Preliminary Results

2nd Dec 2008 07:00



Press Release

2 December 2008

Nviro Cleantech plc

("Nviro" or "the Group")

Preliminary Results

Nviro Cleantech plc (AIM:NVR), a leader in commercialising environmental technologies including clean fuels for power generation, is pleased to announce its Preliminary Results for the twelve months ended 30 September 2008.

Financial Highlights

	Strong net cash balance of £10.95m at year end (2007: £5.9m)
	Pre-revenue company with a reduced loss before tax of £3.17m (£4.19m in 2007)

Operational Highlights 

	Clean Fuel
	Won contract for first Vertus US coal treatment site with Cincinnati Bulk Terminals (CBT). Permits necessary to commence production have been issued, and construction of the facility is now well underway and is due for completion in early 2009.
	Chinese Joint Venture agreement signed with Shenyang Coal Trading Group for three coal treatment projects in China.
	Initiated development programme for a lignite-biomass plant in India with China Light and Power India Private Ltd (CLP).
	By implementing an opportunistic procurement policy we have been able to acquire significant components of clean fuel systems for further facilities which we expect to be installing next year, thereby conserving the Group's cash in the medium term.
	Recycling
	Conducted successful Microrelease trials with one of Europe's largest MDF manufacturers to produce MDF board with up to 20% recycled wood fibre.
	Successfully trialled this product within a sustainable fit-out and refurbishment programme for a major UK high-street grocery retailer.
	Customer satisfaction has led to requests for further material for inclusion in shop fittings within the high-street grocer's flagship UK eco-store, which is currently under construction.
	Air Treatment
	Has developed working prototypes for both Laseair and Organotect, which have reached an inflection point in value on their path to market.

Chris Every, CEO of Nviro Cleantech plc, said: "Over the past twelve months Nviro has successfully built solid foundations which will allow for revenue generation in 2009.  All of the Group's businesses have registered significant progress, with our principal operation, Vertus, currently building its first industrial-scale facility in the US. Microrelease has performed successful trials with leading industry players, and the two air treatment technologies are being primed for the next stage to market following the development of working prototypes.  We are in an exciting period in our evolution and we view the future with confidence." 

For further information:

Nviro Cleantech plc
Chris Every, Chief Executive Officer	Tel: +44 (0) 20 3178 7100
[email protected]	www.nvirocleantech.com

Grant Thornton Corporate Finance -  Nominated Adviser
Fiona Owen	Tel: +44 (0) 20 7383 5100
[email protected]	www.grantthornton.co.uk

Fairfax I.S. PLC Broker
Ewan Leggat	Tel: +44 (0) 20 7598 5368
[email protected]	www.fairfaxplc.com

Media Enquiries:

Abchurch Communications Ltd
Justin Heath / Monique Tsang	Tel: +44 (0) 20 7398 7781
[email protected]	www.abchurch-group.com

  Chairman's and Chief Executive's review

It gives us great pleasure to present Nviro Cleantech plc's results for the twelve-month period ended 30 September 2008, and to report on the Group's progress to date.  

Strategy

The Group is increasingly focusing most of its resources on the commercialisation of Vertus, and the production and treatment of both coal and biomass-based fuels.  This strategy is based on the Directors' belief that clean fuels offer tremendous global growth prospects, and is underpinned by the contract success already achieved in the United States, as well as strong interest in our processes from numerous other potential customers in the power generation and industrial energy sectors.  

The Board believes that Microrelease's real value will be crystallised following the construction of its first industrial plant.  In order to conserve our capital and management resources and leverage the value of the intellectual property (IP) we have created, we anticipate that this plant will be co-funded by one or more industry partners.  

The two air treatment technologies, Laseair and Organotect, have produced working prototypes and are both nearing an inflection point in their development where Nviro will be able to consider a range of options to begin to realise value from these investments.  This may take the form of sale, license, or a combination of both with partners in the relevant markets.  

The Management is cognisant of the difficult economic conditions and has assessed the potential impact on the Group.  Hence we are focusing the delivery of both our capital and human resources on the highest priority areas for the future success of the company.  

