19th Mar 2008 07:01
Alkane Energy PLC19 March 2008 For Immediate Release 19 March 2008 Alkane Energy plc ("Alkane", "the Group" or "the Company") Unaudited preliminary results for the year ended 31 December 2007 Alkane Energy plc (AIM: ALK) is a profitable green energy company specialisingin the use of coal mine methane as a fuel for electricity generation. Headlines • Adjusted PBT up to £1,343,000 from £841,000 • Profit attributable to equity holders £1,034,000 - in line with market expectations • Basic earnings per share 1.13p (2006: 1.17p) • Continued growth in energy sales: •Electricity - up 35% to 79.7 million KWh (2006: 59.3 million KWh) •Gas - up 25% to 11.9 million cu. metres (2006: 9.5 million cu. metres) • Positive outlook for electricity prices • 2008 development programme under way with: •Successful gas well drilled at Mansfield •Additional 1.35MW generator connected at Warsop •Two new development projects approved by BERR Note: Adjusted PBT excludes non-recurring costs, impairment of goodwill, loss ondeemed disposal and profit on licence sale Commenting on the preliminary results, Chief Executive, Dr Cameron Davies, said: "I am pleased to report good results from Alkane Energy with contracted incomesecure until March 2009. Our adjusted year-end PBT was £1,343,000 an underlyingincrease of 60% once non-recurring items have been stripped out. "Our power plants generated a record 79.7 million kilowatt hours of electricityduring the year, up 35%, and our direct gas sales were 11.9 million cubicmetres, up 25% on 2006. We continue to sell our electricity into a strong marketwith low input costs using our own gas reserves. "The continued growth of Alkane is supported by our broad portfolio of licencesand the future project development pipeline." Alkane Energy plc Tel: 020 7466 5000 (Today)Dr. Cameron Davies, CEO Tel: 01623 827927Buchanan Communications Tel: 020 7466 5000Dr. Ben Willey, Partner Tel: 0845 270 8611Miranda Higham, AssociateBrewin DolphinAndrew Emmott, Director Chairman's Statement Introduction Alkane's profit attributable to equity holders was £1,034,000 in 2007, a slightdecrease on the previous year. Profit before tax was £1,032,000 (2006:£1,183,000), however, after adjustment for non-recurring items there was a 60%increase in the underlying profit before tax to £1,343,000 in 2007 up from£841,000 in 2006. As a result of our expanding gas production capacity electricity sales continuedto rise and were 35% higher in 2007 than in the previous year but electricityprices were lower at the time when new sales contracts were signed and growth inpower output only partially offset a lower price per MWh sold. The installation of new generation capacity, a cash repayment of €1,000,000 fromPro2, a non-core licence sale for £185,000, and the availability of leasefinancing have increased our cash resources to £1,750,000 at year end from£778,000 which has allowed us to push forward with our project developmentprogramme in the first quarter 2008. In March 2008, a successful gas well was completed at Mansfield on time and onbudget which should increase gas flow rates sufficiently to enable us to installanother 1.35MW generator in the second quarter of 2008. In addition, a second1.35MW generator was installed at Warsop in the first quarter 2008. The outputfrom this new generation capacity is contracted at £51/MWh until September 2009.This compares with an average price of £42/MWh achieved over the portfolio in2007. In BERR's 2008 13th Onshore Licensing Round, we applied for five new petroleumexploration and development licences covering mines in the East Midlands andSouth Yorkshire. The outcome of our application is expected in the Autumn 2008. Financial Overview Alkane's annual results are presented for the first time in accordance withInternational Financial Reporting Standards (IFRS) and the comparative numbersfor 2006 have been restated from UK Generally Accepted Accounting Practice(UK GAAP). The net effect has been to increase the profit attributable to equityholders for 2006 from £1,015,000 to £1,074,000. The results are also the first to be published following the investment of€1,400,000 by new shareholders in the equity of Pro2 announced on 12 July 2007.As a result of this transaction the Company's holding in