TIDMALK
RNS Number : 5758C
Alkane Energy PLC
09 March 2011
9 March 2011
Alkane Energy plc
("Alkane", "the Group" or "the Company")
Unaudited preliminary results for the year ended 31 December
2010
Alkane Energy plc (AIM: ALK) the profitable alternative energy
company that owns and operates power generation plants using coal
mine methane as fuel, today announces its unaudited preliminary
results for the year ended 31 December 2010.
Operational Highlights
-- Sixth successive year of growth in electricity output
-- 26% increase in electricity output to 120GWh in 2010 (2009:
95GWh)
-- Three new sites opened on time, on budget and in line with
stated strategy, bringing total to 12 (2009: 9)
-- Good progress on 2011 project pipeline
-- First full year of running surplus capacity on conventional
gas with our partner, GDF SUEZ Energy UK
-- First contract in renewable biogas sector to supply power
plant to anaerobic digestion facility due for delivery in 2011
Financial Highlights
-- Revenue increased by 5% to GBP6.6m (2009: GBP6.3m), despite a
21% fall in average electricity selling price
-- Operating cash inflow increased by 25% to GBP3.5m (2009:
GBP2.8m)
-- Depreciation increased by 50% to GBP1.8m (2009: GBP1.2m) due
to continued investment in new sites and planned major services
-- Adjusted profit before tax of GBP1.4m (2009: GBP2.4m)
-- Organic funding in place for CMM programme
Commenting on the preliminary results, Chief Executive Officer,
Neil O'Brien, said:
"The Group produced a strong performance in 2010, increasing
electricity output by 26% to 120GWh and opening three new
sites.
We continue to invest in increasing both our coal mine methane
capacity and electricity output. In addition, we see opportunities
to grow in related market sectors including stranded on-shore gas,
biogas and shale gas. With tight cost controls and pricing expected
to rise over the coming years, Alkane is well placed to make
further progress in 2011."
For more information please contact:
Alkane Energy plc 020 7796 4133 (today), then
Neil O'Brien, Chief Executive 01623 827927
Officer 020 7796 4133 (today), then
Steve Goalby, Finance Director 01623 827927
Altium Capital Limited
Adrian Reed - Financial Advisory
Chloe Ponsonby - Corporate 0845 505 4343
Broking 020 7484 4040
Hudson Sandler
Nick Lyon
Alex Brennan 020 7796 4133
Background Information
Alkane Energy has the UK's leading portfolio of coal mine
methane ("CMM") licences, enabling the Company to extract gas from
abandoned coal mines. Alkane started extracting CMM for direct
sales of gas in 1999 with sites at Shirebrook, Steetley and
Markham. Shirebrook and Markham are still operational today, a
decade after they were opened. Shirebrook is still producing CMM
and surplus capacity has been deployed to conventional peak load
along with capacity at Markham.
The Group now operates from 12 mid size (up to 10MW) power
plants across the UK, 11 CMM and one conventional gas, and sells
this power through the electricity network, using standard modular
reciprocating engines to generate the electricity. The engine units
and other plant are designed to be flexible and transportable and
this allows additional capacity to be brought onto growing sites
and underutilised plant to be moved to new sites to maximise
efficiency.
Alkane's skills and ambitions are not limited to CMM. The
operating model has already been transferred to running peak load
plant (generating power at the times of highest demand, normally on
weekday mornings and evenings) using conventional gas. Alkane
currently operates 8MW across two sites on conventional gas with
our trading partners GDF SUEZ Energy UK.
The Biogas market also provides a potential new business stream.
Running on gas generated from the processing of organic waste will
require exactly the same power assets and core gas and electricity
skills as CMM.
Coal Bed Methane is a longer term opportunity where Alkane has
500km(2) under licence and contingent resource estimates of circa
350 billion cubic feet. The potential shale gas resources within
our licences are also under investigation.
More information is available on our website
www.alkane.co.uk.
Overview
Alkane Energy has had a very successful year in production
terms, expanding our plant capacity with three new sites and
increasing our electricity output by 26%. The Group's production
reached 120GWh (2009: 95GWh), our highest ever output and this has
led to a 5% increase in revenue to GBP6.6m (2009: GBP6.3m) despite
a drop of 21% in average electricity sales price due to the high
relative prices achieved in 2009. This expansion is in line with
the Group's stated strategy of expanding our core coal mine methane
(CMM) portfolio. The Board is pleased with progress on the delivery
of further new production capacity and looks forward to this
additional capacity coming on-stream during the coming years as
forward selling prices continue to strengthen.
