RNS Number : 9216U
Axeon Holdings Plc
21 May 2008
21 May 2008
AXEON HOLDINGS PLC
Delivering clean mobile power for electric vehicles, cordless power tools and mobile power applications
Preliminary Results for year ended 31 December 2007
Axeon Holdings plc ("Axeon"), Europe's largest independent lithium-ion battery system supplier, is pleased to announce preliminary
results for year ended 31 December 2007.
Highlights
2007 Results
* Revenue increased more than tenfold to £29,316,000 (2006: £2,551,000)
* Profit before interest, tax, depreciation and amortisation of £140,000 (2006: Loss of £947,000)
* Loss after tax reduced by 42% to £502,000 (2006: Loss of £864,000)
* R&D investment increased by 46% to £1,489,000 (2006: £1,021,000)
* Acquisition of Ristma AG completed on 9 August 2007 funded by placing of 7.85 million shares to raise £4.7 million net of
expenses, providing pan-European operating capability
* Ristma has traded ahead of management expectations
* Long-term supply agreement with Modec Limited completed on 22 November 2007 for the supply of electric vehicle battery packs and
charger systems worth around £20 million
* Two EV programmes funded by the Energy Savings Trust (EST) to develop next-generation lithium-ion batteries
* Prototype orders from Veicoli, an Italian vehicle converter, for an EV taxi programme and from Rampini for prototype EV buses
* Placing of 13.33 million shares completed on 27 December 2007 to raise £11.4 million net of expenses to fund expected working
capital growth due to the expanding business
* Year end balance sheet strengthened with net assets increased to £19,574,000 (2006: £3,650,000)
2008 Update
* Long term supply agreement completed in May 2008 for delivery of a minimum of 1,000 battery packs over five years to Allied/Zero
Emission Vehicles Limited for a range of electric vehicles including: delivery vehicle, taxi, minibus and city bus worth a minimum of £17.3
million
* Agreement with a US customer completed in May 2008 for the supply of five prototype battery packs for an HEV Bus which may lead to
production orders for several hundred batteries over 2009-2011
* Customer commitment for all battery types for deliveries in 2008 is currently £74.2 million
Hamish Grant, Chief Executive Officer of Axeon, said:
"During 2007 we continued the transformation of Axeon from its early focus on research and development into a company with a
pan-European footprint capable of delivering advanced lithium-ion battery products in volume to our customers across multiple market
segments. We are delighted with the contribution of Ristma AG in the second half of the year. The company has performed above expectation,
has accelerated revenue growth and allowed profit before interest, tax, depreciation and amortisation to be positive for the first time for
the full year.
We have continued our commitment to being a technology-led business and increased our spend on research and development investment
during 2007. The primary areas of investment remain battery management systems and the development of automotive grade, large lithium-ion
battery packs. The first of these packs entered production for our first customer, Modec, before the end of the year. The addition of Allied
Vehicles as a significant UK customer, the first material agreement with a US customer and the size of 2008 customer demand demonstrates
continued progress of the business."
CONTACT
Axeon Holdings plc www.axeon.com
Hamish Grant, CEO Tel: +44 (0)1382 400040
David Campbell, CFO Tel: +44 (0)1382 400040
Gavin Anderson & Co
Ken Cronin / Robert Speed / Janine Brewis Tel: +44 (0)20 7554 1400
Arbuthnot Securities
Antonio Bossi / John Prior Tel: + 44 (0)20 7012 2000
Chairman's Statement
During 2007 we delivered on the strategy laid out to shareholders. The start of production of large electric vehicle lithium-ion battery
packs, incorporating our battery management electronics, positions Axeon for further significant growth during 2008.
The acquisition of Ristma AG has fulfilled our objective of achieving a pan-European footprint enabling faster penetration of the
rapidly emerging European market for electric vehicle lithium-ion battery packs. Ristma is performing above our expectations and has further
accelerated revenue growth, providing an established revenue stream from supplying cordless power tool customers (presently growing at
10-15% p.a.) and an emerging business supplying battery packs for mobile products in the industrial, medical, commercial and leisure markets
(presently growing at 15-25% p.a).
At the end of 2007 Axeon employed 87 professional staff (2006: 18) and 628 production staff (2006: 25) across our offices and
manufacturing facilities in the UK, Germany, Switzerland and Poland. This breadth of location and depth of staff provides Axeon with the
scale to continue to grow revenue strongly across all our target markets during 2008 and beyond.
