TEG.L Regulatory News (TEG)

26 Sep 2006 07:03

TEG Environmental Plc26 September 2006 For release 07.00am 26 September 2006 TEG ENVIRONMENTAL PLC (TEG.L) ("TEG" or "the Company") INTERIM RESULTS for the half year ended 30 June 2006 "Continued impressive progress" TEG Environmental Plc, the leading green technology company, which converts organic wastes into natural organic fertiliser announces its interim results for the half year ended 30 June 2006 Highlights Financial •Turnover up over 100 fold to £1.07m (2005: £9,286) on the same period last year, in line with expectations + •includes revenues from operations in Perth and Preston, and Swansea build project + •second half contributions expected from four projects •Post tax loss of £0.71m (2005:loss of £0.81m restated) •Fundraising in May, raising £8.05m, again oversubscribed Operational •Perth, Scotland, installation completed ahead of schedule - old technology closed •Preston installation of first line of plant completed, second line being installed - on stream end 2006 •Development of largest facility at Todmorden, West Yorkshire-among UK's biggest composting plants- ahead of schedule •First of four lines at Todmorden on stream April 2007 - ahead of schedule •Development of Kildare, Ireland continuing •Development at Claylands Corner, Somerset, after planning permission - expected on stream early 2007 Contract Wins - period under review •City and County of Swansea hand over ahead of schedule •Banham Compost, Norfolk project - construction underway, following planning permission •Collaboration agreement with Glendale Managed Services for joint bids for Local Authority contracts •Schwan Consumer Brands UK Ltd - waste for Preston plant •HJ Heinz - for composting of ABP Materials from its Wigan factory •Greater Manchester Waste - green waste supply to Preston •Shell R & D contract •United Utilities full scale pilot plant Commenting, Mick Fishwick, Chief Executive, TEG Environmental, said: "The market continues to grow strongly as legislation introduced in 2005 takeseffect, and we anticipate significant Local Authority activity as pressuremounts to achieve the statutory LATS targets. Interest in TEG's products isgreater than ever and we are enthusiastic about developments in emergingoverseas markets. Our formal R&D programmes in the oil and sewage sectors arevery exciting. If trials with Shell are successful in investigating thepotential for remediation of oil-based mud drill cuttings, it will presentglobal opportunities". "There is a healthy pipeline of opportunities and the development of the marketcontinues to be strong. Significant growth can be expected". ENDS Contact: TEG Environmental Group Plc Tel: 01772 314100 Michael Fishwick, Chief Executive Adventis Financial PR Tel: 020 7034 4760 / 020 7034 4758 Peter Binns/ Tarquin Edwards 07768 392 582 / 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 (ABP) waste. Planteconomics are predominantly driven by the gate fees charged, rather than thevalue of the end product (compost). The TEG process is an economic alternativeto 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 fertilises, retains moisture, provides structureand reduces the incidence of plant disease. TEG's Silo-Cages are housed inself-contained buildings, are not unsightly and are environmentally friendly. 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. Statutory targets for the diversion of waste fromlandfill increase annually through to 2020, increasing TEG's market opportunityyear on year. The Waste Resource Action Programme estimates that 450 compostingplants will be needed by 2020 to satisfy local authority requirements alone, andthere is increasing demand from the private sector driven by ABP legislation. TEG ENVIRONMENTAL PLC Interim Report for the six months ended 30 June 2006 Chairman's Statement I am delighted to present the company's interim results for the first half of2006. TEG has continued to make impressive progress and has pleasingly reachedthe £1.0million turnover level for the period, a very significant increase onthe previous period and in line with expectations. Turnover was £1.07 millionagainst £9,286 for the same period in 2005. Following the major breakthroughs achieved in 2005, 2006 is proving to be thegrowth year we forecast. The first half of the year not only