TIDMALK
RNS Number : 0443M
Alkane Energy PLC
12 September 2012
12 September 2012
Alkane Energy plc
Unaudited interim results for the half year to 30 June 2012
Alkane Energy plc ("Alkane" "the Group" or "the Company") (AIM:
ALK) the independent gas to power producer, today announces its
unaudited interim results for the six months ended 30 June
2012.
Operational Highlights
-- Transformational Greenpark acquisition completed in the
period, adding six operational sites and several development
opportunities to the Group
-- Enlarged Group now has 70MW of installed power generation
across 19 operating sites with an enlarged development pipeline of
sites and licences
-- Alkane now the largest coal mine methane operator in UK
-- Planned major refurbishment programme nearing completion
-- Newly acquired and developed sites delivering in line with
expectations
-- Commissioning of new site at Gedling adding 3.1MW to
capacity
-- Commenced work on second biogas contract with total biogas
capital contracts signed in excess of GBP4m during 2012
-- Power response capacity increased to 31MW (2011: 8MW)
-- 58% increase in weekly output figure from 2.4GWh prior to
acquisition to 3.8GWh at the start of September
Financial Highlights
-- Revenue increased 6% to GBP5.3m (2011: GBP5.0m)
-- Group profit before tax pre exceptionals increased 7.5% to
GBP0.96m (2011:GBP0.89m)
-- Operating margins pre exceptionals improved to 22.1% (2011:
20.2%)
-- Average power prices of GBP56/MWh (H1 2011: GBP49/MWh)
achieved in the period, benefitting from contracts placed during
2011
Commenting on the interim results, Chief Executive Officer, Neil
O'Brien, said:
"The highlight of the period was the transformational
acquisition of Greenpark which provides us with a significant
increase in operating capacity and in our project pipeline.
We have also made good progress in the existing business with
output now running at record levels and our upgraded sites well
positioned for the start of the peak winter demand period. The full
benefits of the Greenpark acquisition which will be seen in the
second half of this year."
For more information please contact:
Alkane Energy plc
Neil O'Brien, Chief Executive 020 7796 4133 (today), then
Officer 01623 827927
Steve Goalby, Finance Director 020 7796 4133 (today), then
01623 827927
VSA Capital Limited
Andrew Raca 020 3005 5000
Altium Capital Limited
Adrian Reed
Andrew Clarke 0845 505 4343
Hudson Sandler
Nick Lyon 020 7796 4133
Alex Brennan
More information is available on our website
www.alkane.co.uk
Notes to Editors:
Alkane Energy is one of the UK's fastest growing independent
power generators. The Company operates mid-sized "gas to power"
electricity plants providing both predictable and fast response
capacity to the grid. Following the acquisition of Greenpark Energy
Limited ("Greenpark"), Alkane now has a total of 70MW of installed
generating capacity and an electrical grid capacity of 89MW.
Alkane's main operations are based on a portfolio of Coal Mine
Methane ("CMM") sites. Alkane has the UK's leading portfolio of CMM
licences, enabling the Company to extract gas from abandoned coal
mines.
As CMM declines at any one site Alkane retains valuable
generating capacity and a grid connection which we can move to
power response. Power response sites are connected to mains gas and
produce electricity at times of high electrical demand or in order
to balance the electricity grid. Alkane now operates 25MW of power
response on conventional gas post the Greenpark acquisition.
The Group operates from 19 mid-size (up to 10MW) power plants
across the UK, 12 CMM, 4 conventional gas and 3 using both fuel
sources, 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.
The biogas market also provides a potential new business stream
where we are making progress. 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 ("CBM") is a longer term opportunity where
Alkane has 500km(2) under licence and contingent resource estimates
of circa 350 billion cubic feet. In February 2012 the Company
signed a partnership agreement with Aberdeen Drilling Management
Limited who are assessing the exploitation potential of two of our
licences with CBM potential.
Summary
Alkane is pleased to announce its unaudited interim results for
the first half of 2012, which has been a transformational period
for the Group as a result of the acquisition of Greenpark Energy
Limited ("Greenpark"). The integration plan is on track and the
enlarged Group is performing well with the benefits of site
improvements already being demonstrated in the second half.
Following the Greenpark acquisition, Alkane is now the largest
CMM operator in the UK, with installed generation capacity of 70MW
and an electrical grid capacity of 89MW. As a consequence of the
acquisition and site improvements we have seen the weekly output
figure expand from 2.4GWh prior to the acquisition to 3.8GWh in the
first week in September. This represents a 58% increase.
Finance
The half year results include the consolidation of Greenpark
from completion on 26 April 2012. There are a number of exceptional
items relating to the acquisition and also to an impairment of
biogas costs identified in the published figures but which have
been excluded from the adjusted figures below to provide a clearer
comparison.
