Final Results

RNS Number : 1869A

CAP-XX Limited

05 October 2009

 



5 October 2009

CAP-XX Limited

Audited Results for the year ended 30 June 2009

• Net Loss for the year ended June 2009 is an A$8.5m improvement from the previous year. The reported Loss for 2009/08 is A$3.1m compared to A$11.6m in 2007/08. This was principally due to the Murata contribution and the overall reduction in operating expenditure.

• Revenue was up for the year from A$5.1m in 2008 to A$7.8m in 2009 

• Cash balance at the end of the June 2009 year was A$4.0 million. 

• Successfully completed a £1.6m capital raising in June 2009.

• Murata relationship on track to meet targeted production of supercapacitor product in Q4'09

• Nationgate, a Malaysian based contract manufacturer, announced as additional contract manufacturer for CAP-XX in July 2009.

• Development of the next generation SMD supercapacitor progressing well following completion of feasibility studies with Murata.

Anthony Kongats, CEO of CAP-XX said:

'With Murata and Nationgate contract manufacturing agreements in place, CAP-XX's long term manufacturing strategy is complete. Murata remain on schedule to produce the first products from its new supercapacitor manufacturing line by the end of this calendar year. Meanwhile we continue to broaden our business by developing new markets such as SSDs, Energy Harvesting and Location Tracking devices. Our recent successes in securing design wins, and increase in order activity, give us confidence for the future. Our major short term focus remains to ensure a successful Q4 commissioning of the Murata production line and the commencement of volume manufacture.'

For further information contact:

CAP-XX
Anthony Kongats, Chief Executive Officer	[phone]
Kreab Gavin Anderson & Company (Financial PR)
Robert Speed / Deborah Walter/ Anthony Hughes	[phone]
Seymour Pierce Ltd (Nominated Adviser and Broker)
Nandita Sahgal	[phone]

More information is available at www.cap-xx.com

Notes to Editors:

CAP-XX is a world leader in the design and manufacture of thin form supercapacitors and energy management systems, predominantly for portable electronic devices.

The unique feature of CAP-XX's supercapacitors is their ability to store high volumes of energy and output high power levels within a thin form design. These attributes will be critical for the next generation of high volume, power-hungry portable electronic devices, including mobile phones. 

Portable devices are one of the fastest growing segments of the electronics market and provide the greatest opportunities for CAP-XX's products. CAP-XX's products are already an established enabling technology for current generation wireless devices.

Chairman's statement  The financial year ending 30th June, 2009 was a period of satisfying progress as CAP-XX focussed on the major strategic issues which will lead the Company toward profitability. The Company reduced its loss from $11.6m in 2008 to $3.1m in 2009. The Company made material strides in production capacity, new business opportunities, balance sheet strength and development of the relationship with Murata Manufacturing Company. As the new financial year commences, the company is well placed and looking forward to the challenges that lie ahead. The relationship with Murata has continued to grow. Murata has advised that it is on schedule to produce the first products from its new supercapacitor manufacturing line by the end of this calendar year. As highlighted when the Murata agreement was made public, Murata has assumed the lead in the sales and market development for the mobile phone segment and remain on track to commence volume production for shipment to handset customers within 6 months. During the last twelve months, Murata and CAP-XX entered into a Research & Development Feasibility Agreement to investigate the production of a next generation SMD supercapacitor which can be 'surface mounted '. Following the successful outcome of the Feasibility Agreement an extensive collaborative Research & Development Agreement is expected to be signed in the near term.  CAP-XX recently announced the signing of a new contract manufacturing agreement with Nationgate Technology which is located in Penang, Malaysia. Nationgate will acquire the necessary plant and machinery from CAP-XX's Lane Cove facility and commence the assembly of supercapacitors early in calendar year 2010. Transition plans are well underway: the first items of equipment were shipped in September 2009. Initial payments have already been received from Nationgate. Polar Twin Advance, our established contract manufacturer, will continue in their current capacity as an assembler of supercapacitors for CAP-XX. These two contract manufacturers will give CAP-XX the capacity required to meet the expected market demand from areas outside the scope of the Murata agreement. To explore and harness new markets and advance the product development of the surface mount supercapacitor, CAP-XX initiated a limited secondary capital raising in early June 2009. The capital raising was oversubscribed: 12.94m shares were issued at a £0.125 share price. The majority of the shares issued were acquired by institutional investors which now account for 70% of the total shareholding. The cash proceeds are reflected in the June 2009 financial statements. Our customers were negatively impacted by the financial crisis and suffered reduced sales and delayed launching new products. This directly affected our sales and growth. Unit sales in the second half of the financial year were very soft as our larger customers that manufacture handheld devices and industrial PDA's, especially in the USA, had large stocks of inventory and greatly curtailed demand. I am pleased to report that sales orders are now showing the first signs of recovery with improvements evident in the retail and distribution markets. Despite the significant decline in product shipments for 2009 revenues of AUD$7.8 million for the 12 months to 30 June 2009 were significantly higher than the previous year (2008:$5.1m) due to the Murata payments for both Technical Transfer and the Research & Development Feasibility Study. On a positive note, our average selling price increased from US$2.86 to US$2.95 per unit. Product development remains a key strategic focus for CAP-XX. Our scientific staff has been strengthened to ensure that improved products will be available to meet new business opportunities. With early signs of the market strengthening, CAP-XX enters the new financial year with a strengthening order book. CAP-XX's key customers are beginning to rebuild inventory reserves to historical levels. This together with new design wins, which are expected to enter volume significant production quantities in the first half of the current year, gives the Board some confidence that business conditions and sales will continue to strengthen during the year. Michael Quinn Chairman 25th September 2009

