Interim Results

RNS Number : 2488E

Oxford Catalysts Group PLC

25 September 2008

 



25th September 2008 

OXFORD CATALYSTS GROUP PLC

('Oxford Catalysts' or 'the Group' or 'the Company')

Interim Results for the Period Ended 30th June 2008

Oxford Catalysts Group PLC, the leading catalyst innovator for clean fuels, announces today its interim results for the six months ended 30th June 2008. 

Highlights

• Revenues ahead of management expectations at £158,000, up by 82% (H1 2007: £87,000; full year 2007: £163,000).

• MOU signed for small scale Fischer-Tropsch ('FT') with specialist technology developer, delivering revenues of at least $200,000 in 2008 and increasing in 2009 (pending successful trials).

• Small scale FT agreement signed with Thai national oil and gas company, PTT (the country's largest listed company), delivering more than $200,000 of revenue in 2008/2009.

• MOU signed with PTT for the evaluation and commercialisation of natural gas upgrading technology, with commercial side-stream testing due to start by early 2009.

• Strategic Alliance signed with Novus Energy for the production of second-generation renewable transportation fuels from organic wastes, expected to deliver revenues in excess of £120,000 in 2008.

• Instant Steam development with leading fast moving consumer goods company successfully progressed past first 'go/no go' milestone; and, successful completion of safety classification process for Instant Steam fuel.

• Cash burn peaked in period due to capex on office and laboratory extension − now largely complete.

• Cash and short term deposits at period end £13.1 million.

• Board positive of exceeding management revenue expectations for the full year.

Pierre Jungels, CBE, Chairman of Oxford Catalysts, said:

'The outlook for the Group across the markets in which we operate is universally positive. I am confident that we are on course to deliver commercial agreements which will enhance shareholder value.

'The Board is optimistic of exceeding management revenue expectations for the full year, and looks to the future with confidence and excitement.'

For further information, please contact:

Roy Lipski, CEO, Oxford Catalysts	01235 841 700
Jonathan Marren / Oliver Stratton, KBC Peel Hunt (Nomad and Broker)	020 7418 8990
Billy Clegg / Alex Beagley, Financial Dynamics	020 7831 3113

Notes to Editors

Oxford Catalysts designs and develops specialty catalysts for the generation of clean fuels from both conventional fossil fuels and certain renewable sources. The Group has two key platform technologies resulting from almost 20 years of research at the University of Oxford's prestigious Wolfson Catalysis Centre. The first platform is for a novel class of catalysts incorporating metal carbides, which can match or exceed the benefits of more expensive catalysts, at a lower cost, for several key processes used in the petroleum and petrochemical industries. The second relates to a unique chemical reaction which can be used to generate steam instantaneously, starting from room temperature, using a cheap liquid fuel alongside the Group's patented catalysts. Such unprecedented Instant Steam has exciting potential applications in a broad range of markets, from cleaning and disinfecting, to backup power and propulsion.

Oxford Catalysts Group PLC is listed on London's AIM market (coding symbol OCG). 

CHAIRMAN'S STATEMENT 

Pierre Jungels, CBE

I am very pleased with where we are as an energy and environment related business, some two and a half years after flotation. We have a first rate team of senior executives, who have qualified a large number of opportunities and have focussed on the few which we expect will deliver most value in the short, medium and long term.

The Group achieved revenues in the first half of £158,000, almost as much as for the full year 2007 and ahead of our expectations. Cash burn peaked during the period as a result of capex on the office and laboratory extension, which is now largely complete. I am therefore glad to report that at the period end the Group had £13.1 million in cash and short term deposits.

The large number of Non Disclosure Agreements ('NDAs') and Material Transfer Agreements ('MTAs') signed over the past couple of years demonstrates the breadth of engagement with potential partners that the Company has achieved. During the period, a number of these progressed to a more advanced commercial footing.

