Half-yearly report & Change of Directors

KleenAir Systems International plc (the 'Company') KLEENAIR INTERIM RESULTS FOR THE PERIOD ENDED 31 MARCH 2008 & CHANGE OF DIRECTORS London, 18 June 2008 (KSIP) KleenAir Systems International plc ("KleenAir" or "the Company"), a leading provider of vehicle pollution filters, today announces its Interim Results for the period ended 31 March 2008. Highlights · Turnover up ten-fold to £258,014 as sales start to take off · Delays in orders and deliveries now ended with significant increase in orders for existing products · New Transport Refrigeration product launched at the Commercial Vehicle Show expected to contribute additional growth · Distribution and supply agreements reached for new products for perishable food transport and light commercial vehicles · Increasing signs of commitment to establish Low Emission Zones seen in other cities CHAIRMAN'S STATEMENT Sales for the half year were £258,014 (half year ended 31st March 2007, £25,700), resulting in an operating loss for the period of £389,491 (loss, £389,347) and as compared to a loss of £441,536 in the second half of the last financial year. The business was funded during the period principally by the issue of further shares which produced net proceeds of £839,605. As foreshadowed by my Chairman's statement in our annual report sent to shareholders at the end of March, the half year's results reflect a slower than expected start to the Company's trading. This is primarily related to delayed and lower orders by freight operators than had been anticipated for the London Low Emission Zone (LEZ). During the first half-year our margins were adversely impacted by currency movements in the Canadian dollar in which our supplies were principally denominated. To counter these effects the Company has now put in place distribution agreements denominated in a broader range of currencies. We took a record level of monthly orders in May and orders for June are at a higher level than at the equivalent point in May. The launch of our filter for Transport Refrigeration Units (TRU), used in the transport of perishable food, at the Commercial Vehicle Show in April, was well received and we expect that the system will successfully contribute to revenues over the next year as the refrigerated truck industry focuses on upgrading trailers. The Board is confident of the Company's prospects moving into the fourth quarter. Recent distribution and supply agreements have now given us access to products for both the TRU industry and for light commercial vehicles (LCVs). The latter are the next target of the London LEZ, and enquiries are already building for the upgrade of this class of vehicle. There are also increasing signs of commitment from other urban areas to establishing low emission zones. It is expected that these will not only include LCVs as well as heavy goods vehicles, but NOx requirements too, as the probable failure of the UK to meet 2010 EU targets for NOx reduction is causing considerable concern in government circles. It is here that the company's intellectual property is focused. The directors believe that the products and technologies in the Company's portfolio, together with the technical and marketing team and the physical facilities now in place, will enable the Company to become a significant force in meeting the demand for emissions reductions solutions that will be driven by the implementation of the low emission zones here in the UK and throughout the EU. Meanwhile, the Company is actively managing its cash resources and taking measures to exclude or defer any expenditure not essential to the development of the business. I am grateful to my fellow board members for their support in this formative stage of the business. We much regret that our long serving non-executive director Tony Downes, formerly chief technology officer of Perkins Engines, has had to step down due to ill health. His guidance and wisdom were invaluable as he helped us to develop our product portfolio and technology to tackle the automotive emission pollution issues. The board is sorry also to have accepted today the resignation of Nigel Weller, a non-executive director who has contributed to our development since our admission to AIM two years ago. Peter Newell, our Managing Director, will be giving up his executive responsibilities at the end of this month, but we are very pleased that he has agreed to remain on the board. At the same time the company has appointed a general manager to drive sales, bring costs down and improve margins. L Simons For further information please contact: Peter Newell 07786 333 046 peter.newell@kleenairsystems.co.uk Nick Harriss (Nomad) 020 7489 4500 Blomfield Corporate Finance Ltd 13 June 2008 Consolidated Group income statement for the