RNS Number:6242S
Virotec International PLC
18 April 2008
VIROTEC INTERNATIONAL PLC
("Virotec" or the "Group")
PRELIMINARY RESULTS ANNOUNCEMENT
18 April 2008
CHAIRMAN'S STATEMENT
Dear Shareholders
I am pleased to present the Group's financial report for the year ended 31
December 2007.
The Group achieved revenue for the year ended 31 December 2007 of AUD$3.52
million compared with AUD$1.57 million for six months ended 31 December 2006.
The loss for the year was AUD$13.4m, compared to a loss of AUD$7.6m for the six
months ended 31 December 2006. The comparative information provided is only for
the six month period to 31 December 2006 due to the change in the financial
reporting period from the end of June to the end of December as a consequence of
the change of domicile of the Group to the United Kingdom ("UK").
The Group's balance sheet for the year remains strong with net assets of
AUD$17.4m, limited borrowings and significant investments in two listed
companies (Hydrodec Group plc and The Greenhouse Fund Limited). These are
recorded at their book value in the balance sheet of AUD$9.7m whilst their
current market value is in excess of AUD$60m. The cash balance at the year end
was AUD$0.4m. This does not include approximately AUD$2m relating to the sale of
Hydrodec Group plc shares in December 2007, which was accounted for as a
receivable at year end and subsequently received in January 2008.
The Group continued to provide environmental remediation and waste treatment
services through the application of Group patented technologies in the following
areas:
Environmental Remediation
* ViroMineTM Technology - applications developed for the mining industry.
* ViroSoilTM Technology - applications developed for the agricultural,
fertiliser and aquaculture industries.
Drinking Water, Wastewater and Solid Waste Treatment
* ViroFlowTM Technology - applications developed for the treatment of
drinking water and wastewater and solid waste from industrial sites.
* ViroSewageTM Technology (referred to as ViroFilterTM Technology in the
UK) - applications developed for the sewage industry.
The Group's operations are conducted in three geographic areas: Australia and
Asia, Europe and the United States of America ("USA").
Australia and Asia
In Australia and Asia, the Group's environmental remediation operations
continued to grow, with a record year in terms of revenue. The revenue for the
region for the year ended 31 December 2007 year was AUD$2.16m, compared with
AUD$0.89m for six months ended 31 December 2006. The Group has operated for the
longest period in the Australian market which has been the proving ground for
its core technologies. The various environmental remediation and waste treatment
applications have been commercially developed in Australia which has proven the
viability of the aforementioned technologies. The Group now has significant
market presence and forward orders in this region and will continue to increase
both its revenue and profitability in the coming year.
In March 2008, Virotec announced a significant new contract to supply solid
waste treatment services to Nyrstar Hobart Pty Ltd (formerly part of Zinifex
Ltd) using its ViroFlowTM Technology. The contract is to treat mercurous filter
cake and is expected to generate up to AUD$3.5m in revenue in 2008. Work on the
contract has commenced and is expected to be completed by the end of the third
quarter of 2008.
Europe
In Europe, the primary focus to date has been within the UK. The revenue for the
year ended 31 December 2007 was AUD$0.56m compared to AUD$0.55m in the six
months ended 31 December 2006. Initially, the Group targeted water companies
with its ViroFilterTM Technology for phosphate removal from municipal wastewater.
This technology had been successfully trialled by an independent body, the Water
Research Council, and has now been verified by one of the UK's largest water
companies. Due to customer budgetary cycles, this part of the market has taken
longer than expected to penetrate. During the year, a new general manager for
the UK operations was appointed and the business is now expanding into other
areas of waste treatment, including hazardous solid waste management, that have
been successfully realised in Australia and which are expected to generate more
immediate sales in the UK.
The operations in Italy have been scaled back, with a view of finding a licencee
to look after the sales and marketing effort in the region. All production
assets from Italy have been transferred to the USA where production for all
geographical regions will be now based.
