Preliminary results

RNS Number : 7347E

TEG Group (The) PLC

06 June 2012

 

For release

07:01

6 June 2012

The TEG GROUP PLC (AIM: TEG)

("TEG" or "the Company")

PRELIMINARY RESULTS

The TEG Group PLC, the AIM listed cutting edge green technology company, which develops and operates organic composting and energy plants, announces its preliminary results for the year ended 31 December 2011.

 

Highlights

Financial

·      Trading results ahead of market expectations with Group plant operations producing significant growth in both revenues and profits

·      The projects side of the business suffered significant delays, as were announced during 2011 and revenues suffered accordingly

·      Full year revenue for 2011 was £17,871,000 (2010: £20,740,000)

·      Group trading loss before exceptional items was £1,352,000 (2010: £464,000 loss)

·      Impairment adjustment and onerous lease provision totalling £6,264,000, resulting in a total loss of £7,616,000*

·      No dividend is recommended

Operations

Group Plant Operations

·      Revenues and profit margins at the Group's own plant operations grew strongly in 2011, reflecting increased demand for waste contracts rather than procurement of plants and continuing increase in the diversion of waste from landfill.

·      Waste volumes grew by 32% with the Group processing 244,000 tonnes in 2011 (2010: 185,000 tonnes) with average gate fees across plant operations continuing to rise, up 16% on the prior year

Projects

Greater Manchester Waste PFI Contract

·      Construction of the third facility (Trafford Park) proceeded well and the facility was handed over, on time, in Quarter 3 of 2011

·      TEG has successfully achieved Take Over on all three facilities constructed to date, and all are in full operation.

·      Instruction to Proceed ("ITP") for the construction of the fourth facility (Bolton) was received June 2011.  Construction commenced 28 February 2012. 

Perth AD Facility

·      Construction of facility was completed in Q4 of 2011.

·      Commissioning has gone well and facility expected to achieve full throughput by the end of Q2 of 2012. 

·      The plant will process 16,000 tonnes per annum of food waste and will generate 0.7 MW of electricity and 0.2 MW of heat, to be utilised on site in the Binn Eco Park development. 

Dagenham Facilitiy

·      Good progress has been made with regards to the Dagenham project, the combined IVC and AD facility to be constructed in London.

·      Foresight Environmental Fund ("FEF"), the lead funder for the project, is expecting to close the funding package and proceed to financial close during Quarter 2 2012. 

·      The planning permission and Section 106 agreement have both been completed. 

·      In the first phase, it is intended that the Dagenham facility will comprise a 30,000 tonnes per annum AD plant and a 20,000 tonnes per annum IVC plant.  The facility will generate in excess of 1.4MW of electricity, sufficient to power approximately 2,000 homes.

Offer Period Termination & Open Offer to shareholders

·      During January 2012, the Group received a significant number of preliminary expressions of interest from potential purchasers and as a result, the Board decided it should conduct a formal sale process in order to explore the expressions of interest. 

·      Subsequently, the Group received indicative proposals which were carefully considered, but the Board did not believe a transaction could be completed in a reasonable period of time and this would lead to shareholder uncertainty. As a consequence, the Board decided to bring the Offer Period to an end and to resume normal business.

·      In addition to the formal sale process, the Board has also considered a number of other alternative investment structures including an issue of shares to provide further working capital by means of an Open Offer . The Board considered a large number of factors that are influencing the business at this time and determined this to be the best option available for the shareholders. Full details of this Open Offer have been announced separately.

·      Furthermore, the Group continues to investigate investment at the operating company and project level and is in discussion with other potential investors. These funding options will be considered on a case-by-case basis.

Market Update

·      The overall market has continued to grow as Local Authorities are increasingly implementing the separation of organic wastes from municipal waste stream, and the private sector increases its level of organic waste recycling. 

·      Statutory obligations to divert waste from landfill remain in place; these obligations increase annually and are expected to increase continuously until 2020. 

