Last checked at 25 Jun 2010 07:00
| AIM: CINP | 25 June 2010 |
Cinpart plc
("Cinpart", the "Company" or the "Group")
Final Results for the year ended 31 December 2009
Cinpart, which supplies cutting-edge voltage optimisation technology to reduce the energy consumption and CO₂ emissions of commercial buildings, is pleased to announce its final results for the year ended 31 December 2009.
HIGHLIGHTS
·; Transformational year - establishing presence in high growth voltage optimisation market
·; Revenues increased by 42% to £2,880,197 (2008: £2,028,918)
- includes six month contribution from new voltage optimisation subsidiary, Active Energy
·; Loss for the year of £1,175,876 (2008: loss of £338,241)
·; Loss per share was 1.76p (2008: loss per share of 1.09p)
·; Cash balances as at 31 December 2009 of £840,122 (2008: £22,059)
- share placings during the year raised a total of £2,554,000 to support the development of Active Energy
·; Bonus issue proposed of 1 new Ordinary Share for every 20 Ordinary Shares held
·; Active Energy well positioned to build on growth opportunities
- strategic relationship with Scottish and Southern Energy plc subsidiary, Southern Electric Contracting Ltd, announced in January 2010, already proving beneficial
- sales pipeline continues to strengthen
·; Memorandum of Understanding announced today with County Executives of America, which represents elected county leaders across 700 US counties
- strategic relationship will support expansion into major US market
- provides for assistance in securing sales with county owned public facilities
·; Proposed name change to Active Energy Group plc - to reflect ongoing focus of the business
·; Board remains confident of future growth
Commenting on results, Chief Executive of Cinpart, Kevin Baker, said,
"The year under review saw a transformation in our Group's trading activities as we established a presence in the voltage optimisation market. This young and exciting market is being driven by both environmental and legislative pressure to reduce energy consumption and through the associated cost reductions which the technology brings.
We have achieved further progress in the current financial year, establishing strategic relationships both in the UK with SEC and now in the USA with County Executives. We have already seen the benefits of our SEC relationship starting to flow and this should continue to generate new opportunities.
In the longer term, we will also seek to explore other opportunities as we believe there is a substantial international market for our product. Consequently, we remain confident that the Group will be successful in achieving its long-term strategic goals and growth which will in turn enhance shareholder value."
Enquiries:
| Cinpart Plc |
|
| Kevin Baker, Chief Executive Christopher Foster, Executive Director
| Tel: 020 3176 3033 Tel: 020 3176 3031
|
| Merchant John East Securities Ltd (Nominated Adviser) |
|
| Simon Clements/John East | Tel: 020 7628 2200
|
| Jendens Securities Ltd (Joint Broker) |
|
| Kim Richardson
| Tel: 020 7266 2152 |
| Rivington Street Corporate Finance Ltd (Joint Broker) |
|
| Peter Greensmith
| Tel: 020 7562 3370 |
| Biddicks (Financial PR) |
|
| Sophie Lane/ Zoë Biddick
| Tel: 020 7448 1000 |
CHAIRMANS REPORT
The year under review saw a transformation in our Group's trading activities as we established a strong presence in the voltage optimisation market. This young and exciting market is being driven by both environmental and legislative pressure to reduce energy consumption and through the associated cost reductions which the technology brings. In order to target the considerable opportunities for growth in the market, which we identified in 2008, we formed a new subsidiary, Active Energy Limited ("Active Energy"). Active Energy subsequently acquired the intellectual property rights over the VoltageMaster products, a proven range of equipment designed and manufactured in the UK and aimed at the commercial market. Whilst the voltage optimisation market is still in its infancy, the Directors believe that it represents a highly attractive growth opportunity. Your Directors anticipate that up to 400,000 large buildings in the UK alone have the potential to reduce their energy consumption significantly using our technology.
Since the launch of Active Energy in March 2009, the Group has been focused on developing its presence in the voltage optimisation market. I am pleased to be able to report that we are already seeing the benefits of this strategy, as demonstrated by the major contract wins secured since Active Energy was formed. In addition, we have entered into a strategic partnership with Southern Electric Contracting Limited ("SEC"), a wholly owned subsidiary of Scottish and Southern Energy plc, following the year end. The strategic partnership provides that Active Energy is the preferred supplier of voltage optimisation technology to SEC one of the largest mechanical and electrical contractors in the UK and its customers. Active Energy is well placed to continue to build its business in the UK and the Directors are confident that there are further significant growth opportunities for the technology.
