21st Sep 2005 07:01
Alkane Energy PLC21 September 2005 For immediate release 21 September 2005 Alkane Energy plc ("Alkane" or "the Company") Unaudited interim results for the half-year ended 30 June 2005 Alkane Energy (AIM: ALK) is an international renewable energy company thatdesigns, builds, operates and services methane treatment and generation plants. These plants greatly reduce emissions of damaging greenhouse gases and play avital role in world-wide efforts to reduce global warming. Financial Highlights •Turnover down by 30% to £4,626,000 reflects timing of Pro2 revenue recognition •Pro2 order book at 92% of annual target at end August •EBITDA loss narrowed to £380,000 (First Half 2004: £459,000) •Reduction in loss to £875,000 (First Half 2004: loss £896,000) •Loss per share reduced to 0.97p (First Half 2004: 1.00p) Operational Highlights UK •Four new mine gas plants brought into production - two announced today €8.1MW of containerised generation now in place •Additional mine gas projects actively under investigation •Significant rise in energy prices underpins viability of future mine gas projects Germany •Record firm orders at Pro2 •Pro2 revenues continue to be second half weighted •Strategic partnerships increasing sales of biogas renewable energy systems •First orders to new markets in Hungary and Russia •Joarin mine gas electricity plant on stream •Preparations underway at a second mine gas site Commenting on the interim results, Chief Executive, Dr Cameron Davies, said: "In the first half of 2005, Alkane has made substantial progress across thegroup, with 5.4MW of generating capacity built and commissioned and a further2.7MW added since the period end. "The backdrop of sustained high energy prices has improved the economics of ourbusiness and we are delighted with the progress made at an operational level. Anumber of new mine gas projects, previously mothballed, are now being activelyinvestigated with a view to bringing them into operation as soon as practicable. "As a specialist in renewable energy technology with a strong and establishedbase in Europe, Alkane is in an excellent position to benefit from newopportunities in the mine gas, biogas, biomass and landfill industries." Enquiries:Alkane Energy plc Tel: 01623 827927Dr Cameron DaviesBuchanan Communications Tel: 020 7466 5000 (today)Eric Burns Tel: 01943 883990 (thereafter)Ben Willey Tel: 020 7466 5000 Chairman's Statement Introduction We have continued to make good progress towards our goal of becoming aprofitable electricity generator and supplier of systems and services forrenewable energy generation in the UK and worldwide. The Company has broadened the base of its business by increasing its share ofexisting markets and diversifying into new markets. As a result of our decisionto keep the full value chain from gas to electricity in-house, we completed twonew containerised mine gas plants in the period, at Bevercotes and Markham. Asannounced today, Alkane has added two further sites to its portfolio, atMansfield Woodhouse and Whitwell. In Germany, our turnover and profits continue to rise as the market for biogasand other renewable energy systems increases. The nature of trading at Pro2, ourGerman subsidiary, means that revenue is significantly skewed towards the secondhalf of the year. This year is no exception with Pro2's firm order book for thefull year already at 92% of budget. Our mine gas project at Joarin inGelsenkirchen commenced generating renewable electricity in March. Across Europe, energy prices are rising and the Company is in an excellentposition to take advantage of this improvement. A number of sites both in the UKand Germany are under consideration for development and have the potential tosignificantly increase our renewable generation capacity. Financial Overview During the six months ended 30 June 2005, the Company reported a reduction inthe loss for the period to £875,000 (First Half 2004: loss of £896,000). Agross profit of £1,858,000 (First Half 2004: £2,578,000) was recorded,reflecting the lower level of turnover at Pro2. The operating loss for theperiod was £1,072,000 (First Half 2004: £952,000) whilst the loss per share wasreduced to 0.97p (First Half 2004: 1.00p). Cash balances at the period end were £4,051,000 (31 December 2004: £5,716,000)whilst net funds at the half-year end were £62,000 (31 December 2004:£2,591,000). Receipts from the leasing of the plant at