Eco (atlantic) Regulatory News (ECO)

27 Feb 2007 07:04

EcoSecurities Group plc27 February 2007 EcoSecurities Group plc ("EcoSecurities" or "the Group") Preliminary Results For The Year Ended 31 December 2006 Dublin, Ireland - EcoSecurities Group plc ("EcoSecurities", or the "Group"), oneof the world's leading companies in the business of originating, implementingand commercialising carbon credits from greenhouse gas emission reductionprojects, today announces its preliminary results for the year ended 31 December2006. Highlights • Robust origination activity with 201 new projects added to the Group'sportfolio during the year, bringing the total to 353, up 132%. • The Group's Certified Emission Reductions (CER) portfolio grew by 66million tonnes in 2006 representing an increase of 73% during the year, bringingthe total gross contract volume to 156 million tonnes which is one of theworld's largest portfolios of CERs. In line with the Group's policy ofcontinually assessing the projects within the portfolio for expected operatingand regulatory performance, this total takes into account volume adjustments. • On a net basis to EcoSecurities the CER portfolio grew by 119%, from58 million tonnes to 127 million tonnes, due to the Group's focus on principalprojects and the purchase of CERs from projects where the Group previously had ashared interest. • The project portfolio now spans 36 countries and has furtherdiversified with 18 emissions reduction technologies and processes represented. • Strategic business development agreements were signed with StandardBank and UOB Kay Hian to enhance project origination activities in South Africaand Southeast Asia respectively. • Accelerated implementation progress during the year with the number ofprojects registered by the Group with the CDM Executive Board increasing to 53at year end (2005: 13) demonstrating the success of the Group's efforts despitea challenging regulatory environment. • Demand for carbon credits was robust, forward sale agreements for CERstotaling €287 million were completed during the year. • Excellent progress made in the development of new markets with officesand representatives opened in nine locations, expanding the Group's presence to23 offices in 21 countries. The Group continued to expand rapidly in order totake advantage of market opportunities, within cost expectations, and now has adominant platform in the CDM carbon credit project business. • Project investment platform established, and €7 million of projectinvestments were committed during the year. • Revenues for the year were up 35% to • 3.1 million, derived fromconsulting activities, the first spot sales of CERs and from initial delivery ofCERs from a few projects, namely a landfill gas project in China, biomass fuelswitch projects in Brazil and a geothermal power project in Nicaragua. • Loss before tax of •(19.5) million reflects expansion of headcount andthe geographic network and is in line with our expectations. The Groupmaintained a strong net working capital balance of €48.3 million at 31 December2006. • Current trading and outlook is encouraging: • The gross CER portfolio volume increased to 163 million tonnes at 15February 2007, with 21 new projects added since 2006 year end. • The Group continues to focus on principal agreements to maximise itsinterest related to the carbon credits created. • The external process of CDM project validation, host country approvaland CDM EB registration has been difficult over the past year and continues tobe challenging. • Underlying development of the projects in the portfolio continued toprogress with 80 projects in the construction phase at present. • Operational projects increased to 130 to date. These are expected toproduce 56 million CERs through to 2012. • The expected Net Trading Margin on forward CER sales of 29 milliontonnes at 15 February 2007 totaled €154m which is up by €3m since year end.Market interest in Japan has remained strong despite recent weakness in EUAprices. • Prices for Phase 2 EUAs have been soft during the year to date. Thedivergence of Phase 1 and 2 EUAs prices has also focused demand for CERs on 2008initial delivery dates. • Capitalising upon its leading CDM project platform, the Group intendsto capture new opportunities resulting from a significant increase in investorinterest in emissions reductions projects, an increase in CER tradingopportunities in the secondary market, a dramatic change in the U.S. carbonmarkets, and rapid growth in the global market for verified emissions reductionsfor voluntary transactions. • In this context, the Group's first agreement for the sale of VerifiedEmissions Reductions to a voluntary emissions reduction retailer has beenagreed. • Acquired the business of Trexler Climate + Energy Services, aUS-based, internationally recognized leader in the emerging field of climatechange risk management, to accelerate the Group's expansion and marketdevelopment activities in the US where carbon market interest