29th Jun 2016 10:38
LONDON (Alliance News) - Green & Smart Holdings PLC shares rose on Wednesday after reporting its maiden interim results since listing on AIM, delivering a material rise in profit, and revealing its revenue this year and next year will now be significantly higher than previously expected.
Green & Smart shares were trading up 7.5% to 11.15 pence per share on Wednesday morning.
The company primarily offers services to other companies to assist with the construction of renewable power plants and also specialises in areas including wastewater treatment, but has also branched out with its own power plant in Malaysia which generates electricity using biogas captured through the treatment of palm oil mill effluent.
When the company floated on AIM in early May, the company outlined the schedule for development projects that it owns itself alongside those being advanced by associated companies, Megagreen Energy and Concord Green Energy, but was still waiting for confirmation that it had secured the contracts from Concord for the greenfield projects it is progressing.
On Wednesday, Green & Smart confirmed it has now been awarded the engineering, procurement, construction and commissioning contracts for Concord's greenfield projects, which are brand new developments compared to brownfield assets which involve revitalising a formerly active operation.
The contracts cover the construction of four biogas power generation plants on the same sites as four palm oil mills owned by Felda Palm Industries Sdn Bhd, and Green & Smart will be paid a total of GBP11.7 million, of which 30% will be recognised in the current financial year followed by the other 70% in the following year.
That suggests the four contracts will contribute GBP3.5 million this year and GBP8.2 million next year.
In addition, Megagreen Energy has asked to amend existing agreements with Green & Smart to add additional work that needs to be completed by the London-listed firm on its phase one developments, namely the Nasaruddin, Seberang Perak and Melikai projects.
The additional work will secure an extra GBP1.8 million for Green & Smart, however, the extra work will also push back the start of the phase two projects, Maran and Labis, by around three months to December 2016.
As a result, Green & Smart said some of the revenue from the phase two contracts will be pushed back into the next financial year rather than the current one as originally planned.
More importantly, Green & Smart conceded the work for Megagreen Energy and Concord will result in its own projects joining the back of the queue, despite delivering higher margins - but ultimately the extra work will boost Green & Smart's results over the next year and a half.
"In order to accommodate the timings of the projects for Megagreen Energy and Concord, the group has prioritised these lower margin projects over the group's wholly-owned projects. Consequently, there will be a slow-down in the progress of some of its own projects with a small loss of revenues in the 2016 financial year. There is expected to be no detrimental impact on revenues [in the 2017 financial year]," said the company.
Green & Smart, in total, has seven of its own projects and two of them will be completed this year, albeit a little later than originally planned, whilst the other five will still be completed during 2017, the last in December.
Kahang is the primary focus at the moment, the company's first fully-owned biogas power plant that was completed after the financial period ended. Final work is being completed on the project and should take place in mid-July. It has also started working on the Malpom project which should be completed by October.
"As a result of the new Concord contracts and the rescheduling of the other contracts, the group expects to report revenues for 2016 and 2017 significantly higher than management's previous expectations," said the company.
Green & Smart is completing four greenfield projects for Concord, two of which will be completed by March next year followed by the other two in April. The company is also involved in 10 brownfield projects, five of which were set to be completed in November this year, but all of them have now been revised and the completion dates will be advised by Concord.
For Megagreen, Green & Smart is completing five projects in total, three of which will still be completed this month whilst the other two have been pushed back to December this year from September.
"We entered the second half of the year with sustained momentum in our Kahang project as well as our EPCC contracts for Megagreen. The directors are excited about the imminent completion of our first fully-owned biogas power plant and commencement of power generation, which will cement the transition of Green & Smart to an independent power producer, and we look forward to progressing our established pipeline of other projects," said Saravanan Rasaratnam, managing director of the business.
Green & Smart also posted its first set of results on Wednesday, covering the six months to the end of March, prior to the company joining the London Stock Exchange.
The period was significant for the firm as it signalled a significant jump in revenue, all from contracts secured from Megagreen, to MYR21.8 million compared to only MYR720,000 a year earlier - equal to a rise to GBP4.0 million from GBP133,500.
Importantly, Green & Smart said it expects to secure the remaining MYR20.0 million owed by Megagreen for the phase one contracts, which have a total value of MYR49.5 million, "imminently".
Gross profit followed suit, increasing to MYR6.7 million, or GBP1.2 million, from profit of MYR688,000 a year before, or GBP127,600. However, the gross margin was lower as expected, at 30.6% compared to 95.6% last year.
As expected, administrative costs increased significantly but still led Green & Smart's operating profit to increase to MYR4.8 million, or GBP890,000, from MYR319,000 the year before, equal to GBP59,200.
Cash at the end of the period stood at MYR5.2 million, a fall from MYR12.2 million a year ago due to investment in the construction of the the Kahang plant and expenditure at Malpom. That means the company had around GBP960,000 in the bank at the end of March.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
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