Last checked at 11 Dec 2008 07:00
Pursuit Dynamics plc
("Pursuit Dynamics" or "the Company")
Preliminary Results for the Year to 30 September 2008
Pursuit Dynamics plc (AIM: PDX), the developer and exploiter of PDX®, the process improvement platform technology, is pleased to announce that it has continued to make good progress in the commercialisation of its wholly owned PDX technology during the year ended 30 September 2008.
Commercial Highlights
* Ethanol: significant advances in biofuels programme
* Basilisk decontamination licensed to EADS for the European NATO countries
* Aquasonic fire protection system launched
* Food and Brewing impacted by challenging trading in these sectors
* Signed contract for the installation of a PDX Ethanol Reactor Tower (ERT) with Iroquois Bio-Energy Company LLC
Financial Highlights
* Turnover 2008 - £3.3 million (2007: £3.1 million)
* Operating loss - 2008 £8.0 million (2007 £7.0 million)
* Cash 2008 - £8.2 million (2007: £7.5 million)
Commenting on the results, Andrew Quinn, Chairman of Pursuit Dynamics Plc said:
"This has been another year of real progress for the Company and we have made strong advances towards achieving a sustainable revenue base from our groundbreaking technology. In particular, we have taken significant steps to build our business in the US bioethanol market, where we can see a clear path to profitability through the dramatic potential impact of our Ethanol Reactor Tower.
"2009 will be a challenging year for all business but despite the current economic crisis, we are confident that the real cost benefits and performance improvements that the PDX platform technology offers will result in further progress being made."
For Further Information, please contact:
Pursuit Dynamics
John Heathcote, Chief Executive Tel: +44 (0)1480 422050
Donald Bell, Chief Financial Officer
Financial Dynamics
Ben Foster / Marc Cohen Tel: +44 (0) 20 7831 3113
Cenkos Securities plc
Ivonne Cantú/Julian Morse Tel: +44 (0)20 7397 8924
Notes to Editors
- Pursuit Dynamics PLC (AIM: PDX) owns and commercialises the PDX fluid processing reactor whose benefits include significant reductions in energy usage, process acceleration and result enhancement for industries such as Bioethanol production, Food & Drink, Brewing, Fire Suppression and Decontamination.
- Pursuit Dynamics is headquartered in Huntingdon, UK and has offices in Norwalk, Connecticut, and Fallbrook, California, USA. Pursuit Processing Equipment Limited, the processing equipment division of Pursuit Dynamics, operates from its own facility in Brooklands, Surrey, UK.
- Further information is available at the Company's website: www.pursuitdynamics.com
- Publication quality photographs are available from Financial Dynamics
STATEMENT BY THE CHAIRMAN
It gives me great pleasure to report on another year of real progress for the Company during which we have made strong advances towards achieving a sustainable revenue base from our groundbreaking technology platform. The past year has not been an easy one for any of our commercial partners nor our loyal and growing customer base, but in spite of this we have continued to make significant headway in establishing our position in the areas of biofuel production, fire suppression, decontamination, brewing and food processing.
Results
The financial results for the full year are in line with expectations. Turnover for the year to 30 September increased by 7% to £3,3 million from £3,1 million.
During the year we continued to invest heavily in both research and development, and sales and marketing. The major part of our expenditure in research and development has been in our work on bioethanol. The majority of the growth in our sales and marketing expenditure has been in establishing our distribution capabilities for food processing equipment.
The operating loss increased to £8.0 million (2007: £7.0 million). The Board is not recommending a dividend at this stage in the Company's development.
At 30 September 2008 funds (cash and short term investments) stood at £8.2 million. During the year net cash outflow from investing activities increased to £5.2 million.
We raised £6.2 million net of expenses in April 2008 following the issue of 2,167,000 new ordinary shares at 300p. This fundraising has enabled us to continue with our bioethanol development and testwork programme in a commercial environment and to have confidence that we have sufficient liquidity for our foreseeable requirements ahead of achieving positive cashflow. Shareholders' funds at the year end which reflect the fundraising, offset by the increased loss for the year, were £9.9 million.
