14th Jun 2007 07:00
3DM Worldwide PLC14 June 2007 3DM Worldwide plc (the "Company" or "3DM") Preliminary unaudited results for the year ended 31 December 2006 CHIEF EXECUTIVE OFFICER'S STATEMENT 2006 has been a busy year for the Company culminating in the restructuring ofthe business. COMMERCIAL ACTIVITIES The development of the Eco Sheet product in conjunction with Bovis Lend LeaseLtd provided the springboard for commercial discussions. The product ispositioned as a replacement for plywood in temporary works within theconstruction industry. Following trials of the board as site safety fencing anduse as concrete forms (moulds), Eco Sheet won the Chartered Institute ofBuilding Award for Innovation. Eco Sheet has generated commercial interest within the construction industrywhere the focus on recycling is gaining momentum. This has led to advancedlicence negotiations with Express Recycling and Plastics Ltd (Express) for theEco-Sheet manufacturing rights in the UK. Express plans to set up a fullyoperational production plant in South East England during the second half of2008. In South Africa, where 3DM Worldwide plc (3DM) has appointed a marketing agent,negotiations on Eco Sheet production are underway with a consortium of recyclingand manufacturing companies. Further interest in taking the Eco Sheet product tomarket in Europe has also been expressed. While the prospect of the European Union funded project in Tanzania remainspositive, there has been a delay in obtaining the appropriate permissions fromthe Tanzanian Government where there is a considerable backlog in processingproject applications. The application for European funding for a plastic recycling project in Kenyahas recently been submitted. Again representations to the Kenyan FinanceMinister have been well received and we expect to be able to report on progresslater in the current financial year. 3DM is in the process of forming a joint venture with a local recycling companyto establish a plastic recycling and a Powder Impression Moulding (PIM)manufacturing plant in East Hungary. The joint venture has made representationsto the Hungarian Finance and Environment Minister for support in funding theproject, which has been positively received. Formal submission of the projectwill be made in July 2007. RJ Plastics Ltd and 2k Manufacturing Ltd, who took up licences earlier thisyear, are both in the process of product development and evaluation of theirrespective manufacturing strategies. Environmental Polymer Technologies Ltd (EPT) has successfully developedprototype surf boards with samples being produced on the Beta line in BedwasHouse. EPT continues to develop pallet applications including a one trip palletwith sample products being produced at their new Semley facility. Panel productsincorporating recycled tyre rubber have also successfully been produced. Licence opportunities in the Middle East are under discussion with a number ofparties. The Board has concluded that while opportunities will continue to beexplored, it is vital that the right partners be found to take the PIMtechnology forward in China and the Far East. In the USA product development work utilising the PIM process is successfullyunderway through Global Tech. Inc. (GTI), an existing licence holder. Mouldshave been manufactured for James Marine Inc. for the development, and ultimatelyproduction, of river barge covers. These moulds measure 10m long and representthe largest moulds manufactured for the PIM process to date. The development work with Kelly Space Technology Inc. for various partsencapsulating anti-ballistic material for military vehicles continues toprogress satisfactorily. GTI also continues to work on a range of encapsulated automotive components withASIMCO Technologies and USCAR, the United States Council for AutomotiveResearch, an umbrella organisation for collaborative research between, DaimlerChrysler Corporation, Ford Motor Company and General Motors Corporation. RESTRUCTURING The work completed on Eco Sheet has proven the commercial viability of the PIMprocess. This in turn allowed the business to be restructured with the sale on30 November 2006 of 3DM Europe Ltd and its subsidiary 3DM Group Ltd, includingthe Bedwas House facility to EPT. 3DM Worldwide plc will receive 30% of therevenues generated by EPT through the use of the PIM process. The disposal has allowed the business to focus on the commercial exploitation ofthe PIM process while still having access to the Alpha line and