results as expected

A bit of a losss and the market goes ho hum. It is what was expected. The numbers do reveal that their engineering is doing well.
I note in the fine details that there are now 350,000 OEC equipped engines out there, mostly outboards, but motorscooters are catching up.

Regards

Desmond

Page 1 of 5
Orbital – Annual Results Show Continued Improvement
PERTH, AUSTRALIA: Orbital Engine Corporation today announced its financial
results for the full year ended 30 June 2003.
Highlights include: -
• Profit after taxation of $1.0 million in the second half-year.
• Significantly reduced loss after taxation for the full year of $1.9 million, compared
to $26.8 million losses in each of the previous two years of F2002 and F2001.
• Overheads reduced 23% to $19.5 million compared to $25.4 million F2002 due to
a major restructuring program.
• Synerject’s contribution to the full year result was a profit of $1.4 million compared
to $3.1 million loss in the prior year.
• Successful capital raising generating $2.6 million in June 2003 and a further $3.3
million post year end in July 2003.
• Cashflow from operations showing continuing improvement.
• Additional new products introduced by its customers including the launch of
Mercury 3 cylinder Optimax™ engines and Peugeot’s Jetforce scooter.
• Increasing proportion of revenue from engineering services outside the traditional
Orbital Combustion Process (OCP) technology.
The retiring Chairman, Ross Kelly, said that the strategies employed over the last 18
months were clearly delivering the desired outcome. “I am particularly pleased with
the financial results delivered in the second half of the year. The process of
restructure, led by Managing Director, Peter Cook, which commenced 18 months ago
has delivered a very satisfactory outcome.”
New Chairman, Mr Don Bourke, said “The result shows that the Company has been
stabilised and provides the foundation for future development. I look forward to being
part of that process”.
Page 2 of 5
Financial Summary
Orbital’s result for the year is summarised as follows: -
June 2003 June 2002
Full Year 1st Half 2nd Half Full Year
A$'000 A$'000 A$'000 A$'000
Revenue
System Sales 29,304 23,236 6,068 35,748
Engineering 10,089 4,856 5,233 8,765
Royalties 3,192 1,529 1,663 2,693
Licence income 699 91 608 3,758
43,284 29,712 13,572 50,964
Other Income
Proceeds on sale of fixed assets 441 80 361 138
Foreign Exchange gain 1,894 249 1,645 1,393
Other 593 65 528 106
2,928 394 2,534 1,637
Total Revenue (excluding interest) 46,212 30,106 16,106 52,601
System purchases (27,582) (21,696) (5,886) (33,227)
Licence costs (549) - (549) (477)
Gross Contribution 18,081 8,410 9,671 18,897
Overhead expenses (19,460) (10,562) (8,898) (25,449)
Restructuring costs 352 17 335 (5,418)
Share of Synerject net profit/(loss) 1,351 664 687 (3,068)
Provision Texmaco investment - - - (6,446)
Earnings before interest, tax,
depreciation & amortisation 324 (1,471) 1,795 (21,484)
Depreciation & amortisation (1,807) (1,158) (649) (2,752)
Amortisation of prepaid marketing (484) (484) 0 (2,319)
Net interest income 227 147 80 680
Operating loss before tax (1,740) (2,966) 1,226 (25,875)
Income tax (expense) credit (125) 67 (192) (901)
Operating Loss after
tax attributable to members (1,865) (2,899) 1,034 (26,776)
June 2003
Revenue
Whilst revenue for the year of $46.2 million fell 12% compared to the prior year, the
reduction was primarily due to the restructure of Synerject incorporating the transfer of
Orbital’s marine and recreation systems sales business to Synerject with effect from 1
April 2003. The transfer will have full effect in F2004 with all systems sales being
reported by Synerject.
Page 3 of 5
Engineering revenue increased 15% to $10.1 million over the prior year as Orbital
expanded its customer base beyond its traditional technology focus.
Additionally, royalty revenue increased 19% to $3.2 million over the prior year,
reflecting the first full year of motorcycle royalties and the launch of additional new
products including Mercury’s 3 cylinder Optimax™ product range and Peugeot’s
Jetforce scooter.
Licence income, typically volatile period to period, was $0.7 million compared to $3.8
million last year. As announced in February 2003, the Indian component
manufacturer, UCAL, was licensed to supply Orbital fuel systems to the very
prospective Indian motorcycle market.
Expenses
Orbital has continued its restructuring, aggressively commenced in F2001. Overheads
for the year of $19.5 million were $6.0 million lower than 2002, which in turn was $5.5
million lower than 2001. Overhead savings have been generated primarily through
staff reductions, however savings have been achieved across all cost centres. Offices
in the United Kingdom and the United States were closed during the year and the
associated functions either transferred to Synerject or centralised in Perth, Australia.
Further savings in the year ended 30 June 2004 are forecast as the annualised
