6th Mar 2007 07:02
TEG Group (The) PLC06 March 2007 For release 07.00am 6 March 2007 TEG GROUP PLC (TEG) ("TEG" or "the Company") FINAL RESULTS for the year ended 31 December 2006 "Period of Excellent Progress; Further Significant Growth in Revenues Anticipated in 2007" TEG Group Plc, the leading green technology company, which converts organicwastes into natural organic fertiliser announces its final results for the year ended 31 December 2006. Highlights Financial •Turnover increased significantly by 641% to £3,559,330 (2005:£555,250) •Post tax loss narrowed to £1,499,653 (2005:£1,675,984) •Fundraising in April 2006, raising £8,050,000 before expenses to secure the continued expansion of the Todmorden facility •No dividend proposed Operational •Perth, Scotland, installation complete. Grant to TEG of Scotland's first composting PPC permit expected to act as a barrier to new entrants €2 line plant constructed (38,000 tonnes pa) •Preston, Sherdley Farm - Single line plant constructed (6,000 tonnes pa); a second line now under construction •Swansea - Single line plant constructed (7,000 tonnes pa) •Norfolk - a further 2 line plant constructed (24,000 tonnes pa) •Development of largest facility, 50,000 tonnes pa, at Todmorden, West Yorkshire - among UK's biggest composting plants - building construction completed in January 2007 and first of four lines at Todmorden expected on stream April 2007 - ahead of schedule Contract Wins •City and County of Swansea - construction completed during 2006 and handed over to the customer in February 2007 •Banham Compost, Norfolk project - construction completed in 2006 and hand over expected in March 2007 •Greater Manchester Waste Ltd - first contract for green waste supply to Preston •Shell R & D contract - lab work successful and pilot scale trials currently underway •United Utilities - full scale pilot plant installed in January 2007 Post Year-End Events •Greater Manchester Waste PFI - TEG is the exclusive compost technology provider to the Viridor-Laing consortium selected as preferred bidder for the PFI contract. Assuming financial close, TEG expects to be awarded contracts to build 4 large facilities with sales orders worth up to £35 million over the next 3 years. Financial close is expected by 1 June 2007 and the plants will process 180,000 tonnes pa of food and garden waste collected in Greater Manchester Commenting, Mick Fishwick, Chief Executive, TEG Group Plc, said: "Following the progress made in 2005, it is very pleasing to see the companybuild on its success and establish itself as a force in the composting market.Indeed, the announcement that TEG is the exclusive compost technology providerto the Viridor-Laing consortium that was awarded preferred bidder status for theGreater Manchester Waste PFI contract, Europe's largest ever waste managementPFI contract, is a hugely significant step forward for TEG and an endorsement ofTEG's technology and its ability to construct and operate large scale compostingplants". "Based on the contracts awarded, the TEG plants now in operation, the number ofenquiries the Company has received and the number of active projects, the Boardexpects to achieve further significant growth in revenues in 2007". ENDS Contact: The TEG Group Plc Tel: 01772 314 100Michael Fishwick, Chief Executive Adventis Financial PR Tel: 020 7034 4758Tarquin Edwards 07879 458 364 Cannacord Adams (Nomad) Tel: 020 7050 6500Robert Finlay Editor's Notes: TEG provides an in-vessel composting technology, which is one of the fewapproved technologies capable of treating animal by-product (ABP) waste. Planteconomics are predominantly driven by the gate fees charged, rather than thevalue of the end product (compost). The TEG process is an economic alternativeto landfill. The Silo Cage system, one of the few technologies in Europe capable of treatingthis waste, is a natural process producing compost as an end product, used as anexcellent soil conditioner that fertilises, retains moisture, provides structureand reduces the incidence of plant disease. TEG's Silo-Cages are housed inself-contained buildings, are not unsightly and are environmentally friendly. Customers include local authorities, waste management companies, foodprocessors, farmers and landowners. The Company's expanding market is driven byincreasingly stringent EU and UK legislation regulating the treatment anddisposal of organic waste. Statutory targets for the diversion of waste fromlandfill increase annually through to 2020, increasing TEG's market opportunityyear on year. The Waste Resource Action Programme estimates that 450 compostingplants will be needed by 2020 to satisfy local authority requirements alone, andthere is increasing demand from the private sector driven by ABP legislation. NOFCO is a marketing company specialising in the development of end markets