15th Nov 2005 07:01
Turbo Genset Inc.15 November 2005 Tuesday 15th November 2005 TURBO GENSET INC. ANNOUNCES ITS RESULTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2005 Highlights for the nine months to 30th September 2005 •Revenue up 84% to £1.8m (third quarter revenue up by 108%) •Loss for the period reduced by £2.0m (27%) to £5.2m (third quarter loss reduced by 39%) •Cash outflow before financing activities reduced by £1.5m (27%) to £4.0m (third quarter cash outflow reduced by 44%) •$12.5m MoU for high-speed motor/drive system announced in quarter Commenting on the results, Michael Hunt, Chief Executive said, "Our third quarter results reflect revenue generated by our new agreements withTTC, Lotus and ALC and underline the continued progress made against our keyobjective of building sustainable revenues. We continue to show progress ingrowing the order book whilst maintaining tight control of operating costs. Weare seeing increased interest in our products in the new markets we haveidentified." For further information, please contact: Turbo Genset - UK Tel: +44 (0)20 8564 4460Michael Hunt, Chief Executive OfficerStephen Sadler, Chief Financial Officer - CanadaRichard Kapuscinski Tel: +1 (905) 690 1722 Company Website: www.turbogenset.com Gavin Anderson (PR)Ken Cronin Tel: +44 (0)20 7554 1400Michael Turner NOTES TO EDITORS About Turbo Genset Turbo Genset designs and manufactures innovative power solutions which provide local, high quality, controllable electrical power. The Group's products are focused on three independent market areas but are all based on its core technologies of power electronics and high speed electrical machines. The Group operates across the following three market sectors: •High Speed Motors and Motor Drives •Power Electronics •Turbine Based and Variable Speed Gensets Forward looking statementsThis news release contains forward-looking statements. Forward-lookingstatements include statements concerning plans, objectives, goals, strategies,future events, or performance, and underlying assumptions and other statementsthat are other than statement of historical fact. These statements are subjectto uncertainties and risks including, but not limited to, the ability to meetongoing capital needs, product and service demand and acceptance, changes intechnology, economic conditions, the impact of competition, the need to protectproprietary rights to technology, government regulation, and other risks definedin this document and in statements filed from time to time with the applicablesecurities regulatory authorities. Operational Review Quarter three has seen the business make encouraging progress, particularly inthe area of high speed electrical machines and drives. First revenues have beenrecorded on the Lotus and ALC contracts. Development income has been boosted bythe initiation of the FR-Hitemp Boeing 787 Dreamliner project. In addition, thecontribution from our rail power electronics business has, for the first time,included revenue from the Toronto Transit Commission H6 contract. Having made efforts to identify new market sectors for our core technology, weare encouraged by the current level of market interest in our products. High-speed Electrical Machines and Drives Our continued progress was highlighted in October when we announced an MoU witha major international capital equipment manufacturer for the design andmanufacture of a range of high-speed direct drive motors and their associatedpower electronics. This agreement is for the supply of a combined motor and motor drive system, andso draws on our power electronics and motor expertise, and will be jointlymanufactured at our Heathrow and Gateshead sites. The agreement includes acommitment to purchase an initial production quantity of 500 systems followingsuccessful acceptance of the prototype. The value of the initial commitment isexpected to exceed $12,500,000 with deliveries starting in 2007. This agreementrepresents a key milestone in validating our strategy to broaden the range ofsectors for our core technology. The contract with FR-Hitemp for motor drives to be used in conjunction withtheir fuel pumps on the new Boeing 787 commercial aircraft is proceeding well,with the product design now undergoing detailed review with both FR-Hitemp andBoeing. The initial units required for the Boeing flight qualification testingprogramme will be built early next