The key successes during the last 12 months are:
-- a 26% increase in output to 120GWh
-- three new sites opened bringing the total number of Alkane
sites to 12
-- good progress on the project pipeline for new sites in
2011
-- our first contract in the renewable biogas sector with the
supply of the power plant to an anaerobic digestion facility due
for delivery in 2011
Revenue has increased by 5% to GBP6.6m (2009: GBP6.3m), with
increased output offset by significantly lower selling prices.
Organic cash generation has risen by 25% to GBP3.5m (2009:
GBP2.8m). EBITDA has fallen by 11% to GBP3.3m (2009: GBP3.7m).
Adjusted profit before tax reduced by 43% to GBP1.4m (2009:
GBP2.4m), impacted by an increase in depreciation. The year saw
continued investment in new sites and major services of existing
capacity in order to increase output and maintain efficiency.
Consequently depreciation, on a consistent basis, increased by 50%
to GBP1.8m (2009: GBP1.2m).
The 2010 adjusted profit before tax figure incorporates a 21%
drop in average selling prices for electricity to GBP44/MWh during
the year (2009: GBP56/MWh), but encouragingly Alkane has been able
to contract the majority of our expected 2011 output at an average
price of GBP48/MWh.
Adjusted earnings per share are 1.48 pence (2009: 2.59 pence).
Net assets have increased by 13% to GBP17.9m (2009: GBP15.8m) with
gearing a modest 23% (2009: 11%).
Strategy
Alkane is establishing itself as one the UK's leading
independent electricity generators. Our core gas to power skills
encompass the ability to plan, develop, build and run mid-sized
electricity power plant with sites ranging from 0.5MW to 10MW. Our
in-house skills allow us to manage the entire development cycle
covering site selection, planning, environmental impact mitigation,
grid connections and permitting. The build phase of projects is
complex and requires the co-ordination of a wide range of key
contractors. The following table shows our progress in respect of
site development:
Total at Projects
2009 Projects 31 Annual under
installed commissioned December percentage development
capacity in 2010 2010 increase in 2011 Total
---------- ------------- --------- ----------- ------------ ------
MW MW MW MW MW
27.5
CMM -
generation 17 6.5 23.5 38% 4 - 6 29.5
Conventional
gas
generation 7 1 8 14% - 8
Gas supply
(equivalent
MW) 6 - 6 - - 6
---------- ------------- --------- ----------- ------------ ------
41.5
-
Total 30 7.5 37.5 25% 4 - 6 43.5
---------- ------------- --------- ----------- ------------ ------
The Company currently operates from a total of 12 sites with the
majority of our output coming from CMM extracted from abandoned
coal mines in the UK. We started generating electricity from CMM in
2005 and have successfully increased our output every single year
since then. We have the UK's largest portfolio of licensed CMM
sites and we have a stated strategy to increase CMM output over the
coming years. The record output and increase in the number of sites
we manage is a testament to the success of this strategy.
As part of the Company's growth strategy we are continuing to
develop self-funded organic growth of our CMM business. However, we
are aware of the need to increase the overall scale of the Group
and reach critical mass from a financial and operating perspective.
Recent developments in renewable generation, particularly wind and
solar, increase the need for flexible baseload capacity as operated
by Alkane. Accordingly over the last year we have looked at a
number of potential consolidation and expansion opportunities in
CMM, stranded on-shore gas and biogas. We will continue to look for
appropriate opportunities in these sectors, and others including
CBM and shale gas, where we have the in-house expertise to increase
scale and add value for our shareholders.
Alkane's Medium Term Targets
Whilst we are proud of recent progress we are keen to continue
moving ahead on a number of established and new business
fronts.
In respect of CMM, we expect 2011 to be another year of growth
in the number of sites, output and installed capacity. As market
prices have stabilised and improved from their 2010 lows we would
also expect to see an increase in our electricity average selling
price.
The Department of Energy and Climate Change ("DECC") 14(th)
On-Shore Licensing Round is expected to take place in 2011 and we
will be applying for a number of new licences. Our eventual
allocation will not be known until later in 2011.
Our conventional gas programme has successfully completed its
first full year of operation in 2010. This has given us greater
confidence and knowledge and we are targeting to double
conventional gas revenues. Our fledgling biogas division is
targeted to deliver its first power plant in 2011 and we will
continue the search for other investment opportunities along with
partners in this sector.
