30th Apr 2007 07:03
Renewable Energy Holdings plc30 April 2007 Renewable Energy Holdings plc ("REH" or "the Company") Preliminary Unaudited Results for the period ended 31 December 2006 Renewable Energy Holdings plc (AIM: REH), the investor in and operator of provenand innovative renewable energy technologies, announces preliminary results forthe period ended 31 December 2006. In 2006 the Board elected to change theCompany's year end from 30 June to 31 December and, accordingly, these resultscover the six month period from 1 July 2006 to 31 December 2006. Highlights: • Cash flows from income producing assets now meet corporate office running costs - represents achievement of target set at REH's formation • Revenues for the six months to 31 December 2006 of £1,456,035 match those for the preceding full 12-month period (to 30 June 2006: £1,468,178) • 4.6MW expansion to Kesfeld wind farm completed; additional 8.0MW expected to be completed by 1 July 2007 • Credit Facility of €135,000,000 (approx. £92,000,000) through Standard Chartered Bank to finance future expansion of wind assets in Europe and the UK • Gas flow at Landfill Gas operation in Wales markedly increased - reaching engine capacity • CETO, the Group's wave-energy device prototype, validated by independent engineer's review Mike Proffitt, Chief Executive of REH, said: "The plan to build a commercial CETO prototype has been finalised and work isunderway to obtain the appropriate financing to conduct a test in Perth,Australia. The Group has demonstrated itself as an owner and operator of windassets. With management's hands-on experience and the new debt facility, yourCompany is ready to take advantage of its potential in a growing sector of theeconomy." For further information please contact: Renewable Energy Holdings plc Parkgreen Communications Ltd Nabarro Wells & Co. LtdMike Proffitt, Chief Executive Paul McManus Richard SwindellsTel: 01624 641199 Tel: 020 7479 7933 Tel: 020 7710 7400 Mob: 07980 541 893 Chairman's Statement Whilst the Group's reporting period is, on this occasion, a short one as aresult of changing our year end, I am pleased to report substantial progress: - We have gained valuable experience operating a fully commissionedwind farm in Germany and have increased its capacity to 32.5 MW. The turbinesare operating satisfactorily though it was a poor wind year in Germany. - Engineering works were undertaken at our landfill gas project inWales. This has improved the gas flow and hence energy output, and the projectis performing as expected. - Following satisfactory proof of principle in the sea near Perth,Australia we commissioned an Independent Engineer's Report on CETO, the Group'sunique wave energy technology which can be deployed both to generate electricityand desalinate water without any carbon emissions. This report supports theBoard's view on the potential of the technology and the likely timing and costof producing a commercial prototype. Subject to funding, we expect to trialthis commercial prototype in Perth later this year where it continues to attracta lot of interest as one potential answer to Australia's continuing severedrought. We made a loss of £1,538,967 over the six month period in line withexpectations. However, our operating cash flow is now sufficient to meetcorporate running costs - again in line with the ambition we set ourselves.Our new credit facility of €135m from Standard Chartered Bank, which is expectedto complete during May, will now allow us to further expand and re-finance ourexisting German wind farm, provide working capital to the group and proceed withour pipeline of new wind projects. The Board remains confident that the Company is well placed to exploit thebusiness opportunities offered by the international drive to limit carbonemissions and exploit the benefits of renewable energy. John W Baker Chairman Date: 27 April 2007 Chief Executive's Report As reported in the Company's last Annual Report, the Board elected to change theGroup's year end to December 31st. Accordingly, this Annual Report covers 6months of activities to December 31st 2006. Administration expenses of £2,013,114 include £1,108,868 of depreciation andproject operating costs. Corporate office running costs for the six month period were £496,733 insalaries and Directors' remuneration, and £407,513 in legal, travel, projecttask, rental and other general and administrative