TIDMTPS
RNS Number : 4277X
Turbo Power Systems Inc
06 May 2016
Turbo Power Systems Inc. ("TPS" or the "Company")
Announces Results for the Quarter
Ended 31 March 2016
Financial highlights:
-- Revenue decreased 18% to GBP3.35 million (Q1 2015: GBP4.08 million).
-- Gross profit decreased to GBP1.30 million (Q1 2015: GBP1.68
million), with a margin of 39% (Q1 2015: 41%).
-- Net loss of GBP0.15 million (Q1 2015: Profit GBP0.02 million).
-- Total expenses for the period reduced 5% to GBP1.41 million (Q1 2015: GBP1.48 million).
-- Cash outflow from operating activities of GBP0.64 million (Q1 2015: GBP1.44 million).
Operational highlights:
-- Order intake in the quarter GBP1.98 million (Q1 2015: GBP0.80 million).
-- Since the period end order intake of GBP3.72 million in April
for production in 2016, making a total of GBP5.70 million for the
four months to 30 April 2016.
Annual General Meeting
-- To be held at 1pm on Thursday 26 May 2016 at the Company's offices in Gateshead.
Strategic review:
-- Strategic Review of the Company's business, announced February 2015, is ongoing.
-- The Board notes, as previously reported, that all expressions
of interest received to date as part of the Strategic Review from
potential offerors for 100% of the issued and to be issued share
capital of the Company on a debt-free, cash-free basis have been
indicatively priced at a substantial discount to the prevailing
share price.
-- The Board continues to regularly discuss with its majority
owner how best to proceed with the Strategic Review.
-- Further announcements will be made in due course, as appropriate.
Funding
As previously reported, the Company remains critically dependent
on continuing financial support by TPS's parent company, Vale S.A.
("Vale"), Brazil's largest mining company, which owns 89.4% of the
issued share capital of the Company through its wholly owned
subsidiary Tao Sustainable Power Solutions (UK) Ltd ("TAO UK").
On 29 March 2016 the Company's wholly owned subsidiary, Turbo
Power Systems Limited ("TPSL") entered into and announced an
agreement to draw down on a new loan to be provided by TAO UK,
which totalled GBP0.3 million. The loan is repayable on 1 April
2017 and can be extended, at the Company's request, for a further
year and accrues interest at 6% per annum, payable annually.
Carlos Neves, Chief Executive Officer, said:
"We are pleased that order intake for the first quarter was
ahead of 2015 and that for the first four months to 30 April 2016
was GBP5.70 million. The production orders received in April follow
the principles that we set out in terms of profitability and
strategic direction. The order book now covers the anticipated
production for 2016 and well into 2017.
Our performance for the first quarter is in line with management
expectations, despite the uncertainties about the ultimate outcome
of the Strategic Review. I expect with great confidence that we
will continue to deliver our commitments and with the new
production orders received, to grow the business during 2016."
For further information, please contact:
Turbo Power Systems Tel: +44 (0)191 482 9200
Carlos Neves, Chief Executive
Officer
Charles Rendell, Chief Financial
Officer
Kreab (financial public relations) Tel: +44 (0)20 7074 1800
Robert Speed
finnCap (NOMAD, broker and Tel: +44 (0)20 7220 0500
financial advisor)
Ed Frisby, Emily Watts
Notes to Editors
About Turbo Power Systems
Company Website: www.turbopowersystems.com
Company Twitter: https://twitter.com/turbopowersys
Turbo Power Systems Inc. (AIM: TPS.L) is a leading UK based
designer and manufacturer of innovative power solutions. TPS's
products are all based on its core technologies of high speed
motors and generators and power electronics which are sold into a
number of market sectors including transport, industrial, energy
and defence sectors. The Company's products provide high
performance while improving efficiency and reducing process energy
consumption compared to existing technologies.
Turbo Power System's existing customers include blue chip
companies such as Bombardier Transportation, Daikin Applied and
Eaton Aerospace. Tao Sustainable Power Solutions (UK) Ltd ("TAO
UK"), which is a wholly owned subsidiary of Vale S.A., Brazil's
largest mining company, owns 89.4% of the issued share capital of
the Company.
Forward looking statements
This press release contains forward-looking statements.
Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events, or performance, and
underlying assumptions and other statements that are other than
statement of historical fact. These statements are subject to
uncertainties and risks including, but not limited to, the ability
to meet on-going capital needs, product and service demand and
acceptance, changes in technology, economic conditions, the impact
of competition, the need to protect proprietary rights to
technology, government regulation, and other risks defined in this
document and in statements filed from time to time with the
applicable securities regulatory authorities.
Notice of no auditor review of interim financial statements
Under Canadian National Instrument 51-102, Part 4, subsection
4.3(3(a), if an auditor has not performed a review of the interim
financial statements, they must be accompanied by a notice
indicating that the financial statements have not been reviewed by
an auditor.
The accompanying un-audited interim financial statements of the
Company have been prepared by and are the responsibility of the
Company's management.
The Company's independent auditor has not performed a review of
these financial statements in accordance with standards established
by the Canadian Institute of Chartered Accountants for a review of
interim financial statements by an entity's auditor.
This review has been prepared as at 6 May 2016.
OPERATIONAL REVIEW
Business of the Company
Turbo Power Systems is a technology-led Company that designs and
manufactures high-speed permanent magnet electric motors,
generators and power electronics systems and provides bespoke
solutions to transport, industrial, energy conversion, and military
markets.
Its track record in engineering innovation, which has been built
and tested over a substantial number of years, allows the Company
to meet challenging design and manufacturing briefs with specific
requirements relating to environmental performance and performance
to volume demands across the world.
TPS has a proven and worldwide track record in the development
and deployment of equipment in many sectors, especially in rail and
industrial. Long term relationships with customers in these markets
have been built based on delivering competitive products with
proven reliability.
Developed over the last 30 years, expertise on high-speed
electrical machines and power electronics, allows the Company to
explore its current and future portfolio and adjust accordingly to
grow successfully in its chosen markets.
Way Forward
As a technology-led business, the Company understands the
challenges of the market regarding quality, costs and timing. Since
2013 TPS has concentrated on three important pillars to
successfully implement the strategy of achieving sustained
profitability:
-- Improve the quality of the portfolio;
-- Superior execution within design development, manufacturing
operations and support activities; and
-- Consistent delivery of internal improvements.
These will continue to underpin the Company's strategy as the
Company drives forward in its chosen markets.
Market Overview
Transport:
Rail is a growing sector with huge investment globally and it is
a critical development infrastructure in many developing countries.
