RNS Number:0577E
Conder Environmental PLC
19 September 2007
Conder Environmental plc
Preliminary results for the year ended 30 April 2007
Conder Environmental plc, an AIM listed company providing products which combat
waste water pollution including oil and sewage discharges, announces its
preliminary results for the year ended 30 April 2007.
Chairman's Statement
Summary
During the year the Group has successfully completed its restructuring and
continued its financial recovery, ending with a solid balance sheet and
sufficient working capital headroom. The Administration of Hydroserve Limited
and the sale of the business of Cerva in the first half was followed by the
disposal of Vikoma in January 2007, as announced in the interim statement. I am
pleased to report that in line with our strategic plan, our focus upon core
activities, combined with a significant reduction in central costs, have
positioned the Group to generate a small profit for the first half of the new
financial year.
Results
Following the disposal of Vikoma, the Group result is a loss before tax and
minority interest for the year of #0.04m (2006: loss #3.74m).
The continuing operations of the Group made an operating loss in the year of
#0.77m (2006: profit of #0.40m). These losses were a direct result of the
disruption to trade created by the extremely difficult cash position prior to
the sale of Vikoma and were exacerbated by the costs associated with the
restructuring process.
On a positive note, the Group generated an overall cash inflow of #1.04 million
(2006: outflow #0.53 million), an improvement of #1.57 million over the prior
period. This cash inflow led to the controlled release of the financial
restrictions for the remaining businesses in the final quarter of the year,
providing a much stronger position for trading at the start of the new financial
year.
Business Review
The strategy followed by the Board has been to stabilise the group financially,
disposing of non-core operations and creating a platform for future growth. The
start of this process was the Administration of Hydroserve Limited in June 2006,
the only viable option available to terminate the loss-making contracts therein,
which had severely depleted the group's liquid working capital.
From then onwards the focus of the Board was to restructure Vikoma in order to
maximise the disposal value of this company. Having consolidated the Vikoma
operation onto one site, combined with a redundancy programme, I am pleased to
say that the company was sold at the end of January 2007 for a gross cash
consideration of #2.3 million. The Vikoma sale proceeds have been utilised to
stabilise the Group's financing and resolve the remaining working capital
issues. During this period the Group also realised its investment in the
business of Cerva, prior to the expiry of its major five-year contract with the
National Grid.
The remaining business of Conder Products Limited has been renamed Conder
Environmental Solutions Limited and sub-divided into four operating units. This
enlarged portfolio of activity provides the business with a much broader
offering, which its market is now demanding. These operating units are:
* Conder Products, a market leading provider of package sewage treatment
plants, oil separators and pumping stations;
* Conder Technical Solutions, a provider of large sewage treatment
schemes, attenuation schemes, rainwater harvesting systems and
engineered vessel solutions;
* Conder Pumping Solutions, a supplier of technical pumping solutions; and
* Hydroserve, a service solutions provider for the maintenance, repair and
refurbishment of environmental products.
At the same time the group has continued to innovate its product ranges with new
technologies. The latest range of energy efficient sewage treatment plants has
just been launched. Branded as Techflo SAF, this product range is ideally
suited to those discharge requirements which do not demand the need for membrane
technology. Initial sales of these new treatment plants are encouraging, giving
the Board confidence that they will help to underpin the continued growth in
sales.
People
This year has been a difficult period of transition for the staff throughout the
Group. They have responded admirably to major external pressures and the need
to restructure our internal operations. Their commitment and resolve to this
process is both recognised and appreciated and on behalf of the Board I thank
them for their continued support. I would also like to thank my predecessor,
Mike Killingley, for the commitment and contribution he has made to the Group
since its flotation.
Outlook
In line with the Board's strategy, the Group has now been totally restructured
and is fully focused on the future. Working capital restrictions have been
resolved and central costs have been reduced commensurate with the ongoing
business.
Conder Environmental Solutions is now positioned not only to maximise the
opportunities in its existing marketplace but also to expand into export
markets, the benefits of which should have a positive impact from the second
half onwards. Further new products are being developed and will be rolled out
throughout the year. Hydroserve continues to rebuild its position in its core
domestic market and is seeing growth in the commercial service sector.
As a result of these developments the Group expects to achieve a small profit in
the first half of the current financial year compared to the loss on continuing
operations for the first half of the prior year. The Group is expected to be
profitable for the year ending April 2008.
