RNS Number:3139E
Clean Air Power Limited
24 September 2007
Interim results 24 September 2007
CLEAN AIR POWER LIMITED
Interim Report Six Months Ended 30 June 2007
Highlights
2007 Half-Year Highlights
Clean Air Power Ltd (AIM:CAP), the developer of Dual-FuelTM combustion
technology for heavy-duty diesel engines, today announces its results for the 6
month period ended 30 June 2007.
Highlights
*Revenues #1.9m (#1.6m for 6 months to June 2006)
*Gross margin 55% ( 44% for 6 months to June 2006)
*Operating loss #1.6m (#1.7m for 6 months to June 2006)
*Losses after tax #1.4m (#1.9m for 6 months to June 2006)
*Development of demonstration Genesis Dual-FuelTM vehicle with Volvo
completed September 2007 as announced 5 September 2007
*Development of new Engine Management System with support from Ricardo Plc
completed July 2007 as announced 7 August 2007
*Sale of Genesis products to Wiseman dairies
*69% increase in Australian sales compared to the equivalent period in
2006.
*New intellectual property granted in key commercial regions
*Product creating interest due to the significant reduction in emissions
and CO2 - in addition to the original strong financial drivers
*Continuing discussions with potential OEM partners
Commenting on the results, John Pettitt, Chief Executive of Clean Air Power
said:
"The first half of 2007 has been a very busy time for Clean Air Power. In the UK
a number of blue chip companies have trialled the dual fuel products, we have
worked on an exciting project with Volvo and sales and product development
activity in Australia has accelerated significantly. Additionally, we continue
to make progress towards our ultimate goal of OEM integration. ."
For further information contact:
Clean Air Power Canaccord Adams Limited Buchanan Communications
John Pettitt, Chief Executive Robert Finlay Charles Ryland
Peter Rowse, Finance Director Erin Needra Ben Willey
Ben Romney
Tel: +44 (0)1494 527110 Tel: +44 (0)20 7050 6500 Tel: +44 (0)20 7466 5000
Chief Executive's Half-Year Statement
John Pettitt
Outlook
2007 continues to be a year of further development for Clean Air Power. We have
made some important developments to our technology although the early adoption
of the Dual-FuelTM products has not accelerated as quickly as we had
anticipated.
The fundamental drivers for the adoption of Dual-FuelTM remain very persuasive.
The Company is ideally placed to take advantage of two significant and high
profile global issues, increasing fuel costs and growing concern over harmful
emissions and CO2. Clean Air Power technology delivers a marked improvement in
both of these areas and has been proven on over 1,600 trucks worldwide. Some of
these Dual-FuelTM vehicles have run for more than seven years and some have
completed more than 1,000,000 km running on Dual-FuelTM systems.
The Company announced a large order from Mitchell Corporation Pty in Australia
in January 2007.
The ultimate goal of the Company is to enter into an agreement with a
manufacturer and progress has been made towards this goal although discussions
have not reached an advanced stage.
We have recruited new staff to strengthen the engineering teams and have
recognised tangible benefits as a result as Clean Air Power drives forward to
develop its commercial and technological expertise.
Financial Review
During the six months to 30 June 2007 Clean Air Power began to sell its newly
developed versions of its products in the UK and Australia. Early adoption of
these products has been slower than expected although the year to date revenue
of #1.9m still represents an improvement on the #1.6m achieved in the same
period of 2006.
The 2007 gross margin to date of 55% shows a significant improvement on the 44%
achieved up until June 2006. The improvement is driven by the heavier weighting
of the component business in the mix and from the release of unutilised warranty
provisions for vehicles. The provision changes relate to a reassessment of risk
to a specific exhaust system component and the release of provision for vehicles
whose warranty period has expired and the total effect of the release was #0.2m.
This has contributed to produce an operating loss of #1.6m which compares
favourably with the #1.7m loss from the same period in 2006.
The overall net loss of #1.4m in the period to 30 June 2007 compares favourably
with #1.9m in the period to 30 June 2006. This positive variance is partly
explained by non-recurring reorganisation expenses of #0.196m and finance costs
#0.109m incurred in the first half of 2006.
The slower than anticipated increase in sales of the Dual-FuelTM products has
led to a greater than expected cash burn. As a result the company plans to raise
funds in the last quarter of the 2007 in order to fund the development of a Euro
V solution and to progress activity with manufacturers.
Footnote: Transition to International Financial Reporting Standards (IFRS)
As detailed to shareholders in the 2006 Annual Report & Accounts, all AIM listed
companies with accounting periods commencing on or after 1 January 2006 are now
required to report in accordance with the recognition and measurement principles
of the International Financial Reporting Standards (IFRS) issued and effective
at the time of reporting to shareholders. The Board is pleased to report that
the Group has successfully completed this transition to IFRS. Consequently, the
comparative financial statements up to 31 December 2006 detailed in this report
which were previously prepared in accordance with the United Kingdom's Generally
Accepted Accounting Principles (UK GAAP) have been restated. The results, as set
out in this report, have been prepared in accordance with IFRS together with
unaudited restated comparative periods and details of the adjustments required.
There were no significant differences affecting the results and the financial
position of the Group.
Operational Review
Dual FuelTM Vehicle Systems
'Genesis' Development
Clean Air Power's patented Dual-FuelTM technology allows a heavy duty diesel
truck engine to run on a combination of both diesel and natural gas, thereby
generating significant fuel cost savings for the operator whilst considerably
reducing emissions and CO2.
'Genesis' was designed to be generic and is ultimately adaptable to fit any Euro
III engine thereby rendering a much wider market accessible to the Company.
Clean Air Power has developed the technology to operate on both DAF CF85 and
Mercedes Axor Euro III heavy duty trucks. During the first half of 2007 the
Company has made progress in the further development of its Dual-FuelTM
technology leading it to believe that a solution to install and commercialise
the technology on a Euro V vehicle may well now be possible without a formal OEM
agreement.
