RNS Number:6919E
Axeon Holdings Plc
28 September 2007
28th September 2007
Axeon Holdings plc ("AXE")
Unaudited Interim Results for the six months to 30 June 2007
Axeon Holdings plc ("Axeon" the "Company"), the specialist provider of
advanced battery and battery management systems primarily for the reduction of
automotive emissions announces its interim results for the six months to
30 June 2007.
Highlights
First Half 2007
* Revenues increased by 82% to #2,498,000 (2006: #1,371,000).
* Pre-tax loss increased 57% to #522,000 (2006: #332,000).
* Investment in R&D increased by 27% to #653,000 (2006: #513,000).
* Programme wins from the Energy Savings Trust for two electric
vehicle (EV) battery variants and for a hybrid electric vehicle
(HEV) project from Deutz
* First generation battery and charger systems for the Modec zero
emissions electric urban delivery vehicle programme delivered.
Post Half Year
* Acquisition of Ristma AG secures entry to volume powertool
battery market and a European footprint for the roll out of EV and
HEV battery products increasing the scale and reach of the Company.
* Significant additional orders for Li-ion battery packs from Modec
and accelerated production ramp-up starting in October with minimum
annual volume target of 1,000 vehicle battery and charger systems.
* Prototype EV taxi battery for Veicoli and supply for a European bus
manufacturer of battery and charger systems secured.
Commenting on the results Hamish Grant, Chief Executive Officer of Axeon said:
"During the first half of 2007 we have delivered on the strategy laid out to
shareholders. Revenue momentum has been matched with new EV and HEV programmes
across the UK and continental Europe. We believe the securing of Ristma AG
and the production ramp-up with Modec underpins significant growth in Axeon's
revenue and profitability over the next two years. The increasing flow of
EV programmes from the UK and continental Europe will accelerate further
growth."
Enquiries
Axeon Holdings plc Tel: +44 (0)1382 400040
Hamish Grant, CEO
David Campbell, CFO
www.axeon.com
Gavin Anderson & Company Tel: +44 (0)20 7554 1400
Ken Cronin/Robert Speed
Brewin Dolphin Investment Banking Tel: +44 (0)141 221 7733
Ken Fleming, Corporate Finance
Gregor Paterson, Analyst
Chairman's Statement
Overview
The first half of 2007 has seen continued significant progress on delivery of
the Group's strategy through both significantly increased revenue and delivery
of technical project milestones. Our advanced Lithium-ion (Li-ion) battery
pack and proprietary Vindax technology based battery management system (BMS)
for EV and HEV applications are in high demand.
The 82% increase in turnover to #2,498,000 (2006: #1,371,000) reflects the
start of production of first generation sodium nickel chloride batteries
for Modec.
I am particularly pleased with the technical and commercial progress Axeon
has made with the second generation Li-ion battery pack and charger system
for Modec. Axeon has been working on this project since the spring of 2006
and we have been able to report steady progress since then. The Modec
electric urban delivery vehicle is being well received by customers. The
launch of the second generation Li-ion battery and charger system with start
of production ramp-up in October will enable Modec to scale up its production.
We expect this to be followed by the introduction of a third generation longer
range Li-ion battery and charger system in Q2 2008.
Modec have recently asked us to plan on the basis of a more rapid switch from
first to second generation battery and charger systems this year. They have
provided a target of raising second generation production to 60 battery and
charger systems a month before the end of the year, with production rising to
90 battery and charger systems a month during Q2 2008. We are organising our
supply chain to meet this demand and are evaluating the working capital
requirements that flow from this accelerated rate of production ramp-up.
We anticipate that the major acquisition of Ritsma AG completed on 9th August
2007 will contribute significantly to the second half performance of the Group
and will provide a platform for growth in continental Europe during 2008.
Financial Review
With the first generation sodium nickel chloride battery and charger systems
for Modec starting production early in 2007, revenue has significantly
increased by 81% to #2,498,000 (2006: #1,371,000).
The mix of revenue has changed from primarily development to primarily
production related. Production revenues carry a higher proportion of cost of
sale compared to the development projects where engineering development costs
have been written off through the overhead. Reflecting this, gross margin has
fallen from 64% in 2006 to 29% in the first half of 2007 with a consequent drop
in the gross profit by #147,000 to #723,000 (2006: #870,000).
