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KleenAir Systems (KSI.L) - results
KSI.L
Comment by Objective Capital , Apr 01, 2008
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KleenAir has announced its results for the full year ending 30 September 2007. Sales in the year were £35,102 (9 months to 30 September 2006: Nil) and group costs, which were primarily associated with management infrastructure and the costs of implementing the applications engineering and administrative facility in Ross-on-Wye, amounted to £866,817 (£710,281). The loss for the year was £825,003 (£699,262).
Other items of note were, a cash outflow before financing of £871.7k (£690.8K) and a net cash outflow after financing of £474.6k (inflow of £437k) and a year end cash balance of £9.2k (£483.8K).
Objective's view:
2007 was very much a year of preparation for KleenAir, hence the almost negligible sales. Following a disappointment with its patented Noxmaster technology and an initial setback with Dinex, management identified the London Low Emission Zone (LEZ) as its target market, secured a suitable filter and applied for certification from TfL.
Although the LEZ was signed into force in May 2007 KleenAir did not receive certification until September, too late to generate any meaningful sales in the 2006/07 financial year.
Of more interest to investors are the subsequent events some of which are mentioned in the RNS announcement.
The first stage of LEZ compliance was that HGVs over 12 tonnes were required to be retrofitted with filters to make them compliant with Euro III particulate emission standards. After intense lobbying from the engine manufacturers TfL granted various exemptions which reduced the estimated market size for vehicles over 12 tonnes by more than 50%. The resulting confusion also caused many operators to delay compliance work.
KleenAir has now begun shipments and is ramping up production for the next phase, which is for HGVs between 3.5 and 12 tonnes and is achieving a market share of about 8%. While this is within the range of company expectations, we believe this is probably at the low end of those expectations and would expect to see better in the second phase.
Perhaps most importantly the company has secured additional funding through a recently completed share placing, which raised approximately £1m. This funding will provide working capital and allow the company to develop business in additional markets in Europe and in the Corporate Social Responsibility space. It is also worth noting that KleenAir has agreed to make a £300,000 investment for a 3.85% stake in Nonox plc an unlisted company with IP related to particulate reduction in stationary boilers.
