11th Aug 2005 07:01
Turbo Genset Inc.11 August 2005 Thursday 11th August 2005 TURBO GENSET INC. ANNOUNCES ITS RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2005 Highlights •Sales up 68% to £0.95m •Loss before tax reduced by 21% to £3.6m •Cash outflow before financing activities reduced by 17% to £2.8m •Oil field application development agreement announced today Commenting on the results, Michael Hunt, Chief Executive said, "The increase in revenue during the first half as existing contracts move intotheir production phase, combined with the growing level of contract activityacross all three key business sectors, is very encouraging. The recentlyannounced contracts with FR-HiTemp, for motor drive systems to be deployed onthe new Boeing 787, and with ALC for motors in an oil field application areindicative of a number of opportunities that are currently under discussion,harnessing the combined skills of our power electronics team at Gateshead andour high speed electrical machines team at Heathrow. In addition to the increasein revenues our improved cost control has contributed significantly to our cashburn improvement" For further information, please contact: Turbo Genset - UK Tel: +44 (0)20 8564 4460Michael Hunt, Chief Executive OfficerStephen Sadler, Chief Financial Officer 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: •Turbine Based and Variable Speed Gensets •High Speed Motors and Motor Drives •Power Electronics 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 High Speed Electrical Machines and Drives The ability of the company to broaden the application of its core generator/motor technology beyond gas turbine gensets gives us the opportunity to accessnew revenue streams. As a result we have seen significant growth in customerinterest in our high speed electrical machines (both generators and motors) andtheir associated power electronics during the first half of 2005. The recent announcement of the contract award from FR-Hitemp for the developmentand production of motor drives for their fuel pumps to be used on the new Boeing 787 "Dreamliner" is clearly a major event for the company. With a potential longterm contract value of some $20 million for development, production units andafter-market sales, it is not only the largest contract won by the company, butalso demonstrates that Turbo Genset has the technical and commercial ability tobreak into new and highly demanding business sectors. The announcement today ofa development contract with ALC in the oil field sector further underlines thisability. In addition to the contracts already announced we are involved in a number ofcompetitive bids on several major industrial equipment programmes with potential for significant ongoing production revenue. The combined skills of our Gateshead and Heathrow staff give us a strongcompetitive advantage in this growing market as companies look to update theirequipment designs to incorporate high speed systems which improve efficiency,reliability, size and weight. Turning to contracts already underway, initial production of the SKF 15-35kWmotor drive systems will begin in the last quarter of 2005 and will increasethroughout 2006.Finally following the earlier announcement of the MoU betweenTurbo Genset and Lotus Engineering for the development of a hybrid vehicle motor drive system, the formal contract has now been received and work has commenced. Turbine Based Gensets The company continues to expand the number of detailed technical and commercialproposals under consideration for international gas turbine based combined heatand power (CHP) installations. It is clear that the procurement cycle for such high value installations will typically exceed twelve months, however a number of these proposals are scheduled to conclude in the second half of 2005. Progress on testing the 1.2MW land fill gas Genset conversion has proceededsmoothly and the initial production unit scheduled to be located at a land fillsite in Illinois is well advanced. Our launch customer Liquid Solutions hassuccessfully commissioned and demonstrated its land fill site based wastetreatment process, and are actively assessing multiple locations in the Mid-Westwhere the process can be deployed. Turbo Genset is now registered as a landfill gas equipment supplier in the USand has identified a number of state sponsored programmes for such equipmentwhich we are currently investigating. Testing of the 400kW system in France has now concluded, and negotiations arecurrently underway to relocate the hardware to the United Kingdom where it isintended to be deployed within an innovative CHP application for extendedendurance and long term performance evaluation. Power Electronics The volume and value