benefits of the cost saving initiatives introduced during the year are realised.
Synerject
Synerject consolidated the turnaround demonstrated in recent reporting periods, with
Orbital’s share of Synerject’s profit for the year increasing to $1.4 million compared to
a loss of $3.1 million last year. Synerject turnover increased by 52% to US$39 million.
The increase is primarily a result of the first full year of production of direct injection
products for Piaggio motorcycles and Peugeot Motocycles, together with port injection
products for Sanyang and Kymco in Taiwan. Sale volumes to Mercury also increased
including the introduction of direct injection fuel systems to Mercury’s 3 cylinder
Optimax range of engines. Mercury introduced the 115hp engine in April 2003 and
this will be followed by the 90hp and 75hp engines later this calendar year.
The restructure of Synerject announced in January 2003 transferred the benefit of
Orbital’s marine and recreation system sales and Siemens-VDO’s non-automotive
systems business to Synerject with effect from 1 April 2003.
As previously advised, Synerject’s finance arrangements were renegotiated during the
year with loans now in place until September 2006. Synerject was cashflow positive
during the financial year, meeting all terms and conditions of the restructured finance.
Improving Results
The second half-year profit of more than $1.0 million benefited from foreign exchange
gains but was ahead of expectations.
Page 4 of 5
The following graphical presentation of EBITDA over the past four half years illustrates
that the strategy put in place in the last 18 months has dramatically improved the cash
flow profile of Orbital.
Cash
Net operating cash outflow was $7.2 million
for the year, however $6.3 million was in the
first half, reducing to $0.9 million in the
second half. Approximately $2.5 million
cash payments were made during the year
in respect of redundancies and annual and
long service leave for staff reductions. A
further $2.0 million working capital increase
arose from early receipt of trade receivables
in the last year.
In June 2003 Orbital received a net $2.6
million arising out of the successful
placement of shares with a number of
existing and new institutional investors.
Cash at the end of the financial year was
$9.0 million.
Further, during July 2003 a successful
share purchase plan closed oversubscribed,
raising a further net $3.3 million.
Commercial Update
Orbital’s sales and marketing efforts have been focused on delivering continued and
sustained growth in sales of engineering services. Non-Orbital Combustion Process
(OCP) related engineering services now account for approximately one third of all
engineering revenue of $10.1 million. The new customers and expanded engineering
services achieved provide confidence that growth targets forecast for engineering
services revenue this financial year can be met.
Orbital continues to support OCP programs in all its markets, and in particular within
the automotive sector where currently two advanced engineering programs are being
progressed with Original Equipment Manufacturers (OEMs).
The number of engines now incorporating OCP technology has grown to 30 with the
introduction of 5 new models in the marine sector and 1 new model in the motorcycle
sector in the last 12 months. Within the marine sector, Mercury released the 115hp
model of the 1.5 litre Optimax™ 3 cylinder engine, the first of three new models
scheduled for introduction in the northern hemisphere summer of 2003.
Orbital Engine Corporation Limited
EBITDA
(20)
(15)
(10)
(5)
0
5
2002
1st Half
2002
2nd Half
2003
1st Half
2003
2nd Half
Half Years
A$ millions
Peugeot Motocycles released its Jetforce scooter for sale in April 2003. This northern
hemisphere summer will be the first full year of sales of the 4 scooter models released
by Piaggio and Peugeot last year. Aprilia’s two models released several years ago
continue to perform well in the market.
Orbital continues to work with Indian scooter and motorcycle manufacturers to meet
emissions legislation to be introduced in 2005. Orbital’s OCP™ direct injection is a
proven solution enabling 2-stroke engines to meet these requirements while also
providing fuel savings for the end user.
Outlook
Growth in core revenue streams of engineering services and royalties, with costs
continuing to decrease as the full benefits of our restructuring are realised, provides a
basis for optimism.
The annualised benefit from the restructure of Synerject should result in a further profit
improvement enhancing the value of Orbital’s investment in Synerject during F2004.
Orbital is confident that it will be able to continue to build on the good foundation which
it has established.
ENDS
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 – [email protected]
Australia: Mr Peter Cook
Chief Executive Officer
Tel: +61 8 9441 2311
Website – www.orbeng.com
USA: 1 810 245 0621