Orbital - Half Year Results
February 19 2004 - 9:43PM
PR Newswire (US)
Orbital - Half Year Results PERTH, Australia, Feb. 19
/PRNewswire-FirstCall/ -- The Directors of Orbital Engine
Corporation are pleased to announce the financial results for the
half-year ended 31 December 2003. Highlights * Profit after
taxation of $2.1 million compared to a loss of $2.9 million in the
corresponding period last year. * Continuing increase in
engineering services, royalty and licence income. * Overheads
reduced by 32% to $7.2 million. * Record result by Synerject,
contributing $0.9 million to Orbital's result, an increase of 35%
over the previous year. * Successful share purchase plan generating
$3.3 million in July 2003. * Improved cash flow. * Continuing
progress in new markets, particularly India and Taiwan. Orbital
CEO, Peter Cook, said that the Company had consolidated the
turnaround demonstrated in the second half of last financial year:
"This result is another step forward in our process of getting the
fundamentals right. Over last years corresponding period and after
the Synerject restructuring, all business segments have shown
improvement and contribution to the bottom line." Financial Summary
Dec 2003 Dec 2002 A$'000 A$'000 Change Revenue System sales -
23,236 N/A Engineering services 6,141 4,856 +26% Licencing income
1,937 1,620 +20% 8,078 29,712 Other Income Foreign exchange gain
818 249 Proceeds on sale of fixed assets 70 80 ACIS credits 587 -
Other 53 65 1,528 394 Total Revenue (excluding interest) 9,606
30,106 System purchases - (21,696) Licence costs (422) - Gross
Contribution 9,184 8,410 +9% Overhead expenses (7,203) (10,562)
(34%) Restructuring expenses (11) 17 Share of Synerject net profit
896 664 +32% Earnings before Interest, Tax Depreciation and
Amortisation 2,866 (1,471) Depreciation & amortisation (932)
(1,158) Amortisation of prepaid marketing - (484) Net interest
income 276 147 Operating Profit/(Loss) Before Tax 2,210 (2,966)
Income tax (expense)/credit (102) 67 Operating Profit/(Loss) After
Tax 2,108 (2,899) Revenue As previously reported, the restructure
of Synerject included the transfer of Orbital's marine and
recreation systems sales business to Synerject with effect from 1
April 2003. This has resulted in a decrease in total revenue
consolidated by Orbital, however the net result after elimination
of system sales overheads and take up of an improved Synerject
result is a positive contribution. Engineering services and royalty
and licence income have increased by 26% and 20% respectively over
the previous year, despite the strengthening of the Australian
dollar which has eroded royalty revenue by some $200,000 compared
to the prior year's exchange rate. Engineering consulting revenue
continues the improvements demonstrated last year as Orbital has
expanded its sales and marketing focus beyond its traditional
technology customers. Royalty and licence revenue has continued to
grow with the introduction of Mercury's 115 and 90 horsepower
3-cylinder Optimax(TM) product range, launched during the last 9
months. The increase also reflects progress made in the
introduction of OCP technology into new markets, including a
licence fee instalment made by UCAL India. Expenses Orbital
commenced a restructuring program in FY2001, resulting in
progressive reduction of overhead expenses over the last few years.
