28 Apr 2016 07:00
28 April 2016
GREKA ENGINEERING & TECHNOLOGY LTD.
("Greka Engineering" or the "Company")
Final Results
Greka Engineering & Technology Ltd. (AIM: GEL), the unconventional gas sector engineering and technology business with pipeline, gas compression and power generation assets in China, announces its financial results for the year ended 31 December 2015.
CORPORATE HIGHLIGHTS
· A total of 159 customers in China at the end of 2015, a 6% increase over the 150 customers as at 31 December 2014
· Signed new power line construction contract with China United Coalbed Methane Corporation ("CUCBM")
· Signed framework agreement with CUCBM for power supply, covering all well groups of CUCBM powered or to be powered
· Optimized compressor layout to maximize single well production and keep optimum casing pressure well production
· No lost time due to injury or accident in 2015
OPERATIONAL HIGHLIGHTS
· Total sales of 47 gas station refuelling equipment items in 2015
· 10 SCADA systems were sold in 2015
· Full year 2015 gas processed was 1.4 Bcf (40 million cubic meters), as compared to 1.1 Bcf in 2014 (31.6 million cubic metres), of which delivered volumes were 1.2 Bcf (35 million cubic metres), as compared to 0.98 Bcf in 2014 (27.7 million cubic metres). Consumed volume for power generation during 2015 was 0.2 Bcf (4.9 million cubic metres)
· A total of 17,160Mwh was generated in 2015 (2014: 13,853 Mwh) and consisted of: 13,361 Mwh of sales (2014:10,916 Mwh) and 3,799 Mwh was utilized for operations.
· 27km of gas gathering pipelines were constructed during the year bringing a total of 68km at year end
· 8km of power lines built in 2015 expanding power network to 80km
FINANCIAL HIGHLIGHTS
· Revenue of US$5.2 million (2014: US$5.2 million)
· Cash and bank deposits of US$3.2 million at 31 December 2015 (2014: US$2.6 million)
Randeep S. Grewal, Executive Chairman of Greka Engineering, commented:
"2015 was a year of achievements for the Company with milestones across all business units. Going forward we expect to capitalize on the momentum created during 2015 in improving our gathering infrastructure, expanding our power generation foot print and delivering innovative solutions for our clients."
For more information of Greka Engineering, please visit the Company's website at www.grekaengineering.com or contact:
Greka Engineering Betty Cheung, Director Corporate Affairs
| +852 3710 0088 |
Smith & Williamson Nominated Adviser Dr Azhic Basirov / David Jones / Ben Jeynes
| +44 20 7131 4000 |
About Greka Engineering & Technology
Greka Engineering & Technology Ltd., (AIM; GEL) was demerged from Green Dragon Gas Ltd. (AIM; GDG) via a dividend in specie and was admitted to trading on AIM in September 2013.
Greka Engineering offers turnkey solutions to over 100 upstream, midstream and downstream gas suppliers. The Company's technologies include Compressed Natural Gas/Liquefied Natural Gas (CNG/LNG) compressor equipment, CNG retail dispenser equipment and coal bed methane ("CBM") wellhead extraction technologies. The Company also supplies proprietary Integrated Circuit Card Point of Sale (ICC POS) and Supervisory Control and Data Acquisition (SCADA) software and hardware solutions for the remote management of transmission systems, power facilities, vehicle management and retail services.
In addition, the Company invests in, operates and maintains wholly owned assets for its customers in return for service contracts based on the volume management.
The Company has historically completed several Engineering, Procurement, Construction and Management (EPCM) contracts including the design, construction and management of gas gathering systems, a gas pipeline in Shanxi Province to the China West-East pipeline, the installation and commissioning of a 10MW gas-fired power facility in the Shanxi province and the construction of CNG retail stations.
Chairman's Statement
2015 was a significant year for Greka Engineering. In a demanding economic environment and with continued low oil prices, we took this opportunity to optimize our business units, expand our gas gathering systems and focus on our proven business model of steady toll based revenue though high quality infrastructure assets. The Company realized revenues of US$5.2 million in 2015, in line with 2014, while the loss for the year of US$1.4 million was reduced from the US$1.7 million loss in 2014.
Our high quality infrastructure assets of CBM field compressors, pipeline gathering systems and integrated production facility (IPF) continues to provide scope for our Company to deliver stable revenue growth. Gas sales during the year were up 22% year on year to 1.2 Bcf (35 million cubic meters) compared with gas sales of 0.98 Bcf (27.7 million cubic meters) in 2014. Power sales also increased 22% to 13,361 Mwh in 2015 (2014: 10,916 Mwh).
In total 46 new wells were connected into the Company's gas gathering system and a total of 27km of new pipeline were installed in 2015, bringing the cumulative gas gathering pipeline network length to 68km by year end. A technical review of our gathering system was taken during the period and an optimization plan was carried out during the year. This plan included the construction of 17 micro casing pressure production pumps and the installation of 23 pumping units at strategic locations. As at 31 December 2015, there were a total of 39 casing pressure production pumps installed dedicated to delivering gas from Green Dragon Gas Ltd.'s ("Green Dragon Gas") wells into our production facilities.
Within the power generation division, the Company installed 8km of power lines and connected 23 additional Green Dragon Gas wells to the power grid. We also constructed 0.45km of power lines to service 5 CUCBM valve groups during 2015. Following our successful power supply pilot program with CUCBM, CUCBM signed a Power Supply Framework contract to connect their wells into our power grid and for Greka Engineering to provide electricity to power their wells. By year end a total of 7 valve groups relating to 89 wells had been connected and supplied with power. It is expected that all 400 wells of CUCBM will eventually be connected to our power grid, with approximately 200 wells to be connected during 2016.
The technology division completed 10 wellhead SCADA systems, 1 CNG retail station SCADA system and 17 compressor SCADA systems during 2015.
The manufacturing division sold 47 sets of refuelling equipment - which included 35 sets of CNG/LNG dispensers, 6 cylinders and 6 un-loading cylinders. Additionally, 5 sets of dispensers were leased out to retail station together with compressor and gas storage served as a package. 17 new wellhead compressors were manufactured, delivered and installed in field as part of the gas gathering system optimization work.
As a technology company, we understand the need to constantly innovate and bring new ideas to service our clients' needs. In 2015 we embarked on two new research and development projects.
We are in development of a new compressor with better efficiency and stability which will translate to increased gas production for our clients. This technology is expected to revolutionize our product offering and we expect to grow our client base significantly.
We completed our LNG pump skid prototype and hope for it to enter the market during 2016 following a six month trial programme.
Finally, in 2013 the Company began research on a four-line dispenser. In 2015 we expanded the project and have entered into a formal cooperation agreement with Enric to jointly develop a compression-free CNG Retail Station. This new technology will revolutionize the CNG retail industry.
2015 was a year of achievements for the Company with milestones across all business units. Going forward we expect to capitalize on the momentum created during 2015 in improving our gathering infrastructure, expanding our power generation foot print and delivering innovative solutions for our clients.
Despite our progress during 2015, we note the Company's continued poor share price performance and the lack of liquidity in its shares, and are considering whether the costs of maintaining its listing on AIM are justified by the benefits the listing brings. An update on this matter will be announced in due course.
Randeep S. Grewal
Chairman
27 April 2016
Consolidated Statement of Comprehensive Income
| Notes | Year ended 31 December 2015 | Year ended 31 December 2014 |
|
| US$'000 | US$'000 |
|
| Audited | Audited |
Revenue | 2 | 5,188 | 5,233 |
Cost of sales |
| (3,808) | (4,083) |
Gross profit |
| 1,380 | 1,150 |
Selling and distribution |
| (152) | (294) |
Administrative expenses |
| (2,717) | (2,831) |
Other operating loss |
| (55) | 9 |
Total administrative expenses |
| (2,924) | (3,116) |
Loss from operations |
| (1,544) | (1,966) |
Finance income | 4 | 3 | 2 |
Finance costs | 4 | (40) | (58) |
Loss before income tax |
| (1,581) | (2,022) |
Income tax credit | 6 | 112 | 78 |
Loss for the year from continuing operations |
| (1,469) | (1,944) |
Profit from discontinuing operations | 7 | 52 | 241 |
Loss for the period |
| (1,417) | (1,703) |
Other comprehensive(expense)income that may be reclassified subsequently to profit or loss: |
|
|
|
Exchange differences on translation foreign operations |
| (1,326) | (95) |
Total comprehensive losses for the period |
| (2,743) | (1,798) |
Loss attributable to: |
|
|
|
- Owners of the company |
| (1,417) | (1,703) |
Total comprehensive income attributable to: |
|
|
|
- Owners of the company |
| (2,743) | (1,798) |
Basic and diluted loss per share attributable to owners of the company arising from: |
|
|
|
- Continuing operations (cents) | 5 | (0.36) | (0.47) |
- Discontinuing operations (cents) | 5 | 0.01 | 0.05 |
Total |
| (0.35) | (0.42) |
Consolidated Statement of Financial Position
|
| As at 31 December 2015 | As at 31 December 2014 |
|
| US$'000 | US$'000 |
| Notes | Audited | Audited |
ASSETS |
|
|
|
Non-current Assets |
|
|
|
Property, Plant and Equipment |
| 20,695 | 20,738 |
Intangible assets |
| 1,407 | 1,901 |
|
|
|
|
|
| 22,102 | 22,639 |
Current assets |
|
|
|
Inventories |
| 1,103 | 1,978 |
Trade and other receivables |
| 3,666 | 9,731 |
Cash and cash equivalents |
| 3,214 | 2,626 |
|
| 7,983 | 14,335 |
|
|
|
|
Assets held for sale |
| - | 1,753 |
|
|
|
|
Total assets |
| 30,085 | 38,727 |
LIABILITIES |
|
|
|
Current liabilities |
|
|
|
Trade and other payables |
| 2,156 | 3,830 |
Loans and borrowings | 8 | 616 | 4,706 |
Current tax liabilities |
| - | 12 |
|
| 2,772 | 8,548 |
Non current liabilities |
|
|
|
Deferred taxation liabilities |
| 352 | 475 |
|
|
|
|
|
| 352 | 475 |
TOTAL LIABILITIES |
| 3,124 | 9,023 |
Total net assets /(liabilities) |
| 26,961 | 29,704 |
Capital and reserves |
|
|
|
Share capital |
| 4 | 4 |
Share premium account |
| 35,949 | 35,949 |
Foreign exchange reserve |
| (786) | 540 |
Accumulated losses |
| (8,206) | (6,789) |
Total equity/(deficit) attributable to owners of the Company |
| 26,961 | 29,704 |
Consolidated Statement of Changes in Equity
Share capital | Share premium | Foreign exchange reserve | Accumulated losses | Total | |
US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
At 1 January 2014 | 4 | 35,949 | 635 | (5,086) | 31,502 |
Loss for the year | - | - | - | (1,703) | (1,703) |
Other comprehensive income: | |||||
- Exchange difference on translation of foreign operations | - | - | (95) | (95) | |
Total comprehensive income for the year | - | - | (95) | (1,703) | (1,798) |
At 31 December 2014 | 4 | 35,949 | 540 | (6,789) | 29,704 |
Loss for the year | - | - | - | (1,417) | (1,417) |
Other comprehensive income: | |||||
- Exchange difference on translation of foreign operations | - | - | (1,326) | - | (1,326) |
Total comprehensive income for the year | - | - | (1,326) | (1,417) | (2,743) |
At 31 December 2015 | 4 | 35,949 | (786) | (8,206) | 26,961 |
The following describes the nature and purpose of each reserve within owners' equity.
· Share capital: Amount subscribed for share capital at nominal value.
· Share premium: Amount subscribed for share capital in excess of nominal value, including capital contributions
· Foreign exchange reserve: Foreign exchange differences arising on translating the results, assets and liabilities of foreign operations into the reporting currency.
· Accumulated losses: Cumulative net gains and losses recognized in profit or loss.
Consolidated Statement of Cash Flows
|
| Year ended 31 December 2015 | Year ended 31 December 2014 |
|
| US$'000 | US$'000 |
|
| Audited | Audited |
Operating activities |
|
|
|
(Loss) / Profit before income tax |
| (1,581) | (2,022) |
Loss before tax from discontinuing operations |
| 52 | 241 |
|
| (1,529) | (1,781) |
Adjustments for: |
|
|
|
Depreciation |
| 1,205 | 1,022 |
Amortisation of other intangible assets |
| 495 | 495 |
Loss on disposal of property, plant and equipment |
| 60 |
|
Finance income |
| (3) | (2) |
Finance costs |
| 40 | 58 |
Operating cash flows before changes in working capital |
| 268 | (208) |
Movement in inventories |
| 530 | (93) |
Movement in trade and other receivables |
| 139 | 208 |
Movement in trade and other payables |
| 1,369 | (549) |
Cash generated(utilized by) / generated from operations |
| 2,306 | (642) |
Income tax payment |
| 112 | 78 |
Net cash generated (utilized by) / generated from operating activities |
| 2,418 | (564) |
Investing activities |
|
|
|
Payments for purchase of property, plant and equipment |
| (1,950) | (206) |
Interest received |
| 3 | 2 |
Net cash used in investing activities |
| (1,947) | (204) |
Financing activities |
|
|
|
Proceeds from the issue of share, net of issue costs |
|
|
|
Proceeds of short term loan |
| 642 | 650 |
Repayment of short term loan |
| (642) | (650) |
Finance costs paid |
| (40) | (58) |
Net cash (used in)/from financing activities |
| (40) | (58) |
Net (decrease)/increase in cash and cash equivalents |
| 431 | (826) |
Cash and cash equivalents at the beginning of the year |
| 2,626 | 3,494 |
|
| 3,057 | 2,668 |
Effect of foreign exchange rate changes |
| 157 | (42) |
Cash and cash equivalents at end of year |
| 3,214 | 2,626 |
Notes to the financial information for the year ended 31 December 2015
1. PRINCIPAL ACCOUNTING POLICIES
Basis of preparation
The financial statements have been prepared in accordance with IFRSs as adopted by the European Union, that are effective for accounting periods beginning on or after 1 January 2015. The principal accounting policies adopted in the preparation of the financial statements are set out in the Group's full annual report and accounts for the year ended 31 December 2015.
2. REVENUE AND SEGMENT INFORMATION
The Group determines its operating segments based on reports, reviewed by the chief operating decision-makers ("CODMs"), which are also used to make strategic decisions.
The Group reports its operations as two reportable segments: gas equipment sales and the provision of contract infrastructure services in the PRC. The division of the engineering and technology operations into two reportable segments is reflective of how the CODMs manage the business.
The accounting policies of the reportable segments are the same as those described in the summary of principal accounting policies. We evaluate the performance of our operating segments based on revenues from external customers and segmental profits.
Year Ended 31 December 2015
| Gas equipment sales | Infrastructure services | Intercompany | Consolidated from continuing operations |
| US$'000 | US$'000 | US$'000 | US$'000 |
Revenue | 1,555 | 4,289 | (656) | 5,188 |
Cost of sales | (1,069) | (3,229) | 490 | (3,808) |
Gross profit/(loss) | 486 | 1,060 | (166) | 1,380 |
Loss before tax | (1,348) | (67) | (166) | (1,581) |
As at 31 December 2015
| Gas equipment sales | Infrastructure services | Transportation Services (Discontinued Operations) | Intercompany | Consolidated |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
Segment assets | 7,404 | 24,448 |
| (1,767) | 30,085 |
Segment liabilities | 1,498 | 1,626 |
|
| 3,124 |
The results of transportation services have been disclosed within Note 7.
Year Ended 31 December 2014
| Gas equipment sales | Infrastructure services | Intercompany | Consolidated from continuing operations |
| US$'000 | US$'000 | US$'000 | US$'000 |
Revenue | 1,973 | 3,734 | (474) | 5,233 |
Cost of sales | (1,488) | (3,069) | 474 | (4,083) |
Gross profit | 485 | 665 | - | 1,150 |
Loss before tax | (1,628) | (394) | - | (2,022) |
As at 31 December 2014
| Gas equipment sales | Infrastructure services | Transportation Services(Discontinued Operations) | Intercompany | Consolidated |
Segment assets | 5,773 | 32,632 | 1,753 | (1,431) | 38,727 |
Segment liabilities | 11,024 | 35,321 | - |
(37,322) | 9,023 |
Gas equipment sales represent the net invoiced value of gas equipment sales provided to 15 (2014:73) customers for the year. Infrastructure services represent sales to wholly owned subsidiaries of the Green Dragon Gas group and the Greka Drilling Limited group.
3. LOSS FROM OPERATIONS
Loss from continuing operations is stated after charging:
|
| 2015 | 2014 |
|
| US$'000 | US$'000 |
|
|
|
|
Auditor's remuneration |
| 46 | 34 |
Staff costs |
| 1,585 | 1,454 |
Depreciation of property, plant and equipment |
| 1,205 | 1,022 |
Amortisation of intangible assets |
| 495 | 495 |
Operating lease expense (property) |
| 97 | 126 |
4. FINANCE INCOME / EXPENSES
|
| 2015 | 2014 |
|
| US$'000 | US$'000 |
|
|
|
|
Bank interest income |
| 3 | 2 |
|
|
|
|
Bank interest expenses |
| 40 | 58 |
5. LOSS PER SHARE
The calculation of the basic and diluted earnings per share attributable to the owners of the Company is based on the following data:
| 2015 | 2014 |
| US$'000 | US$'000 |
Loss for the year |
|
|
- Continuing operations | (1,469) | (1,944) |
- Discontinuing operations | 52 | 241 |
Loss for the purpose of basic and diluted loss per share | (1,417) | (1,703) |
|
|
|
Denominators |
|
|
Number of shares used in basic and diluted loss calculations | 409,622,133 | 409,622,133 |
|
|
|
Effect of potential dilutive ordinary shares (thousands) |
|
|
- options |
|
|
Basic and diluted loss per share (cents) |
|
|
- Continuing operations | (0.36) | (0.47) |
- Discontinuing operations | 0.01 | 0.05 |
There were no potentially dilutive instruments in 2015 and 2014. The basic and diluted loss per share are equal as the Company has no dilutive instruments. There have been no shares or potentially dilutive instruments issued between year-end and the date these financial statements were approved.
6. TAXATION
| 2015 | 2014 |
| US$'000 | US$'000 |
Current tax |
|
|
Charges for current year | 12 | 46 |
|
|
|
Deferred tax liabilities |
|
|
Under provision of prior year | (124) | (124) |
|
|
|
Income tax credit | (112) | (78) |
The reasons for the difference between the actual tax charge for the years presented and the standard rate of corporation tax in the PRC, as the primary operating environment, applied to the loss for the years presented are as follows:
| 2015 | 2014 |
| US$'000 | US$'000 |
Loss before income tax (excluding discontinued activities) | (1,581) | (2,022) |
Profit/(loss) before income tax - discontinued operations | 52 | 241 |
Loss before income tax | (1,529) | (1,781) |
Expected tax credit based on the standard rate of corporation tax in the PRC of 25% (2014: 25%) | (382) | (445) |
|
|
|
Effect of: |
|
|
|
|
|
Tax effect of revenue not taxable for tax purposes |
| 22 |
Tax effect of expenses not deductible for tax purposes |
|
|
Tax losses not recognized | 273 | 345 |
|
|
|
Income tax charge | (112) | (78) |
The Company is incorporated in the Cayman Islands and is not subject to income tax. The primary operating companies are incorporated in the PRC and are subject to 25% tax rates. The group has unrecognised losses of $418,074 (2014: $1,274,075) which are not recognised given uncertainties in future taxable profits. These tax losses expire in 5 years.
7. ASSETS HELD FOR SALE / DISCONTINUED OPERATIONS
The strategy of the Greka Engineering is to develop its engineering and technology operations. In order to focus on the delivery of this strategy, prior to the demerger from Green Dragon Gas Ltd, during 2012 one of the Company's subsidiaries agreed a proposal to sell its non-core transportation operations to subsidiaries being retained within the Green Dragon Gas Ltd group following the demerger. Subsequently, it entered a legal agreement with Green Dragon Gas Limited on 1 July 2013 to dispose of motor vehicles and equipment for $1,753,357 of cash consideration in line with the previously agreed proposals. The completion of the transaction was subject to obtaining necessary legislative approvals which delayed the ultimate transaction. During the year on 31 October 2015, the company completed above transaction and the Group's transport operations were disposed to Green Dragon Gas Limited. The consideration was increased to $1,876,000 with the remaining $123,000 recorded as a related party receivable
The following table summarises the gain/loss on disposal
| US$'000 |
Consideration received | 1,876 |
Less: Net book value of assets | (1,876) |
Gain on disposal | - |
The profit on discontinued operations in the Consolidated Statement of Comprehensive Income can be analysed, as follows:
| 2015 | 2013 |
| US$'000 | US$'000 |
Transportation service revenue | 128 | 387 |
Cost of sales | (76) | (146) |
Profit/(Loss) before and after taxation | 52 | 241 |
The Consolidated Statement of Cash Flows contains the following elements related to discontinuing operations:
| 2015 | 2013 |
| US$'000 | US$'000 |
Net cash flows attributable to operating activities | 52 | 241 |
8. LOANS AND BORROWINGS
| 2015 | 2014 |
| US$'000 | US$'000 |
|
|
|
Loans and borrowing - secured | 616 | 4,706 |
Included within loans and borrowings is a bank loan of US$615,991 (2014: $653,702) which is secured by buildings and structures with a book value of US$1,066,000(2014: US$1,197,330).
9. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information for the years ended 31 December 2015 and 31 December 2014 set out in this announcement does not constitute the Group's (being Greka Engineering and its subsidiaries) statutory financial information but is extracted from the audited financial statements for those years. The auditors have reported on the full accounts for both periods and their reports were unqualified and did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports.
10. ANNUAL REPORT
The Company's Annual Report and copies of this announcement will be available in due course on the Company's website at www.grekaengineering.com and from the office of the Company's Nominated Adviser, Smith & Williamson Corporate Finance Limited at 25 Moorgate, London EC2R 6AY, United Kingdom.