In the biomass space, we have chosen to form an alliance with Novus Energy, LLC ('Novus Energy') to make second-generation renewable transportation fuels from organic wastes. In the steam applications market, we continue our engagement with a global fast moving consumer goods ('FMCG') giant. We are also working with Thailand's largest company, PTT Public Company Limited ('PTT'), developing and evaluating technology for upgrading natural gas, and seperately, for the development of small scale Fischer-Tropsch ('FT') applications. Finally, we are making very good progress with a specialist technology developer to deploy our highly active catalysts in small scale FT process equipment ideally suited for converting stranded natural gas and flared gas into clean synthetic fuels.

Board

We welcomed Susan Robertson to the Board of Directors of the Company at the Annual General Meeting held on 14 May 2008. 

Susan joined Oxford Catalysts in October 2007 as Chief Financial Officer following seventeen years at The BOC Group (now part of Linde AG). From its inception in 2003 until 2006, Susan was Vice President and Chief Financial Officer of Japan Air Gases, which was then a £700 million turnover joint venture owned by The BOC Group and Air Liquide.

At the same time, Professor Malcolm Green (Non-executive Director), Dr Tiancun Xiao (Executive Director) and Dr Will Barton (Executive Director), stepped down from the Board at the AGM, although all have remained with the Company in their same respective roles. The restructuring was designed to streamline the Board and to meet corporate governance best practice guidelines. I would like to thank them all for their significant contributions to the Board during my tenure as Chairman.

Outlook

The outlook for the Group across the markets in which we operate is universally positive; we are now engaged with a select number of partners, all of whom are committing development funds towards ensuring successful commercial outcomes for our technologies. I am confident that we are on course to deliver commercial agreements which will enhance shareholder value.

The Board is optimistic of exceeding management revenue expectations for the full year, and looks to the future with confidence and excitement. 

Chief Executive's RePORT

Roy Lipski 

Introduction

The Group has had a good first half in 2008, as the Business Development team we put in place last year has achieved substantive and material engagement with potential customers across our suite of technologies. 

There are exciting projects in the pipeline for the second half in each of our core areas of operation, and a number of important commercial milestones with our existing partners. 

Commercialisation

To date, we have secured 90 NDAs and MTAs, 5 MOUs, and 4 other commercial agreements with partners and potential customers, including a Joint Development Agreement. We are engaged with many of the key target partner companies in our markets, such as oil Majors and leading catalyst manufacturers. Going forward, we anticipate that the rise in NDAs and MTAs will slow, whilst the number of MOUs and other commercial agreements will maintain growth, as we continue progressing towards commercial deployment with chosen partners in our application areas. This expected trend is a reflection of progress as our business becomes established in the market place. 

Fischer-Tropsch

At the beginning of July, we entered into a MOU with a specialist technology developer for the deployment of the Company's proprietary catalysts in smaller scale FT applications, such as the conversion of bio-waste or flare gas into clean-burning synthetic liquid fuels − a potential global market of many million of barrels of fuel per day.

Oxford Catalysts has developed high activity fixed bed FT catalysts that can operate at more than 15 times the productivity of conventional catalysts. In combination with novel process technology, such as that provided by our partner, these catalysts hold the promise of delivering more cost-effective small scale FT applications, at anything from 500 to 5,000 barrels of synthetic fuel per day. One of the exciting aspects of our partner's equipment is that it is modular − once the Company's catalysts have been successfully demonstrated on a small scale, no meaningful additional scaling up is anticipated to be required for commercial deployment.

The MOU was signed following months of rigorous testing of the Company's high activity FT catalysts by its partner, including successful demonstration for what now amounts to over 3,000 hours in a pilot unit. The agreement contemplates the supply of FT catalyst for demonstration units, ranging from several kilograms in 2008, to more than a tonne in 2009 − with significant commercial volumes projected beyond, as the technology takes hold in this new market. 

The MOU will deliver development revenues of at least $200,000 during 2008, and increasing in 2009 (pending successful trials). The project could ultimately lead to large volume supply of FT catalyst for commercial deployment through a third party manufacturer. 

The Company has already identified, and is working with, a major catalyst company that is well suited to scale-up the manufacture of its FT catalysts. The latter has already successfully manufactured the catalyst on a Kg scale, and is on course to be able to manufacture the tonnage quantities expected to be required in 2009. 