Joarin, MansfieldWoodhouse and Whitwell, a total of £1,500,000, will be received in the secondhalf of the year. Pro2 recorded turnover for the period of £3,951,000, reflecting a larger thanusual volume of work in progress as at 30 June, which is not recognised asturnover until signed off by the customer on completion of commissioning. The operating loss includes a provision of £160,000 against the investment madein the Company's biogas project in Northern Ireland, further details of whichare provided below. Operational Review United Kingdom Mine Gas We are pleased to announce the completion of two new mine gas generation plants.The plants, at Mansfield Woodhouse, Nottinghamshire and Whitwell, Derbyshire,have a combined generating capacity of 2.7MW. Added to the 5.4MW output fromexisting plants at Markham and Bevercotes, this takes Alkane's generatingcapacity in the UK to 8.1MW. Alkane's CMM plants in the UK are expected to capture approximately 20,000tonnes of methane in 2005, equal to carbon dioxide savings of around 460,000tonnes. This is equivalent to the carbon dioxide that would be saved byoperating around 300 one megawatt wind turbines. Including the two new sites referred to above, four containerised electricitygeneration plants have been built and brought into production and this portfoliois performing in line with expectations. Contracts for electricity sales fromthe sites at Mansfield Woodhouse and Whitwell were set in June at prices morethan 75% higher than those in place for Bevercotes and Markham. The timing ofthe connection of these sites to the grid means that the full financial benefitof this will be seen in the second half. We have commenced a review of our partially developed and undeveloped mine gasprojects following the recent increase in both electricity and gas prices andinvestigations are underway to bring forward the development of more sites wherethe expected payback period is short. Biogas Our proposed biogas project at Fivemiletown, Northern Ireland, which is plannedto produce renewable electricity and organic fertiliser from bio-waste suppliedby local farms and food processors, has encountered difficulties in securing asite for the plant. In view of this, we believe it prudent to make a provisionfor the £160,000 invested in this project and this is reflected in the interimresults. We remain committed to the UK biogas market and discussions aboutfuture projects have started with established waste operators about adding theseplants to existing waste sites, thus obviating the planning risks associatedwith greenfield sites. Germany Pro2 The demand for containerised renewable energy systems, especially for biogasprojects, continues to grow and Pro2's healthy order book reflects this. Newmine gas cogeneration systems also experienced good demand during the period. Although Pro2's turnover reduced to £3,951,000, compared with £6,263,000 for thecorresponding period in 2004, firm orders were at 92% of budget by the end ofAugust, and the business looks well on course to report continued progress atthe full year. Mine Gas Alkane's first German mine gas project, Joarin, developed with local partnerATEC, has been generating electricity since March and is operatingsatisfactorily. Under the German Renewable Energy Law 2000, the 1.8MW ofelectricity exported from the plant is sold at a guaranteed premium price ofapproximately £48/MWh to the local grid on a 20 year contract. We have the option to participate in seven other similar projects and planningapplications have been submitted for boreholes into old mine workings atReinphan, Rialisa and Sabuela. Mine Safety Systems We have continued to actively market our containerised mine safety systems inRussia and India and have welcomed delegations from coal mining companies inboth these nations and also from China. UK Trade and Investment, part of theDTI, is supporting our marketing campaign and we expect our team to visit Indiaand China in the near future. A follow up visit to Russia is planned in order tobuild on our first sale of a generation plant to that market. All of thesecountries are expected to benefit from the Kyoto Clean Development Mechanism bycapturing mine methane and selling the resultant emissions credits. Prospects The first half of 2005 saw Alkane make considerable progress at an operationallevel as mine gas sites were brought on stream in Germany and the UK. During thesecond half, we expect a significant