Interim Results

Alkane Energy PLC 19 September 2007 Immediate Release 19 September 2007 Alkane Energy plc ('Alkane' or 'the Company') Unaudited interim results for the half-year ended 30 June 2007 Alkane Energy plc (AIM:ALK) the international renewable energy company that designs, builds, operates and services methane treatment and electricity generation plants. These plants greatly reduce emissions of damaging greenhouse gases and help in global efforts to slow climate change. Financial Highlights •Profit after tax £310,000 (2006 H1: loss after tax £484,000) •Earnings per share up to 0.34p (2006 H1: loss per share 0.53p) •Turnover up 29.6% (excluding Pro2) £2,359,000 (2006 H1: £1,820,000) •Pro2 now an associate company (2006 H1 Alkane turnover incl. Pro2 £8,435,000) •Cash and cash equivalents £1,446,000 (2006 H1: £843,000) •Net debt position of £491,000 (30 June 2006: £2,867,000) Operational Highlights United Kingdom - Alkane Energy UK Limited •Turnover in first half £2,359,000 (2006 H1: £1,820,000) •Record operating profit £513,000 (2006 H1: £76,000) •17 MW of power generation and gas supply plants operating •39% increase in energy output to 39 million kWh (2006 H1: 28 million kWh) •Equivalent of 6MW of direct gas sales to customers •Share of loss of associate Pro2, £34,000 German Associate - Pro2 Anlagentechnik GmbH •Turnover up to £7,924,000 (2006 H1: £6,696,000) • 2007 order book at record high • New international renewable energy markets opening up •Additional bank finance under negotiation Dr Cameron Davies, Chief Executive, commenting on the interim results, said: 'Alkane made a record operating profit of £513,000 in the first half of 2007 with the UK power generation and gas sales business performing well. Our existing mine gas plants generated the equivalent of 39 million kWh of electricity in the first half of 2007, considerably higher than the 28 million kWh in the first half of 2006. A full review of the mine gas potential of our petroleum licence portfolio has identified a five year pipeline of generation projects for development. Pro2 also improved its performance and came close to break even in the first six months. Although a number of one off items have held back profits in the first half, the background of robust electricity prices and a strong portfolio performance give us confidence to push ahead with our development plans.' Enquiries: Alkane Energy plc Tel: 01623 827927 Cameron Davies - Chief Executive Officer Steve Goalby - Finance Director Buchanan Communications Tel: 020 7466 5000 Ben Willey Nicholas Melson Miranda Higham Brewin Dolphin Securities Tel: 0113 241 0136 Andrew Emmott CHAIRMAN'S STATEMENT Introduction I am pleased to report that Alkane was profitable during the first half of 2007 as a result of a good contribution from the UK business and a near break even position at Pro2 Anlagentechnik GmbH (Pro2), which is now an associate company in which Alkane holds a 38% interest. The UK business contributed a record operating profit of £513,000. Our share of Pro2's much reduced loss was £34,000 leading to an overall profit of £310,000 compared with a loss of £484,000 in the first half of 2006. The increase in UK revenue and operating profit was principally due to the addition of new plants to our portfolio, high average contract electricity prices and high gas prices. Our portfolio of electricity contracts provides visibility at attractive commercial prices into 2009 giving us continued good returns on our mine gas projects. Forward market contracts indicate that electricity prices will continue to rise gently in the medium term. The Company generated a record 39 million kWh (kilowatt hours) of climate change levy exempt electricity during the period compared with 28 million kWh in the same period in 2006. An independent study of our licence areas has identified a pipeline of more than 20 sites with potential for electricity generation and gas supply plants subject to the results of drilling, connections and consents. We are planning a programme to exploit this potential as quickly as possible. Financial Overview These results are the first to be produced under International Financial Reporting Standards (IFRS). The comparative results for the six months to 30 June 2006 have been restated to IFRS, the net effect on earnings being a reduction in the loss attributable to equity holders from £520,000 to £484,000. The results are also the first to be published following the investment by new shareholders of €1.4 million in the equity of Pro2 announced on 12 July 2007. The Company's