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Active Energy Group - Interim Results for Six Months Ended 30 June 2020

RNS Number : 3575A
Active Energy Group PLC
29 September 2020
 

29 September 2020

Active Energy Group Plc

('Active Energy', 'AEG', the 'Company' or the 'Group')

 Interim Results for the Six Months Ended 30 June 2020

Active Energy, the international biomass based renewable energy business, is pleased to announce its interim results for the six months ended 30 June 2020.

Highlights:

·    Lumber operations continued at Lumberton, North Carolina ("Lumberton" or the "Lumberton Site") throughout the period in spite of the COVID-19 operating conditions.

·    Lumber operations increased substantially following the completion of the acquisition of the joint venture interest in Renewable Energy Systems, LLC ("RES") from Renewable Logistics Systems LLC ("RLS") announced on 31 March 2020. All lumber activities at Lumberton are now wholly controlled and operated by Active Energy Renewable Power ("AERP"), a wholly owned subsidiary of the Company.

·    Revenues of US$499,893 for H1 2020 (H1 2019: US$99,830), reflecting the increasing lumber operational activity.

·   Completion of a fund raising of £800,000 (gross) through the issuance of Convertible Loan Notes ("CLN") with the proceeds immediately deployed to accelerate the development of lumber production volumes.

·    Strengthening of operational and industry expertise with the appointments of Max Aitken and Jason Zimmerman as independent Non-Executive Directors in January 2020.

 

Activities post the end of the Period:

·    In August 2020, the grant of the Construction and Air Permit (the "Permit") by the North Carolina Division of Air Quality which allows the Company to complete the construction of its existing CoalSwitch™ plant, thereby enabling its operation to produce CoalSwitch™ pellets at Lumberton.

·    Expansion of lumber operations and sales at Lumberton through increased container shipping capacity for saw log export to international customers and the commencement of a second sawmill shift following the Labour Day weekend.

·    Appointment of an industry qualified engineering firm as the EPC for the CoalSwitch™ plant at Lumberton, this role includes project specific engineering and the commencement of site specific detailed engineering.

·   Announced an equity fundraise of £1.51m (before expenses) with new and existing shareholders and stakeholders which completed in early September 2020, following shareholder approval at a General Meeting.

·    Awarded London Stock Exchange's Green Economy Mark reflecting AEG's environmental credentials.  

·    Inclusion of AERP in the Advanced Biofuel Fuel Payment Program operated by the US Department of Agriculture and registration of AERP to the System for Award Management (SAM) database of entities entitled to work with the Federal Government.

·    Additional award of a patent in regard to the CoalSwitch™ process by the US Patent office.

·    The Company has also received several licensing enquiries from potential international partners in respect of additional CoalSwitch™ plants since the award of the Permit.

 

Outlook:

·    AEG has significantly improved its operating and financial position since the beginning of the financial year in spite of the challenging environment. The goal of generating increasing revenues from the wood processing and saw log export businesses is now being achieved. AEG continues to accommodate demand from its customers for its current activities at Lumberton.  

·    The delay in respect of the award of the Permit, primarily owing to the impact of COVID-19, has meant consequent time delays to the CoalSwitch™ development programme but the Company is acting as quickly as possible to overcome these challenges and limit the effect of the delay.

·    The award of the Permit has meant that the Company has been given the operational parameters for the operation of a CoalSwitch™ plant at Lumberton and the Company is now focussed on achieving commencement of commercial operations as soon as possible.

 

Michael Rowan, CEO of Active Energy, said:

 

"The period under review has seen AEG build the platform to deliver on its two key strategic objectives, becoming a producer of next generation biomass fuels and establish a complementary, profitable lumber operation at the Lumberton Site. The Board is pleased with the progress AEG has made in recent months, particularly against the backdrop of COVID-19, in ramping up production at Lumberton and, whilst the pandemic has resulted in delays to the development of the CoalSwitchTM reference plant, we are confident the commencement of commercial operations can be achieved in the short term. I look forward to updating all stakeholders on the timeline and delivery of the plant as our business focusses on the biomass-to-energy market."

