20th Sep 2006 07:01
EcoSecurities Group plc20 September 2006 EcoSecurities Group plc Interim Results For The Six Months Ended 30 June 2006 Dublin, Ireland - EcoSecurities Group plc (the "Group" or "EcoSecurities"), oneof the world's leading originators of projects which generate carbon credits,today announces its interim results for the half year ended 30 June 2006. Highlights • 40 million CERs* added to the Group's portfolio in H1 2006 representing an increase of 44%, which brings the total gross contract volume to 130 million CERs, exceeding the Group's expectations. • Broad base of origination success, with 61 new projects added to the portfolio in the first half bringing the total to 213, up 40%, spanning 26 countries and using 17 technologies. • Implementation had 17 projects registered or submitted for registration with the CDM Executive Board at 30 June 2006, and 52 projects had either been validated or had been submitted for validation. • Demand for CERs was healthy, with forward contracts for the sale of €220 million of CERs in place at 30 June 2006. The Net Trading Margin locked in from the future delivery of the 21 million tonnes of CERs related to these transactions is €100 million. • Expansion of the international network continued with new offices and representatives added in 6 countries, expanding the Group's presence to 20 countries. The Group is expanding rapidly in order to take advantage of market opportunities, but strict cost control measures have accomplished this within the original budget. • Revenues for the first half were €841,000, including the first principal sale of CERs on the spot market. • Loss before tax of €8,399,000 reflects expansion of headcount and geographic network and is within budget. • Net cash of €60.4 million at 30 June 2006. • Current trading and outlook is encouraging: - Gross carbon credit portfolio volume increased to 146 million CERs currently, an increase of more than 100% since the IPO in 2005. - Adjusting for the relative proportions of Agency, Principal and Project Development contracts in the portfolio, the Group's net ownership position totals 112 million CERs which is up over 175% since the IPO. - Currently the Group has had validated or has submitted to validation 120 projects up from 44 at the IPO; the number of projects which have received Host Country Letters of Approval has grown to 66 up from 18 since the IPO; and the number of projects which have been either registered or submitted to registration has grown to 61 up from 12 since the IPO. - Net Trading Margin on forward CER sales at present total €123m which is up by €109m since the IPO. * Certified Emission Reduction, a CER being equal to one metric tonne of CO2eemission reductions. Mark Nicholls, Chairman of EcoSecurities, commented: "The Group continued tomake significant progress in growing and developing its carbon credit portfolioduring the first half, carrying on from a strong 2005. Both demand for CERs andmarket prices have remained robust, despite the well documented carbon marketvolatility. As the Group's CER portfolio has grown it is enjoying increasingsuccess in selling forward significant volumes of emission reductions to Kyotocompliance buyers in industrialised markets, with over €100 million of NetTrading Margin locked in at period end. The Group contracted to sell €188million of carbon credits during the first half of the year alone. A major highlight of the first half was the Group's first CER revenues and,although slowness in the regulatory approval process continues to limit thespeed of project registration and therefore revenue recognition, the Group isconfident of further progress in the second half and into 2007. Looking further ahead, the latest positive developments in the emissionreduction market, such as the recent legislation to reduce carbon emissions inCalifornia, Verified Emission Reduction trading and activity in the Japanesemarket bode well for the Group's continued commercialisation success.Furthermore, continued development of industrial gas projects, other internalproject development and principal origination efforts gives the Board confidencefor further portfolio growth." Analyst Conference Call The Group is holding a conference call for analysts today at 13.00 BST.Analysts wishing to participate should contact Kevin Smith at Citigate DeweRogerson on 020 7638 9571 for further details. For further information please contact: EcoSecurities Group plc Bruce Usher, CEO +1 212 356 0160 Pedro Moura Costa, COO +44 (0) 1865 202 635 Citigate Dewe Rogerson +44 (0) 20 7638 9571 Kevin Smith / Ged Brumby About EcoSecurities: EcoSecurities is one of the world's leading companies in the business oforiginating, developing and trading carbon credits. EcoSecurities structures andguides greenhouse gas emission reduction projects through the Kyoto Protocol,acting as principal intermediary between the projects and the buyers of carboncredits. EcoSecurities works with companies in developing and industrialising countriesto create carbon credits from