Review of Businesses

Vertus  

The most significant development in the financial period was the announcement of our contract with Cincinnati Bulk Terminals LLC (CBT) for a 25-year agreement to treat fuels for industrial customers in the Cincinnati tri-state region. The construction phase for our Vertus plant at CBT is now progressing towards completion with the core of the equipment, the six-feet diameter rotary kiln, being fitted out at a sub-contractor's facility nearby.  Moreover, the necessary major permits and authorisations to commence production have been granted.  Engineering and ground works are in progress at CBT, where our Vertus plant is located.  We believe that our installation will be completed in early 2009, with revenue from our coal pre-treatment process following on shortly after commissioning.  Once our first industrial-scale Vertus production unit is in full operation it will act as a powerful tool in the conversion of interest in our fuels enhancement process into additional orders from potential customers, whether that be for coal or biomass.

We have established a North American fuel-testing and development facility near the CBT site, which centres on a specially configured, small, six-inch diameter kiln that facilitates the testing of sample materials and enables plant specifications to be refined for potential Vertus customers.  

 

In India the Group initiated a development programme with CLP Power India Private Ltd. to install a combined lignite and biomass plant, and in China our joint venture, Balama Nviro, entered into a fuel evaluation and testing agreement with Shenyang Coal Trading Group (SCTG).  

While these projects are under development the Group is also building a prospect base that includes numerous biomass fuel treatment opportunities.  There has been a recent rapid increase in global demand for such fuels for use in power generation. Demand for these biomass-derived fuels is driven by legislation and stringent requirements to comply with CO2 emission levels under various climate change initiatives around the world. The particular advantages which Nviro can offer include the preparation of a biomass-derived fuel that readily blends with existing solid fuels such as coal, and has sufficient stability to be transported or stored.  Nviro believes that the preparation of high-efficiency biomass fuels for use in power generation is an important growth area. The Group expects biomass opportunities to boost revenues and also provide the benefit of requiring lower capital expenditure relative to coal focused projects.  

In order to support the increasing Vertus workload, we have added key individuals to our team in business development, project management and engineering. The acquisition of specialist skills in the clean fuel team is likely to continue during 2009.

Microrelease 

Microrelease has been progressing well with successful trials conducted with one of Europe's largest MDF producers during the period, where ten tonnes of MDF board incorporating up to 20% of our recycled wood fibre were manufactured. The resulting product met the performance criteria of this leading MDF board producer.  Moreover, this product was successfully trialled within a sustainable fit-out and refurbishment programme for a major UK high-street grocery retailer.  The high-street grocer has subsequently requested further material for inclusion in shop fittings within the organisation's flagship UK eco-store, which is currently under construction.  

The enthusiastic response to the proven Microrelease technology has led us to explore the possibility of entering into a partnership arrangement with industry players to co-fund the construction of future commercial, industrial-scale units.  

Organotect & Laseair 

The Group is pleased with the development of working prototypes for these air treatment and detection technologies.  Both have now reached an inflection point in terms of value, and we believe that, in line with our stated objectives at the time of our IPO last year, it is now the right time to explore a range of strategies which would best allow us to realise the value we created in the IP in these technologies.  

Financial Review

The group successfully raised £10m (before expenses) from a placing in July 2008.  As was indicated at the time, approximately 80% of the proceeds are expected to be invested in the fuels enhancement business in the Vertus operation.  

Over the twelve months ended 30 September 2008, Nviro recorded a reduced pre-tax loss of £3.17m (£4.19m in 2007), which is broadly in line with the Directors' expectations. Cash outflow from operations was £2.65m, reflecting the loss for the period. Net cash at 30 September 2008 was £10.95m.  This robust cash position reflects tight cost control and it is the Directors' intention to seek project financing for forthcoming Vertus projects, once our initial CBT facility is revenue generating.  

