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21st
February 2007
ORBITAL
RESULTS FOR THE HALF YEAR ENDED
31 DECEMBER 2006
PERTH,
AUSTRALIA:
Orbital Corporation Limited today reports results for the half year
ended 31 December 2006.
In commenting on the results Orbital's Chief
Executive Officer, Dr. Rod Houston said the financial results demonstrated
a continuation of the improvements achieved in the 2006 financial
year.
Key Features
- Revenue up 68% to $8.21 million
- Net loss after tax of $0.43 million compared
to a loss of $1.39 million for the same period last year
- Underlying profit after tax; excluding one-off
legal settlement
- Positive operating result in the half year
- Operating activities cash flow positive
- Synerject joint venture revenue up 100%
to US$35.7 million
- Full and final settlement of the R&D
syndicate dispute with Coles Myer for $0.5 million
- Bajaj enter into a new license for LPG and
CNG three wheeler vehicles
- Share placement and share purchase plan
raises $8.8 million net of costs
"The 1st half has realised the benefits
of operating at near capacity after starting the financial year
with a particularly strong order book" said Dr Houston.
"We are pleased to be cash flow positive
from operations during the half year and the recent capital raising
has put Orbital in a strong position to pursue growth opportunities
as they arise." added Dr Houston.
FINANCIAL SUMMARY
The headline financial results for Orbital
for the half year ended 31 December 2006 are as follows:
| |
December
2006 $'m
|
December
2005 $'m
|
| Revenue |
8.21
|
4.88
|
| Synerject profit |
0.83
|
0.80
|
| Result from operations |
0.20
|
(1.21)
|
| Net profit/(loss) after tax |
(0.43)
|
(1.39)
|
| EPS
(cents) |
(0.10)
|
(0.34)
|
Total revenue for the half year ended 31 December
2006 increased by 68% to $8.21 million, due to increased engineering
services revenue of $3.61 million (+108%) offset by reductions in
royalty and licence income of $0.19 million.
Total expenses increased by $1.95 million (28%)
to $8.84 million mainly as a result of the increased personnel,
consumables and contractors expenses to support the much higher
engineering activity during the half year. The increase also includes
legal fees and settlement costs of $0.58 million to resolve the
dispute with Coles Myer Limited regarding research & development
syndication arrangements. Finance costs include notional interest
charges (non cash) of $327k (2005:$311k) and $56k (2005:$nil) on
Orbital's non interest bearing debt and deferred settlement to maintain
the investment in Synerject LLC respectively arising from the application
of international accounting standards.
Orbital's share of profits of its joint venture
with Siemens, Synerject LLC of $0.83 million were in line with the
previous corresponding period. Synerject's revenue increased by
100% to US$35.7 million mainly as a result of its acquisition of
Delavan in March 2006 which accounted for US$15.2 million of the
increase. Synerject's 2006 result includes increased costs associated
with the expansion of operations into China. Synerject's cash at
31 December 2006 was US$5.3 million and net debt was US$2.5 million
representing a gearing ratio of 21%.
Orbital's cash inflow from operating activities
was $0.04 million for the half year compared to $2.04 million cash
outflow in 2005. This improvement is primarily as a result of the
increased engineering services and was achieved despite the payment
of $0.58 million costs of settlement of the legal dispute noted
above.
In November 2006 Orbital raised $4.0 million
through the placement of 26.6 million shares at an issue price of
15 cents. In December 2006 Orbital successfully completed a share
purchase plan raising a further $5.2 million. The share purchase
plan was oversubscribed however the Directors determined the oversubscriptions
would be accepted in full. After transaction costs a total of $8.8
million was raised. At 31 December 2006 Orbital had cash on hand
of $12.0 million.
Powertrain Engineering Services
Engineering services revenue increased by 108%
to $6.96 million for the half year, with an engineering contribution
of over $2.0 million which is up $2.3 million from the corresponding
previous half.
The increased engineering income was generated
across a range of customers including $2.2 million increase in Orbital
DI development programs and $1.4 million increase in other engineering
contracts. The continuing significant portion of Orbital DI activity
is a reflection of the increased interest in the technology for
new applications including the development of spark ignited heavy
fuel and gaseous fuel systems and engines.
The engineering services order bank continues
at over $6 million. The expansion of Orbital's engineering services
market in the Asia-Pacific region has recently been boosted with
the award of a large engineering contract to refine and validate
a North American dual fuel Liquid Natural Gas (LNG) and diesel technology
to operate in the harsh conditions demanded by Australia's heavy
duty truck fleet. This program was initiated by the Australian Government,
LNG provider and industry partners and is an endorsement of the
skills and capabilities that Orbital has now developed.