United States of America
The revenue in the USA for the year ended 31 December 2007 was AUD$0.8m compared
to AUD$0.13m for the six months ended 31 December 2006. The USA is considered to
be our largest target market and three key industries have been identified for
near-term focus by the Group.
1.Drinking Water from Wells - The Group has spent a significant amount of time
addressing the regulatory issues associated with drinking water, particularly
where contaminants include radium, uranium, gross alpha and/or arsenic. The
Group has two ViroFlowTM Technology filter systems installed at the date of
this report.
2.Phosphate Removal from Concentrated Animal Feeding Operation (CAFO) Lagoons -
In June 2007, the Group was contracted to treat 13 lagoons for the largest hog
farmer in the world. The treatments have been completed and it is expected
that further contracts to treat additional lagoons will follow. These results
will allow part of our ongoing sales efforts to target other CAFOs.
3.Wastewater Treatment Plants - To date a number of wastewater treatment plants
have been contracted to use ViroFlowTM Technology to treat their waste lagoons
for phosphate and odour reduction. These treatments have been successful and
the Group now has important reference sites to demonstrate the effectiveness
of the technology to other companies in the region.
In 2007 the sales effort in the USA was based in Colorado and also South
Carolina, where the Group operated through its 66% owned joint venture, Virotec
Aquasolve. Due to the disappointing result in 2007 an extensive review of the
operations was conducted by the Group. Following this review the Board dismissed
existing management of Virotec Aquasolve and commenced proceedings against them
to recover assets which they consider to be misapplied. The majority of fixed
assets have been secured and the remaining assets for which recovery is sought
are not material in the context of the Group as a whole. Nevertheless, this has
delayed the benefits of our sales efforts by several months.
Following the restructuring, all USA operations are now being managed directly
by CEO, Dr Lee Fergusson on a headcount of five employees, and they are now
both financially and operationally structured to more closely resemble Virotec's
Australian operations, which are trading profitably.
Investment in Associate
Virotec holds 54,500,000 ordinary shares in Hydrodec Group plc ("Hydrodec")
representing 28.1 per cent. of its issued share capital. In addition, under a
royalty agreement, Virotec is entitled to receive five per cent. of revenues
generated by the Hydrodec technology.
At present, production of Hydrodec's SuperfineTM transformer oil at its
Australian facility is at near full capacity and demand continues to be strong,
driven primarily by an export order from a Turkish distributor which was
announced on 8 November 2007.
On 29 January 2008, Hydrodec announced it had made progress in the USA with the
construction of its first production plant in Ohio. A decision was also made to
accelerate the planning and construction of a second plant in Mississippi, which
is expected to be fully operational by the third quarter of 2009. In a trading
update announced on 28 February 2008, Hydrodec stated that it had reached a
price agreement with, and secured a conditional commitment from a transformer
oil buyer in the US to purchase more than 50 per cent. of the maximum production
capacity of the Ohio plant, plus a firm expression of interest in increasing
purchase quantities upon the commissioning of the Mississippi plant.
On 11 March 2008, Hydrodec announced its preliminary results for the year to 31
December 2007 which showed a pre-tax loss of �2.3m (2006: �2.8m) and a decrease
in net operating cash outflow to �0.6m (2006: �2.1m).
Investment
Virotec holds 30,000,000 ordinary shares in The Greenhouse Fund Limited
("Greenhouse") representing approximately 20 per cent. of its issued share
capital. Greenhouse is a Jersey domiciled, closed-ended investment company
established to invest principally in sustainable environmental technologies to
create a portfolio of investment holdings in the Environmental Sector.
Since inception Greenhouse has invested in the Environmental Sector acquiring
five BauxsolTM Technology sub-licences from Virotec and now owns approximately
57 per cent. in Molectra Australia Pty Ltd, which is licensed to commercialise
an advanced technology based on a sustainable process that re-cycles used
vehicle tyres and recovers materials from them, including crumb rubber, oil and
carbon.
