TIDMALK
RNS Number : 2485R
Alkane Energy PLC
10 September 2014
10 September 2014
Alkane Energy plc
Unaudited interim results for the half year to 30 June 2014
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
2014.
Operational Highlights
-- Transformational period with installed capacity increased by 69%
-- On track to reach 100MW power response capacity by H1 2015
-- Completion of sealing works at Maltby
-- Successful acquisition of Wheldale STOR facilities and
completion of Egdon shale transaction
-- Acquisition of three power response sites (49MW) from Carron Energy post period end
Financial Highlights
-- Revenue of GBP7.1m and adjusted EBITDA of GBP2.5m, owing to
anticipated reduction in DBO business
-- Group PBT of GBP7.3m (H1 2014: GBP1.0m) owing to exceptional items
-- Adjusted PBT of GBP529k (H1 2013: GBP1,421K) reflecting reduced DBO activity
-- Adjusted EPS of 0.43p per share (H1 2013: 1.43p per share)
-- On track to meet full year expectations
Commenting on the interim results, Chief Executive Officer, Neil
O'Brien, said:
"This has been a transformational period for Alkane. We have
invested for the future and completed important transactions
positioning the business for further long term growth. We have also
enhanced our power response capacity by more than 150%, providing
Alkane with a broader and more balanced generating portfolio and
giving scale to a business with exceptional growth
opportunities.
Our shale business transaction with Egdon Resources means that
we continue to be well positioned to benefit from potential upside
from the development of shale gas in the UK while remaining focused
on our core business.
With the deterioration in UK generating capacity, Alkane has the
expertise and assets in place to capitalise on the opportunities
arising from this situation. We are confident that 2014 will be
another year of progress for the Group."
For more information please contact:
Alkane Energy plc
Neil O'Brien, Chief Executive
Officer
Steve Goalby, Finance Director 01623 827927
Liberum Capital Limited
Clayton Bush
Tim Graham 020 3100 2000
VSA Capital Limited
Andrew Raca 020 3005 5004
Hudson Sandler
Nick Lyon
Alex Brennan 020 7796 4133
Background information
Alkane is one of the UK's fastest growing independent power
generators. The Company operates mid-sized "gas to power"
electricity plants providing both base load and fast response
capacity to the grid. Following the recently announced acquisition
of three power response sites from Carron Energy Limited and Dragon
Generation Limited, Alkane has a total installed generating
capacity of 140MW and an electricity grid capacity of 160MW.
Alkane's base load operations, where power is generated 24/7,
are centred 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 can be redeployed
to power response. Power response sites are connected to mains gas
and produce electricity at times of high electrical demand through
peak running, or in order to balance the electricity grid through
participation in the National Grid's short term operating reserve
programme ("STOR"). Participants in STOR are paid premium rates
when called upon by the Grid to meet temporary supply shortages.
Alkane now operates 93MW of power response, one of the UK's largest
power response businesses, with contracted revenues extending out
to 2025.
The Group operates from 27 mid-size (up to 25MW) power plants
across the UK, 15 CMM only, 8 mains gas only, 3 using both fuel
sources and 1 using kerosene only. Alkane uses standard modular
reciprocating engines to generate the electricity and sells this
power through the electricity network. The engine units and other
plant are designed to be flexible and transportable allowing
additional capacity to be brought onto growing sites and
underutilised plant to be moved to new sites to maximise
efficiency.
Alkane transferred in June 2014 its shale gas interests to Egdon
Resources plc. Alkane received 40m Egdon shares making us the
largest shareholder in Egdon, a significant player within the UK
shale industry.
Alkane has a range of core skills encompassing the entire
project development cycle including planning and permitting,
sourcing plant and managing the build and commissioning stage. This
has enabled Alkane to establish a design, build and operate ("DBO")
business for third party clients in the biogas and oil & gas
industries.
The Group has circa 800km(2) of acreage under various onshore
Petroleum Exploration and Development Licences ("PEDLs").
More information is available on our website
www.alkane.co.uk
Summary
The Board of Alkane Energy announces its interim results for the
six months ended 30 June 2014. It has been a transformational
period for the Group with three significant corporate transactions
completed this year together with on-going work on our organic
project pipeline and running the existing fleet of engines.
The transfer of our shale gas interests to Egdon Resources plc
("Egdon") completed in June was an important strategic agreement
for Alkane. It will enable us to benefit from the potential upside
not only from the development of shale gas in the UK but also from
Egdon's conventional oil and gas exploration and production whilst
we remain firmly focused on growing our core gas to power
business.
Power response, which we only started in 2009, is growing
strongly to form a substantial and complementary business alongside
base load coal mine methane ("CMM"). With the acquisition of
Wheldale from SSE plc in February and the three newest sites
acquired in July from Carron Energy Limited and Dragon Generation
Limited ("Carron Energy") we have reached 93MW of power response
capacity, close to our stated objective of having 100MW in place by
spring of next year.
Our base load CMM operations have seen the completion of the
planned work programme at the Maltby Colliery site, and whilst this
disrupted production during Q2 this year we returned to full
production at the end of June.
The Group results include a one-off exceptional profit of
GBP10.0m, net of costs, from the transfer to Egdon of the shale
rights in 10 of our 21 licences. We have also reviewed the carrying
values of the gas assets held on all of our licences and concluded
that it is appropriate to make an impairment charge of GBP3.2m. The
total of one-off items is an exceptional profit of GBP6.7m.