increase in revenues from our UK mine gasgeneration assets and the completion of firm orders received by Pro2. The new mine gas generation schemes are selling electricity at prices up tothree times higher that those prevailing at the low point in 2002 and thisbackdrop underpins expected revenue growth at the UK operations. Turnover andprofits at Pro2 are set to make further progress whilst new export markets arebeing pursued in Russia, India and China. Alkane has built firm foundations for a profitable future in the renewableenergy systems and services market. John LanderChairman GROUP PROFIT AND LOSS ACCOUNTfor the six months ended 30 June 2005 Six months Six months Year ended ended ended 31 December 30 June 2005 30 June 2004 2004 (Unaudited) (Unaudited) £ '000 £ '000 £ '000 TURNOVER 4,626 6,604 19,785 Cost of sales (2,768) (4,026) (14,910) GROSS PROFIT 1,858 2,578 4,875 Administrative expenses (3,247) (3,687) (6,041)Other operating income 317 157 413 OPERATING LOSS (1,072) (952) (753) Profit on sale of fixed assets 5 - 371 LOSS ON ORDINARY ACTIVITIES BEFOREINTEREST (1,067) (952) (382) Interest receivable and similar 128 186 430incomeInterest payable and similar charges (164) (98) (332) LOSS ON ORDINARY ACTIVITIES BEFORETAXATION (1,103) (864) (284) Taxation (66) (23) (267) LOSS ATTRIBUTABLE TO SHAREHOLDERS (1,169) (887) (551) Minority interests 294 (9) (163) LOSS FOR THE PERIOD (875) (896) (714) Loss per ordinary share - basic anddiluted (0.97p) (1.00p) (0.80p) STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Six months Six months Year ended ended ended 31 December 30 June 2005 30 June 2004 2004 (Unaudited) (Unaudited) £ '000 £ '000 £ '000 Loss for the period (875) (896) (714)Exchange rate differences (114) (113) (2) TOTAL RECOGNISED GAINS AND LOSSES (989) (1,009) (716) GROUP BALANCE SHEETat 30 June 2005 as at as at as at 30 June 2005 30 June 2004 31 December (Unaudited) (Unaudited) 2004 £'000 £'000 £'000 FIXED ASSETS Intangible assets 911 776 873 Tangible assetsTangible fixed assets - gasproperties 242 787 431Tangible fixed assets - generation 3,542 - 2,243Tangible fixed assets - other 3,848 3,079 4,293Investments 135 144 - 7,767 4,010 6,967 8,678 4,786 7,840 CURRENT ASSETSStock 5,547 3,928 1,505Debtors: amounts falling duewithin one year 3,879 4,090 6,349Debtors: amounts falling due aftermore than one year 186 295 258Investments 32 29 30Cash at bank and in hand 4,051 7,235 5,716 13,695 15,577 13,858 CREDITORS: amounts falling duewithin one year (8,290) (6,415) (6,645) NET CURRENT ASSETS 5,405 9,162 7,213 TOTAL ASSETS LESS CURRENTLIABILITIES 14,083 13,948 15,053 CREDITORS: amounts falling dueafter more than one year (2,918) (1,897) (2,665) PROVISIONS FOR LIABILITIES ANDCHARGES (1,986) (2,000) (1,998) MINORITY INTERESTS (766) (1,059) (1,104) NET ASSETS 8,413 8,992 9,286 CAPITAL AND RESERVES Called up share capital 452 449 449Share premium account 33,070 32,955 32,956Profit and loss account (25,109) (24,412) (24,119) TOTAL EQUITY SHAREHOLDERS' FUNDS 8,413 8,992 9,286 GROUP STATEMENT OF CASH FLOWSfor the six months ended 30 June 2005 Six months Six months Year ended ended ended 31 December 30 June 2005 30 June 2004 2004 (Unaudited) (Unaudited) £ '000 £ '000 £ '000 NET CASH OUTFLOW FROM OPERATINGACTIVITIES (note 6) (1,045) (1,114) (261) RETURNS ON INVESTMENT AND SERVICINGOF FINANCE Interest received 150 152 405Interest paid (58) (42) (121)Interest element of finance leasepayments (4) (12) (93) 88 98 191 TAXATION Overseas tax paid (93) (19) (84) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Payments to acquire intangible fixedassets (6) (7) (8)Payments to acquire tangible fixed (1,700) (262) (2,946)assetsReceipts from the sale of tangiblefixed assets 43 5 695 (1,663) (264) (2,259) ACQUISITIONS AND DISPOSALS Purchase of subsidiary undertaking (80) (163) (162)Net cash acquired with subsidiaryundertaking 13 149 149 (67) (14) (13) NET CASH OUTFLOW BEFORE FINANCING (2,780) (1,313) (2,426) FINANCING Increase in long term loans 910 - -Repayment of long term loans (144) (23) (48)Capital element of finance leaserental payments (433) (173) (573)Issue of ordinary share capital 118 8 8 DECREASE IN CASH (note 7) (2,329) (1,501) (3,039) NOTES TO THE ACCOUNTS 1. BASIS OF PREPARATION These unaudited interim financial statements, which are for the six months ended30 June 2005, do not constitute Statutory Accounts within the meaning of Section240 of the Companies Act 1985. They have been prepared using the accountingpolicies set out in the Group's 2004 statutory accounts. The financialinformation for the year ended 31 December 2004 is derived from the Group'sstatutory accounts for that year which have been delivered to the Registrar ofCompanies and on which the Group's auditors gave an unqualified report. Theauditors have not made a report under Section 235 of the Companies Act 1985 onthe statutory accounts for the year ended 31 December 2004. The auditors havecarried out a review of the financial information for the six months ended 30June 2005. 