 

Enquiries:

 

Website

LinkedIn

 

www.aegplc.com

www.linkedin.com/company/activeenergy

 

 

 

Enquiries

Active Energy Group Plc

Michael Rowan

Chief Executive Officer

Antonio Esposito

Chief Operations Officer

 

SP Angel Corporate Finance LLP

 

David Hignell / Caroline Rowe

Office: +44 (0)20 3470 0470

Allenby Capital Limited

Amrit Nahal/Nick Naylor

Office: +44 (0)20 3328 5656

Camarco

Gordon Poole / Tom Huddart / Emily Hall

[email protected]

Office: +44 (0) 20 3757 4980

 

 About Active Energy Group:

Active Energy Group plc is a London listed (AIM: AEG) renewable energy company that is focussed on becoming a biomass supply chain provider using its proprietary technology which transforms low-cost biomass material into next generation biomass fuels.  Its patented product CoalSwitch™ is a leading next generation biomass fuel that can be used to replace either coal in existing coal-fired power stations without requiring plant modification or in existing biomass power facilities. Active Energy Group's immediate strategic focus is the production and commercialisation of CoalSwitch™ utilising other residual wood waste materials.

 

 

Chief Executive Officer's Statement

Introduction

In the first half of this financial year, Active Energy has developed Lumberton as its core operational and strategic focus.  The goal has been two fold, namely (1) to become a producer of next generation biomass fuels, utilising technologies including AEG's proprietary fuel, CoalSwitch™, with a focus on the use of low cost and residual biomass materials that create higher value, energy efficient, carbon neutral fuels and (2) to complement these activities, establish a profitable lumber operation base at Lumberton, which produces a range of lumber products for both local and international markets. It is expected that these customers may, in the medium term, become significant customers for Active Energy's biomass fuel products.  

Lumberton - creation of a strategic hub for lumber activities

AEG's acquisition of 100% ownership interest of the former joint venture operation focused on lumber activities at Lumberton, from RLS in March 2020, has resulted in a significant uplift in the Company's day-to-day operations and activities. Lumberton operations have not been curtailed during the COVID-19 pandemic as the lumber activities were exempted under the relevant North Carolina COVID-19 ordinances.

Accordingly, production volumes at the sawmill have continued to increase month-on-month throughout the year and Active Energy has been able to continue to source additional supplies of feedstock from the North Carolina locality. Lumber production currently focuses on the production of rail ties, lumber and woodchip for sale to US based customers and saw log export to international customers.  The residual waste product from each of the activities are being stored at Lumberton for future use as a waste feedstock for CoalSwitch™ production.

AEG is focused on increasing the scale of these lumber activities at Lumberton and announced in Q2 2020 an intention to move to a second production shift. After Labour Day weekend earlier this month, this second shift commenced. AEG is now focussed on further increasing the lumber revenues and plans to increase production levels to initial targets, including the delivery of up to 100 containers per month and the delivery of circa 1,500 rail ties per week. This should result in monthly revenues in excess of US$400,000 per month.  AEG is aiming for the Lumberton Site itself to operate at breakeven from lumber operations before the end of 2020.

The Company is currently shipping saw log export through ports near Lumberton, namely the Port of Wilmington, North Carolina and Intermodal Container Port of Dillon, South Carolina. Customers are mainly from South East Asia at this time and the Company is actively working with a number of new customers both for saw log export and other lumber products. 

CoalSwitchTM Technology - Issuance of Construction and Air Permit for the Lumberton Site

In August 2020, the Company was granted the Permit by the NC Division of Air Quality ("DAQ") for the Company's 5tph CoalSwitch™ reference plant (the "Plant") at Lumberton. As shareholders are aware, receipt of the Permit had been anticipated by the Company and its advisers earlier in 2020 but COVID-19 resulted in changes to both the approval and consultative processes. The Company remains grateful to the DAQ and our partners at Robeson County for their support through these challenging conditions to ensure the grant of the Permit as soon as practicable.

Nonetheless, this is an important milestone for the Company given that no such permits had ever been awarded previously. With the award of the Permit, AEG is now entitled to complete the engineering process on the original equipment included in the Plant and finalise the operational planning in accordance with the terms of the Permit.  AEG has already commenced this exercise, including relevant engineering analysis, but given the current COVID-19 operating conditions, AEG cannot outline a definitive timetable at this time and currently expects that it is most likely that the Plant will commence operations during the first half of 2021.

At the same time, AEG has continued to protect and develop its intellectual property rights portfolio on its and related black pellet technology production processes. Earlier this month, AEG was issued with a further Notice of Allowance from the United States Patent and Trademark Office in relation to AEG's CoalSwitchTM technology. AEG has pending patents for this technology in Europe, Canada, Malaysia, Thailand and with the International Patent System in Geneva, Switzerland. In addition, AEG has the rights to and controls a number of further patents issued by the United States Patent and Trademark Office, which were acquired when AEG initially became involved in the CoalSwitchTM technology. Finally, AEG has filed a US trademark for its CoalSwitchTM product with the United States Patent and Trademark Office and corollary rights for Canada. The final stage of this process will be to complete a statement of use application, which AEG intends to file once it has commenced commercial production of CoalSwitchTM.

