 accreditation standard for compost has now been achieved at all three TEG facilities and this has enhanced the value of TEG's products. New markets are developing for PAS100 standard compost and the Board anticipates further increases in revenues as the year progresses.

 

The Company was delighted to be recognised for its achievements with two prestigious awards during 2008. The first was the AIM Achievement in Sustainability Award and the second was the Local Authority Partnership Award made by the Association for Organics Recycling. This was a joint award won with one of our customers, Sefton Council in Merseyside.

 

It is at this point that I traditionally turn to the growth strategy and future direction of the company.

 

The organic waste market continues to grow and activity levels are increasing at a very encouraging rate. The £3 per tonne annual Landfill Tax escalator was applied by Government in April 2009 and we were pleased to see Government confirm this rate of increase will now be applied annually until at least 2013. In addition, statutory targets on Local Authorities for the diversion of waste from landfill provide a further stimulus for the market.

 

A significant observation in 2008 was the emphasis from Government on the potential for Anaerobic Digestion ('AD') as a form of renewable energy and when we last met I informed you of the Board's intention to explore options in the renewable energy sector. As announced on 10 March 2009, the Company has entered into a partnership and collaboration agreement with UTS Biogastechnik GmbH, the Munich based Anaerobic Digestion technology provider.  

 

In keeping with our observations of market developments, the Board believes there will be considerable growth in AD in the United Kingdom over the next decade and TEG's expertise in organic waste treatment, operational experience and agricultural end market experience makes it ideally placed to develop AD facilities in tandem with its Silo Cage composting technology. The UTS technology fits well with the TEG Silo Cage composting technology, allowing the partnership to offer the range of solutions required to treat all Local Authority organic waste streams.  The Company is actively pursuing projects that involve both AD and composting.

 

The Board still believes that the best strategic direction for the business is to grow by a combination of plant sales and Build Own and Operate facilities. The development of Build Own Operate facilities, whereby TEG offers a processing service, gaining revenues from gate fees for waste and sales of compost products, offers the significant attraction of generating long term sustainable revenues on which we can build the business. This is supplemented by plant sales, generating significant lump sum revenues. While the interest in TEG is growing and the value of such plant sales is increasing significantly, we still believe it is important to the security of the business to continue to develop our own facilities.  

 

2008 saw a significant step change in the revenues for the business with a 6 fold increase in revenues on 2007. The Group's pipeline of opportunities remains pleasingly strong and it is actively bidding for a sizeable number of significant contracts, including a number of further PFI/PPP projects, in addition to a large number of smaller waste sales opportunities. Trading in 2009 is meeting Board expectations and we still anticipate revenue levels in the second half to increase as activity levels increase on our capital sales projects.

 

TEG is still observing very good market growth and a continued increase in interest in the organic waste sector, despite the global economic situation restricting short term funding of developments in the private sector. The addition of an AD technology to TEG's proposition will further broaden the range of opportunities open to TEG in the future. The Board is confident that the Group has an exciting future with a strong outlook for trading in the remainder of 2009 and beyond.'

 

-ENDS-

Contact:

 

The TEG Group Plc (www.theteggroup.plc.uk )	Tel: [phone]
Michael Fishwick, Chief Executive
Adventis Financial PR	Tel: [phone] / 4759
Tarquin Edwards / Chris Steele	07879 458 364 / 07979 604 687
Canaccord Adams (Nomad)	Tel : [phone]
Robert Finlay / Guy Blakeney

 

Editor's Notes: 

 

TEG

TEG provides an in-vessel composting technology, which is one of the few approved technologies capable of treating animal by-product (ABP) waste. Plant economics are predominantly driven by the gate fees charged, rather than the value of the end product (compost). The TEG process is an economic alternative to landfill.

 

The Silo Cage system, one of the few technologies in Europe capable of treating this waste, is a natural process producing compost as an end product. The compost is an excellent soil conditioner that fertilises, retains moisture, provides structure and reduces the incidence of plant disease. TEG's Silo-Cages are housed in self-contained buildings, are not unsightly and are environmentally friendly.

 

Customers include local authorities, waste management companies, food processors, farmers and landowners. The Company's expanding market is driven by increasingly stringent EU and UK legislation regulating the treatment and disposal of organic waste. Statutory targets for the diversion of waste from landfill increase annually through to 2020, increasing TEG's market opportunity year on year. The Waste Resource Action Programme estimates that 450 composting plants will be needed by 2020 to satisfy local authority requirements alone, and there is increasing demand from the private sector driven by ABP legislation.

 

NOFCO, a subsidiary of TEG, is a marketing company specialising in the development of end markets for compost products, an important aspect of all plant developments and key to local authority development. The company has an expertise in the development of agricultural and horticultural markets and this capability is to be provided to customers to enhance TEG's overall service offering.

 

 

END

 

 

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