Last checked at 28 Jun 2007 12:50
For immediate release: 28 June 2007
ENERGY ASSET MANAGEMENT PLC (the "Company") Preliminary announcement for the year ended 31 December 2006 Chairman's Statement
Following the acquisition of Energy Assets Limited, a provider of meter asset management services, in March 2006 the Group has spent a significant amount of time and money implementing its infrastructure in order to service its clients. I am very pleased to be in a position to report to you that the investment and hard work is now reaping the rewards, which we have been working towards, with the signing of agreements with major leading clients including energy suppliers and retailers.
The Group has obtained the necessary regulatory and other approvals which have enabled it to implement and operate its metering solution and information technology system which is geared towards energy suppliers and end user customers to, among other things, collect `real time half hourly energy consumption data' more efficiently for industrial and commercial users of gas and electricity. As product trials continue with major retail groups, local authorities and energy suppliers we anticipate being able to announce further contract wins in the near future. This will provide secured sources of future income for contract periods extending from 5 to 10 years.
Historic Results 2006 was a year spent establishing the business infrastructure both
operationally and corporately and accordingly in the year to 31 December 2006 the Group made a loss after taxation of ‚£2,782,270 (1.35p loss per share) after writing off ‚£1,734,544 of goodwill and amortising the cost of the share option scheme, compared to a loss after taxation of ‚£24,886 (0.12p loss per share) for the period to 31 December 2005.
Current year activity
We have been successful in winning and negotiating contracts at a greater rate than previously anticipated and this trend is expected to continue for the foreseeable future. However, installation and replacement of meters,
dataloggers and siteworks have in the year to date been at a slower rate than had been expected. We believe that in the second half of the year the installation rate will be increased as both customers and energy suppliers begin to obtain the benefits from the environmentally friendly solutions we are able to offer, but do not expect to see the full benefit of the contract wins until 2008. As a result financial performance in 2007 will be below
expectations. Customers also continue to purchase meters and dataloggers for their own account rather than renting and as a result our requirement to provide asset finance has materially reduced and this will assist to increase earnings over time. We have traded at a loss in the year to date but expect to be trading profitably in the second half of the year and to this end we expect to be cash flow positive in the last quarter.
However in order to finance the anticipated higher level of activity, including the infrastructure to support it, the Company issued, on 26 March 2007, 32,000,000 new shares to raise ‚£400,000.
Lance O'Neill
Lance O'Neill who has acted as a Non- Executive Director since the formation of the Company will retire at the end of the Annual General Meeting. His advice and support has been gratefully received and appreciated.
Future prospects
Your Group is now established in securing contracts and is revenue generating at an increasing rate in a market sector which we believe has strong growth prospects given the growing awareness and the government pressures to conserve energy and use it more effectively. This can only be good for our future prospects.
While we have an excellent story to tell it may take another twelve months to demonstrate this. We look forward to reporting further significant progress to you as it occurs.
