TPG.L Regulatory News (TPG)

29 Mar 2006 07:02

Corac Group Plc29 March 2006 FOR IMMEDIATE RELEASE 29 March 2006 CORAC GROUP PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 Corac Group plc ("Corac") the intellectual property, engineering and licensinggroup specialising in compressor technology, announces its preliminary resultsfor the year ended 31 December 2005 and continued success in thecommercialisation of its technology. Operational Highlights • First contract for industrial air CS Fusion compressor signed with major global player; • Second contract for Corac's innovative industrial air turbo compressor with Loebersdorfer Maschinenfabrik AG (LMF), the Austrian compressor manufacturer who supply compressors for seismic work for the oil and gas industry, high pressure process applications, as well as PET blowers for the plastic bottle industry; • Approval by the Joint Industry Programme (JIP) for Phase 3 of the development programme for the downhole gas compression, providing budgets to build and test six downhole gas compressor modules; • Progress by our high pressure gas seals licensee, AESSEAL, to achieve technology transfer, production engineering and an effective marketing platform; • Appointment of Tom Ivings as Finance Director in January 2006 Financial Highlights • Loss before taxation of £2.0 million in the year ended 31 December 2005 (2004: loss £1.8 million) includes development costs of £1 million (2004: £1 million)• Loss per share 2.7p (2004: loss 1.9p)• Cash at year end; £3.5 million (2004: £4.1 million) with additional £1.1 million raised from Institutional Placing in January 2006 Commenting on the future, Chairman, Professor Gerry Musgrave, said: "I am most encouraged by the recent contract wins for our industrial airproducts because the industry has judged our compressors to have valuablecommercial advantages. We are delighted by the continued support of the oil and gas industry for ourdownhole gas compressor which moves into its final phases of development. Corac is well financed to fund the expected growth in the business, and istaking the necessary steps to deliver its full potential for its shareholders." For further information: Professor Gerry Musgrave, Executive ChairmanThomas Ivings, Finance DirectorCorac Group plc 01895 813463 Richard Darby, 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 EXECUTIVE CHAIRMAN'S STATEMENT Introduction Since my last statement in September, I am delighted to report that twoimportant contracts have been signed in the industrial air sector of ourbusiness, and work on the downhole compressor Joint Industry Programme has beenso encouraging that our JIP partners have sanctioned a further budget of £2million in 2006. In April 2005, Corac exhibited at the Hannover Fair in Germany where our CSFusion machine generated much interest. In partnership with AESSEAL, Corac'sdry gas seal technology has been favourably introduced to key customers and wasshown at the Offshore Europe Conference and Exhibition in September 2005. At thesame exhibition, Corac also presented its work on downhole gas compression. As aresult of these successful events, Corac's products have much greater visibilitywithin our target markets with major companies expressing great interest in ourwork, and many have visited our R&D and test facilities in Uxbridge. I am also delighted with the appointment of Tom Ivings as Finance Director witheffect from January 2006. Tom brings a wealth of experience to the Group andwill assist in the management of our transition from a research and developmentorganisation to a business that is successfully commercialising its intellectualproperty. Financial Review The operating loss for the year was £2.2 million (2004: loss £2.0 million) whichincludes development costs of £1.0 million (2004: £1.0 million). The tax credit for the year was £0.1m (2004: £0.5m). Tax losses carried forwardare £6.9m (2004: £6.0m). At the year end, the Group's cash and treasury deposits amounted to £3.5 million(2004: £4.1 million). An institutional placing of 3,528,900 new ordinary sharesin January 2006 raised £1.1 million net of expenses to augment the Company'sworking capital following the announcement of the first contract win for theindustrial air Fusion compressor and for the further development of thebusiness. Business Review Our specialist expertise in air bearings, compressor aerodynamics and powerelectronics has enabled us to address the industrial air, high pressure dry gasseal and downhole gas compression markets using common patented technology. Thevalue of this technology has been recognised by major industry participants,culminating in contracts in each of these markets. We are also engaged inon-going discussions with a number of other interested parties. Industrial Air Since the Hannover Fair last April where our CS Fusion machine was exhibited ,we have demonstrated with good results our ability to turbo-boost water injectedscrew compressors. It is the integration of our modules with othermanufacturers' products that creates multiple routes to market. The CS Fusionmachine can deliver 15% greater efficiency than competing dry screw machines,with the advantages of no oil contamination, reduced maintenance and lowercapital and operating costs. It is these characteristics which have attractedthe high level of interest in our demonstration unit. The first contract was signed in December with a major global player in thecompressor industry for the CS Fusion machine. The second contract was with anAustrian compressor manufacturer, Loebersdorfer Maschinenfabric AG supplyingcompressors for seismic work in the oil and gas industry, high pressure processapplications and PET blowers for the plastic bottle industry. Supplying turbomachines to two major companies in different application areas gives Corac theprospect of steady growth in revenues for the future. The industrial chillermarket is one further area under consideration where our technology couldprovide inherent advantages, and where the market is substantial. It isessential that the right licensee partner is identified for this segment of themarket, and discussions are ongoing. Downhole Gas Compression We are making good progress in our downhole Joint Industry Programme withsignificant milestones being achieved. Our JIP partners were pleased with theprogress we have made in the detailed design and engineering during the secondphase of the development programme, and have approved the 2006 budget. Corac'steam continues to make imaginative and innovative design solutions for theproduction of a viable demonstrator for an operating gas well. The final development phase has