In November 2019, AEG granted the first CoalSwitchTM licence to RMDE for its forthcoming projects in Alberta and British Columbia, Canada. During 2020, AEG and RMDE have been working together to commercialise the opportunity in Alberta. In the last nine months, RMDE has made significant progress both in terms of plant and engineering design for a 50 tph facility in Alberta and in obtaining the requisite financial support from partners. RMDE is also working on additional projects in Canada which could further accelerate additional licensing opportunities for AEG.

AEG has also continued to assess additional licensing opportunities for CoalSwitchTM technology and process both elsewhere in North America and internationally. AEG is currently working with a number of international prospective partners who wish to establish CoalSwitch™ production facilities in various territories.

Existing Business Operations: Newfoundland and Labrador  

During the first half of 2020, the Company has re-examined the business opportunities from its existing assets in Newfoundland, Canada. This year, Active Energy has had on-going conversations with the Ministry of Forestry and Fisheries in regard to AEG's existing timber permits and appointed new advisers to move the business opportunity forward. AEG believes that its recent experience in North Carolina will provide an important platform for a revised business opportunity in Newfoundland and AEG hopes for further developments in the coming months.

Financial Review

The overall loss for the six months ended 30 June 2020 was US$593,914 (H1 2019: US$1,830,027 loss). The key components are as follows:

·   Revenue generated from the lumber operations was US$499,893 (H1 2019: US$99,830, which related solely to engineering consultancy services).

·    Cost of sales were US$142,058 (H1 2019: US$Nil) and as a result gross profit was US$357,835 (H1 2019: US$99,830).

·    Administration costs were US$1,080,087 for the first six months of 2020 (H1 2019: US$1,642,416). The year on year reduction reflects the loss on disposal of certain items of plant and equipment during the first half of 2019.

·    Finance costs were a credit of US$111,844 (H1 2019: US$290,387) as foreign exchange gains and interest capitalised to tangible and intangible fixed assets, exceeded the interest costs of servicing of the Group's Convertible Loan Notes.

·    Income tax credit on continuing operations was US$16,494 (H1 2019 US$2,946).

In addition, on 31 March 2020, AEG announced that it had entered into an agreement with its joint venture partner RLS, whereby AEG acquired RLS's joint venture interest in RES and thereby secured 100% equity control and ownership of the sawmill and saw log export activities based at Lumberton. As a result, all assets previously associated with AEG's joint venture, including plant and equipment, inventory and goodwill (including customer contracts) were transferred to AERP, a wholly owned subsidiary of the Company which wholly controls and operated the sawmill and saw log export activities at the Lumberton Site. As consideration, AEG paid RLS US$350,000 for the outstanding equity interest in RES, which was satisfied by the issuance to RLS of 64,863,412 new ordinary shares of 1p in AEG.

The operational losses, offset by issue of shares combined with the equity element of newly issued Convertible Loan Notes (see below), meant the Group's unaudited net assets fell to US$207,970 at 30 June 2020 (31 December 2019: US$371,859).

 

Capital Market Activities

On 22 June 2020, the Company announced that it had raised £0.8 million (before expenses) through the issue of additional convertible loan notes ('CLNs') to new and existing investors on the same existing terms. These monies, which are being applied to the development of AEG's wood processing and export activities and working capital requirements, were received in July 2020.

After the period end, on 22 August 2020, AEG announced that it had raised approximately £1.510 million (before expenses) by way of a placing of 251,666,680 new ordinary shares of 0.01p each in the Company at a price of 0.6 pence per Ordinary Share to new and existing institutional investors. This placing was conditional on, inter alia, shareholder approval of a share capital reorganisation which was obtained at a General Meeting held on 7 September 2020.  The net proceeds, which are to be applied to progress construction of the 5tph CoalSwitchTM reference plant and to provide additional general working capital, were received shortly thereafter.

On 7 September 2020, the Company also effected the share reorganisation, under which shareholders received one new ordinary share of 0.01p and a deferred share of 0.9p for every ordinary share of 0.1p then held.

Outlook

Since the acquisition of Lumberton, AEG has started to transform itself into a business focussed on the biomass to energy market using next generation fuels from sustainable and waste resources. Lumberton is a key ingredient and, as the Board had anticipated, the ongoing commercial lumber activities are proving to be a significant operation for the Company. The Company believes that future growth opportunities from these activities alone will continue to emerge, even in the current challenging operational environment.