forcompost products, an important aspect of all plant developments and key to localauthority development. The company has an expertise in the development ofagricultural and horticultural markets and this capability is to be provided tocustomers to enhance TEG's overall service offering. Chairman's Statement I am delighted to present the company's 2006 annual report. TEG has continued tomake tremendous progress and it is a pleasure to report a further period of verysignificant growth. Turnover of £3,559,330 is well ahead of the previous year'sfigure (2005:£555,250). Losses narrowed from £1,675,984 to £1,499,653. Nodividend is recommended. Following the progress made in 2005, it is verypleasing to see the company build on its success and establish itself as a forcein the composting market. This progress has continued into 2007 and we announced on 29 January that TEG isto be the exclusive composting technology provider to the Viridor-Laingconsortium that was selected as preferred bidder by Greater Manchester WasteDisposal Authority in its PFI process, considered to be the largest single wastemanagement contract to be tendered in Europe. This quantum leap contract shouldbring a major increase in turnover and should place TEG in a strong positionwith prospective customers in the Local Authority sector. These accounts are the first to apply 'FRS20 Share based payment', the newlyintroduced accounting standard that requires companies to ascribe a cost toemployee share options. This has introduced a non cash cost of £173,435 for theyear, and the results for the same period in 2005 have been restated accordinglyby £104,917. Plant Construction During 2006, TEG installed four plants and all plants were operational by theend of the year. A single line was constructed at Sherdley Farm (6,000 tonnesper annum), a two line plant was installed at Glenfarg, Perthshire (38,000tonnes per annum), a single line plant was installed in Swansea (7,000 tonnesper annum) and a further two line plant was constructed in Norfolk (24,000tonnes per annum). In addition, TEG acquired a freehold site in Todmorden and commencedconstruction of a new 50,000 tonnes per annum facility. Demolition of theexisting buildings was completed in August 2006 and building construction wascompleted in January 2007. The construction programme is a month ahead ofschedule and TEG is confident the first 2 lines of TEG Silo Cages will beoperational in April 2007. The third and fourth lines are scheduled forconstruction in Quarter 3 of 2007, subject to market demand. TEG placed its first orders to its Polish contractor for the supply of thesteelwork to the Todmorden facility. I am pleased to report the products were ofexcellent quality and delivery was on schedule. I can confirm that TEG willcontinue to work with its partner in Poland, both for engineering supply to theUK and for marketing of TEG in Eastern Europe. Contract Wins During 2006, TEG secured its first sale to the private sector, which was a £1.8mcontract with Banham Compost Limited to construct a TEG plant and equipmentwithin a new building at Carleton Rode, Norfolk. The plant was constructed in2006 and commissioning commenced in December. It is anticipated that the plantwill be handed over to the customer in March 2007. The sale to the City and County of Swansea was announced in 2005 andconstruction took place during 2006. The plant was handed over to the customeron 5 February 2007. The final contract value was £920,000 and the plant has beenoperating since November 2006. The majority of the revenue for both plants isrecognised in our 2006 figures. During 2006, TEG also secured its first contract with Greater Manchester WasteLimited, for supply of green waste into the Sherdley Farm facility. Plant Operations The transition in Perth from the existing technology to the TEG plant provedmore challenging than had been anticipated and it was unfortunately necessary toterminate some waste streams to facilitate the changeover process. I am pleasedto report that the transition is complete and TEG has been able to commencewaste sales to replace the waste streams that were terminated. The Scottish Environment Protection Agency ("SEPA") made the decision in early2006 to apply Pollution Prevention and Control (PPC) legislation to compostingplants in Scotland. The application process is time consuming and theapplication of environmental technology to meet the legislation is costly, but Iam pleased to report that TEG has been awarded its PPC permit, the firstcomposting business to achieve that in Scotland. I believe the application ofPPC legislation will act as a barrier to new entrants. The second line at Sherdley Farm is now under construction. A new waste receiptbuilding is to be constructed to accommodate the increased capacity. Other Contracts We were delighted to sign a research