21st Mar 2006 07:00
EcoSecurities Group plc21 March 2006 EcoSecurities Group plc Maiden preliminary results show strong project growth EcoSecurities Group plc (the "Group" or "EcoSecurities"), one of the world'sleading originators of projects which have the potential to generate CarbonCredits, today announces its maiden preliminary results for the year ended 31December 2005. The Group floated on AIM in December 2005. Highlights • Revenues increase over 45% to €2.3 million (2004: €1.6 million) • Loss before tax of €4.2 million (2004: loss of €0.2 million) • Origination strong with number of projects rising by 25% to 152, from 121 at the time of the IPO: in 26 countries, using 16 methodologies* • Gross contract volume of the Group's projects has increased almost 30% to 90 million CERs, exceeding the Board's expectations* • Implementation going well with 13 projects now registered with the CDM Executive Board, up from 8 at the IPO* • Over 120 of the Group's projects are financed, with more than 60 having completed PDDs and over 20 have been validated* • Demand for CERs continues to grow, with new corporate buyers in Europe increasing significantly • CER market pricing has increased substantially, driven by higher EU Allowance prices • Volume of new projects signed in the first two months of 2006 has grown in line with the Board's expectations * As at 31st December 2005 Mark Nicholls, Chairman of EcoSecurities, commented: "EcoSecurities made considerable progress in 2005, culminating in our successfullisting on AIM. 2006 has started well as the Group, with the benefit of therecent capital raising, seeks to take advantage of its position as one of theworld's leading originators of carbon credit projects. The focus ofEcoSecurities remains on project origination and development, and thecommercialisation of its carbon credit portfolio. The development of the marketand the Group's positive start to the year gives the Board confidence forsignificant growth in 2006 and beyond." For further information please contact: EcoSecuritiesBruce Usher, CEO Tel: +44 (0) 20 7638 9571 (until 3.00pm today)Pedro Moura Costa, COO +44 (0) 1865 202 635 (thereafter) Citigate Dewe Rogerson Tel: +44 (0) 20 7638 9571Patrick Toyne SewellSara BatchelorClare Allison Chairman's Statement EcoSecurities made considerable progress in 2005, culminating in the admissionof the Group's shares to trading on AIM in December. During this period, theGroup expanded rapidly, opening up a formal office in India and working towardsestablishing full offices in China, Thailand, Indonesia, Malaysia, Mexico andChile. The Group has also increased the number of its employees to improve itsability to originate and implement projects, growing from 27 employees to 85employees at year end. At 28 February 2006, the Group had 104 employees, andexpects to grow to approximately 175 employees by the end of 2006. 2006 has started well as the Group, with the benefit of the recent capitalraising, seeks to take advantage of its position as one of the world's leadingoriginators of carbon credit projects. Operationally, we plan to continue to adda significant number of employees to our locations in China, Thailand, Brazil,India and Indonesia. To accommodate this growth, EcoSecurities has initiated anoffice expansion in New York and is moving to new premises in Oxford and Dublin:these projects are expected to be completed by 1 June 2006. EcoSecurities has also separated its Consulting Division from the remainder ofthe Group in order to allow the business to focus on the expansion of itsservices, operating mostly from its offices in The Hague. At the end of 2005,the Consulting Division received, for the fifth consecutive year, the award ofBest CDM/JI Advisory Group, based on a reader's survey conducted by UK'sEnvironmental Finance magazine. The focus of the Group remains on project origination and development, and thecommercialisation of its carbon credit portfolio. The development of the marketand the Group's start to the year give the Board confidence for significantgrowth in 2006 and beyond. Executive Directors' Review 2005 was a watershed year for EcoSecurities and for the carbon market as awhole. The EU Emissions Trading System took effect from 1 January and the KyotoProtocol came into force on 16 February, officially launching the global marketin the trading of carbon credits for the first time. Volumes of carbon tradedincreased dramatically during the year, as evidenced by trading on the EUAllowance exchanges, and the price of credits gained markedly as well, althoughwith significant volatility. In the CDM market, in which EcoSecuritiesgenerates almost all of its projects, the number of projects registered by theExecutive Board of the UN grew from 2 at the beginning of 2005 to nearly 100projects by year end. On 19 October 2005, one of the Group's CDM Projects, a hydro-electric powerstation in Honduras called La Esperanza, became one of the first two CDMprojects in the world to be issued with CERs. The first issuance of CERs by theCDM-EB was a milestone in the development of the Group's market and now providesgreater certainty that many of the Group's contracts will begin to generaterevenues. The Group's list of registered projects increased to 13 by year end from 8 at 31October 2005, and its pipeline of contracted projects grew significantly. Overthe