As an established supplier for auxiliary power units and battery
charges TPS can use its systems expertise to expand into traction
systems and electric distribution systems. The Company continues to
implement its strategy for expanding its Maintenance, Repair and
Overhaul (MRO) services, especially in the UK, where it is working
closely with both train operators and train service companies. In
the UK the train purchasing and refurbishment timetable is governed
by the franchise renewal schedule.
Industrial:
The HVAC Systems market has been a major market for the Company
where TPS has a long standing relationship with Daikin, a major OEM
in this market. The Company continues to work closely with Daikin
on the design and production of its next generation product lines,
and has seen an increase of business during the quarter.
Energy:
The energy recovery sector in which TPS is focusing is growing,
driven by continued increasing energy demand and cost. There are
limited suppliers in 400 kW to 1 MW class systems where TPS has
know-how, experience and can interchange technologies and solutions
in this market. TPS has the pedigree and experience with grid
linked inverters, which the Company believes is growing sector. The
Company will focus on specialised niche applications (i.e.
inverters for smart grid), where added value can be demonstrated,
and the low carbon renewable energy market, such as wind
turbines.
Defence:
A growing market identified by the Company is the
electrification of naval vessels. TPS's technologies are suitable
for energy recovery and efficiency, permanent magnet motors for
traction systems and emission mitigation in marine systems which is
being driven by recent marine regulations. Projects undertaken and
those in development should provide the necessary track record for
potential expansion within this market.
Current Operations
Revenue in the quarter was up by 41% compared with the last
quarter of 2015 but down by 18% on the first quarter of 2015. The
decrease in the Engineering design revenue was due to the delay in
signing new contracts in the first quarter.
The Company increased the production capacity for Daikin as this
product line took capacity from the completion of the Bombardier
contracts. Deliveries to Eaton of the Jettison Fuel Pump continued
in line with their requirements.
The decrease in the development revenue, decreased the gross
margin by 2% to 39% in the quarter, but still reflected the impact
of the Company's focus on profitable contracts as gross margin
increased by 24% from 2014.
The overhead base has been reducing since its peak level in June
2012, with overall expenses in the quarter of GBP1.41 million down
5% compared to GBP1.48 million at 31 March 2015.
Headcount at 31 March 2016 was 113, up two from December 2015
(111).
Strategic Review
On 20 February 2015 shareholders were informed that the Board
are conducting a strategic review of the Company's business and as
part of this review are looking at a potential sale of the Company.
The Board has appointed Lincoln International LLP to assist in this
process. The Company is a Canadian Business Corporation, registered
in Yukon, Canada and is not subject to the provisions of the UK
City Code on Takeovers and Mergers.
Further announcements were made on 12 November 2015, 7 January
2016 and 29 March 2016 explaining that all expressions of interest
received to date as part of the Strategic Review from potential
offerors for 100% of the issued and to be issued share capital of
the Company on a debt-free, cash-free basis have been indicatively
priced at a substantial discount to the share price.
The Board continues to regularly discuss with its majority owner
how best to proceed with the Strategic Review. Further
announcements will be made in due course, as appropriate. In the
meantime there can be no certainty that any potential transaction
will proceed, or as to the terms of any such transaction. The
Company may discontinue the strategic review process at any
time.
Support from TAO UK
On 29 March 2016 the Company entered into a new loan of
GBP314,000 which accrues interest at 6% per annum, from its parent
company, TAO UK, repayable on 1 April 2017, which can be extended
at the Company's request for a further year.
As at 31 March 2016 the loan amount was GBP0.31 million (31
March 2015: GBP10.48 million plus accrued unpaid interest of
GBP1.45 million).
Summary
In summary, the Company has continued to implement its strategy
of bidding for profitable production and development contracts,
whilst maintaining a disciplined and considered approach to
costs.
We believe that this was reflected in the significant
improvement in the gross margin and operating profit of the Company
during 2015. Additionally, the GBP11.76 million loan waiver by TAO
UK in November 2015 meant the Company entered 2016 with a stronger
balance sheet.
Whilst the current order book extends over the next two years
and beyond, the need to win further substantial orders, execution
of those orders and completion of development programmes in a
consistent and timely manner are all key to delivering management's
plans for improved results during 2016 and beyond.
Going Concern
These consolidated financial statements have been prepared on
the basis of International Financial Reporting Standards (IFRS)
applicable to a "going concern", which assume that the Company will
continue in operation for the foreseeable future and will be able
to realise its assets and discharge its liabilities in the normal
course of operations.
As at 31 March 2016 the Company had net operating outflows, with
a net debt of GBP3.16 million, being GBP3.27 million of debt less
GBP0.11 million of cash. The Company has a cumulative deficit of
GBP99.56 million as at 31 March 2016 and was loss making for the
period then ended.
The Company remains critically dependent upon i) customers
paying to contractual terms and ii) the continued financial support
of its intermediate parent undertaking TAO Sustainable Power
Solutions (UK) Limited (TAO UK), who in turn is dependent on their
parent undertaking VSE (which in turn is dependent on its parent
company Vale S.A. (Vale)). The Company relies on TAO for continued
financial support in the form of the loan made available to the
Company, and in order to meet any shortfall in budgeted or
forecasted working capital requirements and support the Company's
growth plans. If not secured, this may result in the curtailment of
the Company's activities.
However, the Directors believe that they will succeed in
delivering the Company's projected financial performance and that
financial support from TAO UK and, ultimately, VSE, and its parent
company, Vale, Brazil's largest mining company, will remain in
place to enable the Company to meet budgeted and forecasted working
capital requirements and support the Company's growth plans.
Although there are no formal letters of support in place for the
purpose of the directors' going concern assessment of the Company,
the directors of the Company have taken comfort from the actions
taken by TAO UK, in that loans have been provided when required
(the latest being GBP0.31 million on 29 March 2016), that the
existing debt was waived in November 2015 and that the majority of
the Board are VSE representatives, in forming their conclusion that
they believe it is appropriate to prepare these financial
statements on a going concern basis. Accordingly, they have
continued to adopt the going concern basis of preparation.
If the Company is unable to either generate positive cash flows
from operations or ensure the continued financial support from TAO
UK and ultimately VSE and its parent company, or secure additional
debt or equity financing, these conditions and events indicate the
existence of a material uncertainty which may cast significant
doubt regarding the going concern assumption and, accordingly, the
use of accounting principles applicable to a going concern.
These consolidated financial statements do not reflect
adjustments to the carrying values of the assets and liabilities,
the reported expenses and the balance sheet classifications, which
could be material, which would be necessary if the going concern
assumption were not appropriate.