·      Landfill Tax ("LFT") continues to rise annually and is expected to continue to stimulate market growth for the foreseeable future.  Welsh Government has maintained policy to procure the construction of a number of organic waste facilities and Scottish Assembly has confirmed the introduction of progressive ban on the landfill of organic waste in both the public and private sectors. 

·      Continued market interest in energy generation from food waste and strengthening of interest in technologies such as AD and IVC.

* The Group carries out annual impairment tests on goodwill and associated assets in accordance with IFRS requirements.  This has resulted in a non-cash impairment adjustment of £6,174,000 in relation to the Group's Perth IVC and Sherdley Farm IVC facilities.  The Perth adjustment includes the write-off of goodwill of £2.3 million associated with the acquisition in 2005 in addition to the write-off of certain historical assets of £3.2 million.  The Sherdley Farm adjustment of £0.7 million comes as a consequence of the Group being unable to find an alternative use for the facility following its closure in 2010.  In addition, the Group made a non-cash onerous lease provision of £90,000 in relation to the lease at Sherdley Farm.

Commenting, Nigel Moore, Non-Executive Chairman, The TEG Group Plc, said:

"The last year has proved to be challenging for the Company and in particular the difficulties faced by the industry in securing project finance have had a significant impact, resulting in long delays and disappointments in losing key projects that the Company had worked hard to secure.  Moreover this has resulted in a major impact on revenues and cash flow.  The Board has taken all the steps it could to secure funding and its strategic review considered all the options open to the Company.

Nevertheless, market demand remains strong and with a secure funding position at the project level, the Group will be well placed to continue to take advantage of the expanding market.  TEG maintains a strong pipeline of tender opportunities and anticipates the successful conclusion of further projects in 2012.  Furthermore, demand for the Group's own plant operations is increasing and the Board expects a continued strong performance in that segment of the business.  The Board is confident that the Group has an exciting future with a promising outlook for trading in the remainder of 2012 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]
N+1 Brewin (Nomad & Broker)	Tel : [phone]
Andrew Craig/Ben Wright

Chairman's statement

I am delighted to present the Group's preliminary results for the year ended 31 December 2011. The Group plant operations produced significant growth in both revenues and profits.  Unfortunately the projects side of the business suffered significant delays, as were announced during 2011 and revenues suffered accordingly.  Despite these setbacks, the Board was pleased to note that the trading results were ahead of market expectations.

Full year revenue for 2011 was £17,871,000 (2010: £20,740,000) and the Group trading loss before exceptional items was £1,352,000 (2010: £464,000 loss).  The Group has also made an impairment adjustment and onerous lease provision of £6,264,000, resulting in a total loss of £7,616,000.  No dividend is recommended.

The Group closing cash balance as at 31 December 2011 was £1,557,000.

Group Plant Operations

Revenues and profit margins at the Group's own plant operations grew impressively in 2011.  This reflected the increasing desire of customers to place waste contracts rather than procure plants, as the Board had anticipated, together with a continued increase in the diversion of waste from landfill.

Waste volumes grew by 32% with the Group processing 244,000 tonnes in 2011 compared to 185,000 tonnes in 2010.  Whilst there remain regional differences, the average gate fee across the plant operations continued to rise, up 16% on the prior year. 

Greater Manchester Waste PFI Contract

Construction of the third facility (Trafford Park) proceeded well and the facility was handed over, on time, in Quarter 3 of 2011.

Unfortunately, as announced during 2011, the anticipated Instruction to Proceed ("ITP") for the construction of the fourth facility (Bolton) was not received until 30 June 2011, several months behind plan. The project was further delayed due to unforeseen ground conditions and TEG was unable to commence its construction until 28 February 2012.  As announced in 2011, this led to a significant delay in revenues and cash flow, though TEG was able to book a proportion of revenues for the design, procurement and manufacturing completed in 2011, the balance of which will be recognised during 2012 and 2013.

TEG has successfully achieved Take Over on all three facilities constructed to date, and all are in full operation.  However, acceptance of the facilities has still to be achieved and a number of retentions remain in place, and it is anticipated that these retentions will be released progressively during 2012.

