Final Results
Embargoed Release: 07:00hrs Thursday 15th March 2007
Zenergy Power plc
(`Zenergy' or the `Group')
Preliminary Results for the Period from 15 July 2005 to 31 December 2006
Report from the Chairman of the Board
It is with great pleasure that I present my first report on the Group since our
successful flotation on the AIM market in August 2006. The period ended 31
December 2006 ("the Period") was a defining one for the Group which now
comprises three of the world's leading high-temperature superconductor ("HTS")
entities spanning Europe, North America and Australia. Throughout the Period,
we met and surpassed our development milestones. We gained increasing
commercial interest in our solutions and products from a range of industries
looking to benefit from the economic advantages afforded by our technology
through the better use of existing energy supplies, the creation of renewable
energy sources and the development of more efficient intensive industrial
processes.
Overview
The successful creation and consolidation of the Group
The enlarged group of Zenergy Power plc has been created through the
opportunistic consolidation of three pioneers in the field of high-temperature
superconductivity. Following its initial acquisition of Germany based Trithor
GmbH (`Trithor') in 2005, Zenergy moved swiftly to purchase SC Power Systems,
Inc. (`SC Power') in the USA, together with its wholly owned subsidiary
Australian Superconductors Pty Limited (`Australian Superconductors') in the
first half of 2006. This amalgamation was achieved with great success and with
a level of harmonious efficiency only conferred in instances where the merging
assets are highly complementary and the end market opportunities so sizable. As
a consequence, the Group owns and employs a powerful portfolio of proprietary
patents for HTS materials, products and related industrial processes. 2006 was
a year in which we successfully consolidated our global base and positioned the
Group to expeditiously become a leading participant in the burgeoning worldwide
market for highly energy efficient HTS materials, products and industrial
solutions.
High-Temperature Superconductors
Commercial interest in superconductive materials derives from their unique
capability to conduct electricity without any electrical resistance enabling
the creation of a new class of electrical products and equipment that are
highly energy efficient, lightweight and compact when compared with their
copper based equivalents. Moreover, these products are capable of reducing the
levels of waste and carbon emissions associated with the production, use and
transfer of electrical energy. First discovered in 1911 in what was to prove to
be one of the most significant scientific breakthroughs of the 20th century,
superconductive materials, are often considered to be the fibre optics of
electrical power. Since their initial discovery however, two major factors have
prevented the widespread deployment of superconductive materials:
1. their need to be operated at prohibitively low temperatures; and
2. the lack of availability of low-cost industrial production processes.
The first of these factors was addressed in 1987 with the development of a new
breed of materials known as high-temperature superconductors ("HTS"). These new
materials (`1st Generation') displayed the same resistance free conductive
properties as standard 'low temperature materials' but could be operated at far
higher temperatures similar to that of liquid nitrogen - a relatively
inexpensive, safe and commonly available cryogen. This discovery substantially
altered the economics for the use and adoption of superconductive materials,
which became operable using standard conduction cooling technologies whilst
still delivering power densities of over 100 times that of copper and with
substantially reduced energy losses. Nonetheless, the 1st Generation of HTS
materials remained inherently more expensive than copper and, whilst adaptable
to high-value applications, has not enjoyed habitual commercial recognition.
Two of the Group's subsidiaries, Australian Superconductors and Trithor, have
historically operated using this 1st Generation HTS material, concentrating on
developing groundbreaking products, industrial applications and environmental
solutions. It is the intention of the Group however, to progressively
incorporate the next generation of cheaper ("2nd Generation") HTS materials in
its range of current commercial applications as and when such materials become
available. Merged to expedite the development of this 2nd Generation of low
cost HTS materials, capable of production on a mass scale, the Group has been
developing its own proprietary lower-cost production techniques which we
believe to be commercially advantageous over alternative processes being
developed by other industry participants. Furthermore, it is the firm belief of
the Board that the processes being developed by the Group's combined research
teams will yield a 2nd Generation of HTS materials that will be made available
to the mass market at a cost which is significantly lower than that of copper.
We have to date invested over €40m into the research and development of our
proprietary technologies and the Group is debt free.
Positioning for future markets whilst generating near-term revenues
Accordingly, during the Period we continued to generate commercial revenues
from our products and solutions utilising 1st Generation materials, whilst
furthering the development of our own 2nd Generation materials in readiness for
mass adoption across a wider range of products and industries.
The Group sees continued demand for applications and products employing 1st
Generation materials as a result of their energy efficiency, weight and power
density benefits. Nonetheless we believe that our lower cost 2nd Generation
materials once available, will lead to mass adoption and commercialisation of
HTS materials across a wide range of industries and applications. Consequently,
the availability of 2nd Generation materials will have significant implications
for the efficiency of the production, employment and distribution of electrical
energy on a global basis.
