RNS Number:6338D
Virotec International PLC
11 September 2007
INTERIM RESULTS
FOR THE SIX MONTHS TO 30 JUNE 2007
During the six months ended 30 June 2007, Virotec International plc ("Virotec"
or the "Company") has continued to operate in three main regions - Australia and
Asia, Europe and USA.
In Australia, the Group's environmental remediation company posted record months
in April and May in terms of revenue and profitability. Australia and Asia are
markets where Virotec has operated the longest and have been the proving ground
for our core Technologies, developing the various environmental remediation and
waste treatment applications and proving their commercial acceptance and
viability. This company was profitable last year and continues to increase both
its revenue and profitability.
In Europe, the main focus to date has been in the United Kingdom. Initially,
Virotec 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 country's largest water companies. Now Virotec is working
with a number of water companies, and has recently announced a significant
municipal wastewater project to be implemented in the next few months. Due to
customer budgetary cycles, this part of the market has taken longer than
expected to penetrate. During the period, a new general manager for UK
operations was appointed, and the business has been refocused on other areas of
waste treatment, including hazardous solids waste management, that have had
successfully exploited in Australia and which are expected to generate a faster
return in the UK.
The USA is our largest target market and three key industries have been
identified for near-term focus by Virotec.
1. Drinking Water from Wells - Virotec 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. Support
from regulators is encouraging and it is expected that this market will grow
significantly over the next 12 months. The initial focus has been radium in
drinking water, where in South Carolina alone we have been advised there are
over 500 wells that require some level of radium treatment. This problem exists
in a number of states (Virotec is at different stages of negotiations with
companies in seven states) and to date, four wells have contracted to use our
ViroFlowTM Technology solution. The first customer is now on line, and our sales
effort has increased in this regard. Virotec expects that more wells will be
signed up progressively throughout the remainder of the year (and beyond).
2. Phosphate Removal from Concentrated Animal Feeding Operation (CAFO) Lagoons -
In June 2007, Virotec was contracted to treat 13 lagoons for the largest hog
farmer in the world. The treatments have been completed and the results are
currently being monitored. Once this monitoring has been completed, 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.
Again, Virotec is encouraged that the regulators are cracking down on phosphate
discharge limits in waterways, and Virotec has demonstrated an effective
solution to this growing problem.
3. Wastewater Treatment Plants - To date four 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 Virotec
now has important reference sites to demonstrate the effectiveness of the
Technology to other companies.
Virotec operates in areas where regulatory approvals and customer acceptance
take time to obtain. These approvals have taken longer than the Company
expected, however now that these milestones have been achieved, Virotec is
focussed on the commercial roll out of its products and services.
Looking to the financial results for the six months to June 2007, Virotec
recorded a loss of AUD$6.0 million. This compares to a profit of AUD$2.8 million
for the corresponding period to June 2006, which included substantial revenue
(of AUD$12.2 million) for the sub-licence and sale of non-core technologies to
The Greenhouse Fund Limited. When the effect of this transaction is removed from
the prior period to produce a like comparative, the result becomes a loss for
the period to June 2006 of AUD$9.2 million.
Revenue derived from Virotec's environmental remediation operations has
continued to increase period-on-period, with a 31% increase over the six months
to December 2006 and 504% over the six months to June 2006 (after adjusting for
the revenue from the Greenhouse transaction noted above). Although these revenue
numbers are modest, the Directors of the Company are satisfied that they
evidence growing acceptance of Virotec's Technologies with successful
implementation of many projects, and this success underpins the substantial
potential for further growth.
As the result of sub-licences and sales of technologies by Virotec over the last
few years, including the transaction with The Greenhouse Fund noted above,
Virotec retains shareholdings in The Greenhouse Fund and the HydroDec Group plc,
with market values of AUD$8.5 million and AUD$34.7 million respectively at 30
June 2007. In addition, Virotec is entitled to royalties from revenue earned
from the exploitation of certain technologies, and during the period the first
of these royalties have been earned.
The Directors have never been more confident of the benefits of our products and
services and that we provide the only viable solution for a number of key
environmental problems is a key to our continued success. As the development of
our Technologies and regulatory sign offs are now completed, the Directors
believe it is only a matter of time before the Technologies will gain even wider
market acceptance.
