Thursday 28 August 2008

Dyesol results

The year to 30 June 2008 has seen Dyesol emerge as a leading force internationally in new generation solar energy. In this year the Company has made significant investment to establish capacity to deliver on the many business opportunities that have arisen. Dyesol now has operations spanning Europe and Asia that enable the Company to bid for and win contracts that we could not have considered or qualified for from our Australian base. An example is the partnership with Corus to develop and industrialise dye solar cells on strip steel for building integration. Our investment in establishing Dyesol UK, setting up prototype facilities in North Wales and employing the team of 8 scientists has brought fruit through the commitment by the Welsh Assembly Government to support the partnership to a level of £5 million during the prototype and pilot production phases. This has enabled Dyesol to plan with assurance for volume manufacture in the UK for the planned industrialization phase. In Italy, Dyesol has established a collaboration with the Universita Dgli Studia Roma Tor Vergata following commitment by the university to acquire a prototyping facility from Dyesol. The industrial and academic team is finalizing a bid for a €10 million project in Italy. In Asia, Dyesol has been approached by many companies seeking to commercialise DSC. Since the end of the year, we have been able to announce three of those projects, two in Korea and one in Taiwan. The Company has been very selective in entering partnerships and collaborates only with organizations that demonstrate financial capacity and long term business and technological commitment. This is essential for commercial success as Dyesol’s business model provides for our major returns to be earned once our partners, collaborators and licencees enter volume manufacture. Consequently, the Company undertakes significant due diligence before committing to a commercial relationship to the extent that there are several other opportunities in Europe, Asia, North America and the Gulf that the international team are evaluating at this time.

In Australia, FY08 has been the year for commitment to production resources for materials and equipments. The new materials manufacturing facility is now completed and will be officially opened shortly. That facility has a capacity of $10 million worth of dye per annum and will shortly be able to produce over $5 million of pastes per annum. The facilities have capacity to double output as demand grows. Our new engineering facilities are on line and the range of prototype equipments is now complete. This investment in the future is reflected in the expenditure on corporate growth and capital equipment. Expense for international growth has predominated in the marketing expense of $2.39 million. The other key element in this line item is the expenditure on exhibitions and sponsorship of high profile conferences in our field. Capital expenditure this year has been $2.37 million predominantly for facility expansion in Queanbeyan, but also comprising the initial prototyping capacity at our facilities in St Asaph in Wales. These new facilities in Queanbeyan will complete Dyesol’s planned investment in Australian operations.

Coupled with the commitment to corporate growth and facilities, the Company has steadily expanded its technological and executive resource to be able to serve the rapidly growing project base internationally. Expenditure on personnel more than doubled in the year to $4.17 million of which $0.67 million was the non-cash value of staff options as calculated by the Black-Scholes method.

In this year sales grew to $2.12 million. While this was below expectations at the start of the year, it is primarily a matter of phasing in key projects in UK, Italy and Asia, each of which has now commenced. The principle project is the partnership with Corus. During the year, one planned project has not eventuated due to the closure by the new Australian government of the Commercial Ready scheme that provided assistance to companies in expansion phase investment. During FY08, Dyesol successfully completed the project for DSTO to develop a camouflage flexible solar panel. The commercial version of this panel will be known as SureVolt reflecting the capability to produce useful power in any light conditions. That project has now entered the engineering phase to prepare for pilot production.

The overall loss for the year of $7.66 million included non cash items of $1.23 million for share based payments to staff and international marketing consultants. This high value was arrived at using the Black Scholes option valuation method and is well out of the market as a result of volatility of Dyesol share price during the year. Depreciation and amortisation amounted to $740K and foreign exchange losses total $180K ($117K unrealized). Payments of a one-off nature totalled $1,130K, primarily related to consultancy services for business establishment and international activities. Significant labour costs were incurred in the administration and marketing areas, with the level of administration support directly related to the increase in scientific personnel. Conference costs of $302K mainly relate to the highly successful Nanofair exhibition and conference at St Gallen in September 2007. Total marketing, new office establishment, and sales expense was $2.37 million, above expectations due to the rate of expansion achieved in the year. The other major expenditure category was R&D which totalled $2.17 million, a level that the Company intends to at least maintain to remain the world leader in DSC technology, equipment and materials.

The year end sees a very solid Balance Sheet with Current Assets at $17.7 million compared to Current Liabilities of only $0.94 million. The Company carries no bank debt and no assets are subject of security. When capital assets are brought to account the Company has a healthy Net Asset balance of $24.28 million. The confidence shown by shareholders in investing $24.4 million during the year has been a key element in the rapid expansion that Dyesol has been able to implement this year.

Net cash usage for operations of $7.8 million reflects an average utilisation of $650K per month within the planned range for this phase of the Company’s growth. Consequently, with similar spend over the next period to promote Dyesol in the international sphere and meet our investment goals under existing development projects, while accepting that cash levels will be maintained due to progressively higher revenue, will place Dyesol in a very good position to reap the rewards from sales to several major customers and partners.

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