Results
Turnover for the year to 31 December 2007 increased more than tenfold to £29,316,000 (2006: £2,551,000). Profit before interest, tax,
depreciation and amortisation is now positive at £140,000 (2006: Loss of £947,000). Loss after tax was reduced by 42% to £502,000 (2006:
£864,000). Operating costs in the year increased by 28% to £3,306,000 (2006: £2,575,000) following the acquisition of Ristma AG.
Investment in research and development was increased by 46% to £1,489,000 (2006: £1,021,000) reflecting our continued commitment to being
a technology-led product-based company. The balance sheet at the end of the year was considerably strengthened with net assets at
£19,574,000 (2006: £3,650,000) of which cash and cash equivalents were £12,028,000 (2006: £1,669,000).
2007 Trading
The integration of Ristma AG now provides Axeon with three distinct market segments for lithium-ion battery pack products. These
segments are automotive, power tool and mobility.
Automotive Batteries
In this segment, revenues were approximately £3,703,000 (2006: £377,000), from a combination of engineering services and over 158
production and prototype battery packs for electric and hybrid electric vehicles.
During the year the principal events were:
* In March the delivery of the first lithium-ion hybrid electric vehicle (HEV) battery packs to Deutz, a German heavy duty
powertrain manufacturer
* In March the launch by Modec of its urban delivery vehicle powered by batteries supplied by Axeon
* Two EV programmes funded by the Energy Savings Trust (EST) to develop next generation lithium-ion batteries
* In October after extensive development and prototyping, the start of production of a 52Kwhr lithium-ion battery for Modec
* The securing of orders for prototype battery packs from Rampini (bus), Veicoli (delivery vehicle, taxi and minibus) and Allied
Vehicles (MPV) before the end of the year
During the first half of 2007 the company focused on completing lithium-ion battery technology and product testing and validation.
During the second half of the year the focus moved to production and to business development across the UK and continental Europe.
The market for electric vehicles is growing rapidly. The threat of global warming and consequent need to reduce CO2 emissions,
particularly from transport, is producing an increasingly favourable regulatory and market environment for electric vehicles. In the UK, the
King Review has identified electric vehicles as the lowest carbon emissions route to clean transportation, taking into account various mixes
of electricity generation. This report was commissioned by the UK Government, and was extensively quoted and referenced in the 2008 UK
Budget. The creation of a £20 million Low Carbon Vehicle fund to assist public procurement is one positive, practical outcome from evolving
Government policy. The rise in crude oil prices is also having a positive impact on customer demand for electric vehicles.
Across Europe the demand for low carbon emissions vehicles is increasing from customers and is encouraging new entrants into the vehicle
supply market. Axeon seeks to be the battery supplier of choice to this increasingly diverse group of vehicle manufacturers.
Power Tool Batteries
In this segment revenues were approximately £21,918,000 (2006: nil) over the five months of Axeon ownership. Ristma AG manufactured a
total of 5.8 million batteries during the 2007 calendar year of which 2.4 million were manufactured after the acquisition by Axeon.
Approximately 23% of production used lithium-ion cells with the majority of the remainder using nickel cadmium. There are two principal
customers in this segment.
During 2007 the geographical split of customer value was £20,458,000 to Europe, £828,000 to SE Asia and £632,000 to North America.
Mobile batteries
In this segment revenues were approximately £3,695,000 (2006: £2,173,000), with a total of 1 million batteries manufactured. There are
almost 400 different customers in this segment, most based in Europe, primarily in the UK, Germany, Austria and Switzerland. Applications
include golf trolleys, medical devices, gas meters, data-loggers, electric wheel chairs, portable credit card readers, ruggedised lap-top
computers, and disability bath lifts.
Research and Development
During 2007 investment in R&D increased by 46% to £1,489,000 (2006: £1,021,000). The continued investment in R&D reflects our
commitment to being innovation and technology led. The primary areas of investment continue to be in the areas of battery management
electronics. The requirements of automotive customers for ten-year reliability in harsh environmental and vibration conditions are
particularly challenging. We are therefore increasing investment in the area of battery system engineering to meet these challenges.