We are pleased to report that we have maintained our core
business EBITDA margins at 44%. As expected, revenue has fallen
when compared with the same period last year at GBP7.1m (H1 2013:
GBP11.1m) This is principally due to a reduction of GBP3.6m in our
design, build and operate business ("DBO") - the prior year
comparative results included revenue of GBP2.9m from the one off
contract for refurbishment work at Three Nooks Farm, Staffordshire.
In addition, as reported on 7 July 2014, electricity output in the
period was 10% lower at 85GWh (H1 2013: 94GWh) as a result of the
closure of the Maltby Colliery taking longer than planned. EBITDA
for the period was in line with expectations at GBP2.5m (H1 2013:
GBP3.3m).
Group profit before tax has increased to GBP7.3m (H1 2013:
GBP1.0m) resulting in an earnings per share of 5.85 pence (H1 2013:
1.05 pence). Excluding the profit on the transfer of shale
interests and other exceptional items, adjusted profit before tax
is GBP529k (H1 2013: GBP1,421k), with the principal reason for the
decrease a reduction in profit from the DBO business. H1 2013
included GBP1.0m profit from the one off Three Nooks contract.
Adjusted earnings per share is 0.43 pence (H1 2013: 1.43
pence).
We remain on track to meet market full year expectations.
Corporate Activity
Wheldale Acquisition
In February, we acquired the Wheldale 7.5MW STOR facility from
SSE plc for a consideration of GBP1.5m. This transaction was funded
by an increase in our bank facility and the operation has been
successfully integrated into our power response operations.
Egdon Shale Transaction
In June, we completed the transfer of the shale rights in 10 of
our licence areas to Egdon Resources plc. The shale transaction has
seen Alkane receive 40m Egdon shares making us the largest
shareholder in Egdon, a significant player within the UK shale
industry. We will continue to work in partnership with them in
progressing both shale and CMM opportunities as well as looking at
jointly bidding in the 14th Onshore Licensing Round which was
announced by DECC on 28 July 2014.
Carron Energy Transaction
In July, post the half year, we acquired three power plants with
a combined 49MW of installed capacity from Carron Energy for a
consideration of GBP11.75m. These operations will be integrated
into our power response activities. Two plants, with a combined
capacity of 24MW, will adopt our normal "gas to power" running
regime of winter evening peak load operation and participating in
National Grid's Short Term Operating Reserve ("STOR") to cover the
summer period and winter mornings. The final site with a capacity
of 25MW has a long term high value STOR contract with 11 years
remaining, and is therefore committed to STOR throughout the
year.
Production
Our base load generation is fuelled by CMM from 18 sites. These
sites are run 24/7 as this maximises cash flow and paybacks on the
CMM development capital costs. Where we have excess grid and engine
capacity or where we can acquire assets effectively we run power
response engines on bought-in mains gas. The use of bought-in gas
increases our costs per MWh, over the operating costs of CMM, but
is still profitable where we achieve peak prices such as winter
evenings and within STOR.
All our sites are remotely managed 24/7 by the central control
based at Markham in Derbyshire. We deploy a team of field
technicians from Markham to provide operation and maintenance
services to the fleet of engines. This keeps our cost base low and
response time as high as possible.
Overall our installed capacity has reached 140MW (H1 2013:
81MW). In the first half of the year our sites have delivered 85GWh
(H1 2013: 94GWh). This was a satisfactory performance given that
production was disrupted at Maltby as the mine closure operation
took place.
Number of operational 2009 2010 2011 2012 2013 H1 2014 2014
sites to date*
---------------------------- ------ ------ ----- ----- ----- -------- ----------
Base load CMM 8 10 11 16 18 18 18
Power response 1 2 2 7 7 8 11
Gas supply 2 2 2 1 1 1 1
---------------------------- ------ ------ ----- ----- ----- -------- ----------
Total 9 12 13 20 23 24 27
---------------------------- ------ ------ ----- ----- ----- -------- ----------
(note - total does not sum as some sites operate
in more than one category)
Installed capacity 2009 2010 2011 2012 2013 H1 2014 2014
to date*
---------------------------- ------ ------ ----- ----- ----- -------- ----------
MW MW MW MW MW MW MW
CMM 17 23 27 37 45 45 45
Power response 7 8 8 31 36 43 93
Gas supply (equivalent
MW) 6 6 6 2 2 2 2
---------------------------- ------ ------ ----- ----- ----- -------- ----------
Total 30 37 41 70 83 90 140
---------------------------- ------ ------ ----- ----- ----- -------- ----------
*Includes the acquisition of three power response sites from
Carron Energy in July 2014
CMM
The shaft sealing operations at Maltby, which was not within our
control, was initially planned for 5 weeks but in the event took 13
weeks. CMM base load output across the rest of the sites has been
in line with management expectations and we are pleased to report
that Maltby returned to full CMM production in June. We have seen a
number of record production figures for total Group CMM production
since this date. In particular, current output from Maltby is ahead
of expectations and we expect production in the second half to
compensate for the delayed shaft sealing operations.
We continue to work on the drilling of new sites with one
further drill expected in Yorkshire by the end of 2014. Overall we
are working as many as 10 potential sites at any one time to bring
them through the permitting, planning, drill and build phases.
Power Response
Output from power response has increased in the period compared
to H1 2013. Our increased presence in the STOR market has resulted
in higher output, despite lower overall demand from National Grid
in the early months of 2014. In H1 2014 Alkane supplied between
2.5%-3% of STOR hours called by National Grid and this share should
rise as the Carron Energy sites are included in our H2 figures. We
expect demand for STOR to increase as we move into a period of
tighter generating margins and more intermittent plant is added to
the system.