holding in Pro2 has reduced from 51% to 38% as a result of this transaction, which was effective on 1 January 2007. Accordingly, Pro2, is treated for reporting purposes as an associated company of Alkane Energy plc rather than as a subsidiary from that date, and in these unaudited interim results Alkane has reported its share of Pro2's results as one line in the income statement, rather than consolidating turnover and costs by individual category. The reduction in the Company's stake in Pro2 Anlagentechnik GmbH has led to a deemed partial disposal, with an accounting loss of £120,000. The comparisons of the numbers for the six months ended 30 June 2007, particularly those for turnover, gross profit and operating profit, with the same period last year are significantly affected by the change of status of Pro2 from subsidiary to associate. In order to facilitate comparison, the numbers for H1 2006 are shown both with the Pro2 contribution excluded and as reported, and the commentary refers first to the UK business, followed by a separate commentary on the Pro2 business. Alkane recorded turnover of £2,359,000 (2006 H1: excluding Pro2 £1,820,000; as reported £8,435,000). The increase reflects a higher volume of gas and electricity sales, due to the contribution of the new sites completed during last year, with electricity sale prices averaging £44/MWh during the period (2006 H1: £45/MWh). As a result of this growth, gross profit increased to £1,549,000 (2006 H1: excluding Pro2 £886,000; as reported £2,558,000). Operating profit increased significantly to £513,000 (2006 H1: excluding Pro2 £76,000; as reported, a loss of £1,105,000). The overall profit attributable to equity holders was £310,000, (2006 H1: a loss of £484,000) whilst earnings per share were 0.34p (2006 H1: loss per share of 0.53p). As well as the bigger contribution from operating sites there are three non-recurring items that affect operating profit. As announced on 21 March 2007 a licence, covering a flooded coal mine, was transferred to a coal bed methane operator for £185,000; the external costs to date associated with the conversion to IFRS are £60,000; and the Company incurred costs of £221,000 in respect of an aborted corporate transaction. Two further non-recurring items were the impairment of the balance of the goodwill that was capitalised when the Company acquired Pro2 Services Limited in March 2005 (£66,000) and a loss on the deemed disposal of Pro2 (£120,000). The Company's share (38%) of the loss of Pro2 is £34,000. This is a significant improvement on the results from Pro2 in H1 2006, a loss of £693,000. The improvement is mainly due to increased turnover of £7,924,000 (H1 2006: £6,696,000) and increased margins, which led to an operating profit of £93,000 (H1 2006: loss of £1,183,000). Pro2's renewable energy business is biased towards the second half, and as in previous years it is expected that Pro2 will record an overall profit at the year-end. Pro2 Services Limited was acquired in order to provide in-house operating and maintenance services, and to assist in the promotion of the German Pro2 business in the UK. It also has a small business of servicing customers in the landfill industry. This latter business has not met expectations and it was therefore appropriate to write off £66,000, the balance of goodwill. Net debt at 30 June 2007 stood at £491,000 (30 June 2006: excluding Pro2 net funds of £171,000, as reported net debt of £2,867,000) whilst the balance of cash and cash equivalents was £1,446,000 (30 June 2006: excluding Pro2 £1,291,000, as reported £843,000). Net cash inflows from operating activities were £193,000 (2006 H1: excluding Pro2, £31,000, as reported outflows of £1,826,000). The principal use of cash was capital expenditure on the addition of a generator and preparatory work in respect of two new sites. Mine Gas Operations Alkane's plants generated 39 million kWh of climate change levy exempt electricity during the period compared with 28 million kWh of electricity during 2006 H1 and project economics remain robust. The plants have operated at high availability and our own service team is gradually taking on more of the routine servicing operations from external contractors. At Alkane UK's methane plant in Germany, the volumes and purity have been lower than predicted at the Joarin mine gas plant, however it is now operating steadily at a reduced rate with a single generation system. A technical study has commenced into increasing the purity of the methane at Joarin along with another study to verify past emissions