30th Mar 2010 07:00
30 MARCH 2010
TURBO POWER SYSTEMS INC. (TPS) ANNOUNCES RESULTS FOR
THE YEAR AND QUARTER ENDED 31 DECEMBER 2009
Highlights
·; Production and development income increased by 35% for the year at £10.5 million (2008: £7.78 million)
·; Production revenues in Q4 increased by 71% to £3.2 million (2008: £1.9 million)
·; EBITDA profit for 2009 of £0.2 million (2008: loss of £6.9 million)
·; Net profit in Q4 of £0.2 million (2008: net loss £3.2 million)
·; Cash inflow in Q4 of £0.1 million (2008: outflow of £0.2 million)
·; Cash outflow for the year reduced by 87% to £0.4 million (2008: £3.2m).
Graham Thornton, Chairman, said:
"The latest financial year has seen significant progress towards making Turbo Power Systems a profitable business capable of sustaining organic growth. New orders were won in the transport and industrial markets, with customer-funded development of both electrical machines and power electronics systems. Both markets proved to be resilient in the face of a general economic downturn, and our sales grew year on year by 35% in 2009. The outlook for 2010 is positive with the prospect of further orders from McQuay and Bombardier.
The growth in our order book is clear evidence that the Company's products and technology continue to be attractive to our existing customer base, and we are seeing an increased level of interest from new customers and market segments. However, the Company's financial structure remains a matter of concern to the Board as we seek to turn a growing order book into sales. Consequently a major focus for the Company in 2010 will be to strengthen the Company's balance sheet to underpin our growth plans.
The management team has made major strides forward in controlling costs and improving operational performance. This has positioned the Company for profitable growth."
For further information, please contact:
Turbo Power Systems Tel: +44 (0)20 8564 4460
Richard Bayliss, Finance Director
Alan Baird, Marketing Communications
Company Website: www.turbopowersystems.com
Kreab Gavin Anderson (financial public relations) Tel: +44 (0)20 7074 1800
Ken Cronin
Michael Turner
finnCap (NOMAD, broker and financial advisor) Tel: +44 (0)20 7600 1658
Marc Young
Henrik Persson
NOTES TO EDITORS
About Turbo Power Systems
Turbo Power Systems Inc (TSX:TPS.TO AIM:TPS.L) is a leading UK based designer and manufacturer of innovative power solutions. The Company's products are all based on its core technologies of power electronics and high speed motors and generators and are sold into a number of market sectors including aerospace, rail, and various industrial sectors. The Company's products provide improved efficiency and reduced energy consumption compared to existing technologies.
Turbo Power System's existing customers include blue chip companies such as Bombardier Transportation, McQuay International and Eaton Aerospace.
Forward looking statements
This press 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.
Definition of non-GAAP financial measures
EBITDA is calculated as the net loss for the period less financial interest income and charges, foreign exchange gains and losses, tax charges and receipts, depreciation, amortization, and stock compensation charges. The Company believes that EBITDA is useful supplemental information as it provides an indication of the operational results generated by its business activities prior to taking into account how those activities are financed and taxed and also prior to taking into consideration asset amortization. EBITDA is not a recognised measure under GAAP and, accordingly, should not be construed as an alternative to operating income or net loss determined in accordance with GAAP as an indicator of financial performance or of liquidity and cash flows. EBITDA does not take into account the impact of working capital changes, capital expenditures and other sources and uses of cash which are disclosed in the consolidated statement of cash flows. The Company's method of calculating EBITDA may differ from other issuers and may not be comparable to similar measures provided by other companies.
OPERATIONAL REVIEW
This review has been prepared as at 25 March 2010.
Business of the Company
Turbo Power Systems designs and manufactures:
·; high-speed permanent magnet based motors and generators for industrial, transport, power generation and military applications, where technical performance, energy efficiency and power density requirements cannot be met by conventional technology.
·; power electronics products, including variable frequency drives and inverters, which combine with the Company's electrical machines to create an integrated solution, and a range of rugged power conversion products for rail and industrial applications.
2009 Summary
Strategic Direction
TPS's primary focus is on the following markets:
·; Transport
o Power Electronics for the Rail Industry
·; Energy
o Grid Link Inverters
o Motors & Generators
·; Industrial Equipment
o Motors & Generators
o Power Supplies
·; Defence
o Power Electronics
o Motors & Generators
Whilst the business will continue to service existing programmes in other areas (e.g. aerospace and automotive) it will behave in a reactive manner to these markets and only engage in new programmes that meet the requirements of the business in terms of risk, cash flow and profitability.
The vision for the business can be summarised as follows:
"To be a world class provider of specialist Power Electronics and Electrical Machines maximising stakeholder benefit"
The business aims to achieve this through:
·; Market leading technologies and programme delivery
·; Long term partnerships with our customers
·; Strong year on year organic growth
·; A culture of continuous improvement of individual and business performance and capability
In terms of the development of the business this means we intend to:
·; Develop technological advantage and customer partnerships in the following business sectors:
o Transport
o Energy
o Industrial
o Defence
·; Be a preferred supplier to a limited number of key blue chip customers
·; Balance business activities across development, production and after sales
Current Operating Climate
The spread of markets in which we operate has provided a degree of resilience to the global downturn during 2009; indeed we have managed to grow the business despite the poor economic climate. We see this spread being of further benefit as and when the global economic climate improves.