Pro2 was reduced from51% to 38%, effective on 1 January 2007. Accordingly, Pro2 is treated forreporting purposes as an associated company of Alkane Energy plc rather than asa subsidiary from that date. Alkane's turnover in 2007 was therefore reducedsubstantially from 2006 as the Company's share of Pro2's results is now reportedas one line in the income statement, rather than by consolidating turnover andcosts. In the second half of 2007, Pro2 completed repayment of the first€1,000,000 instalment of our working capital loan. Revenue in 2007 increased by 15% to £4,270,000, compared to £3,724,000 in 2006when Pro2's revenue of £23,595,000 is excluded from the total of £27,319,000 in2006. The return on Group operations including non-recurring costs in 2007 was£705,000, compared to £817,000 in 2006. The profit before tax for the year is £1,032,000, compared to £1,183,000 in2006. However there were a number of non-recurring items which affect thiscomparison: • In 2007 there was the sale of a non-core licence for £185,000; in 2006 a licence was sold for £350,000; • There were costs of £221,000 in 2007 in respect of an abortive corporate transaction; • The external costs related to the transition to IFRS totalled £89,000 in 2007; • The UK subsidiary Pro2 Services Limited (PSL) was acquired in 2005 in order to provide in-house operating and maintenance services, and to assist in the promotion of the German Pro2 business in the UK. The former objective has been largely achieved but the market for gas engines has proved to be small and not worth investing in. PSL also had a small business servicing customers in the landfill industry but as this latter business has not met expectations it was decided to cease marketing to external customers. As a result, the outstanding amount of goodwill of £66,000 has been written off in 2007; and • The reduction in the Company's holding in Pro2 was classed as a deemed disposal, with an accounting loss of £120,000 in 2007. Taking account of the above items the underlying profit before tax is higher at£1,343,000 compared to £841,000 in 2006. The main reasons for this are anincrease in volume of both electricity (35%) and gas sales (25%), and anincreased contribution from Pro2. Revenue per MWh of electricity sold in 2007was £41.73, compared to £48.64 in 2006. These average prices include revenuefrom the Climate Change Levy (CCL), which is classed by the EU as state aid andwill not continue after 1 November 2008, the end of its five year exemptionterm. Forward electricity contracts, excluding CCL exemption, are currentlytrading at £58/MWh for 2009 and £56/MWh for 2010. It is expected that thesehigher prices will more than compensate for the loss of CCL related revenue. In Germany, continued growth at Pro2 allowed it to repay €1,000,000 of the€3,000,000 working capital loan to Alkane during the year. Sales increasedslightly in 2007 to £23,993,000 (2006: £23,595,000) but its profit for the yearincreased substantially to £787,000 (2006: £55,000). Alkane's share of thisprofit was £299,000 (38%) compared to £28,000 (51%) in 2006. However, futuregrowth in the German biogas market is uncertain as a result of higher commodityprices for agricultural feedstock and changes to the renewable energy law. Pro2is compensating for this by growth in sales to the international renewableenergy and rapidly expanding carbon emissions reduction markets. Net cash flows from operating activities were £1,258,000 (including loanrepayment of £703,000 from Pro2). As a result we ended the year with net fundsof £755,000 (2006: net debt £2,010,000). At the annual general meeting to be held on 7 May 2008 the Company will seekapproval to apply to the Court to cancel the share premium account. This willenable the Company to consider the payment of dividends in future, provided thatthe Company remains profitable, and has sufficient resources to prudently meetthese payments. Operations Review Mine Gas Plants The electricity exports from our portfolio of generation plants increased by 35%to 79,700 MWh compared with 59,300 MWh in 2006 and gas output rose to 11.9million cubic metres compared with 9.5 million in 2006. Electricity prices fellsubstantially in summer 2007 to around £25/MWh and as a result, in September, wesigned 18 month