savings for trading in the international voluntary carbon market. The other container previously installed at Joarin has been relocated to Warsop in the UK and is operating successfully. We have applied for planning consent for additional 1.35MW generators at our existing plants at Bevercotes and Warsop but the slow planning process has delayed these additions probably until Q4 2007 and Q1 2008 respectively. Applications to drill the first new mine gas appraisal boreholes have also been made and detailed documentation is being prepared for submission to the local authorities and DBERR (formerly DTI). A 5-year generation project pipeline has been identified following an evaluation of gas reserves by independent consultants at partially developed and undeveloped sites within our licence portfolio. The study concluded that there are more than 20 sites with potential for mine gas generation and gas supply plants, subject to the results of drilling, grid connections and planning. The application for planning permission for a pilot biodiesel generation plant at Markham was turned down on amenity grounds but we are investigating the other potential green energy solutions to use this and our other valuable unused grid connections. Pro2 Anlagentechnik GmbH The confidence shown by the highly respected new investors and the proceeds of the equity investment are helping Pro2 to source increased funding for working capital and project finance. The first agreement has been reached to provide an increased overdraft facility from a new bank. Negotiations are expected to be completed soon on loan, mezzanine and project finance. In the first half of 2007, Pro2's turnover increased to £7,924,000 from £6,696,000 as a result of strong demand for biogas-fuelled renewable electricity plants in Germany and new orders from the rapidly expanding French landfill and biogas markets. The company made a small net loss of £89,000 compared with a loss of £1,361,000 in 2006. The firm order book for 2007 is at a record high and the outlook for 2008 is for continued growth. The board of Alkane and the new Pro2 supervisory board believe that a well-funded Pro2 will be able to continue to grow and also significantly improve its profitability. Carbon Emissions Trading We have initiated a study by Dutch emissions trading company Carbon-TF B.V. to verify our current and historic emissions reductions. TUV Nord, the German world leader in emissions measurement and accredited by the UNFCCC (United Nations Framework Convention on Climate Change), has started the verification process. The objective is to verify all or part of Alkane's last 7 years' emissions savings, which exceed 2 million tonnes of carbon dioxide equivalent. If they are verified then Carbon-TF will trade these Verified Emissions Reductions (VERs) on Alkane's behalf in the voluntary international carbon market. VERs are actual carbon emissions reductions created by the capture of methane rather than offsets provided by tree planting or carbon sinks. Outlook Alkane has again made good progress during the first half, with an increase in turnover in the UK and an increased profit as a result of good performance here, and a much improved performance from Pro2. Looking ahead, the second half weighting is less pronounced than it has been in the past and we are currently trading in line with market expectations. Commercially attractive electricity prices for our current projects are now tied in with contracts giving visibility on operating revenues up to Summer 2009 and as our pipeline of potential projects is developed the business will continue to grow. I consider that the future of the Company is secure and planning is under way for a smooth succession to the next generation of managers. Finally, I would like to welcome our new non-executive board member, Julia Henderson, who has already made a valuable contribution to our discussions. John Lander Chairman GROUP INCOME STATEMENT for the six months ended 30 June 2007 Six months Six months ended ended 30 June 2007 30 June 2006 (Unaudited) (Unaudited) £ '000 £ '000 REVENUE 2,359 8,435 Cost of sales (810) (5,877) -------- -------- GROSS PROFIT 1,549 2,558 Administrative expenses (1,279) (3,830) Other operating income 58 167 Profit on sale of licence 185 - -------- -------- OPERATING PROFIT/LOSS 513 (1,105) Finance income 131 65 Finance costs (87) (214) -------- -------- NET FINANCE INCOME/(COSTS) 44 (149) IMPAIRMENT OF GOODWILL (note 7) (66) - LOSS ON DEEMED DISPOSAL (note 5) (120) - SHARE OF LOSS OF ASSOCIATE (34) - -------- -------- PROFIT/(LOSS) BEFORE