CAP.L Regulatory News (CAP)

8 Apr 2008 07:00

Clean Air Power Limited08 April 2008 For immediate release 8 April 2008 Clean Air Power Limited ("Clean Air Power" or "the Company") Preliminary 2007 Results Clean Air Power Limited (AIM:CAP) the developer of Dual-FuelTM combustiontechnology for heavy-duty diesel engines today announces its results for the 12month period ended 31 December 2007. Financial Highlights €16% increase in Group revenue to £4.70m, up from £4.07m in 2006. €74% increase in revenue from core Dual-FuelTM technology to £3.04m, up from £1.74m in 2006. •Gross profit increased by 15% to £2.03m, up from £1.76m in 2006. •Net loss reduced by £0.83m to £2.90m (2006: £3.73m). •Financing package worth up to £5.00m agreed in April 2008. Operational Highlights •Development of demonstration Dual-FuelTM vehicle in cooperation with Volvo. •Establishment of Australian subsidiary operation delivered 153% revenue increase within the region. •Commencement of delivery of £1.50m vehicle system order in Australia for Mitchell Corp Pty Ltd. •Follow up £0.90m order placed by Mitchells for delivery in 2008. £€0.30m Wiseman Dairies order for Genesis vehicle system in the UK demonstrates increased momentum. •Order book in January 2008 stood at £2.70m, equating to 57% of 2007 Group revenue. Results Year Ended Year Ended 31 December 2007 31 December 2006 £'000 £'000 Group Revenue 4,704 4,072 Operating Loss (3,067) (3,690)Loss after tax (2,900) (3,729) Basic and diluted loss per (10.8p) (14.8p)share Commenting on Clean Air Power's full year results and looking at Groupprospects, John Pettitt, CEO said: "In 2007, Clean Air Power increased revenues from the core Dual-FuelTM vehicledivision by 74%, with sales of the Genesis product in the UK and considerablesales traction being generated in Australia. We continued to make good progress towards our goal of OEM cooperation and weredelighted to see a Volvo truck with Clean Air Power technology being exhibitedat a number of trade shows and conferences during the year. Clean Air Power'stechnology delivers proven reductions in carbon emissions along with significantfuel cost savings to truck operators. With the current environmental focus andwith fuel costs increasing Clean Air Power is perfectly positioned to assistmajor corporations and governments to deliver on their environmental commitmentswhile at the same time reducing transport overheads." For further details please contact Clean Air Power Tel: +44 (0)1494 527 110John Pettitt, Chief ExecutivePeter Rowse, Finance Director Buchanan Communications Tel: +44 (0)20 7466 5000,Charles RylandBen Willey Canaccord Adams Limited Tel: +44 (0)20 7050 6500Robert FindlayBhavesh Patel Notes to Editors: About Clean Air Power Clean Air Power is the developer and provider of Dual-FuelTM combustiontechnology for heavy duty diesel engines. Dual-FuelTM engines substantially cutfuel costs and carbon emissions without sacrificing the original engine'scharacteristic efficiency or reliability. Clean Air Power is well positioned toassist corporations and governments to deliver on their environmentalcommitments while at the same time reducing transport operators overheads. Initially founded in the USA in 1991, around £40m has been invested indeveloping the technology with the result that 63 patents are currently held orpending. The holding company of the Group is based in Bermuda with operationalsubsidiaries in the UK, the USA and Australia. The Group was admitted to the AIMmarket of the London Stock Exchange in February 2006. Further information on Clean Air Power is available at www.cleanairpower.com Chairman's Statement This year has seen a material increase in sales momentum for our flagshipDual-FuelTM technology and some exciting developments in our discussions withmanufacturers. We believe that our progress with manufacturers has been driven by thecommercial success in 2007 of our Dual-FuelTM vehicle technology. Sales from ourDual-FuelTM vehicle division increased by 74% to £3.04m in 2007 compared with£1.74m in 2006. In April 2008 the Company agreed a financing package to provide up to £5.00mgross proceeds for the Company between April 2008 and June 2009. The fundsraised will be used to further advance in-house product development, provideworking capital to support existing operations and to provide resources forpotential manufacturer cooperation activity. Financial Results The Group has enjoyed a good year in terms of progress with manufacturers withregard to future revenues, and has also seen revenue growth from its existingDual-FuelTM products. During the year, Group revenue was 16% higher than theprevious year at £4.70m (2006: £4.07m). This growth in revenue was generatedprincipally by Dual-FuelTM vehicle conversions in Australia. Gross profit for the year was £2.03m compared to £1.76m in the prior year. Thegross margin for the year was 43% (2006: 43%). Operating