year. Production of the range of high-speed motors and drives being developed for SKFwill commence in quarter four with the rate of deliveries of hardware increasingduring 2006. The design of the innovative oil and gas application, incorporating the TurboGenset modular motor, with ALC is progressing well. ALC have reportedsignificant customer interest in the programme. Field trials in Alaska, sponsored by a major oil company, are scheduled to take place during the second half of 2006 for the complete system. The design programme for hybrid electrical drive systems for Lotus isprogressing to plan, with final designs and hardware expected to be delivered tothe customer by quarter two 2006. Turbine Based Gensets The company is in negotiation on a number of international gas turbinebased combined heat and power (CHP) installations and continues to add furtherenquiries to the pipeline. These opportunities include both natural gas andbio-fuel applications. The testing of the 1.2MW land-fill system in the United States demonstrated thatthe turbine could operate very effectively on low calorific value fuels such asbiogas, and key markets such as Malaysia and Thailand are committed to asignificant increase in distributed generating capacity fueled by biogas derivedfrom processing agricultural products. In order to further develop our potential markets in South East Asia, TurboGenset is concluding a marketing and distribution agreement with a local partnerin Malaysia. Power Electronics In quarter three we announced a contract to supply air-conditioning system powersupplies to Trans-Elektro for inclusion in a train rebuild programme for theDutch rail operator Nedtrain, with a contract value of the order of £500,000 fordelivery in 2006. This is the second order received by Turbo Genset for electronics designed tooperate and control air conditioning systems (the previous order being for theLondon Underground through Bombardier UK), and this has consolidated ourposition in the growth area of on-board systems. During the quarter we shipped initial units on the Toronto Transit Commission H6contract and TTC have now begun their ongoing programme of progressivelyremoving subway cars from revenue service in order to incorporate the newtechnology. Turbo Genset is continuing to submit bids for major North American andInternational rail programmes to the leading rolling stock manufacturers. With regard to our other electronics products, Turbo Genset has seen an increasein demand for its high voltage laser power supplies from PRC with an increase inscheduled quantities now in place for 2006. Spares and services orders are now coming through and will play a significantpart in underpinning our business plan. Financial review Review of Third Quarter 2005 Results of Operations and Cash Flows RevenueRevenue in the nine month period ended 30 September 2005 was £1.76 millioncompared with £0.96 million in 2004 and comprised; 2005 2004 £'000 £'000 Power electronics 1,667 916Motor and generator systems 95 41 ______ ______ 1,762 957 Revenues for 2005 in the power electronics division have grown significantlyover the comparative period in 2004. Rail industry contracts have been the majorcontributor to revenue in the period through agreements with Bombardier (onLondon Underground and other projects), the Toronto Transit Commission and otherinternational rail contractors. In addition industrial power supplies to PRC andthe development of hybrid electrical drive systems for Lotus have generatedrevenue. Spares and service revenues are making an increasing contribution to the powerelectronics business as it moves into production contracts and this revenuestream was worth £0.37million in the nine month period. Motor and generator systems revenue derives from units shipped on the SKFcontract and revenue from the contract with ALC. In the third quarter the company raised invoices for £0.17 million to RollsRoyce Industrial Controls for retention payments on rail contracts purchased aspart of the acquisition of certain business interests in 2002. This income hasbeen shown under other income in the profit and loss account. Cost of product revenuesThe cost of product revenue in the period amounted to £1.55 million (2004 :£1.22 million), resulting in a gross profit on sales of £0.26 million (2004 :loss of £0.27 million) as follows; 2005 2004 £'000 £'000 Power electronics 591 150Generator