Last checked at 4 Oct 2016 07:00
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR).
4th October 2016
CAP-XX Limited
("CAP-XX" the "Company")
Audited results for the year ended 30 June 2016
CAP-XX Limited, a world leader in the design and manufacture of thin, flat supercapacitors and energy management systems, is pleased to announce its audited results for the year ended 30 June 2016.
Key highlights
Sales revenue of A$5.0 million (2015: A$4.4 million) reflected a 12% year on year increase Gross Margin (GM) increased to 52% (2015: 31%) on a like-for-like basis, reflecting significant progress in the transformation of the CompanyGood progress in monetization of intellectual property and the sale of small and large supercapacitorsCompleted the sale of a non-exclusive licence with AVX with upfront licence fees and guaranteed royalty payments spread over the first three yearsAVX product launched in September 2016 and first quarterly royalty payment receivedThe Company benefitted from a sharp increase in royalties from Murata, up 117% following a 106% rise in the previous yearAchieved first design win for the new Thinline product range for a smart credit card for customer delivery in 2017. A thinner 400 micron product is under developmentSignificant operational cash savings realised and the Company has identified further cost savings, which should incrementally improve gross margin and enhance future product competiveness During FY16, the company expanded its development efforts for automotive applications both in terms of new customers and productCash reserves at the end of June were A$0.3 million. A$1.7m was received from AVX following the year end. R&D tax rebate from the Australian Tax Office of A$1.5 million (2014: A$1.1 million) is also expected to be received in October 2016
Anthony Kongats, CEO of CAP-XX said:
"We are pleased with the progress made in commercialising our small and large supercapacitor products and the success of our technology licence wins, which have seen new products launched to market by both Murata and AVX and a consequent strengthening of CAP-XX's licence income. We look forward to announcing more progress in 2017."
For further information contact:
CAP-XX Limited |
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Anthony Kongats (Chief Executive Officer) | +61 (0) 2 9428 0139 |
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Kreab (Financial PR) |
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Robert Speed | +44 (0) 20 7074 1800 |
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Allenby Capital (Nominated Adviser and Broker |
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David Hart / Alex Brearley | +44 (0) 20 3328 5656 |
More information is available at www.cap-xx.com
Notes to Editors:
CAP-XX (LSE: CPX) is a world leader in the design and manufacture of thin, flat supercapacitors and energy management systems used in portable and small-scale electronic devices, and to an increasing extent, in larger applications such as automotive and renewable energy. The unique feature of CAP-XX supercapacitors is their very high power density and high energy storage capacity in a space-efficient prismatic package. These attributes are essential in power-hungry consumer and industrial electronics, and deliver similar benefits in automotive and other transportation applications. For more information about CAP-XX, visit www.cap-xx.com
Chairman's statement
This has been another year of strong progress as the Company has continued to diversify its income base from the sales of its traditional supercapacitor products with the sale of a non exclusive licence to AVX; another year of plus 100% growth in Murata royalties; expansion of our efforts in the automotive markets and the first design win for the Thinline range of supercapacitors.
Licensing activity for the past twelve months has been extremely positive, with the finalisation of the AVX license and the broadening of the Murata agreement. CAP-XX licensed its patents to AVX on a non-exclusive basis for a range of prismatic and cylindrical sizes of supercapacitors. Under the terms of the licence, CAP-XX will receive annual licence fees, plus quarterly guaranteed minimum royalty payments, over a three-year period denominated in Sterling, reflecting the fact that CAP-XX is quoted on AIM. Thereafter, CAP-XX will receive a 5% royalty for the life of the patents, with the royalty being based on the volume of sales of supercapacitors sold by AVX covered by CAP-XX patents. The initial licence fee of £1 million, which has been booked as revenue in the FY16 financial year, was paid by AVX in early July 16, with the first royalties under this licence already having been received. For the Company, the AVX licence deal is very significant. Not only does it provide further validation of the strength of the CAP-XX intellectual property but it also validates our belief that the Company can successfully monetise the value of this intellectual property in ways other than through direct product sales. In addition, this agreement opens up new income streams and sales markets for CAP-XX and new possibilities for ongoing collaboration.
In April 2016, Murata and CAP-XX reached agreement to broaden the existing licence agreement to include battery markets and additional supercapacitor sizes. Following this agreement, Murata announced in late June 16 that it was launching a range of lithium ion batteries. Murata has confirmed that mass production of the new device commenced in June 2016 and that it plans to expand its product line-up to meet future demand for large capacity devices. Royalty payments from Murata continue to grow with total royalties for the year ended June 16 totalling A$238K. This is the second successive year that Murata's royalties have doubled from the previous year (2015: A$108K). The Board remains confident that the cash flow from Murata's royalty stream will continue to grow.