Summary of Quarterly Results
The following table shows selected quarterly consolidated
financial information of the Company for the last eight
quarters:
Revenue Research General Operating Net (loss)/profit Loss
All amounts and product and administrative (loss)/profit per
in GBP'000 development share
pence
June 2014 4,160 378 968 (659) (900) (0.03)
September
2014 4,292 351 870 (6) (47) (0.00)
December
2014 3,424 520 553 264 76 0.00
March 2015 4,082 544 872 202 29 0.00
June 2015 4,086 448 978 257 81 0.00
September
2015 3,246 118 831 346 34 0.00
December
2015 1,973 360 790 (895) (992) (0.03)
March 2016 3,350 416 916 (136) (148) (0.00)
Quarterly revenues returned to their previous levels in March
2016 as production revenue increases and new development contracts
start.
Research and development expenditure continues to remain at a
steady level of just above 2015's quarterly average expenditure of
GBP0.36 million following the Board approved strategy to drive the
Company's technology forward.
General and Administration expenses have increased slightly in
the first quarter but remain in line with the Company's
expectations for 2016.
Copies of Quarterly and Annual Results
The Company's full Financial Results and Managements' Discussion
and Analysis for 2015 together with the First quarter 2016
Financial Results and Managements' Discussion and Analysis are
available on www.sedar.com. The Annual Report and Financial
Statements for 2015 have been mailed to shareholders.
Copies of the quarterly and annual results are available from
the Company's office at 1 Queens Park, Queensway North, Team Valley
Trading Estate, Gateshead, NE11 0QD, United Kingdom or available to
view from the Company's website at www.turbopowersystems.com.
Annual General Meeting ("AGM")
The Company is pleased to announce that its AGM will be held at
1.00 p.m. (GMT+1) on Thursday 26 May 2016, at the Company's offices
at 1 Queens Park, Queensway North, Team Valley Trading Estate,
Gateshead NE11 0QD. Copies of the Annual Report and Financial
Statements for 2015 and the Notice of Meeting, Management Proxy and
Information Circular have been posted to Shareholders. Copies are
also available on the Company's website
www.turbopowersystems.com.
Review of the quarter ended 31 March 2016
Revenue
Revenue in the quarter ended 31 March 2016 was down 18% at
GBP3.35 million (Q1 2015: GBP4.08 million.)
2016 2015
GBP'000 GBP'000
Production 3,056 3,157
Development 294 925
-------- --------
3,350 4,082
-------- --------
Production revenue remained essentially constant for the quarter
at GBP3.06 million (Q1 2015: GBP3.16 million) while development
revenue decreased by 68% to GBP0.29 million (Q1 2015: GBP0.93
million) as new development contracts are starting up.
Cost of Sales
The cost of sales was GBP2.05 million (Q1 2015: GBP2.40
million).
Gross Profit
Gross profit decreased by 23% to GBP1.30 million (Q1 2015:
GBP1.68 million), with gross margin decreasing slightly to 39% (Q1
2015: 41%) and the Company remains committed to increasing the
profitability of both its current and future contracts.
Research and product development
Research and product development costs in the quarter decreased
by 22% to GBP0.42 million (Q1 2015: GBP0.54 million), in line with
the Board's plans for the Company has become more product focused.
This is net of RDEC tax credits of GBP0.05 million (Q1 2015:
GBP0.05 million).
General and administrative costs
General and administrative costs, which consist mainly of staff
costs, facilities costs and the costs associated with the Company's
public listings, were up by 6% compared to 2015 to GBP0.92 million
(Q1 2015: GBP0.87 million). The Company continues to control its
costs without prejudicing the business operational strengths, with
a reduction in headcount of 10% compared with 31 March 2015 (31
March 2016: 113, 31 March 2015: 126) and the consolidation of its
operations to the Gateshead site.
Operating loss
Operating loss before other operating income was GBP0.14 million
(Q1 2015: profit GBP0.20 million).
Other operating income
There was no other operating income arising from the Regional
Growth Fund in the quarter as the Company has terminated the
project (Q1 2015: GBPnil). Discussions are ongoing regarding the
financial impact of this but the Board notes that there is GBP0.24
million liability in the balance sheet to cover any potential
repayments.
Finance expense
Finance expense was GBPnil (Q1 2015: GBP0.17 million arose from
the interest on the historical loans from TAO UK, which was waived
in full in November 2015).
Net loss
The Company recorded a net loss of GBP0.15 million (Q1 2015:
profit GBP0.03 million).
Cash flows for the quarter ended 31 March 2016
Operating cash flows
The Company recorded an operating cash outflow before working
capital movements of GBP0.07 million for the quarter (Q1 2015:
inflow GBP0.27 million).
After adjusting for changes in working capital items the Company
had an overall cash outflow from operations of GBP0.64 million (Q1
2015: GBP1.44 million).
Investing activities
Cash outflows from capital investments in the quarter were
GBP0.05 million (Q1 2015: GBP0.05 million).
Financing activities
Cash inflow received from financing activities amounted to
GBP0.31 million, from the new TAO UK loan (Q1 2015: GBPnil).
Overall cash outflow for the period
Overall the cash outflow during the quarter was GBP0.39 million
(Q1 2015: Outflow GBP1.50 million).
Balance sheet as at 31 March 2016
The Company ended the period with an unrestricted cash balance
of GBP0.11 million compared with GBP0.50 million at 31 December
2015. Substantially all of the Company's cash balances are
denominated in Sterling.
In addition, the Company had restricted cash amounts of GBP0.07
million (31 December 2015: GBP0.07 million), relating to utilities
deposits and a performance bond.
Non-current assets have decreased from GBP0.87 million at 31
December 2015 to GBP0.86 million at 31 March 2016, after
depreciation and amortisation charges of GBP0.06 million.
Loans and borrowings have increased since 31 December 2015 by
the new TAO UK loan of GBP0.31 million. The loan and interest are
shown as a non-current liability repayable on 1 April 2017, which
can be extended, at the Company's request, for a further year, and
accrues interest at 6% per annum, payable annually.
Net current assets at 31 March 2016, excluding restricted cash
balances included under current assets, were GBP3.05 million (31
December 2015: GBP2.88 million).
As at 31 March 2016, the Company had 3,336,865,922 common shares
issued and outstanding and 892,777,778 A ordinary shares issued and
outstanding. As at that date there were 5,982,728 outstanding share
options.