Overheads are slightly higher with increased staff to service the demand for
further projects. The increased staff cost has been partially offset by
reduced infrastructure costs through consolidating all operations at our Dundee
site. Research and development investment has increased by 27% to #653,000
(2006: #513,000) reflecting our commitment to continue BMS and battery system
technology development. In addition development costs of #306,000 (2006: nil)
(not included in R&D expense above) have been capitalised in line with our
accounting policy for research and development costs.
Business Progress
Small and Medium Batteries
This segment continues to generate income for the business, but is becoming
proportionally less significant as the large battery business grows. The major
design win during the first half of the year was announced in February
worth #300,000 for an innovative bath lift product for Care-Knight.
Automotive EV and HEV batteries
The year started well in January with our first HEV battery programme for Deutz.
This programme took only three months from contract to delivery showing
the benefits of our modular BMS design. Deutz were able to show its
hybrid wheel loader vehicle at the Bauma trade fair in April. Since then
the vehicle has been undergoing a period of testing, evaluation and development.
With the Modec programme we delivered various prototype battery and charger
systems as planned during the first half of the year. In March we started
production of 100mile range first generation sodium nickel chloride battery
and charger systems to match Modec's start of production. As a result of this
encouraging performance the Company increased guidance on the total number of
Modec battery and charger systems to be delivered during 2007 from 155 to 175.
In March we also announced a programme valued at #1.15 million over two years
funded by the Energy Savings Trust to develop next generation battery packs
for an electric version of the Daimler Chrysler SMART car and the Modec vehicle.
These programmes will allow us to continue investment in battery pack R&D,
demonstrate capability for the SMART car EV programme and extended durability
for the Modec urban delivery vehicle.
Research and Product Development
We continued development of our BMS products and completed a programme funded
by ITI Energy to integrate our Vindax technology into the BMS to provide
advanced fuel gauge and battery state of health indications. Along with
this work we also carried out numerous cell supplier visits and qualifications
to establish reliable supply of large format cells for our EV programmes.
There are many different types of Li-ion cell chemistry with different levels
of inherent safety, performance and durability. Our evaluation work has
included extended cell testing and both non-destructive and destructive testing
of cells to establish risk and safety criteria. These programmes of test and
validation will be expanded during the second half of 2007 and into 2008 as we
move from development to production.
Our test and evaluation programme of the prototype second generation Li-ion
phosphate batteries for Modec has shown significant range per kilowatt hour
battery capacity benefits over the first generation sodium nickel chloride
batteries. We believe that as well as this, the second generation system
will deliver a more durable, robust and lower cost solution for customers.
Management and Staff
In line with increased revenue and customer product development commitments we
have added additional staff, in finance and administration, in sales and
particularly in engineering. This takes the total headcount of professional
staff to 35 at the half year.
2nd Half 2007 Update
Since the 30th June we have made five further important announcements.
In July we announced the Company had received an order from Veicoli to build
a prototype Li-ion battery system for an EV taxi programme in Italy. This was
Axeon's first EV contract win in continental Europe and the first tangible
result of investment this year in sales activity in continental Europe.
As announced today this prototype has now been completed and is ready for
testing and evaluation.
This initial success has been followed by the announcement today with another
continental European bus manufacturer for Axeon to become its exclusive
supplier of battery and charger systems. The first phase of this project is to
deliver proof of concept systems before the end of the year with detailed
development engineering planned during 2008.
Earlier this month we were able to report significant new orders worth
#2.5 million for the initial launch quantities of the second generation
Li-ion battery and charger systems for the Modec electric zero emission urban
delivery vehicle. These new orders were in addition to previously announced
orders from Modec worth #3.1 million for development engineering and first
generation sodium nickel chloride batteries. We were also able to confirm
that initial production ramp-up of Li-ion would start in October.
We have delivered 66 first generation systems to date and had planned to
deliver a total of 115 first generation systems and 60 second generation
systems before the year end, taking total deliveries to 175. However Modec
have recently asked us to plan on the basis of a more rapid switch from first
to second generation battery and charger systems this year. They have asked
us to stop production of first generation battery and charger systems and to
accelerate production ramp-up of second generation battery and charger systems
to deliver 176 units between now and the end of the year. This would take
total deliveries for the year to 242 battery and charger systems. Modec have
confirmed a production plan for 60 battery and charger systems a month during
Q1 2008 rising to 90 battery and charger systems a month during Q2 2008.