Outlook 

Vertus has met with widespread interest from both coal and biomass fuel users since we launched our marketing campaign last year, culminating in the award of a contract in the US, and agreements in China and India.  The Group will now focus its efforts on transitioning this business into revenue generation, particularly with our maiden installation in the US, which is expected to come on stream in early 2009.  We anticipate that a co-funded Microrelease wood fibre recycling plant will be established in 2009 with an industry partner.  We are in an exciting period in the Group's evolution and we look to the future with confidence.

James SD Leach Non-Executive Chairman

Chris Every Chief Executive Officer

Notes to Editors

Nviro Cleantech plc is a leader in commercialising clean technologies which has developed a strong portfolio of innovative patent-protected businesses, the most advanced of which are Vertus Technologies and Microrelease.

Vertus uses a reductive thermal process (RTP) to remove moisture and contaminants (such as mercury and sulphur) and improve the performance of fuels, notably coal and biomass, producing consistent-quality, high-energy, cleaner-burning fuels tailored for the combustion profiles of client boilers. Furthermore, Vertus maximises effective and clean reuse of the process by-products.

Vertus has already established a range of significant commercial partnerships, under a build, own, and operate model, that include:

a contract with Cincinnati Bulk Terminals, primarily serving the US industrial power generation market;

an agreement with Shenyang Coal, an operator of mines and power plants in northeast China;

a Memorandum of Understanding with utility company CLP India to install a combined lignite and biomass plant.

Microrelease, Nviro's second business, recycles medium-density fibre ("MDF") and particle board into a high-quality reusable wood fibre. Nviro has already conducted successful trials on Microrelease with one of Europe's largest MDF producers, and is targeting the furniture, shopfitting and building industries for the commercialisation and purchase of this technology.

Nviro's portfolio also comprises two follow-on technologies, focusing on air quality evaluation and purification.  

Nviro was quoted on London's Alternative Investment Market (AIM) in August 2007, and in June 2008 it successfully raised £10 million (before expenses) via a placing, which is being used primarily to commercialise Vertus and Microrelease.

CONSOLIDATED INCOME STATEMENT

Year ended 30 September 2008

	Note		2008 £'000	2007 £'000
			Unaudited	Audited
Research expenses			(329)	(2,124)
Administrative expenses			(3,191)	(2,111)
Other operating income			83	-
Operating loss			(3,437)	(4,235)
Share of results of joint venture			(19)	-
Loss before interest			(3,456)	(4,235)
Finance income			283	40
Loss before tax			(3,173)	(4,195)
Tax	9		-	-
Loss for the financial year			(3,173)	(4,195)
Basic and diluted loss per share	4		(6.44)p	(13.81)p

 

No minority interest in the losses has been recognised within these financial statements as the minority does not have a binding obligation to make additional investment to cover the losses. The loss is therefore wholly attributable to the equity holders of the parent.

All results in the current and proceeding financial year derive from continuing operations.

  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 30 September 2008

	Share capital £'000	Share premium £'000	Merger reserve £'000	Share based payment reserve £'000	Translation reserve £'000	Retained Earnings £'000	Total Equity £'000
At 1 October 2006 - Audited	21	-	-	14	19	(857)	(803)
Loss for the year	-	-	-	-	-	(4,195)	(4,195)
Total recognised income and expense	-	-	-	-	-	(5,052)	-
Foreign currency translation	-	-	-	-	(19)	-	(19)
Issue of share capital (net of issue expenses)	12	6,582	-	-	-	-	6,594
Issue of share capital	11	-	4,585	-	-	-	4,596
Share based payment charge	-	-	-	272	-	-	272
At 1 October 2007 - Audited	44	6,582	4,585	286	-	(5,052)	6,445
Loss for the year	-	-	-	-	-	(3,173)	(3,173)
Transfer on exercise of share options	-	-	-	(10)	-	10	-
Total recognised income and expense	-	-	-	-	-	(8,215)	-
Foreign currency translation	-	-	-	-	(3)	-	(3)
Issue of share capital, (net of issue expenses)	22	9,435	-	-	-	-	9,457
Share based payment charge	-	-	-	90	-	-	90
At 30 September 2008 - Unaudited	66	16,017	4,585	366	(3)	(8,215)	12,816

All income and expenses are attributable to the shareholders of the parent company. None is attributable to the minority interest.

