Final Results
June 16 2003 - 4:05AM
UK Regulatory
RNS Number:3494M
Compact Power Holdings PLC
16 June 2003
COMPACT POWER HOLDINGS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
for the year ended 31 March 2003
Compact Power Holdings plc ('CP'), which develops and exploits its innovative
waste to energy technology based on pyrolysis and gasification for processing a
wide range of wastes, announces its results for the year ended 31st March 2003.
Highlights
* Participation in three well advanced municipal projects; further
proposals under review by the relevant authorities
* Market interest continues to grow for fully integrated waste management
facilities which use advanced thermal conversion technologies
* Collaborations have been established with Ferrovial Group and EMTE in
Spain, SNC Lavalin in Benelux and France, ITA in Greece and HLC Group to develop
UK and international opportunities
* The Avonmouth plant continues to be the only commercial pyrolysis and
gasification plant operating in the UK and the only one operating under the
Integrated Pollution Prevention and Control (IPPC) regime
* The Avonmouth plant has achieved accreditation from Ofgem as a
renewable energy generator eligible for Renewable Obligation Credits (ROCs)
* Admission to AIM April 2002
* Capital restructuring significantly improves strength of balance sheet
* Debt free and cash reserves at 31st March 2003 of #3.7m
* Increase in turnover to #411,000 (2002: #98,000)
* Net loss in the period of #3.7m in line with market expectations (2002:
#3.8m), loss per share 13.3p (2002: 41.6p)
Contacts
Nic Cooper - Chairman +44 117980 2909
John Acton - Chief Executive +44 117980 2909
Barrie Newton - Rowan Dartington & Co. Limited +44 117933 0011
Fergus Wylie - Cubitt Consulting Ltd +44 207367 5100
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the results for the year just ended and the first full
set of results as a publicly listed company. In a market known for long
development and contract cycles, Compact Power continues to make progress
demonstrating and improving the technology for the benefit of future plants and
developing relationships with industry players to create the platform to deliver
future growth.
Operating review
We have now operated the Avonmouth plant in commercial conditions for over 18
months under the Integrated Pollution Prevention and Control regime. We remain
the only pyrolysis and gasification technology operating under IPPC in the UK
and we are recognised by the Environment Agency for our outstanding
environmental performance. In addition, the Avonmouth plant has recently
received accreditation from Ofgem as a renewable energy generator eligible for
Renewable Obligation Credits (ROCs). This has given Compact Power a unique
position among advanced thermal conversion technologies which are being promoted
in the market.
Although the environmental performance has been excellent, technical and
operating constraints have affected profitability, and in this sense we have
failed to meet our own expectations. A principal factor has been the thermal
limit of the original specification of the plant which was based on the lower
calorific value waste which was typical of clinical waste when the plant was
designed. However, our continuing presence as a commercial operator and the
experience and technical data that we are gaining significantly increases our
credibility as a technology provider and underlines the importance of this plant
in the marketing of our technology nationally and internationally.
Lessons learned have of course contributed to design improvements for the next
generation of plant and our commercial strategy for different applications of
the technology has evolved with developments in the market and our experience of
operating with our own technology. For the clinical waste sector this is
demonstrated by the planned extension of the Avonmouth facility described below.
We have conducted trials with other waste feedstocks, principally refuse derived
fuel from municipal waste, tyre shred and shredder waste from the automotive
industry, dewatered sewage sludges, paper and paper pulp and rubber industry
waste. The results give further data on our capacity to process mixed wastes and
reinforce the credibility of our process.
We are planning to consolidate our investment in the Avonmouth plant by the
addition of a steam sterilisation plant that will expand its capacity, improve
the energy efficiency of the total facility and improve the financial return.
This will involve further investment in the region of #1 million which will
largely be provided by a lease purchase arrangement secured on the assets of the
project. We expect the plant to make an increased contribution from the second
half of this year. By offering this additional process, Compact Power can
optimise the cost benefits for customers and provide a more comprehensive
service which we believe will strengthen our market position.
There were several project situations that at the time of our listing we
expected to come to fruition within the financial year. In the case of Dumfries,
Scotland, we have already reported delays but we are still hoping to structure
the project within the framework of our existing planning permission.
In relation to projects in the water sector, we have been affected by delays in
the adoption of strategies based on advanced thermal conversion.
In connection with our relationship with CES and the Roche project, the decision
by Cornwall County Council to procure new waste management capacity through the
PFI mechanism has led to the withdrawal of the planning application and a
requirement that the project be put out to competitive tender.
Despite the above delays we are pursuing at least three active prospects which
we hope will enable us to make a positive announcement before the end of the
year.
Technical
We are also happy to report that the ready to build design and procurement
package commissioned from AMEC and reported at the interims has been
successfully completed and we are now in a position to proceed in project
situations to deliver our solutions.
