Interim Results
28 September 2005 - 5:01PM
UK Regulatory
RNS Number:8444R
AeroBox plc
28 September 2005
28 September 2005
AEROBOX PLC
("Aerobox" or "the Company")
Interim Results 2005
Summary
* Production capability for ULD products now 400 per month on a single shift
system.
* Follow on order received from Virgin Atlantic and new order received from
American Airlines.
* Current order book for delivery this year of $1.5m.
* New markets for Aerobox advanced thermoplastic technology being developed
with initial sales achieved in the first half.
* First half operating loss before goodwill amortisation of #2.0m.
Commenting on prospects, David Sebire, Chairman, said:
"After several years of investment and development, we are close to establishing
ACS as a major supplier of air cargo containers to the airline industry.
Delivery of our current order book and some repeat sales will confirm our
arrival in this market. Sales of core material and panels using a specialist
sales and marketing agent is expected to open new areas for the advanced
composite technology in the short term and provide a major market for our
technology.
I expect the new management team to bring a disciplined commercial focus to the
ACS business which, coupled with a growing order book and new markets for the
advanced thermoplastic technology, should offer the business every opportunity
of gaining market acceptance for its products."
Enquiries:
David Sebire, Chairman
Ray Gibbs, Group Managing Director and Finance Director
Aerobox plc +44 (0) 207 929 5599
David Bick/Trevor Phillips
Holborn +44 (0) 207 929 5599
CHAIRMAN'S STATEMENT
Results
The results cover the financial half year to 30 June 2005. Operating loss
before goodwill amortisation amounted to #2,011,000 (2004: loss of #1,234,000).
Goodwill amortisation was #441,000 (2004: #441,000). Net interest receivable
was #35,000 (2004: charge of #15,000). The loss on ordinary activities before
taxation for the period amounted to #2,417,000 (2004: loss of #1,690,000). This
represented a loss per share of 1.8p (2004: loss of 1.8p per share).
Finance
No new funds were raised in the period and cash reduced by #2,236,000 leaving a
balance of #1,650,000 at the half year. We continue to keep our future cash
requirements under close review. Stock and work in progress of almost $1m at
AeroBox Composite Structures ("ACS") represented a significant cash outflow in
the period. Over 50% of this is against orders to be delivered in the second
half of the year.
Review of operations
By late 2004 we had developed the three key prototype products which our
immediate customers were seeking. However, we needed to improve our
productivity and volume capability, and crucially finalise the designs for the
three base ULD models: the AKE2, a bifold solid door unit and a fork liftable
unit. Running parallel with this process was the need to obtain final Federal
Aviation Administration ("FAA") approvals to the production facility and the
three key ULD products. The first half of the year at ACS has been dominated by
these tasks.
These have been achieved but taken longer than expected, utilised substantial
manpower and proved costly. The work has involved the constant scrutiny and
approval process of the FAA. European Aviation Safety Authority ("EASA")
approval is expected shortly. We have recruited 3 staff in the period to work
on the Quality Assurance, safety and procedures manuals needed to meet all
approvals, which together with production management and support has increased
the ACS complement to 60.
The immediate benefits are that our production capability on a single shift
system is now 400 ULDs per month and we do now have our three key ULD products
approved, together with a fully operational and regulator approved production
facility in Albuquerque, New Mexico.
Our priority now is to reduce the cost of manufacture. A number of initiatives,
which include identifying alternative material sources and sub contracting
specific manufacturing operations are being implemented. The headcount at ACS
is expected to fall in the second half as we gain operational efficiency.
Sales and Orders
In December 2004 we secured an order for the delivery of 500 ULDs incorporating
a solid bifold door for Saudi Arabian Airlines. Following completion of FAA
approvals we can now deliver the product in the second half of the year. An
order was received for 500 of the forkliftable variant from American Airlines in
August, again for delivery in the second half of the year. At the end of this
year we will then have all 3 ULD types in operational use. Significantly it has
taken almost a year from initial trial to sale in securing this business.
A major milestone was reached in August when we received a follow on order from
Virgin Atlantic for 250 AKE2s with delivery in 2005. There are indications that
the repeat order cycle is much shorter after initial acceptance of the product
by the customer. We are hopeful that all of our current customers will reorder
in 2006 although we have no visibility on quantities and timing. It has proved
difficult to attract sales interest at price levels significantly above market
rates for aluminium containers and therefore initial pricing of the ULD has been
very competitively positioned. This will not produce significant gross profit
margins in the second half of the year from our current order book.
AeroBox ULDs have now flown over 60,000 flights with less than 100 reported
repairs - a ratio which is 7 times better than our aluminium based competitors.
Robustness and reliability remain outstanding and the products are now widely
recognised within the aviation industry along with improved safety for ground
handling staff. There still exists however a reluctance in the buying divisions
of the airlines to move towards the "whole life cost concept" of a ULD. We
expect this to alter once the operational effectiveness is established,
following product acceptance by major airlines. With a proven minimum repair
rate the focus will be on achieving sales with improved margins in 2006,
although we will still face aggressive pricing from established suppliers of the
aluminium boxes so that margin improvement will remain a significant challenge
in the short term.
Our ULD order book immediately after we received the Virgin order was $1.5m for
delivery this year. With our approved ULD products we can now address 50% of
the available market and will only consider new variants if the price and volume
is acceptable. From our analysis we believe that the average annual demand for
AKE/LD-3 units is 35-40,000.
The technological experience ACS has gained in developing a unique capacity in
the manufacture of superior thermoplastic honeycomb structures and panel
products has now been extended beyond ULDs into the broader industrial
applications market with sales commencing last April of the composite
thermoplastic honeycomb core material. Our strategy is to use the thermoplastic
technology as a platform for innovative cost effective solutions across a range
of industrial applications, and initial opportunities have been established in
the construction and automotive sectors. Turnover in the first half was
$72,500. Our plan is to use the panel technology to add value to the base core
product and sell to a specialist reseller. We have sales and marketing
agreements in place to supply this customer who has established a presence in
markets for the core and panel products. Sales with a minimum value of $1
million for 2006 are under discussion. Further investment in laminating
equipment may be required towards the end of this year to meet product
specifications for known customer requirements.
With limited resources and uncertain demand for the product a decision was taken
to halt all development work on the Kelvin refridgerated product. The global
ULD sales force set up in June 2004 has had a limited impact on market
penetration. Mindful of cash resources we have reduced our sales complement and
will bolster their efforts with sales agents with access to certain markets.
Our aim is to achieve a focussed and targeted approach to known contacts which
complement the customers cultivated by ACS over the last year.
Prospects
After several years of investment and development, we are close to establishing
ACS as a major supplier of air cargo containers to the airline industry.
Delivery of our current order book and some repeat sales will confirm our
arrival in this market. Sales of core material and panels using a specialist
sales and marketing agent is expected to open significant new areas for the
advanced composite technology in the short term and provide a major market for
our technology.
The Company has seen some executive changes with Finance Director, Richard Scott
being replaced by Ray Gibbs. We were sorry to lose Richard to the private
equity world and are grateful for his excellent contribution during a
challenging two years. ACS's Chief Executive Officer, Bob Bushman, retired at
the age of 70. His role at ACS has been taken over by former ACS chief
operating officer, Charles Edwards.
I am pleased to announce that Ray has also agreed to combine his role as Finance
Director with that of Group Managing Director. At this point in the company's
development the Board believes that combining these positions will allow Ray to
manage the expansion of Aerobox whilst maintaining a tight control over the cost
structure and cash flow in the business. Ray has operational skills which will
assist the group in implementing its strategy of the development of its advanced
thermoplastic technology into new markets whilst also providing support to
Charles Edwards at ACS. When it is appropriate to do so, the roles will be
divided and a group finance director appointed.
I expect the new team to bring a disciplined commercial focus to the ACS
business which, coupled with a growing order book and emerging markets for the
advanced composite technology should offer the business every opportunity of
gaining market acceptance for its products.
David Sebire
Chairman
28 September 2005
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2005 2004 2004
#000 #000 #000
Turnover 57 81 172
Cost of sales (390) (128) (320)
Gross loss (333) (47) (148)
Administrative expenses:
- Goodwill amortization (441) (441) (882)
- Other (1,678) (1,187) (2,946)
Operating loss (2,452) (1,675) (3,976)
Net interest receivable/(payable) and 35 (15) -
other charges
Loss on ordinary activities
after taxation (2,417) (1,690) (3,976)
Loss per share - basic and fully diluted (1.8)p (1.8)p (4.0)p
Notes:
1. Basic loss per share has been calculated using a loss for the financial
period of #2,535,000 and a weighted average number of ordinary shares in
issue during the period 1 January 2005 to 30 June 2005 of 134,509,309.
2. Goodwill arising on the acquisition of AeroBox Composite Structures LLC
amounting to #8,827,000 has been capitalised and amortised through the
profit and loss account on a straight line basis over a period of 10 years.
3. The group has no liability to current taxation due to the existence of tax
losses. The group has no potential liability to deferred taxation.
4. All turnover and losses relate to continuing operations.
5. A foreign exchange loss of #75,000 resulting from the retranslation of
the investment in subsidiaries at the closing rate on 30 June 2005 has been
taken to the profit and loss account.
CONSOLIDATED BALANCE SHEET
As at As at As at
30 June 30 June 31 December
2005 2004 2004
#000 #000 #000
Fixed assets
Intangible assets 6,814 7,696 7,255
Tangible assets 1,543 1,082 1,606
8,357 8,778 8,861
Current assets
Stock and work in progress 502 - -
Debtors 114 242 141
Cash at bank 1,650 1,537 3,886
2,266 1,779 4,027
Creditors: amounts falling due (889) (578) (694)
within one year
Net current assets 1,377 1,201 3,333
Total assets less current 9,734 9,979 12,194
liabilities
Creditors: amounts falling due (204) (224) (172)
after more than one year
Net assets 9,530 9,755 12,022
Capital and reserves
Called up share capital 1,345 932 1,345
Share premium account 9,319 5,171 9,319
Other reserve 5,967 6,849 6,408
Profit and loss account (7,101) (3,197) (5,050)
Shareholders' funds-all equity 9,530 9,755 12,022
Notes:
6. The interim financial statements have not been audited and they do not
constitute full financial statements within the meaning of s240 of the
Companies Act 1985. The results for the 12 months to 31 December 2004 are
an abridged version of the full accounts which received an unqualified
report by the auditors and have been files with the Registrar of Companies.
7. The interim financial statements have been prepared in accordance with
applicable accounting standards.
8. Copies of this interim report will be posted to all of the Company's
shareholders. Further copies can be obtained from the Company's web site at
www.aeroboxplc.com or from the Company Secretary at the Registered Office.
CONSOLIDATED CASH FLOW STATEMENT
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2005 2004 2004
#000 #000 #000
Reconciliation of operating loss to net cash
outflow from operating activities
Operating loss (2,452) (1,675) (3,976)
Amortisation of intangible fixed assets 441 441 882
Depreciation of tangible fixed assets 178 22 142
Foreign exchange (76) (14) 1
Increase in stock and work in progress (502) - -
Decrease/(increase) in debtors 27 (11) 90
Increase in creditors 317 315 399
Net cash outflow from operating activities (2,067) (922) (2,462)
Returns on investment and servicing of
finance
Net interest received 35 8 -
Capital expenditure and financial investment
Purchase of tangible fixed assets (115) (745) (1,381)
Cash outflow before financing (2,147) (1,659) (3,843)
Financing
Issue of ordinary share capital - 2720 7,281
Capital elements of finance lease repayments (89) (40) (68)
(89) 2,680 7,213
(Decrease)/increase in cash in the period (2,236) 1,021 3,370
This information is provided by RNS
The company news service from the London Stock Exchange
END
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