16th Apr 2007 10:01
Gas Turbine Efficiency plc (LSE:GTE) ("GTE" or "the Company"), aleading supplier of advanced cleaning, performance monitoring andfluid and control systems for gas turbines, announces its financialresults for the year ended 31 December 2006. £ Financial Highlights £ -- Revenues amounted to $4.7m (2005: $5.3m), reflecting the Company's business model to invest in long term relationships with global Original Equipment Manufacturers (OEMs) £ -- Gross margin broadly unchanged at 44.1% (2005: 44.8%) £ -- Total order intake in 2006 rose 58% to $8.6m, driven by an 158% increase in aviation sector orders £ -- Net cash used by operating activities reduced by 66% to $0.75m (2005: $2.2m) £ -- Basic and fully diluted loss per share were unchanged at 5 cents (2005: 5 cents) £ -- Cash and cash equivalents amounted to $2.9m (2005: $4.7m) as at 31 December £ -- On track for strong revenue growth in 2007 with total revenues up by 402% to $3.4m in Q1 2007 £ -- Current order book for 2007 is in excess of $10m, much of which is expected to be turned into revenue in the first half £ Operating Highlights £ -- Strong growth in aviation revenues, up by 29% to $2.7m £ -- Industrial sector revenues declined 37% to $2m reflecting the Company's strategy to focus on long term supply agreements with global OEMs £ -- Won $5m contract from Pratt & Whitney for a global roll out of commercial aviation hubs £ -- Multi-year agreement signed with Siemens Industrial Turbines AB £ -- Completed rigorous qualification process with four global OEMs in industrial sector £ -- Expanded presence in Middle-East with an exclusive distribution agreement with Nama £ -- Launched a Russian subsidiary to address large industrial turbines market £ -- Acquired Control Center LLC, a top tier supplier to the industrial sector, in February 2007 to provide a strong platform for long term growth £ -- Signed a five year agreement in March 2007 with Solar, a Caterpillar company, to design manufacture and supply cleaning systems for its entire range of existing and new industrial turbines. £ Steven Zwolinski, CEO of Gas Turbine Efficiency, said: "We madetremendous progress in 2006 and fulfilled all our strategicinitiatives to position the business for long term profitable growth.We strengthened relationships with key industrial global OEMs bycompleting approximately 90% of their demanding qualificationtollgates for GTE technology. We have followed this up by making thestrategically important acquisition of Control Center in preparationfor the commercialisation and ramp of our industrial product lines. £ "The positive impact of last year's achievements can already beseen in 2007. Revenues in the first quarter of 2007 increased sharplyand our first half order book is almost double our revenues achievedin the whole of 2006. As a result we have a solid platform fordelivering strong growth for the year and beyond." £ Overview £ Gas Turbine Efficiency is pleased to announce a strong operationalperformance for 2006, which positions the Company for sustained growthfor the long term. The period covered the Company's first full 12month trading as an AIM-listed company and was marked by itstransformation into a much stronger business with broader productlines, technical capabilities, global footprint, and customerrelationships. As a result of the solid foundations laid during 2006and further major milestones achieved early in 2007, GTE is a now aleading provider of advanced cleaning, performance monitoring, fluidand control systems for gas turbines primarily in the aviation,industrial, oil & gas and pharmaceuticals sectors. The Company'scustomers include global OEMs such as Pratt & Whitney (PW),Rolls-Royce, Saab, Siemens, Solar Turbines as well as gas turbineoperators such as Calpine, Norsk Hydro, SNAM, Statoil and TexasGenCo. £ Total revenues during the year declined by 11% to $4.7m (from$5.3m) reflecting a strong increase in demand for GTE's on wingadvanced cleaning systems in the aviation sector. However this wasoffset by a planned reduction in sales into the industrial sectorwhere the Company is pursuing a global strategy, discussed below, todrive growth by focusing on long term partnership agreements withglobal OEMs and major turbine operators. £ Despite the lower revenues, gross margins were broadly unchangedat 44.1% (2005: 44.8%) as the Company benefited from manufacturingefficiencies and tight control on costs. The loss before tax increasedto $2.9m (2005: $2.4m) partly due to sharply higher spending onresearch and development to cement relationships with existing andpotential new customers. £ Operating review £ The market opportunity for GTE in the global gas turbines sectoris large and growing. The global installed base for civilian andmilitary aircraft engines is estimated at approximately 120,000 unitswhile the number of industrial turbines currently in use is estimatedat more than 40,000 units. The Company's core strategy has remainedconsistent and simple: Combine three important business elements: £ -- High Value Environmental and Performance Solutions £ -- Patented or Proprietary Position £ -- Strong Commercial Channel (Long term agreement with OEMs) £ Aviation systems £ Revenues from aviation systems rose by 29% to $2.7m demonstratingthe successful establishment of GTE's business model in this segmentthrough an exclusive partnership agreement with Pratt & Whitney. Thecombination of GTE's on-wing wash technology solution and Pratt &Whitney's global commercial and operations network yielded a 158%increase in order intake for GTE in 2006, including a $5m order signedin December. Further, it positioned the product line for long termopportunities in a number of new geographical and market segments. £ The bulk of the $5m order will be delivered in the first half of2007 and is part of PW's global roll-out of an aviation services' hubthat delivers compelling cost efficiency and environmental benefits