Stephen Barclay Non-Executive Chairman
Consolidated income statement- by function of expense for the year ended 31 December 2006
Year ended Period ended 31 December 31 December 2006 2005 ‚£ ‚£ Revenue 20,768 - Cost of sales (10,664) - _______ Gross Profit 10,104 - Operating expenses (2,811,165) (33,543) _________ Operating loss (2,801,061) (33,543) Finance income 18,791 8,657 _________ Loss before taxation (2,782,270) (24,886) Taxation - - _________ Loss after taxation (2,782,270 (24,886) ) _________ _______ Retained loss for the period (2,782,270) (24,886) Attributable to Equity holders of the Company (2,774,375) (24,886) Minority interest (7,895) - _____________ Retained loss for the period (2,782,270) (24,886) ____ __ Loss per share- basic and (1.35) p (0.12) pdiluted Consolidated balance sheetat 31 December 2006 31 December 31 December 31 December 31 December 2006 2006 2005 2005 ‚£ ‚£ ‚£ ‚£ Assets Non current assets Property, plant and 20,405 - equipment Intangible assets 745,475 - -Goodwill ----------- Total non current assets 765,880 - Current assets Trade and other 53,335 4,431 receivables Cash and cash equivalents 249,095 312,378 Inventories 9,360 - Total current assets 311,790 316,809 Total Assets 1,077,670 316,809 Equity and liabilities attributable to equity holders of the Company Share capital and reserves Issued capital 2,467,684 219,351 Share premium account 1,083,929 107,185 - Retained earnings (2,580,880) (24,886) 970,733 301,650 Minority interest (7,445) - _______ _______ Total equity 963,288 301,650 Current liabilities Trade and other payables 114,382 15,159 Total equity and 1,077,670 316,809liabilities
Statement of changes in equity
Group Share Share Retained Minority Total Capital Premium Earnings Interest Equity ‚£ ‚£ ‚£ ‚£ ‚£ Balance at 1 January 2006 219,351 107,185 (24,886) - 301,650 Loss for year attributable - - (2,774,375) - (2,774,375)to equity holders - Loss for year attributable - - - (7,895) (7,895)to minority interest Equity attributable to - - - 450 450minority interest Share based costs - - 218,381 - 218,381 Acquisition of Energy 1,415,000 707,500 - - 2,122,500Assets Ltd on 9 March 2006 Additional issues on 9 833,333 416,667 - - 1,250,000March 2006 Share issue costs - (147,423) - - (147,423) Balance at 31 December 2,467,684 1,083,929 (2,580,880) (7,445) 963,2882006 (24,886) Balance at 31 December 2005
Consolidated cash flow statement
for the year ended 31 December 2006
Year ended Period ended 31 December 31 December 2006 2005 ‚£ ‚£ Cash flows from operating activities Operating loss for the year as (2,801,061) (33,543)per income statement Depreciation of non current 33,175 -assets Impairment of goodwill 1,734,544 - Share based reserve 218,381 - (814,961) (33,543) Movements in working capital Increase in trade and other (37,045) (4,431)receivables Increase in inventories (9,360) - Decrease in trade and other (13,868) 15,159payables Net cash generated from (875,234) (22,815)operations Cash flows from investing activities Interest received 18,791 8,657 Net purchase of subsidiary (260,190) - undertaking Cash acquired with subsidiary 4,353 - Purchase of non current assets (53,580) - Net cash expenditure from (290,626) 8,657investing activities 657 Cash flows from financing activities Net proceeds from issue of 1,102,577 326,536equity shares Net (decrease)/ increase in cash (63,283) 312,378and cash equivalents Cash and cash equivalents at the 312,378 _beginning of financial period Cash and cash equivalents at end 249,095 312,378of period
Notes on the Preliminary Results
1. The financial information incorporated in this announcement does not constitute full statutory accounts within the meaning of the Companies Act 1985. Full accounts for the year ended 31 December 2006, will be filed with the Registrar of Companies in due course.
2. Key accounting policies Adoption of new and revised standards
In the current year, the Group has adopted the International Financial Reporting Standards (IFRS) as approved by the European Union and the
International Financial Reporting Interpretations Committee (the IFRIC) that is relevant to its operations and effective for listed companies' annual reporting periods beginning on 1 January 2006.The Group has decided to adopt these Standards earlier than required.
The adoption of these new and revised Standards and Interpretations has not resulted in changes to the Group's accounting policies and has not resulted in any change to prior period reported numbers.
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards, as approved by the European Union, IFRIC interpretations and the Companies Act 1985. The financial statements have been prepared using the historical cost convention.
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the financial statements. If in the future such estimates and assumptions which are based on management's best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which the circumstances change. Where necessary, the comparatives have been reclassified or extended from the previously reported results to take into account presentational changes.
It is the first financial year that Energy Asset Management Plc has presented its financial statements under IFRS. The Group's comparative information presented for the year ended 31 December 2005 was initially prepared under United Kingdom generally accepted accounting principles (UK GAAP) and has now been presented in accordance with IFRS. The date of transition to IFRS was 1 July 2006.
There is no difference between the loss, equity or cash flows as previously reported under UK GAAP and those reported in accordance with IFRS.