of bids submitted for international rail projects hassignificantly increased during the quarter. Testing and commissioning of the National Rail Equipment Company ("NRE")traction controller in the US has been completed satisfactorily and trials andcustomer demonstrations will be carried out in Quarter 3. Initial productionunits are expected to be ordered before the end of 2005. Production deliveries of the H6 Auxiliary Power Supplies for the Toronto Transitsubway car began during Quarter 2 and will now continue with monthly shipmentsscheduled until 2007. Manufacture and supply of air-conditioning power supplies for the LondonUnderground District Line to Bombardier is proceeding smoothly. I-Power our power electronics divison continues to develop partnerships with other rail systems suppliers, and a number of combined programmes are under review. Financial review Review of First Half 2005 Results of Operations and Cash Flows Revenue Revenue in the six month period ended 30 June 2005 was £0.95 million comparedwith £0.57 million in 2004 and comprised; 2005 2004 £'000 £'000 Power electronics 917 564Generator systems 36 4 ------ ------ 953 568 ====== ====== Power electronics revenues have grown significantly in the first half as railand industrial contracts have moved into production. The major contributors torevenue in the six month period were contracts with Bombardier, both on LondonUnderground auxillary power units and 'at seat' power supplies, PRC and RollsRoyce. As the power electronics business moves into a production phase, sparesand service revenues will become more significant. These revenues representaround £0.25 million of first half revenues. Generator systems revenues represent sales of motor components to SKF. Cost of product revenues The cost of product revenue in the period amounted to £0.88 million (2004 :£0.81 million), resulting in a gross profit on sales of £0.07 million (2004 :loss of £0.24 million) as follows: 2005 2004 £'000 £'000 Power electronics 307 66Generator systems (237) (305) ------ ------ 70 (239) ====== ====== Certain fixed costs attributable to the manufacturing operation mean that thegenerator systems division recorded an overall loss on product sales. Net development expenditure Net development expenditure in the period was £1.46 million compared with £2.31 million in 2004, and comprised; 2005 2004 £'000 £'000 Development income (315) (241)Research and product development expenditure 1,475 2,333Accrued tax credits (35) (171)Amortisation 334 390 ------ ------Total expenditure 1,459 2,311 ====== ====== Development income of £0.31 million (2004 : £0.24 million) consists mainly ofreceipts from the Toronto Transit Commission and SKF. Research and product development expenditure decreased from £2.33 million in2004 to £1.48 million in 2005 reflecting strict cost control and the movement ofprojects into the production phase. Included in research and product developmentexpenditure is a non refundable cash receipt of £0.14 million recognised net of related expenditures, followign the release from the Dtech contract. The reduced expenditure is reflected in lower research and development tax credit claims. Impairment During the period the company has made a provision for impairment of £0.09million against its investment in shares and convertible debentures in AltekPower Corporation. General and administrative Reduced general and administrative costs for the half year of £1.40 million(2004 : £1.54 million) reflect stronger general cost control and a lowerheadcount. Amortisation Amortisation on research and development assets was £0.33 million compared with£0.39 million in 2004. Non research and development amortisation was £0.36million compared with £0.40 million in 2004. Interest income Interest income in the period was £0.13 million (2004 : £0.15 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 227 88Amortisation of deferred finance charges 87 32Debt accretion 166 91 ------ ------ 480 211 ====== ====== 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 £0.17 million (2004:£ 0.09 million). Cash flows Cash outflow from operating activities Cash outflow from operating activities for the half year was £2.82 million,compared with £3.44 million in 2004. In 2004 the Company recorded an operatingloss of £4.50 million and had a decrease in working capital of £0.33 million.The 2005 operating loss was £3.24 million and working capital increased by £0.01million during the period. The decrease in working capital in 2004 was mainly due to a decrease in debtorsof £0.52 million following the receipt of £0.59 million in UK R&D tax credits.The increase in working capital in 2005 reflects an increase in trade debtorsdue to improved sales in the second