systems (329) (417) ______ ______ 262 (267) ======= ====== Certain fixed costs attributable to the manufacturing operation mean that thegenerator systems division recorded an overall loss on product sales. Research and product development costs Net research and product development costs in the period were £2.28 millioncompared with £3.36 million in 2004, and comprised; 2005 2004 £'000 £'000 Development income (386) (241)Research and product development expenditure 2,256 3,261Accrued tax credits (60) (250)Amortisation 471 586 ______ ______Total expenditure 2,281 3,356 ====== ====== Development income of £0.39 million (2004 : £0.24 million) consists mainly ofreceipts from the Toronto Transit Commission and FR-HiTemp. Research and product development expenditure decreased from £3.26 million in2004 to £2.26 million in 2005 reflecting strict cost control and the movement ofprojects into the production phase. This reduced expenditure is reflected inlower research and development tax credit claims. General and administrative Reduced general and administrative costs for the period of £2.09 million (2004 :£2.37 million) reflect stronger general cost control and a lower headcount. Amortisation Amortisation on research and development assets was £0.47 million compared with£0.59 million in 2004. Non research and development amortisation was £0.54million compared with £0.60 million in 2004. Interest income Interest income in the period was £0.24 million (2004 : £0.19 million). Interest expense and finance charges Interest expense and finance charges arise from the issue of convertible bondsin July 2003 and March 2005 and comprise; 2005 2004 £'000 £'000 Interest payable 380 131Amortisation of deferred finance charges 140 50Debt accretion 267 137 _____ ______ 787 318 ===== ======Convertible bonds are considered to be compound financial instruments, and theliability component and the equity component must be presented separately, asdetermined at initial recognition. The Company has valued the equity componentof these bonds using the residual value of equity component method, whereby theliability component is valued first using current market rate for comparableinstruments, at the time of issuance. The difference between the proceeds of thebonds issued and the fair value of the liability is assigned to the equitycomponent. The equity element of the March 2005 bond issue was estimated at£1.11million. The equity element of the 2003 bond issue was estimated at£0.91 million. The carrying value of the debt element is increased over the termof the debt and this accretion expense is charged to the profit and lossaccount. During the period this charge amounted to £0.27 million (2004:£ 0.14 million). Cash flows Cash outflow from operating activities Cash outflow from operating activities for the period was £3.79 million,compared with £5.44 million in 2004. In 2004 the Company recorded an operatingloss of £7.04 million and had a decrease in working capital of £0.20 million.The 2005 operating loss was £4.78 million and working capital increased by £0.32million during the period. The decrease in working capital in 2004 was mainly due to a decrease in debtorsfollowing the receipt of £0.59 million in UK R&D tax credits. The increase inworking capital in 2005 reflects an increase in trade debtors due to increasedsales in the period. Restructuring payments paid during 2005 relate to redundancy and propertydisposal payments charged to the profit and loss account in prior periods.Interest paid of £0.38 million (2004 : £0.17 million)during the periodrepresents payments made on the convertible bonds issued in 2003 and 2005. Capital investment activities Cash outflows from capital investments in the period were £0.04 million comparedwith £0.06 million in 2004 as shown below; 2005 2004 £'000 £'000Purchase of capital assets 39 190Capitalised R&D tax credits cash receipts - (128) ______ ______ 39 62 ====== ======The reduction in expenditure on capital assets reflects reduced expenditure ontangible fixed assets. Cash flow from financing activities Cash inflow from financing of £8.09 million in the period primarily relates tonet funds received from the issue of convertible notes in March and movements inrestricted cash. On 11 March 2005 the Company completed an £8,000,000 (gross) financing agreementwith institutional investors. The financing comprised unsecured ConvertibleNotes and