The gaseous fuelled heavy duty truck market
in Australia, India and China represents a new market for Orbital
services. These engineering opportunities are complementary with
our strategic aims to develop our core technology for gaseous applications
in the motorcycle and automotive markets.
Royalties and Licences
Licensing and royalties have decreased slightly
in comparison to the corresponding period due to the reduced level
of license fees and continued softness of the European scooter market
due to delays in European emissions legislation.
The royalties from Mercury and Tohatsu remain
strong with growth of the overall DI 2-stroke market in the marine
sector. In this period Mercury celebrated the 10 year anniversary
of the release of OptiMax products which utilise Orbital DI. The
comments below by Mercury are encouraging.
"The 10th birthday marks a highpoint for
OptiMax," said Mercury OptiMax platform manager Mark Klossner.
"It is as strong as ever and getting stronger. OptiMax is part
of our product plan, and our product line-up for many years in the
future. As an outboard technology, it is a great choice for customers
with outstanding performance, reliability and best-in-class fuel
economy."
Bajaj continue to progress the DI autorickshaw
program with the release of pilot production vehicles to select
customers as part of the final preparations for production launch
this financial year. After recent face to face meetings with Bajaj
in India, Orbital continues to be encouraged by the commitment of
Bajaj to the DI autorickshaw and the further expansion of our relationship
for other products. The expansion of their license agreement to
include LPG and CNG applications in September represents further
growth opportunities.
Good progress continues with the assessment of Orbital DI 4-stroke
technology with a number of manufacturers for future motorcycle
and recreational applications. These production feasibility programs
cover both gasoline and spark ignited heavy fuel (kerosene and diesel)
for a number of OEMs, with the first products targeting release
in this calendar year.
Synerject
Synerject has delivered strong growth in revenue
in the first half with a 100% increase in revenue to US$35.7 million
in comparison to the previous corresponding period. This increase
was mainly as a result of its acquisition of Delavan in March 2006
which accounted for US$15.2 million of the increase; however there
has also been 15% growth in Synerject's underlying business.
Orbital's share of profits from Synerject of
$0.83 million were in line with the previous corresponding period.
This result has been impacted by the significant level of increased
costs associated with the expansion of operations into China. Establishment
of the China manufacturing facility in Changchun for the new line
of low cost Electronic control units (ECU) has progressed well in
the first half as announced by Synerject in November 2006. An extract
from the announcement is provided below.
"This initiative complements Synerject's
current manufacturing base for production of engine management modules
and components," said Synerject President and CEO Stephane
Tagliante. "It is primarily aimed at supporting Synerject's
growing business commitments in the Chinese market, while securing
a high quality manufacturing location from which to supply products
to the rest of Synerject's Asian region."
The Synerject initiative is comprised of two
operational elements: the creation of a Manufacturing Center in
Changchun; and, the opening of a sales and application engineering
support center in Chongqing.
Synerject generated cash during the half year
of US$0.8 million notwithstanding the increased costs and capital
investment in China.
Outlook
Orbital is confident that the engineering services
sector will continue to deliver strong revenues going into the second
half based on the order bank and future pipeline of work. The launch
of the DI autorickshaw in India will be a key step for our technology
in a new product into a new market with the potential for significant
royalty contribution in future years. This program will be a key
focus of Orbital resources in the second half as this autorickshaw
platform will be a key part of the launch of the gaseous (CNG and
LPG) DI technology for the Asian market place.
Synerject's results in 2007 will show
strong revenue growth however the contribution will be impacted
by the investment in manufacturing facilities in China. This is
an investment opportunity which we expect to have significant long
term financial returns and we believe that the short term investment
cost will be justified. Synerject's Delavan acquisition is on track
to deliver a significant revenue increase and a positive contribution
for the year.
Overall, your Board is confident that the turnaround demonstrated
in the 2006 1st half year will continue and Orbital will achieve
an improved profit result in the 2007 financial year.
Orbital welcomes the strengthening world-wide commitment towards
tougher emissions and greenhouse gas standards and looks forward
to continuing customer interest in the environmental benefits of
Orbital's direct injection technology which will generate in excess
of 1.39 million tonnes of CO2 savings over the lifetime of current
customer products.
Click here
for financials.
Forward Looking Statements
This release includes forward-looking statements that involve risks
and uncertainties. These forward-looking statements are based upon
management's expectations and beliefs concerning future events.
Forward-looking statements are necessarily subject to risks, uncertainties
and other factors, many of which are outside the control of the
Company, that could cause actual results to differ materially from
such statements. Actual results and events may differ significantly
from those projected in the forward-looking statements as a result
of a number of factors including, but not limited to, those detailed
from time to time in the Company's Form 20-F filings with the US
Securities and Exchange Commission. Orbital makes no undertaking
to subsequently update or revise the forward-looking statements
made in this release to reflect events or circumstances after the
date of this release.
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