Strategic review
Our strategy in the municipal market has been developed on the model of
integrated facilities maximising recycling of materials and the diversion from
landfill to meet the latest requirements under the Landfill Directive and avoid
related financial penalties. We have now developed a portfolio of specific
project opportunities based on this model and plan to build relationships with
industrial and financial partners with the capacity to respond to market demand.
That said, we believe that municipal waste strategies which are being developed
at regional and local level to meet Government targets are increasingly
recognising the need for a thermal process to recover energy from residual waste
following recycling and composting. Industry commentators support this view and
see the place of thermal process and energy recovery as much more fundamental to
achieving these targets.
We are also promoting the wider implications of our technology as a provider of
heat and power to industrial developments which can also exploit the potential
of our pyrolysis process to recover carbon and other materials for added value
applications. This links in with regulatory initiatives which are affecting
certain sectors such as the automotive industry and emphasises the potential
role of our technology in more advanced recycling and materials recovery
applications.
Internationally, the company has continued to form strategic relationships with
key industry players which can create a platform for growth. We have specific
project opportunities in Spain, Italy, Belgium and Australia which are being
developed under the collaborations which we have already established. These will
create the framework for a programme of projects around which we are already
planning for the next few years.
The increasing level of enquiries to which we are responding on a regular basis
gives us confidence that the interest will continue to grow as we continue to
demonstrate that we are one of the few technologies in the world that can
deliver environmental performance that is well within all relevant standards.
On factors affecting our market and on our competitive position, we have the
following general observations:
* The last 12 months have seen our position as a leading advanced
thermal conversion technology reinforced by the further period of operation in
commercial conditions and the fact that since September 2001 we have been the
only pyrolysis process operating under the new IPPC regime.
* There are few available alternatives to our technology. Several of the
other advanced thermal conversion technologies that have been actively promoted
in the sector are not generally regarded as sufficiently developed. These
factors have undoubtedly increased our competitive advantage.
* In reality, our main competitor in the UK municipal waste market
remains landfill, which still presents operators with a practical and economic
disposal option for wastes other than those which are now prohibited. The
government has so far failed to impose sufficient increases in the landfill levy
to redress the balance and to make a compelling economic case for waste
management companies to change their current practice.
* Our focus is, therefore, on those specific situations where there is
already a recognition of the need for a new thermal process and Compact Power's
technology can be seen as the best environmental option based on our
achievements to date.
Our business model continues to be based on a mix of profit from plant sales,
participation in build own operate projects and fees from ongoing technology
support. This approach continues to be justified as we negotiate the detailed
arrangements for projects in development.
In planning for the next phase of the company's development the board has paid
particular attention to the funding requirement and the adequacy of existing
cash resources. We have taken particular care to prioritise those projects which
we believe will be brought to financial close within the reasonably short term
and to use our existing resources to meet those objectives.
FINANCIAL REVIEW
Profit and Loss account
The consolidated operating loss for the group was #4.3 million (2002: #4.0
million). Revenue for the year principally related to processing of high value
wastes at Avonmouth. Development costs in the year remained at #1.3 million
(2002: #1.3 million) of this #0.4m of expenditure in connection with the
development and design of the Multi-Tube MT8 unit has been capitalised.
Administrative expenses increased to #3.0 million (2002: #2.4 million) due to
increased expenditure in commercial development, increases in staff numbers and
a general increase in activity. Interest payable reduced to #32,000 (2002:
#271,000) as a result of a re-organisation of the capital structure of the
company. Research and development tax credits of #0.4 million (2002: #0.4
million) were recognised in the year under the new government incentives to
promote R&D expenditure.
Cash flow and liquidity
Net cash outflow before financing reduced to #3.8 million (2002: #4.9 million).
This was as a result of the receipt of research & development tax credits,
reduced capital expenditure following the completion of the Avonmouth plant and
increases in interest received from cash deposits.
In the year ended 31 March 2003, #7.5 million (2002: #5.7 million) was raised
from private and institutional investors.
Effective management of cash resources continues to be a main area of focus. As
reported at the interims the Board implemented measures to reduce the on going
cash burn by approximately 20%, to #200,000 per calendar month, these changes
became effective in January 2003. The Board continues to monitor the situation
carefully and retains the capacity to realign its resources without prejudicing
its ability to service its current prospects.
Balance sheet
On 24 April 2002 the company converted all loan notes and accrued interest into
share capital and successfully issued 8,333,333 ordinary shares of 2p each.
In April 2002 the capital structure of the company was re-organised and funds
were raised through a #7.5 million institutional and private placing and
admission to the Alternative Investment Market. This has significantly improved
the strength of the Group's balance sheet and the Group's liquid reserves.