Warrants. The Convertible Notes have a term of five years plus one dayand bear interest at a rate of 6.5% per annum. They are convertible into anaggregate of 66,666,667 Common Shares in Turbo Genset Inc. at a conversion priceof £0.12 per share. The Warrants have a term of five years and are convertibleinto an aggregate of 7,000,000 Common Shares in Turbo Genset Inc. at an exerciseprice of £0.15 per share. Movements in restricted cash of £0.38 million reflect cash released fromperformance bonds in the period. Overall Cash outflow for the period Overall the cash inflow during the period was £4.10 million, including proceedsof the debt issue of £7.71 million. This compares with an overall cash outflowof £5.46 million in 2004. Review of Third Quarter 2005 Results of Operations and Cash Flows Revenue Revenue in the quarter was £0.81 million compared with £0.39 million in 2004 andcomprised; 2005 2004 £'000 £'000 Power electronics 750 352Motor and generator systems 59 37 ______ ______ 809 389 ====== ======Power electronics revenue includes continued volume shipments on productioncontracts with Bombardier, PRC and other rail and industrial customers. Inaddition third quarter revenues reflect initial shipments on the Toronto TransitCommission H6 programme and first revenues from the Lotus hybrid electricaldrive contract. Motor and generator systems revenues reflect the first revenues from the ALCcontract to supply motors for its oil field application. Cost of product revenues The cost of product revenue in the quarter amounted to £0.66 million (2004:£0.42), resulting in a gross profit on sales of £0.19 million. 2005 2004 £'000 £'000 Power electronics 284 84Generator systems (92) (112) ______ ______ 192 (28) ====== ======Research and product development costs Net research and product development costs in the quarter were £0.82 millioncompared with £1.05 million in 2004, and comprised; 2005 2004 £'000 £'000Development income (71) -Research and product development expenditure 781 927Accrued tax credits (25) (79)Amortisation 137 197 ______ ______Total expenditure 822 1,045 ====== =======General and administrative General and administrative costs in the quarter of £0.69 million compare with£0.83 million in 2004 reflecting tighter cost control and lower headcount. Amortisation Amortisation on research and development assets was £0.17 million compared with£0.20 million in 2004. Non research and development amortisation was £0.18million compared with £0.19 million in 2004. Interest income Interest income in the quarter increased to £0.11 million from £0.04 million in2004, due to a higher average cash balance held during the period. Interest expense and finance charges Interest expense and finance charges arise from the issue of convertible bondsin July 2003 and March 2005 and comprise; 2005 2004 £'000 £'000Interest payable 153 43Amortisation of deferred finance charges 53 18Debt accretion 101 46 ______ ______ 307 107 ====== ======Cash flows Cash outflow from operating activities Cash outflow from operating activities in the quarter was £0.89 million,compared with £2.06 million in 2004. In 2004 the Company recorded an operatingloss of £2.54 million and had a decrease in working capital of £0.16 million.The 2005 operating loss was £1.54 million and working capital increased by £0.19million during the quarter. Interest paid of £0.29 million (2004 : £0.09 million) during the quarterrepresents payments made on the convertible bonds issued in 2003 and 2005. Overall Cash outflow for the period Overall the cash outflow during the quarter was £0.78 million compared with anoverall cash outflow of £2.06 million in 2004. Balance sheet as at 30 September 2005 The Company ended the period with a cash balance of £6.17 million compared with£2.07 million at 31 December 2004. Substantially all of the Company's cashbalances are denominated in Sterling. The increase in cash funds relates to the £8,000,000 (gross) financing agreementwith institutional investors. In addition the Company had restricted cash amounts of £1.50 million relating toperformance bonds in connection with contracts with the Toronto TransitCommission and FR HiTemp. Long-term assets have decreased from £6.01 million at 31 December 2004 to£5.01 million at 30 September 2005. Deferred financing charges have increased by£384K due to the convertible fundraising and deferred development income hasreduced by £450K