contracts on expiry of the previous contracts at an average ofaround £38/MWh until March 2009. In the light of increasing energy prices, the economics of new projects are keptunder constant review and as a result more capacity has been installed onexisting sites in order to maximise cash flows from exploitation of our provengas reserves. Our technical team is therefore pushing ahead with gas reserveestimates, planning applications, land lease deals and grid connectioninvestigations in order to expedite the development of more mine gas sites fromour project portfolio. At the existing Warsop site in Nottinghamshire, planning consent was obtainedfrom the local authority and an additional 1.35MW generator was installed inMarch 2008. The electricity output from the new plant, which commencedoperations on 4 March 2008, is contracted for 18 months at a price of £51/MWh.This addition to the portfolio has increased our total generating and gas supplycapacity to 18.5 MW. At the Mansfield site, directional well drilling operations were successfullycompleted in the first quarter 2008. This second well has now been flow testedand is currently being connected to the internal gas gathering network. Anadditional 1.35 MW generator ordered for this site will increase its capacity to4.05MW and another of similar output has been ordered for Bevercotes. Both ofthese new containerised plants are scheduled for delivery in June 2008. Our seven UK mine gas plants continued to reduce carbon emissions from abandonedcoal mines within our licence areas and, through our trade association ACMMO, wewill continue to lobby for recognition of this by the Government. German CMM The Joarin power plant continued to generate steadily at around 1MW output andmade a small profit. In response to the lower than expected flows a gas reservereport was commissioned from independent mining engineering consultants at theFraunhofer Institute in Oberhausen. The conclusion of the report was thatsubstantial gas reserves remain but that a second well will be required toaccess this gas and circumvent the air leakage problem which has reduced thecurrent operating capacity. Plans are in preparation to select a site for thissecond well. Pro2 Services UK Limited During the year the remaining external contracts were completed and theoperations team was brought in house. The technicians attended power generationand electronic control system training courses at both Deutz and Pro2 in Germanyand this has enhanced our operational capability and allowed Pro2 Services toreplace expensive outsourced plant maintenance operations and routine servicing. Prospects The prospects for 2008 and for the medium term are encouraging, as electricityprices remain high and some of our new plants are already signed up on contractsat prices substantially above those for last year. We will continue to develop our existing pipeline of defined projects and hopeto add to this existing portfolio with 13th Onshore Round licences later in theyear. This should sustain the Company on a steady growth path. World interest in coal mine gas projects has increased substantially asgovernments recognise that methane is 23 times more potent than carbon dioxideas a greenhouse gas and that these projects make an important contribution toreducing the rate of climate change. In order to take advantage of this growinginternational market, we are actively seeking to grow the Company through anacquisition or a merger with a similar profitable business in the sector. In closing, I would like to thank my colleagues for their dedication incontinuing to operate a profitable business with good growth prospects. John LanderChairman GROUP INCOME STATEMENT (unaudited) for the year ended 31 December 2007 2007 2006 £000 £000 REVENUE 4,270 27,319 Cost of sales (1,682) (18,981) --------- -------- GROSS PROFIT 2,588 8,338 Administrative expenses (1,872) (7,521)Non-recurring corporate costs (note 4) (310) -Share of profit of associate 299 - --------- -------- RETURN ON GROUP OPERATIONS 705 817 Other operating income 83 343Loss on sale of fixed assets - (3)Profit on sale of licence 185 350Impairment of goodwill (note 8) (66) (8)Loss on deemed disposal (note 9) (120) - --------- -------- PROFIT ON ACTIVITIES BEFORE FINANCE INCOME/(COSTS) 