We believe that with our skilled team, cash generating assets
and a strong balance sheet, Alkane can deliver a further year of
progress in 2011.
Financial
Results
Alkane's revenue increased by 5% to reach GBP6.6m (2009:
GBP6.3m). There was a 26% increase in output offset by a 21% drop
in the average selling price we achieved for electricity.
Costs have been well controlled during the year with variable
production costs, those over which we have most control, falling
from GBP7.13/MWh to GBP7.05/MWh. This improvement is due to
economies of scale as we grow and the ability to expand the range
of in-house skills as our output has increased. Supply chain cost
savings have also been achieved. Administration costs have
increased by 3% to GBP1.99m (2009: GBP1.93m) as we continue to
strive to hold central overheads flat whilst expanding production
and developing potential new business streams.
The 21% reduction in average selling price, offset by the
increased output, has resulted in EBITDA, a reflection of the
Group's cash generating capacity, falling by 11% to GBP3.3m (2009:
GBP3.7m). This represents a 50% EBITDA margin (2009: 59%).
Operating cash generated was GBP3.5m (2009: GBP2.8m) representing
over 100% EBITDA to cash conversion.
During the year profit before tax was impacted by GBP0.1m of
non-recurring costs incurred in appraising potential corporate
transactions, whilst in 2009 profit before tax was affected by an
exchange loss of GBP0.3m arising from the disposal of Pro2.
Allowing for these items, adjusted profit before tax is GBP1.4m
(2009: GBP2.4m). Adjusted profit before tax is impacted byan
increase in depreciation of 50% to GBP1.8m (2009: GBP1.2m),
reflecting the continued investment in new sites and major
overhauls. Depreciation for the year is calculated on a consistent
basis with 2009. This results in adjusted earnings per share from
continuing operations of 1.48 pence (2009: 2.59 pence). The full
published profit before tax, which includes the impact of the
non-recurring costs, is GBP1.3m (2009: GBP2.1m). A deferred tax
asset of GBP0.5m has been recognised in accordance with a prudent
estimate of the extent to which future taxable profits will be
available to be utilised against unused tax losses. This has been
credited to the statement of consolidated income, so that profit
for the year from continuing operations is GBP1.8m (2009: GBP2.1m)
with earnings per share of 1.93 pence (2009: 2.24 pence).
The Board is not recommending the declaration of a dividend
(2009: nil), but continues to review this on an annual basis.
Balance Sheet and Cash Flow
Net assets have increased to GBP17.9m (2009: GBP15.8m) as the
investment in CMM sites continues. Our balance sheet is dominated
by the investment in power plant. There is a total of GBP22.3m
covering power plant and site assets such as planning, boreholes,
grid connections and site civil costs. Capital expenditure during
the year was GBP6.0m (2009: GBP10.7m). Of this figure GBP3.3m was
invested in completing the three new sites opened during 2010 and
GBP1.4m was spent in preparing further CMM sites for 2011. The
balance of the investment was incurred on the existing sites and on
biogas. We are prudent in not including on the balance sheet the
considerable value that we have in licences and gas reserves.
Our working capital demand is limited. We hold inventories of
basic spare parts and consumables, and our debtors and creditors
are paid monthly.
The year-end gearing for the Group was 23% (2009:11%). The Board
considers this to be a very prudent ratio given the solid asset
backing on the balance sheet and the strong cash generative nature
of the sites as shown by the 50% revenue to EBITDA ratio, with an
EBITDA to cash conversion of over 100%.
Operating cash flow during the year was GBP3.5m (2009: GBP2.8m).
This cash, together with utilisations of the new revolving credit
facility with Lloyds TSB Bank Plc signed in July 2010, was used in
growing the business. Operating cash flow and the new facility are
expected to be sufficient to cover the full development of our CMM
roll-out programme.
Power Pricing
Alkane sells the majority of its output in the UK electricity
market. The sites are designed to run 24/7 production and the
output is sold into base load contracts.
Electricity prices have experienced a three year decline since
the start of the credit crisis in 2008. At their highest level,
base load prices for 12 month forward contracts briefly touched
GBP90/MWh but had fallen significantly to reach a low point of
GBP38/MWh in the spring of 2010. Since then UK electricity base
load prices have improved to around GBP52/MWh for 2012 delivery (as
at 7 March 2011). Peak prices on weekday evenings can be in excess
of GBP90/MWh and it is during these periods that operating our
plant on conventional gas is economic.