Contractual Obligations
Payments due by period
Total 2016 2017 2018 2019 2020
and
there
after
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade and other
payables 2,953 2,953 - - - -
Loan notes 314 - 314 - - -
Operating leases 1,989 221 295 295 295 883
______ ______ ______ ______ ______ ______
5,256 3,174 609 295 295 883
______ ______ ______ ______ ______ ______
Shareholders' equity
The movement in shareholders' surplus comprised:
2016
GBP'000
As at 1 January
2016 3,478
Loss for the
quarter (148)
As at 31 March
2015 3,330
--------
As at 6 May 2016, the Company had 3,336,865,922 common shares
issued and outstanding and 892,777,778 A ordinary shares issued and
outstanding. As at that date there were 5,982,728 outstanding share
options.
Liquidity
Cash and cash equivalents at 31 March 2016 were GBP0.11 million
(31 December 2015: GBP0.50 million).
Restricted cash at 31 March 2016 was GBP0.07 million (31
December 2015: GBP0.07 million).
The Company reported a loss in the quarter of GBP0.15 million
and has a cumulative deficit of GBP99.58 million. The Company's
ability to continue as a going concern depends on its ability to
generate positive cash flows from operations or secure additional
debt or equity financing.
The Company has not changed its approach to Currency risk and
Interest rate risk management from that of the prior year and as
disclosed in the annual statements at 31 December 2015.
Currency risk management
The Company's expenditure is principally denominated in
Sterling, which is funded from Sterling cash balances. Exchange
differences, which arise on consolidation of the Company's Canadian
operations, are included in exchange adjustments within the income
statement. At 31 March 2016 the Sterling equivalent of Canadian
Dollar denominated net liabilities amounted to GBP20,500 (31
December 2015: net liabilities GBP1,950).
The Company receives a significant proportion of its revenue in
US Dollars (including from contracts with Canadian customers). As
such the Company routinely maintains a significant receivables
balance in US Dollars, which are revalued at each period end. At 31
March 2016 the Sterling equivalent of the US Dollar denominated
assets amounted to GBP1.81 million (31 December 2015: GBP1.96
million).
To manage its foreign exchange risk arising from future
commercial transactions and recognised assets and liabilities, the
Company uses forward foreign exchange contracts. Further
information is provided in Note 7 Derivative Financial
Instruments.
Interest rate risk management
The analysis of the Company's financial assets and borrowings
analysed between floating and fixed interest rates is shown
below
31 March 31 December
2016 2015
GBP'000 GBP'000
Floating rate
financial assets 111 496
Fixed rate borrowings (314) -
The fixed rate borrowings are at 6.0% per annum.
Financial instruments
The Company's financial assets and liabilities consist primarily
of the cash and cash equivalents, restricted cash, trade
receivables, trade payables and loans.
31 March 2016 31 December 2015
Loans and Financial Loans and Financial
receivables liabilities receivables liabilities
at amortised at amortised
cost cost
GBP'000 GBP'000 GBP'000 GBP'000
Asset/(Liability)
Cash and cash equivalent 111 - 496 -
Restricted cash 66 - 66 -
Trade, prepayments
and other receivables 2,969 - 2,675 -
Trade and other
payables - (2,953) - (3,075)
Loans - (314) - -
Total 3,146 (3,267) 3,237 (3,075)
============= ============== ============= ==============
The amounts at which the assets and liabilities above are
recorded are considered to approximate to fair value.
Fair value estimation
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. The
Company uses a variety of methods and makes assumptions that are
based on market conditions existing at each balance sheet date.
Techniques, such as estimated discounted cash flows, are used to
determine fair value for the financial instruments. The fair value
of forward foreign exchange contracts is determined using quoted
forward exchange rates at the balance sheet date.
The carrying value less impairment provision of trade
receivables and payables are assumed to approximate their fair
values due to the short-term nature of trade receivables and
payables. The fair value of financial liabilities for disclosure
purposes is estimated by discounting the future contractual cash
flows at the current market interest rate that is available to the
group for similar financial instruments.
Derivative financial instruments
The Company uses foreign exchange forwards to help manage its
foreign exchange risk. The Company classifies these derivatives as
financial assets at fair value through profit and loss. Derivatives
are classified as current assets.
Financial assets carried at fair value through profit or loss
are initially recognised at fair value, and transaction costs are
expensed in the income statement. Financial assets are derecognised
when the rights to receive cash flows from the investments have
expired or have been transferred and the group has transferred
substantially all risks and rewards of ownership.
Gains or losses arising from changes in the fair value of the
'financial assets at fair value through profit or loss' category
are presented in the income statement within 'Other gains - net' in
the period in which they arise.
Financial Risk Management and Capital Structure
The Company's risk management programme remains as detailed on
page 51 in the Annual Report and Financial Statements 31 December
2015. There have been no significant changes since 31 December
2015.
Further information is provided in Management's Discussion and
Analysis and the notes to these Condensed Consolidated Interim
Financial Statements.
Related Party Transactions
On 29 March 2016 the Company announced that its wholly owned
subsidiary Turbo Power Systems Limited had entered into an
agreement to draw down on a new loan to be provided by TAO UK, to
support working capital requirements. The additional amount
available to draw down as follows:
29 March 2016 GBP314,000
This amount is repayable on 1 April 2017, which can be extended,
at the Company's request, for a further year, and accrues interest
at 6% per annum, payable annually
Critical accounting policies and estimates
These condensed consolidated interim financial statements have
been prepared on the basis of International Financial Reporting
Standards applicable to a going concern, which assume that the
Company will continue in operation for the foreseeable future and
will be able to realize its assets and discharge its liabilities in
the normal course of operations. As at 31 March 2016 the Company
had net operating cash outflows. Therefore the Company may require
additional funding which, if not raised, may result in the
curtailment of activities. The Company has a cumulative deficit of
GBP99.58 million as at 31 March 2016.
Further information on Going Concern is provided in Note 2.
The preparation of financial statements in conformity with IFRS
requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets and liabilities, revenue and expenses and the
related disclosures of contingent assets and liabilities. Although
these estimates are based on management's best knowledge of the
amount, event or actions, actual results ultimately differ from
those estimates.
Estimates and underlying assumptions are continually evaluated
and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in
any future period affected.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the financial year are disclosed on page 42 in
the Annual Report and Financial Statements for 31 December
2015.