Overheads have decreased a further 32% to $7.2 million in this
half-year. The savings were derived primarily from the closure of
Orbital's US office in April 2003, as a result of the transfer of
the system sales business to Synerject noted above. In addition,
all other business expenses have been subject to review and have
contributed to the savings achieved. Synerject Synerject, Orbital's
50:50 joint venture with Siemens VDO Automotive, continues to
achieve improved results with Orbital's share of Synerject's profit
for the half-year increasing by 35% to $0.9 million for the
half-year. Synerject derives revenue in United States dollars and
Euros, and the translation of Synerject's results into Australian
dollars has eroded reported revenue by $210,000 compared to the
prior corresponding period. Synerject realised the benefits of the
transfer of Orbital's marine and recreation system sales and
Siemens VDO's non-automotive systems business for the full
half-year. In addition, sales volumes increased with the
introduction of direct injection fuel systems to Mercury's
3-cylinder Optimax(TM) range of engines. Mercury introduced the
115hp engine in April 2003, the 90hp engine in July 2003 with the
75hp due for introduction in early 2004. Cash EBITDA reflects the
steady improvement in the operating results and consequent cash
flows, as illustrated in the accompanying graph. Cash at bank at 31
December 2003 was $12.0 million compared to $9.0 million at 30 June
2003. In July 2003, Orbital received $3.3 million arising out of a
share purchase plan which was extremely well supported by existing
shareholders. Orbital has reduced net cash used in operating
activities from $6.1 million in the half-year to 31 December 2002
to $0.3 million this year. Increased engineering revenue has
required some additional working capital and final payments with
respect to staff reductions arising out of the Synerject
restructure were settled during the half-year. Net cash
requirements for investing activities are now minimal as Synerject
is self-funding. United States Generally Accepted Accounting
Principles. The financial result for the half-year ended 31
December 2003 under US GAAP is a profit after taxation of A$10.0
million compared to a loss in the corresponding period last year of
A$2.6 million. The most significant difference between Australian
GAAP and US GAAP is the recognition under US GAAP of income tax
losses not previously brought to account of $8.0 million. Under
Australian GAAP tax losses can only be recognised when the
realisation of the asset is virtually certain, however under US
GAAP recognition is required if it is more likely than not that the
tax losses will be utilised. Orbital has total future tax benefits
of approximately $38 million and the Directors have determined that
it is more likely than not that Orbital will realise at least $8.0
million of available losses. The determination is supported by
factors including: - * Recent profits in Synerject and Orbital's US
subsidiaries. * Profit for the 6 months ended 31 December 2003 in
Orbital's Australian operations. * Forecast profits for Orbital
going forward. Commercial Update Orbital continues to expand its
engineering customer base beyond traditional OCP customers. This is
reflected in the 26% improvement in engineering services revenue
for the half-year, which includes, for instance, continued
assessment of ethanol blends in petrol, and the provision of
calibration and validation services for OEMs seeking to outsource
engineering services. In the marine sector, Mercury continued the
introduction of 1.5 litre Optimax(TM) 3 cylinder engines. The 115hp
model which was released in April 2003 was followed by the 90hp in
September 2003. It is anticipated that the 75hp model will be
released in early 2004. In October 2003 Kymco, a leading Taiwanese
motorcycle manufacturer, announced the adoption of Orbital direct
injection technology for the planned introduction of a 100cc
scooter model scheduled for launch in 2004. Kymco have made further
progress in production plans having received qualified EPA approval
with initial launch volumes anticipated prior to the end of the
financial year. Whilst taking longer than originally envisaged,
Orbital continues to make progress with 2-wheeler and 3-wheeler
initiatives in India. As a precursor to any licence agreement,
several engineering programs have been undertaken during the year
with Indian motorcycle OEMs and UCAL, Orbital's licensed system
supplier in India. Outlook Orbital is reasonably confident that the
level of engineering consultancy services provided in the first
half will continue for the remainder of the financial year. Cost
reductions implemented in the last two years which relate primarily
to this business sector are now finalised ensuring a stable
business with secure returns. Royalty and licence income, however,
will most probably be affected by the unstable 50cc European
scooter market. Delays in implementation of Euro III emissions
legislation and escalating European manufacturing costs are
contributing to the market uncertainty in this price sensitive
sector. Synerject will also be affected by the weakness in the
motorcycle sector however the cyclical nature of Synerject business
should see continued growth in Synerject profits in the second half
as OEMs build inventory for the northern hemisphere summer.
Orbital's first half result had the benefit of translation gains
arising from foreign exchange movements. The Directors anticipate
that the financial results in the second half will be in line with
the first half, after excluding any foreign exchange gains or
losses. Orbital is an international developer of engine and related
technologies, providing research, design and development services
for the worlds producers of powertrains and engine management
systems for application in motorcycles, marine and recreational
vehicles, automobiles and trucks. Orbital's principal operations in
Perth, Western Australia, provide a world class facility with
capabilities in design, manufacturing, development and testing of
engines and powertrains unparalleled in the Asia Pacific region.
Orbital provides its customers with leading edge, world class,
engineering expertise. Headquartered in Perth, Western Australia,
Orbital stock is traded on the Australian Stock Exchange (OEC), the
New York Stock Exchange (OE) as well as the Berlin (ORE) and
Frankfurt (OREA) Exchanges CONTACTS: Email - Web site -
http://www.orbeng.com/ Australia: Mr Peter Cook USA, 1 810 245 0621
Chief Executive Officer Tel: 61 8 9441 2311 DATASOURCE: Orbital
CONTACT: Australia, Mr Peter Cook, Chief Executive Officer,
+61-8-9441-2311, or , or in USA, +1-810-245-0621 Web site:
http://www.orbeng.com.au/ http://www.orbeng.com/
Copyright