($ millions)
2011 2010 % Change
Revenue 212.8 126.1 69%
Gross Profit 89.0 45.7 95%
Administrative Expenses (28.7) (11.3) 154%
Operating Profit 60.3 34.5 75%
Net Interest Expense (3.3) (4.6) (28%)
Profit before Tax 57.0 29.8 91%
Tax (15.6) (20.3) (23%)
Net Profit 41.4 9.5 336%
Adjusted EBITDA 109.1 64.2 70%
Pro-forma revenue for the twelve month period ended 31 December
2011 was $212.8 million, an increase of 69% over the same period
last year. The increase in revenue was primarily driven by new
contract wins that went into operation in 2011 including projects
in Argentina, Burkina Faso, Japan, Martinique and Senegal. In
addition, the 2011 results included $12.7 million associated with a
one-time sale of assets as part of a short term project in
Mozambique.
Operating Profit on a pro-forma basis increased 75% to $60.3
million. Improvement in the gross profit margins due to scale
efficiencies as the business has expanded was partially offset by
higher administrative expense. Increases in administrative expense
over the prior year were driven by the growth in infrastructure and
resources to support the business, the addition of public company
costs, share based compensation expense and an increase in the net
bad debt provision.
Net interest expense declined to $3.3 million as all debt was
repaid in the year.
The 2011 tax charge on a pro forma basis was $15.6 million,
reflecting an effective tax rate of 27%. The significant reduction
in the effective tax rate from the prior period is a result of a
reduction in withholding taxes and an increased share of profit
from lower tax jurisdictions. Total withholding taxes for the 12
month period to 31 December 2011 were $10.8 million of which $8.9
million was withholdings on revenue and the remainder associated
with lease payments.
Adjusted EBITDA totalled $109.1 million, an increase of 70% over
the prior year (2010: $64.2 million). Adjusted EBITDA margin was
51% (2010: 51%).
Capital Expenditures on new fleet for the 12 month period ending
31 December 2011 were $298.5 million up from $20.5 million in 2010.
The significant increase in fleet investment supported new project
installations in the year and the initial build out of inventory
for the regional hub infrastructure.
Return on Capital Employed (ROCE) is a key performance metric
for the business. Given the significant increase in net operating
assets associated with the growth of the business, coupled with the
timing of new projects beginning operation and generating profits
being skewed to the second half of the year, the ROCE (on a
pro-forma basis) decreased to 20.7% (2010: 31.9%).
The table below provides a reconciliation of revenue, operating
(loss)/profit and net (loss)/profit from the statutory results to
the pro-forma basis figures described above.
Reconciliation of Pro Forma and Statutory Financial Results
($ million) Revenue Operating (Loss)/Profit Net (Loss)/Profit
Results - As Reported 164.6 (45.2) (41.4)
-------- ------------------------ ------------------
Adjustments:
APR Group pre-acquisition date activity 48.2 6.2 (10.5)
Horizon pre-acquisition date activity (5.8) (1.9)
Amortisation of acquired intangible assets 46.5 46.5
Transaction costs 30.7 30.7
Non-cash expense - Revaluation of founders securities 27.9 27.9
FX gain on conversion of GBP balance sheet to US$ (9.9)
Results - Pro Forma 212.8 60.3 41.4
Audited Statutory Financial Results
The statutory results for APR Energy plc for the period ended 31
December 2011 cover a fourteen month period which include the
results of the former Horizon Acquisition Company plc and its
direct subsidiary (together "Horizon") from 1 November 2010 and
then as a combined entity (with the APR Group) from 13 June
2011.
Revenue
Revenue in the reported fourteen month period ended 31 December
2011 was $164.6 million, reflecting the revenue generated by the
business in the seven month period post acquisition. This compares
to no revenue in the prior year period, given the former Horizon
Acquisition Company had no revenue generating operations.
Operating Loss
The reported Operating Loss was $45.2 million, compared to a
loss in the prior year of $10.5 million. Despite profits generated
by the underlying trading business in the period post the
acquisition date, a loss was reported due to the impact of the
amortisation of intangible assets and exceptional operating items
noted below.
