RED.L Regulatory News (RED)

6 Mar 2008 07:01

Camco International Ltd06 March 2008 Camco International Limited Preliminary results announcement Camco International Limited ("Camco"), a leading climate change business in thegrowing carbon and sustainable development markets, is pleased to announce itspreliminary results for the period ended 31 December 2007. HIGHLIGHTS as at 31 December 2007 • Integrated climate change business model offering a full range of carbon-related services • 149.3m tonnes contracted (up 45% from 102.9m tonnes at 31 December 06) • Acquisition of ESD creating additional value from consulting and advisory services • 46% growth in consultancy revenues, with profit of €0.41 million • Strong consulting support in developing carbon portfolio and North America presence • McCommas Bluff landfill acquired in North America as anchor asset for planned Climate Leaders asset management vehicle • Winner of three prestigious industry awards, demonstrating market leadership FINANCIALS as at 31 December 2007 • Revenue of €10.44 million and loss for the period of €12.09 million • Strong year-end cash position with €20.55 million cash and cash equivalents • No "guaranteed delivery" forward sale liabilities CARBON PORTFOLIO as at 31 December 2007 • Revenue model based on high quality, mature projects • Average project size in excess of 1.0m tonnes • Management committed to delivering 127m tonnes in 1st Kyoto Commitment Period • 101.9m tonnes contracted on a carbon share basis • Of which, 37.3m net tonnes in specie with average purchase price of €7.25 • 39.1m tonnes contracted on a cash / revenue share basis • 30.2m tonnes registered (or equivalent), and 11.6m tonnes submitted for registration • 2.7m tonnes delivered HIGHLIGHTS to 29 February 2008 • Net portfolio increase of 0.8m tonnes (new projects of 5.6m tonnes, less prudent adjustments of 4.8m tonnes) • 40.0m tonnes now held in specie • 7.6m tonne Beijing Taiyanggong project registered subject to corrections • Registered projects now total 37.7m tonnes • Additional projects submitted, taking the total submitted for registration to 22.4m tonnes • 60.1m tonnes registered or submitted for registration • Strong growth in projects that are operational to 67.6m tonnes • Strong growth in validated projects to 80.0m tonnes Commenting on the results, David Potter, Camco Chairman said: "We expect the strong performance of the Group in 2007 to be continued in 2008.In particular, with carbon credit deliveries accelerating, I look forward toseeing the carbon business move into profit this year." Jeff Kenna, Camco Chief Executive, said: "In 2008 the Group expects to see the quality of its project portfoliotranslated into significant deliveries of carbon credits. The exceptional effortof our teams on the ground around the world continues to give me confidence thatour projects are robust and well managed." Progress through stage* (cumulative): 29 Feb 08 31 Dec 07 31 Dec 06 Contracted 150.1m 149.3m 102.9m PDD complete 113.3m 107.0m 78.0m Host LoA 87.8m 88.8m 43.0m Validated 80.0m 56.6m 34.1m Submitted for registration 60.1m 41.8m 2.8m Registered 37.7m** 30.2m 2.8m 1st verification*** 12.3m 12.3m 2.3m Issued / verified 2.7m 2.7m 0.6m Financed 125.8m 126.8m 43.1m Under construction 109.8m 98.6m 42.9m Operational 67.6m 45.3m 5.5m Sell-side ERPA 70.1m 69.7m 35.8m * Clean development mechanism (CDM) stage or equivalent for JI and VER projects** Includes 7.6m Beijing Taiyanggong project*** Projects that have been through at least 1 verification process or equivalent Carbon portfolio contract structures: 29 Feb 08 31 Dec 07 31 Dec 06 Contracted 150.1m 149.3m 102.9m Carbon share 102.8m 101.9m - (of which, held by Camco in specie) 40.0m 37.3m - Cash share 39.7m 39.1m - VERs 7.7m 8.3m - Enquiries: The Camco Group +44 (0)20 7121 6100 Jeff Kenna, Chief Executive Officer Scott McGregor, Chief Financial Officer KBC Peel Hunt Ltd (Nominated Adviser and Broker) +44 (0)20 7418 8900 Jonathan Marren David Anderson Gavin Anderson +44 (0)20 7554 1400 Ken Cronin Kate Hill Daniela Stawinoga Group Investor Relations website www.camcoglobal.com Please note that the Group website address has been revised. Investor relationsinformation can now be found at www.camcoglobal.com/secure/investor.php Notes to editors: The Camco Group is a leading climate change business in the growing carbon andsustainable energy markets. We offer a full range of carbon-related services topublic and private organisations worldwide. The Group has a 20-year track recordand manages one of the world's largest carbon credit portfolios. The Group consists of three business segments: The Camco carbon assets business is a leading project developer with one of theworld's largest carbon credit portfolios. We partner with companies to identify,develop and manage projects that reduce greenhouse gas emissions, and thenarrange the sale and delivery of carbon credits to international compliancebuyers and into the voluntary market. The consulting practice consists of Bradshaw, ECCM, ESD and ESD Sinosphere. Itcombines specialist technical, strategic and financial expertise and experienceaccrued over two decades to deliver a sustainable low carbon society. We arepositioned to work with our clients to turn climate change liabilities intoeconomic, social and environmental assets. Camco Ventures works with project and technology developers, early stagebusinesses and investor Groups to commercialise climate change mitigationtechnologies, projects and services. Part of this business is the ClimateLeaders' asset management vehicle. CHAIRMAN'S STATEMENT Last year I said that I felt we were well placed strategically and that climatechange opinion was "coming our way". This has been validated fully in 2007. The4th Assessment Report from The Intergovernmental Panel on Climate Change and theStern Report were the two most significant independent studies that lentempirical support to our strategy. The award of a Nobel Prize to the formerGroup simply underlined how sustainability and climate change are the criticalissues of the 21st century. 