787 1,499 Finance income 267 124Exchange gain arising from financing 155 -Finance costs (177) (440) --------- -------- NET FINANCE INCOME/(COSTS) 245 (316) --------- -------- PROFIT BEFORE TAX 1,032 1,183 Tax credit / (expense) 2 (58) --------- -------- PROFIT FOR THE YEAR 1,034 1,125 ========= ======== PROFIT FOR THE PERIOD ATTRIBUTABLE TO:Equity holders of the parent 1,034 1,074 Minority interest - 51 --------- -------- 1,034 1,125 ========= ======== Earnings per share Basic, for profit for the year attributable to equityholders of the parent 1.13p 1.17pDiluted, for profit for the year attributable to equityholders of the parent 1.11p 1.15p The earnings per ordinary share calculation representstotal and continuing results GROUP BALANCE SHEET (unaudited) at 31 December 2007 2007 2006 £000 £000 NON-CURRENT ASSETS Intangible assets - 774Property, plant and equipment 3,888 6,443Gas assets 3,315 3,374Investments accounted for using the equity method 3,691 -Other investments - 3 -------- --------- 10,894 10,594 -------- --------- CURRENT ASSETSInventories 101 6,631Trade and other receivables 3,130 7,768Other financial assets 350 512Cash and short-term deposits 1,750 946 -------- --------- 5,331 15,857 -------- --------- TOTAL ASSETS 16,225 26,451 -------- --------- CURRENT LIABILITIES Trade and other payables (1,371) (9,381)Financial liabilities (315) (1,084)Income tax payable - (80)Provisions (3) (4) -------- --------- (1,689) (10,549) -------- --------- NON-CURRENT LIABILITIESOther payables - (43)Financial liabilities (1,473) (2,939)Provisions (1,519) (1,550) -------- --------- (2,992) (4,532) -------- --------- TOTAL LIABILITIES (4,681) (15,081) -------- --------- NET ASSETS 11,544 11,370 ======== ========= EQUITY Share capital 460 459Share premium 33,259 33,234Cumulative translation adjustment 113 -Other reserves 107 81Retained losses (22,395) (23,572) -------- --------- GROUP SHAREHOLDERS' EQUITY 11,544 10,202 Minority interests - 1,168 -------- --------- TOTAL EQUITY 11,544 11,370 ======== ========= GROUP STATEMENT OF CHANGES IN EQUITY (unaudited) for the year ended 31 December 2007 Attributable to equity holders of the parent --------------------------------- ------- ------- ------- ------- ------- Issued Share Translation Other Retained Total capital premium of foreign reserves(1) earnings(2) Equity operations £000 £000 £000 £000 £000 £000 At 1 January2007 459 33,234 - 81 (23,572) 10,202 Foreigncurrencytranslation - - 113 5 143 261 -------- ------- ------- ------- ------- -------Total incomeand expensefor the periodrecogniseddirectly inequity - - 113 5 143 261Profit for theperiod - - - - 1,034 1,034 -------- ------- ------- ------- ------- -------Total incomeand expensefor the period - - 113 5 1,177 1,295 Share-basedpayment - - - 21 - 21 Issue of sharecapital 1 25 - - - 26 -------- ------- ------- ------- ------- ------- At 31 December2007 460 33,259 113 107 (22,395) 11,544 ======== ======= ======= ======= ======= ======= At 1 January2006 456 33,189 - 56 (24,562) 9,139 Foreigncurrencytranslation - - - - (84) (84) -------- ------- ------- ------- ------- -------Total incomeand expensefor the periodrecogniseddirectly inequity - - - - (84) (84)Profit for theperiod - - - - 1,074 1,074 -------- ------- ------- ------- ------- -------Total incomeand expensefor the period - - - - 990 990 Share-basedpayment - - - 25 - 25 Issue of sharecapital 3 45 - - - 48 -------- ------- ------- ------- ------- ------- At 31 December2006 459 33,234 - 81 (23,572) 10,202 ======== ======= ======= ======= ======= ======= (1) Other reserves comprise share-based payments. (2) The balance of the foreign currency translation reserve at 31 December 2007was £123,000 (31 December 2006: (£130,000)). GROUP CASH FLOW STATEMENT (unaudited) for the year ended 31 December 2007 2007 2006 £000 £000 OPERATING ACTIVITIES Profit before tax from continuing 1,032 1,183operations Adjustments to reconcile operatingprofit to net cash flows: Depreciation and impairment ofproperty, plant and equipment 507 1,373and gas assetsAmortisation and impairment of 66 23intangible assetsShare-based payments expense 20 28Pension accrual expense - 27Loss on sale of fixed assets - 3Profit on sale of licence (185) (350)Finance income (267) (124)Finance expense 177 440Loss on deemed