is rapidlyincreasing. • Offices and representatives have been placed in 4 new locations,including the Ukraine, Poland, and the Middle East(2), since year end, to expandthe Group's reach into new markets. • The combination of progress in carbon market development, a heightenedglobal interest in resolving climate change (e.g., publication of the SternReport and the IPCC 4th Assessment Report), and the success of the Group'soperating platform to date, points towards a positive outlook for the comingyear. Mark Nicholls, Chairman of EcoSecurities, commented: "Many external developmentsled to increased public awareness of climate change and improved the overallenvironment for carbon trading in 2006. Looking ahead, tighter EU emissionstargets brought about by recent EU ETS National Allocation Plans, andaccelerating policy momentum in the United States, especially in California,will contribute to the Group's further development in the global carbon marketin 2007." "In 2007 the Group intends to build further upon its leadership position. Inaddition to its core business within the CDM, EcoSecurities intends to expandinto the voluntary emissions reductions market as well as into the emerging USmarket. Furthermore, the acquisition of Trexler Climate + Energy Services'business, will enable the Group to move forward quickly into the emergingdomestic emissions reduction market in the US. In the capital markets, theGroup is pursuing opportunities related to secondary trading of CERs in additionto arranging investments in emission reduction projects." "The accelerating development of both the carbon market and of the Group'soperations in 2006, associated with an excellent start to the current financialyear, gives the Board confidence for continued growth in 2007 and beyond." Analyst Meeting The Group is holding a meeting for analysts today at 12:00 GMT. Analystswishing to attend should contact Ged Brumby at Citigate Dewe Rogerson on 0207638 9571 (ged.brumby@citigatedr.co.uk) for further details. For further information please contact: EcoSecurities Group plcBruce Usher, CEO (27.02.07) 020 7638 9571Pedro Moura Costa, COO (Thereafter) +353 1613 9814 Citigate Dewe Rogerson +44 (0) 20 7638 9571Kevin Smith / Ged Brumby The Preliminary Results accompany this press release. About EcoSecurities: EcoSecurities is one of the world's leading companies in the business oforiginating, developing and trading carbon credits. EcoSecurities structures andguides greenhouse gas emission reduction projects through the Kyoto Protocol,working with both project developers and buyers of carbon credits. EcoSecurities works with companies in developing and industrialising countriesto create carbon credits from projects that reduce emissions of greenhousegases. EcoSecurities has experience with projects in the areas of renewableenergy, agriculture and urban waste management, industrial efficiency, andforestry. With a network of offices and representatives in 26 countries on fivecontinents, EcoSecurities has amassed one of the industry's largest and mostdiversified portfolios of carbon projects. Today, the Group is working on 374projects in 36 countries using 18 different technologies (encompassing 29approved CDM methodologies), with the potential to generate more than 163million carbon credits. EcoSecurities also works with companies in the developed world to assist them inmeeting their greenhouse gas emission compliance targets. Utilising its highlydiversified carbon credit portfolio, EcoSecurities is able to structure carboncredit transactions to fit compliance buyer's needs, and has executedtransactions with both private and public sector buyers in Europe, North Americaand Japan. Working at the forefront of carbon market development, EcoSecurities has beeninvolved in the development of many of the global carbon market's most importantmilestones, including developing the world's first CDM project to be registeredunder the Kyoto Protocol. EcoSecurities' consultancy division has been at theforefront of significant policy and scientific developments in this field.EcoSecurities has been recognised as the world's leading greenhouse gas advisoryfirm over the last five years by reader surveys conducted by EnvironmentalFinance Magazine. EcoSecurities Group plc is listed on the London Stock Exchange AIM (ticker ECO). Additional information is available at www.ecosecurities.com. Chairman's Statement EcoSecurities' first full year of trading as a public company proved successfulwith the Group achieving many significant milestones in regards to theorigination, implementation and commercialisation of Certified EmissionReductions ("CERs" or "carbon credits"). The progress of the Group during theyear was made possible by the IPO in 2005 as well as continued carbon marketgrowth. This progress demonstrated that building a balance sheet and fullydeveloping a platform to originate, implement and commercialise carbon creditprojects in emerging markets has been a formula for success. During