Revenue is GBP5.3m (2011: GBP5.0m) representing a 6% increase
predominantly due to the higher selling prices achieved for the
period. Operating profit pre exceptionals has grown to GBP1.2m
(2011: GBP1.0m) resulting in an improved operating margin of 22%,
up from 20% in the first half of 2011. This improved margin is due
to higher average selling prices. EBITDA was GBP2.1m (2011:
GBP1.9m) representing a 40% margin (2011: 39%). Profit before tax
pre exceptionals has risen 7.5% to GBP958k (2011: GBP891k) after
allowing for higher interest costs following the financing of the
acquisition. Earnings per share pre exceptionals is 1.06pps (2011:
1.15pps) after a reduction in the amount of the deferred tax asset
recognised, from GBP200k in the first half of 2011 to GBP100k in
the first half of 2012.
Average power prices achieved in the period were GBP56/MWh
(2012: GBP49/MWh) as we benefitted from contracts placed during
2011. We expect to see a full year average price for 2012 of
approximately GBP52/MWh with 90% of our expected 2012 output
already contracted. The ongoing economic conditions have depressed
pricing in the energy market and we have as at the time of this
statement contracted 33% of expected 2013 output at an average
price of GBP51/MWh.
The exceptional items in the published figures are the expenses
relating to the acquisition of Greenpark (GBP500k), and the credit
of negative goodwill on the acquisition (GBP539k); and an
impairment of GBP313k in respect of capitalised development costs
relating to the biogas business, principally for the unsuccessful
joint tender bid for the NE Wales Council Anaerobic Digestion
contract. Finally there have been cash receipts totalling GBP328k
in respect of deferred loans from the 2009 disposal of Pro2, which
are shown as a reversal of impairment within discontinued
operations.
The published figures with all of these one off items included
show profit before tax from continuing and discontinued operations
of GBP1,012k (2011: GBP739k) and earnings per share of 1.11pps
(2011: 0.99pps).
The Greenpark acquisition was completed with the maximum
consideration of GBP5.7m funded by a GBP3m additional bank facility
with Lloyds TSB Bank and a GBP2m Shareholder Convertible Loan
Note.
Group cashflow generated an operating inflow of GBP1.8m (2011:
GBP2.1m) with capital expenditure increasing to GBP3.5m (2011:
GBP1.9m) to build the new facilities at Gedling and Pontycymmer and
to complete the site improvements at Calverton and Bilsthorpe. In
addition the cash outflow in acquiring Greenpark and the associated
costs was GBP4.8m.
Net assets are GBP22.5m (2011: GBP19.9m) with a strong asset
base in engine capacity, site infrastructure, 89MW of grid capacity
and capitalised gas extraction costs (planning and drilling costs).
Overall the Group net debt at 30 June 2012 was GBP10.3m (2011:
GBP3.4m) with gearing being 46% (2011: 17%). We have met all the
bank covenant tests and since the period end we have commenced the
scheduled repayment of the acquisition facility.
Operations
Existing CMM Assets
Alkane has the UK's leading portfolio of CMM licences, enabling
the Company to extract gas from abandoned coal mines.
Number of operational 2007 2008 2009 2010 2011 H1 2012
sites
--------------------------------- --------- --------- --------- --------- --------- ------------
CMM 7 7 8 10 11 15
Power response - - 1 2 2 7
Gas supply (equivalent
MW) 2 2 2 2 2 1
--------------------------------- --------- --------- --------- --------- --------- ------------
Total 8 8 9 12 13 19
--------------------------------- --------- --------- --------- --------- --------- ------------
(note - total does not
sum as some sites operate
in more than one category)
Installed capacity 2007 2008 2009 2010 2011 H1 2012
--------------------------------- --------- --------- --------- --------- --------- ------------
MW MW MW MW MW MW
CMM 12.5 14.0 17.0 23.5 27.0 37.0
Power response - - 7.0 8.0 8.0 31.0
Gas supply (equivalent
MW) 6.0 6.0 6.0 6.0 6.0 2.0
--------------------------------- --------- --------- --------- --------- --------- ------------
Total 18.5 20.0 30.0 37.5 41.0 70.0
--------------------------------- --------- --------- --------- --------- --------- ------------
Output was 65GWh in the first half (H1 2011: 70GWh) with the
Greenpark acquisition having added 6GWh to output in the nine weeks
from completion to the period end. The decline in output from
existing Alkane sites reflects the previously reported accelerated
maintenance work that was carried out during the period at all but
two of the Group's existing assets in order to lay the foundations
for the successful integration of Greenpark. The value of this work
can already be seen at Bilsthorpe and Calverton where both sites
have been brought back on stream with improved gas flows.
New Sites
We have carried out a review of the entire operations and the
development pipeline of the Group in order to prioritise the
allocation of funds so as to optimise returns. The enlarged Group
has a greater number of potential development sites and additional
exploration licences which will extend the development pipeline
irrespective of the scale and timing of the next licensing
round.
Alkane has commenced operations at a 3.1MW two engine site at
Gedling, Nottinghamshire, which was fully commissioned in June
2012, and a further 0.7MW site at Pontycymmer, South Wales, is
expected to open in the second half of the year.