Business review

About CAP-XX Limited

CAP-XX Limited is a world leader in the design and manufacture of revolutionary thin-form supercapacitors predominately for use in small portable electronic devices. Supercapacitors can considerably extend battery run-times and provide power-hungry functions that are not possible with current battery technology. CAP-XX supercapacitors have a compact thin-form design and can store higher volumes of energy and output higher power levels than competing supercapacitor products. These attributes are critical for current and future generation electronic devices, such as mobile phone cameras with a quality flash photography capability and high quality audio capabilities. Other potential applications include mobile phone and solid state disk (SSD) power management, mobile phone accessories, digital still cameras, MP3 players, portable drug delivery systems, wireless sensors, uninterrupted power supplies, plant condition monitors, toll tags and location tracking devices.  Longer term as the market for fuel cell systems develops, supercapacitors can be used to support modulated output for fuel cell systems. In 2008-2009, CAP-XX continued to supply supercapacitors to a number of blue chip consumer electronics companies for use in current generation wireless devices such as ruggedised PDAs (personal digital assistants), AMR (automatic meter reading) devices and location tracking products. CAP-XX is increasingly focussed on the larger opportunities represented by SSD, AMR and energy harvesting markets whilst still supporting Murata in its discussions with the mobile phone manufacturers. CAP-XX is incorporated in Australia and has its headquarters and research and development and manufacturing facilities in Sydney, Australia where 21 staff are employed. These facilities have ISO 9000 status. A similar but larger manufacturing facility is operated in Malaysia by Polar Twin Advance Sdn Bhd under a manufacturing agreement with CAP-XX. In early 2010, a second Malaysian based contract manufacturer, Nationgate Technology, will commence production of CAP-XX supercapacitors. This agreement was signed in August 2009.