disposal 120 -Share of net profit of associate (299) -Movements in provisions (32) (38)Decrease/(increase) in trade and 817 (640)other receivablesIncrease in inventories (54) (3,270)(Decrease)/increase in trade and (586) 1,638other payablesIncome tax paid (58) (151) -------- ------------NET CASH FLOWS FROM OPERATING 1,258 142ACTIVITIES CASH FLOWS FROM INVESTING ACIVITIES Proceeds from sale of property, - 2,388plant and equipmentProceeds from sale of licence 185 350Interest received 189 122Purchase of subsidiary undertaking - (20)Purchase of intangible assets - (5)Purchase of property, plant and (629) (601)equipmentPurchase of gas assets (246) (1,251) ------- -------------NET CASH FLOWS (USED IN)/FROM (501) 983INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Issue of share capital 26 48Proceeds from sale and finance 606 550leasebackSale and finance leaseback rentals (350) (243)Repayment of capital element of - (699)finance leasesRepayment of long-term loans - (60)Payments in respect of securities - (555)Interest paid (180) (409) ---------------- ------NET CASH FLOWS FROM/(USED IN) 102 (1,368)FINANCING ACTIVITIES Net increase/(decrease) in cash and cash 859 (243)equivalentsNet foreign exchange difference - 8Cash and cash equivalents at 1 January 1,241 1,525 --------- ------ CASH AND CASH EQUIVALENTS AT 31 DECEMBER 2,100 1,290 ====== ========= NOTES TO THE ACCOUNTS 1. CORPORATE INFORMATION The preliminary unaudited financial statements of the Group for the year ended31 December 2007 were authorised for issue in accordance with a resolution ofthe directors on 18 March 2008. Alkane Energy plc is a public limited company incorporated and domiciled inEngland whose shares are publicly traded. The principal activities of the Group are described in note 3. 2. BASIS OF PREPARATION AND ACCOUNTING POLICIES Basis of preparation The financial statements have been prepared for the first time in accordancewith International Financial Reporting Standards (IFRS) as adopted by theEuropean Union and with those parts of the Companies Act 1985 applicable tocompanies reporting under IFRS. As these are the Group's first IFRS annual financial statements IFRS 1,First-time Adoption of International Financial Reporting Standards, has beenapplied. The financial statements should be read in conjunction with the Group'sStatement of Adoption of International Financial Reporting Standards, which waspublished on 17 September 2007 and shows an explanation of how the transition toIFRS has affected the reported financial position, financial performance andcash flows of the Group. This Statement includes reconciliations of equity andprofit or loss for comparative periods reported under UK GAAP to those reportedfor those periods under IFRS. The difference between the profit attributable toequity owners of the parent under UK GAAP and under IFRS for the year ended 31December 2006 is reconciled in note 14. The Group has adopted all of the standards and interpretations that weremandatory for accounting periods beginning on or after 1 January 2007 that arerelevant to the operations of the Group. The Group has early adopted thefollowing standard: IFRS 8 Operating segments The Group has elected to adopt IFRS 8 as of 1 January 2007. This standardrequires disclosure of information about the Group's operating segments.Adoption of this standard did not have any effect on the financial position orperformance of the Group. The Group determined that the operating segments werethe same as the business segments previously identified under IAS 14. Additionaldisclosures about each of these segments are shown in Note 3, including revisedcomparative information. 