As a result of a conservative accounting treatment this investment has been
written down to market value at 31 December 2007 resulting in an impairment loss
of AUD$3.5m being recorded in the current year.
Dividend
The Directors do not propose the payment of a dividend as they believe their
resources will provide a greater return by being re-invested in its business
operations.
Bid Approach
As advised to the market on 30 January 2008, Virotec was approached in relation
to proposals that might result in an offer being made for the Company. On 4
April 2008, Virotec confirmed that discussions were on-going with one party,
and that Hydrodec had informed Virotec that it had purchased 7.75m shares (2.93
per cent. of the issued share capital) and noted its intention to make an offer
at around 12p for the Company and that it had support of shareholders holding
just below 30 per cent. of the issued share capital. Hydrodec announced that it
had increased its holding to just over 3 per cent. and that its all share offer
would be on the basis of 1 Hydrodec share for every 3.75 Virotec shares. Further
it stated that it was seeking the recommendation of the Virotec Board.
Virotec is progressing these discussions at a good pace and the Board of Virotec
hopes to be in a position to enable proposals to be put before shareholders as
soon as due diligence and the legal requirements have been completed.
Yours sincerely
Brian Sheeran
Executive Chairman
VIROTEC INTERNATIONAL PLC
Consolidated Balance Sheet (Unaudited)
As at 31 December 2007
31 December 2007 31 December 2006
AUD$'000 AUD$'000
Assets
Property, plant and equipment 5,366 6,019
Investments in equity accounted 2,916 5,396
investees
Investments 6,800 9,680
Trade and other receivables 450 521
---------- ----------
Total non-current assets 15,532 21,616
---------- ----------
Inventories 1,031 1,475
Trade and other receivables 3,522 1,955
Cash and cash equivalents 391 3,283
---------- ----------
Total current assets 4,944 6,713
---------- ----------
Total assets 20,476 28,329
---------- ----------
Equity
Share capital 6,535 5,959
Share premium reserve 8,140 -
Other reserves 101,441 105,944
Deficit (98,732) (86,890)
---------- ----------
Total equity 17,384 25,013
---------- ----------
Liabilities
Interest-bearing loans and borrowings 290 551
Provisions 731 690
---------- ----------
Total non-current liabilities 1,021 1,241
---------- ----------
Interest-bearing loans and borrowings 392 139
Trade and other payables 1,556 1,705
Employee benefits 98 206
Provisions 25 25
---------- ----------
Total current liabilities 2,071 2,075
---------- ----------
Total liabilities 3,092 3,316
---------- ----------
Total equity and liabilities 20,476 28,329
---------- ----------
VIROTEC INTERNATIONAL PLC
Consolidated Income Statement (Unaudited)
For the year ended 31 December 2007
Year ended Six months ended
31 December 2007 31 December 2006
AUD$'000 AUD$'000
Revenue 3,522 1,570
Cost of sales (1,924) (1,053)
----------- ----------
Gross profit 1,598 517
Gain on disposal of shares 2,262 -
Other income 101 33
Impairment loss on investments (3,543) -
Sales and marketing expenses (5,509) (2,681)
Administrative expenses (6,660) (4,195)
----------- ----------
Loss from operating activities (11,751) (6,326)
----------- ----------
Financial income 158 204
Financial expenses (77) (31)
----------- ----------
Net financing income 81 173
----------- ----------
Share of loss of associate (1,699) (1,412)
----------- ----------
Loss before tax (13,369) (7,565)
Taxation - -
----------- ----------
Loss after tax (13,369) (7,565)
----------- ----------
Attributable to:
Equity holders of the parent (13,369) (7,565)
Minority - -
----------- ----------
Loss for the year (13,369) (7,565)
----------- ----------
