Eco Investor Update
A Weekly News Update for Environmental Investors
2013 - No 118
On a normalized basis, net profit was up 29 per cent to $98 million, earnings (EBITDA) were up 20 per cent to $324 million, and operating cash flow per security increased 21 per cent to 29.8 cents.
The half year distribution is stable at 17 cents per security. The distribution payout ratio is 66.2 per cent of the normalized operating cash flow compared to 69.2 per cent in the previous corresponding half.
The statutory profit included significant items with a net positive impact of $113.7 million, such as payment of fees made by HDF, costs of the HDF acquisition, a gain on APAs previously held securities in HDF, and the reversal of some of the costs for the sale of the Allgas business in 2011.
The normalized earnings (EBITDA) included $31.6 million from HDFs Epic Energy pipeline assets from 9 October 2012, additional earnings from the Roma Brisbane Pipeline expansion, and increased investment performance, particularly from Envestra.
Managing director Mick McCormack said that the results were in line with expectations and the solid result reflects ongoing growth and earnings stability.
With increasing demand for gas transportation and storage services, APA continues to pursue attractive opportunities to invest in pipelines and related infrastructure. During the half year our growth capital expenditure of $178 million included pipeline capacity and storage expansion projects in Queensland, New South Wales, Victoria and Western Australia, as well as three months of growth capital expenditure by Epic Energy, he said.
For investors in APA, growth opportunities unlocked by APAs ownership of HDFs Epic Energy assets will come to fruition over coming years, particularly with a number of long term revenue contracts commencing within the next few years. (ASX: APA)
Sims Metal Management
The main difference between the statutory and underlying results was due to a previously announced goodwill impairment of $291 million, other intangible asset impairments, and $17 million of inventory adjustments in the UK.
Chairman Geoff Brunsdon acknowledged the enormous contributions of Mr Dienst during his nine years as chief executive officer, including the integration of Metal Management and Hugo Neu, major improvements to the safe working environment of its 6,600 employees, and the establishment of a beachhead in the Chinese market.
As well as considering internal candidates, the board will also commence a global search for a new CEO.
Sims half year revenue was $3.4 billion, a 25 per cent decline, due mainly to reductions of intake and shipments in North America.
During the half, Sims completed its on market buy back, purchasing 0.9 million shares to bring the total number of shares repurchased to 3.9 million shares for $47 million.
As there was no net profit after tax, Sims will not pay an interim dividend. Its dividend policy is to pay 45 to 55 per cent of net profit after tax.
Mr Dienst said While we are beginning to see improving economic fundamentals in our key scrap generating market in the United States, the translation into stronger scrap volumes remains currently challenged as scrap generation typically lags the fundamentals. Subdued scrap generation, particularly within the consumer segment, negatively impacted sales and margins in the first half, which was compounded by weaker commodity prices and periods of tepid ferrous scrap demand. These conditions led to first half earnings which masks the significant accomplishments made on lowering controllable costs and from optimizing our portfolio of assets.
The company grew its Australian metals business, its strongest returning business, with expansions in Western Australia and a recent acquisition in South Australia.
Mr Dienst said We have now endured over four years of volatility and extremely challenging times in our markets. We believe closing the books on the first half of Fiscal 2013 is also a potential closing of the doors on this difficult chapter.
He said the business is on track to reduce its fixed cost base by over $100 million annually before additional savings in its Global SRS e-recycling business.
The day after Sims CEO and half year announcements its shares jumped from $10.65 to over $11.40. (ASX: SGM)
The company said it had a solid first half, with profit after tax reaching of $59.1 million. This was helped by increased revenue from annual tariff adjustments across the gas networks and higher gas volumes due to cooler weather in winter and spring compared to 2011.
The volume of gas delivered was 61.2 petajoules, up from 60.8 PJ in the prior corresponding period. The volume of gas to domestic and small industrial and commercial consumers was up 10 per cent to 30 PJ.
The interim dividend is 3 cents per share, up three per cent.