'Genesis' Target Markets
Clean Air Power is also targeting major UK supermarkets, logistics companies,
local authorities and haulage firms for its 'Genesis' product. We believe these
types of organisations will appreciate the financial benefits of converting
their vehicles to gas whilst also understanding that they will be making a
positive environmental impact.
We also believe that there are opportunities in Europe where certain markets
have more mature natural gas infrastructures or a more beneficial natural gas
versus diesel price differential. Our target markets include Germany, Italy and
the Netherlands.
Tesco Vehicle
An important achievement for the Company in 2006 was the successful conversion
of a Mercedes Axor truck for Tesco. This conversion project enjoyed the support
and cooperation of both Tesco and Mercedes. The formal trial has now been
completed with Tesco concluding that the vehicle had met all objectives, namely
operational effectiveness, cost savings, CO2 reduction and driver acceptability.
The vehicle achieved CO2 savings equivalent to around 10 tonnes per annum and
reduced fuel cost by around 15%. The vehicle continues to run in the Tesco
fleet, based in the Harlow depot, operating mainly in London.
Tesco have recognised the environmental benefits of Clean Air Power's
Dual-FuelTM technology and have expressed a willingness to support Clean Air
Power with their discussions with manufacturers. These discussions relate to
looking to secure the incorporation of Dual-FuelTM technology on Euro V
emissions compliant trucks.
UK Dual-FuelTM Sales Performance
UK vehicle sales to 30 June 2007 of #0.335m are 7% higher than the same period
in 2006. However, sales of the Genesis product to date have been significantly
below expectations. To date Wiseman Dairies and Warburtons Bakers have purchased
the product.
A number of other blue chip organisations have trialled the technology, but
decision making and due diligence within these organisations continues to be a
lengthy process.
These trials have the potential to generate sales in the remainder of the year.
However, due to the low year to date sales UK Genesis revenue for the whole of
2007 is expected to be significantly below expectations.
OEM Developments
Clean Air Power was pleased to announce, earlier in September, the completion of
a demonstration vehicle which was developed jointly with the Volvo Group. This
heavy duty Euro V diesel truck uses an improved version of Clean Air Power's
Genesis technology. This was developed without direct access to the ECU
software, but uses Controller Area Network (CAN) communication protocol that was
jointly developed to more closely integrate the Dual-FuelTM controls with the
truck's existing systems. Volvo is one of a number of manufacturers with whom
Clean Air Power had been holding preliminary discussions.
The 'Genesis' system was specifically developed to be retro-fitted product which
can be installed without the need for formal cooperation of the engine
manufacturers.
Our strategic goal is to work with vehicle and engine manufacturers to reach an
agreement to incorporate the Dual FuelTM technology into their products. The
purpose of the current Genesis product is to provide a revenue stream and to
build market awareness of the Dual-FuelTM technology in advance of developing it
further with the manufacturers' cooperation. Fully integrating the Clean Air
Power technology with that of the manufacturers will produce optimum benefits in
terms of fuel cost savings and CO2 reductions. The Company is actively pursuing
this route to market and have made progress although we recognise that typically
such discussions take some time.
The strategy involves encouraging the engine manufacturers to adopt our
technology in partnership with a combination of interested parties. Truck
operators, truck manufacturers, environmental bodies and governments would all
benefit from the widespread adoption of our Dual FuelTM technology. By
demonstrating the benefits of our technology to these parties we expect to
enlist their support thereby building a compelling proposition for the
manufacturers.
The Volvo demonstration truck was displayed by the Volvo Group in a presentation
in Stockholm before going on to a similar demonstration in Brussels and trade
shows in northern Europe.
Clean Air Power believes that its technology could provide Volvo, and other
manufacturers, with solutions applicable to a number of different types of
vehicles on a global basis. The Volvo Group truck brands include, Renault, Mack,
Nissan Diesel and Volvo. In addition to trucks the Volvo Group product range
includes marine applications, buses, and construction equipment.
Clean Air Power has submitted proposals to Volvo for the further development and
commercialisation of its technology. The Company understands the decision making
lead times involved in such discussions with manufacturers but remains
optimistic that the proven environmental and economic benefits of its technology
will prove compelling.
Volvo is one of a number of European and US manufacturers to which Clean Air
Power has made proposals. These proposals may or may not lead to commercial
agreements with manufacturers being completed.
Australia
January 2007 saw the announcement of a significant order when Mitchell Corp
Australia Pty Ltd (Mitchell), a bulk logistics solutions provider, ordered 50
systems worth a total of approximately #1.5m. The contract agreed also included
an option for a further 20 systems.
Clean Air Power is pleased to confirm that Mitchell has now exercised its option
for the further 20 systems along with additional Clean Air Power intercooler
product enhancements for their entire fleet of Dual FuelTM vehicles. The total
incremental order value is around #0.9m, bringing the total Mitchell revenue
from these orders to around #2.4m
In August the company had reported initial delays to installations under this
contract. These were due to technical issues on some of Mitchell's vehicles
which had previously been fitted with Clean Air Power technology by a third
party. Prior to the confirmation of the above order, these issues were resolved
under a collaborative project involving Clean Air Power, Mitchell and Orbital
Pty Ltd, a leading Australian automotive engineering consultancy. The project
was mainly funded by the truck operators and Australia Greenhouse Office (AGO),
a government body and has resulted in many improvements to the Company's
Australian software.
Also in August, Clean Air Power advised of development of a new optional product
available to its Australian Dual-FuelTM customers. This is a secondary
intercooler (SIC) improving the Dual-FuelTM product performance in conditions of
extreme temperature. Clean Air Power is pleased to confirm that Mitchell has now
ordered 84 of these, 70 for the conversions ordered under the above contract and
a further 14 for their existing Clean Air Power vehicles. Following completion
of the collaborative engineering project, the rate of installation will now ramp
up with all conversions planned to be completed by mid 2008.
