TIDMTPS
RNS Number : 4261F
Turbo Power Systems Inc
12 November 2015
Turbo Power Systems Inc. ("TPS" or the "Company")
Announces Results for the Third Quarter and Nine Months Ended 30
September 2015
TPS reports a Pre-Tax profit for Q3,
and update on Strategic Review, including Loan Waiver
Financial highlights Q3 2015 vs Q3 2014
-- Pre-Tax profit of GBP0.17 million (Q3 2014: loss GBP0.05 million).
-- Revenue 24% lower at GBP3.25 million (Q3 2014: GBP4.29 million).
-- Gross profit increased 8% to GBP1.38 million (Q3 2014:
GBP1.28 million), with an increase in gross margin to 42% (Q3 2014:
30%).
-- Total expenses for the period reduced by 23% to GBP1.03 million (Q3 2014: GBP1.34 million).
-- Operating profit of GBP0.35 million, an improvement of
GBP0.36 million versus the same period of last year (Q3 2014: loss
GBP0.01 million).
Financial highlights YTD 2015 vs YTD 2014
-- Pre-Tax profit of GBP0.28 million represents a turnaround of
GBP2.67 million (YTD 2014: Loss GBP2.39 million).
-- Order intake decreased 32% to GBP6.52 million (YTD 2014:
GBP9.54 million), impacted by both the Company's more stringent
selection process and uncertainties about the ultimate outcome of
the Strategic Review.
-- Revenue decreased 3% to GBP11.41 million (YTD 2014: GBP11.75 million).
-- Gross profit increased to GBP4.79 million (YTD 2014: GBP2.57
million), driven by a gross margin recovery to 42% (YTD 2014:
22%).
-- Total expenses for the period reduced by 14% to GBP4.01 million (YTD 2014: GBP4.67 million).
-- Operating profit GBP0.81 million (YTD 2014: loss GBP1.92 million).
-- Cash outflow from operating activities reduced 41% to GBP1.22
million (YTD 2014: GBP2.07 million).
Strategic Review and Loan Waiver
-- Strategic Review of the Company's business, announced February 2015, is ongoing.
-- As part of seeking to facilitate the Strategic Review, Tao
Sustainable Power Solutions (UK) Ltd ("TAO UK"), which owns 89.4%
of the issued share capital of the Company, has waived the entire
outstanding loan of GBP10.48 million and all unpaid accrued
interest of GBP1.89 million. TAO UK has agreed this waiver for the
potential benefit of all TPS shareholders.
-- Whilst the Loan Waiver is positive news for the Company, the
Board notes that all expressions of interest received to date as
part of the Strategic Review from potential offerors for 100% of
the issued and to be issued share capital of the Company on a
debt-free, cash-free basis have been indicatively priced at a
substantial discount to the share price.
-- The Board continues to regularly discuss with its majority
owner how best to proceed with the Strategic Review.
-- Further announcements will be made in due course, as appropriate.
Funding
As previously reported, the Company remains critically dependent
on continuing financial support by TPS's parent company, Vale
Soluções em Energia S.A. ("VSE"), the Brazilian energy solutions
company, which owns 89.4% of the issued share capital of the
Company through its wholly owned subsidiary Tao Sustainable Power
Solutions (UK) Ltd ("TAO UK"). VSE is dependent on its parent
company Vale S.A. ("Vale"), Brazil's largest mining company. On 24
August 2015, the Company announced that the shareholding of VSE had
changed to make VSE a wholly owned subsidiary of Vale S.A.
As at 30 September 2015 the loan outstanding from TAO UK
amounted to GBP12.29 million (being principal of GBP10.48 million
and accrued interest of GBP1.81 million), which was repayable on 1
April 2017. As reported above, as at 12 November the total amount
owed of GBP12.37 million was waived by TAO UK.
Carlos Neves, Chief Executive Officer, said:
"We are delighted to announce that TPS has made a pre-tax profit
for the fourth consecutive quarter, achieving, on a cumulative
basis in 2015, a 42% gross margin (2014: 22%) and a pre-tax profit
of GBP0.28 million (2014: loss GBP2.39 million). This demonstrates
how focused our teams are on contract profitability and product
creation efficiencies.
The implementation of our strategy and decisions made over the
past 2 years have driven this result. The clear focus on improving
the quality of our portfolio, superior execution within design for
manufacturing and the ongoing delivery of internal improvements are
achieving the expected results whilst creating a solid foundation
for our continued and sustainable growth.
Our sales pipeline opportunities remain good, however the order
intake of GBP6.52 million (2014: GBP9.54 million) has been impacted
by both a more stringent selection process and by uncertainties
about the ultimate outcome of the Strategic Review. Whilst this is
expected to adversely affect performance in quarter 4, nevertheless
we are confident that the year's results will still produce a
significant improvement over 2014.
The strategy, current results, the increasing opportunities
pipeline and the Loan Waiver re-affirm the Board's measured
confidence for 2016."
For further information, please contact:
Turbo Power Systems Tel: +44 (0)191 482 9200
Carlos Neves, Chief Executive
Officer
Charles Rendell, Chief Financial
Officer
Kreab (financial public relations) Tel: +44 (0)20 7074 1800
Robert Speed
finnCap (NOMAD and broker) Tel: +44 (0)20 7220 0500
Ed Frisby, Emily Watts
Notes to Editors
About Turbo Power Systems
Company Website: www.turbopowersystems.com
Company Twitter: https://twitter.com/turbopowersys
Turbo Power Systems Inc. (AIM: TPS.L) is a leading UK based
designer and manufacturer of innovative power solutions. TPS's
products are all based on its core technologies of high speed
motors and generators and power electronics which are sold into a
number of market sectors including transport, industrial, energy
and defence sectors. The Company's products provide high
performance while improving efficiency and reducing process energy
consumption compared to existing technologies.
Turbo Power System's existing customers include blue chip
companies such as Bombardier Transportation, Daikin Applied and
Eaton Aerospace. Tao Sustainable Power Solutions (UK) Ltd ("TAO
UK"), which is a wholly owned subsidiary of Vale S.A., Brazil's
largest mining company, owns 89.4% of the issued share capital of
the Company.
Forward looking statements
This press release contains forward-looking statements.
Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events, or performance, and
underlying assumptions and other statements that are other than
statement of historical fact. These statements are subject to
uncertainties and risks including, but not limited to, the ability
to meet on-going capital needs, product and service demand and
acceptance, changes in technology, economic conditions, the impact
of competition, the need to protect proprietary rights to
technology, government regulation, and other risks defined in this
document and in statements filed from time to time with the
applicable securities regulatory authorities.
Notice of no auditor review of interim financial statements
Under Canadian National Instrument 51-102, Part 4, subsection
4.3(3(a), if an auditor has not performed a review of the interim
financial statements, they must be accompanied by a notice
indicating that the financial statements have not been reviewed by
an auditor.
The accompanying un-audited interim financial statements of the
Company have been prepared by and are the responsibility of the
Company's management.
The Company's independent auditor has not performed a review of
these financial statements in accordance with standards established
by the Canadian Institute of Chartered Accountants for a review of
interim financial statements by an entity's auditor.
This review has been prepared as at 12 November 2015.
OPERATIONAL REVIEW
Business of the Company
Turbo Power Systems is a technology-led Company that designs and
manufactures high-speed electric motors, generators and power
electronics systems providing bespoke solutions to transport,
industrial, energy and defence markets.
Its track record in engineering innovation, which has been built
and tested over a number of years, allows the Company to meet
challenging design and manufacturing briefs with specific
requirements relating to high efficiency, space constraints,
environmental considerations and volume production demands across
the world.
TPS has a proven and worldwide track record developed over the
last 30 years delivering equipment in many sectors, especially in
rail and industrial. Long term relationships with global blue chip
companies in these markets have been built based on TPS's expertise
in high-speed electrical machines and power electronics enabling
the Company to design and manufacture competitive quality products
with proven reliability.
Way Forward
As a technology-led business, the Company understands the
challenges of the market regarding quality, costs and timing. Since
2013 TPS has concentrated on three important pillars that have
driven the successful strategy of the drive to profitability:
-- Improve the quality of the portfolio;
-- Superior execution within design development, manufacturing
operations and support activities; and
-- Consistent delivery of internal improvements.
These will continue to underpin the Company's strategy as the
Company drives forward in its chosen markets.
Market Overview
Transport:
Rail is a growing sector with huge investment globally and it is
a critical development infrastructure in many developing countries.
As an established supplier for auxiliary power units and battery
charges TPS can use its systems expertise to expand into traction
systems and electric distribution systems.
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The Company continues to implement its strategy for expanding
its Maintenance, Repair and Overhaul (MRO) services, especially in
the UK, where it is working closely with both train operators and
train service companies. In the UK, the train purchasing and
refurbishment timetable is governed by the franchise renewal
schedule and the implementation of the strategy closes follows this
schedule.
Industrial:
The HVAC Systems market has been a major market for the Company
where TPS has a long standing relationship with Daikin, a major OEM
in this market. The Company continues to work closely with Daikin
on the design and production of its next generation product lines.
The Company continues to work with its customers of high speed
direct connected motors and variable frequency drives for air/gas
compression and blowers market.
Energy:
The energy recovery sector in which TPS is focusing is a growing
sector, driven by continued increasing energy demand and cost.
There are limited systems suppliers in this market who can bring
TPS' expertise, experience and can interchange technologies and
solutions to meet the market requirements. TPS has the pedigree and
experience with grid linked inverters, which the Company believes
is a growing sector. The Company is focusing on specialised niche
applications (i.e. inverters for smart grid), where added value can
be demonstrated, and the low carbon renewable energy market, such
as wind turbines.
Defence:
Within this market, the Company has identified the growing
sector in the electrification of naval vessels. TPS's technologies
are suitable for energy recovery and efficiency, permanent magnet
motors for traction systems and emission mitigation in marine
systems which is being driven by recent marine regulations.
Recently completed projects and current bids should provide the
necessary track record for potential expansion within this market.
The Company continues to look to capitalise on its track record
with the 1MW generator in this market.
Current Operations
The Company is pleased to announce that the installation and
commissioning of all the smart grid units for UK Power Networks was
completed in the quarter. These units will now enter into
field-testing for the next 12 months, with a view to long-term
production commencing after that. Initial feedback from UK Power
Networks has been very positive about operations to date. As
previously announced, in April 2015 the Company was the winner of
the UK Energy Innovations "Best Electricity Network Improvement"
Award 2015, for its innovation in energy management with this
product.
Production will commence in Q4 for the orders received from
Wabtec Rail for the air conditioning power unit for the Class 321.
During the quarter, the Company enhanced the design of the
demonstrator that had previously been well received by the customer
and train operator. Production income will continue through
2016.
Wabtec Rail is a large rail refurbishment company in the UK and
provides products and services from new locomotives to aftermarket
maintenance in the global market. The Company believes that these
new orders show the strength of the product offering into the rail
refurbishment market, in line with its strategy.
Revenue in the quarter of GBP3.25 million is 24% below the
September quarter 2014 (GBP4.29 million) and 21% below the second
quarter of 2015 (GBP4.09 million), as the Company continues to
concentrate on profitable activities. The Company's focus on
profitable contracts has increased the gross margin to 42% in the
quarter (2014 Q3: 30%).
The Company completed production of the Bombardier Toronto
Rocket units in the quarter. Production of the Bombardier Sao Paulo
Monorail units is expected to recommence in Quarter 4, 2015. The
Company is in active discussions with Bombardier to supply the next
generation of units to the Chicago Transit Authority and for other
production contracts including monorail and light rail auxiliary
power units.
During 2015, the Company has been implementing a new Enterprise
Resource Management system. This has involved a move away from
several individual systems into the unified Epicor system. The
Company believes that this is now showing benefits in its
day-to-day processes and operations. A post implementation review
is underway to further improve processes and systems. The final
areas for integration are project management and customer
relationship management, which are planned for Quarter 4. The full
benefits of this implementation are expected to begin in 2016.
The Company is enhancing its well-established quality control
system, currently ISO9001, AS9100 (Aerospace standards) and OHSAS
18001 (Health & Safety standards), by embarking on IRIS
(International rail standards) certification. This is due to be
completed in 2016. It is hoped that this will benefit the quality
control processes, reduce the cost of engaging with new customers,
as an extension of their quality control systems, and consequently
increase our sales opportunities within the sector.
The overhead base has been reducing since its peak level in June
2012, with overall expenses for the nine months ended 30 September
2015 of GBP4.01 million, down 14% compared to 30 September 2014:
GBP4.67 million and down 48% compared to 30 September 2012: GBP8.33
million.
Headcount at 30 September 2015 was 108, down 17 (14%) from June
2015: 125, as the Company continues to look for process changes
that will lead to future efficiencies.
Strategic Review
On 20 February 2015 shareholders were informed that the Board
was conducting a Strategic Review of the Company's business and as
part of this review is looking at a potential sale of the Company.
The Board appointed Lincoln International LLP to assist in this
process.
The Board notes that the Company is a Canadian Business
Corporation, registered in Yukon, Canada and is not subject to the
provisions of the UK City Code on Takeovers and Mergers.
There can be no certainty that any potential transaction will
proceed, or as to the terms of any such transaction. The Company
may discontinue the strategic review process at any time.
As part of the Strategic Review, TAO has waived the entire
outstanding loan and all unpaid accrued interest. This will
strengthen the Company's financial position and provide a potential
benefit to all of shareholders of TPS.
Whilst the Loan Waiver is positive news for the Company, the
Board notes that all expressions of interest received to date as
part of the Strategic Review from potential offerors for 100% of
the issued and to be issued share capital of the Company on a
debt-free, cash-free basis have been indicatively priced at a
substantial discount to the share price. The Board continues to
regularly discuss with its majority owner how best to proceed with
the Strategic Review.
The Strategic Review is ongoing, further announcements will be
made in due course, as appropriate.
Support from Vale / TAO UK, including Loan Waiver
As at 30 September 2015 the current loan amount is GBP10.48
million plus accrued unpaid interest of GBP1.18 million.
The Company has not drawn down any additional loan during 2015
and continues to fund its own operations, but has not paid any of
the accrued interest.
As an indication of continuing support to the Company, as
announced today Vale / TAO has waived the loan principal of
GBP10.48 million and accrued interest of GBP1.89 million. TAO UK
has agreed this waiver for the potential benefit of all TPS
shareholders.
Summary
In summary, the Company continued to implement the strategy of
bidding for profitable production and development contracts.
Encouragingly, these results for the third quarter 2015 show the
fourth consecutive quarter of profitability for the Company.
The Board will continue to focus as follows:
-- Improve the quality of the portfolio;
-- Superior execution within design development, manufacturing
operations and support activities; and
-- Consistent delivery of internal improvements.
The Board are aware that there have been instances during the
year where potential customers have refrained from concluding
business with the Company until any uncertainty caused by the
Strategic Review has been settled. However, notwithstanding these
instances the Company has continued to report a pre-tax profit in
the quarter compared to the loss reported last year.
The Company will continue to actively pursue exciting new
projects with new customers to increase the diversity of both its
customer base and its technology portfolio, with the right level of
profitability. This drive, which coupled with a continued focus on
operational efficiencies throughout the business, is a key part of
the plan to build on this improved performance and achieve annual
profitability.
Our sales pipeline opportunities remain good, however the order
intake of GBP6.52 million (2014: GBP9.54 million) has been impacted
by both a more stringent selection process and by uncertainties
about the ultimate outcome of the Strategic Review. Whilst this is
expected to adversely affect performance in quarter 4, nevertheless
we are confident that the year's results will still produce a
significant improvement over 2014.
The strategy, current results, the increasing opportunities
pipeline, and the Loan Waiver re-affirm the Board's measured
confidence for 2016.
Going Concern
These condensed consolidated interim financial statements have
been prepared on the basis of International Financial Reporting
Standards (IFRS) applicable to a "going concern", which assume that
the Company will continue in operation for the foreseeable future
and will be able to realise its assets and discharge its
liabilities in the normal course of operations.
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As previously reported, the Company is critically dependent upon
i) customers paying to contractual terms in order to meet budgeted
and forecasted working capital requirements and; ii) the continued
financial support of its intermediate parent undertaking TAO UK, a
wholly owned subsidiary of Vale. If not continued, this may result
in the curtailment of the Company's activities.
As at 30 September 2015 the Company had net operating outflows,
with a net debt of GBP14.91 million, being GBP15.17 million of
debt, including rolled up interest accruals of GBP1.81 million,
less GBP0.26 million of cash. The Company has a cumulative reserves
deficit of GBP98.44 million as at 30 September 2015 and was profit
making for the quarter and nine months then ended.
If the Company is unable to generate positive cash flows from
operations, ensure the continued financial support from TAO UK, a
wholly owned subsidiary of Vale, or secure additional debt or
equity financing these conditions and events indicate the existence
of material uncertainty which may cast significant doubt regarding
the going concern assumption and, accordingly, the use of
accounting principles applicable to a going concern.
These condensed consolidated interim financial statements do not
reflect adjustments to the carrying values of the assets and
liabilities, the reported expenses and the balance sheet
classifications which would be necessary if the going concern
assumption was not appropriate. This could be material.
However, the Directors believe that they will succeed in
delivering the Company's projected financial performance and that
financial support from TAO UK, a wholly owned subsidiary of Vale,
will remain in place to enable the Company to meet budgeted and
forecasted working capital requirements and support the Company's
growth plans. Although there are no formal letters of support in
place for the purpose of the directors' going concern assessment of
the Company, the directors of the Company have taken comfort from
the actions taken by TAO UK, in that loans have been provided
throughout 2014 and that the majority of the Board are Vale
representatives, in forming their conclusion that they believe it
is appropriate to prepare these financial statements on a going
concern basis. Accordingly, they have continued to adopt the going
concern basis of preparation.
Summary of Quarterly Results
The following table shows selected quarterly consolidated
financial information of the Company for the last eight
quarters:
Revenue Research General Net Profit/(loss)
All amounts and product and administrative Profit/ per
in GBP'000 development (loss) share
Except Profit/(loss) Pence
per share
December 2013 4,714 530 1,633 (1,548) (0.05)
March 2014 3,298 502 1,071 (1,442) (0.04)
June 2014 4,160 378 968 (900) (0.03)
September 2014 4,292 351 870 (47) (0.00)
December 2014 3,424 520 553 76 0.00
March 2015 4,082 544 872 29 0.00
June 2015 4,086 448 978 81 0.00
September 2015 3,246 118 831 34 0.00
Revenue reduced to GBP3.25 million in the third quarter due to
the reduction in production revenues mainly attributed to
completing the Bombardier Toronto Rocket contract and the
suspension of the Bombardier Sao Paulo contract until quarter 4
2015.
Research and development expenditure is showing as reduced in
the quarter due to the positive effect of the R&D tax credit of
GBP0.25 million.
General and administration expenses of GBP0.83 million were 5%
below September 2014: GBP0.87 million.
Copies of Quarterly and Annual Results
The Company's full Financial Results and Managements' Discussion
and Analysis for 2014, together with the Third quarter 2015
Financial Results and Managements' Discussion and Analysis are
available on www.sedar.com. Full 2014 financial statements were
mailed to shareholders during May 2015.
Copies of the quarterly and annual results are available from
the Company's office at 1 Queens Park, Queensway North, Team Valley
Trading Estate, Gateshead, NE11 0QD, United Kingdom or available to
view from the Company's website at www.turbopowersystems.com
Review of the quarter ended 30 September 2015
Revenue
Revenue in the quarter ended 30 September 2015 was down 24% at
GBP3.25 million (Q3 2014: GBP4.29 million.)
2015 2014
GBP'000 GBP'000
Production 2,823 3,528
Development 423 764
-------- --------
3,246 4,292
-------- --------
Production revenue for the quarter reduced by 20% to GBP2.82
million (Q3 2014: GBP3.53 million) as production on the Toronto
Rocket units for Bombardier came to the end of the contract and the
suspension of the Bombardier Sao Paulo contract until quarter 4
2015.
Development revenue decreased by 45% to GBP0.42 million (Q3
2014: GBP0.76 million) as revenue on development contracts
commenced in 2014, including UK Power Networks, is concluded.
Cost of Sales
The cost of sales reduced 38% to GBP1.87 million (Q3 2014:
GBP3.02 million).
Gross Profit
Gross profit increased by 8% to GBP1.38 million (Q3 2014:
GBP1.28 million), with gross margin increasing to 42% (Q3 2014:
30%) reflecting the Company's commitment to increase the
profitability of both its current and new contracts.
Research and product development
Research and product development costs in the quarter decreased
by 66% to GBP0.12 million (Q3 2014: GBP0.35 million). In the
quarter there was a benefit from the UK Government's Research and
development expenditure credit scheme (RDEC tax credits) of GBP0.25
million gross of tax (2014 Q3: GBPnil). During the quarter the
Company received a net amount of GBP0.20 million related to 2014
and has accrued for an estimated claim related to 2015.
General and administrative costs
General and administrative costs, which consist mainly of staff
costs, facilities costs and the costs associated with the Company's
public listings, were down 5% at GBP0.83 million (Q3 2014: GBP0.87
million). The Company has continued to control its costs without
prejudicing the business operational strengths. The headcount as at
30 September was 13 lower at 108 (30 September 2014: 121).
Operating profit
Operating profit before other operating income was GBP0.35
million (Q3 2014: loss GBP0.06 million).
Other operating income
There was no other operating income arising from the Regional
Growth Fund in the quarter whilst the Company continues to review
the project and its key milestones (Q3 2014: GBP0.05 million).
Finance expense
Finance expense of GBP0.18 million (Q3 2014: GBP0.04 million)
arose from the interest on the loans from TAO UK (Q3 2015: GBP0.18
million, Q3 2014: GBP 0.17 million) and the effects of foreign
exchange movements (Q3 2015: GBPnil, Q3 2014: gain GBP 0.13
million).
Taxation
Taxation comprises of tax deemed paid on R&D tax credits of
GBP0.10 million (Q3 2014: GBPnil) and tax accrued on future R&D
tax credit claims of GBP0.03 million (Q3 2014: GBPnil)
Net profit
The Company recorded a net profit before tax of GBP0.17 million
(Q3 2014: loss GBP0.05 million). Net profit for the quarter after
tax was GBP0.03 million (Q3 2014: loss GBP0.05 million).
Review of the nine months ended 30 September 2015
Revenue
Revenue in the nine months ended 30 September 2015 was slightly
down by 3% to GBP11.41 million (Q3 2014: GBP11.75million.)
2015 2014
GBP'000 GBP'000
Production 9,597 10,604
Development 1,817 1,146
-------- --------
11,414 11,750
-------- --------
Production revenue for the nine months reduced by 9% to GBP9.60
million (Q3 2014: GBP10.60 million) as production was completed on
the Toronto Rocket units for Bombardier.
Development revenue increased by 59% to GBP1.82 million (Q3
2014: GBP1.15 million) as revenue is recognised on development
contracts commenced in 2014, including revenue related to UK Power
Networks and licencing revenue.
Cost of Sales
The cost of sales reduced 28% to GBP6.62 million (Q3 2014:
GBP9.18 million), net of release of a provision for a loss-making
contract.
Gross Profit
Gross profit increased by 163% to GBP4.80 million (Q3 2014:
GBP2.57 million), with gross margin increasing to 42% (Q3 2014:
22%) reflecting the Company's commitment to increase the
profitability of both its current and new contracts.
Research and product development
Research and product development costs in the quarter decreased
by 10% to GBP1.11 million (Q3 2014: GBP1.23 million), due to the
timing of certain external expenditure and the R&D tax credits
of GBP0.25 million (Q3 2014: GBPnil).
General and administrative costs
General and administrative costs, which consist mainly of staff
costs, facilities costs and the costs associated with the Company's
public listings, were down by 8% to GBP2.68 million (Q3 2014:
GBP2.91 million). The Company has continued to control its costs
without prejudicing the business operational strengths. The
headcount has reduced as at 30 September 2015 to 108 (31 December
2014: 125).
Operating profit
Operating profit before other operating income was GBP0.79
million (Q3 2014: loss GBP2.10 million).
Other operating income
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There was no other operating income arising from the Regional
Growth Fund in the nine months whilst the Company continues to
review the project and its key milestones (Q3 2014: GBP0.18
million).
Finance expense
Finance expense of GBP0.53 million (Q3 2014: GBP0.47 million)
arose from the interest on the loans from TAO UK (Q3 2015: GBP0.53
million, Q3 2014: GBP 0.46 million) and the effects of foreign
exchange movements (Q3 2015: GBPnil, Q3 2014: Loss GBP 0.01
million).
Taxation
Taxation comprises of tax deemed paid on R&D tax credits of
GBP0.10 million (Q3 2014: GBPnil) and tax accrued on future R&D
tax credit claims of GBP0.03 million (Q3 2014: GBPnil)
Net profit
The Company recorded a net profit before tax of GBP0.28 million
(Q3 2014: loss GBP2.39 million). Net profit after tax for the nine
months was GBP0.14 million (Q3 2014: loss GBP2.39 million).
Cash flows for the nine months ended 30 September 2015
Operating cash flows
The Company recorded an operating cash inflow before working
capital movements of GBP0.87 million for the nine months (2014:
outflow GBP1.73 million).
After adjusting for changes in working capital items the Company
suffered an overall cash outflow from operations of GBP1.22 million
(Q3 2014: GBP2.11 million).
Investing activities
Cash outflows from capital investments in the nine months were
GBP0.34 million (Q3 2014: GBP0.15 million). Capital investments
include the costs associated with the implementation of the Epicor
Enterprise Resource Management system during 2015, plant and
equipment and capitalised research and development costs relating
to new product generation.
Financing activities
There were no financing activities in the nine months ended 30
September 2015 (Q3 2014: GBP0.40 million).
Overall cash outflow for the period
Overall the cash outflow during the nine months was GBP1.56
million (Q3 2014: Outflow GBP1.82 million).
Balance sheet as at 30 September 2015
The Company ended the period with an unrestricted cash balance
of GBP0.26 million compared with GBP1.83 million at 31 December
2014. Substantially all of the Company's cash balances are
denominated in Sterling.
In addition, the Company had restricted cash amounts of GBP0.07
million (31 December 2014: GBP0.07 million), relating to utilities
deposits and a performance bond for one customer contract.
Non-current assets have increased from GBP0.78 million at 31
December 2014 to GBP0.90 million at 30 September 2015, after
depreciation and amortisation charges of GBP0.22 million.
Loans and borrowings have increased by interest of GBP0.53
million to GBP12.29 million. The loan and interest are shown as a
non-current liability repayable on 1 April 2017.
Subsequent to the balance sheet date, TAO UK has waived the
entire outstanding loan and all unpaid accrued interest.
Net current assets at 30 September 2015, excluding restricted
cash balances included under current assets, were GBP4.73 million
(31 December 2014: GBP3.28 million).
As at 30 September 2015, the Company had 3,336,865,922 common
shares issued and outstanding and 892,777,778 A ordinary shares
issued and outstanding. As at that date there were 15,080,909
outstanding share options.
Contractual Obligations
Payments due by period
Total 2015 2016 2017 2018 2019
and
there
after
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade and other
payables 2,291 2,291 - - - -
Loan notes 12,288 - - 12,288 - -
Operating leases 2,137 74 295 295 295 1,178
______ ______ ______ ______ ______ ______
16,716 2,365 295 12,583 295 1,178
______ ______ ______ ______ ______ ______
Shareholders' equity
The movement in shareholders' deficit comprised:
2015
GBP'000
As at 1 January
2015 (8,041)
Profit for quarter
1 29
Profit for quarter
2 81
Profit for the
quarter 34
As at 30 September
2015 (7,897)
--------
As at 12 November 2015, the Company had 3,336,865,922 common
shares issued and outstanding and 892,777,778 A ordinary shares
issued and outstanding. As at that date there were 15,080,909
outstanding share options.
Liquidity
Cash and cash equivalents at 30 September 2015 were GBP0.26
million (31 December 2014: GBP1.83 million).
Restricted cash at 30 September 2015 was GBP0.07 million (31
December 2014: GBP0.07 million).
The Company reported a profit in the period of GBP0.14 million
and has a cumulative deficit of GBP98.44 million. The Company's
ability to continue as a going concern depends on its ability to
generate positive cash flows from operations or secure additional
debt or equity financing.
The Company has not changed its approach to Currency risk and
Interest rate risk management from that of the prior year and as
disclosed in the annual statements at 31 December 2014.
Currency risk management
The Company's expenditure is principally denominated in
Sterling, which is funded from Sterling cash balances. Exchange
differences, which arise from foreign currency transactions, are
included in exchange adjustments within the income statement. At 30
September 2015 the Sterling equivalent of Canadian Dollar
denominated net liabilities amounted to GBP2,000 (31 December 2014:
net liabilities GBP3,250).
The Company receives a significant proportion of its revenue in
US Dollars (including from contracts with Canadian customers). As
such the Company routinely maintains a significant receivables
balance in US Dollars, which are revalued at each period end. At 30
September 2015 the Sterling equivalent of the US Dollar denominated
assets amounted to GBP0.14 million (31 December 2014: GBP1.93
million).
To manage its foreign exchange risk arising from future
commercial transactions and recognised assets and liabilities, the
Company uses forward foreign exchange contracts. Further
information is provided in Note 7 Derivative Financial
Instruments.
Interest rate risk management
The analysis of the Company's financial assets and borrowings
analysed between floating and fixed interest rates is shown
below
30 September 31 December
2015 2014
GBP'000 GBP'000
Floating rate
financial assets 262 1,825
Fixed rate borrowings (12,288) (11,757)
The fixed rate borrowings are at 6.0% per annum.
Financial instruments
The Company's financial assets and liabilities consist primarily
of the cash and cash equivalents, restricted cash, trade
receivables, trade payables and loans.
30 September 2015 31 December 2014
Loans and Financial Loans and Financial
receivables liabilities receivables liabilities
at amortised at amortised
cost cost
GBP'000 GBP'000 GBP'000 GBP'000
Asset/(Liability)
Cash and cash
equivalent 262 - 1,825 -
Restricted cash 66 - 68 -
Trade, prepayments
and other receivables 3,161 - 2,995 -
Trade and other
payables - (2,483) - (4,333)
Loans - (12,288) - (11,757)
Total 3,489 (14,771) 4,888 (16,090)
============= ============== ============= ==============
The amounts at which the assets and liabilities above are
recorded are considered to approximate to fair value.
Fair value estimation
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. The
Company uses a variety of methods and makes assumptions that are
based on market conditions existing at each balance sheet date.
Techniques, such as estimated discounted cash flows, are used to
determine fair value for the financial instruments. The fair value
of forward foreign exchange contracts is determined using quoted
forward exchange rates at the balance sheet date.
The carrying value less impairment provision of trade
receivables and payables are assumed to approximate their fair
values due to the short-term nature of trade receivables and
payables. The fair value of financial liabilities for disclosure
purposes is estimated by discounting the future contractual cash
flows at the current market interest rate that is available to the
group for similar financial instruments.
Derivative financial instruments
The Company uses foreign exchange forwards to help manage its
foreign exchange risk. The Company classifies these derivatives as
financial assets at fair value through profit and loss. Derivatives
are classified as current assets.
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Financial assets carried at fair value through profit or loss
are initially recognised at fair value, and transaction costs are
expensed in the income statement. Financial assets are derecognised
when the rights to receive cash flows from the investments have
expired or have been transferred and the group has transferred
substantially all risks and rewards of ownership.
Gains or losses arising from changes in the fair value of the
'financial assets at fair value through profit or loss' category
are presented in the income statement within 'Other gains - net' in
the period in which they arise.
Financial Risk Management and Capital Structure
The Company's risk management programme remains as detailed on
page 51 in the Annual Report and Financial Statements for the year
ended 31 December 2014. There have been no significant changes
since 31 December 2014.
Further information is provided in Management's Discussion and
Analysis and the notes to these Condensed Consolidated Interim
Financial Statements.
Related Party Transactions
On 16 March 2015 the Company announced that it had agreed a one
year extension in the term of its existing loan financing agreement
which will now be repayable on 1 April 2017.
On 12 November 2015, TAO UK waived the entire outstanding loan
and all unpaid accrued interest. TAO UK has agreed this waiver for
the potential benefit of all TPS shareholders.
Critical accounting policies and estimates
These condensed consolidated interim financial statements have
been prepared on the basis of International Financial Reporting
Standards applicable to a going concern, which assume that the
Company will continue in operation for the foreseeable future and
will be able to realize its assets and discharge its liabilities in
the normal course of operations. As at 30 September 2015 the
Company had net operating cash outflows. Therefore the Company may
require additional funding which, if not raised, may result in the
curtailment of activities. The Company has a cumulative deficit of
GBP98.44 million as at 30 September 2015.
Further information on Going Concern is provided in Note 2.
The preparation of financial statements in conformity with IFRS
requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets and liabilities, revenue and expenses and the
related disclosures of contingent assets and liabilities. Although
these estimates are based on management's best knowledge of the
amount, event or actions, actual results ultimately differ from
those estimates.
Estimates and underlying assumptions are continually evaluated
and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in
any future period affected.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the financial year are disclosed on page 42 in
the Annual Report and Financial Statements for 31 December
2014.
Principal Risks and Uncertainties
Risk or uncertainty Mitigation approach
Operating revenues
TPS has entered into large The Company is seeking
development and manufacturing to change the emphasis
contracts. The outcome on new contract signings.
of this is that large amounts The Company has a growing
of revenue are associated revenue stream associated
with one product line and with repair, maintenance
one customer. As there and overhaul that does
is reliance on large contracts not rely on large value
being signed by the Company, contracts. The Company
the impact of not signing is focusing efforts to
a large contract would increase the percentage
be high on the results of revenue associated with
of the Company in any one these activities in addition
year. The Company recognises with the new major contract
that it is increasingly awards.
difficult to forecast when The Company has always
these new contracts will worked closely with its
be signed due to the importance current customer base.
customers associate such Going forward this will
large values. The Company continue, but greater emphasis
has suffered and will continue is being put into working
to suffer from delays in with new customers and
expected contract award hence increasing the number
dates. of contracts in bid and
diluting the relative impact
of individual contract
awards.
Cost overrun on contracts
due to technology risk The Company seeks to mitigate
TPS is a technology-led these risks by significant
company. As the products up front planning and research.
that it develops are technology The new ideas are reviewed
driven, the Company is by senior personnel and
looking to use the latest approved before use in
design and practices when new projects. A project
a new contract is won. based reporting and review
This enables the Company system is in place to monitor
to make the most efficient the activities and the
solution for each project. output from design and
Due to these technology testing phases. A system
advances there is a significant of cost control is in place
risk extra costs may be to ensure that budgets
incurred while developing are monitored and any variances
new ideas to fulfil contracts. recognised early and taken
into account to mitigate
them in future activities.
Further development activities
TPS undertakes research The Company has a structure
activities to ensure that of senior engineers who
the technology used is are responsible for reviewing
current and forward looking. market trends and identifying
There is a risk that the new technologies as they
Company misses a directional become useful in our products.
change in where technology The Company also partakes
is moving and does not in research projects that
produce new and efficient are originated via bodies
designs. such as Innovate UK (was
the Technology Strategy
Board). These projects
typically involve University
departments as well as
a diverse group on interested
parties. This helps the
Company understand potential
customer and supplier's
knowledge and requirements.
Commercial relationships
TPS has longstanding commercial The Company seeks to mitigate
relationships with major this risk by working closely
customers. However, there with the customer. This
is no guarantee that customers involvement starts with
will continue to design understanding their future
and manufacture the appropriate product roadmap and working
products that require our closely at an early stage
technology. Any integration, to help overcome new design
design or manufacturing problems. This works especially
problems that the customer well on projects with existing
encounters could adversely customers. However, the
affect the financial results Company is changing the
of the Company. emphasis of its business
development function as
The risk could be that part of seeking to expand
the customer's designs the customer base. This
no longer require, say, requires the Company to
an auxiliary power unit bring new fresh ideas to
and therefore future orders the market and identify
cease. Alternatively, a current problems encountered
customer could be having in the marketplace.
issues with, say, the overall
train design and manufacture
and therefore revenue could
be delayed.
Dependence of key personnel
TPS is a technology-led The Company works closely
company and hence reliant with key personnel to ensure
on key personnel. The Company that they are fully motivated
has a group of senior personnel and engaged on interesting
who oversee the design and rewarding projects.
research and implementation. The Company believes that
Having been through major the roles should be aligned
personnel number changes to the individual's ability,
in the last few years, so these can be within
key positions exist within technical expertise or
the Company that require management responsibility.
succession plans to be
in place. Where a key position has
been identified a succession
plan has been drawn up.
Foreign currency exchange
rate fluctuations The Company seeks over
TPS is subject to foreign time, to balance currency
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currency risk. Foreign requirements with currency
currency sales (and to inflows. Where there is
a much lesser extent) purchases excess currency inflow
are made in Euros and US the Company seeks to match,
Dollars. Historically, to the extent possible,
the Company's major contracts planned currency sales
are denominated in US Dollars through forward foreign
and therefore a major portion currency exchange contracts.
of cash receipts are in The level of currency hedging
US Dollars. The Company is dependent on the credit
is therefore exposed to limits available for future
movements in foreign currency currency deals and the
rates over time. perceived currency forecast
movement.
The Company has undertaken
a strategy to work with
more customers in the UK,
thus removing a foreign
exchange risk. Also where
possible in negotiations
with customers to provide
quotations in GBP as an
alternative currency.
Future funding
As noted in the Operational The Company works closely
Review and Note 2 Going with Vale to ensure that
Concern, TPS is critically they are fully aware of
dependent upon i) customers the financial situation
paying to contractual terms of the Company on a very
in order to meet budgeted regular basis and also
and forecasted working of customer concerns.
capital requirements and;
ii) the continued financial Two representatives of
support of its intermediate Vale sit on the Board and
parent undertaking TAO therefore approve all budgets
UK (which is a wholly owned and ongoing strategies
subsidiary of Vale). If of the Company. The Company
not continued, this may seeks to gain approval
result in the curtailment for all budgets, working
of the Company's activities, closely with Vale on all
partly due to customer financial and operational
concerns over the Company's matters.
continuing viability.
Internal Control
The Board of Directors has overall responsibility for the
accounting policies and ensuring that the Company maintains an
adequate system of internal financial control to provide them with
reasonable assurance that assets are safeguarded and of the
reliability of financial information used for the business and for
publication. More detail on the Company's internal control can be
found on page 27 of the Annual Report and Financial Statements for
the year ended 31 December 2014.
Turbo Power Systems Inc.
Condensed consolidated interim income statement
Unaudited
________________________________________________________________________________
Notes Quarter Nine Months
ended Ended
30 September 30 September
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 5 3,246 4,292 11,414 11,750
Cost of sales (1,871) (3,015) (6,620) (9,177)
-------- -------- -------- --------
Gross profit 1,375 1,277 4,794 2,573
Expenses
Distribution costs (80) (113) (216) (529)
Research and product development (118) (351) (1,110) (1,231)
General and administrative (831) (871) (2,681) (2,910)
-------- -------- -------- --------
Total expenses (1,029) (1,335) (4,007) (4,670)
Operating profit/(loss)
before other operating
income 346 (58) 787 (2,097)
Other operating Income - 52 - 175
Other gains net 6 - 24 -
Operating profit/(loss) 352 (6) 811 (1,922)
Finance expense (182) (41) (531) (467)
Profit/(loss) before tax 170 (47) 280 (2,389)
Income tax expense (136) - (136) -
Net profit/(loss) and total
comprehensive profit/(loss)
for the periods 34 (47) 144 (2,389)
======== ======== ======== ========
Profit/(loss) per share
- basic and diluted 6 0.00p (0.00)p 0.00p (0.07)p
======== ======== ======== ========
The Notes form an integral part of these condensed consolidated
interim financial statements.
Turbo Power Systems Inc.
Condensed consolidated interim statement of financial
position
Unaudited
________________________________________________________________________________
Notes As at As at
30 September 31 December
2015 2014
GBP'000 GBP'000
Current assets
Restricted cash 66 68
Inventories 2,687 2,894
Trade and other receivables 3,161 2,995
Prepayments 206 226
Cash and cash equivalents 262 1,825
-------------------------- ------------------
6,382 8,008
-------------------------- ------------------
Non-current assets
Intangible assets 438 235
Property, plant and equipment 457 541
895 776
Total assets 7,277 8,784
========================== ==================
Current liabilities
Trade and other payables 2,291 4,333
Derivative financial instruments - 24
Provisions 192 308
-------------------------- ------------------
2,483 4,665
-------------------------- ------------------
Non-current liabilities
Loans and borrowings 8 12,288 11,757
Provisions 403 403
-------------------------- ------------------
12,691 12,160
-------------------------- ------------------
Total liabilities 15,174 16,825
Equity (deficit)
Share capital 9 71,408 71,408
Convertible shares 9 17,310 17,310
Other reserves 1,823 1,823
Retained deficit (98,438) (98,582)
-------------------------- ------------------
Equity (deficit) (7,897) (8,041)
Total liabilities and equity
(deficit) 7,277 8,784
========================== ==================
Approved by the Board:
F Senhora, Chairman
12 November 2015
The Notes form an integral part of these condensed consolidated
interim financial statements.
Turbo Power Systems Inc.
Condensed consolidated interim statement of changes in
equity
Unaudited
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________________________________________________________________________________
Common Convertible Other Accumulated Total
Share Shares reserves deficit
capital
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2014 71,408 17,310 1,823 (96,269) (5,728)
Net loss - - - (2,389) (2,389)
Balance at 30
September 2014 71,408 17,310 1,823 (98,658) (8,117)
Net profit - - - 76 76
Balance at 31
December 2014 71,408 17,310 1,823 (98,582) (8,041)
Net profit - - - 144 144
Balance at 30
September 2015 71,408 17,310 1,823 (98,438) (7,897)
=========== ============== ========== ============ ========
The Notes form an integral part of these condensed consolidated
interim financial statements.
Turbo Power Systems Inc.
Condensed consolidated interim statement of cash flows
Unaudited
________________________________________________________________________________
Nine months
ended
30 September
2015 2014
GBP'000 GBP'000
Cash flows from operating
activities
Net profit/(loss) for the
period 144 (2,389)
Adjustments for:
Grant release - (175)
Finance expense 531 467
Foreign Exchange - (31)
Depreciation of property,
plant and equipment 155 173
Amortization of intangible
assets 66 33
Asset retirement obligation - 14
Movement in Onerous contract
provision - 201
Financial Instruments (24) (21)
Operating cash flows before
movements in working capital 872 (1,728)
Changes in working capital
items
Decrease in inventories 207 297
Decrease in restricted
cash 2 23
(Increase)/decrease in
trade and other receivables (166) 353
Decrease/(increase) in
prepayments 20 (138)
(Decrease) in trade and
other payables (2,042) (1,127)
(Decrease)/increase in
provisions (116) 215
-------- --------
Cash generated by operations (1,223) (2,105)
Grant received - 35
Net cash from operating
activities (1,223) (2,070)
-------- --------
Investing activities
Purchase of property, plant
and equipment (72) (14)
Purchase of intangible
assets (268) (138)
-------- --------
Net cash used in investing
activities (340) (152)
-------- --------
Cash flows from financing
activities
Proceeds from increase
in loans - 400
-------- --------
Net cash from financing
activities - 400
-------- --------
Net decrease in cash and
cash equivalents (1,563) (1,822)
Cash and cash equivalents
at the beginning of the
period 1,825 1,849
Cash and cash equivalents
at the end of the period 262 27
======== ========
The Notes form an integral part of these condensed consolidated
interim financial statements.
Turbo Power Systems Inc.
Notes to the condensed consolidated interim financial
statements
Unaudited
________________________________________________________________________________
1 Reporting entity
Turbo Power Systems Inc. ("The Company") is subsisting pursuant
to the Business Corporations Act (Yukon Territory). The Company's
registered office is Suite 200-204 Lambert Street, Whitehorse,
Yukon Y1A 3T2, Canada.
The Company conducts operations through its wholly owned
subsidiary company, Turbo Power Systems Limited ("TPSL"), whose
main trading address is 1 Queens Park, Queensway North, Team Valley
Trading Estate, Gateshead NE11 0QD, United Kingdom.
The Company's parent undertaking is TAO Sustainable Power
Solutions (UK) Limited ("TAO UK"), a company registered in England
and Wales, UK. Following the announcement on 24 August 2015, where
the Company announced that the shareholding of VSE had changed to
make VSE a wholly owned subsidiary of Vale S.A., the Company's
ultimate parent company is Vale S.A. ("VSE"), a company registered
in Brazil.
These condensed consolidated interim financial statements of the
Company as at and for the quarter ended 30 September 2015 comprises
of the Company and its subsidiaries. The Company's subsidiaries
comprise:
Trading Place of % Ownership
status incorporation
Turbo Power Systems Limited
("TPSL") Trading England 100%
Turbo Power Systems Development
Limited Dormant England 100%
Intelligent Power Systems
Limited Dormant England 100%
Nada-Tech Limited Dormant England 100%
2 Going concern
These condensed consolidated interim financial statements have
been prepared on the basis of International Financial Reporting
Standards (IFRS) applicable to a "going concern", which assume that
the Company will continue in operation for the foreseeable future
and will be able to realise its assets and discharge its
liabilities in the normal course of operations.
As previously reported, the Company is critically dependent upon
i) customers paying to contractual terms in order to meet budgeted
and forecasted working capital requirements and; ii) the continued
financial support of its intermediate parent undertaking TAO UK,
which is a wholly owned subsidiary of Vale. If not continued, this
may result in the curtailment of the Company's activities.
As at 30 September 2015 the Company had net operating outflows,
with a net debt of GBP14.91 million, being GBP15.17 million of
debt, including rolled up interest accruals of GBP1.81 million,
less GBP0.26 million of cash. The Company has a cumulative reserves
deficit of GBP98.44 million as at 30 September 2015 and was profit
making for the quarter and nine months then ended.
If the Company is unable to generate positive cash flows from
operations, ensure the continued financial support from TAO UK, and
ultimately Vale, or secure additional debt or equity financing
these conditions and events indicate the existence of material
uncertainty which may cast significant doubt regarding the going
concern assumption and, accordingly, the use of accounting
principles applicable to a going concern.
These condensed consolidated interim financial statements do not
reflect adjustments to the carrying values of the assets and
liabilities, the reported expenses and the balance sheet
classifications which would be necessary if the going concern
assumption was not appropriate. This could be material.
However the Directors believe that they will succeed in
delivering the Company's projected financial performance and that
financial support from TAO UK, and ultimately Vale ( which is
Brazil's largest mining company), will remain in place to enable
the Company to meet budgeted and forecasted working capital
requirements and support the Company's growth plans. Although there
are no formal letters of support in place for the purpose of the
directors' going concern assessment of the Company, the directors
of the Company have taken comfort from the actions taken by TAO UK,
in that loans have been provided throughout 2014 and that the
majority of the Board are Vale representatives, in forming their
conclusion that they believe it is appropriate to prepare these
financial statements on a going concern basis. Accordingly, they
have continued to adopt the going concern basis of preparation.
3 Basis of preparation
These condensed consolidated interim financial statements have
been prepared in accordance with IAS34 Interim Financial
Reporting.
The Company's condensed consolidated interim financial
statements were prepared in accordance with the accounting policies
set out in Note 3 to the consolidated financial statements for the
year ended 31 December 2014, and using the same methods of
computation.
The condensed consolidated interim financial statements were
authorised for issuance by the Board of Directors on 12 November
2015.
The condensed consolidated interim financial statements have
been prepared under the historical cost convention, except for the
revaluation of certain financial instruments.
The condensed consolidated interim financial statements are
presented in GBP sterling, rounded to the nearest GBP1,000, which
is the Company's functional and presentation currency.
4 Critical accounting judgements and key sources of estimation uncertainty
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These condensed consolidated interim financial statements have
been prepared on the basis of International Financial Reporting
Standards applicable to a 'going concern', which assume that the
Company will continue in operation for the foreseeable future and
will be able to realize its assets and discharge its liabilities in
the normal course of operations. As at 30 September 2015 the
Company had net operating cash outflows. Therefore the Company may
require additional funding which, if not raised, may result in the
curtailment of activities. The Company has a cumulative reserves
deficit of GBP98.44 million as at 30 September 2015.
Further information on Going Concern is provided in Note 2.
The preparation of financial statements in conformity with IFRS
requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets and liabilities, revenue and expenses and the
related disclosures of contingent assets and liabilities. Although
these estimates are based on management's best knowledge of the
amount, event or actions, actual results ultimately may differ from
those estimates.
Estimates and underlying assumptions are continually evaluated
and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in
any future period affected.
5 Segmental analysis
The Company reports by its distinct segments of production and
development, both segments operate in the United Kingdom. Except
for the investments held by the Company which are located in
Canada, all of the Company's assets are located in the United
Kingdom.
Nine months ended Production Development Unallocated Total
30 September 2015
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 9,597 1,817 - 11,414
=========== ============ ============ =========
Segment operating
profit/(loss) 1,528 (741) 24 811
Finance expense - - (531) (531)
Taxation expense - - (136) (136)
----------- ------------ ------------ ---------
Net profit/(loss)
and total comprehensive
profit/(loss) 1,528 (741) (643) 144
=========== ============ ============ =========
Total assets 6,194 755 328 7,277
Total liabilities (1,718) (573) (12,883) (15,174)
Nine months ended Production Development Unallocated Total
30 September 2014
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 10,604 1,146 - 11,750
=========== ============ ============ =========
Segment operating
loss (292) (1,630) - (1,922)
Finance expense - - (467) (467)
Net loss and total
comprehensive loss (292) (1,630) (467) (2,389)
=========== ============ ============ =========
Total assets 5,964 715 505 7,184
Total liabilities (2,608) (802) (11,891) (15,301)
Geographic Segmental Information
Quarter ended Nine months
30 September ended 30 September
Total Revenues by 2015 2014 2015 2014
destination
GBP'000 GBP'000 GBP'000 GBP'000
UK 1,458 1,489 4,525 3,267
USA 1,292 1,304 3,718 3,570
Canada 323 1,219 2,743 3,624
Rest of world 173 280 428 1,289
3,246 4,292 11,414 11,750
======== ======== ========== ==========
All property, plant and equipment were located within the United
Kingdom during both periods ended 30 September 2015 and 30
September 2014.
6 Profit/(loss) per share
Profit/loss) per common share has been calculated using the
weighted average number of shares in issue during the relevant
financial periods.
Quarter ended Nine months ended
30 September 30 September
2015 2014 2015 2014
Numerator for basic
loss per share calculation:
Profit/(loss) attributable GBP34,000 (GBP47,000) GBP144,000 (GBP2,389,000)
to equity shareholders
Denominator:
For basic net profit/(loss)
- weighted average
shares outstanding 3,336,865,922 3,336,865,922 3,336,865,922 3,336,865,922
For diluted net profit/(loss)
- weighted average
shares 4,244,724,609 - 4,244,724,609 -
Basic and diluted
Basic net profit/(loss)
per common share -
pence 0.00p (0.00p) 0.00p (0.07p)
Diluted net profit/(loss)
per common share -
pence 0.00p (0.00p) 0.00p (0.07p)
As the Company experienced a loss in 2014 all potential common
shares outstanding from dilutive securities are considered
anti-dilutive and are excluded from the calculation of diluted loss
per share.
Details of dilutive potential securities outstanding included in
EPS calculations at 30 September 2015 are as follows:
As at 30 As at 30
September September
2015 2014
Common shares potentially
issuable:
- under stock options 15,080,909 30,707,273
- pursuant to A Ordinary
Share conversion 892,777,778 892,777,778
------------ ------------
907,858,687 923,485,051
============ ============
7 Derivative financial instrument
30 September 31 December
2015 2014
Assets Liabilities Assets Liabilities
GBP'000 GBP'000 GBP'000 GBP'000
Forward Exchange
Contracts - 6 - 24
Total - 6 - 24
-------------- ------------ ------------ ------------
Less non-current portion: - - - -
-------------- ------------ ------------ ------------
Current portion - 6 - 24
============== ============ ============ ============
The notional principal amounts of the outstanding forward
foreign exchange contracts at 30 September 2015 were GBP0.65
million (30 September 2014: GBPnil, 31 December 2014: GBP0.65
million).
8 Loans and borrowings
On 22 October 2010 the Company agreed to a loan facility with
TAO UK, which bears interest at 6% per annum and is repayable upon
demand commencing 2 January 2012. During 2012 the repayment term
was renegotiated and the loan became due upon demand commencing 1
April 2014. In March 2014 the repayment date was further extended
to 1 April 2016. The repayment date was extended by one year on 16
March 2015 to 1 April 2017. The loan is secured by a fixed and
floating charge over the assets of the Company's subsidiary
TPSL.
30 September 31 December
2015 2014
Fixed rate loans GBP'000 GBP'000
Due after one year
Loans 10,478 10,478
Accrued Interest 1,810 1,279
------------- ------------
Total 12,288 11,757
============= ============
The Company has drawn down on all its borrowing facilities as at
30 September 2015 (31 December2014: all loans drawn down in full).
Unpaid accrued interest of GBP1.81 million (31 December 2014:
GBP1.28 million) is recorded in the loan amount.
9 Share capital and options
Share capital and other reserves
Share Capital
Common Shares Convertible Shares
(A Ordinary Shares)
Number GBP'000 Number GBP'000
At 30 September
2014 and at
31 December
2014 3,336,865,922 71,408 892,777,778 17,310
At 30 September
2015 3,336,865,922 71,408 892,777,778 17,310
================ ========== ============== ==============
The Company is authorised to issue an unlimited number of common
shares and an unlimited number of preferred shares, issuable in
series, without nominal or par value. All common shares rank
equally with regard to the Company's residual assets.
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