As a consequence of the market decline in pricing, Alkane has
seen a 21% drop in average selling price from GBP56/MWh in 2009 to
GBP44/MWh in 2010. We currently have 67% of our 2011 expected
output contracted at a blended average price of GBP48/MWh.
Operations
2010 has been a very encouraging year for our operations and
project teams. Output has reached a record 120GWh (2009: 95GWh)
which represents a 26% increase. This increase has been driven by
an expansion in the number of sites and our installed capacity.
Coal Mine Methane
Alkane's primary fuel source is methane extracted from abandoned
coal mines. We have licences from the UK Government giving CMM
extraction rights over 644km(2) . We currently operate 30MW of
installed capacity over 11 sites on CMM with a medium range target
to increase this to 50MW of installed capacity across 20 plus
sites.
As planned, during 2010 we opened three new sites: Florence in
Staffordshire, Newmarket near Leeds, and at Kings Mill Hospital in
Mansfield where there is an opportunity to extend operations to
full CHP through the sale of heat. In total these three sites have
added 7MW at a combined capital cost of GBP8.3m. We are progressing
the roll out programme for 2011 with a target to open a further
three sites in the coming 12 months, with expected capacity of 4MW
to 6MW depending on gas reserves. These additional sites are being
funded from our existing cash flows and bank facilities.
We have excellent data in respect of expected gas volumes at
potential sites, but there are risks associated with drilling new
boreholes, as unexpected geological factors such as flooding might
influence our ability to extract gas in the volumes
anticipated.
We try to establish a CMM site to be operational for up to a
decade. This gives us predictable income and earnings stream over
the life cycle of a project and is an attempt to manage our
reserves. No two sites are the same, but we now have a number of
sites, such as Wheldale and Shirebrook, that are moving into their
second decade of operations having been opened in 1999/2000. We
tend to see a site running at full output for two to three years
before gas flows decline at around 15% p.a. This is consistent with
on-shore conventional gas experience.
We are now developing plans to extend the life spans of our
sites. Markham has been switched to running fully on conventional
gas and Shirebrook is part fuelled by CMM and part by conventional
gas. We are also analysing alternative fuel sources such as biogas,
biomass and biodiesel as ways of continuing to run sites
cost-effectively.
DECC have announced their intention to commence a new licensing
round for on-shore gas and oil during 2011. Alkane is well advanced
in its research for licence applications.
Conventional Gas: Peak Load Production
2010 has been the Group's first full year of running our surplus
capacity on conventional gas. We have been operating 8MW as a
"standby facility" with the national grid via our partner, GDF SUEZ
Energy UK, and over the winter months have been using the
flexibility of our operations to run as a peak load generator. This
leaves us well placed to benefit from greater volatility in the
generation side of the grid as more intermittent renewable sources
such as wind power are added to the infrastructure, and we expect
to see a significant increase in revenue in 2011.
The key element is that conventional gas at these sites uses
existing engine units and is supported by the same operations and
maintenance teams that we already have in place for CMM. This helps
to spread costs and ensure capital is run economically.
Biogas
Biogas is a general term covering methane extracted from waste
and energy crops. It covers such items as landfill gas and Alkane
is evaluating a number of opportunities with biogas generated from
anaerobic digestion ("AD") which processes waste/crop material into
methane and fertiliser. AD sites use a back-end electricity
generating power plant that is identical to our standard operating
equipment and the challenges of planning, permitting, selling
electricity and power plant maintenance are already well within
Alkane's proven skill set.
We are reviewing a number of municipal waste and agricultural
projects where we would be either investor, developer or engine
supplier. In 2010 we received our first contract for the supply of
power equipment to the TEG Group PLC waste handling site at
Glenfarg, Perth. Our equipment will be delivered in 2011.
Other Opportunities
We are reviewing several other potential business streams where
we can utilise our core gas to power skills. Where there is a
potential user nearby we are looking to sell the heat produced from
our engines; we have 500km(2) of coal bed methane under licence
with contingent resource estimates of circa 350 billion cubic feet
that we are seeking ways to develop. We are investigating the shale
gas potential within these licence areas and are appraising a
number of on-shore conventional gas opportunities. Our team is also
researching the installation of ground source heat pumps to extract
energy from areas of rising mine water.
Alkane Team
The knowledge and experience of our people is unrivalled in the
industry and we have further added to our team this year attracting
expertise in power generation and the potential for expanding
associated technologies such as combined heat and power.