last six months EcoSecurities has also invested significantly in CDMimplementation personnel and systems, allowing the Group to process a muchlarger volume of projects through the CDM project cycle more efficiently. Origination EcoSecurities has continued to significantly increase the number of projectscontracted and under term sheet since the IPO. The majority of new projects arelocated in China and Indonesia, which reflects the effort EcoSecurities isplacing on developing its presence in Asia, which has the greatest potentialnumber of projects. The technologies employed by the new projects vary widely,but include biomass, biodiesel, hydro and landfill gas collection andutilisation. The legal status of projects contracted has increased as follows: At IPO Total as of Contract legal status (31 Oct 2005) Change 31 Dec 2005Signed contracts 89 +20 109Signed term sheets 32 +11 43Total 121 +31 152 The Group's strategy is to concentrate on higher margin principal and projectdevelopment contracts, as opposed to agency contracts. As a result of thisstrategy, 27 out of the 31 new contracts and term sheets were signed on aprincipal basis. In most, but not all, cases EcoSecurities will be purchasingthe CERs generated by these projects at a fixed price for the term of thecontract. CER volume under contract and term sheet has also increased significantly.Gross contract volume has increased significantly to over 90 million CERs, from72 million calculated at the time of the IPO. Gross contract volume is thetotal number of CERs estimated to be generated by all projects under contractand term sheet. This represents the maximum project volume, and does not adjustfor the risks that any given project faces before the delivery of the projectedvolume of CERs (such as country, financing, construction and CDM approvalrisks). EcoSecurities' portfolio of projects is highly diversified bygeographic location, technology employed and CDM methodology. We believe thatproject diversification, as well as our excellent track record in projectimplementation, significantly mitigates the overall portfolio risk to theGroup's CER volume under contract. The Directors believe the Group's business development relationship with Cargillwill play an important role in assisting the Group in originating new CDMprojects, both with Cargill's own operations and with their customers. Implementation EcoSecurities' projects continue to progress at a steady pace through the CDMcycle, which will be improved by the Group's new web-based document managementand project control system which allows for decentralised project work whilemaintaining centralised quality control standards. The number of EcoSecurities'projects registered by the CDM Executive Board has risen to 13 projects at theyear end from 8 at 31 October 2005. Of the 152 projects at contract and term sheet stage, over 120 are now financed,more than 60 have completed PDDs and over 20 have been validated. In December, the CDM Executive Board approved two new methodologies relating toForestry and Coal Mine Methane projects, which is important for the Group asthese are areas targeted by its origination and business development teams. Commercialisation In the final quarter of 2005, two of the Group's contracted projects had CERsverified and issued by the CDM Executive Board. These were among the world'sfirst projects to receive CERs, demonstrating that the systems and framework arenow in place within EcoSecurities and the UN to enable the processing ofprojects through the entire CDM project cycle. Market pricing has increased substantially throughout 2005, driven by higher EUAllowance prices. The spot EU Allowance price has risen from approximately €8in January 2005 to €21.65 at the end of December 2005. Demand for CERs hasgrown as well, with new buyers entering the market during the year. Inparticular, the number of corporate buyers in Europe has increasedsignificantly, as these buyers can use CERs to meet the emissions caps imposedon them under the terms of the EU Emissions Trading Scheme. EcoSecurities'trading strategy in 2005 was to sell a portion of our portfolio on a forwardpayment versus delivery basis through and including 2012. All contracts are atfixed prices in either Euros or US dollars. Prices obtained for our CERs haveincreased broadly in line with the price of EU Allowances. Outlook In the first two months of 2006, the volume of new contracted and term sheetprojects signed by EcoSecurities grew in line with the Board's expectations.Our strong start, combined with robust demand for carbon credits from buyers,gives us confidence for the remainder of 2006. We anticipate that the expansionin the number of EcoSecurities' local offices and personnel will continue toprovide us with a competitive advantage in the origination of projectopportunities. Our relationship with Cargill is having a positive impact on ourvolume of project leads, and we expect that the volume of CERs in our portfoliowill increase significantly, primarily from project investment and developmentactivities in the landfill, animal and agricultural waste sectors. It is ourexpectation that our portfolio will remain highly diversified by technology,methodology and geographic location, thereby minimising risk to the overallportfolio. Our strategy for the year ahead is to continue to maintain our core