Historical Milestones In 1994, a company associated with Anthony Kongats, now Chief Executive Officer of CAP-XX Limited, entered into an agreement with CSIRO (the Australian Commonwealth Scientific and Industrial Research Organisation) to research and commercialise supercapacitor technology that had resulted from CSIRO research.  CAP-XX Limited (formerly known as Energy Storage Systems Pty Limited) was established in 1997 by Anthony Kongats as the vehicle to hold the intellectual property resulting from the partnership with CSIRO. CAP-XX received research and development grants from the Australian Government and was backed by some of the world's leading technology investors, including Intel, Acer, ABN Amro and Walden, and well supported by Australian based venture capitalists Innovation Capital and Technology Venture Partners.  In 1999, the Company built a pilot production plant in Lane Cove, Sydney, Australia, and progressively improved production capacity. It began shipping supercapacitor products to customers in 2003. Customers supplied to date include Sony, Sony Ericsson, IP Wireless, Option, Sierra Wireless and Flextronics. Product shipped to Motorola, Intermec and Hand Held Products has been incorporated in field-critical devices such as those used by leading parcel delivery companies like FedEx and UPS. In late 2004, the Company entered into a manufacturing agreement with Polar Twin Advance Sdn Bhd ('PTA') of Malaysia to provide high volume manufacturing services. The production flow process developed in Sydney has been replicated successfully in Malaysia and PTA has consistently improved its operational efficiencies and production volumes. CAP-XX was named a 2005 Technology Pioneer by the World Economic Forum for developing and applying innovative and transformational technology. In February 2006, the CAP-XX technology was recognised by Frost & Sullivan's 2005 Technology Innovation of the Year Award as a 'breakthrough nanotechnology process for producing supercapacitors to meet the pulse-power requirements of portable devices'. This Award recognises research expected to make significant contributions to the electronics industry.  CAP-XX has received numerous other international awards for its products and electronic circuit designs including EDN's Top Overall Power Product for 2009 and being voted 3rd overall in Electronic Design's Top 101 Components for 2009. On 20 April 2006, CAP-XX Limited was listed on the AIM market of the London Stock Exchange in conjunction with a placement of 18,433,333 shares at 93 pence per share, which raised gross proceeds of AUD$41million (£17.1 million) and increased the total shareholding to 48,565,893 shares and market capitalisation (at 93p per share) to about AUD$108 million (£45.2 million). Shareholding rose to 49,112,791 by 30 June 2008 as various Employee Shareholder Option Plan participants exercised their options. On 25th June, 2009 a secondary capital raising was completed with 12,940,000 shares being placed at 12.5 pence per share. Shareholding as at 30th June 2009 stands at 62,052,791 shares.  In May 2008, CAP-XX entered into a formal agreement with Murata Manufacturing Corporation (Murata) of Japan to jointly develop and supply high performance supercapacitors for mobile handsets and other peak power hungry, space constrained portable applications. Murata is recognised as one of the world's leading manufacturing companies for electric components and is an existing supplier to all of the top mobile handset market companies. CAP-XX and Murata will initially work together to scale supercapacitor production to meet the anticipated demand of the global handset market. Both organisations are anticipating that volume mass production and sales from this partnership will commence in the second half of 2009. In October 2008, the companies signed a Re-Sale Agreement which provides CAP-XX with a proportion of the Murata manufactured product. This product will be sold to CAP-XX's existing and new customers under the CAP-XX name. In November, 2008 both companies signed a Feasibility Study Agreement which is the first stage of the proposed Collaborative R&D program and which concluded with the successful demonstration of a working surface mountable supercapacitor in H1 2009. It is anticipated that both companies will enter a definitive R&D agreement. This agreement is currently being negotiated and expected to be finalised and signed before the end of November 2009. On 30 July 2009, CAP-XX signed a contract manufacturing agreement with Nationgate Technologies of Penang, Malaysia. Under the terms of the agreement, Nationgate will acquire, and transfer to Penang, the supercapacitor assembly manufacturing plant, from CAP-XX's Lane Cove facility. Following the re-commissioning of the plant at its Penang facility, Nationgate will supply supercapacitors to CAP-XX. It is anticipated that Nationgate will start partial production in Q4 calendar year 2009 and full production in Q1 calendar year 2010. Polar Twin Advance also in Penang, will continue as a contract manufacturer, for CAP-XX.

Review of Operations and Activities

More than 6 million units have been sold since 2003. In the past 12 months CAP-XX has established a new revenue stream with the commencement of license fees and other related payments from Murata. These will increase as the anticipated royalty stream from Murata commences in the current financial year. Revenue for the 12 months to 30 June 2009, increased by AUD$2.7 million to AUD$7.8 million compared to AUD$5.1 million in 2008. Unit sales of 0.6 million were down from the previous year (2008: Sales Units 1.43m) due to the worldwide drop in business confidence with the global electronics market being one of key markets hit the hardest. As highlighted earlier, the total revenue for 2008/09 includes contributions from Murata for Technology Transfer payments and the R&D Feasibility Study. The operating loss for the twelve months to 30 June 2009, was AUD$3.1 million (2008: loss of AUD$11.6 million).  The major variances were an overall reduction in the headcount and operational expenses; the Murata contributions described above; and one-off expenses incurred last year relating to an increase in the inventory obsolescence provision and the write-down of plant and machinery.