As the Company accommodates the operating challenges from COVID-19, AEG's goals for production and supply of biomass remain equally important. The Company is attempting to overcome delays caused by COVID-19 in regard to the commissioning of the plant.  To have an operational reference plant to produce CoalSwitch™ and other black pellet fuels remains the prime focus, particularly with increasing customer interest. The Company is working on the final specification and equipment requirements to commission and commence operations of the CoalSwitch™ reference plant, including the appointment of local engineering and EPC contractors.  The Company will provide an update on the expected timetable to commencement of operations when this process has been completed.

The addition of two non-executive directors to the Board in the last 6 months also represents another milestone in the revised business focus for AEG and their invaluable contribution has already been of great help. The Company expects more developments, which will further strengthen its business, to provide a platform for growth in 2021. We look forward to updating all stakeholders and shareholders at the earliest opportunity.

 

Michael Rowan

Chief Executive Officer

29 September 2020

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND OTHER COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2020

 

 

 

30 June 2020

 

30 June 2019

 

31 December 2019

 

 

 

(Unaudited)

 

(Unaudited)

 

(Audited)

 

 

 

US$

 

US$

 

US$

 

Note

 

 

 

 

 

 

REVENUE FROM CONTRACTS WITH CUSTOMERS

2

 

499,893

 

99,830

 

1,895,972

Cost of sales

 

 

(142,058)

 

-

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

357,835

 

99,830

 

1,895,972

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Administrative expenses

 

 

(1,080,087)

 

(1,642,416)

 

(2,779,473)

 

 

 

 

 

 

 

 

OPERATING LOSS

2

 

(722,252)

 

(1,542,586)

 

(883,501)

 

 

 

 

 

 

 

 

Finance costs

2

 

111,844

 

(290,387)

 

(2,461,376)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

 

(610,408)

 

(1,832,973)

 

(3,344,877)

 

 

 

 

 

 

 

 

Income tax credit on continuing operations

 

 

16,494

 

2,946

 

874,655

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FOR THE PERIOD

 

 

(593,914)

 

(1,830,027)

 

(2,470,222)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss attributable to the Parent Company

 

 

(593,914)

 

(1,830,027)

 

(2,470,222)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME/(EXPENSE):

 

 

 

 

 

 

 

Items that may be subsequently reclassified to profit or loss

 

 

 

 

 

 

 

Exchange differences on translation of operations

 

 

(247,604)

 

(6,129)

 

137,540

Revaluation of land and buildings

 

 

-

 

572,251

 

504,646

Revaluation of assets held for resale

 

 

(106,366)

 

(4,070)

 

563,948

 

 

 

 

 

 

 

 

Total other comprehensive expense

 

 

(353,970)

 

562,052

 

1,206,134

TOTAL COMPREHENSIVE LOSS FOR THE PERIOD

 

 

(947,884)

 

(1,267,975)

 

(1,264,088)

Loss per share (US cent) - continuing operations

3

 

(0.05)

 

(0.15)

 

(0.21)

Basic and Diluted (loss) per share (US cent)

3

 

(0.05)

 

(0.15)

 

(0.21)

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020

 

 

 

30 June 2020

 

30 June 2019

 

31 December 2019

 

 

 

US$

 

US$

 

US$

 

Note

 

(Unaudited)

 

(Unaudited)

 

(Audited)

NON-CURRENT ASSETS

 

 

 

 

 

 

 

Intangible assets

 

 

9,368,367

 

8,721,017

 

9,180,466

Property, plant and equipment

 

 

10,454,916

 

8,677,071

 

9,231,743

Goodwill

 

374,519

 

 

Available for sale financial assets

 

 

1,364,273

 

748,145

 

1,470,639

 

 

 

21,562,075

 

18,146,233

 

19,882,848

CURRENT ASSETS

 

 

 

 

 

 

 

Inventory

 

 

125,171

 

-

 

-

Trade and other receivables

 

 

1,452,467

 

1,371,271

 

1,146,815

Cash and cash equivalents

 

 

135,392

 

661,533

 

397,323

 

 

 

1,713,030

 

2,032,804

 

1,544,138

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

23,275,105

 

20,179,037

 

21,426,986

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Trade and other payables

 

 

2,696,646

 

2,538,992

 

2,391,229

Loans and borrowings

 

 

54,425

 

1,110,731

 

108,850

Finance leases falling due in less than one year

 

 

171,600

 

-

 

-

 

 

 

2,922,671

 

3,649,723

 

2,500,079

NON-CURRENT LIABILITIES

 

 

 

 

 

 

 

Deferred income tax liabilities

 

 

347,822

 

238,639

 

364,316

Finance leases falling due in more than one year

 

 

233,618

 

-

 

-

Loans and borrowings

5

 

19,563,024

 

16,198,842

 

18,190,732

 

 

 

20,144,464

 

16,437,481

 

18,555,048

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

23,067,135

 

20,087,204

 

21,055,127

 

 

 

 

 

 

 

 

NET ASSETS

 

 

207,970

 

91,833

 

371,859

 

 

 

 

 

 

 

 

EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT

 

 

 

 

 

 

 

Share capital

6

 

18,240,259

 

17,265,379

 

17,265,379

Share premium

 

 

17,307,737

 

17,303,159

 

17,303,159

Merger reserve

 

 

2,350,175

 

2,350,175

 

2,350,175

Foreign exchange reserve

 

 

(421,244)

 

(215,014)

 

(67,274)

Own shares held reserve

 

 

(268,442)

 

(268,442)

 

(268,442)

Convertible debt / warrant reserve

 

 

3,677,993

 

3,344,590

 

3,490,621

Revaluation reserve

 

 

504,646

 

572,251

 

504,646

Retained earnings

 

 

(41,183,154)

 

(39,902,222)

 

(40,206,405)

Non‐controlling Interest

 

 

-

 

(358,043)

 

 

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

207,970

 

91,833

 

371,859

 

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS TO 30 JUNE 2020

 

 

30 June 2020

 

30 June 2019

 

31 December 2019

 

Note

(Unaudited)

 

(Unaudited)

 

(Audited)

 

 

US$

 

US$

 

US$

Cash (outflow)/inflow from operations

7

(172,038)

 

(615,419)

 

1,675,831

Income tax paid

 

-

 

-

 

-

Net cash (outflow)/inflow from operating activities

 

(172,038)

 

(615,419)

 

1,675,831

Cash flows from investing activities

 

 

 

 

 

 

Purchase of intangible assets

 

(50,250)

 

(89,744)

 

(519,312)

Purchase of property, plant and equipment

 

(45,170)

 

(3,414,465)

 

(1,756,619)

Sale of property, plant and equipment

 

-

 

402,527

 

362,790

Net cash outflow from investing activities

 

(95,420)

 

(3,101,682)

 

(1,913,141)

 

Cash flows from financing activities

 

 

 

 

 

 

Issue of CLN1

 

-

 

5,019,140

 

2,762,781

Unsecured loans repaid

 

-

 

(216,976)

 

(1,218,857)

Finance expenses

 

-

 

(723,819)

 

(1,207,093)

Net cash inflow from financing activities

 

-

 

4,078,345

 

336,831

Net (decrease)/increase in cash and cash equivalents

 

(267,458)

 

361,244

 

99,521

Cash and cash equivalents at beginning of the year

 

397,323

 

298,768

 

298,768

Exchange gains/(losses) on cash and cash equivalents

 

5,527

 

1,521

 

(966)

Cash and cash equivalents at end of the year

 

135,392

 

661,533

 

397,323

 

 

1 .CLN issued does not include CLN subscribed for in June 2020, as the cash was not received until July 2020.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS TO 30 JUNE 2020

 

 

Share capital

Share premium

Merger reserve

Foreign exchange reserve

Own shares held reserve

Convertible debt and warrant reserve

Revaluation reserve

Retained earnings

 

 

Non-controlling Interest

Total equity

 

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

17,265,379

17,303,159

2,350,175

(204,815)

(268,442)

2,720,933

-

(38,310,938)

(358,043)

497,408

Loss for the period

-

-

-

-

-

-

-

(1,830,027)

-

(1,830,027)

Other comprehensive income

-

-

-

(10,199)

-

-

-

-

-

(10,199)

Revaluation of land & buildings

-

-

-

-

-

-

572,251

-

-

572,251

Embedded derivative on CLN issue

-

-

-

-

-

623,657

-

-

-

623,657

Share based payments

-

-

-

-

-

-

-

238,743

-

238,743

At 30 June 2019

17,265,379

17,303,159

2,350,175

(215,014)

(268,442)

3,344,590

572,251

(39,902,222)

(358,043)

91,833

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS TO 30 June 2020 (continued)

 

Share capital

Share premium

Merger reserve

Foreign exchange reserve

Own shares held reserve

Convertible debt and warrant reserve

Revaluation reserve

Retained earnings

 

 

Non-controlling Interest

Total equity

 

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2018

17,265,379

17,303,159

2,350,175

(204,815)

(268,442)

2,720,933

(38,310,938)

-

(358,043)

497,408

Loss for the period

-

-

-

-

-

-

(2,470,222)

-

-

(2,470,222)

Other comprehensive income

-

-

-

137,541

-

-

563,948

-

-

701,489

Revaluation of land & buildings

-

-

-

-

-

-

-

504,646

-

504,646

Embedded derivative on CLN issue

-

-

-

-

-

769,688

-

-

-

769,688

Share based payments

-

-

-

-

-

-

368,850

-

-

368,850

Minority Interest adjustment

-

-

-

-

-

-

(358,043)

-

358,043

-

 

 

 

 

 

 

 

 

 

 

-

At 31 December 2019

17,265,379

17,303,159

2,350,175

(67,274)

(268,442)

3,490,621

(40,206,405)

504,646

-

371,859

Loss for the period

-

-

-

-

-

-

(593,914)

-

-

(593,914)

Other comprehensive income

-

-

-

(353,970)

-

-

-

-

-

(353,970)

Issue of share capital

802,467

-

-

-

-

-

(452,467)

-

-

350,000

Conversion of CLN

172,413

4,578

-

-

-

(21,160)

-

-

-

155,831

Embedded derivative on CLN issue

-

-

-

-

-

208,532

-

-

-

208,532

Share based payments

-

-

-

-

-

-

69,632

-

-

69,632

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2020

18,240,259

17,307,737

2,350,175

(421,244)

(268,442)

3,677,993

(41,183,154)

504,646

-

207,970

 

 

NOTES FORMING PART OF THE INTERIM REPORT

 

1. GENERAL INFORMATION AND BASIS OF PRESENTATION

 

General information

Active Energy Group plc is a company incorporated in England and Wales and quoted on the AIM market of the London Stock Exchange. The address of the registered office is 27-28 Eastcastle Street, London, W1W 8DH. The Group's principal activities are the development and commercialisation of cutting-edge renewable energy and soil replacement products and the development of timber resources.

 

Basis of preparation

The financial information in these interim results is that of the holding company and all of its subsidiaries. It has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards as adopted for use in the EU (IFRSs). The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 December 2019 and which will form the basis of the 2020 financial statements, except for a number of new and amended standards which have become effective since the beginning of the previous financial year. These new and amended standards are not expected to materially affect the Group.

 

The financial information presented herein does not constitute full statutory accounts under Section 434 of the Companies Act 2006 and was not subject to a formal review by the auditors. The financial information in respect of the year ended 31 December 2019 has been extracted from the statutory accounts which have been delivered to the Registrar of Companies. The Group's Independent Auditor's report on those accounts was unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. The auditor's report on those accounts included a reference to the going concern assumptions detailed in the notes to those accounts, whereby the auditor drew attention to this note by way of emphasis of matter. The auditor did not qualify their report in respect of this matter. The financial information for the half years ended 30 June 2019 and 30 June 2020 is unaudited and the twelve months to 31 December 2019 is audited.

 

These interim accounts have been prepared in accordance with IAS 34.

 

Going concern

Historically, the Group's primary revenue generating business segment was the Ukrainian wood fibre business. This was discontinued during 2017 and the group's emphasis shifted toward development of the CoalSwitch™ business segment. In Q1 2019 AEG purchased an industrial site in Lumberton, North Carolina.

 

On 31 March 2020 AEG announced that it had acquired a 100% interest in the Lumberton wood processing business and this business activity has been operated by AEG's 100% subsidiary (AERP) since this date. This business is in the process of ramping up to expected performance levels. On 4 August 2020 AEG announced that the local authorities in North Carolina had granted AERP a permit to produce CoalSwitch™ at the Lumberton site.

 

The Directors have considered the cash requirements of the business for the following 12 months. As part of this process, they have taken into account existing liabilities, along with detailed operating cash flow requirements. The projections prepared include ongoing running costs of the Group and committed expenditure at the date of approving the financial statements.

 

The Directors note that the current operational plans involve the ramp up of sawmill production and saw log exports during 2020 as well as commencement of CoalSwitch™ operations during the first half of 2021. The Directors have considered the potential impact of the Covid-19 pandemic on the Group and noted that that the business has continued to operate during "lockdown" periods.

 

Taking this into account and following a detailed review by the Directors of the Group's cash flow requirements, the Directors believe that, based on current cash resources and the expected operating performance of the wood processing business, the Group will have sufficient cash resources to continue to trade for a period of at least 12 months from the date of issue of the interim financial statements. Consequently, the financial statements have been prepared on a going concern basis.

 

However, as of the date of signing these financial statements, the wood processing business is still in the ramp-up phase and therefore the Company does not have a significant period of operating history on which to rely.  In addition, the potential impact of the Covid-19 pandemic on the Group is not fully known. Therefore, whilst the Directors have strong reasons to believe that the Group will continue to trade for a period of at least 12 months from the date of issue of the interim financial statements; these circumstances indicate the existence of a material uncertainty which may cast significant doubt on the Company's ability to continue as a going concern.

 

Basis of consolidation

The financial information incorporates the results of AEG and entities controlled by the AEG (its subsidiaries). Control is achieved when the Group has power over relevant activities, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The consolidated interim financial statements present the financial results of AEG plc and its subsidiaries (the Group) as if they formed a single entity. Where necessary, adjustments are made to the results of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

 

2.          SEGMENTAL INFORMATION

 

The Group reports two operating continuing business segments:

 

·    "Forestry & Natural Resources" denotes the Group's initiatives to secure ownership of the entire timber supply chain from forest to finished product.

·    "CoalSwitch™"denotes the Group's renewable wood pellet and soil replacement business.

·    "Wood processing and export" denotes the Group's sawmill and saw log export activities.

 

Factors that management used to identify the Group's reportable segments

The Group's reportable segments are strategic business units that offer different products. During the business development stage, they are managed separately because each business operates in different markets and locations. In future these business segments may be combined into single operations and reporting structures will be revisited accordingly.

 

For the 6 months to 30 June 2020 (Unaudited)

Wood processing & export

Forestry & Natural Resources

CoalSwitch™

Total

 

US$

US$

US$

US$

Revenue from external customers1

382,659

-

-

382,659

Operating segment (loss)/profit

(210,986)

17,940

(48,664)

(241,710)

Segment (loss)/profit before tax

(210,986)

17,940

(48,664)

(241,710)

Tax credit

-

15,099

-

15,099

Segment (loss)/profit for the period

(210,986)

33,039

(48,664)

(226,611)

 1.Revenue does not match the income statement due to rental income shown in reconciliation of reportable segments to operating profit below. 

 

For the 6 months to 30 June 2019 (Unaudited)

Wood processing & export

Forestry & Natural Resources

CoalSwitch™

Total

 

US$

US$

US$

US$

Revenue from external customers

-

-

99,830

99,830

Operating segment loss

-

(14,731)

(679,377)

(694,108)

Segment profit/(loss) before tax

-

(14,731)

(679,377)

(694,108)

Tax credit

-

4,484

-

4,484

Segment loss for the period

-

(10,247)

(679,377)

(689,624)

 

 

 

 

 

For the 12 months to 31 December  2019 (Audited)

Wood processing & export

Forestry & Natural Resources

CoalSwitch™

Total

 

US$

US$

US$

US$

Revenue from external customers

-

-

1,717,676

1,717,676

Operating segment (loss)/profit

-

(150,991)

992,889

841,898

Segment (loss)/profit before tax

-

(150,991)

992,889

841,898

Tax credit

-

30,198

842,362

872,560

Segment (loss)/profit for the period

-

(120,793)

1,835,251

1,714,458

 

1.        CoalSwitch™ revenues in 2019 relate to engineering consultancy services.

 

Capital expenditure relating to the wood processing segment was US$708,958 (H1 2019: US$Nil) reflecting the acquisition of a sawmill via a finance lease arrangement and yard improvement works. Capital expenditure relating to the CoalSwitch™ segment was US$433,540 (H1 2019: US$3,685,701) reflecting the acquisition of the Lumberton Site in 2019. Capital expenditure relating to the Forestry and natural resource segment was US$144,679 (H1 2019: US$111,638).

 

Reconciliation of reportable segment profit or loss, assets and liabilities to the Group's corresponding amounts are as follows:

 

6 months ended 30 June 2020 (unaudited)

6 months ended 30 June 2019 (unaudited)

Year ended 31 December 2019 (audited)

 

US$

US$

US$

Total (loss)/profit from reportable segments

(226,611)

(689,624)

1,714,458

Unallocated amount - corporate expenses

(528,145)

(651,045)

(1,532,750)

Unallocated amount - finance income/(expense)

111,844

(290,387)

(2,461,376)

Share based payments

(69,631)

(238,743)

(368,850)

Unallocated amount - taxes

1,395

-

-

Unallocated amount - other income

117,234

39,772

178,296

Loss for the period

(593,914)

(1,830,027)

(2,670,222)

1.        The positive figure in unallocated amount - finance income/(expense) relates to foreign exchange movements on intercompany accounts.