The industrial sector is recovering well with confirmation of increased production requirements for the remainder of this year and into next year for our laser power suppliers and motors/drives for other industrial applications.
Governments are continuing to invest in infrastructure projects and, indeed, see transport initiatives such as new rail programmes as a way of helping to sustain their industries whilst providing necessary public transportation and having a positive effect on the environment.
Defence spend in both the US and UK is relatively static but have specialist pockets of growth potential in areas where TPS technology can be applied. We will continue to investigate this market further and hope to see increased activity during the coming years.
As a result of the many 'green initiatives' the energy sector is still seeing significant growth and we have been positioning ourselves in several areas in order to gain a share of this growth. We see this sector as offering substantial growth potential.
Many of our current contracts are U.S. Dollar based. We are therefore currently benefiting from the stronger US Dollar to weaker Sterling exchange rate. It has been 16% higher on average during 2009 at 1.565 USD:GBP as compared to a 2008 average of 1.855 USD:GBP. Exposure to exchange rate fluctuations is something that the business is very conscious of and management take measures in our contracting, purchasing and financial arrangements to seek to mitigate against exchange rate risk. At 31 December 2009 and at 31 December 2008 the Company did not have any exchange rate contracts.
Current Programmes
The Company operates with two reportable segments. The Power Electronics Division is involved in the development and manufacture of electrical power supply and control systems, encompassing rail and aerospace transport activities, power conditioning within the renewable energy area and industrial power supplies. The Electrical Machines Division is involved in the development and commercialisation of high speed electrical machines which are currently marketed within the renewable energy, industrial and defence markets.
·; Transport
o Rail
Deliveries continue on the major programmes (Bombardier Chicago Transit Authority and Bombardier Toronto). Deliveries commenced on the Bombardier KL Programme during the latter part of 2009, and completed in early in 2010. Deliveries on our smaller rail programmes continue to be made to customer call off requirements.
o Aerospace
The Jettison Fuel Pump motor drives for Eaton Aerospace continue to be delivered in line with the customer's call-off rate.
·; Energy
o Renewable Energy
There has been continued European funded R&D work in this area relating to Grid Linked Inverters and we anticipate further R&D grant funded work being secured related to charging systems for Electric Vehicles. Along with European partners we have progressed development work on a 6kW combined heat and power generator for use in the domestic gas boiler market. These programmes and capabilities, combined with our compact and power-dense high speed generator units, are being used as the basis for our business development activities for our future in the energy sector.
·; Industrial
o Laser Power Supplies
Our customer has now confirmed an increased demand for their product and our power supply units are now being produced again. The customer has also indicated that they expect to see a return to previous levels of demand during 2010.
o Industrial Motors and Drives
Materials to support deliveries to our Industrial Motors and Drives OEM (McQuay International) have been procured with the current 150 units order being scheduled for delivery during the six months to March 2010. These units are for use in McQuay International's recently launched Magnitude WME chiller.
Work has also commenced on the next motor development under the exclusive development agreement finalised with McQuay in Q3 2009.
We have also re-started the production of the SKF Laser Blower products with indications that there will be continuing demand for these units during 2010.
·; Defence
o 1MW High-Speed Generator
Having successfully delivered our high-speed generator, under the contract awarded during 2008 by SAIC (a major US defence contractor), the complete system is currently undergoing system trials and we are supporting this phase of the programme. On the basis that their trials are successful we have indications that additional units are likely to be required during 2010.
Financial Performance
Total revenues in the year of £10.50 million were 35% greater than in 2008 (2008: £7.78 million), primarily due to increased production volumes during Quarter 4 and sales of development rights to McQuay during the year. R&D tax credits received during the year totalled £0.57 million and further reduced our development outlay.
Research and product development costs and administrative costs have both decreased further over the year following our operational cost review programme undertaken in mid 2007.
The Company recorded a profit before interest, tax, depreciation, amortization, foreign exchange gains and losses and stock compensation for the year of £0.24 million (2008: loss of £8.36 million) as a result of increased revenues and controlled operational costs.
The Company also recorded an operating cash inflow before working capital movements of £0.13 million for the year (2008: outflow of £7.42 million), but after adjusting for changes in working capital items and purchases of property, plant and equipment suffered an overall cash outflow of £0.41 million (2008: outflow of £3.18 million).
The Company finished the year with an unrestricted cash balance of £0.65 million and held further cash of £0.81 million associated with performance bonds.
On 23 December 2009 the Company reached agreement with the holders of its 2005 Series Loan Notes, whereby the conversion rate exercisable by the Note Holder was adjusted from £0.12 to £0.0215, and the Company gained the option to settle the outstanding Loan Notes before 31 January 2010 at a reduced rate of 20% of the outstanding amount.
During the period 23 December 2009 to 31 December 2009 25% of the 2005 Loan Note Holders elected to convert their Notes into equity and 21,162,790 Common Stock Shares were issued in exchange for Loan Notes with a face value of £0.46 million.
During the period 1 January 2010 to 29 January 2010 a further 16% of the 2005 Loan Note Holders elected to convert their Notes into equity and 13,023,256 Common Stock Shares were issued in exchange for Loan Notes with a face value of £0.28 million.