Minimum annual volumes are targeted at 1,000 battery and charger systems a year.
We are organising our supply chain to meet this demand and are evaluating the
working capital requirements that flow from this significantly accelerated rate
of production build up.
In July we announced that we had entered into a share purchase agreement to
acquire the entire issued share capital of Ristma AG for a cash consideration
of CHF12.5 million (approximately #5.11 million) payable at completion and a
deferred consideration of up to CHF5.5 million (approximately #2.25 million)
to be satisfied by the issue of ordinary shares. This major acquisition was
completed in August and changes both the scale and reach of Axeon.
Axeon and Ristma operate in complementary segments of the battery systems
market. Axeon operates in the EV and HEV market while Ristma manufactures
battery packs principally for the handheld cordless power tools market.
The Directors believe that Ristma has the infrastructure that Axeon needs to
be able to accelerate sales of its EV and HEV products in continental Europe.
Ristma's established manufacturing facility in Poland is of particular
importance to Axeon as the Directors believe that it provides a good location
and workforce to supply European automotive customers with EV and HEV
battery packs.
At the time of the acquisition the Board laid out its belief that the
benefits of the acquisition were:
* to accelerate the roll out of the products developed by Axeon across
the European market. The increased size of the Enlarged Group will
give it the profile to compete more effectively in the global
automotive and cordless power tools battery market
* to accelerate the Enlarged Group's profitability and enhance
earnings into the foreseeable future
* that the revenue from Ristma will continue to grow strongly as the
cordless power tools market converts to the more expensive (per unit)
but higher performance Li-ion cell technology
* that margins in Ristma can be improved through increased
manufacturing efficiency
* to generate cashflow which is anticipated to exceed the working
capital growth need of the rapidly expanding EV and HEV product
lines of Axeon while still leaving cash available to invest in
further business development and to pay down debt
* to diversify risk across more key customers and across more of
the Li-ion battery pack market segments
* to concentrate manufacturing operations for the Enlarged Group in
the low cost, high-efficiency Polish site providing an economically
and logistically attractive manufacturing location for battery packs
for the European EV and HEV market place
* to capitalise on the material synergies between Ristma's locations,
operations and customers and Axeon's products and electronic
design skills on the basis that:
- Axeon's established skills in the design and manufacture
of large Li-ion battery packs should assist to accelerate
sales by Ristma
- Ristma's infrastructure in Germany, Switzerland and Poland
should allow acceleration of Axeon's product roll out
across the Europe
In the seven weeks since the acquisition completed the Board has been
impressed by the positive way the Ristma team have responded to the acquisition
and believes that the benefits defined above can be achieved.
Outlook
When we made the preliminary announcement of 2006 results in March the
Board outlined the strategy for the business. We remain committed to this
strategy and believe that the Company has made significant progress on its
implementation. Of particular importance has been the technical and
commercial progress, with the Modec programme moving to start of production
ramp-up and the acquisition of Ristma giving us a continental European
geographical spread.
During the second half of 2007 and into 2008 the Board believes the Group will
see continued material revenue growth and that this rate of revenue growth
may be higher than previously planned increasing our working capital
requirement. Based on these programmes the Board believes the Group will
deliver its first annual profit for financial year 2008.
In addition we now have a pipeline of customer development programmes that if
they come to fruition could further accelerate revenue and profitability
during the second half of 2008.
Charles Matthews
Chairman
28th September 2007
Financial Information
Accounts
The interim financial information has been prepared on the basis of the
recognition and measurement requirements of International Financial Reporting
Standards (IFRSs) in issue that are either endorsed by the European Union
and effective at 30 June 2007, or are expected to be endorsed and effective
at 31 December 2007, the group's first annual reporting date at which it is
required to adopt IFRSs. There are a number of presentational changes but
there are no changes to the previously reported results.
