Final Results

3 June 2010

Eco City Vehicles PLC

("Eco City", "ECV" or "the Group")

Results for the twelve months ended 31 December 2009

Eco City Vehicles PLC, a developer and supplier of eco-friendly commercial vehicles and the London licensed taxi, announces its preliminary results for the 12 months ended 31 December 2009.

Financial highlights

·; Revenues rose 30% to £24.7m (2008: £19m), driven by strong demand for new Mercedes Vito taxis

·; Achieved operating profit from continuing operations of £0.1m (2008: £0.6m loss)

·; Generated operating cashflow of £1.47m (2008: £2.89m cash outflow)

·; Revenue from new vehicle sales rose 40% to £14.5m (2008: £10.4m) with gross margin maintained at 8%

·; Parts & Accessories division increased sales by 19% to £2.9m (2008: £2.5m)

·; Loss before tax from continuing operations and excluding non-recurring items of £0.2m, reduced to £0.2m (2008: £0.7m loss)

·; Loss per share from continuing operations of 0.13p (2008: 0.23p loss); Adjusted loss per share excluding non-recurring items, of 0.06p (2008: adjusted loss per share of 0.23p)

·; Net debt cut to £2.4m (2008: £3.1m) with a further £1.9m available from stocking facilities

Operating highlights

·; New Vito unit sales more than tripled to 398 units in 2009 (2008: 113), capturing a 24% share of the London new taxi market in its first full year of production

·; Used vehicle unit sales in the year were up 112% to 308 units (2008: 145 units)

·; Launched 3.5 tonne hybrid Mitsubishi truck in UK, generating excellent market feedback from potential customers

·; Ceased operating loss-making in-cab advertising licensee, Transmedia Limited.

·; Launched an all electric prototype taxi, the Mercedes eVito, in February 2010 and in discussions to develop series hybrid Vito taxi

·; New agreement with Manganese Bronze subsidiary, LTI, to cover after-sales servicing and parts supply for old-style TX4 taxis and earlier models

·; Appointed David Trendle as Finance Director in April 2010

·; Increased production of the Vito taxi at our Coventry site from eight to twelve units per week in 2010

Commenting on the results, Peter DaCosta, Chief Executive of Eco City, said: "Despite a tough economic environment, Eco City has delivered solid results for 2009. This reflects strong demand for the London-licensed Mercedes Vito taxi, which made its first full year sales contribution to the Group last year, and continues to set the pace for new taxi sales in the capital.

"While trading conditions remain challenging, in particular due to the impact of recent airline disruptions on the taxi trade, we remain on track to report another year of progress. The Vito has established itself as a favourite with corporate London. With the total number of Vito taxis sold now more than 700, production has been stepped up from eight to twelve per week at our site in Coventry. As a result we look to the future with cautious optimism."

Enquiries:

The Company's Annual Report & Accounts will be posted to shareholders on Monday 7th June 2010 and will also be available on the Company's website www.ecocityvehicles.com.

Introduction

Despite exceptionally difficult trading conditions throughout 2009, Eco City Vehicles has delivered a solid performance for the year. Group revenues increased by 30% to £24.7m (2008: £19.0m) driven by robust demand for the London-licensed Mercedes Vito taxi, which has set the pace for new taxi sales in the capital since its launch in June 2008. The superior comfort, performance, reliability and reported economy of the Vito are now widely recognised by both drivers and passengers.

The taxi was co-developed by the Group, its associate company, One80, in partnership with the German auto giant and is second-stage manufactured by a UK sub-contactor at the Group's manufacturing site in Coventry.

Sales of the Vito, which more than offset a sharp fall in sales of the old-style TX4 taxis produced by Manganese Bronze, were the main reason for the 52% increase in total vehicle sales during the year, though a doubling in used vehicle sales compared with 2008 also contributed.

The strong revenue performance, together with higher margins from Vito sales, helped the Group return to a £0.1m operating profit from continuing operations, compared with a £0.6m operating loss in 2008. As announced previously, the Group also discontinued its in-cab advertising business, Transmedia Limited, which incurred a £0.4m loss in the year. Excluding the impact of discontinued activities and non recurring items, the Group made a pre-tax loss of £0.2m compared with a pre-tax loss of £0.7m in 2008.

Non-recurring items of £0.2m were incurred in the year (2008: nil) due to a provision of £0.5m made against amounts owed by Cabvision Limited, a related party, net of £0.3m income received relating to an insurance claim.