On 29 January 2010 the Company exercised its option to redeem the outstanding 2005 Loan Notes early at a 20% rate, and all outstanding Loan Notes, with a face value of £1.05 million were extinguished by way of a payment of £0.21 million.
During the year ended 31 December 2009 the Company had no transactions with related parties and there are no further proposed transactions to disclose.
Going Concern
The Critical Accounting Estimates included within these statements are assessed on an unchanged basis from the prior year and as disclosed in the Company's Financial Statements for the year ended 31 December 2009.
These consolidated financial statements have been prepared on the basis of Canadian generally accepted accounting principles ("Canadian GAAP") applicable to a 'going concern', which assume that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. As at 31 December 2009 the Company had net cash outflows from operations therefore may require additional funding which, if not raised, may result in the curtailment of activities. The Company has incurred cumulative losses (including a loss of £0.74 million in 2009) and has a cumulative deficit of £72.97 million as at 31 December 2009.
At 31 December 2009 the Company had an unrestricted cash balance of £0.65 million and held further cash of £0.81 million associated with performance bonds. If the Company is unable to generate positive cash flow from operations or secure additional debt or equity financing these conditions and events would cast substantial doubt regarding the "going concern" assumption and, accordingly, the use of accounting principles applicable to a going concern. These consolidated financial statements do not reflect adjustments to the carrying values of the assets and liabilities, the reported expenses and the balance sheet classifications, which could be material, that would be necessary if the "going concern" assumption were not appropriate
Management regularly reviews and considers the current and forecast activities of the Company in order to satisfy itself as to the viability of operations. These ongoing reviews include consideration of current order book and future business opportunities, current development and production activities, customer and supplier exposure and forecast cash requirements and balances. Based on these evaluations management consider that the Company is able to continue as a going concern.
Summary of Quarterly Results
The following table sets forth selected quarterly consolidated financial information of the Company for the last eight quarters;
|
All amounts in £'000 |
Revenue |
Research and product development |
General and administrative |
Net profit/ (loss) |
Profit/ (loss) per share |
Net cash flow from operating |
Net cash flow from capital investment |
|
|
|
|
|
|
|
|
|
|
March 2008 |
1,962 |
1,591 |
1,059 |
(2,287) |
(0.7) |
(1,844) |
(96) |
|
June 2008 |
1,711 |
1,470 |
1,049 |
(2,276) |
(0.7) |
(2,479) |
(57) |
|
September 2008 |
1,246 |
1,363 |
1,025 |
(1,849) |
(0.6) |
(1,527) |
(10) |
|
December 2008 |
1,862 |
841 |
816 |
(3,151) |
(1.0) |
167 |
(8) |
|
|
|
|
|
|
|
|
|
|
March 2009 |
1,383 |
881 |
916 |
(368) |
(0.1) |
(458) |
(23) |
|
June 2009 |
1,235 |
199 |
812 |
(234) |
(0.1) |
(151) |
(13) |
|
September 2009 |
1,453 |
579 |
654 |
(344) |
(0.1) |
(165) |
(26) |
|
December 2009 |
3,193 |
743 |
845 |
211 |
0.1 |
(93) |
(10) |
Production revenues decreased during the first nine months of 2009 reflecting the completion of the initial volumes on the McQuay Industrial Motor and Drive contract at the end of 2008, and the depressed industrial product market.
Research and development expenditure has remained at a decreased level compared with previous years reflecting the reduction in development activities on the Bombardier Chicago and Toronto rail programmes, together with the reduced development requirement as a result of the transition agreement on the Hamilton Sundstrand contract for the Boeing 787. Increased R&D tax credits recognized during the second quarter of 2009 further reduced the net Research and product development spend as analysed below.
|
All amounts in £'000 |
Research and Product Development |
||
|
|
Gross |
Tax Credits |
Net |
|
|
|
|
|
|
March 2008 |
1,591 |
- |
1,591 |
|
June 2008 |
1,514 |
(44) |
1,470 |
|
September 2008 |
1,413 |
(50) |
1,363 |
|
December 2008 |
1,248 |
(407) |
841 |
|
|
|
|
|
|
March 2009 |
881 |
- |
881 |
|
June 2009 |
761 |
(562) |
199 |
|
September 2009 |
829 |
(250) |
579 |
|
December 2009 |
743 |
- |
743 |
Reconciliation of net loss to EBITDA result
|
|
|
Quarter ended 31 December |
|
Year ended 31 December |
||
|
|
|
2009 |
2008 |
|
2009 |
2008 |
|
|
|
£'000 |
£'000 |
|
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
Net profit/( loss) |
|
211 |
(3,151) |
|
(735) |
(9,563) |
|
|
|
|
|
|
|
|
|
Add back: |
|
|
|
|
|
|
|
Interest income |
|
- |
(12) |
|
(3) |
(95) |
|
Interest expense |
|
207 |
195 |
|
772 |
457 |
|
Finance (gain)/charge |
|
(495) |
124 |
|
(466) |
236 |
|
Foreign exchange loss/(gain) |
|
78 |
(115) |
|
(76) |
(176) |
|
Amortisation |
|
119 |
166 |
|
618 |
662 |
|
Impairment charges |
|
- |
1,472 |
|
- |
1,472 |
|
Stock Compensation |
|
(14) |
17 |
|
128 |
123 |
|
|
|
---------- |
---------- |
|
---------- |
---------- |
|
EBITDA profit/(loss) |
|
106 |
(1,304) |
|
238 |
(6,884) |
|
|
|
---------- |
---------- |
|
---------- |
---------- |
Copies of Quarterly and Annual Results
The Company's full Financial Results and Managements' Discussion and Analysis are available on www.sedar.com and full financial statements will be mailed to shareholders during May 2010.