Principal Risks and Uncertainties
Risk or uncertainty Mitigation approach
Operating revenues
TPS has entered into large The Company is seeking
development and manufacturing to change the emphasis
contracts. The outcome on new contract signings.
of this is that large amounts The Company has a growing
of revenue are associated revenue stream associated
with one product line and with repair, maintenance
one customer. As there and overhaul that does
is reliance on large contracts not rely on large value
being signed by the Company, contracts. The Company
the impact of not signing is focusing efforts to
a large contract would increase the percentage
be high on the results of revenue associated with
of the Company in any one these activities in addition
year. The Company recognises with the new major contract
that it is increasingly awards.
difficult to forecast when The Company has always
these new contracts will worked closely with its
be signed due to the importance current customer base.
customers associate such Going forward this will
large values. The Company continue, but greater emphasis
has suffered and will continue is being put into working
to suffer from delays in with new customers and
expected contract award hence increasing the number
dates. of contracts in bid and
diluting the relative impact
of individual contract
awards.
Cost overrun on contracts
due to technology risk The Company seeks to mitigate
TPS is a technology-led these risks by significant
company. As the products up front planning and research.
that it develops are technology The new ideas are reviewed
driven, the Company is by senior personnel and
looking to use the latest approved before use in
design and practices when new projects. A project
a new contract is won. based reporting and review
This enables the Company system is in place to monitor
to make the most efficient the activities and the
solution for each project. output from design and
Due to these technology testing phases. A system
advances there is a significant of cost control is in place
risk extra costs may be to ensure that budgets
incurred while developing are monitored and any variances
new ideas to fulfil contracts. recognised early and taken
into account to mitigate
them in future activities.
Further development activities
TPS undertakes research The Company has a structure
activities to ensure that of senior engineers who
the technology used is are responsible for reviewing
current and forward looking. market trends and identifying
There is a risk that the new technologies as they
Company misses a directional become useful in our products.
change in where technology The Company also partakes
is moving and does not in research projects that
produce new and efficient are originated via bodies
designs. such as Innovate UK. These
projects typically involve
University departments
as well as a diverse group
on interested parties.
This helps the Company
understand potential customer
and supplier's knowledge
and requirements.
Commercial relationships
TPS has longstanding commercial The Company seeks to mitigate
relationships with major this risk by working closely
customers. However, there with the customer. This
is no guarantee that customers involvement starts with
will continue to design understanding their future
and manufacture the appropriate product roadmap and working
products that require our closely at an early stage
technology. Any integration, to help overcome new design
design or manufacturing problems. This works especially
problems that the customer well on projects with existing
encounters could adversely customers. However, the
affect the financial results Company is changing the
of the Company. profile of its salesforce
as part of seeking to expand
The risk could be that the customer base. This
the customer's designs requires the Company to
no longer require, say, bring new fresh ideas to
an auxiliary power unit the market and identify
and therefore future orders current problems encountered
cease. Alternatively, a in the marketplace.
customer could be having
issues with, say, the overall In its major market of
train design and manufacture Rail, whilst the Company
and therefore revenue could tries to mitigate customer
be delayed. issues with train manufacture
in regard to its own product
line it will always be
at risk of the overall
train manufacture timing
issues. The Company seeks
to mitigate these through
contractual timeframes
and terms.
Dependence of key personnel
TPS is a technology-led The Company works closely
company and hence reliant with key personnel to ensure
on key personnel. The Company that they are fully motivated
has a group of senior personnel and engaged on interesting
who oversee the design and rewarding projects.
research and implementation. The Company believes that
Having been through major the roles should be aligned
personnel number changes to the individual's ability,
in the last few years, so these can be within
key positions exist within technical expertise or
the Company that require management responsibility.
succession plans to be
in place. Where a key position has
been identified a succession
plan has been drawn up.
Foreign currency exchange
rate fluctuations The Company seeks over
TPS is subject to foreign time, to balance currency
currency risk. Foreign requirements with currency
currency sales (and to inflows. Where there is
a much lesser extent) purchases excess currency inflow
are made in Euros and in the Company seeks to match,
Canadian and US Dollars. to the extent possible,
The Company's major contracts planned currency sales
are denominated in US Dollars through forward foreign
and therefore a major portion currency exchange contracts.
of cash receipts are in The level of currency hedging
US Dollars. The Company is dependent on the credit
is therefore exposed to limits available for future
movements in foreign currency currency deals and the
rates over time. perceived currency forecast
movement.
Part of the Board's strategy
has been to seek increased
sales to UK based companies
where contracts are undertaken
in GBP Sterling.
Future funding
The Company has been loss The Company works closely
making for a number of with VSE, its majority
years and has been critically shareholder, to ensure
reliant on regular increases that it is fully aware
in external funding (which of the financial situation
was waived in November of the Company on a very
2015). As noted in the regular basis and also
Directors' Report and Note of customer concerns. The
2 Going Concern, TPS is Company seeks to gain approval
critically dependent on for all budgets, working
customers paying to contractual closely with VSE on all
terms in order to meet financial and operational
forecast working capital matters, assisted by the
requirements and support two representatives of
the Company's growth plans. VSE on the Board.
If not secured, this may
well result in the curtailment
of the Company's activities,
partly due to customer
concerns over the Company's
continuing viability.
Strategic Review
In conjunction with VSE, The Board has been working
the Company has been undertaking closely with VSE to understand
a Strategic Review for its requirements and with
over a year. The Review's Lincoln International whom
continuation could impact the Board and VSE appointed
the future orders due to to undertake the Review.
the uncertainty that customers Notwithstanding the Review,
and potential customers the Board is operating
might perceive before the the Company in a normal
outcome is determined. manner.
Internal Control
The Board of Directors has overall responsibility for the
accounting policies and ensuring that the Company maintains an
adequate system of internal financial control to provide them with
reasonable assurance that assets are safeguarded and of the
reliability of financial information used for the business and for
publication. More detail on the Company's internal control can be
found on page 27 of the Annual Report and Financial Statements for
the year ended 31 December 2015.
Turbo Power Systems Inc.
Condensed consolidated interim income statement
Unaudited
________________________________________________________________________________
Notes Quarter
ended
31 March
2016 2015
GBP'000 GBP'000
Revenue 5 3,350 4,082
Cost of sales (2,052) (2,399)
-------- --------
Gross profit 1,298 1,683
Expenses
Distribution costs (81) (65)
Research and product development (416) (544)
General and administrative (916) (872)
-------- --------
Total expenses (1,413) (1,481)
Operating (loss)/profit
before other operating
income (115) 202
Other operating Income - -
Other losses - net (21) -
Operating (loss)/profit/ (136) 202
Finance expense - (173)
(Loss)/profit before tax (136) 29
Income tax expense (12) -
Net (loss)/profit and total
comprehensive (loss)/profit
for the periods (148) 29
======== ========
(Loss)/profit per share
- basic and diluted 6 (0.00)p 0.00p
======== ========
The Notes form an integral part of these condensed consolidated
interim financial statements.
Turbo Power Systems Inc.
Condensed consolidated interim statement of financial
position
Unaudited
________________________________________________________________________________
Notes As at As at
31 March 31 December
2016 2015
GBP'000 GBP'000
Current assets
Restricted cash 66 66
Inventories 3,125 3,253
Trade and other receivables 2,969 2,675
Prepayments 362 162
Cash and cash equivalents 111 496
---------------------- ------------------
6,633 6,652
---------------------- ------------------
Non-current assets
Intangible assets 413 433
Property, plant and equipment 447 434
860 867
Total assets 7,493 7,519
====================== ==================
Current liabilities
Trade and other payables 2,953 3,075
Derivative financial instruments 7 21 -
Provisions 8 544 635
---------------------- ------------------
3,518 3,710
---------------------- ------------------
Non-current liabilities
Loans and borrowings 10 314 -
Provisions 8 331 331
---------------------- ------------------
645 331
---------------------- ------------------
Total liabilities 4,163 4,041
Equity (deficit)
Share capital 11 71,408 71,408
Capital contribution reserve 11 12,367 12,367
Convertible shares 11 17,310 17,310
Other reserves 1,823 1,823
Retained deficit (99,578) (99,430)
---------------------- ------------------
Equity 3,330 3,478
Total liabilities and equity 7,493 7,519
====================== ==================
Approved by the Board:
F Senhora, Chairman
6 May 2016
The Notes form an integral part of these condensed consolidated
interim financial statements.
Turbo Power Systems Inc.
Condensed consolidated interim statement of changes in
equity
Unaudited
________________________________________________________________________________
Common Capital Convertible Other Accumulated Total
Share Contribution Shares reserves deficit
capital reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2015 71,408 - 17,310 1,823 (96,582) (8,041)
Net Profit - - - - 29 29
Balance at 31
March 2015 71,408 - 17,310 1,823 (98,553) (8,012)
Capital contribution - 12,367 - - - 12,367
Net loss - - - - (877) (877)
Balance at 31
December 2015 71,408 12,367 17,310 1,823 (99,430) 3,478
Net loss - - - - (148) (148)
Balance at 31
March 2016 71,408 12,367 17,310 1,823 (99,578) 3,330
========= ============== ============ ========== ============ ========
The Notes form an integral part of these condensed consolidated
interim financial statements.
Turbo Power Systems Inc.
Condensed consolidated interim statement of cash flows
Unaudited
________________________________________________________________________________
Quarter ended
31 March
2016 2015
GBP'000 GBP'000
Cash flows from operating
activities
Net (loss)/profit for the
period (148) 29
Adjustments for:
Finance expense - 173
Foreign Exchange - 62
Depreciation of property,
plant and equipment 32 55
Derivative financial instrument 21 -
Amortization of intangible
assets 26 20
Movement in onerous contract
provision - (72)
Operating cash flows before
movements in working capital (69) 267
Changes in working capital
items
Decrease/(increase) in
inventories 128 (295)
(Increase) in trade and
other receivables (294) (955)
(Increase) in prepayments (200) (185)
(Decrease) in trade and
other payables (122) (196)
(Decrease) in provisions (91) (79)
-------- --------
Cash absorbed from operating
activities (643) (1,443)
-------- --------
Investing activities
Purchase of property, plant
and equipment (46) (18)
Purchase of intangible
assets (5) (34)
Net cash used in investing
activities (51) (52)
Cash flows from financing
activities
Proceeds from increase 314 -
in loans
-------- --------
Net cash from financing 314 -
activities
-------- --------
Net decrease in cash and
cash equivalents (385) (1,495)
Cash and cash equivalents
at the beginning of the
period 496 1,825
Cash and cash equivalents
at the end of the period 111 330
======== ========
The Notes form an integral part of these condensed consolidated
interim financial statements.
Turbo Power Systems Inc.
Notes to the condensed consolidated interim financial
statements
Unaudited
________________________________________________________________________________
1 Reporting entity
Turbo Power Systems Inc. ("The Company") is subsisting pursuant
to the Business Corporations Act (Yukon Territory). The Company's
registered office is Suite 200-204 Lambert Street, Whitehorse,
Yukon Y1A 3T2, Canada.
The Company conducts operations through its wholly owned
subsidiary company, Turbo Power Systems Limited ("TPSL"), whose
main trading address is 1 Queens Park, Queensway North, Team Valley
Trading Estate, Gateshead NE11 0QD, United Kingdom.
The Company's parent undertaking is TAO Sustainable Power
Solutions (UK) Limited ("TAO UK"), a company registered in England
and Wales, UK. The Company's ultimate parent company is Vale S.A.
("Vale"), a company registered in Brazil.
These condensed consolidated interim financial statements of the
Company as at and for the quarter ended 31 March 2014 comprises of
the Company and its subsidiaries. The Company's subsidiaries
comprise:
Trading Place of % Ownership
status incorporation
Turbo Power Systems Limited Trading England 100%
Turbo Power Systems Development
Limited Dormant England 100%
Intelligent Power Systems
Limited Dormant England 100%
Nada-Tech Limited Dormant England 100%
2 Going concern
These consolidated financial statements have been prepared on
the basis of International Financial Reporting Standards (IFRS)
applicable to a "going concern", which assume that the Company will
continue in operation for the foreseeable future and will be able
to realise its assets and discharge its liabilities in the normal
course of operations.
As at 31 March 2016 the Company had net operating outflows, with
a net debt of GBP2.84 million, being GBP2.95 million of debt less
GBP0.11 million of cash. The Company has a cumulative deficit of
GBP99.56 million as at 31 March 2016 and was loss making for the
period then ended.
The Company continues to be critically dependent upon i)
customers paying to contractual terms and ii) the continued
financial support of its intermediate parent undertaking TAO
Sustainable Power Solutions (UK) Limited (TAO UK), who in turn is
dependent on their parent undertaking VSE (which in turn is
dependent on its parent company Vale S.A. (Vale)). The Company
relies on TAO for continued financial support in the form of the
loan made available to the Company, and in order to meet any
shortfall in budgeted or forecasted working capital requirements
and support the Company's growth plans. If not secured, this may
result in the curtailment of the Company's activities.
However the Directors believe that they will succeed in
delivering the Company's projected financial performance and that
financial support from TAO UK and, ultimately, VSE, and its parent
company, Vale, Brazil's largest mining company, will remain in
place to enable the Company to meet budgeted and forecasted working
capital requirements and support the Company's growth plans.
Although there are no formal letters of support in place for the
purpose of the directors' going concern assessment of the Company,
the directors of the Company have taken comfort from the actions
taken by TAO UK, in that loans have been provided when required
(the latest being GBP0.31 million on 29 March 2016), that the
existing debt was waived in November 2015 and that the majority of
the Board are VSE representatives, in forming their conclusion that
they believe it is appropriate to prepare these financial
statements on a going concern basis. Accordingly, they have
continued to adopt the going concern basis of preparation.
If the Company is unable to either generate positive cash flows
from operations or ensure the continued financial support from TAO
UK and ultimately VSE and its parent company, or secure additional
debt or equity financing, these conditions and events indicate the
existence of a material uncertainty which may cast significant
doubt regarding the going concern assumption and, accordingly, the
use of accounting principles applicable to a going concern.
These consolidated financial statements do not reflect
adjustments to the carrying values of the assets and liabilities,
the reported expenses and the balance sheet classifications, which
could be material, which would be necessary if the going concern
assumption were not appropriate.
3 Basis of preparation
These condensed consolidated interim financial statements have
been prepared in accordance with IAS34 Interim Financial
Reporting.
The Company's condensed consolidated interim financial
statements were prepared in accordance with the accounting policies
set out in Note 3 to the consolidated financial statements for the
year ended 31 December 2015, and using the same methods of
computation.
The condensed consolidated interim financial statements were
authorised for issuance by the Board of Directors on 6 May
2016.
The condensed consolidated interim financial statements have
been prepared under the historical cost convention, except for the
revaluation of certain financial instruments.
The condensed consolidated interim financial statements are
presented in GBP sterling, rounded to the nearest GBP1,000, which
is the Company's functional and presentation currency.
4 Critical accounting judgements and key sources of estimation uncertainty
These condensed consolidated interim financial statements have
been prepared on the basis of International Financial Reporting
Standards applicable to a 'going concern', which assume that the
Company will continue in operation for the foreseeable future and
will be able to realize its assets and discharge its liabilities in
the normal course of operations. As at 31 March 2016 the Company
had net operating cash outflows. Therefore the Company may require
additional funding which, if not raised, may result in the
curtailment of activities. The Company has a cumulative deficit of
GBP99.56million as at 31 March 2016.
Further information on Going Concern is provided in Note 2.
The preparation of financial statements in conformity with IFRS
requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets and liabilities, revenue and expenses and the
related disclosures of contingent assets and liabilities. Although
these estimates are based on management's best knowledge of the
amount, event or actions, actual results ultimately may differ from
those estimates.
Estimates and underlying assumptions are continually evaluated
and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in
any future period affected.
5 Segmental analysis
The Company reports by its distinct segments of production and
development, both segments operate in the United Kingdom. Except
for the investments held by the Company which are located in
Canada, all of the Company's assets are located in the United
Kingdom.
Quarter ended 31 Production Development Unallocated Total
March 2016
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 3,056 294 - 3,350
=========== ============ ============ ========
Segment operating
profit/(loss) 505 (620) - (115)
Finance expense - - - -
Taxation expense - - (12) (12)
Net loss and total
comprehensive loss 505 (620) (12) (127)
=========== ============ ============ ========
Total assets 6,372 944 177 7,493
Total liabilities (2,215) (738) (1,189) (4,142)
Quarter ended 31 Production Development Unallocated Total
March 2015
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 3,157 925 - 4,082
=========== ============ ============ =========
Segment operating
profit/(loss) 289 (87) - 202
Finance expense - - (173) (173)
Net loss and total
comprehensive loss 289 (87) (173) 29
=========== ============ ============ =========
Total assets 7,443 869 398 8,710
Total liabilities (3,103) (1,034) (12,585) (16,722)
Geographic Segmental Information
Quarter ended
31 March
Total Revenues by destination 2016 2015
GBP'000 GBP'000
UK 1,573 1,170
USA 1,374 1,101
Rest of world 252 238
Canada 151 1,573
3,350 4,082
======== ========
All property, plant and equipment were located within the United
Kingdom during both periods ended 31 March 2016 and 31 March
2015
6 Profit/(loss) per share
(Loss)/profit per common share has been calculated using the
weighted average number of shares in issue during the relevant
financial periods.
Quarter ended
31 March
2016 2015
Numerator for basic loss
per share calculation:
(Loss)/profit attributable (GBP148,000) GBP29,000
to equity shareholders
Denominator:
For basic net (loss)/profit
- weighted average shares
outstanding 3,336,865,922 3,336,865,922
For diluted net (loss)/profit
- weighted average shares 4,235,626,428 4,244,724,609
Basic and diluted
Basic loss per common share
- pence 0.00p 0.00p
Diluted loss per common
share - pence 0.00p 0.00p
As the Company experienced a loss in 2016 all potential common
shares outstanding from dilutive securities are considered
anti-dilutive and are excluded from the calculation of diluted loss
per share.
Details of dilutive potential securities outstanding included in
EPS calculations at 31 March 2016 are as follows:
As at 31 As at 31
March March
2016 2015
Common shares potentially
issuable:
- under stock options 5,982,728 15,080,909
- pursuant to A Ordinary
Share conversion 892,777,778 892,777,778
------------ ------------
898,760,506 907,858,687
============ ============
7 Derivative financial instrument
31 March 31 December
2016 2015
Assets Liabilities Assets Liabilities
GBP'000 GBP'000 GBP'000 GBP'000
Forward Exchange - 21 - -
Contracts
Total - 21 - -
--------- ------------ ------------ ------------
Less non-current portion: - - - -
--------- ------------ ------------ ------------
Current portion - 21 - -
========= ============ ============ ============
The notional principal amounts of the outstanding forward
foreign exchange contracts at 31 March 2016 were GBP0.67 million
(2015: GBP0.31 million).
8 Provisions
Onerous Asset Warranty Total
Contracts Retirement
Obligations
GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January
2015 77 324 310 711
Utilised in period (74) (5) - (79)
Balance at 31 March
2015 3 319 310 632
Utilised in period (3) (34) (56) -
Provided in period - - 500 -
Release in period - - (73) -
Balance at 31 December
2015 - 285 681 966
Utilised in period - - (91) (91)
Balance at 31 March
2016 - 285 590 875
=========== ============= ========= ========
31 Mar 31
Dec
Analysed as: 2016 2015
GBP'000 GBP'000
Current liabilities 544 635
Non-current
liabilities 331 331
Total 875 966
======== ========
Onerous Contracts: The Company entered 2015 with one contract
where the estimated material and labour costs were in excess of the
expected revenues. In 2015 the final GBP77,000 was utilised as the
contract was concluded. There are no onerous contracts in 2016.
