RNS Number:6587O
Turbo Genset Inc.
14 August 2003
Thursday 14th August 2003
TURBO GENSET INC ANNOUNCES ITS RESULTS FOR
THE HALF YEAR ENDED 30 JUNE 2003
Turbo Genset Inc. ("Turbo Genset"), the innovative power generation and power
conditioning equipment provider, is pleased to announce its results for the
six-month period ended 30 June 2003.
Highlights
*SALES UP 45% TO #484,000
*MARKETING AGREEMENTS COVERING STRATEGIC REGIONS SIGNED AND BEING
FINALISED
*A FURTHER ORDER FOR #120,000 "AT SEAT POWER SUPPLIES". TOTAL ORDERS SINCE
PRODUCT LAUNCH IN EXCESS OF 800 UNITS
*CASH OUTFLOW REDUCED BY 43% TO #3.6M
*ADDITIONAL #5 MILLION FINANCE SECURED, RESULTING IN PRO-FORMA CASH
BALANCE AT 30 JUNE OF #14.2 MILLION
During the first six months of 2003, Turbo Genset made solid progress in
developing its business in the three key areas of Turbine based systems above
175kW output, Variable Speed Generator systems below 175kW output and Power
Electronics. The Company has won a series of valuable contracts in Power
Electronics and made its first commercial deliveries of the 400kW generator
systems.
The Company is also announcing today that it has signed a Memorandum of
Understanding with Cupola Limited, a Middle Eastern industrial group, which
intends to market Turbo Genset products throughout the region. In addition,
Turbo Genset is close to an agreement for marketing and systems integration with
a large industrial group that would cover the Indian subcontinent and is in
talks with several other significant potential partners in other regions of the
world to widen our marketing effort still further.
These agreements, coupled with the Company's association with the interests of
the Kadoorie family which have agreed to assist the Company in the marketing of
its products in China and the Far East, means the Company now has an
increasingly powerful and sophisticated network of international marketing
partners to secure overseas orders.
Commenting on the results, Colin Besant, Chairman, said:
"Turbo Genset continues to make steady progress. We set ourselves a series of
important goals at the time of the preliminary announcement and I am pleased to
report that we have made significant progress on all of them. Our turnover is
rising steadily and our cash outflow falling, thanks to the restructuring the
Company underwent last year."
"I am delighted to announce the agreement with Cupola Limited, which together
with the other agreements we are close to finalising will give us access to
important markets for our Distributed Power products. We continue to hold
discussions with a number of other potential partners in other regions of the
world where we believe there is demand for our products."
"Finally I would like to thank Peter Hollins, who stepped down as Interim Chief
Executive earlier this month in order to take up the position of Director
General of the British Heart Foundation. A search has begun to find a permanent
replacement, and in the meantime I have assumed the additional
responsibilities."
For further information, please contact:
Turbo Genset Inc UK Tel: +44 (0)20 8564 4460
Colin Besant, Chairman and Chief Executive
Fraser Searle, Chief Financial Officer
Turbo Genset Inc Canada Tel: +1 (905) 690 1722
Richard Kapuscinski, Business Development
Gavin Anderson & Company (PR) Tel: +44 (0)20 7554 1400
Neil Bennett
Ken Cronin
Seton Services (IR) Tel: +44 (0)20 7373 3536
Toni Vallen Fax: +44 (0)20 7792 0430
Email: toni@setonservices.com
Company Website: www.turbogenset.com
NOTES TO EDITORS
About Turbo Genset
Turbo Genset develops innovative products for power generation and power
conditioning. The Group was established in 1993 as a spin-off from Imperial
College, London and was floated on the London stock exchange in July 2000 and
soon after obtained a secondary listing in Toronto.
In July 2001, the Group acquired Intelligent Power Systems Limited (I-Power)
specialising in power electronics.
About Power Electronics
Power electronics products take a range of power inputs and condition them to
achieve outputs of precisely defined characteristics for applications such as
industrial lasers, Ultra Violet sterilization systems and railway power
electronics systems.