Axeon Holdings plc
for the half year ended 30 June 2007
6 Months 6 Months
to 30 to 30 Year to 31
June 2007 June 2006 December 2006
Note Unaudited Unaudited Unaudited
#'000 #'000 #'000
Revenue 2,498 1,371 2,551
Cost of sales 1,775 501 923
------- ------- -------
Gross profit 723 870 1,628
Administrative expenses (1,257) (1,220) (2,743)
------- ------- -------
Operating loss before
financing costs (534) (350) (1,115)
Financial income 12 31 74
Financial expenses - (13) (19)
------- ------- -------
Loss before taxation (522) (332) (1,060)
Taxation - - 196
------- ------- -------
Loss for the period
attributable to equity
holders (522) (332) (864)
======= ======= =======
Loss per ordinary share
Basic and diluted loss per
share 3 (2.1)p (1.5)p (3.7)p
======= ======= =======
There are no recognised gains or losses other than the loss for the current
and comparative financial years.
Turnover and loss on ordinary activities before taxation for the current
and previous year relate wholly to continuing activities.
Consolidated Balance Sheet
at 30 June 2007
Note 30 June 2007 30 June 2006 31 December 2006
Unaudited Unaudited Unaudited
#'000 #'000 #'000 #'000 #'000 #'000
Non current assets
Intangible assets 1,408 1,209 1,430
Tangible assets 207 205 203
------- ------- -------
Total non current
assets 1,615 1,414 1,633
Current assets
Stock 594 143 399
Trade and other
receivables 3,186 1,098 1,043
Cash and cash
equivalents 140 2,220 1,669
-------- ------- --------
Total current assets 3,920 3,461 3,111
Total current
liabilities (2,155) (446) (866)
-------- -------- --------
Net current assets 1,765 3,015 2,245
------- ------ -------
Total assets less
current liabilities 3,380 4,429 3,878
Non current
liabilities (217) (258) (229)
------- ------ -------
Net assets 3,163 4,171 3,649
======= ====== =======
Equity
Called up share
capital 1,229 1,229 1,229
Share premium account 7,357 7,357 7,357
Merger reserve 6,380 6,380 6,380
Equity reserve 90 53 54
Profit and loss
account (11,893) (10,848) (11,371)
------- -------- -------
Total Equity 3,163 4,171 3,649
======= ======== =======
Consolidated cashflow statement
For the six month period ended 30 June 2007
6 Months 6 Months
to 30 to 30 Year to 31
June 2007 June 2006 December 2006
Unaudited Unaudited Unaudited
#'000 #'000 #'000
Loss for the period (534) (350) (1,115)
Depreciation and amortisation 68 75 168
Share based payments 36 25 35
---------- -------- ----------
Operating loss changes before
changes in working capital (430) (250) (912)
Decrease / (increase) in
inventories (195) (338) (380)
Decrease / (increase) in
trade and other receivables (2,204) - (586)
Increase / (decrease) in
trade and other payables 1,242 - 362
---------- -------- ----------
Cash used by operations (1,578) (588) (1,516)
Taxes received 131 - 187
---------- -------- ----------
(1,456) (588) (1,329)
---------- -------- ----------
Investing activities
Purchase of tangible fixed
assets (50) (95) (300)
Purchase of intangible assets - (26) (26)
Acquisition of subsidiary - (1,629) (1,204)
---------- -------- ----------
Net cash flow from investing
activities (50) (1,750) (1,530)
---------- -------- ----------
Cash flows from financing activities
Interest received 24 30 74
Interest paid (12) (13) (19)
Repayment of borrowings (35) (45) (112)
Issue of Ordinary shares - 4,400 4,400
Share issue expenses - (315) (315)
--------- --------- ---------
Net cash flow from financing
activities (23) 4,057 4,027
--------- -------- ----------
Net increase/(decrease) in
cash and cash equivalents (1,529) 1,719 1,168
Cash and cash equivalents at
the start of period 1,669 501 501
---------- -------- ----------
Cash and cash equivalents at
the end of period 140 2,220 1,669
---------- -------- ----------
Notes to the accounts:
1 Basis of preparation
This interim statement contains the financial information of Axeon Holdings plc
("the Company") and its subsidiaries (together "the Group") for the six month
period ended 30 June 2007. The report was approved by the directors on 27
September 2007.
The preliminary financial information has been prepared under the historical
cost convention.
The AIM Rules require that the next annual consolidated financial statements
of the company, for the year to 31 December 2007, be prepared in accordance
with International Financial Reporting Standards (IFRSs) as adopted by the
European Union ("adopted IFRSs").