TAX 337 (1,254) Tax (27) 102 -------- -------- PROFIT/(LOSS) FOR THE PERIOD 310 (1,152) ======== ======== PROFIT/(LOSS) FOR THE PERIOD ATTRIBUTABLE TO: Equity holders of the parent 310 (484) Minority interest - (668) -------- -------- 310 (1,152) ======== ======== Earnings/(loss) per share Basic, for profit/(loss) for the period attributable to equity holders of the parent 0.34p (0.53p) Diluted, for profit/(loss) for the period attributable to equity holders of the parent 0.33p (0.53p) The earnings/(loss) per ordinary share calculation represents total and continuing results GROUP BALANCE SHEET at 30 June 2007 as at as at as at 30 June 2007 30 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 NON-CURRENT ASSETS Intangible assets - 790 774 Property, plant and equipment 3,334 5,939 6,443 Gas assets 3,352 2,898 3,374 Investments accounted for using the equity method 3,070 - - Other investments - - 3 -------- -------- --------- 9,756 9,627 10,594 -------- -------- --------- CURRENT ASSETS Inventories 78 7,020 6,631 Trade and other receivables 3,656 5,797 7,768 Other financial assets 350 505 512 Cash and short-term deposits 1,096 1,071 946 -------- -------- --------- 5,180 14,393 15,857 -------- -------- --------- TOTAL ASSETS 14,936 24,020 26,451 -------- -------- --------- CURRENT LIABILITIES Trade and other payables (895) (8,590) (9,381) Financial liabilities (304) (1,517) (1,084) Income tax payable - (119) (80) Provisions (4) (1) (4) -------- -------- --------- (1,203) (10,227) (10,549) -------- -------- --------- NON-CURRENT LIABILITIES Other payables - (66) (43) Financial liabilities (1,633) (2,925) (2,939) Provisions (1,550) (1,587) (1,550) -------- -------- --------- (3,183) (4,578) (4,532) -------- -------- --------- TOTAL LIABILITIES (4,386) (14,805) (15,081) -------- -------- --------- NET ASSETS 10,550 9,215 11,370 ======== ======== ========= EQUITY Share capital 460 457 459 Share premium 33,259 33,207 33,234 Other reserves 97 110 81 Retained losses (23,266) (25,037) (23,572) -------- -------- --------- GROUP SHAREHOLDERS' EQUITY 10,550 8,737 10,202 Minority interests - 478 1,168 -------- -------- --------- TOTAL EQUITY 10,550 9,215 11,370 ======== ======== ========= CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2007 Attributable to equity holders of the parent -------------------------- ------- ------- ------- ------- Issued Share Retained Other Total capital premium earnings reserves equity £'000 £'000 £'000 £'000 £'000 At 1 January 2007 459 33,234 (23,572) 81 10,202 Foreign currency translation - - (4) 5 1 ------- ------- ------- ------- ------- Total income and expense for the period recognised directly in equity - - (4) 5 1 Profit for the period - - 310 - 310 ------- ------- ------- ------- ------- Total income and expense for the period - - 306 5 311 Share-based payment - - - 11 11 Issue of share capital 1 25 - - 26 ------- ------- ------- ------- ------- At 30 June 2007 (unaudited) 460 33,259 (23,266) 97 10,550 ======= ======= ======= ======= ======= At 1 January 2006 456 33,189 (24,562) 56 9,139 Foreign currency translation - - 41 - 41 ------- ------- ------- ------- ------- Total income and expense for the period recognised directly in equity - - 41 - 41 Loss for the period - - (484) - (484) ------- ------- ------- ------- ------- Total income and expense for the period - - (443) - (443) Share-based payment - - (32) 54 22 Issue of share capital 1 18 - - 19 ------- ------- ------- ------- ------- At 30 June 2006 (unaudited) 457 33,207 (25,037) 110 8,737 ======= ======= ======= ======= ======= GROUP CASH FLOW STATEMENT for the six months ended 30 June 2007 Six months Six months ended ended 30 June 2007 30 June 2006 (Unaudited) (Unaudited) £ '000 £ '000 OPERATING ACTIVITIES Profit/(loss) before tax from continuing operations 337 (1,254) Adjustments to reconcile operating profit/(loss to net cash flows: Depreciation and impairment of property, plant and equipment and gas assets 247 674 Amortisation and impairment of intangible assets 66 8 Share-based payments expense 10 22 Pension accrual expense - 14 Profit on sale of licence (185) - Finance income (131) (65) Finance expense 87 214 Loss on deemed disposal 120 - Share of net loss of associate 34 - Movements in provisions - (1) Decrease in trade and other receivables 193 914 Increase in inventories (31) (3,563) (Decrease)/increase in trade and other payables (525) 1,130 Income tax (paid)/refunded (29) 81 -------- -------- NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES 193 (1,826) CASH FLOWS FROM INVESTING ACIVITIES