RNS Number:1784L
Turbo Genset Inc.
16 May 2003
Friday 16th May 2003
TURBO GENSET INC ANNOUNCES ITS RESULTS FOR
THE QUARTER ENDED 31 MARCH 2003
Turbo Genset Inc. ("Turbo Genset"), the innovative power generation and power
conditioning equipment provider, is pleased to announce its results for the
three month period ended 31 March 2003.
During the first quarter Turbo Genset has continued to develop its business in
three key areas of Turbine based systems above 175kW output, Variable Speed
Generator systems below 175kW output and Power Electronics.
As forecast we have made the first commercial shipment of the 400kW generator
system to DTE and have furthered our marketing efforts in developing countries.
Development work on the 1.2MW generator has continued and we are becoming
increasingly positive about finalising a deal with a leading engine manufacturer
and by the sales prospects for the unit, which are now emerging.
We have received further orders for the rail power electronics business
totalling #300,000. These are mainly follow-on orders for the PT3000 unit, which
provides conditioned power for on board use by passengers. This product is
becoming established as the UK market leader in providing accessible power for
passengers using PCs or phones. This order brings the total number of units in
service, or on order, to in excess of 700. We continue to focus our marketing
activities on major international rolling stock programmes and now have bids
outstanding in excess of #15 million covering projects in Canada, US, Malaysia,
Turkey and Mainland Europe.
Our cost reduction programme implemented in the last quarter of 2002 and the
completion of our facilities investment programme is reflected in the reduction
of like-for-like quarterly cash outflow from #3.36m to #1.84m. Working capital
has increased temporarily in the quarter as we stock up to facilitate the major
I-Power orders announced previously. As production stabilises we would expect to
see a reduction over the remainder of the year.
Commenting on the results, Colin Besant, Chairman, said:
"Overall I am very pleased with the continued progress we are making on the path
to turning Turbo Genset into a profitable and successful company."
Colin Besant
Chairman
16 May 2003
For further information, please contact:
Turbo Genset Inc UK Tel: +44 (0)20 8564 4460
Peter Hollins, Chief Executive Officer
Fraser Searle, Chief Financial Officer
Turbo Genset Inc Canada
Richard Kapuscinski, Business Development Tel: +1 (905) 690 1722
Gavin Anderson (PR)
Neil Bennett Tel: +44 (0)20 7554 1400
Ken Cronin
Seton Services (IR)
Toni Vallen Tel: +44 (0)20 7373 3536
Fax:+44 (0)20 7792 0430
Email: toni@setonservices.com
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.
FINANCIAL REVIEW
Change in reporting currency
The Company has, with effect from the 1 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.
Profit and loss account
Revenue in the quarter was #0.21 million compared with #0.13 million in the
first quarter 2002, in both cases relating entirely from power electronic
systems.
Production costs in the period amounted to #0.36 million, resulting in a loss on
sales of #0.15 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 #0.26 million resulted in a loss on
sales of #0.13 million.
Research and development costs in the quarter were #0.73 million compared with
#0.38 million in 2002. Gross expenditure increased from #0.67 million to
#1.02 million and relates primarily to the 400kW and 1.2 MW turbine system
programmes, and the variable speed generator project. Gross expenditure in the
quarter includes #0.16 million pre commercial revenue and #0.14 million
capitalised expenditure (both relating to the 400kw programme), compared with
#0.29 million capitalised expenditure and no revenue in 2002.
General and administrative costs in the quarter were #0.71 million down from
#1.29 million in 2002, reflecting the savings resulting from the 2002
restructuring programme.
Lower interest rates and cash balance combine to explain less net interest
income in 2003 - #0.10 million as compared with #0.19 million in 2002.
Cash flow and liquidity
Cash outflow from operating activities was #1.65 million in the quarter,
compared with #2.44 million in the first quarter 2002. The reduction of #0.79
million in cash outflow is primarily due to a #0.68 million working capital and
#0.19 million reduction in operating loss, partially offset by restructuring
payments of #0.05 million.
Capital investment has significantly reduced to #0.24 million from #1.09 million
in the first quarter 2002, primarily reflecting the near completion of the
facilities investment programme. 2003 expenditure includes capitalised
development expenditure of #0.14 million and capital expenditure of #0.10
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 #1.84 million compared with
#3.36 million in the first quarter 2002.
Balance sheet as at 31 March 2003
The Company's balance sheet remains strong, with a cash balance of #11.12
million as at 31 March 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 were stable in the quarter - the slight reduction from
#10.20 million to #10.13 million reflects amortisation just in excess of capital
investment.