Copies of the quarterly and annual results are available from the Company's office at Unit 3 Summit Centre, Hatch Lane, West Drayton, Middlesex, UB7 0LJ, United Kingdom or available to view from the Company's website at www.turbopowersystems.com
|
TURBO POWER SYSTEMS INC. |
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF PROFIT/(LOSS) AND COMPREHENSIVE PROFIT/(LOSS) |
|
||||
|
|
|
||||
|
|
Notes |
Quarter ended 31 December |
Year ended 31 December |
||||||
|
|
|
2009 |
|
2008 |
|
2009 |
2008 |
||
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
3,4 |
|
3,193 |
|
1,862 |
|
7,264 |
|
6,781 |
|
Development income |
3,4 |
|
624 -------- |
|
71 -------- |
|
3,236 -------- |
|
1,003 -------- |
|
|
|
|
3,817 |
|
1,933 |
|
10,500 |
|
7,784 |
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
Production costs |
|
|
(2,109) |
|
(1,596) |
|
(4,761) |
|
(5,577) |
|
Research and product development |
|
|
(743) |
|
(841) |
|
(2,402) |
|
(5,265) |
|
General and administrative |
|
|
(845) |
|
(817) |
|
(3,227) |
|
(3,949) |
|
Amortisation Goodwill impairment Inventory impairment |
|
|
(119) - - -------- |
|
(166) (820) (652) -------- |
|
(618) - - -------- |
|
(662) (820) (652) -------- |
|
|
|
|
(3,816) |
|
(4,892) |
|
(11,008) |
|
(16,925) |
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before interest, restructuring, finance charges and foreign exchange |
|
|
1 |
|
(2,959) |
|
(508) |
|
(9,141) |
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges |
|
|
- |
|
(101) |
|
- |
|
(101) |
|
Debt extinguishment gain/(expense) |
|
|
504 |
|
(115) |
|
504 |
|
(115) |
|
Interest income |
|
|
- |
|
12 |
|
3 |
|
95 |
|
Interest expense |
|
|
(207) |
|
(195) |
|
(772) |
|
(457) |
|
Finance income/(charge) |
|
|
(9) |
|
92 |
|
(38) |
|
(20) |
|
Foreign exchange (loss)/gain |
|
|
(78) -------- |
|
115 -------- |
|
76 -------- |
|
176 -------- |
|
|
|
|
210 |
|
(192) |
|
(227) |
|
(422) |
|
|
|
|
-------- |
|
-------- |
|
-------- |
|
-------- |
|
Net profit/(loss) and Comprehensive profit/(loss) |
|
|
211 ===== |
|
(3,151) ===== |
|
(735) ===== |
|
(9,563) ===== |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic |
5 |
|
0.1 p |
|
(1.0)p |
|
(0.2) p |
|
(3.0) p |
|
Loss per share - diluted |
5 |
|
0.0 p |
|
(1.0)p |
|
(0.2) p
|
|
(3.0) p
|
|
Weighted average number of shares outstanding |
|
|
322,075,673 |
318,571,062 |
319,782,730
|
318,571,062 |
|||
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
|
The results for the years ended 31 December 2009 and 31 December 2008 related to continuing activities |
|||||||||
The accompanying notes are an integral part of these financial statements
|
TURBO POWER SYSTEMS INC. |
|
|
|
|
|
||
|
CONSOLIDATED BALANCE SHEETS |
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
||||
|
|
Notes |
As at 31 December |
As at 31 December |
||||
|
|
|
2009 |
2008 |
||||
|
|
|
|
£'000 |
|
£'000 |
||
|
Current assets |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Cash and cash equivalents |
|
|
649 |
|
1,054 |
||
|
Restricted cash |
|
|
645 |
|
552 |
||
|
Trade and other receivables |
|
|
1,657 |
|
1,255 |
||
|
Stock and work in progress |
|
|
1,943 |
|
1,685 |
||
|
Investments |
|
|
- |
|
- |
||
|
Prepayments |
|
|
435 |
|
372 |
||
|
R&D tax credits receivable |
|
|
350 -------- |
|
144 -------- |
||
|
|
|
|
5,679 -------- |
|
5,062 -------- |
||
|
Long-term assets |
|
|
|
|
|
||
|
Restricted cash |
|
|
169 |
|
796 |
||
|
Intangible assets |
|
|
- |
|
13 |
||
|
Property, plant and equipment |
|
|
1,066 -------- |
|
1,624 -------- |
||
|
|
|
|
6,914 ===== |
|
7,495 ===== |
||
|
Liabilities and shareholders' deficit |
|
|
|
|
|
||
|
Creditors: amounts falling due within one year |
|
|
|
|
|
||
|
Trade and other payables |
|
|
2,887 |
|
3,406 |
||
|
Convertible notes |
|
|
261 |
|
- |
||
|
Deferred income |
|
|
621 -------- |
|
166 -------- |
||
|
|
|
|
3,769 -------- |
|
3,572 -------- |
||
|
Creditors: amounts falling due after more than one year |
|
|
|
|
|
||
|
Warranty provision |
|
|
100 |
|
184 |
||
|
Convertible notes |
|
|
3,386 -------- |
|
4,512 -------- |
||
|
|
|
|
3,486 -------- |
|
4,696 -------- |
||
|
Non controlling interest |
|
|
|
|
|
||
|
A Ordinary share capital |
7 |
|
13,310 |
|
13,310 |
||
|
|
|
|
|
|
|
||
|
Capital and reserves |
|
|
|
|
|
||
|
Common share capital |
6 |
|
56,225 |
|
55,804 |
||
|
Contributed surplus |
|
|
3,095 |
|
2,349 |
||
|
Deficit |
|
|
(72,971) ---------- |
|
(72,236) ---------- |
||
|
Shareholders' deficit |
|
|
(13,651) --------- |
|
(14,083) --------- |
||
|
|
|
|
6,914 ====== |
|
7,495 ====== |
||
The accompanying notes are an integral part of these financial statements
|
TURBO POWER SYSTEMS INC. |
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CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT |
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|||||
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Common Share capital |
Contributed surplus |
Deficit |
Total Deficit |
||
|
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||
|
|
|
|
|
|
|
|
|
||
|
|
Balance at 1 January 2008 |
|
|
55,804 |
1,964 |
(62,673) |
(4,905) |
||
|
|
Net loss |
|
|
|
|
(9,563) |
(9,563) |
||
|
|
Stock compensation |
|
|
|
123 |
|
123 |
||
|
|
Equity portion on issue of convertible notes |
|
|
|
262 |
|
262 |
||
|
|
|
|
|
--------- |
--------- |
--------- |
--------- |
||
|
|
Balance at 31 December 2008 |
|
|
55,804 |
2,349 |
(72,236) |
(14,083) |
||
|
|
Net loss |
|
|
|
|
(735) |
(735) |
||
|
|
Stock compensation |
|
|
|
128 |
|
128 |
||
|
|
Equity portion on revaluation of convertible notes |
|
|
|
927 |
|
927 |
||
|
|
Share conversion |
|
|
398 |
(309) |
|
89 |
||
|
|
Issue of shares |
|
|
23 |
|
|
23 |
||
|
|
|
|
|
--------- |
--------- |
--------- |
--------- |
||
|
|
Balance at 31 December 2009 |
|
|
56,225 ===== |
3,095 ===== |
(72,971) ====== |
(13,651) ===== |
||
The accompanying notes are an integral part of these financial statements
|
TURBO POWER SYSTEMS INC. |
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
|
||||
|
|
|
|
||||
|
|
|
Quarter ended 31 December |
Year ended 31 December |
|||||||
|
|
|
|
2009 |
|
2008 |
|
2009 |
2008 |
||
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
Net profit/(loss) |
|
|
211 |
|
(3,151) |
|
(735) |
|
(9,563) |
|
|
Items not involving cash |
|
|
|
|
|
|
|
|
|
|
|
Amortisation |
|
|
119 |
|
166 |
|
618 |
|
662 |
|
|
Capital grant released |
|
|
25 |
|
25 |
|
25 |
|
25 |
|
|
Accretion of debt |
|
|
25 |
|
92 |
|
119 |
|
137 |
|
|
Deferred finance charges |
|
|
114 |
|
- |
|
114 |
|
- |
|
|
Adjustment to fair value of investment |
|
|
- |
|
12 |
|
- |
|
25 |
|
|
Goodwill impairment |
|
|
- |
|
820 |
|
- |
|
820 |
|
|
Stock compensation charges |
|
|
(14) |
|
17 |
|
128 |
|
123 |
|
|
Movement in loan interest accrual |
|
|
86 |
|
76 |
|
437 |
|
202 |
|
|
Movement in warranty provision |
|
|
(84) |
|
33 |
|
(84) |
|
33 |
|
|
Debt extinguishment gain |
|
|
(504) |
|
- |
|
(504) |
|
- |
|
|
Equity adjustment on loan note conversion |
|
8 |
|
115 |
|
8 |
|
115 |
||
|
|
|
|
--------- |
|
--------- |
|
--------- |
|
--------- |
|
|
Cash in/(out)flow before movements in working capital |
(14) |
|
(1,795) |
|
126 |
|
(7,421) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in working capital items |
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, prepayments and R&D tax credits |
(636) |
|
1,012 |
|
(671) |
|
1,730 |
|||
|
Stock and work in progress |
|
|
66 |
|
1,123 |
|
(258) |
|
691 |
|
|
Accounts payable and deferred income |
|
|
(491) |
|
(173) |
|
(64) |
|
(683) |
|
|
|
|
|
--------- |
|
--------- |
|
--------- |
|
--------- |
|
|
Net cash (out)/inflow from operating activities |
(93) |
|
167 |
|
(867) |
|
(5,683) |
|||
|
|
|
|
--------- |
|
--------- |
|
--------- |
|
--------- |
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
(10) |
|
(8) |
|
(72) |
|
(171) |
||
|
Movement in restricted funds |
|
|
221 |
|
(57) |
|
534 |
|
14 |
|
|
|
|
|
--------- |
|
--------- |
|
--------- |
|
--------- |
|
|
Cash in/(out)flow from investing activities |
211 --------- |
|
(65) --------- |
|
462 --------- |
|
(157) --------- |
|||
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from financing |
|
|
- |
|
(313) |
|
- |
|
2,659 |
|
|
|
|
|
--------- |
|
--------- |
|
--------- |
|
--------- |
|
|
Cash in/(out)flow from financing activities |
- --------- |
|
(313) --------- |
|
- --------- |
|
2,659 --------- |
|||
|
Increase/(decrease) in cash in the period |
|
|
118 ====== |
|
(211) ====== |
|
(405) ====== |
|
(3,181) ====== |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
Beginning of period |
|
|
531 ---------- |
|
1,265 ---------- |
|
1,054 ---------- |
|
4,235 ---------- |
|
|
End of period |
|
|
649 ====== |
|
1,054 ====== |
|
649 ====== |
|
1,054 ====== |
|
|
Supplemental cash flow information |
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
|
- |
|
- |
|
- |
|
(47) |
|
|
Cash received as interest |
|
|
- |
|
12 |
|
3 |
|
95 |
|
The accompanying notes are an integral part of these financial statements
1. Basis of preparation and going concern
The consolidated financial statements have been prepared by management in accordance with Canadian Generally Accepted Accounting Principles. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements have, in management's opinion, been properly prepared using careful judgement with reasonable limits of materiality and within the framework of the significant accounting policies summarised in the Company's financial statements for the year ended 31 December 2008, and the subsequent changes in accounting policies as detailed in Note 2 below.