The Board would like to take this opportunity to thank the
entire Alkane team for their passion, commitment and contribution
in 2010.
Outlook
Alkane has shown itself capable of growing its production even
during this recessionary period. The market is recovering and
pricing is expected to rise over the coming years.
The Company has a strong foundation of a new engine fleet with
an installed capacity of 38MW. Our CMM operations have been
profitable and cash generative even at the selling prices we have
experienced in 2010. We are re-investing these funds with the aim
of delivering both increased production and improved selling prices
in 2011. Our current CMM expansion plans are being funded by our
own cash generation and committed debt facilities. We intend to
open a further three sites in 2011, with an increase in capacity of
4MW to 6MW.
Alkane is also moving into new market sectors. 2010 saw us
complete our first year's production using surplus capacity powered
on conventional gas and we are aiming to significantly increase
revenues from this source in 2011. In addition, we are due to
deliver our first power plant to a biogas project in 2011. Other
new opportunities are being carefully assessed but we will ensure
that we only proceed if they have the potential to add value to the
business.
The Board looks forward with confidence to another year of
progress in 2011.
John Lander
Chairman
Neil O'Brien
Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
for the year ended 31 December 2010
2010 2009
Notes GBP'000 GBP'000
Revenue 6,616 6,292
Cost of sales (3,132) (2,026)
Gross profit 3,484 4,266
Administrative expenses (1,994) (1,933)
Non-recurring costs 3 (70) -
-------- --------
Return on Group operations 1,420 2,333
Other operating income 62 152
Impairment of gas assets - (18)
-------- --------
Profit on activities before finance
income/(costs) 1,482 2,467
Finance income 71 109
Exchange loss arising from financing (5) (307)
Finance costs (247) (185)
-------- --------
Net finance costs (181) (383)
Profit before tax 1,301 2,084
Taxation 5 500 (1)
Profit for the period from continuing
operations 1,801 2,083
-------- --------
Discontinued operations:
Net profit on disposal of associate 6 - 767
Impairment reversal/(charge) 6 151 (1,448)
Profit for the year attributable to
equity holders of the parent 1,952 1,402
-------- --------
Other comprehensive income
Exchange difference transferred to
profit or loss on disposal of foreign
operation - (927)
Total comprehensive income for the
year attributable to equity
holders of the parent 1,952 475
-------- --------
Earnings per ordinary share
From continuing operations:
Basic, for profit for the year attributable 7 1.93p 2.24p
to equity holders of the parent
Diluted, for profit for the year attributable 7 1.92p 2.22p
to equity holders of the parent
From continuing and discontinued operations:
Basic, for profit for the year attributable 7 2.09p 1.51p
to equity holders of the parent
Diluted, for profit for the year attributable 7 2.08p 1.49p
to equity holders of the parent
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (unaudited)
at 31 December 2010
2010 2009
Notes GBP'000 GBP'000
NON-CURRENT ASSETS
Property, plant and equipment 8 10,576 9,355
Gas assets 9 11,687 8,937
Deferred tax asset 5 500 -
22,763 18,292
CURRENT ASSETS
Inventories 424 223
Trade and other receivables 1,692 1,450
Cash and cash equivalents 427 904
2,543 2,577
-------- --------
TOTAL ASSETS 25,306 20,869
-------- --------
CURRENT LIABILITIES
Trade and other payables (1,127) (1,019)
Finance lease obligations (892) (665)
Provisions (19) (13)
(2,038) (1,697)
-------- --------
NON-CURRENT LIABILITIES
Finance lease obligations (1,965) (2,045)
Long-term borrowings (1,751) -
Provisions (1,649) (1,348)
(5,365) (3,393)
-------- --------
TOTAL LIABILITIES (7,403) (5,090)
-------- --------
NET ASSETS 17,903 15,779
-------- --------
EQUITY
Share capital 470 464
Share premium 208 72
Other reserves 8,587 8,557
Retained earnings 8,638 6,686
TOTAL EQUITY 17,903 15,779
-------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
for the year ended 31 December 2010
Attributable to equity holders of the
parent
-------------------------------------------------------------------
Issued Share Translation Other Retained Total
of foreign
capital premium operations reserves(1) earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2010 464 72 - 8,557 6,686 15,779
Total
comprehensive
income and
expense for the
period - - - - 1,952 1,952
Share based
payment - - - 30 - 30
Issue of share
capital 6 136 - - - 142
At 31 December
2010 470 208 - 8,587 8,638 17,903
---------- -------- ------------ ------------ --------- ----------
At 1 January 2009 464 72 927 8,531 5,284 15,278
Total
comprehensive
income and
expense for the
period - - (927) - 1,402 475
Share based
payment - - - 26 - 26
At 31 December
2009 464 72 - 8,557 6,686 15,779
---------- -------- ------------ ------------ --------- ----------
(1) Other reserves comprise share-based payments of GBP168,000
(2009: GBP138,000), and a distributable reserve of GBP8,419,000
(2009: GBP8,419,000) created following cancellation of the share
premium.