Total sales revenue for the year to 30 June 16 increased by A$0.6 million to AUD$5.0 million compared to A$4.4 million in 2015. The CAP-XX sales revenue has also seen a significant shift in mix. While sales from licencing and royalties have increased, sales of the traditional small supercapacitors have declined over the last twelve months as many of CAP-XX's customers have experienced difficult market conditions and looked to reshape their own businesses. Some of the Company's traditionally strong markets such as Point of Sale (POS) and handheld terminals are in a state of transition, just as new market opportunities for CAP-XX like smart credit cards, security cards, energy harvesting and wearables take off. Overall, the Board remains pleased with the number of large volume opportunities that are currently being pursued by the CAP-XX sales team. The majority of these opportunities are in the Internet of Things (IoT) market and may require even thinner ultrathin supercapacitors at 0.4mm compared to our current 0.6mm Thinline products. A 0.4 mm product is under development. The Company is focussed on accelerating the adoption of its products into these key target markets.
Total operational expenditure has increased on a year-on-year basis. The Board has made a conscious decision to invest resources in R&D, product development and manufacturing to lower the Group's manufacturing costs and to develop products with higher gross margins. The majority of the additional expense incurred was eligible research and development expenditure and will be subject to a 45% subsidy from the Australian Federal Government, with the total tax claim for the year to June 2016 increasing to A$1,537K (2015: A$1,127K). The Company also took advantage of an offer for a A$1m line of credit facility to fund any delay in the payment of this tax claim. This facility is expected to be repaid in full in October 2016. In the financial year ended June 2016, CAP-XX also incurred "one-off" expenses associated with the AVX and Murata licensing agreements plus costs associated with the re-negotiation of the Lane Cove lease. Due to the timing of these new arrangements, the full financial benefit was not realised in the year to 30 June 2016 but will be in the current and future financial years.
The operating result for the year to June 2016 was a loss of A$1.13million (2015: loss of A$1.9 million). The result for the year to June 2016 also includes a one-off catch up in employee share options expense, due to timing and vesting conditions with additional expense being recognised in the early years after the grant of the options, rather than on a straight line basis. However, if the options are never exercised and eventually expire there is no possibility to write back this expense and associated reserve. Consequently, while the Board acknowledges that it has no alternative but to comply with the accounting standards, it strongly rejects the premise behind this accounting treatment as it severely disadvantages technology start-ups. As a result of this change in accounting treatment, in the year to 30 June 2016, there was an increase in the expense related to these share based payments of A$289K to a total of A$416K (from a total of A$127k in FY15).
The past twelve months have seen increasing market interest in CAP-XX's large cell products. In addition to the truckStart module for heavy vehicles, the Company has also developed the powerModule for passenger vehicles. Several sales of both truckStart and powerModule products and individual cells have been made for heavy vehicle and passenger vehicle applications globally. While these sales are still for evaluation purposes, the results from customers to date have been excellent and discussions are continuing with potential partners on how best to manufacture, market and finance these new business streams. Further design refinement and development of the large cell supercapacitor is continuing to ensure that our customers' expectations are realised, if not bettered. And while the majority of interest for our large supercapacitors is coming from international automotive markets, we have also received interest from the grid and stationary energy storage markets.
We are looking forward to further positive progress in the coming year.
Patrick Elliott
Chairman 4th October 2016
Business Review
Review of Operations and Activities
The signing of the AVX licence is a further endorsement of our strategy to develop substantial and recurring income from our intellectual property, along with income from sales of small supercapacitors, large supercapacitors and energy storage modules incorporating our supercapacitor cells.
The royalties from Murata have continued to improve with royalties for the year to 30 June 2016 more than doubling to A$236K (2015: A$109K) for the second successive year. The level of royalty increase is pleasing and is consistent with the discussions held with Murata's management regarding sales and marketing efforts and known design wins. CAP-XX's internal sales team are also observing that Murata's presence in the traditional supercapacitor markets is becoming increasingly active and the Board remains confident that the Murata royalties will continue to increase in the foreseeable future, especially with the broadening of the Murata licence to incorporate the Murata lithium-ion battery which was released to the market in June 2016.
During the year, we continued to invest significant resources in redesigning products and processes to reduce manufacturing costs and to improve product performance as well as to reduce the number of standard products for which we carry inventory. The results to date are significant and we expect to see the benefits continuing to flow through the 2017 and 2018 financial years in increased sales.