 

 

3.            LOSS PER SHARE

 

 

6 months to 30 June 2020

6 months to 30 June 2019

12 months to 31 December 2019

 

(Unaudited)

(Unaudited)

(Audited)

 

US$

US$

US$

Weighted average ordinary shares in issue

1,239,618,243

1,201,906,951

1,201,906,951

Loss from continuing operations

(593,914)

(1,830,027)

(2,470,222)

(Loss)/profit per share (US cent) - discontinued operations

-

-

-

Loss attributable to the Parent Company

(593,914)

(1,830,027)

(2,470,222)

Loss per share (US cent) - continuing operations

(0.05)

(0.15)

(0.21)

(Loss)/profit per share (US cent) - discontinued operations

-

-

-

Basic and Diluted loss per share (US cent)

(0.05)

(0.15)

(0.21)

 

 

4.            ACQUISITION OF WOOD PROCESSING AND EXPORT BUSINESS

 

On 31 March 2020, AEG announced that it had entered into an agreement with its joint venture partner Renewable Logistics Systems LLC ("RLS"), whereby AEG acquired RLS's joint venture interest in RES and thereby secured 100% control and ownership of the sawmill and saw log export activities based at AEG's industrial site in Lumberton, North Carolina. As consideration, AEG and RLS agreed for AEG to pay US$350,000. This was satisfied by the issuance to RLS of 64,863,412 new ordinary shares of 1p in AEG on the closing date. In addition, AEG wrote off certain advances made to the earlier joint venture. As a result, all assets previously associated with the joint venture, including plant and equipment, inventory and goodwill (including customer contracts) were transferred to Active Energy Renewable Power LLC, a wholly owned subsidiary of AEG.  As a result, the Group recognised property plant & equipment of US$240,623, inventory of US$24,092 and goodwill of US$374,519.

 

5.            CONVERTIBLE LOAN NOTES

 

On 22 June 2020, the Company announced that it had raised £0.8 million before expenses through the issue of convertible loan notes ('CLNs') to new and existing investors. These monies, which are being applied to the development of AEG's wood processing and export activities and working capital requirements, were received in July 2020. The CLNs have a maturity date of 14 March 2022 and have been listed on the International Securities Exchange. The CLN can be converted into ordinary shares of AEG plc, at any time prior to the Maturity Date, at a conversion price of 1p per share. The fair value of the liability component at inception was £0.169 million (or US$0.209 million). This was calculated using a market interest rate for an equivalent instrument without conversion option. The CLN has a coupon rate of 8% and the imputed interest rate applied was 12%.

 

6.  SHARE CAPITAL

Ordinary shares of 1p each                                                       Allotted, called up and fully paid (Audited)

Number

US$

At 1 January 2019 and 31 December 2019

1,201,906,951

17,265,379

 

 

 

(Unaudited)

Number

US$

At 1 January 2020

1,201,906,951

17,265,379

Shares issued to purchase Lumberton Wood Business

64,863,412

802,467

Conversion of CLN

13,537,400

172,413

At 30 June 2020

1,280,307,763

18,240,259

 

 

7. RECONCILIATION OF LOSS BEFORE TAXATION TO CASH OUTFLOWS FROM OPERATING ACTIVITIES

 

 

30 June 2020

 

30 June 2019

 

31 December 2019

 

 

(Unaudited)

 

(Unaudited)

 

(Audited)

 

 

US$

 

US$

 

US$

Loss for the period

 

(593,914)

 

(1,830,027)

 

(2,470,222)

Adjustments for:

 

 

 

 

 

 

Share based payment expense

 

69,631

 

238,743

 

368,850

Depreciation

 

17,547

 

18,000

 

66,055

Amortisation of intangibles

 

75,495

 

14,731

 

150,991

Loss on disposal of PP&E

 

-

 

-

 

678,803

Revaluation of investments for resale

 

-

 

366,507

 

-

Foreign currency translations

 

(1,525,962)

 

(53,882)

 

612,747

Finance expenses

 

1,342,390

 

613,017

 

1,744,188

Income tax

 

(16,494)

 

(2,946)

 

122,731

 

 

(631,307)

 

(635,857)

 

1,274,143

Increase in inventories

 

(103,702)

 

 

-

Decrease in trade and other receivables

 

491,067

 

333,139

 

557,595

Increase/(Decrease) in trade and other payables

 

71,904

 

(312,701)

 

(155,907)

Net cash (outflow)/inflow from operating activities

 

(172,038)

 

(615,419)

 

1,675,831

 

 

8.            COPIES OF THE INTERIM REPORT

Copies of the interim report will be made available on the Company's website at www.aegplc.com.

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.

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