Business Environment

Portable electronic devices, one of the fastest growing segments of the electronics market, provide the greatest opportunities for CAP-XX's products. Driven by customer requests, manufacturers are constantly adding to the functions and applications available on these devices. This means that power management continues to be an increasingly important consideration. The other important factor is size. The devices are becoming smaller as their capabilities are increasing. CAP-XX technology provides a competitive advantage over other supercapacitor manufacturers, such as AVX, Maxwell Technologies and NEC/Tokin Corporation. Other manufacturers are unable to match the CAP-XX technology for thinness, energy density and power density. Many competitors manufacture higher-capacity, large package devices and focus on applications where the combination of thinness, energy density and power density is not an issue.

Opportunities

An opportunity in the Solid State Disks (SSD) market was identified last year. As a result of lower prices, higher capacities, improved reliability and faster performance SSDs are rapidly replacing hard disks. The SSD market to date has been limited to the enterprise market segment, due largely to high cost. Penetration is growing from a virtual zero base in many consumer segments to substantial quantities by 2009/10. We estimate this will drive SSD growth rates many times more than those of the underlying markets. To ensure system performance is not compromised, SSDs will require an uninterrupted power supply (UPS) to assist with the write speed required by large volumes of metadata that are produced. The attractions of the CAP-XX supercapacitor to the SSD manufacturers are the energy storage capability, delivered power and physical dimensions (small size and weight). CAP-XX has already achieved a number of design wins and trials of the supercapacitor product are well underway with several vendors. Volumes have been impacted by the economic conditions, however it is expected that the design wins will move into large scale production within the current financial year.  Other potential applications include digital still cameras, MP3 players, portable drug delivery systems, wireless sensors, uninterrupted power supplies, energy harvesting, hybrid automobiles, toll tags and location tracking devices.  Additional benefits of the Murata manufacturing agreement are that it will enable the CAP-XX supercapacitor to be validated as a mainstream consumer electronics technology and it will increase exposure to markets and customers that were previously not targeted due to limited resources. Being associated with Murata will help gain recognition for and acceptance of the capabilities of the CAP-XX supercapacitor products to support hi-power functions, and reduce misconceptions about their price and performance.  Murata will not be able to meet the product type or size requirements of all markets. Murata will refer non-core customers to CAP-XX and CAP-XX will supply these markets directly using products made by contract manufacturers.

Strategies for Growth

The Company continues to have discussions aimed at securing business with a number of global original equipment manufacturers active in portable and consumer electronics. We are strengthening our relationships with these organisations and we have regular engineering meetings together with their integrated circuit board providers. We are unable to comment on specific progress with individual companies but can state that we are pleased with the overall progress. Most sales to date have been achieved by direct sales .The Company plans to maintain direct sales contacts with key customers. To gain broader market coverage, the Company also continues to work with a number of well-qualified distributors covering Asia (inclusive of Japan, Korea and China), US and Europe. Sales growth from this distributor network is encouraging and distributors' experience in selling our product is steadily improving.

Research and Development

CAP-XX has a research facility at its headquarters in Lane Cove, Australia where a research and development team comprised of 10 engineers and scientists, ably assisted by 5 other engineers and scientists, is continuing development work to maintain CAP-XX's lead position in the engineering of electrode, separator and electrolyte material in supercapacitor devices. We have a close association with leading personnel across various research institutions. Our Scientific Advisory Board provides clear direction on the commercially relevant technologies our R&D programme should address. The market in which the Company operates is competitive and is characterised by rapid technological change. The Company believes it currently has a strong competitive position in all its target markets with its capability to produce supercapacitors with a high energy density and power density in a small, conveniently sized flat package. CAP-XX devices are also lightweight, work over a broad temperature range and have an operating lifetime measured in years. The Company's success depends on its ability to protect and prevent any infringements of its intellectual property. To protect its intellectual property, CAP-XX has patents covering the design, manufacture and use of its high performance supercapacitors. The CAP-XX patent portfolio currently consists of 20 patent families, 12 granted US patents, 4 US patent applications and corresponding international patents and applications. A further 4 patent applications have yet to enter national phase.  The patents cover supercapacitive devices, components for supercapacitors, techniques for manufacturing devices and applications of the devices in electronic circuits.