losses for the year were down to £3.07m (2006: £3.69m). The retained loss for the year after interest and taxation was £2.90m (2006:£3.73m). The basic and diluted loss per share was 10.8 pence (2006: 14.8 pence). Cash on hand at 31 December 2007 was £1.81m demonstrating lower than expectedcash burn for the year. The net assets of the Group at the year end totalled £3.74m (2006: £6.47m). Netcurrent assets at the year end amounted to £2.75m (2006: £5.93m) of which £1.81mrelates to cash balances (2006: £5.62m). Business Review In 2007 Clean Air Power increased revenues by 16% and reduced net loss by 22%thanks to a growth in sales of the company's Dual-FuelTM products. The lastquarter of 2007 saw a considerable acceleration in sales in both the UK andAustralia. Most importantly, significant progress has been made as a result ofour marketing efforts with a view to reaching a cooperation agreement with amajor manufacturer. Clean Air Power has 3 commercial divisions; Dual-FuelTM vehicles systems,Components and Emissions Reduction systems. 1) Dual-FuelTM vehicles systems The core technology of the Group gives rise to Clean Air Power's patentedDual-FuelTM system which allows a heavy duty diesel truck engine to run on acombination of both diesel and natural gas, thereby generating significantreductions in NOx, particulate and CO2 emissions as well as generating costsavings for the operator. 2007 was a very successful year for this division with sales increasing by 74%. The technology is currently available in two main variants; the interfacedproduct currently marketed in Australia and the Genesis product marketed inEurope. - Interfaced vehicle system In this solution Clean Air Power's technology is interfaced with themanufacturer's electronic engine management system. It requires the cooperationof the manufacturer and maximises the benefits in terms of carbon emissions andfuel cost savings. The current product offering is certified to EPA 02 and itcan be fitted as an after-market solution to vehicles in the Australian andSouth American markets along with markets of a number of developing countries. In order to access the important US and European markets with an interfacedproduct Clean Air Power will need to produce a new variant of this product whichcomplies with the latest engine emission regulations. The current strategyenvisages this new product being delivered under a cooperation agreement with amajor manufacturer although potentially the company could develop and market itsown engine to address opportunities in these key markets. Demand for the solution is growing, driven by the desire to reduce greenhouseemissions and the fuel cost savings available to operators. 31 units were soldin the last quarter of 2007. During 2007 a further order from Mitchell Corp PtyLtd in Australia for £0.90m followed their 2006 order for £1.50m. - Genesis vehicle system The 'Genesis' system was developed specifically to be a retro fitted productwhich can be installed without the need for formal cooperation of the enginemanufacturers. The solution does not interface directly with the vehicles ownengine management system and the emissions and fuel savings are therefore lowerthan would be expected on a fully interfaced system, but still considerable.However, the demonstrated reductions in carbon emissions and fuel costs haveproved the product to be commercially attractive. To date Clean Air Power has developed the Genesis solution for both DAF andMercedes Euro III vehicles. Clean Air Power is targeting major supermarketchains, logistics companies, parcel carriers and local authorities for its'Genesis' product. We believe these types of organisation will appreciate thefinancial benefits of converting their vehicles to gas whilst also understandingthat they will be reducing emissions of CO2. Following an initial purchase oftwo vehicles, the Company was very pleased to receive an order for 20 unitsworth £0.30m from Robert Wiseman Dairies, one of the country's leading dairyproduct suppliers. These 22 vehicles are expected to generate fuel savings of£220,000 per year and around 260 tonnes of C02 per annum for Robert WisemanDairies. In 2008 Clean Air Power continues to sell the Euro III Genesis solution. TheCompany is in the process of developing a Genesis solution that can be fitted toEuro V emission compliant trucks and plans for its implementation in 2008 are inplace. - OEM Developments Our main strategic goal is to work with vehicle and engine manufacturers toreach an agreement whereby the Dual-FuelTM technology is incorporated on theirvehicle as a standard option and develop it further with their full cooperation.In this way the benefits of our technology can be maximised. The Group has beenactively pursuing this route to market with a number of such organisations. An important and exciting event in 2007 was the development of a Dual-FuelTMdemonstration