Perth AD Facility

Construction of the facility was completed in Quarter 4 of 2011.  Commissioning has gone well and the facility is expected to achieve full throughput by the end of Quarter 2 of 2012.  Once at full capacity, the plant will process 16,000 tonnes per annum of food waste and will generate 0.7MW of electricity and 0.2 MW of heat, to be utilised on site in the Binn Eco Park development.  The project is funded by Albion Ventures LLP ("Albion") and Zero Waste Scotland. The Group retains a 50% shareholding in the project.

Dagenham Project

Good progress has been made with regards to the Dagenham project, the combined IVC and AD facility to be constructed in London.  Foresight is expecting to close the funding package and proceed to financial close during Quarter 2 2012.  The planning permission and Section 106 agreement have both been completed.  Under the terms of this project, a new special purpose vehicle ("SPV") will be created, TEG will receive a contract from the SPV to construct the facility and an additional 15 year operating contract.  TEG will hold a minority shareholding in the SPV and will have a seat on its board of directors.

In the first phase, it is intended that the Dagenham facility will comprise a 30,000 tonnes per annum AD plant and a 20,000 tonnes per annum IVC plant.  The facility will generate in excess of 1.4MW of electricity, sufficient to power approximately 2,000 homes.  The planning permission allows for future expansion of the facility with a further 20,000 tonnes per annum of AD capacity.

North East Wales

The Company had previously announced its joint venture subsidiary with Alkane Energy PLC, NEAT Biogas Limited ("NEAT"), had been awarded preferred bidder status by three Councils in North East Wales ("the Hub") to construct and operate an AD facility.  The preferred bidder status was subject to NEAT securing satisfactory finance for the project and whilst NEAT had received an offer of bank finance, it was not possible to agree contractual terms with the funders that were satisfactory to the joint venture partners or the Hub.  Consequently, NEAT was unable to continue as Preferred Bidder.

Impairment and Onerous Lease Provisions

The Group carries out annual impairment tests on goodwill and associated assets in accordance with IFRS requirements.  This has resulted in a non-cash impairment adjustment of £6,174,000 in relation to the Group's Perth IVC and Sherdley Farm IVC facilities.  The Perth adjustment includes the write-off of goodwill of £2.3 million associated with the acquisition in 2005 in addition to the write-off of certain historical assets of £3.2 million.  The Sherdley Farm adjustment of £0.7 million comes as a consequence of the Group being unable to find an alternative use for the facility following its closure in 2010.

In addition, the Group made a non-cash onerous lease provision of £90,000 in relation to the lease at Sherdley Farm.

Strategic Activities

The Board has previously reported its observation that the market is seeking private investment to develop new waste facilities and is increasingly seeking to let waste contracts rather than to procure plant and equipment.  This presents a significant opportunity for the Group, which has built an excellent platform of operating facilities and established itself as a market leader.  However, the Board has also observed the industry is experiencing significant difficulty in raising finance for new projects, as was evidenced in North East Wales, leading to long delays and significant uncertainty in forecasting in the short and medium term.  As announced on 23 and 26 January 2012, the Board has been undertaking a strategic review to consider its options to address the opportunities presented to the business whilst attempting to resolve the funding challenges. KPMG was engaged as strategic advisors.

Whilst the Board firmly believes that the Group has a secure future as an independent business, it recognises that there is potential interest from organisations that could help the business by providing investment to strengthen the Group's balance sheet and provide assistance to secure future projects. Such support could significantly accelerate the Group's growth to take advantage of the opportunities in the waste market. During January 2012, the Group received a significant number of preliminary expressions of interest from potential purchasers and as a result, the Board decided it should conduct a formal sale process in order to explore the expressions of interest.  Subsequently, the Group received indicative proposals which were carefully considered. Potential offerors were provided with access to management but following further discussions and consideration the Board did not believe a transaction could be completed in a reasonable period of time and this would lead to shareholder uncertainty. As a consequence, the Board decided to bring the Offer Period to an end and to resume normal business.

In addition to the formal sale process, the Board also considered a number of other alternative investment structures including an issue of shares to provide further working capital by means of an Open Offer. The Board considered a large number of factors that are influencing the business at this time and determined this to be the best option available for the shareholders. Full details of this Open Offer have been announced separately.