Pricing
Average base load power prices achieved in the period were
GBP55/MWh (H1 2013: GBP53/MWh). Base load prices for the current
year have been falling and we now expect to see a full year average
base load price for 2014 of approximately GBP51/MWh, with 89% of
our expected 2014 output already contracted at this average price.
We have 64% of expected base load output in 2015 contracted at an
average price of GBP52/MWh. Whilst these appear, on the surface,
relatively stable prices there are significant pressures in the
market. Last year's mild winter, increasing LNG deliveries to
European markets and stronger sterling have a depressing impact on
prices. However the situation in the Middle East, Ukraine and the
loss of generating capacity in the UK market all increase pressure
on prices.
As the Group increases the scale of the power response business
then the wholesale base load selling price only tells part of the
story. Our STOR running profitability has benefited from "spark
spread" margin improvement reflecting lower gas prices. At our 25MW
Leven site, acquired from Carron Energy in July 2014, we have an
inflation-proofed contract giving circa GBP1.2m availability
payment per annum up to 2025. In addition we are seeing payments
from National Grid for winter peak running increasing by 17% and we
aim to be attracting capacity payments in future years. As a
consequence of this shift in income streams, Alkane is less exposed
to the pure wholesale energy price than was the case in previous
years.
Design Build and Operate ("DBO")
As expected, we have seen a drop in the level of DBO activity as
the one-off contract at Three Nooks Farm in Staffordshire ended
last year. We continue to work with onshore oil and gas and biogas
operators to secure contracts for the installation of our standard
"gas to power" plant, but expect lower revenue from this source in
the second half of the year compared to the first six months.
We retain our focus on building in areas which will offer us
long term generation and ownership, and are reviewing a number of
opportunities. We aim to be selective in which projects we take on,
ensuring that they remain within our skill set and do not
overstretch our resources.
Finance
Revenue in the period was GBP7.1m (H1 2013: GBP11.1m). Revenue
in our core generation business was GBP6.0m (H1 2013: GBP6.4m), but
there was an expected decrease in revenue from the DBO business to
GBP1.1m (H1 2013: GBP4.7m). Revenue last year included GBP2.9m of
revenue from the one off contract for refurbishment work at Three
Nooks Farm, Staffordshire.
Gross profit was GBP2.2m (H1 2013: GBP3.6m), with the gross
margin held at 32%. Operating profit was GBP7.6m, compared to
GBP1.3m in H1 2013. There are two exceptional items which have
driven this increase in operating profit. Firstly the net profit on
the transfer of our shale gas interests to Egdon was GBP10.0m, with
our shareholding being valued at GBP10.5m, against which we have
charged associated costs of GBP0.5m. Secondly we have reviewed the
carrying values of the gas assets we hold on all of our licences
and concluded that it is appropriate to make an impairment charge
of GBP3.2m. A further GBP0.1m of exceptional administrative
expenses relates to the costs of corporate transactions, mainly the
acquisition of three power responses companies that was completed
in July. Operating profit before these exceptional items was
GBP0.9m compared to GBP1.7m in the first half of 2013, reflecting
the reduction in DBO activity and lower output following the
planned Maltby closure.
Our cost base remains tightly controlled. Administrative
expenses before exceptional items were GBP1.5m (H1 2013:
GBP1.9m).
EBITDA was GBP9.3m (H1 2013: GBP3.0m) and profit before tax was
GBP7.3m (H1 2013: GBP1.0m). After adjustment for the exceptional
items referred to above, EBITDA was GBP2.5m (H1 2013: GBP3.5m)
representing a 36% margin (H1 2013: 31%) and profit before tax was
GBP0.5m (H1 2013: GBP1.4m).
Earnings per share was 5.85 pence (H1 2013: 1.05 pence), and
after adjustment for the exceptional items it was 0.43 pence (H1
2013: 1.43 pence).
Group cash flow generated an operating inflow of GBP1.3m (H1
2013: GBP2.6m) with capital expenditure of GBP3.0m compared to
GBP8.5m in H1 2013 when the majority of the expenditure was in
respect of the Maltby CMM assets purchase.
Net assets at 30 June 2014 stood at GBP40.7m (H1 2013: GBP31.2m)
with a strong asset base in engine capacity, site infrastructure,
grid capacity, and capitalised gas extraction costs (planning and
drilling costs) and our significant investment in Egdon. Overall
the Group net debt at 30 June 2014 was GBP12.4m (H1 2013: GBP8.6m)
with gearing at 31% (H1 2013: 27%). We have met all the bank
covenant tests and in the period we have repaid a total of GBP3.4m
in loan and lease repayments.
A dividend of 0.2 pence per share was paid in May 2014 (H1 2013:
0.1 pence per share).
Subsequent to the period end, on 21 July 2014 the Group acquired
three power response companies from Carron Energy for a total
consideration of GBP12.06m. The acquisition was partly funded by a
term loan of GBP5.5m provided by Lloyds Bank plc, repayable in
monthly instalments over five years commencing in August 2014. The
balance was financed by a proportion of the funds raised by a share
placing. A total of GBP8.0m was raised by the issue of 22,222,222
new Ordinary Shares at a placing price of 36 pence per share. The
balance of the funds raised in the placing will provide additional
working capital to support the continued investment by the Group in
its core gas to power activities.