agreement with Shell in July 2006 toinvestigate the potential to remediate oil based mud drill cuttings. Thelaboratory work was carried out successfully and TEG progressed to pilot scaletrials in November 2006. The outcome of the pilot scale trials will be known byearly in Quarter 2 of 2007 and if successful will progress to full scale planttrials. TEG also secured an order from United Utilities Plc to construct a pilot scalefacility at a United Utilities site in Manchester. The facility, a single SiloCage unit, was installed in January 2007. In February 2006, TEG announced a collaboration with Glendale Managed ServicesLtd, the UK's largest parks maintenance company. The collaboration with Glendalehas proved very helpful in achieving qualification with Local Authorities and itis hoped this will progress to some contract gains in 2007. Fundraising Funding of the continued expansion of the Todmorden facility was achievedthrough a successful share issue fundraising in April 2006. TEG was able toraise £8,050,000 before expenses of £445,449, the cost of which has been chargedagainst the share premium account. Market Update As predicted, the market continues to grow as legislation introduced in 2005takes effect. The Landfill Directive 2001 and the Landfill Allowance TradingScheme ("LATS") introduced under the Waste and Emissions Trading Act 2003annually increases the requirements on Local Authorities to recycle and compostwaste. As widely reported in the press, a number of Local Authorities arealready failing to achieve targets and all Local Authorities are underincreasing financial pressure to increase recycling and composting rates. Tothis end, TEG is in discussions with a number of Local Authorities. The National Audit Office report (Reducing the Reliance on Landfill in Englanddated 26 July 2006) indicated that a further step change in Local Authorityprocurement activity could reasonably be expected in late 2006 and early 2007. Iam pleased to confirm that TEG is experiencing the predicted increase in marketactivity. As one of the few proven composting technologies meeting the standardsof the ABP Regulations, TEG is able to tender for a range of applications. Management and group structure As the company continues its strong growth, it is vital that the management teamis continually strengthened to manage the increased activity. Doug Benjafieldjoined the board as non-executive Director in May 2006. In addition, JaynePierre, an experienced waste management professional, joined us in April 2006from Mouchel Parkman. At the beginning of 2007, TEG re-structured the business, creating two newsubsidiaries that will take operational responsibility for the group. TEGEnvironmental Limited will be the principal operating company, managingoperations, engineering, sales and research and development. Fergus Healy, FionaMaudsley-Drain and Jayne Pierre were appointed to the board of the subsidiary,which will be chaired by the group Chief Executive, Mick Fishwick. Tanja Willis,Finance Director, and Alan Heyworth will also sit on this board. The NaturalOrganic Fertilizer Company Limited ("NOFCO") will focus on developing marketsfor compost sales and placement. Mike Orr was appointed to the board of NOFCO,along with Mick Fishwick and Tanja Willis. In addition, TEG has further strengthened its engineering development teams inthe knowledge of the major business opportunities that are presentingthemselves. Post Year-end events Most significantly, TEG was delighted to announce it is the exclusive composttechnology provider to the Viridor-Laing consortium that was awarded preferredbidder status for the Greater Manchester Waste PFI contract. Assuming financialclose, TEG expects to be awarded contracts to build 4 large facilities withsales orders worth up to £35m over the next three years. Financial close isexpected by 1 June 2007, at which point TEG's contract will becomeunconditional. The plants will process 180,000 tonnes per annum of food andgarden waste collected in Greater Manchester. This is a hugely significant step forward for TEG and an endorsement of TEG'stechnology and its ability to construct and operate large scale compostingplants. Future Prospects Based on the contracts achieved, the TEG plants now in operation, the number ofenquiries the company has received and the number of active projects, the Boardexpects to achieve further significant growth in turnover in 2007. Shareholders will be advised of the date and location of the Annual GeneralMeeting in due course. Nigel MooreChairman6 March 2007 PROFIT AND LOSS ACCOUNT For the year ended 31 December 2006 Note 2006 Restated Note 7 2005 £ £ Turnover - continuing activities 3,559,330 555,250 Cost of sales (2,951,550) (510,298) ------------ ------------ Gross profit 607,780 44,952----------------------------- ------ ------------- ------------Share