six months ended 31 March 2008 Six months Six months Year end to 31 March to 31 March 30 2008 2007 September (Unaudited) (Unaudited 2007 and (Unaudited restated) and restated £ £ £ Notes Revenue 258,014 25,700 35,102 Cost of sales (216,628) (1,449) (3,707) _______ _______ _______ 41,386 24,251 31,395 Sales and marketing expenses 3 (81,556) (55,997) (132,948) Research and development expenses 3 (51,609) (106,817) (119,685) Administrative expenses 3 (297,712) (250,784) (609,645) _______ _______ _______ Operating loss (389,491) (389,347) (830,883) Finance expenses (772) - - Finance income 599 4,858 5,880 _______ _______ _______ Loss before taxation (389,664) (384,489) (825,003) Taxation - - - _______ _______ _______ Loss for the period attributable to (389,664) (384,489) (825,003) equity holders of the Company ======= ======= ======= Loss per share expressed in pence per share Basic 6 (1.67) (2.03) (4.10) Diluted 6 (1.67) (2.03) (4.10) ======= ======= ======= All amounts relate to continuing operations. Consolidated Group balance sheet as at 31 March 2008 31 March 31 March Year end 2008 2007 30 (Unaudited) (Unaudited September and 2007 restated) (Unaudited and restated) £ £ £ Notes Assets Non-current assets Intangible assets 168,218 83,354 186,772 Property, plant and equipment 42,675 22,720 46,879 _______ _______ _______ 210,893 106,074 233,651 _______ _______ _______ Current assets Inventories 150,865 - 178,643 Trade and other receivables 268,390 54,777 67,456 Net cash and cash equivalents 297,202 235,764 9,166 _______ _______ _______ 716,457 290,541 255,265 _______ _______ _______ Total assets 927,350 396,615 488,916 ======= ======= ======= Equity Capital and reserves attributable to equity holders of the Company Ordinary shares 277,544 198,080 206,885 Share premium 2,754,020 1,843,899 1,985,074 Retained earnings (2,511,696) (1,738,804) (2,126,118) _______ _______ _______ Total shareholders' equity 519,868 303,175 65,841 Liabilities Current liabilities Trade and other payables 226,342 93,440 323,075 Provisions 3,070 - - _______ _______ _______ 229,412 93,440 323,075 _______ _______ _______ Non-current liabilities Interest-bearing borrowings 175,000 - 100,000 Provisions 3,070 - - _______ _______ _______ 178,070 - 100,000 _______ _______ _______ Total liabilities 407,482 93,440 423,075 _______ _______ _______ Total equity and liabilities 927,350 396,615 488,916 ======= ======= ======= Statement of changes in shareholder's equity Ordinary Share Retained shares premium earnings Note (Unaudited) (Unaudited (Unaudited and and restated) restated) £ £ £ At 1 October 2006 3 189,235 1,705,699 (1,374,722) Loss after tax for the period to 31 - - (384,489) March 2007 Shares issued 8,845 138,200 - Equity-settled share-based payments - - 20,407 _______ _______ _______ At 31 March 2007 3 198,080 1,843,899 (1,738,804) Loss after tax for the period to 30 September 2007 - - (440,514) Shares issued 8,805 141,175 - Equity-settled share-based payments - - 53,200 _______ _______ _______ At 30 September 2007 3 206,885 1,985,074 (2,126,118) Loss after tax for the period to 31 March 2008 - - (389,664) Shares issued 70,659 768,946 - Equity-settled share-based payments - - 4,086 _______ _______ _______ At 31 March 2008 3 277,544 2,754,020 (2,511,696) ======= ======= ======= Consolidated Group cash flow statement for the six months ended 31 March 2008 Six months Six months Year end to 31 March to 31 March 30 2008 2007 September (Unaudited) (Unaudited 2007 and (Unaudited restated) and restated) £ £ £ Note Cash flows from operating activities Cash used in operations 7 (624,779) (391,105) (704,159) Investment income 599 4,858 5,880 Finance costs (772) - - _______ _______ _______ Net cash absorbed by operating (624,952) (386,247) (698,279) activities _______ _______ _______ Cash flows from investing activities Purchase of property, plant and equipment (1,617) (8,841) (37,860) Expenditure on capitalised development costs - - (135,548) _______ _______ _______ Net cash used in investing activities (1,617) (8,841) (173,408) _______ _______ _______ Cash flows from financing activities Net proceeds from issue of ordinary share capital 839,605 147,044 297,045 Proceeds from borrowings 75,000 - 100,000 _______ _______ _______ Net cash generated from financing activities 914,605 147,044 397,045 _______ _______ _______ Net increase/(decrease) in cash and cash equivalents 288,036 (248,044) (474,642) Net cash and cash equivalents at beginning of period 9,166 483,808 483,808 _______ _______ _______ Net cash and cash equivalents at end of period 8 297,202 235,764 9,166 ======= ======= ======= - - - - Notes to the interim accounts for the six months ended 31 March 2008 1. Basis of preparation These interim financial statements are the first interim financial statements following