Bedwas Housefacility for client demonstrations and conferences. The close workingarrangement with EPT, an existing licence holder, also ensures 3DM can continueto develop products on behalf of clients. As part of the sale, existingcontracts with 3DM Group transferred to EPT. The acquisition of 3DM Europe Ltd and its subsidiary 3DM Group Ltd by EPTprovided significant synergies avoiding duplication of effort in process andmaterial research and development. EPT has undertaken the development ofproduction systems for large-scale three dimensional products including largediameter pipes and marine products such as work boats. This sale has significantly reduced the ongoing overheads of the business. In line with our stated strategy to simplify the group structure, 3DM hasdisposed of the share holding in Longborough Capital plc for a consideration of£100,000. 3DM has also divested its interest in Highseas Technologies Ltd. INTELLECTUAL PROPERTY The intellectual property bank has increased with the following patents beinggranted since the beginning of 2006: PIM process in China (patent no.ZL028045750) PIM process in New Zealand (patent no. 527461) PIM Light duty truck dumping mechanism in the United States (patent no.7032977B2) The European blow moulding technology patent oral examination was won in 2007and will proceed to grant later this year. This brings the total number ofpatents granted to 10 with another 14 in progress. 3DM has acquired the full licensing rights to processes for recyclingagricultural film, x-ray plates and medical waste into a feedstock for the PIMprocess. These licenses form a key part of the funding applications for theHungarian and Kenyan projects. 3DM has also taken the lead role in forming a consortium comprising Tesco, BovisLend Lease Ltd, Severnside Recycling, Phillip Tyler Polymers, Brunel Universityand Pera for a 2 year project to develop sustainable products made from recycledplastic using the PIM process. The consortium has recently won a Department ofTrade & Industry grant for £600,000 funding as part of the £1.2 million project.This is a commercially focused project aimed at developing products for saleinto the retail and construction industry. DEVELOPMENT ACTIVITIES To assist in providing clients with turnkey manufacturing solutions for the PIMprocess, 3DM has entered into a collaboration agreement with Arup, a globaldesign and business consulting firm. Arup has a range of skills includingacoustics, construction, material development, sustainable product development,vehicle design and project management as well as an enviable track record indelivering major projects. Arup will provide the technical expertise and globalreach to assist 3DM in delivering projects on behalf of our clients. Initial analysis has shown that the PIM process compares favourably to otherplastics processes in terms of carbon footprint. Compared to other plasticsprocesses using virgin polymers, preliminary research shows that the PIM processgenerates only one quarter of the carbon dioxide when using recycled wasteplastics. This significantly adds to the environmental credentials of the PIMprocess. CHANGES TO THE BOARD OF DIRECTORS During the year there have been a number of changes to the Board. Havingpreviously announced his intention to step down as a director, the Board and keyshareholders persuaded Ken Brooks to remain as Non Executive Chairman. Ken hasbeen instrumental in effecting the restructuring of the business. To build onthe growing opportunity in recycling of waste plastics, Roger Baynham wasappointed Executive Deputy Chairman. Peter Oldham stood down from the Board asOperational Director and his position has not been replaced. The Board wouldlike to thank Peter for his contribution to the development of the Company. OUTLOOK While sales revenue was disappointing in 2006 the focus on cost control remainedstrong throughout the year. This focus will continue with overheads being keptto a minimum. The company will draw in external expertise on a project byproject basis to deliver turnkey manufacturing solutions to clients. Moving forward, considerable groundwork has been completed in 2006 torestructure the business and establish commercially viable projects. Whilemaintaining the focus on current projects, 3DM will build on the environmentalcredentials of the PIM process focusing on recycling the vast amounts of mixedplastic wastes currently being sent to incineration or landfill. The increasingpublic awareness of environmental issues and climate change, particularly inEurope, presents significant opportunities for the Company. 