3. SEGMENT INFORMATION Business segments The Group is comprised of the following business segments: • Extraction of gas from coal measures for power generation and burner tip use; and • The manufacture, supply, operation and maintenance of equipment. Seasonality of operations There is no significant seasonal nature to the Group's business of theextraction and use of gas. However manufacture and supply of equipment by theassociated company Pro2 Anlagentechnik GmbH's is biased towards the second half,principally due to the effect of the German renewable energy law under whichelectricity prices available for equipment commissioned by customers fall on 1January each year. The following tables present revenue and profit information regarding theGroup's business segments for the year ended 31 December 2007 and 2006respectively. Year ended 31 December 2007 (unaudited) Continuing operations Extraction of Manufacture Total gas from coal supply, operate measures and maintain equipment £000 £000 £000Revenue Revenue from external customers 4,201 69 4,270Inter-segment sales - 200 200 ---------- ---------- -------Total revenue 4,201 269 4,470 ---------- ---------- ------- ---------- ---------- -------Depreciation (514) - (514) ---------- ---------- ------- Impairment of goodwill - (66) (66) ---------- ---------- ------- Results Segment profit 1,130 213 1,343 ---------- ---------- ------- Corporate centre costs (658)Corporate centre finance income 467Loss on deemed disposal (120) -------Profit before tax from continuingoperations 1,032 ======= Year ended 31 December 2006 Continuing operations Extraction of Manufacture Total gas from coal supply, operate measures and maintain equipment £000 £000 £000Revenue Revenue from externalcustomers 3,418 23,901 27,319Inter-segment sales - 736 736 --------- ---------- -------Total revenue 3,418 24,637 28,055 --------- ---------- ------- Depreciation (436) - (436) --------- ---------- ------- Impairment of goodwill - (8) (8) --------- ---------- ------- Results Segment profit 832 377 1,209 --------- ---------- ------- Corporate centre costs (465)Corporate centre finance income 439 -------Profit before tax from continuingoperations 1,183 ======= The following table compares total segment assets, total segment liabilities andsegmental capital expenditure as at 31 December 2007 and 2006. 2007 2006 unaudited £000 £000Extraction of gas from coal measures 10,322 8,486 Manufacture, supply, operate and maintain equipment 125 17,229 --------- ---------Total segment assets 10,447 25,715 Goodwill - 756Corporate centre 778 695Investment in associate 3,691 -Loan to associate 1,612 -Inter-segment adjustment (303) (715) --------- ---------Total consolidated assets 16,225 26,451 ========= ========= Extraction of gas from coal measures (4,551) (4,184) Manufacture, supply, operate and maintain equipment (9) (11,145) --------- ---------Total segment liabilities (4,560) (15,329) Corporate centre (186) (254) Inter-segment adjustment 65 502 --------- ---------Total consolidated liabilities (4,681) (15,081) ========= ========= Extraction of gas from coal measures 1,457 1,647 Manufacture, supply, operate and maintain equipment - 1,341 --------- ---------Total capital expenditure 1,457 2,988 ========= ========= Geographical Segments Year ended 31 December 2007 (unaudited) Continuing operations United Kingdom Continental Total Europe £000 £000 £000Revenue Revenue from external customers 3,985 285 4,270Inter-segment sales 200 - 200 --------- --------- --------Total revenue 4,185 285 4,470 --------- --------- -------- Depreciation (446) (68) (514) --------- --------- -------- Impairment of goodwill (66) - (66) --------- --------- -------- Results Segment profit 1,038 305 1,343 --------- --------- -------- Corporate centre costs (658)Corporate centre finance income 467Loss on deemed disposal (120) --------Profit before tax fromcontinuing operations 1,032 ======== Year ended 31 December 2006 Continuing operations United Kingdom Continental Total Europe £000 £000 £000Revenue Revenue from external customers 3,323 23,996 27,319Inter-segment sales 152 584 736 --------- -------- ---------Total revenue 3,475 24,580 28,055 --------- -------- --------- Depreciation (391) (45) (436) --------- -------- --------- Impairment of goodwill (8) - (8) --------- -------- --------- Results Segment profit 871 338 1,209 --------- -------- --------- Corporate centre costs (465)Corporate centre finance income 439 ---------Profit before tax fromcontinuing operations 1,183 ========= The following table compares total segment assets, total segment liabilities andsegmental capital expenditure as at 31 December 2007 and 2006. 