Strategy
Following seven years of significant innovation, the PDX platform technology now has proven commercial applications in a number of different areas. Pursuit Dynamic's strategy is based on a pragmatic evaluation of revenue horizons rather than just the potential size of the markets for our products. Consequently and as previously announced, we have taken significant steps to build our business in the US bioethanol market, where we can see a clear path to profitability through the dramatic potential impact of the Ethanol Reactor Tower ("ERT") to the bioethanol industry. At the same time, we continue to provide technical assistance to our licensees in fire suppression and decontamination, whilst also pursuing a direct sales model in the food and brewing markets. We are well funded and have developed strong relationships with the leaders in every industry in which we operate. This is clearly demonstrated by the agreements we have entered into and the government programmes in which we are key participants.
Board
There has been one change to the membership of the Board of Directors. Ian Smith resigned as Chief Financial Officer and Company Secretary during the year and in August we appointed Donald Bell to the Board as Chief Financial Officer and Executive Director. At the same time we appointed Dawn Sugden, our Legal Counsel, to the role of Company Secretary. Stuart Evans joined the Board in October 2007 and General Mike Ryan joined the Board in November 2007 as non executive directors.
The past year has required a huge effort from all members of staff, in particular our R&D and Engineering teams who have done an excellent job developing the ERT concept from the drawing board to a commercially viable product and who have run development programmes around the clock for extended periods of time. The Board would like to thank all of our talented and enthusiastic staff for their unrelenting efforts during this time - it has been a remarkable team effort.
Outlook
Revenues from bioethanol will start to come on stream during the first half of 2009. Royalties from our fire suppression product, which have been delayed, will also start during the year. We will continue to receive revenues from our US Government decontamination programmes and anticipate the first revenues from our agreement with EADS will commence during the year. Revenues from Food and Brewing are expected to remain under pressure and although we have a strong order book at the present time, we will continue to look at ways of improving the returns from that business.
2009 will be a challenging year for all businesses and we have already taken substantial costs out of our operations to reflect this. As a result, we enter the New Year with the right strategy and strong operations. At the same time, we are conscious that the global economy is changing rapidly and your board will watch developments within its markets keenly. Should the trading outlook change further we have significant flexibility and can adapt both our business and strategy to reflect this. Whatever the current economic crisis throws at us, we are confident that the real economic benefits and performance improvements that the PDX platform technology offers will result in further commercial progress being made.
Andrew Quinn
Chairman
REVIEW OF OPERATIONS
During 2008 solid advances were made in the commercialisation of the PDX technology in the fields of bioethanol and decontamination while sales of food, brewing and fire suppression equipment proved to be less resilient.
Bioethanol
Our financial year was dominated by our activities in the starch-based biofuels industry. The US ethanol industry will produce approximately 9.3 billion gallons in 2008, an increase of 3 billion gallons over the previous year, with an additional 1.9 billion gallons of capacity under construction at the end of 2008.
Last year we illustrated a four phase programme to take the PDX ethanol technology from test cell trials to full scale commercial validation. During the period we successfully advanced the PDX pre-treatment technology from test cell operation to full-scale production trials in a 40 million gallon per year commercial operation. This was an extremely challenging programme that required the maximum effort from all of those involved: our research and laboratory personnel, designers, logisticians, manufacturers and operators. The successful trials, held at a production facility in Oregon following a test programme conducted at the National Corn to Ethanol Research Centre in Illinois, confirmed that the PDX technology, in the form of the PDX ERT was capable of achieving yield uplifts in excess of 10%, whilst using little or no additional energy compared with conventional processes.