projects that reduce emissions of greenhousegases. EcoSecurities has experience with projects in the areas of renewableenergy, agriculture and urban waste management, industrial efficiency, andforestry. With a network of offices and representatives in 20 countries on fivecontinents, EcoSecurities has amassed one of the industry's largest and mostdiversified portfolios of carbon projects. Today, the Group is working on 213projects in 26 countries using 17 different technologies, with the potential togenerate more than 130 million carbon credits. EcoSecurities also works with companies in the developed world to assist them inmeeting their greenhouse gas emission compliance targets. Utilising its highlydiversified carbon credit portfolio, EcoSecurities is able to structure carboncredit transactions to fit compliance buyer's needs, and has executedtransactions with both private and public sector buyers in Europe, North Americaand Japan. Working at the forefront of carbon market development, EcoSecurities has beeninvolved in the development of many of the global carbon market's most importantmilestones, including developing the world's first CDM project to be registeredunder the Kyoto Protocol. EcoSecurities' consultancy division has been at theforefront of all the significant policy and scientific developments in thisfield. EcoSecurities Consult has been recognised as the world's leadinggreenhouse gas advisory firm over the last five years by reader surveysconducted by Environmental Finance Magazine. EcoSecurities Group plc is listed on the London Stock Exchange AIM (ticker ECO). Additional information is available at www.ecosecurities.com. EcoSecurities Group plc Interim Results For The Six Months Ended 30 June 2006 Chairman's Statement The Group continued to make significant progress in growing and developing itscarbon credit portfolio during the first half of 2006, carrying on from a strong2005. Both demand for CERs and market prices have remained robust, despite thewell documented carbon market volatility. As the Group's CER portfolio hasgrown it is enjoying increasing success in selling forward significant volumesof emission reductions to Kyoto compliance buyers in industrialised markets,with over €100 million of Net Trading Margin locked in at period end. The Groupcontracted to sell €188 million of carbon credits during the first half of theyear alone. A major highlight of the first half was the Group's first CER revenues and,although slowness in the regulatory approval process continues to limit thespeed of project registration and therefore revenue recognition, the Group isconfident of further progress in the second half and into 2007. Looking further ahead, the latest positive developments in the emissionreduction market such as the recent legislation to reduce carbon emissions inCalifornia, Verified Emission Reduction trading and activity in the Japanesemarket bode well for the Group's continued commercialisation success.Furthermore, continued development of industrial gas projects, other internalproject development and principal origination efforts give the Board confidencefor further portfolio growth. Executive Directors' Review We are pleased with the progress we have made over the first half of 2006. Theproject portfolio has now begun to produce CERs and generate revenues for theGroup which is a milestone achievement. Our key strengths lie in (i) origination of a large and diversified portfolio ofprojects, (ii) implementation, where our technical experts excel, and (iii)commercialisation, via the successful structuring of forward sales to meet thespecific needs of Kyoto related compliance buyers. The Group's geographic reachand depth of expertise enable it to add value to the entire spectrum of thecarbon credit development process and this is demonstrated by the attractivemargins the Group continues to achieve. The larger our portfolio, the moreattractive the Group's value proposition becomes to both project developers andKyoto compliance buyers. Origination Origination performance has continued to be strong with the gross contractvolume of the Group's carbon credit portfolio growing to 130 million CERs at 30June 2006. Since the IPO in late 2005 which referenced the portfolio as at 31October 2005, the Group has added 59 million tonnes of CERs to its portfoliowhich has exceeded the Board's expectations. The highlight of the growth in theportfolio during this period was the increase in principal contracts, with over95% of the additions relating to principal agreements, which significantlyexceeded our expectations. Adjusting for the impact of contract type on aproject by project basis gives EcoSecurities a net interest of 96 million tonnesin the 130 million tonne gross portfolio, which has grown on a net basis by 58million tonnes since the IPO in 2005. (Note: Gross and net contract volume measures expected CER production fromprojects through to the end of 2012 and does not adjust for operating orregulatory risk. Gross and net contract volume excludes projects where theprobability