focus onoriginating, implementing and commercialising a highly diversified portfolio ofemissions reductions projects. It is our expectation that the combined strengthof our many local offices and personnel, the expertise of our operating Groupteams, and the capital from the Group's recent IPO, positions EcoSecurities wellto benefit from the exciting opportunities in the market. Financial Review Income has been primarily driven by the consulting business (€2.2m), with theremainder arising from CER transactions where EcoSecurities acted as the agent.The growth in administrative expenses to €3.35m (2005: €0.65m) was broadly inline with plan and is related to the significant growth of the Group's employeebase and geographic spread over the last year, with costs being expensed asincurred. The loss before tax for 2005 was €4.2m again reflecting thesignificant investment in the expansion of the business and the IPO, and theexpensing of share options. Transaction costs amounting to €7.6m have been deducted from the €83.7m proceedsof the IPO. A further €1.3m has been charged to the income statement in respectof costs relating to the Group's preparation for the IPO which the Directorshave determined were not directly attributable to the issuance of the new sharesbut to the related preparatory activities. The year end balance sheet and cash flow statements reflect the funds raised inthe IPO. The Group has a net cash balance of €83.1m, most of which is investedin money market deposits in currencies which match the forecasted operating cashrequirements of the business. EcoSecurities is exposed to the commodity price risk of CERs as the Group entersinto contracts both to buy CERs and invest in projects which develop CERs, whichas of the balance sheet date have not yet been transacted in physical markets.The Group's risk management policy is to partially hedge its CER purchaseagreements by selling forward sufficient quantities to meet its anticipatedoperating costs. EcoSecurities Group plcConsolidated Income Statement for the year ended 31 December 2005 Year ended Year ended 31 December 31 December 2005 2004 •'000 •'000 Revenue 2,268 1,557 Cost of sales (2,166) (1,095) Gross profit 102 462 Net other operating income 47 32 Administrative expenses (3,350) (653) IPO preparation expenses (1,286) - Net profit on disposal of joint ventures 498 - Loss before financing costs (3,989) (159) Financing costs (339) (58)Interest receivable 125 1 Loss before tax (4,203) (216) Income tax expense (115) 19 Loss for the financial year (4,318) (197) Attributable to: Equity holders of the Company (4,344) (161)Minority interest 26 (36) (4,318) (197) Earnings per share expressed in cents pershareBasic and fully diluted earnings per share (26.97) (1.57) EcoSecurities Group plcStatement of Recognised Income and Expenses for the year ended 31 December 2005 Year ended Year ended 31 December 31 December 2005 2004 •'000 •'000 Loss for the financial year (4,318) (197)Currency translation reserve movement (172) 24Total recognised income and expenses for the year (4,490) (173) Attributable to:Equity shareholders of the Company (4,521) (140)Minority interests 31 (33) (4,490) (173) EcoSecurities Group plcConsolidated Balance Sheet as at 31 December 2005 31 December 31 December 2005 2004 •'000 •'000AssetsNon-current assetsIntangible assets 102 -Property, plant and equipment 134 27Investment in subsidiaries - -Total non-current assets 236 27 Current assetsTrade and other receivables 1,320 583Current tax debtors - 22Cash and cash equivalents 83,148 77Total current assets 84,468 682 Total assets 84,704 709 Shareholders' equityIssued capital 229 1Share premium 75,853 -Share based payment reserve 337 61Translation reserve (52) 120Other reserves (573) -Retained earnings (5,022) (678)Total shareholders equity 70,772 (496)Minority interest in equity - (93)Total equity 70,772 (589) LiabilitiesNon-current liabilitiesInterest bearing loans and borrowings 8,752 154Deferred tax liabilities 4 1Total non-current liabilities 8,756 155 Current liabilitiesInterest bearing loans and borrowings 35 221Trade and other payables 5,028 922Current tax creditors 113 -Total current liabilities 5,176 1,143 Total liabilities 13,932 1,298 Total equity and liabilities 84,704 709 EcoSecurities Group plcConsolidated Cash Flow Statement for the year ended 31 December 2005 31 December 31 December 2005 2004 •'000 •'000 Loss for the financial year (4,318) (197)Income tax expense/(credit) 115 (19)Interest paid 339 58Interest received (125) (1)Depreciation 27 14Increase in trade and other receivables (682) (212)Increase in trade and other payables 2,036 150Net profit on disposal of joint ventures (498) -Share based payment 276 24Unrealised foreign exchange difference (100) 31Interest paid (270) (53)Interest received 65 1Tax refunds received 23 16Net cash flow from operating activities (3,112) (188) Cash flows from investing activitiesCash paid to acquire minority interests (477) -Purchase of property, plant and equipment (132) (13)Purchase of intangible fixed assets (103) -Net cash proceeds from disposal of interest in 477 -joint venturesNet cash used in investing activities (235) (13) Cash flows from financing activitiesGross proceeds from the issue of ordinary share 83,667 -capitalAdmission costs paid (5,557) -Net proceeds from issue of new loans 8,745 294Repayment