Graham Setterfield 18 September 2007
Chairman
Operating and Financial review
Conder Environmental Solutions (previously Conder Products)
Conder Environmental Solutions had a positive year given the working capital
constraints that it was forced to work within. Original Equipment Manufacturing
("OEM") revenues at #10.1 million were maintained at prior year levels despite
the working capital difficulties. The OEM business delivered a pre interest
operating profit of #0.12 million compared to the prior year profit of #0.54
million before the allocation of Group costs and before provisions for amounts
due from Hydroserve in the prior year. Having added back, depreciation and
amortisation of #0.36million, EBITDA was #0.48 million compared to #0.86 million
in 2006.
Product development continued on from the new generation of oil separators
launched in late 2006. The launch of a new range of domestic sewage treatment
plants (ASP) was followed by the launch of the technical sewage treatment plant
(SAF) range at the end of this financial year. Both of these ranges which are
more energy efficient, have received a positive response from the market. This
continued development and expansion of the product range puts the company in a
strong position to increase its performance in the new financial year and it is
expected to be profitable and generate cash during the new financial year.
The challenge for the company will be to develop the manufacturing capacity over
the next 6 to 9 months, to both increase the available output to match expected
demand and to reduce unit costs.
The name of the company was changed to reflect the span of operations within the
business that has been extended to include technical solutions and pumping
solutions, as well as the Service division operation.
Hydroserve (Service division)
The Service division of Conder Environmental Solutions has retained the
Hydroserve name and concentrates upon the servicing of the OEM product range,
along with the refurbishment of other similar installations. In June 2006, the
service contracts of the wastewater operation were purchased from Hydroserve
Limited and the relevant employees were transferred to form the new Service
division. It has taken this financial year to grow the business to an
economically viable size and particularly in the first 9 months of its trading
the operation suffered from the association with the Administration of
Hydroserve Limited, when suppliers were understandably unwilling to offer credit
to the new operation.
Whilst the business generated a loss in the 11 months it operated from June 2006
of #0.27 million, those losses were at a reducing rate in the final months and
it produced its first underlying monthly profit at the end of the year.
Expectations for the coming year are being maintained at a realistic level but
it is expected to make a modest financial contribution to the Group.
Disposals and Discontinued Operations
Vikoma
As was noted in the interim results, the disposal of Vikoma International
Limited and its related subsidiaries was completed on 25 January 2007. The
initial cash consideration was for #2.0m, with a further #0.3m due before the
end of January 2008. This was in return for assets of #1.2 million. The cash
generated by this disposal has removed the working capital pressure that the
Group had been experiencing over the previous 12 months.
Prior to its disposal, further development was undertaken in Vikoma at the start
of the financial year with the consolidation of operations into the
manufacturing site in Cowes and the closure of the Southampton office, combined
with headcount reductions of 20%. This helped to make the business more
attractive to potential purchasers which ultimately led to its disposal.
In the 9 months of ownership, Vikoma achieved a turnover of #7.0 million (2006:
#11.7m for the full year) and a profit of #0.26 million (2006: #0.11m) before
allocation of Group costs.
Cerva
The business and assets of Cerva were sold on 29 September 2006 for an initial
consideration of #140,000, after having acquired the minority shareholding in
Cerva for #40,000. The net proceeds were reinvested into the Group's working
capital. Additional consideration up to a maximum of #60,000 may be payable
subject to specified performance conditions, the achievement of which is outside
of the control of the Board.
Hydroserve Limited
As explained in last year's report, the accounting irregularities within
Hydroserve Ltd led to the closure of trading activity within Hydroserve Limited
and the eventual placing of the company into Administration in June 2006. The
Group has assisted with the Administration process where possible, to maximise
the return to creditors. The Administration process is expected to be completed
in the second half of 2007.
Financing
The Board has monitored the cash requirements of the Group closely throughout a
very difficult year. The re-financing of the working capital in June 2006 met
the medium term requirements of the Group via a mixture of invoice discounting
and asset backed finance. The subsequent disposals of Cerva and Vikoma then
created further capital, which has removed the significant barriers to normal
trading. The Group now expects to be cash generative in the coming year.
FRS 20 "Share based payment" prior year adjustment
The 2006 result has been adjusted to reflect the group's adoption of FRS 20 "
Share based payment" during the year. Administrative costs previously reported
in 2006 have consequently increased by #14,000 in respect of share options
issued in prior periods to senior employees.