Greenpark Acquisition
The Greenpark acquisition has added nine sites of which one is a
CMM site, three are power response, two are combined CMM and power
response, and the remaining three sites were non-operational at the
time of the acquisition. The total installed engine capacity of
Greenpark was 29MW and these sites have been delivering in line
with expectations.
The integration of Greenpark is proceeding to plan. Work
continues integrating these sites and we are pleased with progress
to date. We are installing new pump capacity at Cadeby which is
increasing engine utilisation. We are progressing well with plans
to complete similar upgrades at Houghton Main and potentially
Askern.
We are now seeing the benefit across the enlarged Group with
record production months and this will be reflected in the full
year results.
Seven Star
We have also started the preparation to drill at Nooks Farm,
Staffordshire, on a conventional gas reserve acquired within Seven
Star Natural Gas in 2011. The estimated contingent resources at
this site were 1.5bcf which we are targeting for the development of
a 2MW facility.
Following a site survey, an agreement has been reached with
Shell UK Limited, a previous licence holder, under which we will
carry out restoration work on two previously abandoned wells,
including re-drilling and plugging. The value of the work to be
carried out has been agreed with Shell at up to GBP5.8m. Work is
underway and is expected to continue into 2013.
Power Response
Power response is the provision of standby capacity for the
national grid short term operating reserve ("STOR") and peak load
generation. As CMM declines at any one site Alkane retains valuable
generating capacity and a grid connection which we move to power
response when appropriate. Power response sites are connected to
mains gas and produce electricity at times of high electrical
demand or in order to balance the electricity grid. Alkane now
allocates 31MW of generating capacity to power response post the
Greenpark acquisition. Revenue from power response was GBP592k in
the period (2011: GBP211k), an increase of 181%.
Biogas
The biogas market also provides a potential new business stream.
Running on gas generated from the processing of organic waste
requires exactly the same power assets and core gas and electricity
skills as CMM.
During the period we commenced work on our second design, build,
operate ("DBO") contract to supply power plant to an anaerobic
digestion biogas site.
We continue to bid for biogas DBO contracts which provide us
with profitable supply margins. Together with a joint venture
partner we had been appointed preferred bidder for a council based
contract in North East Wales but, as previously reported, it was
not possible to agree contractual terms with the funder that were
satisfactory to the joint venture and we therefore withdrew from
the project.
Alkane has signed biogas contracts to the value of GBP4.0
million so far this year, covering a range of projects in the food
processing, agricultural and council waste. This builds on the
successful commissioning of our first biogas site at Glenfarg in
Scotland.
Coal Bed Methane
CBM is a longer term opportunity where Alkane has 605km(2) under
licence and contingent resource estimates of circa 385 billion
cubic feet. In February 2012 the Company signed a partnership
agreement with Aberdeen Drilling Management Limited under which
they are exploring two of our licences with CBM potential.
Outlook
The first half performance reflects our continuing focus on
improving operational efficiency. The acquisition of Greenpark
extends our development pipeline of new operations over the short
to medium term and now with 15 operating CMM sites we are by far
the largest CMM operator in the UK.
Our strategy remains to develop the business both within the CMM
sector and related areas of power response, biogas and onshore gas
markets.
With the UK power market expecting 25% of industry capacity to
be retired in the next decade, Alkane is strongly placed to take
advantage of this trend with its increasing capacity to produce
reliable energy for the national grid.
We look forward to reporting a further six months of progress at
our preliminary results for the year ending 31 December 2012.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the 6 months ended 30 June 2012
For the For the For the
six six year
months ended months ended
ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
Revenue 5,287 4,995 9,501
Cost of sales (2,862) (2,781) (5,278)
----------------- -------------- ----------------
Gross profit 2,425 2,214 4,223
Administrative expenses (1,255) (1,205) (2,010)
Exceptional administrative expenses 12 (274) (173) (334)
----------------- -------------- ----------------
Total administrative expenses (1,529) (1,378) (2,344)
Return on Group operations 896 836 1,879
Other operating income 15 3 31
Profit on activities before finance
costs 911 839 1,910
Finance income 27 36 71
Exchange loss arising from financing (3) (11) (1)
Finance costs (251) (146) (314)
----------------- -------------- ----------------
Net finance costs (227) (121) (244)
Profit before tax 684 718 1,666
Taxation 4 100 200 200
Profit for the period from continuing
operations 784 918 1,866
----------------- -------------- ----------------
Discontinued operations:
Impairment reversal 5 328 21 64
Profit for the period attributable
to equity holders of the parent 1,112 939 1,930
Other comprehensive income - - -
----------------- -------------- ----------------
Total comprehensive income for the
period attributable to equity holders
of the parent 1,112 939 1,930
----------------- -------------- ----------------
Earnings per share
From continuing operations:
Basic, for profit for the period attributable
to equity holders of the parent 6 0.78p 0.97p 1.92p
Diluted, for profit for the period
attributable to equity holders of the
parent 6 0.76p 0.95p 1.89p
From continuing and discontinued operations:
Basic, for profit for the period attributable
to equity holders of the parent 6 1.11p 0.99p 1.98p
Diluted, for profit for the period
attributable to equity holders of the
parent 6 1.08p 0.98p 1.96p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 June 2012
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
NON-CURRENT ASSETS
Property, plant and equipment 7 19,415 11,594 12,488
Gas assets 8 17,178 13,260 14,909
Intangible assets 11 1,209 1,207 1,209
Deferred tax asset 800 700 700
-------------- -------------- ----------------
38,602 26,761 29,306
CURRENT ASSETS
Inventories 543 285 505
Trade and other receivables 2,788 1,741 1,685
Cash and cash equivalents 560 1,471 745
-------------- -------------- ----------------
3,891 3,497 2,935
TOTAL ASSETS 42,493 30,258 32,241
-------------- -------------- ----------------
CURRENT LIABILITIES
Trade and other payables (2,918) (2,920) (1,989)
Finance lease obligations (787) (904) (838)
Long-term borrowings (1,500) - -
Provisions (21) (20) (15)
-------------- -------------- ----------------
(5,226) (3,844) (2,842)
NON-CURRENT LIABILITIES
Finance lease obligations (736) (1,526) (1,123)
Long-term borrowings (7,864) (2,460) (4,852)
7.5% Convertible loan stock 13 (1,853) - -
Deferred payments (1,125) (900) (900)
Provisions (3,140) (1,647) (1,612)
-------------- -------------- ----------------
(14,718) (6,533) (8,487)
-------------- -------------- ----------------
TOTAL LIABILITIES (19,944) (10,377) (11,329)
-------------- -------------- ----------------
NET ASSETS 22,549 19,881 20,912
-------------- -------------- ----------------
EQUITY ATTRIBUTABLE TO OWNERS
OF THE PARENT
Share capital 14 504 498 499
Share premium/merger relief
reserve 1,461 1,203 1,216
Other reserves 8,904 8,603 8,629
Retained earnings 11,680 9,577 10,568
TOTAL EQUITY 22,549 19,881 20,912
-------------- -------------- ----------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2012
Attributable to equity holders of
the parent
-----------------------------------------------------------------------------------
Issued Share premium/ Other Retained Total
capital merger reserves(2) earnings equity
relief
reserve(1)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2012 499 1,216 8,629 10,568 20,912
Profit and total
comprehensive
income for the period - - - 1,112 1,112
Equity component of
convertible
loan notes - - 232 - 232
Share-based payment - - 43 - 43
Issue of share capital 5 245 - - 250
At 30 June 2012 (Unaudited) 504 1,461 8,904 11,680 22,549
------------- ------------------- ----------------- -------------- ------------
At 1 January 2011 470 208 8,587 8,638 17,903
Profit and total
comprehensive
income for the period - - - 939 939
Share-based payment - - 16 - 16
Issue of share capital 28 995 - - 1,023
At 30 June 2011 (Unaudited) 498 1,203 8,603 9,577 19,881
------------- ------------------- ----------------- -------------- ------------
At 1 January 2011 470 208 8,587 8,638 17,903
Profit and total
comprehensive
income for the year - - - 1,930 1,930
Share-based payment - - 42 - 42
Issue of share capital 29 1,008 - - 1,037
At 31 December 2011
(Audited) 499 1,216 8,629 10,568 20,912
------------- ------------------- ----------------- -------------- ------------
(1) During the six months ended 30 June 2012 GBP245,000, being
the premium on issue of shares as consideration for the acquisition
of
Greenpark Energy Limited (see note 10), has been credited
against merger relief reserve. During the six months ended 30 June
2011, GBP98,000 was written off against the share premium account
in respect of costs relating to the issue of shares.
(2) Other reserves comprise the equity component of convertible
loan notes of GBP232,000 (30 June 2011: nil, 31 December 2011:
nil), share-
based payments of GBP253,000 (30 June 2011: GBP184,000; 31
December 2011: GBP210,000) and a distributable reserve of
GBP8,419,000 (30 June and 31 December 2011: GBP8,419,000) created
following cancellation of the share premium account.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2012
For the For the For the
six six year
months ended months ended ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
Operating activities
Profit before tax from continuing
operations 684 718 1,666
Adjustments to reconcile operating
profit to net cash flows:
Depreciation and impairment of
property, plant and equipment
and gas assets 812 1,107 2,312
Share-based payments expense 43 16 42
Finance income (27) (36) (71)
Finance expense 251 146 314
Movements in provisions 123 (1) (41)
Increase in trade and other receivables (490) (49) (9)
(Increase)/decrease in inventories (38) 139 (81)
Increase in trade and other payables 456 22 242
Net cash flows from operating
activities 1,814 2,062 4,374
Cash flows from investing activities
Payments received 328 21 64
Interest received 16 37 89
Purchase of property, plant and
equipment (2,019) (838) (3,308)
Purchase of gas assets (1,503) (1,086) (3,541)
Purchase of subsidiaries 10/11 (4,761) (309) (311)
Net cash flows used in investing
activities (7,939) (2,175) (7,007)
Cash flows from financing activities
Issue of share capital - 1,023 1,037
Issue of 7.5% convertible loan 2,060 - -
notes
Sale and finance leaseback rentals (435) (427) (895)
Proceeds from long-term borrowing 4,512 709 3,101
Interest paid (197) (148) (292)
----------------- ----------------- ----------------
Net cash flows from financing
activities 5,940 1,157 2,951
Net (decrease)/increase in cash
and cash equivalents (185) 1,044 318
Cash and cash equivalents at beginning
of period 745 427 427
----------------- ----------------- ----------------
Cash and cash equivalents at close
of period 15 560 1,471 745
----------------- ----------------- ----------------
NOTES TO THE ACCOUNTS
1. CORPORATE INFORMATION
The interim condensed consolidated financial statements of the
Group for the six months ended 30 June 2012 were authorised for
issue in accordance with a resolution of the directors on 11
September 2012.
