Antonov: Unaudited interim results for the six months ended 30 June 2006

8/3/2006, 8:15 AM (Source: GlobeNewswire)



* Unaudited profit before tax of £0.395 million (2005: loss
before tax of £1.666 million), largely due to the impact of IFRS
accounting rules

* Accounting impact of Convertible Loan Notes and Euro
Warrants now eliminated without the need for the Company to make
any cash payments

* Undrawn committed funding in place at 30th June 2006 of
€1.9 million with a further €3.6 million committed since the period

* Great Wall Motors (GWM) programme delays are currently
being addressed with full year revenues dependent on progress

* Operational restructuring currently underway


* The 6-speed automatic programme for GWM has been
re-planned and further work has been undertaken with suppliers to
validate suitability of the revised design for production.

* Supercharger drive first production units are undergoing
proof testing and vehicle application work has been undertaken to
generate kits for sale

* Cooperative project for 2-speed engine auxiliary drive
planned to start in Q4 2006

* An initial ruling on the Toyota infringement cases is due
in September 2006

John Moore, CEO commented:-

"The period under review has been one of both success as well as
challenges. Operational restructuring is currently underway in order
to strengthen the group's implementation capabilities and to reduce
programme delays. Good progress on this front has been achieved and
I will be reporting further developments in this area in due course."


Should you have any queries please contact: -

John Moore, CEO, Antonov plc +44 1842 768320

Peter Logsdon, CFO, Antonov plc +44 1842 768320

Jos Haag, Antonov plc +31 651 561 767

Antonov Plc

Unaudited interim results for the six months ended 30 June 2006


The first half of the year has been a mixture of commercial success,
in tandem with production challenges with the initiation of the GWM
project and launch of the supercharger drive, and subsequent delays
in both programmes. As a consequence I have made some major changes
to the structure of the Group to strengthen its capability to deliver
future production programmes and to reduce its fixed costs. Further
announcements will be made on the changes in due course.
The work already carried out for the 6-speed automatic has now
generated a production ready design which has been well received by
the key tier 1 suppliers who are a vital part of its route to

Financial review

We have taken the necessary steps to overcome the perceived negative
impact of IFRS in its treatment of convertible loan notes and euro
warrants as debt.

We have converted all convertible loan notes into ordinary shares and
have exchanged the majority of Euro warrants into Sterling
denominated warrants. It should, however, be noted that up to the
point where these actions were taken, under IFRS rules, the Group has
had to recognise Finance Revenue of £1.745 million in its Income
Statement. In addition, as required under IFRS rules, in the first
six months of 2006 the Group has capitalised development costs
related to the 6-speed automatic and the supercharger projects of
£615,000 (2005: £nil), which has had an impact on operating costs. I
am also pleased to confirm that since the end of June 2006 we have
concluded negotiations with our funding partners, who have agreed an
extension to our current facilities with committed funding for a
further Euro 3.6 million.

6-Speed Automatic Transmission
The initial submission to GWM was not considered to be sufficiently
detailed or validated to enable their senior management to commit to
the production programme investment. Significant progress has now
been made by Antonov to address these issues and work is underway to
re-submit the design and production information at the end of
September 2006. This work takes the initial concept through to the
first stage of the production design process to prove that the design
is both robust and can be manufactured and assembled. It also
involves the first stage of production planning, including the
specification of the main production processes and the facilities
required to support these processes. Initial investment and process
costs are also being generated to support the re-submission of the
design and production information.
Discussions are also continuing with key Tier 1 suppliers to the
programme who have provided enthusiastic support. We have also
continued to discuss the transmission with other vehicle makers.