Brian Sheeran
Chairman
11 September 2007
Consolidated Balance Sheet
As at 30 June 2007
Unaudited Unaudited
30 June 2007 30 June 2006 31 Dec 2006
AUD$'000 AUD$'000 AUD$'000
Assets
Property, plant and equipment 5,886 4,161 6,019
Investments in equity accounted 4,618 6,719 5,396
investees
Investments 8,499 10,978 9,680
Receivables 529 521 521
--------- --------- --------
Total non-current assets 19,532 22,379 21,616
--------- --------- --------
Inventories 1,251 1,360 1,475
Trade and other receivables 1,971 440 1,955
Cash and cash equivalents 4,062 10,812 3,283
--------- --------- --------
Total current assets 7,284 12,612 6,713
--------- --------- --------
Total assets 26,816 34,991 28,329
--------- --------- --------
Equity
Share capital 6,535 - 5,959
Reserves 109,493 110,126 105,944
Retained deficit (92,734) (77,149) (86,890)
--------- --------- --------
Total equity attributable to 23,294 32,977 25,013
equity holders of the Company
Minority interest - 47 -
--------- --------- --------
Total equity 23,294 33,024 25,013
--------- --------- --------
Liabilities
Interest-bearing loans and 184 2 551
borrowings
Provisions 690 670 690
--------- --------- --------
Total non-current liabilities 874 672 1,241
--------- --------- --------
Interest-bearing loans and 160 22 139
borrowings
Trade and other payables 2,237 1,062 1,705
Employee benefits 226 161 206
Provisions 25 50 25
--------- --------- --------
Total current liabilities 2,648 1,295 2,075
--------- --------- --------
Total liabilities 3,522 1,967 3,316
--------- --------- --------
Total equity and liabilities 26,816 34,991 28,329
--------- --------- --------
Consolidated Income Statement
For the six months ended 30 June 2007
Unaudited Unaudited
six months ended six months ended Six months ended
30 June 2007 30 June 2006 31 December 2006
AUD $'000 AUD $'000 AUD $'000
Revenue 2,061 12,539 1,570
Cost of sales (906) (520) (1,053)
--------- --------- ---------
Gross profit 1,155 12,019 517
Other income 46 17 33
Sales and marketing expenses (1,633) (1,091) (2,681)
Administrative expenses (5,148) (7,397) (4,195)
--------- --------- ---------
Loss from operating (5,580) 3,548 (6,326)
activities --------- --------- ---------
Financial income 99 456 204
Financial expenses (18) (2) (31)
--------- --------- ---------
Net financing income 81 454 173
--------- --------- ---------
Share of loss of associate (515) (1,219) (1,412)
--------- --------- ---------
Loss before tax (6,014) 2,783 (7,565)
Taxation - - -
-------- --------- ---------
Loss after tax (6,014) 2,783 (7,565)
-------- --------- ---------
Attributable to:
Equity holders of the parent (6,014) 3,056 (7,565)
Minority - (273) -
--------- --------- --------
Loss for the period (6,014) 2,783 (7,565)
--------- --------- --------
Earnings per ordinary share:
Basic earnings per share (AUD$) (0.02) 0.012 (0.032)
--------- --------- ---------
Diluted earnings per share (AUD$)(0.02) 0.012 (0.032)
--------- --------- ---------
Consolidated Statement of Recognised Income and Expense
Unaudited Unaudited
six months ended six months ended Six months ended
30 June 2007 30 June 2006 31 December 2006
AUD $'000 AUD $'000 AUD $'000
Foreign currency translation (1,014) 466 (420)
differences for foreign operations
Net change in fair value of (885) (558) (1,298)
available-for-sale
financial assets --------- --------- ---------
Income and expense recognised (1,899) (92) (1,718)
directly in equity
Loss for the period (6,014) 2,783 (7,565)
--------- --------- ---------
Total recognised income (7,913) 2,691 (9,283)
and expense for the period --------- --------- ---------
Attributable to:
Equity holders of the Company (7,913) 2,964 (9,283)
Minority interest - (273) -
--------- --------- ---------
Total recognised income (7,913) 2,691 (9,283)
and expense for the period --------- --------- ---------
Consolidated Statement of Cash Flows
Unaudited Unaudited
six months six months Six months
ended ended ended
30 June 30 June 31 December
2007 2006 2006
AUD $'000 AUD $'000 AUD $'000
Cash flows from operating activities
Cash receipts in the course of operations 2,360 2,289 1,035
Cash payments in the course of operations (5,634) (6,248) (7,049)
--------- --------- ---------
Cash generated from operations (3,274) (3,959) (6,014)
Interest received 99 441 205
Interest paid (18) (3) (11)
--------- --------- ---------
Net cash from operating activities (3,193) (3,521) (5,820)
--------- --------- ---------
Cash flows from investing activities
Proceeds from sale of property, plant and 46 11 20
equipment
Proceeds from sale of investment - 503 -
Acquisition of property, plant and equipment (495) (1,903) (2,395)
--------- --------- ---------
Net cash from investing activities (449) (1,389) (2,375)
--------- --------- ---------
Cash flows from financing activities
Proceeds from the issue of share capital 4,984 - -
Share issue costs (216) - -
Increase/(decrease) in borrowings (347) - 666
--------- --------- ---------
Net cash from financing activities 4,421 - 666
--------- --------- ---------
Net increase/(decrease) in cash and cash 779 (4,910) (7,529)
equivalents
Cash and cash equivalents at 1 January 3,283 15,722 10,812
--------- --------- ---------
Cash and cash equivalents at 30 June 4,062 10,812 3,283
--------- --------- ---------
Notes to the Consolidated Financial Statements
1. REPORTING ENTITY
Virotec International plc (the "Company") is a company domiciled in England.