Net working capital at the quarter end, excluding cash balances, was #0.98
million, compared with #0.75 million as at 31 December 2002, primarily as a
result of 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 #0.15 million
as at 31 March 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. The property disposal programme is
expected to be completed by the third quarter of 2003.
TURBO GENSET INC.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
THREE MONTHS ENDED 31 MARCH 2003
Notes Three months Three months
ended ended
31 March 2003 31 March 2002
#'000 C$'000 #'000 C$'000
Revenue
Sales 207 504 129 294
Expenses
Production 363 884 260 592
costs
Research and 4 733 1,785 384 874
product
development
General and 713 1,737 1,285 2,924
administrative
Amortisation 203 494 190 432
-------- -------- -------- --------
2,012 4,900 2,119 4,822
-------- -------- -------- --------
Operating loss (1,805) (4,396) (1,990) (4,528)
Other income and
expense
Net interest 103 251 190 433
income
Restructuring 9 3 7 - -
provision
reduction
Foreign exchange 3 (18) (44) (3) (7)
losses
-------- ------- -------- -------
88 214 187 426
-------- ------- -------- -------
Loss for the 1 (1,717) (4,182) (1,803) (4,102)
period
===== ===== ===== =====
Loss per share (1.0) p (2.4)c (1.0) p (2.3) c
------- ------- ------- -------
Weighted average 175,251,346 175,221,346
number
of shares
outstanding
TURBO GENSET INC.
CONSOLIDATED BALANCE SHEET
AS AT 31 MARCH 2003
Notes As at 31 March As at 31 December
2003 2002
#'000 C$'000 #'000 C$'000
Assets:
Current assets:
Cash and 11,121 25,768 12,961 32,780
short-term
deposits
Debtors 1,730 4,008 1,644 4,158
Stock and work 912 2,113 726 1,836
in progress
-------- -------- -------- --------
13,763 31,889 15,331 38,774
-------- -------- -------- --------
Long term assets:
Investments 300 695 300 759
Intangible 4,8 4,603 10,665 4,494 11,366
assets
Tangible 8 5,224 12,104 5,404 13,667
assets
-------- -------- -------- --------
10,127 23,464 10,198 25,792
-------- -------- -------- --------
23,890 55,353 25,529 64,566
===== ===== ===== =====
Liabilities and
Shareholders'
Equity:
Creditors: 1,666 3,860 1,615 4,085
amounts falling
due within
one year
-------- ------- -------- -------
Creditors: 436 1,010 406 1,027
amounts falling
due after
more than one
year
-------- ------- -------- -------
Capital and
reserves
Share 1,7 42,849 99,281 42,847 108,364
capital
Exchange 1 (62) (143) (57) (144)
adjustments
Profit and 1 (20,999) (48,655) (19,282) (48,766)
loss account
deficit
---------- ---------- ---------- ----------
Shareholders' 21,788 50,483 23,508 59,454
funds
--------- ---------- --------- ----------
23,890 55,353 25,529 64,566
====== ====== ====== ======
TURBO GENSET INC.
CONSOLIDATED CASH FLOW STATEMENT
THREE MONTHS ENDED 31 MARCH 2003
Notes Three months ended Three months ended
31 March 2003 31 March 2002
#'000 C$'000 #'000 C$'000
Cash outflow 2 (1,653) (4,026) (2,436) (5,021)
from operating
activities
Returns on
investments and
servicing of
finance
Net interest 102 248 209 476
received
--------- --------- --------- ---------
Net cash outflow (1,551) (3,778) (2,227) (4,545)
from operating
activities
Capital (244) (594) (1,092) (3,006)
investment
--------- --------- --------- ----------
Net cash outflow (1,795) (4,372) (3,319) (7,551)
before
financing
Cash flow from
financing
Loan (45) (110) (45) (102)
repayment
--------- --------- --------- ---------
Decrease in (1,840) (4,482) (3,364) (7,653)
cash
======
Cash, beginning 12,961 21,520
of the period
---------- ----------
Cash, end of the 11,121 18,156
period
====== ======
TURBO GENSET INC.