The Company's interim financial statements do not conform in all respects to the requirements of Canadian GAAP for annual financial statements. The Company's interim statements should be read in conjunction with the consolidated financial statements of the Company for the year ended 31 December 2009.
The Company's functional and reporting currency is Pound Sterling.
Going concern
These consolidated financial statements have been prepared on the basis of Canadian generally accepted accounting principles ("Canadian GAAP") applicable to a 'going concern', which assume that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. As at 31 December 2009 the Company had net cash outflows from operations therefore may require additional funding which, if not raised, may result in the curtailment of activities. The Company has incurred cumulative losses (including a loss of £0.74 million in 2009) and has a cumulative deficit of £72.97 million as at 31 December 2009.
At 31 December 2009 the Company had an unrestricted cash balance of £0.65 million and held further cash of £0.81 million associated with performance bonds. If the Company is unable to generate positive cash flow from operations or secure additional debt or equity financing these conditions and events would cast substantial doubt regarding the "going concern" assumption and, accordingly, the use of accounting principles applicable to a going concern. These consolidated financial statements do not reflect adjustments to the carrying values of the assets and liabilities, the reported expenses and the balance sheet classifications, which could be material, that would be necessary if the "going concern" assumption were not appropriate
Management regularly reviews and considers the current and forecast activities of the Company in order to satisfy itself as to the viability of operations. These ongoing reviews include consideration of current order book and future business opportunities, current development and production activities, customer and supplier exposure and forecast cash requirements and balances. Based on these evaluations management consider that the Company is able to continue as a going concern.
2. Changes in accounting policies and recent accounting pronouncements
Section 3064 Goodwill and Intangible Assets
In February 2008 the CICA issued Handbook Section 3064 Goodwill and Intangible Assets, effective for interim and annual financial statements relating to fiscal years beginning on or after 1 October 2008. Section 3064, which replaces Section 3062 Goodwill and Other Intangible Assets, and Section 3450 Research and Development Costs, establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. This new standard was effective for the Company's fiscal year commencing 1 January 2009. The adoption of this standard has not affected the Company's consolidated financial statements.
Section 1000 Financial Statement Concepts
On 1 January 2009, the Company adopted the new recommendations of CICA Handbook Section 1000, Financial Statement Concepts, to clarify the criteria for recognition of an asset and the timing of expense recognition. The new requirements are effective for annual financial statements relating to fiscal years beginning on or after 1 October 2008. The adoption of this standard has not affected the Company's consolidated financial statements.
Credit Risk and the Fair Value of Financial Assets and Liabilities
On 20 January 2009 the CICA's Emerging Issue Committee ("EIC") issued abstract EIC-173, Credit and the Fair Value of Financial Assets and Liabilities, which requires entities to take both counterparty credit risk and their own credit risk into account when measuring the fair value of financial assets and liabilities, including derivatives. EIC-173 was to be applied retrospectively without restatement of prior periods in all financial assets and liabilities measured at fair value in interim and annual financial statements ending on or after the date of issuance of this abstract. The adoption of this standard has not affected the Company's consolidated financial statements.
Recent accounting pronouncements
New or updated CICA Handbook sections that have been issued but are not yet effective, and have a potential implication for the Company, are as follows:
Section 1582 Business combinations
This section replaces Section 1581 Business Combinations and applies prospectively to business combinations for which the acquisition date is on or after the first annual reporting period of the Company beginning on or after 1 January 2011. Section 1582 is not expected to have a significant impact on the Company's consolidated financial statements.