2007 also marked a major evolution of our strategy with the acquisition of ESD.This transformed the company from a "pure" carbon asset developer into aglobally integrated carbon and sustainable development Group. We now haveoffices in 11 different countries and have made a major commitment to NorthAmerica where we now operate from two offices. Acquisitions are generally risky, but in ESD we found a common aim and culture -indeed the roots of Camco are grounded within ESD. As a result Jeff Kenna, thefounder of ESD, succeeded Tristan Fischer as CEO. ESD brought 106 experienced consultants and seven new offices into our armoury;their revenue development in 2007 has fully justified the Board's confidence inthe prospects for all our consulting activities. The headline of our 2007 results - an increase in our contracted carbonportfolio of 45% from 102.9m tonnes to 149.3m tonnes - is testament to ourstrong growth story. Our strategy remains to expand on a global basis using our advisory andconsulting services to open doors and find opportunities for our carbon assetdevelopment business. We will work as both agents and principals, as we did onthe acquisition of McCommas Bluff landfill in Dallas, Texas, the anchor assetfor the Climate Leader's Asset management vehicle. We are delighted with the progress made in North America, and the furtherenhancement of our business in China, South East Asia, Russia, Eastern Europeand Africa. We remain alert to acquisition or organic growth opportunitiesworldwide. The purchase of Bradshaw is an excellent example of our strategy at work and theopportunities for marketing their services through our global network aredeveloping strongly. In our maiden report we committed ourselves to maintaining a conservativeattitude to the valuation of our carbon portfolio. This policy, as well as tightcash management, reporting and management systems, has proved valuable in 2007.We believe we now have one of the world's strongest and best developed carbonportfolios. As indicated at the time of our flotation, we anticipated moving intoprofitability in 2008 and the Board and management remain committed to thatgoal. David Potter Camco March 2008 GROUP BUSINESS REVIEW The Camco Group is a leading climate change business in the growing carbon andsustainable energy markets. We offer a full range of carbon-related services topublic and private organisations worldwide. The Group has a 20-year track recordand manages one of the world's largest carbon credit portfolios. In 2007 we acquired several consulting and ventures businesses with expertise inthe environmental markets. The Group's strategy is to leverage the experienceand capability of the consulting practice to increase the number and range ofemission reduction projects the Group can identify, co-develop and manage. As part of the Ventures business, Camco is in the process of establishing anasset management vehicle, through which corporate or institutional investors caninvest in projects originated by Camco's network of offices around the world.The vehicle will have its own origination capability, and be supported byCamco's technical carbon teams. The consulting and ventures businesses contribute to the integrated Group,delivering high value project development opportunities into the core emissionreductions business. The value that these businesses bring to the Group issignificant. Financial review This year's annual report and accounts are broadly in line with management'sexpectations. Revenue for the period was €10.44 million and came from the saleof carbon credits and consultancy services. Camco has a conservative revenuerecognition policy, where we recognise revenues after services have beenprovided, or after credits have been verified. Revenues from the sale of carbon credits has been strong despite the Kyotocompliance credit market not starting until January 2008. The Group has received€2.88 million from the sales of either Certified Emission Reductions (CERs) orVerified Emission Reductions (VERs). We are very pleased with the performance of ESD. In 2007 revenues for theconsulting practice were €6.92 million. In 2006, like-for-like revenues were€4.75 million, an increase of 46%. As the Camco Group acquired ESD on 30 April2007 the percentage growth is based on pro-rated 2006 revenues. In July, additional funds were raised to pursue growth in North America anddevelop new business areas. These funds were partially invested in new marketsand increased operating costs by €1.84 million. There was also a cash and sharetermination payment of €0.89 million, and foreign exchange losses of €2.39million. Treasury policy is to hold cash as low risk cash deposits in either US$, Euro,GBP£ or other local currencies to match the demand for operating expenditures ofour global businesses. At year end, there was a loss of €1.93 million on theGBP£ balance, and a €0.54 million loss on the US$ balance. The majority of thelosses (€2.26 million) are unrealised, with €0.13 million realised. As a result of these adjustments administrative expenses were €14.87 million andthe resulting loss for the period was €12.09 million. Operating loss before July 07 expansion €6.97 million New business expansion: North America expenditure €0.94 million New business ventures €0.90 million Other items: Cash and share termination payment €0.89 million Foreign exchange loss (unrealised) €2.39 million (€2.26 million) Reported loss after adjustments €12.09 million The balance sheet shows a net asset position of €58.24 million at 31 December2007. This includes carbon development contracts (€13.30 million withcapitalised costs of €2.81 million in the year), goodwill and other intangibles(€15.88 million) and cash and cash equivalents (€20.55 million). Other notable assets include an asset held for sale of €8.37 millionrepresenting the investment made in the McCommas Bluff Landfill project. Thisproject is intended to be the anchor asset for the Climate Leaders Asset Management vehicle. The Group intends to transfer the McCommas asset into this vehicle whereupon it will be managed by a dedicated asset management team. Operational review Management's primary focus in 2007 was to develop the carbon credit pipeline,lay the groundwork for sales of carbon credits in 2008 and to integrate theacquired businesses. To support the rapid growth of the Group, there has been continued investment inthe operational infrastructure of the business including additional resource inIT, HR and marketing as well as investment in staff development and training.Growth has seen staff increase from 43 at 2006 financial year end to 207 as at31 December 2007. The Group's network expanded with new offices opening during the year in NorthAmerica, Malaysia and a second office in China. The carbon credits, consultingand ventures businesses have successfully merged with joint offices in Beijing,Denver, Kuala Lumpur, London and South Africa. We are pleased to announce thepromotion of Henrik Dalsgard to MD China, and would like to thank Alan Ho forhis hard work in 2007. Looking ahead The outlook for the Camco Group is positive; the carbon and sustainabledevelopment markets are growing strongly and Camco is uniquely positioned totake advantage of these opportunities. We have strength through our exposure toboth developed and emerging markets, with operations in China and South EastAsia, Russia, Africa, Europe and North America. In 2008 we expect