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 activities of the Group are described in Note
3.
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
Basis of preparation
The interim condensed financial statements are unaudited and do
not constitute statutory financial statements within the meaning of
section 435 of the Companies Act 2006.
The comparative figures for the year ended 31 December 2011 were
derived from the statutory accounts for that year which have been
delivered to the Registrar of Companies. Those accounts received an
unqualified audit report which did not contain statements under
section 498(2) or (3) (accounting records or returns inadequate,
accounts not agreeing with records and returns or failure to obtain
necessary information and explanations) of the Companies Act
2006.
The interim condensed financial statements have been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted by
the European Union and the AIM rules of the London Stock Exchange.
This report should be read in conjunction with the Group's Annual
Report and Accounts 2011, which have been prepared in accordance
with IFRSs as adopted by the European Union.
Accounting policies
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those presented in the Group's Annual Report and Accounts for
the year ended 31 December 2011, with the addition of one new
policy as follows:
Compound Financial Instruments
Compound financial instruments issued by the Group comprise
convertible loan notes that can be converted to share capital at
the option of the holder, and the number of shares to be issued
does not vary with changes in their fair value.
The liability component of a compound financial instrument is
recognised initially at the fair value of a similar liability that
does not have an equity conversion option. The equity component is
recognised initially at the difference between the fair value of
the compound financial instrument as a whole and the fair value of
the liability component. Any directly attributable transaction
costs are allocated to the liability and equity components in
proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a
compound financial instrument is measured at amortised cost using
the effective interest method. The equity component of a compound
financial instrument is not re-measured subsequent to initial
recognition except on conversion or expiry.
Borrowings are classified as current liabilities unless the
Group has unconditional right to defer settlement of the liability
for at least 12 months after the end of the reporting period.
The preparation of interim financial statements requires
management to make judgments, estimates and assumptions that affect
the application of policies and reported amounts of assets and
liabilities, income and expenses. During the period the Group
completed the acquisition of Greenpark Energy Limited and
management carried out a fair value assessment and a calculation of
the liability component of convertible loan notes which were issued
to partly fund the acquisition. These assessments and calculations
are based on estimates and judgments of:
-- the present value of future revenue in respect of non-current assets;
-- the expected costs and the present value of such costs in respect of site restoration; and
-- the present value of the total sum payable over the full term
of the convertible loan notes.
There have been no other significant changes in the bases upon
which estimates have been determined compared to those applied at
31 December 2011, and no other change in estimate has had a
material effect on the current period. All other significant
estimates and judgments have been disclosed in the Group's Annual
Report and Accounts for the year ended 31 December 2011. Actual
results may differ from these estimates.
These condensed consolidated interim financial statements have
been prepared on the basis of IFRSs in issue that are effective at
the Group's annual reporting date as at 31 December 2012.
3. SEGMENT INFORMATION
Operating segments
The directors consider that there are two operating
segments:
-- The extraction of gas for power generation and for direct sale;
-- The development and operation of biogas projects.
Seasonality of operations
There is no significant seasonal nature to the Group's business
segments.
Six months Six months Year ended
ended ended 31 December
30 June
30 June 2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Extraction of gas
Total segment revenue 4,486 4,297 8,417
----------------- --------------- ----------------
Depreciation (1,220) (1,117) (2,333)
----------------- --------------- ----------------
Segment profit before tax 1,171 1,168 2,288
----------------- --------------- ----------------
Development and operation of
biogas projects
Total segment revenue 801 698 1,084
----------------- --------------- ----------------
Impairment (312) - -
----------------- --------------- ----------------
Segment loss before tax (287) (97) (99)
----------------- --------------- ----------------
Total
Total revenue 5,287 4,995 9,501
----------------- --------------- ----------------
Total depreciation/impairment (1,532) (1,117) (2,333)
----------------- --------------- ----------------
Profit before tax from operating
segments 884 1,071 2,189
----------------- --------------- ----------------
Corporate centre (748) (363) (544)
Consolidation adjustment 548 10 21
----------------- --------------- ----------------
Profit before tax from continuing
operations 684 718 1,666
Discontinued operations 328 21 64
----------------- --------------- ----------------
Profit before tax 1,012 739 1,730
----------------- --------------- ----------------
The following table reconciles total segment assets, total
segment liabilities and segment additions to non-current
assets.