tocommercial and defence aircraft operators. £ As previously announced, in January 2006, GTE's contract with PWwas extended to 2014. This contract provides a solid foundation forlong term growth for the Company. GTE generates revenues under thiscontract from the sale of GTE equipment as well as royalties based onthe number of washes carried out by PW. £ Industrial £ Based on the success in the aviation sector we took on a hugechallenge in 2006 to extend the business model with not one, but fourindustrial OEMs in parallel. This strategy had an inherent timing risk- until approval by an OEM, industrial sales by GTE would beessentially zero to that customer. £ Revenues from the industrial segment (which includes powergeneration, oil & gas and marine industries) decreased to $2m - 37%lower than the corresponding period last year. The result was in linewith the Company's expectations and its strategy to work directly withglobal OEMs, and the required, non-recurring process of GTE technologyqualification. During the qualification period, GTE was required tode-emphasise direct sales into a significant portion of itsend-customer base. £ Although the strategy impacted turnover in the short term, theCompany strongly believes it will open up considerably larger marketopportunities in the long term by providing access to the global OEMs'large installed user base. To this end, GTE is currently makingexcellent progress in achieving an extensive programme of productqualifications at key global OEMs in the US and Europe. Approximately95% of the technical and intellectual property issues with all fourOEMs have been addressed and GTE is now in the process of completinglong term commercial contract terms with several OEMs in parallel. £ Through the process, we have maintained ownership of ourintellectual property and more importantly, created a channelstructure for the introduction of future products in a much shortercycle. Also of note is that GTE's product performed as well or betterthan expected in the OEM technical evaluations. £ The progress made in the industrial segment in 2006 has alreadybegun to make a positive impact. In March 2007 we announced a fiveyear agreement with Solar, a Caterpillar company, to designmanufacture and supply cleaning systems for its entire range ofexisting and new industrial turbines. £ Control Center Acquisition £ In preparation for the commercialisation and ramp up of ourindustrial product lines, we made an important acquisition in February2007 of Control Center, LLC located in Orlando, Florida. This dealprovides GTE with a proven Tier 1 OEM supplier, US base of operations,40 year industry track record, and world class quality control system.In addition, it gives GTE several important complementary productlines in the Gas Turbine market segment: £ -- Combustion System Monitoring £ -- Fuel Systems & Measurement £ -- Controls £ -- Fluid Systems and Packaging £ -- Parts Distribution £ Of significance is that many of the core capabilities and customerbase of Control Center, LLC span several industry segments includingOil & Gas, Energy, Pharmaceuticals and Aerospace. Their reputation asa capable, high quality solutions provider is well founded andrespected in the industry. £ That said, the most important aspect of the acquisition is thatwhen the Control Center expertise in several important Gas Turbinesub-systems is combined with GTE's core products and technology team,led by Tom Wagner, with over 30 years of General Electric experience -the resulting team is significantly stronger than either teamseparately. £ GTE can now participate in larger, more complex systems solutions-a flexibility that will be very important as the Power Generation, Oil& Gas and other Process industries take on increasingly difficultEnvironmental, Economic and Fuel challenges. £ New geographic markets £ The Company has also entered the highly promising markets in theMiddle East and Russia. Both regions are attracting major investmentby the international oil and gas industry. The Middle East is alsoinvesting heavily in water desalination plants, which are largeconsumers of power. In Russia there is already a large installed baseof industrial turbines. £ During the year GTE appointed Nama as its distributor in Abu Dhabito address the Middle East market and received its first order fromthat region. In Russia, GTE has set up a new subsidiary based in StPetersburg with a sales and marketing director. £ Financial Review £ Revenues decreased to $4.7m from $5.3m as strong growth from theaviation sector was offset by a planned reduction in the industrialsector in line with the Company's long-term strategy to focus onglobal OEM agreements. £ The Eastern region maintained its contribution to overall revenuesat $4.2m (2005: $4.3m) while revenues from the Western region declinedto $0.4m (2005: $0.9). £ Operating loss amounted to $2.7m (2005: $2.3m) partly reflecting asharp increase in research and development spending which more thandoubled to $0.59m (2005: $0.24m). £ Loss before tax amounted to $2.9m (2005: $2.4m). £ Basic and fully diluted loss per share were unchanged at $0.05(2005: $0.05). £ Cash and cash equivalents as at 31 December 2006 amounted to $2.9m(2005: $4.7m) £ Outlook £ During 2006 GTE focused on strengthening relationships with keyglobal OEMs and on expanding into new regions. These steps have made apositive impact on our business, leading to a strong start to 2007. £ Revenues in the first quarter of 2007 have increased by 402%compared with same time last year and the total order book for firsthalf is at a record level at $9.7m. This provides the Company with asolid platform for delivering strong growth for the year and beyond. £ The Company is considering raising a further $5m through debt orequity sources in order to capitalise upon its current and futuregrowth initiatives. Copyright Business Wire 2007Related Shares:
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