Amortisation of Intangible Assets
As a result of the Acquisition, the Company completed a fair
value analysis of tangible and intangible assets. This analysis
recognised intangible assets of $144.1 million. Included in the
operating loss is a total of $46.5 million of amortisation expense
related to those intangible assets. The amortisation expense
includes $45.7 million associated with acquired customer contracts
and $0.8 million of amortisation of the trade name. The
amortisation related to the customer contracts is expensed over the
remaining terms of the contracts (as of 13 June 2011). The
amortisation of the trade name is being expensed over 25 years.
Exceptional Operating Items
Included in the Operating Loss of $45.2 million is a total of
$58.6 million of exceptional items. These exceptional items are
defined as costs that have arisen in the period which management do
not believe are a result of normal operating performance and, if
not properly disclosed, would distort year over year comparison of
performance.
A total of $30.7 million of one-time expense relates to
transaction costs incurred as part of the Acquisition and the
subsequent re-listing process. The costs include legal and
professional fees, the expense for the termination of a share
appreciation rights plan and the expense for the early termination
of the operating agreement with the founders of Horizon.
In accordance with IAS 39 the issue of shares and the
recognition of the option value of the Founders securities have
resulted in a non-cash charge to the income statement amounting to
$27.9 million. On issue of the shares to settle the fair value of
the D shares liability, the nominal value of the share capital has
been recognised with any difference being recognised in retained
earnings, with the effect of this transaction having no net effect
on distributable profits.
Provision for Bad Debt
A provision for bad debt is recognised against trade receivables
which are greater than 90 days past due based on estimated
recoverable amounts. The net provision for bad debt was $1.9
million in the period.
Share-based Payments
In accordance with IFRS 2, a non-cash charge of $1.4 million
dollars was recognised related to equity settled share-based
payment transactions in the period ended 31 December 2011 (2010:
$0.4 million). This expense relates to equity grants made under the
Company's Performance Share Plan and the Non-Executive Director's
share matching scheme.
Interest and Finance Cost
Net interest income for the year ended 31 December 2011 was $2.2
million. Interest income of $4.8 million generated from the cash
and securities holdings of the Horizon entity prior to the
Acquisition was partially offset by the finance costs of the APR
Group debt facilities of $2.6 million for the period.
Foreign Exchange Gain
The functional currency for the Company changed from GBP to US
dollars during the period. A foreign exchange gain of $9.9 million
was recognised in the period, primarily in relation to the
retranslation of cash balances prior to the Acquisition.
Tax
The Company's reported tax charge for the year was $8.5 million.
The charge primarily comprises withholding taxes of $5.5 million
and foreign income taxes in overseas jurisdictions of $3.9 million
incurred in the APR Group in the period post Acquisition.
Loss per Share
Basic Loss per share was 70.97 cents for the reported period
(2010: Loss per share of 14.9 cents).
Liquidity and Capital Resources
Net cash as at 31 December 2011 was $63.1 million. At year end,
gearing fell to nil, as the Company had repaid all existing notes.
Prior outstanding notes under a previous credit facility and a $51
million bridge loan associated with the Japan project were fully
repaid. A summary analysis of cash flow is set out in the table
below.
During the period, net cash flow from operations totalled $43.7
million. Growth in the business resulted in increased working
capital requirements. Cash flow from investing activities primarily
comprised the investment in subsidiary and purchases of property
and equipment. Cash used in financing activities included $96.8
million of debt repayment.
In November 2011, the Company finalised a new $400 million
five-year revolving credit facility with an international group of
banks. This facility replaced the previous $55 million credit
facility the APR Group had in place with Wells Fargo Bank, N.A.. To
date, no cash has been drawn on the new facility.
The new facility provides for funding of capital expenditures,
working capital requirements and letters of credit. Key financial
covenants include a Total Leverage Ratio (Adjusted EBITDA/Total
Leverage) at a maximum of 2:1 and an Interest Coverage Ratio
(Adjusted EBITDA/Net Interest) at a minimum of 4:1.
Treasury Policies and Risk Management
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