In addition Company's largest Australian customer, Murray Goulburn, is in the
process of having an additional 10 Clean Air Power systems installed and
installations have also started on the #0.25m order from Kleenheat Gas Pty Ltd
which was announced in May.
Australian sales to 30 June 2007 of #0.322m have increased by 69% on the level
of sales in the same period of 2006 (#0.190m). However, delays resulting from
the development programme and issues with Mitchell means that year to date sales
and year end sales projections are significantly below original expectations.
The Australian truck market is one of the most demanding in the world with very
heavy gross vehicle weights and extreme ambient temperatures. The Company is
encouraged by its ability to further prove its technology and achieve sales
growth in such a demanding operating environment. Additionally, with a
relatively immature gas supply infrastructure the considerable benefit of a
Clean Air Power Dual-FuelTM vehicle to operate on 100% diesel, if required,
remains a significant benefit which applies in Australia as in all other
markets.
Components Business
Clean Air Power manufactures a number of the components that are used in the
Company's Dual-FuelTM Technology. The Company also sells these components for
spark ignited gas engines and certain other applications. Global demand for
these engines is increasing as part of the overall shift towards alternative
fuels. With sales mainly in Europe and the USA, strong margins and a customer
base including international OEMs, this is an important supplement to the
overall Clean Air Power business, particularly during these early stages in the
commercial roll out of our latest Dual-FuelTM technology.
Sales in the first half of 2007 for our components generated revenue of #0.795m,
approximately 43% of total revenue. This level of sales compares favourably with
the #0.642m achieved in the first half of 2006.
Emissions Reduction Business
This area of our business provides solutions to very large stationary diesel
engines such as those used in pumping stations. Our current market is mainly in
the US and we provide a service whereby the emissions from large stationary
diesel engines are reduced, usually in response to the requirements of local
legislation.
In the first half of 2007 sales of #0.117m are lower than the same point in 2006
(#0.166m) although with a significant contract close to agreement for delivery
in 2007 revenues are expected to accelerate later in the year.
--------------------
John Pettitt
Chief Executive
24 September 2007
CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2007
Unaudited Unaudited Unaudited
---------- ---------- ------------
6 months to 6 months to Year to
30 June 2007 30 June 2006 31 December 2006
---------- ---------- ------------
#'000 #'000 #'000
---------- ---------- ------------
(restated) (restated)
Revenue 1,869 1,569 4,072
Cost of Sales (833) (880) (2,314)
---------- ---------- ------------
Gross profit 1,036 689 1,758
Administrative expenses (2,434) (2,105) (4,689)
Share-based payments
charge (157) (301) (759)
---------- ---------- ------------
Group operating loss (1,555) (1,717) (3,690)
Reorganisation expenses - (196) (196)
---------- ---------- ------------
Loss before finance costs (1,555) (1,913) (3,886)
Finance costs - (109) (117)
Finance income 114 120 274
---------- ---------- ------------
Loss before taxation (1,441) (1,902) (3,729)
Taxation - - -
---------- ---------- ------------
Loss for the period (1,441) (1,902) (3,729)
---------- ---------- ------------
Basic and diluted loss per
share (5.4p) (8.1p) (14.8p)
---------- ---------- ------------
All items dealt with in arriving at operating loss above relate to continuing
operations.
CONSOLIDATED BALANCE SHEET
As at 30 June 2007
Unaudited Unaudited Unaudited
---------- --------- ------------
6 months to 6 months to Year to
30 June 2007 30 June 2006 31 December 2006
---------- --------- -----------
#'000 #'000 #'000
---------- ---------- ------------
(restated) (restated)
Assets
Non-current assets
Property, plant and equipment 139 164 116
Intangible assets 781 345 426
---------- ---------- ------------
920 509 542
---------- ---------- ------------
Current assets
Inventories 1,450 870 1,090
Trade and other receivables 836 607 1,159
Cash and cash equivalents 3,672 7,656 5,617
---------- ---------- ------------
5,958 9,133 7,866
---------- ---------- ------------
TOTAL ASSETS 6,878 9,642 8,408
---------- ---------- ------------
Equity and liabilities
Equity attributable to equity
holders of the parent
Ordinary share capital 15 15 15
Accumulated loss (37,696) (35,043) (36,412)
Other reserves 33,410 33,410 33,410
Share premium 8,982 8,982 8,982
Translation reserve 490 542 476
---------- ---------- ------------
Total equity 5,201 7,906 6,471
---------- ---------- ------------
Current liabilities
Trade and other payables 1,069 1,039 1,130
Provisions 608 697 807
---------- ---------- ------------
1,677 1,736 1,937
---------- ---------- ------------
TOTAL LIABILITIES 1,677 1,736 1,937
---------- ---------- ------------
---------- ---------- ------------
TOTAL EQUITY AND LIABILITIES 6,878 9,642 8,408
---------- ---------- ------------
Director
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2007
Unaudited Unaudited Unaudited
Consolidated cash flow statement 6 months to 30 6 months to 30 Year to
June 2007 June 2006 31December 2006
#'000 #'000 #'000
(restated) (restated)
Cash flows from operating
activities
Loss before taxation (1,441) (1,902) (3,729)
Adjustments for:
Net finance income (114) (11) (157)
Depreciation and impairment
of property, plant and equipment 22 97 193
Amortisation and impairment
of intangibles 68 30 108
Share-based payments 157 301 759
Decrease/(Increase) in trade
and other receivables 323 137 (496)
(Decrease) in payables (61) (1,012) (465)
(Increase)/Decrease in inventories (360) 272 (95)
(Decrease) in provisions (199) (58) (45)
Other non-cash movements 2 143 6
---------- --------- ------------
Net cash (outflow) from operating
activities (1,603) (2,003) (3,921)
---------- --------- ------------
Investing activities
Interest received 114 120 274
Sale of property, plant and
equipment - - 2
Payments to acquire property,
