Antonov plc (the "Company")
Antonov plc, the automotive technology company, announces its unaudited financial results for the first half ended 30th June 2005.
Key Points
Unaudited loss before tax is in line with expectations at £1.666million (2004: £1.314million)
Commercialising strategy on track with revenues building in second half
€9.75million secured via fund raisings in first half underpin working capital requirements
Discussions continuing well with Shanghai Automotive Corporation with respect to its use of the 6 speed automatic and dual clutch transmissions
Negotiations with Toyota continue in parallel with German court action
Production design signed off for 2 speed supercharger drive for Rotrex and thorough supplier selection process undertaken.
Strong interest from major Tier 1 for 6 speed automatic and ongoing discussions with other Chinese manufacturers for both double clutch and 6 speed automatic transmission technologies.
Enquiries received and sales initiative continuing for additional applications for 2 speed and 3 speed mechanical modules
Directors confident of continued progress in the year ahead
John Moore, Antonov's CEO commented:
"We have made good progress during the period under review and the second half will consolidate upon the heavy investment of the past years as we progress towards revenue generation via the sale of both production units and engineering and design rights to clients.
The response of the automotive industry to the launch of the 2 speed supercharger drive has been very encouraging and in addition to the interest in our 6 speed automatic and dual clutch transmissions from clients in China we have also had strong interest from more advanced manufacturers. This is undoubtedly a result of the progress made with our technologies from design concepts to production designs.
The internal work continues with a new accounting system planned for the second half and further strengthening of our project management processes. These measures will underpin our progress as we move towards our goal of being cash positive."
For further information please contact:
David Bovell, Finance Director,
Antonov plc
+31 10 412 60 46
Richard Evans,
Brewin Dolphin Securities Ltd
+44 161 214 5553
Shane Dolan,
Biddicks
+44 20 7448 1000
Chief Executive's review
Financials
Group losses before tax during the first six months were £1.666 million (2004: £1.314 million). Loss per share for the period was 5.8p (2004: 1.3p). This is in line with expectations. On the 21st January 2005 the Company was granted a convertible term loan facility of €3 million by nine different parties. The Company successfully completed a further fund raising on the 7th June 2005 through a convertible term loan facility of €6.75 million by five different parties including Quivest BV, the Company's largest shareholder. These monies will fund the continued working capital of the Antonov business and are a flexible form of funding, allowing the Company to choose when and how much to draw down to manage its working capital requirements.
As will be seen on the balance sheet the Company has a negative equity position. This has arisen as a result of accounting for convertible loan note stock as a liability. The Directors confidently expect that the loan note holders will convert these instruments into equity, indeed 791,331 shares were issued on the 5th September 2005 pursuant to such a conversion. Further such conversions are expected in the near future and these will be sufficient to transform the equity position into a positive balance. Further clarification on the above issue was required before we could issue our results today.
Commercial
6 Speed Automatic Transmission
Production planning discussions continue with Shanghai Automotive regarding the 250Nm midsized unit. The complexity of the full Shanghai Automotive product plan including vehicles, engines and transmissions, has slowed their decision making process but we expect completion of the production plan before the end of the year.
We are also in discussions regarding a unit for smaller cars from another major Chinese manufacturer and an initial enquiry for a similar unit from a further Asian manufacturer. Both of these opportunities will involve both the licensing of patents and the provision of engineering support services. A further enquiry from a major Tier 1 transmission manufacturer relates to a production licence only. The rapidly increasing interest in the technology from the big automotive industry players is a vindication of the strategy of seeking a first market entry in China.
Dual Clutch Transmission
As with the 6 speed automatic, detailed production planning discussions continue with Shanghai Automotive. This will be a 350Nm large car unit and is designed to enable both manual and automatic variants to be built from common tooling and on a common production line, greatly reducing the upfront investment. We have also received enquiries from other manufacturers and will be pursuing these more strongly as the technology moves towards production.
Mechanical Module
The start of production of the 2 speed Supercharger Drive in conjunction with Rotrex is running to schedule with pre-production units being delivered to clients in October. Sales will build in the first months of next year to a planned production rate of around 4000 units per annum, although there is capacity for further growth, dependent on demand.
The strategy of initiating low volume production to demonstrate the strength of the concept has already started to bear fruit with trial units sold to two vehicle makers and a major Tier 1 supplier.
Discussions are also underway on a number of other applications for the mechanical module concept. A trial unit will be prepared for a two speed front end accessory drive to improve engine efficiency and design work has started on a two speed unit for electric and fuel cell vehicle drives.
Hybrid Vehicle Transmission\Toyota Patent Infringement
As announced on the 19th September, Antonov are in negotiation with Toyota regarding their alleged infringement of Antonov's patents in their hybrid driveline. An initial offer has been received but is not satisfactory. Negotiations will continue in parallel with the legal action and the directors are confident of a positive outcome.