includes revenuesfrom our operations in Perth and Preston, but also revenues from the buildproject in Swansea. The latter build project will be completed in the secondhalf of the year and with the build project secured for Banham Compost Ltd,together with further growth at Preston and Perth, we expect a furthersignificant step change in revenues for the remainder of the year. These accounts are the first to apply FRS20, the newly introduced accountingstandard that requires listed businesses to ascribe a cost to employee shareoptions. This has introduced a non cash cost of £76k for the period, and theresults for the same period in 2005 have been restated accordingly. Contract Wins The build project for The City and County of Swansea is ahead of programme andwe confidently expect to hand over the facility to the customer ahead ofanticipated schedule. We were delighted that Banham Compost Ltd finally receivedplanning permission to build its plant in Norfolk and the construction projectis now fully underway. We are still optimistic that the plant will be completedduring 2006. In February, TEG entered into a collaboration agreement with Glendale ManagedServices Ltd to bid jointly for Local Authority contracts. Glendale is theleading parks maintenance business in the UK, with over 100 Local Authoritycontracts and the partnership offers the unique capability to turn LocalAuthority waste into compost for Local Authority parks. TEG Operations The installation of the TEG plant and equipment at our Perth operation inScotland was completed ahead of schedule with the old technology being closeddown. The transition from the old technology whilst maintaining the ongoingbusiness proved challenging, but we are delighted with the progress made and thebusiness is expected to ramp up in the second half of the year. Installation ofthe first line at our Preston plant was also successfully completed, the line isfully contracted and we are in the process of installing the second line, due tocome on stream at the end of 2006. In addition to the contract with SchwanConsumer Brands UK Ltd, we were delighted to secure a contract with HJ Heinz forthe composting of ABP materials from its factory near Wigan. In addition, wesecured our first supply contract from Greater Manchester Waste, for the supplyof green waste to Preston. Development of TEG's largest facility at Todmorden, West Yorkshire is continuingahead of schedule. The facility will be amongst the largest composting plants inthe UK with a capacity of 50,000 tonnes per annum. We remain confident ofsecuring further waste supply from Greater Manchester Waste, which will in turnsupply our Todmorden and Preston facilities, when new contracts are let later inthe year and commercial negotiations continue with a number of other parties,who have already committed to waste supply into Todmorden. It is anticipatedthat the first of the four lines at Todmorden will be operational by April 2007,a month ahead of schedule. Development of the business at Kildare, Ireland, is continuing. Though furtherfrustrated by local permitting processes, we still expect the plant to beoperational by late 2006. Development at Claylands Corner, Somerset, hasproceeded following the award of planning permission in April 2006 and it isexpected that the plant will be operational by early 2007. Fundraising Funding of our continued and rapid expansion was achieved through a furthersuccessful fundraising in May, one that was again oversubscribed. TEG was ableto raise £8.05m before expenses, from both existing and new investors, the costof which has been charged against the share premium account. In addition, thecompany secured its first tranche of debt, £2.4m from the Bank of Scotland,which has been utilised in the site purchase and development at Todmorden. Thefundraising has secured the finance for the development of our plants atTodmorden, Claylands Corner, Sherdley Farm and Kildare. Development projects We were delighted to secure a funded R&D contract with Shell to investigate thepotential for remediation of oil-based mud drill cuttings, a waste product fromdrilling operations. Laboratory trials are close to completion and we arepleased to confirm regulatory approval has been granted for pilot plant trialsof several tonnes of material at our site in Perth. These will commence