FINANCIAL REVIEW
Group revenues for the period increased by 42 per cent. to £2,880,197 (2008: £2,028,918). Active Energy contributed £1,036,188 in the period, which includes part of the announced contract signed in June 2009 and a number of other smaller contract wins. The Group's legacy businesses, Gasignition Limited ("Gasignition"), a supplier of electrical components to small and medium-sized European gas appliance manufacturers, and Derlite Co Limited ("Derlite"), an international manufacturer of electrical and non-electrical components, contributed the balance. The legacy businesses were affected by the difficult economic conditions globally which led customers to purchase fewer products, movements in the exchange rate between the US Dollar and Sterling and downward pricing pressure in order to maintain competitiveness.
The Group reported a loss for the year of £1,175,876 (2008: loss of £338,241) which was in line with market expectations. The loss includes a number of non-recurring and exceptional items. These include redundancy costs of £58,646 incurred in Derlite, £163,328 relating to share based payments and exchange translation expenses of £46,209. Price reductions and cost increases affected margins within the legacy businesses. Overall gross margin achieved in the period under review was 24.7 per cent (2008: 39.0 per cent.) Loss per share was 1.76p (2008: loss per share of 1.09p).
During the year, the Group completed a number of fundraisings to support its plans for expansion into the voltage optimisation market. In total, the Group raised £2,554,000 before expenses via the issue of 52,619,613 new ordinary shares. Cash balances as at 31 December 2009 were £840,122 (2008: £22,059).
The Directors will not be recommending the payment of a dividend (2008: £nil).
OPERATING REVIEW
Whilst the legacy businesses, Gasignition and Derlite, continue to operate from the Group's low-cost manufacturing base in Thailand, the focus during 2009 has been on the establishment and development of the Group's voltage optimisation subsidiary, Active Energy. Having launched the business in March 2009, in August, we increased our stake in the business from 65 per cent. to 72.2 per cent.
Active Energy sells and installs the VoltageMaster, a voltage optimising product which is designed to reduce the electricity consumption of large commercial buildings and the associated CO₂ emissions and can achieve electricity cost savings of up to 20 per cent., with average savings of around 12 per cent. The technology works by regulating a building's electricity supply to reduce the incoming voltage to around 220 volts, which is the optimum level for operating most electrical appliances, rather than the higher levels provided by electricity companies in order to allow for fluctuations in supply and to minimise transmission losses.
The market is in its infancy, with overall product penetration estimated to be less than 0.5 per cent. Since the establishment of Active Energy in March 2009, we have made excellent progress in creating the necessary infrastructure to target the sales opportunities. In June 2009, Active Energy announced its first major contract win for all the UK stores of a large international affordable home furnishings retailer, and this was followed in September 2009 by the acceptance of a tender to supply VoltageMaster to members of the Eastern Shires Purchasing Organisation ("ESPO"), a non-for-profit procurement consortium acting for a number of local authorities and other customers, under a Framework Agreement.
Demand for the Group's voltage optimisation product is being driven by both environmental legislation and the potential to reduce energy costs. Globally, governments are creating new legislation to tackle the reduction of carbon emissions with a view to preventing further global warming. In the UK, in April 2010, the CRC Energy Efficiency Scheme (formerly known as the Carbon Reduction Commitment) came into force, requiring larger organisations to purchase CO2 credits according to how much CO2 they use. The scheme will also publish an annual league table to rank and award financial incentives to the best performers in terms of energy cuts achieved. The Environment Agency (which is administering the scheme) estimates that some 20,000 companies and public bodies will need to register by 30 September 2010 with an estimated 5,000 of the largest expected to become "participants" (companies which will have to purchase CO₂ credits).