Central overheads reduced by 4% to £1.84m reflecting a reduction in staffing levels for after-sales service activities and cost savings initiated early in 2009.

Operational Review

New Taxis

Sales of new taxis increased by 40% to £14.5m (2008: £10.4m) while gross margin was maintained at 8%. This reflects a 252% increase in sales of new Vitos to 398 in 2009 (2008: 113 units), surpassing the 500 unit level since it was launched as the latest iteration of the London licensed taxi in mid 2008.

The Vito accounted for 84% of total new sales by revenue and, as anticipated, achieved significantly higher margins than the TX4, which continued to be heavily discounted.

The Group estimates that the Vito has captured 24 per cent share of new taxi sales in the London market since its launch and is expected to gain further share as increasing numbers of taxi drivers recognise its benefits, value and low total ownership costs.

The Group continues to work closely with Mercedes-Benz, who are delighted with the success of the Vito taxi, placing the Group as their top distributor of a Vito based vehicle. The Group has taken advantage of the previously announced termination by LTI of its independent dealership network and recruited these ex LTI businesses (with their taxi knowledge and experience) for the distribution of the Vito in the rest of the UK. In addition, the Group is working closely with Mercedes-Benz to enable their dealers to provide quality after-sales service for the Vito taxis, thereby extending the network of approved outlets across the UK.

LTI taxis

In contrast to the Vito, the sales of the LTI manufactured TX4 declined from 247 to 80 despite continued heavy discounting, leading to very low margins as well as validating the Group's decision two years ago to reduce dependence on this product line.

As announced previously, the Group was provided notice in July 2009 for termination of the LTI dealership for new vehicles with effect from mid July 2010. Subsequently the Group has agreed contracts with LTI to continue sales of used vehicles, parts and service of LTI vehicles. The loss of the LTI dealership will therefore have a minimal impact on the Group allowing it to focus on the new generation of modern taxis under the Mercedes brand.

Used taxis

Used sales have performed well with revenue up by 118% to £4m (2008: £1.8m) as the success of the Vito saw cabbies trade in their used LTI vehicles for a new Vito. This contributed to a substantial increase in used vehicles sales to 308 units from 145 last year with margins increasing from 0.8% to 4.9%.

After-Sales Division - Parts and Service

The parts business showed excellent growth with revenue up 19% to £2.9m (2008: £2.5m) and gross margin improvement from 20.4% to 22.7%.

Revenues from after sales service reduced from £4.1m to £3.2m, as the economic recession led cabbies to extend service intervals and prompted more competition from small garages that trade below the VAT threshold. However, early action to reduce costs in this segment, together with the introduction of service packages on new vehicles to retain servicing revenue, resulted in profits of £0.2m compared to £0.3m in the previous year.

Overall the profitability of the After-Sales division contributed £0.7m (2008: £0.7m).

Low Emission Commercial Vehicles

The Group continued to execute its strategy to diversify into the market for environmentally friendly light commercial vehicles. In May 2009, ECV took delivery of the first series-hybrid 3.5 tonnes truck, generating excellent market feedback. Further progress has been made in the development of a 7.5 tonnes hybrid truck.

A prototype all electric Mercedes Vito taxi, the eVito, developed by a consortium including ECV was unveiled in February 2010 garnering considerable media and industry interest. The expected phasing out of the older taxis from London, part of the Mayor's strategy to improve air quality in the city, will increase demand for newer cleaner taxis. The Group is in discussions with the Mayor of London's office and with Mercedes Benz about the production of a low emission Vito taxi.

The Group is now very well positioned to exploit the potential of the growing demand and need for more fuel efficient and lower carbon taxis and other vehicles.

New appointment

During the year the Board agreed to appoint a full time Finance Director to its leadership team as part of its growth strategy. In April 2010, David Trendle, who brings a wealth of experience at growth companies, was appointed to that role.

Related Party transaction

On March 11th this year the Group informed The Stock Exchange that the existence of some previously undisclosed related party transactions had come to light. Although these have not had any adverse impact on our cash or on current trading, an investigation is under way into how these transactions occurred. The results of this investigation, initiated by Eco City Vehicles Plc, are expected to be available in the next few weeks.

Financial review

Inventory

During the year inventories reduced from £4.2m to £2.7m. This was mainly due to a decrease in consignment stock from £3.2m to £1.2m over the same period. The improvement in used sales as well as reducing exposure to LTI stock has contributed to this reduction. Total assets have reduced accordingly from £10.4m to £9.0m.