Finance
Axeon completed the acquisition of Ristma AG on 9 August 2007. The total consideration was £5.1 million with a deferred consideration
of up to £2.25 million to be paid in Axeon shares. This was financed by a placing of 7,846,250 shares at 64p to raise £4.7 million net of
fees, coupled with a debt facility of $8.75 million provided by Ironshield Capital Management. Axeon then added a further $2.6 million of
debt from Ironshield and completed a further placing on 27 December placing 13,333,333 shares at 90p to raise £11.4 million net of fees to
fund future working capital growth.
It is the board's view that this combination of debt and equity provides Axeon with an appropriate finance structure with a strong
balance sheet at the year end and enough working capital to fund the group through the current phase of rapid revenue growth.
Management and Staff
The headcount of Axeon has grown throughout the year as a result both of the needs of organic growth and the acquisition of Ristma AG to
a total of 715 at 31 December (2006: 43). We are delighted that all the key managers of Ristma AG have remained within the company and with
the positive contribution they have made to the enlarged group.
Strategy
The strategy of the business is to continue to build through organic growth to:
* Use our battery management and battery systems engineering intellectual property and know-how as sources of competitive advantage
* Apply this to the wider range of emerging and established markets where lithium-ion cell chemistry is enabling new products in the
automotive, power tool and mobility markets
* Act as a system integrator between customers and cell suppliers to provide customers with solutions tailored to their specific
needs backed up by warranty and flexible volume manufacturing capability
* Become the most significant independent battery pack supplier in each market segment in each geographical region, starting with
Europe, and expanding into the US and SE Asia
2008 Trading Update
Automotive Batteries
The production roll-out of Modec lithium-ion batteries has continued. Some initial technical problems have been encountered; however, we
are now delivering a stable product to Modec's demand schedule. The vehicle continues to be well received by end customers. The
understandable customer need to properly evaluate initial vehicles before following on with further orders means that growth is presently
expected to be steady rather than exponential.
We are on schedule with planned development of a longer range lithium-ion pack for Modec. Initial prototype tests of this pack have
indicated a range above 120 miles and this is expected to come into customer service towards the end of Q3 2008.
The company continues to receive an increasing number of enquiries for electric and hybrid electric vehicle battery packs from across
Europe and the US. Whilst there are relatively few companies in production with electric vehicles today, the number is expected to increase
significantly during 2009/2010. Our business development strategy is to work with as many of these potential customers as possible. Whilst
many are still at the business development stage we have been pleased to announce two significant additional customers:
* On 13 May we were able to announce a contract worth a minimum of £17.3 million with Allied Vehicles Ltd to supply a minimum of
1,000 lithium-ion battery packs to power a range of zero-emission vehicles for their Zev Ltd subsidiary. Allied is building on its strong
relationship with Peugeot to provide a 3.5 tonne rated delivery vehicle based on the Peugeot Boxer, while the Peugeot Expert body shell
provides options for a 3 tonne rated delivery vehicle, an 8 seat minibus, and a taxi. Allied is also developing an electric 16 seat low
floor city bus.
The agreement followed on from first prototypes ordered at the end of 2007, demonstrating the rapid evolution of customer demand.
Vehicles were shown at the recent Commercial Vehicles Show in Birmingham and received a very positive response from potential customers. The
first delivery of batteries to Allied is scheduled for September 2008, with volume production of batteries starting at that point. Zev are
currently forecasting to produce around 200 vehicles a year.
* Agreement in May with a US customer for the supply of 5 prototype battery packs for an HEV Bus application which may lead to
production of several hundred batteries over 2009-2011. The 5 prototype systems are planned to be delivered between Q4 2008 and Q1 2009. The
vehicles will then undergo extensive road trials before volume production commitment.
Through these programmes and other near-term customer opportunities the company expects to deliver between 20 - 30 prototype packs this
year across 10 - 15 new customers. Examples of these programmes include several city bus applications, city car applications, specialist
vehicles and an electric version of a high performance sports car. The majority of these customers are based in continental Europe
reflecting the benefits of our pan-European business development strategy.
The company now has several companies taking or committed to take production battery packs. The outstanding commitment for production
battery packs is currently approximately £35 million. These commitments are expected to be met over the next five years. During 2008 Axeon
expects the value of vehicle battery packs and associated engineering services to be between £5 - 7 million.