These results, if borne out by wide scale adoption, represent the potential for a major advance in efficiency for the US ethanol industry. Our business model is to share in the benefits achieved by the individual customer plants. We expect to see a recurring income flow based on either cost savings (i.e.less corn usage) or greater throughput (resulting in more produced ethanol). As an example, we anticipate a typical 100 million gallon per year ethanol plant would see a benefit, before Pursuit's share, of US $12 - US $18.5 million annually, based on current corn and ethanol prices. Pursuit expects to take 20% of the achieved benefit from each plant where the ERT system is installed.
In August 2008 we opened an office in Fallbrook, California, to start the roll-out of the ERT systems across the US ethanol industry. In October 2008 we announced that we had signed a Letter of Intent with Babcock and Brown Biofuels to install four ERT systems in their plants in the Midwestern states and on 4th December 2008 we announced that we had signed a contract with one of these plants, Iroquois Bio-Energy Corporation LLC, to install an ERT system in their 40 million gallon per year facility in Indiana. We expect this system to be operational in March 2009.
As with all projects where a new technology is being used in production for the first time there were inevitably some technical problems, particularly in the area of deposit build-up in the PDX reactors. I am happy to report that all of the identified problems now have a solution and we are confident that the ERT system will see a quick acceptance by the ethanol industry as we start to roll it out to our customers.
Fire suppression
ANSUL, a subsidiary of Tyco Fire and Building Products, launched the PDX FireMist® technology as part of an integrated fire protection system in June of this year under the brand name "AQUASONIC". The system's performance is revolutionary and we are confident that ANSUL have at their disposal a fire suppression system of unequalled capability.
Dave Pelton, Director of Global Marketing and Communications for Tyco Fire and Suppression comments "the AQUASONIC fire suppression system is a revolutionary water-atomizing system that uses a very efficient means of creating water droplets to generate turbulence in an enclosed space. This helps distribute the water evenly so it can get into all of the nooks and crannies to help suppress the fire as quickly and as efficiently as possible. Because of safety issues associated with CO2 systems, there has been a major push in recent years to use water-based fire suppression systems. We are excited to be at the forefront of innovation with our new water-atomizing solution, which delivers maximum performance and superior benefits through cutting-edge technology."
Decontamination
The PDX Basilisk® decontamination system is unique in its ability to defeat both airborne and surface chemical and biological threat material on a large scale. Basilisk has been proven in numerous trials both in the UK and abroad.
Both US and NATO agencies have, over the past few years, markedly increased expenditure in the area of decontamination - existing solutions are based on technologies that are over 50 years old. We believe that Basilisk represents a step forward in decontamination technology and will now enable a new and more efficient approach to the decontamination of vehicles, aircraft, buildings and personnel.
In June of this year we announced that we had licensed the Basilisk decontamination and disinfection technology to EADS for the European NATO countries. Progress has been rapid and a fully functional demonstrator was completed in October 2008. Both EADS and Pursuit Dynamics have made a number of presentations to potential customers since June and the level of interest in the EADS TransMadd system is high. EADS are currently carrying out a series of extensive tests using various contaminants and chemicals to verify the technology under stringent independent and government standards with the aim of having the system certified to European Standards in early 2009.
The following statement was issued by Jens Bauer, Head of Mobile Systems, EADS Defence and Security on the progress of the testing:
"The TransMADDS prototype has been finalized and is ready for mounting on its mobile platform (trailer). The initial functional tests of the system and controls were carried out successfully and to our satisfaction at our facilities in Immenstaad,Germany. At the same time our Partner Pursuit Dynamics has also done initial testing using a decontaminant chemical with very promising results. The Laboratory testing activities are now scheduled for early 2009".
As previously reported we won the contract for the second phase of a US government programme during the period and I am pleased to report that the total amount of around $540,000 has now been received.
Pursuit Processing Equipment Ltd (PPE)
The global liquid and prepared food equipment market, the target areas for Pursuit's Sonic® food processing systems, represents an opportunity within a $3.5 billion annual market.