quarter. Restructuring payments paid during the first half of 2005 relate to redundancyand property disposal payments charged to the profit and loss account in priorperiods. Interest paid of £0.09 million (2004 : £0.08 million)during the periodrepresents payments made on the convertible bonds issued in 2003. Capital investment activities Cash outflows from capital investments in the period were £0.02 million comparedwith £0.03 million in 2004 as shown below; 2005 2004 £'000 £'000 Purchase of capital assets 25 162Capitalised R&D tax credits cash receipts - (128) ------ ------ 25 34 ====== ====== The reduction in expenditure on capital assets reflects reduced expenditure ontangible fixed assets. Cash flow from financing activities Cash inflow from financing of £7.72 million in the period relates to net fundsreceived from the issue of convertible notes in March. 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. Overall Cash outflow for the period Overall the cash inflow during the period was £4.89 million, including proceedsof the debt issue of £7.71 million. This compares with an overall cash outflowof £3.40 million in 2004. Review of Second Quarter 2005 Results of Operations and Cash Flows Revenue Revenue in the quarter was £0.59 million compared with £0.25 million in 2004 andcomprised; 2005 2004 £'000 £'000 Power electronics 557 249Generator systems 36 - ------ ------ 593 249 ====== ====== Cost of product revenues The cost of product revenue in the quarter amounted to £0.51 million (2004:£0.40million), resulting in a gross profit on sales of £0.08 million( 2004:loss of£0.15 million) as follows: 2005 2004 £'000 £'000 Power electronics 197 17Generator systems (115) (169) ------ ------ 82 (152) ====== ====== Net development expenditure Net developemnt expenditure in the quarter was £0.51 million compared with £1.14 million in 2004, and comprised; 2005 2004 £'000 £'000 Development income (256) (211)Research and product development expenditure 611 1,243Accrued tax credits (15) (93)Amortisation 173 196 ------ ------Total expenditure 513 1,135 ====== ====== Impairment During the quarter the company has made a provision for impairment of £0.09million against its investment in shares and convertible debentures in AltekPower Corporation. General and administrative General and administrative costs in the quarter of £0.73 million compare with£0.80 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 £0.20 million in 2004. Interest income Interest income in the quarter increased to £0.09 million from £0.07 million in2004, due to a higher average cash balance held during the period.Interest expense and finance chargesInterest expense and finance charges arise from the issue of convertible bondsin July 2003 and March 2005 and comprise; 2005 2004 £'000 £'000 Interest payable 153 43Amortisation of deferred finance charges 52 16Debt accretion 102 45 ------ ------ 307 104 ====== ====== Cash flows Cash outflow from operating activities Cash outflow from operating activities in the quarter was £1.39 million,compared with £2.17 million in 2004. In 2004 the Company recorded an operatingloss of £2.28 million and had an increase in working capital of £0.25 million.The 2005 operating loss was £1.44 million and working capital increased by £0.39million during the quarter. Interest paid of £0.18 million (2004 : £0.17 million) during the quarterrepresents payments made on the convertible bonds issued in 2003. Overall Cash outflow for the period Overall the cash outflow during the quarter was £1.35 million compared with anoverall cash outflow of £2.17 million in 2004. Balance sheet as at 30 June 2005The Company ended the period with a cash balance of £6.95 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 £1.87 million relating toperformance bonds entered into as part of a contract with the Toronto TransitCommission. Long-term assets have decreased from £6.01 million at 31 December 2004 to£5.39 million at 30 June 2005. Deferred financing charges have increased by£437K 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 £0.69 million in thefirst half 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 £10.43 million at 30 June 2005 comparedto £4.64 million at 31 December 2004, reflecting the increase in debtattributable to the convertible bond issue. Net working capital at 30 June 2005, excluding cash balances, was £0.85 million,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 June 2005, the Companyhad 186,176,927 common shares issued and outstanding. As at that date there were32,804,750 outstanding share options and 10,500,000 outstanding warrants. TURBO GENSET INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND DEFICIT UNAUDITED Notes Six months ended 30 June 2005 