2007 2006 unaudited £000 £000United Kingdom 9,652 7,869 Continental Europe 795 17,846 --------- ---------Total segment assets 10,447 25,715 Goodwill - 756Corporate centre 778 695Investment in associate 3,691 -Loan to associate 1,612 -Inter-segment adjustment (303) (715) --------- ---------Total consolidated assets 16,225 26,451 ========= ========= United Kingdom (4,514) (4,186) Continental Europe (46) (11,143) --------- ---------Total segment liabilities (4,560) (15,329) Corporate centre (186) (254) Inter-segment adjustment 65 502 --------- ---------Total consolidated liabilities (4,681) (15,081) ========= ========= United Kingdom 1,457 1,647 Continental Europe - 1,341 --------- ---------Total capital expenditure 1,457 2,988 ========= ========= 4. NON-RECURRING ITEMS The following table is an analysis of non-recurring costs: 2007 2006 unaudited £000 £000 Corporate costs 221 -IFRS implementation costs 89 - -------- --------- 310 - ======== ========= The corporate costs were incurred in respect of an aborted corporatetransaction, and the IFRS implementation costs refer to the external costsincurred in the transition from UK GAAP to IFRS. 5. EARNINGS PER ORDINARY SHARE Basic earnings per share amounts are calculated by dividing net profit for theyear attributable to ordinary equity holder of the parent by the weightedaverage number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing net profit for theyear attributable to ordinary equity holders of the parent by the weightedaverage number of ordinary shares outstanding during the year plus the weightedaverage number of ordinary shares that would be issued on the conversion of allthe dilutive potential ordinary shares into ordinary shares. The following reflects the income and share data used in the basic and dilutedearnings per share computations: 2007 2006 unaudited £000 £000 Net profit attributable to equity holders of theparent 1,034 1,074 ========= ========= 2007 2006 unaudited Basic weighted average number of ordinary shares 91,865,828 91,540,638Dilutive effect of share options 1,267,876 1,674,321 --------- ---------Diluted weighted average number of ordinary shares 93,133,704 93,214,959 ========= ========= 6. CASH AND CASH EQUIVALENTS For the purpose of the Group cash flow statement, cash and cash equivalents arecomprised of the following: 31 December 31 December 2007 2006 unaudited £ 000 £ 000 Cash at bank and in hand 1,750 946 Liquid resources 350 512 Bank overdraft - (168) ----------- ---------- 2,100 1,290 =========== ========== 7. TAXATION The major components of the tax credit/(expense) in the Group income statementare: 31 December 31 December 2007 2006 unaudited £000 £000 Foreign tax - 191 Tax over-provided in previous years (2) (133) ----------- ---------- (2) 58 =========== ========== 8. Impairment of goodwill Pro2 Services Limited, a 100% owned subsidiary, provides maintenance supportservices to external customers and to other Group companies. A review has beenundertaken of the future profitability of Pro2 Services Limited in respect ofexternal business, taking into account the market for that business and thepriority to provide services to other Group companies. This review has concludedthat the company should cease marketing to external customers. The goodwillcapitalised when the company was acquired in 2005 was related to externalbusiness and therefore it has been concluded that it has been fully impaired. Asa result the outstanding amount of £66,000 has been written off in the year. 9. Business COMBINATIONS On 1 January 2007 Pro2 Anlagentechnik GmbH issued new equity shares to thirdparty investors for an amount of €1,400,528. As a result Alkane Energy plc'sinterest was reduced from 51% to 38.01%. There is therefore a deemed disposalwhich gives rise to a loss. The book values of the net assets at the date of disposal were as follows: £000 £000 Non-current assets 3,585 Inventories 6,584 Trade and other receivables 6,657 Other financial assets 162 Cash and short-term deposits 55 Current liabilities (11,644) Non-current liabilities (3,023) --------Net assets at 1 January 2007 2,376 Cash inflow following transaction (€1,400,528) 942 -------- 3,318 Effective interest in Pro2 before issue of new equity:-------------------------------------------------------- 51% of £2,376,000 1,212 Plus goodwill on acquisition 665 -------- 1,877 Effective interest in Pro2 after issue of new equity:------------------------------------------------------- 38.01% of £3,318,000 1,261 Plus goodwill on