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Extraction of gas 40,940 28,082 30,413
Development and operation of
Biogas projects 435 447 780
-------------- -------------- ----------------
Total segment assets 41,375 28,529 31,193
Corporate centre 359 954 243
Intangible assets 1,209 1,207 1,209
Consolidation adjustments (450) (432) (404)
-------------- -------------- ----------------
Total consolidated assets 42,493 30,258 32,241
-------------- -------------- ----------------
Extraction of gas (22,032) (17,340) (18,550)
Development and operation of
biogas projects (993) (716) (1,051)
-------------- -------------- ----------------
Total segment liabilities (23,025) (18,056) (19,601)
Corporate centre (6,152) (1,288) (1,202)
Consolidation adjustments 9,233 8,967 9,474
-------------- -------------- ----------------
Total consolidated liabilities (19,944) (10,377) (11,329)
-------------- -------------- ----------------
Extraction of gas 10,642 3,654 7,135
Development and operation of
biogas projects 111 36 168
-------------- -------------- ----------------
Total segment additions to
non-current assets 10,753 3,690 7,303
Deferred tax asset 100 200 200
Corporate centre 3 8 143
Consolidation adjustment: Intangible
assets - 1,207 1,209
-------------- -------------- ----------------
Total consolidated additions
to non-current assets 10,856 5,105 8,855
-------------- -------------- ----------------
4. TAXATION
There is no tax charge for the current period (six months ended
30 June 2011: nil, year ended 31 December 2011: nil). A deferred
tax asset of GBP100,000 has been recognised in the period 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 (six months ended 30 June
2011: GBP200,000, year ended 31 December 2011: GBP200,000).
5. DISCONTINUED OPERATIONS
On 2 March 2009 the Group sold its 38 per cent equity interest
in Pro2 Anlagentechnik GmbH. An impairment charge was made in
respect of deferred payments due to the Company, of which
EUR1,055,000 (GBP854,000) was in respect of shareholder loans made
to Deutsche KWK GmbH, the holding company of Pro2 Anlagentechnik
GmbH. Repayments of EUR100,000 (GBP81,000) have subsequently been
received and credited to the Statement of Comprehensive Income as
impairment reversals, leaving an outstanding balance of EUR955,000
(GBP773,000) at 31 December 2011.
During the period the Company agreed a revised repayment
schedule of the outstanding loans. A revised principal amount of
EUR755,000 (GBP611,000) was agreed in return for repayment of
EUR610,000 (GBP494,000) during 2012. The remaining EUR145,000
(GBP117,000) will remain on the original repayment schedule and is
due to be repaid on 31 December 2013. Repayments of EUR300,000
(GBP247,000) were received in the six months to 30 June 2012 (six
months to June 2011: EUR25,000 (GBP21,000), year to 31 December
2011: EUR75,000 (GBP64,000)). In the period from 30 June 2012 up to
the completion of these interim statements a further EUR100,000
(GBP81,000) has been received. An impairment reversal of EUR400,000
(GBP328,000) has therefore been made in the period. There remains a
fundamental uncertainty in respect of the recovery of the
outstanding balance of EUR355,000 (GBP287,000) and consequently
there has been no further reversal of the impairment charge.
6. EARNINGS PER 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 period.
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 period 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:
Six months Six months Year ended
ended 30 ended 30 31 December
June June
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Profit for the period from continuing
operations 784 918 1,866
Profit for the period from discontinued
operations 328 21 64
---------------- --------------- ----------------
Profit attributable to equity
holders of the parent 1,112 939 1,930
---------------- --------------- ----------------
No. No. No.
Basic weighted average number
of ordinary shares 100,115,933 95,079,389 97,405,275
Dilutive effect of share options 2,380,782 1,119,371 1,252,221
---------------- --------------- ----------------
Diluted weighted average number
of ordinary shares 102,496,715 96,198,760 98,657,496
---------------- --------------- ----------------
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 period if those
transactions had occurred before the end of the period.
7. PROPERTY, PLANT AND EQUIPMENT
Acquisitions and disposals
During the six months ended 30 June 2012, the Group acquired
assets with a cost of GBP7,800,000 (six months ended 30 June 2011:
GBP1,781,000; year ended 31 December 2011 GBP3,543,000). This
includes GBP5,600,000 (after fair value adjustments) acquired as
part of the acquisition of Greenpark Energy Limited. There were no
disposals during the period (30 June and 31 December 2011:
nil).