Forward Looking statements
This news release contains forward-looking statements. Forward-looking
statements include statements concerning plans, objectives, goals, strategies,
future events, or performance, and underlying assumptions and other statements
that are other than statement of historical fact. These statements are subject
to uncertainties and risks including, but not limited to, the ability to meet
ongoing capital needs, product and service demand and acceptance, changes in
technology, economic conditions, the impact of competition, the need to protect
proprietary rights to technology, government regulation, and other risks defined
in this document and in statements filed from time to time with the applicable
securities regulatory authorities.
Review of Operations
Turbine-based Systems
400kW Generator System
During the period under review, the Company commenced commercial deliveries of
its 400kW generator system. These deliveries will continue for the rest of the
year and into 2004 to fulfil the full order.
The Company is continuing to investigate a number of possibilities and potential
orders for 400kW gensets for countries where the requirement for air
conditioning and process heat is of importance.
1.2MW Generator System
The prospects for the Company's planned 1.2MW generator continues to be
exciting, and a number of possible launch customers have expressed an interest
in the larger product. Turbo Genset is in talks with a number of potential
engine partners and should be in a position to proceed with its chosen partner
before the end of the year. Product launch remains on target for mid 2004.
Other Generator Systems
With regard to the Company's other generator systems, good progress has been
made in the development of the 200kW high speed generator for the "Advanced
Integrated Microturbine System" ("AIMS") project. The first units are expected
to be delivered next month.
The BP Genset has been returned to the Company after an agreed period of
prototype testing during which the Genset demonstrated its ability to generate
electricity from vent gas. The Company is in discussions with a number of other
companies to re-deploy the unit.
The full scale prototypes of the Hybrid Electric Turbocharger were delivered in
early July as programmed. The units will be used to evaluate performance and
emissions improvements on larger diesel engines.
Variable Speed Generator Systems
The first two 80kW Variable Speed Generator systems ("VSG") have now been
completed, one is diesel fuelled and the other gas fuelled. Testing is well
advanced and target efficiency improvements and operation under variable loads
have been achieved.
The Company believes that the systems will have major applications in developing
countries where reliable and high quality power is required and is currently
unavailable. The VSG is ideally suited for mobile applications, where it can
provide more power in a limited space envelope.
A particular opportunity being pursued is the sale of VSG units to Turbostar,
which is the planned joint venture between Turbo Genset and Gastar of Canada. In
November 2002, the two companies signed an MOU to exploit the market for
electricity generated from coal bed methane ("CBM") and coal mine methane
("CMM").
Power Electronics
The Power Electronics operation continues to demonstrate strong demand for its
products, with total orders received this year of #1.7 million.
Rail applications
A further order for #120,000 for "At-Seat Power Supply" for use on trains has
been received from the UK rail operator, GNER, and brings the orders received
this year for this product to #457,000. Since product launch in early 2002,
total orders are in excess of 800 units and this product is becoming the
reference standard in the UK rail industry.
The Company has recently delivered two customer funded prototype Auxiliary Power
Supplies to a North American transport operator for hot weather trials in
advance of a significant vehicle upgrade programme.
The Company recently received Class A Global Supplier Approval from Alstom
covering a broad range of rail power systems. This approval was received
following an extensive audit.
Bids outstanding for major international rolling stock programmes now exceed #17
million, and although the complete procurement cycle for large capital projects
such as these is lengthy, we anticipate customer decisions to be made on a
number of them before the end of 2003.
In addition to new rolling stock opportunities, the company is seeing an
increase in the level of spares and refurbishment enquiries being received for
existing equipment in service.
High voltage
We are now in production on the launch contracts for both the major H V
programmes, the laser power supply and the water sterilisation power system.
Negotiations regarding follow on quantities are now underway.
Inverters and motor drives
The Power Electronics group has won a contract to develop a motor drive system
for a high-speed compressor application, pre-production units will be available
before the end of 2003, with the initial production quantities expected to
commence in 2004.
Marketing
The marketing strategy is to form agreements with strong international channel
partners with the capacity and resources to fully support both the sales and
service requirements for our products.
Turbo Genset is pleased to announce that it has signed an MOU with Cupola
Limited, a Middle Eastern industrial group with interests in power and water,
based in Dubai. Cupola will promote and support Turbo Genset's products through
out the Middle East where there is a demand for distributed generation based
systems, particularly systems that can provide chilled water and steam as well
as electricity.
