RNS Number:0908A
EcoSecurities Group plc
21 March 2006
EcoSecurities Group plc
Maiden preliminary results show strong project growth
EcoSecurities Group plc (the "Group" or "EcoSecurities"), one of the world's
leading originators of projects which have the potential to generate Carbon
Credits, today announces its maiden preliminary results for the year ended 31
December 2005. The Group floated on AIM in December 2005.
Highlights
* Revenues increase over 45% to Euro2.3 million (2004: Euro1.6 million)
* Loss before tax of Euro4.2 million (2004: loss of Euro0.2 million)
* Origination strong with number of projects rising by 25% to 152, from 121
at the time of the IPO: in 26 countries, using 16 methodologies*
* Gross contract volume of the Group's projects has increased almost 30% to
90 million CERs, exceeding the Board's expectations*
* Implementation going well with 13 projects now registered with the CDM
Executive Board, up from 8 at the IPO*
* Over 120 of the Group's projects are financed, with more than 60 having
completed PDDs and over 20 have been validated*
* Demand for CERs continues to grow, with new corporate buyers in Europe
increasing significantly
* CER market pricing has increased substantially, driven by higher EU
Allowance prices
* Volume of new projects signed in the first two months of 2006 has grown in
line with the Board's expectations
* As at 31st December 2005
Mark Nicholls, Chairman of EcoSecurities, commented:
"EcoSecurities made considerable progress in 2005, culminating in our successful
listing on AIM. 2006 has started well as the Group, with the benefit of the
recent capital raising, seeks to take advantage of its position as one of the
world's leading originators of carbon credit projects. The focus of
EcoSecurities remains on project origination and development, and the
commercialisation of its carbon credit portfolio. The development of the market
and the Group's positive start to the year gives the Board confidence for
significant growth in 2006 and beyond."
For further information please contact:
EcoSecurities
Bruce Usher, CEO Tel: +44 (0) 20 7638 9571 (until 3.00pm today)
Pedro Moura Costa, COO +44 (0) 1865 202 635 (thereafter)
Citigate Dewe Rogerson Tel: +44 (0) 20 7638 9571
Patrick Toyne Sewell
Sara Batchelor
Clare Allison
Chairman's Statement
EcoSecurities made considerable progress in 2005, culminating in the admission
of the Group's shares to trading on AIM in December. During this period, the
Group expanded rapidly, opening up a formal office in India and working towards
establishing full offices in China, Thailand, Indonesia, Malaysia, Mexico and
Chile. The Group has also increased the number of its employees to improve its
ability to originate and implement projects, growing from 27 employees to 85
employees at year end. At 28 February 2006, the Group had 104 employees, and
expects to grow to approximately 175 employees by the end of 2006.
2006 has started well as the Group, with the benefit of the recent capital
raising, seeks to take advantage of its position as one of the world's leading
originators of carbon credit projects. Operationally, we plan to continue to add
a significant number of employees to our locations in China, Thailand, Brazil,
India and Indonesia. To accommodate this growth, EcoSecurities has initiated an
office expansion in New York and is moving to new premises in Oxford and Dublin:
these projects are expected to be completed by 1 June 2006.
EcoSecurities has also separated its Consulting Division from the remainder of
the Group in order to allow the business to focus on the expansion of its
services, operating mostly from its offices in The Hague. At the end of 2005,
the Consulting Division received, for the fifth consecutive year, the award of
Best CDM/JI Advisory Group, based on a reader's survey conducted by UK's
Environmental Finance magazine.
The focus of the Group remains on project origination and development, and the
commercialisation of its carbon credit portfolio. The development of the market
and the Group's start to the year give the Board confidence for significant
growth in 2006 and beyond.
Executive Directors' Review
2005 was a watershed year for EcoSecurities and for the carbon market as a
whole. The EU Emissions Trading System took effect from 1 January and the Kyoto
Protocol came into force on 16 February, officially launching the global market
in the trading of carbon credits for the first time. Volumes of carbon traded
increased dramatically during the year, as evidenced by trading on the EU
Allowance exchanges, and the price of credits gained markedly as well, although
with significant volatility. In the CDM market, in which EcoSecurities
generates almost all of its projects, the number of projects registered by the
Executive Board of the UN grew from 2 at the beginning of 2005 to nearly 100
projects by year end.
On 19 October 2005, one of the Group's CDM Projects, a hydro-electric power
station in Honduras called La Esperanza, became one of the first two CDM
projects in the world to be issued with CERs. The first issuance of CERs by the
CDM-EB was a milestone in the development of the Group's market and now provides
greater certainty that many of the Group's contracts will begin to generate
revenues.
The Group's list of registered projects increased to 13 by year end from 8 at 31
October 2005, and its pipeline of contracted projects grew significantly. Over
the last six months EcoSecurities has also invested significantly in CDM
implementation personnel and systems, allowing the Group to process a much
larger volume of projects through the CDM project cycle more efficiently.
Origination
EcoSecurities has continued to significantly increase the number of projects
contracted and under term sheet since the IPO. The majority of new projects are
located in China and Indonesia, which reflects the effort EcoSecurities is
placing on developing its presence in Asia, which has the greatest potential
number of projects. The technologies employed by the new projects vary widely,
but include biomass, biodiesel, hydro and landfill gas collection and
utilisation. The legal status of projects contracted has increased as follows:
At IPO Total as of
Contract legal status (31 Oct 2005) Change 31 Dec 2005
Signed contracts 89 +20 109
Signed term sheets 32 +11 43
Total 121 +31 152
The Group's strategy is to concentrate on higher margin principal and project
development contracts, as opposed to agency contracts. As a result of this
strategy, 27 out of the 31 new contracts and term sheets were signed on a
principal basis. In most, but not all, cases EcoSecurities will be purchasing
the CERs generated by these projects at a fixed price for the term of the
contract.
CER volume under contract and term sheet has also increased significantly.
Gross contract volume has increased significantly to over 90 million CERs, from
72 million calculated at the time of the IPO. Gross contract volume is the
total number of CERs estimated to be generated by all projects under contract
and term sheet. This represents the maximum project volume, and does not adjust
for the risks that any given project faces before the delivery of the projected
volume of CERs (such as country, financing, construction and CDM approval
risks). EcoSecurities' portfolio of projects is highly diversified by
geographic location, technology employed and CDM methodology. We believe that
project diversification, as well as our excellent track record in project
implementation, significantly mitigates the overall portfolio risk to the
Group's CER volume under contract.
The Directors believe the Group's business development relationship with Cargill
will play an important role in assisting the Group in originating new CDM
projects, both with Cargill's own operations and with their customers.
Implementation
EcoSecurities' projects continue to progress at a steady pace through the CDM
cycle, which will be improved by the Group's new web-based document management
and project control system which allows for decentralised project work while
maintaining centralised quality control standards. The number of EcoSecurities'
projects registered by the CDM Executive Board has risen to 13 projects at the
year end from 8 at 31 October 2005.
Of the 152 projects at contract and term sheet stage, over 120 are now financed,
more than 60 have completed PDDs and over 20 have been validated.
In December, the CDM Executive Board approved two new methodologies relating to
Forestry and Coal Mine Methane projects, which is important for the Group as
these are areas targeted by its origination and business development teams.
Commercialisation
In the final quarter of 2005, two of the Group's contracted projects had CERs
verified and issued by the CDM Executive Board. These were among the world's
first projects to receive CERs, demonstrating that the systems and framework are
now in place within EcoSecurities and the UN to enable the processing of
projects through the entire CDM project cycle.
Market pricing has increased substantially throughout 2005, driven by higher EU
Allowance prices. The spot EU Allowance price has risen from approximately Euro8
in January 2005 to Euro21.65 at the end of December 2005. Demand for CERs has
grown as well, with new buyers entering the market during the year. In
particular, the number of corporate buyers in Europe has increased
significantly, as these buyers can use CERs to meet the emissions caps imposed
on them under the terms of the EU Emissions Trading Scheme. EcoSecurities'
trading strategy in 2005 was to sell a portion of our portfolio on a forward
payment versus delivery basis through and including 2012. All contracts are at
fixed prices in either Euros or US dollars. Prices obtained for our CERs have
increased broadly in line with the price of EU Allowances.
Outlook
In the first two months of 2006, the volume of new contracted and term sheet
projects signed by EcoSecurities grew in line with the Board's expectations.
Our strong start, combined with robust demand for carbon credits from buyers,
gives us confidence for the remainder of 2006. We anticipate that the expansion
in the number of EcoSecurities' local offices and personnel will continue to
provide us with a competitive advantage in the origination of project
opportunities. Our relationship with Cargill is having a positive impact on our
volume of project leads, and we expect that the volume of CERs in our portfolio
will increase significantly, primarily from project investment and development
activities in the landfill, animal and agricultural waste sectors. It is our
expectation that our portfolio will remain highly diversified by technology,
methodology and geographic location, thereby minimising risk to the overall
portfolio.
Our strategy for the year ahead is to continue to maintain our core focus on
originating, implementing and commercialising a highly diversified portfolio of
emissions reductions projects. It is our expectation that the combined strength
of our many local offices and personnel, the expertise of our operating Group
teams, and the capital from the Group's recent IPO, positions EcoSecurities well
to benefit from the exciting opportunities in the market.
Financial Review
Income has been primarily driven by the consulting business (Euro2.2m), with the
remainder arising from CER transactions where EcoSecurities acted as the agent.
The growth in administrative expenses to Euro3.35m (2005: Euro0.65m) was broadly in
line with plan and is related to the significant growth of the Group's employee
base and geographic spread over the last year, with costs being expensed as
incurred. The loss before tax for 2005 was Euro4.2m again reflecting the
significant investment in the expansion of the business and the IPO, and the
expensing of share options.
Transaction costs amounting to Euro7.6m have been deducted from the Euro83.7m proceeds
of the IPO. A further Euro1.3m has been charged to the income statement in respect
of costs relating to the Group's preparation for the IPO which the Directors
have determined were not directly attributable to the issuance of the new shares
but to the related preparatory activities.
The year end balance sheet and cash flow statements reflect the funds raised in
the IPO. The Group has a net cash balance of Euro83.1m, most of which is invested
in money market deposits in currencies which match the forecasted operating cash
requirements of the business.
EcoSecurities is exposed to the commodity price risk of CERs as the Group enters
into contracts both to buy CERs and invest in projects which develop CERs, which
as of the balance sheet date have not yet been transacted in physical markets.
The Group's risk management policy is to partially hedge its CER purchase
agreements by selling forward sufficient quantities to meet its anticipated
operating costs.
EcoSecurities Group plc
Consolidated Income Statement for the year ended 31 December 2005
Year ended Year ended
31 December 31 December
2005 2004
Euro'000 Euro'000
Revenue 2,268 1,557
Cost of sales (2,166) (1,095)
Gross profit 102 462
Net other operating income 47 32
Administrative expenses (3,350) (653)
IPO preparation expenses (1,286) -
Net profit on disposal of joint ventures 498 -
Loss before financing costs (3,989) (159)
Financing costs (339) (58)
Interest receivable 125 1
Loss before tax (4,203) (216)
Income tax expense (115) 19
Loss for the financial year (4,318) (197)
Attributable to:
Equity holders of the Company (4,344) (161)
Minority interest 26 (36)
(4,318) (197)
Earnings per share expressed in cents per
share
Basic and fully diluted earnings per share (26.97) (1.57)
EcoSecurities Group plc
Statement of Recognised Income and Expenses for the year ended 31 December 2005
Year ended Year ended
31 December 31 December
2005 2004
Euro'000 Euro'000
Loss for the financial year (4,318) (197)
Currency translation reserve movement (172) 24
Total recognised income and expenses for the year
(4,490) (173)
Attributable to:
Equity shareholders of the Company (4,521) (140)
Minority interests 31 (33)
(4,490) (173)
EcoSecurities Group plc
Consolidated Balance Sheet as at 31 December 2005
31 December 31 December
2005 2004
Euro'000 Euro'000
Assets
Non-current assets
Intangible assets 102 -
Property, plant and equipment 134 27
Investment in subsidiaries - -
Total non-current assets 236 27
Current assets
Trade and other receivables 1,320 583
Current tax debtors - 22
Cash and cash equivalents 83,148 77
Total current assets 84,468 682
Total assets 84,704 709
Shareholders' equity
Issued capital 229 1
Share premium 75,853 -
Share based payment reserve 337 61
Translation reserve (52) 120
Other reserves (573) -
Retained earnings (5,022) (678)
Total shareholders equity 70,772 (496)
Minority interest in equity - (93)
Total equity 70,772 (589)
Liabilities
Non-current liabilities
Interest bearing loans and borrowings 8,752 154
Deferred tax liabilities 4 1
Total non-current liabilities 8,756 155
Current liabilities
Interest bearing loans and borrowings 35 221
Trade and other payables 5,028 922
Current tax creditors 113 -
Total current liabilities 5,176 1,143
Total liabilities 13,932 1,298
Total equity and liabilities 84,704 709
EcoSecurities Group plc
Consolidated Cash Flow Statement for the year ended 31 December 2005
31 December 31 December
2005 2004
Euro'000 Euro'000
Loss for the financial year (4,318) (197)
Income tax expense/(credit) 115 (19)
Interest paid 339 58
Interest received (125) (1)
Depreciation 27 14
Increase in trade and other receivables (682) (212)
Increase in trade and other payables 2,036 150
Net profit on disposal of joint ventures (498) -
Share based payment 276 24
Unrealised foreign exchange difference (100) 31
Interest paid (270) (53)
Interest received 65 1
Tax refunds received 23 16
Net cash flow from operating activities (3,112) (188)
Cash flows from investing activities
Cash paid to acquire minority interests (477) -
Purchase of property, plant and equipment (132) (13)
Purchase of intangible fixed assets (103) -
Net cash proceeds from disposal of interest in 477 -
joint ventures
Net cash used in investing activities (235) (13)
Cash flows from financing activities
Gross proceeds from the issue of ordinary share 83,667 -
capital
Admission costs paid (5,557) -
Net proceeds from issue of new loans 8,745 294
Repayment of borrowings (449) (32)
Payments to restricted cash (583) -
Net cash generated from financing activities 85,823 262
Effects of foreign exchange on cash 12 -
Net increase in cash and cash equivalents 82,488 61
Cash and cash equivalents at start of year 77 16
Cash and cash equivalents at end of year 82,565 77
EcoSecurities Group plc
Notes to the financial statements
1. Basis of preparation
This preliminary financial information has been derived from the Group's
consolidated financial statements for the year ended 31 December 2005 which have
been prepared in accordance with International Financial Reporting Standards
(IFRS) as approved by the EU.
The accounting policies applied in preparing the Group's consolidated financial
statements for the year ended 31 December 2005 were as set out in the Admission
Document, issued on 13 December 2005.
2. Business segments
The Group has defined the following three business segments based on
expectations about its future operating activities as follows:
(a) Principal and Agency Emissions Trading;
(b) Emissions Reduction Project Development; and
(c) Consulting and Advisory.
The Group has historically been involved in the provision of consulting and
advisory services and has accordingly reported all costs and revenues and
attributed all assets and liabilities to that segment. Up to 31 December 2005,
no revenue has been attributed to the principal and project development segments
and no separate reporting of segments results presented. The assets and
liabilities of the Group previously classified entirely within the consulting
and advisory segment are being allocated in some cases to other activities, or
are unallocated. For the year ended 31 December 2005, the Group continues to
report all assets and liabilities within this segment as there is yet no
reasonable, or reliable basis for attributing segment assets and liabilities.
The Group will review the basis of disclosure in the future as its activity base
broadens.
3. Loss per share
Basic loss per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year.
The weighted average number of ordinary shares is calculated as follows:
Year ended Year ended
31 December 2005 31 December 2004
('000) ('000)
Issued ordinary shares
Start of year 10,305 10,282
Effect of shares issued during the year 5,805 10
Weighted average number of shares for year 16,110 10,292
The number of shares in issue at the end of the financial year is 91,626,676 and
therefore the weighted average number of shares issued in the year is not
representative of the number of shares upon which future earnings per share will
be calculated.
Basic and fully diluted loss per share is calculated as follows:
Year ended Year ended
31 December 31 December
2005 2004
Earnings (Euro'000) (4,344) (161)
Weighted average number of shares ('000) 16,110 10,292
Loss per share (Euro cent) (26.97) (1.57)
There is no difference between basic and fully diluted loss per share as the
inclusion of the share options in the calculation of the weighted average number
of shares would have the effect of reducing the loss per share. The potential
dilutive effect on the weighted average number of ordinary shares would have
increased by 865,531 shares and comprised the dilutive effect of the share
options issued under the employee share option schemes together with the
dilutive effect of the convertible loan granted to Angel Capital on 16 June 2005
and converted into ordinary shares on 16 August 2005.
The adjusted loss per share has been presented to show the impact on basic
earnings per share of the IPO preparation expenses and the net profit on
disposal of the joint ventures deemed to be of an exceptional nature as follows:
Year ended Year ended
31 December 31 December
2005 2004
Euro'000 Euro'000
Earnings
Items of an exceptional nature: (4,344) (161)
IPO preparation expenses 1,286 -
Disposal of joint ventures (498) -
(3,556) (161)
Adjusted loss per share (Euro cent) (22.07) -
4. Cash and cash equivalents
Year ended Year ended
31 December 31 December
2005 2004
Euro'000 Euro'000
Cash at bank and in hand 422 77
Short term bank deposits 82,143 -
82,565 77
Restricted cash 583 -
83,148 77
The Group's short term bank deposits are invested in money market accounts.
Details of these deposits are as follows:
Balance invested Weighted Weighted
average average term
Euro'000 interest rate (days)
Currency
Euro 54,300 2.44% 22 days
Sterling 11,920 4.67% 17 days
US Dollar 15,923 4.26% 17 days
82,143
5. Share premium account
Year ended
31 December
2005
Euro'000
Start of year -
Premium on shares issued in share for share exchange in the
year, net of expenses 30,519
Premium on shares issued for cash 79,269
Transaction costs (7,586)
Reserve arising on share for share exchange (26,349)
End of year 75,853
On 13 December 2005, the Group issued 36,000,000 ordinary shares of Euro0.0025 each
on IPO at the listing price of #1.50 per share, giving rise to a premium of
Euro79.3 million.
Transaction costs amounting to Euro7.6 million have been deducted from the proceeds
arising on the issue of new shares in the year. A further Euro1.3 million has been
charged to the income statement in respect of the costs relating to the IPO
which management have determined were not directly attributable to the issuing
of new shares but to related preparatory activities.
This information is provided by RNS
The company news service from the London Stock Exchange
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