costs. Looking at the revenue side, the Group's German Wind Farm had a disappointingfirst year, due to the winds over the region being well below anticipation, andone of the poorest wind years in Germany for the last fifteen years. The Boardis not expecting a repeat of this performance in 2007, and is confident that theanticipated revenues will be realised. The Board has recently become aware that the wind hedge taken out in early 2006as part of the Kesfeld financing failed to provide accurate data under which asettlement could occur between the provider of the hedge and the Company. Afterextensive discussions with the hedge provider, it has recently been agreed thatthe wind index available as a basis for any such hedge is inappropriate and theparties have set the hedge agreement aside at no cost to the Company. The 4.6MW expansion of the Kesfeld wind farm to a total 32.5MW was completed bythe year end and the further expansion of 8.0MW is on schedule for completionJuly 1st 2007. These expansions bring a significant uplift to return oninvestment as all necessary infrastructure is already in place. The Group has now demonstrated itself as an owner and operator of wind assetsand has recently agreed a €135,000,000 credit facility with Standard CharteredBank. The facility will be used to refinance the Kesfeld wind farm and to financefuture expansion of wind assets in Europe and the UK. This strategic bankingrelationship will significantly assist in the next stage of the Group's growth. During the six months to December 31st 2006 the Landfill Gas operation in Walesunderwent considerable re-engineering with pumps being replaced and extra pipinginstalled. This has seen a marked increase to the flow of gas throughout theperiod, and currently the gas flow is reaching the engine's capacity of 1 MW. We have now reached the point where the cash flows from the Group's two existingincome producing assets should be sufficient to meet the corporate officerunning costs. This is a target that was set at the Group's formation and onewe are pleased to recognise has been met. CETO, the Group's wave energy device prototype, successfully completed fieldtests during the period, and the Board sought to obtain the findings of anIndependent Engineer's Review. The review, undertaken by Parsons Brinkerhoff,was completed in November 2006 and their report has confirmed the Board's viewthat CETO is a viable proposition at costs both capital and operating thatsuggest commercial success. The plan to build a commercial prototype of CETO II has now been finalised andwork is underway to obtain appropriate financing. The test site is planned tobe in Perth, Australia, where CETO's dual desalination and electrical capacityhas attracted immense interest. With management's hands on experience and the agreed debt facility, your Companyis now ready to take advantage of its potential in a growing sector of theeconomy. Michael J Proffitt Chief Executive Officer Date: 27 April 2007 Unaudited consolidated income statement for the six months ended 31 December2006 Unaudited Audited Six months ended 31 Year December ended 30 2006 June 2006 Note £ £ Revenue & gross profit 1,456,035 1,468,178 CETO development expenses 555,310 612,289Administrative expenses 2,013,114 2,773,925 ________ ________ Loss from operations (1,112,389) (1,918,036) Finance costs (411,988) (333,560) Finance income 70,926 194,702 ________ ________ Loss before tax (1,453,451) (2,056,894) Tax expense 4 85,516 108,436 ________ ________ Loss after tax attributable to the (1,538,967) (2,165,330)equity holders of the parent ________ ________ Basic and diluted loss per share 5 (3.40p) (5.98p) ________ ________ Unaudited consolidated statement of recognised income and expense for the sixmonths ended 31 December 2006 Unaudited Audited Six months ended Year 31 Dec 2006 ended 30 June 2006 Note £ £ Loss after tax (1,538,967) (2,165,330) Foreign exchange loss on retranslation of overseas operations (71,873) (518) ________ _________ Total recognised income and expense for the period 9 (1,610,840) (2,165,848) _________ _________ Unaudited consolidated balance sheet at 31 December 2006 Unaudited Audited At 31 December At 30 2006 June 2006 Note £ £Non-current assetsProperty, plant & equipment 6 26,677,929 23,293,606Intangible assets 7 7,596,806 7,649,485 Current assetsTrade and other receivables 1,271,266 765,658Cash and cash equivalents 