Licence Portfolio
As previously reported, the Board had been reviewing shale
opportunities within the existing acreage and announced in May that
we had selected Egdon Resources plc ("Egdon") as our partner for
the analysis and appraisal of shale potential within our acreage.
The deal with Egdon gave us access to an experienced long term UK
onshore operator who is funded to appraise and progress
developments for the coming years. There is no Alkane cash being
put into this transaction and we have received 40m shares in Egdon,
the third largest listed company within the UK shale industry,
which will provide us with upside potential if shale gas is proven
to be commercially viable over the coming years. The Alkane team
can therefore remain concentrated on the delivery of CMM and power
response sites.
DECC announced on 28 July 2014 the commencement of the 14(th)
Onshore Licensing Round. Alkane will be evaluating a number of
potential CMM and small scale stranded conventional gas
opportunities. Where these overlap with shale areas we will
consider joint bids with Egdon.
Market and our Strategy
The Ofgem capacity appraisal published in June predicted that
without action the risk of power cuts could be as high as one
chance in four by the winter of 2015/16. Since this report,
following shutdowns at a number of power stations, National Grid
have announced emergency measures to reduce the risk of power cuts
in the coming winter. In addition, DECC, Ofgem and the National
Grid are introducing capacity initiatives in order to increase
longer term security of supply. These capacity initiatives include
winter Demand Side Balancing Reserve which starts in November 2014
as an interim measure before the introduction of the capacity
mechanism. The Company has bid into the 2014/2015 round and is
expecting results in mid-September. The full capacity mechanism is
being introduced in respect of plant being available from 2018/2019
onwards. The process for the first year is underway and Alkane has
submitted for pre-qualification its portfolio of existing and
new-build power response and base load CMM, with results due in
early October. We will take part in the auction for 2018/2019 in
December with results expected on 24 December 2014. These
initiatives provide the Group with an opportunity for a significant
additional income stream in future years.
The tighter UK generating market presents a number of
opportunities for Alkane. Our core CMM business could benefit from
higher prices and capacity payments. The power response assets are
well positioned to supply additional running hours. Their speed of
response (on-line in less than 15 minutes of call) means that we
can support intermittent renewable capacity such as wind farms. In
addition our cost effective running regimes make our engines ideal
to support the network during winter evening peak periods.
We have achieved scale in both sides of the production business
- base load CMM and power response and we continue to exploit
growth opportunities.
Outlook
The first half of 2014 has been transformational for the Group.
We have invested for the future, and including the acquisition of
three sites from Carron Energy in July 2014, our power response
capacity has grown by 158% from 36MW to 93MW, delivering a broader
balanced generating portfolio and giving scale to a business where
there are opportunities for growth in the tighter UK generating
market. We have also taken the strategic decision to transfer our
shale gas interests to Egdon, and we will benefit from the
potential upside from the development of shale gas without any
financial commitment from the Company. We are confident that 2014
will be another year of progress for the Group.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the 6 months ended 30 June 2014
For the For the For the
six six year
months ended months ended
ended
30 June 30 June 31 December
2014 2013 2013
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
Revenue 7,064 11,076 20,571
Cost of sales (4,818) (7,478) (13,664)
------------- ---------- ------------
Gross profit 2,246 3,598 6,907
Impairment of gas assets 14 (3,180) - -
Administrative expenses (1,465) (1,854) (3,342)
Exceptional administrative expenses 14 (82) (404) (703)
------------- ---------- ------------
Total administrative expenses (1,547) (2,258) (4,045)
Return on Group operations (2,481) 1,340 2,862
Profit on transfer of licences 12 9,990 - -
Other operating income 127 3 471
Profit on activities before finance
costs 7,636 1,343 3,333
Finance income 3 8 18
Finance costs (382) (334) (696)
------------- ---------- ------------
Net finance costs (379) (326) (678)
Profit before tax 7,257 1,017 2,655
Taxation 4 - 100 100
Profit for the period attributable
to equity holders of the parent 7,257 1,117 2,755
Other comprehensive income (items that
may be reclassified to
profit or loss)
Available for sale financial assets 12 500 - -
Total comprehensive income for the
period attributable to equity
------------- ---------- ------------
holders of the parent 7,757 1,117 2,755
------------- ---------- ------------
Earnings per share
Basic, for profit for the period attributable
to equity holders of the parent 6 5.85p 1.05p 2.40p
Diluted, for profit for the period
attributable to equity holders of the
parent 6 5.14p 1.00p 2.25p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 June 2014
30 June 30 June 31 December
2014 2013 2013
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
NON-CURRENT ASSETS
Property, plant and equipment 8 23,291 23,302 23,316
Gas assets 9 21,215 20,597 23,335
Intangible assets 1,618 1,209 1,633
Derivative financial instrument 22 - 22
Deferred tax asset 900 900 900
Available for sale financial
asset 12 11,000 - -
---------- ---------- ------------
58,046 46,008 49,206
CURRENT ASSETS
Inventories 439 469 464
Trade and other receivables 5,740 3,338 4,156
Cash and cash equivalents 519 3,053 838
---------- ---------- ------------
