TEG.L Regulatory News (TEG)

15 Mar 2006 07:01

TEG Environmental Plc15 March 2006 For Release 7:00am 15 March 2006 TEG ENVIRONMENTAL PLC ("TEG" or "the Company") FINAL RESULTS for the year ended 31 December 2005 'Breakthrough Year as Expected; Significant Growth Anticipated in 2006' TEG Environmental Plc, the leading green technology company, which convertsorganic wastes into natural organic fertilizer announces its final results forthe year ended 31 December 2005. Highlights Financial • Turnover up hugely to £555k (2004: £21.5k) mainly generated in the second half • Post tax loss of £1.571 million (2004: £1.112 million) - largely reflecting exceptional charges and the delay in recognising the Swansea contract revenues, the Company's first sale to a local authority • No dividend is proposed Operational • £3.7 million fund raising in August 2005, oversubscribed several times • Category III ABP Approval granted in June 2005 - positively impacts revenue generation and opens up new and larger markets • Management team substantially strengthened Significant contracts • City & County of Swansea - planning permission granted; revenues now secured for 2006 • Acquisition of Binns Skips, Perth, Scotland - one of the largest animal by-product composting businesses • Sherdley Farm, Lancashire - commercial development of plant final quarter 2005, waste contracts secured with Schwan and HJ Heinz • Banham Poultry, Norfolk - sale of plant, planning approval being sought at site with existing permission for in-vessel composting • Kildare, Ireland - planning approval granted for composting plant • Post financial year end, collaboration deal with quoted support services company jointly targeting local authority contract opportunities Said Mick Fishwick, TEG's Chief Executive, commenting on the year under reviewand future prospects: " 2005 proved to be the breakthrough year we had expected. Based on thecontracts achieved and the number of enquiries the Company has received, theBoard expects to achieve further significant growth in 2006." ENDS Contact: TEG Environmental Group Plc Michael Fishwick, Chief Executive 01772 314 100 Tanja Willis, Finance Director 01772 314 100 Binns & Co PR Ltd 020 7786 9600 Peter Binns 07768 392 582 Tarquin Edwards 07879 458 364 Editor's Notes: TEG provides an in-vessel composting technology, which is one of the fewapproved technologies capable of treating animal by-product waste. Planteconomics are driven by the gate fees charged, rather than the value of the endproduct (compost). The TEG process is an economic alternative to landfill. The Silo Cage system, one of the few technologies in Europe capable of treatingthis waste, is a natural process producing compost as an end product, used as anexcellent soil conditioner that fertilizes, retains moisture, provides structureand reduces the incidence of plant disease. TEG's Silo-Cages are housed in aself-contained building, are not unsightly and are environmentally friendly. Potential customers include local authorities, waste management companies, foodprocessors, farmers and landowners. The Company's expanding market is driven byincreasingly stringent EU and UK legislation regulating the treatment anddisposal of organic waste. Chairman's Statement I am delighted to present the Company's 2005 annual results. TEG has madetremendous progress during the year and it is a pleasure to report our firstmeaningful sales figures. The turnover of £555,250 is a very significantincrease on the previous year's figure (2004: £21,572) and, given it was almostentirely generated in the second half of the year, the growth in annualisedturnover is even greater. It is a minor disappointment that planning permissionfor our Swansea project was delayed to the end of the final quarter and revenuesdid not impact on 2005, but it is reassuring that those revenues are now securedfor 2006. 2005 proved to be the breakthrough year we had expected. The implementation of legislation, principally under the Landfill Directive andAnimal By-Products Regulations, clearly crystallised thinking in the market andafter years of speculative interest we finally saw the commitment from themarket we were seeking. Contract Wins During the year we secured our first sale to the public sector with a sale toThe City and County of Swansea, confirmed as a full contract after obtainingplanning permission in December 2005. We were also successful in securing theacquisition of the Binns Skips composting business in Perth, Scotland, one ofthe largest animal by-products composting businesses in the UK. Commercialdevelopment of the plant at Sherdley Farm, Preston began in the final quarterwith a 3 year waste contract secured with Schwan Consumer Brands UK Ltd, part ofthe pizza and global food processing business, and a further contract has beensecured in March 2006 with HJ Heinz . The contract with yet another global foodbusiness, HJ Heinz, is great news for the Company and is a further endorsementof the TEG product. In addition, we were delighted to reach a conclusion to theplanning process at Kildare in Ireland and we are looking forward to bringingthat plant back on line in 2006. Finally, we are