Business Environment
The Directors believes that the CAP-XX technology provides a competitive advantage over other supercapacitor manufacturers, such as Maxwell Technologies, Ioxus, Nippon Chemicon Corporation and other Chinese and Korean competitors, as they believe that other manufacturers are unable to match the CAP-XX technology for thinness, power density, energy density and reliability. Many competitors manufacture higher-capacity, large package devices and focus on applications where the combination of thinness, energy density and power density is not an issue. In the future, new products like CAP-XX's surface mountable supercapacitor, which is under development, should offer additional significant reductions in size and cost whilst providing an increase in performance.
Portable electronic devices, one of the fastest growing segments of the electronics market, provide one of the greatest opportunities for CAP-XX's products. Driven by customer requests, manufacturers are constantly adding to the functions and applications available on these devices. This means that power management continues to be an increasingly important consideration. The other important factor is size, as devices become smaller whilst their capabilities increase. During the year, the Company was successful in winning new business from a range of markets including smart credit cards; energy harvesting; mobile phones; machine to machine (M2M) communication modules; medical products and other products targeting the internet of things (IoT). However, it also faced threats in these markets from cheaper cylindrical supercapacitors where the thin form, high power and long life of CAP-XX's products are not valued as highly as lower initial cost. In addition, our customers' markets are constantly evolving as new products and technologies threaten the incumbents. In this environment, CAP-XX needs to remain flexible to changing business conditions.
Automotive applications such as Stop-Start systems, flat battery jump-starters, hybrid electric vehicles and electric vehicles also present very attractive opportunities for CAP-XX's products. Numerous automotive OEMs and automotive Tier-1 suppliers have purchased products such as our truckStart and powerModule units for evaluation. The feedback to date has been very pleasing. During the year, additional plant and equipment was purchased and commissioned to enhance our ability to produce these large supercapacitors and to assemble them into modules suitable for use in motor vehicles. However, automotive markets have historically been slow to adopt new technology.
Opportunities
CAP-XX is continuing to refine the products it offers for the IoT, portable electronics and other markets for its traditional small and Thinline supercapacitors. The Thinline range of supercapacitors, which are just 0.6mm thick, were developed to address the space-constrained needs of the IoT. During the year, CAP-XX achieved its first design win for a smart credit card. The Company is actively pursuing many other similar applications where the feedback has been very positive. However, we have also received feedback that in some instances even at 0.6mm, the thickness may be too much and that a 0.4mm product is required for certain applications. The Company is watching these developments closely and has put in place a product development plan to launch a 0.4mm product. All of these markets are forecast to be very high volume opportunities.
CAP-XX is also concentrating on a number of automotive opportunities including heavy vehicle engine cranking with its truckStart product and micro and mild hybrid passenger vehicles with its powerModule product. The world wide interest in these and other applications for large cells has markedly increased over the past twelve months, with numerous modules being shipped to several customers for evaluation. Results to date have been very positive and indicate our performance is superior to the competition. Whilst discussions continue, the Board is hopeful that some of these opportunities will evolve into future licensing or joint venture arrangements.
We expect licencee sales from Murata and AVX to grow significantly in the coming years, as more consumer applications adopt supercapacitor technology.
One of the significant additional benefits of the Murata and AVX licencing agreements is that they validate CAP-XX's technology leadership in the field of supercapacitor and energy storage, and the potential for supercapacitors as a mainstream consumer electronics technology. The Murata and AVX product line and sales activities are also increasing our exposure to markets and customers that were previously beyond our reach. Association with Murata and AVX is also helping CAP-XX gain recognition, win acceptance for its supercapacitors, and reduce misconceptions about price and performance. It is also important that Murata's and AVX's strategy is to offer product ranges targeted at certain end markets. As such, Murata and AVX will not meet the product type or size requirements of all markets and all applications, leaving room for CAP-XX to supply these markets directly using products made by its contract manufacturers.
Strategies for Growth
The Company is exploring opportunities in several new markets to leverage its strong intellectual property and engineering expertise through new license agreements or joint ventures. Given the increasing levels of market interest in the CAP-XX technology and high performance supercapacitors, the Company believes that the IoT and automotive markets in particular offer significant opportunities for growth.
The Company continues to engage in discussions aimed at securing business with a number of global automotive and truck OEM's. We are strengthening relationships with these organisations and have regular engineering meetings with their design teams and manufacturing groups or contract manufacturers. We are unable to comment on specific clients but are pleased with overall progress and are confident that the available market for supercapacitors is increasing as manufacturers become familiar with the technology
The Company will continue to explore additional opportunities to increase the product offering both through the current distributors and direct to customers.
Research and Development
CAP-XX's R&D efforts are focused on a mix of short, medium and long term opportunities covering further cost reductions and improved product performance. CAP-XX has a research and development facility in Sydney, Australia, where a team of 16 engineers and scientists work to maintain CAP-XX's leading position in electrode, separator and electrolyte materials and their assembly into supercapacitor devices. We also have a close association with several leading, third party research institutions, whilst our Scientific Advisory Board provides the Company with clear direction on commercially relevant technologies for our ongoing R&D programme.
The market in which the Company operates is competitive and is characterised by rapid technological change. CAP-XX has a strong competitive position in all its target markets with its capability to produce supercapacitors with a high energy density and power density in a small conveniently sized flat package. CAP-XX devices are also lightweight, work over a broad temperature range and have an operating lifetime measured in years.
The Company's success depends on its ability to protect and prevent any infringements of its intellectual property. To protect this important asset, the Company has considerable intellectual property embodied in its patents covering the design, manufacture and use of its high performance supercapacitors. The CAP-XX patent portfolio currently consists of 22 patents. The Company's intellectual property strategy has been to build company value by focusing on opportunities to capture market share and exclude competition with an IP portfolio capable of generating licensing revenue. The Directors believe that comprehensive embodiments and interlocking patent groups, combined with a 'quick to file, quick to abandon' policy, have given the Company a strong and focused IP portfolio. The Board believes that the recent AVX agreement and the recent expanded Murata agreement are evidence of the strength and breadth of this portfolio and that it will be further strengthened by R&D activities currently underway.
Outlook
The major short term focus for CAP-XX is to drive the adoption of the Company's intellectual property and products, both large and small, into key target markets through future licence deals, joint ventures and direct product sales. The Company expects to see further significant progress over the next twelve months.
CAP-XX Limited
Statement of profit or loss
For the year ended 30 June 2016
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| Consolidated | |||
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| 2016 | 2015 | ||
Currency: Australian Dollars | Notes | $ | $ | ||
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Revenue from continuing operations | 1 | 4,965,448 | 4,434,642 | ||
Cost of sales | 2 | (2,359,612) | (3,080,361) | ||
Gross Profit |
| 2,605,836 | 1,354,281 | ||
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Other revenue | 1 | 25,597 | 21,011 | ||
Other income | 3 | 1,867,444 | 1,312,336 | ||
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General and administrative expenses |
| (2,589,480) | (2,046,151) | ||
Process and engineering expenses |
| (885,418) | (564,197) | ||
Selling and marketing expenses |
| (664,239) | (584,821) | ||
Research and development expenses |
| (1,548,300) | (1,306,971) | ||
Other expenses | 4 | (103,692) | (65,826) | ||
Loss before income tax |
| (1,292,252) | (1,880,338) | ||
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Income tax benefit |
| - | - | ||
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Net loss for the year |
| (1,292,252) | (1,880,338) | ||
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Loss attributable to owners of CAP-XX Limited |
| (1,292,252) | (1,880,338) | ||
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Earnings per share for loss attributable to the ordinary equity holders of the Company |
| Cents | Cents |
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Basic loss per share | 5 | (0.5) | (1.3) |
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Diluted loss per share | 5 | (0.5) | (1.3) |
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CAP-XX Limited
Statement of comprehensive income
For the year ended 30 June 2016
| Consolidated |
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| 2016 | 2015 |
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Currency: Australian Dollars | Notes | $ | $ |
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Loss for the year |
| (1,292,252) | (1,880,338) |
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Other comprehensive income |
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Items that may be reclassified subsequently to profit or loss
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Exchange differences on translation of foreign operations |
| (45,042) | (139,539) |
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Other comprehensive loss for the year, net of tax |
| (45,042) | (139,539) |
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Total comprehensive loss for the year attributable to owners of CAP-XX Limited |
| (1,337,294) | (2,019,877) |
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CAP-XX Limited
Statement of financial position
As at 30 June 2016
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| Consolidated | |
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| June 30, 2016 | June 30, 2015 |
Currency: Australian Dollars | Notes | $ | $ |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
| 331,631 | 2,643,418 |
Receivables |
| 2,078,941 | 685,192 |
Inventories |
| 1,365,524 | 1,409,463 |
Other |
| 1,700,147 | 1,252,158 |
Total current assets |
| 5,476,243 | 5,990,231 |
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Non-current assets |
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Property, plant and equipment |
| 364,695 | 301,272 |
Other |
| 236,507 | 236,507 |
Total non-current assets |
| 601,202 | 537,779 |
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Total assets |