Asset Retirement Obligations: During 2010 the Company recognised
a requirement for a provision for the asset retirement obligations
related to the two properties it then leased. One lease has
subsequently terminated in 2013 and the other will terminate in
2022. Accordingly a provision, based on the present value of the
future expected expenditure was recorded at GBP674,000 as at 31
December 2010. Following a 2015 review of the provision against
expected costs the Company released GBP39,000 of this provision.
There has been no movement on this provision in the first quarter
of 2016. The Company has recorded no further increase in accretion
expense in 2016 (Q1 2015: GBPnil).
Warranty: Production units sold by the Company are provided with
a warranty against operational failure. The warranty period
provided is dependent upon the sales agreement with the customer
and the nature of the unit, but typically is between one and two
years from the date of delivery. The warranty provision is
maintained at a level calculated to reflect the current costs of
repair and incidence of failure of existing and similar units.
During the final quarter of 2015 the Company received a claim
from a customer for warranty, relating to a fault within motor
units delivered to a customer during 2013 to 2015. The Company
included a one off provision expense in 2015 of GBP0.50 million of
which GBP0.44 million remained at 31 December 2015. The Company has
utilised a further GBP0.09 million in the first quarter of 2016
leaving a provision of GBP0.35 million at 31 March 2016. See Note
9.
9 Contingent Liabilities
As reported in Note 8 Provisions above, during the final quarter
of 2015 the Company received a claim from a customer for warranty,
relating to a fault within motor units delivered during 2013 to
2015.
The financial statements include a one off expense during 2015
of GBP0.50 million, of which GBP0.44 million remained as a
liability as at 31 December 2015. In the first quarter of 2016 a
further GBP0.09 was utilised and GBP0.35 million remains at 31
March 2016. The provision was made to cover the costs of the
replacement parts to be supplied and where the cost can be
accurately estimated. It is expected that the majority of the cash
outlay will be in the first half of 2016.
The matter is subject to an insurance claim by the Company for
costs requested by the customer beyond the unit replacement costs.
Currently there is uncertainty about the amount of these costs and
therefore the amount of the insurance claim and whether the
insurance claim will cover all the costs. There is also uncertainty
as to whether the Company is liable for all the costs that the
customer is requesting.
The Directors believe that based on independent advice (which
continues to be taken) and their current assessment of the facts
that the provision made is appropriate. However, the final amount
is dependent upon the outcome of the agreements between the
parties.
10 Loans and borrowings
On 29 March 2016 the Company announced that its wholly owned
subsidiary Turbo Power Systems Limited had entered into an
agreement to draw down on a new loan to be provided by TAO UK, to
support working capital requirements. The additional amount
available to draw down as follows:
29 March 2016 GBP314,000
This amount is repayable on 1 April 2017, which can be extended,
at the Company's request, for a further year, and accrues interest
at 6% per annum, payable annually.
31 March 31 December
2016 2015
Fixed rate loans GBP'000 GBP'000
Due after one year
Loans 314 -
Accrued Interest - -
--------- ------------
Total 314 -
========= ============
The Company has drawn down on all its borrowing facilities as at
31 March 2016 (2015: all loans drawn down in full). There is no
unpaid accrued interest included in the loan amount at 31 March
2016.
11 Share capital and options
Share capital and other reserves
Share Capital
Common Shares Convertible Shares
(A Ordinary Shares)
Number GBP'000 Number GBP'000
At 31 March
2015 and at
31 December
2015 3,336,865,922 71,408 892,777,778 17,310
At 31 March
2016 3,336,865,922 71,408 892,777,778 17,310
================ ========== ============== ==============
The Company is authorised to issue an unlimited number of common
shares and an unlimited number of preferred shares, issuable in
series, without nominal or par value. All common shares rank
equally with regard to the Company's residual assets.
The holders of common shares are entitled to receive dividends
as declared from time to time, and are entitled to one vote per
share at meetings of the Company.
Holders of A Ordinary Shares of Turbo Power Systems Limited
("TPSL") (Convertible shares), carry no voting rights, cannot
attend any shareholder meetings and, in the event of winding-up of
TPSL are entitled to a maximum distribution of GBP500,000 in
aggregate, to rank before the Common Shares. The A Ordinary shares
are convertible into an equal number of Common Shares of the
Company on request by the holder, having given 61 days' notice.
Under certain take over or change in control events, the A Ordinary
Shares are exchangeable under "super exchange" rights, converting
for 3 Common shares of the Company for every A Ordinary Share
held.
As the A Ordinary Shares are non-participating interests in TPSL
and are non-voting, no current year or cumulative net losses have
been allocated to the A Ordinary Shares.
Capital contribution reserve
At 31 March 2016 the Capital contribution reserve, from the
waiver of the TAO UK Loans and accrued interest, was GBP12.37
million (31 December 2015: GBP12.37 million)
Other reserves
At 31 March 2016, other reserves comprise of the stock
compensation reserve of GBP1,823,000 (31 December 2015:
GBP1,823,000).
Potential issue of common shares
The Company has issued share options under the 2002 Stock Option
Plan and A Ordinary Shares that are convertible into common shares
of the Company.
31 March 31 December
2016 2015
Under stock option plan 5,982,728 6,012,728
Pursuant to A Ordinary
Share conversion 892,777,778 892,777,778
------------
898,760,506 898,790,506
--------------- ------------
12 Related party transactions
Transactions with the parent and ultimate parent company
During the periods ended 31 March 2015 and 31 March 2016 the
Company undertook no significant transactions with related
parties.
Save for the loans and borrowings (see Note 10 above) and any
accrued interest, there were no amounts outstanding at 31 December
2015 and 31 March 2016 between the Company and TAO UK, and the
Company and VSE.
Transactions are conducted within the normal course of business
for supply of engineering design services and are transacted at
exchange amount, which is the amount agreed for the
transaction.
Key Management personnel compensation
In addition to their salaries, the Company provides non-cash
benefits to executive management and contributes to a defined
contribution pension plan. Some executive officers participate in
the share option programme.
Key management personnel compensation comprises the
following:
Quarter Ended
31 March
2016 2015
GBP'000 GBP'000
Salaries 138 138
Pension contributions 9 9
157 157
======== ========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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