Turbo Genset is close to an agreement for marketing and systems integration with
a large industrial group company that would cover the Indian subcontinent and is
in talks with several other significant potential partners in other regions of
the world to widen our marketing effort still further. The Kadoorie family
interests, which last month invested #5 million in the Company, and share our
belief in the future of Distributed Power, have already indicated they will
assist our marketing effort in China and the Far East.
Turbo Genset sees India, the Middle East, China and the Far East regions as
being strategically important, as its products are a good fit for the future
energy demands. Distributed Generation systems do not rely on expensive
infrastructure, such as transmission lines, and can be rapidly and inexpensively
installed.
Goals for 2003
At the time of the preliminary results in March 2003, the Company set a number
of key targets for 2003. They included;
* Developing additional sales for the 400kW generator system
* Achieving final agreement with an engine partner for the 1.2MW system
* Delivering the first AIMS generator to General Electric
* Achieving first sales of Variable Speed Generators
* Proceeding with the TurboStar joint venture
* Substantial expansion of the rail Power Electronics business
* Generating follow-on Power Electronics orders for laser and UV
sterilisation applications
Significant progress has so far been made on all of these and we hope to achieve
most, if not all, of them during the rest of the year.
Financial Review
Change in reporting currency
The Company has, with effect from 1st January 2003, changed the Group's
reporting currency from Canadian Dollars to Sterling, to align with its'
functional currency. The majority of the Group's assets and liabilities are
denominated in Sterling and the Group's net expenditure is incurred in Sterling,
which is funded from Sterling cash balances.
Reporting in Canadian Dollars gives rise to exchange gains and losses on the
translation of Sterling cash balances on consolidation. These exchange gains and
losses are included in the consolidated income statement, which can result in
significant variations in the reported results depending on the movement in the
Sterling:Canadian Dollar exchange rate.
The change to reporting the Group's Financial Statements in Sterling will
eliminate these translation exchange differences, with a resultant improvement
in understanding the financial performance of the Company.
Six months ended 30 June 2003 as compared with the six months ended 30 June 2002
Profit and loss
Revenue in the period was #0.48 million compared with #0.33 million in 2002 and
in both cases related substantially to power electronic systems.
Production costs in the period amounted to #0.79 million, resulting in a loss on
sales of #0.31 million. The loss is primarily due to the overheads attributable
to the generator system manufacturing operation, which is currently operating
below capacity. In 2002, production costs of #0.68 million resulted in a loss on
sales of #0.35 million.
Research and product development costs charged to earnings in the first half
period were #1.85 million compared with #1.70 million in 2002. Gross expenditure
increased from #2.23 million to #2.25 million and in 2003 relates primarily to
the 400kW and 1.2 MW turbine system programmes, and the variable speed generator
project. Gross expenditure in the period includes #0.41 million pre commercial
revenue (2002 - #0.13 million) mainly from the sale of 400kW systems,
#0.14 million capitalised expenditure (#0.40 million in 2002) and #0.14 million
relating to the amortisation of deferred research and product development costs
(2002 #nil).
General and administrative costs in 2002 were #1.54 million down from
#1.84 million in 2002, reflecting the savings resulting from the 2002
restructuring programme.
Lower interest rates and cash balance combine to explain the reduction in
interest income in 2003 - #0.18 million as compared with #0 35 million in 2002.
Cash flow and liquidity
Cash outflow from operating activities was #3.42 million, compared with
#4.61 million in 2002. The reduction of #1.19 million in cash outflow is
primarily due to lower working capital (#1.0 million), a higher operating loss
(#0.11 million) offset by a higher depreciation charge (#0.21 million).
Capital investment has significantly reduced to #0.37 million from #2.02 million
in 2002, primarily reflecting the near completion of the facilities investment
programme. 2003 expenditure includes capitalised development expenditure of
#0.14 million (2002 - #0.40 million) and capital expenditure of #0.23 million
(2002 - #1.62 million).
Cash outflow from financing of #0.10 million is due to loan repayments and is
consistent with 2002.
Overall the cash outflow during the first six months of 2003 was #3.70 million
compared with #6.35 million in the first quarter 2002.