In addition, smaller companies are being encouraged to reduce carbon emissions by the government with the Carbon Trust offering interest free loans as an incentive to invest in energy efficient equipment. The loans of up to £100,000 are particularly attractive as the loan repayment period, often exceeds the payback period of the initial investment in the Voltage Master product. All businesses whose electricity consumption is below the level at which they become liable for the CRC Energy Efficiency Scheme qualify for an interest-free loan to purchase energy efficient equipment and VoltageMaster has been approved by the Carbon Trust as a qualifying technology. The Carbon Trust also provides interest-free loans based on payback of up to five years to Public Sector bodies via its public sector arm, Salix Finance. The loans are available to local authorities, NHS hospitals, schools, colleges, universities, libraries and any other public body not directly controlled by central government. As with smaller companies, the VoltageMaster qualifies for interest-free Salix loans.
Cinpart's legacy businesses, Gasignition Limited, a supplier of electrical components to small and medium-sized European gas appliance manufacturers and Derlite Co Limited, an international manufacturer of electrical and non-electrical components, produced a creditable trading performance in a very challenging market. The downturn in the global economy, and in particular the housing markets, in 2008 adversely affected the white goods/household appliances market as we entered 2009 and as a result demand for the gas ignition components which the Group supplies to white goods manufacturers. The Group took the necessary actions to mitigate the impact of the downturn in the first half, including reducing the workforce in Thailand by almost a third and renegotiating wage rates. In the second half, demand picked up and the Group was able to take on additional staff in order to increase production capacity. Both Gasignition and Derlite have benefited from strong customer relationships, which have enabled them to retain business during the downturn, and from the low-cost manufacturing base in Thailand. The Directors believe that the Thai operations also represent a valuable asset in the long-term development of Active Energy's business, offering the potential to expand manufacturing capacity as necessary.
POST-PERIOD EVENTS
Following the year end, Active Energy made further progress in its aim to increase its share of the voltage optimisation market by entering into a strategic partnership with Southern Electric Contracting Limited ("SEC"), a wholly owned subsidiary of Scottish and Southern Energy plc. Under the terms of the agreement, Active Energy is the preferred supplier of voltage optimisation technology to SEC, one of the largest mechanical and electrical contractors in the UK, and SEC is Active Energy's preferred installation sub-contractor. The agreement has already proved beneficial in supporting the delivery, in a very tight time frame, of a major contract signed with the Ministry of Justice in February 2010 for the installation of VoltageMaster units across 52 Courts.
The relationship with SEC continues to bring exciting new sales opportunities which should help to support the business' growth. In order to maximise the potential benefits, Active Energy has launched a number of initiatives including formal training programmes for SEC's sales and installation staff.
The Company advises it has accepted the resignation of Michael Hughes as a non-executive director. His experience of the electricity industry has been of considerable assistance and we thank him for his contribution.
CHANGE OF NAME
Your Directors have determined that the name of the Company should be changed to Active Energy Group plc, to reflect the growth of that part of the Group's businesses. Accordingly, a special resolution is to be proposed at the Annual General Meeting to change the name of the Company to "Active Energy Group plc".
BONUS ISSUE
Given the progress made during the last year, the Board proposes that the Group should initiate a bonus issue of fully paid Ordinary Shares to the holders of Ordinary Shares on the register at the close of business on 30 July 2010 ("the Bonus Issue"), equating to 1 new Ordinary Share for every 20 Ordinary Shares then held. The proposal is subject to shareholder approval at the Annual General Meeting of the Company to be held on 30 July 2010.
The new Ordinary Shares will have the same rights as the existing Ordinary Shares and will rank pari passu in all respects. It is expected that, conditional upon the proposed bonus issue being approved and subject to admission of the new shares to trading on the AIM, dealings in the new Ordinary Shares will commence on 2 August 2010.
It is proposed that part of the amount now standing to the credit of the share premium account of the Company, will be utilised in paying up at par the new Ordinary Shares to be issued pursuant to the Bonus Issue.
Definitive certificates for those shares allotted pursuant to the Bonus Issue will be posted to shareholders no later than 20 August 2010 and stock accounts in CREST will be credited with the new Ordinary Shares on 20 August 2010.
FUTURE DEVELOPMENT
Your Board believes that the progress made to date at Active Energy will stand the Company in good stead in the future. We have a highly capable sales team and the sales pipeline in the UK continues to strengthen, underpinned by our relationship with SEC.
