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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Turbo Power | LSE:TPS | London | Ordinary Share | CA8999101030 | COM SHS NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.035 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMTPS
RNS Number : 4592F
Turbo Power Systems Inc
28 July 2016
Turbo Power Systems Inc. ("TPS" or the "Company")
Announces Results for the Second Quarter & Half Year
Ended 30 June 2016
TPS reports a return to profit
Financial highlights: Q2 2016 vs. Q2 2015
-- Order intake in the quarter of GBP6.77 million (Q2 2015: GBP3.72 million). -- Increase in net profit of 102% to GBP0.16 million (Q2 2015 Profit GBP0.08 million). -- Revenue decreased 9% to GBP3.73 million (Q2 2015: GBP4.09 million).
-- Gross profit decreased to GBP1.65 million (Q2 2015: GBP1.74 million), partially compensated by margin increase to 44% (Q2 2015: 42%).
-- Total expenses for the period reduced by 9% to GBP1.37 million (Q2 2015: GBP1.50 million). -- Operating profit reduced slightly to GBP0.23 million (Q2 2015 GBP0.26 million).
Financial highlights: H1 2016 vs. H1 2015
-- Order intake more than doubled to GBP8.75 million (H1 2015 GBP4.13 million).
-- Decrease in net profit of 85% to GBP0.02 million (H1 2015 Profit GBP0.11 million), mainly due to contract signing delays and re-scheduling of past contracts.
-- Revenue decreased 13% to GBP7.09 million (H1 2015: GBP8.17 million).
-- Gross profit decreased to GBP2.95 million (H1 2015: GBP3.42 million), gross margin maintained at 42% (H1 2015: 42%).
-- Total expenses for the period reduced 7% to GBP2.78 million (H1 2015: GBP2.98 million). -- Cash outflow from operating activities of GBP0.65 million (H1 2015: GBP1.49 million).
Strategic Review:
-- Strategic Review of the Company's business, announced February 2015, remains ongoing.
-- The Board notes, as previously reported, 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 prevailing 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 S.A. ("Vale"), Brazil's largest mining 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").
Carlos Neves, Chief Executive Officer, said:
"Our main goal was to continue improving our performance and the results achieved in the first half of 2016 are fully in line with management expectations. They represent an important milestone under the challenges we have for 2016, moreover considering the uncertainties about the ultimate outcome of the Strategic Review and the BREXIT short term impacts on our customers and suppliers business plans.
The hard work of our employees, in all areas, has demonstrated that the trend to profitability achieved last year could be maintained while we keep reinforcing the pillars for our continuous growth. The increasing order intake in the first six months on 2016 compared to the same period in 2015 together with the benefits derived from the efficiencies in cost control and the new R&D developments are now underpinning future growth.
I remain confident that we will continue to deliver our commitments in 2016 and with the new orders received, and expected to be received, reinforce and refine the successful strategy of turnaround with limited resources."
For further information, please contact:
Hot Features
Premium
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, broker and Tel: +44 (0)20 7220 0500
financial advisor)
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 28 July 2016.
OPERATIONAL REVIEW
Business of the Company
Turbo Power Systems is a technology-led Company that designs and manufactures high-speed permanent magnet electric motors, generators and power electronics systems and provides bespoke solutions to transport, industrial, energy conversion, and military markets.
Its track record in engineering innovation, which has been built and tested over a substantial number of years, allows the Company to meet challenging design and manufacturing briefs with specific requirements relating to environmental performance and performance to volume demands across the world.
TPS has a proven and worldwide track record in the development and deployment of equipment in many sectors, especially in rail and industrial. Long term relationships with customers in these markets have been built based on delivering competitive products with proven reliability.
Developed over the last 30 years, expertise on high-speed electrical machines and power electronics, allows the Company to exploit its current and future portfolio and adjust accordingly to grow successfully in its chosen markets.
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 to successfully implement the strategy of achieving sustained 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.
Current Operations
Revenue in the quarter was up by 11% compared with the first quarter of 2016 but down by 9% on the second quarter of 2015. The decrease in the Engineering design revenue from 2015 was due to the delay in signing new contracts in the first half of 2016.
The Company increased the production capacity for Daikin as this product line used capacity arising from the completion of the Bombardier contracts. Deliveries to Eaton of the Jettison Fuel Pump continued in line with their requirements.
Gross margin increased by 5% from Q1 2016 to 44%, reflecting the benefit of the Company's focus on opportunities for efficiencies. Gross margin increased by 2% from Q1 2015.
The overhead base has been reducing since its peak level in June 2012, with overall expenses in the quarter of GBP1.37 million down 9% compared to GBP1.50 million at 30 June 2015.