Power Tool Batteries
The current order book for 2008 (including deliveries to date) stands at approximately £62.7 million. Volumes in North America have
fallen away due to the 10.7% decrease of the US Dollar against the Euro during 2007 and into 2008. However export to the US represented only
3% of this segment in 2007. This reduction has been more than compensated for by increased orders from Europe reflecting continued organic
growth of cordless power tools in this market. Our customers continue to launch new products enabled by lithium-ion technology, and the
combination of increased unit volumes and increased average pack prices currently indicate growth targets of between 10-15% p.a. over the
next few years.
Mobile Batteries
The current order book for 2008 (including deliveries to date) stands at approximately £7.6 million. Growth in this segment is expected
to continue in 2008 as the range of mobile applications enabled by lithium-ion cell technology increases. Current growth indications are in
the range 15-25% p.a. over the next few years.
Notable events this year include the start of production of lithium-ion powered golf trolleys and electric wheelchair programmes, and
prototype programmes for fork-lift truck applications, electric bikes and medical devices.
Management and Staff
The board has recognised the need to both broaden and deepen the senior executive team of Axeon to manage the rapidly-expanding nature
of the company in a structured, risk-adjusted manner. I was delighted to be able to announce the appointment of Don Newton as Group
Technical Director and Jim Ferguson as Group COO. They both bring relevant expertise from larger organisations and the board looks forward
to their contribution to the business. John Blinkhorne has stepped down from the board and is taking on new responsibilities leading
overseas business development and relationships with key cell suppliers.
In addition the company has made a number of appointments in marketing, finance and engineering to broaden the team. Professional
headcount is anticipated to rise to around 117 by the year end. The majority of new staff will fill engineering roles to meet the needs of
the expanding customer base.
Paul Johnston will retire as a non-executive director of Axeon at our AGM. Paul has had a long association with Axeon, initially as an
advisor to the company in its very early days and more recently as a non-executive director. The board would like to thank Paul for his
unstinting support for the business.
Outlook
The board is evaluating how to expand production capacity at our facility in Poland to enable higher throughputs in 2009 and are also
evaluating a larger facility in Dundee to be able to house the enlarged staff and production required from our growing automotive business.
Having established a nascent customer base in the US the board is evaluating how best to invest in developing the business in the US.
The board is also evaluating re-financing the $11.35 million debt facility in the second half of the year. If the board decides it is in
the best long term interests of the company to do this, then a charge of approximately £879,000 would be taken through the profit and loss
account.
The exact rate of growth of the business is dependent on a number of factors, not all of which are controlled by the company. These
factors include relative currency movements and the rate of build-up of end customer demand in the power tool, mobility and automotive
market segments. Management currently expects that the rate of growth of battery sales in automotive will be lower than prior expectations;
however, this will be more than balanced out by increased revenue in the power tool and mobile markets.
The board retains the view that investing for future profits growth is a more appropriate strategy for the business than trying to
maximise profit in 2008. The board sees increasing investment in R&D and staff overhead as the appropriate growth strategy in the near term.
Overhead in 2008 is therefore likely to be higher than prior expectation, given the breadth of opportunity available in the automotive space
and the potential benefits of starting US operations.
Providing guidance is particularly difficult for a business where revenues have grown 10 fold in 2007. Allowing for higher investment
for further growth the board takes the view that 2008 profit will be towards the bottom end of analyst consensus with higher revenue and
gross profit than current analyst consensus. The outlook for the business remains positive with increasing customer demand.
Charles Matthews
Chairman
Financial Information
The year end financial information has been prepared on the basis of the recognition and measurement requirements of International
Financial Reporting Standards (IFRSs) in issue that are endorsed by the European Union and effective at 31 December 2007.
Axeon Holdings plc
Profit & Loss Account
For the year ended 31 December 2007
2007 2006
Audited Audited
Note £000 £000
Revenue 29,316 2,551
Cost of sales (25,870) (923)
---------- ----------
Gross profit 3,446 1,628
Administrative expenses (3,306) (2,575)
---------- ----------
EBITDA 140 (947)
Depreciation and amortisation (363) (168)
---------- ----------
Operating loss before financing costs (223) (1,115)
Financial income 51 74
Financial expenses (345) (19)
---------- ----------
Loss before taxation (517) (1,060)
Taxation 15 196
---------- ----------
Loss for the period attributable to equity (502) (864)
holders
====== ======
Earnings per share
Basic and diluted loss per share 3 (1.8)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.
