LONDON (Alliance News) - Clean Air Power Ltd saw its shares drop over 20% in early trade Monday after it reported a sharp drop in revenue and an increase in cash consumption in 2014 and warned that 2015 would also be challenging as it seeks fresh funding to shore up an uncertain financial future.
The company said it faces significant doubt over whether it can continue in business unless it secures additional funding. It said it now has limited means to further cut costs, and is now seeking fresh funding through either a second major deal with a manufacturer, which would boost cash flow, or "alternative sources of funding". It said talks are ongoing with a number of manufacturers.
"The directors remain confident that the business can achieve its targets for 2015 and that there is a reasonable expectation that the group will be able to secure alternative funding," it said.
The manufacturer of technology that allows trucks to be powered by natural gas reported a pretax loss of GBP6.3 million for 2014, wider than the GBP2.0 million loss it reported in 2013, as revenue fell to GBP6.8 million, from GBP9.9 million, administrative costs rose by GBP1.2 million, and it booked a GBP393,000 impairment charge for issues in the European business it has been restructuring.
The company's European business has been hit by the economic and political uncertainties in Russia related to the crisis in Ukraine, as well as "the lack of a coherent natural gas strategy in Europe" and low diesel to natural gas price differentials.
"This has been a very challenging year. Following the introduction of the Euro VI emissions standard and narrowing diesel to natural gas price differentials, we saw a steep decline in European sales which prompted us to take the difficult step of restructuring the European business. On top of this, issues with the after-treatment system on the base diesel engine delayed our US Genesis-EDGE program by at least six months," Chief Executive John Pettitt said.
The company's US Genesis-EDGE Dual-Fuel system passed the US Environmental Protection Agency emission standards last December and in February became the only certified dual-fuel system in the US.
"It is very difficult to estimate the quantum of US Genesis-EDGE revenues so soon after product launch or control the timing of (manufacturer)-funded contract cash flows so we have identified funding options to inject the financial headroom we need and provide greater flexibility to support growth in the US," the company said as it warned of another challenging year in 2015.
The company ended 2014 with a cash balance of GBP2.2 million, but its underlying cash consumption before working capital time differences rose 10% in the year to GBP4.5 million, from GBP4.1 million in 2013.
Separately, Clean Air Power said it has been awarded a one-year extension to its two-year funded research project with Brunel University in London aimed at developing the next generation of advanced dual-fuel combustion systems.
Clean Air Power shares were down 23.7% at 2.25 pence early Monday, making it one of the worst-performing stocks on the AIM All-Share index.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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