Dividend
In line with the Board's stated intention at the time of flotation, the Company
does not expect to pay dividends for the foreseeable future therefore no
dividend is recommended by the Directors for the year ended 31 March 2003.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 March 2003
Year ended Year ended
31 March 31 March
2003 2002
#'000 #'000
Turnover 411 98
Cost of sales (827) (353)
Gross Loss (416) (255)
Administrative expenses (2,983) (2,437)
Development costs (890) (1,318)
Operating Loss (4,289) (4,010)
Interest receivable 187 2
Interest payable (32) (271)
Loss on ordinary activities before taxation (4,134) (4,279)
Tax on loss on ordinary activities 407 417
Loss on ordinary activities after taxation (3,727) (3,862)
Minority interest - 41
Loss for the financial year (3,727) (3,821)
Balance brought forward (6,812) (2,991)
Balance carried forward (10,539) (6,812)
Loss per share
Basic and diluted loss per 2p share (13.3)p (41.6)p
The Group has no recognised gains or losses other than the loss for the above
financial year.
All activities are classed as continuing operations.
CONSOLIDATED BALANCE SHEET
for the year ended 31 March 2003
31 March 31 March
2003 2002
#'000 #'000
Fixed Assets
Intangible assets 963 595
Tangible assets 3,602 3,719
Investments 40 40
4,605 4,354
Current Assets
Debtors 584 475
Cash at bank 3,728 737
4,312 1,212
Creditors: amounts falling due within one year
Convertible debt - (9,024)
Other (920) (795)
Net current assets/(liabilities) 3,392 (8,607)
Total assets less current liabilities 7,997 (4,253)
Provisions for liabilities and charges - (61)
Net assets / (liabilities) 7,997 (4,314)
Capital and reserves
Called-up equity share capital 583 184
Share premium 17,953 2,314
Profit and loss account (10,539) (6,812)
Shareholders funds (including non-equity) 7,997 (4,314)
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2003
31 March 31 March 2002
2003
#'000 #'000
Net cash outflow from operating activities (3,816) (4,118)
Returns on investments and servicing of finance
Interest paid (32) (18)
Interest received 155 2
Net cash inflow / (outflow) from returns on
investments and servicing of finance 123 (16)
Taxation 434 115
Capital expenditure and financial investment
Purchase of tangible fixed assets (216) (638)
Investment in intangible assets - research & (228) -
development
Long term loan to other companies (135) (191)
Net cash outflow from capital expenditure and
financial investment (579) (829)
Acquisitions and disposals
Cash disposed of with the reclassification of a
subsidiary to an associated undertaking - (3)
- (3)
Net cash outflow before financing (3,838) (4,851)
Financing
Repayment of loan - (100)
Issue of new shares 7,500 3
Costs of share issue (671) -
Issue of convertible loan notes - 5,672
Issue of unsecured loan - 2
Net cash flow from financing 6,829 5,577
Increase in cash in the year 2,991 726
Reconciliation of operating loss to net cash outflow from operating activities
31 March 2003 31 March 2002
#'000 #'000
Operating loss (4,289) (4,010)
Depreciation and amortisation 368 158
Provision for impairment in value of unlisted investments 135 191
(Increase) / Decrease in debtors (104) (81)
(Decrease) / Increase in creditors 74 (376)
(3,816) (4,118)
NOTES
1. Reconciliation of net cash flow to movement in net funds/(debt)
31 March 2003 31 March 2002
#'000 #'000
Increase in cash in year 2,991 726
Cash outflow from repayment of loan - 100
Cash inflow from increases in convertible debt - (5,672)
Cash inflow from increases in unsecured debt - (2)
Changes in net funds resulting from cash flows 2,991 (4,848)
Conversion of loan notes to ordinary shares 9,024 -
Movement in net funds/(debt) 12,015 (4,848)
Net debt at beginning of year (8,287) (3,439)
Net funds/(debt) at end of year 3,728 (8,287)
2. Analysis of net funds/(debt)
Other non At 31 March
cash
At 1 April movements 2003
#'000
2002 Cashflow #'000
#'000 #'000
Cash at bank 737 2,991 - 3,728
Convertible debt due within one year (9,024) - 9,024 -
(8,287) 2,991 9,024 3,728
3. Loss per share
Basic loss per share is calculated on loss attributable to shareholders of
#3,727,000 (2002 - loss of #3,821,000) divided by the weighted average number of
ordinary shares in issue during the year of 28,119,471 (2002 - 9,182,536).
4. The financial information set out above does not constitute The Company's
financial statements for the years ended 31 March 2003 or 2002. A copy of the
Company's annual report and financial statements for 2003 will be mailed to
shareholders shortly and will also be available for collection from the
Company's registered office
This information is provided by RNS
The company news service from the London Stock Exchange
END
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