plant and equipment (53) (128) (113)
Payments to acquire intangible
assets (420) (277) (516)
---------- --------- ------------
Net cash (outflow) from
investing activities (359) (285) (353)
---------- --------- ------------
Financing activities
Interest paid - (70) (78)
Proceeds from the issue of
ordinary share capital - 10,587 10,587
Share issue costs - (1,599) (1,599)
Payment of loan notes - (137) (182)
---------- --------- ------------
Net cash inflow from
financing activities - 8,781 8,728
---------- --------- ------------
(Decrease)/Increase in cash
and cash equivalents (1,962) 6,493 4,454
Payments on notes payable - 137 182
Effect of exchange rates
on cash and cash equivalents 17 (65) 43
Conversion of debt to equity - 3,391 3,238
Cash and cash equivalents at
the beginning of the year 5,617 (2,300) (2,300)
---------- --------- ------------
Cash and cash equivalents at
end of period 3,672 7,656 5,617
---------- --------- ------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2007
Issued Capital Share Premium Translation Other Reserves Accumulated Total Equity
Reserve loss
#'000 #'000 #'000 #'000 #'000 #'000
-------- ---------- ----------- -------- ---------- --------- ---------
Balance at 1
January 2006
(UK GAAP) 7 - - 26,734 (33,442) (6,701)
---------- ----------- -------- ---------- --------- ---------
Balance at 1
January 2006
(restated) 7 - - 26,734 (33,442) (6,701)
---------- ----------- -------- ---------- --------- ---------
On
cancellation
of shares and
loan notes - - - 6,997 - 6.997
On issue of
new shares 8 10,581 - (321) - 10,268
Share issuance
costs - (1,599) - - - (1,599)
Translation
movements - - 542 - - 542
Share-based
payments - - - - 301 301
---------- ----------- -------- ---------- --------- ---------
Total income
and expenses
for the period
recognised
directly in
equity 8 8,982 542 6,676 301 16,509
Loss for the
period - - - - (1,902) (1,902)
---------- ----------- -------- ---------- --------- ---------
Total income
and expense
for the period 8 8,982 542 6,676 (1,601) 14,607
---------- ----------- -------- ---------- --------- ---------
Balance at 30
June 2006
(restated) 15 8,982 542 33,410 (35,043) 7,906
---------- ----------- -------- ---------- --------- ---------
Translation
movements - - (66) - - (66)
Share-based
payments - - - - 458 458
---------- ----------- -------- ---------- --------- ---------
Total income
and expenses
for the period
recognised
directly in
equity - - (66) - 458 392
Loss for the
period - - - - (1,827) (1,827)
---------- ----------- -------- ---------- --------- ---------
Total income
and expense
for the period - - (66) - (1,369) (1,435)
---------- ----------- -------- ---------- --------- ---------
Balance at 31
December 2006
(restated) 15 8,982 476 33,410 (36,412) 6,471
---------- ----------- -------- ---------- --------- ---------
Translation
movements - - 14 - - 14
Share-based
payments - - - - 157 157
---------- ----------- -------- ---------- --------- ---------
Total income
and expenses
for the period
recognised
directly in
equity - - 14 - 157 171
Loss for the
period - - - - (1,441) (1,441)
---------- ----------- -------- ---------- --------- ---------
Total income
and expense
for the period - - 14 - (1,284) (1,270)
---------- ----------- -------- ---------- --------- ---------
Balance at 30
June 2007 15 8,982 490 33,410 (37,696) 5,201
---------- ----------- -------- ---------- --------- ---------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
The consolidated financial statements of Clean Air Power Limited for the six
months ended 30 June 2007 were authorised for issue by the board of directors on
24 September 2007. Clean Air Power Limited is a public limited company
incorporated in Bermuda whose shares are publicly traded.
Information relating to the reorganisation of the Group on 27 February 2006 can
be found in the 31 December 2006 financial statements.
All of the revenue and profits and operating assets relate to the Group's
principal business activities, being vehicle conversion sales, sales of
components and an emissions reduction business. Revenue is stated net of value
added tax.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
These financial statements have been prepared using the accounting policies
expected to be applied in the 31 December 2007 financial statements which will
be prepared in accordance with IFRS adopted by the European Union. The IFRS
standards and IFRIC interpretations that will be applicable at 31 December 2007,
including those that will be applicable on an optional basis, are not known with
certainty at the time of preparing these interim financial statements. The
interim financial information contained in this statement does not constitute
statutory accounts as defined under section 240 of the Companies Act 1985. The
interim financial Information is unaudited but has been reviewed by the
auditors. The consolidated financial statements for Clean Air Power Limited for
the year ending 31 December 2006 were audited and an unqualified audit opinion
was issued thereon.
The financial statements are covered by IFRS 1 'First-time Adoption of IFRS',
because they are part of the period covered by the Group's first IFRS financial
statements for the year ended 31 December 2007.
These financial statements have been prepared in accordance with those IFRS
standards and IFRIC interpretations issued and effective at the time of
preparing the statements.
The policies set out below have been consistently applied to all years
presented. The Group applied the exemptions under IFRS 1 in respect of IFRS 3
'Business Combinations' and IAS 21 'The Effect of Changes in Foreign Exchange
Rates'.
Clean Air Power Limited's consolidated financial statements were prepared in
accordance with United Kingdom Generally Accepted Accounting Principles (UK
GAAP) until 31 December 2006. UK GAAP differs in some areas from IFRS. In
preparing Clean Air Power Limited's consolidated financial information included
in this document, management has amended certain accounting, valuation and
consolidation methods applied in the UK GAAP financial statements to comply with
IFRS. The comparative figures in respect of 2006 were restated to reflect these
adjustments.