A reduction in finance costs was due to lower interest rates on unhedged borrowings and lower costs on the company's Capital Indexed Bonds as inflation in the period was lower.
Total operating expenses increased by $6.1 million to $75.8 million, of which $4.5 million was due to the carbon price. The permits are expected to be acquired in June 2013 and January 2014, and their cost is being recovered through haulage revenue.
Another 13,000 consumers were connected to the distribution networks in the six months, who will add about $4 million per year to revenue. (ASX: ENV)
Revenue was down 8 per cent to $289.8 million, the trading profit after tax was down 23 per cent to $20.9 million, and the fully franked interim dividend fell from 9.5 to 6 cents per share on a payout ratio of 87 per cent.
Net profit from continuing operations at $15.7 million fell from $19.9 million due to lower trading performance and was offset by lower tax and restructuring costs.
The result included $6 million of revenue from the acquisition in October of API, plus costs from the restructure announced in December.
Managing director Peter Crowley said The half year has been successful in terms of integrating API and commencing the significant restructuring of the GWA Group. The benefits of this restructuring are expected to improve EBIT this year by $4 million, with further improvement in the next financial year.
Sales by the Bathrooms & Kitchens segment and the Door & Access Systems segment both fell by 5 per cent; while sales by the Heating & Cooling segment, which comprises Dux Hot Water and Brivis Climate Systems, fell 16 per cent due to lower demand for environmental water heating products and a slow summer season for evaporative coolers.
GWA is combining Dux Hot Water
with the GWA Bathrooms & Kitchens business and combining Gliderol
with the Gainsborough business. Restructuring in the half year reduced
the workforce by 12.5 per cent excluding API. Another 2.5 per cent reduction
is expected this half.
GWA products are typically sold as dwellings near completion. Because of the lag between dwelling approvals, commencements and completions, I do not expect any sustained recovery in sales activity until the last quarter and I expect sales for the second half year to be flat on the first half year. (ASX: GWA)
In the December half, revenue rose 20 per cent to $10.3 million, and net profit rose marginally to $1.79 million from $1.74 million in the 2011 half year.
Basic earnings per share were 7.15 cents and the fully franked interim dividend is 3.55 cents per share, a payout ratio of 50 per cent of statutory net profit.
Recent acquisition Ward Consulting Services contributed revenue of $0.8 million. There was a 7 per cent increase in revenue from the Australian Energy Exchange (AEX) platform, and a 13 per cent increase in revenue from the Activ8 monitoring product. The Activ8+ sustainability service generated $0.6 million in revenue a 27 per cent increase.
The company said it ran a record number of auctions on the AEX platform with 1,426 auction scenarios. This resulted in 3.7 million megawatt hours being contracted during the half year, or $380 million of energy contracts procured by Energy Action on behalf of corporate customers. The number of AEX sites under contract has risen from 8,100 at 30 June to over 9,000.
The average length of Activ8 contract periods increased from 50 months to 53 months which resulted in a 5 per cent increase in the average Activ8 contract price. The number of contracted Activ8 sites grew to over 7,500.
Ms Duncan said Energy Action continues to perform strongly and grow at an impressive rate. The number of auctions being run on our AEX platform remains at record levels.
We continue to develop new products and services, and we are particularly pleased with the performance of our Activ8+ sustainability product which has grown at a rapid rate in the past six months with a record 60 projects currently on hand. We have a strong pipeline of new business in sustainability, and we expect this sector to continue to be a source of revenue growth. Cross selling our suite of products also provides significant upside potential.
Energy Action has cash of $6.2 million and no debt. Forward contracts sold rose 13 per cent to $74 million. The company expects to deliver double digit revenue and operating net profit after tax growth for 2012-13.
Citigroup Global Markets Australia has become a substantial shareholder with 5.1 per cent. (ASX: EAX)
From July, ERM Powers electricity sales business, ERM Business Energy, will supply electricity and green power for three years to all NSW Government agencies, community non profit organizations, and public bodies like schools, hospitals and councils that consume less than 160 megawatt hours (MWh) per year each.