6,698 6,860 5,458
TOTAL ASSETS 64,744 52,868 54,664
---------- ---------- ------------
CURRENT LIABILITIES
Trade and other payables (5,253) (3,625) (4,616)
Finance lease obligations (586) (524) (343)
Long-term borrowings due within
one year (1,500) (1,500) (1,500)
Provisions (180) (368) (146)
---------- ---------- ------------
(7,519) (6,017) (6,605)
NON-CURRENT LIABILITIES
Finance lease obligations (1,567) (210) (69)
Long-term borrowings (9,281) (9,396) (9,161)
7.5% Convertible loan stock (2,210) (2,081) (2,199)
Deferred payments (900) (900) (900)
Provisions (2,585) (3,018) (2,737)
---------- ---------- ------------
(16,543) (15,605) (15,066)
TOTAL LIABILITIES (24,062) (21,622) (21,671)
---------- ---------- ------------
NET ASSETS 40,682 31,246 32,993
---------- ---------- ------------
EQUITY ATTRIBUTABLE TO OWNERS
OF THE PARENT
Share capital 15 621 618 618
Share premium 7,016 6,905 6,906
Hedging reserve 22 - 22
Other reserves 9,297 9,256 9,230
Retained earnings 23,726 14,467 16,217
TOTAL EQUITY 40,682 31,246 32,993
---------- ---------- ------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2014
Attributable to equity holders of the
parent
-----------------------------------------------------------------------
Issued Share Hedging Other Retained Total
capital premium(1) reserve reserves(2) earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2014 618 6,906 22 9,230 16,217 32,993
Profit for the period - - - - 7,257 7,257
Other comprehensive income
for the period - - - - 500 500
--------- ------------ --------- ------------- ---------- --------
Total comprehensive income
for the period - - - - 7,757 7,757
Dividend (note 7) - - - - (248) (248)
Share-based payment - - - 78 - 78
Equity component of convertible
loan notes - 11 - (11) - -
Issue of share capital 3 99 - - - 102
--------- ------------ --------- ------------- ---------- --------
At 30 June 2014 (Unaudited) 621 7,016 22 9,297 23,726 40,682
--------- ------------ --------- ------------- ---------- --------
At 1 January 2013 507 1,248 - 9,196 13,451 24,402
Profit and total comprehensive
income for the period - - - - 1,117 1,117
Dividend (note 7) - - - - (101) (101)
Share-based payment - - - 60 - 60
Issue of share capital 111 5,657 - - - 5,768
--------- ------------ --------- ------------- ---------- --------
At 30 June 2013 (Unaudited) 618 6,905 - 9,256 14,467 31,246
--------- ------------ --------- ------------- ---------- --------
At 1 January 2013 507 1,248 - 9,196 13,451 24,402
Profit and total comprehensive
income for the year - - - - 2,755 2,755
Dividend - - - - (101) (101)
Fair value of derivative instrument - - 22 - - 22
146
Share-based payment - - - 146 - -
-
Share options lapsed and exercised - - - (112) 112 -
Issue of share capital 111 5,658 - - - 5,769
--------- ------------ --------- ------------- ---------- --------
At 31 December 2013 (Audited) 618 6,906 22 9,230 16,217 32,993
--------- ------------ --------- ------------- ---------- --------
(1) During the six months ended 30 June 2013 GBP274,000 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 GBP221,000 (30 June and 31 December 2013:
GBP232,000), a share-based payments reserve of GBP413,000 (30 June
2013: GBP361,000; 31 December 2013: GBP335,000), a merger relief
reserve of GBP244,000 (30 June and 31 December 2013: GBP244,000),
and a distributable reserve of GBP8,419,000 (30 June and 31
December 2013: GBP8,419,000) created following cancellation of the
share premium account.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2014
For the For the For the
six six year
months ended months ended ended
30 June 30 June 31 December
2014 2013 2013
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
Operating activities
Profit before tax from continuing
operations 7,257 1,017 2,655
Adjustments to reconcile operating
profit to net cash flows:
Transfer of licences 12 (10,500) - -
Depreciation of property, plant and
equipment 1,320 1,366 2,797
Gas asset depletion 292 340 670
Gas asset impairment 14 3,180 - -
Gas asset write off 213 - -
Intangible asset amortisation 15 - 15
Intangible asset impairment - 233 233
Share-based payments expense 78 60 146
Finance income (3) (8) (18)
Finance expense 382 334 696
Movements in provisions (118) 40 (463)
(Increase)/decrease in trade and
other receivables (1,583) 1,391 573
Decrease in inventories 25 3 8
Increase/(decrease) in trade and
other payables 755 (2,150) (1,754)
------------- ------------- ------------
Net cash flows from operating activities 1,313 2,626 5,558
------------- ------------- ------------
Cash flows from investing activities
Interest received 3 8 18
Purchase of property, plant and equipment (1,341) (4,863) (6,180)
Purchase of gas assets (1,639) (3,604) (6,193)
Purchase of intangible assets - - (439)
------------- ------------- ------------
Net cash flows used in investing
activities (2,977) (8,459) (12,794)
------------- ------------- ------------
Cash flows from financing activities
Issue of share capital 13 5,768 5,769
Proceeds from sale and finance leaseback 2,000 - -
Sale and finance leaseback rentals (259) (388) (710)
Proceeds from long-term borrowing 3,220 3,001 3,516
Repayment of long-term borrowings (3,100) (750) (1,500)
Dividend paid to equity holders of
the parent (248) (101) (101)
Interest paid (281) (213) (469)
------------- ------------- ------------
Net cash flows from financing activities 1,345 7,317 6,505
------------- ------------- ------------
Net (decrease)/increase in cash and
cash equivalents (319) 1,484 (731)
Cash and cash equivalents at beginning
of period 838 1,569 1,569
------------- ------------- ------------
Cash and cash equivalents at close
of period 17 519 3,053 838
------------- ------------- ------------
NOTES TO THE ACCOUNTS
1. CORPORATE INFORMATION
The interim condensed consolidated financial statements of the
Group for the six months ended 30 June 2014 were authorised for
issue in accordance with a resolution of the directors on 9
September 2014.