the year,the Group brought 201 new projects into its portfolio which comprised at yearend 353 projects capable of generating 156 million tonnes of emissionsreductions. In line with the Group's policy of continually assessing theprojects within the portfolio for expected operating and regulatory performance,this total takes into account volume adjustments for projects which are highlyuncertain. To demonstrate the scale of the positive impact that these projectsare having on the environment, these reductions are greater than the entireemissions from France and Sweden regulated by the EU Emissions Trading Scheme ("EU ETS") during 2005. It is also pleasing to note that this progress was madewhile keeping costs within expectations and retaining a larger than expectedcash balance. Substantial headway was made in the development of new markets in Asia, theMiddle East, Africa, Latin America and the US during the year, with projects in36 countries at year end. The Group increased staffing levels throughout theyear to improve its ability to originate and implement projects, and headcountgrew by 146%. Reflecting its global outlook, EcoSecurities has evolved into abroadly multinational and multicultural company with its employees representingover 40 nationalities. In terms of processing the Group's project portfolio through the CleanDevelopment Mechanism's ("CDM") approval cycle, 40 of its projects wereregistered with the CDM in 2006 and the Group's project portfolio has now begunto produce CERs and generate revenues. This significant milestone was achieveddespite the well publicised industry-wide delays experienced in projectsobtaining external validation and verification, host country approval and inobtaining registration with the CDM Executive Board ("CDM EB"). The Group has also led the industry in the commercialisation of its emissionsreduction portfolio with forward CER sales contracts representing futurerevenues of €287m entered into during the year. Additionally, the Group soldthe first CERs issued from its projects into the spot market. A highlight ofthe year was the emergence of Japan as a sizeable buyer of CERs. As a complement to its project origination efforts, the Group established aninvestment team to capitalise on project opportunities which require directinvestment. The team focuses on projects where the primary revenue streamresults from the production and sale of carbon credits, and made 32 investmentsthroughout the year. EcoSecurities continues to be recognized as a market leader. In 2006 it wasvoted 'Best Project Developer' by Point Carbon and by a readers' surveyconducted by the UK's Environmental Finance Magazine. The same survey electedEcoSecurities' consulting division the 'Best GHG Advisory Group' for the sixthconsecutive year. Many external developments led to increased public awareness of climate changeand improved the overall environment for carbon trading in 2006. In particular,the publication of the Stern Report in the UK has helped focus attention on theurgency of this subject and strongly emphasised the need for emissions tradingand carbon credits as a means to tackling this challenge. This was reinforced bythe publication of the 4th Assessment Report of the Intergovernmental Panel onClimate Change, in January of 2007, which established that the main cause ofclimate change is man-made. Looking ahead, tighter EU emissions targets broughtabout by recent EU ETS National Allocation Plans, and accelerating policymomentum in the United States, especially in California, will contribute to theGroup's further development in the global carbon market in 2007. In 2007 the Group intends to build further upon its leadership position. Inaddition to its core business within the CDM, EcoSecurities intends to expandinto the voluntary emissions reductions market as well as into the emerging UScarbon market. Furthermore, the acquisition of Trexler Climate + EnergyServices' business, which is being announced today, will enable the Group tomove forward quickly into the emerging domestic emissions reduction market inthe US. In the capital markets, the Group is pursuing opportunities related tosecondary trading of CERs in addition to arranging investments in emissionreduction projects. The accelerating development of both the carbon market and of the Group'soperations in 2006, associated with an excellent start to the current financialyear, gives the Board confidence for continued growth in 2007 and beyond. " Mark NichollsChairman Executive Directors' Review Year-end 2006 marked both the end of EcoSecurities first full year on the LondonAIM market and a year of rapid expansion and major milestone achievements. TheGroup's geographic reach and depth of expertise have enabled it to build uponits industry leadership in terms of portfolio size, growing its CER portfolio by66 million tonnes during the year. The portfolio at the year end comprised 353projects capable of generating up to 156m tonnes of emission reductions. TheGroup's