Cash balances and funding

Cash balances at year end were £0.3m (2008: £0.05m) while borrowings reduced from £3.1m to £2.7m. The Group has agreed total facilities for vehicle stock of £3.5m, with only £1.6m utilised at the year end. Cash flow from operating activities was substantially turned around from an outflow of £2.9m in 2008 to an inflow of £1.5m in 2009.

On 2nd June 2010 the Group entered into a new 5-year loan agreement with KPM-UK Taxis Plc Discretionary Pension Scheme, whose beneficiaries are Peter DaCosta, Michael Troullis and Keith Marder. This loan agreement will provide funding of £0.85m to repay the HBOS overdraft facility and provide working capital for the growth of the business. Interest will be payable at a fixed rate of 5% with the loan being repaid annually in equal installments over the 5 year loan term. The KPM-UK Taxis Plc discretionary pension scheme will have a first fixed and floating charge over the assets of the Group, excluding the leasehold property. The provision of the loan under the agreement is classified as a related party transaction for the purposes of the AIM Rules for Companies. Accordingly, the independent Directors (being all of the Directors other than Peter DaCosta, Michael Troullis and Keith Marder), having consulted with Numis Securities Limited (in its capacity as the Company's nominated adviser), confirm that they are satisfied that the terms of the agreement are fair and reasonable insofar as shareholders in the Company are concerned. 

The Group renegotiated its mortgage facility with Barclays following revised covenants being agreed in line with expected future trading and waiver of previous non-compliance with the terms of the facility, which in the current financial market, have resulted in higher interest rate margins.

In May 2010, the Group also agreed inclusion of second tier manufacturing costs and licence fees within the stocking loan facility provided by Mercedes-Benz, thereby funding the full cost of the vehicle.

Outlook

Trading conditions remain challenging, in particular due to the impact of recent air travel disruptions on the taxi trade. However, the Group remains on track to report another year of progress and its long term prospects remain bright.

The Vito's market share continues to grow without resorting to discounting, helped by the appointment of the Group's regional dealer network throughout the UK. The Vito has now been licensed by 170 Councils, representing an addressable market exceeding 50,000 licensed taxis.

Transport for London have now announced they are reviewing the introduction of an age limit for all London Taxis from 2012.

The Group anticipates introducing a conventional Euro V emission standard compliant (meeting stringent new regulations in the production process and emission standards) Vito later this year for sale in 2011, a year ahead of schedule. The Group also continues to deepen its relationship with Mercedes-Benz and is in negotiations to become a full Light Commercial Vehicle Mercedes-Benz Franchise in the second half of 2010.

With the total number of Vito taxis sold now standing at more than 700, production has been stepped up from eight to twelve vehicles per week at our site in Coventry. As a result the Board looks to the future with cautious optimism.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2009

eco city vehicles plc

Consolidated statement of financial position

As at 31 December 2009

eco city vehicles plc

Consolidated statement of changes in equity

As at 31 December 2009

eco city vehicles plc

Consolidated statement of cash flows

For the year ended 31 December 2009

1. Accounting policies

The principal accounting policies adopted in preparation of the Group's financial statements are set out below.

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS and IFRIC Interpretations) issued by the International Accounting Standards Board (IASB) as adopted by the European Union and with those parts of the Companies Acts applicable to companies preparing their financial statements under IFRS. Practice is continuing to evolve on the application and interpretations of IFRS. Further standards may be issued by the International Accounting Standards (IASB) and standards currently in issue and endorsed by the EU may be subject to interpretations issued by IFRIC.

The financial statements have been prepared using the measurement basis specified by IFRS for each type of asset, liability, income and expense. The measurement bases are more fully described in the detailed accounting policies below.

The preparation of financial statements, in conformity with general accepted accounting principles under IFRS, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimate differ from those estimates.

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these consolidated financial statements.

IAS1 Presentation of Financial Statements (revised 2007) requires presentation of a comparative balance sheet as at the beginning of the first comparative period, in some circumstances. Management considers that this is not necessary this year because the 2008 Balance sheet is the same as that previously published.

Adoption of IFRS 8 'Operating Segments' has resulted in redesignation of the Group's reportable segments to more closely follow internal management reporting.