Furthermore, the Group continues to investigate investment at the operating company and project level and is in discussion with other potential investors. These funding options will be considered on a case-by-case basis.

Market Update

The overall market has continued to grow as Local Authorities are increasingly obliged to implement the separation of organic wastes from the municipal waste stream, and the private sector increases its level of organic waste recycling.  Statutory obligations to divert waste from landfill remain in place; these obligations increase annually and are expected to increase continuously until 2020.  Landfill Tax ("LFT") continues to rise annually; landfill tax rose by £8.00 per tonne in April 2012 and is expected to rise by a further £8.00 per tonne in April 2013, increasing the tax to a total of £72.00 per tonne.  Government has confirmed that LFT will rise by £8.00 per tonne per annum until at least 2014.  This is expected to continue to stimulate market growth for the foreseeable future.  In addition, the Welsh Assembly Government has maintained its policy to procure the construction of a number of organic waste facilities and the Scottish Assembly has passed legislation to progressively introduce a complete ban on the landfill of organic waste in both the public and private sectors from 2014. 

The Board has noted a continued market interest in energy generation from food waste and the strengthening of interest in technologies such as AD.  Government incentives for AD and other renewable energy technologies are largely by subsidy for sales of power in the form of either renewable obligation certificates (ROCs) or feed in tariffs (FITs).  The level of subsidy available through FITs for existing schemes has been determined by Government, but the level of subsidy for future schemes will again be reviewed in 2012.

The Board is also pleased to have noted a continued significant interest in IVC, often alongside AD.  Local Authority costs are often reduced by the collection of green and food wastes together, and this waste stream is better suited to IVC.  The Group's policy is to promote combined IVC and AD facilities wherever possible, allowing the Group to offer a comprehensive organic waste service.

The wider regulatory environment is also expected to benefit the Group, as it believes its technology lends itself to the additional level of containment required by the regulators, and which is now being enforced generally.  In addition, the regulators have introduced policies to reduce the level of low-grade green waste disposal.  This is expected to increase the volume of green waste diverted into the composting sector.

Future Prospects

Market demand remains strong and with a secure funding position at the project level, the Group will be well placed to continue to take advantage of the expanding market.  TEG maintains a strong pipeline of tender opportunities and anticipates the successful conclusion of further projects in 2012.  Furthermore, demand for the Group's own plant operations is increasing and the Board expects a continued strong performance in that segment of the business.  The Board is confident that the Group has an exciting future with a promising outlook for trading in the remainder of 2012 and beyond.

Nigel Moore

Chairman

6 June 2012

Consolidated statement of comprehensive income

For the year ended 31 December 2011

 

		Before exceptional costs	Exceptional costs	Total	Total
		2011	2011	2011	2010
	Note	£'000	£'000	£'000	£'000
Continuing operations
Revenue	2	17,871	-	17,871	20,740
Cost of sales		(13,391)	-	(13,391)	(15,876)
Gross profit		4,480	-	4,480	4,864
Administrative expenses - other		(5,762)	-	(5,762)	(4,968)
Amortisation of intangible assets		(304)	-	(304)	(152)
Impairment charges		-	(6,264)	(6,264)	-
Acquisition costs		-	-	-	(142)
Negative goodwill		-	-	-	15
Total administrative expenses		(6,066)	(6,264)	(12,330)	(5,247)
Operating loss from continuing operations		(1,586)	(6,264)	(7,850)	(383)
Finance income		16	-	16	9
Finance costs		(170)	-	(170)	(254)
Loss before tax		(1,740)	(6,264)	(8,004)	(628)
Income tax	4	388	-	388	164
Loss and total comprehensive income for the year		(1,352)	(6,264)	(7,616)	(464)
Attributable to:
Equity holders of the parent
Retained loss		(1,352)	(6,264)	(7,616)	(464)
Loss per share
Basic and diluted loss per share (pence)	5	(1.40)	(6.50)	(7.90)	(0.71)

Consolidated statement of financial position

At 31 December 2011

  