to progress our 150m tonne carbon portfolio through the Kyotoregulatory process. Management are confident that we will deliver 127m carboncredits into the market up to the end of the 1st Kyoto Commitment period. We also expect to enter into contracts to place Camco's carbon credits withcompliance and financial buyers. This will lock in margins on approximately onethird of our carbon in specie. Our commercial team has demonstrated that it cansecure excellent value for our clients' carbon. The North American team will contribute voluntary market credits to a VerifiedEmission Reduction (VER) portfolio. Our expanding team in the US is establishinga stronghold in this emerging market, with a service offering covering allaspects of the carbon value chain from carbon assessment through to carbon assetmanagement. The Group will continue to invest in building a sustainable business that willconsolidate the operational improvements made in 2007. This is forming the basefor a global business that will be a key contributor in the fight againstclimate change in the coming years. CARBON ASSETS Camco is a leading carbon asset developer with one of the world's largest carboncredit portfolios. We work closely with companies and investors to identify anddevelop projects that reduce greenhouse gas emissions to generate carboncredits. We then arrange the sale and delivery of carbon credits tointernational compliance buyers and into the voluntary market. Our business model is to develop emission reduction projects "at risk". Thismeans that Camco does not generate revenue until the carbon credits aredelivered. As a project co-developer, we build a trusting partnership with ourclient that aligns our economic interests. There is stronger cooperation whenboth parties are pulling in the same direction. We have teams of carbon market experts based locally. Being "on the ground"gives us the ability to understand our markets, react quickly and to developlong term relationships with our clients - essential when developing complexemission reduction projects. The contracted portfolio of carbon credits has grown from 102.9m tonnes to149.3m tonnes, an increase of 45%, with additional increases in 2008. This takesinto account the adjustment management has made to the gross portfolio toreflect known project delays or reduced operating capacity on project sites. Camco has been open and transparent in its reporting of these write-downs, andwill continue to be so. The company's business plan is to contract 200m carboncredits and deliver 127m tonnes during the 1st Phase of the Kyoto commitmentperiod. The portfolio is of high quality, with large, mature, projects which we aremanaging through the regulatory, construction and commercial processes. Theaverage project size is just over 1.0m tonnes, which means that it takes lessresource to secure the necessary approvals than a higher number of smallerprojects. The table below demonstrates continued progress: Progress through stage* (cumulative): 29 Feb 08 31 Dec 07 31 Dec 06 Contracted 150.1m 149.3m 102.9m PDD complete 113.3m 107.0m 78.0m Host LoA 87.8m 88.8m 43.0m Validated 80.0m 56.6m 34.1m Submitted for registration 60.1m 41.8m 2.8m Registered 37.7m** 30.2m 2.8m 1st verification*** 12.3m 12.3m 2.3m Issued / verified 2.7m 2.7m 0.6m Financed 125.8m 126.8m 43.1m Under construction 109.8m 98.6m 42.9m Operational 67.6m 45.3m 5.5m Sell-side ERPA 70.1m 69.7m 35.8m * Clean development mechanism stage or equivalent for JI and VER projects** Includes 7.6m Beijing Taiyanggong project*** Projects that have been through at least 1 verification process or equivalent The CDM Executive Board has indicated that they will register the BeijingTaiyanggong project as long as stated corrections are made to the projectdocumentation. Camco considers the requested corrections to be straightforwardand is therefore confident that the project will be formally registered in duecourse. As at 29 February 2008, the contracted portfolio of 150.1m tonnes comprisescompliance credits (CERs and ERUs) and voluntary market offsets (VERs). Thecontracted portfolio includes 7.7m VERs. The 142.4m compliance grade credits(i.e. excluding VERs) are contracted either on a "cash share" or "carbon share"basis. Carbon share contracts total 102.8m tonnes of which Camco's in specie amount is40.0m tonnes. Under these contracts Camco works in partnership with clients toqualify and commercialise the credits and receives a carbon share which iseither free or purchased at a discounted price. The average purchase price(including free carbon) is €7.35/tonne. Cash share contracts total 39.7m tonnes. Under these contracts, Camco does notphysically receive any carbon credits but instead earns a commission or share ofthe revenue from carbon credit sales. Carbon portfolio contract structures 29 Feb 08 31 Dec 07 31 Dec 06 Contracted 150.1m 149.3m 102.9m Cash share 39.7m 39.1m - Carbon share 102.8m 101.9m - VERs 7.7m 8.3m - During the year, Camco has been awarded several industry prizes. Best ProjectDeveloper - the Point Carbon Awards, Carbon Transaction of the Year -Environmental Finance and an Environmental Markets prize in the Asian EnergyBusiness Awards. These awards demonstrate Camco's leading position in themarket. 2008 will be a watershed year for the carbon market. We will deliver significantvolumes of carbon credits into the European and Japanese markets wherecompliance buyers have contracted to purchase carbon credits. Over the coming years, we will continue to grow our carbon credit portfolio.This will be achieved in the existing markets where we have a strong presencesuch as China, Russia and Eastern Europe and also newer markets like NorthAmerica, Turkey and South East Asia. New sectors for emission reduction projectswill also be developed, such as land use, land use change & forestry ("LULUCF"),and the building sector. CONSULTANCY During the year, Camco acquired the ESD consulting business which has 20-years'expertise in the environmental markets. ESD has successfully integrated into theGroup enabling us to offer a full range of carbon-related services acrossEurope, Africa, Asia and North America. The consultancy practice's technical expertise will add value to our CDM and JIprojects. In addition, high quality carbon credits from our projects can bepurchased by consulting clients who are seeking to offset emissions they areunable to reduce as part of their carbon management strategy. Drawing on Camco's experience in the consulting and carbon asset managementbusiness, the China team launched an innovative pilot project, to test thefeasibility of generating carbon credits from the use of fuel efficient stovesin rural communities. The opening of the new consulting office in South Africa, complimentary to