Three months ended 30 June 2003 as compared with the three months ended 30 June
2002
Profit and loss
Revenue in the quarter was #0.28 million compared with #0.21 million in the
first quarter of 2002, and in both cases related substantially to power
electronic systems.
Production costs in the period amounted to #0.43 million, resulting in a loss on
sales of #0.15 million (2002 - #0.21 million). The loss is primarily due to the
overheads attributable to the generator system manufacturing operation, which is
currently operating below capacity.
Research and product development costs charged to earnings in the quarter were
#1.12 million compared with #1.31 million in 2002. Gross expenditure decreased
from #1.56 million to #1.36 million, and in 2003 relates primarily to the 400kW
and 1.2 MW turbine system programmes, and the variable speed generator project.
Gross expenditure in the quarter includes #0.26 million (2002 - #0.13 million)
pre commercial revenue principally from the delivery of 400kW generator systems,
capitalised research and product development expenditure of #nil
(2002 - #0.11 million) offset by amortisation of deferred research and product
development expenditure amounting to #0.39 million (2002 - # nil).
General and administrative costs in the quarter were #0.83 million compared with
#0.56 million in 2002. The increase is due to cost savings from the 2002
restructuring programme, offset by an adjustment in 2002 to the overheads
allocated to research and product development.
Lower interest rates and cash balance combine to explain the reduction in
interest income in 2003 - #0.08 million as compared with #0.15 million in 2002.
Cash flow and liquidity
Cash outflow from operating activities was #1.77 million in the quarter,
compared with #2.18 million in second quarter 2002. The reduction of
#0.41 million in cash outflow is primarily due to a reduction of #0.32 million
in working capital and a #0.08 million increase in the operating loss offset by
a higher depreciation charge of #0.19 million.
Capital investment has significantly reduced to #0.12 million from #0.93 million
in the 2002, primarily reflecting the near completion of the facilities
investment programme. Expenditure in 2002 includes capitalised development
expenditure of #0.12 million.
Cash outflow from financing of #0.05 million in the quarter, due to loan
repayments, is consistent with 2002.
Overall the cash outflow during the quarter was #1.86 million compared with
#2.98 million in 2002.
Balance sheet as at 30 June 2003
The Company's balance sheet remains strong, with a cash balance of #9.26 million
as at 30 June 2003 compared with #12.96 million as at 31 December 2002.
Substantially all of the Company's cash balances are denominated in Sterling.
Long-term assets have reduced slightly from #10.2 million at 31 December 2002 to
#9.81 million at 30 June 2003, due to the amortisation charge of #0.72 million
partially offset by capital investment of #0.33 million.
Net working capital at the quarter end, excluding cash balances, was #0.92
million, compared with #0.75 million as at 31 December 2002, with the increase
primarily due to inventory build up of the 400KW generator system and power
electronics products.
Restructuring provision
In September 2002 the Company implemented a restructuring plan focused on
facility consolidations and productivity improvements in its UK operations. The
provision has reduced from #0.20 million as at 31 December 2002 to #0.12 million
as at 30 June 2003. With the redundancy programme completed during the quarter,
including a #3,000 release to the profit and loss, the remaining provision
exclusively relates to property disposal.
Financing - Issue of convertible bond
On 11 July 2003, the Company completed a #5,000,000 (C$11,150,000) financing
agreement with Island Investment (Securities) Ltd. & Argun Investments Limited.
The financing comprised Convertible Notes and Warrants. The Convertible Notes
have a term of five years, bear an annual interest rate of 3.5% and are
convertible into an aggregate of 25 million Common Shares of Turbo Genset Inc.
at a conversion price of #0.20 (C$0.446) per share. The Warrants have a term of
three years and are convertible into an aggregate of 3.5 million Common Shares
of Turbo Genset Inc. at an exercise price of #0.15 (C$0.335) per share. No
commissions are payable pursuant to this financing.
The funds will be used to continue the development of products in the three key
areas of Turbine based systems above 175kW output, Variable Speed Generator
systems below 175kW output and Power Electronics, and provide working capital.
TURBO GENSET INC.
CONSOLIDATED PROFIT AND LOSS ACCOUNT - PART 1 OF 2
Notes Six months ended Six months ended
30 June 2003 30 June 2002
#'000 C$'000 #'000 C$'000
Revenue
Sales 484 1,139 334 760
Expenses
Production costs 792 1,864 676 1,539
Research and product
development 4 1,850 4,355 1,696 3,862
General and
administrative 1,543 3,632 1,844 4,199
Amortisation 413 972 339 772
-------- -------- -------- --------
4,598 10,823 4,555 10,372
-------- -------- -------- --------
Operating loss (4,114) (9,684) (4,221) (9,612)
Other income and
expense
Net interest income 185 436 348 792
Restructuring provision
release 9 3 7 - -
Foreign exchange
losses 3 (15) (35) (3) (7)
-------- ------- -------- -------
173 408 345 785
-------- ------- -------- -------
Loss for the period 1 (3,941) (9,276) (3,876) (8,827)
======== ======= ======== =======
Loss per share (2.2) p (5.3) c (2.2) p (5.0) c
-------- ------- -------- -------
Weighted average
number of shares
outstanding 175,251,346 175,231,896
TURBO GENSET INC.
CONSOLIDATED PROFIT AND LOSS ACCOUNT - PART 2 OF 2
Notes Three months ended Three months ended
30 June 2003 30 June 2002
#'000 C$'000 #'000 C$'000
Revenue
Sales 277 652 205 467
Expenses
Production costs 429 1,010 416 947
Research and product
development 4 1,117 2,629 1,312 2,987
General and
administrative 830 1,954 559 1,274
Amortisation 210 494 149 339
-------- -------- -------- --------
2,586 6,087 2,436 5,547
-------- -------- -------- --------
Operating loss (2,309) (5,435) (2,231) (5,080)
Other income and
expense
Net interest income 82 193 158 360
Restructuring provision
release 9 - - - -
Foreign exchange gains
/ (losses) 3 3 7 - -
-------- ------- -------- -------
85 200 158 360
-------- ------- -------- -------
Loss for the period 1 (2,224) (5,235) (2,073) (4,720)
======== ======= ======== =======
Loss per share (1.3) p (3.0)c (1.2) p (2.7) c
-------- ------- -------- -------
Weighted average
number of shares
outstanding 175,251,346 175,242,215
TURBO GENSET INC.
CONSOLIDATED BALANCE SHEET
Notes As at 30 June As at 31 December
2003 2002
#'000 C$'000 #'000 C$'000
Assets:
Current assets:
Cash and
short-term
deposits 9,259 20,573 12,961 32,780
Debtors 1,651 3,668 1,644 4,158
Stock and work
in progress 1,067 2,371 726 1,836
-------- -------- -------- --------
11,977 26,612 15,331 38,774
-------- -------- -------- --------
Long term assets:
Investments 300 667 300 759
Intangible
assets 4,8 4,435 9,854 4,494 11,366
Tangible
assets 8 5,078 11,283 5,404 13,667
-------- -------- -------- --------
9,813 21,804 10,198 25,792
-------- -------- -------- --------
21,790 48,416 25,529 64,566
======== ======== ======== ========
Liabilities and
Shareholders'
Equity:
Creditors: 1,796 3,990 1,615 4,085
amounts falling
due within
one year
-------- ------- -------- -------
Creditors: 436 969 406 1,027
amounts falling
due after
more than one
year
-------- ------- -------- -------
Capital and
reserves
Share capital 1,7 42,850 95,207 42,847 108,364
Exchange
adjustments 1 (69) (152) (57) (144)
Profit and loss
account deficit 1 (23,223) (51,598) (19,282) (48,766)
---------- ---------- ---------- ----------
Shareholders'
funds 19,558 43,457 23,508 59,454
--------- ---------- --------- ----------
21,790 48,416 25,529 64,566
========= ========== ========= ==========
TURBO GENSET INC.