Section 1601 Consolidated Financial Statements
In January 2009, the CICA issued Handbook Section 1601, Consolidated Financial Statements, which replaces Handbook Section 1600, Consolidated Financial Statements carries forward the existing Canadian guidance on aspects of the preparation of consolidated financial statements subsequent to acquisition other than non-controlling interests. The section establishes the standards for preparing consolidated financial statements and is effective for fiscal years beginning on or after 1 January 2011. The Company may elect to early adopt this section and if so, will be required to early adopt Section 1582, Business Combinations and Section 1602, Non-controlling Interests. Section 1601 is not expected to have a significant impact on the Company's consolidated financial statements.
Section 1602 Non-controlling Interests
In January 2009, the CICA issued new Handbook Section 1602, Non-controlling Interests, which establishes standards for the accounting of non-controlling interests of a subsidiary in the preparation of consolidated financial statements subsequent to a business combination. This standard is effective for fiscal years beginning on or after 1 January 2011. The Company may elect to early adopt this section and if so, will be required to early adopt Section 1582, Business Combinations and Section 1601, Consolidated Financial Statements. Section 1602 is not expected to have a significant impact on the Company's consolidated financial statements.
Harmonizing of Canadian and International Financial Reporting Standards (IFRS)
In February 2008, the Accounting Standards Board of the CICA confirmed its strategic plan which will abandon Canadian GAAP and affect a complete convergence to the International Financial Reporting Standards. These new standards will be effective for the Company's interim financial statements commencing 1 January 2011. The Company is closely monitoring changes arising from this convergence and has identified that the majority of the Company's accounting policies are substantially compliant, and is currently establishing the changes required to the remaining accounting policies and determining the required adjustments to its financial statements (including additional disclosures) with its external financial advisors.
3. Segmental analysis
The Company's two reportable segments are the power electronics segment, which is involved in the development and manufacture of electrical power supply and control systems and the electrical machines segment, which is involved in the development and commercialisation of high speed electrical machines.
Corporate charges relating to the financing of the Company and other related management activities are allocated between the two reportable segments.
The power electronics and electrical machines systems segments both operate in the United Kingdom. Except for the Investments held by the Company which are located in Canada, all of the Company's assets are located in the United Kingdom.
|
|
Power electronics |
Electrical machines |
Total
|
|||
|
|
2009 |
2008 |
2009 |
2008 |
2009 |
2008 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Quarter ended 30 December |
|
|
|
|
|
|
|
Revenue |
1,684 |
1,689 |
1,509 |
173 |
3,193 |
1,862 |
|
Development income |
495 |
71 |
129 |
- |
624 |
71 |
|
|
2,179 |
1,760 |
1,638 |
173 |
3,817 |
1,933 |
|
|
|
|
|
|
|
|
|
Amortisation |
(27) |
(32) |
(92) |
(124) |
(119) |
(166) |
|
Interest income |
- |
5 |
- |
7 |
- |
12 |
|
Interest expense |
(104) |
(97) |
(103) |
(98) |
(207) |
(195) |
|
Profit/(Loss) for the period |
1,681 |
(1,872) |
(1,470) |
(1,279) |
211 |
(3,151) |
|
|
-------- |
-------- |
-------- |
-------- |
--------- |
-------- |
|
Property, plant and equipment |
10 |
(4) |
- |
12 |
10 |
8 |
|
|
Power electronics |
Electrical machines |
Total
|
|||
|
|
2009 |
2008 |
2009 |
2008 |
2009 |
2008 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Year ended 30 December |
|
|
|
|
|
|
|
Revenue |
5,323 |
6,112 |
1,941 |
669 |
7,264 |
6,781 |
|
Development income |
884 |
375 |
2,352 |
628 |
3,236 |
1,003 |
|
|
6,207 |
6,487 |
4,293 |
1,297 |
10,500 |
7,784 |
|
|
|
|
|
|
|
|
|
Amortisation |
(198) |
(174) |
(420) |
(488) |
(618) |
(662) |
|
Interest income |
1 |
47 |
2 |
48 |
3 |
95 |
|
Interest expense |
(386) |
(228) |
(386) |
(229) |
(772) |
(457) |
|
Loss for the period |
(301) |
(5,945) |
(434) |
(3,618) |
(735) |
(9,563) |
|
|
-------- |
-------- |
-------- |
-------- |
--------- |
-------- |
|
Property, plant and equipment |
67 |
134 |
5 |
37 |
72 |
171 |
|
|
|
|
|
|
|
|
|
|
Power electronics |
Electrical machines |
Total
|
|||
|
|
Dec 2009 |
Dec 2008 |
Dec 2009 |
Dec 2008 |
Dec 2009 |
Dec 2008 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
Total assets |
3,853 |
4,624 |
3,061 |
2,871 |
6,914 |
7,495 |
|
Property, plant and equipment |
365 |
532 |
701 |
1,092 |
1,066 |
1,624 |
|
Total liabilities |
(4,035) |
(4,596) |
(3,220) |
(3,672) |
(7,255) |
(8,268) |
|
Total revenue |
|
Quarter ended 30 December
|
Year ended 30 December
|
|||
|
|
|
|
2009 |
2008 |
2009 |
2008 |
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
UK |
|
|
316 |
(127) |
1,602 |
750 |
|
USA |
|
|
3,122 |
1,629 |
7,854 |
5,243 |
|
Canada |
|
|
420 |
307 |
599 |
1,496 |
|
Rest of World |
|
|
(41) |
124 |
445 |
295 |
|
|
|
|
_____ |
______ |
_____ |
______ |
|
|
|
|
3,817 |
1,933 |
10,500 |
7,784 |
4. Significant customers
In the year ended 31 December 2009, 64% of the Company's sales were derived from two customers (31 December 2008: 48% from three customers), each of whom represented 10% or more of the Company's sales.