Earnings per ordinary share:
Basic earnings per share (AUD $) (0.052) (0.032)
----------- ----------
VIROTEC INTERNATIONAL PLC
Consolidated Statement of Recognised Income and Expense (Unaudited)
For the year ended 31 December 2007
Year ended Six months ended
31 December 2007 31 December 2006
AUD$'000 AUD$'000
Foreign currency translation (2,105) (420)
differences for foreign operations
Net change in fair value of 1,298 (1,298)
available-for-sale financial assets ---------- -----------
Income and expense recognised (807) (1,718)
directly in equity
Loss for the year (13,369) (7,565)
---------- -----------
Total recognised income and expense (14,176) (9,283)
for the year ---------- -----------
Attributable to:
Equity holders of the Company (14,176) (9,283)
Minority interest - -
---------- -----------
Total recognised income and expense (14,176) (9,283)
for the year ---------- -----------
VIROTEC INTERNATIONAL PLC
Consolidated Statement of Cash Flows (Unaudited)
For the year ended 31 December 2007
Year ended Six months ended
31 December 2007 31 December 2006
AUD$'000 AUD$'000
Cash flows from operating activities
Cash receipts in the course of operations 2,080 1,035
Cash payments in the course of operations (9,100) (7,049)
----------- ----------
Cash absorbed by operations (7,020) (6,014)
Interest received 158 205
Interest paid (77) (11)
----------- ----------
Net cash flows from operating activities (6,939) (5,820)
----------- ----------
Cash flows from investing activities
Proceeds from sale of property, plant and 21 20
equipment
Acquisition of property, plant and equipment (557) (2,395)
----------- ----------
Net cash flows from investing activities (536) (2,375)
----------- ----------
Cash flows from financing activities
Proceeds from the issue of share capital 4,984 -
Share issue costs (216) -
Repayment of borrowings (185) -
Increase in borrowings - 666
----------- ----------
Net cash flows from financing activities 4,583 666
----------- ----------
Net decrease in cash and cash equivalents (2,892) (7,529)
Cash and cash equivalents at 1 January 3,283 10,812
----------- ----------
Cash and cash equivalents at 31 December 391 3,283
----------- ----------
VIROTEC INTERNATIONAL PLC
Notes to the Consolidated Financial Statements
1. BASIS OF PREPARATION
The preliminary result statement has been prepared on the basis of the same
accounting policies as those set out in the financial statements for the year
ended 31 December 2006. These summarised consolidated financial statements have
been prepared in accordance with International Financial Reporting Standards
("IFRS") as adopted by the EU under the historical cost convention. They are
presented in Australian dollars, which is the functional currency of the group
because the significant events of the current and prior period occurred in
Australian dollars.
The preparation of financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
2. SEGMENT REPORTING
Business segments
The Group has operated within one business segment in all financial periods
being environmental services - the provision of solutions to industry for the
treatment of contaminated water and soil.
The Group also retains mining tenements, however as they represent less than 10%
of the Group's assets, are not considered significant, and are therefore not
reported separately.
Geographical segments
The environmental services segment is managed on a worldwide basis, and has
operated in three principal geographical areas:
* Australia and Asia;
* Europe; and
* United States of America.
In presenting information on the basis of geographical segments, segment revenue
is based on the geographical location of customers. Segment assets are based on
the geographical location of the assets.