Recently, Oxford Catalysts announced a second engagement in this highly promising area of smaller scale FT − an agreement with the Thai state controlled oil and gas company and Thailand's largest listed company, PTT, to specify and supply know-how and materials, including catalysts, for a system for the production of synthetic liquid fuels using small scale FT.

PTT's initial focus is on monetising its stranded gas reserves, with a further objective of converting locally available biomass and coal into clean transportation fuels. The initial contract is valued at over $200,000, to be invoiced in the course of 2008 and 2009.

Second Generation Biofuels

The Company's Strategic Alliance with Novus Energy, a Minneapolis-based renewable fuels company, to develop technology for the production of second-generation renewable transportation fuels from organic wastes, is progressing well.

In January, Oxford Catalysts announced that the two companies are pooling their expertise and proprietary technologies to design and deploy on-site units for the processing of organic wastes into 'green' renewable transportation fuels. The companies have been working together under contract to design and build a pilot plant unit; all the equipment for this is now assembled and in place, and the plant is in the final stages of being commissioned, with the section containing the Company's technology already demonstrated to be operational. 

This pilot plant is the forerunner of a large number of commercial plants that, if successful, will be commissioned around the world. Oxford Catalysts' technology is playing a key role in the overall fuels production process.

According to the alliance agreement, Oxford Catalysts will earn royalty income based on fuel sales, which are projected by Novus Energy to average up to $750,000 p.a. per full-scale facility, with the first unit expected in 2010. Novus Energy has announced plans to roll out dozens of facilities in the USA and Europe over the coming years. Development revenues from the alliance to Oxford Catalysts are expected to be in excess of £120,000 in 2008. 

Instant Steam

In the latter part of 2007, Oxford Catalysts announced that it was working with a world-leading FMCG multinational to explore the use of its proprietary technology for Instant Steam. 

The Company's Instant Steam technology enables the generation of steam immediately on demand, using a compact, simple and portable device. The technology incorporates a proprietary catalyst that initiates a chemical reaction in a liquid fuel (consisting of common chemicals), and produces steam instantaneously starting from room temperature. For example, the fuel can be contained in a plastic spray bottle and the catalyst incorporated into the nozzle spray mechanism. When the trigger is squeezed, the fuel passes over the catalyst and steam is produced instantly.

I am pleased to report that work with the Company's partner has now successfully progressed past the first major 'go/no go' milestone of the product development programme. 

In May, the Company announced that it had successfully completed the safety classification process for the transport and handing of its unique fuel mixture for making Instant Steam.

Safety is a critical component to launching any new chemical process; successfully completing the classification process was essential to progressing the technology, and represents the attainment of a significant milestone in the commercialisation of Instant Steam.

Natural Gas Upgrading

In July, Oxford Catalysts signed a MOU with PTT for the evaluation and commercialisation of natural gas upgrading technology.

The technology has been tested against competitive materials in the laboratory, and is now due to be tested in two commercial side-stream units with initial results expected by early 2009. If the testing is successful, the next stage will consist of an industrial scale field trial by PTT.

The project, if successful, will ultimately lead to the supply of materials to PTT for future commercial deployment, through a third party contract manufacturer, with expected revenue to Oxford Catalysts in the form of licence and royalty payments. First commercial revenue could be earned as early as 2010. 

Oxford Catalysts has identified, and is already working with, a major catalyst company as their partner for scaling-up manufacture of the materials for commercial deployment.

Hydro-desulphurisation

The Company's catalysts continue to show highly promising results; in our recent laboratory tests against two commercially available competing catalysts using a refinery sourced feedstock, one of our HDS catalysts was able to process more than 35% additional diesel per hour than the competing catalysts, under similar operating conditions and with similar or better desulphurisation performance. 

Simultaneously, we have made encouraging progress scaling up the manufacture of these catalysts. We have now successfully prepared multi-Kg batches externally, working with a third-party catalyst company, which show similar performance to catalysts prepared in our laboratory.

We remain on track to have our catalysts validated on a Kg scale by potential customers during the coming months, and have recently supplied one sample for testing to a major refiner. 