following the write down of the remaining balance on the 400kWgenerator programme. Amortisation of long term assets was £1.34 million in thefirst nine months of 2005. Deferred finance charges relate to the fair value of the warrants issued and theexpenses in connection with the convertible bond issue that occurred in theperiod. These costs are amortised over the term of the convertible bonds and thewarrants. The related amortisation charges are included in interest expense andfinance charges. Long term liabilities have increased to £10.55 million at 30 September 2005compared to £4.64 million at 31 December 2004, reflecting the increase in debtattributable to the convertible bond issue. Net working capital at 30 September 2005, excluding cash balances, was £0.87million, compared with £0.31 million as at 31 December 2004. During March 2005 investors who had subscribed for the convertible bond issueconverted bonds into 10,549,997 ordinary shares. As at 30 September 2005, theCompany had 186,176,927 common shares issued and outstanding. As at that datethere were 32,804,750 outstanding share options and 10,500,000 outstandingwarrants. TURBO GENSET INC.CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND DEFICITUNAUDITED Notes Nine months ended 30 September 2005 2004 £'000 C$'000 £'000 C$'000 Revenue 4 1,762 3,991 957 2,312 ExpensesProduction costs 1,547 3,503 1,224 2,957 Development income (386) (874) (241) (582)Research and development 5 2,667 6,040 3,597 8,690costs -------- -------- -------- --------Net development expenditure 2,281 5,166 3,356 8,108 Provision for impairment ofinvestment 90 204 - -General and administrative 2,085 4,722 2,373 5,733Amortisation 535 1,212 597 1,443 -------- -------- -------- -------- 6,585 14,807 7,550 18,241 -------- -------- -------- -------- Operating loss (4,776) (10,816) (6,593) (15,929) Other income and expensesOther income 168 380 - -Interest income 239 541 191 461Interest expense and financecharges 6 (787) (1,782) (318) (768)Restructuring charge - - (445) (1,075)Foreign exchange gains/ (30) (68) (11) (26)(losses) -------- -------- -------- ------- (410) (929) (583) (1,408) -------- ------- -------- -------- Loss before taxation (5,186) (11,745) (7,176) (17,337)Taxation (18) (41) - - -------- -------- -------- -------- Loss for the period (5,204) (11,786) (7,176) (17,337)Deficit, beginning of year (38,265) (78,980) (19,282) (46,586) -------- -------- -------- --------Deficit, end of period (43,469) (90,676) (26,458) (63,923) ===== ===== ===== =====Loss per share (2.8)p (6.4)c (4.1)p (9.7)c TURBO GENSET INC.CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND DEFICITUNAUDITED Notes Three months ended 30 September 2005 2004 £'000 C$'000 £'000 C$'000 Revenue 4 809 1,831 389 940 ExpensesProduction costs 664 1,504 417 1,007 Development income (71) (161) - -Research and productdevelopment 5 893 2,022 1,045 2,525 -------- -------- -------- --------Net development expenditure 822 1,861 1,045 2,525 General and administrative 687 1,556 830 2,005Amortisation 175 396 194 469 -------- -------- -------- -------- 2,395 5,317 2,486 6,006 -------- -------- -------- -------- Operating loss (1,539) (3,486) (2,097) (5,066) Other income and expensesOther income 168 380 - -Interest income 109 247 44 106Interest expense and financecharges 6 (307) (695) (107) (259)Restructuring charge - - (445) (1,075)Foreign exchange gains/ (14) (32) (4) (10)(losses) -------- -------- -------- ------- (44) (100) (512) (1,238) -------- ------- -------- -------- Loss before taxation (1,583) (3586) (2,609) (6,304)Taxation (1) (2) - - -------- -------- -------- -------- Loss for the period (1,584) (3,588) (2,609) (6,304) Loss per share (0.9) p (1.9) c (1.5) p (3.6) c TURBO GENSET INC.CONSOLIDATED BALANCE SHEETSUNAUDITED Notes As at 30 September As at 31 December 2005 2004 £'000 C$'000 £'000 C$'000Assets:Current assets:Cash and cash equivalents 6,168 12,731 2,067 4,797 Debtors 10 2,041 4,213 1,711 3,970Stock and work in progress 527 1,088 482 1,119 -------- -------- -------- -------- 8,736 18,032 4,260 9,886 -------- -------- -------- -------- Restricted cash 8 1,496 3,088 1,876 4,353 -------- -------- -------- -------- Long term assets:Investments 9 90 186 180 418Intangible assets 9 1,808 3,732 1,895 4,397Tangible assets 9 3,168 6,539 3,932 9,124 -------- -------- -------- -------- 5,066 10,457 6,007 13,939 -------- -------- -------- -------- 