the adoption of International Financial Reporting Standards (IFRS). The financial information has been prepared in accordance with all International Financial Reporting Standards and IFRIC interpretations that had been published by 31 March 2008 and apply to periods beginning on or after 1 October 2007, The standards used are those endorsed by the EU. Further standards and interpretations may be issued that will be applicable for financial years beginning on or after 1 October 2007 or that are applicable to later accounting periods but may be adopted early. The Group's first full IFRS financial statements to 30 September 2008 may therefore be prepared in accordance with some different accounting policies from the financial information presented here. The interim report is unaudited and does not constitute audited accounts within the meaning of s240 of the Companies Act 1985 and s434(3) and s435(3) of the Companies Act 2006. The accounts for the year ended 30 September 2007 were not prepared in accordance with International Financial Reporting Standards and IFRIC interpretations but have been filed with the Registrar of Companies. The auditors' report on those financial statements was unqualified and contains no statement under s237(2) or (3) of the Companies Act 1985. 2. Segmental analysis The Group has only one principal area of operation, the development, sale and installation of vehicle emission reduction devices and sells product within one geographic segment - the United Kingdom. 3. Restatement The classification of 'other operating expenses' has been reanalysed into Sales and marketing expenses, Research and development expenses and Administrative expenses. The income statement for the six month period ended 31 March 2007 and the year ended 30 September 2007 have been restated to be consistent with this revised presentation. There is no effect on reported earnings. The gain in equity arising in respect of share-based payments is included within Retained earnings. The Statement of changes in shareholders equity for the six month period ended 31 March 2007 and the year ended 30 September 2007 has been restated to be consistent with this revised presentation. There is no effect on net shareholders' equity. 4. Taxation The Group has incurred losses in each period and no corporation tax charge has arisen. The Group has not recognised a deferred tax asset in respect of these losses. 5. Dividends No dividends have been declared and approved in respect of the six month periods ending 31 March 2008 and 31 March 2007. 6. Earnings per share Earnings per share is calculated by reference to the weighted average of 23,035,227 ordinary shares in issue during the period (31 March 2007 - 18,957,426 and 30 September 2007 - 19,953,067). The diluted loss per share is the same as the basic loss per share as the losses in each period have an anti-dilutive effect. 7. Notes to the cash flow statement Net cash flow from operating activities comprises: Six months Six months Year end to 31 March to 31 March 30 2008 2007 September (Unaudited) (Unaudited 2007 and (Unaudited restated) and restated) £ £ £ Loss before taxation (389,491) (389,347) (830,883) Depreciation 5,821 3,322 8,182 Amortisation of development costs 18,554 5,813 37,130 Equity-settled share-based payments 4,086 20,407 73,607 Decrease/(increase) in inventories 27,778 - (178,643) (Increase)/decrease in trade and other (200,934) 35,295 22,595 receivables (Decrease)/increase in trade and other (96,733) (66,595) 163,853 payables Increase in provisions 6,140 - - _______ _______ _______ Net cash outflow from operating activities (624,779) (391,105) (704,159) ======= ======= ======= 8. Net cash and cash equivalents Net cash and cash equivalents consist of cash and bank balances. 9. Reconciliation of net assets and profit under UK GAAP to IFRS The Group reported under UK GAAP in its previously published financial statements for both the year ended 30 September 2007 and the six months ended 31 March 2007. From 1 October 2007 the Group has prepared its consolidated financial statements in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). There were no adjustments required to the total shareholders' equity or reported losses for the six month period to 30 June 2007 and the year to 30 September 2007. As explained in note 3 above the reserve arising in equity in respect of share-based payments has been transferred to retained earnings. 10. Investment in NoNox Plc Subsequent to the period end, on 16th April 2008, the Company paid £150,000 towards the purchase of a 3.85% interest in NoNox Plc, a business in the related field of emission control from land based boilers. 11. Availability Copies of the interim report will be available on the Company's website at www.kleenairsystems.co.uk. -END-