Conectus Consortium estimated in June 2002 that the global market for
superconductor products is projected to grow to near US $5 billion by the year
2010 and to US $38 billion by 2020.
Developing an enduring customer base and products
We believe that the Group's advanced development of new low-cost production
processes for 2nd Generation materials will give us cost and scalability
advantages over alternative methods currently employed by other industry
participants. With respect to industrial applications for such materials, we
have conscientiously concentrated our efforts on responding directly to the
demands of large consumers of electrical power for efficient, compact,
environmentally friendly and cost effective energy products.
Our efforts continue to converge on specific products and solutions in which
the Group companies have a recognised dominion of expertise. During the Period,
and in association with a number of our collaborators and potential customers,
we made considerable progress on maturation of each of our fault current
limiter, wind power generators, hydro power generators, induction heaters and
linear motor projects. For this purpose, we have relied upon the relationships
individually and historically forged by Trithor, SC Power and Australian
Superconductors with a number of manufacturing, utility and power companies.
These relationships, which have taken a number of years to nurture, have proven
to be strong and enduring. In this regard, I am pleased to report that, to
address the product needs of these potential customers, the synergistic and
other related benefits which accrued from the consolidation of the Group
companies cannot be overstated.
Ground Breaking Hydro Power Project
During the Period, and following an extensive collaboration, E.ON Wasserkraft
GmbH elected to install the world's first high-temperature superconductor
hydro-generator in its commercial hydroelectric power station based at Hirshaid
in Bavaria, Germany. The development and installation of the 1.25MW
hydro-generator, which is to be part funded by the European Commission, is
expected to improve the economic return of renewable energy production by
significantly increasing the generator's electrical efficiency. Zenergy's
proprietary HTS materials and processes are at the core of the hydro-generator
making it capable of energy conversion at efficiency levels in excess of 98%.
The projected cost of the overall development and installation is set to be €
3.44 million, of which the European Commission is providing €1.85 million.
Research and development
Zenergy has been developing its own proprietary 2nd Generation low-cost mass
production techniques over a period of many years. In October 2006, SC Power
entered into a co-operative research and development agreement with Sandia
National Laboratories (`SNL') which is jointly funded by the U.S. Department of
Energy, and is projected to cost approximately $800,000. The project will focus
on accelerating the development of advanced mass-production techniques for the
Group's 2nd Generation materials. The support from the U.S. Department of
Energy is demonstrative of the social, economic and environmental significance
of the Group's research work.
During the Period we were delighted to be chosen as the overall winner of the
2006 Frost & Sullivan European Product Innovation of the Year Award for our
research and development work in the field of HTS materials. This prestigious
award was gained in recognition of our innovative, advanced 2nd Generation
materials for electrical power and magnet applications. The Board considers
this to be of particular significance at a time when the Group is gaining
encouraging commercial interest for these applications within the field of
renewable energy production.
Summary of Research Staff and our Patent Portfolio
Zenergy has a leading research and development team boasting more than 21
employees with PhDs or advanced degrees, based in three countries and a patent
portfolio comprising 18 patents and over 45 patent applications based on 20
patent families.
Outlook
The first months of 2007 have been auspicious for the HTS market as a whole as
the benefits of the increased energy efficiency of HTS materials gained further
credence. The Group's continuing research and development work forges
successfully towards commercialisation and our patent portfolio continues to be
strengthened.
We believe that the demand for HTS materials and solutions will continue to
grow as 2nd Generation materials become more widely recognised and are able to
demonstrate their compelling cost and energy saving efficiencies. We continue
to assess our market place for companies which possess potential synergistic or
strategic value for our current product offerings, and will consider further
acquisition opportunities which offer similar synergistic benefits to those
already successfully integrated into the Group.
2007 Development Milestones
To date we have constructed a global entity made up of worldwide experts in the
field of superconductivity. Together they have been successful in accelerating
our combined research and development programme with the specific aim of
bringing to market commercial products in the shortest time possible. As a
Group we remain commercially focused and in the coming year expect to achieve a
number of technical milestones in the development of our products which - for
the purposes of guidance - I detail below:-
1) Induction Heater: Construction and Test of an HTS Induction Heater leading
to a launch product sale in Q3 2007;
2) Fault Current Limiter: Construction of a Distribution Voltage HTS Fault
Current Limiter to be delivered and tested with a major national utility by Q4
2007; and
3) 2G HTS wire: A 10m all chemical 2G HTS wire delivered by Q4 2007.