acquisition x 38.01/51 496 -------- 1,757 --------Loss on Disposal (120) ======== The reduction in the Company's holding means that from the transaction date of1 January 2007 Pro2 Anlagentechnik GmbH has been treated for reporting purposesas an associated company of Alkane Energy plc, using the equity method ofaccounting. In previous periods the results of Pro2 Anlagentechnik GmbH werefully consolidated as a subsidiary undertaking. Under the equity method ofaccounting the Company's share of Pro2 Anlagentechnik GmbH's results are shownas one line in the income statement, rather than consolidating turnover andcosts by individual category. There is therefore a significant reduction inrevenue, cost of sales and administrative expenses in the year to 31 December2007 when compared to the year ended 31 December 2006. In the Balance Sheet for2007, the Group's investment in Pro2 Anlagentechnik GmbH is reported as oneline, Investments accounted for using the equity method, leading to significantreductions in property, plant and equipment, inventories, trade and otherreceivables, and other payables and financial liabilities when compared to 2006 10. PROPERTY, Plant and equipment Acquisitions and disposals During the year ended 31 December 2007 the Group acquired assets with a cost of£1,248,000 (2006: £1,821,000). There were no disposals during the year ended 31December 2007 (2006: £2,391,000). The carrying value of the assets held at31 December 2006 by Pro2 Anlagentechnik GmbH totalled £3,564,000. On 1 January2007 Pro2 issued new equity shares to third party investors and Alkane Energyplc's interest was reduced from 51% to 38.01%. As a result Pro2 has from thatdate been treated for reporting purposes as an associate company rather than asa subsidiary, and the assets are no longer shown within Property, Plant andEquipment. They have therefore been classed as disposals in the year ended 31December 2007. Arising from the transition to IFRS and the implementation of IAS16 (Property, plant and equipment) assets with a carrying value of £2,867,000have been reclassified from Gas Properties to Property, Plant and Equipment asat 1 January 2006. The balance of the assets within Gas Properties has beenrenamed as Gas Assets. Sale and finance leaseback During the year ended 31 December 2007 the Group entered into two new sale andfinance leaseback agreements for items of plant with a total cost of £606,000. 11. gas assets Acquisitions and disposals During the year ended 31 December 2007 the Group acquired assets with a cost of£209,000 (2006: £1,167,000). There were no disposals during the year ended 31December 2007 (2006: nil). 12. Capital commitments At 31 December 2007 the Group had capital commitments contracted for but notprovided in the accounts for the acquisition of property, plant and equipment of£22,000 (2006: £95,000). 13. Share capital During the year ended 31 December 2007, options over 200,000 ordinary shareswere exercised in respect of the Post Admission Share Option Plan. 14. TRANSITION TO IFRS The Group adopted IFRS with effect from 1 January 2006, and the results for theyear ended 31 December 2006 have been restated from UK GAAP. The following tablereconciles the profit reported under UK GAAP with that restated to IFRS: 2006 £000 Profit for the year attributable to equity holders of the parent asreported under UKGAAP 1,015Adjustment in respect of IAS 19 (Employee Benefits) (30)Adjustment in respect of IFRS 3 (Business Combinations) 89 ---------Profit for the year attributable to equity holders of the parent asrestated to IFRS 1,074 ========= 15. GENERAL NOTE a. The preliminary unaudited financial information set out above does notconstitute full accounts within the meaning of Section 254 of the Companies Act1985. b. Audited statutory accounts in respect of the year ended 31 December2006 have been delivered to the Registrar of Companies and those accounts weresubject to an unqualified report by the auditors. c. Copies of the audited annual report and accounts for the year ended31 December 2007 will be sent to shareholders during April 2008 and will beavailable from the Company's registered office - Edwinstowe House, High Street,Edwinstowe, Nottinghamshire NG21 9PR. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Alkemy Capital.