3DM is uniquelypositioned to take advantage of these opportunities and this will be at thecentre of our marketing campaign. 3DM has never been in as strong a position to exploit the commercialopportunities presented by the PIM process and deliver value for shareholders. NIALL MACKAYChief Executive Officer FINANCIAL REVIEW RESULTS Turnover in 2006 was £0.36 million compared to £0.40 million in 2005. Theconsolidated net operating loss was £5.7 million, up from £4.7 million in 2005.Consolidated losses before tax were £7.3 million compared to losses of £4.7million in 2005. DIVIDENDS AND LOSS PER SHARE No dividend payment is proposed. There remained 20.5 million warrants and 4.5 million shares under option at theyear end which produced no effect on the earnings per share. The loss per sharewas (9.41) pence compared to (6.94) pence in 2005. TRADING Turnover included revenue generated from production work, accrued royalties fromSilkwood and a proportion of licence income which is taken to income over theexpected life of the licence of three years. Cost of sales covers material purchases for the Alpha and Beta lines used in theproduction of samples and a small amount of finished product. Administration expenses in the year totalled £6.0 million compared to £5.2million in 2005. Included in administration expenses are all research anddevelopment costs, all operating costs associated with the running of the Alphaand Beta lines at Bedwas House up to 30 November 2006 (the date of thedisposal), corporate expenses, the legal costs associated with securing theongoing intellectual property assets and a number of specific provisions. Administration costs also include an increase in depreciation on plant andmachinery, a charge in relation to the write off of investments and provisionsagainst the investments and associated debts which your board consideredprudent. DISPOSAL OF NON-CORE ASSETS/INVESTMENTS In line with our stated strategy to simplify the group structure and increasetransparency, the Company's investment in Highseas Technologies Ltd was disposedof during the year resulting in a charge of £28,750. A provision of £225,000 wasmade against the investment in Medical Waste Solutions Limited due torestructuring of their company. A provision of £391,850 has been made against the debt due from SilkwoodFinancial Corporation Inc. where legal action is now being pursued to recoverthe outstanding balance due. A provision of £620,380 was made against balancesowed by Value Plastic Technologies LLC. These have both been treated asexceptional administration expenses. A profit of £88,000 was made on the disposal of shares in Longborough Capitalplc during the year. DISPOSAL OF SUBSIDIARIES 3DM Europe Ltd and its subsidiary 3DM Group Ltd were disposed of as at 30November 2006 to EPT an existing licence holder for the PIM process. As part ofthe deal 30% of the revenue generated by the use of the PIM process by EPT willbe paid to 3DM Worldwide plc. The assets disposed of included the facility atBedwas House, the Alpha and Beta lines, the associated staff, overheads andmachinery finance. The outstanding inter company debt between 3DM Worldwide plc and 3DM Group Ltdwas restructured (effectively writing off the bulk of the inter company loansthat financed 3DM Group Ltd) leaving an outstanding inter company debt of£598,583 owed by 3DM Group Ltd to 3DM Worldwide plc. This debt is to be repaidno later than the 31 December 2008. The net asset value of 3DM Europe Ltd afterthis adjustment was £598,583. In consideration of EPT taking over the lease,staff and other liabilities, a payment of £200,000 was made satisfied by theissue of 3,076,923 ordinary shares in 3DM. The negative consideration of £0.8m was made up of £4.3m assets less £3.7mliabilities, together with the £0.2m payable in shares. An additional provisionhas been made for £0.2 million to cover the potential loss arising fromcontractual obligations currently under dispute, which primarily relates to thetransfer of the lease on the Bedwas House facility. The operating losses before taxation attributable to the 3DM Europe Ltd for theeleven months to 30 November 2006 were £3.1 million representing 54% of totaloperating losses incurred. Historically, most of the trading had been carriedout through 3DM Group Ltd and financed by 3DM Worldwide plc through the intercompany account. The net effect of writing down the inter company debt and thecharge to 3DM's profit and loss account for the total cost of disposal was £0.9million. A further loss on disposal of £0.18 million has been provided for arising fromoutstanding finance obligations on fixed assets sold to Medical Waste SolutionsLtd bringing the total losses on disposal to £1.1 million. These disposals have enabled the company to return to its original licensing androyalty model significantly reducing operating overheads and cash outflow. FINANCING In late 2005, the Company entered into a convertible loan note with CornellCapital Partners, L.P. (Cornell) and Montgomery Equity Partners L.P.