Reconciliations and descriptions of the effect of the transition from UK GAAP to
IFRS on the Group's equity are provided in Note 4.
The consolidated financial information included in this document has been
prepared on a historical cost basis. The consolidated financial statements are
presented in sterling and all values are rounded to the nearest thousand (#'000)
except when otherwise stated.
Basis of consolidation
The consolidated interim financial statements incorporate the financial
statements of Clean Air Power Limited and all of its subsidiary undertakings
made up to 30 June 2007. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group, and deconsolidated from the date that
control ceases. The financial statement of subsidiaries used in the preparation
of the consolidated financial statements are prepared for the same reporting
period of the parent Company and are based on consistent accounting policies.
Inter-company transactions, balances, unrealised gains on transactions between
Group companies are eliminated, including unrealised profits or losses.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Changes in accounting policies
Accounting policies detailed below have been adopted and these are in compliance
with IFRS.
New standards and interpretations not applied
IASB and IFRIC have issued the following standards and interpretations with an
effective date after the date of these financial interim financial statements.
International Accounting Standards (IAS/IFRSs) Effective date
IFRS 8 Operating Segments 1 January 2008
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 12 Service Concession Arrangements 1 January 2008
IFRIC 13 Customer Loyalty Plans 1 January 2008
IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset Minimum 1 January 2008
Funding Requirement and their Interaction
The Directors do not anticipate that the adoption of these standards and
interpretations will have a material impact on the Group's financial statements
in the period of initial application.
Property, Plant and Equipment
Plant and equipment is stated at cost less accumulated depreciation and any
impairment in value. Depreciation is calculated on a straight-line basis over
the expected useful life of the asset using the following rates:
Plant and equipment - 20% per annum
Fixtures and fittings - 20 - 33% per annum
Short leasehold improvements 20 - 33% per annum
The carrying values of plant and equipment are reviewed for impairment either
annually, or when events or changes in circumstances indicate the carrying value
may not be recoverable (whichever is earlier). If any such indication exists and
where the carrying values exceed the estimated recoverable amount, the assets
are written down to their recoverable amount.
An item of plant and equipment is derecognised upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any
gain or loss arising on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the item) is
included in the income statement in the year the item is derecognised.
Residual values and estimated remaining lives are reviewed annually.
Inventories
Inventories are stated at the lower of cost and net realisable value. Const
includes all costs incurred in bringing each product to its present location and
condition on an average cost basis. Net realisable value is the estimated
selling price in the ordinary course of business, less any further costs
expected to be incurred to completion and disposal.
Work in Progress
Work in progress is the cost of direct materials and labour.
Operating Leases
Payments made under operating leases (net of any incentives received from the
lessor) are charged to the income statement on a straight-line basis over the
period of the lease.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Foreign Currency
Transactions in foreign currencies are initially recorded in the functional
currency by applying the spot exchange rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are
retranslated at the functional currency rate of exchange ruling at the balance
sheet date. All differences are taken to the income statement, except for
differences on monetary assets and liabilities that form part of the Group's net
investment in a foreign operation. These are taken directly to equity until the
disposal of the net investment, at which time they are recognised in profit or
loss.
The assets and liabilities of foreign operations are translated into sterling at
the rate of exchange ruling at the balance sheet date. Income and expenses are
translated at weighted average exchange rates for the year. The resulting
exchange differences are taken directly to a separate component of equity. On
disposal of a foreign entity, the deferred cumulative amount recognised in
equity relating to that particular foreign operation is recognised in the income
statement.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates as at the dates of the initial
transactions. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value was
determined.
Intangible Assets
Research and Development Costs
Research costs are expensed as incurred. An intangible asset arising from
development expenditure on an individual project is recognised only when the
Group can demonstrate the technical feasibility of completing the intangible
asset so that it will be available for use or sale, its intention to complete
and its ability to use or sell the asset, how the asset will generate future
economic benefits, the ability of resources to complete and the availability to
measure reliably the expenditure during the development. Following the initial
recognition of the development expenditure, the cost model is applied requiring
the asset to be carried at cost less any accumulated amortisation and
accumulated impairment losses. Any expenditure capitalised is amortised over the
period of expected future sales from the related project.
Computer Software
Computer software is carried at cost less accumulated amortisation. Computer
software has a finite life with no residual value and is amortised on a straight
line basis over the expected useful life as follows:
*Computer software - 3 years.
The carrying value of intangible assets is reviewed for impairment whenever
events or changes in circumstances indicate the carrying value may not be
recoverable. In addition, the carrying value of capitalised development
expenditure is reviewed for impairment annually before being brought into use.
Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand
and short-term deposits with an original maturity date of three months or less.
Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation and it is probable that an outflow of economic benefits will be
required to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Deferred Income Taxes
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However, if
the deferred income tax arises from the initial recognition of an asset or
liability in a transaction other than a business combination that at the time of
the transaction affects neither accounting nor taxable profit or loss, it is not
accounted for. Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantially enacted by the balance sheet date and
expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary differences
can be utilised.
Pensions
The Group contributes on behalf of its employees to individual personal defined
contribution plans. The contributions made by the Group are recognised as an
expense in the period they fall due.
Share-based Payment Transactions
Equity-Settled Transactions
The cost of equity settled transactions with employees is measured by reference
to the fair value at the date on which they are granted. The fair value is
determined by an external valuer using an appropriate pricing model. In valuing
equity-settled transactions, no account is taken of any performance conditions,
other than conditions linked to the price of the shares of the Company ('market
conditions'), if applicable.