of either the development of a relevant methodology or theunderlying development of the project is still highly uncertain.) Other highlights of the Group's origination activities include the contractingof several development projects which reduce emissions of nitrous oxide, a majorgreenhouse gas, 310 times more potent than CO2. The Group continued to make progress related to its joint development agreementwith Cargill. MOU's for seven projects were signed in June alone relating toprojects in Latin America, South Africa and Eastern Europe. Implementation Underlying project development and Clean Development Mechanism ('CDM')accreditation continues to progress. Of the 213 projects in the portfolio, over150 were financed, while 108 were either under construction or already inoperation at 30 June 2006. 17 projects were fully registered with the CDMExecutive Board at 30 June 2006. Once full registration is completed and theprojects become operational, they will begin to accumulate emissions reductionsthat will be subsequently verified and sold as CERs by the Group. Commercialisation The highlight of the first half was the recognition of the Group's firstprincipal trading revenues which resulted from the sale of CERs produced by alandfill gas project in China, where carbon credits are created through thecapture of methane gas. The CERs, the first ever to be produced from a projectin China, were sold to a major market participant in Europe and the transactionsets the precedent for sale of the Group's future non-committed production intothe spot market. Furthermore, the Group made particularly strong progress during the first halfof the year with a total €220 million of CERs having been sold forward at 30June 2006. The Net Trading Margin locked in from the future delivery of 21million tonnes of CERs related to these transactions is €100 million. The NetTrading Margin is calculated as total revenue less costs based on the contractterms that EcoSecurities has with each project (i.e. agency fees, price paid forCERs, etc.). The Group's margins have grown during the year due to a number offactors including a stronger balance sheet, continued strong market prices,larger proportions of principal contracts and the growth of the Group'sportfolio. Operations Review The Group's expansion continued with headcount growing from 85 employees to 160at the end of June, an increase of 88%. Though headcount growth exceededexpectations, overall costs remained within expectations. Geographic expansionduring the period was also rapid, with new offices or representatives added in 6countries giving the Group a presence in 20 countries at period end. During theperiod the Group also converted a number of existing representative offices tosubsidiary companies. Financial Review As expected, income in the period came primarily from the consulting businesswith the remainder arising from CER transactions where EcoSecurities acted asthe principal. Consulting income was below the same period last year reflectingan increased focus on internal projects such as implementation and monitoring.The growth in administrative expenses to €9.4 million related to the significantgrowth of the Group's employee base and geographic reach over the last year.IPO expenses were estimated at year end 2005 and the final outcome in 2006resulted in a reduction of €0.28 million from the original cost estimates.Financing costs in the year to date included interest on a $10 million loan andthe effect of holding non Euro cash balances which depreciated. The loss aftertax for the first half of 2006 was €8.7 million, reflecting the significantexpansion of the business to capitalise on market opportunities. The period end balance sheet reflects the balance of funds raised in the IPO andinvestments made during the period in projects and office infrastructure.Operating cash out flows of €6.8 million reflect the loss on operations year todate and capital expenditures on project related investments which totalled€1.2million. The Group had a net cash balance of €60.4 million at period end. Current Trading The highlight in origination activities since 30 June 2006 has been thecontinued focus on industrial gas projects. The Group has added another 6projects bringing the total of industrial gas projects under contract to 21,with the potential to generate 19 million tonnes of CERs in aggregate. Origination performance overall has also continued to be strong with the grosscontract volume of the Group's carbon credit portfolio growing to 146 millionCERs at present. Since the IPO last autumn which referenced the portfolio as at31 October 2005, the Group has added 75 million tonnes of CERs to its portfolio. This is comprised of Agency, Principal and Project Development contracts wherethe net principal equivalent totals 112 million CERs. Good progress has also been made on Project Development. Several nitrous oxideprojects have begun construction in Asia. Projects contracted with Cargill now have reached over 5 million tonnes whichrepresents a significant