Company Announcements

Chairman's statement

Much of the Company's focus for the six months ended 31 December 2019 has been involved with the preparation, completion and delivery of the previously announced acquisition of the supercapacitor production assets of Murata. The Board is pleased to report that excellent progress has been made and that this project remains on track, with project milestones and key deliverables being achieved as per the detailed project plan. A lease has been secured on a new 3,300 sq. metre facility in Western Sydney, which will house the former Murata production lines; the first shipment of equipment left Murata's factory on schedule; and three new engineers have been recruited together with a Head of Sales for North America. The process of transition of production to the new lines remains on schedule and within budget and the Board still expects that the recommissioned production lines will be in production and shipping to customers in the first quarter of the financial year to 30 June 2021.   

Whilst significant resource has been dedicated to the successful relocation of the Murata equipment, focus has not been shifted from CAP-XX's existing operations and significant progress has been made on the realisation of the Company's medium-term goals. Gross margin has again improved from the previous year in both quantum and percentage terms, due to the year-on-year increase in sales revenue, changes to the sales product mix and operational cost savings. Year-on-year sales revenue performance has been buoyed by the increase in demand for CAP-XX's cylindrical can products, coupled with increased royalty receipts from both AVX and Murata.

As was highlighted in previous statements and trading updates, the sales pipeline for both prismatic and cylindrical can supercapacitors remain at historically high levels and this has resulted in the level of unfulfilled orders as at December 2019 being up significantly from the previous year. It is also one the reasons for the 21% increase in year-on-year sales performance. Certain of the Company's customers and suppliers, especially in the Asian region, have advised that the outbreak of the coronavirus is beginning to have a negative trading impact on their businesses. Some customers who have placed orders are asking for delivery dates to be extended and their contract manufacturers have decreased production activities due to the unavailability of staff and materials. To date, the impact on the Company from the outbreak of the coronavirus has been minimal.  It is still too early to forecast the shorter to medium-term financial impact on the Company, although this will become evident in the next few months of trading.

Total revenue for the six months to 31 December 2019 was A$1.9 million (2018: A$1.6 million). Both product sales and revenue generated from royalties and licenses were significantly up from the previous year. For the six-month operating period ended 31 December 2019, the EBITDA loss of A$0.8 million (2018: EBITDA loss of A$1.0 million), which excludes the amortisation of share based payment expenses, improved by A$0.2 million or 21% from the previous year and is broadly in line with management's expectations. Cash reserves as at 31 December 2019 were A$1.8 million (2018: A$4.6 million), which included the proceeds from the R&D Tax Rebate which was received in December 2019, but does not include the proceeds of the capital raising associated with the Murata transaction (net £3.42 million).  Cash reserves as at the end of February 2020 stood at A$6.4 million.

The Company continues to pursue several competitor supercapacitor organisations in potential patent infringement cases. The Company announced in July 2019 that it had completed a licence agreement with Cornell-Dubilier of the USA. The Company remains in negotiations with a number of other parties and the Board remains confident that the Company's efforts in this process will bear fruit in the short to medium term. Given the overall importance of the Murata transaction, the Board and Company have agreed that a risk benefit analysis will be undertaken on the remining patent infringement targets to ensure that the Company's resources are being prioritised towards realisable gains.    

Work continues on the Company's 3 Volt prismatic supercapacitor product to adapt it to the Murata production lines and on new chemistries to further improve product life and performance. The Board remains confident that its 3 Volt prismatic supercapacitors will be a significant source of revenue going forward.

The commissioning of the Murata plant and equipment will be the Company's main focus over the next six months and the Board is confident of reporting on a successful transition when the report and accounts for the full year to 30 June 2020 are released later in the current year.

Patrick Elliott

Chairman