CONSOLIDATED CASH FLOW STATEMENT
Notes Six months ended Six months ended
30 June 2003 30 June 2002
#'000 C$'000 #'000 C$'000
Cash outflow
from operating
activities 2 (3,423) (8,058) (4,613) (10,503)
Returns on
investments and
servicing
of finance
Net interest
received 184 433 373 849
--------- --------- --------- ---------
Net cash outflow
from operating
activities (3,239) (7,625) (4,240) (9,654)
Capital
investment (368) (866) (2,019) (4,597)
--------- --------- --------- ----------
Net cash outflow
before
financing (3,607) (8,491) (6,259) (14,251)
Cash flow from
financing
Proceeds from
issues of
shares - - 3 7
Loan repayment (95) (224) (90) (205)
--------- --------- --------- ---------
Cash flow from
financing (95) (224) (87) (198)
--------- --------- --------- ---------
Decrease in
cash (3,702) (8,715) (6,346) (14,449)
========= ========= =========
Cash, beginning
of the period 12,961 21,520
--------- ---------
Cash, end of the
period 9,259 15,174
========= =========
Notes Three months ended Three months ended
30 June 2003 30 June 2002
#'000 C$'000 #'000 C$'000
Cash outflow
from operating
activities 2 (1,770) (4,167) (2,177) (4,957)
Returns on
investments and
servicing
of finance
Net interest
received 82 193 164 373
--------- --------- --------- ---------
Net cash outflow
from operating
activities (1,688) (3,974) (2,013) (4,584)
Capital
investment (124) (291) (927) (2,110)
--------- --------- --------- ----------
Net cash outflow
before financing (1,812) (4,265) (2,940) (6,694)
Cash flow from
financing
Proceeds from
issues of
shares - - 3 7
Loan repayment (50) (118) (45) (103)
--------- --------- --------- ---------
Cash flow from
financing (50) (118) (42) (96)
--------- --------- --------- ---------
Decrease in
cash (1,862) (4,383) (2,982) (6,790)
========= ========= =========
Cash, beginning
of the period 11,121 18,156
---------- ----------
Cash, end of the
period 9,259 15,174
========== ==========
TURBO GENSET INC.
FINANCIAL NOTES TO THE ACCOUNTS
1 Movements in shareholders' funds
Six months ended 30 June
2003 2002
Share Exchange Profit Share Exchange Profit
Capital adjustments and loss Capital adjustments and loss
#'000 #'000 #'000 #'000 #'000 #'000
Balance at 1 January 42,847 (57) (19,282) 42,794 - (11,095)
Loss for the period (3,941) (3,876)
Exchange (loss)/gain (12) (3)
Contributed surplus 3 18
Exercise of share options 7
-------- --------- -------- ------- --------- ---------
Balance at 30 June 42,850 (69) (23,223) 42,819 (3) (14,971)
======== ========= ======== ======= ========= =========
2 Reconciliation of operating loss to net cash outflow from operating activities
Six months ended 30 June Three months ended 30 June
2003 2002 2003 2002
#'000 #'000 #'000 #'000
Operating loss for the period (4,114) (4,221) (2,309) (2,231)
Movements in working capital
balances
Decrease/(increase) in debtors (7) (261) 79 (81)
Increase/(decrease) in creditors 420 (449) 210 (135)
Decrease/(increase) in stocks
and work in progress (341) (213) (155) 29
Restructuring payments (79) - (30) -
Adjustment for amortisation (a) 724 516 440 246
Stock compensation expense 3 18 1 18
Foreign exchange (29) (3) (6) (23)
(losses)/gains
--------- -------- -------- ---------
Cash outflow from
operating activities (3,423) (4,613) (1,770) (2,177)
--------- --------- -------- ---------
(a) The total amortisation for the six months ended 30 June 2003 and
30 June 2002, and for the three months ended 30 June 2003 and
30 June 2002 includes #311,000, #177,000, #230,000 and #97,000,
respectively which is included in research and product development
expenditure in the profit and loss account.
3 Basis of preparation
The financial statements of the Company have been prepared by management
in accordance with International Accounting Standards and generally
accepted accounting principles in Canada for interim financial statements.