milestone in that Cargill has now fully vested warrantson the Group's shares which were granted in 2005. Projects contracted withCargill are from the animal waste, industrial gas, and cogeneration sectors. Implementation has experienced delays in obtaining host country approvals andCDM registration for projects. However, significant progress continues to bemade. One of the Group's Brazilian biomass projects was recently issued 179,397CERs which were sold under a pre-existing contract. In addition, the Groupcontinues to increase the number of projects progressing through theregistration process. Currently the Group has had validated or has submitted tovalidation 120 projects up from 44 at the IPO; the number of projects which havereceived Host Country Letters of Approval has grown to 66 up from 18 since theIPO; and the number of projects which have been either registered or submittedto registration has grown to 61 up from 12 since the IPO. On the Commercialisation front the Group recently completed a forward saleagreement, with a major European customer which included an upfront premium of€3 million received by the Group in August. Furthermore, Net Trading Margin onforward CER sales at present totals €123 million which is up from €100 millionat 30 June 2006. Outlook The pace of internal project development is expected to accelerate in the secondhalf of 2006 with a focus on agricultural projects, industrial gases and coalmine methane. The Implementation team will focus on processing validations and registrationsfor prompt start projects for which there is a 31 December 2006 deadline. Therewill also be a strong focus on monitoring of producing projects to ensure astreamlined CER verification and issuance process. Commercialisation of the Group's portfolio has progressed rapidly this year andas the process of finalising EU Emissions Trading Scheme Phase II NationalAllocation Plans nears completion, the Group expects demand to continue to bestrong. The Group also expects further growth in Verified Emission Reductionsales which represents a previously untapped market opportunity. The Group has made a good start to the second half of the year and has continuedto progress a growing number of projects through the implementation andoperation phases. A major highlight of the first half was the Group's first CERrevenues and, although slowness in the regulatory approval process continues tolimit the speed of project registration and therefore revenue recognition, theGroup is confident of further progress in the second half and into 2007. New legislation for the reduction of carbon emissions in California bodes wellfor future market opportunities beyond the first Kyoto commitment period. EcoSecurities will continue to expand its global footprint to capitalise fullyon the volume of available project opportunities that the Group uncovers. TheGroup anticipates that the expansion in the number of EcoSecurities' localoffices and personnel will continue to provide it with a competitive advantagein the origination of project opportunities. Headcount is expected to increaseto 220 with a network of offices and representatives in 22 countries by yearend. The Group's portfolio will remain highly diversified by technology, CDMmethodology and geographic location, thereby minimizing overall risk.EcoSecurities' strategy for the balance of the year is to continue to maintainits core focus on originating, implementing and commercialising a highlydiversified portfolio of emissions reductions projects. EcoSecurities Group plcInterim Results For The Six Months Ended 30 June 2006 CONSOLIDATED INCOME STATEMENT 6 months to 30 6 months to 30 Year to June 2006 June 2005 31 Dec 2005 (Unaudited) (Audited) (Audited) €000 €000 €000 Revenue 841 1,031 2,268 Cost of sales (542) (495) (2,166) Gross profit 299 536 102 Other operating income - 9 47 Administrative expensesGeneral (9,359) (472) (3,350)IPO preparation expenses 277 - (1,286) Total (9,082) (472) (4,636) Net profit on disposal of joint ventures - - 498 (Loss)/profit for the period before financing (8,783) 73 (3,989)costs Financing costs (853) (26) (339)Finance income 1,237 - 125 (Loss)/profit for the period before tax (8,399) 47 (4,203) Income tax expense (259) - (115) (Loss)/profit for the period (8,658) 47 (4,318) Attributable to:Equity holders of the Company (8,658) 53 (4,344)Minority interests - (6) 26 (8,658) 47 (4,318)Earnings per share(expressed in cents per share)Basic and fully diluted earnings per share (9.40) 0.51 (26.97) EcoSecurities Group plcInterim Results For The Six Months Ended 30 June 2006 CONSOLIDATED STATEMENT OF RECOGNISED INCOME ANDEXPENSE 6 months to 30 6 months to 30 Year to June 2006 June 31 Dec 2005 2005 (Unaudited) (Audited) (Audited) •'000 •'000 •'000 (Loss)/profit for the period (8,658) 47 (4,318) Currency translation reserve movement 47 (149) (172) Total recognised income and expense for the (8,611) (102) (4,490)period Attributable to:Equity holders of the Company (8,611) (71) (4,521)Minority interests - (31) 31 (8,611) (102) (4,490) EcoSecurities