8. GAS ASSETS
Acquisitions and disposals
During the six months ended 30 June 2012, the Group acquired
assets with a cost of GBP3,000,000 (six months ended 30 June 2011:
GBP1,916,000; year ended 31 December 2011: GBP3,903,000). This
includes GBP1,500,000 (after fair value adjustments) acquired as
part of the acquisition of Greenpark Energy Limited. There were no
disposals during the period (30 June and 31 December 2011:
nil).
9. CAPITAL COMMITMENTS
At 30 June 2012, the Group had the following capital commitments
contracted for but not provided in the financial statements:
Acquisition of property, plant and equipment GBP319,000 (30 June
2011: GBP277,000; 31 December 2011 GBP325,000);
Acquisition of gas assets GBP104,000 (30 June 2011: GBP564,000;
31 December 2011: GBP378,000).
10. Acquisition of Greenpark Energy Limited
On 26 April 2012 the Group completed the purchase of the entire
issued share capital of Greenpark Energy Limited, a company with
seven coal mine methane (CMM) extraction licences and six
operational sites generating from both CMM and natural gas.
The total consideration for the shares is as follows:
GBP'000
Cash(1)(2) 4,761
Deferred consideration(3) 225
Issue of shares(4) 250
Total consideration 5,236
------------
(1) Financed by way of the issue of GBP2,000,000 convertible
loan notes (see note 12) and an increase in borrowing facilities.
The Group has extended its borrowing facilities with Lloyds TSB
Bank. A term loan of GBP3,000,000, secured by way of legal charges
over the Group's assets, has been provided to finance the
acquisition, to be repaid in quarterly payments over two years. At
the same time the existing revolving credit facility was reduced
from GBP7,500,000 to GBP6,500,000.
(2) The cash consideration includes GBP500,000 paid into escrow.
GBP250,000 will be released to the seller on 30 September 2012
provided that certain property issues are satisfied by that date.
GBP250,000 is held in escrow in order to allow for any claims under
the warranties included in the Share Purchase Agreement; the
warranty period runs until 30 September 2012. The effect of
discounting the deferred consideration has not been reflected
within the cost of the investment as the Directors do not consider
it to be material given the payment date.
(3) The deferred amount of GBP225,000 is due to be paid on 30
September 2013. The effect of discounting the deferred
consideration has not been reflected within the cost of the
investment as the Directors do not consider it to be material given
the payment date.
(4) Part of the consideration was the issue of 1,162,237 new
Ordinary Shares at a price of 21.51 pence per share.
Net assets with a book value of GBP11,911,000 were acquired at
the date of acquisition. The Directors have carried out a fair
value assessment of the identifiable assets, liabilities and
contingent liabilities of Greenpark Energy Limited and concluded
that the net fair value at the date of acquisition is GBP5,775,000.
The following table shows the identifiable material assets and
liabilities acquired, the fair value adjustments, the fair value
and the resulting negative goodwill.
Acquired Fair value Fair Value
on 26 April adjustments
2012
GBP'000 GBP'000 GBP'000
Buildings 1,166 (391) 775
Plant 8,061 (3,162) 4,899
Gas assets 3,135 (1,596) 1,539
Receivables 602 - 602
Payables (444) (185) (629)
Site restoration provision(1) (609) (802) (1,411)
----------------- ----------------- ---------------
11,911 (6,136) 5,775
----------------- ----------------- ---------------
GBP'000
Fair value as above 5,775
less Consideration 5,236
---------------
Negative goodwill 539
---------------
(1) The site restoration provision is recognised for the
expected costs of the restoration of operating sites. The fair
value adjustment represents a reassessment of the amount required
to meet the expected costs. A discount factor is applied to the
expected costs in order to arrive at the present value reflected in
the provision.
As a result of the fair value assessment negative goodwill of
GBP539,000 arises in respect of the transaction. Costs of
GBP500,000 were incurred in advisory, professional and other fees
in order to effect the acquisition, and the net amount of GBP39,000
has been credited to the Statement of Comprehensive Income under
the heading of exceptional administrative expenses.
The revenue of the acquired company during the period from the
date of acquisition to 30 June 2012 was GBP668,000, and the profit
before tax was GBP286,000.
On 10 May 2012 the name of Greenpark Energy Limited was changed
to Regent Park Energy Limited.
11. ACQUISITION OF SEVEN STAR NATURAL GAS LIMITED
On 26 May 2011 the Group completed the purchase of the entire
issued share capital of Seven Star Natural Gas Limited ("Seven
Star"), a company with two petroleum extraction and development
licences covering previously identified onshore gas extraction
prospects.
The total consideration for the shares is as follows:
GBP'000
Cash 309
Contingent consideration - see note (i) 900
------------
Total consideration 1,209
------------
(i) The agreement requires the Group to pay the vendors an
additional amount of GBP900,000 split as follows:-
-- GBP250,000 within 15 business days of the satisfaction of
certain conditions with respect to the site at Calow (PL213);
-- GBP250,000 within 15 business days of the satisfaction of
certain conditions with respect to the site
at Nooks Farm (PEDL141); and
-- GBP400,000 once Seven Star has produced in aggregate 1 bcf of
natural gas from either or both of the Seven Star sites under the
licences.