(Montgomery) to provide a £4.75 million draw down facility. As reported in the Interim Statement, Cornell Capital Partners L.P. ("Cornell")made a further advance of £1.5m on 29 June 2006 increasing its debenture loan to£6.25 million including arrangement fees. Since 1 January 2006 to date, Cornellhas converted £3.4 million at an average price of 6.64p per share. Cornell isentitled to convert up to a maximum of £300,000 per week in to shares in thecompany at a price which is the lower of 90% of the volume weighted averageprice during either the 10 days prior to the closing date of the deals or the 10days prior to the conversion date. 3DM has the right to repay all or part of thecombined debenture in cash. The company also has a Standby Equity Distribution Agreement (SEDA) with Cornellto the value of £5 million which is due to expire in September 2008. No drawdown has been made against this facility. With this facility and the reduced overhead base, the company has access tosufficient funds to operate going forward and to fund the commercialisation ofthe PIM process. DAVID SHEPLEY-CUTHBERTFinance Director UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNTYEAR ENDED 31 DECEMBER 2006 Notes Continuing Discontinued Total Year Total Operations Operations Ended 31 Year 2006 2006 December Ended 31 2006 December 2006 £'000 £'000 £'000 £'000TurnoverContinuing operations 319 40 359 404 --------- --------- --------- --------- 319 40 359 404 Cost of sales - (177) (177) (113) --------- --------- --------- --------- Gross profit 319 (137) 182 291 Administrative expenses- exceptional 7 (1,012) - (1,012) -- other (2,070) (2,976) (5,046) (5,188) --------- --------- --------- --------- (3,082) (2,976) (6,058) (5,188) Other operating income 144 - 144 236 --------- --------- --------- --------- Operating Loss (2,619) (3,113) (5,732) (4,661)Loss on disposal of subsidiary - (1,121) (1,121) - --------- --------- --------- --------- (2,619) (4,234) (6,853) (4,661) Foreign currency gains on investments - 247Interest receivable 5 -Interest payable (478) (297) --------- --------- Loss on ordinary activities before (7,326) (4,711)taxationTax on loss on ordinary activities - 75 --------- --------- Loss on ordinary activities after (7,326) (4,636)taxation --------- --------- Loss per shareBasic and diluted loss per ordinary share (9.41)p (6.94)p --------- --------- Loss per share excluding loss on disposal (7.97)p (6.94)pof subsidiary --------- --------- UNAUDITED CONSOLIDATED BALANCE SHEET 31 DECEMBER 2006 Notes 31 31 December December 2006 2005 £'000 £'000 As restatedFixed AssetsIntangible assets 12,473 11,996Tangible assets 544 5,158Investments 97 65 --------- ------------ 13,114 17,219 --------- ------------ Current AssetsDebtors 6 974 2,330Cash at bank 55 4,507 --------- ------------ 1,029 6,837 Creditors: amounts falling due within one year (4,867) (7,245) --------- ------------ Net current liabilities (3,838) (408) --------- ------------ Total assets less current liabilities 9,276 16,811 Creditors: amounts falling due after more thanone year (1,708) (5,329) --------- ------------ Net Assets 7,568 11,482 --------- ------------ Capital and reservesCalled-up equity share capital 2,656 1,670Share premium account 32,213 29,992Warrant reserve 468 265Profit and loss account (27,769) (20,445) --------- ------------ Shareholders' funds 7,568 11,482 --------- ------------ UNAUDITED CONSOLIDATED CASH FLOW STATEMENTYEAR ENDED 31 DECEMBER 2006 31 December 2006 31 December 2005 £'000 £'000 Net cash outflow from operating (1,857) (3,133)activities Returns on investments and servicing offinanceInterest received 5 -Interest paid (369) (270) ----------------- ----------------- Net cash outflow from returns on (364) (270)investments and servicing of finance Capital expenditure and financialinvestmentPurchase of tangible