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
for the year ended 31 December 2010
2010 2009
Notes GBP'000 GBP'000
Operating activities
Profit before tax from continuing operations 1,301 2,084
Adjustments to reconcile operating profit
to net cash flows:
Depreciation and impairment of property,
plant and equipment and gas assets
gas assets 1,798 1,225
Share-based payments expense 30 26
Finance income (71) (109)
Finance expense 247 185
Movements in provisions 307 (38)
(Increase)/decrease in trade and other
receivables (243) 2,235
Increase in inventories (201) (79)
Increase/(decrease) in trade and other
payables 297 (214)
Income tax (paid)/refunded (1) 132
-------- --------
Net cash flows from operating activities 3,464 5,447
Cash flows from investing activities
Proceeds from sale of investment in associate 130 3,162
Deferred payments received 21 -
Interest received 72 176
Purchase of property, plant and equipment (2,678) (5,709)
Purchase of gas assets (3,299) (4,964)
-------- --------
Net cash flows used in investing activities (5,754) (7,335)
Cash flows from financing activities
Issue of share capital 142 -
Proceeds from sale and finance leaseback 1,074 1,417
Sale and finance leaseback rentals (927) (616)
Proceeds from long-term borrowings 1,751 -
Interest paid (227) (185)
-------- --------
Net cash flows from financing activities 1,813 616
Net decrease in cash and cash equivalents (477) (1,272)
Cash and cash equivalents at 1 January 904 2,176
-------- --------
Cash and cash equivalents at 31 December 11 427 904
-------- --------
NOTES TO THE ACCOUNTS
1. CORPORATE INFORMATION
The interim condensed consolidated financial statements of the
Group for the year ended 31 December 2010 were authorised for issue
in accordance with a resolution of the directors on 8 March
2011.
Alkane Energy plc is a public limited company incorporated and
domiciled in England whose shares are publicly traded. The
Company's registered number is 2966946.
The principal activity of the Group is described in Note 4.
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and IFRIC
Interpretations as adopted by the European Union issued and
effective at 1 January 2010 and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS. The
accounting policies set out those policies which apply in preparing
financial statements for the Group and the Company. The Company has
taken advantage of the exemption provided under section 408 of the
Companies Act 2006 not to publish its individual statement of
comprehensive income and related notes. The result for the year of
that Company is a loss of GBP344,000 (2009: GBP301,000).
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of
applying the Group's accounting policies.
The policies set out in the most recently published full
accounts have been followed. The Group has adopted all of the
standards and interpretations that were mandatory for accounting
periods beginning on or after 1 January 2010 that are relevant to
the operations of the Group.
3. NON-RECURRING COSTS
2010
unaudited 2009
GBP'000 GBP'000
Costs of aborted corporate transactions 70 -
------------ --------
4. SEGMENT INFORMATION
Operating segments
The directors consider that there are two operating
segments:
The extraction of gas from coal measures for power generation
and burner tip use;
The development and operation of biogas projects.
There is currently no revenue from the biogas activity, which is
in the early stages of development, and the segment assets are less
than ten per cent of the Group total. The business segment is
therefore not separately disclosed, as permitted under IFRS8
'Operating Segments'.
Seasonality of operations
There is no significant seasonal nature to the Group's business
of the extraction and use of gas.