The address of the Company's registered office is Bioscience Centre,
International Centre for Life, Times Square, Newcastle, England. The
consolidated financial statements of the Company as at and for the period
ended 30 June 2007 comprise the Company and its subsidiaries (together
referred to as the "Group") and the Group's interest in associates. The
Group primarily is involved in the provision of environmental services.
On 25 August 2006, the Company became the holding company of Virotec
International Ltd. The former Virotec International Ltd shareholders were
issued new shares in the Company on a one-for-one basis under the terms of
the Scheme of Arrangement (the "Scheme") approved by Virotec International
Ltd shareholders. Immediately following the Scheme, the former shareholders
of Virotec International Ltd held the same economic interest in Virotec
International plc as they held in Virotec International Ltd immediately
prior to its implementation.
Accordingly, the acquisition of Virotec International Ltd via the Scheme has
been accounted for as a reverse acquisition under IFRS3 "Business
Combinations". For accounting purposes in a reverse acquisition, the
acquirer (Virotec International Ltd) is the entity whose equity interests
have been acquired and the issuing entity (Virotec International plc) is the
acquiree. The effect of this is that the financial statements of the
combined group represent a continuation of Virotec International Ltd's
financial statements.
Virotec International plc, together with is subsidiaries, is referred to as
the "Group". Consolidated financial information has been presented for the
Group for the six month periods ended 30 June 2007, 31 December 2006 and 30
June 2006.
2. BASIS OF PREPARATION
The interim consolidated financial statements for the six months ended 30
June 2007 have been prepared under applicable International Financial
Reporting Standards adopted by the European Union ("IFRS") which include
International Accounting Standards and interpretations issued by the
International Accounting Standards Board and its committees, which are
expected to be endorsed by the European Union.
This interim financial information has been prepared on the historical cost
basis, except for financial assets available for sale which are held at fair
value. The accounting policies applied are consistent with those adopted and
disclosed in the annual financial statements for the period ended 31
December 2006. The financial information for the comparative six months
ended 30 June 2006 was prepared under Australian Accounting Standards
(AASBs), IFRS form the basis of AASBs and no adjustment to the comparative
information has been necessary as no material differences have been
identified.
The financial information included in this document does not comprise
statutory accounts within the meaning of section 240 of the Companies act
1985. The comparative figures for the financial period ended 31 December
2006 are extracted from the statutory financial statements for that period
which have been filed with he Registrar of Companies and on which the
auditor gave an unqualified report, without any statement under section 237
(2) or (3) of the Companies Act 1985.
The financial information is unaudited and has not been reviewed by the
auditor.
3. SEGMENT REPORTING
Business segments
The Group operates within one business segment of environmental services -
the provision of solutions to industry for the treatment of contaminated
water and soil. Previously the Group has also operated in the business
segment of research and development into different applications, but has
stopped this work since June 2006 when all non-core technologies were sold
to the Greenhouse Fund Limited. All research and development work conducted
during the period relates to the core business of the Group, being the
provision of solutions for environmental problems.