The financial statements have, in management's opinion, been properly
prepared using judgement within reasonable limits of materiality. These
financial statements do not include all the note disclosures required for
annual financial statements and therefore they should be read in
conjunction with the Company's audited consolidated financial statements
for the year ended 31 December 2002. The significant accounting policies
are consistent with prior years', except as noted below;
Change in reporting currency and foreign currencies
Most of the Company's operations are conducted by its United Kingdom
subsidiaries in Sterling. As only limited operations are conducted in
Canadian Dollars, in the first quarter of 2003, the Company adopted
Sterling as its reporting currency. Accordingly, the financial statements
have been prepared on that basis. Comparative figures for the prior
periods have been restated to reflect the change in reporting currency.
All numbers reported in these financial statements are stated in Sterling
unless otherwise denoted. A translation of convenience to Canadian dollars
has been included for information purposes. (Note 11).
In addition, the Group has adopted the Current Rate method to account for
the transactions of Group companies. Under this method, the income
statement and the cash flow statement items for each year, or period, are
translated into Sterling using the average rate for the year, or period,
and assets and liabilities are translated using the exchange rate at the
end of that year or period. All resulting exchange differences are
reported as a separate component of shareholders' equity.
The Current Rate method has been used to re-present the financial
statements in respect of the comparative prior periods and years.
4 Research and product development expenditure
The research and product development expenditures incurred during the
period comprise;
Six months ended 30 June
2003 2002
#'000 #'000
Research and product development 2,250 2,233
expenditure
Accrued tax credits - -
Sales of prototype and pre (412) (133)
commercial units
-------- --------
Total expenditure 1,838 2,100
Net amounts deferred during the (136) (404)
period
Amortisation of deferred 148 -
expenditure
-------- --------
Net expenditure charged to profit 1,850 1,696
and loss account
======== ========
Deferred development expenditure, net of accrued tax credits and
amortisation, at 30 June 2003 amounted to #3,294,000 (30 June 2002 -
#2,874,000). Total accrued tax credits receivable at 30 June 2003,
including those credited against deferred development expenditure, amounted
to #505,000 (30 June 2002 - #1,355,000). Capitalised development costs
comprise materials, labour and allocated overheads.
5 Segmental analysis
The Group's three reportable segments are power electronics, which is
involved in the development and manufacture of electrical power supply and
control systems, generator systems which is involved in the development and
commercialisation of electrical machines and related power electronics, and
the corporate segment, which is responsible for the financing of the Group
and other related corporate activities. The power electronics and generator
systems segments operate in the United Kingdom and corporate segment
operates in Canada.
All amounts in Power electronics Generator systems Corporate Total
#'000's
Six months 2003 2002 2003 2002 2003 2002 2003 2002
ended 30 June
Revenue 462 334 22 - - - 484 334
Net interest - 2 30 199 155 147 185 348
Amortisation 124 46 289 293 - - 413 339
Loss for the
period 708 369 2,814 3,154 419 353 3,941 3,876
Three months 2003 2002 2003 2002 2003 2002 2003 2002
ended 30 June
Revenue 255 205 22 - - - 277 205
Net interest - 3 12 105 70 50 82 158
Amortisation 61 1 149 148 - - 210 149
Loss for the
period 312 210 1,665 1,728 247 135 2,224 2,073
As at 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec
2003 2002 2003 2002 2003 2002 2003 2002
Total assets 4,244 3,739 9,372 10,384 8,174 11,407 21,790 25,529
6 Stock options granted and compensation
expense
The number of options and warrants outstanding as at 30 June 2003 and the movement during the
six month period then ended are as follows:
Options Warrants
Number Number
Outstanding at 1 January 2003 30,221,428 2,217,187
Cancelled (875,221) -
Lapsed (101,600) (1,108,594)
Granted 363,850 -
Exercised - -
----------- -----------
Outstanding at 30 June 2003 29,608,457 1,108,593
=========== ===========
During the six months ended 30 June 2003, the following stock options were granted:
Options granted Option price Option life Number of options
C$ #(a) years currently exercisable
363,850 0.25 0.10 5 -
Note a The exercise price of the options is stated in both Sterling
and C$.