Antonov Plc

Unaudited interim results for the six months ended 30 June 2006

Supercharger Drive
The first production units were tested at the start of the year and
the lubrication system has required some additional development
work. This has delayed the production ramp up. In the meantime the
reception from the US market has been very encouraging and, in
addition to the straight tuner market, we have also had expressions
of interest from OEM special vehicle operations.
An intensive process of final test and development is currently
underway to ensure that the unit is robust while development work is
also progressing at our distributors on vehicle application kits.
Discussions have continued through the first half of 2006 with the
major Tier 1 suppliers of front-end accessory drives - the system on
the engine that drives the alternator and auxiliary systems.
Modelling undertaken by independent consultants IAV for Antonov
indicated fuel economy benefits of up to 5% could be achieved on a
small car running air-conditioning. It is therefore planned to
initiate a cooperative project with one selected supplier to build
and test a trial unit. Vehicle manufacturer project partners are
also being brought in to ensure that the work is production
Further opportunities are at an earlier development stage.
During 2006 the administrative operations of the Group were
overhauled to improve information systems and reduce costs. This
work continues and the prompt release of these results is in part due
to the strengthened financial control (the 2005 results were delayed
by issues related to the IFRS transformation described in the 2005
annual report).
Commercial operations have also been strengthened with the
establishment of the UK office. This has brought a new focus to
discussions with the automotive industry that are now much more
focused on production applications rather than technical issues. In
order to access the right mix of skills and experience as these
production applications are developed we are planning to build our
production design capability to support the commercial operations in
the UK.

As a result, a restructuring programme is underway to cut the
operating costs of the innovation activities, reduce the fixed cost
base of the Group and create a stronger production design capability
using a small in-house team supported where appropriate by a range of
specialist service providers such that costs are more directly
dependent on the level of client programmes underway.

Further announcements will be made on this restructuring as the
programme progresses.

John Moore
Chief Executive Officer

3 August 2006

Antonov Plc

Unaudited interim results for the six months ended 30 June 2006



Six months Six months Year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
£'000 £'000 £'000

Revenue 14 - 75
Cost of sales - - -
Gross result 14 - 75

Research costs and administrative (1,364) (1,700) (3,869)
Operating loss (1,350) (1,700) (3,794)

Financing income/(costs) 1,745 34 (1,796)
Profit / (Loss) on ordinary 395 (1,666) (5,590)
activities before taxation

Taxation on profit / (loss) from (301) - 372
ordinary activities

Basic earnings / (loss) per 0.01p (5.8p) (17.3p)
ordinary share

Diluted earnings / (loss) per 0.01p (5.8p) (17.3p)
ordinary share

Antonov Plc

Unaudited interim results for the six months ended 30 June 2006


As at As at As at
30 June 2006 30 June 2005 31 December
Unaudited Unaudited 2005
£'000 £'000 Audited
Non current assets
Intangible assets 2,035 1,259 1,380
Property, plant and 408 100 258
Total non-current 2,443 1,359 1,638

Current assets
Inventories 114 149 114
Trade and other 604 893 919
Cash and cash 49 79 270

Total current assets 767 1,121 1,303
TOTAL ASSETS 3,210 2,480 2,941

Called up share capital 7,008 5,707 6,163
Share premium account 23,487 18,677 20,467
Capital reserve 2,587 2,587 2,587
Translation reserve (122) (77) (85)
Retained earnings (31,453) (28,379) (31,688)

TOTAL EQUITY 1,507 (1,485) (2,556)

Financial liabilities - - 1,348
Convertible loan stock - 1,882 2,410
Total non-current - 1,882 3,758

Trade and other 1,703 1,773 1,739
Other financial - 310 -

Total current 1,703 2,083 1,739

Total non-current and 1,703 3,965 5,497
current liabilities

TOTAL EQUITY AND 3,210 2,480 2,941

Antonov Plc

Unaudited interim results for the six months ended 30 June 2006


Six months Six months Year
ended ended ended
30 June 2006 30 June 2005 31 December
Unaudited Unaudited 2005
£'000 £'000 Audited

Foreign exchange movement (37) (37) (43)
on net investment in
foreign subsidiary

Net expense recognised (37) (37) (43)
directly in equity
Profit / (Loss) for the 94 (1,666) (5,218)
Total recognised income
and expense for the 57 (1,703) (5,261)
period attributable to


Share Share Capital Translation Retained Total
Capital Premium Reserve Reserve Earnings

£000's £000's £000's £000's £000's £000's

Balance at 1 2,587 (85)
January 2006 6,163 20,467 (31,688) (2,556)
Increase in 845 - - - - 845
share capital
Increase in
share premium - 3,020 - - - 3,020
Share based - - - - 35 35
Adjustment to
translation - - - (37) - (37)
Other - - - - 106 106
Profit for the 94 94
Balance at 30 7,008 23,487 2,587 (122) (31,453) 1,507
June 2006

Antonov Plc

Unaudited interim results for the six months ended 30 June 2006


Six months Six Year
ended months ended
30 June ended 31
2006 30 June December
Unaudited 2005 2005
£000's Audited
Unaudited £000's