inOctober 2006. Whilst maintaining a prudent position, we are of course fullyaware of the global potential if the trials are successful. We were similarly delighted to secure an order to build a full scale pilot plantfor United Utilities at their site in Stretford, Manchester. The single cageplant will be used by United Utilities to assess the suitability of the TEGprocess for a variety of sewage-waste materials. Management Doug Benjafield, a waste industry expert with over 30 years' experience, joinedthe board in April as non-executive Director, succeeding John Hough. Doug was aDirector at Cleanaway and is a non-executive Director of a number of highprofile waste management ventures. John stepped down from the Board in May thisyear following over 10 years of support and service to the Company. His adviceand contribution will be very much missed. Market The market continues to grow as legislation introduced in 2005 takes effect. TheLandfill Allowance Trading Scheme ("LATS") introduced under the Waste andEmissions Trading Act 2003 annually increases the requirements on LocalAuthorities to recycle and compost waste. As widely reported in the press, anumber of Local Authorities are already failing to achieve targets and all LocalAuthorities are under increasing financial pressure to increase recycling andcomposting rates. To this end, TEG is in discussions with a number of LocalAuthorities. The National Audit Office report (Reducing the Reliance on Landfill in England)indicated that a further step change in Local Authority procurement activitycould reasonably be expected in late 2006 and early 2007. We have also been pleased to receive interest from elsewhere in the EU. As thenew entrants to the European Union further develop their waste and watertreatment infrastructure, it is expected that a large number of opportunitieswill arise to build TEG plants. TEG has secured an engineering partner inEastern Europe with the capability to manufacture and construct TEG plants,which presents both a potential sales opportunity and the further potentialopportunity to reduce plant build costs. Future Prospects In addition to the development projects discussed above, TEG maintains a healthypipeline of opportunities and the development of the market continues to bestrong. The company looks forward to the future with confidence and expectscontinued significant growth. Nigel Moore Chairman 26 September 2006 SUMMARISED PROFIT AND LOSS ACCOUNT For the six months ended 30 June 2006 Unaudited 6 Restated Restated months ended 30 Unaudited 6 Audited 12 June 2006 months ended 30 months ended 31 June 2005 December 2005 Note £ £ £ Turnover 1,070,750 9,286 555,250 Cost of Sales (838,496) (8,292) (400,647) _________ _________ _________Gross profit 232,254 994 154,603 Administrativeexpenses reshare basedpayment (76,531) (52,459) (104,917)Otheradministrativeexpenses (857,557) (773,981) (1,808,644) _________ _________ _________Totaladministrativeexpenses (934,088) (826,440) (1,913,561) _________ _________ _________Operating loss (701,834) (825,446) (1,758,958) Interestreceivable 50,509 22,446 69,971Interestpayable (57,409) (1,375) (40,107) _________ _________ _________Loss onordinaryactivitiesbeforetaxation (708,734) (804,375) (1,729,094) Taxation - (10,463) 53,110 _________ _________ _________Loss for theperiod (708,734) (814,838) (1,675,984) --------- --------- --------- --------- --------- --------- Loss perordinary share - basic & diluted 2 (2.45p) (4.97p) (8.44p) SUMMARISED BALANCE SHEET As at 30 June 2006 Note Unaudited at 30 Restated Restated June 2006 Unaudited at Audited at 31 30 June 2005 December 2005 £ £ £Fixed assetsIntangibleassets 2,163,198 1,990 2,269,584Tangible assets 4,915,181 179,071 1,093,289Investments 2 - 2 _________ _________ _________ 7,078,381 181,061 3,362,875Current assetsStocks 355,833 3,362 123,070Debtors 458,122 84,217 429,981Cash at bankand in hand 5,467,677 771,650 2,414,392 _________ _________ _________ 6,281,632 859,229 2,967,443 Creditors: duewithin oneyear (1,198,959) (631,707) (1,338,846) _________ _________ _________Net currentassets 5,082,673 227,522 1,628,597 _________ _________ _________Total assetsless currentliabilities 12,161,054 408,583 4,991,472 Creditors: dueafter morethan one year (2,155,878) (24,517) (1,958,644) _________ _________ _________Net assets 