Operations
Following my appointment in January, I have set in place a number of operational changes to prepare the company for the transition from pure research investment to a mix of continued investment, management of client fee paying projects and procurement and sale of components. Following the appointment in the first quarter of a financial controller and programmes director, new processes are being set up for the additional control required and a new group wide finance system is being specified to provide the visibility of expenditure that is needed for effective project management. By reducing dependency on external service providers and improved efficiency these changes are largely cost neutral.
The Paris technical centre will continue to be the centre of our engineering work and some investment has been made to improve the facilities including provision of new test equipment and instrumentation.
Outlook
Antonov expect to build further momentum during the second half of the year with the first sale of transmissions based on the unique Antonov self shifting mechanical module. We also expect to continue to make progress with our main transmission technologies as they progress towards production. As previously stated we are budgeting for revenue in the region of €2m next year on the basis of this excellent progress.
3. INTRODUCTION
From 1 January 2005 we are required to report our financial results under IFRS. This announcement restates the 31 December 2004 results and interim financial results as at 30 June 2004 and 30 June 2005 under IFRS. Restatements are unaudited at this stage. The first IFRS financial statements to be audited will be as at 31 December 2005.
The Group's first IFRS results are these interim results for the 6 month period ended 30 June 2005 and the first Annual report under IFRS will be presented as at 31 December 2005. Reconciliations of the Group's UK GAAP balance sheets to its preliminary IFRS balance sheets at 1 January 2004 (the 'opening balance sheet'), 30 June 2004 and 31 December 2004 together with reconciliations of the Group's UK GAAP profit and loss accounts to its preliminary IFRS profit and loss accounts for the six months to 30 June 2004 and for the year to 31 December 2004 are shown on the following pages. The preliminary IFRS financial statements as at 31 December 2004 will form the basis of the comparative information in the first IFRS accounts and have been prepared on the basis of IFRS expected to be in issue at 31 December 2005 but these are still subject to change. We will update the restated information for any such change as the endorsed IFRS that will be effective (or available for early adoption) in the annual financial statements for the year ended 31 December 2005 are still subject to change and to additional interpretations and therefore cannot be determined with some certainty. The accounting policies applied in preparing the preliminary IFRS financial statements are set out below.
The changes as a result of the transition to IFRS and of adopting the IFRS group accounting policies are as detailed below.
IFRS 2 Share-Based Payments
In accordance with IFRS 2 and the transitional exemption permitted by IFRS 1, the Group has recognised a charge reflecting the fair value of outstanding share options granted to employees since 7 November 2002 and yet to vest at 1 January 2005. The fair value has been calculated using an IFRS 2 compliant valuation model and is charged to profit over the relevant option vesting period, adjusted to reflect actual and expected levels of vesting.
The impact of this change is that there has been a charge of £2,000 to operating profit for the six months to 30 June 2005, with no restatement required in prior periods as all other share options were issued prior to 2 November 2002.
Cumulative translation differences
IAS 21 - The effects of changes in foreign exchange rates requires the classification of translation differences arising in connection with foreign operations to be classified as a separate component of equity. IFRS 1 exempts a first time adopter from the retrospective application of IAS 21. The Group has applied this exemption, with the effect that cumulative translation differences for all foreign operations as at the date of transition are deemed to be Nil.
IAS 32 & IAS 39 Financial Instruments
IAS 32 and IAS 39 address the accounting for financial instruments. IAS 32 deals with disclosure and presentation whilst IAS 39 covers recognition and measurement.
The Group has applied IAS 32 and IAS 39 from 1 January 2005 as permitted by the transition arrangements in IFRS 1.
4. FINANCIAL INFORMATION
4.1 INTERIM CONSOLIDATED INCOME STATEMENT
Six months
ended
30.06.05
unaudited
£'000 Six months
ended
30.06.04
unaudited
£'000 Year
ended
31.12.04
unaudited
£'000
Revenue - - -
Cost of sales - - -
Gross result - - -
Research costs and administrative expenses (1,700) (1,307) (3,109)
Operating loss (1,700) (1,307) (3,109)
Net financing income/(costs) 34 (7) (13)
Loss on ordinary activities before taxation (1,666) (1,314) (3,122)
Taxation on loss from ordinary activities - (15) (51)
LOSS ATTRIBUTABLE TO THE SHAREHOLDERS OF ANTONOV PLC (1,666) (1,329) (3,173)
Basic earnings per ordinary share (5.8p) (1.3p) (11.7p)
Diluted earnings per ordinary share (5.8p) (1.3p) (11.7p)
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