In the quarter ended 31 December 2009, 86% of the Company's sales were derived from two customers (31 December 2008: 43% from two customers).
5. Profit/(loss) per share
Earnings 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.
|
|
|
Quarter ended 31 December
|
Year ended 31 December
|
|||
|
|
|
|
2009 |
2008 |
2009 |
2008 |
|
|
|
|
|
|
|
|
|
Numerator for basic EPS calculation: |
|
|
|
|
|
|
|
Net profit/(loss) |
|
|
£211,000 |
(£3,151,000) |
(£735,000) |
(£9,563,000) |
|
|
|
|
|
|
|
|
|
Denominator |
|
|
|
|
|
|
|
For basic net earnings - weighted average shares outstanding |
|
322,075,673 |
318,571,062 |
319,782,730 |
318,571,062 |
|
|
For diluted net earnings - weighted average shares outstanding |
|
622,965,027 |
318,571,062 |
319,782,730 |
318,571,062 |
|
As the Company experienced a loss in both full years and the quarter ended 31 December 2008 all potential common shares outstanding from dilutive securities are considered anti-dilutive and are excluded from the calculation of loss per share.
Details of anti-dilutive potential securities outstanding not included in EPS calculations at December 31 are as follows:
|
|
2009 |
2008 |
|
Common shares potentially issuable: |
|
|
|
- pursuant to warrants (note 24) |
23,357,142 |
23,357,142 |
|
- under stock options (note 24) |
25,485,700 |
17,651,700 |
|
- pursuant to loan note conversions (note 19) |
137,046,512 |
89,908,333 |
|
- pursuant to A Ordinary stock conversion (note 25) |
115,000,000 |
115,000,000 |
|
|
____________ |
____________ |
|
|
300,889,354 |
245,917,175 |
|
|
____________ |
____________ |
6. Share capital - issued shares
Authorised
At 31 December 2009 and 31 December 2008, the authorised share capital of the Company comprised an unlimited number of common shares and an unlimited number of preferred shares, issuable in series, without nominal or par value.
Issued
Common
Number £'000
At 1 January 2008 318,571,062 55,804
--
At 31 December 2008 318,571,062 55,804
Shares issued 22,827,160 421
--
At 31 December 2009 341,398,222 56,225
Common Shares
On 14 July 2009 the Company issued 1,664,368 common shares to holders of its 2005 series Convertible Loan Notes, in consideration for the interest due on those loan notes for the period 1 January 2009 to 30 June 2009, at a price of 1.4p per share.
On 24 December 2009 the Company issued 21,162,792 common shares as a result of the conversion of £455,000 of 2005 Convertible Loan Notes, at a conversion price of 2.15p per share.
After the balance sheet date, on 28 January 2009 the Company issued a further 9,069,769 common shares, and on 8 February 2009 a final 3,953,488 common shares as a result of additional conversions of £280,000 of 2005 Convertible Loan Notes, at a conversion price of 2.15p per share.
No options or warrants were exercised during the year ended 31 December 2009 or 31 December 2008.
7. A Ordinary equity
Number £'000
At 1 January 2008 115,000,000 13,310
At 31 December 2008 and 31 December 2009 115,000,000 13,310
Holders of A Ordinary Shares of Turbo Power Systems Limited carry no voting rights, cannot attend any shareholder meetings and, in the event of winding-up of the Limited Company are entitled to a maximum distribution of £500,000 in aggregate, to rank before the Common Shares. The A Ordinary shares are convertible into an equal number of Common Shares of Turbo Power Systems Inc. on request by the holder, having given 61 days notice.
Under certain take over or change in control events, the Ordinary Shares are exchangeable under "super exchange" rights, converting for 3 common shares of Turbo Power Systems Inc. for every Ordinary Share held.
As the A Ordinary Shares are non-participating interests in Turbo Power Systems Limited and are non-voting, no current year or cumulative net losses has been allocated to the A Ordinary Shares.
8. Subsequent event
On 28 January 2010 a further 9,069,769 Common Stock shares were issued as a result of the conversion of £195,000 of 2005 loan note principal, and on 8 February 2010 3,953,488 Common Stock shares were issued as a result of the conversion of £85,000 of 2005 loan note principal.
On 29 January 2010 the Company elected to repay the remaining 2005 loan note holders at the agreed redemption rate of 20%, resulting in a payment of £210,800 in full and final settlement of the outstanding principal value of £1,054,000.
On 29 March 2010 the 2008 loan note holders agreed to extend their waiver that removed the requirement for the Company to maintain unrestricted cash balances above £750,000 until 1 May 2010. Although the Company anticipates that it will be able to meet the requirement to maintain an unrestricted cash balance subsequent to 1 May 2010, if the Company is not able to do so the Company would be in default of its agreement with the 2008 loan note holders at that time. In the event that the Company is then unable to amend the required financial covenants or obtain alternative financing the Company may be unable to access credit and its debt obligation could become accelerated. These events would likely have a material adverse effect on the Company.
Related Shares:
TPS.L