2,698,789 5,678,840 ________ ________Total current assets 3,970,055 6,444,498 ________ ________ Total assets 38,244,790 37,387,589 ________ _________Current liabilitiesTrade and other payables 4,442,834 789,178Tax liability 88,384 -Other financial liabilities 8 1,356,277 1,458,063 ________ ________Total current liabilities 5,887,495 2,247,241 Non current liabilitiesFinancial liabilities 8 14,952,785 16,067,108Deferred tax liability 93,497 109,531Other creditors - 70,000 ________ ________ Total non current liabilities 15,046,282 16,246,639 ________ _________Total liabilities 20,933,777 18,493,880 ________ _________ TOTAL NET ASSETS 17,311,013 18,893,709 Unaudited consolidated balance sheet at 31 December 2006 (Continued) Unaudited Audited At 31 December At 30 2006 June 2006 Note £ £Capital and reserves attributable to equity holders of thecompanyShare capital 452,666 452,666Share premium reserve 16,583,898 16,583,898Foreign exchange reserve (82,169) (10,296)Share based payment reserve 984,715 956,571Merger reserve 4,410,000 4,410,000Retained earnings (5,038,097) (3,499,130) ________ _________ TOTAL EQUITY 9 17,311,013 18,893,709 Unaudited consolidated cash flow statement for the six months ended 31 December2006 Unaudited Audited Six months ended Year 31 December 2006 ended 30 June 2006 Note £ £Operating ActivitiesNet loss from operations (1,112,389) (1,918,036)Adjustments for :Depreciation 621,867 601,056Amortisation 52,679 17,560Foreign exchange losses 542,426 577Equity settled share based payment 28,144 114,038 _________ _________ Operating profit/(loss) before changes in working 132,727 (1,184,805)capital and provisionsDecrease in deferred expenditure - 196,569Increase in trade and other receivables (505,608) (513,129)Decrease in other financial assets - 1,276Increase in trade and other payables 3,583,656 611,730 _________ _________ Cash generated/(absorbed) from operations 3,210,775 (888,359) _________ _________ Income taxes paid (13,166) - _________ _________Cash flows from operating activities 3,197,609 (888,359) Unaudited consolidated cash flow statement for six months ended 31 December 2006(continued) Unaudited Audited Six months ended Year 31 December ended 30 June 2006 2006 Note £ £ Cash flows from operating activities (brought forward) 3,197,609 (888,359) Investing activitiesAcquisition of property, plant & equipment (4,620,489) (23,601,806)Acquisition of subsidiary - net of cash acquired - (2,481,926)Finance income received 70,926 194,702 ________ ________ (4,549,563) (25,889,030)Financing activitiesIssue of ordinary shares - 8,550,000Issue costs - (505,861)Proceeds from bank borrowing - 18,655,165Issue costs for bank borrowing - (500,572)Repayment of bank borrowing (1,277,068) (661,212)Finance costs paid (351,029) (301,770) ________ ________ (1,628,097) 25,235,750 ________ ________Decrease in cash and cash equivalents 10 (2,980,051) (1,541,639) ________ ________ Notes forming part of the preliminary results for the six months ended 31December 2006 1 Basis of preparation The unaudited financial information set out in this preliminary announcementdoes not constitute the company's statutory accounts for the period ended 31December 2006 or year ended 30 June 2006. The financial information for the yearended 30 June 2006 is derived from the statutory accounts for that year whichhave been delivered to the Registrar of Companies. The auditors have reportedon those accounts; their report was unqualified and did not contain a statementunder section 15 (4) or 15 (6) of the Isle of Man Companies Act 1982. Thestatutory accounts for the period ended 31 December 2006 will be finalised onthe basis of the financial information presented by the directors in thispreliminary announcement and will be delivered to the Registrar of Companiesfollowing the company's annual general meeting. 2 Refinancing The Group has been informed that Standard Chartered Bank has obtained creditapproval to provide a project finance facility of up to €135,000,000. Thefacility will fund the refinancing of REH's existing assets in Germany,providing funds sufficient for a withdrawal of equity from those assets to meetthe Group's working capital requirements, and subsequently, subject to meetingcertain investment criteria and conditions, the 4.6MW expansion to its Germanwindfarm, a further 8MW expansion in Germany and the Group's windfarm pipe-linein Europe and the UK. It is expected that the legal and documentationrequirements for financial close of the facility will be satisfied within thenext month. 