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 2013 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 2013, which have been prepared in accordance
with IFRSs as adopted by the European Union.
Going concern
The Board is required to assess whether the Group has adequate
resources to continue operations for the foreseeable future. After
making enquiries, the directors have a reasonable expectation that
the Company and the Group will continue in operational existence
for the foreseeable future (being a period of at least 12 months
from the date of this report). For this reason they continue to
adopt the going concern basis for preparing the financial
statements.
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 2013.
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.
There have been no significant changes in the bases upon which
estimates have been determined compared to those applied at 31
December 2013. Whilst there has been no change in the bases of
estimates, following a management review a gas impairment charge
has been realised in the period, which 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 2013. Actual results may differ from
these estimates.
In March 2013 Pro2 Anlagentechnik GmbH invested in Alkane
Services Limited, a Group company, and from that date holds a
non-controlling interest of 25% of the share capital. The minority
interest arising in the six months to 30 June 2014 was not material
and has not been reflected in the interim financial statements.
Alkane Services Limited has been renamed Alkane Pro2 Services
Limited.
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 2014.
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 design, build and operation of projects for external customers.
The operating segment reporting format reflects the Group's
management and reporting structure.
Seasonality of operations
There is no significant seasonal nature to either of the Group's
business segments.
Six months Six months Year ended
ended ended 31 December
30 June
30 June 2014 2013 2013
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Extraction and utilisation of
gas
Total segment revenue 5,936 6,390 13,439
------------- ----------- ------------
Depreciation/impairment (4,802) (1,699) (3,469)
------------- ----------- ------------
Profit on transfer of licences 9,990 - -
------------- ----------- ------------
Interest expense (281) (239) (492)
------------- ----------- ------------
Segment profit before tax 7,965 1,417 3,526
------------- ----------- ------------
Design, build and operate projects
for external customers
Total segment revenue 1,130 4,686 7,142
------------- ----------- ------------
Impairment - (233) (233)
------------- ----------- ------------
Segment (loss)/profit before
tax (61) 361 599
------------- ----------- ------------
Total
Total revenue 7,066 11,076 20,581
------------- ----------- ------------
Total depreciation/impairment (4,802) (1,932) (3,702)
------------- ----------- ------------
Total profit on transfer of licences 9,990 - -
------------- ----------- ------------
Total interest expense (281) (239) (492)
------------- ----------- ------------
Profit before tax from operating
segments 7,904 1,778 4,125
------------- ----------- ------------
Corporate centre (657) (771) (1,491)
Consolidation adjustment 10 10 21
------------- ----------- ------------
Profit before tax 7,257 1,017 2,655
------------- ----------- ------------
The following table reconciles total segment assets, total
segment liabilities and segment additions to non-current
assets.
30 June 30 June 31 December
2014 2013 2013
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Extraction and utilisation
of gas 58,105 48,841 52,611
Design, build and operate projects
for external customers 1,815 2,625 1,296
---------- ---------- ------------
Total segment assets 59,920 51,466 53,907
Corporate centre 11,251 2,387 404
Intangible assets arising on
consolidation 1,209 1,209 1,209
Consolidation adjustments (7,636) (2,194) (856)
---------- ---------- ------------
Total consolidated assets 64,744 52,868 54,664
---------- ---------- ------------
Extraction and utilisation
of gas (23,517) (26,283) (26,507)
Design, build and operate projects
for external customers (1,823) (2,655) (917)
---------- ---------- ------------
Total segment liabilities (25,340) (28,938) (27,424)
Corporate centre (13,280) (8,816) (7,291)
Consolidation adjustments 14,558 16,132 13,044
---------- ---------- ------------
Total consolidated liabilities (24,062) (21,622) (21,671)
---------- ---------- ------------
Extraction and utilisation
of gas 2,860 8,221 13,174
Design, build and operate projects - 47 -
for external customers
---------- ---------- ------------
Total segment additions to
non-current assets 2,860 8,268 13,174
Deferred tax asset - 100 100
Corporate centre 11,000 1 22
---------- ---------- ------------
Total consolidated additions
to non-current assets 13,860 8,369 13,296
---------- ---------- ------------
4. TAXATION
There is no tax charge for the current period (six months ended
30 June 2013: nil, year ended 31 December 2013: nil). No deferred
tax asset has been recognised in the period (six months ended 30
June 2013: GBP100,000, year ended 31 December 2013:
GBP100,000).
5. DISCONTINUED OPERATIONS
A loan to Deutsche KWK GmbH, an operation discontinued in 2009,
is outstanding; after exchange rate differences of GBP8,000 the
balance at 30 June 2014 is EUR145,000 (GBP116,000) (30 June 2013
EUR145,000 (GBP124,000); 31 December 2013 EUR145,000 (GBP121,000)).
This balance is due to be repaid on 31 December 2014. The loan was
fully impaired in 2009, and having reviewed the position at 30 June
2014 there remains a fundamental uncertainty in respect of the
recovery of the outstanding balance of the loan and consequently
there has been no reversal of the balance of the impairment
charge.
6. 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 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
2014 2013 2013
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Profit attributable to equity
holders of the parent 7,257 1,117 2,755
------------ ------------ ------------
No. No. No.