Net assets with a book value of GBP2,000 were acquired at the
date of acquisition, together with the two licences which were not
recognised in the accounts of Seven Star. The directors have
carried out a fair value assessment of the identifiable assets,
liabilities and contingent liabilities of Seven Star and concluded
that the net fair value is GBP1,207,000, and this amount has been
included in the statement of financial position as an intangible
asset. No goodwill arises on the acquisition.
The acquisition was funded by the proceeds of a share placing.
5,605,370 new ordinary shares were issued at a placing price of 20p
per share, raising GBP1,121,000. Expenses of GBP166,000 were
incurred in respect of the placing. These costs have been written
off against the share premium arising on the issue of the
shares.
Costs of GBP173,000 were incurred in advisory, professional and
other fees in order to effect the acquisition, and these costs have
been expensed in the statement of comprehensive income.
12. Exceptional Administrative Expenses
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Costs related to the acquisition of
Greenpark Energy Limited (see note
10) (500) - (156)
Negative goodwill arising from the 539 - -
acquisition of Greenpark Energy Limited
(see note 10)
Impairment of biogas development costs (313) - -
Acquisition of Seven Star Natural Gas
Limited (see note 11) - (173) (178)
--------------- --------------- -----------------
(274) (173) (334)
--------------- --------------- -----------------
13. CONVERTIBLE LOAN NOTES
On 26 April 2012 the Company issued GBP2,000,000 convertible
loan notes, with the proceeds being utilised to partly fund the
acquisition of Greenpark Energy Limited (see note 10). Interest is
at a fixed rate of 7.5% per annum, which is rolled up quarterly in
arrears and included as principal to be repaid or converted. The
convertible loan is unsecured. The convertible loan notes are
convertible at any time prior to repayment or automatic conversion
at the holder's option, at a conversion price, fixed at 17.5 pence.
If any element of the convertible loan is not converted, it is
otherwise repayable on the date which is 3 years and 1 day after
the issue date.
The liability component of the convertible loan notes is
GBP1,768,000. This has been calculated by discounting the total sum
payable over the full term of the loan notes by an effective
interest rate of 12%. The equity component of GBP232,000 has been
taken to other reserves.
14. AUTHORISED AND ISSUED SHARE CAPITAL
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Authorised
1,000,000,000 ordinary shares of 0.5p
each 5,000 5,000 5,000
Allotted, called up and fully paid thousands GBP'000
Ordinary Shares of 0.5p each
At 1 January 2012 99,701 499
Issued as part of consideration for acquisition 1,162 5
-------------- ------------
At 30 June 2012 (Unaudited) 100,863 504
============== ============
At 1 January 2011 93,995 470
Issued as a result of share placings 5,606 28
At 30 June 2011 (Unaudited) 99,601 498
============== ============
At 1 January 2011 93,995 470
Issued on exercise of share options 100 1
Issued as a result of share placings 5,606 28
-------------- ------------
At 31 December 2011 (Audited) 99,701 499
============== ============
15. ADDITIONAL CASH FLOW INFORMATION
Analysis of net funds
1 January Cash Other Exchange 30 June
2012 flow non-cash rate 2012
movements differences
Audited Unaudited
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and
in hand 745 (185) - - 560
Sale and finance
leaseback (1,961) 435 - 3 (1,523)
Long-term loan (4,852) (4,512) - - (9,364)
Net debt (6,068) (4,262) - 3 (10,327)
Securities 222 12 61 - 295
------------ -------------- --------------- ----------------- --------------
Adjusted net debt* (5,846) (4,250) 61 3 (10,032)
1 January Cash Exchange 30 June
2011 flow rate 2011
differences
Audited Unaudited
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and in hand 427 1,044 - 1,471
Sale and finance leaseback (2,857) 437 (10) (2,430)
Long-term loan (1,751) (709) - (2,460)
-------------- --------------- ----------------- --------------
Net debt (4,181) 772 (10) (3,419)
Securities 256 - - 256
-------------- --------------- ----------------- --------------
Adjusted net debt* (3,925) 772 (10) (3,163)
-------------- --------------- ----------------- --------------
1 January Cash Exchange 31 December
2011 flow rate 2011
differences
Audited Audited
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and in hand 427 318 - 745
Sale and finance leaseback (2,857) 895 1 (1,961)
Long-term loan (1,751) (3,101) - (4,852)
Net debt (4,181) (1,888) 1 (6,068)
Securities 256 (34) - 222
------------ ------------ ----------------- ----------------
Adjusted net debt* (3,925) (1,922) 1 (5,846)
------------ ------------ ----------------- ----------------
*This includes the effect of securities paid on finance lease
transactions that are closely related to those items.
16. GENERAL NOTE
Copies of this interim report will be sent to registered
shareholders and further copies will be available from the
Company's registered office. It will also be available on the
Company's website, www.alkane.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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