Managing director and chief executive, Philip St Baker, said that in five years ERM Power has organically grown into what he expects will be the fourth largest electricity retailer in the National Electricity Market.
ERM Power announced a statutory net profit after tax for the December half of $26.4 million. The result in the December 2011 half was $51.2 million including a one off gain of $19.1 million from a discount on acquisition.
Revenue was $715.9 million, up 62 per cent. It was higher than the 41 per cent increase in sales growth as significant increases in network tariffs were passed directly onto customers with no margin, plus the introduction of the carbon tax.
Mr St Baker said the electricity sales business had record sales volumes, the generation business performed reliability, and the gas business expanded to the east coast.
The fully franked interim dividend is 5 cents per share, up 25 per cent. (ASX: EPW)
Net debt was $9.9 million and its gearing ratio was 12 per cent.
The half year dividend was increased 8 per cent from 1.2 to 1.3 cents per share fully franked. (ASX: GAP)
As usual, there is no half year dividend.
Managing director, Dan Daniels, said he is pleased with the significant growth in revenue from the roll out of the new clinical waste collection system, Clinismart, and a revenue lift in the reusable sharps collectors and total waste management sales streams.
These services have increased the companys margin and helped to insulate it from ongoing regional competitive pressures in the clinical waste markets.
SteriHealth continues to penetrate new markets and focus on the development of its customer offering to ensure that it maintains its reputation for innovation and safety, he said. Clinismart possesses the highest standard of cleanliness in the industry and reduces pathogen transfer potential while enhancing clinical environment hygiene and logistics efficiency. The customers support for this new service is evidenced by the increased revenue earned during the December half and reflects the industrys desire and need for such offerings. (ASX: STP)
Broker Ord Minnett has changed its call on Tassal from hold to accumulate based on three positives in its half year results: strong operating cash flows and it ex capex status, volume growth from greater traction with its marketing campaign than Ord expected, and Ords forecast that Tassals margin will continue to increase. (ASX: TGR)
Unlisted Property Funds
Aspen Parks Property Fund
The Portfolio Overview is on the Aspen Parks Property Fund web site at http://www.aspenfunds.com.au/funds/aspen parks property fund
Transpacific Industries Group
However, the directors said this includes items that should be excluded to give a result more aligned with ongoing operations. Excluding these items, the underlying profit after tax was $35.8 million, an increase of 42 per cent over the previous corresponding period.
The underlying results show group revenue up 3.8 per cent to $1.16 billion, and underlying group earnings (EBITDA) down 3.6 per cent to $211 million.
Earnings per share increased 1.6 per cent to 2.3 cents. There is no interim dividend.
Gross debt was reduced by $61 million since 30 June.
The company said it progressed its divestment program and sold two businesses and two surplus properties in the half year for total cash of $10 million. Since 31 December it has exchanged unconditional contracts for the sale of the Australian and New Zealand Metals manufacturing businesses and the sale of several surplus properties totaling $15 million.
A review of the organizational structure has led to the retrenchment of around 200 employees, saving $15 million per annum, with $3 million expected to be realized in the second half before $7 million in restructuring charges.
Total cost savings of $10 million in the second half and $15 million for the full year are expected. (ASX: TPI)
Production increased 4 per cent to 2,161 GWh and revenue increased 6 per cent to $134.2 million.
Borrowings fell 3 per cent to $1,039 million, but net borrowing costs were up 11 per cent to $41.3 million. Infigen said it is on track to repay around $55 million of the Global Facility borrowings in 2012-13.
Broker Ord Minnett said the securities are trading around the value of Woodlawn and cash that is outside the global debt facility. "On this basis, the US [wind portfolio] remains a low-cost option. Our recommendation remains Hold," it said. (ASX: IFN)
The improved results were driven by full period contributions from new assets including enGen with its 98 MW, 28MW of brownfield expansion in the US LFG business, improved pricing in the Australian Clean Energy portfolio with green earnings from new regulatory initiatives from 1 July 2012, and operational and cost efficiencies.