Basic weighted average number
of Ordinary Shares 124,137,446 106,130,525 114,930,148
Dilutive effect of share options 6,124,309 4,112,645 4,992,606
Dilutive effect of convertible
loan notes(1) 13,045,714 12,782,857 13,291,428
------------ ------------ ------------
Diluted weighted average number
of Ordinary Shares 143,307,469 123,026,027 133,214,182
------------ ------------ ------------
(1) For the purposes of calculating the dilutive earnings per
share, the profit for the period attributable to equity holders of
the parent has been adjusted by the transaction costs and interest
charges of GBP103,000 (six months ended 30 June 2013: GBP110,000;
year ended 31 December 2013: GBP242,000) that would have been
avoided if conversion was to have occurred. The revised profit for
the period attributable to equity holders of the parent on this
basis is GBP7,360,000 (six months ended 30 June 2013: GBP1,227,000;
year ended 31 December 2013: GBP2,997,000).
A total of 22,222,222 Ordinary Shares were issued and admitted
to trading on AIM on 21 July 2014 in respect of a share placing
carried out in conjunction with the acquisition of three power
response companies from Carron Energy Limited and Dragon Generation
Limited (see note 16). 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. DIVIDEND
During the six months ended 30 June 2014 the Company paid a
dividend of 0.2 pence per share totalling GBP248,000 (six months
ended 30 June 2013 and year ended 31 December 2013: dividend of 0.1
pence per share totalling GBP101,000).
8. PROPERTY, PLANT AND EQUIPMENT
Acquisitions and disposals
During the six months ended 30 June 2014, the Group acquired
assets with a cost of GBP1,295,000 (six months ended 30 June 2013:
GBP4,661,000; year ended 31 December 2013: GBP6,106,000). Included
within additions for the period ended 30 June 2014 is GBP900,000
relating to the acquisition of Wheldale coal mine methane assets
(see note 11). The figures in 2013 included GBP3,000,000 relating
to the acquisition of Maltby coal mine methane assets (see note
13). There were no disposals during the period (30 June and 31
December 2013: nil).
9. GAS ASSETS
Acquisitions and disposals
During the six months ended 30 June 2014, the Group acquired
assets with a cost of GBP1,565,000 (six months ended 30 June 2013:
GBP3,561,000; year ended 31 December 2013: GBP6,629,000). Included
within additions for the period ended 30 June 2014 is GBP600,000
relating to the acquisition of Wheldale coal mine methane assets
(see note 11). The figures in 2013 included GBP2,754,000 relating
to the acquisition of Maltby coal mine methane assets (see note
13). There were no disposals during the period (30 June and 31
December 2013: nil).
An impairment test of gas assets relating to producing licence
areas was carried out in the period. This test took into account
the expected future price of energy and the expected production
life. The test identified one producing licence with a carrying
value that would not be recovered and an impairment charge of
GBP787,000 was made.
In addition an impairment review of exploration and evaluation
costs relating to non-producing licence areas was carried out in
the period. Following the review an impairment charge of
GBP2,393,000 (30 June and 31 December 2013: nil) was made in
respect of costs that would not lead to commercial operations.
10. CAPITAL COMMITMENTS
At 30 June 2014, the Group had the following capital commitments
contracted for but not provided in the financial statements:
-- Acquisition of property, plant and equipment GBP107,000 (30
June 2013: GBP794,000; 31 December 2013: GBP28,000);
-- Acquisition of gas assets GBP890,000 (30 June 2013:
GBP248,000; 31 December 2013: GBP16,000);
-- Acquisition of Maltby coal mine methane assets GBP2,000,000
(30 June and 31 December 2013: GBP2,000,000). See note 13.
11. PURCHASE OF WHELDALE POWER RESPONSE FACILITIES
On 5 February 2014 the Group acquired the Wheldale power
response facilities from SSE plc, for a total consideration of
GBP1,500,000. The initial consideration for the acquisition was
GBP1,100,000 paid in cash on completion, with a GBP400,000 deferred
cash payment to be paid on 31 October 2014. The facilities comprise
an installed engine capacity of 7.5MW and a grid connection of
10MW. As part of the financial arrangements to fund the acquisition
the Group increased its banking facilities with Lloyds Bank plc by
GBP1,000,000.
12. TRANSFER OF LICENCES
On 12 June 2014 the Group transferred its shale gas interests in
certain UK petroleum and development licences to Egdon Resources
plc in exchange for 40,000,000 new ordinary shares of 1 pence each
in Egdon Resources plc, an AIM listed company whose registered
office is at The Wheat House, 98 High Street, Odiham, Hampshire
RG29 1LP. At the date of the transfer Egdon Resources plc's share
price was 26.25 pence, valuing gross consideration at
GBP10,500,000. A profit of GBP9,990,000 on the transfer has been
recognised in the period. Associated costs of sale attributable to
the transfer of the shale gas interests are detailed below:
Six months
ended 30
June
2014
Unaudited
GBP'000
Gross consideration 10,500
Non-capital costs relating to the transfer of licences (297)
Capital costs relating to the transfer of licences (213)
-----------
Profit on transfer of licences 9,990
-----------
The listed equity investment represents an 18% interest in Egdon
Resources plc shares and is classified as an available for sale
financial asset. The Group's interest in Egdon Resources plc has
not been treated as an associated undertaking as the Group does not
have a significant influence over the company. The shares are
revalued at fair value at the end of each period. The change in
fair value in the period of GBP500,000 is shown in other
comprehensive income. The fair value disclosed is the market value
at the statement of financial position date. The movement in the
fair value of available for sale financial assets is determined
under Level 1 Inputs, being quoted prices in active markets that
the Group has the ability to access as of the measurement date.
