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1st
June 2006
SHAREHOLDER
UPDATE
Dear Shareholder,
I have been in the CEO position
for over 6 months now and I would like to take the opportunity to
communicate directly with you in this introductory letter. This
gives me the chance to give you a trading update with respect to
your company's progress in the second half year ending 30 June 2006
and outlook for the future.
Since the announcement of our first half results
in February, overall trading for the second half has been in line
with expectations.
Synerject
Synerject has had a good start to the second
half and the results during this period are in line with expectations.
The Delavan acquisition was completed with effect from 1st March
and early results indicate that this business has been integrated
successfully into Synerject's business. Overall sales forecast for
this new acquisition are very positive indicating a significant
increase in forecast annualized revenue compared to original expectations.
Synerject continue to explore major new opportunities
in both China and India for the application of their engine management
systems and fuel systems. Progress with Synerject's manufacturing
facility in China for new engine management system products is on
schedule for first production by the end of this calendar year.
Indications from the emerging Asian market are showing strong demand
for Synerject's new product line-up and the outlook for the growth
over the next 5 years are very positive given the stringent emissions
legislation being introduced in these markets.
Powertrain Engineering Services
The expected improvement in the Powertrain
engineering services revenue has started to flow through and we
are on track to meet our forecast revenue for the second half. Our
order book continues to build and is significantly higher than this
time last year, which will give us a good start to next financial
year compared to the first half of this year. This growth has been
assisted significantly by the award of new engineering contracts
from both the Government (relating to ethanol testing for the Australian
fleet) and new direct injection (DI) customers in Europe and Asia.
The pipeline of opportunities is also demonstrating
a good mix of contracts from a broadening customer base in the Asia
region. Recent experiences at trade shows in China have shown significant
recognition and interest in the Orbital brand and as a result we
are expanding our office in Beijing to improve customer support
and increase marketing efforts for our engineering and technology
capability.
Progress on all of our 4-stroke DI engineering
programs is positive and further opportunities to utilize our spark
ignited heavy fuel technology are being developed with a growing
number of customers.
Licensing & Royalties
License and royalty revenue continues on track
and we expect to see overall growth in this sector for the full
year. Mercury Optimax® continue to do well in the market and
have recently launched an aggressive marketing campaign for the
Optimax outboards to back up the re-launch of the Optimax brand
and their success in winning JD Power quality awards. Bajaj are
progressing the DI autorickshaw program with the release of pre-pilot
vehicles for validation. Timing for the production launch has been
delayed slightly but is still expected to occur within the first
half of 2007 financial year.
As expected the Orbital DI scooter volumes
in Europe have continued to struggle, mainly due to delays in emission
legislation for this market segment. Recent initiatives to re-invigorate
this market are underway but it will take at least 12 months to
understand if these initiatives will have a real impact. Encouragingly
we have taken orders for Orbital DI application programs for new
customers and new products. These programs, if successful, will
add to the long term growth of royalties and expand the technology
into new motorcycle markets.
Envirofit (a licensee of Orbital technology)
are also making good progress with their retro-fit DI system for
the Philippines 2-stroke taxi fleet. We look forward to seeing positive
results from their first 3,000 taxi fleet which could lead to significant
benefits for the local environment and lead to further growth in
sales of these kits across Asia.
Shareholder communication
I would encourage all shareholders to visit
Orbital's website at www.orbitalcorp.com.au
to keep up to date with the company news and information as well
as register on Orbital's mailing list.
Orbital would also like to encourage as many
shareholders as possible to minimize printed paper distributed by
your Company. This will have obvious environmental benefits and
help keep costs under control. Australian shareholders can register
with Orbital's share registry, Computershare, to receive Annual
Reports and other company announcements electronically by visiting
www.computershare.com
and following the prompts.
Summary
In summary the second half has begun well and
we anticipate the company will return to profits for the full year
which demonstrates a solid improvement compared to 2005. The outlook
for Orbital is positive in particular the potential growth for Synerject
in Asia and I look forward to progressing this and other new opportunities
for the benefit of all shareholders.
Yours sincerely
Rodney Houston
Chief Executive Officer
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