The Board
The reduced scale of the business has been reflected in the reduced number of
directors of the Group. On 20 June 2006, Paul Herbert, Group Operations
Director, left the Group and Robert Turner, Group Commercial Director, resigned
from the Board. Robert now undertakes a senior operational role in Conder
Environmental Solutions Limited utilising his extensive experience of the
environmental marketplace. On 23 July 2007, Mike Killingley resigned his
position as non-executive Chairman and was succeeded by Graham Setterfield who
has been a non-executive director since 2003. The Company is currently
recruiting another non-executive director to fill the vacated position.
Dividend
The Board is not recommending the payment of a dividend.
David Griffith
18 September 2007
Consolidated profit and loss account
for the year ended 30 April 2007
2007 2007 2007 2006 2006 2006
#000 #000 #000 #000 #000 #000
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
As restated As restated As
restated
Turnover 11,790 7,812 19,602 25,908 5,692 31,600
Operating costs (including a net
exceptional gain of #49,000
(2006: cost of #17,000)) (12,419) (7,736) (20,155) (25,508) (9,725) (35,233)
Operating profit/(loss) before
exceptional items (629) 76 (553) 400 (4,033) (3,633)
Exceptional Items: costs of
restructuring (146) (120) (266) - - -
Operating (loss)/profit (775) (44) (819) 400 (4,033) (3,633)
Profit on sale of subsidiary
businesses 969 -
Profit on ordinary activities
before interest and taxation 150 (3,633)
Interest receivable 12 2
Interest payable and similar
charges (205) (118)
Loss on ordinary activities
before taxation (43) (3,749)
Tax on loss on ordinary
activities - 36
Loss on ordinary activities
after taxation (43) (3,713)
Minority interest - equity (9) (6)
Loss for the financial year
and retained loss for the year (52) (3,719)
Basic and diluted (loss)/
profit per share (1.71p) 1.62p (0.09p) 0.71p (9.13p) (8.42p)
Consolidated balance sheet
at 30 April 2007
2007 2006
#000 #000 #000 #000
Fixed assets
Intangible assets
Goodwill 1,595 1,853
Other intangible assets 53 10
1,648 1,863
Tangible assets 735 1,427
2,383 3,290
Current assets
Stocks 1,000 2,328
Debtors 2,832 6,753
3,832 9,081
Creditors: amounts falling due within one year (3,040) (9,182)
Net current assets/(liabilities) 792 (101)
Total assets less current liabilities 3,175 3,189
Creditors: amounts falling due after more
than one year (24) (32)
Net assets 3,151 3,157
Capital and reserves
Called up share capital 5,725 5,725
Share premium account 3,902 3,902
Merger account - (644)
Profit and loss account (6,476) (5,794)
Equity shareholders' funds 3,151 3,189
Minority interest - equity interest - (32)
3,151 3,157
Consolidated cash flow statement
for the year ended 30 April 2007
2007 2006
#000 #000
Net cash inflow/(outflow) from operating activities
before exceptional items (71) (2,482)
Exceptional items (266) -
Net cash flow from operating activities (337) (2,482)
Returns on investments and servicing of finance (225) (91)
Taxation - 77
Capital expenditure (151) (266)
Acquisitions and disposals 1,718 (235)
Cash inflow/(outflow) before financing 1,005 (2,997)
Financing 36 2,465
Increase/(Decrease) in cash in the year 1,041 (532)
Reconciliation of group net cash flow to movement in net debt
for the year ended 30 April 2007
2007 2006
#000 #000
Increase/(decrease) in cash in the year 1,041 (532)
Repayment of bank loan 1,964 110
Loans acquired (2,000) (570)
Change in net debt resulting from cash flows 1,005 (992)
Loans acquired with subsidiary - (37)
Loans disposed of with subsidiary 40 -
Movement in net debt in the year 1,045 (1,029)
Net debt at the beginning of the year (1,677) (648)
Net debt at the end of the year (632) (1,677)
Reconciliation of movements in shareholders' funds
for the year ended 30 April 2007
2007 2006
#000 #000
As restated
Group
(Loss) for the financial year (52) (3,719)
New share capital subscribed - 2,100
Cost of placing - (95)
Share based payments 14 14
Net reduction in shareholders' funds (38) (1,700)
Opening equity shareholders' funds 3,189 4,889
Closing equity shareholders' funds 3,151 3,189
2007 2006
#000 #000
As restated
Company
Profit/(Loss) for the financial year 3,843 (4,033)
New share capital subscribed - 2,100
Cost of placing - (95)
Share based payments 14 14
Net addition to/(reduction in) shareholders' funds 3,857 (2,014)
Opening equity shareholders' funds 5,678 7,692
Closing equity shareholders' funds 9,535 5,678
1. Segmental Analysis
Turnover represents the amounts (excluding value added tax) derived from the
sale of environmental products to third party customers.