We are also seeing strong levels of interest from other countries, including the USA, Australia and the Middle East. The reduction of CO₂ emissions remains a key focus for many governments, with voltage optimisation offering an innovative solution to cutting energy consumption and the Directors believe Active Energy is well placed to benefit from a "first mover" advantage internationally. These markets are generally less advanced than the UK in terms of the take-up of voltage optimisation technology and represent a substantial growth opportunity in the long term. In order to achieve overseas growth in the most cost-effective manner, the Group will continue to look to build additional strategic relationships.
USA MEMORANDUM OF UNDERSTANDING
As announced separately today, the Company has entered into a Memorandum of Understanding ("MoU") with County Executives of America ("County Executives"), which represents elected county leaders across 700 counties in the USA, acting on behalf of 48 per cent. of the USA population. The MoU provides for County Executives to actively promote Active Energy to government bodies and potential commercial partners in the USA as well as to assist Active Energy in securing sales with county authority owned public facilities such as prisons, schools and hospitals which could benefit from the technology. The Company is considering establishing an assembly facility in the USA to service the expected demand and the MoU also sets out terms for assistance from County Executives with setting up such an operation, in particular in obtaining grants and financial incentives. The Board believes this is a major step forward for the Group.
OUTLOOK
We have achieved further progress in the current financial year, establishing strategic relationships both in the UK with SEC and now in the USA with County Executives. We have already seen the benefits of our SEC relationship starting to flow and this should continue to generate new opportunities. Our UK sales pipeline continues to grow and demand for technologies to reduce energy consumption and CO₂ emissions is being driven by both legislative and cost saving pressures.
In the longer term, we will also seek to explore opportunities as we believe there is a substantial further international market for our product. Consequently, the Directors remain confident that the Group will be successful in achieving its long-term strategic goals and growth which will in turn enhance shareholder value.
Philip E. Palmer
Chairman
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2009
|
| Notes | 2009 | 2008 |
|
|
| £ | £ |
|
|
|
|
|
| Revenue |
| 2,880,197 | 2,028,918 |
| Cost of sales |
| (2,167,579) | (1,236,639) |
|
|
|
|
|
| Gross profit |
| 712,618 | 792,279 |
| Other income |
| 14,332 | 22,292 |
| Administrative expense |
| (1,891,384) | (1,132,349) |
|
|
|
|
|
| Loss from operations |
| (1,164,434) | (317,778) |
| Finance cost | 2 | (11,823) | (18,597) |
| Finance income | 2 | 381 | 1,438 |
|
|
|
|
|
| Loss before tax |
| (1,175,876) | (334,937) |
| Tax expense | 3 | - | (3,304) |
|
|
|
|
|
| Loss for the year from continuing operations |
| (1,175,876) | (338,241) |
| Loss from discontinued operations net of tax |
| - | (8,305) |
|
|
|
|
|
| Other comprehensive income |
| (1,175,876) | (346,546) |
| Exchange difference on translating foreign operations |
|
(107,253) |
154,823 |
|
|
|
|
|
| Total comprehensive income for the period |
| (1,283,129) | (191,723) |
|
|
|
|
|
| Loss for the year attributable to |
|
|
|
| Owners of the parent |
| (1,175,876) | (338,241) |
| Minority interest |
| - | - |
|
|
|
|
|
|
|
| (1,175,876) | (338,241) |
|
|
|
|
|
| Total comprehensive income attributable to |
|
|
|
| Owners of the parent |
| (1,283,129) | (191,723) |
| Minority interest |
| - | - |
|
|
|
|
|
|
|
| (1,283,129) | (191,723) |
|
|
|
|
|