2004 £'000 C$'000 £'000 C$'000 Revenue 4 953 2,218 568 1,382 Expenses Production costs 883 2,055 807 1,963 Development income (315) (733) (241) (586)Research and development costs 5 1,774 4,128 2,552 6,209 -------- -------- -------- --------Net development expenditure 1,459 3,395 2,311 5,623 Provision for impairment of 90 209 - -investmentGeneral and administrative 1,398 3,253 1,543 3,754Amortisation 360 838 403 980 -------- -------- -------- -------- 4,190 9,751 5,064 12,320 -------- -------- -------- -------- Operating loss (3,237) (7,533) (4,496) (10,938) Other income and expensesInterest income 130 303 147 358Interest expense and finance 6 (480) (1,117) (211) (513)chargesForeign exchange gains/(losses) (16) (37) (7) (17) -------- -------- -------- -------- (366) (851) (71) (172) -------- -------- -------- -------- Loss before taxation (3,603) (8,384) (4,567) (11,110)Taxation (17) (40) - - -------- -------- -------- -------- Loss for the period (3,620) (8,424) (4,567) (11,110) Deficit, beginning of year (38,265) (84,422) (28,809) (69,993) -------- -------- -------- --------Deficit, end of period (41,885) (92,846) (33,376) (81,103) ========= ========= ======== ========Loss per share (2.0) p (4.6) c (2.6) p (6.3) c TURBO GENSET INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND DEFICIT UNAUDITED Notes Three months ended 30 June 2005 2004 £'000 C$'000 £'000 C$'000 Revenue 4 593 1,380 249 606 ExpensesProduction costs 511 1,189 401 976 Development income (256) (596) (211) (513)Research and product development 5 769 1,789 1,346 3,275 -------- -------- -------- --------Net development expenditure 513 1,193 1,135 2,762 Provision for impairment of 90 209 - -investmentGeneral and administrative 732 1,703 795 1,934Amortisation 184 428 202 491 -------- -------- -------- -------- 2,030 4,723 2,533 6,163 -------- -------- -------- -------- Operating loss (1,437) (3,343) (2,284) (5,557) Other income and expensesInterest income 89 207 67 163Interest expense and finance 6 (307) (714) (104) (253)chargesForeign exchange gains/(losses) (9) (21) (5) (12) -------- -------- -------- -------- (227) (528) (42) (102) -------- -------- -------- -------- Loss before taxation (1,664) (3,871) (2,326) (5,659)Taxation (17) (40) - - -------- -------- -------- -------- Loss for the period (1,681) (3,911) (2,326) (5,659) Loss per share (0.9) p (2.0) c (1.3) p (3.2) c TURBO GENSET INC. CONSOLIDATED BALANCE SHEETS UNAUDITED Notes As at 30 June As at 31 December 2005 2004 £'000 C$'000 £'000 C$'000Assets:Current assets:Cash and cash equivalents 6,952 15,411 2,067 4,797Debtors 10 1,888 4,185 1,711 3,970Stock and work in progress 530 1,175 482 1,119 -------- -------- -------- -------- 9,370 20,771 4,260 9,886 -------- -------- -------- -------- Restricted cash 8 1,866 4,136 1,876 4,353 -------- -------- -------- -------- Long term assets:Investments 9 90 200 180 418Intangible assets 9 1,882 4,169 1,895 4,397Tangible assets 9 3,419 7,579 3,932 9,124 -------- -------- -------- -------- 5,391 11,948 6,007 13,939 -------- -------- -------- -------- 16,627 36,855 12,143 28,178 ======== ======== ======== ======== Liabilities and shareholders' equity: Creditors: amounts falling due within 11 1,572 3,485 1,884 4,372 one year -------- -------- -------- -------- Creditors: amounts falling due after 12 10,432 23,125 4,643 10,774 more than one year -------- -------- -------- -------- Capital and reserves Share capital and other equity 2,13 46,611 103,322 43,959 102,007 instrumentsExchange adjustments 2 (103) (231) (78) (181)Profit and loss account deficit 2 (41,885) (92,846) (38,265) (88,794) -------- -------- -------- --------Shareholders' funds 4,623 10,245 5,616 13,032 -------- -------- -------- -------- 16,627 36,855 12,143 28,178 ======== ======== ======== ======== TURBO GENSET INC. CONSOLIDATED CASH FLOW STATEMENTSUNAUDITED Six months ended 30 June Notes 2005 2004 £'000 C$'000 £'000 C$'000 Cash outflow from operating 3 (2,824) (6,571) (3,440) (8,370)activities Interest received 122 284 157 382Interest paid (88) (205) (84) (204) --------- --------- --------- ---------Net cash outflow from operating (2,790) (6,492) (3,367) (8,192) Activities Capital investment activitiesPurchase of long term assets (25) (58) (34) (83) --------- --------- --------- ---------Cash outflow from capital investment (25) (58) (34) (83)activities --------- --------- --------- ---------Net cash outflow before financing (2,815) (6,550) (3,401) (8,275)activities Tax (17) (40) - - Financing activities -Net proceeds from debt issue 7,707 17,934 - -Movement in restricted cash 10 23 --------- --------- --------- ---------Cash inflow from financing 7,717 17,957 - -activities --------- --------- --------- ---------Increase/(decrease) in