of borrowings (449) (32)Payments to restricted cash (583) -Net cash generated from financing activities 85,823 262 Effects of foreign exchange on cash 12 - Net increase in cash and cash equivalents 82,488 61 Cash and cash equivalents at start of year 77 16 Cash and cash equivalents at end of year 82,565 77 EcoSecurities Group plcNotes to the financial statements 1. Basis of preparation This preliminary financial information has been derived from the Group'sconsolidated financial statements for the year ended 31 December 2005 which havebeen prepared in accordance with International Financial Reporting Standards(IFRS) as approved by the EU. The accounting policies applied in preparing the Group's consolidated financialstatements for the year ended 31 December 2005 were as set out in the AdmissionDocument, issued on 13 December 2005. 2. Business segments The Group has defined the following three business segments based onexpectations about its future operating activities as follows: (a) Principal and Agency Emissions Trading;(b) Emissions Reduction Project Development; and(c) Consulting and Advisory. The Group has historically been involved in the provision of consulting andadvisory services and has accordingly reported all costs and revenues andattributed all assets and liabilities to that segment. Up to 31 December 2005,no revenue has been attributed to the principal and project development segmentsand no separate reporting of segments results presented. The assets andliabilities of the Group previously classified entirely within the consultingand advisory segment are being allocated in some cases to other activities, orare unallocated. For the year ended 31 December 2005, the Group continues toreport all assets and liabilities within this segment as there is yet noreasonable, or reliable basis for attributing segment assets and liabilities.The Group will review the basis of disclosure in the future as its activity basebroadens. 3. Loss per share Basic loss per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary sharesoutstanding during the year. The weighted average number of ordinary shares is calculated as follows: Year ended Year ended 31 December 2005 31 December 2004 ('000) ('000)Issued ordinary sharesStart of year 10,305 10,282Effect of shares issued during the year 5,805 10Weighted average number of shares for year 16,110 10,292 The number of shares in issue at the end of the financial year is 91,626,676 andtherefore the weighted average number of shares issued in the year is notrepresentative of the number of shares upon which future earnings per share willbe calculated. Basic and fully diluted loss per share is calculated as follows: Year ended Year ended 31 December 31 December 2005 2004 Earnings (•'000) (4,344) (161) Weighted average number of shares ('000) 16,110 10,292 Loss per share (• cent) (26.97) (1.57) There is no difference between basic and fully diluted loss per share as theinclusion of the share options in the calculation of the weighted average numberof shares would have the effect of reducing the loss per share. The potentialdilutive effect on the weighted average number of ordinary shares would haveincreased by 865,531 shares and comprised the dilutive effect of the shareoptions issued under the employee share option schemes together with thedilutive effect of the convertible loan granted to Angel Capital on 16 June 2005and converted into ordinary shares on 16 August 2005. The adjusted loss per share has been presented to show the impact on basicearnings per share of the IPO preparation expenses and the net profit ondisposal of the joint ventures deemed to be of an exceptional nature as follows: Year ended Year ended 31 December 31 December 2005 2004 •'000 •'000EarningsItems of an exceptional nature: (4,344) (161)IPO preparation expenses 1,286 -Disposal of joint ventures (498) - (3,556) (161)Adjusted loss per share (• cent) (22.07) - 4. Cash and cash equivalents Year ended Year ended 31 December 31 December 2005 2004 •'000 •'000 Cash at bank and in hand 422 77Short term bank deposits 82,143 - 82,565 77Restricted cash 583 - 83,148 77 The Group's short term bank deposits are invested in money market accounts.Details of these deposits are as follows: Balance invested Weighted Weighted average average term •'000 interest rate (days)Currency Euro 54,300 2.44% 22 daysSterling 11,920 4.67% 17 daysUS Dollar 15,923 4.26% 17 days 82,143 5. Share premium account Year ended 31 December 2005 •'000 Start of year -Premium on shares issued in share for share exchange in theyear, net of expenses 30,519Premium on shares issued for cash 79,269Transaction costs (7,586)Reserve arising on share for share exchange (26,349) End of year 75,853 On 13 December 2005, the Group issued 36,000,000 ordinary shares of €0.0025 eachon IPO at the listing price of £1.50 per share, giving rise to a premium of€79.3 million. Transaction costs amounting to €7.6 million have been deducted from the proceedsarising on the issue of new shares in the year. A further €1.3 million has beencharged to the income statement in respect of the costs relating to the IPOwhich management have determined were not directly attributable to the issuingof new shares but to related preparatory activities. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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