| Loss per share attributable to the owners of the parent during the year |
|
|
|
| Basic and diluted (pence) | 4 | (1.76) | (1.09) |
|
|
|
|
|
| Loss per share from continuing operations |
|
|
|
| Basic and diluted (pence) | 4 | (1.76) | (1.06) |
|
|
|
|
|
| Loss per share from discontinued operations |
|
|
|
| Basic and diluted (pence) | 4 | - | (0.03) |
|
|
|
|
|
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2009
|
|
| 2009 | 2008 | 2007 |
|
|
|
|
| (Restated) |
|
|
| £ | £ | £ |
| Assets |
|
|
|
|
| Non-current assets |
|
|
|
|
| Goodwill |
| 285,653 | 105,028 | 105,028 |
| Property, plant and equipment |
| 191,106 | 202,479 | 178,280 |
|
|
| 476,759 | 307,507 | 283,308 |
|
|
|
|
|
|
| Current assets |
|
|
|
|
| Inventories |
| 428,202 | 404,169 | 281,961 |
| Trade and other receivables |
| 1,726,873 | 547,692 | 787,796 |
| Cash and cash equivalents |
| 840,122 | 22,059 | 98,717 |
|
|
| 2,995,197 | 973,920 | 1,168,474 |
|
|
|
|
|
|
| Total assets |
| 3,471,956 | 1,281,427 | 1,451,782 |
|
|
|
|
|
|
| Liabilities |
|
|
|
|
| Current liabilities |
|
|
|
|
| Trade and other payables |
| 1,254,803 | 436,898 | 421,084 |
| Financial liabilities - interest bearing loans |
| 21,284 | 109,096 | 118,483 |
| Corporate tax |
| - | 3,304 | - |
|
|
| 1,276,087 | 549,298 | 593,567 |
|
|
|
|
|
|
| Non-current liabilities |
|
|
|
|
| Financial liabilities - interest bearing loans |
| 1,101 | 25,135 | 13,498 |
|
|
|
|
|
|
| Total liabilities |
| 1,277,188 | 574,433 | 553,065 |
|
|
|
|
|
|
| Net assets |
| 2,194,768 | 706,994 | 898,717 |
|
|
|
|
|
|
| Equity |
|
|
|
|
| Called up share capital |
| 4,317,217 | 3,766,748 | 3,759,763 |
| Share premium |
| 4,315,269 | 2,233,163 | 2,186,108 |
| Shares to be issued reserve |
| - | - | 54,040 |
| Merger reserve |
| 128,571 | 128,571 | 128,571 |
| EBT share reserve |
| (25,000) | - | - |
| Retained earnings |
| (6,561,783) | (5,549,235) | (5,202,689) |
| Foreign exchange reserve |
| 20,494 | 127,747 | (27,076) |
|
|
|
|
|
|
| Attributable to equity holders of the parent |
| 2,194,768 | 706,994 | 898,717 |
| Minority interest |
| - | - | - |
|
|
|
|
|
|
| Total Equity |
| 2,194,768 | 706,994 | 898,717 |
|
|
|
|
|
|
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2009
|
|
Share capital £ |
Share premium £ |
Shares to be issued £ |
Retained earnings £ | Translation of foreign operations £ |
Merger reserve £ | EBT share reserve £ |
Total £ |
|
|
|
|
|
|
|
|
|
|
| Balance at 1 January 2008 (Restated) |
3,759,763 |
2,186,108 |
54,040 |
(5,202,689) |
(27,076) |
128,571 |
- |
898,717 |
| Issue of share capital | 6,985 | 47,055 | (54,040) | - | - | - | - | - |
| Total comprehensive income for the period |
- |
- |
- |
(346,546) |
154,823 |
- |
- |
(191,723) |
| Balance at 31 December 2008 |
3,766,748 |
2,233,163 |
- |
(5,549,235) |
127,747 |
128,571 |
- |
706,994 |
|
|
|
|
|
|
|
|
|
|
| At 1 January 2009 | 3,766,748 | 2,233,163 | - | (5,549,235) | 127,747 | 128,571 | - | 706,994 |
| Issue of share capital | 550,469 | 2,229,761 | - | - | - | - | - | 2,780,230 |
| Share issue costs | - | (147,655) | - | - | - | - | - | (147,655) |
| Share option expense | - | - | - | 163,328 | - | - | - | 163,328 |
| EBT share purchase | - | - | - | - | - | - | (25,000) | (25,000) |
| Total comprehensive income for the period |
- |
- |
- |
(1,175,876) |
(107,253) |
- |
- |
(1,283,129) |
| At 31 December 2009 | 4,317,217 | 4,315,269 | - | (6,561,783) | 20,494 | 128,571 | (25,000) | (2,194,768) |
|
|
|
|
|
|
|
|
|
|
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2009
|
|
| 2009
| 2008 Restated |
|
|
| £ | £ |
| Cash flows from operating activities |
|
|
|
| Loss for the year |
| (1,175,876) | (343,242) |
| Adjustments for |
|
|
|
| Depreciation charges |
| 63,763 | 57,032 |
| Share based payment expense |
| 163,328 | - |
| Exchange translation (gain) / loss |
| (81,157) | 103,060 |
| Finance costs |
| 11,797 | 18,597 |
| Finance income |