Cash flows from operating activities
Profit / (Loss) before tax 395 (1,666) (5,590)
Adjustments for:
Net financing (1,745) (34) 1,796
(income)/costs 50 22 15
Depreciation of fixed 69 88 500
Amortisation of intangible
fixed assets
Share based payment expense 35 2 8
Decrease/(Increase) in 315 (181) (482)
trade and other receivables
(Increase)/Decrease in work (1) 7 41
in progress
Increase/(Decrease) in 39 (125) 180
trade payables
Non cash payments - - 382
Cash used from operations (843) (1,887) (3,150)

R&D tax (charge) / credit (301) - 372
Income taxes paid - - (51)
Net cash used in / generated by (301) - 321
operating activities

Net cash used in investing activities
Payments to acquire intangible fixed (724) (30) (458)
Payments to acquire property, plant (201) - (155)
Net cash used in investing activities (925) (30) (613)

Cash flows from financing activities
Proceeds from issue of share capital 899 252 397
Proceeds from the issue of convertible 949 1,882 3,453
Net cash generated by financing 1,848 2,134 3,850

Net (decrease)/increase in cash and (221) 217 408
cash equivalents

Antonov Plc

Unaudited interim results for the six months ended 30 June 2006


Basis of preparation

These interim financial statements have been prepared on the basis of
International Financial Reporting Standards, incorporating
International Accounting Standards (IAS's) and Interpretations
(collectively 'IFRS'), which are expected to be endorsed by the EU
and applicable for use in the company's annual financial statements
for the year ended 31 December 2006.

Comparative information for the six months ended 30 June 2005 and the
year ended 31 December 2005 has been prepared on an IFRS basis.

Details of IFRS policies applied are given in note 4.2.

The interim financial statements do not include all of the
information required for full annual financial statements and do not
comply with all of the disclosures in IAS 34 - Interim financial
reporting, and are, therefore, not in full compliance with IFRS.

The information in this announcement does not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985.
The Auditors have reported on the statutory accounts of Antonov plc
for the year ended 31 December 2005 prepared under IFRS and they have
been delivered to the Registrar of Companies. The report of the
Auditors was unqualified and did not contain a statement under
Sections 237(2) or 237(3) of the Companies Act 1985.

Antonov Plc

Unaudited interim results for the six months ended 30 June 2006

Earnings / (loss) per share

The calculation of earnings/(loss) per share is based on the
profit/(loss) on ordinary activities after taxation and on the
weighted average number of shares in issue. The weighted average
number of shares has been adjusted for the share consolidation in
2005. (See note 4.3).

Share consolidation

During the period to 30 June 2006, a share consolidation took place.
Four of the original 5p ordinary shares of issued and un-issued were
consolidated into ordinary shares of 20p each.

Convertible loan notes

IAS 32 requires Convertible Loan Notes that are convertible into a
fixed number of shares at a fixed price to be classified as equity
and those Notes convertible at a variable price to be recognised as a
financial liability.

The Convertible Loan Notes in issue at 31 December 2005 are
denominated in Euros, a currency other than the company's functional
currency, and may be redeemable into cash although the company also
has the right to convert them into shares, the number of which varies
depending on when they are converted. As such, the loan notes are
convertible into a fixed number of shares at a variable price or will
be settled by delivering a variable number of shares and, therefore,
IAS 32 requires these Convertible Loan Notes to be classified as a

In view of the above accounting treatment and in order to mitigate
the impact on future financial statements, since the year end balance
sheet date of 31 December 2005, the Board has exercised the company's
right to convert the convertible loan notes plus accrued interest
into shares, and therefore, these liabilities have been extinguished
without a cash payment.


Under the terms of the Convertible Loan Notes, the company
is required to issue a pre-determined number of euro warrants on the
drawdown of any of the Notes.

Under IAS 32, warrants denominated in a currency other the
company's functional currency and are therefore convertible into a
fixed number of shares at a variable price, are accounted for as a
liability whereas the sterling warrants that are convertible into a
fixed number of shares at a fixed price are classified as equity.

Since the year end balance sheet date of 31 December 2005,
the holders of the euro denominated warrants have exchanged them for
sterling warrants, or they have been converted into shares.
Therefore, these liabilities have been extinguished without a cash


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