AGM Statement

RNS Number : 4564O

TEG Group (The) PLC

30 June 2010

 



 

For release

07:00

Date: 30 June 2010

The TEG GROUP PLC (TEG/L)

("TEG" or "the Company")

AGM Statement

At the Annual General Meeting of The TEG Group Plc, the AIM-listed cutting edge green technology company, which develops and operates organic composting and energy plants, which is to be held today (30 June 2010) at The Malmaison, Piccadilly, Manchester, Non-Executive Chairman, Nigel Moore will make the following statement:

"When we met last year, I informed you that the Board expected very encouraging progress in 2009 and I am pleased to report that 2009 proved to be as satisfactory as we had expected and the most successful trading year in the Group's history. 

Full year revenue for 2009 increased by 21% to £15.4m, from £12.7m in 2008.   The Group achieved a profit of £243,000 though we did benefit from a one-off gain of £956,000 relating to negative goodwill arising from the highly successful acquisition in June 2009 of Banham Compost Limited. This compared with a loss of £1.5m in 2008.  The Group maintains a healthy cash position with a closing balance as at 31 December 2009 of £3.8m.

Before turning to the Board's outlook for 2010 and beyond, I would like to highlight some of the progress made in the last 12 months.

Construction of the Chichester Street facility, the Greater Manchester plant in  Waithlands, Rochdale, was completed in June 2009 and the plant was handed over in November.  Construction of the second plant in Bredbury commenced in August 2009 and the third plant at Trafford commenced in April 2010.  Both projects are proceeding well.  Planning approval has been gained at the remaining site in Bolton.  As is often the case in ground breaking projects of this nature, technical challenges arise that were not foreseen and modifications to the air management systems were required at Rochdale in the first half of 2010.  We are pleased to report the modifications were successful and the revised design will be applied to the three remaining plants.

The Group was pleased to announce it has secured the £1.6 million sale of a further TEG Silo Cage plant to Taywell Composting Limited to be installed at its plant in Matlock, Derbyshire.  

Revenues at all our operating facilities continued to grow impressively with an increase on 2008 revenues of 64% at Todmorden, 36% at Perth and 45% at Sherdley Farm.  Capacity at Todmorden is now fully contracted.  We were very pleased to announce contracts for the Perth plant with both Perth & Kinross Council and Fife Council.  Revenues at the facility are finally underpinned to 2013 and hopefully beyond.

The Sherdley Farm facility is very small and the buildings do not meet the modern standards expected by the regulators.  The Board decided in early 2010 to progressively close the facility and relocate the plant and equipment to the Company's Carleton Rode facility.  It is the intention to construct a larger, purpose built facility in Lancashire, three potential sites have been identified and we are developing our plans.

As announced on 25 June 2009, the Group completed the acquisition of Banham Compost Limited, following a successful share placing to raise £1.9 million before expenses. The acquisition included the freehold site, buildings and plant at Carleton Rode in Norfolk.

The integration of the Carleton Rode facility has proceeded to plan and pleasingly the operation has exceeded expectation.  The plant had an installed capacity of 28,000 tonnes per annum but we were very pleased to announce a contract with Essex Council that significantly increases demand at the plant.  By relocating plant and equipment from Sherdley Farm in May, we have been able to successfully expand capacity to approximately 35,000 tonnes per annum.

The accounting treatment of the Carleton Rode composting facility as an operating lease has resulted in the interest element of payments being charged to operating profit. This resulted in a charge of £198,000 in the second half of 2009 and will result in a charge of approximately £400,000 per annum until the operating lease ends in 2011.  The charge will then be zero for the remaining life of the plant.

NOFCO has continued to make excellent progress in the development of end markets for TEG's compost product and the prestigious PAS100 Quality Protocol accreditation standard for TEG compost has been achieved at all four TEG facilities.

Turning to our strategic activities, we were delighted to conclude the acquisition of Simpro Limited in June of this year.  Simpro is a well established Midlands based composting business with 6 operating sites.  The acquisition brings immediate revenue and cash flow to the Group but also offers excellent potential for future growth through development of the sites and the ability to secure higher value food waste contracts.  To support the acquisition, the Group completed a successful share placing raising £6.8m before expenses.

I am very pleased to inform you that Simpro is part of a consortium that has secured preferred bidder status for the Milton Keynes Council contract that will be operated from a seventh site to be developed.  The consortium is to construct an Anaerobic Digestion facility to process an anticipated 25,000 tonnes per annum of waste and excitedly the plant will include technology to clean up the biogas produced to be injected into the National Grid.  The plant is expected to be operational by August 2011 and we look forward to working with the consortium members to deliver this prestigious contract.

The Group was very pleased to further advance its relationship with UTS by concluding a Licensing Agreement for the use of its anaerobic digestion technology in the UK waste market.  As I informed you last year, Anaerobic Digestion, or AD, is an exciting development in the organic waste market and TEG's ability to offer both IVC and AD components on tenders greatly enhances TEG's attractiveness as a bidder to potential customers. A number of Local Authorities are now procuring AD capacity in addition to the now well established TEG Silo Cage technology and the Board expects to announce further AD projects in the near future.

Further to the Licensing Agreement with UTS, TEG announced in December 2009 a collaboration agreement with Alkane Energy PLC.  The partnership brought together TEG's experience and proven ability in the waste sector with Alkane's knowledge and experience of the energy sector and its ability to secure electricity prices, Renewable Obligation Certificates and Feed in Tariffs.  The partnership further enhances the Group's ability to successfully bid for Local Authority and other large AD based contracts.