cash in the 4,885 11,367 (3,401) (8,275)period ========= ======== ========= ========= Cash and cash equivalents:Beginning of year 2,067 9,819 --------- ---------End of period 6,952 6,418 ========= ========= TURBO GENSET INC. CONSOLIDATED CASH FLOW STATEMENTS UNAUDITED Three months ended 30 June Notes 2005 2004 £'000 C$'000 £'000 C$'000 Cash outflow from operating 3 (1,389) (3,232) (2,168) (5,275)activities Interest received 87 202 77 187Interest paid (18) (42) (17) (41) --------- --------- --------- ---------Net cash outflow from operating (1,320) (3,072) (2,108) (5,129) Activities Capital investment activitiesPurchase of long term assets (13) (30) (61) (148) --------- --------- --------- ---------Cash outflow from capital investment (13) (30) (61) (148)activities --------- --------- --------- ---------Net cash outflow before financing (1,333) (3,102) (2,169) (5,277)activities Tax (17) (40) - - Financing activitiesNet proceeds from debt issue (8) (19) - -Restricted cash 10 23 --------- --------- --------- ---------Cash inflow from financing 2 4 - -activities --------- --------- --------- ---------Decrease in cash in the period (1,348) (3,138) (2,169) (5,277) ========= ========= ========= ========= Cash and cash equivalents:Beginning of period 8,300 8,587 --------- --------- End of period 6,952 6,418 ========= ========= TURBO GENSET INC. SIX MONTHS ENDED 30 JUNE 2005 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - PART 1 OF 7 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 equity Exchange Profit and Total capital adjustments loss £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2004 42,922 1,027 (83) (28,809) 15,057 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 (3,620) (3,620) Exchange (loss) (25) (25) Stock compensation 41 41 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 June 2005 44,239 2,372 (103) (41,885) 4,623 ========= ========= ========= ========= ========= 3 Reconciliation of operating loss to cash outflow from operating activities Six months ended Three months ended 30 June 30 June 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Operating loss for the period (3,237) (4,496) (1,437) (2,284) Movements in working capital balances Decrease / (increase) in debtors (172) 517 (380) (184) Decrease / (increase) in stocks and (48) - (54) 16 work in progress (Decrease) / increase in creditors 95 (190) 48 (81) Restructuring payments (248) (47) (23) (23) Amortisation 694 792 356 396 Provision for impairment 90 - 90 - Stock compensation expense 41 5 39 3 Foreign exchange (losses)/gains (39) (21) (28) (11) --------- --------- --------- --------- Cash outflow from operating activities (2,824) (3,440) (1,389) (2,168) ========= ========= ========= ========= TURBO GENSET INC. SIX MONTHS ENDED 30 JUNE 2005 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - PART 2 OF 7 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 and drives, 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 2004Six months ended 30 JuneRevenue 917 564 36 4 - - 953 568Net interest income/ - - (447) (204) 97 140 (350) (64)(expense)Amortisation 96 106 264 297 - - 360 403Loss for the period (461) (997) (2,547) (3,057) (612) (513) (3,620) (4,567)Capital expenditure 14 36 11 126 - - 25 162 As at June Dec June Dec June Dec June Dec 2005 2004 2005 2004 2005 2004 2005 2004 Total Assets 4,169 3,948 9,409 7,198 3,049 997 16,627 12,143Total Liabilities 627 643 11,303 5,839 74 45 12,004 6,527 Three months ended 30 JuneRevenue 557 249 36 - - - 593 249Net interest income/ - - (280) (102) 62 65 (218) (37)(expense)Amortisation 65 53 119 149 - - 184 202Loss for the period (64) (427) (1,300) (1,611) (317) (288) (1,681) (2,326)Capital expenditure 4 16 9 31 - - 13 47 5 Research and product development expenditure Research and product development expenditures incurred during the period comprised: Six months ended Three months ended 30 June 30 June 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Research and product development 1,475 2,333 611 1,243 expenditure Accrued tax credits (35) (171) (15) (93) -------- -------- -------- -------- Total expenditure 1,440 2,162 596 1,150 Amortisation 334 390 173 196 -------- -------- -------- -------- Net expenditure charged to profit 1,774 2,552 769 1,346 and loss account ======== ======== ======== ======== TURBO GENSET INC. SIX MONTHS ENDED 30 JUNE 2005 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - PART 3 OF 7 Following the mutual release from the Dtech contract the Company has recognised a non refundable cash deposit net of related expenditures of £139,000. Deferred development expenditure, net of accrued tax credits, amortisation and provisions for impairment, at 30 June 2005 amounted to £241,000 (31 December 2004 - £691,000). Deferred development costs comprise materials, labour and allocated overheads. Total accrued tax credits receivable at 30 June 2005, including those credited against deferred development expenditure, amounted to £492,000 (31 December 2004 - £457,000). 