TPG.L Regulatory News (TPG)

16 Feb 2005 07:00

Corac Group Plc16 February 2005 FOR IMMEDIATE RELEASE 16 February 2005 CORAC GROUP PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004 Corac Group plc ("Corac") the intellectual property, engineering and licensinggroup specialising in compressor technology, announces its preliminary resultsfor the year ended 31 December 2004. Operational Highlights • Our technology is being accepted in our core markets • Significant revenue generation in 2004 • Commencement of licence revenue from AESSEAL • Revenue from first phase of Joint Industry Project • Strengthening of intellectual property portfolio; 12 further patent applications Financial Highlights • Reduced loss after tax; £1.3 million (2003: loss £1.9 million) • Development costs reduced; £1.0 million (£2003: £1.5 million) • Loss per share; 1.9p (2003: loss 2.7p) • Cash position; £4.1 million (2003: £5.3 million) Commenting on the future, Chairman, Professor Gerry Musgrave, said: "The Group has considerably enhanced its opportunities for exploring its productlines in the coming year. We are excited by these prospects and furtherannouncements in 2005 are expected indicating our progress in industrial air anddownhole sectors where the potential is substantial." For further information: Professor Gerry Musgrave, Executive Chairman Roberta Miles, Finance DirectorCorac Group plc 01895 813463 Suzanne Brocks, Ben WilleyBuchanan Communications 020 7466 5000 Notes to editors Corac is an intellectual property, engineering and licensing group, focussing onhigh speed electrical direct drive turbo machinery based on its unique expertisein gas bearings for which it holds several patents. Corac has created aninnovative 'no oil' turbo compressor together with a unique gas seal, and ispart of a joint industry programme for the downhole gas extraction industry.Further information on Corac is available on the internet at www.corac.co.uk CHAIRMAN'S STATEMENT Introduction 2004 has been a significant year for revenue generation, demonstrating that ourtechnology is being accepted in our core markets. Licence revenue started thisyear from an agreement with AESSEAL plc for the manufacture and sale of highpressure dry gas seals. Additionally, we have received revenue from the firstphase of the Joint Industry Project (JIP) where the on-going development ofCorac's downhole gas compressors is being funded by the oil and gas majors. The Group continues to strengthen and protect its intellectual propertyportfolio with a further 12 patent applications in the year, giving a totalportfolio of 45. The financial results for the year ended 31 December 2004 show a reduced lossafter tax of £1.3 million (2003: loss £1.9 million). The loss per share was1.9p (2003: loss 2.7p). Finance The operating loss for the year was £2.0 million (2003: loss £2.6 million).Development costs reduced to £1.0 million (2003: £1.5 million) reflecting theGroup's further progress in moving the technology into the commercial phase. The tax credit for the year was £0.5m (2003: £0.4 million). This arose from theGroup's decision to take research and development tax credits for 2003 and 2004in cash. Tax losses carried forward are £6.0m (2003: loss £8.0m). At the year end, the Group's cash and treasury deposits amounted to £4.1 million(2003: £5.3 million). Business Review In June, a licence agreement was signed with AESSEAL plc for the manufacture andsale of our high pressure dry gas seal. AESSEAL is ranked fourth in the worldfor sales and continues to be the fastest growing company in the sector.Corac's technology addresses the high pressure dry gas seal market, and throughour joint collaboration we should gain good financial returns. The agreementincorporates a licence fee, on-going engineering fees, and in 2005 we expect tosee the first royalty income. This success underlines the value of our patentedtechnology and business model. Corac gained further revenue in 2004 from the first phase of the JIP establishedwith global oil and gas companies - ConocoPhillips, ENI, Husky, Repsol-YPF andShell - for the on-going development of our downhole gas compressors. From ourpatents and the previous feasibility study with Shell, we have now completed thetechnology verification process. The many design aspects and the criticalcomponents have been evaluated for the severe environmental conditions threekilometres into the earth's crust where there are temperatures in excess of100oC and variable pressures of 12 bar - 100 bar with water and particlecontamination. Our JIP partners are delighted with our innovative approach tosolving these problems. We have now started the second phase covering detailedengineering design and component testing. Downhole gas compression modules areexpected to be tested in a flow loop simulating downhole