		2011	2010
		£'000	£'000
ASSETS
Non-current assets
Goodwill		3,883	6,152
Intangible assets		1,255	1,559
Property, plant and equipment		16,196	18,977
Trade and other receivables		1,000	-
		22,334	26,688
Current assets
Inventories		555	616
Trade and other receivables		7,329	7,252
Taxation receivable		166	59
Cash and cash equivalents		1,557	3,389
		9,607	11,316
Total assets		31,941	38,004
LIABILITIES
Current liabilities
Trade and other payables		6,477	7,865
Taxation payable		-	258
Contingent consideration		-	450
Current portion of long-term borrowings		421	951
Current portion of deferred consideration		253	211
Provisions		265	-
		7,416	9,735
Non-current liabilities
Long-term borrowings		1,833	1,716
Long-term deferred consideration		684	966
Deferred tax		447	662
Provisions		50	-
		3,014	3,344
Total liabilities		10,430	13,079
Net assets		21,511	24,925
EQUITY
Equity attributable to equity holders of the parent
Share capital		5,872	3,781
Share premium account		38,045	36,876
Merger relief reserve		886	-
Other reserve		1,061	1,005
Retained losses		(24,353)	(16,737)
Total equity		21,511	24,925

Consolidated statement of changes in equity

for the year ended 31 December 2011

  

	Share capital	Merger relief reserve	Share premium account	Other reserve	Retained  losses	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2010	2,651	-	30,907	898	(16,273)	18,183
Issue of share capital	1,130	-	-	-	-	1,130
Premium on issue of share capital	-	-	6,369	-	-	6,369
Issue costs	-	-	(400)	-	-	(400)
Recognition of share-based payments	-	-	-	107	-	107
Transactions with owners	1,130	-	5,969	107	-	7,206
Loss for the financial year and total comprehensive income	-	-	-	-	(464)	(464)
Balance at 1 January 2011	3,781	-	36,876	1,005	(16,737)	24,925
Issue of share capital	2,091	-	-	-	-	2,091
Premium on issue of share capital	-	285	1,912	-	-	2,197
Issue costs	-	-	(142)	-	-	(142)
Transfer from share premium	-	601	(601)	-	-	-
Recognition of share-based payments	-	-	-	56	-	56
Transactions with owners	2,091	886	1,169	56	-	4,202
Loss for the financial year and total comprehensive income	-	-	-	-	(7,616)	(7,616)
Balance at 31 December 2011	5,872	886	38,045	1,061	(24,353)	21,511

Consolidated statement of cash flows

For the year ended 31 December 2011

		2011	2010
		£'000	£'000
Cash flows from operating activities
Loss after taxation		(7,616)	(464)
Adjustments for:
Negative goodwill		-	(15)
Depreciation		1,661	1,311
Amortisation of intangibles		304	152
Goodwill impairment charge		2,269	-
Property, plant and equipment impairment charge		3,904	-
Share-based payment administrative expense		56	107
Taxation credit recognised in consolidated statement of comprehensive income		(388)	(164)
Interest expense		170	254
Interest income		(16)	(9)
(Profit) /loss on sale of property, plant and equipment		(65)	195
(Increase) / decrease in trade and other receivables		(1,077)	2,385
Decrease / (increase) in inventories		61	(209)
Decrease  in trade payables		(1,184)	(580)
Increase in provisions for liabilities		90	-
Cash (used in)  / from  operations		(1,831)	2,963
Interest paid		(111)	(184)
Income taxes (paid) / received		(171)	87
Net cash (used in) / from operating activities		(2,113)	2,866
Cash flows from investing activities
Acquisition of business - deferred consideration		(300)	(300)
Acquisition of subsidiary net of cash acquired		-	(4,863)
Purchase of property, plant and equipment		(2,464)	(3,808)
Proceeds from sale of property, plant and equipment		73	53
Interest received		16	9
Net cash used in investing activities		(2,675)	(8,909)
Cash flows from financing activities
Proceeds from issue of share capital		3,696	6,399
Repayment of loan		(173)	(173)
Payment of finance lease liabilities		(567)	(564)
Net cash from financing activities		2,956	5,662
Net decrease in cash and cash equivalents		(1,832)	(381)
Cash and cash equivalents at beginning of the year		3,389	3,770
Cash and cash equivalents at end of the year		1,557	3,389

1.     Basis of preparation

The financial information set out in this announcement does not constitute the statutory accounts of the Group for the year ended 31 December 2011.  The auditors reported on those accounts; their report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.  The statutory accounts for the year ended 31 December 2011 will be delivered to the registrar of Companies following the Company's Annual General Meeting.

Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement in itself does not contain sufficient information to comply with IFRS.  Details of the accounting policies are those set out in the annual report for the year ended 31 December 2010.  These accounting policies have remained unchanged for the financial year ended 31 December 2011.

Going concern

In forming their views, the Directors have prepared cash flow forecasts for a 2 year period following the balance sheet date.  As part of the preparation of these forecasts, the Directors have considered the overall financial market at this time, the delays being experienced in obtaining timely project funding and the significant impact such delays have on the cash flow position of the Group. The Directors have estimated the likely conversion of potential future contracts, and in particular the Dagenham project, the likely completion of the Manchester contracts and the likely timetable for release of retentions due, the working capital required and the likely funding available to execute such contracts.

Given the uncertainty with regards to both project funding and the release of the retentions due under the Manchester contract, the Directors have adopted a prudent policy with regards to forecasts over the period.  The Directors have determined that it is necessary to secure further working capital and the Group has agreed an additional bank facility of up to £1.5 million. In addition the Group has announced it is intending to complete an Open Offer of shares for up to £2 million with certain shareholders underwriting up to £1.2 million with a further irrevocable undertaking of £0.6 million.

After reviewing the forecasts, consideration of the Group's cash resources available through the bank facility, the forthcoming Open Offer, the likely financial close of the Dagenham project and having made other appropriate enquiries, the Directors have a reasonable expectation that the Company and Group have adequate resources to maintain operations over the 2 year period. For this reason they continue to adopt the going concern basis in preparing the financial statements.

2.     Revenue

All revenue reported in the period under review arose within the United Kingdom.  An analysis of the Group's revenue for the year (excluding finance income) is as follows:

	2011 £'000	2010 £'000
Revenue from Operations division	8,754	5,820
Rendering of services	8,754	5,820
Revenue from Projects division	8,927	14,760
Revenue from Operations division	190	160
Sale of goods	9,117	14,920
Total revenue	17,871	20,740

3.     Operating Segments

For management purposes, the Group is organised into the following operating segments: Operations segment and Projects segment. In prior years, the Group had been organised into build own and operate, IVC sales to third parties, AD sales to third parties, product management revenue and other corporate expenses. During the year, the organisational structure of the Group has been restructured and the prior year figures have been restated accordingly with build, own and operate and product management being reported with the operations segment, whilst IVC and AD sales to third parties are now being reported within the projects segment.

All revenues from external customers and non-current assets are attributable to, and located in, Great Britain.

In identifying its operating segments, management follows the Group's service lines which represent the main products and services provided by the Group.  These operating segments are monitored and strategic decisions are made on the basis of segment operating results.

The Projects segment includes IVC and AD sales to third parties including the design, production and installation of plants for sale to third party clients.  The Operations segment relates to facilities which are owned and operated by the Group.  These sites process waste received from customers and manage the compost produced by the facilities.  The Operations segment is also responsible for the maintenance and operating contracts carried out for third parties.  The revenues and net result generated by each of the Group's operating segments are summarised as follows:

2011

	Operations	Projects	Other corporate expenses	Consolidated
	£'000	£'000	£'000	£'000
External revenue	8,944	8,927	-	17,871
Gross profit	1,834	2,646	-	4,480
Segment corporate expenses	(1,110)	(2,320)	(615)	(4,045)
Impairment charges	(6,264)	-	-	(6,264)
Depreciation	(1,613)	-	(48)	(1,661)
Amortisation	(304)	-	-	(304)
Segment (loss) / profit before taxation	(7,457)	326	(663)	(7,794)
Share-based payment expense				(56)
Operating loss				(7,850)
Finance income				16
Finance costs				(170)
Loss  before taxation				(8,004)

