Press Release
AgCert International Plc ("AgCert" or "the Company")
Strategic Review & Results for the year ended 31st December 2006
The Board of AgCert International plc (“AgCert” or “the Group”) is today announcing the outcome of the strategic review, which the Group’s management team and advisers have been undertaking during the last three months, together with the financial results for the 2006 financial year.
Concurrently the Board is also releasing a separate statement with full details of a completed re-financing package and the new business structure and strategy.
Strategic review
- Group business model is being substantially re-configured with regard to reducing risk and lowering capital intensity
- Supplement core strategy as a business developer/operator by leveraging the Group’s technical expertise, regulatory & market knowledge and experience
- Revised strategy seeks to increase the diversity of offset sources and consequently lower dependency on Biodigesters
- Group’s funding needs met through a wholly underwritten equity placing to raise approximately €30m which will provide the Group with financing through to self sufficiency
- Annualised operating expenses expected to be cut to €25m under the new business model, including resources to implement the revised strategy, compared with €31m in 2006.
Business performance 2006
- Total number of completed sites at year end 636 (265 at year end 2005)
- CER’s requested for issuance by year end 134,508 (1,897 at year end 2005)
- Signed joint venture agreement (Agriverde) with AES and commenced first projects
- Management team strengthened
- Much improved operational efficiency, processes and systems
- Operating loss of €38.3m in 2006, before one-time, non-recurring, charges
Merrick Andlinger, Chairman, comments:
“Over the last two years, whilst the company has made significant progress with regard to its planned business roll out, we have fallen short of the targets that we set ourselves and which our shareholders expected.
A number of factors, internal and external, technical and regulatory, have held back progress and encouraged the Board to examine alternative means of creating value.
We have learnt much along the way and we are now putting in place a strategy that will enable AgCert to exploit our full complement of skills to best advantage.
The confidence that our two principal shareholders have shown in supporting the Group’s refinancing, together with other commitments from both existing and new investors, will enable the Group to move forward positively in 2007.”
Enquiries:
For further information, please contact:
AgCert |
+3531 245 7400 |
Paul D’Alton |
|
|
|
College Hill |
020 7457 2020 |
Anthony Parker |
|
The company will be holding a conference call for analysts via web-link on Monday April 30 at 14.00 hours (UK time). Please contact College Hill for access details.
About AgCert
AgCert International plc was founded in 2002 to produce and sell reductions in greenhouse gas emissions (referred to as "offsets") from agricultural sources on an industrial scale. These offsets are intended to satisfy the requirements of the Kyoto Protocol and be capable of being traded on the European cap and trade system, the European Union Emissions Trading Scheme ("EU-ETS").
AgCert has identified agriculture as one of the largest commercial opportunities for Offset production and expects to be a leading supplier of offsets from this sector. Agriculture is responsible for around 20 per cent of the world's annual greenhouse gas emissions. Under the Kyoto Protocol, any reductions in greenhouse gas emissions derived from this sector qualify as CERs provided they are derived from projects that have been validated by a DOE and Registered by the UN Executive Board and are properly verified and certified according to the stringent requirements laid down by the UN.
More information about AgCert's greenhouse gas reduction projects can be found at www.agcert.com.
The shares of AgCert International plc (the “Shares”) have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act"). The Shares may not be offered or sold in the United States, or to, or for the account or benefit of, U.S. persons as such term is defined in Regulation S under the Securities Act except (1) in a transaction meeting the requirements of Regulation S under the Securities Act, (2) pursuant to an effective registration statement under the Securities Act, or (3) pursuant to an available exemption from the registration requirements of the Securities Act, in each case in accordance with all applicable securities laws, including applicable state securities laws of the United States.
CHAIRMAN’S REPORT
2006 was a challenging year for AgCert. Operational and strategic accomplishments have been over-shadowed by the Company’s shortfall in achieving its planned Offset production volumes. Consequently, AgCert has restructured and reduced its Offset delivery obligations, albeit at a significant cost, instituted a number of operational improvements, raised capital and embarked on several new strategies to secure Offsets in the future more efficiently and with less capital intensity.
Significant accomplishments
AgCert has advanced its business operationally, financially and strategically during 2006. The Company increased the number of completed sites by 371 to a year end total of 636. From these sites, the Company requested the issuance of 134,508 CERs during 2006 compared to similar requests for issuance in 2005 of 1,897 and delivered its first CERs to its customers. CER annual run rates are higher than ever, and CER yield is improving steadily, although running at levels that are below the Company’s initial expectations. AgCert has hired several key senior people to fill important managerial positions, and realigned reporting lines to better support its refined and revised operational goals.
To fund its operations during 2006 and beyond, the Company completed several financings and is in the process of raising additional capital. During 2006, AgCert completed: an equity transaction with a strategic partner totalling €40 million; debt funding with equity components of €19m; forward CER sale agreements with prepay portions totalling €40 million; and bridging debt issuance of €14 million.