vehicle in conjunction with the Volvo Group. Volvo is one of anumber of manufacturers with whom Clean Air Power had been holding preliminarydiscussions. The heavy duty Euro V diesel truck uses an improved version ofClean Air Power's Genesis retrofit technology installed onto a Volvo 9 litrediesel engine. This was developed without direct access to the ECU software, butuses Controller Area Network (CAN) communication protocol that was jointlydeveloped to more closely integrate the Dual-FuelTM controls with the truck'sexisting systems. The Volvo demonstration truck was displayed by the Volvo Group in a presentationin Stockholm before going on to a similar demonstration in Brussels and tradeshows in northern Europe. The vehicle was exhibited by Volvo in October at theRAI show in Amsterdam, the largest truck show in Europe. In early March 2008 Clean Air Power produced another Dual-FuelTM demonstrationvehicle for the Volvo Group. A 13 litre heavy duty Mack truck was converted andexhibited by Volvo Group at WIREC 2008 (Washington International RenewableEnergy Conference). Mack Trucks Inc. is owned by Volvo Group. Clean Air Power believes that its technology could provide Volvo, and othermanufacturers, with solutions applicable to a number of different types ofvehicles on a global basis. The Volvo Group truck brands include Renault, Mack,Nissan Diesel and Volvo. In addition to trucks the Volvo Group product rangeincludes marine applications, buses, and construction equipment. Clean Air Power has submitted proposals to Volvo for the further development andcommercialisation of its technology. The Company understands the decision makinglead times involved in such discussions with manufacturers but remainsoptimistic that the proven environmental and economic benefits of its technologywill prove compelling. 2- Components Division Clean Air Power manufactures a number of the components that are used in theGroup's Dual-FuelTM technology. The Group also sells these components for sparkignited gas engines and certain other applications. Global demand for theseengines is increasing as part of the overall shift towards alternative fuels. With sales mainly in Europe and the USA, strong margins and a customer baseincluding international OEMs, this is an important contributor to the overallClean Air Power business. 2007 sales grew from £1.43m in 2006 to £1.48m. In 2007 marketing efforts havebeen increased for this division and we expect to strengthen marketing activityfurther in 2008 in order to improve awareness of our product offering. Thisbusiness tends to operate with long initial order lead times but thereafterreceives regular ongoing revenues once customers have specified one of ourproducts into their engines. Repeat orders can then be expected, often for thelife of the vehicles. Late 2007 saw increased interest in this product area withnew business being gained which is expected to continue into 2008. Growth in theComponents division will also coincide with anticipated growth of the Group'sDual-FuelTM vehicle conversion sales. 3- Emissions Reduction Division This area of our business provides solutions to very large stationary dieselengines such as those used in pumping stations. Our current market is mainly inthe USA and we provide a solution whereby the emissions from large stationarydiesel engines are reduced, using Selective Catalytic Reduction technology anddiesel particulate filtering, usually in response to the requirements of locallegislation. The business is mainly project based with a few large scale contracts generatingthe majority of the revenue, although a strategy is in place to develop revenuefrom smaller, more regular contracts. 2007 was a rather lean year for the division with sales of £0.19m being 79%below the 2006 level of £0.90m. This reduction was due to a single large projectbeing delivered in 2006 but no similar type of project being available in 2007.However, in January 2008 Clean Air Power announced a £0.50m order for thisdivision due to be delivered in the first half of the year. Outlook The sales growth generated during the last quarter of 2007 has been veryencouraging and sales in the first quarter of 2008 continue to be strong. Wehave significantly strengthened our Australian team throughout 2007 and early2008. We believe that this demonstration of commitment to the market has beenwell received and will help us build on the sales increase delivered inAustralia during 2007. The Company plans to continue to market its existing Dual-FuelTM solutions inthe UK and Australia in the coming year. In 2008 Clean Air Power plans todevelop a Dual-FuelTM solution for the UK and European market that can be fittedto a Euro V emissions compliant vehicle, a vehicle which has to meet the latestEU Emissions Regulations. Additionally in late 2008, the Company plans to launcha US04 emissions compliant product for