CONSOLIDATED BALANCE SHEET

30 September 2008

		Note	2008 £'000		2007 £'000
			Unaudited		Audited
Non-current assets
Licence fees			923		1,028
Development costs		5	867		-
Property, plant and equipment		6	1,220		35
Total non-current assets			3,010		1,063
Current assets
Other receivables			145		385
Cash and cash equivalents		8	10,946		5,962
Total current assets			11,091		6,347
Total assets			14,101		7,410
Current liabilities
Trade and other payables			(926)		(598)
Provisions			(337)		(337)
Borrowings		8	-		(30)
Total current liabilities			(1,263)		(965)
Non current liabilities
Interests in joint ventures			(22)		-
Total non current liabilities			(22)		-
Total liabilities			(1,285)		(965)
Net assets			12,816		6,445
Equity
Share capital			66		44
Share premium reserve			16,017		6,582
Merger Reserve			4,585		4,585
Share based payment reserve			366		286
Translation reserve			(3)		-
Retained losses			(8,215)		(5,052)
Equity attributable to equity holders of the parent			12,816		6,445
Minority interest			-		-
Total equity			12,816		6,445

  CONSOLIDATED CASH FLOW STATEMENT

Year Ended 30 September 2008

	Note	2008 £'000		2007 £'000
		Unaudited		Audited
Operating activities
Net cash outflow from operations	7	(2,649)		(4,165)
Net cash outflow used in operating activities		(2,649)		(4,165)
Investing activities
Interest received		283		40
Purchase of intangible assets - development activities		(867)		-
Purchase of intangible assets - licences		-		(1,054)
Purchase of property, plant and equipment		(1,210)		(36)
Net cash outflow from investing activities		(1,794)		(1,050)
Financing activities
Proceeds on issue of shares		10,005		12,362
Costs on issue of shares		(548)		(1,215)
Net cash inflow from financing activities		9,457		11,147
Net increase in cash and cash equivalents in the year		5,014		5,932
Cash and cash equivalents at beginning of year		5,932		-
Cash and cash equivalents at end of year	8	10,946		5,932

 

  NOTES TO THE PRELIMINARY ANNOUNCEMENT

Year ended 30 September 2008

 1. BASIS OF PREPARATION

The financial information set out above does not constitute the company's statutory accounts within the meaning of the Companies Acts 1931 to 2004. 

The 2008 figures are based on unaudited accounts for the year ended 30 September 2008. The statutory accounts will be finalised on the basis of the financial information presented by the directors in the preliminary announcement and will be delivered to the Registrar of Companies following the company's Annual General Meeting.

The financial information for the year ended 30 September 2007 is derived from the statutory accounts for that year. The auditor reported on those statutory accounts which have been delivered to the Registrar of Companies. The audit report was unqualified and did not contain a statement under section 15 (4) (b) of the Companies Acts 1982.

This preliminary announcement was approved by the Board of directors on 1 December 2008.

Copies of this announcement are available from the company's registered office at Burleigh Manor, Peel Road, Douglas, Isle of Man, IM1 5EP. The Annual Report and Accounts will be sent to shareholders shortly.

2. ACCOUNTING POLICIES

Basis of accounting

This Announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards and interpretations adopted by the European Union and as applied in accordance with the provisions of the Companies Acts 1931 to 2004 (IFRS) and using accounting policies that are consistent with those as stated in the previous year's financial statements. The Group's new accounting policies this year are stated below.

Joint Ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control.

Jointly controlled entities are accounted for using the equity method. Investments in joint ventures are carried in the balance sheet at the Group's share of the net assets of the joint venture and the Group's share of profits or losses for each financial year are recognised in the consolidated income statement.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment loss. They are depreciated over their estimated useful lives on the following annual bases:

Assets under construction No depreciation until construction of the assets is completed

Leasehold Improvements Over the length of the lease

The gain or loss ensuing on the disposal or retirement of an asset is determined on the difference between sales proceeds and the carrying amount of the asset and is recognised in the income statement.