The Company does not record compensation expense when stock options are
granted to employees, as disclosed in the Company's audited consolidated
financial statements for the year ended 31 December 2002. Had
compensation expense been determined based on the fair value at the grant
dates, the net loss and loss per share would have been reduced to the
pro forma amounts indicated below:
Six months Six months
ended ended
30 June 2003 30 June 2002
Net loss for the period (#'000)
as reported (3,941) (3,876)
proforma (4,006) (3,891)
Loss per share - basic and diluted (in UK pence)
as reported (2.2) (2.2)
proforma (2.3) (2.2)
The fair value of stock options used to compute pro forma net loss and
loss per common share disclosures is the estimated fair value at grant
date using the Black-Scholes option-pricing model with the following
weighted average assumptions for the period ended 30 June 2003:
Dividend yield Nil
Expected volatility 45%
Risk-free interest rate 5.0%
Expected option life 4 years
The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. In addition, option-pricing
models require the input of highly subjective assumptions including the
expected price volatility. The Company uses expected volatility rates,
which are based on historical volatility rates trended into future
years. Changes in the subjective input assumptions can materially affect
the fair value estimate, and therefore the existing models do not
necessarily provide a reliable single measure of the fair value of the
Company's stock options.
The weighted average fair values of the Company's stock options,
calculated using the Black-Scholes option-pricing model, granted during
the six months ended 30 June 2003 was #0.04 per share.
7 Share capital -
issued common
shares
Number
In issue at 1 January 175,251,346
2003 and 30 June 2003
===========
8 Long - term assets -
cumulative
amortisation
The cumulative amortisation by category of long-term assets were as
follows;
30 June 31 December
2003 2002
#'000 #'000
Tangible assets 1,007 561
Intangible assets 344 274
9 Restructuring charges
During the quarter ended 30 September 2002, the Company commenced a
restructuring programme in response to delays in the commercialisation of
the 400kW generator system and a decision not to pursue further development
or commercialisation of products based on the 50 kW alternator. The
restructuring plan focused on facility consolidation, productivity
improvements in the UK operations, which resulted in a 20% reduction in the
UK workforce, and other cost reduction measures.
The movements in the restructuring provisions are as follows:
Redundancy Property Total
costs disposal costs
#'000 #'000 #'000
Provision at 31
December 2002 44 154 198
Cash payments (41) (38) (79)
Release to profit and
loss (3) - (3)
---------- ---------- ---------
Provision at 30 June
2003 - 116 116
========== ========== =========
The redundancy programme was completed by 31 March 2003.
The property disposal provision relates to a property, which is no longer
required following the rationalisation of group's facilities.
10 Selected quarterly information
The following table sets forth selected consolidated financial information of
the Company for the eight most recently completed quarters
Revenue Net loss Earnings per share
#'000 #'000 UK pence
October 2001 282 (1,436) (0.8)
December 2001 (two months) 72 (826) (0.5)
March 2002 129 (1,803) (1.0)
June 2002 205 (2,073) (1.2)
September 2002 317 (2,865) (1.6)
December 2002 76 (1,446) (0.8)
March 2003 207 (1,717) (1.0)
June 2003 277 (2,224) (1.3)
11 Exchange rates
The Sterling amounts have been converted into Canadian Dollars for
convenience purposes using the average and period end exchange rates as
follows:
Six and three months ended 30 June 2003 2.354
Six and three months ended 30 June 2002 2.277
As at 30 June 2003 2.222
As at 31 December 2002 2.529
12 Bank guarantees
The Company has provided bank guarantees, which are secured by a charge
over its cash balances, amounting to #344,000.
13 Post balance sheet event - Issue of convertible bond
On 11 July 2003, the company completed a #5,000,000 (C$11,150,000)
financing agreement with Island Investment (Securities) Ltd. & Argun
Investments Limited. The financing comprised Convertible Notes and
Warrants. The Convertible Notes have a term of five years, bear an annual
interest rate of 3.5% and are convertible into an aggregate of 25 million
Common Shares of Turbo Genset Inc. at a conversion price of #0.20
(C$0.446) per share. The Warrants have a term of three years and are
convertible into an aggregate of 3.5 million Common Shares of Turbo
Genset Inc. at an exercise price of #0.15 (C$0.335) per share. No
commissions are payable pursuant to this financing.
The funds will be used to continue the development of products in the
three key areas of Turbine based systems above 175kW output, Variable
Speed Generator systems below 175kW output and Power Electronics, and
provide working capital.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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