3 Segment information The group's primary reporting format for reporting segment information isbusiness segments, and the segments are defined as Head Office, CETOdevelopment, Windfarm and Landfill gas. This split coincides with a geographicalorigin split of activities; Head Office being in the Isle of Man, CETOdevelopment taking place in Australia, Windfarm being in Germany and Landfillgas being in Wales. Six months ended 31 December 2006 Head CETO Development Windfarm Landfill gas Total Office Isle of Man Australia Germany Wales £ £ £ £ £IncomeRevenue - - 1,374,575 81,460 1,456,035Finance income 49,281 4,078 17,567 - 70,926 ExpensesOperational expenditure 998,317 507,310 280,774 153,548 1,939,949Finance costs - - 411,988 - 411,988Depreciation & amortisation - - 590,883 83,663 674,546Other non-cash charge 28,144 - - - 28,144Retranslation (74,215) - - - (74,215) __________ ________ _______ _______ _________Total profit/(loss) before (902,965) (503,232) 108,497 (155,751) (1,453,451)taxation __________ ________ _______ _______ _________ Balance SheetAssetsProperty, plant & - - 26,476,201 201,729 26,677,929 equipmentIntangible assets - 5,559,878 - 2,036,927 7,596,806 Current assets 1,015,030 206,811 2,622,357 125,857 3,970,055 Liabilities (119,909) (110,582) (20,555,921) (147,365) (20,933,777) _________ ________ ________ ________ _________Net assets 895,121 5,656,107 8,542,637 2,217,148 17,311,013 _________ _________ _________ _________ _________ _________ _________ _________ _________ _________Capital expenditure - - 4,620,489 - 4,620,489 _________ _________ _________ _________ _________ Segment information (Continued) Year ended 30 June 2006 Head Office CETO Development Windfarm Landfill Total gas Isle of Man Australia Germany Wales £ £ £ £ £IncomeRevenue - - 1,427,280 40,898 1,468,178Finance income 169,485 4,666 20,551 - 194,702 ExpensesOperational expenditure 1,952,471 479,146 249,572 39,877 2,721,066Finance costs - - 333,560 - 333,560Depreciation & amortisation - - 584,826 27,888 612,714Other non-cash charge 114,038 - - - 114,038Retranslation (61,604) (61,604) ________ ________ _______ _______ _________Total profit/(loss) before (1,835,420) (474,480) 279,873 (26,867) (2,056,894)taxation ________ ________ _______ _______ _________Balance SheetAssetsProperty, plant & - - 23,060,893 232,713 23,293,606equipmentIntangible assets - 5,559,878 - 2,089,607 7,649,485 Current assets 3,699,879 125,477 2,455,506 163,636 6,444,498 Liabilities (349,140) (35,839) (17,979,178) (129,723) (18,493,880) ________ ________ ________ ________ _________Net assets 3,350,739 5,649,516 7,537,221 2,356,233 18,893,709 ________ ________ ________ ________ _________ ________ ________ ________ ________ ________Capital expenditure - - 23,601,500 - 23,601,500 ________ ________ ________ ________ ________ The group's secondary reporting format for reporting segment information isgeographic segments. All intercompany balances are excluded from the above analysis. 4 Tax expense Six months ended Year ended 30 June 31 December 2006 2006 £ £Current tax expenseIncome tax on loss for the period 101,550 -Deferred tax expenseOrigination and reversal of temporary differences (16,034) 108,436 _______ _______Total current tax 85,516 108,436 _______ _______ The reasons for the difference between the actual tax charge for the period andthe standard rate of income tax in the Isle of Man applied to profits for theperiod are as follows: Six months ended Year ended 30 31 December June 2006 2006 £ £Loss before tax 1,453,451 2,056,894 Expected tax charge based on the standard rate of income tax - -in the Isle of Man of nil% (30 June 2006: nil%)Expenses not deductible for tax purposes - -Unutilised tax losses 151,800 219,000Different tax rates applied in overseas jurisdictions (66,284) (110,564) _______ _______ 85,516 108,436 _______ _______ A deferred tax asset has not been recognised for unused tax losses totalling£2,161,000 (30 June 2006: £1,655,000), due to the uncertainty regardingrecoverability. 5 Loss per share Six months Year ended 30 ended 31 June 2006 December 2006 £ £NumeratorLoss used in basic and diluted EPS 1,538,967 2,165,330 ________ ________DenominatorWeighted average number of shares used in basic and diluted EPS 45,266,669 36,230,870 ________ _________ The loss figure used in this calculation is the loss for the period. Six months Year ended 30 ended 31 June 2006 December 2006Total share options in issue 5,594,167 5,594,167 ________ ________ The effect of all the above share options granted is anti-dilutive. 