based administrative expenses (173,435) (104,917)Other operating charges (2,003,759) (1,698,993)----------------------------- ------ ------------- ------------ Total operating charges (2,177,194) (1,803,910) ------------ ------------ Operating loss - continuing activities (1,569,414) (1,758,958) Interest receivable - bank interest 154,579 69,971 Interest payable and similar charges (145,481) (40,107) ------------ ------------ Loss on ordinary activities beforetaxation (1,560,316) (1,729,094) Tax on loss on ordinary activities 2 60,663 53,110 ------------ ------------Loss for the financial year transferredto reserves (1,499,653) (1,675,984) ============= ============= ------------ ------------Loss per share - basic and diluted 3 (4.48p) (8.44p) BALANCE SHEET As at 31 December 2006 Note 2006 Restated Note 7 £ 2005 £Fixed assetsIntangible assets 2,056,812 2,269,584Tangible assets 7,564,337 1,093,289Investments 2 2 ----------- ------------- 9,621,151 3,362,875 Current assetsStocks 355,638 123,070Debtors 708,311 429,981Cash at bank and in hand 2,242,554 2,414,392 ----------- ------------- 3,306,503 2,967,443 Creditors: amounts falling due within oneyear (1,577,552) (1,338,846) Net current assets 1,728,951 1,628,597 ----------- ------------- Total assets less current liabilities 11,350,102 4,991,472 Creditors: amounts falling due after morethan one year (1,982,941) (1,958,644) ----------- -------------Net assets 9,367,161 3,032,828 =========== ============= Capital and reservesCalled up share capital 1,902,269 1,319,269Share premium account 19,387,544 12,309,993Other reserves 326,632 153,197Profit and loss account (12,249,284) (10,749,631) ----------- ------------- Equity shareholders' funds 9,367,161 3,032,828 CASH FLOW STATEMENT For the year ended 31 December 2006 Note 2006 2005 £ £ Net cash outflow from operating activities 4 (1,729,354) (1,126,123) ------------ ------------ Returns on investments and servicing of financeInterest received 154,579 69,971Finance lease interest paid (2,648) (2,749)Loan interest paid (33,759) - ------------ ------------Net cash inflow from returns on investmentsand servicing of finance 118,172 67,222 R&D tax credit 63,573 65,311 ------------ ------------Taxation 63,573 65,311 Capital expenditure and financial investmentPurchase of tangible fixed assets (6,328,991) (841,771)Sale of tangible fixed assets 11,614 3,859 ------------ ------------Net cash outflow from capital expenditure andfinancial investment (6,317,377) (837,912) Acquisitions and disposalsAcquisition of business - initial payment - (202,500)Acquisition of business - deferredconsideration (300,000) (150,000) ------------ ------------Net cash outflow from acquisitions anddisposals (300,000) (352,500) FinancingNew bank loan 426,000 -Repayment of loan (71,000) -Issue of shares 8,106,000 3,700,000Expenses paid in connection with share issues (445,449) (242,550)Capital element of finance lease rentals (22,403) (23,340) ------------ ------------Net cash inflow from financing 7,993,148 3,434,110 ------------ ------------(Decrease) / increase of cash 5 (171,838) 1,250,108 NOTES TO THE FINAL RESULTS 1. BASIS OF PREPARATION OF FINANCIAL INFORMATION The financial information contained in this preliminary announcement does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The balance sheet at 31 December 2006 and the profit and loss account,cash flow statement and associated notes for the year then ended have beenextracted from the Company's 2006 statutory financial statements upon which theauditors opinion is unqualified and does not include any statement under Section237(2) of the Companies Act 1985. Those financial statements have not yet beendelivered to the Registrar of Companies. The figures for the period ended 31December 2005 have been extracted from the statutory financial which have beenfiled with the Registrar of Companies. The preliminary announcement has been prepared in accordance with applicableUnited Kingdom accounting standards and under the historical cost accountingrules. The principal accounting policies of the Company are set out in the Company's2006 Annual Report and Financial Statements and have remained unchanged from theprevious year with the exception of the adoption of 'FRS 20 Share-basedPayment'. The adoption of this standard represents a change in accounting policyand the comparative figures have been restated accordingly. Details of theeffect of prior year adjustments are given in note 7. 2. TAXATION The tax credit represents a claim for R&D tax credit 3. LOSS PER SHARE The loss per share is calculated by reference to the losses attributable toordinary shareholders divided by the weighted average of 33,451,682 ordinaryshares for the 12 months to 31 December 2006, and 19,859,354 for the 12 monthsto 31 December 2005. 