Axeon Holdings plc
Consolidated Balance Sheet
As at 31 December 2007
2007 2006
Audited Audited
£000 £000
Non-current assets
Goodwill 4,819 1,408
Intangible assets 956 22
Tangible assets 1,677 203
Deferred tax asset 264 -
--------- -------
7,716 1,633
--------- -------
Current assets
Inventories 8,698 399
Trade and other receivables 12,456 1,043
Cash and cash equivalents 12,028 1,669
---------- --------
33,182 3,111
---------- --------
---------- --------
Total assets 4,744
40,898
---------- --------
Current liabilities
Trade and other payables 15,185 794
Borrowings - 71
---------- --------
15,185 865
---------- --------
Net current assets 17,997 2,246
---------- --------
Non-current liabilities
Deferred tax liabilities 443 -
Borrowings 5,696 229
---------- --------
6,139 229
---------- --------
---------- --------
Net assets 19,574 3,650
====== =====
Equity
Called up share capital 2,288 1,229
Share premium account 22,350 7,357
Merger reserve 6,381 6,381
Equity reserve 168 54
Translation reserve 260 -
Profit and loss account (11,873) (11,371)
----------- ----------
Total Equity 19,574 3,650
====== ======
Axeon Holdings plc
Consolidated Cashflow Statement
For the year ended 31 December 2007
2007 2006
Audited Audited
£000 £000
Net cash from operating activities
Loss for the period (502) (864)
Adjustments for:
Depreciation 314 112
Amortisation of intangible assets 21 56
Amortisation of loan expenses 28 -
Equity settled share based payment transactions 114 35
Development expenditure capitalised (910) -
Finance revenues (51) (74)
Finance costs 345 19
Taxation (15) (196)
--------- ---------
Operating loss changes before changes in working (656) (912)
capital
Decrease/(increase) in inventories 1,595 (380)
Increase in trade and other receivables (7,679) (586)
Increase in trade and other payables 2,348 362
Interest received 61 74
Interest paid (56) (19)
Taxation received 84 187
--------- ---------
Cash used by operations (4,303) (1,274)
--------- ---------
Investing activities
Purchase of patents and trademarks (3) (26)
Purchase of property, plant and equipment (883) (300)
Proceeds on disposal of property, plant and
equipment 1 -
Acquisition of subsidiary (5,824) (1,204)
Net cash acquired with subsidiary 1,776 -
--------- ---------
Net cash used in investing activities (4,933) (1,530)
--------- ---------
Financing activities
Repayment of borrowings (2,178) (113)
New borrowings 5,599 -
Proceeds on issue of ordinary shares 16,052 4,085
--------- ---------
Net cash from financing activities 19,473 3,972
--------- ---------
Net increase/(decrease) in cash and cash equivalents 10,237 1,168
Cash and cash equivalents at beginning of year 1,669 501
Effect of foreign exchange rate changes 122 -
--------- ---------
Cash and cash equivalents at the end of period 12,028 1,669
--------- ---------
Notes to the accounts:
1 Basis of preparation
This year end statement contains the financial information of Axeon Holdings plc ("the Company") and its subsidiaries (together "the
Group") for the year ended 31 December 2007. The report was approved by the directors on 20 May 2007.
The preliminary financial information has been prepared under the historical cost convention.
The AIM Rules require that these annual consolidated financial statements of the Group, 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 Group's consolidated financial statements for that financial year. Those audited financial statements, which were
prepared under UK GAAP, have been reported on by the Group'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 year end financial information has been prepared on the basis of the recognition and measurement requirements of adopted IFRSs as
at 31 December 2007 that are effective at 31 December 2007, the Group's first annual reporting date at which it is required to use adopted
IFRSs.
The accounting policies applied in the 2006 consolidated financial statements and in Note 4 have been applied consistently to all
periods presented in this year end financial information and in preparing an opening IFRS balance sheet at 1 January 2006 for the purposes
of the transition to IFRSs.
As required by IFRS 1, the impact of the transition from UK GAAP to IFRSs is explained in note 5.
Taxation
Corporation tax is provided for to the extent required for each company within the Group. 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
Year to 31 December 2007
2007 2006
Audited Audited
£000 £000
Net loss for the financial period (502) (864)
--------------- ---------------
Weighted average number of Ordinary 27,930,030 23,070,144
shares in issue
--------------- ---------------
Basic and diluted loss per share (1.8)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 been adopted 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 year end 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 year ended 31 December
2007, the comparative information 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 and comparative information 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 IFRS 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
END
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