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) p
diluted
Consolidated balance sheet
at 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 1,077,670 316,809
liabilities
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 - - - 450 450
minority interest
Share based costs - - 218,381 - 218,381
Acquisition of Energy 1,415,000 707,500 - - 2,122,500
Assets Ltd on
9 March 2006
Additional issues on 9 833,333 416,667 - - 1,250,000
March 2006
Share issue costs - (147,423) - - (147,423)
Balance at 31 December 2,467,684 1,083,929 (2,580,880) (7,445) 963,288
2006 (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) 15,159
payables
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) 8,657
investing activities
657
Cash flows from financing
activities
Net proceeds from issue of 1,102,577 326,536
equity shares
Net (decrease)/ increase in cash (63,283) 312,378
and cash equivalents
Cash and cash equivalents at the 312,378 _
beginning of financial period
Cash and cash equivalents at end 249,095 312,378
of 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 are
explained 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 2009
Co 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 2,122,500
at 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 Plc
Stephen Barclay, Chairman
Tel: 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
END
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