theservices of the assets division office, created an integrated offering acrossthe Africa division. The division's solar power project in Tanzania performedabove initial targets, achieving major successes in the growing market for solarpower in East Africa. Greater competition for business and for staff is expected in 2008. HoweverESD's 20-year track record provides us with an excellent reputation to securenew work, develop successful partnerships and recruit new staff. The marketopportunity is strong, and over the next three years we aim to leverage thesynergies created by the Camco and ESD merger. VENTURES Camco Ventures collaborates with technology start-ups, energy projectdevelopers, investors, government agencies and manufacturers to commercialisegreenhouse gas technologies and low carbon projects and services. We provide themanagement infrastructure, financial structuring, business planning andtechnical support required to take each start-up business from inception tocommercialisation. The Ventures business develops new services, project development or assetmanagement activities that support the integrated service offering. Oncesuccessful, these initiatives will form part of the integrated Group, and willno longer be categorised as "Ventures". For example, an energy software product to help companies manage and reducetheir carbon emissions has been developed by Bradshaw, one of our consultingbusinesses. The product will leverage the Group's client base of majorindustrial companies in the UK and North America. Last year, the Group acquired the McCommas Bluff landfill in Dallas, Texas, oneof the largest in North America. Specifically we have acquired a 17-year leaseto develop the site for improved collection and destruction of methane gas, oneof the most harmful contributors to global warming. The McCommas project will bethe anchor asset for the planned Climate Leaders asset management vehicle. Initial commercial steps were taken to generate carbon credits under the PlanVivo methodology, a high quality framework for land use and forestry projects.The Group is working with successful projects that have been established inMexico, Uganda and Mozambique, with more projects under development in Africaand North America. This is an example of carbon asset business growing into newsectors and geographies. Abbreviated financial statements for the period from 1 January 2007 to 31December 2007 Consolidated income statement for the period from 1 January 2007 to 31 December2007 Consolidated income statementfor the year ended 31 December 2007-------------------------------------------------------------------------------- Continuingoperations 2007 Period from incorporation to 31 December 2006 Notes •'000 •'000 ----------- ------ ------ ------- -------- --------- --------Revenue 3 10,444 830---------------- ------ ------- -------- --------- --------Cost of sales (4,365) (673)----------------- ------ ------- -------- --------- --------Gross profit 2 6,079 157----------------- ------ ------- -------- --------- --------Administrationexpenses (14,872) (4,945)----------------- ------ ------- -------- --------- --------Share-basedpayments (2,028) (577)----------------- ------ ------- -------- --------- --------Totaladministrationexpenses 4 (16,900) (5,522)----------------- ------ ------- -------- --------- --------Profit/(loss)fromoperations (10,821) (5,365)----------------- ------ ------- -------- --------- --------Finance income 5 1,171 1,450----------------- ------ ------- -------- --------- --------Finance expense 5 (2,582) (58)----------------- ------ ------- -------- --------- --------Profit/(loss)before tax (12,232) (3,973)----------------- ------ ------- -------- --------- --------Taxation 126 (2)----------------- ------ ------- -------- --------- --------Profit/(loss)after tax (12,106) (3,975)----------------- ------ ------- -------- --------- --------Profit fromdiscontinuedoperation (netof tax) 9 16 ------------------ ------ ------- -------- --------- --------Loss for theperiod (12,090) (3,975)----------------- ------ ------- -------- --------- -------- Attributable to:----------------- ------ -------- ------- --------- -------- Equity holders of the Company (12,131) (3,975) Minority shareholders 41 - ----------- -------- ------ -------- ------- --------- --------Loss for theperiod (12,090) (3,975)----------- ----- ------ ------ -------- ------- --------- Basic and diluted loss per share in • cents----------------- ------ -------- ------- --------- -------- Continuing operations (8.19) (3.42) Loss for the period 6 (8.18) (3.42) ----------- -------- ------ -------- ------- --------- -------- Consolidated statement of recognised income and expensefor the year ended 31 December 2007------------------------------------------------------------------------------- Group Group 2007 2006 •'000 •'000 ----------- ----- ------ -------- ------- --------- --------Loss for theperiod (12,090) (3,975)----------------- ------ -------- ------- --------- --------Exchangedifferences ontranslation offoreignoperations 337 (22)----------------- ------ -------- ------- --------- --------Totalrecognisedincome andexpense forthe period (11,753) (3,997)--------------------------- ------- --------- --------Analysed to:----------------- ------ -------- ------- --------- -------- Equity shareholders of the (11,794) (3,997) Company ------ -------- ------- --------- -------- Minority interest in 41 - subsidiary companies ------ -------- ------- --------- -------- (11,753) (3,997) ----------- ------ ------ -------- ------- --------- -------- Balance sheetsas at 31 December 2007------------------------------------------------------------------------------- Group Group Company Company 2007 2006 * 2007 2006 Notes •'000 •'000 •'000 •'000 ----- ------ --- ------ ------- ------- ------- -------Assets-------------------- ------ ------- ------- ------- -------Non-current assets-------------------- ------ ------- ------- ------- -------Property, plant and equipment 1,606 304 106 134-------------------- ------ ------- ------- ------- -------Goodwill on acquisition 7 14,413 1,156 - --------------------- ------ ------- ------- ------- -------Other intangible assets 7 1,463 - - --------------------- ------ ------- ------- ------- -------Carbon development contracts 8 13,302 10,751 8,642 6,123-------------------- ------ ------- ------- ------- -------Investments in subsidiaries - - 18,020 4,997-------------------- ------ ------- ------- ------- -------Other investments 275 - - --------------------- ------ ------- ------- ------- -------Deferred tax assets 414 - - --------------------- ------ ------- ------- ------- -------Total non-current assets 31,473 12,211 26,768 11,254-------------------- ------ ------- ------- ------- -------Current assets-------------------- ------ ------- ------- ------- -------Prepayments and accrued income 3,277 496 1,917 429-------------------- ------ ------- ------- ------- -------Trade and other receivables 5,678 1,112 15,078 2,060-------------------- ------ ------- ------- ------- -------Cash and cash equivalents 20,552 24,719 19,098 24,063-------------------- ------ ------- ------- ------- -------Assets classified as held for sale 9 8,512 - - --------------------- ------ ------- ------- ------- -------Total current assets 38,019 26,327 36,093 26,552-------------------- ------ ------- ------- ------- -------Total assets 69,492 38,538 62,861 37,806-------------------- ------ ------- ------- ------- ------- ------ ------- ------- ------- -------Liabilities-------------------- ------ ------- ------- ------- -------Current liabilities-------------------- ------ ------- ------- ------- -------Current tax liability (917) (1) - ----------------- ------ ------- ------- ------- -------Trade and other payables (5,759) (2,116) (1,172) (1,738)-------------------- ------ ------- ------- ------- -------Loans and borrowing (1,293) - - --------------------- ------ ------- ------- ------- -------Provisions - - - --------------------- ------ ------- ------- ------- -------Deferred consideration (1,861) - - --------------------- ------ ------- ------- ------- -------Liabilities classified as held forsale (143) - - --------------------- ------ ------- ------- ------- -------Total current liabilities (9,973) (2,117) (1,172) (1,738)-------------------- ------ ------- ------- ------- -------Non-current liabilities-------------------- ------ ------- ------- ------- -------Loans and borrowing (297) - - --------------------- ------ ------- ------- ------- -------Provisions (203) - - --------------------- ------ ------- ------- ------- -------Deferred consideration (375) (1,814) - --------------------- ------ ------- ------- ------- -------Deferred tax liabilities (409) - - --------------------- ------ ------- ------- ------- -------Total non-current liabilities (1,284) (1,814) - --------------------- ------ ------- ------- ------- -------Total liabilities (11,257) (3,931) (1,172) (1,738)-------------------- ------ ------- ------- ------- -------Net assets 58,235 34,607 61,689 36,068-------------------- ------ ------- ------- ------- ------- Equity-------------------- ------ ------- ------- ------- -------Share capital 1,662 1,299 1,662 1,299-------------------- ------ ------- ------- ------- -------Share premium 70,997 36,909 70,997 36,909-------------------- ------ ------- ------- ------- -------Share-based payment reserve 2,567 577 2,567 577-------------------- ------ ------- ------- ------- -------Retained earnings (16,106) (3,975) (12,266) (2,536)-------------------- ------ ------- ------- ------- -------Translation reserve 315 (22) - --------------------- ------ ------- ------- ------- -------Own shares (1,271) (181) (1,271) (181)-------------------- ------ ------- ------- ------- -------Total equity attributable toshareholders of the Company 58,164 34,607 61,689 36,068-------------------- ------ ------- ------- ------- -------Minority interest 71 - - --------------------- ------ ------- ------- ------- -------Total equity 58,235 34,607 61,689 36,068-------------------- ------ ------- ------- ------- ------- * As restated (revision of fair value of consideration)These financial statements were approved by the Board of directors on 5March 2008 and were signed on its behalf by: Scott McGregorChief Financial OfficerDirector Cash flow statementsfor the year ended 31 December 2007 Group Group Company Company 2007 2006 2007 2006 Notes •'000 •'000 •'000 •'000 ------- -------- -------- ------- --------------------------Cash flow from operatingactivities ------- -------- -------- ------- --------------------------Revenue and deferred incomereceived 8,573 313 2,919 -------------------- ------- -------- -------- ------- -------Cash paid to suppliers andemployees * (20,766) (6,231) (8,135) (4,682)------------------- ------- -------- -------- ------- -------Interest received 1,254 565 1,228 551------------------- ------- -------- -------- ------- -------Interest paid (72) - - -------------------- ------- -------- -------- ------- -------Service fees paid tosubsidiaries - - (5,626) -------------------- ------- -------- -------- ------- -------Income tax paid (72) (1) - -------------------- ------- -------- -------- ------- -------Net cash flow from operatingactivities (11,083) (5,354) (9,614) (4,131)------------------- ------- -------- -------- ------- ------- Cash flow from investingactivities ------- -------- -------- ------- --------------------------Payment for acquisition ofsubsidiaries (5,295) (366) (4,710) -------------------- ------- -------- -------- ------- -------Repayment of loan notesissued for acquisition ofsubsidiary - (3,150) - (3,150)------------------- ------- -------- -------- ------- -------Net (overdraft)/cash acquiredwith subsidiaries (985) 248 - -------------------- ------- -------- -------- ------- -------Payment for purchase ofcarbon development contracts - (896) - (2,116)------------------- ------- -------- -------- ------- -------Payment for purchase ofproperty, plant and equipment (1,187) (330) (12) (149)------------------- ------- -------- -------- ------- -------Payment for asset heldfor sale (8,369) - - - ------- -------- -------- ------- ------- Net cash flow frominvesting (15,836) (4,494) (4,722) (5,415)activities --- --- ------- -------- -------- ------- ------- ---------------- --- --- ------- -------- -------- ------- ------- Cash flow from financingactivities ------- -------- -------- ------- --------------------------Proceeds from the issue ofloan notes - 5,000 - 5,000------------------- ------- -------- -------- ------- -------Repayment of loan notes - (5,000) - (5,000)------------------- ------- -------- -------- ------- -------Loans made to subsidiaries - - (12,560) (1,384)------------------- ------- -------- -------- ------- -------Proceeds from issuance ofshares 24,280 37,074 24,280 37,074------------------- ------- -------- -------- ------- -------Costs of raising capital (357) (3,069) (357) (2,643)------------------- ------- -------- -------- ------- -------Payment of finance leaseliabilities (201) - - -------------------- ------- -------- -------- ------- -------Net cash flow fromfinancing 23,722 34,005 11,363 33,047activities ------- -------- -------- ------- ------- ---------------- --- --- ------- -------- -------- ------- ------- Change in cash and cashequivalents and bankoverdraft (3,197) 24,157 (2,973) 23,501------------------- ------- -------- -------- ------- -------Opening cash and cashequivalents and bankoverdraft 24,719 - 