Outlook

The Company had recognised that several successful and reliable large scale contract manufacturers needed to be identified in order to pursue the mobile phone market and other opportunities. With the recent addition of Murata and Nationgate, CAP-XX's long term manufacturing strategy is now in place. Access to capacity for both the short and longer term is now available to meet the expected increase in demand for the CAP-XX supercapacitor. Murata is well recognised as a worldwide components manufacturer and already supplies to large mobile handset manufacturers. Murata's worldwide distribution expertise will also assist with the sales and marketing of the CAP-XX supercapacitor. Murata remain on schedule to produce the first products from their new supercapacitor manufacturing line by the end of this calendar year. Nationgate is also well known in South East Asia as a contract manufacturer of choice and has been operating successfully for more than 10 years. Nationgate has an impressive list of customers such as Motorola, Sony Celestica and Swatch. Murata, via its already well established supply chain interaction with the mobile handset manufacturers, assumed the business development role in acquiring a mobile handset design win which would incorporate the CAP-XX supercapacitor. Although progress has been impacted by the global slowdown in the electronics market, expectations remain high that a leading mobile phone will be produced with a CAP-XX supercapacitor within the next financial year.

CAP-XX continues to pursue other business opportunities in addition to mobile handset manufacturers and good progress has been made especially in the SSD, energy harvesting and location tracking markets. Currently, sales volumes are modest. The company is confident in the recovery of the electronics manufacturing market and rapid growth in the newly identified CAP-XX markets. This confidence is supported by numerous design wins in the SSD space and increases in short term order activity. The major short term focus for CAP-XX will be ensuring successful commissioning of the Murata production line; assisting where necessary with discussions with mobile phone manufacturers; and ensuring the new business opportunities identified above are aggressively pursued.

CAP-XX Limited

Income statement

For the year ended 30 June 2009

		Consolidated
		2009	2008
Currency: Australian Dollars	Notes	$	$
Revenue from sale of goods & services	1	7,826,198	5,119,842
Cost of sale of goods	2	(3,605,889)	(6,274,620)
Gross margin (loss) on sale of goods		4,220,309	(1,154,778)
Other revenue	1	69,292	371,619
Other income	3	439,609	89,533
General and administrative expenses		(3,091,449)	(4,026,853)
Process and engineering expenses		(986,653)	(1,302,325)
Selling and marketing expenses		(1,148,693)	(1,608,299)
Research and development expenses		(1,833,732)	(1,887,867)
Impairment loss on plant & equipment		-	(1,622,607)
Other expenses	4	(782,715)	(438,528)
(Loss) before income tax		(3,114,032)	(11,580,105)
Income tax benefit / (expense)		-	-
Net (loss) for the year		(3,114,032)	(11,580,105)

CAP-XX Limited

Balance sheet

As at 30 June 2009

		Consolidated
		2009	2008
Currency: Australian Dollars		$	$
ASSETS
Current assets
Cash and cash equivalents		4,060,241	3,481,060
Receivables		293,218	360,440
Inventories		1,455,715	1,087,009
Other		36,195	109,036
Total current assets		5,845,369	5,037,545
Non-current assets
Property, plant and equipment		1,695,338	1,597,217
Other		208,233	208,233
Total non-current assets		1,903,571	1,805,450
Total assets		7,748,940	6,842,995
LIABILITIES
Current liabilities
Payables		1,189,679	2,017,126
Provisions		409,644	559,496
Other		2,894,214	1,532,390
Total current liabilities		4,493,537	4,109,012
Non-current liabilities
Provisions		158,520	153,752
Total non-current liabilities		158,520	153,752
Total liabilities		4,652,057	4,262,764
Net assets		3,096,883	2,580,231
EQUITY
Contributed equity		78,906,340	75,786,603
Reserves		2,244,733	1,733,786
Accumulated losses		(78,054,190)	(74,940,158)
TOTAL EQUITY		3,096,883	2,580,231