2006 Restated 2005 Attributable loss (1,499,653) (1,675,984) ============= ============= Average number of shares in issue for basic anddiluted loss per share 33,451,682 19,859,354 ============= ============= Loss per share (4.48p) (8.44p) The loss for the period and the weighted average number of ordinary shares forthe purpose of calculating the diluted loss per share are the same as for thebasic loss per share calculation. This is because the outstanding share optionswould have the effect of reducing the loss per ordinary share and wouldtherefore not be dilutive under the terms of Financial Reporting Standard No. 22('FRS 22'). 4. RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING ACTIVITIES 2006 Restated 2005 £ £Operating loss (1,569,414) (1,758,958)Amortisation 212,772 74,914Depreciation 309,641 75,640Share based administrative expense 173,435 104,917(Profit) / loss on sale of tangible fixed assets (3,378) 78,032Increase in stocks (232,568) (114,904)Increase in debtors (281,240) (342,060)(Decrease) / increase in creditors (338,602) 756,296 ------------- -------------Net cash outflow from operating activities (1,729,354) (1,126,123) 5. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2006 2005 £ £(Decrease) / increase in cash in the year (171,838) 1,250,108Cash (inflow) / outflow from (increase) / decrease indebt and lease financing (332,597) 23,340 ------------- -----------Movement of net funds in the year (504,435) 1,273,448Net funds at 1 January 2006 2,378,199 1,104,751 ------------- -----------Net funds at 31 December 2006 1,873,764 2,378,199 6. ANALYSIS OF MOVEMENTS IN NET FUNDS At 1 January Cashflow At 31 December 2006 2006 £ £ £Cash at bank and in hand 2,414,392 (171,838) 2,242,554Bank loan - (355,000) (355,000) ----------- ----------- ----------- 2,414,392 (526,838) 1,887,554Hire purchase agreements (36,193) 22,403 (13,790) ----------- ----------- ----------- 2,378,199 (504,435) 1,873,764 7. PRIOR YEAR ADJUSTMENTS The prior year adjustments relate to the implementation of FRS 20 'Share-basedpayment' and the reclassification of certain administration expenses. FRS 20 'Share-based payment' During the year, the company adopted FRS 20 'Share-based payment'. The adoptionof this standard constitutes a change in accounting policy. Therefore the impacthas been reflected as a prior year adjustment in accordance with FinancialReporting Standard 3. The standard requires that where shares or rights to shares are granted to thirdparties, including employees, a charge should be recognised in the profit andloss account based on the fair value of the shares at the date of the grant ofshares or right to shares is made. Reclassification Following a review by management, certain costs totalling £253,506 which hadpreviously been included in operating charges have now been more appropriatelyincluded within cost of sales. The profit and loss account for the year ended 31December 2005 has been restated accordingly. There is no impact on the loss as aresult of this reclassification. The effect of the adoption of FRS 20 'Share-based payment' and thereclassification on the comparatives is as follows: Year ended 31 December 2005 As previously Impact of FRS Reclassification As restated reported 20 £ £ £ £ Turnover 555,250 - - 555,250 Cost of sales (256,793) - (253,505) (510,298) ------------ ------------ ------------ ------------ Gross profit 298,457 - (253,505) 44,952 Operatingcharges (1,952,498) (104,917) 253,505 (1,803,910) ------------ ------------ ------------ ------------Operating loss (1,654,041) (104,917) - (1,758,958) ============ ============ ============ ============ Loss for thefinancial year (1,571,067) (104,917) - (1,675,984) ============ ============ ============ ============ Net assets 3,032,828 - - 3,032,828 8. RECONCILIATION OF EQUITY SHAREHOLDERS' FINDS 2006 Restated £ 2005 £Loss for the financial year (1,499,653) (1,675,984)Issue of shares 7,660,551 3,457,450FRS 20 share option charge 173,435 104,917 ----------- -----------Net addition to shareholders' funds 6,334,333 1,886,383Opening shareholders' funds as restated 3,032,828 1,146,445 ----------- -----------Closing shareholders' funds 9,367,161 3,032,828 9. POST BALANCE SHEET EVENT On 1 January 2007 the company changed its name to The TEG Group PLC. The TEG Group PLC has two 100% owned subsidiaries, TEG Environmental Limited andThe Natural Organic Fertiliser Company Limited ("NOFCO"). TEG EnvironmentalLimited is the principal operating company and NOFCO is a marketing company,focused on the development of compost markets. Both companies were dormant as at31 December 2006. Copies of the Annual Report and Accounts will be posted shortly. Copies will beavailable from the Company's head office at Houston House, 12 Sceptre Court,Sceptre Point, Preston, PR5 6AW. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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