policy is to continually assess projects within the portfolio forexpected future operating and regulatory performance; the portfolio total takesinto account volume adjustments for projects which are highly uncertain. TheGroup's market share remained significant, as 53 of the more than 400 projectsregistered by the CDM Executive Board at year end were implemented byEcoSecurities. Furthermore, the Group established itself as a market leader incarbon credit commercialisation, by selling forward a further 22 million CERsduring the year, which are expected to generate €140 million in net tradingmargins to the Group. EcoSecurities continued its tradition of "firsts" in 2006, such as developingthe Nanjing landfill gas to energy project, the first project ever to receiveCERs in China. The Group also entered the market for nitrous oxide emissionreduction projects and by year end had one the world's largest portfolio ofthese projects. In addition, the Group undertook its first project investments,and by year end had agreed to invest up to €7 million in 32 emissions reductionprojects. Carbon markets experienced a volatile year in 2006 primarily due to uncertaintyover EU ETS National Allocation plans. Despite this volatility, the Group'score activities prospered and growth in our portfolio of carbon credits projectsexceeded our expectations. Positive developments related to tougher nationalallocations in Phase 2 of the EU ETS, as well as an accelerating policy momentumin the Japanese and US markets, set the stage for a strong business environmentin 2007. Origination Origination of CDM projects during 2006 exceeded Directors' expectations. Duringthe year, 201 projects were added to the Group's portfolio, increasing the grosscontract volume by 73% from 90 million tonnes to 156 million tonnes. On a netbasis to EcoSecurities, i.e. adjusting for contract type (principal, projectdevelopment or agency), the portfolio grew from 58 million tonnes to 127 milliontonnes. The increase in net ownership of CERs was primarily due to a focus onprincipal contracts for the purchase of CERs from CDM projects and to therestructuring of its EcoMethane joint venture with Biogas Technology Ltd.,whereby the Group will now acquire all the CERs generated from EcoMethane'slandfill gas projects. The Group's portfolio also increased in technology diversification, with a mainhighlight on the contracting of 26 projects in China which are expected toreduce emissions of nitrous oxide, a greenhouse gas 310 times more potent thanCO2, which are capable of producing up to 20 million CERs to 2012. In order tomaintain geographical diversification, the Group continued its global expansionby adding representative offices in Morocco, Jordan, Kenya, Guatemala, Malaysia,Pakistan, the Philippines, South Africa, and Singapore. This brought the totalnumber of offices and representative offices to 23 at year end (2005:14).EcoSecurities also signed strategic agreements with Standard Bank (the largestretail bank in South Africa) and UOB Kay Hian (a division of the second largestbank in Singapore) to maximise project origination activities in South Africaand Southeast Asia. Implementation Despite the numerous delays experienced in external validation of projects,obtaining host country approval and with the CDM EB in the processing ofprojects, the number of projects registered by the Group increased to 53 (2005:13) at year end. These registered projects are capable of producing 16 millionCERs through to 2012. Of the 353 projects at contract and term sheet stage in total at year end, 283were financed, more than 132 had completed Project Design Documents, 65 had beenvalidated and 67 had received Host Nation Approval. A total of 84 projects inEcoSecurities portfolio were already operating at year end, and these alone arecapable of producing 39 million CERs through to 2012. Key highlights of the CDM project implementation process for the Group includedthe registration of the first poultry litter biomass-to-electricity project inIndia and the registration of 28 methane recovery and electricity generationprojects in Mexico and the Philippines. In 2006, the CDM EB approved two newmethodologies relating to nitrous oxide and forestry activities, sectors inwhich the Group has demonstrable expertise and exposure. Furthermore, the Groupconducted CER verifications for seven projects during the year. Commercialisation The Group made particularly strong progress in 2006 commercialising CERs. Atotal of 29 million CERs had been sold forward at year end, up from 7 million in2005 which represents expected total forward CER revenues of €328 million andnet trading margin of €151 million respectively. The Group's forward CER salesmargins have been strong during the year due to a number of factors including astronger balance sheet and the growth of the Group's portfolio which diversifiesrisk and improves pricing. 