| (382) | (1,438) |
|
|
| (1,018,527) | (165,991) |
|
|
|
|
|
| (Increase)/decrease in trade & receivables |
| (1,114,410) | 178,320 |
| Increase in trade & payables |
| 828,747 | 44,086 |
| Increase in inventories |
| (46,515) | (116,345) |
| Net cash used in operating activities |
| (1,350,705) | (59,930) |
|
|
|
|
|
| Cash flows from investing activities |
|
|
|
| Purchase of property, plant and equipment |
| (64,690) | (29,468) |
| Investment in subsidiary |
| (180,625) | - |
| Interest received |
| 382 | 1,438 |
| Net cash (used in)/generated from investing activities |
| (244,933) | (28,030) |
|
|
|
|
|
| Cash flows from financing activities |
|
|
|
| Repayment of loans |
| - | (14,184) |
| Repayment of finance leases |
| (21,963) | (19,543) |
| Repayment of bank loans and borrowing |
| (86,976) | (10,397) |
| Proceeds on issue of shares |
| 2,507,575 | - |
| Proceeds from sale and leaseback |
| - | 46,374 |
| Purchase of EBT shares |
| (25,000) | - |
| Interest paid |
| (11,797) | (18,420) |
|
|
|
|
|
| Net cash generated from/(used in) financing activities |
| 2,361,839 | (16,170) |
|
|
|
|
|
| Net increase/(decrease) in cash and cash equivalents |
| 766,201 | (104,130) |
| Cash and cash equivalents at start of year |
| 22,059 | 98,717 |
| Exchange gains on cash and cash equivalents |
| 51,862 | 27,472 |
|
|
|
|
|
| Cash and cash equivalents at end of year |
| 840,122 | 22,059 |
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2009
1. ACCOUNTING POLICIES
Basis of preparation
This preliminary financial information does not constitute the Group's statutory accounts for the years ended 31 December 2009 or 31 December 2008. Statutory accounts for the years ended 31 December 2009 and 31 December 2008 have been reported on by the Independent Auditors. The Independent Auditors' Report on the Annual Report and Financial Statements for 2008 was unqualified and did not contain a statement under 237(2) or 237(3) of the Companies Act 1985. The audit report for the year ended 31 December 2008 included an emphasis of matter in respect of a material uncertainty regarding the achievability of the forecasts and the ability to obtain additional funding which may have cast doubt over the Group's ability to continue as a going concern. The Independent Auditors' Report on the Annual Report and Financial Statements for 2009 was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The audit report for the year ended 31 December 2009 also included an emphasis of matter, which is reproduced below:
Emphasis of matter - going concern
In forming our opinion, which is not qualified, we have considered the adequacy of the disclosures in note 1 of the financial statements concerning the Group's ability to continue as a going concern. These include the following material uncertainties:
·; the achievability of forecasts and key assumptions within the forecasts; and
·; the ability to obtain additional funding from alternative sources should it be required.
These conditions, along with other matters as disclosed in note 1, indicate the existence of material uncertainties which may cast significant doubt over the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.
Statutory accounts for the year ended 31 December 2008 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2009 will be delivered to the Registrar in due course.
The accounting policies are unchanged from those disclosed in the Group's Annual Report and Financial Statements for the year ended 31 December 2008, except for the adoption of IAS 1 "Presentation of Financial Statements" (Revised) and IFRS 8 Operating Segments. These are disclosure standards and have not had any impact on the results or net assets of the Group.
Going concern
In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. The Group has made an operating loss from continuing operations for the year ended 31 December 2009.