15,298 31,577 12,143 28,178 ===== ===== ===== ===== Liabilities and shareholders'equity: Creditors: amountsfalling due within 11 1,695 3,499 1,884 4,372one year -------- ------- -------- ------- Creditors: amountsfalling due after 12 10,545 21,766 4,643 10,774more than one year -------- ------- -------- ------- Capital and reservesShare capital andother equity 2,13 46,613 96,212 43,959 102,007 instrumentsExchange adjustments 2 (86) (178) (78) (181)Profit and lossaccount 2 (43,469) (89,722) (38,265) (88,794)deficit ---------- ---------- ---------- ----------Shareholders' funds 3,058 6,312 5,616 13,032 --------- ---------- --------- ---------- 15,298 31,577 12,143 28,178 ====== ====== ====== ====== TURBO GENSET INC.CONSOLIDATED CASH FLOW STATEMENTSUNAUDITED Nine months ended 30 September Notes 2005 2004 £'000 C$'000 £'000 C$'000 Cash outflow fromoperating activities 3 (3,788) (8,579) (5,443) (13,150) Interest received 239 541 214 517Interest paid (380) (861) (171) (413) --------- --------- --------- ---------Net cash outflow fromoperating activities (3,929) (8,899) (5,400) (13,046) Capital investment activities Purchase of long term assets (39) (88) (62) (150) --------- --------- --------- ---------Cash outflow from capitalinvestment activities (39) (88) (62) (150) --------- --------- --------- ----------Net cash outflow beforefinancing activities (3,968) (8,987) (5,462) (13,196) Tax (18) (41) - - Financing activities Net proceeds from debt issue 7,707 17,454 - - Movement in restricted cash 380 861 --------- --------- --------- ---------Cash inflow fromfinancing activities 8,087 18,315 - - --------- --------- --------- ---------Increase/(decrease) in cash in the period 4,101 9,287 (5,462) (13,196) ====== ====== ====== ====== Cash and cash equivalents:Beginning of year 2,067 9,819 ---------- ----------End of period 6,168 4,357 ====== ====== TURBO GENSET INC.CONSOLIDATED CASH FLOW STATEMENTSUNAUDITED Three months ended 30 September Notes 2005 2004 £'000 C$'000 £'000 C$'000 Cash outflow fromoperating activities 3 (963) (2,181) (2,003) (4,839) Interest received 117 265 57 138Interest paid (293) (664) (87) (210) --------- --------- --------- ---------Net cash outflow from operatingActivities (1,139) (2,580) (2,033) (4,911) Capital investment activities Purchase of long termassets (14) (32) (28) (68) --------- --------- --------- ---------Cash outflow from capitalinvestment activities (14) (32) (28) (68) --------- --------- --------- ----------Net cash outflow beforefinancing activities (1,153) (2,612) (2,061) (4,979) Tax (1) (2) - - Financing activitiesNet proceeds from debt - - - -issueMovement in restricted 370 838cash --------- --------- --------- ---------Cash inflow fromfinancing 370 838 - -activities --------- --------- --------- ---------Decrease in cash in theperiod (784) (1,776) (2,061) (4,979) ====== ====== ====== ====== Cash and cash equivalents:Beginning of period 6,952 6,418 ---------- ----------End of period 6,168 4,357 ====== ====== TURBO GENSET INC.NINE MONTHS ENDED 30 SEPTEMBER 2005 1 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 2004. The significant accounting policies are consistent with prior years. 2 Movements in shareholders' funds Share Other Exchange Profit and capital equity adjustments loss Total £'000 £'000 £'000 £'000 £'000 Balance at 1 January 42,922 1,027 (83) (28,809) 15,057 2004 Loss for the period (9,456) (9,456) Exchange gain 5 5 Stock compensation 10 10 --------- --------- --------- --------- --------- Balance at 31 December 2004 42,932 1,027 (78) (38,265) 5,616 Loss for the period (5,204) (5,204) Exchange (loss) (8) (8) Stock compensation 43 43 Equity component of financial instrument 1,114 1,114 Warrants issued 231 231 Conversion of bonds to equity 1,266 1,266 --------- --------- --------- --------- --------- Balance at 30 September 2005 44,241 2,372 (86) (43,469) 3,058 ===== ===== ===== ====== ===== 3 Reconciliation of operating loss to cash outflow from operating activities Nine months ended Three months ended 30 September 30 September 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Operating loss for (4,776) (7,038) (1,539) (2,542) the period Movements in working capital balances Decrease / (increase) in debtors (330) 512 (158) (5) Decrease / (increase) in stocks and wip (45) (27) 3 (27) (Decrease) / increase in creditors 60 3 (35) 193 Restructuring payments (249) (71) - (24) Amortisation 