Headcount at 30 June 2016 was 115, up four from 31 December 2015 and up two from 31 March 2016.
Strategic Review
On 20 February 2015 shareholders were informed that the Board are conducting a Strategic Review of the Company's business and as part of this review are looking at a potential sale of the Company. The Board has appointed Lincoln International LLP to assist in this process. 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.
Further announcements were made on 12 November 2015, 7 January 2016, 29 March 2016 and 6 May 2016 explaining 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. In the meantime 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.
Support from TAO UK
On 29 March 2016 the Company entered into a new loan of GBP314,000 which accrues interest at 6% per annum, with its parent company, TAO UK, repayable on 1 April 2017, which can be extended at the Company's request for a further year.
As at 30 June 2016 the loan amount was GBP0.31 million plus accrued unpaid interest of GBP 0.01 million (30 June 2015: GBP10.48 million plus accrued unpaid interest of GBP1.63 million, the full outstanding loan was waived in full on 12 November 2015).
Summary
In summary, the Company has continued to implement its strategy of bidding for profitable production and development contracts, whilst maintaining a disciplined and considered approach to costs.
We believe that this was reflected in the significant improvement in the gross margin and operating profit of the Company during 2015, which is continuing into 2016.
As noted in the first quarter results, whilst the current order book extends over the next two years and beyond, the need to win further substantial orders, execution of those orders and completion of development programmes in a consistent and timely manner are all key to delivering management's plans for improved results during 2016 and beyond.
Going Concern
These consolidated 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 at 30 June 2016 the Company had net operating outflows, with a net debt of GBP3.54 million, being GBP3.64 million of debt less GBP0.10 million of cash. The Company has a cumulative retained deficit of GBP99.41 million as at 30 June 2016 and was profit making for the period then ended.
The Company remains critically dependent upon i) customers paying to contractual terms and ii) the continued financial support of its intermediate parent undertaking TAO Sustainable Power Solutions (UK) Limited (TAO UK), who in turn is dependent on their parent undertaking VSE (which in turn is dependent on its parent company Vale S.A. (Vale)). The Company relies on TAO for continued financial support in the form of the loan made available to the Company, and in order to meet any shortfall in budgeted or forecasted working capital requirements and support the Company's growth plans. If not secured, this may result in the curtailment of the Company's activities.
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, VSE, and its parent company, Vale, 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 when required (the latest being GBP0.31 million on 29 March 2016), that the existing debt was waived in November 2015 and that VSE has Board representation, 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.
If the Company is unable to either generate positive cash flows from operations or ensure the continued financial support from TAO UK and ultimately VSE and its parent company, or secure additional debt or equity financing, these conditions and events indicate the existence of a 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 consolidated financial statements do not reflect adjustments to the carrying values of the assets and liabilities, the reported expenses and the balance sheet classifications, which could be material, which would be necessary if the going concern assumption were not appropriate.
Summary of Quarterly Results
The following table shows selected quarterly consolidated financial information of the Company for the last eight quarters:
Revenue Research General Operating Net (loss)/profit Loss
All amounts and product and administrative (loss)/profit per
in GBP'000 development share
pence
September
2014 4,292 351 870 (6) (47) (0.00)
December
2014 3,424 520 553 264 76 0.00
March 2015 4,082 544 872 202 29 0.00
June 2015 4,086 448 978 257 81 0.00
September
2015 3,246 118 831 346 34 0.00
December
2015 1,973 360 790 (895) (992) (0.03)
March 2016 3,350 416 916 (136) (148) (0.00)
June 2016 3,732 413 863 227 164 0.00
Quarterly revenue increased 10% in June 2016 over March 2016, as production revenue increases and development contracts continue.
Research and development expenditure continues to remain at a steady level of just above 2015's quarterly average expenditure of GBP0.37 million following the Board approved strategy to drive the Company's technology forward.
General and Administration expenses have decreased by GBP0.05 million (12%) in June 2016 over the first quarter, benefiting from foreign exchange gains of GBP0.06 million as a result of the change in the value of the GBP following the result of the UK referendum held on 23 June 2016 to leave the European Union.
Copies of Quarterly and Annual Results
The Company's full Financial Results and Managements' Discussion and Analysis for 2015 together with the half year 2016 Financial Results and Managements' Discussion and Analysis are available on www.sedar.com. The Annual Report and Financial Statements for 2015 have been mailed to shareholders.
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 June 2016
Revenue
Revenue in the quarter ended 30 June 2016 was down 18% at GBP3.35 million (Q2 2015: GBP4.08 million.)
2016 2015
GBP'000 GBP'000
Production 3,619 3,617
Development 113 469
-------- --------
3,732 4,086
-------- --------
Production revenue remained constant for the quarter at GBP3.62 million (Q2 2015: GBP3.62 million), while development revenue decreased by 76% to GBP0.13 million (Q2 2015: GBP0.47 million) due to the timing of development projects and the revenue recognised on these projects.
Cost of Sales
The cost of sales was GBP2.08 million (Q2 2015: GBP2.35 million) a reduction of 12%.
Gross Profit
Gross profit decreased by 5% to GBP1.65 million (Q2 2015: GBP1.74 million), with gross margin increasing slightly to 44% (Q2 2015: 42%).
The Company remains committed to increasing the profitability of both its current and future contracts.
Research and product development
Research and product development costs in the quarter decreased by 9% to GBP0.41 million (Q2 2015: GBP0.45 million), in line with the Board's plans for the Company has become more product focused. This is net of Research and Development tax credits of GBP0.12 million (Q2 2015: GBP0.10 million).
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 reduced by 12% compared to 2015 to GBP0.86 million (Q2 2015: GBP0.98 million).
The Company continues to control its costs without prejudicing the business operational strengths, with a reduction in headcount of 8% compared with 30 June 2015 (30 June 2016: 115, 30 June 2015: 125) and the consolidation of its operations to the Gateshead site.
Operating profit
Operating profit before other operating income was GBP0.29 million (Q2 2015: profit GBP0.24 million).
Other operating income
There was no other operating income arising from the Regional Growth Fund in the quarter as the Company is in negotiations about the future of the project (Q2 2015: GBPnil).
Discussions are ongoing regarding the financial impact of this but the Board notes that there is GBP0.24 million liability in the balance sheet to cover any potential repayments.
Finance expense
Finance expense was GBP0.01 million (Q2 2015: GBP0.18 million arose from the interest on the historical loans from TAO UK, which were waived in full in November 2015).
Net profit
The Company recorded a net profit of GBP0.16 million (Q2 2015: profit GBP0.08 million).
Review of the six months ended 30 June 2016
Revenue
Revenue in the six months ended 30 June 2016 decreased 13% to GBP7.08 million (H1 2015: GBP8.17 million.)
2016 2015
GBP'000 GBP'000
Production 6,675 6,774
Development 407 1,394
-------- --------
7,082 8,168
-------- --------
Production revenue for the six months reduced by 1% to GBP6.68 million (H1 2015: GBP6.77 million) as production was completed on the CTA units for Bombardier during 2015.
Development revenue decreased by 69% to GBP0.41 million (H1 2015: GBP1.34 million) as development contracts in 2015 have been completed and the timings of current development contracts affects the revenue recognised.
Cost of Sales
The cost of sales reduced 13% to GBP4.13 million (H1 2015: GBP4.75 million), net of release of a provision for a loss making contract.
Gross Profit
Gross profit decreased by 14% to GBP2.95 million (H1 2015: GBP3.42 million), with gross margin remaining at 42% (H1 2015: 42%).
The Company remains committed to increasing the profitability of both its current and future contracts.
Research and product development
Research and product development costs in the quarter decreased by 13% to GBP0.83 million (H1 2015: GBP0.99 million),
This is net of Research & Development tax credits of GBP0.17 million (H1 2015: GBP0.10 million).
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 4% to GBP1.78 million (H1 2015: GBP1.85 million).
The Company has continued to control its costs without prejudicing the business operational strengths. The headcount has increased, by 4 in the six months, to 115 at 30 June 2016 (31 December 2015: 111).
Operating profit
Operating profit before other operating income was GBP0.17 million (H1 2015: profit GBP0.44 million).
Other operating income
There was no other operating income arising from the Regional Growth Fund in the six months the Company is in negotiations about the future of the project (H1 2015: GBPnil).
Finance expense
Finance expense of GBP0.01 million (H1 2015: GBP0.35 million) arose from the interest on the loans from TAO UK.
Net profit
The Company recorded a net profit for the six months of GBP0.02 million (H1 2015: profit GBP0.11 million).
Cash flows for the six months ended 30 June 2016
Operating cash flows
The Company recorded an operating cash inflow before working capital movements of GBP0.12 million for the period (H1 2015: inflow GBP0.59 million).
After adjusting for changes in working capital items the Company had an overall cash outflow from operations of GBP0.61 million (H1 2015: GBP1.49 million).
Investing activities
Cash outflows from capital investments in the six months were GBP0.06 million (H1 2015: GBP0.14 million).
Financing activities
Cash inflow received from financing activities amounted to GBP0.31 million, from the new TAO UK loan (H1 2015: GBPnil).
Overall cash outflow for the period
Overall the cash outflow during the six months was GBP0.40 million (H1 2015: Outflow GBP1.63 million).
Balance sheet as at 30 June 2016
The Company ended the period with an unrestricted cash balance of GBP0.10 million compared with GBP0.50 million at 31 December 2015. Substantially all of the Company's cash balances are denominated in Sterling.
In addition, the Company had restricted cash amounts of GBP0.01 million (31 December 2015: GBP0.07 million), relating to utilities deposits, the company was released from the performance bond of GBP0.06 million in June 2016.
Non-current assets have decreased from GBP0.87 million at 31 December 2015 to GBP0.82 million at 30 June 2016, after depreciation and amortisation charges of GBP0.11 million.
Loans and borrowings have increased since 31 December 2015 by the new TAO UK loan of GBP0.31 million and accrued interest of GBP0.01 million (2015: GBPnil). The loan and interest are shown as a non-current liability repayable on 1 April 2017, which can be extended, at the Company's request, for a further year, and accrues interest at 6% per annum, payable annually.
Net current assets at 30 June 2016, excluding restricted cash balances included under current assets, were GBP3.32 million (31 December 2015: GBP2.88 million).
As at 30 June 2016, 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 4,872,728 outstanding share options.
Contractual Obligations
Payments due by period
Total 2016 2017 2018 2019 2020
and
there
after
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade and other
payables 3,643 3,643 - - - -
Loan notes 319 - 319 - - -
Operating leases 1,916 148 295 295 295 883
______ ______ ______ ______ ______ ______
5,908 3,791 609 295 295 883
______ ______ ______ ______ ______ ______
Shareholders' equity
The movement in shareholders' surplus comprised:
2016
GBP'000
As at 1 January
2016 3,478
Loss for quarter
1 (148)
Profit for quarter
2 164
As at 30 June
2016 3,494
--------
As at 28 July 2016, 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 4,872,728 outstanding share options.
Liquidity
Cash and cash equivalents at 30 June 2016 were GBP0.10 million (31 December 2015: GBP0.50 million).
Restricted cash at 30 June 2016 was GBP0.01 million (31 December 2015: GBP0.07 million).
The Company reported a profit in the six months of GBP0.02 million and has a cumulative deficit of GBP99.41 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 2015.
Currency risk management
The Company's expenditure is principally denominated in Sterling, which is funded from Sterling cash balances. Exchange differences, which arise on consolidation of the Company's Canadian operations, are included in exchange adjustments within the income statement. At 30 June 2016 the Sterling equivalent of Canadian Dollar denominated net liabilities amounted to GBP2,200 (31 December 2015: net liabilities GBP1,950).
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 June 2016 the Sterling equivalent of the US Dollar denominated assets amounted to GBP1.33 million (31 December 2015: GBP1.96 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 June 31 December
2016 2015
GBP'000 GBP'000
Floating rate
financial assets 101 496
Fixed rate borrowings (319) -
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 June 2016 31 December 2015
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 101 - 496 -
Restricted
cash 9 - 66 -
Trade, prepayments
and other receivables 3,643 - 2,675 -
Trade and other
payables - (3,841) - (3,075)
Loans - (319) - -
Total 3,753 (3,160) 3,237 (3,075)
============= ============== ============= ==============
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.
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 31 December 2015. There have been no significant changes since 31 December 2015.
Further information is provided in Management's Discussion and Analysis and the notes to these Condensed Consolidated Interim Financial Statements.
Related Party Transactions
On 29 March 2016 the Company announced that its wholly owned subsidiary Turbo Power Systems Limited had entered into an agreement to draw down on a new loan to be provided by TAO UK, to support working capital requirements. The additional amount available to draw down as follows:
A summary of the loan movement is:
GBP'000
Balance at 1 -
January 2016
Drawdown 29 March
2016 314
Accrued interest
2016 5
------------------- --------
Balance at 30
June 2016 319
------------------- --------
This amount is repayable on 1 April 2017, which can be extended, at the Company's request, for a further year, and accrues interest at 6% per annum, payable annually
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 June 2016 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 GBP99.41 million as at 30 June 2016.
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 2015.
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. 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. profile of its salesforce
as part of seeking to expand
The risk could be that the customer base. This
the customer's designs requires the Company to
no longer require, say, bring new fresh ideas to
an auxiliary power unit the market and identify
and therefore future orders current problems encountered
cease. Alternatively, a in the marketplace.
customer could be having
issues with, say, the overall In its major market of
train design and manufacture Rail, whilst the Company
and therefore revenue could tries to mitigate customer
be delayed. issues with train manufacture
in regard to its own product
line it will always be
at risk of the overall
train manufacture timing
issues. The Company seeks
to mitigate these through
contractual timeframes
and terms.
The Company works closely
with the customers to ensure
that all production warranty
issues are identified and
treated in line with contractual
relationships. Further
information is provided
in the Financial Statements
Note 9 Contingent Liabilities.
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
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 in the Company seeks to match,
Canadian and US Dollars. 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.
Part of the Board's strategy
has been to seek increased
sales to UK based companies
where contracts are undertaken
in GBP Sterling.
Future funding
The Company has been loss The Company works closely
making for a number of with VSE, its majority
years and has been critically shareholder, to ensure
reliant on regular increases that it is fully aware
in external funding (which of the financial situation
was waived in November of the Company on a very
2015). As noted in the regular basis and also
Directors' Report and Note of customer concerns. The
2 Going Concern, TPS is Company seeks to gain approval
critically dependent on for all budgets, working
customers paying to contractual closely with VSE on all
terms in order to meet financial and operational
forecast working capital matters, assisted by the
requirements and support two representatives of
the Company's growth plans. VSE on the Board.
If not secured, this may
well result in the curtailment
of the Company's activities,
partly due to customer
concerns over the Company's
continuing viability.
Strategic Review
In conjunction with VSE, The Board has been working
the Company has been undertaking closely with VSE to understand
a Strategic Review for its requirements and with
over a year. The Review's Lincoln International whom
continuation could impact the Board and VSE appointed
the future orders due to to undertake the Review.
the uncertainty that customers Notwithstanding the Review,
and potential customers the Board is operating
might perceive before the the Company in a normal
outcome is determined. manner.
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 2015.
Turbo Power Systems Inc.
Condensed consolidated interim income statement
Unaudited
Notes Quarter Six Months
ended Ended
30 June 30 June
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 5 3,732 4,086 7,082 8,168
Cost of sales (2,078) (2,350) (4,130) (4,749)
-------- -------- ----------- --------
Gross profit 1,654 1,736 2,952 3,419
Expenses
Distribution costs (89) (71) (170) (136)
Research and product development (413) (448) (829) (992)
General and administrative (863) (978) (1,779) (1,850)
-------- -------- ----------- --------
Total expenses (1,365) (1,497) (2,778) (2,978)
Operating profit before
other operating income 289 239 174 441
Other (losses)/gains net (62) 18 (83) 18
Operating profit 227 257 91 459
Finance expense (5) (176) (5) (349)
Profit before tax 222 81 86 110
Income tax expense (58) - (70) -
Net profit and total comprehensive
profit for the periods 164 81 16 110
======== ======== =========== ========
Profit per share - basic
and diluted 6 0.00p 0.00p 0.00p 0.00p
======== ======== =========== ========
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 June 31 December
2016 2015
GBP'000 GBP'000
Current assets
Restricted cash 9 66
Inventories 3,217 3,253
Trade and other receivables 3,841 2,675
Prepayments 277 162
Cash and cash equivalents 101 496
--------------------- ------------------
7,445 6,652
--------------------- ------------------
Non-current assets
Intangible assets 396 433
Property, plant and equipment 421 434
817 867
Total assets 8,262 7,519
===================== ==================
Current liabilities
Trade and other payables 3,643 3,075
Derivative financial instruments 7 83 -
Loans and borrowings 10 319 -
Provisions 8 392 635
--------------------- ------------------
4,437 3,710
--------------------- ------------------
Non-current liabilities
Loans and borrowings 10 319 -
Provisions 8 331 331
--------------------- ------------------
331 331
--------------------- ------------------
Total liabilities 4,768 4,041
Equity
Share capital 11 71,408 71,408
Capital contribution reserve 11 12,367 12,367
Convertible shares 11 17,310 17,310
Other reserves 1,823 1,823
Retained deficit (99,414) (99,430)
--------------------- ------------------
Equity 3,494 3,478
Total liabilities and equity 8,262 7,519
===================== ==================
Approved by the Board:
F Senhora, Chairman
28 July 2016
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
Common Capital Convertible Other Accumulated Total
Share Contribution Shares reserves deficit
capital reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2015 71,408 - 17,310 1,823 (96,582) (8,041)
Net Profit - - - - 110 110
Balance at 30
June 2015 71,408 - 17,310 1,823 (98,472) (7,931)
Capital contribution - 12,367 - - - 12,367
Net loss - - - - (958) (958)
Balance at 31
December 2015 71,408 12,367 17,310 1,823 (99,430) 3,478
Net Profit - - - - 16 16
Balance at 30
June 2016 71,408 12,367 17,310 1,823 (99,414) 3,494
========= ============== ============ ========== ============ ========
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
Half Year
ended
30 June
2016 2015
GBP'000 GBP'000
Cash flows from operating
activities
Net profit for the period 16 110
Adjustments for:
Finance expense 5 350
Taxation 70 -
Foreign Exchange - 24
Depreciation of property,
plant and equipment 60 111
Amortization of intangible
assets 52 42
R and D tax credits (168) -
Derivative financial instrument 83 (18)
Asset retirement obligation - (25)
Operating cash flows before
movements in working capital 118 594
Changes in working capital
items
Decrease/(increase) in
inventories 36 (44)
Decrease in restricted
cash 57 2
(Increase) in trade and
other receivables (1,032) (405)
(Increase) in prepayments (115) (32)
Increase/(decrease) in
trade and other payables 568 (1,503)
(Decrease) in provisions (243) (104)
-------- --------
Cash absorbed from operating
activities (611) (1,492)
-------- --------
Taxes paid 36 -
-------- --------
Net cash absorbed from operating
activities (647) (1,492)
-------- --------
Investing activities
Purchase of property, plant
and equipment (48) (31)
Purchase of intangible
assets (14) (104)
Net cash used in investing
activities (62) (135)
Cash flows from financing
activities
Proceeds from increase 314 -
in loans
-------- --------
Net cash from financing 314 -
activities
-------- --------
Net decrease in cash and
cash equivalents (395) (1,627)
Cash and cash equivalents
at the beginning of the
period 496 1,849
Cash and cash equivalents
at the end of the period 101 233
======== ========
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. The Company's ultimate parent company is Vale S.A. ("Vale"), a company registered in Brazil.
These condensed consolidated interim financial statements of the Company as at and for the quarter ended 30 June 2016 comprises of the Company and its subsidiaries. The Company's subsidiaries comprise:
Trading Place of % Ownership
status incorporation
Turbo Power Systems Limited 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 consolidated 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 at 30 June 2016 the Company had net operating outflows, with a net debt of GBP3.54 million, being GBP3.64 million of debt less GBP0.10 million of cash. The Company has a cumulative deficit of GBP99.41 million as at 30 June 2016 and was profit making for the period then ended.
The Company continues to be critically dependent upon i) customers paying to contractual terms and ii) the continued financial support of its intermediate parent undertaking TAO Sustainable Power Solutions (UK) Limited (TAO UK), who in turn is dependent on their parent undertaking VSE (which in turn is dependent on its parent company Vale S.A. (Vale)). The Company relies on TAO for continued financial support in the form of the loan made available to the Company, and in order to meet any shortfall in budgeted or forecasted working capital requirements and support the Company's growth plans. If not secured, this may result in the curtailment of the Company's activities.
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, its parent company, Vale, 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 when required (the latest being GBP0.31 million on 29 March 2016), that the existing debt was waived in November 2015 and that VSE has Board representation,, 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.
If the Company is unable to either generate positive cash flows from operations or ensure the continued financial support from TAO UK and ultimately VSE and its parent company, or secure additional debt or equity financing, these conditions and events indicate the existence of a 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 consolidated financial statements do not reflect adjustments to the carrying values of the assets and liabilities, the reported expenses and the balance sheet classifications, which could be material, which would be necessary if the going concern assumption were not appropriate.
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 2015, and using the same methods of computation.
The condensed consolidated interim financial statements were authorised for issuance by the Board of Directors on 28 July 2016.
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
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 June 2016 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 GBP99.41 million as at 30 June 2016.
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.
Six months ended Production Development Unallocated Total
30 June 2016
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 6,675 407 - 7,082
=========== ============ ============ ========
Segment operating
profit/(loss) 1,570 (1,396) (83) 91
Finance expense - - (5) (5)
Taxation expense - - (70) (70)
Net profit/(loss)
and total comprehensive
profit/(loss) 1,570 (1,396) (158) 16
=========== ============ ============ ========
Total assets 7,042 1,110 110 8,262
Total liabilities (2,795) (931) (1,042) (4,768)
Six months ended Production Development Unallocated Total
30 June 2015
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 6,774 1,394 - 8,168
=========== ============ ============ =========
Segment operating
profit/(loss) 1,032 (591) 18 459
Finance expense - - (349) (349)
Net profit/(loss)
and total comprehensive
profit/(loss) 1,032 (591) (331) 110
=========== ============ ============ =========
Total assets 6,612 742 264 7,618
Total liabilities (2,122) (708) (12,719) (15,549)
Geographic Segmental Information
Quarter ended Six months ended
30 June 30 June
Total Revenues by 2016 2015 2016 2015
destination
GBP'000 GBP'000 GBP'000 GBP'000
USA 2,087 1,325 3,461 2,426
UK 1,601 1,897 3,174 3,067
Rest of world 38 17 290 255
Canada 6 847 157 2,420
3,732 4,086 7,082 8,168
======== ======== ========= ========
All property, plant and equipment were located within the United Kingdom during both periods ended 30 June 2016 and 30 June 2015
6 Profit per share
Profit per common share has been calculated using the weighted average number of shares in issue during the relevant financial periods.
Quarter ended Six months ended
30 June 30 June
2016 2015 2016 2015
Numerator for basic
profit per share calculation:
Profit attributable GBP164,000 GBP81,000 GBP16,000 GBP110,000
to equity shareholders
Denominator:
For basic net profit
- weighted average
shares outstanding 3,336,865,922 3,336,865,922 3,336,865,922 3,336,865,922
For diluted net profit
- weighted average
shares 4,235,071,428 4,244,724,609 4,235,086,428 4,244,724,609
Basic and diluted
Basic net profit per
common share - pence 0.00p 0.00p 0.00p 0.00p
Diluted net profit
per common share -
pence 0.00p 0.00p 0.00p 0.00p
Details of dilutive potential securities outstanding included in EPS calculations at 30 June 2016 are as follows:
30 June 30 June
2016 2015
Common shares potentially
issuable:
- under stock options 4,872,728 15,080,909
- pursuant to A Ordinary
Share conversion 892,777,778 892,777,778
------------ ------------
897,650,506 907,858,687
============ ============
7 Derivative financial instrument
30 June 31 December
2016 2015
Assets Liabilities Assets Liabilities
GBP'000 GBP'000 GBP'000 GBP'000
Forward Exchange Contracts - 21 - -
Total - 83 - -
-------- ------------ ------------ ------------
Less non-current portion: - - - -
-------- ------------ ------------ ------------
Current portion - 83 - -
======== ============ ============ ============
The notional principal amounts of the outstanding forward foreign exchange contracts at 30 June 2016 were GBP1.04 million (30 June 2015: GBP0.31 million, 31 December 2015: GBP0.67 million).
8 Provisions
Onerous Asset Warranty Total
Contracts Retirement
Obligations
GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January
2015 77 324 310 711
Utilised in period (75) (29) - (104)
Balance at 30 June
2015 2 295 310 607
Utilised in period (2) (10) (56) (68)
Provided in period - - 500 500
Release in period - - (73) (73)
Balance at 31 December
2015 - 285 681 966
Utilised in period - (5) (238) (91)
Balance at 30 June
2016 - 280 443 723
=========== ============= ========= ========
30 June 31
Dec
Analysed as: 2016 2015
GBP'000 GBP'000
Current liabilities 392 635
Non-current
liabilities 331 331
Total 723 966
======== ========
Onerous Contracts: The Company entered 2015 with one contract where the estimated material and labour costs were in excess of the expected revenues. In 2015 the final GBP77,000 was utilised as the contract was concluded. There are no onerous contracts in 2016.
Asset Retirement Obligations: During 2010 the Company recognised a requirement for a provision for the asset retirement obligations related to the two properties it then leased. One lease has subsequently terminated in 2013 and the other will terminate in 2022. Accordingly a provision, based on the present value of the future expected expenditure was recorded at GBP674,000 as at 31 December 2010. Following a 2015 review of the provision against expected costs the Company released GBP39,000 of this provision. There has been a further release of GBP29,000 in the second quarter of 2016. The Company has recorded no further increase in accretion expense in 2016 (Q2 2015: GBPnil).
Warranty: Production units sold by the Company are provided with a warranty against operational failure. The warranty period provided is dependent upon the sales agreement with the customer and the nature of the unit, but typically is between one and two years from the date of delivery. The warranty provision is maintained at a level calculated to reflect the current costs of repair and incidence of failure of existing and similar units.
During the final quarter of 2015 the Company received a claim from a customer for warranty, relating to a fault within motor units delivered to a customer during 2013 to 2015. The Company included a one off provision expense in 2015 of GBP0.50 million of which GBP0.44 million remained at 31 December 2015. The Company has utilised a further GBP0.24 million in the first six months of 2016 leaving a provision of GBP0.21 million at 30 June 2016. See Note 9.
9 Contingent Liabilities
As reported in Note 8 Provisions above, during the final quarter of 2015 the Company received a claim from a customer for warranty, relating to a fault within motor units delivered during 2013 to 2015.
The financial statements include a one off expense during 2015 of GBP0.50 million, of which GBP0.44 million remained as a liability as at 31 December 2015. In the first half of 2016 a further GBP0.23million was utilised, with GBP0.21 million remaining at 30 June 2016. The provision was made to cover the costs of the replacement parts to be supplied and where the cost can be accurately estimated. It is expected that the majority of the remaining cash outlay will be in the third quarter of 2016.
The matter is subject to an insurance claim by the Company for costs requested by the customer beyond the unit replacement costs. To date some costs have been covered by the insurance company. There is significant uncertainty about the amount of some of these further costs and therefore the amount of any further insurance claim and whether the insurance claim will cover all the costs. There is also significant uncertainty as to whether the Company is liable for some or all the further costs that the customer is requesting.
The Directors believe that based on independent advice (which continues to be taken) and their current assessment of the facts that the provision made is appropriate. However, the final amount is dependent upon the outcome of the agreements between the parties.
10 Loans and borrowings
On 29 March 2016 the Company announced that its wholly owned subsidiary Turbo Power Systems Limited had entered into an agreement to draw down on a new loan to be provided by TAO UK, to support working capital requirements. The additional amount available to draw down as follows:
29 March 2016 GBP314,000
This amount is repayable on 1 April 2017, which can be extended, at the Company's request, for a further year, and accrues interest at 6% per annum, payable annually.
30 June 31 December
2016 2015
Fixed rate loans GBP'000 GBP'000
Due after one year
Loans 314 -
Accrued Interest 5 -
-------- ------------
Total 319 -
======== ============
The Company has drawn down on all its borrowing facilities as at 30 June 2016 (2015: all loans drawn down in full). There is no unpaid accrued interest included in the loan amount at 30 June 2016.
11 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 June 2015
and at 31 December
2015 3,336,865,922 71,408 892,777,778 17,310
At 30 June
2016 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. The holders of common shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company.
Holders of A Ordinary Shares of Turbo Power Systems Limited ("TPSL") (Convertible shares), carry no voting rights, cannot attend any shareholder meetings and, in the event of winding-up of TPSL are entitled to a maximum distribution of GBP500,000 in aggregate, to rank before the Common Shares. The A Ordinary shares are convertible into an equal number of Common Shares of the Company on request by the holder, having given 61 days' notice. Under certain take over or change in control events, the A Ordinary Shares are exchangeable under "super exchange" rights, converting for 3 Common shares of the Company for every A Ordinary Share held. As the A Ordinary Shares are non-participating interests in TPSL and are non-voting, no current year or cumulative net losses have been allocated to the A Ordinary Shares.
Capital contribution reserve
At 30 June 2016 the Capital contribution reserve, from the waiver of the TAO UK Loans and accrued interest, was GBP12.37 million (31 December 2015: GBP12.37 million)
Other reserves
At 30 June 2016, other reserves comprise of the stock compensation reserve of GBP1,823,000 (31 December 2015: GBP1,823,000).
Potential issue of common shares
The Company has issued share options under the 2002 Stock Option Plan and A Ordinary Shares that are convertible into common shares of the Company.
30 June 31 December
2016 2015
Under stock option plan 4,872,728 6,012,728
Pursuant to A Ordinary
Share conversion 892,777,778 892,777,778
------------
897,650,506 898,790,506
--------------- ------------
12 Related party transactions
Transactions with the parent and ultimate parent company
During the periods ended 30 June 2015 and 30 June 2016 the Company undertook no significant transactions with related parties. Save for the loans and borrowings (see Note 10 above) and any accrued interest, there were no amounts outstanding at 31 December 2015 and 30 June 2016 between the Company and TAO UK, and the Company and VSE. Any transactions are conducted within the normal course of business for supply of engineering design services and are transacted at exchange amount, which is the amount agreed for the transaction.
Key Management personnel compensation
In addition to their salaries, the Company provides non-cash benefits to executive management and contributes to a defined contribution pension plan. Some executive officers participate in the share option programme.
Key management personnel compensation comprises the following:
Quarter Ended Six months Ended
30 June 30 June
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Salaries 139 138 277 275
Pension contributions 9 9 18 18
148 147 295 293
======== ======== ========= ========
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR AKODPDBKBQOB
(END) Dow Jones Newswires
July 28, 2016 02:02 ET (06:02 GMT)
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