NOTES TO THE PRELIMINARY ANNOUNCEMENT

Year ended 30 September 2008

3.  GOING CONCERN BASIS

As at the end of September 2008, the group had cash reserves of £10.95 million. Based on current projections of group expenditure, that could be reduced in certain circumstances, this amount would be fully utilised by November 2009. The group currently has a loan facility available to it of £1.5 million which based on current projections would be utilised. Plans are also in place to generate cash flow from revenue operations in 2009 and possibly to raise further funding in the UK or the US, including project finance, leasing, supplier finance, development grants, debt or equity, thus meaning that the group will be able to continue as a going concern for the next 12 months.

4. LOSS PER SHARE

Basic loss per share of 6.44p (2007: 13.81p) is based on the loss for the financial year of £3,173,000 (2007: loss of £4,195,000) and on 49,298,469 ordinary shares (2007: 30,371,435 ordinary shares) being the weighted average number of shares in issue throughout the year. As there is a loss for the year, there is no difference between the basic and the diluted loss per share.

5. DEVELOPMENT COSTS

	£'000
Cost
At 1 October 2006	-
Additions	-
At 30 September 2007	-
Additions	867
At 30 September 2008	867
Amortisation
At 1 October 2006	-
Charge for the year	-
At 30 September 2007	-
Charge for the year	-
At 30 September 2008	-
Net Book Value:  1 October 2006 - Audited	-
Net Book Value: 30 September 2007 - Audited	-
Net Book Value: 30 September 2008 - Unaudited	867

  NOTES TO THE PRELIMINARY ANNOUNCEMENT

Year ended 30 September 2008

6. PROPERTY, PLANT AND EQUIPMENT

	Leasehold improvements £'000	Assets in the course of construction £'000	Plant & Machinery £'000	Computer Equipment £'000	Total £'000
Cost
At 1 October 2006	-	-	-	-	-
Additions	-	-	33	3	36
At 30 September 2007	-	-	33	3	36
Additions	46	1,141	20	3	1,210
At 30 September 2008	46	1,141	53	6	1,246
Depreciation
At 1 October 2006	-	-	-	-	-
Charge for the year	-	-	1	-	1
At 30 September 2007	-	-	1	-	1
Charge for the year	9	-	14	2	25
At 30 September 2008	9	-	15	2	26
Net book value: 1 October 2006 - Audited	-	-	-	-	-
Net book value: 30 September 2007 - Audited	-	-	32	3	35
Net Book value: 30 September 2008 - Unaudited	37	1,141	38	4	1,220

NOTES TO THE PRELIMINARY ANNOUNCEMENT

Year ended 30 September 2008

7. NOTES TO THE CASH FLOW STATEMENT

		2008 £'000	2007 £'000
		Unaudited	Audited
Operating loss		(3,437)	(4,235)
Adjustments for:
Depreciation of property, plant and equipment		25	1
Amortisation of intangible assets		105	26
Share based payment expense		90	316
Operating cash flows before movements in working capital		(3,217)	(3,892)
Changes in working capital:
Decrease / (Increase) in other receivables		240	(385)
Increase in trade and other payables		328	112
Net cash outflow from operations		(2,649)	(4,165)

8. CASH AND CASH EQUIVALENTS 

	2008 £'000	2007 £'000
	Unaudited	Audited
Cash and cash equivalents per balance sheet	10,946	5,962
Bank overdrafts	-	(30)
Cash and cash equivalents per cash flow statement	10,946	5,932

9. TAXATION

There is no tax charge in the years ended 30 September 2007 and 2008 as there are no profits subject to taxation.

Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. As the availability of future profits against which to utilise a deferred tax asset is uncertain, no asset has been recognised in the years ended 30 September 2007 and 2008.

ENDFR UUGAAPUPRGRG

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