commenced, and will run through 2006 and 2007.Budgets are agreed for the build of six downhole gas compressor modules, whichwill undergo a comprehensive test programme in a flow loop under simulateddownhole conditions. This will lead to a field trial of a commercial prototypein a producing gas well during 2007. With the high price of energy, this project is growing in stature. A compressorplaced close to the reservoir will give optimum performance and could increaserates of gas production from brownfield sites by between 28% and 42%, assubstantiated by end-user gas operating companies. Our downhole unit also hasthe ability to lower the reservoir abandonment pressure and will enableproduction from otherwise sub-economic or depleted wells, thus increasingrecoverable reserves. We are focused on delivering this technology to ourpartners, whilst deploying a strategy that will make this a very successfulglobal business. High Pressure Dry Gas Seals The dry gas seals business is progressing in accordance with plan. Our partner,AESSEAL is gearing up for manufacture of the product as well as organising thenecessary training of its world-wide sales force to achieve early marketpenetration. Selective presentations to potential end customers have beenencouraging and Corac looks forward to future royalty revenues and engineeringdesign income from this segment of the market. Outlook & future prospects I am most encouraged by the recent contract wins in industrial air, the progresswith AESSEAL and advancement into the final phases of the Joint IndustryProgramme for the downhole gas compressor. The prospects for further gains lookencouraging. The Company is well financed to fund the expected growth in thebusiness, and is taking the necessary steps to deliver its full potential forits shareholders. Professor G MusgraveExecutive Chairman28 March 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 December 2005 2005 2004 Note £ £ Turnover 835,860 727,283 Cost of sales (795,698) (429,911) Gross profit 40,162 297,372 Development costs (974,434) (1,007,068) Other administrative expenses (1,322,160) (1,365,950) Administrative expenses (2,296,594) (2,373,018) Other operating income - grant receivable 82,737 82,762 Operating (loss) (2,173,695) (1,992,884) Net interest 182,128 215,547 (Loss) on ordinary activities before taxation (1,991,567) (1,777,337) Taxation 116,335 490,083 (Loss) for the financial year (1,875,232) (1,287,254) Loss per share Basic loss, pence per share 2 (2.7) (1.9) All results relate to continuing activities. There were no recognised gains and losses in 2005 or 2004 other than thoseincluded in the profit and loss account. CONSOLIDATED BALANCE SHEET at 31 December 2005 2005 2004 £ £Fixed assets Tangible assets 273,118 372,695 Current assetsStock and work in progress 45,571 50,000Debtors 555,728 849,840Cash at bank and in hand 3,460,665 4,082,915 4,061,964 4,982,755CreditorsAmounts falling due within one year (1,062,166) (394,218) Net current assets 2,999,798 4,588,537 Total assets less current liabilities 3,272,916 4,961,232 Capital and reservesShare capital 7,057,822 6,870,906Share premium 11,025 11,025Capital redemption reserve 575,000 575,000Own shares held by Employee Benefit Trust (299,604) (299,604)Profit and loss account (4,071,327) (2,196,095) Equity shareholders' funds 3,272,916 4,961,232 CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2005 2005 2004 £ £ £ £ Net cash outflow from operating activities (1,472,931) (1,851,049) Returns on investment and servicing of financeInterest received 182,128 215,547 Net cash inflow from returns on investment and 182,128 215,547servicing of finance Taxation 494,715 426,746 Capital expenditurePurchase of tangible fixed assets (13,078) (71,715)Sale of assets - 364 Net cash outflow from capital expenditure (13,078) (71,351) Net cash outflow before use of liquid (809,166) (1,280,107)resources and financing Management of liquid resourcesCash transferred from long-term deposits 633,437 1,282,816 FinancingNew share capital subscribed 186,916 19,050 Net cash inflow from financing 186,916 19,050 Increase in cash in the year 11,187 21,759 Reconciliation of movement in Group shareholders' funds Group Group 2005 2004 £ £ Shareholders' funds at 1 January 2005 4,961,232 6,229,436 Loss for the year (1,875,232) (1,287,254) New shares issued 186,916 19,050 Net reduction to shareholders' funds (1,688,316) (1,268,204) Shareholders' funds at 31 December 2005 3,272,916 4,961,232 Reconciliation of operating loss to net cash outflow from operating activities Group Group 2005 2004 £ £ Operating loss (2,173,695) (1,992,884) Loss on disposal of assets - 488 Depreciation 112,655 121,071 Decrease in stock and work in progress 4,429 - (Increase)/decrease in debtors (84,268) 48,924 Increase /(decrease) in creditors 667,948 (28,648) Net cash outflow from operating activities (1,472,931) (1,851,049) Reconciliation of net cash flow to movement in net funds Group Group 2005 2004 £ £ Increase in cash 11,187 21,759 Cash used to decrease liquid resources (633,437) (1,282,816) Movement in net funds in the year (622,250) (1,261,057) Net funds at 1 January 2005 4,082,915 5,343,972 Net funds at 31 December 2005 3,460,665 4,082,915 NOTES TO THE FINANCIAL STATEMENTS 31 December 2005 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 to 31 December each year. The results of subsidiaries acquired are consolidated for the periods from the date on which control passed. Acquisitions are accounted for under the acquisition method with goodwill, representing any excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired, being capitalised and amortised on a straight line basis over its estimated useful economic life. The Group incurred a loss during the year ended 31 December 2005 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. Turnover from research and development servicesfor third parties, including cost recharges, is recognised over the period suchservices are provided. All amounts exclude Value Added Tax. 2. Loss per share The calculation of basic loss per share for the year ended 31 December 2005 isbased upon a loss after tax of £1,875,232 (2004: loss £1,287,254), and a weighted average number of shares of 68,905,374 (2004: 68,683,950). Diluted loss per share is not calculated since the 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 2005 and the consolidated profitand loss account, consolidated cash flow statement and associated notes for theyear then ended have been extracted from the Group's 2005 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 2 May 2006. This information is provided by RNS The company news service from the London Stock Exchange