Final Results

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 €2.3 million (2004: €1.6 million) • Loss before tax of €4.2 million (2004: loss of €0.2 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 €8 in January 2005 to €21.65 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 (€2.2m), with the remainder arising from CER transactions where EcoSecurities acted as the agent. The growth in administrative expenses to €3.35m (2005: €0.65m) 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 €4.2m again reflecting the significant investment in the expansion of the business and the IPO, and the expensing of share options. Transaction costs amounting to €7.6m have been deducted from the €83.7m proceeds of the IPO. A further €1.3m 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 €83.1m, 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 €'000 €'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 €'000 €'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 €'000 €'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 €'000 €'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 (€'000) (4,344) (161) Weighted average number of shares ('000) 16,110 10,292 Loss per share (€ 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 €'000 €'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 (€ cent) (22.07) - 4. Cash and cash equivalents Year ended Year ended 31 December 31 December 2005 2004 €'000 €'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 €'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 €'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 €0.0025 each on IPO at the listing price of £1.50 per share, giving rise to a premium of €79.3 million. Transaction costs amounting to €7.6 million have been deducted from the proceeds arising on the issue of new shares in the year. A further €1.3 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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