10,005,176 384,066 3,032,828 --------- --------- --------- --------- --------- --------- Capital and reservesCalled upshare capital 1,894,269 819,269 1,319,269Share premiumaccount 19,339,544 9,352,543 12,309,993Other reserves 229,728 100,738 153,197Profit andloss account (11,458,365) (9,888,484) (10,749,631) _________ _________ _________Equityshareholders'funds 6 10,005,176 384,066 3,032,828 --------- --------- --------- --------- --------- --------- SUMMARISED STATEMENT OF CASHFLOWS For the six months ended 30 June 2006 Unaudited 6 Unaudited 6 Audited 12 months ended 30 months ended 30 months ended 31 June 2006 June 2005 December 2005 Note £ £ £ Net cashoutflow fromoperatingactivities 3 (1,478,752) (397,557) (1,126,123) _________ _________ _________Returns on investment andservicing of financeInterestreceived 50,509 22,446 69,971Interestelement offinance leaseand hirepurchasepayments (1,375) (1,375) (2,749) _________ _________ _________Net cashinflow fromreturns oninvestmentsand servicingof finance 49,134 21,071 67,222 R & D taxcreditreceived - - 65,311 Capital expenditure andfinancial investmentsPurchase oftangible fixedassets (3,542,430) (6,708) (841,771)Sale oftangible fixedassets 6,452 2,230 3,859 _________ _________ _________Net cashoutflow fromcapitalexpenditureand financialinvestments (3,535,978) (4,478) (837,912) Acquisitions and disposalsAcquisition ofbusiness - - (352,500) FinancingIssue of shares 8,050,000 - 3,700,000Expenses paidin connectionwith shareissues (445,449) - (242,550)Loan Receipt 426,000 - -CapitalElement offinance leaserentals (11,670) (11,670) (23,340) _________ _________ _________ 8,018,881 (11,670) 3,434,110 _________ _________ _________Increase /(decrease) incash 3,053,285 (392,634) 1,250,108 --------- --------- --------- --------- --------- --------- NOTES TO THE UNAUDITED INTERIM RESULTS 1. Basis of preparation of interim financial information The financial information contained in this statement does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. Thefigures for the 12 month period ended 31 December 2005 have been extracted fromthe Statutory Financial Statements which have been filed with the Registrar ofCompanies. The 2005 analysis of cost of sales and administrative expenses hasbeen reclassified during the period. The auditors' report on those financialstatements was unqualified and did not contain a statement under Section 237(2)of the Companies Act 1985. The accounts have been prepared in accordance with applicable accountingstandards and under the historical cost convention. The principal accounting policies of the company have remained unchanged fromthose set out in the Company's 2005 Annual Report and Financial Statements withthe exception of accounting for Share Based Payments. This follows the adoptionof FRS 20, Share Based Payments, for the year ended 31 December 2006. Theinterim results include the impact of the FRS 20 charge and both 2005comparative results have been restated to reflect this change in accountingpolicy. The interim report has been reviewed by the Company's auditors. A copy of theauditors' review report is attached to this interim report. 2. Loss per share The loss per share is calculated by reference to the loss attributable toordinary shareholders divided by the weighted average of 28,926,817 ordinaryshares for the 6 months to 30 June 2006, 16,385,381 ordinary shares for the 6months to 30 June 2005, and 19,859,354 for the 12 months to 31 December 2005. Unaudited 6 Restated Restated months ended 30 Unaudited 6 Audited 12 June 2006 months ended 30 months ended 31 June 2004 December 2005 Attributableloss (£) (708,734) (814,838) (1,675,984) _________ _________ _________Average number of ordinaryshares in issuefor basic anddiluted lossper share 28,926,817 16,385,381 19,859,354 _________ _________ _________Basic anddiluted lossper share (2.45p) (4.97p) (8.44p) --------- --------- --------- --------- --------- --------- 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. 14'Earnings per share' (FRS 14). 