| 6,077,445 | 6,528,010 |
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LIABILITIES |
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Current liabilities |
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Payables |
| 642,358 | 1,074,711 |
Provisions |
| 663,069 | 915,862 |
Secured Loans |
| 1,000,000 | - |
Total current liabilities |
| 2,305,427 | 1,990,573 |
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Non-current liabilities |
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Provisions |
| 65,664 | 42,487 |
Total non-current liabilities |
| 65,664 | 42,487 |
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Total liabilities |
| 2,371,091 | 2,033,060 |
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Net assets |
| 3,706,354 | 4,494,950 |
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EQUITY |
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Contributed equity |
| 94,558,726 | 94,426,347 |
Reserves |
| 4,035,574 | 3,664,297 |
Accumulated losses |
| (94,887,946) | (93,595,694) |
TOTAL EQUITY |
| 3,706,354 | 4,494,950 |
Statement of cash flows
For the year ended 30 June 2016
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| Consolidated | |
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| 2016 | 2015 |
Currency: Australian Dollars |
| $ | $ |
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Cash flows from operating activities |
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Receipts from customers (inclusive of goods and services tax) |
| 4,167,729 | 4,716,519 |
Payments to suppliers and employees (inclusive of goods and services tax) |
| (8,466,934) | (8,067,711) |
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| (4,299,205) | (3,351,192) |
Tax credit received |
| 1,127,272 | 1,172,447 |
Interest received |
| 25,597 | 21,011 |
Net cash (outflow) from operating activities |
| (3,146,336) | (2,157,734) |
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Cash flows from investing activities |
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Payments for property, plant and equipment |
| (252,788) | (92,214) |
Net cash (outflow) from investing activities |
| (252,788) | (92,214) |
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Cash flows from financing activities |
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Proceeds from issue of shares (net of costs) |
| 132,379 | 4,132,508 |
Proceeds from Loan |
| 1,000,000 | - |
Net cash inflow from financing activities |
| 1,132,379 | 4,132,508 |
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Net increase/(decrease) in cash and cash equivalents |
| 2,266,745 | 1,882,560 |
Cash and cash equivalents at the beginning of the financial year |
| 2,643,418 | 900,397 |
Effects of exchange rate changes on cash and cash equivalents |
| (45,042) | (139,539) |
Cash and cash equivalents at the end of the financial year |
| 331,631 | 2,643,418 |
Notes to the financial statements
Basis of preparation
The financial information included in this announcement does not constitute statutory accounts within the meaning of the Australian Corporations Act 2001. Whilst the financial information has been computed in accordance with Australian equivalents to International Financial Reporting standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001, this announcement does not itself contain sufficient information to comply with those requirements.
Note 1 Revenue |
| Consolidated | ||
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| 2016 | 2015 | |
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| $ | $ | |
Sales revenue |
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Sale of goods & services |
| 4,965,448 | 4,434,642 | |
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| 4,965,448 | 4,434,642 | |
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Other revenue |
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Interest |
| 25,597 | 21,011 | |
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| 25,597 | 21,011 | |
Note 2 Cost of Sale of Goods |
| Consolidated | |
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| 2016 | 2015 |
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| $ | $ |
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Direct materials and labour |
| 1,913,692 | 2,613,609 |
Indirect manufacturing expenses |
| 445,920 | 466,752 |
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| 2,359,612 | 3,080,361 |
Note 3 Other income |
| Consolidated | |
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| 2016 | 2015 |
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| $ | $ |
Foreign Exchange Gains - (net) R&D Tax Incentive |
|
17,907 1,537,925 | 185,064 1,127,272 |
Make Good provision |
| 249,856 | - |
Miscellaneous Income |
| 61,756 | - |
|
| 1,867,444 | 1,312,336 |
Note 4 Other Expenses |
| Consolidated |
| |||
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| 2016 | 2015 |
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|
| $ | $ |
| ||
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Provision for Withholding Tax Diminution |
| 108,159 | 777 |
| ||
Provision for credit notes / doubtful debts |
| (18,054) | 6,194 |
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Provision for make good on premises |
| - | 71,839 |
| ||
Provision for returns and rework |
| (9,119) | (12,984) |
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Interest Expense |
| 22,706 | - |
| ||
|
| 103,692 | 65,826 |
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Note 5 Loss per share |
| Consolidated |
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|
| 2016 | 2015 |
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|
| $ | $ |
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Net loss |
| (1,292,252) | (1,880,338) | |||
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Loss per share - undiluted |
| ($0.005) | ($0.013) | |||
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Weighted Average Share on Issue during the year |
| 269,048,064 | 146,059,771 | |||