Managing director Greg Pritchard added The result confirms that Energy Developments has delivered sustainable growth over the last 12 months after three years of intensive business and portfolio restructuring and expansion, resulting in diversified earnings streams from clean energy and remote area power generation.
During the period the company commissioned the 17 MW Hill 50 and 60 power project in WA, and the 13 MW German Creek waste coal mine gas power project in Qld. It is currently developing 58 MW of new generation capacity - the 53 MW McArthur River power project expansion and a 5 MW greenfield expansion in the US.
As part of its on market buy back, at 31 December the company had bought back 2,955,696 shares for $9 million. It has increased the buy back program by $5 million.
Mr Pritchard said that the company is well positioned for growth, underpinned by successful completion of projects, ongoing efficiency initiatives and expected earnings from new projects. (ASX: ENE)
Revenue from continuing operations was $32 million, and net profit from continuing operations was $1.2 million. $0.7 million of losses from discontinued operations included the closure and impairment of goodwill of MC2 and litigation costs for the settlement of TRH historical claims.
The company said it achieved $2.8 million in cash flow from operations and maintained growth in its net cash position year on year. Borrowing cost fell by more than half and cash at 31 December was $1.4 million.
A dividend has been defered to later in the year.
A mismatch between resource availability and work flow was largely due to the weak economic activity late in the December quarter, the slump in business confidence and the inconsistency in economic activity between sectors in the economy, it said. This resulted in pockets of well used staff and pockets of poorly used staff, most significantly in WA.
The environmental sector was affected by the deferral of exploration and development projects in the mining sector and the completion of pre GFC projects that were not replaced with new and equivalent projects.
The company said its new consolidated regional structure will reinforce its Greencap brand among its client base of 5,000.
Early results of its new service delivery model include: the Lend Lease Barangaroo hazardous materials monitoring project in NSW; national emergency services training from GE, national banks, and federal government departments; and the major environmental study for a resources company in Indonesia. (ASX: GCG)
Unlisted Investment Companies
Ceramic Fuel Cells
Chief executive, Bob Kennett, said Solar Spirit is a strong and well established operator in Belgium and will strengthen access to the Belgian market for environmentally friendly energy solutions. It has an excellent distribution network and 15 years of distribution experience.
After the latest cuts of solar subsidies in Belgium, publicly guaranteed certificates for power from micro power plants became more important. Since the compensation is tied to the produced power volume, CFCLs BlueGen units suit this promising segment.
Bjorn van Haver, chief executive of Solar Spirit, said We are confident about installing numerous BlueGens in Belgium this year and generating an attractive order volume going forward.
The Belgian market is known for its high environmental awareness and its great interest in innovative solutions for clean energy. Solar Spirit develops new models and product combinations that allow customers to independently generate power. Last year, CFCL and Solar Spirit installed the first BlueGen units with customers and received positive feedback. (ASX: CFU)
Micro Cap Companies
Australian Renewable Fuels
The company sold over 25 million litres of biodiesel over the half year plus by products, mainly glycerine. Revenue from operations more than doubled from $13.7 million to $29.2 million. The company said it had $28.5 million in sales from the Barnawartha plant. Sales were low from Largs Bay as the plant was recommissioned in November, and management is working to improve the sales pipeline from the Picton plant.
As part of the recent placement, Thorney Holdings Pty Ltd, which is related to TIGA Trading Pty Ltd, increased its interest in Australian Renewable Fuels to 19.9 per cent. (ASX: ARW)
The meeting will be held on 12 April. The board said it does not support either resolution. (ASX: CBP)
Clean Seas Tuna
The company said operations improved significantly with the loss from underlying operations falling to $4.3 million compared to an underlying loss of $7 million for the same period last year.
The company is planning to expand Yellowtail Kingfish production. Directors said the resolution of the feed-related Kingfish health problems and the return to normal Kingfish growth and improved survival provide confidence that the Kingfish grow-out business can grow profitably into the future.
Clean Seas is confident it can build a fish production company centred on Kingfish production.
The company has cash of $4.3 million. (ASX: CSS)
Chairman Gregory Melgaard said the company continues its quest to enhance and commercialize its patented EMEW electrowinning process that can recover high purity metal from low concentration, polymetallic and contaminated solutions.
This year we have been focusing attention on building our Customer Care packages which are intended to improve our customers ability to benefit from EMEW, he said. This strategy also has the advantage of boosting recurring revenues, which should over time reduce our vulnerability to uncertain large projects.
Although sales revenue rose 67 per cent, he said this was disappointing and significantly less than in earlier years.
Perhaps even more important for a company in Electrometals' position is that our cash position is only $0.3 million worse than a year ago, although this is largely due to some significant prepayments on projects.
Last year, I expressed the hope that I would be in a position to give a more optimistic review this year. Although Electrometals is still loss making, I believe we have made a number of improvements throughout the year. I remain hopeful that this trend will continue, said Mr Melgaard. (ASX: EMM)
The company said that while it now has 19 embedded utility management networks returning income, this is insufficient to deliver a satisfactory return to shareholders or enable it to break even.
To break even it needs more sites to go live, and needs more capital for this strategy.
The placement will be to sophisticated investors and a rights issue will follow.
Intermoco has received strong support from the Copulos Group including an extension of the repayment of the existing convertible note of $410,000 to March 2013, and another $250,000 under the same terms as that convertible note. It will also support the rights issue by at least $500,000.
The amount of the placement has not been finalized, but Intermoco expects the total amount under the new convertible note, placement and rights issue will be around $1.5 million. (ASX: INT)
Phoslock Water Solutions
Dart is now assessing the implications of the proposed regulatory changes and how it affects its projects.
The announcement by the NSW Government highlights the strength of Darts diverse portfolio of international projects, it said, this portfolio approach has reduced Darts exposure to individual country risk and its NSW assets form only one component of the companys portfolio.
Darts assets in NSW that could be affected are around Sydney, Newcastle, Hunter Valley, Lithgow and near Gunnedah.
Chairman Nick Davies said We will review the detail of the proposed regulatory changes to fully understand the implications for our NSW assets. With many of the States long term gas supply contracts due to expire from next year, the NSW Governments decision will complicate efforts to safely source local natural gas for industry and its one million domestic gas users. Clearly, increased regulation in NSW will result in the export of capital interstate and offshore to countries that work more constructively with industry.
The company will update the market when the full implications of the NSW decision are clear.
Dart Energy said it has received inquiries from a number of parties interested in securing a strategic partnership with subsidiary, Dart Energy International, farming in to a number of DEIs assets or participation DEIs upcoming IPO. The main interest is in DEIs coal bed methane and shale gas assets in the UK. Discussions with several of these parties have been initiated and in several cases due diligence has commenced.
The move follows Darts announcement last November that an industry participant with oil and gas interests in Asia has proposed a broad strategic relationship with Dart Energy International, which Dart intends to soon spin out in an IPO on the AIM market of the London Stock Exchange.
Raymond Lim, currently a director of both Dart Energy and IPO spinoff Dart Energy International, will resign from the Dart Energy board to focus on the IPO. (ASX: DTE)
Micro Cap Companies
The offer is underwritten by Patersons Securities Ltd and Wilson HTM Corporate Finance Ltd. The entitlement is 3.5 new shares for every 1 held.
The proceeds will be used to complete the WMRC DiCOM Expansion Project in Perth, and for working capital.
AnaeCo will pick up another $4.9 million via a Research & Development Tax Incentive Refund of $4.9 million. AnaeCos claim is based on its expenditure developing the DiCOM System, which in 2011-12 was $10.9 million. AnaeCo expects to make another claim for 2012-13.
Managing director and chief executive, Patrick Kedemos, said We are very grateful to be able to participate in this scheme which supports innovation in Australian industry. Technology development is a long and sometimes arduous journey, and one of the main challenges is to fund the development budget before revenue from commercialized operations kicks in. This R&D tax funding is very useful as we undertake full operational scale commissioning of the DiCOM System on the Western Metropolitan Regional Council (WMRC) project.
DiCOM is a disruptive, cutting edge technology and its demonstration at the WMRC project is a world first for hybrid aerobic anaerobic biological processing of municipal solid waste.
The extent of technical innovation is evident in the patent registration we have achieved, with nine new International PCT Applications filed in the last year, on top of the two core granted patent families. Successful commissioning of the DiCOM System at the WMRC project will be a game changer for AnaeCo in our commercialization strategy. I again congratulate our technical team whose efforts and contribution over 14 years is about to bear fruit. (ASX: ANQ)
MTI said the new, transparent solar cells can be produced from inexpensive, abundant, non-toxic and non corrosive materials and be scaled to any volume. They can be printed directly onto glass in a range of colours, making them ideal for use in glazing panels and facades.
This latest investment round will allow OPV to build its technical and commercial teams and construct product development and test facilities at the Begbroke Science Park near Oxford.
The financing was led by MTI through its UMIP Premier Fund alongside investment from the University of Oxford and private investors.
Chief executive of OPV, Kevin Arthur, said Our company is making huge strides in the scale up and commercialization of this technology, our new product development facility at Begbroke will incorporate state of the art printing techniques to enable us to manufacture larger modules and begin the technology transfer of our new, high efficiency MSSC technology.
In addition, our new test and qualification facility will fast track our program to deliver modules that meet internationally accepted standards and specifications for photovoltaic products.
David Ward, managing partner and head of cleantech investing at MTI, said he was delighted with the technical and commercial progress of the business since MTI supported OPVs spin out in 2011.
Last year Oxford Photovoltaics was among the 16 Best of British Cleantech start ups that went to Silicon Valley on an entrepreneurial trade mission. (ASX: DYE)
MEARS shareholders have approved the merger. The meeting of K2 shareholders will now be held on 20 March.
Fosters Stockbroking Pty Ltd, the lead manager and bookrunner for the placement, will conduct investor presentations commencing 25 February. (ASX: KTE)
Metgasco said the details are not yet clear but they could have a significant impact on its Northern Rivers coal seam gas operations.
Metgasco said it understands there is a one month consultation process before the changes are finalized, and it has requested an urgent meeting with the NSW Government to better understand the changes and express its concern about the potential impact on Metgasco and NSWs natural gas supply and business environment. (ASX: MEL)
The capital raising is via a placement and rights issue.
The placement to sophisticated investors will raise $225,000 at 0.15 cents per share. The pro rata renounceable rights issue will raise $1.2 million, also at 0.15 cents per share. The share placement facility with Deer Valley Management LLC will be terminated.
Sophisticated investors in the placement also receive unlisted options on a one for one basis with a strike price of 0.15 cents and expiring three years after their issue. The options are subject to shareholder approval.
It is proposed that the rights issue will be fully underwritten by Pacific Energy International Pty Ltd, an Australian company focused on the commercialization of renewable and emerging energy technologies. Participating shareholders also receive one free option for every three new shares, exercisable at 0.3 cents and with a three year exercise period.
The underwriter will receive 6 per cent of the funds raised, and 200 million listed options on the same terms as rights issue participants.
The new equity will be used for the development of the company's geothermal projects in Indonesia, the identification of new and complimentary projects, and working capital.
Mr Lekkas will be chairman. He has experience in a business and corporate advisory transactions, and has recently focused on the restructure and recapitalization of ASX listed companies in the resources sector.
Mr Wildy has worked for over 30 years in various industries including banking and media, and has been involved in public and private sector transactions in the property, mining and resource sectors, including capital generation.
Mr Clarke has over 18 years of experience in the IT industry, has worked in public and private enterprises, and has experience in the development and management of enterprises and complex systems at senior levels. (ASX: PAX)
Eco Investor Update
Search Eco Investor