pleased to have secured the sale of a plant to Banham PoultryLimited. Whilst this sale remains secure, a change in location for the plant hasbeen proposed and Banham have withdrawn their planning application for anin-vessel composting facility at the original Lenwade site in order to pursueother activities at that site. Banham has however, pleasingly opted to installan in-vessel composting plant at another of its sites in Norfolk for which italready has planning permission for in-vessel composting. TEG believes this newarrangement is preferable, particularly because of the timing and planningpermission implications. Banham has already requested permission for change oftechnology to the TEG system at that site. Fundraising Funding of the expansion was achieved through a successful fundraising in August2005, one that was oversubscribed several times. TEG was able to raise £3.7mbefore expenses. Animal By-Product approval Crucially, TEG achieved Animal By-Product approval from the State VeterinaryService (SVS) during the year, following extensive trials and scrutiny by theregulator. Not only did this enable us to secure certain contracts during theyear but it also opened up market opportunities for 2006 and beyond. Approvalfrom the SVS is fundamental if TEG is to process the higher value animalby-products and full approval hugely reduces the burden of approval on futureplants. Management During the year we made a number of appointments to strengthen the team. MichaelFishwick joined the Company in January 2005 and assumed the role of ChiefExecutive in April 2005. Tanja Willis joined the Board on 7 March 2005 asFinance Director - she also continues as Company Secretary. Together with otherkey executives heading sales, project management, engineering, technical andscientific, we have a strong, committed executive team to take the Companyforward. Results A number of exceptional costs were taken in 2005, notably the write down of£78,000 of redundant assets following development at Sherdley Farm and the£35,000 of legal fees for the Perth contract. In addition, the delay inrecognising the Swansea revenues reduced projected margins by £96,000. We haverecorded a post tax loss of £1.571 million (2004: £1.112 million). No dividendis proposed. Post Year-end events In February 2006, TEG announced a collaboration with Glendale Managed ServicesLtd, a division of Parkwood Holdings PLC, a Support Services company fullyquoted on the London Stock Exchange, to jointly bid for local authoritycontracts. Glendale is the leading parks maintenance business in the UK, withover 100 Local Authority contracts. TEG believes this collaborationsignificantly strengthens the Company's capability to bid for and win a largenumber of the local authority contract opportunities we are seeing throughoutthe UK. Future Prospects Based on the contracts achieved, the number of enquiries the Company hasreceived and the number of active projects, the Board expects to achieve furthersignificant growth in 2006. Shareholders will be advised of the date for the Annual General Meeting in duecourse. Nigel Moore Chairman 15 March 2006 PROFIT AND LOSS ACCOUNT For the period ended 31 December 2005 2005 2004 Note £ £ Turnover - continuing activities 555,250 21,572 Cost of sales (256,793) (12,017) Gross profit 298,457 9,555 Other operating charges (1,952,498) (1,227,550) Operating loss - continuing activities (1,654,041) (1,217,995) Interest receivable 69,971 34,598 Interest payable (40,107) (4,121) Loss on ordinary activities before taxation (1,624,177) (1,187,518) Tax on loss on ordinary activities 2 53,110 75,774 Loss for the financial year transferred from (1,571,067) (1,111,744)reserves Loss per share - basic and diluted 3 (7.91p) (7.91p) BALANCE SHEET As at 31 December 2005 2005 2004 £ £Fixed assetsIntangible assets 2,269,584 3,990Tangible assets 1,093,289 206,549Investments 2 - 3,362,875 210,539Current assetsStocks 123,070 8,166Debtors 429,981 100,122Cash at bank and in hand 2,414,392 1,164,284 2,967,443 1,272,572 Creditors: amounts falling due within one year (1,338,846) (300,479) Net current assets 1,628,597 972,093 Total assets less current liabilities 4,991,472 1,182,632 Creditors : amounts falling due after more (1,958,644) (36,187)than one year Net assets 3,032,828 1,146,445 Capital and reservesCalled up share capital 1,319,269 819,269Share premium account 12,309,993 9,352,543Profit and loss account (10,596,434) (9,025,367)Shareholders' funds 3,032,828 1,146,445 CASH FLOW STATEMENT For the period ended 31 December 2004 2005 2004 Note £ £ Net cash outflow from operating activities 4 (1,126,123) (1,196,815) Returns on investments and servicing of financeInterest received 69,971 34,598Finance lease interest paid (2,749) (4,121) Net cash inflow from returns on investments and 67,222 30,477servicing offinance R & D tax credit received 65,311 71,137 Capital expenditure and financial investmentPurchase of tangible fixed assets (841,771) (27,972)Sale of tangible fixed assets 3,859 2,859 Net cash outflow from capital expenditure and (1,040,412) (25,113)financialinvestment Acquisitions and disposalsAcquisition of business 7 (352,500) - FinancingIssue of