Revenue analysed by product and service
2010
unaudited 2009
GBP'000 GBP'000
Extraction of gas for power generation
and burner tip use 6,616 6,292
Revenue and non-current assets analysed by geographical
information
2010
Revenue unaudited 2009
GBP'000 GBP'000
UK 6,616 6,280
Europe - 12
----------- --------
Total 6,616 6,292
----------- --------
Non-current assets 2010 2009
GBP'000 GBP'000
UK 22,763 18,136
Europe - 156
-------- --------
Total 22,763 18,292
-------- --------
Majorcustomers
In the periods set out below, certain customers, all within the
CMM production operating segment, accounted for greater than 10% of
the Group's total revenues:
2010 2010
unaudited unaudited 2009 2009
GBP'000 % of revenue GBP'000 % of revenue
Customer A 5,101 77% 5,121 81%
Customer B 699 11% 702 11%
5. TAXATION
There is no tax charge in 2010. The tax charge of GBP1,000 for
the year ended 31 December 2009 relates to our former site in
Germany and comprises advance payments to the German tax
authorities net of a refund received that relates to prior
years.
A deferred tax asset of GBP500,000 (2009: nil) has been
recognised in accordance with a prudent estimate of the extent to
which future taxable profits will be available to be utilised
against unused tax losses and other temporary differences. This
amount has been credited to the Consolidated Statement of
Comprehensive Income. The balance of GBP3,628,000 of the deferred
tax asset (2009: GBP4,403,000) has not been recognised due to
uncertainty over the availability of future taxable income against
which these can be utilised.
6. SALE OF ASSOCIATE
On 2 March 2009 the Group completed the sale of its 38% equity
interest in Pro2 Anlagentechnik GmbH for a consideration of
EUR3,600,000. The net profit on disposal was GBP767,000.
The economic effective date for the sale is 1 January 2009.
Calculation of the net profit on disposal is therefore based on the
net assets of Pro2 Anlagentechnik GmbH at 31 December 2008.
Equity Loans Total
GBP'000 GBP'000 GBP'000
Book value of net assets at
31 December 2008 2,617 - 2,617
Goodwill 705 - 705
-------- -------- --------
Assets held for sale at 31 December
2008 3,322 - 3,322
Shareholder loans - 1,873 1,873
-------- -------- --------
3,322 1,873 5,195
Sale proceeds received 2,570 956 3,526
Exchange rate movement 2 64 66
Deferred amounts 640 853 1,493
-------- -------- --------
Loss on disposal before costs (110) - (110)
Cost of disposal (50) - (50)
-------- -------- --------
(160) - (160)
Release of translation reserves
from equity 927 - 927
-------- -------- --------
Net profit on disposal 767 - 767
-------- -------- --------
Alkane placed EUR720,000 (GBP640,000) from the consideration
into an escrow account to act as collateral against any warranties
or other claims. Of the shareholder loan of EUR1,960,000
(GBP1,873,000) made to Pro2 Anlagentechnik GmbH, EUR1,000,000
(GBP956,000) was sold at face value on 2 March 2009. The balance
was due to be repaid in instalments.
The EUR2,000,000 outstanding balance of the EUR3,000,000 working
capital loan made to Pro2 in 2005 was repaid in full on 10 February
2009.
Events since 31 December 2009
-- In January 2010 the Company received EUR50,000 (GBP45,000) in
respect of the outstanding loan.
-- In April 2010 a commercial agreement was reached with
Deutsche KWK GmbH, the parent company of Pro2, under which
EUR388,000 (GBP346,000) of the funds held in escrow were returned
to them as a reduction in the selling price of the equity,
EUR145,000 (GBP125,000) was converted to a loan to Deutsche KWK
GmbH, and EUR187,000 (GBP161,000) was repaid to the Company. After
legal and other directly related costs of EUR37,000 (GBP31,000) the
net amount received and credited to the Statement of Comprehensive
Income is EUR150,000 (GBP130,000).
-- A payment of EUR25,000 (GBP21,000) was received in December
2010 and credited to the Statement of Comprehensive Income.
After exchange rate differences of GBP33,000, the balance
outstanding at 31 December 2010 is EUR1,030,000 (GBP883,000) with
an agreed repayment schedule running to 2013. This balance
represents loans made to Deutsche KWK GmbH which are fully
impaired.
Impairment Charge
Pro2's trading has been impacted by the economic recession as a
result of which there was a fundamental uncertainty at 31 December
2009 as to the recovery of the balance of the deferred amounts of
GBP1,493,000 shown in the table above. An impairment charge was
therefore taken in the year ended 31 December 2009 against that
amount, less GBP45,000 that had been received on 5 January 2010.
Having reviewed the position at 31 December 2010, there remains a
fundamental uncertainty in respect of the recovery of the
outstanding balance in respect of the transaction and consequently
there has been no reversal of the balance of the impairment
charge.
7. EARNINGS PER ORDINARY SHARE
Basic earnings per share amounts are calculated by dividing net
profit for the period attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares
outstanding during the year.