At the date of authorisation of the financial statements, International Financial Reporting Standards 7-8 and Interpretations IFRIC 8 to 10 were in issue but not yet effective. The Directors expect that with the exception of the additional financial information required by IFRS 7, Financial Instruments: Disclosures, that the adoption of these Standards and Interpretations in future periods will not have any significant impact on the financial statements of the Group.
Basis of consolidation
The financial statements of the Company and its Group undertakings have been consolidated to 31 December 2006. The results and cash flows of subsidiary undertakings are included in the profit and loss account and consolidated cash flow statement from the date of acquisition.
The Company has taken advantage of the exemption in Section 230 of the Companies Act 1985 not to present its individual financial statements and related notes that form a part of these approved financial statements.
3. Tax on loss on ordinary activities Tax charge for the year
No taxation arises on the result for the year because of the trading loss.
Factors affecting the tax charge for the year The tax charge for the year does not equate to the loss for the period at the standard rate of UK small companies corporation tax of 19%. The differences areexplained below: Year ended 10 months ended 31 December 31 December 2006 2005 ‚£ ‚£ Loss for the year before taxation (2,782,270) (24,886)
Loss for the year before tax multiplied by the (528,631) (4,728) applicable rate of UK small companies corporation
tax of 19% Depreciation in excess of capital allowances 3,758 - Expenses not deductible for tax 339,490 352 Tax losses for the year not relieved 185,383 4,376 - - Factors affecting the tax charge of future years
Tax losses available to be carried forward by the Group at 31 December 2006 against future profits are estimated at ‚£304,397. There is an unprovided deferred tax asset based on these losses of ‚£57,836.
Due to the Group being in its first year of trading it is difficult to determine with certainty how and when the available tax losses will be utilised. Therefore, the element of the potential deferred tax asset relating to losses has not been recognised in the financial information.
4. Loss per Share
The calculation of basic loss per share is based on the loss attributable to equity holders of ‚£2,774,375 (December 2005 - loss ‚£24,886) divided by the weighted average number of ordinary shares in issue being 205,497,607 (December 2005: 20,581,735) during the year. As the Company has incurred a loss for the year, no option or warrant is potentially dilutive, and hence basic and diluted loss per share are the same. The options and warrants as disclosed in note 7 could potentially dilute basic earnings per share in the future
32,000,000 new ordinary shares were issued after the year end. If these shares had been issued prior to 31 December 2006, this would have altered the weighted average number of ordinary shares in issue as calculated above.
5. Intangible Assets 31 December 31 December 2006 2005 ‚£ ‚£ Goodwill on purchase of Energy Assets Limited on 9 March 2006 Addition during the year 2,480,019 - Impairment (1,734,544) - Total goodwill 745,475 -
Impairment test for goodwill
The goodwill is attributable to the Group's single cash generating unit (CGU), being the principal activity of meter asset management services. The recoverable amount of the CGU has been determined based on value in use calculations. The calculation was based on cash flow projections, approved by management, covering a two year period.
The impairment charge arose because particular underlying elements of the goodwill were considered to be incapable of future use or exploitation. These included certain contracts owned by the acquired group and existing relationships with fund providers.
6. Share capital 31 December 31 December 2006 2005 ‚£ ‚£ Authorised 500,000,000 Ordinary shares of 1p each 5,000,000 5,000,000 Allotted, issued and fully paid 246,768,383 Ordinary shares of 1p each 2,467,684 219,351
On 9 March 2006 the Company acquired Energy Assets Limited, for a consideration of ‚£2,122,500 payable by the issue of 141,500,000 new ordinary shares of the Company. On that date the Company also raised ‚£1,250,000 before expenses by a placing of 83,333,333 new ordinary shares of the Company at 1.5p each.
As part of the acquisition 29,057,500 performance related options to subscribe for new ordinary shares of the Company were issued to Directors and senior executives of Energy Assets Limited as set out in the Directors' Report.
During the year a further 4,500,000 options to subscribe for new ordinary shares of the Company were granted to other Group staff on the same performance conditions as the Directors. These are set out in the Directors' Report.
