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Strategic Investments

Earnings Release Aug 21, 2008

3465_ir_2008-08-21_985e2769-cdc2-4908-b882-2f2fbefaa780.pdf

Earnings Release

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Copenhagen, 21 August 2008

Announcement No. 6/2008

Danionics A/S Ny Vestergade 14, 2. DK 1471 København K, Denmark Telefon: +45 70 23 81 30 Telefax: +45 33 93 40 18 E-mail: [email protected] Website: www.danionics.dk CVR-nr.: 71 06 47 19

Interim report for the period 1 January 30 June 2008

Summary

  • As expected, Danionics reported a loss of DKK 1.5 million for the first half-year before recognition of a DKK 5 million value adjustment in Danionics Asia.
  • The company reiterates its full-year forecast of a loss of DKK 2-3 million before recognition of the share of the profit or loss or value adjustment in Danionics Asia.
  • As planned, Danionics contributed DKK 5 million to Danionics Asia in the first half. For the full year 2008, the capital contribution to Danionics Asia is expected to amount to up to DKK 10 million.
  • Positive outcome of factory audit in China, resulting in order from new large customer.

H1 financial performance

As expected, Danionics reported a loss for the first half of DKK 1.5 million before recognition of a DKK 5.0 million writedown of the loan capital to Danionics Asia. The writedown equals the amount which Danionics contributed as loan capital to Danionics Asia in the first half. Apart from the writedown, the first half financial performance was on a level with the results achieved in H1 2007, when Danionics reported a loss of DKK 1.1 million.

Revenue for the period related to commission income from Danionics Asia.

The loan capital to Danionics Asia is recognised in the amount of DKK 0, as against DKK 29.3 million at 30 June 2007. In connection with the presentation of the annual report for 2007, the loan capital was written down to DKK 0. This valuation was retained in H1 2008, and the capital contribution during this period has therefore been written down over the income statement.

Cash amounted to DKK 16.6 million. Equity amounted to DKK 17.1 million at the end of the half-year period, down from DKK 23.5 million at 31 December 2007. The reduction in equity corresponds to the net loss for the period.

The joint venture

Second-quarter financial performance was a disappointment. The technical problem with one of Danionics trial batteries mentioned in the interim report for Q1 2008 turned out to be a general problem.

Identifying the cause of the problem proved to be a major and time-consuming task, which led to a very low level of production output in April, May and June. Delaying the company s sales efforts and the scheduled capacity expansion, the fault-finding process will also have an adverse impact on the financial performance.

The root of the technical problem was identified in July. It turned out that one of the sub-suppliers of electrodes had changed material forming part of its product, and the factory had failed to discover this change.

In-sourcing critical production

The process underlined the necessity of sourcing in electrode production, and the company will now work to achieve this as soon as possible. The first production line has already been installed, and within the coming 1-2 months production of negative electrodes will commence.

The company has procured production line no. 2, which will be installed in the near future. The goal is to manufacture all electrodes in-house by the end of 1 st quarter of 2009.

Focus on key customers maintained

The second quarter also brought positive events. The joint venture retains its new strategy of developing close relations with a limited number of key customers. Three of these key customers conducted an audit of the factory during H1 2008. Two of the audits have been finalised, and the first of the key customers has placed a production order for 50,000 batteries for shipment in September 2008.

The second key customer has confirmed that it would be interested in working with Danionics, ordering trial batteries from Danionics for a specific product.

A fourth new key customer has tested and approved a Danionics battery, placing a trial order for 20,000 batteries for shipment in September 2008.

Danionics now has 11 active customers, and its current order book for September amounts to 140,000 batteries. Although this is the largest figure for one month to date, break-even is still a long way off, and further growth will depend on how the products of the company's customers are received in the market.

New and experienced factory manager

Another positive event was the appointment of a new and highly experienced factory manager, Mr Richard Koh.

Richard Koh, who is from Singapore, has more than 25 years' experience in R&D, engineering and factory management from electronics and electro-chemical businesses. Educated in Singapore, Europe and the USA, he has been in charge of factories in Singapore, Hong Kong and China.

Danionics benefiting from CSR considerations

There is still substantial and growing demand for lithium polymer batteries, and the market is changing. Price and battery capacity were previously the key factors when it came to winning orders. More and more, however, product reliability is becoming a crucial factor, and key customers are also displaying an interest in environmental factors and working place environment at the factories with which they collaborate. In the long term, both of these factors will be to Danionics advantage.