Australia. Development of these productsis already underway. In November 2007 the Company announced that significant progress had been madewith a major manufacturer concerning possible adoption of Clean Air Power'sDual-FuelTM technology into their engines. These discussions are ongoing and theCompany believes that the flexible nature of its technology offers potentialsolutions for a range of vehicles including heavy duty trucks, mid range trucks,buses but also for generators and, in theory, any diesel engine application. In January 2008 Clean Air Power won a £0.50m order for our emissions divisionbased in Houston, Texas and the Company's overall order book was strong, withorders of £2.70m being received in January 2008. In April 2008 the Company agreed a financing package to provide up to £5.00mgross proceeds for the Company between April 2008 and June 2009. Endeavor,Capital Management LLC, a longstanding and major shareholder in the Company,currently holding 18.5% of the Company's shares, has conditionally agreed toprovide up to £4.65m of the new funds. The remaining funds will be provided byanother institutional investor which has agreed to invest approximately £0.25mand the Company's management which is investing a further £0.10m. The fundsraised will be used to further advance in-house product development, provideworking capital to support existing operations and to provide resources forpotential manufacturer cooperation activity. Looking ahead the company aims to finalise a cooperation agreement with a majormanufacturer during the coming year. Discussions are currently ongoing, andalthough progress has been somewhat slow in formalising such an agreement, weare encouraged by the recent progress that has been made to date. CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2007 Year ended Year ended 31 December 2007 31 December 2006 £'000 £'000 Revenue 4,704 4,072 Cost of Sales (2,677) (2,314) Gross profit 2,027 1,758 Administrative expenses (4,933) (4,689)Share-based payments charge (161) (759) Operating loss (3,067) (3,690) Reorganisation expenses - (196) Loss on ordinary activities before net (3,067) (3,886)finance revenue and taxation Finance revenue 171 274Finance costs (4) (117) Loss on ordinary activities before (2,900) (3,729)taxation Tax expense - - Loss for the financial period (2,900) (3,729) Basic and diluted loss per share 10.8p 14.8p All items dealt with in arriving at operating loss above relate to continuingoperations. CONSOLIDATED BALANCE SHEET At 31 December 2007 31 December 2007 31 December 2006 £'000 £'000AssetsNon-current assetsPlant and equipment 284 116Intangible assets 715 426 999 542Current assetsInventories 1,488 1,090Trade and other receivables 1,635 1,159Cash and cash equivalents 1,814 5,617 4,937 7,866 TOTAL ASSETS 5,936 8,408 Equity and liabilitiesEquity attributable to equity holders ofthe parent Ordinary share capital 15 15Accumulated loss (39,151) (36,412)Other reserves 33,504 33,410Share premium 8,982 8,982Translation reserve 391 476Total equity 3,741 6,471 Non current liabilitiesOther payables 7 - 7 - Current liabilitiesTrade and other payables 1,750 1,130Provisions 438 807 2,188 1,937TOTAL LIABILITIES 2,195 1,937 TOTAL EQUITY AND LIABILITIES 5,936 8,408 CONSOLIDATED CASH FLOW STATEMENT For the Year Ended 31 December 2007 Year ended Year endedConsolidated cash flow statement 31 December 2007 31 December 2006 £'000 £'000 Cash flows from operating activities Loss before taxation (2,900) (3,729)Adjustments for:Net finance income (167) (157)Depreciation of plant and equipment 55 161Amortisation of intangibles 311 140Share-based payments 161 759Increase in trade and other receivables (334) (496)Increase/(decrease) in trade and other payables 503 (465)Increase in inventories (398) (95)Decrease in provisions (369) (45)Other non-cash movements 12 6 Net cash outflow from operating activities (3,126) (3,921) Investing activitiesInterest received 171 274Sale of plant and equipment - 2Payments to acquire plant and equipment (226) (94)Payments to acquire intangible assets (600) (535) Net cash outflow from investing activities (655) (353) Financing activitiesInterest paid (4) (78)Proceeds from the issue of ordinary share capital - 10,587Share issue costs - (1,599)Payment of loan notes - (182) Net cash (outflow)/inflow from financing (4) 8,728activities Net(decrease)/increase in cash and cash (3,785) 4,454equivalentsNet foreign exchange differences (18) - Cash and cash equivalents at 1 January 5,617 1,163 Cash and cash equivalents at 31 December 1,814 5,617 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2007 Issued Share Translation Other Retained Total capital premium reserve reserves earnings equity £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2006 7 - - 26,734 (33,442) (6,701) Translation movements - - 476 - - 476Total income and expense - - 476 - - 476for the year recogniseddirectly in equityLoss