Group plcInterim Results For The Six Months Ended 30 June 2006 CONSOLIDATED BALANCE SHEET 30 June 2006 30 June 31 Dec 2005 2005 (Unaudited) (Audited) (Audited) Assets •'000 •'000 •'000Non-current assetsIntangible fixed assets 450 - 101Property, plant and equipment 890 34 135Trade and other receivables 1,072 - - Total non-current assets 2,412 34 236 Current assetsStock and work in progress 48 - -Trade and other receivables 2,300 823 1,320Current tax debtors - 31 -Cash and cash equivalents 70,933 232 83,148 Total current assets 73,281 1,086 84,468 Total assets 75,693 1,120 84,704 Shareholders' equityIssued capital 231 1 229Share premium 76,410 - 75,853Share based payment reserve 426 77 337Currency translation reserve (5) (4) (52)Other reserves (573) - (573)Retained earnings (13,631) (625) (5,022) Total shareholders' equity attributable to 62,858 (551) 70,772shareholders of the parent Minority interests in equity - (123) - Total equity 62,858 (674) 70,772 LiabilitiesNon-current liabilitiesInterest bearing loans and borrowings 8,166 478 8,752Deferred tax liabilities 4 1 4 Total non-current liabilities 8,170 479 8,756 Current liabilitiesInterest bearing loans and borrowings - 501 35Trade and other payables 4,420 814 5,028Current tax creditors 245 - 113 Total current liabilities 4,665 1,315 5,176 Total liabilities 12,835 1,794 13,932 Total equity and liabilities 75,693 1,120 84,704 EcoSecurities Group plcInterim Results For The Six Months Ended 30 June 2006 CONSOLIDATED CASH FLOW STATEMENT 6 months to 30 6 months to 30 Year to 31 Dec June 2006 June 2005 2005 (Unaudited) (Audited) (Audited) •'000 •'000 •'000 (Loss)/profit for the period (8,658) 47 (4,318)Income tax expense 259 - 115Finance income (1,237) - (125)Finance costs 853 26 339Depreciation and amortisation 71 6 27Increase in stock and work in progress (48) - -Increase in trade and other receivables (1,157) (238) (682)Increase/(decrease) in trade and other payables 2,045 (173) 2,036Net profit on disposal of joint ventures - - (498)Share based payment 138 16 276Foreign exchange differences 59 (126) (100)Interest paid (209) (26) (270)Interest received 1,231 - 65Tax (paid)/refunded (128) (10) 23 Net cash outflow from operating activities (6,781) (478) (3,112) Cash flows from investing activitiesCash paid to acquire minority interests - - (478)Project advances and development expenditure (895) - -Purchase of property, plant and equipment (809) (11) (131)Purchase of intangible fixed assets (370) - (103)Net cash proceeds from disposal of interest in - - 477joint ventures Net cash outflow from investing activities (2,074) (11) (235) Cash flows from financing activitiesGross proceeds from the issue of ordinary share 48 - 83,668capitalNet proceeds from issue of new loans - 765 8,745Admission costs paid (2,200) - (5,558)Repayment of borrowings - (160) (449)Net restricted cash deposits (6,916) (86) (583) Net cash (used)/generated from financing (9,068) 519 85,823activities Net (decrease)/increase in cash and cash (17,923) 30 82,476equivalents Cash and cash equivalents at start of period 82,565 77 77 Foreign exchange on cash and cash equivalents (1,208) 39 12 Cash and cash equivalents at end of period 63,434 146 82,565 NOTES TO THE FINANCIAL INFORMATION 1. General information EcoSecurities Group plc and its subsidiaries (together the Group) originate,trade, develop and invest in emission reduction projects. The Group also offersconsulting and advisory services and operates through a global network ofsubsidiaries, branch offices and representatives. 2. Basis of preparation The information in this document does not include all of the disclosuresrequired by International Financial Reporting Standards in full annual statutoryaccounts and it should be read in conjunction with the Group's annual financialstatements for the year ended 31 December 2005. The accounting policies adopted are consistent with those followed in thepreparation of the Group's annual financial statements for the year ended 31December 2005. 3. Share capital In the period to 30 June 2006 the number of shares in issue increased by 771,004to 92,397,680, reflecting the exercise of employee share options. 4. Reserves Currency Share based Other Retained translation payment reserves earnings reserve reserve •'000 •'000 •'000 •'000 At 1 January 2006 (52) 337 (573) (5,022)Loss for the period - - - (8,658)Foreign exchange translation differences 47 - - -Employee share option scheme - value of servicesprovided - 138 - -Other - (49) - 49 At 30 June 2006 (5) 426 (573) (13,631) 5. Cash and cash equivalents 6 months to 30 6 months to 30 Year to June 2006 June 2005 31 Dec 2005 (Unaudited) (Audited) (Audited) •'000 •'000 •'000 Cash at bank and in hand 2,210 146 421Short-term deposits 61,224 - 82,144 Cash and cash equivalents for the 63,434 146 82,565purposes of the cash flow statementRestricted cash 7,499 86 583 Cash and cash equivalents 70,933 232 83,148 -------------------------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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