THREE MONTHS ENDED 31 MARCH 2003
FINANCIAL NOTES TO THE ACCOUNTS
1 Movements in shareholders' funds
Three months ended 31 March
2003 2002
Share Exchange Profit Share Exchange Profit
Capital adjustments and loss Capital adjustments and loss
#'000 #'000 #'000 #'000 #'000 #'000
Balance at 42,847 (57) (19,282) 42,794 - (11,095)
1 January
Loss for - - (1,717) - - (1,803)
the
period
Exchange - (5) - - 23 -
(loss) /
gain
Contributed 2 - - - - -
surplus
--------- --------- --------- --------- --------- ---------
Balance at 42,849 (62) (20,999) 42,794 23 (12,898)
31 March
===== ===== ===== ===== ===== =====
2 Reconciliation of operating loss to net cash outflow from operating
activities
Three months ended 31 March
2003 2002
#'000 #'000
Operating loss for the period (1,805) (1,990)
Movements in working capital
balances
Increase in debtors (86) (180)
Increase / (decrease) in 210 (314)
creditors
Increase in stocks and work in (186) (242)
progress
Restructuring payments (49) -
Adjustment for amortisation (a) 284 270
Stock compensation expense 2 -
Foreign exchange (losses)/gains (23) 20
--------- ---------
Cash outflow from operating (1,653) (2,436)
activities
---------- ----------
(a) The total amortisation for the three month periods ended 31 March 2003
and 31 March 2002 includes #81,000 and #80,000, 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
subsiduaries in sterling. As only limited operations are conducted in
Canadian dollars, in the first quarter of 2003, the company adopted the
sterling as its reporting currency. Accordingly, the financial statements
have been prepared on that basis. Comparative figures for the prior period
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;
Three months ended 31 March
2003 2002
#'000 #'000
Research and product development 1,024 672
expenditure
Accrued tax credits - -
Sales of prototype and pre (155) -
commercial units
-------- --------
Total expenditure 869 672
Net amounts deferred during the (136) (288)
period
-------- --------
Net expenditure charged to profit 733 384
and loss account
===== =====
Deferred development expenditure, net of accrued tax credits and
amortisation, at 31 March 2003 amounted to #3,440,000 (31 March 2002 -
#2,759,000). Total accrued tax credits receivable at 31 March 2003,
including those credited against deferred development expenditure, amounted
to #505,000 (31 March 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
United Kingdom United Kingdom Canada
Three months ended Three months ended Three months ended Three months ended
31 March 31 March 31 March 31 March
2003 2002 2003 2002 2003 2002 2003 2002
Revenue 207 129 - - - - 207 129
Net interest (1) 18 94 85 97 103 190
Amortisation 63 45 140 145 - - 203 190
Loss for the 396 159 1,149 1,426 172 218 1,717 1,803
period
As at As at As at As at
31 March 31 Dec 31 March 31 Dec 31 March 31 Dec 31 March 31 Dec
2003 2002 2003 2002 2003 2002 2003 2002
Total 3,876 3,739 11,703 10,383 8,311 11,407 23,890 25,529
assets
6 Stock options granted and compensation expense
The number of options and warrants outstanding as at 31 March 2003 and the
movement during the three month period then ended are as follows:
Options Warrants
Number Number
Outstanding at 1 30,221,428 2,217,187
January 2003
Cancelled (700,000) -
Lapsed (101,600) -
Granted 363,850 -
Exercised - -
--------------- ---------------
Outstanding at 31 March 29,783,678 2,217,187
2003
========= =========
During the period ended 31 March 2003, the Company granted the following stock
options:
Options granted Option price Option life Number of
options
years currently
C$ # (a) 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:
Three months Three months
ended ended
31 March 2003 31 March 2002
Net loss for the period (#'000)
as reported 1,717 1,803
proforma 1,747 1,803
Loss per share - basic and diluted (in UK pence)
as reported 1.0 1.0
proforma 1.0 1.0
No options were granted during the three months ended 31 March 2002
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 31 March 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 period ended
31 March 2003 was #0.04 per share.
7 Share capital - issued common shares
Number
In issue at 1 January 2003 and 31 March 2003 175,251,346
=========
8 Long - term assets - cumulative amortisation
The cumulative amortisation by category of long-term assets were as follows;
As at 31 March As at 31
2003 December
2002
#'000 #'000
Tangible assets 809 561
Intangible assets 310 274
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 44 154 198
December 2002
Cash payments (41) (8) (49)
Release to profit (3) - (3)
and loss
------------- ------------- -------------
Provision at 31 - 146 146
March 2003
======== ======== ========
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. Disposal of the
property is expected to be completed by the third quarter of 2003.
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 UK pence
#'000 #'000
July 2001 89 (594) (0.3)
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 2,053 (1.2)
September 2002 317 2,845 (1.6)
December 2002 76 1,391 (0.8)
March 2003 207 1,717 (1.0)
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:
Three months ended 31 March 2003 2.436
Three months ended 31 March 2002 2.274
As at 31 March 2003 2.317
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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