In a strategy to expand the Company’s geographic and sectoral reach and to leverage its regulatory expertise, AgCert completed a joint venture with AES, called AES AgriVerde. AgriVerde began operations during the second half of the year with its first projects focused on the palm oil sector in South East Asia. AgCert is exploring additional similarly structured joint ventures with other partners.
Finally, AgCert negotiated the termination of its largest CER delivery contract at a cost of €50 million in 2006. Although the cost to the Company was significant, its termination will allow AgCert relief from large, near term delivery obligations at below market prices, and so provide an ability to sell future production at market prices.
Operational benchmarks
As previously noted, the Company has slowed the rate of construction on its biodigesters and has experienced lower than expected yields from its completed biodigesters. The combination of reduced actual yields from producing sites and lower maximum yields allowable under modified regulatory guidelines has raised the farm size of a typical installation, thereby shrinking the available number of potential new sites. Although more expensive to build and less productive in Offset generation, new sites can still generate acceptable economic returns. In a new strategy to leverage its experience and available capital, AgCert intends to seek joint venture funding partners to continue this business.
During 2006 the Company instituted a production improvement plan (“PIP”), aimed at improving the operational reporting system, diagnosing underperforming sites and increasing the performance and productivity of underperforming sites. The PIP has delivered strong benefits to date and has contributed to the improvements in yields since the year end. The PIP will continue into the second half of 2007 as its focus shifts away from mechanical to biological improvements with anticipated further benefits to yields.
Market developments
2006 was a year in which the carbon markets matured, global political support for climate change-reducing policies increased and the impact of global warming became more apparent. New capital and new participants entered the carbon market increasing liquidity and presaging new risk management products. After reaching all-time highs, carbon prices in Europe reset to new lower trading levels in response to greater than expected government allocations. Global warming has become a regular topic in U.S. newspapers and in state and federal legislatures – all pointing to eventual regulation of greenhouse gases there. At the annual gathering, the Kyoto signatory countries (the COP/MOP) discussions began regarding the next Kyoto period - post 2012.
On the Clean Development Mechanism (“CDM”) front, 2006 brought increased regulatory clarity, but some decisions taken by the regulators worked to the detriment of project developers, especially the methane related ones, such as AgCert. Just as the CDM Executive Board is gaining more experience and confidence as a regulator, the market participants are working together to advocate for better policies.
Outlook
In response to its experiences during 2006, the Company has developed a revised business strategy to lower its Offset costs and to accelerate the accumulation of Offsets. By lowering its operating expenses, generating its first material revenues and seeking new “low to no” capital cost Offset projects, AgCert has reduced the amount of new funding it will require in 2007 and to reach cash positive operations. AgCert faces key challenges in reaching its 2007 operational objectives, which include securing sufficient Offsets and Offset production capacity to meet its contractual deliveries in 2008. The Board believes that AgCert can achieve its objectives by continuing to improve its core AWMS operations, by leveraging its significant experience in the CDM creation process to collaborate with others on new and existing CDM projects, and by supplementing its core business with new methodologies in agriculture and adopting existing methodologies in agriculture and beyond. The Board and two major shareholders look to AgCert’s future with renewed vigour and cautious optimism.
Merrick G Andlinger
Chairman
26 April 2007
Consolidated income statement
For the year ended 31 December 2006
|
|
Year ended |
Period ended 31 Dec 2005 |
|
|
€’000 |
€’000 |
|
|
|
|
|
|
|
|
Revenue |
|
220 |
3 |
|
|
|
|
Wages and salaries |
|
(15,944) |
(6,906) |
General and administrative expenses |
|
(10,034) |
(4,854) |
Professional and legal expenses |
|
(5,033) |
(4,873) |
Raw materials and consumables used |
|
(195) |
- |
Depreciation and amortisation |
|
(1,505) |
(323) |
Amortisation of employee share based payments |
|
(3,176) |
(985) |
Inventory write-down |
|
(2,658) |
- |