3. Reconciliation of operating loss to net cash flow from operating activities Unaudited 6 Restated Restated months ended 30 Unaudited 6 Audited 12 June 2006 months ended 30 months ended 31 June 2005 December 2005Operating loss (701,834) (825,446) (1,758,958)Amortisation 106,386 2,000 74,914Depreciationof tangiblefixed assets 125,114 31,687 75,640Administrativeexpense reshare basedpayment 76,531 52,459 104,917Goodwill onacquisition ofbusiness - - (2,340,508)(Profit)/losson sale oftangible fixedassets (9,559) 270 78,032(Increase)/decrease instocks andwork inprogress (232,763) 4,804 (114,904)(Increase)/decrease indebtors (28,141) 5,442 (342,060)(Decrease)/increase increditors (263,018) 331,227 756,296(Decrease)/increase indeferredconsideration (150,000) - 2,340,508Increase indeferreddevelopment (401,468) - - _________ _________ _________ (1,478,752) (397,557) (1,126,123) --------- --------- --------- --------- --------- --------- 4. Reconciliation of net cash flow to movement in net funds Unaudited 6 Unaudited 6 Audited 12 months ended 30 months ended 30 months ended 31 June 2006 June 2005 December 2005Increase /(decrease) incash duringthe period 3,053,285 (392,634) 1,250,108 Cash outflowfrom hirepurchase 11,670 11,670 23,340 _________ _________ _________Change in netfundsresulting fromcashflows 3,064,955 (380,964) 1,273,448 _________ _________ _________Movement innet fundsduring theperiod 3,064,955 (380,964) 1,273,448 Opening netfunds 2,378,199 1,104,751 1,104,751 _________ _________ _________Closing netfunds 5,443,154 723,787 2,378,199 --------- --------- --------- --------- --------- 5. Analysis of movement in net funds At 1 January Cash flow 30 June 2006 2006 £ £ £ Cash at bank and in hand 2,414,392 3,053,285 5,467,677Finance leases (36,193) 11,670 (24,523) _________ _________ _________ 2,378,199 3,064,955 5,443,154 --------- --------- --------- --------- --------- --------- 6. Reconciliation of equity shareholders' funds Unaudited At Restated Restated 30 June 2006 Unaudited At Audited At 30 June 2005 31 December 2005 £ Loss for thefinancialperiod (708,734) (814,838) (1,675,984) Issue of sharecapital 7,604,551 - 3,457,450 Other reservesre share basedpayments 76,531 52,459 104,917 _________ _________ _________Increase /(decrease) inequityshareholders'funds 6,972,348 (762,379) 1,886,383 Opening equityshareholders'funds 3,032,828 1,146,445 1,146,445 _________ _________ _________Closing equityshareholders'funds 10,005,176 384,066 3,032,828 --------- --------- --------- --------- --------- 7. Copies will be available on request from the Company Secretary, TEGEnvironmental plc, Houston House, 12 Sceptre Court, Sceptre Point, Preston, PR56AW 8. The interim report was approved by the board of directors on 26 September2006. INDEPENDENT REVIEW REPORT TO TEG ENVIRONMENTAL PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the profit and loss account,balance sheet, cash flow statement and the related notes 1 to 8. We have readthe other information contained in the interim report, which comprises only theChairman's statement, and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. Ourresponsibilities do not extend to any other information. This report is made solely to the company in accordance with guidance containedin APB Bulletin 1999/4 "Review of interim financial information". Our reviewwork has been undertaken so that we might state to the company's members thosematters we are required to state to them in a review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company for our review work, for thisreport, or for the conclusion we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report and ensuring that theaccounting policies and presentation applied to the interim figures areconsistent with those applied in preparing the preceding annual accounts exceptwhere any changes, and the reasons for them, are disclosed. Review work performed We conducted our review having regard to the guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries of group management and applying analytical procedures to thefinancial information and underlying financial data, and based thereon,assessing whether the accounting policies and presentation have beenconsistently applied, unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with United Kingdom Auditing Standards and therefore provides a lowerlevel of assurance than an audit. Accordingly, we do not express an auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. Grant Thornton UK LLP Chartered Accountants Manchester 26 September 2006 This information is provided by RNS The company news service from the London Stock Exchange