shares 3,700,000 1,950,624Expenses paid in connection with share issues (242,550) (449,708)Capital element of finance lease rentals (23,340) (29,823) Net cash inflow from financing 3,434,110 1,471,093 Increase in cash 5 1,250,108 350,779 NOTES TO THE FINAL RESULTS 1. BASIS OF PREPARATION OF FINANCIAL INFORMATION The financial information contained in this preliminary announcement does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The balance sheet at 31 December 2005 and the profit and loss account,cash flow statement and associated notes for the year then ended have beenextracted from the Company's 2005 statutory financial statements upon which theauditors opinion is unqualified and does not include any statement under Section237(2) of the Companies Act 1985. Those financial statements have not yet beendelivered to the Registrar of Companies. The figures for the period ended 31December 2004 have been extracted from the statutory financial which have beenfiled with the Registrar of Companies. The auditors' report on those financialstatements was unqualified but contained an explanatory paragraph in respect offuture funding of the Company and did not contain a statement under Section 237(2) of the Companies Act 1985. The preliminary announcement has been prepared in accordance with applicableaccounting standards and under the historical cost accounting rules. The principal accounting policies of the Company are set out in the Company's2005 Annual Report and Financial Statements and have remained unchanged from theprevious year. However, FRS 21, Events after the balance sheet date, FRS 22,Earnings per share and the disclosure under FRS 25, Financial instruments:disclosure & presentation, have been adopted during the year although there hasbeen no impact on the Company. 2. TAXATION The tax credit represents a claim for R&D tax credit. 3. LOSS PER SHARE The loss per share is calculated by reference to the loss attributable toordinary shareholders divided by the weighted average of 19,859,354 ordinaryshares for the 12 months to 31 December 2005, and 14,060,383 for the 12 monthsto 31 December 2004. 2005 2004 Attributable loss (1,571,067) (1,111,744) Average number of shares in issue for basic and 19,859,354 14,060,383diluted loss per share Loss per share (7.91p) (7.91p) The loss for each period and the weighted average number of ordinary shares forcalculating the diluted loss per share for each period are identical to thoseused for the basic loss per share. This is because the outstanding share optionswould not be dilutive under the terms of Financial Reporting Standard No. 22'Earnings per share' (FRS 22). 4. RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING ACTIVITIES 2005 2004 £ £ Operating loss (1,654,041) (1,217,995)Amortisation 74,914 3,996Depreciation 75,640 32,666Goodwill on acquisition of business (2,340,508) -Loss/(profit) on sale of tangible fixed assets 78,032 (2,859)Increase in stocks (114,904) (1,285)(Increase)/decrease in debtors (342,060) 3,028Increase/(decrease) in creditors 756,296 (14,366)Increase in deferred consideration 2,340,508 -Net cash outflow from operating activities (1,126,123) (1,196,815) 5. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2005 2004 £ £ Increase in cash in the year 1,250,108 350,779Cash outflow from finance leases 23,340 29,823Change in net funds resulting from cashflows 1,273,448 380,602Inception of finance leases - (53,122)Movement of net funds in the year 1,273,448 327,480Net funds at 1 January 2005 1,104,751 777,271Net funds at 31 December 2005 2,378,199 1,104,751 6. ANALYSIS OF MOVEMENT IN NET FUNDS At 1 January At 31 December 2005 Cashflow 2005 £ £ £ Cash at bank and in hand 1,164,284 1,250,108 2,414,392Finance leases (59,533) 23,340 (36,193) 1,104,751 1,273,448 2,378,199 7. ACQUISITIONS On 17 August 2005, the Company acquired the Binns Skips composting business inPerthshire and agreed an 11 year lease and operating contract. The fair value of the acquisition £2,543,008, represents fixed assets acquiredand paid for £202,500 and goodwill, £2,340,508. Management consider the fairvalue of the fixed assets acquired is equal to their book value. The goodwillhas been calculated by discounting the deferred consideration of £3,000,000 topresent value at a rate of 6%. The consideration is payable in equal quarterlyinstalments over a period of 10 years and the consideration for the fixed assetswas paid in full at completion. The difference between the fair value and thedeferred consideration will be deemed interest and will be recognised in thefinancial statements over the 10 year period. This is in accordance with theterms of Financial Reporting Standard No. 7 ('FRS7'). The contract will be reviewed after the initial 11 year contract period. 8. RECONCILIATION OF EQUITY SHAREHOLDERS' FUNDS 2005 2004 £ £ Loss for the financial year (1,571,067) (1,111,744)Issue of shares 3,457,450 1,500,916Net addition to shareholders' funds 1,886,383 389,172Opening shareholders' funds 1,146,445 757,273Closing shareholders' funds 3,032,828 1,146,445 -------------------------- This information is provided by RNS The company news service from the London Stock Exchange