1,281 1,183 587 391 Provision for impairment 90 - - - Stock compensation expense 43 7 2 2 Other income 168 - 168 - Foreign exchange (losses)/gains (30) (12) 9 9 --------- --------- -------- --------- Cash outflow from operating activities (3,788) (5,443) (963) (2,003) ===== ===== ===== ===== 4 Segmental analysis The Group's three reportable segments are the power electronics segment, which is involved in the development and manufacture of electrical power supply and control systems, the generator systems segment, which is involved in the development and commercialisation of gensets and high speed electrical machines, 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. The corporate segment operates in Canada. All amounts in £'000 Power electronics Generator systems Corporate Total 2005 2004 2005 2004 2005 2004 2005 2004Nine months ended 30 SeptemberRevenue 1,667 916 95 41 - - 1,762 957Net interest income/(expense) - - (300) (308) (248) 181 (548) (127)Amortisation 159 302 1,117 881 - - 1,276 1,183Loss for the period (478) (1,505) (3,798) (4,865) (928) (806) (5,204) (7,176)Capital expenditure 16 41 23 148 - - 39 189 As at Sept Dec Sept Dec Sept Dec Sept Dec 2005 2004 2005 2004 2005 2004 2005 2004Total Assets 4,376 3,948 5,801 7,198 5,121 997 15,298 12,143Total Liabilities 294 643 10,251 5,839 - 45 10,545 6,527 Three months ended 30 September Revenue 750 352 59 37 - - 809 389Net interest income/(expense) - - 147 (104) (345) 41 (198) (63)Amortisation 63 196 853 584 - - 916 780Loss for the period (17) (508) (1,251) (1,808) (316) (293) (1,584) (2,609)Capital expenditure 2 5 12 22 - - 14 27 5 Research and product development expenditure Research and product development expenditures incurred during the period comprised: Nine months ended Three months ended 30 September 30 September 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Research and product 2,256 3,261 781 927 development expenditure Accrued tax credits (60) (250) (25) (79) -------- -------- -------- -------- Total expenditure 2,196 3,011 756 848 Amortisation 471 586 137 197 -------- -------- -------- -------- Net expenditure charged to 2,667 3,597 893 1,045 profit and loss account ===== ===== ===== ===== Deferred development expenditure, net of accrued tax credits, amortisation andprovisions for impairment, at 30 September 2005 amounted to £164,000 (31December 2004 - £691,000). Deferred development costs comprise materials,labour and allocated overheads. Total accrued tax credits receivable at 30 September 2005, including thosecredited against deferred development expenditure, amounted to £517,000 (31December 2004 - £457,000). 6 Interest expense and finance charges Nine months ended Three months ended 30 September 30 September 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Interest payable 380 131 153 43 Debt accretion 267 137 101 46 Amortisation of deferred 140 50 53 18 finance charges --------- --------- --------- --------- 787 318 307 107 ====== ====== ====== ====== 7 Loss per share Loss per common share has been calculated using the weighted average number of shares in issue during the relevant financial periods. The treasury stock method was used in determining the weighted average number of shares outstanding for each period and for diluted earnings per share, if applicable. The weighted average number of shares outstanding in the period was 184,009,119 (2004 - 175,626,874). No diluted earnings per share have been reported as the Company has losses in both years and the effect would be anti-dilutive. The loss for the nine months ended 30 September 2005 was £5,204,000 (2004 - £7,176,000). 8 Restricted cash In 2004 the Company committed cash bonds in support of contracts placed by the Toronto Transit Commission. The associated contracts require the bonds to remain in place until two years after all equipment is delivered. According to the current contract schedule that would result in the cash being under the performance bond restriction until 2012. In September 2005 the Company committed cash bonds of £250,000 in support of the contract placed by FR HiTemp. The contract requires the bonds to remain in place until 31st December 2006 or completion of qualification testing, whichever is later. At 30 September 2005 cash subject to restrictions totalled £1,495,556 (December 2004 - 1,875,742) and is secured over an equivalent cash balance. 