CAP-XX Limited

Statement of changes in equity

For the year ended 30 June 2009

		Consolidated
		2009	2008
Currency: Australian Dollars		$	$
Total equity at the beginning of the financial year		2,580,231	13,394,609
Exchange differences on translation of foreign operations		(69,280)	(46,050)
Net income (loss) recognised directly in equity		(69,280)	(46,050)
(Loss) for the year		(3,114,032)	(11,580,106)
Total recognised income and expenses for the year		(3,183,312)	(11,626,156)
Transactions with equity holders in their capacity as equity holders:
Employee share options		580,227	747,289
Exercise of options			64,489
New share equity		3,283,598	-
Share issuance costs		(163,861)
		3,699,964	811,778
Total equity at the end of the financial year		3,096,883	2,580,231

CAP-XX Limited

Cash flow statement

For the year ended 30 June 2009

		Consolidated
		2009	2008
Currency: Australian Dollars		$	$
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)		7,762,358	7,485,925
Payments to suppliers and employees (inclusive of goods and services tax)		(9,519,117)	(13,945,001)
		(1,756,759)	(6,459,076)
Grants received		35,000	89,533
Interest received		69,292	371,619
Net cash (outflow) inflow from operating activities		(1,652,467)	(5,997,924)
Cash flows from investing activities
Payments for property, plant and equipment		(890,862)	(1,329,940)
Proceeds from sale of property, plant and equipment		2,774
Net cash (outflow) inflow from investing activities		(888,088)	(1,329,940)
Cash flows from financing activities
Proceeds from issue of shares		3,119,737	64,489
Net cash inflow from financing activities		3,119,737	64,489
Net increase (decrease) in cash and cash equivalents		579,181	(7,263,375)
Cash and cash equivalents at the beginning of the financial year		3,481,060	10,744,435
Cash and cash equivalents at the end of the financial year		4,060,241	3,481,060

Notes to the financial statements

Basis of preparation

The financial information included in this announcement does not constitute statutory accounts within the meaning of the Australian Corporations Act 2001. Whilst the financial information has been computed in accordance with Australian equivalents to International Financial Reporting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001, this announcement does not itself contain sufficient information to comply with those requirements.

A copy of the Company's annual report incorporating compliant financial statements for the year ended 30 June 2009 will be posted to shareholders in October 2009.

		Consolidated
		2009	2008
		$	$
Note 1 Revenue
Sales revenue
Sale of goods		2,519,828	4,552,232
Sale of services		5,306,370	567,610
		7,826,198	5,119,842
Other revenue
Interest		69,292	371,619
		69,292	371,619
Total revenue		7,895,490	5,491,461
		Consolidated
		2009	2008
		$	$
Note 2 Cost of Sale of Goods
Direct materials and labour		2,346,647	3,582,527
Inventory write downs/(back)		-	916,543
Indirect manufacturing expenses		1,259,242	1,775,550
		3,605,889	6,274,620
		Consolidated
		2009	2008
		$	$
Note 3 Other income
Government grants		35,000	89,533
Foreign Exchange gains		404,609	-
		439,609	89,533
		Consolidated
		2009	2008
		$	$
Note 4 Other Expenses
Foreign exchange losses		-	123,154
Engineering concept design fees		-	(4,401)
Consultants		237,850	94,500
Provision for credit notes / doubtful debts		24,617	(26,376)
Net Loss on disposal of Plant and equipment		704
Provision for make good on premises		40,000	40,000
Provision for returns and rework		51,589
Provision for diminution in recoverable   value - withholding taxes		427,955	211,651
		782,715	438,528
		Consolidated
		2009	2008
		$	$
Note 5 Loss per share
Operating Loss		(3,114,032)	(11,580,105)
Loss per share - undiluted		($0.063)	($0.236)
Weighted Average Share on Issue during the year		49,325,503	49,042,674

 

END

 

 

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