PPE, which is the division of Pursuit Dynamics that is responsible for the sales of Pursuit's food and brewing equipment, had a challenging year, largely as a result of reduced capital expenditure budgets in these industries. However, the PDX systems were adopted by a number of major food producers, but due to difficult market conditions sales remained at the same level as last year at £1.3 million.
Food manufacturing
The PDX technology is now proven beyond any doubt. In food manufacturing, the PDX Sonic systems typically demonstrate much faster production times, whilst showing consistent energy savings and a reduction in a number of required ingredients. This year has seen a number of multisite global companies adopt the PDX Sonic for its ability to mass reproduce reliable, high quality food. These end products are now available in major high street stores across the UK. Overall there are food manufacturers in the UK, US, Japan, Holland, Germany and Mexico using a total of 15 PDX systems in full-time production.
Brewing
In the brewing application, the PDX Wort Heater demonstrates around a 50% reduction in energy use for the intensive wort boiling process compared with conventional systems. The brewing industry suffered higher feedstock and energy prices last year, which resulted in a considerable reduction in capital expenditure budgets. Despite this, we installed the second system into Shepherd Neame's Faversham brewery and have recently taken an order from a major global brewer for the system. In 2007we saw the impressive energy savings the PDX Wort Heater can deliver on ale, this year we have applied our technology to lager and again the results are excellent.
Intellectual Property ("IP")
IP is the core asset of our business and we take the view that the future value of Pursuit Dynamics is directly proportional to the worth of our IP suite. We take the generation, enhancement and prosecution of IP extremely seriously and invest considerable sums every year to ensure that we have the best possible resources available to us in order to protect it. Our internal IP team has built an enviable track record over the past few years and they, in turn, have access to the best external advice available. In addition, we carry full insurance that covers our legal costs in the event of a third party IP transgression or theft attempt.
As our IP portfolio matures and becomes more valuable, it is inevitable that third parties will make more frequent and determined attempts to acquire elements of it without paying us an acceptable price. This year was no exception and we successfully defeated such an attempt - a clear indication that the care we take over this aspect of our business, and our investment in the protection of our IP, is not misplaced. This clearly shows the value of our IP suite and our ability to protect it.
We made six new patent filings during the year, across a broad range of applications. This brings our patent portfolio, both granted and pending worldwide, to a total of 66.
Research and Development
We have continued to invest in our R&D capabilities and the team enjoyed another very active year. Its work has been focused in particular on the renewable fuels industries, to support the bio ethanol programme and the commercialisation of the PDX ERT.
John Heathcote
Chief Executive Officer
| CONSOLIDATED INCOME STATEMENT | ||
| for the year ended 30 September 2008 | ||
| Year ended | Year ended | |
|
| 30 Sept 2008 | 30 Sept 2007 |
|
| Unaudited £ | Unaudited £ |
| Revenue | 3,269,871 | 3,051,490 |
| Operating expenses | (11,290,245) | (10,026,108) |
| Operating loss | (8,020,374) | (6,974,618) |
| Finance income | 398,585 | 383,086 |
| Finance costs | (8,959) | (15,894) |
| Loss before taxation | (7,630,748) | (6,607,426) |
| Income tax credit | 171,196 | 88,097 |
| Loss for the year after taxation | (7,459,552) | (6,519,329) |
| Attributable to | ||
| Equity holders of the company | (7,459,552) | (6,518,689) |
| Minority interest | - | (640) |