24,063 -------------------- ------- -------- -------- ------- -------Effect of exchange ratefluctuations (1,909) 562 (1,992) 562------------------- ------- -------- -------- ------- -------Closing cash and cashequivalents and bankoverdraft 19,613 24,719 19,098 24,063------------------- ------- -------- -------- ------- ------- * Cash paid to suppliers by Group was €12,298,000 (2006: €4,214,000) andemployees €8,468,000 (2006: €2,017,000) Notes to the financial statements1 Abbreviated accounting policies Camco International Limited (the "Company") is a public company incorporated inJersey under Companies (Jersey) Law. The address of its registered office isChannel House, Green Street, St Helier, Jersey JE2 4UH. The consolidatedfinancial statements of the Company for the year ended 31 December 2007 comprisethe Company, its subsidiaries and associates and jointed controlled entities(together the "Group"). Separate financial statements of the Company are alsopresented. The accounting policies of the Company are the same as for the Groupexcept where separately disclosed. The Company is listed on the Alternative Investment Market ('AIM') of the LondonStock Exchange. A Statement of complianceThese consolidated and separate company financial statements have been preparedand approved by the Directors in accordance with International FinancialReporting Standards as adopted by the European Union ("adopted IFRS"). These consolidated and separate company financial statements have been preparedin accordance with and in compliance with Companies (Jersey) Law 1991. The consolidated and separate financial statements were approved by the Board on5 March 2008. B Basis of preparationThe financial statements are presented in Euros, the functional currency of theCompany, rounded to the nearest thousand Euros. The preparation of financial statements in conformity with IFRS requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expenses. The estimates and associated assumptions are based on historicalexperience and other factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making the judgementsabout carrying values of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised if the revision affects only that period, or in the periodof the revision and future periods if the revision affects both current andfuture periods. The most significant techniques for estimation are described inthe accounting policies. The accounting policies set out below have been applied consistently to theperiod presented in these consolidated financial statements. The accountingpolicies have been consistently applied across all Group entities for thepurposes of producing these consolidated financial statements.The financial statements have been prepared on the historical cost basis. C Accounting for Carbon Development Contracts ("CDCs") The Group enters into CDCs with clients from which carbon credits are produced.Carbon credits, also known as Certified Emission Reductions ("CERs") or EmissionReduction Units ("ERUs") are generated through the highly regulated CarbonDevelopment Mechanism ("CDM") and Joint Implementation ("JI") processes. Thesefollow a number of steps including the approval of the project methodology andmonitoring procedures, project design, project approval by the DesignatedNational Authority ("DNA"), project validation by a Designated OperationalEntity or equivalent ("DOE"), project acceptance by the host country,registration, verification and certification by a DOE. Verification of carboncredit production will take place at least once a year during this period. TheGroup works with the client at all stages of the process using proprietaryknowledge and experience to negotiate this complex process. Treatment of CDC costsCDCs acquired by the Group are recorded initially at cost (or fair value ifthrough business combination). Subsequently, the directly attributable costs are added to the carrying amountof CDCs. These costs are only carried forward to the extent that they areexpected to be recouped through the successful completion of the contracts. Thecosts comprise consultancy fees, license costs, technical work and directlyattributable administrative costs. All other costs are expensed as incurred. Most of the Group's CDCs have not yet reached the stage at which income can berecognised. Once the income recognition criteria on these contracts are met (asdescribed above), the CDC costs will be expensed on the basis of carbon creditsdelivered as a proportion of total expected carbon credit production over thecontract period. Most of the contracts are expected to be terminated in 2012. D Discontinued operationsA discontinued operation is a component of the Group's business that is held forsale which was acquired exclusively with a view to resale. Classification as adiscontinued operation occurs when the operation meets the criteria to beclassified as held for sale. E Assets held for saleNon-current assets that are expected to be recovered primarily through salerather than through continuing use are classified as held for sale. Immediatelybefore classification as held for sale, the Group of assets are remeasured inaccordance with the Group's accounting policies. Thereafter generally the groupof assets are measured at the lower of their carrying amount and fair value lesscost to sell. Impairment losses on initial classification as held for sale andsubsequent gains or losses on remeasurement are recognised in profit or loss.Gains are not recognised in excess of any cumulative impairment loss. F RevenueThe Group has two sources of revenue, revenue relating to CDCs and consultingrevenues. CDC revenueRevenue from CDCs is recognised at the point that the carbon credit has beenverified by a DOE and the risk of delivery into the final CDM registry orequivalent (the "registry") is minimal. The Company expects that theverification, and delivery into the registry would take place within six monthsfollowing the carbon credit production taking place. Where the Company takesownership rights in carbon credits from CDCs, revenue will be recognised whenverification, delivery and sales contracts for delivery are complete. Voluntary Emission Reductions ("VERs") and other carbon credit revenue may begenerated from carbon credit projects not operating under CDM or JI processes.The regulation criteria are agreed between all parties and generally revenue isrecognised from VERs when all acceptance and confirmation notices have beenissued by the relevant parties and the significant risks and rewards ofownership have been transferred. The CDCs are scheduled to deliver the majority of carbon credits over the2008-2012 phase of the Kyoto Protocol. In certain instances the Group will perform a management review on behalf ofthird parties to deliver CDCs on a non recourse basis. In these instancesrevenue is recognised on a time and materials basis. Consulting revenueRevenue from consultancy services provided is recognised in the income statementin proportion to the stage of completion of the consultancy contract. The stageof completion is assessed by reference to the overall contract value. 