Going concern

Based on the Group's plans for 2010 and after making enquiries, the Directors have a reasonable expectation that the Group has adequate resources available from funds generated from trading and from loan finance to continue operations for at least 12 months from the date of signing of the financial statements for the year ended 31 December 2009. For this reason they continue to adopt the going concern basis in preparing the financial statements.

The Board have undertaken extensive detailed forecasting of Group activity through to December 2012. Based on actual sales in 2009 and early 2010 of the new Mercedes Vito Taxi and used taxi sales, it has been possible to project vehicle sales and after -sales revenue and profitability until the end of 2012.

The performance of the business within the current economic climate has been objectively assessed and reported upon internally over a period of ten months, and the Board has a clear view of the medium term trading conditions. In addition the market acceptance of the new Vito Taxi is a now known, given unit sales, customer feedback and press opinion. These two aspects lead the Board to have confidence in their forward projections of going concern.

On 2nd June the group entered into a new 5-year loan agreement with KPM-UK Taxis Plc Discretionary Pension Scheme, whose beneficiaries are Peter DaCosta, Michael Troullis and Keith Marder. This loan agreement will provide funding of £0.85m to repay the HBOS overdraft and provide working capital for the growth of the business. Interest will be payable at a fixed rate of 5% with the loan being repaid annually in equal instalments over the 5 year loan term. The KPM-UK Taxis Plc discretionary pension scheme will have a first fixed and floating charge over the assets of the Group, excluding leasehold properties. The provision of the loan under the agreement is classified as a related party transaction for the purposes of the AIM Rules for Companies. Accordingly, the independent Directors (being all of the Directors other than Peter DaCosta, Michael Troullis and Keith Marder), having consulted with Numis Securities Limited (in its capacity as the Company's nominated adviser), confirm that they are satisfied that the terms of the agreement are fair and reasonable insofar as shareholders in the Company are concerned.

The Eco Truck venture due to be launched in the second half of 2010 is the subject of separate negotiations for funding and did not form part of the detailed forecasting regarding going concern, save that it is the Boards' opinion that it cannot be funded from current working capital generated by the Group. The new venture therefore does not pose an additional working capital drain on currently projected resources derived from the core business. The Board are encouraged that funding institutions have expressed a willingness to support the launch of the new vehicle with additional facilities.

2. Operating loss

Operating loss has been arrived at after charging /(crediting):

3. Non-recurring items

The 2009 operating loss of £0.13m is stated after non-recurring items totalling £0.21m shown below:

·; Provision against Cabvision Limited debtor - Cabvision has been involved in legal cases during the last year. Following the initial findings against Cabvision Limited in December 2009, the Group believed it prudent to provide against this debtor. The debtor relates to interest accrued on loans to Cabvision Limited, which were provided against prior to flotation.

·; Insurance claim - the Group received £297,000 from its insurance Company relating to the closure of one of the workshops for a large proportion of 2008, due to a fire.

4. Taxation

5. Discontinued operations

During 2009 management decided to discontinue the in-taxi advertising business, Transmedia Ltd. The decision was taken in line with the Group's strategy to focus on its core business of vehicle development and distribution and consequently, assets and liabilities allocated to Transmedia Ltd were classified as a discontinued business. Revenue and expenses, gains and losses relating to the discontinuation of this company have been eliminated from profit or loss from the Group's continuing operations and are shown as a single line on the face of the Consolidated statement of comprehensive income statement (see 'loss for the year from discontinued operations'). Transmedia Ltd operating profit and loss for the year can be summarised as follows:

The group continues to own the assets and liabilities of Transmedia Ltd, the carrying amounts which can be summarised as follows:

Cash flows generated by Transmedia Ltd for the year can be summarised as follows:

6. Earnings per share

7. Borrowings 

8. Cash flow adjustments and changes in working capital

The following non-cash flow adjustments and adjustments for changes in working capital have been made to profit before tax to arrive at operating cash flow:

9. Financial information

The financial information in this preliminary announcement which comprises the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and related notes is derived from the full Group financial statements for the year ended 31 December 2009 and does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006.

Group statutory accounts for 31 December 2008 have been delivered to the Registrar of Companies and those for 31 December 2009 will be delivered following the Group's annual general meeting. The auditors have reported on each set of Group statutory accounts and their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report, and (iii) did not contain a statement under section 237(2) or section 237(3) of the Companies Act 1985 or section 498(2) or section 498(3) of the Companies Act 2006.