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired and management's
best estimate of the achievement or otherwise of non-market conditions number of
equity instruments that will ultimately vest or in the case of an instrument
subject to a market condition, be treated as vesting as described above. The
movement in cumulative expense since the previous balance sheet date is
recognised in the income statement, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is
designated as replacing a cancelled or settled award, the cost based on the
original award terms continues to be recognised over the original vesting
period. In addition, an expense is recognised over the remainder of the new
vesting period for the incremental fair value of any modification, based on the
difference between the fair value of the original award and the fair value of
the modified award, both as measured on the date of the modification. No
reduction is recognised if this difference is negative.
Where an equity-settled award is cancelled, it is treated as if it had vested on
the date of cancellation, and any cost not yet recognised in the income
statement for the award is expensed immediately. Any compensation paid up to the
fair value of the award at the cancellation or settlement date is deducted from
equity, with any excess over fair value being treated as an expense in the
income statement.
Financial Assets and Liabilities
Trade and Other Receivables
Trade receivables, which generally have 30 day terms, are recognised and carried
at original invoice amount less an allowance for any uncollectible amounts. An
estimate for doubtful debts is made when collection of the full amount is no
longer probable, bad debts are written off when identified.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Interest Bearing Loans and Borrowings
All loans and borrowings are initially recorded at fair value net of issue costs
associated with the borrowing.
Interest bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct issue costs. Finance charges, including premiums payable
on settlement or redemption and direct issue costs, are accounted for on an
amortised cost basis and charged to the Income Statement using the effective
interest method and are added to the carrying amount of the instrument to the
extent that they are not settled during the period in which they arise.
Trade Payables
Trade payables are not interest bearing and are stated at their nominal value.
Capital Instruments
Capital instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.
Capital instruments are all instruments that are issued by the Company as a
means to raising finance, including shares, debentures, debt instruments and
options and warrants that give the holder the right to subscribe for or to
obtain capital instruments. An equity instrument is any contract that evidences
a residual interest in the assets of an entity after deducting all of its
liabilities. All equity instruments are included in shareholders funds. Other
instruments are classified as financial liabilities if they contain a
contractual obligation to transfer economic benefits. The finance costs incurred
in respect of a capital instrument, other than equity shares, are charged to the
Income Statement over the term of the instrument at a constant percentage rate
to the carrying value.
Revenue Recognition
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received, excluding
discounts, rebates, VAT and other sales taxes or duty. The following criteria
must also be met before revenue is recognised.
Sale of Goods
Revenue from the sale of goods is recognised when the significant risks and
rewards of ownership of the goods have passed to the buyer, usually on dispatch
of the goods.
Rendering of Services
Revenue from the emissions reduction business is recognised on a stage
completion basis by reference to the inventory issued, as a percentage of the
total inventory issued for each contract.
Interest Income
Revenue is recognised as interest accrues using the effective interest method.
The effective interest rate is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial instrument to its net
carrying amount.
Critical accounting policies, judgements and estimates
The preparation of financial statements requires management to make estimates
and assumptions that effect the amounts reported for assets and liabilities as
at the balance sheet date and the amounts reported for revenues and expenses
during the year. The nature of estimation means that actual outcomes could
differ from those estimates. Key sources of estimation uncertainty and critical
accounting judgements are as follows:
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Deferred taxation:
In the preparation of the financial statements, the Group estimates the income
taxes in each of the taxing jurisdictions in which the Group operates as well as
any deferred taxes based on temporary differences. Deferred tax assets relating
to tax loss carry-forwards and temporary differences are recognised in those
cases when future taxable income is expected to permit the recovery of those tax
assets. Changes in assumptions in the projections of future taxable income as
well as changes in tax rates could result in significant differences in the
valuation of deferred taxes.
Intangible assets:
An intangible asset arising from development expenditure on an individual
project is recognised only when the Group can demonstrate the technical
feasibility of completing the intangible asset so that it will be available for
use or sale, its intention to complete and its ability to use or sell the asset,
how the asset will generate future economic benefits, the ability of resources
to complete and the availability to measure reliably the expenditure during the
development. Following the initial recognition of the development expenditure,
the cost model is applied requiring the asset to be carried at cost less any
accumulated amortisation and accumulated impairment losses. Any expenditure
capitalised is amortised over the period of expected future sales from the
related project.
Share-based payments:
The estimation of share-based payment costs requires the selection of an
appropriate valuation model, consideration as to the inputs necessary for the
valuation chosen and the estimation of the number of awards that will ultimately
vest, inputs which arise from judgements relating to the continuing
participation of employees.
3. SEGMENTAL ANALYSIS
Revenue by business segment:
The primary segment reporting format is determined to be business segments as
the Group's risks and returns are affected predominantly by differences in the
products and services provided. Secondary segment information is reported
geographically.
Revenue for the six months to 30 June 2007 #'000
------------------ -----------------------------------
Vehicle Components Emissions Total
Conversions Reduction
------------------ ----------- ----------- --------- ----------
Revenue 957 795 117 1,869
Revenue for the six months to 30 June 2006 #'000
------------------ -----------------------------------
Vehicle Conversions Components Emissions Reduction Total
------------------ ----------- ----------- -------- -------
Revenue 761 642 166 1,569
Revenue for the year ended 31 December 2006 #'000
----------------- ------------------------------------
Vehicle Conversions Components Emissions Reduction Total
----------------- ------------- --------- ------------- --------
Revenue 1,744 1,427 901 4,072
Revenue by geographical segment:
Period ended Period ended Year
ended
30 June 2007 30 June 2006 31 December
2006
#'000 #'000 #'000
---------------------------- ---------- ---------- ---------
Revenue by geographical sales
destination:
UK 439 391 537
USA 693 746 2,323
Australia 322 190 674
Rest of Europe 393 230 529
Rest of World 22 12 9
---------- ---------- ---------
1,869 1,569 4,072
---------- ---------- ---------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
4. TRANSITION TO IFRS
Application of IFRS 1 'First Time Adoption of IFRS'
The Group's financial statements for the year ended 31 December 2007 will be the
first annual financial statements that comply with IFRS. This financial
information has been prepared as described in Note 2. The Group has applied IFRS
1 in preparing this consolidated financial information.