9 Long - term assets Cost Impairment Amortisation Net book value £'000 £'000 £'000 £'000 At 30 September 2005 Investments 431 341 - 90 Intangible assets 5,790 2,002 1,980 1,808 Tangible assets 8,133 - 4,965 3,168 -------- -------- -------- -------- Total long term assets 14,354 2,343 6,945 5,066 ===== ===== ===== ===== At 31 December 2004 Investments 431 251 - 180 Intangible assets 5,250 1,706 1,649 1,895 Tangible assets 8,111 - 4,179 3,932 -------- -------- -------- -------- Total long term assets 13,792 1,957 5,828 6,007 ===== ===== ===== ===== (a) In October 2003, the Group invested C$1,000,000 (£431,000) in a 6% Convertible Debenture issued by Altek Power Corporation ("Altek"). On 9 March 2005 the Company restructured its investment in Altek to release both Altek and the Company from the Memorandum of Understanding (MOU) entered into. Along with the release, the Company converted CDN $500,000 of the loan receivable from Altek into 892,857 shares of Altek. The term of the remaining CDN $500,000 Convertible Debenture has been extended to become due onOctober 9, 2008. During the period the Company has made a provision for impairment of £90,000 against the investment. 10 Debtors Sept 2005 Dec 2004 £'000 £'000 Trade debtors 903 610Prepayments 379 534Other debtors 200 26Tax recoverable 559 541 --------- ---------- 2,041 1,711 ========= ========== 11 Creditors: amounts falling due within one year 2005 2004 £'000 £'000 Trade creditors 597 520Other creditors 57 75Tax and social security creditor 120 109Accruals and deferred income 867 877Provision for restructuring 54 303 --------- ---------- 1,695 1,884 ========= ========== 12 Creditors: amounts due after more than one year Convertible bond 2005 2004 £'000 £'000 Balance at 1 January 4,364 4,181 Issued during the period 8,000 - Conversion of Convertible Notes during the period (1,266) - (note 2) Less equity component (1,114) - ------- ------- 9,984 4,181 Add: accretion of debt component during the period 267 183 (note 6) -------- ------- Balance at 30 September 10,251 4,364 ===== ===== Provisions for warranty claims 294 279 ------- ------- 10,545 4,643 ===== ===== 13 Share capital - issued common shares Number of shares At 1 January 2004 and 31 December 2004 175,626,930 Shares issued on conversion of 10,549,997 Convertible Notes --------------- 186,176,927 ========= No options were exercised during the nine months ended 30 September 2005. 14 Financing On 11 March 2005 the Company completed an £8,000,000 (gross) financing agreement with institutional investors. The financing comprised unsecured Convertible Notes and Warrants. The Convertible Notes have a term of five years plus one day and bear interest at a rate of 6.5% per annum. They are convertible into an aggregate of 66,666,667 Common Shares in Turbo Genset Inc. at a conversion price of £0.12 per share. The Warrants have a term of five years and are convertible into an aggregate of 7,000,000 Common Shares in Turbo Genset Inc. at an exercise price of £0.15 per share. 15 Stock options, warrants and compensation expense The number of options and warrants outstanding as at 30 September 2005, and the movement during the nine months then ended, are as follows: Options Warrants Number Number Outstanding at 1 January 2005 26,263,641 3,500,000 Cancelled (4,809,762) - Issued 7,500,000 7,000,000 ------------- ------------ Outstanding at 30 September 28,953,879 10,500,000 2005 ======== ======= The compensation expense in the nine month period ended 30 September 2005 was £43,102 (2004-£7,200). 16 Selected quarterly information The following table sets forth selected consolidated financial information of the Company for the eight most recent quarters. Revenue Net loss (Loss) per share UK pence £'000 £'000 December 2003 474 (3,612) (2.0)March 2004 319 (2,241) (1.3)June 2004 249 (2,326) (1.3)September 2004 389 (2,609) (1.5)December 2004 507 (2,280) (1.3)March 2005 360 (1,939) (1.1)June 2005 593 (1,681) (0.9)September 2005 851 (1,543) (0.9) 17 Exchange rates The Sterling amounts have been converted into Canadian Dollar for convenience purposes using either the average or the period end exchange rates shown below: Nine months and three months ended 30 September 2005 2.265 Nine months, and three months ended 30 September 2004 2.416 As at 30 September 2005 2.064 As at 31 December 2004 2.321 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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