Additionally, as part of the acquisition transactions, warrants to subscribe for 12,403,051 new ordinary shares of the Company with an exercise price of 1.5p were issued on 13 March 2006 to parties connected with the raising of finance for the Company as follows:
Exercisable Ruegg & Co Limited 2,000,000 1.5p from 13 March 2007 to 13 March 2011 Hichens Harrison & 3,000,000 1.5p from 13 March 2007 to 13 March 2009Co Plc ICON EAM LLC 7,403,051 1.5p up to 13 March 2011 12,403,051
On 30 March 2005 the Company issued 2,000,000 founder warrants which entitle the holder to subscribe for one new ordinary share at 1p per share at any time until 30 March 2010. 500,000 founder warrants were issued to each of Stephen Barclay, John Shaw, Lance O'Neill and Chatsford Corporate Finance Limited. On 31 March 2007, Chatsford Corporate Finance Limited transferred 100,000 warrants to each of Stephen Barclay, John Shaw and Martin Perrin and 200,000 warrants to another unconnected party. At 31 December 2006 none of these founder warrants had been exercised, nor have been at the date of this announcement.
The total number of founder and transaction warrants outstanding as at the date of this report is 14,403,051.
There is no overall controlling party. 7. Share Options and warrant movements
No options or warrants were forfeited, exercised or expired in the year.
The total number of options and warrants granted during the year, of 33,557,500 and 14,403,051 respectively, have given rise to a charge to the profit and loss account of ‚£218,381, based on the fair values at the time the options and warrants were granted. The weighted average fair value of the share options and warrants determined using the Black Scholes valuation model was 1.0p. The significant inputs into the model were exercise price, volatility of 65%, a nil dividend yield, weighted average expected option life of 4 years and annual risk free interest rate of 4.9%. The volatility measured at the standard deviation of continuously compounded share returns is based on statistical analysis of the monthly share price over a 14 month period.
8. Business Combinations
On 9 March 2006 the Company acquired 100% of the issued share capital of Energy Assets Limited, the acquired business contributed ‚£660,341 of losses to the group for the period 9 March 2006 to 31 December 2006.
Details of net assets acquired and goodwill are as follows ‚£ Purchase consideration: Fair value of share issue 141,500,000 new ordinary shares 2,122,500at 1.5p each Direct costs relating to the acquisition 260,190 Total purchase consideration 2,382,690 Fair value of net liabilities acquired 97,329 Goodwill (note 5) 2,480,019 The goodwill is attributable to the management, contracts in place, IT software, accreditations and funding ability of the acquired business along with its future earnings potential. The assets and liabilities as at 9 March 2006 arising from the acquisition are as follows: Cash and cash equivalents 4,353 Trade and other receivables 11,409 Trade and other payables (113,091) Net liabilities acquired (97,329) Purchase consideration settled in cash 260,190 Cash and cash equivalents in subsidiary acquired (4,353) Cash outflow on acquisition 255,837 9. Post balance sheet events
On 26 March 2007 the Company issued a total of 32,000,000 new ordinary shares at 1.25p per new ordinary share to raise gross proceeds of ‚£400,000. The new ordinary shares rank pari passu with all existing ordinary shares.
10. Registered Office and copies of Accounts
The Registered Office of the Company is St James's Court, Brown Street, Manchester M2 2JF. Copies of the Annual Report and Accounts, which have today been mailed to shareholders along with the Notice of AGM, may be obtained at this address or at the Company's website http://www.energyassets.co.uk.
Notice is hereby given that the Annual General Meeting of Energy Asset Management Plc will be held at 1 Park Place, Canary Wharf, London E14 4HJ on 23 July 2007 at 11.00 am.
Enquiries:Energy Asset Management PlcStephen Barclay, ChairmanTel: 07767 444114
Alan McKeating, Managing Director
Tel: 07843 231372
Hansard Group, Public Relations
Ben Simons
Tel: 0207 245 1100
Ruegg & Co Limited, Nominated Adviser
Brett Miller/Gavin Burnell
Tel: 0207 584 3663
ENERGY ASSET MANAGEMENT PLC