2010

	Operations	Projects	Other corporate expenses	Consolidated
	£'000	£'000	£'000	£'000
External revenue	5,980	14,760	-	20,740
Gross profit	1,358	3,506	-	4,864
Segment corporate expenses	(928)	(2,164)	(458)	(3,550)
Acquisition costs	(142)	-	-	(142)
Negative goodwill	15	-	-	15
Depreciation	(1,258)	-	(53)	(1,311)
Amortisation	(152)	-	-	(152)
Segment (loss) / profit before taxation	(1,107)	2,532	(1,701)	(276)
Share-based payment expense				(107)
Operating loss				(383)
Finance income				9
Finance costs				(254)
Loss  before taxation				(628)

4.     Income tax

	2011 £'000	2010 £'000
Current tax
Research and development tax credit	(173)	(58)
Corporation tax	-	(27)
Total current tax	(173)	(85)
Deferred tax
Deferred tax credit	(215)	(79)
Total deferred tax	(215)	(79)
Total tax credit for the year	(388)	(164)

The taxation assessed for the year differs from the standard rate of corporation tax in the United Kingdom 26.5%.  The charge is affected by a number of factors in addition to the standard United Kingdom rate. 

The differences are explained as follows: 

	2011 £'000	2010 £'000
Loss before tax	(8,004)	(628)
Income tax credit calculated at 26.5% (2010: 28%)	(2,121)	(176)
Effect of  expenses not deductible / (income that is not chargeable)	676	119
Losses surrendered for R&D tax credit	343	116
Repayable R&D tax credit	(166)	(58)
Movement in unprovided deferred tax asset	518	(335)
Adjustment for tax rate differences	362	170
Total tax credit for the year	(388)	(164)

Deferred tax liability

	2010 £'000	2009 £'000
Liability at 1 January	662	-
Acquired with subsidiaries	-	262
Arising on recognition of intangible assets	-	479
Amount credited to profit or loss in the year	(215)	(79)
Liability at 31 December	447	662

The rate at which deferred tax is expected to unwind is 25% (2010 : 27%) and this has been used to calculate the deferred tax liability.

Unrecognised deferred tax asset

The following deferred tax assets have not been recognised at the balance sheet date on the basis that there is insufficient evidence that the deferred tax asset will be recoverable against future profits of the Group:

	2011 £'000	2010 £'000
Tax losses	(5,236)	(5,114)
Accelerated tax depreciation	223	255
Temporary differences	(28)	(8)
	(5,041)	(4,867)

5.     Loss per share

	2011	2010
	£'000	£'000
Loss for the financial year after tax	(7,616)	(464)
Adjustments to basic earnings
Negative goodwill	-	(15)
Exceptional costs	6,264	-
Underlying losses before exceptional costs	(1,352)	(479)
	Number	Number
Weighted average number of shares for the purposes of basic, diluted and underlying earnings per share	96,334,294	65,089,854
	Pence	Pence
Basic loss per share	(7.90)	(0.71)
Diluted loss per share	(7.90)	(0.71)
Basic underlying loss per share before exceptional costs	(1.40)	(0.74)

Underlying losses per share has been disclosed to give a clear understanding of the Group's underlying trading performance.  It has been calculated using the underlying earnings figures above and the weighted average number of ordinary shares above.

Diluted losses per share is equal to the basic loss per share as the share options in issue at 31 December 2011 are anti-dilutive in respect of the diluted loss per share calculation and have therefore not been included.

6.     Post balance sheet events

The Directors have determined that it is necessary for the Group to secure additional working capital. As such, in the period since the year end, the Group has agreed a bank facility of up to £1.5 million.

7.     Annual report

Copies of the annual report are available from the Group's head office at Westmarch House, 42 Eaton Avenue, Buckshaw Village, Chorley, PR7 7NA or can be downloaded from the Group's website at www.theteggroup.plc.uk.

 

END

 

 

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