for the year - - - - (3,729) (3,729)Total income and expense - - 476 - (3,729) (3,253)for the yearShare-based payments - - - - 759 759On cancellation of shares - - - 6,997 - 6,997and loan notesOn issue of new shares 8 10,581 - (321) - 10,268Share issuance costs - (1,599) - - - (1,599) Balance at 31 December 2006 15 8,982 476 33,410 (36,412) 6,471 Translation movements - - (85) - - (85)Foreign Exchange Movements - - - 94 - 94Total income and expense - - (85) 94 - 9for the year recogniseddirectly in equityLoss for the year - - - - (2,900) (2,900)Total income and expense - - (85) 94 (2,900) (2,891)for the yearShare-based payments - - - - 161 161 Balance at 31 December 2007 15 8,982 391 33,504 (39,151) 3,741 NOTES : 1. Segment information The Board believes the Group has three distinct business classes, VehicleConversions, Components and Emissions Reduction. The following tables present revenue, profit and certain assets and liabilityinformation regarding the Group's business segments for the years ended 31December 2007 and 31 December 2006: Year ended 31 December 2007 £'000 Vehicle Components Emissions Adjustments and Total Conversions Reduction EliminationsRevenueThird party 3,039 1,476 189 - 4,704Inter-segment 986 91 - (1,077) - Total revenue 4,025 1,567 189 (1,077) 4,704 ResultsDepreciation and (321) (34) (11) - (366)amortisation Segment (loss)/ (3,139) 85 (260) 414 (2,900)profit AssetsCapital 746 75 5 - 826expenditureOperating assets 4,207 729 143 (142) 4,937 Provisions 421 18 40 (41) 438Operating 1,873 280 76 (41) 2,188liabilities 1. Inter-segment revenues are eliminated on consolidation.2. Capital expenditure consists of additions to plant and equipment and intangible assets.3. Revenue from one customer amounted to £1,270,080 (2006: nil), arising from sales related to the vehicle conversions segment.4. Adjustments and eliminations relate to consolidation eliminations and Holding Company items. Year ended 31 December 2006 £'000 Vehicle Components Emissions Adjustments and Total Conversions Reduction eliminationsRevenueThird party 1,744 1,427 901 - 4,072Inter-segment - 86 - (86) - Total revenue 1,744 1,513 901 (86) 4,072 ResultsDepreciation and (175) (79) (47) - (301)amortisation Segment (loss)/ (3,215) (433) (472) 391 (3,729)profit AssetsCapital 596 21 12 - 629expenditureOperating assets 6,671 790 428 (23) 7,866 Provisions 739 24 44 - 807Operating 1,432 298 207 - 1,937liabilities 1. Inter-segment revenues are eliminated on consolidation.2. Capital expenditure consists of additions to plant and equipment andintangible assets.3. Adjustments and eliminations relate to consolidation eliminations and HoldingCompany items. Geographical Information The following table presents revenue information regarding the Group'sgeographical segments for the years ended 31 December 2007 and 31 December 2006. Year ended Year ended 31 December 2007 31 December 2006 £'000 £'000Revenues from external customers: UK 947 537USA 1,195 2,323Australia 1,705 674Rest of Europe 658 529Rest of World 199 9 4,704 4,072 2. Loss per Share Basic Basic loss per share is calculated by dividing net loss for the yearattributable to equity holders of the parent by the weighted average number ofCommon Shares in issue during the year. 2007 2006 Loss for the period (2,900) (3,729)Weighted average number of shares 26,905,479 25,134,312Basic and diluted loss per share (10.8p) (14.8p) The loss for the period and the weighted average number of ordinary shares forcalculating the diluted earnings per share for the period to 31 December 2007are identical to those used for the basic earnings per share. This is becausethe outstanding share options would have the effect of reducing the loss perordinary share and would therefore not be dilutive. 3. Dividend Policy In accordance with the Company's policy as set out in its admission document theCompany does not propose to declare a dividend. 4. Registered Office Copies of this statement are available at the registered office of Clean AirPower Limited at; Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. 5. Accounting Polices Prior to 2007 the Group prepared its annual financial statements under UK GAAP.For the year ended 31 December 2007 the Group is required to prepare its annualconsolidated financial statements in accordance with International FinancialReporting Standards (IFRS). 2006 has been restated accordingly. Reconciliationsbetween previously reported accounts are included in the June 2007 interimreport along with the Group's IFRS accounting policies. The preliminary results for the year ended 31 December 2007 have been approvedby the Directors. Our auditors have issued an unqualified audit report on theresults for the year ended 31 December 2007. The financial information set outabove does not constitute statutory accounts within the meaning of section 240of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange