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TEG tumbles as takeover talks end

RESULTS: Takeover talks are off, a fundraising is required and the shares are well off the pace
June 7, 2012

Full-year results from composting technology group TEG were completely overshadowed by the ending of takeover talks and news of a £2m fundraising which sent the shares tumbling and prompts us to call time on our buy recommendation.

IC TIP: Hold at 3.75p

The company has been hit hard by delays to projects and subsequent delays to payments for completed projects, which ultimately resulted in a painful performance. This masked a significant improvement at TEG's composting facilities, which grew waste volumes by a third to 244,000 tonnes, and saw average gate fees rise by 16 per cent. However, delays to a major project at Dagenham and on the fourth facility for Manchester Waste hit revenues in the period. In fact, Manchester is still retaining £1m due to TEG and, although Dagenham is expected to achieve financial close and a first payment within three months, management is taking no further risks.

So TEG is raising £2m in an open offer at 3p a share, of which £1.2m is underwritten and a further £600,000 already committed by key investors. The company has admitted that a failure of the offer and further delays in receipt of income from projects would "place the company in a position of significant uncertainty".

TEG (TEG)

ORD PRICE:3.75pMARKET VALUE:£5m
TOUCH:3.5-4p12-MONTH HIGH:22pLOW: 3p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:17p*NET DEBT:1%

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20072.2-3.10-6.7nil
200812.7-1.62-3.1nil
200915.40.160.5nil
201020.7-0.63-0.7nil
201117.9-8.00-7.9nil
% change----

*Includes £5.1m of intangible assets, or 4p a share