In March 2009 the Group established the new business venture Active Energy Limited. In order to develop this new business while at the same time supporting the existing gas ignition business, the Company has progressively raised additional funds of £2,632,575 net of expenses through three share placings in March, July and December 2009 together with a new share issue to fund the acquisition of further shares in Active Energy in August 2009.
Management has prepared detailed cash flow forecasts for the existing business and for the new venture for the following two financial years.
For the gas ignition business the forecasts indicate that sales revenues in 2010 could return to levels similar to that achieved in 2008 but only modest growth can be expected in 2011.
The new business Active Energy is now established with a regular revenue stream, it has recently been enlarged and strengthened with additional management, in order to achieve a greater market share and significantly increased volume of sales, however there does remain some uncertainty over the achievability of the forecast revenues.
Equally if the demand exceeds expectation the business will need to be expanded rapidly.
It is therefore acknowledged that there could be a need for additional funding. The Directors believe there are a number of options available to them to meet any additional funding requirements, which include establishing a new invoice discounting facility in respect of the trade receivables of Active Energy, or a further placing of shares.
Having reviewed the cash flow forecasts and key assumptions, together with assessing the possible options for additional funding, the Directors have a reasonable expectation that the Group will be able to meet its liabilities as they fall due for the foreseeable future. It is on this basis that the Directors consider it appropriate to prepare the Group's financial statements on a going concern basis.
However for the reasons described above, the Directors recognise that there are material uncertainties that may cast doubt on the Group's ability to continue as a going concern, and therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. These material uncertainties comprise:
- the achievability of forecasts and key assumptions within the forecasts; and
- the ability to obtain additional funding from alternative sources should it be required.
Prior year adjustments
In the 2008 financial statements it was reported that on 15 January 2008 165,176 new ordinary 1p shares were issued to Dr Leon Sharples with consideration of 8.5p per share as part of his termination agreement and 533,333 new ordinary 1p shares with consideration of 7.5p per share were allotted Millstream Solutions Limited as part of their loan restructure. This issue of new shares had previously been announced on 6 December 2008. Following advice received from the Financial Reporting Review Panel the Company acknowledges that the proceeds of these issues should have been included within equity at 31 December 2007, as it represented an obligation to issue a fixed number of shares at a fixed price; the opening balance for equity for 2008 has been restated in these Financial Statements. The Financial Reporting Review Panel advises that in view of this correction together with a correction regarding the disclosure of write back of inventory provisions, details of which are provided in the Annual Report and Financial Statements, the Panel considers its inquiry closed.
2. Net Finance Costs
|
| 2009 | 2008 |
|
| £ | £ |
|
|
|
|
| Finance income: |
|
|
| Deposit account interest | 21 | 658 |
| Interest on other loans | 360 | 780 |
|
| 381 | 1,438 |
| Finance expense: |
|
|
| Interest on shareholder loan | 593 | 4,179 |
| Finance charges payable under finance leases and hire purchase contracts | 3,484 | 3,487 |
| Factoring interest and fees | 7,746 | 10,931 |
|
| 11,823 | 18,597 |
| Net finance cost | 11,442 | 17,159 |
3. Tax
Analysis of tax charge
|
|
| 2009 | 2008 |
|
|
| £ | £ |
|
|
|
|
|
| Current tax: |
|
|
|
| Foreign corporation tax |
| - | 3,304 |
Factors affecting the tax charge
The tax assessed for the year ended 31 December 2009 is higher (2008: higher) than the standard rate of corporation tax in the UK. The difference is explained below.
|
| 2009 | 2008 |
|
| £ | £ |
|
|
|
|
| Loss before tax | (1,175,876) | (343,242) |
|
|
|
|
| Loss multiplied by the standard rate of corporation tax in the UK of 28% |
(329,245) |
(96,108) |
| Effects of: |
|
|
| Expenses not deductible for tax purposes | 3,951 | 12,080 |
| Non taxable income | - | (20,217) |
| Current year tax losses | 338,194 | 114,213 |
| Utilisation of tax losses | - | (124) |
| Excess of capital allowances over depreciation on qualifying assets |
(12,900) |
(453) |
| Other timing differences | - | (6,306) |
| Difference in tax rates | - | 219 |
| Total tax | - | 3,304 |
|
|
|
|
4. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all potentially dilutive ordinary shares.