Australia and Asia USA Europe Consolidated
31 December 2007 AUD$'000 AUD$'000 AUD$'000 AUD$'000
Revenue 2,164 800 558 3,522
--------- --------- --------- ---------
Segment assets 7,324 5,441 7,711 20,476
--------- --------- --------- ---------
Capital expenditure 151 411 40 602
--------- --------- --------- ---------
31 December 2006
Revenue 890 127 553 1,570
--------- --------- --------- ---------
Segment assets 19,913 6,418 1,998 28,329
--------- --------- --------- ---------
Capital expenditure 76 2,283 36 2,395
--------- --------- --------- ---------
3. SHARE CAPITAL AND RESERVES
Number of Nominal Value Share Premium Merger Reserve
Ordinary Shares Reserve
Issues
AUD$'000 AUD$'000 AUD$'000
Issued on incorporation 2 - - -
Shares issued to 240,162,440 5,959 - 96,417
acquire Virotec
International Ltd --------- ------- -------- -------
Balance at 31 240,162,442 5,959 - 96,417
December 2006 --------- ------- -------- -------
Balance at 1 240,162,442 5,959 - 96,417
January 2007
17,350,000 17,350,000 415 4,569 -
ordinary shares
of 1p issued for cash
at a price of 12p
per share
6,655,789 6,655,789 161 3,798 -
ordinary shares of
1p issued under
executive share plans
at a price of AUD$0.60
per share
Capital raising costs - - (227) -
--------- ------- -------- -------
Balance at 31 264,168,231 6,535 8,140 96,417
December 2007 --------- ------- -------- -------
Authorised issued and fully paid share capital
2007 2006
AUD$'000 AUD$'000
Authorised share capital
900,000,000 ordinary shares of 1p each 22,332 22,332
--------- ----------
Called up, allotted and fully paid 264,168,231 6,535 5,959
ordinary shares of 1p each --------- ----------
As at 31 December 2007 the Company has also granted a total of 10,860,000
options (2006: 11,310,000 options).
Share Share Merger Trans- Fair Share Retained Total Min- Total
capital premium reservelation value based earnings ority Equity
reserve reserve res. payments interest
reserve
AUD AUD AUD AUD AUD AUD AUD AUD AUD AUD
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000$'000 $'000
Effect of - -102,376 155 - 9,771 (79,325)32,977 47 33,024
reverse
acquisition
Total - - - (420)(1,298) - (7,565)(9,283)(47)(9,330)
recognised
income and
expense
Equity settled - - - - - 1,319 - 1,319 - 1,319
transactions
Share issues 5,959 -(5,959) - - - - - - -
---------------------------------------------------------------
Balance at 31 5,959 - 96,417 (265)(1,298) 11,090 (86,890) 25,013 - 25,013
December 2006 ---------------------------------------------------------------
Balance at 1 5,959 - 96,417 (265)(1,298) 11,090 (86,890) 25,013 - 25,013
January 2007
Total - - - (2,105)1,298 - (13,369)(14,176)-(14,176)
recognised
income and
expense
Equity settled - - - - - 434 1,357 1,791 - 1,791
transactions
Share issues 576 8,140 - - - (4,130) 170 4,756 - 4,756
--------------------------------------------------------------
Balance at 31 6,535 8,140 96,417 (2,370) - 7,394 (98,732) 17,384 - 17,384
December 2007 --------------------------------------------------------------
4. EARNINGS PER SHARE
The calculation of the basic loss per share is based on the loss attributable to
ordinary shareholders divided by the weighted average number of shares in issue
during the year.
Year ended Six months ended
31 December 2007 31 December 2006
Weighted average number of ordinary
shares used in the calculation 257,983,256 240,162,442
of basic earnings per share ---------------------------------------
The options outlined in Note 3 are potential ordinary shares which were not
considered dilutive at 31 December 2007 or 31 December 2006.
5. ANNUAL REPORT
Copies of the annual report and accounts will be sent to shareholders in the
near future and will be obtainable from the Company's head office and from its
website at www.virotec.com.
6. STATUS OF THIS REPORT
The preliminary results for the year ended 31 December 2007 are unaudited. The
financial information included in this statement does not constitute the Group's
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
Statutory accounts for the year ended 31 December 2007 will be finalised on the
basis of the financial information presented by the directors in the preliminary
announcement and will be delivered to the Registrar of Companies in due course.
The information given as the comparative figures for the six months ended 31
December 2006 do not constitute the Group's statutory accounts for this
financial period. Statutory accounts for the six months ended 31 December 2006,
prepared in accordance with International Financial Reporting Standards as
adopted by the European Union have been reported on the by the Group's auditors.
The report of the auditors was unqualified and did not contain a statement under
Section 237 (2) and (3) of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
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