6 Property, plant and equipment £At 30 June 2005Cost or valuation -Accumulated depreciation - _________Net book value - _________At 30 June 2006Cost or valuation 23,894,662Accumulated depreciation 601,056 _________Net book value 23,293,606 _________At 31 December 2006Cost or valuation 27,884,327Accumulated depreciation 1,206,398 _________Net book value 26,677,929 --_________Year ended 30 June 2006Opening net book value -Additions 23,601,500Acquisitions 293,162Depreciation (595,154)Exchange differences (5,902) _________Closing net book value 23,293,606 _________Period ended 31 December 2006Opening net book value 23,293,606Additions 4,620,489Depreciation (621,867)Exchange differences (614,299) _________Closing net book value 26,677,929 _________ 7 Intangible assets Landfill gas rights In-process research Total & development Ceto device £ £ £At 30 June 2005Cost - 5,559,878 5,559,878Accumulated amortisation - - - ________ ________ ________Net book value - 5,559,878 5,559,878 ________ ________ ________At 30 June 2006Cost 2,107,167 5,559,878 7,667,045Accumulated amortisation 17,560 - 17,560 ________ ________ ________Net book value 2,089,607 5,559,878 7,649,485 ________ ________ ________At 31 December 2006Cost 2,107,167 5,559,878 7,667,045Accumulated amortisation 70,239 - 70,239 ________ ________ ________Net book value 2,036,928 5,559,878 7,596,806 ________ ________ ________ Year ended 30 June 2006Opening net book value - 5,559,878 5,559,878Additions 2,107,167 - 2,107,167Amortisation (17,560) - (17,560) ________ ________ ________Closing net book value 2,089,607 5,559,878 7,649,485 ________ ________ ________ Period ended 31 December 2006Opening net book value 2,089,607 5,559,878 7,649,485Amortisation (52,679) - (52,679) ________ ________ ________ Closing net book value 2,036,928 5,559,878 7,596,806 ________ ________ ________ The cost of landfill gas rights are being amortised over the period to 30 April2026. In-process research & development is assessed for impairment on the basis of anestimate of the assets value in use. 8 Financial assets and liabilities-numerical information Maturity of borrowings The carrying amounts of borrowings, all of which are exposed to cash flow orfair value interest rate risk, are repayable as follows: 31 December 2006 30 June 2006Group £ £In less than one year 1,356,277 1,458,063In more than one year but not more than two years 1,278,520 1,372,264In more than two years but not more than three years 1,293,053 1,302,679In more than three years but not more than four years 1,283,318 1,334,903In more than four years but not more than five years 1,185,464 1,257,718In more than five years 9,912,430 10,799,544 _________ _________ 16,309,062 17,525,171 _________ _________ There is an undrawn loan facility of £3,351,053 at 31 December 2006 (30 June2006: £nil). 9 Changes in shareholder's equity Six months ended Year 31 December 2006 ended 30 June 2006 £ £Total recognised income and expense (1,610,840) (2,165,848)Issue of new ordinary shares for - 8,044,139cash (net of expenses)Share based payment expense 28,144 114,038 _________ _________Total change in the period (1,582,696) 5,992,329 Capital and reserves attributable toequity holders of the parent at thebeginning of the period 18,893,709 12,901,380 _________ _________Capital and reserves attributable toequity holders of the parent at theend of the period 17,311,013 18,893,709 _________ _________ 10 Notes supporting cash flow statement 31 December 30 2006 JuneGroup 2006 £ £Cash and cash equivalents comprises: Cash available on demand 741,620 521,160Short-term deposits 1,957,169 5,157,680 ________ ________ 2,698,789 5,678,840 ________ ________ Net decrease in cash and cash equivalents (2,980,051) (1,541,639) ________ ________Cash and cash equivalents at the beginning of the period 5,678,840 7,220,479 ________ ________Cash and cash equivalents at end of period 2,698,789 5,678,840 ________ ________ Some £1,588,223 (30 June 2006: £2,006,948) of cash and cash equivalents held inGermany are restricted under the terms of the loan agreement covering borrowingsdisclosed in Note 8. 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