conditions during 2006.Corac will continue to own any IPR generated during the project. Our unique downhole solution is expected to enhance gas recovery in someexisting wells. Whilst the technology will not be applicable to all wells, manycould benefit from extending the production plateau, accelerating production byup to 40% and increasing ultimate reserves. Preliminary market studies haveidentified in excess of 500,000 gas wells operational today and only a verysmall market penetration of this number will bring excellent returns to Corac. The know-how and patents in our technology relating to air and gas bearings,high-density permanent magnet machines, high-speed turbo machinery and powercontrol have brought innovation to our 'no-oil' turbo compressors. We havedemonstrated to selected compressor manufacturers that our full design range of100 kW to 500 kW units can be produced from just three spool sizes: 50 kW, 150kW and 250 kW. The higher power units in this range are expected to be thewinners and are subject to on-going development. During 2004, greater effort has been devoted towards finding more effective waysof penetrating the industrial air market. Our existing 50 kW spools have beensuccessfully modified to work as turbo boosting machines for a water injectedscrew compressor. The water screw machines are expected to become importantplayers in the 'oil free' market. Corac has a prototype turbo-boosted, waterscrew compressor to be known as a Fusion unit, and this has been successfullytested at full power with encouraging results. Its performance matches ourpredictions of providing 'no oil' air more efficiently and at a lower price thandry screw compressors that currently dominate this market sector. Another routeto market which is being investigated is refrigeration. Here we can use all ourturbo compressor's inherent advantages of size, weight, no oil and performancewith the added benefit of using the refrigerant gases as a lubricant which canbe easily hermetically sealed. We are in discussions with third parties toestablish the effectiveness of this additional route to market. We believe our 'no oil' compressor technology has been sufficiently developed topresent it at the Hannover Fair in April 2005. This international platform willhelp accelerate the on-going discussions with potential licensees and give othermarketing opportunities. Outlook The Group has considerably enhanced its opportunities for exploiting its productlines in the coming year. We are excited by these prospects and furtherannouncements in 2005 are expected indicating our progress in the industrial airand the downhole sectors where the potential is substantial. The Board wouldlike to thank the staff for the innovative and inspiring work achieved, and theshareholders for their continued support. Professor G Musgrave Executive Chairman 15 February 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 December 2004 2004 2003 Note £ £Turnover 727,283 11,104 Cost of sales (429,911) (10,608) Gross profit 297,372 496 Development costs (1,007,068) (1,462,880) Other administrative expenses (1,365,950) (1,106,029) Administrative expenses (2,373,018) (2,568,909) Other operating income - grant receivable 82,762 - Operating loss (1,992,884) (2,568,413) Net interest 215,547 267,769 Loss on ordinary activities before taxation (1,777,337) (2,300,644) Taxation 490,083 426,746 Loss for the financial year (1,287,254) (1,873,898) Loss per share 2 Basic loss, pence per share (1.9) (2.7) All results relate to continuing activities. There were no recognised gains and losses in 2004 or 2003 other than thoseincluded in the profit and loss account. CONSOLIDATED BALANCE SHEET at 31 December 2004 2004 2003 £ £Fixed assets Tangible assets 372,695 422,903 Current assetsStock and work in progress 50,000 50,000Debtors 849,840 835,427Cash at bank and in hand 4,082,915 5,343,972 4,982,755 6,229,399CreditorsAmounts falling due within one year (394,218) (422,866) Net current assets 4,588,537 5,806,533 Total assets less current liabilities 4,961,232 6,229,436 Capital and reservesShare capital 6,870,906 6,862,881Share premium 11,025 -Capital redemption reserve 575,000 575,000Own shares held by Employee Benefit Trust (299,604) (299,604)Profit and loss account (2,196,095) (908,841) Equity shareholders' funds 4,961,232 6,229,436 CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2004 2004 2003 £ £ £ £ Net cash outflow from operating activities (1,851,049) (2,482,985) Returns on investment and servicing offinanceInterest received 215,547 267,769 Net cash inflow from returns on investment 215,547 267,769and servicing of finance Taxation 426,746 - Capital expenditurePurchase of tangible fixed assets (71,715) (365,226)Sale of assets 364 128 Net cash outflow from capital expenditure (71,351) (365,098) Net cash