The market continues to grow strongly as Local Authorities increasingly implement the separation of organic wastes from the municipal waste stream.  Statutory obligations to divert waste from landfill are increasing annually and are expected to increase continuously until 2020.  Landfill Tax continues to rise annually and the new Government has confirmed a commitment to increase the tax by £8 per annum until at least 2014, with a guaranteed floor of £80 per tonne.  Central Government, the Welsh Assembly and the Scottish Parliament have all announced an intention to promote the recycling of food waste as a priority waste stream and all are considering landfill bans for organic wastes.  This is all creating very favorable market conditions.

The Group has observed increased levels of Local Authority procurement activity and anticipates the elevated levels of activity to be maintained for the foreseeable future.  At the same time, the Group has also noted a significant change in procurement policy by Local Authorities with more emphasis on the letting of long term contracts in return for private sector investment as opposed to direct plant procurement.

The Environment Agency is expected to announce an enhanced level of regulation for the composting sector and The Scottish Environmental Protection Agency has announced a new policy.   This will require existing operators to upgrade older facilities and the Board also considers it likely that the regulatory pressure will lead to future composting facilities being increasingly "in vessel" furtherutilising technology such as the TEG Silo Cages.  

Turning now to 2010 and beyond, I am pleased to report that TEG maintains a strong pipeline of projects and anticipates that a number of these will move into construction in 2010.  The Group has already announced its proposed development with Anagest at Stormy Down, Bridgend and the Group is evaluating a number of opportunities to further expand its range of operations in 2010.

Trading to date in 2010 has been broadly in line with management expectations and revenues in the first half of the year have increased significantly on the same period in 2009.  Plant operating performance has been very satisfactory though this is despite difficulties and green waste shortages in the early part of the year due to the unusually adverse weather conditions in January and February.  The first half results will show charges to the P&L for the one-off cost of the Rochdale modifications and a charge for the Simpro acquisition costs, which under new accounting rules must be taken as a single cost item. The Board had forecast these charges and expects trading for the full year 2010 to be broadly in line with expectations.

The need for diversion of organic waste from landfill is ever increasing, is well supported by both EU and UK legislation and Government intends to promote even greater recycling of food waste.  The acquisition of Carleton Rode has proved very successful and the recent acquisition of Simpro further enhances the Group's ability to expand and take advantage of the market opportunities.  The Group is very well placed to continue to take advantage of the expanding market with its Silo Cage in vessel composting technology and its collaborations in the AD sector with UTS and Alkane.

The Board is confident that the Group has an exciting future with a strong outlook for trading in the remainder of 2010 and beyond."

ENDS

Contact:
The TEG Group Plc	Tel: [phone]
Michael Fishwick, Chief Executive	www.theteggroup.plc.uk
Peckwater PR	Tel: [phone]
Tarquin Edwards	[e-mail]
Canaccord Genuity (Nomad)	Tel : [phone]
Robert Finlay / Guy Blakeney

Editor's Notes:

TEG

TEG provides an in-vessel composting technology, which is one of the few approved technologies capable of treating animal by-product (ABP) waste, and is now providing an anaerobic digestion (AD) technology to produce power from food waste.  Plant economics are predominantly driven by the gate fees charged, rather than the value of the end product (compost).  The AD plants also benefit from power sales and Renewable Obligations Certificates ("ROCS") or Feed-in Tariffs ("FITs").  TEG owns its composting technology and has an agreement with UTS Biogastechnik GmbH ("UTS") for the provision of AD technology into the UK waste markets.  The TEG processes are an economic alternative to landfill.

The TEG Silo Cage System

The Silo Cage system, one of the few technologies in Europe capable of treating this waste, is a natural process producing compost as an end product.  The compost is an excellent soil conditioner that fertilises, retains moisture, provides structure and reduces the incidence of plant disease.  TEG's Silo-Cages are housed in self-contained buildings, are not unsightly and are environmentally friendly.

Collaboration with UTS

Having supplied equipment to more than 1,500 equipped biogas plants, UTS Biogastechnik GmbH is one of the world's leading biogas companies.  The UTS group of companies offers services in the planning, construction, delivery and installation of biogas plants and their key components.  The company has its own production facilities and service shops, technical design and development departments as well as mobile mechanical and biological customer service technicians to support the international client base.  UTS also develops and sells specialized mixers, pumps and a variety of solid/liquid separating devices related to the biogas and agro/food markets. The company is headquartered near Munich, Germany with subsidiaries in Italy, Hungary, Spain, the Czech Republic and now a rapidly developing company UTS Biogas Limited. to service the United Kingdom & Ireland markets.

Anagest, Stormy Down, Bridgend

Anagest is a joint venture between the site owner, a cement manufacturer (Cenin) and a farming concern.  The site at Stormy Down benefits from planning permission for an AD plant and an IVC plant.  The site is ideal for AD development with demand for heat and power from the cement manufacturer and outlets for the digestate through the farming partner. 

General

Customers include local authorities, waste management companies, food processors, farmers and landowners.  The Company's expanding market is driven by increasingly stringent EU and UK legislation regulating the treatment and disposal of organic waste.  Statutory targets for the diversion of waste from landfill increase annually through to 2020, increasing TEG's market opportunity year on year. 

The Natural Organic Fertiliser Company Limited ("NOFCO"), a subsidiary of TEG, is a marketing company specialising in the development of end markets for compost products, an important aspect of all plant developments and key to local authority development.  The company has an expertise in the development of agricultural and horticultural markets and this capability is provided to customers to enhance TEG's overall service offering.

 

END

 

 

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