Reconciliations are set out below.
|
| 2009 | ||
|
|
Earnings £ | Weighted Average number of shares |
Per-share amount pence |
|
|
|
|
|
| Basic EPS |
|
|
|
| Loss attributable to ordinary shareholders | (1,175,876) | 66,806,784 | (1.76) |
| Effect of dilutive securities |
|
|
|
| Options | - | 6,400,886 | - |
|
|
|
|
|
| Diluted loss per share | (1,175,876) | 73,207,670 | (1.76) |
|
|
|
|
|
| Continuing operations |
|
|
|
| Basic EPS |
|
|
|
| Earnings attributable to ordinary shareholders | (1,175,876) | 66,806,784 | (1.76) |
| Effect of dilutive securities |
|
|
|
| Options | - | 6,400,886 | - |
|
|
|
|
|
| Diluted earnings | (1,175,876) | 73,207,670 | (1.76) |
|
|
|
|
|
|
|
|
|
|
Diluted EPS shows a lower loss per share than the basic loss per share and therefore has not been disclosed.
|
| 2008 | ||
|
|
Earnings £ | Weighted Average number of shares |
Per-share amount pence |
|
|
|
|
|
| Basic EPS |
|
|
|
| Loss attributable to ordinary shareholders | (346,546) | 31,920,728 | (1.09) |
| Effect of dilutive securities |
|
|
|
| Options | - | 3,501,182 | - |
|
|
|
|
|
| Diluted loss per share | (346,546) | 35,421,910 | (1.09) |
|
|
|
|
|
| Continuing operations |
|
|
|
| Basic EPS |
|
|
|
| Loss attributable to ordinary shareholders | (338,241) | 31,920,728 | (1.06) |
| Effect of dilutive securities |
|
|
|
| Options | - | 3,501,182 | - |
|
|
|
|
|
| Diluted loss per share | (338,241) | 35,421,910 | (1.06) |
|
|
|
|
|
| Discontinued operations |
|
|
|
| Basic EPS |
|
|
|
| Loss attributable to ordinary shareholders | (8,305) | 31,920,728 | (0.03) |
| Effect of dilutive securities |
|
|
|
| Options | - | 3,501,182 | - |
|
|
|
|
|
| Diluted loss per share | (8,305) | 35,421,910 | (0.03) |
|
|
|
|
|
5. Post balance sheet events
On 1 February 2010 the Company announced that the subsidiary Active Energy Limited had signed a Memorandum of Understanding ("MOU") with Southern Electric Contracting a wholly owned subsidiary of Scottish and Southern Energy plc. The MOU includes, amongst other things, the commercial terms relating to the marketing, sale and installation by SEC of Active Energy's VoltageMaster product as the preferred voltage optimisation device for its commercial clients.
Southern Electric Contracting is one of the largest mechanical and electrical contractors in the United Kingdom operating from 63 regional offices and employing approximately 4,000 experienced engineers and electricians nationwide. The MOU also provides that SEC will become Active Energy's preferred installation sub contractor.
Active Energy has subsequently initiated a number of initiatives in order to maximise the potential benefits arising from this MOU including formal training programs for Active Energy sales and installation staff, the establishment of a rebate scheme that allows Southern Electric Contracting to benefit should sales ensuing from the relationship exceed certain levels.
On 17 November 2009 at an Extraordinary General Meeting the shareholders of the Company approved a proposal for the Company to make an application to the High Court for the cancellation of all the Company's deferred shares and a reduction in the Company's share premium account in order to create sufficient reserves and thus eliminate the Company's accumulated losses of £5,599,643, which existed as at 31 December 2008. The Company received an Order from the Court confirming the reduction of capital and approving the new Statement of Capital on 18 February 2010.
This means that the Authorised Share Capital now comprises 500,000,000 new ordinary shares of 1 pence each. The new Statement of Capital indicates that there are 86,994,398 allotted issued and fully paid new ordinary shares with value of £86,994.
6. Dividends
The Directors will not be recommending the payment of a dividend.
7. Availability of Report & Accounts
Copies of the Report and Accounts will be posted to shareholders shortly and will be available from the Company's registered office, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU and the Company's website http://www.cinpart.com.