Intellectual Property

As we progress towards the commercial deployment of our technology, our developments become more focussed on market requirements. We have, therefore, continued to protect and enhance our portfolio of intellectual property and proprietary know-how − in the period we filed patent applications in the key areas of carbide-based FT catalysis and steam production. Neither of these patent applications have yet reached publication, though the former should publish in the next month or so.

Prosecution of the portfolio of patents licensed from the University of Oxford has continued, and since the beginning of the year our first patent application has been granted in Australia.

Resources

The office and laboratory expansion which commenced in January is now complete. We have improved our facilities and invested in additional experimental and analytical equipment to accelerate catalyst development and better serve our growing customer base. Our partners are impressed with our extended facilities, the standard of which, we understand, exceeds their expectations.

The expansion involved a total investment of £1.6 million, and resulted in a doubling of our laboratory and office facilities. As part of the project, we purchased two Amtec Spider16 high throughput screening reactor systems, which are now fully installed. Each Spider allows the simultaneous testing of 16 different catalyst samples under identical conditions, thereby significantly reducing the time needed to optimise catalysts for various client applications. 

We now have in place both the scientific and management infrastructure to support the Group's growth, as our technologies further progress towards commercial deployment.

Financial Review

Revenues in the first half to 30th June 2008 increased ahead of plan by 82% to £158,000 (H1 2007: £87,000; full year 2007: £163,000), derived from development work with partners in Europe, the USA and Asia, as well as grant revenue from the Carbon Trust. The loss for the period was £1,298,000 (H1 2007: £545,000), which reflects Oxford Catalysts' accelerated growth over the past year, new laboratories and equipment, and is in line with the Company's stated strategy. 

Financial resources continue to be managed prudently. Cash reserves and short term investments at period-end were £13.1 million.

 CONSOLIDATED INCOME STATEMENT 

FOR THE SIX MONTHS ENDED 30 JUNE 2008

	Note	6 months ended 30 June 2008 (unaudited) £'000	6 months ended 30 June 2007 (unaudited) (restated) £'000	Year ended 31 December  2007 (audited) £'000
Revenue		158	87	163
Cost of sales		(128)	(64)	(131)
Gross profit		30	23	32
Development costs		(557)	(363)	(773)
Other administrative expenses		(1,151)	(563)	(1,620)
Share based payments (IFRS2)		(42)	(110)	(199)
Total administrative expenses		(1,750)	(1,036)	(2,592)
Operating loss		(1,720)	(1,013)	(2,560)
Interest on bank deposits and similar income Finance costs		427 (6)	468 -	791 (21)
Loss on ordinary activities before tax		(1,299)	(545)	(1,790)
Tax		-	-	46
Loss for the period from continuing operations		(1,299)	(545)	(1,744)
Loss per share from continuing operations
Basic and diluted (pence)	3	(3.20)	(1.46)	(4.49)

All amounts relate to continuing operations. There are no recognised gains or losses other than the losses shown above.

The figures for 6 months ended 30 June 2007 have been restated for consistency by reclassifying cost of sales and administrative expenses.

 CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2008

	Note	30 June 2008 (unaudited) £’000	30 June 2007 (unaudited) (restated) £’000	31 December 2007 (audited) £’000
Non-current assets
Intangible assets		253	194	205
Property, plant and equipment		1,913	630	860
		2,166	824	1,065
Current assets
Trade and other receivables		732	333	444
Short term investments – cash held on deposits		6,650	7,000	7,000
Cash and cash equivalents		6,403	5,812	8,630
		13,785	13,145	16,074
Total assets		15,951	13,969	17,139
Current liabilities
Trade and other payables		(493)	(187)	(437)
Current tax liabilities		(54)	(38)	(47)
		(547)	(225)	(484)
Non-current liabilities
Deferred licence payments		(128)	(101)	(122)
Total liabilities		(675)	(326)	(606)
Net assets		15,276	13,643	16,533
Equity
Called up share capital	4	405	373	405
Share premium account	4	17,865	13,897	17,865
Merger reserves	4	369	369	369
Retained earnings (deficit)	4	(3,363)	(996)	(2,106)
Total equity		15,276	13,643	16,533

The Cash and cash equivalents and Short term investments figures for the 6 months ended 30 June 2007 have been reclassified for consistency.