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
operates in three principal geographical areas:
- Australia, Asia and the Middle East;
- Europe; and
- North 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, Asia North America Europe Consolidated
and Middle East
AUD$'000 AUD$'000 AUD$'000 AUD$'000
30 June 2007
Revenue 1,374 490 197 2,061
--------- -------- --------- --------
Segment assets 10,972 5,484 11,100 27,556
--------- -------- --------- --------
Capital Expenditure 133 332 30 495
--------- -------- --------- --------
30 June 2006
Revenue 12,327 15 197 12,539
--------- -------- --------- --------
Segment assets 29,634 3,601 1,756 34,991
--------- -------- --------- --------
CapitalExpenditure 255 1,630 18 1,903
--------- -------- --------- --------
31 December 2006
Revenue 890 127 553 1,570
--------- -------- --------- --------
Segment assets 19,913 6,418 1,998 28,329
--------- -------- --------- --------
Capital Expenditure 76 2,283 36 2,395
--------- -------- --------- --------
4. SHARE CAPITAL AND RESERVES
Issues Number of Nominal Merger Share Premium
Ordinary Shares Value Reserve Reserve
AUD$'000 AUD$'000 AUD$'000
Issued on incorporation 2 - - -
Shares issued to acquire Virotec
International Ltd 240,162,440 5,959 96,417 -
--------- ------- -------- --------
Balance at 31 December
2006 240,162,442 5,959 96,417 -
--------- ------- -------- --------
Shares issued under 17,350,000 415 - 4,569
a placing agreement at
12p per share
Shares issued under 6,655,789 161 - 3,798
executive incentive
agreements at
14p per share
Capital raising costs - - - (216)
--------- ------- -------- --------
Balance at 30
June 2007 264,168,231 6,535 96,417 8,151
--------- ------- -------- --------
Authorised issued and fully paid share capital
30 June 2007 30 June 2006 31 Dec 2006
AUD$'000 AUD$'000 AUD$'000
Authorised share capital
900,000,000 ordinary shares of 1p each 22,332 22,332 22,332
---------- --------- ---------
Called up, allotted and fully paid 264,168,231 6,535 - 5,959
ordinary shares of 1p each ---------- --------- ---------
As at 30 June 2007 the Company has also granted a total of 16,480,000 options.
(30 June 2006: 11,460,000 options).
Share Merger Share Trans- Fair Share Retained Total Minority Total
capital reserve premium lation value based earnings interest equity
reserve reservereservepayments
reserve
AUD AUD AUD AUD AUD AUD AUD AUD AUD AUD
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Effect of - 102,376 - 155 - 7,595 (77,149) 32,977 47 33,024
reverse
acquisition
Prior period - - - - - 2,176 (2,176)* - - -
adjustment
Total - - -(420)(1,298) - (7,565)(9,283)(47)(9,330)
recognised **
income and
expense -
Equity settled - - - - - 1,319 - 1,319 - 1,319
transactions
Share issues 5,959 (5,959) - - - - - - - -
-----------------------------------------------------------------
Balance at 31 5,959 96,417 - (265)(1,298) 11,090 (86,890) 25,013 - 25,013
December
2006
Total - - -(1,014)(885) - (6,014)(7,913) - (7,913)
recognised
income and
expense
Equity settled - - - - - 1,426 - 1,426 - 1,426
transactions
Share issues 576 - 8,367 - - (4,129) 170 4,984 - 4,984
Capital - - (216) - - - - (216) - (216)
raising
costs ------------------------------------------------------------------
Balance at 30 6,535 96,417 8,151(1,279)(2,183) 8,387 (92,734)23,294 - 23,294
June 2007
------------------------------------------------------------------
* Previous year adjustment relating to an IFRS conversion error.
** Minority interest no longer recognised as related entity has moved
into net liabilities.
5. EARNINGS PER SHARE
Profit attributable to ordinary shareholders
Six Months Six Months Six Months
ended ended ended
June 2007 30 June 2006 31 Dec 2006
AUD$'000 AUD$'000 AUD$'000
Loss for the period (6,014) 2,783 (7,565)
---------- ---------- ----------
Loss attributable to ordinary (6,014) 3,056 (7,565)
shareholders ---------- ---------- ----------
Weighted average number of ordinary shares
Number Number Number
Weighted average number of ordinary 250,312,825 240,162,442 240,162,442
shares used in the calculation of
basic earnings per share ---------- ---------- ----------
The options noted above are potential ordinary shares which were not
considered dilutive at 30 June 2007, 31 December 2006 or 30 June 2006.
VIROTEC INTERNATIONAL PLC
Company No. 5796515
Bioscience Centre
International Centre for Life
Times Square
Newcastle upon Tyne, NE1 4EP
England
www.virotec.com
This information is provided by RNS
The company news service from the London Stock Exchange
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