Clean Air Power Limited's transition date is 1 January 2006. The Group prepared
its opening IFRS balance sheet at that date. The reporting date of these interim
consolidated financial statements is 30 June 2007.
In preparing this consolidated financial information in accordance with IFRS 1,
the Group has taken advantage of certain of the optional exemptions from full
retrospective application of IFRS.
Exemptions from Full Retrospective Application Elected By the Group
IFRS 3 'Business Combinations'
The Group has applied the business combinations exemption in IFRS 1. It has not
restated business combinations that took place prior to the 1 January 2006
transition date.
IAS 21 'Foreign exchange differences'
The Group has elected not to calculate the cumulative translation differences on
the net assets of foreign subsidiaries held in reserve at the date of
transition. The reserve is therefore reset to zero at the 1 January 2006
transition date.
Reconciliations between IFRS and UK GAAP
The following reconciliations provide a quantification of the effect of the
transition to IFRS. The first three reconciliations provide an overview of the
impact on equity of the transition at 1 January 2006, 30 June 2006 and 31
December 2006. The following two reconciliations provide details of the impact
of the transition on net income for the periods ended 30 June 2006 and 31
December 2006.
* equity at 1 January 2006
* equity at 30 June 2006
* equity at 31 December 2006
* net income for the period ended 30 June 2006
* net income for the year ended 31 December 2006
The transition to IFRS has no effect on the cash flows of the Group but there
are certain presentational differences in the cash flow statement under IFRS and
UK GAAP.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
4.1 Reconciliation of Equity at 1 January 2006
Notes UK GAAP Effect of IFRS
transition to
IFRS
-------------------------- ------ --------- --------- ---------
#'000 #'000 #'000
-------------------------- ------ --------- --------- ---------
(restated)
Assets
Non-current assets
Property, plant and
equipment 4.1(a) 241 (36) 205
Intangible assets 4.1(a) - 36 36
--------- --------- ---------
241 - 241
--------- --------- ---------
Current assets
Inventories 998 - 998
Trade and other
receivables 663 - 663
Cash and cash
equivalents 1,163 - 1,163
--------- --------- ---------
2,824 - 2,824
--------- --------- ---------
TOTAL ASSETS 3,065 - 3,065
--------- --------- ---------
Equity and liabilities
Equity attributable to equity
holders of the parent
Ordinary share capital 7 - 7
Accumulated loss (33,442) - (33,442)
Other reserves 26,734 - 26,734
--------- --------- ---------
Total equity (6,701) - (6,701)
--------- --------- ---------
Non-current liabilities
Preference shares 3,498 - 3,498
Notes payable 144 - 144
--------- --------- ---------
3,642 - 3,642
--------- --------- ---------
Current liabilities
Trade and other
payables 1,953 - 1,953
Notes payable 3,319 - 3,319
Provisions 852 - 852
--------- --------- ---------
6,124 - 6,124
--------- --------- ---------
--------- --------- ---------
TOTAL LIABILITIES 9,766 - 9,766
--------- --------- ---------
--------- --------- ---------
TOTAL EQUITY AND
LIABILITIES 3,065 - 3,065
--------- --------- ---------
Explanation of the effect of the transition to IFRS
4.1(a) Under UK GAAP, computer software was capitalised and reported within
property, plant and equipment. Under IFRS computer software is reported as an
intangible asset.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
4.2 Reconciliation of Equity at 30 June 2006
-------------------------- ------ --------- --------- ---------
Notes UK GAAP Effect of IFRS
-------------------------- ------ --------- transition to ---------
IFRS
---------
#'000 #'000 #'000
-------------------------- ------ --------- --------- ---------
(restated)
Assets
Non-current assets
Property, plant and
equipment 4.2(a) 179 (15) 164
Intangible assets 4.2(a) 330 15 345
--------- --------- ---------
509 - 509
--------- --------- ---------
Current assets
Inventories 870 - 870
Trade and other
receivables 607 - 607
Cash and cash
equivalents 7,656 - 7,656
--------- --------- ---------
9,133 - 9,133
--------- --------- ---------
TOTAL ASSETS 9,642 - 9,642
--------- --------- ---------
Equity and liabilities
Equity attributable to equity
holders of the parent
Ordinary share capital 15 - 15
Accumulated loss (35,043) - (35,043)
Other reserves 4.2(b) 33,952 (542) 33,410
Share premium 8,982 - 8,982
Translation reserve 4.2(b) - 542 542
--------- --------- ---------
Total equity 7,906 - 7,906
--------- --------- ---------
Current liabilities
Trade and other
payables 1,039 - 1,039
Provisions 697 - 697
--------- --------- ---------
1,736 - 1,736
--------- --------- ---------
--------- --------- ---------
TOTAL LIABILITIES 1,736 - 1,736
--------- --------- ---------
--------- --------- ---------
TOTAL EQUITY AND
LIABILITIES 9,642 - 9,642
--------- --------- ---------
Explanation of the effect of the transition to IFRS
4.2(a) Under UK GAAP, computer software was capitalised and reported within
property, plant and equipment. Under IFRS computer software is reported as an
intangible asset.
4.2(b) Under UK GAAP, translation movements were reported within other reserves.