All turnover arose in the United Kingdom and Sweden and is analysed by
destination as follows:
2007 2006
#000 #000
Arising in the United Kingdom
United Kingdom 11,718 18,833
Continental Europe 1,457 1,050
North America 1 821
Middle East and North Africa 1,359 1,806
Former Soviet Union 1,187 6,271
South America 267 200
Rest of World 3,080 1,863
19,069 30,844
Arising in Sweden
Continental Europe 533 756
19,602 31,600
The table below sets out information for each of the group's industry segments,
including discontinued operations:
CES Vikoma Cerva, Hydroserve Total
Limited
Continuing Discontinued Discontinued
2007 2006 2007 2006 2007 2006 2007 2006
#000 #000 #000 #000 #000 #000 #000 #000
Turnover 11,790 10,801 7,023 12,384 789 8,415 19,602 31,600
Segmental Profitability
Segment operating (loss)/ (149) 501 7 (87) (51) (4,037) (193) (3,623)
profit
Central costs (626) 4 - - - - (626) 4
Operating loss (775) 505 7 (87) (51) (4,037) (819) (3,619)
Profit on sale of business 969 -
Net interest (193) (116)
Group loss before taxation (43) (3,735)
Net assets
Segment net assets 2,514 1,876 - 1,900 179 371 2,693 4,147
Unallocated net assets/ 458 (990)
(liabilities)
Total net assets 3,151 3,157
2. (Loss)/profit per ordinary share
Basic (loss)/profit per share for the year ended 30 April 2007 has been
calculated based upon the weighted average number of ordinary shares in issue
for the year of 57,254,309 (2006: 44,158,419).
The diluted loss per share in 2007 is restricted to 0.09p (2006: 8.42p) as it is
not permitted to exceed basic loss per share.
Continuing Discontinued 2007 Continuing Discontinued 2006
Operations Operations Total Operations Operations Total
#000 #000 #000 #000 #000 #000
As restated As restated As
restated
Earnings for basic loss per share (977) 925 (52) 314 (4,033) (3,719)
3. Analysis of group net debt
At 1 May Cash flow Disposals Other At 30 April
2006 non-cash 2007
flows
#000 #000 #000 #000 #000
Cash at bank and in 909 (586) - - 323
hand
Overdrafts (1,996) 1,627 - - (369)
(1,087) 1,041 - - (46)
Debt due within one year (558) (12) 27 (19) (562)
Debt due after one year (32) (24) 13 19 (24)
Total (1,677) 1,005 40 - (632)
4. Financial information
The financial information set out above does not constitute statutory accounts
within the meaning of Section 254 of the Companies Act 1985 for the years ended
30 April 2007 and 2006 but is derived from the Group's audited accounts which
have been approved and signed by the directors. Financial statements for 2006
have been delivered to the Registrar of Companies, and those for 2007 will be
delivered following the Group's Annual General Meeting. The auditors have
reported on those accounts; their report in respect of 2007 was unqualified and
did not contain statements under either Section 237 (2) or 237 (3) of the
Companies Act 1985; their report in respect of 2006 was qualified by a
limitation in audit scope regarding the discontinued business within Hydroserve
Limited. This reported that proper accounting records in respect of that part
of the business had not been kept, as required under Section 237(2) of the
Companies Act 1985.
5. Report and Accounts
Copies of the Report and Accounts will be sent to shareholders and the AIM team.
Copies will be available to the public for one month, from the Group's
Registered Office at Chandlers House, Ganders Business Park, Kingsley, Bordon,
Hants, GU35 9LU, on the Company's web site www.conderenv.com and from the
Company's nominated adviser Shore Capital & Corporate Limited, at The Corn
Exchange, Fenwick Street, Liverpool, L2 7RB
For further information please contact:
Conder Environmental plc: Tel: 01420 470811
Graham Setterfield Chairman
Jon Varney Group Managing Director
David Griffith Group Finance Director
Shore Capital and Corporate Limited - Nominated Adviser Tel: 020 7408 4090
Dru Danford
18 September 2007
This information is provided by RNS
The company news service from the London Stock Exchange
END
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