Outlook for 2008

Danionics retains the forecast for 2008 presented in the annual report for 2007 released on 10 March 2008. The results for 2008 will be impacted by marketing and sales costs concerning Danionics Asia and administrative expenses of approximately DKK 2.5 million.

As a result, the company expects an overall loss in the region of DKK 2-3 million after interest income but before recognition of the share of the profit or loss or value adjustment in Danionics Asia.

Moreover, the company may realise commission income if the sales efforts undertaken by Danionics A/S should result in the addition of new orders.

The company has in 2008 contributed additional operating capital to Danionics Asia of DKK 5 million till date. It is expected to contribute further DKK 5 million before the end of 2008.

For additional information, please contact:

Henning O. Jensen, Chief Executive Officer, tel. +45 70 23 81 30

Financial figures and key ratios (unaudited)

Full
H1 H1 year
DKK'000 except key ratios 2008 2007 2007
Income statement:
Revenue 1 0 0
Production costs 0 0 0
Other operating income 0 0 0
Gross profit/loss 1 0 0
Administrative expenses -1,909 -1,650 -2,776
Operating loss (EBIT) -1,908 -1,650 -2,776
Impairment of investment in associate (joint venture) -4,961 0 -32,029
Net financial expenses/income 419 547 930
Loss before tax -6,450 -1,103 -33,875
Tax on the profit/loss for the period 0 0 0
Net loss for the period -6,450 -1,103 -33,875
Balance sheet:
Assets
Investment in associate 0 0 0
Loan capital to associate 0 29,326 0
Other financial assets 429 478 429
Total financial assets 429 29,804 429
Receivables and prepayments 1,239 509 593
Cash 16,580 27,814 23,840
Total current assets 17,819 28,323 24,433
Total assets 18,248 58,127 24,862
Liabilities and equity
Total equity 17,068 56,366 23,518
Total non-current liabilities 1,180 1,761 1,344
Total liabilities and equity 18,248 58,127 24,862
Cash flow statement:
Cash flows, operating activities -2,299 -6,480 -8,787
Cash flows, investing activities -4,961 0 -23,005
Cash flows, financing activities 0 202 -425
Investments:
Financial assets 4,961 0 23,005
Total investments 4,961 0 23,005
Depreciation, amortisation and impairment 4.961 0 32,029
Key ratios:
Equity ratio (%) 93.5 97.0 94.6
Net asset value per share (DKK) 1.22 4.04 1.68
Market price per share, year end (DKK) 6.20 18.70 11.60
Average number of employees 1 1 1
Earnings per share (EPS) -0.46 -0.08 -2.43
Diluted earnings per share (EPS-D) -0.45 -0.08 -2.36

Statement of changes in equity (unaudited)

Net Retained
revaluation earnings
acc. to incl. share
Share the equity premium
DKK
000
capital method account Total
Equity
1 January 2007 13,946 474 43,447 57,867
Capital increase, exercise of warrants 19 0 183 202
Fees, issuing agent 0 0 -600 -600
Net loss 0 0 -1,103 -1,103
Equity at 30 June 2007 13,965 474 41,927 56,366
Equity
1 January
2008
13,965 425 9,128 23,518
Net loss 0 0 -6,450 -6,450
Equity at 30 June 2008 13,965 425 2,678 17,068

Statement by the Management Board and the Board of Directors

The Board of Directors and the Management Board have today considered and adopted the interim report of Danionics A/S for the period 1 January 30 June 2008.

The interim report is presented in accordance with IAS 34 on interim financial reporting and additional Danish disclosure requirements for listed companies. The accounting policies applied in the interim report are unchanged from those applied in the annual report for 2007.

We consider the accounting policies to be adequate, the accounting estimates to be reasonable and the overall presentation of the interim report to be appropriate. In our opinion, the interim report gives a true and fair view of the company s assets and liabilities and financial position at 30 June 2008 and of the results of the company s operations and cash flows for the period 1 January 30 June 2008.

The interim report is unaudited.

Copenhagen, 21 August 2008

Management Board

Henning O. Jensen

Board of Directors

Chairman

Karsten Borch Frank Gad Henrik Ottosen

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