Appreciation
The Period has been one of significant achievement for the Group which would
not have been possible without the complete dedication and commitment of all of
our employees. On behalf of the Board of Directors, I thank them sincerely for
their extraordinary and continued efforts. I would also like to thank our
shareholders for their continued support.
I look forward to the Group fulfilling its objectives in the next year.
Michael Fitzgerald
Chairman
15 March 2007
Further information:
Dr. Jens Müller Zenergy Power Plc + 49 22 26 90 60 200
Andrew Tan Hansard Group + 44 207 245 1100
www.hansardgroup.co.uk
Preliminary Results for the period 15 July 2005 to 31 December 2006
Consolidated income statement
for period ended 31 December 2006
Statutory Non statutory Non statutory
reporting reporting reporting
period period period
Period 15 Year ended 31 Period 15
July 2005 to December July to 31
31 December December
2006 2006 2005
€000 €000 €000
Revenue 475 119 356
Cost of sales (370) (107) (263)
Gross profit 105 12 93
Other operating income 709 667 42
Distribution expenses (667) (471) (196)
Administrative expenses:
- Equity settled share-based payment (542) (542) -
expenses
- Other admin expenses (1,831) (1,511) (320)
Administrative expenses (2,373) (2,053) (320)
Research & development expenses (2,716) (2,219) (497)
Operating loss (4,942) (4,064) (878)
Financial income 48 47 1
Financial expenses (40) (39) (1)
Net financing costs 8 8 -
Loss before tax (4,934) (4,056) (878)
Taxation 12 12 -
Loss for the period attributable to (4,922) (4,044) (878)
equity holders of the Parent
Earnings per share (Euros)
Basic and fully diluted loss per (0.34) (0.21) (0.13)
share
Consolidated statement of recognised income and expense
for period ended 31 December 2006
Statutory Non Non
reporting statutory statutory
period reporting reporting
period period
Period 15 Year ended Period 15
July 2005 to 31 December July to 31
31 December December
2006 2006 2005
€000 €000 €000
Foreign exchange translation (47) (47) -
differences
Net income recognised directly in (47) (47) -
equity
Loss for the period (4,922) (4,044) (878)
Total recognised income and expense (4,969) (4,091) (878)
Total recognised income and expense for (4,969) (4,091) (878)
the period is attributable to the
equity holders of the parent
Consolidated balance sheet
at 31 December
Statutory Non statutory
reporting reporting
period period
2006 2005
€000 €000
Non-current assets
Property, plant and equipment 1,155 750
Goodwill 1,415 170
Other intangible assets 2,122 45
4,692 965
Current assets
Inventories 123 72
Trade and other receivables 532 352
Cash and cash equivalents 2,722 475
3,377 899
Total assets 8,069 1,864
Current liabilities
Other interest-bearing loans and borrowings - (448)
Trade and other payables (1,168) (293)
(1,168) (741)
Non current liabilities
Deferred tax liabilities (750) -
Total liabilities (1,918) (741)
Net assets 6,151 1,123
Equity attributable to equity holders of the
parent
Share capital 532 1
Share premium 10,046 -
Translation reserve (47) -
Warrant reserve 200 -
Capital and other reserves - 2,000
Retained earnings (4,580) (878)
Total equity attributable to shareholders 6,151 1,123
Consolidated cash flow statement
for period ended 31 December 2006
Statutory Non Non
reporting statutory statutory
period reporting reporting
period period
Period 15 Year ended Period 15
July 2005 to 31 December July to 31
31 December 2006 December
2006 2005
€000 €000 €000
Cash flows from operating activities
Loss for the period (4,942) (4,064) (878)
Adjustments for:
Depreciation, amortisation and impairment 418 334 84
Foreign exchange losses (4) (4) -
Financial income 48 47 1
Financial expense (15) (14) (1)
Equity settled share-based payment 542 542 -
expenses
Taxation (1) (1) -
Operating loss before changes in working (3,954) (3,160) (794)
capital and provisions
Increase in trade and other receivables (418) (98) (320)
Increase in stock (13) (51) 38
Increase in trade and other payables 1,071 869 202
Net cash from operating activities (3,314) (2,440) (874)
Cash flows from investing activities
Acquisition of subsidiary, net of cash (501) (501) -
acquired
Acquisition of a business (1,025) - (1,025)
Acquisition of property, plant and (643) (585) (58)
equipment
Development expenditure capitalised and (134) (118) (16)
other intangible assets acquired
Net cash from investing activities (2,303) (1,204) (1,099)
Cash flows from financing activities
Proceeds from the issue of share capital 1 - 1
Proceeds from the issue of loan notes 9,200 7,200 2,000
Listing expenses (858) (858) -
Proceeds from new loan 447 - 447
Repayment of borrowings (448) (448) -
Net cash from financing activities 8,342 5,894 2,448
Net increase in cash and cash equivalents 2,725 2,250 475
Cash and cash equivalents at start of - 475 -
period
Effect of exchange rate fluctuations on (3) (3) -
cash held
Cash and cash equivalents at 31 December 2,722 2,722 475
Notes
Acquisitions of subsidiaries and businesses
Acquisition of subsidiaries
On 1 June 2006 Zenergy Power acquired SC Power Systems, Inc. (`SC Power').