2006 marked the first year the Group realized principal trading revenuesresulting from the sale of CERs produced by several projects, including alandfill gas project in China, biomass fuel switch projects in Brazil and ageothermal power project in Nicaragua. Consulting 2006 was a year of expansion for EcoSecurities' consultancy division, which grewits headcount to 18 at year end (2005: 10). This expansion in qualifiedpersonnel required an expected increase in training resources and an adjustmentto operating as a larger function, but significantly enhanced the division'sability to add value to the Group. The team spent a large part of the yearproviding support to internal business development throughout the Group as partof the rapid expansion of its operations. The division was also successful insecuring multiple sales to existing multinational clients such as the EuropeanInvestment Bank, Gas Natural from Spain, ESKOM from South Africa, and Sappi fromSouth Africa, demonstrating high levels of customer retention and satisfaction.The division enjoyed continued success with methodology development, developingfour new methodologies that were ultimately approved by the CDM MethodologyPanel in 2006, bringing the Group's total to 13. The Group is today announcing that it acquired the business of Trexler Climate +Energy Services, an internationally recognized leader in the emerging field ofclimate change risk management, operating in this sector since 1991. Based inPortland, Oregon, USA, Trexler specialises in climate change mitigationpolicies, projects and technologies, and will be merged with EcoSecurities'existing Consultancy Division to create EcoSecurities Global ConsultingServices. The combined entity will provide strategic advisory services on aglobal scale and significantly expands the Group's activities in the US market. Operations The Group developed its operational infrastructure during the year to supportits rapid development. A key achievement was the development of a bespokedatabase to manage its growing portfolio of projects through the origination,implementation and commercialisation process Outlook Prospects for 2007 are positive given the Group's leading position in the carbonmarket. The Group's core business model - the global origination,implementation, and commercialisation of carbon credits under the CDM - isoperating very successfully, and it is anticipated that EcoSecurities will beable to generate CERs from an increasing number of projects that were originatedin prior years, thereby contributing to significant revenue growth. The Groupintends to continue to aggressively grow the number of projects and carboncredits contracted, thereby expanding its diversified portfolio. Furthermore,given the Group's pre-eminent position in the global emissions reductionsmarkets, in 2007 EcoSecurities intends to take advantage of previously untappedopportunities. These include: (i) arranging investment from third party capital providers seeking emission reduction projects;(ii) aggressively expanding in the United States to take advantage of the rapid development in state and pending national cap and trade programs;(iii) increased trading of secondary CERs as the market develops; and(iv) originating Verified/Voluntary Emissions Reductions (VERs) from projects in order to become a wholesale provider of VERs to the many voluntary offset markets that are rapidly developing in Europe and the U.S. EcoSecurities plans to continue to expand its global network to capitalise fullyon the volume of available project opportunities. The Group anticipates thatthe expansion in the number of local offices and personnel will continue toprovide it with a competitive advantage in the origination of projectopportunities. Since year end offices and representatives have been placed in 4new locations, including the Ukraine, Poland, and the Middle East. The process of CDM project validation, host country approval and registrationhas been difficult over the past year and continues to be challenging. However,the Group expects that the number of its projects operating and generatingemissions reductions will grow significantly and that the CDM registrationprocess should become more efficient due to increased interaction between theCDM EB, the CDM Secretariat and industry. Furthermore, the Group has planned asignificant expansion of its monitoring team, so that project performance can befollowed more closely to increase the likelihood of projects receiving CERswithin its initial expectations. Lastly, with increasing awareness of climate change and the resulting expansionof the voluntary carbon markets in the US and internationally, the Group intendsto expand into these markets through the provision of corporate strategyservices (carbon footprinting, carbon offsetting and internal emission reductionmeasures) and becoming a supplier of VERs to these segments. The acquisition ofTrexler Climate + Energy Services' business will have an immediate impact onEcoSecurities' presence in the rapidly developing U.S. carbon market and willleverage the development of our voluntary market business. In summary, our strategy for the year ahead is to maintain our primary focus onoriginating, implementing and commercialising a highly diversified portfolio ofemission reduction projects, and to capitalise upon new opportunities that canbe easily leveraged from our core business. These opportunities result from asignificant increase in investor interest in emissions reductions projects, anincrease in CER trading opportunities in the secondary market, a dramatic changein the U.S. carbon markets, and rapid growth in the global market for VoluntaryEmissions Reductions. It is our expectation that the combined strength of ourgeographic network of local offices, the expertise of our operating units andour highly diversified portfolio, leaves the Group well positioned to reactquickly and to maximise the value of these exciting new opportunities. Financial Review Income statement Group revenue rose by 35% to €3.1milllion driven primarily by thecommercialisation of 0.4m CERs over the course of the year. This marked therealisation by the Group of its carbon credit project origination,implementation and commercialisation focus over the past several years.Consulting income decreased during 2006 and was lower than expected, resultingfrom the focus on internal CDM project implementation. Margins on sales were asexpected, with the majority of CER sales during the year relating to agencyprojects. The growth in administrative expenses during the year are in line withmanagement's expectations and reflects the investment made in establishing theGroup's global operational presence. The primary business expense was in respectto staff and staff related costs with headcount increasing from 85 to 209 duringthe year. Financing income totalled €2.4m mainly comprising interest earned from shortterm bank deposits. Financing costs totalled €0.9 which was comprised ofinterest on long term debt with Credit Suisse and unrealised exchangedifferences on the Group's financial assets and liabilities. While the Group as a whole operated at a loss, it incurred a tax charge of €0.6mduring the year due to tax charges at subsidiary company level. The retained loss for the year increased to €20.0m in 2006 (2005: €4.3m)resulting from higher costs due to an expansion in headcount of 135%, increasingthe number of offices and representatives by over 50% and increased publiccompany administration costs. Balance sheet Intangible assets increased by €3.3m during the year reflecting the Group'spolicy to capitalise identifiable costs related to CDM project implementation. Direct investment in project related facilities totalled €1.4m relating directlyto emissions reduction and related equipment together with €1.5m in otherproject investments, capitalised labour and project development expenditurewhich, in accordance with the Group's accounting policies, are deferred andamortised based on expected future CER flows from the projects. In total, 32CDM project investments were made in 8 countries. Non-current trade and otherreceivables grew during the year to €0.5m due mainly to reimbursable CDM projectpayments. Current trade receivables grew during the year to €1.9m from €0.4m due mainly tosales of CERs during the year, expected to be settled in 2007. Cash balancesdeclined during the year in accordance with the budgeted growth in operations,though project related investments were lower than expected. Current trade andother payables grew due to the future settlement of carbon trading activitiesduring the year and accrual of certain administrative expenses. Non-currenttrade payables grew due to the receipt of a €3.0m premium on a call optiongranted by the company on CERs to a European Government. The increase in share capital and the share premium account during the yearreflects the exercise of employee share options and the reversal of an excessprovision in respect of IPO expenses in the share premium account. Cash flow The development of the Group's overseas operations resulted in operating cashout flows of €13.0m during the year. The Group identified a number of CDMproject opportunities into which it invested €2.2m during the year. In addition,the expansion of personnel, facilities and establishment of overseas operationsresulted in €1.3m of capital expenditure. The cash out flow from investingactivities totalled €6.2m which primarily consisted of project relatedinvestments and office related equipment, although the level of investmentactivity was lower than expected. Included within investing cash flows arestructured notes acquired by the Group for €1.3m which provide for futuredeliveries of CERs. In respect of financing cash flows, the Group paid IPOexpenses of €2.2m. Restricted cash deposits grew during the year due to theincreased collateral requirements related to the growth in forward sales ofCERs. The depreciation of the US dollar over the course of 2006 resulted in themajority of unrealised exchange differences on cash deposits of €1.1m. Overall,cash out flows totalled €28.5m leaving strong year end cash reserves of €60.5m. Impacts of IFRS IFRS 2 requires all share-based transactions to be fair valued and a charge madeto the Income Statement to reflect the future 'cost' of their provision. TheGroup has three share-based compensation schemes and in this period theircollective impact was to increase loss after tax by €0.4 million. Hedging Policies The Group has a treasury and commercial hedging policy that covers interestrate, foreign exchange and commodity price hedging. Normally and whereappropriate, the Company may hedge up to 50% of anticipated net production ofcarbon credits to protect cashflows against commodity price and exchange ratefluctuation. Also, the Group maintains cash balances in major operatingcurrencies relative to operational cash requirements in those currencies anduses other hedging arrangements in relation to specific currency exposures whenprudent. EcoSecurities Group plcConsolidated Income Statement for the year ended 31 December 2006 Year ended Year ended 31 December 31 December 2006 2005 •'000 •'000 Revenue 3,073 2,268 Cost of sales (1,374) (2,166) Gross profit 1,699 102 Other operating income - 47 Administrative expenses (22,997) (3,350) IPO preparation expenses 277 (1,286) Net profit on disposal of joint ventures - 498 Loss before financing costs (21,021) (3,989) Finance costs (857) (339)Finance income 2,405 125 Loss before tax (19,473) (4,203) Income tax expense (573) (115) Loss for the financial year (20,046) (4,318) Attributable to: Equity holders of the Company (20,046) (4,344)Minority interest - 26 (20,046) (4,318) Loss per share expressed in cents per shareBasic and fully diluted earnings per share (21.74) (26.97) EcoSecurities Group plcStatement of Recognised Income and Expense for the year ended 31 December 2006 Year ended Year ended 31 December 31 December 2006 2005 •'000 •'000 Loss for the financial year (20,046) (4,318)Currency translation reserve movement (22) (172)Total recognised income and expenses for the year (20,068) (4,490) Attributable to:Equity shareholders of the Company (20,068) (4,521)Minority interests - 31 (20,068) (4,490) EcoSecurities Group plcConsolidated Balance Sheet as at 31 December 2006 31 December 31 December 2006 2005 •'000 •'000AssetsNon-current assetsIntangible assets 3,412 102Property, plant and equipment 2,463 134Trade and other receivables 531 -Total non-current assets 6,406 236 Current assetsTrade and other receivables 5,020 1,320Cash and cash equivalents 60,452 83,148Total current assets 65,472 84,468 Total assets 71,878 84,704 Shareholders' equityIssued capital 232 229Share premium 76,446 75,853Share based payment reserve 664 337Currency translation reserve (74) (52)Other reserves (573) (573)Retained earnings (25,010) (5,022)Total equity 51,685 70,772 LiabilitiesNon-current liabilitiesInterest bearing loans and borrowings - 8,752Trade and other payables 3,040 -Deferred tax liabilities 58 4Total non-current liabilities 3,098 8,756 Current liabilitiesInterest bearing loans and borrowings 7,582 35Trade and other payables 8,885 5,028Current tax creditors 628 113Total current liabilities 17,095 5,176 Total liabilities 20,193 13,932 Total equity and liabilities 71,878 84,704 EcoSecurities Group plcConsolidated cash flow statement for the year ended 31 December 2006 31 December 31 December 2006 2005 •'000 •'000 Loss for the financial year (20,046) (4,318)Income tax expense 573 115Finance costs 856 339Finance income (2,405) (125)Depreciation 377 27Increase in trade and other receivables (3,980) (682)Increase in trade and other payables 9,626 2,036Loss on disposal of property, plant and equipment 139 -Net profit on disposal of joint ventures - (498)Share based payment 385 276Foreign exchange differences (294) (100)Interest paid (428) (270)Interest received 2,170 65Tax refunds received - 23Net cash out flow from operating activities (13,027) (3,112) Cash flows from investing activitiesCash paid to acquire minority interests - (477)Purchase of property, plant and equipment (2,673) (132) Purchase of intangible assets (3,487) (103)Net cash proceeds from disposal of interest in - 477joint venturesNet cash used in investing activities (6,160) (235) Cash flows from financing activitiesGross proceeds from the issue of ordinary share 85 83,667capitalAdmission costs paid (2,222) (5,557)Net proceeds from issue of new loans - 8,745Repayment of borrowings (300) (449)Net restricted cash deposits (5,824) (583)Net cash (used)/generated from financing activities (8,261) 85,823Effects of foreign exchange on cash (1,072) 12Net (decrease)/increase in cash and cash (28,520) 82,488equivalents Cash and cash equivalents at start of year 82,565 77 Cash and cash equivalents at end of year 54,045 82,565 EcoSecurities Group plc Notes to the financial statements 1. Basis of preparation This preliminary financial information has been derived from the Group'sconsolidated financial statements for the year ended 31 December 2006 which havebeen prepared in accordance with International Financial Reporting Standards(IFRS) as approved by the EU. The accounting policies applied in preparing theGroup's consolidated financial statements for the year ended 31 December 2006are as published in the Annual Report for 2005. 