The financial statements were approved by the Board of Directors on 24 September 2008, and were signed on its behalf by:

Susan Robertson

Chief Financial Officer

CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2008

	Note	6 months ended 30 June 2008 (unaudited) £’000	6 months ended 30 June 2007 (unaudited) (restated) £’000	Year ended 31 December 2007 (audited) £’000
Net cash outflow from operating activities	5	(1,555)	(914)	(2,048)
Investing activities
Interest received		209	391	666
Purchases of patents and trademarks		(51)	(16)	(31)
Purchases of property, plant and equipment		(1,180)	(177)	(485)
Investments – cash taken off deposit		350		-
Net cash (used in)/from investing activities		(672)	198	150
Financing activities
Proceeds on issue of shares		-	-	4,000
Net cash from financing activities		-	-	4,000
Net (decrease)/increase in cash and cash equivalents		(2,227)	(716)	2,102
Cash and cash equivalents at the beginning of the period		8,630	6,528	6,528
Cash and cash equivalents at the end of the period		6,403	5,812	8,630

 NOTES TO THE ACCOUNTS

FOR THE SIX MONTHS ENDED 30 JUNE 2008

1.  PRINCIPal ACCOUNTING POLICIES

Basis of Preparation and Accounting Policies

The interim financial report has been prepared using accounting policies consistent with International Financial Reporting Standards ('IFRS') as adopted by the EU and in accordance with IAS 34 'Interim Financial Reporting'.

The interim report is unaudited. 

Segments

For management purposes, the Group reports its entire activities as one business. Accordingly, the Directors consider there to be only one reportable segment, being the design, development and provision of catalysts.

2. Publication of non-statutory accounts

The financial information for the six months ended 30 June 2008 and 30 June 2007 has not been audited and does not constitute full financial statements within the meaning of Section 240 of the Companies Act 1985.

The financial information relating to year ended 31 December 2007 does not constitute full financial statements within the meaning of Section 240 of the Companies Act 1985. This information is based on the Group's statutory accounts for that period. The statutory accounts were prepared in accordance with IFRS, received an unqualified audit report, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 237(2) or (3) of the Companies Act 1985. These accounts and have been filed with the Registrar of Companies. 

3.  EARNINGS PER SHARE

The calculation of earnings per share is based on the following losses and number of shares:

	6 months ended 30 June 2008 (unaudited)			6 months ended 30 June 2007 (unaudited)			Year ended 31 December 2007 (audited)
	Loss £'000	Number of shares '000	Pence per share	Loss £'000	Number of shares '000	Pence per share	Loss £'000	Number of shares '000	Pence per share
Basic & diluted earnings per share	(1,299)	40,567	(3.20)	(545)	37,341	(1.46)	(1,744)	38,808	(4.49)

4.  RECONCILIATION OF MOVEMENT IN TOTAL EQUITY

	Called up share capital £'000	Share premium account £'000	Merger reserve £'000	Retained earnings £'000	Total £'000
At 1 January 2008	405	17,865	369	(2,106)	16,533
Loss recognised for the period	-	-	-	(1,299)	(1,299)
Employee share based payments (IFRS2)	-	-	-	42	42
At 30 June 2008	405	17,865	369	(3,363)	15,276

5.  RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES

	6 months ended 30 June 2008 (unaudited) £'000	6 months ended 30 June 2007 (unaudited) £'000	Year ended 31 December 2007 (audited) £'000
Operating loss	(1,720)	(1,013)	(2,560)
Depreciation	127	72	150
Amortisation - other intangibles	3	2	5
Share based payments expense (IFRS2)	42	110	199
Operating cash flows before movement in working capital	(1,548)	(829)	(2,206)
Increase in receivables	(115)	-	(15)
Increase/(decrease) in payables	62	(85)	173
Tax received	46	-	-
Net cash outflow from operating activities	(1,555)	(914)	(2,048)

 

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