Diluted earnings per share amounts are calculated by dividing
net profit for the period attributable to ordinary equity holders
of the parent by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of
ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
2010 2009
unaudited
GBP'000 GBP'000
Profit for the year from continuing operations 1,801 2,083
Profit/(loss) for the year from discontinued
operations 151 (681)
----------- -----------
Profit attributable to equity holders of
the parent 1,952 1,402
----------- -----------
No. No.
Basic weighted average number of ordinary
shares 93,267,179 92,883,878
Dilutive effect of share options 752,526 1,134,040
----------- -----------
Diluted weighted average number of ordinary
shares 94,019,705 94,017,918
----------- -----------
Earnings per share from discontinued operations for the year
ended 31 December 2010 is 0.16p (2009: loss per share of
0.73p).
There have been no other transactions involving ordinary shares
or potential ordinary shares between the reporting date and the
date of completion of these financial statements that would have
changed significantly the number of ordinary shares or potential
ordinary shares outstanding at the end of the year if those
transactions had occurred before the end of the year (2009:
nil).
8. PROPERTY, PLANT AND EQUIPMENT
Acquisitions and disposals
During the year ended 31 December 2010, the Group acquired
assets with a cost of GBP2,524,000 (2009: GBP4,386,000). There were
no disposals during the period (2009: nil).
Sale and finance leaseback
During the year 31 December 2010, the Group entered into two new
lease agreements for two items of plant with a total cost of
GBP932,000 (2009: two agreements for two items of plant with a
total cost of GBP1,310,000).
9. GAS ASSETS
Acquisitions and disposals
During the year ended 31 December 2010, the Group acquired
assets with a cost of GBP3,245,000 (2009: GBP4,722,000). There were
no disposals during the year (2009: nil).
10. CAPITAL COMMITMENTS
At 31 December 2010, the Group had capital commitments
contracted for but not provided in the financial statements of
GBP657,000 for the acquisition of property, plant and equipment
(2009 GBP71,000) and of GBP51,000 for the acquisition of gas assets
(2009: GBP443,000).
11. ADDITIONAL CASH FLOW INFORMATION
Analysis of net debt
1 Exchange 31
January Cash rate December
2010 flow differences 2010
unaudited
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and in hand 904 (477) - 427
Sale and finance leaseback (2,710) (159) 12 (2,857)
Long-term loan - (1,751) - (1,751)
Net debt (1,806) (2,387) 12 (4,181)
Securities 188 68 - 256
--------- -------- ------------- ----------
Adjusted net debt* (1,618) (2,319) 12 (3,925)
========= ======== ============= ==========
1 Other Exchange 31
January Cash non-cash rate December
2009 flow movements differences 2009
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and
in hand 1,826 (922) - - 904
Liquid resources 350 (350) - - -
--------- -------- ----------- ------------- ----------
Cash and cash
equivalents 2,176 (1,272) - - 904
Sale and finance
leaseback (1,909) (831) - 30 (2,710)
Net funds/(debt) 267 (2,103) - 30 (1,806)
Securities 305 503 (620) - 188
--------- -------- ----------- ------------- ----------
Adjusted net
funds/(debt)* 572 (1,600) (620) 30 (1,618)
========= ======== =========== ============= ==========
*This includes the effect of securities paid on finance lease
transactions that are closely related to those items.
12. RELATED PARTY TRANSACTIONS
Transactions entered into and trading balances outstanding at 31
December with related parties are as follows:
2010 2009
unaudited
GBP'000 GBP'000
(a) Key management compensation
Salaries and other short term employee benefits 542 695
Long term benefits 37 55
Share-based payments 27 26
---------- --------
606 776
---------- --------
(b) Loans to related parties
Loans to associate(1) :
- beginning of year - 3,847
- opening adjustment - equity interest in
associate sold - (3,847)
- end of year - -
---------- --------
The loans to associate relate to former associate company Pro2
Anlagentechnik GmbH.
13. GENERAL NOTE
a. The preliminary unaudited financial information set out above
does not constitute full accounts within the meaning of Section 435
of the Companies Act 2006.
b. Audited statutory accounts in respect of the year ended 31
December 2009 have been delivered to the Registrar of Companies and
those accounts were subject to an unqualified report by the
auditors.
c. Copies of the audited annual report and accounts for the year
ended 31 December 2010 will be sent to shareholders during April
2011 and will be available 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 Exchange
END
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