2. Business segments The Group has defined the following two business segments based on its operatingactivities as follows: (a) Emissions Reductions. This segment comprises CDM project activities wherethe Group contracts with project developers in order to acquire or sell CERs ontheir behalf, or development activities where the Group develops its owninterest in CDM projects as either lead project entity, or, as part of astrategic alliance (b) Consulting and Advisory. This segment provides emissions reduction advisoryservices to commercial and governmental organisations. PRIMARY Emissions Consulting Total reductions and advisory •'000 •'000 •'000 Revenue 2,038 1,035 3,073Segment result (18,192) (1,305) (19,497)Unallocated Group (1,524)expensesOperating loss (21,021)Net finance income 1,548Income tax expense (573)Loss after tax (20,046) Segment assets 14,555 1,271 15,826Unallocated Group 56,052assetsTotal assets 71,878 Segment liabilities (14,579) (1,011) (15,590)Unallocated Group (4,603)liabilities Total liabilities (20,193) Non-cash expensesCapital expenditure 6,135 25 6,160Depreciation/ 355 23 377Amortisation SECONDARY Revenue Segment Capital assets expenditure •'000 •'000 •'000 Europe 823 68,011 4,089North America 1,605 636 150South America 477 724 475Africa 92 24 0Asia 76 2,483 1,446 3,073 71,878 6,160 The Group has historically been involved in the provision of consulting andadvisory services and has accordingly reported all costs and revenues andattributed all assets and liabilities to that segment. Up to 31 December 2005,no revenue had been attributed to the emissions reductions segment and noseparate reporting of segments results presented. The assets and liabilities ofthe Group previously classified entirely within the consulting and advisorysegment are being allocated in some cases to other activities or areunallocated. 3. Loss per share Basic loss per share is calculated by dividing the losses attributable toordinary shareholders by the weighted average number of ordinary sharesoutstanding during the year. The weighted average number of ordinary shares is calculated as follows: Year ended Year ended 31 December 2006 31 December 2005 ('000) ('000)Issued ordinary sharesStart of year 91,627 10,305Effect of shares issued during the year 584 5,805Weighted average number of shares for year 92,211 16,110 Basic and fully diluted loss per share is calculated as follows: Year ended Year ended 31 December 31 December 2006 2005 Loss for the year attributable to equity shareholders of thecompany (•'000) (20,046) (4,344) Weighted average number of shares ('000) 92,211 16,110 Loss per share (cent (•)) (21.74) (26.97) There is no difference between basic and fully diluted loss per share as theinclusion of the share options in the calculation of the weighted average numberof shares would have the effect of reducing the loss per share. The potentialdilutive effect on the weighted average number of ordinary shares would be toincrease the weighted average number of ordinary shares by 8,763,408 shares andcomprises the dilutive effect of the share options issued under the employeeshare option schemes, together with the dilutive effect of the warrants issuedto Cargill, which vested on 31 August 2006. The adjusted loss per share has been presented to show the impact on basicearnings per share of the IPO preparation expenses and the net profit ondisposal of the joint ventures as follows: Year ended Year ended 31 December 31 December 2006 2005 •'000 •'000Loss for the year attributable to equity shareholdersof the company (20,046) (4,344)IPO preparation expenses (277) 1,286Disposal of joint ventures - (498) (20,323) (3,556)Adjusted loss per share (cent (•)) (22.04) (22.07) 4. Cash and cash equivalents Year ended Year ended 31 December 31 December 2006 2005 •'000 •'000 Cash at bank and in hand 4,411 422Short term bank deposits 49,634 82,143 54,045 82,565Restricted cash 6,407 583 60,452 83,148 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 37,965 3.54% 10Sterling 1,599 5.18% 19US Dollar 10,070 5.30% 66 49,634 5. Share premium account Year ended Year ended 31 December 31 December 2006 2005 •'000 •'000 Start of year 75,853 -Premium on shares issued in share for share exchange in theyear, net of expenses - 30,519 Premium on shares issued for cash 82 79,269Transaction costs 511 (7,586)Reserve arising on share for share exchange - (26,349) End of year 76,446 75,853 Transactions costs amounting to €0.5 million have been written back to the sharepremium account in the period as a result of the over-estimation of costsrelating to the IPO in 2005. This information is provided by RNS The company news service from the London Stock Exchange