fixed (220) (3,312)assetsSale of investments 100 - ----------------- ----------------- Net cash outflow from capital expenditure (120) (3,312)and financial investment ----------------- ----------------- Net cash outflow before financing (2,341) (6,715) ----------------- ----------------- FinancingIssue of equity share capital 314 36(Repayment)/Inception of finance leases (164) 3,320(Repayment)/Inception of loans (2,031) 7,560 ----------------- ----------------- Net cash flow from financing (1,881) 10,916 ----------------- ----------------- (Decrease)/Increase in cash (4,222) 4,201 ----------------- ----------------- UNAUDITED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES YEAR ENDED 31 DECEMBER 2006 Year Ended Year Ended 31 December 31 December 2006 2005 £'000 £'000 As restated Loss for the financial year (7,326) (4,636)Currency translation differences on foreign - (247)currency ------------- -------------- Total recognised gains and losses relating (7,326) (4,883)to the year -------------- Prior period adjustment (254) -------------Total recognised gains and losses since the (7,580)last financial statements ------------- NOTES TO THE ACCOUNTS UNAUDITED RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS Year Ended Year Ended 31 December 2006 31 December 2005 As restated £'000 £'000 £'000 £'000 Loss for the financial year (7,326) (4,636)New equity share capital 986 2Premium on new equity share 2,221 34capitalMovement in warrant reserve 203 98Movement due to share options 2 - ------- ------- 3,412 134 -------- -------- Net reduction to funds (3,914) (4,502)Movement in reserves due to - (247)foreign exchange differencesOpening shareholders' funds 11,482 16,231 -------- --------Closing Shareholders' funds 7,568 11,482 -------- -------- 1. The calculation of loss per share is based on the loss of £7,326,065 (2005:£4,635,992) and on 77,862,312 Ordinary shares (2005: 66,802,356) in issue. 2. The financial statements have been prepared on the basis of the accountingpolicies set out in the Group's statutory accounts for 2006. 3. The financial information set out above does not constitute the company'sstatutory accounts within the meaning of section 240 of the Companies Act 1985.The 2006 figures are based on unaudited accounts for the year ended 31 December2006. The auditors do not expect to issue a qualified report on the statutoryaccounts which will be finalised on the basis of the financial informationpresented by the directors in the preliminary announcement and which will bedelivered to the Registrar of Companies following the company's annual generalmeeting. 4. The 2005 comparatives are derived from the statutory accounts for 2005,except for the prior year adjustments, which have been delivered to theRegistrar of Companies and received an unqualified audit report and did notcontain a statement under the Companies Act 1985, s237(2) or (3). 5. This statement will be made available online at www.3dmworldwide.com andcopies will be made available at the Company's registered office, RegentHouse, 316 Beulah Hill, London, SE19 3HF. 6. Included in Debtors is an amount due of £598,583 by 3DM Group Limited. Thisamount is not due to be repaid until 31 December 2008. 7. The exceptional item of £1,012,230 is a write off of loans and trade debtswhich were owed by Silkwood Financial Corporation Inc. and Value PlasticsTechnologies LLC. 8. The Group has adopted FRS 20, 'Share Based Payment' for the first time. FRS 20 'Share Based Payment' requires the recognition of share based payments atfair value at the date of grant. Prior to the adoption of FRS 20, the Grouprecognised the financial effect of the share based payment in the following way:when shares and share options were awarded to employees, a charge was made tothe profit and loss account based on the difference between the market value ofthe company's shares at the date of grant and the option exercise price inaccordance with UITF Abstract 17 (Revised 2003) 'Employee Share Schemes'. Thecredit entry for this charge under both FRS 20 and UITF 17 was taken to theshare option reserve. In accordance with the transitional provisions of FRS 20 and the latestinterpretations thereof, the standard will be applied in the 2006 annualaccounts from the relevant effective date, being 1 January 2006. This isdifferent to the manner in which FRS 20 was dealt with in the 2006 interimaccounts. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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