|
| (7,459,552) | (6,519,329) |
| Loss per share for loss attributable to the equity holders of the company during the year | ||
| Loss per 1p share | ||
| - Basic and diluted | (12.47) | (11.79) |
| CONSOLIDATED BALANCE SHEET |
| |
| as at 30 September 2008 | ||
|
| Group | Group |
|
| 2008 | 2007 |
|
| Unaudited | Unaudited |
|
| £ | £ |
| Non-current assets |
|
|
| Tangible fixed assets | 591,257 | 688,149 |
| Intangible fixed assets | 1,448,951 | 1,986,844 |
|
| 2,040,208 | 2,674,993 |
| Current assets |
| |
| Inventories | 103,609 | 131,856 |
| Trade and other receivables | 1,453,542 | 1,428,035 |
| Corporation tax receivable | 259,426 | 203,562 |
| Short term investments | - | 5,000,000 |
| Cash and cash equivalents | 8,202,128 | 2,518,928 |
|
| 10,018,705 | 9,282,381 |
| Current liabilities: falling due within one year | (2,160,956) | (1,761,021) |
| Net current assets | 7,857,749 | 7,521,360 |
| Non-current liabilities | - | (31,749) |
| Net assets | 9,897,957 | 10,164,604 |
|
|
|
|
| Capital and reserves attributable to equity holders of the company | ||
| Called up share capital | 613,398 | 581,049 |
| Share premium account | 31,342,483 | 24,426,597 |
| Merger reserve | 4,061,185 | 4,061,185 |
| Foreign exchange reserve | (50,452) | - |
| Profit and loss account | (26,068,657) | (18,889,330) |
| Total | 9,897,957 | 10,179,501 |
| Minority Interest in equity | - | (14,897) |
| Total equity | 9,897,957 | 10,164,604 |
| CONSOLIDATED CASH FLOW STATEMENT | ||
| for the year ended 30 September 2008 | ||
| Year ended | Year ended | |
|
| 30 Sept 2008 | 30 Sept 2007 |
|
| Unaudited | Unaudited |
| Cash flows from operating activities (see note 26) | £ | £ |
| Cash needed in operations | (6,516,457) | (5,429,010) |
| Finance costs | - | (236) |
| Interest element of finance lease payments | (8,959) | (15,658) |
| Taxation Received | 115,796 | - |
| Net cash used in operating activities | (6,409,620) | (5,444,904) |
| Cash flows from investing activities | ||
| Purchase of tangible fixed assets | (113,923) | (187,949) |
| Purchase of intangible assets | (45,060) | (56,552) |
| Proceeds from sale of fixed assets | - | 18,350 |
| Acquisition of minority interest | (20) | |
| (Increase)/decrease in short term deposits with banks | 5,000,000 | (5,000,000) |
| Finance income | 398,585 | 232,045 |
| Net cash in/(outflow) from investing activities | 5,239,582 | (4,994,106) |
| Cash flows from financing activities |
|
|
| Proceeds of ordinary share issue | 6,501,000 | 7,998,250 |
| Issuance cost of shares | (325,050) | (369,895) |
| Proceeds of options exercised | 772,285 | 289,646 |
| Capital element of finance lease payments | (35,532) | (29,693) |
| Repayment of loan | (55,983) | (2,033) |
| Net cash inflow from financing activities | 6,856,720 | 7,886,275 |
| Net increase/(decrease) in cash and cash equivalents. | 5,686,682 | (2,552,735) |
| Cash and cash equivalents at beginning of period | 2,518,928 | 5,071,663 |
| Exchange (losses)/gains on cash balances | (3,482) | - |
| Cash and cash equivalents at end of year | 8,202,128 | 2,518,928 |
Notes
The financial information presented is unaudited. The financial information for both years has been prepared in accordance with IFRS as adopted by the European Union. In prior years, the group reported under UK Generally Accepted Accounting Principals ("UK GAAP"). The reconciliations between UK GAAP and IFRS were published at the time of announcing the group's interim results for the period ended 31 March 2008.
This summary of results does not constitute the full financial statements within the meaning of s240 of the Companies Act 1985. The 2007 financial statements, prepared under UK GAAP, which were approved at the 2008 Annual General Meeting on 28 March 2008, have been reported on by the Company's auditors and subsequently delivered to the Registrar of Companies. The audit report was unqualified and did not contain a statement under s237(2) or s237(3) of the Companies Act 1985.