News blog

TEG Group

  • BY: Andrew Hore |
  • POSTED: 20/09/2011 |

Waste composting plants operator TEG Group reported a higher interim loss due to delays in its Greater Manchester contract but recurring revenues are increasing. 

The fourth site in Greater Manchester will proceed but the equipment sales related to this Bolton plant will not contribute much this year.  Originally this could have contributed at least £4m this year but the delay means that it won’t be anywhere near that.

TEG processed 86% more waste in the first half. Revenues increased 6% to £9.33m in the six months to June 2011, while the loss increased from £376,000 to £798,000. Equipment sales fell and recurring revenues from plants operated by TEG jumped from £2.15m to £3.84m. Around £1.5m of the increase came from the Simpro acquisition but there was also organic growth. 

TEG and its partner Alkane Energy were appointed preferred bidders for a food waste and anaerobic digestion contract for three North Wales councils: Denbighshire County Council, Conwy County Borough Council and Flintshire County Council. This is the first of a number of Welsh waste projects which TEG is bidding for.

TEG will own 70% and Alkane 30% of NEAT Biogas, which will construct a 20,000 tonnes per annum anaerobic digestion plant. The contract will last 15 years with a potential extension of five years. The contract guarantees enough waste to fill 60% of the plant’s capacity and that will mean that it should at least break even. TEG has potential waste supplies from north west England that will increase utilisation of the plant.

TEG’s first anaerobic digestion plant will be in Perth and this should be commissioned by the end of this year. There should be news of the planning application for a site in Dagenham in the next few weeks. If things go to plan this plant could be up and running by the end of next year.

House broker Ambrian believes that TEG is on course for full year revenues of £19m, down from £20.7m, even though most of the revenues from the delayed Greater Manchester contract will not show through until next year.

There was £1.52m in the bank at the end of June 2011, although net debt was £868,000. Since the recent £3.69m placing at 10p a share the cash pile has increased to £3.31m. Around £1m of working capital is required for the North Wales contract. The latest plants will be project financed. There was no cash outflow from operations in the first half so TEG has plenty of cash to invest in new operations.

Following a period of uncertainty about public spending there are more projects starting to come through.

At 10.25p a share, TEG is valued at £12m.

Download the September 2011 edition of AIM Journal at http://www.hubinvest.com/AIMPDFSeptember2011_24.pdf

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