2 Segmental reporting--------------------------------------- Segment information is presented in respect of the Group's business and geographical segments. The primary format, business segments, is based on the Group's management and internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated to a segment on a reasonable basis. Segment capital expenditure is the total cost incurred during the year to acquire segment assets, that are expected to be used for more than one period. Business Segments The Group comprises the following main business segments:1. Consulting: The Group's consulting practice providing clients with low carbon energy and sustainable development solutions.2. Ventures: Enters into partnerships with project and technology developers to commercialise climate change mitigation technologies and provide carbon asset management services.3. Carbon: Carbon asset devepment, commercialisation and portfolio management. During 2006, the Group operated in one business segment, being that of CDCs (Carbon). Following on from the acquistion of the ESD Group on the 30 April 2007, there are now two additional business segments, namely Consulting and Ventures. Geographical SegmentsThe CDC business is managed on a world-wide basis but operates in three principle geographic areas, ERMEA (comprising Europe, Russia, Middle East and Africa), Asia and Americas. In ERMEA the Group operates primarily in Russia, Eastern Europe and Africa. In Asia the Group operates primarily in the Republic of China. In Americas the Group operates primarily in the United States of America. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of the projects generating carbon credits and not the location of the Group entity recording the revenue. Segment assets arebased on the location of the project for CDCs and location of office for the consulting business. Business Segments--------------------- --- ------ -------- --- ------- ----- ------ Consulting Ventures Carbon Eliminations Consolidated 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 -------- ------- ------ ------ ------ ------ ------ ------ ------ ------- Externalrevenues 6,924 - 645 - 2,875 830 - - 10,444 830Inter-segmentrevenue 496 - - - - - (496) - - - ------- ------ ------ ------ ------ ------ ------ ------ ------- ------ Total segmentrevenue 7,420 - 645 - 2,875 830 (496) - 10,444 830 ------- ------ ------ ------ ------ ------ ------ ------ ------- ------ Segment grossmargin 5,148 - 337 - 1,090 157 (496) - 6,079 157Segment result 406 - (776) - (6,026) (3,044) - - (6,396) (3,044) ------- ------ ------ ------ ------ ------ ------ ------ ------- ------ Unallocatedexpenses (4,425) (2,321) -------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------ Results fromoperatingactivities (10,821) (5,365) Net finance(expense)/ (1,411) 1,392income Taxation 126 (2) Profit fromdiscontinuedoperation (netof tax) 16 - -------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------ Loss for theperiod (12,090) (3,975) ------- ------ ------ ------ ------ ------ ------ ------ ------- ------ Segment 20,729 - 146 - 45,321 38,538 - - 66,196 38,538assets Otherinvestments - - 275 - - - - - 275 - Unallocatedassets 3,021 - -------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------ Total assets 69,492 38,538 -------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------ Segmentliabilities (4,377) - (997) - (3,190) (3,931) - - (8,564) (3,931) Unallocatedliabilities (2,693) - -------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------ Totalliabilities (11,257) (3,931) -------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------ Capitalexpenditure 335 - 25 - 1,028 1,226 - - 1,388 1,266 Depreciation 210 - - - 169 27 - - 379 27 Amortisationof intangibleassets 222 - - - - - - - 222 - Impairmentlosses ofintangibleassets andproperty,plant andequipment - - - - 153 72 - - 153 72 -------- ------- ------ ------ ------ ------ ------ ------ ------ ------- ------ Geographical Segments--------------------- --- ---- ------- ----- -------- ------ ------ ERMEA Asia Americas Consolidated 2007 2006 * 2007 2006 2007 2006 2007 2006* •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 ------ ------- ------ ------- ------- ------ ------ Revenue fromexternalcustomers 8,847 10 1,597 820 - - 10,444 830Segment assets 48,783 28,066 12,060 10,472 8,649 - 69,492 38,538Capitalexpenditure 1,332 266 56 960 - - 1,388 1,226-------- ---- ------ ------ ------- ------ ------- ------- ------ ------ * As restated (revision of fair value of consideration) 3 Revenue---------------------------------------------- ----- ----- ---- ----- ----- --------- --------Revenue is derivedas follows. 2007 2006 •'000 •'000 --------- ------- ------ ----- ----- ---- ----- ----- --------- --------CDC revenue 2,875 830--------- ------- ------ ----- ----- ---- ----- ----- --------- --------Consulting revenue 7,569 ---------------- ------ ----- ----- ---- ----- ----- --------- -------- -------- 10,444 830 --------- ------- ------ ----- ----- ---- ----- ----- --------- -------- 4 Total administration expenses---------------------------------------------- ----- ----- ---- ----- ----- --------- --------Totaladministrationexpenses areanalysed below. 2007 2006 •'000 •'000 --------- ------- ------ ----- ----- ---- ----- ----- --------- --------Depreciation ofproperty, plantand equipment -owned assets 232 27---------------------- ----- ---- ----- ----- --------- --------Depreciation ofproperty, plantand equipment -leased assets 147 ----------------------- ----- ---- ----- ----- --------- --------Share-basedpayments 2,028 577--------------- ------ ----- ----- ---- ----- ----- --------- --------Exceptional item -discretionary M&Aexpense - 439------------------- ----- ----- ---- ----- ----- --------- --------Otheradministrationexpenses 14,493 4,479--------------- ------ ----- ----- ---- ----- ----- --------- --------Totaladministrationexpenses 16,900 5,522--------------- ------ ----- ----- ---- ----- ----- --------- -------- 5 Net finance income ----- --------- ------- ----- ---- ----- ----- --------- -------- 2007 2006 --------- •'000 •'000 ------- ------ ----- ----- ---- ----- ----- --------- -----------------------------------Finance income--------------------------- ----- ----- --------- --------Interest on bankdeposits 1,171 860--------------------------- ----- ----- --------- --------Exchange movements- unrealised - 490------------------- ----- ----- ---- ----- ----- --------- --------Exchange movements- realised - 100------------------- ----- ----- ---- ----- ----- --------- -------- 1,171 1,450--------------------------- ----- ----- --------- --------Finance expense--------------------------- ----- ----- --------- --------Unwinding ofdiscount (note 21) (97) (58)--------------------------- ----- ----- --------- --------Interest onoverdraft andborrowings (72) ---------------------------- ----- ----- --------- --------Interest onfinance leasecreditor (22) -------------------- ----- ----- ---- ----- ----- --------- --------Exchange movements- unrealised (2,256)------------------- ----- ----- ---- ----- ----- --------- --------Exchange movements- realised (135) -------------------- ----- ----- ---- ----- ----- --------- -------- (2,582) (58) --------- ------- ------ ----- ----- ---- ----- ----- --------- --------Net finance income (1,411) 1,392--------------------------- ----- ----- --------- -------- 6 Loss per share----------------------------------------------Loss per share attributable toequity holders of the Company iscalculated as follows. 2007 2006 ----- ----- --------- -------- --------- ---- ----- ----- --------- -------- Cents Cents per share per share --------- ------- ------ ----- ----- ---- ----- ----- --------- --------Basic and dilutedloss per share (8.18) (3.42)--------------- ------ ----- ----- ---- ----- ----- --------- -------- •'000 --------- ------- ------ ----- ----- ---- ----- ----- --------- --------Loss used incalculation ofbasic and dilutedloss per share (12,090) (3,975)---------------------- ----- ---- ----- ----- --------- --------Weighted averagenumber of sharesused incalculation 147,676,792 116,307,918---------------------- ----- ---- ----- ----- --------- -------- 7 Goodwill on acquisition and other intangibleassets --- --------- ------- ----------------------------------- Group Group Group -------------------------- Goodwill on Other Total acquisition intangible assets •'000 •'000 •'000 ----------- ------- -----------------------Cost at 1 January 2007 1,156 - 1,156--------------- ------ ----- ----- ---- --- --------- ------- --------Acquisitions 13,801 1,685 15,486------------------------- ---- --- --------- ------- --------Revision tooriginal purchaseconsideration (1,075) - (1,075)------------------------- ---- --- --------- ------- --------Revision toprovisional fairvalues atacquisition 531 - 531------------------- ----- ----- ---- --- --------- ------- -------- --------Cost at 31December 2007 14,413 1,685 16,098--------------- ------ ----- ----- ---- --- --------- ------- --------Impairment & amortisation at - - -1 January 2007 ----- ---- --- --------- ------- ------------------------------ -------Amortisationcharge - (222) (222)--------------- -------- ----- ---- --- --------- ------- --------Amortisation at 31December 2007 - (222) (222)---------------------- ----- ---- --- --------- ------- --------Net book value at31 December 2006 1,156 - 1,156---------------------- ----- ---- --- --------- ------- --------Net book value at30 December 2007 14,413 1,463 15,876---------------------- ----- ---- --- --------- ------- -------- Goodwill in the period arose on the acquisition of ESD Partners Limited and its subsidiariesand Bradshaw Consulting Limited. 8 Carbon development contracts------------------------- ------- ------- -------- ------- Group Group Company Company 2007 2006* 2007 2006 •'000 •'000 •'000 •'000 ------- ------- -------- --------------------------------Cost at 1 January2007 & 8 February2006 as previouslystated 12,389 - 6,123 -------------------------- --- ------- ------- -------- -------Revision toprovisional fairvalues atacquisition (1,498) -------------------- ----- ----- --- ------- ------- -------- -------Cost at 1 January2007 & 8 February2006 as restated 10,891 - 6,123 ----------------------- ----- --- ------- ------- -------- -------Acquisitions - 9,210 - 4,716--------- ------- ------ ----- ----- --- ------- ------- -------- -------Carbon developmentcontract costscapitalised 2,811 1,681 2,599 1,407------------------- ------ ----- ----- --- ------- ------- -------- -------Cost at 31December 13,702 10,891 8,722 6,123--------------- ------ ----- ----- --- ------- ------- -------- -------Utilisation andwrite-down at 1January 2007 & 8February 2006 (140) - - -------------------------- --- ------- ------- -------- -------Amount charged tocost of sales inthe period (107) (68) (80) ----------------------- ----- --- ------- ------- -------- -------Write-down of CDCcosts previouslycapitalised (153) (72) - ----------------------- ----- --- ------- ------- -------- -------Utilisation andwrite-down at 31December (400) (140) (80) ----------------------- ----- --- ------- ------- -------- -------Net book value at1 January 2007 & 8February 2006 asrestated 10,751 - 6,123 -------------------------- --- ------- ------- -------- -------Net book value at31 December 13,302 10,751 8,642 6,123---------------------- ----- --- ------- ------- -------- -------* As restated (revision of fair value of consideration). The write-down of CDC costs was recognised following a review of the carrying amounts of CDCs. Where the discounted future cash flows on the contract were deemed insufficient to support the recoverability of the asset a write-down to the lower value was made. 9 Asset and liabilities classified as held for sale---------------------------------------------- On 29 November 2007, the Group purchased the assets related to operating and developing the McCommas Bluff landfill methane collection and destruction plant for cash consideration of €7,822,000. The McCommas project is intended to be sold to a carbon asset fund within 6 to 9 months. The Group intends to transfer the McCommas asset into this fund whereupon it will be managed by a dedicated operations team based in North America.. --------- ------- ------ ----- ----- ---- ----- ----- --------- --------McCommas 2007 2006 •'000 •'000 --------- ------- ------ ----- ----- ---- ----- ----- --------- --------Property, plantand equipment 7,822 ---------------- ------ ----- ----- ---- ----- ----- --------- --------Prepayments andaccrued income 690 ---------------- ------ ----- ----- ---- ----- ----- --------- --------Assets classifiedas held for sale 8,512 ---------------- ------ ----- ----- ---- ----- ----- --------- -------- --------- ------- ------ ----- ----- ---- ----- ----- --------- --------Trade andother (143) -payables ------- ------ ----- ----- ---- ----- ----- --------- -----------------Liabilitiesclassified as heldfor sale (143) ---------------- ------ ----- ----- ---- ----- ----- --------- -------- This information is provided by RNS The company news service from the London Stock Exchange