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Alkane recharges its batteries

RESULTS: Gas-to-power producer Alkane Energy had a mixed first half, but now looks poised to roar ahead.

Through some canny acquisitions and divestments in the first half, Alkane Energy (ALK) has diversified and grown its business to better profit from the UK’s looming energy shortage. But the transformation has not been smooth.

IC TIP: Buy at 39p

Electricity output in the period was 10 per cent lower due to the longer-than-expected closure of the Maltby colliery – home to Alkane’s largest coal-mine-methane operation. And revenues fell sharply at the company’s DBO division, which builds power plants for other companies, because a large one-off contract that generated nearly £1m in pre-tax profits last year was not repeated.

The good news is that electricity output is set to ramp up dramatically in the second half. Maltby is now back on-line, and total installed capacity is up 55 per cent since the period-end, at 140 megawatts. That will more than offset weak power prices: Alkane thinks these will be 4 per cent lower on average this year. Alkane also booked a £10m profit from the sale of its shale gas assets to Egdon Resources (EDR) in exchange for shares. “We’ve got a free ticket to the shale gas party and we'll see what happens to that in the next few years," says chief executive Neil O’Brien.

Mr O’Brien confirmed that the company is “on track to meet full-year expectations” of around £4m in adjusted pre-tax profits.

ALKANE ENERGY (ALK)

ORD PRICE:39pMARKET VALUE:£57m
TOUCH:38-40p12-MONTH HIGH:52pLOW: 36p
DIVIDEND YIELD:0.5%PE RATIO:5
NET ASSET VALUE:28pNET DEBT:36%

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201311.11.01.1nil
20147.17.35.9nil
% change-36+630+457-