Contract management |
|
(50,000) |
______- |
Operating loss before financing costs |
|
(88,325) |
(17,938) |
Financial income |
|
619 |
591 |
Financial expense |
|
(5,678) |
(1,943) |
|
|
|
|
Net financing costs |
|
(5,059) |
(1,352) |
|
|
|
|
Loss before tax |
|
(93,384) |
(19,290) |
|
|
|
|
Income tax expense |
|
(375) |
- |
|
|
_______ |
______ |
Loss for the year / period |
|
(93,759) |
(19,290) |
|
|
|
|
Attributable to: |
|
|
|
Equity holders of the parent |
|
(93,759) |
(19,290) |
|
|
|
|
Basic (loss) per share |
|
(0.58) |
(0.15) |
Diluted (loss) per share |
|
(0.58) |
(0.15) |
On behalf of the board
|
Merrick G Andlinger | Paul M D’Alton |
| Director | Director |
Consolidated statement of recognised income and expense
For the year ended 31 December 2006
|
|
|
|
|
|
Year ended 31 Dec 2006 |
Period ended 31 Dec 2005 |
Foreign exchange translation differences on net investment |
|
(3,027) |
357 |
|
|
|
|
Income and expense recognised directly in equity |
|
(3,027) |
357 |
|
|
|
|
Loss for the year / period |
|
(93,759) |
(19,290) |
|
|
_________ |
_________ |
Total recognised income and expense for the year / period |
|
(96,786) |
(18,933) |
|
|
|
|
|
|
_________ |
________ |
|
|
|
|
Attributable to: |
|
(96,786) |
(18, 933) |
Consolidated Balance Sheet
As at 31 December 2006
Assets |
|
2006 |
2005 |
|
|
|
|
Property, plant and equipment |
|
64,443 |
40,661 |
Goodwill and intangible assets |
|
3,447 |
3,635 |
Total non-current assets |
|
67,890 |
44,296 |
|
|
|
|
Inventories |
|
3,106 |
1,277 |
Trade and other receivables |
|
2,896 |
2,208 |
Cash and cash equivalents |
|
27,576 |
28,085 |
|
|
|
|
Total current assets |
|
33,578 |
31,570 |
|
|
__________ |
__________ |
Total assets |
|
101,468 |
75,866 |
|
|
__________ |
__________ |
Equity |
|
|
|
Issued capital |
|
128,284 |
87,940 |
Translation reserve |
|
(2,670) |
357 |
Equity incentive reserve |
|
3,905 |
985 |
Warrant reserve |
|
11,923 |
- |
Retained earnings |
|
(112,805) |
(19,290) |
|
|
__________ |
__________ |
Total equity attributable to equity |
|
28,637 |
69,992 |
|
|
|
|
Liabilities |
|
|
|
Deferred revenue |
|
37,215 |
- |
Loans due after 1 year |
|
13,982 |
- |
Finance lease liabilities (non-current) |
|
156 |
212 |
|
|
__________ |
__________ |
Total non-current liabilities |
|
51,353 |
212 |
|
|
|
|
Trade and other payables |
|
7,713 |
5,585 |
Loans due in less than 1 year |
|
13,641 |
- |
Finance lease liabilities (current) |
|
124 |
77 |
|
|
|
|
Total current liabilities |
|
21,478 |
5,662 |
|
|
|
|
Total liabilities |
|
72,831 |
5,874 |
|
|
|
|
Total equity and liabilities |
|
101,468 |
75,866 |
On behalf of the board
|
Merrick G Andlinger | Paul M D’Alton |
| Director | Director |
Consolidated cash flow statement
For the year ended 31 December 2006
|
|
Year ended |
Period ended |
|
|
|
|
Cash flows from operating activities |
|
|
|
Loss before taxation |
|
(93,384) |
(19,290) |
Adjustments for: |
|
|
|
Interest income |
|
(619) |
(591) |
Interest expense |
|
5,678 |
395 |
Depreciation and amortisation |
|
1,505 |
323 |
Employee share based payments |
|
3,176 |
985 |
Contract management payments |
|
50,000 |
- |
Increase in trade and other receivables |
|
(688) |
(2,208) |
Increase in inventories |
|
(4,487) |
(1,277) |
Increase in trade and other payables |
|
2,801 |
5,922 |
Deferred revenue |
|
35,919 |
- |
Operating outflow before contract management |
|
2,184 |
(15,741) |
|
|
|
|
Contract management payments |
|
(50,000) |
- |
|
|
|
|
Net cash outflow from operating activities |
|
(47,816) |
(15,741) |
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
Interest income |
|
619 |
591 |
Property, plant and equipment constructed |
|
(28,802) |
(39,283) |
Business operations acquired |
|
- |
(4,996) |
Net cash from investing activities |
|
(28,183) |
(43,688) |
|
|
_________ |
_________ |
|
|
|
|
Cash flows from financing activities |
|
|
|
Proceeds from the issue of share capital |
|
40,466 |
90,853 |
Proceeds from the issue of debt |
|
32,591 |
22,216 |
Repayment of borrowings |
|
- |
(13,839) |
Payment of transaction costs |
|
(134) |
(11,289) |
Interest expense paid |
|
(22) |
- |
Finance costs |
|
(1,321) |
(395) |
Finance lease payments |
|
(171) |
(32) |
Deferred revenue |
|
_4,081 |
- |
|
|
|
|
Net cash from financing activities |
|
75,490 |
87,514 |
|
|
_________ |
_________ |
Consolidated cash flow statement (continued)
For the year ended 31 December 2006
|
|
Year ended 31 Dec 2006 |
Period ended 31 dec 2005 |
|
|
|
|
Net (Decrease) / Increase in cash and cash equivalents |
|
(509) |
28,085 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
28,085 |
- |
|
|
_________ |
_________ |
|
|
|
|
Cash and cash equivalents at 31 December |
|
27,576 |
28,085 |
|
|
|
________ |
On behalf of the board
|
Merrick G Andlinger | Paul M D’Alton |
| Director | Director |