SC Power was formed in 2004 to acquire the underlying business known as
Australian Superconductors from Metal Manufacturers Limited. SC Power was owned
by Jane Capital Partners, LLC (32,500 shares) Metal Manufacturers Limited
(32,500 shares) and Woody Gibson (10,000 shares). On 7 December 2005 Metal
Manufacturers shares were repurchased by SC Power and held in treasury stock.
The repurchase was funded by a loan from Cloverleaf Holdings Limited of
$560,000.
Zenergy Power acquired 42,500 shares in SC Power in exchange for 28,111
Ordinary Shares credited as paid up to €63 per share. The remaining 32,500
shares in SC Power are held in treasury by SC Power. SC Power is effectively a
wholly owned subsidiary of Zenergy Power. SC Power has a wholly owned
subsidiary Australian Superconductors Pty Limited (`Australian
Superconductors').
23,867 of the Ordinary Shares issued were allotted to the former shareholders
of SC Power.
The remaining 4,244 shares were allotted to Cloverleaf Holdings Limited. These
shares were allotted in recognition of the increase in value of SC Power since
the date of the original loan provided by Cloverleaf Holdings Limited.
In a separate private transaction, Cloverleaf Holdings Limited allotted the
4,244 shares by way of a call option to certain key management in Trithor GmbH.
In the period to 31 December 2006 the subsidiaries contributed a net loss of €
1,140,000 to the consolidated net loss for the period. If the acquisition had
occurred at the start of the period the net loss would have been €1,912,000.
Effect of acquisitions
The acquisitions had the following effect on the Group's assets and
liabilities.
Acquiree's Fair value Acquisition
book adjustments amounts
values
€000 €000 €000
Acquiree's net assets at the acquisition
date:
Property, plant and equipment 183 - 183
Patents and Trademarks - 818 818
Development rights 1,247 1,247
Trade and other receivables 11 - 11
Cash and cash equivalents 286 - 286
Trade and other payables (13) - (13)
Deferred tax liability - (785) (785)
Net identifiable assets and liabilities 467 1,280 1,747
Goodwill on acquisition 1,276
Total consideration 3,023
Consideration paid in shares 2,236
Consideration satisfied in cash (Including 787
legal fees of €61,000)
Cash (acquired) (286)
Net cash outflow 501
Consideration paid in shares includes: 28,111 shares credited as paid up to €63
per share, €1,771,000 and €465,000 Series B loan notes issued in consideration
for the loan provided by Cloverleaf Holdings Limited to enable SC Power to
repurchase its own shares, Series B loan notes.
Goodwill has arisen on the acquisition because the employees transferred were
considered to be valuable to the Group for development of future intellectual
property and customer relationships.
A deferred tax liability at the US effective tax rate of 38% has been
recognised in respect of the intangible assets, as the tax base of these assets
is nil.
Acquisition of businesses
On 28 July 2005 the Company acquired an off the shelf company Johanna 55
Vermögensverwaltungsgellschaft mbH now renamed Trithor GmbH, with paid up share
capital of €25,000. On 1 August 2005, Trithor GmbH acquired all the assets in
`Original' Trithor GmbH a company engaged in superconducting technology and
research activities for €1,086,000. The consideration was satisfied in cash;
subsequently €61,000 was refunded from the liquidator as a net payment for
trade and other receivables, advance customer payments and provisions for EU
project funding. In the period from 15 July to 31 December 2006 the business
contributed a net loss of €3,277,000 to the consolidated net loss for the
period. (€2,433,000 in the year ended 31 December 2006 and €844,000 in the five
months to December 2005).
Effect of acquisition
The acquisition had the following effect on the Group's assets and liabilities.