6 Interest expense and finance charges Six months ended Three months ended 30 June 30 June 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Interest payable 227 88 153 43 Debt accretion 166 91 102 45 Amortisation of deferred finance 87 32 52 16 charges --------- --------- --------- --------- 480 211 307 104 ========= ========= ========= ========= 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 six months ended 30 June 2005 was £3,620,000 (2004 - £4,567,000). 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. At 30 June 2005 cash subject to restrictions totalled £1,865,556 (December 2004 - 1,875,742) and is secured over an equivalent cash balance. TURBO GENSET INC. SIX MONTHS ENDED 30 JUNE 2005 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - PART 4 OF 7 9 Long - term assets Cost Impairment Amortisation Net book value £'000 £'000 £'000 £'000 At 30 June 2005 Investments (a) 431 341 - 90 Intangible assets 5,783 2,002 1,899 1,882 Tangible assets 8,127 - 4,708 3,419 -------- -------- -------- -------- Total long term assets 14,341 2,343 6,607 5,391 ======== ======== ======== ======== At 31 December 2004 Investments (a) 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 on October 9, 2008. During the period the Company has made a provision for impairment of £90,000 against the investment. 10 Debtors June December 2004 2005 £'000 £'000 Trade debtors 889 610Prepayments 475 534Other debtors 12 26Tax recoverable 512 541 -------- -------- 1,888 1,711 ======== ======== TURBO GENSET INC. SIX MONTHS ENDED 30 JUNE 2005 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - PART 5 OF 7 11 Creditors: Amounts falling due within one year June December 2004 2005 £'000 £'000 Trade creditors 479 520Other creditors 63 75Tax and social security creditor 94 109Accruals and deferred income 882 877Provision for restructuring 54 303 -------- -------- 1,572 1,884 ======== ======== 12 Creditors 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 (note 2) (1,266) - Less equity component (1,114) - ------- ------- 9,984 4,181 Add: accretion of debt component during the period (note 6) 166 91 ------- ------- Balance at 30 June 10,150 4,272 ======= ======= Provisions for warranty claims 282 307 ------- ------- 10,432 4,579 ======= ======= 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 Convertible Notes 10,549,997 ------------ 186,176,927 ============ No options were exercised during the six months ended 30 June 2005. TURBO GENSET INC. SIX MONTHS ENDED 30 JUNE 2005 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - PART 6 OF 7 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 June 2005, and the movement during the six months then ended, are as follows: Options Warrants Number Number Outstanding at 1 January 2005 26,263,641 3,500,000 Cancelled (958,891) - Issued 7,500,000 7,000,000 ---------- ---------- Outstanding at 30 June 2005 32,804,750 10,500,000 ========== ========== The compensation expense in the six month period ended 30 June 2005 was £40,702 (2004 - £4,800). 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 £'000 £'000 share UK pence September 2003 584 (1,974) (1.1) 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) TURBO GENSET INC. SIX MONTHS ENDED 30 JUNE 2005 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - PART 7 OF 7 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: Six months and three months ended 30 June 2005 2.327 Six months, and three months ended 30 June 2004 2.433 As at 30 June 2005 2.217 As at 31 December 2004 2.321 18 Pensions The Group operates and contributes to a number of defined contribution pension schemes. The group's contributions, which are on a method basis range from 3% to 10% of basic salary. The assets of the plans are held separately from those of the Group in independently administered funds. The contributions payable to the pension plan have been charged to the profit and loss account. The pensions charge for the six month period ended 30 June 2005 represents contributions payable to the Group to the plans and amounted to £70,000 (Six months to June 2004 - £92,000 ) 19 Comparative Figures The comparative figures for the six month period ended 30 June 2004 have not been reviewed by the Group's auditors. The Groups auditors have reviewed the six month period ended 30 June 2005. The groups auditors did not review the quarter ended 31 March 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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