The comparative figures for the financial year ended 31 December 2006 are
in the format required by adopted IFRSs and are therefore not the same as
those in the Company's statutory accounts for that financial year.
Those audited accounts, which were prepared under UK GAAP, have been reported
on by the Company's auditors and delivered to the Registrar of Companies.
The report of the auditors was:
i. unqualified;
ii. did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report; and
iii. did not contain a statement under section 237(2) or (3) of the Companies
Act 1985.
This interim financial information has been prepared on the basis of the
recognition and measurement requirements of adopted IFRSs as at 30 June 2007
that are effective (or available for early adoption) at 31 December 2007,
the Group's first annual reporting date at which it is required to use
adopted IFRSs. Based on these adopted IFRSs, the directors have applied the
accounting policies which they expect to apply when the first annual IFRS
financial statements are prepared for the year ending 31 December 2007.
However, the adopted IFRSs that will be effective (or available for
early adoption) in the annual financial statements for the year ending
31 December 2007 are still subject to change and to additional interpretations
and therefore cannot be determined with certainty. Accordingly, the
accounting policies for that annual period will only be finally determined
when the annual financial statements are prepared for the year
ending 31 December 2007.
The accounting policies set out in Note 4 have been applied consistently to
all periods presented in this interim financial information and in preparing
an opening IFRS balance sheet at 1 January 2006 for the purposes of the
transition to IFRS.
As required by IFRS 1, the impact of the transition from UK GAAP to IFRSs
is explained in note 5.
2 Taxation
No provision for corporation tax is required due to the availability of tax
losses. The taxation credit reflected in the income statement represents
research and development tax credit. In accordance with the Group's
accounting policy, this is estimated on an annual basis and adjusted
for on final receipt.
3 Loss per share
Loss per share is calculated as follows:
6 Months 6 Months
to 30 to 30 Year to 31
June 2007 June 2006 December 2006
Unaudited Unaudited Unaudited
#'000 #'000 #'000
Net loss for the
financial period (522) (332) (863)
--------------- -------------- ---------------
Weighted average number
of Ordinary shares in
issue 24,587,385 21,569,667 23,070,144
--------------- -------------- ---------------
Basic and diluted loss
per share (2.1)p (1.5)p (3.7)p
======== ======== ========
The loss attributable to ordinary shares and the number of ordinary shares for
the purpose of calculating the diluted earnings per share are the same. The
exercise of share options would have the effect of reducing the loss per share
and consequently are not taken into account in the calculation of the diluted
loss per share.
4 Accounting policies
The significant accounting policy which has altered as the Group moves to
production of new products, and the adoption of IFRSs, relates to the
treatment of research and development costs.
Research and Development
Expenditure on research activities undertaken with the prospect of
gaining new scientific or technical knowledge and understanding is recognised
as an expense in the income statement.
Where a product is technically feasible, production and sale are intended,
a market exists and sufficient resources are available to complete the project,
development costs are capitalised and amortised on a straight line basis over
the estimated useful life of the respective product. Where no internally
generated intangible asset can be recognised, development expenditure is
recognised as an expense in the period in which it occurs.
5 Explanation of transition to IFRSs
As stated in Note 1, these are the Group's first consolidated interim financial
statements for part of the period covered by the first IFRS annual consolidated
financial statements to be prepared in accordance with adopted IFRSs.
The accounting policy set out above has been applied in preparing the
consolidated financial statements for the six month period ended 30 June 2007,
the comparative information for the six month period ended 30 June 2006,
for the year ended 31 December 2006 and in the preparation of the opening
IFRS balance sheet at 1 January 2006 (the Group's date of transition).
In preparing its opening IFRS balance sheet, comparative information for the
six months ended 30 June 2006 and for the year ended 31 December 2006, the
Group has not been required to adjust amounts previously reported in financial
statements prepared in accordance with its previous basis of
accounting under UK GAAP.
Accordingly the transition from UK GAAP to IFRSs has not affected the Group's
financial position, financial performance or cash flows.
The only differences between the previous UK GAAP information and the IFRSs
information presented are in the formatting and presentation of the information
which follows the requirements of IFRSs.
This information is provided by RNS
The company news service from the London Stock Exchange
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