2. TURNOVER Turnover is attributable to two continuing activities: a) the extraction and sale of gas from coal measures for power generationand burner tip use; and b) the manufacturing, supplying and operating of gas handling and powergeneration equipment across a range of gases. Turnover is derived from three geographical segments. There is no materialdifference between turnover analysed by origin and by destination. Segmental analysis by activity Extraction of Manufacturing Group gas from coal supplying and total measures operating equipment £ '000 £ '000 £ '000Six months ended 30 June 2005 (unaudited)Turnover 675 3,951 4,626Loss beforetax andminorityinterests (518) (585) (1,103) Six months ended 30 June 2004 (unaudited)Turnover 341 6,263 6,604(Loss)/profitbefore tax andminorityinterests (932) 68 (864) Year ended 31 December 2004Turnover 699 19,086 19,785(Loss)/profitbefore tax andminorityinterests (1,190) 906 (284) Geographical segmental United Kingdom Continental Rest of Groupanalysis Europe the World total £ '000 £ '000 £ '000 £ '000 Six months ended 30 June 2005(unaudited)Turnover 444 4,182 - 4,626(Loss)/profit beforetax and minorityinterests (740) (368) 5 (1,103) Six months ended 30 June 2004(unaudited)Turnover 341 6,263 - 6,604(Loss)/profit beforetax and minorityinterests (932) 68 - (864) Year ended 31 December 2004Turnover 707 19,074 4 19,785(Loss)/profit beforetax and minorityinterests (1,186) 529 373 (284) 3. ACQUISITION OF PRO2 SERVICES LIMITED On 23 March 2005 the Company acquired 100% of the issued share capital of FarleyEnergy Engineering Limited (Farley) for a consideration of £70,000 andassociated costs of £10,000. Farley had net liabilities of £9,000 at the date ofacquisition, and provisional goodwill arising on the acquisition is £89,000.Farley has been renamed Pro2 Services Limited. 4. LOSS PER SHARE The basic and diluted loss per ordinary share is based on a loss of £875,000(six months ended 30 June 2004: loss of £896,000; year ended 31 December 2004:loss of £714,000) on a weighted average of 89,829,303 ordinary shares (sixmonths ended 30 June 2004: 89,690,633; year ended 31 December 2004: 89,732,717). 5. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS Six months Six months Year ended ended ended 31 December 30 June 2005 30 June 2004 2004 (Unaudited) (Unaudited) £ '000 £ '000 £ '000 Decrease in cash (2,329) (1,501) (3,039)Repayment of long term loans 144 23 48Capital element of finance leaserental payments 433 173 573 CHANGE IN NET FUNDS ARISING FROM CASH FLOWS (1,752) (1,305) (2,418) Increase in long term loan (910) - -Finance leases entered into - - (1,046)Exchange rate differences 133 107 (7) CHANGE IN NET FUNDS (2,529) (1,198) (3,471) NET FUNDS AT START OF PERIOD 2,591 6,062 6,062 NET FUNDS AT END OF PERIOD 62 4,864 2,591 6. RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING ACTIVITIES Six months Six months Year ended ended ended 31 December 30 June 2005 30 June 2004 2004 (Unaudited) (Unaudited) £ '000 £ '000 £ '000 Operating loss (1,072) (952) (753)Depreciation 636 450 920Amortisation 56 43 109(Increase)/decrease in stock (4,109) (1,560) 987Decrease/(increase) in debtors 2,316 553 (1,627)Increase in creditors 1,141 352 105Decrease in provisions (13) - (2) NET CASH OUTFLOW FROM OPERATINGACTIVITIES (1,045) (1,114) (261) 7. ANALYSIS OF NET FUNDS As at Cash flow Exchange As at 1 January rate 30 June 2005 differences 2005 (unaudited) £ '000 £ '000 £ '000 £ '000 Cash at bank and in hand 5,716 (1,657) (8) 4,051Overdraft - (672) - (672) 5,716 (2,329) (8) 3,379 Long term loans (322) (766) 15 (1,073)Finance leases (2,803) 433 126 (2,244) 2,591 (2,662) 133 62 8. GENERAL NOTE Copies of this interim report have been sent to registered shareholders andfurther copies are available from the Company's registered office. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Alkemy Capital.