Under IFRS translation movements are reported as a separate component of
equity.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
4.3 Reconciliation of Equity at 31 December 2006
-------------------------- ------ --------- --------- ---------
Notes UK GAAP Effect of IFRS
-------------------------- ------ --------- transition to ---------
IFRS
---------
#'000 #'000 #'000
-------------------------- ------ --------- --------- ---------
(restated)
Assets
Non-current assets
Property, plant and
equipment 4.3(a) 134 (18) 116
Intangible assets 4.3(a) 408 18 426
--------- --------- ---------
542 - 542
--------- --------- ---------
Current assets
Inventories 1,090 - 1,090
Trade and other
receivables 1,159 - 1,159
Cash and cash
equivalents 5,617 - 5,617
--------- --------- ---------
7,866 - 7,866
--------- --------- ---------
TOTAL ASSETS 8,408 - 8,408
--------- --------- ---------
Equity and liabilities
Equity attributable to equity
holders of the parent
Ordinary share
capital 15 - 15
Accumulated loss (36,412) - (36,412)
Other reserves 4.3(b) 33,886 (476) 33,410
Share premium 8,982 - 8,982
Translation reserve 4.3(b) - 476 476
--------- --------- ---------
Total equity 6,471 - 6,471
--------- --------- ---------
Current liabilities
Trade and other
payables 1,130 - 1,130
Provisions 807 - 807
--------- --------- ---------
1,937 - 1,937
--------- --------- ---------
--------- --------- ---------
TOTAL LIABILITIES 1,937 - 1,937
--------- --------- ---------
--------- --------- ---------
TOTAL EQUITY AND
LIABILITIES 8,408 - 8,408
--------- --------- ---------
Explanation of the effect of the transition to IFRS
4.3(a) Under UK GAAP, computer software was capitalised and reported within
property, plant and equipment. Under IFRS computer software is reported as an
intangible asset.
4.3(b) Under UK GAAP, translation movements were reported within other reserves.
Under IFRS translation movements are reported as a separate component of
equity.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
4.4 Reconciliation of Net Income for Six Months Ended 30 June 2006
UK GAAP Effect of IFRS
------------------------ ---------- transition to ---------
IFRS
----------
#'000 #'000 #'000
------------------------ ---------- ---------- ---------
(restated)
Revenue 1,569 - 1,569
Cost of Sales (880) - (880)
---------- ---------- ---------
Gross profit 689 - 689
Administrative expenses (2,105) - (2,105)
Share-based payments charge (301) - (301)
---------- ---------- ---------
Group operating loss (1,717) - (1,717)
Reorganisation expenses (196) - (196)
---------- ---------- ---------
Loss before finance costs (1,913) - (1,913)
Finance costs (109) - (109)
Finance income 120 - 120
---------- ---------- ---------
Loss before taxation (1,902) - (1,902)
Taxation - - -
---------- ---------- ---------
Loss for the period (1,902) - (1,902)
---------- ---------- ---------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
4.5 Reconciliation of Net Income for Six Months Ended 31 December 2006
UK GAAP Effect of IFRS
------------------------ ---------- transition to ---------
IFRS
----------
#'000 #'000 #'000
------------------------ ---------- ---------- ---------
(restated)
Revenue 4,072 - 4,072
Cost of Sales (2,314) - (2,314)
---------- ---------- ---------
Gross profit 1,758 - 1,758
Administrative expenses (4,689) - (4,689)
Share-based payments charge (759) - (759)
---------- ---------- ---------
Group operating loss (3,690) - (3,690)
Reorganisation expenses (196) - (196)
---------- ---------- ---------
Loss before finance costs (3,886) - (3,886)
Finance costs (117) - (117)
Finance income 274 - 274
---------- ---------- ---------
Loss before taxation (3,729) - (3,729)
Taxation - - -
---------- ---------- ---------
Loss for the period (3,729) - (3,729)
---------- ---------- ---------
5. LOSS PER SHARE Unaudited Unaudited Unaudited
6 months ended 6 months ended Year ended
30 June 2007 30 June 2006 31 December
2006
#'000 #'000 #'000
Loss for the period (1,441) (1,902) (3,729)
Weighted average number of
shares 26,905,479 23,376,479 25,134,312
Basic and diluted loss per
share (5.4p) (8.1p) (14.8p)
The basic and diluted loss per share are the same because losses have been
incurred which result in all dilutive shares being treated as anti-dilutive.
6. DIVIDEND POLICY
In accordance with the Company's policy as set out in its admission document
does not propose to declare a dividend.
7. REGISTERED OFFICE
The registered office of Clean Air Power Ltd is Clarendon House, 2 Church
Street, Hamilton, HM 11, Bermuda.
Copies of this statement are available from the registered office, at
www.cleanairpower.com and from:
8 Lancaster Court, Coronation Road, Cressex Business Park, High Wycombe, Bucks,
HP12 3TD, United Kingdom
Independent Review Report to Clean Air Power Ltd
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2007 which comprises the Consolidated Income
Statement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,
Consolidated Statement of Changes in Equity, and the related notes 1 to 7. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
This report is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report as required by the AIM Rules
issued by the London Stock Exchange.
As disclosed in note 2, the next annual financial statements of the group will
be prepared in accordance with those IFRSs adopted for use by the European
Union. This interim report has been prepared in accordance with the requirements
of IFRS 1, "First Time Adoption of International Financial Reporting Standards"
relevant to interim reports.
The accounting policies are consistent with those that the directors intend to
use in the next financial statements. There is, however, a possibility that the
directors may determine that some changes to these policies are necessary when
preparing the full annual financial statements for the first time in accordance
with those IFRSs adopted for use by the European Union.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of group management and applying analytical procedures to the financial
information and underlying financial data, and based thereon, assessing whether
the accounting policies and presentation have been consistently applied, unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with
International Standards on Auditing (UK and Ireland) and therefore provides a
lower level of assurance than an audit. Accordingly we do not express an audit
opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
Ernst & Young LLP
Manchester, United Kingdom
This information is provided by RNS
The company news service from the London Stock Exchange
END
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