Acquiree's Fair value Acquisition
book amounts
values adjustments
€000 €000 €000
Acquiree's net assets at the acquisition
date:
Property, plant and equipment 2,947 (2,171) 776
Intangible assets 254 (224) 30
Inventories 149 (39) 110
Trade and other receivables 32 - 32
Advance customer payments (54) - (54)
Provision for EU project funding (39) - (39)
Net identifiable assets and liabilities 3,289 (2,434) 855
Goodwill on acquisition 170
Total consideration paid (Including legal 1,025
fees of €Nil) satisfied in cash
Net cash outflow 1,025
Goodwill has arisen on the acquisition because the employees transferred were
considered to be valuable to the Group for development of future intellectual
property and customer relationships.
Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 31 December 2006 was based on
the loss attributable to ordinary shareholders of €4,922,000 (Year ended 31
December 2006: €4,044,000, period 15 July to 31 December 2005: €878,000) and a
weighted average number of Ordinary Shares outstanding during the period of
15,408,000 (Year ended 31 December 2006 19,493,000, period 15 July 2005 to 31
December 2005: 6,541,000), calculated as follows:
Statutory Non statutory Non
reporting reporting statutory
period period reporting
period
Period 15 July Year ended 31 Period 15
2005 to 31 December July to 31
December 2006 December
2006 2005
Thousand of shares
Issued ordinary shares at start of 38 41 32
period
Shares issued in respect of the 11 16 -
acquisition of SCP
Effect of the 199:1 bonus issue on 7 9,844 11,351 6,509
August 2006
Effect of Series A loan notes 2,467 3,616 -
Effect of Series B loan notes 364 534 -
Effect of Series C loan notes 1,974 2,893 -
Effect of Series D loan notes 710 1,042 -
Weighted average number of ordinary 15,408 19,493 6,541
shares at 31 December
Diluted earnings per share
Share options and warrants have not been included in the calculation of fully
diluted earnings per share since these are anti-dilutive. The instruments that
could potentially dilute the basic earnings per share in the future, but were
not included because they were antidilutive for the periods presented are:
Statutory Non
reporting statutory
period reporting
period
2006 2005
Thousand of shares
Warrants in respect of the working capital facility 160 -
from Cloverleaf Holdings Limited (issued 16 August
2006)
Share options (issued on various dates from 1 March 1,320 -
2006 to 27 September 2006)
Total potential dilutive instruments 1,480 -
Basis of preparation
The financial information set out in this preliminary results announcement does
not constitute the Company's statutory accounts for the period 15 July 2005 to
31 December 2006 but is derived from those accounts. Those accounts have been
prepared in accordance with International Financial Reporting Standards as
adopted by the EU. In addition to the statutory reporting period the directors
have elected to present results for the period from 15 July 2005 to 31 December
2005 and the year ended 31 December 2006, as the results for the period from 15
July 2005 to 31 December 2005 were previously included in the AIM Admission
document, dated 16 August 2006.
This announcement was approved by a Committee of the Board of Directors on 14
March 2007. Statutory accounts for the period 15 July 2005 to 31 December 2006
will be delivered to the registrar of companies following the Company's Annual
General Meeting. The auditors have reported on those accounts; their report was
unqualified and did not contain statements under section 237(2) or (3) of the
Companies Act 1985.
-Ends-
About Zenergy Group plc
Zenergy Power plc is a global specialist manufacturer and developer of
commercial applications for superconductive materials. Comprising three
operating subsidiaries located in Germany (Trithor), USA (SC Power Systems) and
Australia (Australian Superconductors), Zenergy is developing a number of
energy efficient applications to be adopted in renewable energy power
generation, energy distribution and large scale, energy intensive industrial
processes.
About superconductivity
Superconductive materials are capable of conducting electricity without any
resistance and were first discovered in 1911 in what was to prove to be one of
the most significant scientific breakthroughs of the 20th century.
The global HTS market is substantial and growing, with a number of market
studies projecting multi-billion dollar markets for the application of HTS
materials and products. The proliferation of the use of superconductor
materials is largely being driven by the following key factors:
(a) HTS materials are highly complementary to energy efficient technologies as
a substitute for copper
(b) HTS wires have power densities of over 100x that of copper
(c) Current developments are leading to substantially reduced costs in the
production of HTS wires and are targeting to be cheaper than copper over the
next few years.
(d) HTS applications deliver exceptional energy efficiencies and thus reduced
power consumption and running costs
(e) HTS technology is set to play a significant role in reducing CO2 emissions
in line with international targets
(f) HTS applications are capable of delivering vastly increased levels of power
with increased reliability and reduced material usage
Wednesday, 18th December 2024
COMPANIES COVERED:
Latest directors dealings
- 7 hours ago Taylor Maritime Investments Limited NPV
- 7 hours ago Niox Group
- 8 hours ago Gran Tierra Energy Inc. (CDI)
- 8 hours ago Property Franchise Group
- 8 hours ago QinetiQ Group