outflow before use of liquid (1,280,107) (2,580,314)resources and financing Management of liquid resourcesCash transferred from long-term deposits 1,282,816 4,470,672 FinancingNew share capital subscribed 19,050 10,000Purchase of shares - (1,802,898)Investment in own shares - (101,130) Net cash outflow from financing 19,050 (1,894,028) Increase (decrease) in cash in the year 21,759 (3,670) Reconciliation of movement in shareholders' funds 2004 2003 £ £ Shareholders' funds at 1 January 2004 6,229,436 9,997,362 Loss for the year (1,287,254) (1,873,898) New shares issued 19,050 10,000 Purchase of shares - (1,802,898) Investment in own shares - (101,130) Net reduction to shareholders' funds (1,268,204) (3,767,926) Shareholders' funds at 31 December 2004 4,961,232 6,229,436 Reconciliation of operating loss to net cash outflow from operating activities 2004 2003 £ £ Operating loss (1,992,884) (2,568,413) Loss on disposal of assets 488 665 Depreciation 121,071 103,577 Decrease in stock and work in progress - 50,000 Decrease/(increase) in debtors 48,924 (271,810) (Increase) /decrease in creditors (28,648) 202,996 Net cash outflow from operating activities (1,851,049) (2,482,985) Reconciliation of net cash flow to movement in net funds Group Group 2004 2003 £ £ Increase/(decrease) in cash 21,759 (3,670) Cash used to decrease liquid resources (1,282,816) (4,470,672) Movement in net funds in the year (1,261,057) (4,474,342) Net funds at 1 January 2004 5,343,972 9,818,314 Net funds at 31 December 2004 4,082,915 5,343,972 NOTES TO THE PRELIMINARY RESULTS STATEMENTS 31 December 2004 1. Basis of preparation The accounts have been prepared in accordance with applicable United Kingdomaccounting standards and under the historical cost convention. The Group accounts consolidate the accounts of Corac Group plc and itssubsidiary undertakings drawn up to31 December each year. The results of subsidiaries acquired are consolidatedfor the periods from the date on which control passed. Acquisitions areaccounted for under the acquisition method with goodwill, representing anyexcess of the fair value of the consideration given over the fair value of theidentifiable assets and liabilities acquired, being capitalised and amortisedon a straight line basis over its estimated useful economic life. The Group incurred a loss during the year ended 31 December 2004 and furtherlosses are being incurred in the current financial period as the development ofthe compressor range and the downhole compressor and the high pressure dry gasseals continues. The accounts have been prepared on a going concern basis which assumes that theGroup will continue in operational existence for the foreseeable future. The directors are confident that sufficient funds have been raised for the nextdevelopment stage and to provide additional working capital. Therefore theybelieve it is appropriate for the accounts to be prepared on a going concernbasis. Turnover Turnover on contracts is recognised using the percentage-of-completion method.Under this method revenues recorded represent the aggregate of costs incurredduring the year and a portion of estimated profit on individual contracts basedon the relationship of costs incurred to total estimated costs for eachcontract. Revisions in estimates are reflected in the accounting period whenthe revision becomes known. Anticipated losses on contracts are charged toincome in their entirety when the losses become evident. Turnover from engineering services is recognised over the period services areprovided and turnover from up front licence fees is taken to income oncommencement of the licence. All amounts exclude Value Added Tax. 2. Loss per share The calculation of basic loss per share for the year ended 31 December 2004 isbased upon a loss after tax of£1,287,254 (2003: £1,873,898), and a weighted average number of shares of68,683,950 (2003: 69,486,068). Diluted loss per share is not calculated sincethe conversion to ordinary shares of share options would be anti-dilutive. 3. The financial information contained herein does not constitutestatutory accounts within the meaning of Section 240 of the Companies Act 1985.The consolidated balance sheet at 31 December 2004 and the consolidated profitand loss account, consolidated cash flow statement and associated notes for theyear then ended have been extracted from the Group's 2004 statutory financialstatements upon which the auditors' opinion is unqualified and does not includeany statement under Section 237 of the Companies Act 1985. 4. Copies of this statement will be available from the Company'sregistered office: Brunel Science Park, Kingston Lane, Uxbridge, Middlesex, UB83PQ. The Company's AGM will be held on 18 April 2005. This information is provided by RNS The company news service from the London Stock Exchange