Proceeds from sale of property, plant and equipment - 2,451 Proceeds from sale of licence 185 - Interest received 93 68 Purchase of subsidiary undertaking - (20) Purchase of intangible assets - (5) Purchase of property, plant and equipment (466) (104) Purchase of gas assets (145) (595) -------- -------- NET CASH FLOWS (USED IN)/FROM INVESTING ACTIVITIES (333) 1,795 CASH FLOWS FROM FINANCING ACTIVITIES Issue of share capital 26 19 Proceeds from sale and finance leaseback 606 - Sale and finance leaseback rentals (201) (105) Repayment of capital element of finance leases - (371) Repayment of long-term loans - (27) Interest paid (86) (161) -------- -------- NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES 345 (645) Net increase/(decrease) in cash and cash equivalents 205 (676) Net foreign exchange difference - (6) Cash and cash equivalents at 1 January 1,241 1,525 -------- -------- CASH AND CASH EQUIVALENTS AT 30 JUNE (note 3) 1,446 843 ======== ======== NOTES TO THE ACCOUNTS 1. CORPORATE INFORMATION The interim condensed financial statements of the Group for the six months ended 30 June 2007 were authorised for issue in accordance with a resolution of the directors on 18 September 2007. Alkane Energy plc is a public limited company incorporated and domiciled in England whose shares are publicly traded. The principal activities of the Group are described in note 6. 2. BASIS OF PREPARATION AND ACCOUNTING POLICIES Basis of preparation The interim condensed consolidated financial statements are unaudited and do not constitute statutory financial statements within the meaning of Section 240 of the Companies Act 1985. These are the Group's first IFRS condensed consolidated interim financial statements for part of the period covered by the first IFRS annual financial statements. The Group's financial statements have been prepared in accordance with International Reporting Standards as adopted by the EU and IFRS 1 First-time Adoption of International Financial Reporting Standards has been applied. The condensed consolidated interim financial statements do not include all of the information required for full annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2006 and the Group's statement of Adoption of International Reporting Standards showing an explanation of how the transition to IFRSs has affected the reported financial position, financial performance and cash flows of the Group. This Statement includes reconciliations of equity and profit or loss for comparative periods reported under UK GAAP to those reported for those periods under IFRSs. Significant accounting policies The preparation of the condensed consolidated interim financial statements has resulted in changes to the accounting policies as compared with the most recent annual financial statements prepared under previous GAAP. The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those presented in the IFRS Transition Statements for the opening balance sheet at the date of transition (1 January 2006) and the comparative periods (30 June 2006 and 31 December 2006). The impact of the transition from previous GAAP to IFRSs is explained in the Group's Statement of Adoption of International Financial Reporting Standards. The accounting policies have been applied consistently throughout the Group for purposes of these condensed consolidated interim financial statements. The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. 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 or available for early adoption at the Group's first IFRS annual reporting date as at 31 December 2007. Based on these IFRSs, the Board of Directors have made assumptions about the accounting policies expected to be adopted (accounting policies) when the first IFRS annual financial statements are prepared for the year ended 31 December 2007. The IFRSs that will be effective or available for voluntary early adoption in the annual financial statements for the period ended 31 December 2007 are still subject to change and to the issue of additional interpretations and therefore cannot be determined with certainty. Accordingly, the accounting policies for that annual period that are relevant to this interim financial information will be determined only when the first IFRS financial statements are prepared at 31 December 2007. The Group has early adopted the following standard: IFRS 8 Operating segments The Group has elected to adopt IFRS 8 as of 1 January 2007. This standard requires disclosure of information about the Group's operating segments. Adoption of this standard did not have any effect on the financial position or performance of the Group. The Group determined that the operating segments were the same as the business segments previously identified under IAS 14. Additional disclosures about each of these segments are shown in Note 6, including revised comparative information. 3. CASH AND CASH EQUIVALENTS For the purpose of the interim consolidated cash flow statement, cash and cash equivalents are comprised of the following: 30 June 2007 30 June 2006 (Unaudited) (Unaudited) £ '000 £ '000 Cash at bank and in hand 1,096 1,071 Short term deposits 350 505 Bank overdraft - (733) -------- -------- 1,446 843 ======== ======== 4. INCOME TAX The major components of income tax expense in the interim consolidated income statement are: 30 June 2007 30 June 2006 (Unaudited) (Unaudited) £ '000 £ '000 Foreign tax (29) - Tax over-provided in previous years 2 102 -------- -------- (27) 102 ======== ======== 5. Business COMBINATIONS On 1 January 2007 Pro2 Anlagentechnik GmbH issued new equity shares to third party investors for an amount of €1,400,528. As a result Alkane Energy plc's interest was reduced from 51% to 38.01%. There is therefore a deemed disposal which gives rise to a loss. The book value of the net assets at the date of disposal were as follows: £ '000 £ '000 Non-current assets 3,585 Inventories 6,584 Trade and other receivables 6,657 Other financial assets 162 Cash and short-term deposits 55 Current liabilities (11,644) Non-current liabilities (3,023) -------- Net assets at 1 January 2007 2,376 Cash inflow following transaction (€1,400,528) 942 -------- 3,318 Effective interest in Pro2 before issue of new equity: -------------------------------------------------------- 51% of £2,376,000 1,212 Plus goodwill on acquisition 665 1,877 -------- Effective interest in Pro2 after issue of new equity: ------------------------------------------------------- 38.01% of £3,318,000 1,261 Plus goodwill on acquisition x 38.01/51 496 1,757 -------- -------- Loss on Disposal (120) ======== The reduction in the Company's holding means that from the transaction date of 1 January 2007 Pro2 Anlagentechnik GmbH has been treated for reporting purposes as an associated company of Alkane Energy plc, using the equity method of accounting. In previous periods the results of Pro2 Anlagentechnik GmbH were fully consolidated as a subsidiary undertaking. Under the equity method of accounting the Company's share of Pro2 Anlagentechnik GmbH's results are shown as one line in the income statement, rather than consolidating turnover and costs by individual category. There is therefore a significant reduction in revenue, cost of sales and administrative expenses in the six months to 30 June 2007 when compared to the six months to 30 June 2006. In the Balance Sheet for the six months ended 30 June 2007, the Group's investment in Pro2 Anlagentechnik GmbH is reported as one line, Investments accounted for using the equity method, leading to significant reductions in property, plant and equipment, inventories, trade and other receivables, and other payables and financial liabilities when compared to the six months ended 30 June 2006. 6. SEGMENT INFORMATION Business segments The Group is comprised of the following business segments: • Extraction of gas from coal measures for power generation and burner tip use; and • The manufacture, supply, operation and maintenance of equipment. Seasonality of operations There is no significant seasonal nature to the Group's business of the extraction and use of gas. However manufacture and supply of equipment by the associated company Pro2 Anlagentechnik GmbH's is biased towards the second half, principally due to the effect of the German renewable energy law under which electricity prices available for equipment commissioned by customers fall on 1 January each year. The following tables present revenue and profit information regarding the Group's business segments for the six months ended 30 June 2007 and 2006 respectively. Six months ended 30 June 2007 (unaudited) Continuing operations Extraction of Manufacture Total gas from coal supply, operate measures and maintain equipment £ '000 £ '000 £ '000 Revenue Revenue from external customers 2,308 51 2,359 Inter-segment sales - 102 102 --------- -------- --------- Total revenue 2,308 153 2,461 --------- -------- --------- Results Segment profit/(loss) 860 (136) 724 --------- -------- --------- Corporate centre costs (497) Corporate centre finance income 230 Loss on deemed disposal (120) --------- Profit before tax from continuing operations 337 --------- Six months ended 30 June 2006 (unaudited) Continuing operations Extraction of Manufacture Total gas from coal supply, operate measures and maintain equipment £ '000 £ '000 £ '000 Revenue Revenue from external customers 1,627 6,808 8,435 Inter-segment sales - 99 99 --------- -------- --------- Total revenue 1,627 6,907 8,534 --------- -------- --------- Results Segment profit/(loss) 129 (1,475) (1,346) --------- -------- --------- Corporate centre costs (128) Corporate centre finance income 220 --------- Loss before tax from continuing operations (1,254) ----------------------- The following table compares total segment assets as at 30 June 2007 and as at the date of the last annual financial statements (31 December 2006). 30 June 31 December 2007 2006 (Unaudited) (Audited) £ '000 £ '000 Extraction of gas from coal measures 4,882 4,284 Manufacture, supply, operate and maintain equipment 99 6,103 -------- --------- Total segment assets 4,981 10,387 Goodwill - 756 Corporate centre 586 441 Investment in associate 3,070 - Loan to associate 2,128 - Inter-segment adjustment (215) (214) -------- --------- Total consolidated assets 10,550 11,370 -------- --------- Geographical Segments Six months ended 30 June 2007 (unaudited) Continuing operations United Kingdom Continental Total Europe £ '000 £ '000 £ '000 Revenue Revenue from external customers 2,242 117 2,359 Inter-segment sales 102 - 102 --------- -------- --------- Total revenue 2,344 117 2,461 --------- -------- --------- Results Segment profit/(loss) 835 (111) 724 --------- -------- --------- Corporate centre costs (497) Corporate centre finance income 230 Loss on deemed disposal (120) --------- Profit before tax from continuing operations 337 ========= Six months ended 30 June 2006 (unaudited) Continuing operations United Kingdom Continental Total Europe £ '000 £ '000 £ '000 Revenue Revenue from external customers 1,636 6,799 8,435 Inter-segment sales 17 82 99 --------- -------- --------- Total revenue 1,653 6,881 8,534 --------- -------- --------- Results Segment profit/(loss) 77 (1,423) (1,346) --------- -------- --------- Corporate centre costs (128) Corporate centre finance income 220 --------- Loss before tax from continuing operations (1,254) ========= The following table compares total segment assets as at 30 June 2007 and as at the date of the last annual financial statements (31 December 2006). 30 June 31 December 2007 2006 (Unaudited) (Audited) £ '000 £ '000 United Kingdom 4,296 3,684 Continental Europe 685 6,703 -------- -------- Total segment assets 4,981 10,387 Goodwill - 756 Corporate centre 586 441 Investment in associate 3,070 - Loan to associate 2,128 - Inter-segment adjustment (215) (214) -------- -------- Total consolidated assets 10,550 11,370 -------- -------- 7. Impairment of goodwill Pro2 Services Limited, a 100% owned subsidiary, provides maintenance support services to external customers and to other Group companies. A review has been undertaken of the future profitability of Pro2 Services Limited in respect of external business and this has concluded that the goodwill capitalised when the company was acquired in 2005 has been impaired. As a result the outstanding amount of £66,000 has been written off in the period. 8. Plant and equipment Acquisitions and disposals During the six months ended 30 June 2007 the Group acquired assets with a cost of £571,000 (2006: £645,000). There were no disposals during the six months ended 30 June 2007 (2006: £36,000). Sale and finance leaseback During the six months ended 30 June 2007 the Group entered into two new sale and finance leaseback agreements for items of plant with a total cost of £606,000. 9. Gas assets Acquisitions and disposals During the six months ended 30 June 2007 the Group acquired assets with a cost of £109,000 (2006: £566,000). There were no disposals during the six months ended 30 June 2007 (2006: nil). 10. Capital commitments At 30 June 2007 the Group had capital commitments of £75,000 contracted for but not provided in the accounts (2006: £135,000) of which £54,000 (2006: £115,000) relates to the purchase of plant and equipment and £21,000 (2006: £20,000) relates to the purchase of gas assets. 11. Share capital During the six months ended 30 June 2007, options over 200,000 ordinary shares were exercised in respect of the Post Admission Share Option Plan. 12. 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. This information is provided by RNS The company news service from the London Stock Exchange

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