There is a 12 month lock-in period from the date of issue of the
consideration shares during which time the Company is precluded
from disposal of the shares. The Group does not intend to dispose
of this investment in the foreseeable future.
13. ACQUISITION OF MALTBY COAL MINE METHANE ASSETS
On 24 May 2013 the Group completed the purchase of coal mine
methane assets located at Maltby Colliery for a consideration of
GBP5,500,000.
The purchase was partly funded by an extension of the Group's
borrowing facilities with Lloyds Bank plc. A term loan of
GBP3,000,000, secured by way of legal charges over the Group's
assets, was provided to finance the acquisition, to be repaid in
quarterly payments over two years commencing in April 2014. At the
same time the existing revolving credit facility was increased from
GBP6,500,000 to GBP7,000,000. The balance of the consideration was
financed by a proportion of the funds raised by a share placing. A
total of GBP6,000,000 was raised by the issue of 22,222,223 new
ordinary shares at a placing price of 27 pence per share.
The assets acquired comprise plant and machinery of GBP3,000,000
and site infrastructure (including grid connection) of
GBP2,754,000. The Directors have carried out an assessment of the
assets acquired and have concluded that no fair value adjustments
are required.
A further payment of GBP2,000,000 will be made to acquire
additional site infrastructure assets six months after the Maltby
Colliery mine shafts are satisfactorily sealed as part of the
planned closure of Maltby Colliery. The closure is not within the
control of the Company, but is expected to occur by October
2014.
14. EXCEPTIONAL ITEMS
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Impairment of gas assets (see note
9) (3,180) - -
Costs related to the acquisition of
Wheldale power response assets (see
note 11) - - (7)
Non-capital costs relating to the acquisition
of Maltby coal mine methane assets
(see note 13) (2) (148) (251)
Costs relating to the acquisition of
three power response companies (see
note 16) (57) - -
Impairment of biogas development costs - (233) (233)
Costs relating to the acquisition of
Greenpark Energy Limited - (13) (31)
Costs relating to the acquisition of
licence - (10) (25)
Costs relating to other corporate transactions (23) - (108)
Costs of aborted corporate transactions - - (48)
----------- ----------- -------------
(3,262) (404) (703)
----------- ----------- -------------
15. AUTHORISED AND ISSUED SHARE CAPITAL
30 June 30 June 31 December
2014 2013 2013
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 2014 123,592 618
Issued on conversion of loan stock 645 3
At 30 June 2014 (Unaudited) 124,237 621
---------- --------
At 1 January 2013 101,113 507
Issued on exercise of share options 250 1
Issued as a result of a share placing 22,222 110
At 30 June 2013 (Unaudited) 123,585 618
---------- --------
At 1 January 2013 101,113 507
Issued on exercise of share options 257 1
Issued as a result of a share placing 22,222 110
---------- --------
At 31 December 2013 (Audited) 123,592 618
---------- --------
16. SUBSEQUENT EVENT
On 21 July 2014 the Group acquired three power response
companies from Carron Energy Limited and Dragon Generation Limited,
for a total consideration of GBP12,060,000.
The acquisition was partly funded by a term loan of GBP5,500,000
provided by Lloyds Bank plc, repayable in monthly instalments over
5 years commencing in August 2014. The balance was financed by a
proportion of the funds raised by a share placing. A total of
GBP8,000,000 was raised by the issue of 22,222,222 new Ordinary
Shares at a placing of 36 pence per share.
17. ADDITIONAL CASH FLOW INFORMATION
Analysis of net debt
1 January Cash 30 June
2014 flow 2014
Audited Unaudited
GBP'000 GBP'000 GBP'000
Cash at bank and
in hand 838 (319) 519
Sale and finance
leaseback (412) (1,741) (2,153)
Long-term loan (10,661) (120) (10,781)
Net debt (10,235) (2,180) (12,415)
Securities 257 1 258
---------- -------- ------------
Adjusted net debt(1) (9,978) (2,179) (12,157)
---------- -------- ------------
1 January Cash 30 June
2013 flow 2013
Audited Unaudited
GBP'000 GBP'000 GBP'000
Cash at bank and
in hand 1,569 1,484 3,053
Sale and finance
leaseback (1,122) 388 (734)
Long-term loan (8,645) (2,251) (10,896)
---------- -------- ------------
Net debt (8,198) (379) (8,577)
Securities 256 - 256
---------- -------- ------------
Adjusted net debt(1) (7,942) (379) (8,321)
---------- -------- ------------
1 January Cash 31 December
2013 flow 2013
Audited Audited
GBP'000 GBP'000 GBP'000
Cash at bank and
in hand 1,569 (731) 838
Sale and finance
leaseback (1,122) 710 (412)
Long-term loan (8,645) (2,016) (10,661)
---------- -------- ------------
Net debt (8,198) (2,037) (10,235)
Securities 256 1 257
---------- -------- ------------
Adjusted net debt(1) (7,942) (2,036) (9,978)
---------- -------- ------------
(1) This includes the effect of securities paid on finance lease
transactions that are closely related to those items.
The convertible debt has been excluded from the above
calculations as the current share price is above the conversion
price and the directors expect it to be converted rather than
repaid.
18. 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
IR QKCDNOBKDPCK
Grafico Azioni Alkemy Capital Investments (LSE:ALK)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni Alkemy Capital Investments (LSE:ALK)
Storico
Da Lug 2023 a Lug 2024
